{"symbol":"AAPL","year":2023,"quarter":2,"date":"2023-Q2","chunk_id":3,"sub_chunk_id":0,"centroid_label":"company gross margin","agreed_value":0.443,"count":2,"chunk":"Luca Maestri: Thank you, Tim, and good afternoon, everyone. Revenue for the March quarter was $94.8 billion, down 3% from last year and better than our expectations. Foreign exchange had a negative impact of over five percentage points on our results, in line with what we had expected. On a constant currency basis, our revenue grew year-over-year in total and in the majority of the markets we track. In addition to the records in emerging markets that Tim mentioned, we also set March quarter records in Australia, Canada, Spain and Switzerland, among others. Products revenue was $73.9 billion, down 5% from last year, due to challenging compares on Mac and iPad. iPhone, however, reached a March quarter revenue record thanks to very strong performance in emerging markets from South Asia and India to Latin America and the Middle East. During the quarter, our installed base of active devices continued to grow at a nice pace thanks to extremely high levels of customer satisfaction and loyalty, and reached an all-time high for all major product categories and geographic segments. Our Services set an all-time revenue record of $20.9 billion, up 5% year-over-year, on top of growing 17% in the March quarter a year ago. We reached an all-time services revenue record in Greater China and March quarter records in Americas, Europe and Rest of Asia Pacific. Company gross margin was 44.3%, up 130 basis points from last quarter, driven by cost savings and favorable mix shift towards services partially offset by leverage. Products gross margin was 36.7%, decreasing 30 basis points sequentially due to seasonal loss of leverage and mix, partially offset by favorable costs. Services gross margin was 71%, up 20 basis points sequentially. Operating expenses of $13.7 billion were at the low end of the guidance range we provided at the beginning of the quarter and continued to decelerate from the December quarter. We are closely managing our spend, but remain focused on long term growth with continued investment in innovation and product development. Net income was $24.2 billion. Diluted earnings per share were a $1.52, unchanged versus last year, and we generated very strong operating cash flow of $28.6 billion. Let me now provide more detail for each of our revenue categories. iPhone revenue set a March quarter record of $51.3 billion, up 2% year-over-year despite significant foreign exchange headwinds and a challenging macroeconomic environment. We set March quarter records in several developed and emerging markets with India, Indonesia, Turkey and the UAE doubling on a year-over-year basis. Our active installed base of iPhone grew to a new all-time high and was up in all our geographic segments. We are very pleased by the results of the latest survey of US Consumers from 451 Research, which measured customer satisfaction at 99% for the iPhone 14 family. Mac revenue was $7.2 billion, down 31% year-over-year and in line with our expectations. These results were driven by the challenging macroeconomic environment coupled with a difficult compare against last year's launch of the completely reimagined M1 MacBook Pros. Despite this, the installed base of active Macs reached an all-time high across all geographic segments and we continue to see strong upgraded activity to Apple silicon. Also, the latest survey of US Consumers from 451 Research reported customer satisfaction at 96% for Mac. iPad generated $6.7 billion in revenue, down 13% year-over-year and in line with our expectations. This performance was due to two key factors, a tough compare against the launch of iPad Air powered by the M1 chip in the year ago quarter and headwinds from the macroeconomic environment. The iPad installed base reached a new all-time high in all geographic segments thanks to exceptional customer loyalty and a high number of new customers. In fact, over half of the customers who purchased iPads during the quarter were new to the product. Wearables, home and accessories revenue was $8.8 billion, down 1% year-over-year as the category experienced the impact from the macroeconomic environment. However, we did set March quarter records both in the US and in Greater China. We continue to see strength in our Watch installed base, which set a new all-time record, thanks to very high customer loyalty and new two rates, nearly two thirds of customers purchasing an Apple Watch during the quarter were new to the product. Moving to Services, we reached a new all-time revenue record of $20.9 billion. And in addition to the all-time records Tim mentioned earlier, we set March quarter records for advertising Apple Care and Video. Despite these records, as we saw in recent quarters, certain services offerings such as digital advertising and mobile gaming continue to be affected by the current macroeconomic environment. Stepping back, however, the continued growth in Services is the reflection of our ecosystem strength and the positive momentum we are seeing across several key metrics. First, our growing installed base of over 2 billion active devices represents a great foundation for future expansion of our ecosystem. We continue to grow across every major product category and geographic segment, thanks to very high levels of customer loyalty and satisfaction. Second, we saw increased customer engagement with our services during the quarter. Both our transacting accounts and paid accounts grew double digits year-over-year, each setting a new all-time record. Third, paid subscriptions showed strong growth. We now have more than $975 million paid subscriptions across the Services on our platform, up 150 million during the last 12 months and nearly double the number of paid subscriptions we had only three years ago. And finally, we continue to improve the breadth and the quality of our current services offerings from new content on Apple TV Plus to great new features available in Apple Pay and Apple Music, which we believe our customers will love. Turning to the enterprise market, we see business customers continuing to invest in the Apple platform to drive higher employee productivity and satisfaction. In Brazil, Boticario Group, the world's largest cosmetics franchiser, originally starting with iPhone, 12 employees manage operations across a network of retail stores, franchisees and resellers. As it continues to digitize its business, Boticario has chosen to move all software development in house and adopted Mac as the standard device for all of their developer teams across the world. In small business, we see an increasing number of customers relying on Apple hardware, software and services to power their businesses forward, from accepting payments on iPhone, to tracking inventory on Mac or iPad, to managing employee devices with Apple Business Essentials. As we celebrate National Small Business week here in the US, we are proud to continue supporting the small business community. Let me now turn to our cash position and capital return program. We ended the quarter with over $166 billion in cash and marketable securities. We repaid $2.3 billion in maturing debt and increased commercial paper by about $300 million, leaving us with total debt of $110 billion. As a result, net cash was $57 billion at the end of the quarter. During the March quarter, we returned over $23 billion to shareholders, including $3.7 billion in dividends and equivalents and $19.1 billion through open market repurchases of $129 million Apple shares. Given the continued confidence we have in our business now and into the future, today our Board has authorized an additional $90 billion for share repurchases as we maintain our goal of getting to net cash neutral over time. We're also raising our dividend by 4% to $0.24 a share, and we continue to plan for annual increases in the dividend going forward. As we move ahead into the June 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. We expect our June quarter year-over-year revenue performance to be similar to the March quarter, assuming that the macroeconomic outlook does not worsen from what we are projecting today for the current quarter. Foreign exchange will continue to be a headwind and we expect a negative year-over-year impact of nearly four percentage points. For Services, we expect our June quarter year-over-year revenue growth to be similar to the March quarter, while continuing to face macroeconomic headwinds in areas such as digital advertising and mobile gaming. We expect gross margin to be between 44% and 44.5%. We expect OpEx to be between $13.6 billion and $13.8 billion. We expect OINE to be around negative $250 million excluding any potential impact from the mark-to-market of minority investments and our tax rate to be around 16%. Finally reflecting the dividend increase I mentioned earlier, today, our Board of Directors has declared a cash dividend of $0.24 per share of common stock payable on May 18, 2023, to shareholders of record as on May 15, 2023. With that, let's open the call to questions.","evidence_gemma_new":null,"evidence_llama_3_3":"Company gross margin March quarter","evidence_qwen_3_30b":"Company gross margin up 130 basis points from last quarter","gemma_new_max":null,"gemma_new_min":null,"llama_3_3_max":0.443,"llama_3_3_min":0.443,"qwen_3_30b_max":0.443,"qwen_3_30b_min":0.443}
{"symbol":"AAPL","year":2023,"quarter":4,"date":"2023-Q4","chunk_id":3,"sub_chunk_id":0,"centroid_label":"company gross margin","agreed_value":0.452,"count":2,"chunk":"Luca Maestri: Thank you, Tim, and good afternoon, everyone. Revenue for the September quarter was $89.5 billion, down less than 1% from last year. Foreign exchange had a negative impact of over 2 percentage points. And on a constant-currency basis, our revenue grew year-over-year in total, and in each geographic segment. We set a September quarter record in the Americas and saw strong performance across our emerging markets, where both iPhone and Services grew double digits. Products revenue was $67.2 billion, down 5% from last year, due to very challenging compares on both Mac and iPad, which I will discuss in more detail later on. At the same time, we reached a September quarter record on iPhone, driven by strength in emerging markets. Our total installed-base of active devices reached an all-time high across all products and all geographic segments, thanks to our high levels of customer satisfaction and many new customers joining our ecosystem. Our Services revenue set an all-time record of $22.3 billion, up 16% year-over-year, with growth accelerating sequentially from the June quarter. Our performance in Services were broad based, as we reached all-time revenue records in the Americas, Europe and rest of Asia-Pacific and a September quarter record in Greater China. We also set new records in every Services category. Company gross margin set a September quarter record at 45.2%, up 70 basis points sequentially, driven by leverage and favorable mix, partially offset by foreign exchange. Products gross margin was 36.6%, up 120 basis points sequentially, also driven by leverage and mix, partially offset by foreign exchange. Services gross margin was 70.9%, up 40 basis points from last quarter due to a different mix. Operating expenses of $13.5 billion were at the low end of the guidance range we provided, up 2% year-over-year. Net income was $23 billion, diluted earnings per share was $1.46, up 13% versus last year and a September quarter record, and operating cash flow was strong at $21.6 billion. Let me now provide more detail for each of our revenue categories. iPhone revenue was $43.8 billion, up 3% year-over-year and a new September quarter record. We had strong performance in several markets, including an all-time record in India as September quarter records in Canada, Latin America, the Middle East, and South Asia . Our iPhone active installed base grew to a new all-time high and fiscal 2023 was another record year for switches. We continue to see extremely high levels of customer satisfaction which 451 Research recently measured at 98% in the U.S. Mac revenue was $7.6 billion, down 34% year-over-year, driven by challenging market conditions and compounded by a difficult compare in our own business, whereby last year we experienced supply disruptions from factory shutdowns in the June quarter and were subsequently able to fulfill significant pent-up demand during the September quarter. We also had a difference in launch timing with the MacBook Air launching earlier this year in the June quarter compared to the September quarter last year. We have great confidence in our Mac lineup and are excited about the recently announced iMac and MacBook Pro powered by our M3 chips. Our installed base is at an all-time high and half of Mac buyers during the quarter were new to the product, driven by MacBook Air. Also, we saw reported customer satisfaction of 97% for Mac in the U.S. iPad generated $6.4 billion in revenue, down 10% year-over-year. Similar to Mac, these results were a function of a difficult compare from the supply disruptions in the June quarter a year ago and the subsequent fulfillment of pent-up demand in the September quarter. iPad continues to attract a large number of new customers to the installed base with over half of the customers who purchase iPads during the quarter being new to the product and the latest reports from 451 Research indicate customer satisfaction of 98% in the U.S. Wearables, Home and Accessories revenue was $9.3 billion, down 3% year-over-year. We had a September quarter record in Europe and we saw strong performance in several emerging markets around the world. Apple Watch continues to expand its reach with nearly two-thirds of customers purchasing Apple Watch during the quarter being new to the product and customer satisfaction for the Watch was recently measured at 97% in the U.S. Services had a great quarter. We reached a new all-time revenue record of $22.3 billion, up 16% year-over-year. And we're happy to see growth coming from all categories and every geographic segment, which is a direct result of the strength of our ecosystem. Our installed base of over 2 billion active devices continues to grow at a nice pace and establishes a solid foundation for the future expansion of the ecosystem. And we continue to see increased customer engagement with our Services. Both transacting accounts and paid accounts grew double-digits year-over-year, each reaching a new all-time high. Also our paid subscriptions showed strong growth. We have well over 1 billion paid subscriptions across the services on our platform, nearly double the number we had only three years ago. And finally, we continue to improve the breadth and quality of our current services from exciting new content on Apple TV+ and Apple Arcade to additional storage tiers on iCloud. We believe our customers will love this new offering. Turning to enterprise. We are excited to see our business customers in both developed and emerging markets expand their deployment of Apple products and technologies to drive business innovation and employee satisfaction. Starbucks continuously invest in Apple technology to bring the best experience to the customers and employees, including tens of thousands of iPads across all retail stores to help their teams streamline order management, operations and training. In addition, Starbucks recently refreshed over 10,000 Macs to the latest M2-powered MacBook Air for all store managers, enabling them to do their best work and improve productivity. And in Indonesia, popular technology company GoTo is offering Mac as a choice, so that employees can have the best tools to be most productive. Today, more than half of its workforce are already choosing Mac for work. Let me now turn to our cash position and capital return program. We ended the quarter with over $162 billion in cash and marketable securities. We increased commercial paper by $2 billion, leaving us with total debt of $111 billion. As a result, net cash was $51 billion at the end of the quarter. And our goal of becoming net cash-neutral over time remains unchanged. During the quarter, we returned nearly $25 billion to shareholders, including $3.8 billion in dividends and equivalents and $15.5 billion through open market repurchases of 85 million Apple shares. We also began a $5 billion accelerated share repurchase program in August, resulting in the initial delivery and retirement of 22 million shares. Taking a step back, as we close our 2023 fiscal year, our annual revenue was $383 billion. While it was down 3% from the prior year, it grew on a constant-currency basis despite the volatile and uneven macroeconomic environment. Our year-over-year revenue performance improved each quarter as we went through the year, and so did our earnings per share performance, as we reported double-digit EPS growth in the September quarter. We are particularly pleased with our performance in emerging markets with revenue reaching an all-time record in fiscal 2023 and double-digit growth in constant currency. We are expanding our direct presence in these markets from new Apple retail stores in India to online stores in Vietnam and Chile. And we continue to work with our partners to offer a wide range of affordability programs so that we can best serve our customers. We're very excited about the momentum we have in these markets and the opportunity ahead of us. 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%. Finally, today our Board of Directors has declared a cash dividend of $0.24 per share of common stock, payable on November 16, 2023, to shareholders of record as of November 13, 2023. With that, let's open the call to questions.","evidence_gemma_new":null,"evidence_llama_3_3":"Company gross margin September quarter","evidence_qwen_3_30b":"Company gross margin","gemma_new_max":null,"gemma_new_min":null,"llama_3_3_max":0.452,"llama_3_3_min":0.452,"qwen_3_30b_max":0.452,"qwen_3_30b_min":0.452}
{"symbol":"AAPL","year":2024,"quarter":1,"date":"2024-Q1","chunk_id":3,"sub_chunk_id":0,"centroid_label":"company gross margin","agreed_value":45.9,"count":2,"chunk":"Luca Maestri: Thank you, Tim, and good afternoon, everyone. Revenue for the December quarter was $119.6 billion, up 2% from last year. During the December quarter a year ago, two unique factors affected our results. First, we had an additional week in the quarter. And second, we had COVID-related factory shutdowns that limited iPhone supply. We estimate that the net impact of these two factors resulted in a 2 percentage point headwind to our revenue performance this quarter. We set all-time revenue records in Europe and rest of Asia-Pacific, and continue to see strong performance across our emerging markets with double-digit growth in the majority of the emerging markets we track. Products revenue was $96.5 billion, flat compared to last year, driven by strength in iPhone, offset by challenging compares for iPad and Wearables, Home and Accessories and one less week of sales this year across the entire portfolio. Thanks to our unparalleled customer loyalty and very strong levels of customer satisfaction, our total installed base of active devices set a new record across all products and all geographic segments, and is now over 2.2 billion active devices. Services revenue set an all-time record of $23.1 billion, up 11% year-over-year. When we take into account the extra week last year, this represents a sequential acceleration of growth from the September quarter. We are very pleased with our Services performance in both developed and emerging markets with all-time revenue records in the Americas, Europe, and rest of Asia-Pacific. Company gross margin was 45.9%, up 70 basis points sequentially, driven by leverage and favorable mix, partially offset by foreign exchange. Products gross margin was 39.4%, up 280 basis points sequentially, also driven by leverage and mix, partially offset by foreign exchange. Services gross margin was 72.8%, up 190 basis points from last quarter, due to a more favorable mix. Operating expenses of $14.5 billion were at the midpoint of the guidance range we provided and up 1% year-over-year. Net income was $33.9 billion, up $3.9 billion from last year. Diluted EPS was $2.18, up 16% versus last year and an all-time record. And operating cash flow was very strong at $39.9 billion. Let me now provide more detail for each of our revenue categories. iPhone revenue was $69.7 billion, up 6% year-over-year. We set all-time records in several countries and regions, including Latin America, Western Europe, the Middle East, and Korea, as well as December quarter records in India and Indonesia. Our iPhone active installed base grew to a new all-time high, and we had an all-time record number of iPhone upgraders during the quarter. Customers are loving their new iPhone 15 family, with the latest reports from 451 Research indicating customer satisfaction of 99% in the U.S. In fact, many iPhone models were among the top-selling smartphones around the world during the quarter. According to a survey from Kantar, iPhones were four out of the top five models in the U.S. and Japan, four out of the top six models in urban China and the UK, and all top five models in Australia. Mac generated revenue of $7.8 billion and return to growth, despite one less week of sales this year. This represents a significant acceleration from the September quarter when we faced a challenging compare due to the supply disruptions and subsequent demand recapture we experienced a year ago. Customer response to our latest iMac and MacBook Pro models powered by the M3 chips has been great. And our Mac installed base reached an all-time high with almost half of Mac buyers during the quarter being new to the product. Also, 451 Research recently reported customer satisfaction of 97% for Mac in the U.S. iPad was $7 billion in revenue, down 25% year-over-year. iPad faced a difficult compare because during the December quarter last year, we launched the new iPad Pro and iPad 10 generation, and we had an extra week of sales. However, the iPad installed base continues to grow and is an all-time high with over half of the customers who purchased iPads during the quarter being new to the product, and customer satisfaction for iPad was recently measured at 98% in the U.S. Wearables, Home and Accessories revenue was $12 billion, down 11% year-over-year due to a challenging launch compare and the extra week a year ago. This time last year, we had the full quarter benefit from the launches of the AirPods Pro 2nd generation, the Watch SE, and the first Watch Ultra. We continue to attract new customers to Apple Watch. Nearly two-thirds of customers purchasing an Apple Watch during the quarter were new to the product, and the latest reports from 451 Research indicate customer satisfaction of 96% in the U.S. And in Services, we were very pleased with our double-digit growth, which was driven by the strength of our ecosystem. Our installed base is now over 2.2 billion active devices and continues to grow nicely, establishing a solid foundation for the future expansion of our Services business. And we continue to see increased customer engagement with our services. Both transacting accounts and paid accounts reached a new all-time high, with paid accounts growing double-digits year-over-year. Also, our paid subscriptions showed strong double-digit growth. We have well over 1 billion paid subscriptions across the services on our platform, more than double the number that we had only four years ago. Finally, we continue to build on the breadth and the quality of our current services. From Oscar-nominated theatrical releases with Apple TV+ to more publications or News+ like The Atlantic and exciting new games on Arcade. Turning to Enterprise, we continue to see many business customers leverage Apple products to improve productivity and drive innovation. Target recently added the latest M3 MacBook Pro to their existing deployment of thousands of Mac\u2019s, enabling employees across various departments to do their best work. In emerging markets, Zoho, a leading technology company headquartered in India, offers its 15,000 plus global employees a choice of devices, with 80% of their workforce using iPhone for work and nearly two-thirds of them choosing Mac as their primary computer. With the upcoming launch of Apple Vision Pro, we are seeing strong excitement in Enterprise. Leading organizations across many industries such as Walmart, Nike, Vanguard, Stryker, Bloomberg, and SAP have started leveraging and investing in Apple Vision Pro as their new platform to bring innovative spatial computing experiences to their customers and employees. From everyday productivity to collaborative product design to immersive training, we cannot wait to see the amazing things our enterprise customers will create in the months and years to come. Let me now turn to our cash position and capital return program. We ended the quarter with $173 billion in cash and marketable securities. We decreased commercial paper by $4 billion, leaving us with total debt of $108 billion. As a result, net cash was $65 billion at the end of the quarter, and our goal of becoming net cash-neutral over time remains unchanged. During the quarter, we returned nearly $27 billion to shareholders, including $3.8 billion in dividends and equivalents and $20.5 billion through open market repurchases of 112 million Apple shares. We also retired an additional 6 million shares in the final settlement of our 19th ASR. As usual, we will provide an update to our capital return program when we report results at the end of this quarter. As we move ahead into the March 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. And we expect foreign exchange to be a revenue headwind of about 2 percentage points on a year-over-year basis. As a reminder, in the December quarter a year ago, we faced significant supply constraints on the iPhone 14 Pro and 14 Pro Max due to COVID-19 factory shutdowns. And in the March quarter a year ago, we were able to replenish channel inventory and fulfill significant pent-up demand from the constraints. We estimate that this impact added close to $5 billion to the March quarter's total revenue last year. When we remove this impact from last year's revenue, we expect both our March quarter total company revenue and iPhone revenue to be similar to a year ago. For our Services business, we expect a similar double-digit growth rate to what we reported in the December quarter. We expect gross margin to be between 46% and 47%. We expect OpEx to be between $14.3 billion and $14.5 billion. We expect OI&E to be around $50 million, excluding any potential impact from the mark-to-market of minority investments and our tax rate to be around 16%. Finally, today our Board of Directors has declared a cash dividend of $0.24 per share of common stock payable on February 15, 2024, to shareholders of record as of February 12, 2024. With that, let's open the call to questions.","evidence_gemma_new":"Company gross margin","evidence_llama_3_3":null,"evidence_qwen_3_30b":"company gross margin up 70 basis points sequentially","gemma_new_max":45.9,"gemma_new_min":45.9,"llama_3_3_max":null,"llama_3_3_min":null,"qwen_3_30b_max":45.9,"qwen_3_30b_min":45.9}
{"symbol":"AAPL","year":2024,"quarter":2,"date":"2024-Q2","chunk_id":2,"sub_chunk_id":0,"centroid_label":"company gross margin","agreed_value":46.6,"count":2,"chunk":"Luca Maestri: Thank you, Tim, and good afternoon, everyone. Revenue for the March quarter was $90.8 billion, down 4% from last year. Foreign exchange had a negative year-over-year impact of 140 basis points on our results. Products revenue was $66.9 billion, down 10% year-over-year due to the challenging compare on iPhone that Tim described earlier, which was partially offset by strength from Mac. And thanks to our unparalleled customer satisfaction and loyalty and a high number of customers who are new to our products, our installed base of active devices reached an all-time high across all products and all geographic segments. Services revenue set an all-time record of $23.9 billion, up 14% year-over-year with record performance in both developed and emerging markets. Company gross margin was 46.6%, up 70 basis points sequentially, driven by cost savings and favorable mix to services, partially offset by leverage. Products gross margin was 36.6%, down 280 basis points sequentially, primarily driven by seasonal loss of leverage and mix, partially offset by favorable costs. Services gross margin was 74.6%, up 180 basis points from last quarter due to a more favorable mix. Operating expenses of $14.4 billion were at the midpoint of the guidance range we provided and up 5% year-over-year. Net income was $23.6 billion, diluted EPS was $1.53 and a March quarter record, and operating cash flow was strong at $22.7 billion. Let me now provide more detail for each of our revenue categories. iPhone revenue was $46 billion, down 10% year-over-year, due to the almost $5 billion impact from a year ago that Tim described earlier. Adjusting for this one-time impact, iPhone revenue would be roughly flat to last year. Our iPhone active installed base grew to a new all-time high in total and in every geographic segment. And during the March quarter, we saw many iPhone models as the top-selling smartphones around the world. In fact, according to a survey from Kantar, an iPhone was the top-selling model in the U.S., Urban China, Australia, the U.K., France, Germany and Japan. And the iPhone 15 family continues to be very popular with customers. 451 Research recently measured customer satisfaction at 99% in the U.S. Mac revenue was $7.5 billion, up 4% year-over-year, driven by the strength of our new MacBook Air, powered by the M3 chip. Customers are loving the incredible AI performance of the latest MacBook Air and MacBook Pro models. And our Mac installed base reached an all-time high with half of our MacBook Air buyers during the quarter being new to Mac. Also customer satisfaction for Mac was recently reported at 96% in the U.S. iPad generated $5.6 billion in revenue, down 17% year-over-year. iPad continued to face a challenging compare against the launch of the M2 iPad Pro and iPad 10th Generation from last year. At the same time, the iPad installed base has continued to grow and is at an all-time high as over half of the customers who purchased iPads during the quarter were new to the product. In addition, the latest reports from 451 Research indicated customer satisfaction of 96% for iPad in the US. Wearables, Home and Accessories revenue was $7.9 billion, down 10% year-over-year due to a difficult launch compare. Last year, we had the continued benefit from the launches of the AirPods Pro second-generation, the Watch SE and the first Watch Ultra. Apple Watch continues to attract new customers, with almost two-thirds of customers purchasing an Apple Watch during the quarter being new to the product, sending the Apple Watch installed base to a new all-time high and customer satisfaction was recently measured at 95% in the U.S. In services, as I mentioned, total revenue reached an all-time record of $23.9 billion, growing 14% year-over-year with our installed-base of active devices continuing to grow at a nice pace. This provides a strong foundation for the future growth of the services business as we continued to see increased customer engagement with our ecosystem. Both transacting accounts and paid accounts reached a new all-time high with paid accounts growing double-digits year-over-year. And paid subscriptions showed strong double-digit growth. We have well over $1 billion paid subscriptions across the services on our platform, more than double the number that we had only four years ago. We continued to improve the breadth and quality of our current services from creating new games on Arcade and great new shows on TV+ to launching additional countries and partners for Apple Pay. Turning to enterprise, our customers continued to invest in Apple products to drive productivity and innovation. We see more and more enterprise customers embracing the Mac. In Healthcare, Epic Systems, the world's largest electronic medical record provider, recently launched its native app for the Mac, making it easier for healthcare organizations like Emory Health to transition thousands of PCs to the Mac for clinical use. And since the launch of Vision Pro last quarter, many leading enterprise customers have been investing in this amazing new product to bring spatial computing apps and experiences to life. We are seeing so many compelling use cases from aircraft engine maintenance training at KLM Airlines to real-time team collaboration for racing at Porsche to immersive kitchen design at Lowe's. We couldn't be more excited about the spatial computing opportunity in enterprise. Taking a quick step back, when we look at our performance during the first-half of our fiscal year, total company revenue was roughly flat to the prior year in spite of having one less week of sales during the period and some foreign exchange headwinds. We were particularly pleased with our strong momentum in emerging markets, as we set first-half revenue records in several countries and regions, including Latin-America, the Middle East, India, Indonesia, the Philippines and Turkey. These results, coupled with double-digit growth in services and strong levels of gross margin, drove a first half diluted EPS record of $3.71, up 9% from last year. Let me now turn to our cash position and capital return program. We ended the quarter with $162 billion in cash and marketable securities. We repaid $3.2 billion in maturing debt and commercial paper was unchanged sequentially, leaving us with total debt of $105 billion. As a result, net cash was $58 billion at the end of the quarter. During the quarter, we returned over $27 billion to shareholders, including $3.7 billion in dividends and equivalents and $23.5 billion through open-market repurchases of $130 million Apple's shares. Given the continued confidence we have in our business now and into the future, our Board has authorized today an additional $110 billion for share repurchases, as we maintain our goal of getting to net cash-neutral over time. We are also raising our dividend by 4% to $0.25 per share of common stock, and we continued to plan for annual increases in the dividend going forward as we've done for the last 12 years. This cash dividend will be payable on May 16, 2024 to shareholders of record as of May 13, 2024. As we move ahead into the June 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. We expect our June quarter total company revenue to grow low-single-digits year-over-year in spite of a foreign exchange headwind of about 2.5 percentage points. We expect our services business to grow double-digits at a rate similar to the growth we reported for the first-half of the fiscal year. And we expect iPad revenue to grow double-digits. We expect gross margin to be between 45.5% to -- and 46.5%. We expect OpEx to be between $14.3 billion and $14.5 billion. We expect OI&E to be around $50 million, excluding any potential impact from the mark-to-market of minority investments and our tax rate to be around 16%. With that, let's open the call to questions.","evidence_gemma_new":"Company gross margin sequentially","evidence_llama_3_3":null,"evidence_qwen_3_30b":"Company gross margin up 70 basis points sequentially","gemma_new_max":46.6,"gemma_new_min":46.6,"llama_3_3_max":null,"llama_3_3_min":null,"qwen_3_30b_max":46.6,"qwen_3_30b_min":46.6}
{"symbol":"AAPL","year":2024,"quarter":3,"date":"2024-Q3","chunk_id":2,"sub_chunk_id":0,"centroid_label":"company gross margin","agreed_value":46.3,"count":2,"chunk":"Luca Maestri : Thank you, Tim, and good afternoon, everyone. We are very pleased to report a new June quarter revenue record of $85.8 billion, up 5% year-over-year, despite 230 basis points of negative foreign exchange impact. We achieved growth in the vast majority of our markets, with June quarter revenue records in the Americas, Europe, and rest of Asia Pacific. Products revenue was $61.6 billion, up 2% year-over-year, driven by the launch of the new iPad Pro and iPad Air. Our installed base of active devices reach an all-time high across all products and geographic segments, thanks to our unmatched levels of customer satisfaction and loyalty and a large number of customers who are new to our products. Services revenue reached an all-time record of $24.2 billion, up 14% year-over-year, with an all-time record in developed markets and a June quarter record in emerging markets. Company gross margin was 46.3% near the high end of our guidance range and down 30 basis points sequentially driven by a different mix within products which was partially offset by a favorable mix shift towards services and cost savings. Products gross margin was 35.3%, down 130 basis points sequentially, primarily driven by mix, partially offset by favorable costs. Services gross margin was 74% down 60 basis points from last quarter. Operating expenses of $14.3 billion were at the low end of the guidance range we provided and up 7% year-over-year. Net income was $21.4 billion, diluted EPS of $1.40 was up 11% year-over-year and set a June quarter record. And operating cash flow was very strong at $28.9 billion, also a June quarter record. Let me get into more detail for each of our revenue categories. iPhone revenue was $39.3 billion, down 1% year-over-year, but grew on a constant currency basis. We set June quarter records across several countries, including the UK, Spain, Poland, Mexico, Indonesia, and the Philippines. And the iPhone Active installed base grew to a new all-time high in total and in every geographic segment. During the June quarter, many iPhone models were among the top selling smartphones around the world. In fact, according to a survey from Kantar, iPhone was the top selling model in the US, urban China, the UK, Germany, Australia, and Japan. Customer satisfaction on the iPhone 15 family continues to be extremely high, with 451 Research measuring it at 98% in the US in their latest reports. Mac generated $7 billion in revenue, up 2% year-over-year, driven by the MacBook Air powered by the M3 chip. We saw particularly strong performance in our emerging markets, with June quarter records for Mac in Latin America, India, and South Asia. The Mac installed base reached an all-time high with half of MacBook Air customers in the quarter being new to Mac. And customer satisfaction for Mac was recently reported at 96% in the US. iPad revenue was $7.2 billion, up 24% year-over-year, driven by the launch of the new iPad Pro and iPad Air. Customers are loving the latest iPad lineup for its new design and display, unparalleled performance, AI capabilities and much more. The iPad install base has continued to grow and is an all-time high, as half of the customers who purchased iPads during the quarter were new to the product. Also, customer satisfaction was recently measured at 97% in the US. Wearables, home and accessories revenue was $8.1 billion, down 2% year-over-year, a sequential acceleration from the March quarter. Watch and AirPods continue to face a difficult compare against prior year launches of the AirPods Pro second generation, the Watch SE and the first Watch Ultra. Apple Watch continues to attract new customers, with almost two-thirds of customers purchasing an Apple Watch during the quarter being new to the product, sending the Apple Watch install base to a new all-time high. And the latest reports from 451 Research indicate a customer satisfaction of 97% for watch in the US. In services, total revenue reached an all-time record of $24.2 billion, growing 14% year-over-year. We continue to have great momentum in services, as the growth of our installed base of active devices, sets a strong foundation for the future expansion of our ecosystem. And we see increased customer engagement with our services offerings. Both transacting accounts and paid accounts reach a new all-time high with paid accounts growing double digits year-over-year. Also, paid subscriptions showed strong double digit growth. We have well over 1 billion paid subscriptions across the services on our platform, more than double the number that we had only four years ago. And we are constantly focused on improving the breadth and quality of our services. From critically acclaimed new content on Apple TV+ to new games on Apple Arcade and the many latest features we previewed during WWDC for iCloud, Apple Pay, Apple Cash, Apple Music, and more. Turning to enterprise, we continue to see businesses, leveraging our entire suite of products to drive productivity and creativity for their teams and customers. USAA, a leading insurance and financial services company, recently expanded beyond their existing iPhone and iPad deployments to provide their employees with the latest MacBook Air. And American Express has continued to add to their fleet of over 10,000 Macs to enhance their employees' productivity, security, and collaboration. We're also excited to see leading organizations such as Boston Children's Hospital and Lufthansa using Apple Vision Pro to build innovative spatial computing experiences to transform the training of their workforces. Let me now turn to our cash position and capital return program. We ended the quarter with $153 billion in cash and marketable securities. We repaid $4.3 billion in maturing debt and increased commercial paper by $1 billion, leaving us with total debt of $101 billion. As a result, net cash was $52 billion at the end of the quarter. During the quarter, we returned over $32 billion to shareholders, including $3.9 billion in dividends and equivalents and $26 billion through open market repurchases of 139 million Apple shares. As we move ahead into the September 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. We expect foreign exchange to continue to be a headwind and to have a negative impact on revenue of about 1.5 percentage points on a year-over-year basis. We expect our September quarter total company revenue to grow year-over-year at a rate similar to the June quarter. We expect services revenue to grow double digits at a rate similar to what we reported in the first three quarters of this fiscal year. We expect gross margin to be between 45.5% and 46.5%. We expect OpEx to be between $14.2 billion and $14.4 billion. We expect OI&E to be around negative $50 million, excluding any potential impact from the mark to market of minority investments, and our tax rate to be around 16.5%. Finally, today our Board of Directors has declared a cash dividend of $0.25 per share of common stock payable on August 15, 2024, to shareholders of record as of August 12, 2024. With that, let's open the call to questions.","evidence_gemma_new":"Company gross margin","evidence_llama_3_3":null,"evidence_qwen_3_30b":"Company gross margin June quarter","gemma_new_max":46.3,"gemma_new_min":46.3,"llama_3_3_max":null,"llama_3_3_min":null,"qwen_3_30b_max":46.3,"qwen_3_30b_min":46.3}
{"symbol":"AAPL","year":2023,"quarter":1,"date":"2023-Q1","chunk_id":3,"sub_chunk_id":0,"centroid_label":"gross margin","agreed_value":0.43,"count":2,"chunk":"Luca Maestri: Thank you, Tim, and good afternoon, everyone. As Tim mentioned, revenue for the December quarter was $117.2 billion, down 5% from last year. A number of factors had a significant impact on our results. First, we faced a very difficult foreign exchange environment, which affected our performance by nearly 800 basis points. In other words, we grew revenue on a constant currency basis. And in fact, we did so in the vast majority of markets. Second, the macroeconomic environment this past quarter was markedly more challenging than 12 months ago. Third, we experienced significant supply shortages for iPhone 14 Pro and iPhone 14 Pro Max in November and through December. On the other hand, we had the positive impact of the 14th week in the quarter that Tejas just mentioned at the beginning of the call. Products revenue was $96.4 billion, down 8% from last year due to the factors I just called out. At the same time, however, our installed base of active devices grew double digits and achieved all-time records in each geographic segment and in each major product category. We're proud to now have over 2 billion active devices in our installed base. This continued growth in the installed base is due to extremely strong levels of customer satisfaction and loyalty and a high number of customers who are new to our products. The installed base growth also helped our services set an all-time revenue record of $20.8 billion, up 6% over a year ago. We achieved this new milestone despite more than 700 basis points of negative impact from foreign exchange. We reached all-time services revenue records in the Americas, Europe and rest of Asia Pacific and a December quarter record in Greater China. We also set records in many Services categories, including all-time revenue records for cloud services, payment services and music and December quarter records for the App Store and AppleCare. Company gross margin was 43%, up 70 basis points from last quarter due to leverage and favorable mix, partially offset by foreign exchange. Products gross margin was 37%, up 240 basis points sequentially. And Services gross margin was 70.8%, up 30 basis points sequentially, both due to the same factors that impacted total company gross margin. Operating expenses of $14.3 billion were significantly below the guidance range we provided at the beginning of the quarter and grew at a slower pace than in the past as we took actions to respond to the current macro environment. Net income was $30 billion. Diluted earnings per share were $1.88, and we generated very strong operating cash flow of $34 billion. Let me now get into more detail for each of our revenue categories. iPhone revenue was $65.8 billion despite significant foreign exchange headwinds, supply constraints on iPhone 14 Pro and iPhone 14 Pro Max and a challenging macroeconomic environment. In spite of these circumstances, we set all-time iPhone revenue records in Canada, Italy and Spain, and saw strong growth in several emerging markets, including all-time iPhone revenue records for India and Vietnam. Importantly, the installed base of active iPhones continues to grow nicely and is at an all-time high across all geographic segments. In emerging markets, in particular, the installed base grew double digits, and we had record levels of switchers in India and in Mexico. Our customers continue to love their experience with our products with the latest survey of U.S. consumers from 451 Research indicating customer satisfaction of 98% for the iPhone 14 family. Mac revenue was $7.7 billion, down 29% year-over-year and in line with our expectations. There were 3 key drivers for our Mac results. First, we had a challenging compare against last year's launch of the completely reimagined MacBook Pros, our first notebooks with M1 Pro and M1 Max. Second, we believe that the macro environment impacted our Mac performance. And third, we faced significant foreign exchange headwinds. At the same time, however, the installed base of active Macs reached an all-time high across all geographic segments, and we continue to see very strong upgraded activity to Apple silicon. Customer satisfaction with Mac remains very strong at 96% based on the latest survey of U.S. consumers from 451 Research. iPad revenue was $9.4 billion, up 30% year-over-year despite significant FX headwinds. This performance was driven by 2 key items. First, during the December quarter a year ago, we experienced significant supply constraints, while this year, we had enough supply to meet demand. Second, we launched our new iPad and the iPad Pro powered by the M2 chip during the quarter. The iPad installed base reached a new all-time high, thanks to incredible customer loyalty and a high number of new customers. In fact, over half of the customers who purchased iPads during the quarter were new to the product. Wearables, Home and Accessories revenue was $13.5 billion, down 8% year-over-year. The year-over-year decline was driven by significant FX headwinds and a challenging macroeconomic environment. However, our installed base of devices in the category set a new all-time record thanks to the largest number of customers new to our smartwatch that we've ever had in a given quarter. In fact, nearly 2\/3 of customers purchasing an Apple Watch during the quarter were new to the product. Moving to Services. We generated $20.8 billion in revenue, a new all-time record in total and for many Services offerings in spite of a difficult foreign exchange environment, and macroeconomic headwinds impacting certain categories such as digital advertising and mobile gaming. In constant currency, we grew Services revenue double digits on top of growing 24% during the December quarter a year ago. We remain focused on the large long-term opportunity in this category, and we continue to observe several trends that reflect the strength of our ecosystem. For example, we saw increased customer engagement with our Services during the quarter. Both our transacting accounts and paid accounts grew double digits year-over-year, each setting a new all-time record. Paid subscriptions also continued to grow nicely. We now have more than 935 million paid subscriptions across the services on our platform, up more than 150 million during the last 12 months alone and nearly 4x what we had just 5 years ago. And we continue to increase the reach and improve the quality of our offerings. For instance, Apple Pay is now available to millions of merchants in nearly 70 countries and regions. And we saw a record-breaking number of purchases made using Apple Pay globally during the holiday shopping season. Finally, our installed base of over 2 billion active devices represents a great foundation for future expansion of our ecosystem, and it continues to grow even during difficult macroeconomic conditions, which speaks to the exceptionally high levels of customer loyalty and satisfaction and our ability to attract new customers to our platform. The growth is coming from every major product category and geographic segment, with strong double-digit increases in emerging markets such as Brazil, Mexico, India, Indonesia, Thailand and Vietnam. Turning to the enterprise market. we are seeing continued adoption of our Services for business like Apple Business Essentials, AppleCare, Tap to Pay and Apple Financial Services. For example, Mars Incorporated has expanded its use of AppleCare for Enterprise to provide timely device support and assurance for iPads deployed across their manufacturing sites. Meanwhile, HCA Healthcare has leveraged Apple Financial Services to manage the annual refresh of its entire fleet of iPhones. This not only ensures that their staff stay current on the latest Apple technology, but also provides them with significant annual savings in the process. Let me now turn to our capital return program and our cash position. We returned over $25 billion to shareholders during the December quarter as our business continues to generate very strong cash flow. This included $3.8 billion in dividends and equivalents and $19 billion through open market repurchases of 133 million Apple shares. We ended the quarter with $165 billion in cash and marketable securities. We repaid $1.4 billion in maturing debt and decreased commercial paper by $8.2 billion, leaving us with total debt of $111 billion. As a result, net cash was $54 billion at the end of the quarter, and we maintain our goal of becoming net cash-neutral over time. As we move into the March quarter, I'd like to review our outlook, which includes the types of forward-looking information that Tejas referred to at the beginning of the call. Given the continued uncertainty around the world in the near term, we are not providing revenue guidance, but we are sharing some directional insights based on the assumption that the macroeconomic outlook and COVID-related impacts to our business do not worsen from what we are projecting today for the current quarter. In total, we expect our March quarter year-over-year revenue performance to be similar to the December quarter. This represents an acceleration in our underlying year-over-year business performance as the December quarter benefited from an extra week. Foreign exchange will continue to be a headwind, and we expect a negative year-over-year impact of 5 percentage points. For Services, we expect revenue to grow year-over-year while continuing to face macroeconomic headwinds in areas such as digital advertising and mobile gaming. For iPhone, we expect our March quarter year-over-year revenue performance to accelerate relative to the December quarter year-over-year revenue performance. For Mac and iPad, we expect revenue for both product categories to decline double digits year-over-year because of challenging compares and macroeconomic headwinds. We expect gross margin to be between 43.5% and 44.5%. We expect OpEx to be between $13.7 billion and $13.9 billion. We expect OI&E to be around negative $100 million, excluding any potential impact from the mark-to-market of minority investments, and our tax rate to be around 16%. Finally, today, our Board of Directors has declared a cash dividend of $0.23 per share of common stock payable on February 16, 2023, to shareholders of record as of February 13, 2023. With that, let's open the call to questions.","evidence_gemma_new":"gross margin","evidence_llama_3_3":"gross margin","evidence_qwen_3_30b":null,"gemma_new_max":0.43,"gemma_new_min":0.43,"llama_3_3_max":0.43,"llama_3_3_min":0.43,"qwen_3_30b_max":null,"qwen_3_30b_min":null}
{"symbol":"AAPL","year":2023,"quarter":1,"date":"2023-Q1","chunk_id":9,"sub_chunk_id":0,"centroid_label":"gross margin","agreed_value":44.0,"count":2,"chunk":"Shannon Cross: Luca, I wanted to dig a bit more into the commentary on gross margins. The guidance, especially at 43.5% to 44.5%, is obviously quite strong. So I'm wondering what's helping you out there, assume mix and some other things. And then how should we think about what currency and hedge is going to do as we look forward? And then I have a follow-up.","evidence_gemma_new":"gross margin","evidence_llama_3_3":null,"evidence_qwen_3_30b":"gross margin 43.5% to 44.5%","gemma_new_max":44.0,"gemma_new_min":44.0,"llama_3_3_max":null,"llama_3_3_min":null,"qwen_3_30b_max":44.0,"qwen_3_30b_min":44.0}
{"symbol":"AAPL","year":2023,"quarter":4,"date":"2023-Q1","chunk_id":17,"sub_chunk_id":0,"centroid_label":"gross margin","agreed_value":45.5,"count":2,"chunk":"Luca Maestri: Well, as you've seen from our results in Q4 and the guidance for Q1, we're obviously experiencing very strong levels of gross margin. The 45.2% was a record for the September quarter. And then, the guidance for Q1 is obviously strong at 45% to 46%. Our gross margins are affected by multiple factors. Obviously, the commodity environment is one of them, as you mentioned. It's been a good environment in recent quarters. But equally important is the mix of what we sell. And obviously, growth in Services for us is favorable, and that has helped our company gross margin. Foreign exchange, on the other hand, has been a drag for us for several quarters, given the strength of the dollar. We don't provide guidance past the December quarter, which is a very important one for us because it's the beginning of the product cycle for many products. And so we feel very good, very confident about, this coming year, and I think the gross margin guidance reflects that.","evidence_gemma_new":"gross margin guidance Q1","evidence_llama_3_3":null,"evidence_qwen_3_30b":"guidance gross margin Q1","gemma_new_max":45.5,"gemma_new_min":45.5,"llama_3_3_max":null,"llama_3_3_min":null,"qwen_3_30b_max":45.5,"qwen_3_30b_min":45.5}
{"symbol":"AAPL","year":2023,"quarter":2,"date":"2023-Q2","chunk_id":35,"sub_chunk_id":0,"centroid_label":"gross margin","agreed_value":0.5,"count":2,"chunk":"Amit Daryanani: I have to as well. I guess, first off on gross margins for the June quarter. They seem to be holding up fairly well, especially given the fact that sales are going down on a sequential basis. So, Luca, I'm wondering if you can just touch on what's driving the strength in gross margin sequentially. It's offsetting the lack of leverage, if you may. And then I also noticed that the range of your gross margin guide is 50 basis points, it's typically 100. What does that entail? What does that mean?","evidence_gemma_new":"gross margin","evidence_llama_3_3":"gross margin 50 basis points","evidence_qwen_3_30b":null,"gemma_new_max":0.5,"gemma_new_min":0.5,"llama_3_3_max":0.5,"llama_3_3_min":0.5,"qwen_3_30b_max":null,"qwen_3_30b_min":null}
{"symbol":"AAPL","year":2023,"quarter":2,"date":"2023-Q2","chunk_id":3,"sub_chunk_id":0,"centroid_label":"gross margin","agreed_value":44.25,"count":2,"chunk":"Luca Maestri: Thank you, Tim, and good afternoon, everyone. Revenue for the March quarter was $94.8 billion, down 3% from last year and better than our expectations. Foreign exchange had a negative impact of over five percentage points on our results, in line with what we had expected. On a constant currency basis, our revenue grew year-over-year in total and in the majority of the markets we track. In addition to the records in emerging markets that Tim mentioned, we also set March quarter records in Australia, Canada, Spain and Switzerland, among others. Products revenue was $73.9 billion, down 5% from last year, due to challenging compares on Mac and iPad. iPhone, however, reached a March quarter revenue record thanks to very strong performance in emerging markets from South Asia and India to Latin America and the Middle East. During the quarter, our installed base of active devices continued to grow at a nice pace thanks to extremely high levels of customer satisfaction and loyalty, and reached an all-time high for all major product categories and geographic segments. Our Services set an all-time revenue record of $20.9 billion, up 5% year-over-year, on top of growing 17% in the March quarter a year ago. We reached an all-time services revenue record in Greater China and March quarter records in Americas, Europe and Rest of Asia Pacific. Company gross margin was 44.3%, up 130 basis points from last quarter, driven by cost savings and favorable mix shift towards services partially offset by leverage. Products gross margin was 36.7%, decreasing 30 basis points sequentially due to seasonal loss of leverage and mix, partially offset by favorable costs. Services gross margin was 71%, up 20 basis points sequentially. Operating expenses of $13.7 billion were at the low end of the guidance range we provided at the beginning of the quarter and continued to decelerate from the December quarter. We are closely managing our spend, but remain focused on long term growth with continued investment in innovation and product development. Net income was $24.2 billion. Diluted earnings per share were a $1.52, unchanged versus last year, and we generated very strong operating cash flow of $28.6 billion. Let me now provide more detail for each of our revenue categories. iPhone revenue set a March quarter record of $51.3 billion, up 2% year-over-year despite significant foreign exchange headwinds and a challenging macroeconomic environment. We set March quarter records in several developed and emerging markets with India, Indonesia, Turkey and the UAE doubling on a year-over-year basis. Our active installed base of iPhone grew to a new all-time high and was up in all our geographic segments. We are very pleased by the results of the latest survey of US Consumers from 451 Research, which measured customer satisfaction at 99% for the iPhone 14 family. Mac revenue was $7.2 billion, down 31% year-over-year and in line with our expectations. These results were driven by the challenging macroeconomic environment coupled with a difficult compare against last year's launch of the completely reimagined M1 MacBook Pros. Despite this, the installed base of active Macs reached an all-time high across all geographic segments and we continue to see strong upgraded activity to Apple silicon. Also, the latest survey of US Consumers from 451 Research reported customer satisfaction at 96% for Mac. iPad generated $6.7 billion in revenue, down 13% year-over-year and in line with our expectations. This performance was due to two key factors, a tough compare against the launch of iPad Air powered by the M1 chip in the year ago quarter and headwinds from the macroeconomic environment. The iPad installed base reached a new all-time high in all geographic segments thanks to exceptional customer loyalty and a high number of new customers. In fact, over half of the customers who purchased iPads during the quarter were new to the product. Wearables, home and accessories revenue was $8.8 billion, down 1% year-over-year as the category experienced the impact from the macroeconomic environment. However, we did set March quarter records both in the US and in Greater China. We continue to see strength in our Watch installed base, which set a new all-time record, thanks to very high customer loyalty and new two rates, nearly two thirds of customers purchasing an Apple Watch during the quarter were new to the product. Moving to Services, we reached a new all-time revenue record of $20.9 billion. And in addition to the all-time records Tim mentioned earlier, we set March quarter records for advertising Apple Care and Video. Despite these records, as we saw in recent quarters, certain services offerings such as digital advertising and mobile gaming continue to be affected by the current macroeconomic environment. Stepping back, however, the continued growth in Services is the reflection of our ecosystem strength and the positive momentum we are seeing across several key metrics. First, our growing installed base of over 2 billion active devices represents a great foundation for future expansion of our ecosystem. We continue to grow across every major product category and geographic segment, thanks to very high levels of customer loyalty and satisfaction. Second, we saw increased customer engagement with our services during the quarter. Both our transacting accounts and paid accounts grew double digits year-over-year, each setting a new all-time record. Third, paid subscriptions showed strong growth. We now have more than $975 million paid subscriptions across the Services on our platform, up 150 million during the last 12 months and nearly double the number of paid subscriptions we had only three years ago. And finally, we continue to improve the breadth and the quality of our current services offerings from new content on Apple TV Plus to great new features available in Apple Pay and Apple Music, which we believe our customers will love. Turning to the enterprise market, we see business customers continuing to invest in the Apple platform to drive higher employee productivity and satisfaction. In Brazil, Boticario Group, the world's largest cosmetics franchiser, originally starting with iPhone, 12 employees manage operations across a network of retail stores, franchisees and resellers. As it continues to digitize its business, Boticario has chosen to move all software development in house and adopted Mac as the standard device for all of their developer teams across the world. In small business, we see an increasing number of customers relying on Apple hardware, software and services to power their businesses forward, from accepting payments on iPhone, to tracking inventory on Mac or iPad, to managing employee devices with Apple Business Essentials. As we celebrate National Small Business week here in the US, we are proud to continue supporting the small business community. Let me now turn to our cash position and capital return program. We ended the quarter with over $166 billion in cash and marketable securities. We repaid $2.3 billion in maturing debt and increased commercial paper by about $300 million, leaving us with total debt of $110 billion. As a result, net cash was $57 billion at the end of the quarter. During the March quarter, we returned over $23 billion to shareholders, including $3.7 billion in dividends and equivalents and $19.1 billion through open market repurchases of $129 million Apple shares. Given the continued confidence we have in our business now and into the future, today our Board has authorized an additional $90 billion for share repurchases as we maintain our goal of getting to net cash neutral over time. We're also raising our dividend by 4% to $0.24 a share, and we continue to plan for annual increases in the dividend going forward. As we move ahead into the June 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. We expect our June quarter year-over-year revenue performance to be similar to the March quarter, assuming that the macroeconomic outlook does not worsen from what we are projecting today for the current quarter. Foreign exchange will continue to be a headwind and we expect a negative year-over-year impact of nearly four percentage points. For Services, we expect our June quarter year-over-year revenue growth to be similar to the March quarter, while continuing to face macroeconomic headwinds in areas such as digital advertising and mobile gaming. We expect gross margin to be between 44% and 44.5%. We expect OpEx to be between $13.6 billion and $13.8 billion. We expect OINE to be around negative $250 million excluding any potential impact from the mark-to-market of minority investments and our tax rate to be around 16%. Finally reflecting the dividend increase I mentioned earlier, today, our Board of Directors has declared a cash dividend of $0.24 per share of common stock payable on May 18, 2023, to shareholders of record as on May 15, 2023. With that, let's open the call to questions.","evidence_gemma_new":"gross margin","evidence_llama_3_3":null,"evidence_qwen_3_30b":"gross margin between 44% and 44.5%","gemma_new_max":44.25,"gemma_new_min":44.25,"llama_3_3_max":null,"llama_3_3_min":null,"qwen_3_30b_max":44.25,"qwen_3_30b_min":44.25}
{"symbol":"AAPL","year":2023,"quarter":3,"date":"2023-Q3","chunk_id":10,"sub_chunk_id":0,"centroid_label":"gross margin","agreed_value":0.45,"count":2,"chunk":"Shannon Cross: Sorry about that. I'm not sure why I cut off. In terms of gross margin, you were at the high end of the range [Technical Difficulty] and you guided to 45% at the high end, which is, I think, higher than I remember in 20 years of covering you. So how should we think about puts and takes of gross margin? And it seems like there's like a perfect storm of good things. So I just -- maybe if you can talk about how you're thinking about it more holistically.","evidence_gemma_new":"gross margin","evidence_llama_3_3":"gross margin guided to","evidence_qwen_3_30b":null,"gemma_new_max":0.45,"gemma_new_min":0.45,"llama_3_3_max":0.45,"llama_3_3_min":0.45,"qwen_3_30b_max":null,"qwen_3_30b_min":null}
{"symbol":"AAPL","year":2023,"quarter":3,"date":"2023-Q3","chunk_id":3,"sub_chunk_id":0,"centroid_label":"gross margin","agreed_value":44.5,"count":2,"chunk":"Luca Maestri: Thank you, Tim, and good afternoon, everyone. Revenue for the June quarter was $81.8 billion, down 1% from last year and better than our expectations despite nearly 4 percentage points of negative impact from foreign exchange. On a constant currency basis, our revenue grew year-over-year in total and in the majority of the markets we track. We set June quarter records in both Europe and Greater China and continue to see strong performance across our emerging markets driven by iPhone. Products revenue was $60.6 billion, down 4% from last year, as we faced FX headwinds and an uneven macroeconomic environment. However, our installed base reached an all-time high across all geographic segments, driven by a June quarter record for iPhone switchers and high new-to rates in Mac, iPad and Watch, coupled with very high levels of customer satisfaction and loyalty. Our Services revenue set an all-time record of $21.2 billion, up 8% year-over-year and grew double digits in constant currency. Our performance was strong around the world as we reach all-time Services revenue records in Americas and Europe and June quarter records in Greater China and rest of Asia Pacific. Company gross margin was 44.5%, a record level for the June quarter and up 20 basis points sequentially, driven by cost savings and favorable mix shift towards Services, partially offset by a seasonal loss of leverage. Products gross margin was 35.4%, down 130 basis points from last quarter due to seasonal loss of leverage and mix, partially offset by favorable costs. Services gross margin was 70.5%, decreasing 50 basis points sequentially. Operating expenses of $13.4 billion were below the low end of the guidance range we provided at the beginning of the quarter and decelerated from the March quarter. We continue to take a deliberate approach in managing our spend with strong focus on innovation and new product development. The results of these actions delivered net income of $19.9 billion, diluted earnings per share of $1.26, up 5% versus last year, and very strong operating cash flow of $26.4 billion. Let me now provide more detail for each of our revenue categories. iPhone revenue was $39.7 billion, down 2% year-over-year but grew on a constant currency basis. We set revenue records in several markets around the world, including an all-time record in India and June quarter records in Latin America, the Middle East and Africa, Indonesia, the Philippines, Italy, the Netherlands and the U.K. Our iPhone active installed base grew to a new all-time high, thanks to a June quarter record in switchers. This is a testament to our extremely high levels of customer satisfaction, which 451 Research recently measured at 98% for the iPhone 14 family in the U.S. Mac generated $6.8 billion in revenue, down 7% year-over-year. We continue to invest in our Mac portfolio. And this past quarter, we were pleased to complete the transition to Apple silicon for the entire lineup. This transition has driven both strong upgrade activity and a high number of new customers. In fact, almost half of Mac buyers during the quarter were new to the product. We also saw reported customer satisfaction of 96% for Mac in the U.S. iPad revenue was $5.8 billion, down 20% year-over-year and in line with our expectations. These results were driven by a difficult compare against the full quarter impact of the iPad Air launch in the prior year. At the same time, we continue to attract a large number of new customers to the iPad installed base with over half of the customers who purchased iPads during the quarter being new to the product. And the latest reports from 451 Research indicate customer satisfaction of 96% in the U.S. Wearables, Home and Accessories revenue was $8.3 billion, up 2% year-over-year, with a June quarter record in Greater China and strong performance in several emerging markets. We continue to see Apple Watch expand its reach with about 2\/3 of customers purchasing an Apple Watch during the quarter being new to the product. And this is combined with very high levels of customer satisfaction, which was recently reported at 98% in the United States. Moving on to Services. We reached a new all-time revenue record of $21.2 billion with year-over-year growth accelerating sequentially to 8% and up double digits in constant currency. In addition to the all-time records Tim mentioned earlier, we also set June quarter records for advertising, App Store and Music. We are very pleased with our performance in Services, which is a direct reflection of our ecosystem's strength. First, our installed base of over 2 billion active devices continues to grow at a nice pace and establishes a solid foundation for the future expansion of our ecosystem. Second, we see increased customer engagement with our services. Both our transacting accounts and paid accounts grew double digits year-over-year, each reaching a new all-time high. Third, our paid subscriptions showed strong growth. This past quarter, we reached an important milestone and passed 1 billion paid subscriptions across the services on our platform, up 150 million during the last 12 months and nearly double the number of paid subscriptions we had only 3 years ago. And finally, we continue to improve the breadth and the quality of our current services. From 20 new games on Apple Arcade, to brand-new content on Apple TV+, to the launch of our high-yield savings account with Apple Card, our customers are loving these enhanced offerings. Turning to the enterprise market. Our customers are leveraging Apple products every day to help improve productivity and attract talent. Blackstone, a global investment management firm, is expanding its Apple footprint from their corporate iPhone fleet to now offering the MacBook Air powered by M2 to all of their corporate employees and portfolio companies. Gilead, a leading biopharmaceutical company, has deployed thousands of iPads globally to their sales team. Over the last 6 months, they have also doubled their Mac user base by making MacBook Air available to more employees with a focus on user experience and strong security. Let me now turn to our cash position and capital return program. We ended the quarter with over $166 billion in cash and marketable securities. We repaid $7.5 billion in maturing debt while issuing $5.2 billion of new debt and increasing commercial paper by $2 billion, leaving us with total debt of $109 billion. As a result, net cash was $57 billion at the end of the quarter. During the quarter, we returned over $24 billion to shareholders, including $3.8 billion in dividends and equivalents and $18 billion through open market repurchases of 103 million Apple shares. We continue to believe there is great value in our stock and maintain our target of reaching a net cash neutral position over time. As we move ahead into the September quarter, I'd like to review our outlook, which includes the types of forward-looking information that Saori referred to at the beginning of the call. We expect our September quarter year-over-year revenue performance to be similar to the June quarter, assuming that the macroeconomic outlook doesn't worsen from what we are projecting today for the current quarter. Foreign exchange will continue to be a headwind, and we expect a negative year-over-year revenue impact of over 2 percentage points. We expect iPhone and Services year-over-year performance to accelerate from the June quarter. Also, we expect the revenue for both Mac and iPad to decline by double digits year-over-year due to difficult compares, particularly on the Mac. For both products, we experienced supply disruptions from factory shutdowns in the June quarter a year ago and were able to fulfill significant pent-up demand in the year ago September quarter. We expect gross margin to be between 44% and 45%. We expect OpEx to be between $13.5 billion and $13.7 billion. We expect OI&E to be around negative $250 million, excluding any potential impact from the mark-to-market of minority investments, and our tax rate to be around 16%. Finally, today, our Board of Directors has declared a cash dividend of $0.24 per share of common stock payable on August 17, 2023, to shareholders of record as of August 14, 2023. With that, let's open the call to questions.","evidence_gemma_new":"gross margin","evidence_llama_3_3":null,"evidence_qwen_3_30b":"expect gross margin between 44% and 45%","gemma_new_max":44.5,"gemma_new_min":44.5,"llama_3_3_max":null,"llama_3_3_min":null,"qwen_3_30b_max":44.5,"qwen_3_30b_min":44.5}
{"symbol":"AAPL","year":2023,"quarter":4,"date":"2023-Q4","chunk_id":3,"sub_chunk_id":0,"centroid_label":"gross margin","agreed_value":45.5,"count":2,"chunk":"Luca Maestri: Thank you, Tim, and good afternoon, everyone. Revenue for the September quarter was $89.5 billion, down less than 1% from last year. Foreign exchange had a negative impact of over 2 percentage points. And on a constant-currency basis, our revenue grew year-over-year in total, and in each geographic segment. We set a September quarter record in the Americas and saw strong performance across our emerging markets, where both iPhone and Services grew double digits. Products revenue was $67.2 billion, down 5% from last year, due to very challenging compares on both Mac and iPad, which I will discuss in more detail later on. At the same time, we reached a September quarter record on iPhone, driven by strength in emerging markets. Our total installed-base of active devices reached an all-time high across all products and all geographic segments, thanks to our high levels of customer satisfaction and many new customers joining our ecosystem. Our Services revenue set an all-time record of $22.3 billion, up 16% year-over-year, with growth accelerating sequentially from the June quarter. Our performance in Services were broad based, as we reached all-time revenue records in the Americas, Europe and rest of Asia-Pacific and a September quarter record in Greater China. We also set new records in every Services category. Company gross margin set a September quarter record at 45.2%, up 70 basis points sequentially, driven by leverage and favorable mix, partially offset by foreign exchange. Products gross margin was 36.6%, up 120 basis points sequentially, also driven by leverage and mix, partially offset by foreign exchange. Services gross margin was 70.9%, up 40 basis points from last quarter due to a different mix. Operating expenses of $13.5 billion were at the low end of the guidance range we provided, up 2% year-over-year. Net income was $23 billion, diluted earnings per share was $1.46, up 13% versus last year and a September quarter record, and operating cash flow was strong at $21.6 billion. Let me now provide more detail for each of our revenue categories. iPhone revenue was $43.8 billion, up 3% year-over-year and a new September quarter record. We had strong performance in several markets, including an all-time record in India as September quarter records in Canada, Latin America, the Middle East, and South Asia . Our iPhone active installed base grew to a new all-time high and fiscal 2023 was another record year for switches. We continue to see extremely high levels of customer satisfaction which 451 Research recently measured at 98% in the U.S. Mac revenue was $7.6 billion, down 34% year-over-year, driven by challenging market conditions and compounded by a difficult compare in our own business, whereby last year we experienced supply disruptions from factory shutdowns in the June quarter and were subsequently able to fulfill significant pent-up demand during the September quarter. We also had a difference in launch timing with the MacBook Air launching earlier this year in the June quarter compared to the September quarter last year. We have great confidence in our Mac lineup and are excited about the recently announced iMac and MacBook Pro powered by our M3 chips. Our installed base is at an all-time high and half of Mac buyers during the quarter were new to the product, driven by MacBook Air. Also, we saw reported customer satisfaction of 97% for Mac in the U.S. iPad generated $6.4 billion in revenue, down 10% year-over-year. Similar to Mac, these results were a function of a difficult compare from the supply disruptions in the June quarter a year ago and the subsequent fulfillment of pent-up demand in the September quarter. iPad continues to attract a large number of new customers to the installed base with over half of the customers who purchase iPads during the quarter being new to the product and the latest reports from 451 Research indicate customer satisfaction of 98% in the U.S. Wearables, Home and Accessories revenue was $9.3 billion, down 3% year-over-year. We had a September quarter record in Europe and we saw strong performance in several emerging markets around the world. Apple Watch continues to expand its reach with nearly two-thirds of customers purchasing Apple Watch during the quarter being new to the product and customer satisfaction for the Watch was recently measured at 97% in the U.S. Services had a great quarter. We reached a new all-time revenue record of $22.3 billion, up 16% year-over-year. And we're happy to see growth coming from all categories and every geographic segment, which is a direct result of the strength of our ecosystem. Our installed base of over 2 billion active devices continues to grow at a nice pace and establishes a solid foundation for the future expansion of the ecosystem. And we continue to see increased customer engagement with our Services. Both transacting accounts and paid accounts grew double-digits year-over-year, each reaching a new all-time high. Also our paid subscriptions showed strong growth. We have well over 1 billion paid subscriptions across the services on our platform, nearly double the number we had only three years ago. And finally, we continue to improve the breadth and quality of our current services from exciting new content on Apple TV+ and Apple Arcade to additional storage tiers on iCloud. We believe our customers will love this new offering. Turning to enterprise. We are excited to see our business customers in both developed and emerging markets expand their deployment of Apple products and technologies to drive business innovation and employee satisfaction. Starbucks continuously invest in Apple technology to bring the best experience to the customers and employees, including tens of thousands of iPads across all retail stores to help their teams streamline order management, operations and training. In addition, Starbucks recently refreshed over 10,000 Macs to the latest M2-powered MacBook Air for all store managers, enabling them to do their best work and improve productivity. And in Indonesia, popular technology company GoTo is offering Mac as a choice, so that employees can have the best tools to be most productive. Today, more than half of its workforce are already choosing Mac for work. Let me now turn to our cash position and capital return program. We ended the quarter with over $162 billion in cash and marketable securities. We increased commercial paper by $2 billion, leaving us with total debt of $111 billion. As a result, net cash was $51 billion at the end of the quarter. And our goal of becoming net cash-neutral over time remains unchanged. During the quarter, we returned nearly $25 billion to shareholders, including $3.8 billion in dividends and equivalents and $15.5 billion through open market repurchases of 85 million Apple shares. We also began a $5 billion accelerated share repurchase program in August, resulting in the initial delivery and retirement of 22 million shares. Taking a step back, as we close our 2023 fiscal year, our annual revenue was $383 billion. While it was down 3% from the prior year, it grew on a constant-currency basis despite the volatile and uneven macroeconomic environment. Our year-over-year revenue performance improved each quarter as we went through the year, and so did our earnings per share performance, as we reported double-digit EPS growth in the September quarter. We are particularly pleased with our performance in emerging markets with revenue reaching an all-time record in fiscal 2023 and double-digit growth in constant currency. We are expanding our direct presence in these markets from new Apple retail stores in India to online stores in Vietnam and Chile. And we continue to work with our partners to offer a wide range of affordability programs so that we can best serve our customers. We're very excited about the momentum we have in these markets and the opportunity ahead of us. 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%. Finally, today our Board of Directors has declared a cash dividend of $0.24 per share of common stock, payable on November 16, 2023, to shareholders of record as of November 13, 2023. With that, let's open the call to questions.","evidence_gemma_new":"gross margin September quarter","evidence_llama_3_3":null,"evidence_qwen_3_30b":"gross margin","gemma_new_max":45.2,"gemma_new_min":45.2,"llama_3_3_max":null,"llama_3_3_min":null,"qwen_3_30b_max":45.5,"qwen_3_30b_min":45.5}
{"symbol":"AAPL","year":2024,"quarter":1,"date":"2024-Q1","chunk_id":43,"sub_chunk_id":0,"centroid_label":"gross margin","agreed_value":46.5,"count":2,"chunk":"Luca Maestri: Yes. The -- so the first part of the question was around -- oh, the $5 billion. The $5 billion, as I mentioned, a year ago we had this disruption of supply on iPhone 14 Pro and Pro Max because of the factory shutdown due to the COVID-19 situation. And so, essentially there was pent up demand as we exited December quarter, they got fulfilled and we also did the channel fill associated with it during the March quarter. So close to $5 billion that I mentioned is entirely related to iPhone. On the gross margin side, obviously, we are at very high levels of gross margin. And I'll repeat what I said before, we've had good expansion over the last few quarters and now we are guiding to 46% to 47% and that takes into account everything that is going on, which is, the commodity environment, which is the foreign exchange situation, and obviously the product and services mix. And the outcome of this is the guidance, which obviously is very strong and we're very happy with it.","evidence_gemma_new":"gross margin","evidence_llama_3_3":null,"evidence_qwen_3_30b":"gross margin between 46% and 47%","gemma_new_max":46.5,"gemma_new_min":46.5,"llama_3_3_max":null,"llama_3_3_min":null,"qwen_3_30b_max":46.5,"qwen_3_30b_min":46.5}
{"symbol":"AAPL","year":2024,"quarter":2,"date":"2024-Q2","chunk_id":22,"sub_chunk_id":0,"centroid_label":"gross margin","agreed_value":0.466,"count":2,"chunk":"Luca Maestri: Yes. I mean during the last quarter, commodity costs, and in general, component costs have behaved favorably to us. On the memory front, prices are starting to go up. They've gone up slightly during the March quarter. But in general, I think it's been a period not only this quarter, but the last several quarters where, you know, commodities have behaved well for us. Commodities going cycles and so there's obviously always that possibility. Keep in mind that we are starting from a very high level of gross margins. We reported 46.6%, which is something that we haven't seen in our company in decades. And so we're starting from a good point. As you know, we try to buy ahead when the cycles are favorable to us. And so we will try to mitigate if there are headwinds. But in general, we feel particularly for this cycle, we are in good shape.","evidence_gemma_new":null,"evidence_llama_3_3":"gross margin March quarter","evidence_qwen_3_30b":"gross margins 46.6%","gemma_new_max":null,"gemma_new_min":null,"llama_3_3_max":0.466,"llama_3_3_min":0.466,"qwen_3_30b_max":0.466,"qwen_3_30b_min":0.466}
{"symbol":"AAPL","year":2024,"quarter":2,"date":"2024-Q2","chunk_id":2,"sub_chunk_id":0,"centroid_label":"gross margin","agreed_value":46.0,"count":2,"chunk":"Luca Maestri: Thank you, Tim, and good afternoon, everyone. Revenue for the March quarter was $90.8 billion, down 4% from last year. Foreign exchange had a negative year-over-year impact of 140 basis points on our results. Products revenue was $66.9 billion, down 10% year-over-year due to the challenging compare on iPhone that Tim described earlier, which was partially offset by strength from Mac. And thanks to our unparalleled customer satisfaction and loyalty and a high number of customers who are new to our products, our installed base of active devices reached an all-time high across all products and all geographic segments. Services revenue set an all-time record of $23.9 billion, up 14% year-over-year with record performance in both developed and emerging markets. Company gross margin was 46.6%, up 70 basis points sequentially, driven by cost savings and favorable mix to services, partially offset by leverage. Products gross margin was 36.6%, down 280 basis points sequentially, primarily driven by seasonal loss of leverage and mix, partially offset by favorable costs. Services gross margin was 74.6%, up 180 basis points from last quarter due to a more favorable mix. Operating expenses of $14.4 billion were at the midpoint of the guidance range we provided and up 5% year-over-year. Net income was $23.6 billion, diluted EPS was $1.53 and a March quarter record, and operating cash flow was strong at $22.7 billion. Let me now provide more detail for each of our revenue categories. iPhone revenue was $46 billion, down 10% year-over-year, due to the almost $5 billion impact from a year ago that Tim described earlier. Adjusting for this one-time impact, iPhone revenue would be roughly flat to last year. Our iPhone active installed base grew to a new all-time high in total and in every geographic segment. And during the March quarter, we saw many iPhone models as the top-selling smartphones around the world. In fact, according to a survey from Kantar, an iPhone was the top-selling model in the U.S., Urban China, Australia, the U.K., France, Germany and Japan. And the iPhone 15 family continues to be very popular with customers. 451 Research recently measured customer satisfaction at 99% in the U.S. Mac revenue was $7.5 billion, up 4% year-over-year, driven by the strength of our new MacBook Air, powered by the M3 chip. Customers are loving the incredible AI performance of the latest MacBook Air and MacBook Pro models. And our Mac installed base reached an all-time high with half of our MacBook Air buyers during the quarter being new to Mac. Also customer satisfaction for Mac was recently reported at 96% in the U.S. iPad generated $5.6 billion in revenue, down 17% year-over-year. iPad continued to face a challenging compare against the launch of the M2 iPad Pro and iPad 10th Generation from last year. At the same time, the iPad installed base has continued to grow and is at an all-time high as over half of the customers who purchased iPads during the quarter were new to the product. In addition, the latest reports from 451 Research indicated customer satisfaction of 96% for iPad in the US. Wearables, Home and Accessories revenue was $7.9 billion, down 10% year-over-year due to a difficult launch compare. Last year, we had the continued benefit from the launches of the AirPods Pro second-generation, the Watch SE and the first Watch Ultra. Apple Watch continues to attract new customers, with almost two-thirds of customers purchasing an Apple Watch during the quarter being new to the product, sending the Apple Watch installed base to a new all-time high and customer satisfaction was recently measured at 95% in the U.S. In services, as I mentioned, total revenue reached an all-time record of $23.9 billion, growing 14% year-over-year with our installed-base of active devices continuing to grow at a nice pace. This provides a strong foundation for the future growth of the services business as we continued to see increased customer engagement with our ecosystem. Both transacting accounts and paid accounts reached a new all-time high with paid accounts growing double-digits year-over-year. And paid subscriptions showed strong double-digit growth. We have well over $1 billion paid subscriptions across the services on our platform, more than double the number that we had only four years ago. We continued to improve the breadth and quality of our current services from creating new games on Arcade and great new shows on TV+ to launching additional countries and partners for Apple Pay. Turning to enterprise, our customers continued to invest in Apple products to drive productivity and innovation. We see more and more enterprise customers embracing the Mac. In Healthcare, Epic Systems, the world's largest electronic medical record provider, recently launched its native app for the Mac, making it easier for healthcare organizations like Emory Health to transition thousands of PCs to the Mac for clinical use. And since the launch of Vision Pro last quarter, many leading enterprise customers have been investing in this amazing new product to bring spatial computing apps and experiences to life. We are seeing so many compelling use cases from aircraft engine maintenance training at KLM Airlines to real-time team collaboration for racing at Porsche to immersive kitchen design at Lowe's. We couldn't be more excited about the spatial computing opportunity in enterprise. Taking a quick step back, when we look at our performance during the first-half of our fiscal year, total company revenue was roughly flat to the prior year in spite of having one less week of sales during the period and some foreign exchange headwinds. We were particularly pleased with our strong momentum in emerging markets, as we set first-half revenue records in several countries and regions, including Latin-America, the Middle East, India, Indonesia, the Philippines and Turkey. These results, coupled with double-digit growth in services and strong levels of gross margin, drove a first half diluted EPS record of $3.71, up 9% from last year. Let me now turn to our cash position and capital return program. We ended the quarter with $162 billion in cash and marketable securities. We repaid $3.2 billion in maturing debt and commercial paper was unchanged sequentially, leaving us with total debt of $105 billion. As a result, net cash was $58 billion at the end of the quarter. During the quarter, we returned over $27 billion to shareholders, including $3.7 billion in dividends and equivalents and $23.5 billion through open-market repurchases of $130 million Apple's shares. Given the continued confidence we have in our business now and into the future, our Board has authorized today an additional $110 billion for share repurchases, as we maintain our goal of getting to net cash-neutral over time. We are also raising our dividend by 4% to $0.25 per share of common stock, and we continued to plan for annual increases in the dividend going forward as we've done for the last 12 years. This cash dividend will be payable on May 16, 2024 to shareholders of record as of May 13, 2024. As we move ahead into the June 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. We expect our June quarter total company revenue to grow low-single-digits year-over-year in spite of a foreign exchange headwind of about 2.5 percentage points. We expect our services business to grow double-digits at a rate similar to the growth we reported for the first-half of the fiscal year. And we expect iPad revenue to grow double-digits. We expect gross margin to be between 45.5% to -- and 46.5%. We expect OpEx to be between $14.3 billion and $14.5 billion. We expect OI&E to be around $50 million, excluding any potential impact from the mark-to-market of minority investments and our tax rate to be around 16%. With that, let's open the call to questions.","evidence_gemma_new":"guidance gross margins current quarter","evidence_llama_3_3":null,"evidence_qwen_3_30b":"guidance gross margins sequentially","gemma_new_max":46.0,"gemma_new_min":46.0,"llama_3_3_max":null,"llama_3_3_min":null,"qwen_3_30b_max":46.0,"qwen_3_30b_min":46.0}
{"symbol":"AAPL","year":2024,"quarter":3,"date":"2024-Q3","chunk_id":16,"sub_chunk_id":0,"centroid_label":"gross margin","agreed_value":0.46,"count":2,"chunk":"Luca Maestri: Sure, Ben. I think I'll give you a bit of the walk for the June quarter and then get into the outlook that we provided for the September quarter. At the total company level, we've reported 46.3%. It is down 30 basis points sequentially, and it was really driven by a different mix. Within products, of course, we launched very important products like the iPad during the course of the quarter. But we had an offset from a shift in mix towards Services, and we got some good cost savings. And so when you look at it on a year-over-year basis, we are up significantly on the margin front. And keep in mind that foreign exchange continues to be a bit of a headwind for us. As we go into the September quarter, we are guiding 45.5% to 46.5%, which is kind of within the guidance that we provided last quarter. Again similar dynamics, we expect a slightly different mix. We expect foreign exchange to have a minimal impact sequentially, although a more significant impact on a year-over-year basis. On the commodity side, I think that is what you are referring to, yes we have seen some increases on the memory front, but the rest of the commodities, we see a continuous decline. So in general, we feel -- we're well positioned. And as you know well, these are very high levels of gross margin for us and we are pleased where we are.","evidence_gemma_new":null,"evidence_llama_3_3":"gross margin September quarter","evidence_qwen_3_30b":"guidance gross margin quarter","gemma_new_max":null,"gemma_new_min":null,"llama_3_3_max":0.46,"llama_3_3_min":0.46,"qwen_3_30b_max":0.46,"qwen_3_30b_min":0.46}
{"symbol":"AAPL","year":2024,"quarter":3,"date":"2024-Q3","chunk_id":2,"sub_chunk_id":0,"centroid_label":"gross margin","agreed_value":46.0,"count":2,"chunk":"Luca Maestri : Thank you, Tim, and good afternoon, everyone. We are very pleased to report a new June quarter revenue record of $85.8 billion, up 5% year-over-year, despite 230 basis points of negative foreign exchange impact. We achieved growth in the vast majority of our markets, with June quarter revenue records in the Americas, Europe, and rest of Asia Pacific. Products revenue was $61.6 billion, up 2% year-over-year, driven by the launch of the new iPad Pro and iPad Air. Our installed base of active devices reach an all-time high across all products and geographic segments, thanks to our unmatched levels of customer satisfaction and loyalty and a large number of customers who are new to our products. Services revenue reached an all-time record of $24.2 billion, up 14% year-over-year, with an all-time record in developed markets and a June quarter record in emerging markets. Company gross margin was 46.3% near the high end of our guidance range and down 30 basis points sequentially driven by a different mix within products which was partially offset by a favorable mix shift towards services and cost savings. Products gross margin was 35.3%, down 130 basis points sequentially, primarily driven by mix, partially offset by favorable costs. Services gross margin was 74% down 60 basis points from last quarter. Operating expenses of $14.3 billion were at the low end of the guidance range we provided and up 7% year-over-year. Net income was $21.4 billion, diluted EPS of $1.40 was up 11% year-over-year and set a June quarter record. And operating cash flow was very strong at $28.9 billion, also a June quarter record. Let me get into more detail for each of our revenue categories. iPhone revenue was $39.3 billion, down 1% year-over-year, but grew on a constant currency basis. We set June quarter records across several countries, including the UK, Spain, Poland, Mexico, Indonesia, and the Philippines. And the iPhone Active installed base grew to a new all-time high in total and in every geographic segment. During the June quarter, many iPhone models were among the top selling smartphones around the world. In fact, according to a survey from Kantar, iPhone was the top selling model in the US, urban China, the UK, Germany, Australia, and Japan. Customer satisfaction on the iPhone 15 family continues to be extremely high, with 451 Research measuring it at 98% in the US in their latest reports. Mac generated $7 billion in revenue, up 2% year-over-year, driven by the MacBook Air powered by the M3 chip. We saw particularly strong performance in our emerging markets, with June quarter records for Mac in Latin America, India, and South Asia. The Mac installed base reached an all-time high with half of MacBook Air customers in the quarter being new to Mac. And customer satisfaction for Mac was recently reported at 96% in the US. iPad revenue was $7.2 billion, up 24% year-over-year, driven by the launch of the new iPad Pro and iPad Air. Customers are loving the latest iPad lineup for its new design and display, unparalleled performance, AI capabilities and much more. The iPad install base has continued to grow and is an all-time high, as half of the customers who purchased iPads during the quarter were new to the product. Also, customer satisfaction was recently measured at 97% in the US. Wearables, home and accessories revenue was $8.1 billion, down 2% year-over-year, a sequential acceleration from the March quarter. Watch and AirPods continue to face a difficult compare against prior year launches of the AirPods Pro second generation, the Watch SE and the first Watch Ultra. Apple Watch continues to attract new customers, with almost two-thirds of customers purchasing an Apple Watch during the quarter being new to the product, sending the Apple Watch install base to a new all-time high. And the latest reports from 451 Research indicate a customer satisfaction of 97% for watch in the US. In services, total revenue reached an all-time record of $24.2 billion, growing 14% year-over-year. We continue to have great momentum in services, as the growth of our installed base of active devices, sets a strong foundation for the future expansion of our ecosystem. And we see increased customer engagement with our services offerings. Both transacting accounts and paid accounts reach a new all-time high with paid accounts growing double digits year-over-year. Also, paid subscriptions showed strong double digit growth. We have well over 1 billion paid subscriptions across the services on our platform, more than double the number that we had only four years ago. And we are constantly focused on improving the breadth and quality of our services. From critically acclaimed new content on Apple TV+ to new games on Apple Arcade and the many latest features we previewed during WWDC for iCloud, Apple Pay, Apple Cash, Apple Music, and more. Turning to enterprise, we continue to see businesses, leveraging our entire suite of products to drive productivity and creativity for their teams and customers. USAA, a leading insurance and financial services company, recently expanded beyond their existing iPhone and iPad deployments to provide their employees with the latest MacBook Air. And American Express has continued to add to their fleet of over 10,000 Macs to enhance their employees' productivity, security, and collaboration. We're also excited to see leading organizations such as Boston Children's Hospital and Lufthansa using Apple Vision Pro to build innovative spatial computing experiences to transform the training of their workforces. Let me now turn to our cash position and capital return program. We ended the quarter with $153 billion in cash and marketable securities. We repaid $4.3 billion in maturing debt and increased commercial paper by $1 billion, leaving us with total debt of $101 billion. As a result, net cash was $52 billion at the end of the quarter. During the quarter, we returned over $32 billion to shareholders, including $3.9 billion in dividends and equivalents and $26 billion through open market repurchases of 139 million Apple shares. As we move ahead into the September 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. We expect foreign exchange to continue to be a headwind and to have a negative impact on revenue of about 1.5 percentage points on a year-over-year basis. We expect our September quarter total company revenue to grow year-over-year at a rate similar to the June quarter. We expect services revenue to grow double digits at a rate similar to what we reported in the first three quarters of this fiscal year. We expect gross margin to be between 45.5% and 46.5%. We expect OpEx to be between $14.2 billion and $14.4 billion. We expect OI&E to be around negative $50 million, excluding any potential impact from the mark to market of minority investments, and our tax rate to be around 16.5%. Finally, today our Board of Directors has declared a cash dividend of $0.25 per share of common stock payable on August 15, 2024, to shareholders of record as of August 12, 2024. With that, let's open the call to questions.","evidence_gemma_new":"gross margin guidance current quarter","evidence_llama_3_3":null,"evidence_qwen_3_30b":"expect gross margin September quarter","gemma_new_max":46.0,"gemma_new_min":46.0,"llama_3_3_max":null,"llama_3_3_min":null,"qwen_3_30b_max":46.0,"qwen_3_30b_min":46.0}
{"symbol":"AAPL","year":2024,"quarter":4,"date":"2024-Q4","chunk_id":2,"sub_chunk_id":0,"centroid_label":"gross margin","agreed_value":0.465,"count":2,"chunk":"Luca Maestri: Good afternoon, everyone. And thank you, Tim, for the very kind words. Serving as Apple's CFO has been a real privilege and an amazing journey, and I've greatly appreciated the support from our investors and the analyst community over the years. Kevan is exceptional, and I know you will enjoy interacting with him going forward. Let me now turn to the results for the fourth quarter of our fiscal year. We're very pleased to report a new September quarter revenue record of $94.9 billion, up 6% year-over-year. We grew in the vast majority of the markets we track and achieved September quarter revenue records in the Americas, Europe and Rest of Asia Pacific. Products revenue was $70 billion, up 4% year-over-year, driven by growth in iPhone, iPad and Mac. Our installed base of active devices reached an all-time high across all products and geographic segments, thanks to very high levels of customer satisfaction and loyalty and a large number of customers who are new to our products. Services revenue reached an all-time record of $25 billion, up 12% year-over-year. We saw broad-based strength around the world, reaching all-time records in both developed and emerging markets with double-digit growth and record results across most services categories. Company gross margin was 46.2%, near the high end of our guidance range. Products gross margin was 36.3%, up 100 basis points sequentially, primarily driven by favorable mix. Services gross margin was 74%, unchanged from the prior quarter. Operating expenses of $14.3 billion were at the midpoint of the guidance range we provided at the beginning of the quarter and up 6% year-over-year. During the quarter, we recorded a one-time income tax charge of $10.2 billion, which relates to the impact of the reversal of the European General Court's State Aid decision. When we exclude this one-time charge, net income was $25 billion and diluted earnings per share were a $1.64, up 12% year-over-year, and a September quarter record. Operating cash flow was very strong at $26.8 billion, a new September quarter record. Let me now get into more detail for each of our revenue categories. iPhone revenue was $46.2 billion, up 6% year-over-year, and a September quarter record in total and across several markets, including the US, the Middle East, Korea, and South Asia. The iPhone active installed base grew to a new all-time high in total and in every geographic segment. During the September quarter, many iPhone models were among the top-selling smartphones around the world. In fact, according to a survey from Kantar, iPhone was the top-selling model in the US, Urban China, the UK, Australia, and Japan. We continue to see high levels of customer satisfaction for the iPhone 15 family, with 451 Research recently measuring it at 98% in the US. Mac revenue was $7.7 billion, up 2% year-over-year, driven by the strength in MacBook Air. Customers have been loving the performance of Apple Silicon on Mac and we are very excited to bring the latest M4 family of chips to the lineup. The Mac installed base reached an all-time high with about half of customers in the quarter being new to Mac. And in the latest reports from 451 Research, customer satisfaction was 95% in the US. iPad generated $7 billion in revenue, up 8% year-over-year. In addition to growth in developed markets, we also saw strong performance in many emerging markets, with double-digit growth in Mexico, Brazil, the Middle East, India and South Asia. The iPad installed base reached another all-time high, and over half of the customers who purchased iPads during the quarter were new to the product. Also, customer satisfaction was recently measured at 97% in the US. Wearables, Home and Accessories revenue was $9 billion, down 3% year-over-year. The Apple Watch installed base reached a new all-time high, with over half of customers purchasing an Apple Watch during the quarter being new to the product. And the latest reports from 451 Research indicated customer satisfaction of 96% for watch in the US. Our Services revenue reached an all-time record of $25 billion, growing 12% year-over-year. Services continue to see strong momentum with the growth of our installed base of active devices setting a solid foundation for the future expansion of our ecosystem. And we see increased customer engagement with our services offerings. Both transacting accounts and paid accounts reached a new all-time high, with paid accounts growing double-digits year-over-year. Paid subscriptions also grew double-digits. We have well over 1 billion paid subscriptions across the services on our platform, more than double the number we had only four years ago. And as always, we remain focused on improving the breadth and quality of our services from new games on Apple Arcade to new features like Tap to Cash and pay with installments using Apple Pay to many successful new and returning shows on Apple TV+. This past quarter, we celebrated the five-year anniversary of Apple Card, which was ranked #1 in customer satisfaction among co-branded credit cards by J.D. Power for the fourth year in a row. Turning to enterprise, we continue to see strong demand across our products and services. NVIDIA launched its Mac as a choice program supported by AppleCare for Enterprise and Apple Professional Services with over 10,000 Macs deployed worldwide. And Novartis, a leading global pharmaceutical company, recently chose iPhone 16 as the standard mobile device for all employees. We also see continued momentum with Apple Vision Pro in the enterprise space. UC San Diego Health is the first hospital in the world to test spatial computing apps on Apple Vision Pro in clinical trials for patient surgery in the operating room. Let me now turn to our cash position and capital return program. We ended the quarter with $157 billion in cash and marketable securities. We repaid $2.6 billion in maturing debt and increased commercial paper by $7 billion, leaving us with total debt of $107 billion. As a result, net cash was $50 billion at the end of the quarter. During the quarter, we returned over $29 billion to shareholders, including $3.8 billion in dividends and equivalents and $25 billion through open market repurchases of 112 million Apple shares. 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're providing today assumes that the macroeconomic outlook doesn't worsen from what we are projecting today for the current quarter. We expect our December quarter total company revenue to grow low- to mid-single digits year-over-year. We expect Services revenue to grow double-digits at a rate similar to what we reported in the fiscal year 2024. We expect gross margin to be between 46% and 47%. We expect OpEx to be between $15.3 billion and $15.5 billion. We expect OI&E to be around negative $250 million, excluding any potential impact from the mark to market of minority investments. And our tax rate to be around 16%. Finally, today, our Board of Directors has declared a cash dividend of $0.25 per share of common stock payable on November 14, 2024 to shareholders of record as of November 11, 2024. With that, let us open the call to questions.","evidence_gemma_new":null,"evidence_llama_3_3":"gross margins guiding to December quarter","evidence_qwen_3_30b":"expect gross margin","gemma_new_max":null,"gemma_new_min":null,"llama_3_3_max":0.465,"llama_3_3_min":0.465,"qwen_3_30b_max":0.465,"qwen_3_30b_min":0.465}
{"symbol":"AAPL","year":2024,"quarter":4,"date":"2024-Q4","chunk_id":16,"sub_chunk_id":0,"centroid_label":"gross margin","agreed_value":0.5,"count":2,"chunk":"Erik Woodring: And then, Luca, if I just turn to you, obviously, it's been a pleasure working with you, and we wish you all the best in the next role. There's plenty of debate in the market right now about input costs and commodity prices, and the impact that will have on gross margins. Historically, you do guide gross margins up 50 basis points sequentially, which you just told us about for the December quarter. So, can you maybe just help us understand your view of component prices and broadly whether you still see those as tailwinds to gross margins and how sustainable that tailwind might be, or whether that should become a headwind as we look forward? Thanks so much.","evidence_gemma_new":"gross margins December quarter","evidence_llama_3_3":"gross margins 50 basis points December quarter","evidence_qwen_3_30b":null,"gemma_new_max":0.5,"gemma_new_min":0.5,"llama_3_3_max":0.5,"llama_3_3_min":0.5,"qwen_3_30b_max":null,"qwen_3_30b_min":null}
{"symbol":"AAPL","year":2024,"quarter":4,"date":"2024-Q4","chunk_id":2,"sub_chunk_id":0,"centroid_label":"gross margin","agreed_value":46.5,"count":2,"chunk":"Luca Maestri: Good afternoon, everyone. And thank you, Tim, for the very kind words. Serving as Apple's CFO has been a real privilege and an amazing journey, and I've greatly appreciated the support from our investors and the analyst community over the years. Kevan is exceptional, and I know you will enjoy interacting with him going forward. Let me now turn to the results for the fourth quarter of our fiscal year. We're very pleased to report a new September quarter revenue record of $94.9 billion, up 6% year-over-year. We grew in the vast majority of the markets we track and achieved September quarter revenue records in the Americas, Europe and Rest of Asia Pacific. Products revenue was $70 billion, up 4% year-over-year, driven by growth in iPhone, iPad and Mac. Our installed base of active devices reached an all-time high across all products and geographic segments, thanks to very high levels of customer satisfaction and loyalty and a large number of customers who are new to our products. Services revenue reached an all-time record of $25 billion, up 12% year-over-year. We saw broad-based strength around the world, reaching all-time records in both developed and emerging markets with double-digit growth and record results across most services categories. Company gross margin was 46.2%, near the high end of our guidance range. Products gross margin was 36.3%, up 100 basis points sequentially, primarily driven by favorable mix. Services gross margin was 74%, unchanged from the prior quarter. Operating expenses of $14.3 billion were at the midpoint of the guidance range we provided at the beginning of the quarter and up 6% year-over-year. During the quarter, we recorded a one-time income tax charge of $10.2 billion, which relates to the impact of the reversal of the European General Court's State Aid decision. When we exclude this one-time charge, net income was $25 billion and diluted earnings per share were a $1.64, up 12% year-over-year, and a September quarter record. Operating cash flow was very strong at $26.8 billion, a new September quarter record. Let me now get into more detail for each of our revenue categories. iPhone revenue was $46.2 billion, up 6% year-over-year, and a September quarter record in total and across several markets, including the US, the Middle East, Korea, and South Asia. The iPhone active installed base grew to a new all-time high in total and in every geographic segment. During the September quarter, many iPhone models were among the top-selling smartphones around the world. In fact, according to a survey from Kantar, iPhone was the top-selling model in the US, Urban China, the UK, Australia, and Japan. We continue to see high levels of customer satisfaction for the iPhone 15 family, with 451 Research recently measuring it at 98% in the US. Mac revenue was $7.7 billion, up 2% year-over-year, driven by the strength in MacBook Air. Customers have been loving the performance of Apple Silicon on Mac and we are very excited to bring the latest M4 family of chips to the lineup. The Mac installed base reached an all-time high with about half of customers in the quarter being new to Mac. And in the latest reports from 451 Research, customer satisfaction was 95% in the US. iPad generated $7 billion in revenue, up 8% year-over-year. In addition to growth in developed markets, we also saw strong performance in many emerging markets, with double-digit growth in Mexico, Brazil, the Middle East, India and South Asia. The iPad installed base reached another all-time high, and over half of the customers who purchased iPads during the quarter were new to the product. Also, customer satisfaction was recently measured at 97% in the US. Wearables, Home and Accessories revenue was $9 billion, down 3% year-over-year. The Apple Watch installed base reached a new all-time high, with over half of customers purchasing an Apple Watch during the quarter being new to the product. And the latest reports from 451 Research indicated customer satisfaction of 96% for watch in the US. Our Services revenue reached an all-time record of $25 billion, growing 12% year-over-year. Services continue to see strong momentum with the growth of our installed base of active devices setting a solid foundation for the future expansion of our ecosystem. And we see increased customer engagement with our services offerings. Both transacting accounts and paid accounts reached a new all-time high, with paid accounts growing double-digits year-over-year. Paid subscriptions also grew double-digits. We have well over 1 billion paid subscriptions across the services on our platform, more than double the number we had only four years ago. And as always, we remain focused on improving the breadth and quality of our services from new games on Apple Arcade to new features like Tap to Cash and pay with installments using Apple Pay to many successful new and returning shows on Apple TV+. This past quarter, we celebrated the five-year anniversary of Apple Card, which was ranked #1 in customer satisfaction among co-branded credit cards by J.D. Power for the fourth year in a row. Turning to enterprise, we continue to see strong demand across our products and services. NVIDIA launched its Mac as a choice program supported by AppleCare for Enterprise and Apple Professional Services with over 10,000 Macs deployed worldwide. And Novartis, a leading global pharmaceutical company, recently chose iPhone 16 as the standard mobile device for all employees. We also see continued momentum with Apple Vision Pro in the enterprise space. UC San Diego Health is the first hospital in the world to test spatial computing apps on Apple Vision Pro in clinical trials for patient surgery in the operating room. Let me now turn to our cash position and capital return program. We ended the quarter with $157 billion in cash and marketable securities. We repaid $2.6 billion in maturing debt and increased commercial paper by $7 billion, leaving us with total debt of $107 billion. As a result, net cash was $50 billion at the end of the quarter. During the quarter, we returned over $29 billion to shareholders, including $3.8 billion in dividends and equivalents and $25 billion through open market repurchases of 112 million Apple shares. 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're providing today assumes that the macroeconomic outlook doesn't worsen from what we are projecting today for the current quarter. We expect our December quarter total company revenue to grow low- to mid-single digits year-over-year. We expect Services revenue to grow double-digits at a rate similar to what we reported in the fiscal year 2024. We expect gross margin to be between 46% and 47%. We expect OpEx to be between $15.3 billion and $15.5 billion. We expect OI&E to be around negative $250 million, excluding any potential impact from the mark to market of minority investments. And our tax rate to be around 16%. Finally, today, our Board of Directors has declared a cash dividend of $0.25 per share of common stock payable on November 14, 2024 to shareholders of record as of November 11, 2024. With that, let us open the call to questions.","evidence_gemma_new":"gross margin","evidence_llama_3_3":null,"evidence_qwen_3_30b":"guiding to gross margins December quarter","gemma_new_max":46.5,"gemma_new_min":46.5,"llama_3_3_max":null,"llama_3_3_min":null,"qwen_3_30b_max":46.5,"qwen_3_30b_min":46.5}
{"symbol":"AAPL","year":2023,"quarter":1,"date":"2023-Q1","chunk_id":3,"sub_chunk_id":0,"centroid_label":"ipad revenue","agreed_value":9400000000.0,"count":3,"chunk":"Luca Maestri: Thank you, Tim, and good afternoon, everyone. As Tim mentioned, revenue for the December quarter was $117.2 billion, down 5% from last year. A number of factors had a significant impact on our results. First, we faced a very difficult foreign exchange environment, which affected our performance by nearly 800 basis points. In other words, we grew revenue on a constant currency basis. And in fact, we did so in the vast majority of markets. Second, the macroeconomic environment this past quarter was markedly more challenging than 12 months ago. Third, we experienced significant supply shortages for iPhone 14 Pro and iPhone 14 Pro Max in November and through December. On the other hand, we had the positive impact of the 14th week in the quarter that Tejas just mentioned at the beginning of the call. Products revenue was $96.4 billion, down 8% from last year due to the factors I just called out. At the same time, however, our installed base of active devices grew double digits and achieved all-time records in each geographic segment and in each major product category. We're proud to now have over 2 billion active devices in our installed base. This continued growth in the installed base is due to extremely strong levels of customer satisfaction and loyalty and a high number of customers who are new to our products. The installed base growth also helped our services set an all-time revenue record of $20.8 billion, up 6% over a year ago. We achieved this new milestone despite more than 700 basis points of negative impact from foreign exchange. We reached all-time services revenue records in the Americas, Europe and rest of Asia Pacific and a December quarter record in Greater China. We also set records in many Services categories, including all-time revenue records for cloud services, payment services and music and December quarter records for the App Store and AppleCare. Company gross margin was 43%, up 70 basis points from last quarter due to leverage and favorable mix, partially offset by foreign exchange. Products gross margin was 37%, up 240 basis points sequentially. And Services gross margin was 70.8%, up 30 basis points sequentially, both due to the same factors that impacted total company gross margin. Operating expenses of $14.3 billion were significantly below the guidance range we provided at the beginning of the quarter and grew at a slower pace than in the past as we took actions to respond to the current macro environment. Net income was $30 billion. Diluted earnings per share were $1.88, and we generated very strong operating cash flow of $34 billion. Let me now get into more detail for each of our revenue categories. iPhone revenue was $65.8 billion despite significant foreign exchange headwinds, supply constraints on iPhone 14 Pro and iPhone 14 Pro Max and a challenging macroeconomic environment. In spite of these circumstances, we set all-time iPhone revenue records in Canada, Italy and Spain, and saw strong growth in several emerging markets, including all-time iPhone revenue records for India and Vietnam. Importantly, the installed base of active iPhones continues to grow nicely and is at an all-time high across all geographic segments. In emerging markets, in particular, the installed base grew double digits, and we had record levels of switchers in India and in Mexico. Our customers continue to love their experience with our products with the latest survey of U.S. consumers from 451 Research indicating customer satisfaction of 98% for the iPhone 14 family. Mac revenue was $7.7 billion, down 29% year-over-year and in line with our expectations. There were 3 key drivers for our Mac results. First, we had a challenging compare against last year's launch of the completely reimagined MacBook Pros, our first notebooks with M1 Pro and M1 Max. Second, we believe that the macro environment impacted our Mac performance. And third, we faced significant foreign exchange headwinds. At the same time, however, the installed base of active Macs reached an all-time high across all geographic segments, and we continue to see very strong upgraded activity to Apple silicon. Customer satisfaction with Mac remains very strong at 96% based on the latest survey of U.S. consumers from 451 Research. iPad revenue was $9.4 billion, up 30% year-over-year despite significant FX headwinds. This performance was driven by 2 key items. First, during the December quarter a year ago, we experienced significant supply constraints, while this year, we had enough supply to meet demand. Second, we launched our new iPad and the iPad Pro powered by the M2 chip during the quarter. The iPad installed base reached a new all-time high, thanks to incredible customer loyalty and a high number of new customers. In fact, over half of the customers who purchased iPads during the quarter were new to the product. Wearables, Home and Accessories revenue was $13.5 billion, down 8% year-over-year. The year-over-year decline was driven by significant FX headwinds and a challenging macroeconomic environment. However, our installed base of devices in the category set a new all-time record thanks to the largest number of customers new to our smartwatch that we've ever had in a given quarter. In fact, nearly 2\/3 of customers purchasing an Apple Watch during the quarter were new to the product. Moving to Services. We generated $20.8 billion in revenue, a new all-time record in total and for many Services offerings in spite of a difficult foreign exchange environment, and macroeconomic headwinds impacting certain categories such as digital advertising and mobile gaming. In constant currency, we grew Services revenue double digits on top of growing 24% during the December quarter a year ago. We remain focused on the large long-term opportunity in this category, and we continue to observe several trends that reflect the strength of our ecosystem. For example, we saw increased customer engagement with our Services during the quarter. Both our transacting accounts and paid accounts grew double digits year-over-year, each setting a new all-time record. Paid subscriptions also continued to grow nicely. We now have more than 935 million paid subscriptions across the services on our platform, up more than 150 million during the last 12 months alone and nearly 4x what we had just 5 years ago. And we continue to increase the reach and improve the quality of our offerings. For instance, Apple Pay is now available to millions of merchants in nearly 70 countries and regions. And we saw a record-breaking number of purchases made using Apple Pay globally during the holiday shopping season. Finally, our installed base of over 2 billion active devices represents a great foundation for future expansion of our ecosystem, and it continues to grow even during difficult macroeconomic conditions, which speaks to the exceptionally high levels of customer loyalty and satisfaction and our ability to attract new customers to our platform. The growth is coming from every major product category and geographic segment, with strong double-digit increases in emerging markets such as Brazil, Mexico, India, Indonesia, Thailand and Vietnam. Turning to the enterprise market. we are seeing continued adoption of our Services for business like Apple Business Essentials, AppleCare, Tap to Pay and Apple Financial Services. For example, Mars Incorporated has expanded its use of AppleCare for Enterprise to provide timely device support and assurance for iPads deployed across their manufacturing sites. Meanwhile, HCA Healthcare has leveraged Apple Financial Services to manage the annual refresh of its entire fleet of iPhones. This not only ensures that their staff stay current on the latest Apple technology, but also provides them with significant annual savings in the process. Let me now turn to our capital return program and our cash position. We returned over $25 billion to shareholders during the December quarter as our business continues to generate very strong cash flow. This included $3.8 billion in dividends and equivalents and $19 billion through open market repurchases of 133 million Apple shares. We ended the quarter with $165 billion in cash and marketable securities. We repaid $1.4 billion in maturing debt and decreased commercial paper by $8.2 billion, leaving us with total debt of $111 billion. As a result, net cash was $54 billion at the end of the quarter, and we maintain our goal of becoming net cash-neutral over time. As we move into the March quarter, I'd like to review our outlook, which includes the types of forward-looking information that Tejas referred to at the beginning of the call. Given the continued uncertainty around the world in the near term, we are not providing revenue guidance, but we are sharing some directional insights based on the assumption that the macroeconomic outlook and COVID-related impacts to our business do not worsen from what we are projecting today for the current quarter. In total, we expect our March quarter year-over-year revenue performance to be similar to the December quarter. This represents an acceleration in our underlying year-over-year business performance as the December quarter benefited from an extra week. Foreign exchange will continue to be a headwind, and we expect a negative year-over-year impact of 5 percentage points. For Services, we expect revenue to grow year-over-year while continuing to face macroeconomic headwinds in areas such as digital advertising and mobile gaming. For iPhone, we expect our March quarter year-over-year revenue performance to accelerate relative to the December quarter year-over-year revenue performance. For Mac and iPad, we expect revenue for both product categories to decline double digits year-over-year because of challenging compares and macroeconomic headwinds. We expect gross margin to be between 43.5% and 44.5%. We expect OpEx to be between $13.7 billion and $13.9 billion. We expect OI&E to be around negative $100 million, excluding any potential impact from the mark-to-market of minority investments, and our tax rate to be around 16%. Finally, today, our Board of Directors has declared a cash dividend of $0.23 per share of common stock payable on February 16, 2023, to shareholders of record as of February 13, 2023. With that, let's open the call to questions.","evidence_gemma_new":"iPad revenue","evidence_llama_3_3":"iPad revenue","evidence_qwen_3_30b":"iPad revenue 30%","gemma_new_max":9400000000.0,"gemma_new_min":9400000000.0,"llama_3_3_max":9400000000.0,"llama_3_3_min":9400000000.0,"qwen_3_30b_max":9400000000.0,"qwen_3_30b_min":9400000000.0}
{"symbol":"AAPL","year":2023,"quarter":2,"date":"2023-Q2","chunk_id":2,"sub_chunk_id":0,"centroid_label":"ipad revenue","agreed_value":6700000000.0,"count":3,"chunk":"Tim Cook: Thank you, Suhasini. Good afternoon, everyone, and thanks for joining us. Today, we're reporting revenue of $94.8 billion for the March quarter, which was better than our expectations. We set an all-time record for Services and a March quarter record for iPhone. We were particularly pleased with the performance we saw in emerging markets and achieved all-time records in Mexico, Indonesia, the Philippines, Saudi Arabia, Turkey and the UAE, as well as a number of March quarter records, including in Brazil, Malaysia and India. This result is a testament, first and foremost to our teams around the world who are engaged every day in the work of bringing new innovations to life. It speaks to the incredible power of Apple products and services to enrich people's lives in indispensable ways. And whether it's in the design lab in Cupertino, or in one of the brand new retail stores in India, I am constantly inspired by the way our people come together to make a real difference in the world. During the March quarter, we continued to face foreign exchange headwinds, which had an impact of more than 500 basis points, as well as ongoing challenges related to the macroeconomic environment. Revenue was down 3% year-over-year as a result, while on a constant currency basis, we grew in total and in the vast majority of the markets we tried. Despite these challenges, we continue to manage for the long term and to push the limits of what's possible, always on behalf of the customers who depend on our products whether it's students exploring new frontiers, developers dreaming up their next big idea, or artists taking their creativity to a whole new level. Let me share how these results showed up across our lineup of products and services. Let's start with iPhone, which set a new March quarter record with revenue of $51.3 billion. The iPhone 14 and 14 plus continue to delight users with their long lasting battery and advanced camera. And our pro users continue to rave about the most powerful camera system ever in an iPhone. This March, we were excited to expand emergency SOS via satellite to six new countries, bringing this important safety feature to even more users. We now offer this vital service in 12 countries, and I'm grateful for every note I've received from around the world about the life saving impact of our safety features. Now let's turn to Mac, which recorded $7.2 billion in revenue for the March quarter in line with our expectations. As we noted during our last call, Mac faced a very difficult compare because of the incredibly successful rollout of our M1 chip throughout the Mac lineup last year. And like our other product lines, Mac is facing some macroeconomic and foreign exchange headwinds as well. That said, the advancements we've made in power efficient performance continue to amaze our users. Our M2 Mac Mini customers are raving about the pro level powerhouse packed into an ultra-compact design, and users are marveling at the power and speed at the heart of every M2 powered MacBook Air and MacBook Pro, which allowed them to sustain even the most demanding workloads. iPad revenue was $6.7 billion, which was also in line with our expectations. Similar to Mac, iPad revenue performance was impacted by macroeconomic challenges, foreign exchange headwinds, and a difficult compare with last year when we launched the M1 powered iPad Air. iPad's versatility continues to be its greatest strength as we're helping students learn on the same family of devices artists use to create their next masterpiece. Across wearables, home and accessories, revenue was $8.8 billion. With its exceptional range of game changing health and safety features, Apple Watch becomes more and more indispensable every day. Apple Watch Ultra is attracting adventures, athletes and everyday users with its breakthrough features built for endurance and exploration. And with summer travel season soon heating up, there's no better companion in the air or on the road than AirPods, the best and most popular headphones in the world. Meanwhile, Services set an all-time record with $20.9 billion in revenue for the March quarter. We achieved all time revenue records across App Store, Apple Music, iCloud and payment services. And now, with more than 975 million paid subscriptions, we're reaching even more people with our lineup of services. Apple TV Plus continues to draw praise from customers and reviewers alike. During the past quarter, fans tuned in to incredible new series like Shrinking and The Big Door Prize and got to welcome Ted Lasso back into their homes for a third season. Movies like Tetris are captivating viewers with many more to come, including Martin Scorsese\u2019s Killers of the Flower Moon later this year. Three years since its launch, Apple TV Plus programming has been celebrated across the globe, with over 1,450 nominations and more than 350 wins. Recently, we were thrilled to cheer on The Boy, the Mole, the Fox and the Horse, which won an Academy Award for best Animated Short Film. The first season of our historic tenure partnership with Major League Soccer is well underway with MLS season pass, we've created the ultimate destination for soccer fans, offering subscribers the ability to watch every match with no blackouts. And with baseball season in full swing, Apple TV Plus subscribers can watch their favorite teams with the return of Friday night baseball. This quarter, we launched Apple Music Classical, a standalone app that gives something special to classical music lovers. Apple Music Classical packs the largest library of classical music on Earth into a thoughtful and intuitive design that strikes all the right notes. Whether you're listening with AirPods or HomePod, the premium sound experience of Apple Music Classical will leave you with a feeling of being front row at the symphony just behind the conductor. In March, we also launched Apple Pay Later designed with users privacy and financial health in mind. Apple Pay Later allows users to split purchases into multiple payments with no interest or fees. And last month, we introduced Apple Card Savings Accounts to give users even more value out of their daily cash Apple Card Benefit. At Apple, our customers are at the center of everything we do. Nowhere is that more evident than retail, where our teams are dedicated to sharing the best of Apple with our customers. And we're constantly innovating to deliver exceptional experiences and meet our customers where they are. In the US, we launch Shop with a specialist over video, a new way for customers to learn about iPhone and find the one that's just right for them. And as I noted earlier, in a milestone for Apple, we just opened our first two Apple stores in India, in Mumbai and Delhi. I was there to see it for myself, and I couldn't have been more delighted by the excitement and enthusiasm of the customers, developers, creators and team members I got to spend time with. I've had the chance to connect with customers and teams all around the world in recent months, so many people shared with me that they were fans of Apple, not just because of the innovations we create, but because of the values that guide us, and that means a great deal to us. We're constantly striving to make a positive difference in people's lives and be a force for progress. We're investing in education to give students the skills they need to shape the future. We're helping to create pathways of opportunity for communities of color through our Racial Equity and justice initiative. And every day we're building an even more inclusive and diverse Apple rooted in our culture of belonging. To better understand how our work intersects with our values, look no further than what we're doing for the environment. We just celebrated Earth Day in April, and during that month, Apple announced that its global manufacturing partners now support over 13 gigawatts of renewable energy, a nearly 30% increase in just the last year. This translates to 17.4 million metric tons of avoided carbon emissions, the equivalent of removing nearly 3.8 million cars from the road. We're all investing up to an additional $200 million in our Restore Fund, which is designed to support innovative, scalable, nature based carbon removal projects, with the goal of removing 1 million metric tons of carbon every year. These are just the latest steps on our journey toward our 2030 goal to be carbon neutral across our supply chain and lifecycle of our devices. At the same time, we're advancing renewable energy across our supply chain, we're also sourcing more recycled materials in our products. Last month, we announced our plans to have all Apple design batteries include 100% certified recycled cobalt by 2025, and we remain committed to one day using only recycled and renewable materials in our products. We have a deep sense of mission here at Apple. We believe in the power of innovation to build a better world. We are determined to do our best work on behalf of our customers and to give them the tools that can enrich lives. So we will manage for the long term, just as we always have, with our eyes to the horizon, with limitless creativity, and with a deep belief that we can achieve anything we put our minds to. With that, I'll turn it over to Luca.","evidence_gemma_new":"iPad revenue","evidence_llama_3_3":"iPad revenue March quarter","evidence_qwen_3_30b":"iPad in line with our expectations","gemma_new_max":6700000000.0,"gemma_new_min":6700000000.0,"llama_3_3_max":6700000000.0,"llama_3_3_min":6700000000.0,"qwen_3_30b_max":6700000000.0,"qwen_3_30b_min":6700000000.0}
{"symbol":"AAPL","year":2023,"quarter":3,"date":"2023-Q3","chunk_id":3,"sub_chunk_id":0,"centroid_label":"ipad revenue","agreed_value":5800000000.0,"count":3,"chunk":"Luca Maestri: Thank you, Tim, and good afternoon, everyone. Revenue for the June quarter was $81.8 billion, down 1% from last year and better than our expectations despite nearly 4 percentage points of negative impact from foreign exchange. On a constant currency basis, our revenue grew year-over-year in total and in the majority of the markets we track. We set June quarter records in both Europe and Greater China and continue to see strong performance across our emerging markets driven by iPhone. Products revenue was $60.6 billion, down 4% from last year, as we faced FX headwinds and an uneven macroeconomic environment. However, our installed base reached an all-time high across all geographic segments, driven by a June quarter record for iPhone switchers and high new-to rates in Mac, iPad and Watch, coupled with very high levels of customer satisfaction and loyalty. Our Services revenue set an all-time record of $21.2 billion, up 8% year-over-year and grew double digits in constant currency. Our performance was strong around the world as we reach all-time Services revenue records in Americas and Europe and June quarter records in Greater China and rest of Asia Pacific. Company gross margin was 44.5%, a record level for the June quarter and up 20 basis points sequentially, driven by cost savings and favorable mix shift towards Services, partially offset by a seasonal loss of leverage. Products gross margin was 35.4%, down 130 basis points from last quarter due to seasonal loss of leverage and mix, partially offset by favorable costs. Services gross margin was 70.5%, decreasing 50 basis points sequentially. Operating expenses of $13.4 billion were below the low end of the guidance range we provided at the beginning of the quarter and decelerated from the March quarter. We continue to take a deliberate approach in managing our spend with strong focus on innovation and new product development. The results of these actions delivered net income of $19.9 billion, diluted earnings per share of $1.26, up 5% versus last year, and very strong operating cash flow of $26.4 billion. Let me now provide more detail for each of our revenue categories. iPhone revenue was $39.7 billion, down 2% year-over-year but grew on a constant currency basis. We set revenue records in several markets around the world, including an all-time record in India and June quarter records in Latin America, the Middle East and Africa, Indonesia, the Philippines, Italy, the Netherlands and the U.K. Our iPhone active installed base grew to a new all-time high, thanks to a June quarter record in switchers. This is a testament to our extremely high levels of customer satisfaction, which 451 Research recently measured at 98% for the iPhone 14 family in the U.S. Mac generated $6.8 billion in revenue, down 7% year-over-year. We continue to invest in our Mac portfolio. And this past quarter, we were pleased to complete the transition to Apple silicon for the entire lineup. This transition has driven both strong upgrade activity and a high number of new customers. In fact, almost half of Mac buyers during the quarter were new to the product. We also saw reported customer satisfaction of 96% for Mac in the U.S. iPad revenue was $5.8 billion, down 20% year-over-year and in line with our expectations. These results were driven by a difficult compare against the full quarter impact of the iPad Air launch in the prior year. At the same time, we continue to attract a large number of new customers to the iPad installed base with over half of the customers who purchased iPads during the quarter being new to the product. And the latest reports from 451 Research indicate customer satisfaction of 96% in the U.S. Wearables, Home and Accessories revenue was $8.3 billion, up 2% year-over-year, with a June quarter record in Greater China and strong performance in several emerging markets. We continue to see Apple Watch expand its reach with about 2\/3 of customers purchasing an Apple Watch during the quarter being new to the product. And this is combined with very high levels of customer satisfaction, which was recently reported at 98% in the United States. Moving on to Services. We reached a new all-time revenue record of $21.2 billion with year-over-year growth accelerating sequentially to 8% and up double digits in constant currency. In addition to the all-time records Tim mentioned earlier, we also set June quarter records for advertising, App Store and Music. We are very pleased with our performance in Services, which is a direct reflection of our ecosystem's strength. First, our installed base of over 2 billion active devices continues to grow at a nice pace and establishes a solid foundation for the future expansion of our ecosystem. Second, we see increased customer engagement with our services. Both our transacting accounts and paid accounts grew double digits year-over-year, each reaching a new all-time high. Third, our paid subscriptions showed strong growth. This past quarter, we reached an important milestone and passed 1 billion paid subscriptions across the services on our platform, up 150 million during the last 12 months and nearly double the number of paid subscriptions we had only 3 years ago. And finally, we continue to improve the breadth and the quality of our current services. From 20 new games on Apple Arcade, to brand-new content on Apple TV+, to the launch of our high-yield savings account with Apple Card, our customers are loving these enhanced offerings. Turning to the enterprise market. Our customers are leveraging Apple products every day to help improve productivity and attract talent. Blackstone, a global investment management firm, is expanding its Apple footprint from their corporate iPhone fleet to now offering the MacBook Air powered by M2 to all of their corporate employees and portfolio companies. Gilead, a leading biopharmaceutical company, has deployed thousands of iPads globally to their sales team. Over the last 6 months, they have also doubled their Mac user base by making MacBook Air available to more employees with a focus on user experience and strong security. Let me now turn to our cash position and capital return program. We ended the quarter with over $166 billion in cash and marketable securities. We repaid $7.5 billion in maturing debt while issuing $5.2 billion of new debt and increasing commercial paper by $2 billion, leaving us with total debt of $109 billion. As a result, net cash was $57 billion at the end of the quarter. During the quarter, we returned over $24 billion to shareholders, including $3.8 billion in dividends and equivalents and $18 billion through open market repurchases of 103 million Apple shares. We continue to believe there is great value in our stock and maintain our target of reaching a net cash neutral position over time. As we move ahead into the September quarter, I'd like to review our outlook, which includes the types of forward-looking information that Saori referred to at the beginning of the call. We expect our September quarter year-over-year revenue performance to be similar to the June quarter, assuming that the macroeconomic outlook doesn't worsen from what we are projecting today for the current quarter. Foreign exchange will continue to be a headwind, and we expect a negative year-over-year revenue impact of over 2 percentage points. We expect iPhone and Services year-over-year performance to accelerate from the June quarter. Also, we expect the revenue for both Mac and iPad to decline by double digits year-over-year due to difficult compares, particularly on the Mac. For both products, we experienced supply disruptions from factory shutdowns in the June quarter a year ago and were able to fulfill significant pent-up demand in the year ago September quarter. We expect gross margin to be between 44% and 45%. We expect OpEx to be between $13.5 billion and $13.7 billion. We expect OI&E to be around negative $250 million, excluding any potential impact from the mark-to-market of minority investments, and our tax rate to be around 16%. Finally, today, our Board of Directors has declared a cash dividend of $0.24 per share of common stock payable on August 17, 2023, to shareholders of record as of August 14, 2023. With that, let's open the call to questions.","evidence_gemma_new":"iPad revenue","evidence_llama_3_3":"iPad iPad revenue June quarter","evidence_qwen_3_30b":"iPad revenue down 20% year-over-year","gemma_new_max":5800000000.0,"gemma_new_min":5800000000.0,"llama_3_3_max":5800000000.0,"llama_3_3_min":5800000000.0,"qwen_3_30b_max":5800000000.0,"qwen_3_30b_min":5800000000.0}
{"symbol":"AAPL","year":2023,"quarter":4,"date":"2023-Q4","chunk_id":3,"sub_chunk_id":0,"centroid_label":"ipad revenue","agreed_value":6400000000.0,"count":3,"chunk":"Luca Maestri: Thank you, Tim, and good afternoon, everyone. Revenue for the September quarter was $89.5 billion, down less than 1% from last year. Foreign exchange had a negative impact of over 2 percentage points. And on a constant-currency basis, our revenue grew year-over-year in total, and in each geographic segment. We set a September quarter record in the Americas and saw strong performance across our emerging markets, where both iPhone and Services grew double digits. Products revenue was $67.2 billion, down 5% from last year, due to very challenging compares on both Mac and iPad, which I will discuss in more detail later on. At the same time, we reached a September quarter record on iPhone, driven by strength in emerging markets. Our total installed-base of active devices reached an all-time high across all products and all geographic segments, thanks to our high levels of customer satisfaction and many new customers joining our ecosystem. Our Services revenue set an all-time record of $22.3 billion, up 16% year-over-year, with growth accelerating sequentially from the June quarter. Our performance in Services were broad based, as we reached all-time revenue records in the Americas, Europe and rest of Asia-Pacific and a September quarter record in Greater China. We also set new records in every Services category. Company gross margin set a September quarter record at 45.2%, up 70 basis points sequentially, driven by leverage and favorable mix, partially offset by foreign exchange. Products gross margin was 36.6%, up 120 basis points sequentially, also driven by leverage and mix, partially offset by foreign exchange. Services gross margin was 70.9%, up 40 basis points from last quarter due to a different mix. Operating expenses of $13.5 billion were at the low end of the guidance range we provided, up 2% year-over-year. Net income was $23 billion, diluted earnings per share was $1.46, up 13% versus last year and a September quarter record, and operating cash flow was strong at $21.6 billion. Let me now provide more detail for each of our revenue categories. iPhone revenue was $43.8 billion, up 3% year-over-year and a new September quarter record. We had strong performance in several markets, including an all-time record in India as September quarter records in Canada, Latin America, the Middle East, and South Asia . Our iPhone active installed base grew to a new all-time high and fiscal 2023 was another record year for switches. We continue to see extremely high levels of customer satisfaction which 451 Research recently measured at 98% in the U.S. Mac revenue was $7.6 billion, down 34% year-over-year, driven by challenging market conditions and compounded by a difficult compare in our own business, whereby last year we experienced supply disruptions from factory shutdowns in the June quarter and were subsequently able to fulfill significant pent-up demand during the September quarter. We also had a difference in launch timing with the MacBook Air launching earlier this year in the June quarter compared to the September quarter last year. We have great confidence in our Mac lineup and are excited about the recently announced iMac and MacBook Pro powered by our M3 chips. Our installed base is at an all-time high and half of Mac buyers during the quarter were new to the product, driven by MacBook Air. Also, we saw reported customer satisfaction of 97% for Mac in the U.S. iPad generated $6.4 billion in revenue, down 10% year-over-year. Similar to Mac, these results were a function of a difficult compare from the supply disruptions in the June quarter a year ago and the subsequent fulfillment of pent-up demand in the September quarter. iPad continues to attract a large number of new customers to the installed base with over half of the customers who purchase iPads during the quarter being new to the product and the latest reports from 451 Research indicate customer satisfaction of 98% in the U.S. Wearables, Home and Accessories revenue was $9.3 billion, down 3% year-over-year. We had a September quarter record in Europe and we saw strong performance in several emerging markets around the world. Apple Watch continues to expand its reach with nearly two-thirds of customers purchasing Apple Watch during the quarter being new to the product and customer satisfaction for the Watch was recently measured at 97% in the U.S. Services had a great quarter. We reached a new all-time revenue record of $22.3 billion, up 16% year-over-year. And we're happy to see growth coming from all categories and every geographic segment, which is a direct result of the strength of our ecosystem. Our installed base of over 2 billion active devices continues to grow at a nice pace and establishes a solid foundation for the future expansion of the ecosystem. And we continue to see increased customer engagement with our Services. Both transacting accounts and paid accounts grew double-digits year-over-year, each reaching a new all-time high. Also our paid subscriptions showed strong growth. We have well over 1 billion paid subscriptions across the services on our platform, nearly double the number we had only three years ago. And finally, we continue to improve the breadth and quality of our current services from exciting new content on Apple TV+ and Apple Arcade to additional storage tiers on iCloud. We believe our customers will love this new offering. Turning to enterprise. We are excited to see our business customers in both developed and emerging markets expand their deployment of Apple products and technologies to drive business innovation and employee satisfaction. Starbucks continuously invest in Apple technology to bring the best experience to the customers and employees, including tens of thousands of iPads across all retail stores to help their teams streamline order management, operations and training. In addition, Starbucks recently refreshed over 10,000 Macs to the latest M2-powered MacBook Air for all store managers, enabling them to do their best work and improve productivity. And in Indonesia, popular technology company GoTo is offering Mac as a choice, so that employees can have the best tools to be most productive. Today, more than half of its workforce are already choosing Mac for work. Let me now turn to our cash position and capital return program. We ended the quarter with over $162 billion in cash and marketable securities. We increased commercial paper by $2 billion, leaving us with total debt of $111 billion. As a result, net cash was $51 billion at the end of the quarter. And our goal of becoming net cash-neutral over time remains unchanged. During the quarter, we returned nearly $25 billion to shareholders, including $3.8 billion in dividends and equivalents and $15.5 billion through open market repurchases of 85 million Apple shares. We also began a $5 billion accelerated share repurchase program in August, resulting in the initial delivery and retirement of 22 million shares. Taking a step back, as we close our 2023 fiscal year, our annual revenue was $383 billion. While it was down 3% from the prior year, it grew on a constant-currency basis despite the volatile and uneven macroeconomic environment. Our year-over-year revenue performance improved each quarter as we went through the year, and so did our earnings per share performance, as we reported double-digit EPS growth in the September quarter. We are particularly pleased with our performance in emerging markets with revenue reaching an all-time record in fiscal 2023 and double-digit growth in constant currency. We are expanding our direct presence in these markets from new Apple retail stores in India to online stores in Vietnam and Chile. And we continue to work with our partners to offer a wide range of affordability programs so that we can best serve our customers. We're very excited about the momentum we have in these markets and the opportunity ahead of us. 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%. Finally, today our Board of Directors has declared a cash dividend of $0.24 per share of common stock, payable on November 16, 2023, to shareholders of record as of November 13, 2023. With that, let's open the call to questions.","evidence_gemma_new":"iPad Revenue September quarter","evidence_llama_3_3":"iPad revenue September quarter","evidence_qwen_3_30b":"iPad revenue September quarter","gemma_new_max":6400000000.0,"gemma_new_min":6400000000.0,"llama_3_3_max":6400000000.0,"llama_3_3_min":6400000000.0,"qwen_3_30b_max":6400000000.0,"qwen_3_30b_min":6400000000.0}
{"symbol":"AAPL","year":2024,"quarter":1,"date":"2024-Q1","chunk_id":2,"sub_chunk_id":0,"centroid_label":"ipad revenue","agreed_value":7000000000.0,"count":2,"chunk":"Tim Cook: Thank you. Suhasini. Good afternoon, everyone, and thanks for joining the call. Today, Apple is reporting revenue of $119.6 billion for the December quarter, up 2% from a year ago despite having one less week in the quarter. EPS was $2.18, up 16% from a year ago and an all-time record. We achieved revenue records across more than two dozen countries and regions including all-time records in Europe and rest of Asia-Pacific. We also continue to see strong double-digit growth in many emerging markets with all-time records in Malaysia, Mexico, The Philippines, Poland, and Turkey, as well as December quarter records in India, Indonesia, Saudi Arabia, and Chile. In Services, we set an all-time revenue record with paid subscriptions growing double-digits year-over-year. And I'm pleased to announce today that we have set a new record for our installed base, which has now surpassed 2.2 billion active devices. We are announcing these results on the eve of what is sure to be a historic day as we enter the era of spatial computing. Starting tomorrow, Apple Vision Pro, the most advanced personal electronics device ever, will be available in Apple stores for customers in the U.S. with expansion to other countries later this year. Apple Vision Pro is a revolutionary device built on decades of Apple innovation and it's years ahead of anything else. Apple Vision Pro has a groundbreaking new input system and thousands of innovations, and it will unlock incredible experiences for users and developers that are simply not possible on any other device. There is already so much excitement behind this product from reviewers, customers, and developers. They are praising everything from the incredible experience of watching a movie on a 100-foot screen to remarkable new machine learning capabilities like hand tracking and room mapping. We can't wait for people to experience the magic for themselves. Moments like these are what we live for at Apple. They're why we do what we do. They're why we're so unflinchingly dedicated to groundbreaking innovation and why we're so focused on pushing technology to its limits as we work to enrich the lives of our users. As we look ahead, we will continue to invest in these and other technologies that will shape the future. That includes artificial intelligence where we continue to spend a tremendous amount of time and effort, and we're excited to share the details of our ongoing work in that space later this year. Now, let's turn to the results for the December quarter, beginning with iPhone. We are proud to report that revenue came in at $69.7 billion, 6% higher than a year ago. The iPhone 15 lineup has earned glowing reviews and been embraced by customers. The iPhone 15 and iPhone 15 Plus feature a gorgeous new design with color-infused back glass and contoured edges, Dynamic Island, A16 Bionic, and a new 48 megapixel camera system. And the iPhone 15 Pro and iPhone 15 Pro Max set the gold standard for smartphones with a beautiful and lighter titanium design, industry-leading performance with A17 Pro and our most advanced camera system with the equivalent of seven pro lenses and the ability to record spatial video. Features like Emergency SoS and roadside assistance via satellite bring peace of mind to users when they travel, and I'm grateful for every note I've received about their lifesaving impact. Turning to Mac. Revenue came in at $7.8 billion, up 1% year-over-year, driven by the strength of our latest M3-powered MacBook Pro models in spite of having one less week of sales. Just last week, we got to wish Mac a happy 40th birthday. When it was introduced 40 years ago, Mac changed everything, and through the years, it has done so again and again. Recently, we have been on a tremendous pace of innovation. Since the introduction of Apple silicon in 2020, we've been proud to offer our users unmatched performance and power along with a remarkable Neural Engine for artificial intelligence and machine learning. This past fall, we had an amazing launch of the latest generation of Apple silicon for Mac, M3, M3 Pro, and M3 Max. These chips break new ground in power and performance empowering users to do more than they ever could before, whether they're making a musical masterpiece using the latest features in Logic Pro, or beating their high score in a graphics intensive game. A favorite amongst students, business owners, artists, and video editors, our MacBook Pro lineup is the world's best pro notebook family. And iMac, the world's most capable and best-selling all-in one, is now faster than ever, thanks to M3. In iPad, revenue for the December quarter was $7 billion, down 25% year-over-year due to a difficult compare with the launch of the M2 iPad Pro and the 10th generation iPad during the December quarter last year and one less week of sales. iPad remains the most versatile, capable, and elegant tablet on the market today. It continues to be the go-to-device for students, creators, and more with customers loving iPad's incredible combination of portability and performance. Powerful apps like Final Cut Pro and Logic Pro for iPad allow video and music creators to unleash their creativity in new ways that are only possible on iPad. iPad continues to push the boundaries of what's possible on a tablet. In Wearables, Home and Accessories, revenue came in at $12 billion, down 11% from a year ago due to a difficult compare with the launch timing of several products in this category and the impact of the 14th week last year. Across our latest Apple Watch lineup, we're enabling and encouraging our users to live a healthier day, while making Apple Watch even more intuitive to use. The new double tap gesture on Apple Watch Series 9 and Apple Watch Ultra 2 make it easier to answer calls, play and pause music or take a photo with iPhone. I've been deeply moved by the many touching stories about how features like a regular rhythm notification and fall detection helped Apple Watch users when they needed it most. And for the first time ever, users can choose a carbon-neutral option of any new Apple Watch. Meanwhile, our AirPods lineup continue to be a holiday favorite. In Services, we set an all-time revenue record of $23.1 billion and an 11% year-over-year increase. Because we had one less week this quarter, this growth represents an acceleration from the September quarter, and we achieved all-time revenue records across advertising, cloud services, payment services and video, as well as December quarter records in App Store and AppleCare. Across our services, we're constantly growing our offerings to give users even more to love. With the redesigned Apple TV app, we've made it easier for subscribers to enjoy all their favorite shows, movies and sports, including Apple TV+ hits like Masters of the Air, Monarch, and Slow Horses. We're proud to be a part of Martin Scorsese's Killers of the Flower Moon, a film that has moved audiences and earned more than 200 accolades including Best Film of the Year from the New York Film Critics Circle, nine BAFTA nominations, a Golden Globe win, and 10 Oscar nominations, including Best Picture. Across all Apple TV+ productions, we've now earned 2050 award nominations and 450 wins since we've introduced the service. We're also excited to have a new season of Major League Soccer kicking off this month. We're looking forward to seeing Lionel Messi return to the field and to following all of our favorite teams in what is sure to be an incredible season. And we're counting down to the Apple Music Super Bowl halftime show, featuring Usher. Turning to Retail. In recent months, we opened three stores, including our 100th store in Asia-Pacific. Throughout the holidays, our team members pulled out all the stops to help customers find the perfect gift. And I know our U.S. team members are especially excited to begin demoing Apple Vision Pro for our customers tomorrow. At Apple, we live and breathe innovation. We are driven to pioneer new technology that can enrich our customers' lives, and we're just as intentional about showing up with our values and being a force for good in the world. February is Black History Month, and to honor it, we've launched our new Black Unity Collection, which includes the Black Unity Sport Loop band. This year's designs reflect a lasting commitment to working toward a more equitable world. We also continue to do a central work through our Racial Equity and Justice Initiative, and we're proud to continue providing grants to organizations that are making a real impact in the world. In recent months, we've also taken significant strides in our environmental work. We're partnering with suppliers to bring more clean energy online for Apple production. We're using more recycled materials than ever before and more energy-efficient transportation than ever before. And each day, we are taking more and more steps toward becoming 100% carbon-neutral across all of our products by 2030. Apple is a company that has never shied away from big challenges. That's because we are grounded by a deep sense of purpose and guided by core belief in the transformative power of innovation. And so, we are optimistic about the future, confident in the long-term, and as excited as we've ever been to deliver for our users like only Apple can. With that, I'll turn it over to Luca.","evidence_gemma_new":null,"evidence_llama_3_3":"iPad iPad revenue","evidence_qwen_3_30b":"iPad revenue","gemma_new_max":null,"gemma_new_min":null,"llama_3_3_max":7000000000.0,"llama_3_3_min":7000000000.0,"qwen_3_30b_max":7000000000.0,"qwen_3_30b_min":7000000000.0}
{"symbol":"AAPL","year":2024,"quarter":2,"date":"2024-Q2","chunk_id":1,"sub_chunk_id":0,"centroid_label":"ipad revenue","agreed_value":5600000000.0,"count":3,"chunk":"Tim Cook: Thank you, Suhasini. Good afternoon, everyone, and thanks for joining the call. Today, Apple is reporting revenue of $90.8 billion and an EPS record of $1.53 for the March quarter. We set revenue records in more than a dozen countries and regions. These include, among others, March quarter records in Latin-America and the Middle East, as well as Canada, India, Spain and Turkey. We also achieved an all-time revenue record in Indonesia, one of the many markets where we continue to see so much potential. In services, we set an all-time revenue record, up 14% over the past year. Keep in mind, as we described on the last call, in the March quarter a year-ago, we were able to replenish iPhone channel inventory and fulfill significant pent-up demand from the December quarter COVID-related supply disruptions on the iPhone 14 Pro and 14 Pro Max. We estimate this one-time impact added close to $5 billion to the March quarter revenue last year. If we remove this from last year's results, our March quarter total company revenue this year would have grown. Despite this impact, we were still able to deliver the records I described. Of course, this past quarter, we were thrilled to launch Apple Vision Pro and it has been so wonderful to hear from people who now get to experience the magic of spatial computing. They describe the impossible becoming possible right before their eyes and they share their amazement and their emotions about what they can do now, whether it's reliving their most treasured memories or having a movie theater experience right in their living room. It's also great to see the enthusiasm from the enterprise market. For example, more than half of the Fortune 100 companies have already bought Apple Vision Pro units and are exploring innovative ways to use it to do things that weren't possible before, and this is just the beginning. Looking ahead, we're getting ready for an exciting product announcement next week that we think our customers will love. And next month, we have our Worldwide Developers Conference, which has generated enormous enthusiasm from our developers. We can't wait to reveal what we have in-store. We continue to feel very bullish about our opportunity in Generative AI. We are making significant investments, and we're looking forward to sharing some very exciting things with our customers soon. We believe in the transformative power and promise of AI, and we believe we have advantages that will differentiate us in this new era, including Apple's unique combination of seamless hardware, software and services integration, groundbreaking Apple's silicon, with our industry-leading neural engines and our unwavering focus on privacy, which underpins everything we create. As we push innovation forward, we continue to manage thoughtfully and deliberately through an uneven macroeconomic environment and remain focused on putting our users at the center of everything we do. Now let's turn to our results for the March quarter across each product category, beginning with iPhone. iPhone revenue for the March quarter was $46 billion, down 10% year-over-year. We faced a difficult compare over the previous year due to the $5 billion impact that I mentioned earlier. However, we still saw growth on iPhone in some markets, including Mainland China, and according to Kantar during the quarter, the two best-selling smartphones in Urban China were the iPhone 15 and iPhone 15 Pro Max. I was in China recently where I had the chance to meet with developers and creators who are doing remarkable things with iPhone. And just a couple of weeks ago, I visited Vietnam, Indonesia and Singapore, where it was incredible to see all the ways customers and communities are using our products and services to do amazing things. Everywhere I travel, people have such a great affinity for Apple, and it's one of the many reasons I'm so optimistic about the future. Turning to Mac. March quarter revenue was $7.5 billion, up 4% from a year ago. We had an amazing launch in early March with the new 13-inch and 15-inch MacBook Air. The world's most popular laptop is the best consumer laptop for AI with breakthrough performance of the M3 chip and it\u2019s even more powerful neural engine. Whether it's an entrepreneur starting a new business or a college student finishing their degree, users depend on the power and portability of MacBook Air to take them places they couldn't have gone without it. In iPad, revenue for the March quarter was $5.6 billion, 17% lower year-over-year, due to a difficult compare with the momentum following the launch of M2 iPad Pro and the 10th Generation iPad last fiscal year. iPad continues to stand apart for its versatility, power and performance. For video editors, music makers and creatives of all kinds, iPad is empowering users to do more than they ever could with a tablet. Across Wearables, Home and Accessories, March quarter revenue was $7.9 billion, down 10% from a year-ago due to a difficult launch compare on Watch and AirPods. Apple Watch is helping runners go the extra mile on their wellness journeys, keeping hikers on course with the latest navigation capabilities in watchOS 10, and enabling users of all fitness levels to live a healthier day. Across our watch lineup, we're harnessing AI and machine-learning to power lifesaving features like a regular rhythm notifications and fall detection. I often hear about how much these features mean to users and their loved ones and I'm thankful that so many people are able to get help in their time of greatest need. As I shared earlier, we set an all-time revenue record in services with $23.9 billion, up 14% year-over-year. We also achieved all-time revenue records across several categories and geographic segments. Audiences are tuning in on screens large, small and spatial and are enjoying Apple TV+ Originals like Palm Royale and Sugar. And we have some incredible theatrical releases coming this year, including Wolves, which reunites George Clooney and Brad Pitt. Apple TV+ productions continue to be celebrated as major awards contenders. Since launch, Apple TV+ productions have earned more than 2,100 award nominations and 480 wins. Meanwhile, we're enhancing the live sports experience with a new iPhone app, Apple Sports. This free app allows fans to follow their favorite teams and leagues with real-time scores, stats and more. Apple Sports is the perfect companion for MLS Season Pass subscribers. Turning to retail, our stores continued to be vital spaces for connection and innovation. I was delighted to be in Shanghai for the opening of our latest flagship store. The energy and enthusiasm from our customers was truly something to behold. And across the United States, our incredible retail teams have been sharing Vision Pro demos with customers, delighting them with a profound and emotional experience of using it for the very first time. Everywhere we operate and everything we do, we're guided by our mission to enrich users' lives and lead the world better than we found it, whether we're making Apple podcasts more accessible with a new transcripts feature or helping to safeguard iMessage users' privacy with new protections that can defend against advances in quantum computing. Our environmental work is another great example of how innovation and our values come together. As we work toward our goal of being carbon-neutral across all of our products by 2030, we are proud of how we've been able to innovate and do more for our customers while taking less from the planet. Since 2015, Apple has cut our overall emissions by more than half, while revenue grew nearly 65% during that same time period. And we're now using more recycled materials in our products than ever before. Earlier this spring, we launched our first-ever product to use 50% recycled materials with a new M3-powered MacBook Air. We're also investing in new solar and wind power in the U.S. and Europe, both to power our growing operations and our users' devices. And we're working with partners in India and the U.S. to replenish 100% of the water we use in places that need it most with the goal of delivering billions of gallons of water benefits over the next two decades. Through our Restore Fund, Apple has committed $200 million to nature-based carbon removal projects. And last month, we welcomed two supplier partners as new investors, who will together invest up to an additional $80 million in the fund. Whether we're enriching lives of users across the globe or doing our part to be a force for good in the world, we do everything with a deep sense of purpose at Apple. And I'm proud of the impact we've already made at the halfway point in a year of unprecedented innovation. I couldn't be more excited for the future we have ahead of us, driven by the imagination and innovation of our teams and the enduring importance of our products and services in people's lives. With that, I'll turn it over to Luca.","evidence_gemma_new":"iPad revenue March quarter","evidence_llama_3_3":"iPad revenue March quarter","evidence_qwen_3_30b":"iPad revenue year-over-year","gemma_new_max":5600000000.0,"gemma_new_min":5600000000.0,"llama_3_3_max":5600000000.0,"llama_3_3_min":5600000000.0,"qwen_3_30b_max":5600000000.0,"qwen_3_30b_min":5600000000.0}
{"symbol":"AAPL","year":2024,"quarter":3,"date":"2024-Q3","chunk_id":2,"sub_chunk_id":0,"centroid_label":"ipad revenue","agreed_value":7200000000.0,"count":3,"chunk":"Luca Maestri : Thank you, Tim, and good afternoon, everyone. We are very pleased to report a new June quarter revenue record of $85.8 billion, up 5% year-over-year, despite 230 basis points of negative foreign exchange impact. We achieved growth in the vast majority of our markets, with June quarter revenue records in the Americas, Europe, and rest of Asia Pacific. Products revenue was $61.6 billion, up 2% year-over-year, driven by the launch of the new iPad Pro and iPad Air. Our installed base of active devices reach an all-time high across all products and geographic segments, thanks to our unmatched levels of customer satisfaction and loyalty and a large number of customers who are new to our products. Services revenue reached an all-time record of $24.2 billion, up 14% year-over-year, with an all-time record in developed markets and a June quarter record in emerging markets. Company gross margin was 46.3% near the high end of our guidance range and down 30 basis points sequentially driven by a different mix within products which was partially offset by a favorable mix shift towards services and cost savings. Products gross margin was 35.3%, down 130 basis points sequentially, primarily driven by mix, partially offset by favorable costs. Services gross margin was 74% down 60 basis points from last quarter. Operating expenses of $14.3 billion were at the low end of the guidance range we provided and up 7% year-over-year. Net income was $21.4 billion, diluted EPS of $1.40 was up 11% year-over-year and set a June quarter record. And operating cash flow was very strong at $28.9 billion, also a June quarter record. Let me get into more detail for each of our revenue categories. iPhone revenue was $39.3 billion, down 1% year-over-year, but grew on a constant currency basis. We set June quarter records across several countries, including the UK, Spain, Poland, Mexico, Indonesia, and the Philippines. And the iPhone Active installed base grew to a new all-time high in total and in every geographic segment. During the June quarter, many iPhone models were among the top selling smartphones around the world. In fact, according to a survey from Kantar, iPhone was the top selling model in the US, urban China, the UK, Germany, Australia, and Japan. Customer satisfaction on the iPhone 15 family continues to be extremely high, with 451 Research measuring it at 98% in the US in their latest reports. Mac generated $7 billion in revenue, up 2% year-over-year, driven by the MacBook Air powered by the M3 chip. We saw particularly strong performance in our emerging markets, with June quarter records for Mac in Latin America, India, and South Asia. The Mac installed base reached an all-time high with half of MacBook Air customers in the quarter being new to Mac. And customer satisfaction for Mac was recently reported at 96% in the US. iPad revenue was $7.2 billion, up 24% year-over-year, driven by the launch of the new iPad Pro and iPad Air. Customers are loving the latest iPad lineup for its new design and display, unparalleled performance, AI capabilities and much more. The iPad install base has continued to grow and is an all-time high, as half of the customers who purchased iPads during the quarter were new to the product. Also, customer satisfaction was recently measured at 97% in the US. Wearables, home and accessories revenue was $8.1 billion, down 2% year-over-year, a sequential acceleration from the March quarter. Watch and AirPods continue to face a difficult compare against prior year launches of the AirPods Pro second generation, the Watch SE and the first Watch Ultra. Apple Watch continues to attract new customers, with almost two-thirds of customers purchasing an Apple Watch during the quarter being new to the product, sending the Apple Watch install base to a new all-time high. And the latest reports from 451 Research indicate a customer satisfaction of 97% for watch in the US. In services, total revenue reached an all-time record of $24.2 billion, growing 14% year-over-year. We continue to have great momentum in services, as the growth of our installed base of active devices, sets a strong foundation for the future expansion of our ecosystem. And we see increased customer engagement with our services offerings. Both transacting accounts and paid accounts reach a new all-time high with paid accounts growing double digits year-over-year. Also, paid subscriptions showed strong double digit growth. We have well over 1 billion paid subscriptions across the services on our platform, more than double the number that we had only four years ago. And we are constantly focused on improving the breadth and quality of our services. From critically acclaimed new content on Apple TV+ to new games on Apple Arcade and the many latest features we previewed during WWDC for iCloud, Apple Pay, Apple Cash, Apple Music, and more. Turning to enterprise, we continue to see businesses, leveraging our entire suite of products to drive productivity and creativity for their teams and customers. USAA, a leading insurance and financial services company, recently expanded beyond their existing iPhone and iPad deployments to provide their employees with the latest MacBook Air. And American Express has continued to add to their fleet of over 10,000 Macs to enhance their employees' productivity, security, and collaboration. We're also excited to see leading organizations such as Boston Children's Hospital and Lufthansa using Apple Vision Pro to build innovative spatial computing experiences to transform the training of their workforces. Let me now turn to our cash position and capital return program. We ended the quarter with $153 billion in cash and marketable securities. We repaid $4.3 billion in maturing debt and increased commercial paper by $1 billion, leaving us with total debt of $101 billion. As a result, net cash was $52 billion at the end of the quarter. During the quarter, we returned over $32 billion to shareholders, including $3.9 billion in dividends and equivalents and $26 billion through open market repurchases of 139 million Apple shares. As we move ahead into the September 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. We expect foreign exchange to continue to be a headwind and to have a negative impact on revenue of about 1.5 percentage points on a year-over-year basis. We expect our September quarter total company revenue to grow year-over-year at a rate similar to the June quarter. We expect services revenue to grow double digits at a rate similar to what we reported in the first three quarters of this fiscal year. We expect gross margin to be between 45.5% and 46.5%. We expect OpEx to be between $14.2 billion and $14.4 billion. We expect OI&E to be around negative $50 million, excluding any potential impact from the mark to market of minority investments, and our tax rate to be around 16.5%. Finally, today our Board of Directors has declared a cash dividend of $0.25 per share of common stock payable on August 15, 2024, to shareholders of record as of August 12, 2024. With that, let's open the call to questions.","evidence_gemma_new":"iPad revenue","evidence_llama_3_3":" iPad revenue year-over-year","evidence_qwen_3_30b":"iPad revenue 24% higher year-over-year","gemma_new_max":7200000000.0,"gemma_new_min":7200000000.0,"llama_3_3_max":7200000000.0,"llama_3_3_min":7200000000.0,"qwen_3_30b_max":7200000000.0,"qwen_3_30b_min":7200000000.0}
{"symbol":"AAPL","year":2024,"quarter":4,"date":"2024-Q4","chunk_id":1,"sub_chunk_id":0,"centroid_label":"ipad revenue","agreed_value":7000000000.0,"count":3,"chunk":"Tim Cook: Thank you, Suhasini. Good afternoon, everyone, and thanks for joining the call. Today, Apple is reporting revenue of $94.9 billion, a September quarter record and up 6% from a year ago. iPhone grew in every geographic segment, marking a new September quarter revenue record for the category, and Services set an all-time revenue record, up 12% year-over-year. We also set September quarter segment revenue records in the Americas, Europe, and the Rest of Asia Pacific, as well as in a large number of countries, including the United States, Brazil, Mexico, France, the UK, Korea, Malaysia, Thailand, Saudi Arabia, and the UAE. And we continue to be excited by the enthusiasm we're seeing in India, where we set an all-time revenue record. This has been an extraordinary year of innovation at Apple. We brought the revolutionary Apple Vision Pro to customers in February, which brings users tomorrow's technology today. And in June, we announced Apple Intelligence, a remarkable personal intelligence system that combines the power of generative models with personal context to deliver intelligence that is incredibly useful and relevant. Apple Intelligence marks the beginning of a new chapter for Apple innovation and redefines privacy and AI by extending our groundbreaking approach to privacy into the cloud with Private Cloud Compute. Earlier this week, we made the first set of Apple Intelligence features available in US English for iPhone, iPad, and Mac users, with systemwide Writing Tools that help you refine your writing, a more natural and conversational Siri, a more intelligent Photos app, including the ability to create movies simply by typing a description, and new ways to prioritize and stay in the moment with notification summaries and priority messages. And we look forward to additional intelligence features in December, with even more powerful Writing Tools, a new visual intelligence experience that builds on Apple Intelligence, and ChatGPT integration, as well as localized English in several countries, including the UK, Australia, and Canada. These features have already been provided to developers and we're getting great feedback. More features will be rolling out in the coming months, as well as support for more languages, and this is just the beginning. Now, I'll turn to our results for the quarter, beginning with iPhone. iPhone revenues set a September quarter record of $46.2 billion, up 6% from a year ago, with growth in every geographic segment. With the introduction of Apple Intelligence, we're beginning a new era for iPhone. iPhone 16, powered by A18, is equipped with an incredible new 48-megapixel Fusion camera, fantastic photo experiences, and the addition of the action button and camera control. An iPhone 16 Pro is the most advanced iPhone we've ever made, powered by A18 Pro and featuring even larger displays, an industry-leading pro camera system with camera control, and studio quality mics, all with a huge leap in battery life. Turning to Mac, revenue was $7.7 billion, up 2% from a year ago. Just this week, we brought a new generation of Apple Silicon to Mac, M4, M4 Pro, and M4 Max. From blazing fast performance to Apple's most advanced neural engine yet, our latest chips can easily tackle incredibly complex workflows, and they ensure our newest Macs will be the best personal computers for AI the instant they hit stores. With the newest additions to our Mac lineup, customers can choose the Mac that's just right for them, whether that's iMac, the world's best and most beautiful all-in-one; MacBook Air, the world's most popular laptop now with double the starting memory; MacBook Pro, the best Pro notebook anywhere; or the incredible, mighty new Mac mini, our first-ever carbon-neutral Mac. iPad revenue was $7 billion, 8% higher year-over-year. iPad is unlike any other product on the market today, and it's become an essential device in homes, schools, and businesses of all sizes. Recently, we were thrilled to introduce the newest iPad mini, featuring an ultra-compact design built for Apple Intelligence with support for Apple Pencil Pro. It's been a big year for iPad. iPad Air was popular with students and teachers as they got back to school this year, while creators are pushing the boundaries of what's possible with the M4-powered iPad Pro. In Wearables, Home and Accessories, revenue was $9 billion, down 3% from a year ago. During the quarter, we launched the all-new Apple Watch Series 10, bringing a beautiful new design and new capabilities to the world's most popular watch that make it even more powerful, intelligent, and sophisticated. It's the thinnest Apple Watch yet, making it more comfortable than ever, while offering the biggest, most advanced display. watchOS 11 brings some huge new health and fitness insights to users, including sleep apnea notifications, which help to alert people with a potentially serious but often undiagnosed condition. We're proud of the impact we make through our health innovations on watch, and I'm grateful for every note I receive about the importance of watch in people's lives. With AirPods 4, we broke a new ground in comfort and design with our best-ever open-ear headphones available for the first time with active noise cancellation. And we were especially pleased to unveil revolutionary end-to-end hearing health capabilities for AirPods Pro 2 with hearing protection, hearing test, and hearing aid features. These just became available in a software update this week, and we believe this will make a meaningful difference in our users' lives. I've already started getting notes from customers calling the experience life changing. And Apple Vision Pro continues to deliver spatial experiences that weren't possible before, including immersive entertainment like the new short film, Submerged, which gives people a view into the unique storytelling power made possible by spatial computing. Vision Pro has more than 2,500 native spatial apps and 1.5 million compatible apps for visionOS 2, as well as applications companies are building to reimagine how they work. Vision Pro continues to inspire awe in its users, and we're just scratching the surface of what's possible. And just yesterday, we announced we're bringing Vision Pro to Korea and the UAE. As I mentioned earlier, Services achieved an all-time revenue record of $25 billion, up 12% from a year ago, and with all-time revenue records across most of our categories. With Apple TV+, we love celebrating the craft of great storytellers who know how to put on a show. Audiences love to discover new movies like Wolfs, explore acclaimed new series like Disclaimer, and dive back into returning favorites like Slow Horses and Shrinking. Apple TV+ productions have become fixtures at award shows, earning more than 2,300 nominations and more than 500 wins today. Apple also offers a live sports experience in a league of its own with MLS Season Pass, and subscribers have been cheering on their favorite teams in the MLS Cup playoffs. This month, we also marked 10 years of Apple Pay. There's always something magical about being able to buy groceries or pay for movie tickets seamlessly with your Apple device. Today, users choose Apple Pay for purchases across tens of millions of retailers worldwide. And we're excited to make the Apple Pay experience even better, with the option to redeem rewards and access loans from credit cards, debit cards, and other lenders right at checkout. Whenever we celebrate big moments, Apple Stores are the best places to share them with customers. I had an incredible time during launch day in September alongside our team at Apple Fifth Avenue, where energy and enthusiasm filled the air. And in stores all over the world, customers are eager to get a closer look at our latest innovations. We also opened two new stores during the quarter and we can't wait to bring four new stores to customers in India. We're passionate about education and believe technology has a vital role to play in both helping teachers to inspire their students and students to learn about the world around them. In honor of World Teachers' Day, Apple was proud to share new resources for teachers to engage their students in ways that aim to make learning easy and fun. Additionally, we've expanded our education grant program into 100 new schools and communities, helping with everything from access to technology, to educator resources, to scholarships and financial support. As we near the end of the year, we're proud of the progress we've made in our efforts to be carbon-neutral across our entire footprint by the end of the decade. As I mentioned earlier, we were thrilled to introduce our first-ever carbon-neutral Mac with the latest Mac mini. And in another milestone, customers can choose a carbon-neutral option of any Apple Watch. These achievements are amazing for all of us at Apple, and we are determined to reach our 2030 goal. At Apple, across everything we do, we manage for the long term, because we're always thinking about what comes next, the next great challenge, the next innovative idea, the next big breakthrough. As we close out the year, we have the best lineup we've ever had going into the holiday season, including Apple Intelligence, which marks the start of a new chapter for our products. This is just the beginning of what we believe generative AI can do, and I couldn't be more excited for what's to come. Before I hand it over to Luca, with Luca transitioning to a new role with Apple, this will be the final time he's joining our call. So, I just wanted to take a moment to recognize his extraordinary service as Apple's CFO and to thank him for his partnership. I am deeply grateful. In his 10 years in the role, Luca has done truly exceptional work in shaping Apple as we know it today. He has helped manage Apple for the long term, thoughtfully and deliberately. He has helped us enrich the lives of so many around the world, and he has been a leader that people look up to and have learned so much from. I have incredible confidence in our incoming CFO, Kevan Parekh, and we look forward to more of you meeting and working with him going forward. With that, I'll turn it over to Luca.","evidence_gemma_new":"iPad revenue","evidence_llama_3_3":"iPad iPad revenue fourth quarter fiscal year 2024","evidence_qwen_3_30b":"iPad revenue","gemma_new_max":7000000000.0,"gemma_new_min":7000000000.0,"llama_3_3_max":7000000000.0,"llama_3_3_min":7000000000.0,"qwen_3_30b_max":7000000000.0,"qwen_3_30b_min":7000000000.0}
{"symbol":"AAPL","year":2023,"quarter":1,"date":"2023-Q1","chunk_id":3,"sub_chunk_id":0,"centroid_label":"iphone revenues","agreed_value":65800000000.0,"count":3,"chunk":"Luca Maestri: Thank you, Tim, and good afternoon, everyone. As Tim mentioned, revenue for the December quarter was $117.2 billion, down 5% from last year. A number of factors had a significant impact on our results. First, we faced a very difficult foreign exchange environment, which affected our performance by nearly 800 basis points. In other words, we grew revenue on a constant currency basis. And in fact, we did so in the vast majority of markets. Second, the macroeconomic environment this past quarter was markedly more challenging than 12 months ago. Third, we experienced significant supply shortages for iPhone 14 Pro and iPhone 14 Pro Max in November and through December. On the other hand, we had the positive impact of the 14th week in the quarter that Tejas just mentioned at the beginning of the call. Products revenue was $96.4 billion, down 8% from last year due to the factors I just called out. At the same time, however, our installed base of active devices grew double digits and achieved all-time records in each geographic segment and in each major product category. We're proud to now have over 2 billion active devices in our installed base. This continued growth in the installed base is due to extremely strong levels of customer satisfaction and loyalty and a high number of customers who are new to our products. The installed base growth also helped our services set an all-time revenue record of $20.8 billion, up 6% over a year ago. We achieved this new milestone despite more than 700 basis points of negative impact from foreign exchange. We reached all-time services revenue records in the Americas, Europe and rest of Asia Pacific and a December quarter record in Greater China. We also set records in many Services categories, including all-time revenue records for cloud services, payment services and music and December quarter records for the App Store and AppleCare. Company gross margin was 43%, up 70 basis points from last quarter due to leverage and favorable mix, partially offset by foreign exchange. Products gross margin was 37%, up 240 basis points sequentially. And Services gross margin was 70.8%, up 30 basis points sequentially, both due to the same factors that impacted total company gross margin. Operating expenses of $14.3 billion were significantly below the guidance range we provided at the beginning of the quarter and grew at a slower pace than in the past as we took actions to respond to the current macro environment. Net income was $30 billion. Diluted earnings per share were $1.88, and we generated very strong operating cash flow of $34 billion. Let me now get into more detail for each of our revenue categories. iPhone revenue was $65.8 billion despite significant foreign exchange headwinds, supply constraints on iPhone 14 Pro and iPhone 14 Pro Max and a challenging macroeconomic environment. In spite of these circumstances, we set all-time iPhone revenue records in Canada, Italy and Spain, and saw strong growth in several emerging markets, including all-time iPhone revenue records for India and Vietnam. Importantly, the installed base of active iPhones continues to grow nicely and is at an all-time high across all geographic segments. In emerging markets, in particular, the installed base grew double digits, and we had record levels of switchers in India and in Mexico. Our customers continue to love their experience with our products with the latest survey of U.S. consumers from 451 Research indicating customer satisfaction of 98% for the iPhone 14 family. Mac revenue was $7.7 billion, down 29% year-over-year and in line with our expectations. There were 3 key drivers for our Mac results. First, we had a challenging compare against last year's launch of the completely reimagined MacBook Pros, our first notebooks with M1 Pro and M1 Max. Second, we believe that the macro environment impacted our Mac performance. And third, we faced significant foreign exchange headwinds. At the same time, however, the installed base of active Macs reached an all-time high across all geographic segments, and we continue to see very strong upgraded activity to Apple silicon. Customer satisfaction with Mac remains very strong at 96% based on the latest survey of U.S. consumers from 451 Research. iPad revenue was $9.4 billion, up 30% year-over-year despite significant FX headwinds. This performance was driven by 2 key items. First, during the December quarter a year ago, we experienced significant supply constraints, while this year, we had enough supply to meet demand. Second, we launched our new iPad and the iPad Pro powered by the M2 chip during the quarter. The iPad installed base reached a new all-time high, thanks to incredible customer loyalty and a high number of new customers. In fact, over half of the customers who purchased iPads during the quarter were new to the product. Wearables, Home and Accessories revenue was $13.5 billion, down 8% year-over-year. The year-over-year decline was driven by significant FX headwinds and a challenging macroeconomic environment. However, our installed base of devices in the category set a new all-time record thanks to the largest number of customers new to our smartwatch that we've ever had in a given quarter. In fact, nearly 2\/3 of customers purchasing an Apple Watch during the quarter were new to the product. Moving to Services. We generated $20.8 billion in revenue, a new all-time record in total and for many Services offerings in spite of a difficult foreign exchange environment, and macroeconomic headwinds impacting certain categories such as digital advertising and mobile gaming. In constant currency, we grew Services revenue double digits on top of growing 24% during the December quarter a year ago. We remain focused on the large long-term opportunity in this category, and we continue to observe several trends that reflect the strength of our ecosystem. For example, we saw increased customer engagement with our Services during the quarter. Both our transacting accounts and paid accounts grew double digits year-over-year, each setting a new all-time record. Paid subscriptions also continued to grow nicely. We now have more than 935 million paid subscriptions across the services on our platform, up more than 150 million during the last 12 months alone and nearly 4x what we had just 5 years ago. And we continue to increase the reach and improve the quality of our offerings. For instance, Apple Pay is now available to millions of merchants in nearly 70 countries and regions. And we saw a record-breaking number of purchases made using Apple Pay globally during the holiday shopping season. Finally, our installed base of over 2 billion active devices represents a great foundation for future expansion of our ecosystem, and it continues to grow even during difficult macroeconomic conditions, which speaks to the exceptionally high levels of customer loyalty and satisfaction and our ability to attract new customers to our platform. The growth is coming from every major product category and geographic segment, with strong double-digit increases in emerging markets such as Brazil, Mexico, India, Indonesia, Thailand and Vietnam. Turning to the enterprise market. we are seeing continued adoption of our Services for business like Apple Business Essentials, AppleCare, Tap to Pay and Apple Financial Services. For example, Mars Incorporated has expanded its use of AppleCare for Enterprise to provide timely device support and assurance for iPads deployed across their manufacturing sites. Meanwhile, HCA Healthcare has leveraged Apple Financial Services to manage the annual refresh of its entire fleet of iPhones. This not only ensures that their staff stay current on the latest Apple technology, but also provides them with significant annual savings in the process. Let me now turn to our capital return program and our cash position. We returned over $25 billion to shareholders during the December quarter as our business continues to generate very strong cash flow. This included $3.8 billion in dividends and equivalents and $19 billion through open market repurchases of 133 million Apple shares. We ended the quarter with $165 billion in cash and marketable securities. We repaid $1.4 billion in maturing debt and decreased commercial paper by $8.2 billion, leaving us with total debt of $111 billion. As a result, net cash was $54 billion at the end of the quarter, and we maintain our goal of becoming net cash-neutral over time. As we move into the March quarter, I'd like to review our outlook, which includes the types of forward-looking information that Tejas referred to at the beginning of the call. Given the continued uncertainty around the world in the near term, we are not providing revenue guidance, but we are sharing some directional insights based on the assumption that the macroeconomic outlook and COVID-related impacts to our business do not worsen from what we are projecting today for the current quarter. In total, we expect our March quarter year-over-year revenue performance to be similar to the December quarter. This represents an acceleration in our underlying year-over-year business performance as the December quarter benefited from an extra week. Foreign exchange will continue to be a headwind, and we expect a negative year-over-year impact of 5 percentage points. For Services, we expect revenue to grow year-over-year while continuing to face macroeconomic headwinds in areas such as digital advertising and mobile gaming. For iPhone, we expect our March quarter year-over-year revenue performance to accelerate relative to the December quarter year-over-year revenue performance. For Mac and iPad, we expect revenue for both product categories to decline double digits year-over-year because of challenging compares and macroeconomic headwinds. We expect gross margin to be between 43.5% and 44.5%. We expect OpEx to be between $13.7 billion and $13.9 billion. We expect OI&E to be around negative $100 million, excluding any potential impact from the mark-to-market of minority investments, and our tax rate to be around 16%. Finally, today, our Board of Directors has declared a cash dividend of $0.23 per share of common stock payable on February 16, 2023, to shareholders of record as of February 13, 2023. With that, let's open the call to questions.","evidence_gemma_new":"iPhone revenue","evidence_llama_3_3":"iPhone iPhone revenue","evidence_qwen_3_30b":"iPhone revenue $65.8 billion","gemma_new_max":65800000000.0,"gemma_new_min":65800000000.0,"llama_3_3_max":65800000000.0,"llama_3_3_min":65800000000.0,"qwen_3_30b_max":65800000000.0,"qwen_3_30b_min":65800000000.0}
{"symbol":"AAPL","year":2023,"quarter":2,"date":"2023-Q2","chunk_id":2,"sub_chunk_id":0,"centroid_label":"iphone revenues","agreed_value":51300000000.0,"count":3,"chunk":"Tim Cook: Thank you, Suhasini. Good afternoon, everyone, and thanks for joining us. Today, we're reporting revenue of $94.8 billion for the March quarter, which was better than our expectations. We set an all-time record for Services and a March quarter record for iPhone. We were particularly pleased with the performance we saw in emerging markets and achieved all-time records in Mexico, Indonesia, the Philippines, Saudi Arabia, Turkey and the UAE, as well as a number of March quarter records, including in Brazil, Malaysia and India. This result is a testament, first and foremost to our teams around the world who are engaged every day in the work of bringing new innovations to life. It speaks to the incredible power of Apple products and services to enrich people's lives in indispensable ways. And whether it's in the design lab in Cupertino, or in one of the brand new retail stores in India, I am constantly inspired by the way our people come together to make a real difference in the world. During the March quarter, we continued to face foreign exchange headwinds, which had an impact of more than 500 basis points, as well as ongoing challenges related to the macroeconomic environment. Revenue was down 3% year-over-year as a result, while on a constant currency basis, we grew in total and in the vast majority of the markets we tried. Despite these challenges, we continue to manage for the long term and to push the limits of what's possible, always on behalf of the customers who depend on our products whether it's students exploring new frontiers, developers dreaming up their next big idea, or artists taking their creativity to a whole new level. Let me share how these results showed up across our lineup of products and services. Let's start with iPhone, which set a new March quarter record with revenue of $51.3 billion. The iPhone 14 and 14 plus continue to delight users with their long lasting battery and advanced camera. And our pro users continue to rave about the most powerful camera system ever in an iPhone. This March, we were excited to expand emergency SOS via satellite to six new countries, bringing this important safety feature to even more users. We now offer this vital service in 12 countries, and I'm grateful for every note I've received from around the world about the life saving impact of our safety features. Now let's turn to Mac, which recorded $7.2 billion in revenue for the March quarter in line with our expectations. As we noted during our last call, Mac faced a very difficult compare because of the incredibly successful rollout of our M1 chip throughout the Mac lineup last year. And like our other product lines, Mac is facing some macroeconomic and foreign exchange headwinds as well. That said, the advancements we've made in power efficient performance continue to amaze our users. Our M2 Mac Mini customers are raving about the pro level powerhouse packed into an ultra-compact design, and users are marveling at the power and speed at the heart of every M2 powered MacBook Air and MacBook Pro, which allowed them to sustain even the most demanding workloads. iPad revenue was $6.7 billion, which was also in line with our expectations. Similar to Mac, iPad revenue performance was impacted by macroeconomic challenges, foreign exchange headwinds, and a difficult compare with last year when we launched the M1 powered iPad Air. iPad's versatility continues to be its greatest strength as we're helping students learn on the same family of devices artists use to create their next masterpiece. Across wearables, home and accessories, revenue was $8.8 billion. With its exceptional range of game changing health and safety features, Apple Watch becomes more and more indispensable every day. Apple Watch Ultra is attracting adventures, athletes and everyday users with its breakthrough features built for endurance and exploration. And with summer travel season soon heating up, there's no better companion in the air or on the road than AirPods, the best and most popular headphones in the world. Meanwhile, Services set an all-time record with $20.9 billion in revenue for the March quarter. We achieved all time revenue records across App Store, Apple Music, iCloud and payment services. And now, with more than 975 million paid subscriptions, we're reaching even more people with our lineup of services. Apple TV Plus continues to draw praise from customers and reviewers alike. During the past quarter, fans tuned in to incredible new series like Shrinking and The Big Door Prize and got to welcome Ted Lasso back into their homes for a third season. Movies like Tetris are captivating viewers with many more to come, including Martin Scorsese\u2019s Killers of the Flower Moon later this year. Three years since its launch, Apple TV Plus programming has been celebrated across the globe, with over 1,450 nominations and more than 350 wins. Recently, we were thrilled to cheer on The Boy, the Mole, the Fox and the Horse, which won an Academy Award for best Animated Short Film. The first season of our historic tenure partnership with Major League Soccer is well underway with MLS season pass, we've created the ultimate destination for soccer fans, offering subscribers the ability to watch every match with no blackouts. And with baseball season in full swing, Apple TV Plus subscribers can watch their favorite teams with the return of Friday night baseball. This quarter, we launched Apple Music Classical, a standalone app that gives something special to classical music lovers. Apple Music Classical packs the largest library of classical music on Earth into a thoughtful and intuitive design that strikes all the right notes. Whether you're listening with AirPods or HomePod, the premium sound experience of Apple Music Classical will leave you with a feeling of being front row at the symphony just behind the conductor. In March, we also launched Apple Pay Later designed with users privacy and financial health in mind. Apple Pay Later allows users to split purchases into multiple payments with no interest or fees. And last month, we introduced Apple Card Savings Accounts to give users even more value out of their daily cash Apple Card Benefit. At Apple, our customers are at the center of everything we do. Nowhere is that more evident than retail, where our teams are dedicated to sharing the best of Apple with our customers. And we're constantly innovating to deliver exceptional experiences and meet our customers where they are. In the US, we launch Shop with a specialist over video, a new way for customers to learn about iPhone and find the one that's just right for them. And as I noted earlier, in a milestone for Apple, we just opened our first two Apple stores in India, in Mumbai and Delhi. I was there to see it for myself, and I couldn't have been more delighted by the excitement and enthusiasm of the customers, developers, creators and team members I got to spend time with. I've had the chance to connect with customers and teams all around the world in recent months, so many people shared with me that they were fans of Apple, not just because of the innovations we create, but because of the values that guide us, and that means a great deal to us. We're constantly striving to make a positive difference in people's lives and be a force for progress. We're investing in education to give students the skills they need to shape the future. We're helping to create pathways of opportunity for communities of color through our Racial Equity and justice initiative. And every day we're building an even more inclusive and diverse Apple rooted in our culture of belonging. To better understand how our work intersects with our values, look no further than what we're doing for the environment. We just celebrated Earth Day in April, and during that month, Apple announced that its global manufacturing partners now support over 13 gigawatts of renewable energy, a nearly 30% increase in just the last year. This translates to 17.4 million metric tons of avoided carbon emissions, the equivalent of removing nearly 3.8 million cars from the road. We're all investing up to an additional $200 million in our Restore Fund, which is designed to support innovative, scalable, nature based carbon removal projects, with the goal of removing 1 million metric tons of carbon every year. These are just the latest steps on our journey toward our 2030 goal to be carbon neutral across our supply chain and lifecycle of our devices. At the same time, we're advancing renewable energy across our supply chain, we're also sourcing more recycled materials in our products. Last month, we announced our plans to have all Apple design batteries include 100% certified recycled cobalt by 2025, and we remain committed to one day using only recycled and renewable materials in our products. We have a deep sense of mission here at Apple. We believe in the power of innovation to build a better world. We are determined to do our best work on behalf of our customers and to give them the tools that can enrich lives. So we will manage for the long term, just as we always have, with our eyes to the horizon, with limitless creativity, and with a deep belief that we can achieve anything we put our minds to. With that, I'll turn it over to Luca.","evidence_gemma_new":"iPhone revenue March quarter","evidence_llama_3_3":"iPhone revenue March quarter","evidence_qwen_3_30b":"iPhone revenue March quarter record","gemma_new_max":51300000000.0,"gemma_new_min":51300000000.0,"llama_3_3_max":51300000000.0,"llama_3_3_min":51300000000.0,"qwen_3_30b_max":51300000000.0,"qwen_3_30b_min":51300000000.0}
{"symbol":"AAPL","year":2023,"quarter":3,"date":"2023-Q3","chunk_id":3,"sub_chunk_id":0,"centroid_label":"iphone revenues","agreed_value":39700000000.0,"count":3,"chunk":"Luca Maestri: Thank you, Tim, and good afternoon, everyone. Revenue for the June quarter was $81.8 billion, down 1% from last year and better than our expectations despite nearly 4 percentage points of negative impact from foreign exchange. On a constant currency basis, our revenue grew year-over-year in total and in the majority of the markets we track. We set June quarter records in both Europe and Greater China and continue to see strong performance across our emerging markets driven by iPhone. Products revenue was $60.6 billion, down 4% from last year, as we faced FX headwinds and an uneven macroeconomic environment. However, our installed base reached an all-time high across all geographic segments, driven by a June quarter record for iPhone switchers and high new-to rates in Mac, iPad and Watch, coupled with very high levels of customer satisfaction and loyalty. Our Services revenue set an all-time record of $21.2 billion, up 8% year-over-year and grew double digits in constant currency. Our performance was strong around the world as we reach all-time Services revenue records in Americas and Europe and June quarter records in Greater China and rest of Asia Pacific. Company gross margin was 44.5%, a record level for the June quarter and up 20 basis points sequentially, driven by cost savings and favorable mix shift towards Services, partially offset by a seasonal loss of leverage. Products gross margin was 35.4%, down 130 basis points from last quarter due to seasonal loss of leverage and mix, partially offset by favorable costs. Services gross margin was 70.5%, decreasing 50 basis points sequentially. Operating expenses of $13.4 billion were below the low end of the guidance range we provided at the beginning of the quarter and decelerated from the March quarter. We continue to take a deliberate approach in managing our spend with strong focus on innovation and new product development. The results of these actions delivered net income of $19.9 billion, diluted earnings per share of $1.26, up 5% versus last year, and very strong operating cash flow of $26.4 billion. Let me now provide more detail for each of our revenue categories. iPhone revenue was $39.7 billion, down 2% year-over-year but grew on a constant currency basis. We set revenue records in several markets around the world, including an all-time record in India and June quarter records in Latin America, the Middle East and Africa, Indonesia, the Philippines, Italy, the Netherlands and the U.K. Our iPhone active installed base grew to a new all-time high, thanks to a June quarter record in switchers. This is a testament to our extremely high levels of customer satisfaction, which 451 Research recently measured at 98% for the iPhone 14 family in the U.S. Mac generated $6.8 billion in revenue, down 7% year-over-year. We continue to invest in our Mac portfolio. And this past quarter, we were pleased to complete the transition to Apple silicon for the entire lineup. This transition has driven both strong upgrade activity and a high number of new customers. In fact, almost half of Mac buyers during the quarter were new to the product. We also saw reported customer satisfaction of 96% for Mac in the U.S. iPad revenue was $5.8 billion, down 20% year-over-year and in line with our expectations. These results were driven by a difficult compare against the full quarter impact of the iPad Air launch in the prior year. At the same time, we continue to attract a large number of new customers to the iPad installed base with over half of the customers who purchased iPads during the quarter being new to the product. And the latest reports from 451 Research indicate customer satisfaction of 96% in the U.S. Wearables, Home and Accessories revenue was $8.3 billion, up 2% year-over-year, with a June quarter record in Greater China and strong performance in several emerging markets. We continue to see Apple Watch expand its reach with about 2\/3 of customers purchasing an Apple Watch during the quarter being new to the product. And this is combined with very high levels of customer satisfaction, which was recently reported at 98% in the United States. Moving on to Services. We reached a new all-time revenue record of $21.2 billion with year-over-year growth accelerating sequentially to 8% and up double digits in constant currency. In addition to the all-time records Tim mentioned earlier, we also set June quarter records for advertising, App Store and Music. We are very pleased with our performance in Services, which is a direct reflection of our ecosystem's strength. First, our installed base of over 2 billion active devices continues to grow at a nice pace and establishes a solid foundation for the future expansion of our ecosystem. Second, we see increased customer engagement with our services. Both our transacting accounts and paid accounts grew double digits year-over-year, each reaching a new all-time high. Third, our paid subscriptions showed strong growth. This past quarter, we reached an important milestone and passed 1 billion paid subscriptions across the services on our platform, up 150 million during the last 12 months and nearly double the number of paid subscriptions we had only 3 years ago. And finally, we continue to improve the breadth and the quality of our current services. From 20 new games on Apple Arcade, to brand-new content on Apple TV+, to the launch of our high-yield savings account with Apple Card, our customers are loving these enhanced offerings. Turning to the enterprise market. Our customers are leveraging Apple products every day to help improve productivity and attract talent. Blackstone, a global investment management firm, is expanding its Apple footprint from their corporate iPhone fleet to now offering the MacBook Air powered by M2 to all of their corporate employees and portfolio companies. Gilead, a leading biopharmaceutical company, has deployed thousands of iPads globally to their sales team. Over the last 6 months, they have also doubled their Mac user base by making MacBook Air available to more employees with a focus on user experience and strong security. Let me now turn to our cash position and capital return program. We ended the quarter with over $166 billion in cash and marketable securities. We repaid $7.5 billion in maturing debt while issuing $5.2 billion of new debt and increasing commercial paper by $2 billion, leaving us with total debt of $109 billion. As a result, net cash was $57 billion at the end of the quarter. During the quarter, we returned over $24 billion to shareholders, including $3.8 billion in dividends and equivalents and $18 billion through open market repurchases of 103 million Apple shares. We continue to believe there is great value in our stock and maintain our target of reaching a net cash neutral position over time. As we move ahead into the September quarter, I'd like to review our outlook, which includes the types of forward-looking information that Saori referred to at the beginning of the call. We expect our September quarter year-over-year revenue performance to be similar to the June quarter, assuming that the macroeconomic outlook doesn't worsen from what we are projecting today for the current quarter. Foreign exchange will continue to be a headwind, and we expect a negative year-over-year revenue impact of over 2 percentage points. We expect iPhone and Services year-over-year performance to accelerate from the June quarter. Also, we expect the revenue for both Mac and iPad to decline by double digits year-over-year due to difficult compares, particularly on the Mac. For both products, we experienced supply disruptions from factory shutdowns in the June quarter a year ago and were able to fulfill significant pent-up demand in the year ago September quarter. We expect gross margin to be between 44% and 45%. We expect OpEx to be between $13.5 billion and $13.7 billion. We expect OI&E to be around negative $250 million, excluding any potential impact from the mark-to-market of minority investments, and our tax rate to be around 16%. Finally, today, our Board of Directors has declared a cash dividend of $0.24 per share of common stock payable on August 17, 2023, to shareholders of record as of August 14, 2023. With that, let's open the call to questions.","evidence_gemma_new":"iPhone revenue","evidence_llama_3_3":"iPhone iPhone revenue June quarter","evidence_qwen_3_30b":"iPhone revenue down 2% from the year ago quarter's record performance","gemma_new_max":39700000000.0,"gemma_new_min":39700000000.0,"llama_3_3_max":39700000000.0,"llama_3_3_min":39700000000.0,"qwen_3_30b_max":39700000000.0,"qwen_3_30b_min":39700000000.0}
{"symbol":"AAPL","year":2023,"quarter":4,"date":"2023-Q4","chunk_id":2,"sub_chunk_id":0,"centroid_label":"iphone revenues","agreed_value":43800000000.0,"count":3,"chunk":"Tim Cook: Thank you, Suhasini. Good afternoon, everyone, and thanks for joining the call. Today, Apple is reporting revenue of $89.5 billion for the September quarter. We achieved an all-time revenue record in India, as well as September quarter records in several countries, including Brazil, Canada, France, Indonesia, Mexico, the Philippines, Saudi Arabia, Turkey, the UAE, Vietnam and more. iPhone revenue came in ahead of our expectations, setting a September quarter record, as well as quarterly records in many markets, including China mainland, Latin America, the Middle-East, South Asia and an all-time record in India. In services, we set an all-time revenue record with double-digit growth and ahead of our expectations. During the September quarter, we continue to face an uneven macroeconomic environment, including foreign exchange headwinds and we've navigated these challenges by following the same principles that have always guided us. We've continued to invest in the future and manage for the long-term. We've adapted continuously to circumstances beyond our control, while being thoughtful and deliberate on spending. And we've carved a path of groundbreaking innovations and delivered with excellence every step of the way. That includes Apple Vision Pro, which has gotten such an amazing response from developers who are currently creating truly incredible apps. We're excited to get this magical product in the hands of customers early next year. Now let me share more about our products, beginning with iPhone. iPhone revenue came in at $43.8 billion, 3% higher than a year ago, and a new record for the September quarter. This fall, we were thrilled to debut the iPhone 15 lineup. The all-new iPhone 15 and iPhone 15 Plus feature a gorgeous design, powerful cameras and the intuitive Dynamic Island. Powered by the industry-leading A17 Pro, our iPhone15 Pro lineup has a beautiful strong and durable titanium design and the best iPhone camera system ever, including a 5X Telephoto lens on iPhone 15 Pro Max. Customers are loving the entire iPhone 15 family and reviews have been off the charts. In Mac, revenue came in at $7.6 billion, down 34% year-over-year from the prior year's record quarter. This was due to challenging market conditions, as well as difficult compares against the supply disruptions and subsequent demand recapture we experienced a year ago. Earlier this week, we were excited to unveil the next generation of Apple silicon with our incredible family of M3 chips, M3; M3 Pro; and M3 Max. We're continuing to innovate at a tremendous pace. And our industry-leading lineup of personal computers just got even better. The new MacBook Pro lineup brings our most advanced technology to our Pro users, while iMac, the world's best-selling all-in-one, just got faster and more capable. And according to the latest data from Student Monitor, nearly two out of three college students chose a Mac. We couldn't be more excited about the future. Turning to iPad. Revenue for the September quarter was $6.4 billion. iPad sets the gold standard for tablets and our competitors are unable to match the iPad experience that is enabled by our seamless integration of hardware and software. iPad is also our most versatile product. In classrooms around the world, it's helping educators bring lessons to life, while giving students a window into the world around them. And in artist workshops, design studios and everywhere else, creative minds come together, iPad supercharges the creative process, helping users take their ideas farther than they ever could before. Across wearables, home and accessories, revenue came in at $9.3 billion. Apple Watch has become essential in our lives and this is our best Apple Watch lineup ever. With Apple Watch Series 9 and Apple Watch Ultra 2, we're giving people even more tools to stay safe and live healthy, active lives. With the new double tap gesture, users can easily control Apple Watch Series 9 and Apple Watch Ultra 2 using just one hand and without touching the display. It feels like magic. Our latest Apple Watch lineup also includes our first-ever carbon-neutral products, a significant achievement of innovation and determination. Apple's unique ecosystem of hardware, software, and services delivers an unparalleled user experience. During the quarter, we also had the chance to introduce a range of exciting new updates to our software that will allow users to get even more out of their devices. Whether it's personalized contact posters and new face time features in iOS 17, new tools for users to make their experience their own in macOS Sonoma and iPadOS 17, or a bold new look in watchOS 10 that lets you see and do more, faster than ever, Apple is delivering an even better, richer experience that users are loving. Services revenue set an all-time record of $22.3 billion, a 16% year-over-year increase. We achieved all-time revenue records across App Store, advertising, AppleCare, iCloud, payment services, and video, as well as the September quarter revenue record in Apple Music. Whether subscribers are waking up to headlines on Apple News+, getting their morning workout in with Fitness+, feeling the beat with Apple Music on their way to work or school, or unwinding at the end of the day with Apple Arcade, we have so many different services to enrich their day. Apple TV+ continues to delight customers as well, with new and returning shows like the Morning Show, Lessons in Chemistry and Monarch. We're telling impactful stories that inspire imagination and stir the soul. Making movies that make a difference is also at the heart of Apple TV+ and we were thrilled to produce Martin Scorsese's Killers of the Flower Moon, a powerful work of cinema that premiered in theaters around the world last month. We're proud to say that since launch, just over four years ago, Apple TV+ has earned nearly 1,600 award nominations and nearly 400 wins. We also offer subscribers an unprecedented live sports experience with MLS Season Pass. We couldn't be more pleased with how our partnership with Major League Soccer has gone in its first year. Subscriptions to MLS Season Pass have exceeded our expectations and we're excited to continue that momentum next year. With the playoffs now underway, we can't wait to see who takes home MLS cup. And nowhere does the magic of Apple come alive more than it does in our stores. Over the past year, we've continued to find ways to connect with even more customers. We welcomed customers to our first-ever retail locations in India. We also opened doors to new stores in Korea, China and the UK and expanded the Apple store online to Vietnam and Chile. And we have another store opening in China this week. In September, I joined our team at Apple Fifth Avenue on launch day and the energy and excitement were unbelievable. Every time we connect with the customer, we're reminded why we do what we do. From simple joys of creating and sharing memories, to lifesaving features like emergency SoS via satellite, we're enriching lives in ways large and small. And whether we're working to safeguard user privacy, ensure technology made by Apple is accessible for everyone, or build an even more inclusive workplace, we're determined to lead with our values. Our environmental efforts are a great example of the intersection of our work and our values. Across Apple, we act on a simple premise, the best products in the world should be the best products for the world. We've made our environmental work a central focus of our innovation, because we feel a responsibility to leave the world better than we found it and because we know that climate change cannot be stopped, unless everyone steps up and does their part. Our first ever carbon-neutral products represent a major milestone and we're going to go even further. We plan to make every product across our lineup carbon neutral by the end of the decade. And we're not doing it alone. Over 300 of our suppliers have committed to using a 100% clean energy for Apple production by 2030. We also continue to invest in entrepreneurs who are lighting the way for a greener, more equitable future. Through our third impact accelerator class, we're proud to support a new class of diverse innovators on the cutting edge of green technology and clean energy. Apple is always looking forward, driven in equal measure by a sense a possibility and a deep belief in our purpose. We're motivated by the meaningful difference we can make for our customers and keenly determined to push the limits of technology even further. And that's why I'm so confident that Apple's future is bright. With that, I'll turn it over to Luca.","evidence_gemma_new":"iPhone revenue September quarter","evidence_llama_3_3":"iPhone revenue September quarter","evidence_qwen_3_30b":"iPhone revenue September quarter","gemma_new_max":43800000000.0,"gemma_new_min":43800000000.0,"llama_3_3_max":43800000000.0,"llama_3_3_min":43800000000.0,"qwen_3_30b_max":43800000000.0,"qwen_3_30b_min":43800000000.0}
{"symbol":"AAPL","year":2024,"quarter":1,"date":"2024-Q1","chunk_id":2,"sub_chunk_id":0,"centroid_label":"iphone revenues","agreed_value":69700000000.0,"count":3,"chunk":"Tim Cook: Thank you. Suhasini. Good afternoon, everyone, and thanks for joining the call. Today, Apple is reporting revenue of $119.6 billion for the December quarter, up 2% from a year ago despite having one less week in the quarter. EPS was $2.18, up 16% from a year ago and an all-time record. We achieved revenue records across more than two dozen countries and regions including all-time records in Europe and rest of Asia-Pacific. We also continue to see strong double-digit growth in many emerging markets with all-time records in Malaysia, Mexico, The Philippines, Poland, and Turkey, as well as December quarter records in India, Indonesia, Saudi Arabia, and Chile. In Services, we set an all-time revenue record with paid subscriptions growing double-digits year-over-year. And I'm pleased to announce today that we have set a new record for our installed base, which has now surpassed 2.2 billion active devices. We are announcing these results on the eve of what is sure to be a historic day as we enter the era of spatial computing. Starting tomorrow, Apple Vision Pro, the most advanced personal electronics device ever, will be available in Apple stores for customers in the U.S. with expansion to other countries later this year. Apple Vision Pro is a revolutionary device built on decades of Apple innovation and it's years ahead of anything else. Apple Vision Pro has a groundbreaking new input system and thousands of innovations, and it will unlock incredible experiences for users and developers that are simply not possible on any other device. There is already so much excitement behind this product from reviewers, customers, and developers. They are praising everything from the incredible experience of watching a movie on a 100-foot screen to remarkable new machine learning capabilities like hand tracking and room mapping. We can't wait for people to experience the magic for themselves. Moments like these are what we live for at Apple. They're why we do what we do. They're why we're so unflinchingly dedicated to groundbreaking innovation and why we're so focused on pushing technology to its limits as we work to enrich the lives of our users. As we look ahead, we will continue to invest in these and other technologies that will shape the future. That includes artificial intelligence where we continue to spend a tremendous amount of time and effort, and we're excited to share the details of our ongoing work in that space later this year. Now, let's turn to the results for the December quarter, beginning with iPhone. We are proud to report that revenue came in at $69.7 billion, 6% higher than a year ago. The iPhone 15 lineup has earned glowing reviews and been embraced by customers. The iPhone 15 and iPhone 15 Plus feature a gorgeous new design with color-infused back glass and contoured edges, Dynamic Island, A16 Bionic, and a new 48 megapixel camera system. And the iPhone 15 Pro and iPhone 15 Pro Max set the gold standard for smartphones with a beautiful and lighter titanium design, industry-leading performance with A17 Pro and our most advanced camera system with the equivalent of seven pro lenses and the ability to record spatial video. Features like Emergency SoS and roadside assistance via satellite bring peace of mind to users when they travel, and I'm grateful for every note I've received about their lifesaving impact. Turning to Mac. Revenue came in at $7.8 billion, up 1% year-over-year, driven by the strength of our latest M3-powered MacBook Pro models in spite of having one less week of sales. Just last week, we got to wish Mac a happy 40th birthday. When it was introduced 40 years ago, Mac changed everything, and through the years, it has done so again and again. Recently, we have been on a tremendous pace of innovation. Since the introduction of Apple silicon in 2020, we've been proud to offer our users unmatched performance and power along with a remarkable Neural Engine for artificial intelligence and machine learning. This past fall, we had an amazing launch of the latest generation of Apple silicon for Mac, M3, M3 Pro, and M3 Max. These chips break new ground in power and performance empowering users to do more than they ever could before, whether they're making a musical masterpiece using the latest features in Logic Pro, or beating their high score in a graphics intensive game. A favorite amongst students, business owners, artists, and video editors, our MacBook Pro lineup is the world's best pro notebook family. And iMac, the world's most capable and best-selling all-in one, is now faster than ever, thanks to M3. In iPad, revenue for the December quarter was $7 billion, down 25% year-over-year due to a difficult compare with the launch of the M2 iPad Pro and the 10th generation iPad during the December quarter last year and one less week of sales. iPad remains the most versatile, capable, and elegant tablet on the market today. It continues to be the go-to-device for students, creators, and more with customers loving iPad's incredible combination of portability and performance. Powerful apps like Final Cut Pro and Logic Pro for iPad allow video and music creators to unleash their creativity in new ways that are only possible on iPad. iPad continues to push the boundaries of what's possible on a tablet. In Wearables, Home and Accessories, revenue came in at $12 billion, down 11% from a year ago due to a difficult compare with the launch timing of several products in this category and the impact of the 14th week last year. Across our latest Apple Watch lineup, we're enabling and encouraging our users to live a healthier day, while making Apple Watch even more intuitive to use. The new double tap gesture on Apple Watch Series 9 and Apple Watch Ultra 2 make it easier to answer calls, play and pause music or take a photo with iPhone. I've been deeply moved by the many touching stories about how features like a regular rhythm notification and fall detection helped Apple Watch users when they needed it most. And for the first time ever, users can choose a carbon-neutral option of any new Apple Watch. Meanwhile, our AirPods lineup continue to be a holiday favorite. In Services, we set an all-time revenue record of $23.1 billion and an 11% year-over-year increase. Because we had one less week this quarter, this growth represents an acceleration from the September quarter, and we achieved all-time revenue records across advertising, cloud services, payment services and video, as well as December quarter records in App Store and AppleCare. Across our services, we're constantly growing our offerings to give users even more to love. With the redesigned Apple TV app, we've made it easier for subscribers to enjoy all their favorite shows, movies and sports, including Apple TV+ hits like Masters of the Air, Monarch, and Slow Horses. We're proud to be a part of Martin Scorsese's Killers of the Flower Moon, a film that has moved audiences and earned more than 200 accolades including Best Film of the Year from the New York Film Critics Circle, nine BAFTA nominations, a Golden Globe win, and 10 Oscar nominations, including Best Picture. Across all Apple TV+ productions, we've now earned 2050 award nominations and 450 wins since we've introduced the service. We're also excited to have a new season of Major League Soccer kicking off this month. We're looking forward to seeing Lionel Messi return to the field and to following all of our favorite teams in what is sure to be an incredible season. And we're counting down to the Apple Music Super Bowl halftime show, featuring Usher. Turning to Retail. In recent months, we opened three stores, including our 100th store in Asia-Pacific. Throughout the holidays, our team members pulled out all the stops to help customers find the perfect gift. And I know our U.S. team members are especially excited to begin demoing Apple Vision Pro for our customers tomorrow. At Apple, we live and breathe innovation. We are driven to pioneer new technology that can enrich our customers' lives, and we're just as intentional about showing up with our values and being a force for good in the world. February is Black History Month, and to honor it, we've launched our new Black Unity Collection, which includes the Black Unity Sport Loop band. This year's designs reflect a lasting commitment to working toward a more equitable world. We also continue to do a central work through our Racial Equity and Justice Initiative, and we're proud to continue providing grants to organizations that are making a real impact in the world. In recent months, we've also taken significant strides in our environmental work. We're partnering with suppliers to bring more clean energy online for Apple production. We're using more recycled materials than ever before and more energy-efficient transportation than ever before. And each day, we are taking more and more steps toward becoming 100% carbon-neutral across all of our products by 2030. Apple is a company that has never shied away from big challenges. That's because we are grounded by a deep sense of purpose and guided by core belief in the transformative power of innovation. And so, we are optimistic about the future, confident in the long-term, and as excited as we've ever been to deliver for our users like only Apple can. With that, I'll turn it over to Luca.","evidence_gemma_new":"iPhone revenue","evidence_llama_3_3":"iPhone iPhone revenue","evidence_qwen_3_30b":"iPhone revenue up 6% year-over-year","gemma_new_max":69700000000.0,"gemma_new_min":69700000000.0,"llama_3_3_max":69700000000.0,"llama_3_3_min":69700000000.0,"qwen_3_30b_max":69700000000.0,"qwen_3_30b_min":69700000000.0}
{"symbol":"AAPL","year":2024,"quarter":2,"date":"2024-Q2","chunk_id":1,"sub_chunk_id":0,"centroid_label":"iphone revenues","agreed_value":46000000000.0,"count":3,"chunk":"Tim Cook: Thank you, Suhasini. Good afternoon, everyone, and thanks for joining the call. Today, Apple is reporting revenue of $90.8 billion and an EPS record of $1.53 for the March quarter. We set revenue records in more than a dozen countries and regions. These include, among others, March quarter records in Latin-America and the Middle East, as well as Canada, India, Spain and Turkey. We also achieved an all-time revenue record in Indonesia, one of the many markets where we continue to see so much potential. In services, we set an all-time revenue record, up 14% over the past year. Keep in mind, as we described on the last call, in the March quarter a year-ago, we were able to replenish iPhone channel inventory and fulfill significant pent-up demand from the December quarter COVID-related supply disruptions on the iPhone 14 Pro and 14 Pro Max. We estimate this one-time impact added close to $5 billion to the March quarter revenue last year. If we remove this from last year's results, our March quarter total company revenue this year would have grown. Despite this impact, we were still able to deliver the records I described. Of course, this past quarter, we were thrilled to launch Apple Vision Pro and it has been so wonderful to hear from people who now get to experience the magic of spatial computing. They describe the impossible becoming possible right before their eyes and they share their amazement and their emotions about what they can do now, whether it's reliving their most treasured memories or having a movie theater experience right in their living room. It's also great to see the enthusiasm from the enterprise market. For example, more than half of the Fortune 100 companies have already bought Apple Vision Pro units and are exploring innovative ways to use it to do things that weren't possible before, and this is just the beginning. Looking ahead, we're getting ready for an exciting product announcement next week that we think our customers will love. And next month, we have our Worldwide Developers Conference, which has generated enormous enthusiasm from our developers. We can't wait to reveal what we have in-store. We continue to feel very bullish about our opportunity in Generative AI. We are making significant investments, and we're looking forward to sharing some very exciting things with our customers soon. We believe in the transformative power and promise of AI, and we believe we have advantages that will differentiate us in this new era, including Apple's unique combination of seamless hardware, software and services integration, groundbreaking Apple's silicon, with our industry-leading neural engines and our unwavering focus on privacy, which underpins everything we create. As we push innovation forward, we continue to manage thoughtfully and deliberately through an uneven macroeconomic environment and remain focused on putting our users at the center of everything we do. Now let's turn to our results for the March quarter across each product category, beginning with iPhone. iPhone revenue for the March quarter was $46 billion, down 10% year-over-year. We faced a difficult compare over the previous year due to the $5 billion impact that I mentioned earlier. However, we still saw growth on iPhone in some markets, including Mainland China, and according to Kantar during the quarter, the two best-selling smartphones in Urban China were the iPhone 15 and iPhone 15 Pro Max. I was in China recently where I had the chance to meet with developers and creators who are doing remarkable things with iPhone. And just a couple of weeks ago, I visited Vietnam, Indonesia and Singapore, where it was incredible to see all the ways customers and communities are using our products and services to do amazing things. Everywhere I travel, people have such a great affinity for Apple, and it's one of the many reasons I'm so optimistic about the future. Turning to Mac. March quarter revenue was $7.5 billion, up 4% from a year ago. We had an amazing launch in early March with the new 13-inch and 15-inch MacBook Air. The world's most popular laptop is the best consumer laptop for AI with breakthrough performance of the M3 chip and it\u2019s even more powerful neural engine. Whether it's an entrepreneur starting a new business or a college student finishing their degree, users depend on the power and portability of MacBook Air to take them places they couldn't have gone without it. In iPad, revenue for the March quarter was $5.6 billion, 17% lower year-over-year, due to a difficult compare with the momentum following the launch of M2 iPad Pro and the 10th Generation iPad last fiscal year. iPad continues to stand apart for its versatility, power and performance. For video editors, music makers and creatives of all kinds, iPad is empowering users to do more than they ever could with a tablet. Across Wearables, Home and Accessories, March quarter revenue was $7.9 billion, down 10% from a year-ago due to a difficult launch compare on Watch and AirPods. Apple Watch is helping runners go the extra mile on their wellness journeys, keeping hikers on course with the latest navigation capabilities in watchOS 10, and enabling users of all fitness levels to live a healthier day. Across our watch lineup, we're harnessing AI and machine-learning to power lifesaving features like a regular rhythm notifications and fall detection. I often hear about how much these features mean to users and their loved ones and I'm thankful that so many people are able to get help in their time of greatest need. As I shared earlier, we set an all-time revenue record in services with $23.9 billion, up 14% year-over-year. We also achieved all-time revenue records across several categories and geographic segments. Audiences are tuning in on screens large, small and spatial and are enjoying Apple TV+ Originals like Palm Royale and Sugar. And we have some incredible theatrical releases coming this year, including Wolves, which reunites George Clooney and Brad Pitt. Apple TV+ productions continue to be celebrated as major awards contenders. Since launch, Apple TV+ productions have earned more than 2,100 award nominations and 480 wins. Meanwhile, we're enhancing the live sports experience with a new iPhone app, Apple Sports. This free app allows fans to follow their favorite teams and leagues with real-time scores, stats and more. Apple Sports is the perfect companion for MLS Season Pass subscribers. Turning to retail, our stores continued to be vital spaces for connection and innovation. I was delighted to be in Shanghai for the opening of our latest flagship store. The energy and enthusiasm from our customers was truly something to behold. And across the United States, our incredible retail teams have been sharing Vision Pro demos with customers, delighting them with a profound and emotional experience of using it for the very first time. Everywhere we operate and everything we do, we're guided by our mission to enrich users' lives and lead the world better than we found it, whether we're making Apple podcasts more accessible with a new transcripts feature or helping to safeguard iMessage users' privacy with new protections that can defend against advances in quantum computing. Our environmental work is another great example of how innovation and our values come together. As we work toward our goal of being carbon-neutral across all of our products by 2030, we are proud of how we've been able to innovate and do more for our customers while taking less from the planet. Since 2015, Apple has cut our overall emissions by more than half, while revenue grew nearly 65% during that same time period. And we're now using more recycled materials in our products than ever before. Earlier this spring, we launched our first-ever product to use 50% recycled materials with a new M3-powered MacBook Air. We're also investing in new solar and wind power in the U.S. and Europe, both to power our growing operations and our users' devices. And we're working with partners in India and the U.S. to replenish 100% of the water we use in places that need it most with the goal of delivering billions of gallons of water benefits over the next two decades. Through our Restore Fund, Apple has committed $200 million to nature-based carbon removal projects. And last month, we welcomed two supplier partners as new investors, who will together invest up to an additional $80 million in the fund. Whether we're enriching lives of users across the globe or doing our part to be a force for good in the world, we do everything with a deep sense of purpose at Apple. And I'm proud of the impact we've already made at the halfway point in a year of unprecedented innovation. I couldn't be more excited for the future we have ahead of us, driven by the imagination and innovation of our teams and the enduring importance of our products and services in people's lives. With that, I'll turn it over to Luca.","evidence_gemma_new":"iPhone revenue year-over-year","evidence_llama_3_3":"iPhone revenue March quarter","evidence_qwen_3_30b":"iPhone revenue March quarter","gemma_new_max":46000000000.0,"gemma_new_min":46000000000.0,"llama_3_3_max":46000000000.0,"llama_3_3_min":46000000000.0,"qwen_3_30b_max":46000000000.0,"qwen_3_30b_min":46000000000.0}
{"symbol":"AAPL","year":2024,"quarter":3,"date":"2024-Q3","chunk_id":1,"sub_chunk_id":0,"centroid_label":"iphone revenues","agreed_value":39300000000.0,"count":3,"chunk":"Tim Cook : Thank you Suhasini. Good afternoon everyone and thanks for joining the call. Today, Apple is reporting a new June quarter revenue record of $85.8 billion, up 5% from a year ago and better than we had expected. EPS grew double digits to $1.40 and achieved a record for the June quarter. We also set quarterly revenue records in more than two dozen countries and regions, including Canada, Mexico, France, Germany, the UK, India, Indonesia, the Philippines, and Thailand. And we set an all-time revenue record in services which grew 14%. At our Worldwide Developers Conference, we were thrilled to unveil game-changing updates across our platforms, including Apple Intelligence. Apple Intelligence builds on years of innovation and investment in AI and Machine Learning. It will transform how users interact with technology, from writing tools to help you express yourself, to image playground, which gives you the ability to create fun images and communicate in new ways, to powerful tools for summarizing and prioritizing notifications. Siri also becomes more natural, more useful, and more personal than ever. Apple Intelligence is built on a foundation of privacy, both through on-device processing that does not collect users' data and through private cloud compute, a groundbreaking new approach to using the cloud, while protecting users' information powered by Apple silicon. We are also integrating ChatGPT into experiences within iPhone, Mac, and iPad, enabling users to draw on a broad base of world knowledge. We are very excited about Apple Intelligence and we remain incredibly optimistic about the extraordinary possibilities of AI and its ability to enrich customers' lives. We will continue to make significant investments in this technology and dedicate ourselves to the innovation that will unlock its full potential. Recently, we've also been excited to bring Apple Vision Pro to more countries, giving customers the chance to discover the remarkable capabilities of this magical device. Vision Pro users are customizing their own workspaces, watching movies on 100-foot screens, and exploring entire worlds with just a pinch of their fingertips. With more than 2,500 native spatial apps and 1.5 million compatible apps for Vision OS, the developer community continues to pioneer stunning spatial experiences that are only possible with Vision Pro. Last month, we announced that we're bringing some amazing new immersive content to Vision Pro, including new series, concerts, films, and more. And we've seen great interest for Vision Pro in the enterprise, where it can empower companies large and small to pursue their best ideas like never before. With each innovation, we're unlocking new ways of working, new ways of learning, and new ways of tapping into the unlimited promise of human potential. We are doing that across every product and every service. Now let me share more detail in our June quarter results, beginning with iPhone. iPhone revenue was $39.3 billion, down 1% year-over-year. On a constant currency basis, we grew compared to last year. Customers continue to praise the iPhone 15 lineup for its incredible battery life, exceptional cameras, and unmatched power and performance. And we are excited to bring incredible new features to the iPhone with iOS 18, making it more personal, capable, and intelligent than ever before. This update includes the biggest redesign of the Photos app, new customization options for the home screen, messages over satellite, and the introduction of Apple Intelligence. Apple Intelligence utilizes the power of our most advanced iPhones, the iPhone 15 Pro and Pro Max, offering a transformative set of capabilities. Mac revenue was $7 billion, up 2% from a year ago. Customers are loving the latest M3-powered 13 and 15 inch MacBook Air. With back-to-school season upon us, MacBook Air is the perfect companion for students on campus and small business owners, developers, and creatives of all kinds depend on Mac to do more than they ever could before. Powered by Apple silicon with its neural engine and privacy built in at the chip level, Macs are simply the best personal computers for AI. And every Mac we've shipped with Apple silicon since 2020, is capable of taking advantage of Apple Intelligence with Mac OS Sequoia. We also know the importance of security for our users and enterprises so we continue to advance protections across our products. Turning to iPad, revenue was $7.2 billion, 24% higher year-over-year. During the quarter, we had an incredible launch where we unveiled the all-new 11 and 13 inch iPad Air, the perfect device for education, entertainment, and so much more. And With the new iPad Pro, we pushed the boundaries of power-efficient performance with the remarkable M4 chip, the engine behind this incredibly thin device. By leveraging the latest in Apple silicon, Video Editors and Musicians can take advantage of the cutting edge AI features in Final Cut Pro and Logic Pro. And we're very excited that iPad Pro and iPad Air models powered by the M series of Apple silicon will be able to utilize the powerful capabilities of Apple Intelligence. In wearables, home, and accessories, revenue was $8.1 billion, down 2% from a year ago. Apple Watch is empowering users to live a healthier day with a range of tools to take charge of their wellness journeys. At the core of Apple Watch, are powerful AI features that are helping users get help when they need it most, from irregular heart rhythm notifications to walking steadiness to crash detection and fall detection. I've heard time and again how meaningful these features are for users and their loved ones, and their stories motivate us to keep pushing forward on this vital work. As I mentioned earlier, in services, we set an all-time revenue record of $24.2 billion with paid subscriptions climbing to an all-time high. We achieve revenue records in the majority of the services categories with all-time revenue records in advertising, cloud, and payment services. Apple TV+ productions are delighting audiences on screens large and small. We're sharing powerful works of imagination with series and movies like Presumed Innocent, the Upcoming Disclaimer, and The Instigators starring Matt Damon. And we can't wait for returning fan favorites with new seasons of The Morning Show, Slow Horses, and Severance. Apple TV+ productions also continue to earn accolades with nearly 2,300 nominations and 500 wins to-date. That includes 72 Emmy Award nominations across 16 programs our best ever showing for the upcoming awards event. During the quarter, we also expanded Tap to Pay on iPhone to more markets including Japan, Canada, Italy, and Germany, enabling more businesses to use the power of iPhone to accept contactless payments. And we announced new updates to our services coming this fall, including US national park hikes and custom walk routes and Apple Maps, the ability to pay with rewards using Apple Pay, collaborative listening with Apple Music, and a redesigned Apple Fitness+ experience to help users make the most of our library of workouts and meditations. Turning to retail, we continue to expand in emerging markets with our first ever location in Malaysia. Customers from all over the country came together with our team members to celebrate this special moment. Elsewhere in the world, our teams have been sharing the magic of Apple Vision Pro and demos that delight, inspire, and deeply move customers exploring the wonders of spatial computing for the first time. At the heart of all of our innovations are the values that guide everything we do. We believe fundamentally that the best technology is technology that works for everyone. And in honor of Global Accessibility Awareness Day, we introduced all new capabilities to give users more ways to take advantage of all our products can do. These include eye tracking for users to control iPhone or iPad visually, music haptics to give those who are deaf or hard of hearing a tangible way to experience music, and vocal shortcuts that tie task to a user's voice. And we are committed as ever to shipping products that offer the highest standards of privacy for our users. With everything we do, whether it's offering a browser like Safari that prevents third-parties from tracking you across the internet or providing new features like the ability to lock and hide apps, we are determined to keep our users in control of their own data. And we are just as dedicated to ensuring the security of our users' data. That's why we work to minimize the amount of data we collect and work to maximize how much is processed directly on people's devices, a foundational principle that is at the core of all we build, including Apple Intelligence. And we continue to make significant progress on the environment. We are proud to say that all of our data centers, including those that will run private cloud compute, operate on 100% renewable energy. At Apple, we're constantly accelerating our pace of innovation. We are a company in relentless pursuit of big ideas. Time and again, we've seen how a spark of creativity can reach breakthrough velocity, reach across previously unexplored dimensions, and ultimately take flight in ways that can change the world. It's why we're going to keep investing in the meaningful innovation that enriches the lives of all of our customers. We have a busy time ahead of us, and I couldn't be more excited for all the amazing things yet to come. With that, I'll turn it over to Luca.","evidence_gemma_new":"iPhone revenue","evidence_llama_3_3":" iPhone revenue year-over-year","evidence_qwen_3_30b":"iPhone revenue June quarter","gemma_new_max":39300000000.0,"gemma_new_min":39300000000.0,"llama_3_3_max":39300000000.0,"llama_3_3_min":39300000000.0,"qwen_3_30b_max":39300000000.0,"qwen_3_30b_min":39300000000.0}
{"symbol":"AAPL","year":2024,"quarter":4,"date":"2024-Q4","chunk_id":1,"sub_chunk_id":0,"centroid_label":"iphone revenues","agreed_value":46200000000.0,"count":3,"chunk":"Tim Cook: Thank you, Suhasini. Good afternoon, everyone, and thanks for joining the call. Today, Apple is reporting revenue of $94.9 billion, a September quarter record and up 6% from a year ago. iPhone grew in every geographic segment, marking a new September quarter revenue record for the category, and Services set an all-time revenue record, up 12% year-over-year. We also set September quarter segment revenue records in the Americas, Europe, and the Rest of Asia Pacific, as well as in a large number of countries, including the United States, Brazil, Mexico, France, the UK, Korea, Malaysia, Thailand, Saudi Arabia, and the UAE. And we continue to be excited by the enthusiasm we're seeing in India, where we set an all-time revenue record. This has been an extraordinary year of innovation at Apple. We brought the revolutionary Apple Vision Pro to customers in February, which brings users tomorrow's technology today. And in June, we announced Apple Intelligence, a remarkable personal intelligence system that combines the power of generative models with personal context to deliver intelligence that is incredibly useful and relevant. Apple Intelligence marks the beginning of a new chapter for Apple innovation and redefines privacy and AI by extending our groundbreaking approach to privacy into the cloud with Private Cloud Compute. Earlier this week, we made the first set of Apple Intelligence features available in US English for iPhone, iPad, and Mac users, with systemwide Writing Tools that help you refine your writing, a more natural and conversational Siri, a more intelligent Photos app, including the ability to create movies simply by typing a description, and new ways to prioritize and stay in the moment with notification summaries and priority messages. And we look forward to additional intelligence features in December, with even more powerful Writing Tools, a new visual intelligence experience that builds on Apple Intelligence, and ChatGPT integration, as well as localized English in several countries, including the UK, Australia, and Canada. These features have already been provided to developers and we're getting great feedback. More features will be rolling out in the coming months, as well as support for more languages, and this is just the beginning. Now, I'll turn to our results for the quarter, beginning with iPhone. iPhone revenues set a September quarter record of $46.2 billion, up 6% from a year ago, with growth in every geographic segment. With the introduction of Apple Intelligence, we're beginning a new era for iPhone. iPhone 16, powered by A18, is equipped with an incredible new 48-megapixel Fusion camera, fantastic photo experiences, and the addition of the action button and camera control. An iPhone 16 Pro is the most advanced iPhone we've ever made, powered by A18 Pro and featuring even larger displays, an industry-leading pro camera system with camera control, and studio quality mics, all with a huge leap in battery life. Turning to Mac, revenue was $7.7 billion, up 2% from a year ago. Just this week, we brought a new generation of Apple Silicon to Mac, M4, M4 Pro, and M4 Max. From blazing fast performance to Apple's most advanced neural engine yet, our latest chips can easily tackle incredibly complex workflows, and they ensure our newest Macs will be the best personal computers for AI the instant they hit stores. With the newest additions to our Mac lineup, customers can choose the Mac that's just right for them, whether that's iMac, the world's best and most beautiful all-in-one; MacBook Air, the world's most popular laptop now with double the starting memory; MacBook Pro, the best Pro notebook anywhere; or the incredible, mighty new Mac mini, our first-ever carbon-neutral Mac. iPad revenue was $7 billion, 8% higher year-over-year. iPad is unlike any other product on the market today, and it's become an essential device in homes, schools, and businesses of all sizes. Recently, we were thrilled to introduce the newest iPad mini, featuring an ultra-compact design built for Apple Intelligence with support for Apple Pencil Pro. It's been a big year for iPad. iPad Air was popular with students and teachers as they got back to school this year, while creators are pushing the boundaries of what's possible with the M4-powered iPad Pro. In Wearables, Home and Accessories, revenue was $9 billion, down 3% from a year ago. During the quarter, we launched the all-new Apple Watch Series 10, bringing a beautiful new design and new capabilities to the world's most popular watch that make it even more powerful, intelligent, and sophisticated. It's the thinnest Apple Watch yet, making it more comfortable than ever, while offering the biggest, most advanced display. watchOS 11 brings some huge new health and fitness insights to users, including sleep apnea notifications, which help to alert people with a potentially serious but often undiagnosed condition. We're proud of the impact we make through our health innovations on watch, and I'm grateful for every note I receive about the importance of watch in people's lives. With AirPods 4, we broke a new ground in comfort and design with our best-ever open-ear headphones available for the first time with active noise cancellation. And we were especially pleased to unveil revolutionary end-to-end hearing health capabilities for AirPods Pro 2 with hearing protection, hearing test, and hearing aid features. These just became available in a software update this week, and we believe this will make a meaningful difference in our users' lives. I've already started getting notes from customers calling the experience life changing. And Apple Vision Pro continues to deliver spatial experiences that weren't possible before, including immersive entertainment like the new short film, Submerged, which gives people a view into the unique storytelling power made possible by spatial computing. Vision Pro has more than 2,500 native spatial apps and 1.5 million compatible apps for visionOS 2, as well as applications companies are building to reimagine how they work. Vision Pro continues to inspire awe in its users, and we're just scratching the surface of what's possible. And just yesterday, we announced we're bringing Vision Pro to Korea and the UAE. As I mentioned earlier, Services achieved an all-time revenue record of $25 billion, up 12% from a year ago, and with all-time revenue records across most of our categories. With Apple TV+, we love celebrating the craft of great storytellers who know how to put on a show. Audiences love to discover new movies like Wolfs, explore acclaimed new series like Disclaimer, and dive back into returning favorites like Slow Horses and Shrinking. Apple TV+ productions have become fixtures at award shows, earning more than 2,300 nominations and more than 500 wins today. Apple also offers a live sports experience in a league of its own with MLS Season Pass, and subscribers have been cheering on their favorite teams in the MLS Cup playoffs. This month, we also marked 10 years of Apple Pay. There's always something magical about being able to buy groceries or pay for movie tickets seamlessly with your Apple device. Today, users choose Apple Pay for purchases across tens of millions of retailers worldwide. And we're excited to make the Apple Pay experience even better, with the option to redeem rewards and access loans from credit cards, debit cards, and other lenders right at checkout. Whenever we celebrate big moments, Apple Stores are the best places to share them with customers. I had an incredible time during launch day in September alongside our team at Apple Fifth Avenue, where energy and enthusiasm filled the air. And in stores all over the world, customers are eager to get a closer look at our latest innovations. We also opened two new stores during the quarter and we can't wait to bring four new stores to customers in India. We're passionate about education and believe technology has a vital role to play in both helping teachers to inspire their students and students to learn about the world around them. In honor of World Teachers' Day, Apple was proud to share new resources for teachers to engage their students in ways that aim to make learning easy and fun. Additionally, we've expanded our education grant program into 100 new schools and communities, helping with everything from access to technology, to educator resources, to scholarships and financial support. As we near the end of the year, we're proud of the progress we've made in our efforts to be carbon-neutral across our entire footprint by the end of the decade. As I mentioned earlier, we were thrilled to introduce our first-ever carbon-neutral Mac with the latest Mac mini. And in another milestone, customers can choose a carbon-neutral option of any Apple Watch. These achievements are amazing for all of us at Apple, and we are determined to reach our 2030 goal. At Apple, across everything we do, we manage for the long term, because we're always thinking about what comes next, the next great challenge, the next innovative idea, the next big breakthrough. As we close out the year, we have the best lineup we've ever had going into the holiday season, including Apple Intelligence, which marks the start of a new chapter for our products. This is just the beginning of what we believe generative AI can do, and I couldn't be more excited for what's to come. Before I hand it over to Luca, with Luca transitioning to a new role with Apple, this will be the final time he's joining our call. So, I just wanted to take a moment to recognize his extraordinary service as Apple's CFO and to thank him for his partnership. I am deeply grateful. In his 10 years in the role, Luca has done truly exceptional work in shaping Apple as we know it today. He has helped manage Apple for the long term, thoughtfully and deliberately. He has helped us enrich the lives of so many around the world, and he has been a leader that people look up to and have learned so much from. I have incredible confidence in our incoming CFO, Kevan Parekh, and we look forward to more of you meeting and working with him going forward. With that, I'll turn it over to Luca.","evidence_gemma_new":"iPhone revenue","evidence_llama_3_3":"iPhone iPhone revenue fourth quarter fiscal year 2024","evidence_qwen_3_30b":"iPhone revenue September quarter record","gemma_new_max":46200000000.0,"gemma_new_min":46200000000.0,"llama_3_3_max":46200000000.0,"llama_3_3_min":46200000000.0,"qwen_3_30b_max":46200000000.0,"qwen_3_30b_min":46200000000.0}
{"symbol":"AAPL","year":2023,"quarter":1,"date":"2023-Q1","chunk_id":3,"sub_chunk_id":0,"centroid_label":"mac mac revenue","agreed_value":7700000000.0,"count":3,"chunk":"Luca Maestri: Thank you, Tim, and good afternoon, everyone. As Tim mentioned, revenue for the December quarter was $117.2 billion, down 5% from last year. A number of factors had a significant impact on our results. First, we faced a very difficult foreign exchange environment, which affected our performance by nearly 800 basis points. In other words, we grew revenue on a constant currency basis. And in fact, we did so in the vast majority of markets. Second, the macroeconomic environment this past quarter was markedly more challenging than 12 months ago. Third, we experienced significant supply shortages for iPhone 14 Pro and iPhone 14 Pro Max in November and through December. On the other hand, we had the positive impact of the 14th week in the quarter that Tejas just mentioned at the beginning of the call. Products revenue was $96.4 billion, down 8% from last year due to the factors I just called out. At the same time, however, our installed base of active devices grew double digits and achieved all-time records in each geographic segment and in each major product category. We're proud to now have over 2 billion active devices in our installed base. This continued growth in the installed base is due to extremely strong levels of customer satisfaction and loyalty and a high number of customers who are new to our products. The installed base growth also helped our services set an all-time revenue record of $20.8 billion, up 6% over a year ago. We achieved this new milestone despite more than 700 basis points of negative impact from foreign exchange. We reached all-time services revenue records in the Americas, Europe and rest of Asia Pacific and a December quarter record in Greater China. We also set records in many Services categories, including all-time revenue records for cloud services, payment services and music and December quarter records for the App Store and AppleCare. Company gross margin was 43%, up 70 basis points from last quarter due to leverage and favorable mix, partially offset by foreign exchange. Products gross margin was 37%, up 240 basis points sequentially. And Services gross margin was 70.8%, up 30 basis points sequentially, both due to the same factors that impacted total company gross margin. Operating expenses of $14.3 billion were significantly below the guidance range we provided at the beginning of the quarter and grew at a slower pace than in the past as we took actions to respond to the current macro environment. Net income was $30 billion. Diluted earnings per share were $1.88, and we generated very strong operating cash flow of $34 billion. Let me now get into more detail for each of our revenue categories. iPhone revenue was $65.8 billion despite significant foreign exchange headwinds, supply constraints on iPhone 14 Pro and iPhone 14 Pro Max and a challenging macroeconomic environment. In spite of these circumstances, we set all-time iPhone revenue records in Canada, Italy and Spain, and saw strong growth in several emerging markets, including all-time iPhone revenue records for India and Vietnam. Importantly, the installed base of active iPhones continues to grow nicely and is at an all-time high across all geographic segments. In emerging markets, in particular, the installed base grew double digits, and we had record levels of switchers in India and in Mexico. Our customers continue to love their experience with our products with the latest survey of U.S. consumers from 451 Research indicating customer satisfaction of 98% for the iPhone 14 family. Mac revenue was $7.7 billion, down 29% year-over-year and in line with our expectations. There were 3 key drivers for our Mac results. First, we had a challenging compare against last year's launch of the completely reimagined MacBook Pros, our first notebooks with M1 Pro and M1 Max. Second, we believe that the macro environment impacted our Mac performance. And third, we faced significant foreign exchange headwinds. At the same time, however, the installed base of active Macs reached an all-time high across all geographic segments, and we continue to see very strong upgraded activity to Apple silicon. Customer satisfaction with Mac remains very strong at 96% based on the latest survey of U.S. consumers from 451 Research. iPad revenue was $9.4 billion, up 30% year-over-year despite significant FX headwinds. This performance was driven by 2 key items. First, during the December quarter a year ago, we experienced significant supply constraints, while this year, we had enough supply to meet demand. Second, we launched our new iPad and the iPad Pro powered by the M2 chip during the quarter. The iPad installed base reached a new all-time high, thanks to incredible customer loyalty and a high number of new customers. In fact, over half of the customers who purchased iPads during the quarter were new to the product. Wearables, Home and Accessories revenue was $13.5 billion, down 8% year-over-year. The year-over-year decline was driven by significant FX headwinds and a challenging macroeconomic environment. However, our installed base of devices in the category set a new all-time record thanks to the largest number of customers new to our smartwatch that we've ever had in a given quarter. In fact, nearly 2\/3 of customers purchasing an Apple Watch during the quarter were new to the product. Moving to Services. We generated $20.8 billion in revenue, a new all-time record in total and for many Services offerings in spite of a difficult foreign exchange environment, and macroeconomic headwinds impacting certain categories such as digital advertising and mobile gaming. In constant currency, we grew Services revenue double digits on top of growing 24% during the December quarter a year ago. We remain focused on the large long-term opportunity in this category, and we continue to observe several trends that reflect the strength of our ecosystem. For example, we saw increased customer engagement with our Services during the quarter. Both our transacting accounts and paid accounts grew double digits year-over-year, each setting a new all-time record. Paid subscriptions also continued to grow nicely. We now have more than 935 million paid subscriptions across the services on our platform, up more than 150 million during the last 12 months alone and nearly 4x what we had just 5 years ago. And we continue to increase the reach and improve the quality of our offerings. For instance, Apple Pay is now available to millions of merchants in nearly 70 countries and regions. And we saw a record-breaking number of purchases made using Apple Pay globally during the holiday shopping season. Finally, our installed base of over 2 billion active devices represents a great foundation for future expansion of our ecosystem, and it continues to grow even during difficult macroeconomic conditions, which speaks to the exceptionally high levels of customer loyalty and satisfaction and our ability to attract new customers to our platform. The growth is coming from every major product category and geographic segment, with strong double-digit increases in emerging markets such as Brazil, Mexico, India, Indonesia, Thailand and Vietnam. Turning to the enterprise market. we are seeing continued adoption of our Services for business like Apple Business Essentials, AppleCare, Tap to Pay and Apple Financial Services. For example, Mars Incorporated has expanded its use of AppleCare for Enterprise to provide timely device support and assurance for iPads deployed across their manufacturing sites. Meanwhile, HCA Healthcare has leveraged Apple Financial Services to manage the annual refresh of its entire fleet of iPhones. This not only ensures that their staff stay current on the latest Apple technology, but also provides them with significant annual savings in the process. Let me now turn to our capital return program and our cash position. We returned over $25 billion to shareholders during the December quarter as our business continues to generate very strong cash flow. This included $3.8 billion in dividends and equivalents and $19 billion through open market repurchases of 133 million Apple shares. We ended the quarter with $165 billion in cash and marketable securities. We repaid $1.4 billion in maturing debt and decreased commercial paper by $8.2 billion, leaving us with total debt of $111 billion. As a result, net cash was $54 billion at the end of the quarter, and we maintain our goal of becoming net cash-neutral over time. As we move into the March quarter, I'd like to review our outlook, which includes the types of forward-looking information that Tejas referred to at the beginning of the call. Given the continued uncertainty around the world in the near term, we are not providing revenue guidance, but we are sharing some directional insights based on the assumption that the macroeconomic outlook and COVID-related impacts to our business do not worsen from what we are projecting today for the current quarter. In total, we expect our March quarter year-over-year revenue performance to be similar to the December quarter. This represents an acceleration in our underlying year-over-year business performance as the December quarter benefited from an extra week. Foreign exchange will continue to be a headwind, and we expect a negative year-over-year impact of 5 percentage points. For Services, we expect revenue to grow year-over-year while continuing to face macroeconomic headwinds in areas such as digital advertising and mobile gaming. For iPhone, we expect our March quarter year-over-year revenue performance to accelerate relative to the December quarter year-over-year revenue performance. For Mac and iPad, we expect revenue for both product categories to decline double digits year-over-year because of challenging compares and macroeconomic headwinds. We expect gross margin to be between 43.5% and 44.5%. We expect OpEx to be between $13.7 billion and $13.9 billion. We expect OI&E to be around negative $100 million, excluding any potential impact from the mark-to-market of minority investments, and our tax rate to be around 16%. Finally, today, our Board of Directors has declared a cash dividend of $0.23 per share of common stock payable on February 16, 2023, to shareholders of record as of February 13, 2023. With that, let's open the call to questions.","evidence_gemma_new":"Mac revenue","evidence_llama_3_3":"Mac revenue","evidence_qwen_3_30b":"Mac revenue in line with expectations","gemma_new_max":7700000000.0,"gemma_new_min":7700000000.0,"llama_3_3_max":7700000000.0,"llama_3_3_min":7700000000.0,"qwen_3_30b_max":7700000000.0,"qwen_3_30b_min":7700000000.0}
{"symbol":"AAPL","year":2023,"quarter":2,"date":"2023-Q2","chunk_id":2,"sub_chunk_id":0,"centroid_label":"mac mac revenue","agreed_value":7200000000.0,"count":3,"chunk":"Tim Cook: Thank you, Suhasini. Good afternoon, everyone, and thanks for joining us. Today, we're reporting revenue of $94.8 billion for the March quarter, which was better than our expectations. We set an all-time record for Services and a March quarter record for iPhone. We were particularly pleased with the performance we saw in emerging markets and achieved all-time records in Mexico, Indonesia, the Philippines, Saudi Arabia, Turkey and the UAE, as well as a number of March quarter records, including in Brazil, Malaysia and India. This result is a testament, first and foremost to our teams around the world who are engaged every day in the work of bringing new innovations to life. It speaks to the incredible power of Apple products and services to enrich people's lives in indispensable ways. And whether it's in the design lab in Cupertino, or in one of the brand new retail stores in India, I am constantly inspired by the way our people come together to make a real difference in the world. During the March quarter, we continued to face foreign exchange headwinds, which had an impact of more than 500 basis points, as well as ongoing challenges related to the macroeconomic environment. Revenue was down 3% year-over-year as a result, while on a constant currency basis, we grew in total and in the vast majority of the markets we tried. Despite these challenges, we continue to manage for the long term and to push the limits of what's possible, always on behalf of the customers who depend on our products whether it's students exploring new frontiers, developers dreaming up their next big idea, or artists taking their creativity to a whole new level. Let me share how these results showed up across our lineup of products and services. Let's start with iPhone, which set a new March quarter record with revenue of $51.3 billion. The iPhone 14 and 14 plus continue to delight users with their long lasting battery and advanced camera. And our pro users continue to rave about the most powerful camera system ever in an iPhone. This March, we were excited to expand emergency SOS via satellite to six new countries, bringing this important safety feature to even more users. We now offer this vital service in 12 countries, and I'm grateful for every note I've received from around the world about the life saving impact of our safety features. Now let's turn to Mac, which recorded $7.2 billion in revenue for the March quarter in line with our expectations. As we noted during our last call, Mac faced a very difficult compare because of the incredibly successful rollout of our M1 chip throughout the Mac lineup last year. And like our other product lines, Mac is facing some macroeconomic and foreign exchange headwinds as well. That said, the advancements we've made in power efficient performance continue to amaze our users. Our M2 Mac Mini customers are raving about the pro level powerhouse packed into an ultra-compact design, and users are marveling at the power and speed at the heart of every M2 powered MacBook Air and MacBook Pro, which allowed them to sustain even the most demanding workloads. iPad revenue was $6.7 billion, which was also in line with our expectations. Similar to Mac, iPad revenue performance was impacted by macroeconomic challenges, foreign exchange headwinds, and a difficult compare with last year when we launched the M1 powered iPad Air. iPad's versatility continues to be its greatest strength as we're helping students learn on the same family of devices artists use to create their next masterpiece. Across wearables, home and accessories, revenue was $8.8 billion. With its exceptional range of game changing health and safety features, Apple Watch becomes more and more indispensable every day. Apple Watch Ultra is attracting adventures, athletes and everyday users with its breakthrough features built for endurance and exploration. And with summer travel season soon heating up, there's no better companion in the air or on the road than AirPods, the best and most popular headphones in the world. Meanwhile, Services set an all-time record with $20.9 billion in revenue for the March quarter. We achieved all time revenue records across App Store, Apple Music, iCloud and payment services. And now, with more than 975 million paid subscriptions, we're reaching even more people with our lineup of services. Apple TV Plus continues to draw praise from customers and reviewers alike. During the past quarter, fans tuned in to incredible new series like Shrinking and The Big Door Prize and got to welcome Ted Lasso back into their homes for a third season. Movies like Tetris are captivating viewers with many more to come, including Martin Scorsese\u2019s Killers of the Flower Moon later this year. Three years since its launch, Apple TV Plus programming has been celebrated across the globe, with over 1,450 nominations and more than 350 wins. Recently, we were thrilled to cheer on The Boy, the Mole, the Fox and the Horse, which won an Academy Award for best Animated Short Film. The first season of our historic tenure partnership with Major League Soccer is well underway with MLS season pass, we've created the ultimate destination for soccer fans, offering subscribers the ability to watch every match with no blackouts. And with baseball season in full swing, Apple TV Plus subscribers can watch their favorite teams with the return of Friday night baseball. This quarter, we launched Apple Music Classical, a standalone app that gives something special to classical music lovers. Apple Music Classical packs the largest library of classical music on Earth into a thoughtful and intuitive design that strikes all the right notes. Whether you're listening with AirPods or HomePod, the premium sound experience of Apple Music Classical will leave you with a feeling of being front row at the symphony just behind the conductor. In March, we also launched Apple Pay Later designed with users privacy and financial health in mind. Apple Pay Later allows users to split purchases into multiple payments with no interest or fees. And last month, we introduced Apple Card Savings Accounts to give users even more value out of their daily cash Apple Card Benefit. At Apple, our customers are at the center of everything we do. Nowhere is that more evident than retail, where our teams are dedicated to sharing the best of Apple with our customers. And we're constantly innovating to deliver exceptional experiences and meet our customers where they are. In the US, we launch Shop with a specialist over video, a new way for customers to learn about iPhone and find the one that's just right for them. And as I noted earlier, in a milestone for Apple, we just opened our first two Apple stores in India, in Mumbai and Delhi. I was there to see it for myself, and I couldn't have been more delighted by the excitement and enthusiasm of the customers, developers, creators and team members I got to spend time with. I've had the chance to connect with customers and teams all around the world in recent months, so many people shared with me that they were fans of Apple, not just because of the innovations we create, but because of the values that guide us, and that means a great deal to us. We're constantly striving to make a positive difference in people's lives and be a force for progress. We're investing in education to give students the skills they need to shape the future. We're helping to create pathways of opportunity for communities of color through our Racial Equity and justice initiative. And every day we're building an even more inclusive and diverse Apple rooted in our culture of belonging. To better understand how our work intersects with our values, look no further than what we're doing for the environment. We just celebrated Earth Day in April, and during that month, Apple announced that its global manufacturing partners now support over 13 gigawatts of renewable energy, a nearly 30% increase in just the last year. This translates to 17.4 million metric tons of avoided carbon emissions, the equivalent of removing nearly 3.8 million cars from the road. We're all investing up to an additional $200 million in our Restore Fund, which is designed to support innovative, scalable, nature based carbon removal projects, with the goal of removing 1 million metric tons of carbon every year. These are just the latest steps on our journey toward our 2030 goal to be carbon neutral across our supply chain and lifecycle of our devices. At the same time, we're advancing renewable energy across our supply chain, we're also sourcing more recycled materials in our products. Last month, we announced our plans to have all Apple design batteries include 100% certified recycled cobalt by 2025, and we remain committed to one day using only recycled and renewable materials in our products. We have a deep sense of mission here at Apple. We believe in the power of innovation to build a better world. We are determined to do our best work on behalf of our customers and to give them the tools that can enrich lives. So we will manage for the long term, just as we always have, with our eyes to the horizon, with limitless creativity, and with a deep belief that we can achieve anything we put our minds to. With that, I'll turn it over to Luca.","evidence_gemma_new":"Mac revenue March quarter","evidence_llama_3_3":"Mac Mac revenue March quarter","evidence_qwen_3_30b":"Mac revenue down 31% year-over-year","gemma_new_max":7200000000.0,"gemma_new_min":7200000000.0,"llama_3_3_max":7200000000.0,"llama_3_3_min":7200000000.0,"qwen_3_30b_max":7200000000.0,"qwen_3_30b_min":7200000000.0}
{"symbol":"AAPL","year":2023,"quarter":3,"date":"2023-Q3","chunk_id":3,"sub_chunk_id":0,"centroid_label":"mac mac revenue","agreed_value":6800000000.0,"count":3,"chunk":"Luca Maestri: Thank you, Tim, and good afternoon, everyone. Revenue for the June quarter was $81.8 billion, down 1% from last year and better than our expectations despite nearly 4 percentage points of negative impact from foreign exchange. On a constant currency basis, our revenue grew year-over-year in total and in the majority of the markets we track. We set June quarter records in both Europe and Greater China and continue to see strong performance across our emerging markets driven by iPhone. Products revenue was $60.6 billion, down 4% from last year, as we faced FX headwinds and an uneven macroeconomic environment. However, our installed base reached an all-time high across all geographic segments, driven by a June quarter record for iPhone switchers and high new-to rates in Mac, iPad and Watch, coupled with very high levels of customer satisfaction and loyalty. Our Services revenue set an all-time record of $21.2 billion, up 8% year-over-year and grew double digits in constant currency. Our performance was strong around the world as we reach all-time Services revenue records in Americas and Europe and June quarter records in Greater China and rest of Asia Pacific. Company gross margin was 44.5%, a record level for the June quarter and up 20 basis points sequentially, driven by cost savings and favorable mix shift towards Services, partially offset by a seasonal loss of leverage. Products gross margin was 35.4%, down 130 basis points from last quarter due to seasonal loss of leverage and mix, partially offset by favorable costs. Services gross margin was 70.5%, decreasing 50 basis points sequentially. Operating expenses of $13.4 billion were below the low end of the guidance range we provided at the beginning of the quarter and decelerated from the March quarter. We continue to take a deliberate approach in managing our spend with strong focus on innovation and new product development. The results of these actions delivered net income of $19.9 billion, diluted earnings per share of $1.26, up 5% versus last year, and very strong operating cash flow of $26.4 billion. Let me now provide more detail for each of our revenue categories. iPhone revenue was $39.7 billion, down 2% year-over-year but grew on a constant currency basis. We set revenue records in several markets around the world, including an all-time record in India and June quarter records in Latin America, the Middle East and Africa, Indonesia, the Philippines, Italy, the Netherlands and the U.K. Our iPhone active installed base grew to a new all-time high, thanks to a June quarter record in switchers. This is a testament to our extremely high levels of customer satisfaction, which 451 Research recently measured at 98% for the iPhone 14 family in the U.S. Mac generated $6.8 billion in revenue, down 7% year-over-year. We continue to invest in our Mac portfolio. And this past quarter, we were pleased to complete the transition to Apple silicon for the entire lineup. This transition has driven both strong upgrade activity and a high number of new customers. In fact, almost half of Mac buyers during the quarter were new to the product. We also saw reported customer satisfaction of 96% for Mac in the U.S. iPad revenue was $5.8 billion, down 20% year-over-year and in line with our expectations. These results were driven by a difficult compare against the full quarter impact of the iPad Air launch in the prior year. At the same time, we continue to attract a large number of new customers to the iPad installed base with over half of the customers who purchased iPads during the quarter being new to the product. And the latest reports from 451 Research indicate customer satisfaction of 96% in the U.S. Wearables, Home and Accessories revenue was $8.3 billion, up 2% year-over-year, with a June quarter record in Greater China and strong performance in several emerging markets. We continue to see Apple Watch expand its reach with about 2\/3 of customers purchasing an Apple Watch during the quarter being new to the product. And this is combined with very high levels of customer satisfaction, which was recently reported at 98% in the United States. Moving on to Services. We reached a new all-time revenue record of $21.2 billion with year-over-year growth accelerating sequentially to 8% and up double digits in constant currency. In addition to the all-time records Tim mentioned earlier, we also set June quarter records for advertising, App Store and Music. We are very pleased with our performance in Services, which is a direct reflection of our ecosystem's strength. First, our installed base of over 2 billion active devices continues to grow at a nice pace and establishes a solid foundation for the future expansion of our ecosystem. Second, we see increased customer engagement with our services. Both our transacting accounts and paid accounts grew double digits year-over-year, each reaching a new all-time high. Third, our paid subscriptions showed strong growth. This past quarter, we reached an important milestone and passed 1 billion paid subscriptions across the services on our platform, up 150 million during the last 12 months and nearly double the number of paid subscriptions we had only 3 years ago. And finally, we continue to improve the breadth and the quality of our current services. From 20 new games on Apple Arcade, to brand-new content on Apple TV+, to the launch of our high-yield savings account with Apple Card, our customers are loving these enhanced offerings. Turning to the enterprise market. Our customers are leveraging Apple products every day to help improve productivity and attract talent. Blackstone, a global investment management firm, is expanding its Apple footprint from their corporate iPhone fleet to now offering the MacBook Air powered by M2 to all of their corporate employees and portfolio companies. Gilead, a leading biopharmaceutical company, has deployed thousands of iPads globally to their sales team. Over the last 6 months, they have also doubled their Mac user base by making MacBook Air available to more employees with a focus on user experience and strong security. Let me now turn to our cash position and capital return program. We ended the quarter with over $166 billion in cash and marketable securities. We repaid $7.5 billion in maturing debt while issuing $5.2 billion of new debt and increasing commercial paper by $2 billion, leaving us with total debt of $109 billion. As a result, net cash was $57 billion at the end of the quarter. During the quarter, we returned over $24 billion to shareholders, including $3.8 billion in dividends and equivalents and $18 billion through open market repurchases of 103 million Apple shares. We continue to believe there is great value in our stock and maintain our target of reaching a net cash neutral position over time. As we move ahead into the September quarter, I'd like to review our outlook, which includes the types of forward-looking information that Saori referred to at the beginning of the call. We expect our September quarter year-over-year revenue performance to be similar to the June quarter, assuming that the macroeconomic outlook doesn't worsen from what we are projecting today for the current quarter. Foreign exchange will continue to be a headwind, and we expect a negative year-over-year revenue impact of over 2 percentage points. We expect iPhone and Services year-over-year performance to accelerate from the June quarter. Also, we expect the revenue for both Mac and iPad to decline by double digits year-over-year due to difficult compares, particularly on the Mac. For both products, we experienced supply disruptions from factory shutdowns in the June quarter a year ago and were able to fulfill significant pent-up demand in the year ago September quarter. We expect gross margin to be between 44% and 45%. We expect OpEx to be between $13.5 billion and $13.7 billion. We expect OI&E to be around negative $250 million, excluding any potential impact from the mark-to-market of minority investments, and our tax rate to be around 16%. Finally, today, our Board of Directors has declared a cash dividend of $0.24 per share of common stock payable on August 17, 2023, to shareholders of record as of August 14, 2023. With that, let's open the call to questions.","evidence_gemma_new":"Mac revenue","evidence_llama_3_3":"Mac Mac revenue June quarter","evidence_qwen_3_30b":"Mac revenue down 7% year-over-year","gemma_new_max":6800000000.0,"gemma_new_min":6800000000.0,"llama_3_3_max":6800000000.0,"llama_3_3_min":6800000000.0,"qwen_3_30b_max":6800000000.0,"qwen_3_30b_min":6800000000.0}
{"symbol":"AAPL","year":2023,"quarter":4,"date":"2023-Q4","chunk_id":2,"sub_chunk_id":0,"centroid_label":"mac mac revenue","agreed_value":7600000000.0,"count":3,"chunk":"Tim Cook: Thank you, Suhasini. Good afternoon, everyone, and thanks for joining the call. Today, Apple is reporting revenue of $89.5 billion for the September quarter. We achieved an all-time revenue record in India, as well as September quarter records in several countries, including Brazil, Canada, France, Indonesia, Mexico, the Philippines, Saudi Arabia, Turkey, the UAE, Vietnam and more. iPhone revenue came in ahead of our expectations, setting a September quarter record, as well as quarterly records in many markets, including China mainland, Latin America, the Middle-East, South Asia and an all-time record in India. In services, we set an all-time revenue record with double-digit growth and ahead of our expectations. During the September quarter, we continue to face an uneven macroeconomic environment, including foreign exchange headwinds and we've navigated these challenges by following the same principles that have always guided us. We've continued to invest in the future and manage for the long-term. We've adapted continuously to circumstances beyond our control, while being thoughtful and deliberate on spending. And we've carved a path of groundbreaking innovations and delivered with excellence every step of the way. That includes Apple Vision Pro, which has gotten such an amazing response from developers who are currently creating truly incredible apps. We're excited to get this magical product in the hands of customers early next year. Now let me share more about our products, beginning with iPhone. iPhone revenue came in at $43.8 billion, 3% higher than a year ago, and a new record for the September quarter. This fall, we were thrilled to debut the iPhone 15 lineup. The all-new iPhone 15 and iPhone 15 Plus feature a gorgeous design, powerful cameras and the intuitive Dynamic Island. Powered by the industry-leading A17 Pro, our iPhone15 Pro lineup has a beautiful strong and durable titanium design and the best iPhone camera system ever, including a 5X Telephoto lens on iPhone 15 Pro Max. Customers are loving the entire iPhone 15 family and reviews have been off the charts. In Mac, revenue came in at $7.6 billion, down 34% year-over-year from the prior year's record quarter. This was due to challenging market conditions, as well as difficult compares against the supply disruptions and subsequent demand recapture we experienced a year ago. Earlier this week, we were excited to unveil the next generation of Apple silicon with our incredible family of M3 chips, M3; M3 Pro; and M3 Max. We're continuing to innovate at a tremendous pace. And our industry-leading lineup of personal computers just got even better. The new MacBook Pro lineup brings our most advanced technology to our Pro users, while iMac, the world's best-selling all-in-one, just got faster and more capable. And according to the latest data from Student Monitor, nearly two out of three college students chose a Mac. We couldn't be more excited about the future. Turning to iPad. Revenue for the September quarter was $6.4 billion. iPad sets the gold standard for tablets and our competitors are unable to match the iPad experience that is enabled by our seamless integration of hardware and software. iPad is also our most versatile product. In classrooms around the world, it's helping educators bring lessons to life, while giving students a window into the world around them. And in artist workshops, design studios and everywhere else, creative minds come together, iPad supercharges the creative process, helping users take their ideas farther than they ever could before. Across wearables, home and accessories, revenue came in at $9.3 billion. Apple Watch has become essential in our lives and this is our best Apple Watch lineup ever. With Apple Watch Series 9 and Apple Watch Ultra 2, we're giving people even more tools to stay safe and live healthy, active lives. With the new double tap gesture, users can easily control Apple Watch Series 9 and Apple Watch Ultra 2 using just one hand and without touching the display. It feels like magic. Our latest Apple Watch lineup also includes our first-ever carbon-neutral products, a significant achievement of innovation and determination. Apple's unique ecosystem of hardware, software, and services delivers an unparalleled user experience. During the quarter, we also had the chance to introduce a range of exciting new updates to our software that will allow users to get even more out of their devices. Whether it's personalized contact posters and new face time features in iOS 17, new tools for users to make their experience their own in macOS Sonoma and iPadOS 17, or a bold new look in watchOS 10 that lets you see and do more, faster than ever, Apple is delivering an even better, richer experience that users are loving. Services revenue set an all-time record of $22.3 billion, a 16% year-over-year increase. We achieved all-time revenue records across App Store, advertising, AppleCare, iCloud, payment services, and video, as well as the September quarter revenue record in Apple Music. Whether subscribers are waking up to headlines on Apple News+, getting their morning workout in with Fitness+, feeling the beat with Apple Music on their way to work or school, or unwinding at the end of the day with Apple Arcade, we have so many different services to enrich their day. Apple TV+ continues to delight customers as well, with new and returning shows like the Morning Show, Lessons in Chemistry and Monarch. We're telling impactful stories that inspire imagination and stir the soul. Making movies that make a difference is also at the heart of Apple TV+ and we were thrilled to produce Martin Scorsese's Killers of the Flower Moon, a powerful work of cinema that premiered in theaters around the world last month. We're proud to say that since launch, just over four years ago, Apple TV+ has earned nearly 1,600 award nominations and nearly 400 wins. We also offer subscribers an unprecedented live sports experience with MLS Season Pass. We couldn't be more pleased with how our partnership with Major League Soccer has gone in its first year. Subscriptions to MLS Season Pass have exceeded our expectations and we're excited to continue that momentum next year. With the playoffs now underway, we can't wait to see who takes home MLS cup. And nowhere does the magic of Apple come alive more than it does in our stores. Over the past year, we've continued to find ways to connect with even more customers. We welcomed customers to our first-ever retail locations in India. We also opened doors to new stores in Korea, China and the UK and expanded the Apple store online to Vietnam and Chile. And we have another store opening in China this week. In September, I joined our team at Apple Fifth Avenue on launch day and the energy and excitement were unbelievable. Every time we connect with the customer, we're reminded why we do what we do. From simple joys of creating and sharing memories, to lifesaving features like emergency SoS via satellite, we're enriching lives in ways large and small. And whether we're working to safeguard user privacy, ensure technology made by Apple is accessible for everyone, or build an even more inclusive workplace, we're determined to lead with our values. Our environmental efforts are a great example of the intersection of our work and our values. Across Apple, we act on a simple premise, the best products in the world should be the best products for the world. We've made our environmental work a central focus of our innovation, because we feel a responsibility to leave the world better than we found it and because we know that climate change cannot be stopped, unless everyone steps up and does their part. Our first ever carbon-neutral products represent a major milestone and we're going to go even further. We plan to make every product across our lineup carbon neutral by the end of the decade. And we're not doing it alone. Over 300 of our suppliers have committed to using a 100% clean energy for Apple production by 2030. We also continue to invest in entrepreneurs who are lighting the way for a greener, more equitable future. Through our third impact accelerator class, we're proud to support a new class of diverse innovators on the cutting edge of green technology and clean energy. Apple is always looking forward, driven in equal measure by a sense a possibility and a deep belief in our purpose. We're motivated by the meaningful difference we can make for our customers and keenly determined to push the limits of technology even further. And that's why I'm so confident that Apple's future is bright. With that, I'll turn it over to Luca.","evidence_gemma_new":"Mac revenue","evidence_llama_3_3":"Mac revenue September quarter","evidence_qwen_3_30b":"Mac revenue year-over-year","gemma_new_max":7600000000.0,"gemma_new_min":7600000000.0,"llama_3_3_max":7600000000.0,"llama_3_3_min":7600000000.0,"qwen_3_30b_max":7600000000.0,"qwen_3_30b_min":7600000000.0}
{"symbol":"AAPL","year":2024,"quarter":1,"date":"2024-Q1","chunk_id":2,"sub_chunk_id":0,"centroid_label":"mac mac revenue","agreed_value":7800000000.0,"count":2,"chunk":"Tim Cook: Thank you. Suhasini. Good afternoon, everyone, and thanks for joining the call. Today, Apple is reporting revenue of $119.6 billion for the December quarter, up 2% from a year ago despite having one less week in the quarter. EPS was $2.18, up 16% from a year ago and an all-time record. We achieved revenue records across more than two dozen countries and regions including all-time records in Europe and rest of Asia-Pacific. We also continue to see strong double-digit growth in many emerging markets with all-time records in Malaysia, Mexico, The Philippines, Poland, and Turkey, as well as December quarter records in India, Indonesia, Saudi Arabia, and Chile. In Services, we set an all-time revenue record with paid subscriptions growing double-digits year-over-year. And I'm pleased to announce today that we have set a new record for our installed base, which has now surpassed 2.2 billion active devices. We are announcing these results on the eve of what is sure to be a historic day as we enter the era of spatial computing. Starting tomorrow, Apple Vision Pro, the most advanced personal electronics device ever, will be available in Apple stores for customers in the U.S. with expansion to other countries later this year. Apple Vision Pro is a revolutionary device built on decades of Apple innovation and it's years ahead of anything else. Apple Vision Pro has a groundbreaking new input system and thousands of innovations, and it will unlock incredible experiences for users and developers that are simply not possible on any other device. There is already so much excitement behind this product from reviewers, customers, and developers. They are praising everything from the incredible experience of watching a movie on a 100-foot screen to remarkable new machine learning capabilities like hand tracking and room mapping. We can't wait for people to experience the magic for themselves. Moments like these are what we live for at Apple. They're why we do what we do. They're why we're so unflinchingly dedicated to groundbreaking innovation and why we're so focused on pushing technology to its limits as we work to enrich the lives of our users. As we look ahead, we will continue to invest in these and other technologies that will shape the future. That includes artificial intelligence where we continue to spend a tremendous amount of time and effort, and we're excited to share the details of our ongoing work in that space later this year. Now, let's turn to the results for the December quarter, beginning with iPhone. We are proud to report that revenue came in at $69.7 billion, 6% higher than a year ago. The iPhone 15 lineup has earned glowing reviews and been embraced by customers. The iPhone 15 and iPhone 15 Plus feature a gorgeous new design with color-infused back glass and contoured edges, Dynamic Island, A16 Bionic, and a new 48 megapixel camera system. And the iPhone 15 Pro and iPhone 15 Pro Max set the gold standard for smartphones with a beautiful and lighter titanium design, industry-leading performance with A17 Pro and our most advanced camera system with the equivalent of seven pro lenses and the ability to record spatial video. Features like Emergency SoS and roadside assistance via satellite bring peace of mind to users when they travel, and I'm grateful for every note I've received about their lifesaving impact. Turning to Mac. Revenue came in at $7.8 billion, up 1% year-over-year, driven by the strength of our latest M3-powered MacBook Pro models in spite of having one less week of sales. Just last week, we got to wish Mac a happy 40th birthday. When it was introduced 40 years ago, Mac changed everything, and through the years, it has done so again and again. Recently, we have been on a tremendous pace of innovation. Since the introduction of Apple silicon in 2020, we've been proud to offer our users unmatched performance and power along with a remarkable Neural Engine for artificial intelligence and machine learning. This past fall, we had an amazing launch of the latest generation of Apple silicon for Mac, M3, M3 Pro, and M3 Max. These chips break new ground in power and performance empowering users to do more than they ever could before, whether they're making a musical masterpiece using the latest features in Logic Pro, or beating their high score in a graphics intensive game. A favorite amongst students, business owners, artists, and video editors, our MacBook Pro lineup is the world's best pro notebook family. And iMac, the world's most capable and best-selling all-in one, is now faster than ever, thanks to M3. In iPad, revenue for the December quarter was $7 billion, down 25% year-over-year due to a difficult compare with the launch of the M2 iPad Pro and the 10th generation iPad during the December quarter last year and one less week of sales. iPad remains the most versatile, capable, and elegant tablet on the market today. It continues to be the go-to-device for students, creators, and more with customers loving iPad's incredible combination of portability and performance. Powerful apps like Final Cut Pro and Logic Pro for iPad allow video and music creators to unleash their creativity in new ways that are only possible on iPad. iPad continues to push the boundaries of what's possible on a tablet. In Wearables, Home and Accessories, revenue came in at $12 billion, down 11% from a year ago due to a difficult compare with the launch timing of several products in this category and the impact of the 14th week last year. Across our latest Apple Watch lineup, we're enabling and encouraging our users to live a healthier day, while making Apple Watch even more intuitive to use. The new double tap gesture on Apple Watch Series 9 and Apple Watch Ultra 2 make it easier to answer calls, play and pause music or take a photo with iPhone. I've been deeply moved by the many touching stories about how features like a regular rhythm notification and fall detection helped Apple Watch users when they needed it most. And for the first time ever, users can choose a carbon-neutral option of any new Apple Watch. Meanwhile, our AirPods lineup continue to be a holiday favorite. In Services, we set an all-time revenue record of $23.1 billion and an 11% year-over-year increase. Because we had one less week this quarter, this growth represents an acceleration from the September quarter, and we achieved all-time revenue records across advertising, cloud services, payment services and video, as well as December quarter records in App Store and AppleCare. Across our services, we're constantly growing our offerings to give users even more to love. With the redesigned Apple TV app, we've made it easier for subscribers to enjoy all their favorite shows, movies and sports, including Apple TV+ hits like Masters of the Air, Monarch, and Slow Horses. We're proud to be a part of Martin Scorsese's Killers of the Flower Moon, a film that has moved audiences and earned more than 200 accolades including Best Film of the Year from the New York Film Critics Circle, nine BAFTA nominations, a Golden Globe win, and 10 Oscar nominations, including Best Picture. Across all Apple TV+ productions, we've now earned 2050 award nominations and 450 wins since we've introduced the service. We're also excited to have a new season of Major League Soccer kicking off this month. We're looking forward to seeing Lionel Messi return to the field and to following all of our favorite teams in what is sure to be an incredible season. And we're counting down to the Apple Music Super Bowl halftime show, featuring Usher. Turning to Retail. In recent months, we opened three stores, including our 100th store in Asia-Pacific. Throughout the holidays, our team members pulled out all the stops to help customers find the perfect gift. And I know our U.S. team members are especially excited to begin demoing Apple Vision Pro for our customers tomorrow. At Apple, we live and breathe innovation. We are driven to pioneer new technology that can enrich our customers' lives, and we're just as intentional about showing up with our values and being a force for good in the world. February is Black History Month, and to honor it, we've launched our new Black Unity Collection, which includes the Black Unity Sport Loop band. This year's designs reflect a lasting commitment to working toward a more equitable world. We also continue to do a central work through our Racial Equity and Justice Initiative, and we're proud to continue providing grants to organizations that are making a real impact in the world. In recent months, we've also taken significant strides in our environmental work. We're partnering with suppliers to bring more clean energy online for Apple production. We're using more recycled materials than ever before and more energy-efficient transportation than ever before. And each day, we are taking more and more steps toward becoming 100% carbon-neutral across all of our products by 2030. Apple is a company that has never shied away from big challenges. That's because we are grounded by a deep sense of purpose and guided by core belief in the transformative power of innovation. And so, we are optimistic about the future, confident in the long-term, and as excited as we've ever been to deliver for our users like only Apple can. With that, I'll turn it over to Luca.","evidence_gemma_new":null,"evidence_llama_3_3":"Mac Mac revenue","evidence_qwen_3_30b":"Mac generated revenue return to growth one less week of sales","gemma_new_max":null,"gemma_new_min":null,"llama_3_3_max":7800000000.0,"llama_3_3_min":7800000000.0,"qwen_3_30b_max":7800000000.0,"qwen_3_30b_min":7800000000.0}
{"symbol":"AAPL","year":2024,"quarter":2,"date":"2024-Q2","chunk_id":1,"sub_chunk_id":0,"centroid_label":"mac mac revenue","agreed_value":7500000000.0,"count":3,"chunk":"Tim Cook: Thank you, Suhasini. Good afternoon, everyone, and thanks for joining the call. Today, Apple is reporting revenue of $90.8 billion and an EPS record of $1.53 for the March quarter. We set revenue records in more than a dozen countries and regions. These include, among others, March quarter records in Latin-America and the Middle East, as well as Canada, India, Spain and Turkey. We also achieved an all-time revenue record in Indonesia, one of the many markets where we continue to see so much potential. In services, we set an all-time revenue record, up 14% over the past year. Keep in mind, as we described on the last call, in the March quarter a year-ago, we were able to replenish iPhone channel inventory and fulfill significant pent-up demand from the December quarter COVID-related supply disruptions on the iPhone 14 Pro and 14 Pro Max. We estimate this one-time impact added close to $5 billion to the March quarter revenue last year. If we remove this from last year's results, our March quarter total company revenue this year would have grown. Despite this impact, we were still able to deliver the records I described. Of course, this past quarter, we were thrilled to launch Apple Vision Pro and it has been so wonderful to hear from people who now get to experience the magic of spatial computing. They describe the impossible becoming possible right before their eyes and they share their amazement and their emotions about what they can do now, whether it's reliving their most treasured memories or having a movie theater experience right in their living room. It's also great to see the enthusiasm from the enterprise market. For example, more than half of the Fortune 100 companies have already bought Apple Vision Pro units and are exploring innovative ways to use it to do things that weren't possible before, and this is just the beginning. Looking ahead, we're getting ready for an exciting product announcement next week that we think our customers will love. And next month, we have our Worldwide Developers Conference, which has generated enormous enthusiasm from our developers. We can't wait to reveal what we have in-store. We continue to feel very bullish about our opportunity in Generative AI. We are making significant investments, and we're looking forward to sharing some very exciting things with our customers soon. We believe in the transformative power and promise of AI, and we believe we have advantages that will differentiate us in this new era, including Apple's unique combination of seamless hardware, software and services integration, groundbreaking Apple's silicon, with our industry-leading neural engines and our unwavering focus on privacy, which underpins everything we create. As we push innovation forward, we continue to manage thoughtfully and deliberately through an uneven macroeconomic environment and remain focused on putting our users at the center of everything we do. Now let's turn to our results for the March quarter across each product category, beginning with iPhone. iPhone revenue for the March quarter was $46 billion, down 10% year-over-year. We faced a difficult compare over the previous year due to the $5 billion impact that I mentioned earlier. However, we still saw growth on iPhone in some markets, including Mainland China, and according to Kantar during the quarter, the two best-selling smartphones in Urban China were the iPhone 15 and iPhone 15 Pro Max. I was in China recently where I had the chance to meet with developers and creators who are doing remarkable things with iPhone. And just a couple of weeks ago, I visited Vietnam, Indonesia and Singapore, where it was incredible to see all the ways customers and communities are using our products and services to do amazing things. Everywhere I travel, people have such a great affinity for Apple, and it's one of the many reasons I'm so optimistic about the future. Turning to Mac. March quarter revenue was $7.5 billion, up 4% from a year ago. We had an amazing launch in early March with the new 13-inch and 15-inch MacBook Air. The world's most popular laptop is the best consumer laptop for AI with breakthrough performance of the M3 chip and it\u2019s even more powerful neural engine. Whether it's an entrepreneur starting a new business or a college student finishing their degree, users depend on the power and portability of MacBook Air to take them places they couldn't have gone without it. In iPad, revenue for the March quarter was $5.6 billion, 17% lower year-over-year, due to a difficult compare with the momentum following the launch of M2 iPad Pro and the 10th Generation iPad last fiscal year. iPad continues to stand apart for its versatility, power and performance. For video editors, music makers and creatives of all kinds, iPad is empowering users to do more than they ever could with a tablet. Across Wearables, Home and Accessories, March quarter revenue was $7.9 billion, down 10% from a year-ago due to a difficult launch compare on Watch and AirPods. Apple Watch is helping runners go the extra mile on their wellness journeys, keeping hikers on course with the latest navigation capabilities in watchOS 10, and enabling users of all fitness levels to live a healthier day. Across our watch lineup, we're harnessing AI and machine-learning to power lifesaving features like a regular rhythm notifications and fall detection. I often hear about how much these features mean to users and their loved ones and I'm thankful that so many people are able to get help in their time of greatest need. As I shared earlier, we set an all-time revenue record in services with $23.9 billion, up 14% year-over-year. We also achieved all-time revenue records across several categories and geographic segments. Audiences are tuning in on screens large, small and spatial and are enjoying Apple TV+ Originals like Palm Royale and Sugar. And we have some incredible theatrical releases coming this year, including Wolves, which reunites George Clooney and Brad Pitt. Apple TV+ productions continue to be celebrated as major awards contenders. Since launch, Apple TV+ productions have earned more than 2,100 award nominations and 480 wins. Meanwhile, we're enhancing the live sports experience with a new iPhone app, Apple Sports. This free app allows fans to follow their favorite teams and leagues with real-time scores, stats and more. Apple Sports is the perfect companion for MLS Season Pass subscribers. Turning to retail, our stores continued to be vital spaces for connection and innovation. I was delighted to be in Shanghai for the opening of our latest flagship store. The energy and enthusiasm from our customers was truly something to behold. And across the United States, our incredible retail teams have been sharing Vision Pro demos with customers, delighting them with a profound and emotional experience of using it for the very first time. Everywhere we operate and everything we do, we're guided by our mission to enrich users' lives and lead the world better than we found it, whether we're making Apple podcasts more accessible with a new transcripts feature or helping to safeguard iMessage users' privacy with new protections that can defend against advances in quantum computing. Our environmental work is another great example of how innovation and our values come together. As we work toward our goal of being carbon-neutral across all of our products by 2030, we are proud of how we've been able to innovate and do more for our customers while taking less from the planet. Since 2015, Apple has cut our overall emissions by more than half, while revenue grew nearly 65% during that same time period. And we're now using more recycled materials in our products than ever before. Earlier this spring, we launched our first-ever product to use 50% recycled materials with a new M3-powered MacBook Air. We're also investing in new solar and wind power in the U.S. and Europe, both to power our growing operations and our users' devices. And we're working with partners in India and the U.S. to replenish 100% of the water we use in places that need it most with the goal of delivering billions of gallons of water benefits over the next two decades. Through our Restore Fund, Apple has committed $200 million to nature-based carbon removal projects. And last month, we welcomed two supplier partners as new investors, who will together invest up to an additional $80 million in the fund. Whether we're enriching lives of users across the globe or doing our part to be a force for good in the world, we do everything with a deep sense of purpose at Apple. And I'm proud of the impact we've already made at the halfway point in a year of unprecedented innovation. I couldn't be more excited for the future we have ahead of us, driven by the imagination and innovation of our teams and the enduring importance of our products and services in people's lives. With that, I'll turn it over to Luca.","evidence_gemma_new":"Mac revenue year-over-year","evidence_llama_3_3":"Mac revenue March quarter","evidence_qwen_3_30b":"Mac revenue a year ago","gemma_new_max":7500000000.0,"gemma_new_min":7500000000.0,"llama_3_3_max":7500000000.0,"llama_3_3_min":7500000000.0,"qwen_3_30b_max":7500000000.0,"qwen_3_30b_min":7500000000.0}
{"symbol":"AAPL","year":2024,"quarter":3,"date":"2024-Q3","chunk_id":1,"sub_chunk_id":0,"centroid_label":"mac mac revenue","agreed_value":7000000000.0,"count":3,"chunk":"Tim Cook : Thank you Suhasini. Good afternoon everyone and thanks for joining the call. Today, Apple is reporting a new June quarter revenue record of $85.8 billion, up 5% from a year ago and better than we had expected. EPS grew double digits to $1.40 and achieved a record for the June quarter. We also set quarterly revenue records in more than two dozen countries and regions, including Canada, Mexico, France, Germany, the UK, India, Indonesia, the Philippines, and Thailand. And we set an all-time revenue record in services which grew 14%. At our Worldwide Developers Conference, we were thrilled to unveil game-changing updates across our platforms, including Apple Intelligence. Apple Intelligence builds on years of innovation and investment in AI and Machine Learning. It will transform how users interact with technology, from writing tools to help you express yourself, to image playground, which gives you the ability to create fun images and communicate in new ways, to powerful tools for summarizing and prioritizing notifications. Siri also becomes more natural, more useful, and more personal than ever. Apple Intelligence is built on a foundation of privacy, both through on-device processing that does not collect users' data and through private cloud compute, a groundbreaking new approach to using the cloud, while protecting users' information powered by Apple silicon. We are also integrating ChatGPT into experiences within iPhone, Mac, and iPad, enabling users to draw on a broad base of world knowledge. We are very excited about Apple Intelligence and we remain incredibly optimistic about the extraordinary possibilities of AI and its ability to enrich customers' lives. We will continue to make significant investments in this technology and dedicate ourselves to the innovation that will unlock its full potential. Recently, we've also been excited to bring Apple Vision Pro to more countries, giving customers the chance to discover the remarkable capabilities of this magical device. Vision Pro users are customizing their own workspaces, watching movies on 100-foot screens, and exploring entire worlds with just a pinch of their fingertips. With more than 2,500 native spatial apps and 1.5 million compatible apps for Vision OS, the developer community continues to pioneer stunning spatial experiences that are only possible with Vision Pro. Last month, we announced that we're bringing some amazing new immersive content to Vision Pro, including new series, concerts, films, and more. And we've seen great interest for Vision Pro in the enterprise, where it can empower companies large and small to pursue their best ideas like never before. With each innovation, we're unlocking new ways of working, new ways of learning, and new ways of tapping into the unlimited promise of human potential. We are doing that across every product and every service. Now let me share more detail in our June quarter results, beginning with iPhone. iPhone revenue was $39.3 billion, down 1% year-over-year. On a constant currency basis, we grew compared to last year. Customers continue to praise the iPhone 15 lineup for its incredible battery life, exceptional cameras, and unmatched power and performance. And we are excited to bring incredible new features to the iPhone with iOS 18, making it more personal, capable, and intelligent than ever before. This update includes the biggest redesign of the Photos app, new customization options for the home screen, messages over satellite, and the introduction of Apple Intelligence. Apple Intelligence utilizes the power of our most advanced iPhones, the iPhone 15 Pro and Pro Max, offering a transformative set of capabilities. Mac revenue was $7 billion, up 2% from a year ago. Customers are loving the latest M3-powered 13 and 15 inch MacBook Air. With back-to-school season upon us, MacBook Air is the perfect companion for students on campus and small business owners, developers, and creatives of all kinds depend on Mac to do more than they ever could before. Powered by Apple silicon with its neural engine and privacy built in at the chip level, Macs are simply the best personal computers for AI. And every Mac we've shipped with Apple silicon since 2020, is capable of taking advantage of Apple Intelligence with Mac OS Sequoia. We also know the importance of security for our users and enterprises so we continue to advance protections across our products. Turning to iPad, revenue was $7.2 billion, 24% higher year-over-year. During the quarter, we had an incredible launch where we unveiled the all-new 11 and 13 inch iPad Air, the perfect device for education, entertainment, and so much more. And With the new iPad Pro, we pushed the boundaries of power-efficient performance with the remarkable M4 chip, the engine behind this incredibly thin device. By leveraging the latest in Apple silicon, Video Editors and Musicians can take advantage of the cutting edge AI features in Final Cut Pro and Logic Pro. And we're very excited that iPad Pro and iPad Air models powered by the M series of Apple silicon will be able to utilize the powerful capabilities of Apple Intelligence. In wearables, home, and accessories, revenue was $8.1 billion, down 2% from a year ago. Apple Watch is empowering users to live a healthier day with a range of tools to take charge of their wellness journeys. At the core of Apple Watch, are powerful AI features that are helping users get help when they need it most, from irregular heart rhythm notifications to walking steadiness to crash detection and fall detection. I've heard time and again how meaningful these features are for users and their loved ones, and their stories motivate us to keep pushing forward on this vital work. As I mentioned earlier, in services, we set an all-time revenue record of $24.2 billion with paid subscriptions climbing to an all-time high. We achieve revenue records in the majority of the services categories with all-time revenue records in advertising, cloud, and payment services. Apple TV+ productions are delighting audiences on screens large and small. We're sharing powerful works of imagination with series and movies like Presumed Innocent, the Upcoming Disclaimer, and The Instigators starring Matt Damon. And we can't wait for returning fan favorites with new seasons of The Morning Show, Slow Horses, and Severance. Apple TV+ productions also continue to earn accolades with nearly 2,300 nominations and 500 wins to-date. That includes 72 Emmy Award nominations across 16 programs our best ever showing for the upcoming awards event. During the quarter, we also expanded Tap to Pay on iPhone to more markets including Japan, Canada, Italy, and Germany, enabling more businesses to use the power of iPhone to accept contactless payments. And we announced new updates to our services coming this fall, including US national park hikes and custom walk routes and Apple Maps, the ability to pay with rewards using Apple Pay, collaborative listening with Apple Music, and a redesigned Apple Fitness+ experience to help users make the most of our library of workouts and meditations. Turning to retail, we continue to expand in emerging markets with our first ever location in Malaysia. Customers from all over the country came together with our team members to celebrate this special moment. Elsewhere in the world, our teams have been sharing the magic of Apple Vision Pro and demos that delight, inspire, and deeply move customers exploring the wonders of spatial computing for the first time. At the heart of all of our innovations are the values that guide everything we do. We believe fundamentally that the best technology is technology that works for everyone. And in honor of Global Accessibility Awareness Day, we introduced all new capabilities to give users more ways to take advantage of all our products can do. These include eye tracking for users to control iPhone or iPad visually, music haptics to give those who are deaf or hard of hearing a tangible way to experience music, and vocal shortcuts that tie task to a user's voice. And we are committed as ever to shipping products that offer the highest standards of privacy for our users. With everything we do, whether it's offering a browser like Safari that prevents third-parties from tracking you across the internet or providing new features like the ability to lock and hide apps, we are determined to keep our users in control of their own data. And we are just as dedicated to ensuring the security of our users' data. That's why we work to minimize the amount of data we collect and work to maximize how much is processed directly on people's devices, a foundational principle that is at the core of all we build, including Apple Intelligence. And we continue to make significant progress on the environment. We are proud to say that all of our data centers, including those that will run private cloud compute, operate on 100% renewable energy. At Apple, we're constantly accelerating our pace of innovation. We are a company in relentless pursuit of big ideas. Time and again, we've seen how a spark of creativity can reach breakthrough velocity, reach across previously unexplored dimensions, and ultimately take flight in ways that can change the world. It's why we're going to keep investing in the meaningful innovation that enriches the lives of all of our customers. We have a busy time ahead of us, and I couldn't be more excited for all the amazing things yet to come. With that, I'll turn it over to Luca.","evidence_gemma_new":"Mac revenue","evidence_llama_3_3":" Mac revenue year-over-year","evidence_qwen_3_30b":"Mac revenue June quarter","gemma_new_max":7000000000.0,"gemma_new_min":7000000000.0,"llama_3_3_max":7000000000.0,"llama_3_3_min":7000000000.0,"qwen_3_30b_max":7000000000.0,"qwen_3_30b_min":7000000000.0}
{"symbol":"AAPL","year":2024,"quarter":4,"date":"2024-Q4","chunk_id":1,"sub_chunk_id":0,"centroid_label":"mac mac revenue","agreed_value":7700000000.0,"count":3,"chunk":"Tim Cook: Thank you, Suhasini. Good afternoon, everyone, and thanks for joining the call. Today, Apple is reporting revenue of $94.9 billion, a September quarter record and up 6% from a year ago. iPhone grew in every geographic segment, marking a new September quarter revenue record for the category, and Services set an all-time revenue record, up 12% year-over-year. We also set September quarter segment revenue records in the Americas, Europe, and the Rest of Asia Pacific, as well as in a large number of countries, including the United States, Brazil, Mexico, France, the UK, Korea, Malaysia, Thailand, Saudi Arabia, and the UAE. And we continue to be excited by the enthusiasm we're seeing in India, where we set an all-time revenue record. This has been an extraordinary year of innovation at Apple. We brought the revolutionary Apple Vision Pro to customers in February, which brings users tomorrow's technology today. And in June, we announced Apple Intelligence, a remarkable personal intelligence system that combines the power of generative models with personal context to deliver intelligence that is incredibly useful and relevant. Apple Intelligence marks the beginning of a new chapter for Apple innovation and redefines privacy and AI by extending our groundbreaking approach to privacy into the cloud with Private Cloud Compute. Earlier this week, we made the first set of Apple Intelligence features available in US English for iPhone, iPad, and Mac users, with systemwide Writing Tools that help you refine your writing, a more natural and conversational Siri, a more intelligent Photos app, including the ability to create movies simply by typing a description, and new ways to prioritize and stay in the moment with notification summaries and priority messages. And we look forward to additional intelligence features in December, with even more powerful Writing Tools, a new visual intelligence experience that builds on Apple Intelligence, and ChatGPT integration, as well as localized English in several countries, including the UK, Australia, and Canada. These features have already been provided to developers and we're getting great feedback. More features will be rolling out in the coming months, as well as support for more languages, and this is just the beginning. Now, I'll turn to our results for the quarter, beginning with iPhone. iPhone revenues set a September quarter record of $46.2 billion, up 6% from a year ago, with growth in every geographic segment. With the introduction of Apple Intelligence, we're beginning a new era for iPhone. iPhone 16, powered by A18, is equipped with an incredible new 48-megapixel Fusion camera, fantastic photo experiences, and the addition of the action button and camera control. An iPhone 16 Pro is the most advanced iPhone we've ever made, powered by A18 Pro and featuring even larger displays, an industry-leading pro camera system with camera control, and studio quality mics, all with a huge leap in battery life. Turning to Mac, revenue was $7.7 billion, up 2% from a year ago. Just this week, we brought a new generation of Apple Silicon to Mac, M4, M4 Pro, and M4 Max. From blazing fast performance to Apple's most advanced neural engine yet, our latest chips can easily tackle incredibly complex workflows, and they ensure our newest Macs will be the best personal computers for AI the instant they hit stores. With the newest additions to our Mac lineup, customers can choose the Mac that's just right for them, whether that's iMac, the world's best and most beautiful all-in-one; MacBook Air, the world's most popular laptop now with double the starting memory; MacBook Pro, the best Pro notebook anywhere; or the incredible, mighty new Mac mini, our first-ever carbon-neutral Mac. iPad revenue was $7 billion, 8% higher year-over-year. iPad is unlike any other product on the market today, and it's become an essential device in homes, schools, and businesses of all sizes. Recently, we were thrilled to introduce the newest iPad mini, featuring an ultra-compact design built for Apple Intelligence with support for Apple Pencil Pro. It's been a big year for iPad. iPad Air was popular with students and teachers as they got back to school this year, while creators are pushing the boundaries of what's possible with the M4-powered iPad Pro. In Wearables, Home and Accessories, revenue was $9 billion, down 3% from a year ago. During the quarter, we launched the all-new Apple Watch Series 10, bringing a beautiful new design and new capabilities to the world's most popular watch that make it even more powerful, intelligent, and sophisticated. It's the thinnest Apple Watch yet, making it more comfortable than ever, while offering the biggest, most advanced display. watchOS 11 brings some huge new health and fitness insights to users, including sleep apnea notifications, which help to alert people with a potentially serious but often undiagnosed condition. We're proud of the impact we make through our health innovations on watch, and I'm grateful for every note I receive about the importance of watch in people's lives. With AirPods 4, we broke a new ground in comfort and design with our best-ever open-ear headphones available for the first time with active noise cancellation. And we were especially pleased to unveil revolutionary end-to-end hearing health capabilities for AirPods Pro 2 with hearing protection, hearing test, and hearing aid features. These just became available in a software update this week, and we believe this will make a meaningful difference in our users' lives. I've already started getting notes from customers calling the experience life changing. And Apple Vision Pro continues to deliver spatial experiences that weren't possible before, including immersive entertainment like the new short film, Submerged, which gives people a view into the unique storytelling power made possible by spatial computing. Vision Pro has more than 2,500 native spatial apps and 1.5 million compatible apps for visionOS 2, as well as applications companies are building to reimagine how they work. Vision Pro continues to inspire awe in its users, and we're just scratching the surface of what's possible. And just yesterday, we announced we're bringing Vision Pro to Korea and the UAE. As I mentioned earlier, Services achieved an all-time revenue record of $25 billion, up 12% from a year ago, and with all-time revenue records across most of our categories. With Apple TV+, we love celebrating the craft of great storytellers who know how to put on a show. Audiences love to discover new movies like Wolfs, explore acclaimed new series like Disclaimer, and dive back into returning favorites like Slow Horses and Shrinking. Apple TV+ productions have become fixtures at award shows, earning more than 2,300 nominations and more than 500 wins today. Apple also offers a live sports experience in a league of its own with MLS Season Pass, and subscribers have been cheering on their favorite teams in the MLS Cup playoffs. This month, we also marked 10 years of Apple Pay. There's always something magical about being able to buy groceries or pay for movie tickets seamlessly with your Apple device. Today, users choose Apple Pay for purchases across tens of millions of retailers worldwide. And we're excited to make the Apple Pay experience even better, with the option to redeem rewards and access loans from credit cards, debit cards, and other lenders right at checkout. Whenever we celebrate big moments, Apple Stores are the best places to share them with customers. I had an incredible time during launch day in September alongside our team at Apple Fifth Avenue, where energy and enthusiasm filled the air. And in stores all over the world, customers are eager to get a closer look at our latest innovations. We also opened two new stores during the quarter and we can't wait to bring four new stores to customers in India. We're passionate about education and believe technology has a vital role to play in both helping teachers to inspire their students and students to learn about the world around them. In honor of World Teachers' Day, Apple was proud to share new resources for teachers to engage their students in ways that aim to make learning easy and fun. Additionally, we've expanded our education grant program into 100 new schools and communities, helping with everything from access to technology, to educator resources, to scholarships and financial support. As we near the end of the year, we're proud of the progress we've made in our efforts to be carbon-neutral across our entire footprint by the end of the decade. As I mentioned earlier, we were thrilled to introduce our first-ever carbon-neutral Mac with the latest Mac mini. And in another milestone, customers can choose a carbon-neutral option of any Apple Watch. These achievements are amazing for all of us at Apple, and we are determined to reach our 2030 goal. At Apple, across everything we do, we manage for the long term, because we're always thinking about what comes next, the next great challenge, the next innovative idea, the next big breakthrough. As we close out the year, we have the best lineup we've ever had going into the holiday season, including Apple Intelligence, which marks the start of a new chapter for our products. This is just the beginning of what we believe generative AI can do, and I couldn't be more excited for what's to come. Before I hand it over to Luca, with Luca transitioning to a new role with Apple, this will be the final time he's joining our call. So, I just wanted to take a moment to recognize his extraordinary service as Apple's CFO and to thank him for his partnership. I am deeply grateful. In his 10 years in the role, Luca has done truly exceptional work in shaping Apple as we know it today. He has helped manage Apple for the long term, thoughtfully and deliberately. He has helped us enrich the lives of so many around the world, and he has been a leader that people look up to and have learned so much from. I have incredible confidence in our incoming CFO, Kevan Parekh, and we look forward to more of you meeting and working with him going forward. With that, I'll turn it over to Luca.","evidence_gemma_new":"Mac revenue","evidence_llama_3_3":"Mac Mac revenue fourth quarter fiscal year 2024","evidence_qwen_3_30b":"Mac revenue year-over-year","gemma_new_max":7700000000.0,"gemma_new_min":7700000000.0,"llama_3_3_max":7700000000.0,"llama_3_3_min":7700000000.0,"qwen_3_30b_max":7700000000.0,"qwen_3_30b_min":7700000000.0}
{"symbol":"AAPL","year":2023,"quarter":1,"date":"2023-Q1","chunk_id":3,"sub_chunk_id":0,"centroid_label":"net income","agreed_value":30000000000.0,"count":3,"chunk":"Luca Maestri: Thank you, Tim, and good afternoon, everyone. As Tim mentioned, revenue for the December quarter was $117.2 billion, down 5% from last year. A number of factors had a significant impact on our results. First, we faced a very difficult foreign exchange environment, which affected our performance by nearly 800 basis points. In other words, we grew revenue on a constant currency basis. And in fact, we did so in the vast majority of markets. Second, the macroeconomic environment this past quarter was markedly more challenging than 12 months ago. Third, we experienced significant supply shortages for iPhone 14 Pro and iPhone 14 Pro Max in November and through December. On the other hand, we had the positive impact of the 14th week in the quarter that Tejas just mentioned at the beginning of the call. Products revenue was $96.4 billion, down 8% from last year due to the factors I just called out. At the same time, however, our installed base of active devices grew double digits and achieved all-time records in each geographic segment and in each major product category. We're proud to now have over 2 billion active devices in our installed base. This continued growth in the installed base is due to extremely strong levels of customer satisfaction and loyalty and a high number of customers who are new to our products. The installed base growth also helped our services set an all-time revenue record of $20.8 billion, up 6% over a year ago. We achieved this new milestone despite more than 700 basis points of negative impact from foreign exchange. We reached all-time services revenue records in the Americas, Europe and rest of Asia Pacific and a December quarter record in Greater China. We also set records in many Services categories, including all-time revenue records for cloud services, payment services and music and December quarter records for the App Store and AppleCare. Company gross margin was 43%, up 70 basis points from last quarter due to leverage and favorable mix, partially offset by foreign exchange. Products gross margin was 37%, up 240 basis points sequentially. And Services gross margin was 70.8%, up 30 basis points sequentially, both due to the same factors that impacted total company gross margin. Operating expenses of $14.3 billion were significantly below the guidance range we provided at the beginning of the quarter and grew at a slower pace than in the past as we took actions to respond to the current macro environment. Net income was $30 billion. Diluted earnings per share were $1.88, and we generated very strong operating cash flow of $34 billion. Let me now get into more detail for each of our revenue categories. iPhone revenue was $65.8 billion despite significant foreign exchange headwinds, supply constraints on iPhone 14 Pro and iPhone 14 Pro Max and a challenging macroeconomic environment. In spite of these circumstances, we set all-time iPhone revenue records in Canada, Italy and Spain, and saw strong growth in several emerging markets, including all-time iPhone revenue records for India and Vietnam. Importantly, the installed base of active iPhones continues to grow nicely and is at an all-time high across all geographic segments. In emerging markets, in particular, the installed base grew double digits, and we had record levels of switchers in India and in Mexico. Our customers continue to love their experience with our products with the latest survey of U.S. consumers from 451 Research indicating customer satisfaction of 98% for the iPhone 14 family. Mac revenue was $7.7 billion, down 29% year-over-year and in line with our expectations. There were 3 key drivers for our Mac results. First, we had a challenging compare against last year's launch of the completely reimagined MacBook Pros, our first notebooks with M1 Pro and M1 Max. Second, we believe that the macro environment impacted our Mac performance. And third, we faced significant foreign exchange headwinds. At the same time, however, the installed base of active Macs reached an all-time high across all geographic segments, and we continue to see very strong upgraded activity to Apple silicon. Customer satisfaction with Mac remains very strong at 96% based on the latest survey of U.S. consumers from 451 Research. iPad revenue was $9.4 billion, up 30% year-over-year despite significant FX headwinds. This performance was driven by 2 key items. First, during the December quarter a year ago, we experienced significant supply constraints, while this year, we had enough supply to meet demand. Second, we launched our new iPad and the iPad Pro powered by the M2 chip during the quarter. The iPad installed base reached a new all-time high, thanks to incredible customer loyalty and a high number of new customers. In fact, over half of the customers who purchased iPads during the quarter were new to the product. Wearables, Home and Accessories revenue was $13.5 billion, down 8% year-over-year. The year-over-year decline was driven by significant FX headwinds and a challenging macroeconomic environment. However, our installed base of devices in the category set a new all-time record thanks to the largest number of customers new to our smartwatch that we've ever had in a given quarter. In fact, nearly 2\/3 of customers purchasing an Apple Watch during the quarter were new to the product. Moving to Services. We generated $20.8 billion in revenue, a new all-time record in total and for many Services offerings in spite of a difficult foreign exchange environment, and macroeconomic headwinds impacting certain categories such as digital advertising and mobile gaming. In constant currency, we grew Services revenue double digits on top of growing 24% during the December quarter a year ago. We remain focused on the large long-term opportunity in this category, and we continue to observe several trends that reflect the strength of our ecosystem. For example, we saw increased customer engagement with our Services during the quarter. Both our transacting accounts and paid accounts grew double digits year-over-year, each setting a new all-time record. Paid subscriptions also continued to grow nicely. We now have more than 935 million paid subscriptions across the services on our platform, up more than 150 million during the last 12 months alone and nearly 4x what we had just 5 years ago. And we continue to increase the reach and improve the quality of our offerings. For instance, Apple Pay is now available to millions of merchants in nearly 70 countries and regions. And we saw a record-breaking number of purchases made using Apple Pay globally during the holiday shopping season. Finally, our installed base of over 2 billion active devices represents a great foundation for future expansion of our ecosystem, and it continues to grow even during difficult macroeconomic conditions, which speaks to the exceptionally high levels of customer loyalty and satisfaction and our ability to attract new customers to our platform. The growth is coming from every major product category and geographic segment, with strong double-digit increases in emerging markets such as Brazil, Mexico, India, Indonesia, Thailand and Vietnam. Turning to the enterprise market. we are seeing continued adoption of our Services for business like Apple Business Essentials, AppleCare, Tap to Pay and Apple Financial Services. For example, Mars Incorporated has expanded its use of AppleCare for Enterprise to provide timely device support and assurance for iPads deployed across their manufacturing sites. Meanwhile, HCA Healthcare has leveraged Apple Financial Services to manage the annual refresh of its entire fleet of iPhones. This not only ensures that their staff stay current on the latest Apple technology, but also provides them with significant annual savings in the process. Let me now turn to our capital return program and our cash position. We returned over $25 billion to shareholders during the December quarter as our business continues to generate very strong cash flow. This included $3.8 billion in dividends and equivalents and $19 billion through open market repurchases of 133 million Apple shares. We ended the quarter with $165 billion in cash and marketable securities. We repaid $1.4 billion in maturing debt and decreased commercial paper by $8.2 billion, leaving us with total debt of $111 billion. As a result, net cash was $54 billion at the end of the quarter, and we maintain our goal of becoming net cash-neutral over time. As we move into the March quarter, I'd like to review our outlook, which includes the types of forward-looking information that Tejas referred to at the beginning of the call. Given the continued uncertainty around the world in the near term, we are not providing revenue guidance, but we are sharing some directional insights based on the assumption that the macroeconomic outlook and COVID-related impacts to our business do not worsen from what we are projecting today for the current quarter. In total, we expect our March quarter year-over-year revenue performance to be similar to the December quarter. This represents an acceleration in our underlying year-over-year business performance as the December quarter benefited from an extra week. Foreign exchange will continue to be a headwind, and we expect a negative year-over-year impact of 5 percentage points. For Services, we expect revenue to grow year-over-year while continuing to face macroeconomic headwinds in areas such as digital advertising and mobile gaming. For iPhone, we expect our March quarter year-over-year revenue performance to accelerate relative to the December quarter year-over-year revenue performance. For Mac and iPad, we expect revenue for both product categories to decline double digits year-over-year because of challenging compares and macroeconomic headwinds. We expect gross margin to be between 43.5% and 44.5%. We expect OpEx to be between $13.7 billion and $13.9 billion. We expect OI&E to be around negative $100 million, excluding any potential impact from the mark-to-market of minority investments, and our tax rate to be around 16%. Finally, today, our Board of Directors has declared a cash dividend of $0.23 per share of common stock payable on February 16, 2023, to shareholders of record as of February 13, 2023. With that, let's open the call to questions.","evidence_gemma_new":"Net income","evidence_llama_3_3":"net income","evidence_qwen_3_30b":"net income $30 billion","gemma_new_max":30000000000.0,"gemma_new_min":30000000000.0,"llama_3_3_max":30000000000.0,"llama_3_3_min":30000000000.0,"qwen_3_30b_max":30000000000.0,"qwen_3_30b_min":30000000000.0}
{"symbol":"AAPL","year":2023,"quarter":2,"date":"2023-Q2","chunk_id":3,"sub_chunk_id":0,"centroid_label":"net income","agreed_value":24200000000.0,"count":3,"chunk":"Luca Maestri: Thank you, Tim, and good afternoon, everyone. Revenue for the March quarter was $94.8 billion, down 3% from last year and better than our expectations. Foreign exchange had a negative impact of over five percentage points on our results, in line with what we had expected. On a constant currency basis, our revenue grew year-over-year in total and in the majority of the markets we track. In addition to the records in emerging markets that Tim mentioned, we also set March quarter records in Australia, Canada, Spain and Switzerland, among others. Products revenue was $73.9 billion, down 5% from last year, due to challenging compares on Mac and iPad. iPhone, however, reached a March quarter revenue record thanks to very strong performance in emerging markets from South Asia and India to Latin America and the Middle East. During the quarter, our installed base of active devices continued to grow at a nice pace thanks to extremely high levels of customer satisfaction and loyalty, and reached an all-time high for all major product categories and geographic segments. Our Services set an all-time revenue record of $20.9 billion, up 5% year-over-year, on top of growing 17% in the March quarter a year ago. We reached an all-time services revenue record in Greater China and March quarter records in Americas, Europe and Rest of Asia Pacific. Company gross margin was 44.3%, up 130 basis points from last quarter, driven by cost savings and favorable mix shift towards services partially offset by leverage. Products gross margin was 36.7%, decreasing 30 basis points sequentially due to seasonal loss of leverage and mix, partially offset by favorable costs. Services gross margin was 71%, up 20 basis points sequentially. Operating expenses of $13.7 billion were at the low end of the guidance range we provided at the beginning of the quarter and continued to decelerate from the December quarter. We are closely managing our spend, but remain focused on long term growth with continued investment in innovation and product development. Net income was $24.2 billion. Diluted earnings per share were a $1.52, unchanged versus last year, and we generated very strong operating cash flow of $28.6 billion. Let me now provide more detail for each of our revenue categories. iPhone revenue set a March quarter record of $51.3 billion, up 2% year-over-year despite significant foreign exchange headwinds and a challenging macroeconomic environment. We set March quarter records in several developed and emerging markets with India, Indonesia, Turkey and the UAE doubling on a year-over-year basis. Our active installed base of iPhone grew to a new all-time high and was up in all our geographic segments. We are very pleased by the results of the latest survey of US Consumers from 451 Research, which measured customer satisfaction at 99% for the iPhone 14 family. Mac revenue was $7.2 billion, down 31% year-over-year and in line with our expectations. These results were driven by the challenging macroeconomic environment coupled with a difficult compare against last year's launch of the completely reimagined M1 MacBook Pros. Despite this, the installed base of active Macs reached an all-time high across all geographic segments and we continue to see strong upgraded activity to Apple silicon. Also, the latest survey of US Consumers from 451 Research reported customer satisfaction at 96% for Mac. iPad generated $6.7 billion in revenue, down 13% year-over-year and in line with our expectations. This performance was due to two key factors, a tough compare against the launch of iPad Air powered by the M1 chip in the year ago quarter and headwinds from the macroeconomic environment. The iPad installed base reached a new all-time high in all geographic segments thanks to exceptional customer loyalty and a high number of new customers. In fact, over half of the customers who purchased iPads during the quarter were new to the product. Wearables, home and accessories revenue was $8.8 billion, down 1% year-over-year as the category experienced the impact from the macroeconomic environment. However, we did set March quarter records both in the US and in Greater China. We continue to see strength in our Watch installed base, which set a new all-time record, thanks to very high customer loyalty and new two rates, nearly two thirds of customers purchasing an Apple Watch during the quarter were new to the product. Moving to Services, we reached a new all-time revenue record of $20.9 billion. And in addition to the all-time records Tim mentioned earlier, we set March quarter records for advertising Apple Care and Video. Despite these records, as we saw in recent quarters, certain services offerings such as digital advertising and mobile gaming continue to be affected by the current macroeconomic environment. Stepping back, however, the continued growth in Services is the reflection of our ecosystem strength and the positive momentum we are seeing across several key metrics. First, our growing installed base of over 2 billion active devices represents a great foundation for future expansion of our ecosystem. We continue to grow across every major product category and geographic segment, thanks to very high levels of customer loyalty and satisfaction. Second, we saw increased customer engagement with our services during the quarter. Both our transacting accounts and paid accounts grew double digits year-over-year, each setting a new all-time record. Third, paid subscriptions showed strong growth. We now have more than $975 million paid subscriptions across the Services on our platform, up 150 million during the last 12 months and nearly double the number of paid subscriptions we had only three years ago. And finally, we continue to improve the breadth and the quality of our current services offerings from new content on Apple TV Plus to great new features available in Apple Pay and Apple Music, which we believe our customers will love. Turning to the enterprise market, we see business customers continuing to invest in the Apple platform to drive higher employee productivity and satisfaction. In Brazil, Boticario Group, the world's largest cosmetics franchiser, originally starting with iPhone, 12 employees manage operations across a network of retail stores, franchisees and resellers. As it continues to digitize its business, Boticario has chosen to move all software development in house and adopted Mac as the standard device for all of their developer teams across the world. In small business, we see an increasing number of customers relying on Apple hardware, software and services to power their businesses forward, from accepting payments on iPhone, to tracking inventory on Mac or iPad, to managing employee devices with Apple Business Essentials. As we celebrate National Small Business week here in the US, we are proud to continue supporting the small business community. Let me now turn to our cash position and capital return program. We ended the quarter with over $166 billion in cash and marketable securities. We repaid $2.3 billion in maturing debt and increased commercial paper by about $300 million, leaving us with total debt of $110 billion. As a result, net cash was $57 billion at the end of the quarter. During the March quarter, we returned over $23 billion to shareholders, including $3.7 billion in dividends and equivalents and $19.1 billion through open market repurchases of $129 million Apple shares. Given the continued confidence we have in our business now and into the future, today our Board has authorized an additional $90 billion for share repurchases as we maintain our goal of getting to net cash neutral over time. We're also raising our dividend by 4% to $0.24 a share, and we continue to plan for annual increases in the dividend going forward. As we move ahead into the June 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. We expect our June quarter year-over-year revenue performance to be similar to the March quarter, assuming that the macroeconomic outlook does not worsen from what we are projecting today for the current quarter. Foreign exchange will continue to be a headwind and we expect a negative year-over-year impact of nearly four percentage points. For Services, we expect our June quarter year-over-year revenue growth to be similar to the March quarter, while continuing to face macroeconomic headwinds in areas such as digital advertising and mobile gaming. We expect gross margin to be between 44% and 44.5%. We expect OpEx to be between $13.6 billion and $13.8 billion. We expect OINE to be around negative $250 million excluding any potential impact from the mark-to-market of minority investments and our tax rate to be around 16%. Finally reflecting the dividend increase I mentioned earlier, today, our Board of Directors has declared a cash dividend of $0.24 per share of common stock payable on May 18, 2023, to shareholders of record as on May 15, 2023. With that, let's open the call to questions.","evidence_gemma_new":"Net income","evidence_llama_3_3":"Net income March quarter","evidence_qwen_3_30b":"Net income","gemma_new_max":24200000000.0,"gemma_new_min":24200000000.0,"llama_3_3_max":24200000000.0,"llama_3_3_min":24200000000.0,"qwen_3_30b_max":24200000000.0,"qwen_3_30b_min":24200000000.0}
{"symbol":"AAPL","year":2023,"quarter":3,"date":"2023-Q3","chunk_id":3,"sub_chunk_id":0,"centroid_label":"net income","agreed_value":19900000000.0,"count":3,"chunk":"Luca Maestri: Thank you, Tim, and good afternoon, everyone. Revenue for the June quarter was $81.8 billion, down 1% from last year and better than our expectations despite nearly 4 percentage points of negative impact from foreign exchange. On a constant currency basis, our revenue grew year-over-year in total and in the majority of the markets we track. We set June quarter records in both Europe and Greater China and continue to see strong performance across our emerging markets driven by iPhone. Products revenue was $60.6 billion, down 4% from last year, as we faced FX headwinds and an uneven macroeconomic environment. However, our installed base reached an all-time high across all geographic segments, driven by a June quarter record for iPhone switchers and high new-to rates in Mac, iPad and Watch, coupled with very high levels of customer satisfaction and loyalty. Our Services revenue set an all-time record of $21.2 billion, up 8% year-over-year and grew double digits in constant currency. Our performance was strong around the world as we reach all-time Services revenue records in Americas and Europe and June quarter records in Greater China and rest of Asia Pacific. Company gross margin was 44.5%, a record level for the June quarter and up 20 basis points sequentially, driven by cost savings and favorable mix shift towards Services, partially offset by a seasonal loss of leverage. Products gross margin was 35.4%, down 130 basis points from last quarter due to seasonal loss of leverage and mix, partially offset by favorable costs. Services gross margin was 70.5%, decreasing 50 basis points sequentially. Operating expenses of $13.4 billion were below the low end of the guidance range we provided at the beginning of the quarter and decelerated from the March quarter. We continue to take a deliberate approach in managing our spend with strong focus on innovation and new product development. The results of these actions delivered net income of $19.9 billion, diluted earnings per share of $1.26, up 5% versus last year, and very strong operating cash flow of $26.4 billion. Let me now provide more detail for each of our revenue categories. iPhone revenue was $39.7 billion, down 2% year-over-year but grew on a constant currency basis. We set revenue records in several markets around the world, including an all-time record in India and June quarter records in Latin America, the Middle East and Africa, Indonesia, the Philippines, Italy, the Netherlands and the U.K. Our iPhone active installed base grew to a new all-time high, thanks to a June quarter record in switchers. This is a testament to our extremely high levels of customer satisfaction, which 451 Research recently measured at 98% for the iPhone 14 family in the U.S. Mac generated $6.8 billion in revenue, down 7% year-over-year. We continue to invest in our Mac portfolio. And this past quarter, we were pleased to complete the transition to Apple silicon for the entire lineup. This transition has driven both strong upgrade activity and a high number of new customers. In fact, almost half of Mac buyers during the quarter were new to the product. We also saw reported customer satisfaction of 96% for Mac in the U.S. iPad revenue was $5.8 billion, down 20% year-over-year and in line with our expectations. These results were driven by a difficult compare against the full quarter impact of the iPad Air launch in the prior year. At the same time, we continue to attract a large number of new customers to the iPad installed base with over half of the customers who purchased iPads during the quarter being new to the product. And the latest reports from 451 Research indicate customer satisfaction of 96% in the U.S. Wearables, Home and Accessories revenue was $8.3 billion, up 2% year-over-year, with a June quarter record in Greater China and strong performance in several emerging markets. We continue to see Apple Watch expand its reach with about 2\/3 of customers purchasing an Apple Watch during the quarter being new to the product. And this is combined with very high levels of customer satisfaction, which was recently reported at 98% in the United States. Moving on to Services. We reached a new all-time revenue record of $21.2 billion with year-over-year growth accelerating sequentially to 8% and up double digits in constant currency. In addition to the all-time records Tim mentioned earlier, we also set June quarter records for advertising, App Store and Music. We are very pleased with our performance in Services, which is a direct reflection of our ecosystem's strength. First, our installed base of over 2 billion active devices continues to grow at a nice pace and establishes a solid foundation for the future expansion of our ecosystem. Second, we see increased customer engagement with our services. Both our transacting accounts and paid accounts grew double digits year-over-year, each reaching a new all-time high. Third, our paid subscriptions showed strong growth. This past quarter, we reached an important milestone and passed 1 billion paid subscriptions across the services on our platform, up 150 million during the last 12 months and nearly double the number of paid subscriptions we had only 3 years ago. And finally, we continue to improve the breadth and the quality of our current services. From 20 new games on Apple Arcade, to brand-new content on Apple TV+, to the launch of our high-yield savings account with Apple Card, our customers are loving these enhanced offerings. Turning to the enterprise market. Our customers are leveraging Apple products every day to help improve productivity and attract talent. Blackstone, a global investment management firm, is expanding its Apple footprint from their corporate iPhone fleet to now offering the MacBook Air powered by M2 to all of their corporate employees and portfolio companies. Gilead, a leading biopharmaceutical company, has deployed thousands of iPads globally to their sales team. Over the last 6 months, they have also doubled their Mac user base by making MacBook Air available to more employees with a focus on user experience and strong security. Let me now turn to our cash position and capital return program. We ended the quarter with over $166 billion in cash and marketable securities. We repaid $7.5 billion in maturing debt while issuing $5.2 billion of new debt and increasing commercial paper by $2 billion, leaving us with total debt of $109 billion. As a result, net cash was $57 billion at the end of the quarter. During the quarter, we returned over $24 billion to shareholders, including $3.8 billion in dividends and equivalents and $18 billion through open market repurchases of 103 million Apple shares. We continue to believe there is great value in our stock and maintain our target of reaching a net cash neutral position over time. As we move ahead into the September quarter, I'd like to review our outlook, which includes the types of forward-looking information that Saori referred to at the beginning of the call. We expect our September quarter year-over-year revenue performance to be similar to the June quarter, assuming that the macroeconomic outlook doesn't worsen from what we are projecting today for the current quarter. Foreign exchange will continue to be a headwind, and we expect a negative year-over-year revenue impact of over 2 percentage points. We expect iPhone and Services year-over-year performance to accelerate from the June quarter. Also, we expect the revenue for both Mac and iPad to decline by double digits year-over-year due to difficult compares, particularly on the Mac. For both products, we experienced supply disruptions from factory shutdowns in the June quarter a year ago and were able to fulfill significant pent-up demand in the year ago September quarter. We expect gross margin to be between 44% and 45%. We expect OpEx to be between $13.5 billion and $13.7 billion. We expect OI&E to be around negative $250 million, excluding any potential impact from the mark-to-market of minority investments, and our tax rate to be around 16%. Finally, today, our Board of Directors has declared a cash dividend of $0.24 per share of common stock payable on August 17, 2023, to shareholders of record as of August 14, 2023. With that, let's open the call to questions.","evidence_gemma_new":"net income","evidence_llama_3_3":"Net income June quarter","evidence_qwen_3_30b":"net income $19.9 billion","gemma_new_max":19900000000.0,"gemma_new_min":19900000000.0,"llama_3_3_max":19900000000.0,"llama_3_3_min":19900000000.0,"qwen_3_30b_max":19900000000.0,"qwen_3_30b_min":19900000000.0}
{"symbol":"AAPL","year":2023,"quarter":4,"date":"2023-Q4","chunk_id":3,"sub_chunk_id":0,"centroid_label":"net income","agreed_value":23000000000.0,"count":3,"chunk":"Luca Maestri: Thank you, Tim, and good afternoon, everyone. Revenue for the September quarter was $89.5 billion, down less than 1% from last year. Foreign exchange had a negative impact of over 2 percentage points. And on a constant-currency basis, our revenue grew year-over-year in total, and in each geographic segment. We set a September quarter record in the Americas and saw strong performance across our emerging markets, where both iPhone and Services grew double digits. Products revenue was $67.2 billion, down 5% from last year, due to very challenging compares on both Mac and iPad, which I will discuss in more detail later on. At the same time, we reached a September quarter record on iPhone, driven by strength in emerging markets. Our total installed-base of active devices reached an all-time high across all products and all geographic segments, thanks to our high levels of customer satisfaction and many new customers joining our ecosystem. Our Services revenue set an all-time record of $22.3 billion, up 16% year-over-year, with growth accelerating sequentially from the June quarter. Our performance in Services were broad based, as we reached all-time revenue records in the Americas, Europe and rest of Asia-Pacific and a September quarter record in Greater China. We also set new records in every Services category. Company gross margin set a September quarter record at 45.2%, up 70 basis points sequentially, driven by leverage and favorable mix, partially offset by foreign exchange. Products gross margin was 36.6%, up 120 basis points sequentially, also driven by leverage and mix, partially offset by foreign exchange. Services gross margin was 70.9%, up 40 basis points from last quarter due to a different mix. Operating expenses of $13.5 billion were at the low end of the guidance range we provided, up 2% year-over-year. Net income was $23 billion, diluted earnings per share was $1.46, up 13% versus last year and a September quarter record, and operating cash flow was strong at $21.6 billion. Let me now provide more detail for each of our revenue categories. iPhone revenue was $43.8 billion, up 3% year-over-year and a new September quarter record. We had strong performance in several markets, including an all-time record in India as September quarter records in Canada, Latin America, the Middle East, and South Asia . Our iPhone active installed base grew to a new all-time high and fiscal 2023 was another record year for switches. We continue to see extremely high levels of customer satisfaction which 451 Research recently measured at 98% in the U.S. Mac revenue was $7.6 billion, down 34% year-over-year, driven by challenging market conditions and compounded by a difficult compare in our own business, whereby last year we experienced supply disruptions from factory shutdowns in the June quarter and were subsequently able to fulfill significant pent-up demand during the September quarter. We also had a difference in launch timing with the MacBook Air launching earlier this year in the June quarter compared to the September quarter last year. We have great confidence in our Mac lineup and are excited about the recently announced iMac and MacBook Pro powered by our M3 chips. Our installed base is at an all-time high and half of Mac buyers during the quarter were new to the product, driven by MacBook Air. Also, we saw reported customer satisfaction of 97% for Mac in the U.S. iPad generated $6.4 billion in revenue, down 10% year-over-year. Similar to Mac, these results were a function of a difficult compare from the supply disruptions in the June quarter a year ago and the subsequent fulfillment of pent-up demand in the September quarter. iPad continues to attract a large number of new customers to the installed base with over half of the customers who purchase iPads during the quarter being new to the product and the latest reports from 451 Research indicate customer satisfaction of 98% in the U.S. Wearables, Home and Accessories revenue was $9.3 billion, down 3% year-over-year. We had a September quarter record in Europe and we saw strong performance in several emerging markets around the world. Apple Watch continues to expand its reach with nearly two-thirds of customers purchasing Apple Watch during the quarter being new to the product and customer satisfaction for the Watch was recently measured at 97% in the U.S. Services had a great quarter. We reached a new all-time revenue record of $22.3 billion, up 16% year-over-year. And we're happy to see growth coming from all categories and every geographic segment, which is a direct result of the strength of our ecosystem. Our installed base of over 2 billion active devices continues to grow at a nice pace and establishes a solid foundation for the future expansion of the ecosystem. And we continue to see increased customer engagement with our Services. Both transacting accounts and paid accounts grew double-digits year-over-year, each reaching a new all-time high. Also our paid subscriptions showed strong growth. We have well over 1 billion paid subscriptions across the services on our platform, nearly double the number we had only three years ago. And finally, we continue to improve the breadth and quality of our current services from exciting new content on Apple TV+ and Apple Arcade to additional storage tiers on iCloud. We believe our customers will love this new offering. Turning to enterprise. We are excited to see our business customers in both developed and emerging markets expand their deployment of Apple products and technologies to drive business innovation and employee satisfaction. Starbucks continuously invest in Apple technology to bring the best experience to the customers and employees, including tens of thousands of iPads across all retail stores to help their teams streamline order management, operations and training. In addition, Starbucks recently refreshed over 10,000 Macs to the latest M2-powered MacBook Air for all store managers, enabling them to do their best work and improve productivity. And in Indonesia, popular technology company GoTo is offering Mac as a choice, so that employees can have the best tools to be most productive. Today, more than half of its workforce are already choosing Mac for work. Let me now turn to our cash position and capital return program. We ended the quarter with over $162 billion in cash and marketable securities. We increased commercial paper by $2 billion, leaving us with total debt of $111 billion. As a result, net cash was $51 billion at the end of the quarter. And our goal of becoming net cash-neutral over time remains unchanged. During the quarter, we returned nearly $25 billion to shareholders, including $3.8 billion in dividends and equivalents and $15.5 billion through open market repurchases of 85 million Apple shares. We also began a $5 billion accelerated share repurchase program in August, resulting in the initial delivery and retirement of 22 million shares. Taking a step back, as we close our 2023 fiscal year, our annual revenue was $383 billion. While it was down 3% from the prior year, it grew on a constant-currency basis despite the volatile and uneven macroeconomic environment. Our year-over-year revenue performance improved each quarter as we went through the year, and so did our earnings per share performance, as we reported double-digit EPS growth in the September quarter. We are particularly pleased with our performance in emerging markets with revenue reaching an all-time record in fiscal 2023 and double-digit growth in constant currency. We are expanding our direct presence in these markets from new Apple retail stores in India to online stores in Vietnam and Chile. And we continue to work with our partners to offer a wide range of affordability programs so that we can best serve our customers. We're very excited about the momentum we have in these markets and the opportunity ahead of us. 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%. Finally, today our Board of Directors has declared a cash dividend of $0.24 per share of common stock, payable on November 16, 2023, to shareholders of record as of November 13, 2023. With that, let's open the call to questions.","evidence_gemma_new":"Net income September quarter","evidence_llama_3_3":"Net income September quarter","evidence_qwen_3_30b":"Net income","gemma_new_max":23000000000.0,"gemma_new_min":23000000000.0,"llama_3_3_max":23000000000.0,"llama_3_3_min":23000000000.0,"qwen_3_30b_max":23000000000.0,"qwen_3_30b_min":23000000000.0}
{"symbol":"AAPL","year":2024,"quarter":1,"date":"2024-Q1","chunk_id":3,"sub_chunk_id":0,"centroid_label":"net income","agreed_value":33900000000.0,"count":3,"chunk":"Luca Maestri: Thank you, Tim, and good afternoon, everyone. Revenue for the December quarter was $119.6 billion, up 2% from last year. During the December quarter a year ago, two unique factors affected our results. First, we had an additional week in the quarter. And second, we had COVID-related factory shutdowns that limited iPhone supply. We estimate that the net impact of these two factors resulted in a 2 percentage point headwind to our revenue performance this quarter. We set all-time revenue records in Europe and rest of Asia-Pacific, and continue to see strong performance across our emerging markets with double-digit growth in the majority of the emerging markets we track. Products revenue was $96.5 billion, flat compared to last year, driven by strength in iPhone, offset by challenging compares for iPad and Wearables, Home and Accessories and one less week of sales this year across the entire portfolio. Thanks to our unparalleled customer loyalty and very strong levels of customer satisfaction, our total installed base of active devices set a new record across all products and all geographic segments, and is now over 2.2 billion active devices. Services revenue set an all-time record of $23.1 billion, up 11% year-over-year. When we take into account the extra week last year, this represents a sequential acceleration of growth from the September quarter. We are very pleased with our Services performance in both developed and emerging markets with all-time revenue records in the Americas, Europe, and rest of Asia-Pacific. Company gross margin was 45.9%, up 70 basis points sequentially, driven by leverage and favorable mix, partially offset by foreign exchange. Products gross margin was 39.4%, up 280 basis points sequentially, also driven by leverage and mix, partially offset by foreign exchange. Services gross margin was 72.8%, up 190 basis points from last quarter, due to a more favorable mix. Operating expenses of $14.5 billion were at the midpoint of the guidance range we provided and up 1% year-over-year. Net income was $33.9 billion, up $3.9 billion from last year. Diluted EPS was $2.18, up 16% versus last year and an all-time record. And operating cash flow was very strong at $39.9 billion. Let me now provide more detail for each of our revenue categories. iPhone revenue was $69.7 billion, up 6% year-over-year. We set all-time records in several countries and regions, including Latin America, Western Europe, the Middle East, and Korea, as well as December quarter records in India and Indonesia. Our iPhone active installed base grew to a new all-time high, and we had an all-time record number of iPhone upgraders during the quarter. Customers are loving their new iPhone 15 family, with the latest reports from 451 Research indicating customer satisfaction of 99% in the U.S. In fact, many iPhone models were among the top-selling smartphones around the world during the quarter. According to a survey from Kantar, iPhones were four out of the top five models in the U.S. and Japan, four out of the top six models in urban China and the UK, and all top five models in Australia. Mac generated revenue of $7.8 billion and return to growth, despite one less week of sales this year. This represents a significant acceleration from the September quarter when we faced a challenging compare due to the supply disruptions and subsequent demand recapture we experienced a year ago. Customer response to our latest iMac and MacBook Pro models powered by the M3 chips has been great. And our Mac installed base reached an all-time high with almost half of Mac buyers during the quarter being new to the product. Also, 451 Research recently reported customer satisfaction of 97% for Mac in the U.S. iPad was $7 billion in revenue, down 25% year-over-year. iPad faced a difficult compare because during the December quarter last year, we launched the new iPad Pro and iPad 10 generation, and we had an extra week of sales. However, the iPad installed base continues to grow and is an all-time high with over half of the customers who purchased iPads during the quarter being new to the product, and customer satisfaction for iPad was recently measured at 98% in the U.S. Wearables, Home and Accessories revenue was $12 billion, down 11% year-over-year due to a challenging launch compare and the extra week a year ago. This time last year, we had the full quarter benefit from the launches of the AirPods Pro 2nd generation, the Watch SE, and the first Watch Ultra. We continue to attract new customers to Apple Watch. Nearly two-thirds of customers purchasing an Apple Watch during the quarter were new to the product, and the latest reports from 451 Research indicate customer satisfaction of 96% in the U.S. And in Services, we were very pleased with our double-digit growth, which was driven by the strength of our ecosystem. Our installed base is now over 2.2 billion active devices and continues to grow nicely, establishing a solid foundation for the future expansion of our Services business. And we continue to see increased customer engagement with our services. Both transacting accounts and paid accounts reached a new all-time high, with paid accounts growing double-digits year-over-year. Also, our paid subscriptions showed strong double-digit growth. We have well over 1 billion paid subscriptions across the services on our platform, more than double the number that we had only four years ago. Finally, we continue to build on the breadth and the quality of our current services. From Oscar-nominated theatrical releases with Apple TV+ to more publications or News+ like The Atlantic and exciting new games on Arcade. Turning to Enterprise, we continue to see many business customers leverage Apple products to improve productivity and drive innovation. Target recently added the latest M3 MacBook Pro to their existing deployment of thousands of Mac\u2019s, enabling employees across various departments to do their best work. In emerging markets, Zoho, a leading technology company headquartered in India, offers its 15,000 plus global employees a choice of devices, with 80% of their workforce using iPhone for work and nearly two-thirds of them choosing Mac as their primary computer. With the upcoming launch of Apple Vision Pro, we are seeing strong excitement in Enterprise. Leading organizations across many industries such as Walmart, Nike, Vanguard, Stryker, Bloomberg, and SAP have started leveraging and investing in Apple Vision Pro as their new platform to bring innovative spatial computing experiences to their customers and employees. From everyday productivity to collaborative product design to immersive training, we cannot wait to see the amazing things our enterprise customers will create in the months and years to come. Let me now turn to our cash position and capital return program. We ended the quarter with $173 billion in cash and marketable securities. We decreased commercial paper by $4 billion, leaving us with total debt of $108 billion. As a result, net cash was $65 billion at the end of the quarter, and our goal of becoming net cash-neutral over time remains unchanged. During the quarter, we returned nearly $27 billion to shareholders, including $3.8 billion in dividends and equivalents and $20.5 billion through open market repurchases of 112 million Apple shares. We also retired an additional 6 million shares in the final settlement of our 19th ASR. As usual, we will provide an update to our capital return program when we report results at the end of this quarter. As we move ahead into the March 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. And we expect foreign exchange to be a revenue headwind of about 2 percentage points on a year-over-year basis. As a reminder, in the December quarter a year ago, we faced significant supply constraints on the iPhone 14 Pro and 14 Pro Max due to COVID-19 factory shutdowns. And in the March quarter a year ago, we were able to replenish channel inventory and fulfill significant pent-up demand from the constraints. We estimate that this impact added close to $5 billion to the March quarter's total revenue last year. When we remove this impact from last year's revenue, we expect both our March quarter total company revenue and iPhone revenue to be similar to a year ago. For our Services business, we expect a similar double-digit growth rate to what we reported in the December quarter. We expect gross margin to be between 46% and 47%. We expect OpEx to be between $14.3 billion and $14.5 billion. We expect OI&E to be around $50 million, excluding any potential impact from the mark-to-market of minority investments and our tax rate to be around 16%. Finally, today our Board of Directors has declared a cash dividend of $0.24 per share of common stock payable on February 15, 2024, to shareholders of record as of February 12, 2024. With that, let's open the call to questions.","evidence_gemma_new":"Net income","evidence_llama_3_3":"Net income December quarter","evidence_qwen_3_30b":"Net income up $3.9 billion from last year","gemma_new_max":33900000000.0,"gemma_new_min":33900000000.0,"llama_3_3_max":33900000000.0,"llama_3_3_min":33900000000.0,"qwen_3_30b_max":33900000000.0,"qwen_3_30b_min":33900000000.0}
{"symbol":"AAPL","year":2024,"quarter":2,"date":"2024-Q2","chunk_id":2,"sub_chunk_id":0,"centroid_label":"net income","agreed_value":23600000000.0,"count":3,"chunk":"Luca Maestri: Thank you, Tim, and good afternoon, everyone. Revenue for the March quarter was $90.8 billion, down 4% from last year. Foreign exchange had a negative year-over-year impact of 140 basis points on our results. Products revenue was $66.9 billion, down 10% year-over-year due to the challenging compare on iPhone that Tim described earlier, which was partially offset by strength from Mac. And thanks to our unparalleled customer satisfaction and loyalty and a high number of customers who are new to our products, our installed base of active devices reached an all-time high across all products and all geographic segments. Services revenue set an all-time record of $23.9 billion, up 14% year-over-year with record performance in both developed and emerging markets. Company gross margin was 46.6%, up 70 basis points sequentially, driven by cost savings and favorable mix to services, partially offset by leverage. Products gross margin was 36.6%, down 280 basis points sequentially, primarily driven by seasonal loss of leverage and mix, partially offset by favorable costs. Services gross margin was 74.6%, up 180 basis points from last quarter due to a more favorable mix. Operating expenses of $14.4 billion were at the midpoint of the guidance range we provided and up 5% year-over-year. Net income was $23.6 billion, diluted EPS was $1.53 and a March quarter record, and operating cash flow was strong at $22.7 billion. Let me now provide more detail for each of our revenue categories. iPhone revenue was $46 billion, down 10% year-over-year, due to the almost $5 billion impact from a year ago that Tim described earlier. Adjusting for this one-time impact, iPhone revenue would be roughly flat to last year. Our iPhone active installed base grew to a new all-time high in total and in every geographic segment. And during the March quarter, we saw many iPhone models as the top-selling smartphones around the world. In fact, according to a survey from Kantar, an iPhone was the top-selling model in the U.S., Urban China, Australia, the U.K., France, Germany and Japan. And the iPhone 15 family continues to be very popular with customers. 451 Research recently measured customer satisfaction at 99% in the U.S. Mac revenue was $7.5 billion, up 4% year-over-year, driven by the strength of our new MacBook Air, powered by the M3 chip. Customers are loving the incredible AI performance of the latest MacBook Air and MacBook Pro models. And our Mac installed base reached an all-time high with half of our MacBook Air buyers during the quarter being new to Mac. Also customer satisfaction for Mac was recently reported at 96% in the U.S. iPad generated $5.6 billion in revenue, down 17% year-over-year. iPad continued to face a challenging compare against the launch of the M2 iPad Pro and iPad 10th Generation from last year. At the same time, the iPad installed base has continued to grow and is at an all-time high as over half of the customers who purchased iPads during the quarter were new to the product. In addition, the latest reports from 451 Research indicated customer satisfaction of 96% for iPad in the US. Wearables, Home and Accessories revenue was $7.9 billion, down 10% year-over-year due to a difficult launch compare. Last year, we had the continued benefit from the launches of the AirPods Pro second-generation, the Watch SE and the first Watch Ultra. Apple Watch continues to attract new customers, with almost two-thirds of customers purchasing an Apple Watch during the quarter being new to the product, sending the Apple Watch installed base to a new all-time high and customer satisfaction was recently measured at 95% in the U.S. In services, as I mentioned, total revenue reached an all-time record of $23.9 billion, growing 14% year-over-year with our installed-base of active devices continuing to grow at a nice pace. This provides a strong foundation for the future growth of the services business as we continued to see increased customer engagement with our ecosystem. Both transacting accounts and paid accounts reached a new all-time high with paid accounts growing double-digits year-over-year. And paid subscriptions showed strong double-digit growth. We have well over $1 billion paid subscriptions across the services on our platform, more than double the number that we had only four years ago. We continued to improve the breadth and quality of our current services from creating new games on Arcade and great new shows on TV+ to launching additional countries and partners for Apple Pay. Turning to enterprise, our customers continued to invest in Apple products to drive productivity and innovation. We see more and more enterprise customers embracing the Mac. In Healthcare, Epic Systems, the world's largest electronic medical record provider, recently launched its native app for the Mac, making it easier for healthcare organizations like Emory Health to transition thousands of PCs to the Mac for clinical use. And since the launch of Vision Pro last quarter, many leading enterprise customers have been investing in this amazing new product to bring spatial computing apps and experiences to life. We are seeing so many compelling use cases from aircraft engine maintenance training at KLM Airlines to real-time team collaboration for racing at Porsche to immersive kitchen design at Lowe's. We couldn't be more excited about the spatial computing opportunity in enterprise. Taking a quick step back, when we look at our performance during the first-half of our fiscal year, total company revenue was roughly flat to the prior year in spite of having one less week of sales during the period and some foreign exchange headwinds. We were particularly pleased with our strong momentum in emerging markets, as we set first-half revenue records in several countries and regions, including Latin-America, the Middle East, India, Indonesia, the Philippines and Turkey. These results, coupled with double-digit growth in services and strong levels of gross margin, drove a first half diluted EPS record of $3.71, up 9% from last year. Let me now turn to our cash position and capital return program. We ended the quarter with $162 billion in cash and marketable securities. We repaid $3.2 billion in maturing debt and commercial paper was unchanged sequentially, leaving us with total debt of $105 billion. As a result, net cash was $58 billion at the end of the quarter. During the quarter, we returned over $27 billion to shareholders, including $3.7 billion in dividends and equivalents and $23.5 billion through open-market repurchases of $130 million Apple's shares. Given the continued confidence we have in our business now and into the future, our Board has authorized today an additional $110 billion for share repurchases, as we maintain our goal of getting to net cash-neutral over time. We are also raising our dividend by 4% to $0.25 per share of common stock, and we continued to plan for annual increases in the dividend going forward as we've done for the last 12 years. This cash dividend will be payable on May 16, 2024 to shareholders of record as of May 13, 2024. As we move ahead into the June 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. We expect our June quarter total company revenue to grow low-single-digits year-over-year in spite of a foreign exchange headwind of about 2.5 percentage points. We expect our services business to grow double-digits at a rate similar to the growth we reported for the first-half of the fiscal year. And we expect iPad revenue to grow double-digits. We expect gross margin to be between 45.5% to -- and 46.5%. We expect OpEx to be between $14.3 billion and $14.5 billion. We expect OI&E to be around $50 million, excluding any potential impact from the mark-to-market of minority investments and our tax rate to be around 16%. With that, let's open the call to questions.","evidence_gemma_new":"Net income diluted EPS","evidence_llama_3_3":"net income March quarter","evidence_qwen_3_30b":"Net income $23.6 billion","gemma_new_max":23600000000.0,"gemma_new_min":23600000000.0,"llama_3_3_max":23600000000.0,"llama_3_3_min":23600000000.0,"qwen_3_30b_max":23600000000.0,"qwen_3_30b_min":23600000000.0}
{"symbol":"AAPL","year":2024,"quarter":3,"date":"2024-Q3","chunk_id":2,"sub_chunk_id":0,"centroid_label":"net income","agreed_value":21400000000.0,"count":3,"chunk":"Luca Maestri : Thank you, Tim, and good afternoon, everyone. We are very pleased to report a new June quarter revenue record of $85.8 billion, up 5% year-over-year, despite 230 basis points of negative foreign exchange impact. We achieved growth in the vast majority of our markets, with June quarter revenue records in the Americas, Europe, and rest of Asia Pacific. Products revenue was $61.6 billion, up 2% year-over-year, driven by the launch of the new iPad Pro and iPad Air. Our installed base of active devices reach an all-time high across all products and geographic segments, thanks to our unmatched levels of customer satisfaction and loyalty and a large number of customers who are new to our products. Services revenue reached an all-time record of $24.2 billion, up 14% year-over-year, with an all-time record in developed markets and a June quarter record in emerging markets. Company gross margin was 46.3% near the high end of our guidance range and down 30 basis points sequentially driven by a different mix within products which was partially offset by a favorable mix shift towards services and cost savings. Products gross margin was 35.3%, down 130 basis points sequentially, primarily driven by mix, partially offset by favorable costs. Services gross margin was 74% down 60 basis points from last quarter. Operating expenses of $14.3 billion were at the low end of the guidance range we provided and up 7% year-over-year. Net income was $21.4 billion, diluted EPS of $1.40 was up 11% year-over-year and set a June quarter record. And operating cash flow was very strong at $28.9 billion, also a June quarter record. Let me get into more detail for each of our revenue categories. iPhone revenue was $39.3 billion, down 1% year-over-year, but grew on a constant currency basis. We set June quarter records across several countries, including the UK, Spain, Poland, Mexico, Indonesia, and the Philippines. And the iPhone Active installed base grew to a new all-time high in total and in every geographic segment. During the June quarter, many iPhone models were among the top selling smartphones around the world. In fact, according to a survey from Kantar, iPhone was the top selling model in the US, urban China, the UK, Germany, Australia, and Japan. Customer satisfaction on the iPhone 15 family continues to be extremely high, with 451 Research measuring it at 98% in the US in their latest reports. Mac generated $7 billion in revenue, up 2% year-over-year, driven by the MacBook Air powered by the M3 chip. We saw particularly strong performance in our emerging markets, with June quarter records for Mac in Latin America, India, and South Asia. The Mac installed base reached an all-time high with half of MacBook Air customers in the quarter being new to Mac. And customer satisfaction for Mac was recently reported at 96% in the US. iPad revenue was $7.2 billion, up 24% year-over-year, driven by the launch of the new iPad Pro and iPad Air. Customers are loving the latest iPad lineup for its new design and display, unparalleled performance, AI capabilities and much more. The iPad install base has continued to grow and is an all-time high, as half of the customers who purchased iPads during the quarter were new to the product. Also, customer satisfaction was recently measured at 97% in the US. Wearables, home and accessories revenue was $8.1 billion, down 2% year-over-year, a sequential acceleration from the March quarter. Watch and AirPods continue to face a difficult compare against prior year launches of the AirPods Pro second generation, the Watch SE and the first Watch Ultra. Apple Watch continues to attract new customers, with almost two-thirds of customers purchasing an Apple Watch during the quarter being new to the product, sending the Apple Watch install base to a new all-time high. And the latest reports from 451 Research indicate a customer satisfaction of 97% for watch in the US. In services, total revenue reached an all-time record of $24.2 billion, growing 14% year-over-year. We continue to have great momentum in services, as the growth of our installed base of active devices, sets a strong foundation for the future expansion of our ecosystem. And we see increased customer engagement with our services offerings. Both transacting accounts and paid accounts reach a new all-time high with paid accounts growing double digits year-over-year. Also, paid subscriptions showed strong double digit growth. We have well over 1 billion paid subscriptions across the services on our platform, more than double the number that we had only four years ago. And we are constantly focused on improving the breadth and quality of our services. From critically acclaimed new content on Apple TV+ to new games on Apple Arcade and the many latest features we previewed during WWDC for iCloud, Apple Pay, Apple Cash, Apple Music, and more. Turning to enterprise, we continue to see businesses, leveraging our entire suite of products to drive productivity and creativity for their teams and customers. USAA, a leading insurance and financial services company, recently expanded beyond their existing iPhone and iPad deployments to provide their employees with the latest MacBook Air. And American Express has continued to add to their fleet of over 10,000 Macs to enhance their employees' productivity, security, and collaboration. We're also excited to see leading organizations such as Boston Children's Hospital and Lufthansa using Apple Vision Pro to build innovative spatial computing experiences to transform the training of their workforces. Let me now turn to our cash position and capital return program. We ended the quarter with $153 billion in cash and marketable securities. We repaid $4.3 billion in maturing debt and increased commercial paper by $1 billion, leaving us with total debt of $101 billion. As a result, net cash was $52 billion at the end of the quarter. During the quarter, we returned over $32 billion to shareholders, including $3.9 billion in dividends and equivalents and $26 billion through open market repurchases of 139 million Apple shares. As we move ahead into the September 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. We expect foreign exchange to continue to be a headwind and to have a negative impact on revenue of about 1.5 percentage points on a year-over-year basis. We expect our September quarter total company revenue to grow year-over-year at a rate similar to the June quarter. We expect services revenue to grow double digits at a rate similar to what we reported in the first three quarters of this fiscal year. We expect gross margin to be between 45.5% and 46.5%. We expect OpEx to be between $14.2 billion and $14.4 billion. We expect OI&E to be around negative $50 million, excluding any potential impact from the mark to market of minority investments, and our tax rate to be around 16.5%. Finally, today our Board of Directors has declared a cash dividend of $0.25 per share of common stock payable on August 15, 2024, to shareholders of record as of August 12, 2024. With that, let's open the call to questions.","evidence_gemma_new":"Net income","evidence_llama_3_3":"net income June quarter","evidence_qwen_3_30b":"Net income June quarter","gemma_new_max":21400000000.0,"gemma_new_min":21400000000.0,"llama_3_3_max":21400000000.0,"llama_3_3_min":21400000000.0,"qwen_3_30b_max":21400000000.0,"qwen_3_30b_min":21400000000.0}
{"symbol":"AAPL","year":2024,"quarter":4,"date":"2024-Q4","chunk_id":2,"sub_chunk_id":0,"centroid_label":"net income","agreed_value":25000000000.0,"count":3,"chunk":"Luca Maestri: Good afternoon, everyone. And thank you, Tim, for the very kind words. Serving as Apple's CFO has been a real privilege and an amazing journey, and I've greatly appreciated the support from our investors and the analyst community over the years. Kevan is exceptional, and I know you will enjoy interacting with him going forward. Let me now turn to the results for the fourth quarter of our fiscal year. We're very pleased to report a new September quarter revenue record of $94.9 billion, up 6% year-over-year. We grew in the vast majority of the markets we track and achieved September quarter revenue records in the Americas, Europe and Rest of Asia Pacific. Products revenue was $70 billion, up 4% year-over-year, driven by growth in iPhone, iPad and Mac. Our installed base of active devices reached an all-time high across all products and geographic segments, thanks to very high levels of customer satisfaction and loyalty and a large number of customers who are new to our products. Services revenue reached an all-time record of $25 billion, up 12% year-over-year. We saw broad-based strength around the world, reaching all-time records in both developed and emerging markets with double-digit growth and record results across most services categories. Company gross margin was 46.2%, near the high end of our guidance range. Products gross margin was 36.3%, up 100 basis points sequentially, primarily driven by favorable mix. Services gross margin was 74%, unchanged from the prior quarter. Operating expenses of $14.3 billion were at the midpoint of the guidance range we provided at the beginning of the quarter and up 6% year-over-year. During the quarter, we recorded a one-time income tax charge of $10.2 billion, which relates to the impact of the reversal of the European General Court's State Aid decision. When we exclude this one-time charge, net income was $25 billion and diluted earnings per share were a $1.64, up 12% year-over-year, and a September quarter record. Operating cash flow was very strong at $26.8 billion, a new September quarter record. Let me now get into more detail for each of our revenue categories. iPhone revenue was $46.2 billion, up 6% year-over-year, and a September quarter record in total and across several markets, including the US, the Middle East, Korea, and South Asia. The iPhone active installed base grew to a new all-time high in total and in every geographic segment. During the September quarter, many iPhone models were among the top-selling smartphones around the world. In fact, according to a survey from Kantar, iPhone was the top-selling model in the US, Urban China, the UK, Australia, and Japan. We continue to see high levels of customer satisfaction for the iPhone 15 family, with 451 Research recently measuring it at 98% in the US. Mac revenue was $7.7 billion, up 2% year-over-year, driven by the strength in MacBook Air. Customers have been loving the performance of Apple Silicon on Mac and we are very excited to bring the latest M4 family of chips to the lineup. The Mac installed base reached an all-time high with about half of customers in the quarter being new to Mac. And in the latest reports from 451 Research, customer satisfaction was 95% in the US. iPad generated $7 billion in revenue, up 8% year-over-year. In addition to growth in developed markets, we also saw strong performance in many emerging markets, with double-digit growth in Mexico, Brazil, the Middle East, India and South Asia. The iPad installed base reached another all-time high, and over half of the customers who purchased iPads during the quarter were new to the product. Also, customer satisfaction was recently measured at 97% in the US. Wearables, Home and Accessories revenue was $9 billion, down 3% year-over-year. The Apple Watch installed base reached a new all-time high, with over half of customers purchasing an Apple Watch during the quarter being new to the product. And the latest reports from 451 Research indicated customer satisfaction of 96% for watch in the US. Our Services revenue reached an all-time record of $25 billion, growing 12% year-over-year. Services continue to see strong momentum with the growth of our installed base of active devices setting a solid foundation for the future expansion of our ecosystem. And we see increased customer engagement with our services offerings. Both transacting accounts and paid accounts reached a new all-time high, with paid accounts growing double-digits year-over-year. Paid subscriptions also grew double-digits. We have well over 1 billion paid subscriptions across the services on our platform, more than double the number we had only four years ago. And as always, we remain focused on improving the breadth and quality of our services from new games on Apple Arcade to new features like Tap to Cash and pay with installments using Apple Pay to many successful new and returning shows on Apple TV+. This past quarter, we celebrated the five-year anniversary of Apple Card, which was ranked #1 in customer satisfaction among co-branded credit cards by J.D. Power for the fourth year in a row. Turning to enterprise, we continue to see strong demand across our products and services. NVIDIA launched its Mac as a choice program supported by AppleCare for Enterprise and Apple Professional Services with over 10,000 Macs deployed worldwide. And Novartis, a leading global pharmaceutical company, recently chose iPhone 16 as the standard mobile device for all employees. We also see continued momentum with Apple Vision Pro in the enterprise space. UC San Diego Health is the first hospital in the world to test spatial computing apps on Apple Vision Pro in clinical trials for patient surgery in the operating room. Let me now turn to our cash position and capital return program. We ended the quarter with $157 billion in cash and marketable securities. We repaid $2.6 billion in maturing debt and increased commercial paper by $7 billion, leaving us with total debt of $107 billion. As a result, net cash was $50 billion at the end of the quarter. During the quarter, we returned over $29 billion to shareholders, including $3.8 billion in dividends and equivalents and $25 billion through open market repurchases of 112 million Apple shares. 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're providing today assumes that the macroeconomic outlook doesn't worsen from what we are projecting today for the current quarter. We expect our December quarter total company revenue to grow low- to mid-single digits year-over-year. We expect Services revenue to grow double-digits at a rate similar to what we reported in the fiscal year 2024. We expect gross margin to be between 46% and 47%. We expect OpEx to be between $15.3 billion and $15.5 billion. We expect OI&E to be around negative $250 million, excluding any potential impact from the mark to market of minority investments. And our tax rate to be around 16%. Finally, today, our Board of Directors has declared a cash dividend of $0.25 per share of common stock payable on November 14, 2024 to shareholders of record as of November 11, 2024. With that, let us open the call to questions.","evidence_gemma_new":"net income year-over-year","evidence_llama_3_3":"net income fourth quarter fiscal year 2024","evidence_qwen_3_30b":"net income","gemma_new_max":25000000000.0,"gemma_new_min":25000000000.0,"llama_3_3_max":25000000000.0,"llama_3_3_min":25000000000.0,"qwen_3_30b_max":25000000000.0,"qwen_3_30b_min":25000000000.0}
{"symbol":"AAPL","year":2023,"quarter":1,"date":"2023-Q1","chunk_id":3,"sub_chunk_id":0,"centroid_label":"oi e","agreed_value":-100000000.0,"count":2,"chunk":"Luca Maestri: Thank you, Tim, and good afternoon, everyone. As Tim mentioned, revenue for the December quarter was $117.2 billion, down 5% from last year. A number of factors had a significant impact on our results. First, we faced a very difficult foreign exchange environment, which affected our performance by nearly 800 basis points. In other words, we grew revenue on a constant currency basis. And in fact, we did so in the vast majority of markets. Second, the macroeconomic environment this past quarter was markedly more challenging than 12 months ago. Third, we experienced significant supply shortages for iPhone 14 Pro and iPhone 14 Pro Max in November and through December. On the other hand, we had the positive impact of the 14th week in the quarter that Tejas just mentioned at the beginning of the call. Products revenue was $96.4 billion, down 8% from last year due to the factors I just called out. At the same time, however, our installed base of active devices grew double digits and achieved all-time records in each geographic segment and in each major product category. We're proud to now have over 2 billion active devices in our installed base. This continued growth in the installed base is due to extremely strong levels of customer satisfaction and loyalty and a high number of customers who are new to our products. The installed base growth also helped our services set an all-time revenue record of $20.8 billion, up 6% over a year ago. We achieved this new milestone despite more than 700 basis points of negative impact from foreign exchange. We reached all-time services revenue records in the Americas, Europe and rest of Asia Pacific and a December quarter record in Greater China. We also set records in many Services categories, including all-time revenue records for cloud services, payment services and music and December quarter records for the App Store and AppleCare. Company gross margin was 43%, up 70 basis points from last quarter due to leverage and favorable mix, partially offset by foreign exchange. Products gross margin was 37%, up 240 basis points sequentially. And Services gross margin was 70.8%, up 30 basis points sequentially, both due to the same factors that impacted total company gross margin. Operating expenses of $14.3 billion were significantly below the guidance range we provided at the beginning of the quarter and grew at a slower pace than in the past as we took actions to respond to the current macro environment. Net income was $30 billion. Diluted earnings per share were $1.88, and we generated very strong operating cash flow of $34 billion. Let me now get into more detail for each of our revenue categories. iPhone revenue was $65.8 billion despite significant foreign exchange headwinds, supply constraints on iPhone 14 Pro and iPhone 14 Pro Max and a challenging macroeconomic environment. In spite of these circumstances, we set all-time iPhone revenue records in Canada, Italy and Spain, and saw strong growth in several emerging markets, including all-time iPhone revenue records for India and Vietnam. Importantly, the installed base of active iPhones continues to grow nicely and is at an all-time high across all geographic segments. In emerging markets, in particular, the installed base grew double digits, and we had record levels of switchers in India and in Mexico. Our customers continue to love their experience with our products with the latest survey of U.S. consumers from 451 Research indicating customer satisfaction of 98% for the iPhone 14 family. Mac revenue was $7.7 billion, down 29% year-over-year and in line with our expectations. There were 3 key drivers for our Mac results. First, we had a challenging compare against last year's launch of the completely reimagined MacBook Pros, our first notebooks with M1 Pro and M1 Max. Second, we believe that the macro environment impacted our Mac performance. And third, we faced significant foreign exchange headwinds. At the same time, however, the installed base of active Macs reached an all-time high across all geographic segments, and we continue to see very strong upgraded activity to Apple silicon. Customer satisfaction with Mac remains very strong at 96% based on the latest survey of U.S. consumers from 451 Research. iPad revenue was $9.4 billion, up 30% year-over-year despite significant FX headwinds. This performance was driven by 2 key items. First, during the December quarter a year ago, we experienced significant supply constraints, while this year, we had enough supply to meet demand. Second, we launched our new iPad and the iPad Pro powered by the M2 chip during the quarter. The iPad installed base reached a new all-time high, thanks to incredible customer loyalty and a high number of new customers. In fact, over half of the customers who purchased iPads during the quarter were new to the product. Wearables, Home and Accessories revenue was $13.5 billion, down 8% year-over-year. The year-over-year decline was driven by significant FX headwinds and a challenging macroeconomic environment. However, our installed base of devices in the category set a new all-time record thanks to the largest number of customers new to our smartwatch that we've ever had in a given quarter. In fact, nearly 2\/3 of customers purchasing an Apple Watch during the quarter were new to the product. Moving to Services. We generated $20.8 billion in revenue, a new all-time record in total and for many Services offerings in spite of a difficult foreign exchange environment, and macroeconomic headwinds impacting certain categories such as digital advertising and mobile gaming. In constant currency, we grew Services revenue double digits on top of growing 24% during the December quarter a year ago. We remain focused on the large long-term opportunity in this category, and we continue to observe several trends that reflect the strength of our ecosystem. For example, we saw increased customer engagement with our Services during the quarter. Both our transacting accounts and paid accounts grew double digits year-over-year, each setting a new all-time record. Paid subscriptions also continued to grow nicely. We now have more than 935 million paid subscriptions across the services on our platform, up more than 150 million during the last 12 months alone and nearly 4x what we had just 5 years ago. And we continue to increase the reach and improve the quality of our offerings. For instance, Apple Pay is now available to millions of merchants in nearly 70 countries and regions. And we saw a record-breaking number of purchases made using Apple Pay globally during the holiday shopping season. Finally, our installed base of over 2 billion active devices represents a great foundation for future expansion of our ecosystem, and it continues to grow even during difficult macroeconomic conditions, which speaks to the exceptionally high levels of customer loyalty and satisfaction and our ability to attract new customers to our platform. The growth is coming from every major product category and geographic segment, with strong double-digit increases in emerging markets such as Brazil, Mexico, India, Indonesia, Thailand and Vietnam. Turning to the enterprise market. we are seeing continued adoption of our Services for business like Apple Business Essentials, AppleCare, Tap to Pay and Apple Financial Services. For example, Mars Incorporated has expanded its use of AppleCare for Enterprise to provide timely device support and assurance for iPads deployed across their manufacturing sites. Meanwhile, HCA Healthcare has leveraged Apple Financial Services to manage the annual refresh of its entire fleet of iPhones. This not only ensures that their staff stay current on the latest Apple technology, but also provides them with significant annual savings in the process. Let me now turn to our capital return program and our cash position. We returned over $25 billion to shareholders during the December quarter as our business continues to generate very strong cash flow. This included $3.8 billion in dividends and equivalents and $19 billion through open market repurchases of 133 million Apple shares. We ended the quarter with $165 billion in cash and marketable securities. We repaid $1.4 billion in maturing debt and decreased commercial paper by $8.2 billion, leaving us with total debt of $111 billion. As a result, net cash was $54 billion at the end of the quarter, and we maintain our goal of becoming net cash-neutral over time. As we move into the March quarter, I'd like to review our outlook, which includes the types of forward-looking information that Tejas referred to at the beginning of the call. Given the continued uncertainty around the world in the near term, we are not providing revenue guidance, but we are sharing some directional insights based on the assumption that the macroeconomic outlook and COVID-related impacts to our business do not worsen from what we are projecting today for the current quarter. In total, we expect our March quarter year-over-year revenue performance to be similar to the December quarter. This represents an acceleration in our underlying year-over-year business performance as the December quarter benefited from an extra week. Foreign exchange will continue to be a headwind, and we expect a negative year-over-year impact of 5 percentage points. For Services, we expect revenue to grow year-over-year while continuing to face macroeconomic headwinds in areas such as digital advertising and mobile gaming. For iPhone, we expect our March quarter year-over-year revenue performance to accelerate relative to the December quarter year-over-year revenue performance. For Mac and iPad, we expect revenue for both product categories to decline double digits year-over-year because of challenging compares and macroeconomic headwinds. We expect gross margin to be between 43.5% and 44.5%. We expect OpEx to be between $13.7 billion and $13.9 billion. We expect OI&E to be around negative $100 million, excluding any potential impact from the mark-to-market of minority investments, and our tax rate to be around 16%. Finally, today, our Board of Directors has declared a cash dividend of $0.23 per share of common stock payable on February 16, 2023, to shareholders of record as of February 13, 2023. With that, let's open the call to questions.","evidence_gemma_new":null,"evidence_llama_3_3":"OI&E","evidence_qwen_3_30b":"OI&E around negative $100 million","gemma_new_max":null,"gemma_new_min":null,"llama_3_3_max":-100000000.0,"llama_3_3_min":-100000000.0,"qwen_3_30b_max":-100000000.0,"qwen_3_30b_min":-100000000.0}
{"symbol":"AAPL","year":2023,"quarter":4,"date":"2023-Q4","chunk_id":3,"sub_chunk_id":0,"centroid_label":"oi e","agreed_value":-200000000.0,"count":3,"chunk":"Luca Maestri: Thank you, Tim, and good afternoon, everyone. Revenue for the September quarter was $89.5 billion, down less than 1% from last year. Foreign exchange had a negative impact of over 2 percentage points. And on a constant-currency basis, our revenue grew year-over-year in total, and in each geographic segment. We set a September quarter record in the Americas and saw strong performance across our emerging markets, where both iPhone and Services grew double digits. Products revenue was $67.2 billion, down 5% from last year, due to very challenging compares on both Mac and iPad, which I will discuss in more detail later on. At the same time, we reached a September quarter record on iPhone, driven by strength in emerging markets. Our total installed-base of active devices reached an all-time high across all products and all geographic segments, thanks to our high levels of customer satisfaction and many new customers joining our ecosystem. Our Services revenue set an all-time record of $22.3 billion, up 16% year-over-year, with growth accelerating sequentially from the June quarter. Our performance in Services were broad based, as we reached all-time revenue records in the Americas, Europe and rest of Asia-Pacific and a September quarter record in Greater China. We also set new records in every Services category. Company gross margin set a September quarter record at 45.2%, up 70 basis points sequentially, driven by leverage and favorable mix, partially offset by foreign exchange. Products gross margin was 36.6%, up 120 basis points sequentially, also driven by leverage and mix, partially offset by foreign exchange. Services gross margin was 70.9%, up 40 basis points from last quarter due to a different mix. Operating expenses of $13.5 billion were at the low end of the guidance range we provided, up 2% year-over-year. Net income was $23 billion, diluted earnings per share was $1.46, up 13% versus last year and a September quarter record, and operating cash flow was strong at $21.6 billion. Let me now provide more detail for each of our revenue categories. iPhone revenue was $43.8 billion, up 3% year-over-year and a new September quarter record. We had strong performance in several markets, including an all-time record in India as September quarter records in Canada, Latin America, the Middle East, and South Asia . Our iPhone active installed base grew to a new all-time high and fiscal 2023 was another record year for switches. We continue to see extremely high levels of customer satisfaction which 451 Research recently measured at 98% in the U.S. Mac revenue was $7.6 billion, down 34% year-over-year, driven by challenging market conditions and compounded by a difficult compare in our own business, whereby last year we experienced supply disruptions from factory shutdowns in the June quarter and were subsequently able to fulfill significant pent-up demand during the September quarter. We also had a difference in launch timing with the MacBook Air launching earlier this year in the June quarter compared to the September quarter last year. We have great confidence in our Mac lineup and are excited about the recently announced iMac and MacBook Pro powered by our M3 chips. Our installed base is at an all-time high and half of Mac buyers during the quarter were new to the product, driven by MacBook Air. Also, we saw reported customer satisfaction of 97% for Mac in the U.S. iPad generated $6.4 billion in revenue, down 10% year-over-year. Similar to Mac, these results were a function of a difficult compare from the supply disruptions in the June quarter a year ago and the subsequent fulfillment of pent-up demand in the September quarter. iPad continues to attract a large number of new customers to the installed base with over half of the customers who purchase iPads during the quarter being new to the product and the latest reports from 451 Research indicate customer satisfaction of 98% in the U.S. Wearables, Home and Accessories revenue was $9.3 billion, down 3% year-over-year. We had a September quarter record in Europe and we saw strong performance in several emerging markets around the world. Apple Watch continues to expand its reach with nearly two-thirds of customers purchasing Apple Watch during the quarter being new to the product and customer satisfaction for the Watch was recently measured at 97% in the U.S. Services had a great quarter. We reached a new all-time revenue record of $22.3 billion, up 16% year-over-year. And we're happy to see growth coming from all categories and every geographic segment, which is a direct result of the strength of our ecosystem. Our installed base of over 2 billion active devices continues to grow at a nice pace and establishes a solid foundation for the future expansion of the ecosystem. And we continue to see increased customer engagement with our Services. Both transacting accounts and paid accounts grew double-digits year-over-year, each reaching a new all-time high. Also our paid subscriptions showed strong growth. We have well over 1 billion paid subscriptions across the services on our platform, nearly double the number we had only three years ago. And finally, we continue to improve the breadth and quality of our current services from exciting new content on Apple TV+ and Apple Arcade to additional storage tiers on iCloud. We believe our customers will love this new offering. Turning to enterprise. We are excited to see our business customers in both developed and emerging markets expand their deployment of Apple products and technologies to drive business innovation and employee satisfaction. Starbucks continuously invest in Apple technology to bring the best experience to the customers and employees, including tens of thousands of iPads across all retail stores to help their teams streamline order management, operations and training. In addition, Starbucks recently refreshed over 10,000 Macs to the latest M2-powered MacBook Air for all store managers, enabling them to do their best work and improve productivity. And in Indonesia, popular technology company GoTo is offering Mac as a choice, so that employees can have the best tools to be most productive. Today, more than half of its workforce are already choosing Mac for work. Let me now turn to our cash position and capital return program. We ended the quarter with over $162 billion in cash and marketable securities. We increased commercial paper by $2 billion, leaving us with total debt of $111 billion. As a result, net cash was $51 billion at the end of the quarter. And our goal of becoming net cash-neutral over time remains unchanged. During the quarter, we returned nearly $25 billion to shareholders, including $3.8 billion in dividends and equivalents and $15.5 billion through open market repurchases of 85 million Apple shares. We also began a $5 billion accelerated share repurchase program in August, resulting in the initial delivery and retirement of 22 million shares. Taking a step back, as we close our 2023 fiscal year, our annual revenue was $383 billion. While it was down 3% from the prior year, it grew on a constant-currency basis despite the volatile and uneven macroeconomic environment. Our year-over-year revenue performance improved each quarter as we went through the year, and so did our earnings per share performance, as we reported double-digit EPS growth in the September quarter. We are particularly pleased with our performance in emerging markets with revenue reaching an all-time record in fiscal 2023 and double-digit growth in constant currency. We are expanding our direct presence in these markets from new Apple retail stores in India to online stores in Vietnam and Chile. And we continue to work with our partners to offer a wide range of affordability programs so that we can best serve our customers. We're very excited about the momentum we have in these markets and the opportunity ahead of us. 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%. Finally, today our Board of Directors has declared a cash dividend of $0.24 per share of common stock, payable on November 16, 2023, to shareholders of record as of November 13, 2023. With that, let's open the call to questions.","evidence_gemma_new":"OI&E","evidence_llama_3_3":"expect OI&E December quarter","evidence_qwen_3_30b":"OI&E","gemma_new_max":-200000000.0,"gemma_new_min":-200000000.0,"llama_3_3_max":-200000000.0,"llama_3_3_min":-200000000.0,"qwen_3_30b_max":-200000000.0,"qwen_3_30b_min":-200000000.0}
{"symbol":"AAPL","year":2024,"quarter":1,"date":"2024-Q1","chunk_id":3,"sub_chunk_id":0,"centroid_label":"oi e","agreed_value":50000000.0,"count":2,"chunk":"Luca Maestri: Thank you, Tim, and good afternoon, everyone. Revenue for the December quarter was $119.6 billion, up 2% from last year. During the December quarter a year ago, two unique factors affected our results. First, we had an additional week in the quarter. And second, we had COVID-related factory shutdowns that limited iPhone supply. We estimate that the net impact of these two factors resulted in a 2 percentage point headwind to our revenue performance this quarter. We set all-time revenue records in Europe and rest of Asia-Pacific, and continue to see strong performance across our emerging markets with double-digit growth in the majority of the emerging markets we track. Products revenue was $96.5 billion, flat compared to last year, driven by strength in iPhone, offset by challenging compares for iPad and Wearables, Home and Accessories and one less week of sales this year across the entire portfolio. Thanks to our unparalleled customer loyalty and very strong levels of customer satisfaction, our total installed base of active devices set a new record across all products and all geographic segments, and is now over 2.2 billion active devices. Services revenue set an all-time record of $23.1 billion, up 11% year-over-year. When we take into account the extra week last year, this represents a sequential acceleration of growth from the September quarter. We are very pleased with our Services performance in both developed and emerging markets with all-time revenue records in the Americas, Europe, and rest of Asia-Pacific. Company gross margin was 45.9%, up 70 basis points sequentially, driven by leverage and favorable mix, partially offset by foreign exchange. Products gross margin was 39.4%, up 280 basis points sequentially, also driven by leverage and mix, partially offset by foreign exchange. Services gross margin was 72.8%, up 190 basis points from last quarter, due to a more favorable mix. Operating expenses of $14.5 billion were at the midpoint of the guidance range we provided and up 1% year-over-year. Net income was $33.9 billion, up $3.9 billion from last year. Diluted EPS was $2.18, up 16% versus last year and an all-time record. And operating cash flow was very strong at $39.9 billion. Let me now provide more detail for each of our revenue categories. iPhone revenue was $69.7 billion, up 6% year-over-year. We set all-time records in several countries and regions, including Latin America, Western Europe, the Middle East, and Korea, as well as December quarter records in India and Indonesia. Our iPhone active installed base grew to a new all-time high, and we had an all-time record number of iPhone upgraders during the quarter. Customers are loving their new iPhone 15 family, with the latest reports from 451 Research indicating customer satisfaction of 99% in the U.S. In fact, many iPhone models were among the top-selling smartphones around the world during the quarter. According to a survey from Kantar, iPhones were four out of the top five models in the U.S. and Japan, four out of the top six models in urban China and the UK, and all top five models in Australia. Mac generated revenue of $7.8 billion and return to growth, despite one less week of sales this year. This represents a significant acceleration from the September quarter when we faced a challenging compare due to the supply disruptions and subsequent demand recapture we experienced a year ago. Customer response to our latest iMac and MacBook Pro models powered by the M3 chips has been great. And our Mac installed base reached an all-time high with almost half of Mac buyers during the quarter being new to the product. Also, 451 Research recently reported customer satisfaction of 97% for Mac in the U.S. iPad was $7 billion in revenue, down 25% year-over-year. iPad faced a difficult compare because during the December quarter last year, we launched the new iPad Pro and iPad 10 generation, and we had an extra week of sales. However, the iPad installed base continues to grow and is an all-time high with over half of the customers who purchased iPads during the quarter being new to the product, and customer satisfaction for iPad was recently measured at 98% in the U.S. Wearables, Home and Accessories revenue was $12 billion, down 11% year-over-year due to a challenging launch compare and the extra week a year ago. This time last year, we had the full quarter benefit from the launches of the AirPods Pro 2nd generation, the Watch SE, and the first Watch Ultra. We continue to attract new customers to Apple Watch. Nearly two-thirds of customers purchasing an Apple Watch during the quarter were new to the product, and the latest reports from 451 Research indicate customer satisfaction of 96% in the U.S. And in Services, we were very pleased with our double-digit growth, which was driven by the strength of our ecosystem. Our installed base is now over 2.2 billion active devices and continues to grow nicely, establishing a solid foundation for the future expansion of our Services business. And we continue to see increased customer engagement with our services. Both transacting accounts and paid accounts reached a new all-time high, with paid accounts growing double-digits year-over-year. Also, our paid subscriptions showed strong double-digit growth. We have well over 1 billion paid subscriptions across the services on our platform, more than double the number that we had only four years ago. Finally, we continue to build on the breadth and the quality of our current services. From Oscar-nominated theatrical releases with Apple TV+ to more publications or News+ like The Atlantic and exciting new games on Arcade. Turning to Enterprise, we continue to see many business customers leverage Apple products to improve productivity and drive innovation. Target recently added the latest M3 MacBook Pro to their existing deployment of thousands of Mac\u2019s, enabling employees across various departments to do their best work. In emerging markets, Zoho, a leading technology company headquartered in India, offers its 15,000 plus global employees a choice of devices, with 80% of their workforce using iPhone for work and nearly two-thirds of them choosing Mac as their primary computer. With the upcoming launch of Apple Vision Pro, we are seeing strong excitement in Enterprise. Leading organizations across many industries such as Walmart, Nike, Vanguard, Stryker, Bloomberg, and SAP have started leveraging and investing in Apple Vision Pro as their new platform to bring innovative spatial computing experiences to their customers and employees. From everyday productivity to collaborative product design to immersive training, we cannot wait to see the amazing things our enterprise customers will create in the months and years to come. Let me now turn to our cash position and capital return program. We ended the quarter with $173 billion in cash and marketable securities. We decreased commercial paper by $4 billion, leaving us with total debt of $108 billion. As a result, net cash was $65 billion at the end of the quarter, and our goal of becoming net cash-neutral over time remains unchanged. During the quarter, we returned nearly $27 billion to shareholders, including $3.8 billion in dividends and equivalents and $20.5 billion through open market repurchases of 112 million Apple shares. We also retired an additional 6 million shares in the final settlement of our 19th ASR. As usual, we will provide an update to our capital return program when we report results at the end of this quarter. As we move ahead into the March 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. And we expect foreign exchange to be a revenue headwind of about 2 percentage points on a year-over-year basis. As a reminder, in the December quarter a year ago, we faced significant supply constraints on the iPhone 14 Pro and 14 Pro Max due to COVID-19 factory shutdowns. And in the March quarter a year ago, we were able to replenish channel inventory and fulfill significant pent-up demand from the constraints. We estimate that this impact added close to $5 billion to the March quarter's total revenue last year. When we remove this impact from last year's revenue, we expect both our March quarter total company revenue and iPhone revenue to be similar to a year ago. For our Services business, we expect a similar double-digit growth rate to what we reported in the December quarter. We expect gross margin to be between 46% and 47%. We expect OpEx to be between $14.3 billion and $14.5 billion. We expect OI&E to be around $50 million, excluding any potential impact from the mark-to-market of minority investments and our tax rate to be around 16%. Finally, today our Board of Directors has declared a cash dividend of $0.24 per share of common stock payable on February 15, 2024, to shareholders of record as of February 12, 2024. With that, let's open the call to questions.","evidence_gemma_new":null,"evidence_llama_3_3":"expect OI&E March quarter","evidence_qwen_3_30b":"OI&E around $50 million tax rate to be around 16%","gemma_new_max":null,"gemma_new_min":null,"llama_3_3_max":50000000.0,"llama_3_3_min":50000000.0,"qwen_3_30b_max":50000000.0,"qwen_3_30b_min":50000000.0}
{"symbol":"AAPL","year":2024,"quarter":2,"date":"2024-Q2","chunk_id":2,"sub_chunk_id":0,"centroid_label":"oi e","agreed_value":50000000.0,"count":2,"chunk":"Luca Maestri: Thank you, Tim, and good afternoon, everyone. Revenue for the March quarter was $90.8 billion, down 4% from last year. Foreign exchange had a negative year-over-year impact of 140 basis points on our results. Products revenue was $66.9 billion, down 10% year-over-year due to the challenging compare on iPhone that Tim described earlier, which was partially offset by strength from Mac. And thanks to our unparalleled customer satisfaction and loyalty and a high number of customers who are new to our products, our installed base of active devices reached an all-time high across all products and all geographic segments. Services revenue set an all-time record of $23.9 billion, up 14% year-over-year with record performance in both developed and emerging markets. Company gross margin was 46.6%, up 70 basis points sequentially, driven by cost savings and favorable mix to services, partially offset by leverage. Products gross margin was 36.6%, down 280 basis points sequentially, primarily driven by seasonal loss of leverage and mix, partially offset by favorable costs. Services gross margin was 74.6%, up 180 basis points from last quarter due to a more favorable mix. Operating expenses of $14.4 billion were at the midpoint of the guidance range we provided and up 5% year-over-year. Net income was $23.6 billion, diluted EPS was $1.53 and a March quarter record, and operating cash flow was strong at $22.7 billion. Let me now provide more detail for each of our revenue categories. iPhone revenue was $46 billion, down 10% year-over-year, due to the almost $5 billion impact from a year ago that Tim described earlier. Adjusting for this one-time impact, iPhone revenue would be roughly flat to last year. Our iPhone active installed base grew to a new all-time high in total and in every geographic segment. And during the March quarter, we saw many iPhone models as the top-selling smartphones around the world. In fact, according to a survey from Kantar, an iPhone was the top-selling model in the U.S., Urban China, Australia, the U.K., France, Germany and Japan. And the iPhone 15 family continues to be very popular with customers. 451 Research recently measured customer satisfaction at 99% in the U.S. Mac revenue was $7.5 billion, up 4% year-over-year, driven by the strength of our new MacBook Air, powered by the M3 chip. Customers are loving the incredible AI performance of the latest MacBook Air and MacBook Pro models. And our Mac installed base reached an all-time high with half of our MacBook Air buyers during the quarter being new to Mac. Also customer satisfaction for Mac was recently reported at 96% in the U.S. iPad generated $5.6 billion in revenue, down 17% year-over-year. iPad continued to face a challenging compare against the launch of the M2 iPad Pro and iPad 10th Generation from last year. At the same time, the iPad installed base has continued to grow and is at an all-time high as over half of the customers who purchased iPads during the quarter were new to the product. In addition, the latest reports from 451 Research indicated customer satisfaction of 96% for iPad in the US. Wearables, Home and Accessories revenue was $7.9 billion, down 10% year-over-year due to a difficult launch compare. Last year, we had the continued benefit from the launches of the AirPods Pro second-generation, the Watch SE and the first Watch Ultra. Apple Watch continues to attract new customers, with almost two-thirds of customers purchasing an Apple Watch during the quarter being new to the product, sending the Apple Watch installed base to a new all-time high and customer satisfaction was recently measured at 95% in the U.S. In services, as I mentioned, total revenue reached an all-time record of $23.9 billion, growing 14% year-over-year with our installed-base of active devices continuing to grow at a nice pace. This provides a strong foundation for the future growth of the services business as we continued to see increased customer engagement with our ecosystem. Both transacting accounts and paid accounts reached a new all-time high with paid accounts growing double-digits year-over-year. And paid subscriptions showed strong double-digit growth. We have well over $1 billion paid subscriptions across the services on our platform, more than double the number that we had only four years ago. We continued to improve the breadth and quality of our current services from creating new games on Arcade and great new shows on TV+ to launching additional countries and partners for Apple Pay. Turning to enterprise, our customers continued to invest in Apple products to drive productivity and innovation. We see more and more enterprise customers embracing the Mac. In Healthcare, Epic Systems, the world's largest electronic medical record provider, recently launched its native app for the Mac, making it easier for healthcare organizations like Emory Health to transition thousands of PCs to the Mac for clinical use. And since the launch of Vision Pro last quarter, many leading enterprise customers have been investing in this amazing new product to bring spatial computing apps and experiences to life. We are seeing so many compelling use cases from aircraft engine maintenance training at KLM Airlines to real-time team collaboration for racing at Porsche to immersive kitchen design at Lowe's. We couldn't be more excited about the spatial computing opportunity in enterprise. Taking a quick step back, when we look at our performance during the first-half of our fiscal year, total company revenue was roughly flat to the prior year in spite of having one less week of sales during the period and some foreign exchange headwinds. We were particularly pleased with our strong momentum in emerging markets, as we set first-half revenue records in several countries and regions, including Latin-America, the Middle East, India, Indonesia, the Philippines and Turkey. These results, coupled with double-digit growth in services and strong levels of gross margin, drove a first half diluted EPS record of $3.71, up 9% from last year. Let me now turn to our cash position and capital return program. We ended the quarter with $162 billion in cash and marketable securities. We repaid $3.2 billion in maturing debt and commercial paper was unchanged sequentially, leaving us with total debt of $105 billion. As a result, net cash was $58 billion at the end of the quarter. During the quarter, we returned over $27 billion to shareholders, including $3.7 billion in dividends and equivalents and $23.5 billion through open-market repurchases of $130 million Apple's shares. Given the continued confidence we have in our business now and into the future, our Board has authorized today an additional $110 billion for share repurchases, as we maintain our goal of getting to net cash-neutral over time. We are also raising our dividend by 4% to $0.25 per share of common stock, and we continued to plan for annual increases in the dividend going forward as we've done for the last 12 years. This cash dividend will be payable on May 16, 2024 to shareholders of record as of May 13, 2024. As we move ahead into the June 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. We expect our June quarter total company revenue to grow low-single-digits year-over-year in spite of a foreign exchange headwind of about 2.5 percentage points. We expect our services business to grow double-digits at a rate similar to the growth we reported for the first-half of the fiscal year. And we expect iPad revenue to grow double-digits. We expect gross margin to be between 45.5% to -- and 46.5%. We expect OpEx to be between $14.3 billion and $14.5 billion. We expect OI&E to be around $50 million, excluding any potential impact from the mark-to-market of minority investments and our tax rate to be around 16%. With that, let's open the call to questions.","evidence_gemma_new":null,"evidence_llama_3_3":"OI&E June quarter","evidence_qwen_3_30b":"expect OI&E around $50 million","gemma_new_max":null,"gemma_new_min":null,"llama_3_3_max":50000000.0,"llama_3_3_min":50000000.0,"qwen_3_30b_max":50000000.0,"qwen_3_30b_min":50000000.0}
{"symbol":"AAPL","year":2023,"quarter":1,"date":"2023-Q1","chunk_id":3,"sub_chunk_id":0,"centroid_label":"operating cash flow","agreed_value":34000000000.0,"count":3,"chunk":"Luca Maestri: Thank you, Tim, and good afternoon, everyone. As Tim mentioned, revenue for the December quarter was $117.2 billion, down 5% from last year. A number of factors had a significant impact on our results. First, we faced a very difficult foreign exchange environment, which affected our performance by nearly 800 basis points. In other words, we grew revenue on a constant currency basis. And in fact, we did so in the vast majority of markets. Second, the macroeconomic environment this past quarter was markedly more challenging than 12 months ago. Third, we experienced significant supply shortages for iPhone 14 Pro and iPhone 14 Pro Max in November and through December. On the other hand, we had the positive impact of the 14th week in the quarter that Tejas just mentioned at the beginning of the call. Products revenue was $96.4 billion, down 8% from last year due to the factors I just called out. At the same time, however, our installed base of active devices grew double digits and achieved all-time records in each geographic segment and in each major product category. We're proud to now have over 2 billion active devices in our installed base. This continued growth in the installed base is due to extremely strong levels of customer satisfaction and loyalty and a high number of customers who are new to our products. The installed base growth also helped our services set an all-time revenue record of $20.8 billion, up 6% over a year ago. We achieved this new milestone despite more than 700 basis points of negative impact from foreign exchange. We reached all-time services revenue records in the Americas, Europe and rest of Asia Pacific and a December quarter record in Greater China. We also set records in many Services categories, including all-time revenue records for cloud services, payment services and music and December quarter records for the App Store and AppleCare. Company gross margin was 43%, up 70 basis points from last quarter due to leverage and favorable mix, partially offset by foreign exchange. Products gross margin was 37%, up 240 basis points sequentially. And Services gross margin was 70.8%, up 30 basis points sequentially, both due to the same factors that impacted total company gross margin. Operating expenses of $14.3 billion were significantly below the guidance range we provided at the beginning of the quarter and grew at a slower pace than in the past as we took actions to respond to the current macro environment. Net income was $30 billion. Diluted earnings per share were $1.88, and we generated very strong operating cash flow of $34 billion. Let me now get into more detail for each of our revenue categories. iPhone revenue was $65.8 billion despite significant foreign exchange headwinds, supply constraints on iPhone 14 Pro and iPhone 14 Pro Max and a challenging macroeconomic environment. In spite of these circumstances, we set all-time iPhone revenue records in Canada, Italy and Spain, and saw strong growth in several emerging markets, including all-time iPhone revenue records for India and Vietnam. Importantly, the installed base of active iPhones continues to grow nicely and is at an all-time high across all geographic segments. In emerging markets, in particular, the installed base grew double digits, and we had record levels of switchers in India and in Mexico. Our customers continue to love their experience with our products with the latest survey of U.S. consumers from 451 Research indicating customer satisfaction of 98% for the iPhone 14 family. Mac revenue was $7.7 billion, down 29% year-over-year and in line with our expectations. There were 3 key drivers for our Mac results. First, we had a challenging compare against last year's launch of the completely reimagined MacBook Pros, our first notebooks with M1 Pro and M1 Max. Second, we believe that the macro environment impacted our Mac performance. And third, we faced significant foreign exchange headwinds. At the same time, however, the installed base of active Macs reached an all-time high across all geographic segments, and we continue to see very strong upgraded activity to Apple silicon. Customer satisfaction with Mac remains very strong at 96% based on the latest survey of U.S. consumers from 451 Research. iPad revenue was $9.4 billion, up 30% year-over-year despite significant FX headwinds. This performance was driven by 2 key items. First, during the December quarter a year ago, we experienced significant supply constraints, while this year, we had enough supply to meet demand. Second, we launched our new iPad and the iPad Pro powered by the M2 chip during the quarter. The iPad installed base reached a new all-time high, thanks to incredible customer loyalty and a high number of new customers. In fact, over half of the customers who purchased iPads during the quarter were new to the product. Wearables, Home and Accessories revenue was $13.5 billion, down 8% year-over-year. The year-over-year decline was driven by significant FX headwinds and a challenging macroeconomic environment. However, our installed base of devices in the category set a new all-time record thanks to the largest number of customers new to our smartwatch that we've ever had in a given quarter. In fact, nearly 2\/3 of customers purchasing an Apple Watch during the quarter were new to the product. Moving to Services. We generated $20.8 billion in revenue, a new all-time record in total and for many Services offerings in spite of a difficult foreign exchange environment, and macroeconomic headwinds impacting certain categories such as digital advertising and mobile gaming. In constant currency, we grew Services revenue double digits on top of growing 24% during the December quarter a year ago. We remain focused on the large long-term opportunity in this category, and we continue to observe several trends that reflect the strength of our ecosystem. For example, we saw increased customer engagement with our Services during the quarter. Both our transacting accounts and paid accounts grew double digits year-over-year, each setting a new all-time record. Paid subscriptions also continued to grow nicely. We now have more than 935 million paid subscriptions across the services on our platform, up more than 150 million during the last 12 months alone and nearly 4x what we had just 5 years ago. And we continue to increase the reach and improve the quality of our offerings. For instance, Apple Pay is now available to millions of merchants in nearly 70 countries and regions. And we saw a record-breaking number of purchases made using Apple Pay globally during the holiday shopping season. Finally, our installed base of over 2 billion active devices represents a great foundation for future expansion of our ecosystem, and it continues to grow even during difficult macroeconomic conditions, which speaks to the exceptionally high levels of customer loyalty and satisfaction and our ability to attract new customers to our platform. The growth is coming from every major product category and geographic segment, with strong double-digit increases in emerging markets such as Brazil, Mexico, India, Indonesia, Thailand and Vietnam. Turning to the enterprise market. we are seeing continued adoption of our Services for business like Apple Business Essentials, AppleCare, Tap to Pay and Apple Financial Services. For example, Mars Incorporated has expanded its use of AppleCare for Enterprise to provide timely device support and assurance for iPads deployed across their manufacturing sites. Meanwhile, HCA Healthcare has leveraged Apple Financial Services to manage the annual refresh of its entire fleet of iPhones. This not only ensures that their staff stay current on the latest Apple technology, but also provides them with significant annual savings in the process. Let me now turn to our capital return program and our cash position. We returned over $25 billion to shareholders during the December quarter as our business continues to generate very strong cash flow. This included $3.8 billion in dividends and equivalents and $19 billion through open market repurchases of 133 million Apple shares. We ended the quarter with $165 billion in cash and marketable securities. We repaid $1.4 billion in maturing debt and decreased commercial paper by $8.2 billion, leaving us with total debt of $111 billion. As a result, net cash was $54 billion at the end of the quarter, and we maintain our goal of becoming net cash-neutral over time. As we move into the March quarter, I'd like to review our outlook, which includes the types of forward-looking information that Tejas referred to at the beginning of the call. Given the continued uncertainty around the world in the near term, we are not providing revenue guidance, but we are sharing some directional insights based on the assumption that the macroeconomic outlook and COVID-related impacts to our business do not worsen from what we are projecting today for the current quarter. In total, we expect our March quarter year-over-year revenue performance to be similar to the December quarter. This represents an acceleration in our underlying year-over-year business performance as the December quarter benefited from an extra week. Foreign exchange will continue to be a headwind, and we expect a negative year-over-year impact of 5 percentage points. For Services, we expect revenue to grow year-over-year while continuing to face macroeconomic headwinds in areas such as digital advertising and mobile gaming. For iPhone, we expect our March quarter year-over-year revenue performance to accelerate relative to the December quarter year-over-year revenue performance. For Mac and iPad, we expect revenue for both product categories to decline double digits year-over-year because of challenging compares and macroeconomic headwinds. We expect gross margin to be between 43.5% and 44.5%. We expect OpEx to be between $13.7 billion and $13.9 billion. We expect OI&E to be around negative $100 million, excluding any potential impact from the mark-to-market of minority investments, and our tax rate to be around 16%. Finally, today, our Board of Directors has declared a cash dividend of $0.23 per share of common stock payable on February 16, 2023, to shareholders of record as of February 13, 2023. With that, let's open the call to questions.","evidence_gemma_new":"operating cash flow","evidence_llama_3_3":"operating cash flow","evidence_qwen_3_30b":"operating cash flow $34 billion","gemma_new_max":34000000000.0,"gemma_new_min":34000000000.0,"llama_3_3_max":34000000000.0,"llama_3_3_min":34000000000.0,"qwen_3_30b_max":34000000000.0,"qwen_3_30b_min":34000000000.0}
{"symbol":"AAPL","year":2023,"quarter":2,"date":"2023-Q2","chunk_id":3,"sub_chunk_id":0,"centroid_label":"operating cash flow","agreed_value":28600000000.0,"count":2,"chunk":"Luca Maestri: Thank you, Tim, and good afternoon, everyone. Revenue for the March quarter was $94.8 billion, down 3% from last year and better than our expectations. Foreign exchange had a negative impact of over five percentage points on our results, in line with what we had expected. On a constant currency basis, our revenue grew year-over-year in total and in the majority of the markets we track. In addition to the records in emerging markets that Tim mentioned, we also set March quarter records in Australia, Canada, Spain and Switzerland, among others. Products revenue was $73.9 billion, down 5% from last year, due to challenging compares on Mac and iPad. iPhone, however, reached a March quarter revenue record thanks to very strong performance in emerging markets from South Asia and India to Latin America and the Middle East. During the quarter, our installed base of active devices continued to grow at a nice pace thanks to extremely high levels of customer satisfaction and loyalty, and reached an all-time high for all major product categories and geographic segments. Our Services set an all-time revenue record of $20.9 billion, up 5% year-over-year, on top of growing 17% in the March quarter a year ago. We reached an all-time services revenue record in Greater China and March quarter records in Americas, Europe and Rest of Asia Pacific. Company gross margin was 44.3%, up 130 basis points from last quarter, driven by cost savings and favorable mix shift towards services partially offset by leverage. Products gross margin was 36.7%, decreasing 30 basis points sequentially due to seasonal loss of leverage and mix, partially offset by favorable costs. Services gross margin was 71%, up 20 basis points sequentially. Operating expenses of $13.7 billion were at the low end of the guidance range we provided at the beginning of the quarter and continued to decelerate from the December quarter. We are closely managing our spend, but remain focused on long term growth with continued investment in innovation and product development. Net income was $24.2 billion. Diluted earnings per share were a $1.52, unchanged versus last year, and we generated very strong operating cash flow of $28.6 billion. Let me now provide more detail for each of our revenue categories. iPhone revenue set a March quarter record of $51.3 billion, up 2% year-over-year despite significant foreign exchange headwinds and a challenging macroeconomic environment. We set March quarter records in several developed and emerging markets with India, Indonesia, Turkey and the UAE doubling on a year-over-year basis. Our active installed base of iPhone grew to a new all-time high and was up in all our geographic segments. We are very pleased by the results of the latest survey of US Consumers from 451 Research, which measured customer satisfaction at 99% for the iPhone 14 family. Mac revenue was $7.2 billion, down 31% year-over-year and in line with our expectations. These results were driven by the challenging macroeconomic environment coupled with a difficult compare against last year's launch of the completely reimagined M1 MacBook Pros. Despite this, the installed base of active Macs reached an all-time high across all geographic segments and we continue to see strong upgraded activity to Apple silicon. Also, the latest survey of US Consumers from 451 Research reported customer satisfaction at 96% for Mac. iPad generated $6.7 billion in revenue, down 13% year-over-year and in line with our expectations. This performance was due to two key factors, a tough compare against the launch of iPad Air powered by the M1 chip in the year ago quarter and headwinds from the macroeconomic environment. The iPad installed base reached a new all-time high in all geographic segments thanks to exceptional customer loyalty and a high number of new customers. In fact, over half of the customers who purchased iPads during the quarter were new to the product. Wearables, home and accessories revenue was $8.8 billion, down 1% year-over-year as the category experienced the impact from the macroeconomic environment. However, we did set March quarter records both in the US and in Greater China. We continue to see strength in our Watch installed base, which set a new all-time record, thanks to very high customer loyalty and new two rates, nearly two thirds of customers purchasing an Apple Watch during the quarter were new to the product. Moving to Services, we reached a new all-time revenue record of $20.9 billion. And in addition to the all-time records Tim mentioned earlier, we set March quarter records for advertising Apple Care and Video. Despite these records, as we saw in recent quarters, certain services offerings such as digital advertising and mobile gaming continue to be affected by the current macroeconomic environment. Stepping back, however, the continued growth in Services is the reflection of our ecosystem strength and the positive momentum we are seeing across several key metrics. First, our growing installed base of over 2 billion active devices represents a great foundation for future expansion of our ecosystem. We continue to grow across every major product category and geographic segment, thanks to very high levels of customer loyalty and satisfaction. Second, we saw increased customer engagement with our services during the quarter. Both our transacting accounts and paid accounts grew double digits year-over-year, each setting a new all-time record. Third, paid subscriptions showed strong growth. We now have more than $975 million paid subscriptions across the Services on our platform, up 150 million during the last 12 months and nearly double the number of paid subscriptions we had only three years ago. And finally, we continue to improve the breadth and the quality of our current services offerings from new content on Apple TV Plus to great new features available in Apple Pay and Apple Music, which we believe our customers will love. Turning to the enterprise market, we see business customers continuing to invest in the Apple platform to drive higher employee productivity and satisfaction. In Brazil, Boticario Group, the world's largest cosmetics franchiser, originally starting with iPhone, 12 employees manage operations across a network of retail stores, franchisees and resellers. As it continues to digitize its business, Boticario has chosen to move all software development in house and adopted Mac as the standard device for all of their developer teams across the world. In small business, we see an increasing number of customers relying on Apple hardware, software and services to power their businesses forward, from accepting payments on iPhone, to tracking inventory on Mac or iPad, to managing employee devices with Apple Business Essentials. As we celebrate National Small Business week here in the US, we are proud to continue supporting the small business community. Let me now turn to our cash position and capital return program. We ended the quarter with over $166 billion in cash and marketable securities. We repaid $2.3 billion in maturing debt and increased commercial paper by about $300 million, leaving us with total debt of $110 billion. As a result, net cash was $57 billion at the end of the quarter. During the March quarter, we returned over $23 billion to shareholders, including $3.7 billion in dividends and equivalents and $19.1 billion through open market repurchases of $129 million Apple shares. Given the continued confidence we have in our business now and into the future, today our Board has authorized an additional $90 billion for share repurchases as we maintain our goal of getting to net cash neutral over time. We're also raising our dividend by 4% to $0.24 a share, and we continue to plan for annual increases in the dividend going forward. As we move ahead into the June 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. We expect our June quarter year-over-year revenue performance to be similar to the March quarter, assuming that the macroeconomic outlook does not worsen from what we are projecting today for the current quarter. Foreign exchange will continue to be a headwind and we expect a negative year-over-year impact of nearly four percentage points. For Services, we expect our June quarter year-over-year revenue growth to be similar to the March quarter, while continuing to face macroeconomic headwinds in areas such as digital advertising and mobile gaming. We expect gross margin to be between 44% and 44.5%. We expect OpEx to be between $13.6 billion and $13.8 billion. We expect OINE to be around negative $250 million excluding any potential impact from the mark-to-market of minority investments and our tax rate to be around 16%. Finally reflecting the dividend increase I mentioned earlier, today, our Board of Directors has declared a cash dividend of $0.24 per share of common stock payable on May 18, 2023, to shareholders of record as on May 15, 2023. With that, let's open the call to questions.","evidence_gemma_new":"operating cash flow","evidence_llama_3_3":"Operating cash flow March quarter","evidence_qwen_3_30b":null,"gemma_new_max":28600000000.0,"gemma_new_min":28600000000.0,"llama_3_3_max":28600000000.0,"llama_3_3_min":28600000000.0,"qwen_3_30b_max":null,"qwen_3_30b_min":null}
{"symbol":"AAPL","year":2023,"quarter":3,"date":"2023-Q3","chunk_id":3,"sub_chunk_id":0,"centroid_label":"operating cash flow","agreed_value":26400000000.0,"count":2,"chunk":"Luca Maestri: Thank you, Tim, and good afternoon, everyone. Revenue for the June quarter was $81.8 billion, down 1% from last year and better than our expectations despite nearly 4 percentage points of negative impact from foreign exchange. On a constant currency basis, our revenue grew year-over-year in total and in the majority of the markets we track. We set June quarter records in both Europe and Greater China and continue to see strong performance across our emerging markets driven by iPhone. Products revenue was $60.6 billion, down 4% from last year, as we faced FX headwinds and an uneven macroeconomic environment. However, our installed base reached an all-time high across all geographic segments, driven by a June quarter record for iPhone switchers and high new-to rates in Mac, iPad and Watch, coupled with very high levels of customer satisfaction and loyalty. Our Services revenue set an all-time record of $21.2 billion, up 8% year-over-year and grew double digits in constant currency. Our performance was strong around the world as we reach all-time Services revenue records in Americas and Europe and June quarter records in Greater China and rest of Asia Pacific. Company gross margin was 44.5%, a record level for the June quarter and up 20 basis points sequentially, driven by cost savings and favorable mix shift towards Services, partially offset by a seasonal loss of leverage. Products gross margin was 35.4%, down 130 basis points from last quarter due to seasonal loss of leverage and mix, partially offset by favorable costs. Services gross margin was 70.5%, decreasing 50 basis points sequentially. Operating expenses of $13.4 billion were below the low end of the guidance range we provided at the beginning of the quarter and decelerated from the March quarter. We continue to take a deliberate approach in managing our spend with strong focus on innovation and new product development. The results of these actions delivered net income of $19.9 billion, diluted earnings per share of $1.26, up 5% versus last year, and very strong operating cash flow of $26.4 billion. Let me now provide more detail for each of our revenue categories. iPhone revenue was $39.7 billion, down 2% year-over-year but grew on a constant currency basis. We set revenue records in several markets around the world, including an all-time record in India and June quarter records in Latin America, the Middle East and Africa, Indonesia, the Philippines, Italy, the Netherlands and the U.K. Our iPhone active installed base grew to a new all-time high, thanks to a June quarter record in switchers. This is a testament to our extremely high levels of customer satisfaction, which 451 Research recently measured at 98% for the iPhone 14 family in the U.S. Mac generated $6.8 billion in revenue, down 7% year-over-year. We continue to invest in our Mac portfolio. And this past quarter, we were pleased to complete the transition to Apple silicon for the entire lineup. This transition has driven both strong upgrade activity and a high number of new customers. In fact, almost half of Mac buyers during the quarter were new to the product. We also saw reported customer satisfaction of 96% for Mac in the U.S. iPad revenue was $5.8 billion, down 20% year-over-year and in line with our expectations. These results were driven by a difficult compare against the full quarter impact of the iPad Air launch in the prior year. At the same time, we continue to attract a large number of new customers to the iPad installed base with over half of the customers who purchased iPads during the quarter being new to the product. And the latest reports from 451 Research indicate customer satisfaction of 96% in the U.S. Wearables, Home and Accessories revenue was $8.3 billion, up 2% year-over-year, with a June quarter record in Greater China and strong performance in several emerging markets. We continue to see Apple Watch expand its reach with about 2\/3 of customers purchasing an Apple Watch during the quarter being new to the product. And this is combined with very high levels of customer satisfaction, which was recently reported at 98% in the United States. Moving on to Services. We reached a new all-time revenue record of $21.2 billion with year-over-year growth accelerating sequentially to 8% and up double digits in constant currency. In addition to the all-time records Tim mentioned earlier, we also set June quarter records for advertising, App Store and Music. We are very pleased with our performance in Services, which is a direct reflection of our ecosystem's strength. First, our installed base of over 2 billion active devices continues to grow at a nice pace and establishes a solid foundation for the future expansion of our ecosystem. Second, we see increased customer engagement with our services. Both our transacting accounts and paid accounts grew double digits year-over-year, each reaching a new all-time high. Third, our paid subscriptions showed strong growth. This past quarter, we reached an important milestone and passed 1 billion paid subscriptions across the services on our platform, up 150 million during the last 12 months and nearly double the number of paid subscriptions we had only 3 years ago. And finally, we continue to improve the breadth and the quality of our current services. From 20 new games on Apple Arcade, to brand-new content on Apple TV+, to the launch of our high-yield savings account with Apple Card, our customers are loving these enhanced offerings. Turning to the enterprise market. Our customers are leveraging Apple products every day to help improve productivity and attract talent. Blackstone, a global investment management firm, is expanding its Apple footprint from their corporate iPhone fleet to now offering the MacBook Air powered by M2 to all of their corporate employees and portfolio companies. Gilead, a leading biopharmaceutical company, has deployed thousands of iPads globally to their sales team. Over the last 6 months, they have also doubled their Mac user base by making MacBook Air available to more employees with a focus on user experience and strong security. Let me now turn to our cash position and capital return program. We ended the quarter with over $166 billion in cash and marketable securities. We repaid $7.5 billion in maturing debt while issuing $5.2 billion of new debt and increasing commercial paper by $2 billion, leaving us with total debt of $109 billion. As a result, net cash was $57 billion at the end of the quarter. During the quarter, we returned over $24 billion to shareholders, including $3.8 billion in dividends and equivalents and $18 billion through open market repurchases of 103 million Apple shares. We continue to believe there is great value in our stock and maintain our target of reaching a net cash neutral position over time. As we move ahead into the September quarter, I'd like to review our outlook, which includes the types of forward-looking information that Saori referred to at the beginning of the call. We expect our September quarter year-over-year revenue performance to be similar to the June quarter, assuming that the macroeconomic outlook doesn't worsen from what we are projecting today for the current quarter. Foreign exchange will continue to be a headwind, and we expect a negative year-over-year revenue impact of over 2 percentage points. We expect iPhone and Services year-over-year performance to accelerate from the June quarter. Also, we expect the revenue for both Mac and iPad to decline by double digits year-over-year due to difficult compares, particularly on the Mac. For both products, we experienced supply disruptions from factory shutdowns in the June quarter a year ago and were able to fulfill significant pent-up demand in the year ago September quarter. We expect gross margin to be between 44% and 45%. We expect OpEx to be between $13.5 billion and $13.7 billion. We expect OI&E to be around negative $250 million, excluding any potential impact from the mark-to-market of minority investments, and our tax rate to be around 16%. Finally, today, our Board of Directors has declared a cash dividend of $0.24 per share of common stock payable on August 17, 2023, to shareholders of record as of August 14, 2023. With that, let's open the call to questions.","evidence_gemma_new":"operating cash flow","evidence_llama_3_3":"Operating cash flow June quarter","evidence_qwen_3_30b":null,"gemma_new_max":26400000000.0,"gemma_new_min":26400000000.0,"llama_3_3_max":26400000000.0,"llama_3_3_min":26400000000.0,"qwen_3_30b_max":null,"qwen_3_30b_min":null}
{"symbol":"AAPL","year":2023,"quarter":4,"date":"2023-Q4","chunk_id":3,"sub_chunk_id":0,"centroid_label":"operating cash flow","agreed_value":21600000000.0,"count":2,"chunk":"Luca Maestri: Thank you, Tim, and good afternoon, everyone. Revenue for the September quarter was $89.5 billion, down less than 1% from last year. Foreign exchange had a negative impact of over 2 percentage points. And on a constant-currency basis, our revenue grew year-over-year in total, and in each geographic segment. We set a September quarter record in the Americas and saw strong performance across our emerging markets, where both iPhone and Services grew double digits. Products revenue was $67.2 billion, down 5% from last year, due to very challenging compares on both Mac and iPad, which I will discuss in more detail later on. At the same time, we reached a September quarter record on iPhone, driven by strength in emerging markets. Our total installed-base of active devices reached an all-time high across all products and all geographic segments, thanks to our high levels of customer satisfaction and many new customers joining our ecosystem. Our Services revenue set an all-time record of $22.3 billion, up 16% year-over-year, with growth accelerating sequentially from the June quarter. Our performance in Services were broad based, as we reached all-time revenue records in the Americas, Europe and rest of Asia-Pacific and a September quarter record in Greater China. We also set new records in every Services category. Company gross margin set a September quarter record at 45.2%, up 70 basis points sequentially, driven by leverage and favorable mix, partially offset by foreign exchange. Products gross margin was 36.6%, up 120 basis points sequentially, also driven by leverage and mix, partially offset by foreign exchange. Services gross margin was 70.9%, up 40 basis points from last quarter due to a different mix. Operating expenses of $13.5 billion were at the low end of the guidance range we provided, up 2% year-over-year. Net income was $23 billion, diluted earnings per share was $1.46, up 13% versus last year and a September quarter record, and operating cash flow was strong at $21.6 billion. Let me now provide more detail for each of our revenue categories. iPhone revenue was $43.8 billion, up 3% year-over-year and a new September quarter record. We had strong performance in several markets, including an all-time record in India as September quarter records in Canada, Latin America, the Middle East, and South Asia . Our iPhone active installed base grew to a new all-time high and fiscal 2023 was another record year for switches. We continue to see extremely high levels of customer satisfaction which 451 Research recently measured at 98% in the U.S. Mac revenue was $7.6 billion, down 34% year-over-year, driven by challenging market conditions and compounded by a difficult compare in our own business, whereby last year we experienced supply disruptions from factory shutdowns in the June quarter and were subsequently able to fulfill significant pent-up demand during the September quarter. We also had a difference in launch timing with the MacBook Air launching earlier this year in the June quarter compared to the September quarter last year. We have great confidence in our Mac lineup and are excited about the recently announced iMac and MacBook Pro powered by our M3 chips. Our installed base is at an all-time high and half of Mac buyers during the quarter were new to the product, driven by MacBook Air. Also, we saw reported customer satisfaction of 97% for Mac in the U.S. iPad generated $6.4 billion in revenue, down 10% year-over-year. Similar to Mac, these results were a function of a difficult compare from the supply disruptions in the June quarter a year ago and the subsequent fulfillment of pent-up demand in the September quarter. iPad continues to attract a large number of new customers to the installed base with over half of the customers who purchase iPads during the quarter being new to the product and the latest reports from 451 Research indicate customer satisfaction of 98% in the U.S. Wearables, Home and Accessories revenue was $9.3 billion, down 3% year-over-year. We had a September quarter record in Europe and we saw strong performance in several emerging markets around the world. Apple Watch continues to expand its reach with nearly two-thirds of customers purchasing Apple Watch during the quarter being new to the product and customer satisfaction for the Watch was recently measured at 97% in the U.S. Services had a great quarter. We reached a new all-time revenue record of $22.3 billion, up 16% year-over-year. And we're happy to see growth coming from all categories and every geographic segment, which is a direct result of the strength of our ecosystem. Our installed base of over 2 billion active devices continues to grow at a nice pace and establishes a solid foundation for the future expansion of the ecosystem. And we continue to see increased customer engagement with our Services. Both transacting accounts and paid accounts grew double-digits year-over-year, each reaching a new all-time high. Also our paid subscriptions showed strong growth. We have well over 1 billion paid subscriptions across the services on our platform, nearly double the number we had only three years ago. And finally, we continue to improve the breadth and quality of our current services from exciting new content on Apple TV+ and Apple Arcade to additional storage tiers on iCloud. We believe our customers will love this new offering. Turning to enterprise. We are excited to see our business customers in both developed and emerging markets expand their deployment of Apple products and technologies to drive business innovation and employee satisfaction. Starbucks continuously invest in Apple technology to bring the best experience to the customers and employees, including tens of thousands of iPads across all retail stores to help their teams streamline order management, operations and training. In addition, Starbucks recently refreshed over 10,000 Macs to the latest M2-powered MacBook Air for all store managers, enabling them to do their best work and improve productivity. And in Indonesia, popular technology company GoTo is offering Mac as a choice, so that employees can have the best tools to be most productive. Today, more than half of its workforce are already choosing Mac for work. Let me now turn to our cash position and capital return program. We ended the quarter with over $162 billion in cash and marketable securities. We increased commercial paper by $2 billion, leaving us with total debt of $111 billion. As a result, net cash was $51 billion at the end of the quarter. And our goal of becoming net cash-neutral over time remains unchanged. During the quarter, we returned nearly $25 billion to shareholders, including $3.8 billion in dividends and equivalents and $15.5 billion through open market repurchases of 85 million Apple shares. We also began a $5 billion accelerated share repurchase program in August, resulting in the initial delivery and retirement of 22 million shares. Taking a step back, as we close our 2023 fiscal year, our annual revenue was $383 billion. While it was down 3% from the prior year, it grew on a constant-currency basis despite the volatile and uneven macroeconomic environment. Our year-over-year revenue performance improved each quarter as we went through the year, and so did our earnings per share performance, as we reported double-digit EPS growth in the September quarter. We are particularly pleased with our performance in emerging markets with revenue reaching an all-time record in fiscal 2023 and double-digit growth in constant currency. We are expanding our direct presence in these markets from new Apple retail stores in India to online stores in Vietnam and Chile. And we continue to work with our partners to offer a wide range of affordability programs so that we can best serve our customers. We're very excited about the momentum we have in these markets and the opportunity ahead of us. 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%. Finally, today our Board of Directors has declared a cash dividend of $0.24 per share of common stock, payable on November 16, 2023, to shareholders of record as of November 13, 2023. With that, let's open the call to questions.","evidence_gemma_new":"operating cash flow","evidence_llama_3_3":"Operating cash flow September quarter","evidence_qwen_3_30b":null,"gemma_new_max":21600000000.0,"gemma_new_min":21600000000.0,"llama_3_3_max":21600000000.0,"llama_3_3_min":21600000000.0,"qwen_3_30b_max":null,"qwen_3_30b_min":null}
{"symbol":"AAPL","year":2024,"quarter":1,"date":"2024-Q1","chunk_id":3,"sub_chunk_id":0,"centroid_label":"operating cash flow","agreed_value":39900000000.0,"count":3,"chunk":"Luca Maestri: Thank you, Tim, and good afternoon, everyone. Revenue for the December quarter was $119.6 billion, up 2% from last year. During the December quarter a year ago, two unique factors affected our results. First, we had an additional week in the quarter. And second, we had COVID-related factory shutdowns that limited iPhone supply. We estimate that the net impact of these two factors resulted in a 2 percentage point headwind to our revenue performance this quarter. We set all-time revenue records in Europe and rest of Asia-Pacific, and continue to see strong performance across our emerging markets with double-digit growth in the majority of the emerging markets we track. Products revenue was $96.5 billion, flat compared to last year, driven by strength in iPhone, offset by challenging compares for iPad and Wearables, Home and Accessories and one less week of sales this year across the entire portfolio. Thanks to our unparalleled customer loyalty and very strong levels of customer satisfaction, our total installed base of active devices set a new record across all products and all geographic segments, and is now over 2.2 billion active devices. Services revenue set an all-time record of $23.1 billion, up 11% year-over-year. When we take into account the extra week last year, this represents a sequential acceleration of growth from the September quarter. We are very pleased with our Services performance in both developed and emerging markets with all-time revenue records in the Americas, Europe, and rest of Asia-Pacific. Company gross margin was 45.9%, up 70 basis points sequentially, driven by leverage and favorable mix, partially offset by foreign exchange. Products gross margin was 39.4%, up 280 basis points sequentially, also driven by leverage and mix, partially offset by foreign exchange. Services gross margin was 72.8%, up 190 basis points from last quarter, due to a more favorable mix. Operating expenses of $14.5 billion were at the midpoint of the guidance range we provided and up 1% year-over-year. Net income was $33.9 billion, up $3.9 billion from last year. Diluted EPS was $2.18, up 16% versus last year and an all-time record. And operating cash flow was very strong at $39.9 billion. Let me now provide more detail for each of our revenue categories. iPhone revenue was $69.7 billion, up 6% year-over-year. We set all-time records in several countries and regions, including Latin America, Western Europe, the Middle East, and Korea, as well as December quarter records in India and Indonesia. Our iPhone active installed base grew to a new all-time high, and we had an all-time record number of iPhone upgraders during the quarter. Customers are loving their new iPhone 15 family, with the latest reports from 451 Research indicating customer satisfaction of 99% in the U.S. In fact, many iPhone models were among the top-selling smartphones around the world during the quarter. According to a survey from Kantar, iPhones were four out of the top five models in the U.S. and Japan, four out of the top six models in urban China and the UK, and all top five models in Australia. Mac generated revenue of $7.8 billion and return to growth, despite one less week of sales this year. This represents a significant acceleration from the September quarter when we faced a challenging compare due to the supply disruptions and subsequent demand recapture we experienced a year ago. Customer response to our latest iMac and MacBook Pro models powered by the M3 chips has been great. And our Mac installed base reached an all-time high with almost half of Mac buyers during the quarter being new to the product. Also, 451 Research recently reported customer satisfaction of 97% for Mac in the U.S. iPad was $7 billion in revenue, down 25% year-over-year. iPad faced a difficult compare because during the December quarter last year, we launched the new iPad Pro and iPad 10 generation, and we had an extra week of sales. However, the iPad installed base continues to grow and is an all-time high with over half of the customers who purchased iPads during the quarter being new to the product, and customer satisfaction for iPad was recently measured at 98% in the U.S. Wearables, Home and Accessories revenue was $12 billion, down 11% year-over-year due to a challenging launch compare and the extra week a year ago. This time last year, we had the full quarter benefit from the launches of the AirPods Pro 2nd generation, the Watch SE, and the first Watch Ultra. We continue to attract new customers to Apple Watch. Nearly two-thirds of customers purchasing an Apple Watch during the quarter were new to the product, and the latest reports from 451 Research indicate customer satisfaction of 96% in the U.S. And in Services, we were very pleased with our double-digit growth, which was driven by the strength of our ecosystem. Our installed base is now over 2.2 billion active devices and continues to grow nicely, establishing a solid foundation for the future expansion of our Services business. And we continue to see increased customer engagement with our services. Both transacting accounts and paid accounts reached a new all-time high, with paid accounts growing double-digits year-over-year. Also, our paid subscriptions showed strong double-digit growth. We have well over 1 billion paid subscriptions across the services on our platform, more than double the number that we had only four years ago. Finally, we continue to build on the breadth and the quality of our current services. From Oscar-nominated theatrical releases with Apple TV+ to more publications or News+ like The Atlantic and exciting new games on Arcade. Turning to Enterprise, we continue to see many business customers leverage Apple products to improve productivity and drive innovation. Target recently added the latest M3 MacBook Pro to their existing deployment of thousands of Mac\u2019s, enabling employees across various departments to do their best work. In emerging markets, Zoho, a leading technology company headquartered in India, offers its 15,000 plus global employees a choice of devices, with 80% of their workforce using iPhone for work and nearly two-thirds of them choosing Mac as their primary computer. With the upcoming launch of Apple Vision Pro, we are seeing strong excitement in Enterprise. Leading organizations across many industries such as Walmart, Nike, Vanguard, Stryker, Bloomberg, and SAP have started leveraging and investing in Apple Vision Pro as their new platform to bring innovative spatial computing experiences to their customers and employees. From everyday productivity to collaborative product design to immersive training, we cannot wait to see the amazing things our enterprise customers will create in the months and years to come. Let me now turn to our cash position and capital return program. We ended the quarter with $173 billion in cash and marketable securities. We decreased commercial paper by $4 billion, leaving us with total debt of $108 billion. As a result, net cash was $65 billion at the end of the quarter, and our goal of becoming net cash-neutral over time remains unchanged. During the quarter, we returned nearly $27 billion to shareholders, including $3.8 billion in dividends and equivalents and $20.5 billion through open market repurchases of 112 million Apple shares. We also retired an additional 6 million shares in the final settlement of our 19th ASR. As usual, we will provide an update to our capital return program when we report results at the end of this quarter. As we move ahead into the March 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. And we expect foreign exchange to be a revenue headwind of about 2 percentage points on a year-over-year basis. As a reminder, in the December quarter a year ago, we faced significant supply constraints on the iPhone 14 Pro and 14 Pro Max due to COVID-19 factory shutdowns. And in the March quarter a year ago, we were able to replenish channel inventory and fulfill significant pent-up demand from the constraints. We estimate that this impact added close to $5 billion to the March quarter's total revenue last year. When we remove this impact from last year's revenue, we expect both our March quarter total company revenue and iPhone revenue to be similar to a year ago. For our Services business, we expect a similar double-digit growth rate to what we reported in the December quarter. We expect gross margin to be between 46% and 47%. We expect OpEx to be between $14.3 billion and $14.5 billion. We expect OI&E to be around $50 million, excluding any potential impact from the mark-to-market of minority investments and our tax rate to be around 16%. Finally, today our Board of Directors has declared a cash dividend of $0.24 per share of common stock payable on February 15, 2024, to shareholders of record as of February 12, 2024. With that, let's open the call to questions.","evidence_gemma_new":"operating cash flow","evidence_llama_3_3":"Operating cash flow December quarter","evidence_qwen_3_30b":"operating cash flow very strong","gemma_new_max":39900000000.0,"gemma_new_min":39900000000.0,"llama_3_3_max":39900000000.0,"llama_3_3_min":39900000000.0,"qwen_3_30b_max":39900000000.0,"qwen_3_30b_min":39900000000.0}
{"symbol":"AAPL","year":2024,"quarter":2,"date":"2024-Q2","chunk_id":2,"sub_chunk_id":0,"centroid_label":"operating cash flow","agreed_value":22700000000.0,"count":2,"chunk":"Luca Maestri: Thank you, Tim, and good afternoon, everyone. Revenue for the March quarter was $90.8 billion, down 4% from last year. Foreign exchange had a negative year-over-year impact of 140 basis points on our results. Products revenue was $66.9 billion, down 10% year-over-year due to the challenging compare on iPhone that Tim described earlier, which was partially offset by strength from Mac. And thanks to our unparalleled customer satisfaction and loyalty and a high number of customers who are new to our products, our installed base of active devices reached an all-time high across all products and all geographic segments. Services revenue set an all-time record of $23.9 billion, up 14% year-over-year with record performance in both developed and emerging markets. Company gross margin was 46.6%, up 70 basis points sequentially, driven by cost savings and favorable mix to services, partially offset by leverage. Products gross margin was 36.6%, down 280 basis points sequentially, primarily driven by seasonal loss of leverage and mix, partially offset by favorable costs. Services gross margin was 74.6%, up 180 basis points from last quarter due to a more favorable mix. Operating expenses of $14.4 billion were at the midpoint of the guidance range we provided and up 5% year-over-year. Net income was $23.6 billion, diluted EPS was $1.53 and a March quarter record, and operating cash flow was strong at $22.7 billion. Let me now provide more detail for each of our revenue categories. iPhone revenue was $46 billion, down 10% year-over-year, due to the almost $5 billion impact from a year ago that Tim described earlier. Adjusting for this one-time impact, iPhone revenue would be roughly flat to last year. Our iPhone active installed base grew to a new all-time high in total and in every geographic segment. And during the March quarter, we saw many iPhone models as the top-selling smartphones around the world. In fact, according to a survey from Kantar, an iPhone was the top-selling model in the U.S., Urban China, Australia, the U.K., France, Germany and Japan. And the iPhone 15 family continues to be very popular with customers. 451 Research recently measured customer satisfaction at 99% in the U.S. Mac revenue was $7.5 billion, up 4% year-over-year, driven by the strength of our new MacBook Air, powered by the M3 chip. Customers are loving the incredible AI performance of the latest MacBook Air and MacBook Pro models. And our Mac installed base reached an all-time high with half of our MacBook Air buyers during the quarter being new to Mac. Also customer satisfaction for Mac was recently reported at 96% in the U.S. iPad generated $5.6 billion in revenue, down 17% year-over-year. iPad continued to face a challenging compare against the launch of the M2 iPad Pro and iPad 10th Generation from last year. At the same time, the iPad installed base has continued to grow and is at an all-time high as over half of the customers who purchased iPads during the quarter were new to the product. In addition, the latest reports from 451 Research indicated customer satisfaction of 96% for iPad in the US. Wearables, Home and Accessories revenue was $7.9 billion, down 10% year-over-year due to a difficult launch compare. Last year, we had the continued benefit from the launches of the AirPods Pro second-generation, the Watch SE and the first Watch Ultra. Apple Watch continues to attract new customers, with almost two-thirds of customers purchasing an Apple Watch during the quarter being new to the product, sending the Apple Watch installed base to a new all-time high and customer satisfaction was recently measured at 95% in the U.S. In services, as I mentioned, total revenue reached an all-time record of $23.9 billion, growing 14% year-over-year with our installed-base of active devices continuing to grow at a nice pace. This provides a strong foundation for the future growth of the services business as we continued to see increased customer engagement with our ecosystem. Both transacting accounts and paid accounts reached a new all-time high with paid accounts growing double-digits year-over-year. And paid subscriptions showed strong double-digit growth. We have well over $1 billion paid subscriptions across the services on our platform, more than double the number that we had only four years ago. We continued to improve the breadth and quality of our current services from creating new games on Arcade and great new shows on TV+ to launching additional countries and partners for Apple Pay. Turning to enterprise, our customers continued to invest in Apple products to drive productivity and innovation. We see more and more enterprise customers embracing the Mac. In Healthcare, Epic Systems, the world's largest electronic medical record provider, recently launched its native app for the Mac, making it easier for healthcare organizations like Emory Health to transition thousands of PCs to the Mac for clinical use. And since the launch of Vision Pro last quarter, many leading enterprise customers have been investing in this amazing new product to bring spatial computing apps and experiences to life. We are seeing so many compelling use cases from aircraft engine maintenance training at KLM Airlines to real-time team collaboration for racing at Porsche to immersive kitchen design at Lowe's. We couldn't be more excited about the spatial computing opportunity in enterprise. Taking a quick step back, when we look at our performance during the first-half of our fiscal year, total company revenue was roughly flat to the prior year in spite of having one less week of sales during the period and some foreign exchange headwinds. We were particularly pleased with our strong momentum in emerging markets, as we set first-half revenue records in several countries and regions, including Latin-America, the Middle East, India, Indonesia, the Philippines and Turkey. These results, coupled with double-digit growth in services and strong levels of gross margin, drove a first half diluted EPS record of $3.71, up 9% from last year. Let me now turn to our cash position and capital return program. We ended the quarter with $162 billion in cash and marketable securities. We repaid $3.2 billion in maturing debt and commercial paper was unchanged sequentially, leaving us with total debt of $105 billion. As a result, net cash was $58 billion at the end of the quarter. During the quarter, we returned over $27 billion to shareholders, including $3.7 billion in dividends and equivalents and $23.5 billion through open-market repurchases of $130 million Apple's shares. Given the continued confidence we have in our business now and into the future, our Board has authorized today an additional $110 billion for share repurchases, as we maintain our goal of getting to net cash-neutral over time. We are also raising our dividend by 4% to $0.25 per share of common stock, and we continued to plan for annual increases in the dividend going forward as we've done for the last 12 years. This cash dividend will be payable on May 16, 2024 to shareholders of record as of May 13, 2024. As we move ahead into the June 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. We expect our June quarter total company revenue to grow low-single-digits year-over-year in spite of a foreign exchange headwind of about 2.5 percentage points. We expect our services business to grow double-digits at a rate similar to the growth we reported for the first-half of the fiscal year. And we expect iPad revenue to grow double-digits. We expect gross margin to be between 45.5% to -- and 46.5%. We expect OpEx to be between $14.3 billion and $14.5 billion. We expect OI&E to be around $50 million, excluding any potential impact from the mark-to-market of minority investments and our tax rate to be around 16%. With that, let's open the call to questions.","evidence_gemma_new":"operating cash flow","evidence_llama_3_3":"operating cash flow March quarter","evidence_qwen_3_30b":null,"gemma_new_max":22700000000.0,"gemma_new_min":22700000000.0,"llama_3_3_max":22700000000.0,"llama_3_3_min":22700000000.0,"qwen_3_30b_max":null,"qwen_3_30b_min":null}
{"symbol":"AAPL","year":2024,"quarter":3,"date":"2024-Q3","chunk_id":2,"sub_chunk_id":0,"centroid_label":"operating cash flow","agreed_value":28900000000.0,"count":3,"chunk":"Luca Maestri : Thank you, Tim, and good afternoon, everyone. We are very pleased to report a new June quarter revenue record of $85.8 billion, up 5% year-over-year, despite 230 basis points of negative foreign exchange impact. We achieved growth in the vast majority of our markets, with June quarter revenue records in the Americas, Europe, and rest of Asia Pacific. Products revenue was $61.6 billion, up 2% year-over-year, driven by the launch of the new iPad Pro and iPad Air. Our installed base of active devices reach an all-time high across all products and geographic segments, thanks to our unmatched levels of customer satisfaction and loyalty and a large number of customers who are new to our products. Services revenue reached an all-time record of $24.2 billion, up 14% year-over-year, with an all-time record in developed markets and a June quarter record in emerging markets. Company gross margin was 46.3% near the high end of our guidance range and down 30 basis points sequentially driven by a different mix within products which was partially offset by a favorable mix shift towards services and cost savings. Products gross margin was 35.3%, down 130 basis points sequentially, primarily driven by mix, partially offset by favorable costs. Services gross margin was 74% down 60 basis points from last quarter. Operating expenses of $14.3 billion were at the low end of the guidance range we provided and up 7% year-over-year. Net income was $21.4 billion, diluted EPS of $1.40 was up 11% year-over-year and set a June quarter record. And operating cash flow was very strong at $28.9 billion, also a June quarter record. Let me get into more detail for each of our revenue categories. iPhone revenue was $39.3 billion, down 1% year-over-year, but grew on a constant currency basis. We set June quarter records across several countries, including the UK, Spain, Poland, Mexico, Indonesia, and the Philippines. And the iPhone Active installed base grew to a new all-time high in total and in every geographic segment. During the June quarter, many iPhone models were among the top selling smartphones around the world. In fact, according to a survey from Kantar, iPhone was the top selling model in the US, urban China, the UK, Germany, Australia, and Japan. Customer satisfaction on the iPhone 15 family continues to be extremely high, with 451 Research measuring it at 98% in the US in their latest reports. Mac generated $7 billion in revenue, up 2% year-over-year, driven by the MacBook Air powered by the M3 chip. We saw particularly strong performance in our emerging markets, with June quarter records for Mac in Latin America, India, and South Asia. The Mac installed base reached an all-time high with half of MacBook Air customers in the quarter being new to Mac. And customer satisfaction for Mac was recently reported at 96% in the US. iPad revenue was $7.2 billion, up 24% year-over-year, driven by the launch of the new iPad Pro and iPad Air. Customers are loving the latest iPad lineup for its new design and display, unparalleled performance, AI capabilities and much more. The iPad install base has continued to grow and is an all-time high, as half of the customers who purchased iPads during the quarter were new to the product. Also, customer satisfaction was recently measured at 97% in the US. Wearables, home and accessories revenue was $8.1 billion, down 2% year-over-year, a sequential acceleration from the March quarter. Watch and AirPods continue to face a difficult compare against prior year launches of the AirPods Pro second generation, the Watch SE and the first Watch Ultra. Apple Watch continues to attract new customers, with almost two-thirds of customers purchasing an Apple Watch during the quarter being new to the product, sending the Apple Watch install base to a new all-time high. And the latest reports from 451 Research indicate a customer satisfaction of 97% for watch in the US. In services, total revenue reached an all-time record of $24.2 billion, growing 14% year-over-year. We continue to have great momentum in services, as the growth of our installed base of active devices, sets a strong foundation for the future expansion of our ecosystem. And we see increased customer engagement with our services offerings. Both transacting accounts and paid accounts reach a new all-time high with paid accounts growing double digits year-over-year. Also, paid subscriptions showed strong double digit growth. We have well over 1 billion paid subscriptions across the services on our platform, more than double the number that we had only four years ago. And we are constantly focused on improving the breadth and quality of our services. From critically acclaimed new content on Apple TV+ to new games on Apple Arcade and the many latest features we previewed during WWDC for iCloud, Apple Pay, Apple Cash, Apple Music, and more. Turning to enterprise, we continue to see businesses, leveraging our entire suite of products to drive productivity and creativity for their teams and customers. USAA, a leading insurance and financial services company, recently expanded beyond their existing iPhone and iPad deployments to provide their employees with the latest MacBook Air. And American Express has continued to add to their fleet of over 10,000 Macs to enhance their employees' productivity, security, and collaboration. We're also excited to see leading organizations such as Boston Children's Hospital and Lufthansa using Apple Vision Pro to build innovative spatial computing experiences to transform the training of their workforces. Let me now turn to our cash position and capital return program. We ended the quarter with $153 billion in cash and marketable securities. We repaid $4.3 billion in maturing debt and increased commercial paper by $1 billion, leaving us with total debt of $101 billion. As a result, net cash was $52 billion at the end of the quarter. During the quarter, we returned over $32 billion to shareholders, including $3.9 billion in dividends and equivalents and $26 billion through open market repurchases of 139 million Apple shares. As we move ahead into the September 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. We expect foreign exchange to continue to be a headwind and to have a negative impact on revenue of about 1.5 percentage points on a year-over-year basis. We expect our September quarter total company revenue to grow year-over-year at a rate similar to the June quarter. We expect services revenue to grow double digits at a rate similar to what we reported in the first three quarters of this fiscal year. We expect gross margin to be between 45.5% and 46.5%. We expect OpEx to be between $14.2 billion and $14.4 billion. We expect OI&E to be around negative $50 million, excluding any potential impact from the mark to market of minority investments, and our tax rate to be around 16.5%. Finally, today our Board of Directors has declared a cash dividend of $0.25 per share of common stock payable on August 15, 2024, to shareholders of record as of August 12, 2024. With that, let's open the call to questions.","evidence_gemma_new":"operating cash flow","evidence_llama_3_3":"operating cash flow June quarter","evidence_qwen_3_30b":"operating cash flow June quarter","gemma_new_max":28900000000.0,"gemma_new_min":28900000000.0,"llama_3_3_max":28900000000.0,"llama_3_3_min":28900000000.0,"qwen_3_30b_max":28900000000.0,"qwen_3_30b_min":28900000000.0}
{"symbol":"AAPL","year":2024,"quarter":4,"date":"2024-Q4","chunk_id":2,"sub_chunk_id":0,"centroid_label":"operating cash flow","agreed_value":26800000000.0,"count":3,"chunk":"Luca Maestri: Good afternoon, everyone. And thank you, Tim, for the very kind words. Serving as Apple's CFO has been a real privilege and an amazing journey, and I've greatly appreciated the support from our investors and the analyst community over the years. Kevan is exceptional, and I know you will enjoy interacting with him going forward. Let me now turn to the results for the fourth quarter of our fiscal year. We're very pleased to report a new September quarter revenue record of $94.9 billion, up 6% year-over-year. We grew in the vast majority of the markets we track and achieved September quarter revenue records in the Americas, Europe and Rest of Asia Pacific. Products revenue was $70 billion, up 4% year-over-year, driven by growth in iPhone, iPad and Mac. Our installed base of active devices reached an all-time high across all products and geographic segments, thanks to very high levels of customer satisfaction and loyalty and a large number of customers who are new to our products. Services revenue reached an all-time record of $25 billion, up 12% year-over-year. We saw broad-based strength around the world, reaching all-time records in both developed and emerging markets with double-digit growth and record results across most services categories. Company gross margin was 46.2%, near the high end of our guidance range. Products gross margin was 36.3%, up 100 basis points sequentially, primarily driven by favorable mix. Services gross margin was 74%, unchanged from the prior quarter. Operating expenses of $14.3 billion were at the midpoint of the guidance range we provided at the beginning of the quarter and up 6% year-over-year. During the quarter, we recorded a one-time income tax charge of $10.2 billion, which relates to the impact of the reversal of the European General Court's State Aid decision. When we exclude this one-time charge, net income was $25 billion and diluted earnings per share were a $1.64, up 12% year-over-year, and a September quarter record. Operating cash flow was very strong at $26.8 billion, a new September quarter record. Let me now get into more detail for each of our revenue categories. iPhone revenue was $46.2 billion, up 6% year-over-year, and a September quarter record in total and across several markets, including the US, the Middle East, Korea, and South Asia. The iPhone active installed base grew to a new all-time high in total and in every geographic segment. During the September quarter, many iPhone models were among the top-selling smartphones around the world. In fact, according to a survey from Kantar, iPhone was the top-selling model in the US, Urban China, the UK, Australia, and Japan. We continue to see high levels of customer satisfaction for the iPhone 15 family, with 451 Research recently measuring it at 98% in the US. Mac revenue was $7.7 billion, up 2% year-over-year, driven by the strength in MacBook Air. Customers have been loving the performance of Apple Silicon on Mac and we are very excited to bring the latest M4 family of chips to the lineup. The Mac installed base reached an all-time high with about half of customers in the quarter being new to Mac. And in the latest reports from 451 Research, customer satisfaction was 95% in the US. iPad generated $7 billion in revenue, up 8% year-over-year. In addition to growth in developed markets, we also saw strong performance in many emerging markets, with double-digit growth in Mexico, Brazil, the Middle East, India and South Asia. The iPad installed base reached another all-time high, and over half of the customers who purchased iPads during the quarter were new to the product. Also, customer satisfaction was recently measured at 97% in the US. Wearables, Home and Accessories revenue was $9 billion, down 3% year-over-year. The Apple Watch installed base reached a new all-time high, with over half of customers purchasing an Apple Watch during the quarter being new to the product. And the latest reports from 451 Research indicated customer satisfaction of 96% for watch in the US. Our Services revenue reached an all-time record of $25 billion, growing 12% year-over-year. Services continue to see strong momentum with the growth of our installed base of active devices setting a solid foundation for the future expansion of our ecosystem. And we see increased customer engagement with our services offerings. Both transacting accounts and paid accounts reached a new all-time high, with paid accounts growing double-digits year-over-year. Paid subscriptions also grew double-digits. We have well over 1 billion paid subscriptions across the services on our platform, more than double the number we had only four years ago. And as always, we remain focused on improving the breadth and quality of our services from new games on Apple Arcade to new features like Tap to Cash and pay with installments using Apple Pay to many successful new and returning shows on Apple TV+. This past quarter, we celebrated the five-year anniversary of Apple Card, which was ranked #1 in customer satisfaction among co-branded credit cards by J.D. Power for the fourth year in a row. Turning to enterprise, we continue to see strong demand across our products and services. NVIDIA launched its Mac as a choice program supported by AppleCare for Enterprise and Apple Professional Services with over 10,000 Macs deployed worldwide. And Novartis, a leading global pharmaceutical company, recently chose iPhone 16 as the standard mobile device for all employees. We also see continued momentum with Apple Vision Pro in the enterprise space. UC San Diego Health is the first hospital in the world to test spatial computing apps on Apple Vision Pro in clinical trials for patient surgery in the operating room. Let me now turn to our cash position and capital return program. We ended the quarter with $157 billion in cash and marketable securities. We repaid $2.6 billion in maturing debt and increased commercial paper by $7 billion, leaving us with total debt of $107 billion. As a result, net cash was $50 billion at the end of the quarter. During the quarter, we returned over $29 billion to shareholders, including $3.8 billion in dividends and equivalents and $25 billion through open market repurchases of 112 million Apple shares. 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're providing today assumes that the macroeconomic outlook doesn't worsen from what we are projecting today for the current quarter. We expect our December quarter total company revenue to grow low- to mid-single digits year-over-year. We expect Services revenue to grow double-digits at a rate similar to what we reported in the fiscal year 2024. We expect gross margin to be between 46% and 47%. We expect OpEx to be between $15.3 billion and $15.5 billion. We expect OI&E to be around negative $250 million, excluding any potential impact from the mark to market of minority investments. And our tax rate to be around 16%. Finally, today, our Board of Directors has declared a cash dividend of $0.25 per share of common stock payable on November 14, 2024 to shareholders of record as of November 11, 2024. With that, let us open the call to questions.","evidence_gemma_new":"Operating cash flow","evidence_llama_3_3":"operating cash flow fourth quarter fiscal year 2024","evidence_qwen_3_30b":"operating cash flow","gemma_new_max":26800000000.0,"gemma_new_min":26800000000.0,"llama_3_3_max":26800000000.0,"llama_3_3_min":26800000000.0,"qwen_3_30b_max":26800000000.0,"qwen_3_30b_min":26800000000.0}
{"symbol":"AAPL","year":2023,"quarter":1,"date":"2023-Q1","chunk_id":3,"sub_chunk_id":0,"centroid_label":"operating expenses","agreed_value":14300000000.0,"count":2,"chunk":"Luca Maestri: Thank you, Tim, and good afternoon, everyone. As Tim mentioned, revenue for the December quarter was $117.2 billion, down 5% from last year. A number of factors had a significant impact on our results. First, we faced a very difficult foreign exchange environment, which affected our performance by nearly 800 basis points. In other words, we grew revenue on a constant currency basis. And in fact, we did so in the vast majority of markets. Second, the macroeconomic environment this past quarter was markedly more challenging than 12 months ago. Third, we experienced significant supply shortages for iPhone 14 Pro and iPhone 14 Pro Max in November and through December. On the other hand, we had the positive impact of the 14th week in the quarter that Tejas just mentioned at the beginning of the call. Products revenue was $96.4 billion, down 8% from last year due to the factors I just called out. At the same time, however, our installed base of active devices grew double digits and achieved all-time records in each geographic segment and in each major product category. We're proud to now have over 2 billion active devices in our installed base. This continued growth in the installed base is due to extremely strong levels of customer satisfaction and loyalty and a high number of customers who are new to our products. The installed base growth also helped our services set an all-time revenue record of $20.8 billion, up 6% over a year ago. We achieved this new milestone despite more than 700 basis points of negative impact from foreign exchange. We reached all-time services revenue records in the Americas, Europe and rest of Asia Pacific and a December quarter record in Greater China. We also set records in many Services categories, including all-time revenue records for cloud services, payment services and music and December quarter records for the App Store and AppleCare. Company gross margin was 43%, up 70 basis points from last quarter due to leverage and favorable mix, partially offset by foreign exchange. Products gross margin was 37%, up 240 basis points sequentially. And Services gross margin was 70.8%, up 30 basis points sequentially, both due to the same factors that impacted total company gross margin. Operating expenses of $14.3 billion were significantly below the guidance range we provided at the beginning of the quarter and grew at a slower pace than in the past as we took actions to respond to the current macro environment. Net income was $30 billion. Diluted earnings per share were $1.88, and we generated very strong operating cash flow of $34 billion. Let me now get into more detail for each of our revenue categories. iPhone revenue was $65.8 billion despite significant foreign exchange headwinds, supply constraints on iPhone 14 Pro and iPhone 14 Pro Max and a challenging macroeconomic environment. In spite of these circumstances, we set all-time iPhone revenue records in Canada, Italy and Spain, and saw strong growth in several emerging markets, including all-time iPhone revenue records for India and Vietnam. Importantly, the installed base of active iPhones continues to grow nicely and is at an all-time high across all geographic segments. In emerging markets, in particular, the installed base grew double digits, and we had record levels of switchers in India and in Mexico. Our customers continue to love their experience with our products with the latest survey of U.S. consumers from 451 Research indicating customer satisfaction of 98% for the iPhone 14 family. Mac revenue was $7.7 billion, down 29% year-over-year and in line with our expectations. There were 3 key drivers for our Mac results. First, we had a challenging compare against last year's launch of the completely reimagined MacBook Pros, our first notebooks with M1 Pro and M1 Max. Second, we believe that the macro environment impacted our Mac performance. And third, we faced significant foreign exchange headwinds. At the same time, however, the installed base of active Macs reached an all-time high across all geographic segments, and we continue to see very strong upgraded activity to Apple silicon. Customer satisfaction with Mac remains very strong at 96% based on the latest survey of U.S. consumers from 451 Research. iPad revenue was $9.4 billion, up 30% year-over-year despite significant FX headwinds. This performance was driven by 2 key items. First, during the December quarter a year ago, we experienced significant supply constraints, while this year, we had enough supply to meet demand. Second, we launched our new iPad and the iPad Pro powered by the M2 chip during the quarter. The iPad installed base reached a new all-time high, thanks to incredible customer loyalty and a high number of new customers. In fact, over half of the customers who purchased iPads during the quarter were new to the product. Wearables, Home and Accessories revenue was $13.5 billion, down 8% year-over-year. The year-over-year decline was driven by significant FX headwinds and a challenging macroeconomic environment. However, our installed base of devices in the category set a new all-time record thanks to the largest number of customers new to our smartwatch that we've ever had in a given quarter. In fact, nearly 2\/3 of customers purchasing an Apple Watch during the quarter were new to the product. Moving to Services. We generated $20.8 billion in revenue, a new all-time record in total and for many Services offerings in spite of a difficult foreign exchange environment, and macroeconomic headwinds impacting certain categories such as digital advertising and mobile gaming. In constant currency, we grew Services revenue double digits on top of growing 24% during the December quarter a year ago. We remain focused on the large long-term opportunity in this category, and we continue to observe several trends that reflect the strength of our ecosystem. For example, we saw increased customer engagement with our Services during the quarter. Both our transacting accounts and paid accounts grew double digits year-over-year, each setting a new all-time record. Paid subscriptions also continued to grow nicely. We now have more than 935 million paid subscriptions across the services on our platform, up more than 150 million during the last 12 months alone and nearly 4x what we had just 5 years ago. And we continue to increase the reach and improve the quality of our offerings. For instance, Apple Pay is now available to millions of merchants in nearly 70 countries and regions. And we saw a record-breaking number of purchases made using Apple Pay globally during the holiday shopping season. Finally, our installed base of over 2 billion active devices represents a great foundation for future expansion of our ecosystem, and it continues to grow even during difficult macroeconomic conditions, which speaks to the exceptionally high levels of customer loyalty and satisfaction and our ability to attract new customers to our platform. The growth is coming from every major product category and geographic segment, with strong double-digit increases in emerging markets such as Brazil, Mexico, India, Indonesia, Thailand and Vietnam. Turning to the enterprise market. we are seeing continued adoption of our Services for business like Apple Business Essentials, AppleCare, Tap to Pay and Apple Financial Services. For example, Mars Incorporated has expanded its use of AppleCare for Enterprise to provide timely device support and assurance for iPads deployed across their manufacturing sites. Meanwhile, HCA Healthcare has leveraged Apple Financial Services to manage the annual refresh of its entire fleet of iPhones. This not only ensures that their staff stay current on the latest Apple technology, but also provides them with significant annual savings in the process. Let me now turn to our capital return program and our cash position. We returned over $25 billion to shareholders during the December quarter as our business continues to generate very strong cash flow. This included $3.8 billion in dividends and equivalents and $19 billion through open market repurchases of 133 million Apple shares. We ended the quarter with $165 billion in cash and marketable securities. We repaid $1.4 billion in maturing debt and decreased commercial paper by $8.2 billion, leaving us with total debt of $111 billion. As a result, net cash was $54 billion at the end of the quarter, and we maintain our goal of becoming net cash-neutral over time. As we move into the March quarter, I'd like to review our outlook, which includes the types of forward-looking information that Tejas referred to at the beginning of the call. Given the continued uncertainty around the world in the near term, we are not providing revenue guidance, but we are sharing some directional insights based on the assumption that the macroeconomic outlook and COVID-related impacts to our business do not worsen from what we are projecting today for the current quarter. In total, we expect our March quarter year-over-year revenue performance to be similar to the December quarter. This represents an acceleration in our underlying year-over-year business performance as the December quarter benefited from an extra week. Foreign exchange will continue to be a headwind, and we expect a negative year-over-year impact of 5 percentage points. For Services, we expect revenue to grow year-over-year while continuing to face macroeconomic headwinds in areas such as digital advertising and mobile gaming. For iPhone, we expect our March quarter year-over-year revenue performance to accelerate relative to the December quarter year-over-year revenue performance. For Mac and iPad, we expect revenue for both product categories to decline double digits year-over-year because of challenging compares and macroeconomic headwinds. We expect gross margin to be between 43.5% and 44.5%. We expect OpEx to be between $13.7 billion and $13.9 billion. We expect OI&E to be around negative $100 million, excluding any potential impact from the mark-to-market of minority investments, and our tax rate to be around 16%. Finally, today, our Board of Directors has declared a cash dividend of $0.23 per share of common stock payable on February 16, 2023, to shareholders of record as of February 13, 2023. With that, let's open the call to questions.","evidence_gemma_new":null,"evidence_llama_3_3":"operating expenses","evidence_qwen_3_30b":"operating expenses $14.3 billion","gemma_new_max":null,"gemma_new_min":null,"llama_3_3_max":14300000000.0,"llama_3_3_min":14300000000.0,"qwen_3_30b_max":14300000000.0,"qwen_3_30b_min":14300000000.0}
{"symbol":"AAPL","year":2023,"quarter":2,"date":"2023-Q2","chunk_id":3,"sub_chunk_id":0,"centroid_label":"operating expenses","agreed_value":13700000000.0,"count":2,"chunk":"Luca Maestri: Thank you, Tim, and good afternoon, everyone. Revenue for the March quarter was $94.8 billion, down 3% from last year and better than our expectations. Foreign exchange had a negative impact of over five percentage points on our results, in line with what we had expected. On a constant currency basis, our revenue grew year-over-year in total and in the majority of the markets we track. In addition to the records in emerging markets that Tim mentioned, we also set March quarter records in Australia, Canada, Spain and Switzerland, among others. Products revenue was $73.9 billion, down 5% from last year, due to challenging compares on Mac and iPad. iPhone, however, reached a March quarter revenue record thanks to very strong performance in emerging markets from South Asia and India to Latin America and the Middle East. During the quarter, our installed base of active devices continued to grow at a nice pace thanks to extremely high levels of customer satisfaction and loyalty, and reached an all-time high for all major product categories and geographic segments. Our Services set an all-time revenue record of $20.9 billion, up 5% year-over-year, on top of growing 17% in the March quarter a year ago. We reached an all-time services revenue record in Greater China and March quarter records in Americas, Europe and Rest of Asia Pacific. Company gross margin was 44.3%, up 130 basis points from last quarter, driven by cost savings and favorable mix shift towards services partially offset by leverage. Products gross margin was 36.7%, decreasing 30 basis points sequentially due to seasonal loss of leverage and mix, partially offset by favorable costs. Services gross margin was 71%, up 20 basis points sequentially. Operating expenses of $13.7 billion were at the low end of the guidance range we provided at the beginning of the quarter and continued to decelerate from the December quarter. We are closely managing our spend, but remain focused on long term growth with continued investment in innovation and product development. Net income was $24.2 billion. Diluted earnings per share were a $1.52, unchanged versus last year, and we generated very strong operating cash flow of $28.6 billion. Let me now provide more detail for each of our revenue categories. iPhone revenue set a March quarter record of $51.3 billion, up 2% year-over-year despite significant foreign exchange headwinds and a challenging macroeconomic environment. We set March quarter records in several developed and emerging markets with India, Indonesia, Turkey and the UAE doubling on a year-over-year basis. Our active installed base of iPhone grew to a new all-time high and was up in all our geographic segments. We are very pleased by the results of the latest survey of US Consumers from 451 Research, which measured customer satisfaction at 99% for the iPhone 14 family. Mac revenue was $7.2 billion, down 31% year-over-year and in line with our expectations. These results were driven by the challenging macroeconomic environment coupled with a difficult compare against last year's launch of the completely reimagined M1 MacBook Pros. Despite this, the installed base of active Macs reached an all-time high across all geographic segments and we continue to see strong upgraded activity to Apple silicon. Also, the latest survey of US Consumers from 451 Research reported customer satisfaction at 96% for Mac. iPad generated $6.7 billion in revenue, down 13% year-over-year and in line with our expectations. This performance was due to two key factors, a tough compare against the launch of iPad Air powered by the M1 chip in the year ago quarter and headwinds from the macroeconomic environment. The iPad installed base reached a new all-time high in all geographic segments thanks to exceptional customer loyalty and a high number of new customers. In fact, over half of the customers who purchased iPads during the quarter were new to the product. Wearables, home and accessories revenue was $8.8 billion, down 1% year-over-year as the category experienced the impact from the macroeconomic environment. However, we did set March quarter records both in the US and in Greater China. We continue to see strength in our Watch installed base, which set a new all-time record, thanks to very high customer loyalty and new two rates, nearly two thirds of customers purchasing an Apple Watch during the quarter were new to the product. Moving to Services, we reached a new all-time revenue record of $20.9 billion. And in addition to the all-time records Tim mentioned earlier, we set March quarter records for advertising Apple Care and Video. Despite these records, as we saw in recent quarters, certain services offerings such as digital advertising and mobile gaming continue to be affected by the current macroeconomic environment. Stepping back, however, the continued growth in Services is the reflection of our ecosystem strength and the positive momentum we are seeing across several key metrics. First, our growing installed base of over 2 billion active devices represents a great foundation for future expansion of our ecosystem. We continue to grow across every major product category and geographic segment, thanks to very high levels of customer loyalty and satisfaction. Second, we saw increased customer engagement with our services during the quarter. Both our transacting accounts and paid accounts grew double digits year-over-year, each setting a new all-time record. Third, paid subscriptions showed strong growth. We now have more than $975 million paid subscriptions across the Services on our platform, up 150 million during the last 12 months and nearly double the number of paid subscriptions we had only three years ago. And finally, we continue to improve the breadth and the quality of our current services offerings from new content on Apple TV Plus to great new features available in Apple Pay and Apple Music, which we believe our customers will love. Turning to the enterprise market, we see business customers continuing to invest in the Apple platform to drive higher employee productivity and satisfaction. In Brazil, Boticario Group, the world's largest cosmetics franchiser, originally starting with iPhone, 12 employees manage operations across a network of retail stores, franchisees and resellers. As it continues to digitize its business, Boticario has chosen to move all software development in house and adopted Mac as the standard device for all of their developer teams across the world. In small business, we see an increasing number of customers relying on Apple hardware, software and services to power their businesses forward, from accepting payments on iPhone, to tracking inventory on Mac or iPad, to managing employee devices with Apple Business Essentials. As we celebrate National Small Business week here in the US, we are proud to continue supporting the small business community. Let me now turn to our cash position and capital return program. We ended the quarter with over $166 billion in cash and marketable securities. We repaid $2.3 billion in maturing debt and increased commercial paper by about $300 million, leaving us with total debt of $110 billion. As a result, net cash was $57 billion at the end of the quarter. During the March quarter, we returned over $23 billion to shareholders, including $3.7 billion in dividends and equivalents and $19.1 billion through open market repurchases of $129 million Apple shares. Given the continued confidence we have in our business now and into the future, today our Board has authorized an additional $90 billion for share repurchases as we maintain our goal of getting to net cash neutral over time. We're also raising our dividend by 4% to $0.24 a share, and we continue to plan for annual increases in the dividend going forward. As we move ahead into the June 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. We expect our June quarter year-over-year revenue performance to be similar to the March quarter, assuming that the macroeconomic outlook does not worsen from what we are projecting today for the current quarter. Foreign exchange will continue to be a headwind and we expect a negative year-over-year impact of nearly four percentage points. For Services, we expect our June quarter year-over-year revenue growth to be similar to the March quarter, while continuing to face macroeconomic headwinds in areas such as digital advertising and mobile gaming. We expect gross margin to be between 44% and 44.5%. We expect OpEx to be between $13.6 billion and $13.8 billion. We expect OINE to be around negative $250 million excluding any potential impact from the mark-to-market of minority investments and our tax rate to be around 16%. Finally reflecting the dividend increase I mentioned earlier, today, our Board of Directors has declared a cash dividend of $0.24 per share of common stock payable on May 18, 2023, to shareholders of record as on May 15, 2023. With that, let's open the call to questions.","evidence_gemma_new":null,"evidence_llama_3_3":"Operating expenses March quarter","evidence_qwen_3_30b":"operating expenses low end of the guidance range","gemma_new_max":null,"gemma_new_min":null,"llama_3_3_max":13700000000.0,"llama_3_3_min":13700000000.0,"qwen_3_30b_max":13700000000.0,"qwen_3_30b_min":13700000000.0}
{"symbol":"AAPL","year":2023,"quarter":3,"date":"2023-Q3","chunk_id":3,"sub_chunk_id":0,"centroid_label":"operating expenses","agreed_value":13400000000.0,"count":2,"chunk":"Luca Maestri: Thank you, Tim, and good afternoon, everyone. Revenue for the June quarter was $81.8 billion, down 1% from last year and better than our expectations despite nearly 4 percentage points of negative impact from foreign exchange. On a constant currency basis, our revenue grew year-over-year in total and in the majority of the markets we track. We set June quarter records in both Europe and Greater China and continue to see strong performance across our emerging markets driven by iPhone. Products revenue was $60.6 billion, down 4% from last year, as we faced FX headwinds and an uneven macroeconomic environment. However, our installed base reached an all-time high across all geographic segments, driven by a June quarter record for iPhone switchers and high new-to rates in Mac, iPad and Watch, coupled with very high levels of customer satisfaction and loyalty. Our Services revenue set an all-time record of $21.2 billion, up 8% year-over-year and grew double digits in constant currency. Our performance was strong around the world as we reach all-time Services revenue records in Americas and Europe and June quarter records in Greater China and rest of Asia Pacific. Company gross margin was 44.5%, a record level for the June quarter and up 20 basis points sequentially, driven by cost savings and favorable mix shift towards Services, partially offset by a seasonal loss of leverage. Products gross margin was 35.4%, down 130 basis points from last quarter due to seasonal loss of leverage and mix, partially offset by favorable costs. Services gross margin was 70.5%, decreasing 50 basis points sequentially. Operating expenses of $13.4 billion were below the low end of the guidance range we provided at the beginning of the quarter and decelerated from the March quarter. We continue to take a deliberate approach in managing our spend with strong focus on innovation and new product development. The results of these actions delivered net income of $19.9 billion, diluted earnings per share of $1.26, up 5% versus last year, and very strong operating cash flow of $26.4 billion. Let me now provide more detail for each of our revenue categories. iPhone revenue was $39.7 billion, down 2% year-over-year but grew on a constant currency basis. We set revenue records in several markets around the world, including an all-time record in India and June quarter records in Latin America, the Middle East and Africa, Indonesia, the Philippines, Italy, the Netherlands and the U.K. Our iPhone active installed base grew to a new all-time high, thanks to a June quarter record in switchers. This is a testament to our extremely high levels of customer satisfaction, which 451 Research recently measured at 98% for the iPhone 14 family in the U.S. Mac generated $6.8 billion in revenue, down 7% year-over-year. We continue to invest in our Mac portfolio. And this past quarter, we were pleased to complete the transition to Apple silicon for the entire lineup. This transition has driven both strong upgrade activity and a high number of new customers. In fact, almost half of Mac buyers during the quarter were new to the product. We also saw reported customer satisfaction of 96% for Mac in the U.S. iPad revenue was $5.8 billion, down 20% year-over-year and in line with our expectations. These results were driven by a difficult compare against the full quarter impact of the iPad Air launch in the prior year. At the same time, we continue to attract a large number of new customers to the iPad installed base with over half of the customers who purchased iPads during the quarter being new to the product. And the latest reports from 451 Research indicate customer satisfaction of 96% in the U.S. Wearables, Home and Accessories revenue was $8.3 billion, up 2% year-over-year, with a June quarter record in Greater China and strong performance in several emerging markets. We continue to see Apple Watch expand its reach with about 2\/3 of customers purchasing an Apple Watch during the quarter being new to the product. And this is combined with very high levels of customer satisfaction, which was recently reported at 98% in the United States. Moving on to Services. We reached a new all-time revenue record of $21.2 billion with year-over-year growth accelerating sequentially to 8% and up double digits in constant currency. In addition to the all-time records Tim mentioned earlier, we also set June quarter records for advertising, App Store and Music. We are very pleased with our performance in Services, which is a direct reflection of our ecosystem's strength. First, our installed base of over 2 billion active devices continues to grow at a nice pace and establishes a solid foundation for the future expansion of our ecosystem. Second, we see increased customer engagement with our services. Both our transacting accounts and paid accounts grew double digits year-over-year, each reaching a new all-time high. Third, our paid subscriptions showed strong growth. This past quarter, we reached an important milestone and passed 1 billion paid subscriptions across the services on our platform, up 150 million during the last 12 months and nearly double the number of paid subscriptions we had only 3 years ago. And finally, we continue to improve the breadth and the quality of our current services. From 20 new games on Apple Arcade, to brand-new content on Apple TV+, to the launch of our high-yield savings account with Apple Card, our customers are loving these enhanced offerings. Turning to the enterprise market. Our customers are leveraging Apple products every day to help improve productivity and attract talent. Blackstone, a global investment management firm, is expanding its Apple footprint from their corporate iPhone fleet to now offering the MacBook Air powered by M2 to all of their corporate employees and portfolio companies. Gilead, a leading biopharmaceutical company, has deployed thousands of iPads globally to their sales team. Over the last 6 months, they have also doubled their Mac user base by making MacBook Air available to more employees with a focus on user experience and strong security. Let me now turn to our cash position and capital return program. We ended the quarter with over $166 billion in cash and marketable securities. We repaid $7.5 billion in maturing debt while issuing $5.2 billion of new debt and increasing commercial paper by $2 billion, leaving us with total debt of $109 billion. As a result, net cash was $57 billion at the end of the quarter. During the quarter, we returned over $24 billion to shareholders, including $3.8 billion in dividends and equivalents and $18 billion through open market repurchases of 103 million Apple shares. We continue to believe there is great value in our stock and maintain our target of reaching a net cash neutral position over time. As we move ahead into the September quarter, I'd like to review our outlook, which includes the types of forward-looking information that Saori referred to at the beginning of the call. We expect our September quarter year-over-year revenue performance to be similar to the June quarter, assuming that the macroeconomic outlook doesn't worsen from what we are projecting today for the current quarter. Foreign exchange will continue to be a headwind, and we expect a negative year-over-year revenue impact of over 2 percentage points. We expect iPhone and Services year-over-year performance to accelerate from the June quarter. Also, we expect the revenue for both Mac and iPad to decline by double digits year-over-year due to difficult compares, particularly on the Mac. For both products, we experienced supply disruptions from factory shutdowns in the June quarter a year ago and were able to fulfill significant pent-up demand in the year ago September quarter. We expect gross margin to be between 44% and 45%. We expect OpEx to be between $13.5 billion and $13.7 billion. We expect OI&E to be around negative $250 million, excluding any potential impact from the mark-to-market of minority investments, and our tax rate to be around 16%. Finally, today, our Board of Directors has declared a cash dividend of $0.24 per share of common stock payable on August 17, 2023, to shareholders of record as of August 14, 2023. With that, let's open the call to questions.","evidence_gemma_new":"Operating expenses","evidence_llama_3_3":"Operating expenses June quarter","evidence_qwen_3_30b":null,"gemma_new_max":13400000000.0,"gemma_new_min":13400000000.0,"llama_3_3_max":13400000000.0,"llama_3_3_min":13400000000.0,"qwen_3_30b_max":null,"qwen_3_30b_min":null}
{"symbol":"AAPL","year":2023,"quarter":4,"date":"2023-Q4","chunk_id":3,"sub_chunk_id":0,"centroid_label":"operating expenses","agreed_value":13500000000.0,"count":2,"chunk":"Luca Maestri: Thank you, Tim, and good afternoon, everyone. Revenue for the September quarter was $89.5 billion, down less than 1% from last year. Foreign exchange had a negative impact of over 2 percentage points. And on a constant-currency basis, our revenue grew year-over-year in total, and in each geographic segment. We set a September quarter record in the Americas and saw strong performance across our emerging markets, where both iPhone and Services grew double digits. Products revenue was $67.2 billion, down 5% from last year, due to very challenging compares on both Mac and iPad, which I will discuss in more detail later on. At the same time, we reached a September quarter record on iPhone, driven by strength in emerging markets. Our total installed-base of active devices reached an all-time high across all products and all geographic segments, thanks to our high levels of customer satisfaction and many new customers joining our ecosystem. Our Services revenue set an all-time record of $22.3 billion, up 16% year-over-year, with growth accelerating sequentially from the June quarter. Our performance in Services were broad based, as we reached all-time revenue records in the Americas, Europe and rest of Asia-Pacific and a September quarter record in Greater China. We also set new records in every Services category. Company gross margin set a September quarter record at 45.2%, up 70 basis points sequentially, driven by leverage and favorable mix, partially offset by foreign exchange. Products gross margin was 36.6%, up 120 basis points sequentially, also driven by leverage and mix, partially offset by foreign exchange. Services gross margin was 70.9%, up 40 basis points from last quarter due to a different mix. Operating expenses of $13.5 billion were at the low end of the guidance range we provided, up 2% year-over-year. Net income was $23 billion, diluted earnings per share was $1.46, up 13% versus last year and a September quarter record, and operating cash flow was strong at $21.6 billion. Let me now provide more detail for each of our revenue categories. iPhone revenue was $43.8 billion, up 3% year-over-year and a new September quarter record. We had strong performance in several markets, including an all-time record in India as September quarter records in Canada, Latin America, the Middle East, and South Asia . Our iPhone active installed base grew to a new all-time high and fiscal 2023 was another record year for switches. We continue to see extremely high levels of customer satisfaction which 451 Research recently measured at 98% in the U.S. Mac revenue was $7.6 billion, down 34% year-over-year, driven by challenging market conditions and compounded by a difficult compare in our own business, whereby last year we experienced supply disruptions from factory shutdowns in the June quarter and were subsequently able to fulfill significant pent-up demand during the September quarter. We also had a difference in launch timing with the MacBook Air launching earlier this year in the June quarter compared to the September quarter last year. We have great confidence in our Mac lineup and are excited about the recently announced iMac and MacBook Pro powered by our M3 chips. Our installed base is at an all-time high and half of Mac buyers during the quarter were new to the product, driven by MacBook Air. Also, we saw reported customer satisfaction of 97% for Mac in the U.S. iPad generated $6.4 billion in revenue, down 10% year-over-year. Similar to Mac, these results were a function of a difficult compare from the supply disruptions in the June quarter a year ago and the subsequent fulfillment of pent-up demand in the September quarter. iPad continues to attract a large number of new customers to the installed base with over half of the customers who purchase iPads during the quarter being new to the product and the latest reports from 451 Research indicate customer satisfaction of 98% in the U.S. Wearables, Home and Accessories revenue was $9.3 billion, down 3% year-over-year. We had a September quarter record in Europe and we saw strong performance in several emerging markets around the world. Apple Watch continues to expand its reach with nearly two-thirds of customers purchasing Apple Watch during the quarter being new to the product and customer satisfaction for the Watch was recently measured at 97% in the U.S. Services had a great quarter. We reached a new all-time revenue record of $22.3 billion, up 16% year-over-year. And we're happy to see growth coming from all categories and every geographic segment, which is a direct result of the strength of our ecosystem. Our installed base of over 2 billion active devices continues to grow at a nice pace and establishes a solid foundation for the future expansion of the ecosystem. And we continue to see increased customer engagement with our Services. Both transacting accounts and paid accounts grew double-digits year-over-year, each reaching a new all-time high. Also our paid subscriptions showed strong growth. We have well over 1 billion paid subscriptions across the services on our platform, nearly double the number we had only three years ago. And finally, we continue to improve the breadth and quality of our current services from exciting new content on Apple TV+ and Apple Arcade to additional storage tiers on iCloud. We believe our customers will love this new offering. Turning to enterprise. We are excited to see our business customers in both developed and emerging markets expand their deployment of Apple products and technologies to drive business innovation and employee satisfaction. Starbucks continuously invest in Apple technology to bring the best experience to the customers and employees, including tens of thousands of iPads across all retail stores to help their teams streamline order management, operations and training. In addition, Starbucks recently refreshed over 10,000 Macs to the latest M2-powered MacBook Air for all store managers, enabling them to do their best work and improve productivity. And in Indonesia, popular technology company GoTo is offering Mac as a choice, so that employees can have the best tools to be most productive. Today, more than half of its workforce are already choosing Mac for work. Let me now turn to our cash position and capital return program. We ended the quarter with over $162 billion in cash and marketable securities. We increased commercial paper by $2 billion, leaving us with total debt of $111 billion. As a result, net cash was $51 billion at the end of the quarter. And our goal of becoming net cash-neutral over time remains unchanged. During the quarter, we returned nearly $25 billion to shareholders, including $3.8 billion in dividends and equivalents and $15.5 billion through open market repurchases of 85 million Apple shares. We also began a $5 billion accelerated share repurchase program in August, resulting in the initial delivery and retirement of 22 million shares. Taking a step back, as we close our 2023 fiscal year, our annual revenue was $383 billion. While it was down 3% from the prior year, it grew on a constant-currency basis despite the volatile and uneven macroeconomic environment. Our year-over-year revenue performance improved each quarter as we went through the year, and so did our earnings per share performance, as we reported double-digit EPS growth in the September quarter. We are particularly pleased with our performance in emerging markets with revenue reaching an all-time record in fiscal 2023 and double-digit growth in constant currency. We are expanding our direct presence in these markets from new Apple retail stores in India to online stores in Vietnam and Chile. And we continue to work with our partners to offer a wide range of affordability programs so that we can best serve our customers. We're very excited about the momentum we have in these markets and the opportunity ahead of us. 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%. Finally, today our Board of Directors has declared a cash dividend of $0.24 per share of common stock, payable on November 16, 2023, to shareholders of record as of November 13, 2023. With that, let's open the call to questions.","evidence_gemma_new":null,"evidence_llama_3_3":"Operating expenses September quarter","evidence_qwen_3_30b":"Operating expenses","gemma_new_max":null,"gemma_new_min":null,"llama_3_3_max":13500000000.0,"llama_3_3_min":13500000000.0,"qwen_3_30b_max":13500000000.0,"qwen_3_30b_min":13500000000.0}
{"symbol":"AAPL","year":2024,"quarter":1,"date":"2024-Q1","chunk_id":3,"sub_chunk_id":0,"centroid_label":"operating expenses","agreed_value":14500000000.0,"count":3,"chunk":"Luca Maestri: Thank you, Tim, and good afternoon, everyone. Revenue for the December quarter was $119.6 billion, up 2% from last year. During the December quarter a year ago, two unique factors affected our results. First, we had an additional week in the quarter. And second, we had COVID-related factory shutdowns that limited iPhone supply. We estimate that the net impact of these two factors resulted in a 2 percentage point headwind to our revenue performance this quarter. We set all-time revenue records in Europe and rest of Asia-Pacific, and continue to see strong performance across our emerging markets with double-digit growth in the majority of the emerging markets we track. Products revenue was $96.5 billion, flat compared to last year, driven by strength in iPhone, offset by challenging compares for iPad and Wearables, Home and Accessories and one less week of sales this year across the entire portfolio. Thanks to our unparalleled customer loyalty and very strong levels of customer satisfaction, our total installed base of active devices set a new record across all products and all geographic segments, and is now over 2.2 billion active devices. Services revenue set an all-time record of $23.1 billion, up 11% year-over-year. When we take into account the extra week last year, this represents a sequential acceleration of growth from the September quarter. We are very pleased with our Services performance in both developed and emerging markets with all-time revenue records in the Americas, Europe, and rest of Asia-Pacific. Company gross margin was 45.9%, up 70 basis points sequentially, driven by leverage and favorable mix, partially offset by foreign exchange. Products gross margin was 39.4%, up 280 basis points sequentially, also driven by leverage and mix, partially offset by foreign exchange. Services gross margin was 72.8%, up 190 basis points from last quarter, due to a more favorable mix. Operating expenses of $14.5 billion were at the midpoint of the guidance range we provided and up 1% year-over-year. Net income was $33.9 billion, up $3.9 billion from last year. Diluted EPS was $2.18, up 16% versus last year and an all-time record. And operating cash flow was very strong at $39.9 billion. Let me now provide more detail for each of our revenue categories. iPhone revenue was $69.7 billion, up 6% year-over-year. We set all-time records in several countries and regions, including Latin America, Western Europe, the Middle East, and Korea, as well as December quarter records in India and Indonesia. Our iPhone active installed base grew to a new all-time high, and we had an all-time record number of iPhone upgraders during the quarter. Customers are loving their new iPhone 15 family, with the latest reports from 451 Research indicating customer satisfaction of 99% in the U.S. In fact, many iPhone models were among the top-selling smartphones around the world during the quarter. According to a survey from Kantar, iPhones were four out of the top five models in the U.S. and Japan, four out of the top six models in urban China and the UK, and all top five models in Australia. Mac generated revenue of $7.8 billion and return to growth, despite one less week of sales this year. This represents a significant acceleration from the September quarter when we faced a challenging compare due to the supply disruptions and subsequent demand recapture we experienced a year ago. Customer response to our latest iMac and MacBook Pro models powered by the M3 chips has been great. And our Mac installed base reached an all-time high with almost half of Mac buyers during the quarter being new to the product. Also, 451 Research recently reported customer satisfaction of 97% for Mac in the U.S. iPad was $7 billion in revenue, down 25% year-over-year. iPad faced a difficult compare because during the December quarter last year, we launched the new iPad Pro and iPad 10 generation, and we had an extra week of sales. However, the iPad installed base continues to grow and is an all-time high with over half of the customers who purchased iPads during the quarter being new to the product, and customer satisfaction for iPad was recently measured at 98% in the U.S. Wearables, Home and Accessories revenue was $12 billion, down 11% year-over-year due to a challenging launch compare and the extra week a year ago. This time last year, we had the full quarter benefit from the launches of the AirPods Pro 2nd generation, the Watch SE, and the first Watch Ultra. We continue to attract new customers to Apple Watch. Nearly two-thirds of customers purchasing an Apple Watch during the quarter were new to the product, and the latest reports from 451 Research indicate customer satisfaction of 96% in the U.S. And in Services, we were very pleased with our double-digit growth, which was driven by the strength of our ecosystem. Our installed base is now over 2.2 billion active devices and continues to grow nicely, establishing a solid foundation for the future expansion of our Services business. And we continue to see increased customer engagement with our services. Both transacting accounts and paid accounts reached a new all-time high, with paid accounts growing double-digits year-over-year. Also, our paid subscriptions showed strong double-digit growth. We have well over 1 billion paid subscriptions across the services on our platform, more than double the number that we had only four years ago. Finally, we continue to build on the breadth and the quality of our current services. From Oscar-nominated theatrical releases with Apple TV+ to more publications or News+ like The Atlantic and exciting new games on Arcade. Turning to Enterprise, we continue to see many business customers leverage Apple products to improve productivity and drive innovation. Target recently added the latest M3 MacBook Pro to their existing deployment of thousands of Mac\u2019s, enabling employees across various departments to do their best work. In emerging markets, Zoho, a leading technology company headquartered in India, offers its 15,000 plus global employees a choice of devices, with 80% of their workforce using iPhone for work and nearly two-thirds of them choosing Mac as their primary computer. With the upcoming launch of Apple Vision Pro, we are seeing strong excitement in Enterprise. Leading organizations across many industries such as Walmart, Nike, Vanguard, Stryker, Bloomberg, and SAP have started leveraging and investing in Apple Vision Pro as their new platform to bring innovative spatial computing experiences to their customers and employees. From everyday productivity to collaborative product design to immersive training, we cannot wait to see the amazing things our enterprise customers will create in the months and years to come. Let me now turn to our cash position and capital return program. We ended the quarter with $173 billion in cash and marketable securities. We decreased commercial paper by $4 billion, leaving us with total debt of $108 billion. As a result, net cash was $65 billion at the end of the quarter, and our goal of becoming net cash-neutral over time remains unchanged. During the quarter, we returned nearly $27 billion to shareholders, including $3.8 billion in dividends and equivalents and $20.5 billion through open market repurchases of 112 million Apple shares. We also retired an additional 6 million shares in the final settlement of our 19th ASR. As usual, we will provide an update to our capital return program when we report results at the end of this quarter. As we move ahead into the March 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. And we expect foreign exchange to be a revenue headwind of about 2 percentage points on a year-over-year basis. As a reminder, in the December quarter a year ago, we faced significant supply constraints on the iPhone 14 Pro and 14 Pro Max due to COVID-19 factory shutdowns. And in the March quarter a year ago, we were able to replenish channel inventory and fulfill significant pent-up demand from the constraints. We estimate that this impact added close to $5 billion to the March quarter's total revenue last year. When we remove this impact from last year's revenue, we expect both our March quarter total company revenue and iPhone revenue to be similar to a year ago. For our Services business, we expect a similar double-digit growth rate to what we reported in the December quarter. We expect gross margin to be between 46% and 47%. We expect OpEx to be between $14.3 billion and $14.5 billion. We expect OI&E to be around $50 million, excluding any potential impact from the mark-to-market of minority investments and our tax rate to be around 16%. Finally, today our Board of Directors has declared a cash dividend of $0.24 per share of common stock payable on February 15, 2024, to shareholders of record as of February 12, 2024. With that, let's open the call to questions.","evidence_gemma_new":"Operating expenses","evidence_llama_3_3":"Operating expenses December quarter","evidence_qwen_3_30b":"Operating expenses midpoint of the guidance range up 1% year-over-year","gemma_new_max":14500000000.0,"gemma_new_min":14500000000.0,"llama_3_3_max":14500000000.0,"llama_3_3_min":14500000000.0,"qwen_3_30b_max":14500000000.0,"qwen_3_30b_min":14500000000.0}
{"symbol":"AAPL","year":2024,"quarter":2,"date":"2024-Q2","chunk_id":2,"sub_chunk_id":0,"centroid_label":"operating expenses","agreed_value":14400000000.0,"count":2,"chunk":"Luca Maestri: Thank you, Tim, and good afternoon, everyone. Revenue for the March quarter was $90.8 billion, down 4% from last year. Foreign exchange had a negative year-over-year impact of 140 basis points on our results. Products revenue was $66.9 billion, down 10% year-over-year due to the challenging compare on iPhone that Tim described earlier, which was partially offset by strength from Mac. And thanks to our unparalleled customer satisfaction and loyalty and a high number of customers who are new to our products, our installed base of active devices reached an all-time high across all products and all geographic segments. Services revenue set an all-time record of $23.9 billion, up 14% year-over-year with record performance in both developed and emerging markets. Company gross margin was 46.6%, up 70 basis points sequentially, driven by cost savings and favorable mix to services, partially offset by leverage. Products gross margin was 36.6%, down 280 basis points sequentially, primarily driven by seasonal loss of leverage and mix, partially offset by favorable costs. Services gross margin was 74.6%, up 180 basis points from last quarter due to a more favorable mix. Operating expenses of $14.4 billion were at the midpoint of the guidance range we provided and up 5% year-over-year. Net income was $23.6 billion, diluted EPS was $1.53 and a March quarter record, and operating cash flow was strong at $22.7 billion. Let me now provide more detail for each of our revenue categories. iPhone revenue was $46 billion, down 10% year-over-year, due to the almost $5 billion impact from a year ago that Tim described earlier. Adjusting for this one-time impact, iPhone revenue would be roughly flat to last year. Our iPhone active installed base grew to a new all-time high in total and in every geographic segment. And during the March quarter, we saw many iPhone models as the top-selling smartphones around the world. In fact, according to a survey from Kantar, an iPhone was the top-selling model in the U.S., Urban China, Australia, the U.K., France, Germany and Japan. And the iPhone 15 family continues to be very popular with customers. 451 Research recently measured customer satisfaction at 99% in the U.S. Mac revenue was $7.5 billion, up 4% year-over-year, driven by the strength of our new MacBook Air, powered by the M3 chip. Customers are loving the incredible AI performance of the latest MacBook Air and MacBook Pro models. And our Mac installed base reached an all-time high with half of our MacBook Air buyers during the quarter being new to Mac. Also customer satisfaction for Mac was recently reported at 96% in the U.S. iPad generated $5.6 billion in revenue, down 17% year-over-year. iPad continued to face a challenging compare against the launch of the M2 iPad Pro and iPad 10th Generation from last year. At the same time, the iPad installed base has continued to grow and is at an all-time high as over half of the customers who purchased iPads during the quarter were new to the product. In addition, the latest reports from 451 Research indicated customer satisfaction of 96% for iPad in the US. Wearables, Home and Accessories revenue was $7.9 billion, down 10% year-over-year due to a difficult launch compare. Last year, we had the continued benefit from the launches of the AirPods Pro second-generation, the Watch SE and the first Watch Ultra. Apple Watch continues to attract new customers, with almost two-thirds of customers purchasing an Apple Watch during the quarter being new to the product, sending the Apple Watch installed base to a new all-time high and customer satisfaction was recently measured at 95% in the U.S. In services, as I mentioned, total revenue reached an all-time record of $23.9 billion, growing 14% year-over-year with our installed-base of active devices continuing to grow at a nice pace. This provides a strong foundation for the future growth of the services business as we continued to see increased customer engagement with our ecosystem. Both transacting accounts and paid accounts reached a new all-time high with paid accounts growing double-digits year-over-year. And paid subscriptions showed strong double-digit growth. We have well over $1 billion paid subscriptions across the services on our platform, more than double the number that we had only four years ago. We continued to improve the breadth and quality of our current services from creating new games on Arcade and great new shows on TV+ to launching additional countries and partners for Apple Pay. Turning to enterprise, our customers continued to invest in Apple products to drive productivity and innovation. We see more and more enterprise customers embracing the Mac. In Healthcare, Epic Systems, the world's largest electronic medical record provider, recently launched its native app for the Mac, making it easier for healthcare organizations like Emory Health to transition thousands of PCs to the Mac for clinical use. And since the launch of Vision Pro last quarter, many leading enterprise customers have been investing in this amazing new product to bring spatial computing apps and experiences to life. We are seeing so many compelling use cases from aircraft engine maintenance training at KLM Airlines to real-time team collaboration for racing at Porsche to immersive kitchen design at Lowe's. We couldn't be more excited about the spatial computing opportunity in enterprise. Taking a quick step back, when we look at our performance during the first-half of our fiscal year, total company revenue was roughly flat to the prior year in spite of having one less week of sales during the period and some foreign exchange headwinds. We were particularly pleased with our strong momentum in emerging markets, as we set first-half revenue records in several countries and regions, including Latin-America, the Middle East, India, Indonesia, the Philippines and Turkey. These results, coupled with double-digit growth in services and strong levels of gross margin, drove a first half diluted EPS record of $3.71, up 9% from last year. Let me now turn to our cash position and capital return program. We ended the quarter with $162 billion in cash and marketable securities. We repaid $3.2 billion in maturing debt and commercial paper was unchanged sequentially, leaving us with total debt of $105 billion. As a result, net cash was $58 billion at the end of the quarter. During the quarter, we returned over $27 billion to shareholders, including $3.7 billion in dividends and equivalents and $23.5 billion through open-market repurchases of $130 million Apple's shares. Given the continued confidence we have in our business now and into the future, our Board has authorized today an additional $110 billion for share repurchases, as we maintain our goal of getting to net cash-neutral over time. We are also raising our dividend by 4% to $0.25 per share of common stock, and we continued to plan for annual increases in the dividend going forward as we've done for the last 12 years. This cash dividend will be payable on May 16, 2024 to shareholders of record as of May 13, 2024. As we move ahead into the June 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. We expect our June quarter total company revenue to grow low-single-digits year-over-year in spite of a foreign exchange headwind of about 2.5 percentage points. We expect our services business to grow double-digits at a rate similar to the growth we reported for the first-half of the fiscal year. And we expect iPad revenue to grow double-digits. We expect gross margin to be between 45.5% to -- and 46.5%. We expect OpEx to be between $14.3 billion and $14.5 billion. We expect OI&E to be around $50 million, excluding any potential impact from the mark-to-market of minority investments and our tax rate to be around 16%. With that, let's open the call to questions.","evidence_gemma_new":null,"evidence_llama_3_3":"operating expenses March quarter","evidence_qwen_3_30b":"Operating expenses up 5% year-over-year","gemma_new_max":null,"gemma_new_min":null,"llama_3_3_max":14400000000.0,"llama_3_3_min":14400000000.0,"qwen_3_30b_max":14400000000.0,"qwen_3_30b_min":14400000000.0}
{"symbol":"AAPL","year":2024,"quarter":3,"date":"2024-Q3","chunk_id":2,"sub_chunk_id":0,"centroid_label":"operating expenses","agreed_value":14300000000.0,"count":2,"chunk":"Luca Maestri : Thank you, Tim, and good afternoon, everyone. We are very pleased to report a new June quarter revenue record of $85.8 billion, up 5% year-over-year, despite 230 basis points of negative foreign exchange impact. We achieved growth in the vast majority of our markets, with June quarter revenue records in the Americas, Europe, and rest of Asia Pacific. Products revenue was $61.6 billion, up 2% year-over-year, driven by the launch of the new iPad Pro and iPad Air. Our installed base of active devices reach an all-time high across all products and geographic segments, thanks to our unmatched levels of customer satisfaction and loyalty and a large number of customers who are new to our products. Services revenue reached an all-time record of $24.2 billion, up 14% year-over-year, with an all-time record in developed markets and a June quarter record in emerging markets. Company gross margin was 46.3% near the high end of our guidance range and down 30 basis points sequentially driven by a different mix within products which was partially offset by a favorable mix shift towards services and cost savings. Products gross margin was 35.3%, down 130 basis points sequentially, primarily driven by mix, partially offset by favorable costs. Services gross margin was 74% down 60 basis points from last quarter. Operating expenses of $14.3 billion were at the low end of the guidance range we provided and up 7% year-over-year. Net income was $21.4 billion, diluted EPS of $1.40 was up 11% year-over-year and set a June quarter record. And operating cash flow was very strong at $28.9 billion, also a June quarter record. Let me get into more detail for each of our revenue categories. iPhone revenue was $39.3 billion, down 1% year-over-year, but grew on a constant currency basis. We set June quarter records across several countries, including the UK, Spain, Poland, Mexico, Indonesia, and the Philippines. And the iPhone Active installed base grew to a new all-time high in total and in every geographic segment. During the June quarter, many iPhone models were among the top selling smartphones around the world. In fact, according to a survey from Kantar, iPhone was the top selling model in the US, urban China, the UK, Germany, Australia, and Japan. Customer satisfaction on the iPhone 15 family continues to be extremely high, with 451 Research measuring it at 98% in the US in their latest reports. Mac generated $7 billion in revenue, up 2% year-over-year, driven by the MacBook Air powered by the M3 chip. We saw particularly strong performance in our emerging markets, with June quarter records for Mac in Latin America, India, and South Asia. The Mac installed base reached an all-time high with half of MacBook Air customers in the quarter being new to Mac. And customer satisfaction for Mac was recently reported at 96% in the US. iPad revenue was $7.2 billion, up 24% year-over-year, driven by the launch of the new iPad Pro and iPad Air. Customers are loving the latest iPad lineup for its new design and display, unparalleled performance, AI capabilities and much more. The iPad install base has continued to grow and is an all-time high, as half of the customers who purchased iPads during the quarter were new to the product. Also, customer satisfaction was recently measured at 97% in the US. Wearables, home and accessories revenue was $8.1 billion, down 2% year-over-year, a sequential acceleration from the March quarter. Watch and AirPods continue to face a difficult compare against prior year launches of the AirPods Pro second generation, the Watch SE and the first Watch Ultra. Apple Watch continues to attract new customers, with almost two-thirds of customers purchasing an Apple Watch during the quarter being new to the product, sending the Apple Watch install base to a new all-time high. And the latest reports from 451 Research indicate a customer satisfaction of 97% for watch in the US. In services, total revenue reached an all-time record of $24.2 billion, growing 14% year-over-year. We continue to have great momentum in services, as the growth of our installed base of active devices, sets a strong foundation for the future expansion of our ecosystem. And we see increased customer engagement with our services offerings. Both transacting accounts and paid accounts reach a new all-time high with paid accounts growing double digits year-over-year. Also, paid subscriptions showed strong double digit growth. We have well over 1 billion paid subscriptions across the services on our platform, more than double the number that we had only four years ago. And we are constantly focused on improving the breadth and quality of our services. From critically acclaimed new content on Apple TV+ to new games on Apple Arcade and the many latest features we previewed during WWDC for iCloud, Apple Pay, Apple Cash, Apple Music, and more. Turning to enterprise, we continue to see businesses, leveraging our entire suite of products to drive productivity and creativity for their teams and customers. USAA, a leading insurance and financial services company, recently expanded beyond their existing iPhone and iPad deployments to provide their employees with the latest MacBook Air. And American Express has continued to add to their fleet of over 10,000 Macs to enhance their employees' productivity, security, and collaboration. We're also excited to see leading organizations such as Boston Children's Hospital and Lufthansa using Apple Vision Pro to build innovative spatial computing experiences to transform the training of their workforces. Let me now turn to our cash position and capital return program. We ended the quarter with $153 billion in cash and marketable securities. We repaid $4.3 billion in maturing debt and increased commercial paper by $1 billion, leaving us with total debt of $101 billion. As a result, net cash was $52 billion at the end of the quarter. During the quarter, we returned over $32 billion to shareholders, including $3.9 billion in dividends and equivalents and $26 billion through open market repurchases of 139 million Apple shares. As we move ahead into the September 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. We expect foreign exchange to continue to be a headwind and to have a negative impact on revenue of about 1.5 percentage points on a year-over-year basis. We expect our September quarter total company revenue to grow year-over-year at a rate similar to the June quarter. We expect services revenue to grow double digits at a rate similar to what we reported in the first three quarters of this fiscal year. We expect gross margin to be between 45.5% and 46.5%. We expect OpEx to be between $14.2 billion and $14.4 billion. We expect OI&E to be around negative $50 million, excluding any potential impact from the mark to market of minority investments, and our tax rate to be around 16.5%. Finally, today our Board of Directors has declared a cash dividend of $0.25 per share of common stock payable on August 15, 2024, to shareholders of record as of August 12, 2024. With that, let's open the call to questions.","evidence_gemma_new":null,"evidence_llama_3_3":"operating expenses June quarter","evidence_qwen_3_30b":"Operating expenses June quarter","gemma_new_max":null,"gemma_new_min":null,"llama_3_3_max":14300000000.0,"llama_3_3_min":14300000000.0,"qwen_3_30b_max":14300000000.0,"qwen_3_30b_min":14300000000.0}
{"symbol":"AAPL","year":2024,"quarter":4,"date":"2024-Q4","chunk_id":2,"sub_chunk_id":0,"centroid_label":"operating expenses","agreed_value":14300000000.0,"count":3,"chunk":"Luca Maestri: Good afternoon, everyone. And thank you, Tim, for the very kind words. Serving as Apple's CFO has been a real privilege and an amazing journey, and I've greatly appreciated the support from our investors and the analyst community over the years. Kevan is exceptional, and I know you will enjoy interacting with him going forward. Let me now turn to the results for the fourth quarter of our fiscal year. We're very pleased to report a new September quarter revenue record of $94.9 billion, up 6% year-over-year. We grew in the vast majority of the markets we track and achieved September quarter revenue records in the Americas, Europe and Rest of Asia Pacific. Products revenue was $70 billion, up 4% year-over-year, driven by growth in iPhone, iPad and Mac. Our installed base of active devices reached an all-time high across all products and geographic segments, thanks to very high levels of customer satisfaction and loyalty and a large number of customers who are new to our products. Services revenue reached an all-time record of $25 billion, up 12% year-over-year. We saw broad-based strength around the world, reaching all-time records in both developed and emerging markets with double-digit growth and record results across most services categories. Company gross margin was 46.2%, near the high end of our guidance range. Products gross margin was 36.3%, up 100 basis points sequentially, primarily driven by favorable mix. Services gross margin was 74%, unchanged from the prior quarter. Operating expenses of $14.3 billion were at the midpoint of the guidance range we provided at the beginning of the quarter and up 6% year-over-year. During the quarter, we recorded a one-time income tax charge of $10.2 billion, which relates to the impact of the reversal of the European General Court's State Aid decision. When we exclude this one-time charge, net income was $25 billion and diluted earnings per share were a $1.64, up 12% year-over-year, and a September quarter record. Operating cash flow was very strong at $26.8 billion, a new September quarter record. Let me now get into more detail for each of our revenue categories. iPhone revenue was $46.2 billion, up 6% year-over-year, and a September quarter record in total and across several markets, including the US, the Middle East, Korea, and South Asia. The iPhone active installed base grew to a new all-time high in total and in every geographic segment. During the September quarter, many iPhone models were among the top-selling smartphones around the world. In fact, according to a survey from Kantar, iPhone was the top-selling model in the US, Urban China, the UK, Australia, and Japan. We continue to see high levels of customer satisfaction for the iPhone 15 family, with 451 Research recently measuring it at 98% in the US. Mac revenue was $7.7 billion, up 2% year-over-year, driven by the strength in MacBook Air. Customers have been loving the performance of Apple Silicon on Mac and we are very excited to bring the latest M4 family of chips to the lineup. The Mac installed base reached an all-time high with about half of customers in the quarter being new to Mac. And in the latest reports from 451 Research, customer satisfaction was 95% in the US. iPad generated $7 billion in revenue, up 8% year-over-year. In addition to growth in developed markets, we also saw strong performance in many emerging markets, with double-digit growth in Mexico, Brazil, the Middle East, India and South Asia. The iPad installed base reached another all-time high, and over half of the customers who purchased iPads during the quarter were new to the product. Also, customer satisfaction was recently measured at 97% in the US. Wearables, Home and Accessories revenue was $9 billion, down 3% year-over-year. The Apple Watch installed base reached a new all-time high, with over half of customers purchasing an Apple Watch during the quarter being new to the product. And the latest reports from 451 Research indicated customer satisfaction of 96% for watch in the US. Our Services revenue reached an all-time record of $25 billion, growing 12% year-over-year. Services continue to see strong momentum with the growth of our installed base of active devices setting a solid foundation for the future expansion of our ecosystem. And we see increased customer engagement with our services offerings. Both transacting accounts and paid accounts reached a new all-time high, with paid accounts growing double-digits year-over-year. Paid subscriptions also grew double-digits. We have well over 1 billion paid subscriptions across the services on our platform, more than double the number we had only four years ago. And as always, we remain focused on improving the breadth and quality of our services from new games on Apple Arcade to new features like Tap to Cash and pay with installments using Apple Pay to many successful new and returning shows on Apple TV+. This past quarter, we celebrated the five-year anniversary of Apple Card, which was ranked #1 in customer satisfaction among co-branded credit cards by J.D. Power for the fourth year in a row. Turning to enterprise, we continue to see strong demand across our products and services. NVIDIA launched its Mac as a choice program supported by AppleCare for Enterprise and Apple Professional Services with over 10,000 Macs deployed worldwide. And Novartis, a leading global pharmaceutical company, recently chose iPhone 16 as the standard mobile device for all employees. We also see continued momentum with Apple Vision Pro in the enterprise space. UC San Diego Health is the first hospital in the world to test spatial computing apps on Apple Vision Pro in clinical trials for patient surgery in the operating room. Let me now turn to our cash position and capital return program. We ended the quarter with $157 billion in cash and marketable securities. We repaid $2.6 billion in maturing debt and increased commercial paper by $7 billion, leaving us with total debt of $107 billion. As a result, net cash was $50 billion at the end of the quarter. During the quarter, we returned over $29 billion to shareholders, including $3.8 billion in dividends and equivalents and $25 billion through open market repurchases of 112 million Apple shares. 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're providing today assumes that the macroeconomic outlook doesn't worsen from what we are projecting today for the current quarter. We expect our December quarter total company revenue to grow low- to mid-single digits year-over-year. We expect Services revenue to grow double-digits at a rate similar to what we reported in the fiscal year 2024. We expect gross margin to be between 46% and 47%. We expect OpEx to be between $15.3 billion and $15.5 billion. We expect OI&E to be around negative $250 million, excluding any potential impact from the mark to market of minority investments. And our tax rate to be around 16%. Finally, today, our Board of Directors has declared a cash dividend of $0.25 per share of common stock payable on November 14, 2024 to shareholders of record as of November 11, 2024. With that, let us open the call to questions.","evidence_gemma_new":"Operating expenses year-over-year","evidence_llama_3_3":"operating expenses fourth quarter fiscal year 2024","evidence_qwen_3_30b":"operating expenses","gemma_new_max":14300000000.0,"gemma_new_min":14300000000.0,"llama_3_3_max":14300000000.0,"llama_3_3_min":14300000000.0,"qwen_3_30b_max":14300000000.0,"qwen_3_30b_min":14300000000.0}
{"symbol":"AAPL","year":2023,"quarter":1,"date":"2023-Q1","chunk_id":3,"sub_chunk_id":0,"centroid_label":"opex","agreed_value":13800000000.0,"count":2,"chunk":"Luca Maestri: Thank you, Tim, and good afternoon, everyone. As Tim mentioned, revenue for the December quarter was $117.2 billion, down 5% from last year. A number of factors had a significant impact on our results. First, we faced a very difficult foreign exchange environment, which affected our performance by nearly 800 basis points. In other words, we grew revenue on a constant currency basis. And in fact, we did so in the vast majority of markets. Second, the macroeconomic environment this past quarter was markedly more challenging than 12 months ago. Third, we experienced significant supply shortages for iPhone 14 Pro and iPhone 14 Pro Max in November and through December. On the other hand, we had the positive impact of the 14th week in the quarter that Tejas just mentioned at the beginning of the call. Products revenue was $96.4 billion, down 8% from last year due to the factors I just called out. At the same time, however, our installed base of active devices grew double digits and achieved all-time records in each geographic segment and in each major product category. We're proud to now have over 2 billion active devices in our installed base. This continued growth in the installed base is due to extremely strong levels of customer satisfaction and loyalty and a high number of customers who are new to our products. The installed base growth also helped our services set an all-time revenue record of $20.8 billion, up 6% over a year ago. We achieved this new milestone despite more than 700 basis points of negative impact from foreign exchange. We reached all-time services revenue records in the Americas, Europe and rest of Asia Pacific and a December quarter record in Greater China. We also set records in many Services categories, including all-time revenue records for cloud services, payment services and music and December quarter records for the App Store and AppleCare. Company gross margin was 43%, up 70 basis points from last quarter due to leverage and favorable mix, partially offset by foreign exchange. Products gross margin was 37%, up 240 basis points sequentially. And Services gross margin was 70.8%, up 30 basis points sequentially, both due to the same factors that impacted total company gross margin. Operating expenses of $14.3 billion were significantly below the guidance range we provided at the beginning of the quarter and grew at a slower pace than in the past as we took actions to respond to the current macro environment. Net income was $30 billion. Diluted earnings per share were $1.88, and we generated very strong operating cash flow of $34 billion. Let me now get into more detail for each of our revenue categories. iPhone revenue was $65.8 billion despite significant foreign exchange headwinds, supply constraints on iPhone 14 Pro and iPhone 14 Pro Max and a challenging macroeconomic environment. In spite of these circumstances, we set all-time iPhone revenue records in Canada, Italy and Spain, and saw strong growth in several emerging markets, including all-time iPhone revenue records for India and Vietnam. Importantly, the installed base of active iPhones continues to grow nicely and is at an all-time high across all geographic segments. In emerging markets, in particular, the installed base grew double digits, and we had record levels of switchers in India and in Mexico. Our customers continue to love their experience with our products with the latest survey of U.S. consumers from 451 Research indicating customer satisfaction of 98% for the iPhone 14 family. Mac revenue was $7.7 billion, down 29% year-over-year and in line with our expectations. There were 3 key drivers for our Mac results. First, we had a challenging compare against last year's launch of the completely reimagined MacBook Pros, our first notebooks with M1 Pro and M1 Max. Second, we believe that the macro environment impacted our Mac performance. And third, we faced significant foreign exchange headwinds. At the same time, however, the installed base of active Macs reached an all-time high across all geographic segments, and we continue to see very strong upgraded activity to Apple silicon. Customer satisfaction with Mac remains very strong at 96% based on the latest survey of U.S. consumers from 451 Research. iPad revenue was $9.4 billion, up 30% year-over-year despite significant FX headwinds. This performance was driven by 2 key items. First, during the December quarter a year ago, we experienced significant supply constraints, while this year, we had enough supply to meet demand. Second, we launched our new iPad and the iPad Pro powered by the M2 chip during the quarter. The iPad installed base reached a new all-time high, thanks to incredible customer loyalty and a high number of new customers. In fact, over half of the customers who purchased iPads during the quarter were new to the product. Wearables, Home and Accessories revenue was $13.5 billion, down 8% year-over-year. The year-over-year decline was driven by significant FX headwinds and a challenging macroeconomic environment. However, our installed base of devices in the category set a new all-time record thanks to the largest number of customers new to our smartwatch that we've ever had in a given quarter. In fact, nearly 2\/3 of customers purchasing an Apple Watch during the quarter were new to the product. Moving to Services. We generated $20.8 billion in revenue, a new all-time record in total and for many Services offerings in spite of a difficult foreign exchange environment, and macroeconomic headwinds impacting certain categories such as digital advertising and mobile gaming. In constant currency, we grew Services revenue double digits on top of growing 24% during the December quarter a year ago. We remain focused on the large long-term opportunity in this category, and we continue to observe several trends that reflect the strength of our ecosystem. For example, we saw increased customer engagement with our Services during the quarter. Both our transacting accounts and paid accounts grew double digits year-over-year, each setting a new all-time record. Paid subscriptions also continued to grow nicely. We now have more than 935 million paid subscriptions across the services on our platform, up more than 150 million during the last 12 months alone and nearly 4x what we had just 5 years ago. And we continue to increase the reach and improve the quality of our offerings. For instance, Apple Pay is now available to millions of merchants in nearly 70 countries and regions. And we saw a record-breaking number of purchases made using Apple Pay globally during the holiday shopping season. Finally, our installed base of over 2 billion active devices represents a great foundation for future expansion of our ecosystem, and it continues to grow even during difficult macroeconomic conditions, which speaks to the exceptionally high levels of customer loyalty and satisfaction and our ability to attract new customers to our platform. The growth is coming from every major product category and geographic segment, with strong double-digit increases in emerging markets such as Brazil, Mexico, India, Indonesia, Thailand and Vietnam. Turning to the enterprise market. we are seeing continued adoption of our Services for business like Apple Business Essentials, AppleCare, Tap to Pay and Apple Financial Services. For example, Mars Incorporated has expanded its use of AppleCare for Enterprise to provide timely device support and assurance for iPads deployed across their manufacturing sites. Meanwhile, HCA Healthcare has leveraged Apple Financial Services to manage the annual refresh of its entire fleet of iPhones. This not only ensures that their staff stay current on the latest Apple technology, but also provides them with significant annual savings in the process. Let me now turn to our capital return program and our cash position. We returned over $25 billion to shareholders during the December quarter as our business continues to generate very strong cash flow. This included $3.8 billion in dividends and equivalents and $19 billion through open market repurchases of 133 million Apple shares. We ended the quarter with $165 billion in cash and marketable securities. We repaid $1.4 billion in maturing debt and decreased commercial paper by $8.2 billion, leaving us with total debt of $111 billion. As a result, net cash was $54 billion at the end of the quarter, and we maintain our goal of becoming net cash-neutral over time. As we move into the March quarter, I'd like to review our outlook, which includes the types of forward-looking information that Tejas referred to at the beginning of the call. Given the continued uncertainty around the world in the near term, we are not providing revenue guidance, but we are sharing some directional insights based on the assumption that the macroeconomic outlook and COVID-related impacts to our business do not worsen from what we are projecting today for the current quarter. In total, we expect our March quarter year-over-year revenue performance to be similar to the December quarter. This represents an acceleration in our underlying year-over-year business performance as the December quarter benefited from an extra week. Foreign exchange will continue to be a headwind, and we expect a negative year-over-year impact of 5 percentage points. For Services, we expect revenue to grow year-over-year while continuing to face macroeconomic headwinds in areas such as digital advertising and mobile gaming. For iPhone, we expect our March quarter year-over-year revenue performance to accelerate relative to the December quarter year-over-year revenue performance. For Mac and iPad, we expect revenue for both product categories to decline double digits year-over-year because of challenging compares and macroeconomic headwinds. We expect gross margin to be between 43.5% and 44.5%. We expect OpEx to be between $13.7 billion and $13.9 billion. We expect OI&E to be around negative $100 million, excluding any potential impact from the mark-to-market of minority investments, and our tax rate to be around 16%. Finally, today, our Board of Directors has declared a cash dividend of $0.23 per share of common stock payable on February 16, 2023, to shareholders of record as of February 13, 2023. With that, let's open the call to questions.","evidence_gemma_new":"OpEx","evidence_llama_3_3":null,"evidence_qwen_3_30b":"OpEx $13.7 billion to $13.9 billion","gemma_new_max":13800000000.0,"gemma_new_min":13800000000.0,"llama_3_3_max":null,"llama_3_3_min":null,"qwen_3_30b_max":13800000000.0,"qwen_3_30b_min":13800000000.0}
{"symbol":"AAPL","year":2023,"quarter":2,"date":"2023-Q2","chunk_id":3,"sub_chunk_id":0,"centroid_label":"opex","agreed_value":13700000000.0,"count":2,"chunk":"Luca Maestri: Thank you, Tim, and good afternoon, everyone. Revenue for the March quarter was $94.8 billion, down 3% from last year and better than our expectations. Foreign exchange had a negative impact of over five percentage points on our results, in line with what we had expected. On a constant currency basis, our revenue grew year-over-year in total and in the majority of the markets we track. In addition to the records in emerging markets that Tim mentioned, we also set March quarter records in Australia, Canada, Spain and Switzerland, among others. Products revenue was $73.9 billion, down 5% from last year, due to challenging compares on Mac and iPad. iPhone, however, reached a March quarter revenue record thanks to very strong performance in emerging markets from South Asia and India to Latin America and the Middle East. During the quarter, our installed base of active devices continued to grow at a nice pace thanks to extremely high levels of customer satisfaction and loyalty, and reached an all-time high for all major product categories and geographic segments. Our Services set an all-time revenue record of $20.9 billion, up 5% year-over-year, on top of growing 17% in the March quarter a year ago. We reached an all-time services revenue record in Greater China and March quarter records in Americas, Europe and Rest of Asia Pacific. Company gross margin was 44.3%, up 130 basis points from last quarter, driven by cost savings and favorable mix shift towards services partially offset by leverage. Products gross margin was 36.7%, decreasing 30 basis points sequentially due to seasonal loss of leverage and mix, partially offset by favorable costs. Services gross margin was 71%, up 20 basis points sequentially. Operating expenses of $13.7 billion were at the low end of the guidance range we provided at the beginning of the quarter and continued to decelerate from the December quarter. We are closely managing our spend, but remain focused on long term growth with continued investment in innovation and product development. Net income was $24.2 billion. Diluted earnings per share were a $1.52, unchanged versus last year, and we generated very strong operating cash flow of $28.6 billion. Let me now provide more detail for each of our revenue categories. iPhone revenue set a March quarter record of $51.3 billion, up 2% year-over-year despite significant foreign exchange headwinds and a challenging macroeconomic environment. We set March quarter records in several developed and emerging markets with India, Indonesia, Turkey and the UAE doubling on a year-over-year basis. Our active installed base of iPhone grew to a new all-time high and was up in all our geographic segments. We are very pleased by the results of the latest survey of US Consumers from 451 Research, which measured customer satisfaction at 99% for the iPhone 14 family. Mac revenue was $7.2 billion, down 31% year-over-year and in line with our expectations. These results were driven by the challenging macroeconomic environment coupled with a difficult compare against last year's launch of the completely reimagined M1 MacBook Pros. Despite this, the installed base of active Macs reached an all-time high across all geographic segments and we continue to see strong upgraded activity to Apple silicon. Also, the latest survey of US Consumers from 451 Research reported customer satisfaction at 96% for Mac. iPad generated $6.7 billion in revenue, down 13% year-over-year and in line with our expectations. This performance was due to two key factors, a tough compare against the launch of iPad Air powered by the M1 chip in the year ago quarter and headwinds from the macroeconomic environment. The iPad installed base reached a new all-time high in all geographic segments thanks to exceptional customer loyalty and a high number of new customers. In fact, over half of the customers who purchased iPads during the quarter were new to the product. Wearables, home and accessories revenue was $8.8 billion, down 1% year-over-year as the category experienced the impact from the macroeconomic environment. However, we did set March quarter records both in the US and in Greater China. We continue to see strength in our Watch installed base, which set a new all-time record, thanks to very high customer loyalty and new two rates, nearly two thirds of customers purchasing an Apple Watch during the quarter were new to the product. Moving to Services, we reached a new all-time revenue record of $20.9 billion. And in addition to the all-time records Tim mentioned earlier, we set March quarter records for advertising Apple Care and Video. Despite these records, as we saw in recent quarters, certain services offerings such as digital advertising and mobile gaming continue to be affected by the current macroeconomic environment. Stepping back, however, the continued growth in Services is the reflection of our ecosystem strength and the positive momentum we are seeing across several key metrics. First, our growing installed base of over 2 billion active devices represents a great foundation for future expansion of our ecosystem. We continue to grow across every major product category and geographic segment, thanks to very high levels of customer loyalty and satisfaction. Second, we saw increased customer engagement with our services during the quarter. Both our transacting accounts and paid accounts grew double digits year-over-year, each setting a new all-time record. Third, paid subscriptions showed strong growth. We now have more than $975 million paid subscriptions across the Services on our platform, up 150 million during the last 12 months and nearly double the number of paid subscriptions we had only three years ago. And finally, we continue to improve the breadth and the quality of our current services offerings from new content on Apple TV Plus to great new features available in Apple Pay and Apple Music, which we believe our customers will love. Turning to the enterprise market, we see business customers continuing to invest in the Apple platform to drive higher employee productivity and satisfaction. In Brazil, Boticario Group, the world's largest cosmetics franchiser, originally starting with iPhone, 12 employees manage operations across a network of retail stores, franchisees and resellers. As it continues to digitize its business, Boticario has chosen to move all software development in house and adopted Mac as the standard device for all of their developer teams across the world. In small business, we see an increasing number of customers relying on Apple hardware, software and services to power their businesses forward, from accepting payments on iPhone, to tracking inventory on Mac or iPad, to managing employee devices with Apple Business Essentials. As we celebrate National Small Business week here in the US, we are proud to continue supporting the small business community. Let me now turn to our cash position and capital return program. We ended the quarter with over $166 billion in cash and marketable securities. We repaid $2.3 billion in maturing debt and increased commercial paper by about $300 million, leaving us with total debt of $110 billion. As a result, net cash was $57 billion at the end of the quarter. During the March quarter, we returned over $23 billion to shareholders, including $3.7 billion in dividends and equivalents and $19.1 billion through open market repurchases of $129 million Apple shares. Given the continued confidence we have in our business now and into the future, today our Board has authorized an additional $90 billion for share repurchases as we maintain our goal of getting to net cash neutral over time. We're also raising our dividend by 4% to $0.24 a share, and we continue to plan for annual increases in the dividend going forward. As we move ahead into the June 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. We expect our June quarter year-over-year revenue performance to be similar to the March quarter, assuming that the macroeconomic outlook does not worsen from what we are projecting today for the current quarter. Foreign exchange will continue to be a headwind and we expect a negative year-over-year impact of nearly four percentage points. For Services, we expect our June quarter year-over-year revenue growth to be similar to the March quarter, while continuing to face macroeconomic headwinds in areas such as digital advertising and mobile gaming. We expect gross margin to be between 44% and 44.5%. We expect OpEx to be between $13.6 billion and $13.8 billion. We expect OINE to be around negative $250 million excluding any potential impact from the mark-to-market of minority investments and our tax rate to be around 16%. Finally reflecting the dividend increase I mentioned earlier, today, our Board of Directors has declared a cash dividend of $0.24 per share of common stock payable on May 18, 2023, to shareholders of record as on May 15, 2023. With that, let's open the call to questions.","evidence_gemma_new":null,"evidence_llama_3_3":"OpEx June quarter","evidence_qwen_3_30b":"OpEx between $13.6 billion and $13.8 billion","gemma_new_max":null,"gemma_new_min":null,"llama_3_3_max":13720000000.0,"llama_3_3_min":13720000000.0,"qwen_3_30b_max":13700000000.0,"qwen_3_30b_min":13700000000.0}
{"symbol":"AAPL","year":2023,"quarter":3,"date":"2023-Q3","chunk_id":3,"sub_chunk_id":0,"centroid_label":"opex","agreed_value":13600000000.0,"count":3,"chunk":"Luca Maestri: Thank you, Tim, and good afternoon, everyone. Revenue for the June quarter was $81.8 billion, down 1% from last year and better than our expectations despite nearly 4 percentage points of negative impact from foreign exchange. On a constant currency basis, our revenue grew year-over-year in total and in the majority of the markets we track. We set June quarter records in both Europe and Greater China and continue to see strong performance across our emerging markets driven by iPhone. Products revenue was $60.6 billion, down 4% from last year, as we faced FX headwinds and an uneven macroeconomic environment. However, our installed base reached an all-time high across all geographic segments, driven by a June quarter record for iPhone switchers and high new-to rates in Mac, iPad and Watch, coupled with very high levels of customer satisfaction and loyalty. Our Services revenue set an all-time record of $21.2 billion, up 8% year-over-year and grew double digits in constant currency. Our performance was strong around the world as we reach all-time Services revenue records in Americas and Europe and June quarter records in Greater China and rest of Asia Pacific. Company gross margin was 44.5%, a record level for the June quarter and up 20 basis points sequentially, driven by cost savings and favorable mix shift towards Services, partially offset by a seasonal loss of leverage. Products gross margin was 35.4%, down 130 basis points from last quarter due to seasonal loss of leverage and mix, partially offset by favorable costs. Services gross margin was 70.5%, decreasing 50 basis points sequentially. Operating expenses of $13.4 billion were below the low end of the guidance range we provided at the beginning of the quarter and decelerated from the March quarter. We continue to take a deliberate approach in managing our spend with strong focus on innovation and new product development. The results of these actions delivered net income of $19.9 billion, diluted earnings per share of $1.26, up 5% versus last year, and very strong operating cash flow of $26.4 billion. Let me now provide more detail for each of our revenue categories. iPhone revenue was $39.7 billion, down 2% year-over-year but grew on a constant currency basis. We set revenue records in several markets around the world, including an all-time record in India and June quarter records in Latin America, the Middle East and Africa, Indonesia, the Philippines, Italy, the Netherlands and the U.K. Our iPhone active installed base grew to a new all-time high, thanks to a June quarter record in switchers. This is a testament to our extremely high levels of customer satisfaction, which 451 Research recently measured at 98% for the iPhone 14 family in the U.S. Mac generated $6.8 billion in revenue, down 7% year-over-year. We continue to invest in our Mac portfolio. And this past quarter, we were pleased to complete the transition to Apple silicon for the entire lineup. This transition has driven both strong upgrade activity and a high number of new customers. In fact, almost half of Mac buyers during the quarter were new to the product. We also saw reported customer satisfaction of 96% for Mac in the U.S. iPad revenue was $5.8 billion, down 20% year-over-year and in line with our expectations. These results were driven by a difficult compare against the full quarter impact of the iPad Air launch in the prior year. At the same time, we continue to attract a large number of new customers to the iPad installed base with over half of the customers who purchased iPads during the quarter being new to the product. And the latest reports from 451 Research indicate customer satisfaction of 96% in the U.S. Wearables, Home and Accessories revenue was $8.3 billion, up 2% year-over-year, with a June quarter record in Greater China and strong performance in several emerging markets. We continue to see Apple Watch expand its reach with about 2\/3 of customers purchasing an Apple Watch during the quarter being new to the product. And this is combined with very high levels of customer satisfaction, which was recently reported at 98% in the United States. Moving on to Services. We reached a new all-time revenue record of $21.2 billion with year-over-year growth accelerating sequentially to 8% and up double digits in constant currency. In addition to the all-time records Tim mentioned earlier, we also set June quarter records for advertising, App Store and Music. We are very pleased with our performance in Services, which is a direct reflection of our ecosystem's strength. First, our installed base of over 2 billion active devices continues to grow at a nice pace and establishes a solid foundation for the future expansion of our ecosystem. Second, we see increased customer engagement with our services. Both our transacting accounts and paid accounts grew double digits year-over-year, each reaching a new all-time high. Third, our paid subscriptions showed strong growth. This past quarter, we reached an important milestone and passed 1 billion paid subscriptions across the services on our platform, up 150 million during the last 12 months and nearly double the number of paid subscriptions we had only 3 years ago. And finally, we continue to improve the breadth and the quality of our current services. From 20 new games on Apple Arcade, to brand-new content on Apple TV+, to the launch of our high-yield savings account with Apple Card, our customers are loving these enhanced offerings. Turning to the enterprise market. Our customers are leveraging Apple products every day to help improve productivity and attract talent. Blackstone, a global investment management firm, is expanding its Apple footprint from their corporate iPhone fleet to now offering the MacBook Air powered by M2 to all of their corporate employees and portfolio companies. Gilead, a leading biopharmaceutical company, has deployed thousands of iPads globally to their sales team. Over the last 6 months, they have also doubled their Mac user base by making MacBook Air available to more employees with a focus on user experience and strong security. Let me now turn to our cash position and capital return program. We ended the quarter with over $166 billion in cash and marketable securities. We repaid $7.5 billion in maturing debt while issuing $5.2 billion of new debt and increasing commercial paper by $2 billion, leaving us with total debt of $109 billion. As a result, net cash was $57 billion at the end of the quarter. During the quarter, we returned over $24 billion to shareholders, including $3.8 billion in dividends and equivalents and $18 billion through open market repurchases of 103 million Apple shares. We continue to believe there is great value in our stock and maintain our target of reaching a net cash neutral position over time. As we move ahead into the September quarter, I'd like to review our outlook, which includes the types of forward-looking information that Saori referred to at the beginning of the call. We expect our September quarter year-over-year revenue performance to be similar to the June quarter, assuming that the macroeconomic outlook doesn't worsen from what we are projecting today for the current quarter. Foreign exchange will continue to be a headwind, and we expect a negative year-over-year revenue impact of over 2 percentage points. We expect iPhone and Services year-over-year performance to accelerate from the June quarter. Also, we expect the revenue for both Mac and iPad to decline by double digits year-over-year due to difficult compares, particularly on the Mac. For both products, we experienced supply disruptions from factory shutdowns in the June quarter a year ago and were able to fulfill significant pent-up demand in the year ago September quarter. We expect gross margin to be between 44% and 45%. We expect OpEx to be between $13.5 billion and $13.7 billion. We expect OI&E to be around negative $250 million, excluding any potential impact from the mark-to-market of minority investments, and our tax rate to be around 16%. Finally, today, our Board of Directors has declared a cash dividend of $0.24 per share of common stock payable on August 17, 2023, to shareholders of record as of August 14, 2023. With that, let's open the call to questions.","evidence_gemma_new":"OpEx","evidence_llama_3_3":"expect OpEx September quarter","evidence_qwen_3_30b":"expect OpEx between $13.5 billion and $13.7 billion","gemma_new_max":13600000000.0,"gemma_new_min":13600000000.0,"llama_3_3_max":13600000000.0,"llama_3_3_min":13600000000.0,"qwen_3_30b_max":13600000000.0,"qwen_3_30b_min":13600000000.0}
{"symbol":"AAPL","year":2023,"quarter":4,"date":"2023-Q4","chunk_id":3,"sub_chunk_id":0,"centroid_label":"opex","agreed_value":14500000000.0,"count":2,"chunk":"Luca Maestri: Thank you, Tim, and good afternoon, everyone. Revenue for the September quarter was $89.5 billion, down less than 1% from last year. Foreign exchange had a negative impact of over 2 percentage points. And on a constant-currency basis, our revenue grew year-over-year in total, and in each geographic segment. We set a September quarter record in the Americas and saw strong performance across our emerging markets, where both iPhone and Services grew double digits. Products revenue was $67.2 billion, down 5% from last year, due to very challenging compares on both Mac and iPad, which I will discuss in more detail later on. At the same time, we reached a September quarter record on iPhone, driven by strength in emerging markets. Our total installed-base of active devices reached an all-time high across all products and all geographic segments, thanks to our high levels of customer satisfaction and many new customers joining our ecosystem. Our Services revenue set an all-time record of $22.3 billion, up 16% year-over-year, with growth accelerating sequentially from the June quarter. Our performance in Services were broad based, as we reached all-time revenue records in the Americas, Europe and rest of Asia-Pacific and a September quarter record in Greater China. We also set new records in every Services category. Company gross margin set a September quarter record at 45.2%, up 70 basis points sequentially, driven by leverage and favorable mix, partially offset by foreign exchange. Products gross margin was 36.6%, up 120 basis points sequentially, also driven by leverage and mix, partially offset by foreign exchange. Services gross margin was 70.9%, up 40 basis points from last quarter due to a different mix. Operating expenses of $13.5 billion were at the low end of the guidance range we provided, up 2% year-over-year. Net income was $23 billion, diluted earnings per share was $1.46, up 13% versus last year and a September quarter record, and operating cash flow was strong at $21.6 billion. Let me now provide more detail for each of our revenue categories. iPhone revenue was $43.8 billion, up 3% year-over-year and a new September quarter record. We had strong performance in several markets, including an all-time record in India as September quarter records in Canada, Latin America, the Middle East, and South Asia . Our iPhone active installed base grew to a new all-time high and fiscal 2023 was another record year for switches. We continue to see extremely high levels of customer satisfaction which 451 Research recently measured at 98% in the U.S. Mac revenue was $7.6 billion, down 34% year-over-year, driven by challenging market conditions and compounded by a difficult compare in our own business, whereby last year we experienced supply disruptions from factory shutdowns in the June quarter and were subsequently able to fulfill significant pent-up demand during the September quarter. We also had a difference in launch timing with the MacBook Air launching earlier this year in the June quarter compared to the September quarter last year. We have great confidence in our Mac lineup and are excited about the recently announced iMac and MacBook Pro powered by our M3 chips. Our installed base is at an all-time high and half of Mac buyers during the quarter were new to the product, driven by MacBook Air. Also, we saw reported customer satisfaction of 97% for Mac in the U.S. iPad generated $6.4 billion in revenue, down 10% year-over-year. Similar to Mac, these results were a function of a difficult compare from the supply disruptions in the June quarter a year ago and the subsequent fulfillment of pent-up demand in the September quarter. iPad continues to attract a large number of new customers to the installed base with over half of the customers who purchase iPads during the quarter being new to the product and the latest reports from 451 Research indicate customer satisfaction of 98% in the U.S. Wearables, Home and Accessories revenue was $9.3 billion, down 3% year-over-year. We had a September quarter record in Europe and we saw strong performance in several emerging markets around the world. Apple Watch continues to expand its reach with nearly two-thirds of customers purchasing Apple Watch during the quarter being new to the product and customer satisfaction for the Watch was recently measured at 97% in the U.S. Services had a great quarter. We reached a new all-time revenue record of $22.3 billion, up 16% year-over-year. And we're happy to see growth coming from all categories and every geographic segment, which is a direct result of the strength of our ecosystem. Our installed base of over 2 billion active devices continues to grow at a nice pace and establishes a solid foundation for the future expansion of the ecosystem. And we continue to see increased customer engagement with our Services. Both transacting accounts and paid accounts grew double-digits year-over-year, each reaching a new all-time high. Also our paid subscriptions showed strong growth. We have well over 1 billion paid subscriptions across the services on our platform, nearly double the number we had only three years ago. And finally, we continue to improve the breadth and quality of our current services from exciting new content on Apple TV+ and Apple Arcade to additional storage tiers on iCloud. We believe our customers will love this new offering. Turning to enterprise. We are excited to see our business customers in both developed and emerging markets expand their deployment of Apple products and technologies to drive business innovation and employee satisfaction. Starbucks continuously invest in Apple technology to bring the best experience to the customers and employees, including tens of thousands of iPads across all retail stores to help their teams streamline order management, operations and training. In addition, Starbucks recently refreshed over 10,000 Macs to the latest M2-powered MacBook Air for all store managers, enabling them to do their best work and improve productivity. And in Indonesia, popular technology company GoTo is offering Mac as a choice, so that employees can have the best tools to be most productive. Today, more than half of its workforce are already choosing Mac for work. Let me now turn to our cash position and capital return program. We ended the quarter with over $162 billion in cash and marketable securities. We increased commercial paper by $2 billion, leaving us with total debt of $111 billion. As a result, net cash was $51 billion at the end of the quarter. And our goal of becoming net cash-neutral over time remains unchanged. During the quarter, we returned nearly $25 billion to shareholders, including $3.8 billion in dividends and equivalents and $15.5 billion through open market repurchases of 85 million Apple shares. We also began a $5 billion accelerated share repurchase program in August, resulting in the initial delivery and retirement of 22 million shares. Taking a step back, as we close our 2023 fiscal year, our annual revenue was $383 billion. While it was down 3% from the prior year, it grew on a constant-currency basis despite the volatile and uneven macroeconomic environment. Our year-over-year revenue performance improved each quarter as we went through the year, and so did our earnings per share performance, as we reported double-digit EPS growth in the September quarter. We are particularly pleased with our performance in emerging markets with revenue reaching an all-time record in fiscal 2023 and double-digit growth in constant currency. We are expanding our direct presence in these markets from new Apple retail stores in India to online stores in Vietnam and Chile. And we continue to work with our partners to offer a wide range of affordability programs so that we can best serve our customers. We're very excited about the momentum we have in these markets and the opportunity ahead of us. 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%. Finally, today our Board of Directors has declared a cash dividend of $0.24 per share of common stock, payable on November 16, 2023, to shareholders of record as of November 13, 2023. With that, let's open the call to questions.","evidence_gemma_new":"OpEx","evidence_llama_3_3":null,"evidence_qwen_3_30b":"OpEx","gemma_new_max":14500000000.0,"gemma_new_min":14500000000.0,"llama_3_3_max":null,"llama_3_3_min":null,"qwen_3_30b_max":14500000000.0,"qwen_3_30b_min":14500000000.0}
{"symbol":"AAPL","year":2024,"quarter":1,"date":"2024-Q1","chunk_id":3,"sub_chunk_id":0,"centroid_label":"opex","agreed_value":14400000000.0,"count":2,"chunk":"Luca Maestri: Thank you, Tim, and good afternoon, everyone. Revenue for the December quarter was $119.6 billion, up 2% from last year. During the December quarter a year ago, two unique factors affected our results. First, we had an additional week in the quarter. And second, we had COVID-related factory shutdowns that limited iPhone supply. We estimate that the net impact of these two factors resulted in a 2 percentage point headwind to our revenue performance this quarter. We set all-time revenue records in Europe and rest of Asia-Pacific, and continue to see strong performance across our emerging markets with double-digit growth in the majority of the emerging markets we track. Products revenue was $96.5 billion, flat compared to last year, driven by strength in iPhone, offset by challenging compares for iPad and Wearables, Home and Accessories and one less week of sales this year across the entire portfolio. Thanks to our unparalleled customer loyalty and very strong levels of customer satisfaction, our total installed base of active devices set a new record across all products and all geographic segments, and is now over 2.2 billion active devices. Services revenue set an all-time record of $23.1 billion, up 11% year-over-year. When we take into account the extra week last year, this represents a sequential acceleration of growth from the September quarter. We are very pleased with our Services performance in both developed and emerging markets with all-time revenue records in the Americas, Europe, and rest of Asia-Pacific. Company gross margin was 45.9%, up 70 basis points sequentially, driven by leverage and favorable mix, partially offset by foreign exchange. Products gross margin was 39.4%, up 280 basis points sequentially, also driven by leverage and mix, partially offset by foreign exchange. Services gross margin was 72.8%, up 190 basis points from last quarter, due to a more favorable mix. Operating expenses of $14.5 billion were at the midpoint of the guidance range we provided and up 1% year-over-year. Net income was $33.9 billion, up $3.9 billion from last year. Diluted EPS was $2.18, up 16% versus last year and an all-time record. And operating cash flow was very strong at $39.9 billion. Let me now provide more detail for each of our revenue categories. iPhone revenue was $69.7 billion, up 6% year-over-year. We set all-time records in several countries and regions, including Latin America, Western Europe, the Middle East, and Korea, as well as December quarter records in India and Indonesia. Our iPhone active installed base grew to a new all-time high, and we had an all-time record number of iPhone upgraders during the quarter. Customers are loving their new iPhone 15 family, with the latest reports from 451 Research indicating customer satisfaction of 99% in the U.S. In fact, many iPhone models were among the top-selling smartphones around the world during the quarter. According to a survey from Kantar, iPhones were four out of the top five models in the U.S. and Japan, four out of the top six models in urban China and the UK, and all top five models in Australia. Mac generated revenue of $7.8 billion and return to growth, despite one less week of sales this year. This represents a significant acceleration from the September quarter when we faced a challenging compare due to the supply disruptions and subsequent demand recapture we experienced a year ago. Customer response to our latest iMac and MacBook Pro models powered by the M3 chips has been great. And our Mac installed base reached an all-time high with almost half of Mac buyers during the quarter being new to the product. Also, 451 Research recently reported customer satisfaction of 97% for Mac in the U.S. iPad was $7 billion in revenue, down 25% year-over-year. iPad faced a difficult compare because during the December quarter last year, we launched the new iPad Pro and iPad 10 generation, and we had an extra week of sales. However, the iPad installed base continues to grow and is an all-time high with over half of the customers who purchased iPads during the quarter being new to the product, and customer satisfaction for iPad was recently measured at 98% in the U.S. Wearables, Home and Accessories revenue was $12 billion, down 11% year-over-year due to a challenging launch compare and the extra week a year ago. This time last year, we had the full quarter benefit from the launches of the AirPods Pro 2nd generation, the Watch SE, and the first Watch Ultra. We continue to attract new customers to Apple Watch. Nearly two-thirds of customers purchasing an Apple Watch during the quarter were new to the product, and the latest reports from 451 Research indicate customer satisfaction of 96% in the U.S. And in Services, we were very pleased with our double-digit growth, which was driven by the strength of our ecosystem. Our installed base is now over 2.2 billion active devices and continues to grow nicely, establishing a solid foundation for the future expansion of our Services business. And we continue to see increased customer engagement with our services. Both transacting accounts and paid accounts reached a new all-time high, with paid accounts growing double-digits year-over-year. Also, our paid subscriptions showed strong double-digit growth. We have well over 1 billion paid subscriptions across the services on our platform, more than double the number that we had only four years ago. Finally, we continue to build on the breadth and the quality of our current services. From Oscar-nominated theatrical releases with Apple TV+ to more publications or News+ like The Atlantic and exciting new games on Arcade. Turning to Enterprise, we continue to see many business customers leverage Apple products to improve productivity and drive innovation. Target recently added the latest M3 MacBook Pro to their existing deployment of thousands of Mac\u2019s, enabling employees across various departments to do their best work. In emerging markets, Zoho, a leading technology company headquartered in India, offers its 15,000 plus global employees a choice of devices, with 80% of their workforce using iPhone for work and nearly two-thirds of them choosing Mac as their primary computer. With the upcoming launch of Apple Vision Pro, we are seeing strong excitement in Enterprise. Leading organizations across many industries such as Walmart, Nike, Vanguard, Stryker, Bloomberg, and SAP have started leveraging and investing in Apple Vision Pro as their new platform to bring innovative spatial computing experiences to their customers and employees. From everyday productivity to collaborative product design to immersive training, we cannot wait to see the amazing things our enterprise customers will create in the months and years to come. Let me now turn to our cash position and capital return program. We ended the quarter with $173 billion in cash and marketable securities. We decreased commercial paper by $4 billion, leaving us with total debt of $108 billion. As a result, net cash was $65 billion at the end of the quarter, and our goal of becoming net cash-neutral over time remains unchanged. During the quarter, we returned nearly $27 billion to shareholders, including $3.8 billion in dividends and equivalents and $20.5 billion through open market repurchases of 112 million Apple shares. We also retired an additional 6 million shares in the final settlement of our 19th ASR. As usual, we will provide an update to our capital return program when we report results at the end of this quarter. As we move ahead into the March 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. And we expect foreign exchange to be a revenue headwind of about 2 percentage points on a year-over-year basis. As a reminder, in the December quarter a year ago, we faced significant supply constraints on the iPhone 14 Pro and 14 Pro Max due to COVID-19 factory shutdowns. And in the March quarter a year ago, we were able to replenish channel inventory and fulfill significant pent-up demand from the constraints. We estimate that this impact added close to $5 billion to the March quarter's total revenue last year. When we remove this impact from last year's revenue, we expect both our March quarter total company revenue and iPhone revenue to be similar to a year ago. For our Services business, we expect a similar double-digit growth rate to what we reported in the December quarter. We expect gross margin to be between 46% and 47%. We expect OpEx to be between $14.3 billion and $14.5 billion. We expect OI&E to be around $50 million, excluding any potential impact from the mark-to-market of minority investments and our tax rate to be around 16%. Finally, today our Board of Directors has declared a cash dividend of $0.24 per share of common stock payable on February 15, 2024, to shareholders of record as of February 12, 2024. With that, let's open the call to questions.","evidence_gemma_new":null,"evidence_llama_3_3":"expect OpEx March quarter","evidence_qwen_3_30b":"OpEx between $14.3 billion and $14.5 billion","gemma_new_max":null,"gemma_new_min":null,"llama_3_3_max":14400000000.0,"llama_3_3_min":14400000000.0,"qwen_3_30b_max":14400000000.0,"qwen_3_30b_min":14400000000.0}
{"symbol":"AAPL","year":2024,"quarter":2,"date":"2024-Q2","chunk_id":2,"sub_chunk_id":0,"centroid_label":"opex","agreed_value":14400000000.0,"count":2,"chunk":"Luca Maestri: Thank you, Tim, and good afternoon, everyone. Revenue for the March quarter was $90.8 billion, down 4% from last year. Foreign exchange had a negative year-over-year impact of 140 basis points on our results. Products revenue was $66.9 billion, down 10% year-over-year due to the challenging compare on iPhone that Tim described earlier, which was partially offset by strength from Mac. And thanks to our unparalleled customer satisfaction and loyalty and a high number of customers who are new to our products, our installed base of active devices reached an all-time high across all products and all geographic segments. Services revenue set an all-time record of $23.9 billion, up 14% year-over-year with record performance in both developed and emerging markets. Company gross margin was 46.6%, up 70 basis points sequentially, driven by cost savings and favorable mix to services, partially offset by leverage. Products gross margin was 36.6%, down 280 basis points sequentially, primarily driven by seasonal loss of leverage and mix, partially offset by favorable costs. Services gross margin was 74.6%, up 180 basis points from last quarter due to a more favorable mix. Operating expenses of $14.4 billion were at the midpoint of the guidance range we provided and up 5% year-over-year. Net income was $23.6 billion, diluted EPS was $1.53 and a March quarter record, and operating cash flow was strong at $22.7 billion. Let me now provide more detail for each of our revenue categories. iPhone revenue was $46 billion, down 10% year-over-year, due to the almost $5 billion impact from a year ago that Tim described earlier. Adjusting for this one-time impact, iPhone revenue would be roughly flat to last year. Our iPhone active installed base grew to a new all-time high in total and in every geographic segment. And during the March quarter, we saw many iPhone models as the top-selling smartphones around the world. In fact, according to a survey from Kantar, an iPhone was the top-selling model in the U.S., Urban China, Australia, the U.K., France, Germany and Japan. And the iPhone 15 family continues to be very popular with customers. 451 Research recently measured customer satisfaction at 99% in the U.S. Mac revenue was $7.5 billion, up 4% year-over-year, driven by the strength of our new MacBook Air, powered by the M3 chip. Customers are loving the incredible AI performance of the latest MacBook Air and MacBook Pro models. And our Mac installed base reached an all-time high with half of our MacBook Air buyers during the quarter being new to Mac. Also customer satisfaction for Mac was recently reported at 96% in the U.S. iPad generated $5.6 billion in revenue, down 17% year-over-year. iPad continued to face a challenging compare against the launch of the M2 iPad Pro and iPad 10th Generation from last year. At the same time, the iPad installed base has continued to grow and is at an all-time high as over half of the customers who purchased iPads during the quarter were new to the product. In addition, the latest reports from 451 Research indicated customer satisfaction of 96% for iPad in the US. Wearables, Home and Accessories revenue was $7.9 billion, down 10% year-over-year due to a difficult launch compare. Last year, we had the continued benefit from the launches of the AirPods Pro second-generation, the Watch SE and the first Watch Ultra. Apple Watch continues to attract new customers, with almost two-thirds of customers purchasing an Apple Watch during the quarter being new to the product, sending the Apple Watch installed base to a new all-time high and customer satisfaction was recently measured at 95% in the U.S. In services, as I mentioned, total revenue reached an all-time record of $23.9 billion, growing 14% year-over-year with our installed-base of active devices continuing to grow at a nice pace. This provides a strong foundation for the future growth of the services business as we continued to see increased customer engagement with our ecosystem. Both transacting accounts and paid accounts reached a new all-time high with paid accounts growing double-digits year-over-year. And paid subscriptions showed strong double-digit growth. We have well over $1 billion paid subscriptions across the services on our platform, more than double the number that we had only four years ago. We continued to improve the breadth and quality of our current services from creating new games on Arcade and great new shows on TV+ to launching additional countries and partners for Apple Pay. Turning to enterprise, our customers continued to invest in Apple products to drive productivity and innovation. We see more and more enterprise customers embracing the Mac. In Healthcare, Epic Systems, the world's largest electronic medical record provider, recently launched its native app for the Mac, making it easier for healthcare organizations like Emory Health to transition thousands of PCs to the Mac for clinical use. And since the launch of Vision Pro last quarter, many leading enterprise customers have been investing in this amazing new product to bring spatial computing apps and experiences to life. We are seeing so many compelling use cases from aircraft engine maintenance training at KLM Airlines to real-time team collaboration for racing at Porsche to immersive kitchen design at Lowe's. We couldn't be more excited about the spatial computing opportunity in enterprise. Taking a quick step back, when we look at our performance during the first-half of our fiscal year, total company revenue was roughly flat to the prior year in spite of having one less week of sales during the period and some foreign exchange headwinds. We were particularly pleased with our strong momentum in emerging markets, as we set first-half revenue records in several countries and regions, including Latin-America, the Middle East, India, Indonesia, the Philippines and Turkey. These results, coupled with double-digit growth in services and strong levels of gross margin, drove a first half diluted EPS record of $3.71, up 9% from last year. Let me now turn to our cash position and capital return program. We ended the quarter with $162 billion in cash and marketable securities. We repaid $3.2 billion in maturing debt and commercial paper was unchanged sequentially, leaving us with total debt of $105 billion. As a result, net cash was $58 billion at the end of the quarter. During the quarter, we returned over $27 billion to shareholders, including $3.7 billion in dividends and equivalents and $23.5 billion through open-market repurchases of $130 million Apple's shares. Given the continued confidence we have in our business now and into the future, our Board has authorized today an additional $110 billion for share repurchases, as we maintain our goal of getting to net cash-neutral over time. We are also raising our dividend by 4% to $0.25 per share of common stock, and we continued to plan for annual increases in the dividend going forward as we've done for the last 12 years. This cash dividend will be payable on May 16, 2024 to shareholders of record as of May 13, 2024. As we move ahead into the June 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. We expect our June quarter total company revenue to grow low-single-digits year-over-year in spite of a foreign exchange headwind of about 2.5 percentage points. We expect our services business to grow double-digits at a rate similar to the growth we reported for the first-half of the fiscal year. And we expect iPad revenue to grow double-digits. We expect gross margin to be between 45.5% to -- and 46.5%. We expect OpEx to be between $14.3 billion and $14.5 billion. We expect OI&E to be around $50 million, excluding any potential impact from the mark-to-market of minority investments and our tax rate to be around 16%. With that, let's open the call to questions.","evidence_gemma_new":null,"evidence_llama_3_3":"OpEx June quarter","evidence_qwen_3_30b":"expect OpEx between $14.3 billion and $14.5 billion","gemma_new_max":null,"gemma_new_min":null,"llama_3_3_max":14400000000.0,"llama_3_3_min":14400000000.0,"qwen_3_30b_max":14400000000.0,"qwen_3_30b_min":14400000000.0}
{"symbol":"AAPL","year":2024,"quarter":3,"date":"2024-Q3","chunk_id":2,"sub_chunk_id":0,"centroid_label":"opex","agreed_value":14300000000.0,"count":2,"chunk":"Luca Maestri : Thank you, Tim, and good afternoon, everyone. We are very pleased to report a new June quarter revenue record of $85.8 billion, up 5% year-over-year, despite 230 basis points of negative foreign exchange impact. We achieved growth in the vast majority of our markets, with June quarter revenue records in the Americas, Europe, and rest of Asia Pacific. Products revenue was $61.6 billion, up 2% year-over-year, driven by the launch of the new iPad Pro and iPad Air. Our installed base of active devices reach an all-time high across all products and geographic segments, thanks to our unmatched levels of customer satisfaction and loyalty and a large number of customers who are new to our products. Services revenue reached an all-time record of $24.2 billion, up 14% year-over-year, with an all-time record in developed markets and a June quarter record in emerging markets. Company gross margin was 46.3% near the high end of our guidance range and down 30 basis points sequentially driven by a different mix within products which was partially offset by a favorable mix shift towards services and cost savings. Products gross margin was 35.3%, down 130 basis points sequentially, primarily driven by mix, partially offset by favorable costs. Services gross margin was 74% down 60 basis points from last quarter. Operating expenses of $14.3 billion were at the low end of the guidance range we provided and up 7% year-over-year. Net income was $21.4 billion, diluted EPS of $1.40 was up 11% year-over-year and set a June quarter record. And operating cash flow was very strong at $28.9 billion, also a June quarter record. Let me get into more detail for each of our revenue categories. iPhone revenue was $39.3 billion, down 1% year-over-year, but grew on a constant currency basis. We set June quarter records across several countries, including the UK, Spain, Poland, Mexico, Indonesia, and the Philippines. And the iPhone Active installed base grew to a new all-time high in total and in every geographic segment. During the June quarter, many iPhone models were among the top selling smartphones around the world. In fact, according to a survey from Kantar, iPhone was the top selling model in the US, urban China, the UK, Germany, Australia, and Japan. Customer satisfaction on the iPhone 15 family continues to be extremely high, with 451 Research measuring it at 98% in the US in their latest reports. Mac generated $7 billion in revenue, up 2% year-over-year, driven by the MacBook Air powered by the M3 chip. We saw particularly strong performance in our emerging markets, with June quarter records for Mac in Latin America, India, and South Asia. The Mac installed base reached an all-time high with half of MacBook Air customers in the quarter being new to Mac. And customer satisfaction for Mac was recently reported at 96% in the US. iPad revenue was $7.2 billion, up 24% year-over-year, driven by the launch of the new iPad Pro and iPad Air. Customers are loving the latest iPad lineup for its new design and display, unparalleled performance, AI capabilities and much more. The iPad install base has continued to grow and is an all-time high, as half of the customers who purchased iPads during the quarter were new to the product. Also, customer satisfaction was recently measured at 97% in the US. Wearables, home and accessories revenue was $8.1 billion, down 2% year-over-year, a sequential acceleration from the March quarter. Watch and AirPods continue to face a difficult compare against prior year launches of the AirPods Pro second generation, the Watch SE and the first Watch Ultra. Apple Watch continues to attract new customers, with almost two-thirds of customers purchasing an Apple Watch during the quarter being new to the product, sending the Apple Watch install base to a new all-time high. And the latest reports from 451 Research indicate a customer satisfaction of 97% for watch in the US. In services, total revenue reached an all-time record of $24.2 billion, growing 14% year-over-year. We continue to have great momentum in services, as the growth of our installed base of active devices, sets a strong foundation for the future expansion of our ecosystem. And we see increased customer engagement with our services offerings. Both transacting accounts and paid accounts reach a new all-time high with paid accounts growing double digits year-over-year. Also, paid subscriptions showed strong double digit growth. We have well over 1 billion paid subscriptions across the services on our platform, more than double the number that we had only four years ago. And we are constantly focused on improving the breadth and quality of our services. From critically acclaimed new content on Apple TV+ to new games on Apple Arcade and the many latest features we previewed during WWDC for iCloud, Apple Pay, Apple Cash, Apple Music, and more. Turning to enterprise, we continue to see businesses, leveraging our entire suite of products to drive productivity and creativity for their teams and customers. USAA, a leading insurance and financial services company, recently expanded beyond their existing iPhone and iPad deployments to provide their employees with the latest MacBook Air. And American Express has continued to add to their fleet of over 10,000 Macs to enhance their employees' productivity, security, and collaboration. We're also excited to see leading organizations such as Boston Children's Hospital and Lufthansa using Apple Vision Pro to build innovative spatial computing experiences to transform the training of their workforces. Let me now turn to our cash position and capital return program. We ended the quarter with $153 billion in cash and marketable securities. We repaid $4.3 billion in maturing debt and increased commercial paper by $1 billion, leaving us with total debt of $101 billion. As a result, net cash was $52 billion at the end of the quarter. During the quarter, we returned over $32 billion to shareholders, including $3.9 billion in dividends and equivalents and $26 billion through open market repurchases of 139 million Apple shares. As we move ahead into the September 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. We expect foreign exchange to continue to be a headwind and to have a negative impact on revenue of about 1.5 percentage points on a year-over-year basis. We expect our September quarter total company revenue to grow year-over-year at a rate similar to the June quarter. We expect services revenue to grow double digits at a rate similar to what we reported in the first three quarters of this fiscal year. We expect gross margin to be between 45.5% and 46.5%. We expect OpEx to be between $14.2 billion and $14.4 billion. We expect OI&E to be around negative $50 million, excluding any potential impact from the mark to market of minority investments, and our tax rate to be around 16.5%. Finally, today our Board of Directors has declared a cash dividend of $0.25 per share of common stock payable on August 15, 2024, to shareholders of record as of August 12, 2024. With that, let's open the call to questions.","evidence_gemma_new":null,"evidence_llama_3_3":"OpEx September quarter","evidence_qwen_3_30b":"expect OpEx September quarter","gemma_new_max":null,"gemma_new_min":null,"llama_3_3_max":14300000000.0,"llama_3_3_min":14300000000.0,"qwen_3_30b_max":14300000000.0,"qwen_3_30b_min":14300000000.0}
{"symbol":"AAPL","year":2024,"quarter":4,"date":"2024-Q4","chunk_id":2,"sub_chunk_id":0,"centroid_label":"opex","agreed_value":15400000000.0,"count":3,"chunk":"Luca Maestri: Good afternoon, everyone. And thank you, Tim, for the very kind words. Serving as Apple's CFO has been a real privilege and an amazing journey, and I've greatly appreciated the support from our investors and the analyst community over the years. Kevan is exceptional, and I know you will enjoy interacting with him going forward. Let me now turn to the results for the fourth quarter of our fiscal year. We're very pleased to report a new September quarter revenue record of $94.9 billion, up 6% year-over-year. We grew in the vast majority of the markets we track and achieved September quarter revenue records in the Americas, Europe and Rest of Asia Pacific. Products revenue was $70 billion, up 4% year-over-year, driven by growth in iPhone, iPad and Mac. Our installed base of active devices reached an all-time high across all products and geographic segments, thanks to very high levels of customer satisfaction and loyalty and a large number of customers who are new to our products. Services revenue reached an all-time record of $25 billion, up 12% year-over-year. We saw broad-based strength around the world, reaching all-time records in both developed and emerging markets with double-digit growth and record results across most services categories. Company gross margin was 46.2%, near the high end of our guidance range. Products gross margin was 36.3%, up 100 basis points sequentially, primarily driven by favorable mix. Services gross margin was 74%, unchanged from the prior quarter. Operating expenses of $14.3 billion were at the midpoint of the guidance range we provided at the beginning of the quarter and up 6% year-over-year. During the quarter, we recorded a one-time income tax charge of $10.2 billion, which relates to the impact of the reversal of the European General Court's State Aid decision. When we exclude this one-time charge, net income was $25 billion and diluted earnings per share were a $1.64, up 12% year-over-year, and a September quarter record. Operating cash flow was very strong at $26.8 billion, a new September quarter record. Let me now get into more detail for each of our revenue categories. iPhone revenue was $46.2 billion, up 6% year-over-year, and a September quarter record in total and across several markets, including the US, the Middle East, Korea, and South Asia. The iPhone active installed base grew to a new all-time high in total and in every geographic segment. During the September quarter, many iPhone models were among the top-selling smartphones around the world. In fact, according to a survey from Kantar, iPhone was the top-selling model in the US, Urban China, the UK, Australia, and Japan. We continue to see high levels of customer satisfaction for the iPhone 15 family, with 451 Research recently measuring it at 98% in the US. Mac revenue was $7.7 billion, up 2% year-over-year, driven by the strength in MacBook Air. Customers have been loving the performance of Apple Silicon on Mac and we are very excited to bring the latest M4 family of chips to the lineup. The Mac installed base reached an all-time high with about half of customers in the quarter being new to Mac. And in the latest reports from 451 Research, customer satisfaction was 95% in the US. iPad generated $7 billion in revenue, up 8% year-over-year. In addition to growth in developed markets, we also saw strong performance in many emerging markets, with double-digit growth in Mexico, Brazil, the Middle East, India and South Asia. The iPad installed base reached another all-time high, and over half of the customers who purchased iPads during the quarter were new to the product. Also, customer satisfaction was recently measured at 97% in the US. Wearables, Home and Accessories revenue was $9 billion, down 3% year-over-year. The Apple Watch installed base reached a new all-time high, with over half of customers purchasing an Apple Watch during the quarter being new to the product. And the latest reports from 451 Research indicated customer satisfaction of 96% for watch in the US. Our Services revenue reached an all-time record of $25 billion, growing 12% year-over-year. Services continue to see strong momentum with the growth of our installed base of active devices setting a solid foundation for the future expansion of our ecosystem. And we see increased customer engagement with our services offerings. Both transacting accounts and paid accounts reached a new all-time high, with paid accounts growing double-digits year-over-year. Paid subscriptions also grew double-digits. We have well over 1 billion paid subscriptions across the services on our platform, more than double the number we had only four years ago. And as always, we remain focused on improving the breadth and quality of our services from new games on Apple Arcade to new features like Tap to Cash and pay with installments using Apple Pay to many successful new and returning shows on Apple TV+. This past quarter, we celebrated the five-year anniversary of Apple Card, which was ranked #1 in customer satisfaction among co-branded credit cards by J.D. Power for the fourth year in a row. Turning to enterprise, we continue to see strong demand across our products and services. NVIDIA launched its Mac as a choice program supported by AppleCare for Enterprise and Apple Professional Services with over 10,000 Macs deployed worldwide. And Novartis, a leading global pharmaceutical company, recently chose iPhone 16 as the standard mobile device for all employees. We also see continued momentum with Apple Vision Pro in the enterprise space. UC San Diego Health is the first hospital in the world to test spatial computing apps on Apple Vision Pro in clinical trials for patient surgery in the operating room. Let me now turn to our cash position and capital return program. We ended the quarter with $157 billion in cash and marketable securities. We repaid $2.6 billion in maturing debt and increased commercial paper by $7 billion, leaving us with total debt of $107 billion. As a result, net cash was $50 billion at the end of the quarter. During the quarter, we returned over $29 billion to shareholders, including $3.8 billion in dividends and equivalents and $25 billion through open market repurchases of 112 million Apple shares. 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're providing today assumes that the macroeconomic outlook doesn't worsen from what we are projecting today for the current quarter. We expect our December quarter total company revenue to grow low- to mid-single digits year-over-year. We expect Services revenue to grow double-digits at a rate similar to what we reported in the fiscal year 2024. We expect gross margin to be between 46% and 47%. We expect OpEx to be between $15.3 billion and $15.5 billion. We expect OI&E to be around negative $250 million, excluding any potential impact from the mark to market of minority investments. And our tax rate to be around 16%. Finally, today, our Board of Directors has declared a cash dividend of $0.25 per share of common stock payable on November 14, 2024 to shareholders of record as of November 11, 2024. With that, let us open the call to questions.","evidence_gemma_new":"OpEx","evidence_llama_3_3":"expect OpEx December quarter","evidence_qwen_3_30b":"expect OpEx","gemma_new_max":15400000000.0,"gemma_new_min":15400000000.0,"llama_3_3_max":15400000000.0,"llama_3_3_min":15400000000.0,"qwen_3_30b_max":15400000000.0,"qwen_3_30b_min":15400000000.0}
{"symbol":"AAPL","year":2024,"quarter":4,"date":"2024-Q4","chunk_id":74,"sub_chunk_id":0,"centroid_label":"opex","agreed_value":57000000000.0,"count":3,"chunk":"Richard Kramer: Okay, thanks. And then, Luca, one piece of unfinished business was your pledge to get to a net-neutral cash position. And over the last two years, you stayed around $50 billion of net cash. We've clearly seen instances in the past where elevated marketing spend or other programs brought increases in market share. I guess my question looking back on your tenure is, at your scale now of $57 billion of OpEx, do you still see incremental ways to put that cash to work in the business? Or will we just continue to see increased shareholder returns?","evidence_gemma_new":"OpEx","evidence_llama_3_3":"OpEx","evidence_qwen_3_30b":"OpEx $57 billion","gemma_new_max":57000000000.0,"gemma_new_min":57000000000.0,"llama_3_3_max":57000000000.0,"llama_3_3_min":57000000000.0,"qwen_3_30b_max":57000000000.0,"qwen_3_30b_min":57000000000.0}
{"symbol":"AAPL","year":2023,"quarter":1,"date":"2023-Q1","chunk_id":3,"sub_chunk_id":0,"centroid_label":"paid subscriptions","agreed_value":935000000.0,"count":2,"chunk":"Luca Maestri: Thank you, Tim, and good afternoon, everyone. As Tim mentioned, revenue for the December quarter was $117.2 billion, down 5% from last year. A number of factors had a significant impact on our results. First, we faced a very difficult foreign exchange environment, which affected our performance by nearly 800 basis points. In other words, we grew revenue on a constant currency basis. And in fact, we did so in the vast majority of markets. Second, the macroeconomic environment this past quarter was markedly more challenging than 12 months ago. Third, we experienced significant supply shortages for iPhone 14 Pro and iPhone 14 Pro Max in November and through December. On the other hand, we had the positive impact of the 14th week in the quarter that Tejas just mentioned at the beginning of the call. Products revenue was $96.4 billion, down 8% from last year due to the factors I just called out. At the same time, however, our installed base of active devices grew double digits and achieved all-time records in each geographic segment and in each major product category. We're proud to now have over 2 billion active devices in our installed base. This continued growth in the installed base is due to extremely strong levels of customer satisfaction and loyalty and a high number of customers who are new to our products. The installed base growth also helped our services set an all-time revenue record of $20.8 billion, up 6% over a year ago. We achieved this new milestone despite more than 700 basis points of negative impact from foreign exchange. We reached all-time services revenue records in the Americas, Europe and rest of Asia Pacific and a December quarter record in Greater China. We also set records in many Services categories, including all-time revenue records for cloud services, payment services and music and December quarter records for the App Store and AppleCare. Company gross margin was 43%, up 70 basis points from last quarter due to leverage and favorable mix, partially offset by foreign exchange. Products gross margin was 37%, up 240 basis points sequentially. And Services gross margin was 70.8%, up 30 basis points sequentially, both due to the same factors that impacted total company gross margin. Operating expenses of $14.3 billion were significantly below the guidance range we provided at the beginning of the quarter and grew at a slower pace than in the past as we took actions to respond to the current macro environment. Net income was $30 billion. Diluted earnings per share were $1.88, and we generated very strong operating cash flow of $34 billion. Let me now get into more detail for each of our revenue categories. iPhone revenue was $65.8 billion despite significant foreign exchange headwinds, supply constraints on iPhone 14 Pro and iPhone 14 Pro Max and a challenging macroeconomic environment. In spite of these circumstances, we set all-time iPhone revenue records in Canada, Italy and Spain, and saw strong growth in several emerging markets, including all-time iPhone revenue records for India and Vietnam. Importantly, the installed base of active iPhones continues to grow nicely and is at an all-time high across all geographic segments. In emerging markets, in particular, the installed base grew double digits, and we had record levels of switchers in India and in Mexico. Our customers continue to love their experience with our products with the latest survey of U.S. consumers from 451 Research indicating customer satisfaction of 98% for the iPhone 14 family. Mac revenue was $7.7 billion, down 29% year-over-year and in line with our expectations. There were 3 key drivers for our Mac results. First, we had a challenging compare against last year's launch of the completely reimagined MacBook Pros, our first notebooks with M1 Pro and M1 Max. Second, we believe that the macro environment impacted our Mac performance. And third, we faced significant foreign exchange headwinds. At the same time, however, the installed base of active Macs reached an all-time high across all geographic segments, and we continue to see very strong upgraded activity to Apple silicon. Customer satisfaction with Mac remains very strong at 96% based on the latest survey of U.S. consumers from 451 Research. iPad revenue was $9.4 billion, up 30% year-over-year despite significant FX headwinds. This performance was driven by 2 key items. First, during the December quarter a year ago, we experienced significant supply constraints, while this year, we had enough supply to meet demand. Second, we launched our new iPad and the iPad Pro powered by the M2 chip during the quarter. The iPad installed base reached a new all-time high, thanks to incredible customer loyalty and a high number of new customers. In fact, over half of the customers who purchased iPads during the quarter were new to the product. Wearables, Home and Accessories revenue was $13.5 billion, down 8% year-over-year. The year-over-year decline was driven by significant FX headwinds and a challenging macroeconomic environment. However, our installed base of devices in the category set a new all-time record thanks to the largest number of customers new to our smartwatch that we've ever had in a given quarter. In fact, nearly 2\/3 of customers purchasing an Apple Watch during the quarter were new to the product. Moving to Services. We generated $20.8 billion in revenue, a new all-time record in total and for many Services offerings in spite of a difficult foreign exchange environment, and macroeconomic headwinds impacting certain categories such as digital advertising and mobile gaming. In constant currency, we grew Services revenue double digits on top of growing 24% during the December quarter a year ago. We remain focused on the large long-term opportunity in this category, and we continue to observe several trends that reflect the strength of our ecosystem. For example, we saw increased customer engagement with our Services during the quarter. Both our transacting accounts and paid accounts grew double digits year-over-year, each setting a new all-time record. Paid subscriptions also continued to grow nicely. We now have more than 935 million paid subscriptions across the services on our platform, up more than 150 million during the last 12 months alone and nearly 4x what we had just 5 years ago. And we continue to increase the reach and improve the quality of our offerings. For instance, Apple Pay is now available to millions of merchants in nearly 70 countries and regions. And we saw a record-breaking number of purchases made using Apple Pay globally during the holiday shopping season. Finally, our installed base of over 2 billion active devices represents a great foundation for future expansion of our ecosystem, and it continues to grow even during difficult macroeconomic conditions, which speaks to the exceptionally high levels of customer loyalty and satisfaction and our ability to attract new customers to our platform. The growth is coming from every major product category and geographic segment, with strong double-digit increases in emerging markets such as Brazil, Mexico, India, Indonesia, Thailand and Vietnam. Turning to the enterprise market. we are seeing continued adoption of our Services for business like Apple Business Essentials, AppleCare, Tap to Pay and Apple Financial Services. For example, Mars Incorporated has expanded its use of AppleCare for Enterprise to provide timely device support and assurance for iPads deployed across their manufacturing sites. Meanwhile, HCA Healthcare has leveraged Apple Financial Services to manage the annual refresh of its entire fleet of iPhones. This not only ensures that their staff stay current on the latest Apple technology, but also provides them with significant annual savings in the process. Let me now turn to our capital return program and our cash position. We returned over $25 billion to shareholders during the December quarter as our business continues to generate very strong cash flow. This included $3.8 billion in dividends and equivalents and $19 billion through open market repurchases of 133 million Apple shares. We ended the quarter with $165 billion in cash and marketable securities. We repaid $1.4 billion in maturing debt and decreased commercial paper by $8.2 billion, leaving us with total debt of $111 billion. As a result, net cash was $54 billion at the end of the quarter, and we maintain our goal of becoming net cash-neutral over time. As we move into the March quarter, I'd like to review our outlook, which includes the types of forward-looking information that Tejas referred to at the beginning of the call. Given the continued uncertainty around the world in the near term, we are not providing revenue guidance, but we are sharing some directional insights based on the assumption that the macroeconomic outlook and COVID-related impacts to our business do not worsen from what we are projecting today for the current quarter. In total, we expect our March quarter year-over-year revenue performance to be similar to the December quarter. This represents an acceleration in our underlying year-over-year business performance as the December quarter benefited from an extra week. Foreign exchange will continue to be a headwind, and we expect a negative year-over-year impact of 5 percentage points. For Services, we expect revenue to grow year-over-year while continuing to face macroeconomic headwinds in areas such as digital advertising and mobile gaming. For iPhone, we expect our March quarter year-over-year revenue performance to accelerate relative to the December quarter year-over-year revenue performance. For Mac and iPad, we expect revenue for both product categories to decline double digits year-over-year because of challenging compares and macroeconomic headwinds. We expect gross margin to be between 43.5% and 44.5%. We expect OpEx to be between $13.7 billion and $13.9 billion. We expect OI&E to be around negative $100 million, excluding any potential impact from the mark-to-market of minority investments, and our tax rate to be around 16%. Finally, today, our Board of Directors has declared a cash dividend of $0.23 per share of common stock payable on February 16, 2023, to shareholders of record as of February 13, 2023. With that, let's open the call to questions.","evidence_gemma_new":"Paid subscriptions","evidence_llama_3_3":"paid subscriptions 935 million","evidence_qwen_3_30b":null,"gemma_new_max":935000000.0,"gemma_new_min":935000000.0,"llama_3_3_max":935000000.0,"llama_3_3_min":935000000.0,"qwen_3_30b_max":null,"qwen_3_30b_min":null}
{"symbol":"AAPL","year":2023,"quarter":2,"date":"2023-Q2","chunk_id":28,"sub_chunk_id":0,"centroid_label":"paid subscriptions","agreed_value":975000000.0,"count":3,"chunk":"Luca Maestri: David, it\u2019s Luca. As you said, of course we got the issue around the macroeconomic environment, particularly in advertising and in mobile gaming, but outside of those areas the behavior of customers continues to be pretty consistent. We are doing particularly well, obviously in some of the services that we've launched more recently, like payments where our growth rates are very strong as the adoption of Apple Pay and Apple Card and now the new services that Tim mentioned, the adoption continues to increase. Cloud is an area that continues to grow very consistently. Users want to store more photos and videos and more content on their devices and so they adopt our cloud services and in general the model in the App Store around paid subscriptions continues to grow very strongly. I mentioned we now have more than 975 million paid subscriptions on the platform and that's almost twice as much what we had only three years ago. So obviously, the growth in subscriptions is very strong.","evidence_gemma_new":"paid subscriptions three years ago","evidence_llama_3_3":"paid subscriptions","evidence_qwen_3_30b":"paid subscriptions strong growth","gemma_new_max":975000000.0,"gemma_new_min":975000000.0,"llama_3_3_max":975000000.0,"llama_3_3_min":975000000.0,"qwen_3_30b_max":975000000.0,"qwen_3_30b_min":975000000.0}
{"symbol":"AAPL","year":2023,"quarter":3,"date":"2023-Q3","chunk_id":3,"sub_chunk_id":0,"centroid_label":"paid subscriptions","agreed_value":1000000000.0,"count":2,"chunk":"Luca Maestri: Thank you, Tim, and good afternoon, everyone. Revenue for the June quarter was $81.8 billion, down 1% from last year and better than our expectations despite nearly 4 percentage points of negative impact from foreign exchange. On a constant currency basis, our revenue grew year-over-year in total and in the majority of the markets we track. We set June quarter records in both Europe and Greater China and continue to see strong performance across our emerging markets driven by iPhone. Products revenue was $60.6 billion, down 4% from last year, as we faced FX headwinds and an uneven macroeconomic environment. However, our installed base reached an all-time high across all geographic segments, driven by a June quarter record for iPhone switchers and high new-to rates in Mac, iPad and Watch, coupled with very high levels of customer satisfaction and loyalty. Our Services revenue set an all-time record of $21.2 billion, up 8% year-over-year and grew double digits in constant currency. Our performance was strong around the world as we reach all-time Services revenue records in Americas and Europe and June quarter records in Greater China and rest of Asia Pacific. Company gross margin was 44.5%, a record level for the June quarter and up 20 basis points sequentially, driven by cost savings and favorable mix shift towards Services, partially offset by a seasonal loss of leverage. Products gross margin was 35.4%, down 130 basis points from last quarter due to seasonal loss of leverage and mix, partially offset by favorable costs. Services gross margin was 70.5%, decreasing 50 basis points sequentially. Operating expenses of $13.4 billion were below the low end of the guidance range we provided at the beginning of the quarter and decelerated from the March quarter. We continue to take a deliberate approach in managing our spend with strong focus on innovation and new product development. The results of these actions delivered net income of $19.9 billion, diluted earnings per share of $1.26, up 5% versus last year, and very strong operating cash flow of $26.4 billion. Let me now provide more detail for each of our revenue categories. iPhone revenue was $39.7 billion, down 2% year-over-year but grew on a constant currency basis. We set revenue records in several markets around the world, including an all-time record in India and June quarter records in Latin America, the Middle East and Africa, Indonesia, the Philippines, Italy, the Netherlands and the U.K. Our iPhone active installed base grew to a new all-time high, thanks to a June quarter record in switchers. This is a testament to our extremely high levels of customer satisfaction, which 451 Research recently measured at 98% for the iPhone 14 family in the U.S. Mac generated $6.8 billion in revenue, down 7% year-over-year. We continue to invest in our Mac portfolio. And this past quarter, we were pleased to complete the transition to Apple silicon for the entire lineup. This transition has driven both strong upgrade activity and a high number of new customers. In fact, almost half of Mac buyers during the quarter were new to the product. We also saw reported customer satisfaction of 96% for Mac in the U.S. iPad revenue was $5.8 billion, down 20% year-over-year and in line with our expectations. These results were driven by a difficult compare against the full quarter impact of the iPad Air launch in the prior year. At the same time, we continue to attract a large number of new customers to the iPad installed base with over half of the customers who purchased iPads during the quarter being new to the product. And the latest reports from 451 Research indicate customer satisfaction of 96% in the U.S. Wearables, Home and Accessories revenue was $8.3 billion, up 2% year-over-year, with a June quarter record in Greater China and strong performance in several emerging markets. We continue to see Apple Watch expand its reach with about 2\/3 of customers purchasing an Apple Watch during the quarter being new to the product. And this is combined with very high levels of customer satisfaction, which was recently reported at 98% in the United States. Moving on to Services. We reached a new all-time revenue record of $21.2 billion with year-over-year growth accelerating sequentially to 8% and up double digits in constant currency. In addition to the all-time records Tim mentioned earlier, we also set June quarter records for advertising, App Store and Music. We are very pleased with our performance in Services, which is a direct reflection of our ecosystem's strength. First, our installed base of over 2 billion active devices continues to grow at a nice pace and establishes a solid foundation for the future expansion of our ecosystem. Second, we see increased customer engagement with our services. Both our transacting accounts and paid accounts grew double digits year-over-year, each reaching a new all-time high. Third, our paid subscriptions showed strong growth. This past quarter, we reached an important milestone and passed 1 billion paid subscriptions across the services on our platform, up 150 million during the last 12 months and nearly double the number of paid subscriptions we had only 3 years ago. And finally, we continue to improve the breadth and the quality of our current services. From 20 new games on Apple Arcade, to brand-new content on Apple TV+, to the launch of our high-yield savings account with Apple Card, our customers are loving these enhanced offerings. Turning to the enterprise market. Our customers are leveraging Apple products every day to help improve productivity and attract talent. Blackstone, a global investment management firm, is expanding its Apple footprint from their corporate iPhone fleet to now offering the MacBook Air powered by M2 to all of their corporate employees and portfolio companies. Gilead, a leading biopharmaceutical company, has deployed thousands of iPads globally to their sales team. Over the last 6 months, they have also doubled their Mac user base by making MacBook Air available to more employees with a focus on user experience and strong security. Let me now turn to our cash position and capital return program. We ended the quarter with over $166 billion in cash and marketable securities. We repaid $7.5 billion in maturing debt while issuing $5.2 billion of new debt and increasing commercial paper by $2 billion, leaving us with total debt of $109 billion. As a result, net cash was $57 billion at the end of the quarter. During the quarter, we returned over $24 billion to shareholders, including $3.8 billion in dividends and equivalents and $18 billion through open market repurchases of 103 million Apple shares. We continue to believe there is great value in our stock and maintain our target of reaching a net cash neutral position over time. As we move ahead into the September quarter, I'd like to review our outlook, which includes the types of forward-looking information that Saori referred to at the beginning of the call. We expect our September quarter year-over-year revenue performance to be similar to the June quarter, assuming that the macroeconomic outlook doesn't worsen from what we are projecting today for the current quarter. Foreign exchange will continue to be a headwind, and we expect a negative year-over-year revenue impact of over 2 percentage points. We expect iPhone and Services year-over-year performance to accelerate from the June quarter. Also, we expect the revenue for both Mac and iPad to decline by double digits year-over-year due to difficult compares, particularly on the Mac. For both products, we experienced supply disruptions from factory shutdowns in the June quarter a year ago and were able to fulfill significant pent-up demand in the year ago September quarter. We expect gross margin to be between 44% and 45%. We expect OpEx to be between $13.5 billion and $13.7 billion. We expect OI&E to be around negative $250 million, excluding any potential impact from the mark-to-market of minority investments, and our tax rate to be around 16%. Finally, today, our Board of Directors has declared a cash dividend of $0.24 per share of common stock payable on August 17, 2023, to shareholders of record as of August 14, 2023. With that, let's open the call to questions.","evidence_gemma_new":"paid subscriptions","evidence_llama_3_3":null,"evidence_qwen_3_30b":"paid subscriptions passed 1 billion","gemma_new_max":1000000000.0,"gemma_new_min":1000000000.0,"llama_3_3_max":null,"llama_3_3_min":null,"qwen_3_30b_max":1000000000.0,"qwen_3_30b_min":1000000000.0}
{"symbol":"AAPL","year":2024,"quarter":1,"date":"2024-Q1","chunk_id":7,"sub_chunk_id":0,"centroid_label":"paid subscriptions","agreed_value":1000000000.0,"count":2,"chunk":"Luca Maestri: Thanks, Erik, for the question. Let's start with the December quarter. As we said, up 11%, $23.1 billion is an all-time record for us, with all-time records in The Americas, in Europe, and the rest of Asia Pac. So it was pretty broad-based geographically, and very strong across all the Services categories, because we had all-time revenue records for cloud, for payments, for video, and for advertising and December quarter records for the App Store and for AppleCare. Obviously, last year, we had an extra week, so the 11% is stronger than -- the underlying performance is stronger than the 11% that we have reported. I think the entire ecosystem is doing well because we continue to see growth and new all-time highs in both transacting accounts and paid accounts, which is obviously very important. And paid subscriptions continue to grow strong double-digits. Just as a reference, we have more than a billion paid subscriptions across all the services on our platform. This is more than double the number of paid subscriptions that we had only four years ago. So, obviously, very significant growth there. What I said during the prepared remarks around the March quarter, I mentioned that we will continue to grow double-digits at a percentage that is similar to what we reported for the December quarter. We don't provide guidance around the different services categories. So, we will provide more color when we report in three months.","evidence_gemma_new":"paid subscriptions","evidence_llama_3_3":"paid subscriptions","evidence_qwen_3_30b":null,"gemma_new_max":1000000000.0,"gemma_new_min":1000000000.0,"llama_3_3_max":1000000000.0,"llama_3_3_min":1000000000.0,"qwen_3_30b_max":null,"qwen_3_30b_min":null}
{"symbol":"AAPL","year":2024,"quarter":4,"date":"2024-Q4","chunk_id":30,"sub_chunk_id":0,"centroid_label":"paid subscriptions","agreed_value":1000000000.0,"count":3,"chunk":"Luca Maestri: Yes, Amit, I'll take this one. Yes, we are, first of all, very, very happy with -- it's an important milestone. Of course, we've got to a run rate of $100 billion. You look back just a few years ago, and the growth has been phenomenal. We're very pleased. We've got a very diversified portfolio of services. And over the years, the amount that is recurring in nature has grown and is growing faster than the transactional piece. We have well over 1 billion paid subscriptions on our platform right now between our own services and third-party services. That continues to grow strong double-digits. So, we feel very, very good. And, essentially, to your question, yes, the recurring portion is growing faster than the transactional one.","evidence_gemma_new":"paid subscriptions","evidence_llama_3_3":"paid subscriptions","evidence_qwen_3_30b":"paid subscriptions","gemma_new_max":1000000000.0,"gemma_new_min":1000000000.0,"llama_3_3_max":1000000000.0,"llama_3_3_min":1000000000.0,"qwen_3_30b_max":1000000000.0,"qwen_3_30b_min":1000000000.0}
{"symbol":"AAPL","year":2023,"quarter":2,"date":"2023-Q2","chunk_id":3,"sub_chunk_id":0,"centroid_label":"product gross margins","agreed_value":0.367,"count":2,"chunk":"Luca Maestri: Thank you, Tim, and good afternoon, everyone. Revenue for the March quarter was $94.8 billion, down 3% from last year and better than our expectations. Foreign exchange had a negative impact of over five percentage points on our results, in line with what we had expected. On a constant currency basis, our revenue grew year-over-year in total and in the majority of the markets we track. In addition to the records in emerging markets that Tim mentioned, we also set March quarter records in Australia, Canada, Spain and Switzerland, among others. Products revenue was $73.9 billion, down 5% from last year, due to challenging compares on Mac and iPad. iPhone, however, reached a March quarter revenue record thanks to very strong performance in emerging markets from South Asia and India to Latin America and the Middle East. During the quarter, our installed base of active devices continued to grow at a nice pace thanks to extremely high levels of customer satisfaction and loyalty, and reached an all-time high for all major product categories and geographic segments. Our Services set an all-time revenue record of $20.9 billion, up 5% year-over-year, on top of growing 17% in the March quarter a year ago. We reached an all-time services revenue record in Greater China and March quarter records in Americas, Europe and Rest of Asia Pacific. Company gross margin was 44.3%, up 130 basis points from last quarter, driven by cost savings and favorable mix shift towards services partially offset by leverage. Products gross margin was 36.7%, decreasing 30 basis points sequentially due to seasonal loss of leverage and mix, partially offset by favorable costs. Services gross margin was 71%, up 20 basis points sequentially. Operating expenses of $13.7 billion were at the low end of the guidance range we provided at the beginning of the quarter and continued to decelerate from the December quarter. We are closely managing our spend, but remain focused on long term growth with continued investment in innovation and product development. Net income was $24.2 billion. Diluted earnings per share were a $1.52, unchanged versus last year, and we generated very strong operating cash flow of $28.6 billion. Let me now provide more detail for each of our revenue categories. iPhone revenue set a March quarter record of $51.3 billion, up 2% year-over-year despite significant foreign exchange headwinds and a challenging macroeconomic environment. We set March quarter records in several developed and emerging markets with India, Indonesia, Turkey and the UAE doubling on a year-over-year basis. Our active installed base of iPhone grew to a new all-time high and was up in all our geographic segments. We are very pleased by the results of the latest survey of US Consumers from 451 Research, which measured customer satisfaction at 99% for the iPhone 14 family. Mac revenue was $7.2 billion, down 31% year-over-year and in line with our expectations. These results were driven by the challenging macroeconomic environment coupled with a difficult compare against last year's launch of the completely reimagined M1 MacBook Pros. Despite this, the installed base of active Macs reached an all-time high across all geographic segments and we continue to see strong upgraded activity to Apple silicon. Also, the latest survey of US Consumers from 451 Research reported customer satisfaction at 96% for Mac. iPad generated $6.7 billion in revenue, down 13% year-over-year and in line with our expectations. This performance was due to two key factors, a tough compare against the launch of iPad Air powered by the M1 chip in the year ago quarter and headwinds from the macroeconomic environment. The iPad installed base reached a new all-time high in all geographic segments thanks to exceptional customer loyalty and a high number of new customers. In fact, over half of the customers who purchased iPads during the quarter were new to the product. Wearables, home and accessories revenue was $8.8 billion, down 1% year-over-year as the category experienced the impact from the macroeconomic environment. However, we did set March quarter records both in the US and in Greater China. We continue to see strength in our Watch installed base, which set a new all-time record, thanks to very high customer loyalty and new two rates, nearly two thirds of customers purchasing an Apple Watch during the quarter were new to the product. Moving to Services, we reached a new all-time revenue record of $20.9 billion. And in addition to the all-time records Tim mentioned earlier, we set March quarter records for advertising Apple Care and Video. Despite these records, as we saw in recent quarters, certain services offerings such as digital advertising and mobile gaming continue to be affected by the current macroeconomic environment. Stepping back, however, the continued growth in Services is the reflection of our ecosystem strength and the positive momentum we are seeing across several key metrics. First, our growing installed base of over 2 billion active devices represents a great foundation for future expansion of our ecosystem. We continue to grow across every major product category and geographic segment, thanks to very high levels of customer loyalty and satisfaction. Second, we saw increased customer engagement with our services during the quarter. Both our transacting accounts and paid accounts grew double digits year-over-year, each setting a new all-time record. Third, paid subscriptions showed strong growth. We now have more than $975 million paid subscriptions across the Services on our platform, up 150 million during the last 12 months and nearly double the number of paid subscriptions we had only three years ago. And finally, we continue to improve the breadth and the quality of our current services offerings from new content on Apple TV Plus to great new features available in Apple Pay and Apple Music, which we believe our customers will love. Turning to the enterprise market, we see business customers continuing to invest in the Apple platform to drive higher employee productivity and satisfaction. In Brazil, Boticario Group, the world's largest cosmetics franchiser, originally starting with iPhone, 12 employees manage operations across a network of retail stores, franchisees and resellers. As it continues to digitize its business, Boticario has chosen to move all software development in house and adopted Mac as the standard device for all of their developer teams across the world. In small business, we see an increasing number of customers relying on Apple hardware, software and services to power their businesses forward, from accepting payments on iPhone, to tracking inventory on Mac or iPad, to managing employee devices with Apple Business Essentials. As we celebrate National Small Business week here in the US, we are proud to continue supporting the small business community. Let me now turn to our cash position and capital return program. We ended the quarter with over $166 billion in cash and marketable securities. We repaid $2.3 billion in maturing debt and increased commercial paper by about $300 million, leaving us with total debt of $110 billion. As a result, net cash was $57 billion at the end of the quarter. During the March quarter, we returned over $23 billion to shareholders, including $3.7 billion in dividends and equivalents and $19.1 billion through open market repurchases of $129 million Apple shares. Given the continued confidence we have in our business now and into the future, today our Board has authorized an additional $90 billion for share repurchases as we maintain our goal of getting to net cash neutral over time. We're also raising our dividend by 4% to $0.24 a share, and we continue to plan for annual increases in the dividend going forward. As we move ahead into the June 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. We expect our June quarter year-over-year revenue performance to be similar to the March quarter, assuming that the macroeconomic outlook does not worsen from what we are projecting today for the current quarter. Foreign exchange will continue to be a headwind and we expect a negative year-over-year impact of nearly four percentage points. For Services, we expect our June quarter year-over-year revenue growth to be similar to the March quarter, while continuing to face macroeconomic headwinds in areas such as digital advertising and mobile gaming. We expect gross margin to be between 44% and 44.5%. We expect OpEx to be between $13.6 billion and $13.8 billion. We expect OINE to be around negative $250 million excluding any potential impact from the mark-to-market of minority investments and our tax rate to be around 16%. Finally reflecting the dividend increase I mentioned earlier, today, our Board of Directors has declared a cash dividend of $0.24 per share of common stock payable on May 18, 2023, to shareholders of record as on May 15, 2023. With that, let's open the call to questions.","evidence_gemma_new":null,"evidence_llama_3_3":"Products gross margin March quarter","evidence_qwen_3_30b":"Products gross margin decreasing 30 basis points sequentially","gemma_new_max":null,"gemma_new_min":null,"llama_3_3_max":0.367,"llama_3_3_min":0.367,"qwen_3_30b_max":0.367,"qwen_3_30b_min":0.367}
{"symbol":"AAPL","year":2023,"quarter":4,"date":"2023-Q4","chunk_id":3,"sub_chunk_id":0,"centroid_label":"product gross margins","agreed_value":0.366,"count":2,"chunk":"Luca Maestri: Thank you, Tim, and good afternoon, everyone. Revenue for the September quarter was $89.5 billion, down less than 1% from last year. Foreign exchange had a negative impact of over 2 percentage points. And on a constant-currency basis, our revenue grew year-over-year in total, and in each geographic segment. We set a September quarter record in the Americas and saw strong performance across our emerging markets, where both iPhone and Services grew double digits. Products revenue was $67.2 billion, down 5% from last year, due to very challenging compares on both Mac and iPad, which I will discuss in more detail later on. At the same time, we reached a September quarter record on iPhone, driven by strength in emerging markets. Our total installed-base of active devices reached an all-time high across all products and all geographic segments, thanks to our high levels of customer satisfaction and many new customers joining our ecosystem. Our Services revenue set an all-time record of $22.3 billion, up 16% year-over-year, with growth accelerating sequentially from the June quarter. Our performance in Services were broad based, as we reached all-time revenue records in the Americas, Europe and rest of Asia-Pacific and a September quarter record in Greater China. We also set new records in every Services category. Company gross margin set a September quarter record at 45.2%, up 70 basis points sequentially, driven by leverage and favorable mix, partially offset by foreign exchange. Products gross margin was 36.6%, up 120 basis points sequentially, also driven by leverage and mix, partially offset by foreign exchange. Services gross margin was 70.9%, up 40 basis points from last quarter due to a different mix. Operating expenses of $13.5 billion were at the low end of the guidance range we provided, up 2% year-over-year. Net income was $23 billion, diluted earnings per share was $1.46, up 13% versus last year and a September quarter record, and operating cash flow was strong at $21.6 billion. Let me now provide more detail for each of our revenue categories. iPhone revenue was $43.8 billion, up 3% year-over-year and a new September quarter record. We had strong performance in several markets, including an all-time record in India as September quarter records in Canada, Latin America, the Middle East, and South Asia . Our iPhone active installed base grew to a new all-time high and fiscal 2023 was another record year for switches. We continue to see extremely high levels of customer satisfaction which 451 Research recently measured at 98% in the U.S. Mac revenue was $7.6 billion, down 34% year-over-year, driven by challenging market conditions and compounded by a difficult compare in our own business, whereby last year we experienced supply disruptions from factory shutdowns in the June quarter and were subsequently able to fulfill significant pent-up demand during the September quarter. We also had a difference in launch timing with the MacBook Air launching earlier this year in the June quarter compared to the September quarter last year. We have great confidence in our Mac lineup and are excited about the recently announced iMac and MacBook Pro powered by our M3 chips. Our installed base is at an all-time high and half of Mac buyers during the quarter were new to the product, driven by MacBook Air. Also, we saw reported customer satisfaction of 97% for Mac in the U.S. iPad generated $6.4 billion in revenue, down 10% year-over-year. Similar to Mac, these results were a function of a difficult compare from the supply disruptions in the June quarter a year ago and the subsequent fulfillment of pent-up demand in the September quarter. iPad continues to attract a large number of new customers to the installed base with over half of the customers who purchase iPads during the quarter being new to the product and the latest reports from 451 Research indicate customer satisfaction of 98% in the U.S. Wearables, Home and Accessories revenue was $9.3 billion, down 3% year-over-year. We had a September quarter record in Europe and we saw strong performance in several emerging markets around the world. Apple Watch continues to expand its reach with nearly two-thirds of customers purchasing Apple Watch during the quarter being new to the product and customer satisfaction for the Watch was recently measured at 97% in the U.S. Services had a great quarter. We reached a new all-time revenue record of $22.3 billion, up 16% year-over-year. And we're happy to see growth coming from all categories and every geographic segment, which is a direct result of the strength of our ecosystem. Our installed base of over 2 billion active devices continues to grow at a nice pace and establishes a solid foundation for the future expansion of the ecosystem. And we continue to see increased customer engagement with our Services. Both transacting accounts and paid accounts grew double-digits year-over-year, each reaching a new all-time high. Also our paid subscriptions showed strong growth. We have well over 1 billion paid subscriptions across the services on our platform, nearly double the number we had only three years ago. And finally, we continue to improve the breadth and quality of our current services from exciting new content on Apple TV+ and Apple Arcade to additional storage tiers on iCloud. We believe our customers will love this new offering. Turning to enterprise. We are excited to see our business customers in both developed and emerging markets expand their deployment of Apple products and technologies to drive business innovation and employee satisfaction. Starbucks continuously invest in Apple technology to bring the best experience to the customers and employees, including tens of thousands of iPads across all retail stores to help their teams streamline order management, operations and training. In addition, Starbucks recently refreshed over 10,000 Macs to the latest M2-powered MacBook Air for all store managers, enabling them to do their best work and improve productivity. And in Indonesia, popular technology company GoTo is offering Mac as a choice, so that employees can have the best tools to be most productive. Today, more than half of its workforce are already choosing Mac for work. Let me now turn to our cash position and capital return program. We ended the quarter with over $162 billion in cash and marketable securities. We increased commercial paper by $2 billion, leaving us with total debt of $111 billion. As a result, net cash was $51 billion at the end of the quarter. And our goal of becoming net cash-neutral over time remains unchanged. During the quarter, we returned nearly $25 billion to shareholders, including $3.8 billion in dividends and equivalents and $15.5 billion through open market repurchases of 85 million Apple shares. We also began a $5 billion accelerated share repurchase program in August, resulting in the initial delivery and retirement of 22 million shares. Taking a step back, as we close our 2023 fiscal year, our annual revenue was $383 billion. While it was down 3% from the prior year, it grew on a constant-currency basis despite the volatile and uneven macroeconomic environment. Our year-over-year revenue performance improved each quarter as we went through the year, and so did our earnings per share performance, as we reported double-digit EPS growth in the September quarter. We are particularly pleased with our performance in emerging markets with revenue reaching an all-time record in fiscal 2023 and double-digit growth in constant currency. We are expanding our direct presence in these markets from new Apple retail stores in India to online stores in Vietnam and Chile. And we continue to work with our partners to offer a wide range of affordability programs so that we can best serve our customers. We're very excited about the momentum we have in these markets and the opportunity ahead of us. 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%. Finally, today our Board of Directors has declared a cash dividend of $0.24 per share of common stock, payable on November 16, 2023, to shareholders of record as of November 13, 2023. With that, let's open the call to questions.","evidence_gemma_new":null,"evidence_llama_3_3":"Products gross margin September quarter","evidence_qwen_3_30b":"Products gross margin","gemma_new_max":null,"gemma_new_min":null,"llama_3_3_max":0.366,"llama_3_3_min":0.366,"qwen_3_30b_max":0.366,"qwen_3_30b_min":0.366}
{"symbol":"AAPL","year":2024,"quarter":1,"date":"2024-Q1","chunk_id":3,"sub_chunk_id":0,"centroid_label":"product gross margins","agreed_value":39.4,"count":2,"chunk":"Luca Maestri: Thank you, Tim, and good afternoon, everyone. Revenue for the December quarter was $119.6 billion, up 2% from last year. During the December quarter a year ago, two unique factors affected our results. First, we had an additional week in the quarter. And second, we had COVID-related factory shutdowns that limited iPhone supply. We estimate that the net impact of these two factors resulted in a 2 percentage point headwind to our revenue performance this quarter. We set all-time revenue records in Europe and rest of Asia-Pacific, and continue to see strong performance across our emerging markets with double-digit growth in the majority of the emerging markets we track. Products revenue was $96.5 billion, flat compared to last year, driven by strength in iPhone, offset by challenging compares for iPad and Wearables, Home and Accessories and one less week of sales this year across the entire portfolio. Thanks to our unparalleled customer loyalty and very strong levels of customer satisfaction, our total installed base of active devices set a new record across all products and all geographic segments, and is now over 2.2 billion active devices. Services revenue set an all-time record of $23.1 billion, up 11% year-over-year. When we take into account the extra week last year, this represents a sequential acceleration of growth from the September quarter. We are very pleased with our Services performance in both developed and emerging markets with all-time revenue records in the Americas, Europe, and rest of Asia-Pacific. Company gross margin was 45.9%, up 70 basis points sequentially, driven by leverage and favorable mix, partially offset by foreign exchange. Products gross margin was 39.4%, up 280 basis points sequentially, also driven by leverage and mix, partially offset by foreign exchange. Services gross margin was 72.8%, up 190 basis points from last quarter, due to a more favorable mix. Operating expenses of $14.5 billion were at the midpoint of the guidance range we provided and up 1% year-over-year. Net income was $33.9 billion, up $3.9 billion from last year. Diluted EPS was $2.18, up 16% versus last year and an all-time record. And operating cash flow was very strong at $39.9 billion. Let me now provide more detail for each of our revenue categories. iPhone revenue was $69.7 billion, up 6% year-over-year. We set all-time records in several countries and regions, including Latin America, Western Europe, the Middle East, and Korea, as well as December quarter records in India and Indonesia. Our iPhone active installed base grew to a new all-time high, and we had an all-time record number of iPhone upgraders during the quarter. Customers are loving their new iPhone 15 family, with the latest reports from 451 Research indicating customer satisfaction of 99% in the U.S. In fact, many iPhone models were among the top-selling smartphones around the world during the quarter. According to a survey from Kantar, iPhones were four out of the top five models in the U.S. and Japan, four out of the top six models in urban China and the UK, and all top five models in Australia. Mac generated revenue of $7.8 billion and return to growth, despite one less week of sales this year. This represents a significant acceleration from the September quarter when we faced a challenging compare due to the supply disruptions and subsequent demand recapture we experienced a year ago. Customer response to our latest iMac and MacBook Pro models powered by the M3 chips has been great. And our Mac installed base reached an all-time high with almost half of Mac buyers during the quarter being new to the product. Also, 451 Research recently reported customer satisfaction of 97% for Mac in the U.S. iPad was $7 billion in revenue, down 25% year-over-year. iPad faced a difficult compare because during the December quarter last year, we launched the new iPad Pro and iPad 10 generation, and we had an extra week of sales. However, the iPad installed base continues to grow and is an all-time high with over half of the customers who purchased iPads during the quarter being new to the product, and customer satisfaction for iPad was recently measured at 98% in the U.S. Wearables, Home and Accessories revenue was $12 billion, down 11% year-over-year due to a challenging launch compare and the extra week a year ago. This time last year, we had the full quarter benefit from the launches of the AirPods Pro 2nd generation, the Watch SE, and the first Watch Ultra. We continue to attract new customers to Apple Watch. Nearly two-thirds of customers purchasing an Apple Watch during the quarter were new to the product, and the latest reports from 451 Research indicate customer satisfaction of 96% in the U.S. And in Services, we were very pleased with our double-digit growth, which was driven by the strength of our ecosystem. Our installed base is now over 2.2 billion active devices and continues to grow nicely, establishing a solid foundation for the future expansion of our Services business. And we continue to see increased customer engagement with our services. Both transacting accounts and paid accounts reached a new all-time high, with paid accounts growing double-digits year-over-year. Also, our paid subscriptions showed strong double-digit growth. We have well over 1 billion paid subscriptions across the services on our platform, more than double the number that we had only four years ago. Finally, we continue to build on the breadth and the quality of our current services. From Oscar-nominated theatrical releases with Apple TV+ to more publications or News+ like The Atlantic and exciting new games on Arcade. Turning to Enterprise, we continue to see many business customers leverage Apple products to improve productivity and drive innovation. Target recently added the latest M3 MacBook Pro to their existing deployment of thousands of Mac\u2019s, enabling employees across various departments to do their best work. In emerging markets, Zoho, a leading technology company headquartered in India, offers its 15,000 plus global employees a choice of devices, with 80% of their workforce using iPhone for work and nearly two-thirds of them choosing Mac as their primary computer. With the upcoming launch of Apple Vision Pro, we are seeing strong excitement in Enterprise. Leading organizations across many industries such as Walmart, Nike, Vanguard, Stryker, Bloomberg, and SAP have started leveraging and investing in Apple Vision Pro as their new platform to bring innovative spatial computing experiences to their customers and employees. From everyday productivity to collaborative product design to immersive training, we cannot wait to see the amazing things our enterprise customers will create in the months and years to come. Let me now turn to our cash position and capital return program. We ended the quarter with $173 billion in cash and marketable securities. We decreased commercial paper by $4 billion, leaving us with total debt of $108 billion. As a result, net cash was $65 billion at the end of the quarter, and our goal of becoming net cash-neutral over time remains unchanged. During the quarter, we returned nearly $27 billion to shareholders, including $3.8 billion in dividends and equivalents and $20.5 billion through open market repurchases of 112 million Apple shares. We also retired an additional 6 million shares in the final settlement of our 19th ASR. As usual, we will provide an update to our capital return program when we report results at the end of this quarter. As we move ahead into the March 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. And we expect foreign exchange to be a revenue headwind of about 2 percentage points on a year-over-year basis. As a reminder, in the December quarter a year ago, we faced significant supply constraints on the iPhone 14 Pro and 14 Pro Max due to COVID-19 factory shutdowns. And in the March quarter a year ago, we were able to replenish channel inventory and fulfill significant pent-up demand from the constraints. We estimate that this impact added close to $5 billion to the March quarter's total revenue last year. When we remove this impact from last year's revenue, we expect both our March quarter total company revenue and iPhone revenue to be similar to a year ago. For our Services business, we expect a similar double-digit growth rate to what we reported in the December quarter. We expect gross margin to be between 46% and 47%. We expect OpEx to be between $14.3 billion and $14.5 billion. We expect OI&E to be around $50 million, excluding any potential impact from the mark-to-market of minority investments and our tax rate to be around 16%. Finally, today our Board of Directors has declared a cash dividend of $0.24 per share of common stock payable on February 15, 2024, to shareholders of record as of February 12, 2024. With that, let's open the call to questions.","evidence_gemma_new":"Products gross margin","evidence_llama_3_3":null,"evidence_qwen_3_30b":"Products gross margin up 280 basis points sequentially","gemma_new_max":39.4,"gemma_new_min":39.4,"llama_3_3_max":null,"llama_3_3_min":null,"qwen_3_30b_max":39.4,"qwen_3_30b_min":39.4}
{"symbol":"AAPL","year":2024,"quarter":4,"date":"2024-Q4","chunk_id":2,"sub_chunk_id":0,"centroid_label":"product gross margins","agreed_value":0.363,"count":2,"chunk":"Luca Maestri: Good afternoon, everyone. And thank you, Tim, for the very kind words. Serving as Apple's CFO has been a real privilege and an amazing journey, and I've greatly appreciated the support from our investors and the analyst community over the years. Kevan is exceptional, and I know you will enjoy interacting with him going forward. Let me now turn to the results for the fourth quarter of our fiscal year. We're very pleased to report a new September quarter revenue record of $94.9 billion, up 6% year-over-year. We grew in the vast majority of the markets we track and achieved September quarter revenue records in the Americas, Europe and Rest of Asia Pacific. Products revenue was $70 billion, up 4% year-over-year, driven by growth in iPhone, iPad and Mac. Our installed base of active devices reached an all-time high across all products and geographic segments, thanks to very high levels of customer satisfaction and loyalty and a large number of customers who are new to our products. Services revenue reached an all-time record of $25 billion, up 12% year-over-year. We saw broad-based strength around the world, reaching all-time records in both developed and emerging markets with double-digit growth and record results across most services categories. Company gross margin was 46.2%, near the high end of our guidance range. Products gross margin was 36.3%, up 100 basis points sequentially, primarily driven by favorable mix. Services gross margin was 74%, unchanged from the prior quarter. Operating expenses of $14.3 billion were at the midpoint of the guidance range we provided at the beginning of the quarter and up 6% year-over-year. During the quarter, we recorded a one-time income tax charge of $10.2 billion, which relates to the impact of the reversal of the European General Court's State Aid decision. When we exclude this one-time charge, net income was $25 billion and diluted earnings per share were a $1.64, up 12% year-over-year, and a September quarter record. Operating cash flow was very strong at $26.8 billion, a new September quarter record. Let me now get into more detail for each of our revenue categories. iPhone revenue was $46.2 billion, up 6% year-over-year, and a September quarter record in total and across several markets, including the US, the Middle East, Korea, and South Asia. The iPhone active installed base grew to a new all-time high in total and in every geographic segment. During the September quarter, many iPhone models were among the top-selling smartphones around the world. In fact, according to a survey from Kantar, iPhone was the top-selling model in the US, Urban China, the UK, Australia, and Japan. We continue to see high levels of customer satisfaction for the iPhone 15 family, with 451 Research recently measuring it at 98% in the US. Mac revenue was $7.7 billion, up 2% year-over-year, driven by the strength in MacBook Air. Customers have been loving the performance of Apple Silicon on Mac and we are very excited to bring the latest M4 family of chips to the lineup. The Mac installed base reached an all-time high with about half of customers in the quarter being new to Mac. And in the latest reports from 451 Research, customer satisfaction was 95% in the US. iPad generated $7 billion in revenue, up 8% year-over-year. In addition to growth in developed markets, we also saw strong performance in many emerging markets, with double-digit growth in Mexico, Brazil, the Middle East, India and South Asia. The iPad installed base reached another all-time high, and over half of the customers who purchased iPads during the quarter were new to the product. Also, customer satisfaction was recently measured at 97% in the US. Wearables, Home and Accessories revenue was $9 billion, down 3% year-over-year. The Apple Watch installed base reached a new all-time high, with over half of customers purchasing an Apple Watch during the quarter being new to the product. And the latest reports from 451 Research indicated customer satisfaction of 96% for watch in the US. Our Services revenue reached an all-time record of $25 billion, growing 12% year-over-year. Services continue to see strong momentum with the growth of our installed base of active devices setting a solid foundation for the future expansion of our ecosystem. And we see increased customer engagement with our services offerings. Both transacting accounts and paid accounts reached a new all-time high, with paid accounts growing double-digits year-over-year. Paid subscriptions also grew double-digits. We have well over 1 billion paid subscriptions across the services on our platform, more than double the number we had only four years ago. And as always, we remain focused on improving the breadth and quality of our services from new games on Apple Arcade to new features like Tap to Cash and pay with installments using Apple Pay to many successful new and returning shows on Apple TV+. This past quarter, we celebrated the five-year anniversary of Apple Card, which was ranked #1 in customer satisfaction among co-branded credit cards by J.D. Power for the fourth year in a row. Turning to enterprise, we continue to see strong demand across our products and services. NVIDIA launched its Mac as a choice program supported by AppleCare for Enterprise and Apple Professional Services with over 10,000 Macs deployed worldwide. And Novartis, a leading global pharmaceutical company, recently chose iPhone 16 as the standard mobile device for all employees. We also see continued momentum with Apple Vision Pro in the enterprise space. UC San Diego Health is the first hospital in the world to test spatial computing apps on Apple Vision Pro in clinical trials for patient surgery in the operating room. Let me now turn to our cash position and capital return program. We ended the quarter with $157 billion in cash and marketable securities. We repaid $2.6 billion in maturing debt and increased commercial paper by $7 billion, leaving us with total debt of $107 billion. As a result, net cash was $50 billion at the end of the quarter. During the quarter, we returned over $29 billion to shareholders, including $3.8 billion in dividends and equivalents and $25 billion through open market repurchases of 112 million Apple shares. 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're providing today assumes that the macroeconomic outlook doesn't worsen from what we are projecting today for the current quarter. We expect our December quarter total company revenue to grow low- to mid-single digits year-over-year. We expect Services revenue to grow double-digits at a rate similar to what we reported in the fiscal year 2024. We expect gross margin to be between 46% and 47%. We expect OpEx to be between $15.3 billion and $15.5 billion. We expect OI&E to be around negative $250 million, excluding any potential impact from the mark to market of minority investments. And our tax rate to be around 16%. Finally, today, our Board of Directors has declared a cash dividend of $0.25 per share of common stock payable on November 14, 2024 to shareholders of record as of November 11, 2024. With that, let us open the call to questions.","evidence_gemma_new":null,"evidence_llama_3_3":"Products gross margin fourth quarter fiscal year 2024","evidence_qwen_3_30b":"Products gross margin","gemma_new_max":null,"gemma_new_min":null,"llama_3_3_max":0.363,"llama_3_3_min":0.363,"qwen_3_30b_max":0.363,"qwen_3_30b_min":0.363}
{"symbol":"AAPL","year":2023,"quarter":1,"date":"2023-Q1","chunk_id":3,"sub_chunk_id":0,"centroid_label":"product revenue","agreed_value":96400000000.0,"count":2,"chunk":"Luca Maestri: Thank you, Tim, and good afternoon, everyone. As Tim mentioned, revenue for the December quarter was $117.2 billion, down 5% from last year. A number of factors had a significant impact on our results. First, we faced a very difficult foreign exchange environment, which affected our performance by nearly 800 basis points. In other words, we grew revenue on a constant currency basis. And in fact, we did so in the vast majority of markets. Second, the macroeconomic environment this past quarter was markedly more challenging than 12 months ago. Third, we experienced significant supply shortages for iPhone 14 Pro and iPhone 14 Pro Max in November and through December. On the other hand, we had the positive impact of the 14th week in the quarter that Tejas just mentioned at the beginning of the call. Products revenue was $96.4 billion, down 8% from last year due to the factors I just called out. At the same time, however, our installed base of active devices grew double digits and achieved all-time records in each geographic segment and in each major product category. We're proud to now have over 2 billion active devices in our installed base. This continued growth in the installed base is due to extremely strong levels of customer satisfaction and loyalty and a high number of customers who are new to our products. The installed base growth also helped our services set an all-time revenue record of $20.8 billion, up 6% over a year ago. We achieved this new milestone despite more than 700 basis points of negative impact from foreign exchange. We reached all-time services revenue records in the Americas, Europe and rest of Asia Pacific and a December quarter record in Greater China. We also set records in many Services categories, including all-time revenue records for cloud services, payment services and music and December quarter records for the App Store and AppleCare. Company gross margin was 43%, up 70 basis points from last quarter due to leverage and favorable mix, partially offset by foreign exchange. Products gross margin was 37%, up 240 basis points sequentially. And Services gross margin was 70.8%, up 30 basis points sequentially, both due to the same factors that impacted total company gross margin. Operating expenses of $14.3 billion were significantly below the guidance range we provided at the beginning of the quarter and grew at a slower pace than in the past as we took actions to respond to the current macro environment. Net income was $30 billion. Diluted earnings per share were $1.88, and we generated very strong operating cash flow of $34 billion. Let me now get into more detail for each of our revenue categories. iPhone revenue was $65.8 billion despite significant foreign exchange headwinds, supply constraints on iPhone 14 Pro and iPhone 14 Pro Max and a challenging macroeconomic environment. In spite of these circumstances, we set all-time iPhone revenue records in Canada, Italy and Spain, and saw strong growth in several emerging markets, including all-time iPhone revenue records for India and Vietnam. Importantly, the installed base of active iPhones continues to grow nicely and is at an all-time high across all geographic segments. In emerging markets, in particular, the installed base grew double digits, and we had record levels of switchers in India and in Mexico. Our customers continue to love their experience with our products with the latest survey of U.S. consumers from 451 Research indicating customer satisfaction of 98% for the iPhone 14 family. Mac revenue was $7.7 billion, down 29% year-over-year and in line with our expectations. There were 3 key drivers for our Mac results. First, we had a challenging compare against last year's launch of the completely reimagined MacBook Pros, our first notebooks with M1 Pro and M1 Max. Second, we believe that the macro environment impacted our Mac performance. And third, we faced significant foreign exchange headwinds. At the same time, however, the installed base of active Macs reached an all-time high across all geographic segments, and we continue to see very strong upgraded activity to Apple silicon. Customer satisfaction with Mac remains very strong at 96% based on the latest survey of U.S. consumers from 451 Research. iPad revenue was $9.4 billion, up 30% year-over-year despite significant FX headwinds. This performance was driven by 2 key items. First, during the December quarter a year ago, we experienced significant supply constraints, while this year, we had enough supply to meet demand. Second, we launched our new iPad and the iPad Pro powered by the M2 chip during the quarter. The iPad installed base reached a new all-time high, thanks to incredible customer loyalty and a high number of new customers. In fact, over half of the customers who purchased iPads during the quarter were new to the product. Wearables, Home and Accessories revenue was $13.5 billion, down 8% year-over-year. The year-over-year decline was driven by significant FX headwinds and a challenging macroeconomic environment. However, our installed base of devices in the category set a new all-time record thanks to the largest number of customers new to our smartwatch that we've ever had in a given quarter. In fact, nearly 2\/3 of customers purchasing an Apple Watch during the quarter were new to the product. Moving to Services. We generated $20.8 billion in revenue, a new all-time record in total and for many Services offerings in spite of a difficult foreign exchange environment, and macroeconomic headwinds impacting certain categories such as digital advertising and mobile gaming. In constant currency, we grew Services revenue double digits on top of growing 24% during the December quarter a year ago. We remain focused on the large long-term opportunity in this category, and we continue to observe several trends that reflect the strength of our ecosystem. For example, we saw increased customer engagement with our Services during the quarter. Both our transacting accounts and paid accounts grew double digits year-over-year, each setting a new all-time record. Paid subscriptions also continued to grow nicely. We now have more than 935 million paid subscriptions across the services on our platform, up more than 150 million during the last 12 months alone and nearly 4x what we had just 5 years ago. And we continue to increase the reach and improve the quality of our offerings. For instance, Apple Pay is now available to millions of merchants in nearly 70 countries and regions. And we saw a record-breaking number of purchases made using Apple Pay globally during the holiday shopping season. Finally, our installed base of over 2 billion active devices represents a great foundation for future expansion of our ecosystem, and it continues to grow even during difficult macroeconomic conditions, which speaks to the exceptionally high levels of customer loyalty and satisfaction and our ability to attract new customers to our platform. The growth is coming from every major product category and geographic segment, with strong double-digit increases in emerging markets such as Brazil, Mexico, India, Indonesia, Thailand and Vietnam. Turning to the enterprise market. we are seeing continued adoption of our Services for business like Apple Business Essentials, AppleCare, Tap to Pay and Apple Financial Services. For example, Mars Incorporated has expanded its use of AppleCare for Enterprise to provide timely device support and assurance for iPads deployed across their manufacturing sites. Meanwhile, HCA Healthcare has leveraged Apple Financial Services to manage the annual refresh of its entire fleet of iPhones. This not only ensures that their staff stay current on the latest Apple technology, but also provides them with significant annual savings in the process. Let me now turn to our capital return program and our cash position. We returned over $25 billion to shareholders during the December quarter as our business continues to generate very strong cash flow. This included $3.8 billion in dividends and equivalents and $19 billion through open market repurchases of 133 million Apple shares. We ended the quarter with $165 billion in cash and marketable securities. We repaid $1.4 billion in maturing debt and decreased commercial paper by $8.2 billion, leaving us with total debt of $111 billion. As a result, net cash was $54 billion at the end of the quarter, and we maintain our goal of becoming net cash-neutral over time. As we move into the March quarter, I'd like to review our outlook, which includes the types of forward-looking information that Tejas referred to at the beginning of the call. Given the continued uncertainty around the world in the near term, we are not providing revenue guidance, but we are sharing some directional insights based on the assumption that the macroeconomic outlook and COVID-related impacts to our business do not worsen from what we are projecting today for the current quarter. In total, we expect our March quarter year-over-year revenue performance to be similar to the December quarter. This represents an acceleration in our underlying year-over-year business performance as the December quarter benefited from an extra week. Foreign exchange will continue to be a headwind, and we expect a negative year-over-year impact of 5 percentage points. For Services, we expect revenue to grow year-over-year while continuing to face macroeconomic headwinds in areas such as digital advertising and mobile gaming. For iPhone, we expect our March quarter year-over-year revenue performance to accelerate relative to the December quarter year-over-year revenue performance. For Mac and iPad, we expect revenue for both product categories to decline double digits year-over-year because of challenging compares and macroeconomic headwinds. We expect gross margin to be between 43.5% and 44.5%. We expect OpEx to be between $13.7 billion and $13.9 billion. We expect OI&E to be around negative $100 million, excluding any potential impact from the mark-to-market of minority investments, and our tax rate to be around 16%. Finally, today, our Board of Directors has declared a cash dividend of $0.23 per share of common stock payable on February 16, 2023, to shareholders of record as of February 13, 2023. With that, let's open the call to questions.","evidence_gemma_new":"Products revenue","evidence_llama_3_3":null,"evidence_qwen_3_30b":"Products revenue","gemma_new_max":96400000000.0,"gemma_new_min":96400000000.0,"llama_3_3_max":null,"llama_3_3_min":null,"qwen_3_30b_max":96400000000.0,"qwen_3_30b_min":96400000000.0}
{"symbol":"AAPL","year":2023,"quarter":2,"date":"2023-Q2","chunk_id":3,"sub_chunk_id":0,"centroid_label":"product revenue","agreed_value":73900000000.0,"count":3,"chunk":"Luca Maestri: Thank you, Tim, and good afternoon, everyone. Revenue for the March quarter was $94.8 billion, down 3% from last year and better than our expectations. Foreign exchange had a negative impact of over five percentage points on our results, in line with what we had expected. On a constant currency basis, our revenue grew year-over-year in total and in the majority of the markets we track. In addition to the records in emerging markets that Tim mentioned, we also set March quarter records in Australia, Canada, Spain and Switzerland, among others. Products revenue was $73.9 billion, down 5% from last year, due to challenging compares on Mac and iPad. iPhone, however, reached a March quarter revenue record thanks to very strong performance in emerging markets from South Asia and India to Latin America and the Middle East. During the quarter, our installed base of active devices continued to grow at a nice pace thanks to extremely high levels of customer satisfaction and loyalty, and reached an all-time high for all major product categories and geographic segments. Our Services set an all-time revenue record of $20.9 billion, up 5% year-over-year, on top of growing 17% in the March quarter a year ago. We reached an all-time services revenue record in Greater China and March quarter records in Americas, Europe and Rest of Asia Pacific. Company gross margin was 44.3%, up 130 basis points from last quarter, driven by cost savings and favorable mix shift towards services partially offset by leverage. Products gross margin was 36.7%, decreasing 30 basis points sequentially due to seasonal loss of leverage and mix, partially offset by favorable costs. Services gross margin was 71%, up 20 basis points sequentially. Operating expenses of $13.7 billion were at the low end of the guidance range we provided at the beginning of the quarter and continued to decelerate from the December quarter. We are closely managing our spend, but remain focused on long term growth with continued investment in innovation and product development. Net income was $24.2 billion. Diluted earnings per share were a $1.52, unchanged versus last year, and we generated very strong operating cash flow of $28.6 billion. Let me now provide more detail for each of our revenue categories. iPhone revenue set a March quarter record of $51.3 billion, up 2% year-over-year despite significant foreign exchange headwinds and a challenging macroeconomic environment. We set March quarter records in several developed and emerging markets with India, Indonesia, Turkey and the UAE doubling on a year-over-year basis. Our active installed base of iPhone grew to a new all-time high and was up in all our geographic segments. We are very pleased by the results of the latest survey of US Consumers from 451 Research, which measured customer satisfaction at 99% for the iPhone 14 family. Mac revenue was $7.2 billion, down 31% year-over-year and in line with our expectations. These results were driven by the challenging macroeconomic environment coupled with a difficult compare against last year's launch of the completely reimagined M1 MacBook Pros. Despite this, the installed base of active Macs reached an all-time high across all geographic segments and we continue to see strong upgraded activity to Apple silicon. Also, the latest survey of US Consumers from 451 Research reported customer satisfaction at 96% for Mac. iPad generated $6.7 billion in revenue, down 13% year-over-year and in line with our expectations. This performance was due to two key factors, a tough compare against the launch of iPad Air powered by the M1 chip in the year ago quarter and headwinds from the macroeconomic environment. The iPad installed base reached a new all-time high in all geographic segments thanks to exceptional customer loyalty and a high number of new customers. In fact, over half of the customers who purchased iPads during the quarter were new to the product. Wearables, home and accessories revenue was $8.8 billion, down 1% year-over-year as the category experienced the impact from the macroeconomic environment. However, we did set March quarter records both in the US and in Greater China. We continue to see strength in our Watch installed base, which set a new all-time record, thanks to very high customer loyalty and new two rates, nearly two thirds of customers purchasing an Apple Watch during the quarter were new to the product. Moving to Services, we reached a new all-time revenue record of $20.9 billion. And in addition to the all-time records Tim mentioned earlier, we set March quarter records for advertising Apple Care and Video. Despite these records, as we saw in recent quarters, certain services offerings such as digital advertising and mobile gaming continue to be affected by the current macroeconomic environment. Stepping back, however, the continued growth in Services is the reflection of our ecosystem strength and the positive momentum we are seeing across several key metrics. First, our growing installed base of over 2 billion active devices represents a great foundation for future expansion of our ecosystem. We continue to grow across every major product category and geographic segment, thanks to very high levels of customer loyalty and satisfaction. Second, we saw increased customer engagement with our services during the quarter. Both our transacting accounts and paid accounts grew double digits year-over-year, each setting a new all-time record. Third, paid subscriptions showed strong growth. We now have more than $975 million paid subscriptions across the Services on our platform, up 150 million during the last 12 months and nearly double the number of paid subscriptions we had only three years ago. And finally, we continue to improve the breadth and the quality of our current services offerings from new content on Apple TV Plus to great new features available in Apple Pay and Apple Music, which we believe our customers will love. Turning to the enterprise market, we see business customers continuing to invest in the Apple platform to drive higher employee productivity and satisfaction. In Brazil, Boticario Group, the world's largest cosmetics franchiser, originally starting with iPhone, 12 employees manage operations across a network of retail stores, franchisees and resellers. As it continues to digitize its business, Boticario has chosen to move all software development in house and adopted Mac as the standard device for all of their developer teams across the world. In small business, we see an increasing number of customers relying on Apple hardware, software and services to power their businesses forward, from accepting payments on iPhone, to tracking inventory on Mac or iPad, to managing employee devices with Apple Business Essentials. As we celebrate National Small Business week here in the US, we are proud to continue supporting the small business community. Let me now turn to our cash position and capital return program. We ended the quarter with over $166 billion in cash and marketable securities. We repaid $2.3 billion in maturing debt and increased commercial paper by about $300 million, leaving us with total debt of $110 billion. As a result, net cash was $57 billion at the end of the quarter. During the March quarter, we returned over $23 billion to shareholders, including $3.7 billion in dividends and equivalents and $19.1 billion through open market repurchases of $129 million Apple shares. Given the continued confidence we have in our business now and into the future, today our Board has authorized an additional $90 billion for share repurchases as we maintain our goal of getting to net cash neutral over time. We're also raising our dividend by 4% to $0.24 a share, and we continue to plan for annual increases in the dividend going forward. As we move ahead into the June 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. We expect our June quarter year-over-year revenue performance to be similar to the March quarter, assuming that the macroeconomic outlook does not worsen from what we are projecting today for the current quarter. Foreign exchange will continue to be a headwind and we expect a negative year-over-year impact of nearly four percentage points. For Services, we expect our June quarter year-over-year revenue growth to be similar to the March quarter, while continuing to face macroeconomic headwinds in areas such as digital advertising and mobile gaming. We expect gross margin to be between 44% and 44.5%. We expect OpEx to be between $13.6 billion and $13.8 billion. We expect OINE to be around negative $250 million excluding any potential impact from the mark-to-market of minority investments and our tax rate to be around 16%. Finally reflecting the dividend increase I mentioned earlier, today, our Board of Directors has declared a cash dividend of $0.24 per share of common stock payable on May 18, 2023, to shareholders of record as on May 15, 2023. With that, let's open the call to questions.","evidence_gemma_new":"Products revenue","evidence_llama_3_3":"Products revenue March quarter","evidence_qwen_3_30b":"Products revenue down 5% from last year","gemma_new_max":73900000000.0,"gemma_new_min":73900000000.0,"llama_3_3_max":73900000000.0,"llama_3_3_min":73900000000.0,"qwen_3_30b_max":73900000000.0,"qwen_3_30b_min":73900000000.0}
{"symbol":"AAPL","year":2023,"quarter":3,"date":"2023-Q3","chunk_id":3,"sub_chunk_id":0,"centroid_label":"product revenue","agreed_value":60600000000.0,"count":2,"chunk":"Luca Maestri: Thank you, Tim, and good afternoon, everyone. Revenue for the June quarter was $81.8 billion, down 1% from last year and better than our expectations despite nearly 4 percentage points of negative impact from foreign exchange. On a constant currency basis, our revenue grew year-over-year in total and in the majority of the markets we track. We set June quarter records in both Europe and Greater China and continue to see strong performance across our emerging markets driven by iPhone. Products revenue was $60.6 billion, down 4% from last year, as we faced FX headwinds and an uneven macroeconomic environment. However, our installed base reached an all-time high across all geographic segments, driven by a June quarter record for iPhone switchers and high new-to rates in Mac, iPad and Watch, coupled with very high levels of customer satisfaction and loyalty. Our Services revenue set an all-time record of $21.2 billion, up 8% year-over-year and grew double digits in constant currency. Our performance was strong around the world as we reach all-time Services revenue records in Americas and Europe and June quarter records in Greater China and rest of Asia Pacific. Company gross margin was 44.5%, a record level for the June quarter and up 20 basis points sequentially, driven by cost savings and favorable mix shift towards Services, partially offset by a seasonal loss of leverage. Products gross margin was 35.4%, down 130 basis points from last quarter due to seasonal loss of leverage and mix, partially offset by favorable costs. Services gross margin was 70.5%, decreasing 50 basis points sequentially. Operating expenses of $13.4 billion were below the low end of the guidance range we provided at the beginning of the quarter and decelerated from the March quarter. We continue to take a deliberate approach in managing our spend with strong focus on innovation and new product development. The results of these actions delivered net income of $19.9 billion, diluted earnings per share of $1.26, up 5% versus last year, and very strong operating cash flow of $26.4 billion. Let me now provide more detail for each of our revenue categories. iPhone revenue was $39.7 billion, down 2% year-over-year but grew on a constant currency basis. We set revenue records in several markets around the world, including an all-time record in India and June quarter records in Latin America, the Middle East and Africa, Indonesia, the Philippines, Italy, the Netherlands and the U.K. Our iPhone active installed base grew to a new all-time high, thanks to a June quarter record in switchers. This is a testament to our extremely high levels of customer satisfaction, which 451 Research recently measured at 98% for the iPhone 14 family in the U.S. Mac generated $6.8 billion in revenue, down 7% year-over-year. We continue to invest in our Mac portfolio. And this past quarter, we were pleased to complete the transition to Apple silicon for the entire lineup. This transition has driven both strong upgrade activity and a high number of new customers. In fact, almost half of Mac buyers during the quarter were new to the product. We also saw reported customer satisfaction of 96% for Mac in the U.S. iPad revenue was $5.8 billion, down 20% year-over-year and in line with our expectations. These results were driven by a difficult compare against the full quarter impact of the iPad Air launch in the prior year. At the same time, we continue to attract a large number of new customers to the iPad installed base with over half of the customers who purchased iPads during the quarter being new to the product. And the latest reports from 451 Research indicate customer satisfaction of 96% in the U.S. Wearables, Home and Accessories revenue was $8.3 billion, up 2% year-over-year, with a June quarter record in Greater China and strong performance in several emerging markets. We continue to see Apple Watch expand its reach with about 2\/3 of customers purchasing an Apple Watch during the quarter being new to the product. And this is combined with very high levels of customer satisfaction, which was recently reported at 98% in the United States. Moving on to Services. We reached a new all-time revenue record of $21.2 billion with year-over-year growth accelerating sequentially to 8% and up double digits in constant currency. In addition to the all-time records Tim mentioned earlier, we also set June quarter records for advertising, App Store and Music. We are very pleased with our performance in Services, which is a direct reflection of our ecosystem's strength. First, our installed base of over 2 billion active devices continues to grow at a nice pace and establishes a solid foundation for the future expansion of our ecosystem. Second, we see increased customer engagement with our services. Both our transacting accounts and paid accounts grew double digits year-over-year, each reaching a new all-time high. Third, our paid subscriptions showed strong growth. This past quarter, we reached an important milestone and passed 1 billion paid subscriptions across the services on our platform, up 150 million during the last 12 months and nearly double the number of paid subscriptions we had only 3 years ago. And finally, we continue to improve the breadth and the quality of our current services. From 20 new games on Apple Arcade, to brand-new content on Apple TV+, to the launch of our high-yield savings account with Apple Card, our customers are loving these enhanced offerings. Turning to the enterprise market. Our customers are leveraging Apple products every day to help improve productivity and attract talent. Blackstone, a global investment management firm, is expanding its Apple footprint from their corporate iPhone fleet to now offering the MacBook Air powered by M2 to all of their corporate employees and portfolio companies. Gilead, a leading biopharmaceutical company, has deployed thousands of iPads globally to their sales team. Over the last 6 months, they have also doubled their Mac user base by making MacBook Air available to more employees with a focus on user experience and strong security. Let me now turn to our cash position and capital return program. We ended the quarter with over $166 billion in cash and marketable securities. We repaid $7.5 billion in maturing debt while issuing $5.2 billion of new debt and increasing commercial paper by $2 billion, leaving us with total debt of $109 billion. As a result, net cash was $57 billion at the end of the quarter. During the quarter, we returned over $24 billion to shareholders, including $3.8 billion in dividends and equivalents and $18 billion through open market repurchases of 103 million Apple shares. We continue to believe there is great value in our stock and maintain our target of reaching a net cash neutral position over time. As we move ahead into the September quarter, I'd like to review our outlook, which includes the types of forward-looking information that Saori referred to at the beginning of the call. We expect our September quarter year-over-year revenue performance to be similar to the June quarter, assuming that the macroeconomic outlook doesn't worsen from what we are projecting today for the current quarter. Foreign exchange will continue to be a headwind, and we expect a negative year-over-year revenue impact of over 2 percentage points. We expect iPhone and Services year-over-year performance to accelerate from the June quarter. Also, we expect the revenue for both Mac and iPad to decline by double digits year-over-year due to difficult compares, particularly on the Mac. For both products, we experienced supply disruptions from factory shutdowns in the June quarter a year ago and were able to fulfill significant pent-up demand in the year ago September quarter. We expect gross margin to be between 44% and 45%. We expect OpEx to be between $13.5 billion and $13.7 billion. We expect OI&E to be around negative $250 million, excluding any potential impact from the mark-to-market of minority investments, and our tax rate to be around 16%. Finally, today, our Board of Directors has declared a cash dividend of $0.24 per share of common stock payable on August 17, 2023, to shareholders of record as of August 14, 2023. With that, let's open the call to questions.","evidence_gemma_new":"Products revenue","evidence_llama_3_3":"Products revenue June quarter","evidence_qwen_3_30b":null,"gemma_new_max":60600000000.0,"gemma_new_min":60600000000.0,"llama_3_3_max":60600000000.0,"llama_3_3_min":60600000000.0,"qwen_3_30b_max":null,"qwen_3_30b_min":null}
{"symbol":"AAPL","year":2023,"quarter":4,"date":"2023-Q4","chunk_id":3,"sub_chunk_id":0,"centroid_label":"product revenue","agreed_value":67200000000.0,"count":3,"chunk":"Luca Maestri: Thank you, Tim, and good afternoon, everyone. Revenue for the September quarter was $89.5 billion, down less than 1% from last year. Foreign exchange had a negative impact of over 2 percentage points. And on a constant-currency basis, our revenue grew year-over-year in total, and in each geographic segment. We set a September quarter record in the Americas and saw strong performance across our emerging markets, where both iPhone and Services grew double digits. Products revenue was $67.2 billion, down 5% from last year, due to very challenging compares on both Mac and iPad, which I will discuss in more detail later on. At the same time, we reached a September quarter record on iPhone, driven by strength in emerging markets. Our total installed-base of active devices reached an all-time high across all products and all geographic segments, thanks to our high levels of customer satisfaction and many new customers joining our ecosystem. Our Services revenue set an all-time record of $22.3 billion, up 16% year-over-year, with growth accelerating sequentially from the June quarter. Our performance in Services were broad based, as we reached all-time revenue records in the Americas, Europe and rest of Asia-Pacific and a September quarter record in Greater China. We also set new records in every Services category. Company gross margin set a September quarter record at 45.2%, up 70 basis points sequentially, driven by leverage and favorable mix, partially offset by foreign exchange. Products gross margin was 36.6%, up 120 basis points sequentially, also driven by leverage and mix, partially offset by foreign exchange. Services gross margin was 70.9%, up 40 basis points from last quarter due to a different mix. Operating expenses of $13.5 billion were at the low end of the guidance range we provided, up 2% year-over-year. Net income was $23 billion, diluted earnings per share was $1.46, up 13% versus last year and a September quarter record, and operating cash flow was strong at $21.6 billion. Let me now provide more detail for each of our revenue categories. iPhone revenue was $43.8 billion, up 3% year-over-year and a new September quarter record. We had strong performance in several markets, including an all-time record in India as September quarter records in Canada, Latin America, the Middle East, and South Asia . Our iPhone active installed base grew to a new all-time high and fiscal 2023 was another record year for switches. We continue to see extremely high levels of customer satisfaction which 451 Research recently measured at 98% in the U.S. Mac revenue was $7.6 billion, down 34% year-over-year, driven by challenging market conditions and compounded by a difficult compare in our own business, whereby last year we experienced supply disruptions from factory shutdowns in the June quarter and were subsequently able to fulfill significant pent-up demand during the September quarter. We also had a difference in launch timing with the MacBook Air launching earlier this year in the June quarter compared to the September quarter last year. We have great confidence in our Mac lineup and are excited about the recently announced iMac and MacBook Pro powered by our M3 chips. Our installed base is at an all-time high and half of Mac buyers during the quarter were new to the product, driven by MacBook Air. Also, we saw reported customer satisfaction of 97% for Mac in the U.S. iPad generated $6.4 billion in revenue, down 10% year-over-year. Similar to Mac, these results were a function of a difficult compare from the supply disruptions in the June quarter a year ago and the subsequent fulfillment of pent-up demand in the September quarter. iPad continues to attract a large number of new customers to the installed base with over half of the customers who purchase iPads during the quarter being new to the product and the latest reports from 451 Research indicate customer satisfaction of 98% in the U.S. Wearables, Home and Accessories revenue was $9.3 billion, down 3% year-over-year. We had a September quarter record in Europe and we saw strong performance in several emerging markets around the world. Apple Watch continues to expand its reach with nearly two-thirds of customers purchasing Apple Watch during the quarter being new to the product and customer satisfaction for the Watch was recently measured at 97% in the U.S. Services had a great quarter. We reached a new all-time revenue record of $22.3 billion, up 16% year-over-year. And we're happy to see growth coming from all categories and every geographic segment, which is a direct result of the strength of our ecosystem. Our installed base of over 2 billion active devices continues to grow at a nice pace and establishes a solid foundation for the future expansion of the ecosystem. And we continue to see increased customer engagement with our Services. Both transacting accounts and paid accounts grew double-digits year-over-year, each reaching a new all-time high. Also our paid subscriptions showed strong growth. We have well over 1 billion paid subscriptions across the services on our platform, nearly double the number we had only three years ago. And finally, we continue to improve the breadth and quality of our current services from exciting new content on Apple TV+ and Apple Arcade to additional storage tiers on iCloud. We believe our customers will love this new offering. Turning to enterprise. We are excited to see our business customers in both developed and emerging markets expand their deployment of Apple products and technologies to drive business innovation and employee satisfaction. Starbucks continuously invest in Apple technology to bring the best experience to the customers and employees, including tens of thousands of iPads across all retail stores to help their teams streamline order management, operations and training. In addition, Starbucks recently refreshed over 10,000 Macs to the latest M2-powered MacBook Air for all store managers, enabling them to do their best work and improve productivity. And in Indonesia, popular technology company GoTo is offering Mac as a choice, so that employees can have the best tools to be most productive. Today, more than half of its workforce are already choosing Mac for work. Let me now turn to our cash position and capital return program. We ended the quarter with over $162 billion in cash and marketable securities. We increased commercial paper by $2 billion, leaving us with total debt of $111 billion. As a result, net cash was $51 billion at the end of the quarter. And our goal of becoming net cash-neutral over time remains unchanged. During the quarter, we returned nearly $25 billion to shareholders, including $3.8 billion in dividends and equivalents and $15.5 billion through open market repurchases of 85 million Apple shares. We also began a $5 billion accelerated share repurchase program in August, resulting in the initial delivery and retirement of 22 million shares. Taking a step back, as we close our 2023 fiscal year, our annual revenue was $383 billion. While it was down 3% from the prior year, it grew on a constant-currency basis despite the volatile and uneven macroeconomic environment. Our year-over-year revenue performance improved each quarter as we went through the year, and so did our earnings per share performance, as we reported double-digit EPS growth in the September quarter. We are particularly pleased with our performance in emerging markets with revenue reaching an all-time record in fiscal 2023 and double-digit growth in constant currency. We are expanding our direct presence in these markets from new Apple retail stores in India to online stores in Vietnam and Chile. And we continue to work with our partners to offer a wide range of affordability programs so that we can best serve our customers. We're very excited about the momentum we have in these markets and the opportunity ahead of us. 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%. Finally, today our Board of Directors has declared a cash dividend of $0.24 per share of common stock, payable on November 16, 2023, to shareholders of record as of November 13, 2023. With that, let's open the call to questions.","evidence_gemma_new":"Products revenue","evidence_llama_3_3":"Products revenue September quarter","evidence_qwen_3_30b":"Products revenue","gemma_new_max":67200000000.0,"gemma_new_min":67200000000.0,"llama_3_3_max":67200000000.0,"llama_3_3_min":67200000000.0,"qwen_3_30b_max":67200000000.0,"qwen_3_30b_min":67200000000.0}
{"symbol":"AAPL","year":2024,"quarter":1,"date":"2024-Q1","chunk_id":3,"sub_chunk_id":0,"centroid_label":"product revenue","agreed_value":96500000000.0,"count":2,"chunk":"Luca Maestri: Thank you, Tim, and good afternoon, everyone. Revenue for the December quarter was $119.6 billion, up 2% from last year. During the December quarter a year ago, two unique factors affected our results. First, we had an additional week in the quarter. And second, we had COVID-related factory shutdowns that limited iPhone supply. We estimate that the net impact of these two factors resulted in a 2 percentage point headwind to our revenue performance this quarter. We set all-time revenue records in Europe and rest of Asia-Pacific, and continue to see strong performance across our emerging markets with double-digit growth in the majority of the emerging markets we track. Products revenue was $96.5 billion, flat compared to last year, driven by strength in iPhone, offset by challenging compares for iPad and Wearables, Home and Accessories and one less week of sales this year across the entire portfolio. Thanks to our unparalleled customer loyalty and very strong levels of customer satisfaction, our total installed base of active devices set a new record across all products and all geographic segments, and is now over 2.2 billion active devices. Services revenue set an all-time record of $23.1 billion, up 11% year-over-year. When we take into account the extra week last year, this represents a sequential acceleration of growth from the September quarter. We are very pleased with our Services performance in both developed and emerging markets with all-time revenue records in the Americas, Europe, and rest of Asia-Pacific. Company gross margin was 45.9%, up 70 basis points sequentially, driven by leverage and favorable mix, partially offset by foreign exchange. Products gross margin was 39.4%, up 280 basis points sequentially, also driven by leverage and mix, partially offset by foreign exchange. Services gross margin was 72.8%, up 190 basis points from last quarter, due to a more favorable mix. Operating expenses of $14.5 billion were at the midpoint of the guidance range we provided and up 1% year-over-year. Net income was $33.9 billion, up $3.9 billion from last year. Diluted EPS was $2.18, up 16% versus last year and an all-time record. And operating cash flow was very strong at $39.9 billion. Let me now provide more detail for each of our revenue categories. iPhone revenue was $69.7 billion, up 6% year-over-year. We set all-time records in several countries and regions, including Latin America, Western Europe, the Middle East, and Korea, as well as December quarter records in India and Indonesia. Our iPhone active installed base grew to a new all-time high, and we had an all-time record number of iPhone upgraders during the quarter. Customers are loving their new iPhone 15 family, with the latest reports from 451 Research indicating customer satisfaction of 99% in the U.S. In fact, many iPhone models were among the top-selling smartphones around the world during the quarter. According to a survey from Kantar, iPhones were four out of the top five models in the U.S. and Japan, four out of the top six models in urban China and the UK, and all top five models in Australia. Mac generated revenue of $7.8 billion and return to growth, despite one less week of sales this year. This represents a significant acceleration from the September quarter when we faced a challenging compare due to the supply disruptions and subsequent demand recapture we experienced a year ago. Customer response to our latest iMac and MacBook Pro models powered by the M3 chips has been great. And our Mac installed base reached an all-time high with almost half of Mac buyers during the quarter being new to the product. Also, 451 Research recently reported customer satisfaction of 97% for Mac in the U.S. iPad was $7 billion in revenue, down 25% year-over-year. iPad faced a difficult compare because during the December quarter last year, we launched the new iPad Pro and iPad 10 generation, and we had an extra week of sales. However, the iPad installed base continues to grow and is an all-time high with over half of the customers who purchased iPads during the quarter being new to the product, and customer satisfaction for iPad was recently measured at 98% in the U.S. Wearables, Home and Accessories revenue was $12 billion, down 11% year-over-year due to a challenging launch compare and the extra week a year ago. This time last year, we had the full quarter benefit from the launches of the AirPods Pro 2nd generation, the Watch SE, and the first Watch Ultra. We continue to attract new customers to Apple Watch. Nearly two-thirds of customers purchasing an Apple Watch during the quarter were new to the product, and the latest reports from 451 Research indicate customer satisfaction of 96% in the U.S. And in Services, we were very pleased with our double-digit growth, which was driven by the strength of our ecosystem. Our installed base is now over 2.2 billion active devices and continues to grow nicely, establishing a solid foundation for the future expansion of our Services business. And we continue to see increased customer engagement with our services. Both transacting accounts and paid accounts reached a new all-time high, with paid accounts growing double-digits year-over-year. Also, our paid subscriptions showed strong double-digit growth. We have well over 1 billion paid subscriptions across the services on our platform, more than double the number that we had only four years ago. Finally, we continue to build on the breadth and the quality of our current services. From Oscar-nominated theatrical releases with Apple TV+ to more publications or News+ like The Atlantic and exciting new games on Arcade. Turning to Enterprise, we continue to see many business customers leverage Apple products to improve productivity and drive innovation. Target recently added the latest M3 MacBook Pro to their existing deployment of thousands of Mac\u2019s, enabling employees across various departments to do their best work. In emerging markets, Zoho, a leading technology company headquartered in India, offers its 15,000 plus global employees a choice of devices, with 80% of their workforce using iPhone for work and nearly two-thirds of them choosing Mac as their primary computer. With the upcoming launch of Apple Vision Pro, we are seeing strong excitement in Enterprise. Leading organizations across many industries such as Walmart, Nike, Vanguard, Stryker, Bloomberg, and SAP have started leveraging and investing in Apple Vision Pro as their new platform to bring innovative spatial computing experiences to their customers and employees. From everyday productivity to collaborative product design to immersive training, we cannot wait to see the amazing things our enterprise customers will create in the months and years to come. Let me now turn to our cash position and capital return program. We ended the quarter with $173 billion in cash and marketable securities. We decreased commercial paper by $4 billion, leaving us with total debt of $108 billion. As a result, net cash was $65 billion at the end of the quarter, and our goal of becoming net cash-neutral over time remains unchanged. During the quarter, we returned nearly $27 billion to shareholders, including $3.8 billion in dividends and equivalents and $20.5 billion through open market repurchases of 112 million Apple shares. We also retired an additional 6 million shares in the final settlement of our 19th ASR. As usual, we will provide an update to our capital return program when we report results at the end of this quarter. As we move ahead into the March 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. And we expect foreign exchange to be a revenue headwind of about 2 percentage points on a year-over-year basis. As a reminder, in the December quarter a year ago, we faced significant supply constraints on the iPhone 14 Pro and 14 Pro Max due to COVID-19 factory shutdowns. And in the March quarter a year ago, we were able to replenish channel inventory and fulfill significant pent-up demand from the constraints. We estimate that this impact added close to $5 billion to the March quarter's total revenue last year. When we remove this impact from last year's revenue, we expect both our March quarter total company revenue and iPhone revenue to be similar to a year ago. For our Services business, we expect a similar double-digit growth rate to what we reported in the December quarter. We expect gross margin to be between 46% and 47%. We expect OpEx to be between $14.3 billion and $14.5 billion. We expect OI&E to be around $50 million, excluding any potential impact from the mark-to-market of minority investments and our tax rate to be around 16%. Finally, today our Board of Directors has declared a cash dividend of $0.24 per share of common stock payable on February 15, 2024, to shareholders of record as of February 12, 2024. With that, let's open the call to questions.","evidence_gemma_new":"Products revenue","evidence_llama_3_3":"Products revenue December quarter","evidence_qwen_3_30b":null,"gemma_new_max":96500000000.0,"gemma_new_min":96500000000.0,"llama_3_3_max":96500000000.0,"llama_3_3_min":96500000000.0,"qwen_3_30b_max":null,"qwen_3_30b_min":null}
{"symbol":"AAPL","year":2024,"quarter":2,"date":"2024-Q2","chunk_id":2,"sub_chunk_id":0,"centroid_label":"product revenue","agreed_value":66900000000.0,"count":3,"chunk":"Luca Maestri: Thank you, Tim, and good afternoon, everyone. Revenue for the March quarter was $90.8 billion, down 4% from last year. Foreign exchange had a negative year-over-year impact of 140 basis points on our results. Products revenue was $66.9 billion, down 10% year-over-year due to the challenging compare on iPhone that Tim described earlier, which was partially offset by strength from Mac. And thanks to our unparalleled customer satisfaction and loyalty and a high number of customers who are new to our products, our installed base of active devices reached an all-time high across all products and all geographic segments. Services revenue set an all-time record of $23.9 billion, up 14% year-over-year with record performance in both developed and emerging markets. Company gross margin was 46.6%, up 70 basis points sequentially, driven by cost savings and favorable mix to services, partially offset by leverage. Products gross margin was 36.6%, down 280 basis points sequentially, primarily driven by seasonal loss of leverage and mix, partially offset by favorable costs. Services gross margin was 74.6%, up 180 basis points from last quarter due to a more favorable mix. Operating expenses of $14.4 billion were at the midpoint of the guidance range we provided and up 5% year-over-year. Net income was $23.6 billion, diluted EPS was $1.53 and a March quarter record, and operating cash flow was strong at $22.7 billion. Let me now provide more detail for each of our revenue categories. iPhone revenue was $46 billion, down 10% year-over-year, due to the almost $5 billion impact from a year ago that Tim described earlier. Adjusting for this one-time impact, iPhone revenue would be roughly flat to last year. Our iPhone active installed base grew to a new all-time high in total and in every geographic segment. And during the March quarter, we saw many iPhone models as the top-selling smartphones around the world. In fact, according to a survey from Kantar, an iPhone was the top-selling model in the U.S., Urban China, Australia, the U.K., France, Germany and Japan. And the iPhone 15 family continues to be very popular with customers. 451 Research recently measured customer satisfaction at 99% in the U.S. Mac revenue was $7.5 billion, up 4% year-over-year, driven by the strength of our new MacBook Air, powered by the M3 chip. Customers are loving the incredible AI performance of the latest MacBook Air and MacBook Pro models. And our Mac installed base reached an all-time high with half of our MacBook Air buyers during the quarter being new to Mac. Also customer satisfaction for Mac was recently reported at 96% in the U.S. iPad generated $5.6 billion in revenue, down 17% year-over-year. iPad continued to face a challenging compare against the launch of the M2 iPad Pro and iPad 10th Generation from last year. At the same time, the iPad installed base has continued to grow and is at an all-time high as over half of the customers who purchased iPads during the quarter were new to the product. In addition, the latest reports from 451 Research indicated customer satisfaction of 96% for iPad in the US. Wearables, Home and Accessories revenue was $7.9 billion, down 10% year-over-year due to a difficult launch compare. Last year, we had the continued benefit from the launches of the AirPods Pro second-generation, the Watch SE and the first Watch Ultra. Apple Watch continues to attract new customers, with almost two-thirds of customers purchasing an Apple Watch during the quarter being new to the product, sending the Apple Watch installed base to a new all-time high and customer satisfaction was recently measured at 95% in the U.S. In services, as I mentioned, total revenue reached an all-time record of $23.9 billion, growing 14% year-over-year with our installed-base of active devices continuing to grow at a nice pace. This provides a strong foundation for the future growth of the services business as we continued to see increased customer engagement with our ecosystem. Both transacting accounts and paid accounts reached a new all-time high with paid accounts growing double-digits year-over-year. And paid subscriptions showed strong double-digit growth. We have well over $1 billion paid subscriptions across the services on our platform, more than double the number that we had only four years ago. We continued to improve the breadth and quality of our current services from creating new games on Arcade and great new shows on TV+ to launching additional countries and partners for Apple Pay. Turning to enterprise, our customers continued to invest in Apple products to drive productivity and innovation. We see more and more enterprise customers embracing the Mac. In Healthcare, Epic Systems, the world's largest electronic medical record provider, recently launched its native app for the Mac, making it easier for healthcare organizations like Emory Health to transition thousands of PCs to the Mac for clinical use. And since the launch of Vision Pro last quarter, many leading enterprise customers have been investing in this amazing new product to bring spatial computing apps and experiences to life. We are seeing so many compelling use cases from aircraft engine maintenance training at KLM Airlines to real-time team collaboration for racing at Porsche to immersive kitchen design at Lowe's. We couldn't be more excited about the spatial computing opportunity in enterprise. Taking a quick step back, when we look at our performance during the first-half of our fiscal year, total company revenue was roughly flat to the prior year in spite of having one less week of sales during the period and some foreign exchange headwinds. We were particularly pleased with our strong momentum in emerging markets, as we set first-half revenue records in several countries and regions, including Latin-America, the Middle East, India, Indonesia, the Philippines and Turkey. These results, coupled with double-digit growth in services and strong levels of gross margin, drove a first half diluted EPS record of $3.71, up 9% from last year. Let me now turn to our cash position and capital return program. We ended the quarter with $162 billion in cash and marketable securities. We repaid $3.2 billion in maturing debt and commercial paper was unchanged sequentially, leaving us with total debt of $105 billion. As a result, net cash was $58 billion at the end of the quarter. During the quarter, we returned over $27 billion to shareholders, including $3.7 billion in dividends and equivalents and $23.5 billion through open-market repurchases of $130 million Apple's shares. Given the continued confidence we have in our business now and into the future, our Board has authorized today an additional $110 billion for share repurchases, as we maintain our goal of getting to net cash-neutral over time. We are also raising our dividend by 4% to $0.25 per share of common stock, and we continued to plan for annual increases in the dividend going forward as we've done for the last 12 years. This cash dividend will be payable on May 16, 2024 to shareholders of record as of May 13, 2024. As we move ahead into the June 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. We expect our June quarter total company revenue to grow low-single-digits year-over-year in spite of a foreign exchange headwind of about 2.5 percentage points. We expect our services business to grow double-digits at a rate similar to the growth we reported for the first-half of the fiscal year. And we expect iPad revenue to grow double-digits. We expect gross margin to be between 45.5% to -- and 46.5%. We expect OpEx to be between $14.3 billion and $14.5 billion. We expect OI&E to be around $50 million, excluding any potential impact from the mark-to-market of minority investments and our tax rate to be around 16%. With that, let's open the call to questions.","evidence_gemma_new":"Products revenue year-over-year","evidence_llama_3_3":"Products revenue March quarter","evidence_qwen_3_30b":"Products revenue down 10% year-over-year","gemma_new_max":66900000000.0,"gemma_new_min":66900000000.0,"llama_3_3_max":66900000000.0,"llama_3_3_min":66900000000.0,"qwen_3_30b_max":66900000000.0,"qwen_3_30b_min":66900000000.0}
{"symbol":"AAPL","year":2024,"quarter":3,"date":"2024-Q3","chunk_id":2,"sub_chunk_id":0,"centroid_label":"product revenue","agreed_value":61600000000.0,"count":3,"chunk":"Luca Maestri : Thank you, Tim, and good afternoon, everyone. We are very pleased to report a new June quarter revenue record of $85.8 billion, up 5% year-over-year, despite 230 basis points of negative foreign exchange impact. We achieved growth in the vast majority of our markets, with June quarter revenue records in the Americas, Europe, and rest of Asia Pacific. Products revenue was $61.6 billion, up 2% year-over-year, driven by the launch of the new iPad Pro and iPad Air. Our installed base of active devices reach an all-time high across all products and geographic segments, thanks to our unmatched levels of customer satisfaction and loyalty and a large number of customers who are new to our products. Services revenue reached an all-time record of $24.2 billion, up 14% year-over-year, with an all-time record in developed markets and a June quarter record in emerging markets. Company gross margin was 46.3% near the high end of our guidance range and down 30 basis points sequentially driven by a different mix within products which was partially offset by a favorable mix shift towards services and cost savings. Products gross margin was 35.3%, down 130 basis points sequentially, primarily driven by mix, partially offset by favorable costs. Services gross margin was 74% down 60 basis points from last quarter. Operating expenses of $14.3 billion were at the low end of the guidance range we provided and up 7% year-over-year. Net income was $21.4 billion, diluted EPS of $1.40 was up 11% year-over-year and set a June quarter record. And operating cash flow was very strong at $28.9 billion, also a June quarter record. Let me get into more detail for each of our revenue categories. iPhone revenue was $39.3 billion, down 1% year-over-year, but grew on a constant currency basis. We set June quarter records across several countries, including the UK, Spain, Poland, Mexico, Indonesia, and the Philippines. And the iPhone Active installed base grew to a new all-time high in total and in every geographic segment. During the June quarter, many iPhone models were among the top selling smartphones around the world. In fact, according to a survey from Kantar, iPhone was the top selling model in the US, urban China, the UK, Germany, Australia, and Japan. Customer satisfaction on the iPhone 15 family continues to be extremely high, with 451 Research measuring it at 98% in the US in their latest reports. Mac generated $7 billion in revenue, up 2% year-over-year, driven by the MacBook Air powered by the M3 chip. We saw particularly strong performance in our emerging markets, with June quarter records for Mac in Latin America, India, and South Asia. The Mac installed base reached an all-time high with half of MacBook Air customers in the quarter being new to Mac. And customer satisfaction for Mac was recently reported at 96% in the US. iPad revenue was $7.2 billion, up 24% year-over-year, driven by the launch of the new iPad Pro and iPad Air. Customers are loving the latest iPad lineup for its new design and display, unparalleled performance, AI capabilities and much more. The iPad install base has continued to grow and is an all-time high, as half of the customers who purchased iPads during the quarter were new to the product. Also, customer satisfaction was recently measured at 97% in the US. Wearables, home and accessories revenue was $8.1 billion, down 2% year-over-year, a sequential acceleration from the March quarter. Watch and AirPods continue to face a difficult compare against prior year launches of the AirPods Pro second generation, the Watch SE and the first Watch Ultra. Apple Watch continues to attract new customers, with almost two-thirds of customers purchasing an Apple Watch during the quarter being new to the product, sending the Apple Watch install base to a new all-time high. And the latest reports from 451 Research indicate a customer satisfaction of 97% for watch in the US. In services, total revenue reached an all-time record of $24.2 billion, growing 14% year-over-year. We continue to have great momentum in services, as the growth of our installed base of active devices, sets a strong foundation for the future expansion of our ecosystem. And we see increased customer engagement with our services offerings. Both transacting accounts and paid accounts reach a new all-time high with paid accounts growing double digits year-over-year. Also, paid subscriptions showed strong double digit growth. We have well over 1 billion paid subscriptions across the services on our platform, more than double the number that we had only four years ago. And we are constantly focused on improving the breadth and quality of our services. From critically acclaimed new content on Apple TV+ to new games on Apple Arcade and the many latest features we previewed during WWDC for iCloud, Apple Pay, Apple Cash, Apple Music, and more. Turning to enterprise, we continue to see businesses, leveraging our entire suite of products to drive productivity and creativity for their teams and customers. USAA, a leading insurance and financial services company, recently expanded beyond their existing iPhone and iPad deployments to provide their employees with the latest MacBook Air. And American Express has continued to add to their fleet of over 10,000 Macs to enhance their employees' productivity, security, and collaboration. We're also excited to see leading organizations such as Boston Children's Hospital and Lufthansa using Apple Vision Pro to build innovative spatial computing experiences to transform the training of their workforces. Let me now turn to our cash position and capital return program. We ended the quarter with $153 billion in cash and marketable securities. We repaid $4.3 billion in maturing debt and increased commercial paper by $1 billion, leaving us with total debt of $101 billion. As a result, net cash was $52 billion at the end of the quarter. During the quarter, we returned over $32 billion to shareholders, including $3.9 billion in dividends and equivalents and $26 billion through open market repurchases of 139 million Apple shares. As we move ahead into the September 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. We expect foreign exchange to continue to be a headwind and to have a negative impact on revenue of about 1.5 percentage points on a year-over-year basis. We expect our September quarter total company revenue to grow year-over-year at a rate similar to the June quarter. We expect services revenue to grow double digits at a rate similar to what we reported in the first three quarters of this fiscal year. We expect gross margin to be between 45.5% and 46.5%. We expect OpEx to be between $14.2 billion and $14.4 billion. We expect OI&E to be around negative $50 million, excluding any potential impact from the mark to market of minority investments, and our tax rate to be around 16.5%. Finally, today our Board of Directors has declared a cash dividend of $0.25 per share of common stock payable on August 15, 2024, to shareholders of record as of August 12, 2024. With that, let's open the call to questions.","evidence_gemma_new":"Products revenue","evidence_llama_3_3":"Products revenue June quarter","evidence_qwen_3_30b":"Products revenue June quarter","gemma_new_max":61600000000.0,"gemma_new_min":61600000000.0,"llama_3_3_max":61600000000.0,"llama_3_3_min":61600000000.0,"qwen_3_30b_max":61600000000.0,"qwen_3_30b_min":61600000000.0}
{"symbol":"AAPL","year":2024,"quarter":4,"date":"2024-Q4","chunk_id":2,"sub_chunk_id":0,"centroid_label":"product revenue","agreed_value":70000000000.0,"count":3,"chunk":"Luca Maestri: Good afternoon, everyone. And thank you, Tim, for the very kind words. Serving as Apple's CFO has been a real privilege and an amazing journey, and I've greatly appreciated the support from our investors and the analyst community over the years. Kevan is exceptional, and I know you will enjoy interacting with him going forward. Let me now turn to the results for the fourth quarter of our fiscal year. We're very pleased to report a new September quarter revenue record of $94.9 billion, up 6% year-over-year. We grew in the vast majority of the markets we track and achieved September quarter revenue records in the Americas, Europe and Rest of Asia Pacific. Products revenue was $70 billion, up 4% year-over-year, driven by growth in iPhone, iPad and Mac. Our installed base of active devices reached an all-time high across all products and geographic segments, thanks to very high levels of customer satisfaction and loyalty and a large number of customers who are new to our products. Services revenue reached an all-time record of $25 billion, up 12% year-over-year. We saw broad-based strength around the world, reaching all-time records in both developed and emerging markets with double-digit growth and record results across most services categories. Company gross margin was 46.2%, near the high end of our guidance range. Products gross margin was 36.3%, up 100 basis points sequentially, primarily driven by favorable mix. Services gross margin was 74%, unchanged from the prior quarter. Operating expenses of $14.3 billion were at the midpoint of the guidance range we provided at the beginning of the quarter and up 6% year-over-year. During the quarter, we recorded a one-time income tax charge of $10.2 billion, which relates to the impact of the reversal of the European General Court's State Aid decision. When we exclude this one-time charge, net income was $25 billion and diluted earnings per share were a $1.64, up 12% year-over-year, and a September quarter record. Operating cash flow was very strong at $26.8 billion, a new September quarter record. Let me now get into more detail for each of our revenue categories. iPhone revenue was $46.2 billion, up 6% year-over-year, and a September quarter record in total and across several markets, including the US, the Middle East, Korea, and South Asia. The iPhone active installed base grew to a new all-time high in total and in every geographic segment. During the September quarter, many iPhone models were among the top-selling smartphones around the world. In fact, according to a survey from Kantar, iPhone was the top-selling model in the US, Urban China, the UK, Australia, and Japan. We continue to see high levels of customer satisfaction for the iPhone 15 family, with 451 Research recently measuring it at 98% in the US. Mac revenue was $7.7 billion, up 2% year-over-year, driven by the strength in MacBook Air. Customers have been loving the performance of Apple Silicon on Mac and we are very excited to bring the latest M4 family of chips to the lineup. The Mac installed base reached an all-time high with about half of customers in the quarter being new to Mac. And in the latest reports from 451 Research, customer satisfaction was 95% in the US. iPad generated $7 billion in revenue, up 8% year-over-year. In addition to growth in developed markets, we also saw strong performance in many emerging markets, with double-digit growth in Mexico, Brazil, the Middle East, India and South Asia. The iPad installed base reached another all-time high, and over half of the customers who purchased iPads during the quarter were new to the product. Also, customer satisfaction was recently measured at 97% in the US. Wearables, Home and Accessories revenue was $9 billion, down 3% year-over-year. The Apple Watch installed base reached a new all-time high, with over half of customers purchasing an Apple Watch during the quarter being new to the product. And the latest reports from 451 Research indicated customer satisfaction of 96% for watch in the US. Our Services revenue reached an all-time record of $25 billion, growing 12% year-over-year. Services continue to see strong momentum with the growth of our installed base of active devices setting a solid foundation for the future expansion of our ecosystem. And we see increased customer engagement with our services offerings. Both transacting accounts and paid accounts reached a new all-time high, with paid accounts growing double-digits year-over-year. Paid subscriptions also grew double-digits. We have well over 1 billion paid subscriptions across the services on our platform, more than double the number we had only four years ago. And as always, we remain focused on improving the breadth and quality of our services from new games on Apple Arcade to new features like Tap to Cash and pay with installments using Apple Pay to many successful new and returning shows on Apple TV+. This past quarter, we celebrated the five-year anniversary of Apple Card, which was ranked #1 in customer satisfaction among co-branded credit cards by J.D. Power for the fourth year in a row. Turning to enterprise, we continue to see strong demand across our products and services. NVIDIA launched its Mac as a choice program supported by AppleCare for Enterprise and Apple Professional Services with over 10,000 Macs deployed worldwide. And Novartis, a leading global pharmaceutical company, recently chose iPhone 16 as the standard mobile device for all employees. We also see continued momentum with Apple Vision Pro in the enterprise space. UC San Diego Health is the first hospital in the world to test spatial computing apps on Apple Vision Pro in clinical trials for patient surgery in the operating room. Let me now turn to our cash position and capital return program. We ended the quarter with $157 billion in cash and marketable securities. We repaid $2.6 billion in maturing debt and increased commercial paper by $7 billion, leaving us with total debt of $107 billion. As a result, net cash was $50 billion at the end of the quarter. During the quarter, we returned over $29 billion to shareholders, including $3.8 billion in dividends and equivalents and $25 billion through open market repurchases of 112 million Apple shares. 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're providing today assumes that the macroeconomic outlook doesn't worsen from what we are projecting today for the current quarter. We expect our December quarter total company revenue to grow low- to mid-single digits year-over-year. We expect Services revenue to grow double-digits at a rate similar to what we reported in the fiscal year 2024. We expect gross margin to be between 46% and 47%. We expect OpEx to be between $15.3 billion and $15.5 billion. We expect OI&E to be around negative $250 million, excluding any potential impact from the mark to market of minority investments. And our tax rate to be around 16%. Finally, today, our Board of Directors has declared a cash dividend of $0.25 per share of common stock payable on November 14, 2024 to shareholders of record as of November 11, 2024. With that, let us open the call to questions.","evidence_gemma_new":"Products revenue year-over-year","evidence_llama_3_3":"Products revenue fourth quarter fiscal year 2024","evidence_qwen_3_30b":"Products revenue","gemma_new_max":70000000000.0,"gemma_new_min":70000000000.0,"llama_3_3_max":70000000000.0,"llama_3_3_min":70000000000.0,"qwen_3_30b_max":70000000000.0,"qwen_3_30b_min":70000000000.0}
{"symbol":"AAPL","year":2023,"quarter":1,"date":"2023-Q1","chunk_id":2,"sub_chunk_id":0,"centroid_label":"revenue","agreed_value":117200000000.0,"count":3,"chunk":"Timothy Cook: Thank you, Tejas. Good afternoon, everyone, and thanks for joining us. Today, we're reporting revenue of $117.2 billion for the December quarter. We set all-time revenue records in a number of markets, including Canada, Indonesia, Mexico, Spain, Turkey and Vietnam, along with quarterly records in Brazil and India. As a result of a challenging environment, our revenue was down 5% year-over-year. But I'm proud of the way we have navigated circumstances, seen and unforeseen, over the past several years, and I remain incredibly confident in our team and our mission and in the work we do every day. Let me discuss the 3 factors that impacted our revenue performance during the quarter. The first was foreign exchange headwinds, which had a nearly 800 basis point impact. On a constant currency basis, we grew year-over-year and would have grown in the vast majority of the markets we track. The second factor, which we described in a November 6 update was COVID-19-related challenges, which significantly impacted the supply of iPhone 14 Pro and iPhone 14 Pro Max and lasted through most of December. Because of these constraints, we had significantly less iPhone 14 Pro and iPhone 14 Pro Max supply than we planned, causing ship times to extend far beyond what we had anticipated. As we always have every step of the way throughout the pandemic, we continued to prioritize people and worked with our suppliers to ensure the health and safety of every worker. Production is now back where we want it to be. The third factor was a challenging macroeconomic environment as the world continues to face unprecedented circumstances, from inflation to war in Eastern Europe, to the enduring impacts of the pandemic. And we know that Apple is not immune to it. But whatever conditions we face, our approach is always the same. We are thoughtful and deliberate. We manage for the long term. We adapt quickly to circumstances outside our control while delivering with excellence in the things we can. We invest in innovation, in people and in the positive difference we can make in the world. And we do it all to provide our customers with technology that will enrich their lives and help unlock their full creative potential. It's a wonderful thing to be a part of, and it's so rewarding for all of us at Apple when we hear how much our customers are loving what we create. Let me talk now about what we saw across our product categories. Starting with iPhone. Revenue came in at $65.8 billion for the quarter, down 8% year-over-year. However, on a constant currency basis, iPhone revenue was roughly flat. Our customers continue to rave about the astounding camera capabilities and unprecedented battery life and the groundbreaking suite of health and safety features. The iPhone 14 lineup pushes the limits of what users can do with a smartphone. During the quarter, Mac revenue came in at $7.7 billion, which was in line with what we had expected. We had a difficult compare because this time last year, we had the extremely successful launch of the redesigned M1 MacBook Pros. We also faced a challenging macroeconomic environment and foreign exchange headwinds. We remain confident in and focused on the long-term opportunity for Mac. Just last month, we introduced new MacBook Pro models powered by our latest developments in Apple silicon, M2 Pro and M2 Max. These chips enable unprecedented performance and do so with less energy, which is not only good for the environment but gives the newest MacBook Pro the longest battery life ever in a Mac. We also introduced the M2-powered Mac mini, which will supercharge productivity for users of all kinds and leave them stunned by just how powerful a Mac mini can be. During the quarter, iPad revenue grew 30% to a total of $9.4 billion. The very strong growth was due in part to a favorable compare to the December quarter a year ago when we experienced significant supply constraints. Customers continue to praise our new lineup for its versatility, whether it's the new iPad Pro now powered by the M2 or the newly designed iPad 10th Generation with its stunning liquid retina display and beautiful colors. Revenue for Wearables, Home and Accessories was $13.5 billion, which was down 8% year-over-year driven by foreign exchange headwinds and a challenging macroeconomic environment. We remain excited about the long-term opportunity in the category. As an example, a few weeks ago, we announced the next-generation HomePod, which is an indispensable addition to the smart home. This powerful smart speaker relies on advanced computational audio to produce an incredible listening experience. We're also helping users make their homes safer with sound recognition. This feature, arriving later this spring, allows HomePod to send a notification directly to a user's iPhone if a smoke or carbon monoxide alarm sound is identified. We continue to hear wide praise for Apple Watch Series 8 and Apple Watch Ultra, which has set a new standard for what's possible with a wearable. From a whole host of health and safety features to incredible new capabilities for extreme athletes, there is something for everyone in these amazing products. Customers are excited about some phenomenal new features we've made available across many of our products as well. One of the highlights is emergency SOS via satellite, which launched for iPhone 14 customers in the U.S. and Canada in November and for customers in France, Germany, Ireland and the U.K. in December. This is a feature we hope our users will never need, but it is incredibly heartening to get e-mails from people describing the life-saving impact our new safety features have had on them. We're always looking for new ways to empower people to create and collaborate. In December, we released Freeform, a brand-new app that lets users take their ideas wherever they want, anywhere they are, all while collaborating in real time. Freeform has already received praise from reviewers for its flexibility and simplicity as it works seamlessly across iPhone, iPad and Mac. Today, we are very excited to announce that we've achieved a truly incredible milestone. Thanks to our deep commitment to innovation, incredible customer loyalty and satisfaction and a large number of switchers, we now have more than 2 billion active devices as part of our growing installed base, double what it was just 7 years ago. This is an incredible testament to our products and services and the strength of our ecosystem. We set an all-time revenue record of $20.8 billion in services, which was better than what we had expected. We achieved double-digit revenue growth from App Store subscriptions and set all-time revenue records across a number of categories, including cloud and payment services. All told, Apple now has more than 935 million paid subscriptions. Apple has also just begun a historic 10-year partnership with Major League Soccer. Just yesterday, we launched MLS Season Pass, which will give fans in more than 100 countries access to every live MLS regular season game as well as the playoffs and MLS Cup, all with no blackouts. And while we're providing more content to sports fans than ever before, Apple TV+ continues to showcase powerful characters and moving storytelling. We were thrilled to celebrate the holidays alongside our Apple TV+ subscribers with the hit movie Spirited. And we're delighted to see how much people are enjoying new and returning series like Shrinking, Slow Horses and Truth Be Told. And we have some great upcoming movies in Sharper and Tetris, along with Emmy Award winner Ted Lasso returning this spring. During the quarter, we made some great updates to Fitness+ as well, expanding our catalog of more than 3,500 workouts and meditations to include a new kickboxing category and a new sleep theme for meditations. Our latest artist spotlight series features the music of the incomparable Beyonce, and we're excited to take a stroll with guests appearing on our fifth season of Time to Walk. And we continue to build on our decades-long commitment to helping small businesses thrive when we announced Apple Business Connect. This new tool gives business owners even more control over how billions of people see and engage with their products and services every day. Businesses of all sizes can now customize key information for users across Apple Maps, Messages, Wallet, Siri and other apps. Meanwhile, in retail, we celebrated 25 years of the Apple online store and also opened Apple Pacific Centre in Vancouver and Apple American Dream in New Jersey. And I'm grateful to all the teams who helped our customers throughout the busy holiday season. At Apple, we spend a lot of time focused on creating an unparalleled experience for our customers and every product and service that we offer. We're also just as dedicated to leading with our values in everything we do. As part of that work, we strengthened our deep commitment to privacy and security, giving users 3 new tools to protect their most sensitive data: iMessage contact key verification, security keys for Apple ID and advanced data protection for iCloud. At Apple, we feel a deep sense of responsibility to leave the world better than we found it. We're also a year closer to 2030, and we were ever focused on the environmental commitments we set out for the end of the decade. As an example, the latest Mac mini and MacBook Pro models all use 100% recycled aluminum in the enclosure and recycled rare earth elements in all magnets. And in a first for HomePod, we're using 100% recycled gold in the plating of multiple printed circuit boards. In honor of Black History Month, we released the Black Unity collection, including the Special Edition Apple Watch Black Unity Sport Loop, a new matching watch face and iPhone wallpaper. Through our racial, equity and justice initiative, we're expanding our support of 5 organizations focused on lifting up communities of color through technology. And we are committed as ever to building on our progress around inclusion and diversity. During the quarter, we also announced that since the inception of our Giving program 11 years ago, we've donated more than $880 million to humanitarian efforts, disaster relief, childhood education and more. And over the last 16 years through our partnership with (RED), Apple-supported grants have helped more than 11 million people get the care and support services they need. As we look ahead in 2023, we are excited about the year to come. At Apple, we are always looking forward, always focused on the next challenge, always determined to do great things with unmatched creativity and unrivaled innovation. And that makes me more confident about the future of Apple than I have ever been. With that, I'll turn it over to Luca.","evidence_gemma_new":"revenue December quarter","evidence_llama_3_3":"revenue December quarter","evidence_qwen_3_30b":"revenue December quarter","gemma_new_max":117200000000.0,"gemma_new_min":117200000000.0,"llama_3_3_max":117200000000.0,"llama_3_3_min":117200000000.0,"qwen_3_30b_max":117200000000.0,"qwen_3_30b_min":117200000000.0}
{"symbol":"AAPL","year":2023,"quarter":2,"date":"2023-Q2","chunk_id":3,"sub_chunk_id":0,"centroid_label":"revenue","agreed_value":94800000000.0,"count":2,"chunk":"Luca Maestri: Thank you, Tim, and good afternoon, everyone. Revenue for the March quarter was $94.8 billion, down 3% from last year and better than our expectations. Foreign exchange had a negative impact of over five percentage points on our results, in line with what we had expected. On a constant currency basis, our revenue grew year-over-year in total and in the majority of the markets we track. In addition to the records in emerging markets that Tim mentioned, we also set March quarter records in Australia, Canada, Spain and Switzerland, among others. Products revenue was $73.9 billion, down 5% from last year, due to challenging compares on Mac and iPad. iPhone, however, reached a March quarter revenue record thanks to very strong performance in emerging markets from South Asia and India to Latin America and the Middle East. During the quarter, our installed base of active devices continued to grow at a nice pace thanks to extremely high levels of customer satisfaction and loyalty, and reached an all-time high for all major product categories and geographic segments. Our Services set an all-time revenue record of $20.9 billion, up 5% year-over-year, on top of growing 17% in the March quarter a year ago. We reached an all-time services revenue record in Greater China and March quarter records in Americas, Europe and Rest of Asia Pacific. Company gross margin was 44.3%, up 130 basis points from last quarter, driven by cost savings and favorable mix shift towards services partially offset by leverage. Products gross margin was 36.7%, decreasing 30 basis points sequentially due to seasonal loss of leverage and mix, partially offset by favorable costs. Services gross margin was 71%, up 20 basis points sequentially. Operating expenses of $13.7 billion were at the low end of the guidance range we provided at the beginning of the quarter and continued to decelerate from the December quarter. We are closely managing our spend, but remain focused on long term growth with continued investment in innovation and product development. Net income was $24.2 billion. Diluted earnings per share were a $1.52, unchanged versus last year, and we generated very strong operating cash flow of $28.6 billion. Let me now provide more detail for each of our revenue categories. iPhone revenue set a March quarter record of $51.3 billion, up 2% year-over-year despite significant foreign exchange headwinds and a challenging macroeconomic environment. We set March quarter records in several developed and emerging markets with India, Indonesia, Turkey and the UAE doubling on a year-over-year basis. Our active installed base of iPhone grew to a new all-time high and was up in all our geographic segments. We are very pleased by the results of the latest survey of US Consumers from 451 Research, which measured customer satisfaction at 99% for the iPhone 14 family. Mac revenue was $7.2 billion, down 31% year-over-year and in line with our expectations. These results were driven by the challenging macroeconomic environment coupled with a difficult compare against last year's launch of the completely reimagined M1 MacBook Pros. Despite this, the installed base of active Macs reached an all-time high across all geographic segments and we continue to see strong upgraded activity to Apple silicon. Also, the latest survey of US Consumers from 451 Research reported customer satisfaction at 96% for Mac. iPad generated $6.7 billion in revenue, down 13% year-over-year and in line with our expectations. This performance was due to two key factors, a tough compare against the launch of iPad Air powered by the M1 chip in the year ago quarter and headwinds from the macroeconomic environment. The iPad installed base reached a new all-time high in all geographic segments thanks to exceptional customer loyalty and a high number of new customers. In fact, over half of the customers who purchased iPads during the quarter were new to the product. Wearables, home and accessories revenue was $8.8 billion, down 1% year-over-year as the category experienced the impact from the macroeconomic environment. However, we did set March quarter records both in the US and in Greater China. We continue to see strength in our Watch installed base, which set a new all-time record, thanks to very high customer loyalty and new two rates, nearly two thirds of customers purchasing an Apple Watch during the quarter were new to the product. Moving to Services, we reached a new all-time revenue record of $20.9 billion. And in addition to the all-time records Tim mentioned earlier, we set March quarter records for advertising Apple Care and Video. Despite these records, as we saw in recent quarters, certain services offerings such as digital advertising and mobile gaming continue to be affected by the current macroeconomic environment. Stepping back, however, the continued growth in Services is the reflection of our ecosystem strength and the positive momentum we are seeing across several key metrics. First, our growing installed base of over 2 billion active devices represents a great foundation for future expansion of our ecosystem. We continue to grow across every major product category and geographic segment, thanks to very high levels of customer loyalty and satisfaction. Second, we saw increased customer engagement with our services during the quarter. Both our transacting accounts and paid accounts grew double digits year-over-year, each setting a new all-time record. Third, paid subscriptions showed strong growth. We now have more than $975 million paid subscriptions across the Services on our platform, up 150 million during the last 12 months and nearly double the number of paid subscriptions we had only three years ago. And finally, we continue to improve the breadth and the quality of our current services offerings from new content on Apple TV Plus to great new features available in Apple Pay and Apple Music, which we believe our customers will love. Turning to the enterprise market, we see business customers continuing to invest in the Apple platform to drive higher employee productivity and satisfaction. In Brazil, Boticario Group, the world's largest cosmetics franchiser, originally starting with iPhone, 12 employees manage operations across a network of retail stores, franchisees and resellers. As it continues to digitize its business, Boticario has chosen to move all software development in house and adopted Mac as the standard device for all of their developer teams across the world. In small business, we see an increasing number of customers relying on Apple hardware, software and services to power their businesses forward, from accepting payments on iPhone, to tracking inventory on Mac or iPad, to managing employee devices with Apple Business Essentials. As we celebrate National Small Business week here in the US, we are proud to continue supporting the small business community. Let me now turn to our cash position and capital return program. We ended the quarter with over $166 billion in cash and marketable securities. We repaid $2.3 billion in maturing debt and increased commercial paper by about $300 million, leaving us with total debt of $110 billion. As a result, net cash was $57 billion at the end of the quarter. During the March quarter, we returned over $23 billion to shareholders, including $3.7 billion in dividends and equivalents and $19.1 billion through open market repurchases of $129 million Apple shares. Given the continued confidence we have in our business now and into the future, today our Board has authorized an additional $90 billion for share repurchases as we maintain our goal of getting to net cash neutral over time. We're also raising our dividend by 4% to $0.24 a share, and we continue to plan for annual increases in the dividend going forward. As we move ahead into the June 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. We expect our June quarter year-over-year revenue performance to be similar to the March quarter, assuming that the macroeconomic outlook does not worsen from what we are projecting today for the current quarter. Foreign exchange will continue to be a headwind and we expect a negative year-over-year impact of nearly four percentage points. For Services, we expect our June quarter year-over-year revenue growth to be similar to the March quarter, while continuing to face macroeconomic headwinds in areas such as digital advertising and mobile gaming. We expect gross margin to be between 44% and 44.5%. We expect OpEx to be between $13.6 billion and $13.8 billion. We expect OINE to be around negative $250 million excluding any potential impact from the mark-to-market of minority investments and our tax rate to be around 16%. Finally reflecting the dividend increase I mentioned earlier, today, our Board of Directors has declared a cash dividend of $0.24 per share of common stock payable on May 18, 2023, to shareholders of record as on May 15, 2023. With that, let's open the call to questions.","evidence_gemma_new":"revenue March quarter","evidence_llama_3_3":null,"evidence_qwen_3_30b":"Revenue March quarter","gemma_new_max":94800000000.0,"gemma_new_min":94800000000.0,"llama_3_3_max":null,"llama_3_3_min":null,"qwen_3_30b_max":94800000000.0,"qwen_3_30b_min":94800000000.0}
{"symbol":"AAPL","year":2023,"quarter":3,"date":"2023-Q3","chunk_id":3,"sub_chunk_id":0,"centroid_label":"revenue","agreed_value":81800000000.0,"count":3,"chunk":"Luca Maestri: Thank you, Tim, and good afternoon, everyone. Revenue for the June quarter was $81.8 billion, down 1% from last year and better than our expectations despite nearly 4 percentage points of negative impact from foreign exchange. On a constant currency basis, our revenue grew year-over-year in total and in the majority of the markets we track. We set June quarter records in both Europe and Greater China and continue to see strong performance across our emerging markets driven by iPhone. Products revenue was $60.6 billion, down 4% from last year, as we faced FX headwinds and an uneven macroeconomic environment. However, our installed base reached an all-time high across all geographic segments, driven by a June quarter record for iPhone switchers and high new-to rates in Mac, iPad and Watch, coupled with very high levels of customer satisfaction and loyalty. Our Services revenue set an all-time record of $21.2 billion, up 8% year-over-year and grew double digits in constant currency. Our performance was strong around the world as we reach all-time Services revenue records in Americas and Europe and June quarter records in Greater China and rest of Asia Pacific. Company gross margin was 44.5%, a record level for the June quarter and up 20 basis points sequentially, driven by cost savings and favorable mix shift towards Services, partially offset by a seasonal loss of leverage. Products gross margin was 35.4%, down 130 basis points from last quarter due to seasonal loss of leverage and mix, partially offset by favorable costs. Services gross margin was 70.5%, decreasing 50 basis points sequentially. Operating expenses of $13.4 billion were below the low end of the guidance range we provided at the beginning of the quarter and decelerated from the March quarter. We continue to take a deliberate approach in managing our spend with strong focus on innovation and new product development. The results of these actions delivered net income of $19.9 billion, diluted earnings per share of $1.26, up 5% versus last year, and very strong operating cash flow of $26.4 billion. Let me now provide more detail for each of our revenue categories. iPhone revenue was $39.7 billion, down 2% year-over-year but grew on a constant currency basis. We set revenue records in several markets around the world, including an all-time record in India and June quarter records in Latin America, the Middle East and Africa, Indonesia, the Philippines, Italy, the Netherlands and the U.K. Our iPhone active installed base grew to a new all-time high, thanks to a June quarter record in switchers. This is a testament to our extremely high levels of customer satisfaction, which 451 Research recently measured at 98% for the iPhone 14 family in the U.S. Mac generated $6.8 billion in revenue, down 7% year-over-year. We continue to invest in our Mac portfolio. And this past quarter, we were pleased to complete the transition to Apple silicon for the entire lineup. This transition has driven both strong upgrade activity and a high number of new customers. In fact, almost half of Mac buyers during the quarter were new to the product. We also saw reported customer satisfaction of 96% for Mac in the U.S. iPad revenue was $5.8 billion, down 20% year-over-year and in line with our expectations. These results were driven by a difficult compare against the full quarter impact of the iPad Air launch in the prior year. At the same time, we continue to attract a large number of new customers to the iPad installed base with over half of the customers who purchased iPads during the quarter being new to the product. And the latest reports from 451 Research indicate customer satisfaction of 96% in the U.S. Wearables, Home and Accessories revenue was $8.3 billion, up 2% year-over-year, with a June quarter record in Greater China and strong performance in several emerging markets. We continue to see Apple Watch expand its reach with about 2\/3 of customers purchasing an Apple Watch during the quarter being new to the product. And this is combined with very high levels of customer satisfaction, which was recently reported at 98% in the United States. Moving on to Services. We reached a new all-time revenue record of $21.2 billion with year-over-year growth accelerating sequentially to 8% and up double digits in constant currency. In addition to the all-time records Tim mentioned earlier, we also set June quarter records for advertising, App Store and Music. We are very pleased with our performance in Services, which is a direct reflection of our ecosystem's strength. First, our installed base of over 2 billion active devices continues to grow at a nice pace and establishes a solid foundation for the future expansion of our ecosystem. Second, we see increased customer engagement with our services. Both our transacting accounts and paid accounts grew double digits year-over-year, each reaching a new all-time high. Third, our paid subscriptions showed strong growth. This past quarter, we reached an important milestone and passed 1 billion paid subscriptions across the services on our platform, up 150 million during the last 12 months and nearly double the number of paid subscriptions we had only 3 years ago. And finally, we continue to improve the breadth and the quality of our current services. From 20 new games on Apple Arcade, to brand-new content on Apple TV+, to the launch of our high-yield savings account with Apple Card, our customers are loving these enhanced offerings. Turning to the enterprise market. Our customers are leveraging Apple products every day to help improve productivity and attract talent. Blackstone, a global investment management firm, is expanding its Apple footprint from their corporate iPhone fleet to now offering the MacBook Air powered by M2 to all of their corporate employees and portfolio companies. Gilead, a leading biopharmaceutical company, has deployed thousands of iPads globally to their sales team. Over the last 6 months, they have also doubled their Mac user base by making MacBook Air available to more employees with a focus on user experience and strong security. Let me now turn to our cash position and capital return program. We ended the quarter with over $166 billion in cash and marketable securities. We repaid $7.5 billion in maturing debt while issuing $5.2 billion of new debt and increasing commercial paper by $2 billion, leaving us with total debt of $109 billion. As a result, net cash was $57 billion at the end of the quarter. During the quarter, we returned over $24 billion to shareholders, including $3.8 billion in dividends and equivalents and $18 billion through open market repurchases of 103 million Apple shares. We continue to believe there is great value in our stock and maintain our target of reaching a net cash neutral position over time. As we move ahead into the September quarter, I'd like to review our outlook, which includes the types of forward-looking information that Saori referred to at the beginning of the call. We expect our September quarter year-over-year revenue performance to be similar to the June quarter, assuming that the macroeconomic outlook doesn't worsen from what we are projecting today for the current quarter. Foreign exchange will continue to be a headwind, and we expect a negative year-over-year revenue impact of over 2 percentage points. We expect iPhone and Services year-over-year performance to accelerate from the June quarter. Also, we expect the revenue for both Mac and iPad to decline by double digits year-over-year due to difficult compares, particularly on the Mac. For both products, we experienced supply disruptions from factory shutdowns in the June quarter a year ago and were able to fulfill significant pent-up demand in the year ago September quarter. We expect gross margin to be between 44% and 45%. We expect OpEx to be between $13.5 billion and $13.7 billion. We expect OI&E to be around negative $250 million, excluding any potential impact from the mark-to-market of minority investments, and our tax rate to be around 16%. Finally, today, our Board of Directors has declared a cash dividend of $0.24 per share of common stock payable on August 17, 2023, to shareholders of record as of August 14, 2023. With that, let's open the call to questions.","evidence_gemma_new":"Revenue June quarter","evidence_llama_3_3":"Revenue June quarter","evidence_qwen_3_30b":"revenue June quarter","gemma_new_max":81800000000.0,"gemma_new_min":81800000000.0,"llama_3_3_max":81800000000.0,"llama_3_3_min":81800000000.0,"qwen_3_30b_max":81800000000.0,"qwen_3_30b_min":81800000000.0}
{"symbol":"AAPL","year":2023,"quarter":4,"date":"2023-Q4","chunk_id":3,"sub_chunk_id":0,"centroid_label":"revenue","agreed_value":89500000000.0,"count":3,"chunk":"Luca Maestri: Thank you, Tim, and good afternoon, everyone. Revenue for the September quarter was $89.5 billion, down less than 1% from last year. Foreign exchange had a negative impact of over 2 percentage points. And on a constant-currency basis, our revenue grew year-over-year in total, and in each geographic segment. We set a September quarter record in the Americas and saw strong performance across our emerging markets, where both iPhone and Services grew double digits. Products revenue was $67.2 billion, down 5% from last year, due to very challenging compares on both Mac and iPad, which I will discuss in more detail later on. At the same time, we reached a September quarter record on iPhone, driven by strength in emerging markets. Our total installed-base of active devices reached an all-time high across all products and all geographic segments, thanks to our high levels of customer satisfaction and many new customers joining our ecosystem. Our Services revenue set an all-time record of $22.3 billion, up 16% year-over-year, with growth accelerating sequentially from the June quarter. Our performance in Services were broad based, as we reached all-time revenue records in the Americas, Europe and rest of Asia-Pacific and a September quarter record in Greater China. We also set new records in every Services category. Company gross margin set a September quarter record at 45.2%, up 70 basis points sequentially, driven by leverage and favorable mix, partially offset by foreign exchange. Products gross margin was 36.6%, up 120 basis points sequentially, also driven by leverage and mix, partially offset by foreign exchange. Services gross margin was 70.9%, up 40 basis points from last quarter due to a different mix. Operating expenses of $13.5 billion were at the low end of the guidance range we provided, up 2% year-over-year. Net income was $23 billion, diluted earnings per share was $1.46, up 13% versus last year and a September quarter record, and operating cash flow was strong at $21.6 billion. Let me now provide more detail for each of our revenue categories. iPhone revenue was $43.8 billion, up 3% year-over-year and a new September quarter record. We had strong performance in several markets, including an all-time record in India as September quarter records in Canada, Latin America, the Middle East, and South Asia . Our iPhone active installed base grew to a new all-time high and fiscal 2023 was another record year for switches. We continue to see extremely high levels of customer satisfaction which 451 Research recently measured at 98% in the U.S. Mac revenue was $7.6 billion, down 34% year-over-year, driven by challenging market conditions and compounded by a difficult compare in our own business, whereby last year we experienced supply disruptions from factory shutdowns in the June quarter and were subsequently able to fulfill significant pent-up demand during the September quarter. We also had a difference in launch timing with the MacBook Air launching earlier this year in the June quarter compared to the September quarter last year. We have great confidence in our Mac lineup and are excited about the recently announced iMac and MacBook Pro powered by our M3 chips. Our installed base is at an all-time high and half of Mac buyers during the quarter were new to the product, driven by MacBook Air. Also, we saw reported customer satisfaction of 97% for Mac in the U.S. iPad generated $6.4 billion in revenue, down 10% year-over-year. Similar to Mac, these results were a function of a difficult compare from the supply disruptions in the June quarter a year ago and the subsequent fulfillment of pent-up demand in the September quarter. iPad continues to attract a large number of new customers to the installed base with over half of the customers who purchase iPads during the quarter being new to the product and the latest reports from 451 Research indicate customer satisfaction of 98% in the U.S. Wearables, Home and Accessories revenue was $9.3 billion, down 3% year-over-year. We had a September quarter record in Europe and we saw strong performance in several emerging markets around the world. Apple Watch continues to expand its reach with nearly two-thirds of customers purchasing Apple Watch during the quarter being new to the product and customer satisfaction for the Watch was recently measured at 97% in the U.S. Services had a great quarter. We reached a new all-time revenue record of $22.3 billion, up 16% year-over-year. And we're happy to see growth coming from all categories and every geographic segment, which is a direct result of the strength of our ecosystem. Our installed base of over 2 billion active devices continues to grow at a nice pace and establishes a solid foundation for the future expansion of the ecosystem. And we continue to see increased customer engagement with our Services. Both transacting accounts and paid accounts grew double-digits year-over-year, each reaching a new all-time high. Also our paid subscriptions showed strong growth. We have well over 1 billion paid subscriptions across the services on our platform, nearly double the number we had only three years ago. And finally, we continue to improve the breadth and quality of our current services from exciting new content on Apple TV+ and Apple Arcade to additional storage tiers on iCloud. We believe our customers will love this new offering. Turning to enterprise. We are excited to see our business customers in both developed and emerging markets expand their deployment of Apple products and technologies to drive business innovation and employee satisfaction. Starbucks continuously invest in Apple technology to bring the best experience to the customers and employees, including tens of thousands of iPads across all retail stores to help their teams streamline order management, operations and training. In addition, Starbucks recently refreshed over 10,000 Macs to the latest M2-powered MacBook Air for all store managers, enabling them to do their best work and improve productivity. And in Indonesia, popular technology company GoTo is offering Mac as a choice, so that employees can have the best tools to be most productive. Today, more than half of its workforce are already choosing Mac for work. Let me now turn to our cash position and capital return program. We ended the quarter with over $162 billion in cash and marketable securities. We increased commercial paper by $2 billion, leaving us with total debt of $111 billion. As a result, net cash was $51 billion at the end of the quarter. And our goal of becoming net cash-neutral over time remains unchanged. During the quarter, we returned nearly $25 billion to shareholders, including $3.8 billion in dividends and equivalents and $15.5 billion through open market repurchases of 85 million Apple shares. We also began a $5 billion accelerated share repurchase program in August, resulting in the initial delivery and retirement of 22 million shares. Taking a step back, as we close our 2023 fiscal year, our annual revenue was $383 billion. While it was down 3% from the prior year, it grew on a constant-currency basis despite the volatile and uneven macroeconomic environment. Our year-over-year revenue performance improved each quarter as we went through the year, and so did our earnings per share performance, as we reported double-digit EPS growth in the September quarter. We are particularly pleased with our performance in emerging markets with revenue reaching an all-time record in fiscal 2023 and double-digit growth in constant currency. We are expanding our direct presence in these markets from new Apple retail stores in India to online stores in Vietnam and Chile. And we continue to work with our partners to offer a wide range of affordability programs so that we can best serve our customers. We're very excited about the momentum we have in these markets and the opportunity ahead of us. 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%. Finally, today our Board of Directors has declared a cash dividend of $0.24 per share of common stock, payable on November 16, 2023, to shareholders of record as of November 13, 2023. With that, let's open the call to questions.","evidence_gemma_new":"revenue September quarter","evidence_llama_3_3":"Revenue September quarter","evidence_qwen_3_30b":"Revenue September quarter","gemma_new_max":89500000000.0,"gemma_new_min":89500000000.0,"llama_3_3_max":89500000000.0,"llama_3_3_min":89500000000.0,"qwen_3_30b_max":89500000000.0,"qwen_3_30b_min":89500000000.0}
{"symbol":"AAPL","year":2024,"quarter":1,"date":"2024-Q1","chunk_id":2,"sub_chunk_id":0,"centroid_label":"revenue","agreed_value":119600000000.0,"count":3,"chunk":"Tim Cook: Thank you. Suhasini. Good afternoon, everyone, and thanks for joining the call. Today, Apple is reporting revenue of $119.6 billion for the December quarter, up 2% from a year ago despite having one less week in the quarter. EPS was $2.18, up 16% from a year ago and an all-time record. We achieved revenue records across more than two dozen countries and regions including all-time records in Europe and rest of Asia-Pacific. We also continue to see strong double-digit growth in many emerging markets with all-time records in Malaysia, Mexico, The Philippines, Poland, and Turkey, as well as December quarter records in India, Indonesia, Saudi Arabia, and Chile. In Services, we set an all-time revenue record with paid subscriptions growing double-digits year-over-year. And I'm pleased to announce today that we have set a new record for our installed base, which has now surpassed 2.2 billion active devices. We are announcing these results on the eve of what is sure to be a historic day as we enter the era of spatial computing. Starting tomorrow, Apple Vision Pro, the most advanced personal electronics device ever, will be available in Apple stores for customers in the U.S. with expansion to other countries later this year. Apple Vision Pro is a revolutionary device built on decades of Apple innovation and it's years ahead of anything else. Apple Vision Pro has a groundbreaking new input system and thousands of innovations, and it will unlock incredible experiences for users and developers that are simply not possible on any other device. There is already so much excitement behind this product from reviewers, customers, and developers. They are praising everything from the incredible experience of watching a movie on a 100-foot screen to remarkable new machine learning capabilities like hand tracking and room mapping. We can't wait for people to experience the magic for themselves. Moments like these are what we live for at Apple. They're why we do what we do. They're why we're so unflinchingly dedicated to groundbreaking innovation and why we're so focused on pushing technology to its limits as we work to enrich the lives of our users. As we look ahead, we will continue to invest in these and other technologies that will shape the future. That includes artificial intelligence where we continue to spend a tremendous amount of time and effort, and we're excited to share the details of our ongoing work in that space later this year. Now, let's turn to the results for the December quarter, beginning with iPhone. We are proud to report that revenue came in at $69.7 billion, 6% higher than a year ago. The iPhone 15 lineup has earned glowing reviews and been embraced by customers. The iPhone 15 and iPhone 15 Plus feature a gorgeous new design with color-infused back glass and contoured edges, Dynamic Island, A16 Bionic, and a new 48 megapixel camera system. And the iPhone 15 Pro and iPhone 15 Pro Max set the gold standard for smartphones with a beautiful and lighter titanium design, industry-leading performance with A17 Pro and our most advanced camera system with the equivalent of seven pro lenses and the ability to record spatial video. Features like Emergency SoS and roadside assistance via satellite bring peace of mind to users when they travel, and I'm grateful for every note I've received about their lifesaving impact. Turning to Mac. Revenue came in at $7.8 billion, up 1% year-over-year, driven by the strength of our latest M3-powered MacBook Pro models in spite of having one less week of sales. Just last week, we got to wish Mac a happy 40th birthday. When it was introduced 40 years ago, Mac changed everything, and through the years, it has done so again and again. Recently, we have been on a tremendous pace of innovation. Since the introduction of Apple silicon in 2020, we've been proud to offer our users unmatched performance and power along with a remarkable Neural Engine for artificial intelligence and machine learning. This past fall, we had an amazing launch of the latest generation of Apple silicon for Mac, M3, M3 Pro, and M3 Max. These chips break new ground in power and performance empowering users to do more than they ever could before, whether they're making a musical masterpiece using the latest features in Logic Pro, or beating their high score in a graphics intensive game. A favorite amongst students, business owners, artists, and video editors, our MacBook Pro lineup is the world's best pro notebook family. And iMac, the world's most capable and best-selling all-in one, is now faster than ever, thanks to M3. In iPad, revenue for the December quarter was $7 billion, down 25% year-over-year due to a difficult compare with the launch of the M2 iPad Pro and the 10th generation iPad during the December quarter last year and one less week of sales. iPad remains the most versatile, capable, and elegant tablet on the market today. It continues to be the go-to-device for students, creators, and more with customers loving iPad's incredible combination of portability and performance. Powerful apps like Final Cut Pro and Logic Pro for iPad allow video and music creators to unleash their creativity in new ways that are only possible on iPad. iPad continues to push the boundaries of what's possible on a tablet. In Wearables, Home and Accessories, revenue came in at $12 billion, down 11% from a year ago due to a difficult compare with the launch timing of several products in this category and the impact of the 14th week last year. Across our latest Apple Watch lineup, we're enabling and encouraging our users to live a healthier day, while making Apple Watch even more intuitive to use. The new double tap gesture on Apple Watch Series 9 and Apple Watch Ultra 2 make it easier to answer calls, play and pause music or take a photo with iPhone. I've been deeply moved by the many touching stories about how features like a regular rhythm notification and fall detection helped Apple Watch users when they needed it most. And for the first time ever, users can choose a carbon-neutral option of any new Apple Watch. Meanwhile, our AirPods lineup continue to be a holiday favorite. In Services, we set an all-time revenue record of $23.1 billion and an 11% year-over-year increase. Because we had one less week this quarter, this growth represents an acceleration from the September quarter, and we achieved all-time revenue records across advertising, cloud services, payment services and video, as well as December quarter records in App Store and AppleCare. Across our services, we're constantly growing our offerings to give users even more to love. With the redesigned Apple TV app, we've made it easier for subscribers to enjoy all their favorite shows, movies and sports, including Apple TV+ hits like Masters of the Air, Monarch, and Slow Horses. We're proud to be a part of Martin Scorsese's Killers of the Flower Moon, a film that has moved audiences and earned more than 200 accolades including Best Film of the Year from the New York Film Critics Circle, nine BAFTA nominations, a Golden Globe win, and 10 Oscar nominations, including Best Picture. Across all Apple TV+ productions, we've now earned 2050 award nominations and 450 wins since we've introduced the service. We're also excited to have a new season of Major League Soccer kicking off this month. We're looking forward to seeing Lionel Messi return to the field and to following all of our favorite teams in what is sure to be an incredible season. And we're counting down to the Apple Music Super Bowl halftime show, featuring Usher. Turning to Retail. In recent months, we opened three stores, including our 100th store in Asia-Pacific. Throughout the holidays, our team members pulled out all the stops to help customers find the perfect gift. And I know our U.S. team members are especially excited to begin demoing Apple Vision Pro for our customers tomorrow. At Apple, we live and breathe innovation. We are driven to pioneer new technology that can enrich our customers' lives, and we're just as intentional about showing up with our values and being a force for good in the world. February is Black History Month, and to honor it, we've launched our new Black Unity Collection, which includes the Black Unity Sport Loop band. This year's designs reflect a lasting commitment to working toward a more equitable world. We also continue to do a central work through our Racial Equity and Justice Initiative, and we're proud to continue providing grants to organizations that are making a real impact in the world. In recent months, we've also taken significant strides in our environmental work. We're partnering with suppliers to bring more clean energy online for Apple production. We're using more recycled materials than ever before and more energy-efficient transportation than ever before. And each day, we are taking more and more steps toward becoming 100% carbon-neutral across all of our products by 2030. Apple is a company that has never shied away from big challenges. That's because we are grounded by a deep sense of purpose and guided by core belief in the transformative power of innovation. And so, we are optimistic about the future, confident in the long-term, and as excited as we've ever been to deliver for our users like only Apple can. With that, I'll turn it over to Luca.","evidence_gemma_new":"Revenue","evidence_llama_3_3":"Revenue December quarter","evidence_qwen_3_30b":"Revenue December quarter","gemma_new_max":119600000000.0,"gemma_new_min":119600000000.0,"llama_3_3_max":119600000000.0,"llama_3_3_min":119600000000.0,"qwen_3_30b_max":119600000000.0,"qwen_3_30b_min":119600000000.0}
{"symbol":"AAPL","year":2024,"quarter":2,"date":"2024-Q2","chunk_id":1,"sub_chunk_id":0,"centroid_label":"revenue","agreed_value":90800000000.0,"count":3,"chunk":"Tim Cook: Thank you, Suhasini. Good afternoon, everyone, and thanks for joining the call. Today, Apple is reporting revenue of $90.8 billion and an EPS record of $1.53 for the March quarter. We set revenue records in more than a dozen countries and regions. These include, among others, March quarter records in Latin-America and the Middle East, as well as Canada, India, Spain and Turkey. We also achieved an all-time revenue record in Indonesia, one of the many markets where we continue to see so much potential. In services, we set an all-time revenue record, up 14% over the past year. Keep in mind, as we described on the last call, in the March quarter a year-ago, we were able to replenish iPhone channel inventory and fulfill significant pent-up demand from the December quarter COVID-related supply disruptions on the iPhone 14 Pro and 14 Pro Max. We estimate this one-time impact added close to $5 billion to the March quarter revenue last year. If we remove this from last year's results, our March quarter total company revenue this year would have grown. Despite this impact, we were still able to deliver the records I described. Of course, this past quarter, we were thrilled to launch Apple Vision Pro and it has been so wonderful to hear from people who now get to experience the magic of spatial computing. They describe the impossible becoming possible right before their eyes and they share their amazement and their emotions about what they can do now, whether it's reliving their most treasured memories or having a movie theater experience right in their living room. It's also great to see the enthusiasm from the enterprise market. For example, more than half of the Fortune 100 companies have already bought Apple Vision Pro units and are exploring innovative ways to use it to do things that weren't possible before, and this is just the beginning. Looking ahead, we're getting ready for an exciting product announcement next week that we think our customers will love. And next month, we have our Worldwide Developers Conference, which has generated enormous enthusiasm from our developers. We can't wait to reveal what we have in-store. We continue to feel very bullish about our opportunity in Generative AI. We are making significant investments, and we're looking forward to sharing some very exciting things with our customers soon. We believe in the transformative power and promise of AI, and we believe we have advantages that will differentiate us in this new era, including Apple's unique combination of seamless hardware, software and services integration, groundbreaking Apple's silicon, with our industry-leading neural engines and our unwavering focus on privacy, which underpins everything we create. As we push innovation forward, we continue to manage thoughtfully and deliberately through an uneven macroeconomic environment and remain focused on putting our users at the center of everything we do. Now let's turn to our results for the March quarter across each product category, beginning with iPhone. iPhone revenue for the March quarter was $46 billion, down 10% year-over-year. We faced a difficult compare over the previous year due to the $5 billion impact that I mentioned earlier. However, we still saw growth on iPhone in some markets, including Mainland China, and according to Kantar during the quarter, the two best-selling smartphones in Urban China were the iPhone 15 and iPhone 15 Pro Max. I was in China recently where I had the chance to meet with developers and creators who are doing remarkable things with iPhone. And just a couple of weeks ago, I visited Vietnam, Indonesia and Singapore, where it was incredible to see all the ways customers and communities are using our products and services to do amazing things. Everywhere I travel, people have such a great affinity for Apple, and it's one of the many reasons I'm so optimistic about the future. Turning to Mac. March quarter revenue was $7.5 billion, up 4% from a year ago. We had an amazing launch in early March with the new 13-inch and 15-inch MacBook Air. The world's most popular laptop is the best consumer laptop for AI with breakthrough performance of the M3 chip and it\u2019s even more powerful neural engine. Whether it's an entrepreneur starting a new business or a college student finishing their degree, users depend on the power and portability of MacBook Air to take them places they couldn't have gone without it. In iPad, revenue for the March quarter was $5.6 billion, 17% lower year-over-year, due to a difficult compare with the momentum following the launch of M2 iPad Pro and the 10th Generation iPad last fiscal year. iPad continues to stand apart for its versatility, power and performance. For video editors, music makers and creatives of all kinds, iPad is empowering users to do more than they ever could with a tablet. Across Wearables, Home and Accessories, March quarter revenue was $7.9 billion, down 10% from a year-ago due to a difficult launch compare on Watch and AirPods. Apple Watch is helping runners go the extra mile on their wellness journeys, keeping hikers on course with the latest navigation capabilities in watchOS 10, and enabling users of all fitness levels to live a healthier day. Across our watch lineup, we're harnessing AI and machine-learning to power lifesaving features like a regular rhythm notifications and fall detection. I often hear about how much these features mean to users and their loved ones and I'm thankful that so many people are able to get help in their time of greatest need. As I shared earlier, we set an all-time revenue record in services with $23.9 billion, up 14% year-over-year. We also achieved all-time revenue records across several categories and geographic segments. Audiences are tuning in on screens large, small and spatial and are enjoying Apple TV+ Originals like Palm Royale and Sugar. And we have some incredible theatrical releases coming this year, including Wolves, which reunites George Clooney and Brad Pitt. Apple TV+ productions continue to be celebrated as major awards contenders. Since launch, Apple TV+ productions have earned more than 2,100 award nominations and 480 wins. Meanwhile, we're enhancing the live sports experience with a new iPhone app, Apple Sports. This free app allows fans to follow their favorite teams and leagues with real-time scores, stats and more. Apple Sports is the perfect companion for MLS Season Pass subscribers. Turning to retail, our stores continued to be vital spaces for connection and innovation. I was delighted to be in Shanghai for the opening of our latest flagship store. The energy and enthusiasm from our customers was truly something to behold. And across the United States, our incredible retail teams have been sharing Vision Pro demos with customers, delighting them with a profound and emotional experience of using it for the very first time. Everywhere we operate and everything we do, we're guided by our mission to enrich users' lives and lead the world better than we found it, whether we're making Apple podcasts more accessible with a new transcripts feature or helping to safeguard iMessage users' privacy with new protections that can defend against advances in quantum computing. Our environmental work is another great example of how innovation and our values come together. As we work toward our goal of being carbon-neutral across all of our products by 2030, we are proud of how we've been able to innovate and do more for our customers while taking less from the planet. Since 2015, Apple has cut our overall emissions by more than half, while revenue grew nearly 65% during that same time period. And we're now using more recycled materials in our products than ever before. Earlier this spring, we launched our first-ever product to use 50% recycled materials with a new M3-powered MacBook Air. We're also investing in new solar and wind power in the U.S. and Europe, both to power our growing operations and our users' devices. And we're working with partners in India and the U.S. to replenish 100% of the water we use in places that need it most with the goal of delivering billions of gallons of water benefits over the next two decades. Through our Restore Fund, Apple has committed $200 million to nature-based carbon removal projects. And last month, we welcomed two supplier partners as new investors, who will together invest up to an additional $80 million in the fund. Whether we're enriching lives of users across the globe or doing our part to be a force for good in the world, we do everything with a deep sense of purpose at Apple. And I'm proud of the impact we've already made at the halfway point in a year of unprecedented innovation. I couldn't be more excited for the future we have ahead of us, driven by the imagination and innovation of our teams and the enduring importance of our products and services in people's lives. With that, I'll turn it over to Luca.","evidence_gemma_new":"revenue EPS March quarter","evidence_llama_3_3":"revenue March quarter","evidence_qwen_3_30b":"Revenue March quarter","gemma_new_max":90800000000.0,"gemma_new_min":90800000000.0,"llama_3_3_max":90800000000.0,"llama_3_3_min":90800000000.0,"qwen_3_30b_max":90800000000.0,"qwen_3_30b_min":90800000000.0}
{"symbol":"AAPL","year":2024,"quarter":3,"date":"2024-Q3","chunk_id":1,"sub_chunk_id":0,"centroid_label":"revenue","agreed_value":85800000000.0,"count":3,"chunk":"Tim Cook : Thank you Suhasini. Good afternoon everyone and thanks for joining the call. Today, Apple is reporting a new June quarter revenue record of $85.8 billion, up 5% from a year ago and better than we had expected. EPS grew double digits to $1.40 and achieved a record for the June quarter. We also set quarterly revenue records in more than two dozen countries and regions, including Canada, Mexico, France, Germany, the UK, India, Indonesia, the Philippines, and Thailand. And we set an all-time revenue record in services which grew 14%. At our Worldwide Developers Conference, we were thrilled to unveil game-changing updates across our platforms, including Apple Intelligence. Apple Intelligence builds on years of innovation and investment in AI and Machine Learning. It will transform how users interact with technology, from writing tools to help you express yourself, to image playground, which gives you the ability to create fun images and communicate in new ways, to powerful tools for summarizing and prioritizing notifications. Siri also becomes more natural, more useful, and more personal than ever. Apple Intelligence is built on a foundation of privacy, both through on-device processing that does not collect users' data and through private cloud compute, a groundbreaking new approach to using the cloud, while protecting users' information powered by Apple silicon. We are also integrating ChatGPT into experiences within iPhone, Mac, and iPad, enabling users to draw on a broad base of world knowledge. We are very excited about Apple Intelligence and we remain incredibly optimistic about the extraordinary possibilities of AI and its ability to enrich customers' lives. We will continue to make significant investments in this technology and dedicate ourselves to the innovation that will unlock its full potential. Recently, we've also been excited to bring Apple Vision Pro to more countries, giving customers the chance to discover the remarkable capabilities of this magical device. Vision Pro users are customizing their own workspaces, watching movies on 100-foot screens, and exploring entire worlds with just a pinch of their fingertips. With more than 2,500 native spatial apps and 1.5 million compatible apps for Vision OS, the developer community continues to pioneer stunning spatial experiences that are only possible with Vision Pro. Last month, we announced that we're bringing some amazing new immersive content to Vision Pro, including new series, concerts, films, and more. And we've seen great interest for Vision Pro in the enterprise, where it can empower companies large and small to pursue their best ideas like never before. With each innovation, we're unlocking new ways of working, new ways of learning, and new ways of tapping into the unlimited promise of human potential. We are doing that across every product and every service. Now let me share more detail in our June quarter results, beginning with iPhone. iPhone revenue was $39.3 billion, down 1% year-over-year. On a constant currency basis, we grew compared to last year. Customers continue to praise the iPhone 15 lineup for its incredible battery life, exceptional cameras, and unmatched power and performance. And we are excited to bring incredible new features to the iPhone with iOS 18, making it more personal, capable, and intelligent than ever before. This update includes the biggest redesign of the Photos app, new customization options for the home screen, messages over satellite, and the introduction of Apple Intelligence. Apple Intelligence utilizes the power of our most advanced iPhones, the iPhone 15 Pro and Pro Max, offering a transformative set of capabilities. Mac revenue was $7 billion, up 2% from a year ago. Customers are loving the latest M3-powered 13 and 15 inch MacBook Air. With back-to-school season upon us, MacBook Air is the perfect companion for students on campus and small business owners, developers, and creatives of all kinds depend on Mac to do more than they ever could before. Powered by Apple silicon with its neural engine and privacy built in at the chip level, Macs are simply the best personal computers for AI. And every Mac we've shipped with Apple silicon since 2020, is capable of taking advantage of Apple Intelligence with Mac OS Sequoia. We also know the importance of security for our users and enterprises so we continue to advance protections across our products. Turning to iPad, revenue was $7.2 billion, 24% higher year-over-year. During the quarter, we had an incredible launch where we unveiled the all-new 11 and 13 inch iPad Air, the perfect device for education, entertainment, and so much more. And With the new iPad Pro, we pushed the boundaries of power-efficient performance with the remarkable M4 chip, the engine behind this incredibly thin device. By leveraging the latest in Apple silicon, Video Editors and Musicians can take advantage of the cutting edge AI features in Final Cut Pro and Logic Pro. And we're very excited that iPad Pro and iPad Air models powered by the M series of Apple silicon will be able to utilize the powerful capabilities of Apple Intelligence. In wearables, home, and accessories, revenue was $8.1 billion, down 2% from a year ago. Apple Watch is empowering users to live a healthier day with a range of tools to take charge of their wellness journeys. At the core of Apple Watch, are powerful AI features that are helping users get help when they need it most, from irregular heart rhythm notifications to walking steadiness to crash detection and fall detection. I've heard time and again how meaningful these features are for users and their loved ones, and their stories motivate us to keep pushing forward on this vital work. As I mentioned earlier, in services, we set an all-time revenue record of $24.2 billion with paid subscriptions climbing to an all-time high. We achieve revenue records in the majority of the services categories with all-time revenue records in advertising, cloud, and payment services. Apple TV+ productions are delighting audiences on screens large and small. We're sharing powerful works of imagination with series and movies like Presumed Innocent, the Upcoming Disclaimer, and The Instigators starring Matt Damon. And we can't wait for returning fan favorites with new seasons of The Morning Show, Slow Horses, and Severance. Apple TV+ productions also continue to earn accolades with nearly 2,300 nominations and 500 wins to-date. That includes 72 Emmy Award nominations across 16 programs our best ever showing for the upcoming awards event. During the quarter, we also expanded Tap to Pay on iPhone to more markets including Japan, Canada, Italy, and Germany, enabling more businesses to use the power of iPhone to accept contactless payments. And we announced new updates to our services coming this fall, including US national park hikes and custom walk routes and Apple Maps, the ability to pay with rewards using Apple Pay, collaborative listening with Apple Music, and a redesigned Apple Fitness+ experience to help users make the most of our library of workouts and meditations. Turning to retail, we continue to expand in emerging markets with our first ever location in Malaysia. Customers from all over the country came together with our team members to celebrate this special moment. Elsewhere in the world, our teams have been sharing the magic of Apple Vision Pro and demos that delight, inspire, and deeply move customers exploring the wonders of spatial computing for the first time. At the heart of all of our innovations are the values that guide everything we do. We believe fundamentally that the best technology is technology that works for everyone. And in honor of Global Accessibility Awareness Day, we introduced all new capabilities to give users more ways to take advantage of all our products can do. These include eye tracking for users to control iPhone or iPad visually, music haptics to give those who are deaf or hard of hearing a tangible way to experience music, and vocal shortcuts that tie task to a user's voice. And we are committed as ever to shipping products that offer the highest standards of privacy for our users. With everything we do, whether it's offering a browser like Safari that prevents third-parties from tracking you across the internet or providing new features like the ability to lock and hide apps, we are determined to keep our users in control of their own data. And we are just as dedicated to ensuring the security of our users' data. That's why we work to minimize the amount of data we collect and work to maximize how much is processed directly on people's devices, a foundational principle that is at the core of all we build, including Apple Intelligence. And we continue to make significant progress on the environment. We are proud to say that all of our data centers, including those that will run private cloud compute, operate on 100% renewable energy. At Apple, we're constantly accelerating our pace of innovation. We are a company in relentless pursuit of big ideas. Time and again, we've seen how a spark of creativity can reach breakthrough velocity, reach across previously unexplored dimensions, and ultimately take flight in ways that can change the world. It's why we're going to keep investing in the meaningful innovation that enriches the lives of all of our customers. We have a busy time ahead of us, and I couldn't be more excited for all the amazing things yet to come. With that, I'll turn it over to Luca.","evidence_gemma_new":"revenue June quarter","evidence_llama_3_3":"revenue June quarter","evidence_qwen_3_30b":"revenue June quarter","gemma_new_max":85800000000.0,"gemma_new_min":85800000000.0,"llama_3_3_max":85800000000.0,"llama_3_3_min":85800000000.0,"qwen_3_30b_max":85800000000.0,"qwen_3_30b_min":85800000000.0}
{"symbol":"AAPL","year":2024,"quarter":4,"date":"2024-Q4","chunk_id":2,"sub_chunk_id":0,"centroid_label":"revenue","agreed_value":94900000000.0,"count":3,"chunk":"Luca Maestri: Good afternoon, everyone. And thank you, Tim, for the very kind words. Serving as Apple's CFO has been a real privilege and an amazing journey, and I've greatly appreciated the support from our investors and the analyst community over the years. Kevan is exceptional, and I know you will enjoy interacting with him going forward. Let me now turn to the results for the fourth quarter of our fiscal year. We're very pleased to report a new September quarter revenue record of $94.9 billion, up 6% year-over-year. We grew in the vast majority of the markets we track and achieved September quarter revenue records in the Americas, Europe and Rest of Asia Pacific. Products revenue was $70 billion, up 4% year-over-year, driven by growth in iPhone, iPad and Mac. Our installed base of active devices reached an all-time high across all products and geographic segments, thanks to very high levels of customer satisfaction and loyalty and a large number of customers who are new to our products. Services revenue reached an all-time record of $25 billion, up 12% year-over-year. We saw broad-based strength around the world, reaching all-time records in both developed and emerging markets with double-digit growth and record results across most services categories. Company gross margin was 46.2%, near the high end of our guidance range. Products gross margin was 36.3%, up 100 basis points sequentially, primarily driven by favorable mix. Services gross margin was 74%, unchanged from the prior quarter. Operating expenses of $14.3 billion were at the midpoint of the guidance range we provided at the beginning of the quarter and up 6% year-over-year. During the quarter, we recorded a one-time income tax charge of $10.2 billion, which relates to the impact of the reversal of the European General Court's State Aid decision. When we exclude this one-time charge, net income was $25 billion and diluted earnings per share were a $1.64, up 12% year-over-year, and a September quarter record. Operating cash flow was very strong at $26.8 billion, a new September quarter record. Let me now get into more detail for each of our revenue categories. iPhone revenue was $46.2 billion, up 6% year-over-year, and a September quarter record in total and across several markets, including the US, the Middle East, Korea, and South Asia. The iPhone active installed base grew to a new all-time high in total and in every geographic segment. During the September quarter, many iPhone models were among the top-selling smartphones around the world. In fact, according to a survey from Kantar, iPhone was the top-selling model in the US, Urban China, the UK, Australia, and Japan. We continue to see high levels of customer satisfaction for the iPhone 15 family, with 451 Research recently measuring it at 98% in the US. Mac revenue was $7.7 billion, up 2% year-over-year, driven by the strength in MacBook Air. Customers have been loving the performance of Apple Silicon on Mac and we are very excited to bring the latest M4 family of chips to the lineup. The Mac installed base reached an all-time high with about half of customers in the quarter being new to Mac. And in the latest reports from 451 Research, customer satisfaction was 95% in the US. iPad generated $7 billion in revenue, up 8% year-over-year. In addition to growth in developed markets, we also saw strong performance in many emerging markets, with double-digit growth in Mexico, Brazil, the Middle East, India and South Asia. The iPad installed base reached another all-time high, and over half of the customers who purchased iPads during the quarter were new to the product. Also, customer satisfaction was recently measured at 97% in the US. Wearables, Home and Accessories revenue was $9 billion, down 3% year-over-year. The Apple Watch installed base reached a new all-time high, with over half of customers purchasing an Apple Watch during the quarter being new to the product. And the latest reports from 451 Research indicated customer satisfaction of 96% for watch in the US. Our Services revenue reached an all-time record of $25 billion, growing 12% year-over-year. Services continue to see strong momentum with the growth of our installed base of active devices setting a solid foundation for the future expansion of our ecosystem. And we see increased customer engagement with our services offerings. Both transacting accounts and paid accounts reached a new all-time high, with paid accounts growing double-digits year-over-year. Paid subscriptions also grew double-digits. We have well over 1 billion paid subscriptions across the services on our platform, more than double the number we had only four years ago. And as always, we remain focused on improving the breadth and quality of our services from new games on Apple Arcade to new features like Tap to Cash and pay with installments using Apple Pay to many successful new and returning shows on Apple TV+. This past quarter, we celebrated the five-year anniversary of Apple Card, which was ranked #1 in customer satisfaction among co-branded credit cards by J.D. Power for the fourth year in a row. Turning to enterprise, we continue to see strong demand across our products and services. NVIDIA launched its Mac as a choice program supported by AppleCare for Enterprise and Apple Professional Services with over 10,000 Macs deployed worldwide. And Novartis, a leading global pharmaceutical company, recently chose iPhone 16 as the standard mobile device for all employees. We also see continued momentum with Apple Vision Pro in the enterprise space. UC San Diego Health is the first hospital in the world to test spatial computing apps on Apple Vision Pro in clinical trials for patient surgery in the operating room. Let me now turn to our cash position and capital return program. We ended the quarter with $157 billion in cash and marketable securities. We repaid $2.6 billion in maturing debt and increased commercial paper by $7 billion, leaving us with total debt of $107 billion. As a result, net cash was $50 billion at the end of the quarter. During the quarter, we returned over $29 billion to shareholders, including $3.8 billion in dividends and equivalents and $25 billion through open market repurchases of 112 million Apple shares. 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're providing today assumes that the macroeconomic outlook doesn't worsen from what we are projecting today for the current quarter. We expect our December quarter total company revenue to grow low- to mid-single digits year-over-year. We expect Services revenue to grow double-digits at a rate similar to what we reported in the fiscal year 2024. We expect gross margin to be between 46% and 47%. We expect OpEx to be between $15.3 billion and $15.5 billion. We expect OI&E to be around negative $250 million, excluding any potential impact from the mark to market of minority investments. And our tax rate to be around 16%. Finally, today, our Board of Directors has declared a cash dividend of $0.25 per share of common stock payable on November 14, 2024 to shareholders of record as of November 11, 2024. With that, let us open the call to questions.","evidence_gemma_new":"revenue September quarter","evidence_llama_3_3":"revenue fourth quarter fiscal year 2024","evidence_qwen_3_30b":"revenue September quarter record","gemma_new_max":94900000000.0,"gemma_new_min":94900000000.0,"llama_3_3_max":94900000000.0,"llama_3_3_min":94900000000.0,"qwen_3_30b_max":94900000000.0,"qwen_3_30b_min":94900000000.0}
{"symbol":"AAPL","year":2023,"quarter":2,"date":"2023-Q2","chunk_id":3,"sub_chunk_id":0,"centroid_label":"services gross margin","agreed_value":0.71,"count":2,"chunk":"Luca Maestri: Thank you, Tim, and good afternoon, everyone. Revenue for the March quarter was $94.8 billion, down 3% from last year and better than our expectations. Foreign exchange had a negative impact of over five percentage points on our results, in line with what we had expected. On a constant currency basis, our revenue grew year-over-year in total and in the majority of the markets we track. In addition to the records in emerging markets that Tim mentioned, we also set March quarter records in Australia, Canada, Spain and Switzerland, among others. Products revenue was $73.9 billion, down 5% from last year, due to challenging compares on Mac and iPad. iPhone, however, reached a March quarter revenue record thanks to very strong performance in emerging markets from South Asia and India to Latin America and the Middle East. During the quarter, our installed base of active devices continued to grow at a nice pace thanks to extremely high levels of customer satisfaction and loyalty, and reached an all-time high for all major product categories and geographic segments. Our Services set an all-time revenue record of $20.9 billion, up 5% year-over-year, on top of growing 17% in the March quarter a year ago. We reached an all-time services revenue record in Greater China and March quarter records in Americas, Europe and Rest of Asia Pacific. Company gross margin was 44.3%, up 130 basis points from last quarter, driven by cost savings and favorable mix shift towards services partially offset by leverage. Products gross margin was 36.7%, decreasing 30 basis points sequentially due to seasonal loss of leverage and mix, partially offset by favorable costs. Services gross margin was 71%, up 20 basis points sequentially. Operating expenses of $13.7 billion were at the low end of the guidance range we provided at the beginning of the quarter and continued to decelerate from the December quarter. We are closely managing our spend, but remain focused on long term growth with continued investment in innovation and product development. Net income was $24.2 billion. Diluted earnings per share were a $1.52, unchanged versus last year, and we generated very strong operating cash flow of $28.6 billion. Let me now provide more detail for each of our revenue categories. iPhone revenue set a March quarter record of $51.3 billion, up 2% year-over-year despite significant foreign exchange headwinds and a challenging macroeconomic environment. We set March quarter records in several developed and emerging markets with India, Indonesia, Turkey and the UAE doubling on a year-over-year basis. Our active installed base of iPhone grew to a new all-time high and was up in all our geographic segments. We are very pleased by the results of the latest survey of US Consumers from 451 Research, which measured customer satisfaction at 99% for the iPhone 14 family. Mac revenue was $7.2 billion, down 31% year-over-year and in line with our expectations. These results were driven by the challenging macroeconomic environment coupled with a difficult compare against last year's launch of the completely reimagined M1 MacBook Pros. Despite this, the installed base of active Macs reached an all-time high across all geographic segments and we continue to see strong upgraded activity to Apple silicon. Also, the latest survey of US Consumers from 451 Research reported customer satisfaction at 96% for Mac. iPad generated $6.7 billion in revenue, down 13% year-over-year and in line with our expectations. This performance was due to two key factors, a tough compare against the launch of iPad Air powered by the M1 chip in the year ago quarter and headwinds from the macroeconomic environment. The iPad installed base reached a new all-time high in all geographic segments thanks to exceptional customer loyalty and a high number of new customers. In fact, over half of the customers who purchased iPads during the quarter were new to the product. Wearables, home and accessories revenue was $8.8 billion, down 1% year-over-year as the category experienced the impact from the macroeconomic environment. However, we did set March quarter records both in the US and in Greater China. We continue to see strength in our Watch installed base, which set a new all-time record, thanks to very high customer loyalty and new two rates, nearly two thirds of customers purchasing an Apple Watch during the quarter were new to the product. Moving to Services, we reached a new all-time revenue record of $20.9 billion. And in addition to the all-time records Tim mentioned earlier, we set March quarter records for advertising Apple Care and Video. Despite these records, as we saw in recent quarters, certain services offerings such as digital advertising and mobile gaming continue to be affected by the current macroeconomic environment. Stepping back, however, the continued growth in Services is the reflection of our ecosystem strength and the positive momentum we are seeing across several key metrics. First, our growing installed base of over 2 billion active devices represents a great foundation for future expansion of our ecosystem. We continue to grow across every major product category and geographic segment, thanks to very high levels of customer loyalty and satisfaction. Second, we saw increased customer engagement with our services during the quarter. Both our transacting accounts and paid accounts grew double digits year-over-year, each setting a new all-time record. Third, paid subscriptions showed strong growth. We now have more than $975 million paid subscriptions across the Services on our platform, up 150 million during the last 12 months and nearly double the number of paid subscriptions we had only three years ago. And finally, we continue to improve the breadth and the quality of our current services offerings from new content on Apple TV Plus to great new features available in Apple Pay and Apple Music, which we believe our customers will love. Turning to the enterprise market, we see business customers continuing to invest in the Apple platform to drive higher employee productivity and satisfaction. In Brazil, Boticario Group, the world's largest cosmetics franchiser, originally starting with iPhone, 12 employees manage operations across a network of retail stores, franchisees and resellers. As it continues to digitize its business, Boticario has chosen to move all software development in house and adopted Mac as the standard device for all of their developer teams across the world. In small business, we see an increasing number of customers relying on Apple hardware, software and services to power their businesses forward, from accepting payments on iPhone, to tracking inventory on Mac or iPad, to managing employee devices with Apple Business Essentials. As we celebrate National Small Business week here in the US, we are proud to continue supporting the small business community. Let me now turn to our cash position and capital return program. We ended the quarter with over $166 billion in cash and marketable securities. We repaid $2.3 billion in maturing debt and increased commercial paper by about $300 million, leaving us with total debt of $110 billion. As a result, net cash was $57 billion at the end of the quarter. During the March quarter, we returned over $23 billion to shareholders, including $3.7 billion in dividends and equivalents and $19.1 billion through open market repurchases of $129 million Apple shares. Given the continued confidence we have in our business now and into the future, today our Board has authorized an additional $90 billion for share repurchases as we maintain our goal of getting to net cash neutral over time. We're also raising our dividend by 4% to $0.24 a share, and we continue to plan for annual increases in the dividend going forward. As we move ahead into the June 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. We expect our June quarter year-over-year revenue performance to be similar to the March quarter, assuming that the macroeconomic outlook does not worsen from what we are projecting today for the current quarter. Foreign exchange will continue to be a headwind and we expect a negative year-over-year impact of nearly four percentage points. For Services, we expect our June quarter year-over-year revenue growth to be similar to the March quarter, while continuing to face macroeconomic headwinds in areas such as digital advertising and mobile gaming. We expect gross margin to be between 44% and 44.5%. We expect OpEx to be between $13.6 billion and $13.8 billion. We expect OINE to be around negative $250 million excluding any potential impact from the mark-to-market of minority investments and our tax rate to be around 16%. Finally reflecting the dividend increase I mentioned earlier, today, our Board of Directors has declared a cash dividend of $0.24 per share of common stock payable on May 18, 2023, to shareholders of record as on May 15, 2023. With that, let's open the call to questions.","evidence_gemma_new":null,"evidence_llama_3_3":"Services gross margin March quarter","evidence_qwen_3_30b":"Services gross margin up 20 basis points sequentially","gemma_new_max":null,"gemma_new_min":null,"llama_3_3_max":0.71,"llama_3_3_min":0.71,"qwen_3_30b_max":0.71,"qwen_3_30b_min":0.71}
{"symbol":"AAPL","year":2023,"quarter":3,"date":"2023-Q3","chunk_id":3,"sub_chunk_id":0,"centroid_label":"services gross margin","agreed_value":0.705,"count":2,"chunk":"Luca Maestri: Thank you, Tim, and good afternoon, everyone. Revenue for the June quarter was $81.8 billion, down 1% from last year and better than our expectations despite nearly 4 percentage points of negative impact from foreign exchange. On a constant currency basis, our revenue grew year-over-year in total and in the majority of the markets we track. We set June quarter records in both Europe and Greater China and continue to see strong performance across our emerging markets driven by iPhone. Products revenue was $60.6 billion, down 4% from last year, as we faced FX headwinds and an uneven macroeconomic environment. However, our installed base reached an all-time high across all geographic segments, driven by a June quarter record for iPhone switchers and high new-to rates in Mac, iPad and Watch, coupled with very high levels of customer satisfaction and loyalty. Our Services revenue set an all-time record of $21.2 billion, up 8% year-over-year and grew double digits in constant currency. Our performance was strong around the world as we reach all-time Services revenue records in Americas and Europe and June quarter records in Greater China and rest of Asia Pacific. Company gross margin was 44.5%, a record level for the June quarter and up 20 basis points sequentially, driven by cost savings and favorable mix shift towards Services, partially offset by a seasonal loss of leverage. Products gross margin was 35.4%, down 130 basis points from last quarter due to seasonal loss of leverage and mix, partially offset by favorable costs. Services gross margin was 70.5%, decreasing 50 basis points sequentially. Operating expenses of $13.4 billion were below the low end of the guidance range we provided at the beginning of the quarter and decelerated from the March quarter. We continue to take a deliberate approach in managing our spend with strong focus on innovation and new product development. The results of these actions delivered net income of $19.9 billion, diluted earnings per share of $1.26, up 5% versus last year, and very strong operating cash flow of $26.4 billion. Let me now provide more detail for each of our revenue categories. iPhone revenue was $39.7 billion, down 2% year-over-year but grew on a constant currency basis. We set revenue records in several markets around the world, including an all-time record in India and June quarter records in Latin America, the Middle East and Africa, Indonesia, the Philippines, Italy, the Netherlands and the U.K. Our iPhone active installed base grew to a new all-time high, thanks to a June quarter record in switchers. This is a testament to our extremely high levels of customer satisfaction, which 451 Research recently measured at 98% for the iPhone 14 family in the U.S. Mac generated $6.8 billion in revenue, down 7% year-over-year. We continue to invest in our Mac portfolio. And this past quarter, we were pleased to complete the transition to Apple silicon for the entire lineup. This transition has driven both strong upgrade activity and a high number of new customers. In fact, almost half of Mac buyers during the quarter were new to the product. We also saw reported customer satisfaction of 96% for Mac in the U.S. iPad revenue was $5.8 billion, down 20% year-over-year and in line with our expectations. These results were driven by a difficult compare against the full quarter impact of the iPad Air launch in the prior year. At the same time, we continue to attract a large number of new customers to the iPad installed base with over half of the customers who purchased iPads during the quarter being new to the product. And the latest reports from 451 Research indicate customer satisfaction of 96% in the U.S. Wearables, Home and Accessories revenue was $8.3 billion, up 2% year-over-year, with a June quarter record in Greater China and strong performance in several emerging markets. We continue to see Apple Watch expand its reach with about 2\/3 of customers purchasing an Apple Watch during the quarter being new to the product. And this is combined with very high levels of customer satisfaction, which was recently reported at 98% in the United States. Moving on to Services. We reached a new all-time revenue record of $21.2 billion with year-over-year growth accelerating sequentially to 8% and up double digits in constant currency. In addition to the all-time records Tim mentioned earlier, we also set June quarter records for advertising, App Store and Music. We are very pleased with our performance in Services, which is a direct reflection of our ecosystem's strength. First, our installed base of over 2 billion active devices continues to grow at a nice pace and establishes a solid foundation for the future expansion of our ecosystem. Second, we see increased customer engagement with our services. Both our transacting accounts and paid accounts grew double digits year-over-year, each reaching a new all-time high. Third, our paid subscriptions showed strong growth. This past quarter, we reached an important milestone and passed 1 billion paid subscriptions across the services on our platform, up 150 million during the last 12 months and nearly double the number of paid subscriptions we had only 3 years ago. And finally, we continue to improve the breadth and the quality of our current services. From 20 new games on Apple Arcade, to brand-new content on Apple TV+, to the launch of our high-yield savings account with Apple Card, our customers are loving these enhanced offerings. Turning to the enterprise market. Our customers are leveraging Apple products every day to help improve productivity and attract talent. Blackstone, a global investment management firm, is expanding its Apple footprint from their corporate iPhone fleet to now offering the MacBook Air powered by M2 to all of their corporate employees and portfolio companies. Gilead, a leading biopharmaceutical company, has deployed thousands of iPads globally to their sales team. Over the last 6 months, they have also doubled their Mac user base by making MacBook Air available to more employees with a focus on user experience and strong security. Let me now turn to our cash position and capital return program. We ended the quarter with over $166 billion in cash and marketable securities. We repaid $7.5 billion in maturing debt while issuing $5.2 billion of new debt and increasing commercial paper by $2 billion, leaving us with total debt of $109 billion. As a result, net cash was $57 billion at the end of the quarter. During the quarter, we returned over $24 billion to shareholders, including $3.8 billion in dividends and equivalents and $18 billion through open market repurchases of 103 million Apple shares. We continue to believe there is great value in our stock and maintain our target of reaching a net cash neutral position over time. As we move ahead into the September quarter, I'd like to review our outlook, which includes the types of forward-looking information that Saori referred to at the beginning of the call. We expect our September quarter year-over-year revenue performance to be similar to the June quarter, assuming that the macroeconomic outlook doesn't worsen from what we are projecting today for the current quarter. Foreign exchange will continue to be a headwind, and we expect a negative year-over-year revenue impact of over 2 percentage points. We expect iPhone and Services year-over-year performance to accelerate from the June quarter. Also, we expect the revenue for both Mac and iPad to decline by double digits year-over-year due to difficult compares, particularly on the Mac. For both products, we experienced supply disruptions from factory shutdowns in the June quarter a year ago and were able to fulfill significant pent-up demand in the year ago September quarter. We expect gross margin to be between 44% and 45%. We expect OpEx to be between $13.5 billion and $13.7 billion. We expect OI&E to be around negative $250 million, excluding any potential impact from the mark-to-market of minority investments, and our tax rate to be around 16%. Finally, today, our Board of Directors has declared a cash dividend of $0.24 per share of common stock payable on August 17, 2023, to shareholders of record as of August 14, 2023. With that, let's open the call to questions.","evidence_gemma_new":null,"evidence_llama_3_3":"Services gross margin June quarter","evidence_qwen_3_30b":"Services gross margin 70.5% sequentially","gemma_new_max":null,"gemma_new_min":null,"llama_3_3_max":0.705,"llama_3_3_min":0.705,"qwen_3_30b_max":0.705,"qwen_3_30b_min":0.705}
{"symbol":"AAPL","year":2023,"quarter":4,"date":"2023-Q4","chunk_id":3,"sub_chunk_id":0,"centroid_label":"services gross margin","agreed_value":0.709,"count":2,"chunk":"Luca Maestri: Thank you, Tim, and good afternoon, everyone. Revenue for the September quarter was $89.5 billion, down less than 1% from last year. Foreign exchange had a negative impact of over 2 percentage points. And on a constant-currency basis, our revenue grew year-over-year in total, and in each geographic segment. We set a September quarter record in the Americas and saw strong performance across our emerging markets, where both iPhone and Services grew double digits. Products revenue was $67.2 billion, down 5% from last year, due to very challenging compares on both Mac and iPad, which I will discuss in more detail later on. At the same time, we reached a September quarter record on iPhone, driven by strength in emerging markets. Our total installed-base of active devices reached an all-time high across all products and all geographic segments, thanks to our high levels of customer satisfaction and many new customers joining our ecosystem. Our Services revenue set an all-time record of $22.3 billion, up 16% year-over-year, with growth accelerating sequentially from the June quarter. Our performance in Services were broad based, as we reached all-time revenue records in the Americas, Europe and rest of Asia-Pacific and a September quarter record in Greater China. We also set new records in every Services category. Company gross margin set a September quarter record at 45.2%, up 70 basis points sequentially, driven by leverage and favorable mix, partially offset by foreign exchange. Products gross margin was 36.6%, up 120 basis points sequentially, also driven by leverage and mix, partially offset by foreign exchange. Services gross margin was 70.9%, up 40 basis points from last quarter due to a different mix. Operating expenses of $13.5 billion were at the low end of the guidance range we provided, up 2% year-over-year. Net income was $23 billion, diluted earnings per share was $1.46, up 13% versus last year and a September quarter record, and operating cash flow was strong at $21.6 billion. Let me now provide more detail for each of our revenue categories. iPhone revenue was $43.8 billion, up 3% year-over-year and a new September quarter record. We had strong performance in several markets, including an all-time record in India as September quarter records in Canada, Latin America, the Middle East, and South Asia . Our iPhone active installed base grew to a new all-time high and fiscal 2023 was another record year for switches. We continue to see extremely high levels of customer satisfaction which 451 Research recently measured at 98% in the U.S. Mac revenue was $7.6 billion, down 34% year-over-year, driven by challenging market conditions and compounded by a difficult compare in our own business, whereby last year we experienced supply disruptions from factory shutdowns in the June quarter and were subsequently able to fulfill significant pent-up demand during the September quarter. We also had a difference in launch timing with the MacBook Air launching earlier this year in the June quarter compared to the September quarter last year. We have great confidence in our Mac lineup and are excited about the recently announced iMac and MacBook Pro powered by our M3 chips. Our installed base is at an all-time high and half of Mac buyers during the quarter were new to the product, driven by MacBook Air. Also, we saw reported customer satisfaction of 97% for Mac in the U.S. iPad generated $6.4 billion in revenue, down 10% year-over-year. Similar to Mac, these results were a function of a difficult compare from the supply disruptions in the June quarter a year ago and the subsequent fulfillment of pent-up demand in the September quarter. iPad continues to attract a large number of new customers to the installed base with over half of the customers who purchase iPads during the quarter being new to the product and the latest reports from 451 Research indicate customer satisfaction of 98% in the U.S. Wearables, Home and Accessories revenue was $9.3 billion, down 3% year-over-year. We had a September quarter record in Europe and we saw strong performance in several emerging markets around the world. Apple Watch continues to expand its reach with nearly two-thirds of customers purchasing Apple Watch during the quarter being new to the product and customer satisfaction for the Watch was recently measured at 97% in the U.S. Services had a great quarter. We reached a new all-time revenue record of $22.3 billion, up 16% year-over-year. And we're happy to see growth coming from all categories and every geographic segment, which is a direct result of the strength of our ecosystem. Our installed base of over 2 billion active devices continues to grow at a nice pace and establishes a solid foundation for the future expansion of the ecosystem. And we continue to see increased customer engagement with our Services. Both transacting accounts and paid accounts grew double-digits year-over-year, each reaching a new all-time high. Also our paid subscriptions showed strong growth. We have well over 1 billion paid subscriptions across the services on our platform, nearly double the number we had only three years ago. And finally, we continue to improve the breadth and quality of our current services from exciting new content on Apple TV+ and Apple Arcade to additional storage tiers on iCloud. We believe our customers will love this new offering. Turning to enterprise. We are excited to see our business customers in both developed and emerging markets expand their deployment of Apple products and technologies to drive business innovation and employee satisfaction. Starbucks continuously invest in Apple technology to bring the best experience to the customers and employees, including tens of thousands of iPads across all retail stores to help their teams streamline order management, operations and training. In addition, Starbucks recently refreshed over 10,000 Macs to the latest M2-powered MacBook Air for all store managers, enabling them to do their best work and improve productivity. And in Indonesia, popular technology company GoTo is offering Mac as a choice, so that employees can have the best tools to be most productive. Today, more than half of its workforce are already choosing Mac for work. Let me now turn to our cash position and capital return program. We ended the quarter with over $162 billion in cash and marketable securities. We increased commercial paper by $2 billion, leaving us with total debt of $111 billion. As a result, net cash was $51 billion at the end of the quarter. And our goal of becoming net cash-neutral over time remains unchanged. During the quarter, we returned nearly $25 billion to shareholders, including $3.8 billion in dividends and equivalents and $15.5 billion through open market repurchases of 85 million Apple shares. We also began a $5 billion accelerated share repurchase program in August, resulting in the initial delivery and retirement of 22 million shares. Taking a step back, as we close our 2023 fiscal year, our annual revenue was $383 billion. While it was down 3% from the prior year, it grew on a constant-currency basis despite the volatile and uneven macroeconomic environment. Our year-over-year revenue performance improved each quarter as we went through the year, and so did our earnings per share performance, as we reported double-digit EPS growth in the September quarter. We are particularly pleased with our performance in emerging markets with revenue reaching an all-time record in fiscal 2023 and double-digit growth in constant currency. We are expanding our direct presence in these markets from new Apple retail stores in India to online stores in Vietnam and Chile. And we continue to work with our partners to offer a wide range of affordability programs so that we can best serve our customers. We're very excited about the momentum we have in these markets and the opportunity ahead of us. 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%. Finally, today our Board of Directors has declared a cash dividend of $0.24 per share of common stock, payable on November 16, 2023, to shareholders of record as of November 13, 2023. With that, let's open the call to questions.","evidence_gemma_new":null,"evidence_llama_3_3":"Services gross margin September quarter","evidence_qwen_3_30b":"Services gross margin","gemma_new_max":null,"gemma_new_min":null,"llama_3_3_max":0.709,"llama_3_3_min":0.709,"qwen_3_30b_max":0.709,"qwen_3_30b_min":0.709}
{"symbol":"AAPL","year":2024,"quarter":1,"date":"2024-Q1","chunk_id":3,"sub_chunk_id":0,"centroid_label":"services gross margin","agreed_value":72.8,"count":2,"chunk":"Luca Maestri: Thank you, Tim, and good afternoon, everyone. Revenue for the December quarter was $119.6 billion, up 2% from last year. During the December quarter a year ago, two unique factors affected our results. First, we had an additional week in the quarter. And second, we had COVID-related factory shutdowns that limited iPhone supply. We estimate that the net impact of these two factors resulted in a 2 percentage point headwind to our revenue performance this quarter. We set all-time revenue records in Europe and rest of Asia-Pacific, and continue to see strong performance across our emerging markets with double-digit growth in the majority of the emerging markets we track. Products revenue was $96.5 billion, flat compared to last year, driven by strength in iPhone, offset by challenging compares for iPad and Wearables, Home and Accessories and one less week of sales this year across the entire portfolio. Thanks to our unparalleled customer loyalty and very strong levels of customer satisfaction, our total installed base of active devices set a new record across all products and all geographic segments, and is now over 2.2 billion active devices. Services revenue set an all-time record of $23.1 billion, up 11% year-over-year. When we take into account the extra week last year, this represents a sequential acceleration of growth from the September quarter. We are very pleased with our Services performance in both developed and emerging markets with all-time revenue records in the Americas, Europe, and rest of Asia-Pacific. Company gross margin was 45.9%, up 70 basis points sequentially, driven by leverage and favorable mix, partially offset by foreign exchange. Products gross margin was 39.4%, up 280 basis points sequentially, also driven by leverage and mix, partially offset by foreign exchange. Services gross margin was 72.8%, up 190 basis points from last quarter, due to a more favorable mix. Operating expenses of $14.5 billion were at the midpoint of the guidance range we provided and up 1% year-over-year. Net income was $33.9 billion, up $3.9 billion from last year. Diluted EPS was $2.18, up 16% versus last year and an all-time record. And operating cash flow was very strong at $39.9 billion. Let me now provide more detail for each of our revenue categories. iPhone revenue was $69.7 billion, up 6% year-over-year. We set all-time records in several countries and regions, including Latin America, Western Europe, the Middle East, and Korea, as well as December quarter records in India and Indonesia. Our iPhone active installed base grew to a new all-time high, and we had an all-time record number of iPhone upgraders during the quarter. Customers are loving their new iPhone 15 family, with the latest reports from 451 Research indicating customer satisfaction of 99% in the U.S. In fact, many iPhone models were among the top-selling smartphones around the world during the quarter. According to a survey from Kantar, iPhones were four out of the top five models in the U.S. and Japan, four out of the top six models in urban China and the UK, and all top five models in Australia. Mac generated revenue of $7.8 billion and return to growth, despite one less week of sales this year. This represents a significant acceleration from the September quarter when we faced a challenging compare due to the supply disruptions and subsequent demand recapture we experienced a year ago. Customer response to our latest iMac and MacBook Pro models powered by the M3 chips has been great. And our Mac installed base reached an all-time high with almost half of Mac buyers during the quarter being new to the product. Also, 451 Research recently reported customer satisfaction of 97% for Mac in the U.S. iPad was $7 billion in revenue, down 25% year-over-year. iPad faced a difficult compare because during the December quarter last year, we launched the new iPad Pro and iPad 10 generation, and we had an extra week of sales. However, the iPad installed base continues to grow and is an all-time high with over half of the customers who purchased iPads during the quarter being new to the product, and customer satisfaction for iPad was recently measured at 98% in the U.S. Wearables, Home and Accessories revenue was $12 billion, down 11% year-over-year due to a challenging launch compare and the extra week a year ago. This time last year, we had the full quarter benefit from the launches of the AirPods Pro 2nd generation, the Watch SE, and the first Watch Ultra. We continue to attract new customers to Apple Watch. Nearly two-thirds of customers purchasing an Apple Watch during the quarter were new to the product, and the latest reports from 451 Research indicate customer satisfaction of 96% in the U.S. And in Services, we were very pleased with our double-digit growth, which was driven by the strength of our ecosystem. Our installed base is now over 2.2 billion active devices and continues to grow nicely, establishing a solid foundation for the future expansion of our Services business. And we continue to see increased customer engagement with our services. Both transacting accounts and paid accounts reached a new all-time high, with paid accounts growing double-digits year-over-year. Also, our paid subscriptions showed strong double-digit growth. We have well over 1 billion paid subscriptions across the services on our platform, more than double the number that we had only four years ago. Finally, we continue to build on the breadth and the quality of our current services. From Oscar-nominated theatrical releases with Apple TV+ to more publications or News+ like The Atlantic and exciting new games on Arcade. Turning to Enterprise, we continue to see many business customers leverage Apple products to improve productivity and drive innovation. Target recently added the latest M3 MacBook Pro to their existing deployment of thousands of Mac\u2019s, enabling employees across various departments to do their best work. In emerging markets, Zoho, a leading technology company headquartered in India, offers its 15,000 plus global employees a choice of devices, with 80% of their workforce using iPhone for work and nearly two-thirds of them choosing Mac as their primary computer. With the upcoming launch of Apple Vision Pro, we are seeing strong excitement in Enterprise. Leading organizations across many industries such as Walmart, Nike, Vanguard, Stryker, Bloomberg, and SAP have started leveraging and investing in Apple Vision Pro as their new platform to bring innovative spatial computing experiences to their customers and employees. From everyday productivity to collaborative product design to immersive training, we cannot wait to see the amazing things our enterprise customers will create in the months and years to come. Let me now turn to our cash position and capital return program. We ended the quarter with $173 billion in cash and marketable securities. We decreased commercial paper by $4 billion, leaving us with total debt of $108 billion. As a result, net cash was $65 billion at the end of the quarter, and our goal of becoming net cash-neutral over time remains unchanged. During the quarter, we returned nearly $27 billion to shareholders, including $3.8 billion in dividends and equivalents and $20.5 billion through open market repurchases of 112 million Apple shares. We also retired an additional 6 million shares in the final settlement of our 19th ASR. As usual, we will provide an update to our capital return program when we report results at the end of this quarter. As we move ahead into the March 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. And we expect foreign exchange to be a revenue headwind of about 2 percentage points on a year-over-year basis. As a reminder, in the December quarter a year ago, we faced significant supply constraints on the iPhone 14 Pro and 14 Pro Max due to COVID-19 factory shutdowns. And in the March quarter a year ago, we were able to replenish channel inventory and fulfill significant pent-up demand from the constraints. We estimate that this impact added close to $5 billion to the March quarter's total revenue last year. When we remove this impact from last year's revenue, we expect both our March quarter total company revenue and iPhone revenue to be similar to a year ago. For our Services business, we expect a similar double-digit growth rate to what we reported in the December quarter. We expect gross margin to be between 46% and 47%. We expect OpEx to be between $14.3 billion and $14.5 billion. We expect OI&E to be around $50 million, excluding any potential impact from the mark-to-market of minority investments and our tax rate to be around 16%. Finally, today our Board of Directors has declared a cash dividend of $0.24 per share of common stock payable on February 15, 2024, to shareholders of record as of February 12, 2024. With that, let's open the call to questions.","evidence_gemma_new":"Services gross margin","evidence_llama_3_3":null,"evidence_qwen_3_30b":"Services gross margin up 190 basis points from last quarter","gemma_new_max":72.8,"gemma_new_min":72.8,"llama_3_3_max":null,"llama_3_3_min":null,"qwen_3_30b_max":72.8,"qwen_3_30b_min":72.8}
{"symbol":"AAPL","year":2024,"quarter":4,"date":"2024-Q4","chunk_id":2,"sub_chunk_id":0,"centroid_label":"services gross margin","agreed_value":0.74,"count":2,"chunk":"Luca Maestri: Good afternoon, everyone. And thank you, Tim, for the very kind words. Serving as Apple's CFO has been a real privilege and an amazing journey, and I've greatly appreciated the support from our investors and the analyst community over the years. Kevan is exceptional, and I know you will enjoy interacting with him going forward. Let me now turn to the results for the fourth quarter of our fiscal year. We're very pleased to report a new September quarter revenue record of $94.9 billion, up 6% year-over-year. We grew in the vast majority of the markets we track and achieved September quarter revenue records in the Americas, Europe and Rest of Asia Pacific. Products revenue was $70 billion, up 4% year-over-year, driven by growth in iPhone, iPad and Mac. Our installed base of active devices reached an all-time high across all products and geographic segments, thanks to very high levels of customer satisfaction and loyalty and a large number of customers who are new to our products. Services revenue reached an all-time record of $25 billion, up 12% year-over-year. We saw broad-based strength around the world, reaching all-time records in both developed and emerging markets with double-digit growth and record results across most services categories. Company gross margin was 46.2%, near the high end of our guidance range. Products gross margin was 36.3%, up 100 basis points sequentially, primarily driven by favorable mix. Services gross margin was 74%, unchanged from the prior quarter. Operating expenses of $14.3 billion were at the midpoint of the guidance range we provided at the beginning of the quarter and up 6% year-over-year. During the quarter, we recorded a one-time income tax charge of $10.2 billion, which relates to the impact of the reversal of the European General Court's State Aid decision. When we exclude this one-time charge, net income was $25 billion and diluted earnings per share were a $1.64, up 12% year-over-year, and a September quarter record. Operating cash flow was very strong at $26.8 billion, a new September quarter record. Let me now get into more detail for each of our revenue categories. iPhone revenue was $46.2 billion, up 6% year-over-year, and a September quarter record in total and across several markets, including the US, the Middle East, Korea, and South Asia. The iPhone active installed base grew to a new all-time high in total and in every geographic segment. During the September quarter, many iPhone models were among the top-selling smartphones around the world. In fact, according to a survey from Kantar, iPhone was the top-selling model in the US, Urban China, the UK, Australia, and Japan. We continue to see high levels of customer satisfaction for the iPhone 15 family, with 451 Research recently measuring it at 98% in the US. Mac revenue was $7.7 billion, up 2% year-over-year, driven by the strength in MacBook Air. Customers have been loving the performance of Apple Silicon on Mac and we are very excited to bring the latest M4 family of chips to the lineup. The Mac installed base reached an all-time high with about half of customers in the quarter being new to Mac. And in the latest reports from 451 Research, customer satisfaction was 95% in the US. iPad generated $7 billion in revenue, up 8% year-over-year. In addition to growth in developed markets, we also saw strong performance in many emerging markets, with double-digit growth in Mexico, Brazil, the Middle East, India and South Asia. The iPad installed base reached another all-time high, and over half of the customers who purchased iPads during the quarter were new to the product. Also, customer satisfaction was recently measured at 97% in the US. Wearables, Home and Accessories revenue was $9 billion, down 3% year-over-year. The Apple Watch installed base reached a new all-time high, with over half of customers purchasing an Apple Watch during the quarter being new to the product. And the latest reports from 451 Research indicated customer satisfaction of 96% for watch in the US. Our Services revenue reached an all-time record of $25 billion, growing 12% year-over-year. Services continue to see strong momentum with the growth of our installed base of active devices setting a solid foundation for the future expansion of our ecosystem. And we see increased customer engagement with our services offerings. Both transacting accounts and paid accounts reached a new all-time high, with paid accounts growing double-digits year-over-year. Paid subscriptions also grew double-digits. We have well over 1 billion paid subscriptions across the services on our platform, more than double the number we had only four years ago. And as always, we remain focused on improving the breadth and quality of our services from new games on Apple Arcade to new features like Tap to Cash and pay with installments using Apple Pay to many successful new and returning shows on Apple TV+. This past quarter, we celebrated the five-year anniversary of Apple Card, which was ranked #1 in customer satisfaction among co-branded credit cards by J.D. Power for the fourth year in a row. Turning to enterprise, we continue to see strong demand across our products and services. NVIDIA launched its Mac as a choice program supported by AppleCare for Enterprise and Apple Professional Services with over 10,000 Macs deployed worldwide. And Novartis, a leading global pharmaceutical company, recently chose iPhone 16 as the standard mobile device for all employees. We also see continued momentum with Apple Vision Pro in the enterprise space. UC San Diego Health is the first hospital in the world to test spatial computing apps on Apple Vision Pro in clinical trials for patient surgery in the operating room. Let me now turn to our cash position and capital return program. We ended the quarter with $157 billion in cash and marketable securities. We repaid $2.6 billion in maturing debt and increased commercial paper by $7 billion, leaving us with total debt of $107 billion. As a result, net cash was $50 billion at the end of the quarter. During the quarter, we returned over $29 billion to shareholders, including $3.8 billion in dividends and equivalents and $25 billion through open market repurchases of 112 million Apple shares. 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're providing today assumes that the macroeconomic outlook doesn't worsen from what we are projecting today for the current quarter. We expect our December quarter total company revenue to grow low- to mid-single digits year-over-year. We expect Services revenue to grow double-digits at a rate similar to what we reported in the fiscal year 2024. We expect gross margin to be between 46% and 47%. We expect OpEx to be between $15.3 billion and $15.5 billion. We expect OI&E to be around negative $250 million, excluding any potential impact from the mark to market of minority investments. And our tax rate to be around 16%. Finally, today, our Board of Directors has declared a cash dividend of $0.25 per share of common stock payable on November 14, 2024 to shareholders of record as of November 11, 2024. With that, let us open the call to questions.","evidence_gemma_new":null,"evidence_llama_3_3":"Services gross margin fourth quarter fiscal year 2024","evidence_qwen_3_30b":"Services gross margin","gemma_new_max":null,"gemma_new_min":null,"llama_3_3_max":0.74,"llama_3_3_min":0.74,"qwen_3_30b_max":0.74,"qwen_3_30b_min":0.74}
{"symbol":"AAPL","year":2023,"quarter":1,"date":"2023-Q1","chunk_id":3,"sub_chunk_id":0,"centroid_label":"services revenue","agreed_value":20800000000.0,"count":2,"chunk":"Luca Maestri: Thank you, Tim, and good afternoon, everyone. As Tim mentioned, revenue for the December quarter was $117.2 billion, down 5% from last year. A number of factors had a significant impact on our results. First, we faced a very difficult foreign exchange environment, which affected our performance by nearly 800 basis points. In other words, we grew revenue on a constant currency basis. And in fact, we did so in the vast majority of markets. Second, the macroeconomic environment this past quarter was markedly more challenging than 12 months ago. Third, we experienced significant supply shortages for iPhone 14 Pro and iPhone 14 Pro Max in November and through December. On the other hand, we had the positive impact of the 14th week in the quarter that Tejas just mentioned at the beginning of the call. Products revenue was $96.4 billion, down 8% from last year due to the factors I just called out. At the same time, however, our installed base of active devices grew double digits and achieved all-time records in each geographic segment and in each major product category. We're proud to now have over 2 billion active devices in our installed base. This continued growth in the installed base is due to extremely strong levels of customer satisfaction and loyalty and a high number of customers who are new to our products. The installed base growth also helped our services set an all-time revenue record of $20.8 billion, up 6% over a year ago. We achieved this new milestone despite more than 700 basis points of negative impact from foreign exchange. We reached all-time services revenue records in the Americas, Europe and rest of Asia Pacific and a December quarter record in Greater China. We also set records in many Services categories, including all-time revenue records for cloud services, payment services and music and December quarter records for the App Store and AppleCare. Company gross margin was 43%, up 70 basis points from last quarter due to leverage and favorable mix, partially offset by foreign exchange. Products gross margin was 37%, up 240 basis points sequentially. And Services gross margin was 70.8%, up 30 basis points sequentially, both due to the same factors that impacted total company gross margin. Operating expenses of $14.3 billion were significantly below the guidance range we provided at the beginning of the quarter and grew at a slower pace than in the past as we took actions to respond to the current macro environment. Net income was $30 billion. Diluted earnings per share were $1.88, and we generated very strong operating cash flow of $34 billion. Let me now get into more detail for each of our revenue categories. iPhone revenue was $65.8 billion despite significant foreign exchange headwinds, supply constraints on iPhone 14 Pro and iPhone 14 Pro Max and a challenging macroeconomic environment. In spite of these circumstances, we set all-time iPhone revenue records in Canada, Italy and Spain, and saw strong growth in several emerging markets, including all-time iPhone revenue records for India and Vietnam. Importantly, the installed base of active iPhones continues to grow nicely and is at an all-time high across all geographic segments. In emerging markets, in particular, the installed base grew double digits, and we had record levels of switchers in India and in Mexico. Our customers continue to love their experience with our products with the latest survey of U.S. consumers from 451 Research indicating customer satisfaction of 98% for the iPhone 14 family. Mac revenue was $7.7 billion, down 29% year-over-year and in line with our expectations. There were 3 key drivers for our Mac results. First, we had a challenging compare against last year's launch of the completely reimagined MacBook Pros, our first notebooks with M1 Pro and M1 Max. Second, we believe that the macro environment impacted our Mac performance. And third, we faced significant foreign exchange headwinds. At the same time, however, the installed base of active Macs reached an all-time high across all geographic segments, and we continue to see very strong upgraded activity to Apple silicon. Customer satisfaction with Mac remains very strong at 96% based on the latest survey of U.S. consumers from 451 Research. iPad revenue was $9.4 billion, up 30% year-over-year despite significant FX headwinds. This performance was driven by 2 key items. First, during the December quarter a year ago, we experienced significant supply constraints, while this year, we had enough supply to meet demand. Second, we launched our new iPad and the iPad Pro powered by the M2 chip during the quarter. The iPad installed base reached a new all-time high, thanks to incredible customer loyalty and a high number of new customers. In fact, over half of the customers who purchased iPads during the quarter were new to the product. Wearables, Home and Accessories revenue was $13.5 billion, down 8% year-over-year. The year-over-year decline was driven by significant FX headwinds and a challenging macroeconomic environment. However, our installed base of devices in the category set a new all-time record thanks to the largest number of customers new to our smartwatch that we've ever had in a given quarter. In fact, nearly 2\/3 of customers purchasing an Apple Watch during the quarter were new to the product. Moving to Services. We generated $20.8 billion in revenue, a new all-time record in total and for many Services offerings in spite of a difficult foreign exchange environment, and macroeconomic headwinds impacting certain categories such as digital advertising and mobile gaming. In constant currency, we grew Services revenue double digits on top of growing 24% during the December quarter a year ago. We remain focused on the large long-term opportunity in this category, and we continue to observe several trends that reflect the strength of our ecosystem. For example, we saw increased customer engagement with our Services during the quarter. Both our transacting accounts and paid accounts grew double digits year-over-year, each setting a new all-time record. Paid subscriptions also continued to grow nicely. We now have more than 935 million paid subscriptions across the services on our platform, up more than 150 million during the last 12 months alone and nearly 4x what we had just 5 years ago. And we continue to increase the reach and improve the quality of our offerings. For instance, Apple Pay is now available to millions of merchants in nearly 70 countries and regions. And we saw a record-breaking number of purchases made using Apple Pay globally during the holiday shopping season. Finally, our installed base of over 2 billion active devices represents a great foundation for future expansion of our ecosystem, and it continues to grow even during difficult macroeconomic conditions, which speaks to the exceptionally high levels of customer loyalty and satisfaction and our ability to attract new customers to our platform. The growth is coming from every major product category and geographic segment, with strong double-digit increases in emerging markets such as Brazil, Mexico, India, Indonesia, Thailand and Vietnam. Turning to the enterprise market. we are seeing continued adoption of our Services for business like Apple Business Essentials, AppleCare, Tap to Pay and Apple Financial Services. For example, Mars Incorporated has expanded its use of AppleCare for Enterprise to provide timely device support and assurance for iPads deployed across their manufacturing sites. Meanwhile, HCA Healthcare has leveraged Apple Financial Services to manage the annual refresh of its entire fleet of iPhones. This not only ensures that their staff stay current on the latest Apple technology, but also provides them with significant annual savings in the process. Let me now turn to our capital return program and our cash position. We returned over $25 billion to shareholders during the December quarter as our business continues to generate very strong cash flow. This included $3.8 billion in dividends and equivalents and $19 billion through open market repurchases of 133 million Apple shares. We ended the quarter with $165 billion in cash and marketable securities. We repaid $1.4 billion in maturing debt and decreased commercial paper by $8.2 billion, leaving us with total debt of $111 billion. As a result, net cash was $54 billion at the end of the quarter, and we maintain our goal of becoming net cash-neutral over time. As we move into the March quarter, I'd like to review our outlook, which includes the types of forward-looking information that Tejas referred to at the beginning of the call. Given the continued uncertainty around the world in the near term, we are not providing revenue guidance, but we are sharing some directional insights based on the assumption that the macroeconomic outlook and COVID-related impacts to our business do not worsen from what we are projecting today for the current quarter. In total, we expect our March quarter year-over-year revenue performance to be similar to the December quarter. This represents an acceleration in our underlying year-over-year business performance as the December quarter benefited from an extra week. Foreign exchange will continue to be a headwind, and we expect a negative year-over-year impact of 5 percentage points. For Services, we expect revenue to grow year-over-year while continuing to face macroeconomic headwinds in areas such as digital advertising and mobile gaming. For iPhone, we expect our March quarter year-over-year revenue performance to accelerate relative to the December quarter year-over-year revenue performance. For Mac and iPad, we expect revenue for both product categories to decline double digits year-over-year because of challenging compares and macroeconomic headwinds. We expect gross margin to be between 43.5% and 44.5%. We expect OpEx to be between $13.7 billion and $13.9 billion. We expect OI&E to be around negative $100 million, excluding any potential impact from the mark-to-market of minority investments, and our tax rate to be around 16%. Finally, today, our Board of Directors has declared a cash dividend of $0.23 per share of common stock payable on February 16, 2023, to shareholders of record as of February 13, 2023. With that, let's open the call to questions.","evidence_gemma_new":"Services revenue","evidence_llama_3_3":"Services revenue","evidence_qwen_3_30b":null,"gemma_new_max":20800000000.0,"gemma_new_min":20800000000.0,"llama_3_3_max":20800000000.0,"llama_3_3_min":20800000000.0,"qwen_3_30b_max":null,"qwen_3_30b_min":null}
{"symbol":"AAPL","year":2023,"quarter":2,"date":"2023-Q2","chunk_id":3,"sub_chunk_id":0,"centroid_label":"services revenue","agreed_value":20900000000.0,"count":2,"chunk":"Luca Maestri: Thank you, Tim, and good afternoon, everyone. Revenue for the March quarter was $94.8 billion, down 3% from last year and better than our expectations. Foreign exchange had a negative impact of over five percentage points on our results, in line with what we had expected. On a constant currency basis, our revenue grew year-over-year in total and in the majority of the markets we track. In addition to the records in emerging markets that Tim mentioned, we also set March quarter records in Australia, Canada, Spain and Switzerland, among others. Products revenue was $73.9 billion, down 5% from last year, due to challenging compares on Mac and iPad. iPhone, however, reached a March quarter revenue record thanks to very strong performance in emerging markets from South Asia and India to Latin America and the Middle East. During the quarter, our installed base of active devices continued to grow at a nice pace thanks to extremely high levels of customer satisfaction and loyalty, and reached an all-time high for all major product categories and geographic segments. Our Services set an all-time revenue record of $20.9 billion, up 5% year-over-year, on top of growing 17% in the March quarter a year ago. We reached an all-time services revenue record in Greater China and March quarter records in Americas, Europe and Rest of Asia Pacific. Company gross margin was 44.3%, up 130 basis points from last quarter, driven by cost savings and favorable mix shift towards services partially offset by leverage. Products gross margin was 36.7%, decreasing 30 basis points sequentially due to seasonal loss of leverage and mix, partially offset by favorable costs. Services gross margin was 71%, up 20 basis points sequentially. Operating expenses of $13.7 billion were at the low end of the guidance range we provided at the beginning of the quarter and continued to decelerate from the December quarter. We are closely managing our spend, but remain focused on long term growth with continued investment in innovation and product development. Net income was $24.2 billion. Diluted earnings per share were a $1.52, unchanged versus last year, and we generated very strong operating cash flow of $28.6 billion. Let me now provide more detail for each of our revenue categories. iPhone revenue set a March quarter record of $51.3 billion, up 2% year-over-year despite significant foreign exchange headwinds and a challenging macroeconomic environment. We set March quarter records in several developed and emerging markets with India, Indonesia, Turkey and the UAE doubling on a year-over-year basis. Our active installed base of iPhone grew to a new all-time high and was up in all our geographic segments. We are very pleased by the results of the latest survey of US Consumers from 451 Research, which measured customer satisfaction at 99% for the iPhone 14 family. Mac revenue was $7.2 billion, down 31% year-over-year and in line with our expectations. These results were driven by the challenging macroeconomic environment coupled with a difficult compare against last year's launch of the completely reimagined M1 MacBook Pros. Despite this, the installed base of active Macs reached an all-time high across all geographic segments and we continue to see strong upgraded activity to Apple silicon. Also, the latest survey of US Consumers from 451 Research reported customer satisfaction at 96% for Mac. iPad generated $6.7 billion in revenue, down 13% year-over-year and in line with our expectations. This performance was due to two key factors, a tough compare against the launch of iPad Air powered by the M1 chip in the year ago quarter and headwinds from the macroeconomic environment. The iPad installed base reached a new all-time high in all geographic segments thanks to exceptional customer loyalty and a high number of new customers. In fact, over half of the customers who purchased iPads during the quarter were new to the product. Wearables, home and accessories revenue was $8.8 billion, down 1% year-over-year as the category experienced the impact from the macroeconomic environment. However, we did set March quarter records both in the US and in Greater China. We continue to see strength in our Watch installed base, which set a new all-time record, thanks to very high customer loyalty and new two rates, nearly two thirds of customers purchasing an Apple Watch during the quarter were new to the product. Moving to Services, we reached a new all-time revenue record of $20.9 billion. And in addition to the all-time records Tim mentioned earlier, we set March quarter records for advertising Apple Care and Video. Despite these records, as we saw in recent quarters, certain services offerings such as digital advertising and mobile gaming continue to be affected by the current macroeconomic environment. Stepping back, however, the continued growth in Services is the reflection of our ecosystem strength and the positive momentum we are seeing across several key metrics. First, our growing installed base of over 2 billion active devices represents a great foundation for future expansion of our ecosystem. We continue to grow across every major product category and geographic segment, thanks to very high levels of customer loyalty and satisfaction. Second, we saw increased customer engagement with our services during the quarter. Both our transacting accounts and paid accounts grew double digits year-over-year, each setting a new all-time record. Third, paid subscriptions showed strong growth. We now have more than $975 million paid subscriptions across the Services on our platform, up 150 million during the last 12 months and nearly double the number of paid subscriptions we had only three years ago. And finally, we continue to improve the breadth and the quality of our current services offerings from new content on Apple TV Plus to great new features available in Apple Pay and Apple Music, which we believe our customers will love. Turning to the enterprise market, we see business customers continuing to invest in the Apple platform to drive higher employee productivity and satisfaction. In Brazil, Boticario Group, the world's largest cosmetics franchiser, originally starting with iPhone, 12 employees manage operations across a network of retail stores, franchisees and resellers. As it continues to digitize its business, Boticario has chosen to move all software development in house and adopted Mac as the standard device for all of their developer teams across the world. In small business, we see an increasing number of customers relying on Apple hardware, software and services to power their businesses forward, from accepting payments on iPhone, to tracking inventory on Mac or iPad, to managing employee devices with Apple Business Essentials. As we celebrate National Small Business week here in the US, we are proud to continue supporting the small business community. Let me now turn to our cash position and capital return program. We ended the quarter with over $166 billion in cash and marketable securities. We repaid $2.3 billion in maturing debt and increased commercial paper by about $300 million, leaving us with total debt of $110 billion. As a result, net cash was $57 billion at the end of the quarter. During the March quarter, we returned over $23 billion to shareholders, including $3.7 billion in dividends and equivalents and $19.1 billion through open market repurchases of $129 million Apple shares. Given the continued confidence we have in our business now and into the future, today our Board has authorized an additional $90 billion for share repurchases as we maintain our goal of getting to net cash neutral over time. We're also raising our dividend by 4% to $0.24 a share, and we continue to plan for annual increases in the dividend going forward. As we move ahead into the June 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. We expect our June quarter year-over-year revenue performance to be similar to the March quarter, assuming that the macroeconomic outlook does not worsen from what we are projecting today for the current quarter. Foreign exchange will continue to be a headwind and we expect a negative year-over-year impact of nearly four percentage points. For Services, we expect our June quarter year-over-year revenue growth to be similar to the March quarter, while continuing to face macroeconomic headwinds in areas such as digital advertising and mobile gaming. We expect gross margin to be between 44% and 44.5%. We expect OpEx to be between $13.6 billion and $13.8 billion. We expect OINE to be around negative $250 million excluding any potential impact from the mark-to-market of minority investments and our tax rate to be around 16%. Finally reflecting the dividend increase I mentioned earlier, today, our Board of Directors has declared a cash dividend of $0.24 per share of common stock payable on May 18, 2023, to shareholders of record as on May 15, 2023. With that, let's open the call to questions.","evidence_gemma_new":"Services revenue","evidence_llama_3_3":"Services Services revenue March quarter","evidence_qwen_3_30b":null,"gemma_new_max":20900000000.0,"gemma_new_min":20900000000.0,"llama_3_3_max":20900000000.0,"llama_3_3_min":20900000000.0,"qwen_3_30b_max":null,"qwen_3_30b_min":null}
{"symbol":"AAPL","year":2023,"quarter":3,"date":"2023-Q3","chunk_id":3,"sub_chunk_id":0,"centroid_label":"services revenue","agreed_value":21200000000.0,"count":3,"chunk":"Luca Maestri: Thank you, Tim, and good afternoon, everyone. Revenue for the June quarter was $81.8 billion, down 1% from last year and better than our expectations despite nearly 4 percentage points of negative impact from foreign exchange. On a constant currency basis, our revenue grew year-over-year in total and in the majority of the markets we track. We set June quarter records in both Europe and Greater China and continue to see strong performance across our emerging markets driven by iPhone. Products revenue was $60.6 billion, down 4% from last year, as we faced FX headwinds and an uneven macroeconomic environment. However, our installed base reached an all-time high across all geographic segments, driven by a June quarter record for iPhone switchers and high new-to rates in Mac, iPad and Watch, coupled with very high levels of customer satisfaction and loyalty. Our Services revenue set an all-time record of $21.2 billion, up 8% year-over-year and grew double digits in constant currency. Our performance was strong around the world as we reach all-time Services revenue records in Americas and Europe and June quarter records in Greater China and rest of Asia Pacific. Company gross margin was 44.5%, a record level for the June quarter and up 20 basis points sequentially, driven by cost savings and favorable mix shift towards Services, partially offset by a seasonal loss of leverage. Products gross margin was 35.4%, down 130 basis points from last quarter due to seasonal loss of leverage and mix, partially offset by favorable costs. Services gross margin was 70.5%, decreasing 50 basis points sequentially. Operating expenses of $13.4 billion were below the low end of the guidance range we provided at the beginning of the quarter and decelerated from the March quarter. We continue to take a deliberate approach in managing our spend with strong focus on innovation and new product development. The results of these actions delivered net income of $19.9 billion, diluted earnings per share of $1.26, up 5% versus last year, and very strong operating cash flow of $26.4 billion. Let me now provide more detail for each of our revenue categories. iPhone revenue was $39.7 billion, down 2% year-over-year but grew on a constant currency basis. We set revenue records in several markets around the world, including an all-time record in India and June quarter records in Latin America, the Middle East and Africa, Indonesia, the Philippines, Italy, the Netherlands and the U.K. Our iPhone active installed base grew to a new all-time high, thanks to a June quarter record in switchers. This is a testament to our extremely high levels of customer satisfaction, which 451 Research recently measured at 98% for the iPhone 14 family in the U.S. Mac generated $6.8 billion in revenue, down 7% year-over-year. We continue to invest in our Mac portfolio. And this past quarter, we were pleased to complete the transition to Apple silicon for the entire lineup. This transition has driven both strong upgrade activity and a high number of new customers. In fact, almost half of Mac buyers during the quarter were new to the product. We also saw reported customer satisfaction of 96% for Mac in the U.S. iPad revenue was $5.8 billion, down 20% year-over-year and in line with our expectations. These results were driven by a difficult compare against the full quarter impact of the iPad Air launch in the prior year. At the same time, we continue to attract a large number of new customers to the iPad installed base with over half of the customers who purchased iPads during the quarter being new to the product. And the latest reports from 451 Research indicate customer satisfaction of 96% in the U.S. Wearables, Home and Accessories revenue was $8.3 billion, up 2% year-over-year, with a June quarter record in Greater China and strong performance in several emerging markets. We continue to see Apple Watch expand its reach with about 2\/3 of customers purchasing an Apple Watch during the quarter being new to the product. And this is combined with very high levels of customer satisfaction, which was recently reported at 98% in the United States. Moving on to Services. We reached a new all-time revenue record of $21.2 billion with year-over-year growth accelerating sequentially to 8% and up double digits in constant currency. In addition to the all-time records Tim mentioned earlier, we also set June quarter records for advertising, App Store and Music. We are very pleased with our performance in Services, which is a direct reflection of our ecosystem's strength. First, our installed base of over 2 billion active devices continues to grow at a nice pace and establishes a solid foundation for the future expansion of our ecosystem. Second, we see increased customer engagement with our services. Both our transacting accounts and paid accounts grew double digits year-over-year, each reaching a new all-time high. Third, our paid subscriptions showed strong growth. This past quarter, we reached an important milestone and passed 1 billion paid subscriptions across the services on our platform, up 150 million during the last 12 months and nearly double the number of paid subscriptions we had only 3 years ago. And finally, we continue to improve the breadth and the quality of our current services. From 20 new games on Apple Arcade, to brand-new content on Apple TV+, to the launch of our high-yield savings account with Apple Card, our customers are loving these enhanced offerings. Turning to the enterprise market. Our customers are leveraging Apple products every day to help improve productivity and attract talent. Blackstone, a global investment management firm, is expanding its Apple footprint from their corporate iPhone fleet to now offering the MacBook Air powered by M2 to all of their corporate employees and portfolio companies. Gilead, a leading biopharmaceutical company, has deployed thousands of iPads globally to their sales team. Over the last 6 months, they have also doubled their Mac user base by making MacBook Air available to more employees with a focus on user experience and strong security. Let me now turn to our cash position and capital return program. We ended the quarter with over $166 billion in cash and marketable securities. We repaid $7.5 billion in maturing debt while issuing $5.2 billion of new debt and increasing commercial paper by $2 billion, leaving us with total debt of $109 billion. As a result, net cash was $57 billion at the end of the quarter. During the quarter, we returned over $24 billion to shareholders, including $3.8 billion in dividends and equivalents and $18 billion through open market repurchases of 103 million Apple shares. We continue to believe there is great value in our stock and maintain our target of reaching a net cash neutral position over time. As we move ahead into the September quarter, I'd like to review our outlook, which includes the types of forward-looking information that Saori referred to at the beginning of the call. We expect our September quarter year-over-year revenue performance to be similar to the June quarter, assuming that the macroeconomic outlook doesn't worsen from what we are projecting today for the current quarter. Foreign exchange will continue to be a headwind, and we expect a negative year-over-year revenue impact of over 2 percentage points. We expect iPhone and Services year-over-year performance to accelerate from the June quarter. Also, we expect the revenue for both Mac and iPad to decline by double digits year-over-year due to difficult compares, particularly on the Mac. For both products, we experienced supply disruptions from factory shutdowns in the June quarter a year ago and were able to fulfill significant pent-up demand in the year ago September quarter. We expect gross margin to be between 44% and 45%. We expect OpEx to be between $13.5 billion and $13.7 billion. We expect OI&E to be around negative $250 million, excluding any potential impact from the mark-to-market of minority investments, and our tax rate to be around 16%. Finally, today, our Board of Directors has declared a cash dividend of $0.24 per share of common stock payable on August 17, 2023, to shareholders of record as of August 14, 2023. With that, let's open the call to questions.","evidence_gemma_new":"Services revenue","evidence_llama_3_3":"Services Services revenue June quarter","evidence_qwen_3_30b":"Services revenue 8% year-over-year increase","gemma_new_max":21200000000.0,"gemma_new_min":21200000000.0,"llama_3_3_max":21200000000.0,"llama_3_3_min":21200000000.0,"qwen_3_30b_max":21200000000.0,"qwen_3_30b_min":21200000000.0}
{"symbol":"AAPL","year":2023,"quarter":4,"date":"2023-Q4","chunk_id":3,"sub_chunk_id":0,"centroid_label":"services revenue","agreed_value":22300000000.0,"count":3,"chunk":"Luca Maestri: Thank you, Tim, and good afternoon, everyone. Revenue for the September quarter was $89.5 billion, down less than 1% from last year. Foreign exchange had a negative impact of over 2 percentage points. And on a constant-currency basis, our revenue grew year-over-year in total, and in each geographic segment. We set a September quarter record in the Americas and saw strong performance across our emerging markets, where both iPhone and Services grew double digits. Products revenue was $67.2 billion, down 5% from last year, due to very challenging compares on both Mac and iPad, which I will discuss in more detail later on. At the same time, we reached a September quarter record on iPhone, driven by strength in emerging markets. Our total installed-base of active devices reached an all-time high across all products and all geographic segments, thanks to our high levels of customer satisfaction and many new customers joining our ecosystem. Our Services revenue set an all-time record of $22.3 billion, up 16% year-over-year, with growth accelerating sequentially from the June quarter. Our performance in Services were broad based, as we reached all-time revenue records in the Americas, Europe and rest of Asia-Pacific and a September quarter record in Greater China. We also set new records in every Services category. Company gross margin set a September quarter record at 45.2%, up 70 basis points sequentially, driven by leverage and favorable mix, partially offset by foreign exchange. Products gross margin was 36.6%, up 120 basis points sequentially, also driven by leverage and mix, partially offset by foreign exchange. Services gross margin was 70.9%, up 40 basis points from last quarter due to a different mix. Operating expenses of $13.5 billion were at the low end of the guidance range we provided, up 2% year-over-year. Net income was $23 billion, diluted earnings per share was $1.46, up 13% versus last year and a September quarter record, and operating cash flow was strong at $21.6 billion. Let me now provide more detail for each of our revenue categories. iPhone revenue was $43.8 billion, up 3% year-over-year and a new September quarter record. We had strong performance in several markets, including an all-time record in India as September quarter records in Canada, Latin America, the Middle East, and South Asia . Our iPhone active installed base grew to a new all-time high and fiscal 2023 was another record year for switches. We continue to see extremely high levels of customer satisfaction which 451 Research recently measured at 98% in the U.S. Mac revenue was $7.6 billion, down 34% year-over-year, driven by challenging market conditions and compounded by a difficult compare in our own business, whereby last year we experienced supply disruptions from factory shutdowns in the June quarter and were subsequently able to fulfill significant pent-up demand during the September quarter. We also had a difference in launch timing with the MacBook Air launching earlier this year in the June quarter compared to the September quarter last year. We have great confidence in our Mac lineup and are excited about the recently announced iMac and MacBook Pro powered by our M3 chips. Our installed base is at an all-time high and half of Mac buyers during the quarter were new to the product, driven by MacBook Air. Also, we saw reported customer satisfaction of 97% for Mac in the U.S. iPad generated $6.4 billion in revenue, down 10% year-over-year. Similar to Mac, these results were a function of a difficult compare from the supply disruptions in the June quarter a year ago and the subsequent fulfillment of pent-up demand in the September quarter. iPad continues to attract a large number of new customers to the installed base with over half of the customers who purchase iPads during the quarter being new to the product and the latest reports from 451 Research indicate customer satisfaction of 98% in the U.S. Wearables, Home and Accessories revenue was $9.3 billion, down 3% year-over-year. We had a September quarter record in Europe and we saw strong performance in several emerging markets around the world. Apple Watch continues to expand its reach with nearly two-thirds of customers purchasing Apple Watch during the quarter being new to the product and customer satisfaction for the Watch was recently measured at 97% in the U.S. Services had a great quarter. We reached a new all-time revenue record of $22.3 billion, up 16% year-over-year. And we're happy to see growth coming from all categories and every geographic segment, which is a direct result of the strength of our ecosystem. Our installed base of over 2 billion active devices continues to grow at a nice pace and establishes a solid foundation for the future expansion of the ecosystem. And we continue to see increased customer engagement with our Services. Both transacting accounts and paid accounts grew double-digits year-over-year, each reaching a new all-time high. Also our paid subscriptions showed strong growth. We have well over 1 billion paid subscriptions across the services on our platform, nearly double the number we had only three years ago. And finally, we continue to improve the breadth and quality of our current services from exciting new content on Apple TV+ and Apple Arcade to additional storage tiers on iCloud. We believe our customers will love this new offering. Turning to enterprise. We are excited to see our business customers in both developed and emerging markets expand their deployment of Apple products and technologies to drive business innovation and employee satisfaction. Starbucks continuously invest in Apple technology to bring the best experience to the customers and employees, including tens of thousands of iPads across all retail stores to help their teams streamline order management, operations and training. In addition, Starbucks recently refreshed over 10,000 Macs to the latest M2-powered MacBook Air for all store managers, enabling them to do their best work and improve productivity. And in Indonesia, popular technology company GoTo is offering Mac as a choice, so that employees can have the best tools to be most productive. Today, more than half of its workforce are already choosing Mac for work. Let me now turn to our cash position and capital return program. We ended the quarter with over $162 billion in cash and marketable securities. We increased commercial paper by $2 billion, leaving us with total debt of $111 billion. As a result, net cash was $51 billion at the end of the quarter. And our goal of becoming net cash-neutral over time remains unchanged. During the quarter, we returned nearly $25 billion to shareholders, including $3.8 billion in dividends and equivalents and $15.5 billion through open market repurchases of 85 million Apple shares. We also began a $5 billion accelerated share repurchase program in August, resulting in the initial delivery and retirement of 22 million shares. Taking a step back, as we close our 2023 fiscal year, our annual revenue was $383 billion. While it was down 3% from the prior year, it grew on a constant-currency basis despite the volatile and uneven macroeconomic environment. Our year-over-year revenue performance improved each quarter as we went through the year, and so did our earnings per share performance, as we reported double-digit EPS growth in the September quarter. We are particularly pleased with our performance in emerging markets with revenue reaching an all-time record in fiscal 2023 and double-digit growth in constant currency. We are expanding our direct presence in these markets from new Apple retail stores in India to online stores in Vietnam and Chile. And we continue to work with our partners to offer a wide range of affordability programs so that we can best serve our customers. We're very excited about the momentum we have in these markets and the opportunity ahead of us. 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%. Finally, today our Board of Directors has declared a cash dividend of $0.24 per share of common stock, payable on November 16, 2023, to shareholders of record as of November 13, 2023. With that, let's open the call to questions.","evidence_gemma_new":"Services revenue","evidence_llama_3_3":"Services revenue September quarter","evidence_qwen_3_30b":"services revenue year-over-year","gemma_new_max":22300000000.0,"gemma_new_min":22300000000.0,"llama_3_3_max":22300000000.0,"llama_3_3_min":22300000000.0,"qwen_3_30b_max":22300000000.0,"qwen_3_30b_min":22300000000.0}
{"symbol":"AAPL","year":2024,"quarter":1,"date":"2024-Q1","chunk_id":2,"sub_chunk_id":0,"centroid_label":"services revenue","agreed_value":23100000000.0,"count":3,"chunk":"Tim Cook: Thank you. Suhasini. Good afternoon, everyone, and thanks for joining the call. Today, Apple is reporting revenue of $119.6 billion for the December quarter, up 2% from a year ago despite having one less week in the quarter. EPS was $2.18, up 16% from a year ago and an all-time record. We achieved revenue records across more than two dozen countries and regions including all-time records in Europe and rest of Asia-Pacific. We also continue to see strong double-digit growth in many emerging markets with all-time records in Malaysia, Mexico, The Philippines, Poland, and Turkey, as well as December quarter records in India, Indonesia, Saudi Arabia, and Chile. In Services, we set an all-time revenue record with paid subscriptions growing double-digits year-over-year. And I'm pleased to announce today that we have set a new record for our installed base, which has now surpassed 2.2 billion active devices. We are announcing these results on the eve of what is sure to be a historic day as we enter the era of spatial computing. Starting tomorrow, Apple Vision Pro, the most advanced personal electronics device ever, will be available in Apple stores for customers in the U.S. with expansion to other countries later this year. Apple Vision Pro is a revolutionary device built on decades of Apple innovation and it's years ahead of anything else. Apple Vision Pro has a groundbreaking new input system and thousands of innovations, and it will unlock incredible experiences for users and developers that are simply not possible on any other device. There is already so much excitement behind this product from reviewers, customers, and developers. They are praising everything from the incredible experience of watching a movie on a 100-foot screen to remarkable new machine learning capabilities like hand tracking and room mapping. We can't wait for people to experience the magic for themselves. Moments like these are what we live for at Apple. They're why we do what we do. They're why we're so unflinchingly dedicated to groundbreaking innovation and why we're so focused on pushing technology to its limits as we work to enrich the lives of our users. As we look ahead, we will continue to invest in these and other technologies that will shape the future. That includes artificial intelligence where we continue to spend a tremendous amount of time and effort, and we're excited to share the details of our ongoing work in that space later this year. Now, let's turn to the results for the December quarter, beginning with iPhone. We are proud to report that revenue came in at $69.7 billion, 6% higher than a year ago. The iPhone 15 lineup has earned glowing reviews and been embraced by customers. The iPhone 15 and iPhone 15 Plus feature a gorgeous new design with color-infused back glass and contoured edges, Dynamic Island, A16 Bionic, and a new 48 megapixel camera system. And the iPhone 15 Pro and iPhone 15 Pro Max set the gold standard for smartphones with a beautiful and lighter titanium design, industry-leading performance with A17 Pro and our most advanced camera system with the equivalent of seven pro lenses and the ability to record spatial video. Features like Emergency SoS and roadside assistance via satellite bring peace of mind to users when they travel, and I'm grateful for every note I've received about their lifesaving impact. Turning to Mac. Revenue came in at $7.8 billion, up 1% year-over-year, driven by the strength of our latest M3-powered MacBook Pro models in spite of having one less week of sales. Just last week, we got to wish Mac a happy 40th birthday. When it was introduced 40 years ago, Mac changed everything, and through the years, it has done so again and again. Recently, we have been on a tremendous pace of innovation. Since the introduction of Apple silicon in 2020, we've been proud to offer our users unmatched performance and power along with a remarkable Neural Engine for artificial intelligence and machine learning. This past fall, we had an amazing launch of the latest generation of Apple silicon for Mac, M3, M3 Pro, and M3 Max. These chips break new ground in power and performance empowering users to do more than they ever could before, whether they're making a musical masterpiece using the latest features in Logic Pro, or beating their high score in a graphics intensive game. A favorite amongst students, business owners, artists, and video editors, our MacBook Pro lineup is the world's best pro notebook family. And iMac, the world's most capable and best-selling all-in one, is now faster than ever, thanks to M3. In iPad, revenue for the December quarter was $7 billion, down 25% year-over-year due to a difficult compare with the launch of the M2 iPad Pro and the 10th generation iPad during the December quarter last year and one less week of sales. iPad remains the most versatile, capable, and elegant tablet on the market today. It continues to be the go-to-device for students, creators, and more with customers loving iPad's incredible combination of portability and performance. Powerful apps like Final Cut Pro and Logic Pro for iPad allow video and music creators to unleash their creativity in new ways that are only possible on iPad. iPad continues to push the boundaries of what's possible on a tablet. In Wearables, Home and Accessories, revenue came in at $12 billion, down 11% from a year ago due to a difficult compare with the launch timing of several products in this category and the impact of the 14th week last year. Across our latest Apple Watch lineup, we're enabling and encouraging our users to live a healthier day, while making Apple Watch even more intuitive to use. The new double tap gesture on Apple Watch Series 9 and Apple Watch Ultra 2 make it easier to answer calls, play and pause music or take a photo with iPhone. I've been deeply moved by the many touching stories about how features like a regular rhythm notification and fall detection helped Apple Watch users when they needed it most. And for the first time ever, users can choose a carbon-neutral option of any new Apple Watch. Meanwhile, our AirPods lineup continue to be a holiday favorite. In Services, we set an all-time revenue record of $23.1 billion and an 11% year-over-year increase. Because we had one less week this quarter, this growth represents an acceleration from the September quarter, and we achieved all-time revenue records across advertising, cloud services, payment services and video, as well as December quarter records in App Store and AppleCare. Across our services, we're constantly growing our offerings to give users even more to love. With the redesigned Apple TV app, we've made it easier for subscribers to enjoy all their favorite shows, movies and sports, including Apple TV+ hits like Masters of the Air, Monarch, and Slow Horses. We're proud to be a part of Martin Scorsese's Killers of the Flower Moon, a film that has moved audiences and earned more than 200 accolades including Best Film of the Year from the New York Film Critics Circle, nine BAFTA nominations, a Golden Globe win, and 10 Oscar nominations, including Best Picture. Across all Apple TV+ productions, we've now earned 2050 award nominations and 450 wins since we've introduced the service. We're also excited to have a new season of Major League Soccer kicking off this month. We're looking forward to seeing Lionel Messi return to the field and to following all of our favorite teams in what is sure to be an incredible season. And we're counting down to the Apple Music Super Bowl halftime show, featuring Usher. Turning to Retail. In recent months, we opened three stores, including our 100th store in Asia-Pacific. Throughout the holidays, our team members pulled out all the stops to help customers find the perfect gift. And I know our U.S. team members are especially excited to begin demoing Apple Vision Pro for our customers tomorrow. At Apple, we live and breathe innovation. We are driven to pioneer new technology that can enrich our customers' lives, and we're just as intentional about showing up with our values and being a force for good in the world. February is Black History Month, and to honor it, we've launched our new Black Unity Collection, which includes the Black Unity Sport Loop band. This year's designs reflect a lasting commitment to working toward a more equitable world. We also continue to do a central work through our Racial Equity and Justice Initiative, and we're proud to continue providing grants to organizations that are making a real impact in the world. In recent months, we've also taken significant strides in our environmental work. We're partnering with suppliers to bring more clean energy online for Apple production. We're using more recycled materials than ever before and more energy-efficient transportation than ever before. And each day, we are taking more and more steps toward becoming 100% carbon-neutral across all of our products by 2030. Apple is a company that has never shied away from big challenges. That's because we are grounded by a deep sense of purpose and guided by core belief in the transformative power of innovation. And so, we are optimistic about the future, confident in the long-term, and as excited as we've ever been to deliver for our users like only Apple can. With that, I'll turn it over to Luca.","evidence_gemma_new":"Services revenue year-over-year","evidence_llama_3_3":"Services revenue December quarter","evidence_qwen_3_30b":"Services revenue all-time record up 11% year-over-year","gemma_new_max":23100000000.0,"gemma_new_min":23100000000.0,"llama_3_3_max":23100000000.0,"llama_3_3_min":23100000000.0,"qwen_3_30b_max":23100000000.0,"qwen_3_30b_min":23100000000.0}
{"symbol":"AAPL","year":2024,"quarter":2,"date":"2024-Q2","chunk_id":2,"sub_chunk_id":0,"centroid_label":"services revenue","agreed_value":23900000000.0,"count":2,"chunk":"Luca Maestri: Thank you, Tim, and good afternoon, everyone. Revenue for the March quarter was $90.8 billion, down 4% from last year. Foreign exchange had a negative year-over-year impact of 140 basis points on our results. Products revenue was $66.9 billion, down 10% year-over-year due to the challenging compare on iPhone that Tim described earlier, which was partially offset by strength from Mac. And thanks to our unparalleled customer satisfaction and loyalty and a high number of customers who are new to our products, our installed base of active devices reached an all-time high across all products and all geographic segments. Services revenue set an all-time record of $23.9 billion, up 14% year-over-year with record performance in both developed and emerging markets. Company gross margin was 46.6%, up 70 basis points sequentially, driven by cost savings and favorable mix to services, partially offset by leverage. Products gross margin was 36.6%, down 280 basis points sequentially, primarily driven by seasonal loss of leverage and mix, partially offset by favorable costs. Services gross margin was 74.6%, up 180 basis points from last quarter due to a more favorable mix. Operating expenses of $14.4 billion were at the midpoint of the guidance range we provided and up 5% year-over-year. Net income was $23.6 billion, diluted EPS was $1.53 and a March quarter record, and operating cash flow was strong at $22.7 billion. Let me now provide more detail for each of our revenue categories. iPhone revenue was $46 billion, down 10% year-over-year, due to the almost $5 billion impact from a year ago that Tim described earlier. Adjusting for this one-time impact, iPhone revenue would be roughly flat to last year. Our iPhone active installed base grew to a new all-time high in total and in every geographic segment. And during the March quarter, we saw many iPhone models as the top-selling smartphones around the world. In fact, according to a survey from Kantar, an iPhone was the top-selling model in the U.S., Urban China, Australia, the U.K., France, Germany and Japan. And the iPhone 15 family continues to be very popular with customers. 451 Research recently measured customer satisfaction at 99% in the U.S. Mac revenue was $7.5 billion, up 4% year-over-year, driven by the strength of our new MacBook Air, powered by the M3 chip. Customers are loving the incredible AI performance of the latest MacBook Air and MacBook Pro models. And our Mac installed base reached an all-time high with half of our MacBook Air buyers during the quarter being new to Mac. Also customer satisfaction for Mac was recently reported at 96% in the U.S. iPad generated $5.6 billion in revenue, down 17% year-over-year. iPad continued to face a challenging compare against the launch of the M2 iPad Pro and iPad 10th Generation from last year. At the same time, the iPad installed base has continued to grow and is at an all-time high as over half of the customers who purchased iPads during the quarter were new to the product. In addition, the latest reports from 451 Research indicated customer satisfaction of 96% for iPad in the US. Wearables, Home and Accessories revenue was $7.9 billion, down 10% year-over-year due to a difficult launch compare. Last year, we had the continued benefit from the launches of the AirPods Pro second-generation, the Watch SE and the first Watch Ultra. Apple Watch continues to attract new customers, with almost two-thirds of customers purchasing an Apple Watch during the quarter being new to the product, sending the Apple Watch installed base to a new all-time high and customer satisfaction was recently measured at 95% in the U.S. In services, as I mentioned, total revenue reached an all-time record of $23.9 billion, growing 14% year-over-year with our installed-base of active devices continuing to grow at a nice pace. This provides a strong foundation for the future growth of the services business as we continued to see increased customer engagement with our ecosystem. Both transacting accounts and paid accounts reached a new all-time high with paid accounts growing double-digits year-over-year. And paid subscriptions showed strong double-digit growth. We have well over $1 billion paid subscriptions across the services on our platform, more than double the number that we had only four years ago. We continued to improve the breadth and quality of our current services from creating new games on Arcade and great new shows on TV+ to launching additional countries and partners for Apple Pay. Turning to enterprise, our customers continued to invest in Apple products to drive productivity and innovation. We see more and more enterprise customers embracing the Mac. In Healthcare, Epic Systems, the world's largest electronic medical record provider, recently launched its native app for the Mac, making it easier for healthcare organizations like Emory Health to transition thousands of PCs to the Mac for clinical use. And since the launch of Vision Pro last quarter, many leading enterprise customers have been investing in this amazing new product to bring spatial computing apps and experiences to life. We are seeing so many compelling use cases from aircraft engine maintenance training at KLM Airlines to real-time team collaboration for racing at Porsche to immersive kitchen design at Lowe's. We couldn't be more excited about the spatial computing opportunity in enterprise. Taking a quick step back, when we look at our performance during the first-half of our fiscal year, total company revenue was roughly flat to the prior year in spite of having one less week of sales during the period and some foreign exchange headwinds. We were particularly pleased with our strong momentum in emerging markets, as we set first-half revenue records in several countries and regions, including Latin-America, the Middle East, India, Indonesia, the Philippines and Turkey. These results, coupled with double-digit growth in services and strong levels of gross margin, drove a first half diluted EPS record of $3.71, up 9% from last year. Let me now turn to our cash position and capital return program. We ended the quarter with $162 billion in cash and marketable securities. We repaid $3.2 billion in maturing debt and commercial paper was unchanged sequentially, leaving us with total debt of $105 billion. As a result, net cash was $58 billion at the end of the quarter. During the quarter, we returned over $27 billion to shareholders, including $3.7 billion in dividends and equivalents and $23.5 billion through open-market repurchases of $130 million Apple's shares. Given the continued confidence we have in our business now and into the future, our Board has authorized today an additional $110 billion for share repurchases, as we maintain our goal of getting to net cash-neutral over time. We are also raising our dividend by 4% to $0.25 per share of common stock, and we continued to plan for annual increases in the dividend going forward as we've done for the last 12 years. This cash dividend will be payable on May 16, 2024 to shareholders of record as of May 13, 2024. As we move ahead into the June 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. We expect our June quarter total company revenue to grow low-single-digits year-over-year in spite of a foreign exchange headwind of about 2.5 percentage points. We expect our services business to grow double-digits at a rate similar to the growth we reported for the first-half of the fiscal year. And we expect iPad revenue to grow double-digits. We expect gross margin to be between 45.5% to -- and 46.5%. We expect OpEx to be between $14.3 billion and $14.5 billion. We expect OI&E to be around $50 million, excluding any potential impact from the mark-to-market of minority investments and our tax rate to be around 16%. With that, let's open the call to questions.","evidence_gemma_new":"Services revenue year-over-year","evidence_llama_3_3":"Apple services revenue March quarter","evidence_qwen_3_30b":null,"gemma_new_max":23900000000.0,"gemma_new_min":23900000000.0,"llama_3_3_max":23900000000.0,"llama_3_3_min":23900000000.0,"qwen_3_30b_max":null,"qwen_3_30b_min":null}
{"symbol":"AAPL","year":2024,"quarter":3,"date":"2024-Q3","chunk_id":2,"sub_chunk_id":0,"centroid_label":"services revenue","agreed_value":24200000000.0,"count":3,"chunk":"Luca Maestri : Thank you, Tim, and good afternoon, everyone. We are very pleased to report a new June quarter revenue record of $85.8 billion, up 5% year-over-year, despite 230 basis points of negative foreign exchange impact. We achieved growth in the vast majority of our markets, with June quarter revenue records in the Americas, Europe, and rest of Asia Pacific. Products revenue was $61.6 billion, up 2% year-over-year, driven by the launch of the new iPad Pro and iPad Air. Our installed base of active devices reach an all-time high across all products and geographic segments, thanks to our unmatched levels of customer satisfaction and loyalty and a large number of customers who are new to our products. Services revenue reached an all-time record of $24.2 billion, up 14% year-over-year, with an all-time record in developed markets and a June quarter record in emerging markets. Company gross margin was 46.3% near the high end of our guidance range and down 30 basis points sequentially driven by a different mix within products which was partially offset by a favorable mix shift towards services and cost savings. Products gross margin was 35.3%, down 130 basis points sequentially, primarily driven by mix, partially offset by favorable costs. Services gross margin was 74% down 60 basis points from last quarter. Operating expenses of $14.3 billion were at the low end of the guidance range we provided and up 7% year-over-year. Net income was $21.4 billion, diluted EPS of $1.40 was up 11% year-over-year and set a June quarter record. And operating cash flow was very strong at $28.9 billion, also a June quarter record. Let me get into more detail for each of our revenue categories. iPhone revenue was $39.3 billion, down 1% year-over-year, but grew on a constant currency basis. We set June quarter records across several countries, including the UK, Spain, Poland, Mexico, Indonesia, and the Philippines. And the iPhone Active installed base grew to a new all-time high in total and in every geographic segment. During the June quarter, many iPhone models were among the top selling smartphones around the world. In fact, according to a survey from Kantar, iPhone was the top selling model in the US, urban China, the UK, Germany, Australia, and Japan. Customer satisfaction on the iPhone 15 family continues to be extremely high, with 451 Research measuring it at 98% in the US in their latest reports. Mac generated $7 billion in revenue, up 2% year-over-year, driven by the MacBook Air powered by the M3 chip. We saw particularly strong performance in our emerging markets, with June quarter records for Mac in Latin America, India, and South Asia. The Mac installed base reached an all-time high with half of MacBook Air customers in the quarter being new to Mac. And customer satisfaction for Mac was recently reported at 96% in the US. iPad revenue was $7.2 billion, up 24% year-over-year, driven by the launch of the new iPad Pro and iPad Air. Customers are loving the latest iPad lineup for its new design and display, unparalleled performance, AI capabilities and much more. The iPad install base has continued to grow and is an all-time high, as half of the customers who purchased iPads during the quarter were new to the product. Also, customer satisfaction was recently measured at 97% in the US. Wearables, home and accessories revenue was $8.1 billion, down 2% year-over-year, a sequential acceleration from the March quarter. Watch and AirPods continue to face a difficult compare against prior year launches of the AirPods Pro second generation, the Watch SE and the first Watch Ultra. Apple Watch continues to attract new customers, with almost two-thirds of customers purchasing an Apple Watch during the quarter being new to the product, sending the Apple Watch install base to a new all-time high. And the latest reports from 451 Research indicate a customer satisfaction of 97% for watch in the US. In services, total revenue reached an all-time record of $24.2 billion, growing 14% year-over-year. We continue to have great momentum in services, as the growth of our installed base of active devices, sets a strong foundation for the future expansion of our ecosystem. And we see increased customer engagement with our services offerings. Both transacting accounts and paid accounts reach a new all-time high with paid accounts growing double digits year-over-year. Also, paid subscriptions showed strong double digit growth. We have well over 1 billion paid subscriptions across the services on our platform, more than double the number that we had only four years ago. And we are constantly focused on improving the breadth and quality of our services. From critically acclaimed new content on Apple TV+ to new games on Apple Arcade and the many latest features we previewed during WWDC for iCloud, Apple Pay, Apple Cash, Apple Music, and more. Turning to enterprise, we continue to see businesses, leveraging our entire suite of products to drive productivity and creativity for their teams and customers. USAA, a leading insurance and financial services company, recently expanded beyond their existing iPhone and iPad deployments to provide their employees with the latest MacBook Air. And American Express has continued to add to their fleet of over 10,000 Macs to enhance their employees' productivity, security, and collaboration. We're also excited to see leading organizations such as Boston Children's Hospital and Lufthansa using Apple Vision Pro to build innovative spatial computing experiences to transform the training of their workforces. Let me now turn to our cash position and capital return program. We ended the quarter with $153 billion in cash and marketable securities. We repaid $4.3 billion in maturing debt and increased commercial paper by $1 billion, leaving us with total debt of $101 billion. As a result, net cash was $52 billion at the end of the quarter. During the quarter, we returned over $32 billion to shareholders, including $3.9 billion in dividends and equivalents and $26 billion through open market repurchases of 139 million Apple shares. As we move ahead into the September 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. We expect foreign exchange to continue to be a headwind and to have a negative impact on revenue of about 1.5 percentage points on a year-over-year basis. We expect our September quarter total company revenue to grow year-over-year at a rate similar to the June quarter. We expect services revenue to grow double digits at a rate similar to what we reported in the first three quarters of this fiscal year. We expect gross margin to be between 45.5% and 46.5%. We expect OpEx to be between $14.2 billion and $14.4 billion. We expect OI&E to be around negative $50 million, excluding any potential impact from the mark to market of minority investments, and our tax rate to be around 16.5%. Finally, today our Board of Directors has declared a cash dividend of $0.25 per share of common stock payable on August 15, 2024, to shareholders of record as of August 12, 2024. With that, let's open the call to questions.","evidence_gemma_new":"Services revenue","evidence_llama_3_3":" services revenue quarter","evidence_qwen_3_30b":"Services revenue June quarter","gemma_new_max":24200000000.0,"gemma_new_min":24200000000.0,"llama_3_3_max":24200000000.0,"llama_3_3_min":24200000000.0,"qwen_3_30b_max":24200000000.0,"qwen_3_30b_min":24200000000.0}
{"symbol":"AAPL","year":2024,"quarter":4,"date":"2024-Q4","chunk_id":2,"sub_chunk_id":0,"centroid_label":"services revenue","agreed_value":25000000000.0,"count":3,"chunk":"Luca Maestri: Good afternoon, everyone. And thank you, Tim, for the very kind words. Serving as Apple's CFO has been a real privilege and an amazing journey, and I've greatly appreciated the support from our investors and the analyst community over the years. Kevan is exceptional, and I know you will enjoy interacting with him going forward. Let me now turn to the results for the fourth quarter of our fiscal year. We're very pleased to report a new September quarter revenue record of $94.9 billion, up 6% year-over-year. We grew in the vast majority of the markets we track and achieved September quarter revenue records in the Americas, Europe and Rest of Asia Pacific. Products revenue was $70 billion, up 4% year-over-year, driven by growth in iPhone, iPad and Mac. Our installed base of active devices reached an all-time high across all products and geographic segments, thanks to very high levels of customer satisfaction and loyalty and a large number of customers who are new to our products. Services revenue reached an all-time record of $25 billion, up 12% year-over-year. We saw broad-based strength around the world, reaching all-time records in both developed and emerging markets with double-digit growth and record results across most services categories. Company gross margin was 46.2%, near the high end of our guidance range. Products gross margin was 36.3%, up 100 basis points sequentially, primarily driven by favorable mix. Services gross margin was 74%, unchanged from the prior quarter. Operating expenses of $14.3 billion were at the midpoint of the guidance range we provided at the beginning of the quarter and up 6% year-over-year. During the quarter, we recorded a one-time income tax charge of $10.2 billion, which relates to the impact of the reversal of the European General Court's State Aid decision. When we exclude this one-time charge, net income was $25 billion and diluted earnings per share were a $1.64, up 12% year-over-year, and a September quarter record. Operating cash flow was very strong at $26.8 billion, a new September quarter record. Let me now get into more detail for each of our revenue categories. iPhone revenue was $46.2 billion, up 6% year-over-year, and a September quarter record in total and across several markets, including the US, the Middle East, Korea, and South Asia. The iPhone active installed base grew to a new all-time high in total and in every geographic segment. During the September quarter, many iPhone models were among the top-selling smartphones around the world. In fact, according to a survey from Kantar, iPhone was the top-selling model in the US, Urban China, the UK, Australia, and Japan. We continue to see high levels of customer satisfaction for the iPhone 15 family, with 451 Research recently measuring it at 98% in the US. Mac revenue was $7.7 billion, up 2% year-over-year, driven by the strength in MacBook Air. Customers have been loving the performance of Apple Silicon on Mac and we are very excited to bring the latest M4 family of chips to the lineup. The Mac installed base reached an all-time high with about half of customers in the quarter being new to Mac. And in the latest reports from 451 Research, customer satisfaction was 95% in the US. iPad generated $7 billion in revenue, up 8% year-over-year. In addition to growth in developed markets, we also saw strong performance in many emerging markets, with double-digit growth in Mexico, Brazil, the Middle East, India and South Asia. The iPad installed base reached another all-time high, and over half of the customers who purchased iPads during the quarter were new to the product. Also, customer satisfaction was recently measured at 97% in the US. Wearables, Home and Accessories revenue was $9 billion, down 3% year-over-year. The Apple Watch installed base reached a new all-time high, with over half of customers purchasing an Apple Watch during the quarter being new to the product. And the latest reports from 451 Research indicated customer satisfaction of 96% for watch in the US. Our Services revenue reached an all-time record of $25 billion, growing 12% year-over-year. Services continue to see strong momentum with the growth of our installed base of active devices setting a solid foundation for the future expansion of our ecosystem. And we see increased customer engagement with our services offerings. Both transacting accounts and paid accounts reached a new all-time high, with paid accounts growing double-digits year-over-year. Paid subscriptions also grew double-digits. We have well over 1 billion paid subscriptions across the services on our platform, more than double the number we had only four years ago. And as always, we remain focused on improving the breadth and quality of our services from new games on Apple Arcade to new features like Tap to Cash and pay with installments using Apple Pay to many successful new and returning shows on Apple TV+. This past quarter, we celebrated the five-year anniversary of Apple Card, which was ranked #1 in customer satisfaction among co-branded credit cards by J.D. Power for the fourth year in a row. Turning to enterprise, we continue to see strong demand across our products and services. NVIDIA launched its Mac as a choice program supported by AppleCare for Enterprise and Apple Professional Services with over 10,000 Macs deployed worldwide. And Novartis, a leading global pharmaceutical company, recently chose iPhone 16 as the standard mobile device for all employees. We also see continued momentum with Apple Vision Pro in the enterprise space. UC San Diego Health is the first hospital in the world to test spatial computing apps on Apple Vision Pro in clinical trials for patient surgery in the operating room. Let me now turn to our cash position and capital return program. We ended the quarter with $157 billion in cash and marketable securities. We repaid $2.6 billion in maturing debt and increased commercial paper by $7 billion, leaving us with total debt of $107 billion. As a result, net cash was $50 billion at the end of the quarter. During the quarter, we returned over $29 billion to shareholders, including $3.8 billion in dividends and equivalents and $25 billion through open market repurchases of 112 million Apple shares. 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're providing today assumes that the macroeconomic outlook doesn't worsen from what we are projecting today for the current quarter. We expect our December quarter total company revenue to grow low- to mid-single digits year-over-year. We expect Services revenue to grow double-digits at a rate similar to what we reported in the fiscal year 2024. We expect gross margin to be between 46% and 47%. We expect OpEx to be between $15.3 billion and $15.5 billion. We expect OI&E to be around negative $250 million, excluding any potential impact from the mark to market of minority investments. And our tax rate to be around 16%. Finally, today, our Board of Directors has declared a cash dividend of $0.25 per share of common stock payable on November 14, 2024 to shareholders of record as of November 11, 2024. With that, let us open the call to questions.","evidence_gemma_new":"Services revenue year-over-year","evidence_llama_3_3":"Services Services revenue fourth quarter fiscal year 2024","evidence_qwen_3_30b":"Services revenue all-time record","gemma_new_max":25000000000.0,"gemma_new_min":25000000000.0,"llama_3_3_max":25000000000.0,"llama_3_3_min":25000000000.0,"qwen_3_30b_max":25000000000.0,"qwen_3_30b_min":25000000000.0}
{"symbol":"AAPL","year":2023,"quarter":1,"date":"2023-Q1","chunk_id":3,"sub_chunk_id":0,"centroid_label":"wearables home and accessories wearables home and accessories business","agreed_value":13500000000.0,"count":2,"chunk":"Luca Maestri: Thank you, Tim, and good afternoon, everyone. As Tim mentioned, revenue for the December quarter was $117.2 billion, down 5% from last year. A number of factors had a significant impact on our results. First, we faced a very difficult foreign exchange environment, which affected our performance by nearly 800 basis points. In other words, we grew revenue on a constant currency basis. And in fact, we did so in the vast majority of markets. Second, the macroeconomic environment this past quarter was markedly more challenging than 12 months ago. Third, we experienced significant supply shortages for iPhone 14 Pro and iPhone 14 Pro Max in November and through December. On the other hand, we had the positive impact of the 14th week in the quarter that Tejas just mentioned at the beginning of the call. Products revenue was $96.4 billion, down 8% from last year due to the factors I just called out. At the same time, however, our installed base of active devices grew double digits and achieved all-time records in each geographic segment and in each major product category. We're proud to now have over 2 billion active devices in our installed base. This continued growth in the installed base is due to extremely strong levels of customer satisfaction and loyalty and a high number of customers who are new to our products. The installed base growth also helped our services set an all-time revenue record of $20.8 billion, up 6% over a year ago. We achieved this new milestone despite more than 700 basis points of negative impact from foreign exchange. We reached all-time services revenue records in the Americas, Europe and rest of Asia Pacific and a December quarter record in Greater China. We also set records in many Services categories, including all-time revenue records for cloud services, payment services and music and December quarter records for the App Store and AppleCare. Company gross margin was 43%, up 70 basis points from last quarter due to leverage and favorable mix, partially offset by foreign exchange. Products gross margin was 37%, up 240 basis points sequentially. And Services gross margin was 70.8%, up 30 basis points sequentially, both due to the same factors that impacted total company gross margin. Operating expenses of $14.3 billion were significantly below the guidance range we provided at the beginning of the quarter and grew at a slower pace than in the past as we took actions to respond to the current macro environment. Net income was $30 billion. Diluted earnings per share were $1.88, and we generated very strong operating cash flow of $34 billion. Let me now get into more detail for each of our revenue categories. iPhone revenue was $65.8 billion despite significant foreign exchange headwinds, supply constraints on iPhone 14 Pro and iPhone 14 Pro Max and a challenging macroeconomic environment. In spite of these circumstances, we set all-time iPhone revenue records in Canada, Italy and Spain, and saw strong growth in several emerging markets, including all-time iPhone revenue records for India and Vietnam. Importantly, the installed base of active iPhones continues to grow nicely and is at an all-time high across all geographic segments. In emerging markets, in particular, the installed base grew double digits, and we had record levels of switchers in India and in Mexico. Our customers continue to love their experience with our products with the latest survey of U.S. consumers from 451 Research indicating customer satisfaction of 98% for the iPhone 14 family. Mac revenue was $7.7 billion, down 29% year-over-year and in line with our expectations. There were 3 key drivers for our Mac results. First, we had a challenging compare against last year's launch of the completely reimagined MacBook Pros, our first notebooks with M1 Pro and M1 Max. Second, we believe that the macro environment impacted our Mac performance. And third, we faced significant foreign exchange headwinds. At the same time, however, the installed base of active Macs reached an all-time high across all geographic segments, and we continue to see very strong upgraded activity to Apple silicon. Customer satisfaction with Mac remains very strong at 96% based on the latest survey of U.S. consumers from 451 Research. iPad revenue was $9.4 billion, up 30% year-over-year despite significant FX headwinds. This performance was driven by 2 key items. First, during the December quarter a year ago, we experienced significant supply constraints, while this year, we had enough supply to meet demand. Second, we launched our new iPad and the iPad Pro powered by the M2 chip during the quarter. The iPad installed base reached a new all-time high, thanks to incredible customer loyalty and a high number of new customers. In fact, over half of the customers who purchased iPads during the quarter were new to the product. Wearables, Home and Accessories revenue was $13.5 billion, down 8% year-over-year. The year-over-year decline was driven by significant FX headwinds and a challenging macroeconomic environment. However, our installed base of devices in the category set a new all-time record thanks to the largest number of customers new to our smartwatch that we've ever had in a given quarter. In fact, nearly 2\/3 of customers purchasing an Apple Watch during the quarter were new to the product. Moving to Services. We generated $20.8 billion in revenue, a new all-time record in total and for many Services offerings in spite of a difficult foreign exchange environment, and macroeconomic headwinds impacting certain categories such as digital advertising and mobile gaming. In constant currency, we grew Services revenue double digits on top of growing 24% during the December quarter a year ago. We remain focused on the large long-term opportunity in this category, and we continue to observe several trends that reflect the strength of our ecosystem. For example, we saw increased customer engagement with our Services during the quarter. Both our transacting accounts and paid accounts grew double digits year-over-year, each setting a new all-time record. Paid subscriptions also continued to grow nicely. We now have more than 935 million paid subscriptions across the services on our platform, up more than 150 million during the last 12 months alone and nearly 4x what we had just 5 years ago. And we continue to increase the reach and improve the quality of our offerings. For instance, Apple Pay is now available to millions of merchants in nearly 70 countries and regions. And we saw a record-breaking number of purchases made using Apple Pay globally during the holiday shopping season. Finally, our installed base of over 2 billion active devices represents a great foundation for future expansion of our ecosystem, and it continues to grow even during difficult macroeconomic conditions, which speaks to the exceptionally high levels of customer loyalty and satisfaction and our ability to attract new customers to our platform. The growth is coming from every major product category and geographic segment, with strong double-digit increases in emerging markets such as Brazil, Mexico, India, Indonesia, Thailand and Vietnam. Turning to the enterprise market. we are seeing continued adoption of our Services for business like Apple Business Essentials, AppleCare, Tap to Pay and Apple Financial Services. For example, Mars Incorporated has expanded its use of AppleCare for Enterprise to provide timely device support and assurance for iPads deployed across their manufacturing sites. Meanwhile, HCA Healthcare has leveraged Apple Financial Services to manage the annual refresh of its entire fleet of iPhones. This not only ensures that their staff stay current on the latest Apple technology, but also provides them with significant annual savings in the process. Let me now turn to our capital return program and our cash position. We returned over $25 billion to shareholders during the December quarter as our business continues to generate very strong cash flow. This included $3.8 billion in dividends and equivalents and $19 billion through open market repurchases of 133 million Apple shares. We ended the quarter with $165 billion in cash and marketable securities. We repaid $1.4 billion in maturing debt and decreased commercial paper by $8.2 billion, leaving us with total debt of $111 billion. As a result, net cash was $54 billion at the end of the quarter, and we maintain our goal of becoming net cash-neutral over time. As we move into the March quarter, I'd like to review our outlook, which includes the types of forward-looking information that Tejas referred to at the beginning of the call. Given the continued uncertainty around the world in the near term, we are not providing revenue guidance, but we are sharing some directional insights based on the assumption that the macroeconomic outlook and COVID-related impacts to our business do not worsen from what we are projecting today for the current quarter. In total, we expect our March quarter year-over-year revenue performance to be similar to the December quarter. This represents an acceleration in our underlying year-over-year business performance as the December quarter benefited from an extra week. Foreign exchange will continue to be a headwind, and we expect a negative year-over-year impact of 5 percentage points. For Services, we expect revenue to grow year-over-year while continuing to face macroeconomic headwinds in areas such as digital advertising and mobile gaming. For iPhone, we expect our March quarter year-over-year revenue performance to accelerate relative to the December quarter year-over-year revenue performance. For Mac and iPad, we expect revenue for both product categories to decline double digits year-over-year because of challenging compares and macroeconomic headwinds. We expect gross margin to be between 43.5% and 44.5%. We expect OpEx to be between $13.7 billion and $13.9 billion. We expect OI&E to be around negative $100 million, excluding any potential impact from the mark-to-market of minority investments, and our tax rate to be around 16%. Finally, today, our Board of Directors has declared a cash dividend of $0.23 per share of common stock payable on February 16, 2023, to shareholders of record as of February 13, 2023. With that, let's open the call to questions.","evidence_gemma_new":null,"evidence_llama_3_3":"Wearables, Home and Accessories $13.5 billion","evidence_qwen_3_30b":"Wearables, Home and Accessories revenue down 8% year-over-year","gemma_new_max":null,"gemma_new_min":null,"llama_3_3_max":13500000000.0,"llama_3_3_min":13500000000.0,"qwen_3_30b_max":13500000000.0,"qwen_3_30b_min":13500000000.0}
{"symbol":"AAPL","year":2023,"quarter":2,"date":"2023-Q2","chunk_id":2,"sub_chunk_id":0,"centroid_label":"wearables home and accessories wearables home and accessories business","agreed_value":8800000000.0,"count":2,"chunk":"Tim Cook: Thank you, Suhasini. Good afternoon, everyone, and thanks for joining us. Today, we're reporting revenue of $94.8 billion for the March quarter, which was better than our expectations. We set an all-time record for Services and a March quarter record for iPhone. We were particularly pleased with the performance we saw in emerging markets and achieved all-time records in Mexico, Indonesia, the Philippines, Saudi Arabia, Turkey and the UAE, as well as a number of March quarter records, including in Brazil, Malaysia and India. This result is a testament, first and foremost to our teams around the world who are engaged every day in the work of bringing new innovations to life. It speaks to the incredible power of Apple products and services to enrich people's lives in indispensable ways. And whether it's in the design lab in Cupertino, or in one of the brand new retail stores in India, I am constantly inspired by the way our people come together to make a real difference in the world. During the March quarter, we continued to face foreign exchange headwinds, which had an impact of more than 500 basis points, as well as ongoing challenges related to the macroeconomic environment. Revenue was down 3% year-over-year as a result, while on a constant currency basis, we grew in total and in the vast majority of the markets we tried. Despite these challenges, we continue to manage for the long term and to push the limits of what's possible, always on behalf of the customers who depend on our products whether it's students exploring new frontiers, developers dreaming up their next big idea, or artists taking their creativity to a whole new level. Let me share how these results showed up across our lineup of products and services. Let's start with iPhone, which set a new March quarter record with revenue of $51.3 billion. The iPhone 14 and 14 plus continue to delight users with their long lasting battery and advanced camera. And our pro users continue to rave about the most powerful camera system ever in an iPhone. This March, we were excited to expand emergency SOS via satellite to six new countries, bringing this important safety feature to even more users. We now offer this vital service in 12 countries, and I'm grateful for every note I've received from around the world about the life saving impact of our safety features. Now let's turn to Mac, which recorded $7.2 billion in revenue for the March quarter in line with our expectations. As we noted during our last call, Mac faced a very difficult compare because of the incredibly successful rollout of our M1 chip throughout the Mac lineup last year. And like our other product lines, Mac is facing some macroeconomic and foreign exchange headwinds as well. That said, the advancements we've made in power efficient performance continue to amaze our users. Our M2 Mac Mini customers are raving about the pro level powerhouse packed into an ultra-compact design, and users are marveling at the power and speed at the heart of every M2 powered MacBook Air and MacBook Pro, which allowed them to sustain even the most demanding workloads. iPad revenue was $6.7 billion, which was also in line with our expectations. Similar to Mac, iPad revenue performance was impacted by macroeconomic challenges, foreign exchange headwinds, and a difficult compare with last year when we launched the M1 powered iPad Air. iPad's versatility continues to be its greatest strength as we're helping students learn on the same family of devices artists use to create their next masterpiece. Across wearables, home and accessories, revenue was $8.8 billion. With its exceptional range of game changing health and safety features, Apple Watch becomes more and more indispensable every day. Apple Watch Ultra is attracting adventures, athletes and everyday users with its breakthrough features built for endurance and exploration. And with summer travel season soon heating up, there's no better companion in the air or on the road than AirPods, the best and most popular headphones in the world. Meanwhile, Services set an all-time record with $20.9 billion in revenue for the March quarter. We achieved all time revenue records across App Store, Apple Music, iCloud and payment services. And now, with more than 975 million paid subscriptions, we're reaching even more people with our lineup of services. Apple TV Plus continues to draw praise from customers and reviewers alike. During the past quarter, fans tuned in to incredible new series like Shrinking and The Big Door Prize and got to welcome Ted Lasso back into their homes for a third season. Movies like Tetris are captivating viewers with many more to come, including Martin Scorsese\u2019s Killers of the Flower Moon later this year. Three years since its launch, Apple TV Plus programming has been celebrated across the globe, with over 1,450 nominations and more than 350 wins. Recently, we were thrilled to cheer on The Boy, the Mole, the Fox and the Horse, which won an Academy Award for best Animated Short Film. The first season of our historic tenure partnership with Major League Soccer is well underway with MLS season pass, we've created the ultimate destination for soccer fans, offering subscribers the ability to watch every match with no blackouts. And with baseball season in full swing, Apple TV Plus subscribers can watch their favorite teams with the return of Friday night baseball. This quarter, we launched Apple Music Classical, a standalone app that gives something special to classical music lovers. Apple Music Classical packs the largest library of classical music on Earth into a thoughtful and intuitive design that strikes all the right notes. Whether you're listening with AirPods or HomePod, the premium sound experience of Apple Music Classical will leave you with a feeling of being front row at the symphony just behind the conductor. In March, we also launched Apple Pay Later designed with users privacy and financial health in mind. Apple Pay Later allows users to split purchases into multiple payments with no interest or fees. And last month, we introduced Apple Card Savings Accounts to give users even more value out of their daily cash Apple Card Benefit. At Apple, our customers are at the center of everything we do. Nowhere is that more evident than retail, where our teams are dedicated to sharing the best of Apple with our customers. And we're constantly innovating to deliver exceptional experiences and meet our customers where they are. In the US, we launch Shop with a specialist over video, a new way for customers to learn about iPhone and find the one that's just right for them. And as I noted earlier, in a milestone for Apple, we just opened our first two Apple stores in India, in Mumbai and Delhi. I was there to see it for myself, and I couldn't have been more delighted by the excitement and enthusiasm of the customers, developers, creators and team members I got to spend time with. I've had the chance to connect with customers and teams all around the world in recent months, so many people shared with me that they were fans of Apple, not just because of the innovations we create, but because of the values that guide us, and that means a great deal to us. We're constantly striving to make a positive difference in people's lives and be a force for progress. We're investing in education to give students the skills they need to shape the future. We're helping to create pathways of opportunity for communities of color through our Racial Equity and justice initiative. And every day we're building an even more inclusive and diverse Apple rooted in our culture of belonging. To better understand how our work intersects with our values, look no further than what we're doing for the environment. We just celebrated Earth Day in April, and during that month, Apple announced that its global manufacturing partners now support over 13 gigawatts of renewable energy, a nearly 30% increase in just the last year. This translates to 17.4 million metric tons of avoided carbon emissions, the equivalent of removing nearly 3.8 million cars from the road. We're all investing up to an additional $200 million in our Restore Fund, which is designed to support innovative, scalable, nature based carbon removal projects, with the goal of removing 1 million metric tons of carbon every year. These are just the latest steps on our journey toward our 2030 goal to be carbon neutral across our supply chain and lifecycle of our devices. At the same time, we're advancing renewable energy across our supply chain, we're also sourcing more recycled materials in our products. Last month, we announced our plans to have all Apple design batteries include 100% certified recycled cobalt by 2025, and we remain committed to one day using only recycled and renewable materials in our products. We have a deep sense of mission here at Apple. We believe in the power of innovation to build a better world. We are determined to do our best work on behalf of our customers and to give them the tools that can enrich lives. So we will manage for the long term, just as we always have, with our eyes to the horizon, with limitless creativity, and with a deep belief that we can achieve anything we put our minds to. With that, I'll turn it over to Luca.","evidence_gemma_new":null,"evidence_llama_3_3":"Wearables, home and accessories revenue March quarter","evidence_qwen_3_30b":"wearables, home and accessories revenue","gemma_new_max":null,"gemma_new_min":null,"llama_3_3_max":8800000000.0,"llama_3_3_min":8800000000.0,"qwen_3_30b_max":8800000000.0,"qwen_3_30b_min":8800000000.0}
{"symbol":"AAPL","year":2023,"quarter":3,"date":"2023-Q3","chunk_id":2,"sub_chunk_id":0,"centroid_label":"wearables home and accessories wearables home and accessories business","agreed_value":8300000000.0,"count":3,"chunk":"Tim Cook: Thank you, Saori. Good afternoon, everyone, and thanks for joining us. Today, Apple is reporting revenue of $81.8 billion for the June quarter, better than our expectations. We continued to see strong results in emerging markets, driven by robust sales of iPhone with June quarter total revenue records in India, Indonesia, Mexico, the Philippines, Poland, Saudi Arabia, Turkey and the UAE. We set June quarter records in a number of other countries as well, including France, the Netherlands and Austria. And we set an all-time revenue record in Services driven by more than $1 billion paid subscriptions. We continued to face an uneven macroeconomic environment, including nearly 4 percentage points of foreign exchange headwinds. On a constant currency basis, we grew compared to the prior year's quarter in aggregate and in the majority of markets we track. We continue to manage deliberately and innovate relentlessly, and we are driven by the sense of possibility those efforts inspire. To that end, before I turn to the quarter in more detail, I want to take a moment to acknowledge the unprecedented innovations we were proud to announce at our Worldwide Developers Conference. In addition to extraordinary new Macs and incredible updates to our software platforms, we had the chance to introduce the world to spatial computing. We were so pleased to share the revolutionary Apple Vision Pro with the world, a bold new product unlike anything else created before. Apple Vision Pro is a marvel of engineering, built on decades of innovation only possible at Apple. It is the most advanced personal electronic device ever created, and we've been thrilled by the reaction from press, analysts, developers and content creators who've had the chance to try it. We can't wait to get it into customers' hands early next year. Now let me share more with you on our June quarter results beginning with iPhone. iPhone revenue came in at $39.7 billion for the quarter, down 2% from the year ago quarter's record performance. On a constant currency basis, iPhone revenue grew, and we had a June quarter record for switchers, reflecting the popularity of the iPhone lineup. iPhone 14 customers continue to praise the exceptional battery life and essential health and safety features, while iPhone 14 Plus users are loving the new larger screen size. And with Dynamic Island, Always-On display and the most powerful camera system ever in an iPhone, the iPhone 14 Pro lineup is our best ever. Turning to Mac. We recorded $6.8 billion in revenue, down 7% year-over-year. We are proud to have completed the transition of our entire Mac lineup to run exclusively on Apple silicon. We are also excited to have introduced the new 15-inch MacBook Air during the quarter, the world's best 15-inch laptop and one of the best Macs we've ever made. And we launched 2 new powerhouses in computing, Mac Studio with M2 Max and M2 Ultra and Mac Pro with M2 Ultra, which are the most powerful Macs we've ever made. iPad revenue was $5.8 billion for the June quarter, down 20% year-over-year, in part due to a difficult compare because of the timing of the iPad Air launch last year. Customers are loving iPad's versatility and exceptional value. There was a great deal of excitement from creatives when we brought Final Cut Pro and Logic Pro to iPad this spring. And with the back-to-school season in full swing, iPad has the power to help students tackle the toughest assignments. Across Wearables, Home and Accessories, revenue was $8.3 billion, up 2% year-over-year and in line with our expectations. Packed with features to empower users to live a healthier life, Apple Watch and Apple Watch Ultra continue to help people take the next step on their wellness journey. As I mentioned earlier, last quarter, we held our biggest and most exciting WWDC yet. We were thrilled to welcome developers from across the globe to Apple Park, both in person and virtually, and to share some stunning new announcements with the world. In addition to Apple Vision Pro and the new Macs that we introduced, we had the chance to reveal some truly remarkable new innovations to our software platforms. From exciting new features like Live Voicemail and StandBy in iOS 17, to new tools for users to work, play and personalize their experience in macOS Sonoma and iPadOS 17, to a fresh design and new workout capabilities in watchOS 10, there's so much coming later this year to empower users to get more out of their devices, and we think they're going to instantly love these new features. It was also an exciting quarter for Services where revenue reached $21.2 billion and saw a sequential acceleration to an 8% year-over-year increase, better than we expected. We set an all-time revenue record for total services and in a number of categories, including video, AppleCare, cloud and payment services. Since we introduced Apple Pay almost a decade ago, customers have been loving how easy it is to make purchases online, in apps and in stores. We're also pleased to see Apple Card build on the success of Apple Pay. Designed with our users' financial health in mind, Apple Card has become one of the most successful credit card programs in the U.S. with award-winning customer satisfaction. And this spring, we introduced a new high-yield savings account for Apple Card customers, which has become incredibly popular, with customers already making more than $10 billion in deposits. Meanwhile, Apple TV+ continues to provide a spectacular showcase of imaginative storytelling. Recently, fans welcomed new series like Hijack and Silo as well as returning fan favorites like Foundation and The Afterparty. In the few years since its launch, Apple TV+ has earned more than 1,500 nominations and 370 wins. That includes the 54 Emmy Award nominations across 13 titles that Apple TV+ received last month. It's also been an exciting time for sports on Apple TV+. Soccer legend Lionel Messi made his debut with Major League Soccer last month, and fans all over the world tuned in with MLS Season Pass. We are excited about our MLS partnership, and we're thrilled to see Messi suiting up with Inter Miami. And just in time for summer concert season, Apple Music launched new discovery features celebrating live music, including venue guides in Apple Maps and set lists from tours of major artists. These new features and others join a lineup of updates coming later this year to make Services more powerful, more useful and more fun than ever. Everything we do is in service of our customers, and retail is where we bring the best of Apple. During the quarter, we opened the Apple Store online in Vietnam, and we're excited to connect with more customers there. We also redesigned our first-ever Apple Store located in Tysons Corner, Northern Virginia, with inclusive, innovative and sustainable design enhancements. We opened a beautiful new store beneath our new London headquarters in the historic Battersea Power Station. And the performance of the stores we opened in India this spring exceeded our initial expectations. With every product we create, every feature we develop and every interaction we share with our customers, we lead with the values we stand for. We believe in creating technology that serves all of humanity, which is why accessibility has always been a core value that we embed in everything we do. On Global Accessibility Awareness Day, we unveiled some extraordinary new tools for cognitive, vision, hearing and mobile accessibility that will be available later this year, including Assistive Access, which distills apps to their most essential features, and Personal Voice, which allows users to create a synthesized voice that sounds just like them. Building technology and service of our customers also means protecting their privacy, which we believe is a fundamental human right. That's why we were pleased to announce major updates to Safari Private Browsing, Communication Safety and Lockdown Mode to further safeguard our users. And as part of our efforts to build a better world, we announced that we've more than doubled our initial commitment to our Racial Equity and Justice Initiative to more than $200 million. We will continue to do our part to support education, economic empowerment and criminal justice reform work. And while supporting efforts to advance equity and opportunity, we continue to build a culture of belonging at Apple and a workforce that reflects the communities we serve. Through our environmental work, we're making strides in our commitment to leave the world better than we found it. Last month, Apple joined with global nonprofit Acumen in a new effort to improve livelihoods in India through clean energy innovation, and we are as committed as ever to our Apple 2030 goal to be carbon neutral across our entire supply chain and the life cycle of our products. We've long held that education is the great equalizer. With that in mind, we're expanding Apple Learning Coach, a free professional learning program that teaches educators how to get more out of Apple technology in the classroom. Today, we welcome more than 1,900 educators across the U.S. to the program. By the end of the year, we'll offer Apple Learning Coach in 12 more countries. As we're connecting with teachers, we're also celebrating the graduations of students at our app developer academies around the world. From Detroit, to Naples, to Riyadh and more, we're excited to watch these talented developers embark on careers in coding and find ways to make a positive difference in their communities. Apple remains a champion of innovation, a company fueled by boundless creativity, driven by a deep sense of mission and guided by the unshakable belief that a great idea can change the world. Looking ahead, we'll continue to manage for the long term, always pushing the limits of what's possible and always putting the customer at the center of everything we do. With that, I'll turn it over to Luca.","evidence_gemma_new":"Wearables Home and Accessories revenue","evidence_llama_3_3":"Wearables, Home and Accessories Wearables, Home and Accessories revenue June quarter","evidence_qwen_3_30b":"Wearables, Home and Accessories revenue up 2% year-over-year","gemma_new_max":8300000000.0,"gemma_new_min":8300000000.0,"llama_3_3_max":8300000000.0,"llama_3_3_min":8300000000.0,"qwen_3_30b_max":8300000000.0,"qwen_3_30b_min":8300000000.0}
{"symbol":"AAPL","year":2023,"quarter":3,"date":"2023-Q3","chunk_id":36,"sub_chunk_id":0,"centroid_label":"wearables home and accessories wearables home and accessories business","agreed_value":40000000000.0,"count":2,"chunk":"Luca Maestri: Yes. On the Wearables front, we had really good performance in Greater China. And that's, again, very important for us. It was a June quarter record for Greater China. Very important for us because, again, it shows that the engagement with the ecosystem in a market that is so important for us like China continues to grow. It means that there's more and more customers that are owning more than the iPhone. Also, we continue to grow the installed base of the category very quickly because, as I mentioned, 2\/3 of every buyer of Apple Watch during the course of the June quarter was new to the product. And so that is all additive to the installed base. So it's just great to see that the AirPods continue to be a great success in the marketplace for us. And so things are moving in the right direction there. It's become a very large business for us in Wearables, Home and Accessories. The last 12 months, we've done $40 billion of business, which is nearly the size of a Fortune 100 company. So it's become very important, and it's allowed us to diversify both our revenues and our earnings.","evidence_gemma_new":"Wearables Home and Accessories last 12 months","evidence_llama_3_3":"Wearables, Home and Accessories business the last 12 months","evidence_qwen_3_30b":null,"gemma_new_max":40000000000.0,"gemma_new_min":40000000000.0,"llama_3_3_max":40000000000.0,"llama_3_3_min":40000000000.0,"qwen_3_30b_max":null,"qwen_3_30b_min":null}
{"symbol":"AAPL","year":2023,"quarter":4,"date":"2023-Q4","chunk_id":3,"sub_chunk_id":0,"centroid_label":"wearables home and accessories wearables home and accessories business","agreed_value":9300000000.0,"count":3,"chunk":"Luca Maestri: Thank you, Tim, and good afternoon, everyone. Revenue for the September quarter was $89.5 billion, down less than 1% from last year. Foreign exchange had a negative impact of over 2 percentage points. And on a constant-currency basis, our revenue grew year-over-year in total, and in each geographic segment. We set a September quarter record in the Americas and saw strong performance across our emerging markets, where both iPhone and Services grew double digits. Products revenue was $67.2 billion, down 5% from last year, due to very challenging compares on both Mac and iPad, which I will discuss in more detail later on. At the same time, we reached a September quarter record on iPhone, driven by strength in emerging markets. Our total installed-base of active devices reached an all-time high across all products and all geographic segments, thanks to our high levels of customer satisfaction and many new customers joining our ecosystem. Our Services revenue set an all-time record of $22.3 billion, up 16% year-over-year, with growth accelerating sequentially from the June quarter. Our performance in Services were broad based, as we reached all-time revenue records in the Americas, Europe and rest of Asia-Pacific and a September quarter record in Greater China. We also set new records in every Services category. Company gross margin set a September quarter record at 45.2%, up 70 basis points sequentially, driven by leverage and favorable mix, partially offset by foreign exchange. Products gross margin was 36.6%, up 120 basis points sequentially, also driven by leverage and mix, partially offset by foreign exchange. Services gross margin was 70.9%, up 40 basis points from last quarter due to a different mix. Operating expenses of $13.5 billion were at the low end of the guidance range we provided, up 2% year-over-year. Net income was $23 billion, diluted earnings per share was $1.46, up 13% versus last year and a September quarter record, and operating cash flow was strong at $21.6 billion. Let me now provide more detail for each of our revenue categories. iPhone revenue was $43.8 billion, up 3% year-over-year and a new September quarter record. We had strong performance in several markets, including an all-time record in India as September quarter records in Canada, Latin America, the Middle East, and South Asia . Our iPhone active installed base grew to a new all-time high and fiscal 2023 was another record year for switches. We continue to see extremely high levels of customer satisfaction which 451 Research recently measured at 98% in the U.S. Mac revenue was $7.6 billion, down 34% year-over-year, driven by challenging market conditions and compounded by a difficult compare in our own business, whereby last year we experienced supply disruptions from factory shutdowns in the June quarter and were subsequently able to fulfill significant pent-up demand during the September quarter. We also had a difference in launch timing with the MacBook Air launching earlier this year in the June quarter compared to the September quarter last year. We have great confidence in our Mac lineup and are excited about the recently announced iMac and MacBook Pro powered by our M3 chips. Our installed base is at an all-time high and half of Mac buyers during the quarter were new to the product, driven by MacBook Air. Also, we saw reported customer satisfaction of 97% for Mac in the U.S. iPad generated $6.4 billion in revenue, down 10% year-over-year. Similar to Mac, these results were a function of a difficult compare from the supply disruptions in the June quarter a year ago and the subsequent fulfillment of pent-up demand in the September quarter. iPad continues to attract a large number of new customers to the installed base with over half of the customers who purchase iPads during the quarter being new to the product and the latest reports from 451 Research indicate customer satisfaction of 98% in the U.S. Wearables, Home and Accessories revenue was $9.3 billion, down 3% year-over-year. We had a September quarter record in Europe and we saw strong performance in several emerging markets around the world. Apple Watch continues to expand its reach with nearly two-thirds of customers purchasing Apple Watch during the quarter being new to the product and customer satisfaction for the Watch was recently measured at 97% in the U.S. Services had a great quarter. We reached a new all-time revenue record of $22.3 billion, up 16% year-over-year. And we're happy to see growth coming from all categories and every geographic segment, which is a direct result of the strength of our ecosystem. Our installed base of over 2 billion active devices continues to grow at a nice pace and establishes a solid foundation for the future expansion of the ecosystem. And we continue to see increased customer engagement with our Services. Both transacting accounts and paid accounts grew double-digits year-over-year, each reaching a new all-time high. Also our paid subscriptions showed strong growth. We have well over 1 billion paid subscriptions across the services on our platform, nearly double the number we had only three years ago. And finally, we continue to improve the breadth and quality of our current services from exciting new content on Apple TV+ and Apple Arcade to additional storage tiers on iCloud. We believe our customers will love this new offering. Turning to enterprise. We are excited to see our business customers in both developed and emerging markets expand their deployment of Apple products and technologies to drive business innovation and employee satisfaction. Starbucks continuously invest in Apple technology to bring the best experience to the customers and employees, including tens of thousands of iPads across all retail stores to help their teams streamline order management, operations and training. In addition, Starbucks recently refreshed over 10,000 Macs to the latest M2-powered MacBook Air for all store managers, enabling them to do their best work and improve productivity. And in Indonesia, popular technology company GoTo is offering Mac as a choice, so that employees can have the best tools to be most productive. Today, more than half of its workforce are already choosing Mac for work. Let me now turn to our cash position and capital return program. We ended the quarter with over $162 billion in cash and marketable securities. We increased commercial paper by $2 billion, leaving us with total debt of $111 billion. As a result, net cash was $51 billion at the end of the quarter. And our goal of becoming net cash-neutral over time remains unchanged. During the quarter, we returned nearly $25 billion to shareholders, including $3.8 billion in dividends and equivalents and $15.5 billion through open market repurchases of 85 million Apple shares. We also began a $5 billion accelerated share repurchase program in August, resulting in the initial delivery and retirement of 22 million shares. Taking a step back, as we close our 2023 fiscal year, our annual revenue was $383 billion. While it was down 3% from the prior year, it grew on a constant-currency basis despite the volatile and uneven macroeconomic environment. Our year-over-year revenue performance improved each quarter as we went through the year, and so did our earnings per share performance, as we reported double-digit EPS growth in the September quarter. We are particularly pleased with our performance in emerging markets with revenue reaching an all-time record in fiscal 2023 and double-digit growth in constant currency. We are expanding our direct presence in these markets from new Apple retail stores in India to online stores in Vietnam and Chile. And we continue to work with our partners to offer a wide range of affordability programs so that we can best serve our customers. We're very excited about the momentum we have in these markets and the opportunity ahead of us. 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%. Finally, today our Board of Directors has declared a cash dividend of $0.24 per share of common stock, payable on November 16, 2023, to shareholders of record as of November 13, 2023. With that, let's open the call to questions.","evidence_gemma_new":"Wearables Home and Accessories revenue","evidence_llama_3_3":"Wearables, Home and Accessories revenue September quarter","evidence_qwen_3_30b":"Wearables, Home and Accessories revenue","gemma_new_max":9300000000.0,"gemma_new_min":9300000000.0,"llama_3_3_max":9300000000.0,"llama_3_3_min":9300000000.0,"qwen_3_30b_max":9300000000.0,"qwen_3_30b_min":9300000000.0}
{"symbol":"AAPL","year":2024,"quarter":1,"date":"2024-Q1","chunk_id":3,"sub_chunk_id":0,"centroid_label":"wearables home and accessories wearables home and accessories business","agreed_value":12000000000.0,"count":2,"chunk":"Luca Maestri: Thank you, Tim, and good afternoon, everyone. Revenue for the December quarter was $119.6 billion, up 2% from last year. During the December quarter a year ago, two unique factors affected our results. First, we had an additional week in the quarter. And second, we had COVID-related factory shutdowns that limited iPhone supply. We estimate that the net impact of these two factors resulted in a 2 percentage point headwind to our revenue performance this quarter. We set all-time revenue records in Europe and rest of Asia-Pacific, and continue to see strong performance across our emerging markets with double-digit growth in the majority of the emerging markets we track. Products revenue was $96.5 billion, flat compared to last year, driven by strength in iPhone, offset by challenging compares for iPad and Wearables, Home and Accessories and one less week of sales this year across the entire portfolio. Thanks to our unparalleled customer loyalty and very strong levels of customer satisfaction, our total installed base of active devices set a new record across all products and all geographic segments, and is now over 2.2 billion active devices. Services revenue set an all-time record of $23.1 billion, up 11% year-over-year. When we take into account the extra week last year, this represents a sequential acceleration of growth from the September quarter. We are very pleased with our Services performance in both developed and emerging markets with all-time revenue records in the Americas, Europe, and rest of Asia-Pacific. Company gross margin was 45.9%, up 70 basis points sequentially, driven by leverage and favorable mix, partially offset by foreign exchange. Products gross margin was 39.4%, up 280 basis points sequentially, also driven by leverage and mix, partially offset by foreign exchange. Services gross margin was 72.8%, up 190 basis points from last quarter, due to a more favorable mix. Operating expenses of $14.5 billion were at the midpoint of the guidance range we provided and up 1% year-over-year. Net income was $33.9 billion, up $3.9 billion from last year. Diluted EPS was $2.18, up 16% versus last year and an all-time record. And operating cash flow was very strong at $39.9 billion. Let me now provide more detail for each of our revenue categories. iPhone revenue was $69.7 billion, up 6% year-over-year. We set all-time records in several countries and regions, including Latin America, Western Europe, the Middle East, and Korea, as well as December quarter records in India and Indonesia. Our iPhone active installed base grew to a new all-time high, and we had an all-time record number of iPhone upgraders during the quarter. Customers are loving their new iPhone 15 family, with the latest reports from 451 Research indicating customer satisfaction of 99% in the U.S. In fact, many iPhone models were among the top-selling smartphones around the world during the quarter. According to a survey from Kantar, iPhones were four out of the top five models in the U.S. and Japan, four out of the top six models in urban China and the UK, and all top five models in Australia. Mac generated revenue of $7.8 billion and return to growth, despite one less week of sales this year. This represents a significant acceleration from the September quarter when we faced a challenging compare due to the supply disruptions and subsequent demand recapture we experienced a year ago. Customer response to our latest iMac and MacBook Pro models powered by the M3 chips has been great. And our Mac installed base reached an all-time high with almost half of Mac buyers during the quarter being new to the product. Also, 451 Research recently reported customer satisfaction of 97% for Mac in the U.S. iPad was $7 billion in revenue, down 25% year-over-year. iPad faced a difficult compare because during the December quarter last year, we launched the new iPad Pro and iPad 10 generation, and we had an extra week of sales. However, the iPad installed base continues to grow and is an all-time high with over half of the customers who purchased iPads during the quarter being new to the product, and customer satisfaction for iPad was recently measured at 98% in the U.S. Wearables, Home and Accessories revenue was $12 billion, down 11% year-over-year due to a challenging launch compare and the extra week a year ago. This time last year, we had the full quarter benefit from the launches of the AirPods Pro 2nd generation, the Watch SE, and the first Watch Ultra. We continue to attract new customers to Apple Watch. Nearly two-thirds of customers purchasing an Apple Watch during the quarter were new to the product, and the latest reports from 451 Research indicate customer satisfaction of 96% in the U.S. And in Services, we were very pleased with our double-digit growth, which was driven by the strength of our ecosystem. Our installed base is now over 2.2 billion active devices and continues to grow nicely, establishing a solid foundation for the future expansion of our Services business. And we continue to see increased customer engagement with our services. Both transacting accounts and paid accounts reached a new all-time high, with paid accounts growing double-digits year-over-year. Also, our paid subscriptions showed strong double-digit growth. We have well over 1 billion paid subscriptions across the services on our platform, more than double the number that we had only four years ago. Finally, we continue to build on the breadth and the quality of our current services. From Oscar-nominated theatrical releases with Apple TV+ to more publications or News+ like The Atlantic and exciting new games on Arcade. Turning to Enterprise, we continue to see many business customers leverage Apple products to improve productivity and drive innovation. Target recently added the latest M3 MacBook Pro to their existing deployment of thousands of Mac\u2019s, enabling employees across various departments to do their best work. In emerging markets, Zoho, a leading technology company headquartered in India, offers its 15,000 plus global employees a choice of devices, with 80% of their workforce using iPhone for work and nearly two-thirds of them choosing Mac as their primary computer. With the upcoming launch of Apple Vision Pro, we are seeing strong excitement in Enterprise. Leading organizations across many industries such as Walmart, Nike, Vanguard, Stryker, Bloomberg, and SAP have started leveraging and investing in Apple Vision Pro as their new platform to bring innovative spatial computing experiences to their customers and employees. From everyday productivity to collaborative product design to immersive training, we cannot wait to see the amazing things our enterprise customers will create in the months and years to come. Let me now turn to our cash position and capital return program. We ended the quarter with $173 billion in cash and marketable securities. We decreased commercial paper by $4 billion, leaving us with total debt of $108 billion. As a result, net cash was $65 billion at the end of the quarter, and our goal of becoming net cash-neutral over time remains unchanged. During the quarter, we returned nearly $27 billion to shareholders, including $3.8 billion in dividends and equivalents and $20.5 billion through open market repurchases of 112 million Apple shares. We also retired an additional 6 million shares in the final settlement of our 19th ASR. As usual, we will provide an update to our capital return program when we report results at the end of this quarter. As we move ahead into the March 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. And we expect foreign exchange to be a revenue headwind of about 2 percentage points on a year-over-year basis. As a reminder, in the December quarter a year ago, we faced significant supply constraints on the iPhone 14 Pro and 14 Pro Max due to COVID-19 factory shutdowns. And in the March quarter a year ago, we were able to replenish channel inventory and fulfill significant pent-up demand from the constraints. We estimate that this impact added close to $5 billion to the March quarter's total revenue last year. When we remove this impact from last year's revenue, we expect both our March quarter total company revenue and iPhone revenue to be similar to a year ago. For our Services business, we expect a similar double-digit growth rate to what we reported in the December quarter. We expect gross margin to be between 46% and 47%. We expect OpEx to be between $14.3 billion and $14.5 billion. We expect OI&E to be around $50 million, excluding any potential impact from the mark-to-market of minority investments and our tax rate to be around 16%. Finally, today our Board of Directors has declared a cash dividend of $0.24 per share of common stock payable on February 15, 2024, to shareholders of record as of February 12, 2024. With that, let's open the call to questions.","evidence_gemma_new":null,"evidence_llama_3_3":"Wearables, Home and Accessories Wearables, Home and Accessories revenue","evidence_qwen_3_30b":"Wearables, Home and Accessories revenue","gemma_new_max":null,"gemma_new_min":null,"llama_3_3_max":12000000000.0,"llama_3_3_min":12000000000.0,"qwen_3_30b_max":12000000000.0,"qwen_3_30b_min":12000000000.0}
{"symbol":"AAPL","year":2024,"quarter":2,"date":"2024-Q2","chunk_id":1,"sub_chunk_id":0,"centroid_label":"wearables home and accessories wearables home and accessories business","agreed_value":7900000000.0,"count":2,"chunk":"Tim Cook: Thank you, Suhasini. Good afternoon, everyone, and thanks for joining the call. Today, Apple is reporting revenue of $90.8 billion and an EPS record of $1.53 for the March quarter. We set revenue records in more than a dozen countries and regions. These include, among others, March quarter records in Latin-America and the Middle East, as well as Canada, India, Spain and Turkey. We also achieved an all-time revenue record in Indonesia, one of the many markets where we continue to see so much potential. In services, we set an all-time revenue record, up 14% over the past year. Keep in mind, as we described on the last call, in the March quarter a year-ago, we were able to replenish iPhone channel inventory and fulfill significant pent-up demand from the December quarter COVID-related supply disruptions on the iPhone 14 Pro and 14 Pro Max. We estimate this one-time impact added close to $5 billion to the March quarter revenue last year. If we remove this from last year's results, our March quarter total company revenue this year would have grown. Despite this impact, we were still able to deliver the records I described. Of course, this past quarter, we were thrilled to launch Apple Vision Pro and it has been so wonderful to hear from people who now get to experience the magic of spatial computing. They describe the impossible becoming possible right before their eyes and they share their amazement and their emotions about what they can do now, whether it's reliving their most treasured memories or having a movie theater experience right in their living room. It's also great to see the enthusiasm from the enterprise market. For example, more than half of the Fortune 100 companies have already bought Apple Vision Pro units and are exploring innovative ways to use it to do things that weren't possible before, and this is just the beginning. Looking ahead, we're getting ready for an exciting product announcement next week that we think our customers will love. And next month, we have our Worldwide Developers Conference, which has generated enormous enthusiasm from our developers. We can't wait to reveal what we have in-store. We continue to feel very bullish about our opportunity in Generative AI. We are making significant investments, and we're looking forward to sharing some very exciting things with our customers soon. We believe in the transformative power and promise of AI, and we believe we have advantages that will differentiate us in this new era, including Apple's unique combination of seamless hardware, software and services integration, groundbreaking Apple's silicon, with our industry-leading neural engines and our unwavering focus on privacy, which underpins everything we create. As we push innovation forward, we continue to manage thoughtfully and deliberately through an uneven macroeconomic environment and remain focused on putting our users at the center of everything we do. Now let's turn to our results for the March quarter across each product category, beginning with iPhone. iPhone revenue for the March quarter was $46 billion, down 10% year-over-year. We faced a difficult compare over the previous year due to the $5 billion impact that I mentioned earlier. However, we still saw growth on iPhone in some markets, including Mainland China, and according to Kantar during the quarter, the two best-selling smartphones in Urban China were the iPhone 15 and iPhone 15 Pro Max. I was in China recently where I had the chance to meet with developers and creators who are doing remarkable things with iPhone. And just a couple of weeks ago, I visited Vietnam, Indonesia and Singapore, where it was incredible to see all the ways customers and communities are using our products and services to do amazing things. Everywhere I travel, people have such a great affinity for Apple, and it's one of the many reasons I'm so optimistic about the future. Turning to Mac. March quarter revenue was $7.5 billion, up 4% from a year ago. We had an amazing launch in early March with the new 13-inch and 15-inch MacBook Air. The world's most popular laptop is the best consumer laptop for AI with breakthrough performance of the M3 chip and it\u2019s even more powerful neural engine. Whether it's an entrepreneur starting a new business or a college student finishing their degree, users depend on the power and portability of MacBook Air to take them places they couldn't have gone without it. In iPad, revenue for the March quarter was $5.6 billion, 17% lower year-over-year, due to a difficult compare with the momentum following the launch of M2 iPad Pro and the 10th Generation iPad last fiscal year. iPad continues to stand apart for its versatility, power and performance. For video editors, music makers and creatives of all kinds, iPad is empowering users to do more than they ever could with a tablet. Across Wearables, Home and Accessories, March quarter revenue was $7.9 billion, down 10% from a year-ago due to a difficult launch compare on Watch and AirPods. Apple Watch is helping runners go the extra mile on their wellness journeys, keeping hikers on course with the latest navigation capabilities in watchOS 10, and enabling users of all fitness levels to live a healthier day. Across our watch lineup, we're harnessing AI and machine-learning to power lifesaving features like a regular rhythm notifications and fall detection. I often hear about how much these features mean to users and their loved ones and I'm thankful that so many people are able to get help in their time of greatest need. As I shared earlier, we set an all-time revenue record in services with $23.9 billion, up 14% year-over-year. We also achieved all-time revenue records across several categories and geographic segments. Audiences are tuning in on screens large, small and spatial and are enjoying Apple TV+ Originals like Palm Royale and Sugar. And we have some incredible theatrical releases coming this year, including Wolves, which reunites George Clooney and Brad Pitt. Apple TV+ productions continue to be celebrated as major awards contenders. Since launch, Apple TV+ productions have earned more than 2,100 award nominations and 480 wins. Meanwhile, we're enhancing the live sports experience with a new iPhone app, Apple Sports. This free app allows fans to follow their favorite teams and leagues with real-time scores, stats and more. Apple Sports is the perfect companion for MLS Season Pass subscribers. Turning to retail, our stores continued to be vital spaces for connection and innovation. I was delighted to be in Shanghai for the opening of our latest flagship store. The energy and enthusiasm from our customers was truly something to behold. And across the United States, our incredible retail teams have been sharing Vision Pro demos with customers, delighting them with a profound and emotional experience of using it for the very first time. Everywhere we operate and everything we do, we're guided by our mission to enrich users' lives and lead the world better than we found it, whether we're making Apple podcasts more accessible with a new transcripts feature or helping to safeguard iMessage users' privacy with new protections that can defend against advances in quantum computing. Our environmental work is another great example of how innovation and our values come together. As we work toward our goal of being carbon-neutral across all of our products by 2030, we are proud of how we've been able to innovate and do more for our customers while taking less from the planet. Since 2015, Apple has cut our overall emissions by more than half, while revenue grew nearly 65% during that same time period. And we're now using more recycled materials in our products than ever before. Earlier this spring, we launched our first-ever product to use 50% recycled materials with a new M3-powered MacBook Air. We're also investing in new solar and wind power in the U.S. and Europe, both to power our growing operations and our users' devices. And we're working with partners in India and the U.S. to replenish 100% of the water we use in places that need it most with the goal of delivering billions of gallons of water benefits over the next two decades. Through our Restore Fund, Apple has committed $200 million to nature-based carbon removal projects. And last month, we welcomed two supplier partners as new investors, who will together invest up to an additional $80 million in the fund. Whether we're enriching lives of users across the globe or doing our part to be a force for good in the world, we do everything with a deep sense of purpose at Apple. And I'm proud of the impact we've already made at the halfway point in a year of unprecedented innovation. I couldn't be more excited for the future we have ahead of us, driven by the imagination and innovation of our teams and the enduring importance of our products and services in people's lives. With that, I'll turn it over to Luca.","evidence_gemma_new":null,"evidence_llama_3_3":"Wearables, Home and Accessories revenue March quarter","evidence_qwen_3_30b":"Wearables, Home and Accessories revenue down 10% year-over-year","gemma_new_max":null,"gemma_new_min":null,"llama_3_3_max":7900000000.0,"llama_3_3_min":7900000000.0,"qwen_3_30b_max":7900000000.0,"qwen_3_30b_min":7900000000.0}
{"symbol":"AAPL","year":2024,"quarter":3,"date":"2024-Q3","chunk_id":2,"sub_chunk_id":0,"centroid_label":"wearables home and accessories wearables home and accessories business","agreed_value":8100000000.0,"count":3,"chunk":"Luca Maestri : Thank you, Tim, and good afternoon, everyone. We are very pleased to report a new June quarter revenue record of $85.8 billion, up 5% year-over-year, despite 230 basis points of negative foreign exchange impact. We achieved growth in the vast majority of our markets, with June quarter revenue records in the Americas, Europe, and rest of Asia Pacific. Products revenue was $61.6 billion, up 2% year-over-year, driven by the launch of the new iPad Pro and iPad Air. Our installed base of active devices reach an all-time high across all products and geographic segments, thanks to our unmatched levels of customer satisfaction and loyalty and a large number of customers who are new to our products. Services revenue reached an all-time record of $24.2 billion, up 14% year-over-year, with an all-time record in developed markets and a June quarter record in emerging markets. Company gross margin was 46.3% near the high end of our guidance range and down 30 basis points sequentially driven by a different mix within products which was partially offset by a favorable mix shift towards services and cost savings. Products gross margin was 35.3%, down 130 basis points sequentially, primarily driven by mix, partially offset by favorable costs. Services gross margin was 74% down 60 basis points from last quarter. Operating expenses of $14.3 billion were at the low end of the guidance range we provided and up 7% year-over-year. Net income was $21.4 billion, diluted EPS of $1.40 was up 11% year-over-year and set a June quarter record. And operating cash flow was very strong at $28.9 billion, also a June quarter record. Let me get into more detail for each of our revenue categories. iPhone revenue was $39.3 billion, down 1% year-over-year, but grew on a constant currency basis. We set June quarter records across several countries, including the UK, Spain, Poland, Mexico, Indonesia, and the Philippines. And the iPhone Active installed base grew to a new all-time high in total and in every geographic segment. During the June quarter, many iPhone models were among the top selling smartphones around the world. In fact, according to a survey from Kantar, iPhone was the top selling model in the US, urban China, the UK, Germany, Australia, and Japan. Customer satisfaction on the iPhone 15 family continues to be extremely high, with 451 Research measuring it at 98% in the US in their latest reports. Mac generated $7 billion in revenue, up 2% year-over-year, driven by the MacBook Air powered by the M3 chip. We saw particularly strong performance in our emerging markets, with June quarter records for Mac in Latin America, India, and South Asia. The Mac installed base reached an all-time high with half of MacBook Air customers in the quarter being new to Mac. And customer satisfaction for Mac was recently reported at 96% in the US. iPad revenue was $7.2 billion, up 24% year-over-year, driven by the launch of the new iPad Pro and iPad Air. Customers are loving the latest iPad lineup for its new design and display, unparalleled performance, AI capabilities and much more. The iPad install base has continued to grow and is an all-time high, as half of the customers who purchased iPads during the quarter were new to the product. Also, customer satisfaction was recently measured at 97% in the US. Wearables, home and accessories revenue was $8.1 billion, down 2% year-over-year, a sequential acceleration from the March quarter. Watch and AirPods continue to face a difficult compare against prior year launches of the AirPods Pro second generation, the Watch SE and the first Watch Ultra. Apple Watch continues to attract new customers, with almost two-thirds of customers purchasing an Apple Watch during the quarter being new to the product, sending the Apple Watch install base to a new all-time high. And the latest reports from 451 Research indicate a customer satisfaction of 97% for watch in the US. In services, total revenue reached an all-time record of $24.2 billion, growing 14% year-over-year. We continue to have great momentum in services, as the growth of our installed base of active devices, sets a strong foundation for the future expansion of our ecosystem. And we see increased customer engagement with our services offerings. Both transacting accounts and paid accounts reach a new all-time high with paid accounts growing double digits year-over-year. Also, paid subscriptions showed strong double digit growth. We have well over 1 billion paid subscriptions across the services on our platform, more than double the number that we had only four years ago. And we are constantly focused on improving the breadth and quality of our services. From critically acclaimed new content on Apple TV+ to new games on Apple Arcade and the many latest features we previewed during WWDC for iCloud, Apple Pay, Apple Cash, Apple Music, and more. Turning to enterprise, we continue to see businesses, leveraging our entire suite of products to drive productivity and creativity for their teams and customers. USAA, a leading insurance and financial services company, recently expanded beyond their existing iPhone and iPad deployments to provide their employees with the latest MacBook Air. And American Express has continued to add to their fleet of over 10,000 Macs to enhance their employees' productivity, security, and collaboration. We're also excited to see leading organizations such as Boston Children's Hospital and Lufthansa using Apple Vision Pro to build innovative spatial computing experiences to transform the training of their workforces. Let me now turn to our cash position and capital return program. We ended the quarter with $153 billion in cash and marketable securities. We repaid $4.3 billion in maturing debt and increased commercial paper by $1 billion, leaving us with total debt of $101 billion. As a result, net cash was $52 billion at the end of the quarter. During the quarter, we returned over $32 billion to shareholders, including $3.9 billion in dividends and equivalents and $26 billion through open market repurchases of 139 million Apple shares. As we move ahead into the September 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. We expect foreign exchange to continue to be a headwind and to have a negative impact on revenue of about 1.5 percentage points on a year-over-year basis. We expect our September quarter total company revenue to grow year-over-year at a rate similar to the June quarter. We expect services revenue to grow double digits at a rate similar to what we reported in the first three quarters of this fiscal year. We expect gross margin to be between 45.5% and 46.5%. We expect OpEx to be between $14.2 billion and $14.4 billion. We expect OI&E to be around negative $50 million, excluding any potential impact from the mark to market of minority investments, and our tax rate to be around 16.5%. Finally, today our Board of Directors has declared a cash dividend of $0.25 per share of common stock payable on August 15, 2024, to shareholders of record as of August 12, 2024. With that, let's open the call to questions.","evidence_gemma_new":"Wearables, home and accessories revenue","evidence_llama_3_3":"Wearables, home and accessories Wearables, home and accessories revenue June quarter","evidence_qwen_3_30b":"Wearables, home and accessories revenue June quarter","gemma_new_max":8100000000.0,"gemma_new_min":8100000000.0,"llama_3_3_max":8100000000.0,"llama_3_3_min":8100000000.0,"qwen_3_30b_max":8100000000.0,"qwen_3_30b_min":8100000000.0}
{"symbol":"AAPL","year":2024,"quarter":3,"date":"2024-Q3","chunk_id":64,"sub_chunk_id":0,"centroid_label":"wearables home and accessories wearables home and accessories business","agreed_value":40000000000.0,"count":2,"chunk":"Tim Cook: Yes, I'll take that one. I think the important thing to remember when you look at the Wearables, Home and Accessories categories is that we have a difficult launch compare. And we've been running that for a few quarters and we still have that because last year had the continued benefit from the AirPods Pro second generation, the Watch SE and the very first Watch Ultra. And so it is important to keep that in mind. If you sort of take a step back, however and look at the business across the trailing 12 months, it is grown -- the Wearables, Home and Accessories business has grown to almost $40 billion, which is double what it was five years ago.","evidence_gemma_new":null,"evidence_llama_3_3":"Wearables, Home and Accessories business trailing 12 months","evidence_qwen_3_30b":"Wearables, Home and Accessories business growing trailing 12 months","gemma_new_max":null,"gemma_new_min":null,"llama_3_3_max":40000000000.0,"llama_3_3_min":40000000000.0,"qwen_3_30b_max":40000000000.0,"qwen_3_30b_min":40000000000.0}
{"symbol":"AAPL","year":2024,"quarter":4,"date":"2024-Q4","chunk_id":1,"sub_chunk_id":0,"centroid_label":"wearables home and accessories wearables home and accessories business","agreed_value":9000000000.0,"count":3,"chunk":"Tim Cook: Thank you, Suhasini. Good afternoon, everyone, and thanks for joining the call. Today, Apple is reporting revenue of $94.9 billion, a September quarter record and up 6% from a year ago. iPhone grew in every geographic segment, marking a new September quarter revenue record for the category, and Services set an all-time revenue record, up 12% year-over-year. We also set September quarter segment revenue records in the Americas, Europe, and the Rest of Asia Pacific, as well as in a large number of countries, including the United States, Brazil, Mexico, France, the UK, Korea, Malaysia, Thailand, Saudi Arabia, and the UAE. And we continue to be excited by the enthusiasm we're seeing in India, where we set an all-time revenue record. This has been an extraordinary year of innovation at Apple. We brought the revolutionary Apple Vision Pro to customers in February, which brings users tomorrow's technology today. And in June, we announced Apple Intelligence, a remarkable personal intelligence system that combines the power of generative models with personal context to deliver intelligence that is incredibly useful and relevant. Apple Intelligence marks the beginning of a new chapter for Apple innovation and redefines privacy and AI by extending our groundbreaking approach to privacy into the cloud with Private Cloud Compute. Earlier this week, we made the first set of Apple Intelligence features available in US English for iPhone, iPad, and Mac users, with systemwide Writing Tools that help you refine your writing, a more natural and conversational Siri, a more intelligent Photos app, including the ability to create movies simply by typing a description, and new ways to prioritize and stay in the moment with notification summaries and priority messages. And we look forward to additional intelligence features in December, with even more powerful Writing Tools, a new visual intelligence experience that builds on Apple Intelligence, and ChatGPT integration, as well as localized English in several countries, including the UK, Australia, and Canada. These features have already been provided to developers and we're getting great feedback. More features will be rolling out in the coming months, as well as support for more languages, and this is just the beginning. Now, I'll turn to our results for the quarter, beginning with iPhone. iPhone revenues set a September quarter record of $46.2 billion, up 6% from a year ago, with growth in every geographic segment. With the introduction of Apple Intelligence, we're beginning a new era for iPhone. iPhone 16, powered by A18, is equipped with an incredible new 48-megapixel Fusion camera, fantastic photo experiences, and the addition of the action button and camera control. An iPhone 16 Pro is the most advanced iPhone we've ever made, powered by A18 Pro and featuring even larger displays, an industry-leading pro camera system with camera control, and studio quality mics, all with a huge leap in battery life. Turning to Mac, revenue was $7.7 billion, up 2% from a year ago. Just this week, we brought a new generation of Apple Silicon to Mac, M4, M4 Pro, and M4 Max. From blazing fast performance to Apple's most advanced neural engine yet, our latest chips can easily tackle incredibly complex workflows, and they ensure our newest Macs will be the best personal computers for AI the instant they hit stores. With the newest additions to our Mac lineup, customers can choose the Mac that's just right for them, whether that's iMac, the world's best and most beautiful all-in-one; MacBook Air, the world's most popular laptop now with double the starting memory; MacBook Pro, the best Pro notebook anywhere; or the incredible, mighty new Mac mini, our first-ever carbon-neutral Mac. iPad revenue was $7 billion, 8% higher year-over-year. iPad is unlike any other product on the market today, and it's become an essential device in homes, schools, and businesses of all sizes. Recently, we were thrilled to introduce the newest iPad mini, featuring an ultra-compact design built for Apple Intelligence with support for Apple Pencil Pro. It's been a big year for iPad. iPad Air was popular with students and teachers as they got back to school this year, while creators are pushing the boundaries of what's possible with the M4-powered iPad Pro. In Wearables, Home and Accessories, revenue was $9 billion, down 3% from a year ago. During the quarter, we launched the all-new Apple Watch Series 10, bringing a beautiful new design and new capabilities to the world's most popular watch that make it even more powerful, intelligent, and sophisticated. It's the thinnest Apple Watch yet, making it more comfortable than ever, while offering the biggest, most advanced display. watchOS 11 brings some huge new health and fitness insights to users, including sleep apnea notifications, which help to alert people with a potentially serious but often undiagnosed condition. We're proud of the impact we make through our health innovations on watch, and I'm grateful for every note I receive about the importance of watch in people's lives. With AirPods 4, we broke a new ground in comfort and design with our best-ever open-ear headphones available for the first time with active noise cancellation. And we were especially pleased to unveil revolutionary end-to-end hearing health capabilities for AirPods Pro 2 with hearing protection, hearing test, and hearing aid features. These just became available in a software update this week, and we believe this will make a meaningful difference in our users' lives. I've already started getting notes from customers calling the experience life changing. And Apple Vision Pro continues to deliver spatial experiences that weren't possible before, including immersive entertainment like the new short film, Submerged, which gives people a view into the unique storytelling power made possible by spatial computing. Vision Pro has more than 2,500 native spatial apps and 1.5 million compatible apps for visionOS 2, as well as applications companies are building to reimagine how they work. Vision Pro continues to inspire awe in its users, and we're just scratching the surface of what's possible. And just yesterday, we announced we're bringing Vision Pro to Korea and the UAE. As I mentioned earlier, Services achieved an all-time revenue record of $25 billion, up 12% from a year ago, and with all-time revenue records across most of our categories. With Apple TV+, we love celebrating the craft of great storytellers who know how to put on a show. Audiences love to discover new movies like Wolfs, explore acclaimed new series like Disclaimer, and dive back into returning favorites like Slow Horses and Shrinking. Apple TV+ productions have become fixtures at award shows, earning more than 2,300 nominations and more than 500 wins today. Apple also offers a live sports experience in a league of its own with MLS Season Pass, and subscribers have been cheering on their favorite teams in the MLS Cup playoffs. This month, we also marked 10 years of Apple Pay. There's always something magical about being able to buy groceries or pay for movie tickets seamlessly with your Apple device. Today, users choose Apple Pay for purchases across tens of millions of retailers worldwide. And we're excited to make the Apple Pay experience even better, with the option to redeem rewards and access loans from credit cards, debit cards, and other lenders right at checkout. Whenever we celebrate big moments, Apple Stores are the best places to share them with customers. I had an incredible time during launch day in September alongside our team at Apple Fifth Avenue, where energy and enthusiasm filled the air. And in stores all over the world, customers are eager to get a closer look at our latest innovations. We also opened two new stores during the quarter and we can't wait to bring four new stores to customers in India. We're passionate about education and believe technology has a vital role to play in both helping teachers to inspire their students and students to learn about the world around them. In honor of World Teachers' Day, Apple was proud to share new resources for teachers to engage their students in ways that aim to make learning easy and fun. Additionally, we've expanded our education grant program into 100 new schools and communities, helping with everything from access to technology, to educator resources, to scholarships and financial support. As we near the end of the year, we're proud of the progress we've made in our efforts to be carbon-neutral across our entire footprint by the end of the decade. As I mentioned earlier, we were thrilled to introduce our first-ever carbon-neutral Mac with the latest Mac mini. And in another milestone, customers can choose a carbon-neutral option of any Apple Watch. These achievements are amazing for all of us at Apple, and we are determined to reach our 2030 goal. At Apple, across everything we do, we manage for the long term, because we're always thinking about what comes next, the next great challenge, the next innovative idea, the next big breakthrough. As we close out the year, we have the best lineup we've ever had going into the holiday season, including Apple Intelligence, which marks the start of a new chapter for our products. This is just the beginning of what we believe generative AI can do, and I couldn't be more excited for what's to come. Before I hand it over to Luca, with Luca transitioning to a new role with Apple, this will be the final time he's joining our call. So, I just wanted to take a moment to recognize his extraordinary service as Apple's CFO and to thank him for his partnership. I am deeply grateful. In his 10 years in the role, Luca has done truly exceptional work in shaping Apple as we know it today. He has helped manage Apple for the long term, thoughtfully and deliberately. He has helped us enrich the lives of so many around the world, and he has been a leader that people look up to and have learned so much from. I have incredible confidence in our incoming CFO, Kevan Parekh, and we look forward to more of you meeting and working with him going forward. With that, I'll turn it over to Luca.","evidence_gemma_new":"Wearables Home and Accessories revenue","evidence_llama_3_3":"Wearables, Home and Accessories Wearables, Home and Accessories revenue fourth quarter fiscal year 2024","evidence_qwen_3_30b":"Wearables, Home and Accessories revenue","gemma_new_max":9000000000.0,"gemma_new_min":9000000000.0,"llama_3_3_max":9000000000.0,"llama_3_3_min":9000000000.0,"qwen_3_30b_max":9000000000.0,"qwen_3_30b_min":9000000000.0}
{"symbol":"AMZN","year":2023,"quarter":3,"date":"2023-Q3","chunk_id":2,"sub_chunk_id":0,"centroid_label":"aws annualized revenue run rate","agreed_value":92000000000.0,"count":3,"chunk":"Andrew Jassy: Thanks, Dave. Today, we're reporting $143.1 billion in revenue, up 11% year-over-year; $11.2 billion in operating income, up 343% year-over-year or $8.7 billion; and $20.2 billion in trailing 12-month free cash flow adjusted for equipment finance leases which is up $41.7 billion versus the comparable period last year. We continue to be encouraged by the progress we're making in lowering our cost to serve, improving our customer experiences and investing for future growth. I'll start with our stores business. Our move earlier this year from a single national fulfillment network in the U.S. to 8 distinct regions represented one of the most significant changes to our fulfillment network in our history. This change has gone more smoothly and made more impact than we optimistically expected. And you can see the benefits in many forms. Regional fulfillment clusters with higher local in-stock levels and optimized connections between fulfillment centers and delivery stations mean shorter distances and fewer touches to get items to customers. Shorter travel distances and fewer touches mean lower cost to serve. But perhaps most importantly, shorter distances and fewer touches mean that customers are getting their shipments faster. We remain on pace to deliver the fastest delivery speeds for Prime customers in our 29-year history. And as I talked about last quarter, we know how important speed of delivery is to customer satisfaction and buying behavior. A good example is the significant growth we're seeing in consumables and everyday essentials. When customers are getting items as quickly and conveniently as they are now from Amazon, they're going to consider us more frequently for more of their shopping needs. As we've shared the last few quarters, we've re-evaluated every part of our fulfillment network over the last year. The first substantial rearchitecture centered on the regionalization change. We obviously like the results but don't think we fully realize all the benefits yet and we continue to make steady improvements in fine-tuning the placement algorithms to enable even more in-region fulfillment and to further increase consolidation into fewer shipments. We've also identified several substantial changes to our inbound processes that we believe could have a significant impact on our cost to serve and speed of delivery. We have a long way before being out of ideas to improve cost and speed. The team is really humming on this and I'm proud of the way they're inventing and executing together. Moving to AWS and our investments in generative AI. AWS revenue grew 12% year-over-year in Q3, with $919 million of incremental quarter-over-quarter revenue and now has the annualized revenue run rate of $92 billion. AWS' year-over-year growth rate continued to stabilize in Q3. And while we still saw elevated cost optimization relative to a year ago, it's continued to attenuate as more companies transition to deploying net new workloads. Companies have moved more slowly in an uncertain economy in 2023 to complete deals. But we're seeing the pace and volume of closed deals pick up and we're encouraged by the strong last couple of months of new deals signed. For perspective, we signed several new deals in September with an effective date in October that won't show up in any GAAP reported number for Q3 but the collection of which is higher than our total reported deal volume for all of Q3. Deal signings are always lumpy and the revenue happens over several years but we like the recent deal momentum we're seeing. Top of mind for most companies continues to be generative AI. As I mentioned last quarter, we think about generative AI as having 3 macro layers, each of which is very large in each of which we're investing. A few updates there. At the lowest layer is the compute to train large language models, or LLMs and produce inferences or predictions. The key to this compute is the chip inside it. As we've shared, we've been working on custom silicon for training and inference with our Trainium and Inferentia chips, respectively. Recently, we announced that leading LLM maker Anthropic chose AWS as its primary cloud provider and will use Trainium and Inferentia to build, train and deploy its future LLMs. As part of this partnership, AWS and Anthropic will collaborate on the future development of Trainium and Inferentia technology. We believe this collaboration will be helpful in continuing to accelerate the price performance advantages that Trainium and Inferentia deliver for customers. In the middle layer which we think of as large language models as a service, we recently introduced general availability for Amazon Bedrock which offers customers access to leading LLMs from third-party providers like Anthropic, Stability AI, coherent AI 21 as well as from Amazon's own LLMs called Titan, where customers can take those models, customize them using their own data but without leaking that data back into the generalized LLM, have access to the same security, access control and features that they run the rest of their applications within AWS all through a managed service. In the last couple of months, we've announced the imminent addition of Meta's Llama 2 model to Bedrock, the first time it's being made available through a fully managed service. Also through our expanded collaboration with Anthropic, customers will gain access to future Anthropic models through Bedrock with exclusive early access to unique features, model customization and the ability to fine-tune the models. And Bedrock has added several new compelling features, including the ability to create agents which can be programmed to accomplish tasks like answering questions or automating workflows. In these early days of generative AI, companies are still learning which models they want to use which models they use for what purposes and which model sizes they should use to get the latency and cost characteristics they desire. In our opinion, the only certainty is that there will continue to be a high rate of change. Bedrock helps customers with this fluidity, allowing them to rapidly experiment with move between model types and sizes and enabling them to pick the right tool for the right job. The customer reaction to Bedrock has been very positive and the general availability is buoyed that further. Bedrock is the easiest way to build and scale enterprise-ready generative AI applications and a real game changer for developers and companies trying to get value out of this new technology. And the top layer which are the applications that run the LLMs, our generative AI coding companion Amazon CodeWhisperer has gotten a lot of early traction and got a lot more powerful recently with the launch of its new customization capability. The number one enterprise request for coding companions has been wanting these companions to be familiar with customers' proprietary code bases. It's not just having code companions trained in open source code, companies want the equivalent of a long-time senior engineer who knows their code base well. That's what CodeWhisperer just launched, another first of its kind out there in its current form and customers are excited about it. A few last comments on AWS's generative AI work. As you can tell, we're focused on doing what we've always done for customers, taking technology that can transform customer experiences and businesses but they can be complex and expensive and democratizing it for customers of all sizes and technical abilities. It's also worth remembering that customers want to bring the models to their data, not the other way around. And much of that data resides in AWS as the clear market segment leader in cloud infrastructure. We're innovating and delivering at a rapid rate and our approach is resonating with customers. The number of companies building generative AI apps in AWS is substantial and growing very quickly, including Adidas, Booking.com, Bridgewater, Clariant, GoDaddy, LexisNexis, Merck, Royal Philips and United Airlines, to name a few. We are also seeing success with generative AI start-ups like Perplexity.ai who chose to go all in with AWS, including running future models in Trainium and Inferentia. And the AWS team has a lot of new capabilities to share with its customers at its upcoming AWS re:Invent conference. Beyond AWS, all of our significant businesses are working on generative AI applications to transform their customer experiences. There are too many for me to name on this call but a few examples include, in our stores business, we're using generative AI to help people better discover products they want to more easily access the information needed to make decisions. We use generative AI models to forecast inventory we need in our various locations and to derive optimal last mile transportation routes for drivers to employ. We're also making it much easier for our third-party sellers to create new product pages by entering much less information and letting the models to the rest. In advertising, we just launched a generative AI image generation tool, where all brands need to do is upload a product photo and description to quickly create unique lifestyle images that will help customers discover products they love. And in Alexa, we built a much more expansive LLM and previewed the early version of this. Apart from being a more intelligent version of herself, Alexa's new conversational AI capabilities include the ability to make multiple requests at once as well as more natural and conversational requests without having to use specific phrases. We continue to be convicted that the vision of being the world's best personal assistant is a compelling and viable one and that Alexa has a good chance to be one of the long-term winners in this arena. Every one of our businesses is building generative AI applications to change what's possible for customers and we have a lot more to come. We're also encouraged by the progress we're making in our newer initiatives. Just to name a few, we're pleased with what we're seeing in Prime Video. Prime Video continues to be an integral part of the Prime value proposition where it's often one of the top 2 drivers of customers signing up for Prime. We also have increasing conviction that Prime Video can be a large and profitable business in its own right as we continue to invest in compelling exclusive content for prime members but also offer the best selection of premium streaming video content anywhere with our marketplace offering, including channels for customers who can subscribe to channels like Max, Paramount+, BET Plus and MGM+, as well as our broad transaction video-on-demand selection. As we continue to invest in compelling content, beginning in early 2024, Prime Video shows and movies will include limited advertisements. We aim to have meaningfully fewer ads than linear TV and other streaming TV providers. If customers prefer and add free option, we plan to offer that for an additional $2.99 per month for U.S. members. There is still a lot of work to be done in innovation ahead but we're excited about our future on Prime Video. We're seeing progress on a number of our investments that expand our ability to serve more consumers and sellers in their e-commerce missions. Our emerging international stores continue to improve their customer experiences and profitability and are on a strong trajectory. Both consumers and sellers are excited about Buy with Prime which enables third-party sellers with direct-to-consumer websites to offer Amazon Prime members the same fast payments and delivery options they receive on Amazon.com. We recently announced the capability for sellers to integrate Buy with Prime with their Shopify account, making it easier for Shopify merchants to manage their businesses with inventory pricing and promotions automatically synced in one place. And we're seeing very positive early response from sellers to Supply Chain by Amazon, a fully automated set of supply chain services where Amazon can pick up inventory from manufacturing facilities around the world, ship it across borders, handle customs clearance and ground transportation, store inventory in bulk, manage replenishment across Amazon and other sales channels and deliver directly to customers, all without sellers having to worry about managing their supply chain. Our health care team is continuing to make health care easier for people to access. The Amazon Pharmacy customer experience has significantly evolved this year and customers are responding that both in their purchasing behavior and qualitative feedback. We built RXPass for customers to get unlimited supply of eligible medications for $5 per month, meaningfully reduce the cost for customers to get insulin and diabetes products and partnered with Blue Shield of California to offer a first-of-its-kind model to provide more affordable pharmacy care to its 4.8 million members, providing fast and free delivery of prescription medications and 24\/7 access to pharmacists. We remain convinced that we can be part of the solution of making health care a better customer experience. And our low Earth orbit satellite initiative Project Kuiper which aims to bring fast, affordable broadband to underserved communities around the world, took a meaningful step forward in the last few weeks with the successful launch of 2 prototype satellites. We will use this multi-month mission to test our satellites and network from space and collect data ahead of the planned start of satellite production later this year. I'd like to close by thanking our teams around the world who are gearing up for 2 of our most significant events across the company. First, our annual AWS re:Invent conference that begins on November 27. The team is excited to share a lot of new capabilities with customers and provide an array of opportunities for builders to learn and connect with one another. And on the stores side, we've already kicked off what will be our 29th holiday shopping season. Prime Big Deal Days held earlier this month was our most successful October holiday kick-off event ever, with Prime members saving more than $1 billion across hundreds and millions of items sold. Just as we do all year long, we aim to make our customers' lives easier and better every day and there's no time where it's more important to us that we deliver on this mission than during the busy holiday shopping season. With that, I'll turn it over to Brian.","evidence_gemma_new":"AWS annualized revenue run rate","evidence_llama_3_3":"AWS annualized revenue run rate","evidence_qwen_3_30b":"annualized revenue run rate $92 billion","gemma_new_max":92000000000.0,"gemma_new_min":92000000000.0,"llama_3_3_max":92000000000.0,"llama_3_3_min":92000000000.0,"qwen_3_30b_max":92000000000.0,"qwen_3_30b_min":92000000000.0}
{"symbol":"AMZN","year":2024,"quarter":2,"date":"2024-Q2","chunk_id":3,"sub_chunk_id":0,"centroid_label":"aws annualized revenue run rate","agreed_value":105000000000.0,"count":2,"chunk":"Brian Olsavsky : Thanks, Andy. Let's start with our top line financial results. Worldwide revenue was $148 billion, an 11% increase year-over-year, excluding the impact of foreign exchange. This equates to a $1 billion headwind from foreign exchange in the quarter, which is about $300 million higher than we'd anticipated in our Q2 guidance range. Worldwide operating income nearly doubled year-over-year to $14.7 billion, which was $700 million above the high end of our guidance range. Across all of our segments, we remain focused on managing costs in a way that allows us to continue innovating and investing in areas that we think could move the needle for our customers. Starting with the North American international segments, customers continue to respond positively to our focus on low prices, broad selection, and fast shipping offers. We delivered at our fastest speeds ever so far this year, which helps drive strength in areas like our everyday essentials. These include items like non-perishable foods, as well as health, beauty, and personal care items. And Prime members continue to increase their shopping frequency while growing their spend on Amazon. Overall unit sales grew 11% year-over-year, which is consistent with our growth rates in Q1 after you adjust for the approximately 100 basis point impact of leap year. North America segment revenue was $90 billion, an increase of 9% year-over-year. And international segment revenue was $31.7 billion, an increase of 10% year-over-year, excluding the impact of foreign exchange. North America segment operating income was $5.1 billion, an increase of $1.9 billion year-over-year. Operating margin was 5.6%, up 170 basis points year-over-year, and down 20 basis points quarter over quarter. If we look at profitability of the core North America stores business, we actually improved our margin again quarter-over-quarter in Q2. The overall North America segment operating margin decreased slightly due to increased Q2 spend in some of our investment areas, including Kuiper, where we're starting to manufacture satellites we'll launch into space in Q4. We saw improvements in our cost to serve, driven by our efforts to place inventory more regionally, closer to where our customers are. This resulted in more consolidated shipments, with higher units per box shipped. We also saw packages traveling shorter distances to customers, and this also led to better on-road productivity in our transportation network. Our international segment was profitable again in Q2, with operating income of $300 million, an improvement of $1.2 billion year-over-year. Operating margin was 0.9%, up 390 basis points year over year. This increase is primarily driven by our established countries, as we improve our cost structure with better inventory placement and more consolidated shipments. Additionally, our emerging countries continue to expand their customer offerings, leverage their cost structure, and invest in expanding prime benefits. We are pleased with the overall progress of these countries as they make strides on their respective paths to profitability. Advertising remains an important contributor to profitability in the North America and international segments, and we saw strong growth on an increasing larger revenue base this quarter. We continue to see opportunities that further expand our offering in areas that are driving growth today, like sponsored products, as well as newer areas, like Prime Video ads. Moving next to our AWS segment, revenue is $26.3 billion, an increase of 18.8% year-over-year, excluding the impact of foreign exchange. AWS now has an annualized revenue run rate of more than $105 billion. During the second quarter, we saw continued growth across both generative AI and non-generative AI workloads. We saw companies turn their attention to newer initiatives, bring more workloads to the cloud, restart or accelerate existing migrations from on-premises to the cloud, and tap into the power of generative AI. AWS operating income was $9.3 billion, an increase of $4 billion year-over-year. It's driven by our continued focus on cost control, including a measured pace of hiring. Additionally, AWS operating margin includes an approximately 200 basis point favorable impact from the change in the estimated useful life of our servers that we instituted in Q1. As we've long said, we expect AWS operating margins to fluctuate over time, driven in part by the level of investments we're making at any point in time. We remain focused on driving efficiencies across the business, which enables us to invest to support the strong growth we're seeing in AWS, including generative AI. Now let's turn our attention to capital investments. As a reminder, we define these as a combination of CapEx plus equipment finance leases. For the first half of the year, CapEx was $30.5 billion. Looking ahead to the rest of 2024, we expect capital investments to be higher in the second half of the year. The majority of the spend will be to support the growing need for AWS infrastructure as we continue to see strong demand in both generative AI and our non-generative AI workloads. For the third quarter, specifically, I'd highlight a few seasonal factors to keep in mind. First, we hosted another successful Prime Day in mid-July. It was our 10th Prime Day and was our largest ever. Prime members globally saved billions of dollars on deals across every product category. From a profitability perspective, we've historically seen a headwind to operating margin in Q3, driven by Prime Day deals, as well as the marketing spend surrounding the event. Additionally, in Q3, we also begin to ramp up our capacity to handle Q4 holiday volumes in our fulfillment network. And lastly, we expect an increase in digital content cost quarter-over-quarter from the return of our NFL Thursday Night Football. We remain heads down, focused on driving a better customer experience. We believe putting customers first is the only reliable way to create lasting value for our shareholders. With that, let's move on to your questions.","evidence_gemma_new":null,"evidence_llama_3_3":"AWS segment annualized revenue run rate","evidence_qwen_3_30b":"annualized revenue run rate","gemma_new_max":null,"gemma_new_min":null,"llama_3_3_max":105000000000.0,"llama_3_3_min":105000000000.0,"qwen_3_30b_max":105000000000.0,"qwen_3_30b_min":105000000000.0}
{"symbol":"AMZN","year":2024,"quarter":3,"date":"2024-Q3","chunk_id":3,"sub_chunk_id":0,"centroid_label":"aws annualized revenue run rate","agreed_value":110000000000.0,"count":2,"chunk":"Brian Olsavsky: Thanks, Andy. Let's start with our top line financial results. Worldwide revenue was $158.9 billion, an 11% increase year-over-year, excluding a 20 basis point unfavorable impact of foreign exchange. As a reminder, our Q3 guidance had anticipated a larger unfavorable impact of approximately 90 basis points. Worldwide operating income increased 56% year-over-year to $17.4 billion, our highest quarterly operating income ever and was $2.4 billion above the high end of our guidance range. We remain focused on streamlining and managing costs in a way that allows us to continue inventing for customers in a cost-effective way. In the third quarter, North America segment revenue was $95.5 billion, an increase of 9% year-over-year. International segment revenue was $35.9 billion, an increase of 12% year-over-year. Worldwide paid units accelerated to 12% growth year-over-year as our customers continue to come to Amazon for low prices, broad selection and convenient fast delivery. Prime remains a core contributor to this growth. Year-over-year paid membership growth accelerated in Q3 from both the US and globally, helped by our tenth annual Prime Day event in mid-July. Customers are enjoying even faster delivery speeds, which also helps drive strong growth in items like everyday essentials. This includes items like health, beauty, and personal care as well as nonperishable grocery. Though all these items often have a lower average selling price, the strength in everyday essential's revenue is a positive indicator that customers are turning to us for more of their daily needs. We see that when customers purchase these types of items from us, they build bigger baskets, shop more frequently and spend more on Amazon. We remain focused on keeping prices sharp and offering broad selection that gives customers options when making purchase decisions. Shifting to profitability. Our North America and international segments each delivered their seventh consecutive quarter of year-over-year operating margin improvement. North America segment operating income was $5.7 billion, an increase of $1.4 billion year-over-year. North America operating margin was 5.9%, up 100 basis points year-over-year. In the third quarter, we continue to make progress in improving our fulfillment network cost structure, driven in part by improved inventory placement. This helped us drive better productivity in our transportation network and shipping efficiency from higher units per box. In the international segment, operating income was $1.3 billion, an improvement of $1.4 billion year-over-year. International operating margin was 3.6%, up 390 basis points year-over-year. So far this year, we've generated operating profit in each of the three quarters for the international segment and totals $2.5 billion year-to-date. We're seeing strength in our established countries like the UK and Germany as we continue to drive efficiencies to improve on-road productivity in our transportation network and better execution in our fulfillment centers. Our emerging countries are growing revenue at a healthy rate also, and they are leveraging their cost structures on investing strategically in Prime benefits. We have confidence that our focus on the inputs, coupled with the strength of our global teams, will continue to drive improvement over time. Advertising remains an important contributor to profitability in the North America and international segments. This quarter, we saw strong growth on an increasing large base of advertising revenue. We see many opportunities to further expand our ads offering in areas that are driving growth today like Sponsored Products as well as more recent growth areas like Prime Video ads. Moving next to our AWS segment. Revenue was $27.5 billion, an increase of 19.1% year-over-year, excluding the impact of foreign exchange. AWS now has an annualized revenue run rate of $110 billion. The business continues to grow, mostly opportunity to expand our core cloud offering and our AI services. Customers increasingly recognize that to get the true benefit of Generative AI, they also need to move to the cloud. AWS operating income was $10.4 billion, an increase of $3.5 billion year-over-year as a result of our continued focus on cost control, including a measured pace of hiring, a focus on driving efficiencies in our infrastructure, and reducing costs across the business. Additionally, we increased the estimated useful life of our servers starting in 2024, which contributed approximately 200 basis points to the AWS margin increase year-over-year in Q3. As we said in the past, we expect the AWS operating margins to fluctuate, driven in part by the level of investments we're making at any point in time. Now turning to our capital investments. As a reminder, we define these as a combination of cash CapEx plus equipment finance leases. Year-to-date capital investments were $51.9 billion. We expect to spend approximately $75 billion in CapEx in 2024. The majority of the spend is to support the growing need for technology infrastructure. This primarily relates to AWS as we invest to support demand for our AI services while also including technology infrastructure to support our North America and international segments. Additionally, we're continuing to invest in our fulfillment and transportation network to support the growth of the business, improve delivery speeds and lower our cost to serve. This includes investments in same-day delivery facilities, in our inbound network and as well in robotics and automation. We're encouraged by the start of the holiday season, which kicked off in October with a strong Prime Big Deal Days. We are ready to serve customers throughout the season, and I want to thank our teams across Amazon for delivering two very large Prime member events in the past four months and for getting us ready to delight customers during this holiday season. With that, let's move on to your questions.","evidence_gemma_new":null,"evidence_llama_3_3":"AWS segment AWS annualized revenue run rate Q3","evidence_qwen_3_30b":"annualized revenue run rate","gemma_new_max":null,"gemma_new_min":null,"llama_3_3_max":110000000000.0,"llama_3_3_min":110000000000.0,"qwen_3_30b_max":110000000000.0,"qwen_3_30b_min":110000000000.0}
{"symbol":"AMZN","year":2024,"quarter":4,"date":"2024-Q4","chunk_id":2,"sub_chunk_id":0,"centroid_label":"aws annualized revenue run rate","agreed_value":69000000000.0,"count":2,"chunk":"Andy Jassy: Thanks, Dave. Today, we're reporting $187.8 billion in revenue, up 10% year over year. Given the way the dollar strengthened throughout the quarter, we had $700 million more foreign exchange headwind than we anticipated at guidance. Without that headwind, revenue would have been 11% year over year and exceeded the top end of our guidance. Operating income was $21.2 billion, up 61% year over year, and trailing twelve-month free cash flow adjusted for equipment finance leases was $36.2 billion, up $700 million year over year. We're pleased with the invention, customer experience improvements, and results delivered in 2024, and have a lot more planned in 2025. I'll start by talking about our stores business. We saw 10% year over year revenue growth in our North America segment, and 9% year over year in our international segment, excluding the impact from foreign exchange rates. Our continued focus on expanding selection, lowering prices, and improving convenience drove strong unit growth that even outpaced our revenue growth. We continue to add to our broad range giving customers choice across a variety of price points. We welcomed notable brands to our store throughout 2024, including Clinique, Estee Lauder, Aura Rings, and Armani Beauty. We continue to add to the hundreds of millions of products offered from our selling partners, who made up 61% of items that we sold in 2024, our highest annual mix of third-party seller units ever. We also launched Amazon Haul for US customers in Q4, which offers customers an engaging shopping experience that brings ultra-low priced products into one convenient destination. It's off to a very strong start. In the fourth quarter, consumers saved more than $15 billion with our low everyday prices and record-setting events during Prime Big Deal Days in October, Black Friday, and Cyber Monday around Thanksgiving. Additionally, Profitero's annual pricing study found that entering the holiday season, Amazon had the lowest online prices for the eighth year in a row, averaging 14% lower prices on average than other leading retailers in the US. Our speed of delivery continues to accelerate, and 2024 was another record-setting year for Prime members. We expanded the number of same-day delivery sites by more than 60% in 2024, which now serve more than 140 metro areas. Overall, we delivered over 9 billion units the same or next day around the world. Our relentless pursuit of better selection, price, and delivery speed is driving accelerated growth in Prime membership. For just $14.99 a month, Prime members get unlimited free shipping on 300 million items, off the same day or one day delivery, exclusive shopping events like Prime Day, access to a vast collection of premium programming and live sports on Prime Video, ad-free listening of 100 million songs and podcasts with Amazon Music, access to unlimited generic prescriptions for only $5 a month, unlimited grocery delivery on orders over $35 from Whole Foods Market and Amazon Fresh for $9.99 a month, a free Grubhub Plus membership with free unlimited delivery, and our latest benefit of a 10 cent per gallon fuel discount at BP, AMPM, and AMCO stations. When you think about this as a whole, and also compared to many other membership services that are comparably or more expensively priced and offer just one benefit like video, Prime is a screaming deal. And we have more coming for our Prime members in 2025. We also remain squarely focused on cost to serve in our fulfillment network, which has been a meaningful driver of our increased operating income. We talked about the regionalization of our US network. We've also recently rolled out our redesigned US inbound network. While still in its early stages, our inbound efforts have improved our placement of inventory so that even more items are close to end customers. Ahead of Black Friday in November, we'd improved the percentage of ordered units available in the ideal building by over 40% year over year. We've also spent considerable time optimizing the number of items sent to customers in the same package, which reduces packaging, is more convenient for customers, and less expensive for us to fulfill. And our per-unit transportation costs continue to decline as we build out and optimize our last-mile network. Overall, we've reduced our global cost to serve on a per-unit basis for the second year in a row. While at the same time increasing speed, improving safety, and adding selection. As we look to 2025 and beyond, we see opportunities to reduce costs again as we further refine inventory placement, grow our same-day delivery network, and accelerate robotics and automation throughout the network. In advertising, we remain pleased with the strong growth on a very large base, generating $17.3 billion of revenue in the quarter, and growing 18% year over year. That's a $69 billion annual revenue run rate, more than double what it was just four years ago at $29 billion. Sponsored products, the largest portion of ad revenue, are doing well, and we see a runway for even more growth. We also have a number of newer streaming offerings that are starting to become significant new revenue sources. On the streaming video side, we wrapped up our first year of Prime Video ads, and we're quite pleased with the early progress and head into this year with momentum. We made it easier to do full funnel advertising with us. Full funnel is from the top of the funnel with broad reach advertising that drives brand awareness to mid funnel where sponsored brands let companies specify certain keywords and audiences to attract people to their detail pages or brands to our Amazon to bottom of the funnel where sponsored products help advertisers surface relevant product ads to customers at the point of purchase. We also have differentiated audience features that leverage billions of signals from Amazon Marketing Cloud secure data clean rooms, providing advertisers the ability to analyze data, produce core marketing metrics, and understand how their marketing performs across various channels. With our new multi-touch attribution model, advertisers can understand how various ad types in their campaigns contribute to sales. Moving on to AWS, in Q4, AWS grew 19% year over year and now has a $115 billion annualized revenue run rate. AWS is a reasonably large business by most folks' standards. And though we expect growth will be lumpy over the next few years as enterprises adopt and technology advancements impact timing, it's hard to overstate how optimistic we are about what lies ahead for AWS' customers and business. I spent a fair bit of time thinking several years out. And while it may be hard for some to fathom a world where virtually every app is generative AI-infused, with inference being a core building block just like compute, storage, and database, and most companies having their own agents that accomplish various tasks interact with one another, this is the world we're thinking about all the time. And we continue to believe that this world will mostly be built on top of the cloud with the largest portion of it on AWS. To best help customers realize this future, you need powerful capabilities of all three layers of the stack. At the bottom layer, for those building models, you need compelling chips. Chips are the key ingredient in the compute that drives training and inference. Most AI compute has been driven by NVIDIA chips, and we obviously have a deep partnership with NVIDIA and will for as long as we can see into the future. However, there aren't that many generative AI applications of large scale yet, and when you get there, as we have with apps like Alexa and Rufus, cost can get steep quickly. Customers want better price performance, and it's why we built our own custom AI silicon. Tranium 2 just launched at our AWS reInvent conference in December, E2 instances with these chips are typically 30 to 40 percent more price per form than other current GPU-powered instances available. That's very compelling at scale. Several technically capable companies like Adobe, Databricks, Poolside, and Qualcomm have seen impressive results in early testing of Tranium 2. It's also why you're seeing Anthropic build its future frontier models on Tranium 2. We're collaborating with Anthropic to build project right near. A cluster of training and two ultra-servers containing hundreds of thousands of training m two chips. This cluster is going to be five times the number of Exo-ZLofts as the cluster that Anthropic used to train their current leading set of cloud models. We're already hard at work on Training 3, which we expect to preview late in 25, and defining Training 4 thereafter. Building outstanding performing chips that deliver leading price performance has become a core strength of AWS's, starting with our Nitro and Graviton chips in our core business, and now extending to Tranium and AI. It's something unique to AWS relative to other competing cloud providers. The other key component for model builders is services that make it easier to construct their models. I won't spend a lot of time on these comments on Amazon SageMaker AI, which has become the go-to service for AI model builders to manage their AI data, build models, experiment, and deploy these models. HyperPOD capability automatically splits training workloads across many AI accelerators, prevents interruptions by periodically saving checkpoints, and automatically repairing faulty instances from their last saved checkpoint and saving training time by up to 40 percent. It continues to be a differentiator with several new compelling capabilities at reinvent including the ability to manage costs at a cluster level, and prioritize which workloads should receive capacity when budgets are reached. It is increasingly being adopted by model builders. At the middle layer, for those wanting to leverage frontier models to build Jet AI apps, Amazon Bedrock is our fully managed service providing high performing foundation models with the most compelling features making it easy to build a high-quality generative AI application. We are iterating quickly on Bedrock announcing Luma AI, poolside, and over a hundred other popular emerging models to Bedrock and reinvent. We've just added DeepSeq's R1 models to Bedrock and SageMaker. Additionally, we delivered several compelling new Bedrock features to re-event, including prompt caching, intelligent prompt routing, and model distillation, all of which help customers achieve lower cost and latency in their inference. Like SageMaker AI, Bedrock is growing quickly and resonating strongly with customers. Related, we also launched Amazon's own family of frontier models in Bedrock called Nova. These models compare favorably in intelligence against the leading models in the world to offer lower latency, lower price, about 75 percent lower than other models in Bedrock, and are integrated with key Bedrock features like fine-tuning, model distillation, knowledge base as a rag, and Agentec capabilities. Thousands of AWS customers are already taking advantage of Amazon Nova models' capabilities and price performance, including Palantir, SAP Densu Fortinet Trellix, and Robinhood, and we've just gotten started. At the top layer of the stack, Amazon Q is our most capable generative AI-powered assistant for software development and to leverage your own data. You may remember that on the last call, I shared the very practical use case where Q transformation helps save Amazon Teams $260 million and 4500 developer years in migrating over 30,000 applications to new versions of the Java JDK. This is real value, and companies ask for more, which we obliged with our recent deliveries of Q transformation that enable moves from Windows dot net applications to Linux VMware to EC2, accelerates mainframe migrations. Early customer testing indicates the queue can turn was going to be a multi-year effort to do a mainframe migration into a multi-quarter effort, cutting by more than 50% the time to migrate mainframes. This is a big deal, and these transformations are good examples of practical AI. While AI continues to be a compelling new driver in the business, we haven't lost our focus on core modernization of companies' technology. We signed new AWS agreements with companies including Intuit, PayPal, Norwegian Cruise Line Holdings, Northrop Grumman, The Guardian Life Insurance Company of America, Reddit, Japan Airlines, Baker Hughes, the Hertz Corporation, Resin Chime Financial, Asana, and many others. Consistent customer feedback from our recent AWS reInvent was appreciation that we're still inventing rapidly in non-AI key infrastructure areas like storage, compute, database analytics. Our functionality leadership continues to expand and there were several key launches customers were buzz about, including Amazon Aurora D SQL, our new serverless distributed SQL database that enables applications with the highest availability strong consistency, post-test compatibility, It's four times faster reason rights compared to other pop distributed SQL databases, Amazon S3 tables, which makes S3 the first cloud object store with fully managed support for Apache Iceberg for faster analytics, Amazon S3 metadata, Which automatically generates queryable metadata simplifying data discovery, business analytics, and real time inference to help customers unlock the value of their data in S3, and the next generation of Amazon SageMaker which brings together all the data analytics services and AI services in interface to do analytics and AI more easily at scale. As 2024 comes to an end, I want to thank our teammates and partners for their meaningful impact throughout the year. It was a very successful year across almost any dimension you pick. We're far from done, and look forward to delivering for customers in 2025. With that, I'll turn it over to Brian for a financial update.","evidence_gemma_new":null,"evidence_llama_3_3":"annual revenue run rate","evidence_qwen_3_30b":"annual revenue run rate $69 billion","gemma_new_max":null,"gemma_new_min":null,"llama_3_3_max":69000000000.0,"llama_3_3_min":69000000000.0,"qwen_3_30b_max":69000000000.0,"qwen_3_30b_min":69000000000.0}
{"symbol":"AMZN","year":2024,"quarter":4,"date":"2024-Q4","chunk_id":2,"sub_chunk_id":0,"centroid_label":"aws annualized revenue run rate","agreed_value":115000000000.0,"count":2,"chunk":"Andy Jassy: Thanks, Dave. Today, we're reporting $187.8 billion in revenue, up 10% year over year. Given the way the dollar strengthened throughout the quarter, we had $700 million more foreign exchange headwind than we anticipated at guidance. Without that headwind, revenue would have been 11% year over year and exceeded the top end of our guidance. Operating income was $21.2 billion, up 61% year over year, and trailing twelve-month free cash flow adjusted for equipment finance leases was $36.2 billion, up $700 million year over year. We're pleased with the invention, customer experience improvements, and results delivered in 2024, and have a lot more planned in 2025. I'll start by talking about our stores business. We saw 10% year over year revenue growth in our North America segment, and 9% year over year in our international segment, excluding the impact from foreign exchange rates. Our continued focus on expanding selection, lowering prices, and improving convenience drove strong unit growth that even outpaced our revenue growth. We continue to add to our broad range giving customers choice across a variety of price points. We welcomed notable brands to our store throughout 2024, including Clinique, Estee Lauder, Aura Rings, and Armani Beauty. We continue to add to the hundreds of millions of products offered from our selling partners, who made up 61% of items that we sold in 2024, our highest annual mix of third-party seller units ever. We also launched Amazon Haul for US customers in Q4, which offers customers an engaging shopping experience that brings ultra-low priced products into one convenient destination. It's off to a very strong start. In the fourth quarter, consumers saved more than $15 billion with our low everyday prices and record-setting events during Prime Big Deal Days in October, Black Friday, and Cyber Monday around Thanksgiving. Additionally, Profitero's annual pricing study found that entering the holiday season, Amazon had the lowest online prices for the eighth year in a row, averaging 14% lower prices on average than other leading retailers in the US. Our speed of delivery continues to accelerate, and 2024 was another record-setting year for Prime members. We expanded the number of same-day delivery sites by more than 60% in 2024, which now serve more than 140 metro areas. Overall, we delivered over 9 billion units the same or next day around the world. Our relentless pursuit of better selection, price, and delivery speed is driving accelerated growth in Prime membership. For just $14.99 a month, Prime members get unlimited free shipping on 300 million items, off the same day or one day delivery, exclusive shopping events like Prime Day, access to a vast collection of premium programming and live sports on Prime Video, ad-free listening of 100 million songs and podcasts with Amazon Music, access to unlimited generic prescriptions for only $5 a month, unlimited grocery delivery on orders over $35 from Whole Foods Market and Amazon Fresh for $9.99 a month, a free Grubhub Plus membership with free unlimited delivery, and our latest benefit of a 10 cent per gallon fuel discount at BP, AMPM, and AMCO stations. When you think about this as a whole, and also compared to many other membership services that are comparably or more expensively priced and offer just one benefit like video, Prime is a screaming deal. And we have more coming for our Prime members in 2025. We also remain squarely focused on cost to serve in our fulfillment network, which has been a meaningful driver of our increased operating income. We talked about the regionalization of our US network. We've also recently rolled out our redesigned US inbound network. While still in its early stages, our inbound efforts have improved our placement of inventory so that even more items are close to end customers. Ahead of Black Friday in November, we'd improved the percentage of ordered units available in the ideal building by over 40% year over year. We've also spent considerable time optimizing the number of items sent to customers in the same package, which reduces packaging, is more convenient for customers, and less expensive for us to fulfill. And our per-unit transportation costs continue to decline as we build out and optimize our last-mile network. Overall, we've reduced our global cost to serve on a per-unit basis for the second year in a row. While at the same time increasing speed, improving safety, and adding selection. As we look to 2025 and beyond, we see opportunities to reduce costs again as we further refine inventory placement, grow our same-day delivery network, and accelerate robotics and automation throughout the network. In advertising, we remain pleased with the strong growth on a very large base, generating $17.3 billion of revenue in the quarter, and growing 18% year over year. That's a $69 billion annual revenue run rate, more than double what it was just four years ago at $29 billion. Sponsored products, the largest portion of ad revenue, are doing well, and we see a runway for even more growth. We also have a number of newer streaming offerings that are starting to become significant new revenue sources. On the streaming video side, we wrapped up our first year of Prime Video ads, and we're quite pleased with the early progress and head into this year with momentum. We made it easier to do full funnel advertising with us. Full funnel is from the top of the funnel with broad reach advertising that drives brand awareness to mid funnel where sponsored brands let companies specify certain keywords and audiences to attract people to their detail pages or brands to our Amazon to bottom of the funnel where sponsored products help advertisers surface relevant product ads to customers at the point of purchase. We also have differentiated audience features that leverage billions of signals from Amazon Marketing Cloud secure data clean rooms, providing advertisers the ability to analyze data, produce core marketing metrics, and understand how their marketing performs across various channels. With our new multi-touch attribution model, advertisers can understand how various ad types in their campaigns contribute to sales. Moving on to AWS, in Q4, AWS grew 19% year over year and now has a $115 billion annualized revenue run rate. AWS is a reasonably large business by most folks' standards. And though we expect growth will be lumpy over the next few years as enterprises adopt and technology advancements impact timing, it's hard to overstate how optimistic we are about what lies ahead for AWS' customers and business. I spent a fair bit of time thinking several years out. And while it may be hard for some to fathom a world where virtually every app is generative AI-infused, with inference being a core building block just like compute, storage, and database, and most companies having their own agents that accomplish various tasks interact with one another, this is the world we're thinking about all the time. And we continue to believe that this world will mostly be built on top of the cloud with the largest portion of it on AWS. To best help customers realize this future, you need powerful capabilities of all three layers of the stack. At the bottom layer, for those building models, you need compelling chips. Chips are the key ingredient in the compute that drives training and inference. Most AI compute has been driven by NVIDIA chips, and we obviously have a deep partnership with NVIDIA and will for as long as we can see into the future. However, there aren't that many generative AI applications of large scale yet, and when you get there, as we have with apps like Alexa and Rufus, cost can get steep quickly. Customers want better price performance, and it's why we built our own custom AI silicon. Tranium 2 just launched at our AWS reInvent conference in December, E2 instances with these chips are typically 30 to 40 percent more price per form than other current GPU-powered instances available. That's very compelling at scale. Several technically capable companies like Adobe, Databricks, Poolside, and Qualcomm have seen impressive results in early testing of Tranium 2. It's also why you're seeing Anthropic build its future frontier models on Tranium 2. We're collaborating with Anthropic to build project right near. A cluster of training and two ultra-servers containing hundreds of thousands of training m two chips. This cluster is going to be five times the number of Exo-ZLofts as the cluster that Anthropic used to train their current leading set of cloud models. We're already hard at work on Training 3, which we expect to preview late in 25, and defining Training 4 thereafter. Building outstanding performing chips that deliver leading price performance has become a core strength of AWS's, starting with our Nitro and Graviton chips in our core business, and now extending to Tranium and AI. It's something unique to AWS relative to other competing cloud providers. The other key component for model builders is services that make it easier to construct their models. I won't spend a lot of time on these comments on Amazon SageMaker AI, which has become the go-to service for AI model builders to manage their AI data, build models, experiment, and deploy these models. HyperPOD capability automatically splits training workloads across many AI accelerators, prevents interruptions by periodically saving checkpoints, and automatically repairing faulty instances from their last saved checkpoint and saving training time by up to 40 percent. It continues to be a differentiator with several new compelling capabilities at reinvent including the ability to manage costs at a cluster level, and prioritize which workloads should receive capacity when budgets are reached. It is increasingly being adopted by model builders. At the middle layer, for those wanting to leverage frontier models to build Jet AI apps, Amazon Bedrock is our fully managed service providing high performing foundation models with the most compelling features making it easy to build a high-quality generative AI application. We are iterating quickly on Bedrock announcing Luma AI, poolside, and over a hundred other popular emerging models to Bedrock and reinvent. We've just added DeepSeq's R1 models to Bedrock and SageMaker. Additionally, we delivered several compelling new Bedrock features to re-event, including prompt caching, intelligent prompt routing, and model distillation, all of which help customers achieve lower cost and latency in their inference. Like SageMaker AI, Bedrock is growing quickly and resonating strongly with customers. Related, we also launched Amazon's own family of frontier models in Bedrock called Nova. These models compare favorably in intelligence against the leading models in the world to offer lower latency, lower price, about 75 percent lower than other models in Bedrock, and are integrated with key Bedrock features like fine-tuning, model distillation, knowledge base as a rag, and Agentec capabilities. Thousands of AWS customers are already taking advantage of Amazon Nova models' capabilities and price performance, including Palantir, SAP Densu Fortinet Trellix, and Robinhood, and we've just gotten started. At the top layer of the stack, Amazon Q is our most capable generative AI-powered assistant for software development and to leverage your own data. You may remember that on the last call, I shared the very practical use case where Q transformation helps save Amazon Teams $260 million and 4500 developer years in migrating over 30,000 applications to new versions of the Java JDK. This is real value, and companies ask for more, which we obliged with our recent deliveries of Q transformation that enable moves from Windows dot net applications to Linux VMware to EC2, accelerates mainframe migrations. Early customer testing indicates the queue can turn was going to be a multi-year effort to do a mainframe migration into a multi-quarter effort, cutting by more than 50% the time to migrate mainframes. This is a big deal, and these transformations are good examples of practical AI. While AI continues to be a compelling new driver in the business, we haven't lost our focus on core modernization of companies' technology. We signed new AWS agreements with companies including Intuit, PayPal, Norwegian Cruise Line Holdings, Northrop Grumman, The Guardian Life Insurance Company of America, Reddit, Japan Airlines, Baker Hughes, the Hertz Corporation, Resin Chime Financial, Asana, and many others. Consistent customer feedback from our recent AWS reInvent was appreciation that we're still inventing rapidly in non-AI key infrastructure areas like storage, compute, database analytics. Our functionality leadership continues to expand and there were several key launches customers were buzz about, including Amazon Aurora D SQL, our new serverless distributed SQL database that enables applications with the highest availability strong consistency, post-test compatibility, It's four times faster reason rights compared to other pop distributed SQL databases, Amazon S3 tables, which makes S3 the first cloud object store with fully managed support for Apache Iceberg for faster analytics, Amazon S3 metadata, Which automatically generates queryable metadata simplifying data discovery, business analytics, and real time inference to help customers unlock the value of their data in S3, and the next generation of Amazon SageMaker which brings together all the data analytics services and AI services in interface to do analytics and AI more easily at scale. As 2024 comes to an end, I want to thank our teammates and partners for their meaningful impact throughout the year. It was a very successful year across almost any dimension you pick. We're far from done, and look forward to delivering for customers in 2025. With that, I'll turn it over to Brian for a financial update.","evidence_gemma_new":null,"evidence_llama_3_3":"AWS annualized revenue run rate","evidence_qwen_3_30b":"AWS 19% year over year annualized revenue run rate","gemma_new_max":null,"gemma_new_min":null,"llama_3_3_max":115000000000.0,"llama_3_3_min":115000000000.0,"qwen_3_30b_max":115000000000.0,"qwen_3_30b_min":115000000000.0}
{"symbol":"AMZN","year":2023,"quarter":2,"date":"2023-Q1","chunk_id":10,"sub_chunk_id":0,"centroid_label":"aws revenues","agreed_value":0.16,"count":2,"chunk":"Brian Olsavsky: Yes, sure. Thanks, Mark. Let me start with that second question. So again, if we rewind to our last conference call, we had seen 16% AWS revenue growth in Q1, and the growth rates have been dropping during the quarter. And what I mentioned was that April was running about 500 basis points lower than Q1. What we've seen in the quarter is stabilization and you see the final 12% growth. I will stop for a moment and just put that in perspective. So again, last Q2 last year, we had close to $20 billion of revenue and we grew that $2.4 billion. So that's -- while that is 12%, there's a lot of cost optimization dollars that came out and a lot of new workloads and new customers that went in. So there was -- on our base, it's very large numbers. And when customers start to -- that cost optimization work, they can take some of their spend down for a while as they do that, and we help them do that and been part of our DNA ever since we started AWS. So that's all good. What we're seeing in the quarter is that those cost optimizations, while still going on, are moderating and many maybe behind us in some of our large customers. And now we're seeing more progression into new workloads, new business. So those balanced out in Q2. We're not going to give segment guidance for Q3. But what I would add is that we saw Q2 trends continue into July. So generally feel the business has stabilized, and we're looking forward to the back end of the year in the future because, as Andy said, there's a lot of new functionality coming out with -- and there's a lot of spend that will be in this area for all the great solutions that are out there for generative AI and large language models as well as machine learning solutions that we've always had for customers. So optimistic and starting to see some good traction with our customers' new volumes.","evidence_gemma_new":null,"evidence_llama_3_3":"AWS revenue growth Q1","evidence_qwen_3_30b":"AWS AWS revenue growth Q1","gemma_new_max":null,"gemma_new_min":null,"llama_3_3_max":0.16,"llama_3_3_min":0.16,"qwen_3_30b_max":0.16,"qwen_3_30b_min":0.16}
{"symbol":"AMZN","year":2023,"quarter":2,"date":"2023-Q2","chunk_id":3,"sub_chunk_id":0,"centroid_label":"aws revenues","agreed_value":12.0,"count":2,"chunk":"Brian Olsavsky: Thank you, Andy. As Andy mentioned, we saw worldwide revenue of $134.4 billion, an increase of 11% year-over-year and above the top end of our guidance range. We are encouraged by the strength in our reported revenue, which is another proof point that our focus on price, selection and convenience continues to resonate with customers. We continue to see healthy demand across everyday essentials and in categories like beauty and health and personal care and have seen a positive customer response to improvements in personalization and enhancements to our website and mobile app. During the quarter, we also saw improvements in macroeconomic indicators across our North America and international segments, but continue to see customers trading down and seeking value in their purchases. Delivery speed has been a key area of focus over the last several quarters, and we reached record levels during Q2. Prime members love the faster ship speeds and are shopping more often. Advertising revenue remained strong, up 22% year-over-year. Our performance-based advertising offerings continue to be the largest contributor to our growth. Our teams worked to increase the relevancy of the ads we show to our customers by leveraging machine learning and improve our ability to measure the return on advertising spend for brands. Third-party unit mix increased to 60% during the quarter, the highest level we've ever seen, and we're continuing to see good growth in the number of sellers and the unit sold per seller. We're making steady progress on improving our worldwide stores profitability. Since North America segment operating margins bottomed out in Q1 of 2022, we have seen 5 consecutive quarters of improvement, with second quarter operating margin of 3.9%. This is an improvement of 620 basis points over these past 5 quarters. One of the largest drivers of this operating income improvement in the stores business has been reducing our cost to serve, with shipping costs and fulfillment costs continuing to grow at a slower pace than our unit growth. Most recently, regionalization is an important contributor. Faster delivery speed from better network connectivity and better inventory placement means less miles traveled and fewer touches, resulting in less cost. And while we are pleased with the progress we have made, we see more opportunity to drive improved cost efficiencies going forward. Moving to the international segment. Since our operating margin loss bottomed out in Q3 of last year, we have seen 3 consecutive quarters of improvement, with a second quarter margin loss of negative 3%. This is an improvement of 590 basis points over the last 3 quarters. This segment also includes our emerging countries. It is important to remember how early we are in some of these marketplaces. We've launched more than 10 countries in the past 6 years and are always evaluating our customer experience as well as our path to profitability, and we like the path we're on. As a reminder, it took us 9 years to reach profitability in the United States. In addition, across our North America and international results, inflation headwinds also continue to ease, most notably in fuel prices, linehaul rates, ocean and rail rates. Moving to AWS. Year-over-year revenue growth was 12%, with growth rates stabilizing during Q2. We are encouraged by the strength of our customer pipeline and believe having a large diverse customer base that is mostly cost optimized sets us up well for future growth. On a trailing 12-month basis, free cash flow was positive and improved for the fourth sequential quarter. Our financial focus remains on driving long-term sustainable free cash flows. The largest driver of the recent improvement in free cash flow is our increased operating income, most notably in the North America and international segments where, as I said, we've made meaningful improvement in our fulfillment network productivity and operating leverage and benefited from moderating inflationary pressures. We've also seen improvements in our working capital contributions to free cash flow. Over the past couple of years, working capital hasn't been as efficient as we've held higher weeks of cover of inventory in the face of supply chain disruptions. Most recently, as these disruptions continue to ease, we are improving our inventory efficiency, resulting in improvements in our working capital. We will remain focused on continued free cash flow improvement moving forward. Next, let's turn to our capital investments. We define our capital investments as a combination of capital expenditures plus equipment finance leases. These investments were $54 billion for the trailing 12-month period ended June 30, down from $61 billion in the comparable prior year period. Looking ahead to the full year 2023, we expect capital investments to be slightly more than $50 billion compared to $59 billion in 2022. We expect fulfillment and transportation CapEx to be down year-over-year, partially offset by increased infrastructure CapEx to support growth of our AWS business, including additional investments related to generative AI and large language model efforts. With that, let's move on to your questions.","evidence_gemma_new":"AWS revenue growth","evidence_llama_3_3":null,"evidence_qwen_3_30b":"AWS' revenue growth rate Q2","gemma_new_max":12.0,"gemma_new_min":12.0,"llama_3_3_max":null,"llama_3_3_min":null,"qwen_3_30b_max":12.0,"qwen_3_30b_min":12.0}
{"symbol":"AMZN","year":2023,"quarter":3,"date":"2023-Q3","chunk_id":3,"sub_chunk_id":0,"centroid_label":"aws revenues","agreed_value":23100000000.0,"count":2,"chunk":"Brian Olsavsky: Thanks, Andy. Overall, we saw a strong performance in the third quarter. Worldwide revenue was $143.1 billion, representing an increase of 11% year-over-year, excluding the impact of foreign exchange and approximately $100 million above the top end of our guidance range. We saw our highest quarterly worldwide operating income ever which was $11.2 billion for the quarter, an increase of $8.7 billion year-over-year from $2.7 billion above the high end of our guidance range. North America revenue was $87.9 billion, an increase of 11% year-over-year. And international revenue was $32.1 billion, an increase of 11% year-over-year, excluding foreign exchange. During the quarter, we held our biggest Prime Day event ever with prime members purchasing more than 375 million items worldwide and saving more than $2.5 billion on millions of deals across the Amazon store. Outside of Prime Day, we continue to see strong demand across everyday essentials, including categories like beauty and health and personal care. From a customer behavior standpoint, we still see customers remaining cautious about price, trading down where they can and seeking out deals, coupled with lower spending on discretionary items. Building on the momentum from last quarter, we set another record for delivery speed. For the year-to-date period through the third quarter, we have delivered at the fastest speeds ever in the United States. These improvements in delivery speeds have been a key driver of growth and are resulting in increased purchase frequency by our Prime members. Third-party sellers grew at 18% year-over-year, excluding foreign exchange, primarily driven by selection expansion and growing adoption of our optional services for sellers, including Fulfillment by Amazon and paid account management and more. During the quarter, we hosted Amazon Accelerate, our annual seller conference, where we launched a number of new innovations and product developments for our sellers, including Supply Chain by Amazon. We also continue to see durable growth in advertising which grew 25% year-over-year, excluding foreign exchange, primarily driven by sponsored products as we lean into machine learning to improve the relevancy of the ads we show our customers and enhance our measurement capabilities on behalf of advertisers. We have seen strong improvement in our profitability. North America operating income was $4.3 billion, an increase of $4.7 billion year-over-year, resulting in an operating margin of 4.9%, up 100 basis points quarter-over-quarter. Since North America operating margins bottomed out in Q1 of 2022, we have now seen 6 consecutive quarters of improvement, resulting in a cumulative improvement of over 700 basis points over these past 6 quarters. The third quarter marked the second full quarter of regionalization within the U.S. and we're pleased with the early results. Regionalization has allowed us to simplify the network by reducing the number of line-haul lanes, increasing volume within existing line-haul lanes and adding more direct fulfillment center to delivery station connections. We have also been focused on optimizing inventory placement in a new regionalized network which when coupled with the simplification mentioned earlier, is helping contribute to an overall reduction in cost to serve. Additionally, in the quarter, we saw benefits from lower inflation, primarily within line haul, ocean and rail shipping rates which were partially offset by higher fuel prices. While we are encouraged by the improvements in operating profit, we still see a lot of opportunity in front of us. In international, we were closer to breakeven during the quarter with an operating loss of $95 million. This was an improvement of $2.4 billion year-over-year. This improvement was primarily driven by lowering our cost to serve through higher productivity, decreased inflationary pressures and improvements in leverage across our established and emerging international countries as we continue to focus on customer inputs and improve efficiencies within our operations. Moving to AWS; revenues were $23.1 billion, an increase of 12% year-over-year. On a quarter-over-quarter basis, we added more than $900 million of revenue in AWS as customers are continuing to shift their focus towards driving innovation and bringing new workloads to the cloud. Similar to what we shared last quarter, while optimization still remain a headwind, we've seen the rate of new cost optimization slowdown in AWS and we are encouraged by the strength of our customer pipeline. Customers are excited about our approach to generative AI, with several new announcements made during the quarter, including a strategic collaboration with Anthropic, opening Amazon Bedrock up to general availability, adding Meta's Llama 2 model to Bedrock in the near future and new customization capabilities of CodeWhisperer. AWS remains a clear cloud infrastructure leader with a significant leadership position in the number of customers, the size of our partner ecosystem, our breadth of functionality and the strongest operational performance in the industry. When we look at the fundamentals of the business, we believe we are in good position to drive future growth as the rates of cost optimization slow down. AWS operating income was $7 billion, an increase of $1.6 billion year-over-year. Our operating margin for the quarter was 30.3%. This is an improvement of approximately 600 basis points quarter-over-quarter, primarily driven by increased leverage on our head count costs. Shifting to free cash flow. On a trailing 12-month basis, free cash flow adjusted for finance leases was $20.2 billion, an improvement of $41.7 billion year-over-year. The largest driver of the improvement in free cash flow is our increased operating income which we're seeing across all 3 of our segments. Key drivers of this improvement include reductions in our cost to serve, continued advertising growth and improved leverage on our fixed costs. We are also seeing improvements in working capital, notably with our inventory efficiency as we improve our inventory placement. Now, let's turn to our capital investments. We define our capital investments as a combination of CapEx plus equipment finance leases. These investments were $50 billion for the trailing 12-month period ended September 30, down from $60 billion in the comparable prior year period. For the full year 2023, we expect capital investments to be approximately $50 billion compared to $59 billion in 2022. We expect fulfillment and transportation CapEx to be down year-over-year, partially offset by increased infrastructure CapEx to support growth of our AWS business, including additional investments related to generative AI and large language model efforts. As we head into the fourth quarter, we are ready to make this a great holiday season for our customers. Looking at our operations network, our inventory is the best position it's ever been heading into the holiday season, enabling us to serve customers with fast delivery speeds from their local regions. We continue to believe putting customers first is the only reliable way to create lasting value for our shareholders. With that, let's move on to questions.","evidence_gemma_new":null,"evidence_llama_3_3":"AWS AWS revenue third quarter","evidence_qwen_3_30b":"AWS revenues","gemma_new_max":null,"gemma_new_min":null,"llama_3_3_max":23100000000.0,"llama_3_3_min":23100000000.0,"qwen_3_30b_max":23100000000.0,"qwen_3_30b_min":23100000000.0}
{"symbol":"AMZN","year":2023,"quarter":4,"date":"2023-Q4","chunk_id":3,"sub_chunk_id":0,"centroid_label":"aws revenues","agreed_value":24200000000.0,"count":3,"chunk":"Brian Olsavsky: Thanks, Andy. Overall, we saw strong performance in the fourth quarter. Worldwide revenue was $170 billion, representing an increase of 13% year-over-year, excluding the impact of foreign exchange and approximately $3 billion above the top end of our guidance range. Saw our highest quarterly worldwide operating income ever, which was $13.2 billion for the quarter, an increase of $10.5 billion year-over-year and $2.2 billion above the high end of our guidance range. For the full year 2023, we had a meaningful improvement across our financial results. Revenue was $574.8 billion, an increase of 12% year-over-year, excluding the impact of foreign exchange. Operating income tripled year-over-year to $36.9 billion. Trailing 12-month free cash flow adjusted for equipment finance leases was $35.5 billion, up $48.3 billion versus last year. These financial outputs are a result of a lot of improvements in our key input metrics such as stores' cost to serve, which decreased year-over-year for the first time since 2018 and our ability to deliver to customers at our fastest speeds ever. I want to thank our customers, our partners and our teammates around the world for a very strong 2023 performance. Focusing on the fourth quarter, North America revenue was $105.5 billion, an increase of 13% year-over-year and an acceleration of 200 basis points compared to Q3. International revenue was $40.2 billion, an increase of 13% year-over-year, excluding the impact of foreign exchange, also an acceleration of 200 basis points compared to Q3. During the quarter, we remained focused on the inputs that matter most to our customers, price, selection and convenience. Our shopping events throughout the quarter included Prime Big Deal Days in October and our extended Black Friday and Cyber Monday shopping event helped to attract new Prime members and deliver billions in savings for customers. We made meaningful progress on delivery speeds in the United States and globally, which helped strong sales throughout the quarter, including notable strength in the last-minute gifting where our ability to provide fast shipping helped our Prime members ensure that they got their gifts before the holidays. These improvements in delivery speed have led to increased purchase frequency by our Prime members across all of our major geographies. It also strengthened demand for our everyday essentials. Categories like beauty and health and personal care, where speed is even more important to customers. Third-party sellers were a big part of our success over the holidays with worldwide third-party seller services revenue growing at 19% year-over-year, excluding the impact of foreign exchange. And worldwide third-party seller unit mix was 61%, its highest level ever. We also saw strong performance in worldwide advertising, which grew 26% year-over-year, excluding the impact of foreign exchange. The strength in advertising was primarily driven by sponsored products as our teams worked hard to increase the relevancy of the ads we show customers by leveraging machine learning. Advertising only works if the ads are helpful to customers and there's a lot of value in tailoring sponsored products, so they are relevant to what a customer is actually searching for. We're also continually focused on improving our measurement capabilities, which allow brands to see the payback of their advertising spend. Shifting to profitability. North America segment operating income was $6.5 billion, an increase of $6.7 billion year-over-year, resulting in an operating margin of 6.1%, up 120 basis points quarter-over-quarter. Since North America operating margins were at their recent low levels in Q1 of 2022, we have now seen seven consecutive quarters of improvement resulting in a cumulative improvement of 800 basis points over these past seven quarters. In addition to the strong top line growth, which helped to drive improved leverage throughout our businesses, we continue to make progress on reducing our cost to serve. The fourth quarter is our busiest time of year, supported by an increasingly large and integrated operations network. Overall, our teams executed extremely well, yielding strong efficiency gains with minimal disruptions. We were pleased with the performance of our regionalized network during the holiday period, where we saw benefits from improved inventory placement helping drive faster speeds and also lowering costs. We also continue to see benefits from lower transportation rates, which include linehaul, ocean and rail and from a more stable labor market, resulting in improved staffing levels. In our International segment, we had an operating loss of $419 million, an improvement of $1.8 billion year-over-year. This improvement was primarily driven by lowering our cost to serve through increased units per box, lower transportation rates and leverage across our fixed costs as we continue to focus on customer inputs and improve efficiencies within our operations. The International segment represents more than 20 countries of varying degrees of growth and our largest established countries like the U.K., Germany and Japan, relatively strong revenue growth contributed to the year-over-year improvement in profitability. Additionally, we saw good progress in our emerging countries as they continued to expand their customer offerings, while seeking to invest wisely. Moving to AWS. Revenues were $24.2 billion, an increase of 13% year-over-year. On a quarter-over-quarter basis, we added more than $1.1 billion of revenue in AWS as customers are continuing to shift their focus towards driving innovation and bringing new workloads to the cloud. Similar to what we shared last quarter, we continue to see the diminishing impact of cost optimizations. And as these optimization slow down, we're seeing more companies turning their attention to newer initiatives and reaccelerating existing migrations. Customers are also excited about our approach to generative AI. Still relatively early days, but the revenues are accelerating rapidly across all 3 layers and our approach to democratizing AI is resonating well with our customers. We have seen significant interest from our customers wanting to run generative AI applications and build large language models and foundation models, all with the privacy, reliability and security they have grown accustomed to with AWS. AWS' operating income was $7.2 billion, an increase of $2 billion year-over-year. Our operating margin for the quarter was 29.6%, up more than 500 basis points year-over-year and effectively flat on a quarter-over-quarter basis. This margin improvement reflects our headcount reductions from earlier in the year and a slowdown in the pace of hiring. Shifting to free cash flow. On a trailing 12-month basis, free cash flow adjusted for finance leases was $35.5 billion, an improvement of $48.3 billion year-over-year. The largest driver of the improvement in free cash flow is our increased operating income, which we are seeing across all three of our segments. We're also seeing improvements in working capital, notably in inventory efficiency driven by our regionalization efforts. Next, let's turn to capital investments. We define our capital investments as a combination of CapEx plus equipment finance leases. In 2023, full year CapEx was $48.4 billion, which was down $10.2 billion year-over-year, primarily driven by lower spend on fulfillment and transportation. As we look forward to 2024, we anticipate CapEx to increase year-over-year, primarily driven by increased infrastructure CapEx, support growth of our AWS business, including additional investments in generative AI and large language models. One thing I'd like to highlight in our first quarter guidance is that we recently completed a useful life study for our servers and we are increasing the useful life from 5 years to 6 years beginning in January 2024. We will have this anticipated benefit to our operating income of approximately $900 million in Q1, which is included in our operating income guidance. As we turn the calendar to 2024, we are excited to continue upon the great work the teams have been able to deliver in 2023. We remain focused on streamlining and prioritizing projects in an effective way that reduces costs and also allows us to continue innovating and inventing for customers. With that, let's move on to questions.","evidence_gemma_new":"AWS revenues year-over-year","evidence_llama_3_3":"AWS revenues","evidence_qwen_3_30b":"AWS Revenues fourth quarter","gemma_new_max":24200000000.0,"gemma_new_min":24200000000.0,"llama_3_3_max":24200000000.0,"llama_3_3_min":24200000000.0,"qwen_3_30b_max":24200000000.0,"qwen_3_30b_min":24200000000.0}
{"symbol":"AMZN","year":2024,"quarter":1,"date":"2024-Q1","chunk_id":4,"sub_chunk_id":0,"centroid_label":"aws revenues","agreed_value":25000000000.0,"count":3,"chunk":"We remain focused on the inputs that matter most to our customers: selection, price, and convenience. During the quarter, around the world, we helped customers save with our shopping events. We added selection, including premium and luxury brands, and we delivered our fastest speeds ever for Prime members. Third-party sellers continue to be an important part of our offering. Third-party seller services revenue increased 16% year-over-year, excluding the impact of foreign exchange. We saw strong 3P unit growth, coupled with increased adoption of our optional services, such as fulfillment and global logistics. For the quarter, third-party seller unit mix was 61%, up 200 basis points year-over-year. Shifting to profitability, North America segment operating income was $5 billion, an increase of $4.1 billion year-over-year. Operating margin was 5.8%, up 460 basis points year-over-year. We saw improvements in our cost to serve, including continued benefit from our work to regionalize our operations, savings from more consolidated customer shipments, and improved leverage driven by strong unit growth and lower transportation rates. In our international segment, operating income was $903 million, an improvement of $2.2 billion year-over-year. Operating margin was 2.8%, up 710 basis points year-over-year. This is primarily driven by our established countries as we improve cost efficiencies through network design enhancements and improved volume leverage. Additionally, we saw good progress in our emerging countries as they expand their customer offerings and make strides on their respective journeys to profitability. Looking ahead, we see several opportunities to further lower cost to serve and improved profitability in our worldwide stores business while still investing to improve the customer experience. Within our fulfillment network, we are focused on investing in our inbound network, streamlining and standardizing process paths, and adding robotics and automation. These improvement opportunities will take time. However, we have a solid plan in place and we like the path we're on. Advertising remains an important contributor to profitability in North America and international segments. We see many opportunities to grow our offerings, both in the areas that are driving growth today like sponsored products and in areas that are newer, like streaming TV ads. Moving to AWS. Revenue was $25 billion, an increase of 17% year-over-year, and AWS is now a $100 billion annualized revenue run rate business. Excluding the impact from leap year, AWS revenue increased approximately 16% year-over-year. During the first quarter, we saw growth in both generative AI and non-generative AI workloads across a diverse group of customers and across industries as companies are shifting their focus towards driving innovation and bringing new workloads to the cloud. Additionally, we continue to see the impact of cost optimizations diminish. While there always be a level of ongoing optimization, we think the majority of the recent cycle is behind us, and we're likely closer to a steady state of these optimization efforts. AWS operating income was $9.4 billion, an increase of $4.3 billion year-over-year. As a reminder, these results include the impact from the change in the estimated useful life of our servers, which primarily benefits the AWS segment. We made progress in managing our infrastructure and fixed costs while still growing at a healthy rate, which has resulted in improved leverage. As we've said in the past, over time, we expect the AWS operating margins to fluctuate, driven in part by the level of investments we are making in the business. We remain focused on driving efficiencies across the business, which enables us to invest to support the strong growth we're seeing in AWS, including generative AI, which brings us to capital investments. As a reminder, we define these as the combination of CapEx plus equipment finance leases. In 2023, overall capital investments were $48.4 billion. As I mentioned, we're seeing strong AWS demand in both generative AI and our non-generative AI workloads, with customers signing up for longer deals and making bigger commitments. It's still relatively early days in generative AI and more broadly, the cloud space, and we see sizable opportunity for growth. We anticipate our overall capital expenditures to meaningfully increase year-over-year in 2024, primarily driven by higher infrastructure CapEx to support growth in AWS, including generative AI. Turning to our revenue guidance for Q2. Net sales are expected to be between $144 billion and $149 billion or to grow between 7% and 11% compared with the second quarter of 2023. We saw an unfavorable impact from year-over-year changes in foreign exchange in our Q1 results, and we expect that headwind to grow in the second quarter. Our Q2 net sales guidance anticipates an unfavorable foreign exchange impact of approximately 60 basis points. As part of our guidance considerations, we also continue to keep an eye on consumer spending and macro level trends, specifically in Europe where it appears to be a bit weaker relative to the U.S. Operating income is expected to be between $10 billion and $14 billion in Q2. This estimate includes the impact of our seasonal step-up in stock-based compensation expense, driven by the timing of our annual compensation cycle. I want to thank our customers, our partners, and our teammates around the world for a very strong start to the year, and we're excited to build on this momentum. We'll remain focused on streamlining and prioritizing projects in a way that allows us to continue inventing for customers in a cost-effective way. With that, let's move on to your questions.","evidence_gemma_new":"AWS revenue year-over-year","evidence_llama_3_3":"AWS revenue year-over-year","evidence_qwen_3_30b":"AWS revenue $25 billion year-over-year","gemma_new_max":25000000000.0,"gemma_new_min":25000000000.0,"llama_3_3_max":25000000000.0,"llama_3_3_min":25000000000.0,"qwen_3_30b_max":25000000000.0,"qwen_3_30b_min":25000000000.0}
{"symbol":"AMZN","year":2024,"quarter":3,"date":"2024-Q3","chunk_id":3,"sub_chunk_id":0,"centroid_label":"aws revenues","agreed_value":27500000000.0,"count":2,"chunk":"Brian Olsavsky: Thanks, Andy. Let's start with our top line financial results. Worldwide revenue was $158.9 billion, an 11% increase year-over-year, excluding a 20 basis point unfavorable impact of foreign exchange. As a reminder, our Q3 guidance had anticipated a larger unfavorable impact of approximately 90 basis points. Worldwide operating income increased 56% year-over-year to $17.4 billion, our highest quarterly operating income ever and was $2.4 billion above the high end of our guidance range. We remain focused on streamlining and managing costs in a way that allows us to continue inventing for customers in a cost-effective way. In the third quarter, North America segment revenue was $95.5 billion, an increase of 9% year-over-year. International segment revenue was $35.9 billion, an increase of 12% year-over-year. Worldwide paid units accelerated to 12% growth year-over-year as our customers continue to come to Amazon for low prices, broad selection and convenient fast delivery. Prime remains a core contributor to this growth. Year-over-year paid membership growth accelerated in Q3 from both the US and globally, helped by our tenth annual Prime Day event in mid-July. Customers are enjoying even faster delivery speeds, which also helps drive strong growth in items like everyday essentials. This includes items like health, beauty, and personal care as well as nonperishable grocery. Though all these items often have a lower average selling price, the strength in everyday essential's revenue is a positive indicator that customers are turning to us for more of their daily needs. We see that when customers purchase these types of items from us, they build bigger baskets, shop more frequently and spend more on Amazon. We remain focused on keeping prices sharp and offering broad selection that gives customers options when making purchase decisions. Shifting to profitability. Our North America and international segments each delivered their seventh consecutive quarter of year-over-year operating margin improvement. North America segment operating income was $5.7 billion, an increase of $1.4 billion year-over-year. North America operating margin was 5.9%, up 100 basis points year-over-year. In the third quarter, we continue to make progress in improving our fulfillment network cost structure, driven in part by improved inventory placement. This helped us drive better productivity in our transportation network and shipping efficiency from higher units per box. In the international segment, operating income was $1.3 billion, an improvement of $1.4 billion year-over-year. International operating margin was 3.6%, up 390 basis points year-over-year. So far this year, we've generated operating profit in each of the three quarters for the international segment and totals $2.5 billion year-to-date. We're seeing strength in our established countries like the UK and Germany as we continue to drive efficiencies to improve on-road productivity in our transportation network and better execution in our fulfillment centers. Our emerging countries are growing revenue at a healthy rate also, and they are leveraging their cost structures on investing strategically in Prime benefits. We have confidence that our focus on the inputs, coupled with the strength of our global teams, will continue to drive improvement over time. Advertising remains an important contributor to profitability in the North America and international segments. This quarter, we saw strong growth on an increasing large base of advertising revenue. We see many opportunities to further expand our ads offering in areas that are driving growth today like Sponsored Products as well as more recent growth areas like Prime Video ads. Moving next to our AWS segment. Revenue was $27.5 billion, an increase of 19.1% year-over-year, excluding the impact of foreign exchange. AWS now has an annualized revenue run rate of $110 billion. The business continues to grow, mostly opportunity to expand our core cloud offering and our AI services. Customers increasingly recognize that to get the true benefit of Generative AI, they also need to move to the cloud. AWS operating income was $10.4 billion, an increase of $3.5 billion year-over-year as a result of our continued focus on cost control, including a measured pace of hiring, a focus on driving efficiencies in our infrastructure, and reducing costs across the business. Additionally, we increased the estimated useful life of our servers starting in 2024, which contributed approximately 200 basis points to the AWS margin increase year-over-year in Q3. As we said in the past, we expect the AWS operating margins to fluctuate, driven in part by the level of investments we're making at any point in time. Now turning to our capital investments. As a reminder, we define these as a combination of cash CapEx plus equipment finance leases. Year-to-date capital investments were $51.9 billion. We expect to spend approximately $75 billion in CapEx in 2024. The majority of the spend is to support the growing need for technology infrastructure. This primarily relates to AWS as we invest to support demand for our AI services while also including technology infrastructure to support our North America and international segments. Additionally, we're continuing to invest in our fulfillment and transportation network to support the growth of the business, improve delivery speeds and lower our cost to serve. This includes investments in same-day delivery facilities, in our inbound network and as well in robotics and automation. We're encouraged by the start of the holiday season, which kicked off in October with a strong Prime Big Deal Days. We are ready to serve customers throughout the season, and I want to thank our teams across Amazon for delivering two very large Prime member events in the past four months and for getting us ready to delight customers during this holiday season. With that, let's move on to your questions.","evidence_gemma_new":"AWS segment revenue year-over-year","evidence_llama_3_3":"AWS segment AWS segment revenue Q3","evidence_qwen_3_30b":null,"gemma_new_max":27500000000.0,"gemma_new_min":27500000000.0,"llama_3_3_max":27500000000.0,"llama_3_3_min":27500000000.0,"qwen_3_30b_max":null,"qwen_3_30b_min":null}
{"symbol":"AMZN","year":2024,"quarter":4,"date":"2024-Q4","chunk_id":3,"sub_chunk_id":0,"centroid_label":"aws revenues","agreed_value":28800000000.0,"count":2,"chunk":"Brian Olsavsky: Thanks, Andy. Starting with our top line financial results. Worldwide revenue was $187.8 billion, an 11% increase year over year excluding the impact of foreign exchange. This equates to an approximate $900 million headwind from FX in the Quarter, which is about $700 million higher than what we'd anticipated in our Q4 guidance range. Excluding that additional FX headwind, we would have exceeded the top end of our revenue guidance range. Worldwide operating income was $21.2 billion, our largest operating income quarter ever, and was $1.2 billion above the high end of our guidance range. Across all segments, we continue to innovate for customers while operating more efficiently at the same time. In the North America segment, fourth quarter revenue was $115.6 billion, an increase of 10% year over year. International segment revenue was $43.4 billion, an increase of 9% year over year excluding the impact of foreign exchange. Worldwide paid units grew 11% year over year, as our focus on low prices broad selection, and fast shipping continues to resonate with customers. Shifting to profitability, North America segment operating income was $9.3 billion, an increase of $2.8 billion year over year. Operating margin was 8%, up 190 basis points year over year. In the international segment, operating income was $1.3 billion, an improvement of $1.7 billion year over year, operating margin was 3%, up 400 basis points year over year. This marks the eighth consecutive quarter where we've seen year over year margin improvement in both the North Two thousand twenty-four also marks the second year in a row where we've lowered our global cost to serve on a per unit basis. In the fourth quarter, we saw strong productivity in our transportation network, from improved inventory placement, higher units per package, and reduced travel distances. We also saw improved productivity in our fulfillment centers. Overall, our teams executed extremely well throughout the quarter, and particularly during our peak seasons. I want to thank them for all they do to deliver for our customers. Looking ahead, we have several opportunities to keep lowering our costs through even better inventory placement, which also allows us to deliver items to customers faster. In the US, we're tuning our inbound network and continuing to expand our same day delivery network. Globally, we're adding automation and robotics throughout our network. While these efforts will take time to implement, and progress may not be linear, We have a good plan to continue to drive improvements in our cost structure. Advertising remains an important contributor to profitability in the North America and international segments. This quarter, we saw strong advertising revenue growth on an increasingly large base. We will also continue to invest in experiences that have potential to be important to customers in Amazon long term. In areas like Alexa, health care, and grocery, as well as satellites in the coming months. As a reminder, we currently expense the majority of the cost associated with the development of our satellite network. We will capitalize certain costs once the service achieves commercial viability, including sales to customers. Moving next to our AWS segment, revenue was $28.8 billion, an increase of 19% year over year. AWS now has an annualized revenue run rate of $115 billion. During the fourth quarter, we continue to see growth in both generative AI and non-generative AI offerings. As companies turn their attention to newer initiatives, bring more workloads to the cloud, restart or accelerate existing migrations from on-premise to the cloud, and tap into the power of generative AI. Customers recognize to get the full benefit of generative AI, they have to move to the cloud. AWS reported operating income of $10.6 billion, an increase of $3.5 billion year over year. This is the result of strong growth, innovation in our software and infrastructure to drive efficiencies, and continued focus on cost control across the business. As we've said in the past, we expect AWS operating margins to fluctuate over time, driven in part by the level of investments we're making. Additionally, we increased the estimated useful life of our servers starting in 2024, which contributed approximately 200 basis points to the AWS margin increase year over year in Q4. Now turning to our capital investments. As a reminder, we define these as a combination of cash CapEx plus equipment finance leases. Capital investments were $26.3 billion in the fourth quarter, and we think that run rate will be reasonably representative of our 2025 capital investment rate. Similar to 2024, the majority of the spend will be to support the growing need for technology infrastructure. This primarily relates to AWS, including support demand for our AI services, as well as tech infrastructure to support our North America and international segments. Additionally, we're continuing to invest in capacity for our fulfillment and transportation network to support future growth. We're also investing in same-day delivery facilities and our inbound network, as well as robotics and automation, to improve delivery speeds and to lower our cost to serve. These capital investments will support growth for many years to come. Turning to our revenue guidance for Q1, net sales are expected to be between $151 billion and $155.5 billion. I'd like to highlight two items impacting our Q1 revenue guidance. First, we estimate the year-over-year impact of changes in foreign exchange rates based on current rates, which we expect to be a headwind of approximately $2.1 billion in Q1 year over year, or 150 basis points. As a reminder, global currencies can fluctuate during the quarter, and just as we saw in Q4 with the strengthening of the dollar versus most other currencies. Second, a reminder that we are comping the impact of last year's leap year. The extra day contributed approximately $1.5 billion of additional net sales across our businesses in Q1 2024, or about 120 basis points to the year-over-year growth rate, which impacted all segments. Q1 operating income is expected to be between $14 billion and $18 billion. This guidance includes the estimated impact of certain updates to the useful life of our fixed assets. I'll provide a bit more detail in a moment, but on an aggregate basis, we estimate this will decrease full-year 2025 operating income by approximately $400 million for the assets on our balance sheet as of December 31, 2024. First, in Q4, we completed a useful life study for our servers and network equipment and observed an increased pace of technology development. Particularly in the area of artificial intelligence and machine learning. As a result, we're decreasing the useful life for a subset of our servers and networking equipment from six years to five years beginning in January 2025. We anticipate this will decrease full-year 2025 operating income by approximately $700 million. In addition, we also early-retired a subset of our servers and network equipment. We recorded a Q4 2024 expense of approximately $920 million from accelerated depreciation and related charges and expect this will also decrease full-year 2025 operating income by. Both of these server and network equipment use for life changes primarily impact our AWS segment. Lastly, we also completed a useful life study for certain types of heavy equipment used in our fulfillment centers. And are increasing the useful life from ten years to thirteen years beginning in January 2025, we anticipate this will increase full-year 2025 operating income by approximately $900 million. As we turn the page to 2025, we're energized by the great work our teams have delivered. We'll remain focused on driving even better customer experiences, and we believe putting customers first is the only reliable way to create lasting value for our shareholders. With that, let's move on to your questions.","evidence_gemma_new":"AWS segment revenue year over year","evidence_llama_3_3":"AWS revenue year over year","evidence_qwen_3_30b":null,"gemma_new_max":28800000000.0,"gemma_new_min":28800000000.0,"llama_3_3_max":28800000000.0,"llama_3_3_min":28800000000.0,"qwen_3_30b_max":null,"qwen_3_30b_min":null}
{"symbol":"AMZN","year":2023,"quarter":3,"date":"2023-Q3","chunk_id":3,"sub_chunk_id":0,"centroid_label":"aws segment aws operating income","agreed_value":7000000000.0,"count":3,"chunk":"Brian Olsavsky: Thanks, Andy. Overall, we saw a strong performance in the third quarter. Worldwide revenue was $143.1 billion, representing an increase of 11% year-over-year, excluding the impact of foreign exchange and approximately $100 million above the top end of our guidance range. We saw our highest quarterly worldwide operating income ever which was $11.2 billion for the quarter, an increase of $8.7 billion year-over-year from $2.7 billion above the high end of our guidance range. North America revenue was $87.9 billion, an increase of 11% year-over-year. And international revenue was $32.1 billion, an increase of 11% year-over-year, excluding foreign exchange. During the quarter, we held our biggest Prime Day event ever with prime members purchasing more than 375 million items worldwide and saving more than $2.5 billion on millions of deals across the Amazon store. Outside of Prime Day, we continue to see strong demand across everyday essentials, including categories like beauty and health and personal care. From a customer behavior standpoint, we still see customers remaining cautious about price, trading down where they can and seeking out deals, coupled with lower spending on discretionary items. Building on the momentum from last quarter, we set another record for delivery speed. For the year-to-date period through the third quarter, we have delivered at the fastest speeds ever in the United States. These improvements in delivery speeds have been a key driver of growth and are resulting in increased purchase frequency by our Prime members. Third-party sellers grew at 18% year-over-year, excluding foreign exchange, primarily driven by selection expansion and growing adoption of our optional services for sellers, including Fulfillment by Amazon and paid account management and more. During the quarter, we hosted Amazon Accelerate, our annual seller conference, where we launched a number of new innovations and product developments for our sellers, including Supply Chain by Amazon. We also continue to see durable growth in advertising which grew 25% year-over-year, excluding foreign exchange, primarily driven by sponsored products as we lean into machine learning to improve the relevancy of the ads we show our customers and enhance our measurement capabilities on behalf of advertisers. We have seen strong improvement in our profitability. North America operating income was $4.3 billion, an increase of $4.7 billion year-over-year, resulting in an operating margin of 4.9%, up 100 basis points quarter-over-quarter. Since North America operating margins bottomed out in Q1 of 2022, we have now seen 6 consecutive quarters of improvement, resulting in a cumulative improvement of over 700 basis points over these past 6 quarters. The third quarter marked the second full quarter of regionalization within the U.S. and we're pleased with the early results. Regionalization has allowed us to simplify the network by reducing the number of line-haul lanes, increasing volume within existing line-haul lanes and adding more direct fulfillment center to delivery station connections. We have also been focused on optimizing inventory placement in a new regionalized network which when coupled with the simplification mentioned earlier, is helping contribute to an overall reduction in cost to serve. Additionally, in the quarter, we saw benefits from lower inflation, primarily within line haul, ocean and rail shipping rates which were partially offset by higher fuel prices. While we are encouraged by the improvements in operating profit, we still see a lot of opportunity in front of us. In international, we were closer to breakeven during the quarter with an operating loss of $95 million. This was an improvement of $2.4 billion year-over-year. This improvement was primarily driven by lowering our cost to serve through higher productivity, decreased inflationary pressures and improvements in leverage across our established and emerging international countries as we continue to focus on customer inputs and improve efficiencies within our operations. Moving to AWS; revenues were $23.1 billion, an increase of 12% year-over-year. On a quarter-over-quarter basis, we added more than $900 million of revenue in AWS as customers are continuing to shift their focus towards driving innovation and bringing new workloads to the cloud. Similar to what we shared last quarter, while optimization still remain a headwind, we've seen the rate of new cost optimization slowdown in AWS and we are encouraged by the strength of our customer pipeline. Customers are excited about our approach to generative AI, with several new announcements made during the quarter, including a strategic collaboration with Anthropic, opening Amazon Bedrock up to general availability, adding Meta's Llama 2 model to Bedrock in the near future and new customization capabilities of CodeWhisperer. AWS remains a clear cloud infrastructure leader with a significant leadership position in the number of customers, the size of our partner ecosystem, our breadth of functionality and the strongest operational performance in the industry. When we look at the fundamentals of the business, we believe we are in good position to drive future growth as the rates of cost optimization slow down. AWS operating income was $7 billion, an increase of $1.6 billion year-over-year. Our operating margin for the quarter was 30.3%. This is an improvement of approximately 600 basis points quarter-over-quarter, primarily driven by increased leverage on our head count costs. Shifting to free cash flow. On a trailing 12-month basis, free cash flow adjusted for finance leases was $20.2 billion, an improvement of $41.7 billion year-over-year. The largest driver of the improvement in free cash flow is our increased operating income which we're seeing across all 3 of our segments. Key drivers of this improvement include reductions in our cost to serve, continued advertising growth and improved leverage on our fixed costs. We are also seeing improvements in working capital, notably with our inventory efficiency as we improve our inventory placement. Now, let's turn to our capital investments. We define our capital investments as a combination of CapEx plus equipment finance leases. These investments were $50 billion for the trailing 12-month period ended September 30, down from $60 billion in the comparable prior year period. For the full year 2023, we expect capital investments to be approximately $50 billion compared to $59 billion in 2022. We expect fulfillment and transportation CapEx to be down year-over-year, partially offset by increased infrastructure CapEx to support growth of our AWS business, including additional investments related to generative AI and large language model efforts. As we head into the fourth quarter, we are ready to make this a great holiday season for our customers. Looking at our operations network, our inventory is the best position it's ever been heading into the holiday season, enabling us to serve customers with fast delivery speeds from their local regions. We continue to believe putting customers first is the only reliable way to create lasting value for our shareholders. With that, let's move on to questions.","evidence_gemma_new":"AWS operating income year-over-year","evidence_llama_3_3":"AWS AWS operating income third quarter","evidence_qwen_3_30b":"AWS operating income","gemma_new_max":7000000000.0,"gemma_new_min":7000000000.0,"llama_3_3_max":7000000000.0,"llama_3_3_min":7000000000.0,"qwen_3_30b_max":7000000000.0,"qwen_3_30b_min":7000000000.0}
{"symbol":"AMZN","year":2023,"quarter":4,"date":"2023-Q4","chunk_id":3,"sub_chunk_id":0,"centroid_label":"aws segment aws operating income","agreed_value":7200000000.0,"count":3,"chunk":"Brian Olsavsky: Thanks, Andy. Overall, we saw strong performance in the fourth quarter. Worldwide revenue was $170 billion, representing an increase of 13% year-over-year, excluding the impact of foreign exchange and approximately $3 billion above the top end of our guidance range. Saw our highest quarterly worldwide operating income ever, which was $13.2 billion for the quarter, an increase of $10.5 billion year-over-year and $2.2 billion above the high end of our guidance range. For the full year 2023, we had a meaningful improvement across our financial results. Revenue was $574.8 billion, an increase of 12% year-over-year, excluding the impact of foreign exchange. Operating income tripled year-over-year to $36.9 billion. Trailing 12-month free cash flow adjusted for equipment finance leases was $35.5 billion, up $48.3 billion versus last year. These financial outputs are a result of a lot of improvements in our key input metrics such as stores' cost to serve, which decreased year-over-year for the first time since 2018 and our ability to deliver to customers at our fastest speeds ever. I want to thank our customers, our partners and our teammates around the world for a very strong 2023 performance. Focusing on the fourth quarter, North America revenue was $105.5 billion, an increase of 13% year-over-year and an acceleration of 200 basis points compared to Q3. International revenue was $40.2 billion, an increase of 13% year-over-year, excluding the impact of foreign exchange, also an acceleration of 200 basis points compared to Q3. During the quarter, we remained focused on the inputs that matter most to our customers, price, selection and convenience. Our shopping events throughout the quarter included Prime Big Deal Days in October and our extended Black Friday and Cyber Monday shopping event helped to attract new Prime members and deliver billions in savings for customers. We made meaningful progress on delivery speeds in the United States and globally, which helped strong sales throughout the quarter, including notable strength in the last-minute gifting where our ability to provide fast shipping helped our Prime members ensure that they got their gifts before the holidays. These improvements in delivery speed have led to increased purchase frequency by our Prime members across all of our major geographies. It also strengthened demand for our everyday essentials. Categories like beauty and health and personal care, where speed is even more important to customers. Third-party sellers were a big part of our success over the holidays with worldwide third-party seller services revenue growing at 19% year-over-year, excluding the impact of foreign exchange. And worldwide third-party seller unit mix was 61%, its highest level ever. We also saw strong performance in worldwide advertising, which grew 26% year-over-year, excluding the impact of foreign exchange. The strength in advertising was primarily driven by sponsored products as our teams worked hard to increase the relevancy of the ads we show customers by leveraging machine learning. Advertising only works if the ads are helpful to customers and there's a lot of value in tailoring sponsored products, so they are relevant to what a customer is actually searching for. We're also continually focused on improving our measurement capabilities, which allow brands to see the payback of their advertising spend. Shifting to profitability. North America segment operating income was $6.5 billion, an increase of $6.7 billion year-over-year, resulting in an operating margin of 6.1%, up 120 basis points quarter-over-quarter. Since North America operating margins were at their recent low levels in Q1 of 2022, we have now seen seven consecutive quarters of improvement resulting in a cumulative improvement of 800 basis points over these past seven quarters. In addition to the strong top line growth, which helped to drive improved leverage throughout our businesses, we continue to make progress on reducing our cost to serve. The fourth quarter is our busiest time of year, supported by an increasingly large and integrated operations network. Overall, our teams executed extremely well, yielding strong efficiency gains with minimal disruptions. We were pleased with the performance of our regionalized network during the holiday period, where we saw benefits from improved inventory placement helping drive faster speeds and also lowering costs. We also continue to see benefits from lower transportation rates, which include linehaul, ocean and rail and from a more stable labor market, resulting in improved staffing levels. In our International segment, we had an operating loss of $419 million, an improvement of $1.8 billion year-over-year. This improvement was primarily driven by lowering our cost to serve through increased units per box, lower transportation rates and leverage across our fixed costs as we continue to focus on customer inputs and improve efficiencies within our operations. The International segment represents more than 20 countries of varying degrees of growth and our largest established countries like the U.K., Germany and Japan, relatively strong revenue growth contributed to the year-over-year improvement in profitability. Additionally, we saw good progress in our emerging countries as they continued to expand their customer offerings, while seeking to invest wisely. Moving to AWS. Revenues were $24.2 billion, an increase of 13% year-over-year. On a quarter-over-quarter basis, we added more than $1.1 billion of revenue in AWS as customers are continuing to shift their focus towards driving innovation and bringing new workloads to the cloud. Similar to what we shared last quarter, we continue to see the diminishing impact of cost optimizations. And as these optimization slow down, we're seeing more companies turning their attention to newer initiatives and reaccelerating existing migrations. Customers are also excited about our approach to generative AI. Still relatively early days, but the revenues are accelerating rapidly across all 3 layers and our approach to democratizing AI is resonating well with our customers. We have seen significant interest from our customers wanting to run generative AI applications and build large language models and foundation models, all with the privacy, reliability and security they have grown accustomed to with AWS. AWS' operating income was $7.2 billion, an increase of $2 billion year-over-year. Our operating margin for the quarter was 29.6%, up more than 500 basis points year-over-year and effectively flat on a quarter-over-quarter basis. This margin improvement reflects our headcount reductions from earlier in the year and a slowdown in the pace of hiring. Shifting to free cash flow. On a trailing 12-month basis, free cash flow adjusted for finance leases was $35.5 billion, an improvement of $48.3 billion year-over-year. The largest driver of the improvement in free cash flow is our increased operating income, which we are seeing across all three of our segments. We're also seeing improvements in working capital, notably in inventory efficiency driven by our regionalization efforts. Next, let's turn to capital investments. We define our capital investments as a combination of CapEx plus equipment finance leases. In 2023, full year CapEx was $48.4 billion, which was down $10.2 billion year-over-year, primarily driven by lower spend on fulfillment and transportation. As we look forward to 2024, we anticipate CapEx to increase year-over-year, primarily driven by increased infrastructure CapEx, support growth of our AWS business, including additional investments in generative AI and large language models. One thing I'd like to highlight in our first quarter guidance is that we recently completed a useful life study for our servers and we are increasing the useful life from 5 years to 6 years beginning in January 2024. We will have this anticipated benefit to our operating income of approximately $900 million in Q1, which is included in our operating income guidance. As we turn the calendar to 2024, we are excited to continue upon the great work the teams have been able to deliver in 2023. We remain focused on streamlining and prioritizing projects in an effective way that reduces costs and also allows us to continue innovating and inventing for customers. With that, let's move on to questions.","evidence_gemma_new":"AWS' operating income","evidence_llama_3_3":"AWS operating income","evidence_qwen_3_30b":"AWS operating income fourth quarter","gemma_new_max":7200000000.0,"gemma_new_min":7200000000.0,"llama_3_3_max":7200000000.0,"llama_3_3_min":7200000000.0,"qwen_3_30b_max":7200000000.0,"qwen_3_30b_min":7200000000.0}
{"symbol":"AMZN","year":2024,"quarter":1,"date":"2024-Q1","chunk_id":4,"sub_chunk_id":0,"centroid_label":"aws segment aws operating income","agreed_value":9400000000.0,"count":3,"chunk":"We remain focused on the inputs that matter most to our customers: selection, price, and convenience. During the quarter, around the world, we helped customers save with our shopping events. We added selection, including premium and luxury brands, and we delivered our fastest speeds ever for Prime members. Third-party sellers continue to be an important part of our offering. Third-party seller services revenue increased 16% year-over-year, excluding the impact of foreign exchange. We saw strong 3P unit growth, coupled with increased adoption of our optional services, such as fulfillment and global logistics. For the quarter, third-party seller unit mix was 61%, up 200 basis points year-over-year. Shifting to profitability, North America segment operating income was $5 billion, an increase of $4.1 billion year-over-year. Operating margin was 5.8%, up 460 basis points year-over-year. We saw improvements in our cost to serve, including continued benefit from our work to regionalize our operations, savings from more consolidated customer shipments, and improved leverage driven by strong unit growth and lower transportation rates. In our international segment, operating income was $903 million, an improvement of $2.2 billion year-over-year. Operating margin was 2.8%, up 710 basis points year-over-year. This is primarily driven by our established countries as we improve cost efficiencies through network design enhancements and improved volume leverage. Additionally, we saw good progress in our emerging countries as they expand their customer offerings and make strides on their respective journeys to profitability. Looking ahead, we see several opportunities to further lower cost to serve and improved profitability in our worldwide stores business while still investing to improve the customer experience. Within our fulfillment network, we are focused on investing in our inbound network, streamlining and standardizing process paths, and adding robotics and automation. These improvement opportunities will take time. However, we have a solid plan in place and we like the path we're on. Advertising remains an important contributor to profitability in North America and international segments. We see many opportunities to grow our offerings, both in the areas that are driving growth today like sponsored products and in areas that are newer, like streaming TV ads. Moving to AWS. Revenue was $25 billion, an increase of 17% year-over-year, and AWS is now a $100 billion annualized revenue run rate business. Excluding the impact from leap year, AWS revenue increased approximately 16% year-over-year. During the first quarter, we saw growth in both generative AI and non-generative AI workloads across a diverse group of customers and across industries as companies are shifting their focus towards driving innovation and bringing new workloads to the cloud. Additionally, we continue to see the impact of cost optimizations diminish. While there always be a level of ongoing optimization, we think the majority of the recent cycle is behind us, and we're likely closer to a steady state of these optimization efforts. AWS operating income was $9.4 billion, an increase of $4.3 billion year-over-year. As a reminder, these results include the impact from the change in the estimated useful life of our servers, which primarily benefits the AWS segment. We made progress in managing our infrastructure and fixed costs while still growing at a healthy rate, which has resulted in improved leverage. As we've said in the past, over time, we expect the AWS operating margins to fluctuate, driven in part by the level of investments we are making in the business. We remain focused on driving efficiencies across the business, which enables us to invest to support the strong growth we're seeing in AWS, including generative AI, which brings us to capital investments. As a reminder, we define these as the combination of CapEx plus equipment finance leases. In 2023, overall capital investments were $48.4 billion. As I mentioned, we're seeing strong AWS demand in both generative AI and our non-generative AI workloads, with customers signing up for longer deals and making bigger commitments. It's still relatively early days in generative AI and more broadly, the cloud space, and we see sizable opportunity for growth. We anticipate our overall capital expenditures to meaningfully increase year-over-year in 2024, primarily driven by higher infrastructure CapEx to support growth in AWS, including generative AI. Turning to our revenue guidance for Q2. Net sales are expected to be between $144 billion and $149 billion or to grow between 7% and 11% compared with the second quarter of 2023. We saw an unfavorable impact from year-over-year changes in foreign exchange in our Q1 results, and we expect that headwind to grow in the second quarter. Our Q2 net sales guidance anticipates an unfavorable foreign exchange impact of approximately 60 basis points. As part of our guidance considerations, we also continue to keep an eye on consumer spending and macro level trends, specifically in Europe where it appears to be a bit weaker relative to the U.S. Operating income is expected to be between $10 billion and $14 billion in Q2. This estimate includes the impact of our seasonal step-up in stock-based compensation expense, driven by the timing of our annual compensation cycle. I want to thank our customers, our partners, and our teammates around the world for a very strong start to the year, and we're excited to build on this momentum. We'll remain focused on streamlining and prioritizing projects in a way that allows us to continue inventing for customers in a cost-effective way. With that, let's move on to your questions.","evidence_gemma_new":"AWS operating income year-over-year","evidence_llama_3_3":"AWS operating income year-over-year","evidence_qwen_3_30b":"AWS operating income $9.4 billion year-over-year","gemma_new_max":9400000000.0,"gemma_new_min":9400000000.0,"llama_3_3_max":9400000000.0,"llama_3_3_min":9400000000.0,"qwen_3_30b_max":9400000000.0,"qwen_3_30b_min":9400000000.0}
{"symbol":"AMZN","year":2024,"quarter":2,"date":"2024-Q2","chunk_id":3,"sub_chunk_id":0,"centroid_label":"aws segment aws operating income","agreed_value":9300000000.0,"count":3,"chunk":"Brian Olsavsky : Thanks, Andy. Let's start with our top line financial results. Worldwide revenue was $148 billion, an 11% increase year-over-year, excluding the impact of foreign exchange. This equates to a $1 billion headwind from foreign exchange in the quarter, which is about $300 million higher than we'd anticipated in our Q2 guidance range. Worldwide operating income nearly doubled year-over-year to $14.7 billion, which was $700 million above the high end of our guidance range. Across all of our segments, we remain focused on managing costs in a way that allows us to continue innovating and investing in areas that we think could move the needle for our customers. Starting with the North American international segments, customers continue to respond positively to our focus on low prices, broad selection, and fast shipping offers. We delivered at our fastest speeds ever so far this year, which helps drive strength in areas like our everyday essentials. These include items like non-perishable foods, as well as health, beauty, and personal care items. And Prime members continue to increase their shopping frequency while growing their spend on Amazon. Overall unit sales grew 11% year-over-year, which is consistent with our growth rates in Q1 after you adjust for the approximately 100 basis point impact of leap year. North America segment revenue was $90 billion, an increase of 9% year-over-year. And international segment revenue was $31.7 billion, an increase of 10% year-over-year, excluding the impact of foreign exchange. North America segment operating income was $5.1 billion, an increase of $1.9 billion year-over-year. Operating margin was 5.6%, up 170 basis points year-over-year, and down 20 basis points quarter over quarter. If we look at profitability of the core North America stores business, we actually improved our margin again quarter-over-quarter in Q2. The overall North America segment operating margin decreased slightly due to increased Q2 spend in some of our investment areas, including Kuiper, where we're starting to manufacture satellites we'll launch into space in Q4. We saw improvements in our cost to serve, driven by our efforts to place inventory more regionally, closer to where our customers are. This resulted in more consolidated shipments, with higher units per box shipped. We also saw packages traveling shorter distances to customers, and this also led to better on-road productivity in our transportation network. Our international segment was profitable again in Q2, with operating income of $300 million, an improvement of $1.2 billion year-over-year. Operating margin was 0.9%, up 390 basis points year over year. This increase is primarily driven by our established countries, as we improve our cost structure with better inventory placement and more consolidated shipments. Additionally, our emerging countries continue to expand their customer offerings, leverage their cost structure, and invest in expanding prime benefits. We are pleased with the overall progress of these countries as they make strides on their respective paths to profitability. Advertising remains an important contributor to profitability in the North America and international segments, and we saw strong growth on an increasing larger revenue base this quarter. We continue to see opportunities that further expand our offering in areas that are driving growth today, like sponsored products, as well as newer areas, like Prime Video ads. Moving next to our AWS segment, revenue is $26.3 billion, an increase of 18.8% year-over-year, excluding the impact of foreign exchange. AWS now has an annualized revenue run rate of more than $105 billion. During the second quarter, we saw continued growth across both generative AI and non-generative AI workloads. We saw companies turn their attention to newer initiatives, bring more workloads to the cloud, restart or accelerate existing migrations from on-premises to the cloud, and tap into the power of generative AI. AWS operating income was $9.3 billion, an increase of $4 billion year-over-year. It's driven by our continued focus on cost control, including a measured pace of hiring. Additionally, AWS operating margin includes an approximately 200 basis point favorable impact from the change in the estimated useful life of our servers that we instituted in Q1. As we've long said, we expect AWS operating margins to fluctuate over time, driven in part by the level of investments we're making at any point in time. We remain focused on driving efficiencies across the business, which enables us to invest to support the strong growth we're seeing in AWS, including generative AI. Now let's turn our attention to capital investments. As a reminder, we define these as a combination of CapEx plus equipment finance leases. For the first half of the year, CapEx was $30.5 billion. Looking ahead to the rest of 2024, we expect capital investments to be higher in the second half of the year. The majority of the spend will be to support the growing need for AWS infrastructure as we continue to see strong demand in both generative AI and our non-generative AI workloads. For the third quarter, specifically, I'd highlight a few seasonal factors to keep in mind. First, we hosted another successful Prime Day in mid-July. It was our 10th Prime Day and was our largest ever. Prime members globally saved billions of dollars on deals across every product category. From a profitability perspective, we've historically seen a headwind to operating margin in Q3, driven by Prime Day deals, as well as the marketing spend surrounding the event. Additionally, in Q3, we also begin to ramp up our capacity to handle Q4 holiday volumes in our fulfillment network. And lastly, we expect an increase in digital content cost quarter-over-quarter from the return of our NFL Thursday Night Football. We remain heads down, focused on driving a better customer experience. We believe putting customers first is the only reliable way to create lasting value for our shareholders. With that, let's move on to your questions.","evidence_gemma_new":"AWS operating income year-over-year","evidence_llama_3_3":"AWS segment operating income","evidence_qwen_3_30b":"AWS operating income year-over-year","gemma_new_max":9300000000.0,"gemma_new_min":9300000000.0,"llama_3_3_max":9300000000.0,"llama_3_3_min":9300000000.0,"qwen_3_30b_max":9300000000.0,"qwen_3_30b_min":9300000000.0}
{"symbol":"AMZN","year":2024,"quarter":3,"date":"2024-Q3","chunk_id":3,"sub_chunk_id":0,"centroid_label":"aws segment aws operating income","agreed_value":10400000000.0,"count":2,"chunk":"Brian Olsavsky: Thanks, Andy. Let's start with our top line financial results. Worldwide revenue was $158.9 billion, an 11% increase year-over-year, excluding a 20 basis point unfavorable impact of foreign exchange. As a reminder, our Q3 guidance had anticipated a larger unfavorable impact of approximately 90 basis points. Worldwide operating income increased 56% year-over-year to $17.4 billion, our highest quarterly operating income ever and was $2.4 billion above the high end of our guidance range. We remain focused on streamlining and managing costs in a way that allows us to continue inventing for customers in a cost-effective way. In the third quarter, North America segment revenue was $95.5 billion, an increase of 9% year-over-year. International segment revenue was $35.9 billion, an increase of 12% year-over-year. Worldwide paid units accelerated to 12% growth year-over-year as our customers continue to come to Amazon for low prices, broad selection and convenient fast delivery. Prime remains a core contributor to this growth. Year-over-year paid membership growth accelerated in Q3 from both the US and globally, helped by our tenth annual Prime Day event in mid-July. Customers are enjoying even faster delivery speeds, which also helps drive strong growth in items like everyday essentials. This includes items like health, beauty, and personal care as well as nonperishable grocery. Though all these items often have a lower average selling price, the strength in everyday essential's revenue is a positive indicator that customers are turning to us for more of their daily needs. We see that when customers purchase these types of items from us, they build bigger baskets, shop more frequently and spend more on Amazon. We remain focused on keeping prices sharp and offering broad selection that gives customers options when making purchase decisions. Shifting to profitability. Our North America and international segments each delivered their seventh consecutive quarter of year-over-year operating margin improvement. North America segment operating income was $5.7 billion, an increase of $1.4 billion year-over-year. North America operating margin was 5.9%, up 100 basis points year-over-year. In the third quarter, we continue to make progress in improving our fulfillment network cost structure, driven in part by improved inventory placement. This helped us drive better productivity in our transportation network and shipping efficiency from higher units per box. In the international segment, operating income was $1.3 billion, an improvement of $1.4 billion year-over-year. International operating margin was 3.6%, up 390 basis points year-over-year. So far this year, we've generated operating profit in each of the three quarters for the international segment and totals $2.5 billion year-to-date. We're seeing strength in our established countries like the UK and Germany as we continue to drive efficiencies to improve on-road productivity in our transportation network and better execution in our fulfillment centers. Our emerging countries are growing revenue at a healthy rate also, and they are leveraging their cost structures on investing strategically in Prime benefits. We have confidence that our focus on the inputs, coupled with the strength of our global teams, will continue to drive improvement over time. Advertising remains an important contributor to profitability in the North America and international segments. This quarter, we saw strong growth on an increasing large base of advertising revenue. We see many opportunities to further expand our ads offering in areas that are driving growth today like Sponsored Products as well as more recent growth areas like Prime Video ads. Moving next to our AWS segment. Revenue was $27.5 billion, an increase of 19.1% year-over-year, excluding the impact of foreign exchange. AWS now has an annualized revenue run rate of $110 billion. The business continues to grow, mostly opportunity to expand our core cloud offering and our AI services. Customers increasingly recognize that to get the true benefit of Generative AI, they also need to move to the cloud. AWS operating income was $10.4 billion, an increase of $3.5 billion year-over-year as a result of our continued focus on cost control, including a measured pace of hiring, a focus on driving efficiencies in our infrastructure, and reducing costs across the business. Additionally, we increased the estimated useful life of our servers starting in 2024, which contributed approximately 200 basis points to the AWS margin increase year-over-year in Q3. As we said in the past, we expect the AWS operating margins to fluctuate, driven in part by the level of investments we're making at any point in time. Now turning to our capital investments. As a reminder, we define these as a combination of cash CapEx plus equipment finance leases. Year-to-date capital investments were $51.9 billion. We expect to spend approximately $75 billion in CapEx in 2024. The majority of the spend is to support the growing need for technology infrastructure. This primarily relates to AWS as we invest to support demand for our AI services while also including technology infrastructure to support our North America and international segments. Additionally, we're continuing to invest in our fulfillment and transportation network to support the growth of the business, improve delivery speeds and lower our cost to serve. This includes investments in same-day delivery facilities, in our inbound network and as well in robotics and automation. We're encouraged by the start of the holiday season, which kicked off in October with a strong Prime Big Deal Days. We are ready to serve customers throughout the season, and I want to thank our teams across Amazon for delivering two very large Prime member events in the past four months and for getting us ready to delight customers during this holiday season. With that, let's move on to your questions.","evidence_gemma_new":"AWS operating income year-over-year","evidence_llama_3_3":"AWS segment AWS operating income Q3","evidence_qwen_3_30b":null,"gemma_new_max":10400000000.0,"gemma_new_min":10400000000.0,"llama_3_3_max":10400000000.0,"llama_3_3_min":10400000000.0,"qwen_3_30b_max":null,"qwen_3_30b_min":null}
{"symbol":"AMZN","year":2024,"quarter":4,"date":"2024-Q4","chunk_id":3,"sub_chunk_id":0,"centroid_label":"aws segment aws operating income","agreed_value":10600000000.0,"count":3,"chunk":"Brian Olsavsky: Thanks, Andy. Starting with our top line financial results. Worldwide revenue was $187.8 billion, an 11% increase year over year excluding the impact of foreign exchange. This equates to an approximate $900 million headwind from FX in the Quarter, which is about $700 million higher than what we'd anticipated in our Q4 guidance range. Excluding that additional FX headwind, we would have exceeded the top end of our revenue guidance range. Worldwide operating income was $21.2 billion, our largest operating income quarter ever, and was $1.2 billion above the high end of our guidance range. Across all segments, we continue to innovate for customers while operating more efficiently at the same time. In the North America segment, fourth quarter revenue was $115.6 billion, an increase of 10% year over year. International segment revenue was $43.4 billion, an increase of 9% year over year excluding the impact of foreign exchange. Worldwide paid units grew 11% year over year, as our focus on low prices broad selection, and fast shipping continues to resonate with customers. Shifting to profitability, North America segment operating income was $9.3 billion, an increase of $2.8 billion year over year. Operating margin was 8%, up 190 basis points year over year. In the international segment, operating income was $1.3 billion, an improvement of $1.7 billion year over year, operating margin was 3%, up 400 basis points year over year. This marks the eighth consecutive quarter where we've seen year over year margin improvement in both the North Two thousand twenty-four also marks the second year in a row where we've lowered our global cost to serve on a per unit basis. In the fourth quarter, we saw strong productivity in our transportation network, from improved inventory placement, higher units per package, and reduced travel distances. We also saw improved productivity in our fulfillment centers. Overall, our teams executed extremely well throughout the quarter, and particularly during our peak seasons. I want to thank them for all they do to deliver for our customers. Looking ahead, we have several opportunities to keep lowering our costs through even better inventory placement, which also allows us to deliver items to customers faster. In the US, we're tuning our inbound network and continuing to expand our same day delivery network. Globally, we're adding automation and robotics throughout our network. While these efforts will take time to implement, and progress may not be linear, We have a good plan to continue to drive improvements in our cost structure. Advertising remains an important contributor to profitability in the North America and international segments. This quarter, we saw strong advertising revenue growth on an increasingly large base. We will also continue to invest in experiences that have potential to be important to customers in Amazon long term. In areas like Alexa, health care, and grocery, as well as satellites in the coming months. As a reminder, we currently expense the majority of the cost associated with the development of our satellite network. We will capitalize certain costs once the service achieves commercial viability, including sales to customers. Moving next to our AWS segment, revenue was $28.8 billion, an increase of 19% year over year. AWS now has an annualized revenue run rate of $115 billion. During the fourth quarter, we continue to see growth in both generative AI and non-generative AI offerings. As companies turn their attention to newer initiatives, bring more workloads to the cloud, restart or accelerate existing migrations from on-premise to the cloud, and tap into the power of generative AI. Customers recognize to get the full benefit of generative AI, they have to move to the cloud. AWS reported operating income of $10.6 billion, an increase of $3.5 billion year over year. This is the result of strong growth, innovation in our software and infrastructure to drive efficiencies, and continued focus on cost control across the business. As we've said in the past, we expect AWS operating margins to fluctuate over time, driven in part by the level of investments we're making. Additionally, we increased the estimated useful life of our servers starting in 2024, which contributed approximately 200 basis points to the AWS margin increase year over year in Q4. Now turning to our capital investments. As a reminder, we define these as a combination of cash CapEx plus equipment finance leases. Capital investments were $26.3 billion in the fourth quarter, and we think that run rate will be reasonably representative of our 2025 capital investment rate. Similar to 2024, the majority of the spend will be to support the growing need for technology infrastructure. This primarily relates to AWS, including support demand for our AI services, as well as tech infrastructure to support our North America and international segments. Additionally, we're continuing to invest in capacity for our fulfillment and transportation network to support future growth. We're also investing in same-day delivery facilities and our inbound network, as well as robotics and automation, to improve delivery speeds and to lower our cost to serve. These capital investments will support growth for many years to come. Turning to our revenue guidance for Q1, net sales are expected to be between $151 billion and $155.5 billion. I'd like to highlight two items impacting our Q1 revenue guidance. First, we estimate the year-over-year impact of changes in foreign exchange rates based on current rates, which we expect to be a headwind of approximately $2.1 billion in Q1 year over year, or 150 basis points. As a reminder, global currencies can fluctuate during the quarter, and just as we saw in Q4 with the strengthening of the dollar versus most other currencies. Second, a reminder that we are comping the impact of last year's leap year. The extra day contributed approximately $1.5 billion of additional net sales across our businesses in Q1 2024, or about 120 basis points to the year-over-year growth rate, which impacted all segments. Q1 operating income is expected to be between $14 billion and $18 billion. This guidance includes the estimated impact of certain updates to the useful life of our fixed assets. I'll provide a bit more detail in a moment, but on an aggregate basis, we estimate this will decrease full-year 2025 operating income by approximately $400 million for the assets on our balance sheet as of December 31, 2024. First, in Q4, we completed a useful life study for our servers and network equipment and observed an increased pace of technology development. Particularly in the area of artificial intelligence and machine learning. As a result, we're decreasing the useful life for a subset of our servers and networking equipment from six years to five years beginning in January 2025. We anticipate this will decrease full-year 2025 operating income by approximately $700 million. In addition, we also early-retired a subset of our servers and network equipment. We recorded a Q4 2024 expense of approximately $920 million from accelerated depreciation and related charges and expect this will also decrease full-year 2025 operating income by. Both of these server and network equipment use for life changes primarily impact our AWS segment. Lastly, we also completed a useful life study for certain types of heavy equipment used in our fulfillment centers. And are increasing the useful life from ten years to thirteen years beginning in January 2025, we anticipate this will increase full-year 2025 operating income by approximately $900 million. As we turn the page to 2025, we're energized by the great work our teams have delivered. We'll remain focused on driving even better customer experiences, and we believe putting customers first is the only reliable way to create lasting value for our shareholders. With that, let's move on to your questions.","evidence_gemma_new":"AWS operating income year over year","evidence_llama_3_3":"AWS operating income year over year","evidence_qwen_3_30b":"AWS segment reported operating income $10.6 billion increase $3.5 billion year over year","gemma_new_max":10600000000.0,"gemma_new_min":10600000000.0,"llama_3_3_max":10600000000.0,"llama_3_3_min":10600000000.0,"qwen_3_30b_max":10600000000.0,"qwen_3_30b_min":10600000000.0}
{"symbol":"AMZN","year":2023,"quarter":4,"date":"2023-FY","chunk_id":7,"sub_chunk_id":0,"centroid_label":"capex","agreed_value":48000000000.0,"count":3,"chunk":"Brian Olsavsky: And then if you look back at the revenue growth, it accelerated to 13.2% in Q4 as we just mentioned. That was an acceleration. We expect accelerating trends to continue into 2024. We're excited about the migrate -- continuous their resumption, I guess, of migrations that companies may have put on hold during 2023 in some cases and interest in our generative AI and products, like Bedrock and as Andy was describing that. On the CapEx side, let me talk in total for the company. We had $48 billion in 2023 was down $10 billion year-over-year. We talked about during the year quite a bit. A lot of the mix of investment in 2023 was tied to infrastructure, mostly supporting AWS but also supporting our core Amazon businesses was about 60% of our spend. So it reached a very high percentage. We anticipate those trends continuing into 2024. CapEx will go up in 2024. I'm not giving a number today, but we do -- we're still working through plans for the year, but we do expect CapEx to rise as we add capacity in AWS for region expansions, but primarily the work we're doing with generative AI projects. In the fulfillment center and logistics area, I would say it's more incremental capacity at this point based on additional demand, although we are seeing some additional investments for same-day delivery sites and automation, robotics. But the trend for most of the large percentage of the spend will be in infrastructure is going to continue into 2024.","evidence_gemma_new":"CapEx 2023","evidence_llama_3_3":"CapEx 2023","evidence_qwen_3_30b":"CapEx full year 2023","gemma_new_max":48000000000.0,"gemma_new_min":48000000000.0,"llama_3_3_max":48000000000.0,"llama_3_3_min":48000000000.0,"qwen_3_30b_max":48400000000.0,"qwen_3_30b_min":48400000000.0}
{"symbol":"AMZN","year":2023,"quarter":1,"date":"2023-Q1","chunk_id":6,"sub_chunk_id":0,"centroid_label":"capex","agreed_value":59000000000.0,"count":3,"chunk":"Brian Olsavsky: This is Brian. I\u2019ll take the first -- the second part of that question first. On CapEx, we spent $59 million -- $59 billion, excuse me, last year. And we -- on our core fulfillment and transportation areas, we actually are spending less year-over-year, and those estimates are going down. The GAAP or the increases in AWS and infrastructure and we are adding more dollars to the -- for Large Language Models and generative AI. So, we\u2019re creating some space in our fulfillment and transportation number that has been repurposed over to AWS. We still think the combined CapEx will be lower year-over-year.","evidence_gemma_new":"CapEx last year","evidence_llama_3_3":"CapEx","evidence_qwen_3_30b":"CapEx last year","gemma_new_max":59000000000.0,"gemma_new_min":59000000000.0,"llama_3_3_max":59000000000.0,"llama_3_3_min":59000000000.0,"qwen_3_30b_max":59000000000.0,"qwen_3_30b_min":59000000000.0}
{"symbol":"AMZN","year":2024,"quarter":3,"date":"2024-FY","chunk_id":3,"sub_chunk_id":0,"centroid_label":"capex","agreed_value":75000000000.0,"count":2,"chunk":"Brian Olsavsky: Thanks, Andy. Let's start with our top line financial results. Worldwide revenue was $158.9 billion, an 11% increase year-over-year, excluding a 20 basis point unfavorable impact of foreign exchange. As a reminder, our Q3 guidance had anticipated a larger unfavorable impact of approximately 90 basis points. Worldwide operating income increased 56% year-over-year to $17.4 billion, our highest quarterly operating income ever and was $2.4 billion above the high end of our guidance range. We remain focused on streamlining and managing costs in a way that allows us to continue inventing for customers in a cost-effective way. In the third quarter, North America segment revenue was $95.5 billion, an increase of 9% year-over-year. International segment revenue was $35.9 billion, an increase of 12% year-over-year. Worldwide paid units accelerated to 12% growth year-over-year as our customers continue to come to Amazon for low prices, broad selection and convenient fast delivery. Prime remains a core contributor to this growth. Year-over-year paid membership growth accelerated in Q3 from both the US and globally, helped by our tenth annual Prime Day event in mid-July. Customers are enjoying even faster delivery speeds, which also helps drive strong growth in items like everyday essentials. This includes items like health, beauty, and personal care as well as nonperishable grocery. Though all these items often have a lower average selling price, the strength in everyday essential's revenue is a positive indicator that customers are turning to us for more of their daily needs. We see that when customers purchase these types of items from us, they build bigger baskets, shop more frequently and spend more on Amazon. We remain focused on keeping prices sharp and offering broad selection that gives customers options when making purchase decisions. Shifting to profitability. Our North America and international segments each delivered their seventh consecutive quarter of year-over-year operating margin improvement. North America segment operating income was $5.7 billion, an increase of $1.4 billion year-over-year. North America operating margin was 5.9%, up 100 basis points year-over-year. In the third quarter, we continue to make progress in improving our fulfillment network cost structure, driven in part by improved inventory placement. This helped us drive better productivity in our transportation network and shipping efficiency from higher units per box. In the international segment, operating income was $1.3 billion, an improvement of $1.4 billion year-over-year. International operating margin was 3.6%, up 390 basis points year-over-year. So far this year, we've generated operating profit in each of the three quarters for the international segment and totals $2.5 billion year-to-date. We're seeing strength in our established countries like the UK and Germany as we continue to drive efficiencies to improve on-road productivity in our transportation network and better execution in our fulfillment centers. Our emerging countries are growing revenue at a healthy rate also, and they are leveraging their cost structures on investing strategically in Prime benefits. We have confidence that our focus on the inputs, coupled with the strength of our global teams, will continue to drive improvement over time. Advertising remains an important contributor to profitability in the North America and international segments. This quarter, we saw strong growth on an increasing large base of advertising revenue. We see many opportunities to further expand our ads offering in areas that are driving growth today like Sponsored Products as well as more recent growth areas like Prime Video ads. Moving next to our AWS segment. Revenue was $27.5 billion, an increase of 19.1% year-over-year, excluding the impact of foreign exchange. AWS now has an annualized revenue run rate of $110 billion. The business continues to grow, mostly opportunity to expand our core cloud offering and our AI services. Customers increasingly recognize that to get the true benefit of Generative AI, they also need to move to the cloud. AWS operating income was $10.4 billion, an increase of $3.5 billion year-over-year as a result of our continued focus on cost control, including a measured pace of hiring, a focus on driving efficiencies in our infrastructure, and reducing costs across the business. Additionally, we increased the estimated useful life of our servers starting in 2024, which contributed approximately 200 basis points to the AWS margin increase year-over-year in Q3. As we said in the past, we expect the AWS operating margins to fluctuate, driven in part by the level of investments we're making at any point in time. Now turning to our capital investments. As a reminder, we define these as a combination of cash CapEx plus equipment finance leases. Year-to-date capital investments were $51.9 billion. We expect to spend approximately $75 billion in CapEx in 2024. The majority of the spend is to support the growing need for technology infrastructure. This primarily relates to AWS as we invest to support demand for our AI services while also including technology infrastructure to support our North America and international segments. Additionally, we're continuing to invest in our fulfillment and transportation network to support the growth of the business, improve delivery speeds and lower our cost to serve. This includes investments in same-day delivery facilities, in our inbound network and as well in robotics and automation. We're encouraged by the start of the holiday season, which kicked off in October with a strong Prime Big Deal Days. We are ready to serve customers throughout the season, and I want to thank our teams across Amazon for delivering two very large Prime member events in the past four months and for getting us ready to delight customers during this holiday season. With that, let's move on to your questions.","evidence_gemma_new":"capex 2024","evidence_llama_3_3":null,"evidence_qwen_3_30b":"expect capex 2024","gemma_new_max":75000000000.0,"gemma_new_min":75000000000.0,"llama_3_3_max":null,"llama_3_3_min":null,"qwen_3_30b_max":75000000000.0,"qwen_3_30b_min":75000000000.0}
{"symbol":"AMZN","year":2024,"quarter":1,"date":"2024-Q1","chunk_id":7,"sub_chunk_id":0,"centroid_label":"capex","agreed_value":14000000000.0,"count":3,"chunk":"Brian Olsavsky: Doug, yes, we have historically always mentioned that. You have seen like a pendulum shift sometimes between profitability and investment. I think we're at the stage now where we're doing both at the same time continually, so we are more apt to talk about the specific investments that we're making and how that might impact our short-term outlook. So if you look at the progress we've made on operating income and free cash flow over really the last 18 months, a lot of it's driven by improvements in our stores business, lower cost to serve. We've talked about regionalization efforts and how that's moving into inbound areas now. Advertising has been growing strong and AWS has been strong. And you saw AWS margins increased 800 basis points sequentially off Q4. A lot of that's driven by cost controls and expanding revenue on the top line and lower cost structure throughout the company. We do see, though, on the CapEx side that we will be meaningfully stepping up our CapEx and the majority of that will be in our -- to support AWS infrastructure and specifically generative AI efforts. So I would expect that, that will increase -- it will increase depreciation, definitely in that segment. On the -- well, we're talking about CapEx. Right now, in Q1, we had $14 billion of CapEx. We expect that to be the low quarter for the year. As Andy said earlier, we are seeing strong demand signals from our customers and longer deals and larger commitments, many with generative AI components. So those signals are giving us confidence in our expansion of capital in this area. And as he also mentioned, we've done this for 18 years. We invest capital and resources upfront. We create capacity very carefully for our customers. And then we see the revenue, operating income and free cash flow benefit for years to come after that, with strong returns on invested capital. So a little bit of a long-winded answer to your question. But yes, we have -- the main issue that we'll see in the near term is additional CapEx and we've talked about that. And we continue to see strong CapEx performance in our stores business. Most of that will be related to modest capital or capacity increases, in addition to our same-day fulfillment network and some Amazon Logistics upgrades to the fleet. But for the most part, what you'll see is really going to be on the AWS side.","evidence_gemma_new":"CapEx Q1","evidence_llama_3_3":"CapEx Q1","evidence_qwen_3_30b":"CapEx Q1 low quarter for the year","gemma_new_max":14000000000.0,"gemma_new_min":14000000000.0,"llama_3_3_max":14000000000.0,"llama_3_3_min":14000000000.0,"qwen_3_30b_max":14000000000.0,"qwen_3_30b_min":14000000000.0}
{"symbol":"AMZN","year":2024,"quarter":2,"date":"2024-Q1","chunk_id":3,"sub_chunk_id":0,"centroid_label":"capex","agreed_value":30500000000.0,"count":2,"chunk":"Brian Olsavsky : Thanks, Andy. Let's start with our top line financial results. Worldwide revenue was $148 billion, an 11% increase year-over-year, excluding the impact of foreign exchange. This equates to a $1 billion headwind from foreign exchange in the quarter, which is about $300 million higher than we'd anticipated in our Q2 guidance range. Worldwide operating income nearly doubled year-over-year to $14.7 billion, which was $700 million above the high end of our guidance range. Across all of our segments, we remain focused on managing costs in a way that allows us to continue innovating and investing in areas that we think could move the needle for our customers. Starting with the North American international segments, customers continue to respond positively to our focus on low prices, broad selection, and fast shipping offers. We delivered at our fastest speeds ever so far this year, which helps drive strength in areas like our everyday essentials. These include items like non-perishable foods, as well as health, beauty, and personal care items. And Prime members continue to increase their shopping frequency while growing their spend on Amazon. Overall unit sales grew 11% year-over-year, which is consistent with our growth rates in Q1 after you adjust for the approximately 100 basis point impact of leap year. North America segment revenue was $90 billion, an increase of 9% year-over-year. And international segment revenue was $31.7 billion, an increase of 10% year-over-year, excluding the impact of foreign exchange. North America segment operating income was $5.1 billion, an increase of $1.9 billion year-over-year. Operating margin was 5.6%, up 170 basis points year-over-year, and down 20 basis points quarter over quarter. If we look at profitability of the core North America stores business, we actually improved our margin again quarter-over-quarter in Q2. The overall North America segment operating margin decreased slightly due to increased Q2 spend in some of our investment areas, including Kuiper, where we're starting to manufacture satellites we'll launch into space in Q4. We saw improvements in our cost to serve, driven by our efforts to place inventory more regionally, closer to where our customers are. This resulted in more consolidated shipments, with higher units per box shipped. We also saw packages traveling shorter distances to customers, and this also led to better on-road productivity in our transportation network. Our international segment was profitable again in Q2, with operating income of $300 million, an improvement of $1.2 billion year-over-year. Operating margin was 0.9%, up 390 basis points year over year. This increase is primarily driven by our established countries, as we improve our cost structure with better inventory placement and more consolidated shipments. Additionally, our emerging countries continue to expand their customer offerings, leverage their cost structure, and invest in expanding prime benefits. We are pleased with the overall progress of these countries as they make strides on their respective paths to profitability. Advertising remains an important contributor to profitability in the North America and international segments, and we saw strong growth on an increasing larger revenue base this quarter. We continue to see opportunities that further expand our offering in areas that are driving growth today, like sponsored products, as well as newer areas, like Prime Video ads. Moving next to our AWS segment, revenue is $26.3 billion, an increase of 18.8% year-over-year, excluding the impact of foreign exchange. AWS now has an annualized revenue run rate of more than $105 billion. During the second quarter, we saw continued growth across both generative AI and non-generative AI workloads. We saw companies turn their attention to newer initiatives, bring more workloads to the cloud, restart or accelerate existing migrations from on-premises to the cloud, and tap into the power of generative AI. AWS operating income was $9.3 billion, an increase of $4 billion year-over-year. It's driven by our continued focus on cost control, including a measured pace of hiring. Additionally, AWS operating margin includes an approximately 200 basis point favorable impact from the change in the estimated useful life of our servers that we instituted in Q1. As we've long said, we expect AWS operating margins to fluctuate over time, driven in part by the level of investments we're making at any point in time. We remain focused on driving efficiencies across the business, which enables us to invest to support the strong growth we're seeing in AWS, including generative AI. Now let's turn our attention to capital investments. As a reminder, we define these as a combination of CapEx plus equipment finance leases. For the first half of the year, CapEx was $30.5 billion. Looking ahead to the rest of 2024, we expect capital investments to be higher in the second half of the year. The majority of the spend will be to support the growing need for AWS infrastructure as we continue to see strong demand in both generative AI and our non-generative AI workloads. For the third quarter, specifically, I'd highlight a few seasonal factors to keep in mind. First, we hosted another successful Prime Day in mid-July. It was our 10th Prime Day and was our largest ever. Prime members globally saved billions of dollars on deals across every product category. From a profitability perspective, we've historically seen a headwind to operating margin in Q3, driven by Prime Day deals, as well as the marketing spend surrounding the event. Additionally, in Q3, we also begin to ramp up our capacity to handle Q4 holiday volumes in our fulfillment network. And lastly, we expect an increase in digital content cost quarter-over-quarter from the return of our NFL Thursday Night Football. We remain heads down, focused on driving a better customer experience. We believe putting customers first is the only reliable way to create lasting value for our shareholders. With that, let's move on to your questions.","evidence_gemma_new":"CapEx first half of the year","evidence_llama_3_3":null,"evidence_qwen_3_30b":"CapEx first half of the year","gemma_new_max":30500000000.0,"gemma_new_min":30500000000.0,"llama_3_3_max":null,"llama_3_3_min":null,"qwen_3_30b_max":30500000000.0,"qwen_3_30b_min":30500000000.0}
{"symbol":"AMZN","year":2024,"quarter":4,"date":"2024-Q4","chunk_id":6,"sub_chunk_id":0,"centroid_label":"capex","agreed_value":26300000000.0,"count":2,"chunk":"Brian Olsavsky: So I'll take both of those, Andy. On the CapEx side, as Brian mentioned earlier, we spent $26.3 billion in CapEx in Q4. And I think that is reasonably representative of what you can expect in the annualized CapEx rate in 2025. The vast majority of that CapEx spend is on AI for AWS. It's, you know, the way the AWS business works, the way the cash cycle works is that the faster we grow, the more CapEx we end up spending because we have to procure data center and hardware and chips and networking gear ahead of when we're able to monetize it. We don't procure it unless we see significant signals of demand. And so when AWS is expanding its CapEx, particularly in what we think is one of these once-in-a-lifetime type of business opportunities like AI represents, I think it's actually quite a good sign medium to long-term for the AWS business. And I actually think that spending this capital to pursue this opportunity, which, you know, from our perspective, we think virtually every application that we know of today is gonna be reinvented with AI in inside of it. And with inference being a core building block just like compute and storage and database, if you believe that plus that altogether new experiences that we've only dreamed about are gonna actually be available to us with AI, AI represents for sure the biggest opportunity since cloud probably the biggest technology shift and opportunity in business since the internet. And so I think that both our business, our customers, and shareholders will be happy medium to long term that we're pursuing the capital opportunity and the business opportunity in AI. We also have CapEx that we're spending this year in our stores business, really with an aim towards trying to continue to improve the delivery speed and our cost to serve. And so you'll see us expanding the number of same-day facilities from where we are right now. You'll also see us expand the number of delivery stations that we have in rural areas so we can get items to people who live in rural areas much more quickly. And then a pretty significant investment as well on robotics and automation so we can take our cost to serve down and continue to improve our productivity. So that's the CapEx piece. I think the second question you asked, Mark, is really around AWS growth and whether this is being moderated down at all by supply chain constraints. What you know, it's it is hard to complain when you have a multibillion-dollar annualized revenue run rate business in AI, like we do. And it's growing triple-digit percentage year over year. It's hard to complain. However, it is true that we could be growing faster if not for some of the constraints on capacity. And they come in the form of, you know, I would say, chips from our third-party partners coming a little bit slower than before with a lot of midstream changes. It takes a little bit of time to get the hardware actually yielding the percentage healthy and high-quality servers we expect. It comes with our own big new launch of our own hardware and our own chips in Tranium two, which we just went to general availability at reInvent, but the majority of the volume is coming in really over the next couple of quarters, the next few months. It comes in the form of power constraints where I think, you know, the world is still constrained on power from where I think we all believe we could serve customers if we were unconstrained. There are some components in the supply chain like motherboards that are a little bit short in supply for various types of servers. So, you know, I think the team has done a really good job scrapping and providing capacity for our customers so they can grow. We're still growing a pretty reasonable clip as I mentioned earlier. But I do think we could be growing faster if we were unconstrained. I predict those constraints really start to relax in the second half of '25, and, you know, as I said, I think we could be growing faster even though we're growing at a pretty good clip.","evidence_gemma_new":"CapEx Q4","evidence_llama_3_3":null,"evidence_qwen_3_30b":"CapEx Q4","gemma_new_max":26300000000.0,"gemma_new_min":26300000000.0,"llama_3_3_max":null,"llama_3_3_min":null,"qwen_3_30b_max":26300000000.0,"qwen_3_30b_min":26300000000.0}
{"symbol":"AMZN","year":2024,"quarter":4,"date":"2025-FY","chunk_id":5,"sub_chunk_id":0,"centroid_label":"capex","agreed_value":100000000000.0,"count":3,"chunk":"Mark Mahaney: Thanks. Two quick questions. So, Brian, that's $100 billion CapEx we should think about in 2025. And then, Andy, were there any\u2014so would you describe that AWS growth as being currently moderated down by supply constraints. Do you see those across the industry, or do you see those materially impacting AWS today? Thank you very much.","evidence_gemma_new":"CapEx 2025","evidence_llama_3_3":"CapEx 2025","evidence_qwen_3_30b":"CapEx 2025","gemma_new_max":100000000000.0,"gemma_new_min":100000000000.0,"llama_3_3_max":100000000000.0,"llama_3_3_min":100000000000.0,"qwen_3_30b_max":100000000000.0,"qwen_3_30b_min":100000000000.0}
{"symbol":"AMZN","year":2023,"quarter":3,"date":"2023-FY","chunk_id":3,"sub_chunk_id":0,"centroid_label":"capital investments","agreed_value":50000000000.0,"count":2,"chunk":"Brian Olsavsky: Thanks, Andy. Overall, we saw a strong performance in the third quarter. Worldwide revenue was $143.1 billion, representing an increase of 11% year-over-year, excluding the impact of foreign exchange and approximately $100 million above the top end of our guidance range. We saw our highest quarterly worldwide operating income ever which was $11.2 billion for the quarter, an increase of $8.7 billion year-over-year from $2.7 billion above the high end of our guidance range. North America revenue was $87.9 billion, an increase of 11% year-over-year. And international revenue was $32.1 billion, an increase of 11% year-over-year, excluding foreign exchange. During the quarter, we held our biggest Prime Day event ever with prime members purchasing more than 375 million items worldwide and saving more than $2.5 billion on millions of deals across the Amazon store. Outside of Prime Day, we continue to see strong demand across everyday essentials, including categories like beauty and health and personal care. From a customer behavior standpoint, we still see customers remaining cautious about price, trading down where they can and seeking out deals, coupled with lower spending on discretionary items. Building on the momentum from last quarter, we set another record for delivery speed. For the year-to-date period through the third quarter, we have delivered at the fastest speeds ever in the United States. These improvements in delivery speeds have been a key driver of growth and are resulting in increased purchase frequency by our Prime members. Third-party sellers grew at 18% year-over-year, excluding foreign exchange, primarily driven by selection expansion and growing adoption of our optional services for sellers, including Fulfillment by Amazon and paid account management and more. During the quarter, we hosted Amazon Accelerate, our annual seller conference, where we launched a number of new innovations and product developments for our sellers, including Supply Chain by Amazon. We also continue to see durable growth in advertising which grew 25% year-over-year, excluding foreign exchange, primarily driven by sponsored products as we lean into machine learning to improve the relevancy of the ads we show our customers and enhance our measurement capabilities on behalf of advertisers. We have seen strong improvement in our profitability. North America operating income was $4.3 billion, an increase of $4.7 billion year-over-year, resulting in an operating margin of 4.9%, up 100 basis points quarter-over-quarter. Since North America operating margins bottomed out in Q1 of 2022, we have now seen 6 consecutive quarters of improvement, resulting in a cumulative improvement of over 700 basis points over these past 6 quarters. The third quarter marked the second full quarter of regionalization within the U.S. and we're pleased with the early results. Regionalization has allowed us to simplify the network by reducing the number of line-haul lanes, increasing volume within existing line-haul lanes and adding more direct fulfillment center to delivery station connections. We have also been focused on optimizing inventory placement in a new regionalized network which when coupled with the simplification mentioned earlier, is helping contribute to an overall reduction in cost to serve. Additionally, in the quarter, we saw benefits from lower inflation, primarily within line haul, ocean and rail shipping rates which were partially offset by higher fuel prices. While we are encouraged by the improvements in operating profit, we still see a lot of opportunity in front of us. In international, we were closer to breakeven during the quarter with an operating loss of $95 million. This was an improvement of $2.4 billion year-over-year. This improvement was primarily driven by lowering our cost to serve through higher productivity, decreased inflationary pressures and improvements in leverage across our established and emerging international countries as we continue to focus on customer inputs and improve efficiencies within our operations. Moving to AWS; revenues were $23.1 billion, an increase of 12% year-over-year. On a quarter-over-quarter basis, we added more than $900 million of revenue in AWS as customers are continuing to shift their focus towards driving innovation and bringing new workloads to the cloud. Similar to what we shared last quarter, while optimization still remain a headwind, we've seen the rate of new cost optimization slowdown in AWS and we are encouraged by the strength of our customer pipeline. Customers are excited about our approach to generative AI, with several new announcements made during the quarter, including a strategic collaboration with Anthropic, opening Amazon Bedrock up to general availability, adding Meta's Llama 2 model to Bedrock in the near future and new customization capabilities of CodeWhisperer. AWS remains a clear cloud infrastructure leader with a significant leadership position in the number of customers, the size of our partner ecosystem, our breadth of functionality and the strongest operational performance in the industry. When we look at the fundamentals of the business, we believe we are in good position to drive future growth as the rates of cost optimization slow down. AWS operating income was $7 billion, an increase of $1.6 billion year-over-year. Our operating margin for the quarter was 30.3%. This is an improvement of approximately 600 basis points quarter-over-quarter, primarily driven by increased leverage on our head count costs. Shifting to free cash flow. On a trailing 12-month basis, free cash flow adjusted for finance leases was $20.2 billion, an improvement of $41.7 billion year-over-year. The largest driver of the improvement in free cash flow is our increased operating income which we're seeing across all 3 of our segments. Key drivers of this improvement include reductions in our cost to serve, continued advertising growth and improved leverage on our fixed costs. We are also seeing improvements in working capital, notably with our inventory efficiency as we improve our inventory placement. Now, let's turn to our capital investments. We define our capital investments as a combination of CapEx plus equipment finance leases. These investments were $50 billion for the trailing 12-month period ended September 30, down from $60 billion in the comparable prior year period. For the full year 2023, we expect capital investments to be approximately $50 billion compared to $59 billion in 2022. We expect fulfillment and transportation CapEx to be down year-over-year, partially offset by increased infrastructure CapEx to support growth of our AWS business, including additional investments related to generative AI and large language model efforts. As we head into the fourth quarter, we are ready to make this a great holiday season for our customers. Looking at our operations network, our inventory is the best position it's ever been heading into the holiday season, enabling us to serve customers with fast delivery speeds from their local regions. We continue to believe putting customers first is the only reliable way to create lasting value for our shareholders. With that, let's move on to questions.","evidence_gemma_new":null,"evidence_llama_3_3":"capital investments full year 2023","evidence_qwen_3_30b":"expect capital investments full year 2023","gemma_new_max":null,"gemma_new_min":null,"llama_3_3_max":50000000000.0,"llama_3_3_min":50000000000.0,"qwen_3_30b_max":50000000000.0,"qwen_3_30b_min":50000000000.0}
{"symbol":"AMZN","year":2023,"quarter":2,"date":"2023-Q2","chunk_id":3,"sub_chunk_id":0,"centroid_label":"capital investments","agreed_value":54000000000.0,"count":3,"chunk":"Brian Olsavsky: Thank you, Andy. As Andy mentioned, we saw worldwide revenue of $134.4 billion, an increase of 11% year-over-year and above the top end of our guidance range. We are encouraged by the strength in our reported revenue, which is another proof point that our focus on price, selection and convenience continues to resonate with customers. We continue to see healthy demand across everyday essentials and in categories like beauty and health and personal care and have seen a positive customer response to improvements in personalization and enhancements to our website and mobile app. During the quarter, we also saw improvements in macroeconomic indicators across our North America and international segments, but continue to see customers trading down and seeking value in their purchases. Delivery speed has been a key area of focus over the last several quarters, and we reached record levels during Q2. Prime members love the faster ship speeds and are shopping more often. Advertising revenue remained strong, up 22% year-over-year. Our performance-based advertising offerings continue to be the largest contributor to our growth. Our teams worked to increase the relevancy of the ads we show to our customers by leveraging machine learning and improve our ability to measure the return on advertising spend for brands. Third-party unit mix increased to 60% during the quarter, the highest level we've ever seen, and we're continuing to see good growth in the number of sellers and the unit sold per seller. We're making steady progress on improving our worldwide stores profitability. Since North America segment operating margins bottomed out in Q1 of 2022, we have seen 5 consecutive quarters of improvement, with second quarter operating margin of 3.9%. This is an improvement of 620 basis points over these past 5 quarters. One of the largest drivers of this operating income improvement in the stores business has been reducing our cost to serve, with shipping costs and fulfillment costs continuing to grow at a slower pace than our unit growth. Most recently, regionalization is an important contributor. Faster delivery speed from better network connectivity and better inventory placement means less miles traveled and fewer touches, resulting in less cost. And while we are pleased with the progress we have made, we see more opportunity to drive improved cost efficiencies going forward. Moving to the international segment. Since our operating margin loss bottomed out in Q3 of last year, we have seen 3 consecutive quarters of improvement, with a second quarter margin loss of negative 3%. This is an improvement of 590 basis points over the last 3 quarters. This segment also includes our emerging countries. It is important to remember how early we are in some of these marketplaces. We've launched more than 10 countries in the past 6 years and are always evaluating our customer experience as well as our path to profitability, and we like the path we're on. As a reminder, it took us 9 years to reach profitability in the United States. In addition, across our North America and international results, inflation headwinds also continue to ease, most notably in fuel prices, linehaul rates, ocean and rail rates. Moving to AWS. Year-over-year revenue growth was 12%, with growth rates stabilizing during Q2. We are encouraged by the strength of our customer pipeline and believe having a large diverse customer base that is mostly cost optimized sets us up well for future growth. On a trailing 12-month basis, free cash flow was positive and improved for the fourth sequential quarter. Our financial focus remains on driving long-term sustainable free cash flows. The largest driver of the recent improvement in free cash flow is our increased operating income, most notably in the North America and international segments where, as I said, we've made meaningful improvement in our fulfillment network productivity and operating leverage and benefited from moderating inflationary pressures. We've also seen improvements in our working capital contributions to free cash flow. Over the past couple of years, working capital hasn't been as efficient as we've held higher weeks of cover of inventory in the face of supply chain disruptions. Most recently, as these disruptions continue to ease, we are improving our inventory efficiency, resulting in improvements in our working capital. We will remain focused on continued free cash flow improvement moving forward. Next, let's turn to our capital investments. We define our capital investments as a combination of capital expenditures plus equipment finance leases. These investments were $54 billion for the trailing 12-month period ended June 30, down from $61 billion in the comparable prior year period. Looking ahead to the full year 2023, we expect capital investments to be slightly more than $50 billion compared to $59 billion in 2022. We expect fulfillment and transportation CapEx to be down year-over-year, partially offset by increased infrastructure CapEx to support growth of our AWS business, including additional investments related to generative AI and large language model efforts. With that, let's move on to your questions.","evidence_gemma_new":"capital investments trailing 12-month period","evidence_llama_3_3":"capital investments trailing 12-month period ended June 30","evidence_qwen_3_30b":"capital investments $54 billion trailing 12-month period ended June 30","gemma_new_max":54000000000.0,"gemma_new_min":54000000000.0,"llama_3_3_max":54000000000.0,"llama_3_3_min":54000000000.0,"qwen_3_30b_max":54000000000.0,"qwen_3_30b_min":54000000000.0}
{"symbol":"AMZN","year":2023,"quarter":3,"date":"2023-Q3","chunk_id":3,"sub_chunk_id":0,"centroid_label":"capital investments","agreed_value":50000000000.0,"count":2,"chunk":"Brian Olsavsky: Thanks, Andy. Overall, we saw a strong performance in the third quarter. Worldwide revenue was $143.1 billion, representing an increase of 11% year-over-year, excluding the impact of foreign exchange and approximately $100 million above the top end of our guidance range. We saw our highest quarterly worldwide operating income ever which was $11.2 billion for the quarter, an increase of $8.7 billion year-over-year from $2.7 billion above the high end of our guidance range. North America revenue was $87.9 billion, an increase of 11% year-over-year. And international revenue was $32.1 billion, an increase of 11% year-over-year, excluding foreign exchange. During the quarter, we held our biggest Prime Day event ever with prime members purchasing more than 375 million items worldwide and saving more than $2.5 billion on millions of deals across the Amazon store. Outside of Prime Day, we continue to see strong demand across everyday essentials, including categories like beauty and health and personal care. From a customer behavior standpoint, we still see customers remaining cautious about price, trading down where they can and seeking out deals, coupled with lower spending on discretionary items. Building on the momentum from last quarter, we set another record for delivery speed. For the year-to-date period through the third quarter, we have delivered at the fastest speeds ever in the United States. These improvements in delivery speeds have been a key driver of growth and are resulting in increased purchase frequency by our Prime members. Third-party sellers grew at 18% year-over-year, excluding foreign exchange, primarily driven by selection expansion and growing adoption of our optional services for sellers, including Fulfillment by Amazon and paid account management and more. During the quarter, we hosted Amazon Accelerate, our annual seller conference, where we launched a number of new innovations and product developments for our sellers, including Supply Chain by Amazon. We also continue to see durable growth in advertising which grew 25% year-over-year, excluding foreign exchange, primarily driven by sponsored products as we lean into machine learning to improve the relevancy of the ads we show our customers and enhance our measurement capabilities on behalf of advertisers. We have seen strong improvement in our profitability. North America operating income was $4.3 billion, an increase of $4.7 billion year-over-year, resulting in an operating margin of 4.9%, up 100 basis points quarter-over-quarter. Since North America operating margins bottomed out in Q1 of 2022, we have now seen 6 consecutive quarters of improvement, resulting in a cumulative improvement of over 700 basis points over these past 6 quarters. The third quarter marked the second full quarter of regionalization within the U.S. and we're pleased with the early results. Regionalization has allowed us to simplify the network by reducing the number of line-haul lanes, increasing volume within existing line-haul lanes and adding more direct fulfillment center to delivery station connections. We have also been focused on optimizing inventory placement in a new regionalized network which when coupled with the simplification mentioned earlier, is helping contribute to an overall reduction in cost to serve. Additionally, in the quarter, we saw benefits from lower inflation, primarily within line haul, ocean and rail shipping rates which were partially offset by higher fuel prices. While we are encouraged by the improvements in operating profit, we still see a lot of opportunity in front of us. In international, we were closer to breakeven during the quarter with an operating loss of $95 million. This was an improvement of $2.4 billion year-over-year. This improvement was primarily driven by lowering our cost to serve through higher productivity, decreased inflationary pressures and improvements in leverage across our established and emerging international countries as we continue to focus on customer inputs and improve efficiencies within our operations. Moving to AWS; revenues were $23.1 billion, an increase of 12% year-over-year. On a quarter-over-quarter basis, we added more than $900 million of revenue in AWS as customers are continuing to shift their focus towards driving innovation and bringing new workloads to the cloud. Similar to what we shared last quarter, while optimization still remain a headwind, we've seen the rate of new cost optimization slowdown in AWS and we are encouraged by the strength of our customer pipeline. Customers are excited about our approach to generative AI, with several new announcements made during the quarter, including a strategic collaboration with Anthropic, opening Amazon Bedrock up to general availability, adding Meta's Llama 2 model to Bedrock in the near future and new customization capabilities of CodeWhisperer. AWS remains a clear cloud infrastructure leader with a significant leadership position in the number of customers, the size of our partner ecosystem, our breadth of functionality and the strongest operational performance in the industry. When we look at the fundamentals of the business, we believe we are in good position to drive future growth as the rates of cost optimization slow down. AWS operating income was $7 billion, an increase of $1.6 billion year-over-year. Our operating margin for the quarter was 30.3%. This is an improvement of approximately 600 basis points quarter-over-quarter, primarily driven by increased leverage on our head count costs. Shifting to free cash flow. On a trailing 12-month basis, free cash flow adjusted for finance leases was $20.2 billion, an improvement of $41.7 billion year-over-year. The largest driver of the improvement in free cash flow is our increased operating income which we're seeing across all 3 of our segments. Key drivers of this improvement include reductions in our cost to serve, continued advertising growth and improved leverage on our fixed costs. We are also seeing improvements in working capital, notably with our inventory efficiency as we improve our inventory placement. Now, let's turn to our capital investments. We define our capital investments as a combination of CapEx plus equipment finance leases. These investments were $50 billion for the trailing 12-month period ended September 30, down from $60 billion in the comparable prior year period. For the full year 2023, we expect capital investments to be approximately $50 billion compared to $59 billion in 2022. We expect fulfillment and transportation CapEx to be down year-over-year, partially offset by increased infrastructure CapEx to support growth of our AWS business, including additional investments related to generative AI and large language model efforts. As we head into the fourth quarter, we are ready to make this a great holiday season for our customers. Looking at our operations network, our inventory is the best position it's ever been heading into the holiday season, enabling us to serve customers with fast delivery speeds from their local regions. We continue to believe putting customers first is the only reliable way to create lasting value for our shareholders. With that, let's move on to questions.","evidence_gemma_new":"capital investments trailing 12-month period","evidence_llama_3_3":null,"evidence_qwen_3_30b":"capital investments trailing 12-month period ended September 30","gemma_new_max":50000000000.0,"gemma_new_min":50000000000.0,"llama_3_3_max":null,"llama_3_3_min":null,"qwen_3_30b_max":50000000000.0,"qwen_3_30b_min":50000000000.0}
{"symbol":"AMZN","year":2024,"quarter":3,"date":"2024-Q3","chunk_id":3,"sub_chunk_id":0,"centroid_label":"capital investments","agreed_value":51900000000.0,"count":2,"chunk":"Brian Olsavsky: Thanks, Andy. Let's start with our top line financial results. Worldwide revenue was $158.9 billion, an 11% increase year-over-year, excluding a 20 basis point unfavorable impact of foreign exchange. As a reminder, our Q3 guidance had anticipated a larger unfavorable impact of approximately 90 basis points. Worldwide operating income increased 56% year-over-year to $17.4 billion, our highest quarterly operating income ever and was $2.4 billion above the high end of our guidance range. We remain focused on streamlining and managing costs in a way that allows us to continue inventing for customers in a cost-effective way. In the third quarter, North America segment revenue was $95.5 billion, an increase of 9% year-over-year. International segment revenue was $35.9 billion, an increase of 12% year-over-year. Worldwide paid units accelerated to 12% growth year-over-year as our customers continue to come to Amazon for low prices, broad selection and convenient fast delivery. Prime remains a core contributor to this growth. Year-over-year paid membership growth accelerated in Q3 from both the US and globally, helped by our tenth annual Prime Day event in mid-July. Customers are enjoying even faster delivery speeds, which also helps drive strong growth in items like everyday essentials. This includes items like health, beauty, and personal care as well as nonperishable grocery. Though all these items often have a lower average selling price, the strength in everyday essential's revenue is a positive indicator that customers are turning to us for more of their daily needs. We see that when customers purchase these types of items from us, they build bigger baskets, shop more frequently and spend more on Amazon. We remain focused on keeping prices sharp and offering broad selection that gives customers options when making purchase decisions. Shifting to profitability. Our North America and international segments each delivered their seventh consecutive quarter of year-over-year operating margin improvement. North America segment operating income was $5.7 billion, an increase of $1.4 billion year-over-year. North America operating margin was 5.9%, up 100 basis points year-over-year. In the third quarter, we continue to make progress in improving our fulfillment network cost structure, driven in part by improved inventory placement. This helped us drive better productivity in our transportation network and shipping efficiency from higher units per box. In the international segment, operating income was $1.3 billion, an improvement of $1.4 billion year-over-year. International operating margin was 3.6%, up 390 basis points year-over-year. So far this year, we've generated operating profit in each of the three quarters for the international segment and totals $2.5 billion year-to-date. We're seeing strength in our established countries like the UK and Germany as we continue to drive efficiencies to improve on-road productivity in our transportation network and better execution in our fulfillment centers. Our emerging countries are growing revenue at a healthy rate also, and they are leveraging their cost structures on investing strategically in Prime benefits. We have confidence that our focus on the inputs, coupled with the strength of our global teams, will continue to drive improvement over time. Advertising remains an important contributor to profitability in the North America and international segments. This quarter, we saw strong growth on an increasing large base of advertising revenue. We see many opportunities to further expand our ads offering in areas that are driving growth today like Sponsored Products as well as more recent growth areas like Prime Video ads. Moving next to our AWS segment. Revenue was $27.5 billion, an increase of 19.1% year-over-year, excluding the impact of foreign exchange. AWS now has an annualized revenue run rate of $110 billion. The business continues to grow, mostly opportunity to expand our core cloud offering and our AI services. Customers increasingly recognize that to get the true benefit of Generative AI, they also need to move to the cloud. AWS operating income was $10.4 billion, an increase of $3.5 billion year-over-year as a result of our continued focus on cost control, including a measured pace of hiring, a focus on driving efficiencies in our infrastructure, and reducing costs across the business. Additionally, we increased the estimated useful life of our servers starting in 2024, which contributed approximately 200 basis points to the AWS margin increase year-over-year in Q3. As we said in the past, we expect the AWS operating margins to fluctuate, driven in part by the level of investments we're making at any point in time. Now turning to our capital investments. As a reminder, we define these as a combination of cash CapEx plus equipment finance leases. Year-to-date capital investments were $51.9 billion. We expect to spend approximately $75 billion in CapEx in 2024. The majority of the spend is to support the growing need for technology infrastructure. This primarily relates to AWS as we invest to support demand for our AI services while also including technology infrastructure to support our North America and international segments. Additionally, we're continuing to invest in our fulfillment and transportation network to support the growth of the business, improve delivery speeds and lower our cost to serve. This includes investments in same-day delivery facilities, in our inbound network and as well in robotics and automation. We're encouraged by the start of the holiday season, which kicked off in October with a strong Prime Big Deal Days. We are ready to serve customers throughout the season, and I want to thank our teams across Amazon for delivering two very large Prime member events in the past four months and for getting us ready to delight customers during this holiday season. With that, let's move on to your questions.","evidence_gemma_new":null,"evidence_llama_3_3":"Capital investments year-to-date","evidence_qwen_3_30b":"capital investments year-to-date","gemma_new_max":null,"gemma_new_min":null,"llama_3_3_max":51900000000.0,"llama_3_3_min":51900000000.0,"qwen_3_30b_max":51900000000.0,"qwen_3_30b_min":51900000000.0}
{"symbol":"AMZN","year":2024,"quarter":4,"date":"2024-Q4","chunk_id":3,"sub_chunk_id":0,"centroid_label":"capital investments","agreed_value":26300000000.0,"count":2,"chunk":"Brian Olsavsky: Thanks, Andy. Starting with our top line financial results. Worldwide revenue was $187.8 billion, an 11% increase year over year excluding the impact of foreign exchange. This equates to an approximate $900 million headwind from FX in the Quarter, which is about $700 million higher than what we'd anticipated in our Q4 guidance range. Excluding that additional FX headwind, we would have exceeded the top end of our revenue guidance range. Worldwide operating income was $21.2 billion, our largest operating income quarter ever, and was $1.2 billion above the high end of our guidance range. Across all segments, we continue to innovate for customers while operating more efficiently at the same time. In the North America segment, fourth quarter revenue was $115.6 billion, an increase of 10% year over year. International segment revenue was $43.4 billion, an increase of 9% year over year excluding the impact of foreign exchange. Worldwide paid units grew 11% year over year, as our focus on low prices broad selection, and fast shipping continues to resonate with customers. Shifting to profitability, North America segment operating income was $9.3 billion, an increase of $2.8 billion year over year. Operating margin was 8%, up 190 basis points year over year. In the international segment, operating income was $1.3 billion, an improvement of $1.7 billion year over year, operating margin was 3%, up 400 basis points year over year. This marks the eighth consecutive quarter where we've seen year over year margin improvement in both the North Two thousand twenty-four also marks the second year in a row where we've lowered our global cost to serve on a per unit basis. In the fourth quarter, we saw strong productivity in our transportation network, from improved inventory placement, higher units per package, and reduced travel distances. We also saw improved productivity in our fulfillment centers. Overall, our teams executed extremely well throughout the quarter, and particularly during our peak seasons. I want to thank them for all they do to deliver for our customers. Looking ahead, we have several opportunities to keep lowering our costs through even better inventory placement, which also allows us to deliver items to customers faster. In the US, we're tuning our inbound network and continuing to expand our same day delivery network. Globally, we're adding automation and robotics throughout our network. While these efforts will take time to implement, and progress may not be linear, We have a good plan to continue to drive improvements in our cost structure. Advertising remains an important contributor to profitability in the North America and international segments. This quarter, we saw strong advertising revenue growth on an increasingly large base. We will also continue to invest in experiences that have potential to be important to customers in Amazon long term. In areas like Alexa, health care, and grocery, as well as satellites in the coming months. As a reminder, we currently expense the majority of the cost associated with the development of our satellite network. We will capitalize certain costs once the service achieves commercial viability, including sales to customers. Moving next to our AWS segment, revenue was $28.8 billion, an increase of 19% year over year. AWS now has an annualized revenue run rate of $115 billion. During the fourth quarter, we continue to see growth in both generative AI and non-generative AI offerings. As companies turn their attention to newer initiatives, bring more workloads to the cloud, restart or accelerate existing migrations from on-premise to the cloud, and tap into the power of generative AI. Customers recognize to get the full benefit of generative AI, they have to move to the cloud. AWS reported operating income of $10.6 billion, an increase of $3.5 billion year over year. This is the result of strong growth, innovation in our software and infrastructure to drive efficiencies, and continued focus on cost control across the business. As we've said in the past, we expect AWS operating margins to fluctuate over time, driven in part by the level of investments we're making. Additionally, we increased the estimated useful life of our servers starting in 2024, which contributed approximately 200 basis points to the AWS margin increase year over year in Q4. Now turning to our capital investments. As a reminder, we define these as a combination of cash CapEx plus equipment finance leases. Capital investments were $26.3 billion in the fourth quarter, and we think that run rate will be reasonably representative of our 2025 capital investment rate. Similar to 2024, the majority of the spend will be to support the growing need for technology infrastructure. This primarily relates to AWS, including support demand for our AI services, as well as tech infrastructure to support our North America and international segments. Additionally, we're continuing to invest in capacity for our fulfillment and transportation network to support future growth. We're also investing in same-day delivery facilities and our inbound network, as well as robotics and automation, to improve delivery speeds and to lower our cost to serve. These capital investments will support growth for many years to come. Turning to our revenue guidance for Q1, net sales are expected to be between $151 billion and $155.5 billion. I'd like to highlight two items impacting our Q1 revenue guidance. First, we estimate the year-over-year impact of changes in foreign exchange rates based on current rates, which we expect to be a headwind of approximately $2.1 billion in Q1 year over year, or 150 basis points. As a reminder, global currencies can fluctuate during the quarter, and just as we saw in Q4 with the strengthening of the dollar versus most other currencies. Second, a reminder that we are comping the impact of last year's leap year. The extra day contributed approximately $1.5 billion of additional net sales across our businesses in Q1 2024, or about 120 basis points to the year-over-year growth rate, which impacted all segments. Q1 operating income is expected to be between $14 billion and $18 billion. This guidance includes the estimated impact of certain updates to the useful life of our fixed assets. I'll provide a bit more detail in a moment, but on an aggregate basis, we estimate this will decrease full-year 2025 operating income by approximately $400 million for the assets on our balance sheet as of December 31, 2024. First, in Q4, we completed a useful life study for our servers and network equipment and observed an increased pace of technology development. Particularly in the area of artificial intelligence and machine learning. As a result, we're decreasing the useful life for a subset of our servers and networking equipment from six years to five years beginning in January 2025. We anticipate this will decrease full-year 2025 operating income by approximately $700 million. In addition, we also early-retired a subset of our servers and network equipment. We recorded a Q4 2024 expense of approximately $920 million from accelerated depreciation and related charges and expect this will also decrease full-year 2025 operating income by. Both of these server and network equipment use for life changes primarily impact our AWS segment. Lastly, we also completed a useful life study for certain types of heavy equipment used in our fulfillment centers. And are increasing the useful life from ten years to thirteen years beginning in January 2025, we anticipate this will increase full-year 2025 operating income by approximately $900 million. As we turn the page to 2025, we're energized by the great work our teams have delivered. We'll remain focused on driving even better customer experiences, and we believe putting customers first is the only reliable way to create lasting value for our shareholders. With that, let's move on to your questions.","evidence_gemma_new":"Capital investments fourth quarter","evidence_llama_3_3":null,"evidence_qwen_3_30b":"capital investments $26.3 billion run rate 2025 capital investment rate","gemma_new_max":26300000000.0,"gemma_new_min":26300000000.0,"llama_3_3_max":null,"llama_3_3_min":null,"qwen_3_30b_max":26300000000.0,"qwen_3_30b_min":26300000000.0}
{"symbol":"AMZN","year":2023,"quarter":3,"date":"2023-Q3","chunk_id":3,"sub_chunk_id":0,"centroid_label":"international segment international segment revenue","agreed_value":32100000000.0,"count":3,"chunk":"Brian Olsavsky: Thanks, Andy. Overall, we saw a strong performance in the third quarter. Worldwide revenue was $143.1 billion, representing an increase of 11% year-over-year, excluding the impact of foreign exchange and approximately $100 million above the top end of our guidance range. We saw our highest quarterly worldwide operating income ever which was $11.2 billion for the quarter, an increase of $8.7 billion year-over-year from $2.7 billion above the high end of our guidance range. North America revenue was $87.9 billion, an increase of 11% year-over-year. And international revenue was $32.1 billion, an increase of 11% year-over-year, excluding foreign exchange. During the quarter, we held our biggest Prime Day event ever with prime members purchasing more than 375 million items worldwide and saving more than $2.5 billion on millions of deals across the Amazon store. Outside of Prime Day, we continue to see strong demand across everyday essentials, including categories like beauty and health and personal care. From a customer behavior standpoint, we still see customers remaining cautious about price, trading down where they can and seeking out deals, coupled with lower spending on discretionary items. Building on the momentum from last quarter, we set another record for delivery speed. For the year-to-date period through the third quarter, we have delivered at the fastest speeds ever in the United States. These improvements in delivery speeds have been a key driver of growth and are resulting in increased purchase frequency by our Prime members. Third-party sellers grew at 18% year-over-year, excluding foreign exchange, primarily driven by selection expansion and growing adoption of our optional services for sellers, including Fulfillment by Amazon and paid account management and more. During the quarter, we hosted Amazon Accelerate, our annual seller conference, where we launched a number of new innovations and product developments for our sellers, including Supply Chain by Amazon. We also continue to see durable growth in advertising which grew 25% year-over-year, excluding foreign exchange, primarily driven by sponsored products as we lean into machine learning to improve the relevancy of the ads we show our customers and enhance our measurement capabilities on behalf of advertisers. We have seen strong improvement in our profitability. North America operating income was $4.3 billion, an increase of $4.7 billion year-over-year, resulting in an operating margin of 4.9%, up 100 basis points quarter-over-quarter. Since North America operating margins bottomed out in Q1 of 2022, we have now seen 6 consecutive quarters of improvement, resulting in a cumulative improvement of over 700 basis points over these past 6 quarters. The third quarter marked the second full quarter of regionalization within the U.S. and we're pleased with the early results. Regionalization has allowed us to simplify the network by reducing the number of line-haul lanes, increasing volume within existing line-haul lanes and adding more direct fulfillment center to delivery station connections. We have also been focused on optimizing inventory placement in a new regionalized network which when coupled with the simplification mentioned earlier, is helping contribute to an overall reduction in cost to serve. Additionally, in the quarter, we saw benefits from lower inflation, primarily within line haul, ocean and rail shipping rates which were partially offset by higher fuel prices. While we are encouraged by the improvements in operating profit, we still see a lot of opportunity in front of us. In international, we were closer to breakeven during the quarter with an operating loss of $95 million. This was an improvement of $2.4 billion year-over-year. This improvement was primarily driven by lowering our cost to serve through higher productivity, decreased inflationary pressures and improvements in leverage across our established and emerging international countries as we continue to focus on customer inputs and improve efficiencies within our operations. Moving to AWS; revenues were $23.1 billion, an increase of 12% year-over-year. On a quarter-over-quarter basis, we added more than $900 million of revenue in AWS as customers are continuing to shift their focus towards driving innovation and bringing new workloads to the cloud. Similar to what we shared last quarter, while optimization still remain a headwind, we've seen the rate of new cost optimization slowdown in AWS and we are encouraged by the strength of our customer pipeline. Customers are excited about our approach to generative AI, with several new announcements made during the quarter, including a strategic collaboration with Anthropic, opening Amazon Bedrock up to general availability, adding Meta's Llama 2 model to Bedrock in the near future and new customization capabilities of CodeWhisperer. AWS remains a clear cloud infrastructure leader with a significant leadership position in the number of customers, the size of our partner ecosystem, our breadth of functionality and the strongest operational performance in the industry. When we look at the fundamentals of the business, we believe we are in good position to drive future growth as the rates of cost optimization slow down. AWS operating income was $7 billion, an increase of $1.6 billion year-over-year. Our operating margin for the quarter was 30.3%. This is an improvement of approximately 600 basis points quarter-over-quarter, primarily driven by increased leverage on our head count costs. Shifting to free cash flow. On a trailing 12-month basis, free cash flow adjusted for finance leases was $20.2 billion, an improvement of $41.7 billion year-over-year. The largest driver of the improvement in free cash flow is our increased operating income which we're seeing across all 3 of our segments. Key drivers of this improvement include reductions in our cost to serve, continued advertising growth and improved leverage on our fixed costs. We are also seeing improvements in working capital, notably with our inventory efficiency as we improve our inventory placement. Now, let's turn to our capital investments. We define our capital investments as a combination of CapEx plus equipment finance leases. These investments were $50 billion for the trailing 12-month period ended September 30, down from $60 billion in the comparable prior year period. For the full year 2023, we expect capital investments to be approximately $50 billion compared to $59 billion in 2022. We expect fulfillment and transportation CapEx to be down year-over-year, partially offset by increased infrastructure CapEx to support growth of our AWS business, including additional investments related to generative AI and large language model efforts. As we head into the fourth quarter, we are ready to make this a great holiday season for our customers. Looking at our operations network, our inventory is the best position it's ever been heading into the holiday season, enabling us to serve customers with fast delivery speeds from their local regions. We continue to believe putting customers first is the only reliable way to create lasting value for our shareholders. With that, let's move on to questions.","evidence_gemma_new":"international revenue year-over-year","evidence_llama_3_3":"international revenue third quarter","evidence_qwen_3_30b":"international revenue","gemma_new_max":32100000000.0,"gemma_new_min":32100000000.0,"llama_3_3_max":32100000000.0,"llama_3_3_min":32100000000.0,"qwen_3_30b_max":32100000000.0,"qwen_3_30b_min":32100000000.0}
{"symbol":"AMZN","year":2023,"quarter":4,"date":"2023-Q4","chunk_id":3,"sub_chunk_id":0,"centroid_label":"international segment international segment revenue","agreed_value":40200000000.0,"count":2,"chunk":"Brian Olsavsky: Thanks, Andy. Overall, we saw strong performance in the fourth quarter. Worldwide revenue was $170 billion, representing an increase of 13% year-over-year, excluding the impact of foreign exchange and approximately $3 billion above the top end of our guidance range. Saw our highest quarterly worldwide operating income ever, which was $13.2 billion for the quarter, an increase of $10.5 billion year-over-year and $2.2 billion above the high end of our guidance range. For the full year 2023, we had a meaningful improvement across our financial results. Revenue was $574.8 billion, an increase of 12% year-over-year, excluding the impact of foreign exchange. Operating income tripled year-over-year to $36.9 billion. Trailing 12-month free cash flow adjusted for equipment finance leases was $35.5 billion, up $48.3 billion versus last year. These financial outputs are a result of a lot of improvements in our key input metrics such as stores' cost to serve, which decreased year-over-year for the first time since 2018 and our ability to deliver to customers at our fastest speeds ever. I want to thank our customers, our partners and our teammates around the world for a very strong 2023 performance. Focusing on the fourth quarter, North America revenue was $105.5 billion, an increase of 13% year-over-year and an acceleration of 200 basis points compared to Q3. International revenue was $40.2 billion, an increase of 13% year-over-year, excluding the impact of foreign exchange, also an acceleration of 200 basis points compared to Q3. During the quarter, we remained focused on the inputs that matter most to our customers, price, selection and convenience. Our shopping events throughout the quarter included Prime Big Deal Days in October and our extended Black Friday and Cyber Monday shopping event helped to attract new Prime members and deliver billions in savings for customers. We made meaningful progress on delivery speeds in the United States and globally, which helped strong sales throughout the quarter, including notable strength in the last-minute gifting where our ability to provide fast shipping helped our Prime members ensure that they got their gifts before the holidays. These improvements in delivery speed have led to increased purchase frequency by our Prime members across all of our major geographies. It also strengthened demand for our everyday essentials. Categories like beauty and health and personal care, where speed is even more important to customers. Third-party sellers were a big part of our success over the holidays with worldwide third-party seller services revenue growing at 19% year-over-year, excluding the impact of foreign exchange. And worldwide third-party seller unit mix was 61%, its highest level ever. We also saw strong performance in worldwide advertising, which grew 26% year-over-year, excluding the impact of foreign exchange. The strength in advertising was primarily driven by sponsored products as our teams worked hard to increase the relevancy of the ads we show customers by leveraging machine learning. Advertising only works if the ads are helpful to customers and there's a lot of value in tailoring sponsored products, so they are relevant to what a customer is actually searching for. We're also continually focused on improving our measurement capabilities, which allow brands to see the payback of their advertising spend. Shifting to profitability. North America segment operating income was $6.5 billion, an increase of $6.7 billion year-over-year, resulting in an operating margin of 6.1%, up 120 basis points quarter-over-quarter. Since North America operating margins were at their recent low levels in Q1 of 2022, we have now seen seven consecutive quarters of improvement resulting in a cumulative improvement of 800 basis points over these past seven quarters. In addition to the strong top line growth, which helped to drive improved leverage throughout our businesses, we continue to make progress on reducing our cost to serve. The fourth quarter is our busiest time of year, supported by an increasingly large and integrated operations network. Overall, our teams executed extremely well, yielding strong efficiency gains with minimal disruptions. We were pleased with the performance of our regionalized network during the holiday period, where we saw benefits from improved inventory placement helping drive faster speeds and also lowering costs. We also continue to see benefits from lower transportation rates, which include linehaul, ocean and rail and from a more stable labor market, resulting in improved staffing levels. In our International segment, we had an operating loss of $419 million, an improvement of $1.8 billion year-over-year. This improvement was primarily driven by lowering our cost to serve through increased units per box, lower transportation rates and leverage across our fixed costs as we continue to focus on customer inputs and improve efficiencies within our operations. The International segment represents more than 20 countries of varying degrees of growth and our largest established countries like the U.K., Germany and Japan, relatively strong revenue growth contributed to the year-over-year improvement in profitability. Additionally, we saw good progress in our emerging countries as they continued to expand their customer offerings, while seeking to invest wisely. Moving to AWS. Revenues were $24.2 billion, an increase of 13% year-over-year. On a quarter-over-quarter basis, we added more than $1.1 billion of revenue in AWS as customers are continuing to shift their focus towards driving innovation and bringing new workloads to the cloud. Similar to what we shared last quarter, we continue to see the diminishing impact of cost optimizations. And as these optimization slow down, we're seeing more companies turning their attention to newer initiatives and reaccelerating existing migrations. Customers are also excited about our approach to generative AI. Still relatively early days, but the revenues are accelerating rapidly across all 3 layers and our approach to democratizing AI is resonating well with our customers. We have seen significant interest from our customers wanting to run generative AI applications and build large language models and foundation models, all with the privacy, reliability and security they have grown accustomed to with AWS. AWS' operating income was $7.2 billion, an increase of $2 billion year-over-year. Our operating margin for the quarter was 29.6%, up more than 500 basis points year-over-year and effectively flat on a quarter-over-quarter basis. This margin improvement reflects our headcount reductions from earlier in the year and a slowdown in the pace of hiring. Shifting to free cash flow. On a trailing 12-month basis, free cash flow adjusted for finance leases was $35.5 billion, an improvement of $48.3 billion year-over-year. The largest driver of the improvement in free cash flow is our increased operating income, which we are seeing across all three of our segments. We're also seeing improvements in working capital, notably in inventory efficiency driven by our regionalization efforts. Next, let's turn to capital investments. We define our capital investments as a combination of CapEx plus equipment finance leases. In 2023, full year CapEx was $48.4 billion, which was down $10.2 billion year-over-year, primarily driven by lower spend on fulfillment and transportation. As we look forward to 2024, we anticipate CapEx to increase year-over-year, primarily driven by increased infrastructure CapEx, support growth of our AWS business, including additional investments in generative AI and large language models. One thing I'd like to highlight in our first quarter guidance is that we recently completed a useful life study for our servers and we are increasing the useful life from 5 years to 6 years beginning in January 2024. We will have this anticipated benefit to our operating income of approximately $900 million in Q1, which is included in our operating income guidance. As we turn the calendar to 2024, we are excited to continue upon the great work the teams have been able to deliver in 2023. We remain focused on streamlining and prioritizing projects in an effective way that reduces costs and also allows us to continue innovating and inventing for customers. With that, let's move on to questions.","evidence_gemma_new":"International revenue year-over-year","evidence_llama_3_3":"International revenue fourth quarter","evidence_qwen_3_30b":null,"gemma_new_max":40200000000.0,"gemma_new_min":40200000000.0,"llama_3_3_max":40200000000.0,"llama_3_3_min":40200000000.0,"qwen_3_30b_max":null,"qwen_3_30b_min":null}
{"symbol":"AMZN","year":2023,"quarter":4,"date":"2023-Q4","chunk_id":15,"sub_chunk_id":0,"centroid_label":"international segment international segment revenue","agreed_value":1800000000.0,"count":2,"chunk":"Brian Olsavsky: Yes. Let me start with the second one first. So we're mindful of the geopolitical issues around the world, especially as you say in the supply chain and how that might impact shipments both to the U.S. and to Europe. We're just working very hard to make that not back up on customers, and we'll continue to work that. It's not a material impact into the -- it estimated in our guidance in Q1. But again, as I said, we're vigilant on that, and we'll work to take steps where we need to, to make sure that customer experience is not impacted. On the International segment, operating income, yes, we're very pleased with the results, especially over the last few quarters. We improved operating income by $1.8 billion year-over-year. And I would attribute it to the steady progress that Andy was saying about the U.S. is, again, cost of serve down, advertising is stronger, a lot of attention to cost, a lot of attention to investments, and we are going to invest and other fixed cost control. So a lot of that is what we're seeing in the established countries of Europe and Japan. I would divide the segment a bit into a couple of buckets. First, there's that International segment, excuse me, European established country segment. And that's -- it behaves a lot like you would see in North America. If you look at the emerging countries, and again, we've launched 10 countries in the last 7 years. They're all on their own trajectory of journey to profitability and significance with customers, and we're pleased with that. I think they're all growing nicely and again, leveraging their cost structure, investing wisely and Prime benefits, but all on a curve to breakeven and then be a contributor to income and free cash flow. The other thing I'd point out is that we have advanced loaded, I would say, price benefits in our International markets. We think it's a very good source of customer acquisition and customer retention. The investment in those areas can fluctuate quarter-to-quarter. We had a bit of a higher spend in -- excuse me, in digital content in Q4 as we had a number of marketing and content, especially around live sports, English Premier League and Champions League in Germany and Italy, for example. But we like those benefits in those investments, different proven vehicle for customer acquisition, as I said, and it gets people shopping at our sites and engaging with benefits is always positive for the relationship with Amazon.","evidence_gemma_new":null,"evidence_llama_3_3":"International segment operating income year-over-year","evidence_qwen_3_30b":"International segment operating income year-over-year","gemma_new_max":null,"gemma_new_min":null,"llama_3_3_max":1800000000.0,"llama_3_3_min":1800000000.0,"qwen_3_30b_max":1800000000.0,"qwen_3_30b_min":1800000000.0}
{"symbol":"AMZN","year":2024,"quarter":1,"date":"2024-Q1","chunk_id":3,"sub_chunk_id":0,"centroid_label":"international segment international segment revenue","agreed_value":31900000000.0,"count":2,"chunk":"Brian Olsavsky: Thanks, Andy. Starting with our top line financial results. Worldwide revenue was $143.3 billion, representing a 13% increase year-over-year, excluding the impact of foreign exchange and near the top end of our guidance range. I'd like to highlight a couple of points to help you interpret our growth rates. First, we saw an impact from leap year in Q1, which added approximately 120 basis points to the year-over-year quarterly revenue growth rate. Second, while I typically talk about growth rates, excluding the impact of year-over-year changes in foreign exchange, we did see an unfavorable impact from global currencies weakening against the U.S. dollar, more than we had planned in Q1. This led to a $700 million or 50 basis point headwind to revenue relative to what we guided. Excluding this FX headwind, we would have exceeded the top end of our guidance range. Worldwide operating income was $15.3 billion, which was our highest quarterly income ever, and it was $3.3 billion above the high end of our guidance range. This was driven by strong operational performance across all 3 reportable segments and better-than-expected operating leverage, including lower cost to serve. The impact on operating income from our Q1 FX rate headwind was negligible. I'll speak more to our profitability trends in a moment. In the North America segment, first quarter revenue was $86.3 billion, an increase of 12% year-over-year. In the international segment, revenue was $31.9 billion, an increase of 11% year-over-year, excluding the impact of foreign exchange.","evidence_gemma_new":null,"evidence_llama_3_3":"international segment revenue","evidence_qwen_3_30b":"international segment revenue 11% year-over-year","gemma_new_max":null,"gemma_new_min":null,"llama_3_3_max":31900000000.0,"llama_3_3_min":31900000000.0,"qwen_3_30b_max":31900000000.0,"qwen_3_30b_min":31900000000.0}
{"symbol":"AMZN","year":2024,"quarter":1,"date":"2024-Q1","chunk_id":23,"sub_chunk_id":0,"centroid_label":"international segment international segment revenue","agreed_value":902000000.0,"count":3,"chunk":"Brian Olsavsky: Thank you, Ron. I'm going to start with this one on international profitability. So yes, in the quarter, our operating income was $902 million. And if you've watched that, we've seen a steady progression in operating income in our international segment, it's up $2.2 billion year-over-year. So we like the trend there. It breaks down into a few areas. I would say the established countries of Europe, Japan, as well as the U.K. are following a lot of the same trajectory as in the United States. They are profitable in their own right. They are adding selection, they're adding new features like grocery there, adding to their Prime benefits, and a lot of the work that we do in the United States carries over there. The second group is the emerging countries. And of course, we've launched 10 new countries in the last 7 years. Each of those has its own particular trajectory on profitability. The first thing we see there is having a good customer experience, having people sign up for Prime. A lot of times, our Prime Video benefits help with that. Then work on our cost structure as we get scale, add advertising and other things. And eventually, what we see is a breakeven -- countries breakeven and then they make positive income and free cash flow and are more of a contribution to the -- positive contribution to the international segment. So we're seeing both the emerging and the established improving, and we like the trajectory. And I think you'll see more of as we move forward.","evidence_gemma_new":"international segment operating income year-over-year","evidence_llama_3_3":"international segment operating income year-over-year","evidence_qwen_3_30b":"international segment operating income $903 million year-over-year","gemma_new_max":903000000.0,"gemma_new_min":903000000.0,"llama_3_3_max":903000000.0,"llama_3_3_min":903000000.0,"qwen_3_30b_max":903000000.0,"qwen_3_30b_min":903000000.0}
{"symbol":"AMZN","year":2024,"quarter":1,"date":"2024-Q1","chunk_id":23,"sub_chunk_id":0,"centroid_label":"international segment international segment revenue","agreed_value":2200000000.0,"count":2,"chunk":"Brian Olsavsky: Thank you, Ron. I'm going to start with this one on international profitability. So yes, in the quarter, our operating income was $902 million. And if you've watched that, we've seen a steady progression in operating income in our international segment, it's up $2.2 billion year-over-year. So we like the trend there. It breaks down into a few areas. I would say the established countries of Europe, Japan, as well as the U.K. are following a lot of the same trajectory as in the United States. They are profitable in their own right. They are adding selection, they're adding new features like grocery there, adding to their Prime benefits, and a lot of the work that we do in the United States carries over there. The second group is the emerging countries. And of course, we've launched 10 new countries in the last 7 years. Each of those has its own particular trajectory on profitability. The first thing we see there is having a good customer experience, having people sign up for Prime. A lot of times, our Prime Video benefits help with that. Then work on our cost structure as we get scale, add advertising and other things. And eventually, what we see is a breakeven -- countries breakeven and then they make positive income and free cash flow and are more of a contribution to the -- positive contribution to the international segment. So we're seeing both the emerging and the established improving, and we like the trajectory. And I think you'll see more of as we move forward.","evidence_gemma_new":"international operating income year-over-year","evidence_llama_3_3":null,"evidence_qwen_3_30b":"international segment operating income year-over-year","gemma_new_max":2200000000.0,"gemma_new_min":2200000000.0,"llama_3_3_max":null,"llama_3_3_min":null,"qwen_3_30b_max":2200000000.0,"qwen_3_30b_min":2200000000.0}
{"symbol":"AMZN","year":2024,"quarter":2,"date":"2024-Q2","chunk_id":3,"sub_chunk_id":0,"centroid_label":"international segment international segment revenue","agreed_value":31700000000.0,"count":3,"chunk":"Brian Olsavsky : Thanks, Andy. Let's start with our top line financial results. Worldwide revenue was $148 billion, an 11% increase year-over-year, excluding the impact of foreign exchange. This equates to a $1 billion headwind from foreign exchange in the quarter, which is about $300 million higher than we'd anticipated in our Q2 guidance range. Worldwide operating income nearly doubled year-over-year to $14.7 billion, which was $700 million above the high end of our guidance range. Across all of our segments, we remain focused on managing costs in a way that allows us to continue innovating and investing in areas that we think could move the needle for our customers. Starting with the North American international segments, customers continue to respond positively to our focus on low prices, broad selection, and fast shipping offers. We delivered at our fastest speeds ever so far this year, which helps drive strength in areas like our everyday essentials. These include items like non-perishable foods, as well as health, beauty, and personal care items. And Prime members continue to increase their shopping frequency while growing their spend on Amazon. Overall unit sales grew 11% year-over-year, which is consistent with our growth rates in Q1 after you adjust for the approximately 100 basis point impact of leap year. North America segment revenue was $90 billion, an increase of 9% year-over-year. And international segment revenue was $31.7 billion, an increase of 10% year-over-year, excluding the impact of foreign exchange. North America segment operating income was $5.1 billion, an increase of $1.9 billion year-over-year. Operating margin was 5.6%, up 170 basis points year-over-year, and down 20 basis points quarter over quarter. If we look at profitability of the core North America stores business, we actually improved our margin again quarter-over-quarter in Q2. The overall North America segment operating margin decreased slightly due to increased Q2 spend in some of our investment areas, including Kuiper, where we're starting to manufacture satellites we'll launch into space in Q4. We saw improvements in our cost to serve, driven by our efforts to place inventory more regionally, closer to where our customers are. This resulted in more consolidated shipments, with higher units per box shipped. We also saw packages traveling shorter distances to customers, and this also led to better on-road productivity in our transportation network. Our international segment was profitable again in Q2, with operating income of $300 million, an improvement of $1.2 billion year-over-year. Operating margin was 0.9%, up 390 basis points year over year. This increase is primarily driven by our established countries, as we improve our cost structure with better inventory placement and more consolidated shipments. Additionally, our emerging countries continue to expand their customer offerings, leverage their cost structure, and invest in expanding prime benefits. We are pleased with the overall progress of these countries as they make strides on their respective paths to profitability. Advertising remains an important contributor to profitability in the North America and international segments, and we saw strong growth on an increasing larger revenue base this quarter. We continue to see opportunities that further expand our offering in areas that are driving growth today, like sponsored products, as well as newer areas, like Prime Video ads. Moving next to our AWS segment, revenue is $26.3 billion, an increase of 18.8% year-over-year, excluding the impact of foreign exchange. AWS now has an annualized revenue run rate of more than $105 billion. During the second quarter, we saw continued growth across both generative AI and non-generative AI workloads. We saw companies turn their attention to newer initiatives, bring more workloads to the cloud, restart or accelerate existing migrations from on-premises to the cloud, and tap into the power of generative AI. AWS operating income was $9.3 billion, an increase of $4 billion year-over-year. It's driven by our continued focus on cost control, including a measured pace of hiring. Additionally, AWS operating margin includes an approximately 200 basis point favorable impact from the change in the estimated useful life of our servers that we instituted in Q1. As we've long said, we expect AWS operating margins to fluctuate over time, driven in part by the level of investments we're making at any point in time. We remain focused on driving efficiencies across the business, which enables us to invest to support the strong growth we're seeing in AWS, including generative AI. Now let's turn our attention to capital investments. As a reminder, we define these as a combination of CapEx plus equipment finance leases. For the first half of the year, CapEx was $30.5 billion. Looking ahead to the rest of 2024, we expect capital investments to be higher in the second half of the year. The majority of the spend will be to support the growing need for AWS infrastructure as we continue to see strong demand in both generative AI and our non-generative AI workloads. For the third quarter, specifically, I'd highlight a few seasonal factors to keep in mind. First, we hosted another successful Prime Day in mid-July. It was our 10th Prime Day and was our largest ever. Prime members globally saved billions of dollars on deals across every product category. From a profitability perspective, we've historically seen a headwind to operating margin in Q3, driven by Prime Day deals, as well as the marketing spend surrounding the event. Additionally, in Q3, we also begin to ramp up our capacity to handle Q4 holiday volumes in our fulfillment network. And lastly, we expect an increase in digital content cost quarter-over-quarter from the return of our NFL Thursday Night Football. We remain heads down, focused on driving a better customer experience. We believe putting customers first is the only reliable way to create lasting value for our shareholders. With that, let's move on to your questions.","evidence_gemma_new":"international segment revenue year-over-year","evidence_llama_3_3":"international segment segment revenue","evidence_qwen_3_30b":"international segment revenue year-over-year","gemma_new_max":31700000000.0,"gemma_new_min":31700000000.0,"llama_3_3_max":31700000000.0,"llama_3_3_min":31700000000.0,"qwen_3_30b_max":31700000000.0,"qwen_3_30b_min":31700000000.0}
{"symbol":"AMZN","year":2024,"quarter":3,"date":"2024-Q3","chunk_id":3,"sub_chunk_id":0,"centroid_label":"international segment international segment revenue","agreed_value":35900000000.0,"count":3,"chunk":"Brian Olsavsky: Thanks, Andy. Let's start with our top line financial results. Worldwide revenue was $158.9 billion, an 11% increase year-over-year, excluding a 20 basis point unfavorable impact of foreign exchange. As a reminder, our Q3 guidance had anticipated a larger unfavorable impact of approximately 90 basis points. Worldwide operating income increased 56% year-over-year to $17.4 billion, our highest quarterly operating income ever and was $2.4 billion above the high end of our guidance range. We remain focused on streamlining and managing costs in a way that allows us to continue inventing for customers in a cost-effective way. In the third quarter, North America segment revenue was $95.5 billion, an increase of 9% year-over-year. International segment revenue was $35.9 billion, an increase of 12% year-over-year. Worldwide paid units accelerated to 12% growth year-over-year as our customers continue to come to Amazon for low prices, broad selection and convenient fast delivery. Prime remains a core contributor to this growth. Year-over-year paid membership growth accelerated in Q3 from both the US and globally, helped by our tenth annual Prime Day event in mid-July. Customers are enjoying even faster delivery speeds, which also helps drive strong growth in items like everyday essentials. This includes items like health, beauty, and personal care as well as nonperishable grocery. Though all these items often have a lower average selling price, the strength in everyday essential's revenue is a positive indicator that customers are turning to us for more of their daily needs. We see that when customers purchase these types of items from us, they build bigger baskets, shop more frequently and spend more on Amazon. We remain focused on keeping prices sharp and offering broad selection that gives customers options when making purchase decisions. Shifting to profitability. Our North America and international segments each delivered their seventh consecutive quarter of year-over-year operating margin improvement. North America segment operating income was $5.7 billion, an increase of $1.4 billion year-over-year. North America operating margin was 5.9%, up 100 basis points year-over-year. In the third quarter, we continue to make progress in improving our fulfillment network cost structure, driven in part by improved inventory placement. This helped us drive better productivity in our transportation network and shipping efficiency from higher units per box. In the international segment, operating income was $1.3 billion, an improvement of $1.4 billion year-over-year. International operating margin was 3.6%, up 390 basis points year-over-year. So far this year, we've generated operating profit in each of the three quarters for the international segment and totals $2.5 billion year-to-date. We're seeing strength in our established countries like the UK and Germany as we continue to drive efficiencies to improve on-road productivity in our transportation network and better execution in our fulfillment centers. Our emerging countries are growing revenue at a healthy rate also, and they are leveraging their cost structures on investing strategically in Prime benefits. We have confidence that our focus on the inputs, coupled with the strength of our global teams, will continue to drive improvement over time. Advertising remains an important contributor to profitability in the North America and international segments. This quarter, we saw strong growth on an increasing large base of advertising revenue. We see many opportunities to further expand our ads offering in areas that are driving growth today like Sponsored Products as well as more recent growth areas like Prime Video ads. Moving next to our AWS segment. Revenue was $27.5 billion, an increase of 19.1% year-over-year, excluding the impact of foreign exchange. AWS now has an annualized revenue run rate of $110 billion. The business continues to grow, mostly opportunity to expand our core cloud offering and our AI services. Customers increasingly recognize that to get the true benefit of Generative AI, they also need to move to the cloud. AWS operating income was $10.4 billion, an increase of $3.5 billion year-over-year as a result of our continued focus on cost control, including a measured pace of hiring, a focus on driving efficiencies in our infrastructure, and reducing costs across the business. Additionally, we increased the estimated useful life of our servers starting in 2024, which contributed approximately 200 basis points to the AWS margin increase year-over-year in Q3. As we said in the past, we expect the AWS operating margins to fluctuate, driven in part by the level of investments we're making at any point in time. Now turning to our capital investments. As a reminder, we define these as a combination of cash CapEx plus equipment finance leases. Year-to-date capital investments were $51.9 billion. We expect to spend approximately $75 billion in CapEx in 2024. The majority of the spend is to support the growing need for technology infrastructure. This primarily relates to AWS as we invest to support demand for our AI services while also including technology infrastructure to support our North America and international segments. Additionally, we're continuing to invest in our fulfillment and transportation network to support the growth of the business, improve delivery speeds and lower our cost to serve. This includes investments in same-day delivery facilities, in our inbound network and as well in robotics and automation. We're encouraged by the start of the holiday season, which kicked off in October with a strong Prime Big Deal Days. We are ready to serve customers throughout the season, and I want to thank our teams across Amazon for delivering two very large Prime member events in the past four months and for getting us ready to delight customers during this holiday season. With that, let's move on to your questions.","evidence_gemma_new":"International segment revenue year-over-year","evidence_llama_3_3":"International segment International segment revenue Q3","evidence_qwen_3_30b":"International segment revenue year-over-year","gemma_new_max":35900000000.0,"gemma_new_min":35900000000.0,"llama_3_3_max":35900000000.0,"llama_3_3_min":35900000000.0,"qwen_3_30b_max":35900000000.0,"qwen_3_30b_min":35900000000.0}
{"symbol":"AMZN","year":2024,"quarter":3,"date":"2024-Q3","chunk_id":3,"sub_chunk_id":0,"centroid_label":"international segment international segment revenue","agreed_value":1300000000.0,"count":3,"chunk":"Brian Olsavsky: Thanks, Andy. Let's start with our top line financial results. Worldwide revenue was $158.9 billion, an 11% increase year-over-year, excluding a 20 basis point unfavorable impact of foreign exchange. As a reminder, our Q3 guidance had anticipated a larger unfavorable impact of approximately 90 basis points. Worldwide operating income increased 56% year-over-year to $17.4 billion, our highest quarterly operating income ever and was $2.4 billion above the high end of our guidance range. We remain focused on streamlining and managing costs in a way that allows us to continue inventing for customers in a cost-effective way. In the third quarter, North America segment revenue was $95.5 billion, an increase of 9% year-over-year. International segment revenue was $35.9 billion, an increase of 12% year-over-year. Worldwide paid units accelerated to 12% growth year-over-year as our customers continue to come to Amazon for low prices, broad selection and convenient fast delivery. Prime remains a core contributor to this growth. Year-over-year paid membership growth accelerated in Q3 from both the US and globally, helped by our tenth annual Prime Day event in mid-July. Customers are enjoying even faster delivery speeds, which also helps drive strong growth in items like everyday essentials. This includes items like health, beauty, and personal care as well as nonperishable grocery. Though all these items often have a lower average selling price, the strength in everyday essential's revenue is a positive indicator that customers are turning to us for more of their daily needs. We see that when customers purchase these types of items from us, they build bigger baskets, shop more frequently and spend more on Amazon. We remain focused on keeping prices sharp and offering broad selection that gives customers options when making purchase decisions. Shifting to profitability. Our North America and international segments each delivered their seventh consecutive quarter of year-over-year operating margin improvement. North America segment operating income was $5.7 billion, an increase of $1.4 billion year-over-year. North America operating margin was 5.9%, up 100 basis points year-over-year. In the third quarter, we continue to make progress in improving our fulfillment network cost structure, driven in part by improved inventory placement. This helped us drive better productivity in our transportation network and shipping efficiency from higher units per box. In the international segment, operating income was $1.3 billion, an improvement of $1.4 billion year-over-year. International operating margin was 3.6%, up 390 basis points year-over-year. So far this year, we've generated operating profit in each of the three quarters for the international segment and totals $2.5 billion year-to-date. We're seeing strength in our established countries like the UK and Germany as we continue to drive efficiencies to improve on-road productivity in our transportation network and better execution in our fulfillment centers. Our emerging countries are growing revenue at a healthy rate also, and they are leveraging their cost structures on investing strategically in Prime benefits. We have confidence that our focus on the inputs, coupled with the strength of our global teams, will continue to drive improvement over time. Advertising remains an important contributor to profitability in the North America and international segments. This quarter, we saw strong growth on an increasing large base of advertising revenue. We see many opportunities to further expand our ads offering in areas that are driving growth today like Sponsored Products as well as more recent growth areas like Prime Video ads. Moving next to our AWS segment. Revenue was $27.5 billion, an increase of 19.1% year-over-year, excluding the impact of foreign exchange. AWS now has an annualized revenue run rate of $110 billion. The business continues to grow, mostly opportunity to expand our core cloud offering and our AI services. Customers increasingly recognize that to get the true benefit of Generative AI, they also need to move to the cloud. AWS operating income was $10.4 billion, an increase of $3.5 billion year-over-year as a result of our continued focus on cost control, including a measured pace of hiring, a focus on driving efficiencies in our infrastructure, and reducing costs across the business. Additionally, we increased the estimated useful life of our servers starting in 2024, which contributed approximately 200 basis points to the AWS margin increase year-over-year in Q3. As we said in the past, we expect the AWS operating margins to fluctuate, driven in part by the level of investments we're making at any point in time. Now turning to our capital investments. As a reminder, we define these as a combination of cash CapEx plus equipment finance leases. Year-to-date capital investments were $51.9 billion. We expect to spend approximately $75 billion in CapEx in 2024. The majority of the spend is to support the growing need for technology infrastructure. This primarily relates to AWS as we invest to support demand for our AI services while also including technology infrastructure to support our North America and international segments. Additionally, we're continuing to invest in our fulfillment and transportation network to support the growth of the business, improve delivery speeds and lower our cost to serve. This includes investments in same-day delivery facilities, in our inbound network and as well in robotics and automation. We're encouraged by the start of the holiday season, which kicked off in October with a strong Prime Big Deal Days. We are ready to serve customers throughout the season, and I want to thank our teams across Amazon for delivering two very large Prime member events in the past four months and for getting us ready to delight customers during this holiday season. With that, let's move on to your questions.","evidence_gemma_new":"International segment operating income year-over-year","evidence_llama_3_3":"International segment International operating income Q3","evidence_qwen_3_30b":"international segment operating income year-over-year","gemma_new_max":1300000000.0,"gemma_new_min":1300000000.0,"llama_3_3_max":1300000000.0,"llama_3_3_min":1300000000.0,"qwen_3_30b_max":1300000000.0,"qwen_3_30b_min":1300000000.0}
{"symbol":"AMZN","year":2024,"quarter":4,"date":"2024-Q4","chunk_id":3,"sub_chunk_id":0,"centroid_label":"international segment international segment revenue","agreed_value":43400000000.0,"count":3,"chunk":"Brian Olsavsky: Thanks, Andy. Starting with our top line financial results. Worldwide revenue was $187.8 billion, an 11% increase year over year excluding the impact of foreign exchange. This equates to an approximate $900 million headwind from FX in the Quarter, which is about $700 million higher than what we'd anticipated in our Q4 guidance range. Excluding that additional FX headwind, we would have exceeded the top end of our revenue guidance range. Worldwide operating income was $21.2 billion, our largest operating income quarter ever, and was $1.2 billion above the high end of our guidance range. Across all segments, we continue to innovate for customers while operating more efficiently at the same time. In the North America segment, fourth quarter revenue was $115.6 billion, an increase of 10% year over year. International segment revenue was $43.4 billion, an increase of 9% year over year excluding the impact of foreign exchange. Worldwide paid units grew 11% year over year, as our focus on low prices broad selection, and fast shipping continues to resonate with customers. Shifting to profitability, North America segment operating income was $9.3 billion, an increase of $2.8 billion year over year. Operating margin was 8%, up 190 basis points year over year. In the international segment, operating income was $1.3 billion, an improvement of $1.7 billion year over year, operating margin was 3%, up 400 basis points year over year. This marks the eighth consecutive quarter where we've seen year over year margin improvement in both the North Two thousand twenty-four also marks the second year in a row where we've lowered our global cost to serve on a per unit basis. In the fourth quarter, we saw strong productivity in our transportation network, from improved inventory placement, higher units per package, and reduced travel distances. We also saw improved productivity in our fulfillment centers. Overall, our teams executed extremely well throughout the quarter, and particularly during our peak seasons. I want to thank them for all they do to deliver for our customers. Looking ahead, we have several opportunities to keep lowering our costs through even better inventory placement, which also allows us to deliver items to customers faster. In the US, we're tuning our inbound network and continuing to expand our same day delivery network. Globally, we're adding automation and robotics throughout our network. While these efforts will take time to implement, and progress may not be linear, We have a good plan to continue to drive improvements in our cost structure. Advertising remains an important contributor to profitability in the North America and international segments. This quarter, we saw strong advertising revenue growth on an increasingly large base. We will also continue to invest in experiences that have potential to be important to customers in Amazon long term. In areas like Alexa, health care, and grocery, as well as satellites in the coming months. As a reminder, we currently expense the majority of the cost associated with the development of our satellite network. We will capitalize certain costs once the service achieves commercial viability, including sales to customers. Moving next to our AWS segment, revenue was $28.8 billion, an increase of 19% year over year. AWS now has an annualized revenue run rate of $115 billion. During the fourth quarter, we continue to see growth in both generative AI and non-generative AI offerings. As companies turn their attention to newer initiatives, bring more workloads to the cloud, restart or accelerate existing migrations from on-premise to the cloud, and tap into the power of generative AI. Customers recognize to get the full benefit of generative AI, they have to move to the cloud. AWS reported operating income of $10.6 billion, an increase of $3.5 billion year over year. This is the result of strong growth, innovation in our software and infrastructure to drive efficiencies, and continued focus on cost control across the business. As we've said in the past, we expect AWS operating margins to fluctuate over time, driven in part by the level of investments we're making. Additionally, we increased the estimated useful life of our servers starting in 2024, which contributed approximately 200 basis points to the AWS margin increase year over year in Q4. Now turning to our capital investments. As a reminder, we define these as a combination of cash CapEx plus equipment finance leases. Capital investments were $26.3 billion in the fourth quarter, and we think that run rate will be reasonably representative of our 2025 capital investment rate. Similar to 2024, the majority of the spend will be to support the growing need for technology infrastructure. This primarily relates to AWS, including support demand for our AI services, as well as tech infrastructure to support our North America and international segments. Additionally, we're continuing to invest in capacity for our fulfillment and transportation network to support future growth. We're also investing in same-day delivery facilities and our inbound network, as well as robotics and automation, to improve delivery speeds and to lower our cost to serve. These capital investments will support growth for many years to come. Turning to our revenue guidance for Q1, net sales are expected to be between $151 billion and $155.5 billion. I'd like to highlight two items impacting our Q1 revenue guidance. First, we estimate the year-over-year impact of changes in foreign exchange rates based on current rates, which we expect to be a headwind of approximately $2.1 billion in Q1 year over year, or 150 basis points. As a reminder, global currencies can fluctuate during the quarter, and just as we saw in Q4 with the strengthening of the dollar versus most other currencies. Second, a reminder that we are comping the impact of last year's leap year. The extra day contributed approximately $1.5 billion of additional net sales across our businesses in Q1 2024, or about 120 basis points to the year-over-year growth rate, which impacted all segments. Q1 operating income is expected to be between $14 billion and $18 billion. This guidance includes the estimated impact of certain updates to the useful life of our fixed assets. I'll provide a bit more detail in a moment, but on an aggregate basis, we estimate this will decrease full-year 2025 operating income by approximately $400 million for the assets on our balance sheet as of December 31, 2024. First, in Q4, we completed a useful life study for our servers and network equipment and observed an increased pace of technology development. Particularly in the area of artificial intelligence and machine learning. As a result, we're decreasing the useful life for a subset of our servers and networking equipment from six years to five years beginning in January 2025. We anticipate this will decrease full-year 2025 operating income by approximately $700 million. In addition, we also early-retired a subset of our servers and network equipment. We recorded a Q4 2024 expense of approximately $920 million from accelerated depreciation and related charges and expect this will also decrease full-year 2025 operating income by. Both of these server and network equipment use for life changes primarily impact our AWS segment. Lastly, we also completed a useful life study for certain types of heavy equipment used in our fulfillment centers. And are increasing the useful life from ten years to thirteen years beginning in January 2025, we anticipate this will increase full-year 2025 operating income by approximately $900 million. As we turn the page to 2025, we're energized by the great work our teams have delivered. We'll remain focused on driving even better customer experiences, and we believe putting customers first is the only reliable way to create lasting value for our shareholders. With that, let's move on to your questions.","evidence_gemma_new":"International segment revenue year over year","evidence_llama_3_3":"International revenue year over year","evidence_qwen_3_30b":"International segment revenue 9% year over year","gemma_new_max":43400000000.0,"gemma_new_min":43400000000.0,"llama_3_3_max":43400000000.0,"llama_3_3_min":43400000000.0,"qwen_3_30b_max":43400000000.0,"qwen_3_30b_min":43400000000.0}
{"symbol":"AMZN","year":2024,"quarter":4,"date":"2024-Q4","chunk_id":3,"sub_chunk_id":0,"centroid_label":"international segment international segment revenue","agreed_value":1300000000.0,"count":3,"chunk":"Brian Olsavsky: Thanks, Andy. Starting with our top line financial results. Worldwide revenue was $187.8 billion, an 11% increase year over year excluding the impact of foreign exchange. This equates to an approximate $900 million headwind from FX in the Quarter, which is about $700 million higher than what we'd anticipated in our Q4 guidance range. Excluding that additional FX headwind, we would have exceeded the top end of our revenue guidance range. Worldwide operating income was $21.2 billion, our largest operating income quarter ever, and was $1.2 billion above the high end of our guidance range. Across all segments, we continue to innovate for customers while operating more efficiently at the same time. In the North America segment, fourth quarter revenue was $115.6 billion, an increase of 10% year over year. International segment revenue was $43.4 billion, an increase of 9% year over year excluding the impact of foreign exchange. Worldwide paid units grew 11% year over year, as our focus on low prices broad selection, and fast shipping continues to resonate with customers. Shifting to profitability, North America segment operating income was $9.3 billion, an increase of $2.8 billion year over year. Operating margin was 8%, up 190 basis points year over year. In the international segment, operating income was $1.3 billion, an improvement of $1.7 billion year over year, operating margin was 3%, up 400 basis points year over year. This marks the eighth consecutive quarter where we've seen year over year margin improvement in both the North Two thousand twenty-four also marks the second year in a row where we've lowered our global cost to serve on a per unit basis. In the fourth quarter, we saw strong productivity in our transportation network, from improved inventory placement, higher units per package, and reduced travel distances. We also saw improved productivity in our fulfillment centers. Overall, our teams executed extremely well throughout the quarter, and particularly during our peak seasons. I want to thank them for all they do to deliver for our customers. Looking ahead, we have several opportunities to keep lowering our costs through even better inventory placement, which also allows us to deliver items to customers faster. In the US, we're tuning our inbound network and continuing to expand our same day delivery network. Globally, we're adding automation and robotics throughout our network. While these efforts will take time to implement, and progress may not be linear, We have a good plan to continue to drive improvements in our cost structure. Advertising remains an important contributor to profitability in the North America and international segments. This quarter, we saw strong advertising revenue growth on an increasingly large base. We will also continue to invest in experiences that have potential to be important to customers in Amazon long term. In areas like Alexa, health care, and grocery, as well as satellites in the coming months. As a reminder, we currently expense the majority of the cost associated with the development of our satellite network. We will capitalize certain costs once the service achieves commercial viability, including sales to customers. Moving next to our AWS segment, revenue was $28.8 billion, an increase of 19% year over year. AWS now has an annualized revenue run rate of $115 billion. During the fourth quarter, we continue to see growth in both generative AI and non-generative AI offerings. As companies turn their attention to newer initiatives, bring more workloads to the cloud, restart or accelerate existing migrations from on-premise to the cloud, and tap into the power of generative AI. Customers recognize to get the full benefit of generative AI, they have to move to the cloud. AWS reported operating income of $10.6 billion, an increase of $3.5 billion year over year. This is the result of strong growth, innovation in our software and infrastructure to drive efficiencies, and continued focus on cost control across the business. As we've said in the past, we expect AWS operating margins to fluctuate over time, driven in part by the level of investments we're making. Additionally, we increased the estimated useful life of our servers starting in 2024, which contributed approximately 200 basis points to the AWS margin increase year over year in Q4. Now turning to our capital investments. As a reminder, we define these as a combination of cash CapEx plus equipment finance leases. Capital investments were $26.3 billion in the fourth quarter, and we think that run rate will be reasonably representative of our 2025 capital investment rate. Similar to 2024, the majority of the spend will be to support the growing need for technology infrastructure. This primarily relates to AWS, including support demand for our AI services, as well as tech infrastructure to support our North America and international segments. Additionally, we're continuing to invest in capacity for our fulfillment and transportation network to support future growth. We're also investing in same-day delivery facilities and our inbound network, as well as robotics and automation, to improve delivery speeds and to lower our cost to serve. These capital investments will support growth for many years to come. Turning to our revenue guidance for Q1, net sales are expected to be between $151 billion and $155.5 billion. I'd like to highlight two items impacting our Q1 revenue guidance. First, we estimate the year-over-year impact of changes in foreign exchange rates based on current rates, which we expect to be a headwind of approximately $2.1 billion in Q1 year over year, or 150 basis points. As a reminder, global currencies can fluctuate during the quarter, and just as we saw in Q4 with the strengthening of the dollar versus most other currencies. Second, a reminder that we are comping the impact of last year's leap year. The extra day contributed approximately $1.5 billion of additional net sales across our businesses in Q1 2024, or about 120 basis points to the year-over-year growth rate, which impacted all segments. Q1 operating income is expected to be between $14 billion and $18 billion. This guidance includes the estimated impact of certain updates to the useful life of our fixed assets. I'll provide a bit more detail in a moment, but on an aggregate basis, we estimate this will decrease full-year 2025 operating income by approximately $400 million for the assets on our balance sheet as of December 31, 2024. First, in Q4, we completed a useful life study for our servers and network equipment and observed an increased pace of technology development. Particularly in the area of artificial intelligence and machine learning. As a result, we're decreasing the useful life for a subset of our servers and networking equipment from six years to five years beginning in January 2025. We anticipate this will decrease full-year 2025 operating income by approximately $700 million. In addition, we also early-retired a subset of our servers and network equipment. We recorded a Q4 2024 expense of approximately $920 million from accelerated depreciation and related charges and expect this will also decrease full-year 2025 operating income by. Both of these server and network equipment use for life changes primarily impact our AWS segment. Lastly, we also completed a useful life study for certain types of heavy equipment used in our fulfillment centers. And are increasing the useful life from ten years to thirteen years beginning in January 2025, we anticipate this will increase full-year 2025 operating income by approximately $900 million. As we turn the page to 2025, we're energized by the great work our teams have delivered. We'll remain focused on driving even better customer experiences, and we believe putting customers first is the only reliable way to create lasting value for our shareholders. With that, let's move on to your questions.","evidence_gemma_new":"International segment operating income year over year","evidence_llama_3_3":"International operating income year over year","evidence_qwen_3_30b":"International segment operating income $1.3 billion 400 basis points year over year","gemma_new_max":1300000000.0,"gemma_new_min":1300000000.0,"llama_3_3_max":1300000000.0,"llama_3_3_min":1300000000.0,"qwen_3_30b_max":1300000000.0,"qwen_3_30b_min":1300000000.0}
{"symbol":"AMZN","year":2023,"quarter":3,"date":"2023-Q3","chunk_id":3,"sub_chunk_id":0,"centroid_label":"north america segment north america segment operating income","agreed_value":4300000000.0,"count":2,"chunk":"Brian Olsavsky: Thanks, Andy. Overall, we saw a strong performance in the third quarter. Worldwide revenue was $143.1 billion, representing an increase of 11% year-over-year, excluding the impact of foreign exchange and approximately $100 million above the top end of our guidance range. We saw our highest quarterly worldwide operating income ever which was $11.2 billion for the quarter, an increase of $8.7 billion year-over-year from $2.7 billion above the high end of our guidance range. North America revenue was $87.9 billion, an increase of 11% year-over-year. And international revenue was $32.1 billion, an increase of 11% year-over-year, excluding foreign exchange. During the quarter, we held our biggest Prime Day event ever with prime members purchasing more than 375 million items worldwide and saving more than $2.5 billion on millions of deals across the Amazon store. Outside of Prime Day, we continue to see strong demand across everyday essentials, including categories like beauty and health and personal care. From a customer behavior standpoint, we still see customers remaining cautious about price, trading down where they can and seeking out deals, coupled with lower spending on discretionary items. Building on the momentum from last quarter, we set another record for delivery speed. For the year-to-date period through the third quarter, we have delivered at the fastest speeds ever in the United States. These improvements in delivery speeds have been a key driver of growth and are resulting in increased purchase frequency by our Prime members. Third-party sellers grew at 18% year-over-year, excluding foreign exchange, primarily driven by selection expansion and growing adoption of our optional services for sellers, including Fulfillment by Amazon and paid account management and more. During the quarter, we hosted Amazon Accelerate, our annual seller conference, where we launched a number of new innovations and product developments for our sellers, including Supply Chain by Amazon. We also continue to see durable growth in advertising which grew 25% year-over-year, excluding foreign exchange, primarily driven by sponsored products as we lean into machine learning to improve the relevancy of the ads we show our customers and enhance our measurement capabilities on behalf of advertisers. We have seen strong improvement in our profitability. North America operating income was $4.3 billion, an increase of $4.7 billion year-over-year, resulting in an operating margin of 4.9%, up 100 basis points quarter-over-quarter. Since North America operating margins bottomed out in Q1 of 2022, we have now seen 6 consecutive quarters of improvement, resulting in a cumulative improvement of over 700 basis points over these past 6 quarters. The third quarter marked the second full quarter of regionalization within the U.S. and we're pleased with the early results. Regionalization has allowed us to simplify the network by reducing the number of line-haul lanes, increasing volume within existing line-haul lanes and adding more direct fulfillment center to delivery station connections. We have also been focused on optimizing inventory placement in a new regionalized network which when coupled with the simplification mentioned earlier, is helping contribute to an overall reduction in cost to serve. Additionally, in the quarter, we saw benefits from lower inflation, primarily within line haul, ocean and rail shipping rates which were partially offset by higher fuel prices. While we are encouraged by the improvements in operating profit, we still see a lot of opportunity in front of us. In international, we were closer to breakeven during the quarter with an operating loss of $95 million. This was an improvement of $2.4 billion year-over-year. This improvement was primarily driven by lowering our cost to serve through higher productivity, decreased inflationary pressures and improvements in leverage across our established and emerging international countries as we continue to focus on customer inputs and improve efficiencies within our operations. Moving to AWS; revenues were $23.1 billion, an increase of 12% year-over-year. On a quarter-over-quarter basis, we added more than $900 million of revenue in AWS as customers are continuing to shift their focus towards driving innovation and bringing new workloads to the cloud. Similar to what we shared last quarter, while optimization still remain a headwind, we've seen the rate of new cost optimization slowdown in AWS and we are encouraged by the strength of our customer pipeline. Customers are excited about our approach to generative AI, with several new announcements made during the quarter, including a strategic collaboration with Anthropic, opening Amazon Bedrock up to general availability, adding Meta's Llama 2 model to Bedrock in the near future and new customization capabilities of CodeWhisperer. AWS remains a clear cloud infrastructure leader with a significant leadership position in the number of customers, the size of our partner ecosystem, our breadth of functionality and the strongest operational performance in the industry. When we look at the fundamentals of the business, we believe we are in good position to drive future growth as the rates of cost optimization slow down. AWS operating income was $7 billion, an increase of $1.6 billion year-over-year. Our operating margin for the quarter was 30.3%. This is an improvement of approximately 600 basis points quarter-over-quarter, primarily driven by increased leverage on our head count costs. Shifting to free cash flow. On a trailing 12-month basis, free cash flow adjusted for finance leases was $20.2 billion, an improvement of $41.7 billion year-over-year. The largest driver of the improvement in free cash flow is our increased operating income which we're seeing across all 3 of our segments. Key drivers of this improvement include reductions in our cost to serve, continued advertising growth and improved leverage on our fixed costs. We are also seeing improvements in working capital, notably with our inventory efficiency as we improve our inventory placement. Now, let's turn to our capital investments. We define our capital investments as a combination of CapEx plus equipment finance leases. These investments were $50 billion for the trailing 12-month period ended September 30, down from $60 billion in the comparable prior year period. For the full year 2023, we expect capital investments to be approximately $50 billion compared to $59 billion in 2022. We expect fulfillment and transportation CapEx to be down year-over-year, partially offset by increased infrastructure CapEx to support growth of our AWS business, including additional investments related to generative AI and large language model efforts. As we head into the fourth quarter, we are ready to make this a great holiday season for our customers. Looking at our operations network, our inventory is the best position it's ever been heading into the holiday season, enabling us to serve customers with fast delivery speeds from their local regions. We continue to believe putting customers first is the only reliable way to create lasting value for our shareholders. With that, let's move on to questions.","evidence_gemma_new":"North America operating income year-over-year","evidence_llama_3_3":null,"evidence_qwen_3_30b":"North America operating income","gemma_new_max":4300000000.0,"gemma_new_min":4300000000.0,"llama_3_3_max":null,"llama_3_3_min":null,"qwen_3_30b_max":4300000000.0,"qwen_3_30b_min":4300000000.0}
{"symbol":"AMZN","year":2023,"quarter":4,"date":"2023-Q4","chunk_id":3,"sub_chunk_id":0,"centroid_label":"north america segment north america segment operating income","agreed_value":6500000000.0,"count":3,"chunk":"Brian Olsavsky: Thanks, Andy. Overall, we saw strong performance in the fourth quarter. Worldwide revenue was $170 billion, representing an increase of 13% year-over-year, excluding the impact of foreign exchange and approximately $3 billion above the top end of our guidance range. Saw our highest quarterly worldwide operating income ever, which was $13.2 billion for the quarter, an increase of $10.5 billion year-over-year and $2.2 billion above the high end of our guidance range. For the full year 2023, we had a meaningful improvement across our financial results. Revenue was $574.8 billion, an increase of 12% year-over-year, excluding the impact of foreign exchange. Operating income tripled year-over-year to $36.9 billion. Trailing 12-month free cash flow adjusted for equipment finance leases was $35.5 billion, up $48.3 billion versus last year. These financial outputs are a result of a lot of improvements in our key input metrics such as stores' cost to serve, which decreased year-over-year for the first time since 2018 and our ability to deliver to customers at our fastest speeds ever. I want to thank our customers, our partners and our teammates around the world for a very strong 2023 performance. Focusing on the fourth quarter, North America revenue was $105.5 billion, an increase of 13% year-over-year and an acceleration of 200 basis points compared to Q3. International revenue was $40.2 billion, an increase of 13% year-over-year, excluding the impact of foreign exchange, also an acceleration of 200 basis points compared to Q3. During the quarter, we remained focused on the inputs that matter most to our customers, price, selection and convenience. Our shopping events throughout the quarter included Prime Big Deal Days in October and our extended Black Friday and Cyber Monday shopping event helped to attract new Prime members and deliver billions in savings for customers. We made meaningful progress on delivery speeds in the United States and globally, which helped strong sales throughout the quarter, including notable strength in the last-minute gifting where our ability to provide fast shipping helped our Prime members ensure that they got their gifts before the holidays. These improvements in delivery speed have led to increased purchase frequency by our Prime members across all of our major geographies. It also strengthened demand for our everyday essentials. Categories like beauty and health and personal care, where speed is even more important to customers. Third-party sellers were a big part of our success over the holidays with worldwide third-party seller services revenue growing at 19% year-over-year, excluding the impact of foreign exchange. And worldwide third-party seller unit mix was 61%, its highest level ever. We also saw strong performance in worldwide advertising, which grew 26% year-over-year, excluding the impact of foreign exchange. The strength in advertising was primarily driven by sponsored products as our teams worked hard to increase the relevancy of the ads we show customers by leveraging machine learning. Advertising only works if the ads are helpful to customers and there's a lot of value in tailoring sponsored products, so they are relevant to what a customer is actually searching for. We're also continually focused on improving our measurement capabilities, which allow brands to see the payback of their advertising spend. Shifting to profitability. North America segment operating income was $6.5 billion, an increase of $6.7 billion year-over-year, resulting in an operating margin of 6.1%, up 120 basis points quarter-over-quarter. Since North America operating margins were at their recent low levels in Q1 of 2022, we have now seen seven consecutive quarters of improvement resulting in a cumulative improvement of 800 basis points over these past seven quarters. In addition to the strong top line growth, which helped to drive improved leverage throughout our businesses, we continue to make progress on reducing our cost to serve. The fourth quarter is our busiest time of year, supported by an increasingly large and integrated operations network. Overall, our teams executed extremely well, yielding strong efficiency gains with minimal disruptions. We were pleased with the performance of our regionalized network during the holiday period, where we saw benefits from improved inventory placement helping drive faster speeds and also lowering costs. We also continue to see benefits from lower transportation rates, which include linehaul, ocean and rail and from a more stable labor market, resulting in improved staffing levels. In our International segment, we had an operating loss of $419 million, an improvement of $1.8 billion year-over-year. This improvement was primarily driven by lowering our cost to serve through increased units per box, lower transportation rates and leverage across our fixed costs as we continue to focus on customer inputs and improve efficiencies within our operations. The International segment represents more than 20 countries of varying degrees of growth and our largest established countries like the U.K., Germany and Japan, relatively strong revenue growth contributed to the year-over-year improvement in profitability. Additionally, we saw good progress in our emerging countries as they continued to expand their customer offerings, while seeking to invest wisely. Moving to AWS. Revenues were $24.2 billion, an increase of 13% year-over-year. On a quarter-over-quarter basis, we added more than $1.1 billion of revenue in AWS as customers are continuing to shift their focus towards driving innovation and bringing new workloads to the cloud. Similar to what we shared last quarter, we continue to see the diminishing impact of cost optimizations. And as these optimization slow down, we're seeing more companies turning their attention to newer initiatives and reaccelerating existing migrations. Customers are also excited about our approach to generative AI. Still relatively early days, but the revenues are accelerating rapidly across all 3 layers and our approach to democratizing AI is resonating well with our customers. We have seen significant interest from our customers wanting to run generative AI applications and build large language models and foundation models, all with the privacy, reliability and security they have grown accustomed to with AWS. AWS' operating income was $7.2 billion, an increase of $2 billion year-over-year. Our operating margin for the quarter was 29.6%, up more than 500 basis points year-over-year and effectively flat on a quarter-over-quarter basis. This margin improvement reflects our headcount reductions from earlier in the year and a slowdown in the pace of hiring. Shifting to free cash flow. On a trailing 12-month basis, free cash flow adjusted for finance leases was $35.5 billion, an improvement of $48.3 billion year-over-year. The largest driver of the improvement in free cash flow is our increased operating income, which we are seeing across all three of our segments. We're also seeing improvements in working capital, notably in inventory efficiency driven by our regionalization efforts. Next, let's turn to capital investments. We define our capital investments as a combination of CapEx plus equipment finance leases. In 2023, full year CapEx was $48.4 billion, which was down $10.2 billion year-over-year, primarily driven by lower spend on fulfillment and transportation. As we look forward to 2024, we anticipate CapEx to increase year-over-year, primarily driven by increased infrastructure CapEx, support growth of our AWS business, including additional investments in generative AI and large language models. One thing I'd like to highlight in our first quarter guidance is that we recently completed a useful life study for our servers and we are increasing the useful life from 5 years to 6 years beginning in January 2024. We will have this anticipated benefit to our operating income of approximately $900 million in Q1, which is included in our operating income guidance. As we turn the calendar to 2024, we are excited to continue upon the great work the teams have been able to deliver in 2023. We remain focused on streamlining and prioritizing projects in an effective way that reduces costs and also allows us to continue innovating and inventing for customers. With that, let's move on to questions.","evidence_gemma_new":"North America segment operating income","evidence_llama_3_3":"North America segment operating income","evidence_qwen_3_30b":"North America segment operating income fourth quarter","gemma_new_max":6500000000.0,"gemma_new_min":6500000000.0,"llama_3_3_max":6500000000.0,"llama_3_3_min":6500000000.0,"qwen_3_30b_max":6500000000.0,"qwen_3_30b_min":6500000000.0}
{"symbol":"AMZN","year":2024,"quarter":1,"date":"2024-Q1","chunk_id":4,"sub_chunk_id":0,"centroid_label":"north america segment north america segment operating income","agreed_value":5000000000.0,"count":3,"chunk":"We remain focused on the inputs that matter most to our customers: selection, price, and convenience. During the quarter, around the world, we helped customers save with our shopping events. We added selection, including premium and luxury brands, and we delivered our fastest speeds ever for Prime members. Third-party sellers continue to be an important part of our offering. Third-party seller services revenue increased 16% year-over-year, excluding the impact of foreign exchange. We saw strong 3P unit growth, coupled with increased adoption of our optional services, such as fulfillment and global logistics. For the quarter, third-party seller unit mix was 61%, up 200 basis points year-over-year. Shifting to profitability, North America segment operating income was $5 billion, an increase of $4.1 billion year-over-year. Operating margin was 5.8%, up 460 basis points year-over-year. We saw improvements in our cost to serve, including continued benefit from our work to regionalize our operations, savings from more consolidated customer shipments, and improved leverage driven by strong unit growth and lower transportation rates. In our international segment, operating income was $903 million, an improvement of $2.2 billion year-over-year. Operating margin was 2.8%, up 710 basis points year-over-year. This is primarily driven by our established countries as we improve cost efficiencies through network design enhancements and improved volume leverage. Additionally, we saw good progress in our emerging countries as they expand their customer offerings and make strides on their respective journeys to profitability. Looking ahead, we see several opportunities to further lower cost to serve and improved profitability in our worldwide stores business while still investing to improve the customer experience. Within our fulfillment network, we are focused on investing in our inbound network, streamlining and standardizing process paths, and adding robotics and automation. These improvement opportunities will take time. However, we have a solid plan in place and we like the path we're on. Advertising remains an important contributor to profitability in North America and international segments. We see many opportunities to grow our offerings, both in the areas that are driving growth today like sponsored products and in areas that are newer, like streaming TV ads. Moving to AWS. Revenue was $25 billion, an increase of 17% year-over-year, and AWS is now a $100 billion annualized revenue run rate business. Excluding the impact from leap year, AWS revenue increased approximately 16% year-over-year. During the first quarter, we saw growth in both generative AI and non-generative AI workloads across a diverse group of customers and across industries as companies are shifting their focus towards driving innovation and bringing new workloads to the cloud. Additionally, we continue to see the impact of cost optimizations diminish. While there always be a level of ongoing optimization, we think the majority of the recent cycle is behind us, and we're likely closer to a steady state of these optimization efforts. AWS operating income was $9.4 billion, an increase of $4.3 billion year-over-year. As a reminder, these results include the impact from the change in the estimated useful life of our servers, which primarily benefits the AWS segment. We made progress in managing our infrastructure and fixed costs while still growing at a healthy rate, which has resulted in improved leverage. As we've said in the past, over time, we expect the AWS operating margins to fluctuate, driven in part by the level of investments we are making in the business. We remain focused on driving efficiencies across the business, which enables us to invest to support the strong growth we're seeing in AWS, including generative AI, which brings us to capital investments. As a reminder, we define these as the combination of CapEx plus equipment finance leases. In 2023, overall capital investments were $48.4 billion. As I mentioned, we're seeing strong AWS demand in both generative AI and our non-generative AI workloads, with customers signing up for longer deals and making bigger commitments. It's still relatively early days in generative AI and more broadly, the cloud space, and we see sizable opportunity for growth. We anticipate our overall capital expenditures to meaningfully increase year-over-year in 2024, primarily driven by higher infrastructure CapEx to support growth in AWS, including generative AI. Turning to our revenue guidance for Q2. Net sales are expected to be between $144 billion and $149 billion or to grow between 7% and 11% compared with the second quarter of 2023. We saw an unfavorable impact from year-over-year changes in foreign exchange in our Q1 results, and we expect that headwind to grow in the second quarter. Our Q2 net sales guidance anticipates an unfavorable foreign exchange impact of approximately 60 basis points. As part of our guidance considerations, we also continue to keep an eye on consumer spending and macro level trends, specifically in Europe where it appears to be a bit weaker relative to the U.S. Operating income is expected to be between $10 billion and $14 billion in Q2. This estimate includes the impact of our seasonal step-up in stock-based compensation expense, driven by the timing of our annual compensation cycle. I want to thank our customers, our partners, and our teammates around the world for a very strong start to the year, and we're excited to build on this momentum. We'll remain focused on streamlining and prioritizing projects in a way that allows us to continue inventing for customers in a cost-effective way. With that, let's move on to your questions.","evidence_gemma_new":"North America segment operating income year-over-year","evidence_llama_3_3":"North America operating income year-over-year","evidence_qwen_3_30b":"North America segment operating income $5 billion year-over-year","gemma_new_max":5000000000.0,"gemma_new_min":5000000000.0,"llama_3_3_max":5000000000.0,"llama_3_3_min":5000000000.0,"qwen_3_30b_max":5000000000.0,"qwen_3_30b_min":5000000000.0}
{"symbol":"AMZN","year":2024,"quarter":2,"date":"2024-Q2","chunk_id":3,"sub_chunk_id":0,"centroid_label":"north america segment north america segment operating income","agreed_value":5100000000.0,"count":3,"chunk":"Brian Olsavsky : Thanks, Andy. Let's start with our top line financial results. Worldwide revenue was $148 billion, an 11% increase year-over-year, excluding the impact of foreign exchange. This equates to a $1 billion headwind from foreign exchange in the quarter, which is about $300 million higher than we'd anticipated in our Q2 guidance range. Worldwide operating income nearly doubled year-over-year to $14.7 billion, which was $700 million above the high end of our guidance range. Across all of our segments, we remain focused on managing costs in a way that allows us to continue innovating and investing in areas that we think could move the needle for our customers. Starting with the North American international segments, customers continue to respond positively to our focus on low prices, broad selection, and fast shipping offers. We delivered at our fastest speeds ever so far this year, which helps drive strength in areas like our everyday essentials. These include items like non-perishable foods, as well as health, beauty, and personal care items. And Prime members continue to increase their shopping frequency while growing their spend on Amazon. Overall unit sales grew 11% year-over-year, which is consistent with our growth rates in Q1 after you adjust for the approximately 100 basis point impact of leap year. North America segment revenue was $90 billion, an increase of 9% year-over-year. And international segment revenue was $31.7 billion, an increase of 10% year-over-year, excluding the impact of foreign exchange. North America segment operating income was $5.1 billion, an increase of $1.9 billion year-over-year. Operating margin was 5.6%, up 170 basis points year-over-year, and down 20 basis points quarter over quarter. If we look at profitability of the core North America stores business, we actually improved our margin again quarter-over-quarter in Q2. The overall North America segment operating margin decreased slightly due to increased Q2 spend in some of our investment areas, including Kuiper, where we're starting to manufacture satellites we'll launch into space in Q4. We saw improvements in our cost to serve, driven by our efforts to place inventory more regionally, closer to where our customers are. This resulted in more consolidated shipments, with higher units per box shipped. We also saw packages traveling shorter distances to customers, and this also led to better on-road productivity in our transportation network. Our international segment was profitable again in Q2, with operating income of $300 million, an improvement of $1.2 billion year-over-year. Operating margin was 0.9%, up 390 basis points year over year. This increase is primarily driven by our established countries, as we improve our cost structure with better inventory placement and more consolidated shipments. Additionally, our emerging countries continue to expand their customer offerings, leverage their cost structure, and invest in expanding prime benefits. We are pleased with the overall progress of these countries as they make strides on their respective paths to profitability. Advertising remains an important contributor to profitability in the North America and international segments, and we saw strong growth on an increasing larger revenue base this quarter. We continue to see opportunities that further expand our offering in areas that are driving growth today, like sponsored products, as well as newer areas, like Prime Video ads. Moving next to our AWS segment, revenue is $26.3 billion, an increase of 18.8% year-over-year, excluding the impact of foreign exchange. AWS now has an annualized revenue run rate of more than $105 billion. During the second quarter, we saw continued growth across both generative AI and non-generative AI workloads. We saw companies turn their attention to newer initiatives, bring more workloads to the cloud, restart or accelerate existing migrations from on-premises to the cloud, and tap into the power of generative AI. AWS operating income was $9.3 billion, an increase of $4 billion year-over-year. It's driven by our continued focus on cost control, including a measured pace of hiring. Additionally, AWS operating margin includes an approximately 200 basis point favorable impact from the change in the estimated useful life of our servers that we instituted in Q1. As we've long said, we expect AWS operating margins to fluctuate over time, driven in part by the level of investments we're making at any point in time. We remain focused on driving efficiencies across the business, which enables us to invest to support the strong growth we're seeing in AWS, including generative AI. Now let's turn our attention to capital investments. As a reminder, we define these as a combination of CapEx plus equipment finance leases. For the first half of the year, CapEx was $30.5 billion. Looking ahead to the rest of 2024, we expect capital investments to be higher in the second half of the year. The majority of the spend will be to support the growing need for AWS infrastructure as we continue to see strong demand in both generative AI and our non-generative AI workloads. For the third quarter, specifically, I'd highlight a few seasonal factors to keep in mind. First, we hosted another successful Prime Day in mid-July. It was our 10th Prime Day and was our largest ever. Prime members globally saved billions of dollars on deals across every product category. From a profitability perspective, we've historically seen a headwind to operating margin in Q3, driven by Prime Day deals, as well as the marketing spend surrounding the event. Additionally, in Q3, we also begin to ramp up our capacity to handle Q4 holiday volumes in our fulfillment network. And lastly, we expect an increase in digital content cost quarter-over-quarter from the return of our NFL Thursday Night Football. We remain heads down, focused on driving a better customer experience. We believe putting customers first is the only reliable way to create lasting value for our shareholders. With that, let's move on to your questions.","evidence_gemma_new":"North America segment operating income year-over-year","evidence_llama_3_3":"North America segment operating income","evidence_qwen_3_30b":"North America segment operating income year-over-year","gemma_new_max":5100000000.0,"gemma_new_min":5100000000.0,"llama_3_3_max":5100000000.0,"llama_3_3_min":5100000000.0,"qwen_3_30b_max":5100000000.0,"qwen_3_30b_min":5100000000.0}
{"symbol":"AMZN","year":2024,"quarter":3,"date":"2024-Q3","chunk_id":3,"sub_chunk_id":0,"centroid_label":"north america segment north america segment operating income","agreed_value":5700000000.0,"count":3,"chunk":"Brian Olsavsky: Thanks, Andy. Let's start with our top line financial results. Worldwide revenue was $158.9 billion, an 11% increase year-over-year, excluding a 20 basis point unfavorable impact of foreign exchange. As a reminder, our Q3 guidance had anticipated a larger unfavorable impact of approximately 90 basis points. Worldwide operating income increased 56% year-over-year to $17.4 billion, our highest quarterly operating income ever and was $2.4 billion above the high end of our guidance range. We remain focused on streamlining and managing costs in a way that allows us to continue inventing for customers in a cost-effective way. In the third quarter, North America segment revenue was $95.5 billion, an increase of 9% year-over-year. International segment revenue was $35.9 billion, an increase of 12% year-over-year. Worldwide paid units accelerated to 12% growth year-over-year as our customers continue to come to Amazon for low prices, broad selection and convenient fast delivery. Prime remains a core contributor to this growth. Year-over-year paid membership growth accelerated in Q3 from both the US and globally, helped by our tenth annual Prime Day event in mid-July. Customers are enjoying even faster delivery speeds, which also helps drive strong growth in items like everyday essentials. This includes items like health, beauty, and personal care as well as nonperishable grocery. Though all these items often have a lower average selling price, the strength in everyday essential's revenue is a positive indicator that customers are turning to us for more of their daily needs. We see that when customers purchase these types of items from us, they build bigger baskets, shop more frequently and spend more on Amazon. We remain focused on keeping prices sharp and offering broad selection that gives customers options when making purchase decisions. Shifting to profitability. Our North America and international segments each delivered their seventh consecutive quarter of year-over-year operating margin improvement. North America segment operating income was $5.7 billion, an increase of $1.4 billion year-over-year. North America operating margin was 5.9%, up 100 basis points year-over-year. In the third quarter, we continue to make progress in improving our fulfillment network cost structure, driven in part by improved inventory placement. This helped us drive better productivity in our transportation network and shipping efficiency from higher units per box. In the international segment, operating income was $1.3 billion, an improvement of $1.4 billion year-over-year. International operating margin was 3.6%, up 390 basis points year-over-year. So far this year, we've generated operating profit in each of the three quarters for the international segment and totals $2.5 billion year-to-date. We're seeing strength in our established countries like the UK and Germany as we continue to drive efficiencies to improve on-road productivity in our transportation network and better execution in our fulfillment centers. Our emerging countries are growing revenue at a healthy rate also, and they are leveraging their cost structures on investing strategically in Prime benefits. We have confidence that our focus on the inputs, coupled with the strength of our global teams, will continue to drive improvement over time. Advertising remains an important contributor to profitability in the North America and international segments. This quarter, we saw strong growth on an increasing large base of advertising revenue. We see many opportunities to further expand our ads offering in areas that are driving growth today like Sponsored Products as well as more recent growth areas like Prime Video ads. Moving next to our AWS segment. Revenue was $27.5 billion, an increase of 19.1% year-over-year, excluding the impact of foreign exchange. AWS now has an annualized revenue run rate of $110 billion. The business continues to grow, mostly opportunity to expand our core cloud offering and our AI services. Customers increasingly recognize that to get the true benefit of Generative AI, they also need to move to the cloud. AWS operating income was $10.4 billion, an increase of $3.5 billion year-over-year as a result of our continued focus on cost control, including a measured pace of hiring, a focus on driving efficiencies in our infrastructure, and reducing costs across the business. Additionally, we increased the estimated useful life of our servers starting in 2024, which contributed approximately 200 basis points to the AWS margin increase year-over-year in Q3. As we said in the past, we expect the AWS operating margins to fluctuate, driven in part by the level of investments we're making at any point in time. Now turning to our capital investments. As a reminder, we define these as a combination of cash CapEx plus equipment finance leases. Year-to-date capital investments were $51.9 billion. We expect to spend approximately $75 billion in CapEx in 2024. The majority of the spend is to support the growing need for technology infrastructure. This primarily relates to AWS as we invest to support demand for our AI services while also including technology infrastructure to support our North America and international segments. Additionally, we're continuing to invest in our fulfillment and transportation network to support the growth of the business, improve delivery speeds and lower our cost to serve. This includes investments in same-day delivery facilities, in our inbound network and as well in robotics and automation. We're encouraged by the start of the holiday season, which kicked off in October with a strong Prime Big Deal Days. We are ready to serve customers throughout the season, and I want to thank our teams across Amazon for delivering two very large Prime member events in the past four months and for getting us ready to delight customers during this holiday season. With that, let's move on to your questions.","evidence_gemma_new":"North America segment operating income year-over-year","evidence_llama_3_3":"North America segment North America segment operating income Q3","evidence_qwen_3_30b":"North America segment operating income year-over-year","gemma_new_max":5700000000.0,"gemma_new_min":5700000000.0,"llama_3_3_max":5700000000.0,"llama_3_3_min":5700000000.0,"qwen_3_30b_max":5700000000.0,"qwen_3_30b_min":5700000000.0}
{"symbol":"AMZN","year":2024,"quarter":4,"date":"2024-Q4","chunk_id":3,"sub_chunk_id":0,"centroid_label":"north america segment north america segment operating income","agreed_value":9300000000.0,"count":3,"chunk":"Brian Olsavsky: Thanks, Andy. Starting with our top line financial results. Worldwide revenue was $187.8 billion, an 11% increase year over year excluding the impact of foreign exchange. This equates to an approximate $900 million headwind from FX in the Quarter, which is about $700 million higher than what we'd anticipated in our Q4 guidance range. Excluding that additional FX headwind, we would have exceeded the top end of our revenue guidance range. Worldwide operating income was $21.2 billion, our largest operating income quarter ever, and was $1.2 billion above the high end of our guidance range. Across all segments, we continue to innovate for customers while operating more efficiently at the same time. In the North America segment, fourth quarter revenue was $115.6 billion, an increase of 10% year over year. International segment revenue was $43.4 billion, an increase of 9% year over year excluding the impact of foreign exchange. Worldwide paid units grew 11% year over year, as our focus on low prices broad selection, and fast shipping continues to resonate with customers. Shifting to profitability, North America segment operating income was $9.3 billion, an increase of $2.8 billion year over year. Operating margin was 8%, up 190 basis points year over year. In the international segment, operating income was $1.3 billion, an improvement of $1.7 billion year over year, operating margin was 3%, up 400 basis points year over year. This marks the eighth consecutive quarter where we've seen year over year margin improvement in both the North Two thousand twenty-four also marks the second year in a row where we've lowered our global cost to serve on a per unit basis. In the fourth quarter, we saw strong productivity in our transportation network, from improved inventory placement, higher units per package, and reduced travel distances. We also saw improved productivity in our fulfillment centers. Overall, our teams executed extremely well throughout the quarter, and particularly during our peak seasons. I want to thank them for all they do to deliver for our customers. Looking ahead, we have several opportunities to keep lowering our costs through even better inventory placement, which also allows us to deliver items to customers faster. In the US, we're tuning our inbound network and continuing to expand our same day delivery network. Globally, we're adding automation and robotics throughout our network. While these efforts will take time to implement, and progress may not be linear, We have a good plan to continue to drive improvements in our cost structure. Advertising remains an important contributor to profitability in the North America and international segments. This quarter, we saw strong advertising revenue growth on an increasingly large base. We will also continue to invest in experiences that have potential to be important to customers in Amazon long term. In areas like Alexa, health care, and grocery, as well as satellites in the coming months. As a reminder, we currently expense the majority of the cost associated with the development of our satellite network. We will capitalize certain costs once the service achieves commercial viability, including sales to customers. Moving next to our AWS segment, revenue was $28.8 billion, an increase of 19% year over year. AWS now has an annualized revenue run rate of $115 billion. During the fourth quarter, we continue to see growth in both generative AI and non-generative AI offerings. As companies turn their attention to newer initiatives, bring more workloads to the cloud, restart or accelerate existing migrations from on-premise to the cloud, and tap into the power of generative AI. Customers recognize to get the full benefit of generative AI, they have to move to the cloud. AWS reported operating income of $10.6 billion, an increase of $3.5 billion year over year. This is the result of strong growth, innovation in our software and infrastructure to drive efficiencies, and continued focus on cost control across the business. As we've said in the past, we expect AWS operating margins to fluctuate over time, driven in part by the level of investments we're making. Additionally, we increased the estimated useful life of our servers starting in 2024, which contributed approximately 200 basis points to the AWS margin increase year over year in Q4. Now turning to our capital investments. As a reminder, we define these as a combination of cash CapEx plus equipment finance leases. Capital investments were $26.3 billion in the fourth quarter, and we think that run rate will be reasonably representative of our 2025 capital investment rate. Similar to 2024, the majority of the spend will be to support the growing need for technology infrastructure. This primarily relates to AWS, including support demand for our AI services, as well as tech infrastructure to support our North America and international segments. Additionally, we're continuing to invest in capacity for our fulfillment and transportation network to support future growth. We're also investing in same-day delivery facilities and our inbound network, as well as robotics and automation, to improve delivery speeds and to lower our cost to serve. These capital investments will support growth for many years to come. Turning to our revenue guidance for Q1, net sales are expected to be between $151 billion and $155.5 billion. I'd like to highlight two items impacting our Q1 revenue guidance. First, we estimate the year-over-year impact of changes in foreign exchange rates based on current rates, which we expect to be a headwind of approximately $2.1 billion in Q1 year over year, or 150 basis points. As a reminder, global currencies can fluctuate during the quarter, and just as we saw in Q4 with the strengthening of the dollar versus most other currencies. Second, a reminder that we are comping the impact of last year's leap year. The extra day contributed approximately $1.5 billion of additional net sales across our businesses in Q1 2024, or about 120 basis points to the year-over-year growth rate, which impacted all segments. Q1 operating income is expected to be between $14 billion and $18 billion. This guidance includes the estimated impact of certain updates to the useful life of our fixed assets. I'll provide a bit more detail in a moment, but on an aggregate basis, we estimate this will decrease full-year 2025 operating income by approximately $400 million for the assets on our balance sheet as of December 31, 2024. First, in Q4, we completed a useful life study for our servers and network equipment and observed an increased pace of technology development. Particularly in the area of artificial intelligence and machine learning. As a result, we're decreasing the useful life for a subset of our servers and networking equipment from six years to five years beginning in January 2025. We anticipate this will decrease full-year 2025 operating income by approximately $700 million. In addition, we also early-retired a subset of our servers and network equipment. We recorded a Q4 2024 expense of approximately $920 million from accelerated depreciation and related charges and expect this will also decrease full-year 2025 operating income by. Both of these server and network equipment use for life changes primarily impact our AWS segment. Lastly, we also completed a useful life study for certain types of heavy equipment used in our fulfillment centers. And are increasing the useful life from ten years to thirteen years beginning in January 2025, we anticipate this will increase full-year 2025 operating income by approximately $900 million. As we turn the page to 2025, we're energized by the great work our teams have delivered. We'll remain focused on driving even better customer experiences, and we believe putting customers first is the only reliable way to create lasting value for our shareholders. With that, let's move on to your questions.","evidence_gemma_new":"North America segment operating income year over year","evidence_llama_3_3":"North America operating income year over year","evidence_qwen_3_30b":"North America segment operating income $9.3 billion increase $2.8 billion year over year","gemma_new_max":9300000000.0,"gemma_new_min":9300000000.0,"llama_3_3_max":9300000000.0,"llama_3_3_min":9300000000.0,"qwen_3_30b_max":9300000000.0,"qwen_3_30b_min":9300000000.0}
{"symbol":"AMZN","year":2023,"quarter":3,"date":"2023-Q3","chunk_id":3,"sub_chunk_id":0,"centroid_label":"north america segment segment revenue","agreed_value":87900000000.0,"count":3,"chunk":"Brian Olsavsky: Thanks, Andy. Overall, we saw a strong performance in the third quarter. Worldwide revenue was $143.1 billion, representing an increase of 11% year-over-year, excluding the impact of foreign exchange and approximately $100 million above the top end of our guidance range. We saw our highest quarterly worldwide operating income ever which was $11.2 billion for the quarter, an increase of $8.7 billion year-over-year from $2.7 billion above the high end of our guidance range. North America revenue was $87.9 billion, an increase of 11% year-over-year. And international revenue was $32.1 billion, an increase of 11% year-over-year, excluding foreign exchange. During the quarter, we held our biggest Prime Day event ever with prime members purchasing more than 375 million items worldwide and saving more than $2.5 billion on millions of deals across the Amazon store. Outside of Prime Day, we continue to see strong demand across everyday essentials, including categories like beauty and health and personal care. From a customer behavior standpoint, we still see customers remaining cautious about price, trading down where they can and seeking out deals, coupled with lower spending on discretionary items. Building on the momentum from last quarter, we set another record for delivery speed. For the year-to-date period through the third quarter, we have delivered at the fastest speeds ever in the United States. These improvements in delivery speeds have been a key driver of growth and are resulting in increased purchase frequency by our Prime members. Third-party sellers grew at 18% year-over-year, excluding foreign exchange, primarily driven by selection expansion and growing adoption of our optional services for sellers, including Fulfillment by Amazon and paid account management and more. During the quarter, we hosted Amazon Accelerate, our annual seller conference, where we launched a number of new innovations and product developments for our sellers, including Supply Chain by Amazon. We also continue to see durable growth in advertising which grew 25% year-over-year, excluding foreign exchange, primarily driven by sponsored products as we lean into machine learning to improve the relevancy of the ads we show our customers and enhance our measurement capabilities on behalf of advertisers. We have seen strong improvement in our profitability. North America operating income was $4.3 billion, an increase of $4.7 billion year-over-year, resulting in an operating margin of 4.9%, up 100 basis points quarter-over-quarter. Since North America operating margins bottomed out in Q1 of 2022, we have now seen 6 consecutive quarters of improvement, resulting in a cumulative improvement of over 700 basis points over these past 6 quarters. The third quarter marked the second full quarter of regionalization within the U.S. and we're pleased with the early results. Regionalization has allowed us to simplify the network by reducing the number of line-haul lanes, increasing volume within existing line-haul lanes and adding more direct fulfillment center to delivery station connections. We have also been focused on optimizing inventory placement in a new regionalized network which when coupled with the simplification mentioned earlier, is helping contribute to an overall reduction in cost to serve. Additionally, in the quarter, we saw benefits from lower inflation, primarily within line haul, ocean and rail shipping rates which were partially offset by higher fuel prices. While we are encouraged by the improvements in operating profit, we still see a lot of opportunity in front of us. In international, we were closer to breakeven during the quarter with an operating loss of $95 million. This was an improvement of $2.4 billion year-over-year. This improvement was primarily driven by lowering our cost to serve through higher productivity, decreased inflationary pressures and improvements in leverage across our established and emerging international countries as we continue to focus on customer inputs and improve efficiencies within our operations. Moving to AWS; revenues were $23.1 billion, an increase of 12% year-over-year. On a quarter-over-quarter basis, we added more than $900 million of revenue in AWS as customers are continuing to shift their focus towards driving innovation and bringing new workloads to the cloud. Similar to what we shared last quarter, while optimization still remain a headwind, we've seen the rate of new cost optimization slowdown in AWS and we are encouraged by the strength of our customer pipeline. Customers are excited about our approach to generative AI, with several new announcements made during the quarter, including a strategic collaboration with Anthropic, opening Amazon Bedrock up to general availability, adding Meta's Llama 2 model to Bedrock in the near future and new customization capabilities of CodeWhisperer. AWS remains a clear cloud infrastructure leader with a significant leadership position in the number of customers, the size of our partner ecosystem, our breadth of functionality and the strongest operational performance in the industry. When we look at the fundamentals of the business, we believe we are in good position to drive future growth as the rates of cost optimization slow down. AWS operating income was $7 billion, an increase of $1.6 billion year-over-year. Our operating margin for the quarter was 30.3%. This is an improvement of approximately 600 basis points quarter-over-quarter, primarily driven by increased leverage on our head count costs. Shifting to free cash flow. On a trailing 12-month basis, free cash flow adjusted for finance leases was $20.2 billion, an improvement of $41.7 billion year-over-year. The largest driver of the improvement in free cash flow is our increased operating income which we're seeing across all 3 of our segments. Key drivers of this improvement include reductions in our cost to serve, continued advertising growth and improved leverage on our fixed costs. We are also seeing improvements in working capital, notably with our inventory efficiency as we improve our inventory placement. Now, let's turn to our capital investments. We define our capital investments as a combination of CapEx plus equipment finance leases. These investments were $50 billion for the trailing 12-month period ended September 30, down from $60 billion in the comparable prior year period. For the full year 2023, we expect capital investments to be approximately $50 billion compared to $59 billion in 2022. We expect fulfillment and transportation CapEx to be down year-over-year, partially offset by increased infrastructure CapEx to support growth of our AWS business, including additional investments related to generative AI and large language model efforts. As we head into the fourth quarter, we are ready to make this a great holiday season for our customers. Looking at our operations network, our inventory is the best position it's ever been heading into the holiday season, enabling us to serve customers with fast delivery speeds from their local regions. We continue to believe putting customers first is the only reliable way to create lasting value for our shareholders. With that, let's move on to questions.","evidence_gemma_new":"North America revenue year-over-year","evidence_llama_3_3":"North America revenue third quarter","evidence_qwen_3_30b":"North America revenue","gemma_new_max":87900000000.0,"gemma_new_min":87900000000.0,"llama_3_3_max":87900000000.0,"llama_3_3_min":87900000000.0,"qwen_3_30b_max":87900000000.0,"qwen_3_30b_min":87900000000.0}
{"symbol":"AMZN","year":2023,"quarter":4,"date":"2023-Q4","chunk_id":3,"sub_chunk_id":0,"centroid_label":"north america segment segment revenue","agreed_value":105500000000.0,"count":2,"chunk":"Brian Olsavsky: Thanks, Andy. Overall, we saw strong performance in the fourth quarter. Worldwide revenue was $170 billion, representing an increase of 13% year-over-year, excluding the impact of foreign exchange and approximately $3 billion above the top end of our guidance range. Saw our highest quarterly worldwide operating income ever, which was $13.2 billion for the quarter, an increase of $10.5 billion year-over-year and $2.2 billion above the high end of our guidance range. For the full year 2023, we had a meaningful improvement across our financial results. Revenue was $574.8 billion, an increase of 12% year-over-year, excluding the impact of foreign exchange. Operating income tripled year-over-year to $36.9 billion. Trailing 12-month free cash flow adjusted for equipment finance leases was $35.5 billion, up $48.3 billion versus last year. These financial outputs are a result of a lot of improvements in our key input metrics such as stores' cost to serve, which decreased year-over-year for the first time since 2018 and our ability to deliver to customers at our fastest speeds ever. I want to thank our customers, our partners and our teammates around the world for a very strong 2023 performance. Focusing on the fourth quarter, North America revenue was $105.5 billion, an increase of 13% year-over-year and an acceleration of 200 basis points compared to Q3. International revenue was $40.2 billion, an increase of 13% year-over-year, excluding the impact of foreign exchange, also an acceleration of 200 basis points compared to Q3. During the quarter, we remained focused on the inputs that matter most to our customers, price, selection and convenience. Our shopping events throughout the quarter included Prime Big Deal Days in October and our extended Black Friday and Cyber Monday shopping event helped to attract new Prime members and deliver billions in savings for customers. We made meaningful progress on delivery speeds in the United States and globally, which helped strong sales throughout the quarter, including notable strength in the last-minute gifting where our ability to provide fast shipping helped our Prime members ensure that they got their gifts before the holidays. These improvements in delivery speed have led to increased purchase frequency by our Prime members across all of our major geographies. It also strengthened demand for our everyday essentials. Categories like beauty and health and personal care, where speed is even more important to customers. Third-party sellers were a big part of our success over the holidays with worldwide third-party seller services revenue growing at 19% year-over-year, excluding the impact of foreign exchange. And worldwide third-party seller unit mix was 61%, its highest level ever. We also saw strong performance in worldwide advertising, which grew 26% year-over-year, excluding the impact of foreign exchange. The strength in advertising was primarily driven by sponsored products as our teams worked hard to increase the relevancy of the ads we show customers by leveraging machine learning. Advertising only works if the ads are helpful to customers and there's a lot of value in tailoring sponsored products, so they are relevant to what a customer is actually searching for. We're also continually focused on improving our measurement capabilities, which allow brands to see the payback of their advertising spend. Shifting to profitability. North America segment operating income was $6.5 billion, an increase of $6.7 billion year-over-year, resulting in an operating margin of 6.1%, up 120 basis points quarter-over-quarter. Since North America operating margins were at their recent low levels in Q1 of 2022, we have now seen seven consecutive quarters of improvement resulting in a cumulative improvement of 800 basis points over these past seven quarters. In addition to the strong top line growth, which helped to drive improved leverage throughout our businesses, we continue to make progress on reducing our cost to serve. The fourth quarter is our busiest time of year, supported by an increasingly large and integrated operations network. Overall, our teams executed extremely well, yielding strong efficiency gains with minimal disruptions. We were pleased with the performance of our regionalized network during the holiday period, where we saw benefits from improved inventory placement helping drive faster speeds and also lowering costs. We also continue to see benefits from lower transportation rates, which include linehaul, ocean and rail and from a more stable labor market, resulting in improved staffing levels. In our International segment, we had an operating loss of $419 million, an improvement of $1.8 billion year-over-year. This improvement was primarily driven by lowering our cost to serve through increased units per box, lower transportation rates and leverage across our fixed costs as we continue to focus on customer inputs and improve efficiencies within our operations. The International segment represents more than 20 countries of varying degrees of growth and our largest established countries like the U.K., Germany and Japan, relatively strong revenue growth contributed to the year-over-year improvement in profitability. Additionally, we saw good progress in our emerging countries as they continued to expand their customer offerings, while seeking to invest wisely. Moving to AWS. Revenues were $24.2 billion, an increase of 13% year-over-year. On a quarter-over-quarter basis, we added more than $1.1 billion of revenue in AWS as customers are continuing to shift their focus towards driving innovation and bringing new workloads to the cloud. Similar to what we shared last quarter, we continue to see the diminishing impact of cost optimizations. And as these optimization slow down, we're seeing more companies turning their attention to newer initiatives and reaccelerating existing migrations. Customers are also excited about our approach to generative AI. Still relatively early days, but the revenues are accelerating rapidly across all 3 layers and our approach to democratizing AI is resonating well with our customers. We have seen significant interest from our customers wanting to run generative AI applications and build large language models and foundation models, all with the privacy, reliability and security they have grown accustomed to with AWS. AWS' operating income was $7.2 billion, an increase of $2 billion year-over-year. Our operating margin for the quarter was 29.6%, up more than 500 basis points year-over-year and effectively flat on a quarter-over-quarter basis. This margin improvement reflects our headcount reductions from earlier in the year and a slowdown in the pace of hiring. Shifting to free cash flow. On a trailing 12-month basis, free cash flow adjusted for finance leases was $35.5 billion, an improvement of $48.3 billion year-over-year. The largest driver of the improvement in free cash flow is our increased operating income, which we are seeing across all three of our segments. We're also seeing improvements in working capital, notably in inventory efficiency driven by our regionalization efforts. Next, let's turn to capital investments. We define our capital investments as a combination of CapEx plus equipment finance leases. In 2023, full year CapEx was $48.4 billion, which was down $10.2 billion year-over-year, primarily driven by lower spend on fulfillment and transportation. As we look forward to 2024, we anticipate CapEx to increase year-over-year, primarily driven by increased infrastructure CapEx, support growth of our AWS business, including additional investments in generative AI and large language models. One thing I'd like to highlight in our first quarter guidance is that we recently completed a useful life study for our servers and we are increasing the useful life from 5 years to 6 years beginning in January 2024. We will have this anticipated benefit to our operating income of approximately $900 million in Q1, which is included in our operating income guidance. As we turn the calendar to 2024, we are excited to continue upon the great work the teams have been able to deliver in 2023. We remain focused on streamlining and prioritizing projects in an effective way that reduces costs and also allows us to continue innovating and inventing for customers. With that, let's move on to questions.","evidence_gemma_new":"North America revenue year-over-year","evidence_llama_3_3":"North America revenue fourth quarter","evidence_qwen_3_30b":null,"gemma_new_max":105500000000.0,"gemma_new_min":105500000000.0,"llama_3_3_max":105500000000.0,"llama_3_3_min":105500000000.0,"qwen_3_30b_max":null,"qwen_3_30b_min":null}
{"symbol":"AMZN","year":2024,"quarter":1,"date":"2024-Q1","chunk_id":3,"sub_chunk_id":0,"centroid_label":"north america segment segment revenue","agreed_value":86300000000.0,"count":2,"chunk":"Brian Olsavsky: Thanks, Andy. Starting with our top line financial results. Worldwide revenue was $143.3 billion, representing a 13% increase year-over-year, excluding the impact of foreign exchange and near the top end of our guidance range. I'd like to highlight a couple of points to help you interpret our growth rates. First, we saw an impact from leap year in Q1, which added approximately 120 basis points to the year-over-year quarterly revenue growth rate. Second, while I typically talk about growth rates, excluding the impact of year-over-year changes in foreign exchange, we did see an unfavorable impact from global currencies weakening against the U.S. dollar, more than we had planned in Q1. This led to a $700 million or 50 basis point headwind to revenue relative to what we guided. Excluding this FX headwind, we would have exceeded the top end of our guidance range. Worldwide operating income was $15.3 billion, which was our highest quarterly income ever, and it was $3.3 billion above the high end of our guidance range. This was driven by strong operational performance across all 3 reportable segments and better-than-expected operating leverage, including lower cost to serve. The impact on operating income from our Q1 FX rate headwind was negligible. I'll speak more to our profitability trends in a moment. In the North America segment, first quarter revenue was $86.3 billion, an increase of 12% year-over-year. In the international segment, revenue was $31.9 billion, an increase of 11% year-over-year, excluding the impact of foreign exchange.","evidence_gemma_new":null,"evidence_llama_3_3":"North America segment first quarter revenue","evidence_qwen_3_30b":"North America segment first quarter revenue 12% year-over-year","gemma_new_max":null,"gemma_new_min":null,"llama_3_3_max":86300000000.0,"llama_3_3_min":86300000000.0,"qwen_3_30b_max":86300000000.0,"qwen_3_30b_min":86300000000.0}
{"symbol":"AMZN","year":2024,"quarter":2,"date":"2024-Q2","chunk_id":3,"sub_chunk_id":0,"centroid_label":"north america segment segment revenue","agreed_value":90000000000.0,"count":3,"chunk":"Brian Olsavsky : Thanks, Andy. Let's start with our top line financial results. Worldwide revenue was $148 billion, an 11% increase year-over-year, excluding the impact of foreign exchange. This equates to a $1 billion headwind from foreign exchange in the quarter, which is about $300 million higher than we'd anticipated in our Q2 guidance range. Worldwide operating income nearly doubled year-over-year to $14.7 billion, which was $700 million above the high end of our guidance range. Across all of our segments, we remain focused on managing costs in a way that allows us to continue innovating and investing in areas that we think could move the needle for our customers. Starting with the North American international segments, customers continue to respond positively to our focus on low prices, broad selection, and fast shipping offers. We delivered at our fastest speeds ever so far this year, which helps drive strength in areas like our everyday essentials. These include items like non-perishable foods, as well as health, beauty, and personal care items. And Prime members continue to increase their shopping frequency while growing their spend on Amazon. Overall unit sales grew 11% year-over-year, which is consistent with our growth rates in Q1 after you adjust for the approximately 100 basis point impact of leap year. North America segment revenue was $90 billion, an increase of 9% year-over-year. And international segment revenue was $31.7 billion, an increase of 10% year-over-year, excluding the impact of foreign exchange. North America segment operating income was $5.1 billion, an increase of $1.9 billion year-over-year. Operating margin was 5.6%, up 170 basis points year-over-year, and down 20 basis points quarter over quarter. If we look at profitability of the core North America stores business, we actually improved our margin again quarter-over-quarter in Q2. The overall North America segment operating margin decreased slightly due to increased Q2 spend in some of our investment areas, including Kuiper, where we're starting to manufacture satellites we'll launch into space in Q4. We saw improvements in our cost to serve, driven by our efforts to place inventory more regionally, closer to where our customers are. This resulted in more consolidated shipments, with higher units per box shipped. We also saw packages traveling shorter distances to customers, and this also led to better on-road productivity in our transportation network. Our international segment was profitable again in Q2, with operating income of $300 million, an improvement of $1.2 billion year-over-year. Operating margin was 0.9%, up 390 basis points year over year. This increase is primarily driven by our established countries, as we improve our cost structure with better inventory placement and more consolidated shipments. Additionally, our emerging countries continue to expand their customer offerings, leverage their cost structure, and invest in expanding prime benefits. We are pleased with the overall progress of these countries as they make strides on their respective paths to profitability. Advertising remains an important contributor to profitability in the North America and international segments, and we saw strong growth on an increasing larger revenue base this quarter. We continue to see opportunities that further expand our offering in areas that are driving growth today, like sponsored products, as well as newer areas, like Prime Video ads. Moving next to our AWS segment, revenue is $26.3 billion, an increase of 18.8% year-over-year, excluding the impact of foreign exchange. AWS now has an annualized revenue run rate of more than $105 billion. During the second quarter, we saw continued growth across both generative AI and non-generative AI workloads. We saw companies turn their attention to newer initiatives, bring more workloads to the cloud, restart or accelerate existing migrations from on-premises to the cloud, and tap into the power of generative AI. AWS operating income was $9.3 billion, an increase of $4 billion year-over-year. It's driven by our continued focus on cost control, including a measured pace of hiring. Additionally, AWS operating margin includes an approximately 200 basis point favorable impact from the change in the estimated useful life of our servers that we instituted in Q1. As we've long said, we expect AWS operating margins to fluctuate over time, driven in part by the level of investments we're making at any point in time. We remain focused on driving efficiencies across the business, which enables us to invest to support the strong growth we're seeing in AWS, including generative AI. Now let's turn our attention to capital investments. As a reminder, we define these as a combination of CapEx plus equipment finance leases. For the first half of the year, CapEx was $30.5 billion. Looking ahead to the rest of 2024, we expect capital investments to be higher in the second half of the year. The majority of the spend will be to support the growing need for AWS infrastructure as we continue to see strong demand in both generative AI and our non-generative AI workloads. For the third quarter, specifically, I'd highlight a few seasonal factors to keep in mind. First, we hosted another successful Prime Day in mid-July. It was our 10th Prime Day and was our largest ever. Prime members globally saved billions of dollars on deals across every product category. From a profitability perspective, we've historically seen a headwind to operating margin in Q3, driven by Prime Day deals, as well as the marketing spend surrounding the event. Additionally, in Q3, we also begin to ramp up our capacity to handle Q4 holiday volumes in our fulfillment network. And lastly, we expect an increase in digital content cost quarter-over-quarter from the return of our NFL Thursday Night Football. We remain heads down, focused on driving a better customer experience. We believe putting customers first is the only reliable way to create lasting value for our shareholders. With that, let's move on to your questions.","evidence_gemma_new":"North America segment revenue year-over-year","evidence_llama_3_3":"North America segment segment revenue","evidence_qwen_3_30b":"North America segment revenue year-over-year","gemma_new_max":90000000000.0,"gemma_new_min":90000000000.0,"llama_3_3_max":90000000000.0,"llama_3_3_min":90000000000.0,"qwen_3_30b_max":90000000000.0,"qwen_3_30b_min":90000000000.0}
{"symbol":"AMZN","year":2024,"quarter":3,"date":"2024-Q3","chunk_id":3,"sub_chunk_id":0,"centroid_label":"north america segment segment revenue","agreed_value":95500000000.0,"count":3,"chunk":"Brian Olsavsky: Thanks, Andy. Let's start with our top line financial results. Worldwide revenue was $158.9 billion, an 11% increase year-over-year, excluding a 20 basis point unfavorable impact of foreign exchange. As a reminder, our Q3 guidance had anticipated a larger unfavorable impact of approximately 90 basis points. Worldwide operating income increased 56% year-over-year to $17.4 billion, our highest quarterly operating income ever and was $2.4 billion above the high end of our guidance range. We remain focused on streamlining and managing costs in a way that allows us to continue inventing for customers in a cost-effective way. In the third quarter, North America segment revenue was $95.5 billion, an increase of 9% year-over-year. International segment revenue was $35.9 billion, an increase of 12% year-over-year. Worldwide paid units accelerated to 12% growth year-over-year as our customers continue to come to Amazon for low prices, broad selection and convenient fast delivery. Prime remains a core contributor to this growth. Year-over-year paid membership growth accelerated in Q3 from both the US and globally, helped by our tenth annual Prime Day event in mid-July. Customers are enjoying even faster delivery speeds, which also helps drive strong growth in items like everyday essentials. This includes items like health, beauty, and personal care as well as nonperishable grocery. Though all these items often have a lower average selling price, the strength in everyday essential's revenue is a positive indicator that customers are turning to us for more of their daily needs. We see that when customers purchase these types of items from us, they build bigger baskets, shop more frequently and spend more on Amazon. We remain focused on keeping prices sharp and offering broad selection that gives customers options when making purchase decisions. Shifting to profitability. Our North America and international segments each delivered their seventh consecutive quarter of year-over-year operating margin improvement. North America segment operating income was $5.7 billion, an increase of $1.4 billion year-over-year. North America operating margin was 5.9%, up 100 basis points year-over-year. In the third quarter, we continue to make progress in improving our fulfillment network cost structure, driven in part by improved inventory placement. This helped us drive better productivity in our transportation network and shipping efficiency from higher units per box. In the international segment, operating income was $1.3 billion, an improvement of $1.4 billion year-over-year. International operating margin was 3.6%, up 390 basis points year-over-year. So far this year, we've generated operating profit in each of the three quarters for the international segment and totals $2.5 billion year-to-date. We're seeing strength in our established countries like the UK and Germany as we continue to drive efficiencies to improve on-road productivity in our transportation network and better execution in our fulfillment centers. Our emerging countries are growing revenue at a healthy rate also, and they are leveraging their cost structures on investing strategically in Prime benefits. We have confidence that our focus on the inputs, coupled with the strength of our global teams, will continue to drive improvement over time. Advertising remains an important contributor to profitability in the North America and international segments. This quarter, we saw strong growth on an increasing large base of advertising revenue. We see many opportunities to further expand our ads offering in areas that are driving growth today like Sponsored Products as well as more recent growth areas like Prime Video ads. Moving next to our AWS segment. Revenue was $27.5 billion, an increase of 19.1% year-over-year, excluding the impact of foreign exchange. AWS now has an annualized revenue run rate of $110 billion. The business continues to grow, mostly opportunity to expand our core cloud offering and our AI services. Customers increasingly recognize that to get the true benefit of Generative AI, they also need to move to the cloud. AWS operating income was $10.4 billion, an increase of $3.5 billion year-over-year as a result of our continued focus on cost control, including a measured pace of hiring, a focus on driving efficiencies in our infrastructure, and reducing costs across the business. Additionally, we increased the estimated useful life of our servers starting in 2024, which contributed approximately 200 basis points to the AWS margin increase year-over-year in Q3. As we said in the past, we expect the AWS operating margins to fluctuate, driven in part by the level of investments we're making at any point in time. Now turning to our capital investments. As a reminder, we define these as a combination of cash CapEx plus equipment finance leases. Year-to-date capital investments were $51.9 billion. We expect to spend approximately $75 billion in CapEx in 2024. The majority of the spend is to support the growing need for technology infrastructure. This primarily relates to AWS as we invest to support demand for our AI services while also including technology infrastructure to support our North America and international segments. Additionally, we're continuing to invest in our fulfillment and transportation network to support the growth of the business, improve delivery speeds and lower our cost to serve. This includes investments in same-day delivery facilities, in our inbound network and as well in robotics and automation. We're encouraged by the start of the holiday season, which kicked off in October with a strong Prime Big Deal Days. We are ready to serve customers throughout the season, and I want to thank our teams across Amazon for delivering two very large Prime member events in the past four months and for getting us ready to delight customers during this holiday season. With that, let's move on to your questions.","evidence_gemma_new":"North America segment revenue year-over-year","evidence_llama_3_3":"North America segment North America segment revenue Q3","evidence_qwen_3_30b":"North America segment revenue year-over-year","gemma_new_max":95500000000.0,"gemma_new_min":95500000000.0,"llama_3_3_max":95500000000.0,"llama_3_3_min":95500000000.0,"qwen_3_30b_max":95500000000.0,"qwen_3_30b_min":95500000000.0}
{"symbol":"AMZN","year":2024,"quarter":4,"date":"2024-Q4","chunk_id":2,"sub_chunk_id":0,"centroid_label":"north america segment segment revenue","agreed_value":0.1,"count":2,"chunk":"Andy Jassy: Thanks, Dave. Today, we're reporting $187.8 billion in revenue, up 10% year over year. Given the way the dollar strengthened throughout the quarter, we had $700 million more foreign exchange headwind than we anticipated at guidance. Without that headwind, revenue would have been 11% year over year and exceeded the top end of our guidance. Operating income was $21.2 billion, up 61% year over year, and trailing twelve-month free cash flow adjusted for equipment finance leases was $36.2 billion, up $700 million year over year. We're pleased with the invention, customer experience improvements, and results delivered in 2024, and have a lot more planned in 2025. I'll start by talking about our stores business. We saw 10% year over year revenue growth in our North America segment, and 9% year over year in our international segment, excluding the impact from foreign exchange rates. Our continued focus on expanding selection, lowering prices, and improving convenience drove strong unit growth that even outpaced our revenue growth. We continue to add to our broad range giving customers choice across a variety of price points. We welcomed notable brands to our store throughout 2024, including Clinique, Estee Lauder, Aura Rings, and Armani Beauty. We continue to add to the hundreds of millions of products offered from our selling partners, who made up 61% of items that we sold in 2024, our highest annual mix of third-party seller units ever. We also launched Amazon Haul for US customers in Q4, which offers customers an engaging shopping experience that brings ultra-low priced products into one convenient destination. It's off to a very strong start. In the fourth quarter, consumers saved more than $15 billion with our low everyday prices and record-setting events during Prime Big Deal Days in October, Black Friday, and Cyber Monday around Thanksgiving. Additionally, Profitero's annual pricing study found that entering the holiday season, Amazon had the lowest online prices for the eighth year in a row, averaging 14% lower prices on average than other leading retailers in the US. Our speed of delivery continues to accelerate, and 2024 was another record-setting year for Prime members. We expanded the number of same-day delivery sites by more than 60% in 2024, which now serve more than 140 metro areas. Overall, we delivered over 9 billion units the same or next day around the world. Our relentless pursuit of better selection, price, and delivery speed is driving accelerated growth in Prime membership. For just $14.99 a month, Prime members get unlimited free shipping on 300 million items, off the same day or one day delivery, exclusive shopping events like Prime Day, access to a vast collection of premium programming and live sports on Prime Video, ad-free listening of 100 million songs and podcasts with Amazon Music, access to unlimited generic prescriptions for only $5 a month, unlimited grocery delivery on orders over $35 from Whole Foods Market and Amazon Fresh for $9.99 a month, a free Grubhub Plus membership with free unlimited delivery, and our latest benefit of a 10 cent per gallon fuel discount at BP, AMPM, and AMCO stations. When you think about this as a whole, and also compared to many other membership services that are comparably or more expensively priced and offer just one benefit like video, Prime is a screaming deal. And we have more coming for our Prime members in 2025. We also remain squarely focused on cost to serve in our fulfillment network, which has been a meaningful driver of our increased operating income. We talked about the regionalization of our US network. We've also recently rolled out our redesigned US inbound network. While still in its early stages, our inbound efforts have improved our placement of inventory so that even more items are close to end customers. Ahead of Black Friday in November, we'd improved the percentage of ordered units available in the ideal building by over 40% year over year. We've also spent considerable time optimizing the number of items sent to customers in the same package, which reduces packaging, is more convenient for customers, and less expensive for us to fulfill. And our per-unit transportation costs continue to decline as we build out and optimize our last-mile network. Overall, we've reduced our global cost to serve on a per-unit basis for the second year in a row. While at the same time increasing speed, improving safety, and adding selection. As we look to 2025 and beyond, we see opportunities to reduce costs again as we further refine inventory placement, grow our same-day delivery network, and accelerate robotics and automation throughout the network. In advertising, we remain pleased with the strong growth on a very large base, generating $17.3 billion of revenue in the quarter, and growing 18% year over year. That's a $69 billion annual revenue run rate, more than double what it was just four years ago at $29 billion. Sponsored products, the largest portion of ad revenue, are doing well, and we see a runway for even more growth. We also have a number of newer streaming offerings that are starting to become significant new revenue sources. On the streaming video side, we wrapped up our first year of Prime Video ads, and we're quite pleased with the early progress and head into this year with momentum. We made it easier to do full funnel advertising with us. Full funnel is from the top of the funnel with broad reach advertising that drives brand awareness to mid funnel where sponsored brands let companies specify certain keywords and audiences to attract people to their detail pages or brands to our Amazon to bottom of the funnel where sponsored products help advertisers surface relevant product ads to customers at the point of purchase. We also have differentiated audience features that leverage billions of signals from Amazon Marketing Cloud secure data clean rooms, providing advertisers the ability to analyze data, produce core marketing metrics, and understand how their marketing performs across various channels. With our new multi-touch attribution model, advertisers can understand how various ad types in their campaigns contribute to sales. Moving on to AWS, in Q4, AWS grew 19% year over year and now has a $115 billion annualized revenue run rate. AWS is a reasonably large business by most folks' standards. And though we expect growth will be lumpy over the next few years as enterprises adopt and technology advancements impact timing, it's hard to overstate how optimistic we are about what lies ahead for AWS' customers and business. I spent a fair bit of time thinking several years out. And while it may be hard for some to fathom a world where virtually every app is generative AI-infused, with inference being a core building block just like compute, storage, and database, and most companies having their own agents that accomplish various tasks interact with one another, this is the world we're thinking about all the time. And we continue to believe that this world will mostly be built on top of the cloud with the largest portion of it on AWS. To best help customers realize this future, you need powerful capabilities of all three layers of the stack. At the bottom layer, for those building models, you need compelling chips. Chips are the key ingredient in the compute that drives training and inference. Most AI compute has been driven by NVIDIA chips, and we obviously have a deep partnership with NVIDIA and will for as long as we can see into the future. However, there aren't that many generative AI applications of large scale yet, and when you get there, as we have with apps like Alexa and Rufus, cost can get steep quickly. Customers want better price performance, and it's why we built our own custom AI silicon. Tranium 2 just launched at our AWS reInvent conference in December, E2 instances with these chips are typically 30 to 40 percent more price per form than other current GPU-powered instances available. That's very compelling at scale. Several technically capable companies like Adobe, Databricks, Poolside, and Qualcomm have seen impressive results in early testing of Tranium 2. It's also why you're seeing Anthropic build its future frontier models on Tranium 2. We're collaborating with Anthropic to build project right near. A cluster of training and two ultra-servers containing hundreds of thousands of training m two chips. This cluster is going to be five times the number of Exo-ZLofts as the cluster that Anthropic used to train their current leading set of cloud models. We're already hard at work on Training 3, which we expect to preview late in 25, and defining Training 4 thereafter. Building outstanding performing chips that deliver leading price performance has become a core strength of AWS's, starting with our Nitro and Graviton chips in our core business, and now extending to Tranium and AI. It's something unique to AWS relative to other competing cloud providers. The other key component for model builders is services that make it easier to construct their models. I won't spend a lot of time on these comments on Amazon SageMaker AI, which has become the go-to service for AI model builders to manage their AI data, build models, experiment, and deploy these models. HyperPOD capability automatically splits training workloads across many AI accelerators, prevents interruptions by periodically saving checkpoints, and automatically repairing faulty instances from their last saved checkpoint and saving training time by up to 40 percent. It continues to be a differentiator with several new compelling capabilities at reinvent including the ability to manage costs at a cluster level, and prioritize which workloads should receive capacity when budgets are reached. It is increasingly being adopted by model builders. At the middle layer, for those wanting to leverage frontier models to build Jet AI apps, Amazon Bedrock is our fully managed service providing high performing foundation models with the most compelling features making it easy to build a high-quality generative AI application. We are iterating quickly on Bedrock announcing Luma AI, poolside, and over a hundred other popular emerging models to Bedrock and reinvent. We've just added DeepSeq's R1 models to Bedrock and SageMaker. Additionally, we delivered several compelling new Bedrock features to re-event, including prompt caching, intelligent prompt routing, and model distillation, all of which help customers achieve lower cost and latency in their inference. Like SageMaker AI, Bedrock is growing quickly and resonating strongly with customers. Related, we also launched Amazon's own family of frontier models in Bedrock called Nova. These models compare favorably in intelligence against the leading models in the world to offer lower latency, lower price, about 75 percent lower than other models in Bedrock, and are integrated with key Bedrock features like fine-tuning, model distillation, knowledge base as a rag, and Agentec capabilities. Thousands of AWS customers are already taking advantage of Amazon Nova models' capabilities and price performance, including Palantir, SAP Densu Fortinet Trellix, and Robinhood, and we've just gotten started. At the top layer of the stack, Amazon Q is our most capable generative AI-powered assistant for software development and to leverage your own data. You may remember that on the last call, I shared the very practical use case where Q transformation helps save Amazon Teams $260 million and 4500 developer years in migrating over 30,000 applications to new versions of the Java JDK. This is real value, and companies ask for more, which we obliged with our recent deliveries of Q transformation that enable moves from Windows dot net applications to Linux VMware to EC2, accelerates mainframe migrations. Early customer testing indicates the queue can turn was going to be a multi-year effort to do a mainframe migration into a multi-quarter effort, cutting by more than 50% the time to migrate mainframes. This is a big deal, and these transformations are good examples of practical AI. While AI continues to be a compelling new driver in the business, we haven't lost our focus on core modernization of companies' technology. We signed new AWS agreements with companies including Intuit, PayPal, Norwegian Cruise Line Holdings, Northrop Grumman, The Guardian Life Insurance Company of America, Reddit, Japan Airlines, Baker Hughes, the Hertz Corporation, Resin Chime Financial, Asana, and many others. Consistent customer feedback from our recent AWS reInvent was appreciation that we're still inventing rapidly in non-AI key infrastructure areas like storage, compute, database analytics. Our functionality leadership continues to expand and there were several key launches customers were buzz about, including Amazon Aurora D SQL, our new serverless distributed SQL database that enables applications with the highest availability strong consistency, post-test compatibility, It's four times faster reason rights compared to other pop distributed SQL databases, Amazon S3 tables, which makes S3 the first cloud object store with fully managed support for Apache Iceberg for faster analytics, Amazon S3 metadata, Which automatically generates queryable metadata simplifying data discovery, business analytics, and real time inference to help customers unlock the value of their data in S3, and the next generation of Amazon SageMaker which brings together all the data analytics services and AI services in interface to do analytics and AI more easily at scale. As 2024 comes to an end, I want to thank our teammates and partners for their meaningful impact throughout the year. It was a very successful year across almost any dimension you pick. We're far from done, and look forward to delivering for customers in 2025. With that, I'll turn it over to Brian for a financial update.","evidence_gemma_new":"North America segment revenue growth year over year","evidence_llama_3_3":"North America segment revenue growth year over year","evidence_qwen_3_30b":null,"gemma_new_max":0.1,"gemma_new_min":0.1,"llama_3_3_max":0.1,"llama_3_3_min":0.1,"qwen_3_30b_max":null,"qwen_3_30b_min":null}
{"symbol":"AMZN","year":2024,"quarter":4,"date":"2024-Q4","chunk_id":3,"sub_chunk_id":0,"centroid_label":"north america segment segment revenue","agreed_value":115600000000.0,"count":3,"chunk":"Brian Olsavsky: Thanks, Andy. Starting with our top line financial results. Worldwide revenue was $187.8 billion, an 11% increase year over year excluding the impact of foreign exchange. This equates to an approximate $900 million headwind from FX in the Quarter, which is about $700 million higher than what we'd anticipated in our Q4 guidance range. Excluding that additional FX headwind, we would have exceeded the top end of our revenue guidance range. Worldwide operating income was $21.2 billion, our largest operating income quarter ever, and was $1.2 billion above the high end of our guidance range. Across all segments, we continue to innovate for customers while operating more efficiently at the same time. In the North America segment, fourth quarter revenue was $115.6 billion, an increase of 10% year over year. International segment revenue was $43.4 billion, an increase of 9% year over year excluding the impact of foreign exchange. Worldwide paid units grew 11% year over year, as our focus on low prices broad selection, and fast shipping continues to resonate with customers. Shifting to profitability, North America segment operating income was $9.3 billion, an increase of $2.8 billion year over year. Operating margin was 8%, up 190 basis points year over year. In the international segment, operating income was $1.3 billion, an improvement of $1.7 billion year over year, operating margin was 3%, up 400 basis points year over year. This marks the eighth consecutive quarter where we've seen year over year margin improvement in both the North Two thousand twenty-four also marks the second year in a row where we've lowered our global cost to serve on a per unit basis. In the fourth quarter, we saw strong productivity in our transportation network, from improved inventory placement, higher units per package, and reduced travel distances. We also saw improved productivity in our fulfillment centers. Overall, our teams executed extremely well throughout the quarter, and particularly during our peak seasons. I want to thank them for all they do to deliver for our customers. Looking ahead, we have several opportunities to keep lowering our costs through even better inventory placement, which also allows us to deliver items to customers faster. In the US, we're tuning our inbound network and continuing to expand our same day delivery network. Globally, we're adding automation and robotics throughout our network. While these efforts will take time to implement, and progress may not be linear, We have a good plan to continue to drive improvements in our cost structure. Advertising remains an important contributor to profitability in the North America and international segments. This quarter, we saw strong advertising revenue growth on an increasingly large base. We will also continue to invest in experiences that have potential to be important to customers in Amazon long term. In areas like Alexa, health care, and grocery, as well as satellites in the coming months. As a reminder, we currently expense the majority of the cost associated with the development of our satellite network. We will capitalize certain costs once the service achieves commercial viability, including sales to customers. Moving next to our AWS segment, revenue was $28.8 billion, an increase of 19% year over year. AWS now has an annualized revenue run rate of $115 billion. During the fourth quarter, we continue to see growth in both generative AI and non-generative AI offerings. As companies turn their attention to newer initiatives, bring more workloads to the cloud, restart or accelerate existing migrations from on-premise to the cloud, and tap into the power of generative AI. Customers recognize to get the full benefit of generative AI, they have to move to the cloud. AWS reported operating income of $10.6 billion, an increase of $3.5 billion year over year. This is the result of strong growth, innovation in our software and infrastructure to drive efficiencies, and continued focus on cost control across the business. As we've said in the past, we expect AWS operating margins to fluctuate over time, driven in part by the level of investments we're making. Additionally, we increased the estimated useful life of our servers starting in 2024, which contributed approximately 200 basis points to the AWS margin increase year over year in Q4. Now turning to our capital investments. As a reminder, we define these as a combination of cash CapEx plus equipment finance leases. Capital investments were $26.3 billion in the fourth quarter, and we think that run rate will be reasonably representative of our 2025 capital investment rate. Similar to 2024, the majority of the spend will be to support the growing need for technology infrastructure. This primarily relates to AWS, including support demand for our AI services, as well as tech infrastructure to support our North America and international segments. Additionally, we're continuing to invest in capacity for our fulfillment and transportation network to support future growth. We're also investing in same-day delivery facilities and our inbound network, as well as robotics and automation, to improve delivery speeds and to lower our cost to serve. These capital investments will support growth for many years to come. Turning to our revenue guidance for Q1, net sales are expected to be between $151 billion and $155.5 billion. I'd like to highlight two items impacting our Q1 revenue guidance. First, we estimate the year-over-year impact of changes in foreign exchange rates based on current rates, which we expect to be a headwind of approximately $2.1 billion in Q1 year over year, or 150 basis points. As a reminder, global currencies can fluctuate during the quarter, and just as we saw in Q4 with the strengthening of the dollar versus most other currencies. Second, a reminder that we are comping the impact of last year's leap year. The extra day contributed approximately $1.5 billion of additional net sales across our businesses in Q1 2024, or about 120 basis points to the year-over-year growth rate, which impacted all segments. Q1 operating income is expected to be between $14 billion and $18 billion. This guidance includes the estimated impact of certain updates to the useful life of our fixed assets. I'll provide a bit more detail in a moment, but on an aggregate basis, we estimate this will decrease full-year 2025 operating income by approximately $400 million for the assets on our balance sheet as of December 31, 2024. First, in Q4, we completed a useful life study for our servers and network equipment and observed an increased pace of technology development. Particularly in the area of artificial intelligence and machine learning. As a result, we're decreasing the useful life for a subset of our servers and networking equipment from six years to five years beginning in January 2025. We anticipate this will decrease full-year 2025 operating income by approximately $700 million. In addition, we also early-retired a subset of our servers and network equipment. We recorded a Q4 2024 expense of approximately $920 million from accelerated depreciation and related charges and expect this will also decrease full-year 2025 operating income by. Both of these server and network equipment use for life changes primarily impact our AWS segment. Lastly, we also completed a useful life study for certain types of heavy equipment used in our fulfillment centers. And are increasing the useful life from ten years to thirteen years beginning in January 2025, we anticipate this will increase full-year 2025 operating income by approximately $900 million. As we turn the page to 2025, we're energized by the great work our teams have delivered. We'll remain focused on driving even better customer experiences, and we believe putting customers first is the only reliable way to create lasting value for our shareholders. With that, let's move on to your questions.","evidence_gemma_new":"North America segment fourth quarter revenue year over year","evidence_llama_3_3":"North America revenue year over year","evidence_qwen_3_30b":"North America segment fourth quarter revenue 10% year over year","gemma_new_max":115600000000.0,"gemma_new_min":115600000000.0,"llama_3_3_max":115600000000.0,"llama_3_3_min":115600000000.0,"qwen_3_30b_max":115600000000.0,"qwen_3_30b_min":115600000000.0}
{"symbol":"AMZN","year":2023,"quarter":1,"date":"2023-Q1","chunk_id":2,"sub_chunk_id":0,"centroid_label":"operating income","agreed_value":4800000000.0,"count":2,"chunk":"Brian Olsavsky: Thank you for joining today\u2019s call. As Dave mentioned earlier, I\u2019m joined today by Andy Jassy, our CEO. Before we move on to take your questions, I\u2019ll make some comments regarding our Q1 results. Let\u2019s begin with revenue. For the first quarter, our worldwide net sales were $127.4 billion, up 9% year-over-year, or 11% excluding approximately 210 basis points of unfavorable impact from changes in foreign exchange rates. This was above the top end of our guidance range. Overall, we are pleased with the growth that we\u2019re seeing in worldwide stores businesses, including quarter-over-quarter revenue acceleration in the International segment, which is helped by easing macroeconomic pressures in Europe. Across the geographies we serve, customers appreciate our focus on staying sharp on pricing, having strong selection and easier convenience, including delivery speeds, which continued to improve throughout the first quarter. That said, the uncertain economic environment and ongoing inflationary pressures continue to be a factor, and we believe it\u2019s continuing to drive cautious spending across consumers. This means our customers are looking to stretch their budgets further and are focused on value. We saw moderated spending on discretionary categories as well as shifts to lower-priced items and healthy demand in everyday essentials, such as consumables and beauty. Third-party sellers, including businesses who elect to utilize Fulfillment by Amazon for their storage and shipping services are a key contributor to the selection offered to customers. We also continued to invest meaningfully in brand protection efforts, including industry-leading technology, so that sellers can trust we will provide a great selling experience free from bad actors. Sellers comprised 59% of overall unit sales in Q1, up from 55% one year ago. We also saw strong engagement in our advertising services with revenue up 23% year-over-year, excluding the impact from changes in foreign exchange rates. In particular, our sponsored product and brand offerings remain a key driver of growth as we work with advertisers to help customers make more informed purchase decisions. Our teams remain focused on delivering performance through our comprehensive and flexible measurement capabilities along with insights that allow advertisers the ability to measure the return on their advertising spend and help them grow their business. In AWS, net sales were $21.4 billion in the first quarter, up 16% year-over-year and representing an annualized sales run rate of more than $85 billion. Given the ongoing economic uncertainty, customers of all sizes in all industries continue to look for cost savings across their businesses, similar to what you\u2019ve seen us doing at Amazon. As expected, customers continue to evaluate ways to optimize their cloud spending in response to these tough economic conditions in the first quarter. And we are seeing these optimizations continue into the second quarter with April revenue growth rates about 500 basis points lower than what we saw in Q1. As a reminder, we\u2019re not trying to optimize for any one quarter or year. We\u2019re working to build customer relationships and a business that will outlast all of us. Therefore, our AWS sales and support teams continue to spend much of their time helping customers optimize their AWS spend so that they can better weather this uncertain economy. This customer orientation is built into our DNA and how we think about our customer relationships and business over the long term. Now, let\u2019s shift to worldwide operating income. For the first quarter, we reported $4.8 billion in operating income, above the top end of our guidance range. This operating income was negatively impacted by an estimated employee severance charge of approximately $470 million in Q1, including $270 million related to AWS. As we finalized our annual planning process and considered the ongoing economic environment, we made the difficult decision to eliminate 9,000 roles, impacting our AWS business as well as Twitch, devices, advertising and our human resources teams. In Q1, our year-over-year growth in stores revenue and unit sales outpaced growth in both our fulfillment expense and our outbound shipping costs. Inflationary pressures continued to ease quarter-over-quarter, primarily driven by reductions in linehaul shipping rates as well as lower diesel fuel and electricity costs. We also built on the progress we made throughout 2022 in improving productivity in our fulfillment network through continued process and tech improvements. We exited Q4 with a good balance of labor throughout the network and leveraged that throughout Q1 with customer demand patterns remaining more stable compared to Q1 of last year. As labor availability has stabilized and inventory supply chain challenges have moderated, we\u2019re able to implement some significant structural changes to transition our U.S. fulfillment network to a regionalized model. We believe these improvements put us in a good position to improve both delivery speed and our cost to serve customers over time. We reported overall net income of $3.2 billion in the first quarter. While we primarily focus our comments on operating income, I\u2019d point out that this net income includes a pretax valuation loss of $467 million included in non-operating expense from our common stock investment in Rivian Automotive. As we\u2019ve noted in recent quarters, this activity is not related to Amazon\u2019s ongoing operations but rather to quarter-to-quarter fluctuations in Rivian\u2019s stock price. Turning to cash flows. We remain focused on building long-term sustainable growth in free cash flow, including our efforts towards a strong cash flow accretive working capital cycle. Our operating cash flow for the trailing 12 months ended March 31st increased to $54.3 billion, up 38% versus the comparable period year-over-year. Besides the cash benefit of improved profitability year-over-year, we\u2019ve also seen supply chains easing up and made progress to improve our inventory purchasing and payment cycles, which in turn has a positive impact on working capital. Now, let\u2019s turn to our capital investments. We define our capital investments as the combination of CapEx plus equipment finance leases. For the full year 2023, we expect capital investments to be lower than our $59 billion investment level in 2022, primarily driven by an expected year-over-year decrease in fulfillment network investments. We\u2019re continuing to invest in infrastructure to support AWS customer needs, including investments to support Large Language Models and generative AI. Before we open the call up for your questions, I\u2019ll hand it over to Andy to share some high-level perspectives on the first quarter.","evidence_gemma_new":"operating income","evidence_llama_3_3":"operating income $4.8 billion first quarter","evidence_qwen_3_30b":null,"gemma_new_max":4800000000.0,"gemma_new_min":4800000000.0,"llama_3_3_max":4800000000.0,"llama_3_3_min":4800000000.0,"qwen_3_30b_max":null,"qwen_3_30b_min":null}
{"symbol":"AMZN","year":2023,"quarter":2,"date":"2023-Q2","chunk_id":2,"sub_chunk_id":0,"centroid_label":"operating income","agreed_value":7700000000.0,"count":2,"chunk":"Andrew Jassy: Thank you, Dave. Good afternoon, everyone, and thanks for joining us. Today, we are reporting $134.4 billion in revenue and $7.7 billion in operating income, both of which exceeded the top end of our guidance ranges. We're encouraged by the progress we're making on several key priorities, namely: lowering our cost to serve in our stores business; continuing to innovate on and improve our various customer experiences; and building new customer experiences that can meaningfully change what's possible for customers in our business long term. I'll start with our ongoing effort to lower our cost to serve in our stores' fulfillment network. Q2 saw another meaningful improvement in this area as we have steadily made progress for the last several quarters. Central to our efforts has been the decision to transition our stores' fulfillment and transportation network from one national network in the United States to a series of eight separate regions serving smaller geographic areas. We keep a broad selection of inventory in each region, making it faster and less expensive to get those products to customers. Regionalization is working and has delivered a 20% reduction in number of touches for our delivered package, a 19% reduction in miles traveled to deliver packages to customers and more than 1,000 basis point increase in deliveries fulfilled within region, which is now at 76%. This is a lot of progress. Sometimes I hear people make the argument that Amazon is chasing faster speed, while driving its costs higher and where it doesn't matter much to customers. This argument is incorrect. There are two things to note. First, customers care a lot about faster delivery. We have a lot of data that shows when we make faster delivery promises on a detail page, customers purchase more often, not just a little higher, meaningfully higher. It's also true that when customers know they can get their items really quickly, it changes their consideration of using us for future purchases too. Second, when shipments come from fulfillment centers that are closer to customers, they travel shorter distances, which cost less in transportation, gets there faster and is better for the environment. There's a lot of goodness in that equation. This ability to have shipments closer to customers is the result of a lot of work and invention on the regionalization side, placement logic and local in-stock algorithms. It's also driven by our development and expansion of same-day fulfillment facilities, which is our fastest fulfillment mechanism and one of our least expensive, too. Our same-day facilities are located in the largest metro areas around the U.S., so our top-moving 100,000 SKUs, but also cover millions of other SKUs from nearby fulfillment centers that inject selection into these same-day facilities and have a design that streamlines getting items from order to being ready for delivery in as little as 11 minutes. The experience has been so positive for customers in our business that we're planning to double the number of these facilities. We believe that we are far from the law of diminishing returns and improving speed for customers. While we're seeing strong early results from this regionalization effort, we still see several ways in which we can be more efficient in this structure and we believe will improve productivity further. We've also reevaluated virtually every part of our fulfillment network this past year and see additional structural changes we can make that provide future upside. We're excited about this cost to serve improvement, but also remain maniacally focused on making customers' lives easier and better every day and relentlessly inventing to make it so. This means constantly trying to improve experiences that we can deliver to customers short and long term. This customer experience work is at the heart of what we do every day across every one of our businesses. And I can spend an hour on this call detailing various examples across the teams. For today, I'll just focus a bit on our stores and AWS businesses. For stores, our priorities continue to be providing customers with great selection, low prices and convenience. And as we've discussed, we've been especially focused on providing even faster delivery speeds. Our speed of delivery has never been faster. In this last quarter, across the top 60 largest U.S. metro areas, more than half of Prime members' orders arrived at the same day or next day. So far this year, we've delivered more than 1.8 billion units to U.S. Prime members the same or next day, nearly 4x what we delivered at those speeds by this point in 2019. Lowering our cost to serve allows us not only to invest in these speed improvements, but also add more selection at lower price points. In particular, we're growing our selection in everyday essentials, enabling customers to avoid going out to get these items and both increasing our basket sizes and the frequency with which customers choose to shop with us. We now have more than 300 million items available with U.S. Prime free shipping, including tens of millions of items with free same-day and 1-day delivery. We're continuing to focus on providing great value with tens of millions of deals that help customers stretch their dollar a little more. For instance, in Q2 of '23, we offered customers 144% more deals and coupons than we did in Q2 of 2022. Prime Day was similar. Amazon offered more deals than any past Prime Day event with a wide selection across millions of products. Prime members purchased more than 375 million items worldwide and saved more than $2.5 billion across the Amazon store, helping make it the biggest Prime Day ever. Next, a few words about AWS. AWS remains the clear cloud infrastructure leader with a significant leadership position with respect to number of customers, size of partner ecosystem, breadth of functionality and the strongest operational performance. These are important factors for why AWS has grown the way it has over the last several years and for why AWS has almost doubled the revenue of any other provider. I've talked to many AWS customers over the years and continue to do so. And while all these factors I mentioned have been big drivers of the business' success, AWS customers tell us that as importantly, they care about the very different customer focus and orientation in AWS may see elsewhere. As the economy has been uncertain over the last year, AWS customers have needed assistance cost optimizing to withstand this challenging time and reallocate spend to newer initiatives that better drive growth. We've proactively helped customers do this. And while customers have continued to optimize during the second quarter, we've started seeing more customers shift their focus towards driving innovation and bringing new workloads to the cloud. As a result, we've seen AWS' revenue growth rate stabilize during Q2 where we reported 12% year-over-year growth. The AWS team continues to innovate and change what's possible for customers at a rapid clip. You can see across the array of AWS product categories where AWS leads in compute, networking, storage, database, data solutions and machine learning, among other areas, and the continued invention and delivery in these areas is pretty unusual. For instance, a few years ago, we heard consistently from customers that they wanted to find more price performance ways to do generalized compute. And to enable that, we realized that we needed to rethink things all the way down to the silicon and set out to design our own general purpose CPU chips. Today, more than 50,000 customers use AWS' Graviton chips and AWS Compute instances, including 98 of our top 100 Amazon EC2 customers, and these chips have about 40% better price performance than other leading x86 processors. The same sort of reimagining is happening in generative AI right now. Generative AI has captured people's imagination, but most people are talking about the application layer, specifically what OpenAI has done with ChatGPT. It's important to remember that we're in the very early days of the adoption and success of generative AI, and that consumer applications is only one layer of the opportunity. We think of large language models in generative AI as having 3 key layers, all of which are very large in our opinion and all of which AWS is investing heavily in. At the lowest layer is the compute required to train foundational models and do inference or make predictions. Customers are excited by Amazon EC2 P5 instances powered by NVIDIA H100 GPUs to train large models and develop generative AI applications. However, to date, there's only been one viable option in the market for everybody and supply has been scarce. That, along with the chip expertise we've built over the last several years, prompted us to start working several years ago on our own custom AI chips for training called Trainium and inference called Inferentia that are on their second versions already and are a very appealing price performance option for customers building and running large language models. We're optimistic that a lot of large language model training and inference will be run on AWS' Trainium and Inferentia chips in the future. We think of the middle layer as being large language models as a service. Stepping back for a second, to develop these large language models, it takes billions of dollars and multiple years to develop. Most companies tell us that they don't want to consume that resource building themselves. Rather, they want access to those large language models, want to customize them with their own data without leaking their proprietary data into the general model, have all the security, privacy and platform features in AWS work with this new enhanced model and then have it all wrapped in a managed service. This is what our service Bedrock does and offers customers all of these aforementioned capabilities with not just one large language model but with access to models from multiple leading large language model companies like Anthropic, Stability AI, AI21 Labs, Cohere and Amazon's own developed large language models called Titan. Customers, including Bridgewater Associates, Coda, Lonely Planet, Omnicom, 3M, Ryanair, Showpad and Travelers are using Amazon Bedrock to create generative AI application. And we just recently announced new capabilities from Bedrock, including new models from Cohere, Anthropic's Claude 2 and Stability AI's Stable Diffusion XL 1.0 as well as agents for Amazon Bedrock that allow customers to create conversational agents to deliver personalized up-to-date answers based on their proprietary data and to execute actions. If you think about these first 2 layers I've talked about, what we're doing is democratizing access to generative AI, lowering the cost of training and running models, enabling access to large language model of choice instead of there only being one option, making it simpler for companies of all sizes and technical acumen to customize their own large language model and build generative AI applications in a secure and enterprise-grade fashion, these are all part of making generative AI accessible to everybody and very much what AWS has been doing for technology infrastructure over the last 17 years. Then that top layer is where a lot of the publicity and attention have focused, and these are the actual applications that run on top of these large language models. As I mentioned, ChatGPT is an example. We believe one of the early compelling generative AI applications is a coding companion. It's why we built Amazon CodeWhisperer, an AI-powered coding companion, which recommends code snippets directly in the code editor, accelerating developer productivity as they code. It's off to a very strong start and changes the game with respect to developer productivity. Inside Amazon, every one of our teams is working on building generative AI applications that reinvent and enhance their customers' experience. But while we will build a number of these applications ourselves, most will be built by other companies, and we're optimistic that the largest number of these will be built on AWS. Remember, the core of AI is data. People want to bring generative AI models to the data, not the other way around. AWS not only has the broadest array of storage, database, analytics and data management services for customers, it also has more customers and data store than anybody else. Coupled with providing customers with unmatched choices at these 3 layers of the generative AI stack as well as Bedrock's enterprise-grade security that's required for enterprises to feel comfortable putting generative AI applications into production, we think AWS is poised to be customers' long-term partner of choice in generative AI. We're also continuing to make meaningful progress in building new customer experiences that can meaningfully change what's possible for customers in our business long term. Amazon Business is one of our fastest-growing offerings with a $35 billion annual gross sales run rate. And the team is working hard to further build out the selection, value, convenience and features that business customers need. Buy with Prime is continuing to show a lot of progress. Merchants in early trials who use Buy with Prime saw their shopper conversion increased by 25% on average, which makes a real difference to their business. Also, merchants who participate in Prime Day activities, in aggregate, experienced a 10x increase in daily Buy with Prime orders during the sales event period versus the month before we announced Prime Day. It's frankly only been a short amount of time that we've decided to invest significantly in the health care market segment. A lot of what we tried before were smaller experiments. But we're pleased with Amazon Pharmacy doubling its active customers in the past year, and we're pleased with the response to RxPass, which enables Prime members to receive all of their eligible generic medications for just $5 a month and have them delivered free to their door. One Medical has been part of Amazon for just a few months now and we're encouraged by what we're seeing there, too. Our grocery business continues to grow. We already have a very large business in nontemperature-controlled areas like consumables, pet food, beauty and canned goods that continues to grow as we keep increasing speed and lowering our cost to serve, which allows us to sell more items more cost effectively. Whole Foods continues to lead the organic grocery space, is growing at a healthy clip and has meaningfully improved its profitability in the last year. We're pleased with what we're seeing with Whole Foods. And as I've shared before, we're working on new formats in our mass physical store offering, Amazon Fresh, having significantly improved the number of the key business inputs and just rolled out new concepts in stores. We also see substantial innovation and progress in other areas like Kuiper, Zoox and Alexa. We're still relatively early in many of our investments with technology inventions that are changing what's possible to deliver for customers in these areas, but they're big long-term opportunities that we remain optimistic about. Finally, I want to recognize our teams on being named 1 in LinkedIn's Top Companies to Grow your Career in the United States. It's a testament to our work to be a great employer with leading compensation benefits and upskilling opportunities. With that, I'll turn it over to Brian.","evidence_gemma_new":null,"evidence_llama_3_3":"operating income","evidence_qwen_3_30b":"operating income revenue Q2 2023","gemma_new_max":null,"gemma_new_min":null,"llama_3_3_max":7700000000.0,"llama_3_3_min":7700000000.0,"qwen_3_30b_max":7700000000.0,"qwen_3_30b_min":7700000000.0}
{"symbol":"AMZN","year":2023,"quarter":3,"date":"2023-Q3","chunk_id":2,"sub_chunk_id":0,"centroid_label":"operating income","agreed_value":11200000000.0,"count":3,"chunk":"Andrew Jassy: Thanks, Dave. Today, we're reporting $143.1 billion in revenue, up 11% year-over-year; $11.2 billion in operating income, up 343% year-over-year or $8.7 billion; and $20.2 billion in trailing 12-month free cash flow adjusted for equipment finance leases which is up $41.7 billion versus the comparable period last year. We continue to be encouraged by the progress we're making in lowering our cost to serve, improving our customer experiences and investing for future growth. I'll start with our stores business. Our move earlier this year from a single national fulfillment network in the U.S. to 8 distinct regions represented one of the most significant changes to our fulfillment network in our history. This change has gone more smoothly and made more impact than we optimistically expected. And you can see the benefits in many forms. Regional fulfillment clusters with higher local in-stock levels and optimized connections between fulfillment centers and delivery stations mean shorter distances and fewer touches to get items to customers. Shorter travel distances and fewer touches mean lower cost to serve. But perhaps most importantly, shorter distances and fewer touches mean that customers are getting their shipments faster. We remain on pace to deliver the fastest delivery speeds for Prime customers in our 29-year history. And as I talked about last quarter, we know how important speed of delivery is to customer satisfaction and buying behavior. A good example is the significant growth we're seeing in consumables and everyday essentials. When customers are getting items as quickly and conveniently as they are now from Amazon, they're going to consider us more frequently for more of their shopping needs. As we've shared the last few quarters, we've re-evaluated every part of our fulfillment network over the last year. The first substantial rearchitecture centered on the regionalization change. We obviously like the results but don't think we fully realize all the benefits yet and we continue to make steady improvements in fine-tuning the placement algorithms to enable even more in-region fulfillment and to further increase consolidation into fewer shipments. We've also identified several substantial changes to our inbound processes that we believe could have a significant impact on our cost to serve and speed of delivery. We have a long way before being out of ideas to improve cost and speed. The team is really humming on this and I'm proud of the way they're inventing and executing together. Moving to AWS and our investments in generative AI. AWS revenue grew 12% year-over-year in Q3, with $919 million of incremental quarter-over-quarter revenue and now has the annualized revenue run rate of $92 billion. AWS' year-over-year growth rate continued to stabilize in Q3. And while we still saw elevated cost optimization relative to a year ago, it's continued to attenuate as more companies transition to deploying net new workloads. Companies have moved more slowly in an uncertain economy in 2023 to complete deals. But we're seeing the pace and volume of closed deals pick up and we're encouraged by the strong last couple of months of new deals signed. For perspective, we signed several new deals in September with an effective date in October that won't show up in any GAAP reported number for Q3 but the collection of which is higher than our total reported deal volume for all of Q3. Deal signings are always lumpy and the revenue happens over several years but we like the recent deal momentum we're seeing. Top of mind for most companies continues to be generative AI. As I mentioned last quarter, we think about generative AI as having 3 macro layers, each of which is very large in each of which we're investing. A few updates there. At the lowest layer is the compute to train large language models, or LLMs and produce inferences or predictions. The key to this compute is the chip inside it. As we've shared, we've been working on custom silicon for training and inference with our Trainium and Inferentia chips, respectively. Recently, we announced that leading LLM maker Anthropic chose AWS as its primary cloud provider and will use Trainium and Inferentia to build, train and deploy its future LLMs. As part of this partnership, AWS and Anthropic will collaborate on the future development of Trainium and Inferentia technology. We believe this collaboration will be helpful in continuing to accelerate the price performance advantages that Trainium and Inferentia deliver for customers. In the middle layer which we think of as large language models as a service, we recently introduced general availability for Amazon Bedrock which offers customers access to leading LLMs from third-party providers like Anthropic, Stability AI, coherent AI 21 as well as from Amazon's own LLMs called Titan, where customers can take those models, customize them using their own data but without leaking that data back into the generalized LLM, have access to the same security, access control and features that they run the rest of their applications within AWS all through a managed service. In the last couple of months, we've announced the imminent addition of Meta's Llama 2 model to Bedrock, the first time it's being made available through a fully managed service. Also through our expanded collaboration with Anthropic, customers will gain access to future Anthropic models through Bedrock with exclusive early access to unique features, model customization and the ability to fine-tune the models. And Bedrock has added several new compelling features, including the ability to create agents which can be programmed to accomplish tasks like answering questions or automating workflows. In these early days of generative AI, companies are still learning which models they want to use which models they use for what purposes and which model sizes they should use to get the latency and cost characteristics they desire. In our opinion, the only certainty is that there will continue to be a high rate of change. Bedrock helps customers with this fluidity, allowing them to rapidly experiment with move between model types and sizes and enabling them to pick the right tool for the right job. The customer reaction to Bedrock has been very positive and the general availability is buoyed that further. Bedrock is the easiest way to build and scale enterprise-ready generative AI applications and a real game changer for developers and companies trying to get value out of this new technology. And the top layer which are the applications that run the LLMs, our generative AI coding companion Amazon CodeWhisperer has gotten a lot of early traction and got a lot more powerful recently with the launch of its new customization capability. The number one enterprise request for coding companions has been wanting these companions to be familiar with customers' proprietary code bases. It's not just having code companions trained in open source code, companies want the equivalent of a long-time senior engineer who knows their code base well. That's what CodeWhisperer just launched, another first of its kind out there in its current form and customers are excited about it. A few last comments on AWS's generative AI work. As you can tell, we're focused on doing what we've always done for customers, taking technology that can transform customer experiences and businesses but they can be complex and expensive and democratizing it for customers of all sizes and technical abilities. It's also worth remembering that customers want to bring the models to their data, not the other way around. And much of that data resides in AWS as the clear market segment leader in cloud infrastructure. We're innovating and delivering at a rapid rate and our approach is resonating with customers. The number of companies building generative AI apps in AWS is substantial and growing very quickly, including Adidas, Booking.com, Bridgewater, Clariant, GoDaddy, LexisNexis, Merck, Royal Philips and United Airlines, to name a few. We are also seeing success with generative AI start-ups like Perplexity.ai who chose to go all in with AWS, including running future models in Trainium and Inferentia. And the AWS team has a lot of new capabilities to share with its customers at its upcoming AWS re:Invent conference. Beyond AWS, all of our significant businesses are working on generative AI applications to transform their customer experiences. There are too many for me to name on this call but a few examples include, in our stores business, we're using generative AI to help people better discover products they want to more easily access the information needed to make decisions. We use generative AI models to forecast inventory we need in our various locations and to derive optimal last mile transportation routes for drivers to employ. We're also making it much easier for our third-party sellers to create new product pages by entering much less information and letting the models to the rest. In advertising, we just launched a generative AI image generation tool, where all brands need to do is upload a product photo and description to quickly create unique lifestyle images that will help customers discover products they love. And in Alexa, we built a much more expansive LLM and previewed the early version of this. Apart from being a more intelligent version of herself, Alexa's new conversational AI capabilities include the ability to make multiple requests at once as well as more natural and conversational requests without having to use specific phrases. We continue to be convicted that the vision of being the world's best personal assistant is a compelling and viable one and that Alexa has a good chance to be one of the long-term winners in this arena. Every one of our businesses is building generative AI applications to change what's possible for customers and we have a lot more to come. We're also encouraged by the progress we're making in our newer initiatives. Just to name a few, we're pleased with what we're seeing in Prime Video. Prime Video continues to be an integral part of the Prime value proposition where it's often one of the top 2 drivers of customers signing up for Prime. We also have increasing conviction that Prime Video can be a large and profitable business in its own right as we continue to invest in compelling exclusive content for prime members but also offer the best selection of premium streaming video content anywhere with our marketplace offering, including channels for customers who can subscribe to channels like Max, Paramount+, BET Plus and MGM+, as well as our broad transaction video-on-demand selection. As we continue to invest in compelling content, beginning in early 2024, Prime Video shows and movies will include limited advertisements. We aim to have meaningfully fewer ads than linear TV and other streaming TV providers. If customers prefer and add free option, we plan to offer that for an additional $2.99 per month for U.S. members. There is still a lot of work to be done in innovation ahead but we're excited about our future on Prime Video. We're seeing progress on a number of our investments that expand our ability to serve more consumers and sellers in their e-commerce missions. Our emerging international stores continue to improve their customer experiences and profitability and are on a strong trajectory. Both consumers and sellers are excited about Buy with Prime which enables third-party sellers with direct-to-consumer websites to offer Amazon Prime members the same fast payments and delivery options they receive on Amazon.com. We recently announced the capability for sellers to integrate Buy with Prime with their Shopify account, making it easier for Shopify merchants to manage their businesses with inventory pricing and promotions automatically synced in one place. And we're seeing very positive early response from sellers to Supply Chain by Amazon, a fully automated set of supply chain services where Amazon can pick up inventory from manufacturing facilities around the world, ship it across borders, handle customs clearance and ground transportation, store inventory in bulk, manage replenishment across Amazon and other sales channels and deliver directly to customers, all without sellers having to worry about managing their supply chain. Our health care team is continuing to make health care easier for people to access. The Amazon Pharmacy customer experience has significantly evolved this year and customers are responding that both in their purchasing behavior and qualitative feedback. We built RXPass for customers to get unlimited supply of eligible medications for $5 per month, meaningfully reduce the cost for customers to get insulin and diabetes products and partnered with Blue Shield of California to offer a first-of-its-kind model to provide more affordable pharmacy care to its 4.8 million members, providing fast and free delivery of prescription medications and 24\/7 access to pharmacists. We remain convinced that we can be part of the solution of making health care a better customer experience. And our low Earth orbit satellite initiative Project Kuiper which aims to bring fast, affordable broadband to underserved communities around the world, took a meaningful step forward in the last few weeks with the successful launch of 2 prototype satellites. We will use this multi-month mission to test our satellites and network from space and collect data ahead of the planned start of satellite production later this year. I'd like to close by thanking our teams around the world who are gearing up for 2 of our most significant events across the company. First, our annual AWS re:Invent conference that begins on November 27. The team is excited to share a lot of new capabilities with customers and provide an array of opportunities for builders to learn and connect with one another. And on the stores side, we've already kicked off what will be our 29th holiday shopping season. Prime Big Deal Days held earlier this month was our most successful October holiday kick-off event ever, with Prime members saving more than $1 billion across hundreds and millions of items sold. Just as we do all year long, we aim to make our customers' lives easier and better every day and there's no time where it's more important to us that we deliver on this mission than during the busy holiday shopping season. With that, I'll turn it over to Brian.","evidence_gemma_new":"operating income year-over-year","evidence_llama_3_3":"operating income year-over-year","evidence_qwen_3_30b":"operating income 343% year-over-year","gemma_new_max":11200000000.0,"gemma_new_min":11200000000.0,"llama_3_3_max":11200000000.0,"llama_3_3_min":11200000000.0,"qwen_3_30b_max":11200000000.0,"qwen_3_30b_min":11200000000.0}
{"symbol":"AMZN","year":2023,"quarter":4,"date":"2023-Q4","chunk_id":2,"sub_chunk_id":0,"centroid_label":"operating income","agreed_value":13200000000.0,"count":3,"chunk":"Andrew Jassy: Thanks, Dave. Today we\u2019re reporting $170 billion in revenue, up 13% year-over-year excluding the impact of foreign exchange rates, $13.2 billion in operating income, up 383% year-over-year, or $10.5 billion and $35.5 billion in trailing 12-month free cash flow adjusted for equipment finance leases, up $48.3 billion year-over-year. While we've made meaningful progress in our financial measures, what we're most pleased about is the continued customer experience improvements across our businesses. These results represent a lot of invention, collaboration, discipline, execution, adjusting and reimagining from teams across Amazon. Looking back at Q4, I'll start with our stores business where customers responded to our continued focus on selection price and convenience. We continue to have the broadest retail selection with hundreds and millions of products available and added tens of millions of new items last year alone, including fashion selection from Coach, Victoria's Secrets Fashion, Pit Viper, and Beyonce\u2019s Renaissance to our Merge to cosmetics from Lancome, Urban Decay, cosmetics and No Beauty by Vanessa Hudgens, to consumer technology and services from Boost, Infinite, and Woop to homewares for Martha Stewart. Being sharp on price is always important. But particularly in an uncertain economy where customers are careful about how much they're spending. We kicked off the holiday season with Prime Big Deal Days, an exclusive event for Prime members to provide an early start on holiday shopping. This was followed by our extended Black Friday and Cyber Monday holiday shopping event, which was open to all customers and ended up being our largest event ever. These events also helped attract new customers and Prime members. Throughout the quarter customers saved nearly $10 billion across millions of deals and coupons almost 70% more than last year. In addition to offering great deals, we continue to improve delivery speeds. In 2023, Amazon delivered to Prime members at the fastest speeds ever, with more than 7 billion items arriving same or next day including more than 4 billion in the U.S and more than 2 billion in Europe. In the U.S this result is the combination of two things, one is the benefit of regionalization, where we\u2019ve architected the network to store items closer to customers. The other is the expansion of same day facilities, where in the U.S in the fourth quarter, we increase the number of items delivered the same day or overnight by more than 65% year-over-year. As we're able to get customers items this fast. It increases the number of occasions that customers choose Amazon to fulfill their shopping needs. And we can see that in all sorts of areas including how fast or everyday essentials business is growing. Our regionalization efforts have also brought transportation distances down which has helped lower our cost to serve. In 2023, for the first time since 2018, we've reduced our cost-to-serve on a per unit basis globally. In the U.S alone, cost-to-serve was down by more than $0.45 per unit compared to the prior year. Lowering cost-to-serve allows us not only to invest in speed improvements, but also afford adding more selection at lower average selling prices or ASPs and profitably. We have a saying, that it's not hard to lower prices, it's hard to be able to afford lowering prices. The same is true with adding selection, it's not hard to add lower ASPs selection, it's hard to be able to afford offering lower ASPs selection and still like the economics. Like improving speed, adding selection puts us in the consideration set for more purchases. As we look toward 2024 and beyond, we're not done lowering our cost to serve. We've challenged every closely held belief for our fulfillment network and reevaluated every part of it, and found several areas where we believe we can lower costs while also delivering faster for customers. Our inbound fulfillment architecture and resulting inventory placement are areas of focus in 2024, and we have optimism there's more upside for us. Alongside our stores business, our advertising growth remains strong, up 26% year-over-year, which is primarily driven by our sponsored ads. We've recently added Sponsored TV to this offering in the U.S. a self-service solution for brands to create streaming TV campaigns with no minimum spend, putting this advertising within reach of any business. While still early days, streaming TV advertising continues to grow quickly. Brands are using our capabilities to reach engage viewers on Twitch, Freevee, Fire TV and Prime Video shows and movies, which just launched in the U.S., as well as Thursday Night Football. Shifting to AWS. Revenue in the quarter grew 13% year-over-year in Q4 versus 12% year-over-year in Q3. And we're now approaching an annualized revenue run rate of $100 billion. We watched the incremental revenue added each quarter and in Q4 AWS added more than $1.1 billion an incremental quarter-over-quarter revenue, which on an FX neutral basis is more than any other cloud provider as far as we can tell. While cost optimization continued to attenuate larger new deals also accelerated, evidenced by recently inked agreements with Salesforce, BMW, NVIDIA, LG, Hyundai, Merck, MUFG, Axiata, Cafe, BYD, Arcore, Amgen, and SAIC. Our customer pipeline remains strong, as existing customers are renewing larger commitments over longer periods and migrations are growing. 2023 also was a very significant year of delivery and customer trial for generative AI or Gen AI in AWS. You may remember that we've explained our vision of three distinct layers in the Gen AI stack, each of which is gigantic, and each of which were deeply investing. At the bottom layer, where customers who are building their own models run training and inference on compute with a chip is the key component in that compute, we offer the most expansive collection of compute instances with NVIDIA chips. We also have customers who would like us to push the price performance envelope on AI chips, just as we have with Graviton for generalized CPU chips, which are 40% more price performance than other X86 alternatives. And as a result, we built custom AI training chips, named Trainium, and inference chips, name Inferentia. At re:Invent we announced Trainium2, which offers four times faster training performance and three times more memory capacity versus the first generation of Trainium, enabling advantageous price performance versus alternatives. We already have several customers using our AI chips including Anthropic, Airbnb, Hugging Face, Qualtrics, Ricoh and Snap. In the middle layer where companies seek to leverage an existing large language model, customize it with their own data, and leverage AWS\u2019 security and other features all as a managed service. We've launched Bedrock which is off to a very strong start with many 1,000s of customers using the service after just a few months. The team continues to rapidly iterate on Bedrock, recently delivering capabilities including guardrails to safeguard what questions applications will answer, knowledge bases to expand models knowledge base with retrieval augmented generation or RAG and real time queries, agents to complete multi step tasks and fine tuning to keep teaching and refining models. All which will help customers applications be higher quality and have better customer experiences. We also added new models from Anthropic, Cohere, Meta with Llama2, Stability AI and our own Amazon Titan family of LLMs. What customers have learned at this early stage of Gen AI, is it there's meaningful iteration required in building a production Gen AI application with the requisite enterprise quality at the cost and latency needed. Customers don't want only one model, they want different models for different types of applications, and different size models for different applications. Customers want a service that makes this experimenting and iterating simple and this is what Bedrock does, which is why so many customers are excited about it. And to top layer of the stack is the application layer, one of the very best early gen AI applications is a coded companion. At Reinvent, we launched Amazon Q, which is an expert on AWS, writes code, debugs code, tests code, does translations like moving from an old version of Java to a new one and can also query customer\u2019s various data repositories, like Internet, Wickes or from over 40 different popular connectors to data in Salesforce, Amazon S3, ServiceNow, Slack, Elastin or Zendesk, among others. And answer questions, summarize this data, carry on a coherent conversation and take action. It was designed with security and privacy in mind from the start, making it easier for organizations to use generative AI safely. Q is the most capable work assistant and another service that customers are very excited about. By the way, don't underestimate the point about Bedrock and Q inheriting the same security and access control as customers get with AWS. Security is a big deal, an important differentiator between cloud providers. The data in these models is some of the company's most sensitive and critical assets. With AWS' advantaged security capabilities and track record relative to other providers, we continue to see momentum around customers wanting to do their long-term Gen AI work with AWS. We're building dozens of Gen AI apps across Amazon's businesses, several of which have launched and others of which are in development. This morning, we launched Rufus, an expert shopping assistant trained on our product and customer data that represents a significant customer experience improvement for Discovery. Rufus lets customers ask shopping journey questions like what is the best golf ball to use for better spin control or which are the best cold weather rain jackets and get thoughtful explanations for what matters and recommendations on products. You can carry on a conversation with Rufus on other related or unrelated questions and retains context coherently. You can sift through our rich product pages by asking Rufus questions on any product features and will return answers quickly. We're at the start of what Rufus will do with further personalization and expansion coming, but we're excited about how it will make discovery even easier on Amazon. Gen AI is and will continue to be an area of pervasive focus and investment across Amazon, primarily because there are a few initiatives, if any, that give us the chance to reinvent so many of our customer experiences and processes, and we believe it will ultimately drive tens of billions of dollars of revenue for Amazon over the next several years. In addition to our stores and AWS businesses, we continue to make progress on newer business investments that have the potential to be important to customers and Amazon long term. Touching on two of them. In October, we had a major milestone in our journey to commercialize Project Kuiper, which is our low earth orbit satellite initiative that aims to provide broadband connectivity to the 400 million to 500 million households who don't have it today. We launched two end-to-end prototype satellites into space and successfully validated all key systems and subsystems, made a 2-way video call, streamed a Prime Video movie in Ultra HD 4K and made an Amazon purchase over our end-to-end communication network. It's rare to be able to exercise all these elements in an initial launch like this. We're on track to launch our first production satellite in the first half of 2024 and started beta testing in the second half of the year. We've still got a long way to go, but are encouraged by our progress. During the quarter, we also completed our second season of Thursday Night Football, which was a rousing success by all accounts. The customer experience continued to improve as our talent, production, streaming quality, analytics, unique AI features like Prime Vision and defensive alerts, all took big leaps forward on top of the very good start last year. We launched a new NFL tradition with the inaugural Black Friday football game and our continuous innovation resonated with viewers as the number of people watching increased 24% year-over-year and with advertisers as we made dramatic year-over-year gains in ad sales. We have increasing conviction that Prime Video can be a large and profitable business on its own, and we'll continue to invest in compelling exclusive content for Prime members like Thursday Night Football, Go To The Rings, Reacher, Mr. & Mrs. Smith, Citadel and more. And with the ads in Prime Video, we'll be able to continue investing meaningfully in content over time. I'll close by reiterating that 2023 was a really good year. I'm grateful to all of our teams who delivered on behalf of customers. Yet I think every one of us at Amazon believes this is just the start of what's possible. We have a long way to go in every one of our businesses before we exhaust how we can make customers' lives better and easier, and there is considerable upside in each of the businesses in which we're investing. With that, I'll turn it over to Brian.","evidence_gemma_new":"operating income year-over-year","evidence_llama_3_3":"operating income quarter","evidence_qwen_3_30b":"operating income fourth quarter","gemma_new_max":13200000000.0,"gemma_new_min":13200000000.0,"llama_3_3_max":13200000000.0,"llama_3_3_min":13200000000.0,"qwen_3_30b_max":13200000000.0,"qwen_3_30b_min":13200000000.0}
{"symbol":"AMZN","year":2023,"quarter":4,"date":"2023-Q4","chunk_id":3,"sub_chunk_id":0,"centroid_label":"operating income","agreed_value":36900000000.0,"count":2,"chunk":"Brian Olsavsky: Thanks, Andy. Overall, we saw strong performance in the fourth quarter. Worldwide revenue was $170 billion, representing an increase of 13% year-over-year, excluding the impact of foreign exchange and approximately $3 billion above the top end of our guidance range. Saw our highest quarterly worldwide operating income ever, which was $13.2 billion for the quarter, an increase of $10.5 billion year-over-year and $2.2 billion above the high end of our guidance range. For the full year 2023, we had a meaningful improvement across our financial results. Revenue was $574.8 billion, an increase of 12% year-over-year, excluding the impact of foreign exchange. Operating income tripled year-over-year to $36.9 billion. Trailing 12-month free cash flow adjusted for equipment finance leases was $35.5 billion, up $48.3 billion versus last year. These financial outputs are a result of a lot of improvements in our key input metrics such as stores' cost to serve, which decreased year-over-year for the first time since 2018 and our ability to deliver to customers at our fastest speeds ever. I want to thank our customers, our partners and our teammates around the world for a very strong 2023 performance. Focusing on the fourth quarter, North America revenue was $105.5 billion, an increase of 13% year-over-year and an acceleration of 200 basis points compared to Q3. International revenue was $40.2 billion, an increase of 13% year-over-year, excluding the impact of foreign exchange, also an acceleration of 200 basis points compared to Q3. During the quarter, we remained focused on the inputs that matter most to our customers, price, selection and convenience. Our shopping events throughout the quarter included Prime Big Deal Days in October and our extended Black Friday and Cyber Monday shopping event helped to attract new Prime members and deliver billions in savings for customers. We made meaningful progress on delivery speeds in the United States and globally, which helped strong sales throughout the quarter, including notable strength in the last-minute gifting where our ability to provide fast shipping helped our Prime members ensure that they got their gifts before the holidays. These improvements in delivery speed have led to increased purchase frequency by our Prime members across all of our major geographies. It also strengthened demand for our everyday essentials. Categories like beauty and health and personal care, where speed is even more important to customers. Third-party sellers were a big part of our success over the holidays with worldwide third-party seller services revenue growing at 19% year-over-year, excluding the impact of foreign exchange. And worldwide third-party seller unit mix was 61%, its highest level ever. We also saw strong performance in worldwide advertising, which grew 26% year-over-year, excluding the impact of foreign exchange. The strength in advertising was primarily driven by sponsored products as our teams worked hard to increase the relevancy of the ads we show customers by leveraging machine learning. Advertising only works if the ads are helpful to customers and there's a lot of value in tailoring sponsored products, so they are relevant to what a customer is actually searching for. We're also continually focused on improving our measurement capabilities, which allow brands to see the payback of their advertising spend. Shifting to profitability. North America segment operating income was $6.5 billion, an increase of $6.7 billion year-over-year, resulting in an operating margin of 6.1%, up 120 basis points quarter-over-quarter. Since North America operating margins were at their recent low levels in Q1 of 2022, we have now seen seven consecutive quarters of improvement resulting in a cumulative improvement of 800 basis points over these past seven quarters. In addition to the strong top line growth, which helped to drive improved leverage throughout our businesses, we continue to make progress on reducing our cost to serve. The fourth quarter is our busiest time of year, supported by an increasingly large and integrated operations network. Overall, our teams executed extremely well, yielding strong efficiency gains with minimal disruptions. We were pleased with the performance of our regionalized network during the holiday period, where we saw benefits from improved inventory placement helping drive faster speeds and also lowering costs. We also continue to see benefits from lower transportation rates, which include linehaul, ocean and rail and from a more stable labor market, resulting in improved staffing levels. In our International segment, we had an operating loss of $419 million, an improvement of $1.8 billion year-over-year. This improvement was primarily driven by lowering our cost to serve through increased units per box, lower transportation rates and leverage across our fixed costs as we continue to focus on customer inputs and improve efficiencies within our operations. The International segment represents more than 20 countries of varying degrees of growth and our largest established countries like the U.K., Germany and Japan, relatively strong revenue growth contributed to the year-over-year improvement in profitability. Additionally, we saw good progress in our emerging countries as they continued to expand their customer offerings, while seeking to invest wisely. Moving to AWS. Revenues were $24.2 billion, an increase of 13% year-over-year. On a quarter-over-quarter basis, we added more than $1.1 billion of revenue in AWS as customers are continuing to shift their focus towards driving innovation and bringing new workloads to the cloud. Similar to what we shared last quarter, we continue to see the diminishing impact of cost optimizations. And as these optimization slow down, we're seeing more companies turning their attention to newer initiatives and reaccelerating existing migrations. Customers are also excited about our approach to generative AI. Still relatively early days, but the revenues are accelerating rapidly across all 3 layers and our approach to democratizing AI is resonating well with our customers. We have seen significant interest from our customers wanting to run generative AI applications and build large language models and foundation models, all with the privacy, reliability and security they have grown accustomed to with AWS. AWS' operating income was $7.2 billion, an increase of $2 billion year-over-year. Our operating margin for the quarter was 29.6%, up more than 500 basis points year-over-year and effectively flat on a quarter-over-quarter basis. This margin improvement reflects our headcount reductions from earlier in the year and a slowdown in the pace of hiring. Shifting to free cash flow. On a trailing 12-month basis, free cash flow adjusted for finance leases was $35.5 billion, an improvement of $48.3 billion year-over-year. The largest driver of the improvement in free cash flow is our increased operating income, which we are seeing across all three of our segments. We're also seeing improvements in working capital, notably in inventory efficiency driven by our regionalization efforts. Next, let's turn to capital investments. We define our capital investments as a combination of CapEx plus equipment finance leases. In 2023, full year CapEx was $48.4 billion, which was down $10.2 billion year-over-year, primarily driven by lower spend on fulfillment and transportation. As we look forward to 2024, we anticipate CapEx to increase year-over-year, primarily driven by increased infrastructure CapEx, support growth of our AWS business, including additional investments in generative AI and large language models. One thing I'd like to highlight in our first quarter guidance is that we recently completed a useful life study for our servers and we are increasing the useful life from 5 years to 6 years beginning in January 2024. We will have this anticipated benefit to our operating income of approximately $900 million in Q1, which is included in our operating income guidance. As we turn the calendar to 2024, we are excited to continue upon the great work the teams have been able to deliver in 2023. We remain focused on streamlining and prioritizing projects in an effective way that reduces costs and also allows us to continue innovating and inventing for customers. With that, let's move on to questions.","evidence_gemma_new":"Operating income year-over-year","evidence_llama_3_3":null,"evidence_qwen_3_30b":"operating income full year 2023","gemma_new_max":36900000000.0,"gemma_new_min":36900000000.0,"llama_3_3_max":null,"llama_3_3_min":null,"qwen_3_30b_max":36900000000.0,"qwen_3_30b_min":36900000000.0}
{"symbol":"AMZN","year":2024,"quarter":1,"date":"2024-Q1","chunk_id":2,"sub_chunk_id":0,"centroid_label":"operating income","agreed_value":15300000000.0,"count":3,"chunk":"Andrew Jassy: Thanks, Dave. Today, we're reporting $143.3 billion in revenue, up 13% year-over-year, excluding the impact from foreign exchange rates; $15.3 billion in operating income, up 221% year-over-year or $10.5 billion; and $48.8 billion in trailing 12-month free cash flow adjusted for equipment finance leases, up $53.2 billion year-over-year. We remain focused on driving better experiences for our customers while also delivering efficiency improvements. Our financial results are an encouraging reminder of the progress we're making. Starting with our stores business, despite having hundreds of millions of items and the broadest selection available, we remain intensely focused on adding even more selection. One way is to continue adding brands we know our customers want. For instance, in the U.S., we recently welcomed Clinique and 2 Gen Z fashion favorites, Parade and Cider, and announced a collaboration with Hardly Ever Worn It in Europe to offer customers pre-owned items from luxury brands. Another way to drive selection is to make it easier for our third-party sellers to add their products to our store. We've recently launched a new generative AI tool that enables sellers to simply provide a URL to their own website, and we automatically create high-quality product detail pages on Amazon. Already, over 100,000 of our selling partners have used one or more of our gen AI tools. We remain focused on making sure we're offering everyday low prices, which we know is even more important to our customers in this uncertain economic environment. As our results show, customers are shopping but remain cautious, trading down on price when they can and seeking out deals. In Q1, we helped customers save with shopping events worldwide, including our first big spring sale in Canada and the U.S. We also held spring deal days in Europe and our Ramadan event in Egypt, Saudi Arabia, and the UAE. Delivery speed really matters to customers, and we've continued to get faster while improving our safety performance. In this past Q1, we delivered to Prime members at our fastest speeds ever. In March, across our top 60 largest U.S. metro areas, nearly 60% of Prime members orders arrived the same or next day. And globally, in cities like Toronto, London, and Tokyo, about 3 out of 4 items were delivered the same or next day. Faster delivery times have another important effect. As we get items to customers this fast, customers choose Amazon to fulfill their shopping needs more frequently, and we can see the results in various areas, including how fast our Everyday Essentials business is growing and the continued increase in Prime member purchase frequency and total spend with us. Over the past year, we've talked about how our regionalization efforts have helped lower our cost to serve. We've continued to inspect our fulfillment network for additional opportunities and are working on several areas where we believe we can lower costs even further while also improving customer experience. One example of this is our work to increase the consolidation of units into fewer boxes. As we further optimize our network, we've seen an increase in the number of units delivered per box, an important driver for reducing our cost. When we're able to consolidate more units into a box, it results in fewer boxes and deliveries, a better customer experience, reduces our cost to serve, and lowers our carbon impact. Another prominent example is our efforts to revamp our U.S. inbound fulfillment architecture to allow for better inventory placement closer to our customers. This will be an iterative process throughout the year as we work with sellers and retail partners, and teams are making good progress on their plans. Advertising performance remained strong, with ad sales up 24% year-over-year, excluding the impact of foreign exchange. The strength in advertising was primarily driven by sponsored products, supported by continued improvements in relevancy and measurement capabilities for advertisers. We still see significant opportunity ahead in our sponsored products as well as areas where we're just getting started like Prime Video ads. Prime Video ads offers brands value as we can better link the impact of streaming TV advertising to business outcomes like product sales or subscription sign-ups, whether the brands sell on Amazon or not. It's very early for streaming TV ads but we're encouraged by the early response. Moving to AWS. Year-over-year revenue growth accelerated to 17.2% in Q1, up from 13.2% in Q4. It's useful to remember that year-over-year percentages are only relevant relative to the total base from which you start. And given our much larger infrastructure cloud computing base, at this growth rate, we see more absolute dollar growth again quarter-over-quarter in AWS than we can see elsewhere. We're seeing a few trends right now. First, companies have largely completed the lion's share of their cost optimization and turned their attention to newer initiatives. Before the pandemic, companies were marching to modernize their infrastructure, moving from on-premises infrastructure to the cloud to save money, innovated at a more rapid rate, and to drive more developer productivity. The pandemic and uncertain economy that followed distracted from that momentum, but it's picking up again. Companies are pursuing this relatively low-hanging fruit in modernizing their infrastructure. And with the broadest functionality by a fair bit, deepest partner ecosystem and strong security and operational performance, AWS continues to be their strong partner of choice. Our AWS customers are also quite excited about leveraging gen AI to change the customer experiences and businesses. We see considerable momentum on the AI front where we've accumulated a multibillion-dollar revenue run rate already. You heard me talk about our approach before, and we continue to add capabilities at all 3 layers of the gen AI stack. At the bottom layer, which is for developers and companies building models themselves, we see excitement about our offerings. We have the broadest selection of NVIDIA compute instances around, but demand for our custom silicon, Trainium and Inferentia, is quite high given its favorable price performance benefits relative to available alternatives. Larger quantities of our latest generation Trainium2 is coming in the second half of 2024 and early 2025. Companies are also starting to talk about the eye-opening results they're getting using SageMaker. Our managed end-to-end service has been a game changer for developers in preparing their data for AI, managing experiments, training models faster, lowering inference latency, and improving developer productivity. Perplexity.ai trains models 40% faster than SageMaker. Workday reduces inference latency by 80% with SageMaker, and NatWest reduces its time to value for AI from 12 to 18 months to under 7 months using SageMaker. This change is how challenging it is to build your own models, and we see an increasing number of model builders standardizing on SageMaker. The middle layer of the stack is for developers and companies who prefer not to build models from scratch but rather seek to leverage an existing large language model, or LLM, customize it with their own data and have the easiest and best features available to deploy secure high-quality, low-latency, cost-effective production gen AI apps. This is why we built Amazon Bedrock, which not only has the broadest selection of LLMs available to customers but also unusually compelling model evaluation, retrieval augmented generation, or RAG, to expand model's knowledge base, guardrails to safeguard what questions applications will answer, agents to complete multistep tasks, and fine-tuning to keep teaching and refining models. Bedrock already has tens of thousands of customers, including adidas, New York Stock Exchange, Pfizer, Ryanair and Toyota. In the last few months, Bedrock's added Anthropic's Claude 3 models, the best-performing models in the planet right now; Meta's Llama 3 models; Mistral's various models, Cohere's new models and new first-party Amazon Titan models. A week ago, Bedrock launched a series of other features, but perhaps most importantly, Custom Model Import. Custom Model Import is a sneaky big launch as it satisfies a customer request we've heard frequently and that nobody has yet met. As increasingly more customers are using SageMaker to build their models, they're wanting to take advantage of all the Bedrock features I mentioned earlier that make it so much easier to build high-quality production-grade gen AI apps. Bedrock Custom Model Import makes it simple to import models from SageMaker or elsewhere into Bedrock before deploying their applications. Customers are excited about this, and as more companies find they're employing a mix of custom-built models along with leveraging existing LLMs, the prospect of these 2 linchpin services in SageMaker and Bedrock working well together is quite appealing. The top of the stack are the gen AI applications being built. And today, we announced the general availability of Amazon Q, the most capable generative AI-powered assistant for software development and leveraging company's internal data. On the software development side, Q doesn't just generate code. It also tests code, debugs coding conflicts, and transforms code from one form to another. Today, developers can save months using Q to move from older versions of Java to newer, more secure and capable ones. In the near future, Q will help developers transform their .NET code as well, helping them move from Windows to Linux. Q also has a unique capability called Agents, which can autonomously perform a range of tasks, everything from implementing features, documenting, and refactoring code to performing software upgrades. Developers can simply ask Amazon Q to implement an application feature such as asking it to create an add to favorites feature in a social sharing app, and the agent will analyze their existing application code and generate a step-by-step implementation plan, including code changes across multiple files and suggested new functions. Developers can collaborate with the agent to review and iterate on the plan, and then the agent implements it, connecting multiple steps together and applying updates across multiple files, code blocks and test suites. It's quite handy. On the internal data side, most companies have large troves of internally relevant data that resides in wikis, Internet pages, Salesforce, storage repositories like Amazon S3 and a bevy of other data stores and SaaS apps that are hard to access. It makes answering straightforward questions about company policies, products, business results, code, people, and many other topics hard and frustrating. Q makes this much simpler. You can point Q at all of your enterprise data repositories and it will search all this data, summarize logically, analyze trends, engage in dialogue with customers about this data. We also introduced today a powerful new capability called Q Apps, which lets employees describe a natural language what apps they want to build on top of this internal data and Q Apps will quickly generate that app. This is going to make it so much easier for internal teams to build useful apps from their own data. Q is not only the most functionally capable AI-powered assistant for software development and data but also setting the standard for performance. Q has the highest-known score and acceptance rate for code suggestions, outperforms all other publicly benchmarkable competitors and catching security vulnerabilities, and leads all software development assistants on connecting multiple steps together and applying automatic actions. Customers are gravitating to Q, and we already see companies like Brightcove, British Telecom, Datadog, GitLab, GoDaddy, National Australia Bank, NCS, Netsmart, Slam, Smartsheet, Sun Life, Tata Consultancy Services, Toyota, and Wiz using Q, and we've only been in beta until today. I'd also caution folks not to overlook the security and operational performance elements of these gen AI services. It's less sexy but critically important. Most companies care deeply about the privacy of the data in their AI applications and the reliability of their training and production apps. If you've been paying attention to what's been happening in the last year or so, you can see there are big differences between providers on these dimensions. AWS has a meaningful edge, which is adding to the number of companies moving their AI focus to AWS. We expect the combination of AWS' reaccelerating growth and high demand for gen AI to meaningfully increase year-over-year capital expenditures in 2024, which given the way the AWS business model works is a positive sign of the future growth. The more demand AWS has, the more we have to procure new data centers, power and hardware. And as a reminder, we spend most of the capital upfront. But as you've seen over the last several years, we make that up in operating margin and free cash flow down the road as demand steadies out. And we don't spend the capital without very clear signals that we can monetize it this way. We remain very bullish on AWS. We're at $100 billion-plus annualized revenue run rate, yet 85% or more of the global IT spend remains on-premises. And this is before you even calculate gen AI, most of which will be created over the next 10 to 20 years from scratch and on the cloud. There is a very large opportunity in front of us. We also continue to make strong progress on our newer investments. Our emerging international stores are growing and moving towards profitability. Our third-party logistics business offering services like Buy with Prime, Amazon shipping and multichannel fulfillment continues to grow well. We just launched a Prime delivery grocery benefit that lets customers receive free unlimited grocery delivery for just $9.99 a month, which is great value and customers are responding accordingly. Later this year in Manhattan, we're launching a new smaller Whole Foods market concept called Whole Foods Market Daily Shops. Prime Video continues to produce compelling content, with Fallout being our latest big hit on the heels of a very successful Road House movie, with strong customer engagement in our original and partner content. Our health services business is growing robustly as customers are loving our pharmacy customer experience, and we've launched same-day delivery of prescription medications to customers in 8 cities, including Los Angeles and New York City, with plans to expand to more than a dozen cities by the end of the year, with customers now getting first fill medications 75% faster year-over-year nationwide. And Kuiper is getting closer to having its production satellites in space and entering our commercial beta. There's a lot of invention happening across our business, and I'm super grateful to all our employees for their hard work and ingenuity. I'll close by sharing that I'm enthusiastic about how we started this year. We have a lot of opportunity in front of us in every one of our businesses to make our customers' lives better and easier. With that, I'll turn it over to Brian for a financial update.","evidence_gemma_new":"operating income year-over-year","evidence_llama_3_3":"Amazon operating income","evidence_qwen_3_30b":"operating income year-over-year","gemma_new_max":15300000000.0,"gemma_new_min":15300000000.0,"llama_3_3_max":15300000000.0,"llama_3_3_min":15300000000.0,"qwen_3_30b_max":15300000000.0,"qwen_3_30b_min":15300000000.0}
{"symbol":"AMZN","year":2024,"quarter":1,"date":"2024-Q2","chunk_id":4,"sub_chunk_id":0,"centroid_label":"operating income","agreed_value":12000000000.0,"count":3,"chunk":"We remain focused on the inputs that matter most to our customers: selection, price, and convenience. During the quarter, around the world, we helped customers save with our shopping events. We added selection, including premium and luxury brands, and we delivered our fastest speeds ever for Prime members. Third-party sellers continue to be an important part of our offering. Third-party seller services revenue increased 16% year-over-year, excluding the impact of foreign exchange. We saw strong 3P unit growth, coupled with increased adoption of our optional services, such as fulfillment and global logistics. For the quarter, third-party seller unit mix was 61%, up 200 basis points year-over-year. Shifting to profitability, North America segment operating income was $5 billion, an increase of $4.1 billion year-over-year. Operating margin was 5.8%, up 460 basis points year-over-year. We saw improvements in our cost to serve, including continued benefit from our work to regionalize our operations, savings from more consolidated customer shipments, and improved leverage driven by strong unit growth and lower transportation rates. In our international segment, operating income was $903 million, an improvement of $2.2 billion year-over-year. Operating margin was 2.8%, up 710 basis points year-over-year. This is primarily driven by our established countries as we improve cost efficiencies through network design enhancements and improved volume leverage. Additionally, we saw good progress in our emerging countries as they expand their customer offerings and make strides on their respective journeys to profitability. Looking ahead, we see several opportunities to further lower cost to serve and improved profitability in our worldwide stores business while still investing to improve the customer experience. Within our fulfillment network, we are focused on investing in our inbound network, streamlining and standardizing process paths, and adding robotics and automation. These improvement opportunities will take time. However, we have a solid plan in place and we like the path we're on. Advertising remains an important contributor to profitability in North America and international segments. We see many opportunities to grow our offerings, both in the areas that are driving growth today like sponsored products and in areas that are newer, like streaming TV ads. Moving to AWS. Revenue was $25 billion, an increase of 17% year-over-year, and AWS is now a $100 billion annualized revenue run rate business. Excluding the impact from leap year, AWS revenue increased approximately 16% year-over-year. During the first quarter, we saw growth in both generative AI and non-generative AI workloads across a diverse group of customers and across industries as companies are shifting their focus towards driving innovation and bringing new workloads to the cloud. Additionally, we continue to see the impact of cost optimizations diminish. While there always be a level of ongoing optimization, we think the majority of the recent cycle is behind us, and we're likely closer to a steady state of these optimization efforts. AWS operating income was $9.4 billion, an increase of $4.3 billion year-over-year. As a reminder, these results include the impact from the change in the estimated useful life of our servers, which primarily benefits the AWS segment. We made progress in managing our infrastructure and fixed costs while still growing at a healthy rate, which has resulted in improved leverage. As we've said in the past, over time, we expect the AWS operating margins to fluctuate, driven in part by the level of investments we are making in the business. We remain focused on driving efficiencies across the business, which enables us to invest to support the strong growth we're seeing in AWS, including generative AI, which brings us to capital investments. As a reminder, we define these as the combination of CapEx plus equipment finance leases. In 2023, overall capital investments were $48.4 billion. As I mentioned, we're seeing strong AWS demand in both generative AI and our non-generative AI workloads, with customers signing up for longer deals and making bigger commitments. It's still relatively early days in generative AI and more broadly, the cloud space, and we see sizable opportunity for growth. We anticipate our overall capital expenditures to meaningfully increase year-over-year in 2024, primarily driven by higher infrastructure CapEx to support growth in AWS, including generative AI. Turning to our revenue guidance for Q2. Net sales are expected to be between $144 billion and $149 billion or to grow between 7% and 11% compared with the second quarter of 2023. We saw an unfavorable impact from year-over-year changes in foreign exchange in our Q1 results, and we expect that headwind to grow in the second quarter. Our Q2 net sales guidance anticipates an unfavorable foreign exchange impact of approximately 60 basis points. As part of our guidance considerations, we also continue to keep an eye on consumer spending and macro level trends, specifically in Europe where it appears to be a bit weaker relative to the U.S. Operating income is expected to be between $10 billion and $14 billion in Q2. This estimate includes the impact of our seasonal step-up in stock-based compensation expense, driven by the timing of our annual compensation cycle. I want to thank our customers, our partners, and our teammates around the world for a very strong start to the year, and we're excited to build on this momentum. We'll remain focused on streamlining and prioritizing projects in a way that allows us to continue inventing for customers in a cost-effective way. With that, let's move on to your questions.","evidence_gemma_new":"Operating income Q2","evidence_llama_3_3":"expect operating income Q2","evidence_qwen_3_30b":"expected operating income $10 billion to $14 billion Q2","gemma_new_max":12000000000.0,"gemma_new_min":12000000000.0,"llama_3_3_max":12000000000.0,"llama_3_3_min":12000000000.0,"qwen_3_30b_max":12000000000.0,"qwen_3_30b_min":12000000000.0}
{"symbol":"AMZN","year":2024,"quarter":2,"date":"2024-Q2","chunk_id":2,"sub_chunk_id":0,"centroid_label":"operating income","agreed_value":14700000000.0,"count":3,"chunk":"Andy Jassy : Thanks, Dave. Today, we're reporting $148 billion in revenue, up 11% year-over-year, excluding the impact from foreign exchange rates. Operating income was $14.7 billion, up 91% year-over-year, and trailing 12-month free cash flow adjusted for equipment finance leases was $51.4 billion, up 664% or $44.7 billion year-over-year. As I think about what matters to customers long-term and, therefore, to Amazon, there's a lot to like about what we're seeing. Starting with AWS, year-over-year revenue growth accelerated again from 17.2% in Q1 to 18.8% in Q2. We're continuing to see three macro trends drive AWS growth. First, companies have completed the significant majority of their cost optimization efforts and are focused again on new efforts. Second, companies are spending their energy again on modernizing their infrastructure and moving from on-premises infrastructure to the cloud. This modernization enables builders to save money, innovate at a more rapid clip, and drive productivity in most companies' scarcest resources, developers. This is the flip I've talked about in the past, where the vast majority of global IT spend today is on-premises, and we expect that to keep inverting over time. With the broadest functionality, the strongest security and operational performance, and the deepest partner ecosystem, AWS continues to be customers' partner of choice and the biggest beneficiary of this flip from on-premises to the cloud. And third, builders and companies of all sizes are excited about leveraging AI. Our AI business continues to grow dramatically with a multi-billion dollar revenue run rate despite it being such early days, but we can see in our results and conversations with customers that our unique approach and offerings are resonating with customers. At the heart of this strategy is a firmly held belief, which we've had since the beginning of AWS, that there is not one tool to rule the world. People don't want just one database option or one analytics choice or one container type. Developers and companies not only reject it, but are suspicious of it. They want multiple options for flexibility and to use the best tool for each job to be done. The same is true in AI. You saw this several years ago when some companies tried to argue that TensorFlow would be the only machine learning framework that mattered, and then PyTorch and others overtook it. The same one model or one-chip approach dominated the earliest moments of the generative AI boom, but we have a lot of data to suggest this is not what customers want here either. And our AWS team is determined to deliver choice and options for customers. You can see this philosophy in the primitive building blocks we're building at all three layers of the Gen AI stack. At the bottom layer, which is for those building generative AI models themselves, the cost to compute for training and inference is critical, especially as models get to scale. We have a deep partnership with NVIDIA and the broadest selection of NVIDIA instances available, but we've heard loud and clear from customers that they relish better price performance. It's why we've invested in our own custom silicon in Trainium for training and Inferentia for inference. And the second versions of those chips, with Trainium coming later this year, are very compelling in price performance. We're seeing significant demand for these chips. These model builders also desire services that make it much easier to manage the data, construct the models, experiment, deploy to production, and achieve high-quality performance, all while saving considerable time and money. That's what Amazon SageMaker does so well, including its most recently launched feature called HyperPods that changes the game and networking performance for large models. And we're increasingly seeing model builders standardized on SageMaker. While many teams will build their own models, lots of others will leverage somebody else's frontier model, customize it with their own data and seek a service that provides broad model selection and great generative AI capabilities. This is what we think of as the middle layer, what Amazon Bedrock does and why Bedrock has tens of thousands of companies using it already. Bedrock has the largest selection of models, the best generative AI capabilities in critical areas like model evaluation, guardrails, RAG and agenting, and then makes it easy to switch between different model types and model sizes. Bedrock has recently added Anthropic's Claude 3.5 models, which are the best performing models on the planet. Meta's new Llama 3.1 models and Mistral's new Large two models. And Lama's and Mistral's impressive performance benchmarks in open nature are quite compelling to our customers as well. At the application or top layer, we're continuing to see strong adoption of Amazon Q, the most capable generative AI powered assistant for software development and to leverage your own data. Q has the highest known score and acceptance rate for code suggestions, but it does a lot more than provide code suggestions. It tests code, outperforms all other publicly benchmarkable competitors on catching security vulnerabilities and leads all software development assistants on connecting multiple steps together and applying automatic action. It also saves development teams time and money on the muck nobody likes to talk about. For instance, when companies decide to upgrade from one version of a framework to another, it takes development teams many months, sometimes years, burning valuable opportunity costs and churning developers who hate this tedious, though important work. With Q's code transformation capabilities, Amazon has migrated over 30,000 Java JDK applications in a few months, saving the company $260 million and 4,500 developer years compared to what it would have otherwise cost. That's a game changer. And think about how this Q transformation capability might evolve to address other elusive but highly desired migrations. During the past 18 months, AWS has launched more than twice as many machine learning and generative AI features into general availability than all the other major cloud providers combined. This team is cooking, but we're not close to being done adding capabilities for our customer's usage base. For perspective, we've added over $2 billion in advertising revenue year-over-year and generated more than $50 billion in revenue in the trailing 12 months. Sponsored ads drive the majority of our advertising revenue today and we see further opportunity there. Even with this growth, it's important to realize we're at the very beginning of what's possible in our video advertising. In May, we made our first appearance at the upfronts and were encouraged by the agency and advertiser feedback on the differentiated value we offer across our content, reach, signals, and ad tech. With ads and prime video, the exciting opportunity for brands is the ability to directly connect advertising that's traditionally been focused on driving awareness, as is the case for TV, to a business outcome, like product sales or subscription signups. We're able to do that through our measurement and ad tech, so brands can continually improve the relevance and performance of their ads. While ads have become the norm in streaming video, we aim to have meaningfully fewer ads than linear TV and other streaming TV providers. And of course, for customers preferring an ad-free experience, we offer that option for an additional $2.99 a month. In our stores business, we saw growth of 9% year-over-year in the North America segment and 10% year-over-year in the international segment. A few notes on our North America revenue growth rate. First, last quarter's leap day added about 100 basis points of year-over-year growth. Second, we're seeing lower average selling prices, or ASPs, right now because customers continue to trade down on price when they can. More discretionary higher ticket items, like computers or electronics or TVs, are growing faster for us than what we see elsewhere in the industry, but more slowly than we see in a more robust economy. And our continued faster delivery speed is earning us more of our customers' everyday essentials business. Third, our seller fees are a little lower than expected given the behavior changes we've seen from our latest fee changes. While some of these issues compress short-term revenue, we generally like these trends. While consumers are being careful on price, our North America unit growth is meaningfully outpacing our sales growth as our continued work on selection, low prices, and delivery is resonating. So far this year, our speed of delivery for prime customers has been faster than ever before, with more than 5 billion units arriving the same day or next day. As more customers experience our fast delivery, they look to Amazon for more of their shopping needs, and the continued acceleration of our everyday essentials business is an example of this phenomenon. On seller fees, lowering apparel fees has spurred substantial year-over-year unit growth in apparel. And the incentive we've given sellers to send their items to multiple Amazon inbound facilities so they can save money where they save us effort and money is getting more traction than we even hoped. These collective developments will benefit customers in the form of better selection, lower prices, and faster delivery speed. There's no shortage of ideas aimed in improving the experience for stores' customers. For instance, we're adding even more value to Prime, recently introducing free restaurant delivery in many of our geos, expanding Amazon's PharmacyRx pass to Medicare members. This is a benefit that gives subscribers all you can consume access to the most common generic medications for just $5 a month, and offering a grocery subscription to help save on grocery items when shopping our U.S. and UK fresh stores. As we pursue these initiatives, we remain focused on lowering our cost to serve. We have a number of opportunities to further reduce costs, including expanding our use of automation and robotics, further building out our same-day facility network, and regionalizing our inbound network. With more optimal inbound inventory placement, we expect to enable faster speeds, consolidate more orders in one box, and reduce inventory transfers once items reach a fulfillment center. These cost improvements won't happen in one quarter or one fell swoop. They take technology and process innovation with a lot of outstanding execution, but we see a path to continuing to lower our cost to serve, which as we've discussed in the past, has very meaningful value for customers in our business. As we lower our cost to serve, we can add more low ASP selection that we can support economically, which coupled with our fast delivery, puts Amazon in the consideration set for increasingly more shopping needs for customers. A few other comments about areas in which we're investing. We remain very bullish on the medium to long-term impact of AI in every business we know and can imagine. The progress may not be one straight line for companies. Generative AI especially is quite iterative, and companies have to build muscle around the best way to solve actual customer problems. But we see so much potential to change customer experiences. We see it in how our generative AI-powered shopping assistant Rufus is helping customers make better shopping decisions. We see it in how our AI features that allow customers to simulate trying apparel items or changing the buying experience. We see it in how our generative AI listing tool is enabling sellers to create new selection with a line or two of text versus the many forms previously required. We see it in our fulfillment centers across North America where we're rolling out Project Private Investigator, which uses a combination of generative AI and computer vision to uncover defects before products reach customers. We see it in how our generative AI is helping our customers discover new music and video. We see it in how it's making Alexa smarter. And we see it in how our custom silicon and services like SageMaker and Bedrock are helping both our internal teams and many thousands of external companies reinvent their customer experiences and businesses. We are investing a lot across the board in AI, and we'll keep doing so as we like what we're seeing and what we see ahead of us. We also continue to like the progress in Prime Video. Our storytelling is resonating with our hundreds of millions of monthly viewers worldwide, and the 62 Emmy nominations Amazon MGM Studios recently received is another supporting data point. We recently debuted titles like Fallout, the second most watched original title ever for Prime Video, The Idea of You, which attracted nearly 50 million viewers worldwide in the first two weeks on Prime Video, and Season 4, The Boys, which reached number one on Prime Video in 165 countries in its opening two weeks. And we continue to see momentum in live sports. We recently announced 11-year landmark deals with the NBA and the WNBA. When combined with our original films and shows, partner streaming services, licensed content, and rent or buy titles, Prime Video continues to evolve into the best destination for streaming video. And for Project Kuiper, our low-Earth orbit satellite constellation, we're accelerating satellite manufacturing at our facility in Kirkland, Washington. We've announced a distribution agreement with Vrio, who distributes direct TV Latin America and Sky Brazil to offer Project Kuiper's satellite broadband network to residential customers across seven countries in South America, and we continue to feel significant demand for the service from enterprise and government entities. We expect to start shipping production satellites late this year and continue to believe this could be a very large business for us. I could go on, but we'll stop here. There's a lot to feel optimistic about over the next several years and the team collectively remains focused on continuing to invent and deliver for our customers in the business. With that, I'll turn it over to Brian for a financial update.","evidence_gemma_new":"Operating income year-over-year","evidence_llama_3_3":"operating income year-over-year","evidence_qwen_3_30b":"Operating income year-over-year","gemma_new_max":14700000000.0,"gemma_new_min":14700000000.0,"llama_3_3_max":14700000000.0,"llama_3_3_min":14700000000.0,"qwen_3_30b_max":14700000000.0,"qwen_3_30b_min":14700000000.0}
{"symbol":"AMZN","year":2024,"quarter":3,"date":"2024-Q3","chunk_id":2,"sub_chunk_id":0,"centroid_label":"operating income","agreed_value":17400000000.0,"count":3,"chunk":"Andy Jassy: Thanks, Dave. Today, we're reporting $158.9 billion in revenue, up 11% year-over-year excluding the impact from foreign exchange rates. Operating income was $17.4 billion, up 56% year-over-year, and trailing 12-month free cash flow adjusted for equipment finance leases was $46.1 billion, up 128% or $25.9 billion year-over-year. As always, we're focused on making our customers' lives better and easier and thinking long term with respect to how we can keep helping customers and build a successful business to outlast all of us. In our stores business, we saw sales growth of 9% year-over-year in the North America segment and 12% year-over-year in the international segment. Our team continues to focus on the inputs that matter most to customers, really broad selection, low prices, fast and free delivery, and a range of compelling Prime member benefits, including our recent additions of unlimited grocery delivery from Whole Foods Market, Amazon Fresh, and local third-party grocery partners for $9.99 a month and fuel savings of $0.10 a gallon at bp, Amoco, and ampm stations in the US. At a time when consumers are being careful about how much they spend, we're continuing to lower prices and ship even more quickly, and we can see this resonating with customers as our unit growth continues to be strong and outpace even our revenue growth. In the last few months, we've hosted our largest and most successful Prime Day and Prime Big Deal Days ever and helped customers save over $5 billion across more than 50 million deals. And for the second year in a row, we are on track to deliver our fastest speeds ever for Prime members globally. We also continue to focus on lowering our cost to serve and are pursuing several initiatives that we believe will have meaningful long-term impact in this area. First, we continue to believe there are more gains on top of what we've captured thus far in outbound regionalization and getting more items closer to end consumers. As such, we're in the process of significantly changing the way we inbound items into our fulfillment network and subsequently spread them to our regional fulfillment nodes. In the last few months, we've made hundreds of changes to our US inbound network and opened more than 15 inbound buildings. While still relatively early in this re-architecture, we've already improved our ability to spread inventory across our fulfillment centers by 25% year-over-year, allowing us to have more of the requisite items in fulfillment centers closest to the customer, so we can compile shipments and ship to customers even more quickly. As we scale and optimize this new design, we expect these changes will further improve inventory placement, offer faster delivery time, save transportation costs, and enable us to increase units shipped per box. Second, we continue to roll out same-day delivery facilities, which is not only the fastest way to get products to customers but also one of our lowest cost ways to deliver. Over 40 million customers this past quarter have had their orders delivered for free with same-day delivery, an increase of more than 25% year-over-year. And third, we continue to innovate in robotics to speed delivery, lower cost to serve, and further improve safety in our fulfillment network. We recently launched our 12th-generation fulfillment center design with the first building launching in Shreveport, Louisiana. This is the first facility that incorporates our newest robotics inventions that simplify stowing, picking, packing, and shipping processes. Thus far, this new design reduces fulfillment processing time by up to 25%, increases the number of items we can offer for same-day or next-day delivery and is expected to drive a 25% improvement in our cost to serve during peak within this next generation facility. Though we believe we have more expansive automation and robotics than other retail peers, it's still early days in how much automation we expect in our fulfillment network. In advertising, we remain pleased with our progress, generating $14.3 billion of revenue in the quarter, 18.8% year-over-year growth. Our expansive reach, ability to service relevant offers to our customers, opportunity to engage customers from the top of the funnel to point of purchase, and leading capabilities around measuring outcomes at every touch point provide all types of brands with full funnel advertising at scale. With sponsored products, we're seeing meaningful growth on a very large base, and we see further opportunity in driving even better performance for advertisers by further improving the relevancy of the ads we show and by providing additional optimization controls. At the same time, some of our newer offerings are in their very early days. We're just entering our first broadcast season for Prime Video advertising, following a very strong showing at upfronts. And we're continuing to support brands of all sizes with our Generative AI-powered creative tools across display, video and audio, including our video generator that uses a single product image to curate custom AI-generated videos. While we're generating a lot of advertising revenue today, there remains considerable upside. AWS grew 19.1% year-over-year and now stands at a $110 billion annualized run rate. We've seen significant reacceleration of AWS growth for the last four quarters. With the broadest functionality, the strongest security and operational performance and the deepest partner community, AWS continues to be a customer's partner of choice. There are signs of this in every part of AWS's business. We see more enterprises growing their footprint in the cloud, evidenced in part by recent customer deals with the ANZ Banking Group, Booking.com, Capital One, Fast Retailing, Ita\u00fa Unibanco, National Australia Bank, Sony, T-Mobile, and Toyota. You can look at our partnership with NVIDIA called Project Ceiba, where NVIDIA has chosen AWS's infrastructure for its R&D supercomputer due in part to AWS's leading operational performance and security. And you can see how AWS continues to innovate in its infrastructure capabilities. With deliveries like Aurora Limitless Database, which extends AWS's very successful relational database to support millions of database writes per second and manage petabytes of data whilst maintaining the simplicity of operating a single database or with our custom Graviton4 CPU instances, which provide up to nearly 40% better price performance versus other leading x86 processors. Companies are focused on new efforts again, spending energy on modernizing their infrastructure from on-premises to the cloud. This modernization enables companies to save money, innovate more quickly, and get more productivity from their scarce engineering resources. However, it also allows them to organize their data in the right architecture and environment to do Generative AI at scale. It's much harder to be successful and competitive in Generative AI if your data is not in the cloud. The AWS team continues to make rapid progress in delivering AI capabilities for customers in building a substantial AI business. In the last 18 months, AWS has released nearly twice as many machine learning and GenAI features as the other leading cloud providers combined. AWS's AI business is a multibillion-dollar revenue run rate business that continues to grow at a triple-digit year-over-year percentage and is growing more than 3 times faster at this stage of its evolution as AWS itself grew, and we felt like AWS grew pretty quickly. We talk about our AI offering as three macro layers of the stack, with each layer being a giant opportunity and each is progressing rapidly. At the bottom layer, which is for model builders, we were the first major cloud provider to offer NVIDIA's H200 GPUs through our EC2 P5e instances. And thanks to our networking innovations like Elastic Fabric adapter and Nitro, we continue to offer advantaged networking performance. And while we have a deep partnership with NVIDIA, we've also heard from customers that they want better price performance on their AI workloads. As customers approach higher scale in their implementations, they realize quickly that AI can get costly. It's why we've invested in our own custom silicon in Trainium for training and Inferentia for inference. The second version of Trainium, Trainium2 is starting to ramp up in the next few weeks and will be very compelling for customers on price performance. We're seeing significant interest in these chips, and we've gone back to our manufacturing partners multiple times to produce much more than we'd originally planned. We also continue to see increasingly more model builders standardize an Amazon SageMaker, our service that makes it much easier to manage your AI data, build models, experiment, and deploy to production. This team continues to add features at a rapid clip punctuated by SageMaker's unique hyperpod capability, which automatically splits training workloads across more than 1,000 AI accelerators, prevents interruptions by periodically saving checkpoints, and automatically repairing faulty instances from their last saved checkpoint and saving training time by up to 40%. At the middle layer where teams want to leverage an existing foundation model customized with their data and then have features to deploy high-quality Generative AI applications, Amazon Bedrock has the broadest selection of leading foundation models and most compelling modules for key capabilities like model valuation, guardrails, rag and agents. Recently, we've added Anthropic's Claude 3.5 Sonnet model, Meta's Llama 3.2 models, Mistral's Large 2 models and multiple stability AI models. We also continue to see teams use multiple model types from different model providers and multiple model sizes in the same application. There's mucking orchestration required to make this happen. And part of what makes Bedrock so appealing to customers and why it has so much traction is that Bedrock makes this much easier. Customers have many other requests, access to even more models, making prompt management easier, further optimizing inference costs, and our Bedrock team is hard at work making this happen. At the application or top layer, we're continuing to see strong adoption of Amazon Q, the most capable Generative AI-powered assistant for software development and to leverage your own data. Q has the highest reported code acceptance rates in the industry for multiline code suggestions. The team has added all sorts of capabilities in the last few months, but the very practical use case recently shared where Q Transform saved Amazon's teams $260 million and 4,500 developer years in migrating over 30,000 applications to new versions of the Java JDK as excited developers and prompted them to ask how else we could help them with tedious and painful transformations. Spend a few minutes reading developer forums about what they wish they could move away from, and you'll get an idea of what they want. Expect more practical AI game changers from Q. We're also using Generative AI pervasively across Amazon's other businesses with hundreds of apps in development or launched. For consumers, we've expanded Rufus, our Generative AI-powered expert shopping assistant to the UK, India, Germany, France, Italy, Spain, and Canada. And in the US, we've added more personalization, the ability to better narrow customer intent and real-time pricing and deal information. We've recently debuted AI Shopping Guides for consumers, which simplifies product research by using Generative AI to pair key factors to consider in a product category with Amazon's wide selection, making it easier for customers to find the right product for their needs. For sellers, we've recently launched Project Amelia, an AI system that offers tailored business insights to boost productivity and drive seller growth. We continue to rearchitect the brain of Alexa with a new set of foundation models that we'll share with customers in the near future, and we're increasingly adding more AI into all of our devices. Take the new Kindle Scribe we just announced. The note-taking experience is much more powerful with the new built-in AI-powered notebook, which enables you to quickly summarize pages of notes into concise bullets in a script font that can easily be shared. Speaking of Kindle products, we just launched a completely new Kindle lineup, the first time we've done a portfolio refresh of this size. Apart from the Scribe, it includes the first-ever color Kindle, the fastest Kindle Paperwhite ever and a new pocket-sized Kindle. The early sales for these devices have significantly outperformed our expectations, and Kindle is having an excellent year with customers reading more than ever. We now have over 20 billion average monthly pages read on Kindle devices worldwide. There are so many things we're energized by right now, but we'll quickly mention one more, the progress we're making in improving customers' pharmacy experience. Brick-and-mortar pharmacies account for just over 90% of prescriptions dispensed in the US that require customers to make trips to forlorn physical venues with much of the selection behind locked shelves, waiting lines for meds and only finding out about pricing at the point of purchase. The largest mail order pharmacies offer delivery in 5 to 10 business days. We think customers deserve better. Today, we can deliver to 95% of first-time Amazon Pharmacy customers in the US within two business days and to 20% of US Prime members within 24 hours. Next year, we plan to launch operations in 20 new cities, so nearly half the US will have the ability to have their medications delivered to their door within hours. We believe making it easier for customers to get their medications will improve medication adherence, which we know can directly improve health outcomes. Across Amazon, we have a lot coming in the next few months. We eagerly look forward to sharing these with customers, and a big thank you to my Amazon teammates around the world for all their hard work. And with that, I'll turn it over to Brian for a financial update.","evidence_gemma_new":"Operating income year-over-year","evidence_llama_3_3":"operating income","evidence_qwen_3_30b":"Operating income $17.4 billion","gemma_new_max":17400000000.0,"gemma_new_min":17400000000.0,"llama_3_3_max":17400000000.0,"llama_3_3_min":17400000000.0,"qwen_3_30b_max":17400000000.0,"qwen_3_30b_min":17400000000.0}
{"symbol":"AMZN","year":2024,"quarter":3,"date":"2024-Q3","chunk_id":13,"sub_chunk_id":0,"centroid_label":"operating income","agreed_value":1400000000.0,"count":2,"chunk":"Brian Olsavsky: This is Brian. Let me take the first part of that question on international segment profitability. So if you've looked at the trends, we see quarter-to-quarter fluctuations certainly in operating profit in the international segment. But we're starting to see clear trend lines that are moving positive and above zero. And for each of the last seven quarters, as I mentioned, we've had year-over-year improvement in op margin. And in the last quarter, operating income was up $1.4 billion versus the prior year. So really, it is a lot of the same factors you're seeing in North America, lower cost to serve, greater contribution from advertising, improved selection, faster delivery speeds, which help drive consumer demand. And if you step back further, international is really a mix of our established countries where we've been operating for a long time, the UK, Europe, and Germany -- excuse me, Europe and Japan, and a number of emerging countries, including 10 new countries that we launched in the last seven years. So there's a lot under the hood there and there's different stories in each country. Each of them is on a different point in the path from launching to customer adoption, just scaling towards profitability to then making consistent operating profit. So I think our expectations in each of those countries mirror those in North America. And we intend, over the fullness of time, that we're going to aim for North America margins, which are not static themselves. So we're happy with the performance. Glad to see a number above zero in many of the last few quarters, but really it\u2019s a story on a country-by-country basis that we're working hard. On the robotics piece, what I would say is even though we believe we have more expansive and advanced automation, robotics capabilities in our fulfillment network than other peers, it's so early with respect to what we're going to do automation, robotics-wise in our fulfillment network. We're just at the stage right now where we're starting to roll out. We had about a five or six very significant new robotics capabilities in the areas of stowing, picking, packing, and shipping that we are finally put into one facility to get the entire workflow. It's a facility in Shreveport, Louisiana that was just launched a few weeks ago. And as I mentioned in my opening comments, we're seeing very encouraging results there. And of course, the reason why we're trying to have more robotics and automation in our fulfillment network is it allows us to fast -- to ship more quickly, to ship more cost effectively, and to make conditions even safer for our fulfillment teammates than what they already have today. And I think something that the team has done in a very disciplined way, and I talked about this a little bit in my annual letter, my shareholder letter is just they have been very thoughtful about defining what are the primitive foundational building blocks that you need, that you can then use in lots of different combinations to build additional automation\/robotics capabilities down the road, so we can move even more quickly with the next generation of robotics capabilities. And that team has invested in those and they're already working on the next generation. And the last piece I would add to that is we really do believe that AI is going to be a big piece of what we do in our robotics network. We had a number of efforts going on there. We just hired a number of people from an incredibly strong robotics AI organization. And I think that will be a very central part of what we do moving forward, too.","evidence_gemma_new":"operating income last quarter","evidence_llama_3_3":null,"evidence_qwen_3_30b":"operating income last quarter","gemma_new_max":1400000000.0,"gemma_new_min":1400000000.0,"llama_3_3_max":null,"llama_3_3_min":null,"qwen_3_30b_max":1400000000.0,"qwen_3_30b_min":1400000000.0}
{"symbol":"AMZN","year":2024,"quarter":4,"date":"2024-Q4","chunk_id":2,"sub_chunk_id":0,"centroid_label":"operating income","agreed_value":21200000000.0,"count":3,"chunk":"Andy Jassy: Thanks, Dave. Today, we're reporting $187.8 billion in revenue, up 10% year over year. Given the way the dollar strengthened throughout the quarter, we had $700 million more foreign exchange headwind than we anticipated at guidance. Without that headwind, revenue would have been 11% year over year and exceeded the top end of our guidance. Operating income was $21.2 billion, up 61% year over year, and trailing twelve-month free cash flow adjusted for equipment finance leases was $36.2 billion, up $700 million year over year. We're pleased with the invention, customer experience improvements, and results delivered in 2024, and have a lot more planned in 2025. I'll start by talking about our stores business. We saw 10% year over year revenue growth in our North America segment, and 9% year over year in our international segment, excluding the impact from foreign exchange rates. Our continued focus on expanding selection, lowering prices, and improving convenience drove strong unit growth that even outpaced our revenue growth. We continue to add to our broad range giving customers choice across a variety of price points. We welcomed notable brands to our store throughout 2024, including Clinique, Estee Lauder, Aura Rings, and Armani Beauty. We continue to add to the hundreds of millions of products offered from our selling partners, who made up 61% of items that we sold in 2024, our highest annual mix of third-party seller units ever. We also launched Amazon Haul for US customers in Q4, which offers customers an engaging shopping experience that brings ultra-low priced products into one convenient destination. It's off to a very strong start. In the fourth quarter, consumers saved more than $15 billion with our low everyday prices and record-setting events during Prime Big Deal Days in October, Black Friday, and Cyber Monday around Thanksgiving. Additionally, Profitero's annual pricing study found that entering the holiday season, Amazon had the lowest online prices for the eighth year in a row, averaging 14% lower prices on average than other leading retailers in the US. Our speed of delivery continues to accelerate, and 2024 was another record-setting year for Prime members. We expanded the number of same-day delivery sites by more than 60% in 2024, which now serve more than 140 metro areas. Overall, we delivered over 9 billion units the same or next day around the world. Our relentless pursuit of better selection, price, and delivery speed is driving accelerated growth in Prime membership. For just $14.99 a month, Prime members get unlimited free shipping on 300 million items, off the same day or one day delivery, exclusive shopping events like Prime Day, access to a vast collection of premium programming and live sports on Prime Video, ad-free listening of 100 million songs and podcasts with Amazon Music, access to unlimited generic prescriptions for only $5 a month, unlimited grocery delivery on orders over $35 from Whole Foods Market and Amazon Fresh for $9.99 a month, a free Grubhub Plus membership with free unlimited delivery, and our latest benefit of a 10 cent per gallon fuel discount at BP, AMPM, and AMCO stations. When you think about this as a whole, and also compared to many other membership services that are comparably or more expensively priced and offer just one benefit like video, Prime is a screaming deal. And we have more coming for our Prime members in 2025. We also remain squarely focused on cost to serve in our fulfillment network, which has been a meaningful driver of our increased operating income. We talked about the regionalization of our US network. We've also recently rolled out our redesigned US inbound network. While still in its early stages, our inbound efforts have improved our placement of inventory so that even more items are close to end customers. Ahead of Black Friday in November, we'd improved the percentage of ordered units available in the ideal building by over 40% year over year. We've also spent considerable time optimizing the number of items sent to customers in the same package, which reduces packaging, is more convenient for customers, and less expensive for us to fulfill. And our per-unit transportation costs continue to decline as we build out and optimize our last-mile network. Overall, we've reduced our global cost to serve on a per-unit basis for the second year in a row. While at the same time increasing speed, improving safety, and adding selection. As we look to 2025 and beyond, we see opportunities to reduce costs again as we further refine inventory placement, grow our same-day delivery network, and accelerate robotics and automation throughout the network. In advertising, we remain pleased with the strong growth on a very large base, generating $17.3 billion of revenue in the quarter, and growing 18% year over year. That's a $69 billion annual revenue run rate, more than double what it was just four years ago at $29 billion. Sponsored products, the largest portion of ad revenue, are doing well, and we see a runway for even more growth. We also have a number of newer streaming offerings that are starting to become significant new revenue sources. On the streaming video side, we wrapped up our first year of Prime Video ads, and we're quite pleased with the early progress and head into this year with momentum. We made it easier to do full funnel advertising with us. Full funnel is from the top of the funnel with broad reach advertising that drives brand awareness to mid funnel where sponsored brands let companies specify certain keywords and audiences to attract people to their detail pages or brands to our Amazon to bottom of the funnel where sponsored products help advertisers surface relevant product ads to customers at the point of purchase. We also have differentiated audience features that leverage billions of signals from Amazon Marketing Cloud secure data clean rooms, providing advertisers the ability to analyze data, produce core marketing metrics, and understand how their marketing performs across various channels. With our new multi-touch attribution model, advertisers can understand how various ad types in their campaigns contribute to sales. Moving on to AWS, in Q4, AWS grew 19% year over year and now has a $115 billion annualized revenue run rate. AWS is a reasonably large business by most folks' standards. And though we expect growth will be lumpy over the next few years as enterprises adopt and technology advancements impact timing, it's hard to overstate how optimistic we are about what lies ahead for AWS' customers and business. I spent a fair bit of time thinking several years out. And while it may be hard for some to fathom a world where virtually every app is generative AI-infused, with inference being a core building block just like compute, storage, and database, and most companies having their own agents that accomplish various tasks interact with one another, this is the world we're thinking about all the time. And we continue to believe that this world will mostly be built on top of the cloud with the largest portion of it on AWS. To best help customers realize this future, you need powerful capabilities of all three layers of the stack. At the bottom layer, for those building models, you need compelling chips. Chips are the key ingredient in the compute that drives training and inference. Most AI compute has been driven by NVIDIA chips, and we obviously have a deep partnership with NVIDIA and will for as long as we can see into the future. However, there aren't that many generative AI applications of large scale yet, and when you get there, as we have with apps like Alexa and Rufus, cost can get steep quickly. Customers want better price performance, and it's why we built our own custom AI silicon. Tranium 2 just launched at our AWS reInvent conference in December, E2 instances with these chips are typically 30 to 40 percent more price per form than other current GPU-powered instances available. That's very compelling at scale. Several technically capable companies like Adobe, Databricks, Poolside, and Qualcomm have seen impressive results in early testing of Tranium 2. It's also why you're seeing Anthropic build its future frontier models on Tranium 2. We're collaborating with Anthropic to build project right near. A cluster of training and two ultra-servers containing hundreds of thousands of training m two chips. This cluster is going to be five times the number of Exo-ZLofts as the cluster that Anthropic used to train their current leading set of cloud models. We're already hard at work on Training 3, which we expect to preview late in 25, and defining Training 4 thereafter. Building outstanding performing chips that deliver leading price performance has become a core strength of AWS's, starting with our Nitro and Graviton chips in our core business, and now extending to Tranium and AI. It's something unique to AWS relative to other competing cloud providers. The other key component for model builders is services that make it easier to construct their models. I won't spend a lot of time on these comments on Amazon SageMaker AI, which has become the go-to service for AI model builders to manage their AI data, build models, experiment, and deploy these models. HyperPOD capability automatically splits training workloads across many AI accelerators, prevents interruptions by periodically saving checkpoints, and automatically repairing faulty instances from their last saved checkpoint and saving training time by up to 40 percent. It continues to be a differentiator with several new compelling capabilities at reinvent including the ability to manage costs at a cluster level, and prioritize which workloads should receive capacity when budgets are reached. It is increasingly being adopted by model builders. At the middle layer, for those wanting to leverage frontier models to build Jet AI apps, Amazon Bedrock is our fully managed service providing high performing foundation models with the most compelling features making it easy to build a high-quality generative AI application. We are iterating quickly on Bedrock announcing Luma AI, poolside, and over a hundred other popular emerging models to Bedrock and reinvent. We've just added DeepSeq's R1 models to Bedrock and SageMaker. Additionally, we delivered several compelling new Bedrock features to re-event, including prompt caching, intelligent prompt routing, and model distillation, all of which help customers achieve lower cost and latency in their inference. Like SageMaker AI, Bedrock is growing quickly and resonating strongly with customers. Related, we also launched Amazon's own family of frontier models in Bedrock called Nova. These models compare favorably in intelligence against the leading models in the world to offer lower latency, lower price, about 75 percent lower than other models in Bedrock, and are integrated with key Bedrock features like fine-tuning, model distillation, knowledge base as a rag, and Agentec capabilities. Thousands of AWS customers are already taking advantage of Amazon Nova models' capabilities and price performance, including Palantir, SAP Densu Fortinet Trellix, and Robinhood, and we've just gotten started. At the top layer of the stack, Amazon Q is our most capable generative AI-powered assistant for software development and to leverage your own data. You may remember that on the last call, I shared the very practical use case where Q transformation helps save Amazon Teams $260 million and 4500 developer years in migrating over 30,000 applications to new versions of the Java JDK. This is real value, and companies ask for more, which we obliged with our recent deliveries of Q transformation that enable moves from Windows dot net applications to Linux VMware to EC2, accelerates mainframe migrations. Early customer testing indicates the queue can turn was going to be a multi-year effort to do a mainframe migration into a multi-quarter effort, cutting by more than 50% the time to migrate mainframes. This is a big deal, and these transformations are good examples of practical AI. While AI continues to be a compelling new driver in the business, we haven't lost our focus on core modernization of companies' technology. We signed new AWS agreements with companies including Intuit, PayPal, Norwegian Cruise Line Holdings, Northrop Grumman, The Guardian Life Insurance Company of America, Reddit, Japan Airlines, Baker Hughes, the Hertz Corporation, Resin Chime Financial, Asana, and many others. Consistent customer feedback from our recent AWS reInvent was appreciation that we're still inventing rapidly in non-AI key infrastructure areas like storage, compute, database analytics. Our functionality leadership continues to expand and there were several key launches customers were buzz about, including Amazon Aurora D SQL, our new serverless distributed SQL database that enables applications with the highest availability strong consistency, post-test compatibility, It's four times faster reason rights compared to other pop distributed SQL databases, Amazon S3 tables, which makes S3 the first cloud object store with fully managed support for Apache Iceberg for faster analytics, Amazon S3 metadata, Which automatically generates queryable metadata simplifying data discovery, business analytics, and real time inference to help customers unlock the value of their data in S3, and the next generation of Amazon SageMaker which brings together all the data analytics services and AI services in interface to do analytics and AI more easily at scale. As 2024 comes to an end, I want to thank our teammates and partners for their meaningful impact throughout the year. It was a very successful year across almost any dimension you pick. We're far from done, and look forward to delivering for customers in 2025. With that, I'll turn it over to Brian for a financial update.","evidence_gemma_new":"operating income year over year","evidence_llama_3_3":"operating income year over year","evidence_qwen_3_30b":"operating income 61% year over year","gemma_new_max":21200000000.0,"gemma_new_min":21200000000.0,"llama_3_3_max":21200000000.0,"llama_3_3_min":21200000000.0,"qwen_3_30b_max":21200000000.0,"qwen_3_30b_min":21200000000.0}
{"symbol":"AMZN","year":2023,"quarter":4,"date":"2023-FY","chunk_id":3,"sub_chunk_id":0,"centroid_label":"revenue","agreed_value":574800000000.0,"count":2,"chunk":"Brian Olsavsky: Thanks, Andy. Overall, we saw strong performance in the fourth quarter. Worldwide revenue was $170 billion, representing an increase of 13% year-over-year, excluding the impact of foreign exchange and approximately $3 billion above the top end of our guidance range. Saw our highest quarterly worldwide operating income ever, which was $13.2 billion for the quarter, an increase of $10.5 billion year-over-year and $2.2 billion above the high end of our guidance range. For the full year 2023, we had a meaningful improvement across our financial results. Revenue was $574.8 billion, an increase of 12% year-over-year, excluding the impact of foreign exchange. Operating income tripled year-over-year to $36.9 billion. Trailing 12-month free cash flow adjusted for equipment finance leases was $35.5 billion, up $48.3 billion versus last year. These financial outputs are a result of a lot of improvements in our key input metrics such as stores' cost to serve, which decreased year-over-year for the first time since 2018 and our ability to deliver to customers at our fastest speeds ever. I want to thank our customers, our partners and our teammates around the world for a very strong 2023 performance. Focusing on the fourth quarter, North America revenue was $105.5 billion, an increase of 13% year-over-year and an acceleration of 200 basis points compared to Q3. International revenue was $40.2 billion, an increase of 13% year-over-year, excluding the impact of foreign exchange, also an acceleration of 200 basis points compared to Q3. During the quarter, we remained focused on the inputs that matter most to our customers, price, selection and convenience. Our shopping events throughout the quarter included Prime Big Deal Days in October and our extended Black Friday and Cyber Monday shopping event helped to attract new Prime members and deliver billions in savings for customers. We made meaningful progress on delivery speeds in the United States and globally, which helped strong sales throughout the quarter, including notable strength in the last-minute gifting where our ability to provide fast shipping helped our Prime members ensure that they got their gifts before the holidays. These improvements in delivery speed have led to increased purchase frequency by our Prime members across all of our major geographies. It also strengthened demand for our everyday essentials. Categories like beauty and health and personal care, where speed is even more important to customers. Third-party sellers were a big part of our success over the holidays with worldwide third-party seller services revenue growing at 19% year-over-year, excluding the impact of foreign exchange. And worldwide third-party seller unit mix was 61%, its highest level ever. We also saw strong performance in worldwide advertising, which grew 26% year-over-year, excluding the impact of foreign exchange. The strength in advertising was primarily driven by sponsored products as our teams worked hard to increase the relevancy of the ads we show customers by leveraging machine learning. Advertising only works if the ads are helpful to customers and there's a lot of value in tailoring sponsored products, so they are relevant to what a customer is actually searching for. We're also continually focused on improving our measurement capabilities, which allow brands to see the payback of their advertising spend. Shifting to profitability. North America segment operating income was $6.5 billion, an increase of $6.7 billion year-over-year, resulting in an operating margin of 6.1%, up 120 basis points quarter-over-quarter. Since North America operating margins were at their recent low levels in Q1 of 2022, we have now seen seven consecutive quarters of improvement resulting in a cumulative improvement of 800 basis points over these past seven quarters. In addition to the strong top line growth, which helped to drive improved leverage throughout our businesses, we continue to make progress on reducing our cost to serve. The fourth quarter is our busiest time of year, supported by an increasingly large and integrated operations network. Overall, our teams executed extremely well, yielding strong efficiency gains with minimal disruptions. We were pleased with the performance of our regionalized network during the holiday period, where we saw benefits from improved inventory placement helping drive faster speeds and also lowering costs. We also continue to see benefits from lower transportation rates, which include linehaul, ocean and rail and from a more stable labor market, resulting in improved staffing levels. In our International segment, we had an operating loss of $419 million, an improvement of $1.8 billion year-over-year. This improvement was primarily driven by lowering our cost to serve through increased units per box, lower transportation rates and leverage across our fixed costs as we continue to focus on customer inputs and improve efficiencies within our operations. The International segment represents more than 20 countries of varying degrees of growth and our largest established countries like the U.K., Germany and Japan, relatively strong revenue growth contributed to the year-over-year improvement in profitability. Additionally, we saw good progress in our emerging countries as they continued to expand their customer offerings, while seeking to invest wisely. Moving to AWS. Revenues were $24.2 billion, an increase of 13% year-over-year. On a quarter-over-quarter basis, we added more than $1.1 billion of revenue in AWS as customers are continuing to shift their focus towards driving innovation and bringing new workloads to the cloud. Similar to what we shared last quarter, we continue to see the diminishing impact of cost optimizations. And as these optimization slow down, we're seeing more companies turning their attention to newer initiatives and reaccelerating existing migrations. Customers are also excited about our approach to generative AI. Still relatively early days, but the revenues are accelerating rapidly across all 3 layers and our approach to democratizing AI is resonating well with our customers. We have seen significant interest from our customers wanting to run generative AI applications and build large language models and foundation models, all with the privacy, reliability and security they have grown accustomed to with AWS. AWS' operating income was $7.2 billion, an increase of $2 billion year-over-year. Our operating margin for the quarter was 29.6%, up more than 500 basis points year-over-year and effectively flat on a quarter-over-quarter basis. This margin improvement reflects our headcount reductions from earlier in the year and a slowdown in the pace of hiring. Shifting to free cash flow. On a trailing 12-month basis, free cash flow adjusted for finance leases was $35.5 billion, an improvement of $48.3 billion year-over-year. The largest driver of the improvement in free cash flow is our increased operating income, which we are seeing across all three of our segments. We're also seeing improvements in working capital, notably in inventory efficiency driven by our regionalization efforts. Next, let's turn to capital investments. We define our capital investments as a combination of CapEx plus equipment finance leases. In 2023, full year CapEx was $48.4 billion, which was down $10.2 billion year-over-year, primarily driven by lower spend on fulfillment and transportation. As we look forward to 2024, we anticipate CapEx to increase year-over-year, primarily driven by increased infrastructure CapEx, support growth of our AWS business, including additional investments in generative AI and large language models. One thing I'd like to highlight in our first quarter guidance is that we recently completed a useful life study for our servers and we are increasing the useful life from 5 years to 6 years beginning in January 2024. We will have this anticipated benefit to our operating income of approximately $900 million in Q1, which is included in our operating income guidance. As we turn the calendar to 2024, we are excited to continue upon the great work the teams have been able to deliver in 2023. We remain focused on streamlining and prioritizing projects in an effective way that reduces costs and also allows us to continue innovating and inventing for customers. With that, let's move on to questions.","evidence_gemma_new":null,"evidence_llama_3_3":"Revenue full year 2023","evidence_qwen_3_30b":"revenue full year 2023","gemma_new_max":null,"gemma_new_min":null,"llama_3_3_max":574800000000.0,"llama_3_3_min":574800000000.0,"qwen_3_30b_max":574800000000.0,"qwen_3_30b_min":574800000000.0}
{"symbol":"AMZN","year":2023,"quarter":2,"date":"2023-Q2","chunk_id":2,"sub_chunk_id":0,"centroid_label":"revenue","agreed_value":134400000000.0,"count":2,"chunk":"Andrew Jassy: Thank you, Dave. Good afternoon, everyone, and thanks for joining us. Today, we are reporting $134.4 billion in revenue and $7.7 billion in operating income, both of which exceeded the top end of our guidance ranges. We're encouraged by the progress we're making on several key priorities, namely: lowering our cost to serve in our stores business; continuing to innovate on and improve our various customer experiences; and building new customer experiences that can meaningfully change what's possible for customers in our business long term. I'll start with our ongoing effort to lower our cost to serve in our stores' fulfillment network. Q2 saw another meaningful improvement in this area as we have steadily made progress for the last several quarters. Central to our efforts has been the decision to transition our stores' fulfillment and transportation network from one national network in the United States to a series of eight separate regions serving smaller geographic areas. We keep a broad selection of inventory in each region, making it faster and less expensive to get those products to customers. Regionalization is working and has delivered a 20% reduction in number of touches for our delivered package, a 19% reduction in miles traveled to deliver packages to customers and more than 1,000 basis point increase in deliveries fulfilled within region, which is now at 76%. This is a lot of progress. Sometimes I hear people make the argument that Amazon is chasing faster speed, while driving its costs higher and where it doesn't matter much to customers. This argument is incorrect. There are two things to note. First, customers care a lot about faster delivery. We have a lot of data that shows when we make faster delivery promises on a detail page, customers purchase more often, not just a little higher, meaningfully higher. It's also true that when customers know they can get their items really quickly, it changes their consideration of using us for future purchases too. Second, when shipments come from fulfillment centers that are closer to customers, they travel shorter distances, which cost less in transportation, gets there faster and is better for the environment. There's a lot of goodness in that equation. This ability to have shipments closer to customers is the result of a lot of work and invention on the regionalization side, placement logic and local in-stock algorithms. It's also driven by our development and expansion of same-day fulfillment facilities, which is our fastest fulfillment mechanism and one of our least expensive, too. Our same-day facilities are located in the largest metro areas around the U.S., so our top-moving 100,000 SKUs, but also cover millions of other SKUs from nearby fulfillment centers that inject selection into these same-day facilities and have a design that streamlines getting items from order to being ready for delivery in as little as 11 minutes. The experience has been so positive for customers in our business that we're planning to double the number of these facilities. We believe that we are far from the law of diminishing returns and improving speed for customers. While we're seeing strong early results from this regionalization effort, we still see several ways in which we can be more efficient in this structure and we believe will improve productivity further. We've also reevaluated virtually every part of our fulfillment network this past year and see additional structural changes we can make that provide future upside. We're excited about this cost to serve improvement, but also remain maniacally focused on making customers' lives easier and better every day and relentlessly inventing to make it so. This means constantly trying to improve experiences that we can deliver to customers short and long term. This customer experience work is at the heart of what we do every day across every one of our businesses. And I can spend an hour on this call detailing various examples across the teams. For today, I'll just focus a bit on our stores and AWS businesses. For stores, our priorities continue to be providing customers with great selection, low prices and convenience. And as we've discussed, we've been especially focused on providing even faster delivery speeds. Our speed of delivery has never been faster. In this last quarter, across the top 60 largest U.S. metro areas, more than half of Prime members' orders arrived at the same day or next day. So far this year, we've delivered more than 1.8 billion units to U.S. Prime members the same or next day, nearly 4x what we delivered at those speeds by this point in 2019. Lowering our cost to serve allows us not only to invest in these speed improvements, but also add more selection at lower price points. In particular, we're growing our selection in everyday essentials, enabling customers to avoid going out to get these items and both increasing our basket sizes and the frequency with which customers choose to shop with us. We now have more than 300 million items available with U.S. Prime free shipping, including tens of millions of items with free same-day and 1-day delivery. We're continuing to focus on providing great value with tens of millions of deals that help customers stretch their dollar a little more. For instance, in Q2 of '23, we offered customers 144% more deals and coupons than we did in Q2 of 2022. Prime Day was similar. Amazon offered more deals than any past Prime Day event with a wide selection across millions of products. Prime members purchased more than 375 million items worldwide and saved more than $2.5 billion across the Amazon store, helping make it the biggest Prime Day ever. Next, a few words about AWS. AWS remains the clear cloud infrastructure leader with a significant leadership position with respect to number of customers, size of partner ecosystem, breadth of functionality and the strongest operational performance. These are important factors for why AWS has grown the way it has over the last several years and for why AWS has almost doubled the revenue of any other provider. I've talked to many AWS customers over the years and continue to do so. And while all these factors I mentioned have been big drivers of the business' success, AWS customers tell us that as importantly, they care about the very different customer focus and orientation in AWS may see elsewhere. As the economy has been uncertain over the last year, AWS customers have needed assistance cost optimizing to withstand this challenging time and reallocate spend to newer initiatives that better drive growth. We've proactively helped customers do this. And while customers have continued to optimize during the second quarter, we've started seeing more customers shift their focus towards driving innovation and bringing new workloads to the cloud. As a result, we've seen AWS' revenue growth rate stabilize during Q2 where we reported 12% year-over-year growth. The AWS team continues to innovate and change what's possible for customers at a rapid clip. You can see across the array of AWS product categories where AWS leads in compute, networking, storage, database, data solutions and machine learning, among other areas, and the continued invention and delivery in these areas is pretty unusual. For instance, a few years ago, we heard consistently from customers that they wanted to find more price performance ways to do generalized compute. And to enable that, we realized that we needed to rethink things all the way down to the silicon and set out to design our own general purpose CPU chips. Today, more than 50,000 customers use AWS' Graviton chips and AWS Compute instances, including 98 of our top 100 Amazon EC2 customers, and these chips have about 40% better price performance than other leading x86 processors. The same sort of reimagining is happening in generative AI right now. Generative AI has captured people's imagination, but most people are talking about the application layer, specifically what OpenAI has done with ChatGPT. It's important to remember that we're in the very early days of the adoption and success of generative AI, and that consumer applications is only one layer of the opportunity. We think of large language models in generative AI as having 3 key layers, all of which are very large in our opinion and all of which AWS is investing heavily in. At the lowest layer is the compute required to train foundational models and do inference or make predictions. Customers are excited by Amazon EC2 P5 instances powered by NVIDIA H100 GPUs to train large models and develop generative AI applications. However, to date, there's only been one viable option in the market for everybody and supply has been scarce. That, along with the chip expertise we've built over the last several years, prompted us to start working several years ago on our own custom AI chips for training called Trainium and inference called Inferentia that are on their second versions already and are a very appealing price performance option for customers building and running large language models. We're optimistic that a lot of large language model training and inference will be run on AWS' Trainium and Inferentia chips in the future. We think of the middle layer as being large language models as a service. Stepping back for a second, to develop these large language models, it takes billions of dollars and multiple years to develop. Most companies tell us that they don't want to consume that resource building themselves. Rather, they want access to those large language models, want to customize them with their own data without leaking their proprietary data into the general model, have all the security, privacy and platform features in AWS work with this new enhanced model and then have it all wrapped in a managed service. This is what our service Bedrock does and offers customers all of these aforementioned capabilities with not just one large language model but with access to models from multiple leading large language model companies like Anthropic, Stability AI, AI21 Labs, Cohere and Amazon's own developed large language models called Titan. Customers, including Bridgewater Associates, Coda, Lonely Planet, Omnicom, 3M, Ryanair, Showpad and Travelers are using Amazon Bedrock to create generative AI application. And we just recently announced new capabilities from Bedrock, including new models from Cohere, Anthropic's Claude 2 and Stability AI's Stable Diffusion XL 1.0 as well as agents for Amazon Bedrock that allow customers to create conversational agents to deliver personalized up-to-date answers based on their proprietary data and to execute actions. If you think about these first 2 layers I've talked about, what we're doing is democratizing access to generative AI, lowering the cost of training and running models, enabling access to large language model of choice instead of there only being one option, making it simpler for companies of all sizes and technical acumen to customize their own large language model and build generative AI applications in a secure and enterprise-grade fashion, these are all part of making generative AI accessible to everybody and very much what AWS has been doing for technology infrastructure over the last 17 years. Then that top layer is where a lot of the publicity and attention have focused, and these are the actual applications that run on top of these large language models. As I mentioned, ChatGPT is an example. We believe one of the early compelling generative AI applications is a coding companion. It's why we built Amazon CodeWhisperer, an AI-powered coding companion, which recommends code snippets directly in the code editor, accelerating developer productivity as they code. It's off to a very strong start and changes the game with respect to developer productivity. Inside Amazon, every one of our teams is working on building generative AI applications that reinvent and enhance their customers' experience. But while we will build a number of these applications ourselves, most will be built by other companies, and we're optimistic that the largest number of these will be built on AWS. Remember, the core of AI is data. People want to bring generative AI models to the data, not the other way around. AWS not only has the broadest array of storage, database, analytics and data management services for customers, it also has more customers and data store than anybody else. Coupled with providing customers with unmatched choices at these 3 layers of the generative AI stack as well as Bedrock's enterprise-grade security that's required for enterprises to feel comfortable putting generative AI applications into production, we think AWS is poised to be customers' long-term partner of choice in generative AI. We're also continuing to make meaningful progress in building new customer experiences that can meaningfully change what's possible for customers in our business long term. Amazon Business is one of our fastest-growing offerings with a $35 billion annual gross sales run rate. And the team is working hard to further build out the selection, value, convenience and features that business customers need. Buy with Prime is continuing to show a lot of progress. Merchants in early trials who use Buy with Prime saw their shopper conversion increased by 25% on average, which makes a real difference to their business. Also, merchants who participate in Prime Day activities, in aggregate, experienced a 10x increase in daily Buy with Prime orders during the sales event period versus the month before we announced Prime Day. It's frankly only been a short amount of time that we've decided to invest significantly in the health care market segment. A lot of what we tried before were smaller experiments. But we're pleased with Amazon Pharmacy doubling its active customers in the past year, and we're pleased with the response to RxPass, which enables Prime members to receive all of their eligible generic medications for just $5 a month and have them delivered free to their door. One Medical has been part of Amazon for just a few months now and we're encouraged by what we're seeing there, too. Our grocery business continues to grow. We already have a very large business in nontemperature-controlled areas like consumables, pet food, beauty and canned goods that continues to grow as we keep increasing speed and lowering our cost to serve, which allows us to sell more items more cost effectively. Whole Foods continues to lead the organic grocery space, is growing at a healthy clip and has meaningfully improved its profitability in the last year. We're pleased with what we're seeing with Whole Foods. And as I've shared before, we're working on new formats in our mass physical store offering, Amazon Fresh, having significantly improved the number of the key business inputs and just rolled out new concepts in stores. We also see substantial innovation and progress in other areas like Kuiper, Zoox and Alexa. We're still relatively early in many of our investments with technology inventions that are changing what's possible to deliver for customers in these areas, but they're big long-term opportunities that we remain optimistic about. Finally, I want to recognize our teams on being named 1 in LinkedIn's Top Companies to Grow your Career in the United States. It's a testament to our work to be a great employer with leading compensation benefits and upskilling opportunities. With that, I'll turn it over to Brian.","evidence_gemma_new":null,"evidence_llama_3_3":"revenue","evidence_qwen_3_30b":"revenue operating income Q2 2023","gemma_new_max":null,"gemma_new_min":null,"llama_3_3_max":134400000000.0,"llama_3_3_min":134400000000.0,"qwen_3_30b_max":134400000000.0,"qwen_3_30b_min":134400000000.0}
{"symbol":"AMZN","year":2023,"quarter":3,"date":"2023-Q3","chunk_id":3,"sub_chunk_id":0,"centroid_label":"revenue","agreed_value":143100000000.0,"count":3,"chunk":"Brian Olsavsky: Thanks, Andy. Overall, we saw a strong performance in the third quarter. Worldwide revenue was $143.1 billion, representing an increase of 11% year-over-year, excluding the impact of foreign exchange and approximately $100 million above the top end of our guidance range. We saw our highest quarterly worldwide operating income ever which was $11.2 billion for the quarter, an increase of $8.7 billion year-over-year from $2.7 billion above the high end of our guidance range. North America revenue was $87.9 billion, an increase of 11% year-over-year. And international revenue was $32.1 billion, an increase of 11% year-over-year, excluding foreign exchange. During the quarter, we held our biggest Prime Day event ever with prime members purchasing more than 375 million items worldwide and saving more than $2.5 billion on millions of deals across the Amazon store. Outside of Prime Day, we continue to see strong demand across everyday essentials, including categories like beauty and health and personal care. From a customer behavior standpoint, we still see customers remaining cautious about price, trading down where they can and seeking out deals, coupled with lower spending on discretionary items. Building on the momentum from last quarter, we set another record for delivery speed. For the year-to-date period through the third quarter, we have delivered at the fastest speeds ever in the United States. These improvements in delivery speeds have been a key driver of growth and are resulting in increased purchase frequency by our Prime members. Third-party sellers grew at 18% year-over-year, excluding foreign exchange, primarily driven by selection expansion and growing adoption of our optional services for sellers, including Fulfillment by Amazon and paid account management and more. During the quarter, we hosted Amazon Accelerate, our annual seller conference, where we launched a number of new innovations and product developments for our sellers, including Supply Chain by Amazon. We also continue to see durable growth in advertising which grew 25% year-over-year, excluding foreign exchange, primarily driven by sponsored products as we lean into machine learning to improve the relevancy of the ads we show our customers and enhance our measurement capabilities on behalf of advertisers. We have seen strong improvement in our profitability. North America operating income was $4.3 billion, an increase of $4.7 billion year-over-year, resulting in an operating margin of 4.9%, up 100 basis points quarter-over-quarter. Since North America operating margins bottomed out in Q1 of 2022, we have now seen 6 consecutive quarters of improvement, resulting in a cumulative improvement of over 700 basis points over these past 6 quarters. The third quarter marked the second full quarter of regionalization within the U.S. and we're pleased with the early results. Regionalization has allowed us to simplify the network by reducing the number of line-haul lanes, increasing volume within existing line-haul lanes and adding more direct fulfillment center to delivery station connections. We have also been focused on optimizing inventory placement in a new regionalized network which when coupled with the simplification mentioned earlier, is helping contribute to an overall reduction in cost to serve. Additionally, in the quarter, we saw benefits from lower inflation, primarily within line haul, ocean and rail shipping rates which were partially offset by higher fuel prices. While we are encouraged by the improvements in operating profit, we still see a lot of opportunity in front of us. In international, we were closer to breakeven during the quarter with an operating loss of $95 million. This was an improvement of $2.4 billion year-over-year. This improvement was primarily driven by lowering our cost to serve through higher productivity, decreased inflationary pressures and improvements in leverage across our established and emerging international countries as we continue to focus on customer inputs and improve efficiencies within our operations. Moving to AWS; revenues were $23.1 billion, an increase of 12% year-over-year. On a quarter-over-quarter basis, we added more than $900 million of revenue in AWS as customers are continuing to shift their focus towards driving innovation and bringing new workloads to the cloud. Similar to what we shared last quarter, while optimization still remain a headwind, we've seen the rate of new cost optimization slowdown in AWS and we are encouraged by the strength of our customer pipeline. Customers are excited about our approach to generative AI, with several new announcements made during the quarter, including a strategic collaboration with Anthropic, opening Amazon Bedrock up to general availability, adding Meta's Llama 2 model to Bedrock in the near future and new customization capabilities of CodeWhisperer. AWS remains a clear cloud infrastructure leader with a significant leadership position in the number of customers, the size of our partner ecosystem, our breadth of functionality and the strongest operational performance in the industry. When we look at the fundamentals of the business, we believe we are in good position to drive future growth as the rates of cost optimization slow down. AWS operating income was $7 billion, an increase of $1.6 billion year-over-year. Our operating margin for the quarter was 30.3%. This is an improvement of approximately 600 basis points quarter-over-quarter, primarily driven by increased leverage on our head count costs. Shifting to free cash flow. On a trailing 12-month basis, free cash flow adjusted for finance leases was $20.2 billion, an improvement of $41.7 billion year-over-year. The largest driver of the improvement in free cash flow is our increased operating income which we're seeing across all 3 of our segments. Key drivers of this improvement include reductions in our cost to serve, continued advertising growth and improved leverage on our fixed costs. We are also seeing improvements in working capital, notably with our inventory efficiency as we improve our inventory placement. Now, let's turn to our capital investments. We define our capital investments as a combination of CapEx plus equipment finance leases. These investments were $50 billion for the trailing 12-month period ended September 30, down from $60 billion in the comparable prior year period. For the full year 2023, we expect capital investments to be approximately $50 billion compared to $59 billion in 2022. We expect fulfillment and transportation CapEx to be down year-over-year, partially offset by increased infrastructure CapEx to support growth of our AWS business, including additional investments related to generative AI and large language model efforts. As we head into the fourth quarter, we are ready to make this a great holiday season for our customers. Looking at our operations network, our inventory is the best position it's ever been heading into the holiday season, enabling us to serve customers with fast delivery speeds from their local regions. We continue to believe putting customers first is the only reliable way to create lasting value for our shareholders. With that, let's move on to questions.","evidence_gemma_new":"revenue year-over-year","evidence_llama_3_3":"revenue year-over-year","evidence_qwen_3_30b":"revenue 11% year-over-year","gemma_new_max":143100000000.0,"gemma_new_min":143100000000.0,"llama_3_3_max":143100000000.0,"llama_3_3_min":143100000000.0,"qwen_3_30b_max":143100000000.0,"qwen_3_30b_min":143100000000.0}
{"symbol":"AMZN","year":2023,"quarter":4,"date":"2023-Q4","chunk_id":2,"sub_chunk_id":0,"centroid_label":"revenue","agreed_value":170000000000.0,"count":2,"chunk":"Andrew Jassy: Thanks, Dave. Today we\u2019re reporting $170 billion in revenue, up 13% year-over-year excluding the impact of foreign exchange rates, $13.2 billion in operating income, up 383% year-over-year, or $10.5 billion and $35.5 billion in trailing 12-month free cash flow adjusted for equipment finance leases, up $48.3 billion year-over-year. While we've made meaningful progress in our financial measures, what we're most pleased about is the continued customer experience improvements across our businesses. These results represent a lot of invention, collaboration, discipline, execution, adjusting and reimagining from teams across Amazon. Looking back at Q4, I'll start with our stores business where customers responded to our continued focus on selection price and convenience. We continue to have the broadest retail selection with hundreds and millions of products available and added tens of millions of new items last year alone, including fashion selection from Coach, Victoria's Secrets Fashion, Pit Viper, and Beyonce\u2019s Renaissance to our Merge to cosmetics from Lancome, Urban Decay, cosmetics and No Beauty by Vanessa Hudgens, to consumer technology and services from Boost, Infinite, and Woop to homewares for Martha Stewart. Being sharp on price is always important. But particularly in an uncertain economy where customers are careful about how much they're spending. We kicked off the holiday season with Prime Big Deal Days, an exclusive event for Prime members to provide an early start on holiday shopping. This was followed by our extended Black Friday and Cyber Monday holiday shopping event, which was open to all customers and ended up being our largest event ever. These events also helped attract new customers and Prime members. Throughout the quarter customers saved nearly $10 billion across millions of deals and coupons almost 70% more than last year. In addition to offering great deals, we continue to improve delivery speeds. In 2023, Amazon delivered to Prime members at the fastest speeds ever, with more than 7 billion items arriving same or next day including more than 4 billion in the U.S and more than 2 billion in Europe. In the U.S this result is the combination of two things, one is the benefit of regionalization, where we\u2019ve architected the network to store items closer to customers. The other is the expansion of same day facilities, where in the U.S in the fourth quarter, we increase the number of items delivered the same day or overnight by more than 65% year-over-year. As we're able to get customers items this fast. It increases the number of occasions that customers choose Amazon to fulfill their shopping needs. And we can see that in all sorts of areas including how fast or everyday essentials business is growing. Our regionalization efforts have also brought transportation distances down which has helped lower our cost to serve. In 2023, for the first time since 2018, we've reduced our cost-to-serve on a per unit basis globally. In the U.S alone, cost-to-serve was down by more than $0.45 per unit compared to the prior year. Lowering cost-to-serve allows us not only to invest in speed improvements, but also afford adding more selection at lower average selling prices or ASPs and profitably. We have a saying, that it's not hard to lower prices, it's hard to be able to afford lowering prices. The same is true with adding selection, it's not hard to add lower ASPs selection, it's hard to be able to afford offering lower ASPs selection and still like the economics. Like improving speed, adding selection puts us in the consideration set for more purchases. As we look toward 2024 and beyond, we're not done lowering our cost to serve. We've challenged every closely held belief for our fulfillment network and reevaluated every part of it, and found several areas where we believe we can lower costs while also delivering faster for customers. Our inbound fulfillment architecture and resulting inventory placement are areas of focus in 2024, and we have optimism there's more upside for us. Alongside our stores business, our advertising growth remains strong, up 26% year-over-year, which is primarily driven by our sponsored ads. We've recently added Sponsored TV to this offering in the U.S. a self-service solution for brands to create streaming TV campaigns with no minimum spend, putting this advertising within reach of any business. While still early days, streaming TV advertising continues to grow quickly. Brands are using our capabilities to reach engage viewers on Twitch, Freevee, Fire TV and Prime Video shows and movies, which just launched in the U.S., as well as Thursday Night Football. Shifting to AWS. Revenue in the quarter grew 13% year-over-year in Q4 versus 12% year-over-year in Q3. And we're now approaching an annualized revenue run rate of $100 billion. We watched the incremental revenue added each quarter and in Q4 AWS added more than $1.1 billion an incremental quarter-over-quarter revenue, which on an FX neutral basis is more than any other cloud provider as far as we can tell. While cost optimization continued to attenuate larger new deals also accelerated, evidenced by recently inked agreements with Salesforce, BMW, NVIDIA, LG, Hyundai, Merck, MUFG, Axiata, Cafe, BYD, Arcore, Amgen, and SAIC. Our customer pipeline remains strong, as existing customers are renewing larger commitments over longer periods and migrations are growing. 2023 also was a very significant year of delivery and customer trial for generative AI or Gen AI in AWS. You may remember that we've explained our vision of three distinct layers in the Gen AI stack, each of which is gigantic, and each of which were deeply investing. At the bottom layer, where customers who are building their own models run training and inference on compute with a chip is the key component in that compute, we offer the most expansive collection of compute instances with NVIDIA chips. We also have customers who would like us to push the price performance envelope on AI chips, just as we have with Graviton for generalized CPU chips, which are 40% more price performance than other X86 alternatives. And as a result, we built custom AI training chips, named Trainium, and inference chips, name Inferentia. At re:Invent we announced Trainium2, which offers four times faster training performance and three times more memory capacity versus the first generation of Trainium, enabling advantageous price performance versus alternatives. We already have several customers using our AI chips including Anthropic, Airbnb, Hugging Face, Qualtrics, Ricoh and Snap. In the middle layer where companies seek to leverage an existing large language model, customize it with their own data, and leverage AWS\u2019 security and other features all as a managed service. We've launched Bedrock which is off to a very strong start with many 1,000s of customers using the service after just a few months. The team continues to rapidly iterate on Bedrock, recently delivering capabilities including guardrails to safeguard what questions applications will answer, knowledge bases to expand models knowledge base with retrieval augmented generation or RAG and real time queries, agents to complete multi step tasks and fine tuning to keep teaching and refining models. All which will help customers applications be higher quality and have better customer experiences. We also added new models from Anthropic, Cohere, Meta with Llama2, Stability AI and our own Amazon Titan family of LLMs. What customers have learned at this early stage of Gen AI, is it there's meaningful iteration required in building a production Gen AI application with the requisite enterprise quality at the cost and latency needed. Customers don't want only one model, they want different models for different types of applications, and different size models for different applications. Customers want a service that makes this experimenting and iterating simple and this is what Bedrock does, which is why so many customers are excited about it. And to top layer of the stack is the application layer, one of the very best early gen AI applications is a coded companion. At Reinvent, we launched Amazon Q, which is an expert on AWS, writes code, debugs code, tests code, does translations like moving from an old version of Java to a new one and can also query customer\u2019s various data repositories, like Internet, Wickes or from over 40 different popular connectors to data in Salesforce, Amazon S3, ServiceNow, Slack, Elastin or Zendesk, among others. And answer questions, summarize this data, carry on a coherent conversation and take action. It was designed with security and privacy in mind from the start, making it easier for organizations to use generative AI safely. Q is the most capable work assistant and another service that customers are very excited about. By the way, don't underestimate the point about Bedrock and Q inheriting the same security and access control as customers get with AWS. Security is a big deal, an important differentiator between cloud providers. The data in these models is some of the company's most sensitive and critical assets. With AWS' advantaged security capabilities and track record relative to other providers, we continue to see momentum around customers wanting to do their long-term Gen AI work with AWS. We're building dozens of Gen AI apps across Amazon's businesses, several of which have launched and others of which are in development. This morning, we launched Rufus, an expert shopping assistant trained on our product and customer data that represents a significant customer experience improvement for Discovery. Rufus lets customers ask shopping journey questions like what is the best golf ball to use for better spin control or which are the best cold weather rain jackets and get thoughtful explanations for what matters and recommendations on products. You can carry on a conversation with Rufus on other related or unrelated questions and retains context coherently. You can sift through our rich product pages by asking Rufus questions on any product features and will return answers quickly. We're at the start of what Rufus will do with further personalization and expansion coming, but we're excited about how it will make discovery even easier on Amazon. Gen AI is and will continue to be an area of pervasive focus and investment across Amazon, primarily because there are a few initiatives, if any, that give us the chance to reinvent so many of our customer experiences and processes, and we believe it will ultimately drive tens of billions of dollars of revenue for Amazon over the next several years. In addition to our stores and AWS businesses, we continue to make progress on newer business investments that have the potential to be important to customers and Amazon long term. Touching on two of them. In October, we had a major milestone in our journey to commercialize Project Kuiper, which is our low earth orbit satellite initiative that aims to provide broadband connectivity to the 400 million to 500 million households who don't have it today. We launched two end-to-end prototype satellites into space and successfully validated all key systems and subsystems, made a 2-way video call, streamed a Prime Video movie in Ultra HD 4K and made an Amazon purchase over our end-to-end communication network. It's rare to be able to exercise all these elements in an initial launch like this. We're on track to launch our first production satellite in the first half of 2024 and started beta testing in the second half of the year. We've still got a long way to go, but are encouraged by our progress. During the quarter, we also completed our second season of Thursday Night Football, which was a rousing success by all accounts. The customer experience continued to improve as our talent, production, streaming quality, analytics, unique AI features like Prime Vision and defensive alerts, all took big leaps forward on top of the very good start last year. We launched a new NFL tradition with the inaugural Black Friday football game and our continuous innovation resonated with viewers as the number of people watching increased 24% year-over-year and with advertisers as we made dramatic year-over-year gains in ad sales. We have increasing conviction that Prime Video can be a large and profitable business on its own, and we'll continue to invest in compelling exclusive content for Prime members like Thursday Night Football, Go To The Rings, Reacher, Mr. & Mrs. Smith, Citadel and more. And with the ads in Prime Video, we'll be able to continue investing meaningfully in content over time. I'll close by reiterating that 2023 was a really good year. I'm grateful to all of our teams who delivered on behalf of customers. Yet I think every one of us at Amazon believes this is just the start of what's possible. We have a long way to go in every one of our businesses before we exhaust how we can make customers' lives better and easier, and there is considerable upside in each of the businesses in which we're investing. With that, I'll turn it over to Brian.","evidence_gemma_new":"revenue year-over-year","evidence_llama_3_3":null,"evidence_qwen_3_30b":"revenue 13% year-over-year","gemma_new_max":170000000000.0,"gemma_new_min":170000000000.0,"llama_3_3_max":null,"llama_3_3_min":null,"qwen_3_30b_max":170000000000.0,"qwen_3_30b_min":170000000000.0}
{"symbol":"AMZN","year":2024,"quarter":1,"date":"2024-Q1","chunk_id":2,"sub_chunk_id":0,"centroid_label":"revenue","agreed_value":143300000000.0,"count":3,"chunk":"Andrew Jassy: Thanks, Dave. Today, we're reporting $143.3 billion in revenue, up 13% year-over-year, excluding the impact from foreign exchange rates; $15.3 billion in operating income, up 221% year-over-year or $10.5 billion; and $48.8 billion in trailing 12-month free cash flow adjusted for equipment finance leases, up $53.2 billion year-over-year. We remain focused on driving better experiences for our customers while also delivering efficiency improvements. Our financial results are an encouraging reminder of the progress we're making. Starting with our stores business, despite having hundreds of millions of items and the broadest selection available, we remain intensely focused on adding even more selection. One way is to continue adding brands we know our customers want. For instance, in the U.S., we recently welcomed Clinique and 2 Gen Z fashion favorites, Parade and Cider, and announced a collaboration with Hardly Ever Worn It in Europe to offer customers pre-owned items from luxury brands. Another way to drive selection is to make it easier for our third-party sellers to add their products to our store. We've recently launched a new generative AI tool that enables sellers to simply provide a URL to their own website, and we automatically create high-quality product detail pages on Amazon. Already, over 100,000 of our selling partners have used one or more of our gen AI tools. We remain focused on making sure we're offering everyday low prices, which we know is even more important to our customers in this uncertain economic environment. As our results show, customers are shopping but remain cautious, trading down on price when they can and seeking out deals. In Q1, we helped customers save with shopping events worldwide, including our first big spring sale in Canada and the U.S. We also held spring deal days in Europe and our Ramadan event in Egypt, Saudi Arabia, and the UAE. Delivery speed really matters to customers, and we've continued to get faster while improving our safety performance. In this past Q1, we delivered to Prime members at our fastest speeds ever. In March, across our top 60 largest U.S. metro areas, nearly 60% of Prime members orders arrived the same or next day. And globally, in cities like Toronto, London, and Tokyo, about 3 out of 4 items were delivered the same or next day. Faster delivery times have another important effect. As we get items to customers this fast, customers choose Amazon to fulfill their shopping needs more frequently, and we can see the results in various areas, including how fast our Everyday Essentials business is growing and the continued increase in Prime member purchase frequency and total spend with us. Over the past year, we've talked about how our regionalization efforts have helped lower our cost to serve. We've continued to inspect our fulfillment network for additional opportunities and are working on several areas where we believe we can lower costs even further while also improving customer experience. One example of this is our work to increase the consolidation of units into fewer boxes. As we further optimize our network, we've seen an increase in the number of units delivered per box, an important driver for reducing our cost. When we're able to consolidate more units into a box, it results in fewer boxes and deliveries, a better customer experience, reduces our cost to serve, and lowers our carbon impact. Another prominent example is our efforts to revamp our U.S. inbound fulfillment architecture to allow for better inventory placement closer to our customers. This will be an iterative process throughout the year as we work with sellers and retail partners, and teams are making good progress on their plans. Advertising performance remained strong, with ad sales up 24% year-over-year, excluding the impact of foreign exchange. The strength in advertising was primarily driven by sponsored products, supported by continued improvements in relevancy and measurement capabilities for advertisers. We still see significant opportunity ahead in our sponsored products as well as areas where we're just getting started like Prime Video ads. Prime Video ads offers brands value as we can better link the impact of streaming TV advertising to business outcomes like product sales or subscription sign-ups, whether the brands sell on Amazon or not. It's very early for streaming TV ads but we're encouraged by the early response. Moving to AWS. Year-over-year revenue growth accelerated to 17.2% in Q1, up from 13.2% in Q4. It's useful to remember that year-over-year percentages are only relevant relative to the total base from which you start. And given our much larger infrastructure cloud computing base, at this growth rate, we see more absolute dollar growth again quarter-over-quarter in AWS than we can see elsewhere. We're seeing a few trends right now. First, companies have largely completed the lion's share of their cost optimization and turned their attention to newer initiatives. Before the pandemic, companies were marching to modernize their infrastructure, moving from on-premises infrastructure to the cloud to save money, innovated at a more rapid rate, and to drive more developer productivity. The pandemic and uncertain economy that followed distracted from that momentum, but it's picking up again. Companies are pursuing this relatively low-hanging fruit in modernizing their infrastructure. And with the broadest functionality by a fair bit, deepest partner ecosystem and strong security and operational performance, AWS continues to be their strong partner of choice. Our AWS customers are also quite excited about leveraging gen AI to change the customer experiences and businesses. We see considerable momentum on the AI front where we've accumulated a multibillion-dollar revenue run rate already. You heard me talk about our approach before, and we continue to add capabilities at all 3 layers of the gen AI stack. At the bottom layer, which is for developers and companies building models themselves, we see excitement about our offerings. We have the broadest selection of NVIDIA compute instances around, but demand for our custom silicon, Trainium and Inferentia, is quite high given its favorable price performance benefits relative to available alternatives. Larger quantities of our latest generation Trainium2 is coming in the second half of 2024 and early 2025. Companies are also starting to talk about the eye-opening results they're getting using SageMaker. Our managed end-to-end service has been a game changer for developers in preparing their data for AI, managing experiments, training models faster, lowering inference latency, and improving developer productivity. Perplexity.ai trains models 40% faster than SageMaker. Workday reduces inference latency by 80% with SageMaker, and NatWest reduces its time to value for AI from 12 to 18 months to under 7 months using SageMaker. This change is how challenging it is to build your own models, and we see an increasing number of model builders standardizing on SageMaker. The middle layer of the stack is for developers and companies who prefer not to build models from scratch but rather seek to leverage an existing large language model, or LLM, customize it with their own data and have the easiest and best features available to deploy secure high-quality, low-latency, cost-effective production gen AI apps. This is why we built Amazon Bedrock, which not only has the broadest selection of LLMs available to customers but also unusually compelling model evaluation, retrieval augmented generation, or RAG, to expand model's knowledge base, guardrails to safeguard what questions applications will answer, agents to complete multistep tasks, and fine-tuning to keep teaching and refining models. Bedrock already has tens of thousands of customers, including adidas, New York Stock Exchange, Pfizer, Ryanair and Toyota. In the last few months, Bedrock's added Anthropic's Claude 3 models, the best-performing models in the planet right now; Meta's Llama 3 models; Mistral's various models, Cohere's new models and new first-party Amazon Titan models. A week ago, Bedrock launched a series of other features, but perhaps most importantly, Custom Model Import. Custom Model Import is a sneaky big launch as it satisfies a customer request we've heard frequently and that nobody has yet met. As increasingly more customers are using SageMaker to build their models, they're wanting to take advantage of all the Bedrock features I mentioned earlier that make it so much easier to build high-quality production-grade gen AI apps. Bedrock Custom Model Import makes it simple to import models from SageMaker or elsewhere into Bedrock before deploying their applications. Customers are excited about this, and as more companies find they're employing a mix of custom-built models along with leveraging existing LLMs, the prospect of these 2 linchpin services in SageMaker and Bedrock working well together is quite appealing. The top of the stack are the gen AI applications being built. And today, we announced the general availability of Amazon Q, the most capable generative AI-powered assistant for software development and leveraging company's internal data. On the software development side, Q doesn't just generate code. It also tests code, debugs coding conflicts, and transforms code from one form to another. Today, developers can save months using Q to move from older versions of Java to newer, more secure and capable ones. In the near future, Q will help developers transform their .NET code as well, helping them move from Windows to Linux. Q also has a unique capability called Agents, which can autonomously perform a range of tasks, everything from implementing features, documenting, and refactoring code to performing software upgrades. Developers can simply ask Amazon Q to implement an application feature such as asking it to create an add to favorites feature in a social sharing app, and the agent will analyze their existing application code and generate a step-by-step implementation plan, including code changes across multiple files and suggested new functions. Developers can collaborate with the agent to review and iterate on the plan, and then the agent implements it, connecting multiple steps together and applying updates across multiple files, code blocks and test suites. It's quite handy. On the internal data side, most companies have large troves of internally relevant data that resides in wikis, Internet pages, Salesforce, storage repositories like Amazon S3 and a bevy of other data stores and SaaS apps that are hard to access. It makes answering straightforward questions about company policies, products, business results, code, people, and many other topics hard and frustrating. Q makes this much simpler. You can point Q at all of your enterprise data repositories and it will search all this data, summarize logically, analyze trends, engage in dialogue with customers about this data. We also introduced today a powerful new capability called Q Apps, which lets employees describe a natural language what apps they want to build on top of this internal data and Q Apps will quickly generate that app. This is going to make it so much easier for internal teams to build useful apps from their own data. Q is not only the most functionally capable AI-powered assistant for software development and data but also setting the standard for performance. Q has the highest-known score and acceptance rate for code suggestions, outperforms all other publicly benchmarkable competitors and catching security vulnerabilities, and leads all software development assistants on connecting multiple steps together and applying automatic actions. Customers are gravitating to Q, and we already see companies like Brightcove, British Telecom, Datadog, GitLab, GoDaddy, National Australia Bank, NCS, Netsmart, Slam, Smartsheet, Sun Life, Tata Consultancy Services, Toyota, and Wiz using Q, and we've only been in beta until today. I'd also caution folks not to overlook the security and operational performance elements of these gen AI services. It's less sexy but critically important. Most companies care deeply about the privacy of the data in their AI applications and the reliability of their training and production apps. If you've been paying attention to what's been happening in the last year or so, you can see there are big differences between providers on these dimensions. AWS has a meaningful edge, which is adding to the number of companies moving their AI focus to AWS. We expect the combination of AWS' reaccelerating growth and high demand for gen AI to meaningfully increase year-over-year capital expenditures in 2024, which given the way the AWS business model works is a positive sign of the future growth. The more demand AWS has, the more we have to procure new data centers, power and hardware. And as a reminder, we spend most of the capital upfront. But as you've seen over the last several years, we make that up in operating margin and free cash flow down the road as demand steadies out. And we don't spend the capital without very clear signals that we can monetize it this way. We remain very bullish on AWS. We're at $100 billion-plus annualized revenue run rate, yet 85% or more of the global IT spend remains on-premises. And this is before you even calculate gen AI, most of which will be created over the next 10 to 20 years from scratch and on the cloud. There is a very large opportunity in front of us. We also continue to make strong progress on our newer investments. Our emerging international stores are growing and moving towards profitability. Our third-party logistics business offering services like Buy with Prime, Amazon shipping and multichannel fulfillment continues to grow well. We just launched a Prime delivery grocery benefit that lets customers receive free unlimited grocery delivery for just $9.99 a month, which is great value and customers are responding accordingly. Later this year in Manhattan, we're launching a new smaller Whole Foods market concept called Whole Foods Market Daily Shops. Prime Video continues to produce compelling content, with Fallout being our latest big hit on the heels of a very successful Road House movie, with strong customer engagement in our original and partner content. Our health services business is growing robustly as customers are loving our pharmacy customer experience, and we've launched same-day delivery of prescription medications to customers in 8 cities, including Los Angeles and New York City, with plans to expand to more than a dozen cities by the end of the year, with customers now getting first fill medications 75% faster year-over-year nationwide. And Kuiper is getting closer to having its production satellites in space and entering our commercial beta. There's a lot of invention happening across our business, and I'm super grateful to all our employees for their hard work and ingenuity. I'll close by sharing that I'm enthusiastic about how we started this year. We have a lot of opportunity in front of us in every one of our businesses to make our customers' lives better and easier. With that, I'll turn it over to Brian for a financial update.","evidence_gemma_new":"revenue year-over-year","evidence_llama_3_3":"Amazon revenue","evidence_qwen_3_30b":"revenue year-over-year","gemma_new_max":143300000000.0,"gemma_new_min":143300000000.0,"llama_3_3_max":143300000000.0,"llama_3_3_min":143300000000.0,"qwen_3_30b_max":143300000000.0,"qwen_3_30b_min":143300000000.0}
{"symbol":"AMZN","year":2024,"quarter":1,"date":"2024-Q1","chunk_id":3,"sub_chunk_id":0,"centroid_label":"revenue","agreed_value":700000000.0,"count":2,"chunk":"Brian Olsavsky: Thanks, Andy. Starting with our top line financial results. Worldwide revenue was $143.3 billion, representing a 13% increase year-over-year, excluding the impact of foreign exchange and near the top end of our guidance range. I'd like to highlight a couple of points to help you interpret our growth rates. First, we saw an impact from leap year in Q1, which added approximately 120 basis points to the year-over-year quarterly revenue growth rate. Second, while I typically talk about growth rates, excluding the impact of year-over-year changes in foreign exchange, we did see an unfavorable impact from global currencies weakening against the U.S. dollar, more than we had planned in Q1. This led to a $700 million or 50 basis point headwind to revenue relative to what we guided. Excluding this FX headwind, we would have exceeded the top end of our guidance range. Worldwide operating income was $15.3 billion, which was our highest quarterly income ever, and it was $3.3 billion above the high end of our guidance range. This was driven by strong operational performance across all 3 reportable segments and better-than-expected operating leverage, including lower cost to serve. The impact on operating income from our Q1 FX rate headwind was negligible. I'll speak more to our profitability trends in a moment. In the North America segment, first quarter revenue was $86.3 billion, an increase of 12% year-over-year. In the international segment, revenue was $31.9 billion, an increase of 11% year-over-year, excluding the impact of foreign exchange.","evidence_gemma_new":"revenue","evidence_llama_3_3":"revenue","evidence_qwen_3_30b":null,"gemma_new_max":700000000.0,"gemma_new_min":700000000.0,"llama_3_3_max":700000000.0,"llama_3_3_min":700000000.0,"qwen_3_30b_max":null,"qwen_3_30b_min":null}
{"symbol":"AMZN","year":2024,"quarter":2,"date":"2024-Q2","chunk_id":2,"sub_chunk_id":0,"centroid_label":"revenue","agreed_value":148000000000.0,"count":2,"chunk":"Andy Jassy : Thanks, Dave. Today, we're reporting $148 billion in revenue, up 11% year-over-year, excluding the impact from foreign exchange rates. Operating income was $14.7 billion, up 91% year-over-year, and trailing 12-month free cash flow adjusted for equipment finance leases was $51.4 billion, up 664% or $44.7 billion year-over-year. As I think about what matters to customers long-term and, therefore, to Amazon, there's a lot to like about what we're seeing. Starting with AWS, year-over-year revenue growth accelerated again from 17.2% in Q1 to 18.8% in Q2. We're continuing to see three macro trends drive AWS growth. First, companies have completed the significant majority of their cost optimization efforts and are focused again on new efforts. Second, companies are spending their energy again on modernizing their infrastructure and moving from on-premises infrastructure to the cloud. This modernization enables builders to save money, innovate at a more rapid clip, and drive productivity in most companies' scarcest resources, developers. This is the flip I've talked about in the past, where the vast majority of global IT spend today is on-premises, and we expect that to keep inverting over time. With the broadest functionality, the strongest security and operational performance, and the deepest partner ecosystem, AWS continues to be customers' partner of choice and the biggest beneficiary of this flip from on-premises to the cloud. And third, builders and companies of all sizes are excited about leveraging AI. Our AI business continues to grow dramatically with a multi-billion dollar revenue run rate despite it being such early days, but we can see in our results and conversations with customers that our unique approach and offerings are resonating with customers. At the heart of this strategy is a firmly held belief, which we've had since the beginning of AWS, that there is not one tool to rule the world. People don't want just one database option or one analytics choice or one container type. Developers and companies not only reject it, but are suspicious of it. They want multiple options for flexibility and to use the best tool for each job to be done. The same is true in AI. You saw this several years ago when some companies tried to argue that TensorFlow would be the only machine learning framework that mattered, and then PyTorch and others overtook it. The same one model or one-chip approach dominated the earliest moments of the generative AI boom, but we have a lot of data to suggest this is not what customers want here either. And our AWS team is determined to deliver choice and options for customers. You can see this philosophy in the primitive building blocks we're building at all three layers of the Gen AI stack. At the bottom layer, which is for those building generative AI models themselves, the cost to compute for training and inference is critical, especially as models get to scale. We have a deep partnership with NVIDIA and the broadest selection of NVIDIA instances available, but we've heard loud and clear from customers that they relish better price performance. It's why we've invested in our own custom silicon in Trainium for training and Inferentia for inference. And the second versions of those chips, with Trainium coming later this year, are very compelling in price performance. We're seeing significant demand for these chips. These model builders also desire services that make it much easier to manage the data, construct the models, experiment, deploy to production, and achieve high-quality performance, all while saving considerable time and money. That's what Amazon SageMaker does so well, including its most recently launched feature called HyperPods that changes the game and networking performance for large models. And we're increasingly seeing model builders standardized on SageMaker. While many teams will build their own models, lots of others will leverage somebody else's frontier model, customize it with their own data and seek a service that provides broad model selection and great generative AI capabilities. This is what we think of as the middle layer, what Amazon Bedrock does and why Bedrock has tens of thousands of companies using it already. Bedrock has the largest selection of models, the best generative AI capabilities in critical areas like model evaluation, guardrails, RAG and agenting, and then makes it easy to switch between different model types and model sizes. Bedrock has recently added Anthropic's Claude 3.5 models, which are the best performing models on the planet. Meta's new Llama 3.1 models and Mistral's new Large two models. And Lama's and Mistral's impressive performance benchmarks in open nature are quite compelling to our customers as well. At the application or top layer, we're continuing to see strong adoption of Amazon Q, the most capable generative AI powered assistant for software development and to leverage your own data. Q has the highest known score and acceptance rate for code suggestions, but it does a lot more than provide code suggestions. It tests code, outperforms all other publicly benchmarkable competitors on catching security vulnerabilities and leads all software development assistants on connecting multiple steps together and applying automatic action. It also saves development teams time and money on the muck nobody likes to talk about. For instance, when companies decide to upgrade from one version of a framework to another, it takes development teams many months, sometimes years, burning valuable opportunity costs and churning developers who hate this tedious, though important work. With Q's code transformation capabilities, Amazon has migrated over 30,000 Java JDK applications in a few months, saving the company $260 million and 4,500 developer years compared to what it would have otherwise cost. That's a game changer. And think about how this Q transformation capability might evolve to address other elusive but highly desired migrations. During the past 18 months, AWS has launched more than twice as many machine learning and generative AI features into general availability than all the other major cloud providers combined. This team is cooking, but we're not close to being done adding capabilities for our customer's usage base. For perspective, we've added over $2 billion in advertising revenue year-over-year and generated more than $50 billion in revenue in the trailing 12 months. Sponsored ads drive the majority of our advertising revenue today and we see further opportunity there. Even with this growth, it's important to realize we're at the very beginning of what's possible in our video advertising. In May, we made our first appearance at the upfronts and were encouraged by the agency and advertiser feedback on the differentiated value we offer across our content, reach, signals, and ad tech. With ads and prime video, the exciting opportunity for brands is the ability to directly connect advertising that's traditionally been focused on driving awareness, as is the case for TV, to a business outcome, like product sales or subscription signups. We're able to do that through our measurement and ad tech, so brands can continually improve the relevance and performance of their ads. While ads have become the norm in streaming video, we aim to have meaningfully fewer ads than linear TV and other streaming TV providers. And of course, for customers preferring an ad-free experience, we offer that option for an additional $2.99 a month. In our stores business, we saw growth of 9% year-over-year in the North America segment and 10% year-over-year in the international segment. A few notes on our North America revenue growth rate. First, last quarter's leap day added about 100 basis points of year-over-year growth. Second, we're seeing lower average selling prices, or ASPs, right now because customers continue to trade down on price when they can. More discretionary higher ticket items, like computers or electronics or TVs, are growing faster for us than what we see elsewhere in the industry, but more slowly than we see in a more robust economy. And our continued faster delivery speed is earning us more of our customers' everyday essentials business. Third, our seller fees are a little lower than expected given the behavior changes we've seen from our latest fee changes. While some of these issues compress short-term revenue, we generally like these trends. While consumers are being careful on price, our North America unit growth is meaningfully outpacing our sales growth as our continued work on selection, low prices, and delivery is resonating. So far this year, our speed of delivery for prime customers has been faster than ever before, with more than 5 billion units arriving the same day or next day. As more customers experience our fast delivery, they look to Amazon for more of their shopping needs, and the continued acceleration of our everyday essentials business is an example of this phenomenon. On seller fees, lowering apparel fees has spurred substantial year-over-year unit growth in apparel. And the incentive we've given sellers to send their items to multiple Amazon inbound facilities so they can save money where they save us effort and money is getting more traction than we even hoped. These collective developments will benefit customers in the form of better selection, lower prices, and faster delivery speed. There's no shortage of ideas aimed in improving the experience for stores' customers. For instance, we're adding even more value to Prime, recently introducing free restaurant delivery in many of our geos, expanding Amazon's PharmacyRx pass to Medicare members. This is a benefit that gives subscribers all you can consume access to the most common generic medications for just $5 a month, and offering a grocery subscription to help save on grocery items when shopping our U.S. and UK fresh stores. As we pursue these initiatives, we remain focused on lowering our cost to serve. We have a number of opportunities to further reduce costs, including expanding our use of automation and robotics, further building out our same-day facility network, and regionalizing our inbound network. With more optimal inbound inventory placement, we expect to enable faster speeds, consolidate more orders in one box, and reduce inventory transfers once items reach a fulfillment center. These cost improvements won't happen in one quarter or one fell swoop. They take technology and process innovation with a lot of outstanding execution, but we see a path to continuing to lower our cost to serve, which as we've discussed in the past, has very meaningful value for customers in our business. As we lower our cost to serve, we can add more low ASP selection that we can support economically, which coupled with our fast delivery, puts Amazon in the consideration set for increasingly more shopping needs for customers. A few other comments about areas in which we're investing. We remain very bullish on the medium to long-term impact of AI in every business we know and can imagine. The progress may not be one straight line for companies. Generative AI especially is quite iterative, and companies have to build muscle around the best way to solve actual customer problems. But we see so much potential to change customer experiences. We see it in how our generative AI-powered shopping assistant Rufus is helping customers make better shopping decisions. We see it in how our AI features that allow customers to simulate trying apparel items or changing the buying experience. We see it in how our generative AI listing tool is enabling sellers to create new selection with a line or two of text versus the many forms previously required. We see it in our fulfillment centers across North America where we're rolling out Project Private Investigator, which uses a combination of generative AI and computer vision to uncover defects before products reach customers. We see it in how our generative AI is helping our customers discover new music and video. We see it in how it's making Alexa smarter. And we see it in how our custom silicon and services like SageMaker and Bedrock are helping both our internal teams and many thousands of external companies reinvent their customer experiences and businesses. We are investing a lot across the board in AI, and we'll keep doing so as we like what we're seeing and what we see ahead of us. We also continue to like the progress in Prime Video. Our storytelling is resonating with our hundreds of millions of monthly viewers worldwide, and the 62 Emmy nominations Amazon MGM Studios recently received is another supporting data point. We recently debuted titles like Fallout, the second most watched original title ever for Prime Video, The Idea of You, which attracted nearly 50 million viewers worldwide in the first two weeks on Prime Video, and Season 4, The Boys, which reached number one on Prime Video in 165 countries in its opening two weeks. And we continue to see momentum in live sports. We recently announced 11-year landmark deals with the NBA and the WNBA. When combined with our original films and shows, partner streaming services, licensed content, and rent or buy titles, Prime Video continues to evolve into the best destination for streaming video. And for Project Kuiper, our low-Earth orbit satellite constellation, we're accelerating satellite manufacturing at our facility in Kirkland, Washington. We've announced a distribution agreement with Vrio, who distributes direct TV Latin America and Sky Brazil to offer Project Kuiper's satellite broadband network to residential customers across seven countries in South America, and we continue to feel significant demand for the service from enterprise and government entities. We expect to start shipping production satellites late this year and continue to believe this could be a very large business for us. I could go on, but we'll stop here. There's a lot to feel optimistic about over the next several years and the team collectively remains focused on continuing to invent and deliver for our customers in the business. With that, I'll turn it over to Brian for a financial update.","evidence_gemma_new":"revenue year-over-year","evidence_llama_3_3":"revenue year-over-year","evidence_qwen_3_30b":null,"gemma_new_max":148000000000.0,"gemma_new_min":148000000000.0,"llama_3_3_max":148000000000.0,"llama_3_3_min":148000000000.0,"qwen_3_30b_max":null,"qwen_3_30b_min":null}
{"symbol":"AMZN","year":2024,"quarter":3,"date":"2024-Q3","chunk_id":2,"sub_chunk_id":0,"centroid_label":"revenue","agreed_value":158900000000.0,"count":3,"chunk":"Andy Jassy: Thanks, Dave. Today, we're reporting $158.9 billion in revenue, up 11% year-over-year excluding the impact from foreign exchange rates. Operating income was $17.4 billion, up 56% year-over-year, and trailing 12-month free cash flow adjusted for equipment finance leases was $46.1 billion, up 128% or $25.9 billion year-over-year. As always, we're focused on making our customers' lives better and easier and thinking long term with respect to how we can keep helping customers and build a successful business to outlast all of us. In our stores business, we saw sales growth of 9% year-over-year in the North America segment and 12% year-over-year in the international segment. Our team continues to focus on the inputs that matter most to customers, really broad selection, low prices, fast and free delivery, and a range of compelling Prime member benefits, including our recent additions of unlimited grocery delivery from Whole Foods Market, Amazon Fresh, and local third-party grocery partners for $9.99 a month and fuel savings of $0.10 a gallon at bp, Amoco, and ampm stations in the US. At a time when consumers are being careful about how much they spend, we're continuing to lower prices and ship even more quickly, and we can see this resonating with customers as our unit growth continues to be strong and outpace even our revenue growth. In the last few months, we've hosted our largest and most successful Prime Day and Prime Big Deal Days ever and helped customers save over $5 billion across more than 50 million deals. And for the second year in a row, we are on track to deliver our fastest speeds ever for Prime members globally. We also continue to focus on lowering our cost to serve and are pursuing several initiatives that we believe will have meaningful long-term impact in this area. First, we continue to believe there are more gains on top of what we've captured thus far in outbound regionalization and getting more items closer to end consumers. As such, we're in the process of significantly changing the way we inbound items into our fulfillment network and subsequently spread them to our regional fulfillment nodes. In the last few months, we've made hundreds of changes to our US inbound network and opened more than 15 inbound buildings. While still relatively early in this re-architecture, we've already improved our ability to spread inventory across our fulfillment centers by 25% year-over-year, allowing us to have more of the requisite items in fulfillment centers closest to the customer, so we can compile shipments and ship to customers even more quickly. As we scale and optimize this new design, we expect these changes will further improve inventory placement, offer faster delivery time, save transportation costs, and enable us to increase units shipped per box. Second, we continue to roll out same-day delivery facilities, which is not only the fastest way to get products to customers but also one of our lowest cost ways to deliver. Over 40 million customers this past quarter have had their orders delivered for free with same-day delivery, an increase of more than 25% year-over-year. And third, we continue to innovate in robotics to speed delivery, lower cost to serve, and further improve safety in our fulfillment network. We recently launched our 12th-generation fulfillment center design with the first building launching in Shreveport, Louisiana. This is the first facility that incorporates our newest robotics inventions that simplify stowing, picking, packing, and shipping processes. Thus far, this new design reduces fulfillment processing time by up to 25%, increases the number of items we can offer for same-day or next-day delivery and is expected to drive a 25% improvement in our cost to serve during peak within this next generation facility. Though we believe we have more expansive automation and robotics than other retail peers, it's still early days in how much automation we expect in our fulfillment network. In advertising, we remain pleased with our progress, generating $14.3 billion of revenue in the quarter, 18.8% year-over-year growth. Our expansive reach, ability to service relevant offers to our customers, opportunity to engage customers from the top of the funnel to point of purchase, and leading capabilities around measuring outcomes at every touch point provide all types of brands with full funnel advertising at scale. With sponsored products, we're seeing meaningful growth on a very large base, and we see further opportunity in driving even better performance for advertisers by further improving the relevancy of the ads we show and by providing additional optimization controls. At the same time, some of our newer offerings are in their very early days. We're just entering our first broadcast season for Prime Video advertising, following a very strong showing at upfronts. And we're continuing to support brands of all sizes with our Generative AI-powered creative tools across display, video and audio, including our video generator that uses a single product image to curate custom AI-generated videos. While we're generating a lot of advertising revenue today, there remains considerable upside. AWS grew 19.1% year-over-year and now stands at a $110 billion annualized run rate. We've seen significant reacceleration of AWS growth for the last four quarters. With the broadest functionality, the strongest security and operational performance and the deepest partner community, AWS continues to be a customer's partner of choice. There are signs of this in every part of AWS's business. We see more enterprises growing their footprint in the cloud, evidenced in part by recent customer deals with the ANZ Banking Group, Booking.com, Capital One, Fast Retailing, Ita\u00fa Unibanco, National Australia Bank, Sony, T-Mobile, and Toyota. You can look at our partnership with NVIDIA called Project Ceiba, where NVIDIA has chosen AWS's infrastructure for its R&D supercomputer due in part to AWS's leading operational performance and security. And you can see how AWS continues to innovate in its infrastructure capabilities. With deliveries like Aurora Limitless Database, which extends AWS's very successful relational database to support millions of database writes per second and manage petabytes of data whilst maintaining the simplicity of operating a single database or with our custom Graviton4 CPU instances, which provide up to nearly 40% better price performance versus other leading x86 processors. Companies are focused on new efforts again, spending energy on modernizing their infrastructure from on-premises to the cloud. This modernization enables companies to save money, innovate more quickly, and get more productivity from their scarce engineering resources. However, it also allows them to organize their data in the right architecture and environment to do Generative AI at scale. It's much harder to be successful and competitive in Generative AI if your data is not in the cloud. The AWS team continues to make rapid progress in delivering AI capabilities for customers in building a substantial AI business. In the last 18 months, AWS has released nearly twice as many machine learning and GenAI features as the other leading cloud providers combined. AWS's AI business is a multibillion-dollar revenue run rate business that continues to grow at a triple-digit year-over-year percentage and is growing more than 3 times faster at this stage of its evolution as AWS itself grew, and we felt like AWS grew pretty quickly. We talk about our AI offering as three macro layers of the stack, with each layer being a giant opportunity and each is progressing rapidly. At the bottom layer, which is for model builders, we were the first major cloud provider to offer NVIDIA's H200 GPUs through our EC2 P5e instances. And thanks to our networking innovations like Elastic Fabric adapter and Nitro, we continue to offer advantaged networking performance. And while we have a deep partnership with NVIDIA, we've also heard from customers that they want better price performance on their AI workloads. As customers approach higher scale in their implementations, they realize quickly that AI can get costly. It's why we've invested in our own custom silicon in Trainium for training and Inferentia for inference. The second version of Trainium, Trainium2 is starting to ramp up in the next few weeks and will be very compelling for customers on price performance. We're seeing significant interest in these chips, and we've gone back to our manufacturing partners multiple times to produce much more than we'd originally planned. We also continue to see increasingly more model builders standardize an Amazon SageMaker, our service that makes it much easier to manage your AI data, build models, experiment, and deploy to production. This team continues to add features at a rapid clip punctuated by SageMaker's unique hyperpod capability, which automatically splits training workloads across more than 1,000 AI accelerators, prevents interruptions by periodically saving checkpoints, and automatically repairing faulty instances from their last saved checkpoint and saving training time by up to 40%. At the middle layer where teams want to leverage an existing foundation model customized with their data and then have features to deploy high-quality Generative AI applications, Amazon Bedrock has the broadest selection of leading foundation models and most compelling modules for key capabilities like model valuation, guardrails, rag and agents. Recently, we've added Anthropic's Claude 3.5 Sonnet model, Meta's Llama 3.2 models, Mistral's Large 2 models and multiple stability AI models. We also continue to see teams use multiple model types from different model providers and multiple model sizes in the same application. There's mucking orchestration required to make this happen. And part of what makes Bedrock so appealing to customers and why it has so much traction is that Bedrock makes this much easier. Customers have many other requests, access to even more models, making prompt management easier, further optimizing inference costs, and our Bedrock team is hard at work making this happen. At the application or top layer, we're continuing to see strong adoption of Amazon Q, the most capable Generative AI-powered assistant for software development and to leverage your own data. Q has the highest reported code acceptance rates in the industry for multiline code suggestions. The team has added all sorts of capabilities in the last few months, but the very practical use case recently shared where Q Transform saved Amazon's teams $260 million and 4,500 developer years in migrating over 30,000 applications to new versions of the Java JDK as excited developers and prompted them to ask how else we could help them with tedious and painful transformations. Spend a few minutes reading developer forums about what they wish they could move away from, and you'll get an idea of what they want. Expect more practical AI game changers from Q. We're also using Generative AI pervasively across Amazon's other businesses with hundreds of apps in development or launched. For consumers, we've expanded Rufus, our Generative AI-powered expert shopping assistant to the UK, India, Germany, France, Italy, Spain, and Canada. And in the US, we've added more personalization, the ability to better narrow customer intent and real-time pricing and deal information. We've recently debuted AI Shopping Guides for consumers, which simplifies product research by using Generative AI to pair key factors to consider in a product category with Amazon's wide selection, making it easier for customers to find the right product for their needs. For sellers, we've recently launched Project Amelia, an AI system that offers tailored business insights to boost productivity and drive seller growth. We continue to rearchitect the brain of Alexa with a new set of foundation models that we'll share with customers in the near future, and we're increasingly adding more AI into all of our devices. Take the new Kindle Scribe we just announced. The note-taking experience is much more powerful with the new built-in AI-powered notebook, which enables you to quickly summarize pages of notes into concise bullets in a script font that can easily be shared. Speaking of Kindle products, we just launched a completely new Kindle lineup, the first time we've done a portfolio refresh of this size. Apart from the Scribe, it includes the first-ever color Kindle, the fastest Kindle Paperwhite ever and a new pocket-sized Kindle. The early sales for these devices have significantly outperformed our expectations, and Kindle is having an excellent year with customers reading more than ever. We now have over 20 billion average monthly pages read on Kindle devices worldwide. There are so many things we're energized by right now, but we'll quickly mention one more, the progress we're making in improving customers' pharmacy experience. Brick-and-mortar pharmacies account for just over 90% of prescriptions dispensed in the US that require customers to make trips to forlorn physical venues with much of the selection behind locked shelves, waiting lines for meds and only finding out about pricing at the point of purchase. The largest mail order pharmacies offer delivery in 5 to 10 business days. We think customers deserve better. Today, we can deliver to 95% of first-time Amazon Pharmacy customers in the US within two business days and to 20% of US Prime members within 24 hours. Next year, we plan to launch operations in 20 new cities, so nearly half the US will have the ability to have their medications delivered to their door within hours. We believe making it easier for customers to get their medications will improve medication adherence, which we know can directly improve health outcomes. Across Amazon, we have a lot coming in the next few months. We eagerly look forward to sharing these with customers, and a big thank you to my Amazon teammates around the world for all their hard work. And with that, I'll turn it over to Brian for a financial update.","evidence_gemma_new":"revenue year-over-year","evidence_llama_3_3":"revenue","evidence_qwen_3_30b":"revenue $158.9 billion","gemma_new_max":158900000000.0,"gemma_new_min":158900000000.0,"llama_3_3_max":158900000000.0,"llama_3_3_min":158900000000.0,"qwen_3_30b_max":158900000000.0,"qwen_3_30b_min":158900000000.0}
{"symbol":"AMZN","year":2024,"quarter":4,"date":"2024-Q4","chunk_id":2,"sub_chunk_id":0,"centroid_label":"revenue","agreed_value":187800000000.0,"count":3,"chunk":"Andy Jassy: Thanks, Dave. Today, we're reporting $187.8 billion in revenue, up 10% year over year. Given the way the dollar strengthened throughout the quarter, we had $700 million more foreign exchange headwind than we anticipated at guidance. Without that headwind, revenue would have been 11% year over year and exceeded the top end of our guidance. Operating income was $21.2 billion, up 61% year over year, and trailing twelve-month free cash flow adjusted for equipment finance leases was $36.2 billion, up $700 million year over year. We're pleased with the invention, customer experience improvements, and results delivered in 2024, and have a lot more planned in 2025. I'll start by talking about our stores business. We saw 10% year over year revenue growth in our North America segment, and 9% year over year in our international segment, excluding the impact from foreign exchange rates. Our continued focus on expanding selection, lowering prices, and improving convenience drove strong unit growth that even outpaced our revenue growth. We continue to add to our broad range giving customers choice across a variety of price points. We welcomed notable brands to our store throughout 2024, including Clinique, Estee Lauder, Aura Rings, and Armani Beauty. We continue to add to the hundreds of millions of products offered from our selling partners, who made up 61% of items that we sold in 2024, our highest annual mix of third-party seller units ever. We also launched Amazon Haul for US customers in Q4, which offers customers an engaging shopping experience that brings ultra-low priced products into one convenient destination. It's off to a very strong start. In the fourth quarter, consumers saved more than $15 billion with our low everyday prices and record-setting events during Prime Big Deal Days in October, Black Friday, and Cyber Monday around Thanksgiving. Additionally, Profitero's annual pricing study found that entering the holiday season, Amazon had the lowest online prices for the eighth year in a row, averaging 14% lower prices on average than other leading retailers in the US. Our speed of delivery continues to accelerate, and 2024 was another record-setting year for Prime members. We expanded the number of same-day delivery sites by more than 60% in 2024, which now serve more than 140 metro areas. Overall, we delivered over 9 billion units the same or next day around the world. Our relentless pursuit of better selection, price, and delivery speed is driving accelerated growth in Prime membership. For just $14.99 a month, Prime members get unlimited free shipping on 300 million items, off the same day or one day delivery, exclusive shopping events like Prime Day, access to a vast collection of premium programming and live sports on Prime Video, ad-free listening of 100 million songs and podcasts with Amazon Music, access to unlimited generic prescriptions for only $5 a month, unlimited grocery delivery on orders over $35 from Whole Foods Market and Amazon Fresh for $9.99 a month, a free Grubhub Plus membership with free unlimited delivery, and our latest benefit of a 10 cent per gallon fuel discount at BP, AMPM, and AMCO stations. When you think about this as a whole, and also compared to many other membership services that are comparably or more expensively priced and offer just one benefit like video, Prime is a screaming deal. And we have more coming for our Prime members in 2025. We also remain squarely focused on cost to serve in our fulfillment network, which has been a meaningful driver of our increased operating income. We talked about the regionalization of our US network. We've also recently rolled out our redesigned US inbound network. While still in its early stages, our inbound efforts have improved our placement of inventory so that even more items are close to end customers. Ahead of Black Friday in November, we'd improved the percentage of ordered units available in the ideal building by over 40% year over year. We've also spent considerable time optimizing the number of items sent to customers in the same package, which reduces packaging, is more convenient for customers, and less expensive for us to fulfill. And our per-unit transportation costs continue to decline as we build out and optimize our last-mile network. Overall, we've reduced our global cost to serve on a per-unit basis for the second year in a row. While at the same time increasing speed, improving safety, and adding selection. As we look to 2025 and beyond, we see opportunities to reduce costs again as we further refine inventory placement, grow our same-day delivery network, and accelerate robotics and automation throughout the network. In advertising, we remain pleased with the strong growth on a very large base, generating $17.3 billion of revenue in the quarter, and growing 18% year over year. That's a $69 billion annual revenue run rate, more than double what it was just four years ago at $29 billion. Sponsored products, the largest portion of ad revenue, are doing well, and we see a runway for even more growth. We also have a number of newer streaming offerings that are starting to become significant new revenue sources. On the streaming video side, we wrapped up our first year of Prime Video ads, and we're quite pleased with the early progress and head into this year with momentum. We made it easier to do full funnel advertising with us. Full funnel is from the top of the funnel with broad reach advertising that drives brand awareness to mid funnel where sponsored brands let companies specify certain keywords and audiences to attract people to their detail pages or brands to our Amazon to bottom of the funnel where sponsored products help advertisers surface relevant product ads to customers at the point of purchase. We also have differentiated audience features that leverage billions of signals from Amazon Marketing Cloud secure data clean rooms, providing advertisers the ability to analyze data, produce core marketing metrics, and understand how their marketing performs across various channels. With our new multi-touch attribution model, advertisers can understand how various ad types in their campaigns contribute to sales. Moving on to AWS, in Q4, AWS grew 19% year over year and now has a $115 billion annualized revenue run rate. AWS is a reasonably large business by most folks' standards. And though we expect growth will be lumpy over the next few years as enterprises adopt and technology advancements impact timing, it's hard to overstate how optimistic we are about what lies ahead for AWS' customers and business. I spent a fair bit of time thinking several years out. And while it may be hard for some to fathom a world where virtually every app is generative AI-infused, with inference being a core building block just like compute, storage, and database, and most companies having their own agents that accomplish various tasks interact with one another, this is the world we're thinking about all the time. And we continue to believe that this world will mostly be built on top of the cloud with the largest portion of it on AWS. To best help customers realize this future, you need powerful capabilities of all three layers of the stack. At the bottom layer, for those building models, you need compelling chips. Chips are the key ingredient in the compute that drives training and inference. Most AI compute has been driven by NVIDIA chips, and we obviously have a deep partnership with NVIDIA and will for as long as we can see into the future. However, there aren't that many generative AI applications of large scale yet, and when you get there, as we have with apps like Alexa and Rufus, cost can get steep quickly. Customers want better price performance, and it's why we built our own custom AI silicon. Tranium 2 just launched at our AWS reInvent conference in December, E2 instances with these chips are typically 30 to 40 percent more price per form than other current GPU-powered instances available. That's very compelling at scale. Several technically capable companies like Adobe, Databricks, Poolside, and Qualcomm have seen impressive results in early testing of Tranium 2. It's also why you're seeing Anthropic build its future frontier models on Tranium 2. We're collaborating with Anthropic to build project right near. A cluster of training and two ultra-servers containing hundreds of thousands of training m two chips. This cluster is going to be five times the number of Exo-ZLofts as the cluster that Anthropic used to train their current leading set of cloud models. We're already hard at work on Training 3, which we expect to preview late in 25, and defining Training 4 thereafter. Building outstanding performing chips that deliver leading price performance has become a core strength of AWS's, starting with our Nitro and Graviton chips in our core business, and now extending to Tranium and AI. It's something unique to AWS relative to other competing cloud providers. The other key component for model builders is services that make it easier to construct their models. I won't spend a lot of time on these comments on Amazon SageMaker AI, which has become the go-to service for AI model builders to manage their AI data, build models, experiment, and deploy these models. HyperPOD capability automatically splits training workloads across many AI accelerators, prevents interruptions by periodically saving checkpoints, and automatically repairing faulty instances from their last saved checkpoint and saving training time by up to 40 percent. It continues to be a differentiator with several new compelling capabilities at reinvent including the ability to manage costs at a cluster level, and prioritize which workloads should receive capacity when budgets are reached. It is increasingly being adopted by model builders. At the middle layer, for those wanting to leverage frontier models to build Jet AI apps, Amazon Bedrock is our fully managed service providing high performing foundation models with the most compelling features making it easy to build a high-quality generative AI application. We are iterating quickly on Bedrock announcing Luma AI, poolside, and over a hundred other popular emerging models to Bedrock and reinvent. We've just added DeepSeq's R1 models to Bedrock and SageMaker. Additionally, we delivered several compelling new Bedrock features to re-event, including prompt caching, intelligent prompt routing, and model distillation, all of which help customers achieve lower cost and latency in their inference. Like SageMaker AI, Bedrock is growing quickly and resonating strongly with customers. Related, we also launched Amazon's own family of frontier models in Bedrock called Nova. These models compare favorably in intelligence against the leading models in the world to offer lower latency, lower price, about 75 percent lower than other models in Bedrock, and are integrated with key Bedrock features like fine-tuning, model distillation, knowledge base as a rag, and Agentec capabilities. Thousands of AWS customers are already taking advantage of Amazon Nova models' capabilities and price performance, including Palantir, SAP Densu Fortinet Trellix, and Robinhood, and we've just gotten started. At the top layer of the stack, Amazon Q is our most capable generative AI-powered assistant for software development and to leverage your own data. You may remember that on the last call, I shared the very practical use case where Q transformation helps save Amazon Teams $260 million and 4500 developer years in migrating over 30,000 applications to new versions of the Java JDK. This is real value, and companies ask for more, which we obliged with our recent deliveries of Q transformation that enable moves from Windows dot net applications to Linux VMware to EC2, accelerates mainframe migrations. Early customer testing indicates the queue can turn was going to be a multi-year effort to do a mainframe migration into a multi-quarter effort, cutting by more than 50% the time to migrate mainframes. This is a big deal, and these transformations are good examples of practical AI. While AI continues to be a compelling new driver in the business, we haven't lost our focus on core modernization of companies' technology. We signed new AWS agreements with companies including Intuit, PayPal, Norwegian Cruise Line Holdings, Northrop Grumman, The Guardian Life Insurance Company of America, Reddit, Japan Airlines, Baker Hughes, the Hertz Corporation, Resin Chime Financial, Asana, and many others. Consistent customer feedback from our recent AWS reInvent was appreciation that we're still inventing rapidly in non-AI key infrastructure areas like storage, compute, database analytics. Our functionality leadership continues to expand and there were several key launches customers were buzz about, including Amazon Aurora D SQL, our new serverless distributed SQL database that enables applications with the highest availability strong consistency, post-test compatibility, It's four times faster reason rights compared to other pop distributed SQL databases, Amazon S3 tables, which makes S3 the first cloud object store with fully managed support for Apache Iceberg for faster analytics, Amazon S3 metadata, Which automatically generates queryable metadata simplifying data discovery, business analytics, and real time inference to help customers unlock the value of their data in S3, and the next generation of Amazon SageMaker which brings together all the data analytics services and AI services in interface to do analytics and AI more easily at scale. As 2024 comes to an end, I want to thank our teammates and partners for their meaningful impact throughout the year. It was a very successful year across almost any dimension you pick. We're far from done, and look forward to delivering for customers in 2025. With that, I'll turn it over to Brian for a financial update.","evidence_gemma_new":"revenue year over year","evidence_llama_3_3":"revenue year over year","evidence_qwen_3_30b":"revenue 10% year over year","gemma_new_max":187800000000.0,"gemma_new_min":187800000000.0,"llama_3_3_max":187800000000.0,"llama_3_3_min":187800000000.0,"qwen_3_30b_max":187800000000.0,"qwen_3_30b_min":187800000000.0}
{"symbol":"AMZN","year":2023,"quarter":2,"date":"2023-Q2","chunk_id":3,"sub_chunk_id":0,"centroid_label":"worldwide revenue","agreed_value":134400000000.0,"count":3,"chunk":"Brian Olsavsky: Thank you, Andy. As Andy mentioned, we saw worldwide revenue of $134.4 billion, an increase of 11% year-over-year and above the top end of our guidance range. We are encouraged by the strength in our reported revenue, which is another proof point that our focus on price, selection and convenience continues to resonate with customers. We continue to see healthy demand across everyday essentials and in categories like beauty and health and personal care and have seen a positive customer response to improvements in personalization and enhancements to our website and mobile app. During the quarter, we also saw improvements in macroeconomic indicators across our North America and international segments, but continue to see customers trading down and seeking value in their purchases. Delivery speed has been a key area of focus over the last several quarters, and we reached record levels during Q2. Prime members love the faster ship speeds and are shopping more often. Advertising revenue remained strong, up 22% year-over-year. Our performance-based advertising offerings continue to be the largest contributor to our growth. Our teams worked to increase the relevancy of the ads we show to our customers by leveraging machine learning and improve our ability to measure the return on advertising spend for brands. Third-party unit mix increased to 60% during the quarter, the highest level we've ever seen, and we're continuing to see good growth in the number of sellers and the unit sold per seller. We're making steady progress on improving our worldwide stores profitability. Since North America segment operating margins bottomed out in Q1 of 2022, we have seen 5 consecutive quarters of improvement, with second quarter operating margin of 3.9%. This is an improvement of 620 basis points over these past 5 quarters. One of the largest drivers of this operating income improvement in the stores business has been reducing our cost to serve, with shipping costs and fulfillment costs continuing to grow at a slower pace than our unit growth. Most recently, regionalization is an important contributor. Faster delivery speed from better network connectivity and better inventory placement means less miles traveled and fewer touches, resulting in less cost. And while we are pleased with the progress we have made, we see more opportunity to drive improved cost efficiencies going forward. Moving to the international segment. Since our operating margin loss bottomed out in Q3 of last year, we have seen 3 consecutive quarters of improvement, with a second quarter margin loss of negative 3%. This is an improvement of 590 basis points over the last 3 quarters. This segment also includes our emerging countries. It is important to remember how early we are in some of these marketplaces. We've launched more than 10 countries in the past 6 years and are always evaluating our customer experience as well as our path to profitability, and we like the path we're on. As a reminder, it took us 9 years to reach profitability in the United States. In addition, across our North America and international results, inflation headwinds also continue to ease, most notably in fuel prices, linehaul rates, ocean and rail rates. Moving to AWS. Year-over-year revenue growth was 12%, with growth rates stabilizing during Q2. We are encouraged by the strength of our customer pipeline and believe having a large diverse customer base that is mostly cost optimized sets us up well for future growth. On a trailing 12-month basis, free cash flow was positive and improved for the fourth sequential quarter. Our financial focus remains on driving long-term sustainable free cash flows. The largest driver of the recent improvement in free cash flow is our increased operating income, most notably in the North America and international segments where, as I said, we've made meaningful improvement in our fulfillment network productivity and operating leverage and benefited from moderating inflationary pressures. We've also seen improvements in our working capital contributions to free cash flow. Over the past couple of years, working capital hasn't been as efficient as we've held higher weeks of cover of inventory in the face of supply chain disruptions. Most recently, as these disruptions continue to ease, we are improving our inventory efficiency, resulting in improvements in our working capital. We will remain focused on continued free cash flow improvement moving forward. Next, let's turn to our capital investments. We define our capital investments as a combination of capital expenditures plus equipment finance leases. These investments were $54 billion for the trailing 12-month period ended June 30, down from $61 billion in the comparable prior year period. Looking ahead to the full year 2023, we expect capital investments to be slightly more than $50 billion compared to $59 billion in 2022. We expect fulfillment and transportation CapEx to be down year-over-year, partially offset by increased infrastructure CapEx to support growth of our AWS business, including additional investments related to generative AI and large language model efforts. With that, let's move on to your questions.","evidence_gemma_new":"worldwide revenue year-over-year","evidence_llama_3_3":"worldwide revenue Q2","evidence_qwen_3_30b":"worldwide revenue 11% year-over-year","gemma_new_max":134400000000.0,"gemma_new_min":134400000000.0,"llama_3_3_max":134400000000.0,"llama_3_3_min":134400000000.0,"qwen_3_30b_max":134400000000.0,"qwen_3_30b_min":134400000000.0}
{"symbol":"AMZN","year":2023,"quarter":3,"date":"2023-Q3","chunk_id":3,"sub_chunk_id":0,"centroid_label":"worldwide revenue","agreed_value":143100000000.0,"count":2,"chunk":"Brian Olsavsky: Thanks, Andy. Overall, we saw a strong performance in the third quarter. Worldwide revenue was $143.1 billion, representing an increase of 11% year-over-year, excluding the impact of foreign exchange and approximately $100 million above the top end of our guidance range. We saw our highest quarterly worldwide operating income ever which was $11.2 billion for the quarter, an increase of $8.7 billion year-over-year from $2.7 billion above the high end of our guidance range. North America revenue was $87.9 billion, an increase of 11% year-over-year. And international revenue was $32.1 billion, an increase of 11% year-over-year, excluding foreign exchange. During the quarter, we held our biggest Prime Day event ever with prime members purchasing more than 375 million items worldwide and saving more than $2.5 billion on millions of deals across the Amazon store. Outside of Prime Day, we continue to see strong demand across everyday essentials, including categories like beauty and health and personal care. From a customer behavior standpoint, we still see customers remaining cautious about price, trading down where they can and seeking out deals, coupled with lower spending on discretionary items. Building on the momentum from last quarter, we set another record for delivery speed. For the year-to-date period through the third quarter, we have delivered at the fastest speeds ever in the United States. These improvements in delivery speeds have been a key driver of growth and are resulting in increased purchase frequency by our Prime members. Third-party sellers grew at 18% year-over-year, excluding foreign exchange, primarily driven by selection expansion and growing adoption of our optional services for sellers, including Fulfillment by Amazon and paid account management and more. During the quarter, we hosted Amazon Accelerate, our annual seller conference, where we launched a number of new innovations and product developments for our sellers, including Supply Chain by Amazon. We also continue to see durable growth in advertising which grew 25% year-over-year, excluding foreign exchange, primarily driven by sponsored products as we lean into machine learning to improve the relevancy of the ads we show our customers and enhance our measurement capabilities on behalf of advertisers. We have seen strong improvement in our profitability. North America operating income was $4.3 billion, an increase of $4.7 billion year-over-year, resulting in an operating margin of 4.9%, up 100 basis points quarter-over-quarter. Since North America operating margins bottomed out in Q1 of 2022, we have now seen 6 consecutive quarters of improvement, resulting in a cumulative improvement of over 700 basis points over these past 6 quarters. The third quarter marked the second full quarter of regionalization within the U.S. and we're pleased with the early results. Regionalization has allowed us to simplify the network by reducing the number of line-haul lanes, increasing volume within existing line-haul lanes and adding more direct fulfillment center to delivery station connections. We have also been focused on optimizing inventory placement in a new regionalized network which when coupled with the simplification mentioned earlier, is helping contribute to an overall reduction in cost to serve. Additionally, in the quarter, we saw benefits from lower inflation, primarily within line haul, ocean and rail shipping rates which were partially offset by higher fuel prices. While we are encouraged by the improvements in operating profit, we still see a lot of opportunity in front of us. In international, we were closer to breakeven during the quarter with an operating loss of $95 million. This was an improvement of $2.4 billion year-over-year. This improvement was primarily driven by lowering our cost to serve through higher productivity, decreased inflationary pressures and improvements in leverage across our established and emerging international countries as we continue to focus on customer inputs and improve efficiencies within our operations. Moving to AWS; revenues were $23.1 billion, an increase of 12% year-over-year. On a quarter-over-quarter basis, we added more than $900 million of revenue in AWS as customers are continuing to shift their focus towards driving innovation and bringing new workloads to the cloud. Similar to what we shared last quarter, while optimization still remain a headwind, we've seen the rate of new cost optimization slowdown in AWS and we are encouraged by the strength of our customer pipeline. Customers are excited about our approach to generative AI, with several new announcements made during the quarter, including a strategic collaboration with Anthropic, opening Amazon Bedrock up to general availability, adding Meta's Llama 2 model to Bedrock in the near future and new customization capabilities of CodeWhisperer. AWS remains a clear cloud infrastructure leader with a significant leadership position in the number of customers, the size of our partner ecosystem, our breadth of functionality and the strongest operational performance in the industry. When we look at the fundamentals of the business, we believe we are in good position to drive future growth as the rates of cost optimization slow down. AWS operating income was $7 billion, an increase of $1.6 billion year-over-year. Our operating margin for the quarter was 30.3%. This is an improvement of approximately 600 basis points quarter-over-quarter, primarily driven by increased leverage on our head count costs. Shifting to free cash flow. On a trailing 12-month basis, free cash flow adjusted for finance leases was $20.2 billion, an improvement of $41.7 billion year-over-year. The largest driver of the improvement in free cash flow is our increased operating income which we're seeing across all 3 of our segments. Key drivers of this improvement include reductions in our cost to serve, continued advertising growth and improved leverage on our fixed costs. We are also seeing improvements in working capital, notably with our inventory efficiency as we improve our inventory placement. Now, let's turn to our capital investments. We define our capital investments as a combination of CapEx plus equipment finance leases. These investments were $50 billion for the trailing 12-month period ended September 30, down from $60 billion in the comparable prior year period. For the full year 2023, we expect capital investments to be approximately $50 billion compared to $59 billion in 2022. We expect fulfillment and transportation CapEx to be down year-over-year, partially offset by increased infrastructure CapEx to support growth of our AWS business, including additional investments related to generative AI and large language model efforts. As we head into the fourth quarter, we are ready to make this a great holiday season for our customers. Looking at our operations network, our inventory is the best position it's ever been heading into the holiday season, enabling us to serve customers with fast delivery speeds from their local regions. We continue to believe putting customers first is the only reliable way to create lasting value for our shareholders. With that, let's move on to questions.","evidence_gemma_new":"Worldwide revenue year-over-year","evidence_llama_3_3":null,"evidence_qwen_3_30b":"worldwide revenue third quarter","gemma_new_max":143100000000.0,"gemma_new_min":143100000000.0,"llama_3_3_max":null,"llama_3_3_min":null,"qwen_3_30b_max":143100000000.0,"qwen_3_30b_min":143100000000.0}
{"symbol":"AMZN","year":2023,"quarter":4,"date":"2023-Q4","chunk_id":3,"sub_chunk_id":0,"centroid_label":"worldwide revenue","agreed_value":170000000000.0,"count":3,"chunk":"Brian Olsavsky: Thanks, Andy. Overall, we saw strong performance in the fourth quarter. Worldwide revenue was $170 billion, representing an increase of 13% year-over-year, excluding the impact of foreign exchange and approximately $3 billion above the top end of our guidance range. Saw our highest quarterly worldwide operating income ever, which was $13.2 billion for the quarter, an increase of $10.5 billion year-over-year and $2.2 billion above the high end of our guidance range. For the full year 2023, we had a meaningful improvement across our financial results. Revenue was $574.8 billion, an increase of 12% year-over-year, excluding the impact of foreign exchange. Operating income tripled year-over-year to $36.9 billion. Trailing 12-month free cash flow adjusted for equipment finance leases was $35.5 billion, up $48.3 billion versus last year. These financial outputs are a result of a lot of improvements in our key input metrics such as stores' cost to serve, which decreased year-over-year for the first time since 2018 and our ability to deliver to customers at our fastest speeds ever. I want to thank our customers, our partners and our teammates around the world for a very strong 2023 performance. Focusing on the fourth quarter, North America revenue was $105.5 billion, an increase of 13% year-over-year and an acceleration of 200 basis points compared to Q3. International revenue was $40.2 billion, an increase of 13% year-over-year, excluding the impact of foreign exchange, also an acceleration of 200 basis points compared to Q3. During the quarter, we remained focused on the inputs that matter most to our customers, price, selection and convenience. Our shopping events throughout the quarter included Prime Big Deal Days in October and our extended Black Friday and Cyber Monday shopping event helped to attract new Prime members and deliver billions in savings for customers. We made meaningful progress on delivery speeds in the United States and globally, which helped strong sales throughout the quarter, including notable strength in the last-minute gifting where our ability to provide fast shipping helped our Prime members ensure that they got their gifts before the holidays. These improvements in delivery speed have led to increased purchase frequency by our Prime members across all of our major geographies. It also strengthened demand for our everyday essentials. Categories like beauty and health and personal care, where speed is even more important to customers. Third-party sellers were a big part of our success over the holidays with worldwide third-party seller services revenue growing at 19% year-over-year, excluding the impact of foreign exchange. And worldwide third-party seller unit mix was 61%, its highest level ever. We also saw strong performance in worldwide advertising, which grew 26% year-over-year, excluding the impact of foreign exchange. The strength in advertising was primarily driven by sponsored products as our teams worked hard to increase the relevancy of the ads we show customers by leveraging machine learning. Advertising only works if the ads are helpful to customers and there's a lot of value in tailoring sponsored products, so they are relevant to what a customer is actually searching for. We're also continually focused on improving our measurement capabilities, which allow brands to see the payback of their advertising spend. Shifting to profitability. North America segment operating income was $6.5 billion, an increase of $6.7 billion year-over-year, resulting in an operating margin of 6.1%, up 120 basis points quarter-over-quarter. Since North America operating margins were at their recent low levels in Q1 of 2022, we have now seen seven consecutive quarters of improvement resulting in a cumulative improvement of 800 basis points over these past seven quarters. In addition to the strong top line growth, which helped to drive improved leverage throughout our businesses, we continue to make progress on reducing our cost to serve. The fourth quarter is our busiest time of year, supported by an increasingly large and integrated operations network. Overall, our teams executed extremely well, yielding strong efficiency gains with minimal disruptions. We were pleased with the performance of our regionalized network during the holiday period, where we saw benefits from improved inventory placement helping drive faster speeds and also lowering costs. We also continue to see benefits from lower transportation rates, which include linehaul, ocean and rail and from a more stable labor market, resulting in improved staffing levels. In our International segment, we had an operating loss of $419 million, an improvement of $1.8 billion year-over-year. This improvement was primarily driven by lowering our cost to serve through increased units per box, lower transportation rates and leverage across our fixed costs as we continue to focus on customer inputs and improve efficiencies within our operations. The International segment represents more than 20 countries of varying degrees of growth and our largest established countries like the U.K., Germany and Japan, relatively strong revenue growth contributed to the year-over-year improvement in profitability. Additionally, we saw good progress in our emerging countries as they continued to expand their customer offerings, while seeking to invest wisely. Moving to AWS. Revenues were $24.2 billion, an increase of 13% year-over-year. On a quarter-over-quarter basis, we added more than $1.1 billion of revenue in AWS as customers are continuing to shift their focus towards driving innovation and bringing new workloads to the cloud. Similar to what we shared last quarter, we continue to see the diminishing impact of cost optimizations. And as these optimization slow down, we're seeing more companies turning their attention to newer initiatives and reaccelerating existing migrations. Customers are also excited about our approach to generative AI. Still relatively early days, but the revenues are accelerating rapidly across all 3 layers and our approach to democratizing AI is resonating well with our customers. We have seen significant interest from our customers wanting to run generative AI applications and build large language models and foundation models, all with the privacy, reliability and security they have grown accustomed to with AWS. AWS' operating income was $7.2 billion, an increase of $2 billion year-over-year. Our operating margin for the quarter was 29.6%, up more than 500 basis points year-over-year and effectively flat on a quarter-over-quarter basis. This margin improvement reflects our headcount reductions from earlier in the year and a slowdown in the pace of hiring. Shifting to free cash flow. On a trailing 12-month basis, free cash flow adjusted for finance leases was $35.5 billion, an improvement of $48.3 billion year-over-year. The largest driver of the improvement in free cash flow is our increased operating income, which we are seeing across all three of our segments. We're also seeing improvements in working capital, notably in inventory efficiency driven by our regionalization efforts. Next, let's turn to capital investments. We define our capital investments as a combination of CapEx plus equipment finance leases. In 2023, full year CapEx was $48.4 billion, which was down $10.2 billion year-over-year, primarily driven by lower spend on fulfillment and transportation. As we look forward to 2024, we anticipate CapEx to increase year-over-year, primarily driven by increased infrastructure CapEx, support growth of our AWS business, including additional investments in generative AI and large language models. One thing I'd like to highlight in our first quarter guidance is that we recently completed a useful life study for our servers and we are increasing the useful life from 5 years to 6 years beginning in January 2024. We will have this anticipated benefit to our operating income of approximately $900 million in Q1, which is included in our operating income guidance. As we turn the calendar to 2024, we are excited to continue upon the great work the teams have been able to deliver in 2023. We remain focused on streamlining and prioritizing projects in an effective way that reduces costs and also allows us to continue innovating and inventing for customers. With that, let's move on to questions.","evidence_gemma_new":"Worldwide revenue year-over-year","evidence_llama_3_3":"Worldwide revenue fourth quarter","evidence_qwen_3_30b":"worldwide revenue fourth quarter","gemma_new_max":170000000000.0,"gemma_new_min":170000000000.0,"llama_3_3_max":170000000000.0,"llama_3_3_min":170000000000.0,"qwen_3_30b_max":170000000000.0,"qwen_3_30b_min":170000000000.0}
{"symbol":"AMZN","year":2024,"quarter":1,"date":"2024-Q1","chunk_id":3,"sub_chunk_id":0,"centroid_label":"worldwide revenue","agreed_value":143300000000.0,"count":2,"chunk":"Brian Olsavsky: Thanks, Andy. Starting with our top line financial results. Worldwide revenue was $143.3 billion, representing a 13% increase year-over-year, excluding the impact of foreign exchange and near the top end of our guidance range. I'd like to highlight a couple of points to help you interpret our growth rates. First, we saw an impact from leap year in Q1, which added approximately 120 basis points to the year-over-year quarterly revenue growth rate. Second, while I typically talk about growth rates, excluding the impact of year-over-year changes in foreign exchange, we did see an unfavorable impact from global currencies weakening against the U.S. dollar, more than we had planned in Q1. This led to a $700 million or 50 basis point headwind to revenue relative to what we guided. Excluding this FX headwind, we would have exceeded the top end of our guidance range. Worldwide operating income was $15.3 billion, which was our highest quarterly income ever, and it was $3.3 billion above the high end of our guidance range. This was driven by strong operational performance across all 3 reportable segments and better-than-expected operating leverage, including lower cost to serve. The impact on operating income from our Q1 FX rate headwind was negligible. I'll speak more to our profitability trends in a moment. In the North America segment, first quarter revenue was $86.3 billion, an increase of 12% year-over-year. In the international segment, revenue was $31.9 billion, an increase of 11% year-over-year, excluding the impact of foreign exchange.","evidence_gemma_new":"Worldwide revenue year-over-year","evidence_llama_3_3":"Worldwide revenue","evidence_qwen_3_30b":null,"gemma_new_max":143300000000.0,"gemma_new_min":143300000000.0,"llama_3_3_max":143300000000.0,"llama_3_3_min":143300000000.0,"qwen_3_30b_max":null,"qwen_3_30b_min":null}
{"symbol":"AMZN","year":2024,"quarter":2,"date":"2024-Q2","chunk_id":3,"sub_chunk_id":0,"centroid_label":"worldwide revenue","agreed_value":148000000000.0,"count":2,"chunk":"Brian Olsavsky : Thanks, Andy. Let's start with our top line financial results. Worldwide revenue was $148 billion, an 11% increase year-over-year, excluding the impact of foreign exchange. This equates to a $1 billion headwind from foreign exchange in the quarter, which is about $300 million higher than we'd anticipated in our Q2 guidance range. Worldwide operating income nearly doubled year-over-year to $14.7 billion, which was $700 million above the high end of our guidance range. Across all of our segments, we remain focused on managing costs in a way that allows us to continue innovating and investing in areas that we think could move the needle for our customers. Starting with the North American international segments, customers continue to respond positively to our focus on low prices, broad selection, and fast shipping offers. We delivered at our fastest speeds ever so far this year, which helps drive strength in areas like our everyday essentials. These include items like non-perishable foods, as well as health, beauty, and personal care items. And Prime members continue to increase their shopping frequency while growing their spend on Amazon. Overall unit sales grew 11% year-over-year, which is consistent with our growth rates in Q1 after you adjust for the approximately 100 basis point impact of leap year. North America segment revenue was $90 billion, an increase of 9% year-over-year. And international segment revenue was $31.7 billion, an increase of 10% year-over-year, excluding the impact of foreign exchange. North America segment operating income was $5.1 billion, an increase of $1.9 billion year-over-year. Operating margin was 5.6%, up 170 basis points year-over-year, and down 20 basis points quarter over quarter. If we look at profitability of the core North America stores business, we actually improved our margin again quarter-over-quarter in Q2. The overall North America segment operating margin decreased slightly due to increased Q2 spend in some of our investment areas, including Kuiper, where we're starting to manufacture satellites we'll launch into space in Q4. We saw improvements in our cost to serve, driven by our efforts to place inventory more regionally, closer to where our customers are. This resulted in more consolidated shipments, with higher units per box shipped. We also saw packages traveling shorter distances to customers, and this also led to better on-road productivity in our transportation network. Our international segment was profitable again in Q2, with operating income of $300 million, an improvement of $1.2 billion year-over-year. Operating margin was 0.9%, up 390 basis points year over year. This increase is primarily driven by our established countries, as we improve our cost structure with better inventory placement and more consolidated shipments. Additionally, our emerging countries continue to expand their customer offerings, leverage their cost structure, and invest in expanding prime benefits. We are pleased with the overall progress of these countries as they make strides on their respective paths to profitability. Advertising remains an important contributor to profitability in the North America and international segments, and we saw strong growth on an increasing larger revenue base this quarter. We continue to see opportunities that further expand our offering in areas that are driving growth today, like sponsored products, as well as newer areas, like Prime Video ads. Moving next to our AWS segment, revenue is $26.3 billion, an increase of 18.8% year-over-year, excluding the impact of foreign exchange. AWS now has an annualized revenue run rate of more than $105 billion. During the second quarter, we saw continued growth across both generative AI and non-generative AI workloads. We saw companies turn their attention to newer initiatives, bring more workloads to the cloud, restart or accelerate existing migrations from on-premises to the cloud, and tap into the power of generative AI. AWS operating income was $9.3 billion, an increase of $4 billion year-over-year. It's driven by our continued focus on cost control, including a measured pace of hiring. Additionally, AWS operating margin includes an approximately 200 basis point favorable impact from the change in the estimated useful life of our servers that we instituted in Q1. As we've long said, we expect AWS operating margins to fluctuate over time, driven in part by the level of investments we're making at any point in time. We remain focused on driving efficiencies across the business, which enables us to invest to support the strong growth we're seeing in AWS, including generative AI. Now let's turn our attention to capital investments. As a reminder, we define these as a combination of CapEx plus equipment finance leases. For the first half of the year, CapEx was $30.5 billion. Looking ahead to the rest of 2024, we expect capital investments to be higher in the second half of the year. The majority of the spend will be to support the growing need for AWS infrastructure as we continue to see strong demand in both generative AI and our non-generative AI workloads. For the third quarter, specifically, I'd highlight a few seasonal factors to keep in mind. First, we hosted another successful Prime Day in mid-July. It was our 10th Prime Day and was our largest ever. Prime members globally saved billions of dollars on deals across every product category. From a profitability perspective, we've historically seen a headwind to operating margin in Q3, driven by Prime Day deals, as well as the marketing spend surrounding the event. Additionally, in Q3, we also begin to ramp up our capacity to handle Q4 holiday volumes in our fulfillment network. And lastly, we expect an increase in digital content cost quarter-over-quarter from the return of our NFL Thursday Night Football. We remain heads down, focused on driving a better customer experience. We believe putting customers first is the only reliable way to create lasting value for our shareholders. With that, let's move on to your questions.","evidence_gemma_new":"Worldwide revenue year-over-year","evidence_llama_3_3":null,"evidence_qwen_3_30b":"Worldwide revenue year-over-year","gemma_new_max":148000000000.0,"gemma_new_min":148000000000.0,"llama_3_3_max":null,"llama_3_3_min":null,"qwen_3_30b_max":148000000000.0,"qwen_3_30b_min":148000000000.0}
{"symbol":"AMZN","year":2024,"quarter":3,"date":"2024-Q3","chunk_id":3,"sub_chunk_id":0,"centroid_label":"worldwide revenue","agreed_value":158900000000.0,"count":2,"chunk":"Brian Olsavsky: Thanks, Andy. Let's start with our top line financial results. Worldwide revenue was $158.9 billion, an 11% increase year-over-year, excluding a 20 basis point unfavorable impact of foreign exchange. As a reminder, our Q3 guidance had anticipated a larger unfavorable impact of approximately 90 basis points. Worldwide operating income increased 56% year-over-year to $17.4 billion, our highest quarterly operating income ever and was $2.4 billion above the high end of our guidance range. We remain focused on streamlining and managing costs in a way that allows us to continue inventing for customers in a cost-effective way. In the third quarter, North America segment revenue was $95.5 billion, an increase of 9% year-over-year. International segment revenue was $35.9 billion, an increase of 12% year-over-year. Worldwide paid units accelerated to 12% growth year-over-year as our customers continue to come to Amazon for low prices, broad selection and convenient fast delivery. Prime remains a core contributor to this growth. Year-over-year paid membership growth accelerated in Q3 from both the US and globally, helped by our tenth annual Prime Day event in mid-July. Customers are enjoying even faster delivery speeds, which also helps drive strong growth in items like everyday essentials. This includes items like health, beauty, and personal care as well as nonperishable grocery. Though all these items often have a lower average selling price, the strength in everyday essential's revenue is a positive indicator that customers are turning to us for more of their daily needs. We see that when customers purchase these types of items from us, they build bigger baskets, shop more frequently and spend more on Amazon. We remain focused on keeping prices sharp and offering broad selection that gives customers options when making purchase decisions. Shifting to profitability. Our North America and international segments each delivered their seventh consecutive quarter of year-over-year operating margin improvement. North America segment operating income was $5.7 billion, an increase of $1.4 billion year-over-year. North America operating margin was 5.9%, up 100 basis points year-over-year. In the third quarter, we continue to make progress in improving our fulfillment network cost structure, driven in part by improved inventory placement. This helped us drive better productivity in our transportation network and shipping efficiency from higher units per box. In the international segment, operating income was $1.3 billion, an improvement of $1.4 billion year-over-year. International operating margin was 3.6%, up 390 basis points year-over-year. So far this year, we've generated operating profit in each of the three quarters for the international segment and totals $2.5 billion year-to-date. We're seeing strength in our established countries like the UK and Germany as we continue to drive efficiencies to improve on-road productivity in our transportation network and better execution in our fulfillment centers. Our emerging countries are growing revenue at a healthy rate also, and they are leveraging their cost structures on investing strategically in Prime benefits. We have confidence that our focus on the inputs, coupled with the strength of our global teams, will continue to drive improvement over time. Advertising remains an important contributor to profitability in the North America and international segments. This quarter, we saw strong growth on an increasing large base of advertising revenue. We see many opportunities to further expand our ads offering in areas that are driving growth today like Sponsored Products as well as more recent growth areas like Prime Video ads. Moving next to our AWS segment. Revenue was $27.5 billion, an increase of 19.1% year-over-year, excluding the impact of foreign exchange. AWS now has an annualized revenue run rate of $110 billion. The business continues to grow, mostly opportunity to expand our core cloud offering and our AI services. Customers increasingly recognize that to get the true benefit of Generative AI, they also need to move to the cloud. AWS operating income was $10.4 billion, an increase of $3.5 billion year-over-year as a result of our continued focus on cost control, including a measured pace of hiring, a focus on driving efficiencies in our infrastructure, and reducing costs across the business. Additionally, we increased the estimated useful life of our servers starting in 2024, which contributed approximately 200 basis points to the AWS margin increase year-over-year in Q3. As we said in the past, we expect the AWS operating margins to fluctuate, driven in part by the level of investments we're making at any point in time. Now turning to our capital investments. As a reminder, we define these as a combination of cash CapEx plus equipment finance leases. Year-to-date capital investments were $51.9 billion. We expect to spend approximately $75 billion in CapEx in 2024. The majority of the spend is to support the growing need for technology infrastructure. This primarily relates to AWS as we invest to support demand for our AI services while also including technology infrastructure to support our North America and international segments. Additionally, we're continuing to invest in our fulfillment and transportation network to support the growth of the business, improve delivery speeds and lower our cost to serve. This includes investments in same-day delivery facilities, in our inbound network and as well in robotics and automation. We're encouraged by the start of the holiday season, which kicked off in October with a strong Prime Big Deal Days. We are ready to serve customers throughout the season, and I want to thank our teams across Amazon for delivering two very large Prime member events in the past four months and for getting us ready to delight customers during this holiday season. With that, let's move on to your questions.","evidence_gemma_new":"Worldwide revenue year-over-year","evidence_llama_3_3":"Worldwide revenue Q3","evidence_qwen_3_30b":null,"gemma_new_max":158900000000.0,"gemma_new_min":158900000000.0,"llama_3_3_max":158900000000.0,"llama_3_3_min":158900000000.0,"qwen_3_30b_max":null,"qwen_3_30b_min":null}
{"symbol":"AMZN","year":2024,"quarter":4,"date":"2024-Q4","chunk_id":3,"sub_chunk_id":0,"centroid_label":"worldwide revenue","agreed_value":187800000000.0,"count":2,"chunk":"Brian Olsavsky: Thanks, Andy. Starting with our top line financial results. Worldwide revenue was $187.8 billion, an 11% increase year over year excluding the impact of foreign exchange. This equates to an approximate $900 million headwind from FX in the Quarter, which is about $700 million higher than what we'd anticipated in our Q4 guidance range. Excluding that additional FX headwind, we would have exceeded the top end of our revenue guidance range. Worldwide operating income was $21.2 billion, our largest operating income quarter ever, and was $1.2 billion above the high end of our guidance range. Across all segments, we continue to innovate for customers while operating more efficiently at the same time. In the North America segment, fourth quarter revenue was $115.6 billion, an increase of 10% year over year. International segment revenue was $43.4 billion, an increase of 9% year over year excluding the impact of foreign exchange. Worldwide paid units grew 11% year over year, as our focus on low prices broad selection, and fast shipping continues to resonate with customers. Shifting to profitability, North America segment operating income was $9.3 billion, an increase of $2.8 billion year over year. Operating margin was 8%, up 190 basis points year over year. In the international segment, operating income was $1.3 billion, an improvement of $1.7 billion year over year, operating margin was 3%, up 400 basis points year over year. This marks the eighth consecutive quarter where we've seen year over year margin improvement in both the North Two thousand twenty-four also marks the second year in a row where we've lowered our global cost to serve on a per unit basis. In the fourth quarter, we saw strong productivity in our transportation network, from improved inventory placement, higher units per package, and reduced travel distances. We also saw improved productivity in our fulfillment centers. Overall, our teams executed extremely well throughout the quarter, and particularly during our peak seasons. I want to thank them for all they do to deliver for our customers. Looking ahead, we have several opportunities to keep lowering our costs through even better inventory placement, which also allows us to deliver items to customers faster. In the US, we're tuning our inbound network and continuing to expand our same day delivery network. Globally, we're adding automation and robotics throughout our network. While these efforts will take time to implement, and progress may not be linear, We have a good plan to continue to drive improvements in our cost structure. Advertising remains an important contributor to profitability in the North America and international segments. This quarter, we saw strong advertising revenue growth on an increasingly large base. We will also continue to invest in experiences that have potential to be important to customers in Amazon long term. In areas like Alexa, health care, and grocery, as well as satellites in the coming months. As a reminder, we currently expense the majority of the cost associated with the development of our satellite network. We will capitalize certain costs once the service achieves commercial viability, including sales to customers. Moving next to our AWS segment, revenue was $28.8 billion, an increase of 19% year over year. AWS now has an annualized revenue run rate of $115 billion. During the fourth quarter, we continue to see growth in both generative AI and non-generative AI offerings. As companies turn their attention to newer initiatives, bring more workloads to the cloud, restart or accelerate existing migrations from on-premise to the cloud, and tap into the power of generative AI. Customers recognize to get the full benefit of generative AI, they have to move to the cloud. AWS reported operating income of $10.6 billion, an increase of $3.5 billion year over year. This is the result of strong growth, innovation in our software and infrastructure to drive efficiencies, and continued focus on cost control across the business. As we've said in the past, we expect AWS operating margins to fluctuate over time, driven in part by the level of investments we're making. Additionally, we increased the estimated useful life of our servers starting in 2024, which contributed approximately 200 basis points to the AWS margin increase year over year in Q4. Now turning to our capital investments. As a reminder, we define these as a combination of cash CapEx plus equipment finance leases. Capital investments were $26.3 billion in the fourth quarter, and we think that run rate will be reasonably representative of our 2025 capital investment rate. Similar to 2024, the majority of the spend will be to support the growing need for technology infrastructure. This primarily relates to AWS, including support demand for our AI services, as well as tech infrastructure to support our North America and international segments. Additionally, we're continuing to invest in capacity for our fulfillment and transportation network to support future growth. We're also investing in same-day delivery facilities and our inbound network, as well as robotics and automation, to improve delivery speeds and to lower our cost to serve. These capital investments will support growth for many years to come. Turning to our revenue guidance for Q1, net sales are expected to be between $151 billion and $155.5 billion. I'd like to highlight two items impacting our Q1 revenue guidance. First, we estimate the year-over-year impact of changes in foreign exchange rates based on current rates, which we expect to be a headwind of approximately $2.1 billion in Q1 year over year, or 150 basis points. As a reminder, global currencies can fluctuate during the quarter, and just as we saw in Q4 with the strengthening of the dollar versus most other currencies. Second, a reminder that we are comping the impact of last year's leap year. The extra day contributed approximately $1.5 billion of additional net sales across our businesses in Q1 2024, or about 120 basis points to the year-over-year growth rate, which impacted all segments. Q1 operating income is expected to be between $14 billion and $18 billion. This guidance includes the estimated impact of certain updates to the useful life of our fixed assets. I'll provide a bit more detail in a moment, but on an aggregate basis, we estimate this will decrease full-year 2025 operating income by approximately $400 million for the assets on our balance sheet as of December 31, 2024. First, in Q4, we completed a useful life study for our servers and network equipment and observed an increased pace of technology development. Particularly in the area of artificial intelligence and machine learning. As a result, we're decreasing the useful life for a subset of our servers and networking equipment from six years to five years beginning in January 2025. We anticipate this will decrease full-year 2025 operating income by approximately $700 million. In addition, we also early-retired a subset of our servers and network equipment. We recorded a Q4 2024 expense of approximately $920 million from accelerated depreciation and related charges and expect this will also decrease full-year 2025 operating income by. Both of these server and network equipment use for life changes primarily impact our AWS segment. Lastly, we also completed a useful life study for certain types of heavy equipment used in our fulfillment centers. And are increasing the useful life from ten years to thirteen years beginning in January 2025, we anticipate this will increase full-year 2025 operating income by approximately $900 million. As we turn the page to 2025, we're energized by the great work our teams have delivered. We'll remain focused on driving even better customer experiences, and we believe putting customers first is the only reliable way to create lasting value for our shareholders. With that, let's move on to your questions.","evidence_gemma_new":"Worldwide revenue year over year","evidence_llama_3_3":"Worldwide revenue year over year","evidence_qwen_3_30b":null,"gemma_new_max":187800000000.0,"gemma_new_min":187800000000.0,"llama_3_3_max":187800000000.0,"llama_3_3_min":187800000000.0,"qwen_3_30b_max":null,"qwen_3_30b_min":null}
{"symbol":"BA","year":2023,"quarter":1,"date":"2023-Q1","chunk_id":2,"sub_chunk_id":0,"centroid_label":"737s deliveries","agreed_value":450.0,"count":2,"chunk":"Now I will turn the call over to Dave Calhoun. David Calhoun: Thanks, Matt. Good morning, everyone, and thank you for joining us. We had a solid first quarter, and we continue to make real progress, steady progress in our recovery. Challenges remain. There's more to do. But overall, we feel good about the operational and financial outlook shared last November, including cash flow and delivery ranges set for 2023 as well as for the 2025, 2026 time frame, where we can see $10 billion in annual free cash flow. Let's start with an update on our 737. Our team has been working hard over the last week. We've been progressing in our early inspection of affected airplanes. The issue's understood. It's isolated to two specific fittings, and we know what we have to do. The work will impact the timing of our deliveries over the next several months. However, we still expect to deliver 450 737 airplanes this year. Unfortunately, the timing of these delivery shortfalls will impact summer capacities for many of our customers, and we feel terrible about that. Deliveries and production will be lower near term, but we will recover over the coming months, and we plan to increase our rate to 38 per month later this year. As mentioned last week, we're also not changing the supplier master schedule to ensure that they can keep pace, and we're comfortable adding parts inventory. Stepping back, we appreciate that Spirit promptly notified us of this issue. They're an important partner. We're working closely on the recovery plan, and we are working in a very constructive way. We will continue to work transparently with the FAA as always. As well, we will work transparently with our customers to support their fleet planning and scheduling requirements. As we mentioned last week, there's no immediate safety of flight issue, and the fleet can continue to operate safely. We will work diligently through this process together. We will prioritize safety. We will prioritize quality and transparency every step of the way. Taking a wider view. I couldn't be more proud of the MAX team and the progress that we have made. We now have over 1,000 737 MAX airplanes flying in the fleet. And since our return to service, the fleet has safely flown more than 4 million flight hours with exceptional reliability. And with respect to China, our focus has been and is on supporting our customers and their return to service. All MAX operators have returned to flying airplanes in service, and 45 of their 95 airplanes are back in the sky. In addition, the CAAC released their 737 Aircraft Evaluation Report. It's an important step toward the delivery of aircraft that are currently in Boeing's possession. We will follow the lead of our customers. Moving to BCA. I'll start with orders. Demand remains very strong across all of our product lines. We booked 107 net airplane orders in the first quarter. And on top of this, we were proud to announce major customer commitments earlier this year: Air India, 190 737 MAX, 20 787s and 10 777Xs; and Riyadh Air, the newly established airline in Saudi Arabia; and Saudia, ordering up to 121 787 airplanes. On the subject of deliveries, with strong demand, we're working to meet our customer commitments. We delivered 130 commercial airplanes in the quarter, including a strong month in March with 64 deliveries. However, variation in monthly deliveries remains high, and we still have work to improve stability. Of course, that starts with the 737, as I mentioned earlier. On the subject of production, we are also steadily increasing rates across key programs to meet the robust demand. And we'll prioritize our stability and not push the system too fast. And yes, we will pause when we are notified of defects. On development, we're progressing across all of our key development programs. And certification time lines have not changed on the 737-7, -10 or the 777X. Now let me switch to BDS, Boeing Defense. In defense and space, we still have more work to do to improve our operating performance. But our portfolio is well positioned, and our products are performing well in the field. First quarter results were impacted by the added cost on the KC-46A Tanker program, driven by a supplier quality issue that we previously shared last month. The good news is we understand it, and we're progressing through that rework. On the operational side, the tanker is continuing to perform its mission well. Customers' decision on the KC-Y is a great opportunity for us, and it reflects the capabilities the tanker is delivering for the United States Air Force. On the demand side, we're continuing to see solid order activity. In the quarter, we booked key orders on the tanker, the Apache and E-7. In addition, we are accelerating the delivery of missiles and weapons in response to our customers' needs. We're also encouraged by the initial presidential budget request recently released. It's in line with our expectations. And our portfolio and capabilities are well positioned to support the needs of the nation and our allies, both in the short and the long term. Our defense business is well positioned, and we'll continue to improve operational performance to more normalized levels. In Boeing Global Services, another very strong quarter. Solid, steady performance has enabled both commercial and military customers to keep fleets flying through a very dynamic time. The services business has now fully returned to pre-pandemic levels. I'm very proud of the team and the progress that they have made. All things considered across the businesses, we remain on the right path. We'll work through most recent MAX issue transparently and in partnership with our customers and our suppliers. We're focused on the long term, and we'll continue to drive stability across the business and the supply chain. In our November guidance, we did not predict significant supply chain improvement until well into 2024. We remain in the same place today and share that same view. That said, we've seen improvement, and our line of sight is getting better every day. Demand is strong and our portfolio is well positioned. We have a robust pipeline of development programs, and we're innovating in new capabilities to prepare for the next generation of products. Lots of work to do, but we're on track to restore our operational and our financial strength. And we still feel good about the outlook that we've shared, both for this year and for our longer term. With that, I'll turn it over to Brian.","evidence_gemma_new":null,"evidence_llama_3_3":"737 deliveries this year","evidence_qwen_3_30b":"737 deliveries this year","gemma_new_max":null,"gemma_new_min":null,"llama_3_3_max":450.0,"llama_3_3_min":450.0,"qwen_3_30b_max":450.0,"qwen_3_30b_min":450.0}
{"symbol":"BA","year":2023,"quarter":3,"date":"2023-Q3","chunk_id":2,"sub_chunk_id":0,"centroid_label":"737s deliveries","agreed_value":387.5,"count":2,"chunk":"Dave Calhoun: Thank you, Matt, and thanks to all for joining us this morning. Let me start with a comment on the conflict in Israel and Gaza. We were saddened to see the horrific attacks on Israel and the escalating conflict in the region that is resulting in a significant humanitarian emergency. We will continue to monitor the situation. We will focus on the safety of our employees and we will aid those in need. As always, we'll follow the lead of the U.S. government and we'll coordinate closely with government agencies, customers and suppliers, always with safety, security and well-being as our top priority. Now let me turn to the quarter. As you know, we ran into a few challenges over the last several months, but we've demonstrated that we know how to overcome obstacles and it will continue to do just that. We knew 2023 would be a bumpy ride. We have more work to do, but overall, we're making progress in our recovery and we are on track to meet the financial goals we shared for this year and for the 2025\/2026 time frame. A time frame I refer to as stability. As you know, free cash flow has been our primary financial metric through this recovery. And based on our performance year-to-date, we still plan to be in the guidance range for the year as well as the $10 billion target by 2025 and 2026. This is a complex long cycle business and driving stability takes time, especially as an entire industry works its way back from the impact of a global pandemic. We expect challenges to come our way. And when they do, we are transparent. We take action and we move forward. So month to month and quarter to quarter, it can be tough to predict, but we're focused on the long-term and we're taking the tough actions now to ensure that the long-term future is strong. So with that, I'll highlight a few key updates around the business. Boeing Commercial, BCA, in commercial, demand continues to be incredibly robust. We booked about 400 net orders in the quarter, including 150 737 MAX-10s for Ryanair, 50 787s for United Airlines, and 39 787s for Saudi Arabian Airlines. With demand strong, our focus remains on delivering airplanes. We are seeing increased stability and quality performance within our own factories, but we're working to get the supply chain caught up to the same standards. Our production system is poised for steady and efficient increases, but we won't push the system too fast and will ensure the supply base is in lockstep with us. On the 737, we're moving through rework on the most recent non-conformance in the aft pressure bulkhead. That work slowed production and deliveries down in the course of the quarter, and given our year-to-date total, we now expect 737 deliveries for the year to be in this 375 to 400 range. While a setback, we'll regain our momentum as we progress through the issue. We are keeping our suppliers hot, according to the master schedule. We plan to complete the production transition to 38 per month by the end of the year, and still plan to reach the key rate of 50 per month by that 2025 and 2026 time frame. Important to note, with respect to our supply chain, delivery shortfalls have been driven by non-conformances, not actual supply chain constraints. On the 787, the program is demonstrating improved stability. We are now transitioning production from four to five per month and expect to meet our delivery range of 70 to 80 for the year. And longer term, we're on track for the rate step up to ten per month by 2025 and 2026. To ensure our broader recovery and return to more normal margins, the key focus continues to be on liquidating our 787 and 737 inventory so that we can eliminate those shadow factories and focus our resources on the production floor, all of our resources. Nonconformance costs are exponentially higher on all of those finished airplanes. We still plan to deliver most, if not all, of the inventory by the end of next year, which will set us on a strong path for 2025 and 2026. With respect to China, we are encouraged by recent signs of progress and continue to work closely with our customers on the timing of returning to delivery. As I mentioned, supply chain performance will be a key enabler. As Spirit Aerospace Systems brings in new leadership, we're looking forward to working with Pat. Pat Shanahan is known by The Boeing Company. We have great respect for his abilities on the shop floor, and we're pleased to have recently established a mutually beneficial agreement that will enhance stability of our production system and help us deliver on our customer commitments, a true win-win. Lastly, on the development side, we're progressing across our commercial programs, and our timelines are unchanged on the 737-7 and the 737-10 and the 777X and 777-8 freighter. A reminder, as always, the FAA will ultimately control the timing. Boeing Defense Systems, BDS, in Defense and Space, we still have more work to improve operating performance. Results this quarter were impacted by higher estimated costs on the VC-25B program. We are maturing through this build process, incorporating engineering changes to better support the installation process, and we resolved important supplier negotiations over the course of the quarter. I'll note that none of these items will impact the performance and capability of the end product. The increased estimates reflect the process by which we build the airplanes. And in a fixed price environment, any unplanned hurdles can introduce unrecoverable costs. At the end of the day, we have two airplanes to build. We are getting past these hurdles and are committed to delivering two exceptional airplanes for our customer. Separately, as you saw, we are also expecting higher costs on a satellite program as we build out the Constellation and meet our life cycle commitments for our customer. We're working on real innovation and advanced capabilities in this space and see real potential market as we deliver against this commitment. More broadly across BDS, we're stabilizing operations and taking comprehensive actions to improve performance, including lean initiatives, contracting disciplines, factory improvements, engineering investments and more. We're seeing some early signs of progress, but financial improvement at BDS' lower volumes takes time. Recovery in BDS is slower than we'd like, slower than I'd like, but we're confident in the future and our path to normalizing BDS margin performance by that 2025 and 2026 time frame is intact. The confidence is due in part to key milestones we're starting to hit and the strong demand we're seeing. For example, we delivered the first T-7A to the U.S. Air Force this quarter. We also captured a key award from the U.S. Army for 21 Apache helicopters. Additionally, we continue to invest and position ourselves for significant opportunities in proprietary programs. The backlog at BDS is $58 billion, and nearly 30% of that is outside the United States. We're proud of the role our products play in protecting global security and national defense. Demand is strong, we're confident in the business, and we will continue to improve operational performance to more normalized levels. Boeing Global Services, BGS, in Global Services, the team had another strong quarter, both on the commercial and the government side with improved revenue and earnings relative to the third quarter of 2022. The financials were again driven by strong operating performance and the team's ability to hit key milestones and capture new business. In the quarter, BGS delivered the 150th 737-800 Boeing Converted Freighter, received an award from the U.S. Navy for P-8 trainer upgrades and signed a digital maintenance agreement with multiple airlines. Our services team represents Boeing with our customers nearly every minute of every day. The work they do to keep military and commercial fleets flying is best-in-class, and we're proud of the performance that they're delivering. A step back with respect to the market outlook. Looking across all three business units, demand for our products and services continues to be incredibly strong. Our backlog is at $469 billion, including over 5,100 commercial airplanes. Over the next ten years, the value of the markets we serve across commercial, defense, space and services is estimated at $10.7 trillion according to our most recent Boeing market outlook. Our products deliver exceptional capability in strong and growing markets, and our portfolio is well aligned with our customers' needs. The demand is there to support our recovery. It is on us to perform, and we will remain disciplined and patient in the process. Brian, I'll turn it over to you.","evidence_gemma_new":"737 deliveries the year","evidence_llama_3_3":null,"evidence_qwen_3_30b":"737 deliveries 375 to 400","gemma_new_max":387.5,"gemma_new_min":387.5,"llama_3_3_max":null,"llama_3_3_min":null,"qwen_3_30b_max":387.5,"qwen_3_30b_min":387.5}
{"symbol":"BA","year":2023,"quarter":3,"date":"2024-FY","chunk_id":40,"sub_chunk_id":0,"centroid_label":"737s deliveries","agreed_value":456.0,"count":2,"chunk":"Seth Seifman: Hey. Thanks very much. Good morning everyone. Brian, with your comment that the 2023 cash flow is going to come in at the low end of the range, your expectation for growth in 2024. I guess, should we be expecting 2024 to be in the 2023 range when we're trying to get a draw beat on where 2024 is? And then within that, the 737s, sometimes I think it's hard to bridge between production and deliveries. If it's 38 a month exiting the year, can we say at least 38 times 12 next year plus some chunk of the inventory that's remaining?","evidence_gemma_new":null,"evidence_llama_3_3":"737s deliveries 2024","evidence_qwen_3_30b":"737s deliveries next year","gemma_new_max":null,"gemma_new_min":null,"llama_3_3_max":456.0,"llama_3_3_min":456.0,"qwen_3_30b_max":456.0,"qwen_3_30b_min":456.0}
{"symbol":"BA","year":2024,"quarter":4,"date":"2024-Q4","chunk_id":9,"sub_chunk_id":0,"centroid_label":"737s deliveries","agreed_value":35.0,"count":2,"chunk":"A - Brian West: David, a little bit on how to think about 737 deliveries for the year. We're not putting out formal guidance, a little too early for that. But let's just talk about a framework for the year. So January is off to a very solid start, and delivery should be in the high 30\u2019s for the month. Now, keep in mind, some of these airplanes are the benefit of clearing the delivery center ramp that had accumulated in the November or December time frame. So there's an advantage of a nice tailwind entering the year. We expect February will be lighter because there's fewer manufacturing days and also the timing of the factory restart, and then March is likely to be better than February as we begin to get more predictability. So as we've said, the first half is going to reflect our gradual, steady restart of the factory. And the second half is likely going to benefit from achieving higher production rates, which include the 38 per month target and possibly higher based on approval from the FAA, as Kelly mentioned. So, as we sit here today, we've got a lot of work in front of us. You know, 2025 in some ways could look like 2023, maybe a bit better if things go our way.","evidence_gemma_new":"737 deliveries January","evidence_llama_3_3":"737 deliveries January","evidence_qwen_3_30b":null,"gemma_new_max":35.0,"gemma_new_min":35.0,"llama_3_3_max":35.0,"llama_3_3_min":35.0,"qwen_3_30b_max":null,"qwen_3_30b_min":null}
{"symbol":"BA","year":2023,"quarter":1,"date":"2023-Q1","chunk_id":17,"sub_chunk_id":0,"centroid_label":"boeing VAL","agreed_value":38.0,"count":2,"chunk":"Brian West: Yes. Let's start with that back end. So we will have a plan to get to 38. In terms of subsequent ramps to higher numbers, let's let that take care of itself. Let's focus on getting to 38. And we still believe that 50 is the number in '25, '26. And in terms of the near term, so in terms of what's in front of us, we know barrel by barrel in Spirit's factory and obviously, we know everyone in our factory in terms of what's got to get done. If the unit is not too far into the production -- our production cycle, the time to take to repair one of these, it's days. As you have the vertical fin on an airplane, obviously, it's more complicated, then it takes more time. But we will sort our way out. In the near term, getting back to production levels that are normal will be months. In terms of the inventory that we've described, the 225 finished goods inventory, 75% of those are going to have to have this fix. The good news is that this will not take us off our path to liquidate that inventory in the 37 of 225 by the -- largely by the time we get out of 2025. It's going to cost a little bit more. We provided for that -- 2024 rather, yes, liquidated by 2024. It will take a little bit more cost, but we factored that into our closing position in the first quarter. So all in all, we think we know what's in front of us and working closely with Spirit. And as we move our way out of the short-term recovery, then we get back to an area we can start to get to the 38. And I think that the -- for us, the biggest thing is that, one, we're calling it out; and two, we have not changed the master schedule. And that's a big deal. We want to make sure that the supply chain keeps pace as we move our way through the rest of the year.","evidence_gemma_new":"38","evidence_llama_3_3":null,"evidence_qwen_3_30b":"38","gemma_new_max":38.0,"gemma_new_min":38.0,"llama_3_3_max":null,"llama_3_3_min":null,"qwen_3_30b_max":38.0,"qwen_3_30b_min":38.0}
{"symbol":"BA","year":2023,"quarter":2,"date":"2023-Q2","chunk_id":45,"sub_chunk_id":0,"centroid_label":"boeing VAL","agreed_value":38.0,"count":2,"chunk":"Dave Calhoun: Yes. It is. As you suggest, 38 has to come and has to come in a stable form so that we are not up and down every month. But maybe more important than that, we now have such good visibility into the supply chain. We know whether they are ready for the next \u2013 for 40, 42, 44, etcetera. So, I just think it\u2019s the combination of much better visibility on each of those step-ups and yes, our own factories assembling and delivering at a steady pace. But you will see all that just like we do.","evidence_gemma_new":"38","evidence_llama_3_3":null,"evidence_qwen_3_30b":"38","gemma_new_max":38.0,"gemma_new_min":38.0,"llama_3_3_max":null,"llama_3_3_min":null,"qwen_3_30b_max":38.0,"qwen_3_30b_min":38.0}
{"symbol":"BA","year":2023,"quarter":3,"date":"2023-Q3","chunk_id":48,"sub_chunk_id":0,"centroid_label":"boeing VAL","agreed_value":38.0,"count":2,"chunk":"Brian West: Answer your first question, the answer is yes, for sure. And in terms of how we think about the rate, we, the system, as Dave mentioned has always maintained to be hot because we want to make sure that they know that the demand signal is there. And we want them to continue focus on that master schedule. How exactly as we start the year we'll be able to count deliveries relative to that 38, we'll see. But right now, job one is to exit \u2013 get the non-conformance behind us. Remember, we had about a 30 aircraft growth between the second quarter and the third quarter into the inventory airplane. So that's going to be working its way out of the system relatively quickly, which gives us confidence in the November, December time frame. And then as we think about prime of the pump for 38 per month, we're going to move towards January and beyond and hopefully some pretty good execution. So we'll have to wait and see exactly how that plays out, but the underlying system is going to stay at 38. And as we get through next year, obviously, there'll be certain rate ramps that we'll describe later. But right now, if we have everything be coordinated across the broad supply chain, I think we'll be fine.","evidence_gemma_new":"38","evidence_llama_3_3":"38","evidence_qwen_3_30b":null,"gemma_new_max":38.0,"gemma_new_min":38.0,"llama_3_3_max":38.0,"llama_3_3_min":38.0,"qwen_3_30b_max":null,"qwen_3_30b_min":null}
{"symbol":"BA","year":2023,"quarter":4,"date":"2023-Q4","chunk_id":3,"sub_chunk_id":0,"centroid_label":"boeing VAL","agreed_value":10.0,"count":2,"chunk":"Brian West: Thanks Dave and good morning everyone. Let's start off with the total company financial performance for the quarter. Revenue was $22 billion. That's up 10% year-over-year. Growth was driven by higher commercial volume and favorable mix. The core loss per share was $0.47, better than last year primarily on improved commercial volume, better mix and lower abnormal costs. They were offset by lower defense margins and higher period expenses, including R&D, which we expected. Free cash flow was $3 billion in the quarter, in line with the prior year and up sequentially from the third quarter primarily due to improved commercial deliveries and strong order activity, which show favorable advanced payment timing, some of which was anticipated in the first quarter of 2024. Turning to the next page, I'll cover Boeing Commercial Airplanes. BCA booked 611 net orders in the quarter with 411 737s, including an order with Akasa, 98 777Xs largely an Emirates order and 83 787s. We have over 5,600 airplanes in backlog valued at $441 billion. BCA delivered 157 airplanes in the quarter and revenue was $10.5 billion. That's up 13% driven by higher widebody deliveries and favorable mix. Operating margin was just positive at 0.4%, driven by returning to normal 737 delivery levels in the quarter, improved mix as well as lower abnormal costs associated with getting to five per month on the 87 and resuming production on the 777X. Now, I'll give more color on the key programs. On the 737, we delivered 110 airplanes in the quarter and 45 in December. The program also began FAA certification flight testing on the 737-10 in December. For the year, we delivered 396 airplanes, on the upper end of the revised guidance range we provided in October. Per the FAA announcement, we'll maintain production at 38 per month and work transparently with the FAA to complete all requirements for future increases. At the same time, we'll continue to prioritize the master schedule to avoid disruption in our supply chain. On the 737-9, we're actively supporting our customers' return to service activities. And as of today, the majority are back flying. In our factory, we have 10 -9s in production, all of which will undergo the FAA group inspection process prior to delivery. Spirit has also adopted this inspection routine in its factory. The quarter ended with about 200 MAX airplanes in inventory. It's important to think about this inventory in three buckets. First, there are 140 737-8s built prior to 2023. The vast majority are for customers in China and India. We still expect to deliver most of these airplanes by year-end as we work towards shutting down the shadow factory. In the second bucket, there are around 25 airplanes produced in 2023 that are still in WIP, given the disruptions in the second half of last year. And we expect these to deliver in 2024. And lastly, there are approximately 35 -7 to -10s that we will deliver once those airplanes are certified, the timing of which will be determined by the FAA. Moving on to the 787. We delivered 23 airplanes in the quarter, including 11 in December. For the year, we delivered 73 airplanes, within the guidance range we originally outlined for 2023. The program successfully transitioned production to five per month in the quarter and still plan to steadily work our way to 10 per month in the 2025, 2026 timeframe. We ended the quarter with approximately 60 airplanes in inventory, about 50 of which require rework, which continues to progress steadily. We still expect to deliver most of these airplanes by year-end as we finish the rework and shut down the shadow factory. We booked $77 million of abnormal costs in the quarter and have approximately $300 million left to go that will wind down by year-end, in line with our expectations. On the 777X, we resumed production in the quarter and continue to progress along the program timeline, which remains unchanged. During the quarter, the Emirates order for 90 777Xs brought the program backlog to more than 400 airplanes and also extended the accounting quantity. We continue to follow the lead of the FAA as we progress through the certification process, including working to obtain approval from the FAA to begin certification flight testing. We booked $71 million of abnormal costs in the quarter, which is now fully behind us after resuming production, in line with our expectations. Moving to the next page, Boeing Defense and Space. BDS booked $8 billion in orders during the quarter, including the Lot 10 Award from the US Air Force for 15 KC-46A Tankers. The backlog is now at $59 billion. Revenue was $6.7 billion, up 9% on the tanker award and improved volume and BDS delivered 52 aircraft and two satellites in the quarter. Operating margin was minus 1.5% in the quarter, a sequential improvement from 3Q, but still we have more work to do. 4Q results were impacted by cost true-ups on three fixed-price development programs totaling $139 million as well as unfavorable performance and mix on other programs. Our game plan to get BDS back to high single-digit margins by the 2025-2026 timeframe remains unchanged. Our core business remains solid, representing 60% of our revenue and performing in the mid to high single-digit margin range. The demand for these products is very strong and we need to execute, compete and grow these offerings. On the 25% of the portfolio primarily comprised of fighter and satellite programs, operational performance stabilized as we exit the year. And as a result, the fourth quarter saw improved margin trends, although still negative. We still expect to return to the strong historical performance levels as we roll out new contracts with tighter underwriting disciplines as we move into the 2025-2026 timeframe. Lastly, we have our fixed-price development programs that represent the remaining 15% of revenue. Despite the relatively modest cost trips [ph] in the quarter, we continue to focus on maturing these programs and retiring risks quarter in, quarter out. And we made some good progress in the fourth quarter. In addition to capturing the tanker award from the US Air Force, the program delivered nine aircraft in the fourth quarter, continuing to build positive momentum in spite of the supply-related disruptions to the factory that we faced earlier last year. And on the T-7A, the first Red Hawk arrived at Edwards Air Force Base in November, formally starting the Air Force development flight test campaign for the aircraft. Overall, the defense portfolio is poised to improve. The strong demand across the customer base, the products are performing in the field, and we're confident that our efforts to drive execution and stability will return this business to performance levels that our investors recognize. Moving now to the next page, Boeing Global Services. BGS had another strong quarter. They received $6 billion in orders and the backlog is now at $20 billion. Revenue was $4.8 billion, up 6% primarily on favorable commercial volume and mix. Operating margins were a very strong 17.4%, an expansion of 350 basis points versus last year as both our commercial and government businesses were delivering double-digit margins. In the quarter, BGS opened a parts distribution center in India and received a follow-on contract to provide sustainment for the C-17. Turning now to the next page, I'll cover cash and debt. On cash and marketable securities, we ended the quarter at $16 billion. On debt, the balance remained flat at $52.3 billion and over the next few days, we'll pay down $4 billion of the $5 billion of maturities coming due this year from our available cash on hand. We continue to maintain access to $10 billion of revolving credit facilities, all of which remain undrawn. Our liquidity position remains strong. Our investment-grade credit rating continues to be a priority. And we're developing -- deploying capital in line with the portage [ph] we've shared previously: invest in the business and pay down debt. Turning to the next page, I'll cover our full year financials. Full year revenue was $77.8 billion, up 17% year-over-year. Growth was driven by improved commercial volume primarily on higher 787 deliveries. The core loss per share was $5.81, better than prior year primarily on improved commercial volume and mix as well as lower fixed price development charges in defense. Free cash flow was $4.4 billion for the year, up versus prior year primarily on higher 787 deliveries and favorable receipt timing that was partially offset by higher expenditures as we increase production rates and invest in the business. While we're postponing issuing 2024 guidance today, given our current focus, we're committed to sharing timely and transparent updates moving forward. I would like to provide some additional context on our path forward. We always knew 2024 was going to be an important year in our recovery. Based on what we know today, we expect another steady year of free cash flow, driven by the 737 production at 38 per month, ongoing execution of the 787 toward our long-term objectives, continued liquidation of our 737 and 787 inventory, and continued focus to wind down both shadow factories. Our defense business will continue to improve as we mature fixed-price programs and transition recently challenged programs with better underwriting disciplines that we've already started to see and BGS will continue to generate strong free cash flow. Longer term, we're focused on quality and stability, which will ultimately drive free cash flow. Nothing has changed on the demand front, and the backlog is strong and growing. Remember, our 2025-2026 guidance was based on achieving stability and we have to earn that by applying resources to fix our issues and demonstrate predictability one airplane at a time, side-by-side with our regulator. This team is up to the challenge, and we'll apply any and all resources to get back to deliveries that satisfy our customers and underwrite the long-term demand profile. We're still confident in the goals we laid out for 2025-2026 although it may take longer in that window than originally anticipated, and we won't rush the system. With that, I'll turn it back to Dave for closing comments.","evidence_gemma_new":"10% year-over-year","evidence_llama_3_3":"Boeing 10,000","evidence_qwen_3_30b":null,"gemma_new_max":10.0,"gemma_new_min":10.0,"llama_3_3_max":10000.0,"llama_3_3_min":10000.0,"qwen_3_30b_max":null,"qwen_3_30b_min":null}
{"symbol":"BA","year":2023,"quarter":1,"date":"2023-Q1","chunk_id":3,"sub_chunk_id":0,"centroid_label":"cash flow","agreed_value":14800000000.0,"count":2,"chunk":"Brian West: Great. Thanks, Dave, and good morning, everyone. Let's go to the next page and cover the total company results. First quarter revenue was $17.9 billion. That's up 28% year-over-year, primarily driven by higher volume in both commercial and defense. Core operating margin was minus 2.5%, and the core loss per share was $1.27, both big improvements versus last year due to higher commercial volume and improved operating performance. Margins and EPS were negative driven by expected abnormal costs and period expenses as well as a charge on the KC-46 Tanker program that I noted last month. Free cash flow was a usage of $786 million in the quarter, significantly better versus last year driven by the higher commercial deliveries as well as an advanced payment tied to lot 9 on the tanker program, another important award for the KC-46 franchise. As we noted in our last earnings call, cash was lower this quarter than the fourth quarter due to lower wide-body deliveries and expected seasonality. Turning to the next page, I'll cover Commercial Airplanes. Let's start with orders. BCA booked 107 net orders in the quarter, including JAL and Lufthansa, and we have a backlog of over 4,500 airplanes valued at $334 billion. Moving to the figures on the left. Revenue was $6.7 billion, up 60% year-over-year, driven by 130 airplane deliveries with increases on both the 87 and the 37 programs, partially offset by 87 customer considerations. Operating margin was minus 9.2%, which was significantly better than last year. But margins are impacted by expected abnormal costs and period expenses, including higher R&D spending. Let's take a minute on the 737 program. The 37 had 113 deliveries in the first quarter, up 31% year-over-year, including 53 deliveries in the month of March. Picking up where Dave left off regarding the supplier fuselage item. We found the issue. We booked a nonmaterial financial impact in the quarter. We understand the rework steps required, and we started repairs on several airplanes. And although near-term deliveries will be impacted, we still expect to deliver between 400 and 450 737s this year. April and 2Q deliveries will be lower, but the first half monthly average will be about 30 airplanes per month, in line with what we said previously. The second half deliveries are expected to be around 40 per month, with sequential quarterly improvement in the back half. While the high end of the delivery range is pressured, ultimate performance will be dictated by the pace of the fuselage recovery. Regarding inventory, we ended the quarter with approximately 225 MAX airplanes in inventory, including 138 that were built for customers in China and roughly 30 -7s and -10s. Within these 225 inventoried airplanes, roughly 75% will require the fuselage rework. And the number of inventoried airplanes will likely increase in 2Q, and we still expect most to be delivered by the end of 2024. On production, we're completing airplanes in final assembly and expect to recover in the coming months, paced by fuselage availability. We're supporting Spirit through this recovery, including manufacturing and engineering resources as well as a cash advance. To support overall supply chain stability, we're not changing the master schedule, including anticipated production rate increases and we've contemplated any near-term parts inventory builds into our forward look. Within final assembly, as Dave mentioned, we expect to increase our rate to 38 per month later this year and 50 per month in the '25, '26 time frame. Moving on to the 787 program. We had 11 deliveries in the first quarter and still expect 70 to 80 deliveries this year. We're producing at 3 per month and still plan to reach 5 per month by year-end. We ended the quarter with 95 airplanes in inventory, most of which will be delivered by the end of 2024. We booked 379 of abnormal costs in the quarter, in line with expectations, and there's no change to the total estimate of $2.8 billion. We still expect abnormal to be largely done by the end of this year. Finally, on the 777X program, efforts are ongoing. Both the program time line and the abnormal estimate of $1.5 billion are unchanged. We booked $126 million of abnormal costs in the quarter, in line with expectations. With that, let's turn to the next page and go through defense and space. BDS booked $10 billion in orders during the quarter, including awards for the U.S. Air Force for 15 KC-46 Tankers and an E-7 development contract as well as 184 Apaches for the U.S. Army. The BDS backlog is $58 billion. Moving to the figures on the left. Revenue was $6.5 billion, up 19% year-over-year, driven by the KC-46 Tanker award, program milestone completions and underlying volume. We delivered 39 aircraft and 3 satellites in the quarter and also began production of the MH-139 Grey Wolf. Operating margin was minus 3.2%, significantly higher than last year but still negative, driven by a $245 million pretax charge on the tanker program, which I noted last month. Let me give you a little bit of context on the overall BDS portfolio. Remember, 15% of the revenues in the quarter are the firm fixed-price development contracts. These contracts get a lot of attention, and there is a commitment to derisk these programs as much as we can as we move through the development cycles and into full-scale, stable production. Next and importantly, over 60% of revenues in the quarter collectively delivered double-digit margins. We have many important programs that are performing to historical performance levels. The balance of the 1Q revenue is made up of a small number of established programs that are experiencing negative margins on certain contracts due to specific near-term supply chain and factory stability pressures that we've highlighted previously. It will take time to work through these issues, and we fully expect that these programs will improve through the course of this year and return to normal margin levels over time. The BDS team is fully committed delivering the development programs to our customers. We've implemented new contracting disciplines, accelerated efforts around lean manufacturing and we're investing in innovation and in our people, all of which underpin our plans going forward. Overall, the defense portfolio is well positioned. There's strong demand across the customer base, the products are performing in the field, and we're confident that our efforts to drive execution and stability will return this business to performance levels that our investors would recognize. Turning to the next page, I'll cover Global Services. As Dave mentioned, BGS had another very strong quarter. We received $4 billion in orders during the quarter, and the backlog is $19 billion. Looking to the figures on the left. Revenue was $4.7 billion, up 9% year-over-year, primarily driven by our commercial parts and distribution business. Operating margin was 17.9%, an expansion of 330 basis points versus last year, with both our commercial and government businesses delivering double-digit margins. Operating margins in the quarter were higher than expected due to favorable mix, and we don't assume that will repeat. In the quarter, BGS announced the first Boeing Converted Freighter line in India, delivered AerCap's 50th 737-800 Boeing Converted Freighter and broke ground on a new component operations facility in Jacksonville, Florida. Turning to the next page, I'll cover cash and debt. We ended the quarter with $14.8 billion of cash and marketable securities, and our debt balance decreased to $55.4 billion. We paid down $1.7 billion of debt maturities in the quarter and absorbed the expected cash flow usage driven by seasonality. We also had $12 billion of revolving credit facilities at the end of the quarter, all of which remain undrawn. Our liquidity position is very strong. The investment-grade credit rating is a priority, and we're deploying capital in line with the priorities we've shared: generate strong cash flow, invest the business and pay down debt. And flipping to the last page on our outlook. The 2023 financial outlook is unchanged from what we previously shared, including $3 billion to $5 billion of free cash flow generation. Commercial demand remains strong across our key programs and services. Passenger traffic in February increased over 55% year-over-year and is at 85% of pre-pandemic levels, comprised [indiscernible] domestic and 78% international. Defense demand is robust, and the initial FY '24 presidential budget is in line with expectations. As Dave mentioned, our portfolio and capabilities are well positioned to support the needs of the nation and of our allies. On the supply chain front, as you'll recall when we set out our 2023 framework last November, we predicted the supply chain instability would likely continue. The good news is that we plan for it within our financial and delivery guidance. There's progress in many areas of the supply base, but we will likely face pockets of variability through the rest of this year. We continue to make key investments, including higher inventory buffers and forward deployment of resources as we take appropriate actions to mitigate impacts and improve predictability. From a quarterly perspective, we continue to expect financials to improve throughout the year. On 2Q specifically, we expect core EPS will be roughly in line with 1Q '23 performance absent the tanker charge, as the 737 delivery impacts would be largely offset by higher wide-body deliveries. We expect free cash flow to be breakeven to slightly negative as we work through the 37 recovery. All things considered, we feel good about what's in front of us. And we remain on track to achieve our long-term guidance, including $10 billion of free cash flow in the '25, '26 time frame. With that, I'll turn it over to Dave for any closing comments.","evidence_gemma_new":"cash the quarter","evidence_llama_3_3":"cash","evidence_qwen_3_30b":null,"gemma_new_max":14800000000.0,"gemma_new_min":14800000000.0,"llama_3_3_max":14800000000.0,"llama_3_3_min":14800000000.0,"qwen_3_30b_max":null,"qwen_3_30b_min":null}
{"symbol":"BA","year":2023,"quarter":1,"date":"2023-Q1","chunk_id":38,"sub_chunk_id":0,"centroid_label":"cash flow","agreed_value":4000000000.0,"count":3,"chunk":"Cai Von Rumohr: At the November Investor Day, you laid out a forecast of cash flow of $3 billion to $5 billion this year. And since that time, you've taken a couple of shells, you see the 737, you discussed the 767, and you mentioned because of supply chain having to build to higher inventories. So there were a lot of bad guys in that revised number. What are the good guys to get you home to stay in that number? I know you had the $1 billion tanker advance, but are the advances from airline customers substantially better? What are the good things in that forecast that allow you to maintain it?","evidence_gemma_new":"cash flow this year","evidence_llama_3_3":"cash flow this year","evidence_qwen_3_30b":"cash flow this year","gemma_new_max":4000000000.0,"gemma_new_min":4000000000.0,"llama_3_3_max":4000000000.0,"llama_3_3_min":4000000000.0,"qwen_3_30b_max":4000000000.0,"qwen_3_30b_min":4000000000.0}
{"symbol":"BA","year":2023,"quarter":2,"date":"2023-Q2","chunk_id":3,"sub_chunk_id":0,"centroid_label":"cash flow","agreed_value":13800000000.0,"count":2,"chunk":"Brian West: Thanks, Dave and good morning everyone. Let\u2019s start with the total company financial performance. Second quarter revenue was $19.8 billion, that\u2019s up 18% year-over-year. The growth was primarily driven by higher commercial volume, including increased 787 deliveries. Core operating margin in the quarter was minus 2% and the core loss per share was $0.82. Margins and EPS were driven by expected abnormal costs and period expenses as well as losses on three fixed price development programs in our defense business, which I will cover later. Free cash flow, as Dave mentioned, was positive $2.6 billion in the quarter, significantly better versus last year and last quarter driven by higher commercial deliveries and favorable receipt timing. Relative to our expectations shared at the last earnings call, the strong order activity in the quarter drove over $2 billion of favorable advanced payment timing. Keep in mind, most of this was expected to incur in the third quarter. Turning to the next page, I will cover Commercial Airplanes. BCA booked 460 net orders in the quarter, including 220 with Air India, 39 with Riyadh Air and signed a purchase agreement with Ryanair for up to 300 737 MAX-10s. We now have over 4,800 airplanes in backlog valued at $363 billion. Revenue was $8.8 billion, up 41% year-over-year on 136 airplane deliveries driven by the 87 program. Operating margin was minus 4.3%, a sequential improvement versus the first quarter as anticipated, but remains negative as we continue to be impacted by expected abnormal costs and period expenses, including higher R&D spending. As Dave noted, we worked through a number of operational challenges so far this year. We are making steady progress and we will continue to focus on stability as we look to increase production on key programs. On the Spirit work stoppage, we were pleased to see a quick resolution and we will work through any limited impacts to production. Overall, this is not expected to change our production and delivery outlook. On to the programs. On the 737, we had 103 deliveries in the quarter, including 49 in June, a positive proof point that the production system is stabilizing. In regards to the Spirit fitting issue that we discussed last quarter, in May, we resumed deliveries of rework airplanes and also began producing newly built airplanes meeting our specifications. In light of this progress, we are now transitioning production to 38 per month and still plan to increase to 50 per month in the \u201825-26 timeframe. As we move to the higher rate, we will continue to prioritize stability and it will take some time to consistently deliver at 38 per month off the line. We still project full year 737 deliveries of 400 to 450 with sequential improvement in the second half. We ended the quarter with approximately 228 MAX airplanes in inventory. This includes 85 for customers in China and 55 that have now been remarketed as part of the plan we have previously discussed. We still expect most MAX inventory airplane to be delivered by the end of 2024. Moving on to the 87 program, we had 20 deliveries in the quarter and still expect between 70 and 80 deliveries this year. We increased production to 4 per month during the quarter and still plan to reach 5 per month by year end. We ended the quarter with 85 airplanes in inventory and rework is progressing nicely. And we still expect most to be delivered by the end of 2024. We booked $314 million of abnormal costs in the quarter in line with expectations and there is no change to the total estimate of $2.8 billion, which is largely done by year end. Finally, on the 777X program, efforts are ongoing and the program timeline is unchanged. Abnormal costs were $136 million as expected and we have lowered our total estimate from $1.5 billion to $1 billion, which reflects plans to resume production later this year rather than early 2024. Moving on to the next page and defense and space. BDS booked $6 billion in orders in the quarter, including an award from the U.S. Army for 19 CH-47 Chinooks and the backlog is now at $58 billion. Revenue was flat at $6.2 billion and we delivered 38 aircraft in the quarter. Operating margin was minus 8.5% primarily driven by three fixed price development programs. The first was related to commercial crew tied to scheduled delays that we have previously shared and had a $257 million impact; the second on MQ-25 related to a schedule shift that drove a $68 million impact; and lastly, on the T-7A production contract, we revised the long-term production cost estimates that will occur over several years starting in the 2025 timeframe, which drove an impact of $189 million. These determinations were mostly made over the last few weeks as we closed out the quarter. Similar to last quarter, roughly 60% of the portfolio is generating solid levels of performance, in line with historical margins. But we continue to see operational impacts from labor instability and supply chain disruption on other programs that contributed to lower margins. Looking at BDS in aggregate, it will take time to return to normalized levels of performance. We are confident and we are focused on the path to high single-digit margins in 2025-2026. The strong demand across the customer base, the portfolio is well positioned, and we are focused on execution. Moving on to the next page, let\u2019s cover services. BGS had another very strong quarter. BGS received $4 billion in orders during the quarter and the backlog is $18 billion. Revenue was $4.7 billion, up 10% year-over-year primarily driven by favorable volume and mix in both commercial and government services. Operating margin was 18%, an expansion of 110 basis points versus last year with both our commercial and government businesses delivering double-digit margins. Operating margins in the quarter were higher than expected due to favorable mix, which we don\u2019t expect to continue at these levels. In the quarter, BGS announced an expansion in Poland with a new parts distribution site, a collaboration with CAE. And the Japan Airlines has adopted the Boeing Insight Accelerator for their 787 fleet. Turning to the next page, I\u2019ll cover cash and debt. We ended the quarter with $13.8 billion of cash and marketable securities. And our debt balance decreased to $52.3 billion. In the quarter, we repaid $3.4 billion of maturing debt and provided a $180 million cash advance to Spirit as previously shared. Year-to-date, we\u2019ve repaid $5.1 billion of debt, which is essentially all of our maturities for the year. We also maintained $12 billion revolving credit facilities at the end of the quarter, all of which remain undrawn. Our liquidity position is strong. Investment-grade credit rating continues to be important. And we\u2019re deploying capital in line with the priorities we\u2019ve shared: invest in the business and pay down debt, strong cash flow generation. And flipping to the last page, I\u2019ll cover our outlook. The 2023 overall financial outlook is unchanged from what we previously shared, including $3 billion to $5 billion of free cash flow generation. The operating cash makeup by division will likely be different with BCA and BGS better than expected and BDS lower than expected due to the lower operating performance. Net-net, we still have confidence in the $3 billion to $5 billion of free cash flow for the year. Stepping back to address the state of the market. Commercial demand remains strong across our key programs and services. Cargo remains healthy. Global passenger traffic was up 39% in May and is at 96% of pre-pandemic levels, 105% domestic and 91% international. China pass-through traffic in May was at 87% of pre-pandemic levels with domestic traffic up more than 300% year-on-year and above pre-pandemic levels. Defense demand is also robust, and the FY \u201824 budget continues to progress in line with our expectations. Our portfolio and capabilities are well positioned to support the needs of the nation and of our allies. With demand strong, we still find ourselves in a supply-constrained environment. And our focus continues to be on execution, both within our factories and the supply chain as we steadily increase production. Relative to the first half of 2023, we continue to expect operating and financial performance to improve in the second half. On the third quarter specifically, we expect BCA margins to improve sequentially but remain negative, and we\u2019re not anticipating much in terms of BDS profitability. The 2Q effective tax rate of 63% included cumulative adjustments related to the projected valuation allowance. These adjustments will continue to weigh on the tax rate for the remainder of the year. And given the strong results in 2Q cash flow, 3Q will be lower sequentially, still positive and likely in the hundreds of millions of dollars. All things considered, we feel good about where we\u2019re at on the road to recovery. Right now, we\u2019re squarely focused on meaningful operating performance improvement, including deliveries, revenue, margins and cash flow, all of which will improve as we progress through 2023. And while the challenges remain, we\u2019re headed in the right direction. Ultimately, we expect our operational and financial performance to continue to accelerate, aligned with the plan we laid out at our IR Day last November. And we are confident in $10 billion of free cash flow in 2025, 2026. With that, I\u2019ll turn it over to Dave with some final remarks.","evidence_gemma_new":"cash the quarter","evidence_llama_3_3":"cash second quarter","evidence_qwen_3_30b":null,"gemma_new_max":13800000000.0,"gemma_new_min":13800000000.0,"llama_3_3_max":13800000000.0,"llama_3_3_min":13800000000.0,"qwen_3_30b_max":null,"qwen_3_30b_min":null}
{"symbol":"BA","year":2024,"quarter":2,"date":"2024-Q3","chunk_id":16,"sub_chunk_id":0,"centroid_label":"cash flow","agreed_value":10000000000.0,"count":2,"chunk":"Sheila Kahyaoglu: Thank you guys, and good morning Dave and Brian. Brian, this one's for you. Maybe if we could just think about what's the buffer on free cash flow and the cash balance? How do we think about tapping that RC if cash falls below $10 billion, which is what you're suggesting in Q3? And do you think about Q4 as cash usage or generation? And what's the cadence of inventories and advances maybe over the next two to four quarters, if you can?","evidence_gemma_new":"cash","evidence_llama_3_3":null,"evidence_qwen_3_30b":"cash Q3","gemma_new_max":10000000000.0,"gemma_new_min":10000000000.0,"llama_3_3_max":null,"llama_3_3_min":null,"qwen_3_30b_max":10000000000.0,"qwen_3_30b_min":10000000000.0}
{"symbol":"BA","year":2024,"quarter":4,"date":"2024-Q4","chunk_id":18,"sub_chunk_id":0,"centroid_label":"cash flow","agreed_value":1700000000.0,"count":2,"chunk":"A - Brian West: And Sheila, in terms of the cash flow, you're correct. The new charge of $1.7 billion, we characterize. About a third of that is going to be over the next three years. So it's a little bit front-end loaded, so a few million dollars \u2013 a few hundred million dollars of pressure that we see in 2025 versus what we said back in October. Now, in terms of your broader question on the full weight of the charges, they are going to tend to flow through. I think BDS for 2025 from cash flow performance is going to look a little bit like 2023. And then once we get through 2025, it'll be in a much different spot, because a lot of that headwind from the charge will be behind us. And when we get exactly to breakeven positive, won't be this year, but can't wait to have that discussion as we move out beyond exiting this year.","evidence_gemma_new":"cash flow","evidence_llama_3_3":null,"evidence_qwen_3_30b":"cash flow $1.7 billion next three years","gemma_new_max":1700000000.0,"gemma_new_min":1700000000.0,"llama_3_3_max":null,"llama_3_3_min":null,"qwen_3_30b_max":1700000000.0,"qwen_3_30b_min":1700000000.0}
{"symbol":"BA","year":2023,"quarter":1,"date":"2023-Q1","chunk_id":3,"sub_chunk_id":0,"centroid_label":"core loss per share","agreed_value":1.27,"count":2,"chunk":"Brian West: Great. Thanks, Dave, and good morning, everyone. Let's go to the next page and cover the total company results. First quarter revenue was $17.9 billion. That's up 28% year-over-year, primarily driven by higher volume in both commercial and defense. Core operating margin was minus 2.5%, and the core loss per share was $1.27, both big improvements versus last year due to higher commercial volume and improved operating performance. Margins and EPS were negative driven by expected abnormal costs and period expenses as well as a charge on the KC-46 Tanker program that I noted last month. Free cash flow was a usage of $786 million in the quarter, significantly better versus last year driven by the higher commercial deliveries as well as an advanced payment tied to lot 9 on the tanker program, another important award for the KC-46 franchise. As we noted in our last earnings call, cash was lower this quarter than the fourth quarter due to lower wide-body deliveries and expected seasonality. Turning to the next page, I'll cover Commercial Airplanes. Let's start with orders. BCA booked 107 net orders in the quarter, including JAL and Lufthansa, and we have a backlog of over 4,500 airplanes valued at $334 billion. Moving to the figures on the left. Revenue was $6.7 billion, up 60% year-over-year, driven by 130 airplane deliveries with increases on both the 87 and the 37 programs, partially offset by 87 customer considerations. Operating margin was minus 9.2%, which was significantly better than last year. But margins are impacted by expected abnormal costs and period expenses, including higher R&D spending. Let's take a minute on the 737 program. The 37 had 113 deliveries in the first quarter, up 31% year-over-year, including 53 deliveries in the month of March. Picking up where Dave left off regarding the supplier fuselage item. We found the issue. We booked a nonmaterial financial impact in the quarter. We understand the rework steps required, and we started repairs on several airplanes. And although near-term deliveries will be impacted, we still expect to deliver between 400 and 450 737s this year. April and 2Q deliveries will be lower, but the first half monthly average will be about 30 airplanes per month, in line with what we said previously. The second half deliveries are expected to be around 40 per month, with sequential quarterly improvement in the back half. While the high end of the delivery range is pressured, ultimate performance will be dictated by the pace of the fuselage recovery. Regarding inventory, we ended the quarter with approximately 225 MAX airplanes in inventory, including 138 that were built for customers in China and roughly 30 -7s and -10s. Within these 225 inventoried airplanes, roughly 75% will require the fuselage rework. And the number of inventoried airplanes will likely increase in 2Q, and we still expect most to be delivered by the end of 2024. On production, we're completing airplanes in final assembly and expect to recover in the coming months, paced by fuselage availability. We're supporting Spirit through this recovery, including manufacturing and engineering resources as well as a cash advance. To support overall supply chain stability, we're not changing the master schedule, including anticipated production rate increases and we've contemplated any near-term parts inventory builds into our forward look. Within final assembly, as Dave mentioned, we expect to increase our rate to 38 per month later this year and 50 per month in the '25, '26 time frame. Moving on to the 787 program. We had 11 deliveries in the first quarter and still expect 70 to 80 deliveries this year. We're producing at 3 per month and still plan to reach 5 per month by year-end. We ended the quarter with 95 airplanes in inventory, most of which will be delivered by the end of 2024. We booked 379 of abnormal costs in the quarter, in line with expectations, and there's no change to the total estimate of $2.8 billion. We still expect abnormal to be largely done by the end of this year. Finally, on the 777X program, efforts are ongoing. Both the program time line and the abnormal estimate of $1.5 billion are unchanged. We booked $126 million of abnormal costs in the quarter, in line with expectations. With that, let's turn to the next page and go through defense and space. BDS booked $10 billion in orders during the quarter, including awards for the U.S. Air Force for 15 KC-46 Tankers and an E-7 development contract as well as 184 Apaches for the U.S. Army. The BDS backlog is $58 billion. Moving to the figures on the left. Revenue was $6.5 billion, up 19% year-over-year, driven by the KC-46 Tanker award, program milestone completions and underlying volume. We delivered 39 aircraft and 3 satellites in the quarter and also began production of the MH-139 Grey Wolf. Operating margin was minus 3.2%, significantly higher than last year but still negative, driven by a $245 million pretax charge on the tanker program, which I noted last month. Let me give you a little bit of context on the overall BDS portfolio. Remember, 15% of the revenues in the quarter are the firm fixed-price development contracts. These contracts get a lot of attention, and there is a commitment to derisk these programs as much as we can as we move through the development cycles and into full-scale, stable production. Next and importantly, over 60% of revenues in the quarter collectively delivered double-digit margins. We have many important programs that are performing to historical performance levels. The balance of the 1Q revenue is made up of a small number of established programs that are experiencing negative margins on certain contracts due to specific near-term supply chain and factory stability pressures that we've highlighted previously. It will take time to work through these issues, and we fully expect that these programs will improve through the course of this year and return to normal margin levels over time. The BDS team is fully committed delivering the development programs to our customers. We've implemented new contracting disciplines, accelerated efforts around lean manufacturing and we're investing in innovation and in our people, all of which underpin our plans going forward. Overall, the defense portfolio is well positioned. There's strong demand across the customer base, the products are performing in the field, and we're confident that our efforts to drive execution and stability will return this business to performance levels that our investors would recognize. Turning to the next page, I'll cover Global Services. As Dave mentioned, BGS had another very strong quarter. We received $4 billion in orders during the quarter, and the backlog is $19 billion. Looking to the figures on the left. Revenue was $4.7 billion, up 9% year-over-year, primarily driven by our commercial parts and distribution business. Operating margin was 17.9%, an expansion of 330 basis points versus last year, with both our commercial and government businesses delivering double-digit margins. Operating margins in the quarter were higher than expected due to favorable mix, and we don't assume that will repeat. In the quarter, BGS announced the first Boeing Converted Freighter line in India, delivered AerCap's 50th 737-800 Boeing Converted Freighter and broke ground on a new component operations facility in Jacksonville, Florida. Turning to the next page, I'll cover cash and debt. We ended the quarter with $14.8 billion of cash and marketable securities, and our debt balance decreased to $55.4 billion. We paid down $1.7 billion of debt maturities in the quarter and absorbed the expected cash flow usage driven by seasonality. We also had $12 billion of revolving credit facilities at the end of the quarter, all of which remain undrawn. Our liquidity position is very strong. The investment-grade credit rating is a priority, and we're deploying capital in line with the priorities we've shared: generate strong cash flow, invest the business and pay down debt. And flipping to the last page on our outlook. The 2023 financial outlook is unchanged from what we previously shared, including $3 billion to $5 billion of free cash flow generation. Commercial demand remains strong across our key programs and services. Passenger traffic in February increased over 55% year-over-year and is at 85% of pre-pandemic levels, comprised [indiscernible] domestic and 78% international. Defense demand is robust, and the initial FY '24 presidential budget is in line with expectations. As Dave mentioned, our portfolio and capabilities are well positioned to support the needs of the nation and of our allies. On the supply chain front, as you'll recall when we set out our 2023 framework last November, we predicted the supply chain instability would likely continue. The good news is that we plan for it within our financial and delivery guidance. There's progress in many areas of the supply base, but we will likely face pockets of variability through the rest of this year. We continue to make key investments, including higher inventory buffers and forward deployment of resources as we take appropriate actions to mitigate impacts and improve predictability. From a quarterly perspective, we continue to expect financials to improve throughout the year. On 2Q specifically, we expect core EPS will be roughly in line with 1Q '23 performance absent the tanker charge, as the 737 delivery impacts would be largely offset by higher wide-body deliveries. We expect free cash flow to be breakeven to slightly negative as we work through the 37 recovery. All things considered, we feel good about what's in front of us. And we remain on track to achieve our long-term guidance, including $10 billion of free cash flow in the '25, '26 time frame. With that, I'll turn it over to Dave for any closing comments.","evidence_gemma_new":"core loss per share","evidence_llama_3_3":"core loss per share","evidence_qwen_3_30b":null,"gemma_new_max":1.27,"gemma_new_min":1.27,"llama_3_3_max":1.27,"llama_3_3_min":1.27,"qwen_3_30b_max":null,"qwen_3_30b_min":null}
{"symbol":"BA","year":2023,"quarter":3,"date":"2023-Q3","chunk_id":3,"sub_chunk_id":0,"centroid_label":"core loss per share","agreed_value":3.26,"count":3,"chunk":"Brian West: Thanks, Dave, and good morning, everyone. Let's go to the next slide and start with total company financial performance. Third quarter revenue was $18.1 billion. That's up 13% year-over-year. Growth was driven by higher commercial volume, primarily on higher 787 deliveries. Core operating margin in the quarter was minus 6%, and the core loss per share was $3.26. Margins and EPS were negatively impacted by unfavorable defense performance, which I'll cover in a moment; lower 737 deliveries that were in line with expectations set last month; and expected abnormal costs and period expenses. Free cash flow was a usage of $310 million in the quarter. This reflects the lower 737 deliveries and in line with our expectations. With that, I'll turn to the next page and cover Boeing Commercial Airplanes. BCA booked 398 net orders in the quarter, including 150 MAX-10s for Ryanair, 50 87s for United and 39 87s for Saudi Arabian Airlines. BCA now has over 5,100 airplanes in the backlog valued at $392 billion. BCA delivered 105 airplanes in the quarter, and revenue was $7.9 billion. That's up 25% year-over-year driven by the higher 787 deliveries. Operating margin was minus 8.6%. We saw the impact of the lower 737 deliveries as well as expected abnormal costs and period expenses, including higher R&D spending primarily on the 777X investment. Now I'll give a little more color on the key programs. On 737, we delivered 70 airplanes in the quarter, reflecting the impact of the recent supplier fuselage nonconformance. Since our early September update, additional areas of the aft pressure bulkhead were identified that require further inspection and rework, which you likely read about. This additional scope impacts units that had already gone through the initial rework and will take us more time to stabilize production and deliveries. We founded the issue, understand the rework steps required and booked a nonmaterial financial impact in the quarter. Considering these latest facts, we expect October deliveries to be in line with September and now expect to deliver between 375 and 400 airplanes for the year. Performance ultimately will be dictated by the pace of a fuselage recovery. The quarter ended with approximately 250 MAX airplanes in inventory, 85 of which are being held for customers in China. We still expect most of the MAX inventory aircraft to be delivered by the end of 2024 but more are likely to slip into 2025 tied to the fuselage recovery. To support stability, suppliers are continuing with planned rate increases and we're selectively managing inventory levels on certain parts where prudent. We expect to complete the 737 transition to 38 per month by year-end, and we're maintaining plans to increase to 50 per month in the 2025, 2026 time frame. On the 787 program, we had 19 deliveries in the quarter and 50 year-to-date. We still expect 70 to 80 deliveries this year. We started transitioning production to five per month in October and still plan to reach 10 per month in the 2025, 2026 time frame. We ended the quarter with 75 airplanes in inventory. Rework is progressing nicely, and we still expect most to be delivered by the end of 2024. We booked $244 million of abnormal costs, in line with expectations. The total estimate is now $3 billion, up a bit, and we still expect to be largely done by year-end. Moving to the 777X program. Efforts are ongoing. The program timeline is unchanged, and we plan to resume production later this year. We booked $180 million of abnormal costs in the quarter, in line with expectations. The total estimate is unchanged at $1 billion, and we expect to be done this quarter. Importantly, as Dave mentioned, we recently reached an agreement with Spirit on commercial terms associated with the 737 and 787 programs. We believe this agreement is a win-win for both companies and directly promotes our goal to drive stability and support our airline customers. Moving on to the next page, Boeing Defense and Space. BDS booked $6 billion in orders during the quarter, and the backlog now stands at $58 billion. Revenue was $5.5 billion, essentially flat year-over-year, and we delivered 28 aircraft. Operating margin was minus 16.9% in the quarter. In early September, we indicated that margins would be around minus 9%, the driver being a $482 million charge on the VC-25B fixed price development program due to higher estimated manufacturing costs related to engineering changes, labor instability, and the resolution of supplier negotiations. As we closed the books at quarter end, we saw another 8 points of margin erosion driven by first a $315 million loss tied to customer considerations and higher estimated costs to deliver a highly innovative satellite constellation contract that we signed several years ago. And second, we had smaller, less material cost pressures across a couple programs totaling $136 million primarily driven by the MQ-25program. These are disappointing results in the quarter and year-to-date. This performance is below our expectations, and we acknowledge that we aren\u2019t as far along in this recovery as we expected to be at this stage. I\u2019d like to point out that the team is executing a game plan to get BDS back to the high-single digit margins by the 2025, 2026 time frame. As you can see on the right hand side of the slide, we\u2019re driving lean manufacturing, program management rigor and cost productivity consistently across the division. We have invested in new training programs to accelerate performance on the factory floor, and we\u2019ve deployed resources at our suppliers to support their recovery. Perhaps most importantly, we instituted much tighter underwriting standards. As you know, part of the challenge we\u2019re dealing with are legacy contracts that we need to get out from under. Rest assured, we haven\u2019t signed any fixed price development contracts nor intend to. These moves are all fundamental to accelerating the recovery by the 2025, 2026 time frame. We have detailed metrics and milestones to evaluate our performance and progress across the three areas that we\u2019ve previously highlighted. First, we have a solid core business representing about 60% of our revenue that performs in the mid to high-single digit margin range. The demand for these products is strong. In particular, volume for our missile and weapons products as well as the Apache are very robust given the current threat environment, and we need to keep executing, competing and growing these offerings. Then we have the 25% of the portfolio representing specific fighter and satellite programs that have negatively impacted margins the past several quarters. In these areas, we took on fixed price production contracts in a pre-pandemic environment with real technical innovation that we\u2019re working our way through. We fully expect to see recovery in these areas as we improve execution, deliver next generation capabilities, and roll into new contracts with stronger underwriting disciplines that more accurately reflect the prevailing economic conditions. We expect to return to the strong performance levels that we\u2019ve demonstrated historically on these programs as we move into the 2025, 2026 time frame. Lastly, we have our large fixed price development programs that represent the remaining 15% of the portfolio, and we continue to be focused on maturing and retiring these risks. Specifically, on the KC-46A program, we\u2019re stabilizing the production system. We\u2019ve seen signs of progress and improved productivity, and as of this month, we have delivered 77 tankers to the customer. For the VC-25B, we\u2019re now maturing through the build process, and the key milestones ahead are power on and first flight, both of which will essentially be behind us as we move through the 2025, 2026 time frame and represent a significant derisking of the program. For commercial crew, while it has been a long road, we\u2019re preparing to execute a successful crewed flight test next year and then fulfill operational launch commitments, all of which will be completed as we exit 2025, 2026. On T-7A, we just delivered the first aircraft to the Air Force this quarter and have begun critical phases of the flight test program. On MQ-25, we\u2019ll get through key build and flight test milestones and transition out of the development phase as we move through the 2025, 2026 time frame. We remain very confident in the T-7A and MQ-25 investments that will deliver innovative performance to the customer with a strong long-term demand profile. So for BDS, this recovery is challenging at the moment, but we believe the actions we\u2019re taking will begin to gain traction and then accelerate. Fast forward to that 2025, 2026 time frame, fixed price development contracts will be substantially derisked. We\u2019ll have a healthy order book underwritten with much better economics and underwriting disciplines, and a resilient employee base and supply chain that\u2019s executing at a much higher level. Moving on to the next slide Boeing Global Services. BGS had another strong quarter. They received $5 billion in orders during the quarter, and the backlog sits at $18 billion. Revenue was $4.8 billion, up 9% year-over-year, primarily on favorable commercial volume and mix. Operating margins were a strong 16.3% in line with our expectations. Importantly, our commercial and government businesses continued to deliver double-digit margins. With that, we\u2019ll turn to the next page and cover cash and debt. On cash marketable securities, we ended the quarter at $13.4 billion, and on debt, the balance remained flat at $52.3 billion. We had access to $10 billion of revolving credit facilities at the end of the quarter, all of which was undrawn. Our liquidity position is strong. The investment grade credit rating continues to be a priority, and we're deploying capital in line with the priorities that we've shared, invest in the business and pay down debt through strong cash flow generation. And flip into the last page on our outlook. The overall financial outlook for 2023 is unchanged from what we previously shared, including $3 billion to $5 billion of free cash flow generation, although the updated 737 deliveries now point more toward the low end of the free cash flow range. We also expect R&D to come in slightly above our original guide, tied to the higher 777X investments that I touched on earlier. Stepping back to address the state of the market. Commercial demand remains strong across our key programs and services. Global passenger traffic was up nearly 30% year-on-year in August and is at 96% of pre-pandemic levels, 109% domestic and 89% international. Cargo remains healthy and August was the first month with annual cargo growth since early 2022. Defense demand is also robust, and FY2024 budget continues to be in line with our expectations. Our portfolio and capabilities are well position to support the needs of the nation and of our allies. With demand strong, we still find ourselves in a supply constrained environment and our focus continues to be on execution both within our factories and the supply chain as we steadily increase production. We're squarely focused on a meaningful step up in operating performance, including deliveries, revenue, margins and cash flow, all of which we expect to improve as we finish out the year. On 4Q specifically, we expect BCA margins to improve sequentially, but remain negative more in line with 2Q, and we're still not anticipating much in terms of BDS profitability. On the tax expense side, we still expect full year tax expense of approximately $250 million. As we look into early 2024, we see a number of key milestones that give us confidence in building momentum across the business. The 737 factory should be recovered from the current non-conformance and will be stabilizing production at 38 per month with step ups as we move to 50 per month by 2025, 2026. 787 will be stabilizing production at five per month with a focus on stepping up to 10 per month by 2025, 2026. We'll be further along in our inventory unwind with better line of sight to the elimination of the 737 and 787 dual factories. Keep in mind that correcting non-conformances gets exponentially easier when this inventory has been delivered to our customers. BDS will be further along in recovery as I described earlier. BGS will still be generating mid-teen margins, executing on its high cash conversion, capital efficient, disciplined growth model. And all of this will underwrite our continued strong liquidity position and enable us to further delever the balance sheet early next year. With that, back over to Dave for closing comments.","evidence_gemma_new":"core loss per share","evidence_llama_3_3":"Core loss per share","evidence_qwen_3_30b":"core loss per share $3.26","gemma_new_max":3.26,"gemma_new_min":3.26,"llama_3_3_max":3.26,"llama_3_3_min":3.26,"qwen_3_30b_max":3.26,"qwen_3_30b_min":3.26}
{"symbol":"BA","year":2023,"quarter":4,"date":"2023-Q4","chunk_id":3,"sub_chunk_id":0,"centroid_label":"core loss per share","agreed_value":0.47,"count":3,"chunk":"Brian West: Thanks Dave and good morning everyone. Let's start off with the total company financial performance for the quarter. Revenue was $22 billion. That's up 10% year-over-year. Growth was driven by higher commercial volume and favorable mix. The core loss per share was $0.47, better than last year primarily on improved commercial volume, better mix and lower abnormal costs. They were offset by lower defense margins and higher period expenses, including R&D, which we expected. Free cash flow was $3 billion in the quarter, in line with the prior year and up sequentially from the third quarter primarily due to improved commercial deliveries and strong order activity, which show favorable advanced payment timing, some of which was anticipated in the first quarter of 2024. Turning to the next page, I'll cover Boeing Commercial Airplanes. BCA booked 611 net orders in the quarter with 411 737s, including an order with Akasa, 98 777Xs largely an Emirates order and 83 787s. We have over 5,600 airplanes in backlog valued at $441 billion. BCA delivered 157 airplanes in the quarter and revenue was $10.5 billion. That's up 13% driven by higher widebody deliveries and favorable mix. Operating margin was just positive at 0.4%, driven by returning to normal 737 delivery levels in the quarter, improved mix as well as lower abnormal costs associated with getting to five per month on the 87 and resuming production on the 777X. Now, I'll give more color on the key programs. On the 737, we delivered 110 airplanes in the quarter and 45 in December. The program also began FAA certification flight testing on the 737-10 in December. For the year, we delivered 396 airplanes, on the upper end of the revised guidance range we provided in October. Per the FAA announcement, we'll maintain production at 38 per month and work transparently with the FAA to complete all requirements for future increases. At the same time, we'll continue to prioritize the master schedule to avoid disruption in our supply chain. On the 737-9, we're actively supporting our customers' return to service activities. And as of today, the majority are back flying. In our factory, we have 10 -9s in production, all of which will undergo the FAA group inspection process prior to delivery. Spirit has also adopted this inspection routine in its factory. The quarter ended with about 200 MAX airplanes in inventory. It's important to think about this inventory in three buckets. First, there are 140 737-8s built prior to 2023. The vast majority are for customers in China and India. We still expect to deliver most of these airplanes by year-end as we work towards shutting down the shadow factory. In the second bucket, there are around 25 airplanes produced in 2023 that are still in WIP, given the disruptions in the second half of last year. And we expect these to deliver in 2024. And lastly, there are approximately 35 -7 to -10s that we will deliver once those airplanes are certified, the timing of which will be determined by the FAA. Moving on to the 787. We delivered 23 airplanes in the quarter, including 11 in December. For the year, we delivered 73 airplanes, within the guidance range we originally outlined for 2023. The program successfully transitioned production to five per month in the quarter and still plan to steadily work our way to 10 per month in the 2025, 2026 timeframe. We ended the quarter with approximately 60 airplanes in inventory, about 50 of which require rework, which continues to progress steadily. We still expect to deliver most of these airplanes by year-end as we finish the rework and shut down the shadow factory. We booked $77 million of abnormal costs in the quarter and have approximately $300 million left to go that will wind down by year-end, in line with our expectations. On the 777X, we resumed production in the quarter and continue to progress along the program timeline, which remains unchanged. During the quarter, the Emirates order for 90 777Xs brought the program backlog to more than 400 airplanes and also extended the accounting quantity. We continue to follow the lead of the FAA as we progress through the certification process, including working to obtain approval from the FAA to begin certification flight testing. We booked $71 million of abnormal costs in the quarter, which is now fully behind us after resuming production, in line with our expectations. Moving to the next page, Boeing Defense and Space. BDS booked $8 billion in orders during the quarter, including the Lot 10 Award from the US Air Force for 15 KC-46A Tankers. The backlog is now at $59 billion. Revenue was $6.7 billion, up 9% on the tanker award and improved volume and BDS delivered 52 aircraft and two satellites in the quarter. Operating margin was minus 1.5% in the quarter, a sequential improvement from 3Q, but still we have more work to do. 4Q results were impacted by cost true-ups on three fixed-price development programs totaling $139 million as well as unfavorable performance and mix on other programs. Our game plan to get BDS back to high single-digit margins by the 2025-2026 timeframe remains unchanged. Our core business remains solid, representing 60% of our revenue and performing in the mid to high single-digit margin range. The demand for these products is very strong and we need to execute, compete and grow these offerings. On the 25% of the portfolio primarily comprised of fighter and satellite programs, operational performance stabilized as we exit the year. And as a result, the fourth quarter saw improved margin trends, although still negative. We still expect to return to the strong historical performance levels as we roll out new contracts with tighter underwriting disciplines as we move into the 2025-2026 timeframe. Lastly, we have our fixed-price development programs that represent the remaining 15% of revenue. Despite the relatively modest cost trips [ph] in the quarter, we continue to focus on maturing these programs and retiring risks quarter in, quarter out. And we made some good progress in the fourth quarter. In addition to capturing the tanker award from the US Air Force, the program delivered nine aircraft in the fourth quarter, continuing to build positive momentum in spite of the supply-related disruptions to the factory that we faced earlier last year. And on the T-7A, the first Red Hawk arrived at Edwards Air Force Base in November, formally starting the Air Force development flight test campaign for the aircraft. Overall, the defense portfolio is poised to improve. The strong demand across the customer base, the products are performing in the field, and we're confident that our efforts to drive execution and stability will return this business to performance levels that our investors recognize. Moving now to the next page, Boeing Global Services. BGS had another strong quarter. They received $6 billion in orders and the backlog is now at $20 billion. Revenue was $4.8 billion, up 6% primarily on favorable commercial volume and mix. Operating margins were a very strong 17.4%, an expansion of 350 basis points versus last year as both our commercial and government businesses were delivering double-digit margins. In the quarter, BGS opened a parts distribution center in India and received a follow-on contract to provide sustainment for the C-17. Turning now to the next page, I'll cover cash and debt. On cash and marketable securities, we ended the quarter at $16 billion. On debt, the balance remained flat at $52.3 billion and over the next few days, we'll pay down $4 billion of the $5 billion of maturities coming due this year from our available cash on hand. We continue to maintain access to $10 billion of revolving credit facilities, all of which remain undrawn. Our liquidity position remains strong. Our investment-grade credit rating continues to be a priority. And we're developing -- deploying capital in line with the portage [ph] we've shared previously: invest in the business and pay down debt. Turning to the next page, I'll cover our full year financials. Full year revenue was $77.8 billion, up 17% year-over-year. Growth was driven by improved commercial volume primarily on higher 787 deliveries. The core loss per share was $5.81, better than prior year primarily on improved commercial volume and mix as well as lower fixed price development charges in defense. Free cash flow was $4.4 billion for the year, up versus prior year primarily on higher 787 deliveries and favorable receipt timing that was partially offset by higher expenditures as we increase production rates and invest in the business. While we're postponing issuing 2024 guidance today, given our current focus, we're committed to sharing timely and transparent updates moving forward. I would like to provide some additional context on our path forward. We always knew 2024 was going to be an important year in our recovery. Based on what we know today, we expect another steady year of free cash flow, driven by the 737 production at 38 per month, ongoing execution of the 787 toward our long-term objectives, continued liquidation of our 737 and 787 inventory, and continued focus to wind down both shadow factories. Our defense business will continue to improve as we mature fixed-price programs and transition recently challenged programs with better underwriting disciplines that we've already started to see and BGS will continue to generate strong free cash flow. Longer term, we're focused on quality and stability, which will ultimately drive free cash flow. Nothing has changed on the demand front, and the backlog is strong and growing. Remember, our 2025-2026 guidance was based on achieving stability and we have to earn that by applying resources to fix our issues and demonstrate predictability one airplane at a time, side-by-side with our regulator. This team is up to the challenge, and we'll apply any and all resources to get back to deliveries that satisfy our customers and underwrite the long-term demand profile. We're still confident in the goals we laid out for 2025-2026 although it may take longer in that window than originally anticipated, and we won't rush the system. With that, I'll turn it back to Dave for closing comments.","evidence_gemma_new":"core loss per share","evidence_llama_3_3":"core loss per share the quarter","evidence_qwen_3_30b":"total company core loss per share better than last year","gemma_new_max":0.47,"gemma_new_min":0.47,"llama_3_3_max":0.47,"llama_3_3_min":0.47,"qwen_3_30b_max":0.47,"qwen_3_30b_min":0.47}
{"symbol":"BA","year":2023,"quarter":4,"date":"2023-Q4","chunk_id":3,"sub_chunk_id":0,"centroid_label":"core loss per share","agreed_value":5.81,"count":2,"chunk":"Brian West: Thanks Dave and good morning everyone. Let's start off with the total company financial performance for the quarter. Revenue was $22 billion. That's up 10% year-over-year. Growth was driven by higher commercial volume and favorable mix. The core loss per share was $0.47, better than last year primarily on improved commercial volume, better mix and lower abnormal costs. They were offset by lower defense margins and higher period expenses, including R&D, which we expected. Free cash flow was $3 billion in the quarter, in line with the prior year and up sequentially from the third quarter primarily due to improved commercial deliveries and strong order activity, which show favorable advanced payment timing, some of which was anticipated in the first quarter of 2024. Turning to the next page, I'll cover Boeing Commercial Airplanes. BCA booked 611 net orders in the quarter with 411 737s, including an order with Akasa, 98 777Xs largely an Emirates order and 83 787s. We have over 5,600 airplanes in backlog valued at $441 billion. BCA delivered 157 airplanes in the quarter and revenue was $10.5 billion. That's up 13% driven by higher widebody deliveries and favorable mix. Operating margin was just positive at 0.4%, driven by returning to normal 737 delivery levels in the quarter, improved mix as well as lower abnormal costs associated with getting to five per month on the 87 and resuming production on the 777X. Now, I'll give more color on the key programs. On the 737, we delivered 110 airplanes in the quarter and 45 in December. The program also began FAA certification flight testing on the 737-10 in December. For the year, we delivered 396 airplanes, on the upper end of the revised guidance range we provided in October. Per the FAA announcement, we'll maintain production at 38 per month and work transparently with the FAA to complete all requirements for future increases. At the same time, we'll continue to prioritize the master schedule to avoid disruption in our supply chain. On the 737-9, we're actively supporting our customers' return to service activities. And as of today, the majority are back flying. In our factory, we have 10 -9s in production, all of which will undergo the FAA group inspection process prior to delivery. Spirit has also adopted this inspection routine in its factory. The quarter ended with about 200 MAX airplanes in inventory. It's important to think about this inventory in three buckets. First, there are 140 737-8s built prior to 2023. The vast majority are for customers in China and India. We still expect to deliver most of these airplanes by year-end as we work towards shutting down the shadow factory. In the second bucket, there are around 25 airplanes produced in 2023 that are still in WIP, given the disruptions in the second half of last year. And we expect these to deliver in 2024. And lastly, there are approximately 35 -7 to -10s that we will deliver once those airplanes are certified, the timing of which will be determined by the FAA. Moving on to the 787. We delivered 23 airplanes in the quarter, including 11 in December. For the year, we delivered 73 airplanes, within the guidance range we originally outlined for 2023. The program successfully transitioned production to five per month in the quarter and still plan to steadily work our way to 10 per month in the 2025, 2026 timeframe. We ended the quarter with approximately 60 airplanes in inventory, about 50 of which require rework, which continues to progress steadily. We still expect to deliver most of these airplanes by year-end as we finish the rework and shut down the shadow factory. We booked $77 million of abnormal costs in the quarter and have approximately $300 million left to go that will wind down by year-end, in line with our expectations. On the 777X, we resumed production in the quarter and continue to progress along the program timeline, which remains unchanged. During the quarter, the Emirates order for 90 777Xs brought the program backlog to more than 400 airplanes and also extended the accounting quantity. We continue to follow the lead of the FAA as we progress through the certification process, including working to obtain approval from the FAA to begin certification flight testing. We booked $71 million of abnormal costs in the quarter, which is now fully behind us after resuming production, in line with our expectations. Moving to the next page, Boeing Defense and Space. BDS booked $8 billion in orders during the quarter, including the Lot 10 Award from the US Air Force for 15 KC-46A Tankers. The backlog is now at $59 billion. Revenue was $6.7 billion, up 9% on the tanker award and improved volume and BDS delivered 52 aircraft and two satellites in the quarter. Operating margin was minus 1.5% in the quarter, a sequential improvement from 3Q, but still we have more work to do. 4Q results were impacted by cost true-ups on three fixed-price development programs totaling $139 million as well as unfavorable performance and mix on other programs. Our game plan to get BDS back to high single-digit margins by the 2025-2026 timeframe remains unchanged. Our core business remains solid, representing 60% of our revenue and performing in the mid to high single-digit margin range. The demand for these products is very strong and we need to execute, compete and grow these offerings. On the 25% of the portfolio primarily comprised of fighter and satellite programs, operational performance stabilized as we exit the year. And as a result, the fourth quarter saw improved margin trends, although still negative. We still expect to return to the strong historical performance levels as we roll out new contracts with tighter underwriting disciplines as we move into the 2025-2026 timeframe. Lastly, we have our fixed-price development programs that represent the remaining 15% of revenue. Despite the relatively modest cost trips [ph] in the quarter, we continue to focus on maturing these programs and retiring risks quarter in, quarter out. And we made some good progress in the fourth quarter. In addition to capturing the tanker award from the US Air Force, the program delivered nine aircraft in the fourth quarter, continuing to build positive momentum in spite of the supply-related disruptions to the factory that we faced earlier last year. And on the T-7A, the first Red Hawk arrived at Edwards Air Force Base in November, formally starting the Air Force development flight test campaign for the aircraft. Overall, the defense portfolio is poised to improve. The strong demand across the customer base, the products are performing in the field, and we're confident that our efforts to drive execution and stability will return this business to performance levels that our investors recognize. Moving now to the next page, Boeing Global Services. BGS had another strong quarter. They received $6 billion in orders and the backlog is now at $20 billion. Revenue was $4.8 billion, up 6% primarily on favorable commercial volume and mix. Operating margins were a very strong 17.4%, an expansion of 350 basis points versus last year as both our commercial and government businesses were delivering double-digit margins. In the quarter, BGS opened a parts distribution center in India and received a follow-on contract to provide sustainment for the C-17. Turning now to the next page, I'll cover cash and debt. On cash and marketable securities, we ended the quarter at $16 billion. On debt, the balance remained flat at $52.3 billion and over the next few days, we'll pay down $4 billion of the $5 billion of maturities coming due this year from our available cash on hand. We continue to maintain access to $10 billion of revolving credit facilities, all of which remain undrawn. Our liquidity position remains strong. Our investment-grade credit rating continues to be a priority. And we're developing -- deploying capital in line with the portage [ph] we've shared previously: invest in the business and pay down debt. Turning to the next page, I'll cover our full year financials. Full year revenue was $77.8 billion, up 17% year-over-year. Growth was driven by improved commercial volume primarily on higher 787 deliveries. The core loss per share was $5.81, better than prior year primarily on improved commercial volume and mix as well as lower fixed price development charges in defense. Free cash flow was $4.4 billion for the year, up versus prior year primarily on higher 787 deliveries and favorable receipt timing that was partially offset by higher expenditures as we increase production rates and invest in the business. While we're postponing issuing 2024 guidance today, given our current focus, we're committed to sharing timely and transparent updates moving forward. I would like to provide some additional context on our path forward. We always knew 2024 was going to be an important year in our recovery. Based on what we know today, we expect another steady year of free cash flow, driven by the 737 production at 38 per month, ongoing execution of the 787 toward our long-term objectives, continued liquidation of our 737 and 787 inventory, and continued focus to wind down both shadow factories. Our defense business will continue to improve as we mature fixed-price programs and transition recently challenged programs with better underwriting disciplines that we've already started to see and BGS will continue to generate strong free cash flow. Longer term, we're focused on quality and stability, which will ultimately drive free cash flow. Nothing has changed on the demand front, and the backlog is strong and growing. Remember, our 2025-2026 guidance was based on achieving stability and we have to earn that by applying resources to fix our issues and demonstrate predictability one airplane at a time, side-by-side with our regulator. This team is up to the challenge, and we'll apply any and all resources to get back to deliveries that satisfy our customers and underwrite the long-term demand profile. We're still confident in the goals we laid out for 2025-2026 although it may take longer in that window than originally anticipated, and we won't rush the system. With that, I'll turn it back to Dave for closing comments.","evidence_gemma_new":null,"evidence_llama_3_3":"core loss per share the year","evidence_qwen_3_30b":"total company core loss per share better than prior year","gemma_new_max":null,"gemma_new_min":null,"llama_3_3_max":5.81,"llama_3_3_min":5.81,"qwen_3_30b_max":5.81,"qwen_3_30b_min":5.81}
{"symbol":"BA","year":2024,"quarter":1,"date":"2024-Q1","chunk_id":3,"sub_chunk_id":0,"centroid_label":"core loss per share","agreed_value":1.13,"count":3,"chunk":"Brian West: Thanks, Dave, and good morning, everyone. Let's start with the total company financial performance for the quarter. Revenue was $16.6 billion, down 8% versus last year, primarily reflecting lower 737 delivery volume. The core loss per share was $1.13, a slight improvement versus last year, also reflecting lower 737 deliveries. Free cash flow was a usage of $3.9 billion in the quarter, a higher usage than last year and in line with the expectations shared last month. Cash was impacted by lower commercial deliveries and unfavorable timing of receipts and expenditures. Turning to the next page, I'll cover Boeing Commercial Airplanes. BCA booked 125 net orders in the quarter, including 85 737-10s for American Airlines and 28 777Xs for customers, including Ethiopian Airlines. The backlog grew to $448 billion and includes more than 5,600 airplanes. BCA delivered 83 airplanes in the quarter. Revenue was $4.7 billion, and operating margin was minus 24.6%. These results were significantly lower than last year, primarily reflecting lower 737 deliveries and the 737-9 grounding impact for customer considerations of $443 million. Now I'll give more color on the key programs. On the 737, we delivered 67 airplanes in the first quarter as we deliberately slowed production below 38 per month to incorporate improvements to our quality and safety management systems, including reducing traveled work and addressing supplier nonconformances. These continued efforts will cause April deliveries to be more in line with February levels as we complete our work. Production [ ordering ] below 38 per month for the first half of the year and will be higher in the second half as we move back to 38 per month, with the timing of rates beyond 38 predicated on the work we're doing with the FAA. We've recently made adjustments to the master schedule, and we'll continue to manage supplier by supplier based on inventory levels and rate ramp readiness. Our objective remains to keep the supply chain paced ahead of final assembly to support stability and minimize traveled work. The quarter ended with approximately 110 737-8s built prior to 2023, the vast majority for customers in China and India. This is down 30 airplanes from last quarter and in line with our plans. We still expect to deliver most of these inventoried airplanes by year-end as we work towards shutting down the shadow factory. There were [ approximately ] 95 additional airplanes in inventory, about 35 of which were -7 and -10s, and the remaining are WIP airplanes impacted by factory and supply chain constraints. On the anti-icing, the timeline is unchanged, and we're making good progress towards resolution. As it pertains to the certification of the -7 and the -10, we coordinated with our customers and added more 8s and 9s into the skyline in the near term to mitigate impacts to their fleet needs and stabilize our production plans. And the program margin has been updated to reflect these impacts as well as the slower production ramp. On the 787, we delivered 13 airplanes in the quarter. We're slowing near-term production and plan to return to 5 per month later this year. We expect to achieve rate increases, including 10 per month by 2026. We ended the quarter with about 60 airplanes of inventory, about 40 of which require rework, which continues to progress steadily and in line with our expectations. We still expect to finish the reworked airplanes and shut down the shadow factory by year-end, with most of these airplanes delivering in the year. Finally, on 777X. We continue to progress along the program time line and still expect first delivery in 2025. We'll follow the lead of the FAA as we progress through the process, including working to obtain approval from the FAA to begin certification flight testing. Moving on to the next page, we'll go to Boeing Defense and Space. BDS booked $9 billion in orders during the quarter, including awards for 17 P-8 aircraft for the Royal Canadian Air Force and the German Navy and securing the final F\/A-18 newbuild production contract from the U.S. Navy. The backlog grew to $61 billion. Revenue was $7 billion, up 6% on improved volume, and BDS delivered 14 aircraft in the quarter. Operating margin was 2.2%, another quarter of sequential improvement, but still more work to do. First quarter results were impacted by losses on 2 fixed-price development programs totaling $222 million, $128 million on the tanker and $94 million on the T-7A. Our game plan to get BDS back to high single-digit margins by the '25, '26 time frame remains intact. We've made important progress in 1Q. Our core business, representing about 60% of our revenue, is seeing solid consistent performance in the mid- to high single-digit margin range with strong demand across the board. On the 25% of the portfolio, primarily comprised of fighter and satellite programs, operational performance further stabilized in the quarter, which drove improved margin trends. We still expect to return to the strong historical performance levels as we roll into new contracts with tighter underwriting disciplines as we move into the '25, '26 time frame. Lastly, we have our fixed-price development programs that represent the remaining 15% of revenue. Despite the relatively modest updates in the quarter, we continue to retire risks and remain focused on maturing these programs quarter in and quarter out. Importantly, on the MQ-25 program, the program was awarded a cost-type contract modification from the U.S. Navy that included 2 additional test aircraft, demonstrating our progress and our commitment to stronger underwriting disciplines in the area of the development programs. The program also delivered the first static test article to the Navy, and the airframe is ready to begin stress testing. And on the Starliner, the program continues to progress towards a May 6 crew flight test as the spacecraft was recently integrated on top of its Atlas V rocket, and prelaunch testing is underway. Lastly, the T-7A test aircraft completed climate lab testing in February, and the program continues to progress with Air Force flight testing. Overall, the defense portfolio is well positioned. As seen in the initial FY '25 presidential budget, there's strong demand across the customer base. The products are performing in the field, and we're confident that our efforts to drive [ execution stability ] will return this business to performance levels that our investors recognize. Moving on to the next page, Boeing Global Services. BGS had another strong quarter. They received $5 billion in orders, and backlog is at $20 billion. Revenue was $5 billion, up 7% primarily on higher commercial volume and favorable mix. Operating margin was a strong 18.2%, an expansion of 30 basis points compared to last year. In the quarter, BGS opened a maintenance facility in Jacksonville, Florida, supporting our military customers. And the U.S. Navy exercised options on a P-8 sustainment modification contract. Turning to the next page, I'll cover cash and debt. On cash and marketable securities, we ended the quarter at $7.5 billion, reflecting the debt repayment activity and use of free cash in the quarter. The debt balance decreased to $47.9 billion as we paid down $4.4 billion of the $5 billion of maturities due this year. We continue to maintain access to $10 billion of revolving credit facilities, all of which remain undrawn. While we're still not in a position to provide a more detailed 2024 outlook today, I want to provide some additional context on the path forward. The 2024 free cash flow outlook I shared last month is still expected to be a generation in the low single-digit billions. Cash flow should improve as we move through the year and be back-end loaded, driven by BCA deliveries and receipt timing, including an expected Lot 11 award on the tanker. Second quarter free cash flow is expected to improve sequentially but be another sizable use of cash. We're committed to managing the balance sheet in a prudent manner with two main objectives: one, prioritize the investment-grade rating; and two, allow the factory and supply chain to stabilize for a stronger trajectory as we exit this year. As we operate at these lower production rates, we're actively monitoring our liquidity levels and believe we have significant market access, and are continuously monitoring and evaluating opportunities should we decide to supplement our liquidity position. Longer term, we remain confident in our ability to achieve $10 billion of free cash flow. However, given our continued focus on safety, quality and stability, we continue to expect that this goal will take us longer than we originally planned and later in the '25, '26 window, primarily tied to the 737 and 787 production delivery ramps of 50 per month and 10 per month, respectively. Moving on, discussions with Spirit are ongoing. As with any large and complex deal, there are a number of terms and issues we need to work through, including price, financing and other key items and the best approach to handling and potentially divesting certain work that Spirit does for other customers. We believe in the strategic logic of a deal, but we'll take the time needed to get this right before we decide to enter into agreement. In the meantime, the focus is on factory stability in Wichita and in Renton. And as you saw yesterday, we agreed to advance Spirit $425 million, virtually all of which will be repaid in the third quarter. This will be accounted for as investing cash. Looking forward to the balance of the year. We're taking the time now to ensure our BCA factories are stable and positioned to ramp production. We'll also continue to make progress on other important objectives, including shutting down the shadow factories, maturing and derisking the defense fixed-price development programs and building on the continued strong results in services. Our backlog of nearly $530 billion speaks to the breadth of our portfolio, and this demand backdrop underpins our commitment to drive long-term results, all enabled by the everyday execution of 170,000 incredibly talented and dedicated team of Boeing employees. With that, why don't we turn it over to questions?","evidence_gemma_new":"core loss per share last year","evidence_llama_3_3":"core loss per share the quarter","evidence_qwen_3_30b":"total company core loss per share last year","gemma_new_max":1.13,"gemma_new_min":1.13,"llama_3_3_max":1.13,"llama_3_3_min":1.13,"qwen_3_30b_max":1.13,"qwen_3_30b_min":1.13}
{"symbol":"BA","year":2024,"quarter":2,"date":"2024-Q2","chunk_id":3,"sub_chunk_id":0,"centroid_label":"core loss per share","agreed_value":2.9,"count":2,"chunk":"Brian West: Thanks, Dave, and good morning, everyone. Before jumping into the financial results, let me take a moment on our planned acquisition of Spirit AeroSystems. On July 1, we announced a definitive agreement to acquire Spirit in an all-stock transaction worth approximately $4.7 billion with a total enterprise value of approximately $8.3 billion. As our materials indicated, we expect the transaction to close mid-2025, subject to the satisfaction of customary closing conditions, including regulatory and Spirit shareholder approvals as well as the sale of Spirit operations related to certain Airbus commercial work packages. This agreement contemplates us acquiring substantially all Boeing related commercial operations primarily consisting of the Wichita, Kansas, Tulsa, Oklahoma and Dallas, Texas facilities as well as other commercial, defense and aftermarket operations that would further augment our capabilities and offerings across the portfolio. Regarding the defense programs, we're committed to working with Spirit, its customers and the DoD to ensure continuity in order to support these critical missions. We continue to believe that this reintegration leverages and builds on our capabilities, support supply chain stability, integrates critical manufacturing and engineering workforces that allows for the ultimate unification of safety and quality management systems. Fully aligning to the same priorities, incentives and -- centered on safety and quality is in the best interest of our customers, the aviation industry and all stakeholders, including the flying public. All of this demonstrates our ongoing commitment to aviation safety, quality and stability. Turning to the next page, I'll cover the total company financial performance for the quarter. Revenue was $16.9 billion, primarily reflecting lower commercial delivery volume. The quarter loss per share was $2.90, reflecting lower commercial delivery volume and losses of $1 billion on fixed price defense development programs, which I'll get into later. Free cash flow was a usage of $4.3 billion in the quarter, which was generally in line with the expectations shared in May. Results impacted by lower commercial deliveries and unfavorable working capital timing. Turning to the next page, I'll cover Boeing Commercial Airplanes. BCA delivered 92 airplanes in the quarter. Revenue was $6 billion, and operating margin was minus -- 11.9%, primarily reflecting lower deliveries and expected higher period costs, including R&D. The backlog in the quarter ended at $437 billion and includes more than 5,400 airplanes. Last week's Farnborough Airshow continue to highlight the robust demand for our product lineup as we announced orders and commitments for over 150 airplanes, including nearly 100 widebodies. Now I'll give more color on the key programs. The 737 program delivered 70 airplanes in the second quarter, including a meaningful step up to 35 in June. July will be more or less in line with June levels despite normal seasonality. On production, we gradually increased during the quarter and still expect to be higher in the second half, as we move to 38 per month by year-end. We've reactivated the third line in our rented factory and monthly production improvement from high single digits at the end of the first quarter to roughly 25 in June and July. As Dave noted, the factory is currently operating within or near the KPI control limits laid out with the FAA as part of the safety and quality plan. The factory is operating with all fully inspected fuselages today and near-term production will continue to be paced by fuselages from Wichita. More broadly on the master schedule, we continue to make adjustments as needed and manage supplier by supplier based on inventory levels. Our objective remains to keep the supply chain paced ahead of final assembly to support stability and minimize traveled work. The quarter ended with approximately 90 737-8s built prior to 2023, the vast majority for customers in China and India. This is down 20 from last quarter's value, and we expect approximately 10 more delivered in the month of July. We still expect to deliver most of these airplanes by year-end as we work towards shutting down the shadow factory. Regarding the -7 and the -10 models, inventory levels remained stable at approximately 35 airplanes and the certification timelines remain unchanged. On the 787, we delivered nine airplanes in the quarter, although the quarter was impacted by lower production, seat delays and other delivery timing items noted previously. We're starting to work through these issues and delivered six airplanes in July. The program produced below five per month in the quarter as expected and still plans to return to five per month by year-end. We ended the quarter with around 35 airplanes of inventory built prior to 2023 that required rework, which continues to progress steadily. We still expect to finish the rework and shut down the shadow factory by year-end with most of these airplanes delivering this year. Finally, on the 777X program, as Dave noted, we took a very important step on the certification timeline earlier this month as the program obtained type inspection authorization and began FAA certification flight testing. We'll continue to follow the lead of the FAA as we progress through the certification process and still expect first delivery in 2025. Inventory in the quarter grew approximately $800 million in line with recent quarterly trends and will continue to grow as we move towards entry into service as we've previously contemplated. Moving on to the next page, Boeing Defense & Space. BDS booked $4 billion in orders during quarter, including capturing an award from the US Air Force for seven MH-139 helicopters and the backlog ended at $59 billion. Revenue was $6 billion, down 2%, driven by fixed price development losses and BDS delivered 28 aircraft in the quarter, including the first CH-47F Block 2 Chinook to the US Army. We took a $1 billion loss on certain fixed-price development contracts in the quarter and operating margin was minus 15.2%. In late May, we indicated that margins would take a step back and be negative due to a couple of things. First, the deliberate slowdown of the Puget Sound factories has impacted the derivative programs, specifically, a $391 million loss on the KC-46A Tanker, as well as margin compression on the profitable P8 program. Second, we've seen additional fixed price development cost pressures, resulting in additional losses on T-7A, VC-25B and commercial crew, primarily related to higher estimated engineering and manufacturing costs and inefficiencies associated with meeting certain technical requirements. Given the fixed price nature of these contracts, we continue to be transparent about impacts as we work to stabilize and mature these programs. While acknowledging these are disappointing results, there's a complicated development programs, and we continue to put milestones behind us and remain focused on retiring risk each quarter and ultimately delivering these mission-critical commitments to our customers. Stepping back, the game plan to get BDS back to high single-digit margins in the medium to long term remains unchanged. The core business remains solid, representing approximately 60% of our revenue and performing in the mid to high single-digit margin range. The demand for these products continue to be very strong, supported by the geopolitical threat environment confronting our nation and our allies. And the 25% of the portfolio primarily comprised of fighter and satellite programs, the quarter again saw improved margin trends as we continue to make important progress including delivering our eight F-15EX aircraft to the US Air Force, which enabled the program to achieve its initial operating capability milestone in July. We still expect to return strong historical performance level as we roll to new contracts with tighter underwriting standards. Overall, the defense portfolio is well positioned for the long term. There's strong demand across the customer base, the products are performing well in the field, and we're confident that our efforts to drive execution and stability will return this business performance levels that our investors will recognize. Moving on to the next page, Boeing Global Services. BGS continued to perform well in the second quarter, delivering very strong results across a globally deployed team that is focused on supporting its customers on both the defense and commercial sides. They received $4 billion in orders and the backlog ended at $19 billion. Revenue was $4.9 billion, up 3%, primarily on higher commercial volume. Operating margin was 17.8%, down slightly compared to last year, but still strong performance. In the quarter, BGS secured an Apache performance-based logistics contract from the US Army and captured FliteDeck Pro service contracts with Hainan Airlines and Ryanair. Importantly, BGS continued to deliver very strong operating margins for the first half of the year, matching the record levels from 2023. It's a terrific franchise that's set up for years to come. The team is focused on profitable, capital-efficient high IP offerings, and we still expect it to grow at solid mid-single-digit revenue levels and throw off mid-teen margins with very high free cash flow conversion. Turning to the next page, I'll cover cash and cash and debt. On cash and marketable securities, we ended the quarter at $12.6 billion, reflecting the $10 billion issuance of new debt in May, partially offset by the use of free cash flow in the quarter. The debt balance increased to $57.9 billion driven by the new debt issuance. We continue to maintain access to $10 billion of revolving credit facilities, all of which remain undrawn. The deliberate actions we're taking demonstrate our commitment to improve safety and quality, and we continue to manage the business with a long-term view. We acknowledge the impact these actions are having on calendar year cash flows. So let me provide some additional context on near-term expectations. While commercial production and deliveries are improving, additional losses in BDS and working capital timing continue to weigh on near-term cash flow. Inventory will remain a near-term headwind as we prioritize supply chain stability to support future rate increases and advanced payments will take time to improve as we stabilize production and improve profitability of deliveries to our customers. Given these near-term working capital pressures, third quarter is expected to be another use of cash. We expect these working capital timing impacts will be -- unwind as deliveries and production stabilize later this year. On the free cash flow outlook for the year, we are now expecting a larger use of cash than previously forecasted. As you know, operating leverage in our business is meaningful. And as we ramp up deliveries, free cash flow will grow. We are deliberately investing today and taking the time necessary to get it right to ensure we're positioned to ramp -- in a more predictable and stable fashion. We remain committed to managing the balance sheet in a prudent manner with two main objectives: First, prioritize the investment grade rating; and second, allow the factory and supply chain to reset, both of which were supported by our decision to acquire Spirit with all stock financing. We'll continue to actively monitor our liquidity levels and as needed, we'll supplement our liquidity position with these two objectives in mind. We're confident that over time, the business performance and capital structure will return to levels fully aligned with an investment-grade profile. Looking forward, we're taking the time now to ensure that our BCA factories are positioned to ramp production in a stable fashion for years to come. We'll also continue make progress on other important objectives, including shutting down the shadow factories, maturing and derisking the defense fixed-price development programs and building on the continued strong results and services. Entering 2025 will be in a much stronger position because of the work we're doing now. As noted in the commercial market outlook published this month, we continue to see robust demand and the fundamentals are there for the next 20 years, where we expect the global fleet to almost double as nearly 44,000 new airplanes are delivered with about half of those full replacement demand. The commercial and defense markets we serve, along with our product portfolio underpin our confidence as we manage the business today with a long-term view built on safety, quality and delivering for our customers. With that, let's open it up for questions.","evidence_gemma_new":"loss per share quarter","evidence_llama_3_3":"loss per share the quarter","evidence_qwen_3_30b":null,"gemma_new_max":2.9,"gemma_new_min":2.9,"llama_3_3_max":2.9,"llama_3_3_min":2.9,"qwen_3_30b_max":null,"qwen_3_30b_min":null}
{"symbol":"BA","year":2024,"quarter":3,"date":"2024-Q3","chunk_id":3,"sub_chunk_id":0,"centroid_label":"core loss per share","agreed_value":10.44,"count":3,"chunk":"Brian West: Thanks Kelly, and good morning, everyone. Let's start with the total company financial performance for the quarter. Revenue was $17.8 billion, down 1%, primarily driven by lower commercial wide body deliveries, including impacts of the IAM work stoppage. The core loss per share was $10.44, primarily reflecting impacts from the IAM work stoppage and previously announced charges across certain commercial and defense programs. Free cash flow was a use of $2 billion in the quarter with results impacted by lower commercial wide body deliveries and unfavorable working capital timing, including impacts associated with the work stoppage. Improvement versus prior expectations was driven by better-than-expected BCA advanced payments. Turning to the next page, I'll cover Boeing Commercial Airplanes. BCA delivered 116 airplanes in the quarter. Revenue was $7.4 billion, and operating margin was minus 54%, primarily reflecting previously announced -- tax charges of $3 billion on the 777X and 767 programs, the IAM work stoppage and higher period costs, including R&D. Backlog in the quarter ended at $428 billion and includes more than 5,400 airplanes. Now I'll give more color on the key programs. The 737 program delivered 92 airplanes in the quarter. As noted in mid-September, we had been making good progress on stabilizing production and preparing for 38 per month by year-end, but those objectives will now take longer due to the IAM work stoppage. Given the strike and our need to conserve cash, we've made near-term adjustments to broadly stop supplier shipments. We continue to manage supplier by supplier based on inventory levels and for certain suppliers, this will allow them to catch up. We maintain our objective to position the supply chain to support our ramp post-strike. The quarter ended with approximately 60 737-8s built prior to 2023, the vast majority for customers in China and India, down 30 from last quarter. Additional progress on shutting down the shadow factory has been impacted by the work stoppage, which will now extend into next year. On the -7 and -10, inventory levels remained stable at approximately 35 airplanes and the certification time lines remain unchanged. On the 787 program, we delivered 14 airplanes in the quarter. And as previously noted, we continue to work through production recovery plans on heat exchangers and delivery delays associated with seat certifications. The program is currently producing at 4 per month and still plans to return to 5 per month by year-end. We ended the quarter with 30 airplanes in inventory built prior to 2023 that required rework, down 5 from last quarter. Our ability to finish the rework and shut down the shadow factory has also been impacted by the work stoppage and will now extend into next year. Finally, on the 777X program. As previously announced, the $2.6 billion pretax charge primarily reflects our latest assessment of the certification time lines to address the delays in flight testing of the 777-9 as well as anticipated delays associated with the IAM work stoppage. We'll continue to follow the lead of the FAA as we progress through the certification process and now expect first delivery in 2026. Year-to-date, 777X inventory spend has averaged a bit below $800 million per quarter. The cash profile will look similar to prior development programs with the year prior to first delivery, typically the largest use of cash driven by inventory build associated with the production ramp, which will unwind as deliveries commence. Moving on to the next page, Boeing Defense & Space. BDS booked $8 billion in orders during the quarter, including definitizing a $2.6 billion award from the U.S. Air Force for 2 rapid prototype E-7A Wedgetails aircraft and the backlog ended at $62 billion. Revenue was $5.5 billion, stable year-over-year, and BDS delivered 34 aircraft in the quarter, including the first production MH-139A Grey Wolf, to the U.S. Air Force. As previously announced, BDS recognized $2 billion of pretax charges on the T-7A, KC-46A, commercial crew and MQ-25 programs in the third quarter, and operating margin was minus 43.1%. In September, we indicated that margins would again be negative due to two things: First, on the 25% of the portfolio, primarily comprised of fighter and satellite programs. Our fighter programs recognized losses in third quarter due to disruption as the F-15EX ramps up on a shared production line as well as additional cost pressures and winding down F-18 production. Second, additional cost pressures on fixed price development programs. The magnitude of these losses expanded as we close the books, primarily reflecting higher estimated production costs on the T-7A program, mainly on contracts in 2026 and beyond and an updated assessment of impacts on the Case 46A program associated with the IAM work stoppage and the decision to conclude production on the 767 freighter. Given the fixed price nature for these contracts, we'll continue to be transparent about impact as we work to stabilize and mature these programs. While acknowledging these are disappointing results, these are complicated development programs, and we remain focused on retiring risk each quarter and ultimately delivering these mission-critical capabilities to our customers. The plan to improve BDS margins in the medium to long term remains unchanged. Our core business remains solid, representing about 60% of our revenue and generally performing in the mid-to-high single-digit margin range with commercial derivatives experiencing margin compression in 3Q due to the disruption in Puget Sound factories, including the work stoppage. Broadly, the demand for our defense products remains very strong, supported by the threat environment contracting our nation and our allies. We still expect the business to return to historical performance levels as we stabilize production, execute on development programs and transition to new contracts with tighter underwriting standards. Moving on to the next page, Boeing Global Services. BGS continues to perform well in the quarter. The business received $6 billion in orders and the backlog ended at $20 billion. Revenue was $4.9 billion, up 2%, primarily on higher commercial volume. Operating margin was 17%, up 70 basis points compared to last year on favorable volume and mix. In the quarter, BGS secured several key services agreements with ANA as well as a KC-135 spares contract from the U.S. Air Force. It's a terrific long-term franchise focused on profitable, capital-efficient service offerings and executing well with mid-single-digit revenue growth, mid-teen margins and very high cash flow conversion. Turning to the next page, I'll cover cash and debt. On cash and marketable securities, we ended the quarter at $10.5 billion, primarily reflecting the $2 billion use of free cash flow in the quarter. The debt balance remained stable, ending at $57.7 billion. Last week, we entered into a new $10 billion short-term credit facility and now have access to credit facilities totaling $20 billion, all of which remain undrawn. We expect 4Q free cash flow to be a usage driven by the timing of return to work, the pace of our production ramp and the unwind of inventory in the balance sheet. While we expect 2025 to be another use of cash, we anticipate a significant improvement over this year. Importantly, we expect to exit next year with real momentum in the business as we return to normal production rates. We continue to take a tough but necessary actions to preserve cash and safeguard our future. We've worked across our supply chain partners to significantly reduce expenditures while balancing the associated trade-offs. We shared plans to reduce our workforce to align with our financial reality and a more focused set of priorities. We're decisively implementing reductions to our discretionary spending across the company. As we move through this process, we'll maintain our steadfast focus on safety, quality and delivery for our customers. We remain committed to managing the balance sheet in a prudent manner with two main objectives: First, prioritize the investment-grade credit rating; and second, allowing the factory and supply chain to reset, which will take longer as a result of the work stoppage. We're constantly evaluating our capital structure and liquidity levels to ensure that we could satisfy our debt maturities over the next 18 months while keeping confidence in our credit rating as investment grade. The actions we've recently taken, including establishing the universal shelf registration, which is now effective, directly support these priorities, and we have a plan to comprehensively address the balance sheet in the near term that could include an offering of equity and equity-linked securities. We're confident that overtime, the business performance and capital structure will return to levels fully aligned with an investment-grade profile. Near term, we're focused on reaching an agreement with our representative workforce to allow our factories in the Puget Sound area to resume and then ramp production in a stable fashion for years to come. Stepping back, the markets we serve are significant, and our product portfolio is well positioned, demonstrated by our backlog of more than $0.5 trillion. Long-term, these fundamentals underpin our confidence as we manage the business with a long-term view built on safety, quality and delivering for our customers. With that, Matt, let's open up for questions.","evidence_gemma_new":"core loss per share","evidence_llama_3_3":"core loss per share quarter","evidence_qwen_3_30b":"total company core loss per share quarter","gemma_new_max":10.44,"gemma_new_min":10.44,"llama_3_3_max":10.44,"llama_3_3_min":10.44,"qwen_3_30b_max":10.44,"qwen_3_30b_min":10.44}
{"symbol":"BA","year":2024,"quarter":4,"date":"2024-Q4","chunk_id":3,"sub_chunk_id":0,"centroid_label":"core loss per share","agreed_value":5.9,"count":2,"chunk":"Brian West : Thanks Kelly, and good morning, everyone. Let's start with the total company financial performance for the quarter. Revenue was $15.2 billion, down 31%, primarily driven by lower commercial deliveries associated with the IAM work stoppage. The core loss per share was $5.90, primarily reflecting previously announced impacts of the IAM work stoppage and agreement, charges on certain defense programs, as well as costs associated with workforce reductions announced last year. Pre-cash flow with the use of $4.1 billion in the quarter, in line with the expectations shared at our last earnings call. Results were impacted by lower commercial deliveries and unfavorable working capital timing, primarily driven by the IAM work stoppage. Turning to the next page, I'll cover Boeing commercial airplanes. BCA delivered 57 airplanes in the quarter. Revenue was $4.8 billion, and operating margin was minus 43.9%, primarily reflecting previously announced impacts from the IAM work stoppage and agreement, including pre-tax charges of $1.1 billion on the 777X and 767 programs. Backlog in the quarter ended at $435 billion and includes more than 5,500 airplanes. Now, I'll give more color on the key programs. The 737 program delivered 36 airplanes in 4Q, including a step up to 18 in December, and as of yesterday we've delivered 33 airplanes in January with four days to go. On production, we restarted the factory in December and plan to gradually increase rate. We expect to be in a position to go above 38 per month later in the year. All three lines in our rent and factory recycling and monthly production is already in the low to mid 20s for January. More broadly on the master schedule, we continue to make adjustments as needed and manage supplier-by-supplier based on inventory levels. Over the past year, our buffer inventory has grown to promote stability across our production system. As production stabilizes and rates increase over time, we plan to deliberately return buffer inventory to more normal levels. The quarter ended with 55 737-8s built prior to 2023, the majority for customers in China and India, down five from 3Q, with about another 10 already delivered in January. Given the impact of the strike, we now expect to shut down the shadow factory mid-year and deliver all remaining airplanes to customers within the year. On the -7 -10, inventory levels were stable at approximately 35 airplanes and testing on the anti-icing design solution is ongoing with certification expected to follow later in the year. On the 787 program, we delivered 15 airplanes in the quarter as we made progress on working through production recovery plans for heat exchangers and delivery delays associated with seat certifications. The program exited the year at a production rate of five per month and we recently announced plans to expand South Carolina operations as we prepared for anticipated future need of the commercial market. We are intent on ensuring the production system and the supply chain demonstrate stability prior to making the next increase on rates sometime this year. We ended the quarter with 25 airplanes in inventory built prior to 2023 that require rework, down five from last quarter. Our ability to finish the rework and shut down the shadow factory was also impacted by the work stoppage and we expect to complete this work in early 2025. Finally, on 777X, as previously announced, the $900 million pre-tax charge primarily reflects higher estimated labor costs associated with finalizing the IM Agreement and will be incurred over the next several years. Flight testing recently resumed and we still expect first delivery in 2026 and will continue to follow the lead of the FAA as we move through certification. 777X inventory spend in 2024 finished at $2.6 billion as 4Q spending levels moderated due to the work stoppage. As noted previously, we expect the cash profile to look similar to prior development programs, with a first year prior to first delivery typically the largest use of cash driven by inventory build associated with the production ramp, which will unwind as deliveries accelerate. Moving on to the next page in Boeing Defense and Space. BDS booked $8 billion in orders during the quarter, including awards for 15 KC-46A Tankers from the U.S. Air Force and seven P-8A aircraft from the U.S. Navy and the backlog ended at $64 billion. Revenue was $5.4 billion down 20% year-over-year on volume and program charges and operating margin was minus 41.9%. BDS delivered 34 aircraft and two satellites in the quarter, including the final T-7A EMD aircraft to the U.S. Air Force. The 15% of their portfolio comprised of fixed price development programs and recorded a $1.7 billion pre-tax charge as previously announced. The fixed price development cost pressures were driven by the KC-46A and T-7A programs with KC-46 primarily reflecting higher estimated manufacturing costs, including the impacts of the IAM work stoppage and agreement and T-7 driven by higher estimated production costs on contracts in 2026 and beyond. Roughly one-third of these new charges will work through the cash flows in the next few years with the remainder spread over the coming decade. Given the fixed price nature of these contracts, we'll continue to be transparent about impacts as we work to stabilize and mature these programs. We acknowledge that these are disappointing results. These are complicated development programs and we remain focused on retiring risk each quarter, and ultimately delivering these mission critical capabilities to our customers. As Kelly shared, we continue to make progress in 4Q, including key order and delivery milestones already noted. Importantly, the updated acquisition approach for the T-7A is a proof point for how we are working with our customers to find better overall outcomes for both parties, and those efforts will continue as we work through other parts of the portfolio. On the 25% of the portfolio, primarily it comprised of fighter and satellite programs. Our fighter programs again recognize losses in 4Q due to disruptions associated with the F-15 EX ramp-up and the F-18 production wind-down. We also recognize impacts across satellites and a few other legacy platforms tied to development realities as we work to refresh the capabilities of these platforms to support our customer needs. The remaining 60% of revenues of the portfolio are generally performing in the mid to high single-digit margin range. Although the P-8 commercial derivative program experienced margin compression in the fourth quarter due to the IAM work stoppage and agreement. While still more work in front of us, we continue to be confident that BDS margins can improve to high single-digit levels in the medium to longer term. The demand for our defense products remains very strong, supported by the threat environment confronting our nation and our allies. We still expect the business to return to historical performance levels as we stabilize production, execute on development programs, and transition to new contracts with tighter underwriting standards. Moving on to the next page, Boeing Global Services. BGS continued to perform well, delivering record operating margins in the quarter. The business received $6 billion in orders and the backlog ended at $21 billion. Revenue was $5.1 billion, up 6%, primarily on higher commercial volume. Operating margin was a record 19.5% in the quarter, up 210 basis points compared to last year, with both our commercial and government businesses delivering double-digit margins. In the quarter, BGS secured awards for C-17 sustainment, as well as a contract for F-15 Japan super interceptor upgrade and services from the U.S. Air Force. BGS is a terrific long-term franchise focused on profitable, capital-efficient service offerings and executing well with mid-single-digit revenue growth, mid-team margins, and very high cash flow conversion. Turning to the next page, I'll cover Cash and Debt. On cash and marketable securities, we ended the quarter at $26.3 billion, primarily reflecting the successful $24 billion capital raise in October, partially offset by the free cash flow usage and debt repayment. The debt balance ended at $53.9 billion, down $3.8 billion in the quarter, driven by the early repayment of a $3.5 billion bond originally set to mature in 2025. Importantly, this prepayment de-risks our 2025 maturity profile, resulting in $800 million of debt maturities remaining in the year. The company maintains access to $10 billion of revolving credit facilities, all of which remain undrawn. We remain committed to managing the balance sheet in a prudent manner with two main objectives. First, continue to prioritize the investment grade rating; and second, allow the factory and supply chain to reset. We will continue to evaluate opportunities to further supplement the balance sheet as we make certain portfolio decisions through the course of the year. Turning to the next page, I'll cover the total financial company results for the full year. Full year revenue was $66.5 billion, down 14% year-over-year, driven by lower commercial deliveries, including impacts of the IAM work stoppage. The core loss per share was $20.38, down from prior year, primarily on lower deliveries and commercial and defense program chargers, including impacts of the IAM work stoppage and agreement. Pre-cash flow was a $14.3 billion usage for the year, down versus prior year on commercial deliveries and unfavorable working capital timing, including the impact of the work stoppage. Stepping back, let me provide some additional context on 2025 free cash flow. 2025 will be an important year in our recovery, and while we still expect it to be a use of cash, we anticipate a significant improvement over 2024. Within 2025, we expect 1Q free cash flow will be a usage, and similar to 4Q\u201924, driven by continued working capital headwinds as we ramp production, as well as normal seasonality. We still expect the first half to be a use of cash, with the second half turning positive and accelerating as we exit 2025. CapEx investments stepped up last year and could increase by approximately $500 million in 2025 to support planned growth across both, the commercial and defense businesses. Importantly, we expect to exit the year with real momentum in the business as we return to normal production rates. This outlook will be underwritten by a few critical factors. Increasing 737 production rates through the year; moving 787 steadily towards its long-term production rates; liquidating our legacy 737 and 787 inventory and shutting down both shadow factories; strategically investing in the business, including the 777X production ramp and CapEx to support planned growth across the portfolio; Improving our defense business as we continue to mature the fixed price development programs and work to transition recently challenged programs with our renewed focus on disciplined program management and stabilizing the business. And finally, continuing to demonstrate strong performance across our services business. Broadly, the markets we serve continue to be significant and our backlog of more than $0.5 trillion demonstrates that our product portfolio is positioned to win. Long-term, these fundamentals underpin our confidence as we continue to manage the business with a long-term view built on safety, quality and delivering for our customers. With that, let's open it up for questions.","evidence_gemma_new":"core loss per share","evidence_llama_3_3":null,"evidence_qwen_3_30b":"total company core loss per share quarter","gemma_new_max":5.9,"gemma_new_min":5.9,"llama_3_3_max":null,"llama_3_3_min":null,"qwen_3_30b_max":5.9,"qwen_3_30b_min":5.9}
{"symbol":"BA","year":2023,"quarter":1,"date":"2023-Q1","chunk_id":3,"sub_chunk_id":0,"centroid_label":"free cash flow","agreed_value":786000000.0,"count":3,"chunk":"Brian West: Great. Thanks, Dave, and good morning, everyone. Let's go to the next page and cover the total company results. First quarter revenue was $17.9 billion. That's up 28% year-over-year, primarily driven by higher volume in both commercial and defense. Core operating margin was minus 2.5%, and the core loss per share was $1.27, both big improvements versus last year due to higher commercial volume and improved operating performance. Margins and EPS were negative driven by expected abnormal costs and period expenses as well as a charge on the KC-46 Tanker program that I noted last month. Free cash flow was a usage of $786 million in the quarter, significantly better versus last year driven by the higher commercial deliveries as well as an advanced payment tied to lot 9 on the tanker program, another important award for the KC-46 franchise. As we noted in our last earnings call, cash was lower this quarter than the fourth quarter due to lower wide-body deliveries and expected seasonality. Turning to the next page, I'll cover Commercial Airplanes. Let's start with orders. BCA booked 107 net orders in the quarter, including JAL and Lufthansa, and we have a backlog of over 4,500 airplanes valued at $334 billion. Moving to the figures on the left. Revenue was $6.7 billion, up 60% year-over-year, driven by 130 airplane deliveries with increases on both the 87 and the 37 programs, partially offset by 87 customer considerations. Operating margin was minus 9.2%, which was significantly better than last year. But margins are impacted by expected abnormal costs and period expenses, including higher R&D spending. Let's take a minute on the 737 program. The 37 had 113 deliveries in the first quarter, up 31% year-over-year, including 53 deliveries in the month of March. Picking up where Dave left off regarding the supplier fuselage item. We found the issue. We booked a nonmaterial financial impact in the quarter. We understand the rework steps required, and we started repairs on several airplanes. And although near-term deliveries will be impacted, we still expect to deliver between 400 and 450 737s this year. April and 2Q deliveries will be lower, but the first half monthly average will be about 30 airplanes per month, in line with what we said previously. The second half deliveries are expected to be around 40 per month, with sequential quarterly improvement in the back half. While the high end of the delivery range is pressured, ultimate performance will be dictated by the pace of the fuselage recovery. Regarding inventory, we ended the quarter with approximately 225 MAX airplanes in inventory, including 138 that were built for customers in China and roughly 30 -7s and -10s. Within these 225 inventoried airplanes, roughly 75% will require the fuselage rework. And the number of inventoried airplanes will likely increase in 2Q, and we still expect most to be delivered by the end of 2024. On production, we're completing airplanes in final assembly and expect to recover in the coming months, paced by fuselage availability. We're supporting Spirit through this recovery, including manufacturing and engineering resources as well as a cash advance. To support overall supply chain stability, we're not changing the master schedule, including anticipated production rate increases and we've contemplated any near-term parts inventory builds into our forward look. Within final assembly, as Dave mentioned, we expect to increase our rate to 38 per month later this year and 50 per month in the '25, '26 time frame. Moving on to the 787 program. We had 11 deliveries in the first quarter and still expect 70 to 80 deliveries this year. We're producing at 3 per month and still plan to reach 5 per month by year-end. We ended the quarter with 95 airplanes in inventory, most of which will be delivered by the end of 2024. We booked 379 of abnormal costs in the quarter, in line with expectations, and there's no change to the total estimate of $2.8 billion. We still expect abnormal to be largely done by the end of this year. Finally, on the 777X program, efforts are ongoing. Both the program time line and the abnormal estimate of $1.5 billion are unchanged. We booked $126 million of abnormal costs in the quarter, in line with expectations. With that, let's turn to the next page and go through defense and space. BDS booked $10 billion in orders during the quarter, including awards for the U.S. Air Force for 15 KC-46 Tankers and an E-7 development contract as well as 184 Apaches for the U.S. Army. The BDS backlog is $58 billion. Moving to the figures on the left. Revenue was $6.5 billion, up 19% year-over-year, driven by the KC-46 Tanker award, program milestone completions and underlying volume. We delivered 39 aircraft and 3 satellites in the quarter and also began production of the MH-139 Grey Wolf. Operating margin was minus 3.2%, significantly higher than last year but still negative, driven by a $245 million pretax charge on the tanker program, which I noted last month. Let me give you a little bit of context on the overall BDS portfolio. Remember, 15% of the revenues in the quarter are the firm fixed-price development contracts. These contracts get a lot of attention, and there is a commitment to derisk these programs as much as we can as we move through the development cycles and into full-scale, stable production. Next and importantly, over 60% of revenues in the quarter collectively delivered double-digit margins. We have many important programs that are performing to historical performance levels. The balance of the 1Q revenue is made up of a small number of established programs that are experiencing negative margins on certain contracts due to specific near-term supply chain and factory stability pressures that we've highlighted previously. It will take time to work through these issues, and we fully expect that these programs will improve through the course of this year and return to normal margin levels over time. The BDS team is fully committed delivering the development programs to our customers. We've implemented new contracting disciplines, accelerated efforts around lean manufacturing and we're investing in innovation and in our people, all of which underpin our plans going forward. Overall, the defense portfolio is well positioned. There's strong demand across the customer base, the products are performing in the field, and we're confident that our efforts to drive execution and stability will return this business to performance levels that our investors would recognize. Turning to the next page, I'll cover Global Services. As Dave mentioned, BGS had another very strong quarter. We received $4 billion in orders during the quarter, and the backlog is $19 billion. Looking to the figures on the left. Revenue was $4.7 billion, up 9% year-over-year, primarily driven by our commercial parts and distribution business. Operating margin was 17.9%, an expansion of 330 basis points versus last year, with both our commercial and government businesses delivering double-digit margins. Operating margins in the quarter were higher than expected due to favorable mix, and we don't assume that will repeat. In the quarter, BGS announced the first Boeing Converted Freighter line in India, delivered AerCap's 50th 737-800 Boeing Converted Freighter and broke ground on a new component operations facility in Jacksonville, Florida. Turning to the next page, I'll cover cash and debt. We ended the quarter with $14.8 billion of cash and marketable securities, and our debt balance decreased to $55.4 billion. We paid down $1.7 billion of debt maturities in the quarter and absorbed the expected cash flow usage driven by seasonality. We also had $12 billion of revolving credit facilities at the end of the quarter, all of which remain undrawn. Our liquidity position is very strong. The investment-grade credit rating is a priority, and we're deploying capital in line with the priorities we've shared: generate strong cash flow, invest the business and pay down debt. And flipping to the last page on our outlook. The 2023 financial outlook is unchanged from what we previously shared, including $3 billion to $5 billion of free cash flow generation. Commercial demand remains strong across our key programs and services. Passenger traffic in February increased over 55% year-over-year and is at 85% of pre-pandemic levels, comprised [indiscernible] domestic and 78% international. Defense demand is robust, and the initial FY '24 presidential budget is in line with expectations. As Dave mentioned, our portfolio and capabilities are well positioned to support the needs of the nation and of our allies. On the supply chain front, as you'll recall when we set out our 2023 framework last November, we predicted the supply chain instability would likely continue. The good news is that we plan for it within our financial and delivery guidance. There's progress in many areas of the supply base, but we will likely face pockets of variability through the rest of this year. We continue to make key investments, including higher inventory buffers and forward deployment of resources as we take appropriate actions to mitigate impacts and improve predictability. From a quarterly perspective, we continue to expect financials to improve throughout the year. On 2Q specifically, we expect core EPS will be roughly in line with 1Q '23 performance absent the tanker charge, as the 737 delivery impacts would be largely offset by higher wide-body deliveries. We expect free cash flow to be breakeven to slightly negative as we work through the 37 recovery. All things considered, we feel good about what's in front of us. And we remain on track to achieve our long-term guidance, including $10 billion of free cash flow in the '25, '26 time frame. With that, I'll turn it over to Dave for any closing comments.","evidence_gemma_new":"Free cash flow the quarter","evidence_llama_3_3":"Free cash flow","evidence_qwen_3_30b":"Free cash flow Free cash flow First quarter","gemma_new_max":786000000.0,"gemma_new_min":786000000.0,"llama_3_3_max":786000000.0,"llama_3_3_min":786000000.0,"qwen_3_30b_max":786000000.0,"qwen_3_30b_min":786000000.0}
{"symbol":"BA","year":2023,"quarter":1,"date":"2023-Q1","chunk_id":3,"sub_chunk_id":0,"centroid_label":"free cash flow","agreed_value":10000000000.0,"count":2,"chunk":"Brian West: Great. Thanks, Dave, and good morning, everyone. Let's go to the next page and cover the total company results. First quarter revenue was $17.9 billion. That's up 28% year-over-year, primarily driven by higher volume in both commercial and defense. Core operating margin was minus 2.5%, and the core loss per share was $1.27, both big improvements versus last year due to higher commercial volume and improved operating performance. Margins and EPS were negative driven by expected abnormal costs and period expenses as well as a charge on the KC-46 Tanker program that I noted last month. Free cash flow was a usage of $786 million in the quarter, significantly better versus last year driven by the higher commercial deliveries as well as an advanced payment tied to lot 9 on the tanker program, another important award for the KC-46 franchise. As we noted in our last earnings call, cash was lower this quarter than the fourth quarter due to lower wide-body deliveries and expected seasonality. Turning to the next page, I'll cover Commercial Airplanes. Let's start with orders. BCA booked 107 net orders in the quarter, including JAL and Lufthansa, and we have a backlog of over 4,500 airplanes valued at $334 billion. Moving to the figures on the left. Revenue was $6.7 billion, up 60% year-over-year, driven by 130 airplane deliveries with increases on both the 87 and the 37 programs, partially offset by 87 customer considerations. Operating margin was minus 9.2%, which was significantly better than last year. But margins are impacted by expected abnormal costs and period expenses, including higher R&D spending. Let's take a minute on the 737 program. The 37 had 113 deliveries in the first quarter, up 31% year-over-year, including 53 deliveries in the month of March. Picking up where Dave left off regarding the supplier fuselage item. We found the issue. We booked a nonmaterial financial impact in the quarter. We understand the rework steps required, and we started repairs on several airplanes. And although near-term deliveries will be impacted, we still expect to deliver between 400 and 450 737s this year. April and 2Q deliveries will be lower, but the first half monthly average will be about 30 airplanes per month, in line with what we said previously. The second half deliveries are expected to be around 40 per month, with sequential quarterly improvement in the back half. While the high end of the delivery range is pressured, ultimate performance will be dictated by the pace of the fuselage recovery. Regarding inventory, we ended the quarter with approximately 225 MAX airplanes in inventory, including 138 that were built for customers in China and roughly 30 -7s and -10s. Within these 225 inventoried airplanes, roughly 75% will require the fuselage rework. And the number of inventoried airplanes will likely increase in 2Q, and we still expect most to be delivered by the end of 2024. On production, we're completing airplanes in final assembly and expect to recover in the coming months, paced by fuselage availability. We're supporting Spirit through this recovery, including manufacturing and engineering resources as well as a cash advance. To support overall supply chain stability, we're not changing the master schedule, including anticipated production rate increases and we've contemplated any near-term parts inventory builds into our forward look. Within final assembly, as Dave mentioned, we expect to increase our rate to 38 per month later this year and 50 per month in the '25, '26 time frame. Moving on to the 787 program. We had 11 deliveries in the first quarter and still expect 70 to 80 deliveries this year. We're producing at 3 per month and still plan to reach 5 per month by year-end. We ended the quarter with 95 airplanes in inventory, most of which will be delivered by the end of 2024. We booked 379 of abnormal costs in the quarter, in line with expectations, and there's no change to the total estimate of $2.8 billion. We still expect abnormal to be largely done by the end of this year. Finally, on the 777X program, efforts are ongoing. Both the program time line and the abnormal estimate of $1.5 billion are unchanged. We booked $126 million of abnormal costs in the quarter, in line with expectations. With that, let's turn to the next page and go through defense and space. BDS booked $10 billion in orders during the quarter, including awards for the U.S. Air Force for 15 KC-46 Tankers and an E-7 development contract as well as 184 Apaches for the U.S. Army. The BDS backlog is $58 billion. Moving to the figures on the left. Revenue was $6.5 billion, up 19% year-over-year, driven by the KC-46 Tanker award, program milestone completions and underlying volume. We delivered 39 aircraft and 3 satellites in the quarter and also began production of the MH-139 Grey Wolf. Operating margin was minus 3.2%, significantly higher than last year but still negative, driven by a $245 million pretax charge on the tanker program, which I noted last month. Let me give you a little bit of context on the overall BDS portfolio. Remember, 15% of the revenues in the quarter are the firm fixed-price development contracts. These contracts get a lot of attention, and there is a commitment to derisk these programs as much as we can as we move through the development cycles and into full-scale, stable production. Next and importantly, over 60% of revenues in the quarter collectively delivered double-digit margins. We have many important programs that are performing to historical performance levels. The balance of the 1Q revenue is made up of a small number of established programs that are experiencing negative margins on certain contracts due to specific near-term supply chain and factory stability pressures that we've highlighted previously. It will take time to work through these issues, and we fully expect that these programs will improve through the course of this year and return to normal margin levels over time. The BDS team is fully committed delivering the development programs to our customers. We've implemented new contracting disciplines, accelerated efforts around lean manufacturing and we're investing in innovation and in our people, all of which underpin our plans going forward. Overall, the defense portfolio is well positioned. There's strong demand across the customer base, the products are performing in the field, and we're confident that our efforts to drive execution and stability will return this business to performance levels that our investors would recognize. Turning to the next page, I'll cover Global Services. As Dave mentioned, BGS had another very strong quarter. We received $4 billion in orders during the quarter, and the backlog is $19 billion. Looking to the figures on the left. Revenue was $4.7 billion, up 9% year-over-year, primarily driven by our commercial parts and distribution business. Operating margin was 17.9%, an expansion of 330 basis points versus last year, with both our commercial and government businesses delivering double-digit margins. Operating margins in the quarter were higher than expected due to favorable mix, and we don't assume that will repeat. In the quarter, BGS announced the first Boeing Converted Freighter line in India, delivered AerCap's 50th 737-800 Boeing Converted Freighter and broke ground on a new component operations facility in Jacksonville, Florida. Turning to the next page, I'll cover cash and debt. We ended the quarter with $14.8 billion of cash and marketable securities, and our debt balance decreased to $55.4 billion. We paid down $1.7 billion of debt maturities in the quarter and absorbed the expected cash flow usage driven by seasonality. We also had $12 billion of revolving credit facilities at the end of the quarter, all of which remain undrawn. Our liquidity position is very strong. The investment-grade credit rating is a priority, and we're deploying capital in line with the priorities we've shared: generate strong cash flow, invest the business and pay down debt. And flipping to the last page on our outlook. The 2023 financial outlook is unchanged from what we previously shared, including $3 billion to $5 billion of free cash flow generation. Commercial demand remains strong across our key programs and services. Passenger traffic in February increased over 55% year-over-year and is at 85% of pre-pandemic levels, comprised [indiscernible] domestic and 78% international. Defense demand is robust, and the initial FY '24 presidential budget is in line with expectations. As Dave mentioned, our portfolio and capabilities are well positioned to support the needs of the nation and of our allies. On the supply chain front, as you'll recall when we set out our 2023 framework last November, we predicted the supply chain instability would likely continue. The good news is that we plan for it within our financial and delivery guidance. There's progress in many areas of the supply base, but we will likely face pockets of variability through the rest of this year. We continue to make key investments, including higher inventory buffers and forward deployment of resources as we take appropriate actions to mitigate impacts and improve predictability. From a quarterly perspective, we continue to expect financials to improve throughout the year. On 2Q specifically, we expect core EPS will be roughly in line with 1Q '23 performance absent the tanker charge, as the 737 delivery impacts would be largely offset by higher wide-body deliveries. We expect free cash flow to be breakeven to slightly negative as we work through the 37 recovery. All things considered, we feel good about what's in front of us. And we remain on track to achieve our long-term guidance, including $10 billion of free cash flow in the '25, '26 time frame. With that, I'll turn it over to Dave for any closing comments.","evidence_gemma_new":"annual free cash flow","evidence_llama_3_3":"free cash flow '25, '26 time frame","evidence_qwen_3_30b":null,"gemma_new_max":10000000000.0,"gemma_new_min":10000000000.0,"llama_3_3_max":10000000000.0,"llama_3_3_min":10000000000.0,"qwen_3_30b_max":null,"qwen_3_30b_min":null}
{"symbol":"BA","year":2023,"quarter":2,"date":"2023-Q2","chunk_id":3,"sub_chunk_id":0,"centroid_label":"free cash flow","agreed_value":2600000000.0,"count":3,"chunk":"Brian West: Thanks, Dave and good morning everyone. Let\u2019s start with the total company financial performance. Second quarter revenue was $19.8 billion, that\u2019s up 18% year-over-year. The growth was primarily driven by higher commercial volume, including increased 787 deliveries. Core operating margin in the quarter was minus 2% and the core loss per share was $0.82. Margins and EPS were driven by expected abnormal costs and period expenses as well as losses on three fixed price development programs in our defense business, which I will cover later. Free cash flow, as Dave mentioned, was positive $2.6 billion in the quarter, significantly better versus last year and last quarter driven by higher commercial deliveries and favorable receipt timing. Relative to our expectations shared at the last earnings call, the strong order activity in the quarter drove over $2 billion of favorable advanced payment timing. Keep in mind, most of this was expected to incur in the third quarter. Turning to the next page, I will cover Commercial Airplanes. BCA booked 460 net orders in the quarter, including 220 with Air India, 39 with Riyadh Air and signed a purchase agreement with Ryanair for up to 300 737 MAX-10s. We now have over 4,800 airplanes in backlog valued at $363 billion. Revenue was $8.8 billion, up 41% year-over-year on 136 airplane deliveries driven by the 87 program. Operating margin was minus 4.3%, a sequential improvement versus the first quarter as anticipated, but remains negative as we continue to be impacted by expected abnormal costs and period expenses, including higher R&D spending. As Dave noted, we worked through a number of operational challenges so far this year. We are making steady progress and we will continue to focus on stability as we look to increase production on key programs. On the Spirit work stoppage, we were pleased to see a quick resolution and we will work through any limited impacts to production. Overall, this is not expected to change our production and delivery outlook. On to the programs. On the 737, we had 103 deliveries in the quarter, including 49 in June, a positive proof point that the production system is stabilizing. In regards to the Spirit fitting issue that we discussed last quarter, in May, we resumed deliveries of rework airplanes and also began producing newly built airplanes meeting our specifications. In light of this progress, we are now transitioning production to 38 per month and still plan to increase to 50 per month in the \u201825-26 timeframe. As we move to the higher rate, we will continue to prioritize stability and it will take some time to consistently deliver at 38 per month off the line. We still project full year 737 deliveries of 400 to 450 with sequential improvement in the second half. We ended the quarter with approximately 228 MAX airplanes in inventory. This includes 85 for customers in China and 55 that have now been remarketed as part of the plan we have previously discussed. We still expect most MAX inventory airplane to be delivered by the end of 2024. Moving on to the 87 program, we had 20 deliveries in the quarter and still expect between 70 and 80 deliveries this year. We increased production to 4 per month during the quarter and still plan to reach 5 per month by year end. We ended the quarter with 85 airplanes in inventory and rework is progressing nicely. And we still expect most to be delivered by the end of 2024. We booked $314 million of abnormal costs in the quarter in line with expectations and there is no change to the total estimate of $2.8 billion, which is largely done by year end. Finally, on the 777X program, efforts are ongoing and the program timeline is unchanged. Abnormal costs were $136 million as expected and we have lowered our total estimate from $1.5 billion to $1 billion, which reflects plans to resume production later this year rather than early 2024. Moving on to the next page and defense and space. BDS booked $6 billion in orders in the quarter, including an award from the U.S. Army for 19 CH-47 Chinooks and the backlog is now at $58 billion. Revenue was flat at $6.2 billion and we delivered 38 aircraft in the quarter. Operating margin was minus 8.5% primarily driven by three fixed price development programs. The first was related to commercial crew tied to scheduled delays that we have previously shared and had a $257 million impact; the second on MQ-25 related to a schedule shift that drove a $68 million impact; and lastly, on the T-7A production contract, we revised the long-term production cost estimates that will occur over several years starting in the 2025 timeframe, which drove an impact of $189 million. These determinations were mostly made over the last few weeks as we closed out the quarter. Similar to last quarter, roughly 60% of the portfolio is generating solid levels of performance, in line with historical margins. But we continue to see operational impacts from labor instability and supply chain disruption on other programs that contributed to lower margins. Looking at BDS in aggregate, it will take time to return to normalized levels of performance. We are confident and we are focused on the path to high single-digit margins in 2025-2026. The strong demand across the customer base, the portfolio is well positioned, and we are focused on execution. Moving on to the next page, let\u2019s cover services. BGS had another very strong quarter. BGS received $4 billion in orders during the quarter and the backlog is $18 billion. Revenue was $4.7 billion, up 10% year-over-year primarily driven by favorable volume and mix in both commercial and government services. Operating margin was 18%, an expansion of 110 basis points versus last year with both our commercial and government businesses delivering double-digit margins. Operating margins in the quarter were higher than expected due to favorable mix, which we don\u2019t expect to continue at these levels. In the quarter, BGS announced an expansion in Poland with a new parts distribution site, a collaboration with CAE. And the Japan Airlines has adopted the Boeing Insight Accelerator for their 787 fleet. Turning to the next page, I\u2019ll cover cash and debt. We ended the quarter with $13.8 billion of cash and marketable securities. And our debt balance decreased to $52.3 billion. In the quarter, we repaid $3.4 billion of maturing debt and provided a $180 million cash advance to Spirit as previously shared. Year-to-date, we\u2019ve repaid $5.1 billion of debt, which is essentially all of our maturities for the year. We also maintained $12 billion revolving credit facilities at the end of the quarter, all of which remain undrawn. Our liquidity position is strong. Investment-grade credit rating continues to be important. And we\u2019re deploying capital in line with the priorities we\u2019ve shared: invest in the business and pay down debt, strong cash flow generation. And flipping to the last page, I\u2019ll cover our outlook. The 2023 overall financial outlook is unchanged from what we previously shared, including $3 billion to $5 billion of free cash flow generation. The operating cash makeup by division will likely be different with BCA and BGS better than expected and BDS lower than expected due to the lower operating performance. Net-net, we still have confidence in the $3 billion to $5 billion of free cash flow for the year. Stepping back to address the state of the market. Commercial demand remains strong across our key programs and services. Cargo remains healthy. Global passenger traffic was up 39% in May and is at 96% of pre-pandemic levels, 105% domestic and 91% international. China pass-through traffic in May was at 87% of pre-pandemic levels with domestic traffic up more than 300% year-on-year and above pre-pandemic levels. Defense demand is also robust, and the FY \u201824 budget continues to progress in line with our expectations. Our portfolio and capabilities are well positioned to support the needs of the nation and of our allies. With demand strong, we still find ourselves in a supply-constrained environment. And our focus continues to be on execution, both within our factories and the supply chain as we steadily increase production. Relative to the first half of 2023, we continue to expect operating and financial performance to improve in the second half. On the third quarter specifically, we expect BCA margins to improve sequentially but remain negative, and we\u2019re not anticipating much in terms of BDS profitability. The 2Q effective tax rate of 63% included cumulative adjustments related to the projected valuation allowance. These adjustments will continue to weigh on the tax rate for the remainder of the year. And given the strong results in 2Q cash flow, 3Q will be lower sequentially, still positive and likely in the hundreds of millions of dollars. All things considered, we feel good about where we\u2019re at on the road to recovery. Right now, we\u2019re squarely focused on meaningful operating performance improvement, including deliveries, revenue, margins and cash flow, all of which will improve as we progress through 2023. And while the challenges remain, we\u2019re headed in the right direction. Ultimately, we expect our operational and financial performance to continue to accelerate, aligned with the plan we laid out at our IR Day last November. And we are confident in $10 billion of free cash flow in 2025, 2026. With that, I\u2019ll turn it over to Dave with some final remarks.","evidence_gemma_new":"free cash flow quarter","evidence_llama_3_3":"free cash flow the quarter","evidence_qwen_3_30b":"Free cash flow positive $2.6 billion","gemma_new_max":2600000000.0,"gemma_new_min":2600000000.0,"llama_3_3_max":2600000000.0,"llama_3_3_min":2600000000.0,"qwen_3_30b_max":2600000000.0,"qwen_3_30b_min":2600000000.0}
{"symbol":"BA","year":2023,"quarter":2,"date":"2023-Q2","chunk_id":3,"sub_chunk_id":0,"centroid_label":"free cash flow","agreed_value":4000000000.0,"count":2,"chunk":"Brian West: Thanks, Dave and good morning everyone. Let\u2019s start with the total company financial performance. Second quarter revenue was $19.8 billion, that\u2019s up 18% year-over-year. The growth was primarily driven by higher commercial volume, including increased 787 deliveries. Core operating margin in the quarter was minus 2% and the core loss per share was $0.82. Margins and EPS were driven by expected abnormal costs and period expenses as well as losses on three fixed price development programs in our defense business, which I will cover later. Free cash flow, as Dave mentioned, was positive $2.6 billion in the quarter, significantly better versus last year and last quarter driven by higher commercial deliveries and favorable receipt timing. Relative to our expectations shared at the last earnings call, the strong order activity in the quarter drove over $2 billion of favorable advanced payment timing. Keep in mind, most of this was expected to incur in the third quarter. Turning to the next page, I will cover Commercial Airplanes. BCA booked 460 net orders in the quarter, including 220 with Air India, 39 with Riyadh Air and signed a purchase agreement with Ryanair for up to 300 737 MAX-10s. We now have over 4,800 airplanes in backlog valued at $363 billion. Revenue was $8.8 billion, up 41% year-over-year on 136 airplane deliveries driven by the 87 program. Operating margin was minus 4.3%, a sequential improvement versus the first quarter as anticipated, but remains negative as we continue to be impacted by expected abnormal costs and period expenses, including higher R&D spending. As Dave noted, we worked through a number of operational challenges so far this year. We are making steady progress and we will continue to focus on stability as we look to increase production on key programs. On the Spirit work stoppage, we were pleased to see a quick resolution and we will work through any limited impacts to production. Overall, this is not expected to change our production and delivery outlook. On to the programs. On the 737, we had 103 deliveries in the quarter, including 49 in June, a positive proof point that the production system is stabilizing. In regards to the Spirit fitting issue that we discussed last quarter, in May, we resumed deliveries of rework airplanes and also began producing newly built airplanes meeting our specifications. In light of this progress, we are now transitioning production to 38 per month and still plan to increase to 50 per month in the \u201825-26 timeframe. As we move to the higher rate, we will continue to prioritize stability and it will take some time to consistently deliver at 38 per month off the line. We still project full year 737 deliveries of 400 to 450 with sequential improvement in the second half. We ended the quarter with approximately 228 MAX airplanes in inventory. This includes 85 for customers in China and 55 that have now been remarketed as part of the plan we have previously discussed. We still expect most MAX inventory airplane to be delivered by the end of 2024. Moving on to the 87 program, we had 20 deliveries in the quarter and still expect between 70 and 80 deliveries this year. We increased production to 4 per month during the quarter and still plan to reach 5 per month by year end. We ended the quarter with 85 airplanes in inventory and rework is progressing nicely. And we still expect most to be delivered by the end of 2024. We booked $314 million of abnormal costs in the quarter in line with expectations and there is no change to the total estimate of $2.8 billion, which is largely done by year end. Finally, on the 777X program, efforts are ongoing and the program timeline is unchanged. Abnormal costs were $136 million as expected and we have lowered our total estimate from $1.5 billion to $1 billion, which reflects plans to resume production later this year rather than early 2024. Moving on to the next page and defense and space. BDS booked $6 billion in orders in the quarter, including an award from the U.S. Army for 19 CH-47 Chinooks and the backlog is now at $58 billion. Revenue was flat at $6.2 billion and we delivered 38 aircraft in the quarter. Operating margin was minus 8.5% primarily driven by three fixed price development programs. The first was related to commercial crew tied to scheduled delays that we have previously shared and had a $257 million impact; the second on MQ-25 related to a schedule shift that drove a $68 million impact; and lastly, on the T-7A production contract, we revised the long-term production cost estimates that will occur over several years starting in the 2025 timeframe, which drove an impact of $189 million. These determinations were mostly made over the last few weeks as we closed out the quarter. Similar to last quarter, roughly 60% of the portfolio is generating solid levels of performance, in line with historical margins. But we continue to see operational impacts from labor instability and supply chain disruption on other programs that contributed to lower margins. Looking at BDS in aggregate, it will take time to return to normalized levels of performance. We are confident and we are focused on the path to high single-digit margins in 2025-2026. The strong demand across the customer base, the portfolio is well positioned, and we are focused on execution. Moving on to the next page, let\u2019s cover services. BGS had another very strong quarter. BGS received $4 billion in orders during the quarter and the backlog is $18 billion. Revenue was $4.7 billion, up 10% year-over-year primarily driven by favorable volume and mix in both commercial and government services. Operating margin was 18%, an expansion of 110 basis points versus last year with both our commercial and government businesses delivering double-digit margins. Operating margins in the quarter were higher than expected due to favorable mix, which we don\u2019t expect to continue at these levels. In the quarter, BGS announced an expansion in Poland with a new parts distribution site, a collaboration with CAE. And the Japan Airlines has adopted the Boeing Insight Accelerator for their 787 fleet. Turning to the next page, I\u2019ll cover cash and debt. We ended the quarter with $13.8 billion of cash and marketable securities. And our debt balance decreased to $52.3 billion. In the quarter, we repaid $3.4 billion of maturing debt and provided a $180 million cash advance to Spirit as previously shared. Year-to-date, we\u2019ve repaid $5.1 billion of debt, which is essentially all of our maturities for the year. We also maintained $12 billion revolving credit facilities at the end of the quarter, all of which remain undrawn. Our liquidity position is strong. Investment-grade credit rating continues to be important. And we\u2019re deploying capital in line with the priorities we\u2019ve shared: invest in the business and pay down debt, strong cash flow generation. And flipping to the last page, I\u2019ll cover our outlook. The 2023 overall financial outlook is unchanged from what we previously shared, including $3 billion to $5 billion of free cash flow generation. The operating cash makeup by division will likely be different with BCA and BGS better than expected and BDS lower than expected due to the lower operating performance. Net-net, we still have confidence in the $3 billion to $5 billion of free cash flow for the year. Stepping back to address the state of the market. Commercial demand remains strong across our key programs and services. Cargo remains healthy. Global passenger traffic was up 39% in May and is at 96% of pre-pandemic levels, 105% domestic and 91% international. China pass-through traffic in May was at 87% of pre-pandemic levels with domestic traffic up more than 300% year-on-year and above pre-pandemic levels. Defense demand is also robust, and the FY \u201824 budget continues to progress in line with our expectations. Our portfolio and capabilities are well positioned to support the needs of the nation and of our allies. With demand strong, we still find ourselves in a supply-constrained environment. And our focus continues to be on execution, both within our factories and the supply chain as we steadily increase production. Relative to the first half of 2023, we continue to expect operating and financial performance to improve in the second half. On the third quarter specifically, we expect BCA margins to improve sequentially but remain negative, and we\u2019re not anticipating much in terms of BDS profitability. The 2Q effective tax rate of 63% included cumulative adjustments related to the projected valuation allowance. These adjustments will continue to weigh on the tax rate for the remainder of the year. And given the strong results in 2Q cash flow, 3Q will be lower sequentially, still positive and likely in the hundreds of millions of dollars. All things considered, we feel good about where we\u2019re at on the road to recovery. Right now, we\u2019re squarely focused on meaningful operating performance improvement, including deliveries, revenue, margins and cash flow, all of which will improve as we progress through 2023. And while the challenges remain, we\u2019re headed in the right direction. Ultimately, we expect our operational and financial performance to continue to accelerate, aligned with the plan we laid out at our IR Day last November. And we are confident in $10 billion of free cash flow in 2025, 2026. With that, I\u2019ll turn it over to Dave with some final remarks.","evidence_gemma_new":"free cash flow generation","evidence_llama_3_3":null,"evidence_qwen_3_30b":"$3 billion to $5 billion","gemma_new_max":4000000000.0,"gemma_new_min":4000000000.0,"llama_3_3_max":null,"llama_3_3_min":null,"qwen_3_30b_max":4000000000.0,"qwen_3_30b_min":4000000000.0}
{"symbol":"BA","year":2023,"quarter":3,"date":"2023-Q3","chunk_id":3,"sub_chunk_id":0,"centroid_label":"free cash flow","agreed_value":310000000.0,"count":2,"chunk":"Brian West: Thanks, Dave, and good morning, everyone. Let's go to the next slide and start with total company financial performance. Third quarter revenue was $18.1 billion. That's up 13% year-over-year. Growth was driven by higher commercial volume, primarily on higher 787 deliveries. Core operating margin in the quarter was minus 6%, and the core loss per share was $3.26. Margins and EPS were negatively impacted by unfavorable defense performance, which I'll cover in a moment; lower 737 deliveries that were in line with expectations set last month; and expected abnormal costs and period expenses. Free cash flow was a usage of $310 million in the quarter. This reflects the lower 737 deliveries and in line with our expectations. With that, I'll turn to the next page and cover Boeing Commercial Airplanes. BCA booked 398 net orders in the quarter, including 150 MAX-10s for Ryanair, 50 87s for United and 39 87s for Saudi Arabian Airlines. BCA now has over 5,100 airplanes in the backlog valued at $392 billion. BCA delivered 105 airplanes in the quarter, and revenue was $7.9 billion. That's up 25% year-over-year driven by the higher 787 deliveries. Operating margin was minus 8.6%. We saw the impact of the lower 737 deliveries as well as expected abnormal costs and period expenses, including higher R&D spending primarily on the 777X investment. Now I'll give a little more color on the key programs. On 737, we delivered 70 airplanes in the quarter, reflecting the impact of the recent supplier fuselage nonconformance. Since our early September update, additional areas of the aft pressure bulkhead were identified that require further inspection and rework, which you likely read about. This additional scope impacts units that had already gone through the initial rework and will take us more time to stabilize production and deliveries. We founded the issue, understand the rework steps required and booked a nonmaterial financial impact in the quarter. Considering these latest facts, we expect October deliveries to be in line with September and now expect to deliver between 375 and 400 airplanes for the year. Performance ultimately will be dictated by the pace of a fuselage recovery. The quarter ended with approximately 250 MAX airplanes in inventory, 85 of which are being held for customers in China. We still expect most of the MAX inventory aircraft to be delivered by the end of 2024 but more are likely to slip into 2025 tied to the fuselage recovery. To support stability, suppliers are continuing with planned rate increases and we're selectively managing inventory levels on certain parts where prudent. We expect to complete the 737 transition to 38 per month by year-end, and we're maintaining plans to increase to 50 per month in the 2025, 2026 time frame. On the 787 program, we had 19 deliveries in the quarter and 50 year-to-date. We still expect 70 to 80 deliveries this year. We started transitioning production to five per month in October and still plan to reach 10 per month in the 2025, 2026 time frame. We ended the quarter with 75 airplanes in inventory. Rework is progressing nicely, and we still expect most to be delivered by the end of 2024. We booked $244 million of abnormal costs, in line with expectations. The total estimate is now $3 billion, up a bit, and we still expect to be largely done by year-end. Moving to the 777X program. Efforts are ongoing. The program timeline is unchanged, and we plan to resume production later this year. We booked $180 million of abnormal costs in the quarter, in line with expectations. The total estimate is unchanged at $1 billion, and we expect to be done this quarter. Importantly, as Dave mentioned, we recently reached an agreement with Spirit on commercial terms associated with the 737 and 787 programs. We believe this agreement is a win-win for both companies and directly promotes our goal to drive stability and support our airline customers. Moving on to the next page, Boeing Defense and Space. BDS booked $6 billion in orders during the quarter, and the backlog now stands at $58 billion. Revenue was $5.5 billion, essentially flat year-over-year, and we delivered 28 aircraft. Operating margin was minus 16.9% in the quarter. In early September, we indicated that margins would be around minus 9%, the driver being a $482 million charge on the VC-25B fixed price development program due to higher estimated manufacturing costs related to engineering changes, labor instability, and the resolution of supplier negotiations. As we closed the books at quarter end, we saw another 8 points of margin erosion driven by first a $315 million loss tied to customer considerations and higher estimated costs to deliver a highly innovative satellite constellation contract that we signed several years ago. And second, we had smaller, less material cost pressures across a couple programs totaling $136 million primarily driven by the MQ-25program. These are disappointing results in the quarter and year-to-date. This performance is below our expectations, and we acknowledge that we aren\u2019t as far along in this recovery as we expected to be at this stage. I\u2019d like to point out that the team is executing a game plan to get BDS back to the high-single digit margins by the 2025, 2026 time frame. As you can see on the right hand side of the slide, we\u2019re driving lean manufacturing, program management rigor and cost productivity consistently across the division. We have invested in new training programs to accelerate performance on the factory floor, and we\u2019ve deployed resources at our suppliers to support their recovery. Perhaps most importantly, we instituted much tighter underwriting standards. As you know, part of the challenge we\u2019re dealing with are legacy contracts that we need to get out from under. Rest assured, we haven\u2019t signed any fixed price development contracts nor intend to. These moves are all fundamental to accelerating the recovery by the 2025, 2026 time frame. We have detailed metrics and milestones to evaluate our performance and progress across the three areas that we\u2019ve previously highlighted. First, we have a solid core business representing about 60% of our revenue that performs in the mid to high-single digit margin range. The demand for these products is strong. In particular, volume for our missile and weapons products as well as the Apache are very robust given the current threat environment, and we need to keep executing, competing and growing these offerings. Then we have the 25% of the portfolio representing specific fighter and satellite programs that have negatively impacted margins the past several quarters. In these areas, we took on fixed price production contracts in a pre-pandemic environment with real technical innovation that we\u2019re working our way through. We fully expect to see recovery in these areas as we improve execution, deliver next generation capabilities, and roll into new contracts with stronger underwriting disciplines that more accurately reflect the prevailing economic conditions. We expect to return to the strong performance levels that we\u2019ve demonstrated historically on these programs as we move into the 2025, 2026 time frame. Lastly, we have our large fixed price development programs that represent the remaining 15% of the portfolio, and we continue to be focused on maturing and retiring these risks. Specifically, on the KC-46A program, we\u2019re stabilizing the production system. We\u2019ve seen signs of progress and improved productivity, and as of this month, we have delivered 77 tankers to the customer. For the VC-25B, we\u2019re now maturing through the build process, and the key milestones ahead are power on and first flight, both of which will essentially be behind us as we move through the 2025, 2026 time frame and represent a significant derisking of the program. For commercial crew, while it has been a long road, we\u2019re preparing to execute a successful crewed flight test next year and then fulfill operational launch commitments, all of which will be completed as we exit 2025, 2026. On T-7A, we just delivered the first aircraft to the Air Force this quarter and have begun critical phases of the flight test program. On MQ-25, we\u2019ll get through key build and flight test milestones and transition out of the development phase as we move through the 2025, 2026 time frame. We remain very confident in the T-7A and MQ-25 investments that will deliver innovative performance to the customer with a strong long-term demand profile. So for BDS, this recovery is challenging at the moment, but we believe the actions we\u2019re taking will begin to gain traction and then accelerate. Fast forward to that 2025, 2026 time frame, fixed price development contracts will be substantially derisked. We\u2019ll have a healthy order book underwritten with much better economics and underwriting disciplines, and a resilient employee base and supply chain that\u2019s executing at a much higher level. Moving on to the next slide Boeing Global Services. BGS had another strong quarter. They received $5 billion in orders during the quarter, and the backlog sits at $18 billion. Revenue was $4.8 billion, up 9% year-over-year, primarily on favorable commercial volume and mix. Operating margins were a strong 16.3% in line with our expectations. Importantly, our commercial and government businesses continued to deliver double-digit margins. With that, we\u2019ll turn to the next page and cover cash and debt. On cash marketable securities, we ended the quarter at $13.4 billion, and on debt, the balance remained flat at $52.3 billion. We had access to $10 billion of revolving credit facilities at the end of the quarter, all of which was undrawn. Our liquidity position is strong. The investment grade credit rating continues to be a priority, and we're deploying capital in line with the priorities that we've shared, invest in the business and pay down debt through strong cash flow generation. And flip into the last page on our outlook. The overall financial outlook for 2023 is unchanged from what we previously shared, including $3 billion to $5 billion of free cash flow generation, although the updated 737 deliveries now point more toward the low end of the free cash flow range. We also expect R&D to come in slightly above our original guide, tied to the higher 777X investments that I touched on earlier. Stepping back to address the state of the market. Commercial demand remains strong across our key programs and services. Global passenger traffic was up nearly 30% year-on-year in August and is at 96% of pre-pandemic levels, 109% domestic and 89% international. Cargo remains healthy and August was the first month with annual cargo growth since early 2022. Defense demand is also robust, and FY2024 budget continues to be in line with our expectations. Our portfolio and capabilities are well position to support the needs of the nation and of our allies. With demand strong, we still find ourselves in a supply constrained environment and our focus continues to be on execution both within our factories and the supply chain as we steadily increase production. We're squarely focused on a meaningful step up in operating performance, including deliveries, revenue, margins and cash flow, all of which we expect to improve as we finish out the year. On 4Q specifically, we expect BCA margins to improve sequentially, but remain negative more in line with 2Q, and we're still not anticipating much in terms of BDS profitability. On the tax expense side, we still expect full year tax expense of approximately $250 million. As we look into early 2024, we see a number of key milestones that give us confidence in building momentum across the business. The 737 factory should be recovered from the current non-conformance and will be stabilizing production at 38 per month with step ups as we move to 50 per month by 2025, 2026. 787 will be stabilizing production at five per month with a focus on stepping up to 10 per month by 2025, 2026. We'll be further along in our inventory unwind with better line of sight to the elimination of the 737 and 787 dual factories. Keep in mind that correcting non-conformances gets exponentially easier when this inventory has been delivered to our customers. BDS will be further along in recovery as I described earlier. BGS will still be generating mid-teen margins, executing on its high cash conversion, capital efficient, disciplined growth model. And all of this will underwrite our continued strong liquidity position and enable us to further delever the balance sheet early next year. With that, back over to Dave for closing comments.","evidence_gemma_new":null,"evidence_llama_3_3":"Free cash flow","evidence_qwen_3_30b":"free cash flow $310 million","gemma_new_max":null,"gemma_new_min":null,"llama_3_3_max":310000000.0,"llama_3_3_min":310000000.0,"qwen_3_30b_max":310000000.0,"qwen_3_30b_min":310000000.0}
{"symbol":"BA","year":2023,"quarter":4,"date":"2023-Q4","chunk_id":3,"sub_chunk_id":0,"centroid_label":"free cash flow","agreed_value":3000000000.0,"count":2,"chunk":"Brian West: Thanks Dave and good morning everyone. Let's start off with the total company financial performance for the quarter. Revenue was $22 billion. That's up 10% year-over-year. Growth was driven by higher commercial volume and favorable mix. The core loss per share was $0.47, better than last year primarily on improved commercial volume, better mix and lower abnormal costs. They were offset by lower defense margins and higher period expenses, including R&D, which we expected. Free cash flow was $3 billion in the quarter, in line with the prior year and up sequentially from the third quarter primarily due to improved commercial deliveries and strong order activity, which show favorable advanced payment timing, some of which was anticipated in the first quarter of 2024. Turning to the next page, I'll cover Boeing Commercial Airplanes. BCA booked 611 net orders in the quarter with 411 737s, including an order with Akasa, 98 777Xs largely an Emirates order and 83 787s. We have over 5,600 airplanes in backlog valued at $441 billion. BCA delivered 157 airplanes in the quarter and revenue was $10.5 billion. That's up 13% driven by higher widebody deliveries and favorable mix. Operating margin was just positive at 0.4%, driven by returning to normal 737 delivery levels in the quarter, improved mix as well as lower abnormal costs associated with getting to five per month on the 87 and resuming production on the 777X. Now, I'll give more color on the key programs. On the 737, we delivered 110 airplanes in the quarter and 45 in December. The program also began FAA certification flight testing on the 737-10 in December. For the year, we delivered 396 airplanes, on the upper end of the revised guidance range we provided in October. Per the FAA announcement, we'll maintain production at 38 per month and work transparently with the FAA to complete all requirements for future increases. At the same time, we'll continue to prioritize the master schedule to avoid disruption in our supply chain. On the 737-9, we're actively supporting our customers' return to service activities. And as of today, the majority are back flying. In our factory, we have 10 -9s in production, all of which will undergo the FAA group inspection process prior to delivery. Spirit has also adopted this inspection routine in its factory. The quarter ended with about 200 MAX airplanes in inventory. It's important to think about this inventory in three buckets. First, there are 140 737-8s built prior to 2023. The vast majority are for customers in China and India. We still expect to deliver most of these airplanes by year-end as we work towards shutting down the shadow factory. In the second bucket, there are around 25 airplanes produced in 2023 that are still in WIP, given the disruptions in the second half of last year. And we expect these to deliver in 2024. And lastly, there are approximately 35 -7 to -10s that we will deliver once those airplanes are certified, the timing of which will be determined by the FAA. Moving on to the 787. We delivered 23 airplanes in the quarter, including 11 in December. For the year, we delivered 73 airplanes, within the guidance range we originally outlined for 2023. The program successfully transitioned production to five per month in the quarter and still plan to steadily work our way to 10 per month in the 2025, 2026 timeframe. We ended the quarter with approximately 60 airplanes in inventory, about 50 of which require rework, which continues to progress steadily. We still expect to deliver most of these airplanes by year-end as we finish the rework and shut down the shadow factory. We booked $77 million of abnormal costs in the quarter and have approximately $300 million left to go that will wind down by year-end, in line with our expectations. On the 777X, we resumed production in the quarter and continue to progress along the program timeline, which remains unchanged. During the quarter, the Emirates order for 90 777Xs brought the program backlog to more than 400 airplanes and also extended the accounting quantity. We continue to follow the lead of the FAA as we progress through the certification process, including working to obtain approval from the FAA to begin certification flight testing. We booked $71 million of abnormal costs in the quarter, which is now fully behind us after resuming production, in line with our expectations. Moving to the next page, Boeing Defense and Space. BDS booked $8 billion in orders during the quarter, including the Lot 10 Award from the US Air Force for 15 KC-46A Tankers. The backlog is now at $59 billion. Revenue was $6.7 billion, up 9% on the tanker award and improved volume and BDS delivered 52 aircraft and two satellites in the quarter. Operating margin was minus 1.5% in the quarter, a sequential improvement from 3Q, but still we have more work to do. 4Q results were impacted by cost true-ups on three fixed-price development programs totaling $139 million as well as unfavorable performance and mix on other programs. Our game plan to get BDS back to high single-digit margins by the 2025-2026 timeframe remains unchanged. Our core business remains solid, representing 60% of our revenue and performing in the mid to high single-digit margin range. The demand for these products is very strong and we need to execute, compete and grow these offerings. On the 25% of the portfolio primarily comprised of fighter and satellite programs, operational performance stabilized as we exit the year. And as a result, the fourth quarter saw improved margin trends, although still negative. We still expect to return to the strong historical performance levels as we roll out new contracts with tighter underwriting disciplines as we move into the 2025-2026 timeframe. Lastly, we have our fixed-price development programs that represent the remaining 15% of revenue. Despite the relatively modest cost trips [ph] in the quarter, we continue to focus on maturing these programs and retiring risks quarter in, quarter out. And we made some good progress in the fourth quarter. In addition to capturing the tanker award from the US Air Force, the program delivered nine aircraft in the fourth quarter, continuing to build positive momentum in spite of the supply-related disruptions to the factory that we faced earlier last year. And on the T-7A, the first Red Hawk arrived at Edwards Air Force Base in November, formally starting the Air Force development flight test campaign for the aircraft. Overall, the defense portfolio is poised to improve. The strong demand across the customer base, the products are performing in the field, and we're confident that our efforts to drive execution and stability will return this business to performance levels that our investors recognize. Moving now to the next page, Boeing Global Services. BGS had another strong quarter. They received $6 billion in orders and the backlog is now at $20 billion. Revenue was $4.8 billion, up 6% primarily on favorable commercial volume and mix. Operating margins were a very strong 17.4%, an expansion of 350 basis points versus last year as both our commercial and government businesses were delivering double-digit margins. In the quarter, BGS opened a parts distribution center in India and received a follow-on contract to provide sustainment for the C-17. Turning now to the next page, I'll cover cash and debt. On cash and marketable securities, we ended the quarter at $16 billion. On debt, the balance remained flat at $52.3 billion and over the next few days, we'll pay down $4 billion of the $5 billion of maturities coming due this year from our available cash on hand. We continue to maintain access to $10 billion of revolving credit facilities, all of which remain undrawn. Our liquidity position remains strong. Our investment-grade credit rating continues to be a priority. And we're developing -- deploying capital in line with the portage [ph] we've shared previously: invest in the business and pay down debt. Turning to the next page, I'll cover our full year financials. Full year revenue was $77.8 billion, up 17% year-over-year. Growth was driven by improved commercial volume primarily on higher 787 deliveries. The core loss per share was $5.81, better than prior year primarily on improved commercial volume and mix as well as lower fixed price development charges in defense. Free cash flow was $4.4 billion for the year, up versus prior year primarily on higher 787 deliveries and favorable receipt timing that was partially offset by higher expenditures as we increase production rates and invest in the business. While we're postponing issuing 2024 guidance today, given our current focus, we're committed to sharing timely and transparent updates moving forward. I would like to provide some additional context on our path forward. We always knew 2024 was going to be an important year in our recovery. Based on what we know today, we expect another steady year of free cash flow, driven by the 737 production at 38 per month, ongoing execution of the 787 toward our long-term objectives, continued liquidation of our 737 and 787 inventory, and continued focus to wind down both shadow factories. Our defense business will continue to improve as we mature fixed-price programs and transition recently challenged programs with better underwriting disciplines that we've already started to see and BGS will continue to generate strong free cash flow. Longer term, we're focused on quality and stability, which will ultimately drive free cash flow. Nothing has changed on the demand front, and the backlog is strong and growing. Remember, our 2025-2026 guidance was based on achieving stability and we have to earn that by applying resources to fix our issues and demonstrate predictability one airplane at a time, side-by-side with our regulator. This team is up to the challenge, and we'll apply any and all resources to get back to deliveries that satisfy our customers and underwrite the long-term demand profile. We're still confident in the goals we laid out for 2025-2026 although it may take longer in that window than originally anticipated, and we won't rush the system. With that, I'll turn it back to Dave for closing comments.","evidence_gemma_new":"Free cash flow in the quarter","evidence_llama_3_3":"free cash flow the quarter","evidence_qwen_3_30b":null,"gemma_new_max":3000000000.0,"gemma_new_min":3000000000.0,"llama_3_3_max":3000000000.0,"llama_3_3_min":3000000000.0,"qwen_3_30b_max":null,"qwen_3_30b_min":null}
{"symbol":"BA","year":2023,"quarter":4,"date":"2023-Q4","chunk_id":3,"sub_chunk_id":0,"centroid_label":"free cash flow","agreed_value":4400000000.0,"count":2,"chunk":"Brian West: Thanks Dave and good morning everyone. Let's start off with the total company financial performance for the quarter. Revenue was $22 billion. That's up 10% year-over-year. Growth was driven by higher commercial volume and favorable mix. The core loss per share was $0.47, better than last year primarily on improved commercial volume, better mix and lower abnormal costs. They were offset by lower defense margins and higher period expenses, including R&D, which we expected. Free cash flow was $3 billion in the quarter, in line with the prior year and up sequentially from the third quarter primarily due to improved commercial deliveries and strong order activity, which show favorable advanced payment timing, some of which was anticipated in the first quarter of 2024. Turning to the next page, I'll cover Boeing Commercial Airplanes. BCA booked 611 net orders in the quarter with 411 737s, including an order with Akasa, 98 777Xs largely an Emirates order and 83 787s. We have over 5,600 airplanes in backlog valued at $441 billion. BCA delivered 157 airplanes in the quarter and revenue was $10.5 billion. That's up 13% driven by higher widebody deliveries and favorable mix. Operating margin was just positive at 0.4%, driven by returning to normal 737 delivery levels in the quarter, improved mix as well as lower abnormal costs associated with getting to five per month on the 87 and resuming production on the 777X. Now, I'll give more color on the key programs. On the 737, we delivered 110 airplanes in the quarter and 45 in December. The program also began FAA certification flight testing on the 737-10 in December. For the year, we delivered 396 airplanes, on the upper end of the revised guidance range we provided in October. Per the FAA announcement, we'll maintain production at 38 per month and work transparently with the FAA to complete all requirements for future increases. At the same time, we'll continue to prioritize the master schedule to avoid disruption in our supply chain. On the 737-9, we're actively supporting our customers' return to service activities. And as of today, the majority are back flying. In our factory, we have 10 -9s in production, all of which will undergo the FAA group inspection process prior to delivery. Spirit has also adopted this inspection routine in its factory. The quarter ended with about 200 MAX airplanes in inventory. It's important to think about this inventory in three buckets. First, there are 140 737-8s built prior to 2023. The vast majority are for customers in China and India. We still expect to deliver most of these airplanes by year-end as we work towards shutting down the shadow factory. In the second bucket, there are around 25 airplanes produced in 2023 that are still in WIP, given the disruptions in the second half of last year. And we expect these to deliver in 2024. And lastly, there are approximately 35 -7 to -10s that we will deliver once those airplanes are certified, the timing of which will be determined by the FAA. Moving on to the 787. We delivered 23 airplanes in the quarter, including 11 in December. For the year, we delivered 73 airplanes, within the guidance range we originally outlined for 2023. The program successfully transitioned production to five per month in the quarter and still plan to steadily work our way to 10 per month in the 2025, 2026 timeframe. We ended the quarter with approximately 60 airplanes in inventory, about 50 of which require rework, which continues to progress steadily. We still expect to deliver most of these airplanes by year-end as we finish the rework and shut down the shadow factory. We booked $77 million of abnormal costs in the quarter and have approximately $300 million left to go that will wind down by year-end, in line with our expectations. On the 777X, we resumed production in the quarter and continue to progress along the program timeline, which remains unchanged. During the quarter, the Emirates order for 90 777Xs brought the program backlog to more than 400 airplanes and also extended the accounting quantity. We continue to follow the lead of the FAA as we progress through the certification process, including working to obtain approval from the FAA to begin certification flight testing. We booked $71 million of abnormal costs in the quarter, which is now fully behind us after resuming production, in line with our expectations. Moving to the next page, Boeing Defense and Space. BDS booked $8 billion in orders during the quarter, including the Lot 10 Award from the US Air Force for 15 KC-46A Tankers. The backlog is now at $59 billion. Revenue was $6.7 billion, up 9% on the tanker award and improved volume and BDS delivered 52 aircraft and two satellites in the quarter. Operating margin was minus 1.5% in the quarter, a sequential improvement from 3Q, but still we have more work to do. 4Q results were impacted by cost true-ups on three fixed-price development programs totaling $139 million as well as unfavorable performance and mix on other programs. Our game plan to get BDS back to high single-digit margins by the 2025-2026 timeframe remains unchanged. Our core business remains solid, representing 60% of our revenue and performing in the mid to high single-digit margin range. The demand for these products is very strong and we need to execute, compete and grow these offerings. On the 25% of the portfolio primarily comprised of fighter and satellite programs, operational performance stabilized as we exit the year. And as a result, the fourth quarter saw improved margin trends, although still negative. We still expect to return to the strong historical performance levels as we roll out new contracts with tighter underwriting disciplines as we move into the 2025-2026 timeframe. Lastly, we have our fixed-price development programs that represent the remaining 15% of revenue. Despite the relatively modest cost trips [ph] in the quarter, we continue to focus on maturing these programs and retiring risks quarter in, quarter out. And we made some good progress in the fourth quarter. In addition to capturing the tanker award from the US Air Force, the program delivered nine aircraft in the fourth quarter, continuing to build positive momentum in spite of the supply-related disruptions to the factory that we faced earlier last year. And on the T-7A, the first Red Hawk arrived at Edwards Air Force Base in November, formally starting the Air Force development flight test campaign for the aircraft. Overall, the defense portfolio is poised to improve. The strong demand across the customer base, the products are performing in the field, and we're confident that our efforts to drive execution and stability will return this business to performance levels that our investors recognize. Moving now to the next page, Boeing Global Services. BGS had another strong quarter. They received $6 billion in orders and the backlog is now at $20 billion. Revenue was $4.8 billion, up 6% primarily on favorable commercial volume and mix. Operating margins were a very strong 17.4%, an expansion of 350 basis points versus last year as both our commercial and government businesses were delivering double-digit margins. In the quarter, BGS opened a parts distribution center in India and received a follow-on contract to provide sustainment for the C-17. Turning now to the next page, I'll cover cash and debt. On cash and marketable securities, we ended the quarter at $16 billion. On debt, the balance remained flat at $52.3 billion and over the next few days, we'll pay down $4 billion of the $5 billion of maturities coming due this year from our available cash on hand. We continue to maintain access to $10 billion of revolving credit facilities, all of which remain undrawn. Our liquidity position remains strong. Our investment-grade credit rating continues to be a priority. And we're developing -- deploying capital in line with the portage [ph] we've shared previously: invest in the business and pay down debt. Turning to the next page, I'll cover our full year financials. Full year revenue was $77.8 billion, up 17% year-over-year. Growth was driven by improved commercial volume primarily on higher 787 deliveries. The core loss per share was $5.81, better than prior year primarily on improved commercial volume and mix as well as lower fixed price development charges in defense. Free cash flow was $4.4 billion for the year, up versus prior year primarily on higher 787 deliveries and favorable receipt timing that was partially offset by higher expenditures as we increase production rates and invest in the business. While we're postponing issuing 2024 guidance today, given our current focus, we're committed to sharing timely and transparent updates moving forward. I would like to provide some additional context on our path forward. We always knew 2024 was going to be an important year in our recovery. Based on what we know today, we expect another steady year of free cash flow, driven by the 737 production at 38 per month, ongoing execution of the 787 toward our long-term objectives, continued liquidation of our 737 and 787 inventory, and continued focus to wind down both shadow factories. Our defense business will continue to improve as we mature fixed-price programs and transition recently challenged programs with better underwriting disciplines that we've already started to see and BGS will continue to generate strong free cash flow. Longer term, we're focused on quality and stability, which will ultimately drive free cash flow. Nothing has changed on the demand front, and the backlog is strong and growing. Remember, our 2025-2026 guidance was based on achieving stability and we have to earn that by applying resources to fix our issues and demonstrate predictability one airplane at a time, side-by-side with our regulator. This team is up to the challenge, and we'll apply any and all resources to get back to deliveries that satisfy our customers and underwrite the long-term demand profile. We're still confident in the goals we laid out for 2025-2026 although it may take longer in that window than originally anticipated, and we won't rush the system. With that, I'll turn it back to Dave for closing comments.","evidence_gemma_new":"Free cash flow for the year","evidence_llama_3_3":"free cash flow the year","evidence_qwen_3_30b":null,"gemma_new_max":4400000000.0,"gemma_new_min":4400000000.0,"llama_3_3_max":4400000000.0,"llama_3_3_min":4400000000.0,"qwen_3_30b_max":null,"qwen_3_30b_min":null}
{"symbol":"BA","year":2024,"quarter":1,"date":"2024-Q1","chunk_id":21,"sub_chunk_id":0,"centroid_label":"free cash flow","agreed_value":10000000000.0,"count":2,"chunk":"Sheila Kahyaoglu: The $10 billion free cash flow, does it incorporate the IAM negotiation?","evidence_gemma_new":"free cash flow","evidence_llama_3_3":"free cash flow","evidence_qwen_3_30b":null,"gemma_new_max":10000000000.0,"gemma_new_min":10000000000.0,"llama_3_3_max":10000000000.0,"llama_3_3_min":10000000000.0,"qwen_3_30b_max":null,"qwen_3_30b_min":null}
{"symbol":"BA","year":2024,"quarter":2,"date":"2024-Q2","chunk_id":3,"sub_chunk_id":0,"centroid_label":"free cash flow","agreed_value":4300000000.0,"count":2,"chunk":"Brian West: Thanks, Dave, and good morning, everyone. Before jumping into the financial results, let me take a moment on our planned acquisition of Spirit AeroSystems. On July 1, we announced a definitive agreement to acquire Spirit in an all-stock transaction worth approximately $4.7 billion with a total enterprise value of approximately $8.3 billion. As our materials indicated, we expect the transaction to close mid-2025, subject to the satisfaction of customary closing conditions, including regulatory and Spirit shareholder approvals as well as the sale of Spirit operations related to certain Airbus commercial work packages. This agreement contemplates us acquiring substantially all Boeing related commercial operations primarily consisting of the Wichita, Kansas, Tulsa, Oklahoma and Dallas, Texas facilities as well as other commercial, defense and aftermarket operations that would further augment our capabilities and offerings across the portfolio. Regarding the defense programs, we're committed to working with Spirit, its customers and the DoD to ensure continuity in order to support these critical missions. We continue to believe that this reintegration leverages and builds on our capabilities, support supply chain stability, integrates critical manufacturing and engineering workforces that allows for the ultimate unification of safety and quality management systems. Fully aligning to the same priorities, incentives and -- centered on safety and quality is in the best interest of our customers, the aviation industry and all stakeholders, including the flying public. All of this demonstrates our ongoing commitment to aviation safety, quality and stability. Turning to the next page, I'll cover the total company financial performance for the quarter. Revenue was $16.9 billion, primarily reflecting lower commercial delivery volume. The quarter loss per share was $2.90, reflecting lower commercial delivery volume and losses of $1 billion on fixed price defense development programs, which I'll get into later. Free cash flow was a usage of $4.3 billion in the quarter, which was generally in line with the expectations shared in May. Results impacted by lower commercial deliveries and unfavorable working capital timing. Turning to the next page, I'll cover Boeing Commercial Airplanes. BCA delivered 92 airplanes in the quarter. Revenue was $6 billion, and operating margin was minus -- 11.9%, primarily reflecting lower deliveries and expected higher period costs, including R&D. The backlog in the quarter ended at $437 billion and includes more than 5,400 airplanes. Last week's Farnborough Airshow continue to highlight the robust demand for our product lineup as we announced orders and commitments for over 150 airplanes, including nearly 100 widebodies. Now I'll give more color on the key programs. The 737 program delivered 70 airplanes in the second quarter, including a meaningful step up to 35 in June. July will be more or less in line with June levels despite normal seasonality. On production, we gradually increased during the quarter and still expect to be higher in the second half, as we move to 38 per month by year-end. We've reactivated the third line in our rented factory and monthly production improvement from high single digits at the end of the first quarter to roughly 25 in June and July. As Dave noted, the factory is currently operating within or near the KPI control limits laid out with the FAA as part of the safety and quality plan. The factory is operating with all fully inspected fuselages today and near-term production will continue to be paced by fuselages from Wichita. More broadly on the master schedule, we continue to make adjustments as needed and manage supplier by supplier based on inventory levels. Our objective remains to keep the supply chain paced ahead of final assembly to support stability and minimize traveled work. The quarter ended with approximately 90 737-8s built prior to 2023, the vast majority for customers in China and India. This is down 20 from last quarter's value, and we expect approximately 10 more delivered in the month of July. We still expect to deliver most of these airplanes by year-end as we work towards shutting down the shadow factory. Regarding the -7 and the -10 models, inventory levels remained stable at approximately 35 airplanes and the certification timelines remain unchanged. On the 787, we delivered nine airplanes in the quarter, although the quarter was impacted by lower production, seat delays and other delivery timing items noted previously. We're starting to work through these issues and delivered six airplanes in July. The program produced below five per month in the quarter as expected and still plans to return to five per month by year-end. We ended the quarter with around 35 airplanes of inventory built prior to 2023 that required rework, which continues to progress steadily. We still expect to finish the rework and shut down the shadow factory by year-end with most of these airplanes delivering this year. Finally, on the 777X program, as Dave noted, we took a very important step on the certification timeline earlier this month as the program obtained type inspection authorization and began FAA certification flight testing. We'll continue to follow the lead of the FAA as we progress through the certification process and still expect first delivery in 2025. Inventory in the quarter grew approximately $800 million in line with recent quarterly trends and will continue to grow as we move towards entry into service as we've previously contemplated. Moving on to the next page, Boeing Defense & Space. BDS booked $4 billion in orders during quarter, including capturing an award from the US Air Force for seven MH-139 helicopters and the backlog ended at $59 billion. Revenue was $6 billion, down 2%, driven by fixed price development losses and BDS delivered 28 aircraft in the quarter, including the first CH-47F Block 2 Chinook to the US Army. We took a $1 billion loss on certain fixed-price development contracts in the quarter and operating margin was minus 15.2%. In late May, we indicated that margins would take a step back and be negative due to a couple of things. First, the deliberate slowdown of the Puget Sound factories has impacted the derivative programs, specifically, a $391 million loss on the KC-46A Tanker, as well as margin compression on the profitable P8 program. Second, we've seen additional fixed price development cost pressures, resulting in additional losses on T-7A, VC-25B and commercial crew, primarily related to higher estimated engineering and manufacturing costs and inefficiencies associated with meeting certain technical requirements. Given the fixed price nature of these contracts, we continue to be transparent about impacts as we work to stabilize and mature these programs. While acknowledging these are disappointing results, there's a complicated development programs, and we continue to put milestones behind us and remain focused on retiring risk each quarter and ultimately delivering these mission-critical commitments to our customers. Stepping back, the game plan to get BDS back to high single-digit margins in the medium to long term remains unchanged. The core business remains solid, representing approximately 60% of our revenue and performing in the mid to high single-digit margin range. The demand for these products continue to be very strong, supported by the geopolitical threat environment confronting our nation and our allies. And the 25% of the portfolio primarily comprised of fighter and satellite programs, the quarter again saw improved margin trends as we continue to make important progress including delivering our eight F-15EX aircraft to the US Air Force, which enabled the program to achieve its initial operating capability milestone in July. We still expect to return strong historical performance level as we roll to new contracts with tighter underwriting standards. Overall, the defense portfolio is well positioned for the long term. There's strong demand across the customer base, the products are performing well in the field, and we're confident that our efforts to drive execution and stability will return this business performance levels that our investors will recognize. Moving on to the next page, Boeing Global Services. BGS continued to perform well in the second quarter, delivering very strong results across a globally deployed team that is focused on supporting its customers on both the defense and commercial sides. They received $4 billion in orders and the backlog ended at $19 billion. Revenue was $4.9 billion, up 3%, primarily on higher commercial volume. Operating margin was 17.8%, down slightly compared to last year, but still strong performance. In the quarter, BGS secured an Apache performance-based logistics contract from the US Army and captured FliteDeck Pro service contracts with Hainan Airlines and Ryanair. Importantly, BGS continued to deliver very strong operating margins for the first half of the year, matching the record levels from 2023. It's a terrific franchise that's set up for years to come. The team is focused on profitable, capital-efficient high IP offerings, and we still expect it to grow at solid mid-single-digit revenue levels and throw off mid-teen margins with very high free cash flow conversion. Turning to the next page, I'll cover cash and cash and debt. On cash and marketable securities, we ended the quarter at $12.6 billion, reflecting the $10 billion issuance of new debt in May, partially offset by the use of free cash flow in the quarter. The debt balance increased to $57.9 billion driven by the new debt issuance. We continue to maintain access to $10 billion of revolving credit facilities, all of which remain undrawn. The deliberate actions we're taking demonstrate our commitment to improve safety and quality, and we continue to manage the business with a long-term view. We acknowledge the impact these actions are having on calendar year cash flows. So let me provide some additional context on near-term expectations. While commercial production and deliveries are improving, additional losses in BDS and working capital timing continue to weigh on near-term cash flow. Inventory will remain a near-term headwind as we prioritize supply chain stability to support future rate increases and advanced payments will take time to improve as we stabilize production and improve profitability of deliveries to our customers. Given these near-term working capital pressures, third quarter is expected to be another use of cash. We expect these working capital timing impacts will be -- unwind as deliveries and production stabilize later this year. On the free cash flow outlook for the year, we are now expecting a larger use of cash than previously forecasted. As you know, operating leverage in our business is meaningful. And as we ramp up deliveries, free cash flow will grow. We are deliberately investing today and taking the time necessary to get it right to ensure we're positioned to ramp -- in a more predictable and stable fashion. We remain committed to managing the balance sheet in a prudent manner with two main objectives: First, prioritize the investment grade rating; and second, allow the factory and supply chain to reset, both of which were supported by our decision to acquire Spirit with all stock financing. We'll continue to actively monitor our liquidity levels and as needed, we'll supplement our liquidity position with these two objectives in mind. We're confident that over time, the business performance and capital structure will return to levels fully aligned with an investment-grade profile. Looking forward, we're taking the time now to ensure that our BCA factories are positioned to ramp production in a stable fashion for years to come. We'll also continue make progress on other important objectives, including shutting down the shadow factories, maturing and derisking the defense fixed-price development programs and building on the continued strong results and services. Entering 2025 will be in a much stronger position because of the work we're doing now. As noted in the commercial market outlook published this month, we continue to see robust demand and the fundamentals are there for the next 20 years, where we expect the global fleet to almost double as nearly 44,000 new airplanes are delivered with about half of those full replacement demand. The commercial and defense markets we serve, along with our product portfolio underpin our confidence as we manage the business today with a long-term view built on safety, quality and delivering for our customers. With that, let's open it up for questions.","evidence_gemma_new":"Free cash flow quarter","evidence_llama_3_3":null,"evidence_qwen_3_30b":"free cash flow May","gemma_new_max":4300000000.0,"gemma_new_min":4300000000.0,"llama_3_3_max":null,"llama_3_3_min":null,"qwen_3_30b_max":4300000000.0,"qwen_3_30b_min":4300000000.0}
{"symbol":"BA","year":2024,"quarter":2,"date":"2024-Q3","chunk_id":16,"sub_chunk_id":0,"centroid_label":"free cash flow","agreed_value":10000000000.0,"count":2,"chunk":"Sheila Kahyaoglu: Thank you guys, and good morning Dave and Brian. Brian, this one's for you. Maybe if we could just think about what's the buffer on free cash flow and the cash balance? How do we think about tapping that RC if cash falls below $10 billion, which is what you're suggesting in Q3? And do you think about Q4 as cash usage or generation? And what's the cadence of inventories and advances maybe over the next two to four quarters, if you can?","evidence_gemma_new":"free cash flow target","evidence_llama_3_3":"free cash flow Q3","evidence_qwen_3_30b":null,"gemma_new_max":10000000000.0,"gemma_new_min":10000000000.0,"llama_3_3_max":10000000000.0,"llama_3_3_min":10000000000.0,"qwen_3_30b_max":null,"qwen_3_30b_min":null}
{"symbol":"BA","year":2023,"quarter":3,"date":"2025-FY","chunk_id":2,"sub_chunk_id":0,"centroid_label":"free cash flow","agreed_value":10000000000.0,"count":3,"chunk":"Dave Calhoun: Thank you, Matt, and thanks to all for joining us this morning. Let me start with a comment on the conflict in Israel and Gaza. We were saddened to see the horrific attacks on Israel and the escalating conflict in the region that is resulting in a significant humanitarian emergency. We will continue to monitor the situation. We will focus on the safety of our employees and we will aid those in need. As always, we'll follow the lead of the U.S. government and we'll coordinate closely with government agencies, customers and suppliers, always with safety, security and well-being as our top priority. Now let me turn to the quarter. As you know, we ran into a few challenges over the last several months, but we've demonstrated that we know how to overcome obstacles and it will continue to do just that. We knew 2023 would be a bumpy ride. We have more work to do, but overall, we're making progress in our recovery and we are on track to meet the financial goals we shared for this year and for the 2025\/2026 time frame. A time frame I refer to as stability. As you know, free cash flow has been our primary financial metric through this recovery. And based on our performance year-to-date, we still plan to be in the guidance range for the year as well as the $10 billion target by 2025 and 2026. This is a complex long cycle business and driving stability takes time, especially as an entire industry works its way back from the impact of a global pandemic. We expect challenges to come our way. And when they do, we are transparent. We take action and we move forward. So month to month and quarter to quarter, it can be tough to predict, but we're focused on the long-term and we're taking the tough actions now to ensure that the long-term future is strong. So with that, I'll highlight a few key updates around the business. Boeing Commercial, BCA, in commercial, demand continues to be incredibly robust. We booked about 400 net orders in the quarter, including 150 737 MAX-10s for Ryanair, 50 787s for United Airlines, and 39 787s for Saudi Arabian Airlines. With demand strong, our focus remains on delivering airplanes. We are seeing increased stability and quality performance within our own factories, but we're working to get the supply chain caught up to the same standards. Our production system is poised for steady and efficient increases, but we won't push the system too fast and will ensure the supply base is in lockstep with us. On the 737, we're moving through rework on the most recent non-conformance in the aft pressure bulkhead. That work slowed production and deliveries down in the course of the quarter, and given our year-to-date total, we now expect 737 deliveries for the year to be in this 375 to 400 range. While a setback, we'll regain our momentum as we progress through the issue. We are keeping our suppliers hot, according to the master schedule. We plan to complete the production transition to 38 per month by the end of the year, and still plan to reach the key rate of 50 per month by that 2025 and 2026 time frame. Important to note, with respect to our supply chain, delivery shortfalls have been driven by non-conformances, not actual supply chain constraints. On the 787, the program is demonstrating improved stability. We are now transitioning production from four to five per month and expect to meet our delivery range of 70 to 80 for the year. And longer term, we're on track for the rate step up to ten per month by 2025 and 2026. To ensure our broader recovery and return to more normal margins, the key focus continues to be on liquidating our 787 and 737 inventory so that we can eliminate those shadow factories and focus our resources on the production floor, all of our resources. Nonconformance costs are exponentially higher on all of those finished airplanes. We still plan to deliver most, if not all, of the inventory by the end of next year, which will set us on a strong path for 2025 and 2026. With respect to China, we are encouraged by recent signs of progress and continue to work closely with our customers on the timing of returning to delivery. As I mentioned, supply chain performance will be a key enabler. As Spirit Aerospace Systems brings in new leadership, we're looking forward to working with Pat. Pat Shanahan is known by The Boeing Company. We have great respect for his abilities on the shop floor, and we're pleased to have recently established a mutually beneficial agreement that will enhance stability of our production system and help us deliver on our customer commitments, a true win-win. Lastly, on the development side, we're progressing across our commercial programs, and our timelines are unchanged on the 737-7 and the 737-10 and the 777X and 777-8 freighter. A reminder, as always, the FAA will ultimately control the timing. Boeing Defense Systems, BDS, in Defense and Space, we still have more work to improve operating performance. Results this quarter were impacted by higher estimated costs on the VC-25B program. We are maturing through this build process, incorporating engineering changes to better support the installation process, and we resolved important supplier negotiations over the course of the quarter. I'll note that none of these items will impact the performance and capability of the end product. The increased estimates reflect the process by which we build the airplanes. And in a fixed price environment, any unplanned hurdles can introduce unrecoverable costs. At the end of the day, we have two airplanes to build. We are getting past these hurdles and are committed to delivering two exceptional airplanes for our customer. Separately, as you saw, we are also expecting higher costs on a satellite program as we build out the Constellation and meet our life cycle commitments for our customer. We're working on real innovation and advanced capabilities in this space and see real potential market as we deliver against this commitment. More broadly across BDS, we're stabilizing operations and taking comprehensive actions to improve performance, including lean initiatives, contracting disciplines, factory improvements, engineering investments and more. We're seeing some early signs of progress, but financial improvement at BDS' lower volumes takes time. Recovery in BDS is slower than we'd like, slower than I'd like, but we're confident in the future and our path to normalizing BDS margin performance by that 2025 and 2026 time frame is intact. The confidence is due in part to key milestones we're starting to hit and the strong demand we're seeing. For example, we delivered the first T-7A to the U.S. Air Force this quarter. We also captured a key award from the U.S. Army for 21 Apache helicopters. Additionally, we continue to invest and position ourselves for significant opportunities in proprietary programs. The backlog at BDS is $58 billion, and nearly 30% of that is outside the United States. We're proud of the role our products play in protecting global security and national defense. Demand is strong, we're confident in the business, and we will continue to improve operational performance to more normalized levels. Boeing Global Services, BGS, in Global Services, the team had another strong quarter, both on the commercial and the government side with improved revenue and earnings relative to the third quarter of 2022. The financials were again driven by strong operating performance and the team's ability to hit key milestones and capture new business. In the quarter, BGS delivered the 150th 737-800 Boeing Converted Freighter, received an award from the U.S. Navy for P-8 trainer upgrades and signed a digital maintenance agreement with multiple airlines. Our services team represents Boeing with our customers nearly every minute of every day. The work they do to keep military and commercial fleets flying is best-in-class, and we're proud of the performance that they're delivering. A step back with respect to the market outlook. Looking across all three business units, demand for our products and services continues to be incredibly strong. Our backlog is at $469 billion, including over 5,100 commercial airplanes. Over the next ten years, the value of the markets we serve across commercial, defense, space and services is estimated at $10.7 trillion according to our most recent Boeing market outlook. Our products deliver exceptional capability in strong and growing markets, and our portfolio is well aligned with our customers' needs. The demand is there to support our recovery. It is on us to perform, and we will remain disciplined and patient in the process. Brian, I'll turn it over to you.","evidence_gemma_new":"free cash flow 2025","evidence_llama_3_3":"free cash flow 2025 2026","evidence_qwen_3_30b":"still plan free cash flow guidance range year-to-date","gemma_new_max":10000000000.0,"gemma_new_min":10000000000.0,"llama_3_3_max":10000000000.0,"llama_3_3_min":10000000000.0,"qwen_3_30b_max":10000000000.0,"qwen_3_30b_min":10000000000.0}
{"symbol":"BA","year":2023,"quarter":1,"date":"2023-Q1","chunk_id":3,"sub_chunk_id":0,"centroid_label":"revenue","agreed_value":6700000000.0,"count":2,"chunk":"Brian West: Great. Thanks, Dave, and good morning, everyone. Let's go to the next page and cover the total company results. First quarter revenue was $17.9 billion. That's up 28% year-over-year, primarily driven by higher volume in both commercial and defense. Core operating margin was minus 2.5%, and the core loss per share was $1.27, both big improvements versus last year due to higher commercial volume and improved operating performance. Margins and EPS were negative driven by expected abnormal costs and period expenses as well as a charge on the KC-46 Tanker program that I noted last month. Free cash flow was a usage of $786 million in the quarter, significantly better versus last year driven by the higher commercial deliveries as well as an advanced payment tied to lot 9 on the tanker program, another important award for the KC-46 franchise. As we noted in our last earnings call, cash was lower this quarter than the fourth quarter due to lower wide-body deliveries and expected seasonality. Turning to the next page, I'll cover Commercial Airplanes. Let's start with orders. BCA booked 107 net orders in the quarter, including JAL and Lufthansa, and we have a backlog of over 4,500 airplanes valued at $334 billion. Moving to the figures on the left. Revenue was $6.7 billion, up 60% year-over-year, driven by 130 airplane deliveries with increases on both the 87 and the 37 programs, partially offset by 87 customer considerations. Operating margin was minus 9.2%, which was significantly better than last year. But margins are impacted by expected abnormal costs and period expenses, including higher R&D spending. Let's take a minute on the 737 program. The 37 had 113 deliveries in the first quarter, up 31% year-over-year, including 53 deliveries in the month of March. Picking up where Dave left off regarding the supplier fuselage item. We found the issue. We booked a nonmaterial financial impact in the quarter. We understand the rework steps required, and we started repairs on several airplanes. And although near-term deliveries will be impacted, we still expect to deliver between 400 and 450 737s this year. April and 2Q deliveries will be lower, but the first half monthly average will be about 30 airplanes per month, in line with what we said previously. The second half deliveries are expected to be around 40 per month, with sequential quarterly improvement in the back half. While the high end of the delivery range is pressured, ultimate performance will be dictated by the pace of the fuselage recovery. Regarding inventory, we ended the quarter with approximately 225 MAX airplanes in inventory, including 138 that were built for customers in China and roughly 30 -7s and -10s. Within these 225 inventoried airplanes, roughly 75% will require the fuselage rework. And the number of inventoried airplanes will likely increase in 2Q, and we still expect most to be delivered by the end of 2024. On production, we're completing airplanes in final assembly and expect to recover in the coming months, paced by fuselage availability. We're supporting Spirit through this recovery, including manufacturing and engineering resources as well as a cash advance. To support overall supply chain stability, we're not changing the master schedule, including anticipated production rate increases and we've contemplated any near-term parts inventory builds into our forward look. Within final assembly, as Dave mentioned, we expect to increase our rate to 38 per month later this year and 50 per month in the '25, '26 time frame. Moving on to the 787 program. We had 11 deliveries in the first quarter and still expect 70 to 80 deliveries this year. We're producing at 3 per month and still plan to reach 5 per month by year-end. We ended the quarter with 95 airplanes in inventory, most of which will be delivered by the end of 2024. We booked 379 of abnormal costs in the quarter, in line with expectations, and there's no change to the total estimate of $2.8 billion. We still expect abnormal to be largely done by the end of this year. Finally, on the 777X program, efforts are ongoing. Both the program time line and the abnormal estimate of $1.5 billion are unchanged. We booked $126 million of abnormal costs in the quarter, in line with expectations. With that, let's turn to the next page and go through defense and space. BDS booked $10 billion in orders during the quarter, including awards for the U.S. Air Force for 15 KC-46 Tankers and an E-7 development contract as well as 184 Apaches for the U.S. Army. The BDS backlog is $58 billion. Moving to the figures on the left. Revenue was $6.5 billion, up 19% year-over-year, driven by the KC-46 Tanker award, program milestone completions and underlying volume. We delivered 39 aircraft and 3 satellites in the quarter and also began production of the MH-139 Grey Wolf. Operating margin was minus 3.2%, significantly higher than last year but still negative, driven by a $245 million pretax charge on the tanker program, which I noted last month. Let me give you a little bit of context on the overall BDS portfolio. Remember, 15% of the revenues in the quarter are the firm fixed-price development contracts. These contracts get a lot of attention, and there is a commitment to derisk these programs as much as we can as we move through the development cycles and into full-scale, stable production. Next and importantly, over 60% of revenues in the quarter collectively delivered double-digit margins. We have many important programs that are performing to historical performance levels. The balance of the 1Q revenue is made up of a small number of established programs that are experiencing negative margins on certain contracts due to specific near-term supply chain and factory stability pressures that we've highlighted previously. It will take time to work through these issues, and we fully expect that these programs will improve through the course of this year and return to normal margin levels over time. The BDS team is fully committed delivering the development programs to our customers. We've implemented new contracting disciplines, accelerated efforts around lean manufacturing and we're investing in innovation and in our people, all of which underpin our plans going forward. Overall, the defense portfolio is well positioned. There's strong demand across the customer base, the products are performing in the field, and we're confident that our efforts to drive execution and stability will return this business to performance levels that our investors would recognize. Turning to the next page, I'll cover Global Services. As Dave mentioned, BGS had another very strong quarter. We received $4 billion in orders during the quarter, and the backlog is $19 billion. Looking to the figures on the left. Revenue was $4.7 billion, up 9% year-over-year, primarily driven by our commercial parts and distribution business. Operating margin was 17.9%, an expansion of 330 basis points versus last year, with both our commercial and government businesses delivering double-digit margins. Operating margins in the quarter were higher than expected due to favorable mix, and we don't assume that will repeat. In the quarter, BGS announced the first Boeing Converted Freighter line in India, delivered AerCap's 50th 737-800 Boeing Converted Freighter and broke ground on a new component operations facility in Jacksonville, Florida. Turning to the next page, I'll cover cash and debt. We ended the quarter with $14.8 billion of cash and marketable securities, and our debt balance decreased to $55.4 billion. We paid down $1.7 billion of debt maturities in the quarter and absorbed the expected cash flow usage driven by seasonality. We also had $12 billion of revolving credit facilities at the end of the quarter, all of which remain undrawn. Our liquidity position is very strong. The investment-grade credit rating is a priority, and we're deploying capital in line with the priorities we've shared: generate strong cash flow, invest the business and pay down debt. And flipping to the last page on our outlook. The 2023 financial outlook is unchanged from what we previously shared, including $3 billion to $5 billion of free cash flow generation. Commercial demand remains strong across our key programs and services. Passenger traffic in February increased over 55% year-over-year and is at 85% of pre-pandemic levels, comprised [indiscernible] domestic and 78% international. Defense demand is robust, and the initial FY '24 presidential budget is in line with expectations. As Dave mentioned, our portfolio and capabilities are well positioned to support the needs of the nation and of our allies. On the supply chain front, as you'll recall when we set out our 2023 framework last November, we predicted the supply chain instability would likely continue. The good news is that we plan for it within our financial and delivery guidance. There's progress in many areas of the supply base, but we will likely face pockets of variability through the rest of this year. We continue to make key investments, including higher inventory buffers and forward deployment of resources as we take appropriate actions to mitigate impacts and improve predictability. From a quarterly perspective, we continue to expect financials to improve throughout the year. On 2Q specifically, we expect core EPS will be roughly in line with 1Q '23 performance absent the tanker charge, as the 737 delivery impacts would be largely offset by higher wide-body deliveries. We expect free cash flow to be breakeven to slightly negative as we work through the 37 recovery. All things considered, we feel good about what's in front of us. And we remain on track to achieve our long-term guidance, including $10 billion of free cash flow in the '25, '26 time frame. With that, I'll turn it over to Dave for any closing comments.","evidence_gemma_new":"Revenue","evidence_llama_3_3":null,"evidence_qwen_3_30b":"Revenue Revenue First quarter","gemma_new_max":6700000000.0,"gemma_new_min":6700000000.0,"llama_3_3_max":null,"llama_3_3_min":null,"qwen_3_30b_max":6700000000.0,"qwen_3_30b_min":6700000000.0}
{"symbol":"BA","year":2023,"quarter":2,"date":"2023-Q2","chunk_id":3,"sub_chunk_id":0,"centroid_label":"revenue","agreed_value":19800000000.0,"count":3,"chunk":"Brian West: Thanks, Dave and good morning everyone. Let\u2019s start with the total company financial performance. Second quarter revenue was $19.8 billion, that\u2019s up 18% year-over-year. The growth was primarily driven by higher commercial volume, including increased 787 deliveries. Core operating margin in the quarter was minus 2% and the core loss per share was $0.82. Margins and EPS were driven by expected abnormal costs and period expenses as well as losses on three fixed price development programs in our defense business, which I will cover later. Free cash flow, as Dave mentioned, was positive $2.6 billion in the quarter, significantly better versus last year and last quarter driven by higher commercial deliveries and favorable receipt timing. Relative to our expectations shared at the last earnings call, the strong order activity in the quarter drove over $2 billion of favorable advanced payment timing. Keep in mind, most of this was expected to incur in the third quarter. Turning to the next page, I will cover Commercial Airplanes. BCA booked 460 net orders in the quarter, including 220 with Air India, 39 with Riyadh Air and signed a purchase agreement with Ryanair for up to 300 737 MAX-10s. We now have over 4,800 airplanes in backlog valued at $363 billion. Revenue was $8.8 billion, up 41% year-over-year on 136 airplane deliveries driven by the 87 program. Operating margin was minus 4.3%, a sequential improvement versus the first quarter as anticipated, but remains negative as we continue to be impacted by expected abnormal costs and period expenses, including higher R&D spending. As Dave noted, we worked through a number of operational challenges so far this year. We are making steady progress and we will continue to focus on stability as we look to increase production on key programs. On the Spirit work stoppage, we were pleased to see a quick resolution and we will work through any limited impacts to production. Overall, this is not expected to change our production and delivery outlook. On to the programs. On the 737, we had 103 deliveries in the quarter, including 49 in June, a positive proof point that the production system is stabilizing. In regards to the Spirit fitting issue that we discussed last quarter, in May, we resumed deliveries of rework airplanes and also began producing newly built airplanes meeting our specifications. In light of this progress, we are now transitioning production to 38 per month and still plan to increase to 50 per month in the \u201825-26 timeframe. As we move to the higher rate, we will continue to prioritize stability and it will take some time to consistently deliver at 38 per month off the line. We still project full year 737 deliveries of 400 to 450 with sequential improvement in the second half. We ended the quarter with approximately 228 MAX airplanes in inventory. This includes 85 for customers in China and 55 that have now been remarketed as part of the plan we have previously discussed. We still expect most MAX inventory airplane to be delivered by the end of 2024. Moving on to the 87 program, we had 20 deliveries in the quarter and still expect between 70 and 80 deliveries this year. We increased production to 4 per month during the quarter and still plan to reach 5 per month by year end. We ended the quarter with 85 airplanes in inventory and rework is progressing nicely. And we still expect most to be delivered by the end of 2024. We booked $314 million of abnormal costs in the quarter in line with expectations and there is no change to the total estimate of $2.8 billion, which is largely done by year end. Finally, on the 777X program, efforts are ongoing and the program timeline is unchanged. Abnormal costs were $136 million as expected and we have lowered our total estimate from $1.5 billion to $1 billion, which reflects plans to resume production later this year rather than early 2024. Moving on to the next page and defense and space. BDS booked $6 billion in orders in the quarter, including an award from the U.S. Army for 19 CH-47 Chinooks and the backlog is now at $58 billion. Revenue was flat at $6.2 billion and we delivered 38 aircraft in the quarter. Operating margin was minus 8.5% primarily driven by three fixed price development programs. The first was related to commercial crew tied to scheduled delays that we have previously shared and had a $257 million impact; the second on MQ-25 related to a schedule shift that drove a $68 million impact; and lastly, on the T-7A production contract, we revised the long-term production cost estimates that will occur over several years starting in the 2025 timeframe, which drove an impact of $189 million. These determinations were mostly made over the last few weeks as we closed out the quarter. Similar to last quarter, roughly 60% of the portfolio is generating solid levels of performance, in line with historical margins. But we continue to see operational impacts from labor instability and supply chain disruption on other programs that contributed to lower margins. Looking at BDS in aggregate, it will take time to return to normalized levels of performance. We are confident and we are focused on the path to high single-digit margins in 2025-2026. The strong demand across the customer base, the portfolio is well positioned, and we are focused on execution. Moving on to the next page, let\u2019s cover services. BGS had another very strong quarter. BGS received $4 billion in orders during the quarter and the backlog is $18 billion. Revenue was $4.7 billion, up 10% year-over-year primarily driven by favorable volume and mix in both commercial and government services. Operating margin was 18%, an expansion of 110 basis points versus last year with both our commercial and government businesses delivering double-digit margins. Operating margins in the quarter were higher than expected due to favorable mix, which we don\u2019t expect to continue at these levels. In the quarter, BGS announced an expansion in Poland with a new parts distribution site, a collaboration with CAE. And the Japan Airlines has adopted the Boeing Insight Accelerator for their 787 fleet. Turning to the next page, I\u2019ll cover cash and debt. We ended the quarter with $13.8 billion of cash and marketable securities. And our debt balance decreased to $52.3 billion. In the quarter, we repaid $3.4 billion of maturing debt and provided a $180 million cash advance to Spirit as previously shared. Year-to-date, we\u2019ve repaid $5.1 billion of debt, which is essentially all of our maturities for the year. We also maintained $12 billion revolving credit facilities at the end of the quarter, all of which remain undrawn. Our liquidity position is strong. Investment-grade credit rating continues to be important. And we\u2019re deploying capital in line with the priorities we\u2019ve shared: invest in the business and pay down debt, strong cash flow generation. And flipping to the last page, I\u2019ll cover our outlook. The 2023 overall financial outlook is unchanged from what we previously shared, including $3 billion to $5 billion of free cash flow generation. The operating cash makeup by division will likely be different with BCA and BGS better than expected and BDS lower than expected due to the lower operating performance. Net-net, we still have confidence in the $3 billion to $5 billion of free cash flow for the year. Stepping back to address the state of the market. Commercial demand remains strong across our key programs and services. Cargo remains healthy. Global passenger traffic was up 39% in May and is at 96% of pre-pandemic levels, 105% domestic and 91% international. China pass-through traffic in May was at 87% of pre-pandemic levels with domestic traffic up more than 300% year-on-year and above pre-pandemic levels. Defense demand is also robust, and the FY \u201824 budget continues to progress in line with our expectations. Our portfolio and capabilities are well positioned to support the needs of the nation and of our allies. With demand strong, we still find ourselves in a supply-constrained environment. And our focus continues to be on execution, both within our factories and the supply chain as we steadily increase production. Relative to the first half of 2023, we continue to expect operating and financial performance to improve in the second half. On the third quarter specifically, we expect BCA margins to improve sequentially but remain negative, and we\u2019re not anticipating much in terms of BDS profitability. The 2Q effective tax rate of 63% included cumulative adjustments related to the projected valuation allowance. These adjustments will continue to weigh on the tax rate for the remainder of the year. And given the strong results in 2Q cash flow, 3Q will be lower sequentially, still positive and likely in the hundreds of millions of dollars. All things considered, we feel good about where we\u2019re at on the road to recovery. Right now, we\u2019re squarely focused on meaningful operating performance improvement, including deliveries, revenue, margins and cash flow, all of which will improve as we progress through 2023. And while the challenges remain, we\u2019re headed in the right direction. Ultimately, we expect our operational and financial performance to continue to accelerate, aligned with the plan we laid out at our IR Day last November. And we are confident in $10 billion of free cash flow in 2025, 2026. With that, I\u2019ll turn it over to Dave with some final remarks.","evidence_gemma_new":"revenue Second quarter","evidence_llama_3_3":"revenue second quarter","evidence_qwen_3_30b":"revenue Second quarter","gemma_new_max":19800000000.0,"gemma_new_min":19800000000.0,"llama_3_3_max":19800000000.0,"llama_3_3_min":19800000000.0,"qwen_3_30b_max":19800000000.0,"qwen_3_30b_min":19800000000.0}
{"symbol":"BA","year":2023,"quarter":2,"date":"2023-Q2","chunk_id":3,"sub_chunk_id":0,"centroid_label":"revenue","agreed_value":6200000000.0,"count":2,"chunk":"Brian West: Thanks, Dave and good morning everyone. Let\u2019s start with the total company financial performance. Second quarter revenue was $19.8 billion, that\u2019s up 18% year-over-year. The growth was primarily driven by higher commercial volume, including increased 787 deliveries. Core operating margin in the quarter was minus 2% and the core loss per share was $0.82. Margins and EPS were driven by expected abnormal costs and period expenses as well as losses on three fixed price development programs in our defense business, which I will cover later. Free cash flow, as Dave mentioned, was positive $2.6 billion in the quarter, significantly better versus last year and last quarter driven by higher commercial deliveries and favorable receipt timing. Relative to our expectations shared at the last earnings call, the strong order activity in the quarter drove over $2 billion of favorable advanced payment timing. Keep in mind, most of this was expected to incur in the third quarter. Turning to the next page, I will cover Commercial Airplanes. BCA booked 460 net orders in the quarter, including 220 with Air India, 39 with Riyadh Air and signed a purchase agreement with Ryanair for up to 300 737 MAX-10s. We now have over 4,800 airplanes in backlog valued at $363 billion. Revenue was $8.8 billion, up 41% year-over-year on 136 airplane deliveries driven by the 87 program. Operating margin was minus 4.3%, a sequential improvement versus the first quarter as anticipated, but remains negative as we continue to be impacted by expected abnormal costs and period expenses, including higher R&D spending. As Dave noted, we worked through a number of operational challenges so far this year. We are making steady progress and we will continue to focus on stability as we look to increase production on key programs. On the Spirit work stoppage, we were pleased to see a quick resolution and we will work through any limited impacts to production. Overall, this is not expected to change our production and delivery outlook. On to the programs. On the 737, we had 103 deliveries in the quarter, including 49 in June, a positive proof point that the production system is stabilizing. In regards to the Spirit fitting issue that we discussed last quarter, in May, we resumed deliveries of rework airplanes and also began producing newly built airplanes meeting our specifications. In light of this progress, we are now transitioning production to 38 per month and still plan to increase to 50 per month in the \u201825-26 timeframe. As we move to the higher rate, we will continue to prioritize stability and it will take some time to consistently deliver at 38 per month off the line. We still project full year 737 deliveries of 400 to 450 with sequential improvement in the second half. We ended the quarter with approximately 228 MAX airplanes in inventory. This includes 85 for customers in China and 55 that have now been remarketed as part of the plan we have previously discussed. We still expect most MAX inventory airplane to be delivered by the end of 2024. Moving on to the 87 program, we had 20 deliveries in the quarter and still expect between 70 and 80 deliveries this year. We increased production to 4 per month during the quarter and still plan to reach 5 per month by year end. We ended the quarter with 85 airplanes in inventory and rework is progressing nicely. And we still expect most to be delivered by the end of 2024. We booked $314 million of abnormal costs in the quarter in line with expectations and there is no change to the total estimate of $2.8 billion, which is largely done by year end. Finally, on the 777X program, efforts are ongoing and the program timeline is unchanged. Abnormal costs were $136 million as expected and we have lowered our total estimate from $1.5 billion to $1 billion, which reflects plans to resume production later this year rather than early 2024. Moving on to the next page and defense and space. BDS booked $6 billion in orders in the quarter, including an award from the U.S. Army for 19 CH-47 Chinooks and the backlog is now at $58 billion. Revenue was flat at $6.2 billion and we delivered 38 aircraft in the quarter. Operating margin was minus 8.5% primarily driven by three fixed price development programs. The first was related to commercial crew tied to scheduled delays that we have previously shared and had a $257 million impact; the second on MQ-25 related to a schedule shift that drove a $68 million impact; and lastly, on the T-7A production contract, we revised the long-term production cost estimates that will occur over several years starting in the 2025 timeframe, which drove an impact of $189 million. These determinations were mostly made over the last few weeks as we closed out the quarter. Similar to last quarter, roughly 60% of the portfolio is generating solid levels of performance, in line with historical margins. But we continue to see operational impacts from labor instability and supply chain disruption on other programs that contributed to lower margins. Looking at BDS in aggregate, it will take time to return to normalized levels of performance. We are confident and we are focused on the path to high single-digit margins in 2025-2026. The strong demand across the customer base, the portfolio is well positioned, and we are focused on execution. Moving on to the next page, let\u2019s cover services. BGS had another very strong quarter. BGS received $4 billion in orders during the quarter and the backlog is $18 billion. Revenue was $4.7 billion, up 10% year-over-year primarily driven by favorable volume and mix in both commercial and government services. Operating margin was 18%, an expansion of 110 basis points versus last year with both our commercial and government businesses delivering double-digit margins. Operating margins in the quarter were higher than expected due to favorable mix, which we don\u2019t expect to continue at these levels. In the quarter, BGS announced an expansion in Poland with a new parts distribution site, a collaboration with CAE. And the Japan Airlines has adopted the Boeing Insight Accelerator for their 787 fleet. Turning to the next page, I\u2019ll cover cash and debt. We ended the quarter with $13.8 billion of cash and marketable securities. And our debt balance decreased to $52.3 billion. In the quarter, we repaid $3.4 billion of maturing debt and provided a $180 million cash advance to Spirit as previously shared. Year-to-date, we\u2019ve repaid $5.1 billion of debt, which is essentially all of our maturities for the year. We also maintained $12 billion revolving credit facilities at the end of the quarter, all of which remain undrawn. Our liquidity position is strong. Investment-grade credit rating continues to be important. And we\u2019re deploying capital in line with the priorities we\u2019ve shared: invest in the business and pay down debt, strong cash flow generation. And flipping to the last page, I\u2019ll cover our outlook. The 2023 overall financial outlook is unchanged from what we previously shared, including $3 billion to $5 billion of free cash flow generation. The operating cash makeup by division will likely be different with BCA and BGS better than expected and BDS lower than expected due to the lower operating performance. Net-net, we still have confidence in the $3 billion to $5 billion of free cash flow for the year. Stepping back to address the state of the market. Commercial demand remains strong across our key programs and services. Cargo remains healthy. Global passenger traffic was up 39% in May and is at 96% of pre-pandemic levels, 105% domestic and 91% international. China pass-through traffic in May was at 87% of pre-pandemic levels with domestic traffic up more than 300% year-on-year and above pre-pandemic levels. Defense demand is also robust, and the FY \u201824 budget continues to progress in line with our expectations. Our portfolio and capabilities are well positioned to support the needs of the nation and of our allies. With demand strong, we still find ourselves in a supply-constrained environment. And our focus continues to be on execution, both within our factories and the supply chain as we steadily increase production. Relative to the first half of 2023, we continue to expect operating and financial performance to improve in the second half. On the third quarter specifically, we expect BCA margins to improve sequentially but remain negative, and we\u2019re not anticipating much in terms of BDS profitability. The 2Q effective tax rate of 63% included cumulative adjustments related to the projected valuation allowance. These adjustments will continue to weigh on the tax rate for the remainder of the year. And given the strong results in 2Q cash flow, 3Q will be lower sequentially, still positive and likely in the hundreds of millions of dollars. All things considered, we feel good about where we\u2019re at on the road to recovery. Right now, we\u2019re squarely focused on meaningful operating performance improvement, including deliveries, revenue, margins and cash flow, all of which will improve as we progress through 2023. And while the challenges remain, we\u2019re headed in the right direction. Ultimately, we expect our operational and financial performance to continue to accelerate, aligned with the plan we laid out at our IR Day last November. And we are confident in $10 billion of free cash flow in 2025, 2026. With that, I\u2019ll turn it over to Dave with some final remarks.","evidence_gemma_new":"Revenue","evidence_llama_3_3":null,"evidence_qwen_3_30b":"Revenue $6.2 billion","gemma_new_max":6200000000.0,"gemma_new_min":6200000000.0,"llama_3_3_max":null,"llama_3_3_min":null,"qwen_3_30b_max":6200000000.0,"qwen_3_30b_min":6200000000.0}
{"symbol":"BA","year":2023,"quarter":3,"date":"2023-Q3","chunk_id":3,"sub_chunk_id":0,"centroid_label":"revenue","agreed_value":18100000000.0,"count":3,"chunk":"Brian West: Thanks, Dave, and good morning, everyone. Let's go to the next slide and start with total company financial performance. Third quarter revenue was $18.1 billion. That's up 13% year-over-year. Growth was driven by higher commercial volume, primarily on higher 787 deliveries. Core operating margin in the quarter was minus 6%, and the core loss per share was $3.26. Margins and EPS were negatively impacted by unfavorable defense performance, which I'll cover in a moment; lower 737 deliveries that were in line with expectations set last month; and expected abnormal costs and period expenses. Free cash flow was a usage of $310 million in the quarter. This reflects the lower 737 deliveries and in line with our expectations. With that, I'll turn to the next page and cover Boeing Commercial Airplanes. BCA booked 398 net orders in the quarter, including 150 MAX-10s for Ryanair, 50 87s for United and 39 87s for Saudi Arabian Airlines. BCA now has over 5,100 airplanes in the backlog valued at $392 billion. BCA delivered 105 airplanes in the quarter, and revenue was $7.9 billion. That's up 25% year-over-year driven by the higher 787 deliveries. Operating margin was minus 8.6%. We saw the impact of the lower 737 deliveries as well as expected abnormal costs and period expenses, including higher R&D spending primarily on the 777X investment. Now I'll give a little more color on the key programs. On 737, we delivered 70 airplanes in the quarter, reflecting the impact of the recent supplier fuselage nonconformance. Since our early September update, additional areas of the aft pressure bulkhead were identified that require further inspection and rework, which you likely read about. This additional scope impacts units that had already gone through the initial rework and will take us more time to stabilize production and deliveries. We founded the issue, understand the rework steps required and booked a nonmaterial financial impact in the quarter. Considering these latest facts, we expect October deliveries to be in line with September and now expect to deliver between 375 and 400 airplanes for the year. Performance ultimately will be dictated by the pace of a fuselage recovery. The quarter ended with approximately 250 MAX airplanes in inventory, 85 of which are being held for customers in China. We still expect most of the MAX inventory aircraft to be delivered by the end of 2024 but more are likely to slip into 2025 tied to the fuselage recovery. To support stability, suppliers are continuing with planned rate increases and we're selectively managing inventory levels on certain parts where prudent. We expect to complete the 737 transition to 38 per month by year-end, and we're maintaining plans to increase to 50 per month in the 2025, 2026 time frame. On the 787 program, we had 19 deliveries in the quarter and 50 year-to-date. We still expect 70 to 80 deliveries this year. We started transitioning production to five per month in October and still plan to reach 10 per month in the 2025, 2026 time frame. We ended the quarter with 75 airplanes in inventory. Rework is progressing nicely, and we still expect most to be delivered by the end of 2024. We booked $244 million of abnormal costs, in line with expectations. The total estimate is now $3 billion, up a bit, and we still expect to be largely done by year-end. Moving to the 777X program. Efforts are ongoing. The program timeline is unchanged, and we plan to resume production later this year. We booked $180 million of abnormal costs in the quarter, in line with expectations. The total estimate is unchanged at $1 billion, and we expect to be done this quarter. Importantly, as Dave mentioned, we recently reached an agreement with Spirit on commercial terms associated with the 737 and 787 programs. We believe this agreement is a win-win for both companies and directly promotes our goal to drive stability and support our airline customers. Moving on to the next page, Boeing Defense and Space. BDS booked $6 billion in orders during the quarter, and the backlog now stands at $58 billion. Revenue was $5.5 billion, essentially flat year-over-year, and we delivered 28 aircraft. Operating margin was minus 16.9% in the quarter. In early September, we indicated that margins would be around minus 9%, the driver being a $482 million charge on the VC-25B fixed price development program due to higher estimated manufacturing costs related to engineering changes, labor instability, and the resolution of supplier negotiations. As we closed the books at quarter end, we saw another 8 points of margin erosion driven by first a $315 million loss tied to customer considerations and higher estimated costs to deliver a highly innovative satellite constellation contract that we signed several years ago. And second, we had smaller, less material cost pressures across a couple programs totaling $136 million primarily driven by the MQ-25program. These are disappointing results in the quarter and year-to-date. This performance is below our expectations, and we acknowledge that we aren\u2019t as far along in this recovery as we expected to be at this stage. I\u2019d like to point out that the team is executing a game plan to get BDS back to the high-single digit margins by the 2025, 2026 time frame. As you can see on the right hand side of the slide, we\u2019re driving lean manufacturing, program management rigor and cost productivity consistently across the division. We have invested in new training programs to accelerate performance on the factory floor, and we\u2019ve deployed resources at our suppliers to support their recovery. Perhaps most importantly, we instituted much tighter underwriting standards. As you know, part of the challenge we\u2019re dealing with are legacy contracts that we need to get out from under. Rest assured, we haven\u2019t signed any fixed price development contracts nor intend to. These moves are all fundamental to accelerating the recovery by the 2025, 2026 time frame. We have detailed metrics and milestones to evaluate our performance and progress across the three areas that we\u2019ve previously highlighted. First, we have a solid core business representing about 60% of our revenue that performs in the mid to high-single digit margin range. The demand for these products is strong. In particular, volume for our missile and weapons products as well as the Apache are very robust given the current threat environment, and we need to keep executing, competing and growing these offerings. Then we have the 25% of the portfolio representing specific fighter and satellite programs that have negatively impacted margins the past several quarters. In these areas, we took on fixed price production contracts in a pre-pandemic environment with real technical innovation that we\u2019re working our way through. We fully expect to see recovery in these areas as we improve execution, deliver next generation capabilities, and roll into new contracts with stronger underwriting disciplines that more accurately reflect the prevailing economic conditions. We expect to return to the strong performance levels that we\u2019ve demonstrated historically on these programs as we move into the 2025, 2026 time frame. Lastly, we have our large fixed price development programs that represent the remaining 15% of the portfolio, and we continue to be focused on maturing and retiring these risks. Specifically, on the KC-46A program, we\u2019re stabilizing the production system. We\u2019ve seen signs of progress and improved productivity, and as of this month, we have delivered 77 tankers to the customer. For the VC-25B, we\u2019re now maturing through the build process, and the key milestones ahead are power on and first flight, both of which will essentially be behind us as we move through the 2025, 2026 time frame and represent a significant derisking of the program. For commercial crew, while it has been a long road, we\u2019re preparing to execute a successful crewed flight test next year and then fulfill operational launch commitments, all of which will be completed as we exit 2025, 2026. On T-7A, we just delivered the first aircraft to the Air Force this quarter and have begun critical phases of the flight test program. On MQ-25, we\u2019ll get through key build and flight test milestones and transition out of the development phase as we move through the 2025, 2026 time frame. We remain very confident in the T-7A and MQ-25 investments that will deliver innovative performance to the customer with a strong long-term demand profile. So for BDS, this recovery is challenging at the moment, but we believe the actions we\u2019re taking will begin to gain traction and then accelerate. Fast forward to that 2025, 2026 time frame, fixed price development contracts will be substantially derisked. We\u2019ll have a healthy order book underwritten with much better economics and underwriting disciplines, and a resilient employee base and supply chain that\u2019s executing at a much higher level. Moving on to the next slide Boeing Global Services. BGS had another strong quarter. They received $5 billion in orders during the quarter, and the backlog sits at $18 billion. Revenue was $4.8 billion, up 9% year-over-year, primarily on favorable commercial volume and mix. Operating margins were a strong 16.3% in line with our expectations. Importantly, our commercial and government businesses continued to deliver double-digit margins. With that, we\u2019ll turn to the next page and cover cash and debt. On cash marketable securities, we ended the quarter at $13.4 billion, and on debt, the balance remained flat at $52.3 billion. We had access to $10 billion of revolving credit facilities at the end of the quarter, all of which was undrawn. Our liquidity position is strong. The investment grade credit rating continues to be a priority, and we're deploying capital in line with the priorities that we've shared, invest in the business and pay down debt through strong cash flow generation. And flip into the last page on our outlook. The overall financial outlook for 2023 is unchanged from what we previously shared, including $3 billion to $5 billion of free cash flow generation, although the updated 737 deliveries now point more toward the low end of the free cash flow range. We also expect R&D to come in slightly above our original guide, tied to the higher 777X investments that I touched on earlier. Stepping back to address the state of the market. Commercial demand remains strong across our key programs and services. Global passenger traffic was up nearly 30% year-on-year in August and is at 96% of pre-pandemic levels, 109% domestic and 89% international. Cargo remains healthy and August was the first month with annual cargo growth since early 2022. Defense demand is also robust, and FY2024 budget continues to be in line with our expectations. Our portfolio and capabilities are well position to support the needs of the nation and of our allies. With demand strong, we still find ourselves in a supply constrained environment and our focus continues to be on execution both within our factories and the supply chain as we steadily increase production. We're squarely focused on a meaningful step up in operating performance, including deliveries, revenue, margins and cash flow, all of which we expect to improve as we finish out the year. On 4Q specifically, we expect BCA margins to improve sequentially, but remain negative more in line with 2Q, and we're still not anticipating much in terms of BDS profitability. On the tax expense side, we still expect full year tax expense of approximately $250 million. As we look into early 2024, we see a number of key milestones that give us confidence in building momentum across the business. The 737 factory should be recovered from the current non-conformance and will be stabilizing production at 38 per month with step ups as we move to 50 per month by 2025, 2026. 787 will be stabilizing production at five per month with a focus on stepping up to 10 per month by 2025, 2026. We'll be further along in our inventory unwind with better line of sight to the elimination of the 737 and 787 dual factories. Keep in mind that correcting non-conformances gets exponentially easier when this inventory has been delivered to our customers. BDS will be further along in recovery as I described earlier. BGS will still be generating mid-teen margins, executing on its high cash conversion, capital efficient, disciplined growth model. And all of this will underwrite our continued strong liquidity position and enable us to further delever the balance sheet early next year. With that, back over to Dave for closing comments.","evidence_gemma_new":"revenue Third quarter","evidence_llama_3_3":"revenue Third quarter","evidence_qwen_3_30b":"revenue Third quarter","gemma_new_max":18100000000.0,"gemma_new_min":18100000000.0,"llama_3_3_max":18100000000.0,"llama_3_3_min":18100000000.0,"qwen_3_30b_max":18100000000.0,"qwen_3_30b_min":18100000000.0}
{"symbol":"BA","year":2024,"quarter":1,"date":"2024-Q1","chunk_id":3,"sub_chunk_id":0,"centroid_label":"revenue","agreed_value":16600000000.0,"count":2,"chunk":"Brian West: Thanks, Dave, and good morning, everyone. Let's start with the total company financial performance for the quarter. Revenue was $16.6 billion, down 8% versus last year, primarily reflecting lower 737 delivery volume. The core loss per share was $1.13, a slight improvement versus last year, also reflecting lower 737 deliveries. Free cash flow was a usage of $3.9 billion in the quarter, a higher usage than last year and in line with the expectations shared last month. Cash was impacted by lower commercial deliveries and unfavorable timing of receipts and expenditures. Turning to the next page, I'll cover Boeing Commercial Airplanes. BCA booked 125 net orders in the quarter, including 85 737-10s for American Airlines and 28 777Xs for customers, including Ethiopian Airlines. The backlog grew to $448 billion and includes more than 5,600 airplanes. BCA delivered 83 airplanes in the quarter. Revenue was $4.7 billion, and operating margin was minus 24.6%. These results were significantly lower than last year, primarily reflecting lower 737 deliveries and the 737-9 grounding impact for customer considerations of $443 million. Now I'll give more color on the key programs. On the 737, we delivered 67 airplanes in the first quarter as we deliberately slowed production below 38 per month to incorporate improvements to our quality and safety management systems, including reducing traveled work and addressing supplier nonconformances. These continued efforts will cause April deliveries to be more in line with February levels as we complete our work. Production [ ordering ] below 38 per month for the first half of the year and will be higher in the second half as we move back to 38 per month, with the timing of rates beyond 38 predicated on the work we're doing with the FAA. We've recently made adjustments to the master schedule, and we'll continue to manage supplier by supplier based on inventory levels and rate ramp readiness. Our objective remains to keep the supply chain paced ahead of final assembly to support stability and minimize traveled work. The quarter ended with approximately 110 737-8s built prior to 2023, the vast majority for customers in China and India. This is down 30 airplanes from last quarter and in line with our plans. We still expect to deliver most of these inventoried airplanes by year-end as we work towards shutting down the shadow factory. There were [ approximately ] 95 additional airplanes in inventory, about 35 of which were -7 and -10s, and the remaining are WIP airplanes impacted by factory and supply chain constraints. On the anti-icing, the timeline is unchanged, and we're making good progress towards resolution. As it pertains to the certification of the -7 and the -10, we coordinated with our customers and added more 8s and 9s into the skyline in the near term to mitigate impacts to their fleet needs and stabilize our production plans. And the program margin has been updated to reflect these impacts as well as the slower production ramp. On the 787, we delivered 13 airplanes in the quarter. We're slowing near-term production and plan to return to 5 per month later this year. We expect to achieve rate increases, including 10 per month by 2026. We ended the quarter with about 60 airplanes of inventory, about 40 of which require rework, which continues to progress steadily and in line with our expectations. We still expect to finish the reworked airplanes and shut down the shadow factory by year-end, with most of these airplanes delivering in the year. Finally, on 777X. We continue to progress along the program time line and still expect first delivery in 2025. We'll follow the lead of the FAA as we progress through the process, including working to obtain approval from the FAA to begin certification flight testing. Moving on to the next page, we'll go to Boeing Defense and Space. BDS booked $9 billion in orders during the quarter, including awards for 17 P-8 aircraft for the Royal Canadian Air Force and the German Navy and securing the final F\/A-18 newbuild production contract from the U.S. Navy. The backlog grew to $61 billion. Revenue was $7 billion, up 6% on improved volume, and BDS delivered 14 aircraft in the quarter. Operating margin was 2.2%, another quarter of sequential improvement, but still more work to do. First quarter results were impacted by losses on 2 fixed-price development programs totaling $222 million, $128 million on the tanker and $94 million on the T-7A. Our game plan to get BDS back to high single-digit margins by the '25, '26 time frame remains intact. We've made important progress in 1Q. Our core business, representing about 60% of our revenue, is seeing solid consistent performance in the mid- to high single-digit margin range with strong demand across the board. On the 25% of the portfolio, primarily comprised of fighter and satellite programs, operational performance further stabilized in the quarter, which drove improved margin trends. We still expect to return to the strong historical performance levels as we roll into new contracts with tighter underwriting disciplines as we move into the '25, '26 time frame. Lastly, we have our fixed-price development programs that represent the remaining 15% of revenue. Despite the relatively modest updates in the quarter, we continue to retire risks and remain focused on maturing these programs quarter in and quarter out. Importantly, on the MQ-25 program, the program was awarded a cost-type contract modification from the U.S. Navy that included 2 additional test aircraft, demonstrating our progress and our commitment to stronger underwriting disciplines in the area of the development programs. The program also delivered the first static test article to the Navy, and the airframe is ready to begin stress testing. And on the Starliner, the program continues to progress towards a May 6 crew flight test as the spacecraft was recently integrated on top of its Atlas V rocket, and prelaunch testing is underway. Lastly, the T-7A test aircraft completed climate lab testing in February, and the program continues to progress with Air Force flight testing. Overall, the defense portfolio is well positioned. As seen in the initial FY '25 presidential budget, there's strong demand across the customer base. The products are performing in the field, and we're confident that our efforts to drive [ execution stability ] will return this business to performance levels that our investors recognize. Moving on to the next page, Boeing Global Services. BGS had another strong quarter. They received $5 billion in orders, and backlog is at $20 billion. Revenue was $5 billion, up 7% primarily on higher commercial volume and favorable mix. Operating margin was a strong 18.2%, an expansion of 30 basis points compared to last year. In the quarter, BGS opened a maintenance facility in Jacksonville, Florida, supporting our military customers. And the U.S. Navy exercised options on a P-8 sustainment modification contract. Turning to the next page, I'll cover cash and debt. On cash and marketable securities, we ended the quarter at $7.5 billion, reflecting the debt repayment activity and use of free cash in the quarter. The debt balance decreased to $47.9 billion as we paid down $4.4 billion of the $5 billion of maturities due this year. We continue to maintain access to $10 billion of revolving credit facilities, all of which remain undrawn. While we're still not in a position to provide a more detailed 2024 outlook today, I want to provide some additional context on the path forward. The 2024 free cash flow outlook I shared last month is still expected to be a generation in the low single-digit billions. Cash flow should improve as we move through the year and be back-end loaded, driven by BCA deliveries and receipt timing, including an expected Lot 11 award on the tanker. Second quarter free cash flow is expected to improve sequentially but be another sizable use of cash. We're committed to managing the balance sheet in a prudent manner with two main objectives: one, prioritize the investment-grade rating; and two, allow the factory and supply chain to stabilize for a stronger trajectory as we exit this year. As we operate at these lower production rates, we're actively monitoring our liquidity levels and believe we have significant market access, and are continuously monitoring and evaluating opportunities should we decide to supplement our liquidity position. Longer term, we remain confident in our ability to achieve $10 billion of free cash flow. However, given our continued focus on safety, quality and stability, we continue to expect that this goal will take us longer than we originally planned and later in the '25, '26 window, primarily tied to the 737 and 787 production delivery ramps of 50 per month and 10 per month, respectively. Moving on, discussions with Spirit are ongoing. As with any large and complex deal, there are a number of terms and issues we need to work through, including price, financing and other key items and the best approach to handling and potentially divesting certain work that Spirit does for other customers. We believe in the strategic logic of a deal, but we'll take the time needed to get this right before we decide to enter into agreement. In the meantime, the focus is on factory stability in Wichita and in Renton. And as you saw yesterday, we agreed to advance Spirit $425 million, virtually all of which will be repaid in the third quarter. This will be accounted for as investing cash. Looking forward to the balance of the year. We're taking the time now to ensure our BCA factories are stable and positioned to ramp production. We'll also continue to make progress on other important objectives, including shutting down the shadow factories, maturing and derisking the defense fixed-price development programs and building on the continued strong results in services. Our backlog of nearly $530 billion speaks to the breadth of our portfolio, and this demand backdrop underpins our commitment to drive long-term results, all enabled by the everyday execution of 170,000 incredibly talented and dedicated team of Boeing employees. With that, why don't we turn it over to questions?","evidence_gemma_new":"Revenue last year","evidence_llama_3_3":"Revenue the quarter","evidence_qwen_3_30b":null,"gemma_new_max":16600000000.0,"gemma_new_min":16600000000.0,"llama_3_3_max":16600000000.0,"llama_3_3_min":16600000000.0,"qwen_3_30b_max":null,"qwen_3_30b_min":null}
{"symbol":"BA","year":2024,"quarter":2,"date":"2024-Q2","chunk_id":3,"sub_chunk_id":0,"centroid_label":"revenue","agreed_value":16900000000.0,"count":3,"chunk":"Brian West: Thanks, Dave, and good morning, everyone. Before jumping into the financial results, let me take a moment on our planned acquisition of Spirit AeroSystems. On July 1, we announced a definitive agreement to acquire Spirit in an all-stock transaction worth approximately $4.7 billion with a total enterprise value of approximately $8.3 billion. As our materials indicated, we expect the transaction to close mid-2025, subject to the satisfaction of customary closing conditions, including regulatory and Spirit shareholder approvals as well as the sale of Spirit operations related to certain Airbus commercial work packages. This agreement contemplates us acquiring substantially all Boeing related commercial operations primarily consisting of the Wichita, Kansas, Tulsa, Oklahoma and Dallas, Texas facilities as well as other commercial, defense and aftermarket operations that would further augment our capabilities and offerings across the portfolio. Regarding the defense programs, we're committed to working with Spirit, its customers and the DoD to ensure continuity in order to support these critical missions. We continue to believe that this reintegration leverages and builds on our capabilities, support supply chain stability, integrates critical manufacturing and engineering workforces that allows for the ultimate unification of safety and quality management systems. Fully aligning to the same priorities, incentives and -- centered on safety and quality is in the best interest of our customers, the aviation industry and all stakeholders, including the flying public. All of this demonstrates our ongoing commitment to aviation safety, quality and stability. Turning to the next page, I'll cover the total company financial performance for the quarter. Revenue was $16.9 billion, primarily reflecting lower commercial delivery volume. The quarter loss per share was $2.90, reflecting lower commercial delivery volume and losses of $1 billion on fixed price defense development programs, which I'll get into later. Free cash flow was a usage of $4.3 billion in the quarter, which was generally in line with the expectations shared in May. Results impacted by lower commercial deliveries and unfavorable working capital timing. Turning to the next page, I'll cover Boeing Commercial Airplanes. BCA delivered 92 airplanes in the quarter. Revenue was $6 billion, and operating margin was minus -- 11.9%, primarily reflecting lower deliveries and expected higher period costs, including R&D. The backlog in the quarter ended at $437 billion and includes more than 5,400 airplanes. Last week's Farnborough Airshow continue to highlight the robust demand for our product lineup as we announced orders and commitments for over 150 airplanes, including nearly 100 widebodies. Now I'll give more color on the key programs. The 737 program delivered 70 airplanes in the second quarter, including a meaningful step up to 35 in June. July will be more or less in line with June levels despite normal seasonality. On production, we gradually increased during the quarter and still expect to be higher in the second half, as we move to 38 per month by year-end. We've reactivated the third line in our rented factory and monthly production improvement from high single digits at the end of the first quarter to roughly 25 in June and July. As Dave noted, the factory is currently operating within or near the KPI control limits laid out with the FAA as part of the safety and quality plan. The factory is operating with all fully inspected fuselages today and near-term production will continue to be paced by fuselages from Wichita. More broadly on the master schedule, we continue to make adjustments as needed and manage supplier by supplier based on inventory levels. Our objective remains to keep the supply chain paced ahead of final assembly to support stability and minimize traveled work. The quarter ended with approximately 90 737-8s built prior to 2023, the vast majority for customers in China and India. This is down 20 from last quarter's value, and we expect approximately 10 more delivered in the month of July. We still expect to deliver most of these airplanes by year-end as we work towards shutting down the shadow factory. Regarding the -7 and the -10 models, inventory levels remained stable at approximately 35 airplanes and the certification timelines remain unchanged. On the 787, we delivered nine airplanes in the quarter, although the quarter was impacted by lower production, seat delays and other delivery timing items noted previously. We're starting to work through these issues and delivered six airplanes in July. The program produced below five per month in the quarter as expected and still plans to return to five per month by year-end. We ended the quarter with around 35 airplanes of inventory built prior to 2023 that required rework, which continues to progress steadily. We still expect to finish the rework and shut down the shadow factory by year-end with most of these airplanes delivering this year. Finally, on the 777X program, as Dave noted, we took a very important step on the certification timeline earlier this month as the program obtained type inspection authorization and began FAA certification flight testing. We'll continue to follow the lead of the FAA as we progress through the certification process and still expect first delivery in 2025. Inventory in the quarter grew approximately $800 million in line with recent quarterly trends and will continue to grow as we move towards entry into service as we've previously contemplated. Moving on to the next page, Boeing Defense & Space. BDS booked $4 billion in orders during quarter, including capturing an award from the US Air Force for seven MH-139 helicopters and the backlog ended at $59 billion. Revenue was $6 billion, down 2%, driven by fixed price development losses and BDS delivered 28 aircraft in the quarter, including the first CH-47F Block 2 Chinook to the US Army. We took a $1 billion loss on certain fixed-price development contracts in the quarter and operating margin was minus 15.2%. In late May, we indicated that margins would take a step back and be negative due to a couple of things. First, the deliberate slowdown of the Puget Sound factories has impacted the derivative programs, specifically, a $391 million loss on the KC-46A Tanker, as well as margin compression on the profitable P8 program. Second, we've seen additional fixed price development cost pressures, resulting in additional losses on T-7A, VC-25B and commercial crew, primarily related to higher estimated engineering and manufacturing costs and inefficiencies associated with meeting certain technical requirements. Given the fixed price nature of these contracts, we continue to be transparent about impacts as we work to stabilize and mature these programs. While acknowledging these are disappointing results, there's a complicated development programs, and we continue to put milestones behind us and remain focused on retiring risk each quarter and ultimately delivering these mission-critical commitments to our customers. Stepping back, the game plan to get BDS back to high single-digit margins in the medium to long term remains unchanged. The core business remains solid, representing approximately 60% of our revenue and performing in the mid to high single-digit margin range. The demand for these products continue to be very strong, supported by the geopolitical threat environment confronting our nation and our allies. And the 25% of the portfolio primarily comprised of fighter and satellite programs, the quarter again saw improved margin trends as we continue to make important progress including delivering our eight F-15EX aircraft to the US Air Force, which enabled the program to achieve its initial operating capability milestone in July. We still expect to return strong historical performance level as we roll to new contracts with tighter underwriting standards. Overall, the defense portfolio is well positioned for the long term. There's strong demand across the customer base, the products are performing well in the field, and we're confident that our efforts to drive execution and stability will return this business performance levels that our investors will recognize. Moving on to the next page, Boeing Global Services. BGS continued to perform well in the second quarter, delivering very strong results across a globally deployed team that is focused on supporting its customers on both the defense and commercial sides. They received $4 billion in orders and the backlog ended at $19 billion. Revenue was $4.9 billion, up 3%, primarily on higher commercial volume. Operating margin was 17.8%, down slightly compared to last year, but still strong performance. In the quarter, BGS secured an Apache performance-based logistics contract from the US Army and captured FliteDeck Pro service contracts with Hainan Airlines and Ryanair. Importantly, BGS continued to deliver very strong operating margins for the first half of the year, matching the record levels from 2023. It's a terrific franchise that's set up for years to come. The team is focused on profitable, capital-efficient high IP offerings, and we still expect it to grow at solid mid-single-digit revenue levels and throw off mid-teen margins with very high free cash flow conversion. Turning to the next page, I'll cover cash and cash and debt. On cash and marketable securities, we ended the quarter at $12.6 billion, reflecting the $10 billion issuance of new debt in May, partially offset by the use of free cash flow in the quarter. The debt balance increased to $57.9 billion driven by the new debt issuance. We continue to maintain access to $10 billion of revolving credit facilities, all of which remain undrawn. The deliberate actions we're taking demonstrate our commitment to improve safety and quality, and we continue to manage the business with a long-term view. We acknowledge the impact these actions are having on calendar year cash flows. So let me provide some additional context on near-term expectations. While commercial production and deliveries are improving, additional losses in BDS and working capital timing continue to weigh on near-term cash flow. Inventory will remain a near-term headwind as we prioritize supply chain stability to support future rate increases and advanced payments will take time to improve as we stabilize production and improve profitability of deliveries to our customers. Given these near-term working capital pressures, third quarter is expected to be another use of cash. We expect these working capital timing impacts will be -- unwind as deliveries and production stabilize later this year. On the free cash flow outlook for the year, we are now expecting a larger use of cash than previously forecasted. As you know, operating leverage in our business is meaningful. And as we ramp up deliveries, free cash flow will grow. We are deliberately investing today and taking the time necessary to get it right to ensure we're positioned to ramp -- in a more predictable and stable fashion. We remain committed to managing the balance sheet in a prudent manner with two main objectives: First, prioritize the investment grade rating; and second, allow the factory and supply chain to reset, both of which were supported by our decision to acquire Spirit with all stock financing. We'll continue to actively monitor our liquidity levels and as needed, we'll supplement our liquidity position with these two objectives in mind. We're confident that over time, the business performance and capital structure will return to levels fully aligned with an investment-grade profile. Looking forward, we're taking the time now to ensure that our BCA factories are positioned to ramp production in a stable fashion for years to come. We'll also continue make progress on other important objectives, including shutting down the shadow factories, maturing and derisking the defense fixed-price development programs and building on the continued strong results and services. Entering 2025 will be in a much stronger position because of the work we're doing now. As noted in the commercial market outlook published this month, we continue to see robust demand and the fundamentals are there for the next 20 years, where we expect the global fleet to almost double as nearly 44,000 new airplanes are delivered with about half of those full replacement demand. The commercial and defense markets we serve, along with our product portfolio underpin our confidence as we manage the business today with a long-term view built on safety, quality and delivering for our customers. With that, let's open it up for questions.","evidence_gemma_new":"Revenue quarter","evidence_llama_3_3":"revenue the quarter","evidence_qwen_3_30b":"Revenue lower commercial delivery volume","gemma_new_max":16900000000.0,"gemma_new_min":16900000000.0,"llama_3_3_max":16900000000.0,"llama_3_3_min":16900000000.0,"qwen_3_30b_max":16900000000.0,"qwen_3_30b_min":16900000000.0}
{"symbol":"BA","year":2024,"quarter":2,"date":"2024-Q2","chunk_id":3,"sub_chunk_id":0,"centroid_label":"revenue","agreed_value":4900000000.0,"count":2,"chunk":"Brian West: Thanks, Dave, and good morning, everyone. Before jumping into the financial results, let me take a moment on our planned acquisition of Spirit AeroSystems. On July 1, we announced a definitive agreement to acquire Spirit in an all-stock transaction worth approximately $4.7 billion with a total enterprise value of approximately $8.3 billion. As our materials indicated, we expect the transaction to close mid-2025, subject to the satisfaction of customary closing conditions, including regulatory and Spirit shareholder approvals as well as the sale of Spirit operations related to certain Airbus commercial work packages. This agreement contemplates us acquiring substantially all Boeing related commercial operations primarily consisting of the Wichita, Kansas, Tulsa, Oklahoma and Dallas, Texas facilities as well as other commercial, defense and aftermarket operations that would further augment our capabilities and offerings across the portfolio. Regarding the defense programs, we're committed to working with Spirit, its customers and the DoD to ensure continuity in order to support these critical missions. We continue to believe that this reintegration leverages and builds on our capabilities, support supply chain stability, integrates critical manufacturing and engineering workforces that allows for the ultimate unification of safety and quality management systems. Fully aligning to the same priorities, incentives and -- centered on safety and quality is in the best interest of our customers, the aviation industry and all stakeholders, including the flying public. All of this demonstrates our ongoing commitment to aviation safety, quality and stability. Turning to the next page, I'll cover the total company financial performance for the quarter. Revenue was $16.9 billion, primarily reflecting lower commercial delivery volume. The quarter loss per share was $2.90, reflecting lower commercial delivery volume and losses of $1 billion on fixed price defense development programs, which I'll get into later. Free cash flow was a usage of $4.3 billion in the quarter, which was generally in line with the expectations shared in May. Results impacted by lower commercial deliveries and unfavorable working capital timing. Turning to the next page, I'll cover Boeing Commercial Airplanes. BCA delivered 92 airplanes in the quarter. Revenue was $6 billion, and operating margin was minus -- 11.9%, primarily reflecting lower deliveries and expected higher period costs, including R&D. The backlog in the quarter ended at $437 billion and includes more than 5,400 airplanes. Last week's Farnborough Airshow continue to highlight the robust demand for our product lineup as we announced orders and commitments for over 150 airplanes, including nearly 100 widebodies. Now I'll give more color on the key programs. The 737 program delivered 70 airplanes in the second quarter, including a meaningful step up to 35 in June. July will be more or less in line with June levels despite normal seasonality. On production, we gradually increased during the quarter and still expect to be higher in the second half, as we move to 38 per month by year-end. We've reactivated the third line in our rented factory and monthly production improvement from high single digits at the end of the first quarter to roughly 25 in June and July. As Dave noted, the factory is currently operating within or near the KPI control limits laid out with the FAA as part of the safety and quality plan. The factory is operating with all fully inspected fuselages today and near-term production will continue to be paced by fuselages from Wichita. More broadly on the master schedule, we continue to make adjustments as needed and manage supplier by supplier based on inventory levels. Our objective remains to keep the supply chain paced ahead of final assembly to support stability and minimize traveled work. The quarter ended with approximately 90 737-8s built prior to 2023, the vast majority for customers in China and India. This is down 20 from last quarter's value, and we expect approximately 10 more delivered in the month of July. We still expect to deliver most of these airplanes by year-end as we work towards shutting down the shadow factory. Regarding the -7 and the -10 models, inventory levels remained stable at approximately 35 airplanes and the certification timelines remain unchanged. On the 787, we delivered nine airplanes in the quarter, although the quarter was impacted by lower production, seat delays and other delivery timing items noted previously. We're starting to work through these issues and delivered six airplanes in July. The program produced below five per month in the quarter as expected and still plans to return to five per month by year-end. We ended the quarter with around 35 airplanes of inventory built prior to 2023 that required rework, which continues to progress steadily. We still expect to finish the rework and shut down the shadow factory by year-end with most of these airplanes delivering this year. Finally, on the 777X program, as Dave noted, we took a very important step on the certification timeline earlier this month as the program obtained type inspection authorization and began FAA certification flight testing. We'll continue to follow the lead of the FAA as we progress through the certification process and still expect first delivery in 2025. Inventory in the quarter grew approximately $800 million in line with recent quarterly trends and will continue to grow as we move towards entry into service as we've previously contemplated. Moving on to the next page, Boeing Defense & Space. BDS booked $4 billion in orders during quarter, including capturing an award from the US Air Force for seven MH-139 helicopters and the backlog ended at $59 billion. Revenue was $6 billion, down 2%, driven by fixed price development losses and BDS delivered 28 aircraft in the quarter, including the first CH-47F Block 2 Chinook to the US Army. We took a $1 billion loss on certain fixed-price development contracts in the quarter and operating margin was minus 15.2%. In late May, we indicated that margins would take a step back and be negative due to a couple of things. First, the deliberate slowdown of the Puget Sound factories has impacted the derivative programs, specifically, a $391 million loss on the KC-46A Tanker, as well as margin compression on the profitable P8 program. Second, we've seen additional fixed price development cost pressures, resulting in additional losses on T-7A, VC-25B and commercial crew, primarily related to higher estimated engineering and manufacturing costs and inefficiencies associated with meeting certain technical requirements. Given the fixed price nature of these contracts, we continue to be transparent about impacts as we work to stabilize and mature these programs. While acknowledging these are disappointing results, there's a complicated development programs, and we continue to put milestones behind us and remain focused on retiring risk each quarter and ultimately delivering these mission-critical commitments to our customers. Stepping back, the game plan to get BDS back to high single-digit margins in the medium to long term remains unchanged. The core business remains solid, representing approximately 60% of our revenue and performing in the mid to high single-digit margin range. The demand for these products continue to be very strong, supported by the geopolitical threat environment confronting our nation and our allies. And the 25% of the portfolio primarily comprised of fighter and satellite programs, the quarter again saw improved margin trends as we continue to make important progress including delivering our eight F-15EX aircraft to the US Air Force, which enabled the program to achieve its initial operating capability milestone in July. We still expect to return strong historical performance level as we roll to new contracts with tighter underwriting standards. Overall, the defense portfolio is well positioned for the long term. There's strong demand across the customer base, the products are performing well in the field, and we're confident that our efforts to drive execution and stability will return this business performance levels that our investors will recognize. Moving on to the next page, Boeing Global Services. BGS continued to perform well in the second quarter, delivering very strong results across a globally deployed team that is focused on supporting its customers on both the defense and commercial sides. They received $4 billion in orders and the backlog ended at $19 billion. Revenue was $4.9 billion, up 3%, primarily on higher commercial volume. Operating margin was 17.8%, down slightly compared to last year, but still strong performance. In the quarter, BGS secured an Apache performance-based logistics contract from the US Army and captured FliteDeck Pro service contracts with Hainan Airlines and Ryanair. Importantly, BGS continued to deliver very strong operating margins for the first half of the year, matching the record levels from 2023. It's a terrific franchise that's set up for years to come. The team is focused on profitable, capital-efficient high IP offerings, and we still expect it to grow at solid mid-single-digit revenue levels and throw off mid-teen margins with very high free cash flow conversion. Turning to the next page, I'll cover cash and cash and debt. On cash and marketable securities, we ended the quarter at $12.6 billion, reflecting the $10 billion issuance of new debt in May, partially offset by the use of free cash flow in the quarter. The debt balance increased to $57.9 billion driven by the new debt issuance. We continue to maintain access to $10 billion of revolving credit facilities, all of which remain undrawn. The deliberate actions we're taking demonstrate our commitment to improve safety and quality, and we continue to manage the business with a long-term view. We acknowledge the impact these actions are having on calendar year cash flows. So let me provide some additional context on near-term expectations. While commercial production and deliveries are improving, additional losses in BDS and working capital timing continue to weigh on near-term cash flow. Inventory will remain a near-term headwind as we prioritize supply chain stability to support future rate increases and advanced payments will take time to improve as we stabilize production and improve profitability of deliveries to our customers. Given these near-term working capital pressures, third quarter is expected to be another use of cash. We expect these working capital timing impacts will be -- unwind as deliveries and production stabilize later this year. On the free cash flow outlook for the year, we are now expecting a larger use of cash than previously forecasted. As you know, operating leverage in our business is meaningful. And as we ramp up deliveries, free cash flow will grow. We are deliberately investing today and taking the time necessary to get it right to ensure we're positioned to ramp -- in a more predictable and stable fashion. We remain committed to managing the balance sheet in a prudent manner with two main objectives: First, prioritize the investment grade rating; and second, allow the factory and supply chain to reset, both of which were supported by our decision to acquire Spirit with all stock financing. We'll continue to actively monitor our liquidity levels and as needed, we'll supplement our liquidity position with these two objectives in mind. We're confident that over time, the business performance and capital structure will return to levels fully aligned with an investment-grade profile. Looking forward, we're taking the time now to ensure that our BCA factories are positioned to ramp production in a stable fashion for years to come. We'll also continue make progress on other important objectives, including shutting down the shadow factories, maturing and derisking the defense fixed-price development programs and building on the continued strong results and services. Entering 2025 will be in a much stronger position because of the work we're doing now. As noted in the commercial market outlook published this month, we continue to see robust demand and the fundamentals are there for the next 20 years, where we expect the global fleet to almost double as nearly 44,000 new airplanes are delivered with about half of those full replacement demand. The commercial and defense markets we serve, along with our product portfolio underpin our confidence as we manage the business today with a long-term view built on safety, quality and delivering for our customers. With that, let's open it up for questions.","evidence_gemma_new":"Revenue","evidence_llama_3_3":null,"evidence_qwen_3_30b":"Revenue up 3% higher commercial volume","gemma_new_max":4900000000.0,"gemma_new_min":4900000000.0,"llama_3_3_max":null,"llama_3_3_min":null,"qwen_3_30b_max":4900000000.0,"qwen_3_30b_min":4900000000.0}
{"symbol":"BA","year":2024,"quarter":3,"date":"2024-Q3","chunk_id":3,"sub_chunk_id":0,"centroid_label":"revenue","agreed_value":17800000000.0,"count":2,"chunk":"Brian West: Thanks Kelly, and good morning, everyone. Let's start with the total company financial performance for the quarter. Revenue was $17.8 billion, down 1%, primarily driven by lower commercial wide body deliveries, including impacts of the IAM work stoppage. The core loss per share was $10.44, primarily reflecting impacts from the IAM work stoppage and previously announced charges across certain commercial and defense programs. Free cash flow was a use of $2 billion in the quarter with results impacted by lower commercial wide body deliveries and unfavorable working capital timing, including impacts associated with the work stoppage. Improvement versus prior expectations was driven by better-than-expected BCA advanced payments. Turning to the next page, I'll cover Boeing Commercial Airplanes. BCA delivered 116 airplanes in the quarter. Revenue was $7.4 billion, and operating margin was minus 54%, primarily reflecting previously announced -- tax charges of $3 billion on the 777X and 767 programs, the IAM work stoppage and higher period costs, including R&D. Backlog in the quarter ended at $428 billion and includes more than 5,400 airplanes. Now I'll give more color on the key programs. The 737 program delivered 92 airplanes in the quarter. As noted in mid-September, we had been making good progress on stabilizing production and preparing for 38 per month by year-end, but those objectives will now take longer due to the IAM work stoppage. Given the strike and our need to conserve cash, we've made near-term adjustments to broadly stop supplier shipments. We continue to manage supplier by supplier based on inventory levels and for certain suppliers, this will allow them to catch up. We maintain our objective to position the supply chain to support our ramp post-strike. The quarter ended with approximately 60 737-8s built prior to 2023, the vast majority for customers in China and India, down 30 from last quarter. Additional progress on shutting down the shadow factory has been impacted by the work stoppage, which will now extend into next year. On the -7 and -10, inventory levels remained stable at approximately 35 airplanes and the certification time lines remain unchanged. On the 787 program, we delivered 14 airplanes in the quarter. And as previously noted, we continue to work through production recovery plans on heat exchangers and delivery delays associated with seat certifications. The program is currently producing at 4 per month and still plans to return to 5 per month by year-end. We ended the quarter with 30 airplanes in inventory built prior to 2023 that required rework, down 5 from last quarter. Our ability to finish the rework and shut down the shadow factory has also been impacted by the work stoppage and will now extend into next year. Finally, on the 777X program. As previously announced, the $2.6 billion pretax charge primarily reflects our latest assessment of the certification time lines to address the delays in flight testing of the 777-9 as well as anticipated delays associated with the IAM work stoppage. We'll continue to follow the lead of the FAA as we progress through the certification process and now expect first delivery in 2026. Year-to-date, 777X inventory spend has averaged a bit below $800 million per quarter. The cash profile will look similar to prior development programs with the year prior to first delivery, typically the largest use of cash driven by inventory build associated with the production ramp, which will unwind as deliveries commence. Moving on to the next page, Boeing Defense & Space. BDS booked $8 billion in orders during the quarter, including definitizing a $2.6 billion award from the U.S. Air Force for 2 rapid prototype E-7A Wedgetails aircraft and the backlog ended at $62 billion. Revenue was $5.5 billion, stable year-over-year, and BDS delivered 34 aircraft in the quarter, including the first production MH-139A Grey Wolf, to the U.S. Air Force. As previously announced, BDS recognized $2 billion of pretax charges on the T-7A, KC-46A, commercial crew and MQ-25 programs in the third quarter, and operating margin was minus 43.1%. In September, we indicated that margins would again be negative due to two things: First, on the 25% of the portfolio, primarily comprised of fighter and satellite programs. Our fighter programs recognized losses in third quarter due to disruption as the F-15EX ramps up on a shared production line as well as additional cost pressures and winding down F-18 production. Second, additional cost pressures on fixed price development programs. The magnitude of these losses expanded as we close the books, primarily reflecting higher estimated production costs on the T-7A program, mainly on contracts in 2026 and beyond and an updated assessment of impacts on the Case 46A program associated with the IAM work stoppage and the decision to conclude production on the 767 freighter. Given the fixed price nature for these contracts, we'll continue to be transparent about impact as we work to stabilize and mature these programs. While acknowledging these are disappointing results, these are complicated development programs, and we remain focused on retiring risk each quarter and ultimately delivering these mission-critical capabilities to our customers. The plan to improve BDS margins in the medium to long term remains unchanged. Our core business remains solid, representing about 60% of our revenue and generally performing in the mid-to-high single-digit margin range with commercial derivatives experiencing margin compression in 3Q due to the disruption in Puget Sound factories, including the work stoppage. Broadly, the demand for our defense products remains very strong, supported by the threat environment contracting our nation and our allies. We still expect the business to return to historical performance levels as we stabilize production, execute on development programs and transition to new contracts with tighter underwriting standards. Moving on to the next page, Boeing Global Services. BGS continues to perform well in the quarter. The business received $6 billion in orders and the backlog ended at $20 billion. Revenue was $4.9 billion, up 2%, primarily on higher commercial volume. Operating margin was 17%, up 70 basis points compared to last year on favorable volume and mix. In the quarter, BGS secured several key services agreements with ANA as well as a KC-135 spares contract from the U.S. Air Force. It's a terrific long-term franchise focused on profitable, capital-efficient service offerings and executing well with mid-single-digit revenue growth, mid-teen margins and very high cash flow conversion. Turning to the next page, I'll cover cash and debt. On cash and marketable securities, we ended the quarter at $10.5 billion, primarily reflecting the $2 billion use of free cash flow in the quarter. The debt balance remained stable, ending at $57.7 billion. Last week, we entered into a new $10 billion short-term credit facility and now have access to credit facilities totaling $20 billion, all of which remain undrawn. We expect 4Q free cash flow to be a usage driven by the timing of return to work, the pace of our production ramp and the unwind of inventory in the balance sheet. While we expect 2025 to be another use of cash, we anticipate a significant improvement over this year. Importantly, we expect to exit next year with real momentum in the business as we return to normal production rates. We continue to take a tough but necessary actions to preserve cash and safeguard our future. We've worked across our supply chain partners to significantly reduce expenditures while balancing the associated trade-offs. We shared plans to reduce our workforce to align with our financial reality and a more focused set of priorities. We're decisively implementing reductions to our discretionary spending across the company. As we move through this process, we'll maintain our steadfast focus on safety, quality and delivery for our customers. We remain committed to managing the balance sheet in a prudent manner with two main objectives: First, prioritize the investment-grade credit rating; and second, allowing the factory and supply chain to reset, which will take longer as a result of the work stoppage. We're constantly evaluating our capital structure and liquidity levels to ensure that we could satisfy our debt maturities over the next 18 months while keeping confidence in our credit rating as investment grade. The actions we've recently taken, including establishing the universal shelf registration, which is now effective, directly support these priorities, and we have a plan to comprehensively address the balance sheet in the near term that could include an offering of equity and equity-linked securities. We're confident that overtime, the business performance and capital structure will return to levels fully aligned with an investment-grade profile. Near term, we're focused on reaching an agreement with our representative workforce to allow our factories in the Puget Sound area to resume and then ramp production in a stable fashion for years to come. Stepping back, the markets we serve are significant, and our product portfolio is well positioned, demonstrated by our backlog of more than $0.5 trillion. Long-term, these fundamentals underpin our confidence as we manage the business with a long-term view built on safety, quality and delivering for our customers. With that, Matt, let's open up for questions.","evidence_gemma_new":"Revenue","evidence_llama_3_3":"Revenue quarter","evidence_qwen_3_30b":null,"gemma_new_max":17800000000.0,"gemma_new_min":17800000000.0,"llama_3_3_max":17800000000.0,"llama_3_3_min":17800000000.0,"qwen_3_30b_max":null,"qwen_3_30b_min":null}
{"symbol":"BAC","year":2023,"quarter":1,"date":"2023-Q1","chunk_id":2,"sub_chunk_id":0,"centroid_label":"cet1 ratio improved","agreed_value":11.4,"count":2,"chunk":"Brian Moynihan: Good morning, and thank you all of you for joining us. I'm starting on Slide 2 of the materials. Your company produced one of its highest core EPS, earnings numbers in a challenged operating environment in the first quarter. Simply put, we navigated that environment well. The preparedness and strength of Bank of America and the trust of our clients reflects a decade-long responsible growth model and relationship nature of our franchise. During quarter one, importantly, organic growth engine continued to perform. Let me first summarize some points, and I'll turn it over to Alastair to take you through the details of the quarter. If you go to Slide 2 of the materials, Bank of America delivered strong earnings, growing EPS 18% over first quarter '22. Every business segment performed well. We grew clients and accounts organically and at a strong pace. We delivered our seventh straight quarter of operating leverage, led by a 13% year-over-year revenue growth. We further strengthened our balance sheet, with our CET1 ratio increasing to 11.4%. Regulatory capital ended at the highest nominal level in our history at $184 billion. We maintained strong liquidity. We ended the quarter with more than $900 billion in Global Liquidity Sources. We are in good returns for you as our shareholders, with a return on tangible common equity of 17%, a 107 basis points return on average assets. Tangible book value per share grew 9% year-over-year. We did this as the economy slowed. And, remember, our research team continues to predict a shallow recession that will occur beginning in the quarter three of 2023. It's interesting, when we look at our consumer behavior, payments by consumer continued to drive the U.S. economy. We've seen debit and credit card spending at about 6% year-over-year growth pace, a little slower but still healthy. But, remember, card spending represents less than a quarter of how consumers pay for things out of their accounts at Bank of America. Overall payments from our customers' accounts across all sources were up 9% year-over-year for March as a month. Year-to-date, they were up about 8% for the quarter. After slowing in the back half of 2022 a bit, we saw the payments -- pace of payments picked back up in quarter one, especially in the latter parts of the quarter. Consumers' financial positions remains generally healthy. They're employed with generally higher wages, continue to have strong account balances, and have good access to credit. As you think through all the tightening actions of the Fed, the flows to alternative yielding assets, investments and the disruption the past quarter, our deposits continued to perform well, ending the quarter at $1.91 trillion. If you think about it, that's about the same balance that we had in mid-October of 2022. So, we've seen these balances stabilize and remain 34% above they were in prior to the pandemic. The team has managed well during these periods by remaining focused on the things we can control to drive value through our franchise. I thank them for a very strong quarter, near-record earnings with strong returns. Let me turn the call over to Alastair to walk through the details of the quarter.","evidence_gemma_new":"CET1 ratio","evidence_llama_3_3":"Bank of America CET1 ratio first quarter","evidence_qwen_3_30b":null,"gemma_new_max":11.4,"gemma_new_min":11.4,"llama_3_3_max":11.4,"llama_3_3_min":11.4,"qwen_3_30b_max":null,"qwen_3_30b_min":null}
{"symbol":"BAC","year":2023,"quarter":1,"date":"2023-Q1","chunk_id":3,"sub_chunk_id":0,"centroid_label":"cet1 ratio improved","agreed_value":184000000000.0,"count":2,"chunk":"Alastair Borthwick: Thank you, Brian. And I'll pick up on Slide 3, where we list some of the more detailed highlights of the quarter. And then, on Slide 4, we present the summary income statement. So, I'm going to refer to both of these together. As Brian mentioned, for the quarter, we generated $8.2 billion of net income, and that resulted in $0.94 per diluted share. Our revenue grew 13%, and that was led by a 25% improvement in net interest income, coupled with strong 9% growth in sales and trading results, excluding DVA. Our non-interest revenue was strong, despite three headwinds: First, we had lower service charges as commercial clients paid lower fees for treasury services, since they now receive higher earned rates on balances. And, obviously, that allows us to invest those funds to earn NII. On consumer, we had lower NSF insufficient funds and overdraft fees as a result of our policy changes announced in late 2021. Second, with lower asset management fees and that just reflects the lower equity market levels and fixed-income market levels. And, third, investment banking fees were lower, just reflecting the continuation of sluggish industry activity and reduced fee pools. Now, all that said, despite these headwinds, each of the three categories saw modest improvement from the fourth quarter levels. Asset quality remained strong, and provision expense for the quarter was $931 million. That consisted of $807 million of net charge-offs and $124 million of reserve build. And that reserve build compares to a reserve release in the first quarter 2022 of $362 million. Our charge-off rate was 32 basis points and still well below the fourth quarter of '19 when our pre-pandemic rate was 39 basis points. And, remember, 2019 was a multi-decade low. So, credit, obviously, remains quite strong. I want to make one other point on Slide 4 and that is simply to note that pre-tax pre-provision income grew 27% year-over-year compared to reported net income growth of 15%. So, let's turn to the balance sheet that starts on Slide 5. And you can see, during the quarter, our balance sheet increased $144 billion to $3.195 trillion. Brian noted our liquidity levels at the end of the period, those rose to more than $900 billion from December 31. That's $23 billion higher and it remains $324 billion above our pre-pandemic level in the fourth quarter of '19. Shareholders' equity increased $7 billion from the fourth quarter as earnings were only partially offset by capital distributed to shareholders, and we saw an improvement in AOCI of $3 billion due to lower long-term interest rates. The AOCI included more than $0.5 billion increase from improved valuations of AFS debt securities and that flows through CET1. And the remaining $2.5 billion due to changes in cash flow hedges doesn't impact regulatory capital. During the quarter, we paid $1.8 billion in common dividends and we bought back $2.2 billion in shares. Turning to regulatory capital, our CET1 level improved to $184 billion since December 31 and our CET1 ratio improved 14 basis points to 11.4%, once again, adding to our buffer over our 10.4% current minimum requirement as well as the 10.9% minimum requirement that we'll see on January 1st of 2024. That means, in the past 12 months, we've improved our CET1 ratio by 100 basis points, and we've supported our clients and we've returned $12 billion in capital to shareholders. CET1 capital improved $4 billion, and that reflects the benefit of earnings and the AOCI improvement, partially offset by the capital we've returned to shareholders. Our risk-weighted assets increased modestly and that partially offset the benefit to the CET1 ratio of the higher capital we generated. And then, our supplemental leverage ratio increased to 6%. That compares to a minimum requirement of 5% and leaves plenty of capacity for balance sheet growth, and our TLAC ratio remains comfortably above our requirements. So, let's spend a minute on loan growth, and we'll do that by turning to Slide 6, where you can see the average loans grew 7% year-over-year, driven by commercial loans and credit card growth. The credit card growth reflects increased marketing, it reflects enhanced offers and higher levels of card account openings. The commercial growth across the past year reflects the diversity of commercial activity across global banking and global markets and, to some degree, global wealth. And on a more near-term linked-quarter basis, loans grew at a much slower pace, partly driven by seasonal credit card paydowns after the fourth quarter holiday spending, and then commercial demand slowed in Q1 and we saw some paydowns by our wealth management clients as they lowered leverage as rates rose. So, let's turn to deposits and there's obviously been a lot of additional focus this quarter, so I want to spend extra time here and I'm going to start with Slide 7 and talk about average deposits. Just a few points we need to make before focusing on a more detailed discussion of the recent trends. Average total deposits for the first quarter were $1.89 trillion, that is down 2% linked-quarter and down 7% year-over-year. Our deposits peaked in the fourth quarter of 2021. And even as the Fed has continued to withdraw money supply, our deposits have held around $1.9 trillion, because there's a lot more industry deposits today in a much bigger economy today compared to pre-pandemic. Our average deposits were up 34% compared to our pre-pandemic Q4 '19 balance and the industry's deposits were up 31% to $17.4 trillion. So, we've obviously fared a little bit better than the industry. We put our pre-pandemic deposits for each line of business on the slide, so you can compare our balances then and now. I want to highlight consumer checking balances, which remained 53% higher than pre-pandemic. And as I think all of us would expect, GWIM combined client deposits are up a lesser 23%, as those are the clients that generally move their excess cash into other off-balance sheet products. And in global banking, you can see the rotation to interest-bearing across time as rates rose. So, let's get a little more granular and a little more near-term and we'll use Slide 8 for that, where you can see the breakout of deposit trends on a weekly ending basis across the last two quarters. You can also see that we plotted the timeline of Fed target and rate hikes on the top-left chart, just for comparison through time. In the upper left, you can see the trend of our total deposits. We ended Q1 '23 at $1.91 trillion, that's down 1%. And, as Brian mentioned, over the course of the past six months, those balances have been relatively stable. In consumer, looking at the top-right chart, we show the difference here in the movement through the quarter between the balances of low to no interest checking accounts, and the higher-yielding non-checking accounts and, across the entire quarter, we saw a modest $4 billion decline in total. Checking balances, obviously, have some variability around pay days in particular, but note the relative stability of checking deposits, because these are the operational accounts with money and motion to pay the bills and everyday living costs for families. I'd also point out that our checking balances were modestly growing even ahead of March 9th upheaval and continue to move higher through the quarter on the back of disruption. Lower non-checking balances mostly reflect money moved out of deposits and into brokerage accounts where we earn a small fee. Rate paid increased 6 basis points from the fourth quarter to 12 basis points on this [trillion dollars] (ph) of total consumer deposits and remains low, because of the 52% mix that is checking. Lastly, I just note that the rate movements in this business are concentrated in the small CDs and consumer investment deposits, which together represent about 5% of the deposits. In wealth management, as you would expect, it shows the most relative decline, and you can see the continued trend of clients moving money from lower-yielding sweep accounts into higher-yielding preferred deposits and off-balance sheet to other investment alternatives. Now, if we went back further, you'd see that roughly $90 billion has moved out of sweeps in the past year, which leaves $80 billion in these accounts. So, you can see how with the pace and size of rate hikes slowing, we expect the declines in balances to lessen from here. At the bottom-right, note the global banking deposit movement, where we hold about $500 billion in customer deposits. These are generally operational deposits of our commercial customers and they use that to manage their cash flows through the course of the year. Those were down $3 billion from the fourth quarter. And what's interesting to note is that, our total deposits in this segment have been stable at around $500 billion for the past six months and this business just continues to see rotation into interest-bearing. The mix of interest-bearing deposits on an ending basis moved from 49% last quarter to 55% in Q1. And, obviously, we pay increased rates on those interest-bearing deposits. And it's this rotation in global banking that's driving the rotational shift of the total company, and it's pretty typical and to be expected in this environment. So, in summary, our deposits continued to behave as we would expect. The cash transactional balances have shown some recent stabilization. And for investment cash, we've seen deposits moved to brokerage and other platforms for direct holdings of money market, mutual funds, treasuries, and we are capturing many of those flows as you see in our numbers, it's just we expect that to slow going forward. So, now that we've examined trends for the different lines of business, I want to make some important points about the characteristics of our deposit franchise using Slide 9, and this will just help reinforce for shareholders who own Bank of America that they're investing in one of the world's great deposit franchises, all of it based off of relationships we have with our customers and the value they place on the award-winning capabilities and convenience they have access to. So, starting from the top, focus first on consumer. You can see that more than 80% of deposits have been with us for more than five years, and more than two-thirds of our consumer deposits are balances with customers who have had relationships with the bank for more than 10 years. Also, more than three-quarters of these customers are very highly engaged in their activities with us. They are also, geographically, dispersed across the United States given our presence in 83 of the top 100 markets. Lastly, whether you look at consumers or small business, the value proposition is what's driving the same result. We've got long-tenured customers with deep relationships that are highly engaged. Turning to wealth management, you can see a similar story around long tenure and quite active relationships. The average relationship of our GWIM clients is around 14 years. And, again, these clients are very geographically diverse, they're also very digitally engaged, and we continue to see deepening around banking solutions and products of all types. There's lots of options for these clients that extend from their operational checking accounts all the way up through preferred deposit options, and then we also benefit from having great alternatives for them within our investment platform. On global banking, note that 80% of our U.S. deposit balances are held by clients who have had an account with us for at least 10 years. Furthermore, as we measure the number of solutions that clients have with us, we know that 73% of balances are held by clients that have at least five products on us and, just like the other businesses, they are highly diversified by industry and geography. So, those are some of the things that make our quality deposit base stable. So, now that we've walked through both loans and deposits, I want to transition a bit to make some points on balance sheet management and to focus on the liquidity we enjoy by having a surplus of customer deposits that far exceeds the loan demand of our clients today and far exceeded the loan demand of our clients pre-pandemic. Having the deposits alone doesn't pay the expenses to support these great customer bases and it doesn't mean much to our shareholders, unless we put them to work to extract the value of those deposits. So, that's what we're trying to illustrate and we want to show you how we do them. You can see that on Slide 10, where you note we had significant excess deposits over loans pre-pandemic. And during the pandemic, that increased -- that amount increased significantly. Before the pandemic, we had $0.5 trillion more in deposits than loans and that peaked in late 2021 at more than $1.1 trillion and it remains high at roughly $900 billion still today. That's the context as we talk about how we manage excess cash. So, let's turn to Slide 11. And here we're going to focus on the banking book, because our global markets' balance sheet has remained largely market funded. And just follow the graph from left to right. At the top of the slide, you note trend of cash and cash equivalents and the two components of the debt securities balances: available-for-sale and held-to-maturity. And you can see the trend of the overall combined cash and securities balance movement and it closely mirrors the previous slide's excess deposit trends, as you would expect. In 2020, deposits grew, while loans declined and that was pandemic borrowing from our commercial clients stopping and then quickly paying it off. Throughout 2020, as we put deposits to work, we took a number of actions to protect our capital and that included a buildup in hold-to-maturity, better aligning our capital treatment with our intent to hold those securities to maturity. We also hedged rate risk in the available-for-sale book using pay-fixed, receive-variable swaps. So, these securities acted like cash and they earned higher yields and guarded against capital volatility. As we entered the middle of 2021, it became more clearer that the stimulus payment would likely be the last one and, therefore, we believed deposits would be peaking. As a result, we stopped adding to our hold-to-maturity securities book. That book peaked in the third quarter of 2021 at $683 billion, $562 billion were mortgage backs, and the rest were treasuries. And all that's happened is that notional balances have declined in each of the past six quarters, ending the quarter at $625 billion. And within that, the mortgage-backed portfolio was down $67 billion to $495 billion. As rates began to rise quickly throughout 2022, the value of our deposits rose. And, at the same time, the disclosed market value of the hold-to-maturity securities has declined, resulting in a negative market valuation on those bonds. That negative market valuation peaked in the third quarter, came down in the fourth quarter, and it's come down another $10 billion in the first quarter. In our 10-K disclosure, we included a chart which shows the maturity distribution of our securities portfolio. And, I'd remind you, this is based on the maturity dates of those originations, i.e., the date of the last contractual payment. When we look at the actual cash flows of those bonds over time, it results in an average weighted life of the hold-to-maturity securities book of a little more than eight years. And as you can see, since the third quarter of 2021, we've continued to see increases in the overall yield on the balances due to both the maturity and reinvestment of lower-yielding securities as well as remix into higher-yielding cash. And, as you can see, with deposits paying 92 basis points, that compares to our blend of cash and government-guaranteed securities, which pays 290 basis points. So, we continue to benefit NII and yield. And, finally, one very important last point I want to make, which is on the improved NII of our banking book. Because, remember, we manage the entirety of our balance sheet. That includes our deposits and that's where you see the net interest income has improved significantly. NII, excluding global markets, which we disclose each quarter, troughed in the third quarter of 2020 at $9.1 billion, and it's now $5.4 billion higher on a quarterly basis at $14.5 billion in the first quarter of '23, and that's the acid test of managing the entire balance sheet. So, let's turn now to Slide 12 and focus on net interest income. On a GAAP non-FTE basis, NII in the first quarter was $14.4 billion and the FTE NII number was $14.6 billion. Focusing on FTE, net interest income increased $2.9 billion from the first quarter of 2022 or 25%, while our net interest yield improved 51 basis points to 2.2%. The improvement was driven by rates, and that includes reductions in securities premium amortization. Average Fed fund rates are up 440 basis points year-over-year. Relative to that increase in Fed funds, which has benefited all of our variable rate assets, the rate paid on our total deposits rose 89 basis points and the rate paid today on interest-bearing deposits is up 133 basis points. Average loan growth of $64 billion also aided the year-over-year NII improvement. Turning to a linked-quarter discussion, NII of $14.6 billion is down $222 million from Q4, and that's primarily driven by the continued impact of lower deposit balances and the mix shift into interest-bearing. It's also influenced by lower global markets NII, which, remember, still gets passed through to clients via higher non-interest income as part of the trading revenue. Excluding the $262 million decline in global markets' NII, the banking book NII of $14.5 billion, that was modestly higher as the benefit of increased short interest rates, some modest loan growth and some deposit favorability was offset by two less days of interest in the quarter. Turning to asset sensitivity on a forward basis, the plus 100 basis point parallel shift at March 31st stands at $3.3 billion of expected NII over the next 12 months from our banking book. 96% of that sensitivity is driven by short rates. Summary, the first quarter NII was $14.6 billion in this quarter on an FTE basis and that was a little better than our $14.4 billion expectation as we began the quarter since deposits and rate pass-throughs were both modestly better. Looking forward, based on everything we know about interest rates and customer behavior, we expect second quarter NII on an FTE basis to be around 2% lower compared to Q1. So, think about that NII as about $14.3 billion FTE, plus or minus, driven by expected deposit movements as well as lower global markets' NII, which again is offset in the trading revenue. So, let me remind you of some of the caveats when it comes to that NII guidance. First, importantly, it assumes that interest rates in the forward curve materialize and that includes one more hike and then a couple of cuts in 2023. We also expect funding costs for global markets client activity to continue to increase based on those high rates. And, as noted, the impact of that is still offset in non-interest income, and that obviously assumes our current client positioning and the forward rate expectations. We continue to expect modest loan growth. So, that's in our NII expectation as well, and it's driven by credit card and, to a lesser degree, commercial. And then, finally, we just expect lower deposits and rotational shifts towards interest-bearing, really for three reasons. First, we expect further Fed balance sheet reductions to continue to reduce deposits for the industry. Second, we anticipate lower wealth management deposits in the second quarter. That's pretty typical due to the seasonal impact of clients paying income taxes and, to a lesser degree now, a continuation of balance movement seeking better yields off-balance sheet. And, third, we just continue to expect some of the rotation of commercial deposits towards interest-bearing. Okay. Let's go to Slide 13, we'll talk about expense. And here what you can see is, in the first quarter, our expenses were $16.2 billion, that's up $700 million from the fourth quarter and it's driven by seasonal elevation from payroll taxes, mostly at $450 million, a little bit from higher FDIC insurance expense, that was another $100 million this quarter, and the cost of adding people, call that another $100 million. We ended the first quarter with a little more than 217,000 people at the company, that was 260 people more than year-end. During the quarter, we welcomed 3,000 additional people into the company in January, that's due to outstanding offers that we extended in the fourth quarter. That meant that our headcount peaked in January. That's a little more than 218,000. And, at the end of last week, we were down to 216,000. We continue to expect that to move lower over time and we expect, by the end of the second quarter, our full-time equivalent headcount will be roughly 213,000, excluding our summer interns. As we look forward to the next quarter then, we would expect Q2 expense to benefit from the reduction of the seasonal elevation of payroll tax in Q1, and we would also expect to see expense reductions coming from headcount reductions through attrition over time and our operational excellence work. So, we expect expense in Q2 to be around $400 million or $500 million lower than Q1, so think of that as around $15.8 billion, plus or minus, in Q2. And then further, we just expect continued sequential expense declines in the third quarter and then again in the fourth quarter as we benefit from continued headcount discipline and attrition through time. Now turn to asset quality on Slide 14, and I want to start the credit discussion by saying, once again, asset quality of our customers remains healthy and net charge-offs continue to rise from their near historic lows. Net charge-offs of $807 million increased $118 million from the fourth quarter. That increase was driven by credit card losses as higher late-stage delinquencies flowed through to charge-offs. For context, the credit card net charge-off rate was 2.21% in this first quarter and that compares to 3.03% in the fourth quarter of '19 pre-pandemic. Provision expense was $931 million in Q1, and that included a $124 million reserve build. That's obviously less than the $403 million build we took in the fourth quarter, and it reflects modest loan growth and an ever so slightly improved macroeconomic outlook that, on a weighted basis, continues to include an unemployment rate still north of 5% as we end 2023. We included a slide in the appendix this quarter that highlights the mix and credit metrics of our commercial real estate exposure. And I just wanted to remind everyone here, we've been very intentional around our client selection, very intentional around portfolio concentration, and deal structure over many years and, as a result, we've seen NPLs and realized losses that remain quite low for this portfolio. We had a total of $66 million of commercial real estate losses in 2022. 70% of that was in office loans and that resulted in an annualized loss rate of 26 basis points. In the first quarter, to give some perspective, our office loan losses were $15 million. We have roughly $73 billion in commercial real estate loans outstanding, that's less than 7% of our loan book. It's highly diversified by geography, and no part of the country represents more than 22% of the book. It's also very diversified across property type. Within property type, our office portfolio was $19 billion, it's about 2% of our total loans. The portfolio is roughly 75% Class A properties. And when we originate, they are typically around 55% loan-to-value. Even though we've seen some property value declines, this exposure still remain well secured. $3.6 billion is classified as reservable criticized. And even on the most recent refreshes on our toughest loans, we still have 75% LTVs. In our office book, $4 billion is scheduled to mature this year, another $6 billion in 2024, with the remainder spread over the following years. So, we continue to feel that the portfolio is well-positioned and adequately reserved given the current conditions. On Slide 15, for completeness, we highlight the credit quality metrics for both our consumer and commercial portfolios. And, with that, I'm going to turn it back to Brian to talk about the lines of business.","evidence_gemma_new":null,"evidence_llama_3_3":"Bank of America CET1 level first quarter","evidence_qwen_3_30b":"CET1 level improved $184 billion December 31","gemma_new_max":null,"gemma_new_min":null,"llama_3_3_max":184000000000.0,"llama_3_3_min":184000000000.0,"qwen_3_30b_max":184000000000.0,"qwen_3_30b_min":184000000000.0}
{"symbol":"BAC","year":2023,"quarter":1,"date":"2023-Q1","chunk_id":3,"sub_chunk_id":0,"centroid_label":"cet1 ratio improved","agreed_value":0.114,"count":2,"chunk":"Alastair Borthwick: Thank you, Brian. And I'll pick up on Slide 3, where we list some of the more detailed highlights of the quarter. And then, on Slide 4, we present the summary income statement. So, I'm going to refer to both of these together. As Brian mentioned, for the quarter, we generated $8.2 billion of net income, and that resulted in $0.94 per diluted share. Our revenue grew 13%, and that was led by a 25% improvement in net interest income, coupled with strong 9% growth in sales and trading results, excluding DVA. Our non-interest revenue was strong, despite three headwinds: First, we had lower service charges as commercial clients paid lower fees for treasury services, since they now receive higher earned rates on balances. And, obviously, that allows us to invest those funds to earn NII. On consumer, we had lower NSF insufficient funds and overdraft fees as a result of our policy changes announced in late 2021. Second, with lower asset management fees and that just reflects the lower equity market levels and fixed-income market levels. And, third, investment banking fees were lower, just reflecting the continuation of sluggish industry activity and reduced fee pools. Now, all that said, despite these headwinds, each of the three categories saw modest improvement from the fourth quarter levels. Asset quality remained strong, and provision expense for the quarter was $931 million. That consisted of $807 million of net charge-offs and $124 million of reserve build. And that reserve build compares to a reserve release in the first quarter 2022 of $362 million. Our charge-off rate was 32 basis points and still well below the fourth quarter of '19 when our pre-pandemic rate was 39 basis points. And, remember, 2019 was a multi-decade low. So, credit, obviously, remains quite strong. I want to make one other point on Slide 4 and that is simply to note that pre-tax pre-provision income grew 27% year-over-year compared to reported net income growth of 15%. So, let's turn to the balance sheet that starts on Slide 5. And you can see, during the quarter, our balance sheet increased $144 billion to $3.195 trillion. Brian noted our liquidity levels at the end of the period, those rose to more than $900 billion from December 31. That's $23 billion higher and it remains $324 billion above our pre-pandemic level in the fourth quarter of '19. Shareholders' equity increased $7 billion from the fourth quarter as earnings were only partially offset by capital distributed to shareholders, and we saw an improvement in AOCI of $3 billion due to lower long-term interest rates. The AOCI included more than $0.5 billion increase from improved valuations of AFS debt securities and that flows through CET1. And the remaining $2.5 billion due to changes in cash flow hedges doesn't impact regulatory capital. During the quarter, we paid $1.8 billion in common dividends and we bought back $2.2 billion in shares. Turning to regulatory capital, our CET1 level improved to $184 billion since December 31 and our CET1 ratio improved 14 basis points to 11.4%, once again, adding to our buffer over our 10.4% current minimum requirement as well as the 10.9% minimum requirement that we'll see on January 1st of 2024. That means, in the past 12 months, we've improved our CET1 ratio by 100 basis points, and we've supported our clients and we've returned $12 billion in capital to shareholders. CET1 capital improved $4 billion, and that reflects the benefit of earnings and the AOCI improvement, partially offset by the capital we've returned to shareholders. Our risk-weighted assets increased modestly and that partially offset the benefit to the CET1 ratio of the higher capital we generated. And then, our supplemental leverage ratio increased to 6%. That compares to a minimum requirement of 5% and leaves plenty of capacity for balance sheet growth, and our TLAC ratio remains comfortably above our requirements. So, let's spend a minute on loan growth, and we'll do that by turning to Slide 6, where you can see the average loans grew 7% year-over-year, driven by commercial loans and credit card growth. The credit card growth reflects increased marketing, it reflects enhanced offers and higher levels of card account openings. The commercial growth across the past year reflects the diversity of commercial activity across global banking and global markets and, to some degree, global wealth. And on a more near-term linked-quarter basis, loans grew at a much slower pace, partly driven by seasonal credit card paydowns after the fourth quarter holiday spending, and then commercial demand slowed in Q1 and we saw some paydowns by our wealth management clients as they lowered leverage as rates rose. So, let's turn to deposits and there's obviously been a lot of additional focus this quarter, so I want to spend extra time here and I'm going to start with Slide 7 and talk about average deposits. Just a few points we need to make before focusing on a more detailed discussion of the recent trends. Average total deposits for the first quarter were $1.89 trillion, that is down 2% linked-quarter and down 7% year-over-year. Our deposits peaked in the fourth quarter of 2021. And even as the Fed has continued to withdraw money supply, our deposits have held around $1.9 trillion, because there's a lot more industry deposits today in a much bigger economy today compared to pre-pandemic. Our average deposits were up 34% compared to our pre-pandemic Q4 '19 balance and the industry's deposits were up 31% to $17.4 trillion. So, we've obviously fared a little bit better than the industry. We put our pre-pandemic deposits for each line of business on the slide, so you can compare our balances then and now. I want to highlight consumer checking balances, which remained 53% higher than pre-pandemic. And as I think all of us would expect, GWIM combined client deposits are up a lesser 23%, as those are the clients that generally move their excess cash into other off-balance sheet products. And in global banking, you can see the rotation to interest-bearing across time as rates rose. So, let's get a little more granular and a little more near-term and we'll use Slide 8 for that, where you can see the breakout of deposit trends on a weekly ending basis across the last two quarters. You can also see that we plotted the timeline of Fed target and rate hikes on the top-left chart, just for comparison through time. In the upper left, you can see the trend of our total deposits. We ended Q1 '23 at $1.91 trillion, that's down 1%. And, as Brian mentioned, over the course of the past six months, those balances have been relatively stable. In consumer, looking at the top-right chart, we show the difference here in the movement through the quarter between the balances of low to no interest checking accounts, and the higher-yielding non-checking accounts and, across the entire quarter, we saw a modest $4 billion decline in total. Checking balances, obviously, have some variability around pay days in particular, but note the relative stability of checking deposits, because these are the operational accounts with money and motion to pay the bills and everyday living costs for families. I'd also point out that our checking balances were modestly growing even ahead of March 9th upheaval and continue to move higher through the quarter on the back of disruption. Lower non-checking balances mostly reflect money moved out of deposits and into brokerage accounts where we earn a small fee. Rate paid increased 6 basis points from the fourth quarter to 12 basis points on this [trillion dollars] (ph) of total consumer deposits and remains low, because of the 52% mix that is checking. Lastly, I just note that the rate movements in this business are concentrated in the small CDs and consumer investment deposits, which together represent about 5% of the deposits. In wealth management, as you would expect, it shows the most relative decline, and you can see the continued trend of clients moving money from lower-yielding sweep accounts into higher-yielding preferred deposits and off-balance sheet to other investment alternatives. Now, if we went back further, you'd see that roughly $90 billion has moved out of sweeps in the past year, which leaves $80 billion in these accounts. So, you can see how with the pace and size of rate hikes slowing, we expect the declines in balances to lessen from here. At the bottom-right, note the global banking deposit movement, where we hold about $500 billion in customer deposits. These are generally operational deposits of our commercial customers and they use that to manage their cash flows through the course of the year. Those were down $3 billion from the fourth quarter. And what's interesting to note is that, our total deposits in this segment have been stable at around $500 billion for the past six months and this business just continues to see rotation into interest-bearing. The mix of interest-bearing deposits on an ending basis moved from 49% last quarter to 55% in Q1. And, obviously, we pay increased rates on those interest-bearing deposits. And it's this rotation in global banking that's driving the rotational shift of the total company, and it's pretty typical and to be expected in this environment. So, in summary, our deposits continued to behave as we would expect. The cash transactional balances have shown some recent stabilization. And for investment cash, we've seen deposits moved to brokerage and other platforms for direct holdings of money market, mutual funds, treasuries, and we are capturing many of those flows as you see in our numbers, it's just we expect that to slow going forward. So, now that we've examined trends for the different lines of business, I want to make some important points about the characteristics of our deposit franchise using Slide 9, and this will just help reinforce for shareholders who own Bank of America that they're investing in one of the world's great deposit franchises, all of it based off of relationships we have with our customers and the value they place on the award-winning capabilities and convenience they have access to. So, starting from the top, focus first on consumer. You can see that more than 80% of deposits have been with us for more than five years, and more than two-thirds of our consumer deposits are balances with customers who have had relationships with the bank for more than 10 years. Also, more than three-quarters of these customers are very highly engaged in their activities with us. They are also, geographically, dispersed across the United States given our presence in 83 of the top 100 markets. Lastly, whether you look at consumers or small business, the value proposition is what's driving the same result. We've got long-tenured customers with deep relationships that are highly engaged. Turning to wealth management, you can see a similar story around long tenure and quite active relationships. The average relationship of our GWIM clients is around 14 years. And, again, these clients are very geographically diverse, they're also very digitally engaged, and we continue to see deepening around banking solutions and products of all types. There's lots of options for these clients that extend from their operational checking accounts all the way up through preferred deposit options, and then we also benefit from having great alternatives for them within our investment platform. On global banking, note that 80% of our U.S. deposit balances are held by clients who have had an account with us for at least 10 years. Furthermore, as we measure the number of solutions that clients have with us, we know that 73% of balances are held by clients that have at least five products on us and, just like the other businesses, they are highly diversified by industry and geography. So, those are some of the things that make our quality deposit base stable. So, now that we've walked through both loans and deposits, I want to transition a bit to make some points on balance sheet management and to focus on the liquidity we enjoy by having a surplus of customer deposits that far exceeds the loan demand of our clients today and far exceeded the loan demand of our clients pre-pandemic. Having the deposits alone doesn't pay the expenses to support these great customer bases and it doesn't mean much to our shareholders, unless we put them to work to extract the value of those deposits. So, that's what we're trying to illustrate and we want to show you how we do them. You can see that on Slide 10, where you note we had significant excess deposits over loans pre-pandemic. And during the pandemic, that increased -- that amount increased significantly. Before the pandemic, we had $0.5 trillion more in deposits than loans and that peaked in late 2021 at more than $1.1 trillion and it remains high at roughly $900 billion still today. That's the context as we talk about how we manage excess cash. So, let's turn to Slide 11. And here we're going to focus on the banking book, because our global markets' balance sheet has remained largely market funded. And just follow the graph from left to right. At the top of the slide, you note trend of cash and cash equivalents and the two components of the debt securities balances: available-for-sale and held-to-maturity. And you can see the trend of the overall combined cash and securities balance movement and it closely mirrors the previous slide's excess deposit trends, as you would expect. In 2020, deposits grew, while loans declined and that was pandemic borrowing from our commercial clients stopping and then quickly paying it off. Throughout 2020, as we put deposits to work, we took a number of actions to protect our capital and that included a buildup in hold-to-maturity, better aligning our capital treatment with our intent to hold those securities to maturity. We also hedged rate risk in the available-for-sale book using pay-fixed, receive-variable swaps. So, these securities acted like cash and they earned higher yields and guarded against capital volatility. As we entered the middle of 2021, it became more clearer that the stimulus payment would likely be the last one and, therefore, we believed deposits would be peaking. As a result, we stopped adding to our hold-to-maturity securities book. That book peaked in the third quarter of 2021 at $683 billion, $562 billion were mortgage backs, and the rest were treasuries. And all that's happened is that notional balances have declined in each of the past six quarters, ending the quarter at $625 billion. And within that, the mortgage-backed portfolio was down $67 billion to $495 billion. As rates began to rise quickly throughout 2022, the value of our deposits rose. And, at the same time, the disclosed market value of the hold-to-maturity securities has declined, resulting in a negative market valuation on those bonds. That negative market valuation peaked in the third quarter, came down in the fourth quarter, and it's come down another $10 billion in the first quarter. In our 10-K disclosure, we included a chart which shows the maturity distribution of our securities portfolio. And, I'd remind you, this is based on the maturity dates of those originations, i.e., the date of the last contractual payment. When we look at the actual cash flows of those bonds over time, it results in an average weighted life of the hold-to-maturity securities book of a little more than eight years. And as you can see, since the third quarter of 2021, we've continued to see increases in the overall yield on the balances due to both the maturity and reinvestment of lower-yielding securities as well as remix into higher-yielding cash. And, as you can see, with deposits paying 92 basis points, that compares to our blend of cash and government-guaranteed securities, which pays 290 basis points. So, we continue to benefit NII and yield. And, finally, one very important last point I want to make, which is on the improved NII of our banking book. Because, remember, we manage the entirety of our balance sheet. That includes our deposits and that's where you see the net interest income has improved significantly. NII, excluding global markets, which we disclose each quarter, troughed in the third quarter of 2020 at $9.1 billion, and it's now $5.4 billion higher on a quarterly basis at $14.5 billion in the first quarter of '23, and that's the acid test of managing the entire balance sheet. So, let's turn now to Slide 12 and focus on net interest income. On a GAAP non-FTE basis, NII in the first quarter was $14.4 billion and the FTE NII number was $14.6 billion. Focusing on FTE, net interest income increased $2.9 billion from the first quarter of 2022 or 25%, while our net interest yield improved 51 basis points to 2.2%. The improvement was driven by rates, and that includes reductions in securities premium amortization. Average Fed fund rates are up 440 basis points year-over-year. Relative to that increase in Fed funds, which has benefited all of our variable rate assets, the rate paid on our total deposits rose 89 basis points and the rate paid today on interest-bearing deposits is up 133 basis points. Average loan growth of $64 billion also aided the year-over-year NII improvement. Turning to a linked-quarter discussion, NII of $14.6 billion is down $222 million from Q4, and that's primarily driven by the continued impact of lower deposit balances and the mix shift into interest-bearing. It's also influenced by lower global markets NII, which, remember, still gets passed through to clients via higher non-interest income as part of the trading revenue. Excluding the $262 million decline in global markets' NII, the banking book NII of $14.5 billion, that was modestly higher as the benefit of increased short interest rates, some modest loan growth and some deposit favorability was offset by two less days of interest in the quarter. Turning to asset sensitivity on a forward basis, the plus 100 basis point parallel shift at March 31st stands at $3.3 billion of expected NII over the next 12 months from our banking book. 96% of that sensitivity is driven by short rates. Summary, the first quarter NII was $14.6 billion in this quarter on an FTE basis and that was a little better than our $14.4 billion expectation as we began the quarter since deposits and rate pass-throughs were both modestly better. Looking forward, based on everything we know about interest rates and customer behavior, we expect second quarter NII on an FTE basis to be around 2% lower compared to Q1. So, think about that NII as about $14.3 billion FTE, plus or minus, driven by expected deposit movements as well as lower global markets' NII, which again is offset in the trading revenue. So, let me remind you of some of the caveats when it comes to that NII guidance. First, importantly, it assumes that interest rates in the forward curve materialize and that includes one more hike and then a couple of cuts in 2023. We also expect funding costs for global markets client activity to continue to increase based on those high rates. And, as noted, the impact of that is still offset in non-interest income, and that obviously assumes our current client positioning and the forward rate expectations. We continue to expect modest loan growth. So, that's in our NII expectation as well, and it's driven by credit card and, to a lesser degree, commercial. And then, finally, we just expect lower deposits and rotational shifts towards interest-bearing, really for three reasons. First, we expect further Fed balance sheet reductions to continue to reduce deposits for the industry. Second, we anticipate lower wealth management deposits in the second quarter. That's pretty typical due to the seasonal impact of clients paying income taxes and, to a lesser degree now, a continuation of balance movement seeking better yields off-balance sheet. And, third, we just continue to expect some of the rotation of commercial deposits towards interest-bearing. Okay. Let's go to Slide 13, we'll talk about expense. And here what you can see is, in the first quarter, our expenses were $16.2 billion, that's up $700 million from the fourth quarter and it's driven by seasonal elevation from payroll taxes, mostly at $450 million, a little bit from higher FDIC insurance expense, that was another $100 million this quarter, and the cost of adding people, call that another $100 million. We ended the first quarter with a little more than 217,000 people at the company, that was 260 people more than year-end. During the quarter, we welcomed 3,000 additional people into the company in January, that's due to outstanding offers that we extended in the fourth quarter. That meant that our headcount peaked in January. That's a little more than 218,000. And, at the end of last week, we were down to 216,000. We continue to expect that to move lower over time and we expect, by the end of the second quarter, our full-time equivalent headcount will be roughly 213,000, excluding our summer interns. As we look forward to the next quarter then, we would expect Q2 expense to benefit from the reduction of the seasonal elevation of payroll tax in Q1, and we would also expect to see expense reductions coming from headcount reductions through attrition over time and our operational excellence work. So, we expect expense in Q2 to be around $400 million or $500 million lower than Q1, so think of that as around $15.8 billion, plus or minus, in Q2. And then further, we just expect continued sequential expense declines in the third quarter and then again in the fourth quarter as we benefit from continued headcount discipline and attrition through time. Now turn to asset quality on Slide 14, and I want to start the credit discussion by saying, once again, asset quality of our customers remains healthy and net charge-offs continue to rise from their near historic lows. Net charge-offs of $807 million increased $118 million from the fourth quarter. That increase was driven by credit card losses as higher late-stage delinquencies flowed through to charge-offs. For context, the credit card net charge-off rate was 2.21% in this first quarter and that compares to 3.03% in the fourth quarter of '19 pre-pandemic. Provision expense was $931 million in Q1, and that included a $124 million reserve build. That's obviously less than the $403 million build we took in the fourth quarter, and it reflects modest loan growth and an ever so slightly improved macroeconomic outlook that, on a weighted basis, continues to include an unemployment rate still north of 5% as we end 2023. We included a slide in the appendix this quarter that highlights the mix and credit metrics of our commercial real estate exposure. And I just wanted to remind everyone here, we've been very intentional around our client selection, very intentional around portfolio concentration, and deal structure over many years and, as a result, we've seen NPLs and realized losses that remain quite low for this portfolio. We had a total of $66 million of commercial real estate losses in 2022. 70% of that was in office loans and that resulted in an annualized loss rate of 26 basis points. In the first quarter, to give some perspective, our office loan losses were $15 million. We have roughly $73 billion in commercial real estate loans outstanding, that's less than 7% of our loan book. It's highly diversified by geography, and no part of the country represents more than 22% of the book. It's also very diversified across property type. Within property type, our office portfolio was $19 billion, it's about 2% of our total loans. The portfolio is roughly 75% Class A properties. And when we originate, they are typically around 55% loan-to-value. Even though we've seen some property value declines, this exposure still remain well secured. $3.6 billion is classified as reservable criticized. And even on the most recent refreshes on our toughest loans, we still have 75% LTVs. In our office book, $4 billion is scheduled to mature this year, another $6 billion in 2024, with the remainder spread over the following years. So, we continue to feel that the portfolio is well-positioned and adequately reserved given the current conditions. On Slide 15, for completeness, we highlight the credit quality metrics for both our consumer and commercial portfolios. And, with that, I'm going to turn it back to Brian to talk about the lines of business.","evidence_gemma_new":null,"evidence_llama_3_3":"Bank of America CET1 ratio first quarter","evidence_qwen_3_30b":"CET1 ratio improved 11.4% quarter","gemma_new_max":null,"gemma_new_min":null,"llama_3_3_max":0.114,"llama_3_3_min":0.114,"qwen_3_30b_max":0.114,"qwen_3_30b_min":0.114}
{"symbol":"BAC","year":2023,"quarter":3,"date":"2023-Q3","chunk_id":3,"sub_chunk_id":0,"centroid_label":"cet1 ratio improved","agreed_value":194000000000.0,"count":2,"chunk":"Alastair Borthwick: Thanks, Brian. And on Slide 10, we present the summary income statement. I'm not going to spend a lot of time here because Brian touched on this and the highlights that we show on Slide 3. For the quarter, we generated $7.8 billion in net income, resulting in $0.90 per diluted share. Both of those are up the double digits from the third quarter of last year. The year-over-year revenue growth of 3% was led by improvement in net interest income, coupled with a strong 8% increase in sales and trading results, and that excludes DVA, and a 4% increase in investment in brokerage revenue driven by our Wealth Management businesses. Expense for the quarter of $15.8 billion included good discipline from our team, which allowed us to reduce costs from the second quarter, even as we continue our planned investments for marketing, technology and physical presence build-outs, including financial center openings and renovations. Asset quality remains stellar, and provision expense for the quarter was $1.2 billion. That consisted of $931 million of net charge-offs and $303 million of reserve build. The provision expense reflects the continued trend in charge-offs toward pre-pandemic levels and remains below historical levels. Our charge-off rate was 35 basis points, that's 2 basis points higher than the second quarter, and still below the 39 basis points we saw in the fourth quarter of '19. And as a reminder, that 2019 was a multi-decade low. 30-day delinquencies also remained below their fourth quarter '19 level. Lastly, our tax rate this quarter was 4%, driven mostly by higher-than-expected volume of investment tax credit, or ITC deals for the rest of the year. And we can expect other income in Q4 will reflect seasonally higher renewables investment losses when these projects get placed into service. Okay. Let's turn to the balance sheet that's on Slide 11. And you can see it ended the quarter at $3.2 trillion, up $31 billion from the second quarter. So not a lot to note here. The driver of the increase was a $34 billion increase in available for sales securities. With cash levels so high, we chose to reduce the cash and just put some of the money into short-term T-bills this quarter, and those earn essentially the same rate as cash. Our cash remains high at $352 billion. In addition to the cash level change, we saw another $11 billion decline in hold to maturity securities as those securities matured and paid down. And as Brian noted, global excess liquidity sources remain strong at $859 billion, that's down very modestly from the second quarter, and still remains approximately $280 billion above our pre-pandemic fourth quarter '19 level. Shareholders' equity increased $4 billion from the second quarter as earnings were only partially offset by capital distributed to shareholders. During the quarter, we paid out $1.9 billion in common dividends and we bought back $1 billion in shares to offset our employee awards. AOCI was $1.1 billion lower, reflecting both a modest decline in the value of AFS securities, modestly impacting CET1 as well as a small change in cash flow hedges, which doesn't impact the regulatory capital. Tangible book value per share is up 12% year-over-year. Turning to regulatory capital. our CET1 level improved to $194 billion from June 30, and our CET1 ratio improved 30 basis points to 11.9%. It's now well above our current 9.5% requirement as Brian noted. Risk-weighted assets declined modestly as loans and Global Markets RWA both moved lower. Our supplemental leverage ratio was 62% versus a minimum requirement of 5%, which leaves capacity for balance sheet growth and our TLAC ratio remains well above our requirements. LCR ratios remain well above minimums for BAC metrics and stronger at the bank level. Let's now focus on loans by looking at average balances on Slide 12. And loan growth slowed this quarter as a decline in demand for commercial borrowing more than offset our credit card growth. So we saw that lower commercial demand in lower revolver utilization among higher funding costs. And commercial balances were also impacted by term loan repayments due to borrowers accessing other capital market solutions. Focusing for a moment on average deposits and using Slide 13. Given Brian's earlier comments, I'll just note the comparisons. Relative to pre-pandemic fourth quarter '19, average deposits are up 33%. Consumer is up 36%, with consumer checking up 45%. And you can see the other segment comparisons on the page. Turning to Slide 14. Let's extend the conversation we\u2019ve been having over the course of the past couple of quarters around management of our excess liquidity. This slide serves as a reminder of the size of our high-quality deposit book, the magnitude of deposits we have in excess of those needed to fund loans and the way we've extracted the value of that excess to deliver value back to our shareholders. The excess of deposits needed to fund loans increased from $420 billion pre-pandemic to a peak of $1.1 trillion in the fall of 2021. And as you can see, it remains high at $835 billion today. That $1.1 trillion of excess liquidity has always included a balanced mix of cash, available for sale securities, and securities we hold to maturity. In late 2020 and into 2021, we concluded that additional stimulus was going to remain in client accounts for an extended period, and we increased the hold to maturity securities portion so we could lock in value from those deposits. And we made these investments given the core nature of our customers' deposits. Note, the split of the shorter-term investments in cash and available-for-sale securities, and then the term hold to maturity securities. And I just draw your attention to just how much cash we have above the actual level we need to run the company. On the available-for-sale, we would just note the duration is less than six months as it's mostly all short-term treasuries. And the combination of the cash and available-for-sale securities represents about 47% of the total noted on this page in the third quarter of '23 to give us the balance we're looking for. And if we look at the hold-to-maturity book, it had grown from $190 billion pre-pandemic, peaking two years ago, and now falling to just over $600 billion currently. That $600 billion consists of about $122 billion in treasuries. Those will mature in a little more than six years, and about $474 billion in mortgage-backed securities and a few billion other. Hold to maturity securities peaked at $683 billion, and we're now down $80 billion from the peak and $11 billion in last quarter. That $80 billion decline from peak was all driven by the reduction of mortgages from $555 billion to $474 billion. With less loan funding needs over the past several quarters, the proceeds from security paydowns have been deployed into higher-yielding cash, and this mix shift has been happening at about a 300 basis point spread benefit for these assets. Given the increased cash rates, the combined cash and security yield has risen now to more than 3%. It's up more than 200 basis points since the peak size of the portfolio in the third quarter of '21, and it's risen faster than the rate paid on deposits. In fact, today, it's 178 basis points above what we pay for deposits. And remember also, we have $1 trillion of loans that are largely in floating rate in addition. From a valuation perspective, we did experience a decline in the valuation of the hold-to-maturity book this quarter, and that's in the context of mortgage rates reaching a two-decade high. Comparing the valuation change to the year-ago period, it worsened $15 billion. And over that same time period, we grew regulatory capital by $19 billion and hold global liquidity sources in excess of $850 billion. And importantly, as we move to Slide 15, I'll make one final comment here, which is the improved NII over this investment period. The net interest income, excluding Global Markets, which we disclose each quarter, troughed in Q3 '20 at $9.1 billion, that compares to $13.9 billion in the third quarter of '23 or $4.7 billion higher every quarter on a quarterly basis, and that gives a sense of the entire balance sheet working together. Okay. Let's now turn our focus to NII performance over the past quarter, and we'll talk about the path forward, and I'm going to use Slide 15 for that. On last quarter's call, we guided to expect Q3 NII to be about $14.2 billion to $14.3 billion on an FTE basis. Our third quarter performance turned out to be better than our guidance. And on an FTE basis, NII was $14.5 billion this quarter. We expect Q4 will be around $14 billion fully taxable equivalent, and that increases our full year guidance for NII in 2023 versus 2022 to 9% growth per year. We believe NII will hover around this expected fourth quarter $14 billion level, plus or minus, in the first half of next year, and then we anticipate modest growth in the half of 2024. By the time we get to the fourth quarter of 2024, we believe we can see NII up low single digits compared to the fourth quarter of 2023. The good news is we believe NII will likely trough around the fourth quarter level of $14 billion and begin to grow again in the middle of next year. I'd note a few caveats around that forward view I just provided. It includes an assumption that interest rates in the forward curve materialize and it includes rate cuts for the second half of 2024. It also includes an expectation of modest loan and deposit growth as we move into the second half of 2024. Focusing again on this quarter, $14.5 billion NII was an increase of nearly $700 million from the third quarter of '22, or 4%, while our net interest yield improved 5 basis points to 2.11%. The year-over-year improvement was driven by higher interest rates and partially offset by lower deposit balances. On a linked-quarter comparison, NII improved $239 million from Q2, and that comes from the benefit of an extra day of interest, a rate hike and higher global markets NII, partially offset by increased deposit pricing. And the net interest yield improved 5 basis points. Turning to asset sensitivity and focused on a forward yield curve basis, the plus 100 basis point parallel shift at September 30 was $3.1 billion of expected NII benefit over the next 12 months from our banking book. And that expects -- or that assumes no expected change in balance sheet levels or mix relative to our baseline forecast, and 95% of the sensitivity is driven by short rates. The 100 basis point down rate scenario was $3.3 billion. Okay. Let's turn to expense, and we'll use Slide 16 for the discussion. Previously highlighted that we guided you to a trend of sequential declines in our expense each quarter this year, and we achieved that in Q3 with our expense down $200 million to $15.8 billion. Additionally, we expect the fourth quarter to go down another couple of hundred million to $15.6 billion, excluding any FDIC special assessment. That would mean our fourth quarter expense of $15.6 billion, compared to the fourth quarter of '22, would be up by only $100 million or less than 1%. And we're proud of that work by the team, especially considering our regular FDIC insurance expense alone increased by $125 million quarterly starting in the first quarter of this year. So without that, we would be flat year-over-year in Q4. The decline this quarter from the second was driven by the reduction in litigation expense and lower headcount, offset somewhat by investments in inflationary costs. Our headcount is down nearly 2,800 from the second quarter to 213,000. And that includes the addition of 2,500 or so full-time campus hires we brought into the company. So that's good work by the team after we peaked at 218,000 in January month-end. And you see the movement here across the past year at the bottom left of the slide. As we look forward to next quarter, we'd add $1.9 billion of expense for the proposed notice of special assessment from the FDIC as a possibility. Absent that, we'd expect our fourth quarter $15.6 billion expense target to more fully benefit from the third quarter headcount reductions, and that will allow expense to continue the decline experienced throughout the year so far. All of that is going to set us up well for next year. Let's now turn to credit, and we'll turn to Slide 17. Net charge-offs of $931 million increased $62 million from the second quarter. The increase is driven by credit card losses as higher late-stage delinquencies flow through to charge-offs. For context, the credit card net charge-off rate rose 12 basis points to 2.72% in Q3, and it remains below the 3.03% pre-pandemic rate in the fourth quarter of '19. Provision expense was $1.2 billion in Q3, and that included a $303 million reserve build. It reflects a macroeconomic outlook that on a weighted basis continues to include an unemployment rate that rises to north of 5% during 2024. On Slide 18, we highlight the credit quality metrics for both our Consumer and our Commercial portfolios. And on Consumer, we just note that we continue to see the asset quality metrics come off the bottom. And for the most part, they remain below historical averages. 30 and 90-day consumer delinquencies still remain below the fourth quarter of 2019 as an example. Commercial net charge-offs declined from the second quarter, driven mostly by a reduction in office write-downs. And as a reminder, our CRE credit exposure represents 7% of total loans, and that includes office exposure, which represents less than 2% of our loans. We've been very intentional around client selection and portfolio concentration and deal structure over many years, and that's helped us to mitigate risk in this portfolio. We continue to believe that the portfolio is well positioned and adequately reserved against the current conditions. And in the appendix, we've included a current view of our commercial real estate and office portfolio stats we provided last quarter. We've also included the historical perspective of our loan book de-risking and our net charge-offs, and you can see all of those on Slides 36, 37, 38 and 39. Okay. Let's move on to the various lines of business and their results. And I'm going to start on Slide 19 with Consumer Banking. For the quarter, Consumer earned $2.9 billion on good organic revenue growth and delivered its 10th consecutive quarter of operating leverage, while we continue to invest for the future. Note that the top-line revenue grew 6%, while expense rose 3%. Reported earnings declined 7% year-over-year given credit costs continue to return to pre-pandemic level. And we believe this understates the underlying success of the business in driving revenue and managing costs, because PPNR grew 9% year-over-year. Much of this success is driven by the pace of organic growth of checking and card accounts, as well as investment accounts and balances, as Brian noted earlier. And expense reflects the continued investments by the business for their future growth. Moving to Wealth Management on Slide 20. We produced good results, and we earned a little more than $1 billion. These results are down from last year, due to a decline in NII from higher deposit costs, which more than offset higher fees from asset management. While lower this quarter, NII of $1.8 billion derives from a world-class banking offering, and it provides good balance in our revenue stream and a competitive advantage in the business for us. As Brian noted, both Merrill and the Private Bank continued to see strong organic growth, and they produced solid assets under management flows of $44 billion since the third quarter of last year, reflecting good mix of new client money as well as our existing clients putting their money to work. Expense reflects continued investments in the business as we add financial advisers and capabilities from technology investments. On Slide 21, you see the Global Banking results. And this business produced very strong results with earnings of $2.6 billion, driven by 11% year-over-year growth in revenue to $6.2 billion. Coupled with good expense management, the business has produced solid operating leverage. Our GTS, or Global Treasury Services business has been robust. We've also seen a steady volume of solar and wind investment projects this quarter, and our investment banking business is performing well in a sluggish environment. Year-over-year revenue growth also benefited from the absence of marks taken on leverage loans in the prior year-ago period. The company's overall investment banking fees were $1.2 billion in Q3, growing modestly over the prior year, despite a pool that was down nearly 20%. And we held on to number three position given our performance. Provision expense reflected a reserve release of $139 million as certain troubled industries and credits outside of commercial real estate continue to have improved outlooks. Expense increased 6% year-over-year, reflecting our continued investments in this business. Switching to Global Markets on Slide 22. The team had another strong quarter, with earnings growing to $1.3 billion driven by revenue growth of 10%, and I'm referring to results excluding DVA as we normally do. The continued themes of inflation, geopolitical tensions and central banks changing monetary policies around the globe have continued to impact both bond and equity markets. And as a result, it was a quarter where we saw strong performance in our FICC businesses, as well as a record third quarter in equities. Focusing on sales and trading, ex DVA, revenue improved 8% year-over-year to $4.4 billion. FICC improved 6% and equities improved 10% compared to the third quarter of last year. And at $1.7 billion, that's a record third quarter for our equities teammates. Year-over-year, expense increased 7%, primarily driven by investments for people and technology. Finally, on Slide 13, all other shows a profit of $89 million. So revenue improved from the second quarter, driven by the absence of prior period debt security sale losses and available-for-sale securities, and partially offset by higher operating losses on tax credit investments in wind, solar and affordable housing. As I mentioned earlier, our effective tax rate in the quarter was 4%, and that reflects a higher-than-expected volume of investment tax credits in which the value of the deals are recognized upfront. We also had a small discrete benefit to tax expense from a state tax law change. Excluding renewable investments and any other discrete tax benefits, our tax rate would have been 25%. And as we wrap up 2023, we expect our full year tax rate, excluding discrete and special items, such as the FDIC special assessment, we expect that full year tax rate should end up in the 9% to 10% range. So to summarize, we grew our earnings double digit year-over-year. We reported NII that was above our expectations, and we increased our full year expectations. We've managed costs aligned with our guidance and brought expenses down in every quarter so far this year, and we expect to do that again in the fourth quarter. We earned more than 15% return on tangible common equity. We returned $2.9 billion in capital back to shareholders, including a 9% dividend increase. And we built 30 basis points of CET1, positioning us well for the proposed capital rules. So all in all, it was a strong quarter. It was one where our teams executed well against responsible growth. And with that, David, I think we'll open it up for the Q&A session.","evidence_gemma_new":null,"evidence_llama_3_3":"CET1 level","evidence_qwen_3_30b":"CET1 level","gemma_new_max":null,"gemma_new_min":null,"llama_3_3_max":194000000000.0,"llama_3_3_min":194000000000.0,"qwen_3_30b_max":194000000000.0,"qwen_3_30b_min":194000000000.0}
{"symbol":"BAC","year":2024,"quarter":2,"date":"2024-Q2","chunk_id":3,"sub_chunk_id":0,"centroid_label":"cet1 ratio improved","agreed_value":198000000000.0,"count":2,"chunk":"Alastair Borthwick: Thank you, Brian, and I'm going to start on slide six of the earnings presentation. I'll touch on more highlights noted on slide six as we work through the material. I just want to say upfront that we delivered strong returns with return on average assets of 85 basis points and a return on tangible common equity of nearly 14%. So let's move to the balance sheet on slide seven, where you can see we ended the quarter at $3.26 trillion of total assets, relatively unchanged from the first quarter. And not much to note here apart from a mixed shift of lower securities balances, mostly offset by an increase in reverse repo and modest loan growth, as well as global markets client activity. On the funding side, deposits declined $36 billion on an ending basis, reflecting typical seasonal customer payments of income taxes. And as Brian noted, average deposits were still modestly higher. Liquidity remained strong with $909 billion of global liquidity sources that was flat compared to the first quarter. Shareholders' equity was also flat compared to Q1, as earnings were offset by $5.4 billion in capital distributed to shareholders and a $1.9 billion redemption of preferred stock in the quarter. The $5.4 billion of capital contributions included $1.9 billion in common dividends and the repurchase of $3.5 billion in shares. AOCI improved modestly in the quarter and tangible book value per share of $25.37 rose 9% from the second quarter of last year. In terms of regulatory capital, our CET1 level improved to $198 billion and the CET1 ratio was stable at 11.9%. This 11.9% ratio remained well above our current 10% requirement, as well as our new 10.7% requirement as of October 1, 2024. Risk-weighted assets increased modestly and that was driven by lending activity. Our supplemental leverage ratio was 6% versus our minimum requirement of 5% and that leaves plenty of capacity for balance sheet growth. And our $468 billion of TLAC means our total loss-absorbing capital ratio remains comfortably above our requirements. Brian already covered deposit trends, so let's turn the balance sheet focus to loans and we'll look at average balances on slide eight. You can see average loans in Q2 of $1.051 trillion. They improved 1% year-over-year, driven by 5% credit card growth and modest commercial growth. The modest improvement in overall commercial loans included a 2% increase in our domestic commercial loans and leases, partially offset by a 4% decline in commercial real estate. Middle market lending saw an uptick in the quarter, and we saw good demand in our wealth businesses from custom lending. These areas of growth were largely offset by continued paydowns from our larger corporate clients on interest rate sentiment. Consumer growth was driven by credit card borrowing, and while home lending balances were flattish, originations picked up a bit this quarter. Lastly, and on a positive note, loan spreads continued to widen. As we turn our focus then to NII performance and slide nine, note that we moved the slide we typically use to talk about excess deposits to the appendix on slide 22, so you can see that there. Our excess deposit levels above loans remained high at $850 billion and continue to be a good source of value for shareholders. 52% of our excess liquidity is now in short-dated cash and available for sale securities. The longer-dated, lower-yielding hold-to-maturity book continues to roll off, and we reinvested again this quarter in higher-yielding assets. The blended yield of cash and securities continued to improve in the quarter and is now 160 basis points above our deposit rate paid. Regarding NII, on a GAAP [Technical Difficulty]","evidence_gemma_new":null,"evidence_llama_3_3":"CET1 level","evidence_qwen_3_30b":"CET1 level $198 billion","gemma_new_max":null,"gemma_new_min":null,"llama_3_3_max":198000000000.0,"llama_3_3_min":198000000000.0,"qwen_3_30b_max":198000000000.0,"qwen_3_30b_min":198000000000.0}
{"symbol":"BAC","year":2024,"quarter":2,"date":"2024-Q2","chunk_id":2,"sub_chunk_id":0,"centroid_label":"cet1 ratio improved","agreed_value":11.9,"count":2,"chunk":"Brian Moynihan: Thank you, Lee, and good morning and thank all of you for joining us today. Before I begin today, I just want to reflect a second on the horrible events this weekend. We at Bank of America are clear that there's no place for political violence in our great country, and we continue to wish the former President Trump a speedy recovery. And our thoughts, of course, go out to the victims and their families and others impacted by this terrible event. With that, let's turn attention to the results for the second quarter of 2024 at Bank of America Corporation. This quarter, we achieved success in a number of areas, underscoring the benefits of our diversity and the dedication of our team to deliver responsible growth. Our organic growth engine continues to add customers and activity to all our businesses, even as we see the drop in net interest income this quarter. I'm starting on slide two. Our net income for the quarter was $6.9 billion after tax or $0.83 in diluted EPS. Attesting to the balance in our franchise, the earnings were split evenly, half in our consumer and GWIM businesses, which serve people, and the other half in our institutional-focused business global banking and markets. We grew revenue from the second quarter of 2023 as improvement in non-interest income overcame the decline in net interest income. Fees grew 6% year-over-year and represented 46% of total revenue in the quarter. Our strong fee performance was led by a 14% improvement in asset management fees in our wealth management businesses. We grew investment banking fees 29% year-over-year and saw sales and trading revenue increase 7%. Global Markets had its 9th consecutive quarter of year-over-year growth in sales and trading revenue, a good job by Jimmy DeMare and his team. Card and service charge revenue also grew by 6% year-over-year in our Consumer business. Much of this fee growth is a result of our intensity around organic growth, and is a testament to the diversity of our operating model. Now on to slide three. Organic growth has been driven by several key factors. First, we focus on our customers. We continue to place them at the center of everything we do. Consumer led the way in delivering solid organic growth with high-quality accounts and engaged clients. For the 22nd consecutive quarter, we had significant net new consumer checking accounts. We expanded our customer base and our market share. Specifically, we added 278,000 net new checking accounts this quarter, which brings our first six months of 2024 to more than 500,000. In wealth management, we added another 6,100 new relationships this quarter. In our commercial businesses, we added 1,000s of small businesses and 100s of commercial banking relationships. This has led to now managing $5.7 trillion in client balances, loans, deposits, and investments across the consumer and wealth management client segments. In those areas, we saw flows of $58 billion in the past four quarters. Our emphasis on personalized financial solutions and superior customer service has strengthened customer loyalty, attracted new clients across all our businesses. Our focus on providing liquidity and risk management solutions to our institutional clients positions to continue to gain more share of the wallet as well. Second, we continue to deliver innovative digital solutions. One of the primary contributors of both attracting and retaining customers to our platforms is our digital banking capabilities for our clients across all the businesses. Our fully integrated consumer banking investment app drives the utility for our customers across their investment and consumer accounts. Our use of stats are strong proof points. Our second language capabilities in our consumer businesses further enhance our customers' capabilities. You can see the continued digital growth in the slides on pages 26, 28, and 30 in the appendix. A couple highlights. Our consumer mobile banking app now serves more than 47 million active users. They logged in 3.5 billion times this quarter. We also continue to see more sales through the use of our digital properties. Digital sales represented 53% of our total sales in the past quarter in our consumer businesses. 23 million consumers are now using Zelle. They send money on Zelle at nearly 2.5 times the rate they write checks. And, in fact, more Zelle transactions -- send transactions take place than a combination of customer ATM transactions, cash withdrawals, and tellers. Simply put, Zelle has become a dominant way to move money. In our wealth management business, we are seeing more banking accounts being opened to complement the investment business those clients do with us. Importantly, these clients are also recognizing the ease of our digital banking capability. 75% of our new accounts and our Merrill teammates were open digitally. 87% of our global banking clients also are digitally active. We have innovated and significantly streamlined service requests by enabling clients to directly initiate and track transaction inquiries within our awarded CashPro platform, using AI to accomplish that. Third, we continue to make core strategic investments in our businesses. We're not complacent with the success you see on this page. We continue to strategically invest in our core businesses. A few examples, while we have the leading retail deposit share in America, we continue to invest and have opened 11 new financial centers this quarter -- in this first-half of the year and renovated another 243. This is an investment in both our expansion markets and our growth markets. In wealth management, we continue to invest in our advisor development program. It's grown to 2,300 teammates, allowing us to continuously add more than -- teammates to our 18,000 strong best-in-class financial advisory force across all our wealth management businesses. We're also adding teams of experienced advisors strategically in areas across the country. In our banking teams, we continue to add to our regional investment banking team. We now have more than 200 regional bankers across the country to better serve our commercial clients, and they complement our industry coverage to our corporate clients. In our global markets business, we continue to extend balance sheet to our clients in adding expertise and talent to continue to lead our market share improvements seen over the last several years. We also have increased our technology initiatives and expect to spend nearly $4 billion on technology initiatives this year. We have focused projects around artificial intelligence enhancements with both clients and our teammates. A recent example of our use of AI is our advisor and client insights tool. We've delivered more than 6 million insights here today to our financial advisors, providing them proactive reasons to engage our clients. AI has moved from cost savings ideas to enhancing the quality of our customer interactions. Fourth, organic growth is driving integrated flows across our business. We invest heavily in each line of business that compete in the markets based on their particular customer segment. But importantly, we also invest across our lines of business to knit them together and gain market share in the local markets. It's a differentiated advantage for us, our banking leadership position across our businesses and our nationwide franchise. For example, we leverage our franchise by connecting business customers with wealth management teams. Our teams across all our businesses have made 4 million referrals to other businesses in the first six months of this year. Next, we drive efficiency and effectiveness, and that's through our operational excellence platform. We continue to invest heavily in the future of our franchise and growth, while we also have to manage expenses day-to-day. Our focus on operational excellence has enabled us to hold our expense growth up to 2% year-over-year, well below the inflation rates. We continue to work to achieve operating leverages as NII stabilizes and begins to grow again. As you look at it now, Alistair will explain later, a fair portion of the year-over-year increase in expense is due to the formulaic incentives of wealth management due to the peak growth of that business. And last, our capital strength allows us to deliver for all our stakeholders. Our capital remains strong as we held our CET1 ratio at 11.9% this quarter. We grew loans, increased our share repurchases to $3.5 billion and paid $1.9 billion in dividends. Average diluted shares dropped below 8 billion shares outstanding. In addition, we also announced our intent to increase our quarterly dividend 8% upon board approval. Note that with 11.9% CET1 ratio, we remain in a solid excess capital position, both above the current regulatory requirements and the increased requirement to 10.7% beginning in October as a result of the recent CCAR exam. Let's turn to slide four. A couple things to note here. First, we've noted for several quarters that the second quarter NII would be the trough for this rate cycle. We expect NII to grow in the third quarter and fourth quarter of this year. Alistair is going to provide you some points in detail about the path forward. One of the important contributors to that change is deposit behaviors of our customers. On slide four, you'll note that average deposits grew 2% year-over-year and increased modestly linked quarter. The second quarter, in reality, is typically a heavy outflow quarter. We have a lot of customers who pay a lot of taxes in that quarter. Quarter-over-quarter increases in rates paid continue to slow again this quarter across all businesses except for wealth management. And we show you that on this page, slide four, by line of business. While wealth business deposit rates have moved higher with continued rotation, we expect those rates to begin to stabilize and the rate of quarterly change to decrease going forward. Turning to slide five, in previous calls, many of you asked questions or commented upon the question about consumer net charge-offs and when would they stabilize in the second-half of 2024. That expectation we have remains unchanged as well. This quarter's net charge-offs were 59 basis points. And for context, this is a stabilization of the rate. I would just remind you that prior to this quarter, I have to go all the way back to 2014 to see a charge-off rate of that high. And that's near when we were still emerging from the financial crisis. On slide four, we highlight the 30 and 90-day-plus credit card delinquency trends, which showed delinquencies have plateaued for the second consecutive quarter. This should lead to stabilized net credit losses in credit card in the second-half of the year. At the bottom of the page, note a couple of facts. First, on the payment rates. This is the rate of paydown on balances in a given month remain 20% above index to the pre-pandemic levels, even while our card customers have plenty of capacity to borrow. And importantly, because we're relation-based businesses, look at the right-hand slide at the bottom of page five. There you can see our deposit investment balances of our customers, who also have a card with us, remain 25% above their pre-pandemic levels, illustrating continued health of these customers. So if you think about consumer credit, the card charge-offs drive it, and they flattened out in terms of delinquencies, and we expect an improvement in the second-half. With regard to commercial real estate, our usual CRA credit exposure slide is included in our appendix. We continue to aggressively work through our loans in our modest CRA office portfolio. We saw a decrease in all the categories, a decrease in reservable criticized loans, a decrease in NPLs, and a decrease in net charge-offs. This supports our previous expectation that net charge-offs in the second-half of 2024 will be lower than the first-half of 2024. Our second quarter performance highlights Bank of America's ability to generate strong, sustainable growth through a combination of customer-centric strategies, innovation, strategic investments, and a commitment to a strong balance of risk and reward. We call that responsible growth. We're confident that focused approach will continue to drive long-term success and create value for you, our shareholders. Now I will turn it to Alistair for additional results.","evidence_gemma_new":"CET1 ratio","evidence_llama_3_3":null,"evidence_qwen_3_30b":"CET1 ratio 11.9%","gemma_new_max":11.9,"gemma_new_min":11.9,"llama_3_3_max":null,"llama_3_3_min":null,"qwen_3_30b_max":11.9,"qwen_3_30b_min":11.9}
{"symbol":"BAC","year":2024,"quarter":3,"date":"2024-Q3","chunk_id":3,"sub_chunk_id":0,"centroid_label":"cet1 ratio improved","agreed_value":200000000000.0,"count":2,"chunk":"Alastair Borthwick: Thank you, Brian, and I'm starting on Slide 5 of the earnings presentation. We'll touch on more highlights noted here as we work through the material, and I'd just add that we delivered solid returns with a return on average assets of 83 basis points and return on tangible common equity of 12.8%. So let's move to the balance sheet on Slide 6, where you can see that the balance sheet ended the quarter at $3.3 trillion of total assets, up $66 billion from the second quarter, as global markets client demands expanded and commercial loans grew $16 billion in the quarter. Otherwise in the quarter, the investments of our excess liquidity saw a $10 billion reduction in hold to maturity securities, and the combination of shorter-term liquidity investments of cash and available for sale securities were relatively flat for the second quarter. On the funding side, global markets grew to support balance sheet needs of our clients and total deposits grew $20 billion on an ending basis. It's noteworthy that our average deposits are now up for the fifth consecutive quarter. Liquidity remains strong with $947 billion of global liquidity sources, and that was up $38 billion compared to the second quarter. Shareholders' equity was up $2.6 billion, with common equity up $4.6 billion and a preferred redemption driving a $2 billion decline in preferred equity. The increase income and equity compared to Q2, included $5.6 billion in capital returned to shareholders, partially offsetting our earnings, and it included an improvement in AOCI driven by an improvement from cash flow hedges given the drop in long-term rates in the quarter. $5.6 billion in capital distributions includes $2 billion in common dividends and the repurchase of $3.5 billion in shares. Tangible book value per share of $26.25 rose 10% from the third quarter of '23. And turning to regulatory capital, our CET1 level improved to $200 billion and the CET1 ratio was 11.8%. And that remains well above our new 10.7% requirement as of October 1. Risk weighted assets increased modestly, driven by both lending activity and global markets needs to support clients and our supplemental leverage ratio was 5.9% compared to the minimum requirement of 5%, which leaves plenty of capacity for balance sheet growth. Our $463 billion of total loss-absorbing capital means our TLAC ratio remains comfortably above our requirements. So let's dig a little deeper on deposits and the growth from the second quarter using Slide 7. Here, we show you deposits and rates by line of business. Average deposits grew $45 billion, or 2% year-over-year, and they increased modestly linked-quarter. Notably, quarter-over-quarter increases in rates paid continue to slow again this quarter, rising 7 basis points to 210 basis points. Consumer Banking increased modestly, driven by product mix and higher rate product offerings. And Global Banking rate paid increased modestly driven by growth in interest bearing balances. It's worth noting that wealth management declined a basis point. We acted quickly following the September 50 basis point rate cut in our wealth business and our Global Banking business, and since late in the quarter, only a small portion of those cuts are reflected. Total rate paid for all deposits from these actions is expected to fall below 2% later in October, as the fuller effect of the pass-throughs occur. Let's turn to loans by looking at average balances on Slide 8. Loans in Q3 of $1.06 trillion improved 1% year-over-year driven by solid commercial loan growth as well as credit card and vehicle loans. Overall, commercial loans grew 2% year-over-year. And importantly, this included a drop in commercial real estate loans of 6%. Commercial loans, excluding commercial real estate, grew 3% year-over-year and were up 6% annualized from the Q2. Consumer banking loan growth was driven by credit card, small business and vehicle borrowing, and the overall consumer growth was muted by a decline in mortgage balances as pay downs exceeded originations in a higher rate environment. Let's turn our focus to NII performance and Slide 9. So note that our trended investment of excess deposit slide is in our appendix on Page 21. Deposit levels were $855 billion in excess of loans at the end of Q3 and continue to be a good source of value for shareholders. Nearly $625 billion or 52% of our excess liquidity is in short dated cash and AFS securities. The longer dated lower yielding hold to maturity book continues to roll-off, and we reinvest that in higher yielding assets. The blended yield of cash and securities on Page 21 remains well above our deposit rate paid. So going back to Slide 9, regarding NII on a GAAP, non-FTE basis, NII in Q3 was $14 billion and on a fully tax equivalent basis, NII was $14.1 billion. On our Q3 earnings call last year, we first provided our expectation that the Q2 would be the trough and then we would begin to grow in the Q3 of '24, marking an inflection point for NII. And that's what you see this quarter. NII increased by $252 million from the Q2 driven by a number of factors. Global Markets activity and pricing, fixed asset repricing and one extra day all benefited NII, while higher funding costs partially offset those benefits. A 50 basis point rate cut in September also negatively impacted NII. With regard to a forward view of NII, there are obviously several variables at play in the Q4, and we still expect Q4 NII to grow, and we expect it to be $14.3 billion or more on a fully tax equivalent basis. Now we note the following assumptions. First, we assume that the forward curve on October 10, is the one that materializes, so that includes a 25 basis point cut in November and another 25 basis points in December. We also assumed very modest balance increases in both loans and deposits in Q4, building off the activity seen in Q3. Last quarter, we told you we expect about $20 billion in the aggregate of fixed rate loans and securities to reprice on a quarterly basis, and those are expected to reprice into higher yielding assets and provide a benefit to NII for many periods ahead. And as described previously, we expect to see roughly $200 million benefit in Q4 from the BSBY alternative rate transition. So we think this sets us up well for 2025. With regard to interest rate sensitivity on a dynamic deposit basis, we provide a 12-month change in NII for an instantaneous shift above or below the forward curve. On that basis, a 100 basis point increase would benefit NII by $1.8 billion, while a decrease of 100 basis points would decrease NII over the next 12 months by $2.7 billion. Okay, let's now turn to expense and we'll use Slide 10 for the discussion. We reported $16.5 billion in expense this quarter, up 1% from the second quarter, driven by the revenue improvement in three primary areas that Brian noted earlier. Investment banking, investment broke - and brokerage fees and sales and trading revenue all have more activity and incentive variability than other revenues, and they were up 3% in aggregate versus the second quarter and up 13% year-over-year. In Q3, our headcount of 213,000 was up a little more than 1000, and this quarter we saw the departure of roughly 2,000 summer interns and we welcomed roughly 2500 college graduates from the nearly 120,000 applications received. Regarding a forward view in Q4, we don't expect much change in our headcount, and with continued investments we expect expense to be in line with Q3 at $16.5 billion. As we look into 2025, with an expected return of NII growth and through our expense discipline, we expect a return to operating leverage, an improvement in our efficiency ratio. Let's turn to credit on Slide 11. And the good news is there's not a lot to report here compared to the second quarter. Net charge-offs of $1.5 billion were flat compared to Q2. We've seen consumer losses in a pretty tight range for a few quarters now. Outside of that, we saw lower losses from office exposure and otherwise we had two somewhat unrelated commercial losses. The net charge off ratio was 58 basis points, down one basis point from Q2. Provision expense was unchanged from Q2 at $1.5 billion as reserve levels remain constant. And with regard to reserve levels on a weighted basis, we remain reserved for an unemployment rate of 5% by the end of 2025 compared to the most recent 4.1% rate reported. On Slide 12, we highlight the credit quality metrics for both our consumer and commercial portfolios, and there's nothing really noteworthy to highlight on this page. So let's move to the various lines of business and some brief comments on their results, starting on Slide 13 with consumer banking. Consumer banking continues to lead the company in organic growth, and this included another strong quarter of net new checking growth, another strong period of card openings and investment balances for consumer clients, which climbed 28% year-over-year to a record $497 billion. It also included 12-months of strong flows at $29 billion in addition to market appreciation. As noted earlier, loans grew nicely year-over-year from credit card and vehicle as well as small business, where we remain the industry leader. One highlight to note, our Practice Solutions Lending Group for doctors and dentists and related professionals saw loans grow 11% year-over-year. All of this organic growth helped to drive $2.7 billion in net income in Q3. So reported earnings remained strong, declining 6% year-over-year as revenue declined from lower NII, partially offset by higher card income. With the trajectory shifting in NII, we should see earnings in this business begin to shift as well. Expense rose 5% as we continued our business investments. And those investments included those in our people, including the announcement of moving our minimum wage to $24 per hour and that raises the minimum annualized salary for our associates to nearly $50,000. As you can see on the appendix Page 25, digital adoption and engagement continue to improve and customer satisfaction scores remain near record levels illustrating the appreciation of enhanced capabilities from our continuous investments. Bank of America's 23 million Zelle users are up 10% in the past 12-months and their volume usage is now up more than 20%. Customers are now using Zelle at nearly 3x the rate they're writing checks, and Zelle usage has meaningfully surpassed the combination of checks written and ATM withdrawals. Moving to Wealth Management on Slide 14. We produced good results, reflecting healthy organic growth and client activity with increased banking activities of our clients and the impacts of increased market levels together with strong assets under management flows. With a continued increase in banking product usage from our investing clients, the diversity of our revenue base continues to improve. More than 60% of our wealth clients now have banking products with us and 30% of our revenue is now in net interest income to complement the fees earned in our advice model. Net income rose from the third quarter '23 to $1.1 billion this year. In Q3, we reported revenue of nearly $5.8 billion growing 8% over the prior year, led by 14% growth in asset management fees that Brian highlighted earlier. Expenses growth reflects the fee growth and other investments for our future growth as we continue to grow our advisor force through hiring of both experienced advisors and graduates from our training program. We welcomed 5,500 Merrill and Private Bank net new households this quarter and more than 1\/3 of those Merrill openings were driven by graduates from our training program. The business had a 25% margin and generated a strong return on capital of 23%. Average loans were up 3% year-over-year, driven by growth in custom lending and a pickup in mortgage lending. Both Merrill and the Private Bank continue to see healthy organic growth, producing strong assets under management flows of $65 billion year-over-year, which reflects a good mix of new client money as well as existing clients putting money to work. We should also highlight the continued digital momentum that you'll find on Slide 27. As an example, three quarters of Merrill Bank and Investment accounts were opened digitally this quarter. On Slide 15, you see Global Banking results. This business produced earnings of $1.9 billion down 26% year-over-year as improved investment banking fees and treasury services revenue were overcome by lower net interest income and higher provision expense. Revenue declined 6%, driven by the impact of interest rates and deposit rotation. In our global treasury services business, fees for managing the cash of clients continue to offset some of the NII pressure from higher rates. Investment banking had a strong quarter, growing fees 18% year-over-year to $1.4 billion, led by debt capital markets fees, mostly in leveraged finance and investment grade. We finished the quarter strong, maintaining our number three investment banking fee position. What began as a slow quarter this summer gained some momentum through September and the pipeline looking forward looks solid. An increase in provision expense from last year was driven by the previously noted commercial and CRE losses. Expense increased 7% year-over-year, including continued investments in the business, particularly around technology. Switching to global markets on Slide 16. I\u2019ll focus comments on results excluding DVA as we normally do and the team continued their impressive streak of strong revenue and earnings performance. They achieved operating leverage and continued to deliver good return on capital. Earnings of $1.6 billion grew 23% year-over-year and return on average allocated capital was 14%. Revenue again, ex-DVA improved 14% from the third quarter of last year as both sales and trading and investment banking fees for institutional clients improved nicely year-over-year. Focusing on sales & trading, ex-DVA revenue improved 12% year-over-year to $4.9 billion. FICC increased 8% while equities increased 18% compared to the third quarter of '23. FICC revenues remained strong growing over both the prior year and the second quarter, driven by momentum in currencies trading. Equities had a record third quarter driven by strong trading performance in derivatives and cash. Year-over-year expenses were up 6% on revenue improvement and our continued investment in the business. Finally, on Slide 17, all other shows a loss of $295 million. Revenue was lower and included a charge to other income of roughly 200 million related to Visa's increase in its litigation escrow account. The decline in expense was driven by reduced costs of a liquidating business and lower legal expense. Our effective tax rate for the quarter was 6% and excluding discrete items and the tax credits related to investments in renewable energy and affordable housing, the effective tax rate would have been approximately 24%. So that's where I'll stop, and with that we'll open it up for Q&A.","evidence_gemma_new":null,"evidence_llama_3_3":"CET1 level","evidence_qwen_3_30b":"CET1 level $200 billion CET1 ratio 11.8%","gemma_new_max":null,"gemma_new_min":null,"llama_3_3_max":200000000000.0,"llama_3_3_min":200000000000.0,"qwen_3_30b_max":200000000000.0,"qwen_3_30b_min":200000000000.0}
{"symbol":"BAC","year":2024,"quarter":3,"date":"2024-Q3","chunk_id":3,"sub_chunk_id":0,"centroid_label":"cet1 ratio improved","agreed_value":0.118,"count":2,"chunk":"Alastair Borthwick: Thank you, Brian, and I'm starting on Slide 5 of the earnings presentation. We'll touch on more highlights noted here as we work through the material, and I'd just add that we delivered solid returns with a return on average assets of 83 basis points and return on tangible common equity of 12.8%. So let's move to the balance sheet on Slide 6, where you can see that the balance sheet ended the quarter at $3.3 trillion of total assets, up $66 billion from the second quarter, as global markets client demands expanded and commercial loans grew $16 billion in the quarter. Otherwise in the quarter, the investments of our excess liquidity saw a $10 billion reduction in hold to maturity securities, and the combination of shorter-term liquidity investments of cash and available for sale securities were relatively flat for the second quarter. On the funding side, global markets grew to support balance sheet needs of our clients and total deposits grew $20 billion on an ending basis. It's noteworthy that our average deposits are now up for the fifth consecutive quarter. Liquidity remains strong with $947 billion of global liquidity sources, and that was up $38 billion compared to the second quarter. Shareholders' equity was up $2.6 billion, with common equity up $4.6 billion and a preferred redemption driving a $2 billion decline in preferred equity. The increase income and equity compared to Q2, included $5.6 billion in capital returned to shareholders, partially offsetting our earnings, and it included an improvement in AOCI driven by an improvement from cash flow hedges given the drop in long-term rates in the quarter. $5.6 billion in capital distributions includes $2 billion in common dividends and the repurchase of $3.5 billion in shares. Tangible book value per share of $26.25 rose 10% from the third quarter of '23. And turning to regulatory capital, our CET1 level improved to $200 billion and the CET1 ratio was 11.8%. And that remains well above our new 10.7% requirement as of October 1. Risk weighted assets increased modestly, driven by both lending activity and global markets needs to support clients and our supplemental leverage ratio was 5.9% compared to the minimum requirement of 5%, which leaves plenty of capacity for balance sheet growth. Our $463 billion of total loss-absorbing capital means our TLAC ratio remains comfortably above our requirements. So let's dig a little deeper on deposits and the growth from the second quarter using Slide 7. Here, we show you deposits and rates by line of business. Average deposits grew $45 billion, or 2% year-over-year, and they increased modestly linked-quarter. Notably, quarter-over-quarter increases in rates paid continue to slow again this quarter, rising 7 basis points to 210 basis points. Consumer Banking increased modestly, driven by product mix and higher rate product offerings. And Global Banking rate paid increased modestly driven by growth in interest bearing balances. It's worth noting that wealth management declined a basis point. We acted quickly following the September 50 basis point rate cut in our wealth business and our Global Banking business, and since late in the quarter, only a small portion of those cuts are reflected. Total rate paid for all deposits from these actions is expected to fall below 2% later in October, as the fuller effect of the pass-throughs occur. Let's turn to loans by looking at average balances on Slide 8. Loans in Q3 of $1.06 trillion improved 1% year-over-year driven by solid commercial loan growth as well as credit card and vehicle loans. Overall, commercial loans grew 2% year-over-year. And importantly, this included a drop in commercial real estate loans of 6%. Commercial loans, excluding commercial real estate, grew 3% year-over-year and were up 6% annualized from the Q2. Consumer banking loan growth was driven by credit card, small business and vehicle borrowing, and the overall consumer growth was muted by a decline in mortgage balances as pay downs exceeded originations in a higher rate environment. Let's turn our focus to NII performance and Slide 9. So note that our trended investment of excess deposit slide is in our appendix on Page 21. Deposit levels were $855 billion in excess of loans at the end of Q3 and continue to be a good source of value for shareholders. Nearly $625 billion or 52% of our excess liquidity is in short dated cash and AFS securities. The longer dated lower yielding hold to maturity book continues to roll-off, and we reinvest that in higher yielding assets. The blended yield of cash and securities on Page 21 remains well above our deposit rate paid. So going back to Slide 9, regarding NII on a GAAP, non-FTE basis, NII in Q3 was $14 billion and on a fully tax equivalent basis, NII was $14.1 billion. On our Q3 earnings call last year, we first provided our expectation that the Q2 would be the trough and then we would begin to grow in the Q3 of '24, marking an inflection point for NII. And that's what you see this quarter. NII increased by $252 million from the Q2 driven by a number of factors. Global Markets activity and pricing, fixed asset repricing and one extra day all benefited NII, while higher funding costs partially offset those benefits. A 50 basis point rate cut in September also negatively impacted NII. With regard to a forward view of NII, there are obviously several variables at play in the Q4, and we still expect Q4 NII to grow, and we expect it to be $14.3 billion or more on a fully tax equivalent basis. Now we note the following assumptions. First, we assume that the forward curve on October 10, is the one that materializes, so that includes a 25 basis point cut in November and another 25 basis points in December. We also assumed very modest balance increases in both loans and deposits in Q4, building off the activity seen in Q3. Last quarter, we told you we expect about $20 billion in the aggregate of fixed rate loans and securities to reprice on a quarterly basis, and those are expected to reprice into higher yielding assets and provide a benefit to NII for many periods ahead. And as described previously, we expect to see roughly $200 million benefit in Q4 from the BSBY alternative rate transition. So we think this sets us up well for 2025. With regard to interest rate sensitivity on a dynamic deposit basis, we provide a 12-month change in NII for an instantaneous shift above or below the forward curve. On that basis, a 100 basis point increase would benefit NII by $1.8 billion, while a decrease of 100 basis points would decrease NII over the next 12 months by $2.7 billion. Okay, let's now turn to expense and we'll use Slide 10 for the discussion. We reported $16.5 billion in expense this quarter, up 1% from the second quarter, driven by the revenue improvement in three primary areas that Brian noted earlier. Investment banking, investment broke - and brokerage fees and sales and trading revenue all have more activity and incentive variability than other revenues, and they were up 3% in aggregate versus the second quarter and up 13% year-over-year. In Q3, our headcount of 213,000 was up a little more than 1000, and this quarter we saw the departure of roughly 2,000 summer interns and we welcomed roughly 2500 college graduates from the nearly 120,000 applications received. Regarding a forward view in Q4, we don't expect much change in our headcount, and with continued investments we expect expense to be in line with Q3 at $16.5 billion. As we look into 2025, with an expected return of NII growth and through our expense discipline, we expect a return to operating leverage, an improvement in our efficiency ratio. Let's turn to credit on Slide 11. And the good news is there's not a lot to report here compared to the second quarter. Net charge-offs of $1.5 billion were flat compared to Q2. We've seen consumer losses in a pretty tight range for a few quarters now. Outside of that, we saw lower losses from office exposure and otherwise we had two somewhat unrelated commercial losses. The net charge off ratio was 58 basis points, down one basis point from Q2. Provision expense was unchanged from Q2 at $1.5 billion as reserve levels remain constant. And with regard to reserve levels on a weighted basis, we remain reserved for an unemployment rate of 5% by the end of 2025 compared to the most recent 4.1% rate reported. On Slide 12, we highlight the credit quality metrics for both our consumer and commercial portfolios, and there's nothing really noteworthy to highlight on this page. So let's move to the various lines of business and some brief comments on their results, starting on Slide 13 with consumer banking. Consumer banking continues to lead the company in organic growth, and this included another strong quarter of net new checking growth, another strong period of card openings and investment balances for consumer clients, which climbed 28% year-over-year to a record $497 billion. It also included 12-months of strong flows at $29 billion in addition to market appreciation. As noted earlier, loans grew nicely year-over-year from credit card and vehicle as well as small business, where we remain the industry leader. One highlight to note, our Practice Solutions Lending Group for doctors and dentists and related professionals saw loans grow 11% year-over-year. All of this organic growth helped to drive $2.7 billion in net income in Q3. So reported earnings remained strong, declining 6% year-over-year as revenue declined from lower NII, partially offset by higher card income. With the trajectory shifting in NII, we should see earnings in this business begin to shift as well. Expense rose 5% as we continued our business investments. And those investments included those in our people, including the announcement of moving our minimum wage to $24 per hour and that raises the minimum annualized salary for our associates to nearly $50,000. As you can see on the appendix Page 25, digital adoption and engagement continue to improve and customer satisfaction scores remain near record levels illustrating the appreciation of enhanced capabilities from our continuous investments. Bank of America's 23 million Zelle users are up 10% in the past 12-months and their volume usage is now up more than 20%. Customers are now using Zelle at nearly 3x the rate they're writing checks, and Zelle usage has meaningfully surpassed the combination of checks written and ATM withdrawals. Moving to Wealth Management on Slide 14. We produced good results, reflecting healthy organic growth and client activity with increased banking activities of our clients and the impacts of increased market levels together with strong assets under management flows. With a continued increase in banking product usage from our investing clients, the diversity of our revenue base continues to improve. More than 60% of our wealth clients now have banking products with us and 30% of our revenue is now in net interest income to complement the fees earned in our advice model. Net income rose from the third quarter '23 to $1.1 billion this year. In Q3, we reported revenue of nearly $5.8 billion growing 8% over the prior year, led by 14% growth in asset management fees that Brian highlighted earlier. Expenses growth reflects the fee growth and other investments for our future growth as we continue to grow our advisor force through hiring of both experienced advisors and graduates from our training program. We welcomed 5,500 Merrill and Private Bank net new households this quarter and more than 1\/3 of those Merrill openings were driven by graduates from our training program. The business had a 25% margin and generated a strong return on capital of 23%. Average loans were up 3% year-over-year, driven by growth in custom lending and a pickup in mortgage lending. Both Merrill and the Private Bank continue to see healthy organic growth, producing strong assets under management flows of $65 billion year-over-year, which reflects a good mix of new client money as well as existing clients putting money to work. We should also highlight the continued digital momentum that you'll find on Slide 27. As an example, three quarters of Merrill Bank and Investment accounts were opened digitally this quarter. On Slide 15, you see Global Banking results. This business produced earnings of $1.9 billion down 26% year-over-year as improved investment banking fees and treasury services revenue were overcome by lower net interest income and higher provision expense. Revenue declined 6%, driven by the impact of interest rates and deposit rotation. In our global treasury services business, fees for managing the cash of clients continue to offset some of the NII pressure from higher rates. Investment banking had a strong quarter, growing fees 18% year-over-year to $1.4 billion, led by debt capital markets fees, mostly in leveraged finance and investment grade. We finished the quarter strong, maintaining our number three investment banking fee position. What began as a slow quarter this summer gained some momentum through September and the pipeline looking forward looks solid. An increase in provision expense from last year was driven by the previously noted commercial and CRE losses. Expense increased 7% year-over-year, including continued investments in the business, particularly around technology. Switching to global markets on Slide 16. I\u2019ll focus comments on results excluding DVA as we normally do and the team continued their impressive streak of strong revenue and earnings performance. They achieved operating leverage and continued to deliver good return on capital. Earnings of $1.6 billion grew 23% year-over-year and return on average allocated capital was 14%. Revenue again, ex-DVA improved 14% from the third quarter of last year as both sales and trading and investment banking fees for institutional clients improved nicely year-over-year. Focusing on sales & trading, ex-DVA revenue improved 12% year-over-year to $4.9 billion. FICC increased 8% while equities increased 18% compared to the third quarter of '23. FICC revenues remained strong growing over both the prior year and the second quarter, driven by momentum in currencies trading. Equities had a record third quarter driven by strong trading performance in derivatives and cash. Year-over-year expenses were up 6% on revenue improvement and our continued investment in the business. Finally, on Slide 17, all other shows a loss of $295 million. Revenue was lower and included a charge to other income of roughly 200 million related to Visa's increase in its litigation escrow account. The decline in expense was driven by reduced costs of a liquidating business and lower legal expense. Our effective tax rate for the quarter was 6% and excluding discrete items and the tax credits related to investments in renewable energy and affordable housing, the effective tax rate would have been approximately 24%. So that's where I'll stop, and with that we'll open it up for Q&A.","evidence_gemma_new":null,"evidence_llama_3_3":"CET1 ratio","evidence_qwen_3_30b":"CET1 ratio 11.8% new 10.7% requirement as of October 1","gemma_new_max":null,"gemma_new_min":null,"llama_3_3_max":0.118,"llama_3_3_min":0.118,"qwen_3_30b_max":0.118,"qwen_3_30b_min":0.118}
{"symbol":"BAC","year":2023,"quarter":1,"date":"2023-Q1","chunk_id":4,"sub_chunk_id":0,"centroid_label":"consumer net new checking accounts","agreed_value":130000.0,"count":3,"chunk":"Brian Moynihan: Thank you, Alastair. And we're going to begin on Slide 16. So, I want to bring us back to the things that drive the long-term value of this franchise and the value for you, our shareholders. Every business segment grew customers and accounts organically in the quarter and use digital tools and capabilities to drive engagement even deeper and also to drive customer satisfaction to industry-leading levels. On Slide 16, we've highlighted some of the important elements of organic growth. I won't go through all the line items here, but, in consumer, we saw -- we opened 130,000 net new checking accounts, 1.3 million credit card accounts, and 9% more investment accounts, that aided to record quarter one consumer investment flows. Consumer also has now -- have -- has had 17 quarters of positive net new checking accounts. In global wealth, we had a record quarter, adding 14,500 net new wealth relationships. In global banking, we had our clients increase the number of products per relationship. In global markets, as we said earlier, Jim DeMare and team had one of the highest quarters of sales and trading. The other elements of earnings the management team remains focused on throughout this inflationary environment is our expense management efforts and -- but, even given those, we continue to make investments in the future. We continue to streak up operating leverage in our account and you can see that on Slide 17 -- in our company and you can see that on Slide 17. We now had seven quarters of operating leverage. The efficiency ratio went to 62%, and the nominal dollars of expenses we have today are similar to what we had 10 -- eight, nine, 10 years ago. As we go to Slide 18, let's talk about individual businesses, and consumer banking first. For the quarter, consumer banking earned 31 -- $3.1 billion on good organic revenue growth and delivered its eighth consecutive quarter of strong operating leverage, while we continue to invest in future. Top-line revenue grew 21%. Expenses rose 11%. These results demonstrate the true value of the $1 trillion deposit franchise and the deep relationship we have with the clients in that business. The business continues to have $700 billion in excess deposits over its loan balances. And, as we said earlier, we grew checking accounts $2.5 million -- 2.5 million new checking accounts, since the pandemic started. Solid earnings growth of 4% understates the success of this business as prior year included reserve releases, while we built reserves this quarter. On a pre-tax pre-provision basis PPNR grew 34% year-over-year. I'll also note that the revenue growth overcame a decline in service charges as a result of us lowering our NSFOD charges for customers several quarters ago. The expense in the consumers reflect the continued business investments for growth, including adding relationship associates, further develop increases in the cost of technology and implementation of new tools. As you think about this business, remember, much of the company's minimum wage hikes during 2022, the ones we made mid-year in addition to our March of $25 an hour, impact this business more than any other business. However, it has helped drive the attrition in this business in half compared to last year this quarter. On Slide 19, you can see some of the digital statistics around consumer. We believe that those digital tools, our customers have access to it, are the key to growing and retaining customer relationships. These tools also help us deliver more efficiently. We now have 45 million users actively engaged with our digital properties. They login 1 billion times a month. Erica, our artificial intelligence-driven personal assistant, saw usage rise 35% just in the past year. The number of our customers using Zelle grew 21% in the past year. Remember, these aren't new functionalities just being put in place, these are growing off a high scale and showed the Bank of America impact on these products. On Zelle, remember, back in mid-2021, Zelle transactions crossed the number of checks written for our clients. Now, at 60% higher, less than two years later. And you can see the growth in digital sales that continues. We remained focused on growing the customer base and delivering the best-in-class tools and service that make us more efficient and more important to our clients in the consumer business, and Dean Athanasia and team continue to do a good job with respect to those goals. On Slide 20, we move to wealth management. We had good results, earning about a little over $900 million after tax for the quarter. These results were down from last year, as Alastair said, as asset management fees fell with the negative market levels in equity and fixed income. Those fees were mitigated by the beneficial impact of revenue from the sizable banking business within this line of business for us. As I noted a moment ago, both Merrill and the Private Bank saw organic revenue growth and provided solid client flows at $25 billion in the quarter. Our assets under management flows of $15 billion reflects some of the movement in deposits noted earlier, but we also saw a $33 billion of brokerage flows. Expenses reflects lower revenue related incentives, but also reflects continued investments in the business as we continue to add financial advisors. We've added more than 650 wealth advisors in the past year alone. As we move forward, we are excited to have Eric Schimpf and Lindsay Hans lead this business. They work closely with Katy Knox to drive our global wealth and investment management business across the company. As we go to global wealth and investment management digital on Slide 21, you can see the statistics here. Just as with the consumer business, these clients become more and more digital engaged across time. Our advisors have led the way in driving a personal-driven advice model, supplemented by our digital tools. On Slide 21, you can see the client digital adoption rate of 84% with Merrill and the Private Bank is over 90%. More than 75% embrace digital delivery of their statements, which, as a key tool of their service, providing more convenience for them and our advisor. Erica and Zelle interactions continue to grow here also, even among these wealthy clients. On Slide 22, you see the global banking results. This business produced very strong results, growing revenue 19% year-to-year to $6.2 billion. The business earned $2.6 billion after tax. While investment banking remained sluggish, our global treasury services business has been robust, leading to strong revenue performance. Loan activity has been good across this business also. As noted earlier, the deposit flows appear to have stabilized in March and we benefitted from some customer flows during the flight to safety during the quarter. The company's overall investment banking fees were $1.2 billion in quarter one. And while down from quarter one '22, we saw a modest improvement from quarter four of '22. Provision expense declined year-over-year as prior year's reserve builds compared to release in the current period. Credit quality of this business, again, remains very strong. Expense increased 10% year-over-year, driven by strategic investments in the business, including relationship manager hiring and technology costs. Digital engagement, as shown on Slide 23, with our global banking customers. These commercial customers continue to grow in importance as treasuries and others appreciate the ease of doing business with us through these tools. While the volume of transactions in sheer numbers [aren't] (ph) the same as consumer, the volume of money moved is tremendous. Next business, we'll go towards our global markets business on Slide 24. Jim DeMare and the team had another strong quarter of results, growing year-over-year earnings to nearly $1.7 billion after tax. The continued themes of inflation due to political tensions and central banks changing monetary policies around the globe drove volatility in the bond and equity markets, which his team did a good job of managing. As a result, this quarter, we saw a strong performance in our credit trading business, particularly in mortgages and muni trading and macro trading again fared well buoyed by strong client activity and secured financing. Investments made in this business over the last few years continued to produce favorable results. Just to focus on the sales and trading numbers alone, ex-DVA, revenue improved 9% year-over-year to $5.1 billion. FICC improved 29%, while equities were down 19% compared to quarter one of 2022. Year-over-year expense increased 8%, primarily driven by continued investments as stated in this business. Finally, on [Slide 5] (ph), you can see the all other shows a modest loss, which includes the $220 million losses in securities sold, as Alastair mentioned earlier. And last, I would note our 10% effective tax rate this quarter continues to benefit us from a strong business with clients, supporting environmental investments, in-housing investments to produce tax benefits. Excluding those and the other discrete tax benefits, our tax rate would have been 26%. So, in summary, a strong quarter by our team delivered for you, our shareholders, operating leverage, organic growth, strong credit, capital return, and strong ROTCE. With that, let's jump to Q&A.","evidence_gemma_new":"net new checking accounts","evidence_llama_3_3":"net new checking this quarter","evidence_qwen_3_30b":"consumer bank 130,000 net new checking accounts","gemma_new_max":130000.0,"gemma_new_min":130000.0,"llama_3_3_max":130000.0,"llama_3_3_min":130000.0,"qwen_3_30b_max":130000.0,"qwen_3_30b_min":130000.0}
{"symbol":"BAC","year":2023,"quarter":2,"date":"2023-Q2","chunk_id":2,"sub_chunk_id":0,"centroid_label":"consumer net new checking accounts","agreed_value":157000.0,"count":3,"chunk":"Brian Moynihan: Thanks, Lee, and good morning to all of you, and thank you for joining us. I'm starting on Slide 2 of the earnings presentation. This morning, Bank of America reported one of the best quarters and one of the best first halves net income in the company's history. Our results this quarter once again include solid performance on things we can control by delivering organic growth and operating leverage. We did that in economy that remains healthy that had a slowing rate of growth. It was also a quarter that included volatility from the debate about the debt ceiling, continuation of central bank monetary tightening actions and a slowing in consumer spending and the slowing inflation. As you look at it now, our customer spending patterns now are more consistent with the pre-pandemic, lower growth, lower inflation economy. Before Alastair takes to details, let me summarize Bank of America's quarter two performance. On Slide 2, you can see the highlights. We earned $7.4 billion after tax, and grew earnings per share of 21% over the second quarter of 2022. All business segments performed well, and I want to thank all my teammates for doing so. We grew clients and accounts organically and at a strong pace. We delivered 8th straight quarter of operating leverage, led by 11% year-over-year revenue growth. We further strengthened our balance sheet, improving our common equity Tier 1 ratio more than 110 basis points year-over-year to 11.6%, and we have $867 billion in Global Liquidity Sources. We also produced strong returns for our shareholders with a return on tangible common equity of 15.5%, continuing a streak of many quarters at that level or above. While our business has performed well this quarter, I would particularly highlight our global markets and sales and trading team, and our investment banking teams. Both have appeared to outperform the industry peers, investments made over the past couple of years and global markets capabilities under Jim DeMare's leadership, as well as Matthew Koder's leadership in the global corporate investment banking area allowed us to improve our market shares for both of these people. I'd also note the strong contribution by our middle-market clients and our teammates there led by Wendy Stewart. I'd also like to touch a few additional points before turning the call over to Alastair. These points will help illustrate continued investment in the franchise and work we do to drive growth. Let's start with the organic growth slide on Page 3. On that page, we highlight some of the important elements of organic growth. You can see evidence in every business segment as you look at the page. In consumer, in quarter two, we opened 157,000 net new checking accounts. Consumers now had 18 straight quarters of positive net new checking account growth. Now these are core primary checking accounts across the board, allowing our tremendous deposit franchise to continue to prosper and take market share. While the progress here made pier inch meal over the last three years, we've grown our core customers in consumer checking account customers from 33 million to 36 million. We opened another one million-plus credit card accounts this quarter, and have 10% more investment accounts this year than we did last year in the consumer business. Consumer investment business balances reached a new high of $387 billion aided by a 30% increase in new funded consumer investment accounts year-over-year, and frankly moving our money from our depositors into the market as they have done so. In Global Wealth, we added 12,000 net new relationships in Merrill and the Private Bank, and our advisors open more than 36,000 new banking relationships in the quarter, showing a strong differentiation of our model of fulfilling both investment in banking these for clients. In the past 90 days, we added 190 experienced advisors to our salesforce in addition to digital capabilities to help us deliver at scale. In Global Banking, we added clients and increased number of solutions per relationship. Over the past three years, we've added net new relationship managers and increased our client facing headcount by nearly 10%. We've also improved our tools for prospect colleagues through investments in technology, and it's benefiting our ability to add customers and improve our solutions per existing clients. Year-to-date, we've added over 1,000 new commercial and business banking clients across the United States, which is the same number we added in the full year of last year. Again, operationalizing that ability to do this at scale increases our speed of onboarding these clients. In our global markets area, we saw one of the highest second quarter for sales and trading in our history, so another quarter of good organic growth. To achieve that growth, we are managing our expense trajectory, which Alastair is going to cover, requires inherent efficiency progress from digital and other applied technology across all our units. Digital superiority is key to our operating dynamics. First, it produces a great customer experience resulting strong customer retention and strong customer scores. Second, it ensures our position as a lead transactional bank for our customers, whether they are consumers, companies or investors. Third, it preserves a strong deposit balance as a good price and do the core nature of transactional deposits. And last, but importantly not least, efficiency. So, how we're doing on digital progress? You can see that on Slide 4, first with the consumer. In consumer, we now have 46 million active users that are digitally engaged with our digital platform and are logging over 1 billion times a month. And even with this scale, the stage of maturity logins is up double digits from last year. Customer uses of Erica continues to be at expectations. This was an early application of natural language processing and artificial intelligence that we built in our company, and it continues to learn about with additional use. Interactions with Erica rose 35% in just the past year, and now it's crossed over 1.5 billion client interactions in the first five years of introduction. There's a lot of questions about our artificial intelligence out there, but one [indiscernible] together a series of systems. We have to build a system and it's highly regulated, high customer-focused business, and Erica is one such application you can see its impact. Likewise, Zelle hasn't slowed down either. The number of people using Zelle grew 19% this past year. Remember, these aren't new functionalities at this point, they've been around for years, but they continue to grow very strong growth rates, showing customer desire and acceptance of the activities. You can see the digital sales continue to growth. We continue to have both great high-tech and high-touch options. As part of that, we've added 310 new financial centers since 2019, and by the end of this year, we have refurbished every one of our existing centers in our company. We plan on opening 50 more centers a year for the next few years, which included an expansion in nine new markets we announced a few years ago - a few weeks ago, excuse me Our entrance into these markets is enhanced by digital and leads to strong early success. Just to give you a point of reference, for all the expansion markets over the last several years for branches opened a year or more in those expansion markets, our average deposit balances per those branch are $160 million in each branch. You go to the wealth management digital on Slide 5, you can see that they continue to be the most digitally engaged clients in our company. Our advisors have led the way in driving a personal driven advice model, supplemented by our digital tools. You can see the client adoption rate of 82% in Merrill and 92% in the private bank, 78% have embraced digital delivery as a tool service providing more convenience for them and our advisors. Erica and Zelle also continue expanding these client sets. A new program we announced just a few quarters ago has generated 20,000 digital leads to 7,000 advisors, it's called Advisor Match, matching our clients with advisors of their choice. On Slide 6, you can see the digital engagement of global banking area. Corporate treasury teams and our clients appreciate the ease of doing business with us digitally. CashPro App sign-ins are up nearly 60% from last year, where the value of payments through CashPro App are up 20%. As you can see, every line of business is delivering strong organic growth. Investments made in technology have enabled us to grow industry leading positions in digital tools, while enabling our clients to do great things and making us more efficient. This provides for a very satisfied, stable customer and client base with Bank of America's primary provider. And by doing with a digital application, that also produces operating leverage. On Slide 7, you can see our streak of operating leverage continued in the second quarter of 2023. We're now back in eight quarters in a row. The chart on Slide 7 covers the 8.5 years at 34 quarters, and all but eight of those quarters and you can see those identified. Six of which were in the heart of the pandemic, we've achieved operating leverage. Operating leverage is that simple task of growing revenue at a better growth rate and expense. As I said, Alastair's is going to discuss with you our good and declining expansion trajectory which sets us up to continue to provide operating leverage, even with the shift in economy. In sum, in the quarter, we delivered earnings that are 19% higher and a 15% return on tangible common equity that was driven by continued strong organic growth and operating leverage in a volatile economic environment. Alastair is going to talk to you about a bit more strength we see ahead in our net interest income for the balance of the year and that provides a better start as we think about 2024. You're going hear our expectations for the quarterly decline expenses in the following quarters for the rest of '23, even as we keep investing, and you hear about the resilience of credit and strong trajectory in capital, this all positions us well to continue both our streaks of organic growth and operating leverage. With that, let me turn it over to Alastair.","evidence_gemma_new":"net new checking accounts quarter two","evidence_llama_3_3":"consumer net new checking accounts quarter two","evidence_qwen_3_30b":"consumer net new checking accounts quarter two","gemma_new_max":157000.0,"gemma_new_min":157000.0,"llama_3_3_max":157000.0,"llama_3_3_min":157000.0,"qwen_3_30b_max":157000.0,"qwen_3_30b_min":157000.0}
{"symbol":"BAC","year":2023,"quarter":3,"date":"2023-Q3","chunk_id":71,"sub_chunk_id":0,"centroid_label":"consumer net new checking accounts","agreed_value":900000.0,"count":2,"chunk":"Brian Moynihan: We prefer to grow deposits in line with customer growth and activity. So in the last four quarters, Consumer I think were up another 900,000. Net new checking accounts, which average balance is around $11,000, they come in lower than that and mature after that. We grow -- we have a transactional banking business for all types of customers and we grow irrespective of it. That produces $2 trillion. You have a loan business to customers, that produces $1 trillion, and that difference then is a wonderful thing to have every day.","evidence_gemma_new":null,"evidence_llama_3_3":"Net new checking accounts","evidence_qwen_3_30b":"Consumer net new checking accounts last four quarters","gemma_new_max":null,"gemma_new_min":null,"llama_3_3_max":900000.0,"llama_3_3_min":900000.0,"qwen_3_30b_max":900000.0,"qwen_3_30b_min":900000.0}
{"symbol":"BAC","year":2023,"quarter":3,"date":"2023-Q3","chunk_id":71,"sub_chunk_id":0,"centroid_label":"consumer net new checking accounts","agreed_value":11000.0,"count":2,"chunk":"Brian Moynihan: We prefer to grow deposits in line with customer growth and activity. So in the last four quarters, Consumer I think were up another 900,000. Net new checking accounts, which average balance is around $11,000, they come in lower than that and mature after that. We grow -- we have a transactional banking business for all types of customers and we grow irrespective of it. That produces $2 trillion. You have a loan business to customers, that produces $1 trillion, and that difference then is a wonderful thing to have every day.","evidence_gemma_new":"Net new checking accounts","evidence_llama_3_3":"Net new checking accounts average balance","evidence_qwen_3_30b":null,"gemma_new_max":11000.0,"gemma_new_min":11000.0,"llama_3_3_max":11000.0,"llama_3_3_min":11000.0,"qwen_3_30b_max":null,"qwen_3_30b_min":null}
{"symbol":"BAC","year":2023,"quarter":3,"date":"2023-Q3","chunk_id":2,"sub_chunk_id":0,"centroid_label":"consumer net new checking accounts","agreed_value":200000.0,"count":2,"chunk":"Brian Moynihan: Good morning, everyone, and thank you for joining us. As usual, we're starting on Slide 2. Our third quarter here at Bank of America was another strong quarter as we delivered $7.8 billion in net income. That is a 10% growth over the year-ago third quarter. And for the first nine months of the year, we have earned $23.4 billion, an increase of 15% over 2022. We grew clients and accounts organically and at a strong pace across all our businesses. Our operating leverage was about flat. We improved our common equity Tier 1 ratio by nearly 30 basis points in the quarter to a level of 11.9% against a current minimum of 9.5%. We saw an increase in our deposits and we maintained our strong pricing discipline. We continue to maintain $859 billion in global liquidity sources. We also deliver a good return for you, our shareholders, with a return on tangible common equity of over 15% and a 1% return on assets. Just a quick note of what we see in the economy. Our team of economists predicts a soft landing with a trough in the middle of next year. We see that in our customer data, our 37 million checking customers, we see their spending slowing down. You can see that on Slide 34. The third quarter was up about 4% over last year's third quarter. Earlier this year, that would have been more of a 10% increase year-over-year. And for the entire year of 2022, it increased 10% [round numbers over \u201821] (ph). This 4% level is consistent with the spending we saw in the pre-pandemic period from 2016 to 2019. That is consistent with a low-inflation, lower-growth economy. As we move into October, the spending is holding at that 4% level. So growing, but growing at a basis more consistent with low growth, low inflation economy. With that, let me turn to Slide 3. We provide various highlights, and Al's just going to cover a lot of this. Our team continues to focus on driving organic growth, driving digital progress, and operational excellence, which keeps us focused on operating leverage. A few words on organic growth as we flip to Slide 4. Every business segment had organic growth. In Consumer, in quarter three, we opened more than 200,000 net new checking accounts this quarter alone. We also opened another 1 million credit card accounts. We have 10% more investment accounts this year, third quarter, than we did last year. In Small Business, we have seen 35 straight quarters of net new checking account growth. We've also seen good small business loan growth, and our loans are up 14% from last year. That was -- in this quarter, our Small Business teammates extended $2.8 billion in credit to small business in America alone. In Global Wealth, we added nearly 7,000 net new relationships to the Merrill and Private Bank franchises. And our advisors opened more than 35,000 new bank accounts for the third consecutive quarter, fulfilling both investing and banking needs for those clients. We also increased our number of advisors. In the past year, across our wealth spectrum, in GWIM and in consumer investments, they have combined to gather $87 billion in total net flows. In our Global Banking team, we added clients and increased the number of products per relationship. Year-to-date, we've added 1,900 new commercial and business banking clients. That is more than we added in the full year last year. Even while activity is low, the investment banking team continues to hold us number three position. In the Global Markets, we continue to see performance establish new records for our firm. I'm going to cover that in a little more detail in a moment. As you can move to Slide 5, you can see the digital adoption engagement and volumes continue to increase. We lead the industry in digital banking and continue to provide the best-in-class disclosures. You can find those disclosures by line of business in the appendix on slides 26, 29, and 31. We also continue to receive top accolades from third parties around these capabilities. Most important, these capabilities are valued by our clients and customers and allow us to grow with great expense leverage. Let me give you a few examples. Our Consumer and Merrill clients logged into our consumer banking app a record 3.2 billion times this quarter. Even at this scale and stage of maturity of this operation, logins are up double digits from the year prior. Customer use of Erica continued to beat our expectations with almost 19 million users, up 16% in the past 12 months. CashPro App sign-ins with our business clients are up more than 40%. And we recently added the Erica functionality to CashPro to help corporate clients benefit from that artificial intelligence. Likewise, Zelle users continues to grow. Zelle transaction levels are up more than 25% from last year. And Zelle is becoming a meaningful way our customers move money. In fact, customers now send money with Zelle at twice the rate they write checks. We're nearing a period where the Zelle transactions sent will exceed the combination of checks written and ATM withdrawal transactions. As you move across the lines of business on the slide, the story is the same. All these capabilities help us deliver faster, safer, and more efficiently. And all of it gets strong customer and client feedback. When you put that together, that helps us drive operating leverage, and you can see it on Slide 6. We have a strong record of driving operating leverage in our company. We drove operating leverage every quarter for nearly five years before the pandemic. And then again, more recently, we've had an eight-quarter streak leading to this quarter. We acknowledged to you this last quarter that our operating leverage is going to be tough for a few quarters as we navigate through the trough of net interest income. But as you can see on Slide 6, we managed to grow revenue year-over-year faster than expense in dollar terms this quarter, even though the percentage change was basically flat. Now, in January, we told you we'd manage our head countdown to help make sure we got our expenses in line. Over the course of 2023 we've seen moving from 2022's great resignation to our current level of a record low attrition in our company. All that meant the team had to work harder to manage that headcount down. And they did it. Our headcount is now down over 7,000 FTEs [from a] (ph) peak in January, even with the addition of 2,500 college grads this fall. As a result, you've seen expense decline from $16.2 billion in quarter one to $16 billion in quarter two to $15.8 billion this quarter. By the way, we've done this without special charges or large layoffs. Expense will decline again in the fourth quarter, excluding any FDIC special assessment, of course. We expect to report $15.6 billion in expenses in 4Q. Now interestingly, the debt is up only around 1% from fourth quarter of last year. This is stronger expense guidance than we thought we could do earlier in the year and sets us up nicely for next year. Shifting gears, let's focus on the balance sheet. Slide 7 shows the breakout of deposit trends on a weekly basis -- ending basis across the third quarter. We gave you this chart last quarter also. In the upper left-hand, you can see the trend of total deposits. We ended quarter three at $1.88 trillion, up from quarter two and better than industry results. What you should also note is the cost of these deposits. Our team has rewarded customers with higher rates for their investment [or in cash] (ph), re-initiated deposit growth and grown share with always superior mix in cost. You will note we're now paying 155 basis points all in for deposits, which is up 31 basis points from last quarter. I ask that you remember two things when you think about the deposits. The rate remains low relative to many because of the transactional nature of deposit relationships with $565 billion in non-interest-bearing deposits. And you can see in the upper right alone, in low interest and no interest checking, there's $504 billion in Consumer. Secondly, remember the importance of the spread against the quarter's average Fed funds rate. This position is very advantageous compared to past cycles because the transactional counts in the current cycle are a much higher mix of Bank of America's deposits. I would also add that while we maintain discipline in deposit price and we pay competitive rates to customers with excess cash seeing higher yields across all the businesses, if rates fall, those particular products will see the rates come down also. Dropping into the business trends. In Consumer, if you look at the top right chart, you saw a $22 billion decline. Note, the difference in the movement through the quarter between the balance of low to no-interest checking accounts and higher-yielding non-checking accounts. You could also see the low levels of our more rate-sensitive balance in consumer investments and CD balances broken out. In total, we have $982 billion in consumer deposits. In Consumer alone, this is $250 billion more than we had pre-pandemic. The total rate paid on consumer deposits in the quarter was 34 basis points. This remains very low, driven by the high percentage of transactional -- high-quality transaction accounts. Most of the quarter's rate increase is concentrated in CDs and consumer investment deposits where about -- which are about 13% of the deposits. Turning to Wealth Management, balances were flat. We saw a slowing in the previous quarterly trend of clients moving money from lower-yielding sweep accounts into higher-yielding preferred deposits and off-balance sheet products ones. Sweep balances were down by $7 billion and were replaced by new account generation and deepening. At the bottom right, note the Global Banking deposits grew $2 billion and have hovered around $500 million for the past six quarters. These are generally the transaction deposits of our commercial customers used to manage their cash flows. Noninterest-bearing deposits were 37% of deposits at the end of the quarter. Sticking with the balance sheet but moving to capital, let me give you a few thoughts on the proposed capital rules. As you are well aware, our banking industry in the United States is the most highly capitalized the most profitable banking group in the world. It's a source of strength for our country and its economy. The annual stress tests over -- are now over a dozen years old, using ever-increasing harsher test scenarios have proven that capital is sufficient. Banks have proven to be a part of the solution during the more recent COVID pandemic and the banking disruption in March this year. We add to our capital and reduce our lending capacity to American business consumers, and those trade-offs are being debated. But as far as the rules are concerned, there are many parts of the rules that our industry doesn't agree with because of double accounts or increased trading and market risk. And we're talking to those proposals and working, and we're hopeful they'll change. But in any event, they may not. If they don't, how will they affect us? If you go to Slide 8, you can show the expected impact as we interpret those proposed rules. This assumes that they're proposed today without any changes. The proposed rules would inflate our risk-weighted assets by about 20%. So if I apply the inflation against this quarter's RWA of $1.63 trillion, that means, if nothing else changed in the rules, we'd end up with about $320 billion more risk-weighted assets. The biggest increase in RWA would be a couple hundred billion dollars in operational RWA. The next biggest category would be driven by a four-fold increase in the RWA against non-publicly traded equity exposures. In our case, that really is mostly about the tax-advantaged investments in solar and wind. Looking at the capital to be held against the inflated RWA on the right side of the slide, I'd remind you today that our minimum capital requirement is to hold 9.5% in on Common Equity Tier 1. But based on our G-SIB charges, that going to come in effect on January 1, 2024, we moved to 10%. So I'm going to use that as a requirement. Holding 10% today means $163 billion, that we finished the third quarter with $194 billion. So today, we have more than $30 billion excess capital. Now, let's assume the proposed change is going through in full. The proposed changes are phased in from '25 -- the middle '25 to '28 under the current proposal. When those are fully phased in, as we used to call Basel fully phased in, if you remember, we would have a need for $195 billion of total capital. Now if you look on the upper right-hand side of the page, you'll see that we're today, we're at $194 billion. So we hold the required capital today. And of course, we'd have to build a buffer to that throughout the implementation period. But if you look at the bottom of the page, you see just in the last nine quarters the kind of capital generation this company has. Once we understand the rules, we'll of course have a bit -- a chance to optimize our balance sheet and appropriately price assets to improve the return on tangible common equity. Now, before I turn it over to Alastair, I just wanted to highlight one of the businesses that we talked about over the many years. That's our Global Markets business. Global Markets represent 17% of the company's year-to-date earnings and it's one of the top capital markets platforms in world. It's one 'of a handful of firms that can do what is due, providing advice and execution in every major market around the world. Jimmy DeMare and the team who run the business asked us for additional investment around four years ago, and they've grown this business with an intensity that clients are appreciative and reward us with more of their business. This has produced strong revenue growth. We've grown the balance sheet here but have done it efficiently. That's allowed us to grow sales and trading revenue over the past 12 months consistently, and now stands 32% higher than the average of the five years leading into the pandemic in the investment in the business. And through effective cost management, we also generated 11% to 12% returns on capital in this business. This exceeds our cost of capital even as we continue to allocate more capital to the business. Returns are even larger if you combine it with the Global Banking business, that many show the businesses combined and take -- because our corporate clients also take advantage of these industry-leading capabilities. With that, let me turn over the call to Alastair to walk through the quarter. Alastair?","evidence_gemma_new":"net new checking accounts","evidence_llama_3_3":null,"evidence_qwen_3_30b":"Consumer 200,000 net new checking accounts quarter three","gemma_new_max":200000.0,"gemma_new_min":200000.0,"llama_3_3_max":null,"llama_3_3_min":null,"qwen_3_30b_max":200000.0,"qwen_3_30b_min":200000.0}
{"symbol":"BAC","year":2023,"quarter":4,"date":"2023-Q4","chunk_id":30,"sub_chunk_id":0,"centroid_label":"consumer net new checking accounts","agreed_value":600000.0,"count":3,"chunk":"Brian Moynihan: Yeah, there's always more to go. So if you -- I think we've got lined up. If you take what we're doing this year and next year, meaning '24, '25 and enrolled in '26, it's a couple of billion dollars plus, which helps us to the dynamic Erika was talking about avoiding growth and expenses, keeping below inflation. Because you think of us as rolling that expense taken out back into good things. This year will be, I think, $3.8 billion on technology initiatives. That's up from '21 to '22 by $500 million or more and then sort of flattish '22 to '23. They're being applied in different ways. We added relationship managers across the board. We keep opening the branches. We're largely through the rehab of the branches that we're keeping. And these are all spending to grow. And that's what you're seeing. So net new checking account, 600,000 for the year. That's 20 straight quarters of net checking account growth. All good core accounts flows into the asset manager business, $80 billion or more. In our Merrill Edge program, the advertising has driven the business. We have 10% more customers. And those customers, which is 300,000 to 400,000 customers added in the last 12 months, those customers bring an average opening balance of $80,000 to $100,000. To give you a sense, they're not small accounts, that's good. So we're just investing. But there's a thousand levers. None of them are simple. But even this year, when we said we got to get the headcount growth back in alliance after the great resignation in '22 and we had to hire fast, we went from 218,000 people in January down to 212,900 at the end of the year. And in that, we're rolling over teammates from one business to another business where we need help and retraining people and reskilling people. And as AI comes in and to the extent that we can deploy it, deploy it wisely, it'll allow us to redeploy people. And even with our very low turnover rate, which is 7% for year '23 and actually down from 12% in the year '22 and I think 6% in the fourth quarter, we still can manage headcount down just by not hiring people, because that gives us an opportunity. We hired 15,000 people this year. So we hire -- we can always hire a little less if we see the efficiencies coming through and redeploy the people we have.","evidence_gemma_new":"net new checking accounts","evidence_llama_3_3":"net new checking account 20 straight quarters","evidence_qwen_3_30b":"net new checking account 600,000","gemma_new_max":600000.0,"gemma_new_min":600000.0,"llama_3_3_max":600000.0,"llama_3_3_min":600000.0,"qwen_3_30b_max":600000.0,"qwen_3_30b_min":600000.0}
{"symbol":"BAC","year":2024,"quarter":1,"date":"2024-Q1","chunk_id":2,"sub_chunk_id":0,"centroid_label":"consumer net new checking accounts","agreed_value":245000.0,"count":3,"chunk":"Brian Moynihan: Thank you Lee, and good morning to all of you, and thank you for joining us. I am starting on Slide 2 of the earnings presentation. We once again delivered a strong set of results in quarter one. We reported net income of $6.7 billion after tax and EPS of $0.76. This included the additional expense accrual for the industry special assessment by the FDIC to recover losses from the failures of Silicon Valley Bank and Signature Bank. This lowered our quarter one EPS by $0.07. Excluding that expense, net income was $7.2 billion and EPS was $0.83 per share in quarter one. Alastair is going to walk you through details of the quarter momentarily, but first let me give you a few thoughts on our performance. We delivered good improvement in our fee-based business, driven both by continued organic growth and good market conditions. Investment banking saw a nice rebound this quarter. We delivered nearly $1.6 billion in investment banking fees and grew 35% from the first quarter 2023. Matthew Koder and the team have done a great job delivering market share growth. In addition, our results reflect the benefits of investments made in our middle market investment banking teams and dual coverage teams. Matthew has utilized [indiscernible] power wisely to grow our middle market team from 15 bankers in 2018 across a dozen cities, to more than 200 bankers in twice as many cities today. Both groups work with our commercial bankers and wealth management advisors in those cities to deliver for our clients. Investment and brokerage services revenue across Merrill and the private bank grew 11% year-over-year in quarter one to nearly $3.6 billion. Continued investments in our advisor training programs and digital delivery for our clients as well as positive market helped us deliver strong revenue. Asset under management flows were $25 billion in the quarter. Sales and trading excluding DBA delivered its eighth consecutive quarter of year-over-year revenue improvement. At $5.2 billion, this is the highest first quarter result in over a decade. We have allocated more balance sheet invested in talent to build our [indiscernible] for the last five years in this business. Those investments plus the intensity of the teams under Jimmy DeMare\u2019s leadership have resulted in good momentum and market share improvement. From a balance sheet perspective, we entered the quarter expecting modest moves in loan growth and a decline in deposits - those were our expectations. What we actually delivered was growth in ending deposits of more than $20 billion. Ending loans were down modestly due to the expected credit card seasonality, otherwise loans were pretty stable. This balance sheet performance along with our continued pricing discipline allowed us to deliver better than expected NII performance. We told you last quarter that we expected NII to decline from the fourth quarter of 2023 to the first quarter of 2024, a decline of about $100 million to $200 million. We actually reported today NII of $14.2 billion - that was $100 million higher than quarter four, exceeding our guidance. We continue to deliver strong expense management. Year-over-year expenses adjusted for the FDIC assessment was up a little less than 2% - that compares to the 4%-plus inflation rate. We also continued to invest in our company while managing those expenses. We had several categories with stronger fee-based revenue in the first quarter this year. This drove higher formulaic compensation and processing costs of the increased activity. Fees and commissions were up 10% year-over-year. We are happy to pay for that revenue and deliver more earnings to the bottom line because of it. How did we do all that and hold expenses under the inflation rate? Well, we remain focused on three primary drivers at Bank of America. First, our operational excellence platform continues to deliver and improve processes. These savings from that growth help fund the future growth in the company and lower the risk. Second, we managed headcount as we eliminated work. Recall, we noted an expectation in January of last year that our headcount would be down throughout the year. Our headcount at the end of first quarter 2024 was down by more than 4,700 people from the first quarter 2023. It declined 650 people just from the end of 2023. The digitization activity is also driving ongoing expense cost savings, customer retention and market share improvement, driving across all three factors. It also supports the ever-increasing volumes of client activity with little increased cost. I would highlight our continued capital strength with common equity Tier 1 capital of $197 billion. That amount of capital is $31 billion over the current regulatory minimums for our company. That capital has allowed us to both support our clients and return $4.4 billion to shareholders this quarter in share repurchases and dividends. Let me highlight a few points on our organic growth before I pass it over to Alastair. Now I\u2019m turning to Slide 3. You can see on Slide 3 the highlights of quarter one successful organic activity across the businesses. We continue to invest and enhance our digital platforms. We provide our customers with convenient and secure banking experiences. By leveraging our technology and continuous investment in that technology and putting customers at the center of everything we do, we have successfully deepened our relationships and expanded our customer base across all our businesses. In consumer, we had added 245,000 net new checking accounts this quarter. This completes 21 straight quarters of net additions. Dean Athanasia, Aron Levine and Holly O\u2019Neill helped drive that business for us and continue to perform well, driving strong performance across our consumer franchise. These checking balances continue to drive the performance of our consumer deposits. These checking additions are important for many other reasons. On average, 68% of our deposit balances have been with us for more than 10 years; 92% of the customer checking accounts are primary checking accounts in the household, meaning that they\u2019re the core operating account for the household for their financial lives. When we on-board a client, we start a long-term valuable relationship. About 60% of our checking accounts customers use a debit card and on average they do about 400 transactions per year on that card. The new checking accounts have traditionally opened savings accounts, about 25% of the time within a few months of opening that checking account. Opening a new checking account on average brings about $4,000 in balances below our averages, but that continues to grow and within a year, it\u2019s two times that amount. Likewise when we open a new savings account, it on average brings about $7,000 in balances. This also deepens by about two times during the year. Investment relationships and credit card account openings continued to be strong in the first quarter as well. While we believe some of these statistics are best in class, rest assured there are plenty opportunities for further growth in our franchise and our company. As we think about our global wealth team led by Eric Schimpf, Lindsay Hans and Katy Knox, that team added 7,300 net new wealth relationships with Merrill and the private bank. Our advisors opened 29,000 new bank accounts in the quarter with our customers, deepening their relationships. More than 60% are investing clients in Merrill and 90% of our private banking clients now have a core banking relationship with us. In addition, across our wealth spectrum we saw $60 billion in total flows over the last year. As you can see on this slide, we now manage more than $5.6 trillion in total client balances across loans, deposits and investments, and consumer and wealth management. When we move to global banking, we added more new relationships in this quarter than we did in last year\u2019s first quarter. We also increased the number of solutions per relationship with preexisting clients. Just like in our consumer business, we have seen good growth in customers seeking the benefits of both our physical and our online capabilities and also the care of our talented relationship managers, who provide financing solutions and advice for our clients with global needs. A couple other points I\u2019d make on our digital success. Erica, our virtual banking assistant, reached a key milestone of more than 2 billion interactions since its introduction about six years ago. It took four years to reach 1 billion interactions; it took just 18 months to reach the second billion. In August, we extended Erica\u2019s reach and launched Erica in our global treasury services business and CashPro. Erica has resolved 43% of the CashPro chat inquiries automatedly, demonstrating more and more clients are able to self-solve. This is a great example of best practices being shared across the scale of our company. Second, as an example of our digital success, Zelle continues to grow. It wasn\u2019t long ago that we noted that the number of Zelle transactions in a quarter had surpassed the number of checks written. Shortly after that, Zelle transactions reached two times the number of checks written. This quarter, Zelle transactions have now passed the combined number of checks written plus the amount of cash withdrawals from tellers and from ATMs. That is a rapid adoption and represents continued cost savings and convenience and security for the customers. These stats and others are included in our quarterly activity for our digital banking progress. That\u2019s included in Slides 20, 22 and 24. I encourage you to read them. They show our market-leading efforts representing billions of dollars of our investment over the years, and we are continuing to drive growth with expense growth under control. The solid earnings results achieved this quarter are a testament to the dedication and talent of our 212,000 people who work here and deliver for our customers every day. I thank them for another great quarter. With that, I\u2019ll turn it over to Alastair.","evidence_gemma_new":"net new checking accounts quarter","evidence_llama_3_3":"consumer net new checking accounts quarter one","evidence_qwen_3_30b":"consumer added 245,000 net new checking accounts","gemma_new_max":245000.0,"gemma_new_min":245000.0,"llama_3_3_max":245000.0,"llama_3_3_min":245000.0,"qwen_3_30b_max":245000.0,"qwen_3_30b_min":245000.0}
{"symbol":"BAC","year":2024,"quarter":2,"date":"2024-Q2","chunk_id":2,"sub_chunk_id":0,"centroid_label":"consumer net new checking accounts","agreed_value":278000.0,"count":3,"chunk":"Brian Moynihan: Thank you, Lee, and good morning and thank all of you for joining us today. Before I begin today, I just want to reflect a second on the horrible events this weekend. We at Bank of America are clear that there's no place for political violence in our great country, and we continue to wish the former President Trump a speedy recovery. And our thoughts, of course, go out to the victims and their families and others impacted by this terrible event. With that, let's turn attention to the results for the second quarter of 2024 at Bank of America Corporation. This quarter, we achieved success in a number of areas, underscoring the benefits of our diversity and the dedication of our team to deliver responsible growth. Our organic growth engine continues to add customers and activity to all our businesses, even as we see the drop in net interest income this quarter. I'm starting on slide two. Our net income for the quarter was $6.9 billion after tax or $0.83 in diluted EPS. Attesting to the balance in our franchise, the earnings were split evenly, half in our consumer and GWIM businesses, which serve people, and the other half in our institutional-focused business global banking and markets. We grew revenue from the second quarter of 2023 as improvement in non-interest income overcame the decline in net interest income. Fees grew 6% year-over-year and represented 46% of total revenue in the quarter. Our strong fee performance was led by a 14% improvement in asset management fees in our wealth management businesses. We grew investment banking fees 29% year-over-year and saw sales and trading revenue increase 7%. Global Markets had its 9th consecutive quarter of year-over-year growth in sales and trading revenue, a good job by Jimmy DeMare and his team. Card and service charge revenue also grew by 6% year-over-year in our Consumer business. Much of this fee growth is a result of our intensity around organic growth, and is a testament to the diversity of our operating model. Now on to slide three. Organic growth has been driven by several key factors. First, we focus on our customers. We continue to place them at the center of everything we do. Consumer led the way in delivering solid organic growth with high-quality accounts and engaged clients. For the 22nd consecutive quarter, we had significant net new consumer checking accounts. We expanded our customer base and our market share. Specifically, we added 278,000 net new checking accounts this quarter, which brings our first six months of 2024 to more than 500,000. In wealth management, we added another 6,100 new relationships this quarter. In our commercial businesses, we added 1,000s of small businesses and 100s of commercial banking relationships. This has led to now managing $5.7 trillion in client balances, loans, deposits, and investments across the consumer and wealth management client segments. In those areas, we saw flows of $58 billion in the past four quarters. Our emphasis on personalized financial solutions and superior customer service has strengthened customer loyalty, attracted new clients across all our businesses. Our focus on providing liquidity and risk management solutions to our institutional clients positions to continue to gain more share of the wallet as well. Second, we continue to deliver innovative digital solutions. One of the primary contributors of both attracting and retaining customers to our platforms is our digital banking capabilities for our clients across all the businesses. Our fully integrated consumer banking investment app drives the utility for our customers across their investment and consumer accounts. Our use of stats are strong proof points. Our second language capabilities in our consumer businesses further enhance our customers' capabilities. You can see the continued digital growth in the slides on pages 26, 28, and 30 in the appendix. A couple highlights. Our consumer mobile banking app now serves more than 47 million active users. They logged in 3.5 billion times this quarter. We also continue to see more sales through the use of our digital properties. Digital sales represented 53% of our total sales in the past quarter in our consumer businesses. 23 million consumers are now using Zelle. They send money on Zelle at nearly 2.5 times the rate they write checks. And, in fact, more Zelle transactions -- send transactions take place than a combination of customer ATM transactions, cash withdrawals, and tellers. Simply put, Zelle has become a dominant way to move money. In our wealth management business, we are seeing more banking accounts being opened to complement the investment business those clients do with us. Importantly, these clients are also recognizing the ease of our digital banking capability. 75% of our new accounts and our Merrill teammates were open digitally. 87% of our global banking clients also are digitally active. We have innovated and significantly streamlined service requests by enabling clients to directly initiate and track transaction inquiries within our awarded CashPro platform, using AI to accomplish that. Third, we continue to make core strategic investments in our businesses. We're not complacent with the success you see on this page. We continue to strategically invest in our core businesses. A few examples, while we have the leading retail deposit share in America, we continue to invest and have opened 11 new financial centers this quarter -- in this first-half of the year and renovated another 243. This is an investment in both our expansion markets and our growth markets. In wealth management, we continue to invest in our advisor development program. It's grown to 2,300 teammates, allowing us to continuously add more than -- teammates to our 18,000 strong best-in-class financial advisory force across all our wealth management businesses. We're also adding teams of experienced advisors strategically in areas across the country. In our banking teams, we continue to add to our regional investment banking team. We now have more than 200 regional bankers across the country to better serve our commercial clients, and they complement our industry coverage to our corporate clients. In our global markets business, we continue to extend balance sheet to our clients in adding expertise and talent to continue to lead our market share improvements seen over the last several years. We also have increased our technology initiatives and expect to spend nearly $4 billion on technology initiatives this year. We have focused projects around artificial intelligence enhancements with both clients and our teammates. A recent example of our use of AI is our advisor and client insights tool. We've delivered more than 6 million insights here today to our financial advisors, providing them proactive reasons to engage our clients. AI has moved from cost savings ideas to enhancing the quality of our customer interactions. Fourth, organic growth is driving integrated flows across our business. We invest heavily in each line of business that compete in the markets based on their particular customer segment. But importantly, we also invest across our lines of business to knit them together and gain market share in the local markets. It's a differentiated advantage for us, our banking leadership position across our businesses and our nationwide franchise. For example, we leverage our franchise by connecting business customers with wealth management teams. Our teams across all our businesses have made 4 million referrals to other businesses in the first six months of this year. Next, we drive efficiency and effectiveness, and that's through our operational excellence platform. We continue to invest heavily in the future of our franchise and growth, while we also have to manage expenses day-to-day. Our focus on operational excellence has enabled us to hold our expense growth up to 2% year-over-year, well below the inflation rates. We continue to work to achieve operating leverages as NII stabilizes and begins to grow again. As you look at it now, Alistair will explain later, a fair portion of the year-over-year increase in expense is due to the formulaic incentives of wealth management due to the peak growth of that business. And last, our capital strength allows us to deliver for all our stakeholders. Our capital remains strong as we held our CET1 ratio at 11.9% this quarter. We grew loans, increased our share repurchases to $3.5 billion and paid $1.9 billion in dividends. Average diluted shares dropped below 8 billion shares outstanding. In addition, we also announced our intent to increase our quarterly dividend 8% upon board approval. Note that with 11.9% CET1 ratio, we remain in a solid excess capital position, both above the current regulatory requirements and the increased requirement to 10.7% beginning in October as a result of the recent CCAR exam. Let's turn to slide four. A couple things to note here. First, we've noted for several quarters that the second quarter NII would be the trough for this rate cycle. We expect NII to grow in the third quarter and fourth quarter of this year. Alistair is going to provide you some points in detail about the path forward. One of the important contributors to that change is deposit behaviors of our customers. On slide four, you'll note that average deposits grew 2% year-over-year and increased modestly linked quarter. The second quarter, in reality, is typically a heavy outflow quarter. We have a lot of customers who pay a lot of taxes in that quarter. Quarter-over-quarter increases in rates paid continue to slow again this quarter across all businesses except for wealth management. And we show you that on this page, slide four, by line of business. While wealth business deposit rates have moved higher with continued rotation, we expect those rates to begin to stabilize and the rate of quarterly change to decrease going forward. Turning to slide five, in previous calls, many of you asked questions or commented upon the question about consumer net charge-offs and when would they stabilize in the second-half of 2024. That expectation we have remains unchanged as well. This quarter's net charge-offs were 59 basis points. And for context, this is a stabilization of the rate. I would just remind you that prior to this quarter, I have to go all the way back to 2014 to see a charge-off rate of that high. And that's near when we were still emerging from the financial crisis. On slide four, we highlight the 30 and 90-day-plus credit card delinquency trends, which showed delinquencies have plateaued for the second consecutive quarter. This should lead to stabilized net credit losses in credit card in the second-half of the year. At the bottom of the page, note a couple of facts. First, on the payment rates. This is the rate of paydown on balances in a given month remain 20% above index to the pre-pandemic levels, even while our card customers have plenty of capacity to borrow. And importantly, because we're relation-based businesses, look at the right-hand slide at the bottom of page five. There you can see our deposit investment balances of our customers, who also have a card with us, remain 25% above their pre-pandemic levels, illustrating continued health of these customers. So if you think about consumer credit, the card charge-offs drive it, and they flattened out in terms of delinquencies, and we expect an improvement in the second-half. With regard to commercial real estate, our usual CRA credit exposure slide is included in our appendix. We continue to aggressively work through our loans in our modest CRA office portfolio. We saw a decrease in all the categories, a decrease in reservable criticized loans, a decrease in NPLs, and a decrease in net charge-offs. This supports our previous expectation that net charge-offs in the second-half of 2024 will be lower than the first-half of 2024. Our second quarter performance highlights Bank of America's ability to generate strong, sustainable growth through a combination of customer-centric strategies, innovation, strategic investments, and a commitment to a strong balance of risk and reward. We call that responsible growth. We're confident that focused approach will continue to drive long-term success and create value for you, our shareholders. Now I will turn it to Alistair for additional results.","evidence_gemma_new":"net new checking accounts","evidence_llama_3_3":"net new consumer checking accounts second quarter of 2024","evidence_qwen_3_30b":"net new checking accounts 278,000","gemma_new_max":278000.0,"gemma_new_min":278000.0,"llama_3_3_max":278000.0,"llama_3_3_min":278000.0,"qwen_3_30b_max":278000.0,"qwen_3_30b_min":278000.0}
{"symbol":"BAC","year":2024,"quarter":3,"date":"2024-Q3","chunk_id":2,"sub_chunk_id":0,"centroid_label":"consumer net new checking accounts","agreed_value":360000.0,"count":3,"chunk":"Brian Moynihan: Thank you, Lee, and good morning, and thank all of you for joining us for our discussion of our third quarter results. Bank of America continued to demonstrate strength this quarter in an economy that continued to be stable, albeit with slower growth and falling inflation. So many of you asked me from time-to-time what do we see in our own customer -- consumer customer base. As we talked about many times, our consumer payments is an indicator of activity. Those payments were up 4% to 5% year-over-year for the quarter in the total money those consumers moved in the economy. The pace of year-to-year money movement has been steady since late summer this year. After having fallen in the spring and early summer. This growth in consumer payments continues into October. This activity is consistent with how customers are spending money in the 2016 to 2019 timeframe. When the economy was growing, inflation was under control. This report is not meant to gainsay that consumers are worried of the cost of living, worried about higher rates and other matters. But overall activity is fine, unemployment is low and wage growth is steady, both of which bode well for the consumer overall and for consumer asset quality. With respect to what we see in our commercial businesses, it is consistent with a lower growth economy. Line of credit usage rates remain lower than pre-pandemic levels. This does not surprise us what with the dramatic increase in the cost of borrowing for small and medium-sized businesses. They aren't being indolent, they want to grow. They are simply being more careful and worry a final demand will hold. Therefore, they are being cost conscious across the board. So how did Bank of America do against this backdrop? At Bank of America, our commitment to responsible growth remains unwavering, and this quarter is another illustration of that. We grew, we did it the right way. In the third quarter, Bank of America generated $25.5 billion in revenue and earned $6.9 billion in net income after tax. Year-to-date, we've generated net income of just over $20 billion. Four quarters ago, we called that a bottom would occur in our net interest income in the second quarter of 2024. Even with a rate environment that has bounced around quite a bit since we said that we got it right. As we expected then, NII indeed troughed in the quarter two. NII grew 2% this quarter and Alastair will note later, we expect NII to grow again in quarter four, even as the market expects two more rate cuts in quarter four. This quarter, we saw a healthy revenue growth in our wealth and investment management business and in our global markets businesses. We returned 5.6 billion of capital to shareholders while also supporting the needs of our clients. So with that brief overview, let's dive into Slide 2. Earnings per share came in at $0.81 this quarter at $25.5 billion in revenue we grew modestly from the third quarter, '23 as improvement in noninterest income more than offset a year-over-year decline in net interest income. Fees grew 5% year-over-year and represented 45% of total revenue. The strong year-over-year fee performance was led by a 15% improvement in investment in brokerage services, mostly in our global wealth management business. We also grew investment banking fees 18% year-over-year sales and trading revenue increased 12% year-over-year and aggregate, these market related revenue streams rose an impressive 13% year-over-year. Our total expense in the company increased 4%. You can attribute most of the year-over-year expense growth to these market related areas. Overall, a good job by the team. On asset quality a few quarters ago we told you that consumer credit losses would go down this quarter, given delinquency trends we had seen at the time. We also told you that office losses would be lower. Both of these proved true again this quarter. Good asset quality resulted in net charge-off in provision expense for this quarter at $1.5 billion, which was unchanged from last quarter. Our performance is partly attributable to the diversity and balance of the company. A little more than half our earnings come from our consumer and GWIM businesses serving people and the other half come through from our Global Banking and Markets businesses serving companies and institutional investors. So let's turn to see how we grew organically this quarter. We are now on Slide 3. Our organic growth has been driven by a continued focus on customers and client experience throughout all our businesses. Consumer leads the way delivering solid organic growth with high quality accounts engaged clients. For the 23rd consecutive quarter, we added significant net new consumer checking accounts and expanded our customer base and market share. We added 360,000 net new checking accounts this quarter, which brings our first nine months of '24 to more than 880,000 net new checking accounts. In wealth management, we added another 5,500 net new relationships this quarter. In our commercial businesses, we added hundreds of small business and commercial banking relationships. Also note that we saw a strong organic growth of investment balances with banking customers and growth in banking products for our investment clients in our GWIM business. This has led us to now manage $5.9 trillion in client balances of loans, deposits and investments across the consumer and wealth management clients. We saw flows of $62 billion into those businesses in the past four quarters. In our Global Banking business, we saw loan demand start to pick up late in the quarter. We again ranked third in the logic IB fees we received and have a solid pipeline. Our global transaction services platform continues to grow around the world and showed strong deposit growth for our commercial businesses over the last year and a quarter. This quarter, global markets saw continued momentum. Global markets recorded the 10th consecutive quarter of year-over-year growth in sales and trading. Investments we've made in this business and the intensity of the teams has enabled a 35% improvement in sales and trading revenue in the past three years. Good work by Jimmy DeMare and the team. Our customers and clients continue to want more from us, especially when it comes to our digital capabilities. So let's discuss this on Slide 4. Slide 4 highlights this continued success across our digital platforms. As usual, we include our disclosures on digital stats across the business, which we believe lead the industry. I commend you the pages in the appendix, which give you more granular disclosure for each of the businesses' digital activities. Our fully integrated consumer banking investment application drives the utility for our customers across GWIM and consumer. The usage stats you see are strong proof points. Our second language capabilities also enhance the customer's experience. We have grown to more than 48 million active digital users and those digital users logged in more than 3.6 billion times this quarter. We also continue to see more sales through their digital properties. Digital sales represented 54% of our total consumer sales this quarter. Note that it simply takes both high-touch and high-tech to drive continued growth with individual clients across the wealth spectrum in America. Erica, our AI enabled virtual assistant reached 2.4 billion client interactions since its launch and Zelle showed continued user and usage increases. In our wealth management business, we continue to see full relationships increase with both investing and banking relationships being open. 75% of new accounts in Merrill were opened digitally whether they were banking accounts or investment accounts. This enables more efficient customer coverage for our advisory teams. Finally, 87% of our Global Banking relationship clients are digitally active. We have innovated and significantly streamlined service requests by enabling clients to directly initiate and track inquiries within our award winning cash flow platform. As a result, app sign-ins for these clients increased nearly 80% in just the last 24-months. In summary, the economic environment remains solid. Issues remain out there to external factors that could affect our business and the economy generally. We still see great opportunities for continued growth across all our businesses. We are focused on driving market share in all our businesses, investing in technology to further enhance the customer experience and continue to increase our efficiency. With NII now growing and complementing our fee growth along with our continued solid expense discipline, we expect to return to operating leverage as we move through the quarters in 2025. With that, I'll turn to Alastair for additional details.","evidence_gemma_new":"net new checking accounts this quarter","evidence_llama_3_3":"net new consumer checking accounts","evidence_qwen_3_30b":"net new checking accounts this quarter","gemma_new_max":360000.0,"gemma_new_min":360000.0,"llama_3_3_max":360000.0,"llama_3_3_min":360000.0,"qwen_3_30b_max":360000.0,"qwen_3_30b_min":360000.0}
{"symbol":"BAC","year":2024,"quarter":4,"date":"2024-Q4","chunk_id":48,"sub_chunk_id":0,"centroid_label":"consumer net new checking accounts","agreed_value":1100000.0,"count":3,"chunk":"Jim Mitchell: Hey, good afternoon. Maybe just dialing in on the deposit growth, you clearly have been outperforming the peer group. But maybe just want to focus on consumer for a second. You generated 1.1 million of net new checking accounts, which seems best among peers. I think that's showing up in better consumer deposit growth in 4Q. So, what do you think you're doing differently that's generating that kind of consistent success in adding new accounts?","evidence_gemma_new":"net new checking accounts","evidence_llama_3_3":"consumer net new checking accounts 4Q","evidence_qwen_3_30b":"consumer net new checking accounts 4Q","gemma_new_max":1100000.0,"gemma_new_min":1100000.0,"llama_3_3_max":1100000.0,"llama_3_3_min":1100000.0,"qwen_3_30b_max":1100000.0,"qwen_3_30b_min":1100000.0}
{"symbol":"BAC","year":2024,"quarter":4,"date":"2024-Q4","chunk_id":49,"sub_chunk_id":0,"centroid_label":"consumer net new checking accounts","agreed_value":1000000000.0,"count":2,"chunk":"Brian Moynihan: Look, at the end of the day, our brand is best received. You know, in terms of our scores, our customer service capabilities are scoring at the highest they've ever come. The fairness of our account structures, the transparency, the digital capabilities, it's just winning in the market. It's in a billion net new checking accounts and not -- you know, 92%, 90%, whatever they are, are primary. They start with an average balance of 2,000 to 3,000. They move to, you know, 6,000, 7,000 over the course of, you know, six months. This is just a great job done by Dean Athanasia and Aron Levine and Holly O'Neill that run this business for us, just continue to drive it. Then, on top of that, we've layered in ways with various business lines to help generate accounts. So, our work we do with companies to offer our best products and services as a benefit to their employees helps us generate some extra growth. Our ability to do business around college campuses, which is not huge for, you know, this quarter's growth. But because we're generating the amount of openings at twice the rate of young people exist in society for our customers five years ago, five years later the people are out working and they're great customers. So, it's a whole bunch of things. So, it's relentless and sustainable, you know, and yet, we still have lots of ways to grow. And we weren't in -- you know, we just entered a lot of markets over the last five years, you know, Denver, Cleveland, Columbus, Cincinnati, Indianapolis, Minneapolis, Milwaukee now, Lexington, etc. That's one way. And then, if you think about in wealth management teammates -- and Katy Knox and Lindsay and Eric do a great job there, but we have a lot of room to go where we continue to outfit those clients with a full range of services at Bank of America. And even Merrill Edge has a lot going on there. So, there's a fair amount of deposits that come from our Merrill Edge originations, which are 300,000 accounts year over year. And, you know, those are all $100,000 starting accounts, not $3,000.","evidence_gemma_new":"net new checking accounts","evidence_llama_3_3":"net new checking accounts","evidence_qwen_3_30b":null,"gemma_new_max":1000000000.0,"gemma_new_min":1000000000.0,"llama_3_3_max":1000000000.0,"llama_3_3_min":1000000000.0,"qwen_3_30b_max":null,"qwen_3_30b_min":null}
{"symbol":"BAC","year":2023,"quarter":4,"date":"2023-FY","chunk_id":12,"sub_chunk_id":0,"centroid_label":"deposit","agreed_value":1885000000000.0,"count":3,"chunk":"Alastair Borthwick: Yeah, okay. So, first of all, if I go back over the trajectory of deposits through the course of 2023, we troughed at [$1.845 trillion and we ended at $1.925 trillion] (ph). So underneath there, there's $80 billion of growth in deposits since May. So that obviously informs our perspective around how we think about deposit gathering at this stage. That feels to us like it's a supportive environment of our NII forecast. Second, obviously, over the course of this year, there's been a move towards more interest bearing. And that actually helps us in the event that we start seeing Fed cuts, because that's obviously going to allow us to take those rates down. So, look, we're going to see a little bit of rotation, I think, here in Q1 and Q2. I think we'll likely see a little bit of deposit pricing lag. But the last Fed hike at this point was July. So there's been an awful lot of time at this point for deposit pricing to shake out. We won't be immune from anything. We have to compete for deposits along with everyone else. But combine all of those things and that's where we get our confidence.","evidence_gemma_new":"deposits 2023","evidence_llama_3_3":"deposits 2023","evidence_qwen_3_30b":"deposits through the course of 2023","gemma_new_max":1877500000000.0,"gemma_new_min":1877500000000.0,"llama_3_3_max":1886750000000.0,"llama_3_3_min":1886750000000.0,"qwen_3_30b_max":1885000000000.0,"qwen_3_30b_min":1885000000000.0}
{"symbol":"BAC","year":2023,"quarter":1,"date":"2023-Q1","chunk_id":2,"sub_chunk_id":0,"centroid_label":"deposit","agreed_value":1910000000000.0,"count":2,"chunk":"Brian Moynihan: Good morning, and thank you all of you for joining us. I'm starting on Slide 2 of the materials. Your company produced one of its highest core EPS, earnings numbers in a challenged operating environment in the first quarter. Simply put, we navigated that environment well. The preparedness and strength of Bank of America and the trust of our clients reflects a decade-long responsible growth model and relationship nature of our franchise. During quarter one, importantly, organic growth engine continued to perform. Let me first summarize some points, and I'll turn it over to Alastair to take you through the details of the quarter. If you go to Slide 2 of the materials, Bank of America delivered strong earnings, growing EPS 18% over first quarter '22. Every business segment performed well. We grew clients and accounts organically and at a strong pace. We delivered our seventh straight quarter of operating leverage, led by a 13% year-over-year revenue growth. We further strengthened our balance sheet, with our CET1 ratio increasing to 11.4%. Regulatory capital ended at the highest nominal level in our history at $184 billion. We maintained strong liquidity. We ended the quarter with more than $900 billion in Global Liquidity Sources. We are in good returns for you as our shareholders, with a return on tangible common equity of 17%, a 107 basis points return on average assets. Tangible book value per share grew 9% year-over-year. We did this as the economy slowed. And, remember, our research team continues to predict a shallow recession that will occur beginning in the quarter three of 2023. It's interesting, when we look at our consumer behavior, payments by consumer continued to drive the U.S. economy. We've seen debit and credit card spending at about 6% year-over-year growth pace, a little slower but still healthy. But, remember, card spending represents less than a quarter of how consumers pay for things out of their accounts at Bank of America. Overall payments from our customers' accounts across all sources were up 9% year-over-year for March as a month. Year-to-date, they were up about 8% for the quarter. After slowing in the back half of 2022 a bit, we saw the payments -- pace of payments picked back up in quarter one, especially in the latter parts of the quarter. Consumers' financial positions remains generally healthy. They're employed with generally higher wages, continue to have strong account balances, and have good access to credit. As you think through all the tightening actions of the Fed, the flows to alternative yielding assets, investments and the disruption the past quarter, our deposits continued to perform well, ending the quarter at $1.91 trillion. If you think about it, that's about the same balance that we had in mid-October of 2022. So, we've seen these balances stabilize and remain 34% above they were in prior to the pandemic. The team has managed well during these periods by remaining focused on the things we can control to drive value through our franchise. I thank them for a very strong quarter, near-record earnings with strong returns. Let me turn the call over to Alastair to walk through the details of the quarter.","evidence_gemma_new":"deposits","evidence_llama_3_3":"Bank of America deposits first quarter","evidence_qwen_3_30b":null,"gemma_new_max":1910000000000.0,"gemma_new_min":1910000000000.0,"llama_3_3_max":1910000000000.0,"llama_3_3_min":1910000000000.0,"qwen_3_30b_max":null,"qwen_3_30b_min":null}
{"symbol":"BAC","year":2023,"quarter":3,"date":"2023-Q3","chunk_id":69,"sub_chunk_id":0,"centroid_label":"deposit","agreed_value":1900000000000.0,"count":3,"chunk":"Brian Moynihan: So a couple things. One, just broad base, we have a $1.9 trillion deposit, $1 trillion of loan. So we have a tremendously high deposit base. But also, if you think about, if you look at the Slide 5 or whatever, as we show the deposits by business, in the banking business, Global Banking, I think six quarters we've been relatively flat, so, and starting to grow off of that. That is fully priced at -- it's not like corporate treasurers wait around to talk to you about what you're paying and the noninterest-bearing percentage has drifted down. The amount they hold in excess of that, part of that to pay fees has been relatively stable. And so, we feel very good about that. Looking at Wealth Management, basically all the movement was made -- has been made pretty much to the higher rate environment, i.e. buying treasury securities directly. If you look in our Wealth Management business, the amount of short-term cash-oriented type investments, money market funds, et cetera, treasuries, et cetera, has gone from like $500 billion to $700 billion or $800 billion over the last several -- last couple of years. So that move has taken place. And so the rest of it is now in a relatively stable base. You can see those numbers flat. If you go to the consumer side, there's basically two or three things. One is, in the medium income households plus or minus, you're seeing the slow spend down even though they still have multiples of what they had pre-pandemic in their accounts. And even though that's a small part of the overall deposit base, there's still this low trend that where that's drifting down as all the things you read about go on. And the higher end part of that base, in a broad consumer base, they're actually below the pandemic by about 20%. And that's because they moved the money into the market. And you can see that in some of the preferred category of pricing. So where people think about checking and money markets and this, we think, I always have thought about it a little more straightforward, which is transactional cash and investment cash. The investment cash has largely been re-suited across the businesses. The transactional cash holds because it's money in motion moving every day. And for our Consumer business, that\u2019s represented by the $0.5 trillion of checking account balance, as you can see on the page, with some modest amounts in money markets and stuff that are carried as the cushion people have. And if they've moved the money to market, they've moved it. And so we're watching Consumer because there's a little more drifting there, and it's up $250 billion since pre-pandemic. And you're saying you have the dynamics of loans, student loan repayment starting, that's a million of our customers pay student loans. You have the dynamics of interest rate impacts on cash carry of loan balance if that's higher. And that'll sort out, but just takes a lot longer. That's across 37 million people. So it\u2019s a -- the impact takes a while to sort through. And so we feel good about it. But I think people look by category in this and that. You have to think about more how a customer, which a business or consumer, behaves. And what we've seen them is adjust their behavior based on their household circumstances, and largely through the system, and most of it coming a little bit slower in consumer, just because natural question is there, if there are a lot of stimulus went in those accounts, what do I do with it over time? And now they're doing something.","evidence_gemma_new":"deposit loan","evidence_llama_3_3":"deposit","evidence_qwen_3_30b":"deposit $1.9 trillion","gemma_new_max":1900000000000.0,"gemma_new_min":1900000000000.0,"llama_3_3_max":1900000000000.0,"llama_3_3_min":1900000000000.0,"qwen_3_30b_max":1900000000000.0,"qwen_3_30b_min":1900000000000.0}
{"symbol":"BAC","year":2023,"quarter":4,"date":"2023-Q4","chunk_id":6,"sub_chunk_id":0,"centroid_label":"deposit","agreed_value":14000000000.0,"count":3,"chunk":"Alastair Borthwick: Yeah. Well, I think, Jim, going back to last quarter, I don't think our views have changed a great deal. So our guidance isn't changing much either in that regard, if anything, Q4 deposits were a little better than we expected. So I think, you see and -- we sort of thought this quarter might be around $14 billion. It was a little better than that. So that's obviously a good starting point. Now, when we look forward off of that slightly higher number, if you think about Q1, I'm thinking about it in terms of a date count, that might be $150 million, let's say. So from where we are, that's going to get us to somewhere between $13.9 billion and $14 billion. It's going to be in that kind of a range. Q2, we see going down just a little bit more. That's a little bit of deposit seasonality in Q1 and a little bit of just catch up on rate paid and some rotation. But at that point, we see growing in the back half of the year, and that's largely, yes, deposits growing, it's loans growing a little bit, it's some restriking of the securities that come off the balance sheet, and it's restriking some of the loans that come off the balance sheet. So it's all of those things. You're right. When we got together last quarter, we thought there might be three rate cuts. Now it's up to six. So that's obviously a -- that's a little harder but the deposit picture has been a little better. So no particular change at this point.","evidence_gemma_new":"deposits Q4","evidence_llama_3_3":"guidance deposits this quarter","evidence_qwen_3_30b":"deposits Q4","gemma_new_max":14000000000.0,"gemma_new_min":14000000000.0,"llama_3_3_max":13950000000.0,"llama_3_3_min":13950000000.0,"qwen_3_30b_max":14000000000.0,"qwen_3_30b_min":14000000000.0}
{"symbol":"BAC","year":2023,"quarter":4,"date":"2023-Q4","chunk_id":12,"sub_chunk_id":0,"centroid_label":"deposit","agreed_value":80000000000.0,"count":2,"chunk":"Alastair Borthwick: Yeah, okay. So, first of all, if I go back over the trajectory of deposits through the course of 2023, we troughed at [$1.845 trillion and we ended at $1.925 trillion] (ph). So underneath there, there's $80 billion of growth in deposits since May. So that obviously informs our perspective around how we think about deposit gathering at this stage. That feels to us like it's a supportive environment of our NII forecast. Second, obviously, over the course of this year, there's been a move towards more interest bearing. And that actually helps us in the event that we start seeing Fed cuts, because that's obviously going to allow us to take those rates down. So, look, we're going to see a little bit of rotation, I think, here in Q1 and Q2. I think we'll likely see a little bit of deposit pricing lag. But the last Fed hike at this point was July. So there's been an awful lot of time at this point for deposit pricing to shake out. We won't be immune from anything. We have to compete for deposits along with everyone else. But combine all of those things and that's where we get our confidence.","evidence_gemma_new":"deposits May","evidence_llama_3_3":"deposits May","evidence_qwen_3_30b":null,"gemma_new_max":80000000000.0,"gemma_new_min":80000000000.0,"llama_3_3_max":80000000000.0,"llama_3_3_min":80000000000.0,"qwen_3_30b_max":null,"qwen_3_30b_min":null}
{"symbol":"BAC","year":2023,"quarter":4,"date":"2023-Q4","chunk_id":37,"sub_chunk_id":0,"centroid_label":"deposit","agreed_value":0.35,"count":2,"chunk":"Glenn Schorr: Hello, there. Good morning. First question is on the deposits. And I like the path that we've seen in terms of all the stimulus comes, all the deposits come in, you get some spending, you get some migration, you get some rich people buying treasuries. It's great. To see the stability in the fourth quarter and hear your comments about 2024 for deposits is a little encouraging. We'd always want more, but it's a little encouraging. But my question is, to be 35% higher in 4Q '19 is what I would call a lot more growth than a normal period of time would be with the up and down. So is that a good thing or is that a risk? And maybe the answer lies within how much of those excess deposits are sitting in all these new accounts that you've opened versus just cash from sitting around in existing clients that's maybe waiting to be deployed. I hope that question is clear.","evidence_gemma_new":"deposits 4Q '19","evidence_llama_3_3":"deposits 4Q '19","evidence_qwen_3_30b":null,"gemma_new_max":0.35,"gemma_new_min":0.35,"llama_3_3_max":0.35,"llama_3_3_min":0.35,"qwen_3_30b_max":null,"qwen_3_30b_min":null}
{"symbol":"BAC","year":2024,"quarter":1,"date":"2024-Q1","chunk_id":3,"sub_chunk_id":0,"centroid_label":"deposit","agreed_value":23000000000.0,"count":2,"chunk":"Alastair Borthwick: Thank you Brian. I\u2019m going to start on Slide 4 of the earnings presentation. Brian covered much of the income statement highlights and he noted the difference in our reported results and the results adjusted for the FDIC assessment, so I\u2019m not going to repeat that; I\u2019d just add that we delivered strong returns. On a reported basis, our return on average assets was 83 basis points, and return on tangible common equity was 12.7%. When adjusted for the FDIC assessment, our efficiency ratio was 64%, ROA at 89 basis points, and ROTCE at 14%. Let\u2019s move to the balance sheet on Slide 5, where we ended the quarter at $3.27 trillion of total assets, up $94 billion from the fourth quarter, and the bulk of that increase was in global markets to support seasonally elevated levels of client activity. Outside of the global markets activity, we\u2019d highlight both the $23 billion growth in deposits and the $20 billion decline in cash levels. With that increase in liquidity, you\u2019ll also note that debt securities increased $39 billion, which included an $8 billion decline in hold-to-maturity securities and a $47 billion increase in AFS securities. Those are mostly hedged U.S. treasuries added with yields effectively at cash rates. At $313 billion, our absolute cash levels remain higher than required. Liquidity remains strong with $909 billion of global liquidity sources, and that\u2019s up $12 billion from the fourth quarter and remains $333 billion above our pre-pandemic fourth quarter \u201919 level. Shareholder equity increased $1.9 billion [indiscernible] earnings, as they were only partially offset by capital distributed to shareholders, and AOCI was little changed in the quarter. During the quarter, we paid out $1.9 billion in common dividends and we bought back $2.5 billion in shares, which more than offset our employee awards. As part of those share awards in the first quarter, we announced our seventh consecutive year of share and success compensation awards, covering more than 95% of our associates and further aligning their interests with shareholders. Tangible book value per share of $24.79 is up 9% year-over-year. Looking at regulatory capital, our CET-1 level improved to $197 billion from December 31, and the CET-1 ratio was stable at 11.8% and remained well above our current 10% requirement. We also remain quite well positioned against the current proposed capital rules as our CET-1 level is also above the 10% requirement even when we include estimated RWA inflation from those new proposed rules. Risk-weighted assets increased modestly, driven by client activity in global markets, and our supplemental leverage ratio was 6% compared to a minimum requirement of 5%, which leaves capacity for balance sheet growth. At $475 billion of total loss absorbing capital, our TLAC ratio remains comfortably above our requirements. Let\u2019s turn our balance sheet focus to loans by looking at the average balances in Slide 6. Average loans in the first quarter of $1.048 trillion were flat compared to the fourth quarter, and they improved 1% year-over-year as solid credit card growth was partially offset by declines in securities-based lending. Commercial loans grew modestly year-over-year. We experienced modest improvement in revolver utilization in commercial lending in the first quarter, and that\u2019s being offset for the most part by pay downs as larger client financing solutions are being met through capital markets access. Lastly on a positive note, loan spreads continued to widen. Moving to deposits, we\u2019ll stay focused on averages on Slide 7, and relative to pre-pandemic Q4 2019, average deposits are still up 35%. Every line of business remains well above their pre-pandemic levels and consumer is up 32%, with checking up 38% driven by net new checking accounts added, as Brian noted earlier. Linked quarter total average deposits remained steady at more than $1.9 trillion. The total rate paid on consumer deposits in the quarter was 55 basis points, and while the rate increased nine basis points from the fourth quarter, the pace of increases continues to slow. The mix of low rate and high quality transactional accounts keeps the rate paid low. Wealth management and global banking also saw a slowdown in the increases in their rate paid and slowdown in the rotation out of non-interest bearing accounts in the first quarter. Focusing for a moment on ending deposits and movement from the fourth quarter, this quarter we delivered good deposit growth. Total deposits grew $23 billion and are now $100 billion above their trough in mid-May of 2023. Consumer banking deposits saw growth in both consumer interest-bearing and non-interest bearing. Global banking continued their more normal pattern of deposits seen for the past five quarters and up more than $30 billion over the last year. Deposit growth exceeded loan growth for the third straight quarter and our excess of deposits over loans expanded to $897 billion, and that\u2019s nearly two times the $450 billion we had pre-pandemic. You can see that on the upper left-hand side of Slide 8. We continue to have a mix of cash, available-for-sale securities and held-to-maturity securities, and this quarter our combination of cash and AFS is now 52% of the total $1.2 trillion noted on this page. You\u2019ll also notice the continued change in mix of the shorter term portfolio as we again lower cash and increase AFS securities that are mostly hedged and at similar yields to the cash. Note also the hold-to-maturity book continues to decline from pay downs. In total, the hold-to-maturity book is now down $96 billion from its peak and consists of about $122 billion in treasuries and about $458 billion in mortgage-backed securities, along with $7 billion of other securities. Lastly, a blended cash and securities yield of 360 basis points continued to rise and remained about 168 basis points above the rate we paid for deposits. The replacement of lower earning assets into higher yielding assets continues to provide an ongoing benefit to NII. Let\u2019s turn our focus to NII performance using Slide 9, where you can see on a fully tax-equivalent basis NII was $14.2 billion. Good deposit growth provided a strong start to the year for NII, and as Brian noted, NII of $14.2 billion increased by $100 million from the fourth quarter. That compares to our expectation and guidance of a decline of $100 million to $200 million, and that would have resulted in NII this quarter of $13.9 billion to $14 billion, so we did quite a bit better than we had originally expected. The improvement in quarterly NII in Q1 compared to Q4 included the benefits of higher yielding assets and improvement in global markets NII, partially offset by higher deposit cots and one less day in Q1 than 4Q23. Deposit balance activity more generally also aided in the beat versus our expectations. As we look forward for Q2, we expect some modest impact of lower deposits in wealth management as client make their seasonal income tax payments, and we expect global markets NII to decline mostly seasonally a little bit as well, so we expect second quarter NII could approach $14 billion on an FTE basis. Further, we continue to expect that Q2 will be the low point for NII and we expect the back half of 2024 to grow. Compared to our guidance last quarter, we\u2019re obviously growing off a larger base of NII after having outperformed in the first quarter. With regard to that forward view, let me just note a few other caveats. It includes our assumption that interest rates in the forward curve at the end of the quarter materialize, and at the end of first quarter there were still three cuts expected this year, starting in June. Our forward view also includes an expectation of low single-digit loan growth and some moderate growth in deposits as we move into the back half of 2024. Given our recent deposit and loan performance, we continue to feel good about these assumptions. Turning to asset sensitivity and focused on a forward yield curve basis, our sensitivity to the plus and minus-100 basis points parallel shift in the forward curve at March 31 remains well balance. Let\u2019s turn to expense, and we\u2019ll use Slide 10 for that discussion, where we reported $17.2 billion expense this quarter including the FDIC assessment. Adjusted for the assessment, expenses were $16.5 billion and the increase over the fourth quarter included a little more than $400 million in seasonal payroll tax expense, as well as higher revenue-related costs and, to a lesser extent, annual merit increases and other annual awards, like sharing success awards provided this quarter. $16.5 billion was just a little above our forecast for Q1 which we made last quarter, and the increase is driven by better than expected fee revenue across wealth management, investment banking, and sales and trading, and as Brian said, that\u2019s a trade-off we\u2019re more than happy to make, bringing more earnings to the bottom line. While expense is up almost 2% from last year, we simply remind you inflation is up by more than 4% and we\u2019ve increased our investment, and we\u2019re paying for the revenue growth, so we think it represents good work by our teams. As we look forward in Q2, we expect a decline from the Q1 level as we typically see about two-thirds of the Q1 elevate payroll tax expense come back out, and the remainder of the year expense is expected to trend down. Continued digital engagement savings and operational excellent initiatives should help us offset other cost increases for people and technology through the back half of the year. Turning to credit on Slide 11, provision expense was $1.3 billion in the first quarter, and that included $179 million of reserve release due to a modestly improved macro environment outlook as the baseline consensus expectations improved from the fourth quarter. On a weighted basis, we remain reserved for an unemployment rate of nearly 5% by the end of 2025 compared to the most recent actual 3.8% rate. Net charge-offs of $1.5 billion increased $306 million from the fourth quarter, driven by continued credit card seasoning and commercial real estate office exposures as swift revaluations from current appraisals and resolutions drove higher charge-offs. The net charge-off ratio was 58 basis points, a 13 basis point increase from the fourth quarter. On Slide 12, we show you the credit quality metrics for both our consumer and commercial portfolios. Consumer net charge-offs increased $150 million versus the fourth quarter from the flow-through of higher late stage credit card delinquencies. We included a credit card delinquency slide, No. 28 in our appendix, and we\u2019re encouraged by the trend of delinquencies because the late stage increases slowed and early stage delinquencies improved as well, and that leads us to believe we should begin to see consumer net charge-offs start to level out over the next quarter or so. All of this is still well within our risk appetite and our expectations, and it\u2019s consistent with the normalization of credit we discussed with you in prior calls. Commercial net charge-offs increased $191 million versus the fourth quarter, driven by commercial real estate losses and office exposures. On office losses this quarter, we recorded charge-offs on 16 office loans. Four were a result of sales activity, i.e. final resolution, seven were from losses that we expect on exposures that are in the process of expected resolution in the course of the next 90 days, and the rest we took as a result of refreshed valuations. We use a continuous and thorough loan-by-loan analysis and we\u2019re quick to recognize impacts in the commercial real estate office space through our risk ratings, and that\u2019s resulted in several downgrades in the last few quarters. As a result of these quick actions and our downgrades in categorization, we\u2019ve also refreshed the valuation of our reservable criticized properties, and we\u2019ve taken appropriate reserves and charge-offs in the process. Roughly one-third of our office exposure is now categorized as reservable criticized, and importantly the pace of the increase in reservable criticized exposures has slowed each quarter since the second quarter of last year, so we believe the losses on these office properties have been front-loaded and largely reserved. We expect the losses to move lower in the second quarter and we expect a notable decline in the second half of the year when compared to the first half of this year, absent any material change in expected real estate prices. In the appendix on Slide 29, we\u2019ve included a current view of our commercial real estate and office portfolio metrics, as we usually do. Let\u2019s turn to the various lines of business and offer some brief comments on their results, starting on Slide 13 with consumer banking. For the quarter, consumer banking earned $2.7 billion on continued strong organic growth. The reported earnings declined 15% year-over-year as revenue declined from lower deposit balances compared to the first quarter of \u201923. Credit card loss normalization also caused year-over-year provision expense to increase. As Brian noted, customer activity showed another strong quarter of net new checking growth, another strong period of card openings, and investment balances for consumer clients which climbed 29% year-over-year to a record $456 billion. That included market appreciation and also very strong full-year flows of $44 billion. As noted earlier, loans grew nicely year-over-year from credit card as well as small business, where we remain the industry leader. Expenses were flat year-over-year, fighting off inflation, merit increases, higher minimum wages, and new and renovated financial centers and technology investments, so holding expense flat reflected very good work by the consumer team. As you can see on the appendix, Page 20, digital adoption and engagement continued to improve, reaching a record of $3.4 billion digital log-ins in the quarter, and it showed good year-over-year improvement. Customer satisfaction scores at near record levels illustrate the continued appreciation of the enhanced capabilities we provide. Moving to wealth management on Slide 14, we produced good results, and that included good organic client activity, market favorability and strong flows. Our comprehensive suite of investment and advisory services coupled with a commitment to personalized wealth management planning and solutions has enabled us to meet the diverse needs and aspirations of our clients. In first quarter, we reported record revenue of $5.6 billion and a little more than $1 billion in net income. That net income was 10% from the first quarter of \u201923. The business generated positive operating leverage and grew revenue faster than expense, while improving the pre-tax margin year-over-year. While overall average loans were down year-over-year, driven by the securities-based lending, it\u2019s worth noting the strong growth we\u2019re seeing in custom lending, and ending loans in the wealth management custom loan book are up 6% year-over-year. As Brian noted earlier, both Merrill and the private bank continued to see strong organic growth and produce good assets under management flows of more than $60 billion since the first quarter of \u201923, which reflects a good mix of new client money, as well as existing clients putting money to work. Expense growth here matched the revenue growth, otherwise fighting off higher investment costs and inflation. Let me also highlight the continued digital momentum here. As an example, Merrill has 86% of its clients now engaging with us digitally and 80% utilizing e-delivery. 76% of their eligible accounts are now opened digitally, so the cost for us to open is half and the customer cycle times are improved greatly. On Slide 15, you\u2019ll see our global banking results, and the business produced earnings of just less than $2 billion, down 22% year-over-year as improved investment banking fees and treasury services revenue were overcome by lower net interest income and higher provision expense. Revenue declined 4% driven by the impact of interest rates and deposit rotation to interest-bearing, and that impacted NII. The diversification of our revenue across products and regions continues to reflect the strength in this platform, and GTS and investment banking fees are good examples. In our global treasury services business, some of the NII pressure from higher rates on deposits is offset by the fees paid for moving and managing the cash of clients, and that continues to grow with existing clients as well as with new client generation. As Brian noted, investment banking had a strong quarter, and at $1.6 billion in investment banking fees, this quarter was the strongest quarter in seven years, absent the pandemic 2020 and 2021 periods. An increase in provision expense included the commercial real estate net charge-offs I discussed earlier, as well as a larger reserve release in the prior year period. Expense increased 2% year-over-year, including the 35% lift in investment banking fees from the first quarter of \u201923. Switching to global markets on Slide 16, we\u2019ll focus our comments on results excluding DVA, as we normally do. The team had another terrific quarter with $1.8 billion in earnings, growing 7% year-over-year. Revenue improved 6% from the first quarter of \u201923 and return on average allocated capital was 16%. Focusing on sales and trading ex-DVA, revenue improved 2% year-over-year to $5.2 billion, which is the highest first quarter result in over a decade. FICC was down 4% while equities increased 15% compared to the first quarter of \u201923. The decline in the FICC revenues versus the first quarter was driven by a weaker macro trading quarter that was partially offset by better mortgage trading results. Equities was driven by strong trading results in derivatives, and year-over-year expenses were up 4% from continued investment in the business. Finally on Slide 17, all other shows a loss of $700 million driven by the FDIC assessment. Revenue declined year-over-year, reflecting higher investment tax credit yields, and expense adjusted for the FDIC assessment was down $133 million, driven by lower unemployment processing costs. Our effective tax rate for the quarter was 8%, and excluding the FDIC assessment and other discrete items, it would have been 9%. Further excluding tax credits related to investments in renewable energy and affordable housing, our effective tax rate would have been 26%. Thank you, and with that, we\u2019ll jump into Q&A.","evidence_gemma_new":"deposits","evidence_llama_3_3":null,"evidence_qwen_3_30b":"deposits","gemma_new_max":23000000000.0,"gemma_new_min":23000000000.0,"llama_3_3_max":null,"llama_3_3_min":null,"qwen_3_30b_max":23000000000.0,"qwen_3_30b_min":23000000000.0}
{"symbol":"BAC","year":2024,"quarter":2,"date":"2024-Q2","chunk_id":3,"sub_chunk_id":0,"centroid_label":"deposit","agreed_value":36000000000.0,"count":3,"chunk":"Alastair Borthwick: Thank you, Brian, and I'm going to start on slide six of the earnings presentation. I'll touch on more highlights noted on slide six as we work through the material. I just want to say upfront that we delivered strong returns with return on average assets of 85 basis points and a return on tangible common equity of nearly 14%. So let's move to the balance sheet on slide seven, where you can see we ended the quarter at $3.26 trillion of total assets, relatively unchanged from the first quarter. And not much to note here apart from a mixed shift of lower securities balances, mostly offset by an increase in reverse repo and modest loan growth, as well as global markets client activity. On the funding side, deposits declined $36 billion on an ending basis, reflecting typical seasonal customer payments of income taxes. And as Brian noted, average deposits were still modestly higher. Liquidity remained strong with $909 billion of global liquidity sources that was flat compared to the first quarter. Shareholders' equity was also flat compared to Q1, as earnings were offset by $5.4 billion in capital distributed to shareholders and a $1.9 billion redemption of preferred stock in the quarter. The $5.4 billion of capital contributions included $1.9 billion in common dividends and the repurchase of $3.5 billion in shares. AOCI improved modestly in the quarter and tangible book value per share of $25.37 rose 9% from the second quarter of last year. In terms of regulatory capital, our CET1 level improved to $198 billion and the CET1 ratio was stable at 11.9%. This 11.9% ratio remained well above our current 10% requirement, as well as our new 10.7% requirement as of October 1, 2024. Risk-weighted assets increased modestly and that was driven by lending activity. Our supplemental leverage ratio was 6% versus our minimum requirement of 5% and that leaves plenty of capacity for balance sheet growth. And our $468 billion of TLAC means our total loss-absorbing capital ratio remains comfortably above our requirements. Brian already covered deposit trends, so let's turn the balance sheet focus to loans and we'll look at average balances on slide eight. You can see average loans in Q2 of $1.051 trillion. They improved 1% year-over-year, driven by 5% credit card growth and modest commercial growth. The modest improvement in overall commercial loans included a 2% increase in our domestic commercial loans and leases, partially offset by a 4% decline in commercial real estate. Middle market lending saw an uptick in the quarter, and we saw good demand in our wealth businesses from custom lending. These areas of growth were largely offset by continued paydowns from our larger corporate clients on interest rate sentiment. Consumer growth was driven by credit card borrowing, and while home lending balances were flattish, originations picked up a bit this quarter. Lastly, and on a positive note, loan spreads continued to widen. As we turn our focus then to NII performance and slide nine, note that we moved the slide we typically use to talk about excess deposits to the appendix on slide 22, so you can see that there. Our excess deposit levels above loans remained high at $850 billion and continue to be a good source of value for shareholders. 52% of our excess liquidity is now in short-dated cash and available for sale securities. The longer-dated, lower-yielding hold-to-maturity book continues to roll off, and we reinvested again this quarter in higher-yielding assets. The blended yield of cash and securities continued to improve in the quarter and is now 160 basis points above our deposit rate paid. Regarding NII, on a GAAP [Technical Difficulty]","evidence_gemma_new":"deposits","evidence_llama_3_3":"deposits","evidence_qwen_3_30b":"deposits $36 billion","gemma_new_max":36000000000.0,"gemma_new_min":36000000000.0,"llama_3_3_max":36000000000.0,"llama_3_3_min":36000000000.0,"qwen_3_30b_max":36000000000.0,"qwen_3_30b_min":36000000000.0}
{"symbol":"BAC","year":2024,"quarter":2,"date":"2024-Q2","chunk_id":73,"sub_chunk_id":0,"centroid_label":"deposit","agreed_value":1910000000000.0,"count":3,"chunk":"Brian Moynihan: Yes. I think that's very business and more importantly, customer-specific views, Gerard. So we think of our deposit strategies in the context of how our customers utilize our services. And so, if you think about the parts that priced up in Global Banking or the investment-related cash in the Consumer business and Wealth Management, that will come back down as rates come, because the short-term equivalents come down, some is absolutely mechanical because it's actually priced to meet a money market fund equivalent that will happen. And so, yes, I think if you think about us being all in, if you look on that slide at 203 basis points, there'll be some pickup as rates come down in those higher things. The zero interest balance accounts are low-interest checking. You know, they don't really move because there's zero interest or low interest, so they'll be kind of static, but they're still extremely valuable in the current context. So when you think of all the consumer, I think 60 odd basis-points or something, that's driven by the fact that we have $40-odd million transactional primary checking accounts that is growing at $1 million a year, meant, multiple years in a row, $900,000 a million a year that are maturing from $3,000 up to $7,000 or $8,000 in balances as people mature the relationship with us, that's where the tremendous value in the deposit base this company goes. And so if you think about $1.91 trillion having grown $100 billion almost from the trough, you think about it growing linked-quarter, multiple quarters in a row, you think about even as we look now to buy the balances above that amount. Yes, that -- those are good dynamics. So we think about it, but it will move. But if you remember, part of our deposit pricing is never going to move to zero.","evidence_gemma_new":"deposits","evidence_llama_3_3":"deposits","evidence_qwen_3_30b":"deposits","gemma_new_max":1900000000000.0,"gemma_new_min":1900000000000.0,"llama_3_3_max":1900000000000.0,"llama_3_3_min":1900000000000.0,"qwen_3_30b_max":1900000000000.0,"qwen_3_30b_min":1900000000000.0}
{"symbol":"BAC","year":2023,"quarter":1,"date":"2023-Q1","chunk_id":12,"sub_chunk_id":0,"centroid_label":"expense","agreed_value":62500000000.0,"count":2,"chunk":"Erika Najarian: Hi, good morning. Alastair, just a clarification. You gave us the quarterly expected trajectory for expenses. Do you still expect to hit $62.5 billion or so of full year expenses in '23?","evidence_gemma_new":null,"evidence_llama_3_3":"expect expenses '23","evidence_qwen_3_30b":"expected expenses quarterly","gemma_new_max":null,"gemma_new_min":null,"llama_3_3_max":62500000000.0,"llama_3_3_min":62500000000.0,"qwen_3_30b_max":62500000000.0,"qwen_3_30b_min":62500000000.0}
{"symbol":"BAC","year":2023,"quarter":2,"date":"2023-Q2","chunk_id":12,"sub_chunk_id":0,"centroid_label":"expense","agreed_value":5.0,"count":2,"chunk":"Glenn Schorr: Good morning. So, no one to take issue with 600 basis points of operating leverage. But I just always like doing a little gut check. Expenses are up 5%. I heard all the reasons why a lot of investment, FDIC charges coming, but I just wanted to make sure did anything change over the last like decade or so, you've been basically flat for life? Is expenses more of a relative game throughout the revenues or do you think you can keep expenses in and around the same area as we continue to invest. Thanks.","evidence_gemma_new":null,"evidence_llama_3_3":"Expenses","evidence_qwen_3_30b":"expenses","gemma_new_max":null,"gemma_new_min":null,"llama_3_3_max":5.0,"llama_3_3_min":5.0,"qwen_3_30b_max":5.0,"qwen_3_30b_min":5.0}
{"symbol":"BAC","year":2023,"quarter":3,"date":"2023-Q3","chunk_id":2,"sub_chunk_id":0,"centroid_label":"expense","agreed_value":16200000000.0,"count":3,"chunk":"Brian Moynihan: Good morning, everyone, and thank you for joining us. As usual, we're starting on Slide 2. Our third quarter here at Bank of America was another strong quarter as we delivered $7.8 billion in net income. That is a 10% growth over the year-ago third quarter. And for the first nine months of the year, we have earned $23.4 billion, an increase of 15% over 2022. We grew clients and accounts organically and at a strong pace across all our businesses. Our operating leverage was about flat. We improved our common equity Tier 1 ratio by nearly 30 basis points in the quarter to a level of 11.9% against a current minimum of 9.5%. We saw an increase in our deposits and we maintained our strong pricing discipline. We continue to maintain $859 billion in global liquidity sources. We also deliver a good return for you, our shareholders, with a return on tangible common equity of over 15% and a 1% return on assets. Just a quick note of what we see in the economy. Our team of economists predicts a soft landing with a trough in the middle of next year. We see that in our customer data, our 37 million checking customers, we see their spending slowing down. You can see that on Slide 34. The third quarter was up about 4% over last year's third quarter. Earlier this year, that would have been more of a 10% increase year-over-year. And for the entire year of 2022, it increased 10% [round numbers over \u201821] (ph). This 4% level is consistent with the spending we saw in the pre-pandemic period from 2016 to 2019. That is consistent with a low-inflation, lower-growth economy. As we move into October, the spending is holding at that 4% level. So growing, but growing at a basis more consistent with low growth, low inflation economy. With that, let me turn to Slide 3. We provide various highlights, and Al's just going to cover a lot of this. Our team continues to focus on driving organic growth, driving digital progress, and operational excellence, which keeps us focused on operating leverage. A few words on organic growth as we flip to Slide 4. Every business segment had organic growth. In Consumer, in quarter three, we opened more than 200,000 net new checking accounts this quarter alone. We also opened another 1 million credit card accounts. We have 10% more investment accounts this year, third quarter, than we did last year. In Small Business, we have seen 35 straight quarters of net new checking account growth. We've also seen good small business loan growth, and our loans are up 14% from last year. That was -- in this quarter, our Small Business teammates extended $2.8 billion in credit to small business in America alone. In Global Wealth, we added nearly 7,000 net new relationships to the Merrill and Private Bank franchises. And our advisors opened more than 35,000 new bank accounts for the third consecutive quarter, fulfilling both investing and banking needs for those clients. We also increased our number of advisors. In the past year, across our wealth spectrum, in GWIM and in consumer investments, they have combined to gather $87 billion in total net flows. In our Global Banking team, we added clients and increased the number of products per relationship. Year-to-date, we've added 1,900 new commercial and business banking clients. That is more than we added in the full year last year. Even while activity is low, the investment banking team continues to hold us number three position. In the Global Markets, we continue to see performance establish new records for our firm. I'm going to cover that in a little more detail in a moment. As you can move to Slide 5, you can see the digital adoption engagement and volumes continue to increase. We lead the industry in digital banking and continue to provide the best-in-class disclosures. You can find those disclosures by line of business in the appendix on slides 26, 29, and 31. We also continue to receive top accolades from third parties around these capabilities. Most important, these capabilities are valued by our clients and customers and allow us to grow with great expense leverage. Let me give you a few examples. Our Consumer and Merrill clients logged into our consumer banking app a record 3.2 billion times this quarter. Even at this scale and stage of maturity of this operation, logins are up double digits from the year prior. Customer use of Erica continued to beat our expectations with almost 19 million users, up 16% in the past 12 months. CashPro App sign-ins with our business clients are up more than 40%. And we recently added the Erica functionality to CashPro to help corporate clients benefit from that artificial intelligence. Likewise, Zelle users continues to grow. Zelle transaction levels are up more than 25% from last year. And Zelle is becoming a meaningful way our customers move money. In fact, customers now send money with Zelle at twice the rate they write checks. We're nearing a period where the Zelle transactions sent will exceed the combination of checks written and ATM withdrawal transactions. As you move across the lines of business on the slide, the story is the same. All these capabilities help us deliver faster, safer, and more efficiently. And all of it gets strong customer and client feedback. When you put that together, that helps us drive operating leverage, and you can see it on Slide 6. We have a strong record of driving operating leverage in our company. We drove operating leverage every quarter for nearly five years before the pandemic. And then again, more recently, we've had an eight-quarter streak leading to this quarter. We acknowledged to you this last quarter that our operating leverage is going to be tough for a few quarters as we navigate through the trough of net interest income. But as you can see on Slide 6, we managed to grow revenue year-over-year faster than expense in dollar terms this quarter, even though the percentage change was basically flat. Now, in January, we told you we'd manage our head countdown to help make sure we got our expenses in line. Over the course of 2023 we've seen moving from 2022's great resignation to our current level of a record low attrition in our company. All that meant the team had to work harder to manage that headcount down. And they did it. Our headcount is now down over 7,000 FTEs [from a] (ph) peak in January, even with the addition of 2,500 college grads this fall. As a result, you've seen expense decline from $16.2 billion in quarter one to $16 billion in quarter two to $15.8 billion this quarter. By the way, we've done this without special charges or large layoffs. Expense will decline again in the fourth quarter, excluding any FDIC special assessment, of course. We expect to report $15.6 billion in expenses in 4Q. Now interestingly, the debt is up only around 1% from fourth quarter of last year. This is stronger expense guidance than we thought we could do earlier in the year and sets us up nicely for next year. Shifting gears, let's focus on the balance sheet. Slide 7 shows the breakout of deposit trends on a weekly basis -- ending basis across the third quarter. We gave you this chart last quarter also. In the upper left-hand, you can see the trend of total deposits. We ended quarter three at $1.88 trillion, up from quarter two and better than industry results. What you should also note is the cost of these deposits. Our team has rewarded customers with higher rates for their investment [or in cash] (ph), re-initiated deposit growth and grown share with always superior mix in cost. You will note we're now paying 155 basis points all in for deposits, which is up 31 basis points from last quarter. I ask that you remember two things when you think about the deposits. The rate remains low relative to many because of the transactional nature of deposit relationships with $565 billion in non-interest-bearing deposits. And you can see in the upper right alone, in low interest and no interest checking, there's $504 billion in Consumer. Secondly, remember the importance of the spread against the quarter's average Fed funds rate. This position is very advantageous compared to past cycles because the transactional counts in the current cycle are a much higher mix of Bank of America's deposits. I would also add that while we maintain discipline in deposit price and we pay competitive rates to customers with excess cash seeing higher yields across all the businesses, if rates fall, those particular products will see the rates come down also. Dropping into the business trends. In Consumer, if you look at the top right chart, you saw a $22 billion decline. Note, the difference in the movement through the quarter between the balance of low to no-interest checking accounts and higher-yielding non-checking accounts. You could also see the low levels of our more rate-sensitive balance in consumer investments and CD balances broken out. In total, we have $982 billion in consumer deposits. In Consumer alone, this is $250 billion more than we had pre-pandemic. The total rate paid on consumer deposits in the quarter was 34 basis points. This remains very low, driven by the high percentage of transactional -- high-quality transaction accounts. Most of the quarter's rate increase is concentrated in CDs and consumer investment deposits where about -- which are about 13% of the deposits. Turning to Wealth Management, balances were flat. We saw a slowing in the previous quarterly trend of clients moving money from lower-yielding sweep accounts into higher-yielding preferred deposits and off-balance sheet products ones. Sweep balances were down by $7 billion and were replaced by new account generation and deepening. At the bottom right, note the Global Banking deposits grew $2 billion and have hovered around $500 million for the past six quarters. These are generally the transaction deposits of our commercial customers used to manage their cash flows. Noninterest-bearing deposits were 37% of deposits at the end of the quarter. Sticking with the balance sheet but moving to capital, let me give you a few thoughts on the proposed capital rules. As you are well aware, our banking industry in the United States is the most highly capitalized the most profitable banking group in the world. It's a source of strength for our country and its economy. The annual stress tests over -- are now over a dozen years old, using ever-increasing harsher test scenarios have proven that capital is sufficient. Banks have proven to be a part of the solution during the more recent COVID pandemic and the banking disruption in March this year. We add to our capital and reduce our lending capacity to American business consumers, and those trade-offs are being debated. But as far as the rules are concerned, there are many parts of the rules that our industry doesn't agree with because of double accounts or increased trading and market risk. And we're talking to those proposals and working, and we're hopeful they'll change. But in any event, they may not. If they don't, how will they affect us? If you go to Slide 8, you can show the expected impact as we interpret those proposed rules. This assumes that they're proposed today without any changes. The proposed rules would inflate our risk-weighted assets by about 20%. So if I apply the inflation against this quarter's RWA of $1.63 trillion, that means, if nothing else changed in the rules, we'd end up with about $320 billion more risk-weighted assets. The biggest increase in RWA would be a couple hundred billion dollars in operational RWA. The next biggest category would be driven by a four-fold increase in the RWA against non-publicly traded equity exposures. In our case, that really is mostly about the tax-advantaged investments in solar and wind. Looking at the capital to be held against the inflated RWA on the right side of the slide, I'd remind you today that our minimum capital requirement is to hold 9.5% in on Common Equity Tier 1. But based on our G-SIB charges, that going to come in effect on January 1, 2024, we moved to 10%. So I'm going to use that as a requirement. Holding 10% today means $163 billion, that we finished the third quarter with $194 billion. So today, we have more than $30 billion excess capital. Now, let's assume the proposed change is going through in full. The proposed changes are phased in from '25 -- the middle '25 to '28 under the current proposal. When those are fully phased in, as we used to call Basel fully phased in, if you remember, we would have a need for $195 billion of total capital. Now if you look on the upper right-hand side of the page, you'll see that we're today, we're at $194 billion. So we hold the required capital today. And of course, we'd have to build a buffer to that throughout the implementation period. But if you look at the bottom of the page, you see just in the last nine quarters the kind of capital generation this company has. Once we understand the rules, we'll of course have a bit -- a chance to optimize our balance sheet and appropriately price assets to improve the return on tangible common equity. Now, before I turn it over to Alastair, I just wanted to highlight one of the businesses that we talked about over the many years. That's our Global Markets business. Global Markets represent 17% of the company's year-to-date earnings and it's one of the top capital markets platforms in world. It's one 'of a handful of firms that can do what is due, providing advice and execution in every major market around the world. Jimmy DeMare and the team who run the business asked us for additional investment around four years ago, and they've grown this business with an intensity that clients are appreciative and reward us with more of their business. This has produced strong revenue growth. We've grown the balance sheet here but have done it efficiently. That's allowed us to grow sales and trading revenue over the past 12 months consistently, and now stands 32% higher than the average of the five years leading into the pandemic in the investment in the business. And through effective cost management, we also generated 11% to 12% returns on capital in this business. This exceeds our cost of capital even as we continue to allocate more capital to the business. Returns are even larger if you combine it with the Global Banking business, that many show the businesses combined and take -- because our corporate clients also take advantage of these industry-leading capabilities. With that, let me turn over the call to Alastair to walk through the quarter. Alastair?","evidence_gemma_new":"Expense","evidence_llama_3_3":"expense last year","evidence_qwen_3_30b":"expense $16.2 billion","gemma_new_max":16200000000.0,"gemma_new_min":16200000000.0,"llama_3_3_max":16200000000.0,"llama_3_3_min":16200000000.0,"qwen_3_30b_max":16200000000.0,"qwen_3_30b_min":16200000000.0}
{"symbol":"BAC","year":2023,"quarter":3,"date":"2023-Q3","chunk_id":3,"sub_chunk_id":0,"centroid_label":"expense","agreed_value":15800000000.0,"count":2,"chunk":"Alastair Borthwick: Thanks, Brian. And on Slide 10, we present the summary income statement. I'm not going to spend a lot of time here because Brian touched on this and the highlights that we show on Slide 3. For the quarter, we generated $7.8 billion in net income, resulting in $0.90 per diluted share. Both of those are up the double digits from the third quarter of last year. The year-over-year revenue growth of 3% was led by improvement in net interest income, coupled with a strong 8% increase in sales and trading results, and that excludes DVA, and a 4% increase in investment in brokerage revenue driven by our Wealth Management businesses. Expense for the quarter of $15.8 billion included good discipline from our team, which allowed us to reduce costs from the second quarter, even as we continue our planned investments for marketing, technology and physical presence build-outs, including financial center openings and renovations. Asset quality remains stellar, and provision expense for the quarter was $1.2 billion. That consisted of $931 million of net charge-offs and $303 million of reserve build. The provision expense reflects the continued trend in charge-offs toward pre-pandemic levels and remains below historical levels. Our charge-off rate was 35 basis points, that's 2 basis points higher than the second quarter, and still below the 39 basis points we saw in the fourth quarter of '19. And as a reminder, that 2019 was a multi-decade low. 30-day delinquencies also remained below their fourth quarter '19 level. Lastly, our tax rate this quarter was 4%, driven mostly by higher-than-expected volume of investment tax credit, or ITC deals for the rest of the year. And we can expect other income in Q4 will reflect seasonally higher renewables investment losses when these projects get placed into service. Okay. Let's turn to the balance sheet that's on Slide 11. And you can see it ended the quarter at $3.2 trillion, up $31 billion from the second quarter. So not a lot to note here. The driver of the increase was a $34 billion increase in available for sales securities. With cash levels so high, we chose to reduce the cash and just put some of the money into short-term T-bills this quarter, and those earn essentially the same rate as cash. Our cash remains high at $352 billion. In addition to the cash level change, we saw another $11 billion decline in hold to maturity securities as those securities matured and paid down. And as Brian noted, global excess liquidity sources remain strong at $859 billion, that's down very modestly from the second quarter, and still remains approximately $280 billion above our pre-pandemic fourth quarter '19 level. Shareholders' equity increased $4 billion from the second quarter as earnings were only partially offset by capital distributed to shareholders. During the quarter, we paid out $1.9 billion in common dividends and we bought back $1 billion in shares to offset our employee awards. AOCI was $1.1 billion lower, reflecting both a modest decline in the value of AFS securities, modestly impacting CET1 as well as a small change in cash flow hedges, which doesn't impact the regulatory capital. Tangible book value per share is up 12% year-over-year. Turning to regulatory capital. our CET1 level improved to $194 billion from June 30, and our CET1 ratio improved 30 basis points to 11.9%. It's now well above our current 9.5% requirement as Brian noted. Risk-weighted assets declined modestly as loans and Global Markets RWA both moved lower. Our supplemental leverage ratio was 62% versus a minimum requirement of 5%, which leaves capacity for balance sheet growth and our TLAC ratio remains well above our requirements. LCR ratios remain well above minimums for BAC metrics and stronger at the bank level. Let's now focus on loans by looking at average balances on Slide 12. And loan growth slowed this quarter as a decline in demand for commercial borrowing more than offset our credit card growth. So we saw that lower commercial demand in lower revolver utilization among higher funding costs. And commercial balances were also impacted by term loan repayments due to borrowers accessing other capital market solutions. Focusing for a moment on average deposits and using Slide 13. Given Brian's earlier comments, I'll just note the comparisons. Relative to pre-pandemic fourth quarter '19, average deposits are up 33%. Consumer is up 36%, with consumer checking up 45%. And you can see the other segment comparisons on the page. Turning to Slide 14. Let's extend the conversation we\u2019ve been having over the course of the past couple of quarters around management of our excess liquidity. This slide serves as a reminder of the size of our high-quality deposit book, the magnitude of deposits we have in excess of those needed to fund loans and the way we've extracted the value of that excess to deliver value back to our shareholders. The excess of deposits needed to fund loans increased from $420 billion pre-pandemic to a peak of $1.1 trillion in the fall of 2021. And as you can see, it remains high at $835 billion today. That $1.1 trillion of excess liquidity has always included a balanced mix of cash, available for sale securities, and securities we hold to maturity. In late 2020 and into 2021, we concluded that additional stimulus was going to remain in client accounts for an extended period, and we increased the hold to maturity securities portion so we could lock in value from those deposits. And we made these investments given the core nature of our customers' deposits. Note, the split of the shorter-term investments in cash and available-for-sale securities, and then the term hold to maturity securities. And I just draw your attention to just how much cash we have above the actual level we need to run the company. On the available-for-sale, we would just note the duration is less than six months as it's mostly all short-term treasuries. And the combination of the cash and available-for-sale securities represents about 47% of the total noted on this page in the third quarter of '23 to give us the balance we're looking for. And if we look at the hold-to-maturity book, it had grown from $190 billion pre-pandemic, peaking two years ago, and now falling to just over $600 billion currently. That $600 billion consists of about $122 billion in treasuries. Those will mature in a little more than six years, and about $474 billion in mortgage-backed securities and a few billion other. Hold to maturity securities peaked at $683 billion, and we're now down $80 billion from the peak and $11 billion in last quarter. That $80 billion decline from peak was all driven by the reduction of mortgages from $555 billion to $474 billion. With less loan funding needs over the past several quarters, the proceeds from security paydowns have been deployed into higher-yielding cash, and this mix shift has been happening at about a 300 basis point spread benefit for these assets. Given the increased cash rates, the combined cash and security yield has risen now to more than 3%. It's up more than 200 basis points since the peak size of the portfolio in the third quarter of '21, and it's risen faster than the rate paid on deposits. In fact, today, it's 178 basis points above what we pay for deposits. And remember also, we have $1 trillion of loans that are largely in floating rate in addition. From a valuation perspective, we did experience a decline in the valuation of the hold-to-maturity book this quarter, and that's in the context of mortgage rates reaching a two-decade high. Comparing the valuation change to the year-ago period, it worsened $15 billion. And over that same time period, we grew regulatory capital by $19 billion and hold global liquidity sources in excess of $850 billion. And importantly, as we move to Slide 15, I'll make one final comment here, which is the improved NII over this investment period. The net interest income, excluding Global Markets, which we disclose each quarter, troughed in Q3 '20 at $9.1 billion, that compares to $13.9 billion in the third quarter of '23 or $4.7 billion higher every quarter on a quarterly basis, and that gives a sense of the entire balance sheet working together. Okay. Let's now turn our focus to NII performance over the past quarter, and we'll talk about the path forward, and I'm going to use Slide 15 for that. On last quarter's call, we guided to expect Q3 NII to be about $14.2 billion to $14.3 billion on an FTE basis. Our third quarter performance turned out to be better than our guidance. And on an FTE basis, NII was $14.5 billion this quarter. We expect Q4 will be around $14 billion fully taxable equivalent, and that increases our full year guidance for NII in 2023 versus 2022 to 9% growth per year. We believe NII will hover around this expected fourth quarter $14 billion level, plus or minus, in the first half of next year, and then we anticipate modest growth in the half of 2024. By the time we get to the fourth quarter of 2024, we believe we can see NII up low single digits compared to the fourth quarter of 2023. The good news is we believe NII will likely trough around the fourth quarter level of $14 billion and begin to grow again in the middle of next year. I'd note a few caveats around that forward view I just provided. It includes an assumption that interest rates in the forward curve materialize and it includes rate cuts for the second half of 2024. It also includes an expectation of modest loan and deposit growth as we move into the second half of 2024. Focusing again on this quarter, $14.5 billion NII was an increase of nearly $700 million from the third quarter of '22, or 4%, while our net interest yield improved 5 basis points to 2.11%. The year-over-year improvement was driven by higher interest rates and partially offset by lower deposit balances. On a linked-quarter comparison, NII improved $239 million from Q2, and that comes from the benefit of an extra day of interest, a rate hike and higher global markets NII, partially offset by increased deposit pricing. And the net interest yield improved 5 basis points. Turning to asset sensitivity and focused on a forward yield curve basis, the plus 100 basis point parallel shift at September 30 was $3.1 billion of expected NII benefit over the next 12 months from our banking book. And that expects -- or that assumes no expected change in balance sheet levels or mix relative to our baseline forecast, and 95% of the sensitivity is driven by short rates. The 100 basis point down rate scenario was $3.3 billion. Okay. Let's turn to expense, and we'll use Slide 16 for the discussion. Previously highlighted that we guided you to a trend of sequential declines in our expense each quarter this year, and we achieved that in Q3 with our expense down $200 million to $15.8 billion. Additionally, we expect the fourth quarter to go down another couple of hundred million to $15.6 billion, excluding any FDIC special assessment. That would mean our fourth quarter expense of $15.6 billion, compared to the fourth quarter of '22, would be up by only $100 million or less than 1%. And we're proud of that work by the team, especially considering our regular FDIC insurance expense alone increased by $125 million quarterly starting in the first quarter of this year. So without that, we would be flat year-over-year in Q4. The decline this quarter from the second was driven by the reduction in litigation expense and lower headcount, offset somewhat by investments in inflationary costs. Our headcount is down nearly 2,800 from the second quarter to 213,000. And that includes the addition of 2,500 or so full-time campus hires we brought into the company. So that's good work by the team after we peaked at 218,000 in January month-end. And you see the movement here across the past year at the bottom left of the slide. As we look forward to next quarter, we'd add $1.9 billion of expense for the proposed notice of special assessment from the FDIC as a possibility. Absent that, we'd expect our fourth quarter $15.6 billion expense target to more fully benefit from the third quarter headcount reductions, and that will allow expense to continue the decline experienced throughout the year so far. All of that is going to set us up well for next year. Let's now turn to credit, and we'll turn to Slide 17. Net charge-offs of $931 million increased $62 million from the second quarter. The increase is driven by credit card losses as higher late-stage delinquencies flow through to charge-offs. For context, the credit card net charge-off rate rose 12 basis points to 2.72% in Q3, and it remains below the 3.03% pre-pandemic rate in the fourth quarter of '19. Provision expense was $1.2 billion in Q3, and that included a $303 million reserve build. It reflects a macroeconomic outlook that on a weighted basis continues to include an unemployment rate that rises to north of 5% during 2024. On Slide 18, we highlight the credit quality metrics for both our Consumer and our Commercial portfolios. And on Consumer, we just note that we continue to see the asset quality metrics come off the bottom. And for the most part, they remain below historical averages. 30 and 90-day consumer delinquencies still remain below the fourth quarter of 2019 as an example. Commercial net charge-offs declined from the second quarter, driven mostly by a reduction in office write-downs. And as a reminder, our CRE credit exposure represents 7% of total loans, and that includes office exposure, which represents less than 2% of our loans. We've been very intentional around client selection and portfolio concentration and deal structure over many years, and that's helped us to mitigate risk in this portfolio. We continue to believe that the portfolio is well positioned and adequately reserved against the current conditions. And in the appendix, we've included a current view of our commercial real estate and office portfolio stats we provided last quarter. We've also included the historical perspective of our loan book de-risking and our net charge-offs, and you can see all of those on Slides 36, 37, 38 and 39. Okay. Let's move on to the various lines of business and their results. And I'm going to start on Slide 19 with Consumer Banking. For the quarter, Consumer earned $2.9 billion on good organic revenue growth and delivered its 10th consecutive quarter of operating leverage, while we continue to invest for the future. Note that the top-line revenue grew 6%, while expense rose 3%. Reported earnings declined 7% year-over-year given credit costs continue to return to pre-pandemic level. And we believe this understates the underlying success of the business in driving revenue and managing costs, because PPNR grew 9% year-over-year. Much of this success is driven by the pace of organic growth of checking and card accounts, as well as investment accounts and balances, as Brian noted earlier. And expense reflects the continued investments by the business for their future growth. Moving to Wealth Management on Slide 20. We produced good results, and we earned a little more than $1 billion. These results are down from last year, due to a decline in NII from higher deposit costs, which more than offset higher fees from asset management. While lower this quarter, NII of $1.8 billion derives from a world-class banking offering, and it provides good balance in our revenue stream and a competitive advantage in the business for us. As Brian noted, both Merrill and the Private Bank continued to see strong organic growth, and they produced solid assets under management flows of $44 billion since the third quarter of last year, reflecting good mix of new client money as well as our existing clients putting their money to work. Expense reflects continued investments in the business as we add financial advisers and capabilities from technology investments. On Slide 21, you see the Global Banking results. And this business produced very strong results with earnings of $2.6 billion, driven by 11% year-over-year growth in revenue to $6.2 billion. Coupled with good expense management, the business has produced solid operating leverage. Our GTS, or Global Treasury Services business has been robust. We've also seen a steady volume of solar and wind investment projects this quarter, and our investment banking business is performing well in a sluggish environment. Year-over-year revenue growth also benefited from the absence of marks taken on leverage loans in the prior year-ago period. The company's overall investment banking fees were $1.2 billion in Q3, growing modestly over the prior year, despite a pool that was down nearly 20%. And we held on to number three position given our performance. Provision expense reflected a reserve release of $139 million as certain troubled industries and credits outside of commercial real estate continue to have improved outlooks. Expense increased 6% year-over-year, reflecting our continued investments in this business. Switching to Global Markets on Slide 22. The team had another strong quarter, with earnings growing to $1.3 billion driven by revenue growth of 10%, and I'm referring to results excluding DVA as we normally do. The continued themes of inflation, geopolitical tensions and central banks changing monetary policies around the globe have continued to impact both bond and equity markets. And as a result, it was a quarter where we saw strong performance in our FICC businesses, as well as a record third quarter in equities. Focusing on sales and trading, ex DVA, revenue improved 8% year-over-year to $4.4 billion. FICC improved 6% and equities improved 10% compared to the third quarter of last year. And at $1.7 billion, that's a record third quarter for our equities teammates. Year-over-year, expense increased 7%, primarily driven by investments for people and technology. Finally, on Slide 13, all other shows a profit of $89 million. So revenue improved from the second quarter, driven by the absence of prior period debt security sale losses and available-for-sale securities, and partially offset by higher operating losses on tax credit investments in wind, solar and affordable housing. As I mentioned earlier, our effective tax rate in the quarter was 4%, and that reflects a higher-than-expected volume of investment tax credits in which the value of the deals are recognized upfront. We also had a small discrete benefit to tax expense from a state tax law change. Excluding renewable investments and any other discrete tax benefits, our tax rate would have been 25%. And as we wrap up 2023, we expect our full year tax rate, excluding discrete and special items, such as the FDIC special assessment, we expect that full year tax rate should end up in the 9% to 10% range. So to summarize, we grew our earnings double digit year-over-year. We reported NII that was above our expectations, and we increased our full year expectations. We've managed costs aligned with our guidance and brought expenses down in every quarter so far this year, and we expect to do that again in the fourth quarter. We earned more than 15% return on tangible common equity. We returned $2.9 billion in capital back to shareholders, including a 9% dividend increase. And we built 30 basis points of CET1, positioning us well for the proposed capital rules. So all in all, it was a strong quarter. It was one where our teams executed well against responsible growth. And with that, David, I think we'll open it up for the Q&A session.","evidence_gemma_new":null,"evidence_llama_3_3":"expense","evidence_qwen_3_30b":"expense","gemma_new_max":null,"gemma_new_min":null,"llama_3_3_max":15800000000.0,"llama_3_3_min":15800000000.0,"qwen_3_30b_max":15800000000.0,"qwen_3_30b_min":15800000000.0}
{"symbol":"BAC","year":2023,"quarter":3,"date":"2023-Q3","chunk_id":2,"sub_chunk_id":0,"centroid_label":"expense","agreed_value":15600000000.0,"count":2,"chunk":"Brian Moynihan: Good morning, everyone, and thank you for joining us. As usual, we're starting on Slide 2. Our third quarter here at Bank of America was another strong quarter as we delivered $7.8 billion in net income. That is a 10% growth over the year-ago third quarter. And for the first nine months of the year, we have earned $23.4 billion, an increase of 15% over 2022. We grew clients and accounts organically and at a strong pace across all our businesses. Our operating leverage was about flat. We improved our common equity Tier 1 ratio by nearly 30 basis points in the quarter to a level of 11.9% against a current minimum of 9.5%. We saw an increase in our deposits and we maintained our strong pricing discipline. We continue to maintain $859 billion in global liquidity sources. We also deliver a good return for you, our shareholders, with a return on tangible common equity of over 15% and a 1% return on assets. Just a quick note of what we see in the economy. Our team of economists predicts a soft landing with a trough in the middle of next year. We see that in our customer data, our 37 million checking customers, we see their spending slowing down. You can see that on Slide 34. The third quarter was up about 4% over last year's third quarter. Earlier this year, that would have been more of a 10% increase year-over-year. And for the entire year of 2022, it increased 10% [round numbers over \u201821] (ph). This 4% level is consistent with the spending we saw in the pre-pandemic period from 2016 to 2019. That is consistent with a low-inflation, lower-growth economy. As we move into October, the spending is holding at that 4% level. So growing, but growing at a basis more consistent with low growth, low inflation economy. With that, let me turn to Slide 3. We provide various highlights, and Al's just going to cover a lot of this. Our team continues to focus on driving organic growth, driving digital progress, and operational excellence, which keeps us focused on operating leverage. A few words on organic growth as we flip to Slide 4. Every business segment had organic growth. In Consumer, in quarter three, we opened more than 200,000 net new checking accounts this quarter alone. We also opened another 1 million credit card accounts. We have 10% more investment accounts this year, third quarter, than we did last year. In Small Business, we have seen 35 straight quarters of net new checking account growth. We've also seen good small business loan growth, and our loans are up 14% from last year. That was -- in this quarter, our Small Business teammates extended $2.8 billion in credit to small business in America alone. In Global Wealth, we added nearly 7,000 net new relationships to the Merrill and Private Bank franchises. And our advisors opened more than 35,000 new bank accounts for the third consecutive quarter, fulfilling both investing and banking needs for those clients. We also increased our number of advisors. In the past year, across our wealth spectrum, in GWIM and in consumer investments, they have combined to gather $87 billion in total net flows. In our Global Banking team, we added clients and increased the number of products per relationship. Year-to-date, we've added 1,900 new commercial and business banking clients. That is more than we added in the full year last year. Even while activity is low, the investment banking team continues to hold us number three position. In the Global Markets, we continue to see performance establish new records for our firm. I'm going to cover that in a little more detail in a moment. As you can move to Slide 5, you can see the digital adoption engagement and volumes continue to increase. We lead the industry in digital banking and continue to provide the best-in-class disclosures. You can find those disclosures by line of business in the appendix on slides 26, 29, and 31. We also continue to receive top accolades from third parties around these capabilities. Most important, these capabilities are valued by our clients and customers and allow us to grow with great expense leverage. Let me give you a few examples. Our Consumer and Merrill clients logged into our consumer banking app a record 3.2 billion times this quarter. Even at this scale and stage of maturity of this operation, logins are up double digits from the year prior. Customer use of Erica continued to beat our expectations with almost 19 million users, up 16% in the past 12 months. CashPro App sign-ins with our business clients are up more than 40%. And we recently added the Erica functionality to CashPro to help corporate clients benefit from that artificial intelligence. Likewise, Zelle users continues to grow. Zelle transaction levels are up more than 25% from last year. And Zelle is becoming a meaningful way our customers move money. In fact, customers now send money with Zelle at twice the rate they write checks. We're nearing a period where the Zelle transactions sent will exceed the combination of checks written and ATM withdrawal transactions. As you move across the lines of business on the slide, the story is the same. All these capabilities help us deliver faster, safer, and more efficiently. And all of it gets strong customer and client feedback. When you put that together, that helps us drive operating leverage, and you can see it on Slide 6. We have a strong record of driving operating leverage in our company. We drove operating leverage every quarter for nearly five years before the pandemic. And then again, more recently, we've had an eight-quarter streak leading to this quarter. We acknowledged to you this last quarter that our operating leverage is going to be tough for a few quarters as we navigate through the trough of net interest income. But as you can see on Slide 6, we managed to grow revenue year-over-year faster than expense in dollar terms this quarter, even though the percentage change was basically flat. Now, in January, we told you we'd manage our head countdown to help make sure we got our expenses in line. Over the course of 2023 we've seen moving from 2022's great resignation to our current level of a record low attrition in our company. All that meant the team had to work harder to manage that headcount down. And they did it. Our headcount is now down over 7,000 FTEs [from a] (ph) peak in January, even with the addition of 2,500 college grads this fall. As a result, you've seen expense decline from $16.2 billion in quarter one to $16 billion in quarter two to $15.8 billion this quarter. By the way, we've done this without special charges or large layoffs. Expense will decline again in the fourth quarter, excluding any FDIC special assessment, of course. We expect to report $15.6 billion in expenses in 4Q. Now interestingly, the debt is up only around 1% from fourth quarter of last year. This is stronger expense guidance than we thought we could do earlier in the year and sets us up nicely for next year. Shifting gears, let's focus on the balance sheet. Slide 7 shows the breakout of deposit trends on a weekly basis -- ending basis across the third quarter. We gave you this chart last quarter also. In the upper left-hand, you can see the trend of total deposits. We ended quarter three at $1.88 trillion, up from quarter two and better than industry results. What you should also note is the cost of these deposits. Our team has rewarded customers with higher rates for their investment [or in cash] (ph), re-initiated deposit growth and grown share with always superior mix in cost. You will note we're now paying 155 basis points all in for deposits, which is up 31 basis points from last quarter. I ask that you remember two things when you think about the deposits. The rate remains low relative to many because of the transactional nature of deposit relationships with $565 billion in non-interest-bearing deposits. And you can see in the upper right alone, in low interest and no interest checking, there's $504 billion in Consumer. Secondly, remember the importance of the spread against the quarter's average Fed funds rate. This position is very advantageous compared to past cycles because the transactional counts in the current cycle are a much higher mix of Bank of America's deposits. I would also add that while we maintain discipline in deposit price and we pay competitive rates to customers with excess cash seeing higher yields across all the businesses, if rates fall, those particular products will see the rates come down also. Dropping into the business trends. In Consumer, if you look at the top right chart, you saw a $22 billion decline. Note, the difference in the movement through the quarter between the balance of low to no-interest checking accounts and higher-yielding non-checking accounts. You could also see the low levels of our more rate-sensitive balance in consumer investments and CD balances broken out. In total, we have $982 billion in consumer deposits. In Consumer alone, this is $250 billion more than we had pre-pandemic. The total rate paid on consumer deposits in the quarter was 34 basis points. This remains very low, driven by the high percentage of transactional -- high-quality transaction accounts. Most of the quarter's rate increase is concentrated in CDs and consumer investment deposits where about -- which are about 13% of the deposits. Turning to Wealth Management, balances were flat. We saw a slowing in the previous quarterly trend of clients moving money from lower-yielding sweep accounts into higher-yielding preferred deposits and off-balance sheet products ones. Sweep balances were down by $7 billion and were replaced by new account generation and deepening. At the bottom right, note the Global Banking deposits grew $2 billion and have hovered around $500 million for the past six quarters. These are generally the transaction deposits of our commercial customers used to manage their cash flows. Noninterest-bearing deposits were 37% of deposits at the end of the quarter. Sticking with the balance sheet but moving to capital, let me give you a few thoughts on the proposed capital rules. As you are well aware, our banking industry in the United States is the most highly capitalized the most profitable banking group in the world. It's a source of strength for our country and its economy. The annual stress tests over -- are now over a dozen years old, using ever-increasing harsher test scenarios have proven that capital is sufficient. Banks have proven to be a part of the solution during the more recent COVID pandemic and the banking disruption in March this year. We add to our capital and reduce our lending capacity to American business consumers, and those trade-offs are being debated. But as far as the rules are concerned, there are many parts of the rules that our industry doesn't agree with because of double accounts or increased trading and market risk. And we're talking to those proposals and working, and we're hopeful they'll change. But in any event, they may not. If they don't, how will they affect us? If you go to Slide 8, you can show the expected impact as we interpret those proposed rules. This assumes that they're proposed today without any changes. The proposed rules would inflate our risk-weighted assets by about 20%. So if I apply the inflation against this quarter's RWA of $1.63 trillion, that means, if nothing else changed in the rules, we'd end up with about $320 billion more risk-weighted assets. The biggest increase in RWA would be a couple hundred billion dollars in operational RWA. The next biggest category would be driven by a four-fold increase in the RWA against non-publicly traded equity exposures. In our case, that really is mostly about the tax-advantaged investments in solar and wind. Looking at the capital to be held against the inflated RWA on the right side of the slide, I'd remind you today that our minimum capital requirement is to hold 9.5% in on Common Equity Tier 1. But based on our G-SIB charges, that going to come in effect on January 1, 2024, we moved to 10%. So I'm going to use that as a requirement. Holding 10% today means $163 billion, that we finished the third quarter with $194 billion. So today, we have more than $30 billion excess capital. Now, let's assume the proposed change is going through in full. The proposed changes are phased in from '25 -- the middle '25 to '28 under the current proposal. When those are fully phased in, as we used to call Basel fully phased in, if you remember, we would have a need for $195 billion of total capital. Now if you look on the upper right-hand side of the page, you'll see that we're today, we're at $194 billion. So we hold the required capital today. And of course, we'd have to build a buffer to that throughout the implementation period. But if you look at the bottom of the page, you see just in the last nine quarters the kind of capital generation this company has. Once we understand the rules, we'll of course have a bit -- a chance to optimize our balance sheet and appropriately price assets to improve the return on tangible common equity. Now, before I turn it over to Alastair, I just wanted to highlight one of the businesses that we talked about over the many years. That's our Global Markets business. Global Markets represent 17% of the company's year-to-date earnings and it's one of the top capital markets platforms in world. It's one 'of a handful of firms that can do what is due, providing advice and execution in every major market around the world. Jimmy DeMare and the team who run the business asked us for additional investment around four years ago, and they've grown this business with an intensity that clients are appreciative and reward us with more of their business. This has produced strong revenue growth. We've grown the balance sheet here but have done it efficiently. That's allowed us to grow sales and trading revenue over the past 12 months consistently, and now stands 32% higher than the average of the five years leading into the pandemic in the investment in the business. And through effective cost management, we also generated 11% to 12% returns on capital in this business. This exceeds our cost of capital even as we continue to allocate more capital to the business. Returns are even larger if you combine it with the Global Banking business, that many show the businesses combined and take -- because our corporate clients also take advantage of these industry-leading capabilities. With that, let me turn over the call to Alastair to walk through the quarter. Alastair?","evidence_gemma_new":"expenses","evidence_llama_3_3":"expense","evidence_qwen_3_30b":null,"gemma_new_max":15600000000.0,"gemma_new_min":15600000000.0,"llama_3_3_max":15600000000.0,"llama_3_3_min":15600000000.0,"qwen_3_30b_max":null,"qwen_3_30b_min":null}
{"symbol":"BAC","year":2023,"quarter":4,"date":"2023-Q4","chunk_id":13,"sub_chunk_id":0,"centroid_label":"expense","agreed_value":16400000000.0,"count":3,"chunk":"Erika Najarian: Got it. And just to clarify how we should think about the full year, the $16.4 billion in 1Q '24 expenses and a quarterly decline from there, does that pretty much square with what you've said in the past for expenses of up 1% to 2% year-over-year? And would that number include an assumption that investment banking activity returns in force in 2024?","evidence_gemma_new":"expenses 1Q '24","evidence_llama_3_3":"expenses 1Q '24","evidence_qwen_3_30b":"expenses 1Q '24","gemma_new_max":16400000000.0,"gemma_new_min":16400000000.0,"llama_3_3_max":16400000000.0,"llama_3_3_min":16400000000.0,"qwen_3_30b_max":16400000000.0,"qwen_3_30b_min":16400000000.0}
{"symbol":"BAC","year":2024,"quarter":1,"date":"2024-Q1","chunk_id":16,"sub_chunk_id":0,"centroid_label":"expense","agreed_value":100000000.0,"count":3,"chunk":"Alastair Borthwick: Well last year, remember Mike, we told you we thought we could drive expense down every quarter. We believe this year, the expense will trend down over the course of this year, and obviously Q1 is inflated a little bit with just payroll tax and some of the revenue seasonality, but underneath that there\u2019s pretty significant revenue strength, so I think that probably cost us $100 million or so this quarter. I think we probably are looking--you know, if this environment continues, we\u2019re looking at another $100 million per quarter going forward, but it\u2019s--to Brian\u2019s point, it\u2019s the good expense that comes with revenue growth over time. That\u2019s really the only change I\u2019d say with respect to how we think about the expense picture.","evidence_gemma_new":"expense per quarter","evidence_llama_3_3":"expense this year","evidence_qwen_3_30b":"expense going forward","gemma_new_max":100000000.0,"gemma_new_min":100000000.0,"llama_3_3_max":100000000.0,"llama_3_3_min":100000000.0,"qwen_3_30b_max":100000000.0,"qwen_3_30b_min":100000000.0}
{"symbol":"BAC","year":2024,"quarter":1,"date":"2024-Q1","chunk_id":3,"sub_chunk_id":0,"centroid_label":"expense","agreed_value":17200000000.0,"count":2,"chunk":"Alastair Borthwick: Thank you Brian. I\u2019m going to start on Slide 4 of the earnings presentation. Brian covered much of the income statement highlights and he noted the difference in our reported results and the results adjusted for the FDIC assessment, so I\u2019m not going to repeat that; I\u2019d just add that we delivered strong returns. On a reported basis, our return on average assets was 83 basis points, and return on tangible common equity was 12.7%. When adjusted for the FDIC assessment, our efficiency ratio was 64%, ROA at 89 basis points, and ROTCE at 14%. Let\u2019s move to the balance sheet on Slide 5, where we ended the quarter at $3.27 trillion of total assets, up $94 billion from the fourth quarter, and the bulk of that increase was in global markets to support seasonally elevated levels of client activity. Outside of the global markets activity, we\u2019d highlight both the $23 billion growth in deposits and the $20 billion decline in cash levels. With that increase in liquidity, you\u2019ll also note that debt securities increased $39 billion, which included an $8 billion decline in hold-to-maturity securities and a $47 billion increase in AFS securities. Those are mostly hedged U.S. treasuries added with yields effectively at cash rates. At $313 billion, our absolute cash levels remain higher than required. Liquidity remains strong with $909 billion of global liquidity sources, and that\u2019s up $12 billion from the fourth quarter and remains $333 billion above our pre-pandemic fourth quarter \u201919 level. Shareholder equity increased $1.9 billion [indiscernible] earnings, as they were only partially offset by capital distributed to shareholders, and AOCI was little changed in the quarter. During the quarter, we paid out $1.9 billion in common dividends and we bought back $2.5 billion in shares, which more than offset our employee awards. As part of those share awards in the first quarter, we announced our seventh consecutive year of share and success compensation awards, covering more than 95% of our associates and further aligning their interests with shareholders. Tangible book value per share of $24.79 is up 9% year-over-year. Looking at regulatory capital, our CET-1 level improved to $197 billion from December 31, and the CET-1 ratio was stable at 11.8% and remained well above our current 10% requirement. We also remain quite well positioned against the current proposed capital rules as our CET-1 level is also above the 10% requirement even when we include estimated RWA inflation from those new proposed rules. Risk-weighted assets increased modestly, driven by client activity in global markets, and our supplemental leverage ratio was 6% compared to a minimum requirement of 5%, which leaves capacity for balance sheet growth. At $475 billion of total loss absorbing capital, our TLAC ratio remains comfortably above our requirements. Let\u2019s turn our balance sheet focus to loans by looking at the average balances in Slide 6. Average loans in the first quarter of $1.048 trillion were flat compared to the fourth quarter, and they improved 1% year-over-year as solid credit card growth was partially offset by declines in securities-based lending. Commercial loans grew modestly year-over-year. We experienced modest improvement in revolver utilization in commercial lending in the first quarter, and that\u2019s being offset for the most part by pay downs as larger client financing solutions are being met through capital markets access. Lastly on a positive note, loan spreads continued to widen. Moving to deposits, we\u2019ll stay focused on averages on Slide 7, and relative to pre-pandemic Q4 2019, average deposits are still up 35%. Every line of business remains well above their pre-pandemic levels and consumer is up 32%, with checking up 38% driven by net new checking accounts added, as Brian noted earlier. Linked quarter total average deposits remained steady at more than $1.9 trillion. The total rate paid on consumer deposits in the quarter was 55 basis points, and while the rate increased nine basis points from the fourth quarter, the pace of increases continues to slow. The mix of low rate and high quality transactional accounts keeps the rate paid low. Wealth management and global banking also saw a slowdown in the increases in their rate paid and slowdown in the rotation out of non-interest bearing accounts in the first quarter. Focusing for a moment on ending deposits and movement from the fourth quarter, this quarter we delivered good deposit growth. Total deposits grew $23 billion and are now $100 billion above their trough in mid-May of 2023. Consumer banking deposits saw growth in both consumer interest-bearing and non-interest bearing. Global banking continued their more normal pattern of deposits seen for the past five quarters and up more than $30 billion over the last year. Deposit growth exceeded loan growth for the third straight quarter and our excess of deposits over loans expanded to $897 billion, and that\u2019s nearly two times the $450 billion we had pre-pandemic. You can see that on the upper left-hand side of Slide 8. We continue to have a mix of cash, available-for-sale securities and held-to-maturity securities, and this quarter our combination of cash and AFS is now 52% of the total $1.2 trillion noted on this page. You\u2019ll also notice the continued change in mix of the shorter term portfolio as we again lower cash and increase AFS securities that are mostly hedged and at similar yields to the cash. Note also the hold-to-maturity book continues to decline from pay downs. In total, the hold-to-maturity book is now down $96 billion from its peak and consists of about $122 billion in treasuries and about $458 billion in mortgage-backed securities, along with $7 billion of other securities. Lastly, a blended cash and securities yield of 360 basis points continued to rise and remained about 168 basis points above the rate we paid for deposits. The replacement of lower earning assets into higher yielding assets continues to provide an ongoing benefit to NII. Let\u2019s turn our focus to NII performance using Slide 9, where you can see on a fully tax-equivalent basis NII was $14.2 billion. Good deposit growth provided a strong start to the year for NII, and as Brian noted, NII of $14.2 billion increased by $100 million from the fourth quarter. That compares to our expectation and guidance of a decline of $100 million to $200 million, and that would have resulted in NII this quarter of $13.9 billion to $14 billion, so we did quite a bit better than we had originally expected. The improvement in quarterly NII in Q1 compared to Q4 included the benefits of higher yielding assets and improvement in global markets NII, partially offset by higher deposit cots and one less day in Q1 than 4Q23. Deposit balance activity more generally also aided in the beat versus our expectations. As we look forward for Q2, we expect some modest impact of lower deposits in wealth management as client make their seasonal income tax payments, and we expect global markets NII to decline mostly seasonally a little bit as well, so we expect second quarter NII could approach $14 billion on an FTE basis. Further, we continue to expect that Q2 will be the low point for NII and we expect the back half of 2024 to grow. Compared to our guidance last quarter, we\u2019re obviously growing off a larger base of NII after having outperformed in the first quarter. With regard to that forward view, let me just note a few other caveats. It includes our assumption that interest rates in the forward curve at the end of the quarter materialize, and at the end of first quarter there were still three cuts expected this year, starting in June. Our forward view also includes an expectation of low single-digit loan growth and some moderate growth in deposits as we move into the back half of 2024. Given our recent deposit and loan performance, we continue to feel good about these assumptions. Turning to asset sensitivity and focused on a forward yield curve basis, our sensitivity to the plus and minus-100 basis points parallel shift in the forward curve at March 31 remains well balance. Let\u2019s turn to expense, and we\u2019ll use Slide 10 for that discussion, where we reported $17.2 billion expense this quarter including the FDIC assessment. Adjusted for the assessment, expenses were $16.5 billion and the increase over the fourth quarter included a little more than $400 million in seasonal payroll tax expense, as well as higher revenue-related costs and, to a lesser extent, annual merit increases and other annual awards, like sharing success awards provided this quarter. $16.5 billion was just a little above our forecast for Q1 which we made last quarter, and the increase is driven by better than expected fee revenue across wealth management, investment banking, and sales and trading, and as Brian said, that\u2019s a trade-off we\u2019re more than happy to make, bringing more earnings to the bottom line. While expense is up almost 2% from last year, we simply remind you inflation is up by more than 4% and we\u2019ve increased our investment, and we\u2019re paying for the revenue growth, so we think it represents good work by our teams. As we look forward in Q2, we expect a decline from the Q1 level as we typically see about two-thirds of the Q1 elevate payroll tax expense come back out, and the remainder of the year expense is expected to trend down. Continued digital engagement savings and operational excellent initiatives should help us offset other cost increases for people and technology through the back half of the year. Turning to credit on Slide 11, provision expense was $1.3 billion in the first quarter, and that included $179 million of reserve release due to a modestly improved macro environment outlook as the baseline consensus expectations improved from the fourth quarter. On a weighted basis, we remain reserved for an unemployment rate of nearly 5% by the end of 2025 compared to the most recent actual 3.8% rate. Net charge-offs of $1.5 billion increased $306 million from the fourth quarter, driven by continued credit card seasoning and commercial real estate office exposures as swift revaluations from current appraisals and resolutions drove higher charge-offs. The net charge-off ratio was 58 basis points, a 13 basis point increase from the fourth quarter. On Slide 12, we show you the credit quality metrics for both our consumer and commercial portfolios. Consumer net charge-offs increased $150 million versus the fourth quarter from the flow-through of higher late stage credit card delinquencies. We included a credit card delinquency slide, No. 28 in our appendix, and we\u2019re encouraged by the trend of delinquencies because the late stage increases slowed and early stage delinquencies improved as well, and that leads us to believe we should begin to see consumer net charge-offs start to level out over the next quarter or so. All of this is still well within our risk appetite and our expectations, and it\u2019s consistent with the normalization of credit we discussed with you in prior calls. Commercial net charge-offs increased $191 million versus the fourth quarter, driven by commercial real estate losses and office exposures. On office losses this quarter, we recorded charge-offs on 16 office loans. Four were a result of sales activity, i.e. final resolution, seven were from losses that we expect on exposures that are in the process of expected resolution in the course of the next 90 days, and the rest we took as a result of refreshed valuations. We use a continuous and thorough loan-by-loan analysis and we\u2019re quick to recognize impacts in the commercial real estate office space through our risk ratings, and that\u2019s resulted in several downgrades in the last few quarters. As a result of these quick actions and our downgrades in categorization, we\u2019ve also refreshed the valuation of our reservable criticized properties, and we\u2019ve taken appropriate reserves and charge-offs in the process. Roughly one-third of our office exposure is now categorized as reservable criticized, and importantly the pace of the increase in reservable criticized exposures has slowed each quarter since the second quarter of last year, so we believe the losses on these office properties have been front-loaded and largely reserved. We expect the losses to move lower in the second quarter and we expect a notable decline in the second half of the year when compared to the first half of this year, absent any material change in expected real estate prices. In the appendix on Slide 29, we\u2019ve included a current view of our commercial real estate and office portfolio metrics, as we usually do. Let\u2019s turn to the various lines of business and offer some brief comments on their results, starting on Slide 13 with consumer banking. For the quarter, consumer banking earned $2.7 billion on continued strong organic growth. The reported earnings declined 15% year-over-year as revenue declined from lower deposit balances compared to the first quarter of \u201923. Credit card loss normalization also caused year-over-year provision expense to increase. As Brian noted, customer activity showed another strong quarter of net new checking growth, another strong period of card openings, and investment balances for consumer clients which climbed 29% year-over-year to a record $456 billion. That included market appreciation and also very strong full-year flows of $44 billion. As noted earlier, loans grew nicely year-over-year from credit card as well as small business, where we remain the industry leader. Expenses were flat year-over-year, fighting off inflation, merit increases, higher minimum wages, and new and renovated financial centers and technology investments, so holding expense flat reflected very good work by the consumer team. As you can see on the appendix, Page 20, digital adoption and engagement continued to improve, reaching a record of $3.4 billion digital log-ins in the quarter, and it showed good year-over-year improvement. Customer satisfaction scores at near record levels illustrate the continued appreciation of the enhanced capabilities we provide. Moving to wealth management on Slide 14, we produced good results, and that included good organic client activity, market favorability and strong flows. Our comprehensive suite of investment and advisory services coupled with a commitment to personalized wealth management planning and solutions has enabled us to meet the diverse needs and aspirations of our clients. In first quarter, we reported record revenue of $5.6 billion and a little more than $1 billion in net income. That net income was 10% from the first quarter of \u201923. The business generated positive operating leverage and grew revenue faster than expense, while improving the pre-tax margin year-over-year. While overall average loans were down year-over-year, driven by the securities-based lending, it\u2019s worth noting the strong growth we\u2019re seeing in custom lending, and ending loans in the wealth management custom loan book are up 6% year-over-year. As Brian noted earlier, both Merrill and the private bank continued to see strong organic growth and produce good assets under management flows of more than $60 billion since the first quarter of \u201923, which reflects a good mix of new client money, as well as existing clients putting money to work. Expense growth here matched the revenue growth, otherwise fighting off higher investment costs and inflation. Let me also highlight the continued digital momentum here. As an example, Merrill has 86% of its clients now engaging with us digitally and 80% utilizing e-delivery. 76% of their eligible accounts are now opened digitally, so the cost for us to open is half and the customer cycle times are improved greatly. On Slide 15, you\u2019ll see our global banking results, and the business produced earnings of just less than $2 billion, down 22% year-over-year as improved investment banking fees and treasury services revenue were overcome by lower net interest income and higher provision expense. Revenue declined 4% driven by the impact of interest rates and deposit rotation to interest-bearing, and that impacted NII. The diversification of our revenue across products and regions continues to reflect the strength in this platform, and GTS and investment banking fees are good examples. In our global treasury services business, some of the NII pressure from higher rates on deposits is offset by the fees paid for moving and managing the cash of clients, and that continues to grow with existing clients as well as with new client generation. As Brian noted, investment banking had a strong quarter, and at $1.6 billion in investment banking fees, this quarter was the strongest quarter in seven years, absent the pandemic 2020 and 2021 periods. An increase in provision expense included the commercial real estate net charge-offs I discussed earlier, as well as a larger reserve release in the prior year period. Expense increased 2% year-over-year, including the 35% lift in investment banking fees from the first quarter of \u201923. Switching to global markets on Slide 16, we\u2019ll focus our comments on results excluding DVA, as we normally do. The team had another terrific quarter with $1.8 billion in earnings, growing 7% year-over-year. Revenue improved 6% from the first quarter of \u201923 and return on average allocated capital was 16%. Focusing on sales and trading ex-DVA, revenue improved 2% year-over-year to $5.2 billion, which is the highest first quarter result in over a decade. FICC was down 4% while equities increased 15% compared to the first quarter of \u201923. The decline in the FICC revenues versus the first quarter was driven by a weaker macro trading quarter that was partially offset by better mortgage trading results. Equities was driven by strong trading results in derivatives, and year-over-year expenses were up 4% from continued investment in the business. Finally on Slide 17, all other shows a loss of $700 million driven by the FDIC assessment. Revenue declined year-over-year, reflecting higher investment tax credit yields, and expense adjusted for the FDIC assessment was down $133 million, driven by lower unemployment processing costs. Our effective tax rate for the quarter was 8%, and excluding the FDIC assessment and other discrete items, it would have been 9%. Further excluding tax credits related to investments in renewable energy and affordable housing, our effective tax rate would have been 26%. Thank you, and with that, we\u2019ll jump into Q&A.","evidence_gemma_new":"expense","evidence_llama_3_3":null,"evidence_qwen_3_30b":"expense","gemma_new_max":17200000000.0,"gemma_new_min":17200000000.0,"llama_3_3_max":null,"llama_3_3_min":null,"qwen_3_30b_max":17200000000.0,"qwen_3_30b_min":17200000000.0}
{"symbol":"BAC","year":2024,"quarter":2,"date":"2024-Q2","chunk_id":5,"sub_chunk_id":0,"centroid_label":"expense","agreed_value":16300000000.0,"count":2,"chunk":"Alastair Borthwick: [Technical Difficulty] will materialize. And this now includes three interest rate cuts, starting in September, another in November, and one more in December. And the waterfall shows an estimated impact of those rate cuts to our quarterly NII. The next couple of categories are a result of natural management of interest rate risk in a balance sheet mixed with fixed-rate assets and variable-rate assets. And our balance sheet is split roughly half and half. So we take in liquidity from customers that we use to fund our assets, and then we store excess liquidity in cash and securities. We have fixed assets that mature and pay down, and those supply cash that then gets put back to work on the balance sheet and reprices over time. And we have two basic categories of fixed assets that mature and pay off, and those are securities and loans. On securities, you can see we've got about $10 billion a quarter of cash coming off of our securities portfolio, and we gain roughly 300 basis points of improvement on those assets when we put that money back on the balance sheet. On loans, between resi, mortgage, and auto, we've got another roughly $10 billion, which reprices with a little less yield improvement than securities. And between the securities and loans, we expect a fixed-rate asset repricing adds about $300 million to our quarterly rate of NII as we get to the fourth quarter. On the variable rate asset side, and to protect from down moves in rates, we hedge some of that with cash flow swaps. And those typically roll off in any given quarter and get replaced over time. So included in the cash flow hedges is an impact of cessation of BSBY as an alternative rate. If you recall, we took a charge in the fourth quarter of \u201823. It was $1.6 billion, and we said that would come back to us through time. And beginning in November, we start to see the benefit coming back into NII. And in Q4, that's about $200 million. That Q4 partial quarter benefit will grow by a slightly smaller sequential NII benefit in Q1 \u201825. And then it begins to taper off heading into 2026. In addition, we've got about $150 billion of received fixed cash flow hedges, protecting us from short rate moves moving over. Most are hedging floating rate commercial loans. And the cost of those hedges is reported as contra revenue in commercial loan interest income. These hedges have a weighted average life of just over two years. And they've got an average fixed rate of approximately 250 basis points. So starting in the second-half of 2025, we begin to get some additional NII tailwind, because the cash flow hedges with lower fixed rate likes where we receive, those will begin to roll off, and will likely replace those at higher current market rates at the time. The actual size of the tailwind we'll get from the expiration of those swaps will obviously be highly dependent on the level and the shape of the yield curve at the time of those maturities. And that stretches out over the course of the next four years. Okay, a couple other points to make. You'll note we don't expect much movement around our modestly, liability sensitive global markets NII activity. And lastly, our forward view has an expectation of low-single-digit growth in loans, low-single-digit growth in deposits, with continued slowing of rate paid movement through the back half of 2024. And you can see our expectation of the combined impact here as well. This last element is the one that has the most potential variability. And obviously, it will depend upon actual deposit and loan growth, and pricing and rotation. Okay, let's turn to expense and we'll use slide 11 for the discussion. We reported $16.3 billion of expense this quarter. And that's more than $900 million lower than Q1, which included $700 million for the FDIC special assessment. Not including the FDIC assessment, expenses were lower than Q1 by $229 million, driven by seasonally lower payroll tax expense. Compared to Q2 \u201823, we're up less than 2%. And that increase is equal to the incentives paid for improved fee revenue. Incentives for our GWIN business alone are up $200 million year-over-year. And that's obviously an expense we're happy to pay when we have a 14% improvement in fees for assets under management. Our second quarter headcount number included welcoming a diverse class of nearly 2,000 summer interns we hope will join us over the course of the next year or two upon their graduation. And absent those interns, our headcount fell by nearly 2,000. In the third quarter, we expect to add approximately 2,500 college graduates for full time. More than -- and that's from more than 120,000 applications received, showing that we remain an employer of choice for talented young people. Expense levels for the rest of 2024 are expected to bounce around this second quarter level, given the higher fee revenue and investments made for growth. So let's now move to credit and we'll turn to slide 12. There was little change in our asset quality metrics this quarter. Provision expense was $1.5 billion. That was $189 million higher than Q1, driven by a smaller reserve release in Q2. Net charge offs of $1.5 billion were little changed, with a small increase in credit card, mostly offset by lower commercial real estate office charge offs. On a weighted basis, we remain reserved for an employment rate of nearly 5% by the end of 2025, compared to the most recent 4.1% rate reported. The net charge off ratio was 59 basis points, largely unchanged for Q1. On slide 13, we highlight more credit quality metrics for both our consumer and commercial portfolios. Consumer net charge-offs increased by a modest $31 million versus the first quarter from the flow-through of higher late-stage credit card delinquencies from Q1. Highlighting the change in direction of delinquencies, consumer 90-day-plus delinquencies declined in 2Q by $57 million. Commercial net charge-offs were relatively flat as lower commercial real estate losses were mostly offset by a small increase in other commercial loans. Our office losses went from $304 million in Q1 to $226 million in Q2. Other commercial real estate loan losses were simply one hotel. Okay, let's move to the various lines of business and some brief comments on their results, and I'll start on slide 14 with consumer banking. For the quarter, consumer earned $2.6 billion on continued strong organic growth, and reported earnings declined 9% year-over-year as revenue declined from lower deposit balances, compared to the second quarter of last year. Customer activity showed another strong quarter, net new checking growth, another strong period of card openings, and investment balances for consumer clients, which climbed 23% year-over-year to a new record $476 billion. That included 12 months of strong flows at $38 billion in addition to market appreciation over the time. As noted earlier, loans grew nicely year-over-year from credit card, as well as small business where we remained the industry leader. The team held expense flat year-over-year, reflecting good work with continued business investments for growth, offset by the operational excellence work to improve processes and move more of our transactions to digital. And as you can see on the appendix page 26, digital adoption and engagement continue to improve, and customer satisfaction scores remain near record levels, illustrating customer appreciation of our enhanced capabilities due to our continuous investment. Moving to wealth management on slide 15, we produced good results, and those included good organic client activity, market favorability, and strong AUM flows, and this quarter also saw good lending results. Our comprehensive suite of investment and advisory services, coupled with our commitment to personalized wealth management planning and solutions, has enabled us to meet the diverse needs and aspirations of our clients. Net income rose 5% from the second quarter of last year to a little more than $1 billion. In Q2, we reported revenue of $5.6 billion, growing 6% over the prior year. As Brian noted, a strong 14% growth in fee revenue from investment and brokerage services overcame the NII headwind. Expense growth reflects the fee growth and other investments for future. The business had a 25% margin, and it generated a strong return on capital of more than 22%. Average loans were up 2% year-over-year, driven by strong growth we're seeing in custom lending and a pickup in mortgage lending. Both Merrill and the Private Bank continue to see good organic growth, and they produced strong assets under management flows of $58 billion since last year's second quarter, which reflects a mix of new client money, as well as existing clients putting more of their money to work. I also want to highlight the continued digital momentum in this business, and you can find that on slide 28. On slide 16, we turn to Global Banking results. And here, the business produced earnings of $2.1 billion, down 20% year-over-year, as improved investment banking fees and treasury services revenue were overcome by lower net interest income and higher provision expense. Revenue declined 6%, driven by the impact of interest rates and deposit rotation. The diversified revenue across products and regions reflects the strength of our Global Banking franchise. In our GTS business, fees for managing the cash of clients offsets a lot of the NII pressure from higher rates, and clients are accessing the capital markets for their capital needs instead of borrowing. Investment banking had a strong quarter, growing fees 29% year-over-year to nearly $1.6 billion, led by debt capital markets fees, mostly in leveraged finance and investment grade. And we finished the quarter strong, maintaining our number three investment banking fee position globally. A solid start to 2024 has left us in a good position, with top three rankings now in North America, Latin America, and EMEA, and number six in APAC. And we're seeing strong performance in important industry groups as well. An increase in provision expense from last year was driven by the commercial real estate net charge-offs I discussed earlier, and expense increased 3% year-over-year, including continued investment in the business. Switching to Global Markets on Slide 17, I'll focus my comments on results, excluding DVA as I normally do. The team had another terrific quarter as we generated good revenue growth and achieved operating leverage and continued to deliver a solid return on capital. Earnings of $1.4 billion grew 19% year-over-year, and return on average allocated capital was 13%. Revenue, and again, this is ex-DVA, improved 10% from the second quarter of 2023. Focusing on sales and trading, ex-DVA, revenue improved 7% year-over-year to $4.7 billion, and that's the highest second quarter in over a decade. FICC was down 1%, while equities increased 20% compared to Q2 '23. FICC revenues remained strong, and versus Q2 '23, they were modestly lower, driven by a weaker macro trading quarter in FX and rates, and that was largely offset by better commodities and mortgage trading. Equities was driven by strong trading results in derivatives and cash equities. Year-over-year expenses were up 4% on revenue improvement and continued investment in the business. Finally, on Slide 18, all other shows a loss of $0.3 billion, and that was little changed year-over-year, as lower expense was offset by lower provision costs as a result of reserve changes. Our effective tax rate for the quarter was 9%, and excluding discrete items and the tax credits related to investments in renewable energy and affordable housing, the effective tax rate would have been 25%. And with that, I think we'll stop there, and we'll jump into questions.","evidence_gemma_new":"expense this quarter","evidence_llama_3_3":null,"evidence_qwen_3_30b":"expense $16.3 billion this quarter","gemma_new_max":16300000000.0,"gemma_new_min":16300000000.0,"llama_3_3_max":null,"llama_3_3_min":null,"qwen_3_30b_max":16300000000.0,"qwen_3_30b_min":16300000000.0}
{"symbol":"BAC","year":2024,"quarter":3,"date":"2024-Q3","chunk_id":3,"sub_chunk_id":0,"centroid_label":"expense","agreed_value":16500000000.0,"count":2,"chunk":"Alastair Borthwick: Thank you, Brian, and I'm starting on Slide 5 of the earnings presentation. We'll touch on more highlights noted here as we work through the material, and I'd just add that we delivered solid returns with a return on average assets of 83 basis points and return on tangible common equity of 12.8%. So let's move to the balance sheet on Slide 6, where you can see that the balance sheet ended the quarter at $3.3 trillion of total assets, up $66 billion from the second quarter, as global markets client demands expanded and commercial loans grew $16 billion in the quarter. Otherwise in the quarter, the investments of our excess liquidity saw a $10 billion reduction in hold to maturity securities, and the combination of shorter-term liquidity investments of cash and available for sale securities were relatively flat for the second quarter. On the funding side, global markets grew to support balance sheet needs of our clients and total deposits grew $20 billion on an ending basis. It's noteworthy that our average deposits are now up for the fifth consecutive quarter. Liquidity remains strong with $947 billion of global liquidity sources, and that was up $38 billion compared to the second quarter. Shareholders' equity was up $2.6 billion, with common equity up $4.6 billion and a preferred redemption driving a $2 billion decline in preferred equity. The increase income and equity compared to Q2, included $5.6 billion in capital returned to shareholders, partially offsetting our earnings, and it included an improvement in AOCI driven by an improvement from cash flow hedges given the drop in long-term rates in the quarter. $5.6 billion in capital distributions includes $2 billion in common dividends and the repurchase of $3.5 billion in shares. Tangible book value per share of $26.25 rose 10% from the third quarter of '23. And turning to regulatory capital, our CET1 level improved to $200 billion and the CET1 ratio was 11.8%. And that remains well above our new 10.7% requirement as of October 1. Risk weighted assets increased modestly, driven by both lending activity and global markets needs to support clients and our supplemental leverage ratio was 5.9% compared to the minimum requirement of 5%, which leaves plenty of capacity for balance sheet growth. Our $463 billion of total loss-absorbing capital means our TLAC ratio remains comfortably above our requirements. So let's dig a little deeper on deposits and the growth from the second quarter using Slide 7. Here, we show you deposits and rates by line of business. Average deposits grew $45 billion, or 2% year-over-year, and they increased modestly linked-quarter. Notably, quarter-over-quarter increases in rates paid continue to slow again this quarter, rising 7 basis points to 210 basis points. Consumer Banking increased modestly, driven by product mix and higher rate product offerings. And Global Banking rate paid increased modestly driven by growth in interest bearing balances. It's worth noting that wealth management declined a basis point. We acted quickly following the September 50 basis point rate cut in our wealth business and our Global Banking business, and since late in the quarter, only a small portion of those cuts are reflected. Total rate paid for all deposits from these actions is expected to fall below 2% later in October, as the fuller effect of the pass-throughs occur. Let's turn to loans by looking at average balances on Slide 8. Loans in Q3 of $1.06 trillion improved 1% year-over-year driven by solid commercial loan growth as well as credit card and vehicle loans. Overall, commercial loans grew 2% year-over-year. And importantly, this included a drop in commercial real estate loans of 6%. Commercial loans, excluding commercial real estate, grew 3% year-over-year and were up 6% annualized from the Q2. Consumer banking loan growth was driven by credit card, small business and vehicle borrowing, and the overall consumer growth was muted by a decline in mortgage balances as pay downs exceeded originations in a higher rate environment. Let's turn our focus to NII performance and Slide 9. So note that our trended investment of excess deposit slide is in our appendix on Page 21. Deposit levels were $855 billion in excess of loans at the end of Q3 and continue to be a good source of value for shareholders. Nearly $625 billion or 52% of our excess liquidity is in short dated cash and AFS securities. The longer dated lower yielding hold to maturity book continues to roll-off, and we reinvest that in higher yielding assets. The blended yield of cash and securities on Page 21 remains well above our deposit rate paid. So going back to Slide 9, regarding NII on a GAAP, non-FTE basis, NII in Q3 was $14 billion and on a fully tax equivalent basis, NII was $14.1 billion. On our Q3 earnings call last year, we first provided our expectation that the Q2 would be the trough and then we would begin to grow in the Q3 of '24, marking an inflection point for NII. And that's what you see this quarter. NII increased by $252 million from the Q2 driven by a number of factors. Global Markets activity and pricing, fixed asset repricing and one extra day all benefited NII, while higher funding costs partially offset those benefits. A 50 basis point rate cut in September also negatively impacted NII. With regard to a forward view of NII, there are obviously several variables at play in the Q4, and we still expect Q4 NII to grow, and we expect it to be $14.3 billion or more on a fully tax equivalent basis. Now we note the following assumptions. First, we assume that the forward curve on October 10, is the one that materializes, so that includes a 25 basis point cut in November and another 25 basis points in December. We also assumed very modest balance increases in both loans and deposits in Q4, building off the activity seen in Q3. Last quarter, we told you we expect about $20 billion in the aggregate of fixed rate loans and securities to reprice on a quarterly basis, and those are expected to reprice into higher yielding assets and provide a benefit to NII for many periods ahead. And as described previously, we expect to see roughly $200 million benefit in Q4 from the BSBY alternative rate transition. So we think this sets us up well for 2025. With regard to interest rate sensitivity on a dynamic deposit basis, we provide a 12-month change in NII for an instantaneous shift above or below the forward curve. On that basis, a 100 basis point increase would benefit NII by $1.8 billion, while a decrease of 100 basis points would decrease NII over the next 12 months by $2.7 billion. Okay, let's now turn to expense and we'll use Slide 10 for the discussion. We reported $16.5 billion in expense this quarter, up 1% from the second quarter, driven by the revenue improvement in three primary areas that Brian noted earlier. Investment banking, investment broke - and brokerage fees and sales and trading revenue all have more activity and incentive variability than other revenues, and they were up 3% in aggregate versus the second quarter and up 13% year-over-year. In Q3, our headcount of 213,000 was up a little more than 1000, and this quarter we saw the departure of roughly 2,000 summer interns and we welcomed roughly 2500 college graduates from the nearly 120,000 applications received. Regarding a forward view in Q4, we don't expect much change in our headcount, and with continued investments we expect expense to be in line with Q3 at $16.5 billion. As we look into 2025, with an expected return of NII growth and through our expense discipline, we expect a return to operating leverage, an improvement in our efficiency ratio. Let's turn to credit on Slide 11. And the good news is there's not a lot to report here compared to the second quarter. Net charge-offs of $1.5 billion were flat compared to Q2. We've seen consumer losses in a pretty tight range for a few quarters now. Outside of that, we saw lower losses from office exposure and otherwise we had two somewhat unrelated commercial losses. The net charge off ratio was 58 basis points, down one basis point from Q2. Provision expense was unchanged from Q2 at $1.5 billion as reserve levels remain constant. And with regard to reserve levels on a weighted basis, we remain reserved for an unemployment rate of 5% by the end of 2025 compared to the most recent 4.1% rate reported. On Slide 12, we highlight the credit quality metrics for both our consumer and commercial portfolios, and there's nothing really noteworthy to highlight on this page. So let's move to the various lines of business and some brief comments on their results, starting on Slide 13 with consumer banking. Consumer banking continues to lead the company in organic growth, and this included another strong quarter of net new checking growth, another strong period of card openings and investment balances for consumer clients, which climbed 28% year-over-year to a record $497 billion. It also included 12-months of strong flows at $29 billion in addition to market appreciation. As noted earlier, loans grew nicely year-over-year from credit card and vehicle as well as small business, where we remain the industry leader. One highlight to note, our Practice Solutions Lending Group for doctors and dentists and related professionals saw loans grow 11% year-over-year. All of this organic growth helped to drive $2.7 billion in net income in Q3. So reported earnings remained strong, declining 6% year-over-year as revenue declined from lower NII, partially offset by higher card income. With the trajectory shifting in NII, we should see earnings in this business begin to shift as well. Expense rose 5% as we continued our business investments. And those investments included those in our people, including the announcement of moving our minimum wage to $24 per hour and that raises the minimum annualized salary for our associates to nearly $50,000. As you can see on the appendix Page 25, digital adoption and engagement continue to improve and customer satisfaction scores remain near record levels illustrating the appreciation of enhanced capabilities from our continuous investments. Bank of America's 23 million Zelle users are up 10% in the past 12-months and their volume usage is now up more than 20%. Customers are now using Zelle at nearly 3x the rate they're writing checks, and Zelle usage has meaningfully surpassed the combination of checks written and ATM withdrawals. Moving to Wealth Management on Slide 14. We produced good results, reflecting healthy organic growth and client activity with increased banking activities of our clients and the impacts of increased market levels together with strong assets under management flows. With a continued increase in banking product usage from our investing clients, the diversity of our revenue base continues to improve. More than 60% of our wealth clients now have banking products with us and 30% of our revenue is now in net interest income to complement the fees earned in our advice model. Net income rose from the third quarter '23 to $1.1 billion this year. In Q3, we reported revenue of nearly $5.8 billion growing 8% over the prior year, led by 14% growth in asset management fees that Brian highlighted earlier. Expenses growth reflects the fee growth and other investments for our future growth as we continue to grow our advisor force through hiring of both experienced advisors and graduates from our training program. We welcomed 5,500 Merrill and Private Bank net new households this quarter and more than 1\/3 of those Merrill openings were driven by graduates from our training program. The business had a 25% margin and generated a strong return on capital of 23%. Average loans were up 3% year-over-year, driven by growth in custom lending and a pickup in mortgage lending. Both Merrill and the Private Bank continue to see healthy organic growth, producing strong assets under management flows of $65 billion year-over-year, which reflects a good mix of new client money as well as existing clients putting money to work. We should also highlight the continued digital momentum that you'll find on Slide 27. As an example, three quarters of Merrill Bank and Investment accounts were opened digitally this quarter. On Slide 15, you see Global Banking results. This business produced earnings of $1.9 billion down 26% year-over-year as improved investment banking fees and treasury services revenue were overcome by lower net interest income and higher provision expense. Revenue declined 6%, driven by the impact of interest rates and deposit rotation. In our global treasury services business, fees for managing the cash of clients continue to offset some of the NII pressure from higher rates. Investment banking had a strong quarter, growing fees 18% year-over-year to $1.4 billion, led by debt capital markets fees, mostly in leveraged finance and investment grade. We finished the quarter strong, maintaining our number three investment banking fee position. What began as a slow quarter this summer gained some momentum through September and the pipeline looking forward looks solid. An increase in provision expense from last year was driven by the previously noted commercial and CRE losses. Expense increased 7% year-over-year, including continued investments in the business, particularly around technology. Switching to global markets on Slide 16. I\u2019ll focus comments on results excluding DVA as we normally do and the team continued their impressive streak of strong revenue and earnings performance. They achieved operating leverage and continued to deliver good return on capital. Earnings of $1.6 billion grew 23% year-over-year and return on average allocated capital was 14%. Revenue again, ex-DVA improved 14% from the third quarter of last year as both sales and trading and investment banking fees for institutional clients improved nicely year-over-year. Focusing on sales & trading, ex-DVA revenue improved 12% year-over-year to $4.9 billion. FICC increased 8% while equities increased 18% compared to the third quarter of '23. FICC revenues remained strong growing over both the prior year and the second quarter, driven by momentum in currencies trading. Equities had a record third quarter driven by strong trading performance in derivatives and cash. Year-over-year expenses were up 6% on revenue improvement and our continued investment in the business. Finally, on Slide 17, all other shows a loss of $295 million. Revenue was lower and included a charge to other income of roughly 200 million related to Visa's increase in its litigation escrow account. The decline in expense was driven by reduced costs of a liquidating business and lower legal expense. Our effective tax rate for the quarter was 6% and excluding discrete items and the tax credits related to investments in renewable energy and affordable housing, the effective tax rate would have been approximately 24%. So that's where I'll stop, and with that we'll open it up for Q&A.","evidence_gemma_new":null,"evidence_llama_3_3":"expense expense","evidence_qwen_3_30b":"expense $16.5 billion up 1% from the second quarter","gemma_new_max":null,"gemma_new_min":null,"llama_3_3_max":16500000000.0,"llama_3_3_min":16500000000.0,"qwen_3_30b_max":16500000000.0,"qwen_3_30b_min":16500000000.0}
{"symbol":"BAC","year":2024,"quarter":4,"date":"2024-Q4","chunk_id":9,"sub_chunk_id":0,"centroid_label":"expense","agreed_value":2.5,"count":2,"chunk":"Steven Chubak: That's great, Alastair. And maybe a follow-up for Brian. Just at a recent conference, you spoke about the expectation of delivering 200 bps of sustainable operating leverage, laying out an algorithm where revenues grew 4% to 5%, expenses grow 2% to 3%. What gives you confidence in that ability to deliver that level of top line growth on a sustainable basis? Just want to unpack that a little bit further.","evidence_gemma_new":"expenses","evidence_llama_3_3":null,"evidence_qwen_3_30b":"expenses recent conference","gemma_new_max":2.5,"gemma_new_min":2.5,"llama_3_3_max":null,"llama_3_3_min":null,"qwen_3_30b_max":2.5,"qwen_3_30b_min":2.5}
{"symbol":"BAC","year":2023,"quarter":1,"date":"2023-Q1","chunk_id":3,"sub_chunk_id":0,"centroid_label":"net charge offs","agreed_value":807000000.0,"count":2,"chunk":"Alastair Borthwick: Thank you, Brian. And I'll pick up on Slide 3, where we list some of the more detailed highlights of the quarter. And then, on Slide 4, we present the summary income statement. So, I'm going to refer to both of these together. As Brian mentioned, for the quarter, we generated $8.2 billion of net income, and that resulted in $0.94 per diluted share. Our revenue grew 13%, and that was led by a 25% improvement in net interest income, coupled with strong 9% growth in sales and trading results, excluding DVA. Our non-interest revenue was strong, despite three headwinds: First, we had lower service charges as commercial clients paid lower fees for treasury services, since they now receive higher earned rates on balances. And, obviously, that allows us to invest those funds to earn NII. On consumer, we had lower NSF insufficient funds and overdraft fees as a result of our policy changes announced in late 2021. Second, with lower asset management fees and that just reflects the lower equity market levels and fixed-income market levels. And, third, investment banking fees were lower, just reflecting the continuation of sluggish industry activity and reduced fee pools. Now, all that said, despite these headwinds, each of the three categories saw modest improvement from the fourth quarter levels. Asset quality remained strong, and provision expense for the quarter was $931 million. That consisted of $807 million of net charge-offs and $124 million of reserve build. And that reserve build compares to a reserve release in the first quarter 2022 of $362 million. Our charge-off rate was 32 basis points and still well below the fourth quarter of '19 when our pre-pandemic rate was 39 basis points. And, remember, 2019 was a multi-decade low. So, credit, obviously, remains quite strong. I want to make one other point on Slide 4 and that is simply to note that pre-tax pre-provision income grew 27% year-over-year compared to reported net income growth of 15%. So, let's turn to the balance sheet that starts on Slide 5. And you can see, during the quarter, our balance sheet increased $144 billion to $3.195 trillion. Brian noted our liquidity levels at the end of the period, those rose to more than $900 billion from December 31. That's $23 billion higher and it remains $324 billion above our pre-pandemic level in the fourth quarter of '19. Shareholders' equity increased $7 billion from the fourth quarter as earnings were only partially offset by capital distributed to shareholders, and we saw an improvement in AOCI of $3 billion due to lower long-term interest rates. The AOCI included more than $0.5 billion increase from improved valuations of AFS debt securities and that flows through CET1. And the remaining $2.5 billion due to changes in cash flow hedges doesn't impact regulatory capital. During the quarter, we paid $1.8 billion in common dividends and we bought back $2.2 billion in shares. Turning to regulatory capital, our CET1 level improved to $184 billion since December 31 and our CET1 ratio improved 14 basis points to 11.4%, once again, adding to our buffer over our 10.4% current minimum requirement as well as the 10.9% minimum requirement that we'll see on January 1st of 2024. That means, in the past 12 months, we've improved our CET1 ratio by 100 basis points, and we've supported our clients and we've returned $12 billion in capital to shareholders. CET1 capital improved $4 billion, and that reflects the benefit of earnings and the AOCI improvement, partially offset by the capital we've returned to shareholders. Our risk-weighted assets increased modestly and that partially offset the benefit to the CET1 ratio of the higher capital we generated. And then, our supplemental leverage ratio increased to 6%. That compares to a minimum requirement of 5% and leaves plenty of capacity for balance sheet growth, and our TLAC ratio remains comfortably above our requirements. So, let's spend a minute on loan growth, and we'll do that by turning to Slide 6, where you can see the average loans grew 7% year-over-year, driven by commercial loans and credit card growth. The credit card growth reflects increased marketing, it reflects enhanced offers and higher levels of card account openings. The commercial growth across the past year reflects the diversity of commercial activity across global banking and global markets and, to some degree, global wealth. And on a more near-term linked-quarter basis, loans grew at a much slower pace, partly driven by seasonal credit card paydowns after the fourth quarter holiday spending, and then commercial demand slowed in Q1 and we saw some paydowns by our wealth management clients as they lowered leverage as rates rose. So, let's turn to deposits and there's obviously been a lot of additional focus this quarter, so I want to spend extra time here and I'm going to start with Slide 7 and talk about average deposits. Just a few points we need to make before focusing on a more detailed discussion of the recent trends. Average total deposits for the first quarter were $1.89 trillion, that is down 2% linked-quarter and down 7% year-over-year. Our deposits peaked in the fourth quarter of 2021. And even as the Fed has continued to withdraw money supply, our deposits have held around $1.9 trillion, because there's a lot more industry deposits today in a much bigger economy today compared to pre-pandemic. Our average deposits were up 34% compared to our pre-pandemic Q4 '19 balance and the industry's deposits were up 31% to $17.4 trillion. So, we've obviously fared a little bit better than the industry. We put our pre-pandemic deposits for each line of business on the slide, so you can compare our balances then and now. I want to highlight consumer checking balances, which remained 53% higher than pre-pandemic. And as I think all of us would expect, GWIM combined client deposits are up a lesser 23%, as those are the clients that generally move their excess cash into other off-balance sheet products. And in global banking, you can see the rotation to interest-bearing across time as rates rose. So, let's get a little more granular and a little more near-term and we'll use Slide 8 for that, where you can see the breakout of deposit trends on a weekly ending basis across the last two quarters. You can also see that we plotted the timeline of Fed target and rate hikes on the top-left chart, just for comparison through time. In the upper left, you can see the trend of our total deposits. We ended Q1 '23 at $1.91 trillion, that's down 1%. And, as Brian mentioned, over the course of the past six months, those balances have been relatively stable. In consumer, looking at the top-right chart, we show the difference here in the movement through the quarter between the balances of low to no interest checking accounts, and the higher-yielding non-checking accounts and, across the entire quarter, we saw a modest $4 billion decline in total. Checking balances, obviously, have some variability around pay days in particular, but note the relative stability of checking deposits, because these are the operational accounts with money and motion to pay the bills and everyday living costs for families. I'd also point out that our checking balances were modestly growing even ahead of March 9th upheaval and continue to move higher through the quarter on the back of disruption. Lower non-checking balances mostly reflect money moved out of deposits and into brokerage accounts where we earn a small fee. Rate paid increased 6 basis points from the fourth quarter to 12 basis points on this [trillion dollars] (ph) of total consumer deposits and remains low, because of the 52% mix that is checking. Lastly, I just note that the rate movements in this business are concentrated in the small CDs and consumer investment deposits, which together represent about 5% of the deposits. In wealth management, as you would expect, it shows the most relative decline, and you can see the continued trend of clients moving money from lower-yielding sweep accounts into higher-yielding preferred deposits and off-balance sheet to other investment alternatives. Now, if we went back further, you'd see that roughly $90 billion has moved out of sweeps in the past year, which leaves $80 billion in these accounts. So, you can see how with the pace and size of rate hikes slowing, we expect the declines in balances to lessen from here. At the bottom-right, note the global banking deposit movement, where we hold about $500 billion in customer deposits. These are generally operational deposits of our commercial customers and they use that to manage their cash flows through the course of the year. Those were down $3 billion from the fourth quarter. And what's interesting to note is that, our total deposits in this segment have been stable at around $500 billion for the past six months and this business just continues to see rotation into interest-bearing. The mix of interest-bearing deposits on an ending basis moved from 49% last quarter to 55% in Q1. And, obviously, we pay increased rates on those interest-bearing deposits. And it's this rotation in global banking that's driving the rotational shift of the total company, and it's pretty typical and to be expected in this environment. So, in summary, our deposits continued to behave as we would expect. The cash transactional balances have shown some recent stabilization. And for investment cash, we've seen deposits moved to brokerage and other platforms for direct holdings of money market, mutual funds, treasuries, and we are capturing many of those flows as you see in our numbers, it's just we expect that to slow going forward. So, now that we've examined trends for the different lines of business, I want to make some important points about the characteristics of our deposit franchise using Slide 9, and this will just help reinforce for shareholders who own Bank of America that they're investing in one of the world's great deposit franchises, all of it based off of relationships we have with our customers and the value they place on the award-winning capabilities and convenience they have access to. So, starting from the top, focus first on consumer. You can see that more than 80% of deposits have been with us for more than five years, and more than two-thirds of our consumer deposits are balances with customers who have had relationships with the bank for more than 10 years. Also, more than three-quarters of these customers are very highly engaged in their activities with us. They are also, geographically, dispersed across the United States given our presence in 83 of the top 100 markets. Lastly, whether you look at consumers or small business, the value proposition is what's driving the same result. We've got long-tenured customers with deep relationships that are highly engaged. Turning to wealth management, you can see a similar story around long tenure and quite active relationships. The average relationship of our GWIM clients is around 14 years. And, again, these clients are very geographically diverse, they're also very digitally engaged, and we continue to see deepening around banking solutions and products of all types. There's lots of options for these clients that extend from their operational checking accounts all the way up through preferred deposit options, and then we also benefit from having great alternatives for them within our investment platform. On global banking, note that 80% of our U.S. deposit balances are held by clients who have had an account with us for at least 10 years. Furthermore, as we measure the number of solutions that clients have with us, we know that 73% of balances are held by clients that have at least five products on us and, just like the other businesses, they are highly diversified by industry and geography. So, those are some of the things that make our quality deposit base stable. So, now that we've walked through both loans and deposits, I want to transition a bit to make some points on balance sheet management and to focus on the liquidity we enjoy by having a surplus of customer deposits that far exceeds the loan demand of our clients today and far exceeded the loan demand of our clients pre-pandemic. Having the deposits alone doesn't pay the expenses to support these great customer bases and it doesn't mean much to our shareholders, unless we put them to work to extract the value of those deposits. So, that's what we're trying to illustrate and we want to show you how we do them. You can see that on Slide 10, where you note we had significant excess deposits over loans pre-pandemic. And during the pandemic, that increased -- that amount increased significantly. Before the pandemic, we had $0.5 trillion more in deposits than loans and that peaked in late 2021 at more than $1.1 trillion and it remains high at roughly $900 billion still today. That's the context as we talk about how we manage excess cash. So, let's turn to Slide 11. And here we're going to focus on the banking book, because our global markets' balance sheet has remained largely market funded. And just follow the graph from left to right. At the top of the slide, you note trend of cash and cash equivalents and the two components of the debt securities balances: available-for-sale and held-to-maturity. And you can see the trend of the overall combined cash and securities balance movement and it closely mirrors the previous slide's excess deposit trends, as you would expect. In 2020, deposits grew, while loans declined and that was pandemic borrowing from our commercial clients stopping and then quickly paying it off. Throughout 2020, as we put deposits to work, we took a number of actions to protect our capital and that included a buildup in hold-to-maturity, better aligning our capital treatment with our intent to hold those securities to maturity. We also hedged rate risk in the available-for-sale book using pay-fixed, receive-variable swaps. So, these securities acted like cash and they earned higher yields and guarded against capital volatility. As we entered the middle of 2021, it became more clearer that the stimulus payment would likely be the last one and, therefore, we believed deposits would be peaking. As a result, we stopped adding to our hold-to-maturity securities book. That book peaked in the third quarter of 2021 at $683 billion, $562 billion were mortgage backs, and the rest were treasuries. And all that's happened is that notional balances have declined in each of the past six quarters, ending the quarter at $625 billion. And within that, the mortgage-backed portfolio was down $67 billion to $495 billion. As rates began to rise quickly throughout 2022, the value of our deposits rose. And, at the same time, the disclosed market value of the hold-to-maturity securities has declined, resulting in a negative market valuation on those bonds. That negative market valuation peaked in the third quarter, came down in the fourth quarter, and it's come down another $10 billion in the first quarter. In our 10-K disclosure, we included a chart which shows the maturity distribution of our securities portfolio. And, I'd remind you, this is based on the maturity dates of those originations, i.e., the date of the last contractual payment. When we look at the actual cash flows of those bonds over time, it results in an average weighted life of the hold-to-maturity securities book of a little more than eight years. And as you can see, since the third quarter of 2021, we've continued to see increases in the overall yield on the balances due to both the maturity and reinvestment of lower-yielding securities as well as remix into higher-yielding cash. And, as you can see, with deposits paying 92 basis points, that compares to our blend of cash and government-guaranteed securities, which pays 290 basis points. So, we continue to benefit NII and yield. And, finally, one very important last point I want to make, which is on the improved NII of our banking book. Because, remember, we manage the entirety of our balance sheet. That includes our deposits and that's where you see the net interest income has improved significantly. NII, excluding global markets, which we disclose each quarter, troughed in the third quarter of 2020 at $9.1 billion, and it's now $5.4 billion higher on a quarterly basis at $14.5 billion in the first quarter of '23, and that's the acid test of managing the entire balance sheet. So, let's turn now to Slide 12 and focus on net interest income. On a GAAP non-FTE basis, NII in the first quarter was $14.4 billion and the FTE NII number was $14.6 billion. Focusing on FTE, net interest income increased $2.9 billion from the first quarter of 2022 or 25%, while our net interest yield improved 51 basis points to 2.2%. The improvement was driven by rates, and that includes reductions in securities premium amortization. Average Fed fund rates are up 440 basis points year-over-year. Relative to that increase in Fed funds, which has benefited all of our variable rate assets, the rate paid on our total deposits rose 89 basis points and the rate paid today on interest-bearing deposits is up 133 basis points. Average loan growth of $64 billion also aided the year-over-year NII improvement. Turning to a linked-quarter discussion, NII of $14.6 billion is down $222 million from Q4, and that's primarily driven by the continued impact of lower deposit balances and the mix shift into interest-bearing. It's also influenced by lower global markets NII, which, remember, still gets passed through to clients via higher non-interest income as part of the trading revenue. Excluding the $262 million decline in global markets' NII, the banking book NII of $14.5 billion, that was modestly higher as the benefit of increased short interest rates, some modest loan growth and some deposit favorability was offset by two less days of interest in the quarter. Turning to asset sensitivity on a forward basis, the plus 100 basis point parallel shift at March 31st stands at $3.3 billion of expected NII over the next 12 months from our banking book. 96% of that sensitivity is driven by short rates. Summary, the first quarter NII was $14.6 billion in this quarter on an FTE basis and that was a little better than our $14.4 billion expectation as we began the quarter since deposits and rate pass-throughs were both modestly better. Looking forward, based on everything we know about interest rates and customer behavior, we expect second quarter NII on an FTE basis to be around 2% lower compared to Q1. So, think about that NII as about $14.3 billion FTE, plus or minus, driven by expected deposit movements as well as lower global markets' NII, which again is offset in the trading revenue. So, let me remind you of some of the caveats when it comes to that NII guidance. First, importantly, it assumes that interest rates in the forward curve materialize and that includes one more hike and then a couple of cuts in 2023. We also expect funding costs for global markets client activity to continue to increase based on those high rates. And, as noted, the impact of that is still offset in non-interest income, and that obviously assumes our current client positioning and the forward rate expectations. We continue to expect modest loan growth. So, that's in our NII expectation as well, and it's driven by credit card and, to a lesser degree, commercial. And then, finally, we just expect lower deposits and rotational shifts towards interest-bearing, really for three reasons. First, we expect further Fed balance sheet reductions to continue to reduce deposits for the industry. Second, we anticipate lower wealth management deposits in the second quarter. That's pretty typical due to the seasonal impact of clients paying income taxes and, to a lesser degree now, a continuation of balance movement seeking better yields off-balance sheet. And, third, we just continue to expect some of the rotation of commercial deposits towards interest-bearing. Okay. Let's go to Slide 13, we'll talk about expense. And here what you can see is, in the first quarter, our expenses were $16.2 billion, that's up $700 million from the fourth quarter and it's driven by seasonal elevation from payroll taxes, mostly at $450 million, a little bit from higher FDIC insurance expense, that was another $100 million this quarter, and the cost of adding people, call that another $100 million. We ended the first quarter with a little more than 217,000 people at the company, that was 260 people more than year-end. During the quarter, we welcomed 3,000 additional people into the company in January, that's due to outstanding offers that we extended in the fourth quarter. That meant that our headcount peaked in January. That's a little more than 218,000. And, at the end of last week, we were down to 216,000. We continue to expect that to move lower over time and we expect, by the end of the second quarter, our full-time equivalent headcount will be roughly 213,000, excluding our summer interns. As we look forward to the next quarter then, we would expect Q2 expense to benefit from the reduction of the seasonal elevation of payroll tax in Q1, and we would also expect to see expense reductions coming from headcount reductions through attrition over time and our operational excellence work. So, we expect expense in Q2 to be around $400 million or $500 million lower than Q1, so think of that as around $15.8 billion, plus or minus, in Q2. And then further, we just expect continued sequential expense declines in the third quarter and then again in the fourth quarter as we benefit from continued headcount discipline and attrition through time. Now turn to asset quality on Slide 14, and I want to start the credit discussion by saying, once again, asset quality of our customers remains healthy and net charge-offs continue to rise from their near historic lows. Net charge-offs of $807 million increased $118 million from the fourth quarter. That increase was driven by credit card losses as higher late-stage delinquencies flowed through to charge-offs. For context, the credit card net charge-off rate was 2.21% in this first quarter and that compares to 3.03% in the fourth quarter of '19 pre-pandemic. Provision expense was $931 million in Q1, and that included a $124 million reserve build. That's obviously less than the $403 million build we took in the fourth quarter, and it reflects modest loan growth and an ever so slightly improved macroeconomic outlook that, on a weighted basis, continues to include an unemployment rate still north of 5% as we end 2023. We included a slide in the appendix this quarter that highlights the mix and credit metrics of our commercial real estate exposure. And I just wanted to remind everyone here, we've been very intentional around our client selection, very intentional around portfolio concentration, and deal structure over many years and, as a result, we've seen NPLs and realized losses that remain quite low for this portfolio. We had a total of $66 million of commercial real estate losses in 2022. 70% of that was in office loans and that resulted in an annualized loss rate of 26 basis points. In the first quarter, to give some perspective, our office loan losses were $15 million. We have roughly $73 billion in commercial real estate loans outstanding, that's less than 7% of our loan book. It's highly diversified by geography, and no part of the country represents more than 22% of the book. It's also very diversified across property type. Within property type, our office portfolio was $19 billion, it's about 2% of our total loans. The portfolio is roughly 75% Class A properties. And when we originate, they are typically around 55% loan-to-value. Even though we've seen some property value declines, this exposure still remain well secured. $3.6 billion is classified as reservable criticized. And even on the most recent refreshes on our toughest loans, we still have 75% LTVs. In our office book, $4 billion is scheduled to mature this year, another $6 billion in 2024, with the remainder spread over the following years. So, we continue to feel that the portfolio is well-positioned and adequately reserved given the current conditions. On Slide 15, for completeness, we highlight the credit quality metrics for both our consumer and commercial portfolios. And, with that, I'm going to turn it back to Brian to talk about the lines of business.","evidence_gemma_new":null,"evidence_llama_3_3":"Bank of America net charge-offs first quarter","evidence_qwen_3_30b":"net charge-offs $807 million quarter","gemma_new_max":null,"gemma_new_min":null,"llama_3_3_max":807000000.0,"llama_3_3_min":807000000.0,"qwen_3_30b_max":807000000.0,"qwen_3_30b_min":807000000.0}
{"symbol":"BAC","year":2023,"quarter":4,"date":"2023-Q4","chunk_id":3,"sub_chunk_id":0,"centroid_label":"net charge offs","agreed_value":1200000000.0,"count":2,"chunk":"Alastair Borthwick: Thank you, Brian. And I'm going to start on Slide 4 of the earnings presentation to provide just a little more context on the summary income statement and the highlights. For the fourth quarter, as Brian noted, we reported $3.1 billion in net income or $0.35 per diluted share. That GAAP net income number included two notable items. First, we recorded $2.1 billion of pretax expense, that's $0.20 after-tax earnings per share for the special assessment by the FDIC to recover losses from the failures of Silicon Valley and Signature Bank. Second, on November 15th 2023, Bloomberg announced that they would discontinue publishing the Bloomberg Short-Term Bank Yield Index rate after November 15th 2024 and many commercial loans in the industry had BSBY as a reference rate prior to SOFR becoming industry-standard. As noted in an 8-K we filed earlier this week, we came to conclusion in early January that BSBY cessation would not get the same accounting treatment allowed under LIBOR cessation. And therefore cash-flow hedges of BSBY indexed products related to BSBY cash flows, forecast to occur after November 15th 2024, we need to be moved out of OCI into earnings in the fourth quarter of '23 financials. So as a result of the accounting interpretation, we recorded a negative pretax impact to our market making revenue of approximately $1.6 billion. I just want to reinforce that's an accounting impact. It's not an economic change to the contracts and we'll see an offset to this over time through higher NII mostly occurring in 2025 and 2026 after BSBY ceases in November 2024. The accounting lowered CET1 by 8 basis points during the quarter and we will recapture that in the next two or three years. Adjusted for the FDIC assessment and the BSBY cessation related impact, Q4 net income was $5.9 billion, or $0.70 per share. On Slide 5, we show the highlights of the quarter and we reported revenue of $22.1 billion on an FTE basis. And excluding the BSBY cessation impact, adjusted revenue was $23.7 billion and declined 4%, driven by net interest income. Fourth quarter revenue is a tough year-over-year comparison as NII peaked in the fourth quarter of '22 at $14.8 billion, before slowly moving lower over 2023. Outside of NII, we saw good growth in treasury service fees and wealth management fees and those were offset by higher tax-advantaged investment deal activity, creating higher operating losses and the more tax credits associated with them and recognized across periods. Expense for the quarter of $17.7 billion included the $2.1 billion FDIC charge. So excluding that charge, adjusted expense was $15.6 billion and consistent with our prior guidance. That allowed us to invest for growth, as well as use good expense discipline to eliminate work and reduce headcount. And on an adjusted basis, this then is the third quarter of sequential expense decline this year. Provision expense for the quarter was $1.1 billion, that consisted of $1.2 billion in net charge-offs and a modest reserve release, reflecting the improved macroeconomic outlook. Net charge-offs reflect the continued trend in consumer and commercial charge-offs towards more normalized levels as well as higher commercial real-estate office losses. Lastly, our income tax expense this quarter was a modest benefit as credits from tax-advantaged investment deals offset the tax expense on the lower earnings in Q4 driven by the notable charges. So let's review the balance sheet on Slide 6, and you'll see we ended the quarter at $3.2 trillion of total assets, up $27 billion from the third quarter. I'd highlight here, both the $39 billion growth in deposits and a decline in cash on balance sheet of $19 billion. Overall, you'll note the debt securities increased $92 billion. And that included a $9 billion decline in hold-to-maturity securities, and $100 billion increase in available-for-sale securities reflecting short term investment of liquidity from all of these activities. We continue to put money into very short-term T-bills and hedged treasury notes this quarter and those are essentially earning the same rate as cash. And you can see our absolute cash levels remain quite high. As Brian noted, liquidity remained strong with $897 billion of global excess liquidity sources. That was up $38 billion from the third quarter of '23 and it remained $321 billion above our pre-pandemic level in the fourth quarter of '19. Shareholders' equity increased $5 billion from the third quarter as earnings and AOCI improvement were only partially offset by capital distributed to shareholders. The AOCI improved $4 billion, reflecting both the previously mentioned BSBY-related reclassification into fourth quarter earnings and other AOCI improvements. This included some improvements in other cash-flow hedges, which don't impact regulatory capital, driven by a decline in long-end rates. During the quarter, we paid out $1.9 billion in common dividends and we bought back $800 million in shares, which more than offset our employee awards. Tangible book value per share is up 3% linked-quarter and 12% year-over-year. Turning to the regulatory capital, our CET1 level improved to $195 billion from September 30th, while the CET1 ratio declined 9 basis points to 11.8% and remains well above our current 10% requirement as of January 1st '24. We also remained well-positioned against the proposed capital rules, as our current CET1 level matches our 10% minimum against anticipated RWA inflation from the proposed rules. Risk-weighted assets increased $19 billion on loan growth and growth in global markets, RWA, and our supplemental leverage ratio was 6.1% versus the minimum requirement of 5%, which leaves plenty of capacity for balance sheet growth and our TLAC ratio remains comfortably above requirements. So let's focus on loans by looking at the average balances on Slide 7. And you can see loan growth improved this quarter as we saw improvement in both credit card and commercial borrowing, offset by declines in commercial real estate and securities-based lending. The commercial growth reflects good demand overall and was muted only at quarter-end by companies paying down commercial balances as they finalized their year-end financial positions. Lastly, on a positive note, we've seen loan spreads continue to widen, given some of the capital pressures from proposed rules on the banking industry, and this combined with investments in relationship managers we've added over the past few years, has positioned us to take market-share and improved spreads. Moving to deposits, I'll stay focused on averages on Slide 8, and the trends of ending balances saw growth in Global Banking and wealth management and declines in consumer. Relative to the pre-pandemic fourth quarter '19 period, average deposits are still up 35%. Every line of business remains well above their pre-pandemic levels. Consumer is up 33%, with checking up 40% driven by the net-new checking accounts added that Brian noted earlier. On a more recent performance basis, deposits grew $29 billion or 6% from Q3 on an annualized basis. The only business that saw a decline in deposits linked-quarter was consumer. And here we saw a decline of $21 billion. This linked-quarter decline slowed from the third quarter change. And in total, we have $959 billion in high-quality consumer deposits, which remains $239 billion above pre-pandemic levels. The total rate paid on consumer deposits in the quarter was 47 basis points and this remains very low, driven by the high mix of quality transactional accounts. Most of this quarter's rate increase remains concentrated in CDs and consumer investment deposits, which together only represent 15% of the consumer deposits. Turning to wealth management, balances on an end-of-period basis improved modestly, and we continued to experience a slowing in the trend of clients moving money from lower-yielding sweep accounts into higher-yielding preferred deposits and off-balance sheet. Our sweep balances were down $4 billion and were replaced by new account generation and deepening. Global Banking deposits grew $23 billion, moving nicely above the $500 billion level that we've experienced over the course of the past six quarters. These deposits are generally transactional deposits of our commercial customers. They are the ones that used to manage their cash flows. And noninterest-bearing deposits were about 33% of deposits at the end of that quarter. So when we turn to excess deposit levels on Slide 9, you can see deposit growth exceeded loan growth this quarter. And that expanded our excess of deposits above loans, from Q3 to about $0.9 trillion, which is well above the $0.5 trillion we had pre-pandemic. You can see that in the upper-left of Slide 9, which is where we've used and shown you how we think about managing excess liquidity. We continue to have a balanced mix of cash available-for-sale securities and held-to-maturity securities. And this quarter, the combination of the cash and the AFS securities now represent 51% of the total $1.2 trillion noted on this page. You'll also notice the change in mix of the shorter-term portfolio as we began to lower cash and increase available-for-sale securities buying mostly short-dated T-Bills with similar yields. You can note also the hold-to-maturity book continued to decline from paydowns and maturities pulling to PAR. In total, the hold-to-maturity book moved below $600 billion this quarter. It's now down $89 billion from its peak and it consists of about $122 billion in treasuries and about $465 billion in mortgage-backed securities along with a few billion others. Also note that the blended cash and securities yield continued to rise and remained about 170 basis points above the rate we pay for deposits. The replacement of these lower earning assets into higher yielding assets continues to provide an ongoing benefit and support to NII. From a valuation perspective, given the reduced balance and the longer-term interest-rate reductions we've seen in the fourth quarter, we experienced an improvement of more than $30 billion in the valuation of the hold-to-maturity securities. So, let's turn our focus to NII performance using Slide 10. And a strong finish to the year helped us report $57.5 billion in NII on a fully tax-equivalent basis for the full year of 2023. That's up 9% compared to 2022. On an FTE basis, we reported $14.1 billion in NII, which was modestly better than we told you to expect last quarter driven by modestly better deposit growth. The $14.1 billion was a decline of $400 million from the third quarter, driven by the unfavorable impacts of deposits and related pricing and lower global markets NII, partially offset by higher rates benefiting asset yields. And as we look forward, given that we've got one less day of interest in the first quarter and that's worth about $125 million to $150 million, and given the rate curve shift, we believe the first quarter will be somewhere between $100 million and $200 million lower than the fourth quarter. It could move a touch lower in Q2 and then we believe it should begin to grow sequentially in the second half of 2024. So very consistent with our prior guidance. With regard to the forward view I just provided, let me note a few other caveats. It would include an assumption that interest rates in the forward curve materialize. And the forward curve today has six cuts compared to last quarter when we had three cuts in the 2024 curve. So it's bouncing around a little and shifted in the past quarter. Forward view also includes our expectation of low to mid-single-digit loan growth and some moderate growth in deposits as we move into the back half of 2024. Given our recent deposit and loan performance, we continue to feel good about these assumptions. Before moving away, it's worth noting our net interest yield declined 14 basis points to 197 basis points. And that's driven by the decline in NII, as well as higher average earning assets, reflecting prior period builds of cash and cash-like securities. Turning to asset sensitivity and focusing on a forward yield curve basis, the plus 100 basis point parallel shift at December 31st was $3.5 billion of expected NII over the next 12 months, coming from our banking book. And that assumes no expected change in balance sheet levels or mix relative to our baseline forecast, and 93% of that sensitivity is driven by short rates. The 100 basis point down scenario is $3.1 billion. Let's turn to expense and we'll use Slide 11 for the discussion. And we reported $15.6 billion in adjusted expense this quarter, which excludes the FDIC assessment. This was in line with our projection from last quarter and down $199 million from the third quarter, driven by reductions in headcount earlier in the year and seasonally lower revenue-related expense. These reductions outpace the continued investments that we're making to drive growth. Our average headcount was down from the third quarter to 213,000 people, and that's good work after peaking at 218,000 last January. We lowered our headcount through the year by 5,000 and did so without taking an outsized severance charge as we used attrition to lower our headcount along the way. One more point to acknowledge the good work of our teams on expense, Q4 '23 adjusted expense of $15.6 billion is only $94 million higher than the fourth quarter of '22. And just remember, we began 2023 with a $125 million lift in quarterly FDIC expense. So through some good operational excellence work and otherwise, we've managed through all of the additional costs of investments in new tech initiatives and merit and financial center openings, as well as some stronger revenue and higher marketing costs. As we look forward to next quarter, we expect to see the more typical Q1 seasonal elevation in expense of $700 million to $800 million compared to Q4. So we believe expense will be around $16.4 billion in the first quarter. That includes elevated payroll tax expense and the expected costs of higher revenue in both sales and trading and wealth management, as well as merit cost increases. And as we move through 2024, we expect the quarterly expense to decline from Q1, reflecting a drop in the elevated payroll tax expense and revenue changes, as well as some additional operational excellence initiative work. Continued digital transformation and adoption is also going to help us as we go through the year. Now turn to credit, and I'll use Slide 12 for that. Provision expense was $1.1 billion in the fourth quarter and it included an $88 million reserve release due to a modestly improved macroeconomic environment. On a weighted basis, we're reserved for an unemployment rate of nearly 5% by the end of 2024 compared to the most recent 3.7% rate reported. Net charge-offs of $1.2 billion increased $261 million from the third quarter, and the net charge-off ratio was 45 basis points, a 10 basis point increase from the third quarter. On Slide 13, we highlight the credit quality metrics for both our consumer and commercial portfolios, and the overall increase in net charge-offs was driven by three things. First, $104 million of the increase was driven by credit card losses, which continued to normalize as higher late-stage delinquencies flowed through to charge-offs. Second, $65 million of the increase was driven by a broad range of smaller commercial and industrial losses, which were mostly previously reserved and monitored for the past couple of quarters. And lastly, $76 million of the increase was driven by commercial real estate losses, primarily due to office, also mostly reserved. In the appendix, we've included a current view of our commercial real estate and office portfolio stats provided last quarter, and we've also included the historical perspective of our loan book de-risking and long term trend of our consumer and commercial net charge-offs, and you can see those on slides 30 to 33. Let's move on to the various lines of business and their results and I'll start on Slide 14 with Consumer Banking. For the quarter, consumer earned $2.8 billion on continued good organic growth and despite their good client activity, it's difficult to outrun the earnings impact of higher rates on deposit costs while the credit is also normalizing. The reported earnings declined 23% year-over-year as top line revenue declined 4% while expense rose 3% and the credit costs rose. Customer activity showed another strong quarter of net new checking growth, another strong period of card opening and investment balances for consumer clients which climbed $105 billion over the past year to a record $424 billion. Our full year flows were $49 billion as accounts grew 10% in the past 12 months. Loan growth was led by credit card and that broke above $100 billion this quarter. Deposit decline slowed in the quarter with continued strong discipline around pricing. And our expense reflects continued business investments for growth. And as you can also see on the appendix page 21, digital engagement continued to improve and showed good year-over-year improvement as customers enjoy the continuation of enhanced capabilities. Moving to Wealth Management on Slide 15. We produced good results, earning a little more than $1 billion after adding 40,000 net new relationships in Merrill and the private bank this year. These results were down from last year as a decline in NII from higher deposit costs still catching up from the interest rate hikes, more than offset higher fees from asset management, driven by higher market levels and assets under management flows. As Brian noted earlier, both Merrill and the private bank continued to see strong organic growth and produced solid assets under management flows of $52 billion since the fourth quarter of '22, which reflects a good mix of new client money as well as existing clients putting their money to the work. Expenses reflect continued investments in the business and revenue related costs. On Slide 16, you see the global banking results. The business produced strong results with earnings of $2.5 billion as a decline from peak levels of NII was offset by lower provision expense, leaving earnings down 3% year-over-year. Revenue declined 8%, driven by the NII. Our global treasury services business remained robust with strong business from existing clients as well as good new client generation. In addition, we continued to see a steady volume of solar and wind investment projects this quarter and our investment banking business continued to perform well in a sluggish environment. Year-over-year revenue growth also benefited from lower marks on leveraged loan positions. The company's overall investment banking fees were $1.1 billion in Q4. That grew 7% over the prior year despite a fee pool that was down 8%. And for the year we held on to the number three position overall, given that performance. In the component parts, we ended the year number one in investment grade, number two in leverage finance, number four in equity capital markets, and number four in mergers and acquisition. The diversification of the revenue across products and regions reflects the growing strength of our platform, and a good example of that is our focus on the equity capital markets blocks business, where we finished number one in the United States for the first time since 1998. And in EMEA, we were also number one for blocks. Provision expense reflected a reserve release of $399 million and that comes from an improved macroeconomic outlook as well as realized charge-offs better, as noted before. Expense decreased 2% year-over-year as continued investments in the business were more than offset by reductions in other operating costs. Switching to Global Markets on Slide 17, the team had another strong quarter, with earnings growing 13% year-over-year to $736 million, driven by revenue growth of 4% and we refer to results excluding DVA as we normally do. Good results in sales and trading and comparatively low remarks on leverage loan positions drove the year-over-year performance and focusing on the sales and trading ex-DVA, revenue improved 1% year-over-year to $3.8 billion, which is a new fourth quarter record for the firm. FICC was down 6% from a record quarter, while equities increased 12% compared to the fourth quarter of '22. And the FICC revenues were down versus that record fourth quarter level with higher revenues in mortgages and municipal trading. Equities was driven by improved trading performance in derivatives. And our expense was up 3% on continued investment in the business. Finally, on Slide 18, all other shows a loss of $3.8 billion, as the two notable items highlighted earlier negatively impacted net income by $2.8 billion in that segment. Revenue adjusted for the $1.6 billion BSBY cessation was flat year-over-year, and expense adjusted for the $2.1 billion FDIC assessment was down a couple hundred million, driven by lower litigation and lower unemployment processing costs. I noted earlier we reported a modest tax benefit this quarter. The tax credits from tax advantaged investment deals throughout the year, including their benefits in the fourth quarter, exceeded taxes on reported earnings because we had the two notable items that lowered results this quarter. For the full year, our tax rate was a little more than 6%. And excluding the impacts of BSBY cessation and FDIC and the other discrete tax benefits, that rate was 10%. And further excluding our investment tax credits, our tax rate would have been 25%. So thank you. And with that, we'll launch into the Q&A, please.","evidence_gemma_new":null,"evidence_llama_3_3":"BAC net charge-offs Q4","evidence_qwen_3_30b":"net charge-offs $1.2 billion $261 million increase","gemma_new_max":null,"gemma_new_min":null,"llama_3_3_max":1200000000.0,"llama_3_3_min":1200000000.0,"qwen_3_30b_max":1200000000.0,"qwen_3_30b_min":1200000000.0}
{"symbol":"BAC","year":2024,"quarter":2,"date":"2024-Q2","chunk_id":2,"sub_chunk_id":0,"centroid_label":"net charge offs","agreed_value":0.59,"count":2,"chunk":"Brian Moynihan: Thank you, Lee, and good morning and thank all of you for joining us today. Before I begin today, I just want to reflect a second on the horrible events this weekend. We at Bank of America are clear that there's no place for political violence in our great country, and we continue to wish the former President Trump a speedy recovery. And our thoughts, of course, go out to the victims and their families and others impacted by this terrible event. With that, let's turn attention to the results for the second quarter of 2024 at Bank of America Corporation. This quarter, we achieved success in a number of areas, underscoring the benefits of our diversity and the dedication of our team to deliver responsible growth. Our organic growth engine continues to add customers and activity to all our businesses, even as we see the drop in net interest income this quarter. I'm starting on slide two. Our net income for the quarter was $6.9 billion after tax or $0.83 in diluted EPS. Attesting to the balance in our franchise, the earnings were split evenly, half in our consumer and GWIM businesses, which serve people, and the other half in our institutional-focused business global banking and markets. We grew revenue from the second quarter of 2023 as improvement in non-interest income overcame the decline in net interest income. Fees grew 6% year-over-year and represented 46% of total revenue in the quarter. Our strong fee performance was led by a 14% improvement in asset management fees in our wealth management businesses. We grew investment banking fees 29% year-over-year and saw sales and trading revenue increase 7%. Global Markets had its 9th consecutive quarter of year-over-year growth in sales and trading revenue, a good job by Jimmy DeMare and his team. Card and service charge revenue also grew by 6% year-over-year in our Consumer business. Much of this fee growth is a result of our intensity around organic growth, and is a testament to the diversity of our operating model. Now on to slide three. Organic growth has been driven by several key factors. First, we focus on our customers. We continue to place them at the center of everything we do. Consumer led the way in delivering solid organic growth with high-quality accounts and engaged clients. For the 22nd consecutive quarter, we had significant net new consumer checking accounts. We expanded our customer base and our market share. Specifically, we added 278,000 net new checking accounts this quarter, which brings our first six months of 2024 to more than 500,000. In wealth management, we added another 6,100 new relationships this quarter. In our commercial businesses, we added 1,000s of small businesses and 100s of commercial banking relationships. This has led to now managing $5.7 trillion in client balances, loans, deposits, and investments across the consumer and wealth management client segments. In those areas, we saw flows of $58 billion in the past four quarters. Our emphasis on personalized financial solutions and superior customer service has strengthened customer loyalty, attracted new clients across all our businesses. Our focus on providing liquidity and risk management solutions to our institutional clients positions to continue to gain more share of the wallet as well. Second, we continue to deliver innovative digital solutions. One of the primary contributors of both attracting and retaining customers to our platforms is our digital banking capabilities for our clients across all the businesses. Our fully integrated consumer banking investment app drives the utility for our customers across their investment and consumer accounts. Our use of stats are strong proof points. Our second language capabilities in our consumer businesses further enhance our customers' capabilities. You can see the continued digital growth in the slides on pages 26, 28, and 30 in the appendix. A couple highlights. Our consumer mobile banking app now serves more than 47 million active users. They logged in 3.5 billion times this quarter. We also continue to see more sales through the use of our digital properties. Digital sales represented 53% of our total sales in the past quarter in our consumer businesses. 23 million consumers are now using Zelle. They send money on Zelle at nearly 2.5 times the rate they write checks. And, in fact, more Zelle transactions -- send transactions take place than a combination of customer ATM transactions, cash withdrawals, and tellers. Simply put, Zelle has become a dominant way to move money. In our wealth management business, we are seeing more banking accounts being opened to complement the investment business those clients do with us. Importantly, these clients are also recognizing the ease of our digital banking capability. 75% of our new accounts and our Merrill teammates were open digitally. 87% of our global banking clients also are digitally active. We have innovated and significantly streamlined service requests by enabling clients to directly initiate and track transaction inquiries within our awarded CashPro platform, using AI to accomplish that. Third, we continue to make core strategic investments in our businesses. We're not complacent with the success you see on this page. We continue to strategically invest in our core businesses. A few examples, while we have the leading retail deposit share in America, we continue to invest and have opened 11 new financial centers this quarter -- in this first-half of the year and renovated another 243. This is an investment in both our expansion markets and our growth markets. In wealth management, we continue to invest in our advisor development program. It's grown to 2,300 teammates, allowing us to continuously add more than -- teammates to our 18,000 strong best-in-class financial advisory force across all our wealth management businesses. We're also adding teams of experienced advisors strategically in areas across the country. In our banking teams, we continue to add to our regional investment banking team. We now have more than 200 regional bankers across the country to better serve our commercial clients, and they complement our industry coverage to our corporate clients. In our global markets business, we continue to extend balance sheet to our clients in adding expertise and talent to continue to lead our market share improvements seen over the last several years. We also have increased our technology initiatives and expect to spend nearly $4 billion on technology initiatives this year. We have focused projects around artificial intelligence enhancements with both clients and our teammates. A recent example of our use of AI is our advisor and client insights tool. We've delivered more than 6 million insights here today to our financial advisors, providing them proactive reasons to engage our clients. AI has moved from cost savings ideas to enhancing the quality of our customer interactions. Fourth, organic growth is driving integrated flows across our business. We invest heavily in each line of business that compete in the markets based on their particular customer segment. But importantly, we also invest across our lines of business to knit them together and gain market share in the local markets. It's a differentiated advantage for us, our banking leadership position across our businesses and our nationwide franchise. For example, we leverage our franchise by connecting business customers with wealth management teams. Our teams across all our businesses have made 4 million referrals to other businesses in the first six months of this year. Next, we drive efficiency and effectiveness, and that's through our operational excellence platform. We continue to invest heavily in the future of our franchise and growth, while we also have to manage expenses day-to-day. Our focus on operational excellence has enabled us to hold our expense growth up to 2% year-over-year, well below the inflation rates. We continue to work to achieve operating leverages as NII stabilizes and begins to grow again. As you look at it now, Alistair will explain later, a fair portion of the year-over-year increase in expense is due to the formulaic incentives of wealth management due to the peak growth of that business. And last, our capital strength allows us to deliver for all our stakeholders. Our capital remains strong as we held our CET1 ratio at 11.9% this quarter. We grew loans, increased our share repurchases to $3.5 billion and paid $1.9 billion in dividends. Average diluted shares dropped below 8 billion shares outstanding. In addition, we also announced our intent to increase our quarterly dividend 8% upon board approval. Note that with 11.9% CET1 ratio, we remain in a solid excess capital position, both above the current regulatory requirements and the increased requirement to 10.7% beginning in October as a result of the recent CCAR exam. Let's turn to slide four. A couple things to note here. First, we've noted for several quarters that the second quarter NII would be the trough for this rate cycle. We expect NII to grow in the third quarter and fourth quarter of this year. Alistair is going to provide you some points in detail about the path forward. One of the important contributors to that change is deposit behaviors of our customers. On slide four, you'll note that average deposits grew 2% year-over-year and increased modestly linked quarter. The second quarter, in reality, is typically a heavy outflow quarter. We have a lot of customers who pay a lot of taxes in that quarter. Quarter-over-quarter increases in rates paid continue to slow again this quarter across all businesses except for wealth management. And we show you that on this page, slide four, by line of business. While wealth business deposit rates have moved higher with continued rotation, we expect those rates to begin to stabilize and the rate of quarterly change to decrease going forward. Turning to slide five, in previous calls, many of you asked questions or commented upon the question about consumer net charge-offs and when would they stabilize in the second-half of 2024. That expectation we have remains unchanged as well. This quarter's net charge-offs were 59 basis points. And for context, this is a stabilization of the rate. I would just remind you that prior to this quarter, I have to go all the way back to 2014 to see a charge-off rate of that high. And that's near when we were still emerging from the financial crisis. On slide four, we highlight the 30 and 90-day-plus credit card delinquency trends, which showed delinquencies have plateaued for the second consecutive quarter. This should lead to stabilized net credit losses in credit card in the second-half of the year. At the bottom of the page, note a couple of facts. First, on the payment rates. This is the rate of paydown on balances in a given month remain 20% above index to the pre-pandemic levels, even while our card customers have plenty of capacity to borrow. And importantly, because we're relation-based businesses, look at the right-hand slide at the bottom of page five. There you can see our deposit investment balances of our customers, who also have a card with us, remain 25% above their pre-pandemic levels, illustrating continued health of these customers. So if you think about consumer credit, the card charge-offs drive it, and they flattened out in terms of delinquencies, and we expect an improvement in the second-half. With regard to commercial real estate, our usual CRA credit exposure slide is included in our appendix. We continue to aggressively work through our loans in our modest CRA office portfolio. We saw a decrease in all the categories, a decrease in reservable criticized loans, a decrease in NPLs, and a decrease in net charge-offs. This supports our previous expectation that net charge-offs in the second-half of 2024 will be lower than the first-half of 2024. Our second quarter performance highlights Bank of America's ability to generate strong, sustainable growth through a combination of customer-centric strategies, innovation, strategic investments, and a commitment to a strong balance of risk and reward. We call that responsible growth. We're confident that focused approach will continue to drive long-term success and create value for you, our shareholders. Now I will turn it to Alistair for additional results.","evidence_gemma_new":"net charge-offs","evidence_llama_3_3":"net charge-offs second quarter of 2024","evidence_qwen_3_30b":null,"gemma_new_max":0.59,"gemma_new_min":0.59,"llama_3_3_max":0.59,"llama_3_3_min":0.59,"qwen_3_30b_max":null,"qwen_3_30b_min":null}
{"symbol":"BAC","year":2024,"quarter":3,"date":"2024-Q3","chunk_id":2,"sub_chunk_id":0,"centroid_label":"net charge offs","agreed_value":1500000000.0,"count":3,"chunk":"Brian Moynihan: Thank you, Lee, and good morning, and thank all of you for joining us for our discussion of our third quarter results. Bank of America continued to demonstrate strength this quarter in an economy that continued to be stable, albeit with slower growth and falling inflation. So many of you asked me from time-to-time what do we see in our own customer -- consumer customer base. As we talked about many times, our consumer payments is an indicator of activity. Those payments were up 4% to 5% year-over-year for the quarter in the total money those consumers moved in the economy. The pace of year-to-year money movement has been steady since late summer this year. After having fallen in the spring and early summer. This growth in consumer payments continues into October. This activity is consistent with how customers are spending money in the 2016 to 2019 timeframe. When the economy was growing, inflation was under control. This report is not meant to gainsay that consumers are worried of the cost of living, worried about higher rates and other matters. But overall activity is fine, unemployment is low and wage growth is steady, both of which bode well for the consumer overall and for consumer asset quality. With respect to what we see in our commercial businesses, it is consistent with a lower growth economy. Line of credit usage rates remain lower than pre-pandemic levels. This does not surprise us what with the dramatic increase in the cost of borrowing for small and medium-sized businesses. They aren't being indolent, they want to grow. They are simply being more careful and worry a final demand will hold. Therefore, they are being cost conscious across the board. So how did Bank of America do against this backdrop? At Bank of America, our commitment to responsible growth remains unwavering, and this quarter is another illustration of that. We grew, we did it the right way. In the third quarter, Bank of America generated $25.5 billion in revenue and earned $6.9 billion in net income after tax. Year-to-date, we've generated net income of just over $20 billion. Four quarters ago, we called that a bottom would occur in our net interest income in the second quarter of 2024. Even with a rate environment that has bounced around quite a bit since we said that we got it right. As we expected then, NII indeed troughed in the quarter two. NII grew 2% this quarter and Alastair will note later, we expect NII to grow again in quarter four, even as the market expects two more rate cuts in quarter four. This quarter, we saw a healthy revenue growth in our wealth and investment management business and in our global markets businesses. We returned 5.6 billion of capital to shareholders while also supporting the needs of our clients. So with that brief overview, let's dive into Slide 2. Earnings per share came in at $0.81 this quarter at $25.5 billion in revenue we grew modestly from the third quarter, '23 as improvement in noninterest income more than offset a year-over-year decline in net interest income. Fees grew 5% year-over-year and represented 45% of total revenue. The strong year-over-year fee performance was led by a 15% improvement in investment in brokerage services, mostly in our global wealth management business. We also grew investment banking fees 18% year-over-year sales and trading revenue increased 12% year-over-year and aggregate, these market related revenue streams rose an impressive 13% year-over-year. Our total expense in the company increased 4%. You can attribute most of the year-over-year expense growth to these market related areas. Overall, a good job by the team. On asset quality a few quarters ago we told you that consumer credit losses would go down this quarter, given delinquency trends we had seen at the time. We also told you that office losses would be lower. Both of these proved true again this quarter. Good asset quality resulted in net charge-off in provision expense for this quarter at $1.5 billion, which was unchanged from last quarter. Our performance is partly attributable to the diversity and balance of the company. A little more than half our earnings come from our consumer and GWIM businesses serving people and the other half come through from our Global Banking and Markets businesses serving companies and institutional investors. So let's turn to see how we grew organically this quarter. We are now on Slide 3. Our organic growth has been driven by a continued focus on customers and client experience throughout all our businesses. Consumer leads the way delivering solid organic growth with high quality accounts engaged clients. For the 23rd consecutive quarter, we added significant net new consumer checking accounts and expanded our customer base and market share. We added 360,000 net new checking accounts this quarter, which brings our first nine months of '24 to more than 880,000 net new checking accounts. In wealth management, we added another 5,500 net new relationships this quarter. In our commercial businesses, we added hundreds of small business and commercial banking relationships. Also note that we saw a strong organic growth of investment balances with banking customers and growth in banking products for our investment clients in our GWIM business. This has led us to now manage $5.9 trillion in client balances of loans, deposits and investments across the consumer and wealth management clients. We saw flows of $62 billion into those businesses in the past four quarters. In our Global Banking business, we saw loan demand start to pick up late in the quarter. We again ranked third in the logic IB fees we received and have a solid pipeline. Our global transaction services platform continues to grow around the world and showed strong deposit growth for our commercial businesses over the last year and a quarter. This quarter, global markets saw continued momentum. Global markets recorded the 10th consecutive quarter of year-over-year growth in sales and trading. Investments we've made in this business and the intensity of the teams has enabled a 35% improvement in sales and trading revenue in the past three years. Good work by Jimmy DeMare and the team. Our customers and clients continue to want more from us, especially when it comes to our digital capabilities. So let's discuss this on Slide 4. Slide 4 highlights this continued success across our digital platforms. As usual, we include our disclosures on digital stats across the business, which we believe lead the industry. I commend you the pages in the appendix, which give you more granular disclosure for each of the businesses' digital activities. Our fully integrated consumer banking investment application drives the utility for our customers across GWIM and consumer. The usage stats you see are strong proof points. Our second language capabilities also enhance the customer's experience. We have grown to more than 48 million active digital users and those digital users logged in more than 3.6 billion times this quarter. We also continue to see more sales through their digital properties. Digital sales represented 54% of our total consumer sales this quarter. Note that it simply takes both high-touch and high-tech to drive continued growth with individual clients across the wealth spectrum in America. Erica, our AI enabled virtual assistant reached 2.4 billion client interactions since its launch and Zelle showed continued user and usage increases. In our wealth management business, we continue to see full relationships increase with both investing and banking relationships being open. 75% of new accounts in Merrill were opened digitally whether they were banking accounts or investment accounts. This enables more efficient customer coverage for our advisory teams. Finally, 87% of our Global Banking relationship clients are digitally active. We have innovated and significantly streamlined service requests by enabling clients to directly initiate and track inquiries within our award winning cash flow platform. As a result, app sign-ins for these clients increased nearly 80% in just the last 24-months. In summary, the economic environment remains solid. Issues remain out there to external factors that could affect our business and the economy generally. We still see great opportunities for continued growth across all our businesses. We are focused on driving market share in all our businesses, investing in technology to further enhance the customer experience and continue to increase our efficiency. With NII now growing and complementing our fee growth along with our continued solid expense discipline, we expect to return to operating leverage as we move through the quarters in 2025. With that, I'll turn to Alastair for additional details.","evidence_gemma_new":"net charge-off this quarter","evidence_llama_3_3":"net charge-off","evidence_qwen_3_30b":"net charge-offs $1.5 billion","gemma_new_max":1500000000.0,"gemma_new_min":1500000000.0,"llama_3_3_max":1500000000.0,"llama_3_3_min":1500000000.0,"qwen_3_30b_max":1500000000.0,"qwen_3_30b_min":1500000000.0}
{"symbol":"BAC","year":2023,"quarter":1,"date":"2023-Q1","chunk_id":3,"sub_chunk_id":0,"centroid_label":"net income","agreed_value":8200000000.0,"count":2,"chunk":"Alastair Borthwick: Thank you, Brian. And I'll pick up on Slide 3, where we list some of the more detailed highlights of the quarter. And then, on Slide 4, we present the summary income statement. So, I'm going to refer to both of these together. As Brian mentioned, for the quarter, we generated $8.2 billion of net income, and that resulted in $0.94 per diluted share. Our revenue grew 13%, and that was led by a 25% improvement in net interest income, coupled with strong 9% growth in sales and trading results, excluding DVA. Our non-interest revenue was strong, despite three headwinds: First, we had lower service charges as commercial clients paid lower fees for treasury services, since they now receive higher earned rates on balances. And, obviously, that allows us to invest those funds to earn NII. On consumer, we had lower NSF insufficient funds and overdraft fees as a result of our policy changes announced in late 2021. Second, with lower asset management fees and that just reflects the lower equity market levels and fixed-income market levels. And, third, investment banking fees were lower, just reflecting the continuation of sluggish industry activity and reduced fee pools. Now, all that said, despite these headwinds, each of the three categories saw modest improvement from the fourth quarter levels. Asset quality remained strong, and provision expense for the quarter was $931 million. That consisted of $807 million of net charge-offs and $124 million of reserve build. And that reserve build compares to a reserve release in the first quarter 2022 of $362 million. Our charge-off rate was 32 basis points and still well below the fourth quarter of '19 when our pre-pandemic rate was 39 basis points. And, remember, 2019 was a multi-decade low. So, credit, obviously, remains quite strong. I want to make one other point on Slide 4 and that is simply to note that pre-tax pre-provision income grew 27% year-over-year compared to reported net income growth of 15%. So, let's turn to the balance sheet that starts on Slide 5. And you can see, during the quarter, our balance sheet increased $144 billion to $3.195 trillion. Brian noted our liquidity levels at the end of the period, those rose to more than $900 billion from December 31. That's $23 billion higher and it remains $324 billion above our pre-pandemic level in the fourth quarter of '19. Shareholders' equity increased $7 billion from the fourth quarter as earnings were only partially offset by capital distributed to shareholders, and we saw an improvement in AOCI of $3 billion due to lower long-term interest rates. The AOCI included more than $0.5 billion increase from improved valuations of AFS debt securities and that flows through CET1. And the remaining $2.5 billion due to changes in cash flow hedges doesn't impact regulatory capital. During the quarter, we paid $1.8 billion in common dividends and we bought back $2.2 billion in shares. Turning to regulatory capital, our CET1 level improved to $184 billion since December 31 and our CET1 ratio improved 14 basis points to 11.4%, once again, adding to our buffer over our 10.4% current minimum requirement as well as the 10.9% minimum requirement that we'll see on January 1st of 2024. That means, in the past 12 months, we've improved our CET1 ratio by 100 basis points, and we've supported our clients and we've returned $12 billion in capital to shareholders. CET1 capital improved $4 billion, and that reflects the benefit of earnings and the AOCI improvement, partially offset by the capital we've returned to shareholders. Our risk-weighted assets increased modestly and that partially offset the benefit to the CET1 ratio of the higher capital we generated. And then, our supplemental leverage ratio increased to 6%. That compares to a minimum requirement of 5% and leaves plenty of capacity for balance sheet growth, and our TLAC ratio remains comfortably above our requirements. So, let's spend a minute on loan growth, and we'll do that by turning to Slide 6, where you can see the average loans grew 7% year-over-year, driven by commercial loans and credit card growth. The credit card growth reflects increased marketing, it reflects enhanced offers and higher levels of card account openings. The commercial growth across the past year reflects the diversity of commercial activity across global banking and global markets and, to some degree, global wealth. And on a more near-term linked-quarter basis, loans grew at a much slower pace, partly driven by seasonal credit card paydowns after the fourth quarter holiday spending, and then commercial demand slowed in Q1 and we saw some paydowns by our wealth management clients as they lowered leverage as rates rose. So, let's turn to deposits and there's obviously been a lot of additional focus this quarter, so I want to spend extra time here and I'm going to start with Slide 7 and talk about average deposits. Just a few points we need to make before focusing on a more detailed discussion of the recent trends. Average total deposits for the first quarter were $1.89 trillion, that is down 2% linked-quarter and down 7% year-over-year. Our deposits peaked in the fourth quarter of 2021. And even as the Fed has continued to withdraw money supply, our deposits have held around $1.9 trillion, because there's a lot more industry deposits today in a much bigger economy today compared to pre-pandemic. Our average deposits were up 34% compared to our pre-pandemic Q4 '19 balance and the industry's deposits were up 31% to $17.4 trillion. So, we've obviously fared a little bit better than the industry. We put our pre-pandemic deposits for each line of business on the slide, so you can compare our balances then and now. I want to highlight consumer checking balances, which remained 53% higher than pre-pandemic. And as I think all of us would expect, GWIM combined client deposits are up a lesser 23%, as those are the clients that generally move their excess cash into other off-balance sheet products. And in global banking, you can see the rotation to interest-bearing across time as rates rose. So, let's get a little more granular and a little more near-term and we'll use Slide 8 for that, where you can see the breakout of deposit trends on a weekly ending basis across the last two quarters. You can also see that we plotted the timeline of Fed target and rate hikes on the top-left chart, just for comparison through time. In the upper left, you can see the trend of our total deposits. We ended Q1 '23 at $1.91 trillion, that's down 1%. And, as Brian mentioned, over the course of the past six months, those balances have been relatively stable. In consumer, looking at the top-right chart, we show the difference here in the movement through the quarter between the balances of low to no interest checking accounts, and the higher-yielding non-checking accounts and, across the entire quarter, we saw a modest $4 billion decline in total. Checking balances, obviously, have some variability around pay days in particular, but note the relative stability of checking deposits, because these are the operational accounts with money and motion to pay the bills and everyday living costs for families. I'd also point out that our checking balances were modestly growing even ahead of March 9th upheaval and continue to move higher through the quarter on the back of disruption. Lower non-checking balances mostly reflect money moved out of deposits and into brokerage accounts where we earn a small fee. Rate paid increased 6 basis points from the fourth quarter to 12 basis points on this [trillion dollars] (ph) of total consumer deposits and remains low, because of the 52% mix that is checking. Lastly, I just note that the rate movements in this business are concentrated in the small CDs and consumer investment deposits, which together represent about 5% of the deposits. In wealth management, as you would expect, it shows the most relative decline, and you can see the continued trend of clients moving money from lower-yielding sweep accounts into higher-yielding preferred deposits and off-balance sheet to other investment alternatives. Now, if we went back further, you'd see that roughly $90 billion has moved out of sweeps in the past year, which leaves $80 billion in these accounts. So, you can see how with the pace and size of rate hikes slowing, we expect the declines in balances to lessen from here. At the bottom-right, note the global banking deposit movement, where we hold about $500 billion in customer deposits. These are generally operational deposits of our commercial customers and they use that to manage their cash flows through the course of the year. Those were down $3 billion from the fourth quarter. And what's interesting to note is that, our total deposits in this segment have been stable at around $500 billion for the past six months and this business just continues to see rotation into interest-bearing. The mix of interest-bearing deposits on an ending basis moved from 49% last quarter to 55% in Q1. And, obviously, we pay increased rates on those interest-bearing deposits. And it's this rotation in global banking that's driving the rotational shift of the total company, and it's pretty typical and to be expected in this environment. So, in summary, our deposits continued to behave as we would expect. The cash transactional balances have shown some recent stabilization. And for investment cash, we've seen deposits moved to brokerage and other platforms for direct holdings of money market, mutual funds, treasuries, and we are capturing many of those flows as you see in our numbers, it's just we expect that to slow going forward. So, now that we've examined trends for the different lines of business, I want to make some important points about the characteristics of our deposit franchise using Slide 9, and this will just help reinforce for shareholders who own Bank of America that they're investing in one of the world's great deposit franchises, all of it based off of relationships we have with our customers and the value they place on the award-winning capabilities and convenience they have access to. So, starting from the top, focus first on consumer. You can see that more than 80% of deposits have been with us for more than five years, and more than two-thirds of our consumer deposits are balances with customers who have had relationships with the bank for more than 10 years. Also, more than three-quarters of these customers are very highly engaged in their activities with us. They are also, geographically, dispersed across the United States given our presence in 83 of the top 100 markets. Lastly, whether you look at consumers or small business, the value proposition is what's driving the same result. We've got long-tenured customers with deep relationships that are highly engaged. Turning to wealth management, you can see a similar story around long tenure and quite active relationships. The average relationship of our GWIM clients is around 14 years. And, again, these clients are very geographically diverse, they're also very digitally engaged, and we continue to see deepening around banking solutions and products of all types. There's lots of options for these clients that extend from their operational checking accounts all the way up through preferred deposit options, and then we also benefit from having great alternatives for them within our investment platform. On global banking, note that 80% of our U.S. deposit balances are held by clients who have had an account with us for at least 10 years. Furthermore, as we measure the number of solutions that clients have with us, we know that 73% of balances are held by clients that have at least five products on us and, just like the other businesses, they are highly diversified by industry and geography. So, those are some of the things that make our quality deposit base stable. So, now that we've walked through both loans and deposits, I want to transition a bit to make some points on balance sheet management and to focus on the liquidity we enjoy by having a surplus of customer deposits that far exceeds the loan demand of our clients today and far exceeded the loan demand of our clients pre-pandemic. Having the deposits alone doesn't pay the expenses to support these great customer bases and it doesn't mean much to our shareholders, unless we put them to work to extract the value of those deposits. So, that's what we're trying to illustrate and we want to show you how we do them. You can see that on Slide 10, where you note we had significant excess deposits over loans pre-pandemic. And during the pandemic, that increased -- that amount increased significantly. Before the pandemic, we had $0.5 trillion more in deposits than loans and that peaked in late 2021 at more than $1.1 trillion and it remains high at roughly $900 billion still today. That's the context as we talk about how we manage excess cash. So, let's turn to Slide 11. And here we're going to focus on the banking book, because our global markets' balance sheet has remained largely market funded. And just follow the graph from left to right. At the top of the slide, you note trend of cash and cash equivalents and the two components of the debt securities balances: available-for-sale and held-to-maturity. And you can see the trend of the overall combined cash and securities balance movement and it closely mirrors the previous slide's excess deposit trends, as you would expect. In 2020, deposits grew, while loans declined and that was pandemic borrowing from our commercial clients stopping and then quickly paying it off. Throughout 2020, as we put deposits to work, we took a number of actions to protect our capital and that included a buildup in hold-to-maturity, better aligning our capital treatment with our intent to hold those securities to maturity. We also hedged rate risk in the available-for-sale book using pay-fixed, receive-variable swaps. So, these securities acted like cash and they earned higher yields and guarded against capital volatility. As we entered the middle of 2021, it became more clearer that the stimulus payment would likely be the last one and, therefore, we believed deposits would be peaking. As a result, we stopped adding to our hold-to-maturity securities book. That book peaked in the third quarter of 2021 at $683 billion, $562 billion were mortgage backs, and the rest were treasuries. And all that's happened is that notional balances have declined in each of the past six quarters, ending the quarter at $625 billion. And within that, the mortgage-backed portfolio was down $67 billion to $495 billion. As rates began to rise quickly throughout 2022, the value of our deposits rose. And, at the same time, the disclosed market value of the hold-to-maturity securities has declined, resulting in a negative market valuation on those bonds. That negative market valuation peaked in the third quarter, came down in the fourth quarter, and it's come down another $10 billion in the first quarter. In our 10-K disclosure, we included a chart which shows the maturity distribution of our securities portfolio. And, I'd remind you, this is based on the maturity dates of those originations, i.e., the date of the last contractual payment. When we look at the actual cash flows of those bonds over time, it results in an average weighted life of the hold-to-maturity securities book of a little more than eight years. And as you can see, since the third quarter of 2021, we've continued to see increases in the overall yield on the balances due to both the maturity and reinvestment of lower-yielding securities as well as remix into higher-yielding cash. And, as you can see, with deposits paying 92 basis points, that compares to our blend of cash and government-guaranteed securities, which pays 290 basis points. So, we continue to benefit NII and yield. And, finally, one very important last point I want to make, which is on the improved NII of our banking book. Because, remember, we manage the entirety of our balance sheet. That includes our deposits and that's where you see the net interest income has improved significantly. NII, excluding global markets, which we disclose each quarter, troughed in the third quarter of 2020 at $9.1 billion, and it's now $5.4 billion higher on a quarterly basis at $14.5 billion in the first quarter of '23, and that's the acid test of managing the entire balance sheet. So, let's turn now to Slide 12 and focus on net interest income. On a GAAP non-FTE basis, NII in the first quarter was $14.4 billion and the FTE NII number was $14.6 billion. Focusing on FTE, net interest income increased $2.9 billion from the first quarter of 2022 or 25%, while our net interest yield improved 51 basis points to 2.2%. The improvement was driven by rates, and that includes reductions in securities premium amortization. Average Fed fund rates are up 440 basis points year-over-year. Relative to that increase in Fed funds, which has benefited all of our variable rate assets, the rate paid on our total deposits rose 89 basis points and the rate paid today on interest-bearing deposits is up 133 basis points. Average loan growth of $64 billion also aided the year-over-year NII improvement. Turning to a linked-quarter discussion, NII of $14.6 billion is down $222 million from Q4, and that's primarily driven by the continued impact of lower deposit balances and the mix shift into interest-bearing. It's also influenced by lower global markets NII, which, remember, still gets passed through to clients via higher non-interest income as part of the trading revenue. Excluding the $262 million decline in global markets' NII, the banking book NII of $14.5 billion, that was modestly higher as the benefit of increased short interest rates, some modest loan growth and some deposit favorability was offset by two less days of interest in the quarter. Turning to asset sensitivity on a forward basis, the plus 100 basis point parallel shift at March 31st stands at $3.3 billion of expected NII over the next 12 months from our banking book. 96% of that sensitivity is driven by short rates. Summary, the first quarter NII was $14.6 billion in this quarter on an FTE basis and that was a little better than our $14.4 billion expectation as we began the quarter since deposits and rate pass-throughs were both modestly better. Looking forward, based on everything we know about interest rates and customer behavior, we expect second quarter NII on an FTE basis to be around 2% lower compared to Q1. So, think about that NII as about $14.3 billion FTE, plus or minus, driven by expected deposit movements as well as lower global markets' NII, which again is offset in the trading revenue. So, let me remind you of some of the caveats when it comes to that NII guidance. First, importantly, it assumes that interest rates in the forward curve materialize and that includes one more hike and then a couple of cuts in 2023. We also expect funding costs for global markets client activity to continue to increase based on those high rates. And, as noted, the impact of that is still offset in non-interest income, and that obviously assumes our current client positioning and the forward rate expectations. We continue to expect modest loan growth. So, that's in our NII expectation as well, and it's driven by credit card and, to a lesser degree, commercial. And then, finally, we just expect lower deposits and rotational shifts towards interest-bearing, really for three reasons. First, we expect further Fed balance sheet reductions to continue to reduce deposits for the industry. Second, we anticipate lower wealth management deposits in the second quarter. That's pretty typical due to the seasonal impact of clients paying income taxes and, to a lesser degree now, a continuation of balance movement seeking better yields off-balance sheet. And, third, we just continue to expect some of the rotation of commercial deposits towards interest-bearing. Okay. Let's go to Slide 13, we'll talk about expense. And here what you can see is, in the first quarter, our expenses were $16.2 billion, that's up $700 million from the fourth quarter and it's driven by seasonal elevation from payroll taxes, mostly at $450 million, a little bit from higher FDIC insurance expense, that was another $100 million this quarter, and the cost of adding people, call that another $100 million. We ended the first quarter with a little more than 217,000 people at the company, that was 260 people more than year-end. During the quarter, we welcomed 3,000 additional people into the company in January, that's due to outstanding offers that we extended in the fourth quarter. That meant that our headcount peaked in January. That's a little more than 218,000. And, at the end of last week, we were down to 216,000. We continue to expect that to move lower over time and we expect, by the end of the second quarter, our full-time equivalent headcount will be roughly 213,000, excluding our summer interns. As we look forward to the next quarter then, we would expect Q2 expense to benefit from the reduction of the seasonal elevation of payroll tax in Q1, and we would also expect to see expense reductions coming from headcount reductions through attrition over time and our operational excellence work. So, we expect expense in Q2 to be around $400 million or $500 million lower than Q1, so think of that as around $15.8 billion, plus or minus, in Q2. And then further, we just expect continued sequential expense declines in the third quarter and then again in the fourth quarter as we benefit from continued headcount discipline and attrition through time. Now turn to asset quality on Slide 14, and I want to start the credit discussion by saying, once again, asset quality of our customers remains healthy and net charge-offs continue to rise from their near historic lows. Net charge-offs of $807 million increased $118 million from the fourth quarter. That increase was driven by credit card losses as higher late-stage delinquencies flowed through to charge-offs. For context, the credit card net charge-off rate was 2.21% in this first quarter and that compares to 3.03% in the fourth quarter of '19 pre-pandemic. Provision expense was $931 million in Q1, and that included a $124 million reserve build. That's obviously less than the $403 million build we took in the fourth quarter, and it reflects modest loan growth and an ever so slightly improved macroeconomic outlook that, on a weighted basis, continues to include an unemployment rate still north of 5% as we end 2023. We included a slide in the appendix this quarter that highlights the mix and credit metrics of our commercial real estate exposure. And I just wanted to remind everyone here, we've been very intentional around our client selection, very intentional around portfolio concentration, and deal structure over many years and, as a result, we've seen NPLs and realized losses that remain quite low for this portfolio. We had a total of $66 million of commercial real estate losses in 2022. 70% of that was in office loans and that resulted in an annualized loss rate of 26 basis points. In the first quarter, to give some perspective, our office loan losses were $15 million. We have roughly $73 billion in commercial real estate loans outstanding, that's less than 7% of our loan book. It's highly diversified by geography, and no part of the country represents more than 22% of the book. It's also very diversified across property type. Within property type, our office portfolio was $19 billion, it's about 2% of our total loans. The portfolio is roughly 75% Class A properties. And when we originate, they are typically around 55% loan-to-value. Even though we've seen some property value declines, this exposure still remain well secured. $3.6 billion is classified as reservable criticized. And even on the most recent refreshes on our toughest loans, we still have 75% LTVs. In our office book, $4 billion is scheduled to mature this year, another $6 billion in 2024, with the remainder spread over the following years. So, we continue to feel that the portfolio is well-positioned and adequately reserved given the current conditions. On Slide 15, for completeness, we highlight the credit quality metrics for both our consumer and commercial portfolios. And, with that, I'm going to turn it back to Brian to talk about the lines of business.","evidence_gemma_new":null,"evidence_llama_3_3":"Bank of America net income first quarter","evidence_qwen_3_30b":"net income $8.2 billion quarter","gemma_new_max":null,"gemma_new_min":null,"llama_3_3_max":8200000000.0,"llama_3_3_min":8200000000.0,"qwen_3_30b_max":8200000000.0,"qwen_3_30b_min":8200000000.0}
{"symbol":"BAC","year":2023,"quarter":2,"date":"2023-Q2","chunk_id":3,"sub_chunk_id":0,"centroid_label":"net income","agreed_value":7400000000.0,"count":2,"chunk":"Alastair Borthwick: Thank you, Brian. And on Slide 8, we list the more detailed highlights of the quarter, and then Slide 9 presents a summary income statement, so I'm going to refer to both of those. For the quarter, we generated $7.4 billion in net income, and that resulted in $0.88 per diluted share. A year-over-year revenue growth of 11% was led by a 14% improvement in net interest income, coupled with a strong 10% increase in sales and trading results ex-DVA. Revenue was strong, and it included a few headwinds, and I thought I'd go through those headwinds first. We had lower service charges from both higher earnings credit rates on deposits for commercial clients, and the policy changes we announced in late 2021 to lower our insufficient funds and overdraft fees for our consumer customers. The good news on the consumer piece is year-over-year comparisons get a bit easier starting next quarter, as the third quarter of '22 reflects the full first quarter of these changes. Second, we had lower asset management and brokerage fees as a result of the lower equity and fixed income market levels, and market uncertainty that impacted transactional volumes compared to a year ago quarter. Third, we have a net DVA loss of $102 million this quarter compared to a gain in DVA of $158 million in the second quarter a year ago. We also recorded roughly $200 million in securities losses as we closed out some available for sale security positions and their related hedges, and we put the proceeds and cash. Lastly, and just as a reminder, our tax-rate benefits from ESG investments, and those are somewhat offset by operating losses on the ESG investments which show up in other income. So, this quarter, our tax-rate is a little bit lower and the operating losses are a little bit higher from volume of these deals. So you have to be careful in analyzing the lower tax-rate without considering the operating losses, and that in-turn often offsets what would have been higher revenue elsewhere. Our tax-rate for the full year is expected to benefit by 15% as a result of the ESG investment tax credit deals, and absent of these credits, our effective tax-rate would still be roughly 25%, and we continue to expect a tax-rate of 10% to 11% for the rest of 2023. Expense for the quarter of $16 billion included roughly $276 million in litigation expense which was pushed higher this quarter by the agreements announced last week with the OCC and the CFPB on consumer matters. Asset quality remains solid and provision expense for the quarter was $1.1 billion consisting of $869 million in net charge-offs and $256 million in reserve built. The provision expense reflects the continued trend in charge-offs towards pre-pandemic levels, and it is still below historical levels. The charge-off rate was 33 basis points, and that's only 1 basis point higher than the first quarter and still remains well below the 39 basis points we last saw in Q4 of 2019, when remember, 2019 was a multi-decade low. I'd also use Slide 9 just to highlight returns, and you can see we generated 15.5% return on tangible common equity and 94 basis points return on assets. Let's turn to the balance sheet starting with Slide 10, and you can see our balance sheet ended the quarter at $3.1 trillion, declining $72 billion from the first quarter. A $33 billion or 1.7% reduction in deposits closely matched a $41 billion decline in securities balances through paydowns from the hold to maturity and sales of available for sale securities. Securities are now down $177 billion from a quarter to '22. Cash levels remained high at $374 billion and loans grew $5 billion. As Brian noted, our liquidity remains strong with $867 billion of liquidity, up modestly from the first quarter of '23, and still remains nearly $300 billion above our pre-pandemic fourth quarter '19 level. Shareholders' equity increased $3 billion from the first quarter as earnings were only partially offset by capital distributed to shareholders. AOCI decreased by $2 billion, driven by derivatives valuation and AFS securities values were little changed. So, there is little change in the AOCI component that impacts regulatory capital. Tangible book-value is up 10% per share year-over-year. During the quarter, we also paid out $1.8 billion in common dividends, and we bought back $550 million in shares to offset our employee awards. And last week, we announced the intent to increase our dividend by 9%, beginning in the third quarter. Turning to regulatory capital, our CET1 level improved to $190 billion from March 31st, and the ratio of CET1 improved more than 20 basis points to 11.6%, once again, adding to the buffer over our 10.4% current requirement. While our risk-weighted assets increased modestly in the quarter. Also noteworthy, on July 3rd, we initiated dialog with the Fed to better understand our CCAR exam results, and we remain in discussions today with no news to update as of now. In the past 12 months, we've improved our CET1 ratio by more than 110 basis points, and we've done that while supporting claims for loan demand and returned $11.3 billion in dividends and share repurchases to shareholders. A supplemental leverage ratio was 6% versus our minimum requirement of 5%, and that leaves us plenty of capacity for balance sheet growth. Finally, the TLAC ratio remains comfortably above our requirements. So, let's now focus on loans by looking at average balances, you can see those on Slide 11, and there you can see, average loans grew 3% year-over-year. The drivers of loan growth are much the same. Consumer credit card growth is strong, and then commercial loans grew 4%. The credit card growth reflects increased marketing, enhanced offers and higher levels of account openings over time. And in commercial, we saw a little bit of a slowdown this quarter, driven by higher paydowns from borrowers and weaker customer demand as opposed to any credit availability from us. We are still open for business for loans. While loan growth has slowed, it's generally remained still ahead of GDP and commercial client conversations remain solid as our clients seem to be waiting for some of the economic uncertainty to lift before borrowing further. Slide 12 shows the breakout of deposit trends that's on a weekly ending basis across the last two quarters, and it's the same chart that we provided last quarter. In the upper left, you see the trend of total deposits. We ended the second quarter at $1.88 trillion, down 1.7% with several elements of our deposits seeming to find stability. Given the normal tax seasonality impacts on deposit balances in Q2 and the monetary policy actions, we believe this is a good result. I want to use the other three charts on the page to illustrate the different trends across the last quarter, and more specifically in each line-of-business. In consumer, looking at the top right chart, you see the difference in the movement through the quarter between the balances of low to no interest checking accounts and the higher-yielding non-checking accounts. Here you can also see the low levels of our more rate-sensitive balances in consumer investments and CD balances. And they're both broken out here. In total, we've got still more than $1 trillion in high quality consumer deposits, which remains $274 billion, above pre-pandemic levels. In the second quarter that decline in consumer deposits was driven by higher debt payments, higher spend and seasonal tax activity. And some non-checking balances that rotated from deposits into brokerage accounts. We did see some competitive pressure this quarter within about roughly $40 billion of CD's, as some of the financial institutions pushed prices higher. And at this point with deposits, far exceeding our loans we've not yet felt the need to chase deposits with rate. Broadly speaking, average deposit balances of our consumers remain at multiples of their pre-pandemic level, especially in the lower end of our customer base. Total rate paid on consumer deposits in the quarter rose to 22 basis points, and remains low relative to Fed funds driven by the high mix of quality transactional accounts. Most of this quarter's 10 basis point rate increase remains concentrated in those CD's and consumer investment deposits and together, those represent only 11% of our consumer deposits. Turning to Wealth Management. This business is also impacted by tax payments and normally shows the most relative rate movement because these clients tend to have the most excess cash. The previous quarters trend of clients moving money from lower-yielding sweep accounts into higher-yielding preferred deposits. And moving off-balance sheet on to other parts of the platform seem to stabilize this quarter, and our sweep balances were more modestly down $72 billion. At the bottom right, note the global banking deposits stability. We ended the second quarter at $493 billion down $3 billion from the first quarter. We've now been in this $490 billion to $500 billion range for the past several quarters. And these are generally the transactional deposits of our commercial customers that they use to manage their cash flows. And while the overall balances have been stable, we've continued to see shift towards interest-bearing as the Fed raised rates one more time during the quarter before pausing in June. Non-interest-bearing deposits were 40% of their deposits at the end of the quarter. Focusing for a moment, on average deposits using Slide 13, I really only have one additional point to make. While you've seen the modest downtick in deposits for the past several quarters, as the Fed has removed some accommodation, we just want to note that deposits remain 33% above the fourth quarter 2019 pre-pandemic period. And as you look at the page every segment relative to pre-pandemic is up at least 15%, consumer is up 40%, consumer checking is up more than 50%, and as noted global banking has been right around $500 billion for the past five quarters, and it remains 31%, above pre-pandemic. So let's move to Slide 14. And we'll continue the conversation that we began last quarter around management of excess deposits above loans. In the top left, note the balances in the second-quarter of each year since the pandemic began. The excess of deposits needed to fund loans increased from $500 billion pre-pandemic to a peak of $1.1 trillion in the fall of 2021. And as you can see it remains high at the end of June at $826 billion. In the top right, note that the amount of cash and securities held has increased across time, in-line with the excess deposit trend. And you will also note the mix shift over time. This excess of deposits over loans has been held in a balanced manner across the period shown with roughly 50% fixed longer dated held-to-maturity securities and the rest has been held in shorter dated available-for-sale securities and cash. Cash and the shorter day-to-day FS securities combined was $516 billion at the end of the quarter. And cash of $375 billion is more than twice what we held pre-pandemic and you should expect to see that come down over time. We made these investments, given the mix and transactional nature of our customers deposits, particularly given the excess deposits built. Note also in the bottom left chart, the combined cash and securities yields continue to expand this quarter and remain meaningfully wider than the overall deposit rate paid that's a result of two things. Securities book has seen a steady decline since the fall of 2021, when we stopped adding to it. With less loan funding needs, proceeds from security pay-downs have been deployed into higher-yielding cash and through this action, and the increased cash rates, the combined cash and securities yield has risen further and faster than deposit rates. Deposits at the end of the quarter were paying 124 basis points while our blend of cash and securities has increased to 319 basis points. So, over the past year the deposit cost has risen by 118 basis points, and the cash and securities yield has improved by 164 basis points. And as a reminder, this slide focuses on the banking book because our global markets balance sheet has remained largely market funded. Finally, one very last - one last very important point that I want to make is on the improved NII of our banking book. The NII excluding global markets which we disclose each quarter troughed in the third quarter of 2020 at $9.1 billion, and that compares to $14 billion in the second quarter of 2023, so almost $5 billion higher on a quarter basis, $20 billion per year. That's led to a stronger capital position even as we returned capital to shareholders and supplied capital to our customers in the form of loans and other financing capital. And then more specifically on the hold-to-maturity book, the balance of that portfolio declined again $10 billion from the first quarter, it's down $69 billion since we stopped adding to the book in the third quarter of '21. The market valuation on our hold-to-maturity book, which is in a negative position, worsened $7 billion since March 31, 2023, driven by a 54 basis point increase in mortgage rates. The OCI impact from the valuation of our hedged AFS book modestly improved this quarter. Let's turn to Slide 15, and we can focus on net interest income. On a GAAP or non-FTE basis, NII in the second quarter was $14.2 billion, and the fully tax equivalent NII number was $14.3 billion. So, I'm going to focus on that fully tax equivalent. Here NII increased $1.7 billion from the second quarter of '22 or 14%, while our net interest yield improved 20 basis points to 2.06%. This improvement has been driven by rates which includes securities premium amortization, partially offset by global markets activity, and $137 billion of lower average deposit balances. Average loan growth during the period of $32 billion also aided the year-over-year NII improvement. Turning to a linked quarter discussion, NII of $14.3 billion is down $289 million or 2% from the first quarter, and that's driven primarily by the continued impact of lower deposit balances and mix shift into interest bearing, partially offset by one additional day of interest in the period. Global markets NII increased during the quarter. The net interest yield fell 14 basis points in the quarter, driven by a larger average balance sheet due to the cash positioning we chose and some higher funding costs. This quarter's compression, we believe, was just a little anomalous, driven by our decision late first quarter to position the balance sheet around higher cash levels. Turning to asset sensitivity and focusing on a forward yield curve basis, the plus 100 basis point parallel shift at June 30 was unchanged from March 31, '23, at $3.3 billion of expected NII over the next 12 months in our banking book, and that assumes no expected change in balance sheet levels or mix relative to our baseline forecast, and 95% of the sensitivity remains driven by short rates. A 100 basis point down-rate scenario was unchanged at negative $3.6 billion. Let me give you a few thoughts on NII as we look forward. We still believe NII for the full year will be a little above $57 billion, which would be up more than 8% from full year 2022, and this could include third quarter at approximately the same level as second quarter, so think $14.2 billion, $14.3 billion. And then fourth quarter, somewhere around $14 billion. That's a slightly better viewpoint than we had last quarter for the third and fourth quarter, with a little more stability closer to the second quarter level, and therefore provides a better start point for 2024. So, let's talk through the caveats around our NII comments. First, it assumes that interest rates in the forward curve materialized, and an expectation of modest loan growth driven by credit card. On deposits, we are expecting modestly lower balances led by consumer, and we expect continued modest deposit mix shifts from global banking deposits into interest bearing. The past few months have provided us a little more positive outlook around NII, given the apparent stabilization of some elements of deposits as well as better pricing, and now we'll see how the rest of the year plays out. Okay, let's turn to expense, and we'll use Slide 16 for that discussion. Second quarter expenses were $16 billion, that was down $200 million from the first quarter. And as I mentioned, the second quarter included $276 million of litigation expense. In addition, we also saw a little higher revenue related expense driven by our sales and trading results. Those higher costs were more than offset by the absence of the first quarter seasonal elevation of payroll taxes and savings from a reduction in overall full-time headcount. Now, excluding the 2,500 or so summer interns that we welcomed into our offices over the summer months, our full-time head count was down roughly 4,000 from the first quarter start point to 213,000. That's some good work after peaking at 218,000 in January. Our summer interns will leave us in the third quarter, and hopefully many will return as full-time associates next summer. And at the same time in Q3, we welcomed back about 2,600 new full-time hires as college grads, many of whom interned with us last summer. And that's a very diverse class of associates who are excited to join the company. As we look forward to next quarter, we would expect the third quarter expense to more fully benefit from the second quarter head count reduction, even as we remain in a mode of modest hiring for client-facing positions. Additionally, the proposed notice of special assessment from the FDIC to recover losses from the failures of Silicon Valley and signature banks could add $1.9 billion expense for us, $1.5 billion after tax, and we just remain unsure at this point of timing to record that expense. Let's now move to credit, and we'll turn to Slide 17. Net charge-offs of $869 million increased $62 million from the first quarter, and the increase was driven by credit card losses as higher late-stage delinquencies flowed through to charge-offs. For context, the credit card net charge-off rate was 2.6% in Q2, and remains well below the 3.03% pre-pandemic rate in the fourth quarter of '19. Provision expense was $1.1 billion in Q2, and that included a $256 million further reserve build, that's driven by loan growth, particularly in credit card, and it reflects a macroeconomic outlook that on a weighted basis continues to include an unemployment rate that rises to north of 5% in 2024. On Slide 18, we highlight the credit quality metrics for both our consumer and commercial portfolios. On consumer, we note we continue to see asset quality metrics come off the bottom, and they remain below historical averages. Overall commercial net charge-offs were flat from first quarter. And within commercial we saw a decrease in C&I losses that was offset by an increase in charge-offs related to commercial real estate office exposures. As a reminder, commercial real estate office credit exposure represents less than 2% of our total loans, and this is an area where we've been quite intentional around our client selection, portfolio concentration, and deal structure over many years, and as a result, we've seen NPLs and realized losses that are quite low for this portfolio. In the second quarter we experienced $70 million in charge-offs on office exposure, to write down a handful of properties where the LTV has deteriorated. Our charge-offs on office exposures were $15 million in the first quarter. We pulled forward some of the office portfolio stats provided last quarter in a slide in our appendix for you. Now, we continue to believe that the portfolio is well positioned and adequately reserved against the current conditions. Moving to the various lines of business and their results, starting on Slide 19 with consumer banking, for the quarter, consumer earned $2.9 billion on good organic revenue growth and delivered its 9th consecutive quarter of strong operating leverage, while we continue to invest in our future. Note that top-line revenue grew 15% while expense rose 10%. These segment results include the bulk of the impact of the costs of the regulator agreements from last week. While reported earnings were strong in both periods at $2.9 billion, it understates the success of the business because the prior year included reserve leases while we built reserves this quarter for card growth. EPNR grew 21% year-over-year even with the added cost of the agreements. And the revenue growth overcame a decline in service charges that I noted earlier. Much of this success is driven by the pace of organic growth of checking and card accounts as well as investment accounts and balances, as Brian noted earlier In addition to the litigation noted, expense reflects the continued business investments for growth, and as you think about this business, remember much of the company's minimum wage hikes and the mid-year increased salary in wage moves in 2022 impact consumer banking the most, and that, therefore, impacts the year-over-year comparisons. Moving to wealth management on Slide 20, we produced good results earning a little less than $1 billion. These results were down from last year as asset management and brokerage fees felt the negative impact of lower equity, lower fixed income markets, and some market uncertainty, impacting transactional volume. Those fees were complemented by the revenue from a sizeable banking business, and that remains an advantage for us. As Brian noted earlier, both Merrill and the private bank continued to see strong organic growth and produce solid client flows of $83 billion since the third - since the second quarter '22. Our assets under management flows of $14 billion reflect a good mix of new client money as well as existing clients putting money to work. Expenses reflect lower revenue-related incentives and also reflect continued investments in the business as we add financial advisers. On Slide 21, you see the global banking results, and this business produced very strong results with earnings of $2.7 billion, driven by 29% growth in revenue to $6.5 billion. Coupled with good expense management, this business produced strong operating leverage. Our global transaction services business has been robust. We've also seen a higher volume of solar and wind investment projects this quarter, and our investment banking business is performing well in a sluggish environment. Year-over-year revenue growth also benefited from the absence of marks taken on leveraged loans in the prior-year period. We saw modest loan growth on average year-over-year and link quarter, the utilization rates declined, and more generally, we saw lower levels of demand. As we noted earlier, the deposit flows have stabilized in the $490 billion to $500 billion range over the past several quarters, reflecting the benefits of our strong client relationships. The company's overall investment banking fees were $1.2 billion in the second quarter, growing 7% over the prior year and 4% linked quarter, a good performance in a sluggish environment that saw fee pools down 20% year-over-year. Provision expense declined year-over-year as we built more reserve in the prior year. Expense was held relatively flat year-over-year even as we drove strategic investments in the business, including a relationship management hiring and technology costs, and additionally comparisons benefit from the absence of elevated expense for some regulatory matters in the second quarter of '22. Switching to global markets on Slide 22, we had another strong quarter with earnings growing to $1.2 billion driven by revenue growth of 14% and I'm referring to results excluding DVA as we normally do. The continued themes of inflation, geopolitical tensions and central banks changing monetary policies around the globe. Along with this quarter's debt ceiling concerns, continued to impact both the bond and equity markets. As a result, it was a quarter where we saw a strong performance in both our macro and micro trading businesses. The investments made in the business over the past two years continued to produce favorable results. Year-over-year revenue growth benefited from strong sales and trading results and the absence of marks on leverage finance positions last year. Focusing on-sales and trading ex-DVA revenue improved 10% year-over-year to $4.4 billion. FICC improved 18% while equities was down 2% compared to the second quarter of '22. Year-over-year expense increased 8%, primarily driven by investments in the business and revenue-related costs, partially offset by the absence of regulatory matters in the second quarter of '22. Finally on Slide 23, all other shows a loss of $182 million. Revenue included a $197 million of losses on securities sales and increased volume of solar and wind investment operating losses that create the tax credits for the company. As a result of the increased solar and wind tax deal volume, and their associated related operating losses our effective tax-rate in the quarter was lower at 8%, but excluding ESG and any other discrete tax benefits our tax-rate would have been 26%. So with that, let's stop there and we'll open it up for Q&A.","evidence_gemma_new":null,"evidence_llama_3_3":"net income second quarter","evidence_qwen_3_30b":"net income the quarter","gemma_new_max":null,"gemma_new_min":null,"llama_3_3_max":7400000000.0,"llama_3_3_min":7400000000.0,"qwen_3_30b_max":7400000000.0,"qwen_3_30b_min":7400000000.0}
{"symbol":"BAC","year":2023,"quarter":3,"date":"2023-Q3","chunk_id":3,"sub_chunk_id":0,"centroid_label":"net income","agreed_value":7800000000.0,"count":3,"chunk":"Alastair Borthwick: Thanks, Brian. And on Slide 10, we present the summary income statement. I'm not going to spend a lot of time here because Brian touched on this and the highlights that we show on Slide 3. For the quarter, we generated $7.8 billion in net income, resulting in $0.90 per diluted share. Both of those are up the double digits from the third quarter of last year. The year-over-year revenue growth of 3% was led by improvement in net interest income, coupled with a strong 8% increase in sales and trading results, and that excludes DVA, and a 4% increase in investment in brokerage revenue driven by our Wealth Management businesses. Expense for the quarter of $15.8 billion included good discipline from our team, which allowed us to reduce costs from the second quarter, even as we continue our planned investments for marketing, technology and physical presence build-outs, including financial center openings and renovations. Asset quality remains stellar, and provision expense for the quarter was $1.2 billion. That consisted of $931 million of net charge-offs and $303 million of reserve build. The provision expense reflects the continued trend in charge-offs toward pre-pandemic levels and remains below historical levels. Our charge-off rate was 35 basis points, that's 2 basis points higher than the second quarter, and still below the 39 basis points we saw in the fourth quarter of '19. And as a reminder, that 2019 was a multi-decade low. 30-day delinquencies also remained below their fourth quarter '19 level. Lastly, our tax rate this quarter was 4%, driven mostly by higher-than-expected volume of investment tax credit, or ITC deals for the rest of the year. And we can expect other income in Q4 will reflect seasonally higher renewables investment losses when these projects get placed into service. Okay. Let's turn to the balance sheet that's on Slide 11. And you can see it ended the quarter at $3.2 trillion, up $31 billion from the second quarter. So not a lot to note here. The driver of the increase was a $34 billion increase in available for sales securities. With cash levels so high, we chose to reduce the cash and just put some of the money into short-term T-bills this quarter, and those earn essentially the same rate as cash. Our cash remains high at $352 billion. In addition to the cash level change, we saw another $11 billion decline in hold to maturity securities as those securities matured and paid down. And as Brian noted, global excess liquidity sources remain strong at $859 billion, that's down very modestly from the second quarter, and still remains approximately $280 billion above our pre-pandemic fourth quarter '19 level. Shareholders' equity increased $4 billion from the second quarter as earnings were only partially offset by capital distributed to shareholders. During the quarter, we paid out $1.9 billion in common dividends and we bought back $1 billion in shares to offset our employee awards. AOCI was $1.1 billion lower, reflecting both a modest decline in the value of AFS securities, modestly impacting CET1 as well as a small change in cash flow hedges, which doesn't impact the regulatory capital. Tangible book value per share is up 12% year-over-year. Turning to regulatory capital. our CET1 level improved to $194 billion from June 30, and our CET1 ratio improved 30 basis points to 11.9%. It's now well above our current 9.5% requirement as Brian noted. Risk-weighted assets declined modestly as loans and Global Markets RWA both moved lower. Our supplemental leverage ratio was 62% versus a minimum requirement of 5%, which leaves capacity for balance sheet growth and our TLAC ratio remains well above our requirements. LCR ratios remain well above minimums for BAC metrics and stronger at the bank level. Let's now focus on loans by looking at average balances on Slide 12. And loan growth slowed this quarter as a decline in demand for commercial borrowing more than offset our credit card growth. So we saw that lower commercial demand in lower revolver utilization among higher funding costs. And commercial balances were also impacted by term loan repayments due to borrowers accessing other capital market solutions. Focusing for a moment on average deposits and using Slide 13. Given Brian's earlier comments, I'll just note the comparisons. Relative to pre-pandemic fourth quarter '19, average deposits are up 33%. Consumer is up 36%, with consumer checking up 45%. And you can see the other segment comparisons on the page. Turning to Slide 14. Let's extend the conversation we\u2019ve been having over the course of the past couple of quarters around management of our excess liquidity. This slide serves as a reminder of the size of our high-quality deposit book, the magnitude of deposits we have in excess of those needed to fund loans and the way we've extracted the value of that excess to deliver value back to our shareholders. The excess of deposits needed to fund loans increased from $420 billion pre-pandemic to a peak of $1.1 trillion in the fall of 2021. And as you can see, it remains high at $835 billion today. That $1.1 trillion of excess liquidity has always included a balanced mix of cash, available for sale securities, and securities we hold to maturity. In late 2020 and into 2021, we concluded that additional stimulus was going to remain in client accounts for an extended period, and we increased the hold to maturity securities portion so we could lock in value from those deposits. And we made these investments given the core nature of our customers' deposits. Note, the split of the shorter-term investments in cash and available-for-sale securities, and then the term hold to maturity securities. And I just draw your attention to just how much cash we have above the actual level we need to run the company. On the available-for-sale, we would just note the duration is less than six months as it's mostly all short-term treasuries. And the combination of the cash and available-for-sale securities represents about 47% of the total noted on this page in the third quarter of '23 to give us the balance we're looking for. And if we look at the hold-to-maturity book, it had grown from $190 billion pre-pandemic, peaking two years ago, and now falling to just over $600 billion currently. That $600 billion consists of about $122 billion in treasuries. Those will mature in a little more than six years, and about $474 billion in mortgage-backed securities and a few billion other. Hold to maturity securities peaked at $683 billion, and we're now down $80 billion from the peak and $11 billion in last quarter. That $80 billion decline from peak was all driven by the reduction of mortgages from $555 billion to $474 billion. With less loan funding needs over the past several quarters, the proceeds from security paydowns have been deployed into higher-yielding cash, and this mix shift has been happening at about a 300 basis point spread benefit for these assets. Given the increased cash rates, the combined cash and security yield has risen now to more than 3%. It's up more than 200 basis points since the peak size of the portfolio in the third quarter of '21, and it's risen faster than the rate paid on deposits. In fact, today, it's 178 basis points above what we pay for deposits. And remember also, we have $1 trillion of loans that are largely in floating rate in addition. From a valuation perspective, we did experience a decline in the valuation of the hold-to-maturity book this quarter, and that's in the context of mortgage rates reaching a two-decade high. Comparing the valuation change to the year-ago period, it worsened $15 billion. And over that same time period, we grew regulatory capital by $19 billion and hold global liquidity sources in excess of $850 billion. And importantly, as we move to Slide 15, I'll make one final comment here, which is the improved NII over this investment period. The net interest income, excluding Global Markets, which we disclose each quarter, troughed in Q3 '20 at $9.1 billion, that compares to $13.9 billion in the third quarter of '23 or $4.7 billion higher every quarter on a quarterly basis, and that gives a sense of the entire balance sheet working together. Okay. Let's now turn our focus to NII performance over the past quarter, and we'll talk about the path forward, and I'm going to use Slide 15 for that. On last quarter's call, we guided to expect Q3 NII to be about $14.2 billion to $14.3 billion on an FTE basis. Our third quarter performance turned out to be better than our guidance. And on an FTE basis, NII was $14.5 billion this quarter. We expect Q4 will be around $14 billion fully taxable equivalent, and that increases our full year guidance for NII in 2023 versus 2022 to 9% growth per year. We believe NII will hover around this expected fourth quarter $14 billion level, plus or minus, in the first half of next year, and then we anticipate modest growth in the half of 2024. By the time we get to the fourth quarter of 2024, we believe we can see NII up low single digits compared to the fourth quarter of 2023. The good news is we believe NII will likely trough around the fourth quarter level of $14 billion and begin to grow again in the middle of next year. I'd note a few caveats around that forward view I just provided. It includes an assumption that interest rates in the forward curve materialize and it includes rate cuts for the second half of 2024. It also includes an expectation of modest loan and deposit growth as we move into the second half of 2024. Focusing again on this quarter, $14.5 billion NII was an increase of nearly $700 million from the third quarter of '22, or 4%, while our net interest yield improved 5 basis points to 2.11%. The year-over-year improvement was driven by higher interest rates and partially offset by lower deposit balances. On a linked-quarter comparison, NII improved $239 million from Q2, and that comes from the benefit of an extra day of interest, a rate hike and higher global markets NII, partially offset by increased deposit pricing. And the net interest yield improved 5 basis points. Turning to asset sensitivity and focused on a forward yield curve basis, the plus 100 basis point parallel shift at September 30 was $3.1 billion of expected NII benefit over the next 12 months from our banking book. And that expects -- or that assumes no expected change in balance sheet levels or mix relative to our baseline forecast, and 95% of the sensitivity is driven by short rates. The 100 basis point down rate scenario was $3.3 billion. Okay. Let's turn to expense, and we'll use Slide 16 for the discussion. Previously highlighted that we guided you to a trend of sequential declines in our expense each quarter this year, and we achieved that in Q3 with our expense down $200 million to $15.8 billion. Additionally, we expect the fourth quarter to go down another couple of hundred million to $15.6 billion, excluding any FDIC special assessment. That would mean our fourth quarter expense of $15.6 billion, compared to the fourth quarter of '22, would be up by only $100 million or less than 1%. And we're proud of that work by the team, especially considering our regular FDIC insurance expense alone increased by $125 million quarterly starting in the first quarter of this year. So without that, we would be flat year-over-year in Q4. The decline this quarter from the second was driven by the reduction in litigation expense and lower headcount, offset somewhat by investments in inflationary costs. Our headcount is down nearly 2,800 from the second quarter to 213,000. And that includes the addition of 2,500 or so full-time campus hires we brought into the company. So that's good work by the team after we peaked at 218,000 in January month-end. And you see the movement here across the past year at the bottom left of the slide. As we look forward to next quarter, we'd add $1.9 billion of expense for the proposed notice of special assessment from the FDIC as a possibility. Absent that, we'd expect our fourth quarter $15.6 billion expense target to more fully benefit from the third quarter headcount reductions, and that will allow expense to continue the decline experienced throughout the year so far. All of that is going to set us up well for next year. Let's now turn to credit, and we'll turn to Slide 17. Net charge-offs of $931 million increased $62 million from the second quarter. The increase is driven by credit card losses as higher late-stage delinquencies flow through to charge-offs. For context, the credit card net charge-off rate rose 12 basis points to 2.72% in Q3, and it remains below the 3.03% pre-pandemic rate in the fourth quarter of '19. Provision expense was $1.2 billion in Q3, and that included a $303 million reserve build. It reflects a macroeconomic outlook that on a weighted basis continues to include an unemployment rate that rises to north of 5% during 2024. On Slide 18, we highlight the credit quality metrics for both our Consumer and our Commercial portfolios. And on Consumer, we just note that we continue to see the asset quality metrics come off the bottom. And for the most part, they remain below historical averages. 30 and 90-day consumer delinquencies still remain below the fourth quarter of 2019 as an example. Commercial net charge-offs declined from the second quarter, driven mostly by a reduction in office write-downs. And as a reminder, our CRE credit exposure represents 7% of total loans, and that includes office exposure, which represents less than 2% of our loans. We've been very intentional around client selection and portfolio concentration and deal structure over many years, and that's helped us to mitigate risk in this portfolio. We continue to believe that the portfolio is well positioned and adequately reserved against the current conditions. And in the appendix, we've included a current view of our commercial real estate and office portfolio stats we provided last quarter. We've also included the historical perspective of our loan book de-risking and our net charge-offs, and you can see all of those on Slides 36, 37, 38 and 39. Okay. Let's move on to the various lines of business and their results. And I'm going to start on Slide 19 with Consumer Banking. For the quarter, Consumer earned $2.9 billion on good organic revenue growth and delivered its 10th consecutive quarter of operating leverage, while we continue to invest for the future. Note that the top-line revenue grew 6%, while expense rose 3%. Reported earnings declined 7% year-over-year given credit costs continue to return to pre-pandemic level. And we believe this understates the underlying success of the business in driving revenue and managing costs, because PPNR grew 9% year-over-year. Much of this success is driven by the pace of organic growth of checking and card accounts, as well as investment accounts and balances, as Brian noted earlier. And expense reflects the continued investments by the business for their future growth. Moving to Wealth Management on Slide 20. We produced good results, and we earned a little more than $1 billion. These results are down from last year, due to a decline in NII from higher deposit costs, which more than offset higher fees from asset management. While lower this quarter, NII of $1.8 billion derives from a world-class banking offering, and it provides good balance in our revenue stream and a competitive advantage in the business for us. As Brian noted, both Merrill and the Private Bank continued to see strong organic growth, and they produced solid assets under management flows of $44 billion since the third quarter of last year, reflecting good mix of new client money as well as our existing clients putting their money to work. Expense reflects continued investments in the business as we add financial advisers and capabilities from technology investments. On Slide 21, you see the Global Banking results. And this business produced very strong results with earnings of $2.6 billion, driven by 11% year-over-year growth in revenue to $6.2 billion. Coupled with good expense management, the business has produced solid operating leverage. Our GTS, or Global Treasury Services business has been robust. We've also seen a steady volume of solar and wind investment projects this quarter, and our investment banking business is performing well in a sluggish environment. Year-over-year revenue growth also benefited from the absence of marks taken on leverage loans in the prior year-ago period. The company's overall investment banking fees were $1.2 billion in Q3, growing modestly over the prior year, despite a pool that was down nearly 20%. And we held on to number three position given our performance. Provision expense reflected a reserve release of $139 million as certain troubled industries and credits outside of commercial real estate continue to have improved outlooks. Expense increased 6% year-over-year, reflecting our continued investments in this business. Switching to Global Markets on Slide 22. The team had another strong quarter, with earnings growing to $1.3 billion driven by revenue growth of 10%, and I'm referring to results excluding DVA as we normally do. The continued themes of inflation, geopolitical tensions and central banks changing monetary policies around the globe have continued to impact both bond and equity markets. And as a result, it was a quarter where we saw strong performance in our FICC businesses, as well as a record third quarter in equities. Focusing on sales and trading, ex DVA, revenue improved 8% year-over-year to $4.4 billion. FICC improved 6% and equities improved 10% compared to the third quarter of last year. And at $1.7 billion, that's a record third quarter for our equities teammates. Year-over-year, expense increased 7%, primarily driven by investments for people and technology. Finally, on Slide 13, all other shows a profit of $89 million. So revenue improved from the second quarter, driven by the absence of prior period debt security sale losses and available-for-sale securities, and partially offset by higher operating losses on tax credit investments in wind, solar and affordable housing. As I mentioned earlier, our effective tax rate in the quarter was 4%, and that reflects a higher-than-expected volume of investment tax credits in which the value of the deals are recognized upfront. We also had a small discrete benefit to tax expense from a state tax law change. Excluding renewable investments and any other discrete tax benefits, our tax rate would have been 25%. And as we wrap up 2023, we expect our full year tax rate, excluding discrete and special items, such as the FDIC special assessment, we expect that full year tax rate should end up in the 9% to 10% range. So to summarize, we grew our earnings double digit year-over-year. We reported NII that was above our expectations, and we increased our full year expectations. We've managed costs aligned with our guidance and brought expenses down in every quarter so far this year, and we expect to do that again in the fourth quarter. We earned more than 15% return on tangible common equity. We returned $2.9 billion in capital back to shareholders, including a 9% dividend increase. And we built 30 basis points of CET1, positioning us well for the proposed capital rules. So all in all, it was a strong quarter. It was one where our teams executed well against responsible growth. And with that, David, I think we'll open it up for the Q&A session.","evidence_gemma_new":"net income","evidence_llama_3_3":"net income","evidence_qwen_3_30b":"net income the quarter","gemma_new_max":7800000000.0,"gemma_new_min":7800000000.0,"llama_3_3_max":7800000000.0,"llama_3_3_min":7800000000.0,"qwen_3_30b_max":7800000000.0,"qwen_3_30b_min":7800000000.0}
{"symbol":"BAC","year":2023,"quarter":4,"date":"2023-Q4","chunk_id":3,"sub_chunk_id":0,"centroid_label":"net income","agreed_value":3100000000.0,"count":2,"chunk":"Alastair Borthwick: Thank you, Brian. And I'm going to start on Slide 4 of the earnings presentation to provide just a little more context on the summary income statement and the highlights. For the fourth quarter, as Brian noted, we reported $3.1 billion in net income or $0.35 per diluted share. That GAAP net income number included two notable items. First, we recorded $2.1 billion of pretax expense, that's $0.20 after-tax earnings per share for the special assessment by the FDIC to recover losses from the failures of Silicon Valley and Signature Bank. Second, on November 15th 2023, Bloomberg announced that they would discontinue publishing the Bloomberg Short-Term Bank Yield Index rate after November 15th 2024 and many commercial loans in the industry had BSBY as a reference rate prior to SOFR becoming industry-standard. As noted in an 8-K we filed earlier this week, we came to conclusion in early January that BSBY cessation would not get the same accounting treatment allowed under LIBOR cessation. And therefore cash-flow hedges of BSBY indexed products related to BSBY cash flows, forecast to occur after November 15th 2024, we need to be moved out of OCI into earnings in the fourth quarter of '23 financials. So as a result of the accounting interpretation, we recorded a negative pretax impact to our market making revenue of approximately $1.6 billion. I just want to reinforce that's an accounting impact. It's not an economic change to the contracts and we'll see an offset to this over time through higher NII mostly occurring in 2025 and 2026 after BSBY ceases in November 2024. The accounting lowered CET1 by 8 basis points during the quarter and we will recapture that in the next two or three years. Adjusted for the FDIC assessment and the BSBY cessation related impact, Q4 net income was $5.9 billion, or $0.70 per share. On Slide 5, we show the highlights of the quarter and we reported revenue of $22.1 billion on an FTE basis. And excluding the BSBY cessation impact, adjusted revenue was $23.7 billion and declined 4%, driven by net interest income. Fourth quarter revenue is a tough year-over-year comparison as NII peaked in the fourth quarter of '22 at $14.8 billion, before slowly moving lower over 2023. Outside of NII, we saw good growth in treasury service fees and wealth management fees and those were offset by higher tax-advantaged investment deal activity, creating higher operating losses and the more tax credits associated with them and recognized across periods. Expense for the quarter of $17.7 billion included the $2.1 billion FDIC charge. So excluding that charge, adjusted expense was $15.6 billion and consistent with our prior guidance. That allowed us to invest for growth, as well as use good expense discipline to eliminate work and reduce headcount. And on an adjusted basis, this then is the third quarter of sequential expense decline this year. Provision expense for the quarter was $1.1 billion, that consisted of $1.2 billion in net charge-offs and a modest reserve release, reflecting the improved macroeconomic outlook. Net charge-offs reflect the continued trend in consumer and commercial charge-offs towards more normalized levels as well as higher commercial real-estate office losses. Lastly, our income tax expense this quarter was a modest benefit as credits from tax-advantaged investment deals offset the tax expense on the lower earnings in Q4 driven by the notable charges. So let's review the balance sheet on Slide 6, and you'll see we ended the quarter at $3.2 trillion of total assets, up $27 billion from the third quarter. I'd highlight here, both the $39 billion growth in deposits and a decline in cash on balance sheet of $19 billion. Overall, you'll note the debt securities increased $92 billion. And that included a $9 billion decline in hold-to-maturity securities, and $100 billion increase in available-for-sale securities reflecting short term investment of liquidity from all of these activities. We continue to put money into very short-term T-bills and hedged treasury notes this quarter and those are essentially earning the same rate as cash. And you can see our absolute cash levels remain quite high. As Brian noted, liquidity remained strong with $897 billion of global excess liquidity sources. That was up $38 billion from the third quarter of '23 and it remained $321 billion above our pre-pandemic level in the fourth quarter of '19. Shareholders' equity increased $5 billion from the third quarter as earnings and AOCI improvement were only partially offset by capital distributed to shareholders. The AOCI improved $4 billion, reflecting both the previously mentioned BSBY-related reclassification into fourth quarter earnings and other AOCI improvements. This included some improvements in other cash-flow hedges, which don't impact regulatory capital, driven by a decline in long-end rates. During the quarter, we paid out $1.9 billion in common dividends and we bought back $800 million in shares, which more than offset our employee awards. Tangible book value per share is up 3% linked-quarter and 12% year-over-year. Turning to the regulatory capital, our CET1 level improved to $195 billion from September 30th, while the CET1 ratio declined 9 basis points to 11.8% and remains well above our current 10% requirement as of January 1st '24. We also remained well-positioned against the proposed capital rules, as our current CET1 level matches our 10% minimum against anticipated RWA inflation from the proposed rules. Risk-weighted assets increased $19 billion on loan growth and growth in global markets, RWA, and our supplemental leverage ratio was 6.1% versus the minimum requirement of 5%, which leaves plenty of capacity for balance sheet growth and our TLAC ratio remains comfortably above requirements. So let's focus on loans by looking at the average balances on Slide 7. And you can see loan growth improved this quarter as we saw improvement in both credit card and commercial borrowing, offset by declines in commercial real estate and securities-based lending. The commercial growth reflects good demand overall and was muted only at quarter-end by companies paying down commercial balances as they finalized their year-end financial positions. Lastly, on a positive note, we've seen loan spreads continue to widen, given some of the capital pressures from proposed rules on the banking industry, and this combined with investments in relationship managers we've added over the past few years, has positioned us to take market-share and improved spreads. Moving to deposits, I'll stay focused on averages on Slide 8, and the trends of ending balances saw growth in Global Banking and wealth management and declines in consumer. Relative to the pre-pandemic fourth quarter '19 period, average deposits are still up 35%. Every line of business remains well above their pre-pandemic levels. Consumer is up 33%, with checking up 40% driven by the net-new checking accounts added that Brian noted earlier. On a more recent performance basis, deposits grew $29 billion or 6% from Q3 on an annualized basis. The only business that saw a decline in deposits linked-quarter was consumer. And here we saw a decline of $21 billion. This linked-quarter decline slowed from the third quarter change. And in total, we have $959 billion in high-quality consumer deposits, which remains $239 billion above pre-pandemic levels. The total rate paid on consumer deposits in the quarter was 47 basis points and this remains very low, driven by the high mix of quality transactional accounts. Most of this quarter's rate increase remains concentrated in CDs and consumer investment deposits, which together only represent 15% of the consumer deposits. Turning to wealth management, balances on an end-of-period basis improved modestly, and we continued to experience a slowing in the trend of clients moving money from lower-yielding sweep accounts into higher-yielding preferred deposits and off-balance sheet. Our sweep balances were down $4 billion and were replaced by new account generation and deepening. Global Banking deposits grew $23 billion, moving nicely above the $500 billion level that we've experienced over the course of the past six quarters. These deposits are generally transactional deposits of our commercial customers. They are the ones that used to manage their cash flows. And noninterest-bearing deposits were about 33% of deposits at the end of that quarter. So when we turn to excess deposit levels on Slide 9, you can see deposit growth exceeded loan growth this quarter. And that expanded our excess of deposits above loans, from Q3 to about $0.9 trillion, which is well above the $0.5 trillion we had pre-pandemic. You can see that in the upper-left of Slide 9, which is where we've used and shown you how we think about managing excess liquidity. We continue to have a balanced mix of cash available-for-sale securities and held-to-maturity securities. And this quarter, the combination of the cash and the AFS securities now represent 51% of the total $1.2 trillion noted on this page. You'll also notice the change in mix of the shorter-term portfolio as we began to lower cash and increase available-for-sale securities buying mostly short-dated T-Bills with similar yields. You can note also the hold-to-maturity book continued to decline from paydowns and maturities pulling to PAR. In total, the hold-to-maturity book moved below $600 billion this quarter. It's now down $89 billion from its peak and it consists of about $122 billion in treasuries and about $465 billion in mortgage-backed securities along with a few billion others. Also note that the blended cash and securities yield continued to rise and remained about 170 basis points above the rate we pay for deposits. The replacement of these lower earning assets into higher yielding assets continues to provide an ongoing benefit and support to NII. From a valuation perspective, given the reduced balance and the longer-term interest-rate reductions we've seen in the fourth quarter, we experienced an improvement of more than $30 billion in the valuation of the hold-to-maturity securities. So, let's turn our focus to NII performance using Slide 10. And a strong finish to the year helped us report $57.5 billion in NII on a fully tax-equivalent basis for the full year of 2023. That's up 9% compared to 2022. On an FTE basis, we reported $14.1 billion in NII, which was modestly better than we told you to expect last quarter driven by modestly better deposit growth. The $14.1 billion was a decline of $400 million from the third quarter, driven by the unfavorable impacts of deposits and related pricing and lower global markets NII, partially offset by higher rates benefiting asset yields. And as we look forward, given that we've got one less day of interest in the first quarter and that's worth about $125 million to $150 million, and given the rate curve shift, we believe the first quarter will be somewhere between $100 million and $200 million lower than the fourth quarter. It could move a touch lower in Q2 and then we believe it should begin to grow sequentially in the second half of 2024. So very consistent with our prior guidance. With regard to the forward view I just provided, let me note a few other caveats. It would include an assumption that interest rates in the forward curve materialize. And the forward curve today has six cuts compared to last quarter when we had three cuts in the 2024 curve. So it's bouncing around a little and shifted in the past quarter. Forward view also includes our expectation of low to mid-single-digit loan growth and some moderate growth in deposits as we move into the back half of 2024. Given our recent deposit and loan performance, we continue to feel good about these assumptions. Before moving away, it's worth noting our net interest yield declined 14 basis points to 197 basis points. And that's driven by the decline in NII, as well as higher average earning assets, reflecting prior period builds of cash and cash-like securities. Turning to asset sensitivity and focusing on a forward yield curve basis, the plus 100 basis point parallel shift at December 31st was $3.5 billion of expected NII over the next 12 months, coming from our banking book. And that assumes no expected change in balance sheet levels or mix relative to our baseline forecast, and 93% of that sensitivity is driven by short rates. The 100 basis point down scenario is $3.1 billion. Let's turn to expense and we'll use Slide 11 for the discussion. And we reported $15.6 billion in adjusted expense this quarter, which excludes the FDIC assessment. This was in line with our projection from last quarter and down $199 million from the third quarter, driven by reductions in headcount earlier in the year and seasonally lower revenue-related expense. These reductions outpace the continued investments that we're making to drive growth. Our average headcount was down from the third quarter to 213,000 people, and that's good work after peaking at 218,000 last January. We lowered our headcount through the year by 5,000 and did so without taking an outsized severance charge as we used attrition to lower our headcount along the way. One more point to acknowledge the good work of our teams on expense, Q4 '23 adjusted expense of $15.6 billion is only $94 million higher than the fourth quarter of '22. And just remember, we began 2023 with a $125 million lift in quarterly FDIC expense. So through some good operational excellence work and otherwise, we've managed through all of the additional costs of investments in new tech initiatives and merit and financial center openings, as well as some stronger revenue and higher marketing costs. As we look forward to next quarter, we expect to see the more typical Q1 seasonal elevation in expense of $700 million to $800 million compared to Q4. So we believe expense will be around $16.4 billion in the first quarter. That includes elevated payroll tax expense and the expected costs of higher revenue in both sales and trading and wealth management, as well as merit cost increases. And as we move through 2024, we expect the quarterly expense to decline from Q1, reflecting a drop in the elevated payroll tax expense and revenue changes, as well as some additional operational excellence initiative work. Continued digital transformation and adoption is also going to help us as we go through the year. Now turn to credit, and I'll use Slide 12 for that. Provision expense was $1.1 billion in the fourth quarter and it included an $88 million reserve release due to a modestly improved macroeconomic environment. On a weighted basis, we're reserved for an unemployment rate of nearly 5% by the end of 2024 compared to the most recent 3.7% rate reported. Net charge-offs of $1.2 billion increased $261 million from the third quarter, and the net charge-off ratio was 45 basis points, a 10 basis point increase from the third quarter. On Slide 13, we highlight the credit quality metrics for both our consumer and commercial portfolios, and the overall increase in net charge-offs was driven by three things. First, $104 million of the increase was driven by credit card losses, which continued to normalize as higher late-stage delinquencies flowed through to charge-offs. Second, $65 million of the increase was driven by a broad range of smaller commercial and industrial losses, which were mostly previously reserved and monitored for the past couple of quarters. And lastly, $76 million of the increase was driven by commercial real estate losses, primarily due to office, also mostly reserved. In the appendix, we've included a current view of our commercial real estate and office portfolio stats provided last quarter, and we've also included the historical perspective of our loan book de-risking and long term trend of our consumer and commercial net charge-offs, and you can see those on slides 30 to 33. Let's move on to the various lines of business and their results and I'll start on Slide 14 with Consumer Banking. For the quarter, consumer earned $2.8 billion on continued good organic growth and despite their good client activity, it's difficult to outrun the earnings impact of higher rates on deposit costs while the credit is also normalizing. The reported earnings declined 23% year-over-year as top line revenue declined 4% while expense rose 3% and the credit costs rose. Customer activity showed another strong quarter of net new checking growth, another strong period of card opening and investment balances for consumer clients which climbed $105 billion over the past year to a record $424 billion. Our full year flows were $49 billion as accounts grew 10% in the past 12 months. Loan growth was led by credit card and that broke above $100 billion this quarter. Deposit decline slowed in the quarter with continued strong discipline around pricing. And our expense reflects continued business investments for growth. And as you can also see on the appendix page 21, digital engagement continued to improve and showed good year-over-year improvement as customers enjoy the continuation of enhanced capabilities. Moving to Wealth Management on Slide 15. We produced good results, earning a little more than $1 billion after adding 40,000 net new relationships in Merrill and the private bank this year. These results were down from last year as a decline in NII from higher deposit costs still catching up from the interest rate hikes, more than offset higher fees from asset management, driven by higher market levels and assets under management flows. As Brian noted earlier, both Merrill and the private bank continued to see strong organic growth and produced solid assets under management flows of $52 billion since the fourth quarter of '22, which reflects a good mix of new client money as well as existing clients putting their money to the work. Expenses reflect continued investments in the business and revenue related costs. On Slide 16, you see the global banking results. The business produced strong results with earnings of $2.5 billion as a decline from peak levels of NII was offset by lower provision expense, leaving earnings down 3% year-over-year. Revenue declined 8%, driven by the NII. Our global treasury services business remained robust with strong business from existing clients as well as good new client generation. In addition, we continued to see a steady volume of solar and wind investment projects this quarter and our investment banking business continued to perform well in a sluggish environment. Year-over-year revenue growth also benefited from lower marks on leveraged loan positions. The company's overall investment banking fees were $1.1 billion in Q4. That grew 7% over the prior year despite a fee pool that was down 8%. And for the year we held on to the number three position overall, given that performance. In the component parts, we ended the year number one in investment grade, number two in leverage finance, number four in equity capital markets, and number four in mergers and acquisition. The diversification of the revenue across products and regions reflects the growing strength of our platform, and a good example of that is our focus on the equity capital markets blocks business, where we finished number one in the United States for the first time since 1998. And in EMEA, we were also number one for blocks. Provision expense reflected a reserve release of $399 million and that comes from an improved macroeconomic outlook as well as realized charge-offs better, as noted before. Expense decreased 2% year-over-year as continued investments in the business were more than offset by reductions in other operating costs. Switching to Global Markets on Slide 17, the team had another strong quarter, with earnings growing 13% year-over-year to $736 million, driven by revenue growth of 4% and we refer to results excluding DVA as we normally do. Good results in sales and trading and comparatively low remarks on leverage loan positions drove the year-over-year performance and focusing on the sales and trading ex-DVA, revenue improved 1% year-over-year to $3.8 billion, which is a new fourth quarter record for the firm. FICC was down 6% from a record quarter, while equities increased 12% compared to the fourth quarter of '22. And the FICC revenues were down versus that record fourth quarter level with higher revenues in mortgages and municipal trading. Equities was driven by improved trading performance in derivatives. And our expense was up 3% on continued investment in the business. Finally, on Slide 18, all other shows a loss of $3.8 billion, as the two notable items highlighted earlier negatively impacted net income by $2.8 billion in that segment. Revenue adjusted for the $1.6 billion BSBY cessation was flat year-over-year, and expense adjusted for the $2.1 billion FDIC assessment was down a couple hundred million, driven by lower litigation and lower unemployment processing costs. I noted earlier we reported a modest tax benefit this quarter. The tax credits from tax advantaged investment deals throughout the year, including their benefits in the fourth quarter, exceeded taxes on reported earnings because we had the two notable items that lowered results this quarter. For the full year, our tax rate was a little more than 6%. And excluding the impacts of BSBY cessation and FDIC and the other discrete tax benefits, that rate was 10%. And further excluding our investment tax credits, our tax rate would have been 25%. So thank you. And with that, we'll launch into the Q&A, please.","evidence_gemma_new":null,"evidence_llama_3_3":"BAC net income Q4","evidence_qwen_3_30b":"net income fourth quarter","gemma_new_max":null,"gemma_new_min":null,"llama_3_3_max":3100000000.0,"llama_3_3_min":3100000000.0,"qwen_3_30b_max":3100000000.0,"qwen_3_30b_min":3100000000.0}
{"symbol":"BAC","year":2024,"quarter":4,"date":"2023-Q4","chunk_id":3,"sub_chunk_id":0,"centroid_label":"net income","agreed_value":5900000000.0,"count":2,"chunk":"Alastair Borthwick: Thank you, Brian. And I'm going to start on Slide 5 of the earnings presentation, because it will provide just a little more context on the quarter. For the fourth quarter, as Brian noted, we reported $6.7 billion in net income or $0.82 per share. And before we talk about comparisons between periods, I just need to remind you that our fourth quarter 2023 GAAP net income number included two notable items. In the fourth quarter of \u201823, first, we recorded $2.1 billion of pre-tax expense for the special assessment by the FDIC to the industry to recover losses from the failures of Silicon Valley Bank and Signature Bank, and that reduced EPS last year by $0.20. Second, we recorded a negative pre-tax impact to our market-making revenue of approximately $1.6 billion related to the cessation of BSBY as an alternative rate, and that reduced earnings per share last year by $0.15. So when you adjust for the large FDIC assessment and the BSBY cessation charge, fourth quarter \u201823 net income was $5.9 billion or $0.70 per share. On Slide 6, we note some of the highlights of the quarter and we reported revenue of $25.5 billion on a fully taxable equivalent basis, up 15% from the fourth quarter of \u201823. And if you exclude the fourth quarter \u201823 BSBY cessation charge, our revenues grew 8% year-over-year. As Brian said, all the revenue items are showing improvement year-over-year. NII grew 3%. Investment banking grew 44%. This quarter, our $4 billion of sales and trading revenue marked a fourth quarter record, and it grew 10% from the year ago period. And investment brokerage fees rose 21%, with both assets under management flows and market levels contributing nicely to the growth. Our card income and service charges grew 7%. Non-interest expense was $16.8 billion and was up when adjusted for the FDIC special assessment driven by incentives paid for the strong revenue growth as Brian noted and the related activity costs that comes with that. Expense also included additional investments in people, technology, and brand with some major partnerships announced recently. And it included what we expect to be the peak in quarterly costs associated with enhancing our compliance costs and controls. The good news is we created operating leverage in the quarter. Provision expense for the quarter was $1.5 billion and was consistent with the previous two quarters. And lastly, returns in the fourth quarter were 80 basis points of ROA and 13% return on tangible common equity. Back to the balance sheet on Slide 7. We ended the quarter at $3.26 trillion of total assets, down $63 billion from the third quarter, driven by seasonally lower levels of client activity in global markets, while loans across the businesses grew $20 billion in the quarter. Otherwise in the quarter, the investments of our excess liquidity saw a $9 billion reduction in hold to maturity securities. And at the same time, the combination of shorter-term liquidity investments of cash and available for sale securities increased $28 billion. On the funding side, total deposits grew $35 billion on an ending basis as both interest bearing and non-interest bearing grew. Long-term debt fell $14 billion driven by net redemptions and valuations, and global markets funding declined in line with assets. Liquidity remains strong with $953 billion of global liquidity sources. That is up modestly compared to the third quarter, even as we paid down some debt and retired some preferreds. Shareholders' equity was flat at around $295 billion. And within all of that, we returned $5.5 billion of capital back to shareholders with $2 billion in common dividends paid and the repurchase of $3.5 billion in shares this quarter. Tangible book value per share of $26.58 rose 9% from the fourth quarter last year. Turning to regulatory capital, our CET1 level improved to $201 billion and the CET1 ratio rose to 11.9%, remaining well above our new 10.7% requirement. Risk-weighted assets increased modestly as increases in loans were mostly offset by lower RWA supporting our global markets client activity. Our supplementary leverage ratio was 5.9% versus a minimum requirement of 5%, which leaves some capacity for balance sheet growth, and our $460 billion of total loss absorbing capital means our TLAC ratio remains comfortably above our requirements. Let's turn to Slide 8. We can go a little deeper on loans by looking at average balances. And loans in the fourth quarter of $1.08 trillion improved 3% year-over-year, driven by solid commercial loan growth. Overall, commercial loans grew 5% year-over-year. And importantly, this included an 8% drop in commercial real estate loans. Commercial loans excluding commercial real estate grew 7% year-over-year, and the consumer loans grew modestly both linked quarter and year-over-year. As Brian said, on a linked quarter basis, every category of consumer lending grew, and you can see that at the bottom of Slide 8. If we turn our focus to NII performance and use Slide 9, regarding NII on a GAAP, non-fully taxable equivalent basis, NII in Q4 was $14.4 billion. And on a fully taxable equivalent basis, NII was $14.5 billion. Several quarters ago, we signaled our expectation that NII would trough in the second quarter of 2024 and begin to grow from there. And this represents now our second quarter of NII growth. And we expect that growth to continue in 2025. In fact, if you look at the two quarters after the inflection point, NII is already growing at a 5% rate. Fourth quarter NII on a fully taxable equivalent basis increased by $399 million from the third quarter, driven by a number of factors. First, it was led by improvement in deposits across the businesses. And even as deposit balances increased linked quarter, our interest expense on those deposits declined by $600 million. Loan growth and fixed rate asset repricing also benefited us again this quarter. With regard to a forward view, interest rate expectations continue to drive volatility and predictability, but we'll provide some thoughts for future NII. We expect to start the year in the first quarter with NII modestly higher than the fourth. Remember that the first quarter has two fewer days of interest and that's roughly the equivalent of about $250 million of NII equivalent. So even with that, we expect to grow modestly. Then we expect that growth to increase through the year to the point where it could be 6% to 7% higher in 2025 than 2024. We expect to exit the year at least $1 billion higher in the fourth quarter and that would put us in a range of $15.5 billion to $15.7 billion on a fully taxable equivalent basis, and that's obviously significantly higher than the Q2 '24 trough of $13.9 billion. I have to note the following assumptions. First, we assume that the current forward curve materializes. And while the interest rate curve has changed significantly over a fairly short period of time, as of the 10 of January, the curve was expecting only one rate cut in 2025 that may come in May or June. Based on our more recent growth experienced, we're assuming loan and deposit growth in 2025 that's higher than 2024, and more consistent with growth in a 2% to 3% GDP environment. The other elements of anticipated growth in NII expected are the benefits of asset repricing as fixed rate securities and loans and swaps roll off and those get repriced at higher rates. And those themes all remain consistent with our prior conversations with you in the last several earnings calls. With regard to interest rate sensitivity, on a dynamic deposit basis, we provide a 12-month change in NII for an instantaneous shift in the curve, above or below the forward curve. And on that basis, a 100 basis point increase would benefit NII by roughly $1 billion, while a decrease of 100 basis points would decrease NII over the next 12 months by $2.3 billion. Lastly, note that our slide showing the trended investment of excess deposits is in our appendix. It's on page 21. Deposit levels grew to $870 billion over loans at the end of Q4, and that's an incredible source of value for shareholders. And $649 billion, or 54% of our excess liquidity, is now in short-dated cash and available for sale securities. The longer-dated lower-yielding hold-to-maturity book continues to roll off, and we continue to reinvest in higher-yielding assets. Okay. Let's now turn to expense, and we'll use Slide 10 for the discussion. We reported $16.8 billion in expense this quarter. And the fourth quarter of '23 included the large FDIC special assessment charge and excluding that, expense increased. The increased expense from prior periods was driven by a number of factors and was partially offset by a roughly $300 million release of prior period accruals for the FDIC special assessment. Let's talk about the drivers of the expense. First, in regard to revenue, our markets-related businesses of investment banking, investment in Brokerage and Sales & Trading, those were up 20% year-over-year. Incentives for the firm were up 15% versus the fourth quarter of '23 and were in large part related to these market-related revenue streams. On investments that we made, we added bankers and advisers across most of our businesses in 2024, and we also increased investments in our brand with significant sponsorships like the Masters in FIFA to name a few. And we increased our investments around technology as well as financial centers. This quarter alone, we added 17 financial centers with nine of those in our new expansion markets. We're a growth company, and we continue to invest in our future. As far as head count goes, we've managed our head count carefully, and we've held it fairly flat through the 4 quarters of 2024 at around 213,000 people. Lastly, we incurred additional costs to accelerate work on compliance and controls. As you likely saw in late December, the OCC issued a compliance consent order to Bank of America, and that's a result of exams done more than a year ago. This orders about correcting or enhancing certain deficiencies in some aspects of our processes that existed at the time. The order doesn't limit any of our growth plans and the order acknowledges we began taking corrective actions before the order was announced. And as a result of the work in process, we increased our resources substantially in the second-half of 2024 and those costs are already embedded in our quarterly run rate. Okay. Let's go back to expense and how to think about a forward view. First, most importantly, we remain focused on growing the company and driving operating leverage. Second, we expect the first quarter to include some normal seasonal elevation and we believe this amount will be roughly $600 million to $700 million, primarily for payroll tax expense. So we think $17.6 billion is a good number to expect for Q1 and before seasonally declining in Q2. And that's all part of our expectation that expense should be roughly 2% to 3% higher in 2025, compared to 2024. Let's now move to credit and turn to Slide 11, where you can see net charge-offs of a little less than $1.5 billion, improving modestly compared to Q3. That's the fourth quarter now that net charge-offs are around $1.5 billion. We've seen consumer losses in a pretty stable range of $1 billion to $1.1 billion over those past few quarters. And on the commercial side, we saw losses of $359 million, which is down from the third quarter, driven by the continued decline in commercial real estate office losses. Net charge-off ratio this quarter was 54 basis points, down 4 basis points from the third quarter. We don't see overall net charge-offs or the related ratio changing much in 2025, without much change in current GDP or the employment environment, we expect the net charge-off ratio to be in the range of 50 to 60 basis points of loans for 2025. Q4 provision expense was $90 million lower than Q3 at $1.5 billion as reserve levels remain constant. And as it relates to reserve levels on a weighted basis, where reserved for an unemployment rate a little below 5% by the end of 2025, and that compares to the most recent 4.1% rate reported. On Slide 12, we highlight the credit quality metrics for both consumer and commercial portfolios. And there's nothing really noteworthy here that I want to highlight on this page. So let's move to the various lines of business starting on Slide 13 with Consumer Banking. That business made nearly $11 billion or 40% of the company's earnings in 2024. In the fourth quarter, Consumer Banking generated $10.6 billion in revenue and $2.8 billion in net income. Both grew modestly from the fourth quarter of '23 as fee improvement for card and service charges is now being complemented by the growth in NII. Consumer Banking continued to deliver strong organic growth with high-quality accounts and engage clients and they achieved a new record of client experience scores in December. The organic growth activity noted on Slide 3 includes more than 200,000 net new checking accounts, which now takes us to six years' worth of quarter-after-quarter growth. And we show another strong period of card openings and investment account growth. Investment balances grew 22% to $518 billion with full year flows of $25 billion and market improvement throughout the year. Expense rose 8% as we continued investments in our business. The biggest story in consumer this quarter is deposits because these are the most valuable deposits in the franchise. And in the last six months, we believe we've seen the floor begin to form after several periods of slowing decline. Consumer Banking deposits appear to have bottomed in mid-August at around $928 billion and ended the year at $952 billion on an ending basis. Looking at averages, you can see then the deposits grew $4 billion from the third quarter to $942 billion, all while our rate paid declined to 64 basis points. Finally, as you can see in the appendix, page 26, digital adoption and engagement continue to improve and customer satisfaction scores rose to record levels, illustrating our client appreciation of enhanced capabilities from these investments. On Slide 14, we move to Wealth Management, where the business had a very profitable year, generating $4.2 billion in earnings from nearly $23 billion in revenue. In 2024, our Merrill Lynch and Private Bank advisers added another 24,000 net new relationships. And the professionalism of these teams earned them numerous best-in-class industry rankings as you can see on Slide 27 in the appendix. With a continued increase in banking product usage from our investing clients, the diversity of revenue in the wealth business continues to improve. The number of GWIM clients that now have banking products with us continues to grow. And at this point, it represents more than 60% of our clients. Importantly, about 30% of our revenue remains in net interest income, which complements the fees earned in our advice model and those have also grown. Net income rose 15% from the fourth quarter of '23 to nearly $1.2 billion. In the fourth quarter, we reported revenue of $6 billion, growing 15% over the prior year and led by 23% growth in asset management fees. While expenses were up year-over-year, they grew slower than revenue creating the operating leverage in the business. Business had a 26% pretax margin and generated a strong return on capital of 25%. Average loans were up 4%, driven by growth in custom lending, securities-based lending and a pickup in mortgage lending. Deposits grew 2% from the third quarter, and the teams were quite disciplined on pricing of those deposits. Both Merrill and the Private Bank continued to see strong organic growth. And that helped to produce excellent asset under management flows of $79 billion this year, reflecting a good mix of new client money, as well as existing clients putting money to work. We also want to draw your attention to the continued digital momentum that you'll find on Slide 28. Because, for example, three quarters of Merrill bank and brokerage accounts were opened digitally this quarter. Slide 15 shows the Global Banking results and this business generating $8.1 billion or 30% of the company's earnings in 2024, and it continues to be the most efficient business in the company at less than 50% efficiency ratio. The business saw a nice rebound in investment banking fees in 2024, which we expect to continue in 2025. In Q4, Global Banking produced earnings of $2.1 billion. Pretax pre-provision results were flat year-over-year as improved investment banking fees offset lower NII and higher expense. The total earnings were down 13% year-over-year, driven by higher provision expense that came as a result of prior period reserve release. Investment banking fees were $1.7 billion in Q4, growing 44% year-over-year. This was led by mergers and acquisitions. We also saw strength across debt capital markets fees mostly in leverage finance and in equity capital markets fees and we finished the year strong, maintaining our number three investment banking fee position. The fourth quarter saw a strong momentum as the election results provided a lift to sentiment for a more pro-business climate and expectations for more deals to be completed. Expense in this business increased 6% year-over-year, driven by the 13% growth in non-interest income and continued investments in people and technology. The balance sheet saw good client activity, and it was muted somewhat by the strength of the U.S. dollar. Year-over-year flatness in Global Banking loans includes this foreign exchange impact and a $6 billion decline in commercial real estate from paydowns. Otherwise, loans in Global Banking were up 2%. Deposits have been growing for many quarters now with our commercial and corporate clients. And total global banking deposits are now up 10% year-over-year, reaching a new record. So we're seeing strong growth across all the categories from our corporate and commercial clients all the way from the larger end the business banking on the lower end. And we also saw a 10% growth in our international deposits. Turning to Global Markets on Slide 16, I want to focus my comments on results excluding DVA as we normally do. Our team continued their impressive streak of strong revenue and earnings performance. They achieved operating leverage, and they continue to deliver a good return on capital. For the year, record sales and trading results of nearly $19 billion grew 7% from 2023 and they've been growing consistently now on a year-over-year basis for almost three years. This led to $5.7 billion in full-year profits and represents more than 20% of the company's full-year results. In the fourth quarter, earnings of $955 million grew 30% year-over-year. Revenue and again, this is ex DVA, improved 15% from the fourth quarter of '23, as both Sales & Trading and Investment Banking fees improved nicely year-over-year. Focusing on sales and trading ex DVA, revenue improved 10% year-over-year to $4.1 billion. This is the first time we've recorded more than $4 billion in our Q4 results and it included Q4 records for both FICC and Equities. FICC grew 13%, while equities improved 6%, compared to the fourth quarter '23. FICC benefited from tighter credit spreads as well as increased volatility in interest rates, while equities benefited from increased activity around the U.S. election. Year-over-year expenses were up 7% on revenue improvement and our continued investment in the business. And then on Slide 17, you can see all other with a loss of $407 million in the fourth quarter. We spoke earlier about the fourth quarter \u201823 charges for BSBY and the FDIC special assessment charge. Their reversal impacts the comparisons on revenue, expense and net income in this segment. Otherwise, there really isn't anything significant to report here. Our effective tax rate for the quarter was 6%, and excluding discrete items and the tax credits related to investments in renewable energy and affordable housing, the effective tax rate would have been approximately 26%. Looking forward, we expect the tax rate for 2025 to be in a range of 11% to 13%. And this just includes our expectation for higher expected earnings in 2025 and relatively stable tax credits. Finally, this quarter, on page 18, we thought it was important to summarize some of the guidance points we talked through this morning, and we hope you'll find this page helpful. So in summary, we're looking for a strong growth in NII, and we'll look to both continue important investments in the franchise and drive operating leverage as we grow throughout the year. We aren't expecting much movement around credit based on a pretty solid economic outlook. And we remain with a very strong balance sheet with excess capital that we can deploy to grow the business and deliver back to shareholders as appropriate. So with that, I'll stop there. I thank everybody, and we'll open it up for Q&A.","evidence_gemma_new":"net income","evidence_llama_3_3":null,"evidence_qwen_3_30b":"adjusted for those two items net income","gemma_new_max":5900000000.0,"gemma_new_min":5900000000.0,"llama_3_3_max":null,"llama_3_3_min":null,"qwen_3_30b_max":5900000000.0,"qwen_3_30b_min":5900000000.0}
{"symbol":"BAC","year":2023,"quarter":4,"date":"2023-Q4","chunk_id":2,"sub_chunk_id":0,"centroid_label":"net income","agreed_value":26500000000.0,"count":2,"chunk":"Brian Moynihan: Thank you, and Happy New Year to everyone. Good morning. Thank you for joining us. I'm starting on Slide 2 of the earnings presentation. Here at Bank of America, our teammates finished 2023 with a solid fourth quarter. Reported EPS was $0.35, but that included two notable items that Alastair will describe in more detail. Adjusted for those two items, net income was $5.9 billion after tax or $0.70 per share. Before Alastair covers quarter four results, I want to take a moment and briefly review the 2023 full year results. Our team at Bank of America delivered strong profits for shareholders across a challenging year, navigating a slowing economy, geopolitical tensions, bank failures, and the impact of a rate hike of historic speed. We began the year with a pretentious aura as economists predicted a mild recession within the year. Instead, 2023 showcased economic resilience led by US consumers despite higher interest rates. We ended 2023 with economists projecting the Fed has successfully steered the US economy to a soft landing. In regards to the economy, during 2023, we consistently made a few points regarding what we were seeing in our customer data here at Bank of America. First, the year-over-year growth rate in spending from the beginning of '23 started declining. And it went from, in the early part of '23 over the early part of '22 from a 9% to 10% growth rate to this quarter's 4% to 5% growth rate and that's where it stands here early in 2024. You can see that on Page -- Slide 29 in the appendix. That growth rate, 4% to 5%, is more consistent with a 2% GDP environment and a lower inflation environment. Second, the point we've made is that our consumer deposit balances at Bank of America remained 30% higher than pre-pandemic. We saw the deposit balance of consumer accounts move lower this quarter, but are now seeing more differentiation in behavior. In the lower average balance size accounts, the balances in there still remain at multiples of pre-pandemic levels, nearly three years past last stimulus. They are modestly declining. The deposit outflows you've seen in consumer have largely been driven by the higher-balance accounts who've moved their excess balances into the markets to seek higher yields. We capture those with our leading wealth platform. Third, the consumers of Bank of America have had access to credit and are borrowing responsibly. The balance sheets are generally in good shape. And while impacted by higher rates, remember, many of them have fixed-rate mortgages and remain employed. So they've shown great resilience. Let's move to discussion of full year 2023 earnings. We reported net income of $26.5 billion after tax, which includes $2.8 billion after tax for notable quarter four items. Adjusted for those items, adjusted net income was $29.3 billion after tax. Earnings per share were $3.42 and that grew 7% over 2022. On that adjusted basis, we generated a 90 basis point return on assets and a 15% return on tangible common equity. The year 2023 was characterized by a record organic customer activity, record digital customer engagement levels and satisfaction scores, strong but slowing NII during the course of the year, strong sales and trading up 7% year-over-year, operating leverage reflected good expense discipline, solid asset quality and a strong capital and liquidity position. All this was helped by the years of Bank of America's assiduous dedication to responsible growth. This helped us bring our headcount and expense down every quarter during 2023, in line with what we told you to expect early this year -- early last year. Adjusted full year revenue grew 5% on the back of 9% NII improvement and strong asset management fees and sales and trading results. We achieved 170 basis points of operating leverage in 2023 as heightened quarterly expense levels were driven lower throughout the year even as the investments in growth continued. Net charge-offs moved higher through the year off the historic lows, but they still compare very favorably against historic averages. One last point worth noting is the level of deposits. If you think back as we ended 2022 and entered 2023, the great debate was how much the pandemic surge in deposits would dissipate. But looking today, we ended 2023 with $1.924 trillion of deposits, only $7 billion less than we had at year-end '22 and 4% higher than the trough in May of this year. The total deposits -- the total average deposits in the fourth quarter remained 35% higher than they did in the quarter four of 2019. This has been tremendous works by our teams to drive our industry-leading market share, actually outperforming the industry across the four-year period, and again this year. While the economy appears to continue to normalize and rates continue to have some volatility, one thing that remains important is driving that organic growth. This client activity sticks to the ribs is what we want to spend a moment as I wrap up. On Slide 3, we highlight some of the successes in organic activity in our results for the year. Bank of America team is a powerful engine that's fueling results across all our businesses. I would note a couple of examples to try and connect the importance to our financials. It's easy to use the consumer business as an example. In consumer, we added 600,000 net new checking accounts during the year 2023. The fourth quarter of 2023 represents the 20th straight quarter of net addition of head -- of checking accounts. The quality is what drives the checking account balances. On average, 67% of the deposit balances have been with us for customers who have been with us for more than 10 years. 92% of the consumer checking accounts are primary, meaning they're the core client household account. 60% of our checking accounts use their debit card. They average 400 transactions per account each year, showing how engaged they are. They have traditionally opened savings accounts 20% to 25% of the time within a few months of opening their checking accounts. Thinking about those new accounts, at opening those new checking accounts opened last year, bring in about $4,000 of balances. Then they deepen over the next subsequent months to two times that amount. New saving accounts come with those accounts, starting with about $8,000 and doubling over time. From the total new checking accounts we opened just in 2023, those customers have opened nearly 0.5 million credit card accounts with us so far in 2023. Historically, we've seen on average these customers more than doubled those card balances within a year. Those card accounts on average have spent about $7,000 per year, of which a portion will carry a balance. Now, there's always additional opportunity to further serve our clients and to continue to meet them where they are. In addition to the industry-leading digital platforms that we have, we have opened 50 new financial centers in 2023. More than half of those were in our expansion markets. We've expanded our presence during 2023 to 10 markets, including our latest opening in Omaha. In our global wealth management team, we added more than 40,000 net new relationships across Merrill and the Private Bank. Our advisors opened 150,000 new banking accounts for wealth management clients, showing the completeness of the relationship approach. The average Merrill account is over $1 million at opening. The average private bank account is multiples of that. As you can see on the slide, we now manage $5.4 trillion of client balances across loans, deposits, investments of our consumer clients, both consumer and GWIM. We saw $84 billion of flows into those accounts last year. As we switch to Global Banking on the lower-left-hand side of the slide, we added clients to increase the number of products per relationship. Just like in consumer, we have seen good growth in customers seeking the benefits of our physical and digital capabilities, but most importantly, our talent relationship managers who provide financing solutions, treasury services, strategic advice for clients with local and global needs. We added roughly 2,500 new commercial and business banking clients this year. That is more than twice what we added in 2022. We look forward to continue to drive with those -- grow with those clients in '24 and add even more. This capitalized on a multi-year build of our relationship management team in the Global Banking businesses, especially in product expansion also, especially in the global transaction services area and mid-market investment bank. As we think about global markets, we continue to see strong performance from our team with 7% year-over-year revenue growth, the strongest we've had in many years. We see digital tools our customers have access to across the board, helping us enable this activity at lower costs. Our normal digital banking slides are once again included for your reference on Pages 21, 24 and 26. In summary, this was a good quarter. We delivered our third quarter of expense declines. We saw NII outperform what we expected when we talked to you on the last earnings call. We continue to manage well through the transition and the rate structure. We saw deposits grow this quarter. And we look forward with a strong capital base, strong liquidity and growing loans and deposits to a greet 2024. I want to thank my teammates for what they did for us in 2023, and we all know we're off to a nice start for '24. With that, I'll turn it over to Alastair.","evidence_gemma_new":"net income","evidence_llama_3_3":null,"evidence_qwen_3_30b":"net income","gemma_new_max":26500000000.0,"gemma_new_min":26500000000.0,"llama_3_3_max":null,"llama_3_3_min":null,"qwen_3_30b_max":26500000000.0,"qwen_3_30b_min":26500000000.0}
{"symbol":"BAC","year":2024,"quarter":1,"date":"2024-Q1","chunk_id":2,"sub_chunk_id":0,"centroid_label":"net income","agreed_value":6700000000.0,"count":2,"chunk":"Brian Moynihan: Thank you Lee, and good morning to all of you, and thank you for joining us. I am starting on Slide 2 of the earnings presentation. We once again delivered a strong set of results in quarter one. We reported net income of $6.7 billion after tax and EPS of $0.76. This included the additional expense accrual for the industry special assessment by the FDIC to recover losses from the failures of Silicon Valley Bank and Signature Bank. This lowered our quarter one EPS by $0.07. Excluding that expense, net income was $7.2 billion and EPS was $0.83 per share in quarter one. Alastair is going to walk you through details of the quarter momentarily, but first let me give you a few thoughts on our performance. We delivered good improvement in our fee-based business, driven both by continued organic growth and good market conditions. Investment banking saw a nice rebound this quarter. We delivered nearly $1.6 billion in investment banking fees and grew 35% from the first quarter 2023. Matthew Koder and the team have done a great job delivering market share growth. In addition, our results reflect the benefits of investments made in our middle market investment banking teams and dual coverage teams. Matthew has utilized [indiscernible] power wisely to grow our middle market team from 15 bankers in 2018 across a dozen cities, to more than 200 bankers in twice as many cities today. Both groups work with our commercial bankers and wealth management advisors in those cities to deliver for our clients. Investment and brokerage services revenue across Merrill and the private bank grew 11% year-over-year in quarter one to nearly $3.6 billion. Continued investments in our advisor training programs and digital delivery for our clients as well as positive market helped us deliver strong revenue. Asset under management flows were $25 billion in the quarter. Sales and trading excluding DBA delivered its eighth consecutive quarter of year-over-year revenue improvement. At $5.2 billion, this is the highest first quarter result in over a decade. We have allocated more balance sheet invested in talent to build our [indiscernible] for the last five years in this business. Those investments plus the intensity of the teams under Jimmy DeMare\u2019s leadership have resulted in good momentum and market share improvement. From a balance sheet perspective, we entered the quarter expecting modest moves in loan growth and a decline in deposits - those were our expectations. What we actually delivered was growth in ending deposits of more than $20 billion. Ending loans were down modestly due to the expected credit card seasonality, otherwise loans were pretty stable. This balance sheet performance along with our continued pricing discipline allowed us to deliver better than expected NII performance. We told you last quarter that we expected NII to decline from the fourth quarter of 2023 to the first quarter of 2024, a decline of about $100 million to $200 million. We actually reported today NII of $14.2 billion - that was $100 million higher than quarter four, exceeding our guidance. We continue to deliver strong expense management. Year-over-year expenses adjusted for the FDIC assessment was up a little less than 2% - that compares to the 4%-plus inflation rate. We also continued to invest in our company while managing those expenses. We had several categories with stronger fee-based revenue in the first quarter this year. This drove higher formulaic compensation and processing costs of the increased activity. Fees and commissions were up 10% year-over-year. We are happy to pay for that revenue and deliver more earnings to the bottom line because of it. How did we do all that and hold expenses under the inflation rate? Well, we remain focused on three primary drivers at Bank of America. First, our operational excellence platform continues to deliver and improve processes. These savings from that growth help fund the future growth in the company and lower the risk. Second, we managed headcount as we eliminated work. Recall, we noted an expectation in January of last year that our headcount would be down throughout the year. Our headcount at the end of first quarter 2024 was down by more than 4,700 people from the first quarter 2023. It declined 650 people just from the end of 2023. The digitization activity is also driving ongoing expense cost savings, customer retention and market share improvement, driving across all three factors. It also supports the ever-increasing volumes of client activity with little increased cost. I would highlight our continued capital strength with common equity Tier 1 capital of $197 billion. That amount of capital is $31 billion over the current regulatory minimums for our company. That capital has allowed us to both support our clients and return $4.4 billion to shareholders this quarter in share repurchases and dividends. Let me highlight a few points on our organic growth before I pass it over to Alastair. Now I\u2019m turning to Slide 3. You can see on Slide 3 the highlights of quarter one successful organic activity across the businesses. We continue to invest and enhance our digital platforms. We provide our customers with convenient and secure banking experiences. By leveraging our technology and continuous investment in that technology and putting customers at the center of everything we do, we have successfully deepened our relationships and expanded our customer base across all our businesses. In consumer, we had added 245,000 net new checking accounts this quarter. This completes 21 straight quarters of net additions. Dean Athanasia, Aron Levine and Holly O\u2019Neill helped drive that business for us and continue to perform well, driving strong performance across our consumer franchise. These checking balances continue to drive the performance of our consumer deposits. These checking additions are important for many other reasons. On average, 68% of our deposit balances have been with us for more than 10 years; 92% of the customer checking accounts are primary checking accounts in the household, meaning that they\u2019re the core operating account for the household for their financial lives. When we on-board a client, we start a long-term valuable relationship. About 60% of our checking accounts customers use a debit card and on average they do about 400 transactions per year on that card. The new checking accounts have traditionally opened savings accounts, about 25% of the time within a few months of opening that checking account. Opening a new checking account on average brings about $4,000 in balances below our averages, but that continues to grow and within a year, it\u2019s two times that amount. Likewise when we open a new savings account, it on average brings about $7,000 in balances. This also deepens by about two times during the year. Investment relationships and credit card account openings continued to be strong in the first quarter as well. While we believe some of these statistics are best in class, rest assured there are plenty opportunities for further growth in our franchise and our company. As we think about our global wealth team led by Eric Schimpf, Lindsay Hans and Katy Knox, that team added 7,300 net new wealth relationships with Merrill and the private bank. Our advisors opened 29,000 new bank accounts in the quarter with our customers, deepening their relationships. More than 60% are investing clients in Merrill and 90% of our private banking clients now have a core banking relationship with us. In addition, across our wealth spectrum we saw $60 billion in total flows over the last year. As you can see on this slide, we now manage more than $5.6 trillion in total client balances across loans, deposits and investments, and consumer and wealth management. When we move to global banking, we added more new relationships in this quarter than we did in last year\u2019s first quarter. We also increased the number of solutions per relationship with preexisting clients. Just like in our consumer business, we have seen good growth in customers seeking the benefits of both our physical and our online capabilities and also the care of our talented relationship managers, who provide financing solutions and advice for our clients with global needs. A couple other points I\u2019d make on our digital success. Erica, our virtual banking assistant, reached a key milestone of more than 2 billion interactions since its introduction about six years ago. It took four years to reach 1 billion interactions; it took just 18 months to reach the second billion. In August, we extended Erica\u2019s reach and launched Erica in our global treasury services business and CashPro. Erica has resolved 43% of the CashPro chat inquiries automatedly, demonstrating more and more clients are able to self-solve. This is a great example of best practices being shared across the scale of our company. Second, as an example of our digital success, Zelle continues to grow. It wasn\u2019t long ago that we noted that the number of Zelle transactions in a quarter had surpassed the number of checks written. Shortly after that, Zelle transactions reached two times the number of checks written. This quarter, Zelle transactions have now passed the combined number of checks written plus the amount of cash withdrawals from tellers and from ATMs. That is a rapid adoption and represents continued cost savings and convenience and security for the customers. These stats and others are included in our quarterly activity for our digital banking progress. That\u2019s included in Slides 20, 22 and 24. I encourage you to read them. They show our market-leading efforts representing billions of dollars of our investment over the years, and we are continuing to drive growth with expense growth under control. The solid earnings results achieved this quarter are a testament to the dedication and talent of our 212,000 people who work here and deliver for our customers every day. I thank them for another great quarter. With that, I\u2019ll turn it over to Alastair.","evidence_gemma_new":null,"evidence_llama_3_3":"net income quarter one","evidence_qwen_3_30b":"net income EPS quarter one","gemma_new_max":null,"gemma_new_min":null,"llama_3_3_max":6700000000.0,"llama_3_3_min":6700000000.0,"qwen_3_30b_max":6700000000.0,"qwen_3_30b_min":6700000000.0}
{"symbol":"BAC","year":2024,"quarter":1,"date":"2024-Q1","chunk_id":2,"sub_chunk_id":0,"centroid_label":"net income","agreed_value":7200000000.0,"count":2,"chunk":"Brian Moynihan: Thank you Lee, and good morning to all of you, and thank you for joining us. I am starting on Slide 2 of the earnings presentation. We once again delivered a strong set of results in quarter one. We reported net income of $6.7 billion after tax and EPS of $0.76. This included the additional expense accrual for the industry special assessment by the FDIC to recover losses from the failures of Silicon Valley Bank and Signature Bank. This lowered our quarter one EPS by $0.07. Excluding that expense, net income was $7.2 billion and EPS was $0.83 per share in quarter one. Alastair is going to walk you through details of the quarter momentarily, but first let me give you a few thoughts on our performance. We delivered good improvement in our fee-based business, driven both by continued organic growth and good market conditions. Investment banking saw a nice rebound this quarter. We delivered nearly $1.6 billion in investment banking fees and grew 35% from the first quarter 2023. Matthew Koder and the team have done a great job delivering market share growth. In addition, our results reflect the benefits of investments made in our middle market investment banking teams and dual coverage teams. Matthew has utilized [indiscernible] power wisely to grow our middle market team from 15 bankers in 2018 across a dozen cities, to more than 200 bankers in twice as many cities today. Both groups work with our commercial bankers and wealth management advisors in those cities to deliver for our clients. Investment and brokerage services revenue across Merrill and the private bank grew 11% year-over-year in quarter one to nearly $3.6 billion. Continued investments in our advisor training programs and digital delivery for our clients as well as positive market helped us deliver strong revenue. Asset under management flows were $25 billion in the quarter. Sales and trading excluding DBA delivered its eighth consecutive quarter of year-over-year revenue improvement. At $5.2 billion, this is the highest first quarter result in over a decade. We have allocated more balance sheet invested in talent to build our [indiscernible] for the last five years in this business. Those investments plus the intensity of the teams under Jimmy DeMare\u2019s leadership have resulted in good momentum and market share improvement. From a balance sheet perspective, we entered the quarter expecting modest moves in loan growth and a decline in deposits - those were our expectations. What we actually delivered was growth in ending deposits of more than $20 billion. Ending loans were down modestly due to the expected credit card seasonality, otherwise loans were pretty stable. This balance sheet performance along with our continued pricing discipline allowed us to deliver better than expected NII performance. We told you last quarter that we expected NII to decline from the fourth quarter of 2023 to the first quarter of 2024, a decline of about $100 million to $200 million. We actually reported today NII of $14.2 billion - that was $100 million higher than quarter four, exceeding our guidance. We continue to deliver strong expense management. Year-over-year expenses adjusted for the FDIC assessment was up a little less than 2% - that compares to the 4%-plus inflation rate. We also continued to invest in our company while managing those expenses. We had several categories with stronger fee-based revenue in the first quarter this year. This drove higher formulaic compensation and processing costs of the increased activity. Fees and commissions were up 10% year-over-year. We are happy to pay for that revenue and deliver more earnings to the bottom line because of it. How did we do all that and hold expenses under the inflation rate? Well, we remain focused on three primary drivers at Bank of America. First, our operational excellence platform continues to deliver and improve processes. These savings from that growth help fund the future growth in the company and lower the risk. Second, we managed headcount as we eliminated work. Recall, we noted an expectation in January of last year that our headcount would be down throughout the year. Our headcount at the end of first quarter 2024 was down by more than 4,700 people from the first quarter 2023. It declined 650 people just from the end of 2023. The digitization activity is also driving ongoing expense cost savings, customer retention and market share improvement, driving across all three factors. It also supports the ever-increasing volumes of client activity with little increased cost. I would highlight our continued capital strength with common equity Tier 1 capital of $197 billion. That amount of capital is $31 billion over the current regulatory minimums for our company. That capital has allowed us to both support our clients and return $4.4 billion to shareholders this quarter in share repurchases and dividends. Let me highlight a few points on our organic growth before I pass it over to Alastair. Now I\u2019m turning to Slide 3. You can see on Slide 3 the highlights of quarter one successful organic activity across the businesses. We continue to invest and enhance our digital platforms. We provide our customers with convenient and secure banking experiences. By leveraging our technology and continuous investment in that technology and putting customers at the center of everything we do, we have successfully deepened our relationships and expanded our customer base across all our businesses. In consumer, we had added 245,000 net new checking accounts this quarter. This completes 21 straight quarters of net additions. Dean Athanasia, Aron Levine and Holly O\u2019Neill helped drive that business for us and continue to perform well, driving strong performance across our consumer franchise. These checking balances continue to drive the performance of our consumer deposits. These checking additions are important for many other reasons. On average, 68% of our deposit balances have been with us for more than 10 years; 92% of the customer checking accounts are primary checking accounts in the household, meaning that they\u2019re the core operating account for the household for their financial lives. When we on-board a client, we start a long-term valuable relationship. About 60% of our checking accounts customers use a debit card and on average they do about 400 transactions per year on that card. The new checking accounts have traditionally opened savings accounts, about 25% of the time within a few months of opening that checking account. Opening a new checking account on average brings about $4,000 in balances below our averages, but that continues to grow and within a year, it\u2019s two times that amount. Likewise when we open a new savings account, it on average brings about $7,000 in balances. This also deepens by about two times during the year. Investment relationships and credit card account openings continued to be strong in the first quarter as well. While we believe some of these statistics are best in class, rest assured there are plenty opportunities for further growth in our franchise and our company. As we think about our global wealth team led by Eric Schimpf, Lindsay Hans and Katy Knox, that team added 7,300 net new wealth relationships with Merrill and the private bank. Our advisors opened 29,000 new bank accounts in the quarter with our customers, deepening their relationships. More than 60% are investing clients in Merrill and 90% of our private banking clients now have a core banking relationship with us. In addition, across our wealth spectrum we saw $60 billion in total flows over the last year. As you can see on this slide, we now manage more than $5.6 trillion in total client balances across loans, deposits and investments, and consumer and wealth management. When we move to global banking, we added more new relationships in this quarter than we did in last year\u2019s first quarter. We also increased the number of solutions per relationship with preexisting clients. Just like in our consumer business, we have seen good growth in customers seeking the benefits of both our physical and our online capabilities and also the care of our talented relationship managers, who provide financing solutions and advice for our clients with global needs. A couple other points I\u2019d make on our digital success. Erica, our virtual banking assistant, reached a key milestone of more than 2 billion interactions since its introduction about six years ago. It took four years to reach 1 billion interactions; it took just 18 months to reach the second billion. In August, we extended Erica\u2019s reach and launched Erica in our global treasury services business and CashPro. Erica has resolved 43% of the CashPro chat inquiries automatedly, demonstrating more and more clients are able to self-solve. This is a great example of best practices being shared across the scale of our company. Second, as an example of our digital success, Zelle continues to grow. It wasn\u2019t long ago that we noted that the number of Zelle transactions in a quarter had surpassed the number of checks written. Shortly after that, Zelle transactions reached two times the number of checks written. This quarter, Zelle transactions have now passed the combined number of checks written plus the amount of cash withdrawals from tellers and from ATMs. That is a rapid adoption and represents continued cost savings and convenience and security for the customers. These stats and others are included in our quarterly activity for our digital banking progress. That\u2019s included in Slides 20, 22 and 24. I encourage you to read them. They show our market-leading efforts representing billions of dollars of our investment over the years, and we are continuing to drive growth with expense growth under control. The solid earnings results achieved this quarter are a testament to the dedication and talent of our 212,000 people who work here and deliver for our customers every day. I thank them for another great quarter. With that, I\u2019ll turn it over to Alastair.","evidence_gemma_new":null,"evidence_llama_3_3":"net income quarter one","evidence_qwen_3_30b":"net income EPS quarter one","gemma_new_max":null,"gemma_new_min":null,"llama_3_3_max":7200000000.0,"llama_3_3_min":7200000000.0,"qwen_3_30b_max":7200000000.0,"qwen_3_30b_min":7200000000.0}
{"symbol":"BAC","year":2024,"quarter":2,"date":"2024-Q2","chunk_id":2,"sub_chunk_id":0,"centroid_label":"net income","agreed_value":6900000000.0,"count":3,"chunk":"Brian Moynihan: Thank you, Lee, and good morning and thank all of you for joining us today. Before I begin today, I just want to reflect a second on the horrible events this weekend. We at Bank of America are clear that there's no place for political violence in our great country, and we continue to wish the former President Trump a speedy recovery. And our thoughts, of course, go out to the victims and their families and others impacted by this terrible event. With that, let's turn attention to the results for the second quarter of 2024 at Bank of America Corporation. This quarter, we achieved success in a number of areas, underscoring the benefits of our diversity and the dedication of our team to deliver responsible growth. Our organic growth engine continues to add customers and activity to all our businesses, even as we see the drop in net interest income this quarter. I'm starting on slide two. Our net income for the quarter was $6.9 billion after tax or $0.83 in diluted EPS. Attesting to the balance in our franchise, the earnings were split evenly, half in our consumer and GWIM businesses, which serve people, and the other half in our institutional-focused business global banking and markets. We grew revenue from the second quarter of 2023 as improvement in non-interest income overcame the decline in net interest income. Fees grew 6% year-over-year and represented 46% of total revenue in the quarter. Our strong fee performance was led by a 14% improvement in asset management fees in our wealth management businesses. We grew investment banking fees 29% year-over-year and saw sales and trading revenue increase 7%. Global Markets had its 9th consecutive quarter of year-over-year growth in sales and trading revenue, a good job by Jimmy DeMare and his team. Card and service charge revenue also grew by 6% year-over-year in our Consumer business. Much of this fee growth is a result of our intensity around organic growth, and is a testament to the diversity of our operating model. Now on to slide three. Organic growth has been driven by several key factors. First, we focus on our customers. We continue to place them at the center of everything we do. Consumer led the way in delivering solid organic growth with high-quality accounts and engaged clients. For the 22nd consecutive quarter, we had significant net new consumer checking accounts. We expanded our customer base and our market share. Specifically, we added 278,000 net new checking accounts this quarter, which brings our first six months of 2024 to more than 500,000. In wealth management, we added another 6,100 new relationships this quarter. In our commercial businesses, we added 1,000s of small businesses and 100s of commercial banking relationships. This has led to now managing $5.7 trillion in client balances, loans, deposits, and investments across the consumer and wealth management client segments. In those areas, we saw flows of $58 billion in the past four quarters. Our emphasis on personalized financial solutions and superior customer service has strengthened customer loyalty, attracted new clients across all our businesses. Our focus on providing liquidity and risk management solutions to our institutional clients positions to continue to gain more share of the wallet as well. Second, we continue to deliver innovative digital solutions. One of the primary contributors of both attracting and retaining customers to our platforms is our digital banking capabilities for our clients across all the businesses. Our fully integrated consumer banking investment app drives the utility for our customers across their investment and consumer accounts. Our use of stats are strong proof points. Our second language capabilities in our consumer businesses further enhance our customers' capabilities. You can see the continued digital growth in the slides on pages 26, 28, and 30 in the appendix. A couple highlights. Our consumer mobile banking app now serves more than 47 million active users. They logged in 3.5 billion times this quarter. We also continue to see more sales through the use of our digital properties. Digital sales represented 53% of our total sales in the past quarter in our consumer businesses. 23 million consumers are now using Zelle. They send money on Zelle at nearly 2.5 times the rate they write checks. And, in fact, more Zelle transactions -- send transactions take place than a combination of customer ATM transactions, cash withdrawals, and tellers. Simply put, Zelle has become a dominant way to move money. In our wealth management business, we are seeing more banking accounts being opened to complement the investment business those clients do with us. Importantly, these clients are also recognizing the ease of our digital banking capability. 75% of our new accounts and our Merrill teammates were open digitally. 87% of our global banking clients also are digitally active. We have innovated and significantly streamlined service requests by enabling clients to directly initiate and track transaction inquiries within our awarded CashPro platform, using AI to accomplish that. Third, we continue to make core strategic investments in our businesses. We're not complacent with the success you see on this page. We continue to strategically invest in our core businesses. A few examples, while we have the leading retail deposit share in America, we continue to invest and have opened 11 new financial centers this quarter -- in this first-half of the year and renovated another 243. This is an investment in both our expansion markets and our growth markets. In wealth management, we continue to invest in our advisor development program. It's grown to 2,300 teammates, allowing us to continuously add more than -- teammates to our 18,000 strong best-in-class financial advisory force across all our wealth management businesses. We're also adding teams of experienced advisors strategically in areas across the country. In our banking teams, we continue to add to our regional investment banking team. We now have more than 200 regional bankers across the country to better serve our commercial clients, and they complement our industry coverage to our corporate clients. In our global markets business, we continue to extend balance sheet to our clients in adding expertise and talent to continue to lead our market share improvements seen over the last several years. We also have increased our technology initiatives and expect to spend nearly $4 billion on technology initiatives this year. We have focused projects around artificial intelligence enhancements with both clients and our teammates. A recent example of our use of AI is our advisor and client insights tool. We've delivered more than 6 million insights here today to our financial advisors, providing them proactive reasons to engage our clients. AI has moved from cost savings ideas to enhancing the quality of our customer interactions. Fourth, organic growth is driving integrated flows across our business. We invest heavily in each line of business that compete in the markets based on their particular customer segment. But importantly, we also invest across our lines of business to knit them together and gain market share in the local markets. It's a differentiated advantage for us, our banking leadership position across our businesses and our nationwide franchise. For example, we leverage our franchise by connecting business customers with wealth management teams. Our teams across all our businesses have made 4 million referrals to other businesses in the first six months of this year. Next, we drive efficiency and effectiveness, and that's through our operational excellence platform. We continue to invest heavily in the future of our franchise and growth, while we also have to manage expenses day-to-day. Our focus on operational excellence has enabled us to hold our expense growth up to 2% year-over-year, well below the inflation rates. We continue to work to achieve operating leverages as NII stabilizes and begins to grow again. As you look at it now, Alistair will explain later, a fair portion of the year-over-year increase in expense is due to the formulaic incentives of wealth management due to the peak growth of that business. And last, our capital strength allows us to deliver for all our stakeholders. Our capital remains strong as we held our CET1 ratio at 11.9% this quarter. We grew loans, increased our share repurchases to $3.5 billion and paid $1.9 billion in dividends. Average diluted shares dropped below 8 billion shares outstanding. In addition, we also announced our intent to increase our quarterly dividend 8% upon board approval. Note that with 11.9% CET1 ratio, we remain in a solid excess capital position, both above the current regulatory requirements and the increased requirement to 10.7% beginning in October as a result of the recent CCAR exam. Let's turn to slide four. A couple things to note here. First, we've noted for several quarters that the second quarter NII would be the trough for this rate cycle. We expect NII to grow in the third quarter and fourth quarter of this year. Alistair is going to provide you some points in detail about the path forward. One of the important contributors to that change is deposit behaviors of our customers. On slide four, you'll note that average deposits grew 2% year-over-year and increased modestly linked quarter. The second quarter, in reality, is typically a heavy outflow quarter. We have a lot of customers who pay a lot of taxes in that quarter. Quarter-over-quarter increases in rates paid continue to slow again this quarter across all businesses except for wealth management. And we show you that on this page, slide four, by line of business. While wealth business deposit rates have moved higher with continued rotation, we expect those rates to begin to stabilize and the rate of quarterly change to decrease going forward. Turning to slide five, in previous calls, many of you asked questions or commented upon the question about consumer net charge-offs and when would they stabilize in the second-half of 2024. That expectation we have remains unchanged as well. This quarter's net charge-offs were 59 basis points. And for context, this is a stabilization of the rate. I would just remind you that prior to this quarter, I have to go all the way back to 2014 to see a charge-off rate of that high. And that's near when we were still emerging from the financial crisis. On slide four, we highlight the 30 and 90-day-plus credit card delinquency trends, which showed delinquencies have plateaued for the second consecutive quarter. This should lead to stabilized net credit losses in credit card in the second-half of the year. At the bottom of the page, note a couple of facts. First, on the payment rates. This is the rate of paydown on balances in a given month remain 20% above index to the pre-pandemic levels, even while our card customers have plenty of capacity to borrow. And importantly, because we're relation-based businesses, look at the right-hand slide at the bottom of page five. There you can see our deposit investment balances of our customers, who also have a card with us, remain 25% above their pre-pandemic levels, illustrating continued health of these customers. So if you think about consumer credit, the card charge-offs drive it, and they flattened out in terms of delinquencies, and we expect an improvement in the second-half. With regard to commercial real estate, our usual CRA credit exposure slide is included in our appendix. We continue to aggressively work through our loans in our modest CRA office portfolio. We saw a decrease in all the categories, a decrease in reservable criticized loans, a decrease in NPLs, and a decrease in net charge-offs. This supports our previous expectation that net charge-offs in the second-half of 2024 will be lower than the first-half of 2024. Our second quarter performance highlights Bank of America's ability to generate strong, sustainable growth through a combination of customer-centric strategies, innovation, strategic investments, and a commitment to a strong balance of risk and reward. We call that responsible growth. We're confident that focused approach will continue to drive long-term success and create value for you, our shareholders. Now I will turn it to Alistair for additional results.","evidence_gemma_new":"net income","evidence_llama_3_3":"net income second quarter of 2024","evidence_qwen_3_30b":"net income $6.9 billion","gemma_new_max":6900000000.0,"gemma_new_min":6900000000.0,"llama_3_3_max":6900000000.0,"llama_3_3_min":6900000000.0,"qwen_3_30b_max":6900000000.0,"qwen_3_30b_min":6900000000.0}
{"symbol":"BAC","year":2024,"quarter":2,"date":"2024-Q2","chunk_id":5,"sub_chunk_id":0,"centroid_label":"net income","agreed_value":1000000000.0,"count":2,"chunk":"Alastair Borthwick: [Technical Difficulty] will materialize. And this now includes three interest rate cuts, starting in September, another in November, and one more in December. And the waterfall shows an estimated impact of those rate cuts to our quarterly NII. The next couple of categories are a result of natural management of interest rate risk in a balance sheet mixed with fixed-rate assets and variable-rate assets. And our balance sheet is split roughly half and half. So we take in liquidity from customers that we use to fund our assets, and then we store excess liquidity in cash and securities. We have fixed assets that mature and pay down, and those supply cash that then gets put back to work on the balance sheet and reprices over time. And we have two basic categories of fixed assets that mature and pay off, and those are securities and loans. On securities, you can see we've got about $10 billion a quarter of cash coming off of our securities portfolio, and we gain roughly 300 basis points of improvement on those assets when we put that money back on the balance sheet. On loans, between resi, mortgage, and auto, we've got another roughly $10 billion, which reprices with a little less yield improvement than securities. And between the securities and loans, we expect a fixed-rate asset repricing adds about $300 million to our quarterly rate of NII as we get to the fourth quarter. On the variable rate asset side, and to protect from down moves in rates, we hedge some of that with cash flow swaps. And those typically roll off in any given quarter and get replaced over time. So included in the cash flow hedges is an impact of cessation of BSBY as an alternative rate. If you recall, we took a charge in the fourth quarter of \u201823. It was $1.6 billion, and we said that would come back to us through time. And beginning in November, we start to see the benefit coming back into NII. And in Q4, that's about $200 million. That Q4 partial quarter benefit will grow by a slightly smaller sequential NII benefit in Q1 \u201825. And then it begins to taper off heading into 2026. In addition, we've got about $150 billion of received fixed cash flow hedges, protecting us from short rate moves moving over. Most are hedging floating rate commercial loans. And the cost of those hedges is reported as contra revenue in commercial loan interest income. These hedges have a weighted average life of just over two years. And they've got an average fixed rate of approximately 250 basis points. So starting in the second-half of 2025, we begin to get some additional NII tailwind, because the cash flow hedges with lower fixed rate likes where we receive, those will begin to roll off, and will likely replace those at higher current market rates at the time. The actual size of the tailwind we'll get from the expiration of those swaps will obviously be highly dependent on the level and the shape of the yield curve at the time of those maturities. And that stretches out over the course of the next four years. Okay, a couple other points to make. You'll note we don't expect much movement around our modestly, liability sensitive global markets NII activity. And lastly, our forward view has an expectation of low-single-digit growth in loans, low-single-digit growth in deposits, with continued slowing of rate paid movement through the back half of 2024. And you can see our expectation of the combined impact here as well. This last element is the one that has the most potential variability. And obviously, it will depend upon actual deposit and loan growth, and pricing and rotation. Okay, let's turn to expense and we'll use slide 11 for the discussion. We reported $16.3 billion of expense this quarter. And that's more than $900 million lower than Q1, which included $700 million for the FDIC special assessment. Not including the FDIC assessment, expenses were lower than Q1 by $229 million, driven by seasonally lower payroll tax expense. Compared to Q2 \u201823, we're up less than 2%. And that increase is equal to the incentives paid for improved fee revenue. Incentives for our GWIN business alone are up $200 million year-over-year. And that's obviously an expense we're happy to pay when we have a 14% improvement in fees for assets under management. Our second quarter headcount number included welcoming a diverse class of nearly 2,000 summer interns we hope will join us over the course of the next year or two upon their graduation. And absent those interns, our headcount fell by nearly 2,000. In the third quarter, we expect to add approximately 2,500 college graduates for full time. More than -- and that's from more than 120,000 applications received, showing that we remain an employer of choice for talented young people. Expense levels for the rest of 2024 are expected to bounce around this second quarter level, given the higher fee revenue and investments made for growth. So let's now move to credit and we'll turn to slide 12. There was little change in our asset quality metrics this quarter. Provision expense was $1.5 billion. That was $189 million higher than Q1, driven by a smaller reserve release in Q2. Net charge offs of $1.5 billion were little changed, with a small increase in credit card, mostly offset by lower commercial real estate office charge offs. On a weighted basis, we remain reserved for an employment rate of nearly 5% by the end of 2025, compared to the most recent 4.1% rate reported. The net charge off ratio was 59 basis points, largely unchanged for Q1. On slide 13, we highlight more credit quality metrics for both our consumer and commercial portfolios. Consumer net charge-offs increased by a modest $31 million versus the first quarter from the flow-through of higher late-stage credit card delinquencies from Q1. Highlighting the change in direction of delinquencies, consumer 90-day-plus delinquencies declined in 2Q by $57 million. Commercial net charge-offs were relatively flat as lower commercial real estate losses were mostly offset by a small increase in other commercial loans. Our office losses went from $304 million in Q1 to $226 million in Q2. Other commercial real estate loan losses were simply one hotel. Okay, let's move to the various lines of business and some brief comments on their results, and I'll start on slide 14 with consumer banking. For the quarter, consumer earned $2.6 billion on continued strong organic growth, and reported earnings declined 9% year-over-year as revenue declined from lower deposit balances, compared to the second quarter of last year. Customer activity showed another strong quarter, net new checking growth, another strong period of card openings, and investment balances for consumer clients, which climbed 23% year-over-year to a new record $476 billion. That included 12 months of strong flows at $38 billion in addition to market appreciation over the time. As noted earlier, loans grew nicely year-over-year from credit card, as well as small business where we remained the industry leader. The team held expense flat year-over-year, reflecting good work with continued business investments for growth, offset by the operational excellence work to improve processes and move more of our transactions to digital. And as you can see on the appendix page 26, digital adoption and engagement continue to improve, and customer satisfaction scores remain near record levels, illustrating customer appreciation of our enhanced capabilities due to our continuous investment. Moving to wealth management on slide 15, we produced good results, and those included good organic client activity, market favorability, and strong AUM flows, and this quarter also saw good lending results. Our comprehensive suite of investment and advisory services, coupled with our commitment to personalized wealth management planning and solutions, has enabled us to meet the diverse needs and aspirations of our clients. Net income rose 5% from the second quarter of last year to a little more than $1 billion. In Q2, we reported revenue of $5.6 billion, growing 6% over the prior year. As Brian noted, a strong 14% growth in fee revenue from investment and brokerage services overcame the NII headwind. Expense growth reflects the fee growth and other investments for future. The business had a 25% margin, and it generated a strong return on capital of more than 22%. Average loans were up 2% year-over-year, driven by strong growth we're seeing in custom lending and a pickup in mortgage lending. Both Merrill and the Private Bank continue to see good organic growth, and they produced strong assets under management flows of $58 billion since last year's second quarter, which reflects a mix of new client money, as well as existing clients putting more of their money to work. I also want to highlight the continued digital momentum in this business, and you can find that on slide 28. On slide 16, we turn to Global Banking results. And here, the business produced earnings of $2.1 billion, down 20% year-over-year, as improved investment banking fees and treasury services revenue were overcome by lower net interest income and higher provision expense. Revenue declined 6%, driven by the impact of interest rates and deposit rotation. The diversified revenue across products and regions reflects the strength of our Global Banking franchise. In our GTS business, fees for managing the cash of clients offsets a lot of the NII pressure from higher rates, and clients are accessing the capital markets for their capital needs instead of borrowing. Investment banking had a strong quarter, growing fees 29% year-over-year to nearly $1.6 billion, led by debt capital markets fees, mostly in leveraged finance and investment grade. And we finished the quarter strong, maintaining our number three investment banking fee position globally. A solid start to 2024 has left us in a good position, with top three rankings now in North America, Latin America, and EMEA, and number six in APAC. And we're seeing strong performance in important industry groups as well. An increase in provision expense from last year was driven by the commercial real estate net charge-offs I discussed earlier, and expense increased 3% year-over-year, including continued investment in the business. Switching to Global Markets on Slide 17, I'll focus my comments on results, excluding DVA as I normally do. The team had another terrific quarter as we generated good revenue growth and achieved operating leverage and continued to deliver a solid return on capital. Earnings of $1.4 billion grew 19% year-over-year, and return on average allocated capital was 13%. Revenue, and again, this is ex-DVA, improved 10% from the second quarter of 2023. Focusing on sales and trading, ex-DVA, revenue improved 7% year-over-year to $4.7 billion, and that's the highest second quarter in over a decade. FICC was down 1%, while equities increased 20% compared to Q2 '23. FICC revenues remained strong, and versus Q2 '23, they were modestly lower, driven by a weaker macro trading quarter in FX and rates, and that was largely offset by better commodities and mortgage trading. Equities was driven by strong trading results in derivatives and cash equities. Year-over-year expenses were up 4% on revenue improvement and continued investment in the business. Finally, on Slide 18, all other shows a loss of $0.3 billion, and that was little changed year-over-year, as lower expense was offset by lower provision costs as a result of reserve changes. Our effective tax rate for the quarter was 9%, and excluding discrete items and the tax credits related to investments in renewable energy and affordable housing, the effective tax rate would have been 25%. And with that, I think we'll stop there, and we'll jump into questions.","evidence_gemma_new":"Net income","evidence_llama_3_3":"net income second quarter of last year","evidence_qwen_3_30b":null,"gemma_new_max":1000000000.0,"gemma_new_min":1000000000.0,"llama_3_3_max":1000000000.0,"llama_3_3_min":1000000000.0,"qwen_3_30b_max":null,"qwen_3_30b_min":null}
{"symbol":"BAC","year":2024,"quarter":3,"date":"2024-Q3","chunk_id":2,"sub_chunk_id":0,"centroid_label":"net income","agreed_value":20000000000.0,"count":3,"chunk":"Brian Moynihan: Thank you, Lee, and good morning, and thank all of you for joining us for our discussion of our third quarter results. Bank of America continued to demonstrate strength this quarter in an economy that continued to be stable, albeit with slower growth and falling inflation. So many of you asked me from time-to-time what do we see in our own customer -- consumer customer base. As we talked about many times, our consumer payments is an indicator of activity. Those payments were up 4% to 5% year-over-year for the quarter in the total money those consumers moved in the economy. The pace of year-to-year money movement has been steady since late summer this year. After having fallen in the spring and early summer. This growth in consumer payments continues into October. This activity is consistent with how customers are spending money in the 2016 to 2019 timeframe. When the economy was growing, inflation was under control. This report is not meant to gainsay that consumers are worried of the cost of living, worried about higher rates and other matters. But overall activity is fine, unemployment is low and wage growth is steady, both of which bode well for the consumer overall and for consumer asset quality. With respect to what we see in our commercial businesses, it is consistent with a lower growth economy. Line of credit usage rates remain lower than pre-pandemic levels. This does not surprise us what with the dramatic increase in the cost of borrowing for small and medium-sized businesses. They aren't being indolent, they want to grow. They are simply being more careful and worry a final demand will hold. Therefore, they are being cost conscious across the board. So how did Bank of America do against this backdrop? At Bank of America, our commitment to responsible growth remains unwavering, and this quarter is another illustration of that. We grew, we did it the right way. In the third quarter, Bank of America generated $25.5 billion in revenue and earned $6.9 billion in net income after tax. Year-to-date, we've generated net income of just over $20 billion. Four quarters ago, we called that a bottom would occur in our net interest income in the second quarter of 2024. Even with a rate environment that has bounced around quite a bit since we said that we got it right. As we expected then, NII indeed troughed in the quarter two. NII grew 2% this quarter and Alastair will note later, we expect NII to grow again in quarter four, even as the market expects two more rate cuts in quarter four. This quarter, we saw a healthy revenue growth in our wealth and investment management business and in our global markets businesses. We returned 5.6 billion of capital to shareholders while also supporting the needs of our clients. So with that brief overview, let's dive into Slide 2. Earnings per share came in at $0.81 this quarter at $25.5 billion in revenue we grew modestly from the third quarter, '23 as improvement in noninterest income more than offset a year-over-year decline in net interest income. Fees grew 5% year-over-year and represented 45% of total revenue. The strong year-over-year fee performance was led by a 15% improvement in investment in brokerage services, mostly in our global wealth management business. We also grew investment banking fees 18% year-over-year sales and trading revenue increased 12% year-over-year and aggregate, these market related revenue streams rose an impressive 13% year-over-year. Our total expense in the company increased 4%. You can attribute most of the year-over-year expense growth to these market related areas. Overall, a good job by the team. On asset quality a few quarters ago we told you that consumer credit losses would go down this quarter, given delinquency trends we had seen at the time. We also told you that office losses would be lower. Both of these proved true again this quarter. Good asset quality resulted in net charge-off in provision expense for this quarter at $1.5 billion, which was unchanged from last quarter. Our performance is partly attributable to the diversity and balance of the company. A little more than half our earnings come from our consumer and GWIM businesses serving people and the other half come through from our Global Banking and Markets businesses serving companies and institutional investors. So let's turn to see how we grew organically this quarter. We are now on Slide 3. Our organic growth has been driven by a continued focus on customers and client experience throughout all our businesses. Consumer leads the way delivering solid organic growth with high quality accounts engaged clients. For the 23rd consecutive quarter, we added significant net new consumer checking accounts and expanded our customer base and market share. We added 360,000 net new checking accounts this quarter, which brings our first nine months of '24 to more than 880,000 net new checking accounts. In wealth management, we added another 5,500 net new relationships this quarter. In our commercial businesses, we added hundreds of small business and commercial banking relationships. Also note that we saw a strong organic growth of investment balances with banking customers and growth in banking products for our investment clients in our GWIM business. This has led us to now manage $5.9 trillion in client balances of loans, deposits and investments across the consumer and wealth management clients. We saw flows of $62 billion into those businesses in the past four quarters. In our Global Banking business, we saw loan demand start to pick up late in the quarter. We again ranked third in the logic IB fees we received and have a solid pipeline. Our global transaction services platform continues to grow around the world and showed strong deposit growth for our commercial businesses over the last year and a quarter. This quarter, global markets saw continued momentum. Global markets recorded the 10th consecutive quarter of year-over-year growth in sales and trading. Investments we've made in this business and the intensity of the teams has enabled a 35% improvement in sales and trading revenue in the past three years. Good work by Jimmy DeMare and the team. Our customers and clients continue to want more from us, especially when it comes to our digital capabilities. So let's discuss this on Slide 4. Slide 4 highlights this continued success across our digital platforms. As usual, we include our disclosures on digital stats across the business, which we believe lead the industry. I commend you the pages in the appendix, which give you more granular disclosure for each of the businesses' digital activities. Our fully integrated consumer banking investment application drives the utility for our customers across GWIM and consumer. The usage stats you see are strong proof points. Our second language capabilities also enhance the customer's experience. We have grown to more than 48 million active digital users and those digital users logged in more than 3.6 billion times this quarter. We also continue to see more sales through their digital properties. Digital sales represented 54% of our total consumer sales this quarter. Note that it simply takes both high-touch and high-tech to drive continued growth with individual clients across the wealth spectrum in America. Erica, our AI enabled virtual assistant reached 2.4 billion client interactions since its launch and Zelle showed continued user and usage increases. In our wealth management business, we continue to see full relationships increase with both investing and banking relationships being open. 75% of new accounts in Merrill were opened digitally whether they were banking accounts or investment accounts. This enables more efficient customer coverage for our advisory teams. Finally, 87% of our Global Banking relationship clients are digitally active. We have innovated and significantly streamlined service requests by enabling clients to directly initiate and track inquiries within our award winning cash flow platform. As a result, app sign-ins for these clients increased nearly 80% in just the last 24-months. In summary, the economic environment remains solid. Issues remain out there to external factors that could affect our business and the economy generally. We still see great opportunities for continued growth across all our businesses. We are focused on driving market share in all our businesses, investing in technology to further enhance the customer experience and continue to increase our efficiency. With NII now growing and complementing our fee growth along with our continued solid expense discipline, we expect to return to operating leverage as we move through the quarters in 2025. With that, I'll turn to Alastair for additional details.","evidence_gemma_new":"net income","evidence_llama_3_3":"net income","evidence_qwen_3_30b":"net income year-to-date","gemma_new_max":20000000000.0,"gemma_new_min":20000000000.0,"llama_3_3_max":20000000000.0,"llama_3_3_min":20000000000.0,"qwen_3_30b_max":20000000000.0,"qwen_3_30b_min":20000000000.0}
{"symbol":"BAC","year":2024,"quarter":4,"date":"2024-Q4","chunk_id":2,"sub_chunk_id":0,"centroid_label":"net income","agreed_value":6700000000.0,"count":3,"chunk":"Brian Moynihan: So good morning, everyone, and thank you for joining us. Before we begin today, I just want to express our deep concern for our communities, clients, and teammates impacted by the California wildfires. Our top priority, of course, is ensuring the safety and welfare of our team and helping our clients and customers. Our imperturbable Market President Raul Anaya is leading our team out there. We have teams on the ground assisting in any way we can and are monitoring of the situation to extend support and resources. So far, we have activated our Client Assistance Program, donated $1 million in disaster relief to the American Red Cross, additional contributions to the L.A. Food Bank and the L.A. Chamber of Commerce Small Business Efforts. With that, let's turn to earnings starting on page two of the presentation. This morning, we reported $6.7 billion in net income, that is $0.82 in EPS for the fourth quarter. That was a solid finish to another good year at Bank of America. We grew revenue on a year-over-year basis in every category in quarter four. We saw good loan and deposit growth, and Alastair is going to walk you through some of the details of the quarter in a moment, but I want to thank our team for another great year. For the full-year of 2024, we generated $102 billion of revenue and reported net income of $27.1 billion of EPS of $3.21. We produced 83 basis points return on assets and 13% return on tangible common equity. We generated these results working from a strong balance sheet that allowed us to support clients and economies continue to grow. The economy appears to be now settled into a 2% to 3% GDP-type growth environment. It has healthy employment levels in the resilient consumer. The immensity of the American consumer can be seen in our data. So far in the first two weeks in January, they're spending money at 4% to 5% clip over last year, similar to what they did in the fourth quarter. In our business side, the clients are profitable, they're liquid, and seeing good productivity. We ended the year with $953 billion in liquidity. We also ended with $201 billion of regulatory CET1 capital and a CET1 ratio of 11.9%, leaving us nearly 115 basis points of excess capital as we begin 2025. For Bank of America, the year was characterized by a few important highlights that played out as expected and were consistent with our communications to you throughout the year. First, we saw net interest income bottom out at $13.9 billion on an FTE basis in the second quarter of 2024. We ended the year with a fourth quarter on the same FTE basis at $14.5 billion, then that was a bit better than we expected. This obviously provides a great starting point for 2025, and based on the assumptions Alastair is going to discuss a little later, we should report record NII in 2025. So how did we do that? We drove organic growth in all the businesses, and that we have highlighted on Slide 3. We saw continued growth in net new checking, new households, new companies, and commercial banking growth in our institutional markets business. This organic activity enabled us to grow loans and deposits at a pace we believe is to be ahead of our industry average and our peers. A key for us, obviously, is a growth in our deposit franchise. If you look at Slide 4, you can see we've now grown deposits for six consecutive quarters. In the most recent quarter, we saw growth in consumer balances and stability around non-interest-bearing balances across all the businesses. We continued to price in a disciplined manner, and rates paid moved lower this quarter across the board. Overall, rate paid on deposits moved from 210 basis points in the third quarter to 194 basis points this quarter. And we're lower in the fourth quarter, we're lower in every business segment. On the loan side, consumer loans grew in every category-linked quarter. Commercial loan demand continued to build off the strengths we saw in the third quarter of 2024, and commercial loans grew 5% year-over-year for the fourth quarter, and a much faster annualized pace when comparing the third quarter to the fourth quarter of 2024. So back to Slide 3. In our wealth management business, we added 24,000 new households in 2024. We ended the year with $6 trillion in total client balances that we manage for people in America across our global wealth and consumer businesses. Our consumer investments team, what we call Merrill Edge, crossed a new milestone this quarter and now sits in excess of $518 billion in balances. Investment banking gained share of industry revenue in 2024. Our sales and trading team put up the 11th straight quarter of year-over-year revenue growth and achieved a new full-year record of nearly $19 billion in revenue. As the quality stabilized and remained strong, with net charge-offs declining modestly from third quarter. Early in the year, we highlighted that our expectation on consumer credit is that they would stabilize to normal level. And on commercial office losses, they would trend down during the year. We saw both those trends continue into quarter four. On the expense side, we continue to invest in our franchise. And even though spending increases in brand, people, and technology, and strong fee growth, which drove incentive and transaction processing costs higher, we managed to create operating leverage in the fourth quarter. Our digitalization and engagement expanded across all our businesses. We saw more than 14 billion logins to our digital platforms in 2024. Our Erica capability surpassed 2.5 billion interactions from its inception. And our CashPro app surpassed $1 trillion in payments made through the app in 2024. It's also worth noting that digital sales in our consumer product areas crossed 60% in the fourth quarter again. You can see all these trends in our industry-leading digital disclosure on Slides 26, 28, and 30 in the appendix. All the success in balance sheet straights allowed us to deliver more capital back to our shareholders. We returned $21 billion of capital to the shareholders in 2024, which was 75% more than 2023 and included an 8% increase in the common dividend. So in summary, for both the fourth quarter and for the year, we enjoyed good profitability, we drove healthy returns, we saw good organic client activity across all the businesses, we continue to manage the risk well and increase the capital delivered back to our shareholders. And we positioned ourselves well for growth in 2025. I want to again thank my team for continuing to drive another year of responsible growth. And with that, I'll turn it over to Alastair.","evidence_gemma_new":"net income EPS fourth quarter","evidence_llama_3_3":"net income fourth quarter","evidence_qwen_3_30b":"net income fourth quarter","gemma_new_max":6700000000.0,"gemma_new_min":6700000000.0,"llama_3_3_max":6700000000.0,"llama_3_3_min":6700000000.0,"qwen_3_30b_max":6700000000.0,"qwen_3_30b_min":6700000000.0}
{"symbol":"BAC","year":2024,"quarter":2,"date":"2026-FY","chunk_id":5,"sub_chunk_id":0,"centroid_label":"net income","agreed_value":1300000000.0,"count":2,"chunk":"Alastair Borthwick: [Technical Difficulty] will materialize. And this now includes three interest rate cuts, starting in September, another in November, and one more in December. And the waterfall shows an estimated impact of those rate cuts to our quarterly NII. The next couple of categories are a result of natural management of interest rate risk in a balance sheet mixed with fixed-rate assets and variable-rate assets. And our balance sheet is split roughly half and half. So we take in liquidity from customers that we use to fund our assets, and then we store excess liquidity in cash and securities. We have fixed assets that mature and pay down, and those supply cash that then gets put back to work on the balance sheet and reprices over time. And we have two basic categories of fixed assets that mature and pay off, and those are securities and loans. On securities, you can see we've got about $10 billion a quarter of cash coming off of our securities portfolio, and we gain roughly 300 basis points of improvement on those assets when we put that money back on the balance sheet. On loans, between resi, mortgage, and auto, we've got another roughly $10 billion, which reprices with a little less yield improvement than securities. And between the securities and loans, we expect a fixed-rate asset repricing adds about $300 million to our quarterly rate of NII as we get to the fourth quarter. On the variable rate asset side, and to protect from down moves in rates, we hedge some of that with cash flow swaps. And those typically roll off in any given quarter and get replaced over time. So included in the cash flow hedges is an impact of cessation of BSBY as an alternative rate. If you recall, we took a charge in the fourth quarter of \u201823. It was $1.6 billion, and we said that would come back to us through time. And beginning in November, we start to see the benefit coming back into NII. And in Q4, that's about $200 million. That Q4 partial quarter benefit will grow by a slightly smaller sequential NII benefit in Q1 \u201825. And then it begins to taper off heading into 2026. In addition, we've got about $150 billion of received fixed cash flow hedges, protecting us from short rate moves moving over. Most are hedging floating rate commercial loans. And the cost of those hedges is reported as contra revenue in commercial loan interest income. These hedges have a weighted average life of just over two years. And they've got an average fixed rate of approximately 250 basis points. So starting in the second-half of 2025, we begin to get some additional NII tailwind, because the cash flow hedges with lower fixed rate likes where we receive, those will begin to roll off, and will likely replace those at higher current market rates at the time. The actual size of the tailwind we'll get from the expiration of those swaps will obviously be highly dependent on the level and the shape of the yield curve at the time of those maturities. And that stretches out over the course of the next four years. Okay, a couple other points to make. You'll note we don't expect much movement around our modestly, liability sensitive global markets NII activity. And lastly, our forward view has an expectation of low-single-digit growth in loans, low-single-digit growth in deposits, with continued slowing of rate paid movement through the back half of 2024. And you can see our expectation of the combined impact here as well. This last element is the one that has the most potential variability. And obviously, it will depend upon actual deposit and loan growth, and pricing and rotation. Okay, let's turn to expense and we'll use slide 11 for the discussion. We reported $16.3 billion of expense this quarter. And that's more than $900 million lower than Q1, which included $700 million for the FDIC special assessment. Not including the FDIC assessment, expenses were lower than Q1 by $229 million, driven by seasonally lower payroll tax expense. Compared to Q2 \u201823, we're up less than 2%. And that increase is equal to the incentives paid for improved fee revenue. Incentives for our GWIN business alone are up $200 million year-over-year. And that's obviously an expense we're happy to pay when we have a 14% improvement in fees for assets under management. Our second quarter headcount number included welcoming a diverse class of nearly 2,000 summer interns we hope will join us over the course of the next year or two upon their graduation. And absent those interns, our headcount fell by nearly 2,000. In the third quarter, we expect to add approximately 2,500 college graduates for full time. More than -- and that's from more than 120,000 applications received, showing that we remain an employer of choice for talented young people. Expense levels for the rest of 2024 are expected to bounce around this second quarter level, given the higher fee revenue and investments made for growth. So let's now move to credit and we'll turn to slide 12. There was little change in our asset quality metrics this quarter. Provision expense was $1.5 billion. That was $189 million higher than Q1, driven by a smaller reserve release in Q2. Net charge offs of $1.5 billion were little changed, with a small increase in credit card, mostly offset by lower commercial real estate office charge offs. On a weighted basis, we remain reserved for an employment rate of nearly 5% by the end of 2025, compared to the most recent 4.1% rate reported. The net charge off ratio was 59 basis points, largely unchanged for Q1. On slide 13, we highlight more credit quality metrics for both our consumer and commercial portfolios. Consumer net charge-offs increased by a modest $31 million versus the first quarter from the flow-through of higher late-stage credit card delinquencies from Q1. Highlighting the change in direction of delinquencies, consumer 90-day-plus delinquencies declined in 2Q by $57 million. Commercial net charge-offs were relatively flat as lower commercial real estate losses were mostly offset by a small increase in other commercial loans. Our office losses went from $304 million in Q1 to $226 million in Q2. Other commercial real estate loan losses were simply one hotel. Okay, let's move to the various lines of business and some brief comments on their results, and I'll start on slide 14 with consumer banking. For the quarter, consumer earned $2.6 billion on continued strong organic growth, and reported earnings declined 9% year-over-year as revenue declined from lower deposit balances, compared to the second quarter of last year. Customer activity showed another strong quarter, net new checking growth, another strong period of card openings, and investment balances for consumer clients, which climbed 23% year-over-year to a new record $476 billion. That included 12 months of strong flows at $38 billion in addition to market appreciation over the time. As noted earlier, loans grew nicely year-over-year from credit card, as well as small business where we remained the industry leader. The team held expense flat year-over-year, reflecting good work with continued business investments for growth, offset by the operational excellence work to improve processes and move more of our transactions to digital. And as you can see on the appendix page 26, digital adoption and engagement continue to improve, and customer satisfaction scores remain near record levels, illustrating customer appreciation of our enhanced capabilities due to our continuous investment. Moving to wealth management on slide 15, we produced good results, and those included good organic client activity, market favorability, and strong AUM flows, and this quarter also saw good lending results. Our comprehensive suite of investment and advisory services, coupled with our commitment to personalized wealth management planning and solutions, has enabled us to meet the diverse needs and aspirations of our clients. Net income rose 5% from the second quarter of last year to a little more than $1 billion. In Q2, we reported revenue of $5.6 billion, growing 6% over the prior year. As Brian noted, a strong 14% growth in fee revenue from investment and brokerage services overcame the NII headwind. Expense growth reflects the fee growth and other investments for future. The business had a 25% margin, and it generated a strong return on capital of more than 22%. Average loans were up 2% year-over-year, driven by strong growth we're seeing in custom lending and a pickup in mortgage lending. Both Merrill and the Private Bank continue to see good organic growth, and they produced strong assets under management flows of $58 billion since last year's second quarter, which reflects a mix of new client money, as well as existing clients putting more of their money to work. I also want to highlight the continued digital momentum in this business, and you can find that on slide 28. On slide 16, we turn to Global Banking results. And here, the business produced earnings of $2.1 billion, down 20% year-over-year, as improved investment banking fees and treasury services revenue were overcome by lower net interest income and higher provision expense. Revenue declined 6%, driven by the impact of interest rates and deposit rotation. The diversified revenue across products and regions reflects the strength of our Global Banking franchise. In our GTS business, fees for managing the cash of clients offsets a lot of the NII pressure from higher rates, and clients are accessing the capital markets for their capital needs instead of borrowing. Investment banking had a strong quarter, growing fees 29% year-over-year to nearly $1.6 billion, led by debt capital markets fees, mostly in leveraged finance and investment grade. And we finished the quarter strong, maintaining our number three investment banking fee position globally. A solid start to 2024 has left us in a good position, with top three rankings now in North America, Latin America, and EMEA, and number six in APAC. And we're seeing strong performance in important industry groups as well. An increase in provision expense from last year was driven by the commercial real estate net charge-offs I discussed earlier, and expense increased 3% year-over-year, including continued investment in the business. Switching to Global Markets on Slide 17, I'll focus my comments on results, excluding DVA as I normally do. The team had another terrific quarter as we generated good revenue growth and achieved operating leverage and continued to deliver a solid return on capital. Earnings of $1.4 billion grew 19% year-over-year, and return on average allocated capital was 13%. Revenue, and again, this is ex-DVA, improved 10% from the second quarter of 2023. Focusing on sales and trading, ex-DVA, revenue improved 7% year-over-year to $4.7 billion, and that's the highest second quarter in over a decade. FICC was down 1%, while equities increased 20% compared to Q2 '23. FICC revenues remained strong, and versus Q2 '23, they were modestly lower, driven by a weaker macro trading quarter in FX and rates, and that was largely offset by better commodities and mortgage trading. Equities was driven by strong trading results in derivatives and cash equities. Year-over-year expenses were up 4% on revenue improvement and continued investment in the business. Finally, on Slide 18, all other shows a loss of $0.3 billion, and that was little changed year-over-year, as lower expense was offset by lower provision costs as a result of reserve changes. Our effective tax rate for the quarter was 9%, and excluding discrete items and the tax credits related to investments in renewable energy and affordable housing, the effective tax rate would have been 25%. And with that, I think we'll stop there, and we'll jump into questions.","evidence_gemma_new":"net income fiscal year 2026","evidence_llama_3_3":"expect net income fiscal year 2026","evidence_qwen_3_30b":null,"gemma_new_max":1300000000.0,"gemma_new_min":1300000000.0,"llama_3_3_max":1300000000.0,"llama_3_3_min":1300000000.0,"qwen_3_30b_max":null,"qwen_3_30b_min":null}
{"symbol":"BAC","year":2023,"quarter":1,"date":"2023-Q1","chunk_id":66,"sub_chunk_id":0,"centroid_label":"net interest income","agreed_value":3300000000.0,"count":2,"chunk":"Gerard Cassidy: Alastair, can you elaborate a little further, you talked about, I think in Slide 12, you showed us 100 basis point parallel shift impacts, net interest income by a positive $3.3 billion over the following 12 months. If the rate environment does shift and, maybe, we do start to see lower rates by the end of the year, how quickly can you guys move this from being asset sensitive to neutral or a liability sensitive on the balance sheet?","evidence_gemma_new":null,"evidence_llama_3_3":"net interest income following 12 months","evidence_qwen_3_30b":"net interest income 100 basis point parallel shift following 12 months","gemma_new_max":null,"gemma_new_min":null,"llama_3_3_max":3300000000.0,"llama_3_3_min":3300000000.0,"qwen_3_30b_max":3300000000.0,"qwen_3_30b_min":3300000000.0}
{"symbol":"BAC","year":2023,"quarter":2,"date":"2024-FY","chunk_id":60,"sub_chunk_id":0,"centroid_label":"net interest income","agreed_value":14000000000.0,"count":3,"chunk":"Erika Najarian: Hi, good morning. I'm sorry I missed the earlier call. On the net interest income trajectory, Alastair, clearly a big focus for your shareholders. You mentioned when you were responding to Gerard's first question that you narrowed the volatility of net interest income. And I think that investors I'm sure are going to start asking you guys and us about the starting point of $14 billion for NII next year. I guess we're wondering, if the Fed stays higher for longer, doesn't move, how does that impact that $14 billion run rate? Does that $14 billion capture a cumulative deposit beta that would sort of fully reflect what you would expect to experience through the cycle? And then I have a follow-up question from there.","evidence_gemma_new":"net interest income next year","evidence_llama_3_3":"net interest income next year","evidence_qwen_3_30b":"net interest income $14 billion next year","gemma_new_max":14000000000.0,"gemma_new_min":14000000000.0,"llama_3_3_max":14000000000.0,"llama_3_3_min":14000000000.0,"qwen_3_30b_max":14000000000.0,"qwen_3_30b_min":14000000000.0}
{"symbol":"BAC","year":2024,"quarter":2,"date":"2024-Q2","chunk_id":25,"sub_chunk_id":0,"centroid_label":"net interest income","agreed_value":0.0193,"count":2,"chunk":"Alastair Borthwick: So I'd say right now in terms of the 1.93%, we feel like we are under earning. We feel like that number is going to go up over time. It'll go up as net interest income goes up. But additionally, I think the balance sheet is likely to stay kind of flattish here. So the numerator is going to grow, the denominator is going to stay pretty tight here. So we think we're under-earning there. We think through a cycle, we got to get back to a more normal number like 2.30-ish over time. That takes a while. It's a grind, Mike, quarter-after-quarter, so that's where we're headed. And in terms of return on allocated capital, right now we're right around that 14%. We want to be 15% or higher for our shareholder. A lot of it is because we've accrued an awful lot of capital over the time -- over the course of time in advance of any potential capital changes. And the other final thing I'll just remind you is, we're a little different than some of the regional banks in that we've got an enormous global markets business. And that obviously makes an impact on the headline NIM number.","evidence_gemma_new":"net interest income","evidence_llama_3_3":"net interest income 1.93%","evidence_qwen_3_30b":null,"gemma_new_max":0.0193,"gemma_new_min":0.0193,"llama_3_3_max":0.0193,"llama_3_3_min":0.0193,"qwen_3_30b_max":null,"qwen_3_30b_min":null}
{"symbol":"BAC","year":2024,"quarter":4,"date":"2024-Q2","chunk_id":2,"sub_chunk_id":0,"centroid_label":"net interest income","agreed_value":13900000000.0,"count":2,"chunk":"Brian Moynihan: So good morning, everyone, and thank you for joining us. Before we begin today, I just want to express our deep concern for our communities, clients, and teammates impacted by the California wildfires. Our top priority, of course, is ensuring the safety and welfare of our team and helping our clients and customers. Our imperturbable Market President Raul Anaya is leading our team out there. We have teams on the ground assisting in any way we can and are monitoring of the situation to extend support and resources. So far, we have activated our Client Assistance Program, donated $1 million in disaster relief to the American Red Cross, additional contributions to the L.A. Food Bank and the L.A. Chamber of Commerce Small Business Efforts. With that, let's turn to earnings starting on page two of the presentation. This morning, we reported $6.7 billion in net income, that is $0.82 in EPS for the fourth quarter. That was a solid finish to another good year at Bank of America. We grew revenue on a year-over-year basis in every category in quarter four. We saw good loan and deposit growth, and Alastair is going to walk you through some of the details of the quarter in a moment, but I want to thank our team for another great year. For the full-year of 2024, we generated $102 billion of revenue and reported net income of $27.1 billion of EPS of $3.21. We produced 83 basis points return on assets and 13% return on tangible common equity. We generated these results working from a strong balance sheet that allowed us to support clients and economies continue to grow. The economy appears to be now settled into a 2% to 3% GDP-type growth environment. It has healthy employment levels in the resilient consumer. The immensity of the American consumer can be seen in our data. So far in the first two weeks in January, they're spending money at 4% to 5% clip over last year, similar to what they did in the fourth quarter. In our business side, the clients are profitable, they're liquid, and seeing good productivity. We ended the year with $953 billion in liquidity. We also ended with $201 billion of regulatory CET1 capital and a CET1 ratio of 11.9%, leaving us nearly 115 basis points of excess capital as we begin 2025. For Bank of America, the year was characterized by a few important highlights that played out as expected and were consistent with our communications to you throughout the year. First, we saw net interest income bottom out at $13.9 billion on an FTE basis in the second quarter of 2024. We ended the year with a fourth quarter on the same FTE basis at $14.5 billion, then that was a bit better than we expected. This obviously provides a great starting point for 2025, and based on the assumptions Alastair is going to discuss a little later, we should report record NII in 2025. So how did we do that? We drove organic growth in all the businesses, and that we have highlighted on Slide 3. We saw continued growth in net new checking, new households, new companies, and commercial banking growth in our institutional markets business. This organic activity enabled us to grow loans and deposits at a pace we believe is to be ahead of our industry average and our peers. A key for us, obviously, is a growth in our deposit franchise. If you look at Slide 4, you can see we've now grown deposits for six consecutive quarters. In the most recent quarter, we saw growth in consumer balances and stability around non-interest-bearing balances across all the businesses. We continued to price in a disciplined manner, and rates paid moved lower this quarter across the board. Overall, rate paid on deposits moved from 210 basis points in the third quarter to 194 basis points this quarter. And we're lower in the fourth quarter, we're lower in every business segment. On the loan side, consumer loans grew in every category-linked quarter. Commercial loan demand continued to build off the strengths we saw in the third quarter of 2024, and commercial loans grew 5% year-over-year for the fourth quarter, and a much faster annualized pace when comparing the third quarter to the fourth quarter of 2024. So back to Slide 3. In our wealth management business, we added 24,000 new households in 2024. We ended the year with $6 trillion in total client balances that we manage for people in America across our global wealth and consumer businesses. Our consumer investments team, what we call Merrill Edge, crossed a new milestone this quarter and now sits in excess of $518 billion in balances. Investment banking gained share of industry revenue in 2024. Our sales and trading team put up the 11th straight quarter of year-over-year revenue growth and achieved a new full-year record of nearly $19 billion in revenue. As the quality stabilized and remained strong, with net charge-offs declining modestly from third quarter. Early in the year, we highlighted that our expectation on consumer credit is that they would stabilize to normal level. And on commercial office losses, they would trend down during the year. We saw both those trends continue into quarter four. On the expense side, we continue to invest in our franchise. And even though spending increases in brand, people, and technology, and strong fee growth, which drove incentive and transaction processing costs higher, we managed to create operating leverage in the fourth quarter. Our digitalization and engagement expanded across all our businesses. We saw more than 14 billion logins to our digital platforms in 2024. Our Erica capability surpassed 2.5 billion interactions from its inception. And our CashPro app surpassed $1 trillion in payments made through the app in 2024. It's also worth noting that digital sales in our consumer product areas crossed 60% in the fourth quarter again. You can see all these trends in our industry-leading digital disclosure on Slides 26, 28, and 30 in the appendix. All the success in balance sheet straights allowed us to deliver more capital back to our shareholders. We returned $21 billion of capital to the shareholders in 2024, which was 75% more than 2023 and included an 8% increase in the common dividend. So in summary, for both the fourth quarter and for the year, we enjoyed good profitability, we drove healthy returns, we saw good organic client activity across all the businesses, we continue to manage the risk well and increase the capital delivered back to our shareholders. And we positioned ourselves well for growth in 2025. I want to again thank my team for continuing to drive another year of responsible growth. And with that, I'll turn it over to Alastair.","evidence_gemma_new":null,"evidence_llama_3_3":"net interest income second quarter of 2024","evidence_qwen_3_30b":"net interest income second quarter of 2024","gemma_new_max":null,"gemma_new_min":null,"llama_3_3_max":13900000000.0,"llama_3_3_min":13900000000.0,"qwen_3_30b_max":13900000000.0,"qwen_3_30b_min":13900000000.0}
{"symbol":"BAC","year":2024,"quarter":4,"date":"2024-Q4","chunk_id":2,"sub_chunk_id":0,"centroid_label":"net interest income","agreed_value":14500000000.0,"count":2,"chunk":"Brian Moynihan: So good morning, everyone, and thank you for joining us. Before we begin today, I just want to express our deep concern for our communities, clients, and teammates impacted by the California wildfires. Our top priority, of course, is ensuring the safety and welfare of our team and helping our clients and customers. Our imperturbable Market President Raul Anaya is leading our team out there. We have teams on the ground assisting in any way we can and are monitoring of the situation to extend support and resources. So far, we have activated our Client Assistance Program, donated $1 million in disaster relief to the American Red Cross, additional contributions to the L.A. Food Bank and the L.A. Chamber of Commerce Small Business Efforts. With that, let's turn to earnings starting on page two of the presentation. This morning, we reported $6.7 billion in net income, that is $0.82 in EPS for the fourth quarter. That was a solid finish to another good year at Bank of America. We grew revenue on a year-over-year basis in every category in quarter four. We saw good loan and deposit growth, and Alastair is going to walk you through some of the details of the quarter in a moment, but I want to thank our team for another great year. For the full-year of 2024, we generated $102 billion of revenue and reported net income of $27.1 billion of EPS of $3.21. We produced 83 basis points return on assets and 13% return on tangible common equity. We generated these results working from a strong balance sheet that allowed us to support clients and economies continue to grow. The economy appears to be now settled into a 2% to 3% GDP-type growth environment. It has healthy employment levels in the resilient consumer. The immensity of the American consumer can be seen in our data. So far in the first two weeks in January, they're spending money at 4% to 5% clip over last year, similar to what they did in the fourth quarter. In our business side, the clients are profitable, they're liquid, and seeing good productivity. We ended the year with $953 billion in liquidity. We also ended with $201 billion of regulatory CET1 capital and a CET1 ratio of 11.9%, leaving us nearly 115 basis points of excess capital as we begin 2025. For Bank of America, the year was characterized by a few important highlights that played out as expected and were consistent with our communications to you throughout the year. First, we saw net interest income bottom out at $13.9 billion on an FTE basis in the second quarter of 2024. We ended the year with a fourth quarter on the same FTE basis at $14.5 billion, then that was a bit better than we expected. This obviously provides a great starting point for 2025, and based on the assumptions Alastair is going to discuss a little later, we should report record NII in 2025. So how did we do that? We drove organic growth in all the businesses, and that we have highlighted on Slide 3. We saw continued growth in net new checking, new households, new companies, and commercial banking growth in our institutional markets business. This organic activity enabled us to grow loans and deposits at a pace we believe is to be ahead of our industry average and our peers. A key for us, obviously, is a growth in our deposit franchise. If you look at Slide 4, you can see we've now grown deposits for six consecutive quarters. In the most recent quarter, we saw growth in consumer balances and stability around non-interest-bearing balances across all the businesses. We continued to price in a disciplined manner, and rates paid moved lower this quarter across the board. Overall, rate paid on deposits moved from 210 basis points in the third quarter to 194 basis points this quarter. And we're lower in the fourth quarter, we're lower in every business segment. On the loan side, consumer loans grew in every category-linked quarter. Commercial loan demand continued to build off the strengths we saw in the third quarter of 2024, and commercial loans grew 5% year-over-year for the fourth quarter, and a much faster annualized pace when comparing the third quarter to the fourth quarter of 2024. So back to Slide 3. In our wealth management business, we added 24,000 new households in 2024. We ended the year with $6 trillion in total client balances that we manage for people in America across our global wealth and consumer businesses. Our consumer investments team, what we call Merrill Edge, crossed a new milestone this quarter and now sits in excess of $518 billion in balances. Investment banking gained share of industry revenue in 2024. Our sales and trading team put up the 11th straight quarter of year-over-year revenue growth and achieved a new full-year record of nearly $19 billion in revenue. As the quality stabilized and remained strong, with net charge-offs declining modestly from third quarter. Early in the year, we highlighted that our expectation on consumer credit is that they would stabilize to normal level. And on commercial office losses, they would trend down during the year. We saw both those trends continue into quarter four. On the expense side, we continue to invest in our franchise. And even though spending increases in brand, people, and technology, and strong fee growth, which drove incentive and transaction processing costs higher, we managed to create operating leverage in the fourth quarter. Our digitalization and engagement expanded across all our businesses. We saw more than 14 billion logins to our digital platforms in 2024. Our Erica capability surpassed 2.5 billion interactions from its inception. And our CashPro app surpassed $1 trillion in payments made through the app in 2024. It's also worth noting that digital sales in our consumer product areas crossed 60% in the fourth quarter again. You can see all these trends in our industry-leading digital disclosure on Slides 26, 28, and 30 in the appendix. All the success in balance sheet straights allowed us to deliver more capital back to our shareholders. We returned $21 billion of capital to the shareholders in 2024, which was 75% more than 2023 and included an 8% increase in the common dividend. So in summary, for both the fourth quarter and for the year, we enjoyed good profitability, we drove healthy returns, we saw good organic client activity across all the businesses, we continue to manage the risk well and increase the capital delivered back to our shareholders. And we positioned ourselves well for growth in 2025. I want to again thank my team for continuing to drive another year of responsible growth. And with that, I'll turn it over to Alastair.","evidence_gemma_new":null,"evidence_llama_3_3":"expect net interest income Q4","evidence_qwen_3_30b":"net interest income fourth quarter a bit better than we expected","gemma_new_max":null,"gemma_new_min":null,"llama_3_3_max":14500000000.0,"llama_3_3_min":14500000000.0,"qwen_3_30b_max":14500000000.0,"qwen_3_30b_min":14500000000.0}
{"symbol":"BAC","year":2023,"quarter":2,"date":"2023-Q2","chunk_id":19,"sub_chunk_id":0,"centroid_label":"nii","agreed_value":0.8,"count":2,"chunk":"Brian Moynihan: So our goal is always to maintain it. And Mike, you point out that the toughest times when you have sort of a twist in the interest-rate environment and you can see that at the end of '19 and we got right back into it right after the environment stabilize, but just thinking about the question you asked me a few years ago Mike was - when NII is coming in are going to let it fall the bottom-line, you going to spend it at about 80% plus of it is falling to the bottom-line, which shows you how we position the franchise from the second quarter of '21 until now as we went through the interest-rate - the fast interest-rate raising. So we gave you the specific as you said, the specific expense guidance by quarter. We'd expect that should produce operating leverage that will be it gets tougher and then it will get easier as we start to see the stabilization of deposits and loans and loan growth, you sort of routinely come through in the economy frankly, shaking through whether we're going to have a recession or not. And so we feel good about what we've done, that's why I tried to give that longer period of time that people have the context, it's very different environments how you've achieved at sometimes revenue fell and expense fell faster, sometimes revenue grew and expense grew, but slower and all the different ways. So we'll keep working at it in a key leading indicator we like as we've been able to manage the headcount down as Alastair said earlier and frankly that is in the face of a turnover rate year-over-year which has dropped in half, which is good because we're not training and hiring as many people, and that then sets us up for the second half of the year because that headcount benefit us not really come through the P&L and will offset some of the other inflation.","evidence_gemma_new":"NII","evidence_llama_3_3":"NII 80% plus second quarter of '21","evidence_qwen_3_30b":null,"gemma_new_max":0.8,"gemma_new_min":0.8,"llama_3_3_max":0.8,"llama_3_3_min":0.8,"qwen_3_30b_max":null,"qwen_3_30b_min":null}
{"symbol":"BAC","year":2023,"quarter":4,"date":"2023-Q4","chunk_id":17,"sub_chunk_id":0,"centroid_label":"nii","agreed_value":3100000000.0,"count":3,"chunk":"John McDonald: Hi, Alastair, Brian. Alastair, I wanted to go back on the NII and maybe you could help us. It's so hard for us to square the NII outlook with the rate sensitivity disclosure that you have in the slide with the 100 basis point parallel shift down is $3.1 billion. Maybe just, is there some caveats about how in the real world it doesn't play out like the disclosures? We've already seen rates come down on the long end, almost 100 basis points. So I guess it just -- where's that $3.1 billion headwind in your number? Because it's very impressive, obviously, to be able to kind of keep it flat despite that, using the forward curve. Thanks.","evidence_gemma_new":"NII 100 basis point parallel shift down","evidence_llama_3_3":"NII 100 basis point","evidence_qwen_3_30b":"NII 100 basis point parallel shift down","gemma_new_max":3100000000.0,"gemma_new_min":3100000000.0,"llama_3_3_max":3100000000.0,"llama_3_3_min":3100000000.0,"qwen_3_30b_max":3100000000.0,"qwen_3_30b_min":3100000000.0}
{"symbol":"BAC","year":2024,"quarter":1,"date":"2024-Q1","chunk_id":29,"sub_chunk_id":0,"centroid_label":"nii","agreed_value":3.0,"count":2,"chunk":"Betsy Graseck: Thanks very much for taking the question. I guess I just wanted to follow up on the conversation you were just having, and Alastair, I know that--look, your NII guide improved this quarter due to 1Q results being better than what you had anticipated a quarter ago. My question is on the second half \u201924 improvement, I guess it is going to be an improvement from first half, right - that\u2019s basically the base that you\u2019re looking at? I\u2019m wondering how you\u2019re thinking about the NII trajectory on a year-[audio loss]. I believe NII is down about 3% year-on-year in 1Q. Should we anticipate that that is stable pace throughout the year, or that reduces as well when we\u2019re talking about second half \u201924? If you can just give us a sense of year-on-year, that\u2019d be helpful, thanks.","evidence_gemma_new":null,"evidence_llama_3_3":"NII 3% 1Q year-on-year","evidence_qwen_3_30b":"NII 3% 1Q","gemma_new_max":null,"gemma_new_min":null,"llama_3_3_max":3.0,"llama_3_3_min":3.0,"qwen_3_30b_max":3.0,"qwen_3_30b_min":3.0}
{"symbol":"BAC","year":2024,"quarter":1,"date":"2024-Q1","chunk_id":46,"sub_chunk_id":0,"centroid_label":"nii","agreed_value":4500000000.0,"count":2,"chunk":"Alastair Borthwick: Sure, well I\u2019d say generally speaking, higher for longer is probably better for banks, as a general statement. The question will become why are rates higher, like what\u2019s going on in the economy? Are we talking about inflation, is it under control, is it coming down? Right now, that appears to be the case, so that\u2019s obviously a good place. The Fed\u2019s in a good place because they appear to have rates that are a real rate that is high enough to make sure that inflation stays in a good place. Things can change, Matt, so an awful lot will depend upon just the why for rates; but generally speaking, if it\u2019s just because it\u2019s taken a little while longer for the inflation to nudge down before the next set of cuts, that\u2019s probably a good environment for us. I would expect us to perform relatively better than we\u2019ve disclosed so far. Then you\u2019re asking a second question, which is around what does the sensitivity look like to plus-100 or minus-100. We\u2019ve tried to just make sure that we continue to stay balanced. If anything, that corridor of plus-100, minus-100 has gotten narrower and narrower over time as we\u2019re trying to lock in NII that\u2019s $4 billion or $5 billion higher per quarter today than it was three years ago, and just make sure that the shareholder benefits from that through the course of time. We\u2019ll see how the environment plays out - it\u2019s only been a quarter since we were last here talking about six cuts. Now it\u2019s three, so we just have to watch this play out and stay patient. Matt O\u2019Connor: Okay, fair enough. That\u2019s helpful, thank you.","evidence_gemma_new":"NII per quarter","evidence_llama_3_3":"NII per quarter","evidence_qwen_3_30b":null,"gemma_new_max":4500000000.0,"gemma_new_min":4500000000.0,"llama_3_3_max":4500000000.0,"llama_3_3_min":4500000000.0,"qwen_3_30b_max":null,"qwen_3_30b_min":null}
{"symbol":"BAC","year":2024,"quarter":1,"date":"2024-Q1","chunk_id":2,"sub_chunk_id":0,"centroid_label":"nii","agreed_value":14200000000.0,"count":2,"chunk":"Brian Moynihan: Thank you Lee, and good morning to all of you, and thank you for joining us. I am starting on Slide 2 of the earnings presentation. We once again delivered a strong set of results in quarter one. We reported net income of $6.7 billion after tax and EPS of $0.76. This included the additional expense accrual for the industry special assessment by the FDIC to recover losses from the failures of Silicon Valley Bank and Signature Bank. This lowered our quarter one EPS by $0.07. Excluding that expense, net income was $7.2 billion and EPS was $0.83 per share in quarter one. Alastair is going to walk you through details of the quarter momentarily, but first let me give you a few thoughts on our performance. We delivered good improvement in our fee-based business, driven both by continued organic growth and good market conditions. Investment banking saw a nice rebound this quarter. We delivered nearly $1.6 billion in investment banking fees and grew 35% from the first quarter 2023. Matthew Koder and the team have done a great job delivering market share growth. In addition, our results reflect the benefits of investments made in our middle market investment banking teams and dual coverage teams. Matthew has utilized [indiscernible] power wisely to grow our middle market team from 15 bankers in 2018 across a dozen cities, to more than 200 bankers in twice as many cities today. Both groups work with our commercial bankers and wealth management advisors in those cities to deliver for our clients. Investment and brokerage services revenue across Merrill and the private bank grew 11% year-over-year in quarter one to nearly $3.6 billion. Continued investments in our advisor training programs and digital delivery for our clients as well as positive market helped us deliver strong revenue. Asset under management flows were $25 billion in the quarter. Sales and trading excluding DBA delivered its eighth consecutive quarter of year-over-year revenue improvement. At $5.2 billion, this is the highest first quarter result in over a decade. We have allocated more balance sheet invested in talent to build our [indiscernible] for the last five years in this business. Those investments plus the intensity of the teams under Jimmy DeMare\u2019s leadership have resulted in good momentum and market share improvement. From a balance sheet perspective, we entered the quarter expecting modest moves in loan growth and a decline in deposits - those were our expectations. What we actually delivered was growth in ending deposits of more than $20 billion. Ending loans were down modestly due to the expected credit card seasonality, otherwise loans were pretty stable. This balance sheet performance along with our continued pricing discipline allowed us to deliver better than expected NII performance. We told you last quarter that we expected NII to decline from the fourth quarter of 2023 to the first quarter of 2024, a decline of about $100 million to $200 million. We actually reported today NII of $14.2 billion - that was $100 million higher than quarter four, exceeding our guidance. We continue to deliver strong expense management. Year-over-year expenses adjusted for the FDIC assessment was up a little less than 2% - that compares to the 4%-plus inflation rate. We also continued to invest in our company while managing those expenses. We had several categories with stronger fee-based revenue in the first quarter this year. This drove higher formulaic compensation and processing costs of the increased activity. Fees and commissions were up 10% year-over-year. We are happy to pay for that revenue and deliver more earnings to the bottom line because of it. How did we do all that and hold expenses under the inflation rate? Well, we remain focused on three primary drivers at Bank of America. First, our operational excellence platform continues to deliver and improve processes. These savings from that growth help fund the future growth in the company and lower the risk. Second, we managed headcount as we eliminated work. Recall, we noted an expectation in January of last year that our headcount would be down throughout the year. Our headcount at the end of first quarter 2024 was down by more than 4,700 people from the first quarter 2023. It declined 650 people just from the end of 2023. The digitization activity is also driving ongoing expense cost savings, customer retention and market share improvement, driving across all three factors. It also supports the ever-increasing volumes of client activity with little increased cost. I would highlight our continued capital strength with common equity Tier 1 capital of $197 billion. That amount of capital is $31 billion over the current regulatory minimums for our company. That capital has allowed us to both support our clients and return $4.4 billion to shareholders this quarter in share repurchases and dividends. Let me highlight a few points on our organic growth before I pass it over to Alastair. Now I\u2019m turning to Slide 3. You can see on Slide 3 the highlights of quarter one successful organic activity across the businesses. We continue to invest and enhance our digital platforms. We provide our customers with convenient and secure banking experiences. By leveraging our technology and continuous investment in that technology and putting customers at the center of everything we do, we have successfully deepened our relationships and expanded our customer base across all our businesses. In consumer, we had added 245,000 net new checking accounts this quarter. This completes 21 straight quarters of net additions. Dean Athanasia, Aron Levine and Holly O\u2019Neill helped drive that business for us and continue to perform well, driving strong performance across our consumer franchise. These checking balances continue to drive the performance of our consumer deposits. These checking additions are important for many other reasons. On average, 68% of our deposit balances have been with us for more than 10 years; 92% of the customer checking accounts are primary checking accounts in the household, meaning that they\u2019re the core operating account for the household for their financial lives. When we on-board a client, we start a long-term valuable relationship. About 60% of our checking accounts customers use a debit card and on average they do about 400 transactions per year on that card. The new checking accounts have traditionally opened savings accounts, about 25% of the time within a few months of opening that checking account. Opening a new checking account on average brings about $4,000 in balances below our averages, but that continues to grow and within a year, it\u2019s two times that amount. Likewise when we open a new savings account, it on average brings about $7,000 in balances. This also deepens by about two times during the year. Investment relationships and credit card account openings continued to be strong in the first quarter as well. While we believe some of these statistics are best in class, rest assured there are plenty opportunities for further growth in our franchise and our company. As we think about our global wealth team led by Eric Schimpf, Lindsay Hans and Katy Knox, that team added 7,300 net new wealth relationships with Merrill and the private bank. Our advisors opened 29,000 new bank accounts in the quarter with our customers, deepening their relationships. More than 60% are investing clients in Merrill and 90% of our private banking clients now have a core banking relationship with us. In addition, across our wealth spectrum we saw $60 billion in total flows over the last year. As you can see on this slide, we now manage more than $5.6 trillion in total client balances across loans, deposits and investments, and consumer and wealth management. When we move to global banking, we added more new relationships in this quarter than we did in last year\u2019s first quarter. We also increased the number of solutions per relationship with preexisting clients. Just like in our consumer business, we have seen good growth in customers seeking the benefits of both our physical and our online capabilities and also the care of our talented relationship managers, who provide financing solutions and advice for our clients with global needs. A couple other points I\u2019d make on our digital success. Erica, our virtual banking assistant, reached a key milestone of more than 2 billion interactions since its introduction about six years ago. It took four years to reach 1 billion interactions; it took just 18 months to reach the second billion. In August, we extended Erica\u2019s reach and launched Erica in our global treasury services business and CashPro. Erica has resolved 43% of the CashPro chat inquiries automatedly, demonstrating more and more clients are able to self-solve. This is a great example of best practices being shared across the scale of our company. Second, as an example of our digital success, Zelle continues to grow. It wasn\u2019t long ago that we noted that the number of Zelle transactions in a quarter had surpassed the number of checks written. Shortly after that, Zelle transactions reached two times the number of checks written. This quarter, Zelle transactions have now passed the combined number of checks written plus the amount of cash withdrawals from tellers and from ATMs. That is a rapid adoption and represents continued cost savings and convenience and security for the customers. These stats and others are included in our quarterly activity for our digital banking progress. That\u2019s included in Slides 20, 22 and 24. I encourage you to read them. They show our market-leading efforts representing billions of dollars of our investment over the years, and we are continuing to drive growth with expense growth under control. The solid earnings results achieved this quarter are a testament to the dedication and talent of our 212,000 people who work here and deliver for our customers every day. I thank them for another great quarter. With that, I\u2019ll turn it over to Alastair.","evidence_gemma_new":"NII","evidence_llama_3_3":null,"evidence_qwen_3_30b":"NII expectations first quarter 2024","gemma_new_max":14200000000.0,"gemma_new_min":14200000000.0,"llama_3_3_max":null,"llama_3_3_min":null,"qwen_3_30b_max":14200000000.0,"qwen_3_30b_min":14200000000.0}
{"symbol":"BAC","year":2024,"quarter":2,"date":"2024-Q2","chunk_id":9,"sub_chunk_id":0,"centroid_label":"nii","agreed_value":0.04,"count":2,"chunk":"Glenn Schorr: Hi, thanks very much. Hello there. And definitely appreciate slide 10 a lot. I know you would have given us the 2025 NII guide if you wanted to give us one, so feel free to give that if you want, but that's not my question. My question is, given all the pieces of the puzzle that you gave us expectations for modest loan and deposit growth and slowing deposit-seeking behavior, if you get that 4% pickup from 2Q to 4Q this year that you're expecting, right now or at least recently, consensus had NII looking flattish with that fourth quarter number, and that doesn't make a lot of sense given all the pieces. So maybe if you can just comment directionally if you don't want to give the number of, does it make sense to you that we'd collectively be expecting flat NII with your higher fourth quarter number?","evidence_gemma_new":"NII 2Q 4Q","evidence_llama_3_3":"NII expecting 4% this year","evidence_qwen_3_30b":null,"gemma_new_max":0.04,"gemma_new_min":0.04,"llama_3_3_max":0.04,"llama_3_3_min":0.04,"qwen_3_30b_max":null,"qwen_3_30b_min":null}
{"symbol":"BAC","year":2024,"quarter":2,"date":"2024-Q2","chunk_id":75,"sub_chunk_id":0,"centroid_label":"nii","agreed_value":4500000000.0,"count":3,"chunk":"Alastair Borthwick: Yes. So this is -- this shows that we're asset sensitive. That's why the red box obviously is bigger than the green box. It's the market specifically that's liability sensitive. So we're still asset-sensitive, Gerard. What it would take for us is either we can have a lot more rotation into interest-bearing or we could buy some short-dated duration, fixed-rate. So those are the two alternatives. And if you look at the course of time, if you were to go back to our queues over time, you'd see that we've become less and less rate-sensitive overtime. We've really narrowed the corridor of whether rates go up by 100 or down by 100, what could that outcome look like? Narrowed that pretty substantially over time because we're trying to lock in rates here, recognizing that NII is up $4 billion or $5 billion over the course of the past several years per quarter.","evidence_gemma_new":"NII over the course of the past several years per quarter","evidence_llama_3_3":"NII over the course of the past several years per quarter","evidence_qwen_3_30b":"NII over the course of the past several years per quarter","gemma_new_max":4500000000.0,"gemma_new_min":4500000000.0,"llama_3_3_max":4500000000.0,"llama_3_3_min":4500000000.0,"qwen_3_30b_max":4500000000.0,"qwen_3_30b_min":4500000000.0}
{"symbol":"BAC","year":2024,"quarter":3,"date":"2024-Q3","chunk_id":2,"sub_chunk_id":0,"centroid_label":"nii","agreed_value":2.0,"count":2,"chunk":"Brian Moynihan: Thank you, Lee, and good morning, and thank all of you for joining us for our discussion of our third quarter results. Bank of America continued to demonstrate strength this quarter in an economy that continued to be stable, albeit with slower growth and falling inflation. So many of you asked me from time-to-time what do we see in our own customer -- consumer customer base. As we talked about many times, our consumer payments is an indicator of activity. Those payments were up 4% to 5% year-over-year for the quarter in the total money those consumers moved in the economy. The pace of year-to-year money movement has been steady since late summer this year. After having fallen in the spring and early summer. This growth in consumer payments continues into October. This activity is consistent with how customers are spending money in the 2016 to 2019 timeframe. When the economy was growing, inflation was under control. This report is not meant to gainsay that consumers are worried of the cost of living, worried about higher rates and other matters. But overall activity is fine, unemployment is low and wage growth is steady, both of which bode well for the consumer overall and for consumer asset quality. With respect to what we see in our commercial businesses, it is consistent with a lower growth economy. Line of credit usage rates remain lower than pre-pandemic levels. This does not surprise us what with the dramatic increase in the cost of borrowing for small and medium-sized businesses. They aren't being indolent, they want to grow. They are simply being more careful and worry a final demand will hold. Therefore, they are being cost conscious across the board. So how did Bank of America do against this backdrop? At Bank of America, our commitment to responsible growth remains unwavering, and this quarter is another illustration of that. We grew, we did it the right way. In the third quarter, Bank of America generated $25.5 billion in revenue and earned $6.9 billion in net income after tax. Year-to-date, we've generated net income of just over $20 billion. Four quarters ago, we called that a bottom would occur in our net interest income in the second quarter of 2024. Even with a rate environment that has bounced around quite a bit since we said that we got it right. As we expected then, NII indeed troughed in the quarter two. NII grew 2% this quarter and Alastair will note later, we expect NII to grow again in quarter four, even as the market expects two more rate cuts in quarter four. This quarter, we saw a healthy revenue growth in our wealth and investment management business and in our global markets businesses. We returned 5.6 billion of capital to shareholders while also supporting the needs of our clients. So with that brief overview, let's dive into Slide 2. Earnings per share came in at $0.81 this quarter at $25.5 billion in revenue we grew modestly from the third quarter, '23 as improvement in noninterest income more than offset a year-over-year decline in net interest income. Fees grew 5% year-over-year and represented 45% of total revenue. The strong year-over-year fee performance was led by a 15% improvement in investment in brokerage services, mostly in our global wealth management business. We also grew investment banking fees 18% year-over-year sales and trading revenue increased 12% year-over-year and aggregate, these market related revenue streams rose an impressive 13% year-over-year. Our total expense in the company increased 4%. You can attribute most of the year-over-year expense growth to these market related areas. Overall, a good job by the team. On asset quality a few quarters ago we told you that consumer credit losses would go down this quarter, given delinquency trends we had seen at the time. We also told you that office losses would be lower. Both of these proved true again this quarter. Good asset quality resulted in net charge-off in provision expense for this quarter at $1.5 billion, which was unchanged from last quarter. Our performance is partly attributable to the diversity and balance of the company. A little more than half our earnings come from our consumer and GWIM businesses serving people and the other half come through from our Global Banking and Markets businesses serving companies and institutional investors. So let's turn to see how we grew organically this quarter. We are now on Slide 3. Our organic growth has been driven by a continued focus on customers and client experience throughout all our businesses. Consumer leads the way delivering solid organic growth with high quality accounts engaged clients. For the 23rd consecutive quarter, we added significant net new consumer checking accounts and expanded our customer base and market share. We added 360,000 net new checking accounts this quarter, which brings our first nine months of '24 to more than 880,000 net new checking accounts. In wealth management, we added another 5,500 net new relationships this quarter. In our commercial businesses, we added hundreds of small business and commercial banking relationships. Also note that we saw a strong organic growth of investment balances with banking customers and growth in banking products for our investment clients in our GWIM business. This has led us to now manage $5.9 trillion in client balances of loans, deposits and investments across the consumer and wealth management clients. We saw flows of $62 billion into those businesses in the past four quarters. In our Global Banking business, we saw loan demand start to pick up late in the quarter. We again ranked third in the logic IB fees we received and have a solid pipeline. Our global transaction services platform continues to grow around the world and showed strong deposit growth for our commercial businesses over the last year and a quarter. This quarter, global markets saw continued momentum. Global markets recorded the 10th consecutive quarter of year-over-year growth in sales and trading. Investments we've made in this business and the intensity of the teams has enabled a 35% improvement in sales and trading revenue in the past three years. Good work by Jimmy DeMare and the team. Our customers and clients continue to want more from us, especially when it comes to our digital capabilities. So let's discuss this on Slide 4. Slide 4 highlights this continued success across our digital platforms. As usual, we include our disclosures on digital stats across the business, which we believe lead the industry. I commend you the pages in the appendix, which give you more granular disclosure for each of the businesses' digital activities. Our fully integrated consumer banking investment application drives the utility for our customers across GWIM and consumer. The usage stats you see are strong proof points. Our second language capabilities also enhance the customer's experience. We have grown to more than 48 million active digital users and those digital users logged in more than 3.6 billion times this quarter. We also continue to see more sales through their digital properties. Digital sales represented 54% of our total consumer sales this quarter. Note that it simply takes both high-touch and high-tech to drive continued growth with individual clients across the wealth spectrum in America. Erica, our AI enabled virtual assistant reached 2.4 billion client interactions since its launch and Zelle showed continued user and usage increases. In our wealth management business, we continue to see full relationships increase with both investing and banking relationships being open. 75% of new accounts in Merrill were opened digitally whether they were banking accounts or investment accounts. This enables more efficient customer coverage for our advisory teams. Finally, 87% of our Global Banking relationship clients are digitally active. We have innovated and significantly streamlined service requests by enabling clients to directly initiate and track inquiries within our award winning cash flow platform. As a result, app sign-ins for these clients increased nearly 80% in just the last 24-months. In summary, the economic environment remains solid. Issues remain out there to external factors that could affect our business and the economy generally. We still see great opportunities for continued growth across all our businesses. We are focused on driving market share in all our businesses, investing in technology to further enhance the customer experience and continue to increase our efficiency. With NII now growing and complementing our fee growth along with our continued solid expense discipline, we expect to return to operating leverage as we move through the quarters in 2025. With that, I'll turn to Alastair for additional details.","evidence_gemma_new":null,"evidence_llama_3_3":"NII","evidence_qwen_3_30b":"expect NII quarter four","gemma_new_max":null,"gemma_new_min":null,"llama_3_3_max":2.0,"llama_3_3_min":2.0,"qwen_3_30b_max":2.0,"qwen_3_30b_min":2.0}
{"symbol":"BAC","year":2024,"quarter":4,"date":"2024-Q4","chunk_id":3,"sub_chunk_id":0,"centroid_label":"nii","agreed_value":14400000000.0,"count":2,"chunk":"Alastair Borthwick: Thank you, Brian. And I'm going to start on Slide 5 of the earnings presentation, because it will provide just a little more context on the quarter. For the fourth quarter, as Brian noted, we reported $6.7 billion in net income or $0.82 per share. And before we talk about comparisons between periods, I just need to remind you that our fourth quarter 2023 GAAP net income number included two notable items. In the fourth quarter of \u201823, first, we recorded $2.1 billion of pre-tax expense for the special assessment by the FDIC to the industry to recover losses from the failures of Silicon Valley Bank and Signature Bank, and that reduced EPS last year by $0.20. Second, we recorded a negative pre-tax impact to our market-making revenue of approximately $1.6 billion related to the cessation of BSBY as an alternative rate, and that reduced earnings per share last year by $0.15. So when you adjust for the large FDIC assessment and the BSBY cessation charge, fourth quarter \u201823 net income was $5.9 billion or $0.70 per share. On Slide 6, we note some of the highlights of the quarter and we reported revenue of $25.5 billion on a fully taxable equivalent basis, up 15% from the fourth quarter of \u201823. And if you exclude the fourth quarter \u201823 BSBY cessation charge, our revenues grew 8% year-over-year. As Brian said, all the revenue items are showing improvement year-over-year. NII grew 3%. Investment banking grew 44%. This quarter, our $4 billion of sales and trading revenue marked a fourth quarter record, and it grew 10% from the year ago period. And investment brokerage fees rose 21%, with both assets under management flows and market levels contributing nicely to the growth. Our card income and service charges grew 7%. Non-interest expense was $16.8 billion and was up when adjusted for the FDIC special assessment driven by incentives paid for the strong revenue growth as Brian noted and the related activity costs that comes with that. Expense also included additional investments in people, technology, and brand with some major partnerships announced recently. And it included what we expect to be the peak in quarterly costs associated with enhancing our compliance costs and controls. The good news is we created operating leverage in the quarter. Provision expense for the quarter was $1.5 billion and was consistent with the previous two quarters. And lastly, returns in the fourth quarter were 80 basis points of ROA and 13% return on tangible common equity. Back to the balance sheet on Slide 7. We ended the quarter at $3.26 trillion of total assets, down $63 billion from the third quarter, driven by seasonally lower levels of client activity in global markets, while loans across the businesses grew $20 billion in the quarter. Otherwise in the quarter, the investments of our excess liquidity saw a $9 billion reduction in hold to maturity securities. And at the same time, the combination of shorter-term liquidity investments of cash and available for sale securities increased $28 billion. On the funding side, total deposits grew $35 billion on an ending basis as both interest bearing and non-interest bearing grew. Long-term debt fell $14 billion driven by net redemptions and valuations, and global markets funding declined in line with assets. Liquidity remains strong with $953 billion of global liquidity sources. That is up modestly compared to the third quarter, even as we paid down some debt and retired some preferreds. Shareholders' equity was flat at around $295 billion. And within all of that, we returned $5.5 billion of capital back to shareholders with $2 billion in common dividends paid and the repurchase of $3.5 billion in shares this quarter. Tangible book value per share of $26.58 rose 9% from the fourth quarter last year. Turning to regulatory capital, our CET1 level improved to $201 billion and the CET1 ratio rose to 11.9%, remaining well above our new 10.7% requirement. Risk-weighted assets increased modestly as increases in loans were mostly offset by lower RWA supporting our global markets client activity. Our supplementary leverage ratio was 5.9% versus a minimum requirement of 5%, which leaves some capacity for balance sheet growth, and our $460 billion of total loss absorbing capital means our TLAC ratio remains comfortably above our requirements. Let's turn to Slide 8. We can go a little deeper on loans by looking at average balances. And loans in the fourth quarter of $1.08 trillion improved 3% year-over-year, driven by solid commercial loan growth. Overall, commercial loans grew 5% year-over-year. And importantly, this included an 8% drop in commercial real estate loans. Commercial loans excluding commercial real estate grew 7% year-over-year, and the consumer loans grew modestly both linked quarter and year-over-year. As Brian said, on a linked quarter basis, every category of consumer lending grew, and you can see that at the bottom of Slide 8. If we turn our focus to NII performance and use Slide 9, regarding NII on a GAAP, non-fully taxable equivalent basis, NII in Q4 was $14.4 billion. And on a fully taxable equivalent basis, NII was $14.5 billion. Several quarters ago, we signaled our expectation that NII would trough in the second quarter of 2024 and begin to grow from there. And this represents now our second quarter of NII growth. And we expect that growth to continue in 2025. In fact, if you look at the two quarters after the inflection point, NII is already growing at a 5% rate. Fourth quarter NII on a fully taxable equivalent basis increased by $399 million from the third quarter, driven by a number of factors. First, it was led by improvement in deposits across the businesses. And even as deposit balances increased linked quarter, our interest expense on those deposits declined by $600 million. Loan growth and fixed rate asset repricing also benefited us again this quarter. With regard to a forward view, interest rate expectations continue to drive volatility and predictability, but we'll provide some thoughts for future NII. We expect to start the year in the first quarter with NII modestly higher than the fourth. Remember that the first quarter has two fewer days of interest and that's roughly the equivalent of about $250 million of NII equivalent. So even with that, we expect to grow modestly. Then we expect that growth to increase through the year to the point where it could be 6% to 7% higher in 2025 than 2024. We expect to exit the year at least $1 billion higher in the fourth quarter and that would put us in a range of $15.5 billion to $15.7 billion on a fully taxable equivalent basis, and that's obviously significantly higher than the Q2 '24 trough of $13.9 billion. I have to note the following assumptions. First, we assume that the current forward curve materializes. And while the interest rate curve has changed significantly over a fairly short period of time, as of the 10 of January, the curve was expecting only one rate cut in 2025 that may come in May or June. Based on our more recent growth experienced, we're assuming loan and deposit growth in 2025 that's higher than 2024, and more consistent with growth in a 2% to 3% GDP environment. The other elements of anticipated growth in NII expected are the benefits of asset repricing as fixed rate securities and loans and swaps roll off and those get repriced at higher rates. And those themes all remain consistent with our prior conversations with you in the last several earnings calls. With regard to interest rate sensitivity, on a dynamic deposit basis, we provide a 12-month change in NII for an instantaneous shift in the curve, above or below the forward curve. And on that basis, a 100 basis point increase would benefit NII by roughly $1 billion, while a decrease of 100 basis points would decrease NII over the next 12 months by $2.3 billion. Lastly, note that our slide showing the trended investment of excess deposits is in our appendix. It's on page 21. Deposit levels grew to $870 billion over loans at the end of Q4, and that's an incredible source of value for shareholders. And $649 billion, or 54% of our excess liquidity, is now in short-dated cash and available for sale securities. The longer-dated lower-yielding hold-to-maturity book continues to roll off, and we continue to reinvest in higher-yielding assets. Okay. Let's now turn to expense, and we'll use Slide 10 for the discussion. We reported $16.8 billion in expense this quarter. And the fourth quarter of '23 included the large FDIC special assessment charge and excluding that, expense increased. The increased expense from prior periods was driven by a number of factors and was partially offset by a roughly $300 million release of prior period accruals for the FDIC special assessment. Let's talk about the drivers of the expense. First, in regard to revenue, our markets-related businesses of investment banking, investment in Brokerage and Sales & Trading, those were up 20% year-over-year. Incentives for the firm were up 15% versus the fourth quarter of '23 and were in large part related to these market-related revenue streams. On investments that we made, we added bankers and advisers across most of our businesses in 2024, and we also increased investments in our brand with significant sponsorships like the Masters in FIFA to name a few. And we increased our investments around technology as well as financial centers. This quarter alone, we added 17 financial centers with nine of those in our new expansion markets. We're a growth company, and we continue to invest in our future. As far as head count goes, we've managed our head count carefully, and we've held it fairly flat through the 4 quarters of 2024 at around 213,000 people. Lastly, we incurred additional costs to accelerate work on compliance and controls. As you likely saw in late December, the OCC issued a compliance consent order to Bank of America, and that's a result of exams done more than a year ago. This orders about correcting or enhancing certain deficiencies in some aspects of our processes that existed at the time. The order doesn't limit any of our growth plans and the order acknowledges we began taking corrective actions before the order was announced. And as a result of the work in process, we increased our resources substantially in the second-half of 2024 and those costs are already embedded in our quarterly run rate. Okay. Let's go back to expense and how to think about a forward view. First, most importantly, we remain focused on growing the company and driving operating leverage. Second, we expect the first quarter to include some normal seasonal elevation and we believe this amount will be roughly $600 million to $700 million, primarily for payroll tax expense. So we think $17.6 billion is a good number to expect for Q1 and before seasonally declining in Q2. And that's all part of our expectation that expense should be roughly 2% to 3% higher in 2025, compared to 2024. Let's now move to credit and turn to Slide 11, where you can see net charge-offs of a little less than $1.5 billion, improving modestly compared to Q3. That's the fourth quarter now that net charge-offs are around $1.5 billion. We've seen consumer losses in a pretty stable range of $1 billion to $1.1 billion over those past few quarters. And on the commercial side, we saw losses of $359 million, which is down from the third quarter, driven by the continued decline in commercial real estate office losses. Net charge-off ratio this quarter was 54 basis points, down 4 basis points from the third quarter. We don't see overall net charge-offs or the related ratio changing much in 2025, without much change in current GDP or the employment environment, we expect the net charge-off ratio to be in the range of 50 to 60 basis points of loans for 2025. Q4 provision expense was $90 million lower than Q3 at $1.5 billion as reserve levels remain constant. And as it relates to reserve levels on a weighted basis, where reserved for an unemployment rate a little below 5% by the end of 2025, and that compares to the most recent 4.1% rate reported. On Slide 12, we highlight the credit quality metrics for both consumer and commercial portfolios. And there's nothing really noteworthy here that I want to highlight on this page. So let's move to the various lines of business starting on Slide 13 with Consumer Banking. That business made nearly $11 billion or 40% of the company's earnings in 2024. In the fourth quarter, Consumer Banking generated $10.6 billion in revenue and $2.8 billion in net income. Both grew modestly from the fourth quarter of '23 as fee improvement for card and service charges is now being complemented by the growth in NII. Consumer Banking continued to deliver strong organic growth with high-quality accounts and engage clients and they achieved a new record of client experience scores in December. The organic growth activity noted on Slide 3 includes more than 200,000 net new checking accounts, which now takes us to six years' worth of quarter-after-quarter growth. And we show another strong period of card openings and investment account growth. Investment balances grew 22% to $518 billion with full year flows of $25 billion and market improvement throughout the year. Expense rose 8% as we continued investments in our business. The biggest story in consumer this quarter is deposits because these are the most valuable deposits in the franchise. And in the last six months, we believe we've seen the floor begin to form after several periods of slowing decline. Consumer Banking deposits appear to have bottomed in mid-August at around $928 billion and ended the year at $952 billion on an ending basis. Looking at averages, you can see then the deposits grew $4 billion from the third quarter to $942 billion, all while our rate paid declined to 64 basis points. Finally, as you can see in the appendix, page 26, digital adoption and engagement continue to improve and customer satisfaction scores rose to record levels, illustrating our client appreciation of enhanced capabilities from these investments. On Slide 14, we move to Wealth Management, where the business had a very profitable year, generating $4.2 billion in earnings from nearly $23 billion in revenue. In 2024, our Merrill Lynch and Private Bank advisers added another 24,000 net new relationships. And the professionalism of these teams earned them numerous best-in-class industry rankings as you can see on Slide 27 in the appendix. With a continued increase in banking product usage from our investing clients, the diversity of revenue in the wealth business continues to improve. The number of GWIM clients that now have banking products with us continues to grow. And at this point, it represents more than 60% of our clients. Importantly, about 30% of our revenue remains in net interest income, which complements the fees earned in our advice model and those have also grown. Net income rose 15% from the fourth quarter of '23 to nearly $1.2 billion. In the fourth quarter, we reported revenue of $6 billion, growing 15% over the prior year and led by 23% growth in asset management fees. While expenses were up year-over-year, they grew slower than revenue creating the operating leverage in the business. Business had a 26% pretax margin and generated a strong return on capital of 25%. Average loans were up 4%, driven by growth in custom lending, securities-based lending and a pickup in mortgage lending. Deposits grew 2% from the third quarter, and the teams were quite disciplined on pricing of those deposits. Both Merrill and the Private Bank continued to see strong organic growth. And that helped to produce excellent asset under management flows of $79 billion this year, reflecting a good mix of new client money, as well as existing clients putting money to work. We also want to draw your attention to the continued digital momentum that you'll find on Slide 28. Because, for example, three quarters of Merrill bank and brokerage accounts were opened digitally this quarter. Slide 15 shows the Global Banking results and this business generating $8.1 billion or 30% of the company's earnings in 2024, and it continues to be the most efficient business in the company at less than 50% efficiency ratio. The business saw a nice rebound in investment banking fees in 2024, which we expect to continue in 2025. In Q4, Global Banking produced earnings of $2.1 billion. Pretax pre-provision results were flat year-over-year as improved investment banking fees offset lower NII and higher expense. The total earnings were down 13% year-over-year, driven by higher provision expense that came as a result of prior period reserve release. Investment banking fees were $1.7 billion in Q4, growing 44% year-over-year. This was led by mergers and acquisitions. We also saw strength across debt capital markets fees mostly in leverage finance and in equity capital markets fees and we finished the year strong, maintaining our number three investment banking fee position. The fourth quarter saw a strong momentum as the election results provided a lift to sentiment for a more pro-business climate and expectations for more deals to be completed. Expense in this business increased 6% year-over-year, driven by the 13% growth in non-interest income and continued investments in people and technology. The balance sheet saw good client activity, and it was muted somewhat by the strength of the U.S. dollar. Year-over-year flatness in Global Banking loans includes this foreign exchange impact and a $6 billion decline in commercial real estate from paydowns. Otherwise, loans in Global Banking were up 2%. Deposits have been growing for many quarters now with our commercial and corporate clients. And total global banking deposits are now up 10% year-over-year, reaching a new record. So we're seeing strong growth across all the categories from our corporate and commercial clients all the way from the larger end the business banking on the lower end. And we also saw a 10% growth in our international deposits. Turning to Global Markets on Slide 16, I want to focus my comments on results excluding DVA as we normally do. Our team continued their impressive streak of strong revenue and earnings performance. They achieved operating leverage, and they continue to deliver a good return on capital. For the year, record sales and trading results of nearly $19 billion grew 7% from 2023 and they've been growing consistently now on a year-over-year basis for almost three years. This led to $5.7 billion in full-year profits and represents more than 20% of the company's full-year results. In the fourth quarter, earnings of $955 million grew 30% year-over-year. Revenue and again, this is ex DVA, improved 15% from the fourth quarter of '23, as both Sales & Trading and Investment Banking fees improved nicely year-over-year. Focusing on sales and trading ex DVA, revenue improved 10% year-over-year to $4.1 billion. This is the first time we've recorded more than $4 billion in our Q4 results and it included Q4 records for both FICC and Equities. FICC grew 13%, while equities improved 6%, compared to the fourth quarter '23. FICC benefited from tighter credit spreads as well as increased volatility in interest rates, while equities benefited from increased activity around the U.S. election. Year-over-year expenses were up 7% on revenue improvement and our continued investment in the business. And then on Slide 17, you can see all other with a loss of $407 million in the fourth quarter. We spoke earlier about the fourth quarter \u201823 charges for BSBY and the FDIC special assessment charge. Their reversal impacts the comparisons on revenue, expense and net income in this segment. Otherwise, there really isn't anything significant to report here. Our effective tax rate for the quarter was 6%, and excluding discrete items and the tax credits related to investments in renewable energy and affordable housing, the effective tax rate would have been approximately 26%. Looking forward, we expect the tax rate for 2025 to be in a range of 11% to 13%. And this just includes our expectation for higher expected earnings in 2025 and relatively stable tax credits. Finally, this quarter, on page 18, we thought it was important to summarize some of the guidance points we talked through this morning, and we hope you'll find this page helpful. So in summary, we're looking for a strong growth in NII, and we'll look to both continue important investments in the franchise and drive operating leverage as we grow throughout the year. We aren't expecting much movement around credit based on a pretty solid economic outlook. And we remain with a very strong balance sheet with excess capital that we can deploy to grow the business and deliver back to shareholders as appropriate. So with that, I'll stop there. I thank everybody, and we'll open it up for Q&A.","evidence_gemma_new":"NII Q4","evidence_llama_3_3":"NII Q4","evidence_qwen_3_30b":null,"gemma_new_max":14500000000.0,"gemma_new_min":14500000000.0,"llama_3_3_max":14400000000.0,"llama_3_3_min":14400000000.0,"qwen_3_30b_max":null,"qwen_3_30b_min":null}
{"symbol":"BAC","year":2023,"quarter":1,"date":"2023-Q1","chunk_id":3,"sub_chunk_id":0,"centroid_label":"provision expense","agreed_value":931000000.0,"count":2,"chunk":"Alastair Borthwick: Thank you, Brian. And I'll pick up on Slide 3, where we list some of the more detailed highlights of the quarter. And then, on Slide 4, we present the summary income statement. So, I'm going to refer to both of these together. As Brian mentioned, for the quarter, we generated $8.2 billion of net income, and that resulted in $0.94 per diluted share. Our revenue grew 13%, and that was led by a 25% improvement in net interest income, coupled with strong 9% growth in sales and trading results, excluding DVA. Our non-interest revenue was strong, despite three headwinds: First, we had lower service charges as commercial clients paid lower fees for treasury services, since they now receive higher earned rates on balances. And, obviously, that allows us to invest those funds to earn NII. On consumer, we had lower NSF insufficient funds and overdraft fees as a result of our policy changes announced in late 2021. Second, with lower asset management fees and that just reflects the lower equity market levels and fixed-income market levels. And, third, investment banking fees were lower, just reflecting the continuation of sluggish industry activity and reduced fee pools. Now, all that said, despite these headwinds, each of the three categories saw modest improvement from the fourth quarter levels. Asset quality remained strong, and provision expense for the quarter was $931 million. That consisted of $807 million of net charge-offs and $124 million of reserve build. And that reserve build compares to a reserve release in the first quarter 2022 of $362 million. Our charge-off rate was 32 basis points and still well below the fourth quarter of '19 when our pre-pandemic rate was 39 basis points. And, remember, 2019 was a multi-decade low. So, credit, obviously, remains quite strong. I want to make one other point on Slide 4 and that is simply to note that pre-tax pre-provision income grew 27% year-over-year compared to reported net income growth of 15%. So, let's turn to the balance sheet that starts on Slide 5. And you can see, during the quarter, our balance sheet increased $144 billion to $3.195 trillion. Brian noted our liquidity levels at the end of the period, those rose to more than $900 billion from December 31. That's $23 billion higher and it remains $324 billion above our pre-pandemic level in the fourth quarter of '19. Shareholders' equity increased $7 billion from the fourth quarter as earnings were only partially offset by capital distributed to shareholders, and we saw an improvement in AOCI of $3 billion due to lower long-term interest rates. The AOCI included more than $0.5 billion increase from improved valuations of AFS debt securities and that flows through CET1. And the remaining $2.5 billion due to changes in cash flow hedges doesn't impact regulatory capital. During the quarter, we paid $1.8 billion in common dividends and we bought back $2.2 billion in shares. Turning to regulatory capital, our CET1 level improved to $184 billion since December 31 and our CET1 ratio improved 14 basis points to 11.4%, once again, adding to our buffer over our 10.4% current minimum requirement as well as the 10.9% minimum requirement that we'll see on January 1st of 2024. That means, in the past 12 months, we've improved our CET1 ratio by 100 basis points, and we've supported our clients and we've returned $12 billion in capital to shareholders. CET1 capital improved $4 billion, and that reflects the benefit of earnings and the AOCI improvement, partially offset by the capital we've returned to shareholders. Our risk-weighted assets increased modestly and that partially offset the benefit to the CET1 ratio of the higher capital we generated. And then, our supplemental leverage ratio increased to 6%. That compares to a minimum requirement of 5% and leaves plenty of capacity for balance sheet growth, and our TLAC ratio remains comfortably above our requirements. So, let's spend a minute on loan growth, and we'll do that by turning to Slide 6, where you can see the average loans grew 7% year-over-year, driven by commercial loans and credit card growth. The credit card growth reflects increased marketing, it reflects enhanced offers and higher levels of card account openings. The commercial growth across the past year reflects the diversity of commercial activity across global banking and global markets and, to some degree, global wealth. And on a more near-term linked-quarter basis, loans grew at a much slower pace, partly driven by seasonal credit card paydowns after the fourth quarter holiday spending, and then commercial demand slowed in Q1 and we saw some paydowns by our wealth management clients as they lowered leverage as rates rose. So, let's turn to deposits and there's obviously been a lot of additional focus this quarter, so I want to spend extra time here and I'm going to start with Slide 7 and talk about average deposits. Just a few points we need to make before focusing on a more detailed discussion of the recent trends. Average total deposits for the first quarter were $1.89 trillion, that is down 2% linked-quarter and down 7% year-over-year. Our deposits peaked in the fourth quarter of 2021. And even as the Fed has continued to withdraw money supply, our deposits have held around $1.9 trillion, because there's a lot more industry deposits today in a much bigger economy today compared to pre-pandemic. Our average deposits were up 34% compared to our pre-pandemic Q4 '19 balance and the industry's deposits were up 31% to $17.4 trillion. So, we've obviously fared a little bit better than the industry. We put our pre-pandemic deposits for each line of business on the slide, so you can compare our balances then and now. I want to highlight consumer checking balances, which remained 53% higher than pre-pandemic. And as I think all of us would expect, GWIM combined client deposits are up a lesser 23%, as those are the clients that generally move their excess cash into other off-balance sheet products. And in global banking, you can see the rotation to interest-bearing across time as rates rose. So, let's get a little more granular and a little more near-term and we'll use Slide 8 for that, where you can see the breakout of deposit trends on a weekly ending basis across the last two quarters. You can also see that we plotted the timeline of Fed target and rate hikes on the top-left chart, just for comparison through time. In the upper left, you can see the trend of our total deposits. We ended Q1 '23 at $1.91 trillion, that's down 1%. And, as Brian mentioned, over the course of the past six months, those balances have been relatively stable. In consumer, looking at the top-right chart, we show the difference here in the movement through the quarter between the balances of low to no interest checking accounts, and the higher-yielding non-checking accounts and, across the entire quarter, we saw a modest $4 billion decline in total. Checking balances, obviously, have some variability around pay days in particular, but note the relative stability of checking deposits, because these are the operational accounts with money and motion to pay the bills and everyday living costs for families. I'd also point out that our checking balances were modestly growing even ahead of March 9th upheaval and continue to move higher through the quarter on the back of disruption. Lower non-checking balances mostly reflect money moved out of deposits and into brokerage accounts where we earn a small fee. Rate paid increased 6 basis points from the fourth quarter to 12 basis points on this [trillion dollars] (ph) of total consumer deposits and remains low, because of the 52% mix that is checking. Lastly, I just note that the rate movements in this business are concentrated in the small CDs and consumer investment deposits, which together represent about 5% of the deposits. In wealth management, as you would expect, it shows the most relative decline, and you can see the continued trend of clients moving money from lower-yielding sweep accounts into higher-yielding preferred deposits and off-balance sheet to other investment alternatives. Now, if we went back further, you'd see that roughly $90 billion has moved out of sweeps in the past year, which leaves $80 billion in these accounts. So, you can see how with the pace and size of rate hikes slowing, we expect the declines in balances to lessen from here. At the bottom-right, note the global banking deposit movement, where we hold about $500 billion in customer deposits. These are generally operational deposits of our commercial customers and they use that to manage their cash flows through the course of the year. Those were down $3 billion from the fourth quarter. And what's interesting to note is that, our total deposits in this segment have been stable at around $500 billion for the past six months and this business just continues to see rotation into interest-bearing. The mix of interest-bearing deposits on an ending basis moved from 49% last quarter to 55% in Q1. And, obviously, we pay increased rates on those interest-bearing deposits. And it's this rotation in global banking that's driving the rotational shift of the total company, and it's pretty typical and to be expected in this environment. So, in summary, our deposits continued to behave as we would expect. The cash transactional balances have shown some recent stabilization. And for investment cash, we've seen deposits moved to brokerage and other platforms for direct holdings of money market, mutual funds, treasuries, and we are capturing many of those flows as you see in our numbers, it's just we expect that to slow going forward. So, now that we've examined trends for the different lines of business, I want to make some important points about the characteristics of our deposit franchise using Slide 9, and this will just help reinforce for shareholders who own Bank of America that they're investing in one of the world's great deposit franchises, all of it based off of relationships we have with our customers and the value they place on the award-winning capabilities and convenience they have access to. So, starting from the top, focus first on consumer. You can see that more than 80% of deposits have been with us for more than five years, and more than two-thirds of our consumer deposits are balances with customers who have had relationships with the bank for more than 10 years. Also, more than three-quarters of these customers are very highly engaged in their activities with us. They are also, geographically, dispersed across the United States given our presence in 83 of the top 100 markets. Lastly, whether you look at consumers or small business, the value proposition is what's driving the same result. We've got long-tenured customers with deep relationships that are highly engaged. Turning to wealth management, you can see a similar story around long tenure and quite active relationships. The average relationship of our GWIM clients is around 14 years. And, again, these clients are very geographically diverse, they're also very digitally engaged, and we continue to see deepening around banking solutions and products of all types. There's lots of options for these clients that extend from their operational checking accounts all the way up through preferred deposit options, and then we also benefit from having great alternatives for them within our investment platform. On global banking, note that 80% of our U.S. deposit balances are held by clients who have had an account with us for at least 10 years. Furthermore, as we measure the number of solutions that clients have with us, we know that 73% of balances are held by clients that have at least five products on us and, just like the other businesses, they are highly diversified by industry and geography. So, those are some of the things that make our quality deposit base stable. So, now that we've walked through both loans and deposits, I want to transition a bit to make some points on balance sheet management and to focus on the liquidity we enjoy by having a surplus of customer deposits that far exceeds the loan demand of our clients today and far exceeded the loan demand of our clients pre-pandemic. Having the deposits alone doesn't pay the expenses to support these great customer bases and it doesn't mean much to our shareholders, unless we put them to work to extract the value of those deposits. So, that's what we're trying to illustrate and we want to show you how we do them. You can see that on Slide 10, where you note we had significant excess deposits over loans pre-pandemic. And during the pandemic, that increased -- that amount increased significantly. Before the pandemic, we had $0.5 trillion more in deposits than loans and that peaked in late 2021 at more than $1.1 trillion and it remains high at roughly $900 billion still today. That's the context as we talk about how we manage excess cash. So, let's turn to Slide 11. And here we're going to focus on the banking book, because our global markets' balance sheet has remained largely market funded. And just follow the graph from left to right. At the top of the slide, you note trend of cash and cash equivalents and the two components of the debt securities balances: available-for-sale and held-to-maturity. And you can see the trend of the overall combined cash and securities balance movement and it closely mirrors the previous slide's excess deposit trends, as you would expect. In 2020, deposits grew, while loans declined and that was pandemic borrowing from our commercial clients stopping and then quickly paying it off. Throughout 2020, as we put deposits to work, we took a number of actions to protect our capital and that included a buildup in hold-to-maturity, better aligning our capital treatment with our intent to hold those securities to maturity. We also hedged rate risk in the available-for-sale book using pay-fixed, receive-variable swaps. So, these securities acted like cash and they earned higher yields and guarded against capital volatility. As we entered the middle of 2021, it became more clearer that the stimulus payment would likely be the last one and, therefore, we believed deposits would be peaking. As a result, we stopped adding to our hold-to-maturity securities book. That book peaked in the third quarter of 2021 at $683 billion, $562 billion were mortgage backs, and the rest were treasuries. And all that's happened is that notional balances have declined in each of the past six quarters, ending the quarter at $625 billion. And within that, the mortgage-backed portfolio was down $67 billion to $495 billion. As rates began to rise quickly throughout 2022, the value of our deposits rose. And, at the same time, the disclosed market value of the hold-to-maturity securities has declined, resulting in a negative market valuation on those bonds. That negative market valuation peaked in the third quarter, came down in the fourth quarter, and it's come down another $10 billion in the first quarter. In our 10-K disclosure, we included a chart which shows the maturity distribution of our securities portfolio. And, I'd remind you, this is based on the maturity dates of those originations, i.e., the date of the last contractual payment. When we look at the actual cash flows of those bonds over time, it results in an average weighted life of the hold-to-maturity securities book of a little more than eight years. And as you can see, since the third quarter of 2021, we've continued to see increases in the overall yield on the balances due to both the maturity and reinvestment of lower-yielding securities as well as remix into higher-yielding cash. And, as you can see, with deposits paying 92 basis points, that compares to our blend of cash and government-guaranteed securities, which pays 290 basis points. So, we continue to benefit NII and yield. And, finally, one very important last point I want to make, which is on the improved NII of our banking book. Because, remember, we manage the entirety of our balance sheet. That includes our deposits and that's where you see the net interest income has improved significantly. NII, excluding global markets, which we disclose each quarter, troughed in the third quarter of 2020 at $9.1 billion, and it's now $5.4 billion higher on a quarterly basis at $14.5 billion in the first quarter of '23, and that's the acid test of managing the entire balance sheet. So, let's turn now to Slide 12 and focus on net interest income. On a GAAP non-FTE basis, NII in the first quarter was $14.4 billion and the FTE NII number was $14.6 billion. Focusing on FTE, net interest income increased $2.9 billion from the first quarter of 2022 or 25%, while our net interest yield improved 51 basis points to 2.2%. The improvement was driven by rates, and that includes reductions in securities premium amortization. Average Fed fund rates are up 440 basis points year-over-year. Relative to that increase in Fed funds, which has benefited all of our variable rate assets, the rate paid on our total deposits rose 89 basis points and the rate paid today on interest-bearing deposits is up 133 basis points. Average loan growth of $64 billion also aided the year-over-year NII improvement. Turning to a linked-quarter discussion, NII of $14.6 billion is down $222 million from Q4, and that's primarily driven by the continued impact of lower deposit balances and the mix shift into interest-bearing. It's also influenced by lower global markets NII, which, remember, still gets passed through to clients via higher non-interest income as part of the trading revenue. Excluding the $262 million decline in global markets' NII, the banking book NII of $14.5 billion, that was modestly higher as the benefit of increased short interest rates, some modest loan growth and some deposit favorability was offset by two less days of interest in the quarter. Turning to asset sensitivity on a forward basis, the plus 100 basis point parallel shift at March 31st stands at $3.3 billion of expected NII over the next 12 months from our banking book. 96% of that sensitivity is driven by short rates. Summary, the first quarter NII was $14.6 billion in this quarter on an FTE basis and that was a little better than our $14.4 billion expectation as we began the quarter since deposits and rate pass-throughs were both modestly better. Looking forward, based on everything we know about interest rates and customer behavior, we expect second quarter NII on an FTE basis to be around 2% lower compared to Q1. So, think about that NII as about $14.3 billion FTE, plus or minus, driven by expected deposit movements as well as lower global markets' NII, which again is offset in the trading revenue. So, let me remind you of some of the caveats when it comes to that NII guidance. First, importantly, it assumes that interest rates in the forward curve materialize and that includes one more hike and then a couple of cuts in 2023. We also expect funding costs for global markets client activity to continue to increase based on those high rates. And, as noted, the impact of that is still offset in non-interest income, and that obviously assumes our current client positioning and the forward rate expectations. We continue to expect modest loan growth. So, that's in our NII expectation as well, and it's driven by credit card and, to a lesser degree, commercial. And then, finally, we just expect lower deposits and rotational shifts towards interest-bearing, really for three reasons. First, we expect further Fed balance sheet reductions to continue to reduce deposits for the industry. Second, we anticipate lower wealth management deposits in the second quarter. That's pretty typical due to the seasonal impact of clients paying income taxes and, to a lesser degree now, a continuation of balance movement seeking better yields off-balance sheet. And, third, we just continue to expect some of the rotation of commercial deposits towards interest-bearing. Okay. Let's go to Slide 13, we'll talk about expense. And here what you can see is, in the first quarter, our expenses were $16.2 billion, that's up $700 million from the fourth quarter and it's driven by seasonal elevation from payroll taxes, mostly at $450 million, a little bit from higher FDIC insurance expense, that was another $100 million this quarter, and the cost of adding people, call that another $100 million. We ended the first quarter with a little more than 217,000 people at the company, that was 260 people more than year-end. During the quarter, we welcomed 3,000 additional people into the company in January, that's due to outstanding offers that we extended in the fourth quarter. That meant that our headcount peaked in January. That's a little more than 218,000. And, at the end of last week, we were down to 216,000. We continue to expect that to move lower over time and we expect, by the end of the second quarter, our full-time equivalent headcount will be roughly 213,000, excluding our summer interns. As we look forward to the next quarter then, we would expect Q2 expense to benefit from the reduction of the seasonal elevation of payroll tax in Q1, and we would also expect to see expense reductions coming from headcount reductions through attrition over time and our operational excellence work. So, we expect expense in Q2 to be around $400 million or $500 million lower than Q1, so think of that as around $15.8 billion, plus or minus, in Q2. And then further, we just expect continued sequential expense declines in the third quarter and then again in the fourth quarter as we benefit from continued headcount discipline and attrition through time. Now turn to asset quality on Slide 14, and I want to start the credit discussion by saying, once again, asset quality of our customers remains healthy and net charge-offs continue to rise from their near historic lows. Net charge-offs of $807 million increased $118 million from the fourth quarter. That increase was driven by credit card losses as higher late-stage delinquencies flowed through to charge-offs. For context, the credit card net charge-off rate was 2.21% in this first quarter and that compares to 3.03% in the fourth quarter of '19 pre-pandemic. Provision expense was $931 million in Q1, and that included a $124 million reserve build. That's obviously less than the $403 million build we took in the fourth quarter, and it reflects modest loan growth and an ever so slightly improved macroeconomic outlook that, on a weighted basis, continues to include an unemployment rate still north of 5% as we end 2023. We included a slide in the appendix this quarter that highlights the mix and credit metrics of our commercial real estate exposure. And I just wanted to remind everyone here, we've been very intentional around our client selection, very intentional around portfolio concentration, and deal structure over many years and, as a result, we've seen NPLs and realized losses that remain quite low for this portfolio. We had a total of $66 million of commercial real estate losses in 2022. 70% of that was in office loans and that resulted in an annualized loss rate of 26 basis points. In the first quarter, to give some perspective, our office loan losses were $15 million. We have roughly $73 billion in commercial real estate loans outstanding, that's less than 7% of our loan book. It's highly diversified by geography, and no part of the country represents more than 22% of the book. It's also very diversified across property type. Within property type, our office portfolio was $19 billion, it's about 2% of our total loans. The portfolio is roughly 75% Class A properties. And when we originate, they are typically around 55% loan-to-value. Even though we've seen some property value declines, this exposure still remain well secured. $3.6 billion is classified as reservable criticized. And even on the most recent refreshes on our toughest loans, we still have 75% LTVs. In our office book, $4 billion is scheduled to mature this year, another $6 billion in 2024, with the remainder spread over the following years. So, we continue to feel that the portfolio is well-positioned and adequately reserved given the current conditions. On Slide 15, for completeness, we highlight the credit quality metrics for both our consumer and commercial portfolios. And, with that, I'm going to turn it back to Brian to talk about the lines of business.","evidence_gemma_new":null,"evidence_llama_3_3":"Bank of America provision expense first quarter","evidence_qwen_3_30b":"provision expense $931 million Q1","gemma_new_max":null,"gemma_new_min":null,"llama_3_3_max":931000000.0,"llama_3_3_min":931000000.0,"qwen_3_30b_max":931000000.0,"qwen_3_30b_min":931000000.0}
{"symbol":"BAC","year":2023,"quarter":4,"date":"2023-Q4","chunk_id":3,"sub_chunk_id":0,"centroid_label":"provision expense","agreed_value":1100000000.0,"count":2,"chunk":"Alastair Borthwick: Thank you, Brian. And I'm going to start on Slide 4 of the earnings presentation to provide just a little more context on the summary income statement and the highlights. For the fourth quarter, as Brian noted, we reported $3.1 billion in net income or $0.35 per diluted share. That GAAP net income number included two notable items. First, we recorded $2.1 billion of pretax expense, that's $0.20 after-tax earnings per share for the special assessment by the FDIC to recover losses from the failures of Silicon Valley and Signature Bank. Second, on November 15th 2023, Bloomberg announced that they would discontinue publishing the Bloomberg Short-Term Bank Yield Index rate after November 15th 2024 and many commercial loans in the industry had BSBY as a reference rate prior to SOFR becoming industry-standard. As noted in an 8-K we filed earlier this week, we came to conclusion in early January that BSBY cessation would not get the same accounting treatment allowed under LIBOR cessation. And therefore cash-flow hedges of BSBY indexed products related to BSBY cash flows, forecast to occur after November 15th 2024, we need to be moved out of OCI into earnings in the fourth quarter of '23 financials. So as a result of the accounting interpretation, we recorded a negative pretax impact to our market making revenue of approximately $1.6 billion. I just want to reinforce that's an accounting impact. It's not an economic change to the contracts and we'll see an offset to this over time through higher NII mostly occurring in 2025 and 2026 after BSBY ceases in November 2024. The accounting lowered CET1 by 8 basis points during the quarter and we will recapture that in the next two or three years. Adjusted for the FDIC assessment and the BSBY cessation related impact, Q4 net income was $5.9 billion, or $0.70 per share. On Slide 5, we show the highlights of the quarter and we reported revenue of $22.1 billion on an FTE basis. And excluding the BSBY cessation impact, adjusted revenue was $23.7 billion and declined 4%, driven by net interest income. Fourth quarter revenue is a tough year-over-year comparison as NII peaked in the fourth quarter of '22 at $14.8 billion, before slowly moving lower over 2023. Outside of NII, we saw good growth in treasury service fees and wealth management fees and those were offset by higher tax-advantaged investment deal activity, creating higher operating losses and the more tax credits associated with them and recognized across periods. Expense for the quarter of $17.7 billion included the $2.1 billion FDIC charge. So excluding that charge, adjusted expense was $15.6 billion and consistent with our prior guidance. That allowed us to invest for growth, as well as use good expense discipline to eliminate work and reduce headcount. And on an adjusted basis, this then is the third quarter of sequential expense decline this year. Provision expense for the quarter was $1.1 billion, that consisted of $1.2 billion in net charge-offs and a modest reserve release, reflecting the improved macroeconomic outlook. Net charge-offs reflect the continued trend in consumer and commercial charge-offs towards more normalized levels as well as higher commercial real-estate office losses. Lastly, our income tax expense this quarter was a modest benefit as credits from tax-advantaged investment deals offset the tax expense on the lower earnings in Q4 driven by the notable charges. So let's review the balance sheet on Slide 6, and you'll see we ended the quarter at $3.2 trillion of total assets, up $27 billion from the third quarter. I'd highlight here, both the $39 billion growth in deposits and a decline in cash on balance sheet of $19 billion. Overall, you'll note the debt securities increased $92 billion. And that included a $9 billion decline in hold-to-maturity securities, and $100 billion increase in available-for-sale securities reflecting short term investment of liquidity from all of these activities. We continue to put money into very short-term T-bills and hedged treasury notes this quarter and those are essentially earning the same rate as cash. And you can see our absolute cash levels remain quite high. As Brian noted, liquidity remained strong with $897 billion of global excess liquidity sources. That was up $38 billion from the third quarter of '23 and it remained $321 billion above our pre-pandemic level in the fourth quarter of '19. Shareholders' equity increased $5 billion from the third quarter as earnings and AOCI improvement were only partially offset by capital distributed to shareholders. The AOCI improved $4 billion, reflecting both the previously mentioned BSBY-related reclassification into fourth quarter earnings and other AOCI improvements. This included some improvements in other cash-flow hedges, which don't impact regulatory capital, driven by a decline in long-end rates. During the quarter, we paid out $1.9 billion in common dividends and we bought back $800 million in shares, which more than offset our employee awards. Tangible book value per share is up 3% linked-quarter and 12% year-over-year. Turning to the regulatory capital, our CET1 level improved to $195 billion from September 30th, while the CET1 ratio declined 9 basis points to 11.8% and remains well above our current 10% requirement as of January 1st '24. We also remained well-positioned against the proposed capital rules, as our current CET1 level matches our 10% minimum against anticipated RWA inflation from the proposed rules. Risk-weighted assets increased $19 billion on loan growth and growth in global markets, RWA, and our supplemental leverage ratio was 6.1% versus the minimum requirement of 5%, which leaves plenty of capacity for balance sheet growth and our TLAC ratio remains comfortably above requirements. So let's focus on loans by looking at the average balances on Slide 7. And you can see loan growth improved this quarter as we saw improvement in both credit card and commercial borrowing, offset by declines in commercial real estate and securities-based lending. The commercial growth reflects good demand overall and was muted only at quarter-end by companies paying down commercial balances as they finalized their year-end financial positions. Lastly, on a positive note, we've seen loan spreads continue to widen, given some of the capital pressures from proposed rules on the banking industry, and this combined with investments in relationship managers we've added over the past few years, has positioned us to take market-share and improved spreads. Moving to deposits, I'll stay focused on averages on Slide 8, and the trends of ending balances saw growth in Global Banking and wealth management and declines in consumer. Relative to the pre-pandemic fourth quarter '19 period, average deposits are still up 35%. Every line of business remains well above their pre-pandemic levels. Consumer is up 33%, with checking up 40% driven by the net-new checking accounts added that Brian noted earlier. On a more recent performance basis, deposits grew $29 billion or 6% from Q3 on an annualized basis. The only business that saw a decline in deposits linked-quarter was consumer. And here we saw a decline of $21 billion. This linked-quarter decline slowed from the third quarter change. And in total, we have $959 billion in high-quality consumer deposits, which remains $239 billion above pre-pandemic levels. The total rate paid on consumer deposits in the quarter was 47 basis points and this remains very low, driven by the high mix of quality transactional accounts. Most of this quarter's rate increase remains concentrated in CDs and consumer investment deposits, which together only represent 15% of the consumer deposits. Turning to wealth management, balances on an end-of-period basis improved modestly, and we continued to experience a slowing in the trend of clients moving money from lower-yielding sweep accounts into higher-yielding preferred deposits and off-balance sheet. Our sweep balances were down $4 billion and were replaced by new account generation and deepening. Global Banking deposits grew $23 billion, moving nicely above the $500 billion level that we've experienced over the course of the past six quarters. These deposits are generally transactional deposits of our commercial customers. They are the ones that used to manage their cash flows. And noninterest-bearing deposits were about 33% of deposits at the end of that quarter. So when we turn to excess deposit levels on Slide 9, you can see deposit growth exceeded loan growth this quarter. And that expanded our excess of deposits above loans, from Q3 to about $0.9 trillion, which is well above the $0.5 trillion we had pre-pandemic. You can see that in the upper-left of Slide 9, which is where we've used and shown you how we think about managing excess liquidity. We continue to have a balanced mix of cash available-for-sale securities and held-to-maturity securities. And this quarter, the combination of the cash and the AFS securities now represent 51% of the total $1.2 trillion noted on this page. You'll also notice the change in mix of the shorter-term portfolio as we began to lower cash and increase available-for-sale securities buying mostly short-dated T-Bills with similar yields. You can note also the hold-to-maturity book continued to decline from paydowns and maturities pulling to PAR. In total, the hold-to-maturity book moved below $600 billion this quarter. It's now down $89 billion from its peak and it consists of about $122 billion in treasuries and about $465 billion in mortgage-backed securities along with a few billion others. Also note that the blended cash and securities yield continued to rise and remained about 170 basis points above the rate we pay for deposits. The replacement of these lower earning assets into higher yielding assets continues to provide an ongoing benefit and support to NII. From a valuation perspective, given the reduced balance and the longer-term interest-rate reductions we've seen in the fourth quarter, we experienced an improvement of more than $30 billion in the valuation of the hold-to-maturity securities. So, let's turn our focus to NII performance using Slide 10. And a strong finish to the year helped us report $57.5 billion in NII on a fully tax-equivalent basis for the full year of 2023. That's up 9% compared to 2022. On an FTE basis, we reported $14.1 billion in NII, which was modestly better than we told you to expect last quarter driven by modestly better deposit growth. The $14.1 billion was a decline of $400 million from the third quarter, driven by the unfavorable impacts of deposits and related pricing and lower global markets NII, partially offset by higher rates benefiting asset yields. And as we look forward, given that we've got one less day of interest in the first quarter and that's worth about $125 million to $150 million, and given the rate curve shift, we believe the first quarter will be somewhere between $100 million and $200 million lower than the fourth quarter. It could move a touch lower in Q2 and then we believe it should begin to grow sequentially in the second half of 2024. So very consistent with our prior guidance. With regard to the forward view I just provided, let me note a few other caveats. It would include an assumption that interest rates in the forward curve materialize. And the forward curve today has six cuts compared to last quarter when we had three cuts in the 2024 curve. So it's bouncing around a little and shifted in the past quarter. Forward view also includes our expectation of low to mid-single-digit loan growth and some moderate growth in deposits as we move into the back half of 2024. Given our recent deposit and loan performance, we continue to feel good about these assumptions. Before moving away, it's worth noting our net interest yield declined 14 basis points to 197 basis points. And that's driven by the decline in NII, as well as higher average earning assets, reflecting prior period builds of cash and cash-like securities. Turning to asset sensitivity and focusing on a forward yield curve basis, the plus 100 basis point parallel shift at December 31st was $3.5 billion of expected NII over the next 12 months, coming from our banking book. And that assumes no expected change in balance sheet levels or mix relative to our baseline forecast, and 93% of that sensitivity is driven by short rates. The 100 basis point down scenario is $3.1 billion. Let's turn to expense and we'll use Slide 11 for the discussion. And we reported $15.6 billion in adjusted expense this quarter, which excludes the FDIC assessment. This was in line with our projection from last quarter and down $199 million from the third quarter, driven by reductions in headcount earlier in the year and seasonally lower revenue-related expense. These reductions outpace the continued investments that we're making to drive growth. Our average headcount was down from the third quarter to 213,000 people, and that's good work after peaking at 218,000 last January. We lowered our headcount through the year by 5,000 and did so without taking an outsized severance charge as we used attrition to lower our headcount along the way. One more point to acknowledge the good work of our teams on expense, Q4 '23 adjusted expense of $15.6 billion is only $94 million higher than the fourth quarter of '22. And just remember, we began 2023 with a $125 million lift in quarterly FDIC expense. So through some good operational excellence work and otherwise, we've managed through all of the additional costs of investments in new tech initiatives and merit and financial center openings, as well as some stronger revenue and higher marketing costs. As we look forward to next quarter, we expect to see the more typical Q1 seasonal elevation in expense of $700 million to $800 million compared to Q4. So we believe expense will be around $16.4 billion in the first quarter. That includes elevated payroll tax expense and the expected costs of higher revenue in both sales and trading and wealth management, as well as merit cost increases. And as we move through 2024, we expect the quarterly expense to decline from Q1, reflecting a drop in the elevated payroll tax expense and revenue changes, as well as some additional operational excellence initiative work. Continued digital transformation and adoption is also going to help us as we go through the year. Now turn to credit, and I'll use Slide 12 for that. Provision expense was $1.1 billion in the fourth quarter and it included an $88 million reserve release due to a modestly improved macroeconomic environment. On a weighted basis, we're reserved for an unemployment rate of nearly 5% by the end of 2024 compared to the most recent 3.7% rate reported. Net charge-offs of $1.2 billion increased $261 million from the third quarter, and the net charge-off ratio was 45 basis points, a 10 basis point increase from the third quarter. On Slide 13, we highlight the credit quality metrics for both our consumer and commercial portfolios, and the overall increase in net charge-offs was driven by three things. First, $104 million of the increase was driven by credit card losses, which continued to normalize as higher late-stage delinquencies flowed through to charge-offs. Second, $65 million of the increase was driven by a broad range of smaller commercial and industrial losses, which were mostly previously reserved and monitored for the past couple of quarters. And lastly, $76 million of the increase was driven by commercial real estate losses, primarily due to office, also mostly reserved. In the appendix, we've included a current view of our commercial real estate and office portfolio stats provided last quarter, and we've also included the historical perspective of our loan book de-risking and long term trend of our consumer and commercial net charge-offs, and you can see those on slides 30 to 33. Let's move on to the various lines of business and their results and I'll start on Slide 14 with Consumer Banking. For the quarter, consumer earned $2.8 billion on continued good organic growth and despite their good client activity, it's difficult to outrun the earnings impact of higher rates on deposit costs while the credit is also normalizing. The reported earnings declined 23% year-over-year as top line revenue declined 4% while expense rose 3% and the credit costs rose. Customer activity showed another strong quarter of net new checking growth, another strong period of card opening and investment balances for consumer clients which climbed $105 billion over the past year to a record $424 billion. Our full year flows were $49 billion as accounts grew 10% in the past 12 months. Loan growth was led by credit card and that broke above $100 billion this quarter. Deposit decline slowed in the quarter with continued strong discipline around pricing. And our expense reflects continued business investments for growth. And as you can also see on the appendix page 21, digital engagement continued to improve and showed good year-over-year improvement as customers enjoy the continuation of enhanced capabilities. Moving to Wealth Management on Slide 15. We produced good results, earning a little more than $1 billion after adding 40,000 net new relationships in Merrill and the private bank this year. These results were down from last year as a decline in NII from higher deposit costs still catching up from the interest rate hikes, more than offset higher fees from asset management, driven by higher market levels and assets under management flows. As Brian noted earlier, both Merrill and the private bank continued to see strong organic growth and produced solid assets under management flows of $52 billion since the fourth quarter of '22, which reflects a good mix of new client money as well as existing clients putting their money to the work. Expenses reflect continued investments in the business and revenue related costs. On Slide 16, you see the global banking results. The business produced strong results with earnings of $2.5 billion as a decline from peak levels of NII was offset by lower provision expense, leaving earnings down 3% year-over-year. Revenue declined 8%, driven by the NII. Our global treasury services business remained robust with strong business from existing clients as well as good new client generation. In addition, we continued to see a steady volume of solar and wind investment projects this quarter and our investment banking business continued to perform well in a sluggish environment. Year-over-year revenue growth also benefited from lower marks on leveraged loan positions. The company's overall investment banking fees were $1.1 billion in Q4. That grew 7% over the prior year despite a fee pool that was down 8%. And for the year we held on to the number three position overall, given that performance. In the component parts, we ended the year number one in investment grade, number two in leverage finance, number four in equity capital markets, and number four in mergers and acquisition. The diversification of the revenue across products and regions reflects the growing strength of our platform, and a good example of that is our focus on the equity capital markets blocks business, where we finished number one in the United States for the first time since 1998. And in EMEA, we were also number one for blocks. Provision expense reflected a reserve release of $399 million and that comes from an improved macroeconomic outlook as well as realized charge-offs better, as noted before. Expense decreased 2% year-over-year as continued investments in the business were more than offset by reductions in other operating costs. Switching to Global Markets on Slide 17, the team had another strong quarter, with earnings growing 13% year-over-year to $736 million, driven by revenue growth of 4% and we refer to results excluding DVA as we normally do. Good results in sales and trading and comparatively low remarks on leverage loan positions drove the year-over-year performance and focusing on the sales and trading ex-DVA, revenue improved 1% year-over-year to $3.8 billion, which is a new fourth quarter record for the firm. FICC was down 6% from a record quarter, while equities increased 12% compared to the fourth quarter of '22. And the FICC revenues were down versus that record fourth quarter level with higher revenues in mortgages and municipal trading. Equities was driven by improved trading performance in derivatives. And our expense was up 3% on continued investment in the business. Finally, on Slide 18, all other shows a loss of $3.8 billion, as the two notable items highlighted earlier negatively impacted net income by $2.8 billion in that segment. Revenue adjusted for the $1.6 billion BSBY cessation was flat year-over-year, and expense adjusted for the $2.1 billion FDIC assessment was down a couple hundred million, driven by lower litigation and lower unemployment processing costs. I noted earlier we reported a modest tax benefit this quarter. The tax credits from tax advantaged investment deals throughout the year, including their benefits in the fourth quarter, exceeded taxes on reported earnings because we had the two notable items that lowered results this quarter. For the full year, our tax rate was a little more than 6%. And excluding the impacts of BSBY cessation and FDIC and the other discrete tax benefits, that rate was 10%. And further excluding our investment tax credits, our tax rate would have been 25%. So thank you. And with that, we'll launch into the Q&A, please.","evidence_gemma_new":null,"evidence_llama_3_3":"BAC provision expense Q4","evidence_qwen_3_30b":"provision expense $88 million reserve release modestly improved macroeconomic environment","gemma_new_max":null,"gemma_new_min":null,"llama_3_3_max":1100000000.0,"llama_3_3_min":1100000000.0,"qwen_3_30b_max":1100000000.0,"qwen_3_30b_min":1100000000.0}
{"symbol":"BAC","year":2024,"quarter":3,"date":"2024-Q3","chunk_id":2,"sub_chunk_id":0,"centroid_label":"provision expense","agreed_value":1500000000.0,"count":2,"chunk":"Brian Moynihan: Thank you, Lee, and good morning, and thank all of you for joining us for our discussion of our third quarter results. Bank of America continued to demonstrate strength this quarter in an economy that continued to be stable, albeit with slower growth and falling inflation. So many of you asked me from time-to-time what do we see in our own customer -- consumer customer base. As we talked about many times, our consumer payments is an indicator of activity. Those payments were up 4% to 5% year-over-year for the quarter in the total money those consumers moved in the economy. The pace of year-to-year money movement has been steady since late summer this year. After having fallen in the spring and early summer. This growth in consumer payments continues into October. This activity is consistent with how customers are spending money in the 2016 to 2019 timeframe. When the economy was growing, inflation was under control. This report is not meant to gainsay that consumers are worried of the cost of living, worried about higher rates and other matters. But overall activity is fine, unemployment is low and wage growth is steady, both of which bode well for the consumer overall and for consumer asset quality. With respect to what we see in our commercial businesses, it is consistent with a lower growth economy. Line of credit usage rates remain lower than pre-pandemic levels. This does not surprise us what with the dramatic increase in the cost of borrowing for small and medium-sized businesses. They aren't being indolent, they want to grow. They are simply being more careful and worry a final demand will hold. Therefore, they are being cost conscious across the board. So how did Bank of America do against this backdrop? At Bank of America, our commitment to responsible growth remains unwavering, and this quarter is another illustration of that. We grew, we did it the right way. In the third quarter, Bank of America generated $25.5 billion in revenue and earned $6.9 billion in net income after tax. Year-to-date, we've generated net income of just over $20 billion. Four quarters ago, we called that a bottom would occur in our net interest income in the second quarter of 2024. Even with a rate environment that has bounced around quite a bit since we said that we got it right. As we expected then, NII indeed troughed in the quarter two. NII grew 2% this quarter and Alastair will note later, we expect NII to grow again in quarter four, even as the market expects two more rate cuts in quarter four. This quarter, we saw a healthy revenue growth in our wealth and investment management business and in our global markets businesses. We returned 5.6 billion of capital to shareholders while also supporting the needs of our clients. So with that brief overview, let's dive into Slide 2. Earnings per share came in at $0.81 this quarter at $25.5 billion in revenue we grew modestly from the third quarter, '23 as improvement in noninterest income more than offset a year-over-year decline in net interest income. Fees grew 5% year-over-year and represented 45% of total revenue. The strong year-over-year fee performance was led by a 15% improvement in investment in brokerage services, mostly in our global wealth management business. We also grew investment banking fees 18% year-over-year sales and trading revenue increased 12% year-over-year and aggregate, these market related revenue streams rose an impressive 13% year-over-year. Our total expense in the company increased 4%. You can attribute most of the year-over-year expense growth to these market related areas. Overall, a good job by the team. On asset quality a few quarters ago we told you that consumer credit losses would go down this quarter, given delinquency trends we had seen at the time. We also told you that office losses would be lower. Both of these proved true again this quarter. Good asset quality resulted in net charge-off in provision expense for this quarter at $1.5 billion, which was unchanged from last quarter. Our performance is partly attributable to the diversity and balance of the company. A little more than half our earnings come from our consumer and GWIM businesses serving people and the other half come through from our Global Banking and Markets businesses serving companies and institutional investors. So let's turn to see how we grew organically this quarter. We are now on Slide 3. Our organic growth has been driven by a continued focus on customers and client experience throughout all our businesses. Consumer leads the way delivering solid organic growth with high quality accounts engaged clients. For the 23rd consecutive quarter, we added significant net new consumer checking accounts and expanded our customer base and market share. We added 360,000 net new checking accounts this quarter, which brings our first nine months of '24 to more than 880,000 net new checking accounts. In wealth management, we added another 5,500 net new relationships this quarter. In our commercial businesses, we added hundreds of small business and commercial banking relationships. Also note that we saw a strong organic growth of investment balances with banking customers and growth in banking products for our investment clients in our GWIM business. This has led us to now manage $5.9 trillion in client balances of loans, deposits and investments across the consumer and wealth management clients. We saw flows of $62 billion into those businesses in the past four quarters. In our Global Banking business, we saw loan demand start to pick up late in the quarter. We again ranked third in the logic IB fees we received and have a solid pipeline. Our global transaction services platform continues to grow around the world and showed strong deposit growth for our commercial businesses over the last year and a quarter. This quarter, global markets saw continued momentum. Global markets recorded the 10th consecutive quarter of year-over-year growth in sales and trading. Investments we've made in this business and the intensity of the teams has enabled a 35% improvement in sales and trading revenue in the past three years. Good work by Jimmy DeMare and the team. Our customers and clients continue to want more from us, especially when it comes to our digital capabilities. So let's discuss this on Slide 4. Slide 4 highlights this continued success across our digital platforms. As usual, we include our disclosures on digital stats across the business, which we believe lead the industry. I commend you the pages in the appendix, which give you more granular disclosure for each of the businesses' digital activities. Our fully integrated consumer banking investment application drives the utility for our customers across GWIM and consumer. The usage stats you see are strong proof points. Our second language capabilities also enhance the customer's experience. We have grown to more than 48 million active digital users and those digital users logged in more than 3.6 billion times this quarter. We also continue to see more sales through their digital properties. Digital sales represented 54% of our total consumer sales this quarter. Note that it simply takes both high-touch and high-tech to drive continued growth with individual clients across the wealth spectrum in America. Erica, our AI enabled virtual assistant reached 2.4 billion client interactions since its launch and Zelle showed continued user and usage increases. In our wealth management business, we continue to see full relationships increase with both investing and banking relationships being open. 75% of new accounts in Merrill were opened digitally whether they were banking accounts or investment accounts. This enables more efficient customer coverage for our advisory teams. Finally, 87% of our Global Banking relationship clients are digitally active. We have innovated and significantly streamlined service requests by enabling clients to directly initiate and track inquiries within our award winning cash flow platform. As a result, app sign-ins for these clients increased nearly 80% in just the last 24-months. In summary, the economic environment remains solid. Issues remain out there to external factors that could affect our business and the economy generally. We still see great opportunities for continued growth across all our businesses. We are focused on driving market share in all our businesses, investing in technology to further enhance the customer experience and continue to increase our efficiency. With NII now growing and complementing our fee growth along with our continued solid expense discipline, we expect to return to operating leverage as we move through the quarters in 2025. With that, I'll turn to Alastair for additional details.","evidence_gemma_new":null,"evidence_llama_3_3":"provision expense","evidence_qwen_3_30b":"provision expense $1.5 billion","gemma_new_max":null,"gemma_new_min":null,"llama_3_3_max":1500000000.0,"llama_3_3_min":1500000000.0,"qwen_3_30b_max":1500000000.0,"qwen_3_30b_min":1500000000.0}
{"symbol":"BAC","year":2024,"quarter":4,"date":"2024-Q4","chunk_id":3,"sub_chunk_id":0,"centroid_label":"provision expense","agreed_value":1500000000.0,"count":2,"chunk":"Alastair Borthwick: Thank you, Brian. And I'm going to start on Slide 5 of the earnings presentation, because it will provide just a little more context on the quarter. For the fourth quarter, as Brian noted, we reported $6.7 billion in net income or $0.82 per share. And before we talk about comparisons between periods, I just need to remind you that our fourth quarter 2023 GAAP net income number included two notable items. In the fourth quarter of \u201823, first, we recorded $2.1 billion of pre-tax expense for the special assessment by the FDIC to the industry to recover losses from the failures of Silicon Valley Bank and Signature Bank, and that reduced EPS last year by $0.20. Second, we recorded a negative pre-tax impact to our market-making revenue of approximately $1.6 billion related to the cessation of BSBY as an alternative rate, and that reduced earnings per share last year by $0.15. So when you adjust for the large FDIC assessment and the BSBY cessation charge, fourth quarter \u201823 net income was $5.9 billion or $0.70 per share. On Slide 6, we note some of the highlights of the quarter and we reported revenue of $25.5 billion on a fully taxable equivalent basis, up 15% from the fourth quarter of \u201823. And if you exclude the fourth quarter \u201823 BSBY cessation charge, our revenues grew 8% year-over-year. As Brian said, all the revenue items are showing improvement year-over-year. NII grew 3%. Investment banking grew 44%. This quarter, our $4 billion of sales and trading revenue marked a fourth quarter record, and it grew 10% from the year ago period. And investment brokerage fees rose 21%, with both assets under management flows and market levels contributing nicely to the growth. Our card income and service charges grew 7%. Non-interest expense was $16.8 billion and was up when adjusted for the FDIC special assessment driven by incentives paid for the strong revenue growth as Brian noted and the related activity costs that comes with that. Expense also included additional investments in people, technology, and brand with some major partnerships announced recently. And it included what we expect to be the peak in quarterly costs associated with enhancing our compliance costs and controls. The good news is we created operating leverage in the quarter. Provision expense for the quarter was $1.5 billion and was consistent with the previous two quarters. And lastly, returns in the fourth quarter were 80 basis points of ROA and 13% return on tangible common equity. Back to the balance sheet on Slide 7. We ended the quarter at $3.26 trillion of total assets, down $63 billion from the third quarter, driven by seasonally lower levels of client activity in global markets, while loans across the businesses grew $20 billion in the quarter. Otherwise in the quarter, the investments of our excess liquidity saw a $9 billion reduction in hold to maturity securities. And at the same time, the combination of shorter-term liquidity investments of cash and available for sale securities increased $28 billion. On the funding side, total deposits grew $35 billion on an ending basis as both interest bearing and non-interest bearing grew. Long-term debt fell $14 billion driven by net redemptions and valuations, and global markets funding declined in line with assets. Liquidity remains strong with $953 billion of global liquidity sources. That is up modestly compared to the third quarter, even as we paid down some debt and retired some preferreds. Shareholders' equity was flat at around $295 billion. And within all of that, we returned $5.5 billion of capital back to shareholders with $2 billion in common dividends paid and the repurchase of $3.5 billion in shares this quarter. Tangible book value per share of $26.58 rose 9% from the fourth quarter last year. Turning to regulatory capital, our CET1 level improved to $201 billion and the CET1 ratio rose to 11.9%, remaining well above our new 10.7% requirement. Risk-weighted assets increased modestly as increases in loans were mostly offset by lower RWA supporting our global markets client activity. Our supplementary leverage ratio was 5.9% versus a minimum requirement of 5%, which leaves some capacity for balance sheet growth, and our $460 billion of total loss absorbing capital means our TLAC ratio remains comfortably above our requirements. Let's turn to Slide 8. We can go a little deeper on loans by looking at average balances. And loans in the fourth quarter of $1.08 trillion improved 3% year-over-year, driven by solid commercial loan growth. Overall, commercial loans grew 5% year-over-year. And importantly, this included an 8% drop in commercial real estate loans. Commercial loans excluding commercial real estate grew 7% year-over-year, and the consumer loans grew modestly both linked quarter and year-over-year. As Brian said, on a linked quarter basis, every category of consumer lending grew, and you can see that at the bottom of Slide 8. If we turn our focus to NII performance and use Slide 9, regarding NII on a GAAP, non-fully taxable equivalent basis, NII in Q4 was $14.4 billion. And on a fully taxable equivalent basis, NII was $14.5 billion. Several quarters ago, we signaled our expectation that NII would trough in the second quarter of 2024 and begin to grow from there. And this represents now our second quarter of NII growth. And we expect that growth to continue in 2025. In fact, if you look at the two quarters after the inflection point, NII is already growing at a 5% rate. Fourth quarter NII on a fully taxable equivalent basis increased by $399 million from the third quarter, driven by a number of factors. First, it was led by improvement in deposits across the businesses. And even as deposit balances increased linked quarter, our interest expense on those deposits declined by $600 million. Loan growth and fixed rate asset repricing also benefited us again this quarter. With regard to a forward view, interest rate expectations continue to drive volatility and predictability, but we'll provide some thoughts for future NII. We expect to start the year in the first quarter with NII modestly higher than the fourth. Remember that the first quarter has two fewer days of interest and that's roughly the equivalent of about $250 million of NII equivalent. So even with that, we expect to grow modestly. Then we expect that growth to increase through the year to the point where it could be 6% to 7% higher in 2025 than 2024. We expect to exit the year at least $1 billion higher in the fourth quarter and that would put us in a range of $15.5 billion to $15.7 billion on a fully taxable equivalent basis, and that's obviously significantly higher than the Q2 '24 trough of $13.9 billion. I have to note the following assumptions. First, we assume that the current forward curve materializes. And while the interest rate curve has changed significantly over a fairly short period of time, as of the 10 of January, the curve was expecting only one rate cut in 2025 that may come in May or June. Based on our more recent growth experienced, we're assuming loan and deposit growth in 2025 that's higher than 2024, and more consistent with growth in a 2% to 3% GDP environment. The other elements of anticipated growth in NII expected are the benefits of asset repricing as fixed rate securities and loans and swaps roll off and those get repriced at higher rates. And those themes all remain consistent with our prior conversations with you in the last several earnings calls. With regard to interest rate sensitivity, on a dynamic deposit basis, we provide a 12-month change in NII for an instantaneous shift in the curve, above or below the forward curve. And on that basis, a 100 basis point increase would benefit NII by roughly $1 billion, while a decrease of 100 basis points would decrease NII over the next 12 months by $2.3 billion. Lastly, note that our slide showing the trended investment of excess deposits is in our appendix. It's on page 21. Deposit levels grew to $870 billion over loans at the end of Q4, and that's an incredible source of value for shareholders. And $649 billion, or 54% of our excess liquidity, is now in short-dated cash and available for sale securities. The longer-dated lower-yielding hold-to-maturity book continues to roll off, and we continue to reinvest in higher-yielding assets. Okay. Let's now turn to expense, and we'll use Slide 10 for the discussion. We reported $16.8 billion in expense this quarter. And the fourth quarter of '23 included the large FDIC special assessment charge and excluding that, expense increased. The increased expense from prior periods was driven by a number of factors and was partially offset by a roughly $300 million release of prior period accruals for the FDIC special assessment. Let's talk about the drivers of the expense. First, in regard to revenue, our markets-related businesses of investment banking, investment in Brokerage and Sales & Trading, those were up 20% year-over-year. Incentives for the firm were up 15% versus the fourth quarter of '23 and were in large part related to these market-related revenue streams. On investments that we made, we added bankers and advisers across most of our businesses in 2024, and we also increased investments in our brand with significant sponsorships like the Masters in FIFA to name a few. And we increased our investments around technology as well as financial centers. This quarter alone, we added 17 financial centers with nine of those in our new expansion markets. We're a growth company, and we continue to invest in our future. As far as head count goes, we've managed our head count carefully, and we've held it fairly flat through the 4 quarters of 2024 at around 213,000 people. Lastly, we incurred additional costs to accelerate work on compliance and controls. As you likely saw in late December, the OCC issued a compliance consent order to Bank of America, and that's a result of exams done more than a year ago. This orders about correcting or enhancing certain deficiencies in some aspects of our processes that existed at the time. The order doesn't limit any of our growth plans and the order acknowledges we began taking corrective actions before the order was announced. And as a result of the work in process, we increased our resources substantially in the second-half of 2024 and those costs are already embedded in our quarterly run rate. Okay. Let's go back to expense and how to think about a forward view. First, most importantly, we remain focused on growing the company and driving operating leverage. Second, we expect the first quarter to include some normal seasonal elevation and we believe this amount will be roughly $600 million to $700 million, primarily for payroll tax expense. So we think $17.6 billion is a good number to expect for Q1 and before seasonally declining in Q2. And that's all part of our expectation that expense should be roughly 2% to 3% higher in 2025, compared to 2024. Let's now move to credit and turn to Slide 11, where you can see net charge-offs of a little less than $1.5 billion, improving modestly compared to Q3. That's the fourth quarter now that net charge-offs are around $1.5 billion. We've seen consumer losses in a pretty stable range of $1 billion to $1.1 billion over those past few quarters. And on the commercial side, we saw losses of $359 million, which is down from the third quarter, driven by the continued decline in commercial real estate office losses. Net charge-off ratio this quarter was 54 basis points, down 4 basis points from the third quarter. We don't see overall net charge-offs or the related ratio changing much in 2025, without much change in current GDP or the employment environment, we expect the net charge-off ratio to be in the range of 50 to 60 basis points of loans for 2025. Q4 provision expense was $90 million lower than Q3 at $1.5 billion as reserve levels remain constant. And as it relates to reserve levels on a weighted basis, where reserved for an unemployment rate a little below 5% by the end of 2025, and that compares to the most recent 4.1% rate reported. On Slide 12, we highlight the credit quality metrics for both consumer and commercial portfolios. And there's nothing really noteworthy here that I want to highlight on this page. So let's move to the various lines of business starting on Slide 13 with Consumer Banking. That business made nearly $11 billion or 40% of the company's earnings in 2024. In the fourth quarter, Consumer Banking generated $10.6 billion in revenue and $2.8 billion in net income. Both grew modestly from the fourth quarter of '23 as fee improvement for card and service charges is now being complemented by the growth in NII. Consumer Banking continued to deliver strong organic growth with high-quality accounts and engage clients and they achieved a new record of client experience scores in December. The organic growth activity noted on Slide 3 includes more than 200,000 net new checking accounts, which now takes us to six years' worth of quarter-after-quarter growth. And we show another strong period of card openings and investment account growth. Investment balances grew 22% to $518 billion with full year flows of $25 billion and market improvement throughout the year. Expense rose 8% as we continued investments in our business. The biggest story in consumer this quarter is deposits because these are the most valuable deposits in the franchise. And in the last six months, we believe we've seen the floor begin to form after several periods of slowing decline. Consumer Banking deposits appear to have bottomed in mid-August at around $928 billion and ended the year at $952 billion on an ending basis. Looking at averages, you can see then the deposits grew $4 billion from the third quarter to $942 billion, all while our rate paid declined to 64 basis points. Finally, as you can see in the appendix, page 26, digital adoption and engagement continue to improve and customer satisfaction scores rose to record levels, illustrating our client appreciation of enhanced capabilities from these investments. On Slide 14, we move to Wealth Management, where the business had a very profitable year, generating $4.2 billion in earnings from nearly $23 billion in revenue. In 2024, our Merrill Lynch and Private Bank advisers added another 24,000 net new relationships. And the professionalism of these teams earned them numerous best-in-class industry rankings as you can see on Slide 27 in the appendix. With a continued increase in banking product usage from our investing clients, the diversity of revenue in the wealth business continues to improve. The number of GWIM clients that now have banking products with us continues to grow. And at this point, it represents more than 60% of our clients. Importantly, about 30% of our revenue remains in net interest income, which complements the fees earned in our advice model and those have also grown. Net income rose 15% from the fourth quarter of '23 to nearly $1.2 billion. In the fourth quarter, we reported revenue of $6 billion, growing 15% over the prior year and led by 23% growth in asset management fees. While expenses were up year-over-year, they grew slower than revenue creating the operating leverage in the business. Business had a 26% pretax margin and generated a strong return on capital of 25%. Average loans were up 4%, driven by growth in custom lending, securities-based lending and a pickup in mortgage lending. Deposits grew 2% from the third quarter, and the teams were quite disciplined on pricing of those deposits. Both Merrill and the Private Bank continued to see strong organic growth. And that helped to produce excellent asset under management flows of $79 billion this year, reflecting a good mix of new client money, as well as existing clients putting money to work. We also want to draw your attention to the continued digital momentum that you'll find on Slide 28. Because, for example, three quarters of Merrill bank and brokerage accounts were opened digitally this quarter. Slide 15 shows the Global Banking results and this business generating $8.1 billion or 30% of the company's earnings in 2024, and it continues to be the most efficient business in the company at less than 50% efficiency ratio. The business saw a nice rebound in investment banking fees in 2024, which we expect to continue in 2025. In Q4, Global Banking produced earnings of $2.1 billion. Pretax pre-provision results were flat year-over-year as improved investment banking fees offset lower NII and higher expense. The total earnings were down 13% year-over-year, driven by higher provision expense that came as a result of prior period reserve release. Investment banking fees were $1.7 billion in Q4, growing 44% year-over-year. This was led by mergers and acquisitions. We also saw strength across debt capital markets fees mostly in leverage finance and in equity capital markets fees and we finished the year strong, maintaining our number three investment banking fee position. The fourth quarter saw a strong momentum as the election results provided a lift to sentiment for a more pro-business climate and expectations for more deals to be completed. Expense in this business increased 6% year-over-year, driven by the 13% growth in non-interest income and continued investments in people and technology. The balance sheet saw good client activity, and it was muted somewhat by the strength of the U.S. dollar. Year-over-year flatness in Global Banking loans includes this foreign exchange impact and a $6 billion decline in commercial real estate from paydowns. Otherwise, loans in Global Banking were up 2%. Deposits have been growing for many quarters now with our commercial and corporate clients. And total global banking deposits are now up 10% year-over-year, reaching a new record. So we're seeing strong growth across all the categories from our corporate and commercial clients all the way from the larger end the business banking on the lower end. And we also saw a 10% growth in our international deposits. Turning to Global Markets on Slide 16, I want to focus my comments on results excluding DVA as we normally do. Our team continued their impressive streak of strong revenue and earnings performance. They achieved operating leverage, and they continue to deliver a good return on capital. For the year, record sales and trading results of nearly $19 billion grew 7% from 2023 and they've been growing consistently now on a year-over-year basis for almost three years. This led to $5.7 billion in full-year profits and represents more than 20% of the company's full-year results. In the fourth quarter, earnings of $955 million grew 30% year-over-year. Revenue and again, this is ex DVA, improved 15% from the fourth quarter of '23, as both Sales & Trading and Investment Banking fees improved nicely year-over-year. Focusing on sales and trading ex DVA, revenue improved 10% year-over-year to $4.1 billion. This is the first time we've recorded more than $4 billion in our Q4 results and it included Q4 records for both FICC and Equities. FICC grew 13%, while equities improved 6%, compared to the fourth quarter '23. FICC benefited from tighter credit spreads as well as increased volatility in interest rates, while equities benefited from increased activity around the U.S. election. Year-over-year expenses were up 7% on revenue improvement and our continued investment in the business. And then on Slide 17, you can see all other with a loss of $407 million in the fourth quarter. We spoke earlier about the fourth quarter \u201823 charges for BSBY and the FDIC special assessment charge. Their reversal impacts the comparisons on revenue, expense and net income in this segment. Otherwise, there really isn't anything significant to report here. Our effective tax rate for the quarter was 6%, and excluding discrete items and the tax credits related to investments in renewable energy and affordable housing, the effective tax rate would have been approximately 26%. Looking forward, we expect the tax rate for 2025 to be in a range of 11% to 13%. And this just includes our expectation for higher expected earnings in 2025 and relatively stable tax credits. Finally, this quarter, on page 18, we thought it was important to summarize some of the guidance points we talked through this morning, and we hope you'll find this page helpful. So in summary, we're looking for a strong growth in NII, and we'll look to both continue important investments in the franchise and drive operating leverage as we grow throughout the year. We aren't expecting much movement around credit based on a pretty solid economic outlook. And we remain with a very strong balance sheet with excess capital that we can deploy to grow the business and deliver back to shareholders as appropriate. So with that, I'll stop there. I thank everybody, and we'll open it up for Q&A.","evidence_gemma_new":null,"evidence_llama_3_3":"provision expense Q4","evidence_qwen_3_30b":"provision expense consistent with the previous two quarters","gemma_new_max":null,"gemma_new_min":null,"llama_3_3_max":1500000000.0,"llama_3_3_min":1500000000.0,"qwen_3_30b_max":1500000000.0,"qwen_3_30b_min":1500000000.0}
{"symbol":"BAC","year":2023,"quarter":2,"date":"2023-Q2","chunk_id":7,"sub_chunk_id":0,"centroid_label":"revenue","agreed_value":3000000000.0,"count":3,"chunk":"Gerard Cassidy: Very good. And then as a follow-up, Alastair, you talked about the balance sheet. I think you said 100 basis point increase, it wouldn't lead to over $3 billion in net interest revenue growth over the next 12 months. And 100 basis point decrease would lead to a decline of just over $3 billion in revenue. Can you share with us, when do you think you might change or what would make you change that position to be liability sensitive, would you rely on the forward curve. What's the outlook for the balance sheet management, that you're looking at now.","evidence_gemma_new":"revenue","evidence_llama_3_3":"revenue next 12 months","evidence_qwen_3_30b":"revenue decline 100 basis point decrease","gemma_new_max":3000000000.0,"gemma_new_min":3000000000.0,"llama_3_3_max":3000000000.0,"llama_3_3_min":3000000000.0,"qwen_3_30b_max":3000000000.0,"qwen_3_30b_min":3000000000.0}
{"symbol":"BAC","year":2023,"quarter":4,"date":"2023-Q4","chunk_id":33,"sub_chunk_id":0,"centroid_label":"revenue","agreed_value":17600000000.0,"count":2,"chunk":"Brian Moynihan: Yeah. I'm not sure of the media report, but in the end of the day, Jim DeMare and team have done a great job to deploying capital and growing market share in the sales and trading business. So they're up 7% year-over-year in revenue. FICC was up 11% for the year. Equity was down a little bit, down 1% or so. And they've done a great job. $17.6 billion of revenue, highest by a lot -- over the last few years. And think about it, in the '19 time frame, we were $13 billion in revenues. They fundamentally moved up. That was deploying more balance sheet, you got a little bit more capital but inherently, but not a lot. They're not taking a lot of risk. They made money every trading day in '23, again, I think. And so they do a great job of serving the clients. So don't think there's a big capital, a massive amount of capital. They get the capital they need. They have the balance sheet and the risk appetite they need. But we're continuing to put money towards that business because they've proven to be successful. We gave them the balance sheet a few years ago and they were able to deploy. More broadly, we pay out the dividend. We then have a bunch of capital. Today we meet the standards as best. As Alastair said, we could divine from the rule, and we'll see what the final rule looks like when it comes out. But right now, the $194 billion of CET1 is the level of notional CET1. We have to meet the RWA inflation. I'm not saying it's a good rule. I'm just saying we make the math work. And so from now on, we can basically deploy capital to the dividend payment, a couple of billion dollars a quarter, and then everything above that will go to support business growth if we have it, build a little bit of cushion, we need to build over some period of time to meet these new rules if they come through, and then share buybacks, which we bought $800 million or so last quarter, and you'd expect that to keep ticking up. Matt O\u2019Connor: Okay, that's helpful. And then you did mention that trading or markets is off to a good start so far this year. Obviously, just a handful of days, but any color around that? And then kind of more broadly speaking, as we think about the overall wallet, like, obviously banking is the press, but how would you frame the market trading wallet? Do we use 2020 as a jumping off point and grow it by some kind of long term trend or any way to kind of frame that in terms of a base case? Thank you.","evidence_gemma_new":"revenue","evidence_llama_3_3":"revenue","evidence_qwen_3_30b":null,"gemma_new_max":17600000000.0,"gemma_new_min":17600000000.0,"llama_3_3_max":17600000000.0,"llama_3_3_min":17600000000.0,"qwen_3_30b_max":null,"qwen_3_30b_min":null}
{"symbol":"BAC","year":2023,"quarter":4,"date":"2023-Q4","chunk_id":33,"sub_chunk_id":0,"centroid_label":"revenue","agreed_value":7.0,"count":2,"chunk":"Brian Moynihan: Yeah. I'm not sure of the media report, but in the end of the day, Jim DeMare and team have done a great job to deploying capital and growing market share in the sales and trading business. So they're up 7% year-over-year in revenue. FICC was up 11% for the year. Equity was down a little bit, down 1% or so. And they've done a great job. $17.6 billion of revenue, highest by a lot -- over the last few years. And think about it, in the '19 time frame, we were $13 billion in revenues. They fundamentally moved up. That was deploying more balance sheet, you got a little bit more capital but inherently, but not a lot. They're not taking a lot of risk. They made money every trading day in '23, again, I think. And so they do a great job of serving the clients. So don't think there's a big capital, a massive amount of capital. They get the capital they need. They have the balance sheet and the risk appetite they need. But we're continuing to put money towards that business because they've proven to be successful. We gave them the balance sheet a few years ago and they were able to deploy. More broadly, we pay out the dividend. We then have a bunch of capital. Today we meet the standards as best. As Alastair said, we could divine from the rule, and we'll see what the final rule looks like when it comes out. But right now, the $194 billion of CET1 is the level of notional CET1. We have to meet the RWA inflation. I'm not saying it's a good rule. I'm just saying we make the math work. And so from now on, we can basically deploy capital to the dividend payment, a couple of billion dollars a quarter, and then everything above that will go to support business growth if we have it, build a little bit of cushion, we need to build over some period of time to meet these new rules if they come through, and then share buybacks, which we bought $800 million or so last quarter, and you'd expect that to keep ticking up. Matt O\u2019Connor: Okay, that's helpful. And then you did mention that trading or markets is off to a good start so far this year. Obviously, just a handful of days, but any color around that? And then kind of more broadly speaking, as we think about the overall wallet, like, obviously banking is the press, but how would you frame the market trading wallet? Do we use 2020 as a jumping off point and grow it by some kind of long term trend or any way to kind of frame that in terms of a base case? Thank you.","evidence_gemma_new":"revenue year-over-year","evidence_llama_3_3":null,"evidence_qwen_3_30b":"revenue 7% year-over-year","gemma_new_max":7.0,"gemma_new_min":7.0,"llama_3_3_max":null,"llama_3_3_min":null,"qwen_3_30b_max":7.0,"qwen_3_30b_min":7.0}
{"symbol":"BAC","year":2024,"quarter":2,"date":"2024-Q2","chunk_id":5,"sub_chunk_id":0,"centroid_label":"revenue","agreed_value":5600000000.0,"count":2,"chunk":"Alastair Borthwick: [Technical Difficulty] will materialize. And this now includes three interest rate cuts, starting in September, another in November, and one more in December. And the waterfall shows an estimated impact of those rate cuts to our quarterly NII. The next couple of categories are a result of natural management of interest rate risk in a balance sheet mixed with fixed-rate assets and variable-rate assets. And our balance sheet is split roughly half and half. So we take in liquidity from customers that we use to fund our assets, and then we store excess liquidity in cash and securities. We have fixed assets that mature and pay down, and those supply cash that then gets put back to work on the balance sheet and reprices over time. And we have two basic categories of fixed assets that mature and pay off, and those are securities and loans. On securities, you can see we've got about $10 billion a quarter of cash coming off of our securities portfolio, and we gain roughly 300 basis points of improvement on those assets when we put that money back on the balance sheet. On loans, between resi, mortgage, and auto, we've got another roughly $10 billion, which reprices with a little less yield improvement than securities. And between the securities and loans, we expect a fixed-rate asset repricing adds about $300 million to our quarterly rate of NII as we get to the fourth quarter. On the variable rate asset side, and to protect from down moves in rates, we hedge some of that with cash flow swaps. And those typically roll off in any given quarter and get replaced over time. So included in the cash flow hedges is an impact of cessation of BSBY as an alternative rate. If you recall, we took a charge in the fourth quarter of \u201823. It was $1.6 billion, and we said that would come back to us through time. And beginning in November, we start to see the benefit coming back into NII. And in Q4, that's about $200 million. That Q4 partial quarter benefit will grow by a slightly smaller sequential NII benefit in Q1 \u201825. And then it begins to taper off heading into 2026. In addition, we've got about $150 billion of received fixed cash flow hedges, protecting us from short rate moves moving over. Most are hedging floating rate commercial loans. And the cost of those hedges is reported as contra revenue in commercial loan interest income. These hedges have a weighted average life of just over two years. And they've got an average fixed rate of approximately 250 basis points. So starting in the second-half of 2025, we begin to get some additional NII tailwind, because the cash flow hedges with lower fixed rate likes where we receive, those will begin to roll off, and will likely replace those at higher current market rates at the time. The actual size of the tailwind we'll get from the expiration of those swaps will obviously be highly dependent on the level and the shape of the yield curve at the time of those maturities. And that stretches out over the course of the next four years. Okay, a couple other points to make. You'll note we don't expect much movement around our modestly, liability sensitive global markets NII activity. And lastly, our forward view has an expectation of low-single-digit growth in loans, low-single-digit growth in deposits, with continued slowing of rate paid movement through the back half of 2024. And you can see our expectation of the combined impact here as well. This last element is the one that has the most potential variability. And obviously, it will depend upon actual deposit and loan growth, and pricing and rotation. Okay, let's turn to expense and we'll use slide 11 for the discussion. We reported $16.3 billion of expense this quarter. And that's more than $900 million lower than Q1, which included $700 million for the FDIC special assessment. Not including the FDIC assessment, expenses were lower than Q1 by $229 million, driven by seasonally lower payroll tax expense. Compared to Q2 \u201823, we're up less than 2%. And that increase is equal to the incentives paid for improved fee revenue. Incentives for our GWIN business alone are up $200 million year-over-year. And that's obviously an expense we're happy to pay when we have a 14% improvement in fees for assets under management. Our second quarter headcount number included welcoming a diverse class of nearly 2,000 summer interns we hope will join us over the course of the next year or two upon their graduation. And absent those interns, our headcount fell by nearly 2,000. In the third quarter, we expect to add approximately 2,500 college graduates for full time. More than -- and that's from more than 120,000 applications received, showing that we remain an employer of choice for talented young people. Expense levels for the rest of 2024 are expected to bounce around this second quarter level, given the higher fee revenue and investments made for growth. So let's now move to credit and we'll turn to slide 12. There was little change in our asset quality metrics this quarter. Provision expense was $1.5 billion. That was $189 million higher than Q1, driven by a smaller reserve release in Q2. Net charge offs of $1.5 billion were little changed, with a small increase in credit card, mostly offset by lower commercial real estate office charge offs. On a weighted basis, we remain reserved for an employment rate of nearly 5% by the end of 2025, compared to the most recent 4.1% rate reported. The net charge off ratio was 59 basis points, largely unchanged for Q1. On slide 13, we highlight more credit quality metrics for both our consumer and commercial portfolios. Consumer net charge-offs increased by a modest $31 million versus the first quarter from the flow-through of higher late-stage credit card delinquencies from Q1. Highlighting the change in direction of delinquencies, consumer 90-day-plus delinquencies declined in 2Q by $57 million. Commercial net charge-offs were relatively flat as lower commercial real estate losses were mostly offset by a small increase in other commercial loans. Our office losses went from $304 million in Q1 to $226 million in Q2. Other commercial real estate loan losses were simply one hotel. Okay, let's move to the various lines of business and some brief comments on their results, and I'll start on slide 14 with consumer banking. For the quarter, consumer earned $2.6 billion on continued strong organic growth, and reported earnings declined 9% year-over-year as revenue declined from lower deposit balances, compared to the second quarter of last year. Customer activity showed another strong quarter, net new checking growth, another strong period of card openings, and investment balances for consumer clients, which climbed 23% year-over-year to a new record $476 billion. That included 12 months of strong flows at $38 billion in addition to market appreciation over the time. As noted earlier, loans grew nicely year-over-year from credit card, as well as small business where we remained the industry leader. The team held expense flat year-over-year, reflecting good work with continued business investments for growth, offset by the operational excellence work to improve processes and move more of our transactions to digital. And as you can see on the appendix page 26, digital adoption and engagement continue to improve, and customer satisfaction scores remain near record levels, illustrating customer appreciation of our enhanced capabilities due to our continuous investment. Moving to wealth management on slide 15, we produced good results, and those included good organic client activity, market favorability, and strong AUM flows, and this quarter also saw good lending results. Our comprehensive suite of investment and advisory services, coupled with our commitment to personalized wealth management planning and solutions, has enabled us to meet the diverse needs and aspirations of our clients. Net income rose 5% from the second quarter of last year to a little more than $1 billion. In Q2, we reported revenue of $5.6 billion, growing 6% over the prior year. As Brian noted, a strong 14% growth in fee revenue from investment and brokerage services overcame the NII headwind. Expense growth reflects the fee growth and other investments for future. The business had a 25% margin, and it generated a strong return on capital of more than 22%. Average loans were up 2% year-over-year, driven by strong growth we're seeing in custom lending and a pickup in mortgage lending. Both Merrill and the Private Bank continue to see good organic growth, and they produced strong assets under management flows of $58 billion since last year's second quarter, which reflects a mix of new client money, as well as existing clients putting more of their money to work. I also want to highlight the continued digital momentum in this business, and you can find that on slide 28. On slide 16, we turn to Global Banking results. And here, the business produced earnings of $2.1 billion, down 20% year-over-year, as improved investment banking fees and treasury services revenue were overcome by lower net interest income and higher provision expense. Revenue declined 6%, driven by the impact of interest rates and deposit rotation. The diversified revenue across products and regions reflects the strength of our Global Banking franchise. In our GTS business, fees for managing the cash of clients offsets a lot of the NII pressure from higher rates, and clients are accessing the capital markets for their capital needs instead of borrowing. Investment banking had a strong quarter, growing fees 29% year-over-year to nearly $1.6 billion, led by debt capital markets fees, mostly in leveraged finance and investment grade. And we finished the quarter strong, maintaining our number three investment banking fee position globally. A solid start to 2024 has left us in a good position, with top three rankings now in North America, Latin America, and EMEA, and number six in APAC. And we're seeing strong performance in important industry groups as well. An increase in provision expense from last year was driven by the commercial real estate net charge-offs I discussed earlier, and expense increased 3% year-over-year, including continued investment in the business. Switching to Global Markets on Slide 17, I'll focus my comments on results, excluding DVA as I normally do. The team had another terrific quarter as we generated good revenue growth and achieved operating leverage and continued to deliver a solid return on capital. Earnings of $1.4 billion grew 19% year-over-year, and return on average allocated capital was 13%. Revenue, and again, this is ex-DVA, improved 10% from the second quarter of 2023. Focusing on sales and trading, ex-DVA, revenue improved 7% year-over-year to $4.7 billion, and that's the highest second quarter in over a decade. FICC was down 1%, while equities increased 20% compared to Q2 '23. FICC revenues remained strong, and versus Q2 '23, they were modestly lower, driven by a weaker macro trading quarter in FX and rates, and that was largely offset by better commodities and mortgage trading. Equities was driven by strong trading results in derivatives and cash equities. Year-over-year expenses were up 4% on revenue improvement and continued investment in the business. Finally, on Slide 18, all other shows a loss of $0.3 billion, and that was little changed year-over-year, as lower expense was offset by lower provision costs as a result of reserve changes. Our effective tax rate for the quarter was 9%, and excluding discrete items and the tax credits related to investments in renewable energy and affordable housing, the effective tax rate would have been 25%. And with that, I think we'll stop there, and we'll jump into questions.","evidence_gemma_new":null,"evidence_llama_3_3":"revenue prior year","evidence_qwen_3_30b":"revenue $5.6 billion","gemma_new_max":null,"gemma_new_min":null,"llama_3_3_max":5600000000.0,"llama_3_3_min":5600000000.0,"qwen_3_30b_max":5600000000.0,"qwen_3_30b_min":5600000000.0}
{"symbol":"BAC","year":2024,"quarter":4,"date":"2024-Q4","chunk_id":2,"sub_chunk_id":0,"centroid_label":"revenue","agreed_value":102000000000.0,"count":2,"chunk":"Brian Moynihan: So good morning, everyone, and thank you for joining us. Before we begin today, I just want to express our deep concern for our communities, clients, and teammates impacted by the California wildfires. Our top priority, of course, is ensuring the safety and welfare of our team and helping our clients and customers. Our imperturbable Market President Raul Anaya is leading our team out there. We have teams on the ground assisting in any way we can and are monitoring of the situation to extend support and resources. So far, we have activated our Client Assistance Program, donated $1 million in disaster relief to the American Red Cross, additional contributions to the L.A. Food Bank and the L.A. Chamber of Commerce Small Business Efforts. With that, let's turn to earnings starting on page two of the presentation. This morning, we reported $6.7 billion in net income, that is $0.82 in EPS for the fourth quarter. That was a solid finish to another good year at Bank of America. We grew revenue on a year-over-year basis in every category in quarter four. We saw good loan and deposit growth, and Alastair is going to walk you through some of the details of the quarter in a moment, but I want to thank our team for another great year. For the full-year of 2024, we generated $102 billion of revenue and reported net income of $27.1 billion of EPS of $3.21. We produced 83 basis points return on assets and 13% return on tangible common equity. We generated these results working from a strong balance sheet that allowed us to support clients and economies continue to grow. The economy appears to be now settled into a 2% to 3% GDP-type growth environment. It has healthy employment levels in the resilient consumer. The immensity of the American consumer can be seen in our data. So far in the first two weeks in January, they're spending money at 4% to 5% clip over last year, similar to what they did in the fourth quarter. In our business side, the clients are profitable, they're liquid, and seeing good productivity. We ended the year with $953 billion in liquidity. We also ended with $201 billion of regulatory CET1 capital and a CET1 ratio of 11.9%, leaving us nearly 115 basis points of excess capital as we begin 2025. For Bank of America, the year was characterized by a few important highlights that played out as expected and were consistent with our communications to you throughout the year. First, we saw net interest income bottom out at $13.9 billion on an FTE basis in the second quarter of 2024. We ended the year with a fourth quarter on the same FTE basis at $14.5 billion, then that was a bit better than we expected. This obviously provides a great starting point for 2025, and based on the assumptions Alastair is going to discuss a little later, we should report record NII in 2025. So how did we do that? We drove organic growth in all the businesses, and that we have highlighted on Slide 3. We saw continued growth in net new checking, new households, new companies, and commercial banking growth in our institutional markets business. This organic activity enabled us to grow loans and deposits at a pace we believe is to be ahead of our industry average and our peers. A key for us, obviously, is a growth in our deposit franchise. If you look at Slide 4, you can see we've now grown deposits for six consecutive quarters. In the most recent quarter, we saw growth in consumer balances and stability around non-interest-bearing balances across all the businesses. We continued to price in a disciplined manner, and rates paid moved lower this quarter across the board. Overall, rate paid on deposits moved from 210 basis points in the third quarter to 194 basis points this quarter. And we're lower in the fourth quarter, we're lower in every business segment. On the loan side, consumer loans grew in every category-linked quarter. Commercial loan demand continued to build off the strengths we saw in the third quarter of 2024, and commercial loans grew 5% year-over-year for the fourth quarter, and a much faster annualized pace when comparing the third quarter to the fourth quarter of 2024. So back to Slide 3. In our wealth management business, we added 24,000 new households in 2024. We ended the year with $6 trillion in total client balances that we manage for people in America across our global wealth and consumer businesses. Our consumer investments team, what we call Merrill Edge, crossed a new milestone this quarter and now sits in excess of $518 billion in balances. Investment banking gained share of industry revenue in 2024. Our sales and trading team put up the 11th straight quarter of year-over-year revenue growth and achieved a new full-year record of nearly $19 billion in revenue. As the quality stabilized and remained strong, with net charge-offs declining modestly from third quarter. Early in the year, we highlighted that our expectation on consumer credit is that they would stabilize to normal level. And on commercial office losses, they would trend down during the year. We saw both those trends continue into quarter four. On the expense side, we continue to invest in our franchise. And even though spending increases in brand, people, and technology, and strong fee growth, which drove incentive and transaction processing costs higher, we managed to create operating leverage in the fourth quarter. Our digitalization and engagement expanded across all our businesses. We saw more than 14 billion logins to our digital platforms in 2024. Our Erica capability surpassed 2.5 billion interactions from its inception. And our CashPro app surpassed $1 trillion in payments made through the app in 2024. It's also worth noting that digital sales in our consumer product areas crossed 60% in the fourth quarter again. You can see all these trends in our industry-leading digital disclosure on Slides 26, 28, and 30 in the appendix. All the success in balance sheet straights allowed us to deliver more capital back to our shareholders. We returned $21 billion of capital to the shareholders in 2024, which was 75% more than 2023 and included an 8% increase in the common dividend. So in summary, for both the fourth quarter and for the year, we enjoyed good profitability, we drove healthy returns, we saw good organic client activity across all the businesses, we continue to manage the risk well and increase the capital delivered back to our shareholders. And we positioned ourselves well for growth in 2025. I want to again thank my team for continuing to drive another year of responsible growth. And with that, I'll turn it over to Alastair.","evidence_gemma_new":"revenue net income EPS 2024","evidence_llama_3_3":"revenue","evidence_qwen_3_30b":null,"gemma_new_max":102000000000.0,"gemma_new_min":102000000000.0,"llama_3_3_max":102000000000.0,"llama_3_3_min":102000000000.0,"qwen_3_30b_max":null,"qwen_3_30b_min":null}
{"symbol":"BAC","year":2024,"quarter":4,"date":"2024-Q4","chunk_id":2,"sub_chunk_id":0,"centroid_label":"revenue","agreed_value":19000000000.0,"count":2,"chunk":"Brian Moynihan: So good morning, everyone, and thank you for joining us. Before we begin today, I just want to express our deep concern for our communities, clients, and teammates impacted by the California wildfires. Our top priority, of course, is ensuring the safety and welfare of our team and helping our clients and customers. Our imperturbable Market President Raul Anaya is leading our team out there. We have teams on the ground assisting in any way we can and are monitoring of the situation to extend support and resources. So far, we have activated our Client Assistance Program, donated $1 million in disaster relief to the American Red Cross, additional contributions to the L.A. Food Bank and the L.A. Chamber of Commerce Small Business Efforts. With that, let's turn to earnings starting on page two of the presentation. This morning, we reported $6.7 billion in net income, that is $0.82 in EPS for the fourth quarter. That was a solid finish to another good year at Bank of America. We grew revenue on a year-over-year basis in every category in quarter four. We saw good loan and deposit growth, and Alastair is going to walk you through some of the details of the quarter in a moment, but I want to thank our team for another great year. For the full-year of 2024, we generated $102 billion of revenue and reported net income of $27.1 billion of EPS of $3.21. We produced 83 basis points return on assets and 13% return on tangible common equity. We generated these results working from a strong balance sheet that allowed us to support clients and economies continue to grow. The economy appears to be now settled into a 2% to 3% GDP-type growth environment. It has healthy employment levels in the resilient consumer. The immensity of the American consumer can be seen in our data. So far in the first two weeks in January, they're spending money at 4% to 5% clip over last year, similar to what they did in the fourth quarter. In our business side, the clients are profitable, they're liquid, and seeing good productivity. We ended the year with $953 billion in liquidity. We also ended with $201 billion of regulatory CET1 capital and a CET1 ratio of 11.9%, leaving us nearly 115 basis points of excess capital as we begin 2025. For Bank of America, the year was characterized by a few important highlights that played out as expected and were consistent with our communications to you throughout the year. First, we saw net interest income bottom out at $13.9 billion on an FTE basis in the second quarter of 2024. We ended the year with a fourth quarter on the same FTE basis at $14.5 billion, then that was a bit better than we expected. This obviously provides a great starting point for 2025, and based on the assumptions Alastair is going to discuss a little later, we should report record NII in 2025. So how did we do that? We drove organic growth in all the businesses, and that we have highlighted on Slide 3. We saw continued growth in net new checking, new households, new companies, and commercial banking growth in our institutional markets business. This organic activity enabled us to grow loans and deposits at a pace we believe is to be ahead of our industry average and our peers. A key for us, obviously, is a growth in our deposit franchise. If you look at Slide 4, you can see we've now grown deposits for six consecutive quarters. In the most recent quarter, we saw growth in consumer balances and stability around non-interest-bearing balances across all the businesses. We continued to price in a disciplined manner, and rates paid moved lower this quarter across the board. Overall, rate paid on deposits moved from 210 basis points in the third quarter to 194 basis points this quarter. And we're lower in the fourth quarter, we're lower in every business segment. On the loan side, consumer loans grew in every category-linked quarter. Commercial loan demand continued to build off the strengths we saw in the third quarter of 2024, and commercial loans grew 5% year-over-year for the fourth quarter, and a much faster annualized pace when comparing the third quarter to the fourth quarter of 2024. So back to Slide 3. In our wealth management business, we added 24,000 new households in 2024. We ended the year with $6 trillion in total client balances that we manage for people in America across our global wealth and consumer businesses. Our consumer investments team, what we call Merrill Edge, crossed a new milestone this quarter and now sits in excess of $518 billion in balances. Investment banking gained share of industry revenue in 2024. Our sales and trading team put up the 11th straight quarter of year-over-year revenue growth and achieved a new full-year record of nearly $19 billion in revenue. As the quality stabilized and remained strong, with net charge-offs declining modestly from third quarter. Early in the year, we highlighted that our expectation on consumer credit is that they would stabilize to normal level. And on commercial office losses, they would trend down during the year. We saw both those trends continue into quarter four. On the expense side, we continue to invest in our franchise. And even though spending increases in brand, people, and technology, and strong fee growth, which drove incentive and transaction processing costs higher, we managed to create operating leverage in the fourth quarter. Our digitalization and engagement expanded across all our businesses. We saw more than 14 billion logins to our digital platforms in 2024. Our Erica capability surpassed 2.5 billion interactions from its inception. And our CashPro app surpassed $1 trillion in payments made through the app in 2024. It's also worth noting that digital sales in our consumer product areas crossed 60% in the fourth quarter again. You can see all these trends in our industry-leading digital disclosure on Slides 26, 28, and 30 in the appendix. All the success in balance sheet straights allowed us to deliver more capital back to our shareholders. We returned $21 billion of capital to the shareholders in 2024, which was 75% more than 2023 and included an 8% increase in the common dividend. So in summary, for both the fourth quarter and for the year, we enjoyed good profitability, we drove healthy returns, we saw good organic client activity across all the businesses, we continue to manage the risk well and increase the capital delivered back to our shareholders. And we positioned ourselves well for growth in 2025. I want to again thank my team for continuing to drive another year of responsible growth. And with that, I'll turn it over to Alastair.","evidence_gemma_new":null,"evidence_llama_3_3":"revenue","evidence_qwen_3_30b":"sales and trading team 11th straight quarter year-over-year revenue growth full-year","gemma_new_max":null,"gemma_new_min":null,"llama_3_3_max":19000000000.0,"llama_3_3_min":19000000000.0,"qwen_3_30b_max":19000000000.0,"qwen_3_30b_min":19000000000.0}
{"symbol":"BAC","year":2023,"quarter":1,"date":"2023-Q1","chunk_id":2,"sub_chunk_id":0,"centroid_label":"tangible book value per share","agreed_value":9.0,"count":2,"chunk":"Brian Moynihan: Good morning, and thank you all of you for joining us. I'm starting on Slide 2 of the materials. Your company produced one of its highest core EPS, earnings numbers in a challenged operating environment in the first quarter. Simply put, we navigated that environment well. The preparedness and strength of Bank of America and the trust of our clients reflects a decade-long responsible growth model and relationship nature of our franchise. During quarter one, importantly, organic growth engine continued to perform. Let me first summarize some points, and I'll turn it over to Alastair to take you through the details of the quarter. If you go to Slide 2 of the materials, Bank of America delivered strong earnings, growing EPS 18% over first quarter '22. Every business segment performed well. We grew clients and accounts organically and at a strong pace. We delivered our seventh straight quarter of operating leverage, led by a 13% year-over-year revenue growth. We further strengthened our balance sheet, with our CET1 ratio increasing to 11.4%. Regulatory capital ended at the highest nominal level in our history at $184 billion. We maintained strong liquidity. We ended the quarter with more than $900 billion in Global Liquidity Sources. We are in good returns for you as our shareholders, with a return on tangible common equity of 17%, a 107 basis points return on average assets. Tangible book value per share grew 9% year-over-year. We did this as the economy slowed. And, remember, our research team continues to predict a shallow recession that will occur beginning in the quarter three of 2023. It's interesting, when we look at our consumer behavior, payments by consumer continued to drive the U.S. economy. We've seen debit and credit card spending at about 6% year-over-year growth pace, a little slower but still healthy. But, remember, card spending represents less than a quarter of how consumers pay for things out of their accounts at Bank of America. Overall payments from our customers' accounts across all sources were up 9% year-over-year for March as a month. Year-to-date, they were up about 8% for the quarter. After slowing in the back half of 2022 a bit, we saw the payments -- pace of payments picked back up in quarter one, especially in the latter parts of the quarter. Consumers' financial positions remains generally healthy. They're employed with generally higher wages, continue to have strong account balances, and have good access to credit. As you think through all the tightening actions of the Fed, the flows to alternative yielding assets, investments and the disruption the past quarter, our deposits continued to perform well, ending the quarter at $1.91 trillion. If you think about it, that's about the same balance that we had in mid-October of 2022. So, we've seen these balances stabilize and remain 34% above they were in prior to the pandemic. The team has managed well during these periods by remaining focused on the things we can control to drive value through our franchise. I thank them for a very strong quarter, near-record earnings with strong returns. Let me turn the call over to Alastair to walk through the details of the quarter.","evidence_gemma_new":"Tangible book value per share year-over-year","evidence_llama_3_3":"Bank of America Tangible book value per share first quarter","evidence_qwen_3_30b":null,"gemma_new_max":9.0,"gemma_new_min":9.0,"llama_3_3_max":9.0,"llama_3_3_min":9.0,"qwen_3_30b_max":null,"qwen_3_30b_min":null}
{"symbol":"BAC","year":2024,"quarter":1,"date":"2024-Q1","chunk_id":3,"sub_chunk_id":0,"centroid_label":"tangible book value per share","agreed_value":24.79,"count":2,"chunk":"Alastair Borthwick: Thank you Brian. I\u2019m going to start on Slide 4 of the earnings presentation. Brian covered much of the income statement highlights and he noted the difference in our reported results and the results adjusted for the FDIC assessment, so I\u2019m not going to repeat that; I\u2019d just add that we delivered strong returns. On a reported basis, our return on average assets was 83 basis points, and return on tangible common equity was 12.7%. When adjusted for the FDIC assessment, our efficiency ratio was 64%, ROA at 89 basis points, and ROTCE at 14%. Let\u2019s move to the balance sheet on Slide 5, where we ended the quarter at $3.27 trillion of total assets, up $94 billion from the fourth quarter, and the bulk of that increase was in global markets to support seasonally elevated levels of client activity. Outside of the global markets activity, we\u2019d highlight both the $23 billion growth in deposits and the $20 billion decline in cash levels. With that increase in liquidity, you\u2019ll also note that debt securities increased $39 billion, which included an $8 billion decline in hold-to-maturity securities and a $47 billion increase in AFS securities. Those are mostly hedged U.S. treasuries added with yields effectively at cash rates. At $313 billion, our absolute cash levels remain higher than required. Liquidity remains strong with $909 billion of global liquidity sources, and that\u2019s up $12 billion from the fourth quarter and remains $333 billion above our pre-pandemic fourth quarter \u201919 level. Shareholder equity increased $1.9 billion [indiscernible] earnings, as they were only partially offset by capital distributed to shareholders, and AOCI was little changed in the quarter. During the quarter, we paid out $1.9 billion in common dividends and we bought back $2.5 billion in shares, which more than offset our employee awards. As part of those share awards in the first quarter, we announced our seventh consecutive year of share and success compensation awards, covering more than 95% of our associates and further aligning their interests with shareholders. Tangible book value per share of $24.79 is up 9% year-over-year. Looking at regulatory capital, our CET-1 level improved to $197 billion from December 31, and the CET-1 ratio was stable at 11.8% and remained well above our current 10% requirement. We also remain quite well positioned against the current proposed capital rules as our CET-1 level is also above the 10% requirement even when we include estimated RWA inflation from those new proposed rules. Risk-weighted assets increased modestly, driven by client activity in global markets, and our supplemental leverage ratio was 6% compared to a minimum requirement of 5%, which leaves capacity for balance sheet growth. At $475 billion of total loss absorbing capital, our TLAC ratio remains comfortably above our requirements. Let\u2019s turn our balance sheet focus to loans by looking at the average balances in Slide 6. Average loans in the first quarter of $1.048 trillion were flat compared to the fourth quarter, and they improved 1% year-over-year as solid credit card growth was partially offset by declines in securities-based lending. Commercial loans grew modestly year-over-year. We experienced modest improvement in revolver utilization in commercial lending in the first quarter, and that\u2019s being offset for the most part by pay downs as larger client financing solutions are being met through capital markets access. Lastly on a positive note, loan spreads continued to widen. Moving to deposits, we\u2019ll stay focused on averages on Slide 7, and relative to pre-pandemic Q4 2019, average deposits are still up 35%. Every line of business remains well above their pre-pandemic levels and consumer is up 32%, with checking up 38% driven by net new checking accounts added, as Brian noted earlier. Linked quarter total average deposits remained steady at more than $1.9 trillion. The total rate paid on consumer deposits in the quarter was 55 basis points, and while the rate increased nine basis points from the fourth quarter, the pace of increases continues to slow. The mix of low rate and high quality transactional accounts keeps the rate paid low. Wealth management and global banking also saw a slowdown in the increases in their rate paid and slowdown in the rotation out of non-interest bearing accounts in the first quarter. Focusing for a moment on ending deposits and movement from the fourth quarter, this quarter we delivered good deposit growth. Total deposits grew $23 billion and are now $100 billion above their trough in mid-May of 2023. Consumer banking deposits saw growth in both consumer interest-bearing and non-interest bearing. Global banking continued their more normal pattern of deposits seen for the past five quarters and up more than $30 billion over the last year. Deposit growth exceeded loan growth for the third straight quarter and our excess of deposits over loans expanded to $897 billion, and that\u2019s nearly two times the $450 billion we had pre-pandemic. You can see that on the upper left-hand side of Slide 8. We continue to have a mix of cash, available-for-sale securities and held-to-maturity securities, and this quarter our combination of cash and AFS is now 52% of the total $1.2 trillion noted on this page. You\u2019ll also notice the continued change in mix of the shorter term portfolio as we again lower cash and increase AFS securities that are mostly hedged and at similar yields to the cash. Note also the hold-to-maturity book continues to decline from pay downs. In total, the hold-to-maturity book is now down $96 billion from its peak and consists of about $122 billion in treasuries and about $458 billion in mortgage-backed securities, along with $7 billion of other securities. Lastly, a blended cash and securities yield of 360 basis points continued to rise and remained about 168 basis points above the rate we paid for deposits. The replacement of lower earning assets into higher yielding assets continues to provide an ongoing benefit to NII. Let\u2019s turn our focus to NII performance using Slide 9, where you can see on a fully tax-equivalent basis NII was $14.2 billion. Good deposit growth provided a strong start to the year for NII, and as Brian noted, NII of $14.2 billion increased by $100 million from the fourth quarter. That compares to our expectation and guidance of a decline of $100 million to $200 million, and that would have resulted in NII this quarter of $13.9 billion to $14 billion, so we did quite a bit better than we had originally expected. The improvement in quarterly NII in Q1 compared to Q4 included the benefits of higher yielding assets and improvement in global markets NII, partially offset by higher deposit cots and one less day in Q1 than 4Q23. Deposit balance activity more generally also aided in the beat versus our expectations. As we look forward for Q2, we expect some modest impact of lower deposits in wealth management as client make their seasonal income tax payments, and we expect global markets NII to decline mostly seasonally a little bit as well, so we expect second quarter NII could approach $14 billion on an FTE basis. Further, we continue to expect that Q2 will be the low point for NII and we expect the back half of 2024 to grow. Compared to our guidance last quarter, we\u2019re obviously growing off a larger base of NII after having outperformed in the first quarter. With regard to that forward view, let me just note a few other caveats. It includes our assumption that interest rates in the forward curve at the end of the quarter materialize, and at the end of first quarter there were still three cuts expected this year, starting in June. Our forward view also includes an expectation of low single-digit loan growth and some moderate growth in deposits as we move into the back half of 2024. Given our recent deposit and loan performance, we continue to feel good about these assumptions. Turning to asset sensitivity and focused on a forward yield curve basis, our sensitivity to the plus and minus-100 basis points parallel shift in the forward curve at March 31 remains well balance. Let\u2019s turn to expense, and we\u2019ll use Slide 10 for that discussion, where we reported $17.2 billion expense this quarter including the FDIC assessment. Adjusted for the assessment, expenses were $16.5 billion and the increase over the fourth quarter included a little more than $400 million in seasonal payroll tax expense, as well as higher revenue-related costs and, to a lesser extent, annual merit increases and other annual awards, like sharing success awards provided this quarter. $16.5 billion was just a little above our forecast for Q1 which we made last quarter, and the increase is driven by better than expected fee revenue across wealth management, investment banking, and sales and trading, and as Brian said, that\u2019s a trade-off we\u2019re more than happy to make, bringing more earnings to the bottom line. While expense is up almost 2% from last year, we simply remind you inflation is up by more than 4% and we\u2019ve increased our investment, and we\u2019re paying for the revenue growth, so we think it represents good work by our teams. As we look forward in Q2, we expect a decline from the Q1 level as we typically see about two-thirds of the Q1 elevate payroll tax expense come back out, and the remainder of the year expense is expected to trend down. Continued digital engagement savings and operational excellent initiatives should help us offset other cost increases for people and technology through the back half of the year. Turning to credit on Slide 11, provision expense was $1.3 billion in the first quarter, and that included $179 million of reserve release due to a modestly improved macro environment outlook as the baseline consensus expectations improved from the fourth quarter. On a weighted basis, we remain reserved for an unemployment rate of nearly 5% by the end of 2025 compared to the most recent actual 3.8% rate. Net charge-offs of $1.5 billion increased $306 million from the fourth quarter, driven by continued credit card seasoning and commercial real estate office exposures as swift revaluations from current appraisals and resolutions drove higher charge-offs. The net charge-off ratio was 58 basis points, a 13 basis point increase from the fourth quarter. On Slide 12, we show you the credit quality metrics for both our consumer and commercial portfolios. Consumer net charge-offs increased $150 million versus the fourth quarter from the flow-through of higher late stage credit card delinquencies. We included a credit card delinquency slide, No. 28 in our appendix, and we\u2019re encouraged by the trend of delinquencies because the late stage increases slowed and early stage delinquencies improved as well, and that leads us to believe we should begin to see consumer net charge-offs start to level out over the next quarter or so. All of this is still well within our risk appetite and our expectations, and it\u2019s consistent with the normalization of credit we discussed with you in prior calls. Commercial net charge-offs increased $191 million versus the fourth quarter, driven by commercial real estate losses and office exposures. On office losses this quarter, we recorded charge-offs on 16 office loans. Four were a result of sales activity, i.e. final resolution, seven were from losses that we expect on exposures that are in the process of expected resolution in the course of the next 90 days, and the rest we took as a result of refreshed valuations. We use a continuous and thorough loan-by-loan analysis and we\u2019re quick to recognize impacts in the commercial real estate office space through our risk ratings, and that\u2019s resulted in several downgrades in the last few quarters. As a result of these quick actions and our downgrades in categorization, we\u2019ve also refreshed the valuation of our reservable criticized properties, and we\u2019ve taken appropriate reserves and charge-offs in the process. Roughly one-third of our office exposure is now categorized as reservable criticized, and importantly the pace of the increase in reservable criticized exposures has slowed each quarter since the second quarter of last year, so we believe the losses on these office properties have been front-loaded and largely reserved. We expect the losses to move lower in the second quarter and we expect a notable decline in the second half of the year when compared to the first half of this year, absent any material change in expected real estate prices. In the appendix on Slide 29, we\u2019ve included a current view of our commercial real estate and office portfolio metrics, as we usually do. Let\u2019s turn to the various lines of business and offer some brief comments on their results, starting on Slide 13 with consumer banking. For the quarter, consumer banking earned $2.7 billion on continued strong organic growth. The reported earnings declined 15% year-over-year as revenue declined from lower deposit balances compared to the first quarter of \u201923. Credit card loss normalization also caused year-over-year provision expense to increase. As Brian noted, customer activity showed another strong quarter of net new checking growth, another strong period of card openings, and investment balances for consumer clients which climbed 29% year-over-year to a record $456 billion. That included market appreciation and also very strong full-year flows of $44 billion. As noted earlier, loans grew nicely year-over-year from credit card as well as small business, where we remain the industry leader. Expenses were flat year-over-year, fighting off inflation, merit increases, higher minimum wages, and new and renovated financial centers and technology investments, so holding expense flat reflected very good work by the consumer team. As you can see on the appendix, Page 20, digital adoption and engagement continued to improve, reaching a record of $3.4 billion digital log-ins in the quarter, and it showed good year-over-year improvement. Customer satisfaction scores at near record levels illustrate the continued appreciation of the enhanced capabilities we provide. Moving to wealth management on Slide 14, we produced good results, and that included good organic client activity, market favorability and strong flows. Our comprehensive suite of investment and advisory services coupled with a commitment to personalized wealth management planning and solutions has enabled us to meet the diverse needs and aspirations of our clients. In first quarter, we reported record revenue of $5.6 billion and a little more than $1 billion in net income. That net income was 10% from the first quarter of \u201923. The business generated positive operating leverage and grew revenue faster than expense, while improving the pre-tax margin year-over-year. While overall average loans were down year-over-year, driven by the securities-based lending, it\u2019s worth noting the strong growth we\u2019re seeing in custom lending, and ending loans in the wealth management custom loan book are up 6% year-over-year. As Brian noted earlier, both Merrill and the private bank continued to see strong organic growth and produce good assets under management flows of more than $60 billion since the first quarter of \u201923, which reflects a good mix of new client money, as well as existing clients putting money to work. Expense growth here matched the revenue growth, otherwise fighting off higher investment costs and inflation. Let me also highlight the continued digital momentum here. As an example, Merrill has 86% of its clients now engaging with us digitally and 80% utilizing e-delivery. 76% of their eligible accounts are now opened digitally, so the cost for us to open is half and the customer cycle times are improved greatly. On Slide 15, you\u2019ll see our global banking results, and the business produced earnings of just less than $2 billion, down 22% year-over-year as improved investment banking fees and treasury services revenue were overcome by lower net interest income and higher provision expense. Revenue declined 4% driven by the impact of interest rates and deposit rotation to interest-bearing, and that impacted NII. The diversification of our revenue across products and regions continues to reflect the strength in this platform, and GTS and investment banking fees are good examples. In our global treasury services business, some of the NII pressure from higher rates on deposits is offset by the fees paid for moving and managing the cash of clients, and that continues to grow with existing clients as well as with new client generation. As Brian noted, investment banking had a strong quarter, and at $1.6 billion in investment banking fees, this quarter was the strongest quarter in seven years, absent the pandemic 2020 and 2021 periods. An increase in provision expense included the commercial real estate net charge-offs I discussed earlier, as well as a larger reserve release in the prior year period. Expense increased 2% year-over-year, including the 35% lift in investment banking fees from the first quarter of \u201923. Switching to global markets on Slide 16, we\u2019ll focus our comments on results excluding DVA, as we normally do. The team had another terrific quarter with $1.8 billion in earnings, growing 7% year-over-year. Revenue improved 6% from the first quarter of \u201923 and return on average allocated capital was 16%. Focusing on sales and trading ex-DVA, revenue improved 2% year-over-year to $5.2 billion, which is the highest first quarter result in over a decade. FICC was down 4% while equities increased 15% compared to the first quarter of \u201923. The decline in the FICC revenues versus the first quarter was driven by a weaker macro trading quarter that was partially offset by better mortgage trading results. Equities was driven by strong trading results in derivatives, and year-over-year expenses were up 4% from continued investment in the business. Finally on Slide 17, all other shows a loss of $700 million driven by the FDIC assessment. Revenue declined year-over-year, reflecting higher investment tax credit yields, and expense adjusted for the FDIC assessment was down $133 million, driven by lower unemployment processing costs. Our effective tax rate for the quarter was 8%, and excluding the FDIC assessment and other discrete items, it would have been 9%. Further excluding tax credits related to investments in renewable energy and affordable housing, our effective tax rate would have been 26%. Thank you, and with that, we\u2019ll jump into Q&A.","evidence_gemma_new":"Tangible book value per share","evidence_llama_3_3":null,"evidence_qwen_3_30b":"tangible book value per share","gemma_new_max":24.79,"gemma_new_min":24.79,"llama_3_3_max":null,"llama_3_3_min":null,"qwen_3_30b_max":24.79,"qwen_3_30b_min":24.79}
{"symbol":"BAC","year":2024,"quarter":2,"date":"2024-Q2","chunk_id":3,"sub_chunk_id":0,"centroid_label":"tangible book value per share","agreed_value":25.37,"count":2,"chunk":"Alastair Borthwick: Thank you, Brian, and I'm going to start on slide six of the earnings presentation. I'll touch on more highlights noted on slide six as we work through the material. I just want to say upfront that we delivered strong returns with return on average assets of 85 basis points and a return on tangible common equity of nearly 14%. So let's move to the balance sheet on slide seven, where you can see we ended the quarter at $3.26 trillion of total assets, relatively unchanged from the first quarter. And not much to note here apart from a mixed shift of lower securities balances, mostly offset by an increase in reverse repo and modest loan growth, as well as global markets client activity. On the funding side, deposits declined $36 billion on an ending basis, reflecting typical seasonal customer payments of income taxes. And as Brian noted, average deposits were still modestly higher. Liquidity remained strong with $909 billion of global liquidity sources that was flat compared to the first quarter. Shareholders' equity was also flat compared to Q1, as earnings were offset by $5.4 billion in capital distributed to shareholders and a $1.9 billion redemption of preferred stock in the quarter. The $5.4 billion of capital contributions included $1.9 billion in common dividends and the repurchase of $3.5 billion in shares. AOCI improved modestly in the quarter and tangible book value per share of $25.37 rose 9% from the second quarter of last year. In terms of regulatory capital, our CET1 level improved to $198 billion and the CET1 ratio was stable at 11.9%. This 11.9% ratio remained well above our current 10% requirement, as well as our new 10.7% requirement as of October 1, 2024. Risk-weighted assets increased modestly and that was driven by lending activity. Our supplemental leverage ratio was 6% versus our minimum requirement of 5% and that leaves plenty of capacity for balance sheet growth. And our $468 billion of TLAC means our total loss-absorbing capital ratio remains comfortably above our requirements. Brian already covered deposit trends, so let's turn the balance sheet focus to loans and we'll look at average balances on slide eight. You can see average loans in Q2 of $1.051 trillion. They improved 1% year-over-year, driven by 5% credit card growth and modest commercial growth. The modest improvement in overall commercial loans included a 2% increase in our domestic commercial loans and leases, partially offset by a 4% decline in commercial real estate. Middle market lending saw an uptick in the quarter, and we saw good demand in our wealth businesses from custom lending. These areas of growth were largely offset by continued paydowns from our larger corporate clients on interest rate sentiment. Consumer growth was driven by credit card borrowing, and while home lending balances were flattish, originations picked up a bit this quarter. Lastly, and on a positive note, loan spreads continued to widen. As we turn our focus then to NII performance and slide nine, note that we moved the slide we typically use to talk about excess deposits to the appendix on slide 22, so you can see that there. Our excess deposit levels above loans remained high at $850 billion and continue to be a good source of value for shareholders. 52% of our excess liquidity is now in short-dated cash and available for sale securities. The longer-dated, lower-yielding hold-to-maturity book continues to roll off, and we reinvested again this quarter in higher-yielding assets. The blended yield of cash and securities continued to improve in the quarter and is now 160 basis points above our deposit rate paid. Regarding NII, on a GAAP [Technical Difficulty]","evidence_gemma_new":null,"evidence_llama_3_3":"tangible book value per share","evidence_qwen_3_30b":"tangible book value per share $25.37","gemma_new_max":null,"gemma_new_min":null,"llama_3_3_max":25.37,"llama_3_3_min":25.37,"qwen_3_30b_max":25.37,"qwen_3_30b_min":25.37}
{"symbol":"BAC","year":2024,"quarter":3,"date":"2024-Q3","chunk_id":3,"sub_chunk_id":0,"centroid_label":"tangible book value per share","agreed_value":26.25,"count":2,"chunk":"Alastair Borthwick: Thank you, Brian, and I'm starting on Slide 5 of the earnings presentation. We'll touch on more highlights noted here as we work through the material, and I'd just add that we delivered solid returns with a return on average assets of 83 basis points and return on tangible common equity of 12.8%. So let's move to the balance sheet on Slide 6, where you can see that the balance sheet ended the quarter at $3.3 trillion of total assets, up $66 billion from the second quarter, as global markets client demands expanded and commercial loans grew $16 billion in the quarter. Otherwise in the quarter, the investments of our excess liquidity saw a $10 billion reduction in hold to maturity securities, and the combination of shorter-term liquidity investments of cash and available for sale securities were relatively flat for the second quarter. On the funding side, global markets grew to support balance sheet needs of our clients and total deposits grew $20 billion on an ending basis. It's noteworthy that our average deposits are now up for the fifth consecutive quarter. Liquidity remains strong with $947 billion of global liquidity sources, and that was up $38 billion compared to the second quarter. Shareholders' equity was up $2.6 billion, with common equity up $4.6 billion and a preferred redemption driving a $2 billion decline in preferred equity. The increase income and equity compared to Q2, included $5.6 billion in capital returned to shareholders, partially offsetting our earnings, and it included an improvement in AOCI driven by an improvement from cash flow hedges given the drop in long-term rates in the quarter. $5.6 billion in capital distributions includes $2 billion in common dividends and the repurchase of $3.5 billion in shares. Tangible book value per share of $26.25 rose 10% from the third quarter of '23. And turning to regulatory capital, our CET1 level improved to $200 billion and the CET1 ratio was 11.8%. And that remains well above our new 10.7% requirement as of October 1. Risk weighted assets increased modestly, driven by both lending activity and global markets needs to support clients and our supplemental leverage ratio was 5.9% compared to the minimum requirement of 5%, which leaves plenty of capacity for balance sheet growth. Our $463 billion of total loss-absorbing capital means our TLAC ratio remains comfortably above our requirements. So let's dig a little deeper on deposits and the growth from the second quarter using Slide 7. Here, we show you deposits and rates by line of business. Average deposits grew $45 billion, or 2% year-over-year, and they increased modestly linked-quarter. Notably, quarter-over-quarter increases in rates paid continue to slow again this quarter, rising 7 basis points to 210 basis points. Consumer Banking increased modestly, driven by product mix and higher rate product offerings. And Global Banking rate paid increased modestly driven by growth in interest bearing balances. It's worth noting that wealth management declined a basis point. We acted quickly following the September 50 basis point rate cut in our wealth business and our Global Banking business, and since late in the quarter, only a small portion of those cuts are reflected. Total rate paid for all deposits from these actions is expected to fall below 2% later in October, as the fuller effect of the pass-throughs occur. Let's turn to loans by looking at average balances on Slide 8. Loans in Q3 of $1.06 trillion improved 1% year-over-year driven by solid commercial loan growth as well as credit card and vehicle loans. Overall, commercial loans grew 2% year-over-year. And importantly, this included a drop in commercial real estate loans of 6%. Commercial loans, excluding commercial real estate, grew 3% year-over-year and were up 6% annualized from the Q2. Consumer banking loan growth was driven by credit card, small business and vehicle borrowing, and the overall consumer growth was muted by a decline in mortgage balances as pay downs exceeded originations in a higher rate environment. Let's turn our focus to NII performance and Slide 9. So note that our trended investment of excess deposit slide is in our appendix on Page 21. Deposit levels were $855 billion in excess of loans at the end of Q3 and continue to be a good source of value for shareholders. Nearly $625 billion or 52% of our excess liquidity is in short dated cash and AFS securities. The longer dated lower yielding hold to maturity book continues to roll-off, and we reinvest that in higher yielding assets. The blended yield of cash and securities on Page 21 remains well above our deposit rate paid. So going back to Slide 9, regarding NII on a GAAP, non-FTE basis, NII in Q3 was $14 billion and on a fully tax equivalent basis, NII was $14.1 billion. On our Q3 earnings call last year, we first provided our expectation that the Q2 would be the trough and then we would begin to grow in the Q3 of '24, marking an inflection point for NII. And that's what you see this quarter. NII increased by $252 million from the Q2 driven by a number of factors. Global Markets activity and pricing, fixed asset repricing and one extra day all benefited NII, while higher funding costs partially offset those benefits. A 50 basis point rate cut in September also negatively impacted NII. With regard to a forward view of NII, there are obviously several variables at play in the Q4, and we still expect Q4 NII to grow, and we expect it to be $14.3 billion or more on a fully tax equivalent basis. Now we note the following assumptions. First, we assume that the forward curve on October 10, is the one that materializes, so that includes a 25 basis point cut in November and another 25 basis points in December. We also assumed very modest balance increases in both loans and deposits in Q4, building off the activity seen in Q3. Last quarter, we told you we expect about $20 billion in the aggregate of fixed rate loans and securities to reprice on a quarterly basis, and those are expected to reprice into higher yielding assets and provide a benefit to NII for many periods ahead. And as described previously, we expect to see roughly $200 million benefit in Q4 from the BSBY alternative rate transition. So we think this sets us up well for 2025. With regard to interest rate sensitivity on a dynamic deposit basis, we provide a 12-month change in NII for an instantaneous shift above or below the forward curve. On that basis, a 100 basis point increase would benefit NII by $1.8 billion, while a decrease of 100 basis points would decrease NII over the next 12 months by $2.7 billion. Okay, let's now turn to expense and we'll use Slide 10 for the discussion. We reported $16.5 billion in expense this quarter, up 1% from the second quarter, driven by the revenue improvement in three primary areas that Brian noted earlier. Investment banking, investment broke - and brokerage fees and sales and trading revenue all have more activity and incentive variability than other revenues, and they were up 3% in aggregate versus the second quarter and up 13% year-over-year. In Q3, our headcount of 213,000 was up a little more than 1000, and this quarter we saw the departure of roughly 2,000 summer interns and we welcomed roughly 2500 college graduates from the nearly 120,000 applications received. Regarding a forward view in Q4, we don't expect much change in our headcount, and with continued investments we expect expense to be in line with Q3 at $16.5 billion. As we look into 2025, with an expected return of NII growth and through our expense discipline, we expect a return to operating leverage, an improvement in our efficiency ratio. Let's turn to credit on Slide 11. And the good news is there's not a lot to report here compared to the second quarter. Net charge-offs of $1.5 billion were flat compared to Q2. We've seen consumer losses in a pretty tight range for a few quarters now. Outside of that, we saw lower losses from office exposure and otherwise we had two somewhat unrelated commercial losses. The net charge off ratio was 58 basis points, down one basis point from Q2. Provision expense was unchanged from Q2 at $1.5 billion as reserve levels remain constant. And with regard to reserve levels on a weighted basis, we remain reserved for an unemployment rate of 5% by the end of 2025 compared to the most recent 4.1% rate reported. On Slide 12, we highlight the credit quality metrics for both our consumer and commercial portfolios, and there's nothing really noteworthy to highlight on this page. So let's move to the various lines of business and some brief comments on their results, starting on Slide 13 with consumer banking. Consumer banking continues to lead the company in organic growth, and this included another strong quarter of net new checking growth, another strong period of card openings and investment balances for consumer clients, which climbed 28% year-over-year to a record $497 billion. It also included 12-months of strong flows at $29 billion in addition to market appreciation. As noted earlier, loans grew nicely year-over-year from credit card and vehicle as well as small business, where we remain the industry leader. One highlight to note, our Practice Solutions Lending Group for doctors and dentists and related professionals saw loans grow 11% year-over-year. All of this organic growth helped to drive $2.7 billion in net income in Q3. So reported earnings remained strong, declining 6% year-over-year as revenue declined from lower NII, partially offset by higher card income. With the trajectory shifting in NII, we should see earnings in this business begin to shift as well. Expense rose 5% as we continued our business investments. And those investments included those in our people, including the announcement of moving our minimum wage to $24 per hour and that raises the minimum annualized salary for our associates to nearly $50,000. As you can see on the appendix Page 25, digital adoption and engagement continue to improve and customer satisfaction scores remain near record levels illustrating the appreciation of enhanced capabilities from our continuous investments. Bank of America's 23 million Zelle users are up 10% in the past 12-months and their volume usage is now up more than 20%. Customers are now using Zelle at nearly 3x the rate they're writing checks, and Zelle usage has meaningfully surpassed the combination of checks written and ATM withdrawals. Moving to Wealth Management on Slide 14. We produced good results, reflecting healthy organic growth and client activity with increased banking activities of our clients and the impacts of increased market levels together with strong assets under management flows. With a continued increase in banking product usage from our investing clients, the diversity of our revenue base continues to improve. More than 60% of our wealth clients now have banking products with us and 30% of our revenue is now in net interest income to complement the fees earned in our advice model. Net income rose from the third quarter '23 to $1.1 billion this year. In Q3, we reported revenue of nearly $5.8 billion growing 8% over the prior year, led by 14% growth in asset management fees that Brian highlighted earlier. Expenses growth reflects the fee growth and other investments for our future growth as we continue to grow our advisor force through hiring of both experienced advisors and graduates from our training program. We welcomed 5,500 Merrill and Private Bank net new households this quarter and more than 1\/3 of those Merrill openings were driven by graduates from our training program. The business had a 25% margin and generated a strong return on capital of 23%. Average loans were up 3% year-over-year, driven by growth in custom lending and a pickup in mortgage lending. Both Merrill and the Private Bank continue to see healthy organic growth, producing strong assets under management flows of $65 billion year-over-year, which reflects a good mix of new client money as well as existing clients putting money to work. We should also highlight the continued digital momentum that you'll find on Slide 27. As an example, three quarters of Merrill Bank and Investment accounts were opened digitally this quarter. On Slide 15, you see Global Banking results. This business produced earnings of $1.9 billion down 26% year-over-year as improved investment banking fees and treasury services revenue were overcome by lower net interest income and higher provision expense. Revenue declined 6%, driven by the impact of interest rates and deposit rotation. In our global treasury services business, fees for managing the cash of clients continue to offset some of the NII pressure from higher rates. Investment banking had a strong quarter, growing fees 18% year-over-year to $1.4 billion, led by debt capital markets fees, mostly in leveraged finance and investment grade. We finished the quarter strong, maintaining our number three investment banking fee position. What began as a slow quarter this summer gained some momentum through September and the pipeline looking forward looks solid. An increase in provision expense from last year was driven by the previously noted commercial and CRE losses. Expense increased 7% year-over-year, including continued investments in the business, particularly around technology. Switching to global markets on Slide 16. I\u2019ll focus comments on results excluding DVA as we normally do and the team continued their impressive streak of strong revenue and earnings performance. They achieved operating leverage and continued to deliver good return on capital. Earnings of $1.6 billion grew 23% year-over-year and return on average allocated capital was 14%. Revenue again, ex-DVA improved 14% from the third quarter of last year as both sales and trading and investment banking fees for institutional clients improved nicely year-over-year. Focusing on sales & trading, ex-DVA revenue improved 12% year-over-year to $4.9 billion. FICC increased 8% while equities increased 18% compared to the third quarter of '23. FICC revenues remained strong growing over both the prior year and the second quarter, driven by momentum in currencies trading. Equities had a record third quarter driven by strong trading performance in derivatives and cash. Year-over-year expenses were up 6% on revenue improvement and our continued investment in the business. Finally, on Slide 17, all other shows a loss of $295 million. Revenue was lower and included a charge to other income of roughly 200 million related to Visa's increase in its litigation escrow account. The decline in expense was driven by reduced costs of a liquidating business and lower legal expense. Our effective tax rate for the quarter was 6% and excluding discrete items and the tax credits related to investments in renewable energy and affordable housing, the effective tax rate would have been approximately 24%. So that's where I'll stop, and with that we'll open it up for Q&A.","evidence_gemma_new":null,"evidence_llama_3_3":"tangible book value per share","evidence_qwen_3_30b":"tangible book value per share $26.25 rose 10% from the third quarter of '23","gemma_new_max":null,"gemma_new_min":null,"llama_3_3_max":26.25,"llama_3_3_min":26.25,"qwen_3_30b_max":26.25,"qwen_3_30b_min":26.25}
{"symbol":"CAT","year":2023,"quarter":4,"date":"2023-Q4","chunk_id":3,"sub_chunk_id":0,"centroid_label":"adjusted operating profit","agreed_value":3200000000.0,"count":2,"chunk":"Andrew Bonfield: Thanks, Jim, and good morning, everyone. I'll begin with commentary on the fourth quarter results, including the performance of our segments. Then I'll discuss the balance sheet and cash flow, followed by an update to our target ranges for adjusted operating profit margins and ME&T free cash flow. I'll conclude with our high-level assumptions for 2024 and our expectations for the first quarter. Beginning on Slide 9. Strong operating performance continued in the fourth quarter as sales and revenues, adjusted operating profit margin, adjusted profit per share and ME&T free cash flow were all better than we had expected. In summary, sales and revenues increased by 3% to $17.1 billion. Adjusted operating profit increased by 15% to $3.2 billion. The adjusted operating profit margin was 18.9%, an increase of 190 basis points versus the prior year. Profit per share was $5.28 in the fourth quarter compared to $2.79 in the fourth quarter of last year. Profit per share in the quarter included favorable mark-to-market gains of $0.14 for the remeasurement of pension and OPEB plans and certain favorable deferred tax valuation adjustments of $0.04. It also included restructuring costs of $92 million or $0.13. Adjusted profit per share increased by 35% to $5.23 in the fourth quarter compared to $3.86 last year. The provision for income taxes in the fourth quarter, excluding the amounts related to mark-to-market and discrete items, reflected a global annual effective tax rate of 21.4%. This was lower than we had expected a quarter ago due to favorable changes in the geographic mix of profits. The lower rate benefited performance in the quarter by about $0.24. Moving on to Slide 10. I'll discuss top line results in the fourth quarter. The 3% sales increase versus the prior year was primarily driven by price realization, partially offset by lower volume as impacts from dealer inventory changes more than offset the 8% increase in sales to users. Both price and volume was slightly better than we had anticipated. The dealer inventory change resulted in an unfavorable sales impact of $1.6 billion versus the prior year. Dealer inventory decreased in the fourth quarter by $900 million overall compared to an increase of approximately $700 million during the fourth quarter of 2022. The dealer inventory decrease in the fourth quarter was led by Construction Industries, where the reduction was at the high end of our expectations. The decrease in this segment was led by excavators and the impact of the Cat engine changeover in building construction products that we have mentioned in previous earnings calls. Dealers also reduced their inventories in resource industries. Overall, the decrease in dealer inventory of machines was $1.4 billion in the quarter. Conversely, dealer inventory in Energy & Transportation increased mostly due to extended commissioning time lines, resulting from strong shipments, which was supported by healthy demand. As a reminder, dealer inventory in both Energy & Transportation and Resource Industries is mainly a function of the commissioning pipeline, and over 70% of dealer inventory in these segments is backed by firm customer orders. Looking at sales by segment. Sales in Construction Industries and Energy Transportation was slightly higher than we had anticipated, while sales in Resource Industries were about in line with our expectations. Moving to operating profit on Slide 11. Adjusted operating profit increased by 15% to $3.2 billion. Price realization and favorable manufacturing costs benefited the quarter, while higher SG&A and R&D expenses and lower sales volumes acted as a partial offset. The increase in SG&A and R&D expenses was primarily driven by higher short-term incentive compensation expense and strategic investment spend. The adjusted operating profit margin of 18.9% improved by 190 basis points versus the prior year. Margins were slightly higher than we had anticipated on volumes and price being marginally better than we had expected. Now on Slide 12. Construction Industries sales decreased by 5% in the fourth quarter to $6.5 billion due to lower sales volume, partially offset by favorable price realization. Lower sales volume was primarily due to the changes in dealer inventories that I mentioned earlier and more than offset the favorable sales to users. The dealer inventory changes impacted all of the regions. By region, sales in North America increased by 4%. In Latin America, sales decreased by 25%. Sales in EAME increased -- decreased by 18%. This region accounted for the largest dealer inventory decline in the quarter. In Asia Pacific, sales decreased by 4%. Fourth quarter profit for Construction Industries was $1.5 billion, an increase by 3% versus the prior year. The increase was primarily due to favorable price, partially offset by the profit impact from lower sales volume. The segment's operating margin of 23.5% was an increase of 180 basis points versus last year. This was broadly in line with our expectations. Turning to Slide 13. Resource Industries sales decreased by 6% in the fourth quarter to $3.2 billion. The decrease was primarily due to lower sales volume, partially offset by favorable price realization. Lower volume was impacted by changes in dealer inventories as dealers decreased inventories during the fourth quarter of 2023 compared to an increase in the prior year's quarter. Volume was also impacted by slightly lower aftermarket market part sales volume, partly due to dealer buying patterns. Fourth quarter profit for Resource Industries decreased by 1% versus the prior year to $600 million. The segment's operating margin of 18.5% was an increase of 90 basis points versus last year and was in line with our expectations. Now on Slide 14. Energy & Transportation sales increased by 12% in the fourth quarter to $7.7 billion. The increase was primarily due to higher sales volume and favorable price realization. Sales volume benefited from higher shipments of large engines and solar turbines and turbine-related services in the quarter. By application, oil and gas sales increased by 23%, power generation sales were higher by 29%, industrial sales decreased by 5% and transportation sales increased by 11%. While industrial sales decreased, they remain at healthy levels. Fourth quarter profit for Energy & Transportation increased by 21% versus the prior year to $1.4 billion. The increase was primarily due to favorable price and higher sales volume, partially offset by higher SG&A and R&D expenses, currency impacts and unfavorable manufacturing costs. The increase in SG&A and R&D expenses reflected ramping investments related to strategic growth initiatives and higher short-term incentive compensation expense. As a reminder, most of our strategic investments relating to electrification and alternative fuels are in Energy & Transportation, which therefore impacts this segment's margin. The operating margin of 18.6% was an increase of 130 basis points versus the prior year. Margin exceeded our expectations on higher volume, including favorable mix and price. Moving to Slide 15. Financial Products revenues increased by 15% to $981 million, primarily due to higher average financing rates across all regions and higher average earning assets in North America. Segment profit increased by 24% to $234 million. The increase was mainly due to lower provision for credit losses at Cat Financial, higher average earning assets and a higher net yield on average earning assets. Our portfolio continues to perform well with past dues near historic levels of 1.79%. We saw a 10 basis point improvement compared to the fourth quarter of 2022 and a 17 basis point improvement compared to the third quarter. This is the lowest fourth quarter past dues percentage since 2006. The year-end allowance rate was our lowest fourth quarter rate on record of 1.18% and was the second lowest quarterly rate ever. In addition, provision expense in 2023 was at the lowest level we've seen in over 20 years. Business activity remains strong, as retail new business volume increased versus the prior year and the third quarter. The increase versus the prior year reflected higher end user sales and rental conversions in the US. In addition, we continue to see strong demand for used equipment. Though used inventories have ticked up slightly, they remain close to historically low levels. Despite some moderation in used pricing on improved availability, it is still comfortably above historic norms. Moving on to Slide 16. The record $10 billion in ME&T free cash flow for the year included $3.2 billion in the fourth quarter, an increase of $200 million versus the prior year. On CapEx, we continue to make disciplined investments that are right for our business, governed by our focus on growing absolute OPACC dollars. We spent about $1.7 billion in 2023. Looking to 2024, we expect CapEx in the range of $2 billion to $2.5 billion. This is higher than our recent run rate and includes the investment in large engine capacity, which Jim referenced a moment ago. We also plan to invest more around AACE, which is autonomy, alternative fuels, connectivity and, digital and electrification. In addition, we are investing to make our supply chain more resilient. Moving to capital deployment. We returned $3.4 billion to shareholders in the fourth quarter, including $2.8 billion in share repurchases. Our net share count has decreased by approximately 14% since 2019, when we shared our intention to return substantially all ME&T free cash flow to shareholders over time and on a consistent basis. Our dividend remains a priority as we increased our quarterly payout by 8% in 2023. You will recall from our Investor Day in 2022, we shared that we expected to increase our dividend by at least high single digits for the next three years. The increase in 2023 reflected the second of those three years. Our balance sheet remains strong. We have ample liquidity with an enterprise cash balance of $7 billion, and we hold an additional $3.8 billion in slightly longer-dated liquid marketable securities to improve yields on that cash. Now on Slide 17, I'll discuss our revised adjusted operating profit margin targets. We exceeded our progressive target range in 2023, and we are confident that our strong execution and operating performance supports the potential for higher top end adjusted operating profit margins than were reflected in the prior range. Therefore, we have increased the top end of the range by 100 basis points relative to the corresponding level of sales. Achieving the top end of the range will remain challenging, as we are committed to increase investments in our strategic initiatives supporting long-term profitable growth. The bottom end of the target range remains unchanged. To explain, while higher gross margin support increasing the top end of the range, they actually pressure our margins in periods of decreasing volume. For that reason, we believe that the bottom end of the range remains challenging, but achievable. We will now target adjusted operating profit margins of 10% to 14% at $42 billion of sales and revenues, increasing to 18% to 22% at $72 billion of sales and revenues. Now on Slide 18. When I joined Caterpillar just over five years ago, I was impressed with the potential of our business to deliver higher, more consistent ME&T free cash flow as a result of the operating and execution model and our focus on generating absolute OPACC dollars. This is how we define winning at Caterpillar. We believe increasing absolute OPACC dollars will lead to higher shareholder returns over time. Since the beginning of 2019, we have generated $30 billion in ME&T free cash flow, including a record $10 billion in 2023. We are confident in our ability to consistently generate positive ME&T free cash flow over time. Therefore, we are introducing an updated target range for ME&T free cash flow, which is between $5 billion and $10 billion. Our strong operating performance as well as confidence in our future execution supports the higher range. The updated target range still maintains our flexibility to invest in our strategic initiatives, which is a priority. We also continue to expect to return substantially all of our ME&T free cash flow to shareholders over time through dividends and share repurchases. Moving to Slide 19. I will share our high-level assumptions for the full year. As Jim mentioned, in 2024, we anticipate sales and revenues will be broadly similar to 2023. We expect slightly favorable price realization and continued healthy underlying demand across the business as a whole. We anticipate another year of services growth as we continue to target $28 billion by 2026. We do not expect a significant change in dealer inventory for machines by the end of this year. And for Energy & Transportation, it is difficult to predict with certainty what will happen to dealer inventory as we have discussed previously. In total, dealer inventory increased by $2.1 billion in 2023. By segment, in Construction Industries, sales of equipment to end users should remain roughly similar compared to the strong year we saw in 2023. However, we do not expect a dealer inventory build as we saw last year. We also anticipate our services initiatives will benefit the segment in 2024. In Resource Industries, we anticipate lower sales versus 2023, impacted by lower machine volume primarily in off-highway and articulated trucks. We had strong sales of these products in 2023 as we converted our elevated backlog into sales, making for a challenging comparison. We also anticipate an unfavorable year-over-year change in dealer inventories. However, we expect services revenues will increase in this segment. In Energy & Transportation, we expect slightly higher sales in 2024. Power generation, oil and gas, and transportation sales should be positive, while industrial sales are expected to be lower compared to our historically strong levels in 2023. On full year adjusted operating profit margin, we currently expect to be in the top half of the updated margin target range at our expected sales levels. I'll discuss some of the puts and takes. In 2024, we expect a small pricing benefit weighted towards the first half of the year given carryover from increases taken in the second half of 2023. For the full year, we expect price to modestly exceed manufacturing costs. Versus last year, price in absolute dollar terms should moderate as we let the more favorable pricing trends from 2023. Short-term incentive compensation expense was about $1.7 billion in 2023, while we anticipate $1.2 billion in 2024. We expect the benefit of that low expense will be offset by increases in SG&A and R&D expenses as we continue to invest in strategic initiatives and of future long-term profitable growth. Investments are focused in services, new product introductions and AACE. We also anticipate there may be some negative margin impact due to mix this year. I'll explain. During 2023, when availability was somewhat challenged, we biased our production and shipments to products with the highest OPACC potential. Given that availability has improved, we anticipate a more normalized mix of products in 2024. We may also see an impact on margins from the mix of different segments as we anticipate in sales in 2024 will be slightly more weighted towards Energy & Transportation than they were in 2023. Moving on, we expect to be within the top half of our updated ME&T free cash flow target range of $5 billion to $10 billion. As you consider our cash position, keep in mind, the $1.7 billion cash outflow in the first quarter related to the payout of last year's incentive compensation expense. We also anticipate restructuring charges of $300 million to $450 million this year. Finally, we expect global effective tax rate in the range of 22.5% to 23.5%, an increase versus the 21.4% in 2023. Now on Slide 20. Our expectations for the first quarter, starting with the top line. We expect first quarter sales and revenues to be broadly similar to the prior year. We anticipate price to be favorable, although significantly less in absolute dollar terms than had occurred through 2023. We expect demand to remain healthy. However, we anticipate a slightly lower dealer inventory build for machines in the first quarter compared to a $1.1 billion build in the first quarter of 2023. This will act as a headwind to sales. At the segment level, in Construction Industries, we anticipate flattish to slightly higher first quarter sales versus the prior year, primarily due to favorable price. We anticipate lower sales in Resource Industries compared to the prior year, driven by lower volume, partially offset by favorable price. In Energy & Transportation, we expect flattish to slightly higher sales versus the prior year, with updated favorable volume benefiting the upside scenario. On margins, we expect the enterprise adjusted operating profit margin in the first quarter to be broadly similar to the first -- prior year. Price should more than offset manufacturing costs as price actions from 2023 rolled into 2024. We expect price will be lower in absolute dollar terms versus the prior year. We anticipate manufacturing costs to increase compared to last year, principally impacted by cost absorption as we do not expect an inventory build like we saw in the first quarter of 2023. We also anticipate an increase in SG&A and R&D expenses related to the strategic investment spend. By segment, in Construction Industries, we anticipate a similar margin as compared to the prior year. We expect price to offset strategic investment spend and slightly higher manufacturing costs, including cost absorption. In Resource Industries, we expect a lower margin compared to the prior year, impacted by lower volume, partially offset by favorable price. In Energy & Transportation, we anticipate a similar margin versus prior year, a slightly stronger price should be offset by higher manufacturing costs. Turning to Slide 21. Let me summarize. Adjusted profit per share of $21.21 exceeded our previous full year record by 53%. We exceeded the top end of our targeted ranges for adjusted operating profit margin and ME&T free cash flow. We have increased the top end of our adjusted profit margin range, and we have raised our ME&T free cash flow target range. We expect to be in the top half of our updated margin and ME&T free cash flow target ranges in 2024, and we anticipate another year of services growth as we continue to execute our strategy for long-term profitable growth. And with that, we'll take your questions.","evidence_gemma_new":"adjusted operating profit","evidence_llama_3_3":null,"evidence_qwen_3_30b":"adjusted operating profit fourth quarter","gemma_new_max":3200000000.0,"gemma_new_min":3200000000.0,"llama_3_3_max":null,"llama_3_3_min":null,"qwen_3_30b_max":3200000000.0,"qwen_3_30b_min":3200000000.0}
{"symbol":"CAT","year":2024,"quarter":1,"date":"2024-Q1","chunk_id":2,"sub_chunk_id":0,"centroid_label":"adjusted operating profit","agreed_value":3500000000.0,"count":3,"chunk":"Jim Umpleby : Thanks, Ryan. Good morning, everyone. Thank you for joining us. I'd like to start by thanking our global team for delivering another strong quarter, including higher adjusted operating profit margin, record adjusted profit per share, and strong ME&T free cash flow. Our strong balance sheet and ME&T free cash flow allowed us to deploy a record $5.1 billion of cash for share repurchases and dividends in the first quarter. Our results reflect a continuation of healthy demand for our products and services across most of our end markets. We remain focused on executing our strategy and continue to invest for long-term profitable growth. I'll begin with my perspectives about our performance in the quarter. I'll then provide some insights about our end markets, followed by an update on our sustainability journey. It was another strong quarter. Sales and revenues were about flat in the quarter versus last year, broadly in line with our expectations. Services revenues increased in the quarter. Our adjusted operating profit increased by 5% to $3.5 billion. Adjusted operating profit margin was slightly better than we expected and improved to 22.2% up a 110 basis points versus last year. We achieved a record adjusted profit per share of $5.60 up 14%. We also generated strong ME&T free cash flow in the quarter of $1.3 billion. In addition, our backlog increased to $27.9 billion up $400 million versus the fourth quarter of 2023. We continue to expect 2024 sales and revenues to be broadly similar to the record 2023 level. We have revised our full year 2024 segment expectations to reflect a slightly stronger top line in Energy & Transportation offset by softening in the European market for Construction Industries. We anticipate services to be higher in 2024 as we strive to achieve our 2026 target of $28 billion. For the year, we continue to expect adjusted operating profit margin and ME&T free cash flow to be in the top half of our target ranges. Turning to slide four. In the first quarter of 2024 sales and revenues remained about flat at $15.8 billion. Compared to our expectations, sales volume was slightly lower while price realization, including geographic mix, was better than we anticipated. Compared to the first quarter of 2023, overall sales to users decreased by 5%. This was slightly lower than we expected, mainly due to weakness in Europe for Construction Industries. Energy & Transportation continued to show strength, where sales to users increased 9%. For machines, which includes Construction Industries and Resource Industries, sales to users declined by 9%. Focusing on Construction Industries, sales to users were down 5%. In North America, our largest geographic region for Construction Industries, sales to users increased as expected, and demand remained healthy for both non-residential and residential construction. Construction projects, as well as government related infrastructure, continue to benefit non-residential demand. Although residential sales to users in North America were down slightly, demand for new housing remained strong. Sales to users declined in EAME primarily due to weakness in Europe related to residential construction and economic conditions. Latin America and Asia Pacific sales to users also saw some declines. In Resource Industries, sales to users declined 17% in the first quarter compared to a very strong first quarter in 2023. Mining, as well as heavy construction and quarry and aggregates were lower, mainly due to softness in off-highway and articulated trucks that we mentioned during our last earnings call. In Energy & Transportation, sales to users increased by 9%. Oil and gas sales to users benefited from strong sales of turbines and turbine-related services. We also saw increased sales of reciprocating engines in the gas compression and well servicing oil and gas applications. Power generation sales to users grew as market conditions remained favorable, including strong data center growth. Transportation sales to users increased while industrial declined as we expected from strong levels last year. In total, dealer inventory increased by $1.4 billion versus the fourth quarter. For machines, dealer inventory increased by $1.1 billion, which was slightly higher than our expectations, largely due to sales to users being modestly lower than anticipated. The increase in machine dealer inventory is consistent with normal seasonal patterns of which Construction Industries products accounted for the majority of the increase. The total level of machine dealer inventory is comfortably within the typical range. As I mentioned, backlog increased to $27.9 billion, up $400 million versus the fourth quarter of 2023, led by Energy & Transportation. Backlog remains elevated as a percentage of revenues compared to historical levels. Adjusted operating profit margin increased to 22.2% in the first quarter, a 110 basis point increase over last year, which was slightly better than we anticipated. This was primarily due to better than expected manufacturing costs, mainly related to freight. Moving to slide five. We generated strong ME&T free cash flow of $1.3 billion in the first quarter. We deployed $5.1 billion of cash for share repurchases and dividends in the first quarter, including the initiation of a $3.5 billion accelerated share repurchase program which may last up to nine months. We remain proud of our Dividend Aristocrat status and continue to expect to return substantially all ME&T free cash flow to shareholders over time through dividends and share repurchases. Now on slide six, I'll describe our expectations moving forward. We expect a continuation of healthy demand across most of our end markets for our products and services. We continue to anticipate 2024 sales and revenues to be broadly similar to the record 2023 level. As I mentioned, we expect services to continue to grow in 2024. We currently do not anticipate a significant change in dealer inventory in machines in 2024, compared to a $700 million increase in 2023. This is expected to be a headwind to sales in 2024. As a reminder, dealers are independent businesses and manage their own inventories. The vast majority of dealer inventories in Energy & Transportation are backed by firm customer orders. The timing of these products being recognized as sales to users is impacted by dealer packaging and commissioning, which is why it is difficult to predict dealer inventory in E&T. This is why we have become more explicit about the differentiation between machine dealer inventory and total dealer inventory. As I mentioned, we anticipate that our 2024 results will be within the top half of our target ranges for both adjusted operating profit margin and ME&T free cash flow. Our strong results continue to reflect the diversity of our end markets, as well as the disciplined execution of our strategy for profitable growth. Now, I'll discuss our outlook for key end markets starting with Construction Industries. In North America, after a very strong 2023, we continue to expect demand in the region will remain healthy in 2024 for both non-residential and residential construction. We anticipate non-residential construction to remain at similar levels to slightly higher demand levels compared to last year due to construction projects, as well as government related infrastructure. Residential construction demand is expected to be flat to slightly down versus last year, which remains strong in comparison to historical levels. In Asia Pacific, outside of China, we are seeing some softening in economic conditions. We anticipate demand in China will remain at a relatively low level for the above 10-ton excavator industry. In EAME, we anticipate that weak economic conditions in Europe will continue, somewhat offset by strong construction activity in the Middle East. Construction activity in Latin America remains mixed, but overall, we are expecting modest growth. In addition, we expect the ongoing benefit of our services initiatives will positively impact Construction Industries in 2024. Next, I'll discuss Resource Industries. After strong performance in 2023 in mining, as well as heavy construction and quarry and aggregates, we anticipate lower machine volume versus last year, primarily due to off-highway and articulated trucks. In addition, we anticipate a small decrease in resource industry dealer inventories during 2024 versus a slight increase last year. While we continue to see a high level of quoting activity overall, we anticipate lower order rates as customers display capital discipline. We expect to see higher services revenues, including robust rebuild activity. Customer product utilization remains high, the number of parked trucks remains low, and the age of the fleet remains elevated, and our autonomous solutions continue to see strong customer acceptance. We continue to believe the energy transition will support increased commodity demand over time, expanding our total addressable market, and providing further opportunities for long-term profitable growth. Moving to Energy & Transportation. In oil and gas, we expect reciprocating engines and services to be about flat after strong 2023 performance. We expect reciprocating gas compression demand to be higher in 2024 than it was in 2023. While servicing demand in North America is expected to soften, Cat reciprocating engine demand for power generation is expected to remain strong, largely due to continued data center growth relating to Cloud Computing and Generative AI. Last quarter, I mentioned we are making a multi-year capital investment in our large reciprocating engine division, including increasing capacity for both new engines and aftermarket parts. This investment will approximately double output for large engines and aftermarket parts as compared to 2023. We leverage these large engines across a variety of applications, including data centers, oil and gas, large mining trucks, and distributed power generation. For Solar Turbines, our backlog and quoting activity both remain strong for oil and gas and power generation. As we said previously, industrial demand is expected to soften relative to a strong 2023. In transportation, we anticipate high-speed marine to increase as customers continue to upgrade aging fleets. Moving to slide seven, I'll provide an update on our sustainability journey. We are contributing to a reduced carbon future and continue to invest in new products technologies and services, to help our customers achieve their climate related objectives. In January we announced the signing of an electrification strategic agreement with CRH to advance the deployment of Caterpillar\u2018s Zero-Exhaust Emissions Solutions. CRH is the number one aggregate producer in North America and the first company in that industry to sign such an agreement with Caterpillar. The agreement is focused on accelerating the deployment of Caterpillar\u2019s 70-ton to 100-ton class battery electric off-highway trucks and charging solutions at a CRH site in North America. Through the agreement CRH will participate in Caterpillar\u2019s early learner program for battery electric off-highway trucks. In February Caterpillar oil and gas announced the launch of the Cat Hybrid Energy Storage Solution to help drillers and operators cut fuel consumption, lower total cost of ownership and reduce emissions in oil and gas operations. The custom designed energy storage system stores excess power from the job site and then discharges it as needed. In a hybrid system that combines the Cat Hybrid Energy Storage Solution in a natural gas fuel generator set, the transient response is even quicker than a conventional diesel only rigs. Depending upon site configuration the Hybrid Energy Storage Solution has proven to deliver up to 30% fuel cost savings with natural gas, 85% fuel cost savings with fuel gas, and up to an 80% reduction in nitrogen oxides. Carbon dioxide equivalent reductions up to 11% and 7% are possible with natural gas and fuel gas respectively. In addition, we look forward to issuing our 19th Annual Sustainability Report in May. The material in our report reinforce our ongoing commitment to sustainability. With that I'll turn it over to Andrew.","evidence_gemma_new":"adjusted operating profit 5%","evidence_llama_3_3":"adjusted operating profit first quarter","evidence_qwen_3_30b":"adjusted operating profit 5% $3.5 billion adjusted operating profit margin 22.2%","gemma_new_max":3500000000.0,"gemma_new_min":3500000000.0,"llama_3_3_max":3500000000.0,"llama_3_3_min":3500000000.0,"qwen_3_30b_max":3500000000.0,"qwen_3_30b_min":3500000000.0}
{"symbol":"CAT","year":2024,"quarter":2,"date":"2024-Q2","chunk_id":2,"sub_chunk_id":0,"centroid_label":"adjusted operating profit","agreed_value":3700000000.0,"count":3,"chunk":"James Umpleby: Thanks, Ryan. Good morning, everyone. Thank you for joining us. I'd like to start by thanking our global team for their strong execution in the first half of the year. In the second quarter, we achieved higher adjusted operating profit margin, record adjusted profit per share and generated robust ME&T free cash flow. Our results continue to reflect the benefit of the diversity of our end-markets as well as the disciplined execution of our strategy for long-term profitable growth. I'll begin with my perspectives about our performance in the quarter and we'll provide an update on our full year expectations. I'll then provide some insights about our end-markets, followed by an update on our sustainability journey. Moving to quarterly results. Sales and revenues were down 4% in the second quarter versus last year, slightly below our expectations. Services increased in the quarter. Our adjusted operating profit increased to $3.7 billion, a record. Adjusted operating profit margin was better than we expected and improved to 22.4% up 110 basis points versus last year. We achieved a record quarterly adjusted profit per share of $5.99, up 8%. We also generated $2.5 billion of ME&T free cash flow in the quarter. In addition, our backlog increased to $28.6 billion, up $700 million versus the first quarter of 2024. Before I get into the detail of the quarter and outlook for our segments, I'll update our expectations for the full year based on our first half results. Earlier in the year, we estimated that sales and revenues would be broadly similar for the full year. For the first half, the top-line came in marginally below our expectations and ended 2% below the prior year. We now anticipate our sales and revenues will decline at a roughly similar rate in the second half versus the prior year, in-part due to our latest assumptions for dealer inventory, principally into Resource Industries. Overall sales to users and construction industries are running slightly lower than we anticipated, partially offset by stronger-than-expected sales in Energy and Transportation. Service revenues continue to grow. Although sales and revenues have been marginally below our expectations, adjusted operating profit margins have been stronger than we anticipated. Earlier in the year, we expected our adjusted operating profit margin to be in the top half of the target range at the corresponding level of sales. Due to the strength of our performance in the first half of the year, we now expect overall adjusted operating profit margins to be above the top of the target range for the full year. For the second half, we expect adjusted operating profit margins to be better than we previously anticipated or about flat to the second half of 2023, which Andrew will describe. The strength of our performance to date and our improved second half adjusted operating profit margin expectations give us confidence to guide above our target range. Overall, our expectations for full year adjusted operating profit and adjusted profit per share are now higher than it was during our last earnings call. We also anticipate that ME&T free cash flow will remain in the top half of the free cash flow target range. Turning to Slide 4 and our second quarter results. In the second quarter of 2024, sales and revenues declined 4% to $16.7 billion. Sales volume declined slightly more than we expected, while price realization, including geographic mix was better than we anticipated. Dealer inventory also declined in the second quarter. Compared to the second quarter of 2023, overall sales to users decreased 3%, slightly below expectations. For machines, which includes Construction Industries and Resource Industries, sales to users declined by 8%, slightly more than expected. Energy and transportation continued to show strength as sales to users increased 10%. Sales to users in Construction Industries were down 5%. In North America, sales to users were slightly lower than anticipated, primarily due to weaker than expected rental fleet loading. Government related infrastructure projects remained healthy. Residential sales to users in North America were up as demand for new housing remained resilient. Sales to users declined in the EAME, primarily due to weakness in Europe relating to residential construction and economic conditions. Sales to users in Asia Pacific declined, while Latin America increased. In Resource Industries, sales to users declined 15%, a slightly smaller decline than we expected versus a very strong second quarter in 2023. Mining as well as heavy construction and quarry and aggregates were lower, mainly due to softness we previously discussed for two products, articulated trucks and off-highway trucks. In Energy and Transportation, despite the ongoing weakness in industrial, sales to users increased by 10% as we continue to see strength across most applications. Oil and gas sales to users benefited from strong sales of turbines and turbine related services. We also saw increased sales of reciprocating engines into gas compression, while well servicing oil and gas applications were lower. Power generation sales to users grew as market conditions remained favorable, including strong data center growth. Transportation sales to users increased, while industrial declined as expected from the strong levels last year. Our results continue to reflect the benefit of the diversity of our end-markets as well as the disciplined execution of our strategy for long-term profitable growth. Moving to dealer inventory. In total, dealer inventory decreased by $200 million versus the first quarter. For machines, dealer inventory decreased by $400 million and remains within our typical range. As I mentioned, backlog increased to $28.6 billion, up $700 million versus the first quarter of 2024. Energy & Transportation drove the increase as we continue to see strong demand for solar turbines and reciprocating engines for power generation. Adjusted operating profit margin increased to 22.4% in the second quarter, a 110 basis point increase over last year, which was better than we anticipated. Margin exceeded our expectations, primarily due to lower than expected manufacturing costs and slightly better than expected price. Moving to Slide 5, we generated ME&T free cash flow of $2.5 billion in the second quarter. We deployed more than $1.8 billion of cash for share repurchases and about $600 million in dividends in the second quarter. In June, we announced an additional $20 billion share repurchase authorization with no expiration date. We remain committed to consistent share repurchases. Since 2019, when we communicated our intention to return substantially all ME&T free cash flow to shareholders over time, our net share count has decreased by approximately 18%. In addition, we increased our dividend by 8% in the second quarter, which is our fourth straight year of a high single-digit quarterly increase. We remain proud of our Dividend Aristocrat status and continue to expect to return substantially all ME&T free cash to shareholders over time through dividends and share repurchases. Now on Slide 6. I'll describe our expectations for our three primary segments moving forward. In Construction Industries, after a record 2023, sales to users in the second half are now expected to decline slightly versus last year. In North America, we now anticipate slightly lower construction industry sales to users for full year 2024 than we did previously, primarily due to weaker than expected rental fleet loading. Government related infrastructure projects are expected to remain healthy. In Asia Pacific, outside of China, we still expect soft economic conditions to continue. We anticipate demand in China will remain at a relatively low level for the above 10 ton excavator industry. In the EAME, we anticipate that weak economic conditions in Europe will continue, somewhat offset by continued healthy construction demand in the Middle East. Construction activity in Latin America remains mixed, but overall, we are expecting modest growth. In addition, we are expecting the ongoing benefit of our services initiatives will positively impact Construction Industries. Next, I'll discuss Resource Industries. After strong performance in 2023 in mining as well as heavy construction, in quarry and aggregates, we continue to anticipate lower machine volume versus last year, primarily due to off-highway and articulated trucks. We currently anticipate a decrease in Resource Industries dealer inventories in 2024 versus a slight increase last year. We expect to see higher services revenues, including robust rebuild activity. Customer product utilization remains high, the number of parked trucks remains low and the age of the fleet remains elevated and our autonomous solutions continue to see strong customer acceptance. Customers continue to display capital discipline, however, we continue to believe the energy transition will support increased commodity demand over time, expanding our total addressable market and providing further opportunities for long-term profitable growth. Moving to Energy & Transportation. In oil and gas, in total, we expect a stronger year overall in 2024 versus last year. After a strong 2023, we expect reciprocating engine sales in oil and gas to be flat to slightly down, primarily due to ongoing softness in well servicing. We still expect gas compression to be up for the full year, however, we expect it to soften in the second half. For solar turbines, we continue to expect volume growth in the second half as our backlog remains strong for oil and gas. CAT reciprocating engine and solar turbine demand for power generation is expected to remain strong, largely due to continued data center growth relating to cloud computing and Generative AI. Industrial demand is expected to remain at a relatively low level compared to 2023 in the second half. In Transportation, we anticipate growth as the year progresses in both high speed marine and rail services. Moving to Slide 7. I'll provide an update on our sustainability journey. We are contributing to a reduced carbon future and continue to invest in new products, technologies and services to help our customers achieve their climate related objectives. In April, Caterpillar and Vale signed an agreement to test battery-electric large mining trucks as well as to conduct studies on ethanol powered trucks. Progress has been made on both initiatives since the agreement was signed, including conducting a joint study on a dual-fuel solution for haul trucks operating on ethanol and diesel fuel. We are supporting Vale's sustainability objectives. In June, we added CAT CG260 Gas Generator sets to our portfolio of commercially available power solutions capable of running on hydrogen fuel. Previously, our portfolio with this capability ranged from 400 KW to 2,500 KW. The addition of the CG260 now provides up to 4,500 KW of electric power for continuous, prime and load management requirements and is approved to operate on gas containing up to 25% hydrogen by volume. Caterpillar offers retrofit kits to upgrade CG260 Generator sets already installed with these same hydrogen capabilities. In addition to our hydrogen capabilities and reciprocating engines, solar turbines has been a leader with its ability to burn a wide variety of fuels, including hydrogen, natural gas and biofuels. Today, Caterpillar has a large and growing lineup of technologies to support customers in their sustainability journey. These two examples highlight how we are helping our customers build a better, more sustainable world. With that, I'll turn it over to Andrew.","evidence_gemma_new":"adjusted operating profit","evidence_llama_3_3":"adjusted operating profit second quarter","evidence_qwen_3_30b":"adjusted operating profit $3.7 billion increased by 2%","gemma_new_max":3700000000.0,"gemma_new_min":3700000000.0,"llama_3_3_max":3700000000.0,"llama_3_3_min":3700000000.0,"qwen_3_30b_max":3700000000.0,"qwen_3_30b_min":3700000000.0}
{"symbol":"CAT","year":2024,"quarter":3,"date":"2024-Q3","chunk_id":3,"sub_chunk_id":0,"centroid_label":"adjusted operating profit","agreed_value":3200000000.0,"count":2,"chunk":"Andrew Bonfield: Thank you, Jim, and good morning, everyone. As usual, I'll begin with a high-level summary of the third quarter, and then provide more detailed comments, including the performance of the segments. I'll then, discuss the balance sheet and free cash flow, before concluding with comments on our assumptions for the full year and the fourth quarter. Beginning on Slide 8, although sales and revenues were lower than we had expected, our adjusted operating profit margin was 20.0%, generally in line with what we had anticipated. Adjusted profit per share was in line with our expectations despite adjusted operating profit being impacted by the lower sales and revenues. I will highlight a few of the moving parts in a moment. As Jim mentioned, our full year margin expectations remain unchanged, and we continue to anticipate the adjusted operating profit margin will be above the top end of the target range despite the slightly lower outlook for the top-line. Our expectations for adjusted profit per share remain unchanged versus our expectations at the time of our last earnings call. Also, we have increased our expectations for ME&T free cash flow for the year, which we now anticipate will be near the top of our $5 billion to $10 billion target range. In the third quarter, sales and revenues of $16.1 billion decreased by 4% compared to the prior year. The adjusted operating profit margin of 20.0% was 80 basis points lower when compared to the prior year. Profit per share was $5.06 in the third quarter compared to $5.45 in the third quarter of last year. Restructuring costs were $0.11 in the quarter versus $0.07 in the prior year. Adjusted profit per share was $5.17 in the quarter compared to $5.52 last year. Other income and expense was $119 million headwind versus the prior year, mostly driven by an unfavorable currency impact related to ME&T balance sheet translation. We do not forecast the impact of foreign currency translation on our adjusted profit per share, so this acted as a headwind compared to our expectations for the quarter. Excluding discrete items, the provision for income taxes in the third quarter in both 2023 and 2024 reflected a global annual effective tax rate of 22.5%. We recorded a discrete tax benefit, which had an $0.11 favorable impact within the quarter. We do not anticipate discrete items. Finally, the year-over-year impact from the reduction in the average number of shares outstanding, primarily due to share repurchases, resulted in a favorable impact on adjusted profit per share of approximately $0.26 as compared to the third quarter 2023. This was slightly better than we had expected. Moving to Slide 9, I'll discuss our top-line results for the third quarter. Sales and revenues decreased by 4% compared to the prior year, primarily impacted by lower sales volume as a result of lower sales to users and impacts from changes in dealer inventories. Total sales to users decreased by 6% as a 10% decrease from Machines was partially offset by a 5% increase for Energy & Transportation. The impact from changes in total dealer inventories acted as a sales headwind of about $200 million in the quarter. For Machines-only, dealer inventory increased by about $100 million, a smaller increase than the $400 million increase in the prior year, but slightly above our expectations of being flattish to slightly lower. Service revenues increased versus the prior year, as we had anticipated. Moving to operating profit on Slide 10. Operating profit in the third quarter decreased by 9% to $3.1 billion. Adjusted operating profit decreased by 8% to $3.2 billion, mainly due to the impact of lower sales volume, partially offset by favorable price realization and manufacturing costs. Since early 2022, price realization has been a strong -- has been strong and often exceeded our expectations. Over the past several quarters, we have highlighted that price will begin to moderate in the second half of this year. In the third quarter, this moderation began to occur as price realization was lower than previous quarters and generally in line with our expectations. As I mentioned, for the third quarter, the adjusted operating profit margin was 20.0%, which was generally in line with our expectations. By segment, margin in Construction Industries and Resource Industries was slightly below our expectations on lower volume, while Energy & Transportation was about in line. Financial products had a slightly stronger quarter than we had expected. On Slide 11, Construction Industries sales decreased by 9% in the third quarter to $6.3 billion, slightly below our expectations. The decrease versus the prior year was primarily due to lower sales volume and unfavorable price realization. The decrease in sales volume was mainly driven by lower sales of equipment to end users. Changes in dealer inventories also acted as a slight headwind to sales. By region, Construction Industries sales in North America decreased by 11%; in Latin America, sales increased by 19%; sales in the EAME region decreased by 15%; in Asia Pacific, sales declined by 12%. Third quarter profit for Construction Industries was $1.5 billion, a 20% decrease versus the prior year. This is mainly due to the profit impact of lower sales volume and unfavorable price realization. The segment's margin of 23.4% was a decrease of 300 basis points versus the prior year. Turning to Slide 12, Resource Industries sales decreased by 10% in the third quarter to $3.0 billion, which was slightly point below our expectations. The decline versus the prior year was primarily due to lower sales volume, mainly driven by lower sales of equipment to end users given a challenging comparison to the prior year. Third quarter profit for Resource Industries decreased by 15% versus the prior year to $619 million. This was mainly due to the profit impact of lower sales volume. The segment's margin of 20.4% was a decrease of 140 basis points versus the prior year. Now, on Slide 13, Energy & Transportation sales increased by 5% in the third quarter to $7.2 billion, slightly lower than we had expected, driven by the timing of deliveries. The increase versus the prior year was primarily due to favorable price realization and higher sales volume, including higher intersegment sales. By application, power generation sales increased by 26%, transportation sales were higher by 3%, oil and gas sales decreased by 1%, and industrial sales decreased by 16%. Third quarter profit for Energy & Transportation increased by 21% versus the prior year to $1.4 billion. The increase was mainly due to favorable price realization. The segment's margin of 19.9% was an increase of 270 basis points versus the prior year. Moving to Slide 14, financial products revenues increased by 6% to about $1 billion, primarily due to higher average earning assets driven by North America and higher average financing rates across all regions. Segment profit increased by 21% to $246 million. This is mainly due to a favorable impact from equity securities and a lower provision for credit losses. Our customers' financial health is strong. Past dues remain near historic lows of 1.74% in the quarter, down 22 basis points versus the prior year. Our allowance rate was 0.87%, our lowest on record. Business activity at Cat Financial remains healthy. Our retail new business volume increased by 17% versus the prior year, supported by our financing packages for customers choosing to buy Caterpillar equipment. Though Caterpillar's retail machine sales volume was lower, proportionately more sales have been financed through Cat Financial, which highlights the attractiveness of the financing options we are offering to our customers. We also continue to see healthy demand for used equipment and inventories remain at low levels. Conversion rates are also strong as customers choose to buy equipment at the end of their lease term. Moving on to Slide 15, we generated about $2.7 billion in ME&T free cash flow in the third quarter and deployed about $1.5 billion in share repurchases and dividends. Our balance sheet remains strong with an enterprise cash balance of $5.6 billion. In addition, we hold $1.8 billion in slightly longer dated liquid marketable securities to improve yields on that cash. Now, on Slide 16, I will share our high-level assumptions for the full year. For the full year, we have updated our outlook to reflect sales and revenues that are slightly lower than our expectations at the time of our last earnings call, driven by lower-than-expected third quarter sales and an update to our expectations for dealer rental fleet loading in Construction Industries. We continue to anticipate services growth in 2024. As I mentioned earlier, our full year expectations for adjusted operating profit margin and adjusted profit per share remain unchanged compared to our last earnings call. We continue to expect adjusted operating profit margin to be above the top end of the target range. In addition, we are increasing our expectations for ME&T free cash flow for the year, which we now anticipate to be near the top of our $5 billion to $10 billion target range. To assist you with your modeling for the full year, we now anticipate CapEx of around $2 billion and restructuring costs of approximately $400 million. Our expectation for the global annual effective tax rate, excluding discrete items, remains at 22.5%. Turning to Slide 17, I'll provide a few comments on the fourth quarter, starting with the top-line. We expect slightly lower sales and revenues in the fourth quarter compared to the prior year, impacted by lower machine sales to users versus a strong comparison. On machine dealer inventory, our planning assumptions include the expectation that dealers will reduce their inventories in the fourth quarter while balancing their need to be prepared for 2025. The magnitude of the decline for machine dealer inventory is expected to be less than the $1.4 billion decrease we saw in the fourth quarter of 2023. For perspective, we expect machine dealer inventory to end the year around the same level as year-end 2023. Also, the ongoing benefit of our services initiatives is expected to positively impact sales in the fourth quarter. By segment, in the fourth quarter, compared to the prior year, we anticipate a sales decrease in Construction Industries. This is impacted by lower sales to users, which Jim mentioned, along with unfavorable price realization. In Resource Industries, we expect slightly lower sales, impacted by lower sales to users versus a strong fourth quarter of 2023. In Energy & Transportation, we anticipate slightly higher sales versus the prior year, supported by power generation. Enterprise margin in the fourth quarter is expected to trend lower compared to the third quarter, following the typical seasonable pattern. However, versus the prior year, we expect a modestly higher adjusted operating profit margin despite lower sales. We anticipate favorable manufacturing costs and lower SG&A and R&D expenses will more than offset the profit impact of lower sales volume. Lower SG&A and R&D expenses are primarily driven by the benefit of lower short-term incentive compensation versus a high expense in the prior year quarter. Price realization for Machines is expected to trend lower as the pricing environment continues to normalize, though price in Energy & Transportation should act as a partial offset. Regarding price expectations for Machines, it is important to note that discounts to dealers occur through post sales merchandising programs, which impact our results over time. This includes financing support from Cat Financial, which is an effective way of supporting our customers, and we recover a portion of that support over the life of the deal. Let me explain. Based on the current level of price discounting support, we reserve the anticipated payments to dealers for these merchandising programs. At times, there is a lag between the timing of the invoice of the dealer and when the dealer invoices the customer, which impacts the reserve. Over the next few quarters, we expect the impact from these merchandising programs to drive a headwind to Machine price realization as we continue to adjust the reserve to reflect the current level of price discounting support. By segment, in the fourth quarter, in Construction Industries, we anticipate lower margin compared to the prior year primarily due to unfavorable price realization, partially offset by favorable manufacturing costs. In Resource Industries, we anticipate lower margin in the fourth quarter compared to the prior year, mainly due to lower volume and prioritization of strategic investments around services growth and AACE, which is autonomy, alternative fuels, connectivity and digital, and electrification. Favorable manufacturing costs should act as a partial offset. In Energy & Transportation, we expect a higher margin versus the prior year, primarily impacted by favorable price realization. So, turning to Slide 18, let me summarize. Although sales and revenues were lower than we had expected, adjusted operating profit margin and adjusted profit per share were generally in line with our expectations. We now anticipate our top-line for the full year will be slightly below our prior estimate. Our backlog increased slightly and remains at a very healthy level. Our expectations for full year adjusted operating profit margin and adjusted profit per share remain unchanged compared to a quarter ago. We continue to expect adjusted operating profit margin to be above the top end of the target range for the full year based on our expected sales levels. We are now increasing our expectations for ME&T free cash flow, which we anticipate to be near the top of our target range for the full year. Our team executed well in the quarter, and our results continue to benefit -- to reflect the benefit of the diversity of our end markets and the disciplined execution of our strategy for long-term profitable growth. And with that, we'll now take your questions.","evidence_gemma_new":"Adjusted operating profit","evidence_llama_3_3":null,"evidence_qwen_3_30b":"adjusted operating profit $3.2 billion third quarter","gemma_new_max":3200000000.0,"gemma_new_min":3200000000.0,"llama_3_3_max":null,"llama_3_3_min":null,"qwen_3_30b_max":3200000000.0,"qwen_3_30b_min":3200000000.0}
{"symbol":"CAT","year":2024,"quarter":4,"date":"2024-Q4","chunk_id":3,"sub_chunk_id":0,"centroid_label":"adjusted operating profit","agreed_value":3000000000.0,"count":3,"chunk":"Andrew Bonfield: Thank you Jim, and good morning everyone. I\u2019ll begin with a summary of the fourth quarter and then provide more detailed comments, including some on the performance of the segments. Next, I\u2019ll discuss the balance sheet and free cash flow before concluding with comments on our high level assumptions for 2025, as well as expectations for the first quarter. Beginning on Slide 9, sales and revenues were $16.2 billion, a 5% decrease versus the prior year. As Jim mentioned, sales were slightly lower than we had anticipated, which together with unfavorable mix resulted in lower than expected margins for the quarter. Adjusted operating profit was $3 billion and our adjusted operating profit margin was 18.3%. Profit per share was $5.78 in the fourth quarter compared to $5.28 in the fourth quarter of last year. Adjusted profit per share was $5.14 in the quarter, a 2% decrease compared to $5.23 last year. Adjusted profit per share excluded a discrete tax benefit of $0.46 for a tax law change related to currency translation. Mark to market gains of $0.23 for the re-measurement of pension and other post-employment plans was also excluded, in addition to restructuring costs of $0.05 in the quarter. Other income expense was $185 million favorable versus the prior year, mostly driven by a positive currency impact related to ME&T balance sheet translation, which compared to a negative impact in the fourth quarter last year. As I have mentioned previously, we do not anticipate currency translation movements, so the positive impact on the fourth quarter of 2024 helped to offset the impact of operating profit being lower than expected. Excluding discrete items, the provision for income taxes in the fourth quarter of 2024 reflected a global annual effective tax rate of 22.2%. This was slightly lower than we had expected a quarter ago and benefited the quarter by $0.09. Finally, the year-over-year impact from the reduction in the average number of shares outstanding, primarily due to share repurchases, resulted in a favorable impact on adjusted profit per share of approximately $0.24 as compared to the fourth quarter of 2023. Moving onto Slide 10, I\u2019ll discuss the top line results for the fourth quarter. Sales and revenues decreased by 5% compared to the prior year, primarily impacted by lower sales volume. Price was unfavorable year-over-year and about in line with what we had expected. Lower volume was driven by the impact from changes in dealer inventories and a 2% year-over-year decrease in total sales to users. Total machine dealer inventory decreased by $1.6 billion in the quarter compared to $1.4 billion decrease in the prior year. The decrease in machine dealer inventory was larger than we had expected, and it\u2019s mostly a function of higher than anticipated sales to users across both construction industries in North America and resource industries. Service revenues increased in the quarter compared to 2023. As I mentioned, the sales decrease in the quarter was slightly larger than we had anticipated. This was mostly due to services growing at a slightly slower rate than we had expected and some delivery delays in energy and transportation. Moving to operating profit on Slide 11, operating profit in the fourth quarter decreased by 7% to $2.9 billion. Adjusted operating profit decreased by 8% to $3 billion mainly due to the profit impact of lower than expected sales volume. As I mentioned, for the fourth quarter the adjusted operating profit margin was 18.3%, a 60 basis point decrease compared to the prior year. This was lower than we had anticipated mainly due to a lower than expected sales volume and the impact of unfavorable mix. On Slide 12, construction industry sales decreased by 8% in the fourth quarter to $6 billion. This was slightly below our expectations on lower than anticipated volume. Compared to the prior year, the 8% sales decrease was primarily due to unfavorable price realization and lower sales volume. The decrease in sales volume was mainly driven by lower sales of equipment to end users and dealers reducing their inventory by slightly more than they did during the fourth quarter of 2023. By region, construction industry sales in North America decreased by 14%. In Latin America, sales increased by 6%. Sales in the EAME region decreased by 1%, and Asia Pacific sales decreased by 2%. Fourth quarter profit for construction industries was $1.2 billion, a 24% decrease versus the prior year. This was primarily due to unfavorable price realization as a result of the impact of the post-sales merchandising programs that we discussed with you in October. The segment\u2019s margin of 19.6% was a decrease of 390 basis points versus the prior year. The margin was lower than we had anticipated, primarily impacted by lower volume and unfavorable mix. Manufacturing costs were also unfavorable versus our expectations, principally due to a headwind from cost absorption as our inventory in construction industries declined. Turning to Slide 13, resource industry sales decreased by 9% in the fourth quarter to $3 billion. This was below our expectations mainly due to services growing at a slightly lower rate than we had anticipated. As we compare to the prior year, the 9% sales decrease was primarily due to lower sales volume mainly driven by the impact from changes in dealer inventories. Dealer inventory decreased more in the fourth quarter of 2024 than it did in the fourth quarter of 2023. Fourth quarter profit for resource industries decreased by 22% versus the prior year to $466 million. This was mainly due to the profit impact of lower sales volume. The segment\u2019s margin of 15.7% was a decrease of 280 basis points versus the prior year. This was lower than we had anticipated, primarily due to lower volume. Now on Slide 14, energy and transportation sales of $7.6 billion were about flat versus the prior year. Sales were slightly below our expectations to a lower than expected services growth rate, largely in oil and gas, and the timing of deliveries of international locomotives. Compared to the prior year, sales were roughly flat as the impact of lower sales volume was mostly offset by favorable price realization. By application, power generation sales increased by 22%, transportation sales were lower by 1%, oil and gas sales decreased by 14%, and industrial sales decreased by 14%. Fourth quarter profit for energy and transportation increased by 3% versus the prior year to $1.5 billion. The increase was primarily due to favorable price realization partially offset by the profit impact of lower sales volume. The segment\u2019s margin of 19.3% was an increase of 70 basis points versus the prior year. This was lower than we had anticipated, primarily due to lower than expected volume and an unfavorable mix of products. Moving to Slide 15, financial products revenues increased by 4% versus the prior year to about $1 billion, primarily due to higher average earning assets in North America and higher average financing rates across all regions, except North America. Segment profit decreased by 29% to $166 million. This was mainly due to an unfavorable impact from equities securities in addition to lower margin and a higher provision for credit losses. Our customers\u2019 financial health remains strong. Past dues were 1.56% in the quarter, down 23 basis points versus the prior year and our lowest level since 2005. The allowance rate was 0.91%, remaining near historic lows. Business activity at Cat Financial remains healthy. Retail credit applications increased and our retail new business volume grew by 3% versus the prior year. This was our highest level since 2012, supported by attractive finance packages for customers choosing to buy Caterpillar equipment. We continue to see proportionately more of our sales financed through Cat Financial; in addition, demand for used equipment remains healthy and inventories remain at low levels. Conversion rates were above historical averages as customers choose to buy equipment at the end of their lease term. Moving onto Slide 16, we continue to generate strong ME&T free cash flow. The $9.4 billion in 2024 was near the top end of our target range and just slightly lower than the prior year despite a larger payment for short term incentive compensation and higher capital expenditure. CapEx for the year was about $2 billion, which was in line with our expectations. Moving to capital deployment, in 2024 we returned $10.3 billion to shareholders through repurchased stock and dividends. On share repurchases, we deployed $7.7 billion as we continue to fulfill our objective to be in the market on a more consistent basis. Our balance sheet remains strong with an enterprise cash balance of $6.9 billion. In addition, we hold $2 billion in slightly longer dated liquid marketable securities to improve yields on that cash. Now on Slide 17, let me start with a high level overview of our expectations for the full year. We expect a slight decrease in sales for 2025 with an unfavorable impact from both volume and price. Due to the impact of post-sales merchandising programs, price realization should account for about a 1% decrease in sales for the full year. On margins, the impact of price together with high depreciation costs due to the investments we are making should result in adjusted operating profit margins being in the top half of the target range with the expected level of sales, rather than being above the top end of the range, as occurred in 2024. Our margin targets are progressive, so while we would expect volume to have an impact on absolute margins, our target is adjusted for lower sales. We expect a slight headwind in other income and expense in 2025 primarily due to lower interest income, mostly due to lower interest rates, as well as the absence of the positive currency benefit from ME&T balance sheet translation that occurred in 2024. As I mentioned, we do not anticipate translation movements in our expectations. We expect restructuring costs of approximately $150 million to $200 million in 2025. We anticipate a global annual effective tax rate of 23% for 2025, excluding discrete items. While the impact of the share buyback should be positive, we expect to have less ME&T free cash flow to deploy in 2025. This implies a less favorable impact to profit per share in 2025 as compared to 2024. By segment, lower sales in construction industries and resource industries will be partially offset by sales growth in energy and transportation. For construction industries, we expect lower sales in 2025 based on the outlook Jim described and unfavorable price realization. In resource industries, we anticipate slightly lower sales versus 2024 driven by unfavorable price realization and slightly lower volume. Higher volumes and favorable price in energy and transportation should drive sales growth, though sales remain constrained until the benefits of the investments we are making in large engines begin to flow through beyond 2025. We also anticipate another year of services growth in each of our primary segments. Currently, we do not anticipate a significant change in dealer inventory in machines by the end of 2025. Moving onto ME&T free cash flow, we expect to be in the top half of our target range of $5 billion to $10 billion. The first quarter of 2025 will be impacted by a $1.4 billion cash outflow related to the payout of last year\u2019s incentive compensation. We anticipate CapEx of about $2.5 billion in 2025 as we continue to make disciplined investments that are right for our business, governed by a focus on growing absolute OPACC [ph] dollars. This includes the multi-year capital investment to expand our large engine volume output capability that we mentioned last year. Turning to Slide 18, to assist with your modeling, I\u2019ll provide some color on the first quarter, starting with the top line. We expect lower sales versus the prior year. For perspective, in a typical year we see our lowest sales in the first quarter of the year. In 2025, we anticipate that trend to continue to be more pronounced as sales in the first quarter should account for a lower percentage of full year sales than is typical by about 100 basis points. This decrease is mainly due to our expectations for dealer inventory movements and price, which primarily impacts machines. Energy and transportation is expected to show normal seasonality with sales growing throughout the year. Let me explain. Although dealers did reduce machine inventory significantly in the fourth quarter, they remain around the top end of the range as we enter 2025. This compares with dealer inventories in construction industries being towards the middle of the range at the beginning of 2024. As a result, we expect them to build correspondingly less inventory during the first quarter than the $1.1 billion that they built in the first quarter of 2024. As we expect dealer inventory to be about flat by year end, we should see a tailwind to sales in the fourth quarter as we don\u2019t expect a similar machine dealer inventory change as we have seen in the last two years. We also expect unfavorable price realization for machines in the first quarter due to the impact of post-sales merchandising programs. We would expect these price impacts to be greater for machines in the first half of the year as the noticeable impact of post-sales merchandising programs started in the third quarter of 2024, making for an easier comparison in the second half. To pull together the impact by segment, we anticipate lower sales in construction industries in the first quarter, impacted by lower sales to users, the headwind from changes in dealer inventory and price, the impact of which should be similar to what we saw in the fourth quarter of 2024. In resource industries in the first quarter, we expect lower sales volume versus the prior year, impacted by lower volume and unfavorable price realization. In energy and transportation, we anticipate similar sales in the first quarter versus the prior year as continued strength in power generation is about offset by lower oil and gas and transportation sales. Price should be positive for energy and transportation. Now I\u2019ll provide some color on first quarter margin expectations. Though enterprise margins are typically stronger in the first quarter compared to with the remaining quarters of the year, we do not expect this seasonal trend to occur in 2025. Compared to the prior year, we anticipate a lower enterprise adjusted operating profit margin in the first quarter due primarily to lower than usual volume and price. Volume is impacted by the lower build of machine dealer inventory and slightly lower sales to users for machines. Unfavorable price realization for machines is principally due to the factors I\u2019ve discussed previously, which will be partially offset by favorable price in energy and transportation. We expect there will be improvement in first quarter margins offsetting the volume impact in the first quarter due to stronger volume in the fourth quarter than is typical. By segment, in the first quarter in construction industries, we anticipate lower margins compared to the prior year due primarily to lower volume and price. We do not expect to see the margin benefit we typically see in the first quarter of the year as compared to the fourth quarter of the prior year, which is generally in the range of 100 to 200 basis points. Again, some of this will be offset in the fourth quarter as volume is favorable and price more neutral. In resource industries, we anticipate lower margin in the first quarter compared to the prior year, mainly due to lower volume and unfavorable price realization. In energy and transportation, we expect slightly lower margin versus the prior year as favorable price realization is more than offset by higher manufacturing costs and unfavorable mix impacts. Again, as a reminder, this detail is provided to help you model the first quarter and does not impact our expectations for the full year that I set out earlier, which is a slight decrease in sales and revenues for the year and margins in the top half of the target range. Turning to Slide 19, let me summarize. Adjusted profit per share of $21.90 exceeded last year\u2019s record by 3%. This was our third straight year with record adjusted profit per share. Adjusted operating profit margin of 20.7% exceeded the top of our target range. ME&T free cash flow of $9.4 billion was near the top of the target range of $5 billion to $10 billion. For 2025, while we expect a slight drop in sales, we expect to be in the top half of the adjusted operating profit margin range and the top half of the ME&T free cash flow target range, and we anticipate another year of services growth. We continue to execute our strategy for long term profitable growth, and with that, we\u2019ll take your questions.","evidence_gemma_new":"adjusted operating profit","evidence_llama_3_3":"adjusted operating profit fourth quarter","evidence_qwen_3_30b":"adjusted operating profit 4th quarter","gemma_new_max":3000000000.0,"gemma_new_min":3000000000.0,"llama_3_3_max":3000000000.0,"llama_3_3_min":3000000000.0,"qwen_3_30b_max":3000000000.0,"qwen_3_30b_min":3000000000.0}
{"symbol":"CAT","year":2023,"quarter":1,"date":"2023-Q1","chunk_id":2,"sub_chunk_id":0,"centroid_label":"adjusted operating profit margins","agreed_value":21.1,"count":3,"chunk":"Jim Umpleby: Thanks, Ryan. Good morning, everyone. Thank you for joining us. I'd like to start by thanking our global team for a strong first quarter, including double-digit top line growth, higher operating profit margins, record adjusted profit per share and strong ME&T free cash flow. Our results reflect healthy customer demand to most end markets for our products and services. We remain focused on executing our strategy and continue to invest for long-term profitable growth. In today's call, I'll begin with my perspectives on our performance in the quarter. I'll then provide some insights on our end markets. Lastly, I'll provide an update on our sustainability journey. It was a very strong quarter. Sales and revenues were better than we expected, with price realization, dealer inventory and sales to users each slightly better than we anticipated. Sales to users were higher than expected in Energy & Transportation and Resource Industries. Overall, sales and revenues rose by 17% versus the first quarter of 2022. The year-over-year increase was due to strong price realization and volume growth, which was driven by higher sales of equipment to end users. We achieved double-digit top line increases in each of our three primary segments. Adjusted operating profit margins increased to 21.1% in the first quarter, as we saw margins improve, both on a sequential and year-over-year basis. The adjusted operating profit margins were significantly better than we had anticipated primarily due to better-than-expected manufacturing costs, including efficiencies and absorption, stronger price realization and volume growth. Andrew will discuss in detail later. Backlog ended the quarter at $30.4 billion, flat relative to the fourth quarter of 2022. Equipment availability increased during the quarter due to improving supply chain conditions. While dealer order rates are lower, they remain at healthy levels. As you know, as availability improves, order rates typically normalize, as dealers can wait longer to place orders for long lead time items. Our healthy backlog continues to underpin our constructive views about our end markets. Despite the improvement in supply chain, pockets of challenge remain as we increase production, particularly for large engines, which impacts energy and transportation and some of our larger machines. We delivered a strong first quarter, which positions us well for an even better year in 2023 than we previously anticipated. While we continue to closely monitor global macroeconomic conditions, overall demand remains healthy across our products and services. Turning to Slide 4, in the first quarter of 2023, sales and revenues increased 17% versus last year at $15.9 billion. This was primarily due to favorable price and volume growth. Compared with the first quarter of 2022, overall sales to users increased 13%. For Construction Industries and Resource Industries, sales to users rose by 5%, while Energy & Transportation was up 39%. Sales to users in Construction Industries were flat, in line with our expectations. North American sales to users increased, as demand remained healthy for both nonresidential and residential, despite some moderation of the growth rate in residential. Overall, our North American sales to users were better than we expected. EAME also saw higher sales to users, led by strength in the Middle East. In Latin America and Asia Pacific, sales to users declined in the quarter. The decline in Asia Pacific included further weakening in China. In Resource Industries, sales to users increased 18%, which was our third consecutive quarter of accelerating sales to users. In Mining, sales to users benefited from a higher level of commissioning in the quarter. Within heavy construction and quarry and aggregates, sales to users also increased, supported by growth for infrastructure-related projects. In Energy & Transportation, sales to users increased by 39%. In the first quarter, oil and gas sales to users benefited from continued strength in new engine sales to customers, including repowering active fleets, upgrading technology to Tier 4 Dynamic Gas Blending and adding incremental gas compression units. We also saw strong sales of turbines and turbine-related services. Power Generation and Industrial sales to users continue to remain positive due to favorable market conditions. Transportation declined from a relatively low base primarily due to timing in marine deliveries, which was partially offset by deliveries of international locomotives. Dealer inventory increased by about $1.4 billion in the first quarter, which was slightly above our expectations compared to a $1.3 billion increase in the same quarter last year. In Construction Industries, the increase in dealer inventory was primarily due to stronger North American shipments, which remains our most constrained region. As we mentioned last quarter, over 70% of the combined dealer inventory in Resource Industries and Energy & Transportation is supported by customer orders. Moving to Slide 5, we generated strong ME&T free cash flow of $1.4 billion in the first quarter. We returned $1 billion to shareholders, which included about $600 million in dividends and $400 million in repurchase stock. We remain proud of our dividend aristocrat status and continue to expect to return substantially all ME&T free cash flow to shareholders over time through dividends and share repurchases. Now on Slide 6, I'll share some commentary on our expectations moving forward. While we continue to closely monitor global macroeconomic conditions, our first quarter results lead us to expect that 2023 will be even better than we had previously anticipated on both the top and bottom line. For 2023, we currently expect to be in the top half of the targeted range for both adjusted operating profit margin and ME&T free cash flow. Andrew will provide additional color. Before I discuss our outlook for key end markets, I'll provide some color on how we expect our top line to progress through this year. As I mentioned, we expect a strong top line for 2023, supported by price and higher sales to users, with healthy underlying end markets. We expect higher sales in the second quarter compared to the first, as is the typical seasonal pattern. Looking to the second half of 2023, it is important to highlight the second half of last year included the dealer inventory build of $1.4 billion, as dealers began to restock their inventories. We are not planning for this trend to repeat. Instead, we expect to see dealers decrease inventories compared to the first quarter levels and end 2023 about flat relative to the end of 2022. Although we expect sales to users to remain positive for our primary segments in each quarter, our planning assumption is that Caterpillar second half sales will have a dealer inventory impact. Let me explain. First, although dealer inventory in some products and regions have normalized, others remain constrained. For example, in North America, dealer inventory remains below the typical range for many products. However, there is greater excavator inventory in a few regions, as supply dynamics improved in 2022, which, coupled with the slowing in China, has resulted in improved excavation product availability. Given the improved availability of excavators, we expect that dealers will scale back their levels of excavator inventory in the second half of the year, even though demand remains healthy. As a reminder, dealers are independent businesses and control their own inventory. Second, in late 2023, we have scheduled a couple of new product changeovers in construction industry factories that will also impact the second half. Now I'll discuss our outlook for key end markets this year, starting with Construction Industries. In North America, overall, we continue to see positive momentum in 2023. We expect growth in nonresidential construction in North America due to the positive impact of government-related infrastructure investments and a healthy pipeline of construction projects. Although residential construction housing starts have softened, the growth rate of our residential construction equipment remains positive as the supply chain pressures alleviate. In Asia Pacific, excluding China, we expect growth in Construction Industries due to public infrastructure spending and supportive commodity prices. As we mentioned during our previous earnings calls, we expect China\u2019s above ten-ton excavator industry to remain below 2022 levels due to low construction activity. In 2023, sales in China are expected to be below the typical range of 5% to 10% of total Caterpillar sales. In the EAME, business activity is now expected to increase versus last year based on healthy construction project activity, particularly strong construction demand in the Middle East. Although uncertain economic conditions remain, European construction is proving to be more resilient than we previously anticipated. Construction activity in Latin America is expected to be down in 2023 versus the strong 2022 performance. There is some concern about the potential impact of a commercial real estate slowdown. We estimate that North American commercial real estate accounts for about 1% of total construction industry sales. Any slowdown related to this sector should not have a significant impact on Construction Industries. In Resource Industries, we expect healthy mining demand to continue, as commodity prices remain above investment thresholds. As I have mentioned during the last few years, customers remain capital disciplined, which supports a gradual increase in mining over time. We anticipate production utilization levels will remain elevated. We also expect the aging of the fleet and a lower level of parked trucks to support future demand for our equipment and services. We continue to believe the energy transition will support increased commodity demand, expanding our total addressable market and providing further opportunities for profitable growth. In heavy construction and quarry and aggregates, we anticipate continued growth due to major infrastructure and nonresidential construction projects. In Energy & Transportation, we expect to follow our normal seasonal pattern, with higher sales in the second half of the year versus the first half. In oil and gas, reciprocating engines, although customers remain disciplined, we are encouraged by continued strength and demand for both well servicing and gas compression. Power generation reciprocating engine demand is expected to remain healthy, including strong data center growth. New equipment orders and services for solar turbines in both oil and gas and power generation are robust. Industrial remains healthy. In transportation, we anticipate strength in high-speed Marine as customers continue to upgrade aging fleets. Moving to Slide 7. We are contributing to a reduced carbon future and continue to invest in new products, technologies and services to help our customers achieve their climate-related objectives. We recently completed and upgraded more than 50 models across our entire next-generation hydraulic excavator line. The new models reduced fuel consumption by up to 25% compared to previous models and provide another option for customers to lower emissions, while improving operational efficiency. A customer can realize meaningful emissions reductions by simply moving to the newest next-gen model. This example reinforces our ongoing sustainability leadership and how we help our customers build a better, more sustainable world. In addition, we look forward to issuing our 18th annual sustainability report in May. With that, I'll turn the call over to Andrew.","evidence_gemma_new":"adjusted operating profit margin","evidence_llama_3_3":"adjusted operating profit margins first quarter","evidence_qwen_3_30b":"adjusted operating profit margins 21.1% first quarter","gemma_new_max":21.1,"gemma_new_min":21.1,"llama_3_3_max":21.1,"llama_3_3_min":21.1,"qwen_3_30b_max":21.1,"qwen_3_30b_min":21.1}
{"symbol":"CAT","year":2023,"quarter":1,"date":"2023-Q1","chunk_id":3,"sub_chunk_id":0,"centroid_label":"adjusted operating profit margins","agreed_value":0.211,"count":3,"chunk":"Andrew Bonfield: Thanks, Jim, and good morning, everyone. I'll begin by providing further color on the first quarter results, including the performance of our segments. Then I'll cover the balance sheet and ME&T free cash flow before concluding with a few comments on the full year and our assumptions for the second quarter. Beginning on Slide 8. Sales and revenues for the first quarter increased by 17% or $2.3 billion to $15.9 billion, the sales increase versus the prior year was due to strong price realization and higher volume, partially offset by currency impacts. Sales were higher than we had expected in January, with price realization, dealer inventory and end user demand each slightly better than we had anticipated. Operating profit increased by 47% by $876 million to $2.7 billion, which includes the impact of the divestiture of the company's longwall business. Adjusted operating profit increased by 79% or $1.5 billion to $3.3 billion. Favorable price realization and higher volume was partially offset by higher manufacturing costs. The adjusted operating profit margin was 21.1%, an increase of 740 basis points versus the prior year. As Jim mentioned, the adjusted operating margin was much better than we had anticipated. Lower-than-expected manufacturing costs, including efficiencies and absorption were the largest variable, while price realization and volume were also stronger than we had envisioned. I'll provide additional color in a moment. Adjusted profit per share increased by 70% to $4.91 in the first quarter compared to $2.88 in the first quarter of last year. Adjusted profit per share in the first quarter of 2023 excluded pretax restructuring costs of $611 million, most of this related to the noncash charge from the divestiture of the company's longwall business. This compares to pretax restructuring costs of $13 million in the first quarter of 2022. Other income of $32 million in the quarter was lower than the first quarter of 2022 by $221 million. The year-over-year decline included about $100 million unfavorable currency impact related to ME&T balance sheet translation and an adverse impact of $80 million for pension expense. The dollar strengthened marginally since our last earnings call, so the currency impact within the first quarter of 2023 was about $30 million better than we had anticipated than when we spoke to you in January. Finally, the provision for income tax in the first quarter, excluding discrete items, reflected a global annual effective tax rate of 23%. Moving on to Slide 9. The 17% increase in the top line versus the prior year was driven by favorable price realization and higher sales volume, while currency remained a headwind to sales. Volume improved in part due to a 13% increase in sales to users. The impact from changes in dealer inventory was minimal, as the $1.4 billion build in the first quarter was similar to that seen in the first quarter of 2022. Services sales volume was slightly down, mainly due to dealer ordering patterns while services to their customers remain positive. Compared to our expectations a quarter ago, sales were higher than we anticipated, largely due to slightly stronger volume and better-than-expected price realization. On volume, sales to users outpaced our expectations due to strong demand. In addition, the improving supply chain supported higher levels of production across our primary segments. This enabled dealers to increase their inventory levels ahead of the selling season by slightly more than we had expected. Moving to Slide 10. First quarter operating profit increased by 47% to $2.7 billion. Adjusted operating profit increased by 79% versus the prior year quarter as favorable price realization outpaced higher manufacturing costs. Sales volume was also a benefit. Our first quarter adjusted operating profit margin of 21.1% was a 740 basis point increase versus the prior year. Now let me explain why our adjusted operating profit margin was so much better than we had expected. While manufacturing costs did increase year-over-year, the increase was less than we had than anticipated and was the most important factor in the quarter. As we have mentioned, volumes were better than expected due to favorable demand and improvements in the supply chain. This helped manufacturing cost as both factory efficiency and cost absorption were better than expected. Freight costs were also lower than we had anticipated due to lower premium freight utilization and rate reductions. Material costs were in line with our expectations and did not impact the margin outperformance. In addition to lower manufacturing costs, price realization was also stronger than we had anticipated a quarter ago. Stronger-than-anticipated volume had a smaller beneficial impact on margins. Spend on strategic investments was also lower than expected, as project spend ramps up slower than we had planned. Moving to Slide 11, I'll review segment performance. Starting with Construction Industries, sales increased by 10% in the first quarter to $6.7 billion due to favorable price realization, partially offset by lower sales volume and unfavorable currency impacts. The decrease in sales volume was driven by the impact from changes in dealer inventories, which increased by less in the first quarter of 2023 than compared to the prior year. Compared to our expectations, sales were higher due to stronger volumes. While sales to end users were as we'd anticipated, the dealer inventory increase was slightly above our expectations. By region, sales in North America rose by 33% due to favorable price realization and higher sales volume. Supply chain improvements enabled stronger-than-expected shipments in North America, supporting dealer restocking in the region. This is a positive, as North America continues to be our most constrained region from a dealer inventory perspective. Sales in Latin America decreased by 4% primarily due to lower sales volume, partially offset by favorable price realization. In EAME, sales increased by 5% on favorable price realization, partially offset by favorable currency impacts. Sales in Asia-Pacific decreased by 21% primarily due to lower sales volume and unfavorable currency impacts, partially offset by favorable price realization. First quarter profit for Construction Industries increased by 69% versus the prior year to $1.8 billion, price realization mainly drove the increase. This was partially offset by lower sales volume, including an unfavorable product mix and higher manufacturing costs. The segment's operating margin of 26.5% was an increase of 920 basis points versus last year. The segment margin for the quarter exceeded our expectations on moderating manufacturing costs and better-than-expected price and volume. Manufacturing costs were lower than we had expected on favorable freight, manufacturing efficiencies and absorption. Production volume was more favorable than we had anticipated, which drove the usual favorable benefits margins from the fourth quarter to the first. You will recall that in January, we said we did not expect that to happen. Turning to Slide 12. Resource Industries sales grew by 21% in the first quarter to $3.4 billion. The increase was primarily due to favorable price realization and higher sales volume. Although, aftermarket sales volumes were lower in resource industries due to dealer buying patterns, dealer services to customers remain positive. First quarter profit for Resource Industries increased by 112% versus the prior year to $764 million, mainly due to favorable price realization and higher sales volume. This was partially offset by unfavorable manufacturing costs. The segment's operating margin of 22.3% was an increase of 950 basis points versus last year. Segment margin was better than we expected due to lower manufacturing costs, including favorable absorption, efficiencies and freight. Price realization and volume benefits also exceeded our expectations. Now on Slide 13. Energy & Transportation sales increased by 24% in the first quarter to $6.3 billion, with sales up double-digits across all applications. Oil and gas sales increased by 39%, power generation sales by 27%, industrial sales rose by 23%. And finally, transportation sales increased by 14%. First quarter profit for Energy & Transportation increased by 96% versus the prior year to $1.1 billion. The increase was mainly due to favorable price realization and higher sales volume. Unfavorable manufacturing costs and higher SG&A and R&D expenses acted as a partial offset. SG&A and R&D expenses increased primarily due to investments aligned with our strategic initiatives, including electrification and services growth. The segment's operating margin of 16.9% was an increase of 620 basis points versus last year, but lower than the fourth quarter as is typical from a seasonality perspective. Compared to our expectations last quarter, margin was better than anticipated on lower manufacturing costs due in part to favorable absorption. Volume was also modestly stronger than we had expected. Moving to Slide 14. Financial Products revenue increased by 15% to $902 million primarily due to higher average financing rates across all regions. Segment profit decreased by 3% to $232 million. The slight profit decrease was mainly due to unfavorable impacts from equity securities, currency exchange losses and mark-to-market adjustments on derivative contracts. However, higher net yield on average earning assets and lower provision for credit losses acted as a partial offset. Business activity remains strong, and our portfolio continues to perform well. Past dues in the quarter were 2.00%, a 5 basis point improvement compared to the first quarter of 2022. This is the lowest first quarter past dues percentage since 2006. And whilst retail new business volume declined compared to the first quarter of 2022, this was expected as high interest rates drove more cash deals and increased competition from banks. Finally, we continue to see strong demand for used equipment, as prices remain elevated while used equipment inventory is at historic lows. Before I move on, I want to point out that CAT Financial has strong liquidity and broad access to funding. We are funded through the wholesale debt markets rather than from customer deposits, and we match assets and liabilities based on duration, currency and interest rate profile. As we have mentioned previously, in a rising interest rate environment, banks are able to provide more competitive interest rates than CAT Financial, and we tend to lose some share of the machines financed. In the event of a slowdown in lending from regional banks, we are well positioned to step in and fund creditworthy customers, so they can purchase their machines. Now on Slide 15. We continue to generate strong ME&T free cash flows. ME&T free cash flow of $1.4 billion in the quarter was about a $1.8 billion increase compared to an outflow in the prior year. The increase was primarily driven by higher profit. This increase is notable in the quarter that included our annual short-term incentive payout and a rise in working capital impacted by an increase in Caterpillar inventory. As Jim mentioned, following the strong half \u2013 first \u2013 strong first quarter, we expect to end the year in the top half of our ME&T free cash flow range of $4 billion to $8 billion. CapEx was around $400 million in the quarter, and we still expect to spend around $1.5 billion for the year. As Jim mentioned, capital deployment was about $1 billion in the quarter for dividends and share repurchases. Our balance sheet remains strong, and we have ample liquidity with an enterprise cash balance of $6.8 billion. Now on Slide 16, I will share some high-level assumptions for the full year, followed by the second quarter. Looking at the full year, we expect a strong top-line supported by price and higher sales to users, with healthy underlying end markets. As Jim mentioned, we expect full year reported sales for Construction Industries to be impacted by dealer inventory movements, particularly in the second half of the year. Underlying demand remains strong and as we do expect Construction Industries sales to users to show positive growth in the next three quarters. We anticipate continued strength in Resource Industries end markets and stronger end user sales in 2023. In addition, as typical seasonality would suggest, we expect to see some sales ramp in the second half in Energy & Transportation given strong demand for large engines and turbines. Moving on to margins. Based on our current planning assumptions, we anticipate full year adjusted operating profit margins to be in the top half of our target range. Given the favorable impact of cost absorption in the first quarter, which we do not expect to recur, we anticipate margins in the remaining quarters of the year will be lower than the first quarter level, while underlying demand and end markets remain strong. Also despite the slower-than-expected start, we anticipate the spend related to strategic investments within SG&A and R&D will ramp through the year. We expect price to continue to be favorable, although the absolute dollar value of the year-over-year price increases will moderate as we lap through the increases put through in 2022. We also expect the relationship between price and manufacturing costs for machines to normalize as the year progresses, as we\u2019ve now caught up to the manufacturing cost increases, which have outpaced price in late 2021 and early 2022. This means that the benefit to margins of price outpacing manufacturing cost inflation will moderate tempering the possibility of further margin expansion. Keep in mind, similar to the first quarter, we still anticipate a headwind of about $80 million per quarter at the corporate level related to pension expense. We also continue to anticipate restructuring expenses of around $700 million this year, with around $100 million remaining following the first quarter. And the global effective tax rate should be around 23%, excluding discrete items. Now on to our assumptions for the second quarter. We expect higher sales in the second quarter compared to the prior year on strong sales to users and price. Following the typical seasonal pattern, we expect higher sales in the second quarter as compared to the first. We expect Energy & Transportation sales will accelerate given strong sales to users, which are supported by healthy demand. We expect to report flattish sales levels compared to the first quarter in Construction Industries and Resource Industries. Both segments are expected to report positive sales to users. In the second quarter of 2022, we saw a decrease in dealer inventory of $400 million. We expect a smaller decrease in the second quarter of 2023. Specific to second quarter margins versus the prior year, adjusted operating margins at the enterprise and segment level should be substantially stronger than the prior year on favorable price and volume. However, we do expect to see a return to the typical seasonal pattern of lower second quarter margins compared to the first quarter, despite higher sales. We expect the year-over-year benefit of price realization in the second quarter to moderate compared to the benefit we saw in the first quarter, as we lapped prior year increases. In addition, SG&A and R&D investment spend should increase, as we continue to accelerate our strategic investments in areas like autonomy, alternative fuels, connectivity, digital and electrification. Finally, we do not anticipate that the favorable absorption impact that we saw in the first quarter will be repeated. At the segment level, in Construction Industries, we expect lower second quarter margins compared to the first quarter largely due to the lack of a favorable impact from absorption and a ramp-up in strategic investment spend. Likewise, second quarter margins in Resource Industries were likely to be lower than the first quarter as is the typical seasonal pattern. Conversely, Energy & Transportation should see a slight margin improvement compared to the first quarter levels, supported by stronger sales volume as demand remains healthy. Now turning to Slide 17, let me summarize. Sales grew by 17% led by strong price realization and volume gains. The adjusted operating profit margin increased by 740 basis points to 21.1%. ME&T free cash flow was strong at $1.4 billion, and we expect to be at the top half of our ME&T free cash flow range of $4 billion to $8 billion for the full year. After a strong first quarter, we currently expect our 2023 adjusted operating profit margins will be in the top half of our target range. The environment remains positive with improving supply chain dynamics, a strong backlog and healthy underlying end markets. We will continue to execute our strategy for long-term profitable growth. And with that, we\u2019ll take your questions.","evidence_gemma_new":"Adjusted operating profit margins","evidence_llama_3_3":"adjusted operating profit margin first quarter 2023","evidence_qwen_3_30b":"adjusted operating profit margin 21.1% first quarter","gemma_new_max":0.211,"gemma_new_min":0.211,"llama_3_3_max":0.211,"llama_3_3_min":0.211,"qwen_3_30b_max":0.211,"qwen_3_30b_min":0.211}
{"symbol":"CAT","year":2023,"quarter":2,"date":"2023-Q2","chunk_id":2,"sub_chunk_id":0,"centroid_label":"adjusted operating profit margins","agreed_value":0.213,"count":3,"chunk":"James Umpleby: Thanks, Ryan. Good morning, everyone. Thank you for joining us. As we close out the first half of 2023, I want to recognize our global team for delivering a very strong second quarter. This included double-digit top-line growth, higher adjusted operating profit margin, record adjusted profit per share and robust ME&T free cash flow. Our results continued to reflect healthy demand across most end markets for our products and services. We remain focused on executing our strategy and continue to invest for long-term profitable growth. In today's call, I'll begin with my perspectives on our performance in the quarter. I'll then provide some insights on our end markets. Lastly, I'll provide an update on our sustainability journey. It was another strong quarter. Sales and revenues increased 22% in the second quarter versus last year. Adjusted operating profit margin improved 21.3%, up sequentially and year-over-year. We also generated $2.6 billion of ME&T free cash flow in the quarter. Our second quarter results were better than we expected for sales and revenues, adjusted operating profit margin, and ME&T free cash flow. In addition, we ended the quarter with a healthy backlog of $30.7 billion. We continue to see improvement in the supply chain, which allowed us to increase production in the quarter. However, areas of challenge remain, particularly for large engines, which impacts energy and transportation and some of our larger machines. While we continue to closely monitor global macroeconomic conditions, we now expect our 2023 results to be better than we had previously anticipated. Turning to Slide 4. In the second quarter of 2023, sales and revenues increased by 22% to $17.3 billion. This was primarily due to higher sales volume and price realization. Sales volumes were higher than we expected, largely due to an increase in dealer inventory relating to energy and transportation, which is supported by customer orders. We saw double-digit increases in sales and revenues in each of our three primary segments. Compared with the second quarter of 2022, overall sales to users increased 16%. For machines, which includes Construction Industries and Resource Industries, sales to users rose by 8%. Energy & Transportation was up 47%. Sales to users in Construction Industries were up 3%. North American sales to users increased and were better than expected as demand remained healthy for non-residential and residential construction. Non-residential continue to benefit from government-related infrastructure and construction projects. Residential sales to users in North America also increased in the quarter. EAME saw lower sales to users due to weaker than expected market conditions in Europe. The Middle East continued to demonstrate strong construction activity. In Latin America and Asia\/Pacific, sales to users declined in the quarter. In Resource Industries, sales to users increased 26%. In mining, sales to users increased, supported by commodities remaining above investment thresholds. Within heavy construction and quarry and aggregates, sales to users also increased, supported by growth for infrastructure-related projects. In Energy & Transportation, sales to users increased by 47% in the second quarter. All applications saw higher sales to users in the quarter. Oil and gas sales to users benefited from strong sales of turbines and turbine-related services. We also saw continued strength in sales of reciprocating engines into oil and gas applications, such as Tier 4 dynamic gas blending, gas compression, and repowering active well servicing fleets. Power generation sales to users continued to remain positive due to favorable market conditions, including strong data center growth. Industrial and transportation sales to users also increased. Dealer inventories increased by $600 million in the quarter, led by energy and transportation. We are very comfortable with the total level of dealer inventory, which remains in the typical range. Adjusted operating profit margin increased to 21.3% in the second quarter as we saw improvements, both on a sequential and year-over-year basis. Adjusted operating profit margin was better than we had anticipated, primarily due to better than expected volume growth and lower than expected manufacturing costs, including freight. Moving to Slide 5. We generated strong ME&T free cash flow of $2.6 billion in the second quarter. We returned $2 billion to shareholders, which included about $1.4 billion in repurchase stock and $600 million in dividends. In June, we announced an 8% dividend increase. Since May of 2019, when we introduced our current capital allocation strategy, we have increased the quarterly dividend per share by 51%. We remain proud of our dividend aristocrat status and continue to expect to return to substantially all ME&T free cash flow to shareholders over time through dividends and share repurchases. Now on Slide 6, I'll describe our expectations moving forward. While we continue to closely monitor global macroeconomic conditions, our second quarter results lead us to expect that full-year 2023 will now be even better than we described during our last earnings call. We now expect adjusted operating profit margins to be close to the top of the targeted range relative to the corresponding expected level of sales. This positive operating performance increases our expectations for ME&T free cash flow, which we now expect to be around the top of the $4 billion to $8 billion range for the full-year. Our current expectations for adjusted operating profit margin and ME&T free cash flow reflect continuing healthy customer demand and our strong operating performance. Now I'll discuss our outlook for key end markets this year, starting with the Construction Industries. In North America, overall, we continue to see positive momentum in 2023. We expect continued growth in non-residential construction in North America due to the positive impact of government-related infrastructure investments and a healthy pipeline of construction projects. Although residential construction growth has moderated, we expect the rest of 2023 to remain healthy. In Asia\/Pacific, excluding China, we expect growth in Construction Industries due to public infrastructure spending in support of commodity prices. We mentioned during our last earnings call that we expected sales in China to be below the typical 5% to 10% of our enterprise sales. We now expect further weakness as the 10-tons and above excavator industry has declined even more than we anticipated. In EAME, we anticipate that it will be flat to slightly up overall, with the Middle East exhibiting strong construction demand, whereas Europe is expected to be down. Construction activity in Latin America is expected to be down in 2023 versus a strong 2022 performance. In Resource Industries, we expect healthy mining demand to continue as commodity prices remain above investment thresholds. As I've mentioned previously, customers remain capital disciplined, which supports a gradual increase in mining over time. We anticipate production and utilization levels will remain elevated. We also expect the age of the fleet and the low level of park trucks to support future demand for our equipment and services. We continue to believe the energy transition will support increased commodity demand, expanding our total addressable market and providing further opportunities for profitable growth. In heavy construction and quarry and aggregates, we anticipate continued growth due to major infrastructure in non-residential construction projects. Now I'll discuss Energy & Transportation. For Cat reciprocating engines and oil and gas applications, although customers remain disciplined, we are encouraged by continuing strong demand for gas compression. Cat reciprocating engine demand for power generation is expected to remain healthy, including strong data center growth. New equipment orders and services for solar turbines in both oil and gas and power generation remain robust. Industrial continues to be healthy. In transportation, we anticipate strength in high speed marine as customers continued to upgrade aging fleets. Moving to Slide 7. We continued to advance our sustainability journey. Since our last quarterly earnings call, we published our 2022 sustainability report, which disclosed our estimated Scope 3 greenhouse gas emissions for the first time. We also published our first ever task force on climate-related financial disclosures report. We're helping our customers achieve their climate-related goals by continuing to invest in new products, technologies and services that facilitate fuel flexibility, increased operational efficiency and reduced emissions. For example, a customer in Chile is realizing fuel savings and lower emissions after purchasing our Cat D6 XE, the world's first high drive diesel-electric drive dozer. The customer reported a 30% reduction in fuel consumption versus the previous model working in the same operation. This example reinforces our ongoing sustainability leadership in how we help our customers build a better, more sustainable world. With that, I'll turn the call over to Andrew.","evidence_gemma_new":"adjusted operating profit margin","evidence_llama_3_3":"adjusted operating profit margin second quarter","evidence_qwen_3_30b":"adjusted operating profit margin 21.3% better than we had anticipated","gemma_new_max":0.213,"gemma_new_min":0.213,"llama_3_3_max":0.213,"llama_3_3_min":0.213,"qwen_3_30b_max":0.213,"qwen_3_30b_min":0.213}
{"symbol":"CAT","year":2023,"quarter":2,"date":"2023-Q2","chunk_id":2,"sub_chunk_id":0,"centroid_label":"adjusted operating profit margins","agreed_value":21.3,"count":2,"chunk":"James Umpleby: Thanks, Ryan. Good morning, everyone. Thank you for joining us. As we close out the first half of 2023, I want to recognize our global team for delivering a very strong second quarter. This included double-digit top-line growth, higher adjusted operating profit margin, record adjusted profit per share and robust ME&T free cash flow. Our results continued to reflect healthy demand across most end markets for our products and services. We remain focused on executing our strategy and continue to invest for long-term profitable growth. In today's call, I'll begin with my perspectives on our performance in the quarter. I'll then provide some insights on our end markets. Lastly, I'll provide an update on our sustainability journey. It was another strong quarter. Sales and revenues increased 22% in the second quarter versus last year. Adjusted operating profit margin improved 21.3%, up sequentially and year-over-year. We also generated $2.6 billion of ME&T free cash flow in the quarter. Our second quarter results were better than we expected for sales and revenues, adjusted operating profit margin, and ME&T free cash flow. In addition, we ended the quarter with a healthy backlog of $30.7 billion. We continue to see improvement in the supply chain, which allowed us to increase production in the quarter. However, areas of challenge remain, particularly for large engines, which impacts energy and transportation and some of our larger machines. While we continue to closely monitor global macroeconomic conditions, we now expect our 2023 results to be better than we had previously anticipated. Turning to Slide 4. In the second quarter of 2023, sales and revenues increased by 22% to $17.3 billion. This was primarily due to higher sales volume and price realization. Sales volumes were higher than we expected, largely due to an increase in dealer inventory relating to energy and transportation, which is supported by customer orders. We saw double-digit increases in sales and revenues in each of our three primary segments. Compared with the second quarter of 2022, overall sales to users increased 16%. For machines, which includes Construction Industries and Resource Industries, sales to users rose by 8%. Energy & Transportation was up 47%. Sales to users in Construction Industries were up 3%. North American sales to users increased and were better than expected as demand remained healthy for non-residential and residential construction. Non-residential continue to benefit from government-related infrastructure and construction projects. Residential sales to users in North America also increased in the quarter. EAME saw lower sales to users due to weaker than expected market conditions in Europe. The Middle East continued to demonstrate strong construction activity. In Latin America and Asia\/Pacific, sales to users declined in the quarter. In Resource Industries, sales to users increased 26%. In mining, sales to users increased, supported by commodities remaining above investment thresholds. Within heavy construction and quarry and aggregates, sales to users also increased, supported by growth for infrastructure-related projects. In Energy & Transportation, sales to users increased by 47% in the second quarter. All applications saw higher sales to users in the quarter. Oil and gas sales to users benefited from strong sales of turbines and turbine-related services. We also saw continued strength in sales of reciprocating engines into oil and gas applications, such as Tier 4 dynamic gas blending, gas compression, and repowering active well servicing fleets. Power generation sales to users continued to remain positive due to favorable market conditions, including strong data center growth. Industrial and transportation sales to users also increased. Dealer inventories increased by $600 million in the quarter, led by energy and transportation. We are very comfortable with the total level of dealer inventory, which remains in the typical range. Adjusted operating profit margin increased to 21.3% in the second quarter as we saw improvements, both on a sequential and year-over-year basis. Adjusted operating profit margin was better than we had anticipated, primarily due to better than expected volume growth and lower than expected manufacturing costs, including freight. Moving to Slide 5. We generated strong ME&T free cash flow of $2.6 billion in the second quarter. We returned $2 billion to shareholders, which included about $1.4 billion in repurchase stock and $600 million in dividends. In June, we announced an 8% dividend increase. Since May of 2019, when we introduced our current capital allocation strategy, we have increased the quarterly dividend per share by 51%. We remain proud of our dividend aristocrat status and continue to expect to return to substantially all ME&T free cash flow to shareholders over time through dividends and share repurchases. Now on Slide 6, I'll describe our expectations moving forward. While we continue to closely monitor global macroeconomic conditions, our second quarter results lead us to expect that full-year 2023 will now be even better than we described during our last earnings call. We now expect adjusted operating profit margins to be close to the top of the targeted range relative to the corresponding expected level of sales. This positive operating performance increases our expectations for ME&T free cash flow, which we now expect to be around the top of the $4 billion to $8 billion range for the full-year. Our current expectations for adjusted operating profit margin and ME&T free cash flow reflect continuing healthy customer demand and our strong operating performance. Now I'll discuss our outlook for key end markets this year, starting with the Construction Industries. In North America, overall, we continue to see positive momentum in 2023. We expect continued growth in non-residential construction in North America due to the positive impact of government-related infrastructure investments and a healthy pipeline of construction projects. Although residential construction growth has moderated, we expect the rest of 2023 to remain healthy. In Asia\/Pacific, excluding China, we expect growth in Construction Industries due to public infrastructure spending in support of commodity prices. We mentioned during our last earnings call that we expected sales in China to be below the typical 5% to 10% of our enterprise sales. We now expect further weakness as the 10-tons and above excavator industry has declined even more than we anticipated. In EAME, we anticipate that it will be flat to slightly up overall, with the Middle East exhibiting strong construction demand, whereas Europe is expected to be down. Construction activity in Latin America is expected to be down in 2023 versus a strong 2022 performance. In Resource Industries, we expect healthy mining demand to continue as commodity prices remain above investment thresholds. As I've mentioned previously, customers remain capital disciplined, which supports a gradual increase in mining over time. We anticipate production and utilization levels will remain elevated. We also expect the age of the fleet and the low level of park trucks to support future demand for our equipment and services. We continue to believe the energy transition will support increased commodity demand, expanding our total addressable market and providing further opportunities for profitable growth. In heavy construction and quarry and aggregates, we anticipate continued growth due to major infrastructure in non-residential construction projects. Now I'll discuss Energy & Transportation. For Cat reciprocating engines and oil and gas applications, although customers remain disciplined, we are encouraged by continuing strong demand for gas compression. Cat reciprocating engine demand for power generation is expected to remain healthy, including strong data center growth. New equipment orders and services for solar turbines in both oil and gas and power generation remain robust. Industrial continues to be healthy. In transportation, we anticipate strength in high speed marine as customers continued to upgrade aging fleets. Moving to Slide 7. We continued to advance our sustainability journey. Since our last quarterly earnings call, we published our 2022 sustainability report, which disclosed our estimated Scope 3 greenhouse gas emissions for the first time. We also published our first ever task force on climate-related financial disclosures report. We're helping our customers achieve their climate-related goals by continuing to invest in new products, technologies and services that facilitate fuel flexibility, increased operational efficiency and reduced emissions. For example, a customer in Chile is realizing fuel savings and lower emissions after purchasing our Cat D6 XE, the world's first high drive diesel-electric drive dozer. The customer reported a 30% reduction in fuel consumption versus the previous model working in the same operation. This example reinforces our ongoing sustainability leadership in how we help our customers build a better, more sustainable world. With that, I'll turn the call over to Andrew.","evidence_gemma_new":"adjusted operating profit margin","evidence_llama_3_3":null,"evidence_qwen_3_30b":"adjusted operating profit margin","gemma_new_max":21.3,"gemma_new_min":21.3,"llama_3_3_max":null,"llama_3_3_min":null,"qwen_3_30b_max":21.3,"qwen_3_30b_min":21.3}
{"symbol":"CAT","year":2023,"quarter":3,"date":"2023-Q3","chunk_id":3,"sub_chunk_id":0,"centroid_label":"adjusted operating profit margins","agreed_value":0.208,"count":2,"chunk":"Andrew Bonfield: Thank you, Jim, and good morning, everyone. I'll begin with commentary on the third quarter results, including the performance of our segments. Then, I'll discuss the balance sheet and cash flow, before concluding with our assumptions for the fourth quarter and full year. Beginning on Slide 8. Our overall operating performance was strong. Adjusted operating profit margin, adjusted profit per share, and ME&T free cash flow, all were better than we expected, while sales grew in line with our expectations. Based on the strong third quarter, and year-to-date operating performance, we now expect that the adjusted operating profit margin for the year will be slightly above the top end of our target range, at the corresponding level of sales. We also anticipate that ME&T free cash flow will exceed the target range of $4 billion to $8 billion. In summary, sales and revenues increased by 12% or $1.8 billion to $16.8 billion. The sales increase versus the prior year was driven by -- primarily by price realization, as well as higher sales volume. Operating profit increased by 42% or $1 billion to $3.4 billion. The adjusted operating profit margin was 20.8%, an increase of 430 basis points versus the prior year. Profit per share was $5.45 in the third quarter of this year. This included restructuring costs of $0.07 per share as compared to $0.08 in the prior year. We continue to expect restructuring expenses of about $700 million for the full year. Adjusted profit per share increased by 40% to $5.52 in the third quarter compared to $3.95 last year. Other income of $195 million was lower than that -- than the third quarter of 2022 by $47 million. The decline was driven by less favorable currency impacts in the quarter, related to ME&T balance sheet translation, as compared to the prior year, along with the recurring increase and a pension expense of approximately $18 million per quarter. Higher investment and interest income acted as a partial offset. The provision for income taxes in the third quarter, excluding discrete items, reflected a global annual effective tax rate of 22.5%, which is the rate we now expect for the full year. The slightly lower-than-expected tax rate, along with discrete items, added about $0.14 to profit per share in the quarter. Moving on to Slide 9. As I mentioned, the 12% increase in the top line versus the prior year was primarily due to price realization, as well as higher sales volume. Volume improved as sales to users increased by 13% while year-over-year changes in dealer inventory acted as a slight offset. Overall, the magnitude of the sales increase was in line with our expectations. However, by segment, construction Industries sales were higher, Resource Industries sales were in line, and Energy & Transportation sales were lower than we had anticipated. Services revenues increased in the third quarter. We will update you with our progress towards our services growth target when we report our fourth quarter results, and as is our normal practice. Price realization was slightly better than we had anticipated for the quarter. However, as we anticipated, we did see the magnitude of the year-over-year price effects moderate compared to the second quarter, as we lap the prior-year price increases. Volume was slightly below our expectations. As Jim mentioned, sales to users were lower than we had anticipated, principally in Energy & Transportation. However, this was nearly offset by the increase in dealer inventory versus our expectations of being about flat for the quarter. The increase in dealer inventory was driven primarily by Construction Industries. There, we had stronger-than-expected shipments in North America, particularly in building construction products, and earthmoving. Within North America, these products remain constrained, and are near the bottom end of the typical dealer inventory range of three to four months of sales. We also saw some dealer inventory increase in Energy & Transportation within the quarter. I'll remind you that dealer inventory in Energy & Transportation and Resource Industries is mainly a function of the commissioning pipeline, with over 70% of dealer inventory in these segments backed by firm customer orders. Because dealer inventory is more a functioning -- function of commissioning in Resource Industries and Energy & Transportation, it is difficult for us to predict in these two segments. I will discuss further our full-year expectations for dealer inventories a little bit later. Moving to Slide 10. Third quarter operating profit increased by 42% to $3.4 billion, while adjusted operating profit increased by 41% to $3.5 billion. Price realization, which included a slight benefit from a shift in the geographic mix of sales and sales volume were favorable in the quarter. Our largest headwinds to operating profit were higher SG&A and R&D expenses, and higher manufacturing costs. SG&A and R&D expenses included higher strategic investment spend. Manufacturing cost increases included higher material costs, and unfavorable cost absorption, as we reduced our inventories compared to a corresponding increase in the third quarter of 2022. Lower freight costs acted as a partial offset within manufacturing costs. The adjusted operating profit margin of 20.8% improved by 430 basis points. This was better than we had anticipated, primarily due to favorable manufacturing costs, of which freight was the largest contributor. Also, the slightly better-than-expected price helped margins. Now, I'll discuss the performance of the segments. On Slide 11, Construction Industries sales increased by 12% in the third quarter to $7 billion, primarily due to favorable price realization. By region, sales in North America rose by 31% due to higher sales volume and favorable price. As I mentioned, supply chain improvements enabled stronger-than-expected shipments in North America, which supported some dealer restocking. Sales of equipment to end users were in line with our expectations for the region. Sales in Latin America decreased by 31%, primarily due to lower sales volume, partially offset by favorable price. In EAME, sales increased by 8%, mainly due to favorable price and currency impacts. Sales in Asia Pacific decreased by 8%, primarily due to lower sales volume, driven by lower sales of equipment to end users. Third quarter profit for Construction Industries increased by 53% versus the prior year to $1.8 billion. The increase was mainly due to favorable price realization. The segment's operating margin of 26.4% was an increase of 710 basis points versus last year. Margin exceeded our expectations on better volume, price, and lower-than-anticipated manufacturing costs, primarily freight. Turning to Slide 12, Resource Industries sales grew by 9% in the third quarter to $3.4 billion. The increase was primarily due to favorable price realization, partially offset by lower sales volume. Volume decreased as higher sales of equipment to end users were more than offset by lower aftermarket [sale parts] (ph) volume, which reflected changes in dealer buying patterns. Third quarter profit for Resource Industries increased by 44% versus the prior year to $730 million, mainly due to favorable price realization. Profit was partially offset by the by the impact of lower sales volume, which included unfavorable product mix. The segment's operating margin of 21.8% was an increase of 540 basis points versus last year. Margin was better than we had expected, primarily due to lower-than-anticipated manufacturing costs, driven by freight and price. Now on Slide 13. Energy & Transportation sales increased by 11% in the third quarter to $6.9 billion. Sales were up across all applications. Oil and gas sales increased by 26%, power generation sales were higher by 21%, industrial sales rose by 5% and transportation sales increased by 6%. Third quarter profit for Energy & Transportation increased by 26% versus the prior year to $1.2 billion. The increase was mainly due to favorable price realization, and higher sales volume, partially offset by higher SG&A and R&D expenses, unfavorable manufacturing costs, and currency impacts. SG&A and R&D expenses reflected ramping investments related to strategic growth initiatives. As a reminder, the most of our strategic investments relating to electrification and alternative fuels occur in this segment, which impacts reported margins. The segment's operating margin of 17.2% was an increase of 210 basis points versus the prior year. Margin was lower than we had anticipated, primarily due to lower-than-expected sales volume, impacted by supply chain challenges for large engines, and delivery delays for solar turbines. Moving to Slide 14. Financial Products revenue increased by 20% to $979 million, primarily due to higher average financing rates across all regions. Segment profit decreased by 8% to $203 million. The decrease was mainly due to a higher provision for credit losses at Cat Financial. The unfavorable impact reflects a challenging comparison as we had reserve releases in the prior year, as compared to a more typical provision expense in the third quarter of 2023. Of note though, through the third quarter of this year, provision expense for a comparable nine-month period is at the lowest level for over 20 years. Business activity remains strong with our -- and our portfolio continues to perform well, with past dues and write-offs at historic low levels. Past dues in the quarter were 1.96%, a 4 basis point improvement compared to the third quarter of 2022, and a decrease of 19 basis points compared to the second quarter. Retail new business volume increased versus the prior year, and though it declined compared to the second quarter, this follows the typical seasonal pattern. In addition, we continue to see strong demand for used equipment, and used inventory remains at low levels. Now on Slide 15. Our ME&T free cash flow has been robust this year with another $2.9 billion generated during the third quarter. With $6.8 billion generated through the first three quarters of this year, we expect to exceed our target of $4 billion to $8 billion this year. From a working capital perspective, we had a small inventory decrease of around $200 million in the quarter. Looking ahead, we expect our inventory levels will continue to decrease as we've seen sustained supply chain improvement. CapEx in the third quarter was around $400 million. With about $1.1 billion in CapEx through the first three quarters, we continue to expect around $1.5 billion for the full year. Our balance sheet remains strong. We have ample liquidity with an enterprise cash balance of $6.5 billion, and we hold an additional $4.3 billion in slightly longer-dated liquid marketable securities to improve yields on that cash. Now on Slide 16. I will share some high-level assumptions for the fourth quarter and the full year. During the fourth quarter, we anticipate slightly higher sales as compared to the prior year. Price should remain favorable. We expect sales to users to continue to support good underlying growth, though, changes in dealer inventories should act as an offset. As a reminder, we saw dealers increase inventories by $700 million in the fourth quarter of 2022, whilst we expect a decrease in the fourth quarter of this year. Specifically in Construction Industries, we do not expect the seasonal sales increase typically seen from the third to the fourth quarter. Those sales to users are expected to increase on both a sequential and year-over-year basis. Instead, we anticipate lower shipment volumes, as we complete the Cat engine changeover in building construction products, and dealers reduced their inventories, principally of excavators. This compares to a dealer inventory increase in the fourth quarter of 2022. Though we now expect that dealer inventory in Construction Industries will be higher at the end of 2023 than it was at year end 2022, we still expect it to be within the typical three to four months of sales range. A reminder, this is an average across all dealers and all products in Construction Industries, and it's difficult to predict with precision, given over 150 independent dealers, and hundreds of different products. Similar to last quarter, there are still areas and\/or products where dealers would like to have more inventory. As Jim has mentioned, we are very comfortable with the level of inventory held by dealers overall. In Resource Industries, we anticipate slightly lower sales as compared to the third quarter, as a result of improvements in availability. We also expect lower sales versus the prior year, driven by changes in dealer inventory. In the fourth quarter of 2022, there was an increase in dealer inventories for Resource Industries, while we expect a decrease in the fourth quarter of this year. We expect sales in Energy & Transportation to increase in the fourth quarter as compared to the third quarter, with higher solar turbines and rail deliveries. However, keep in mind that we continue to work through supply chain challenges, primarily impacting large engines. We also anticipate some moderation in industrial sales during the fourth quarter, compared to recent high levels. Now, I'll comment on our expectations for margins. We provided our adjusted operating profit margin target charge to assist you in your modeling process. Based on our current planning assumptions, we anticipate the adjusted operating profit margin to be slightly above the target range for the full year 2023. This is based on the corresponding estimated level of sales. Your expectation for total enterprise sales this year will inform where margins could finish for the year. Specific to the fourth quarter, we anticipate the adjusted operating profit margin to be lower than the third quarter. We anticipate lower-than-normal volume leverage, particularly impacting Construction Industries, for the reasons I mentioned previously. We also anticipate a negative segment mix impact to impact operating margins, as Construction Industries sales would be a lower proportion of total sales, as compared to the third quarter. Price realization should remain positive, though we expect the magnitude of the favorability versus the prior year to moderate as we continue to lap more favorable pricing trends from last year. Therefore, the increases in margins that have occurred from price outpacing manufacturing cost inflation, should moderate in the fourth quarter. In addition, as you look down the income statement for the prior year, there are a couple of points to note. First, short-term incentive expense in the fourth quarter of 2022 was lower than normal due to the true up for the final outcomes for the financial year. This will be a headwind for year-over-year operating margins. However, this will be partially offset by favorability in other operating income and expense, as we do not expect the significant currency translation losses that we saw in the fourth quarter of last year to recur. By segment, in Construction Industries, we expect slightly lower margin compared to the third quarter, assuming lower volume. We also anticipate lower sequential margins in Resource Industries, as is typical, impacted by cost absorption, along with higher spend, relating to strategic investments. In Energy & Transportation, we expect margins will be similar to the third quarter, with stronger volume offset by manufacturing costs, and an unfavorable mix of products, which includes international locomotive deliveries in rail. Now turning to Slide 17, let me summarize. Adjusted profit per share was $15.98 through the first three quarters of the year, which already exceeds our previous full year record by 15%. We generated strong adjusted operating profit margin, with a 430 basis point increase to 20.8%. We now expect to be slightly above the targeted range for adjusted operating profit margin for the full year, based on our expected sales levels. ME&T free cash flow remained robust with $6.8 billion year-to-date. We now expect ME&T free cash flow to exceed our $4 billion to $8 billion target range for the full year. We continue to execute our strategy for long-term profitable growth. And with that, we'll take your questions.","evidence_gemma_new":"adjusted operating profit margin","evidence_llama_3_3":"adjusted operating profit margin 20.8% third quarter","evidence_qwen_3_30b":null,"gemma_new_max":0.208,"gemma_new_min":0.208,"llama_3_3_max":0.208,"llama_3_3_min":0.208,"qwen_3_30b_max":null,"qwen_3_30b_min":null}
{"symbol":"CAT","year":2023,"quarter":3,"date":"2023-Q3","chunk_id":2,"sub_chunk_id":0,"centroid_label":"adjusted operating profit margins","agreed_value":430.0,"count":2,"chunk":"Jim Umpleby: Thanks, Ryan. Good morning, everyone. Thank you for joining us. Before discussing our results, I'd like to take a moment to acknowledge the tragic events in the Middle East. We are deeply saddened by the loss of life, and are hopeful for a quick and peaceful resolution. The Caterpillar Foundation is donating $1 million to the American Red Cross, and its network of Red Crescent Societies in the region, to support the humanitarian needs of those impacted. As we closed out the third quarter, I want to thank our global team for delivering another strong quarter. This included double-digit top line growth, strong adjusted operating profit margin, and robust ME&T free cash flow. Our results continue to reflect healthy demand across most of our end markets for our products and services. We remain focused on executing our strategy, and continue to invest for long-term profitable growth. I'll begin with my perspectives about our performance in the quarter. I'll then provide some insights about our end markets. Lastly, I'll provide an update on our sustainability journey. Moving to quarterly results, it was another strong quarter. Sales and revenues increased 12% in the third quarter versus last year. Adjusted operating profit margin improved to 20.8%, up significantly year-over-year. We also generated $2.9 billion of ME&T free cash flow in the quarter. Sales were generally in line with our expectations, while both adjusted operating profit margin, and ME&T free cash flow in the third quarter were better than we expected. In addition, we ended the quarter with a healthy backlog of $28.1 billion. Backlog is a function of demand and lead times. As I've mentioned, demand remains healthy in most of our end markets. Due to improving supply chain conditions, product availability and lead times have improved for many products. Dealers and customers can wait longer to place orders, which has led to a moderation in order rates, as expected. In addition, we have seen a reduction in dealer orders for building construction products, which we anticipated, due to the changeover to CAT engines that we previously discussed, and for excavation, in anticipation of dealers reducing their inventories in the fourth quarter. Although, our backlog declined as expected, it still remains elevated as a percentage of revenues compared to historic levels. While we continue to closely monitor global macroeconomic conditions, we now expect our full-year 2023 results to be better than we anticipated during our last earnings call. Turning to Slide 4. In the third quarter of 2023, sales and revenues increased by 12% to $16.8 billion, driven primarily by favorable price realization, as well as volume growth. Sales increased in each of our three primary segments. Compared with the third quarter of 2022, overall sales to users increased 13%, which was below our expectations. Energy & Transportation sales to users increased 34%, but was lower than expected due to some supply chain challenges for large engines, and the timing of gas turbine in international locomotive deliveries. For machines, which includes Construction Industries and Resource Industries, sales to users rose by 7%, in line with expectations. Sales to users in Construction Industries were up 6%. North American sales to users increased as demand remained healthy for non-residential, and residential construction. Non-residential continued to benefit from government-related infrastructure and construction projects. Residential sales to users in North America also increased in the quarter. EAME sales to users were up slightly, primarily due to continuing strength in Middle East construction activity. In Latin America and Asia-Pacific, sales to users declined in the quarter. In Resource Industries, sales to users increased 10%. In mining, sales to users increased with commodities remaining above investment thresholds. Within heavy construction, and quarry and aggregates, sales to users also increased, supported by growth for infrastructure-related projects. In Energy & Transportation, sales to users increased by 34%. All applications saw higher sales to users in the quarter. Oil and gas sales to users benefited from strong sales of turbines, and turbine-related services. We also saw continued strength in sales of reciprocating engines into oil and gas applications such as Tier 4 dynamic gas blending, repowering well servicing fleets and gas compression. Power generation sales to users continued to remain positive, due to favorable market conditions, including strong data center growth. Industrial and transportation sales to users also increased. Dealer inventories increased by $600 million in the quarter, led by Construction Industries and followed by Energy & Transportation. In Construction Industries, the increase was in North America in some of our most constrained product lines including BCP and Earthmoving. We remain very comfortable with the total level of dealer inventory, which is within the typical range. Andrew will provide more color later in the call. Adjusted operating profit margin increased to 20.8% in the third quarter, a 430 basis point increase over last year. Adjusted operating profit margin was better than we had anticipated. Relative to our expectations, we saw lower-than-expected manufacturing costs, including freight, as well as slightly favorable price realization, which included the positive impact from geographic mix. Moving to Slide 5. We generated strong ME&T free cash flow of $2.9 billion in the third quarter, and $6.8 billion in the first three quarters of 2023. Year-to-date, we returned $4.1 billion to shareholders, which included about $2.2 billion of repurchased stock, and $1.9 billion in dividends. We remain proud of our Dividend Aristocrat status, and continue to expect to return substantially all ME&T free cash flow to shareholders over time through dividends and share repurchases. Now on Slide 6, I'll describe our expectations moving forward. As I mentioned earlier, we now anticipate the full year to be better than we previously expected. We expect our adjusted operating profit margin to be slightly above the targeted range relative to the corresponding level of sales. This positive operating performance increases our expectations for ME&T free cash flow, which we now expect will exceed the $4 billion to $8 billion target range for the full year. This outlook for the adjusted operating profit margin, and ME&T free cash flow, reflects healthy customer demand and our strong operating performance. Now, I'll discuss our outlook for key end markets starting with Construction Industries. In North America overall, we continue to see positive momentum. We expect continued growth in non-residential construction in North America due to the impact of government-related infrastructure investments, and a healthy pipeline of construction projects. Although, residential construction growth has moderated, we expect it to remain healthy. In Asia Pacific, excluding China, we expect growth in Construction Industries due to public infrastructure spending, in support of commodity prices. As we have mentioned during previous earnings calls, we anticipate continued weakness in China, and expect it to remain well below our typical range of 5% to 10% of enterprise sales. In EAME, we anticipate the region will be slightly down as weakness continues in Europe, partially offset by continuing strong construction demand in the Middle East. Construction activity in Latin America is expected to be about flat versus strong 2022 performance. In Resource Industries, we continue to see a high level of quoting activity. In mining, customer product utilization remains high. The number of parked trucks remains low, and the age of the fleet remains elevated. Order rates are slightly lower than we expected at this time, reflecting continued capital discipline by our customers. We continue to believe the energy transition will support increased commodity demand over time, expanding our total addressable market, and providing further opportunities for long-term profitable growth. In addition, customer acceptance of our autonomous solutions continues to grow. This is evidenced by the announcement this morning with Freeport-McMoRan, who will convert their fleet of Cat 793 large mining trucks at an Arizona copper mine to autonomous haulage using Cat MineStar Command. We also expect heavy construction, and quarry and aggregates to remain in healthy levels due to major infrastructure in non-residential construction projects. Moving to Energy & Transportation. In oil and gas, we remain encouraged by continuing strong demand for Cat reciprocating engines and gas compression. As we said last quarter, well servicing in North America is showing some short-term moderation, but we remain optimistic about future demand. Cat reciprocating engine demand for power generation is expected to remain strong, primarily driven by data center growth. New equipment and services for solar turbines in both oil and gas and power generation remain robust. Industrial demand is expected to soften slightly from recent high levels, but remains well above our historical averages. In transportation, we anticipate strength in high-speed marine as customers continue to upgrade aging fleets. As we've described, we continue to see strength in most of our end markets. Based on our backlog, dealer inventory, and current market conditions, we expect to have another good year in 2024. We will provide additional information during our fourth quarter call. Moving to Slide 7. We continue to advance our sustainability journey. We're helping our customers achieve their climate related objectives by continuing to invest in new products, technologies, and services, that facilitate fuel flexibility, increased operational efficiency, and reduced emissions. For example, Caterpillar provides a number of low-carbon intensity solutions to customers. In Construction Industries, the Cat 980 XE Wheel Loader, which features a Cat designed and manufactured continuous variable transmission, improves fuel efficiency by as much as 35%, and reduces CO2 emissions by as much as 17% compared to the previous model. We also introduced the new Cat G3600 Gen 2 engine, the latest evolution of the powerful G3600 series, offering lower emissions. With more than 8,500 Cat G3600 units in the field, the Gen 2 engine is designed to build upon the platform's robust performance, to provide a 10% increase in power, and lower emissions compared to the previous model. We've also made several joint announcements with customers that demonstrate our commitment to supporting their climate-related objectives. I'll highlight one here. In September, Caterpillar and Albemarle introduced a unique collaboration, aimed to support their efforts to establish Kings Mountain, North Carolina as the first-ever zero emissions lithium mine in North America, while also making lithium available for use in Caterpillar battery production. These examples reinforce our ongoing sustainability leadership, and how we're helping our customers build a better, more sustainable world. With that, I will turn it over to Andrew.","evidence_gemma_new":"adjusted operating profit margin third quarter","evidence_llama_3_3":"adjusted operating profit margin 430 basis point third quarter of 2023","evidence_qwen_3_30b":null,"gemma_new_max":430.0,"gemma_new_min":430.0,"llama_3_3_max":430.0,"llama_3_3_min":430.0,"qwen_3_30b_max":null,"qwen_3_30b_min":null}
{"symbol":"CAT","year":2023,"quarter":4,"date":"2023-Q4","chunk_id":3,"sub_chunk_id":0,"centroid_label":"adjusted operating profit margins","agreed_value":0.189,"count":2,"chunk":"Andrew Bonfield: Thanks, Jim, and good morning, everyone. I'll begin with commentary on the fourth quarter results, including the performance of our segments. Then I'll discuss the balance sheet and cash flow, followed by an update to our target ranges for adjusted operating profit margins and ME&T free cash flow. I'll conclude with our high-level assumptions for 2024 and our expectations for the first quarter. Beginning on Slide 9. Strong operating performance continued in the fourth quarter as sales and revenues, adjusted operating profit margin, adjusted profit per share and ME&T free cash flow were all better than we had expected. In summary, sales and revenues increased by 3% to $17.1 billion. Adjusted operating profit increased by 15% to $3.2 billion. The adjusted operating profit margin was 18.9%, an increase of 190 basis points versus the prior year. Profit per share was $5.28 in the fourth quarter compared to $2.79 in the fourth quarter of last year. Profit per share in the quarter included favorable mark-to-market gains of $0.14 for the remeasurement of pension and OPEB plans and certain favorable deferred tax valuation adjustments of $0.04. It also included restructuring costs of $92 million or $0.13. Adjusted profit per share increased by 35% to $5.23 in the fourth quarter compared to $3.86 last year. The provision for income taxes in the fourth quarter, excluding the amounts related to mark-to-market and discrete items, reflected a global annual effective tax rate of 21.4%. This was lower than we had expected a quarter ago due to favorable changes in the geographic mix of profits. The lower rate benefited performance in the quarter by about $0.24. Moving on to Slide 10. I'll discuss top line results in the fourth quarter. The 3% sales increase versus the prior year was primarily driven by price realization, partially offset by lower volume as impacts from dealer inventory changes more than offset the 8% increase in sales to users. Both price and volume was slightly better than we had anticipated. The dealer inventory change resulted in an unfavorable sales impact of $1.6 billion versus the prior year. Dealer inventory decreased in the fourth quarter by $900 million overall compared to an increase of approximately $700 million during the fourth quarter of 2022. The dealer inventory decrease in the fourth quarter was led by Construction Industries, where the reduction was at the high end of our expectations. The decrease in this segment was led by excavators and the impact of the Cat engine changeover in building construction products that we have mentioned in previous earnings calls. Dealers also reduced their inventories in resource industries. Overall, the decrease in dealer inventory of machines was $1.4 billion in the quarter. Conversely, dealer inventory in Energy & Transportation increased mostly due to extended commissioning time lines, resulting from strong shipments, which was supported by healthy demand. As a reminder, dealer inventory in both Energy & Transportation and Resource Industries is mainly a function of the commissioning pipeline, and over 70% of dealer inventory in these segments is backed by firm customer orders. Looking at sales by segment. Sales in Construction Industries and Energy Transportation was slightly higher than we had anticipated, while sales in Resource Industries were about in line with our expectations. Moving to operating profit on Slide 11. Adjusted operating profit increased by 15% to $3.2 billion. Price realization and favorable manufacturing costs benefited the quarter, while higher SG&A and R&D expenses and lower sales volumes acted as a partial offset. The increase in SG&A and R&D expenses was primarily driven by higher short-term incentive compensation expense and strategic investment spend. The adjusted operating profit margin of 18.9% improved by 190 basis points versus the prior year. Margins were slightly higher than we had anticipated on volumes and price being marginally better than we had expected. Now on Slide 12. Construction Industries sales decreased by 5% in the fourth quarter to $6.5 billion due to lower sales volume, partially offset by favorable price realization. Lower sales volume was primarily due to the changes in dealer inventories that I mentioned earlier and more than offset the favorable sales to users. The dealer inventory changes impacted all of the regions. By region, sales in North America increased by 4%. In Latin America, sales decreased by 25%. Sales in EAME increased -- decreased by 18%. This region accounted for the largest dealer inventory decline in the quarter. In Asia Pacific, sales decreased by 4%. Fourth quarter profit for Construction Industries was $1.5 billion, an increase by 3% versus the prior year. The increase was primarily due to favorable price, partially offset by the profit impact from lower sales volume. The segment's operating margin of 23.5% was an increase of 180 basis points versus last year. This was broadly in line with our expectations. Turning to Slide 13. Resource Industries sales decreased by 6% in the fourth quarter to $3.2 billion. The decrease was primarily due to lower sales volume, partially offset by favorable price realization. Lower volume was impacted by changes in dealer inventories as dealers decreased inventories during the fourth quarter of 2023 compared to an increase in the prior year's quarter. Volume was also impacted by slightly lower aftermarket market part sales volume, partly due to dealer buying patterns. Fourth quarter profit for Resource Industries decreased by 1% versus the prior year to $600 million. The segment's operating margin of 18.5% was an increase of 90 basis points versus last year and was in line with our expectations. Now on Slide 14. Energy & Transportation sales increased by 12% in the fourth quarter to $7.7 billion. The increase was primarily due to higher sales volume and favorable price realization. Sales volume benefited from higher shipments of large engines and solar turbines and turbine-related services in the quarter. By application, oil and gas sales increased by 23%, power generation sales were higher by 29%, industrial sales decreased by 5% and transportation sales increased by 11%. While industrial sales decreased, they remain at healthy levels. Fourth quarter profit for Energy & Transportation increased by 21% versus the prior year to $1.4 billion. The increase was primarily due to favorable price and higher sales volume, partially offset by higher SG&A and R&D expenses, currency impacts and unfavorable manufacturing costs. The increase in SG&A and R&D expenses reflected ramping investments related to strategic growth initiatives and higher short-term incentive compensation expense. As a reminder, most of our strategic investments relating to electrification and alternative fuels are in Energy & Transportation, which therefore impacts this segment's margin. The operating margin of 18.6% was an increase of 130 basis points versus the prior year. Margin exceeded our expectations on higher volume, including favorable mix and price. Moving to Slide 15. Financial Products revenues increased by 15% to $981 million, primarily due to higher average financing rates across all regions and higher average earning assets in North America. Segment profit increased by 24% to $234 million. The increase was mainly due to lower provision for credit losses at Cat Financial, higher average earning assets and a higher net yield on average earning assets. Our portfolio continues to perform well with past dues near historic levels of 1.79%. We saw a 10 basis point improvement compared to the fourth quarter of 2022 and a 17 basis point improvement compared to the third quarter. This is the lowest fourth quarter past dues percentage since 2006. The year-end allowance rate was our lowest fourth quarter rate on record of 1.18% and was the second lowest quarterly rate ever. In addition, provision expense in 2023 was at the lowest level we've seen in over 20 years. Business activity remains strong, as retail new business volume increased versus the prior year and the third quarter. The increase versus the prior year reflected higher end user sales and rental conversions in the US. In addition, we continue to see strong demand for used equipment. Though used inventories have ticked up slightly, they remain close to historically low levels. Despite some moderation in used pricing on improved availability, it is still comfortably above historic norms. Moving on to Slide 16. The record $10 billion in ME&T free cash flow for the year included $3.2 billion in the fourth quarter, an increase of $200 million versus the prior year. On CapEx, we continue to make disciplined investments that are right for our business, governed by our focus on growing absolute OPACC dollars. We spent about $1.7 billion in 2023. Looking to 2024, we expect CapEx in the range of $2 billion to $2.5 billion. This is higher than our recent run rate and includes the investment in large engine capacity, which Jim referenced a moment ago. We also plan to invest more around AACE, which is autonomy, alternative fuels, connectivity and, digital and electrification. In addition, we are investing to make our supply chain more resilient. Moving to capital deployment. We returned $3.4 billion to shareholders in the fourth quarter, including $2.8 billion in share repurchases. Our net share count has decreased by approximately 14% since 2019, when we shared our intention to return substantially all ME&T free cash flow to shareholders over time and on a consistent basis. Our dividend remains a priority as we increased our quarterly payout by 8% in 2023. You will recall from our Investor Day in 2022, we shared that we expected to increase our dividend by at least high single digits for the next three years. The increase in 2023 reflected the second of those three years. Our balance sheet remains strong. We have ample liquidity with an enterprise cash balance of $7 billion, and we hold an additional $3.8 billion in slightly longer-dated liquid marketable securities to improve yields on that cash. Now on Slide 17, I'll discuss our revised adjusted operating profit margin targets. We exceeded our progressive target range in 2023, and we are confident that our strong execution and operating performance supports the potential for higher top end adjusted operating profit margins than were reflected in the prior range. Therefore, we have increased the top end of the range by 100 basis points relative to the corresponding level of sales. Achieving the top end of the range will remain challenging, as we are committed to increase investments in our strategic initiatives supporting long-term profitable growth. The bottom end of the target range remains unchanged. To explain, while higher gross margin support increasing the top end of the range, they actually pressure our margins in periods of decreasing volume. For that reason, we believe that the bottom end of the range remains challenging, but achievable. We will now target adjusted operating profit margins of 10% to 14% at $42 billion of sales and revenues, increasing to 18% to 22% at $72 billion of sales and revenues. Now on Slide 18. When I joined Caterpillar just over five years ago, I was impressed with the potential of our business to deliver higher, more consistent ME&T free cash flow as a result of the operating and execution model and our focus on generating absolute OPACC dollars. This is how we define winning at Caterpillar. We believe increasing absolute OPACC dollars will lead to higher shareholder returns over time. Since the beginning of 2019, we have generated $30 billion in ME&T free cash flow, including a record $10 billion in 2023. We are confident in our ability to consistently generate positive ME&T free cash flow over time. Therefore, we are introducing an updated target range for ME&T free cash flow, which is between $5 billion and $10 billion. Our strong operating performance as well as confidence in our future execution supports the higher range. The updated target range still maintains our flexibility to invest in our strategic initiatives, which is a priority. We also continue to expect to return substantially all of our ME&T free cash flow to shareholders over time through dividends and share repurchases. Moving to Slide 19. I will share our high-level assumptions for the full year. As Jim mentioned, in 2024, we anticipate sales and revenues will be broadly similar to 2023. We expect slightly favorable price realization and continued healthy underlying demand across the business as a whole. We anticipate another year of services growth as we continue to target $28 billion by 2026. We do not expect a significant change in dealer inventory for machines by the end of this year. And for Energy & Transportation, it is difficult to predict with certainty what will happen to dealer inventory as we have discussed previously. In total, dealer inventory increased by $2.1 billion in 2023. By segment, in Construction Industries, sales of equipment to end users should remain roughly similar compared to the strong year we saw in 2023. However, we do not expect a dealer inventory build as we saw last year. We also anticipate our services initiatives will benefit the segment in 2024. In Resource Industries, we anticipate lower sales versus 2023, impacted by lower machine volume primarily in off-highway and articulated trucks. We had strong sales of these products in 2023 as we converted our elevated backlog into sales, making for a challenging comparison. We also anticipate an unfavorable year-over-year change in dealer inventories. However, we expect services revenues will increase in this segment. In Energy & Transportation, we expect slightly higher sales in 2024. Power generation, oil and gas, and transportation sales should be positive, while industrial sales are expected to be lower compared to our historically strong levels in 2023. On full year adjusted operating profit margin, we currently expect to be in the top half of the updated margin target range at our expected sales levels. I'll discuss some of the puts and takes. In 2024, we expect a small pricing benefit weighted towards the first half of the year given carryover from increases taken in the second half of 2023. For the full year, we expect price to modestly exceed manufacturing costs. Versus last year, price in absolute dollar terms should moderate as we let the more favorable pricing trends from 2023. Short-term incentive compensation expense was about $1.7 billion in 2023, while we anticipate $1.2 billion in 2024. We expect the benefit of that low expense will be offset by increases in SG&A and R&D expenses as we continue to invest in strategic initiatives and of future long-term profitable growth. Investments are focused in services, new product introductions and AACE. We also anticipate there may be some negative margin impact due to mix this year. I'll explain. During 2023, when availability was somewhat challenged, we biased our production and shipments to products with the highest OPACC potential. Given that availability has improved, we anticipate a more normalized mix of products in 2024. We may also see an impact on margins from the mix of different segments as we anticipate in sales in 2024 will be slightly more weighted towards Energy & Transportation than they were in 2023. Moving on, we expect to be within the top half of our updated ME&T free cash flow target range of $5 billion to $10 billion. As you consider our cash position, keep in mind, the $1.7 billion cash outflow in the first quarter related to the payout of last year's incentive compensation expense. We also anticipate restructuring charges of $300 million to $450 million this year. Finally, we expect global effective tax rate in the range of 22.5% to 23.5%, an increase versus the 21.4% in 2023. Now on Slide 20. Our expectations for the first quarter, starting with the top line. We expect first quarter sales and revenues to be broadly similar to the prior year. We anticipate price to be favorable, although significantly less in absolute dollar terms than had occurred through 2023. We expect demand to remain healthy. However, we anticipate a slightly lower dealer inventory build for machines in the first quarter compared to a $1.1 billion build in the first quarter of 2023. This will act as a headwind to sales. At the segment level, in Construction Industries, we anticipate flattish to slightly higher first quarter sales versus the prior year, primarily due to favorable price. We anticipate lower sales in Resource Industries compared to the prior year, driven by lower volume, partially offset by favorable price. In Energy & Transportation, we expect flattish to slightly higher sales versus the prior year, with updated favorable volume benefiting the upside scenario. On margins, we expect the enterprise adjusted operating profit margin in the first quarter to be broadly similar to the first -- prior year. Price should more than offset manufacturing costs as price actions from 2023 rolled into 2024. We expect price will be lower in absolute dollar terms versus the prior year. We anticipate manufacturing costs to increase compared to last year, principally impacted by cost absorption as we do not expect an inventory build like we saw in the first quarter of 2023. We also anticipate an increase in SG&A and R&D expenses related to the strategic investment spend. By segment, in Construction Industries, we anticipate a similar margin as compared to the prior year. We expect price to offset strategic investment spend and slightly higher manufacturing costs, including cost absorption. In Resource Industries, we expect a lower margin compared to the prior year, impacted by lower volume, partially offset by favorable price. In Energy & Transportation, we anticipate a similar margin versus prior year, a slightly stronger price should be offset by higher manufacturing costs. Turning to Slide 21. Let me summarize. Adjusted profit per share of $21.21 exceeded our previous full year record by 53%. We exceeded the top end of our targeted ranges for adjusted operating profit margin and ME&T free cash flow. We have increased the top end of our adjusted profit margin range, and we have raised our ME&T free cash flow target range. We expect to be in the top half of our updated margin and ME&T free cash flow target ranges in 2024, and we anticipate another year of services growth as we continue to execute our strategy for long-term profitable growth. And with that, we'll take your questions.","evidence_gemma_new":"adjusted operating profit margin","evidence_llama_3_3":"adjusted operating profit margin fourth quarter","evidence_qwen_3_30b":null,"gemma_new_max":0.189,"gemma_new_min":0.189,"llama_3_3_max":0.189,"llama_3_3_min":0.189,"qwen_3_30b_max":null,"qwen_3_30b_min":null}
{"symbol":"CAT","year":2023,"quarter":4,"date":"2023-Q4","chunk_id":2,"sub_chunk_id":0,"centroid_label":"adjusted operating profit margins","agreed_value":20.5,"count":2,"chunk":"Jim Umpleby: Thanks, Ryan. Good morning, everyone. Thank you for joining us. As we close out 2023, I'd like to start by recognizing our global team for delivering another strong quarter and the best year in our 98-year history. For the year, we delivered record sales and revenues, record adjusted profit margin, record adjusted profit per share, and record ME&T free cash flow. Our results continue to reflect healthy demand across most of our end markets for our products and services. We remain focused on executing our strategy and continue to invest for long-term profitable growth. I'll begin with my perspectives about our performance in the quarter and for the full year. I'll then provide some insights about our end markets, followed by an update on our strategy. I'll then provide some insights about our end markets, followed by an update on our strategy and sustainability journey. Moving to quarterly results, it was another strong quarter. While sales and revenues increased 3% in the fourth quarter versus a strong quarter last year, our adjust operating profit increased by 15%. Adjusted operating profit margin improved to 18.9%, up 190 basis points versus last year. We also generated $3.2 billion of ME&T free cash flow in the quarter. Sales, adjusted operating profit margin, adjusted profit per share and ME&T free cash flow in the fourth quarter were all better than we expected. For the full year, we generated a 13% increase in total sales and revenues to $67.1 billion. Services also increased by 5% to $23 billion, a record. We generated $13.7 billion of adjusted operating profit in 2023, up 51% from 2022. Adjusted operating profit margin for the full year was 20.5%, a 510 basis point increase over the prior year. This exceeded the top end of our target margin range for this level of sales by 80 basis points. Adjusted profit per share in 2023 was $21.21, a 53% increase over 2022. In addition, we also generated $10 billion of ME&T free cash flow, exceeding the high end of our target range by over $2 billion for the full year. This performance led to continued growth in absolute OPACC dollars, which is our internal measure of profitable growth. As a result of our strong execution and record financial performance, we are increasing our target range for adjusted operating profit margin and ME&T free cash flow. We are increasing the top end of our adjusted operating profit margin range by 100 basis points relative to the corresponding level of sales. Moving to ME&T free cash flow, we've generated more than $30 billion over the last five years, including a record $10 billion in 2023. Based on our demonstrated ability to generate strong free cash flow, we are raising our ME&T free cash flow target range to $5 billion to $10 billion, up from $4 billion to $8 billion. Andrew will provide additional details around these updated targets. Turning to Slide 4. In the fourth quarter of 2023, sales and revenues increased by 3% to $17.1 billion, driven by favorable price realization and partially offset by lower volume. Both price and volume were slightly better than we expected. Compared to the fourth quarter of 2022, overall sales to users increased 8%, slightly better than our expectations. Energy & Transportation sales to users increased 20%. For machines, which includes Construction Industries and Resource Industries, sales to users rose by 3%. Sales to users in Construction Industries were up 4%. North American sales to users increased as demand remained healthy for non-residential and residential construction. Non-residential continued to benefit from government related infrastructure and construction projects. Residential sales to users in North America also increased in the quarter. Sales to users in EAME and Latin America were down slightly relative to a strong comparative. In Asia Pacific, sales to users declined in the quarter. In Resource Industries, sales to users increased 1%. In mining, sales to users also increased and in heavy construction and quarry and aggregates, sales to users declined against a strong comparative in 2022. In Energy & Transportation, sales to users increased by 20%. Oil and gas sales to users benefited from strong sales of turbines and turbine related services. We also saw continued strength in sales of reciprocating engines into gas compression and well servicing oil and gas applications, including the Tier 4 dynamic gas blending engines used in well servicing fleets. Power generation sales to users increased -- excuse me, power generation sales to users continued to remain positive due to favorable market conditions, including strong data center growth. Transportation sales to users also increased, while industrial declined from historically strong levels in 2022. Dealer inventory decreased by $900 million versus the third quarter. Machines declined by $1.4 billion, slightly more than we expected. We saw the largest decline in Construction Industries as dealer inventory decreased across all regions. The largest decline was in excavators. We remain comfortable with the total level of machine dealer inventory, which is within the typical range. Adjusted operating profit margin increased to 18.9% in the fourth quarter, a 190 basis point increase over last year. Adjusted operating profit margin was slightly better than we had anticipated. Relative to our margin expectations, we saw higher price realization and higher sales volume, both marginally better than expected. Turning to Slide 5, I'll now provide full year highlights. In 2023, we generated sales and revenues of $67.1 billion, up 13% versus last year. This was due to favorable price and higher sales volume, driven primarily by higher sales of equipment to end users. As I mentioned, we generated $23 billion of services revenue in 2023, a 5% increase over 2022. We continue to see improvement of customer value agreements with new equipment, which remains an important part of our services growth initiatives. We saw strong e-commerce sales growth as we continued to enhance our digital tools to make it easier for customers to identify and purchase the right parts. We added more than 100,000 new customers to our online channel. We also exceeded the e-commerce goal we shared at our May 2022 Investor Day. By combining the data from more than 1.5 million connected assets with our engineering expertise, advanced analytics and AI, we are helping customers avoid unplanned downtime through intelligent leads, which we call prioritized service events, or PSEs. We continue to execute our various service initiatives as we strive to achieve our 2026 target of $28 billion. Our full-year adjusted operating profit margin was 20.5%, a 510 basis point increase over 2022. Moving to Slide 6. We generated strong ME&T free cash flow of $10 billion in 2023, a $3.7 billion, or 58% increase over our previous record. We returned a record $7.5 billion to shareholders through repurchase stock and dividends. We remain proud of our Dividend Aristocrat status and continue to expect to return substantially all ME&T free cash flow to shareholders over time through dividends and share repurchases. Now on Slide 7, I'll describe our expectations moving forward. Overall demand remains healthy across most of our end markets for our products and services. We ended 2023 with a backlog of $27.5 billion, which remains elevated as a percentage of revenues compared to historical levels. We currently anticipate 2024 sales and revenues to be broadly similar to the record 2023 level. We expect continued strength in end user demand, including services growth, and a slight benefit from carryover pricing, offset by a dealer inventory headwind, which was a $2.1 billion benefit in 2023. We currently do not anticipate a significant change in dealer inventory of machines in 2024 as compared to an increase in 2023. Now, I'll discuss our outlook for key end markets, starting with construction industries. In North America, after a very strong 2023, we expect the region to remain healthy in 2024. We expect non-residential construction to remain at similar demand levels due to government-related infrastructure investments. Residential construction is expected to remain healthy relative to historical levels. In Asia Pacific, excluding China, we are seeing some softening in economic conditions. We anticipate China will remain at a relatively low level for the above 10-ton excavator industry. In EAME, we anticipate the region will be slightly down due to economic uncertainty in Europe, somewhat offset by continuing strong construction demand in the Middle East. Construction activity in Latin America is expected to increase due to easing financial conditions. In addition, we also anticipate the ongoing benefit of our services initiatives will positively impact construction industries in 2024. Next, I'll discuss Resource Industries. After strong performance in 2023 in mining, heavy construction and quarry and aggregates, we anticipate lower machine volume versus last year, primarily due to off-highway and articulated trucks. In addition, we anticipate a small decrease in dealer inventory during 2024 versus a slight increase in dealer inventory last year. While we continue to see a high level of quoting activity overall, we anticipate lower order rates as customers display capital discipline. We expect to see higher services revenues, including robust rebuild activity. Customer product utilization remains high, the number of parked trucks remains low, the age of the fleet remains elevated, and our autonomous solutions continue to see strong customer acceptance. We continue to believe the energy transition will support increased commodity demand over time, expanding our total addressable market and providing further opportunities for long-term profitable growth. Moving to Energy & Transportation. In oil and gas, we expect reciprocating engines and services to increase slightly after a strong 2023. As we said during the last two quarters, well servicing in North America is showing some short-term moderation. Gas compression order backlog remains healthy. And overall, we continue to remain optimistic about future demand. Cat reciprocating engine demand for power generation is expected to remain strong due to continued data center growth. Solar Turbines has a strong backlog and continues to experience robust quoting activity. As we said in the last quarter, industrial demand is expected to soften in the near term from a strong 2023. In transportation, we anticipate high-speed marine to increase slightly as customers continue to upgrade aging fleets. Moving to Slide 8. Now I'll provide an update on our strategy and sustainability journey. Over the past year, we have discussed constraints for our large engines, given the robust demand in power generation for data centers and in oil and gas. We believe that our total addressable market is expanding due to the secular growth trend for data centers relating to cloud computing and Generative AI. We also expect the energy transition to create opportunities for distributed generation. As more renewables are added to the grid, our reciprocating engine and gas turbine generator sets can help provide grid stability. We are making a large multiyear capital investment in our large engine division, including increasing capacity for both new engines and aftermarket parts. This will help us satisfy growing customer demand and contribute to future absolute OPACC dollar growth, which we believe has the highest correlation to total shareholder return over time. We continued to advance our sustainability journey in 2023. I'll highlight some recent announcements demonstrating our commitment to a reduced carbon future. Caterpillar had a goal that 100% of new products will be more sustainable than the previous generation, including by lowering fuel consumption and thus, corresponding emissions. One recent example is our 420 XE Backhoe Loader with the Cat 3.6 engine. Through internal testing in a typical mix of applications, it consumed up to 10% less fuel and produced up to 10% less tail pipe emissions than the previous model. Earlier this year, we announced the success of our collaboration with Microsoft and Ballard Power Systems to demonstrate the viability of using large-format hydrogen fuel cells to supply reliable and sustainable backup power for data centers. The demonstration validated the hydrogen fuel cell power systems performance in more than 6,000 feet above sea level and in below freezing conditions. Caterpillar led the project, providing the overall system integration, power electronics and microgrid controls that form the central structure of the hydrogen power solution. These examples reinforce our ongoing sustainability leadership. With that, I'll turn it over to Andrew.","evidence_gemma_new":"adjusted operating profit margin 20.5%","evidence_llama_3_3":null,"evidence_qwen_3_30b":"adjusted operating profit margin 20.5% 510 basis points prior year","gemma_new_max":20.5,"gemma_new_min":20.5,"llama_3_3_max":null,"llama_3_3_min":null,"qwen_3_30b_max":20.5,"qwen_3_30b_min":20.5}
{"symbol":"CAT","year":2024,"quarter":1,"date":"2024-Q1","chunk_id":2,"sub_chunk_id":0,"centroid_label":"adjusted operating profit margins","agreed_value":22.2,"count":2,"chunk":"Jim Umpleby : Thanks, Ryan. Good morning, everyone. Thank you for joining us. I'd like to start by thanking our global team for delivering another strong quarter, including higher adjusted operating profit margin, record adjusted profit per share, and strong ME&T free cash flow. Our strong balance sheet and ME&T free cash flow allowed us to deploy a record $5.1 billion of cash for share repurchases and dividends in the first quarter. Our results reflect a continuation of healthy demand for our products and services across most of our end markets. We remain focused on executing our strategy and continue to invest for long-term profitable growth. I'll begin with my perspectives about our performance in the quarter. I'll then provide some insights about our end markets, followed by an update on our sustainability journey. It was another strong quarter. Sales and revenues were about flat in the quarter versus last year, broadly in line with our expectations. Services revenues increased in the quarter. Our adjusted operating profit increased by 5% to $3.5 billion. Adjusted operating profit margin was slightly better than we expected and improved to 22.2% up a 110 basis points versus last year. We achieved a record adjusted profit per share of $5.60 up 14%. We also generated strong ME&T free cash flow in the quarter of $1.3 billion. In addition, our backlog increased to $27.9 billion up $400 million versus the fourth quarter of 2023. We continue to expect 2024 sales and revenues to be broadly similar to the record 2023 level. We have revised our full year 2024 segment expectations to reflect a slightly stronger top line in Energy & Transportation offset by softening in the European market for Construction Industries. We anticipate services to be higher in 2024 as we strive to achieve our 2026 target of $28 billion. For the year, we continue to expect adjusted operating profit margin and ME&T free cash flow to be in the top half of our target ranges. Turning to slide four. In the first quarter of 2024 sales and revenues remained about flat at $15.8 billion. Compared to our expectations, sales volume was slightly lower while price realization, including geographic mix, was better than we anticipated. Compared to the first quarter of 2023, overall sales to users decreased by 5%. This was slightly lower than we expected, mainly due to weakness in Europe for Construction Industries. Energy & Transportation continued to show strength, where sales to users increased 9%. For machines, which includes Construction Industries and Resource Industries, sales to users declined by 9%. Focusing on Construction Industries, sales to users were down 5%. In North America, our largest geographic region for Construction Industries, sales to users increased as expected, and demand remained healthy for both non-residential and residential construction. Construction projects, as well as government related infrastructure, continue to benefit non-residential demand. Although residential sales to users in North America were down slightly, demand for new housing remained strong. Sales to users declined in EAME primarily due to weakness in Europe related to residential construction and economic conditions. Latin America and Asia Pacific sales to users also saw some declines. In Resource Industries, sales to users declined 17% in the first quarter compared to a very strong first quarter in 2023. Mining, as well as heavy construction and quarry and aggregates were lower, mainly due to softness in off-highway and articulated trucks that we mentioned during our last earnings call. In Energy & Transportation, sales to users increased by 9%. Oil and gas sales to users benefited from strong sales of turbines and turbine-related services. We also saw increased sales of reciprocating engines in the gas compression and well servicing oil and gas applications. Power generation sales to users grew as market conditions remained favorable, including strong data center growth. Transportation sales to users increased while industrial declined as we expected from strong levels last year. In total, dealer inventory increased by $1.4 billion versus the fourth quarter. For machines, dealer inventory increased by $1.1 billion, which was slightly higher than our expectations, largely due to sales to users being modestly lower than anticipated. The increase in machine dealer inventory is consistent with normal seasonal patterns of which Construction Industries products accounted for the majority of the increase. The total level of machine dealer inventory is comfortably within the typical range. As I mentioned, backlog increased to $27.9 billion, up $400 million versus the fourth quarter of 2023, led by Energy & Transportation. Backlog remains elevated as a percentage of revenues compared to historical levels. Adjusted operating profit margin increased to 22.2% in the first quarter, a 110 basis point increase over last year, which was slightly better than we anticipated. This was primarily due to better than expected manufacturing costs, mainly related to freight. Moving to slide five. We generated strong ME&T free cash flow of $1.3 billion in the first quarter. We deployed $5.1 billion of cash for share repurchases and dividends in the first quarter, including the initiation of a $3.5 billion accelerated share repurchase program which may last up to nine months. We remain proud of our Dividend Aristocrat status and continue to expect to return substantially all ME&T free cash flow to shareholders over time through dividends and share repurchases. Now on slide six, I'll describe our expectations moving forward. We expect a continuation of healthy demand across most of our end markets for our products and services. We continue to anticipate 2024 sales and revenues to be broadly similar to the record 2023 level. As I mentioned, we expect services to continue to grow in 2024. We currently do not anticipate a significant change in dealer inventory in machines in 2024, compared to a $700 million increase in 2023. This is expected to be a headwind to sales in 2024. As a reminder, dealers are independent businesses and manage their own inventories. The vast majority of dealer inventories in Energy & Transportation are backed by firm customer orders. The timing of these products being recognized as sales to users is impacted by dealer packaging and commissioning, which is why it is difficult to predict dealer inventory in E&T. This is why we have become more explicit about the differentiation between machine dealer inventory and total dealer inventory. As I mentioned, we anticipate that our 2024 results will be within the top half of our target ranges for both adjusted operating profit margin and ME&T free cash flow. Our strong results continue to reflect the diversity of our end markets, as well as the disciplined execution of our strategy for profitable growth. Now, I'll discuss our outlook for key end markets starting with Construction Industries. In North America, after a very strong 2023, we continue to expect demand in the region will remain healthy in 2024 for both non-residential and residential construction. We anticipate non-residential construction to remain at similar levels to slightly higher demand levels compared to last year due to construction projects, as well as government related infrastructure. Residential construction demand is expected to be flat to slightly down versus last year, which remains strong in comparison to historical levels. In Asia Pacific, outside of China, we are seeing some softening in economic conditions. We anticipate demand in China will remain at a relatively low level for the above 10-ton excavator industry. In EAME, we anticipate that weak economic conditions in Europe will continue, somewhat offset by strong construction activity in the Middle East. Construction activity in Latin America remains mixed, but overall, we are expecting modest growth. In addition, we expect the ongoing benefit of our services initiatives will positively impact Construction Industries in 2024. Next, I'll discuss Resource Industries. After strong performance in 2023 in mining, as well as heavy construction and quarry and aggregates, we anticipate lower machine volume versus last year, primarily due to off-highway and articulated trucks. In addition, we anticipate a small decrease in resource industry dealer inventories during 2024 versus a slight increase last year. While we continue to see a high level of quoting activity overall, we anticipate lower order rates as customers display capital discipline. We expect to see higher services revenues, including robust rebuild activity. Customer product utilization remains high, the number of parked trucks remains low, and the age of the fleet remains elevated, and our autonomous solutions continue to see strong customer acceptance. We continue to believe the energy transition will support increased commodity demand over time, expanding our total addressable market, and providing further opportunities for long-term profitable growth. Moving to Energy & Transportation. In oil and gas, we expect reciprocating engines and services to be about flat after strong 2023 performance. We expect reciprocating gas compression demand to be higher in 2024 than it was in 2023. While servicing demand in North America is expected to soften, Cat reciprocating engine demand for power generation is expected to remain strong, largely due to continued data center growth relating to Cloud Computing and Generative AI. Last quarter, I mentioned we are making a multi-year capital investment in our large reciprocating engine division, including increasing capacity for both new engines and aftermarket parts. This investment will approximately double output for large engines and aftermarket parts as compared to 2023. We leverage these large engines across a variety of applications, including data centers, oil and gas, large mining trucks, and distributed power generation. For Solar Turbines, our backlog and quoting activity both remain strong for oil and gas and power generation. As we said previously, industrial demand is expected to soften relative to a strong 2023. In transportation, we anticipate high-speed marine to increase as customers continue to upgrade aging fleets. Moving to slide seven, I'll provide an update on our sustainability journey. We are contributing to a reduced carbon future and continue to invest in new products technologies and services, to help our customers achieve their climate related objectives. In January we announced the signing of an electrification strategic agreement with CRH to advance the deployment of Caterpillar\u2018s Zero-Exhaust Emissions Solutions. CRH is the number one aggregate producer in North America and the first company in that industry to sign such an agreement with Caterpillar. The agreement is focused on accelerating the deployment of Caterpillar\u2019s 70-ton to 100-ton class battery electric off-highway trucks and charging solutions at a CRH site in North America. Through the agreement CRH will participate in Caterpillar\u2019s early learner program for battery electric off-highway trucks. In February Caterpillar oil and gas announced the launch of the Cat Hybrid Energy Storage Solution to help drillers and operators cut fuel consumption, lower total cost of ownership and reduce emissions in oil and gas operations. The custom designed energy storage system stores excess power from the job site and then discharges it as needed. In a hybrid system that combines the Cat Hybrid Energy Storage Solution in a natural gas fuel generator set, the transient response is even quicker than a conventional diesel only rigs. Depending upon site configuration the Hybrid Energy Storage Solution has proven to deliver up to 30% fuel cost savings with natural gas, 85% fuel cost savings with fuel gas, and up to an 80% reduction in nitrogen oxides. Carbon dioxide equivalent reductions up to 11% and 7% are possible with natural gas and fuel gas respectively. In addition, we look forward to issuing our 19th Annual Sustainability Report in May. The material in our report reinforce our ongoing commitment to sustainability. With that I'll turn it over to Andrew.","evidence_gemma_new":null,"evidence_llama_3_3":"adjusted operating profit margin first quarter","evidence_qwen_3_30b":"adjusted operating profit margin 22.2% 110 basis points last year","gemma_new_max":null,"gemma_new_min":null,"llama_3_3_max":22.2,"llama_3_3_min":22.2,"qwen_3_30b_max":22.2,"qwen_3_30b_min":22.2}
{"symbol":"CAT","year":2024,"quarter":2,"date":"2024-Q2","chunk_id":2,"sub_chunk_id":0,"centroid_label":"adjusted operating profit margins","agreed_value":22.4,"count":2,"chunk":"James Umpleby: Thanks, Ryan. Good morning, everyone. Thank you for joining us. I'd like to start by thanking our global team for their strong execution in the first half of the year. In the second quarter, we achieved higher adjusted operating profit margin, record adjusted profit per share and generated robust ME&T free cash flow. Our results continue to reflect the benefit of the diversity of our end-markets as well as the disciplined execution of our strategy for long-term profitable growth. I'll begin with my perspectives about our performance in the quarter and we'll provide an update on our full year expectations. I'll then provide some insights about our end-markets, followed by an update on our sustainability journey. Moving to quarterly results. Sales and revenues were down 4% in the second quarter versus last year, slightly below our expectations. Services increased in the quarter. Our adjusted operating profit increased to $3.7 billion, a record. Adjusted operating profit margin was better than we expected and improved to 22.4% up 110 basis points versus last year. We achieved a record quarterly adjusted profit per share of $5.99, up 8%. We also generated $2.5 billion of ME&T free cash flow in the quarter. In addition, our backlog increased to $28.6 billion, up $700 million versus the first quarter of 2024. Before I get into the detail of the quarter and outlook for our segments, I'll update our expectations for the full year based on our first half results. Earlier in the year, we estimated that sales and revenues would be broadly similar for the full year. For the first half, the top-line came in marginally below our expectations and ended 2% below the prior year. We now anticipate our sales and revenues will decline at a roughly similar rate in the second half versus the prior year, in-part due to our latest assumptions for dealer inventory, principally into Resource Industries. Overall sales to users and construction industries are running slightly lower than we anticipated, partially offset by stronger-than-expected sales in Energy and Transportation. Service revenues continue to grow. Although sales and revenues have been marginally below our expectations, adjusted operating profit margins have been stronger than we anticipated. Earlier in the year, we expected our adjusted operating profit margin to be in the top half of the target range at the corresponding level of sales. Due to the strength of our performance in the first half of the year, we now expect overall adjusted operating profit margins to be above the top of the target range for the full year. For the second half, we expect adjusted operating profit margins to be better than we previously anticipated or about flat to the second half of 2023, which Andrew will describe. The strength of our performance to date and our improved second half adjusted operating profit margin expectations give us confidence to guide above our target range. Overall, our expectations for full year adjusted operating profit and adjusted profit per share are now higher than it was during our last earnings call. We also anticipate that ME&T free cash flow will remain in the top half of the free cash flow target range. Turning to Slide 4 and our second quarter results. In the second quarter of 2024, sales and revenues declined 4% to $16.7 billion. Sales volume declined slightly more than we expected, while price realization, including geographic mix was better than we anticipated. Dealer inventory also declined in the second quarter. Compared to the second quarter of 2023, overall sales to users decreased 3%, slightly below expectations. For machines, which includes Construction Industries and Resource Industries, sales to users declined by 8%, slightly more than expected. Energy and transportation continued to show strength as sales to users increased 10%. Sales to users in Construction Industries were down 5%. In North America, sales to users were slightly lower than anticipated, primarily due to weaker than expected rental fleet loading. Government related infrastructure projects remained healthy. Residential sales to users in North America were up as demand for new housing remained resilient. Sales to users declined in the EAME, primarily due to weakness in Europe relating to residential construction and economic conditions. Sales to users in Asia Pacific declined, while Latin America increased. In Resource Industries, sales to users declined 15%, a slightly smaller decline than we expected versus a very strong second quarter in 2023. Mining as well as heavy construction and quarry and aggregates were lower, mainly due to softness we previously discussed for two products, articulated trucks and off-highway trucks. In Energy and Transportation, despite the ongoing weakness in industrial, sales to users increased by 10% as we continue to see strength across most applications. Oil and gas sales to users benefited from strong sales of turbines and turbine related services. We also saw increased sales of reciprocating engines into gas compression, while well servicing oil and gas applications were lower. Power generation sales to users grew as market conditions remained favorable, including strong data center growth. Transportation sales to users increased, while industrial declined as expected from the strong levels last year. Our results continue to reflect the benefit of the diversity of our end-markets as well as the disciplined execution of our strategy for long-term profitable growth. Moving to dealer inventory. In total, dealer inventory decreased by $200 million versus the first quarter. For machines, dealer inventory decreased by $400 million and remains within our typical range. As I mentioned, backlog increased to $28.6 billion, up $700 million versus the first quarter of 2024. Energy & Transportation drove the increase as we continue to see strong demand for solar turbines and reciprocating engines for power generation. Adjusted operating profit margin increased to 22.4% in the second quarter, a 110 basis point increase over last year, which was better than we anticipated. Margin exceeded our expectations, primarily due to lower than expected manufacturing costs and slightly better than expected price. Moving to Slide 5, we generated ME&T free cash flow of $2.5 billion in the second quarter. We deployed more than $1.8 billion of cash for share repurchases and about $600 million in dividends in the second quarter. In June, we announced an additional $20 billion share repurchase authorization with no expiration date. We remain committed to consistent share repurchases. Since 2019, when we communicated our intention to return substantially all ME&T free cash flow to shareholders over time, our net share count has decreased by approximately 18%. In addition, we increased our dividend by 8% in the second quarter, which is our fourth straight year of a high single-digit quarterly increase. We remain proud of our Dividend Aristocrat status and continue to expect to return substantially all ME&T free cash to shareholders over time through dividends and share repurchases. Now on Slide 6. I'll describe our expectations for our three primary segments moving forward. In Construction Industries, after a record 2023, sales to users in the second half are now expected to decline slightly versus last year. In North America, we now anticipate slightly lower construction industry sales to users for full year 2024 than we did previously, primarily due to weaker than expected rental fleet loading. Government related infrastructure projects are expected to remain healthy. In Asia Pacific, outside of China, we still expect soft economic conditions to continue. We anticipate demand in China will remain at a relatively low level for the above 10 ton excavator industry. In the EAME, we anticipate that weak economic conditions in Europe will continue, somewhat offset by continued healthy construction demand in the Middle East. Construction activity in Latin America remains mixed, but overall, we are expecting modest growth. In addition, we are expecting the ongoing benefit of our services initiatives will positively impact Construction Industries. Next, I'll discuss Resource Industries. After strong performance in 2023 in mining as well as heavy construction, in quarry and aggregates, we continue to anticipate lower machine volume versus last year, primarily due to off-highway and articulated trucks. We currently anticipate a decrease in Resource Industries dealer inventories in 2024 versus a slight increase last year. We expect to see higher services revenues, including robust rebuild activity. Customer product utilization remains high, the number of parked trucks remains low and the age of the fleet remains elevated and our autonomous solutions continue to see strong customer acceptance. Customers continue to display capital discipline, however, we continue to believe the energy transition will support increased commodity demand over time, expanding our total addressable market and providing further opportunities for long-term profitable growth. Moving to Energy & Transportation. In oil and gas, in total, we expect a stronger year overall in 2024 versus last year. After a strong 2023, we expect reciprocating engine sales in oil and gas to be flat to slightly down, primarily due to ongoing softness in well servicing. We still expect gas compression to be up for the full year, however, we expect it to soften in the second half. For solar turbines, we continue to expect volume growth in the second half as our backlog remains strong for oil and gas. CAT reciprocating engine and solar turbine demand for power generation is expected to remain strong, largely due to continued data center growth relating to cloud computing and Generative AI. Industrial demand is expected to remain at a relatively low level compared to 2023 in the second half. In Transportation, we anticipate growth as the year progresses in both high speed marine and rail services. Moving to Slide 7. I'll provide an update on our sustainability journey. We are contributing to a reduced carbon future and continue to invest in new products, technologies and services to help our customers achieve their climate related objectives. In April, Caterpillar and Vale signed an agreement to test battery-electric large mining trucks as well as to conduct studies on ethanol powered trucks. Progress has been made on both initiatives since the agreement was signed, including conducting a joint study on a dual-fuel solution for haul trucks operating on ethanol and diesel fuel. We are supporting Vale's sustainability objectives. In June, we added CAT CG260 Gas Generator sets to our portfolio of commercially available power solutions capable of running on hydrogen fuel. Previously, our portfolio with this capability ranged from 400 KW to 2,500 KW. The addition of the CG260 now provides up to 4,500 KW of electric power for continuous, prime and load management requirements and is approved to operate on gas containing up to 25% hydrogen by volume. Caterpillar offers retrofit kits to upgrade CG260 Generator sets already installed with these same hydrogen capabilities. In addition to our hydrogen capabilities and reciprocating engines, solar turbines has been a leader with its ability to burn a wide variety of fuels, including hydrogen, natural gas and biofuels. Today, Caterpillar has a large and growing lineup of technologies to support customers in their sustainability journey. These two examples highlight how we are helping our customers build a better, more sustainable world. With that, I'll turn it over to Andrew.","evidence_gemma_new":"adjusted operating profit margin","evidence_llama_3_3":"adjusted operating profit margin second quarter","evidence_qwen_3_30b":null,"gemma_new_max":22.4,"gemma_new_min":22.4,"llama_3_3_max":22.4,"llama_3_3_min":22.4,"qwen_3_30b_max":null,"qwen_3_30b_min":null}
{"symbol":"CAT","year":2024,"quarter":2,"date":"2024-Q2","chunk_id":3,"sub_chunk_id":0,"centroid_label":"adjusted operating profit margins","agreed_value":0.224,"count":2,"chunk":"Andrew Bonfield: Thank you, Jim, and good morning, everyone. I'll begin with a high level summary of the quarter. Then I'll provide more detailed comments on our second quarter results, including the performance of the segments. Next, I'll discuss the balance sheet and free cash flow and then conclude with comments on our assumptions for the remainder of the year. Beginning on Slide 8. Although sales and revenues were slightly below our expectations, we had strong operating performance in the quarter, including higher adjusted operating profit margin and record adjusted profit per share, both of which were stronger than we had anticipated. Sales and revenues of $16.7 billion decreased by about 4% compared to the prior year. Adjusted operating profit increased by 2% to $3.7 billion. And the adjusted operating profit margin was 22.4%, an increase of 110 basis points versus the prior year. Profit per share was $5.48 in the second quarter compared to $5.67 in the second quarter of last year. Adjusted profit per share increased by 8% to $5.99 in the quarter compared to $5.55 last year. Adjusted profit per share excluded restructuring costs of $0.51 per share mainly due to a loss on the divestiture of two non-US entities. This compares to restructuring costs of $0.05 per share and a discrete deferred tax benefit of $0.17 per share, which were both excluded in the second quarter of 2023. Other income of $155 million for the quarter was a $28 million benefit versus the prior year and was primarily driven by favorable impacts from commodity hedges. The provision for income taxes in the second quarter, excluding discrete items, reflected a global annual effective tax rate of 22.5% compared with 23% in the second quarter of 2023. Finally, the year-over-year impact from the reduction in the average number of shares outstanding primarily due to share repurchases over the past year had a favorable impact on adjusted profit per share of approximately $0.29. Moving on to Slide 9. I'll discuss our top line results in the second quarter. Sales and revenues decreased by 4% compared to the prior year as lower volume was partially offset by favorable price realization. Lower volume was mainly driven by the impact from the changes in dealer inventories. As you may recall, we anticipated a sales decline this quarter versus last year as an atypical dealer inventory increase in the second quarter of 2023 made for a challenging comparison. To explain, dealer inventory decreased by about $200 million in the second quarter. In comparison, we saw an increase of $600 million in the second quarter of last year. For machines only, dealer inventory followed the typical seasonal trend this quarter with a decrease of $400 million as compared to a $200 million increase in the second quarter of last year. Sales were slightly below our expectations due to lower-than-expected volume being partially offset by better-than-expected price realization, including geographic mix. Moving to operating profit on Slide 10. Operating profit in the second quarter decreased by 5% to $3.5 billion. This included a $227 million unfavorable impact from higher restructuring costs. Adjusted operating profit increased by 2% to $3.7 billion. Price realization benefited the quarter while the profit impact of lower sales volume acted as a partial offset. The adjusted operating profit margin of 22.4% improved by 110 basis points versus the prior year. Margins were better than we expected mainly due to favorable manufacturing costs, product mix and price. Versus our expectation, price was slightly better than we anticipated driven by Energy & Transportation. On Slide 11, Construction Industries sales decreased by 7% in the second quarter to $6.7 billion. This is primarily due to lower sales volume, partially offset by favorable price realization. Sales volume was impacted by unfavorable changes in dealer inventories. Dealer inventory was about flat in the second quarter of 2024 versus an increase in the second quarter of last year. Lower sales to users also impacted volume. Sales in Construction Industries were lower than we had anticipated due to lower-than-expected rental fleet loading in North America and continued weakness in Europe. By region, sales in North America were about flat and Latin America sales increased by 20%. Sales in the EAME region decreased by 27%. In Asia Pacific, sales declined by 15%. Second quarter profit for Construction Industries was $1.7 billion, a 3% decrease versus the prior year. This was mainly due to lower sales volume, partially offset by favorable price realization, which benefited from geographic mix effects. Favorable manufacturing costs provided some tailwind as well largely reflecting lower material costs. The segment's margin of 26.1% was an increase of 90 basis points versus last year. Margin was better than we had expected primarily due to a favorable product mix and the timing of planned SG&A and R&D spend. Price was in line with our expectations. Turning to Slide 12. Resource Industries sales decreased by 10% in the second quarter to $3.2 billion, which was about in line with our expectations. The decline was primarily due to lower sales volume, partially offset by favorable price realization. Sales volume was impacted by changes in dealer inventories as dealer inventory decreased more during the second quarter of 2024 than during the second quarter of last year. In addition, we saw lower sales to users in the segment as anticipated given the challenging comparison. Second quarter profit for Resource Industries decreased by 3% versus the prior year to $718 million. This is mainly due to lower sales volume, partially offset by favorable impacts from price realization and manufacturing costs, including lower freight. The segment's margin of 22.4% was an increase of 160 basis points versus last year. Margin was better than we had expected mainly driven by the timing of planned SG&A and R&D spend and a favorable product mix. Now on Slide 13. Energy & Transportation sales increased by 2% in the second quarter to $7.3 billion. The increase was due to favorable price realization, which was partially offset by lower sales volume driven by industrial, which declined in line with our expectations. The segment sales were slightly better than we had anticipated primarily driven by price. By application, power generation sales increased by 15%. Transportation sales were higher by 7%. Oil and gas sales improved by 4%, while industrial sales decreased by 21%. Second quarter profit for Energy & Transportation increased by 20% versus the prior year to $1.5 billion. The increase was primarily due to favorable price. The segment's margin of 20.8% was an increase of 320 basis points versus the prior year. Margin was significantly stronger than we had anticipated due to better price and lower-than-expected manufacturing costs, which largely reflected favorable inventory absorption, lower freight and lower material costs. Moving to Slide 14. Financial Products revenues increased by 9% to about $1 billion primarily due to higher average financing rates across all regions and higher average earning assets in North America. Segment profit decreased by 5% to $227 million. This was mainly due to a higher provision for credit losses, which largely reflected the absence of a nonrecurring reserve release from the prior year. The portfolio remains healthy as past dues of 1.74% on near historic lows and reflect a 41 basis point improvement compared to the prior year. In addition, the allowance rate was 0.89% our lowest rate on record. Business activity remains healthy as new business volume increased versus the prior year primarily driven by North America. We also continue to see healthy demand for used equipment where inventories remain close to historical low levels. Moving on to Slide 15. We generated $2.5 billion in ME&T free cash flow in the second quarter and we expect our full year free cash flow to be in the top half of our annual target range of between $7.5 billion to $10 billion. Our expectations for CapEx remain between $2 billion and $2.5 billion for the year. On share repurchases, the more than $1.8 billion deployed in the second quarter included a $1 billion accelerated share repurchase agreement. Approximately 75% of those shares were delivered to the company upfront with the balance to be delivered when the agreement is terminated prior to year-end. Note that we also had an ME&T bond maturity of $1 billion in the second quarter. And given our healthy liquidity position, we did not issue new bonds. Our balance sheet remains strong with an enterprise cash balance of $4.3 billion. In addition, we hold $1.8 billion in slightly longer-dated liquid marketable securities to improve yields on that cash. Now on Slides 16 and 17, I will show our high-level assumptions for the remainder of the year. As Jim mentioned, we now anticipate sales and revenues to be slightly lower this year versus the record 2023 level. This compares to our previous expectation for broadly similar sales. This change reflects an updated assumption of a slight reduction in machine dealer inventory, primarily in Resource Industries and lower-than-expected sales to users in Construction Industries mainly due to lower rental fleet loading in North America. Now specific to our second half assumptions. We typically see higher sales in the second half as compared to the first and we expect sales to follow that normal seasonable trend this year. As compared to the prior year, we now anticipate slightly lower sales in the second half driven by lower machine sales to users. Changes in dealer inventories and machines are expected to have a nominal impact as the decrease in the second half of this year should be similar to the decrease observed in the second half of 2023, which was about $1 billion. However, note that machine dealer inventory changes will impact the quarters differently as we expect a sales headwind in the third quarter as dealers built their inventories in the third quarter of 2023 and a sales tailwind in the fourth quarter due to a smaller inventory decline than the prior year. Finally, we continue to anticipate services growth in the second half of the year as we strive to achieve our 2026 target of $28 billion in services revenues. Moving on to our margin expectations. As Jim mentioned, the strength of our first half performance combined with the more favorable expectations for the second half mean that we now anticipate overall adjusted operating profit margin to be above the top end of the target range for the full year. Specific to second half margins, despite higher sales, we do expect lower margins versus the first half, which follows a typical seasonable trend. However, keep in mind that first half margins were at record levels and the magnitude of the second half decline may be slightly larger than is typical. As compared to the prior year, we expect our adjusted operating profit margin in the second half will be similar to the prior year level. While we anticipate some favorability in manufacturing costs on improved operational efficiencies, we do expect slightly lower volumes and a slight headwind from price in the second half versus a year ago. On price, the impact of lapping the increases taken in the second half of 2023 means that the benefit in the second half of this year will be significantly lower. In addition, we expect that improved availability across the industry will result in the normalization of the pricing environment. To assist you with your modeling for the full year, please note that we now anticipate restructuring costs of around $450 million and that our expectations for the annual effective tax rate, excluding discrete items, remains at 22.5%. Now on Slide 18. I'll provide a few comments on the third quarter, starting on the top line. We expect slightly lower sales and revenues in the third quarter compared to the prior year as we anticipate a dealer inventory headwind for machines, which will impact volumes. We expect dealer inventory machines to be flattish to slightly lower in the third quarter as is typical, which compares to the atypical $400 million increase in the prior year. We also anticipate lower machine sales to users versus a strong comparison. We expect flattish price realization in the third quarter versus the prior year due to the normalization that I mentioned a moment ago. We also anticipate that the ongoing benefit of our service initiatives will positively impact sales in the third quarter. By segment in the third quarter compared to the prior year, we anticipate lower sales in Construction Industries primarily due to a headwind from changes in dealer inventories. In Resource Industries, we expect lower sales as sales to users are impacted by a challenging comparison similar to that which we have observed in the first two quarters of this year. In Energy & Transportation, we anticipate higher sales versus the prior year, supported by strengthen in power generation, oil and gas and transportation. Lower sales in industrial should act as a partial offset. For enterprise margins in the third quarter, we expect similar adjusted operating profit margin compared to the prior year as we anticipate lower volume will be offset primarily by favorable manufacturing costs. By segment in the third quarter, in Construction Industries, we anticipate lower margin compared to the prior year on lower volume and slightly unfavorable price realization. Favorable manufacturing costs should act as a partial offset. For Resource Industries, we anticipate slightly lower margins in the third quarter compared to the prior year due to unfavorable volume and higher SG&A and R&D spend. In Energy & Transportation, we expect a higher margin versus the prior year and stronger volumes and favorable price realization. So turning to Slide 19, let me summarize. Strong execution and operating performance continued in the second quarter. Higher adjusted operating profit margin of 22.4% offset the decrease in sales and revenues and led to a record adjusted profit per share of $5.99. We now expect overall adjusted operating profit margin to be above the top end of the target range for the full year based on our expected sales levels, which should now be slightly lower than levels in 2023. The net of these factors leads to our current expectation for higher adjusted operating profit and adjusted profit per share as compared to what we contemplated at the beginning of the year. ME&T free cash flow generation was $2.5 billion in the quarter. We continue to expect to be in the top half of our target range for the full year. We have deployed $7.6 billion to shareholders through share repurchases and dividends in the first half of 2024. We continue to execute our strategy for long-term profitable growth. And with that we'll take your questions.","evidence_gemma_new":"Adjusted operating profit margin","evidence_llama_3_3":null,"evidence_qwen_3_30b":"adjusted operating profit margin 22.4% better than we expected up 110 basis points second quarter","gemma_new_max":0.224,"gemma_new_min":0.224,"llama_3_3_max":null,"llama_3_3_min":null,"qwen_3_30b_max":0.224,"qwen_3_30b_min":0.224}
{"symbol":"CAT","year":2024,"quarter":3,"date":"2024-Q3","chunk_id":2,"sub_chunk_id":0,"centroid_label":"adjusted operating profit margins","agreed_value":20.0,"count":3,"chunk":"Jim Umpleby: Thanks, Ryan. Good morning, everyone. Thank you for joining us. As we close out the third quarter, I want to thank our global team for another good quarter as our results reflect the benefit of the diversity of our end markets. We delivered strong adjusted operating profit margin and adjusted profit per share, which were consistent with our expectations, although our top-line was lower than we anticipated. We also generated ME&T free cash flow of $2.7 billion in the third quarter. Our robust ME&T free cash flow, along with our strong balance sheet, allowed us to deploy over $9 billion to shareholders through share repurchases and dividends during the first three quarters of the year, including $1.5 billion this quarter. We continue to remain disciplined in the execution of our strategy for long-term profitable growth. I'll begin with my perspectives about our performance in the quarter and will provide an update on our full year expectations. I'll then provide some insights about our end markets, followed by an update on our strategy and sustainability journey. Moving to quarterly results. Sales and revenues were down 4% in the third quarter versus last year, below our expectations due to the impact of lower-than-expected sales to users in Construction Industries and timing of deliveries in Resource Industries and Energy & Transportation. Services increased in the quarter compared to 2023. Adjusted operating profit margin was generally in line with our expectations at 20%. We achieved quarterly adjusted profit per share of $5.17, in line with our expectations at the time of the last earnings call. In addition, our backlog increased slightly to $28.7 billion and remains at a very healthy level. For the full year, although we updated our expectations since our last earnings call to reflect sales being slightly below our prior estimate, our expected adjusted operating profit margin is unchanged and remains above the top of the range. Also, our expectation for adjusted profit per share is unchanged. We are increasing our expectations for ME&T free cash flow and now anticipate it will be near the top of our target range of $5 billion to $10 billion. Turning to Slide 4. In the third quarter of 2024, sales and revenues declined 4% to $16.1 billion due to lower sales volume. Compared to the third quarter of 2023, overall sales to users decreased 6%. For Machines, which includes Construction Industries and Resource Industries, sales to users declined by 10%, which was below our expectations. Energy & Transportation continued to grow as sales to users increased 5%. Sales to users in Construction Industries were down 7% year-over-year. In North America, sales to users were down primarily due to lower rental fleet loading and the absence of a large pipeline deal in the third quarter of 2023. Excluding these two items, sales to users were about flat versus the prior year. Compared to our expectations, sales to users were lower than expected, impacted by rental fleet loading. Our dealers' rental revenue continued to grow in the quarter. Sales to users declined in EAME, primarily due to ongoing weakness in construction activity in Europe. Sales to users in Asia Pacific declined, while Latin America increased. In Resource Industries, sales to users declined 18%, generally in line with our expectations versus a strong third quarter in 2023. Mining, as well as heavy construction, and quarry and aggregates were lower, mainly due to softness we previously discussed for two products, articulated trucks and off-highway trucks. In Energy & Transportation, sales to users increased by 5%, and we continue to see growth in all applications except industrial. Power generation sales to users grew strongly as market conditions remained favorable for both reciprocating engines and solar turbines and turbine-related services. Oil and gas sales to users benefited from strong sales of turbines and turbine-related services. For reciprocating engines in oil and gas applications, sales to users were higher for gas compression but lower in well servicing. Transportation sales to users increased, while industrial declined as we expected. Our results continue to reflect the benefit of the diversity of our end markets, as well as the disciplined execution of our strategy for long-term profitable growth. Moving to dealer inventory and our backlog. In total, dealer inventory increased by $400 million versus the second quarter of 2024. For Machines, dealer inventory increased by $100 million, slightly more than we had anticipated. Looking ahead to the fourth quarter, our current planning assumptions forecast a reduction in machine dealer inventory, and we expect machine dealer inventory to end the year around the same level as year-end 2023. Dealers are independent businesses and make stocking decisions across a wide range of products based on multiple factors across the product portfolio. While machine dealer inventory is currently around the top end of the typical range, we remain comfortable with the overall level of dealer inventory. As I mentioned, backlog increased slightly versus the second quarter to $28.7 billion. Energy & Transportation increased as we continue to see strong demand for solar turbines in oil and gas and power generation, as well as strong demand for reciprocating engines for power generation. Moving to Slide 5, we generated robust ME&T free cash flow of $2.7 billion in the third quarter and $6.4 billion in the first three quarters of 2024. As I mentioned, year-to-date, we deployed more than $9 billion to shareholders through share repurchases and dividends. We remain proud of our dividend aristocrat status and continue to expect to return substantially all ME&T free cash flow to shareholders over time through dividends and share repurchases. Now, on Slide 6, I'll describe our expectations for our three primary segments moving forward. In Construction Industries, we expect lower sales to users in the fourth quarter, but remain positive about the longer-term demand outlook. During our August earnings call, we noted a lower level of rental fleet loading in North America, which continued into the third quarter, and we now expect the trend to persist in the fourth quarter. Although we have lowered our expectations for sales to users in the fourth quarter, primarily due to lower rental fleet loading, dealer rental revenue continues to grow. In addition, government-related infrastructure projects are expected to remain healthy, supported by funding yet to be spent from the IIJA. In Asia Pacific, outside of China, we expect soft economic conditions to continue. We anticipate demand in China will remain at a relatively low level for the above 10-ton excavator industry. In EAME, we anticipate that weak economic conditions in Europe will continue, partially offset by continued healthy construction demand in the Middle East. Construction activity in Latin America remains healthy, and we are expecting modest growth to continue. In addition, we expect the ongoing benefit of our services initiatives will positively impact Construction Industries. Next, I'll discuss Resource Industries. After strong performance in 2023 in mining as well as heavy construction and quarry and aggregates, we continue to anticipate lower machine volume in the fourth quarter of 2024 versus last year. However, the rate of decline for sales to users in the fourth quarter is expected to moderate versus the previous quarters. We expect to see higher services revenues, including robust rebuild activity. Customer product utilization remains high, the number of parked trucks remains relatively low, the age of the fleet remains elevated, and our autonomous solutions continue to see strong customer acceptance. Customers continue to display capital discipline. However, we continue to believe the energy transition will support increased commodity demand over time, expanding our total addressable market and providing further opportunities for long-term profitable growth. Moving to Energy & Transportation. For power generation, demand is expected to remain strong, and we expect robust growth in the fourth quarter and full year sales for both reciprocating engines and solar turbines. Overall strength in power generation continues to be driven by data center growth related to cloud computing and generative AI, and we expect this trend to continue. In oil and gas, in total, we continue to expect a stronger year overall in 2024 versus 2023. For solar turbines used in oil and gas applications, we expect a strong fourth quarter, but sales are expected to be lower than the fourth quarter of 2023 due to the timing of deliveries. The increase in power generation at solar will mostly offset solar's decline in oil and gas, so we expect solar's total sales in the fourth quarter to be roughly flat compared to last year. Solar has a strong backlog as well as healthy order and inquiry activity, and we continue to expect full year growth for solar in oil and gas. After a strong 2023, we expect reciprocating engine sales in oil and gas to be slightly down this year, primarily due to ongoing softness in well servicing. We still expect gas compression to be up for the full year. However, we expect it to soften in the near term as equipment lead times have normalized. As we had previously mentioned, we can leverage our large engine platforms across a variety of applications. Based on current market conditions and well servicing applications, we are able to serve additional power generation demand as we continue to meet oil and gas customer needs while optimizing our overall large engine capacity. Industrial demand has continued to remain at a relatively low level compared to 2023. In transportation, we anticipate full year growth in both rail services and marine applications. Moving to Slide 7, now, I'll provide an update on our strategy and sustainability journey. In February of 2024, we announced a multiyear capital investment in our large reciprocating engine division to approximately double output capability compared to 2023 for new engines and aftermarket parts. Based on increasing expectations of future demand growth, today, we are announcing an additional multiyear investment to further expand our large engine volume output capability to more than 125% compared to 2023. As I mentioned, we leverage these large engines across a variety of applications, including data centers, oil and gas, large mining trucks, and distributed power generation. Moving on to sustainability. We continue to invest in new product, technologies and services to help our customers achieve their climate-related objectives. In September, we unveiled an innovative solution to help solve one of the most complex aspects of the mining industry's energy transition, energy management. Cat Dynamic Energy Transfer, or DET, is a fully Caterpillar developed system that can transfer energy to both diesel electric and battery electric large mining trucks while they are working around them on-site. It can also charge batteries while operating with increased speed on grade, improving operational efficiency and machine uptime. Cat DET is comprised of a series of integrated elements, including a power module that converts energy from a mine site's power source, an electrified rail system to transmit the energy, and a machine system to transfer the energy to the truck's powertrain. Cat DET will integrate with the Cat MineStar Command for hauling solution, merging autonomy and electrification technologies to provide a holistic site solution. We believe mine sites will benefit from enhanced efficiency with the integration of electrification and automation. When combined, these technologies will help miners achieve production targets, while simultaneously managing energy demands. This example highlights how we leverage our industry-leading technology through an integrated approach across our portfolio to help our customers build a better, more sustainable world. With that, I'll turn it over to Andrew.","evidence_gemma_new":"adjusted operating profit margin","evidence_llama_3_3":"adjusted operating profit margin third quarter","evidence_qwen_3_30b":"adjusted operating profit margin 20.0% third quarter","gemma_new_max":20.0,"gemma_new_min":20.0,"llama_3_3_max":20.0,"llama_3_3_min":20.0,"qwen_3_30b_max":20.0,"qwen_3_30b_min":20.0}
{"symbol":"CAT","year":2024,"quarter":3,"date":"2024-Q3","chunk_id":3,"sub_chunk_id":0,"centroid_label":"adjusted operating profit margins","agreed_value":0.2,"count":2,"chunk":"Andrew Bonfield: Thank you, Jim, and good morning, everyone. As usual, I'll begin with a high-level summary of the third quarter, and then provide more detailed comments, including the performance of the segments. I'll then, discuss the balance sheet and free cash flow, before concluding with comments on our assumptions for the full year and the fourth quarter. Beginning on Slide 8, although sales and revenues were lower than we had expected, our adjusted operating profit margin was 20.0%, generally in line with what we had anticipated. Adjusted profit per share was in line with our expectations despite adjusted operating profit being impacted by the lower sales and revenues. I will highlight a few of the moving parts in a moment. As Jim mentioned, our full year margin expectations remain unchanged, and we continue to anticipate the adjusted operating profit margin will be above the top end of the target range despite the slightly lower outlook for the top-line. Our expectations for adjusted profit per share remain unchanged versus our expectations at the time of our last earnings call. Also, we have increased our expectations for ME&T free cash flow for the year, which we now anticipate will be near the top of our $5 billion to $10 billion target range. In the third quarter, sales and revenues of $16.1 billion decreased by 4% compared to the prior year. The adjusted operating profit margin of 20.0% was 80 basis points lower when compared to the prior year. Profit per share was $5.06 in the third quarter compared to $5.45 in the third quarter of last year. Restructuring costs were $0.11 in the quarter versus $0.07 in the prior year. Adjusted profit per share was $5.17 in the quarter compared to $5.52 last year. Other income and expense was $119 million headwind versus the prior year, mostly driven by an unfavorable currency impact related to ME&T balance sheet translation. We do not forecast the impact of foreign currency translation on our adjusted profit per share, so this acted as a headwind compared to our expectations for the quarter. Excluding discrete items, the provision for income taxes in the third quarter in both 2023 and 2024 reflected a global annual effective tax rate of 22.5%. We recorded a discrete tax benefit, which had an $0.11 favorable impact within the quarter. We do not anticipate discrete items. Finally, the year-over-year impact from the reduction in the average number of shares outstanding, primarily due to share repurchases, resulted in a favorable impact on adjusted profit per share of approximately $0.26 as compared to the third quarter 2023. This was slightly better than we had expected. Moving to Slide 9, I'll discuss our top-line results for the third quarter. Sales and revenues decreased by 4% compared to the prior year, primarily impacted by lower sales volume as a result of lower sales to users and impacts from changes in dealer inventories. Total sales to users decreased by 6% as a 10% decrease from Machines was partially offset by a 5% increase for Energy & Transportation. The impact from changes in total dealer inventories acted as a sales headwind of about $200 million in the quarter. For Machines-only, dealer inventory increased by about $100 million, a smaller increase than the $400 million increase in the prior year, but slightly above our expectations of being flattish to slightly lower. Service revenues increased versus the prior year, as we had anticipated. Moving to operating profit on Slide 10. Operating profit in the third quarter decreased by 9% to $3.1 billion. Adjusted operating profit decreased by 8% to $3.2 billion, mainly due to the impact of lower sales volume, partially offset by favorable price realization and manufacturing costs. Since early 2022, price realization has been a strong -- has been strong and often exceeded our expectations. Over the past several quarters, we have highlighted that price will begin to moderate in the second half of this year. In the third quarter, this moderation began to occur as price realization was lower than previous quarters and generally in line with our expectations. As I mentioned, for the third quarter, the adjusted operating profit margin was 20.0%, which was generally in line with our expectations. By segment, margin in Construction Industries and Resource Industries was slightly below our expectations on lower volume, while Energy & Transportation was about in line. Financial products had a slightly stronger quarter than we had expected. On Slide 11, Construction Industries sales decreased by 9% in the third quarter to $6.3 billion, slightly below our expectations. The decrease versus the prior year was primarily due to lower sales volume and unfavorable price realization. The decrease in sales volume was mainly driven by lower sales of equipment to end users. Changes in dealer inventories also acted as a slight headwind to sales. By region, Construction Industries sales in North America decreased by 11%; in Latin America, sales increased by 19%; sales in the EAME region decreased by 15%; in Asia Pacific, sales declined by 12%. Third quarter profit for Construction Industries was $1.5 billion, a 20% decrease versus the prior year. This is mainly due to the profit impact of lower sales volume and unfavorable price realization. The segment's margin of 23.4% was a decrease of 300 basis points versus the prior year. Turning to Slide 12, Resource Industries sales decreased by 10% in the third quarter to $3.0 billion, which was slightly point below our expectations. The decline versus the prior year was primarily due to lower sales volume, mainly driven by lower sales of equipment to end users given a challenging comparison to the prior year. Third quarter profit for Resource Industries decreased by 15% versus the prior year to $619 million. This was mainly due to the profit impact of lower sales volume. The segment's margin of 20.4% was a decrease of 140 basis points versus the prior year. Now, on Slide 13, Energy & Transportation sales increased by 5% in the third quarter to $7.2 billion, slightly lower than we had expected, driven by the timing of deliveries. The increase versus the prior year was primarily due to favorable price realization and higher sales volume, including higher intersegment sales. By application, power generation sales increased by 26%, transportation sales were higher by 3%, oil and gas sales decreased by 1%, and industrial sales decreased by 16%. Third quarter profit for Energy & Transportation increased by 21% versus the prior year to $1.4 billion. The increase was mainly due to favorable price realization. The segment's margin of 19.9% was an increase of 270 basis points versus the prior year. Moving to Slide 14, financial products revenues increased by 6% to about $1 billion, primarily due to higher average earning assets driven by North America and higher average financing rates across all regions. Segment profit increased by 21% to $246 million. This is mainly due to a favorable impact from equity securities and a lower provision for credit losses. Our customers' financial health is strong. Past dues remain near historic lows of 1.74% in the quarter, down 22 basis points versus the prior year. Our allowance rate was 0.87%, our lowest on record. Business activity at Cat Financial remains healthy. Our retail new business volume increased by 17% versus the prior year, supported by our financing packages for customers choosing to buy Caterpillar equipment. Though Caterpillar's retail machine sales volume was lower, proportionately more sales have been financed through Cat Financial, which highlights the attractiveness of the financing options we are offering to our customers. We also continue to see healthy demand for used equipment and inventories remain at low levels. Conversion rates are also strong as customers choose to buy equipment at the end of their lease term. Moving on to Slide 15, we generated about $2.7 billion in ME&T free cash flow in the third quarter and deployed about $1.5 billion in share repurchases and dividends. Our balance sheet remains strong with an enterprise cash balance of $5.6 billion. In addition, we hold $1.8 billion in slightly longer dated liquid marketable securities to improve yields on that cash. Now, on Slide 16, I will share our high-level assumptions for the full year. For the full year, we have updated our outlook to reflect sales and revenues that are slightly lower than our expectations at the time of our last earnings call, driven by lower-than-expected third quarter sales and an update to our expectations for dealer rental fleet loading in Construction Industries. We continue to anticipate services growth in 2024. As I mentioned earlier, our full year expectations for adjusted operating profit margin and adjusted profit per share remain unchanged compared to our last earnings call. We continue to expect adjusted operating profit margin to be above the top end of the target range. In addition, we are increasing our expectations for ME&T free cash flow for the year, which we now anticipate to be near the top of our $5 billion to $10 billion target range. To assist you with your modeling for the full year, we now anticipate CapEx of around $2 billion and restructuring costs of approximately $400 million. Our expectation for the global annual effective tax rate, excluding discrete items, remains at 22.5%. Turning to Slide 17, I'll provide a few comments on the fourth quarter, starting with the top-line. We expect slightly lower sales and revenues in the fourth quarter compared to the prior year, impacted by lower machine sales to users versus a strong comparison. On machine dealer inventory, our planning assumptions include the expectation that dealers will reduce their inventories in the fourth quarter while balancing their need to be prepared for 2025. The magnitude of the decline for machine dealer inventory is expected to be less than the $1.4 billion decrease we saw in the fourth quarter of 2023. For perspective, we expect machine dealer inventory to end the year around the same level as year-end 2023. Also, the ongoing benefit of our services initiatives is expected to positively impact sales in the fourth quarter. By segment, in the fourth quarter, compared to the prior year, we anticipate a sales decrease in Construction Industries. This is impacted by lower sales to users, which Jim mentioned, along with unfavorable price realization. In Resource Industries, we expect slightly lower sales, impacted by lower sales to users versus a strong fourth quarter of 2023. In Energy & Transportation, we anticipate slightly higher sales versus the prior year, supported by power generation. Enterprise margin in the fourth quarter is expected to trend lower compared to the third quarter, following the typical seasonable pattern. However, versus the prior year, we expect a modestly higher adjusted operating profit margin despite lower sales. We anticipate favorable manufacturing costs and lower SG&A and R&D expenses will more than offset the profit impact of lower sales volume. Lower SG&A and R&D expenses are primarily driven by the benefit of lower short-term incentive compensation versus a high expense in the prior year quarter. Price realization for Machines is expected to trend lower as the pricing environment continues to normalize, though price in Energy & Transportation should act as a partial offset. Regarding price expectations for Machines, it is important to note that discounts to dealers occur through post sales merchandising programs, which impact our results over time. This includes financing support from Cat Financial, which is an effective way of supporting our customers, and we recover a portion of that support over the life of the deal. Let me explain. Based on the current level of price discounting support, we reserve the anticipated payments to dealers for these merchandising programs. At times, there is a lag between the timing of the invoice of the dealer and when the dealer invoices the customer, which impacts the reserve. Over the next few quarters, we expect the impact from these merchandising programs to drive a headwind to Machine price realization as we continue to adjust the reserve to reflect the current level of price discounting support. By segment, in the fourth quarter, in Construction Industries, we anticipate lower margin compared to the prior year primarily due to unfavorable price realization, partially offset by favorable manufacturing costs. In Resource Industries, we anticipate lower margin in the fourth quarter compared to the prior year, mainly due to lower volume and prioritization of strategic investments around services growth and AACE, which is autonomy, alternative fuels, connectivity and digital, and electrification. Favorable manufacturing costs should act as a partial offset. In Energy & Transportation, we expect a higher margin versus the prior year, primarily impacted by favorable price realization. So, turning to Slide 18, let me summarize. Although sales and revenues were lower than we had expected, adjusted operating profit margin and adjusted profit per share were generally in line with our expectations. We now anticipate our top-line for the full year will be slightly below our prior estimate. Our backlog increased slightly and remains at a very healthy level. Our expectations for full year adjusted operating profit margin and adjusted profit per share remain unchanged compared to a quarter ago. We continue to expect adjusted operating profit margin to be above the top end of the target range for the full year based on our expected sales levels. We are now increasing our expectations for ME&T free cash flow, which we anticipate to be near the top of our target range for the full year. Our team executed well in the quarter, and our results continue to benefit -- to reflect the benefit of the diversity of our end markets and the disciplined execution of our strategy for long-term profitable growth. And with that, we'll now take your questions.","evidence_gemma_new":"adjusted operating profit margin","evidence_llama_3_3":"adjusted operating profit margin third quarter","evidence_qwen_3_30b":null,"gemma_new_max":0.2,"gemma_new_min":0.2,"llama_3_3_max":0.2,"llama_3_3_min":0.2,"qwen_3_30b_max":null,"qwen_3_30b_min":null}
{"symbol":"CAT","year":2024,"quarter":4,"date":"2024-Q4","chunk_id":3,"sub_chunk_id":0,"centroid_label":"adjusted operating profit margins","agreed_value":18.3,"count":2,"chunk":"Andrew Bonfield: Thank you Jim, and good morning everyone. I\u2019ll begin with a summary of the fourth quarter and then provide more detailed comments, including some on the performance of the segments. Next, I\u2019ll discuss the balance sheet and free cash flow before concluding with comments on our high level assumptions for 2025, as well as expectations for the first quarter. Beginning on Slide 9, sales and revenues were $16.2 billion, a 5% decrease versus the prior year. As Jim mentioned, sales were slightly lower than we had anticipated, which together with unfavorable mix resulted in lower than expected margins for the quarter. Adjusted operating profit was $3 billion and our adjusted operating profit margin was 18.3%. Profit per share was $5.78 in the fourth quarter compared to $5.28 in the fourth quarter of last year. Adjusted profit per share was $5.14 in the quarter, a 2% decrease compared to $5.23 last year. Adjusted profit per share excluded a discrete tax benefit of $0.46 for a tax law change related to currency translation. Mark to market gains of $0.23 for the re-measurement of pension and other post-employment plans was also excluded, in addition to restructuring costs of $0.05 in the quarter. Other income expense was $185 million favorable versus the prior year, mostly driven by a positive currency impact related to ME&T balance sheet translation, which compared to a negative impact in the fourth quarter last year. As I have mentioned previously, we do not anticipate currency translation movements, so the positive impact on the fourth quarter of 2024 helped to offset the impact of operating profit being lower than expected. Excluding discrete items, the provision for income taxes in the fourth quarter of 2024 reflected a global annual effective tax rate of 22.2%. This was slightly lower than we had expected a quarter ago and benefited the quarter by $0.09. Finally, the year-over-year impact from the reduction in the average number of shares outstanding, primarily due to share repurchases, resulted in a favorable impact on adjusted profit per share of approximately $0.24 as compared to the fourth quarter of 2023. Moving onto Slide 10, I\u2019ll discuss the top line results for the fourth quarter. Sales and revenues decreased by 5% compared to the prior year, primarily impacted by lower sales volume. Price was unfavorable year-over-year and about in line with what we had expected. Lower volume was driven by the impact from changes in dealer inventories and a 2% year-over-year decrease in total sales to users. Total machine dealer inventory decreased by $1.6 billion in the quarter compared to $1.4 billion decrease in the prior year. The decrease in machine dealer inventory was larger than we had expected, and it\u2019s mostly a function of higher than anticipated sales to users across both construction industries in North America and resource industries. Service revenues increased in the quarter compared to 2023. As I mentioned, the sales decrease in the quarter was slightly larger than we had anticipated. This was mostly due to services growing at a slightly slower rate than we had expected and some delivery delays in energy and transportation. Moving to operating profit on Slide 11, operating profit in the fourth quarter decreased by 7% to $2.9 billion. Adjusted operating profit decreased by 8% to $3 billion mainly due to the profit impact of lower than expected sales volume. As I mentioned, for the fourth quarter the adjusted operating profit margin was 18.3%, a 60 basis point decrease compared to the prior year. This was lower than we had anticipated mainly due to a lower than expected sales volume and the impact of unfavorable mix. On Slide 12, construction industry sales decreased by 8% in the fourth quarter to $6 billion. This was slightly below our expectations on lower than anticipated volume. Compared to the prior year, the 8% sales decrease was primarily due to unfavorable price realization and lower sales volume. The decrease in sales volume was mainly driven by lower sales of equipment to end users and dealers reducing their inventory by slightly more than they did during the fourth quarter of 2023. By region, construction industry sales in North America decreased by 14%. In Latin America, sales increased by 6%. Sales in the EAME region decreased by 1%, and Asia Pacific sales decreased by 2%. Fourth quarter profit for construction industries was $1.2 billion, a 24% decrease versus the prior year. This was primarily due to unfavorable price realization as a result of the impact of the post-sales merchandising programs that we discussed with you in October. The segment\u2019s margin of 19.6% was a decrease of 390 basis points versus the prior year. The margin was lower than we had anticipated, primarily impacted by lower volume and unfavorable mix. Manufacturing costs were also unfavorable versus our expectations, principally due to a headwind from cost absorption as our inventory in construction industries declined. Turning to Slide 13, resource industry sales decreased by 9% in the fourth quarter to $3 billion. This was below our expectations mainly due to services growing at a slightly lower rate than we had anticipated. As we compare to the prior year, the 9% sales decrease was primarily due to lower sales volume mainly driven by the impact from changes in dealer inventories. Dealer inventory decreased more in the fourth quarter of 2024 than it did in the fourth quarter of 2023. Fourth quarter profit for resource industries decreased by 22% versus the prior year to $466 million. This was mainly due to the profit impact of lower sales volume. The segment\u2019s margin of 15.7% was a decrease of 280 basis points versus the prior year. This was lower than we had anticipated, primarily due to lower volume. Now on Slide 14, energy and transportation sales of $7.6 billion were about flat versus the prior year. Sales were slightly below our expectations to a lower than expected services growth rate, largely in oil and gas, and the timing of deliveries of international locomotives. Compared to the prior year, sales were roughly flat as the impact of lower sales volume was mostly offset by favorable price realization. By application, power generation sales increased by 22%, transportation sales were lower by 1%, oil and gas sales decreased by 14%, and industrial sales decreased by 14%. Fourth quarter profit for energy and transportation increased by 3% versus the prior year to $1.5 billion. The increase was primarily due to favorable price realization partially offset by the profit impact of lower sales volume. The segment\u2019s margin of 19.3% was an increase of 70 basis points versus the prior year. This was lower than we had anticipated, primarily due to lower than expected volume and an unfavorable mix of products. Moving to Slide 15, financial products revenues increased by 4% versus the prior year to about $1 billion, primarily due to higher average earning assets in North America and higher average financing rates across all regions, except North America. Segment profit decreased by 29% to $166 million. This was mainly due to an unfavorable impact from equities securities in addition to lower margin and a higher provision for credit losses. Our customers\u2019 financial health remains strong. Past dues were 1.56% in the quarter, down 23 basis points versus the prior year and our lowest level since 2005. The allowance rate was 0.91%, remaining near historic lows. Business activity at Cat Financial remains healthy. Retail credit applications increased and our retail new business volume grew by 3% versus the prior year. This was our highest level since 2012, supported by attractive finance packages for customers choosing to buy Caterpillar equipment. We continue to see proportionately more of our sales financed through Cat Financial; in addition, demand for used equipment remains healthy and inventories remain at low levels. Conversion rates were above historical averages as customers choose to buy equipment at the end of their lease term. Moving onto Slide 16, we continue to generate strong ME&T free cash flow. The $9.4 billion in 2024 was near the top end of our target range and just slightly lower than the prior year despite a larger payment for short term incentive compensation and higher capital expenditure. CapEx for the year was about $2 billion, which was in line with our expectations. Moving to capital deployment, in 2024 we returned $10.3 billion to shareholders through repurchased stock and dividends. On share repurchases, we deployed $7.7 billion as we continue to fulfill our objective to be in the market on a more consistent basis. Our balance sheet remains strong with an enterprise cash balance of $6.9 billion. In addition, we hold $2 billion in slightly longer dated liquid marketable securities to improve yields on that cash. Now on Slide 17, let me start with a high level overview of our expectations for the full year. We expect a slight decrease in sales for 2025 with an unfavorable impact from both volume and price. Due to the impact of post-sales merchandising programs, price realization should account for about a 1% decrease in sales for the full year. On margins, the impact of price together with high depreciation costs due to the investments we are making should result in adjusted operating profit margins being in the top half of the target range with the expected level of sales, rather than being above the top end of the range, as occurred in 2024. Our margin targets are progressive, so while we would expect volume to have an impact on absolute margins, our target is adjusted for lower sales. We expect a slight headwind in other income and expense in 2025 primarily due to lower interest income, mostly due to lower interest rates, as well as the absence of the positive currency benefit from ME&T balance sheet translation that occurred in 2024. As I mentioned, we do not anticipate translation movements in our expectations. We expect restructuring costs of approximately $150 million to $200 million in 2025. We anticipate a global annual effective tax rate of 23% for 2025, excluding discrete items. While the impact of the share buyback should be positive, we expect to have less ME&T free cash flow to deploy in 2025. This implies a less favorable impact to profit per share in 2025 as compared to 2024. By segment, lower sales in construction industries and resource industries will be partially offset by sales growth in energy and transportation. For construction industries, we expect lower sales in 2025 based on the outlook Jim described and unfavorable price realization. In resource industries, we anticipate slightly lower sales versus 2024 driven by unfavorable price realization and slightly lower volume. Higher volumes and favorable price in energy and transportation should drive sales growth, though sales remain constrained until the benefits of the investments we are making in large engines begin to flow through beyond 2025. We also anticipate another year of services growth in each of our primary segments. Currently, we do not anticipate a significant change in dealer inventory in machines by the end of 2025. Moving onto ME&T free cash flow, we expect to be in the top half of our target range of $5 billion to $10 billion. The first quarter of 2025 will be impacted by a $1.4 billion cash outflow related to the payout of last year\u2019s incentive compensation. We anticipate CapEx of about $2.5 billion in 2025 as we continue to make disciplined investments that are right for our business, governed by a focus on growing absolute OPACC [ph] dollars. This includes the multi-year capital investment to expand our large engine volume output capability that we mentioned last year. Turning to Slide 18, to assist with your modeling, I\u2019ll provide some color on the first quarter, starting with the top line. We expect lower sales versus the prior year. For perspective, in a typical year we see our lowest sales in the first quarter of the year. In 2025, we anticipate that trend to continue to be more pronounced as sales in the first quarter should account for a lower percentage of full year sales than is typical by about 100 basis points. This decrease is mainly due to our expectations for dealer inventory movements and price, which primarily impacts machines. Energy and transportation is expected to show normal seasonality with sales growing throughout the year. Let me explain. Although dealers did reduce machine inventory significantly in the fourth quarter, they remain around the top end of the range as we enter 2025. This compares with dealer inventories in construction industries being towards the middle of the range at the beginning of 2024. As a result, we expect them to build correspondingly less inventory during the first quarter than the $1.1 billion that they built in the first quarter of 2024. As we expect dealer inventory to be about flat by year end, we should see a tailwind to sales in the fourth quarter as we don\u2019t expect a similar machine dealer inventory change as we have seen in the last two years. We also expect unfavorable price realization for machines in the first quarter due to the impact of post-sales merchandising programs. We would expect these price impacts to be greater for machines in the first half of the year as the noticeable impact of post-sales merchandising programs started in the third quarter of 2024, making for an easier comparison in the second half. To pull together the impact by segment, we anticipate lower sales in construction industries in the first quarter, impacted by lower sales to users, the headwind from changes in dealer inventory and price, the impact of which should be similar to what we saw in the fourth quarter of 2024. In resource industries in the first quarter, we expect lower sales volume versus the prior year, impacted by lower volume and unfavorable price realization. In energy and transportation, we anticipate similar sales in the first quarter versus the prior year as continued strength in power generation is about offset by lower oil and gas and transportation sales. Price should be positive for energy and transportation. Now I\u2019ll provide some color on first quarter margin expectations. Though enterprise margins are typically stronger in the first quarter compared to with the remaining quarters of the year, we do not expect this seasonal trend to occur in 2025. Compared to the prior year, we anticipate a lower enterprise adjusted operating profit margin in the first quarter due primarily to lower than usual volume and price. Volume is impacted by the lower build of machine dealer inventory and slightly lower sales to users for machines. Unfavorable price realization for machines is principally due to the factors I\u2019ve discussed previously, which will be partially offset by favorable price in energy and transportation. We expect there will be improvement in first quarter margins offsetting the volume impact in the first quarter due to stronger volume in the fourth quarter than is typical. By segment, in the first quarter in construction industries, we anticipate lower margins compared to the prior year due primarily to lower volume and price. We do not expect to see the margin benefit we typically see in the first quarter of the year as compared to the fourth quarter of the prior year, which is generally in the range of 100 to 200 basis points. Again, some of this will be offset in the fourth quarter as volume is favorable and price more neutral. In resource industries, we anticipate lower margin in the first quarter compared to the prior year, mainly due to lower volume and unfavorable price realization. In energy and transportation, we expect slightly lower margin versus the prior year as favorable price realization is more than offset by higher manufacturing costs and unfavorable mix impacts. Again, as a reminder, this detail is provided to help you model the first quarter and does not impact our expectations for the full year that I set out earlier, which is a slight decrease in sales and revenues for the year and margins in the top half of the target range. Turning to Slide 19, let me summarize. Adjusted profit per share of $21.90 exceeded last year\u2019s record by 3%. This was our third straight year with record adjusted profit per share. Adjusted operating profit margin of 20.7% exceeded the top of our target range. ME&T free cash flow of $9.4 billion was near the top of the target range of $5 billion to $10 billion. For 2025, while we expect a slight drop in sales, we expect to be in the top half of the adjusted operating profit margin range and the top half of the ME&T free cash flow target range, and we anticipate another year of services growth. We continue to execute our strategy for long term profitable growth, and with that, we\u2019ll take your questions.","evidence_gemma_new":null,"evidence_llama_3_3":"adjusted operating profit margin fourth quarter","evidence_qwen_3_30b":"adjusted operating profit margin fourth quarter","gemma_new_max":null,"gemma_new_min":null,"llama_3_3_max":18.3,"llama_3_3_min":18.3,"qwen_3_30b_max":18.3,"qwen_3_30b_min":18.3}
{"symbol":"CAT","year":2023,"quarter":1,"date":"2023-Q1","chunk_id":3,"sub_chunk_id":0,"centroid_label":"adjusted profit per share","agreed_value":4.91,"count":2,"chunk":"Andrew Bonfield: Thanks, Jim, and good morning, everyone. I'll begin by providing further color on the first quarter results, including the performance of our segments. Then I'll cover the balance sheet and ME&T free cash flow before concluding with a few comments on the full year and our assumptions for the second quarter. Beginning on Slide 8. Sales and revenues for the first quarter increased by 17% or $2.3 billion to $15.9 billion, the sales increase versus the prior year was due to strong price realization and higher volume, partially offset by currency impacts. Sales were higher than we had expected in January, with price realization, dealer inventory and end user demand each slightly better than we had anticipated. Operating profit increased by 47% by $876 million to $2.7 billion, which includes the impact of the divestiture of the company's longwall business. Adjusted operating profit increased by 79% or $1.5 billion to $3.3 billion. Favorable price realization and higher volume was partially offset by higher manufacturing costs. The adjusted operating profit margin was 21.1%, an increase of 740 basis points versus the prior year. As Jim mentioned, the adjusted operating margin was much better than we had anticipated. Lower-than-expected manufacturing costs, including efficiencies and absorption were the largest variable, while price realization and volume were also stronger than we had envisioned. I'll provide additional color in a moment. Adjusted profit per share increased by 70% to $4.91 in the first quarter compared to $2.88 in the first quarter of last year. Adjusted profit per share in the first quarter of 2023 excluded pretax restructuring costs of $611 million, most of this related to the noncash charge from the divestiture of the company's longwall business. This compares to pretax restructuring costs of $13 million in the first quarter of 2022. Other income of $32 million in the quarter was lower than the first quarter of 2022 by $221 million. The year-over-year decline included about $100 million unfavorable currency impact related to ME&T balance sheet translation and an adverse impact of $80 million for pension expense. The dollar strengthened marginally since our last earnings call, so the currency impact within the first quarter of 2023 was about $30 million better than we had anticipated than when we spoke to you in January. Finally, the provision for income tax in the first quarter, excluding discrete items, reflected a global annual effective tax rate of 23%. Moving on to Slide 9. The 17% increase in the top line versus the prior year was driven by favorable price realization and higher sales volume, while currency remained a headwind to sales. Volume improved in part due to a 13% increase in sales to users. The impact from changes in dealer inventory was minimal, as the $1.4 billion build in the first quarter was similar to that seen in the first quarter of 2022. Services sales volume was slightly down, mainly due to dealer ordering patterns while services to their customers remain positive. Compared to our expectations a quarter ago, sales were higher than we anticipated, largely due to slightly stronger volume and better-than-expected price realization. On volume, sales to users outpaced our expectations due to strong demand. In addition, the improving supply chain supported higher levels of production across our primary segments. This enabled dealers to increase their inventory levels ahead of the selling season by slightly more than we had expected. Moving to Slide 10. First quarter operating profit increased by 47% to $2.7 billion. Adjusted operating profit increased by 79% versus the prior year quarter as favorable price realization outpaced higher manufacturing costs. Sales volume was also a benefit. Our first quarter adjusted operating profit margin of 21.1% was a 740 basis point increase versus the prior year. Now let me explain why our adjusted operating profit margin was so much better than we had expected. While manufacturing costs did increase year-over-year, the increase was less than we had than anticipated and was the most important factor in the quarter. As we have mentioned, volumes were better than expected due to favorable demand and improvements in the supply chain. This helped manufacturing cost as both factory efficiency and cost absorption were better than expected. Freight costs were also lower than we had anticipated due to lower premium freight utilization and rate reductions. Material costs were in line with our expectations and did not impact the margin outperformance. In addition to lower manufacturing costs, price realization was also stronger than we had anticipated a quarter ago. Stronger-than-anticipated volume had a smaller beneficial impact on margins. Spend on strategic investments was also lower than expected, as project spend ramps up slower than we had planned. Moving to Slide 11, I'll review segment performance. Starting with Construction Industries, sales increased by 10% in the first quarter to $6.7 billion due to favorable price realization, partially offset by lower sales volume and unfavorable currency impacts. The decrease in sales volume was driven by the impact from changes in dealer inventories, which increased by less in the first quarter of 2023 than compared to the prior year. Compared to our expectations, sales were higher due to stronger volumes. While sales to end users were as we'd anticipated, the dealer inventory increase was slightly above our expectations. By region, sales in North America rose by 33% due to favorable price realization and higher sales volume. Supply chain improvements enabled stronger-than-expected shipments in North America, supporting dealer restocking in the region. This is a positive, as North America continues to be our most constrained region from a dealer inventory perspective. Sales in Latin America decreased by 4% primarily due to lower sales volume, partially offset by favorable price realization. In EAME, sales increased by 5% on favorable price realization, partially offset by favorable currency impacts. Sales in Asia-Pacific decreased by 21% primarily due to lower sales volume and unfavorable currency impacts, partially offset by favorable price realization. First quarter profit for Construction Industries increased by 69% versus the prior year to $1.8 billion, price realization mainly drove the increase. This was partially offset by lower sales volume, including an unfavorable product mix and higher manufacturing costs. The segment's operating margin of 26.5% was an increase of 920 basis points versus last year. The segment margin for the quarter exceeded our expectations on moderating manufacturing costs and better-than-expected price and volume. Manufacturing costs were lower than we had expected on favorable freight, manufacturing efficiencies and absorption. Production volume was more favorable than we had anticipated, which drove the usual favorable benefits margins from the fourth quarter to the first. You will recall that in January, we said we did not expect that to happen. Turning to Slide 12. Resource Industries sales grew by 21% in the first quarter to $3.4 billion. The increase was primarily due to favorable price realization and higher sales volume. Although, aftermarket sales volumes were lower in resource industries due to dealer buying patterns, dealer services to customers remain positive. First quarter profit for Resource Industries increased by 112% versus the prior year to $764 million, mainly due to favorable price realization and higher sales volume. This was partially offset by unfavorable manufacturing costs. The segment's operating margin of 22.3% was an increase of 950 basis points versus last year. Segment margin was better than we expected due to lower manufacturing costs, including favorable absorption, efficiencies and freight. Price realization and volume benefits also exceeded our expectations. Now on Slide 13. Energy & Transportation sales increased by 24% in the first quarter to $6.3 billion, with sales up double-digits across all applications. Oil and gas sales increased by 39%, power generation sales by 27%, industrial sales rose by 23%. And finally, transportation sales increased by 14%. First quarter profit for Energy & Transportation increased by 96% versus the prior year to $1.1 billion. The increase was mainly due to favorable price realization and higher sales volume. Unfavorable manufacturing costs and higher SG&A and R&D expenses acted as a partial offset. SG&A and R&D expenses increased primarily due to investments aligned with our strategic initiatives, including electrification and services growth. The segment's operating margin of 16.9% was an increase of 620 basis points versus last year, but lower than the fourth quarter as is typical from a seasonality perspective. Compared to our expectations last quarter, margin was better than anticipated on lower manufacturing costs due in part to favorable absorption. Volume was also modestly stronger than we had expected. Moving to Slide 14. Financial Products revenue increased by 15% to $902 million primarily due to higher average financing rates across all regions. Segment profit decreased by 3% to $232 million. The slight profit decrease was mainly due to unfavorable impacts from equity securities, currency exchange losses and mark-to-market adjustments on derivative contracts. However, higher net yield on average earning assets and lower provision for credit losses acted as a partial offset. Business activity remains strong, and our portfolio continues to perform well. Past dues in the quarter were 2.00%, a 5 basis point improvement compared to the first quarter of 2022. This is the lowest first quarter past dues percentage since 2006. And whilst retail new business volume declined compared to the first quarter of 2022, this was expected as high interest rates drove more cash deals and increased competition from banks. Finally, we continue to see strong demand for used equipment, as prices remain elevated while used equipment inventory is at historic lows. Before I move on, I want to point out that CAT Financial has strong liquidity and broad access to funding. We are funded through the wholesale debt markets rather than from customer deposits, and we match assets and liabilities based on duration, currency and interest rate profile. As we have mentioned previously, in a rising interest rate environment, banks are able to provide more competitive interest rates than CAT Financial, and we tend to lose some share of the machines financed. In the event of a slowdown in lending from regional banks, we are well positioned to step in and fund creditworthy customers, so they can purchase their machines. Now on Slide 15. We continue to generate strong ME&T free cash flows. ME&T free cash flow of $1.4 billion in the quarter was about a $1.8 billion increase compared to an outflow in the prior year. The increase was primarily driven by higher profit. This increase is notable in the quarter that included our annual short-term incentive payout and a rise in working capital impacted by an increase in Caterpillar inventory. As Jim mentioned, following the strong half \u2013 first \u2013 strong first quarter, we expect to end the year in the top half of our ME&T free cash flow range of $4 billion to $8 billion. CapEx was around $400 million in the quarter, and we still expect to spend around $1.5 billion for the year. As Jim mentioned, capital deployment was about $1 billion in the quarter for dividends and share repurchases. Our balance sheet remains strong, and we have ample liquidity with an enterprise cash balance of $6.8 billion. Now on Slide 16, I will share some high-level assumptions for the full year, followed by the second quarter. Looking at the full year, we expect a strong top-line supported by price and higher sales to users, with healthy underlying end markets. As Jim mentioned, we expect full year reported sales for Construction Industries to be impacted by dealer inventory movements, particularly in the second half of the year. Underlying demand remains strong and as we do expect Construction Industries sales to users to show positive growth in the next three quarters. We anticipate continued strength in Resource Industries end markets and stronger end user sales in 2023. In addition, as typical seasonality would suggest, we expect to see some sales ramp in the second half in Energy & Transportation given strong demand for large engines and turbines. Moving on to margins. Based on our current planning assumptions, we anticipate full year adjusted operating profit margins to be in the top half of our target range. Given the favorable impact of cost absorption in the first quarter, which we do not expect to recur, we anticipate margins in the remaining quarters of the year will be lower than the first quarter level, while underlying demand and end markets remain strong. Also despite the slower-than-expected start, we anticipate the spend related to strategic investments within SG&A and R&D will ramp through the year. We expect price to continue to be favorable, although the absolute dollar value of the year-over-year price increases will moderate as we lap through the increases put through in 2022. We also expect the relationship between price and manufacturing costs for machines to normalize as the year progresses, as we\u2019ve now caught up to the manufacturing cost increases, which have outpaced price in late 2021 and early 2022. This means that the benefit to margins of price outpacing manufacturing cost inflation will moderate tempering the possibility of further margin expansion. Keep in mind, similar to the first quarter, we still anticipate a headwind of about $80 million per quarter at the corporate level related to pension expense. We also continue to anticipate restructuring expenses of around $700 million this year, with around $100 million remaining following the first quarter. And the global effective tax rate should be around 23%, excluding discrete items. Now on to our assumptions for the second quarter. We expect higher sales in the second quarter compared to the prior year on strong sales to users and price. Following the typical seasonal pattern, we expect higher sales in the second quarter as compared to the first. We expect Energy & Transportation sales will accelerate given strong sales to users, which are supported by healthy demand. We expect to report flattish sales levels compared to the first quarter in Construction Industries and Resource Industries. Both segments are expected to report positive sales to users. In the second quarter of 2022, we saw a decrease in dealer inventory of $400 million. We expect a smaller decrease in the second quarter of 2023. Specific to second quarter margins versus the prior year, adjusted operating margins at the enterprise and segment level should be substantially stronger than the prior year on favorable price and volume. However, we do expect to see a return to the typical seasonal pattern of lower second quarter margins compared to the first quarter, despite higher sales. We expect the year-over-year benefit of price realization in the second quarter to moderate compared to the benefit we saw in the first quarter, as we lapped prior year increases. In addition, SG&A and R&D investment spend should increase, as we continue to accelerate our strategic investments in areas like autonomy, alternative fuels, connectivity, digital and electrification. Finally, we do not anticipate that the favorable absorption impact that we saw in the first quarter will be repeated. At the segment level, in Construction Industries, we expect lower second quarter margins compared to the first quarter largely due to the lack of a favorable impact from absorption and a ramp-up in strategic investment spend. Likewise, second quarter margins in Resource Industries were likely to be lower than the first quarter as is the typical seasonal pattern. Conversely, Energy & Transportation should see a slight margin improvement compared to the first quarter levels, supported by stronger sales volume as demand remains healthy. Now turning to Slide 17, let me summarize. Sales grew by 17% led by strong price realization and volume gains. The adjusted operating profit margin increased by 740 basis points to 21.1%. ME&T free cash flow was strong at $1.4 billion, and we expect to be at the top half of our ME&T free cash flow range of $4 billion to $8 billion for the full year. After a strong first quarter, we currently expect our 2023 adjusted operating profit margins will be in the top half of our target range. The environment remains positive with improving supply chain dynamics, a strong backlog and healthy underlying end markets. We will continue to execute our strategy for long-term profitable growth. And with that, we\u2019ll take your questions.","evidence_gemma_new":null,"evidence_llama_3_3":"adjusted profit per share first quarter 2023","evidence_qwen_3_30b":"adjusted profit per share 70% first quarter","gemma_new_max":null,"gemma_new_min":null,"llama_3_3_max":4.91,"llama_3_3_min":4.91,"qwen_3_30b_max":4.91,"qwen_3_30b_min":4.91}
{"symbol":"CAT","year":2023,"quarter":2,"date":"2023-Q2","chunk_id":3,"sub_chunk_id":0,"centroid_label":"adjusted profit per share","agreed_value":5.55,"count":2,"chunk":"Andrew Bonfield: Thank you, Jim, and good morning, everyone. I'll begin with commentary on the second quarter results, including the performance of our business segments. Then I'll discuss the balance sheet and free cash flow before concluding with our assumptions for the remainder of the year, including color on the third quarter. Beginning on Slide 8. Our team delivered a very strong second quarter as overall results exceeded our expectations on strong operating performance. We saw a healthy top-line growth, improved operating margins and robust ME&T free cash flow. For the year, we now expect our adjusted operating profit margin to be close to the top of the targeted range at our anticipated sales level. We also expect ME&T free cash flow to be around the top of our $4 billion to $8 billion target range. To summarize the results, sales and revenues increased by 22% or $3.1 billion to $17.3 billion. Sales increase versus the prior year was due to higher sales volume and price realization. Operating profit increased by 88% or $1.7 billion to $3.7 billion. The adjusted operating profit margin was 21.3%, an increase of 750 basis points versus the prior year. Adjusted profit per share increased by 75% to $5.55 in the second quarter compared to $3.18 last year. Profit per share was $5.67 in the second quarter of this year. This included a discrete deferred tax benefit of $0.17 per share, while restructuring costs were $0.05 per share, flat compared to the prior year. We continue to expect restructuring expenses of about $700 million for the full-year. Other income of $127 million in the quarter was lower than the second quarter of 2022 by $133 million. The year-over-year decline was primarily driven by an unfavorable currency impact related to ME&T balance sheet translation and a recurring increase in quarterly pension expense of approximately $80 million, which we initially spoke to you about in January. Higher investment and interest income acted as a partial offset. The provision for income tax in the second quarter, excluding discrete items reflected a global annual effective tax rate of approximately 23%, which remains our expectation for the full-year. Moving on to Slide 9. The 22% increase in the top-line versus the prior year was due to higher sales volume and price. Volume improved as sales to users increased by 16% and from changes in dealer inventory. Sales for the quarter were higher than we had anticipated, mostly due to volume. The volume outperformance reflected a dealer inventory increase, which was primarily due to our stronger than expected shipments in Energy & Transportation, particularly in power generation, which is in line with strong data center demand. Price realization was in line with our expectations for the quarter. As I mentioned, sales to users grew by 16% in the quarter. As Jim has discussed, demand remains healthy across most end markets for all our products and services and is supported by a healthy order backlog. Moving to Slide 10. Second quarter operating profit increased by 88%, while adjusted operating profit increased by 87% to $3.7 billion. Year-over-year favorable price realization and higher sales volume were partially offset by higher manufacturing costs, which largely reflected higher material costs. An increase in SG&A and R&D expenses included higher strategic investment spend. The adjusted operating profit margin of 21.3% was better than we had anticipated. Volume exceeded our expectations, which supported the margin outperformance. In addition, manufacturing costs increased less than we expected due to lower freight costs and a lower than anticipated impact from cost absorption. SG&A and R&D expenses were about in line. Moving to Slide 11. I'll review the segment performance. Construction Industries sales increased by 19% in the second quarter to $7.2 billion due to price realization and higher sales volume. By region, sales in North America rose by 32% due to higher sales volume and price realization. Stronger demand and supply chain improvements enabled stronger than expected shipments in North America. This supported stronger sales of equipment to end users and some delivery stocking in what remains our most constrained region. Sales in Latin America decreased by 11%, primarily due to lower sales volume, partially offset by price realization. In EAME, sales increased by 20%, primarily the result of higher sales volume and price realization. Sales in Asia\/Pacific were about flat. Second quarter profit for Construction Industries increased by 82% versus the prior year to $1.8 billion. The increase was mainly due to price realization and higher sales volume. The segment's operating margin of 25.2% was an increase of 880 basis points versus last year. Margin exceeded our expectations, largely due to better than expected volume of freight costs, which were lower than we had anticipated. Turning to Slide 12. Resource Industries sales grew by 20% in the second quarter to $3.6 billion. The increase was primarily due to price realization and higher sales volume. Volume increased due to higher sales of equipment to end users. Although aftermarket sales volumes were lower, dealer sales to customers for services remained positive. Second quarter profit for Resource Industries increased by 108% versus the prior year to $740 million, mainly due to price realization and higher sales volume. This was partially offset by unfavorable manufacturing costs, largely material costs. The segment's operating margin of 20.8% was an increase of 880 basis points versus last year. The segment's margin was better than we had expected, primarily due to favorable volume, timing of SG&A and R&D spend and lower than anticipated freight costs. Now on Slide 13. Energy & Transportation sales increased by 27% in the second quarter to $7.2 billion. Sales were up double-digits across all applications. Oil and gas sales increased by 43%, power generation sales increased by 39%, industrial sales rose by 18% and transportation sales increased by 12%. Second quarter profit for Energy & Transportation increased by 93% versus the prior year to $1.3 billion. The increase was mainly due to higher sales volume and price realization, partially offset by unfavorable manufacturing costs and higher SG&A and R&D expenses. The segment's operating margin of 17.6% was an increase of 600 basis points versus last year. The margin was generally in line with our expectations. Moving to Slide 14. Financial Products revenue increased by 16% to $923 million, primarily due to higher average financing rates across all regions. Segment profit increased by 11% to $240 million. The increase was mainly due to a lower provision for credit losses at Cat Financial, partially offset by an increase in SG&A expense. Business activity remains strong, and our portfolio continues to perform well. Past dues in the quarter were 2.15%, a 4 basis points improvement compared to the second quarter of 2022. This is the lowest second quarter past dues percentage since 2007. Retail new business volume performed well, increasing versus the prior year and the first quarter. In addition, we continue to see strong demand for used equipment. Now on Slide 15. Our ME&T free cash flow generation was again robust as we generated $2.6 billion in the quarter. This was an increase of $1.5 billion compared to the prior year. With approximately $4 billion generated in the first half, we now expect ME&T free cash flow to be around the top of our $4 billion to $8 billion target range for the full-year. CapEx in the second quarter was about $300 million, and we still expect to spend around $1.5 billion for the full-year. As Jim mentioned, we returned about $2 billion through share repurchases and dividends in the second quarter. Our balance sheet remains strong. We have ample liquidity with an enterprise cash balance of $7.4 billion, and we also hold an additional $2 billion in slightly longer-dated liquid marketable securities to improve yields on that cash. Now turning to Slide 16. I will share some high level assumptions for the second half and the third quarter. In the second half of 2023, we expect higher total sales and revenues as compared to the second half of last year. We anticipate both sales to users and price realization will be positive in the second half. Keep in mind that on a comparative basis, we start to lap the stronger price we saw from the third quarter onwards last year. Caterpillar sales will be impacted by changes in dealer inventories as dealers increased their inventories in the second half of last year, which is not typical, versus our expectation of a more typical reduction in the second half of 2023. I want to spend just a few moments talking about dealer inventories. Dealers are independent businesses, and they make their own decisions around the level of inventory they hold. We obviously work closely with them because this impacts our production levels. As Jim mentioned, we are very comfortable with the levels of inventory that dealers are holding. We talk about dealer inventory in aggregate. This is difficult to predict with certainty as it arises from three different business segments, over 150 dealers and hundreds of different products. In Resource Industries and Energy & Transportation, dealer inventory is mainly a function of the commissioning pipeline. Keep in mind that over 70% of dealer inventory in these segments is backed by firm customer orders. For Construction Industries, dealer inventory is principally a function of end user demand and availability from the factory. In Construction Industries, dealers typically increase inventories during the first half of the year. Around 60% of the $2 billion increase during the first half of this year was from products in this segment. The remaining 40% is in Resource Industries and Energy & Transportation. For Resource Industries and Energy Transportation, we currently anticipate a slight reduction in levels in the second-half, but this is dependent on commissioning. In Construction Industries, dealers are currently holding around the midpoint of the typical three to four months range. Some dealers would like to increase inventories of certain products, such as BCP and earth moving due to strong customer demand. Conversely, some dealers would like to reduce the levels of excavated inventory because of high availability. In addition, we are scheduled to replace third-party engines with Cat engines and certain products, which will impact production in these products during the second half. Our current planning assumption for the Construction Industries is that dealers will reduce their overall levels in inventory in the second half of 2023 with a principal focus on excavators. Overall, at the enterprise level, we currently expect dealer inventory should be slightly higher at the end of 2023 versus last year. Moving on. On this slide, we provide our adjusted profit margins target charge to assist you in your modeling process. Based on our current planning assumptions, we anticipate full-year adjusted operating profit margin to be close to the top of that 300 basis points target range at our expected sales level. Your expectation for total enterprise sales this year will inform you where on the curve margins should finish for the year. Specific to the second half, we anticipate adjusted operating profit margins in the remaining quarters of the year will be above the year ago levels, although they will be lower than the levels we saw in the first two quarters of this year. As compared to the first half, we anticipate a margin headwind from cost absorption in the second half. We do not expect to build our inventory as we did in the first half and anticipate that there will be some inventory reduction if we continue to see sustained supply chain improvement. In addition, spend related to the strategic growth initiatives should continue to ramp. Price realization should remain positive that the magnitude of the favorability versus the prior year is expected to be lower in the second half as we lap the more favorable pricing trends from last year. Therefore, the increases in margins that we have occurred -- that have occurred from price outpacing manufacturing cost inflation should moderate in the second half of this year. Now let's move on to our assumptions that are specific to the third quarter. We anticipate third quarter sales to be higher than the third quarter of 2022, but to exhibit the typical sequential decline when compared to the second quarter of 2023. In Construction Industries, as is our normal seasonal end, we expect lower sales compared to the second quarter. In Resource Industries, which can be lumpy, we anticipate slightly lower sales compared to the second quarter. We expect sales in Energy & Transportation will increase slightly compared to the second quarter. Specific to third quarter margins versus the prior year, adjusted operating profit margins at the enterprise level and segment margins should be stronger. However, we do expect lower enterprise adjusted operating profit margins in the third quarter compared to the second quarter of this year on lower volume and impacts from cost absorption. We also anticipate investment spend will ramp across our primary segments as we continue to accelerate our strategic investments in area like autonomy, alternative fuels, connectivity and digital and electrification. At the segment level, for Construction Industries, we expect a lower margin compared to the second quarter as is typical. This is largely due to lower quarter-on-quarter volume, increased investment in strategic initiatives and slightly higher manufacturing costs, including a headwind from cost absorption. Favorable price realization will act as a partial offset. We also anticipate lower third quarter margins in Resource Industries compared to the second quarter, primarily due to lower volume quarter-on-quarter. Conversely, we expect third quarter margins in Energy & Transportation will be slightly higher compared to the second quarter on higher volume and stronger price realization, partially offset by higher manufacturing costs and spend relating to strategic initiatives. Now turning to Slide 13, let me summarize. We generated strong adjusted operating profit margin with a 750 basis point increase to 21.3%. We now expect to be close to the top of the targeted range for adjusted operating margin -- profit margin for the full-year based on our expected sales levels. ME&T free cash flow generation was robust at $2.6 billion in the quarter. We returned $2 billion to shareholders through share repurchases and dividends. We now expect ME&T free cash flow to be around the top of our $4 billion to $8 billion range for the full-year. Lastly, we continue to execute our strategy for long-term profitable growth. And with that, we'll now take your questions.","evidence_gemma_new":"adjusted profit per share","evidence_llama_3_3":null,"evidence_qwen_3_30b":"adjusted profit per share 75% second quarter last year","gemma_new_max":5.55,"gemma_new_min":5.55,"llama_3_3_max":null,"llama_3_3_min":null,"qwen_3_30b_max":5.55,"qwen_3_30b_min":5.55}
{"symbol":"CAT","year":2023,"quarter":3,"date":"2023-Q3","chunk_id":3,"sub_chunk_id":0,"centroid_label":"adjusted profit per share","agreed_value":5.52,"count":2,"chunk":"Andrew Bonfield: Thank you, Jim, and good morning, everyone. I'll begin with commentary on the third quarter results, including the performance of our segments. Then, I'll discuss the balance sheet and cash flow, before concluding with our assumptions for the fourth quarter and full year. Beginning on Slide 8. Our overall operating performance was strong. Adjusted operating profit margin, adjusted profit per share, and ME&T free cash flow, all were better than we expected, while sales grew in line with our expectations. Based on the strong third quarter, and year-to-date operating performance, we now expect that the adjusted operating profit margin for the year will be slightly above the top end of our target range, at the corresponding level of sales. We also anticipate that ME&T free cash flow will exceed the target range of $4 billion to $8 billion. In summary, sales and revenues increased by 12% or $1.8 billion to $16.8 billion. The sales increase versus the prior year was driven by -- primarily by price realization, as well as higher sales volume. Operating profit increased by 42% or $1 billion to $3.4 billion. The adjusted operating profit margin was 20.8%, an increase of 430 basis points versus the prior year. Profit per share was $5.45 in the third quarter of this year. This included restructuring costs of $0.07 per share as compared to $0.08 in the prior year. We continue to expect restructuring expenses of about $700 million for the full year. Adjusted profit per share increased by 40% to $5.52 in the third quarter compared to $3.95 last year. Other income of $195 million was lower than that -- than the third quarter of 2022 by $47 million. The decline was driven by less favorable currency impacts in the quarter, related to ME&T balance sheet translation, as compared to the prior year, along with the recurring increase and a pension expense of approximately $18 million per quarter. Higher investment and interest income acted as a partial offset. The provision for income taxes in the third quarter, excluding discrete items, reflected a global annual effective tax rate of 22.5%, which is the rate we now expect for the full year. The slightly lower-than-expected tax rate, along with discrete items, added about $0.14 to profit per share in the quarter. Moving on to Slide 9. As I mentioned, the 12% increase in the top line versus the prior year was primarily due to price realization, as well as higher sales volume. Volume improved as sales to users increased by 13% while year-over-year changes in dealer inventory acted as a slight offset. Overall, the magnitude of the sales increase was in line with our expectations. However, by segment, construction Industries sales were higher, Resource Industries sales were in line, and Energy & Transportation sales were lower than we had anticipated. Services revenues increased in the third quarter. We will update you with our progress towards our services growth target when we report our fourth quarter results, and as is our normal practice. Price realization was slightly better than we had anticipated for the quarter. However, as we anticipated, we did see the magnitude of the year-over-year price effects moderate compared to the second quarter, as we lap the prior-year price increases. Volume was slightly below our expectations. As Jim mentioned, sales to users were lower than we had anticipated, principally in Energy & Transportation. However, this was nearly offset by the increase in dealer inventory versus our expectations of being about flat for the quarter. The increase in dealer inventory was driven primarily by Construction Industries. There, we had stronger-than-expected shipments in North America, particularly in building construction products, and earthmoving. Within North America, these products remain constrained, and are near the bottom end of the typical dealer inventory range of three to four months of sales. We also saw some dealer inventory increase in Energy & Transportation within the quarter. I'll remind you that dealer inventory in Energy & Transportation and Resource Industries is mainly a function of the commissioning pipeline, with over 70% of dealer inventory in these segments backed by firm customer orders. Because dealer inventory is more a functioning -- function of commissioning in Resource Industries and Energy & Transportation, it is difficult for us to predict in these two segments. I will discuss further our full-year expectations for dealer inventories a little bit later. Moving to Slide 10. Third quarter operating profit increased by 42% to $3.4 billion, while adjusted operating profit increased by 41% to $3.5 billion. Price realization, which included a slight benefit from a shift in the geographic mix of sales and sales volume were favorable in the quarter. Our largest headwinds to operating profit were higher SG&A and R&D expenses, and higher manufacturing costs. SG&A and R&D expenses included higher strategic investment spend. Manufacturing cost increases included higher material costs, and unfavorable cost absorption, as we reduced our inventories compared to a corresponding increase in the third quarter of 2022. Lower freight costs acted as a partial offset within manufacturing costs. The adjusted operating profit margin of 20.8% improved by 430 basis points. This was better than we had anticipated, primarily due to favorable manufacturing costs, of which freight was the largest contributor. Also, the slightly better-than-expected price helped margins. Now, I'll discuss the performance of the segments. On Slide 11, Construction Industries sales increased by 12% in the third quarter to $7 billion, primarily due to favorable price realization. By region, sales in North America rose by 31% due to higher sales volume and favorable price. As I mentioned, supply chain improvements enabled stronger-than-expected shipments in North America, which supported some dealer restocking. Sales of equipment to end users were in line with our expectations for the region. Sales in Latin America decreased by 31%, primarily due to lower sales volume, partially offset by favorable price. In EAME, sales increased by 8%, mainly due to favorable price and currency impacts. Sales in Asia Pacific decreased by 8%, primarily due to lower sales volume, driven by lower sales of equipment to end users. Third quarter profit for Construction Industries increased by 53% versus the prior year to $1.8 billion. The increase was mainly due to favorable price realization. The segment's operating margin of 26.4% was an increase of 710 basis points versus last year. Margin exceeded our expectations on better volume, price, and lower-than-anticipated manufacturing costs, primarily freight. Turning to Slide 12, Resource Industries sales grew by 9% in the third quarter to $3.4 billion. The increase was primarily due to favorable price realization, partially offset by lower sales volume. Volume decreased as higher sales of equipment to end users were more than offset by lower aftermarket [sale parts] (ph) volume, which reflected changes in dealer buying patterns. Third quarter profit for Resource Industries increased by 44% versus the prior year to $730 million, mainly due to favorable price realization. Profit was partially offset by the by the impact of lower sales volume, which included unfavorable product mix. The segment's operating margin of 21.8% was an increase of 540 basis points versus last year. Margin was better than we had expected, primarily due to lower-than-anticipated manufacturing costs, driven by freight and price. Now on Slide 13. Energy & Transportation sales increased by 11% in the third quarter to $6.9 billion. Sales were up across all applications. Oil and gas sales increased by 26%, power generation sales were higher by 21%, industrial sales rose by 5% and transportation sales increased by 6%. Third quarter profit for Energy & Transportation increased by 26% versus the prior year to $1.2 billion. The increase was mainly due to favorable price realization, and higher sales volume, partially offset by higher SG&A and R&D expenses, unfavorable manufacturing costs, and currency impacts. SG&A and R&D expenses reflected ramping investments related to strategic growth initiatives. As a reminder, the most of our strategic investments relating to electrification and alternative fuels occur in this segment, which impacts reported margins. The segment's operating margin of 17.2% was an increase of 210 basis points versus the prior year. Margin was lower than we had anticipated, primarily due to lower-than-expected sales volume, impacted by supply chain challenges for large engines, and delivery delays for solar turbines. Moving to Slide 14. Financial Products revenue increased by 20% to $979 million, primarily due to higher average financing rates across all regions. Segment profit decreased by 8% to $203 million. The decrease was mainly due to a higher provision for credit losses at Cat Financial. The unfavorable impact reflects a challenging comparison as we had reserve releases in the prior year, as compared to a more typical provision expense in the third quarter of 2023. Of note though, through the third quarter of this year, provision expense for a comparable nine-month period is at the lowest level for over 20 years. Business activity remains strong with our -- and our portfolio continues to perform well, with past dues and write-offs at historic low levels. Past dues in the quarter were 1.96%, a 4 basis point improvement compared to the third quarter of 2022, and a decrease of 19 basis points compared to the second quarter. Retail new business volume increased versus the prior year, and though it declined compared to the second quarter, this follows the typical seasonal pattern. In addition, we continue to see strong demand for used equipment, and used inventory remains at low levels. Now on Slide 15. Our ME&T free cash flow has been robust this year with another $2.9 billion generated during the third quarter. With $6.8 billion generated through the first three quarters of this year, we expect to exceed our target of $4 billion to $8 billion this year. From a working capital perspective, we had a small inventory decrease of around $200 million in the quarter. Looking ahead, we expect our inventory levels will continue to decrease as we've seen sustained supply chain improvement. CapEx in the third quarter was around $400 million. With about $1.1 billion in CapEx through the first three quarters, we continue to expect around $1.5 billion for the full year. Our balance sheet remains strong. We have ample liquidity with an enterprise cash balance of $6.5 billion, and we hold an additional $4.3 billion in slightly longer-dated liquid marketable securities to improve yields on that cash. Now on Slide 16. I will share some high-level assumptions for the fourth quarter and the full year. During the fourth quarter, we anticipate slightly higher sales as compared to the prior year. Price should remain favorable. We expect sales to users to continue to support good underlying growth, though, changes in dealer inventories should act as an offset. As a reminder, we saw dealers increase inventories by $700 million in the fourth quarter of 2022, whilst we expect a decrease in the fourth quarter of this year. Specifically in Construction Industries, we do not expect the seasonal sales increase typically seen from the third to the fourth quarter. Those sales to users are expected to increase on both a sequential and year-over-year basis. Instead, we anticipate lower shipment volumes, as we complete the Cat engine changeover in building construction products, and dealers reduced their inventories, principally of excavators. This compares to a dealer inventory increase in the fourth quarter of 2022. Though we now expect that dealer inventory in Construction Industries will be higher at the end of 2023 than it was at year end 2022, we still expect it to be within the typical three to four months of sales range. A reminder, this is an average across all dealers and all products in Construction Industries, and it's difficult to predict with precision, given over 150 independent dealers, and hundreds of different products. Similar to last quarter, there are still areas and\/or products where dealers would like to have more inventory. As Jim has mentioned, we are very comfortable with the level of inventory held by dealers overall. In Resource Industries, we anticipate slightly lower sales as compared to the third quarter, as a result of improvements in availability. We also expect lower sales versus the prior year, driven by changes in dealer inventory. In the fourth quarter of 2022, there was an increase in dealer inventories for Resource Industries, while we expect a decrease in the fourth quarter of this year. We expect sales in Energy & Transportation to increase in the fourth quarter as compared to the third quarter, with higher solar turbines and rail deliveries. However, keep in mind that we continue to work through supply chain challenges, primarily impacting large engines. We also anticipate some moderation in industrial sales during the fourth quarter, compared to recent high levels. Now, I'll comment on our expectations for margins. We provided our adjusted operating profit margin target charge to assist you in your modeling process. Based on our current planning assumptions, we anticipate the adjusted operating profit margin to be slightly above the target range for the full year 2023. This is based on the corresponding estimated level of sales. Your expectation for total enterprise sales this year will inform where margins could finish for the year. Specific to the fourth quarter, we anticipate the adjusted operating profit margin to be lower than the third quarter. We anticipate lower-than-normal volume leverage, particularly impacting Construction Industries, for the reasons I mentioned previously. We also anticipate a negative segment mix impact to impact operating margins, as Construction Industries sales would be a lower proportion of total sales, as compared to the third quarter. Price realization should remain positive, though we expect the magnitude of the favorability versus the prior year to moderate as we continue to lap more favorable pricing trends from last year. Therefore, the increases in margins that have occurred from price outpacing manufacturing cost inflation, should moderate in the fourth quarter. In addition, as you look down the income statement for the prior year, there are a couple of points to note. First, short-term incentive expense in the fourth quarter of 2022 was lower than normal due to the true up for the final outcomes for the financial year. This will be a headwind for year-over-year operating margins. However, this will be partially offset by favorability in other operating income and expense, as we do not expect the significant currency translation losses that we saw in the fourth quarter of last year to recur. By segment, in Construction Industries, we expect slightly lower margin compared to the third quarter, assuming lower volume. We also anticipate lower sequential margins in Resource Industries, as is typical, impacted by cost absorption, along with higher spend, relating to strategic investments. In Energy & Transportation, we expect margins will be similar to the third quarter, with stronger volume offset by manufacturing costs, and an unfavorable mix of products, which includes international locomotive deliveries in rail. Now turning to Slide 17, let me summarize. Adjusted profit per share was $15.98 through the first three quarters of the year, which already exceeds our previous full year record by 15%. We generated strong adjusted operating profit margin, with a 430 basis point increase to 20.8%. We now expect to be slightly above the targeted range for adjusted operating profit margin for the full year, based on our expected sales levels. ME&T free cash flow remained robust with $6.8 billion year-to-date. We now expect ME&T free cash flow to exceed our $4 billion to $8 billion target range for the full year. We continue to execute our strategy for long-term profitable growth. And with that, we'll take your questions.","evidence_gemma_new":"Adjusted profit per share third quarter","evidence_llama_3_3":"adjusted profit per share third quarter","evidence_qwen_3_30b":null,"gemma_new_max":5.52,"gemma_new_min":5.52,"llama_3_3_max":5.52,"llama_3_3_min":5.52,"qwen_3_30b_max":null,"qwen_3_30b_min":null}
{"symbol":"CAT","year":2023,"quarter":4,"date":"2023-Q4","chunk_id":3,"sub_chunk_id":0,"centroid_label":"adjusted profit per share","agreed_value":21.21,"count":2,"chunk":"Andrew Bonfield: Thanks, Jim, and good morning, everyone. I'll begin with commentary on the fourth quarter results, including the performance of our segments. Then I'll discuss the balance sheet and cash flow, followed by an update to our target ranges for adjusted operating profit margins and ME&T free cash flow. I'll conclude with our high-level assumptions for 2024 and our expectations for the first quarter. Beginning on Slide 9. Strong operating performance continued in the fourth quarter as sales and revenues, adjusted operating profit margin, adjusted profit per share and ME&T free cash flow were all better than we had expected. In summary, sales and revenues increased by 3% to $17.1 billion. Adjusted operating profit increased by 15% to $3.2 billion. The adjusted operating profit margin was 18.9%, an increase of 190 basis points versus the prior year. Profit per share was $5.28 in the fourth quarter compared to $2.79 in the fourth quarter of last year. Profit per share in the quarter included favorable mark-to-market gains of $0.14 for the remeasurement of pension and OPEB plans and certain favorable deferred tax valuation adjustments of $0.04. It also included restructuring costs of $92 million or $0.13. Adjusted profit per share increased by 35% to $5.23 in the fourth quarter compared to $3.86 last year. The provision for income taxes in the fourth quarter, excluding the amounts related to mark-to-market and discrete items, reflected a global annual effective tax rate of 21.4%. This was lower than we had expected a quarter ago due to favorable changes in the geographic mix of profits. The lower rate benefited performance in the quarter by about $0.24. Moving on to Slide 10. I'll discuss top line results in the fourth quarter. The 3% sales increase versus the prior year was primarily driven by price realization, partially offset by lower volume as impacts from dealer inventory changes more than offset the 8% increase in sales to users. Both price and volume was slightly better than we had anticipated. The dealer inventory change resulted in an unfavorable sales impact of $1.6 billion versus the prior year. Dealer inventory decreased in the fourth quarter by $900 million overall compared to an increase of approximately $700 million during the fourth quarter of 2022. The dealer inventory decrease in the fourth quarter was led by Construction Industries, where the reduction was at the high end of our expectations. The decrease in this segment was led by excavators and the impact of the Cat engine changeover in building construction products that we have mentioned in previous earnings calls. Dealers also reduced their inventories in resource industries. Overall, the decrease in dealer inventory of machines was $1.4 billion in the quarter. Conversely, dealer inventory in Energy & Transportation increased mostly due to extended commissioning time lines, resulting from strong shipments, which was supported by healthy demand. As a reminder, dealer inventory in both Energy & Transportation and Resource Industries is mainly a function of the commissioning pipeline, and over 70% of dealer inventory in these segments is backed by firm customer orders. Looking at sales by segment. Sales in Construction Industries and Energy Transportation was slightly higher than we had anticipated, while sales in Resource Industries were about in line with our expectations. Moving to operating profit on Slide 11. Adjusted operating profit increased by 15% to $3.2 billion. Price realization and favorable manufacturing costs benefited the quarter, while higher SG&A and R&D expenses and lower sales volumes acted as a partial offset. The increase in SG&A and R&D expenses was primarily driven by higher short-term incentive compensation expense and strategic investment spend. The adjusted operating profit margin of 18.9% improved by 190 basis points versus the prior year. Margins were slightly higher than we had anticipated on volumes and price being marginally better than we had expected. Now on Slide 12. Construction Industries sales decreased by 5% in the fourth quarter to $6.5 billion due to lower sales volume, partially offset by favorable price realization. Lower sales volume was primarily due to the changes in dealer inventories that I mentioned earlier and more than offset the favorable sales to users. The dealer inventory changes impacted all of the regions. By region, sales in North America increased by 4%. In Latin America, sales decreased by 25%. Sales in EAME increased -- decreased by 18%. This region accounted for the largest dealer inventory decline in the quarter. In Asia Pacific, sales decreased by 4%. Fourth quarter profit for Construction Industries was $1.5 billion, an increase by 3% versus the prior year. The increase was primarily due to favorable price, partially offset by the profit impact from lower sales volume. The segment's operating margin of 23.5% was an increase of 180 basis points versus last year. This was broadly in line with our expectations. Turning to Slide 13. Resource Industries sales decreased by 6% in the fourth quarter to $3.2 billion. The decrease was primarily due to lower sales volume, partially offset by favorable price realization. Lower volume was impacted by changes in dealer inventories as dealers decreased inventories during the fourth quarter of 2023 compared to an increase in the prior year's quarter. Volume was also impacted by slightly lower aftermarket market part sales volume, partly due to dealer buying patterns. Fourth quarter profit for Resource Industries decreased by 1% versus the prior year to $600 million. The segment's operating margin of 18.5% was an increase of 90 basis points versus last year and was in line with our expectations. Now on Slide 14. Energy & Transportation sales increased by 12% in the fourth quarter to $7.7 billion. The increase was primarily due to higher sales volume and favorable price realization. Sales volume benefited from higher shipments of large engines and solar turbines and turbine-related services in the quarter. By application, oil and gas sales increased by 23%, power generation sales were higher by 29%, industrial sales decreased by 5% and transportation sales increased by 11%. While industrial sales decreased, they remain at healthy levels. Fourth quarter profit for Energy & Transportation increased by 21% versus the prior year to $1.4 billion. The increase was primarily due to favorable price and higher sales volume, partially offset by higher SG&A and R&D expenses, currency impacts and unfavorable manufacturing costs. The increase in SG&A and R&D expenses reflected ramping investments related to strategic growth initiatives and higher short-term incentive compensation expense. As a reminder, most of our strategic investments relating to electrification and alternative fuels are in Energy & Transportation, which therefore impacts this segment's margin. The operating margin of 18.6% was an increase of 130 basis points versus the prior year. Margin exceeded our expectations on higher volume, including favorable mix and price. Moving to Slide 15. Financial Products revenues increased by 15% to $981 million, primarily due to higher average financing rates across all regions and higher average earning assets in North America. Segment profit increased by 24% to $234 million. The increase was mainly due to lower provision for credit losses at Cat Financial, higher average earning assets and a higher net yield on average earning assets. Our portfolio continues to perform well with past dues near historic levels of 1.79%. We saw a 10 basis point improvement compared to the fourth quarter of 2022 and a 17 basis point improvement compared to the third quarter. This is the lowest fourth quarter past dues percentage since 2006. The year-end allowance rate was our lowest fourth quarter rate on record of 1.18% and was the second lowest quarterly rate ever. In addition, provision expense in 2023 was at the lowest level we've seen in over 20 years. Business activity remains strong, as retail new business volume increased versus the prior year and the third quarter. The increase versus the prior year reflected higher end user sales and rental conversions in the US. In addition, we continue to see strong demand for used equipment. Though used inventories have ticked up slightly, they remain close to historically low levels. Despite some moderation in used pricing on improved availability, it is still comfortably above historic norms. Moving on to Slide 16. The record $10 billion in ME&T free cash flow for the year included $3.2 billion in the fourth quarter, an increase of $200 million versus the prior year. On CapEx, we continue to make disciplined investments that are right for our business, governed by our focus on growing absolute OPACC dollars. We spent about $1.7 billion in 2023. Looking to 2024, we expect CapEx in the range of $2 billion to $2.5 billion. This is higher than our recent run rate and includes the investment in large engine capacity, which Jim referenced a moment ago. We also plan to invest more around AACE, which is autonomy, alternative fuels, connectivity and, digital and electrification. In addition, we are investing to make our supply chain more resilient. Moving to capital deployment. We returned $3.4 billion to shareholders in the fourth quarter, including $2.8 billion in share repurchases. Our net share count has decreased by approximately 14% since 2019, when we shared our intention to return substantially all ME&T free cash flow to shareholders over time and on a consistent basis. Our dividend remains a priority as we increased our quarterly payout by 8% in 2023. You will recall from our Investor Day in 2022, we shared that we expected to increase our dividend by at least high single digits for the next three years. The increase in 2023 reflected the second of those three years. Our balance sheet remains strong. We have ample liquidity with an enterprise cash balance of $7 billion, and we hold an additional $3.8 billion in slightly longer-dated liquid marketable securities to improve yields on that cash. Now on Slide 17, I'll discuss our revised adjusted operating profit margin targets. We exceeded our progressive target range in 2023, and we are confident that our strong execution and operating performance supports the potential for higher top end adjusted operating profit margins than were reflected in the prior range. Therefore, we have increased the top end of the range by 100 basis points relative to the corresponding level of sales. Achieving the top end of the range will remain challenging, as we are committed to increase investments in our strategic initiatives supporting long-term profitable growth. The bottom end of the target range remains unchanged. To explain, while higher gross margin support increasing the top end of the range, they actually pressure our margins in periods of decreasing volume. For that reason, we believe that the bottom end of the range remains challenging, but achievable. We will now target adjusted operating profit margins of 10% to 14% at $42 billion of sales and revenues, increasing to 18% to 22% at $72 billion of sales and revenues. Now on Slide 18. When I joined Caterpillar just over five years ago, I was impressed with the potential of our business to deliver higher, more consistent ME&T free cash flow as a result of the operating and execution model and our focus on generating absolute OPACC dollars. This is how we define winning at Caterpillar. We believe increasing absolute OPACC dollars will lead to higher shareholder returns over time. Since the beginning of 2019, we have generated $30 billion in ME&T free cash flow, including a record $10 billion in 2023. We are confident in our ability to consistently generate positive ME&T free cash flow over time. Therefore, we are introducing an updated target range for ME&T free cash flow, which is between $5 billion and $10 billion. Our strong operating performance as well as confidence in our future execution supports the higher range. The updated target range still maintains our flexibility to invest in our strategic initiatives, which is a priority. We also continue to expect to return substantially all of our ME&T free cash flow to shareholders over time through dividends and share repurchases. Moving to Slide 19. I will share our high-level assumptions for the full year. As Jim mentioned, in 2024, we anticipate sales and revenues will be broadly similar to 2023. We expect slightly favorable price realization and continued healthy underlying demand across the business as a whole. We anticipate another year of services growth as we continue to target $28 billion by 2026. We do not expect a significant change in dealer inventory for machines by the end of this year. And for Energy & Transportation, it is difficult to predict with certainty what will happen to dealer inventory as we have discussed previously. In total, dealer inventory increased by $2.1 billion in 2023. By segment, in Construction Industries, sales of equipment to end users should remain roughly similar compared to the strong year we saw in 2023. However, we do not expect a dealer inventory build as we saw last year. We also anticipate our services initiatives will benefit the segment in 2024. In Resource Industries, we anticipate lower sales versus 2023, impacted by lower machine volume primarily in off-highway and articulated trucks. We had strong sales of these products in 2023 as we converted our elevated backlog into sales, making for a challenging comparison. We also anticipate an unfavorable year-over-year change in dealer inventories. However, we expect services revenues will increase in this segment. In Energy & Transportation, we expect slightly higher sales in 2024. Power generation, oil and gas, and transportation sales should be positive, while industrial sales are expected to be lower compared to our historically strong levels in 2023. On full year adjusted operating profit margin, we currently expect to be in the top half of the updated margin target range at our expected sales levels. I'll discuss some of the puts and takes. In 2024, we expect a small pricing benefit weighted towards the first half of the year given carryover from increases taken in the second half of 2023. For the full year, we expect price to modestly exceed manufacturing costs. Versus last year, price in absolute dollar terms should moderate as we let the more favorable pricing trends from 2023. Short-term incentive compensation expense was about $1.7 billion in 2023, while we anticipate $1.2 billion in 2024. We expect the benefit of that low expense will be offset by increases in SG&A and R&D expenses as we continue to invest in strategic initiatives and of future long-term profitable growth. Investments are focused in services, new product introductions and AACE. We also anticipate there may be some negative margin impact due to mix this year. I'll explain. During 2023, when availability was somewhat challenged, we biased our production and shipments to products with the highest OPACC potential. Given that availability has improved, we anticipate a more normalized mix of products in 2024. We may also see an impact on margins from the mix of different segments as we anticipate in sales in 2024 will be slightly more weighted towards Energy & Transportation than they were in 2023. Moving on, we expect to be within the top half of our updated ME&T free cash flow target range of $5 billion to $10 billion. As you consider our cash position, keep in mind, the $1.7 billion cash outflow in the first quarter related to the payout of last year's incentive compensation expense. We also anticipate restructuring charges of $300 million to $450 million this year. Finally, we expect global effective tax rate in the range of 22.5% to 23.5%, an increase versus the 21.4% in 2023. Now on Slide 20. Our expectations for the first quarter, starting with the top line. We expect first quarter sales and revenues to be broadly similar to the prior year. We anticipate price to be favorable, although significantly less in absolute dollar terms than had occurred through 2023. We expect demand to remain healthy. However, we anticipate a slightly lower dealer inventory build for machines in the first quarter compared to a $1.1 billion build in the first quarter of 2023. This will act as a headwind to sales. At the segment level, in Construction Industries, we anticipate flattish to slightly higher first quarter sales versus the prior year, primarily due to favorable price. We anticipate lower sales in Resource Industries compared to the prior year, driven by lower volume, partially offset by favorable price. In Energy & Transportation, we expect flattish to slightly higher sales versus the prior year, with updated favorable volume benefiting the upside scenario. On margins, we expect the enterprise adjusted operating profit margin in the first quarter to be broadly similar to the first -- prior year. Price should more than offset manufacturing costs as price actions from 2023 rolled into 2024. We expect price will be lower in absolute dollar terms versus the prior year. We anticipate manufacturing costs to increase compared to last year, principally impacted by cost absorption as we do not expect an inventory build like we saw in the first quarter of 2023. We also anticipate an increase in SG&A and R&D expenses related to the strategic investment spend. By segment, in Construction Industries, we anticipate a similar margin as compared to the prior year. We expect price to offset strategic investment spend and slightly higher manufacturing costs, including cost absorption. In Resource Industries, we expect a lower margin compared to the prior year, impacted by lower volume, partially offset by favorable price. In Energy & Transportation, we anticipate a similar margin versus prior year, a slightly stronger price should be offset by higher manufacturing costs. Turning to Slide 21. Let me summarize. Adjusted profit per share of $21.21 exceeded our previous full year record by 53%. We exceeded the top end of our targeted ranges for adjusted operating profit margin and ME&T free cash flow. We have increased the top end of our adjusted profit margin range, and we have raised our ME&T free cash flow target range. We expect to be in the top half of our updated margin and ME&T free cash flow target ranges in 2024, and we anticipate another year of services growth as we continue to execute our strategy for long-term profitable growth. And with that, we'll take your questions.","evidence_gemma_new":"adjusted profit per share $21.21","evidence_llama_3_3":null,"evidence_qwen_3_30b":"adjusted profit per share $21.21","gemma_new_max":21.21,"gemma_new_min":21.21,"llama_3_3_max":null,"llama_3_3_min":null,"qwen_3_30b_max":21.21,"qwen_3_30b_min":21.21}
{"symbol":"CAT","year":2023,"quarter":4,"date":"2023-Q4","chunk_id":3,"sub_chunk_id":0,"centroid_label":"adjusted profit per share","agreed_value":5.23,"count":2,"chunk":"Andrew Bonfield: Thanks, Jim, and good morning, everyone. I'll begin with commentary on the fourth quarter results, including the performance of our segments. Then I'll discuss the balance sheet and cash flow, followed by an update to our target ranges for adjusted operating profit margins and ME&T free cash flow. I'll conclude with our high-level assumptions for 2024 and our expectations for the first quarter. Beginning on Slide 9. Strong operating performance continued in the fourth quarter as sales and revenues, adjusted operating profit margin, adjusted profit per share and ME&T free cash flow were all better than we had expected. In summary, sales and revenues increased by 3% to $17.1 billion. Adjusted operating profit increased by 15% to $3.2 billion. The adjusted operating profit margin was 18.9%, an increase of 190 basis points versus the prior year. Profit per share was $5.28 in the fourth quarter compared to $2.79 in the fourth quarter of last year. Profit per share in the quarter included favorable mark-to-market gains of $0.14 for the remeasurement of pension and OPEB plans and certain favorable deferred tax valuation adjustments of $0.04. It also included restructuring costs of $92 million or $0.13. Adjusted profit per share increased by 35% to $5.23 in the fourth quarter compared to $3.86 last year. The provision for income taxes in the fourth quarter, excluding the amounts related to mark-to-market and discrete items, reflected a global annual effective tax rate of 21.4%. This was lower than we had expected a quarter ago due to favorable changes in the geographic mix of profits. The lower rate benefited performance in the quarter by about $0.24. Moving on to Slide 10. I'll discuss top line results in the fourth quarter. The 3% sales increase versus the prior year was primarily driven by price realization, partially offset by lower volume as impacts from dealer inventory changes more than offset the 8% increase in sales to users. Both price and volume was slightly better than we had anticipated. The dealer inventory change resulted in an unfavorable sales impact of $1.6 billion versus the prior year. Dealer inventory decreased in the fourth quarter by $900 million overall compared to an increase of approximately $700 million during the fourth quarter of 2022. The dealer inventory decrease in the fourth quarter was led by Construction Industries, where the reduction was at the high end of our expectations. The decrease in this segment was led by excavators and the impact of the Cat engine changeover in building construction products that we have mentioned in previous earnings calls. Dealers also reduced their inventories in resource industries. Overall, the decrease in dealer inventory of machines was $1.4 billion in the quarter. Conversely, dealer inventory in Energy & Transportation increased mostly due to extended commissioning time lines, resulting from strong shipments, which was supported by healthy demand. As a reminder, dealer inventory in both Energy & Transportation and Resource Industries is mainly a function of the commissioning pipeline, and over 70% of dealer inventory in these segments is backed by firm customer orders. Looking at sales by segment. Sales in Construction Industries and Energy Transportation was slightly higher than we had anticipated, while sales in Resource Industries were about in line with our expectations. Moving to operating profit on Slide 11. Adjusted operating profit increased by 15% to $3.2 billion. Price realization and favorable manufacturing costs benefited the quarter, while higher SG&A and R&D expenses and lower sales volumes acted as a partial offset. The increase in SG&A and R&D expenses was primarily driven by higher short-term incentive compensation expense and strategic investment spend. The adjusted operating profit margin of 18.9% improved by 190 basis points versus the prior year. Margins were slightly higher than we had anticipated on volumes and price being marginally better than we had expected. Now on Slide 12. Construction Industries sales decreased by 5% in the fourth quarter to $6.5 billion due to lower sales volume, partially offset by favorable price realization. Lower sales volume was primarily due to the changes in dealer inventories that I mentioned earlier and more than offset the favorable sales to users. The dealer inventory changes impacted all of the regions. By region, sales in North America increased by 4%. In Latin America, sales decreased by 25%. Sales in EAME increased -- decreased by 18%. This region accounted for the largest dealer inventory decline in the quarter. In Asia Pacific, sales decreased by 4%. Fourth quarter profit for Construction Industries was $1.5 billion, an increase by 3% versus the prior year. The increase was primarily due to favorable price, partially offset by the profit impact from lower sales volume. The segment's operating margin of 23.5% was an increase of 180 basis points versus last year. This was broadly in line with our expectations. Turning to Slide 13. Resource Industries sales decreased by 6% in the fourth quarter to $3.2 billion. The decrease was primarily due to lower sales volume, partially offset by favorable price realization. Lower volume was impacted by changes in dealer inventories as dealers decreased inventories during the fourth quarter of 2023 compared to an increase in the prior year's quarter. Volume was also impacted by slightly lower aftermarket market part sales volume, partly due to dealer buying patterns. Fourth quarter profit for Resource Industries decreased by 1% versus the prior year to $600 million. The segment's operating margin of 18.5% was an increase of 90 basis points versus last year and was in line with our expectations. Now on Slide 14. Energy & Transportation sales increased by 12% in the fourth quarter to $7.7 billion. The increase was primarily due to higher sales volume and favorable price realization. Sales volume benefited from higher shipments of large engines and solar turbines and turbine-related services in the quarter. By application, oil and gas sales increased by 23%, power generation sales were higher by 29%, industrial sales decreased by 5% and transportation sales increased by 11%. While industrial sales decreased, they remain at healthy levels. Fourth quarter profit for Energy & Transportation increased by 21% versus the prior year to $1.4 billion. The increase was primarily due to favorable price and higher sales volume, partially offset by higher SG&A and R&D expenses, currency impacts and unfavorable manufacturing costs. The increase in SG&A and R&D expenses reflected ramping investments related to strategic growth initiatives and higher short-term incentive compensation expense. As a reminder, most of our strategic investments relating to electrification and alternative fuels are in Energy & Transportation, which therefore impacts this segment's margin. The operating margin of 18.6% was an increase of 130 basis points versus the prior year. Margin exceeded our expectations on higher volume, including favorable mix and price. Moving to Slide 15. Financial Products revenues increased by 15% to $981 million, primarily due to higher average financing rates across all regions and higher average earning assets in North America. Segment profit increased by 24% to $234 million. The increase was mainly due to lower provision for credit losses at Cat Financial, higher average earning assets and a higher net yield on average earning assets. Our portfolio continues to perform well with past dues near historic levels of 1.79%. We saw a 10 basis point improvement compared to the fourth quarter of 2022 and a 17 basis point improvement compared to the third quarter. This is the lowest fourth quarter past dues percentage since 2006. The year-end allowance rate was our lowest fourth quarter rate on record of 1.18% and was the second lowest quarterly rate ever. In addition, provision expense in 2023 was at the lowest level we've seen in over 20 years. Business activity remains strong, as retail new business volume increased versus the prior year and the third quarter. The increase versus the prior year reflected higher end user sales and rental conversions in the US. In addition, we continue to see strong demand for used equipment. Though used inventories have ticked up slightly, they remain close to historically low levels. Despite some moderation in used pricing on improved availability, it is still comfortably above historic norms. Moving on to Slide 16. The record $10 billion in ME&T free cash flow for the year included $3.2 billion in the fourth quarter, an increase of $200 million versus the prior year. On CapEx, we continue to make disciplined investments that are right for our business, governed by our focus on growing absolute OPACC dollars. We spent about $1.7 billion in 2023. Looking to 2024, we expect CapEx in the range of $2 billion to $2.5 billion. This is higher than our recent run rate and includes the investment in large engine capacity, which Jim referenced a moment ago. We also plan to invest more around AACE, which is autonomy, alternative fuels, connectivity and, digital and electrification. In addition, we are investing to make our supply chain more resilient. Moving to capital deployment. We returned $3.4 billion to shareholders in the fourth quarter, including $2.8 billion in share repurchases. Our net share count has decreased by approximately 14% since 2019, when we shared our intention to return substantially all ME&T free cash flow to shareholders over time and on a consistent basis. Our dividend remains a priority as we increased our quarterly payout by 8% in 2023. You will recall from our Investor Day in 2022, we shared that we expected to increase our dividend by at least high single digits for the next three years. The increase in 2023 reflected the second of those three years. Our balance sheet remains strong. We have ample liquidity with an enterprise cash balance of $7 billion, and we hold an additional $3.8 billion in slightly longer-dated liquid marketable securities to improve yields on that cash. Now on Slide 17, I'll discuss our revised adjusted operating profit margin targets. We exceeded our progressive target range in 2023, and we are confident that our strong execution and operating performance supports the potential for higher top end adjusted operating profit margins than were reflected in the prior range. Therefore, we have increased the top end of the range by 100 basis points relative to the corresponding level of sales. Achieving the top end of the range will remain challenging, as we are committed to increase investments in our strategic initiatives supporting long-term profitable growth. The bottom end of the target range remains unchanged. To explain, while higher gross margin support increasing the top end of the range, they actually pressure our margins in periods of decreasing volume. For that reason, we believe that the bottom end of the range remains challenging, but achievable. We will now target adjusted operating profit margins of 10% to 14% at $42 billion of sales and revenues, increasing to 18% to 22% at $72 billion of sales and revenues. Now on Slide 18. When I joined Caterpillar just over five years ago, I was impressed with the potential of our business to deliver higher, more consistent ME&T free cash flow as a result of the operating and execution model and our focus on generating absolute OPACC dollars. This is how we define winning at Caterpillar. We believe increasing absolute OPACC dollars will lead to higher shareholder returns over time. Since the beginning of 2019, we have generated $30 billion in ME&T free cash flow, including a record $10 billion in 2023. We are confident in our ability to consistently generate positive ME&T free cash flow over time. Therefore, we are introducing an updated target range for ME&T free cash flow, which is between $5 billion and $10 billion. Our strong operating performance as well as confidence in our future execution supports the higher range. The updated target range still maintains our flexibility to invest in our strategic initiatives, which is a priority. We also continue to expect to return substantially all of our ME&T free cash flow to shareholders over time through dividends and share repurchases. Moving to Slide 19. I will share our high-level assumptions for the full year. As Jim mentioned, in 2024, we anticipate sales and revenues will be broadly similar to 2023. We expect slightly favorable price realization and continued healthy underlying demand across the business as a whole. We anticipate another year of services growth as we continue to target $28 billion by 2026. We do not expect a significant change in dealer inventory for machines by the end of this year. And for Energy & Transportation, it is difficult to predict with certainty what will happen to dealer inventory as we have discussed previously. In total, dealer inventory increased by $2.1 billion in 2023. By segment, in Construction Industries, sales of equipment to end users should remain roughly similar compared to the strong year we saw in 2023. However, we do not expect a dealer inventory build as we saw last year. We also anticipate our services initiatives will benefit the segment in 2024. In Resource Industries, we anticipate lower sales versus 2023, impacted by lower machine volume primarily in off-highway and articulated trucks. We had strong sales of these products in 2023 as we converted our elevated backlog into sales, making for a challenging comparison. We also anticipate an unfavorable year-over-year change in dealer inventories. However, we expect services revenues will increase in this segment. In Energy & Transportation, we expect slightly higher sales in 2024. Power generation, oil and gas, and transportation sales should be positive, while industrial sales are expected to be lower compared to our historically strong levels in 2023. On full year adjusted operating profit margin, we currently expect to be in the top half of the updated margin target range at our expected sales levels. I'll discuss some of the puts and takes. In 2024, we expect a small pricing benefit weighted towards the first half of the year given carryover from increases taken in the second half of 2023. For the full year, we expect price to modestly exceed manufacturing costs. Versus last year, price in absolute dollar terms should moderate as we let the more favorable pricing trends from 2023. Short-term incentive compensation expense was about $1.7 billion in 2023, while we anticipate $1.2 billion in 2024. We expect the benefit of that low expense will be offset by increases in SG&A and R&D expenses as we continue to invest in strategic initiatives and of future long-term profitable growth. Investments are focused in services, new product introductions and AACE. We also anticipate there may be some negative margin impact due to mix this year. I'll explain. During 2023, when availability was somewhat challenged, we biased our production and shipments to products with the highest OPACC potential. Given that availability has improved, we anticipate a more normalized mix of products in 2024. We may also see an impact on margins from the mix of different segments as we anticipate in sales in 2024 will be slightly more weighted towards Energy & Transportation than they were in 2023. Moving on, we expect to be within the top half of our updated ME&T free cash flow target range of $5 billion to $10 billion. As you consider our cash position, keep in mind, the $1.7 billion cash outflow in the first quarter related to the payout of last year's incentive compensation expense. We also anticipate restructuring charges of $300 million to $450 million this year. Finally, we expect global effective tax rate in the range of 22.5% to 23.5%, an increase versus the 21.4% in 2023. Now on Slide 20. Our expectations for the first quarter, starting with the top line. We expect first quarter sales and revenues to be broadly similar to the prior year. We anticipate price to be favorable, although significantly less in absolute dollar terms than had occurred through 2023. We expect demand to remain healthy. However, we anticipate a slightly lower dealer inventory build for machines in the first quarter compared to a $1.1 billion build in the first quarter of 2023. This will act as a headwind to sales. At the segment level, in Construction Industries, we anticipate flattish to slightly higher first quarter sales versus the prior year, primarily due to favorable price. We anticipate lower sales in Resource Industries compared to the prior year, driven by lower volume, partially offset by favorable price. In Energy & Transportation, we expect flattish to slightly higher sales versus the prior year, with updated favorable volume benefiting the upside scenario. On margins, we expect the enterprise adjusted operating profit margin in the first quarter to be broadly similar to the first -- prior year. Price should more than offset manufacturing costs as price actions from 2023 rolled into 2024. We expect price will be lower in absolute dollar terms versus the prior year. We anticipate manufacturing costs to increase compared to last year, principally impacted by cost absorption as we do not expect an inventory build like we saw in the first quarter of 2023. We also anticipate an increase in SG&A and R&D expenses related to the strategic investment spend. By segment, in Construction Industries, we anticipate a similar margin as compared to the prior year. We expect price to offset strategic investment spend and slightly higher manufacturing costs, including cost absorption. In Resource Industries, we expect a lower margin compared to the prior year, impacted by lower volume, partially offset by favorable price. In Energy & Transportation, we anticipate a similar margin versus prior year, a slightly stronger price should be offset by higher manufacturing costs. Turning to Slide 21. Let me summarize. Adjusted profit per share of $21.21 exceeded our previous full year record by 53%. We exceeded the top end of our targeted ranges for adjusted operating profit margin and ME&T free cash flow. We have increased the top end of our adjusted profit margin range, and we have raised our ME&T free cash flow target range. We expect to be in the top half of our updated margin and ME&T free cash flow target ranges in 2024, and we anticipate another year of services growth as we continue to execute our strategy for long-term profitable growth. And with that, we'll take your questions.","evidence_gemma_new":"Adjusted profit per share","evidence_llama_3_3":null,"evidence_qwen_3_30b":"adjusted profit per share fourth quarter","gemma_new_max":5.23,"gemma_new_min":5.23,"llama_3_3_max":null,"llama_3_3_min":null,"qwen_3_30b_max":5.23,"qwen_3_30b_min":5.23}
{"symbol":"CAT","year":2024,"quarter":1,"date":"2024-Q1","chunk_id":3,"sub_chunk_id":0,"centroid_label":"adjusted profit per share","agreed_value":5.6,"count":2,"chunk":"Andrew Bonfield: Thank you, Jim. Good morning everyone. I'll begin by commenting on the first quarter results, including the performance of our segments. Then I'll discuss the balance sheet and ME&T free cash flow before concluding with a few comments on the full year and our assumptions for the second quarter. Beginning on slide eight. Our operating performance was strong with both adjusted operating profit margin and adjusted profit per share, being better than we had expected. Sales and revenues of $15.8 billion were about flat compared to the prior year, broadly in line with our expectations. Adjusted operating profit increased by 5% to $3.5 billion and the adjusted operating profit margin was 22.2% an increase of 110 basis points versus the prior year which was slightly better than we had expected. Profit per share was $5.75 in the first quarter, compared to $3.74 in the first quarter of last year Adjusted profit per share increased by 14% to $5.60 in the first quarter, compared to $4.91 last year. Adjusted profit per share excluded net restructuring income of $0.15 per share, this compares to restructuring expense of $1.17 which was excluded in the first quarter of 2023. Other income of $156 million for the quarter, was higher than the first quarter of 2023 by $124 million, this primary related to favorable ME&T balance sheet translation. The provision for income taxes in the first quarter excluding discrete items, reflected a global annual effective tax rate of 22.5% compared with 23% in the first quarter of 2023. Included in profit per share and adjusted profit per share was a benefit of $38 million or $0.08 for a discrete tax item related to stock based compensation. A comparable benefit of $32 million or $0.06 per share was included in the first quarter of 2023. The year-over-year impact of a reduction in the number of shares primarily due to share repurchases over the past year, had a favorable impact on adjusted profit per share of approximately $0.24. This included a favorable impact from the initial shares we received, from the $3.5 billion accelerated share repurchase agreement that Jim mentioned earlier. Before, I move on you will have seen some additional detail on earnings release segment commentaries. We continue to highlight the primary drivers of year-over-year changes in sales and profit by segment, as we have done previously, but in addition we are now also quantifying those significant variances. You will also find some additional information on historical dealer inventory, including at the machines level in the appendix of today's slides Moving to slide nine. I'll discuss our top line results in the first quarter. Sales remained about flat compared to the prior year, as lower volume was largely offset by favorable price realization. The decline in volume was primarily due to lower sales to users. As Jim mentioned, the 5% decrease in sales to users was slightly more than our expectations, mainly driven by weakness in Europe for Construction Industries. Changes in total dealer inventories did not have a significant impact on sales, as the increase of $1.4 billion in the quarter was similar to the increase last year. As Jim mentioned, the $1.1 billion increase for machines was slightly higher than we had anticipated, primarily as sales to users were modestly lower than we had expected. As compared to our expectations for the quarter, sales were broadly in line. Sales volume was slightly lower than we had anticipated, while price realization, including geographic mix, was better than we had expected. By segment, sales in Construction Industries were lower than we had anticipated, while sales in Energy & Transportation exceeded our expectations. Resource Industry sales were about in line. Moving to operating profit on Slide 10. The first quarter operating profit increased by 29% to $3.5 billion. As a reminder, the prior year included a $586 million charge that arose from the divestiture of the company's long-haul business. Adjusted operating profit increased by 5% to $3.5 billion. Price realization benefited the quarter, while lower sales volume acted as a partial offset. The adjusted operating profit margin of 22.2% improved by 110 basis points versus the prior year. Margins were slightly better than we had anticipated, mainly due to favorable manufacturing costs, as freight costs were lower than we had expected. Price, including a benefit from geographic mix, was also better than we had anticipated. Now on slide 11, I'll review segment performance, starting with Construction Industries. Sales decreased by 5% in the first quarter to $6.4 billion, primarily due to lower sales volume, partially offset by favorable price realization. Sales were slightly lower than we had anticipated. Sales in North America increased by 6% in the quarter. In the EAME region, sales fell by 25%, and in particular, Europe was lower than we had anticipated, impacted by weakness in residential construction and economic conditions. In Latin America, sales decreased by 1%. In Asia Pacific, sales decreased by 14%. First quarter profit for Construction Industries was $1.8 billion, a slight decrease versus the prior year. The decrease was mainly due to lower sales volume, partially offset by favorable price realization and manufacturing costs. The segments margin of 27.5% was an increase of 100 basis points versus the last year. This was better than we had expected due to favorable manufacturing costs, which largely reflected lower freight costs. Turning to slide 12, Resource Industries sales decreased by 7% in the first quarter to $3.2 billion, which was about in line with our expectations. The decrease was primarily due to lower sales volume, partially offset by favorable price realization. The decrease in sales volume was mainly driven by lower sales of equipment to end users, which Jim explained. First quarter profit for Resource Industries decreased by 4% versus the prior year to $730 million. The decrease was mainly due to lower sales volume, partially offset by favorable price realization. The segments margin of 22.9% was an increase of 60 basis points versus last year. This is better than we had expected on stronger price and favorable manufacturing costs, driven mainly by lower freight costs. Now on slide 13, Energy & Transportation sales increased by 7% in the first quarter to $6.7 billion. The increase was primarily due to higher sales volume and favorable price. Sales were stronger than we had expected, mostly due to increased deliveries of large engines. By application, power generation sales increased by 26%, oil and gas sales improved by 19%, transportation sales were higher by 9%, while industrial sales decreased by 21%. First quarter profit for Energy & Transportation increased by 23% versus the prior year to $1.3 billion. The increase was primarily due to favorable price realization. The segments margin of 19.5% was an increase of 260 basis points versus the prior year. The margin was significantly stronger than we had anticipated due to lower than expected manufacturing costs, higher volume, and better price. Moving to slide 14, Financial Products revenues increased by 10% to $991 million, primarily due to higher average financing rates across all regions and higher average net earning assets in North America. Segment profit was strong, increasing by 26% to $293 million. The increase was mainly due to an insurance settlement and a favorable impact from equity securities. Our portfolio continues to perform well as past dues remain near historic lows at 1.78%, a 22 basis point improvement compared to the first quarter of 2023. This is the lowest first quarter past dues since 2006. In addition, the allowance rate was our lowest on record at 1.01%. Business activity remains strong as new business volume increased versus the prior year, primarily driven by North America. We continue to see strong demand for used equipment and inventories remain close to historically low levels, with just slight increases over recent quarters. Moving on to slide 15. As Jim mentioned, our ME&T free cash flow remains strong. We generated $1.3 billion in the quarter after taking into account the $1.7 billion payments made for 2023 short-term incentive compensation and CapEx spend of about $500 million. Spend for both short-term incentive compensation and CapEx was higher than it was in the first quarter of 2023. For the full year, we expect to be in the top half of our ME&T free cash flow target range, which correlates to between $7.5 billion and $10 billion. We still expect to spend between $2 billion and $2.5 billion in CapEx, and we will continue to prioritize investments around AACE, which is autonomy, alternative fuels, connectivity, and digital and electrification. Moving to capital deployment. We continue to expect to return substantially all our ME&T free cash flow to shareholders over time through dividends and share repurchases. Of the record $5.1 billion of cash deployed in the first quarter, share repurchase spend was $4.5 billion, including the $3.5 billion accelerated share repurchase, or ASR. The $3.5 billion were deployed in the first quarter, and the ASR agreement may last for up to nine months. The ASR provides us with favorable pricing as compared to shorter-term ASRs, which we have carried out previously, which makes it more attractive. Price is finally determined relative to the volume-weighted average price, or VWAP, over the duration of the agreement. Approximately 70% of the shares were delivered to the company up front, but the balance calculated when the agreement is terminated based on the actual average VWAP. As a reminder, our objective is to be in the market on a more consistent basis with share repurchases, so this is a great mechanism for us to use. As I mentioned, our balance sheet remains strong. We have ample liquidity with an enterprise cash balance of $5 billion, and we hold an additional $2.2 billion in slightly longer-dated liquid marketable securities to improve yields on that cash. Moving to slide 16, I will share our high-level assumptions for the full year. As compared to a quarter ago, our assumptions for the full year generally remain unchanged. On the top line, we anticipate broadly similar sales and revenues as compared to the record 2023 level, consistent with what we mentioned last quarter. Although our top-level sales expectations remain the same, segment inputs have shifted a bit. We now see a slightly stronger top line in Energy & Transportation after a strong first quarter, while our expectations have been tampered slightly in Construction Industries due to economic conditions in the European market. We continue to expect slightly favorable price realization versus the prior year. Our expectations on dealer inventory also remain unchanged. We currently do not expect a significant change in dealer inventory of machines in 2024 compared to a $700 million increase in 2023. This is expected to be a headwind to sales. We also continue to anticipate another year of services growth across each of our primary segments as we strive to achieve our 2026 target of $28 billion in services revenues. At the segment level, we now expect Construction Industries sales to users to be slightly lower compared to 2023 due to the softer economic conditions in Europe. We expect demand in North America to remain at healthy levels, as Jim discussed. We also anticipate changes in dealer inventory to act as a headwind to Construction Industries sales in 2024. We expect sales service revenues to be positive versus the prior year. In Resource Industries, we continue to expect lower sales impacted by lower machine volume, primarily in off-highway and articulated trucks, where the comparison versus the prior year is challenging. We anticipate changes in dealer inventory to act as a headwind to sales in this segment as well. In Energy & Transportation, our 2024 sales expectations have increased slightly after the strong first quarter. We continue to see strong demand for reciprocating engines in power generation, as well as healthy order and quoting activity for Solar Turbines for both oil and gas and power generation. This supports our improved optimism for higher sales in Energy & Transportation in 2024. Also, as typical seasonality would suggest, we expect to see some sales ramp in Energy & Transportation as we move through the full year. On full year adjusted operating profit margin, we continue to expect to be in the top half of the margin target range at our expected sales levels. As I mentioned last quarter, we expect a relatively small pricing benefit to be weighted towards the first half of the year, given carryover from increases in the second half of last year. We now expect flattish manufacturing costs this year versus the prior year, as we anticipate more favorable freight costs, although the unfavorable impact from cost absorption could act as a partial offset. As I mentioned a quarter ago, given better availability this year, we anticipate shipping a more normal mix of products this year. We anticipate this dynamic may act as a slight headwind to margins. SG&A and R&D expenses are expected to ramp through the remainder of the year as we continue to invest in strategic initiatives aimed at future long-term profitable growth. This will be offset by the benefit of lower short-term incentive compensation. In addition, from a segment perspective, keep in mind that margins in Construction Industries tend to trend lower as the year progresses. Finally, we continue to anticipate restructuring costs of $300 million to $450 million this year, and our expectation for annual effective tax rate, excluding discrete items, is now 22.5%. Now on slide 17, I'll discuss our expectations for the second quarter, starting with the top line. We expect lower sales in the second quarter compared to the prior year, as we anticipate a headwind due to changes in dealer inventory of machines which will impact volumes. We expect dealer inventory of machines to decline this quarter in line with normal seasonal trends, versus the atypical $200 million increase that occurred in the second quarter of 2023. However, we anticipate a continuation of healthy demand across most of our end markets for our products and services, and prices expected to remain positive year-over-year. Following the typical seasonable pattern, we do expect higher sales in the second quarter as compared to the first. By segment compared to the prior year, we anticipate lower sales in Construction Industries as we expect changes in dealer inventory to act as a headwind. Favorable price should that provide a partial offset. We expect lower sales in resource industries versus the prior year, driven by lower volume, partially offset by favorable price. In Energy & Transportation, we anticipate similar sales versus the prior year. On enterprise margins in the second quarter, we expect the adjusted operating profit margin to be similar to the prior year, and lower versus the first quarter, following the typical seasonable pattern. As compared to the prior year, we could expect that price will remain favorable from the continued carryover benefit from increases taken in the second half of 2023. We expect flattish manufacturing costs compared to the prior year, as favorable freight is expected to offset the impacts of unfavorable cost absorption. We also anticipate an increase in SG&A and R&D expenses related to strategic investments, although this will be offset by lower short-term incentive compensation. By segment, in both Construction Industries and Resource Industries, we expect similar margins in the second quarter compared to the prior year, as we expect favorable price to be offset by lower volume. In Energy & Transportation, we expect a higher margin versus the prior year on better price and favorable mix. Unfavorable manufacturing costs and SG&A and R&D spend related to strategic investments are expected to act as a partial offset in this segment. Note that we expect a headwind to enterprise margins and corporate costs in the quarter, where we anticipate unfavorable year-over-year impacts from timing differences. So turning to slide 18, let me summarize. The strong operating performance continued in this quarter, with the adjusted operating profit margin at 22.2%, and record adjusted profit per share of $5.60. We deployed a record $5.1 billion of cash per share repurchases and dividends in the quarter. Our assumptions for the full year remain similar, and we expect to be in the top half of our target ranges for both adjusted operating profit margin and ME&T free cash flow. We continue to execute our strategy for the long-term profitable growth. And with that, we'll take your questions.","evidence_gemma_new":"Adjusted profit per share","evidence_llama_3_3":"adjusted profit per share first quarter","evidence_qwen_3_30b":null,"gemma_new_max":5.6,"gemma_new_min":5.6,"llama_3_3_max":5.6,"llama_3_3_min":5.6,"qwen_3_30b_max":null,"qwen_3_30b_min":null}
{"symbol":"CAT","year":2024,"quarter":2,"date":"2024-Q2","chunk_id":3,"sub_chunk_id":0,"centroid_label":"adjusted profit per share","agreed_value":5.99,"count":3,"chunk":"Andrew Bonfield: Thank you, Jim, and good morning, everyone. I'll begin with a high level summary of the quarter. Then I'll provide more detailed comments on our second quarter results, including the performance of the segments. Next, I'll discuss the balance sheet and free cash flow and then conclude with comments on our assumptions for the remainder of the year. Beginning on Slide 8. Although sales and revenues were slightly below our expectations, we had strong operating performance in the quarter, including higher adjusted operating profit margin and record adjusted profit per share, both of which were stronger than we had anticipated. Sales and revenues of $16.7 billion decreased by about 4% compared to the prior year. Adjusted operating profit increased by 2% to $3.7 billion. And the adjusted operating profit margin was 22.4%, an increase of 110 basis points versus the prior year. Profit per share was $5.48 in the second quarter compared to $5.67 in the second quarter of last year. Adjusted profit per share increased by 8% to $5.99 in the quarter compared to $5.55 last year. Adjusted profit per share excluded restructuring costs of $0.51 per share mainly due to a loss on the divestiture of two non-US entities. This compares to restructuring costs of $0.05 per share and a discrete deferred tax benefit of $0.17 per share, which were both excluded in the second quarter of 2023. Other income of $155 million for the quarter was a $28 million benefit versus the prior year and was primarily driven by favorable impacts from commodity hedges. The provision for income taxes in the second quarter, excluding discrete items, reflected a global annual effective tax rate of 22.5% compared with 23% in the second quarter of 2023. Finally, the year-over-year impact from the reduction in the average number of shares outstanding primarily due to share repurchases over the past year had a favorable impact on adjusted profit per share of approximately $0.29. Moving on to Slide 9. I'll discuss our top line results in the second quarter. Sales and revenues decreased by 4% compared to the prior year as lower volume was partially offset by favorable price realization. Lower volume was mainly driven by the impact from the changes in dealer inventories. As you may recall, we anticipated a sales decline this quarter versus last year as an atypical dealer inventory increase in the second quarter of 2023 made for a challenging comparison. To explain, dealer inventory decreased by about $200 million in the second quarter. In comparison, we saw an increase of $600 million in the second quarter of last year. For machines only, dealer inventory followed the typical seasonal trend this quarter with a decrease of $400 million as compared to a $200 million increase in the second quarter of last year. Sales were slightly below our expectations due to lower-than-expected volume being partially offset by better-than-expected price realization, including geographic mix. Moving to operating profit on Slide 10. Operating profit in the second quarter decreased by 5% to $3.5 billion. This included a $227 million unfavorable impact from higher restructuring costs. Adjusted operating profit increased by 2% to $3.7 billion. Price realization benefited the quarter while the profit impact of lower sales volume acted as a partial offset. The adjusted operating profit margin of 22.4% improved by 110 basis points versus the prior year. Margins were better than we expected mainly due to favorable manufacturing costs, product mix and price. Versus our expectation, price was slightly better than we anticipated driven by Energy & Transportation. On Slide 11, Construction Industries sales decreased by 7% in the second quarter to $6.7 billion. This is primarily due to lower sales volume, partially offset by favorable price realization. Sales volume was impacted by unfavorable changes in dealer inventories. Dealer inventory was about flat in the second quarter of 2024 versus an increase in the second quarter of last year. Lower sales to users also impacted volume. Sales in Construction Industries were lower than we had anticipated due to lower-than-expected rental fleet loading in North America and continued weakness in Europe. By region, sales in North America were about flat and Latin America sales increased by 20%. Sales in the EAME region decreased by 27%. In Asia Pacific, sales declined by 15%. Second quarter profit for Construction Industries was $1.7 billion, a 3% decrease versus the prior year. This was mainly due to lower sales volume, partially offset by favorable price realization, which benefited from geographic mix effects. Favorable manufacturing costs provided some tailwind as well largely reflecting lower material costs. The segment's margin of 26.1% was an increase of 90 basis points versus last year. Margin was better than we had expected primarily due to a favorable product mix and the timing of planned SG&A and R&D spend. Price was in line with our expectations. Turning to Slide 12. Resource Industries sales decreased by 10% in the second quarter to $3.2 billion, which was about in line with our expectations. The decline was primarily due to lower sales volume, partially offset by favorable price realization. Sales volume was impacted by changes in dealer inventories as dealer inventory decreased more during the second quarter of 2024 than during the second quarter of last year. In addition, we saw lower sales to users in the segment as anticipated given the challenging comparison. Second quarter profit for Resource Industries decreased by 3% versus the prior year to $718 million. This is mainly due to lower sales volume, partially offset by favorable impacts from price realization and manufacturing costs, including lower freight. The segment's margin of 22.4% was an increase of 160 basis points versus last year. Margin was better than we had expected mainly driven by the timing of planned SG&A and R&D spend and a favorable product mix. Now on Slide 13. Energy & Transportation sales increased by 2% in the second quarter to $7.3 billion. The increase was due to favorable price realization, which was partially offset by lower sales volume driven by industrial, which declined in line with our expectations. The segment sales were slightly better than we had anticipated primarily driven by price. By application, power generation sales increased by 15%. Transportation sales were higher by 7%. Oil and gas sales improved by 4%, while industrial sales decreased by 21%. Second quarter profit for Energy & Transportation increased by 20% versus the prior year to $1.5 billion. The increase was primarily due to favorable price. The segment's margin of 20.8% was an increase of 320 basis points versus the prior year. Margin was significantly stronger than we had anticipated due to better price and lower-than-expected manufacturing costs, which largely reflected favorable inventory absorption, lower freight and lower material costs. Moving to Slide 14. Financial Products revenues increased by 9% to about $1 billion primarily due to higher average financing rates across all regions and higher average earning assets in North America. Segment profit decreased by 5% to $227 million. This was mainly due to a higher provision for credit losses, which largely reflected the absence of a nonrecurring reserve release from the prior year. The portfolio remains healthy as past dues of 1.74% on near historic lows and reflect a 41 basis point improvement compared to the prior year. In addition, the allowance rate was 0.89% our lowest rate on record. Business activity remains healthy as new business volume increased versus the prior year primarily driven by North America. We also continue to see healthy demand for used equipment where inventories remain close to historical low levels. Moving on to Slide 15. We generated $2.5 billion in ME&T free cash flow in the second quarter and we expect our full year free cash flow to be in the top half of our annual target range of between $7.5 billion to $10 billion. Our expectations for CapEx remain between $2 billion and $2.5 billion for the year. On share repurchases, the more than $1.8 billion deployed in the second quarter included a $1 billion accelerated share repurchase agreement. Approximately 75% of those shares were delivered to the company upfront with the balance to be delivered when the agreement is terminated prior to year-end. Note that we also had an ME&T bond maturity of $1 billion in the second quarter. And given our healthy liquidity position, we did not issue new bonds. Our balance sheet remains strong with an enterprise cash balance of $4.3 billion. In addition, we hold $1.8 billion in slightly longer-dated liquid marketable securities to improve yields on that cash. Now on Slides 16 and 17, I will show our high-level assumptions for the remainder of the year. As Jim mentioned, we now anticipate sales and revenues to be slightly lower this year versus the record 2023 level. This compares to our previous expectation for broadly similar sales. This change reflects an updated assumption of a slight reduction in machine dealer inventory, primarily in Resource Industries and lower-than-expected sales to users in Construction Industries mainly due to lower rental fleet loading in North America. Now specific to our second half assumptions. We typically see higher sales in the second half as compared to the first and we expect sales to follow that normal seasonable trend this year. As compared to the prior year, we now anticipate slightly lower sales in the second half driven by lower machine sales to users. Changes in dealer inventories and machines are expected to have a nominal impact as the decrease in the second half of this year should be similar to the decrease observed in the second half of 2023, which was about $1 billion. However, note that machine dealer inventory changes will impact the quarters differently as we expect a sales headwind in the third quarter as dealers built their inventories in the third quarter of 2023 and a sales tailwind in the fourth quarter due to a smaller inventory decline than the prior year. Finally, we continue to anticipate services growth in the second half of the year as we strive to achieve our 2026 target of $28 billion in services revenues. Moving on to our margin expectations. As Jim mentioned, the strength of our first half performance combined with the more favorable expectations for the second half mean that we now anticipate overall adjusted operating profit margin to be above the top end of the target range for the full year. Specific to second half margins, despite higher sales, we do expect lower margins versus the first half, which follows a typical seasonable trend. However, keep in mind that first half margins were at record levels and the magnitude of the second half decline may be slightly larger than is typical. As compared to the prior year, we expect our adjusted operating profit margin in the second half will be similar to the prior year level. While we anticipate some favorability in manufacturing costs on improved operational efficiencies, we do expect slightly lower volumes and a slight headwind from price in the second half versus a year ago. On price, the impact of lapping the increases taken in the second half of 2023 means that the benefit in the second half of this year will be significantly lower. In addition, we expect that improved availability across the industry will result in the normalization of the pricing environment. To assist you with your modeling for the full year, please note that we now anticipate restructuring costs of around $450 million and that our expectations for the annual effective tax rate, excluding discrete items, remains at 22.5%. Now on Slide 18. I'll provide a few comments on the third quarter, starting on the top line. We expect slightly lower sales and revenues in the third quarter compared to the prior year as we anticipate a dealer inventory headwind for machines, which will impact volumes. We expect dealer inventory machines to be flattish to slightly lower in the third quarter as is typical, which compares to the atypical $400 million increase in the prior year. We also anticipate lower machine sales to users versus a strong comparison. We expect flattish price realization in the third quarter versus the prior year due to the normalization that I mentioned a moment ago. We also anticipate that the ongoing benefit of our service initiatives will positively impact sales in the third quarter. By segment in the third quarter compared to the prior year, we anticipate lower sales in Construction Industries primarily due to a headwind from changes in dealer inventories. In Resource Industries, we expect lower sales as sales to users are impacted by a challenging comparison similar to that which we have observed in the first two quarters of this year. In Energy & Transportation, we anticipate higher sales versus the prior year, supported by strengthen in power generation, oil and gas and transportation. Lower sales in industrial should act as a partial offset. For enterprise margins in the third quarter, we expect similar adjusted operating profit margin compared to the prior year as we anticipate lower volume will be offset primarily by favorable manufacturing costs. By segment in the third quarter, in Construction Industries, we anticipate lower margin compared to the prior year on lower volume and slightly unfavorable price realization. Favorable manufacturing costs should act as a partial offset. For Resource Industries, we anticipate slightly lower margins in the third quarter compared to the prior year due to unfavorable volume and higher SG&A and R&D spend. In Energy & Transportation, we expect a higher margin versus the prior year and stronger volumes and favorable price realization. So turning to Slide 19, let me summarize. Strong execution and operating performance continued in the second quarter. Higher adjusted operating profit margin of 22.4% offset the decrease in sales and revenues and led to a record adjusted profit per share of $5.99. We now expect overall adjusted operating profit margin to be above the top end of the target range for the full year based on our expected sales levels, which should now be slightly lower than levels in 2023. The net of these factors leads to our current expectation for higher adjusted operating profit and adjusted profit per share as compared to what we contemplated at the beginning of the year. ME&T free cash flow generation was $2.5 billion in the quarter. We continue to expect to be in the top half of our target range for the full year. We have deployed $7.6 billion to shareholders through share repurchases and dividends in the first half of 2024. We continue to execute our strategy for long-term profitable growth. And with that we'll take your questions.","evidence_gemma_new":"adjusted profit per share","evidence_llama_3_3":"adjusted profit per share second quarter","evidence_qwen_3_30b":"adjusted profit per share $5.99 increased by 8%","gemma_new_max":5.99,"gemma_new_min":5.99,"llama_3_3_max":5.99,"llama_3_3_min":5.99,"qwen_3_30b_max":5.99,"qwen_3_30b_min":5.99}
{"symbol":"CAT","year":2024,"quarter":3,"date":"2024-Q3","chunk_id":2,"sub_chunk_id":0,"centroid_label":"adjusted profit per share","agreed_value":5.17,"count":3,"chunk":"Jim Umpleby: Thanks, Ryan. Good morning, everyone. Thank you for joining us. As we close out the third quarter, I want to thank our global team for another good quarter as our results reflect the benefit of the diversity of our end markets. We delivered strong adjusted operating profit margin and adjusted profit per share, which were consistent with our expectations, although our top-line was lower than we anticipated. We also generated ME&T free cash flow of $2.7 billion in the third quarter. Our robust ME&T free cash flow, along with our strong balance sheet, allowed us to deploy over $9 billion to shareholders through share repurchases and dividends during the first three quarters of the year, including $1.5 billion this quarter. We continue to remain disciplined in the execution of our strategy for long-term profitable growth. I'll begin with my perspectives about our performance in the quarter and will provide an update on our full year expectations. I'll then provide some insights about our end markets, followed by an update on our strategy and sustainability journey. Moving to quarterly results. Sales and revenues were down 4% in the third quarter versus last year, below our expectations due to the impact of lower-than-expected sales to users in Construction Industries and timing of deliveries in Resource Industries and Energy & Transportation. Services increased in the quarter compared to 2023. Adjusted operating profit margin was generally in line with our expectations at 20%. We achieved quarterly adjusted profit per share of $5.17, in line with our expectations at the time of the last earnings call. In addition, our backlog increased slightly to $28.7 billion and remains at a very healthy level. For the full year, although we updated our expectations since our last earnings call to reflect sales being slightly below our prior estimate, our expected adjusted operating profit margin is unchanged and remains above the top of the range. Also, our expectation for adjusted profit per share is unchanged. We are increasing our expectations for ME&T free cash flow and now anticipate it will be near the top of our target range of $5 billion to $10 billion. Turning to Slide 4. In the third quarter of 2024, sales and revenues declined 4% to $16.1 billion due to lower sales volume. Compared to the third quarter of 2023, overall sales to users decreased 6%. For Machines, which includes Construction Industries and Resource Industries, sales to users declined by 10%, which was below our expectations. Energy & Transportation continued to grow as sales to users increased 5%. Sales to users in Construction Industries were down 7% year-over-year. In North America, sales to users were down primarily due to lower rental fleet loading and the absence of a large pipeline deal in the third quarter of 2023. Excluding these two items, sales to users were about flat versus the prior year. Compared to our expectations, sales to users were lower than expected, impacted by rental fleet loading. Our dealers' rental revenue continued to grow in the quarter. Sales to users declined in EAME, primarily due to ongoing weakness in construction activity in Europe. Sales to users in Asia Pacific declined, while Latin America increased. In Resource Industries, sales to users declined 18%, generally in line with our expectations versus a strong third quarter in 2023. Mining, as well as heavy construction, and quarry and aggregates were lower, mainly due to softness we previously discussed for two products, articulated trucks and off-highway trucks. In Energy & Transportation, sales to users increased by 5%, and we continue to see growth in all applications except industrial. Power generation sales to users grew strongly as market conditions remained favorable for both reciprocating engines and solar turbines and turbine-related services. Oil and gas sales to users benefited from strong sales of turbines and turbine-related services. For reciprocating engines in oil and gas applications, sales to users were higher for gas compression but lower in well servicing. Transportation sales to users increased, while industrial declined as we expected. Our results continue to reflect the benefit of the diversity of our end markets, as well as the disciplined execution of our strategy for long-term profitable growth. Moving to dealer inventory and our backlog. In total, dealer inventory increased by $400 million versus the second quarter of 2024. For Machines, dealer inventory increased by $100 million, slightly more than we had anticipated. Looking ahead to the fourth quarter, our current planning assumptions forecast a reduction in machine dealer inventory, and we expect machine dealer inventory to end the year around the same level as year-end 2023. Dealers are independent businesses and make stocking decisions across a wide range of products based on multiple factors across the product portfolio. While machine dealer inventory is currently around the top end of the typical range, we remain comfortable with the overall level of dealer inventory. As I mentioned, backlog increased slightly versus the second quarter to $28.7 billion. Energy & Transportation increased as we continue to see strong demand for solar turbines in oil and gas and power generation, as well as strong demand for reciprocating engines for power generation. Moving to Slide 5, we generated robust ME&T free cash flow of $2.7 billion in the third quarter and $6.4 billion in the first three quarters of 2024. As I mentioned, year-to-date, we deployed more than $9 billion to shareholders through share repurchases and dividends. We remain proud of our dividend aristocrat status and continue to expect to return substantially all ME&T free cash flow to shareholders over time through dividends and share repurchases. Now, on Slide 6, I'll describe our expectations for our three primary segments moving forward. In Construction Industries, we expect lower sales to users in the fourth quarter, but remain positive about the longer-term demand outlook. During our August earnings call, we noted a lower level of rental fleet loading in North America, which continued into the third quarter, and we now expect the trend to persist in the fourth quarter. Although we have lowered our expectations for sales to users in the fourth quarter, primarily due to lower rental fleet loading, dealer rental revenue continues to grow. In addition, government-related infrastructure projects are expected to remain healthy, supported by funding yet to be spent from the IIJA. In Asia Pacific, outside of China, we expect soft economic conditions to continue. We anticipate demand in China will remain at a relatively low level for the above 10-ton excavator industry. In EAME, we anticipate that weak economic conditions in Europe will continue, partially offset by continued healthy construction demand in the Middle East. Construction activity in Latin America remains healthy, and we are expecting modest growth to continue. In addition, we expect the ongoing benefit of our services initiatives will positively impact Construction Industries. Next, I'll discuss Resource Industries. After strong performance in 2023 in mining as well as heavy construction and quarry and aggregates, we continue to anticipate lower machine volume in the fourth quarter of 2024 versus last year. However, the rate of decline for sales to users in the fourth quarter is expected to moderate versus the previous quarters. We expect to see higher services revenues, including robust rebuild activity. Customer product utilization remains high, the number of parked trucks remains relatively low, the age of the fleet remains elevated, and our autonomous solutions continue to see strong customer acceptance. Customers continue to display capital discipline. However, we continue to believe the energy transition will support increased commodity demand over time, expanding our total addressable market and providing further opportunities for long-term profitable growth. Moving to Energy & Transportation. For power generation, demand is expected to remain strong, and we expect robust growth in the fourth quarter and full year sales for both reciprocating engines and solar turbines. Overall strength in power generation continues to be driven by data center growth related to cloud computing and generative AI, and we expect this trend to continue. In oil and gas, in total, we continue to expect a stronger year overall in 2024 versus 2023. For solar turbines used in oil and gas applications, we expect a strong fourth quarter, but sales are expected to be lower than the fourth quarter of 2023 due to the timing of deliveries. The increase in power generation at solar will mostly offset solar's decline in oil and gas, so we expect solar's total sales in the fourth quarter to be roughly flat compared to last year. Solar has a strong backlog as well as healthy order and inquiry activity, and we continue to expect full year growth for solar in oil and gas. After a strong 2023, we expect reciprocating engine sales in oil and gas to be slightly down this year, primarily due to ongoing softness in well servicing. We still expect gas compression to be up for the full year. However, we expect it to soften in the near term as equipment lead times have normalized. As we had previously mentioned, we can leverage our large engine platforms across a variety of applications. Based on current market conditions and well servicing applications, we are able to serve additional power generation demand as we continue to meet oil and gas customer needs while optimizing our overall large engine capacity. Industrial demand has continued to remain at a relatively low level compared to 2023. In transportation, we anticipate full year growth in both rail services and marine applications. Moving to Slide 7, now, I'll provide an update on our strategy and sustainability journey. In February of 2024, we announced a multiyear capital investment in our large reciprocating engine division to approximately double output capability compared to 2023 for new engines and aftermarket parts. Based on increasing expectations of future demand growth, today, we are announcing an additional multiyear investment to further expand our large engine volume output capability to more than 125% compared to 2023. As I mentioned, we leverage these large engines across a variety of applications, including data centers, oil and gas, large mining trucks, and distributed power generation. Moving on to sustainability. We continue to invest in new product, technologies and services to help our customers achieve their climate-related objectives. In September, we unveiled an innovative solution to help solve one of the most complex aspects of the mining industry's energy transition, energy management. Cat Dynamic Energy Transfer, or DET, is a fully Caterpillar developed system that can transfer energy to both diesel electric and battery electric large mining trucks while they are working around them on-site. It can also charge batteries while operating with increased speed on grade, improving operational efficiency and machine uptime. Cat DET is comprised of a series of integrated elements, including a power module that converts energy from a mine site's power source, an electrified rail system to transmit the energy, and a machine system to transfer the energy to the truck's powertrain. Cat DET will integrate with the Cat MineStar Command for hauling solution, merging autonomy and electrification technologies to provide a holistic site solution. We believe mine sites will benefit from enhanced efficiency with the integration of electrification and automation. When combined, these technologies will help miners achieve production targets, while simultaneously managing energy demands. This example highlights how we leverage our industry-leading technology through an integrated approach across our portfolio to help our customers build a better, more sustainable world. With that, I'll turn it over to Andrew.","evidence_gemma_new":"adjusted profit per share","evidence_llama_3_3":"adjusted profit per share third quarter","evidence_qwen_3_30b":"adjusted profit per share $5.17 third quarter","gemma_new_max":5.17,"gemma_new_min":5.17,"llama_3_3_max":5.17,"llama_3_3_min":5.17,"qwen_3_30b_max":5.17,"qwen_3_30b_min":5.17}
{"symbol":"CAT","year":2024,"quarter":4,"date":"2024-Q4","chunk_id":3,"sub_chunk_id":0,"centroid_label":"adjusted profit per share","agreed_value":5.14,"count":3,"chunk":"Andrew Bonfield: Thank you Jim, and good morning everyone. I\u2019ll begin with a summary of the fourth quarter and then provide more detailed comments, including some on the performance of the segments. Next, I\u2019ll discuss the balance sheet and free cash flow before concluding with comments on our high level assumptions for 2025, as well as expectations for the first quarter. Beginning on Slide 9, sales and revenues were $16.2 billion, a 5% decrease versus the prior year. As Jim mentioned, sales were slightly lower than we had anticipated, which together with unfavorable mix resulted in lower than expected margins for the quarter. Adjusted operating profit was $3 billion and our adjusted operating profit margin was 18.3%. Profit per share was $5.78 in the fourth quarter compared to $5.28 in the fourth quarter of last year. Adjusted profit per share was $5.14 in the quarter, a 2% decrease compared to $5.23 last year. Adjusted profit per share excluded a discrete tax benefit of $0.46 for a tax law change related to currency translation. Mark to market gains of $0.23 for the re-measurement of pension and other post-employment plans was also excluded, in addition to restructuring costs of $0.05 in the quarter. Other income expense was $185 million favorable versus the prior year, mostly driven by a positive currency impact related to ME&T balance sheet translation, which compared to a negative impact in the fourth quarter last year. As I have mentioned previously, we do not anticipate currency translation movements, so the positive impact on the fourth quarter of 2024 helped to offset the impact of operating profit being lower than expected. Excluding discrete items, the provision for income taxes in the fourth quarter of 2024 reflected a global annual effective tax rate of 22.2%. This was slightly lower than we had expected a quarter ago and benefited the quarter by $0.09. Finally, the year-over-year impact from the reduction in the average number of shares outstanding, primarily due to share repurchases, resulted in a favorable impact on adjusted profit per share of approximately $0.24 as compared to the fourth quarter of 2023. Moving onto Slide 10, I\u2019ll discuss the top line results for the fourth quarter. Sales and revenues decreased by 5% compared to the prior year, primarily impacted by lower sales volume. Price was unfavorable year-over-year and about in line with what we had expected. Lower volume was driven by the impact from changes in dealer inventories and a 2% year-over-year decrease in total sales to users. Total machine dealer inventory decreased by $1.6 billion in the quarter compared to $1.4 billion decrease in the prior year. The decrease in machine dealer inventory was larger than we had expected, and it\u2019s mostly a function of higher than anticipated sales to users across both construction industries in North America and resource industries. Service revenues increased in the quarter compared to 2023. As I mentioned, the sales decrease in the quarter was slightly larger than we had anticipated. This was mostly due to services growing at a slightly slower rate than we had expected and some delivery delays in energy and transportation. Moving to operating profit on Slide 11, operating profit in the fourth quarter decreased by 7% to $2.9 billion. Adjusted operating profit decreased by 8% to $3 billion mainly due to the profit impact of lower than expected sales volume. As I mentioned, for the fourth quarter the adjusted operating profit margin was 18.3%, a 60 basis point decrease compared to the prior year. This was lower than we had anticipated mainly due to a lower than expected sales volume and the impact of unfavorable mix. On Slide 12, construction industry sales decreased by 8% in the fourth quarter to $6 billion. This was slightly below our expectations on lower than anticipated volume. Compared to the prior year, the 8% sales decrease was primarily due to unfavorable price realization and lower sales volume. The decrease in sales volume was mainly driven by lower sales of equipment to end users and dealers reducing their inventory by slightly more than they did during the fourth quarter of 2023. By region, construction industry sales in North America decreased by 14%. In Latin America, sales increased by 6%. Sales in the EAME region decreased by 1%, and Asia Pacific sales decreased by 2%. Fourth quarter profit for construction industries was $1.2 billion, a 24% decrease versus the prior year. This was primarily due to unfavorable price realization as a result of the impact of the post-sales merchandising programs that we discussed with you in October. The segment\u2019s margin of 19.6% was a decrease of 390 basis points versus the prior year. The margin was lower than we had anticipated, primarily impacted by lower volume and unfavorable mix. Manufacturing costs were also unfavorable versus our expectations, principally due to a headwind from cost absorption as our inventory in construction industries declined. Turning to Slide 13, resource industry sales decreased by 9% in the fourth quarter to $3 billion. This was below our expectations mainly due to services growing at a slightly lower rate than we had anticipated. As we compare to the prior year, the 9% sales decrease was primarily due to lower sales volume mainly driven by the impact from changes in dealer inventories. Dealer inventory decreased more in the fourth quarter of 2024 than it did in the fourth quarter of 2023. Fourth quarter profit for resource industries decreased by 22% versus the prior year to $466 million. This was mainly due to the profit impact of lower sales volume. The segment\u2019s margin of 15.7% was a decrease of 280 basis points versus the prior year. This was lower than we had anticipated, primarily due to lower volume. Now on Slide 14, energy and transportation sales of $7.6 billion were about flat versus the prior year. Sales were slightly below our expectations to a lower than expected services growth rate, largely in oil and gas, and the timing of deliveries of international locomotives. Compared to the prior year, sales were roughly flat as the impact of lower sales volume was mostly offset by favorable price realization. By application, power generation sales increased by 22%, transportation sales were lower by 1%, oil and gas sales decreased by 14%, and industrial sales decreased by 14%. Fourth quarter profit for energy and transportation increased by 3% versus the prior year to $1.5 billion. The increase was primarily due to favorable price realization partially offset by the profit impact of lower sales volume. The segment\u2019s margin of 19.3% was an increase of 70 basis points versus the prior year. This was lower than we had anticipated, primarily due to lower than expected volume and an unfavorable mix of products. Moving to Slide 15, financial products revenues increased by 4% versus the prior year to about $1 billion, primarily due to higher average earning assets in North America and higher average financing rates across all regions, except North America. Segment profit decreased by 29% to $166 million. This was mainly due to an unfavorable impact from equities securities in addition to lower margin and a higher provision for credit losses. Our customers\u2019 financial health remains strong. Past dues were 1.56% in the quarter, down 23 basis points versus the prior year and our lowest level since 2005. The allowance rate was 0.91%, remaining near historic lows. Business activity at Cat Financial remains healthy. Retail credit applications increased and our retail new business volume grew by 3% versus the prior year. This was our highest level since 2012, supported by attractive finance packages for customers choosing to buy Caterpillar equipment. We continue to see proportionately more of our sales financed through Cat Financial; in addition, demand for used equipment remains healthy and inventories remain at low levels. Conversion rates were above historical averages as customers choose to buy equipment at the end of their lease term. Moving onto Slide 16, we continue to generate strong ME&T free cash flow. The $9.4 billion in 2024 was near the top end of our target range and just slightly lower than the prior year despite a larger payment for short term incentive compensation and higher capital expenditure. CapEx for the year was about $2 billion, which was in line with our expectations. Moving to capital deployment, in 2024 we returned $10.3 billion to shareholders through repurchased stock and dividends. On share repurchases, we deployed $7.7 billion as we continue to fulfill our objective to be in the market on a more consistent basis. Our balance sheet remains strong with an enterprise cash balance of $6.9 billion. In addition, we hold $2 billion in slightly longer dated liquid marketable securities to improve yields on that cash. Now on Slide 17, let me start with a high level overview of our expectations for the full year. We expect a slight decrease in sales for 2025 with an unfavorable impact from both volume and price. Due to the impact of post-sales merchandising programs, price realization should account for about a 1% decrease in sales for the full year. On margins, the impact of price together with high depreciation costs due to the investments we are making should result in adjusted operating profit margins being in the top half of the target range with the expected level of sales, rather than being above the top end of the range, as occurred in 2024. Our margin targets are progressive, so while we would expect volume to have an impact on absolute margins, our target is adjusted for lower sales. We expect a slight headwind in other income and expense in 2025 primarily due to lower interest income, mostly due to lower interest rates, as well as the absence of the positive currency benefit from ME&T balance sheet translation that occurred in 2024. As I mentioned, we do not anticipate translation movements in our expectations. We expect restructuring costs of approximately $150 million to $200 million in 2025. We anticipate a global annual effective tax rate of 23% for 2025, excluding discrete items. While the impact of the share buyback should be positive, we expect to have less ME&T free cash flow to deploy in 2025. This implies a less favorable impact to profit per share in 2025 as compared to 2024. By segment, lower sales in construction industries and resource industries will be partially offset by sales growth in energy and transportation. For construction industries, we expect lower sales in 2025 based on the outlook Jim described and unfavorable price realization. In resource industries, we anticipate slightly lower sales versus 2024 driven by unfavorable price realization and slightly lower volume. Higher volumes and favorable price in energy and transportation should drive sales growth, though sales remain constrained until the benefits of the investments we are making in large engines begin to flow through beyond 2025. We also anticipate another year of services growth in each of our primary segments. Currently, we do not anticipate a significant change in dealer inventory in machines by the end of 2025. Moving onto ME&T free cash flow, we expect to be in the top half of our target range of $5 billion to $10 billion. The first quarter of 2025 will be impacted by a $1.4 billion cash outflow related to the payout of last year\u2019s incentive compensation. We anticipate CapEx of about $2.5 billion in 2025 as we continue to make disciplined investments that are right for our business, governed by a focus on growing absolute OPACC [ph] dollars. This includes the multi-year capital investment to expand our large engine volume output capability that we mentioned last year. Turning to Slide 18, to assist with your modeling, I\u2019ll provide some color on the first quarter, starting with the top line. We expect lower sales versus the prior year. For perspective, in a typical year we see our lowest sales in the first quarter of the year. In 2025, we anticipate that trend to continue to be more pronounced as sales in the first quarter should account for a lower percentage of full year sales than is typical by about 100 basis points. This decrease is mainly due to our expectations for dealer inventory movements and price, which primarily impacts machines. Energy and transportation is expected to show normal seasonality with sales growing throughout the year. Let me explain. Although dealers did reduce machine inventory significantly in the fourth quarter, they remain around the top end of the range as we enter 2025. This compares with dealer inventories in construction industries being towards the middle of the range at the beginning of 2024. As a result, we expect them to build correspondingly less inventory during the first quarter than the $1.1 billion that they built in the first quarter of 2024. As we expect dealer inventory to be about flat by year end, we should see a tailwind to sales in the fourth quarter as we don\u2019t expect a similar machine dealer inventory change as we have seen in the last two years. We also expect unfavorable price realization for machines in the first quarter due to the impact of post-sales merchandising programs. We would expect these price impacts to be greater for machines in the first half of the year as the noticeable impact of post-sales merchandising programs started in the third quarter of 2024, making for an easier comparison in the second half. To pull together the impact by segment, we anticipate lower sales in construction industries in the first quarter, impacted by lower sales to users, the headwind from changes in dealer inventory and price, the impact of which should be similar to what we saw in the fourth quarter of 2024. In resource industries in the first quarter, we expect lower sales volume versus the prior year, impacted by lower volume and unfavorable price realization. In energy and transportation, we anticipate similar sales in the first quarter versus the prior year as continued strength in power generation is about offset by lower oil and gas and transportation sales. Price should be positive for energy and transportation. Now I\u2019ll provide some color on first quarter margin expectations. Though enterprise margins are typically stronger in the first quarter compared to with the remaining quarters of the year, we do not expect this seasonal trend to occur in 2025. Compared to the prior year, we anticipate a lower enterprise adjusted operating profit margin in the first quarter due primarily to lower than usual volume and price. Volume is impacted by the lower build of machine dealer inventory and slightly lower sales to users for machines. Unfavorable price realization for machines is principally due to the factors I\u2019ve discussed previously, which will be partially offset by favorable price in energy and transportation. We expect there will be improvement in first quarter margins offsetting the volume impact in the first quarter due to stronger volume in the fourth quarter than is typical. By segment, in the first quarter in construction industries, we anticipate lower margins compared to the prior year due primarily to lower volume and price. We do not expect to see the margin benefit we typically see in the first quarter of the year as compared to the fourth quarter of the prior year, which is generally in the range of 100 to 200 basis points. Again, some of this will be offset in the fourth quarter as volume is favorable and price more neutral. In resource industries, we anticipate lower margin in the first quarter compared to the prior year, mainly due to lower volume and unfavorable price realization. In energy and transportation, we expect slightly lower margin versus the prior year as favorable price realization is more than offset by higher manufacturing costs and unfavorable mix impacts. Again, as a reminder, this detail is provided to help you model the first quarter and does not impact our expectations for the full year that I set out earlier, which is a slight decrease in sales and revenues for the year and margins in the top half of the target range. Turning to Slide 19, let me summarize. Adjusted profit per share of $21.90 exceeded last year\u2019s record by 3%. This was our third straight year with record adjusted profit per share. Adjusted operating profit margin of 20.7% exceeded the top of our target range. ME&T free cash flow of $9.4 billion was near the top of the target range of $5 billion to $10 billion. For 2025, while we expect a slight drop in sales, we expect to be in the top half of the adjusted operating profit margin range and the top half of the ME&T free cash flow target range, and we anticipate another year of services growth. We continue to execute our strategy for long term profitable growth, and with that, we\u2019ll take your questions.","evidence_gemma_new":"adjusted profit per share","evidence_llama_3_3":"adjusted profit per share fourth quarter","evidence_qwen_3_30b":"adjusted profit per share 4th quarter 2% decrease","gemma_new_max":5.14,"gemma_new_min":5.14,"llama_3_3_max":5.14,"llama_3_3_min":5.14,"qwen_3_30b_max":5.14,"qwen_3_30b_min":5.14}
{"symbol":"CAT","year":2023,"quarter":1,"date":"2022-Q4","chunk_id":2,"sub_chunk_id":0,"centroid_label":"backlog","agreed_value":30400000000.0,"count":2,"chunk":"Jim Umpleby: Thanks, Ryan. Good morning, everyone. Thank you for joining us. I'd like to start by thanking our global team for a strong first quarter, including double-digit top line growth, higher operating profit margins, record adjusted profit per share and strong ME&T free cash flow. Our results reflect healthy customer demand to most end markets for our products and services. We remain focused on executing our strategy and continue to invest for long-term profitable growth. In today's call, I'll begin with my perspectives on our performance in the quarter. I'll then provide some insights on our end markets. Lastly, I'll provide an update on our sustainability journey. It was a very strong quarter. Sales and revenues were better than we expected, with price realization, dealer inventory and sales to users each slightly better than we anticipated. Sales to users were higher than expected in Energy & Transportation and Resource Industries. Overall, sales and revenues rose by 17% versus the first quarter of 2022. The year-over-year increase was due to strong price realization and volume growth, which was driven by higher sales of equipment to end users. We achieved double-digit top line increases in each of our three primary segments. Adjusted operating profit margins increased to 21.1% in the first quarter, as we saw margins improve, both on a sequential and year-over-year basis. The adjusted operating profit margins were significantly better than we had anticipated primarily due to better-than-expected manufacturing costs, including efficiencies and absorption, stronger price realization and volume growth. Andrew will discuss in detail later. Backlog ended the quarter at $30.4 billion, flat relative to the fourth quarter of 2022. Equipment availability increased during the quarter due to improving supply chain conditions. While dealer order rates are lower, they remain at healthy levels. As you know, as availability improves, order rates typically normalize, as dealers can wait longer to place orders for long lead time items. Our healthy backlog continues to underpin our constructive views about our end markets. Despite the improvement in supply chain, pockets of challenge remain as we increase production, particularly for large engines, which impacts energy and transportation and some of our larger machines. We delivered a strong first quarter, which positions us well for an even better year in 2023 than we previously anticipated. While we continue to closely monitor global macroeconomic conditions, overall demand remains healthy across our products and services. Turning to Slide 4, in the first quarter of 2023, sales and revenues increased 17% versus last year at $15.9 billion. This was primarily due to favorable price and volume growth. Compared with the first quarter of 2022, overall sales to users increased 13%. For Construction Industries and Resource Industries, sales to users rose by 5%, while Energy & Transportation was up 39%. Sales to users in Construction Industries were flat, in line with our expectations. North American sales to users increased, as demand remained healthy for both nonresidential and residential, despite some moderation of the growth rate in residential. Overall, our North American sales to users were better than we expected. EAME also saw higher sales to users, led by strength in the Middle East. In Latin America and Asia Pacific, sales to users declined in the quarter. The decline in Asia Pacific included further weakening in China. In Resource Industries, sales to users increased 18%, which was our third consecutive quarter of accelerating sales to users. In Mining, sales to users benefited from a higher level of commissioning in the quarter. Within heavy construction and quarry and aggregates, sales to users also increased, supported by growth for infrastructure-related projects. In Energy & Transportation, sales to users increased by 39%. In the first quarter, oil and gas sales to users benefited from continued strength in new engine sales to customers, including repowering active fleets, upgrading technology to Tier 4 Dynamic Gas Blending and adding incremental gas compression units. We also saw strong sales of turbines and turbine-related services. Power Generation and Industrial sales to users continue to remain positive due to favorable market conditions. Transportation declined from a relatively low base primarily due to timing in marine deliveries, which was partially offset by deliveries of international locomotives. Dealer inventory increased by about $1.4 billion in the first quarter, which was slightly above our expectations compared to a $1.3 billion increase in the same quarter last year. In Construction Industries, the increase in dealer inventory was primarily due to stronger North American shipments, which remains our most constrained region. As we mentioned last quarter, over 70% of the combined dealer inventory in Resource Industries and Energy & Transportation is supported by customer orders. Moving to Slide 5, we generated strong ME&T free cash flow of $1.4 billion in the first quarter. We returned $1 billion to shareholders, which included about $600 million in dividends and $400 million in repurchase stock. We remain proud of our dividend aristocrat status and continue to expect to return substantially all ME&T free cash flow to shareholders over time through dividends and share repurchases. Now on Slide 6, I'll share some commentary on our expectations moving forward. While we continue to closely monitor global macroeconomic conditions, our first quarter results lead us to expect that 2023 will be even better than we had previously anticipated on both the top and bottom line. For 2023, we currently expect to be in the top half of the targeted range for both adjusted operating profit margin and ME&T free cash flow. Andrew will provide additional color. Before I discuss our outlook for key end markets, I'll provide some color on how we expect our top line to progress through this year. As I mentioned, we expect a strong top line for 2023, supported by price and higher sales to users, with healthy underlying end markets. We expect higher sales in the second quarter compared to the first, as is the typical seasonal pattern. Looking to the second half of 2023, it is important to highlight the second half of last year included the dealer inventory build of $1.4 billion, as dealers began to restock their inventories. We are not planning for this trend to repeat. Instead, we expect to see dealers decrease inventories compared to the first quarter levels and end 2023 about flat relative to the end of 2022. Although we expect sales to users to remain positive for our primary segments in each quarter, our planning assumption is that Caterpillar second half sales will have a dealer inventory impact. Let me explain. First, although dealer inventory in some products and regions have normalized, others remain constrained. For example, in North America, dealer inventory remains below the typical range for many products. However, there is greater excavator inventory in a few regions, as supply dynamics improved in 2022, which, coupled with the slowing in China, has resulted in improved excavation product availability. Given the improved availability of excavators, we expect that dealers will scale back their levels of excavator inventory in the second half of the year, even though demand remains healthy. As a reminder, dealers are independent businesses and control their own inventory. Second, in late 2023, we have scheduled a couple of new product changeovers in construction industry factories that will also impact the second half. Now I'll discuss our outlook for key end markets this year, starting with Construction Industries. In North America, overall, we continue to see positive momentum in 2023. We expect growth in nonresidential construction in North America due to the positive impact of government-related infrastructure investments and a healthy pipeline of construction projects. Although residential construction housing starts have softened, the growth rate of our residential construction equipment remains positive as the supply chain pressures alleviate. In Asia Pacific, excluding China, we expect growth in Construction Industries due to public infrastructure spending and supportive commodity prices. As we mentioned during our previous earnings calls, we expect China\u2019s above ten-ton excavator industry to remain below 2022 levels due to low construction activity. In 2023, sales in China are expected to be below the typical range of 5% to 10% of total Caterpillar sales. In the EAME, business activity is now expected to increase versus last year based on healthy construction project activity, particularly strong construction demand in the Middle East. Although uncertain economic conditions remain, European construction is proving to be more resilient than we previously anticipated. Construction activity in Latin America is expected to be down in 2023 versus the strong 2022 performance. There is some concern about the potential impact of a commercial real estate slowdown. We estimate that North American commercial real estate accounts for about 1% of total construction industry sales. Any slowdown related to this sector should not have a significant impact on Construction Industries. In Resource Industries, we expect healthy mining demand to continue, as commodity prices remain above investment thresholds. As I have mentioned during the last few years, customers remain capital disciplined, which supports a gradual increase in mining over time. We anticipate production utilization levels will remain elevated. We also expect the aging of the fleet and a lower level of parked trucks to support future demand for our equipment and services. We continue to believe the energy transition will support increased commodity demand, expanding our total addressable market and providing further opportunities for profitable growth. In heavy construction and quarry and aggregates, we anticipate continued growth due to major infrastructure and nonresidential construction projects. In Energy & Transportation, we expect to follow our normal seasonal pattern, with higher sales in the second half of the year versus the first half. In oil and gas, reciprocating engines, although customers remain disciplined, we are encouraged by continued strength and demand for both well servicing and gas compression. Power generation reciprocating engine demand is expected to remain healthy, including strong data center growth. New equipment orders and services for solar turbines in both oil and gas and power generation are robust. Industrial remains healthy. In transportation, we anticipate strength in high-speed Marine as customers continue to upgrade aging fleets. Moving to Slide 7. We are contributing to a reduced carbon future and continue to invest in new products, technologies and services to help our customers achieve their climate-related objectives. We recently completed and upgraded more than 50 models across our entire next-generation hydraulic excavator line. The new models reduced fuel consumption by up to 25% compared to previous models and provide another option for customers to lower emissions, while improving operational efficiency. A customer can realize meaningful emissions reductions by simply moving to the newest next-gen model. This example reinforces our ongoing sustainability leadership and how we help our customers build a better, more sustainable world. In addition, we look forward to issuing our 18th annual sustainability report in May. With that, I'll turn the call over to Andrew.","evidence_gemma_new":null,"evidence_llama_3_3":"backlog fourth quarter of 2022","evidence_qwen_3_30b":"backlog $30.4 billion fourth quarter of 2022","gemma_new_max":null,"gemma_new_min":null,"llama_3_3_max":30400000000.0,"llama_3_3_min":30400000000.0,"qwen_3_30b_max":30400000000.0,"qwen_3_30b_min":30400000000.0}
{"symbol":"CAT","year":2023,"quarter":4,"date":"2023-FY","chunk_id":2,"sub_chunk_id":0,"centroid_label":"backlog","agreed_value":27500000000.0,"count":2,"chunk":"Jim Umpleby: Thanks, Ryan. Good morning, everyone. Thank you for joining us. As we close out 2023, I'd like to start by recognizing our global team for delivering another strong quarter and the best year in our 98-year history. For the year, we delivered record sales and revenues, record adjusted profit margin, record adjusted profit per share, and record ME&T free cash flow. Our results continue to reflect healthy demand across most of our end markets for our products and services. We remain focused on executing our strategy and continue to invest for long-term profitable growth. I'll begin with my perspectives about our performance in the quarter and for the full year. I'll then provide some insights about our end markets, followed by an update on our strategy. I'll then provide some insights about our end markets, followed by an update on our strategy and sustainability journey. Moving to quarterly results, it was another strong quarter. While sales and revenues increased 3% in the fourth quarter versus a strong quarter last year, our adjust operating profit increased by 15%. Adjusted operating profit margin improved to 18.9%, up 190 basis points versus last year. We also generated $3.2 billion of ME&T free cash flow in the quarter. Sales, adjusted operating profit margin, adjusted profit per share and ME&T free cash flow in the fourth quarter were all better than we expected. For the full year, we generated a 13% increase in total sales and revenues to $67.1 billion. Services also increased by 5% to $23 billion, a record. We generated $13.7 billion of adjusted operating profit in 2023, up 51% from 2022. Adjusted operating profit margin for the full year was 20.5%, a 510 basis point increase over the prior year. This exceeded the top end of our target margin range for this level of sales by 80 basis points. Adjusted profit per share in 2023 was $21.21, a 53% increase over 2022. In addition, we also generated $10 billion of ME&T free cash flow, exceeding the high end of our target range by over $2 billion for the full year. This performance led to continued growth in absolute OPACC dollars, which is our internal measure of profitable growth. As a result of our strong execution and record financial performance, we are increasing our target range for adjusted operating profit margin and ME&T free cash flow. We are increasing the top end of our adjusted operating profit margin range by 100 basis points relative to the corresponding level of sales. Moving to ME&T free cash flow, we've generated more than $30 billion over the last five years, including a record $10 billion in 2023. Based on our demonstrated ability to generate strong free cash flow, we are raising our ME&T free cash flow target range to $5 billion to $10 billion, up from $4 billion to $8 billion. Andrew will provide additional details around these updated targets. Turning to Slide 4. In the fourth quarter of 2023, sales and revenues increased by 3% to $17.1 billion, driven by favorable price realization and partially offset by lower volume. Both price and volume were slightly better than we expected. Compared to the fourth quarter of 2022, overall sales to users increased 8%, slightly better than our expectations. Energy & Transportation sales to users increased 20%. For machines, which includes Construction Industries and Resource Industries, sales to users rose by 3%. Sales to users in Construction Industries were up 4%. North American sales to users increased as demand remained healthy for non-residential and residential construction. Non-residential continued to benefit from government related infrastructure and construction projects. Residential sales to users in North America also increased in the quarter. Sales to users in EAME and Latin America were down slightly relative to a strong comparative. In Asia Pacific, sales to users declined in the quarter. In Resource Industries, sales to users increased 1%. In mining, sales to users also increased and in heavy construction and quarry and aggregates, sales to users declined against a strong comparative in 2022. In Energy & Transportation, sales to users increased by 20%. Oil and gas sales to users benefited from strong sales of turbines and turbine related services. We also saw continued strength in sales of reciprocating engines into gas compression and well servicing oil and gas applications, including the Tier 4 dynamic gas blending engines used in well servicing fleets. Power generation sales to users increased -- excuse me, power generation sales to users continued to remain positive due to favorable market conditions, including strong data center growth. Transportation sales to users also increased, while industrial declined from historically strong levels in 2022. Dealer inventory decreased by $900 million versus the third quarter. Machines declined by $1.4 billion, slightly more than we expected. We saw the largest decline in Construction Industries as dealer inventory decreased across all regions. The largest decline was in excavators. We remain comfortable with the total level of machine dealer inventory, which is within the typical range. Adjusted operating profit margin increased to 18.9% in the fourth quarter, a 190 basis point increase over last year. Adjusted operating profit margin was slightly better than we had anticipated. Relative to our margin expectations, we saw higher price realization and higher sales volume, both marginally better than expected. Turning to Slide 5, I'll now provide full year highlights. In 2023, we generated sales and revenues of $67.1 billion, up 13% versus last year. This was due to favorable price and higher sales volume, driven primarily by higher sales of equipment to end users. As I mentioned, we generated $23 billion of services revenue in 2023, a 5% increase over 2022. We continue to see improvement of customer value agreements with new equipment, which remains an important part of our services growth initiatives. We saw strong e-commerce sales growth as we continued to enhance our digital tools to make it easier for customers to identify and purchase the right parts. We added more than 100,000 new customers to our online channel. We also exceeded the e-commerce goal we shared at our May 2022 Investor Day. By combining the data from more than 1.5 million connected assets with our engineering expertise, advanced analytics and AI, we are helping customers avoid unplanned downtime through intelligent leads, which we call prioritized service events, or PSEs. We continue to execute our various service initiatives as we strive to achieve our 2026 target of $28 billion. Our full-year adjusted operating profit margin was 20.5%, a 510 basis point increase over 2022. Moving to Slide 6. We generated strong ME&T free cash flow of $10 billion in 2023, a $3.7 billion, or 58% increase over our previous record. We returned a record $7.5 billion to shareholders through repurchase stock and dividends. We remain proud of our Dividend Aristocrat status and continue to expect to return substantially all ME&T free cash flow to shareholders over time through dividends and share repurchases. Now on Slide 7, I'll describe our expectations moving forward. Overall demand remains healthy across most of our end markets for our products and services. We ended 2023 with a backlog of $27.5 billion, which remains elevated as a percentage of revenues compared to historical levels. We currently anticipate 2024 sales and revenues to be broadly similar to the record 2023 level. We expect continued strength in end user demand, including services growth, and a slight benefit from carryover pricing, offset by a dealer inventory headwind, which was a $2.1 billion benefit in 2023. We currently do not anticipate a significant change in dealer inventory of machines in 2024 as compared to an increase in 2023. Now, I'll discuss our outlook for key end markets, starting with construction industries. In North America, after a very strong 2023, we expect the region to remain healthy in 2024. We expect non-residential construction to remain at similar demand levels due to government-related infrastructure investments. Residential construction is expected to remain healthy relative to historical levels. In Asia Pacific, excluding China, we are seeing some softening in economic conditions. We anticipate China will remain at a relatively low level for the above 10-ton excavator industry. In EAME, we anticipate the region will be slightly down due to economic uncertainty in Europe, somewhat offset by continuing strong construction demand in the Middle East. Construction activity in Latin America is expected to increase due to easing financial conditions. In addition, we also anticipate the ongoing benefit of our services initiatives will positively impact construction industries in 2024. Next, I'll discuss Resource Industries. After strong performance in 2023 in mining, heavy construction and quarry and aggregates, we anticipate lower machine volume versus last year, primarily due to off-highway and articulated trucks. In addition, we anticipate a small decrease in dealer inventory during 2024 versus a slight increase in dealer inventory last year. While we continue to see a high level of quoting activity overall, we anticipate lower order rates as customers display capital discipline. We expect to see higher services revenues, including robust rebuild activity. Customer product utilization remains high, the number of parked trucks remains low, the age of the fleet remains elevated, and our autonomous solutions continue to see strong customer acceptance. We continue to believe the energy transition will support increased commodity demand over time, expanding our total addressable market and providing further opportunities for long-term profitable growth. Moving to Energy & Transportation. In oil and gas, we expect reciprocating engines and services to increase slightly after a strong 2023. As we said during the last two quarters, well servicing in North America is showing some short-term moderation. Gas compression order backlog remains healthy. And overall, we continue to remain optimistic about future demand. Cat reciprocating engine demand for power generation is expected to remain strong due to continued data center growth. Solar Turbines has a strong backlog and continues to experience robust quoting activity. As we said in the last quarter, industrial demand is expected to soften in the near term from a strong 2023. In transportation, we anticipate high-speed marine to increase slightly as customers continue to upgrade aging fleets. Moving to Slide 8. Now I'll provide an update on our strategy and sustainability journey. Over the past year, we have discussed constraints for our large engines, given the robust demand in power generation for data centers and in oil and gas. We believe that our total addressable market is expanding due to the secular growth trend for data centers relating to cloud computing and Generative AI. We also expect the energy transition to create opportunities for distributed generation. As more renewables are added to the grid, our reciprocating engine and gas turbine generator sets can help provide grid stability. We are making a large multiyear capital investment in our large engine division, including increasing capacity for both new engines and aftermarket parts. This will help us satisfy growing customer demand and contribute to future absolute OPACC dollar growth, which we believe has the highest correlation to total shareholder return over time. We continued to advance our sustainability journey in 2023. I'll highlight some recent announcements demonstrating our commitment to a reduced carbon future. Caterpillar had a goal that 100% of new products will be more sustainable than the previous generation, including by lowering fuel consumption and thus, corresponding emissions. One recent example is our 420 XE Backhoe Loader with the Cat 3.6 engine. Through internal testing in a typical mix of applications, it consumed up to 10% less fuel and produced up to 10% less tail pipe emissions than the previous model. Earlier this year, we announced the success of our collaboration with Microsoft and Ballard Power Systems to demonstrate the viability of using large-format hydrogen fuel cells to supply reliable and sustainable backup power for data centers. The demonstration validated the hydrogen fuel cell power systems performance in more than 6,000 feet above sea level and in below freezing conditions. Caterpillar led the project, providing the overall system integration, power electronics and microgrid controls that form the central structure of the hydrogen power solution. These examples reinforce our ongoing sustainability leadership. With that, I'll turn it over to Andrew.","evidence_gemma_new":null,"evidence_llama_3_3":"backlog 2023","evidence_qwen_3_30b":"backlog 27.5 billion elevated as a percentage of revenues historical levels 2023","gemma_new_max":null,"gemma_new_min":null,"llama_3_3_max":27500000000.0,"llama_3_3_min":27500000000.0,"qwen_3_30b_max":27500000000.0,"qwen_3_30b_min":27500000000.0}
{"symbol":"CAT","year":2023,"quarter":2,"date":"2023-Q2","chunk_id":2,"sub_chunk_id":0,"centroid_label":"backlog","agreed_value":30700000000.0,"count":2,"chunk":"James Umpleby: Thanks, Ryan. Good morning, everyone. Thank you for joining us. As we close out the first half of 2023, I want to recognize our global team for delivering a very strong second quarter. This included double-digit top-line growth, higher adjusted operating profit margin, record adjusted profit per share and robust ME&T free cash flow. Our results continued to reflect healthy demand across most end markets for our products and services. We remain focused on executing our strategy and continue to invest for long-term profitable growth. In today's call, I'll begin with my perspectives on our performance in the quarter. I'll then provide some insights on our end markets. Lastly, I'll provide an update on our sustainability journey. It was another strong quarter. Sales and revenues increased 22% in the second quarter versus last year. Adjusted operating profit margin improved 21.3%, up sequentially and year-over-year. We also generated $2.6 billion of ME&T free cash flow in the quarter. Our second quarter results were better than we expected for sales and revenues, adjusted operating profit margin, and ME&T free cash flow. In addition, we ended the quarter with a healthy backlog of $30.7 billion. We continue to see improvement in the supply chain, which allowed us to increase production in the quarter. However, areas of challenge remain, particularly for large engines, which impacts energy and transportation and some of our larger machines. While we continue to closely monitor global macroeconomic conditions, we now expect our 2023 results to be better than we had previously anticipated. Turning to Slide 4. In the second quarter of 2023, sales and revenues increased by 22% to $17.3 billion. This was primarily due to higher sales volume and price realization. Sales volumes were higher than we expected, largely due to an increase in dealer inventory relating to energy and transportation, which is supported by customer orders. We saw double-digit increases in sales and revenues in each of our three primary segments. Compared with the second quarter of 2022, overall sales to users increased 16%. For machines, which includes Construction Industries and Resource Industries, sales to users rose by 8%. Energy & Transportation was up 47%. Sales to users in Construction Industries were up 3%. North American sales to users increased and were better than expected as demand remained healthy for non-residential and residential construction. Non-residential continue to benefit from government-related infrastructure and construction projects. Residential sales to users in North America also increased in the quarter. EAME saw lower sales to users due to weaker than expected market conditions in Europe. The Middle East continued to demonstrate strong construction activity. In Latin America and Asia\/Pacific, sales to users declined in the quarter. In Resource Industries, sales to users increased 26%. In mining, sales to users increased, supported by commodities remaining above investment thresholds. Within heavy construction and quarry and aggregates, sales to users also increased, supported by growth for infrastructure-related projects. In Energy & Transportation, sales to users increased by 47% in the second quarter. All applications saw higher sales to users in the quarter. Oil and gas sales to users benefited from strong sales of turbines and turbine-related services. We also saw continued strength in sales of reciprocating engines into oil and gas applications, such as Tier 4 dynamic gas blending, gas compression, and repowering active well servicing fleets. Power generation sales to users continued to remain positive due to favorable market conditions, including strong data center growth. Industrial and transportation sales to users also increased. Dealer inventories increased by $600 million in the quarter, led by energy and transportation. We are very comfortable with the total level of dealer inventory, which remains in the typical range. Adjusted operating profit margin increased to 21.3% in the second quarter as we saw improvements, both on a sequential and year-over-year basis. Adjusted operating profit margin was better than we had anticipated, primarily due to better than expected volume growth and lower than expected manufacturing costs, including freight. Moving to Slide 5. We generated strong ME&T free cash flow of $2.6 billion in the second quarter. We returned $2 billion to shareholders, which included about $1.4 billion in repurchase stock and $600 million in dividends. In June, we announced an 8% dividend increase. Since May of 2019, when we introduced our current capital allocation strategy, we have increased the quarterly dividend per share by 51%. We remain proud of our dividend aristocrat status and continue to expect to return to substantially all ME&T free cash flow to shareholders over time through dividends and share repurchases. Now on Slide 6, I'll describe our expectations moving forward. While we continue to closely monitor global macroeconomic conditions, our second quarter results lead us to expect that full-year 2023 will now be even better than we described during our last earnings call. We now expect adjusted operating profit margins to be close to the top of the targeted range relative to the corresponding expected level of sales. This positive operating performance increases our expectations for ME&T free cash flow, which we now expect to be around the top of the $4 billion to $8 billion range for the full-year. Our current expectations for adjusted operating profit margin and ME&T free cash flow reflect continuing healthy customer demand and our strong operating performance. Now I'll discuss our outlook for key end markets this year, starting with the Construction Industries. In North America, overall, we continue to see positive momentum in 2023. We expect continued growth in non-residential construction in North America due to the positive impact of government-related infrastructure investments and a healthy pipeline of construction projects. Although residential construction growth has moderated, we expect the rest of 2023 to remain healthy. In Asia\/Pacific, excluding China, we expect growth in Construction Industries due to public infrastructure spending in support of commodity prices. We mentioned during our last earnings call that we expected sales in China to be below the typical 5% to 10% of our enterprise sales. We now expect further weakness as the 10-tons and above excavator industry has declined even more than we anticipated. In EAME, we anticipate that it will be flat to slightly up overall, with the Middle East exhibiting strong construction demand, whereas Europe is expected to be down. Construction activity in Latin America is expected to be down in 2023 versus a strong 2022 performance. In Resource Industries, we expect healthy mining demand to continue as commodity prices remain above investment thresholds. As I've mentioned previously, customers remain capital disciplined, which supports a gradual increase in mining over time. We anticipate production and utilization levels will remain elevated. We also expect the age of the fleet and the low level of park trucks to support future demand for our equipment and services. We continue to believe the energy transition will support increased commodity demand, expanding our total addressable market and providing further opportunities for profitable growth. In heavy construction and quarry and aggregates, we anticipate continued growth due to major infrastructure in non-residential construction projects. Now I'll discuss Energy & Transportation. For Cat reciprocating engines and oil and gas applications, although customers remain disciplined, we are encouraged by continuing strong demand for gas compression. Cat reciprocating engine demand for power generation is expected to remain healthy, including strong data center growth. New equipment orders and services for solar turbines in both oil and gas and power generation remain robust. Industrial continues to be healthy. In transportation, we anticipate strength in high speed marine as customers continued to upgrade aging fleets. Moving to Slide 7. We continued to advance our sustainability journey. Since our last quarterly earnings call, we published our 2022 sustainability report, which disclosed our estimated Scope 3 greenhouse gas emissions for the first time. We also published our first ever task force on climate-related financial disclosures report. We're helping our customers achieve their climate-related goals by continuing to invest in new products, technologies and services that facilitate fuel flexibility, increased operational efficiency and reduced emissions. For example, a customer in Chile is realizing fuel savings and lower emissions after purchasing our Cat D6 XE, the world's first high drive diesel-electric drive dozer. The customer reported a 30% reduction in fuel consumption versus the previous model working in the same operation. This example reinforces our ongoing sustainability leadership in how we help our customers build a better, more sustainable world. With that, I'll turn the call over to Andrew.","evidence_gemma_new":null,"evidence_llama_3_3":"backlog quarter","evidence_qwen_3_30b":"backlog","gemma_new_max":null,"gemma_new_min":null,"llama_3_3_max":30700000000.0,"llama_3_3_min":30700000000.0,"qwen_3_30b_max":30700000000.0,"qwen_3_30b_min":30700000000.0}
{"symbol":"CAT","year":2023,"quarter":2,"date":"2023-Q2","chunk_id":26,"sub_chunk_id":0,"centroid_label":"backlog","agreed_value":300000000.0,"count":3,"chunk":"Tami Zakaria: Hi, good morning. Thank you so much. So going back to backlog, it went up by $300 million sequentially. What exactly drove that? Was it purely driven by pricing? Or did you see a net increase in order volumes in the quarter as well?","evidence_gemma_new":"backlog sequentially","evidence_llama_3_3":"backlog sequentially","evidence_qwen_3_30b":"backlog $300 million sequentially","gemma_new_max":300000000.0,"gemma_new_min":300000000.0,"llama_3_3_max":300000000.0,"llama_3_3_min":300000000.0,"qwen_3_30b_max":300000000.0,"qwen_3_30b_min":300000000.0}
{"symbol":"CAT","year":2023,"quarter":3,"date":"2023-Q3","chunk_id":2,"sub_chunk_id":0,"centroid_label":"backlog","agreed_value":28100000000.0,"count":3,"chunk":"Jim Umpleby: Thanks, Ryan. Good morning, everyone. Thank you for joining us. Before discussing our results, I'd like to take a moment to acknowledge the tragic events in the Middle East. We are deeply saddened by the loss of life, and are hopeful for a quick and peaceful resolution. The Caterpillar Foundation is donating $1 million to the American Red Cross, and its network of Red Crescent Societies in the region, to support the humanitarian needs of those impacted. As we closed out the third quarter, I want to thank our global team for delivering another strong quarter. This included double-digit top line growth, strong adjusted operating profit margin, and robust ME&T free cash flow. Our results continue to reflect healthy demand across most of our end markets for our products and services. We remain focused on executing our strategy, and continue to invest for long-term profitable growth. I'll begin with my perspectives about our performance in the quarter. I'll then provide some insights about our end markets. Lastly, I'll provide an update on our sustainability journey. Moving to quarterly results, it was another strong quarter. Sales and revenues increased 12% in the third quarter versus last year. Adjusted operating profit margin improved to 20.8%, up significantly year-over-year. We also generated $2.9 billion of ME&T free cash flow in the quarter. Sales were generally in line with our expectations, while both adjusted operating profit margin, and ME&T free cash flow in the third quarter were better than we expected. In addition, we ended the quarter with a healthy backlog of $28.1 billion. Backlog is a function of demand and lead times. As I've mentioned, demand remains healthy in most of our end markets. Due to improving supply chain conditions, product availability and lead times have improved for many products. Dealers and customers can wait longer to place orders, which has led to a moderation in order rates, as expected. In addition, we have seen a reduction in dealer orders for building construction products, which we anticipated, due to the changeover to CAT engines that we previously discussed, and for excavation, in anticipation of dealers reducing their inventories in the fourth quarter. Although, our backlog declined as expected, it still remains elevated as a percentage of revenues compared to historic levels. While we continue to closely monitor global macroeconomic conditions, we now expect our full-year 2023 results to be better than we anticipated during our last earnings call. Turning to Slide 4. In the third quarter of 2023, sales and revenues increased by 12% to $16.8 billion, driven primarily by favorable price realization, as well as volume growth. Sales increased in each of our three primary segments. Compared with the third quarter of 2022, overall sales to users increased 13%, which was below our expectations. Energy & Transportation sales to users increased 34%, but was lower than expected due to some supply chain challenges for large engines, and the timing of gas turbine in international locomotive deliveries. For machines, which includes Construction Industries and Resource Industries, sales to users rose by 7%, in line with expectations. Sales to users in Construction Industries were up 6%. North American sales to users increased as demand remained healthy for non-residential, and residential construction. Non-residential continued to benefit from government-related infrastructure and construction projects. Residential sales to users in North America also increased in the quarter. EAME sales to users were up slightly, primarily due to continuing strength in Middle East construction activity. In Latin America and Asia-Pacific, sales to users declined in the quarter. In Resource Industries, sales to users increased 10%. In mining, sales to users increased with commodities remaining above investment thresholds. Within heavy construction, and quarry and aggregates, sales to users also increased, supported by growth for infrastructure-related projects. In Energy & Transportation, sales to users increased by 34%. All applications saw higher sales to users in the quarter. Oil and gas sales to users benefited from strong sales of turbines, and turbine-related services. We also saw continued strength in sales of reciprocating engines into oil and gas applications such as Tier 4 dynamic gas blending, repowering well servicing fleets and gas compression. Power generation sales to users continued to remain positive, due to favorable market conditions, including strong data center growth. Industrial and transportation sales to users also increased. Dealer inventories increased by $600 million in the quarter, led by Construction Industries and followed by Energy & Transportation. In Construction Industries, the increase was in North America in some of our most constrained product lines including BCP and Earthmoving. We remain very comfortable with the total level of dealer inventory, which is within the typical range. Andrew will provide more color later in the call. Adjusted operating profit margin increased to 20.8% in the third quarter, a 430 basis point increase over last year. Adjusted operating profit margin was better than we had anticipated. Relative to our expectations, we saw lower-than-expected manufacturing costs, including freight, as well as slightly favorable price realization, which included the positive impact from geographic mix. Moving to Slide 5. We generated strong ME&T free cash flow of $2.9 billion in the third quarter, and $6.8 billion in the first three quarters of 2023. Year-to-date, we returned $4.1 billion to shareholders, which included about $2.2 billion of repurchased stock, and $1.9 billion in dividends. We remain proud of our Dividend Aristocrat status, and continue to expect to return substantially all ME&T free cash flow to shareholders over time through dividends and share repurchases. Now on Slide 6, I'll describe our expectations moving forward. As I mentioned earlier, we now anticipate the full year to be better than we previously expected. We expect our adjusted operating profit margin to be slightly above the targeted range relative to the corresponding level of sales. This positive operating performance increases our expectations for ME&T free cash flow, which we now expect will exceed the $4 billion to $8 billion target range for the full year. This outlook for the adjusted operating profit margin, and ME&T free cash flow, reflects healthy customer demand and our strong operating performance. Now, I'll discuss our outlook for key end markets starting with Construction Industries. In North America overall, we continue to see positive momentum. We expect continued growth in non-residential construction in North America due to the impact of government-related infrastructure investments, and a healthy pipeline of construction projects. Although, residential construction growth has moderated, we expect it to remain healthy. In Asia Pacific, excluding China, we expect growth in Construction Industries due to public infrastructure spending, in support of commodity prices. As we have mentioned during previous earnings calls, we anticipate continued weakness in China, and expect it to remain well below our typical range of 5% to 10% of enterprise sales. In EAME, we anticipate the region will be slightly down as weakness continues in Europe, partially offset by continuing strong construction demand in the Middle East. Construction activity in Latin America is expected to be about flat versus strong 2022 performance. In Resource Industries, we continue to see a high level of quoting activity. In mining, customer product utilization remains high. The number of parked trucks remains low, and the age of the fleet remains elevated. Order rates are slightly lower than we expected at this time, reflecting continued capital discipline by our customers. We continue to believe the energy transition will support increased commodity demand over time, expanding our total addressable market, and providing further opportunities for long-term profitable growth. In addition, customer acceptance of our autonomous solutions continues to grow. This is evidenced by the announcement this morning with Freeport-McMoRan, who will convert their fleet of Cat 793 large mining trucks at an Arizona copper mine to autonomous haulage using Cat MineStar Command. We also expect heavy construction, and quarry and aggregates to remain in healthy levels due to major infrastructure in non-residential construction projects. Moving to Energy & Transportation. In oil and gas, we remain encouraged by continuing strong demand for Cat reciprocating engines and gas compression. As we said last quarter, well servicing in North America is showing some short-term moderation, but we remain optimistic about future demand. Cat reciprocating engine demand for power generation is expected to remain strong, primarily driven by data center growth. New equipment and services for solar turbines in both oil and gas and power generation remain robust. Industrial demand is expected to soften slightly from recent high levels, but remains well above our historical averages. In transportation, we anticipate strength in high-speed marine as customers continue to upgrade aging fleets. As we've described, we continue to see strength in most of our end markets. Based on our backlog, dealer inventory, and current market conditions, we expect to have another good year in 2024. We will provide additional information during our fourth quarter call. Moving to Slide 7. We continue to advance our sustainability journey. We're helping our customers achieve their climate related objectives by continuing to invest in new products, technologies, and services, that facilitate fuel flexibility, increased operational efficiency, and reduced emissions. For example, Caterpillar provides a number of low-carbon intensity solutions to customers. In Construction Industries, the Cat 980 XE Wheel Loader, which features a Cat designed and manufactured continuous variable transmission, improves fuel efficiency by as much as 35%, and reduces CO2 emissions by as much as 17% compared to the previous model. We also introduced the new Cat G3600 Gen 2 engine, the latest evolution of the powerful G3600 series, offering lower emissions. With more than 8,500 Cat G3600 units in the field, the Gen 2 engine is designed to build upon the platform's robust performance, to provide a 10% increase in power, and lower emissions compared to the previous model. We've also made several joint announcements with customers that demonstrate our commitment to supporting their climate-related objectives. I'll highlight one here. In September, Caterpillar and Albemarle introduced a unique collaboration, aimed to support their efforts to establish Kings Mountain, North Carolina as the first-ever zero emissions lithium mine in North America, while also making lithium available for use in Caterpillar battery production. These examples reinforce our ongoing sustainability leadership, and how we're helping our customers build a better, more sustainable world. With that, I will turn it over to Andrew.","evidence_gemma_new":"backlog","evidence_llama_3_3":"backlog $28.1 billion third quarter","evidence_qwen_3_30b":"backlog $28.1 billion end of the quarter","gemma_new_max":28100000000.0,"gemma_new_min":28100000000.0,"llama_3_3_max":28100000000.0,"llama_3_3_min":28100000000.0,"qwen_3_30b_max":28100000000.0,"qwen_3_30b_min":28100000000.0}
{"symbol":"CAT","year":2024,"quarter":1,"date":"2023-Q4","chunk_id":2,"sub_chunk_id":0,"centroid_label":"backlog","agreed_value":27900000000.0,"count":2,"chunk":"Jim Umpleby : Thanks, Ryan. Good morning, everyone. Thank you for joining us. I'd like to start by thanking our global team for delivering another strong quarter, including higher adjusted operating profit margin, record adjusted profit per share, and strong ME&T free cash flow. Our strong balance sheet and ME&T free cash flow allowed us to deploy a record $5.1 billion of cash for share repurchases and dividends in the first quarter. Our results reflect a continuation of healthy demand for our products and services across most of our end markets. We remain focused on executing our strategy and continue to invest for long-term profitable growth. I'll begin with my perspectives about our performance in the quarter. I'll then provide some insights about our end markets, followed by an update on our sustainability journey. It was another strong quarter. Sales and revenues were about flat in the quarter versus last year, broadly in line with our expectations. Services revenues increased in the quarter. Our adjusted operating profit increased by 5% to $3.5 billion. Adjusted operating profit margin was slightly better than we expected and improved to 22.2% up a 110 basis points versus last year. We achieved a record adjusted profit per share of $5.60 up 14%. We also generated strong ME&T free cash flow in the quarter of $1.3 billion. In addition, our backlog increased to $27.9 billion up $400 million versus the fourth quarter of 2023. We continue to expect 2024 sales and revenues to be broadly similar to the record 2023 level. We have revised our full year 2024 segment expectations to reflect a slightly stronger top line in Energy & Transportation offset by softening in the European market for Construction Industries. We anticipate services to be higher in 2024 as we strive to achieve our 2026 target of $28 billion. For the year, we continue to expect adjusted operating profit margin and ME&T free cash flow to be in the top half of our target ranges. Turning to slide four. In the first quarter of 2024 sales and revenues remained about flat at $15.8 billion. Compared to our expectations, sales volume was slightly lower while price realization, including geographic mix, was better than we anticipated. Compared to the first quarter of 2023, overall sales to users decreased by 5%. This was slightly lower than we expected, mainly due to weakness in Europe for Construction Industries. Energy & Transportation continued to show strength, where sales to users increased 9%. For machines, which includes Construction Industries and Resource Industries, sales to users declined by 9%. Focusing on Construction Industries, sales to users were down 5%. In North America, our largest geographic region for Construction Industries, sales to users increased as expected, and demand remained healthy for both non-residential and residential construction. Construction projects, as well as government related infrastructure, continue to benefit non-residential demand. Although residential sales to users in North America were down slightly, demand for new housing remained strong. Sales to users declined in EAME primarily due to weakness in Europe related to residential construction and economic conditions. Latin America and Asia Pacific sales to users also saw some declines. In Resource Industries, sales to users declined 17% in the first quarter compared to a very strong first quarter in 2023. Mining, as well as heavy construction and quarry and aggregates were lower, mainly due to softness in off-highway and articulated trucks that we mentioned during our last earnings call. In Energy & Transportation, sales to users increased by 9%. Oil and gas sales to users benefited from strong sales of turbines and turbine-related services. We also saw increased sales of reciprocating engines in the gas compression and well servicing oil and gas applications. Power generation sales to users grew as market conditions remained favorable, including strong data center growth. Transportation sales to users increased while industrial declined as we expected from strong levels last year. In total, dealer inventory increased by $1.4 billion versus the fourth quarter. For machines, dealer inventory increased by $1.1 billion, which was slightly higher than our expectations, largely due to sales to users being modestly lower than anticipated. The increase in machine dealer inventory is consistent with normal seasonal patterns of which Construction Industries products accounted for the majority of the increase. The total level of machine dealer inventory is comfortably within the typical range. As I mentioned, backlog increased to $27.9 billion, up $400 million versus the fourth quarter of 2023, led by Energy & Transportation. Backlog remains elevated as a percentage of revenues compared to historical levels. Adjusted operating profit margin increased to 22.2% in the first quarter, a 110 basis point increase over last year, which was slightly better than we anticipated. This was primarily due to better than expected manufacturing costs, mainly related to freight. Moving to slide five. We generated strong ME&T free cash flow of $1.3 billion in the first quarter. We deployed $5.1 billion of cash for share repurchases and dividends in the first quarter, including the initiation of a $3.5 billion accelerated share repurchase program which may last up to nine months. We remain proud of our Dividend Aristocrat status and continue to expect to return substantially all ME&T free cash flow to shareholders over time through dividends and share repurchases. Now on slide six, I'll describe our expectations moving forward. We expect a continuation of healthy demand across most of our end markets for our products and services. We continue to anticipate 2024 sales and revenues to be broadly similar to the record 2023 level. As I mentioned, we expect services to continue to grow in 2024. We currently do not anticipate a significant change in dealer inventory in machines in 2024, compared to a $700 million increase in 2023. This is expected to be a headwind to sales in 2024. As a reminder, dealers are independent businesses and manage their own inventories. The vast majority of dealer inventories in Energy & Transportation are backed by firm customer orders. The timing of these products being recognized as sales to users is impacted by dealer packaging and commissioning, which is why it is difficult to predict dealer inventory in E&T. This is why we have become more explicit about the differentiation between machine dealer inventory and total dealer inventory. As I mentioned, we anticipate that our 2024 results will be within the top half of our target ranges for both adjusted operating profit margin and ME&T free cash flow. Our strong results continue to reflect the diversity of our end markets, as well as the disciplined execution of our strategy for profitable growth. Now, I'll discuss our outlook for key end markets starting with Construction Industries. In North America, after a very strong 2023, we continue to expect demand in the region will remain healthy in 2024 for both non-residential and residential construction. We anticipate non-residential construction to remain at similar levels to slightly higher demand levels compared to last year due to construction projects, as well as government related infrastructure. Residential construction demand is expected to be flat to slightly down versus last year, which remains strong in comparison to historical levels. In Asia Pacific, outside of China, we are seeing some softening in economic conditions. We anticipate demand in China will remain at a relatively low level for the above 10-ton excavator industry. In EAME, we anticipate that weak economic conditions in Europe will continue, somewhat offset by strong construction activity in the Middle East. Construction activity in Latin America remains mixed, but overall, we are expecting modest growth. In addition, we expect the ongoing benefit of our services initiatives will positively impact Construction Industries in 2024. Next, I'll discuss Resource Industries. After strong performance in 2023 in mining, as well as heavy construction and quarry and aggregates, we anticipate lower machine volume versus last year, primarily due to off-highway and articulated trucks. In addition, we anticipate a small decrease in resource industry dealer inventories during 2024 versus a slight increase last year. While we continue to see a high level of quoting activity overall, we anticipate lower order rates as customers display capital discipline. We expect to see higher services revenues, including robust rebuild activity. Customer product utilization remains high, the number of parked trucks remains low, and the age of the fleet remains elevated, and our autonomous solutions continue to see strong customer acceptance. We continue to believe the energy transition will support increased commodity demand over time, expanding our total addressable market, and providing further opportunities for long-term profitable growth. Moving to Energy & Transportation. In oil and gas, we expect reciprocating engines and services to be about flat after strong 2023 performance. We expect reciprocating gas compression demand to be higher in 2024 than it was in 2023. While servicing demand in North America is expected to soften, Cat reciprocating engine demand for power generation is expected to remain strong, largely due to continued data center growth relating to Cloud Computing and Generative AI. Last quarter, I mentioned we are making a multi-year capital investment in our large reciprocating engine division, including increasing capacity for both new engines and aftermarket parts. This investment will approximately double output for large engines and aftermarket parts as compared to 2023. We leverage these large engines across a variety of applications, including data centers, oil and gas, large mining trucks, and distributed power generation. For Solar Turbines, our backlog and quoting activity both remain strong for oil and gas and power generation. As we said previously, industrial demand is expected to soften relative to a strong 2023. In transportation, we anticipate high-speed marine to increase as customers continue to upgrade aging fleets. Moving to slide seven, I'll provide an update on our sustainability journey. We are contributing to a reduced carbon future and continue to invest in new products technologies and services, to help our customers achieve their climate related objectives. In January we announced the signing of an electrification strategic agreement with CRH to advance the deployment of Caterpillar\u2018s Zero-Exhaust Emissions Solutions. CRH is the number one aggregate producer in North America and the first company in that industry to sign such an agreement with Caterpillar. The agreement is focused on accelerating the deployment of Caterpillar\u2019s 70-ton to 100-ton class battery electric off-highway trucks and charging solutions at a CRH site in North America. Through the agreement CRH will participate in Caterpillar\u2019s early learner program for battery electric off-highway trucks. In February Caterpillar oil and gas announced the launch of the Cat Hybrid Energy Storage Solution to help drillers and operators cut fuel consumption, lower total cost of ownership and reduce emissions in oil and gas operations. The custom designed energy storage system stores excess power from the job site and then discharges it as needed. In a hybrid system that combines the Cat Hybrid Energy Storage Solution in a natural gas fuel generator set, the transient response is even quicker than a conventional diesel only rigs. Depending upon site configuration the Hybrid Energy Storage Solution has proven to deliver up to 30% fuel cost savings with natural gas, 85% fuel cost savings with fuel gas, and up to an 80% reduction in nitrogen oxides. Carbon dioxide equivalent reductions up to 11% and 7% are possible with natural gas and fuel gas respectively. In addition, we look forward to issuing our 19th Annual Sustainability Report in May. The material in our report reinforce our ongoing commitment to sustainability. With that I'll turn it over to Andrew.","evidence_gemma_new":"backlog fourth quarter of 2023","evidence_llama_3_3":null,"evidence_qwen_3_30b":"backlog $27.9 billion $400 million fourth quarter of 2023","gemma_new_max":27900000000.0,"gemma_new_min":27900000000.0,"llama_3_3_max":null,"llama_3_3_min":null,"qwen_3_30b_max":27900000000.0,"qwen_3_30b_min":27900000000.0}
{"symbol":"CAT","year":2024,"quarter":2,"date":"2024-Q2","chunk_id":2,"sub_chunk_id":0,"centroid_label":"backlog","agreed_value":28600000000.0,"count":2,"chunk":"James Umpleby: Thanks, Ryan. Good morning, everyone. Thank you for joining us. I'd like to start by thanking our global team for their strong execution in the first half of the year. In the second quarter, we achieved higher adjusted operating profit margin, record adjusted profit per share and generated robust ME&T free cash flow. Our results continue to reflect the benefit of the diversity of our end-markets as well as the disciplined execution of our strategy for long-term profitable growth. I'll begin with my perspectives about our performance in the quarter and we'll provide an update on our full year expectations. I'll then provide some insights about our end-markets, followed by an update on our sustainability journey. Moving to quarterly results. Sales and revenues were down 4% in the second quarter versus last year, slightly below our expectations. Services increased in the quarter. Our adjusted operating profit increased to $3.7 billion, a record. Adjusted operating profit margin was better than we expected and improved to 22.4% up 110 basis points versus last year. We achieved a record quarterly adjusted profit per share of $5.99, up 8%. We also generated $2.5 billion of ME&T free cash flow in the quarter. In addition, our backlog increased to $28.6 billion, up $700 million versus the first quarter of 2024. Before I get into the detail of the quarter and outlook for our segments, I'll update our expectations for the full year based on our first half results. Earlier in the year, we estimated that sales and revenues would be broadly similar for the full year. For the first half, the top-line came in marginally below our expectations and ended 2% below the prior year. We now anticipate our sales and revenues will decline at a roughly similar rate in the second half versus the prior year, in-part due to our latest assumptions for dealer inventory, principally into Resource Industries. Overall sales to users and construction industries are running slightly lower than we anticipated, partially offset by stronger-than-expected sales in Energy and Transportation. Service revenues continue to grow. Although sales and revenues have been marginally below our expectations, adjusted operating profit margins have been stronger than we anticipated. Earlier in the year, we expected our adjusted operating profit margin to be in the top half of the target range at the corresponding level of sales. Due to the strength of our performance in the first half of the year, we now expect overall adjusted operating profit margins to be above the top of the target range for the full year. For the second half, we expect adjusted operating profit margins to be better than we previously anticipated or about flat to the second half of 2023, which Andrew will describe. The strength of our performance to date and our improved second half adjusted operating profit margin expectations give us confidence to guide above our target range. Overall, our expectations for full year adjusted operating profit and adjusted profit per share are now higher than it was during our last earnings call. We also anticipate that ME&T free cash flow will remain in the top half of the free cash flow target range. Turning to Slide 4 and our second quarter results. In the second quarter of 2024, sales and revenues declined 4% to $16.7 billion. Sales volume declined slightly more than we expected, while price realization, including geographic mix was better than we anticipated. Dealer inventory also declined in the second quarter. Compared to the second quarter of 2023, overall sales to users decreased 3%, slightly below expectations. For machines, which includes Construction Industries and Resource Industries, sales to users declined by 8%, slightly more than expected. Energy and transportation continued to show strength as sales to users increased 10%. Sales to users in Construction Industries were down 5%. In North America, sales to users were slightly lower than anticipated, primarily due to weaker than expected rental fleet loading. Government related infrastructure projects remained healthy. Residential sales to users in North America were up as demand for new housing remained resilient. Sales to users declined in the EAME, primarily due to weakness in Europe relating to residential construction and economic conditions. Sales to users in Asia Pacific declined, while Latin America increased. In Resource Industries, sales to users declined 15%, a slightly smaller decline than we expected versus a very strong second quarter in 2023. Mining as well as heavy construction and quarry and aggregates were lower, mainly due to softness we previously discussed for two products, articulated trucks and off-highway trucks. In Energy and Transportation, despite the ongoing weakness in industrial, sales to users increased by 10% as we continue to see strength across most applications. Oil and gas sales to users benefited from strong sales of turbines and turbine related services. We also saw increased sales of reciprocating engines into gas compression, while well servicing oil and gas applications were lower. Power generation sales to users grew as market conditions remained favorable, including strong data center growth. Transportation sales to users increased, while industrial declined as expected from the strong levels last year. Our results continue to reflect the benefit of the diversity of our end-markets as well as the disciplined execution of our strategy for long-term profitable growth. Moving to dealer inventory. In total, dealer inventory decreased by $200 million versus the first quarter. For machines, dealer inventory decreased by $400 million and remains within our typical range. As I mentioned, backlog increased to $28.6 billion, up $700 million versus the first quarter of 2024. Energy & Transportation drove the increase as we continue to see strong demand for solar turbines and reciprocating engines for power generation. Adjusted operating profit margin increased to 22.4% in the second quarter, a 110 basis point increase over last year, which was better than we anticipated. Margin exceeded our expectations, primarily due to lower than expected manufacturing costs and slightly better than expected price. Moving to Slide 5, we generated ME&T free cash flow of $2.5 billion in the second quarter. We deployed more than $1.8 billion of cash for share repurchases and about $600 million in dividends in the second quarter. In June, we announced an additional $20 billion share repurchase authorization with no expiration date. We remain committed to consistent share repurchases. Since 2019, when we communicated our intention to return substantially all ME&T free cash flow to shareholders over time, our net share count has decreased by approximately 18%. In addition, we increased our dividend by 8% in the second quarter, which is our fourth straight year of a high single-digit quarterly increase. We remain proud of our Dividend Aristocrat status and continue to expect to return substantially all ME&T free cash to shareholders over time through dividends and share repurchases. Now on Slide 6. I'll describe our expectations for our three primary segments moving forward. In Construction Industries, after a record 2023, sales to users in the second half are now expected to decline slightly versus last year. In North America, we now anticipate slightly lower construction industry sales to users for full year 2024 than we did previously, primarily due to weaker than expected rental fleet loading. Government related infrastructure projects are expected to remain healthy. In Asia Pacific, outside of China, we still expect soft economic conditions to continue. We anticipate demand in China will remain at a relatively low level for the above 10 ton excavator industry. In the EAME, we anticipate that weak economic conditions in Europe will continue, somewhat offset by continued healthy construction demand in the Middle East. Construction activity in Latin America remains mixed, but overall, we are expecting modest growth. In addition, we are expecting the ongoing benefit of our services initiatives will positively impact Construction Industries. Next, I'll discuss Resource Industries. After strong performance in 2023 in mining as well as heavy construction, in quarry and aggregates, we continue to anticipate lower machine volume versus last year, primarily due to off-highway and articulated trucks. We currently anticipate a decrease in Resource Industries dealer inventories in 2024 versus a slight increase last year. We expect to see higher services revenues, including robust rebuild activity. Customer product utilization remains high, the number of parked trucks remains low and the age of the fleet remains elevated and our autonomous solutions continue to see strong customer acceptance. Customers continue to display capital discipline, however, we continue to believe the energy transition will support increased commodity demand over time, expanding our total addressable market and providing further opportunities for long-term profitable growth. Moving to Energy & Transportation. In oil and gas, in total, we expect a stronger year overall in 2024 versus last year. After a strong 2023, we expect reciprocating engine sales in oil and gas to be flat to slightly down, primarily due to ongoing softness in well servicing. We still expect gas compression to be up for the full year, however, we expect it to soften in the second half. For solar turbines, we continue to expect volume growth in the second half as our backlog remains strong for oil and gas. CAT reciprocating engine and solar turbine demand for power generation is expected to remain strong, largely due to continued data center growth relating to cloud computing and Generative AI. Industrial demand is expected to remain at a relatively low level compared to 2023 in the second half. In Transportation, we anticipate growth as the year progresses in both high speed marine and rail services. Moving to Slide 7. I'll provide an update on our sustainability journey. We are contributing to a reduced carbon future and continue to invest in new products, technologies and services to help our customers achieve their climate related objectives. In April, Caterpillar and Vale signed an agreement to test battery-electric large mining trucks as well as to conduct studies on ethanol powered trucks. Progress has been made on both initiatives since the agreement was signed, including conducting a joint study on a dual-fuel solution for haul trucks operating on ethanol and diesel fuel. We are supporting Vale's sustainability objectives. In June, we added CAT CG260 Gas Generator sets to our portfolio of commercially available power solutions capable of running on hydrogen fuel. Previously, our portfolio with this capability ranged from 400 KW to 2,500 KW. The addition of the CG260 now provides up to 4,500 KW of electric power for continuous, prime and load management requirements and is approved to operate on gas containing up to 25% hydrogen by volume. Caterpillar offers retrofit kits to upgrade CG260 Generator sets already installed with these same hydrogen capabilities. In addition to our hydrogen capabilities and reciprocating engines, solar turbines has been a leader with its ability to burn a wide variety of fuels, including hydrogen, natural gas and biofuels. Today, Caterpillar has a large and growing lineup of technologies to support customers in their sustainability journey. These two examples highlight how we are helping our customers build a better, more sustainable world. With that, I'll turn it over to Andrew.","evidence_gemma_new":null,"evidence_llama_3_3":"backlog second quarter","evidence_qwen_3_30b":"backlog increased slightly $28.7 billion second quarter","gemma_new_max":null,"gemma_new_min":null,"llama_3_3_max":28600000000.0,"llama_3_3_min":28600000000.0,"qwen_3_30b_max":28700000000.0,"qwen_3_30b_min":28700000000.0}
{"symbol":"CAT","year":2024,"quarter":3,"date":"2024-Q3","chunk_id":2,"sub_chunk_id":0,"centroid_label":"backlog","agreed_value":28700000000.0,"count":2,"chunk":"Jim Umpleby: Thanks, Ryan. Good morning, everyone. Thank you for joining us. As we close out the third quarter, I want to thank our global team for another good quarter as our results reflect the benefit of the diversity of our end markets. We delivered strong adjusted operating profit margin and adjusted profit per share, which were consistent with our expectations, although our top-line was lower than we anticipated. We also generated ME&T free cash flow of $2.7 billion in the third quarter. Our robust ME&T free cash flow, along with our strong balance sheet, allowed us to deploy over $9 billion to shareholders through share repurchases and dividends during the first three quarters of the year, including $1.5 billion this quarter. We continue to remain disciplined in the execution of our strategy for long-term profitable growth. I'll begin with my perspectives about our performance in the quarter and will provide an update on our full year expectations. I'll then provide some insights about our end markets, followed by an update on our strategy and sustainability journey. Moving to quarterly results. Sales and revenues were down 4% in the third quarter versus last year, below our expectations due to the impact of lower-than-expected sales to users in Construction Industries and timing of deliveries in Resource Industries and Energy & Transportation. Services increased in the quarter compared to 2023. Adjusted operating profit margin was generally in line with our expectations at 20%. We achieved quarterly adjusted profit per share of $5.17, in line with our expectations at the time of the last earnings call. In addition, our backlog increased slightly to $28.7 billion and remains at a very healthy level. For the full year, although we updated our expectations since our last earnings call to reflect sales being slightly below our prior estimate, our expected adjusted operating profit margin is unchanged and remains above the top of the range. Also, our expectation for adjusted profit per share is unchanged. We are increasing our expectations for ME&T free cash flow and now anticipate it will be near the top of our target range of $5 billion to $10 billion. Turning to Slide 4. In the third quarter of 2024, sales and revenues declined 4% to $16.1 billion due to lower sales volume. Compared to the third quarter of 2023, overall sales to users decreased 6%. For Machines, which includes Construction Industries and Resource Industries, sales to users declined by 10%, which was below our expectations. Energy & Transportation continued to grow as sales to users increased 5%. Sales to users in Construction Industries were down 7% year-over-year. In North America, sales to users were down primarily due to lower rental fleet loading and the absence of a large pipeline deal in the third quarter of 2023. Excluding these two items, sales to users were about flat versus the prior year. Compared to our expectations, sales to users were lower than expected, impacted by rental fleet loading. Our dealers' rental revenue continued to grow in the quarter. Sales to users declined in EAME, primarily due to ongoing weakness in construction activity in Europe. Sales to users in Asia Pacific declined, while Latin America increased. In Resource Industries, sales to users declined 18%, generally in line with our expectations versus a strong third quarter in 2023. Mining, as well as heavy construction, and quarry and aggregates were lower, mainly due to softness we previously discussed for two products, articulated trucks and off-highway trucks. In Energy & Transportation, sales to users increased by 5%, and we continue to see growth in all applications except industrial. Power generation sales to users grew strongly as market conditions remained favorable for both reciprocating engines and solar turbines and turbine-related services. Oil and gas sales to users benefited from strong sales of turbines and turbine-related services. For reciprocating engines in oil and gas applications, sales to users were higher for gas compression but lower in well servicing. Transportation sales to users increased, while industrial declined as we expected. Our results continue to reflect the benefit of the diversity of our end markets, as well as the disciplined execution of our strategy for long-term profitable growth. Moving to dealer inventory and our backlog. In total, dealer inventory increased by $400 million versus the second quarter of 2024. For Machines, dealer inventory increased by $100 million, slightly more than we had anticipated. Looking ahead to the fourth quarter, our current planning assumptions forecast a reduction in machine dealer inventory, and we expect machine dealer inventory to end the year around the same level as year-end 2023. Dealers are independent businesses and make stocking decisions across a wide range of products based on multiple factors across the product portfolio. While machine dealer inventory is currently around the top end of the typical range, we remain comfortable with the overall level of dealer inventory. As I mentioned, backlog increased slightly versus the second quarter to $28.7 billion. Energy & Transportation increased as we continue to see strong demand for solar turbines in oil and gas and power generation, as well as strong demand for reciprocating engines for power generation. Moving to Slide 5, we generated robust ME&T free cash flow of $2.7 billion in the third quarter and $6.4 billion in the first three quarters of 2024. As I mentioned, year-to-date, we deployed more than $9 billion to shareholders through share repurchases and dividends. We remain proud of our dividend aristocrat status and continue to expect to return substantially all ME&T free cash flow to shareholders over time through dividends and share repurchases. Now, on Slide 6, I'll describe our expectations for our three primary segments moving forward. In Construction Industries, we expect lower sales to users in the fourth quarter, but remain positive about the longer-term demand outlook. During our August earnings call, we noted a lower level of rental fleet loading in North America, which continued into the third quarter, and we now expect the trend to persist in the fourth quarter. Although we have lowered our expectations for sales to users in the fourth quarter, primarily due to lower rental fleet loading, dealer rental revenue continues to grow. In addition, government-related infrastructure projects are expected to remain healthy, supported by funding yet to be spent from the IIJA. In Asia Pacific, outside of China, we expect soft economic conditions to continue. We anticipate demand in China will remain at a relatively low level for the above 10-ton excavator industry. In EAME, we anticipate that weak economic conditions in Europe will continue, partially offset by continued healthy construction demand in the Middle East. Construction activity in Latin America remains healthy, and we are expecting modest growth to continue. In addition, we expect the ongoing benefit of our services initiatives will positively impact Construction Industries. Next, I'll discuss Resource Industries. After strong performance in 2023 in mining as well as heavy construction and quarry and aggregates, we continue to anticipate lower machine volume in the fourth quarter of 2024 versus last year. However, the rate of decline for sales to users in the fourth quarter is expected to moderate versus the previous quarters. We expect to see higher services revenues, including robust rebuild activity. Customer product utilization remains high, the number of parked trucks remains relatively low, the age of the fleet remains elevated, and our autonomous solutions continue to see strong customer acceptance. Customers continue to display capital discipline. However, we continue to believe the energy transition will support increased commodity demand over time, expanding our total addressable market and providing further opportunities for long-term profitable growth. Moving to Energy & Transportation. For power generation, demand is expected to remain strong, and we expect robust growth in the fourth quarter and full year sales for both reciprocating engines and solar turbines. Overall strength in power generation continues to be driven by data center growth related to cloud computing and generative AI, and we expect this trend to continue. In oil and gas, in total, we continue to expect a stronger year overall in 2024 versus 2023. For solar turbines used in oil and gas applications, we expect a strong fourth quarter, but sales are expected to be lower than the fourth quarter of 2023 due to the timing of deliveries. The increase in power generation at solar will mostly offset solar's decline in oil and gas, so we expect solar's total sales in the fourth quarter to be roughly flat compared to last year. Solar has a strong backlog as well as healthy order and inquiry activity, and we continue to expect full year growth for solar in oil and gas. After a strong 2023, we expect reciprocating engine sales in oil and gas to be slightly down this year, primarily due to ongoing softness in well servicing. We still expect gas compression to be up for the full year. However, we expect it to soften in the near term as equipment lead times have normalized. As we had previously mentioned, we can leverage our large engine platforms across a variety of applications. Based on current market conditions and well servicing applications, we are able to serve additional power generation demand as we continue to meet oil and gas customer needs while optimizing our overall large engine capacity. Industrial demand has continued to remain at a relatively low level compared to 2023. In transportation, we anticipate full year growth in both rail services and marine applications. Moving to Slide 7, now, I'll provide an update on our strategy and sustainability journey. In February of 2024, we announced a multiyear capital investment in our large reciprocating engine division to approximately double output capability compared to 2023 for new engines and aftermarket parts. Based on increasing expectations of future demand growth, today, we are announcing an additional multiyear investment to further expand our large engine volume output capability to more than 125% compared to 2023. As I mentioned, we leverage these large engines across a variety of applications, including data centers, oil and gas, large mining trucks, and distributed power generation. Moving on to sustainability. We continue to invest in new product, technologies and services to help our customers achieve their climate-related objectives. In September, we unveiled an innovative solution to help solve one of the most complex aspects of the mining industry's energy transition, energy management. Cat Dynamic Energy Transfer, or DET, is a fully Caterpillar developed system that can transfer energy to both diesel electric and battery electric large mining trucks while they are working around them on-site. It can also charge batteries while operating with increased speed on grade, improving operational efficiency and machine uptime. Cat DET is comprised of a series of integrated elements, including a power module that converts energy from a mine site's power source, an electrified rail system to transmit the energy, and a machine system to transfer the energy to the truck's powertrain. Cat DET will integrate with the Cat MineStar Command for hauling solution, merging autonomy and electrification technologies to provide a holistic site solution. We believe mine sites will benefit from enhanced efficiency with the integration of electrification and automation. When combined, these technologies will help miners achieve production targets, while simultaneously managing energy demands. This example highlights how we leverage our industry-leading technology through an integrated approach across our portfolio to help our customers build a better, more sustainable world. With that, I'll turn it over to Andrew.","evidence_gemma_new":"backlog","evidence_llama_3_3":"backlog third quarter","evidence_qwen_3_30b":null,"gemma_new_max":28700000000.0,"gemma_new_min":28700000000.0,"llama_3_3_max":28700000000.0,"llama_3_3_min":28700000000.0,"qwen_3_30b_max":null,"qwen_3_30b_min":null}
{"symbol":"CAT","year":2023,"quarter":1,"date":"2023-Q1","chunk_id":3,"sub_chunk_id":0,"centroid_label":"construction industry sales","agreed_value":6700000000.0,"count":3,"chunk":"Andrew Bonfield: Thanks, Jim, and good morning, everyone. I'll begin by providing further color on the first quarter results, including the performance of our segments. Then I'll cover the balance sheet and ME&T free cash flow before concluding with a few comments on the full year and our assumptions for the second quarter. Beginning on Slide 8. Sales and revenues for the first quarter increased by 17% or $2.3 billion to $15.9 billion, the sales increase versus the prior year was due to strong price realization and higher volume, partially offset by currency impacts. Sales were higher than we had expected in January, with price realization, dealer inventory and end user demand each slightly better than we had anticipated. Operating profit increased by 47% by $876 million to $2.7 billion, which includes the impact of the divestiture of the company's longwall business. Adjusted operating profit increased by 79% or $1.5 billion to $3.3 billion. Favorable price realization and higher volume was partially offset by higher manufacturing costs. The adjusted operating profit margin was 21.1%, an increase of 740 basis points versus the prior year. As Jim mentioned, the adjusted operating margin was much better than we had anticipated. Lower-than-expected manufacturing costs, including efficiencies and absorption were the largest variable, while price realization and volume were also stronger than we had envisioned. I'll provide additional color in a moment. Adjusted profit per share increased by 70% to $4.91 in the first quarter compared to $2.88 in the first quarter of last year. Adjusted profit per share in the first quarter of 2023 excluded pretax restructuring costs of $611 million, most of this related to the noncash charge from the divestiture of the company's longwall business. This compares to pretax restructuring costs of $13 million in the first quarter of 2022. Other income of $32 million in the quarter was lower than the first quarter of 2022 by $221 million. The year-over-year decline included about $100 million unfavorable currency impact related to ME&T balance sheet translation and an adverse impact of $80 million for pension expense. The dollar strengthened marginally since our last earnings call, so the currency impact within the first quarter of 2023 was about $30 million better than we had anticipated than when we spoke to you in January. Finally, the provision for income tax in the first quarter, excluding discrete items, reflected a global annual effective tax rate of 23%. Moving on to Slide 9. The 17% increase in the top line versus the prior year was driven by favorable price realization and higher sales volume, while currency remained a headwind to sales. Volume improved in part due to a 13% increase in sales to users. The impact from changes in dealer inventory was minimal, as the $1.4 billion build in the first quarter was similar to that seen in the first quarter of 2022. Services sales volume was slightly down, mainly due to dealer ordering patterns while services to their customers remain positive. Compared to our expectations a quarter ago, sales were higher than we anticipated, largely due to slightly stronger volume and better-than-expected price realization. On volume, sales to users outpaced our expectations due to strong demand. In addition, the improving supply chain supported higher levels of production across our primary segments. This enabled dealers to increase their inventory levels ahead of the selling season by slightly more than we had expected. Moving to Slide 10. First quarter operating profit increased by 47% to $2.7 billion. Adjusted operating profit increased by 79% versus the prior year quarter as favorable price realization outpaced higher manufacturing costs. Sales volume was also a benefit. Our first quarter adjusted operating profit margin of 21.1% was a 740 basis point increase versus the prior year. Now let me explain why our adjusted operating profit margin was so much better than we had expected. While manufacturing costs did increase year-over-year, the increase was less than we had than anticipated and was the most important factor in the quarter. As we have mentioned, volumes were better than expected due to favorable demand and improvements in the supply chain. This helped manufacturing cost as both factory efficiency and cost absorption were better than expected. Freight costs were also lower than we had anticipated due to lower premium freight utilization and rate reductions. Material costs were in line with our expectations and did not impact the margin outperformance. In addition to lower manufacturing costs, price realization was also stronger than we had anticipated a quarter ago. Stronger-than-anticipated volume had a smaller beneficial impact on margins. Spend on strategic investments was also lower than expected, as project spend ramps up slower than we had planned. Moving to Slide 11, I'll review segment performance. Starting with Construction Industries, sales increased by 10% in the first quarter to $6.7 billion due to favorable price realization, partially offset by lower sales volume and unfavorable currency impacts. The decrease in sales volume was driven by the impact from changes in dealer inventories, which increased by less in the first quarter of 2023 than compared to the prior year. Compared to our expectations, sales were higher due to stronger volumes. While sales to end users were as we'd anticipated, the dealer inventory increase was slightly above our expectations. By region, sales in North America rose by 33% due to favorable price realization and higher sales volume. Supply chain improvements enabled stronger-than-expected shipments in North America, supporting dealer restocking in the region. This is a positive, as North America continues to be our most constrained region from a dealer inventory perspective. Sales in Latin America decreased by 4% primarily due to lower sales volume, partially offset by favorable price realization. In EAME, sales increased by 5% on favorable price realization, partially offset by favorable currency impacts. Sales in Asia-Pacific decreased by 21% primarily due to lower sales volume and unfavorable currency impacts, partially offset by favorable price realization. First quarter profit for Construction Industries increased by 69% versus the prior year to $1.8 billion, price realization mainly drove the increase. This was partially offset by lower sales volume, including an unfavorable product mix and higher manufacturing costs. The segment's operating margin of 26.5% was an increase of 920 basis points versus last year. The segment margin for the quarter exceeded our expectations on moderating manufacturing costs and better-than-expected price and volume. Manufacturing costs were lower than we had expected on favorable freight, manufacturing efficiencies and absorption. Production volume was more favorable than we had anticipated, which drove the usual favorable benefits margins from the fourth quarter to the first. You will recall that in January, we said we did not expect that to happen. Turning to Slide 12. Resource Industries sales grew by 21% in the first quarter to $3.4 billion. The increase was primarily due to favorable price realization and higher sales volume. Although, aftermarket sales volumes were lower in resource industries due to dealer buying patterns, dealer services to customers remain positive. First quarter profit for Resource Industries increased by 112% versus the prior year to $764 million, mainly due to favorable price realization and higher sales volume. This was partially offset by unfavorable manufacturing costs. The segment's operating margin of 22.3% was an increase of 950 basis points versus last year. Segment margin was better than we expected due to lower manufacturing costs, including favorable absorption, efficiencies and freight. Price realization and volume benefits also exceeded our expectations. Now on Slide 13. Energy & Transportation sales increased by 24% in the first quarter to $6.3 billion, with sales up double-digits across all applications. Oil and gas sales increased by 39%, power generation sales by 27%, industrial sales rose by 23%. And finally, transportation sales increased by 14%. First quarter profit for Energy & Transportation increased by 96% versus the prior year to $1.1 billion. The increase was mainly due to favorable price realization and higher sales volume. Unfavorable manufacturing costs and higher SG&A and R&D expenses acted as a partial offset. SG&A and R&D expenses increased primarily due to investments aligned with our strategic initiatives, including electrification and services growth. The segment's operating margin of 16.9% was an increase of 620 basis points versus last year, but lower than the fourth quarter as is typical from a seasonality perspective. Compared to our expectations last quarter, margin was better than anticipated on lower manufacturing costs due in part to favorable absorption. Volume was also modestly stronger than we had expected. Moving to Slide 14. Financial Products revenue increased by 15% to $902 million primarily due to higher average financing rates across all regions. Segment profit decreased by 3% to $232 million. The slight profit decrease was mainly due to unfavorable impacts from equity securities, currency exchange losses and mark-to-market adjustments on derivative contracts. However, higher net yield on average earning assets and lower provision for credit losses acted as a partial offset. Business activity remains strong, and our portfolio continues to perform well. Past dues in the quarter were 2.00%, a 5 basis point improvement compared to the first quarter of 2022. This is the lowest first quarter past dues percentage since 2006. And whilst retail new business volume declined compared to the first quarter of 2022, this was expected as high interest rates drove more cash deals and increased competition from banks. Finally, we continue to see strong demand for used equipment, as prices remain elevated while used equipment inventory is at historic lows. Before I move on, I want to point out that CAT Financial has strong liquidity and broad access to funding. We are funded through the wholesale debt markets rather than from customer deposits, and we match assets and liabilities based on duration, currency and interest rate profile. As we have mentioned previously, in a rising interest rate environment, banks are able to provide more competitive interest rates than CAT Financial, and we tend to lose some share of the machines financed. In the event of a slowdown in lending from regional banks, we are well positioned to step in and fund creditworthy customers, so they can purchase their machines. Now on Slide 15. We continue to generate strong ME&T free cash flows. ME&T free cash flow of $1.4 billion in the quarter was about a $1.8 billion increase compared to an outflow in the prior year. The increase was primarily driven by higher profit. This increase is notable in the quarter that included our annual short-term incentive payout and a rise in working capital impacted by an increase in Caterpillar inventory. As Jim mentioned, following the strong half \u2013 first \u2013 strong first quarter, we expect to end the year in the top half of our ME&T free cash flow range of $4 billion to $8 billion. CapEx was around $400 million in the quarter, and we still expect to spend around $1.5 billion for the year. As Jim mentioned, capital deployment was about $1 billion in the quarter for dividends and share repurchases. Our balance sheet remains strong, and we have ample liquidity with an enterprise cash balance of $6.8 billion. Now on Slide 16, I will share some high-level assumptions for the full year, followed by the second quarter. Looking at the full year, we expect a strong top-line supported by price and higher sales to users, with healthy underlying end markets. As Jim mentioned, we expect full year reported sales for Construction Industries to be impacted by dealer inventory movements, particularly in the second half of the year. Underlying demand remains strong and as we do expect Construction Industries sales to users to show positive growth in the next three quarters. We anticipate continued strength in Resource Industries end markets and stronger end user sales in 2023. In addition, as typical seasonality would suggest, we expect to see some sales ramp in the second half in Energy & Transportation given strong demand for large engines and turbines. Moving on to margins. Based on our current planning assumptions, we anticipate full year adjusted operating profit margins to be in the top half of our target range. Given the favorable impact of cost absorption in the first quarter, which we do not expect to recur, we anticipate margins in the remaining quarters of the year will be lower than the first quarter level, while underlying demand and end markets remain strong. Also despite the slower-than-expected start, we anticipate the spend related to strategic investments within SG&A and R&D will ramp through the year. We expect price to continue to be favorable, although the absolute dollar value of the year-over-year price increases will moderate as we lap through the increases put through in 2022. We also expect the relationship between price and manufacturing costs for machines to normalize as the year progresses, as we\u2019ve now caught up to the manufacturing cost increases, which have outpaced price in late 2021 and early 2022. This means that the benefit to margins of price outpacing manufacturing cost inflation will moderate tempering the possibility of further margin expansion. Keep in mind, similar to the first quarter, we still anticipate a headwind of about $80 million per quarter at the corporate level related to pension expense. We also continue to anticipate restructuring expenses of around $700 million this year, with around $100 million remaining following the first quarter. And the global effective tax rate should be around 23%, excluding discrete items. Now on to our assumptions for the second quarter. We expect higher sales in the second quarter compared to the prior year on strong sales to users and price. Following the typical seasonal pattern, we expect higher sales in the second quarter as compared to the first. We expect Energy & Transportation sales will accelerate given strong sales to users, which are supported by healthy demand. We expect to report flattish sales levels compared to the first quarter in Construction Industries and Resource Industries. Both segments are expected to report positive sales to users. In the second quarter of 2022, we saw a decrease in dealer inventory of $400 million. We expect a smaller decrease in the second quarter of 2023. Specific to second quarter margins versus the prior year, adjusted operating margins at the enterprise and segment level should be substantially stronger than the prior year on favorable price and volume. However, we do expect to see a return to the typical seasonal pattern of lower second quarter margins compared to the first quarter, despite higher sales. We expect the year-over-year benefit of price realization in the second quarter to moderate compared to the benefit we saw in the first quarter, as we lapped prior year increases. In addition, SG&A and R&D investment spend should increase, as we continue to accelerate our strategic investments in areas like autonomy, alternative fuels, connectivity, digital and electrification. Finally, we do not anticipate that the favorable absorption impact that we saw in the first quarter will be repeated. At the segment level, in Construction Industries, we expect lower second quarter margins compared to the first quarter largely due to the lack of a favorable impact from absorption and a ramp-up in strategic investment spend. Likewise, second quarter margins in Resource Industries were likely to be lower than the first quarter as is the typical seasonal pattern. Conversely, Energy & Transportation should see a slight margin improvement compared to the first quarter levels, supported by stronger sales volume as demand remains healthy. Now turning to Slide 17, let me summarize. Sales grew by 17% led by strong price realization and volume gains. The adjusted operating profit margin increased by 740 basis points to 21.1%. ME&T free cash flow was strong at $1.4 billion, and we expect to be at the top half of our ME&T free cash flow range of $4 billion to $8 billion for the full year. After a strong first quarter, we currently expect our 2023 adjusted operating profit margins will be in the top half of our target range. The environment remains positive with improving supply chain dynamics, a strong backlog and healthy underlying end markets. We will continue to execute our strategy for long-term profitable growth. And with that, we\u2019ll take your questions.","evidence_gemma_new":"Construction Industries sales first quarter","evidence_llama_3_3":"Construction Industries sales first quarter 2023","evidence_qwen_3_30b":"Construction Industries sales 10% first quarter","gemma_new_max":6700000000.0,"gemma_new_min":6700000000.0,"llama_3_3_max":6700000000.0,"llama_3_3_min":6700000000.0,"qwen_3_30b_max":6700000000.0,"qwen_3_30b_min":6700000000.0}
{"symbol":"CAT","year":2023,"quarter":2,"date":"2023-Q2","chunk_id":3,"sub_chunk_id":0,"centroid_label":"construction industry sales","agreed_value":7200000000.0,"count":2,"chunk":"Andrew Bonfield: Thank you, Jim, and good morning, everyone. I'll begin with commentary on the second quarter results, including the performance of our business segments. Then I'll discuss the balance sheet and free cash flow before concluding with our assumptions for the remainder of the year, including color on the third quarter. Beginning on Slide 8. Our team delivered a very strong second quarter as overall results exceeded our expectations on strong operating performance. We saw a healthy top-line growth, improved operating margins and robust ME&T free cash flow. For the year, we now expect our adjusted operating profit margin to be close to the top of the targeted range at our anticipated sales level. We also expect ME&T free cash flow to be around the top of our $4 billion to $8 billion target range. To summarize the results, sales and revenues increased by 22% or $3.1 billion to $17.3 billion. Sales increase versus the prior year was due to higher sales volume and price realization. Operating profit increased by 88% or $1.7 billion to $3.7 billion. The adjusted operating profit margin was 21.3%, an increase of 750 basis points versus the prior year. Adjusted profit per share increased by 75% to $5.55 in the second quarter compared to $3.18 last year. Profit per share was $5.67 in the second quarter of this year. This included a discrete deferred tax benefit of $0.17 per share, while restructuring costs were $0.05 per share, flat compared to the prior year. We continue to expect restructuring expenses of about $700 million for the full-year. Other income of $127 million in the quarter was lower than the second quarter of 2022 by $133 million. The year-over-year decline was primarily driven by an unfavorable currency impact related to ME&T balance sheet translation and a recurring increase in quarterly pension expense of approximately $80 million, which we initially spoke to you about in January. Higher investment and interest income acted as a partial offset. The provision for income tax in the second quarter, excluding discrete items reflected a global annual effective tax rate of approximately 23%, which remains our expectation for the full-year. Moving on to Slide 9. The 22% increase in the top-line versus the prior year was due to higher sales volume and price. Volume improved as sales to users increased by 16% and from changes in dealer inventory. Sales for the quarter were higher than we had anticipated, mostly due to volume. The volume outperformance reflected a dealer inventory increase, which was primarily due to our stronger than expected shipments in Energy & Transportation, particularly in power generation, which is in line with strong data center demand. Price realization was in line with our expectations for the quarter. As I mentioned, sales to users grew by 16% in the quarter. As Jim has discussed, demand remains healthy across most end markets for all our products and services and is supported by a healthy order backlog. Moving to Slide 10. Second quarter operating profit increased by 88%, while adjusted operating profit increased by 87% to $3.7 billion. Year-over-year favorable price realization and higher sales volume were partially offset by higher manufacturing costs, which largely reflected higher material costs. An increase in SG&A and R&D expenses included higher strategic investment spend. The adjusted operating profit margin of 21.3% was better than we had anticipated. Volume exceeded our expectations, which supported the margin outperformance. In addition, manufacturing costs increased less than we expected due to lower freight costs and a lower than anticipated impact from cost absorption. SG&A and R&D expenses were about in line. Moving to Slide 11. I'll review the segment performance. Construction Industries sales increased by 19% in the second quarter to $7.2 billion due to price realization and higher sales volume. By region, sales in North America rose by 32% due to higher sales volume and price realization. Stronger demand and supply chain improvements enabled stronger than expected shipments in North America. This supported stronger sales of equipment to end users and some delivery stocking in what remains our most constrained region. Sales in Latin America decreased by 11%, primarily due to lower sales volume, partially offset by price realization. In EAME, sales increased by 20%, primarily the result of higher sales volume and price realization. Sales in Asia\/Pacific were about flat. Second quarter profit for Construction Industries increased by 82% versus the prior year to $1.8 billion. The increase was mainly due to price realization and higher sales volume. The segment's operating margin of 25.2% was an increase of 880 basis points versus last year. Margin exceeded our expectations, largely due to better than expected volume of freight costs, which were lower than we had anticipated. Turning to Slide 12. Resource Industries sales grew by 20% in the second quarter to $3.6 billion. The increase was primarily due to price realization and higher sales volume. Volume increased due to higher sales of equipment to end users. Although aftermarket sales volumes were lower, dealer sales to customers for services remained positive. Second quarter profit for Resource Industries increased by 108% versus the prior year to $740 million, mainly due to price realization and higher sales volume. This was partially offset by unfavorable manufacturing costs, largely material costs. The segment's operating margin of 20.8% was an increase of 880 basis points versus last year. The segment's margin was better than we had expected, primarily due to favorable volume, timing of SG&A and R&D spend and lower than anticipated freight costs. Now on Slide 13. Energy & Transportation sales increased by 27% in the second quarter to $7.2 billion. Sales were up double-digits across all applications. Oil and gas sales increased by 43%, power generation sales increased by 39%, industrial sales rose by 18% and transportation sales increased by 12%. Second quarter profit for Energy & Transportation increased by 93% versus the prior year to $1.3 billion. The increase was mainly due to higher sales volume and price realization, partially offset by unfavorable manufacturing costs and higher SG&A and R&D expenses. The segment's operating margin of 17.6% was an increase of 600 basis points versus last year. The margin was generally in line with our expectations. Moving to Slide 14. Financial Products revenue increased by 16% to $923 million, primarily due to higher average financing rates across all regions. Segment profit increased by 11% to $240 million. The increase was mainly due to a lower provision for credit losses at Cat Financial, partially offset by an increase in SG&A expense. Business activity remains strong, and our portfolio continues to perform well. Past dues in the quarter were 2.15%, a 4 basis points improvement compared to the second quarter of 2022. This is the lowest second quarter past dues percentage since 2007. Retail new business volume performed well, increasing versus the prior year and the first quarter. In addition, we continue to see strong demand for used equipment. Now on Slide 15. Our ME&T free cash flow generation was again robust as we generated $2.6 billion in the quarter. This was an increase of $1.5 billion compared to the prior year. With approximately $4 billion generated in the first half, we now expect ME&T free cash flow to be around the top of our $4 billion to $8 billion target range for the full-year. CapEx in the second quarter was about $300 million, and we still expect to spend around $1.5 billion for the full-year. As Jim mentioned, we returned about $2 billion through share repurchases and dividends in the second quarter. Our balance sheet remains strong. We have ample liquidity with an enterprise cash balance of $7.4 billion, and we also hold an additional $2 billion in slightly longer-dated liquid marketable securities to improve yields on that cash. Now turning to Slide 16. I will share some high level assumptions for the second half and the third quarter. In the second half of 2023, we expect higher total sales and revenues as compared to the second half of last year. We anticipate both sales to users and price realization will be positive in the second half. Keep in mind that on a comparative basis, we start to lap the stronger price we saw from the third quarter onwards last year. Caterpillar sales will be impacted by changes in dealer inventories as dealers increased their inventories in the second half of last year, which is not typical, versus our expectation of a more typical reduction in the second half of 2023. I want to spend just a few moments talking about dealer inventories. Dealers are independent businesses, and they make their own decisions around the level of inventory they hold. We obviously work closely with them because this impacts our production levels. As Jim mentioned, we are very comfortable with the levels of inventory that dealers are holding. We talk about dealer inventory in aggregate. This is difficult to predict with certainty as it arises from three different business segments, over 150 dealers and hundreds of different products. In Resource Industries and Energy & Transportation, dealer inventory is mainly a function of the commissioning pipeline. Keep in mind that over 70% of dealer inventory in these segments is backed by firm customer orders. For Construction Industries, dealer inventory is principally a function of end user demand and availability from the factory. In Construction Industries, dealers typically increase inventories during the first half of the year. Around 60% of the $2 billion increase during the first half of this year was from products in this segment. The remaining 40% is in Resource Industries and Energy & Transportation. For Resource Industries and Energy Transportation, we currently anticipate a slight reduction in levels in the second-half, but this is dependent on commissioning. In Construction Industries, dealers are currently holding around the midpoint of the typical three to four months range. Some dealers would like to increase inventories of certain products, such as BCP and earth moving due to strong customer demand. Conversely, some dealers would like to reduce the levels of excavated inventory because of high availability. In addition, we are scheduled to replace third-party engines with Cat engines and certain products, which will impact production in these products during the second half. Our current planning assumption for the Construction Industries is that dealers will reduce their overall levels in inventory in the second half of 2023 with a principal focus on excavators. Overall, at the enterprise level, we currently expect dealer inventory should be slightly higher at the end of 2023 versus last year. Moving on. On this slide, we provide our adjusted profit margins target charge to assist you in your modeling process. Based on our current planning assumptions, we anticipate full-year adjusted operating profit margin to be close to the top of that 300 basis points target range at our expected sales level. Your expectation for total enterprise sales this year will inform you where on the curve margins should finish for the year. Specific to the second half, we anticipate adjusted operating profit margins in the remaining quarters of the year will be above the year ago levels, although they will be lower than the levels we saw in the first two quarters of this year. As compared to the first half, we anticipate a margin headwind from cost absorption in the second half. We do not expect to build our inventory as we did in the first half and anticipate that there will be some inventory reduction if we continue to see sustained supply chain improvement. In addition, spend related to the strategic growth initiatives should continue to ramp. Price realization should remain positive that the magnitude of the favorability versus the prior year is expected to be lower in the second half as we lap the more favorable pricing trends from last year. Therefore, the increases in margins that we have occurred -- that have occurred from price outpacing manufacturing cost inflation should moderate in the second half of this year. Now let's move on to our assumptions that are specific to the third quarter. We anticipate third quarter sales to be higher than the third quarter of 2022, but to exhibit the typical sequential decline when compared to the second quarter of 2023. In Construction Industries, as is our normal seasonal end, we expect lower sales compared to the second quarter. In Resource Industries, which can be lumpy, we anticipate slightly lower sales compared to the second quarter. We expect sales in Energy & Transportation will increase slightly compared to the second quarter. Specific to third quarter margins versus the prior year, adjusted operating profit margins at the enterprise level and segment margins should be stronger. However, we do expect lower enterprise adjusted operating profit margins in the third quarter compared to the second quarter of this year on lower volume and impacts from cost absorption. We also anticipate investment spend will ramp across our primary segments as we continue to accelerate our strategic investments in area like autonomy, alternative fuels, connectivity and digital and electrification. At the segment level, for Construction Industries, we expect a lower margin compared to the second quarter as is typical. This is largely due to lower quarter-on-quarter volume, increased investment in strategic initiatives and slightly higher manufacturing costs, including a headwind from cost absorption. Favorable price realization will act as a partial offset. We also anticipate lower third quarter margins in Resource Industries compared to the second quarter, primarily due to lower volume quarter-on-quarter. Conversely, we expect third quarter margins in Energy & Transportation will be slightly higher compared to the second quarter on higher volume and stronger price realization, partially offset by higher manufacturing costs and spend relating to strategic initiatives. Now turning to Slide 13, let me summarize. We generated strong adjusted operating profit margin with a 750 basis point increase to 21.3%. We now expect to be close to the top of the targeted range for adjusted operating margin -- profit margin for the full-year based on our expected sales levels. ME&T free cash flow generation was robust at $2.6 billion in the quarter. We returned $2 billion to shareholders through share repurchases and dividends. We now expect ME&T free cash flow to be around the top of our $4 billion to $8 billion range for the full-year. Lastly, we continue to execute our strategy for long-term profitable growth. And with that, we'll now take your questions.","evidence_gemma_new":"Construction Industries sales second quarter","evidence_llama_3_3":"Construction Industries sales second quarter","evidence_qwen_3_30b":null,"gemma_new_max":7200000000.0,"gemma_new_min":7200000000.0,"llama_3_3_max":7200000000.0,"llama_3_3_min":7200000000.0,"qwen_3_30b_max":null,"qwen_3_30b_min":null}
{"symbol":"CAT","year":2024,"quarter":2,"date":"2024-Q2","chunk_id":3,"sub_chunk_id":0,"centroid_label":"construction industry sales","agreed_value":6700000000.0,"count":2,"chunk":"Andrew Bonfield: Thank you, Jim, and good morning, everyone. I'll begin with a high level summary of the quarter. Then I'll provide more detailed comments on our second quarter results, including the performance of the segments. Next, I'll discuss the balance sheet and free cash flow and then conclude with comments on our assumptions for the remainder of the year. Beginning on Slide 8. Although sales and revenues were slightly below our expectations, we had strong operating performance in the quarter, including higher adjusted operating profit margin and record adjusted profit per share, both of which were stronger than we had anticipated. Sales and revenues of $16.7 billion decreased by about 4% compared to the prior year. Adjusted operating profit increased by 2% to $3.7 billion. And the adjusted operating profit margin was 22.4%, an increase of 110 basis points versus the prior year. Profit per share was $5.48 in the second quarter compared to $5.67 in the second quarter of last year. Adjusted profit per share increased by 8% to $5.99 in the quarter compared to $5.55 last year. Adjusted profit per share excluded restructuring costs of $0.51 per share mainly due to a loss on the divestiture of two non-US entities. This compares to restructuring costs of $0.05 per share and a discrete deferred tax benefit of $0.17 per share, which were both excluded in the second quarter of 2023. Other income of $155 million for the quarter was a $28 million benefit versus the prior year and was primarily driven by favorable impacts from commodity hedges. The provision for income taxes in the second quarter, excluding discrete items, reflected a global annual effective tax rate of 22.5% compared with 23% in the second quarter of 2023. Finally, the year-over-year impact from the reduction in the average number of shares outstanding primarily due to share repurchases over the past year had a favorable impact on adjusted profit per share of approximately $0.29. Moving on to Slide 9. I'll discuss our top line results in the second quarter. Sales and revenues decreased by 4% compared to the prior year as lower volume was partially offset by favorable price realization. Lower volume was mainly driven by the impact from the changes in dealer inventories. As you may recall, we anticipated a sales decline this quarter versus last year as an atypical dealer inventory increase in the second quarter of 2023 made for a challenging comparison. To explain, dealer inventory decreased by about $200 million in the second quarter. In comparison, we saw an increase of $600 million in the second quarter of last year. For machines only, dealer inventory followed the typical seasonal trend this quarter with a decrease of $400 million as compared to a $200 million increase in the second quarter of last year. Sales were slightly below our expectations due to lower-than-expected volume being partially offset by better-than-expected price realization, including geographic mix. Moving to operating profit on Slide 10. Operating profit in the second quarter decreased by 5% to $3.5 billion. This included a $227 million unfavorable impact from higher restructuring costs. Adjusted operating profit increased by 2% to $3.7 billion. Price realization benefited the quarter while the profit impact of lower sales volume acted as a partial offset. The adjusted operating profit margin of 22.4% improved by 110 basis points versus the prior year. Margins were better than we expected mainly due to favorable manufacturing costs, product mix and price. Versus our expectation, price was slightly better than we anticipated driven by Energy & Transportation. On Slide 11, Construction Industries sales decreased by 7% in the second quarter to $6.7 billion. This is primarily due to lower sales volume, partially offset by favorable price realization. Sales volume was impacted by unfavorable changes in dealer inventories. Dealer inventory was about flat in the second quarter of 2024 versus an increase in the second quarter of last year. Lower sales to users also impacted volume. Sales in Construction Industries were lower than we had anticipated due to lower-than-expected rental fleet loading in North America and continued weakness in Europe. By region, sales in North America were about flat and Latin America sales increased by 20%. Sales in the EAME region decreased by 27%. In Asia Pacific, sales declined by 15%. Second quarter profit for Construction Industries was $1.7 billion, a 3% decrease versus the prior year. This was mainly due to lower sales volume, partially offset by favorable price realization, which benefited from geographic mix effects. Favorable manufacturing costs provided some tailwind as well largely reflecting lower material costs. The segment's margin of 26.1% was an increase of 90 basis points versus last year. Margin was better than we had expected primarily due to a favorable product mix and the timing of planned SG&A and R&D spend. Price was in line with our expectations. Turning to Slide 12. Resource Industries sales decreased by 10% in the second quarter to $3.2 billion, which was about in line with our expectations. The decline was primarily due to lower sales volume, partially offset by favorable price realization. Sales volume was impacted by changes in dealer inventories as dealer inventory decreased more during the second quarter of 2024 than during the second quarter of last year. In addition, we saw lower sales to users in the segment as anticipated given the challenging comparison. Second quarter profit for Resource Industries decreased by 3% versus the prior year to $718 million. This is mainly due to lower sales volume, partially offset by favorable impacts from price realization and manufacturing costs, including lower freight. The segment's margin of 22.4% was an increase of 160 basis points versus last year. Margin was better than we had expected mainly driven by the timing of planned SG&A and R&D spend and a favorable product mix. Now on Slide 13. Energy & Transportation sales increased by 2% in the second quarter to $7.3 billion. The increase was due to favorable price realization, which was partially offset by lower sales volume driven by industrial, which declined in line with our expectations. The segment sales were slightly better than we had anticipated primarily driven by price. By application, power generation sales increased by 15%. Transportation sales were higher by 7%. Oil and gas sales improved by 4%, while industrial sales decreased by 21%. Second quarter profit for Energy & Transportation increased by 20% versus the prior year to $1.5 billion. The increase was primarily due to favorable price. The segment's margin of 20.8% was an increase of 320 basis points versus the prior year. Margin was significantly stronger than we had anticipated due to better price and lower-than-expected manufacturing costs, which largely reflected favorable inventory absorption, lower freight and lower material costs. Moving to Slide 14. Financial Products revenues increased by 9% to about $1 billion primarily due to higher average financing rates across all regions and higher average earning assets in North America. Segment profit decreased by 5% to $227 million. This was mainly due to a higher provision for credit losses, which largely reflected the absence of a nonrecurring reserve release from the prior year. The portfolio remains healthy as past dues of 1.74% on near historic lows and reflect a 41 basis point improvement compared to the prior year. In addition, the allowance rate was 0.89% our lowest rate on record. Business activity remains healthy as new business volume increased versus the prior year primarily driven by North America. We also continue to see healthy demand for used equipment where inventories remain close to historical low levels. Moving on to Slide 15. We generated $2.5 billion in ME&T free cash flow in the second quarter and we expect our full year free cash flow to be in the top half of our annual target range of between $7.5 billion to $10 billion. Our expectations for CapEx remain between $2 billion and $2.5 billion for the year. On share repurchases, the more than $1.8 billion deployed in the second quarter included a $1 billion accelerated share repurchase agreement. Approximately 75% of those shares were delivered to the company upfront with the balance to be delivered when the agreement is terminated prior to year-end. Note that we also had an ME&T bond maturity of $1 billion in the second quarter. And given our healthy liquidity position, we did not issue new bonds. Our balance sheet remains strong with an enterprise cash balance of $4.3 billion. In addition, we hold $1.8 billion in slightly longer-dated liquid marketable securities to improve yields on that cash. Now on Slides 16 and 17, I will show our high-level assumptions for the remainder of the year. As Jim mentioned, we now anticipate sales and revenues to be slightly lower this year versus the record 2023 level. This compares to our previous expectation for broadly similar sales. This change reflects an updated assumption of a slight reduction in machine dealer inventory, primarily in Resource Industries and lower-than-expected sales to users in Construction Industries mainly due to lower rental fleet loading in North America. Now specific to our second half assumptions. We typically see higher sales in the second half as compared to the first and we expect sales to follow that normal seasonable trend this year. As compared to the prior year, we now anticipate slightly lower sales in the second half driven by lower machine sales to users. Changes in dealer inventories and machines are expected to have a nominal impact as the decrease in the second half of this year should be similar to the decrease observed in the second half of 2023, which was about $1 billion. However, note that machine dealer inventory changes will impact the quarters differently as we expect a sales headwind in the third quarter as dealers built their inventories in the third quarter of 2023 and a sales tailwind in the fourth quarter due to a smaller inventory decline than the prior year. Finally, we continue to anticipate services growth in the second half of the year as we strive to achieve our 2026 target of $28 billion in services revenues. Moving on to our margin expectations. As Jim mentioned, the strength of our first half performance combined with the more favorable expectations for the second half mean that we now anticipate overall adjusted operating profit margin to be above the top end of the target range for the full year. Specific to second half margins, despite higher sales, we do expect lower margins versus the first half, which follows a typical seasonable trend. However, keep in mind that first half margins were at record levels and the magnitude of the second half decline may be slightly larger than is typical. As compared to the prior year, we expect our adjusted operating profit margin in the second half will be similar to the prior year level. While we anticipate some favorability in manufacturing costs on improved operational efficiencies, we do expect slightly lower volumes and a slight headwind from price in the second half versus a year ago. On price, the impact of lapping the increases taken in the second half of 2023 means that the benefit in the second half of this year will be significantly lower. In addition, we expect that improved availability across the industry will result in the normalization of the pricing environment. To assist you with your modeling for the full year, please note that we now anticipate restructuring costs of around $450 million and that our expectations for the annual effective tax rate, excluding discrete items, remains at 22.5%. Now on Slide 18. I'll provide a few comments on the third quarter, starting on the top line. We expect slightly lower sales and revenues in the third quarter compared to the prior year as we anticipate a dealer inventory headwind for machines, which will impact volumes. We expect dealer inventory machines to be flattish to slightly lower in the third quarter as is typical, which compares to the atypical $400 million increase in the prior year. We also anticipate lower machine sales to users versus a strong comparison. We expect flattish price realization in the third quarter versus the prior year due to the normalization that I mentioned a moment ago. We also anticipate that the ongoing benefit of our service initiatives will positively impact sales in the third quarter. By segment in the third quarter compared to the prior year, we anticipate lower sales in Construction Industries primarily due to a headwind from changes in dealer inventories. In Resource Industries, we expect lower sales as sales to users are impacted by a challenging comparison similar to that which we have observed in the first two quarters of this year. In Energy & Transportation, we anticipate higher sales versus the prior year, supported by strengthen in power generation, oil and gas and transportation. Lower sales in industrial should act as a partial offset. For enterprise margins in the third quarter, we expect similar adjusted operating profit margin compared to the prior year as we anticipate lower volume will be offset primarily by favorable manufacturing costs. By segment in the third quarter, in Construction Industries, we anticipate lower margin compared to the prior year on lower volume and slightly unfavorable price realization. Favorable manufacturing costs should act as a partial offset. For Resource Industries, we anticipate slightly lower margins in the third quarter compared to the prior year due to unfavorable volume and higher SG&A and R&D spend. In Energy & Transportation, we expect a higher margin versus the prior year and stronger volumes and favorable price realization. So turning to Slide 19, let me summarize. Strong execution and operating performance continued in the second quarter. Higher adjusted operating profit margin of 22.4% offset the decrease in sales and revenues and led to a record adjusted profit per share of $5.99. We now expect overall adjusted operating profit margin to be above the top end of the target range for the full year based on our expected sales levels, which should now be slightly lower than levels in 2023. The net of these factors leads to our current expectation for higher adjusted operating profit and adjusted profit per share as compared to what we contemplated at the beginning of the year. ME&T free cash flow generation was $2.5 billion in the quarter. We continue to expect to be in the top half of our target range for the full year. We have deployed $7.6 billion to shareholders through share repurchases and dividends in the first half of 2024. We continue to execute our strategy for long-term profitable growth. And with that we'll take your questions.","evidence_gemma_new":null,"evidence_llama_3_3":"Construction Industries sales second quarter","evidence_qwen_3_30b":"Construction Industries sales $6.7 billion decreased by 7%","gemma_new_max":null,"gemma_new_min":null,"llama_3_3_max":6700000000.0,"llama_3_3_min":6700000000.0,"qwen_3_30b_max":6700000000.0,"qwen_3_30b_min":6700000000.0}
{"symbol":"CAT","year":2024,"quarter":3,"date":"2024-Q3","chunk_id":3,"sub_chunk_id":0,"centroid_label":"construction industry sales","agreed_value":6300000000.0,"count":3,"chunk":"Andrew Bonfield: Thank you, Jim, and good morning, everyone. As usual, I'll begin with a high-level summary of the third quarter, and then provide more detailed comments, including the performance of the segments. I'll then, discuss the balance sheet and free cash flow, before concluding with comments on our assumptions for the full year and the fourth quarter. Beginning on Slide 8, although sales and revenues were lower than we had expected, our adjusted operating profit margin was 20.0%, generally in line with what we had anticipated. Adjusted profit per share was in line with our expectations despite adjusted operating profit being impacted by the lower sales and revenues. I will highlight a few of the moving parts in a moment. As Jim mentioned, our full year margin expectations remain unchanged, and we continue to anticipate the adjusted operating profit margin will be above the top end of the target range despite the slightly lower outlook for the top-line. Our expectations for adjusted profit per share remain unchanged versus our expectations at the time of our last earnings call. Also, we have increased our expectations for ME&T free cash flow for the year, which we now anticipate will be near the top of our $5 billion to $10 billion target range. In the third quarter, sales and revenues of $16.1 billion decreased by 4% compared to the prior year. The adjusted operating profit margin of 20.0% was 80 basis points lower when compared to the prior year. Profit per share was $5.06 in the third quarter compared to $5.45 in the third quarter of last year. Restructuring costs were $0.11 in the quarter versus $0.07 in the prior year. Adjusted profit per share was $5.17 in the quarter compared to $5.52 last year. Other income and expense was $119 million headwind versus the prior year, mostly driven by an unfavorable currency impact related to ME&T balance sheet translation. We do not forecast the impact of foreign currency translation on our adjusted profit per share, so this acted as a headwind compared to our expectations for the quarter. Excluding discrete items, the provision for income taxes in the third quarter in both 2023 and 2024 reflected a global annual effective tax rate of 22.5%. We recorded a discrete tax benefit, which had an $0.11 favorable impact within the quarter. We do not anticipate discrete items. Finally, the year-over-year impact from the reduction in the average number of shares outstanding, primarily due to share repurchases, resulted in a favorable impact on adjusted profit per share of approximately $0.26 as compared to the third quarter 2023. This was slightly better than we had expected. Moving to Slide 9, I'll discuss our top-line results for the third quarter. Sales and revenues decreased by 4% compared to the prior year, primarily impacted by lower sales volume as a result of lower sales to users and impacts from changes in dealer inventories. Total sales to users decreased by 6% as a 10% decrease from Machines was partially offset by a 5% increase for Energy & Transportation. The impact from changes in total dealer inventories acted as a sales headwind of about $200 million in the quarter. For Machines-only, dealer inventory increased by about $100 million, a smaller increase than the $400 million increase in the prior year, but slightly above our expectations of being flattish to slightly lower. Service revenues increased versus the prior year, as we had anticipated. Moving to operating profit on Slide 10. Operating profit in the third quarter decreased by 9% to $3.1 billion. Adjusted operating profit decreased by 8% to $3.2 billion, mainly due to the impact of lower sales volume, partially offset by favorable price realization and manufacturing costs. Since early 2022, price realization has been a strong -- has been strong and often exceeded our expectations. Over the past several quarters, we have highlighted that price will begin to moderate in the second half of this year. In the third quarter, this moderation began to occur as price realization was lower than previous quarters and generally in line with our expectations. As I mentioned, for the third quarter, the adjusted operating profit margin was 20.0%, which was generally in line with our expectations. By segment, margin in Construction Industries and Resource Industries was slightly below our expectations on lower volume, while Energy & Transportation was about in line. Financial products had a slightly stronger quarter than we had expected. On Slide 11, Construction Industries sales decreased by 9% in the third quarter to $6.3 billion, slightly below our expectations. The decrease versus the prior year was primarily due to lower sales volume and unfavorable price realization. The decrease in sales volume was mainly driven by lower sales of equipment to end users. Changes in dealer inventories also acted as a slight headwind to sales. By region, Construction Industries sales in North America decreased by 11%; in Latin America, sales increased by 19%; sales in the EAME region decreased by 15%; in Asia Pacific, sales declined by 12%. Third quarter profit for Construction Industries was $1.5 billion, a 20% decrease versus the prior year. This is mainly due to the profit impact of lower sales volume and unfavorable price realization. The segment's margin of 23.4% was a decrease of 300 basis points versus the prior year. Turning to Slide 12, Resource Industries sales decreased by 10% in the third quarter to $3.0 billion, which was slightly point below our expectations. The decline versus the prior year was primarily due to lower sales volume, mainly driven by lower sales of equipment to end users given a challenging comparison to the prior year. Third quarter profit for Resource Industries decreased by 15% versus the prior year to $619 million. This was mainly due to the profit impact of lower sales volume. The segment's margin of 20.4% was a decrease of 140 basis points versus the prior year. Now, on Slide 13, Energy & Transportation sales increased by 5% in the third quarter to $7.2 billion, slightly lower than we had expected, driven by the timing of deliveries. The increase versus the prior year was primarily due to favorable price realization and higher sales volume, including higher intersegment sales. By application, power generation sales increased by 26%, transportation sales were higher by 3%, oil and gas sales decreased by 1%, and industrial sales decreased by 16%. Third quarter profit for Energy & Transportation increased by 21% versus the prior year to $1.4 billion. The increase was mainly due to favorable price realization. The segment's margin of 19.9% was an increase of 270 basis points versus the prior year. Moving to Slide 14, financial products revenues increased by 6% to about $1 billion, primarily due to higher average earning assets driven by North America and higher average financing rates across all regions. Segment profit increased by 21% to $246 million. This is mainly due to a favorable impact from equity securities and a lower provision for credit losses. Our customers' financial health is strong. Past dues remain near historic lows of 1.74% in the quarter, down 22 basis points versus the prior year. Our allowance rate was 0.87%, our lowest on record. Business activity at Cat Financial remains healthy. Our retail new business volume increased by 17% versus the prior year, supported by our financing packages for customers choosing to buy Caterpillar equipment. Though Caterpillar's retail machine sales volume was lower, proportionately more sales have been financed through Cat Financial, which highlights the attractiveness of the financing options we are offering to our customers. We also continue to see healthy demand for used equipment and inventories remain at low levels. Conversion rates are also strong as customers choose to buy equipment at the end of their lease term. Moving on to Slide 15, we generated about $2.7 billion in ME&T free cash flow in the third quarter and deployed about $1.5 billion in share repurchases and dividends. Our balance sheet remains strong with an enterprise cash balance of $5.6 billion. In addition, we hold $1.8 billion in slightly longer dated liquid marketable securities to improve yields on that cash. Now, on Slide 16, I will share our high-level assumptions for the full year. For the full year, we have updated our outlook to reflect sales and revenues that are slightly lower than our expectations at the time of our last earnings call, driven by lower-than-expected third quarter sales and an update to our expectations for dealer rental fleet loading in Construction Industries. We continue to anticipate services growth in 2024. As I mentioned earlier, our full year expectations for adjusted operating profit margin and adjusted profit per share remain unchanged compared to our last earnings call. We continue to expect adjusted operating profit margin to be above the top end of the target range. In addition, we are increasing our expectations for ME&T free cash flow for the year, which we now anticipate to be near the top of our $5 billion to $10 billion target range. To assist you with your modeling for the full year, we now anticipate CapEx of around $2 billion and restructuring costs of approximately $400 million. Our expectation for the global annual effective tax rate, excluding discrete items, remains at 22.5%. Turning to Slide 17, I'll provide a few comments on the fourth quarter, starting with the top-line. We expect slightly lower sales and revenues in the fourth quarter compared to the prior year, impacted by lower machine sales to users versus a strong comparison. On machine dealer inventory, our planning assumptions include the expectation that dealers will reduce their inventories in the fourth quarter while balancing their need to be prepared for 2025. The magnitude of the decline for machine dealer inventory is expected to be less than the $1.4 billion decrease we saw in the fourth quarter of 2023. For perspective, we expect machine dealer inventory to end the year around the same level as year-end 2023. Also, the ongoing benefit of our services initiatives is expected to positively impact sales in the fourth quarter. By segment, in the fourth quarter, compared to the prior year, we anticipate a sales decrease in Construction Industries. This is impacted by lower sales to users, which Jim mentioned, along with unfavorable price realization. In Resource Industries, we expect slightly lower sales, impacted by lower sales to users versus a strong fourth quarter of 2023. In Energy & Transportation, we anticipate slightly higher sales versus the prior year, supported by power generation. Enterprise margin in the fourth quarter is expected to trend lower compared to the third quarter, following the typical seasonable pattern. However, versus the prior year, we expect a modestly higher adjusted operating profit margin despite lower sales. We anticipate favorable manufacturing costs and lower SG&A and R&D expenses will more than offset the profit impact of lower sales volume. Lower SG&A and R&D expenses are primarily driven by the benefit of lower short-term incentive compensation versus a high expense in the prior year quarter. Price realization for Machines is expected to trend lower as the pricing environment continues to normalize, though price in Energy & Transportation should act as a partial offset. Regarding price expectations for Machines, it is important to note that discounts to dealers occur through post sales merchandising programs, which impact our results over time. This includes financing support from Cat Financial, which is an effective way of supporting our customers, and we recover a portion of that support over the life of the deal. Let me explain. Based on the current level of price discounting support, we reserve the anticipated payments to dealers for these merchandising programs. At times, there is a lag between the timing of the invoice of the dealer and when the dealer invoices the customer, which impacts the reserve. Over the next few quarters, we expect the impact from these merchandising programs to drive a headwind to Machine price realization as we continue to adjust the reserve to reflect the current level of price discounting support. By segment, in the fourth quarter, in Construction Industries, we anticipate lower margin compared to the prior year primarily due to unfavorable price realization, partially offset by favorable manufacturing costs. In Resource Industries, we anticipate lower margin in the fourth quarter compared to the prior year, mainly due to lower volume and prioritization of strategic investments around services growth and AACE, which is autonomy, alternative fuels, connectivity and digital, and electrification. Favorable manufacturing costs should act as a partial offset. In Energy & Transportation, we expect a higher margin versus the prior year, primarily impacted by favorable price realization. So, turning to Slide 18, let me summarize. Although sales and revenues were lower than we had expected, adjusted operating profit margin and adjusted profit per share were generally in line with our expectations. We now anticipate our top-line for the full year will be slightly below our prior estimate. Our backlog increased slightly and remains at a very healthy level. Our expectations for full year adjusted operating profit margin and adjusted profit per share remain unchanged compared to a quarter ago. We continue to expect adjusted operating profit margin to be above the top end of the target range for the full year based on our expected sales levels. We are now increasing our expectations for ME&T free cash flow, which we anticipate to be near the top of our target range for the full year. Our team executed well in the quarter, and our results continue to benefit -- to reflect the benefit of the diversity of our end markets and the disciplined execution of our strategy for long-term profitable growth. And with that, we'll now take your questions.","evidence_gemma_new":"Construction Industries sales","evidence_llama_3_3":"Construction Industries sales third quarter","evidence_qwen_3_30b":"Construction Industries sales decreased by 9% third quarter","gemma_new_max":6300000000.0,"gemma_new_min":6300000000.0,"llama_3_3_max":6300000000.0,"llama_3_3_min":6300000000.0,"qwen_3_30b_max":6300000000.0,"qwen_3_30b_min":6300000000.0}
{"symbol":"CAT","year":2024,"quarter":4,"date":"2024-Q4","chunk_id":3,"sub_chunk_id":0,"centroid_label":"construction industry sales","agreed_value":6000000000.0,"count":2,"chunk":"Andrew Bonfield: Thank you Jim, and good morning everyone. I\u2019ll begin with a summary of the fourth quarter and then provide more detailed comments, including some on the performance of the segments. Next, I\u2019ll discuss the balance sheet and free cash flow before concluding with comments on our high level assumptions for 2025, as well as expectations for the first quarter. Beginning on Slide 9, sales and revenues were $16.2 billion, a 5% decrease versus the prior year. As Jim mentioned, sales were slightly lower than we had anticipated, which together with unfavorable mix resulted in lower than expected margins for the quarter. Adjusted operating profit was $3 billion and our adjusted operating profit margin was 18.3%. Profit per share was $5.78 in the fourth quarter compared to $5.28 in the fourth quarter of last year. Adjusted profit per share was $5.14 in the quarter, a 2% decrease compared to $5.23 last year. Adjusted profit per share excluded a discrete tax benefit of $0.46 for a tax law change related to currency translation. Mark to market gains of $0.23 for the re-measurement of pension and other post-employment plans was also excluded, in addition to restructuring costs of $0.05 in the quarter. Other income expense was $185 million favorable versus the prior year, mostly driven by a positive currency impact related to ME&T balance sheet translation, which compared to a negative impact in the fourth quarter last year. As I have mentioned previously, we do not anticipate currency translation movements, so the positive impact on the fourth quarter of 2024 helped to offset the impact of operating profit being lower than expected. Excluding discrete items, the provision for income taxes in the fourth quarter of 2024 reflected a global annual effective tax rate of 22.2%. This was slightly lower than we had expected a quarter ago and benefited the quarter by $0.09. Finally, the year-over-year impact from the reduction in the average number of shares outstanding, primarily due to share repurchases, resulted in a favorable impact on adjusted profit per share of approximately $0.24 as compared to the fourth quarter of 2023. Moving onto Slide 10, I\u2019ll discuss the top line results for the fourth quarter. Sales and revenues decreased by 5% compared to the prior year, primarily impacted by lower sales volume. Price was unfavorable year-over-year and about in line with what we had expected. Lower volume was driven by the impact from changes in dealer inventories and a 2% year-over-year decrease in total sales to users. Total machine dealer inventory decreased by $1.6 billion in the quarter compared to $1.4 billion decrease in the prior year. The decrease in machine dealer inventory was larger than we had expected, and it\u2019s mostly a function of higher than anticipated sales to users across both construction industries in North America and resource industries. Service revenues increased in the quarter compared to 2023. As I mentioned, the sales decrease in the quarter was slightly larger than we had anticipated. This was mostly due to services growing at a slightly slower rate than we had expected and some delivery delays in energy and transportation. Moving to operating profit on Slide 11, operating profit in the fourth quarter decreased by 7% to $2.9 billion. Adjusted operating profit decreased by 8% to $3 billion mainly due to the profit impact of lower than expected sales volume. As I mentioned, for the fourth quarter the adjusted operating profit margin was 18.3%, a 60 basis point decrease compared to the prior year. This was lower than we had anticipated mainly due to a lower than expected sales volume and the impact of unfavorable mix. On Slide 12, construction industry sales decreased by 8% in the fourth quarter to $6 billion. This was slightly below our expectations on lower than anticipated volume. Compared to the prior year, the 8% sales decrease was primarily due to unfavorable price realization and lower sales volume. The decrease in sales volume was mainly driven by lower sales of equipment to end users and dealers reducing their inventory by slightly more than they did during the fourth quarter of 2023. By region, construction industry sales in North America decreased by 14%. In Latin America, sales increased by 6%. Sales in the EAME region decreased by 1%, and Asia Pacific sales decreased by 2%. Fourth quarter profit for construction industries was $1.2 billion, a 24% decrease versus the prior year. This was primarily due to unfavorable price realization as a result of the impact of the post-sales merchandising programs that we discussed with you in October. The segment\u2019s margin of 19.6% was a decrease of 390 basis points versus the prior year. The margin was lower than we had anticipated, primarily impacted by lower volume and unfavorable mix. Manufacturing costs were also unfavorable versus our expectations, principally due to a headwind from cost absorption as our inventory in construction industries declined. Turning to Slide 13, resource industry sales decreased by 9% in the fourth quarter to $3 billion. This was below our expectations mainly due to services growing at a slightly lower rate than we had anticipated. As we compare to the prior year, the 9% sales decrease was primarily due to lower sales volume mainly driven by the impact from changes in dealer inventories. Dealer inventory decreased more in the fourth quarter of 2024 than it did in the fourth quarter of 2023. Fourth quarter profit for resource industries decreased by 22% versus the prior year to $466 million. This was mainly due to the profit impact of lower sales volume. The segment\u2019s margin of 15.7% was a decrease of 280 basis points versus the prior year. This was lower than we had anticipated, primarily due to lower volume. Now on Slide 14, energy and transportation sales of $7.6 billion were about flat versus the prior year. Sales were slightly below our expectations to a lower than expected services growth rate, largely in oil and gas, and the timing of deliveries of international locomotives. Compared to the prior year, sales were roughly flat as the impact of lower sales volume was mostly offset by favorable price realization. By application, power generation sales increased by 22%, transportation sales were lower by 1%, oil and gas sales decreased by 14%, and industrial sales decreased by 14%. Fourth quarter profit for energy and transportation increased by 3% versus the prior year to $1.5 billion. The increase was primarily due to favorable price realization partially offset by the profit impact of lower sales volume. The segment\u2019s margin of 19.3% was an increase of 70 basis points versus the prior year. This was lower than we had anticipated, primarily due to lower than expected volume and an unfavorable mix of products. Moving to Slide 15, financial products revenues increased by 4% versus the prior year to about $1 billion, primarily due to higher average earning assets in North America and higher average financing rates across all regions, except North America. Segment profit decreased by 29% to $166 million. This was mainly due to an unfavorable impact from equities securities in addition to lower margin and a higher provision for credit losses. Our customers\u2019 financial health remains strong. Past dues were 1.56% in the quarter, down 23 basis points versus the prior year and our lowest level since 2005. The allowance rate was 0.91%, remaining near historic lows. Business activity at Cat Financial remains healthy. Retail credit applications increased and our retail new business volume grew by 3% versus the prior year. This was our highest level since 2012, supported by attractive finance packages for customers choosing to buy Caterpillar equipment. We continue to see proportionately more of our sales financed through Cat Financial; in addition, demand for used equipment remains healthy and inventories remain at low levels. Conversion rates were above historical averages as customers choose to buy equipment at the end of their lease term. Moving onto Slide 16, we continue to generate strong ME&T free cash flow. The $9.4 billion in 2024 was near the top end of our target range and just slightly lower than the prior year despite a larger payment for short term incentive compensation and higher capital expenditure. CapEx for the year was about $2 billion, which was in line with our expectations. Moving to capital deployment, in 2024 we returned $10.3 billion to shareholders through repurchased stock and dividends. On share repurchases, we deployed $7.7 billion as we continue to fulfill our objective to be in the market on a more consistent basis. Our balance sheet remains strong with an enterprise cash balance of $6.9 billion. In addition, we hold $2 billion in slightly longer dated liquid marketable securities to improve yields on that cash. Now on Slide 17, let me start with a high level overview of our expectations for the full year. We expect a slight decrease in sales for 2025 with an unfavorable impact from both volume and price. Due to the impact of post-sales merchandising programs, price realization should account for about a 1% decrease in sales for the full year. On margins, the impact of price together with high depreciation costs due to the investments we are making should result in adjusted operating profit margins being in the top half of the target range with the expected level of sales, rather than being above the top end of the range, as occurred in 2024. Our margin targets are progressive, so while we would expect volume to have an impact on absolute margins, our target is adjusted for lower sales. We expect a slight headwind in other income and expense in 2025 primarily due to lower interest income, mostly due to lower interest rates, as well as the absence of the positive currency benefit from ME&T balance sheet translation that occurred in 2024. As I mentioned, we do not anticipate translation movements in our expectations. We expect restructuring costs of approximately $150 million to $200 million in 2025. We anticipate a global annual effective tax rate of 23% for 2025, excluding discrete items. While the impact of the share buyback should be positive, we expect to have less ME&T free cash flow to deploy in 2025. This implies a less favorable impact to profit per share in 2025 as compared to 2024. By segment, lower sales in construction industries and resource industries will be partially offset by sales growth in energy and transportation. For construction industries, we expect lower sales in 2025 based on the outlook Jim described and unfavorable price realization. In resource industries, we anticipate slightly lower sales versus 2024 driven by unfavorable price realization and slightly lower volume. Higher volumes and favorable price in energy and transportation should drive sales growth, though sales remain constrained until the benefits of the investments we are making in large engines begin to flow through beyond 2025. We also anticipate another year of services growth in each of our primary segments. Currently, we do not anticipate a significant change in dealer inventory in machines by the end of 2025. Moving onto ME&T free cash flow, we expect to be in the top half of our target range of $5 billion to $10 billion. The first quarter of 2025 will be impacted by a $1.4 billion cash outflow related to the payout of last year\u2019s incentive compensation. We anticipate CapEx of about $2.5 billion in 2025 as we continue to make disciplined investments that are right for our business, governed by a focus on growing absolute OPACC [ph] dollars. This includes the multi-year capital investment to expand our large engine volume output capability that we mentioned last year. Turning to Slide 18, to assist with your modeling, I\u2019ll provide some color on the first quarter, starting with the top line. We expect lower sales versus the prior year. For perspective, in a typical year we see our lowest sales in the first quarter of the year. In 2025, we anticipate that trend to continue to be more pronounced as sales in the first quarter should account for a lower percentage of full year sales than is typical by about 100 basis points. This decrease is mainly due to our expectations for dealer inventory movements and price, which primarily impacts machines. Energy and transportation is expected to show normal seasonality with sales growing throughout the year. Let me explain. Although dealers did reduce machine inventory significantly in the fourth quarter, they remain around the top end of the range as we enter 2025. This compares with dealer inventories in construction industries being towards the middle of the range at the beginning of 2024. As a result, we expect them to build correspondingly less inventory during the first quarter than the $1.1 billion that they built in the first quarter of 2024. As we expect dealer inventory to be about flat by year end, we should see a tailwind to sales in the fourth quarter as we don\u2019t expect a similar machine dealer inventory change as we have seen in the last two years. We also expect unfavorable price realization for machines in the first quarter due to the impact of post-sales merchandising programs. We would expect these price impacts to be greater for machines in the first half of the year as the noticeable impact of post-sales merchandising programs started in the third quarter of 2024, making for an easier comparison in the second half. To pull together the impact by segment, we anticipate lower sales in construction industries in the first quarter, impacted by lower sales to users, the headwind from changes in dealer inventory and price, the impact of which should be similar to what we saw in the fourth quarter of 2024. In resource industries in the first quarter, we expect lower sales volume versus the prior year, impacted by lower volume and unfavorable price realization. In energy and transportation, we anticipate similar sales in the first quarter versus the prior year as continued strength in power generation is about offset by lower oil and gas and transportation sales. Price should be positive for energy and transportation. Now I\u2019ll provide some color on first quarter margin expectations. Though enterprise margins are typically stronger in the first quarter compared to with the remaining quarters of the year, we do not expect this seasonal trend to occur in 2025. Compared to the prior year, we anticipate a lower enterprise adjusted operating profit margin in the first quarter due primarily to lower than usual volume and price. Volume is impacted by the lower build of machine dealer inventory and slightly lower sales to users for machines. Unfavorable price realization for machines is principally due to the factors I\u2019ve discussed previously, which will be partially offset by favorable price in energy and transportation. We expect there will be improvement in first quarter margins offsetting the volume impact in the first quarter due to stronger volume in the fourth quarter than is typical. By segment, in the first quarter in construction industries, we anticipate lower margins compared to the prior year due primarily to lower volume and price. We do not expect to see the margin benefit we typically see in the first quarter of the year as compared to the fourth quarter of the prior year, which is generally in the range of 100 to 200 basis points. Again, some of this will be offset in the fourth quarter as volume is favorable and price more neutral. In resource industries, we anticipate lower margin in the first quarter compared to the prior year, mainly due to lower volume and unfavorable price realization. In energy and transportation, we expect slightly lower margin versus the prior year as favorable price realization is more than offset by higher manufacturing costs and unfavorable mix impacts. Again, as a reminder, this detail is provided to help you model the first quarter and does not impact our expectations for the full year that I set out earlier, which is a slight decrease in sales and revenues for the year and margins in the top half of the target range. Turning to Slide 19, let me summarize. Adjusted profit per share of $21.90 exceeded last year\u2019s record by 3%. This was our third straight year with record adjusted profit per share. Adjusted operating profit margin of 20.7% exceeded the top of our target range. ME&T free cash flow of $9.4 billion was near the top of the target range of $5 billion to $10 billion. For 2025, while we expect a slight drop in sales, we expect to be in the top half of the adjusted operating profit margin range and the top half of the ME&T free cash flow target range, and we anticipate another year of services growth. We continue to execute our strategy for long term profitable growth, and with that, we\u2019ll take your questions.","evidence_gemma_new":null,"evidence_llama_3_3":"construction industry sales fourth quarter","evidence_qwen_3_30b":"construction industry sales 4th quarter 8% decrease","gemma_new_max":null,"gemma_new_min":null,"llama_3_3_max":6000000000.0,"llama_3_3_min":6000000000.0,"qwen_3_30b_max":6000000000.0,"qwen_3_30b_min":6000000000.0}
{"symbol":"CAT","year":2023,"quarter":1,"date":"2023-Q1","chunk_id":3,"sub_chunk_id":0,"centroid_label":"dealer inventory","agreed_value":1400000000.0,"count":2,"chunk":"Andrew Bonfield: Thanks, Jim, and good morning, everyone. I'll begin by providing further color on the first quarter results, including the performance of our segments. Then I'll cover the balance sheet and ME&T free cash flow before concluding with a few comments on the full year and our assumptions for the second quarter. Beginning on Slide 8. Sales and revenues for the first quarter increased by 17% or $2.3 billion to $15.9 billion, the sales increase versus the prior year was due to strong price realization and higher volume, partially offset by currency impacts. Sales were higher than we had expected in January, with price realization, dealer inventory and end user demand each slightly better than we had anticipated. Operating profit increased by 47% by $876 million to $2.7 billion, which includes the impact of the divestiture of the company's longwall business. Adjusted operating profit increased by 79% or $1.5 billion to $3.3 billion. Favorable price realization and higher volume was partially offset by higher manufacturing costs. The adjusted operating profit margin was 21.1%, an increase of 740 basis points versus the prior year. As Jim mentioned, the adjusted operating margin was much better than we had anticipated. Lower-than-expected manufacturing costs, including efficiencies and absorption were the largest variable, while price realization and volume were also stronger than we had envisioned. I'll provide additional color in a moment. Adjusted profit per share increased by 70% to $4.91 in the first quarter compared to $2.88 in the first quarter of last year. Adjusted profit per share in the first quarter of 2023 excluded pretax restructuring costs of $611 million, most of this related to the noncash charge from the divestiture of the company's longwall business. This compares to pretax restructuring costs of $13 million in the first quarter of 2022. Other income of $32 million in the quarter was lower than the first quarter of 2022 by $221 million. The year-over-year decline included about $100 million unfavorable currency impact related to ME&T balance sheet translation and an adverse impact of $80 million for pension expense. The dollar strengthened marginally since our last earnings call, so the currency impact within the first quarter of 2023 was about $30 million better than we had anticipated than when we spoke to you in January. Finally, the provision for income tax in the first quarter, excluding discrete items, reflected a global annual effective tax rate of 23%. Moving on to Slide 9. The 17% increase in the top line versus the prior year was driven by favorable price realization and higher sales volume, while currency remained a headwind to sales. Volume improved in part due to a 13% increase in sales to users. The impact from changes in dealer inventory was minimal, as the $1.4 billion build in the first quarter was similar to that seen in the first quarter of 2022. Services sales volume was slightly down, mainly due to dealer ordering patterns while services to their customers remain positive. Compared to our expectations a quarter ago, sales were higher than we anticipated, largely due to slightly stronger volume and better-than-expected price realization. On volume, sales to users outpaced our expectations due to strong demand. In addition, the improving supply chain supported higher levels of production across our primary segments. This enabled dealers to increase their inventory levels ahead of the selling season by slightly more than we had expected. Moving to Slide 10. First quarter operating profit increased by 47% to $2.7 billion. Adjusted operating profit increased by 79% versus the prior year quarter as favorable price realization outpaced higher manufacturing costs. Sales volume was also a benefit. Our first quarter adjusted operating profit margin of 21.1% was a 740 basis point increase versus the prior year. Now let me explain why our adjusted operating profit margin was so much better than we had expected. While manufacturing costs did increase year-over-year, the increase was less than we had than anticipated and was the most important factor in the quarter. As we have mentioned, volumes were better than expected due to favorable demand and improvements in the supply chain. This helped manufacturing cost as both factory efficiency and cost absorption were better than expected. Freight costs were also lower than we had anticipated due to lower premium freight utilization and rate reductions. Material costs were in line with our expectations and did not impact the margin outperformance. In addition to lower manufacturing costs, price realization was also stronger than we had anticipated a quarter ago. Stronger-than-anticipated volume had a smaller beneficial impact on margins. Spend on strategic investments was also lower than expected, as project spend ramps up slower than we had planned. Moving to Slide 11, I'll review segment performance. Starting with Construction Industries, sales increased by 10% in the first quarter to $6.7 billion due to favorable price realization, partially offset by lower sales volume and unfavorable currency impacts. The decrease in sales volume was driven by the impact from changes in dealer inventories, which increased by less in the first quarter of 2023 than compared to the prior year. Compared to our expectations, sales were higher due to stronger volumes. While sales to end users were as we'd anticipated, the dealer inventory increase was slightly above our expectations. By region, sales in North America rose by 33% due to favorable price realization and higher sales volume. Supply chain improvements enabled stronger-than-expected shipments in North America, supporting dealer restocking in the region. This is a positive, as North America continues to be our most constrained region from a dealer inventory perspective. Sales in Latin America decreased by 4% primarily due to lower sales volume, partially offset by favorable price realization. In EAME, sales increased by 5% on favorable price realization, partially offset by favorable currency impacts. Sales in Asia-Pacific decreased by 21% primarily due to lower sales volume and unfavorable currency impacts, partially offset by favorable price realization. First quarter profit for Construction Industries increased by 69% versus the prior year to $1.8 billion, price realization mainly drove the increase. This was partially offset by lower sales volume, including an unfavorable product mix and higher manufacturing costs. The segment's operating margin of 26.5% was an increase of 920 basis points versus last year. The segment margin for the quarter exceeded our expectations on moderating manufacturing costs and better-than-expected price and volume. Manufacturing costs were lower than we had expected on favorable freight, manufacturing efficiencies and absorption. Production volume was more favorable than we had anticipated, which drove the usual favorable benefits margins from the fourth quarter to the first. You will recall that in January, we said we did not expect that to happen. Turning to Slide 12. Resource Industries sales grew by 21% in the first quarter to $3.4 billion. The increase was primarily due to favorable price realization and higher sales volume. Although, aftermarket sales volumes were lower in resource industries due to dealer buying patterns, dealer services to customers remain positive. First quarter profit for Resource Industries increased by 112% versus the prior year to $764 million, mainly due to favorable price realization and higher sales volume. This was partially offset by unfavorable manufacturing costs. The segment's operating margin of 22.3% was an increase of 950 basis points versus last year. Segment margin was better than we expected due to lower manufacturing costs, including favorable absorption, efficiencies and freight. Price realization and volume benefits also exceeded our expectations. Now on Slide 13. Energy & Transportation sales increased by 24% in the first quarter to $6.3 billion, with sales up double-digits across all applications. Oil and gas sales increased by 39%, power generation sales by 27%, industrial sales rose by 23%. And finally, transportation sales increased by 14%. First quarter profit for Energy & Transportation increased by 96% versus the prior year to $1.1 billion. The increase was mainly due to favorable price realization and higher sales volume. Unfavorable manufacturing costs and higher SG&A and R&D expenses acted as a partial offset. SG&A and R&D expenses increased primarily due to investments aligned with our strategic initiatives, including electrification and services growth. The segment's operating margin of 16.9% was an increase of 620 basis points versus last year, but lower than the fourth quarter as is typical from a seasonality perspective. Compared to our expectations last quarter, margin was better than anticipated on lower manufacturing costs due in part to favorable absorption. Volume was also modestly stronger than we had expected. Moving to Slide 14. Financial Products revenue increased by 15% to $902 million primarily due to higher average financing rates across all regions. Segment profit decreased by 3% to $232 million. The slight profit decrease was mainly due to unfavorable impacts from equity securities, currency exchange losses and mark-to-market adjustments on derivative contracts. However, higher net yield on average earning assets and lower provision for credit losses acted as a partial offset. Business activity remains strong, and our portfolio continues to perform well. Past dues in the quarter were 2.00%, a 5 basis point improvement compared to the first quarter of 2022. This is the lowest first quarter past dues percentage since 2006. And whilst retail new business volume declined compared to the first quarter of 2022, this was expected as high interest rates drove more cash deals and increased competition from banks. Finally, we continue to see strong demand for used equipment, as prices remain elevated while used equipment inventory is at historic lows. Before I move on, I want to point out that CAT Financial has strong liquidity and broad access to funding. We are funded through the wholesale debt markets rather than from customer deposits, and we match assets and liabilities based on duration, currency and interest rate profile. As we have mentioned previously, in a rising interest rate environment, banks are able to provide more competitive interest rates than CAT Financial, and we tend to lose some share of the machines financed. In the event of a slowdown in lending from regional banks, we are well positioned to step in and fund creditworthy customers, so they can purchase their machines. Now on Slide 15. We continue to generate strong ME&T free cash flows. ME&T free cash flow of $1.4 billion in the quarter was about a $1.8 billion increase compared to an outflow in the prior year. The increase was primarily driven by higher profit. This increase is notable in the quarter that included our annual short-term incentive payout and a rise in working capital impacted by an increase in Caterpillar inventory. As Jim mentioned, following the strong half \u2013 first \u2013 strong first quarter, we expect to end the year in the top half of our ME&T free cash flow range of $4 billion to $8 billion. CapEx was around $400 million in the quarter, and we still expect to spend around $1.5 billion for the year. As Jim mentioned, capital deployment was about $1 billion in the quarter for dividends and share repurchases. Our balance sheet remains strong, and we have ample liquidity with an enterprise cash balance of $6.8 billion. Now on Slide 16, I will share some high-level assumptions for the full year, followed by the second quarter. Looking at the full year, we expect a strong top-line supported by price and higher sales to users, with healthy underlying end markets. As Jim mentioned, we expect full year reported sales for Construction Industries to be impacted by dealer inventory movements, particularly in the second half of the year. Underlying demand remains strong and as we do expect Construction Industries sales to users to show positive growth in the next three quarters. We anticipate continued strength in Resource Industries end markets and stronger end user sales in 2023. In addition, as typical seasonality would suggest, we expect to see some sales ramp in the second half in Energy & Transportation given strong demand for large engines and turbines. Moving on to margins. Based on our current planning assumptions, we anticipate full year adjusted operating profit margins to be in the top half of our target range. Given the favorable impact of cost absorption in the first quarter, which we do not expect to recur, we anticipate margins in the remaining quarters of the year will be lower than the first quarter level, while underlying demand and end markets remain strong. Also despite the slower-than-expected start, we anticipate the spend related to strategic investments within SG&A and R&D will ramp through the year. We expect price to continue to be favorable, although the absolute dollar value of the year-over-year price increases will moderate as we lap through the increases put through in 2022. We also expect the relationship between price and manufacturing costs for machines to normalize as the year progresses, as we\u2019ve now caught up to the manufacturing cost increases, which have outpaced price in late 2021 and early 2022. This means that the benefit to margins of price outpacing manufacturing cost inflation will moderate tempering the possibility of further margin expansion. Keep in mind, similar to the first quarter, we still anticipate a headwind of about $80 million per quarter at the corporate level related to pension expense. We also continue to anticipate restructuring expenses of around $700 million this year, with around $100 million remaining following the first quarter. And the global effective tax rate should be around 23%, excluding discrete items. Now on to our assumptions for the second quarter. We expect higher sales in the second quarter compared to the prior year on strong sales to users and price. Following the typical seasonal pattern, we expect higher sales in the second quarter as compared to the first. We expect Energy & Transportation sales will accelerate given strong sales to users, which are supported by healthy demand. We expect to report flattish sales levels compared to the first quarter in Construction Industries and Resource Industries. Both segments are expected to report positive sales to users. In the second quarter of 2022, we saw a decrease in dealer inventory of $400 million. We expect a smaller decrease in the second quarter of 2023. Specific to second quarter margins versus the prior year, adjusted operating margins at the enterprise and segment level should be substantially stronger than the prior year on favorable price and volume. However, we do expect to see a return to the typical seasonal pattern of lower second quarter margins compared to the first quarter, despite higher sales. We expect the year-over-year benefit of price realization in the second quarter to moderate compared to the benefit we saw in the first quarter, as we lapped prior year increases. In addition, SG&A and R&D investment spend should increase, as we continue to accelerate our strategic investments in areas like autonomy, alternative fuels, connectivity, digital and electrification. Finally, we do not anticipate that the favorable absorption impact that we saw in the first quarter will be repeated. At the segment level, in Construction Industries, we expect lower second quarter margins compared to the first quarter largely due to the lack of a favorable impact from absorption and a ramp-up in strategic investment spend. Likewise, second quarter margins in Resource Industries were likely to be lower than the first quarter as is the typical seasonal pattern. Conversely, Energy & Transportation should see a slight margin improvement compared to the first quarter levels, supported by stronger sales volume as demand remains healthy. Now turning to Slide 17, let me summarize. Sales grew by 17% led by strong price realization and volume gains. The adjusted operating profit margin increased by 740 basis points to 21.1%. ME&T free cash flow was strong at $1.4 billion, and we expect to be at the top half of our ME&T free cash flow range of $4 billion to $8 billion for the full year. After a strong first quarter, we currently expect our 2023 adjusted operating profit margins will be in the top half of our target range. The environment remains positive with improving supply chain dynamics, a strong backlog and healthy underlying end markets. We will continue to execute our strategy for long-term profitable growth. And with that, we\u2019ll take your questions.","evidence_gemma_new":null,"evidence_llama_3_3":"dealer inventory first quarter","evidence_qwen_3_30b":"dealer inventory $1.4 billion first quarter","gemma_new_max":null,"gemma_new_min":null,"llama_3_3_max":1400000000.0,"llama_3_3_min":1400000000.0,"qwen_3_30b_max":1400000000.0,"qwen_3_30b_min":1400000000.0}
{"symbol":"CAT","year":2023,"quarter":1,"date":"2023-Q1","chunk_id":19,"sub_chunk_id":0,"centroid_label":"dealer inventory","agreed_value":3.5,"count":3,"chunk":"Jim Umpleby: And dealer inventory is within a typical range of three to four months, and again we have strong market conditions.","evidence_gemma_new":"dealer inventory","evidence_llama_3_3":"dealer inventory","evidence_qwen_3_30b":"dealer inventory typical range","gemma_new_max":3.5,"gemma_new_min":3.5,"llama_3_3_max":3.5,"llama_3_3_min":3.5,"qwen_3_30b_max":3.5,"qwen_3_30b_min":3.5}
{"symbol":"CAT","year":2023,"quarter":3,"date":"2023-Q3","chunk_id":2,"sub_chunk_id":0,"centroid_label":"dealer inventory","agreed_value":600000000.0,"count":3,"chunk":"Jim Umpleby: Thanks, Ryan. Good morning, everyone. Thank you for joining us. Before discussing our results, I'd like to take a moment to acknowledge the tragic events in the Middle East. We are deeply saddened by the loss of life, and are hopeful for a quick and peaceful resolution. The Caterpillar Foundation is donating $1 million to the American Red Cross, and its network of Red Crescent Societies in the region, to support the humanitarian needs of those impacted. As we closed out the third quarter, I want to thank our global team for delivering another strong quarter. This included double-digit top line growth, strong adjusted operating profit margin, and robust ME&T free cash flow. Our results continue to reflect healthy demand across most of our end markets for our products and services. We remain focused on executing our strategy, and continue to invest for long-term profitable growth. I'll begin with my perspectives about our performance in the quarter. I'll then provide some insights about our end markets. Lastly, I'll provide an update on our sustainability journey. Moving to quarterly results, it was another strong quarter. Sales and revenues increased 12% in the third quarter versus last year. Adjusted operating profit margin improved to 20.8%, up significantly year-over-year. We also generated $2.9 billion of ME&T free cash flow in the quarter. Sales were generally in line with our expectations, while both adjusted operating profit margin, and ME&T free cash flow in the third quarter were better than we expected. In addition, we ended the quarter with a healthy backlog of $28.1 billion. Backlog is a function of demand and lead times. As I've mentioned, demand remains healthy in most of our end markets. Due to improving supply chain conditions, product availability and lead times have improved for many products. Dealers and customers can wait longer to place orders, which has led to a moderation in order rates, as expected. In addition, we have seen a reduction in dealer orders for building construction products, which we anticipated, due to the changeover to CAT engines that we previously discussed, and for excavation, in anticipation of dealers reducing their inventories in the fourth quarter. Although, our backlog declined as expected, it still remains elevated as a percentage of revenues compared to historic levels. While we continue to closely monitor global macroeconomic conditions, we now expect our full-year 2023 results to be better than we anticipated during our last earnings call. Turning to Slide 4. In the third quarter of 2023, sales and revenues increased by 12% to $16.8 billion, driven primarily by favorable price realization, as well as volume growth. Sales increased in each of our three primary segments. Compared with the third quarter of 2022, overall sales to users increased 13%, which was below our expectations. Energy & Transportation sales to users increased 34%, but was lower than expected due to some supply chain challenges for large engines, and the timing of gas turbine in international locomotive deliveries. For machines, which includes Construction Industries and Resource Industries, sales to users rose by 7%, in line with expectations. Sales to users in Construction Industries were up 6%. North American sales to users increased as demand remained healthy for non-residential, and residential construction. Non-residential continued to benefit from government-related infrastructure and construction projects. Residential sales to users in North America also increased in the quarter. EAME sales to users were up slightly, primarily due to continuing strength in Middle East construction activity. In Latin America and Asia-Pacific, sales to users declined in the quarter. In Resource Industries, sales to users increased 10%. In mining, sales to users increased with commodities remaining above investment thresholds. Within heavy construction, and quarry and aggregates, sales to users also increased, supported by growth for infrastructure-related projects. In Energy & Transportation, sales to users increased by 34%. All applications saw higher sales to users in the quarter. Oil and gas sales to users benefited from strong sales of turbines, and turbine-related services. We also saw continued strength in sales of reciprocating engines into oil and gas applications such as Tier 4 dynamic gas blending, repowering well servicing fleets and gas compression. Power generation sales to users continued to remain positive, due to favorable market conditions, including strong data center growth. Industrial and transportation sales to users also increased. Dealer inventories increased by $600 million in the quarter, led by Construction Industries and followed by Energy & Transportation. In Construction Industries, the increase was in North America in some of our most constrained product lines including BCP and Earthmoving. We remain very comfortable with the total level of dealer inventory, which is within the typical range. Andrew will provide more color later in the call. Adjusted operating profit margin increased to 20.8% in the third quarter, a 430 basis point increase over last year. Adjusted operating profit margin was better than we had anticipated. Relative to our expectations, we saw lower-than-expected manufacturing costs, including freight, as well as slightly favorable price realization, which included the positive impact from geographic mix. Moving to Slide 5. We generated strong ME&T free cash flow of $2.9 billion in the third quarter, and $6.8 billion in the first three quarters of 2023. Year-to-date, we returned $4.1 billion to shareholders, which included about $2.2 billion of repurchased stock, and $1.9 billion in dividends. We remain proud of our Dividend Aristocrat status, and continue to expect to return substantially all ME&T free cash flow to shareholders over time through dividends and share repurchases. Now on Slide 6, I'll describe our expectations moving forward. As I mentioned earlier, we now anticipate the full year to be better than we previously expected. We expect our adjusted operating profit margin to be slightly above the targeted range relative to the corresponding level of sales. This positive operating performance increases our expectations for ME&T free cash flow, which we now expect will exceed the $4 billion to $8 billion target range for the full year. This outlook for the adjusted operating profit margin, and ME&T free cash flow, reflects healthy customer demand and our strong operating performance. Now, I'll discuss our outlook for key end markets starting with Construction Industries. In North America overall, we continue to see positive momentum. We expect continued growth in non-residential construction in North America due to the impact of government-related infrastructure investments, and a healthy pipeline of construction projects. Although, residential construction growth has moderated, we expect it to remain healthy. In Asia Pacific, excluding China, we expect growth in Construction Industries due to public infrastructure spending, in support of commodity prices. As we have mentioned during previous earnings calls, we anticipate continued weakness in China, and expect it to remain well below our typical range of 5% to 10% of enterprise sales. In EAME, we anticipate the region will be slightly down as weakness continues in Europe, partially offset by continuing strong construction demand in the Middle East. Construction activity in Latin America is expected to be about flat versus strong 2022 performance. In Resource Industries, we continue to see a high level of quoting activity. In mining, customer product utilization remains high. The number of parked trucks remains low, and the age of the fleet remains elevated. Order rates are slightly lower than we expected at this time, reflecting continued capital discipline by our customers. We continue to believe the energy transition will support increased commodity demand over time, expanding our total addressable market, and providing further opportunities for long-term profitable growth. In addition, customer acceptance of our autonomous solutions continues to grow. This is evidenced by the announcement this morning with Freeport-McMoRan, who will convert their fleet of Cat 793 large mining trucks at an Arizona copper mine to autonomous haulage using Cat MineStar Command. We also expect heavy construction, and quarry and aggregates to remain in healthy levels due to major infrastructure in non-residential construction projects. Moving to Energy & Transportation. In oil and gas, we remain encouraged by continuing strong demand for Cat reciprocating engines and gas compression. As we said last quarter, well servicing in North America is showing some short-term moderation, but we remain optimistic about future demand. Cat reciprocating engine demand for power generation is expected to remain strong, primarily driven by data center growth. New equipment and services for solar turbines in both oil and gas and power generation remain robust. Industrial demand is expected to soften slightly from recent high levels, but remains well above our historical averages. In transportation, we anticipate strength in high-speed marine as customers continue to upgrade aging fleets. As we've described, we continue to see strength in most of our end markets. Based on our backlog, dealer inventory, and current market conditions, we expect to have another good year in 2024. We will provide additional information during our fourth quarter call. Moving to Slide 7. We continue to advance our sustainability journey. We're helping our customers achieve their climate related objectives by continuing to invest in new products, technologies, and services, that facilitate fuel flexibility, increased operational efficiency, and reduced emissions. For example, Caterpillar provides a number of low-carbon intensity solutions to customers. In Construction Industries, the Cat 980 XE Wheel Loader, which features a Cat designed and manufactured continuous variable transmission, improves fuel efficiency by as much as 35%, and reduces CO2 emissions by as much as 17% compared to the previous model. We also introduced the new Cat G3600 Gen 2 engine, the latest evolution of the powerful G3600 series, offering lower emissions. With more than 8,500 Cat G3600 units in the field, the Gen 2 engine is designed to build upon the platform's robust performance, to provide a 10% increase in power, and lower emissions compared to the previous model. We've also made several joint announcements with customers that demonstrate our commitment to supporting their climate-related objectives. I'll highlight one here. In September, Caterpillar and Albemarle introduced a unique collaboration, aimed to support their efforts to establish Kings Mountain, North Carolina as the first-ever zero emissions lithium mine in North America, while also making lithium available for use in Caterpillar battery production. These examples reinforce our ongoing sustainability leadership, and how we're helping our customers build a better, more sustainable world. With that, I will turn it over to Andrew.","evidence_gemma_new":"Dealer inventories","evidence_llama_3_3":"dealer inventories $600 million third quarter of 2023","evidence_qwen_3_30b":"dealer inventories $600 million in the quarter","gemma_new_max":600000000.0,"gemma_new_min":600000000.0,"llama_3_3_max":600000000.0,"llama_3_3_min":600000000.0,"qwen_3_30b_max":600000000.0,"qwen_3_30b_min":600000000.0}
{"symbol":"CAT","year":2023,"quarter":3,"date":"2023-Q3","chunk_id":46,"sub_chunk_id":0,"centroid_label":"dealer inventory","agreed_value":2600000000.0,"count":2,"chunk":"Mig Dobre: Yes. Thank you. Good morning. I wanted to ask a question surrounding dealer inventories. They built $2.6 billion year-to-date, which seems to be a little bit different than the way you were framing expectations. So I guess I'm curious, first, how do you expect dealer inventory still exiting 2023? Why is there a bit of a variance relative to your initial expectations? And lastly, if we are indeed going into a bit of a dealer destock mode, does it stand to infer that your incoming orders are going to continue to be soft and, obviously, backlog continues to erode? Thank you.","evidence_gemma_new":"dealer inventories year-to-date","evidence_llama_3_3":null,"evidence_qwen_3_30b":"dealer inventories year-to-date","gemma_new_max":2600000000.0,"gemma_new_min":2600000000.0,"llama_3_3_max":null,"llama_3_3_min":null,"qwen_3_30b_max":2600000000.0,"qwen_3_30b_min":2600000000.0}
{"symbol":"CAT","year":2023,"quarter":4,"date":"2023-Q4","chunk_id":3,"sub_chunk_id":0,"centroid_label":"dealer inventory","agreed_value":900000000.0,"count":2,"chunk":"Andrew Bonfield: Thanks, Jim, and good morning, everyone. I'll begin with commentary on the fourth quarter results, including the performance of our segments. Then I'll discuss the balance sheet and cash flow, followed by an update to our target ranges for adjusted operating profit margins and ME&T free cash flow. I'll conclude with our high-level assumptions for 2024 and our expectations for the first quarter. Beginning on Slide 9. Strong operating performance continued in the fourth quarter as sales and revenues, adjusted operating profit margin, adjusted profit per share and ME&T free cash flow were all better than we had expected. In summary, sales and revenues increased by 3% to $17.1 billion. Adjusted operating profit increased by 15% to $3.2 billion. The adjusted operating profit margin was 18.9%, an increase of 190 basis points versus the prior year. Profit per share was $5.28 in the fourth quarter compared to $2.79 in the fourth quarter of last year. Profit per share in the quarter included favorable mark-to-market gains of $0.14 for the remeasurement of pension and OPEB plans and certain favorable deferred tax valuation adjustments of $0.04. It also included restructuring costs of $92 million or $0.13. Adjusted profit per share increased by 35% to $5.23 in the fourth quarter compared to $3.86 last year. The provision for income taxes in the fourth quarter, excluding the amounts related to mark-to-market and discrete items, reflected a global annual effective tax rate of 21.4%. This was lower than we had expected a quarter ago due to favorable changes in the geographic mix of profits. The lower rate benefited performance in the quarter by about $0.24. Moving on to Slide 10. I'll discuss top line results in the fourth quarter. The 3% sales increase versus the prior year was primarily driven by price realization, partially offset by lower volume as impacts from dealer inventory changes more than offset the 8% increase in sales to users. Both price and volume was slightly better than we had anticipated. The dealer inventory change resulted in an unfavorable sales impact of $1.6 billion versus the prior year. Dealer inventory decreased in the fourth quarter by $900 million overall compared to an increase of approximately $700 million during the fourth quarter of 2022. The dealer inventory decrease in the fourth quarter was led by Construction Industries, where the reduction was at the high end of our expectations. The decrease in this segment was led by excavators and the impact of the Cat engine changeover in building construction products that we have mentioned in previous earnings calls. Dealers also reduced their inventories in resource industries. Overall, the decrease in dealer inventory of machines was $1.4 billion in the quarter. Conversely, dealer inventory in Energy & Transportation increased mostly due to extended commissioning time lines, resulting from strong shipments, which was supported by healthy demand. As a reminder, dealer inventory in both Energy & Transportation and Resource Industries is mainly a function of the commissioning pipeline, and over 70% of dealer inventory in these segments is backed by firm customer orders. Looking at sales by segment. Sales in Construction Industries and Energy Transportation was slightly higher than we had anticipated, while sales in Resource Industries were about in line with our expectations. Moving to operating profit on Slide 11. Adjusted operating profit increased by 15% to $3.2 billion. Price realization and favorable manufacturing costs benefited the quarter, while higher SG&A and R&D expenses and lower sales volumes acted as a partial offset. The increase in SG&A and R&D expenses was primarily driven by higher short-term incentive compensation expense and strategic investment spend. The adjusted operating profit margin of 18.9% improved by 190 basis points versus the prior year. Margins were slightly higher than we had anticipated on volumes and price being marginally better than we had expected. Now on Slide 12. Construction Industries sales decreased by 5% in the fourth quarter to $6.5 billion due to lower sales volume, partially offset by favorable price realization. Lower sales volume was primarily due to the changes in dealer inventories that I mentioned earlier and more than offset the favorable sales to users. The dealer inventory changes impacted all of the regions. By region, sales in North America increased by 4%. In Latin America, sales decreased by 25%. Sales in EAME increased -- decreased by 18%. This region accounted for the largest dealer inventory decline in the quarter. In Asia Pacific, sales decreased by 4%. Fourth quarter profit for Construction Industries was $1.5 billion, an increase by 3% versus the prior year. The increase was primarily due to favorable price, partially offset by the profit impact from lower sales volume. The segment's operating margin of 23.5% was an increase of 180 basis points versus last year. This was broadly in line with our expectations. Turning to Slide 13. Resource Industries sales decreased by 6% in the fourth quarter to $3.2 billion. The decrease was primarily due to lower sales volume, partially offset by favorable price realization. Lower volume was impacted by changes in dealer inventories as dealers decreased inventories during the fourth quarter of 2023 compared to an increase in the prior year's quarter. Volume was also impacted by slightly lower aftermarket market part sales volume, partly due to dealer buying patterns. Fourth quarter profit for Resource Industries decreased by 1% versus the prior year to $600 million. The segment's operating margin of 18.5% was an increase of 90 basis points versus last year and was in line with our expectations. Now on Slide 14. Energy & Transportation sales increased by 12% in the fourth quarter to $7.7 billion. The increase was primarily due to higher sales volume and favorable price realization. Sales volume benefited from higher shipments of large engines and solar turbines and turbine-related services in the quarter. By application, oil and gas sales increased by 23%, power generation sales were higher by 29%, industrial sales decreased by 5% and transportation sales increased by 11%. While industrial sales decreased, they remain at healthy levels. Fourth quarter profit for Energy & Transportation increased by 21% versus the prior year to $1.4 billion. The increase was primarily due to favorable price and higher sales volume, partially offset by higher SG&A and R&D expenses, currency impacts and unfavorable manufacturing costs. The increase in SG&A and R&D expenses reflected ramping investments related to strategic growth initiatives and higher short-term incentive compensation expense. As a reminder, most of our strategic investments relating to electrification and alternative fuels are in Energy & Transportation, which therefore impacts this segment's margin. The operating margin of 18.6% was an increase of 130 basis points versus the prior year. Margin exceeded our expectations on higher volume, including favorable mix and price. Moving to Slide 15. Financial Products revenues increased by 15% to $981 million, primarily due to higher average financing rates across all regions and higher average earning assets in North America. Segment profit increased by 24% to $234 million. The increase was mainly due to lower provision for credit losses at Cat Financial, higher average earning assets and a higher net yield on average earning assets. Our portfolio continues to perform well with past dues near historic levels of 1.79%. We saw a 10 basis point improvement compared to the fourth quarter of 2022 and a 17 basis point improvement compared to the third quarter. This is the lowest fourth quarter past dues percentage since 2006. The year-end allowance rate was our lowest fourth quarter rate on record of 1.18% and was the second lowest quarterly rate ever. In addition, provision expense in 2023 was at the lowest level we've seen in over 20 years. Business activity remains strong, as retail new business volume increased versus the prior year and the third quarter. The increase versus the prior year reflected higher end user sales and rental conversions in the US. In addition, we continue to see strong demand for used equipment. Though used inventories have ticked up slightly, they remain close to historically low levels. Despite some moderation in used pricing on improved availability, it is still comfortably above historic norms. Moving on to Slide 16. The record $10 billion in ME&T free cash flow for the year included $3.2 billion in the fourth quarter, an increase of $200 million versus the prior year. On CapEx, we continue to make disciplined investments that are right for our business, governed by our focus on growing absolute OPACC dollars. We spent about $1.7 billion in 2023. Looking to 2024, we expect CapEx in the range of $2 billion to $2.5 billion. This is higher than our recent run rate and includes the investment in large engine capacity, which Jim referenced a moment ago. We also plan to invest more around AACE, which is autonomy, alternative fuels, connectivity and, digital and electrification. In addition, we are investing to make our supply chain more resilient. Moving to capital deployment. We returned $3.4 billion to shareholders in the fourth quarter, including $2.8 billion in share repurchases. Our net share count has decreased by approximately 14% since 2019, when we shared our intention to return substantially all ME&T free cash flow to shareholders over time and on a consistent basis. Our dividend remains a priority as we increased our quarterly payout by 8% in 2023. You will recall from our Investor Day in 2022, we shared that we expected to increase our dividend by at least high single digits for the next three years. The increase in 2023 reflected the second of those three years. Our balance sheet remains strong. We have ample liquidity with an enterprise cash balance of $7 billion, and we hold an additional $3.8 billion in slightly longer-dated liquid marketable securities to improve yields on that cash. Now on Slide 17, I'll discuss our revised adjusted operating profit margin targets. We exceeded our progressive target range in 2023, and we are confident that our strong execution and operating performance supports the potential for higher top end adjusted operating profit margins than were reflected in the prior range. Therefore, we have increased the top end of the range by 100 basis points relative to the corresponding level of sales. Achieving the top end of the range will remain challenging, as we are committed to increase investments in our strategic initiatives supporting long-term profitable growth. The bottom end of the target range remains unchanged. To explain, while higher gross margin support increasing the top end of the range, they actually pressure our margins in periods of decreasing volume. For that reason, we believe that the bottom end of the range remains challenging, but achievable. We will now target adjusted operating profit margins of 10% to 14% at $42 billion of sales and revenues, increasing to 18% to 22% at $72 billion of sales and revenues. Now on Slide 18. When I joined Caterpillar just over five years ago, I was impressed with the potential of our business to deliver higher, more consistent ME&T free cash flow as a result of the operating and execution model and our focus on generating absolute OPACC dollars. This is how we define winning at Caterpillar. We believe increasing absolute OPACC dollars will lead to higher shareholder returns over time. Since the beginning of 2019, we have generated $30 billion in ME&T free cash flow, including a record $10 billion in 2023. We are confident in our ability to consistently generate positive ME&T free cash flow over time. Therefore, we are introducing an updated target range for ME&T free cash flow, which is between $5 billion and $10 billion. Our strong operating performance as well as confidence in our future execution supports the higher range. The updated target range still maintains our flexibility to invest in our strategic initiatives, which is a priority. We also continue to expect to return substantially all of our ME&T free cash flow to shareholders over time through dividends and share repurchases. Moving to Slide 19. I will share our high-level assumptions for the full year. As Jim mentioned, in 2024, we anticipate sales and revenues will be broadly similar to 2023. We expect slightly favorable price realization and continued healthy underlying demand across the business as a whole. We anticipate another year of services growth as we continue to target $28 billion by 2026. We do not expect a significant change in dealer inventory for machines by the end of this year. And for Energy & Transportation, it is difficult to predict with certainty what will happen to dealer inventory as we have discussed previously. In total, dealer inventory increased by $2.1 billion in 2023. By segment, in Construction Industries, sales of equipment to end users should remain roughly similar compared to the strong year we saw in 2023. However, we do not expect a dealer inventory build as we saw last year. We also anticipate our services initiatives will benefit the segment in 2024. In Resource Industries, we anticipate lower sales versus 2023, impacted by lower machine volume primarily in off-highway and articulated trucks. We had strong sales of these products in 2023 as we converted our elevated backlog into sales, making for a challenging comparison. We also anticipate an unfavorable year-over-year change in dealer inventories. However, we expect services revenues will increase in this segment. In Energy & Transportation, we expect slightly higher sales in 2024. Power generation, oil and gas, and transportation sales should be positive, while industrial sales are expected to be lower compared to our historically strong levels in 2023. On full year adjusted operating profit margin, we currently expect to be in the top half of the updated margin target range at our expected sales levels. I'll discuss some of the puts and takes. In 2024, we expect a small pricing benefit weighted towards the first half of the year given carryover from increases taken in the second half of 2023. For the full year, we expect price to modestly exceed manufacturing costs. Versus last year, price in absolute dollar terms should moderate as we let the more favorable pricing trends from 2023. Short-term incentive compensation expense was about $1.7 billion in 2023, while we anticipate $1.2 billion in 2024. We expect the benefit of that low expense will be offset by increases in SG&A and R&D expenses as we continue to invest in strategic initiatives and of future long-term profitable growth. Investments are focused in services, new product introductions and AACE. We also anticipate there may be some negative margin impact due to mix this year. I'll explain. During 2023, when availability was somewhat challenged, we biased our production and shipments to products with the highest OPACC potential. Given that availability has improved, we anticipate a more normalized mix of products in 2024. We may also see an impact on margins from the mix of different segments as we anticipate in sales in 2024 will be slightly more weighted towards Energy & Transportation than they were in 2023. Moving on, we expect to be within the top half of our updated ME&T free cash flow target range of $5 billion to $10 billion. As you consider our cash position, keep in mind, the $1.7 billion cash outflow in the first quarter related to the payout of last year's incentive compensation expense. We also anticipate restructuring charges of $300 million to $450 million this year. Finally, we expect global effective tax rate in the range of 22.5% to 23.5%, an increase versus the 21.4% in 2023. Now on Slide 20. Our expectations for the first quarter, starting with the top line. We expect first quarter sales and revenues to be broadly similar to the prior year. We anticipate price to be favorable, although significantly less in absolute dollar terms than had occurred through 2023. We expect demand to remain healthy. However, we anticipate a slightly lower dealer inventory build for machines in the first quarter compared to a $1.1 billion build in the first quarter of 2023. This will act as a headwind to sales. At the segment level, in Construction Industries, we anticipate flattish to slightly higher first quarter sales versus the prior year, primarily due to favorable price. We anticipate lower sales in Resource Industries compared to the prior year, driven by lower volume, partially offset by favorable price. In Energy & Transportation, we expect flattish to slightly higher sales versus the prior year, with updated favorable volume benefiting the upside scenario. On margins, we expect the enterprise adjusted operating profit margin in the first quarter to be broadly similar to the first -- prior year. Price should more than offset manufacturing costs as price actions from 2023 rolled into 2024. We expect price will be lower in absolute dollar terms versus the prior year. We anticipate manufacturing costs to increase compared to last year, principally impacted by cost absorption as we do not expect an inventory build like we saw in the first quarter of 2023. We also anticipate an increase in SG&A and R&D expenses related to the strategic investment spend. By segment, in Construction Industries, we anticipate a similar margin as compared to the prior year. We expect price to offset strategic investment spend and slightly higher manufacturing costs, including cost absorption. In Resource Industries, we expect a lower margin compared to the prior year, impacted by lower volume, partially offset by favorable price. In Energy & Transportation, we anticipate a similar margin versus prior year, a slightly stronger price should be offset by higher manufacturing costs. Turning to Slide 21. Let me summarize. Adjusted profit per share of $21.21 exceeded our previous full year record by 53%. We exceeded the top end of our targeted ranges for adjusted operating profit margin and ME&T free cash flow. We have increased the top end of our adjusted profit margin range, and we have raised our ME&T free cash flow target range. We expect to be in the top half of our updated margin and ME&T free cash flow target ranges in 2024, and we anticipate another year of services growth as we continue to execute our strategy for long-term profitable growth. And with that, we'll take your questions.","evidence_gemma_new":null,"evidence_llama_3_3":"dealer inventory fourth quarter","evidence_qwen_3_30b":"dealer inventory fourth quarter","gemma_new_max":null,"gemma_new_min":null,"llama_3_3_max":900000000.0,"llama_3_3_min":900000000.0,"qwen_3_30b_max":900000000.0,"qwen_3_30b_min":900000000.0}
{"symbol":"CAT","year":2024,"quarter":3,"date":"2024-Q2","chunk_id":2,"sub_chunk_id":0,"centroid_label":"dealer inventory","agreed_value":400000000.0,"count":2,"chunk":"Jim Umpleby: Thanks, Ryan. Good morning, everyone. Thank you for joining us. As we close out the third quarter, I want to thank our global team for another good quarter as our results reflect the benefit of the diversity of our end markets. We delivered strong adjusted operating profit margin and adjusted profit per share, which were consistent with our expectations, although our top-line was lower than we anticipated. We also generated ME&T free cash flow of $2.7 billion in the third quarter. Our robust ME&T free cash flow, along with our strong balance sheet, allowed us to deploy over $9 billion to shareholders through share repurchases and dividends during the first three quarters of the year, including $1.5 billion this quarter. We continue to remain disciplined in the execution of our strategy for long-term profitable growth. I'll begin with my perspectives about our performance in the quarter and will provide an update on our full year expectations. I'll then provide some insights about our end markets, followed by an update on our strategy and sustainability journey. Moving to quarterly results. Sales and revenues were down 4% in the third quarter versus last year, below our expectations due to the impact of lower-than-expected sales to users in Construction Industries and timing of deliveries in Resource Industries and Energy & Transportation. Services increased in the quarter compared to 2023. Adjusted operating profit margin was generally in line with our expectations at 20%. We achieved quarterly adjusted profit per share of $5.17, in line with our expectations at the time of the last earnings call. In addition, our backlog increased slightly to $28.7 billion and remains at a very healthy level. For the full year, although we updated our expectations since our last earnings call to reflect sales being slightly below our prior estimate, our expected adjusted operating profit margin is unchanged and remains above the top of the range. Also, our expectation for adjusted profit per share is unchanged. We are increasing our expectations for ME&T free cash flow and now anticipate it will be near the top of our target range of $5 billion to $10 billion. Turning to Slide 4. In the third quarter of 2024, sales and revenues declined 4% to $16.1 billion due to lower sales volume. Compared to the third quarter of 2023, overall sales to users decreased 6%. For Machines, which includes Construction Industries and Resource Industries, sales to users declined by 10%, which was below our expectations. Energy & Transportation continued to grow as sales to users increased 5%. Sales to users in Construction Industries were down 7% year-over-year. In North America, sales to users were down primarily due to lower rental fleet loading and the absence of a large pipeline deal in the third quarter of 2023. Excluding these two items, sales to users were about flat versus the prior year. Compared to our expectations, sales to users were lower than expected, impacted by rental fleet loading. Our dealers' rental revenue continued to grow in the quarter. Sales to users declined in EAME, primarily due to ongoing weakness in construction activity in Europe. Sales to users in Asia Pacific declined, while Latin America increased. In Resource Industries, sales to users declined 18%, generally in line with our expectations versus a strong third quarter in 2023. Mining, as well as heavy construction, and quarry and aggregates were lower, mainly due to softness we previously discussed for two products, articulated trucks and off-highway trucks. In Energy & Transportation, sales to users increased by 5%, and we continue to see growth in all applications except industrial. Power generation sales to users grew strongly as market conditions remained favorable for both reciprocating engines and solar turbines and turbine-related services. Oil and gas sales to users benefited from strong sales of turbines and turbine-related services. For reciprocating engines in oil and gas applications, sales to users were higher for gas compression but lower in well servicing. Transportation sales to users increased, while industrial declined as we expected. Our results continue to reflect the benefit of the diversity of our end markets, as well as the disciplined execution of our strategy for long-term profitable growth. Moving to dealer inventory and our backlog. In total, dealer inventory increased by $400 million versus the second quarter of 2024. For Machines, dealer inventory increased by $100 million, slightly more than we had anticipated. Looking ahead to the fourth quarter, our current planning assumptions forecast a reduction in machine dealer inventory, and we expect machine dealer inventory to end the year around the same level as year-end 2023. Dealers are independent businesses and make stocking decisions across a wide range of products based on multiple factors across the product portfolio. While machine dealer inventory is currently around the top end of the typical range, we remain comfortable with the overall level of dealer inventory. As I mentioned, backlog increased slightly versus the second quarter to $28.7 billion. Energy & Transportation increased as we continue to see strong demand for solar turbines in oil and gas and power generation, as well as strong demand for reciprocating engines for power generation. Moving to Slide 5, we generated robust ME&T free cash flow of $2.7 billion in the third quarter and $6.4 billion in the first three quarters of 2024. As I mentioned, year-to-date, we deployed more than $9 billion to shareholders through share repurchases and dividends. We remain proud of our dividend aristocrat status and continue to expect to return substantially all ME&T free cash flow to shareholders over time through dividends and share repurchases. Now, on Slide 6, I'll describe our expectations for our three primary segments moving forward. In Construction Industries, we expect lower sales to users in the fourth quarter, but remain positive about the longer-term demand outlook. During our August earnings call, we noted a lower level of rental fleet loading in North America, which continued into the third quarter, and we now expect the trend to persist in the fourth quarter. Although we have lowered our expectations for sales to users in the fourth quarter, primarily due to lower rental fleet loading, dealer rental revenue continues to grow. In addition, government-related infrastructure projects are expected to remain healthy, supported by funding yet to be spent from the IIJA. In Asia Pacific, outside of China, we expect soft economic conditions to continue. We anticipate demand in China will remain at a relatively low level for the above 10-ton excavator industry. In EAME, we anticipate that weak economic conditions in Europe will continue, partially offset by continued healthy construction demand in the Middle East. Construction activity in Latin America remains healthy, and we are expecting modest growth to continue. In addition, we expect the ongoing benefit of our services initiatives will positively impact Construction Industries. Next, I'll discuss Resource Industries. After strong performance in 2023 in mining as well as heavy construction and quarry and aggregates, we continue to anticipate lower machine volume in the fourth quarter of 2024 versus last year. However, the rate of decline for sales to users in the fourth quarter is expected to moderate versus the previous quarters. We expect to see higher services revenues, including robust rebuild activity. Customer product utilization remains high, the number of parked trucks remains relatively low, the age of the fleet remains elevated, and our autonomous solutions continue to see strong customer acceptance. Customers continue to display capital discipline. However, we continue to believe the energy transition will support increased commodity demand over time, expanding our total addressable market and providing further opportunities for long-term profitable growth. Moving to Energy & Transportation. For power generation, demand is expected to remain strong, and we expect robust growth in the fourth quarter and full year sales for both reciprocating engines and solar turbines. Overall strength in power generation continues to be driven by data center growth related to cloud computing and generative AI, and we expect this trend to continue. In oil and gas, in total, we continue to expect a stronger year overall in 2024 versus 2023. For solar turbines used in oil and gas applications, we expect a strong fourth quarter, but sales are expected to be lower than the fourth quarter of 2023 due to the timing of deliveries. The increase in power generation at solar will mostly offset solar's decline in oil and gas, so we expect solar's total sales in the fourth quarter to be roughly flat compared to last year. Solar has a strong backlog as well as healthy order and inquiry activity, and we continue to expect full year growth for solar in oil and gas. After a strong 2023, we expect reciprocating engine sales in oil and gas to be slightly down this year, primarily due to ongoing softness in well servicing. We still expect gas compression to be up for the full year. However, we expect it to soften in the near term as equipment lead times have normalized. As we had previously mentioned, we can leverage our large engine platforms across a variety of applications. Based on current market conditions and well servicing applications, we are able to serve additional power generation demand as we continue to meet oil and gas customer needs while optimizing our overall large engine capacity. Industrial demand has continued to remain at a relatively low level compared to 2023. In transportation, we anticipate full year growth in both rail services and marine applications. Moving to Slide 7, now, I'll provide an update on our strategy and sustainability journey. In February of 2024, we announced a multiyear capital investment in our large reciprocating engine division to approximately double output capability compared to 2023 for new engines and aftermarket parts. Based on increasing expectations of future demand growth, today, we are announcing an additional multiyear investment to further expand our large engine volume output capability to more than 125% compared to 2023. As I mentioned, we leverage these large engines across a variety of applications, including data centers, oil and gas, large mining trucks, and distributed power generation. Moving on to sustainability. We continue to invest in new product, technologies and services to help our customers achieve their climate-related objectives. In September, we unveiled an innovative solution to help solve one of the most complex aspects of the mining industry's energy transition, energy management. Cat Dynamic Energy Transfer, or DET, is a fully Caterpillar developed system that can transfer energy to both diesel electric and battery electric large mining trucks while they are working around them on-site. It can also charge batteries while operating with increased speed on grade, improving operational efficiency and machine uptime. Cat DET is comprised of a series of integrated elements, including a power module that converts energy from a mine site's power source, an electrified rail system to transmit the energy, and a machine system to transfer the energy to the truck's powertrain. Cat DET will integrate with the Cat MineStar Command for hauling solution, merging autonomy and electrification technologies to provide a holistic site solution. We believe mine sites will benefit from enhanced efficiency with the integration of electrification and automation. When combined, these technologies will help miners achieve production targets, while simultaneously managing energy demands. This example highlights how we leverage our industry-leading technology through an integrated approach across our portfolio to help our customers build a better, more sustainable world. With that, I'll turn it over to Andrew.","evidence_gemma_new":"dealer inventory","evidence_llama_3_3":"dealer inventory second quarter of 2024","evidence_qwen_3_30b":null,"gemma_new_max":400000000.0,"gemma_new_min":400000000.0,"llama_3_3_max":400000000.0,"llama_3_3_min":400000000.0,"qwen_3_30b_max":null,"qwen_3_30b_min":null}
{"symbol":"CAT","year":2024,"quarter":2,"date":"2024-Q2","chunk_id":2,"sub_chunk_id":0,"centroid_label":"dealer inventory","agreed_value":200000000.0,"count":2,"chunk":"James Umpleby: Thanks, Ryan. Good morning, everyone. Thank you for joining us. I'd like to start by thanking our global team for their strong execution in the first half of the year. In the second quarter, we achieved higher adjusted operating profit margin, record adjusted profit per share and generated robust ME&T free cash flow. Our results continue to reflect the benefit of the diversity of our end-markets as well as the disciplined execution of our strategy for long-term profitable growth. I'll begin with my perspectives about our performance in the quarter and we'll provide an update on our full year expectations. I'll then provide some insights about our end-markets, followed by an update on our sustainability journey. Moving to quarterly results. Sales and revenues were down 4% in the second quarter versus last year, slightly below our expectations. Services increased in the quarter. Our adjusted operating profit increased to $3.7 billion, a record. Adjusted operating profit margin was better than we expected and improved to 22.4% up 110 basis points versus last year. We achieved a record quarterly adjusted profit per share of $5.99, up 8%. We also generated $2.5 billion of ME&T free cash flow in the quarter. In addition, our backlog increased to $28.6 billion, up $700 million versus the first quarter of 2024. Before I get into the detail of the quarter and outlook for our segments, I'll update our expectations for the full year based on our first half results. Earlier in the year, we estimated that sales and revenues would be broadly similar for the full year. For the first half, the top-line came in marginally below our expectations and ended 2% below the prior year. We now anticipate our sales and revenues will decline at a roughly similar rate in the second half versus the prior year, in-part due to our latest assumptions for dealer inventory, principally into Resource Industries. Overall sales to users and construction industries are running slightly lower than we anticipated, partially offset by stronger-than-expected sales in Energy and Transportation. Service revenues continue to grow. Although sales and revenues have been marginally below our expectations, adjusted operating profit margins have been stronger than we anticipated. Earlier in the year, we expected our adjusted operating profit margin to be in the top half of the target range at the corresponding level of sales. Due to the strength of our performance in the first half of the year, we now expect overall adjusted operating profit margins to be above the top of the target range for the full year. For the second half, we expect adjusted operating profit margins to be better than we previously anticipated or about flat to the second half of 2023, which Andrew will describe. The strength of our performance to date and our improved second half adjusted operating profit margin expectations give us confidence to guide above our target range. Overall, our expectations for full year adjusted operating profit and adjusted profit per share are now higher than it was during our last earnings call. We also anticipate that ME&T free cash flow will remain in the top half of the free cash flow target range. Turning to Slide 4 and our second quarter results. In the second quarter of 2024, sales and revenues declined 4% to $16.7 billion. Sales volume declined slightly more than we expected, while price realization, including geographic mix was better than we anticipated. Dealer inventory also declined in the second quarter. Compared to the second quarter of 2023, overall sales to users decreased 3%, slightly below expectations. For machines, which includes Construction Industries and Resource Industries, sales to users declined by 8%, slightly more than expected. Energy and transportation continued to show strength as sales to users increased 10%. Sales to users in Construction Industries were down 5%. In North America, sales to users were slightly lower than anticipated, primarily due to weaker than expected rental fleet loading. Government related infrastructure projects remained healthy. Residential sales to users in North America were up as demand for new housing remained resilient. Sales to users declined in the EAME, primarily due to weakness in Europe relating to residential construction and economic conditions. Sales to users in Asia Pacific declined, while Latin America increased. In Resource Industries, sales to users declined 15%, a slightly smaller decline than we expected versus a very strong second quarter in 2023. Mining as well as heavy construction and quarry and aggregates were lower, mainly due to softness we previously discussed for two products, articulated trucks and off-highway trucks. In Energy and Transportation, despite the ongoing weakness in industrial, sales to users increased by 10% as we continue to see strength across most applications. Oil and gas sales to users benefited from strong sales of turbines and turbine related services. We also saw increased sales of reciprocating engines into gas compression, while well servicing oil and gas applications were lower. Power generation sales to users grew as market conditions remained favorable, including strong data center growth. Transportation sales to users increased, while industrial declined as expected from the strong levels last year. Our results continue to reflect the benefit of the diversity of our end-markets as well as the disciplined execution of our strategy for long-term profitable growth. Moving to dealer inventory. In total, dealer inventory decreased by $200 million versus the first quarter. For machines, dealer inventory decreased by $400 million and remains within our typical range. As I mentioned, backlog increased to $28.6 billion, up $700 million versus the first quarter of 2024. Energy & Transportation drove the increase as we continue to see strong demand for solar turbines and reciprocating engines for power generation. Adjusted operating profit margin increased to 22.4% in the second quarter, a 110 basis point increase over last year, which was better than we anticipated. Margin exceeded our expectations, primarily due to lower than expected manufacturing costs and slightly better than expected price. Moving to Slide 5, we generated ME&T free cash flow of $2.5 billion in the second quarter. We deployed more than $1.8 billion of cash for share repurchases and about $600 million in dividends in the second quarter. In June, we announced an additional $20 billion share repurchase authorization with no expiration date. We remain committed to consistent share repurchases. Since 2019, when we communicated our intention to return substantially all ME&T free cash flow to shareholders over time, our net share count has decreased by approximately 18%. In addition, we increased our dividend by 8% in the second quarter, which is our fourth straight year of a high single-digit quarterly increase. We remain proud of our Dividend Aristocrat status and continue to expect to return substantially all ME&T free cash to shareholders over time through dividends and share repurchases. Now on Slide 6. I'll describe our expectations for our three primary segments moving forward. In Construction Industries, after a record 2023, sales to users in the second half are now expected to decline slightly versus last year. In North America, we now anticipate slightly lower construction industry sales to users for full year 2024 than we did previously, primarily due to weaker than expected rental fleet loading. Government related infrastructure projects are expected to remain healthy. In Asia Pacific, outside of China, we still expect soft economic conditions to continue. We anticipate demand in China will remain at a relatively low level for the above 10 ton excavator industry. In the EAME, we anticipate that weak economic conditions in Europe will continue, somewhat offset by continued healthy construction demand in the Middle East. Construction activity in Latin America remains mixed, but overall, we are expecting modest growth. In addition, we are expecting the ongoing benefit of our services initiatives will positively impact Construction Industries. Next, I'll discuss Resource Industries. After strong performance in 2023 in mining as well as heavy construction, in quarry and aggregates, we continue to anticipate lower machine volume versus last year, primarily due to off-highway and articulated trucks. We currently anticipate a decrease in Resource Industries dealer inventories in 2024 versus a slight increase last year. We expect to see higher services revenues, including robust rebuild activity. Customer product utilization remains high, the number of parked trucks remains low and the age of the fleet remains elevated and our autonomous solutions continue to see strong customer acceptance. Customers continue to display capital discipline, however, we continue to believe the energy transition will support increased commodity demand over time, expanding our total addressable market and providing further opportunities for long-term profitable growth. Moving to Energy & Transportation. In oil and gas, in total, we expect a stronger year overall in 2024 versus last year. After a strong 2023, we expect reciprocating engine sales in oil and gas to be flat to slightly down, primarily due to ongoing softness in well servicing. We still expect gas compression to be up for the full year, however, we expect it to soften in the second half. For solar turbines, we continue to expect volume growth in the second half as our backlog remains strong for oil and gas. CAT reciprocating engine and solar turbine demand for power generation is expected to remain strong, largely due to continued data center growth relating to cloud computing and Generative AI. Industrial demand is expected to remain at a relatively low level compared to 2023 in the second half. In Transportation, we anticipate growth as the year progresses in both high speed marine and rail services. Moving to Slide 7. I'll provide an update on our sustainability journey. We are contributing to a reduced carbon future and continue to invest in new products, technologies and services to help our customers achieve their climate related objectives. In April, Caterpillar and Vale signed an agreement to test battery-electric large mining trucks as well as to conduct studies on ethanol powered trucks. Progress has been made on both initiatives since the agreement was signed, including conducting a joint study on a dual-fuel solution for haul trucks operating on ethanol and diesel fuel. We are supporting Vale's sustainability objectives. In June, we added CAT CG260 Gas Generator sets to our portfolio of commercially available power solutions capable of running on hydrogen fuel. Previously, our portfolio with this capability ranged from 400 KW to 2,500 KW. The addition of the CG260 now provides up to 4,500 KW of electric power for continuous, prime and load management requirements and is approved to operate on gas containing up to 25% hydrogen by volume. Caterpillar offers retrofit kits to upgrade CG260 Generator sets already installed with these same hydrogen capabilities. In addition to our hydrogen capabilities and reciprocating engines, solar turbines has been a leader with its ability to burn a wide variety of fuels, including hydrogen, natural gas and biofuels. Today, Caterpillar has a large and growing lineup of technologies to support customers in their sustainability journey. These two examples highlight how we are helping our customers build a better, more sustainable world. With that, I'll turn it over to Andrew.","evidence_gemma_new":"dealer inventory","evidence_llama_3_3":null,"evidence_qwen_3_30b":"dealer inventory decreased by $200 million first quarter","gemma_new_max":200000000.0,"gemma_new_min":200000000.0,"llama_3_3_max":null,"llama_3_3_min":null,"qwen_3_30b_max":200000000.0,"qwen_3_30b_min":200000000.0}
{"symbol":"CAT","year":2023,"quarter":1,"date":"2023-Q1","chunk_id":3,"sub_chunk_id":0,"centroid_label":"energy transportation sales","agreed_value":6300000000.0,"count":3,"chunk":"Andrew Bonfield: Thanks, Jim, and good morning, everyone. I'll begin by providing further color on the first quarter results, including the performance of our segments. Then I'll cover the balance sheet and ME&T free cash flow before concluding with a few comments on the full year and our assumptions for the second quarter. Beginning on Slide 8. Sales and revenues for the first quarter increased by 17% or $2.3 billion to $15.9 billion, the sales increase versus the prior year was due to strong price realization and higher volume, partially offset by currency impacts. Sales were higher than we had expected in January, with price realization, dealer inventory and end user demand each slightly better than we had anticipated. Operating profit increased by 47% by $876 million to $2.7 billion, which includes the impact of the divestiture of the company's longwall business. Adjusted operating profit increased by 79% or $1.5 billion to $3.3 billion. Favorable price realization and higher volume was partially offset by higher manufacturing costs. The adjusted operating profit margin was 21.1%, an increase of 740 basis points versus the prior year. As Jim mentioned, the adjusted operating margin was much better than we had anticipated. Lower-than-expected manufacturing costs, including efficiencies and absorption were the largest variable, while price realization and volume were also stronger than we had envisioned. I'll provide additional color in a moment. Adjusted profit per share increased by 70% to $4.91 in the first quarter compared to $2.88 in the first quarter of last year. Adjusted profit per share in the first quarter of 2023 excluded pretax restructuring costs of $611 million, most of this related to the noncash charge from the divestiture of the company's longwall business. This compares to pretax restructuring costs of $13 million in the first quarter of 2022. Other income of $32 million in the quarter was lower than the first quarter of 2022 by $221 million. The year-over-year decline included about $100 million unfavorable currency impact related to ME&T balance sheet translation and an adverse impact of $80 million for pension expense. The dollar strengthened marginally since our last earnings call, so the currency impact within the first quarter of 2023 was about $30 million better than we had anticipated than when we spoke to you in January. Finally, the provision for income tax in the first quarter, excluding discrete items, reflected a global annual effective tax rate of 23%. Moving on to Slide 9. The 17% increase in the top line versus the prior year was driven by favorable price realization and higher sales volume, while currency remained a headwind to sales. Volume improved in part due to a 13% increase in sales to users. The impact from changes in dealer inventory was minimal, as the $1.4 billion build in the first quarter was similar to that seen in the first quarter of 2022. Services sales volume was slightly down, mainly due to dealer ordering patterns while services to their customers remain positive. Compared to our expectations a quarter ago, sales were higher than we anticipated, largely due to slightly stronger volume and better-than-expected price realization. On volume, sales to users outpaced our expectations due to strong demand. In addition, the improving supply chain supported higher levels of production across our primary segments. This enabled dealers to increase their inventory levels ahead of the selling season by slightly more than we had expected. Moving to Slide 10. First quarter operating profit increased by 47% to $2.7 billion. Adjusted operating profit increased by 79% versus the prior year quarter as favorable price realization outpaced higher manufacturing costs. Sales volume was also a benefit. Our first quarter adjusted operating profit margin of 21.1% was a 740 basis point increase versus the prior year. Now let me explain why our adjusted operating profit margin was so much better than we had expected. While manufacturing costs did increase year-over-year, the increase was less than we had than anticipated and was the most important factor in the quarter. As we have mentioned, volumes were better than expected due to favorable demand and improvements in the supply chain. This helped manufacturing cost as both factory efficiency and cost absorption were better than expected. Freight costs were also lower than we had anticipated due to lower premium freight utilization and rate reductions. Material costs were in line with our expectations and did not impact the margin outperformance. In addition to lower manufacturing costs, price realization was also stronger than we had anticipated a quarter ago. Stronger-than-anticipated volume had a smaller beneficial impact on margins. Spend on strategic investments was also lower than expected, as project spend ramps up slower than we had planned. Moving to Slide 11, I'll review segment performance. Starting with Construction Industries, sales increased by 10% in the first quarter to $6.7 billion due to favorable price realization, partially offset by lower sales volume and unfavorable currency impacts. The decrease in sales volume was driven by the impact from changes in dealer inventories, which increased by less in the first quarter of 2023 than compared to the prior year. Compared to our expectations, sales were higher due to stronger volumes. While sales to end users were as we'd anticipated, the dealer inventory increase was slightly above our expectations. By region, sales in North America rose by 33% due to favorable price realization and higher sales volume. Supply chain improvements enabled stronger-than-expected shipments in North America, supporting dealer restocking in the region. This is a positive, as North America continues to be our most constrained region from a dealer inventory perspective. Sales in Latin America decreased by 4% primarily due to lower sales volume, partially offset by favorable price realization. In EAME, sales increased by 5% on favorable price realization, partially offset by favorable currency impacts. Sales in Asia-Pacific decreased by 21% primarily due to lower sales volume and unfavorable currency impacts, partially offset by favorable price realization. First quarter profit for Construction Industries increased by 69% versus the prior year to $1.8 billion, price realization mainly drove the increase. This was partially offset by lower sales volume, including an unfavorable product mix and higher manufacturing costs. The segment's operating margin of 26.5% was an increase of 920 basis points versus last year. The segment margin for the quarter exceeded our expectations on moderating manufacturing costs and better-than-expected price and volume. Manufacturing costs were lower than we had expected on favorable freight, manufacturing efficiencies and absorption. Production volume was more favorable than we had anticipated, which drove the usual favorable benefits margins from the fourth quarter to the first. You will recall that in January, we said we did not expect that to happen. Turning to Slide 12. Resource Industries sales grew by 21% in the first quarter to $3.4 billion. The increase was primarily due to favorable price realization and higher sales volume. Although, aftermarket sales volumes were lower in resource industries due to dealer buying patterns, dealer services to customers remain positive. First quarter profit for Resource Industries increased by 112% versus the prior year to $764 million, mainly due to favorable price realization and higher sales volume. This was partially offset by unfavorable manufacturing costs. The segment's operating margin of 22.3% was an increase of 950 basis points versus last year. Segment margin was better than we expected due to lower manufacturing costs, including favorable absorption, efficiencies and freight. Price realization and volume benefits also exceeded our expectations. Now on Slide 13. Energy & Transportation sales increased by 24% in the first quarter to $6.3 billion, with sales up double-digits across all applications. Oil and gas sales increased by 39%, power generation sales by 27%, industrial sales rose by 23%. And finally, transportation sales increased by 14%. First quarter profit for Energy & Transportation increased by 96% versus the prior year to $1.1 billion. The increase was mainly due to favorable price realization and higher sales volume. Unfavorable manufacturing costs and higher SG&A and R&D expenses acted as a partial offset. SG&A and R&D expenses increased primarily due to investments aligned with our strategic initiatives, including electrification and services growth. The segment's operating margin of 16.9% was an increase of 620 basis points versus last year, but lower than the fourth quarter as is typical from a seasonality perspective. Compared to our expectations last quarter, margin was better than anticipated on lower manufacturing costs due in part to favorable absorption. Volume was also modestly stronger than we had expected. Moving to Slide 14. Financial Products revenue increased by 15% to $902 million primarily due to higher average financing rates across all regions. Segment profit decreased by 3% to $232 million. The slight profit decrease was mainly due to unfavorable impacts from equity securities, currency exchange losses and mark-to-market adjustments on derivative contracts. However, higher net yield on average earning assets and lower provision for credit losses acted as a partial offset. Business activity remains strong, and our portfolio continues to perform well. Past dues in the quarter were 2.00%, a 5 basis point improvement compared to the first quarter of 2022. This is the lowest first quarter past dues percentage since 2006. And whilst retail new business volume declined compared to the first quarter of 2022, this was expected as high interest rates drove more cash deals and increased competition from banks. Finally, we continue to see strong demand for used equipment, as prices remain elevated while used equipment inventory is at historic lows. Before I move on, I want to point out that CAT Financial has strong liquidity and broad access to funding. We are funded through the wholesale debt markets rather than from customer deposits, and we match assets and liabilities based on duration, currency and interest rate profile. As we have mentioned previously, in a rising interest rate environment, banks are able to provide more competitive interest rates than CAT Financial, and we tend to lose some share of the machines financed. In the event of a slowdown in lending from regional banks, we are well positioned to step in and fund creditworthy customers, so they can purchase their machines. Now on Slide 15. We continue to generate strong ME&T free cash flows. ME&T free cash flow of $1.4 billion in the quarter was about a $1.8 billion increase compared to an outflow in the prior year. The increase was primarily driven by higher profit. This increase is notable in the quarter that included our annual short-term incentive payout and a rise in working capital impacted by an increase in Caterpillar inventory. As Jim mentioned, following the strong half \u2013 first \u2013 strong first quarter, we expect to end the year in the top half of our ME&T free cash flow range of $4 billion to $8 billion. CapEx was around $400 million in the quarter, and we still expect to spend around $1.5 billion for the year. As Jim mentioned, capital deployment was about $1 billion in the quarter for dividends and share repurchases. Our balance sheet remains strong, and we have ample liquidity with an enterprise cash balance of $6.8 billion. Now on Slide 16, I will share some high-level assumptions for the full year, followed by the second quarter. Looking at the full year, we expect a strong top-line supported by price and higher sales to users, with healthy underlying end markets. As Jim mentioned, we expect full year reported sales for Construction Industries to be impacted by dealer inventory movements, particularly in the second half of the year. Underlying demand remains strong and as we do expect Construction Industries sales to users to show positive growth in the next three quarters. We anticipate continued strength in Resource Industries end markets and stronger end user sales in 2023. In addition, as typical seasonality would suggest, we expect to see some sales ramp in the second half in Energy & Transportation given strong demand for large engines and turbines. Moving on to margins. Based on our current planning assumptions, we anticipate full year adjusted operating profit margins to be in the top half of our target range. Given the favorable impact of cost absorption in the first quarter, which we do not expect to recur, we anticipate margins in the remaining quarters of the year will be lower than the first quarter level, while underlying demand and end markets remain strong. Also despite the slower-than-expected start, we anticipate the spend related to strategic investments within SG&A and R&D will ramp through the year. We expect price to continue to be favorable, although the absolute dollar value of the year-over-year price increases will moderate as we lap through the increases put through in 2022. We also expect the relationship between price and manufacturing costs for machines to normalize as the year progresses, as we\u2019ve now caught up to the manufacturing cost increases, which have outpaced price in late 2021 and early 2022. This means that the benefit to margins of price outpacing manufacturing cost inflation will moderate tempering the possibility of further margin expansion. Keep in mind, similar to the first quarter, we still anticipate a headwind of about $80 million per quarter at the corporate level related to pension expense. We also continue to anticipate restructuring expenses of around $700 million this year, with around $100 million remaining following the first quarter. And the global effective tax rate should be around 23%, excluding discrete items. Now on to our assumptions for the second quarter. We expect higher sales in the second quarter compared to the prior year on strong sales to users and price. Following the typical seasonal pattern, we expect higher sales in the second quarter as compared to the first. We expect Energy & Transportation sales will accelerate given strong sales to users, which are supported by healthy demand. We expect to report flattish sales levels compared to the first quarter in Construction Industries and Resource Industries. Both segments are expected to report positive sales to users. In the second quarter of 2022, we saw a decrease in dealer inventory of $400 million. We expect a smaller decrease in the second quarter of 2023. Specific to second quarter margins versus the prior year, adjusted operating margins at the enterprise and segment level should be substantially stronger than the prior year on favorable price and volume. However, we do expect to see a return to the typical seasonal pattern of lower second quarter margins compared to the first quarter, despite higher sales. We expect the year-over-year benefit of price realization in the second quarter to moderate compared to the benefit we saw in the first quarter, as we lapped prior year increases. In addition, SG&A and R&D investment spend should increase, as we continue to accelerate our strategic investments in areas like autonomy, alternative fuels, connectivity, digital and electrification. Finally, we do not anticipate that the favorable absorption impact that we saw in the first quarter will be repeated. At the segment level, in Construction Industries, we expect lower second quarter margins compared to the first quarter largely due to the lack of a favorable impact from absorption and a ramp-up in strategic investment spend. Likewise, second quarter margins in Resource Industries were likely to be lower than the first quarter as is the typical seasonal pattern. Conversely, Energy & Transportation should see a slight margin improvement compared to the first quarter levels, supported by stronger sales volume as demand remains healthy. Now turning to Slide 17, let me summarize. Sales grew by 17% led by strong price realization and volume gains. The adjusted operating profit margin increased by 740 basis points to 21.1%. ME&T free cash flow was strong at $1.4 billion, and we expect to be at the top half of our ME&T free cash flow range of $4 billion to $8 billion for the full year. After a strong first quarter, we currently expect our 2023 adjusted operating profit margins will be in the top half of our target range. The environment remains positive with improving supply chain dynamics, a strong backlog and healthy underlying end markets. We will continue to execute our strategy for long-term profitable growth. And with that, we\u2019ll take your questions.","evidence_gemma_new":"Energy & Transportation sales first quarter","evidence_llama_3_3":"Energy & Transportation sales first quarter 2023","evidence_qwen_3_30b":"Energy & Transportation sales 24% first quarter","gemma_new_max":6300000000.0,"gemma_new_min":6300000000.0,"llama_3_3_max":6300000000.0,"llama_3_3_min":6300000000.0,"qwen_3_30b_max":6300000000.0,"qwen_3_30b_min":6300000000.0}
{"symbol":"CAT","year":2023,"quarter":2,"date":"2023-Q2","chunk_id":3,"sub_chunk_id":0,"centroid_label":"energy transportation sales","agreed_value":7200000000.0,"count":2,"chunk":"Andrew Bonfield: Thank you, Jim, and good morning, everyone. I'll begin with commentary on the second quarter results, including the performance of our business segments. Then I'll discuss the balance sheet and free cash flow before concluding with our assumptions for the remainder of the year, including color on the third quarter. Beginning on Slide 8. Our team delivered a very strong second quarter as overall results exceeded our expectations on strong operating performance. We saw a healthy top-line growth, improved operating margins and robust ME&T free cash flow. For the year, we now expect our adjusted operating profit margin to be close to the top of the targeted range at our anticipated sales level. We also expect ME&T free cash flow to be around the top of our $4 billion to $8 billion target range. To summarize the results, sales and revenues increased by 22% or $3.1 billion to $17.3 billion. Sales increase versus the prior year was due to higher sales volume and price realization. Operating profit increased by 88% or $1.7 billion to $3.7 billion. The adjusted operating profit margin was 21.3%, an increase of 750 basis points versus the prior year. Adjusted profit per share increased by 75% to $5.55 in the second quarter compared to $3.18 last year. Profit per share was $5.67 in the second quarter of this year. This included a discrete deferred tax benefit of $0.17 per share, while restructuring costs were $0.05 per share, flat compared to the prior year. We continue to expect restructuring expenses of about $700 million for the full-year. Other income of $127 million in the quarter was lower than the second quarter of 2022 by $133 million. The year-over-year decline was primarily driven by an unfavorable currency impact related to ME&T balance sheet translation and a recurring increase in quarterly pension expense of approximately $80 million, which we initially spoke to you about in January. Higher investment and interest income acted as a partial offset. The provision for income tax in the second quarter, excluding discrete items reflected a global annual effective tax rate of approximately 23%, which remains our expectation for the full-year. Moving on to Slide 9. The 22% increase in the top-line versus the prior year was due to higher sales volume and price. Volume improved as sales to users increased by 16% and from changes in dealer inventory. Sales for the quarter were higher than we had anticipated, mostly due to volume. The volume outperformance reflected a dealer inventory increase, which was primarily due to our stronger than expected shipments in Energy & Transportation, particularly in power generation, which is in line with strong data center demand. Price realization was in line with our expectations for the quarter. As I mentioned, sales to users grew by 16% in the quarter. As Jim has discussed, demand remains healthy across most end markets for all our products and services and is supported by a healthy order backlog. Moving to Slide 10. Second quarter operating profit increased by 88%, while adjusted operating profit increased by 87% to $3.7 billion. Year-over-year favorable price realization and higher sales volume were partially offset by higher manufacturing costs, which largely reflected higher material costs. An increase in SG&A and R&D expenses included higher strategic investment spend. The adjusted operating profit margin of 21.3% was better than we had anticipated. Volume exceeded our expectations, which supported the margin outperformance. In addition, manufacturing costs increased less than we expected due to lower freight costs and a lower than anticipated impact from cost absorption. SG&A and R&D expenses were about in line. Moving to Slide 11. I'll review the segment performance. Construction Industries sales increased by 19% in the second quarter to $7.2 billion due to price realization and higher sales volume. By region, sales in North America rose by 32% due to higher sales volume and price realization. Stronger demand and supply chain improvements enabled stronger than expected shipments in North America. This supported stronger sales of equipment to end users and some delivery stocking in what remains our most constrained region. Sales in Latin America decreased by 11%, primarily due to lower sales volume, partially offset by price realization. In EAME, sales increased by 20%, primarily the result of higher sales volume and price realization. Sales in Asia\/Pacific were about flat. Second quarter profit for Construction Industries increased by 82% versus the prior year to $1.8 billion. The increase was mainly due to price realization and higher sales volume. The segment's operating margin of 25.2% was an increase of 880 basis points versus last year. Margin exceeded our expectations, largely due to better than expected volume of freight costs, which were lower than we had anticipated. Turning to Slide 12. Resource Industries sales grew by 20% in the second quarter to $3.6 billion. The increase was primarily due to price realization and higher sales volume. Volume increased due to higher sales of equipment to end users. Although aftermarket sales volumes were lower, dealer sales to customers for services remained positive. Second quarter profit for Resource Industries increased by 108% versus the prior year to $740 million, mainly due to price realization and higher sales volume. This was partially offset by unfavorable manufacturing costs, largely material costs. The segment's operating margin of 20.8% was an increase of 880 basis points versus last year. The segment's margin was better than we had expected, primarily due to favorable volume, timing of SG&A and R&D spend and lower than anticipated freight costs. Now on Slide 13. Energy & Transportation sales increased by 27% in the second quarter to $7.2 billion. Sales were up double-digits across all applications. Oil and gas sales increased by 43%, power generation sales increased by 39%, industrial sales rose by 18% and transportation sales increased by 12%. Second quarter profit for Energy & Transportation increased by 93% versus the prior year to $1.3 billion. The increase was mainly due to higher sales volume and price realization, partially offset by unfavorable manufacturing costs and higher SG&A and R&D expenses. The segment's operating margin of 17.6% was an increase of 600 basis points versus last year. The margin was generally in line with our expectations. Moving to Slide 14. Financial Products revenue increased by 16% to $923 million, primarily due to higher average financing rates across all regions. Segment profit increased by 11% to $240 million. The increase was mainly due to a lower provision for credit losses at Cat Financial, partially offset by an increase in SG&A expense. Business activity remains strong, and our portfolio continues to perform well. Past dues in the quarter were 2.15%, a 4 basis points improvement compared to the second quarter of 2022. This is the lowest second quarter past dues percentage since 2007. Retail new business volume performed well, increasing versus the prior year and the first quarter. In addition, we continue to see strong demand for used equipment. Now on Slide 15. Our ME&T free cash flow generation was again robust as we generated $2.6 billion in the quarter. This was an increase of $1.5 billion compared to the prior year. With approximately $4 billion generated in the first half, we now expect ME&T free cash flow to be around the top of our $4 billion to $8 billion target range for the full-year. CapEx in the second quarter was about $300 million, and we still expect to spend around $1.5 billion for the full-year. As Jim mentioned, we returned about $2 billion through share repurchases and dividends in the second quarter. Our balance sheet remains strong. We have ample liquidity with an enterprise cash balance of $7.4 billion, and we also hold an additional $2 billion in slightly longer-dated liquid marketable securities to improve yields on that cash. Now turning to Slide 16. I will share some high level assumptions for the second half and the third quarter. In the second half of 2023, we expect higher total sales and revenues as compared to the second half of last year. We anticipate both sales to users and price realization will be positive in the second half. Keep in mind that on a comparative basis, we start to lap the stronger price we saw from the third quarter onwards last year. Caterpillar sales will be impacted by changes in dealer inventories as dealers increased their inventories in the second half of last year, which is not typical, versus our expectation of a more typical reduction in the second half of 2023. I want to spend just a few moments talking about dealer inventories. Dealers are independent businesses, and they make their own decisions around the level of inventory they hold. We obviously work closely with them because this impacts our production levels. As Jim mentioned, we are very comfortable with the levels of inventory that dealers are holding. We talk about dealer inventory in aggregate. This is difficult to predict with certainty as it arises from three different business segments, over 150 dealers and hundreds of different products. In Resource Industries and Energy & Transportation, dealer inventory is mainly a function of the commissioning pipeline. Keep in mind that over 70% of dealer inventory in these segments is backed by firm customer orders. For Construction Industries, dealer inventory is principally a function of end user demand and availability from the factory. In Construction Industries, dealers typically increase inventories during the first half of the year. Around 60% of the $2 billion increase during the first half of this year was from products in this segment. The remaining 40% is in Resource Industries and Energy & Transportation. For Resource Industries and Energy Transportation, we currently anticipate a slight reduction in levels in the second-half, but this is dependent on commissioning. In Construction Industries, dealers are currently holding around the midpoint of the typical three to four months range. Some dealers would like to increase inventories of certain products, such as BCP and earth moving due to strong customer demand. Conversely, some dealers would like to reduce the levels of excavated inventory because of high availability. In addition, we are scheduled to replace third-party engines with Cat engines and certain products, which will impact production in these products during the second half. Our current planning assumption for the Construction Industries is that dealers will reduce their overall levels in inventory in the second half of 2023 with a principal focus on excavators. Overall, at the enterprise level, we currently expect dealer inventory should be slightly higher at the end of 2023 versus last year. Moving on. On this slide, we provide our adjusted profit margins target charge to assist you in your modeling process. Based on our current planning assumptions, we anticipate full-year adjusted operating profit margin to be close to the top of that 300 basis points target range at our expected sales level. Your expectation for total enterprise sales this year will inform you where on the curve margins should finish for the year. Specific to the second half, we anticipate adjusted operating profit margins in the remaining quarters of the year will be above the year ago levels, although they will be lower than the levels we saw in the first two quarters of this year. As compared to the first half, we anticipate a margin headwind from cost absorption in the second half. We do not expect to build our inventory as we did in the first half and anticipate that there will be some inventory reduction if we continue to see sustained supply chain improvement. In addition, spend related to the strategic growth initiatives should continue to ramp. Price realization should remain positive that the magnitude of the favorability versus the prior year is expected to be lower in the second half as we lap the more favorable pricing trends from last year. Therefore, the increases in margins that we have occurred -- that have occurred from price outpacing manufacturing cost inflation should moderate in the second half of this year. Now let's move on to our assumptions that are specific to the third quarter. We anticipate third quarter sales to be higher than the third quarter of 2022, but to exhibit the typical sequential decline when compared to the second quarter of 2023. In Construction Industries, as is our normal seasonal end, we expect lower sales compared to the second quarter. In Resource Industries, which can be lumpy, we anticipate slightly lower sales compared to the second quarter. We expect sales in Energy & Transportation will increase slightly compared to the second quarter. Specific to third quarter margins versus the prior year, adjusted operating profit margins at the enterprise level and segment margins should be stronger. However, we do expect lower enterprise adjusted operating profit margins in the third quarter compared to the second quarter of this year on lower volume and impacts from cost absorption. We also anticipate investment spend will ramp across our primary segments as we continue to accelerate our strategic investments in area like autonomy, alternative fuels, connectivity and digital and electrification. At the segment level, for Construction Industries, we expect a lower margin compared to the second quarter as is typical. This is largely due to lower quarter-on-quarter volume, increased investment in strategic initiatives and slightly higher manufacturing costs, including a headwind from cost absorption. Favorable price realization will act as a partial offset. We also anticipate lower third quarter margins in Resource Industries compared to the second quarter, primarily due to lower volume quarter-on-quarter. Conversely, we expect third quarter margins in Energy & Transportation will be slightly higher compared to the second quarter on higher volume and stronger price realization, partially offset by higher manufacturing costs and spend relating to strategic initiatives. Now turning to Slide 13, let me summarize. We generated strong adjusted operating profit margin with a 750 basis point increase to 21.3%. We now expect to be close to the top of the targeted range for adjusted operating margin -- profit margin for the full-year based on our expected sales levels. ME&T free cash flow generation was robust at $2.6 billion in the quarter. We returned $2 billion to shareholders through share repurchases and dividends. We now expect ME&T free cash flow to be around the top of our $4 billion to $8 billion range for the full-year. Lastly, we continue to execute our strategy for long-term profitable growth. And with that, we'll now take your questions.","evidence_gemma_new":"Energy & Transportation sales second quarter","evidence_llama_3_3":"Energy & Transportation sales second quarter","evidence_qwen_3_30b":null,"gemma_new_max":7200000000.0,"gemma_new_min":7200000000.0,"llama_3_3_max":7200000000.0,"llama_3_3_min":7200000000.0,"qwen_3_30b_max":null,"qwen_3_30b_min":null}
{"symbol":"CAT","year":2024,"quarter":1,"date":"2024-Q1","chunk_id":3,"sub_chunk_id":0,"centroid_label":"energy transportation sales","agreed_value":6700000000.0,"count":2,"chunk":"Andrew Bonfield: Thank you, Jim. Good morning everyone. I'll begin by commenting on the first quarter results, including the performance of our segments. Then I'll discuss the balance sheet and ME&T free cash flow before concluding with a few comments on the full year and our assumptions for the second quarter. Beginning on slide eight. Our operating performance was strong with both adjusted operating profit margin and adjusted profit per share, being better than we had expected. Sales and revenues of $15.8 billion were about flat compared to the prior year, broadly in line with our expectations. Adjusted operating profit increased by 5% to $3.5 billion and the adjusted operating profit margin was 22.2% an increase of 110 basis points versus the prior year which was slightly better than we had expected. Profit per share was $5.75 in the first quarter, compared to $3.74 in the first quarter of last year Adjusted profit per share increased by 14% to $5.60 in the first quarter, compared to $4.91 last year. Adjusted profit per share excluded net restructuring income of $0.15 per share, this compares to restructuring expense of $1.17 which was excluded in the first quarter of 2023. Other income of $156 million for the quarter, was higher than the first quarter of 2023 by $124 million, this primary related to favorable ME&T balance sheet translation. The provision for income taxes in the first quarter excluding discrete items, reflected a global annual effective tax rate of 22.5% compared with 23% in the first quarter of 2023. Included in profit per share and adjusted profit per share was a benefit of $38 million or $0.08 for a discrete tax item related to stock based compensation. A comparable benefit of $32 million or $0.06 per share was included in the first quarter of 2023. The year-over-year impact of a reduction in the number of shares primarily due to share repurchases over the past year, had a favorable impact on adjusted profit per share of approximately $0.24. This included a favorable impact from the initial shares we received, from the $3.5 billion accelerated share repurchase agreement that Jim mentioned earlier. Before, I move on you will have seen some additional detail on earnings release segment commentaries. We continue to highlight the primary drivers of year-over-year changes in sales and profit by segment, as we have done previously, but in addition we are now also quantifying those significant variances. You will also find some additional information on historical dealer inventory, including at the machines level in the appendix of today's slides Moving to slide nine. I'll discuss our top line results in the first quarter. Sales remained about flat compared to the prior year, as lower volume was largely offset by favorable price realization. The decline in volume was primarily due to lower sales to users. As Jim mentioned, the 5% decrease in sales to users was slightly more than our expectations, mainly driven by weakness in Europe for Construction Industries. Changes in total dealer inventories did not have a significant impact on sales, as the increase of $1.4 billion in the quarter was similar to the increase last year. As Jim mentioned, the $1.1 billion increase for machines was slightly higher than we had anticipated, primarily as sales to users were modestly lower than we had expected. As compared to our expectations for the quarter, sales were broadly in line. Sales volume was slightly lower than we had anticipated, while price realization, including geographic mix, was better than we had expected. By segment, sales in Construction Industries were lower than we had anticipated, while sales in Energy & Transportation exceeded our expectations. Resource Industry sales were about in line. Moving to operating profit on Slide 10. The first quarter operating profit increased by 29% to $3.5 billion. As a reminder, the prior year included a $586 million charge that arose from the divestiture of the company's long-haul business. Adjusted operating profit increased by 5% to $3.5 billion. Price realization benefited the quarter, while lower sales volume acted as a partial offset. The adjusted operating profit margin of 22.2% improved by 110 basis points versus the prior year. Margins were slightly better than we had anticipated, mainly due to favorable manufacturing costs, as freight costs were lower than we had expected. Price, including a benefit from geographic mix, was also better than we had anticipated. Now on slide 11, I'll review segment performance, starting with Construction Industries. Sales decreased by 5% in the first quarter to $6.4 billion, primarily due to lower sales volume, partially offset by favorable price realization. Sales were slightly lower than we had anticipated. Sales in North America increased by 6% in the quarter. In the EAME region, sales fell by 25%, and in particular, Europe was lower than we had anticipated, impacted by weakness in residential construction and economic conditions. In Latin America, sales decreased by 1%. In Asia Pacific, sales decreased by 14%. First quarter profit for Construction Industries was $1.8 billion, a slight decrease versus the prior year. The decrease was mainly due to lower sales volume, partially offset by favorable price realization and manufacturing costs. The segments margin of 27.5% was an increase of 100 basis points versus the last year. This was better than we had expected due to favorable manufacturing costs, which largely reflected lower freight costs. Turning to slide 12, Resource Industries sales decreased by 7% in the first quarter to $3.2 billion, which was about in line with our expectations. The decrease was primarily due to lower sales volume, partially offset by favorable price realization. The decrease in sales volume was mainly driven by lower sales of equipment to end users, which Jim explained. First quarter profit for Resource Industries decreased by 4% versus the prior year to $730 million. The decrease was mainly due to lower sales volume, partially offset by favorable price realization. The segments margin of 22.9% was an increase of 60 basis points versus last year. This is better than we had expected on stronger price and favorable manufacturing costs, driven mainly by lower freight costs. Now on slide 13, Energy & Transportation sales increased by 7% in the first quarter to $6.7 billion. The increase was primarily due to higher sales volume and favorable price. Sales were stronger than we had expected, mostly due to increased deliveries of large engines. By application, power generation sales increased by 26%, oil and gas sales improved by 19%, transportation sales were higher by 9%, while industrial sales decreased by 21%. First quarter profit for Energy & Transportation increased by 23% versus the prior year to $1.3 billion. The increase was primarily due to favorable price realization. The segments margin of 19.5% was an increase of 260 basis points versus the prior year. The margin was significantly stronger than we had anticipated due to lower than expected manufacturing costs, higher volume, and better price. Moving to slide 14, Financial Products revenues increased by 10% to $991 million, primarily due to higher average financing rates across all regions and higher average net earning assets in North America. Segment profit was strong, increasing by 26% to $293 million. The increase was mainly due to an insurance settlement and a favorable impact from equity securities. Our portfolio continues to perform well as past dues remain near historic lows at 1.78%, a 22 basis point improvement compared to the first quarter of 2023. This is the lowest first quarter past dues since 2006. In addition, the allowance rate was our lowest on record at 1.01%. Business activity remains strong as new business volume increased versus the prior year, primarily driven by North America. We continue to see strong demand for used equipment and inventories remain close to historically low levels, with just slight increases over recent quarters. Moving on to slide 15. As Jim mentioned, our ME&T free cash flow remains strong. We generated $1.3 billion in the quarter after taking into account the $1.7 billion payments made for 2023 short-term incentive compensation and CapEx spend of about $500 million. Spend for both short-term incentive compensation and CapEx was higher than it was in the first quarter of 2023. For the full year, we expect to be in the top half of our ME&T free cash flow target range, which correlates to between $7.5 billion and $10 billion. We still expect to spend between $2 billion and $2.5 billion in CapEx, and we will continue to prioritize investments around AACE, which is autonomy, alternative fuels, connectivity, and digital and electrification. Moving to capital deployment. We continue to expect to return substantially all our ME&T free cash flow to shareholders over time through dividends and share repurchases. Of the record $5.1 billion of cash deployed in the first quarter, share repurchase spend was $4.5 billion, including the $3.5 billion accelerated share repurchase, or ASR. The $3.5 billion were deployed in the first quarter, and the ASR agreement may last for up to nine months. The ASR provides us with favorable pricing as compared to shorter-term ASRs, which we have carried out previously, which makes it more attractive. Price is finally determined relative to the volume-weighted average price, or VWAP, over the duration of the agreement. Approximately 70% of the shares were delivered to the company up front, but the balance calculated when the agreement is terminated based on the actual average VWAP. As a reminder, our objective is to be in the market on a more consistent basis with share repurchases, so this is a great mechanism for us to use. As I mentioned, our balance sheet remains strong. We have ample liquidity with an enterprise cash balance of $5 billion, and we hold an additional $2.2 billion in slightly longer-dated liquid marketable securities to improve yields on that cash. Moving to slide 16, I will share our high-level assumptions for the full year. As compared to a quarter ago, our assumptions for the full year generally remain unchanged. On the top line, we anticipate broadly similar sales and revenues as compared to the record 2023 level, consistent with what we mentioned last quarter. Although our top-level sales expectations remain the same, segment inputs have shifted a bit. We now see a slightly stronger top line in Energy & Transportation after a strong first quarter, while our expectations have been tampered slightly in Construction Industries due to economic conditions in the European market. We continue to expect slightly favorable price realization versus the prior year. Our expectations on dealer inventory also remain unchanged. We currently do not expect a significant change in dealer inventory of machines in 2024 compared to a $700 million increase in 2023. This is expected to be a headwind to sales. We also continue to anticipate another year of services growth across each of our primary segments as we strive to achieve our 2026 target of $28 billion in services revenues. At the segment level, we now expect Construction Industries sales to users to be slightly lower compared to 2023 due to the softer economic conditions in Europe. We expect demand in North America to remain at healthy levels, as Jim discussed. We also anticipate changes in dealer inventory to act as a headwind to Construction Industries sales in 2024. We expect sales service revenues to be positive versus the prior year. In Resource Industries, we continue to expect lower sales impacted by lower machine volume, primarily in off-highway and articulated trucks, where the comparison versus the prior year is challenging. We anticipate changes in dealer inventory to act as a headwind to sales in this segment as well. In Energy & Transportation, our 2024 sales expectations have increased slightly after the strong first quarter. We continue to see strong demand for reciprocating engines in power generation, as well as healthy order and quoting activity for Solar Turbines for both oil and gas and power generation. This supports our improved optimism for higher sales in Energy & Transportation in 2024. Also, as typical seasonality would suggest, we expect to see some sales ramp in Energy & Transportation as we move through the full year. On full year adjusted operating profit margin, we continue to expect to be in the top half of the margin target range at our expected sales levels. As I mentioned last quarter, we expect a relatively small pricing benefit to be weighted towards the first half of the year, given carryover from increases in the second half of last year. We now expect flattish manufacturing costs this year versus the prior year, as we anticipate more favorable freight costs, although the unfavorable impact from cost absorption could act as a partial offset. As I mentioned a quarter ago, given better availability this year, we anticipate shipping a more normal mix of products this year. We anticipate this dynamic may act as a slight headwind to margins. SG&A and R&D expenses are expected to ramp through the remainder of the year as we continue to invest in strategic initiatives aimed at future long-term profitable growth. This will be offset by the benefit of lower short-term incentive compensation. In addition, from a segment perspective, keep in mind that margins in Construction Industries tend to trend lower as the year progresses. Finally, we continue to anticipate restructuring costs of $300 million to $450 million this year, and our expectation for annual effective tax rate, excluding discrete items, is now 22.5%. Now on slide 17, I'll discuss our expectations for the second quarter, starting with the top line. We expect lower sales in the second quarter compared to the prior year, as we anticipate a headwind due to changes in dealer inventory of machines which will impact volumes. We expect dealer inventory of machines to decline this quarter in line with normal seasonal trends, versus the atypical $200 million increase that occurred in the second quarter of 2023. However, we anticipate a continuation of healthy demand across most of our end markets for our products and services, and prices expected to remain positive year-over-year. Following the typical seasonable pattern, we do expect higher sales in the second quarter as compared to the first. By segment compared to the prior year, we anticipate lower sales in Construction Industries as we expect changes in dealer inventory to act as a headwind. Favorable price should that provide a partial offset. We expect lower sales in resource industries versus the prior year, driven by lower volume, partially offset by favorable price. In Energy & Transportation, we anticipate similar sales versus the prior year. On enterprise margins in the second quarter, we expect the adjusted operating profit margin to be similar to the prior year, and lower versus the first quarter, following the typical seasonable pattern. As compared to the prior year, we could expect that price will remain favorable from the continued carryover benefit from increases taken in the second half of 2023. We expect flattish manufacturing costs compared to the prior year, as favorable freight is expected to offset the impacts of unfavorable cost absorption. We also anticipate an increase in SG&A and R&D expenses related to strategic investments, although this will be offset by lower short-term incentive compensation. By segment, in both Construction Industries and Resource Industries, we expect similar margins in the second quarter compared to the prior year, as we expect favorable price to be offset by lower volume. In Energy & Transportation, we expect a higher margin versus the prior year on better price and favorable mix. Unfavorable manufacturing costs and SG&A and R&D spend related to strategic investments are expected to act as a partial offset in this segment. Note that we expect a headwind to enterprise margins and corporate costs in the quarter, where we anticipate unfavorable year-over-year impacts from timing differences. So turning to slide 18, let me summarize. The strong operating performance continued in this quarter, with the adjusted operating profit margin at 22.2%, and record adjusted profit per share of $5.60. We deployed a record $5.1 billion of cash per share repurchases and dividends in the quarter. Our assumptions for the full year remain similar, and we expect to be in the top half of our target ranges for both adjusted operating profit margin and ME&T free cash flow. We continue to execute our strategy for the long-term profitable growth. And with that, we'll take your questions.","evidence_gemma_new":"Energy & Transportation sales","evidence_llama_3_3":"Energy & Transportation sales first quarter","evidence_qwen_3_30b":null,"gemma_new_max":6700000000.0,"gemma_new_min":6700000000.0,"llama_3_3_max":6700000000.0,"llama_3_3_min":6700000000.0,"qwen_3_30b_max":null,"qwen_3_30b_min":null}
{"symbol":"CAT","year":2024,"quarter":2,"date":"2024-Q2","chunk_id":3,"sub_chunk_id":0,"centroid_label":"energy transportation sales","agreed_value":7300000000.0,"count":2,"chunk":"Andrew Bonfield: Thank you, Jim, and good morning, everyone. I'll begin with a high level summary of the quarter. Then I'll provide more detailed comments on our second quarter results, including the performance of the segments. Next, I'll discuss the balance sheet and free cash flow and then conclude with comments on our assumptions for the remainder of the year. Beginning on Slide 8. Although sales and revenues were slightly below our expectations, we had strong operating performance in the quarter, including higher adjusted operating profit margin and record adjusted profit per share, both of which were stronger than we had anticipated. Sales and revenues of $16.7 billion decreased by about 4% compared to the prior year. Adjusted operating profit increased by 2% to $3.7 billion. And the adjusted operating profit margin was 22.4%, an increase of 110 basis points versus the prior year. Profit per share was $5.48 in the second quarter compared to $5.67 in the second quarter of last year. Adjusted profit per share increased by 8% to $5.99 in the quarter compared to $5.55 last year. Adjusted profit per share excluded restructuring costs of $0.51 per share mainly due to a loss on the divestiture of two non-US entities. This compares to restructuring costs of $0.05 per share and a discrete deferred tax benefit of $0.17 per share, which were both excluded in the second quarter of 2023. Other income of $155 million for the quarter was a $28 million benefit versus the prior year and was primarily driven by favorable impacts from commodity hedges. The provision for income taxes in the second quarter, excluding discrete items, reflected a global annual effective tax rate of 22.5% compared with 23% in the second quarter of 2023. Finally, the year-over-year impact from the reduction in the average number of shares outstanding primarily due to share repurchases over the past year had a favorable impact on adjusted profit per share of approximately $0.29. Moving on to Slide 9. I'll discuss our top line results in the second quarter. Sales and revenues decreased by 4% compared to the prior year as lower volume was partially offset by favorable price realization. Lower volume was mainly driven by the impact from the changes in dealer inventories. As you may recall, we anticipated a sales decline this quarter versus last year as an atypical dealer inventory increase in the second quarter of 2023 made for a challenging comparison. To explain, dealer inventory decreased by about $200 million in the second quarter. In comparison, we saw an increase of $600 million in the second quarter of last year. For machines only, dealer inventory followed the typical seasonal trend this quarter with a decrease of $400 million as compared to a $200 million increase in the second quarter of last year. Sales were slightly below our expectations due to lower-than-expected volume being partially offset by better-than-expected price realization, including geographic mix. Moving to operating profit on Slide 10. Operating profit in the second quarter decreased by 5% to $3.5 billion. This included a $227 million unfavorable impact from higher restructuring costs. Adjusted operating profit increased by 2% to $3.7 billion. Price realization benefited the quarter while the profit impact of lower sales volume acted as a partial offset. The adjusted operating profit margin of 22.4% improved by 110 basis points versus the prior year. Margins were better than we expected mainly due to favorable manufacturing costs, product mix and price. Versus our expectation, price was slightly better than we anticipated driven by Energy & Transportation. On Slide 11, Construction Industries sales decreased by 7% in the second quarter to $6.7 billion. This is primarily due to lower sales volume, partially offset by favorable price realization. Sales volume was impacted by unfavorable changes in dealer inventories. Dealer inventory was about flat in the second quarter of 2024 versus an increase in the second quarter of last year. Lower sales to users also impacted volume. Sales in Construction Industries were lower than we had anticipated due to lower-than-expected rental fleet loading in North America and continued weakness in Europe. By region, sales in North America were about flat and Latin America sales increased by 20%. Sales in the EAME region decreased by 27%. In Asia Pacific, sales declined by 15%. Second quarter profit for Construction Industries was $1.7 billion, a 3% decrease versus the prior year. This was mainly due to lower sales volume, partially offset by favorable price realization, which benefited from geographic mix effects. Favorable manufacturing costs provided some tailwind as well largely reflecting lower material costs. The segment's margin of 26.1% was an increase of 90 basis points versus last year. Margin was better than we had expected primarily due to a favorable product mix and the timing of planned SG&A and R&D spend. Price was in line with our expectations. Turning to Slide 12. Resource Industries sales decreased by 10% in the second quarter to $3.2 billion, which was about in line with our expectations. The decline was primarily due to lower sales volume, partially offset by favorable price realization. Sales volume was impacted by changes in dealer inventories as dealer inventory decreased more during the second quarter of 2024 than during the second quarter of last year. In addition, we saw lower sales to users in the segment as anticipated given the challenging comparison. Second quarter profit for Resource Industries decreased by 3% versus the prior year to $718 million. This is mainly due to lower sales volume, partially offset by favorable impacts from price realization and manufacturing costs, including lower freight. The segment's margin of 22.4% was an increase of 160 basis points versus last year. Margin was better than we had expected mainly driven by the timing of planned SG&A and R&D spend and a favorable product mix. Now on Slide 13. Energy & Transportation sales increased by 2% in the second quarter to $7.3 billion. The increase was due to favorable price realization, which was partially offset by lower sales volume driven by industrial, which declined in line with our expectations. The segment sales were slightly better than we had anticipated primarily driven by price. By application, power generation sales increased by 15%. Transportation sales were higher by 7%. Oil and gas sales improved by 4%, while industrial sales decreased by 21%. Second quarter profit for Energy & Transportation increased by 20% versus the prior year to $1.5 billion. The increase was primarily due to favorable price. The segment's margin of 20.8% was an increase of 320 basis points versus the prior year. Margin was significantly stronger than we had anticipated due to better price and lower-than-expected manufacturing costs, which largely reflected favorable inventory absorption, lower freight and lower material costs. Moving to Slide 14. Financial Products revenues increased by 9% to about $1 billion primarily due to higher average financing rates across all regions and higher average earning assets in North America. Segment profit decreased by 5% to $227 million. This was mainly due to a higher provision for credit losses, which largely reflected the absence of a nonrecurring reserve release from the prior year. The portfolio remains healthy as past dues of 1.74% on near historic lows and reflect a 41 basis point improvement compared to the prior year. In addition, the allowance rate was 0.89% our lowest rate on record. Business activity remains healthy as new business volume increased versus the prior year primarily driven by North America. We also continue to see healthy demand for used equipment where inventories remain close to historical low levels. Moving on to Slide 15. We generated $2.5 billion in ME&T free cash flow in the second quarter and we expect our full year free cash flow to be in the top half of our annual target range of between $7.5 billion to $10 billion. Our expectations for CapEx remain between $2 billion and $2.5 billion for the year. On share repurchases, the more than $1.8 billion deployed in the second quarter included a $1 billion accelerated share repurchase agreement. Approximately 75% of those shares were delivered to the company upfront with the balance to be delivered when the agreement is terminated prior to year-end. Note that we also had an ME&T bond maturity of $1 billion in the second quarter. And given our healthy liquidity position, we did not issue new bonds. Our balance sheet remains strong with an enterprise cash balance of $4.3 billion. In addition, we hold $1.8 billion in slightly longer-dated liquid marketable securities to improve yields on that cash. Now on Slides 16 and 17, I will show our high-level assumptions for the remainder of the year. As Jim mentioned, we now anticipate sales and revenues to be slightly lower this year versus the record 2023 level. This compares to our previous expectation for broadly similar sales. This change reflects an updated assumption of a slight reduction in machine dealer inventory, primarily in Resource Industries and lower-than-expected sales to users in Construction Industries mainly due to lower rental fleet loading in North America. Now specific to our second half assumptions. We typically see higher sales in the second half as compared to the first and we expect sales to follow that normal seasonable trend this year. As compared to the prior year, we now anticipate slightly lower sales in the second half driven by lower machine sales to users. Changes in dealer inventories and machines are expected to have a nominal impact as the decrease in the second half of this year should be similar to the decrease observed in the second half of 2023, which was about $1 billion. However, note that machine dealer inventory changes will impact the quarters differently as we expect a sales headwind in the third quarter as dealers built their inventories in the third quarter of 2023 and a sales tailwind in the fourth quarter due to a smaller inventory decline than the prior year. Finally, we continue to anticipate services growth in the second half of the year as we strive to achieve our 2026 target of $28 billion in services revenues. Moving on to our margin expectations. As Jim mentioned, the strength of our first half performance combined with the more favorable expectations for the second half mean that we now anticipate overall adjusted operating profit margin to be above the top end of the target range for the full year. Specific to second half margins, despite higher sales, we do expect lower margins versus the first half, which follows a typical seasonable trend. However, keep in mind that first half margins were at record levels and the magnitude of the second half decline may be slightly larger than is typical. As compared to the prior year, we expect our adjusted operating profit margin in the second half will be similar to the prior year level. While we anticipate some favorability in manufacturing costs on improved operational efficiencies, we do expect slightly lower volumes and a slight headwind from price in the second half versus a year ago. On price, the impact of lapping the increases taken in the second half of 2023 means that the benefit in the second half of this year will be significantly lower. In addition, we expect that improved availability across the industry will result in the normalization of the pricing environment. To assist you with your modeling for the full year, please note that we now anticipate restructuring costs of around $450 million and that our expectations for the annual effective tax rate, excluding discrete items, remains at 22.5%. Now on Slide 18. I'll provide a few comments on the third quarter, starting on the top line. We expect slightly lower sales and revenues in the third quarter compared to the prior year as we anticipate a dealer inventory headwind for machines, which will impact volumes. We expect dealer inventory machines to be flattish to slightly lower in the third quarter as is typical, which compares to the atypical $400 million increase in the prior year. We also anticipate lower machine sales to users versus a strong comparison. We expect flattish price realization in the third quarter versus the prior year due to the normalization that I mentioned a moment ago. We also anticipate that the ongoing benefit of our service initiatives will positively impact sales in the third quarter. By segment in the third quarter compared to the prior year, we anticipate lower sales in Construction Industries primarily due to a headwind from changes in dealer inventories. In Resource Industries, we expect lower sales as sales to users are impacted by a challenging comparison similar to that which we have observed in the first two quarters of this year. In Energy & Transportation, we anticipate higher sales versus the prior year, supported by strengthen in power generation, oil and gas and transportation. Lower sales in industrial should act as a partial offset. For enterprise margins in the third quarter, we expect similar adjusted operating profit margin compared to the prior year as we anticipate lower volume will be offset primarily by favorable manufacturing costs. By segment in the third quarter, in Construction Industries, we anticipate lower margin compared to the prior year on lower volume and slightly unfavorable price realization. Favorable manufacturing costs should act as a partial offset. For Resource Industries, we anticipate slightly lower margins in the third quarter compared to the prior year due to unfavorable volume and higher SG&A and R&D spend. In Energy & Transportation, we expect a higher margin versus the prior year and stronger volumes and favorable price realization. So turning to Slide 19, let me summarize. Strong execution and operating performance continued in the second quarter. Higher adjusted operating profit margin of 22.4% offset the decrease in sales and revenues and led to a record adjusted profit per share of $5.99. We now expect overall adjusted operating profit margin to be above the top end of the target range for the full year based on our expected sales levels, which should now be slightly lower than levels in 2023. The net of these factors leads to our current expectation for higher adjusted operating profit and adjusted profit per share as compared to what we contemplated at the beginning of the year. ME&T free cash flow generation was $2.5 billion in the quarter. We continue to expect to be in the top half of our target range for the full year. We have deployed $7.6 billion to shareholders through share repurchases and dividends in the first half of 2024. We continue to execute our strategy for long-term profitable growth. And with that we'll take your questions.","evidence_gemma_new":null,"evidence_llama_3_3":"Energy & Transportation sales second quarter","evidence_qwen_3_30b":"Energy & Transportation sales $7.3 billion increased by 2%","gemma_new_max":null,"gemma_new_min":null,"llama_3_3_max":7300000000.0,"llama_3_3_min":7300000000.0,"qwen_3_30b_max":7300000000.0,"qwen_3_30b_min":7300000000.0}
{"symbol":"CAT","year":2024,"quarter":3,"date":"2024-Q3","chunk_id":3,"sub_chunk_id":0,"centroid_label":"energy transportation sales","agreed_value":7200000000.0,"count":3,"chunk":"Andrew Bonfield: Thank you, Jim, and good morning, everyone. As usual, I'll begin with a high-level summary of the third quarter, and then provide more detailed comments, including the performance of the segments. I'll then, discuss the balance sheet and free cash flow, before concluding with comments on our assumptions for the full year and the fourth quarter. Beginning on Slide 8, although sales and revenues were lower than we had expected, our adjusted operating profit margin was 20.0%, generally in line with what we had anticipated. Adjusted profit per share was in line with our expectations despite adjusted operating profit being impacted by the lower sales and revenues. I will highlight a few of the moving parts in a moment. As Jim mentioned, our full year margin expectations remain unchanged, and we continue to anticipate the adjusted operating profit margin will be above the top end of the target range despite the slightly lower outlook for the top-line. Our expectations for adjusted profit per share remain unchanged versus our expectations at the time of our last earnings call. Also, we have increased our expectations for ME&T free cash flow for the year, which we now anticipate will be near the top of our $5 billion to $10 billion target range. In the third quarter, sales and revenues of $16.1 billion decreased by 4% compared to the prior year. The adjusted operating profit margin of 20.0% was 80 basis points lower when compared to the prior year. Profit per share was $5.06 in the third quarter compared to $5.45 in the third quarter of last year. Restructuring costs were $0.11 in the quarter versus $0.07 in the prior year. Adjusted profit per share was $5.17 in the quarter compared to $5.52 last year. Other income and expense was $119 million headwind versus the prior year, mostly driven by an unfavorable currency impact related to ME&T balance sheet translation. We do not forecast the impact of foreign currency translation on our adjusted profit per share, so this acted as a headwind compared to our expectations for the quarter. Excluding discrete items, the provision for income taxes in the third quarter in both 2023 and 2024 reflected a global annual effective tax rate of 22.5%. We recorded a discrete tax benefit, which had an $0.11 favorable impact within the quarter. We do not anticipate discrete items. Finally, the year-over-year impact from the reduction in the average number of shares outstanding, primarily due to share repurchases, resulted in a favorable impact on adjusted profit per share of approximately $0.26 as compared to the third quarter 2023. This was slightly better than we had expected. Moving to Slide 9, I'll discuss our top-line results for the third quarter. Sales and revenues decreased by 4% compared to the prior year, primarily impacted by lower sales volume as a result of lower sales to users and impacts from changes in dealer inventories. Total sales to users decreased by 6% as a 10% decrease from Machines was partially offset by a 5% increase for Energy & Transportation. The impact from changes in total dealer inventories acted as a sales headwind of about $200 million in the quarter. For Machines-only, dealer inventory increased by about $100 million, a smaller increase than the $400 million increase in the prior year, but slightly above our expectations of being flattish to slightly lower. Service revenues increased versus the prior year, as we had anticipated. Moving to operating profit on Slide 10. Operating profit in the third quarter decreased by 9% to $3.1 billion. Adjusted operating profit decreased by 8% to $3.2 billion, mainly due to the impact of lower sales volume, partially offset by favorable price realization and manufacturing costs. Since early 2022, price realization has been a strong -- has been strong and often exceeded our expectations. Over the past several quarters, we have highlighted that price will begin to moderate in the second half of this year. In the third quarter, this moderation began to occur as price realization was lower than previous quarters and generally in line with our expectations. As I mentioned, for the third quarter, the adjusted operating profit margin was 20.0%, which was generally in line with our expectations. By segment, margin in Construction Industries and Resource Industries was slightly below our expectations on lower volume, while Energy & Transportation was about in line. Financial products had a slightly stronger quarter than we had expected. On Slide 11, Construction Industries sales decreased by 9% in the third quarter to $6.3 billion, slightly below our expectations. The decrease versus the prior year was primarily due to lower sales volume and unfavorable price realization. The decrease in sales volume was mainly driven by lower sales of equipment to end users. Changes in dealer inventories also acted as a slight headwind to sales. By region, Construction Industries sales in North America decreased by 11%; in Latin America, sales increased by 19%; sales in the EAME region decreased by 15%; in Asia Pacific, sales declined by 12%. Third quarter profit for Construction Industries was $1.5 billion, a 20% decrease versus the prior year. This is mainly due to the profit impact of lower sales volume and unfavorable price realization. The segment's margin of 23.4% was a decrease of 300 basis points versus the prior year. Turning to Slide 12, Resource Industries sales decreased by 10% in the third quarter to $3.0 billion, which was slightly point below our expectations. The decline versus the prior year was primarily due to lower sales volume, mainly driven by lower sales of equipment to end users given a challenging comparison to the prior year. Third quarter profit for Resource Industries decreased by 15% versus the prior year to $619 million. This was mainly due to the profit impact of lower sales volume. The segment's margin of 20.4% was a decrease of 140 basis points versus the prior year. Now, on Slide 13, Energy & Transportation sales increased by 5% in the third quarter to $7.2 billion, slightly lower than we had expected, driven by the timing of deliveries. The increase versus the prior year was primarily due to favorable price realization and higher sales volume, including higher intersegment sales. By application, power generation sales increased by 26%, transportation sales were higher by 3%, oil and gas sales decreased by 1%, and industrial sales decreased by 16%. Third quarter profit for Energy & Transportation increased by 21% versus the prior year to $1.4 billion. The increase was mainly due to favorable price realization. The segment's margin of 19.9% was an increase of 270 basis points versus the prior year. Moving to Slide 14, financial products revenues increased by 6% to about $1 billion, primarily due to higher average earning assets driven by North America and higher average financing rates across all regions. Segment profit increased by 21% to $246 million. This is mainly due to a favorable impact from equity securities and a lower provision for credit losses. Our customers' financial health is strong. Past dues remain near historic lows of 1.74% in the quarter, down 22 basis points versus the prior year. Our allowance rate was 0.87%, our lowest on record. Business activity at Cat Financial remains healthy. Our retail new business volume increased by 17% versus the prior year, supported by our financing packages for customers choosing to buy Caterpillar equipment. Though Caterpillar's retail machine sales volume was lower, proportionately more sales have been financed through Cat Financial, which highlights the attractiveness of the financing options we are offering to our customers. We also continue to see healthy demand for used equipment and inventories remain at low levels. Conversion rates are also strong as customers choose to buy equipment at the end of their lease term. Moving on to Slide 15, we generated about $2.7 billion in ME&T free cash flow in the third quarter and deployed about $1.5 billion in share repurchases and dividends. Our balance sheet remains strong with an enterprise cash balance of $5.6 billion. In addition, we hold $1.8 billion in slightly longer dated liquid marketable securities to improve yields on that cash. Now, on Slide 16, I will share our high-level assumptions for the full year. For the full year, we have updated our outlook to reflect sales and revenues that are slightly lower than our expectations at the time of our last earnings call, driven by lower-than-expected third quarter sales and an update to our expectations for dealer rental fleet loading in Construction Industries. We continue to anticipate services growth in 2024. As I mentioned earlier, our full year expectations for adjusted operating profit margin and adjusted profit per share remain unchanged compared to our last earnings call. We continue to expect adjusted operating profit margin to be above the top end of the target range. In addition, we are increasing our expectations for ME&T free cash flow for the year, which we now anticipate to be near the top of our $5 billion to $10 billion target range. To assist you with your modeling for the full year, we now anticipate CapEx of around $2 billion and restructuring costs of approximately $400 million. Our expectation for the global annual effective tax rate, excluding discrete items, remains at 22.5%. Turning to Slide 17, I'll provide a few comments on the fourth quarter, starting with the top-line. We expect slightly lower sales and revenues in the fourth quarter compared to the prior year, impacted by lower machine sales to users versus a strong comparison. On machine dealer inventory, our planning assumptions include the expectation that dealers will reduce their inventories in the fourth quarter while balancing their need to be prepared for 2025. The magnitude of the decline for machine dealer inventory is expected to be less than the $1.4 billion decrease we saw in the fourth quarter of 2023. For perspective, we expect machine dealer inventory to end the year around the same level as year-end 2023. Also, the ongoing benefit of our services initiatives is expected to positively impact sales in the fourth quarter. By segment, in the fourth quarter, compared to the prior year, we anticipate a sales decrease in Construction Industries. This is impacted by lower sales to users, which Jim mentioned, along with unfavorable price realization. In Resource Industries, we expect slightly lower sales, impacted by lower sales to users versus a strong fourth quarter of 2023. In Energy & Transportation, we anticipate slightly higher sales versus the prior year, supported by power generation. Enterprise margin in the fourth quarter is expected to trend lower compared to the third quarter, following the typical seasonable pattern. However, versus the prior year, we expect a modestly higher adjusted operating profit margin despite lower sales. We anticipate favorable manufacturing costs and lower SG&A and R&D expenses will more than offset the profit impact of lower sales volume. Lower SG&A and R&D expenses are primarily driven by the benefit of lower short-term incentive compensation versus a high expense in the prior year quarter. Price realization for Machines is expected to trend lower as the pricing environment continues to normalize, though price in Energy & Transportation should act as a partial offset. Regarding price expectations for Machines, it is important to note that discounts to dealers occur through post sales merchandising programs, which impact our results over time. This includes financing support from Cat Financial, which is an effective way of supporting our customers, and we recover a portion of that support over the life of the deal. Let me explain. Based on the current level of price discounting support, we reserve the anticipated payments to dealers for these merchandising programs. At times, there is a lag between the timing of the invoice of the dealer and when the dealer invoices the customer, which impacts the reserve. Over the next few quarters, we expect the impact from these merchandising programs to drive a headwind to Machine price realization as we continue to adjust the reserve to reflect the current level of price discounting support. By segment, in the fourth quarter, in Construction Industries, we anticipate lower margin compared to the prior year primarily due to unfavorable price realization, partially offset by favorable manufacturing costs. In Resource Industries, we anticipate lower margin in the fourth quarter compared to the prior year, mainly due to lower volume and prioritization of strategic investments around services growth and AACE, which is autonomy, alternative fuels, connectivity and digital, and electrification. Favorable manufacturing costs should act as a partial offset. In Energy & Transportation, we expect a higher margin versus the prior year, primarily impacted by favorable price realization. So, turning to Slide 18, let me summarize. Although sales and revenues were lower than we had expected, adjusted operating profit margin and adjusted profit per share were generally in line with our expectations. We now anticipate our top-line for the full year will be slightly below our prior estimate. Our backlog increased slightly and remains at a very healthy level. Our expectations for full year adjusted operating profit margin and adjusted profit per share remain unchanged compared to a quarter ago. We continue to expect adjusted operating profit margin to be above the top end of the target range for the full year based on our expected sales levels. We are now increasing our expectations for ME&T free cash flow, which we anticipate to be near the top of our target range for the full year. Our team executed well in the quarter, and our results continue to benefit -- to reflect the benefit of the diversity of our end markets and the disciplined execution of our strategy for long-term profitable growth. And with that, we'll now take your questions.","evidence_gemma_new":"Energy & Transportation sales","evidence_llama_3_3":"Energy & Transportation sales third quarter","evidence_qwen_3_30b":"Energy & Transportation sales increased by 5% third quarter","gemma_new_max":7200000000.0,"gemma_new_min":7200000000.0,"llama_3_3_max":7200000000.0,"llama_3_3_min":7200000000.0,"qwen_3_30b_max":7200000000.0,"qwen_3_30b_min":7200000000.0}
{"symbol":"CAT","year":2023,"quarter":1,"date":"2023-Q1","chunk_id":3,"sub_chunk_id":0,"centroid_label":"financial products revenues","agreed_value":902000000.0,"count":3,"chunk":"Andrew Bonfield: Thanks, Jim, and good morning, everyone. I'll begin by providing further color on the first quarter results, including the performance of our segments. Then I'll cover the balance sheet and ME&T free cash flow before concluding with a few comments on the full year and our assumptions for the second quarter. Beginning on Slide 8. Sales and revenues for the first quarter increased by 17% or $2.3 billion to $15.9 billion, the sales increase versus the prior year was due to strong price realization and higher volume, partially offset by currency impacts. Sales were higher than we had expected in January, with price realization, dealer inventory and end user demand each slightly better than we had anticipated. Operating profit increased by 47% by $876 million to $2.7 billion, which includes the impact of the divestiture of the company's longwall business. Adjusted operating profit increased by 79% or $1.5 billion to $3.3 billion. Favorable price realization and higher volume was partially offset by higher manufacturing costs. The adjusted operating profit margin was 21.1%, an increase of 740 basis points versus the prior year. As Jim mentioned, the adjusted operating margin was much better than we had anticipated. Lower-than-expected manufacturing costs, including efficiencies and absorption were the largest variable, while price realization and volume were also stronger than we had envisioned. I'll provide additional color in a moment. Adjusted profit per share increased by 70% to $4.91 in the first quarter compared to $2.88 in the first quarter of last year. Adjusted profit per share in the first quarter of 2023 excluded pretax restructuring costs of $611 million, most of this related to the noncash charge from the divestiture of the company's longwall business. This compares to pretax restructuring costs of $13 million in the first quarter of 2022. Other income of $32 million in the quarter was lower than the first quarter of 2022 by $221 million. The year-over-year decline included about $100 million unfavorable currency impact related to ME&T balance sheet translation and an adverse impact of $80 million for pension expense. The dollar strengthened marginally since our last earnings call, so the currency impact within the first quarter of 2023 was about $30 million better than we had anticipated than when we spoke to you in January. Finally, the provision for income tax in the first quarter, excluding discrete items, reflected a global annual effective tax rate of 23%. Moving on to Slide 9. The 17% increase in the top line versus the prior year was driven by favorable price realization and higher sales volume, while currency remained a headwind to sales. Volume improved in part due to a 13% increase in sales to users. The impact from changes in dealer inventory was minimal, as the $1.4 billion build in the first quarter was similar to that seen in the first quarter of 2022. Services sales volume was slightly down, mainly due to dealer ordering patterns while services to their customers remain positive. Compared to our expectations a quarter ago, sales were higher than we anticipated, largely due to slightly stronger volume and better-than-expected price realization. On volume, sales to users outpaced our expectations due to strong demand. In addition, the improving supply chain supported higher levels of production across our primary segments. This enabled dealers to increase their inventory levels ahead of the selling season by slightly more than we had expected. Moving to Slide 10. First quarter operating profit increased by 47% to $2.7 billion. Adjusted operating profit increased by 79% versus the prior year quarter as favorable price realization outpaced higher manufacturing costs. Sales volume was also a benefit. Our first quarter adjusted operating profit margin of 21.1% was a 740 basis point increase versus the prior year. Now let me explain why our adjusted operating profit margin was so much better than we had expected. While manufacturing costs did increase year-over-year, the increase was less than we had than anticipated and was the most important factor in the quarter. As we have mentioned, volumes were better than expected due to favorable demand and improvements in the supply chain. This helped manufacturing cost as both factory efficiency and cost absorption were better than expected. Freight costs were also lower than we had anticipated due to lower premium freight utilization and rate reductions. Material costs were in line with our expectations and did not impact the margin outperformance. In addition to lower manufacturing costs, price realization was also stronger than we had anticipated a quarter ago. Stronger-than-anticipated volume had a smaller beneficial impact on margins. Spend on strategic investments was also lower than expected, as project spend ramps up slower than we had planned. Moving to Slide 11, I'll review segment performance. Starting with Construction Industries, sales increased by 10% in the first quarter to $6.7 billion due to favorable price realization, partially offset by lower sales volume and unfavorable currency impacts. The decrease in sales volume was driven by the impact from changes in dealer inventories, which increased by less in the first quarter of 2023 than compared to the prior year. Compared to our expectations, sales were higher due to stronger volumes. While sales to end users were as we'd anticipated, the dealer inventory increase was slightly above our expectations. By region, sales in North America rose by 33% due to favorable price realization and higher sales volume. Supply chain improvements enabled stronger-than-expected shipments in North America, supporting dealer restocking in the region. This is a positive, as North America continues to be our most constrained region from a dealer inventory perspective. Sales in Latin America decreased by 4% primarily due to lower sales volume, partially offset by favorable price realization. In EAME, sales increased by 5% on favorable price realization, partially offset by favorable currency impacts. Sales in Asia-Pacific decreased by 21% primarily due to lower sales volume and unfavorable currency impacts, partially offset by favorable price realization. First quarter profit for Construction Industries increased by 69% versus the prior year to $1.8 billion, price realization mainly drove the increase. This was partially offset by lower sales volume, including an unfavorable product mix and higher manufacturing costs. The segment's operating margin of 26.5% was an increase of 920 basis points versus last year. The segment margin for the quarter exceeded our expectations on moderating manufacturing costs and better-than-expected price and volume. Manufacturing costs were lower than we had expected on favorable freight, manufacturing efficiencies and absorption. Production volume was more favorable than we had anticipated, which drove the usual favorable benefits margins from the fourth quarter to the first. You will recall that in January, we said we did not expect that to happen. Turning to Slide 12. Resource Industries sales grew by 21% in the first quarter to $3.4 billion. The increase was primarily due to favorable price realization and higher sales volume. Although, aftermarket sales volumes were lower in resource industries due to dealer buying patterns, dealer services to customers remain positive. First quarter profit for Resource Industries increased by 112% versus the prior year to $764 million, mainly due to favorable price realization and higher sales volume. This was partially offset by unfavorable manufacturing costs. The segment's operating margin of 22.3% was an increase of 950 basis points versus last year. Segment margin was better than we expected due to lower manufacturing costs, including favorable absorption, efficiencies and freight. Price realization and volume benefits also exceeded our expectations. Now on Slide 13. Energy & Transportation sales increased by 24% in the first quarter to $6.3 billion, with sales up double-digits across all applications. Oil and gas sales increased by 39%, power generation sales by 27%, industrial sales rose by 23%. And finally, transportation sales increased by 14%. First quarter profit for Energy & Transportation increased by 96% versus the prior year to $1.1 billion. The increase was mainly due to favorable price realization and higher sales volume. Unfavorable manufacturing costs and higher SG&A and R&D expenses acted as a partial offset. SG&A and R&D expenses increased primarily due to investments aligned with our strategic initiatives, including electrification and services growth. The segment's operating margin of 16.9% was an increase of 620 basis points versus last year, but lower than the fourth quarter as is typical from a seasonality perspective. Compared to our expectations last quarter, margin was better than anticipated on lower manufacturing costs due in part to favorable absorption. Volume was also modestly stronger than we had expected. Moving to Slide 14. Financial Products revenue increased by 15% to $902 million primarily due to higher average financing rates across all regions. Segment profit decreased by 3% to $232 million. The slight profit decrease was mainly due to unfavorable impacts from equity securities, currency exchange losses and mark-to-market adjustments on derivative contracts. However, higher net yield on average earning assets and lower provision for credit losses acted as a partial offset. Business activity remains strong, and our portfolio continues to perform well. Past dues in the quarter were 2.00%, a 5 basis point improvement compared to the first quarter of 2022. This is the lowest first quarter past dues percentage since 2006. And whilst retail new business volume declined compared to the first quarter of 2022, this was expected as high interest rates drove more cash deals and increased competition from banks. Finally, we continue to see strong demand for used equipment, as prices remain elevated while used equipment inventory is at historic lows. Before I move on, I want to point out that CAT Financial has strong liquidity and broad access to funding. We are funded through the wholesale debt markets rather than from customer deposits, and we match assets and liabilities based on duration, currency and interest rate profile. As we have mentioned previously, in a rising interest rate environment, banks are able to provide more competitive interest rates than CAT Financial, and we tend to lose some share of the machines financed. In the event of a slowdown in lending from regional banks, we are well positioned to step in and fund creditworthy customers, so they can purchase their machines. Now on Slide 15. We continue to generate strong ME&T free cash flows. ME&T free cash flow of $1.4 billion in the quarter was about a $1.8 billion increase compared to an outflow in the prior year. The increase was primarily driven by higher profit. This increase is notable in the quarter that included our annual short-term incentive payout and a rise in working capital impacted by an increase in Caterpillar inventory. As Jim mentioned, following the strong half \u2013 first \u2013 strong first quarter, we expect to end the year in the top half of our ME&T free cash flow range of $4 billion to $8 billion. CapEx was around $400 million in the quarter, and we still expect to spend around $1.5 billion for the year. As Jim mentioned, capital deployment was about $1 billion in the quarter for dividends and share repurchases. Our balance sheet remains strong, and we have ample liquidity with an enterprise cash balance of $6.8 billion. Now on Slide 16, I will share some high-level assumptions for the full year, followed by the second quarter. Looking at the full year, we expect a strong top-line supported by price and higher sales to users, with healthy underlying end markets. As Jim mentioned, we expect full year reported sales for Construction Industries to be impacted by dealer inventory movements, particularly in the second half of the year. Underlying demand remains strong and as we do expect Construction Industries sales to users to show positive growth in the next three quarters. We anticipate continued strength in Resource Industries end markets and stronger end user sales in 2023. In addition, as typical seasonality would suggest, we expect to see some sales ramp in the second half in Energy & Transportation given strong demand for large engines and turbines. Moving on to margins. Based on our current planning assumptions, we anticipate full year adjusted operating profit margins to be in the top half of our target range. Given the favorable impact of cost absorption in the first quarter, which we do not expect to recur, we anticipate margins in the remaining quarters of the year will be lower than the first quarter level, while underlying demand and end markets remain strong. Also despite the slower-than-expected start, we anticipate the spend related to strategic investments within SG&A and R&D will ramp through the year. We expect price to continue to be favorable, although the absolute dollar value of the year-over-year price increases will moderate as we lap through the increases put through in 2022. We also expect the relationship between price and manufacturing costs for machines to normalize as the year progresses, as we\u2019ve now caught up to the manufacturing cost increases, which have outpaced price in late 2021 and early 2022. This means that the benefit to margins of price outpacing manufacturing cost inflation will moderate tempering the possibility of further margin expansion. Keep in mind, similar to the first quarter, we still anticipate a headwind of about $80 million per quarter at the corporate level related to pension expense. We also continue to anticipate restructuring expenses of around $700 million this year, with around $100 million remaining following the first quarter. And the global effective tax rate should be around 23%, excluding discrete items. Now on to our assumptions for the second quarter. We expect higher sales in the second quarter compared to the prior year on strong sales to users and price. Following the typical seasonal pattern, we expect higher sales in the second quarter as compared to the first. We expect Energy & Transportation sales will accelerate given strong sales to users, which are supported by healthy demand. We expect to report flattish sales levels compared to the first quarter in Construction Industries and Resource Industries. Both segments are expected to report positive sales to users. In the second quarter of 2022, we saw a decrease in dealer inventory of $400 million. We expect a smaller decrease in the second quarter of 2023. Specific to second quarter margins versus the prior year, adjusted operating margins at the enterprise and segment level should be substantially stronger than the prior year on favorable price and volume. However, we do expect to see a return to the typical seasonal pattern of lower second quarter margins compared to the first quarter, despite higher sales. We expect the year-over-year benefit of price realization in the second quarter to moderate compared to the benefit we saw in the first quarter, as we lapped prior year increases. In addition, SG&A and R&D investment spend should increase, as we continue to accelerate our strategic investments in areas like autonomy, alternative fuels, connectivity, digital and electrification. Finally, we do not anticipate that the favorable absorption impact that we saw in the first quarter will be repeated. At the segment level, in Construction Industries, we expect lower second quarter margins compared to the first quarter largely due to the lack of a favorable impact from absorption and a ramp-up in strategic investment spend. Likewise, second quarter margins in Resource Industries were likely to be lower than the first quarter as is the typical seasonal pattern. Conversely, Energy & Transportation should see a slight margin improvement compared to the first quarter levels, supported by stronger sales volume as demand remains healthy. Now turning to Slide 17, let me summarize. Sales grew by 17% led by strong price realization and volume gains. The adjusted operating profit margin increased by 740 basis points to 21.1%. ME&T free cash flow was strong at $1.4 billion, and we expect to be at the top half of our ME&T free cash flow range of $4 billion to $8 billion for the full year. After a strong first quarter, we currently expect our 2023 adjusted operating profit margins will be in the top half of our target range. The environment remains positive with improving supply chain dynamics, a strong backlog and healthy underlying end markets. We will continue to execute our strategy for long-term profitable growth. And with that, we\u2019ll take your questions.","evidence_gemma_new":"Financial Products revenue","evidence_llama_3_3":"Financial Products revenue first quarter 2023","evidence_qwen_3_30b":"financial products revenue 15% first quarter","gemma_new_max":902000000.0,"gemma_new_min":902000000.0,"llama_3_3_max":902000000.0,"llama_3_3_min":902000000.0,"qwen_3_30b_max":902000000.0,"qwen_3_30b_min":902000000.0}
{"symbol":"CAT","year":2023,"quarter":2,"date":"2023-Q2","chunk_id":3,"sub_chunk_id":0,"centroid_label":"financial products revenues","agreed_value":923000000.0,"count":2,"chunk":"Andrew Bonfield: Thank you, Jim, and good morning, everyone. I'll begin with commentary on the second quarter results, including the performance of our business segments. Then I'll discuss the balance sheet and free cash flow before concluding with our assumptions for the remainder of the year, including color on the third quarter. Beginning on Slide 8. Our team delivered a very strong second quarter as overall results exceeded our expectations on strong operating performance. We saw a healthy top-line growth, improved operating margins and robust ME&T free cash flow. For the year, we now expect our adjusted operating profit margin to be close to the top of the targeted range at our anticipated sales level. We also expect ME&T free cash flow to be around the top of our $4 billion to $8 billion target range. To summarize the results, sales and revenues increased by 22% or $3.1 billion to $17.3 billion. Sales increase versus the prior year was due to higher sales volume and price realization. Operating profit increased by 88% or $1.7 billion to $3.7 billion. The adjusted operating profit margin was 21.3%, an increase of 750 basis points versus the prior year. Adjusted profit per share increased by 75% to $5.55 in the second quarter compared to $3.18 last year. Profit per share was $5.67 in the second quarter of this year. This included a discrete deferred tax benefit of $0.17 per share, while restructuring costs were $0.05 per share, flat compared to the prior year. We continue to expect restructuring expenses of about $700 million for the full-year. Other income of $127 million in the quarter was lower than the second quarter of 2022 by $133 million. The year-over-year decline was primarily driven by an unfavorable currency impact related to ME&T balance sheet translation and a recurring increase in quarterly pension expense of approximately $80 million, which we initially spoke to you about in January. Higher investment and interest income acted as a partial offset. The provision for income tax in the second quarter, excluding discrete items reflected a global annual effective tax rate of approximately 23%, which remains our expectation for the full-year. Moving on to Slide 9. The 22% increase in the top-line versus the prior year was due to higher sales volume and price. Volume improved as sales to users increased by 16% and from changes in dealer inventory. Sales for the quarter were higher than we had anticipated, mostly due to volume. The volume outperformance reflected a dealer inventory increase, which was primarily due to our stronger than expected shipments in Energy & Transportation, particularly in power generation, which is in line with strong data center demand. Price realization was in line with our expectations for the quarter. As I mentioned, sales to users grew by 16% in the quarter. As Jim has discussed, demand remains healthy across most end markets for all our products and services and is supported by a healthy order backlog. Moving to Slide 10. Second quarter operating profit increased by 88%, while adjusted operating profit increased by 87% to $3.7 billion. Year-over-year favorable price realization and higher sales volume were partially offset by higher manufacturing costs, which largely reflected higher material costs. An increase in SG&A and R&D expenses included higher strategic investment spend. The adjusted operating profit margin of 21.3% was better than we had anticipated. Volume exceeded our expectations, which supported the margin outperformance. In addition, manufacturing costs increased less than we expected due to lower freight costs and a lower than anticipated impact from cost absorption. SG&A and R&D expenses were about in line. Moving to Slide 11. I'll review the segment performance. Construction Industries sales increased by 19% in the second quarter to $7.2 billion due to price realization and higher sales volume. By region, sales in North America rose by 32% due to higher sales volume and price realization. Stronger demand and supply chain improvements enabled stronger than expected shipments in North America. This supported stronger sales of equipment to end users and some delivery stocking in what remains our most constrained region. Sales in Latin America decreased by 11%, primarily due to lower sales volume, partially offset by price realization. In EAME, sales increased by 20%, primarily the result of higher sales volume and price realization. Sales in Asia\/Pacific were about flat. Second quarter profit for Construction Industries increased by 82% versus the prior year to $1.8 billion. The increase was mainly due to price realization and higher sales volume. The segment's operating margin of 25.2% was an increase of 880 basis points versus last year. Margin exceeded our expectations, largely due to better than expected volume of freight costs, which were lower than we had anticipated. Turning to Slide 12. Resource Industries sales grew by 20% in the second quarter to $3.6 billion. The increase was primarily due to price realization and higher sales volume. Volume increased due to higher sales of equipment to end users. Although aftermarket sales volumes were lower, dealer sales to customers for services remained positive. Second quarter profit for Resource Industries increased by 108% versus the prior year to $740 million, mainly due to price realization and higher sales volume. This was partially offset by unfavorable manufacturing costs, largely material costs. The segment's operating margin of 20.8% was an increase of 880 basis points versus last year. The segment's margin was better than we had expected, primarily due to favorable volume, timing of SG&A and R&D spend and lower than anticipated freight costs. Now on Slide 13. Energy & Transportation sales increased by 27% in the second quarter to $7.2 billion. Sales were up double-digits across all applications. Oil and gas sales increased by 43%, power generation sales increased by 39%, industrial sales rose by 18% and transportation sales increased by 12%. Second quarter profit for Energy & Transportation increased by 93% versus the prior year to $1.3 billion. The increase was mainly due to higher sales volume and price realization, partially offset by unfavorable manufacturing costs and higher SG&A and R&D expenses. The segment's operating margin of 17.6% was an increase of 600 basis points versus last year. The margin was generally in line with our expectations. Moving to Slide 14. Financial Products revenue increased by 16% to $923 million, primarily due to higher average financing rates across all regions. Segment profit increased by 11% to $240 million. The increase was mainly due to a lower provision for credit losses at Cat Financial, partially offset by an increase in SG&A expense. Business activity remains strong, and our portfolio continues to perform well. Past dues in the quarter were 2.15%, a 4 basis points improvement compared to the second quarter of 2022. This is the lowest second quarter past dues percentage since 2007. Retail new business volume performed well, increasing versus the prior year and the first quarter. In addition, we continue to see strong demand for used equipment. Now on Slide 15. Our ME&T free cash flow generation was again robust as we generated $2.6 billion in the quarter. This was an increase of $1.5 billion compared to the prior year. With approximately $4 billion generated in the first half, we now expect ME&T free cash flow to be around the top of our $4 billion to $8 billion target range for the full-year. CapEx in the second quarter was about $300 million, and we still expect to spend around $1.5 billion for the full-year. As Jim mentioned, we returned about $2 billion through share repurchases and dividends in the second quarter. Our balance sheet remains strong. We have ample liquidity with an enterprise cash balance of $7.4 billion, and we also hold an additional $2 billion in slightly longer-dated liquid marketable securities to improve yields on that cash. Now turning to Slide 16. I will share some high level assumptions for the second half and the third quarter. In the second half of 2023, we expect higher total sales and revenues as compared to the second half of last year. We anticipate both sales to users and price realization will be positive in the second half. Keep in mind that on a comparative basis, we start to lap the stronger price we saw from the third quarter onwards last year. Caterpillar sales will be impacted by changes in dealer inventories as dealers increased their inventories in the second half of last year, which is not typical, versus our expectation of a more typical reduction in the second half of 2023. I want to spend just a few moments talking about dealer inventories. Dealers are independent businesses, and they make their own decisions around the level of inventory they hold. We obviously work closely with them because this impacts our production levels. As Jim mentioned, we are very comfortable with the levels of inventory that dealers are holding. We talk about dealer inventory in aggregate. This is difficult to predict with certainty as it arises from three different business segments, over 150 dealers and hundreds of different products. In Resource Industries and Energy & Transportation, dealer inventory is mainly a function of the commissioning pipeline. Keep in mind that over 70% of dealer inventory in these segments is backed by firm customer orders. For Construction Industries, dealer inventory is principally a function of end user demand and availability from the factory. In Construction Industries, dealers typically increase inventories during the first half of the year. Around 60% of the $2 billion increase during the first half of this year was from products in this segment. The remaining 40% is in Resource Industries and Energy & Transportation. For Resource Industries and Energy Transportation, we currently anticipate a slight reduction in levels in the second-half, but this is dependent on commissioning. In Construction Industries, dealers are currently holding around the midpoint of the typical three to four months range. Some dealers would like to increase inventories of certain products, such as BCP and earth moving due to strong customer demand. Conversely, some dealers would like to reduce the levels of excavated inventory because of high availability. In addition, we are scheduled to replace third-party engines with Cat engines and certain products, which will impact production in these products during the second half. Our current planning assumption for the Construction Industries is that dealers will reduce their overall levels in inventory in the second half of 2023 with a principal focus on excavators. Overall, at the enterprise level, we currently expect dealer inventory should be slightly higher at the end of 2023 versus last year. Moving on. On this slide, we provide our adjusted profit margins target charge to assist you in your modeling process. Based on our current planning assumptions, we anticipate full-year adjusted operating profit margin to be close to the top of that 300 basis points target range at our expected sales level. Your expectation for total enterprise sales this year will inform you where on the curve margins should finish for the year. Specific to the second half, we anticipate adjusted operating profit margins in the remaining quarters of the year will be above the year ago levels, although they will be lower than the levels we saw in the first two quarters of this year. As compared to the first half, we anticipate a margin headwind from cost absorption in the second half. We do not expect to build our inventory as we did in the first half and anticipate that there will be some inventory reduction if we continue to see sustained supply chain improvement. In addition, spend related to the strategic growth initiatives should continue to ramp. Price realization should remain positive that the magnitude of the favorability versus the prior year is expected to be lower in the second half as we lap the more favorable pricing trends from last year. Therefore, the increases in margins that we have occurred -- that have occurred from price outpacing manufacturing cost inflation should moderate in the second half of this year. Now let's move on to our assumptions that are specific to the third quarter. We anticipate third quarter sales to be higher than the third quarter of 2022, but to exhibit the typical sequential decline when compared to the second quarter of 2023. In Construction Industries, as is our normal seasonal end, we expect lower sales compared to the second quarter. In Resource Industries, which can be lumpy, we anticipate slightly lower sales compared to the second quarter. We expect sales in Energy & Transportation will increase slightly compared to the second quarter. Specific to third quarter margins versus the prior year, adjusted operating profit margins at the enterprise level and segment margins should be stronger. However, we do expect lower enterprise adjusted operating profit margins in the third quarter compared to the second quarter of this year on lower volume and impacts from cost absorption. We also anticipate investment spend will ramp across our primary segments as we continue to accelerate our strategic investments in area like autonomy, alternative fuels, connectivity and digital and electrification. At the segment level, for Construction Industries, we expect a lower margin compared to the second quarter as is typical. This is largely due to lower quarter-on-quarter volume, increased investment in strategic initiatives and slightly higher manufacturing costs, including a headwind from cost absorption. Favorable price realization will act as a partial offset. We also anticipate lower third quarter margins in Resource Industries compared to the second quarter, primarily due to lower volume quarter-on-quarter. Conversely, we expect third quarter margins in Energy & Transportation will be slightly higher compared to the second quarter on higher volume and stronger price realization, partially offset by higher manufacturing costs and spend relating to strategic initiatives. Now turning to Slide 13, let me summarize. We generated strong adjusted operating profit margin with a 750 basis point increase to 21.3%. We now expect to be close to the top of the targeted range for adjusted operating margin -- profit margin for the full-year based on our expected sales levels. ME&T free cash flow generation was robust at $2.6 billion in the quarter. We returned $2 billion to shareholders through share repurchases and dividends. We now expect ME&T free cash flow to be around the top of our $4 billion to $8 billion range for the full-year. Lastly, we continue to execute our strategy for long-term profitable growth. And with that, we'll now take your questions.","evidence_gemma_new":"Financial Products revenue","evidence_llama_3_3":"Financial Products revenue second quarter","evidence_qwen_3_30b":null,"gemma_new_max":923000000.0,"gemma_new_min":923000000.0,"llama_3_3_max":923000000.0,"llama_3_3_min":923000000.0,"qwen_3_30b_max":null,"qwen_3_30b_min":null}
{"symbol":"CAT","year":2024,"quarter":3,"date":"2024-Q3","chunk_id":3,"sub_chunk_id":0,"centroid_label":"financial products revenues","agreed_value":1000000000.0,"count":3,"chunk":"Andrew Bonfield: Thank you, Jim, and good morning, everyone. As usual, I'll begin with a high-level summary of the third quarter, and then provide more detailed comments, including the performance of the segments. I'll then, discuss the balance sheet and free cash flow, before concluding with comments on our assumptions for the full year and the fourth quarter. Beginning on Slide 8, although sales and revenues were lower than we had expected, our adjusted operating profit margin was 20.0%, generally in line with what we had anticipated. Adjusted profit per share was in line with our expectations despite adjusted operating profit being impacted by the lower sales and revenues. I will highlight a few of the moving parts in a moment. As Jim mentioned, our full year margin expectations remain unchanged, and we continue to anticipate the adjusted operating profit margin will be above the top end of the target range despite the slightly lower outlook for the top-line. Our expectations for adjusted profit per share remain unchanged versus our expectations at the time of our last earnings call. Also, we have increased our expectations for ME&T free cash flow for the year, which we now anticipate will be near the top of our $5 billion to $10 billion target range. In the third quarter, sales and revenues of $16.1 billion decreased by 4% compared to the prior year. The adjusted operating profit margin of 20.0% was 80 basis points lower when compared to the prior year. Profit per share was $5.06 in the third quarter compared to $5.45 in the third quarter of last year. Restructuring costs were $0.11 in the quarter versus $0.07 in the prior year. Adjusted profit per share was $5.17 in the quarter compared to $5.52 last year. Other income and expense was $119 million headwind versus the prior year, mostly driven by an unfavorable currency impact related to ME&T balance sheet translation. We do not forecast the impact of foreign currency translation on our adjusted profit per share, so this acted as a headwind compared to our expectations for the quarter. Excluding discrete items, the provision for income taxes in the third quarter in both 2023 and 2024 reflected a global annual effective tax rate of 22.5%. We recorded a discrete tax benefit, which had an $0.11 favorable impact within the quarter. We do not anticipate discrete items. Finally, the year-over-year impact from the reduction in the average number of shares outstanding, primarily due to share repurchases, resulted in a favorable impact on adjusted profit per share of approximately $0.26 as compared to the third quarter 2023. This was slightly better than we had expected. Moving to Slide 9, I'll discuss our top-line results for the third quarter. Sales and revenues decreased by 4% compared to the prior year, primarily impacted by lower sales volume as a result of lower sales to users and impacts from changes in dealer inventories. Total sales to users decreased by 6% as a 10% decrease from Machines was partially offset by a 5% increase for Energy & Transportation. The impact from changes in total dealer inventories acted as a sales headwind of about $200 million in the quarter. For Machines-only, dealer inventory increased by about $100 million, a smaller increase than the $400 million increase in the prior year, but slightly above our expectations of being flattish to slightly lower. Service revenues increased versus the prior year, as we had anticipated. Moving to operating profit on Slide 10. Operating profit in the third quarter decreased by 9% to $3.1 billion. Adjusted operating profit decreased by 8% to $3.2 billion, mainly due to the impact of lower sales volume, partially offset by favorable price realization and manufacturing costs. Since early 2022, price realization has been a strong -- has been strong and often exceeded our expectations. Over the past several quarters, we have highlighted that price will begin to moderate in the second half of this year. In the third quarter, this moderation began to occur as price realization was lower than previous quarters and generally in line with our expectations. As I mentioned, for the third quarter, the adjusted operating profit margin was 20.0%, which was generally in line with our expectations. By segment, margin in Construction Industries and Resource Industries was slightly below our expectations on lower volume, while Energy & Transportation was about in line. Financial products had a slightly stronger quarter than we had expected. On Slide 11, Construction Industries sales decreased by 9% in the third quarter to $6.3 billion, slightly below our expectations. The decrease versus the prior year was primarily due to lower sales volume and unfavorable price realization. The decrease in sales volume was mainly driven by lower sales of equipment to end users. Changes in dealer inventories also acted as a slight headwind to sales. By region, Construction Industries sales in North America decreased by 11%; in Latin America, sales increased by 19%; sales in the EAME region decreased by 15%; in Asia Pacific, sales declined by 12%. Third quarter profit for Construction Industries was $1.5 billion, a 20% decrease versus the prior year. This is mainly due to the profit impact of lower sales volume and unfavorable price realization. The segment's margin of 23.4% was a decrease of 300 basis points versus the prior year. Turning to Slide 12, Resource Industries sales decreased by 10% in the third quarter to $3.0 billion, which was slightly point below our expectations. The decline versus the prior year was primarily due to lower sales volume, mainly driven by lower sales of equipment to end users given a challenging comparison to the prior year. Third quarter profit for Resource Industries decreased by 15% versus the prior year to $619 million. This was mainly due to the profit impact of lower sales volume. The segment's margin of 20.4% was a decrease of 140 basis points versus the prior year. Now, on Slide 13, Energy & Transportation sales increased by 5% in the third quarter to $7.2 billion, slightly lower than we had expected, driven by the timing of deliveries. The increase versus the prior year was primarily due to favorable price realization and higher sales volume, including higher intersegment sales. By application, power generation sales increased by 26%, transportation sales were higher by 3%, oil and gas sales decreased by 1%, and industrial sales decreased by 16%. Third quarter profit for Energy & Transportation increased by 21% versus the prior year to $1.4 billion. The increase was mainly due to favorable price realization. The segment's margin of 19.9% was an increase of 270 basis points versus the prior year. Moving to Slide 14, financial products revenues increased by 6% to about $1 billion, primarily due to higher average earning assets driven by North America and higher average financing rates across all regions. Segment profit increased by 21% to $246 million. This is mainly due to a favorable impact from equity securities and a lower provision for credit losses. Our customers' financial health is strong. Past dues remain near historic lows of 1.74% in the quarter, down 22 basis points versus the prior year. Our allowance rate was 0.87%, our lowest on record. Business activity at Cat Financial remains healthy. Our retail new business volume increased by 17% versus the prior year, supported by our financing packages for customers choosing to buy Caterpillar equipment. Though Caterpillar's retail machine sales volume was lower, proportionately more sales have been financed through Cat Financial, which highlights the attractiveness of the financing options we are offering to our customers. We also continue to see healthy demand for used equipment and inventories remain at low levels. Conversion rates are also strong as customers choose to buy equipment at the end of their lease term. Moving on to Slide 15, we generated about $2.7 billion in ME&T free cash flow in the third quarter and deployed about $1.5 billion in share repurchases and dividends. Our balance sheet remains strong with an enterprise cash balance of $5.6 billion. In addition, we hold $1.8 billion in slightly longer dated liquid marketable securities to improve yields on that cash. Now, on Slide 16, I will share our high-level assumptions for the full year. For the full year, we have updated our outlook to reflect sales and revenues that are slightly lower than our expectations at the time of our last earnings call, driven by lower-than-expected third quarter sales and an update to our expectations for dealer rental fleet loading in Construction Industries. We continue to anticipate services growth in 2024. As I mentioned earlier, our full year expectations for adjusted operating profit margin and adjusted profit per share remain unchanged compared to our last earnings call. We continue to expect adjusted operating profit margin to be above the top end of the target range. In addition, we are increasing our expectations for ME&T free cash flow for the year, which we now anticipate to be near the top of our $5 billion to $10 billion target range. To assist you with your modeling for the full year, we now anticipate CapEx of around $2 billion and restructuring costs of approximately $400 million. Our expectation for the global annual effective tax rate, excluding discrete items, remains at 22.5%. Turning to Slide 17, I'll provide a few comments on the fourth quarter, starting with the top-line. We expect slightly lower sales and revenues in the fourth quarter compared to the prior year, impacted by lower machine sales to users versus a strong comparison. On machine dealer inventory, our planning assumptions include the expectation that dealers will reduce their inventories in the fourth quarter while balancing their need to be prepared for 2025. The magnitude of the decline for machine dealer inventory is expected to be less than the $1.4 billion decrease we saw in the fourth quarter of 2023. For perspective, we expect machine dealer inventory to end the year around the same level as year-end 2023. Also, the ongoing benefit of our services initiatives is expected to positively impact sales in the fourth quarter. By segment, in the fourth quarter, compared to the prior year, we anticipate a sales decrease in Construction Industries. This is impacted by lower sales to users, which Jim mentioned, along with unfavorable price realization. In Resource Industries, we expect slightly lower sales, impacted by lower sales to users versus a strong fourth quarter of 2023. In Energy & Transportation, we anticipate slightly higher sales versus the prior year, supported by power generation. Enterprise margin in the fourth quarter is expected to trend lower compared to the third quarter, following the typical seasonable pattern. However, versus the prior year, we expect a modestly higher adjusted operating profit margin despite lower sales. We anticipate favorable manufacturing costs and lower SG&A and R&D expenses will more than offset the profit impact of lower sales volume. Lower SG&A and R&D expenses are primarily driven by the benefit of lower short-term incentive compensation versus a high expense in the prior year quarter. Price realization for Machines is expected to trend lower as the pricing environment continues to normalize, though price in Energy & Transportation should act as a partial offset. Regarding price expectations for Machines, it is important to note that discounts to dealers occur through post sales merchandising programs, which impact our results over time. This includes financing support from Cat Financial, which is an effective way of supporting our customers, and we recover a portion of that support over the life of the deal. Let me explain. Based on the current level of price discounting support, we reserve the anticipated payments to dealers for these merchandising programs. At times, there is a lag between the timing of the invoice of the dealer and when the dealer invoices the customer, which impacts the reserve. Over the next few quarters, we expect the impact from these merchandising programs to drive a headwind to Machine price realization as we continue to adjust the reserve to reflect the current level of price discounting support. By segment, in the fourth quarter, in Construction Industries, we anticipate lower margin compared to the prior year primarily due to unfavorable price realization, partially offset by favorable manufacturing costs. In Resource Industries, we anticipate lower margin in the fourth quarter compared to the prior year, mainly due to lower volume and prioritization of strategic investments around services growth and AACE, which is autonomy, alternative fuels, connectivity and digital, and electrification. Favorable manufacturing costs should act as a partial offset. In Energy & Transportation, we expect a higher margin versus the prior year, primarily impacted by favorable price realization. So, turning to Slide 18, let me summarize. Although sales and revenues were lower than we had expected, adjusted operating profit margin and adjusted profit per share were generally in line with our expectations. We now anticipate our top-line for the full year will be slightly below our prior estimate. Our backlog increased slightly and remains at a very healthy level. Our expectations for full year adjusted operating profit margin and adjusted profit per share remain unchanged compared to a quarter ago. We continue to expect adjusted operating profit margin to be above the top end of the target range for the full year based on our expected sales levels. We are now increasing our expectations for ME&T free cash flow, which we anticipate to be near the top of our target range for the full year. Our team executed well in the quarter, and our results continue to benefit -- to reflect the benefit of the diversity of our end markets and the disciplined execution of our strategy for long-term profitable growth. And with that, we'll now take your questions.","evidence_gemma_new":"financial products revenues","evidence_llama_3_3":"Financial products revenues third quarter","evidence_qwen_3_30b":"financial products revenues increased by 6% third quarter","gemma_new_max":1000000000.0,"gemma_new_min":1000000000.0,"llama_3_3_max":1000000000.0,"llama_3_3_min":1000000000.0,"qwen_3_30b_max":1000000000.0,"qwen_3_30b_min":1000000000.0}
{"symbol":"CAT","year":2024,"quarter":4,"date":"2024-Q4","chunk_id":3,"sub_chunk_id":0,"centroid_label":"financial products revenues","agreed_value":1000000000.0,"count":2,"chunk":"Andrew Bonfield: Thank you Jim, and good morning everyone. I\u2019ll begin with a summary of the fourth quarter and then provide more detailed comments, including some on the performance of the segments. Next, I\u2019ll discuss the balance sheet and free cash flow before concluding with comments on our high level assumptions for 2025, as well as expectations for the first quarter. Beginning on Slide 9, sales and revenues were $16.2 billion, a 5% decrease versus the prior year. As Jim mentioned, sales were slightly lower than we had anticipated, which together with unfavorable mix resulted in lower than expected margins for the quarter. Adjusted operating profit was $3 billion and our adjusted operating profit margin was 18.3%. Profit per share was $5.78 in the fourth quarter compared to $5.28 in the fourth quarter of last year. Adjusted profit per share was $5.14 in the quarter, a 2% decrease compared to $5.23 last year. Adjusted profit per share excluded a discrete tax benefit of $0.46 for a tax law change related to currency translation. Mark to market gains of $0.23 for the re-measurement of pension and other post-employment plans was also excluded, in addition to restructuring costs of $0.05 in the quarter. Other income expense was $185 million favorable versus the prior year, mostly driven by a positive currency impact related to ME&T balance sheet translation, which compared to a negative impact in the fourth quarter last year. As I have mentioned previously, we do not anticipate currency translation movements, so the positive impact on the fourth quarter of 2024 helped to offset the impact of operating profit being lower than expected. Excluding discrete items, the provision for income taxes in the fourth quarter of 2024 reflected a global annual effective tax rate of 22.2%. This was slightly lower than we had expected a quarter ago and benefited the quarter by $0.09. Finally, the year-over-year impact from the reduction in the average number of shares outstanding, primarily due to share repurchases, resulted in a favorable impact on adjusted profit per share of approximately $0.24 as compared to the fourth quarter of 2023. Moving onto Slide 10, I\u2019ll discuss the top line results for the fourth quarter. Sales and revenues decreased by 5% compared to the prior year, primarily impacted by lower sales volume. Price was unfavorable year-over-year and about in line with what we had expected. Lower volume was driven by the impact from changes in dealer inventories and a 2% year-over-year decrease in total sales to users. Total machine dealer inventory decreased by $1.6 billion in the quarter compared to $1.4 billion decrease in the prior year. The decrease in machine dealer inventory was larger than we had expected, and it\u2019s mostly a function of higher than anticipated sales to users across both construction industries in North America and resource industries. Service revenues increased in the quarter compared to 2023. As I mentioned, the sales decrease in the quarter was slightly larger than we had anticipated. This was mostly due to services growing at a slightly slower rate than we had expected and some delivery delays in energy and transportation. Moving to operating profit on Slide 11, operating profit in the fourth quarter decreased by 7% to $2.9 billion. Adjusted operating profit decreased by 8% to $3 billion mainly due to the profit impact of lower than expected sales volume. As I mentioned, for the fourth quarter the adjusted operating profit margin was 18.3%, a 60 basis point decrease compared to the prior year. This was lower than we had anticipated mainly due to a lower than expected sales volume and the impact of unfavorable mix. On Slide 12, construction industry sales decreased by 8% in the fourth quarter to $6 billion. This was slightly below our expectations on lower than anticipated volume. Compared to the prior year, the 8% sales decrease was primarily due to unfavorable price realization and lower sales volume. The decrease in sales volume was mainly driven by lower sales of equipment to end users and dealers reducing their inventory by slightly more than they did during the fourth quarter of 2023. By region, construction industry sales in North America decreased by 14%. In Latin America, sales increased by 6%. Sales in the EAME region decreased by 1%, and Asia Pacific sales decreased by 2%. Fourth quarter profit for construction industries was $1.2 billion, a 24% decrease versus the prior year. This was primarily due to unfavorable price realization as a result of the impact of the post-sales merchandising programs that we discussed with you in October. The segment\u2019s margin of 19.6% was a decrease of 390 basis points versus the prior year. The margin was lower than we had anticipated, primarily impacted by lower volume and unfavorable mix. Manufacturing costs were also unfavorable versus our expectations, principally due to a headwind from cost absorption as our inventory in construction industries declined. Turning to Slide 13, resource industry sales decreased by 9% in the fourth quarter to $3 billion. This was below our expectations mainly due to services growing at a slightly lower rate than we had anticipated. As we compare to the prior year, the 9% sales decrease was primarily due to lower sales volume mainly driven by the impact from changes in dealer inventories. Dealer inventory decreased more in the fourth quarter of 2024 than it did in the fourth quarter of 2023. Fourth quarter profit for resource industries decreased by 22% versus the prior year to $466 million. This was mainly due to the profit impact of lower sales volume. The segment\u2019s margin of 15.7% was a decrease of 280 basis points versus the prior year. This was lower than we had anticipated, primarily due to lower volume. Now on Slide 14, energy and transportation sales of $7.6 billion were about flat versus the prior year. Sales were slightly below our expectations to a lower than expected services growth rate, largely in oil and gas, and the timing of deliveries of international locomotives. Compared to the prior year, sales were roughly flat as the impact of lower sales volume was mostly offset by favorable price realization. By application, power generation sales increased by 22%, transportation sales were lower by 1%, oil and gas sales decreased by 14%, and industrial sales decreased by 14%. Fourth quarter profit for energy and transportation increased by 3% versus the prior year to $1.5 billion. The increase was primarily due to favorable price realization partially offset by the profit impact of lower sales volume. The segment\u2019s margin of 19.3% was an increase of 70 basis points versus the prior year. This was lower than we had anticipated, primarily due to lower than expected volume and an unfavorable mix of products. Moving to Slide 15, financial products revenues increased by 4% versus the prior year to about $1 billion, primarily due to higher average earning assets in North America and higher average financing rates across all regions, except North America. Segment profit decreased by 29% to $166 million. This was mainly due to an unfavorable impact from equities securities in addition to lower margin and a higher provision for credit losses. Our customers\u2019 financial health remains strong. Past dues were 1.56% in the quarter, down 23 basis points versus the prior year and our lowest level since 2005. The allowance rate was 0.91%, remaining near historic lows. Business activity at Cat Financial remains healthy. Retail credit applications increased and our retail new business volume grew by 3% versus the prior year. This was our highest level since 2012, supported by attractive finance packages for customers choosing to buy Caterpillar equipment. We continue to see proportionately more of our sales financed through Cat Financial; in addition, demand for used equipment remains healthy and inventories remain at low levels. Conversion rates were above historical averages as customers choose to buy equipment at the end of their lease term. Moving onto Slide 16, we continue to generate strong ME&T free cash flow. The $9.4 billion in 2024 was near the top end of our target range and just slightly lower than the prior year despite a larger payment for short term incentive compensation and higher capital expenditure. CapEx for the year was about $2 billion, which was in line with our expectations. Moving to capital deployment, in 2024 we returned $10.3 billion to shareholders through repurchased stock and dividends. On share repurchases, we deployed $7.7 billion as we continue to fulfill our objective to be in the market on a more consistent basis. Our balance sheet remains strong with an enterprise cash balance of $6.9 billion. In addition, we hold $2 billion in slightly longer dated liquid marketable securities to improve yields on that cash. Now on Slide 17, let me start with a high level overview of our expectations for the full year. We expect a slight decrease in sales for 2025 with an unfavorable impact from both volume and price. Due to the impact of post-sales merchandising programs, price realization should account for about a 1% decrease in sales for the full year. On margins, the impact of price together with high depreciation costs due to the investments we are making should result in adjusted operating profit margins being in the top half of the target range with the expected level of sales, rather than being above the top end of the range, as occurred in 2024. Our margin targets are progressive, so while we would expect volume to have an impact on absolute margins, our target is adjusted for lower sales. We expect a slight headwind in other income and expense in 2025 primarily due to lower interest income, mostly due to lower interest rates, as well as the absence of the positive currency benefit from ME&T balance sheet translation that occurred in 2024. As I mentioned, we do not anticipate translation movements in our expectations. We expect restructuring costs of approximately $150 million to $200 million in 2025. We anticipate a global annual effective tax rate of 23% for 2025, excluding discrete items. While the impact of the share buyback should be positive, we expect to have less ME&T free cash flow to deploy in 2025. This implies a less favorable impact to profit per share in 2025 as compared to 2024. By segment, lower sales in construction industries and resource industries will be partially offset by sales growth in energy and transportation. For construction industries, we expect lower sales in 2025 based on the outlook Jim described and unfavorable price realization. In resource industries, we anticipate slightly lower sales versus 2024 driven by unfavorable price realization and slightly lower volume. Higher volumes and favorable price in energy and transportation should drive sales growth, though sales remain constrained until the benefits of the investments we are making in large engines begin to flow through beyond 2025. We also anticipate another year of services growth in each of our primary segments. Currently, we do not anticipate a significant change in dealer inventory in machines by the end of 2025. Moving onto ME&T free cash flow, we expect to be in the top half of our target range of $5 billion to $10 billion. The first quarter of 2025 will be impacted by a $1.4 billion cash outflow related to the payout of last year\u2019s incentive compensation. We anticipate CapEx of about $2.5 billion in 2025 as we continue to make disciplined investments that are right for our business, governed by a focus on growing absolute OPACC [ph] dollars. This includes the multi-year capital investment to expand our large engine volume output capability that we mentioned last year. Turning to Slide 18, to assist with your modeling, I\u2019ll provide some color on the first quarter, starting with the top line. We expect lower sales versus the prior year. For perspective, in a typical year we see our lowest sales in the first quarter of the year. In 2025, we anticipate that trend to continue to be more pronounced as sales in the first quarter should account for a lower percentage of full year sales than is typical by about 100 basis points. This decrease is mainly due to our expectations for dealer inventory movements and price, which primarily impacts machines. Energy and transportation is expected to show normal seasonality with sales growing throughout the year. Let me explain. Although dealers did reduce machine inventory significantly in the fourth quarter, they remain around the top end of the range as we enter 2025. This compares with dealer inventories in construction industries being towards the middle of the range at the beginning of 2024. As a result, we expect them to build correspondingly less inventory during the first quarter than the $1.1 billion that they built in the first quarter of 2024. As we expect dealer inventory to be about flat by year end, we should see a tailwind to sales in the fourth quarter as we don\u2019t expect a similar machine dealer inventory change as we have seen in the last two years. We also expect unfavorable price realization for machines in the first quarter due to the impact of post-sales merchandising programs. We would expect these price impacts to be greater for machines in the first half of the year as the noticeable impact of post-sales merchandising programs started in the third quarter of 2024, making for an easier comparison in the second half. To pull together the impact by segment, we anticipate lower sales in construction industries in the first quarter, impacted by lower sales to users, the headwind from changes in dealer inventory and price, the impact of which should be similar to what we saw in the fourth quarter of 2024. In resource industries in the first quarter, we expect lower sales volume versus the prior year, impacted by lower volume and unfavorable price realization. In energy and transportation, we anticipate similar sales in the first quarter versus the prior year as continued strength in power generation is about offset by lower oil and gas and transportation sales. Price should be positive for energy and transportation. Now I\u2019ll provide some color on first quarter margin expectations. Though enterprise margins are typically stronger in the first quarter compared to with the remaining quarters of the year, we do not expect this seasonal trend to occur in 2025. Compared to the prior year, we anticipate a lower enterprise adjusted operating profit margin in the first quarter due primarily to lower than usual volume and price. Volume is impacted by the lower build of machine dealer inventory and slightly lower sales to users for machines. Unfavorable price realization for machines is principally due to the factors I\u2019ve discussed previously, which will be partially offset by favorable price in energy and transportation. We expect there will be improvement in first quarter margins offsetting the volume impact in the first quarter due to stronger volume in the fourth quarter than is typical. By segment, in the first quarter in construction industries, we anticipate lower margins compared to the prior year due primarily to lower volume and price. We do not expect to see the margin benefit we typically see in the first quarter of the year as compared to the fourth quarter of the prior year, which is generally in the range of 100 to 200 basis points. Again, some of this will be offset in the fourth quarter as volume is favorable and price more neutral. In resource industries, we anticipate lower margin in the first quarter compared to the prior year, mainly due to lower volume and unfavorable price realization. In energy and transportation, we expect slightly lower margin versus the prior year as favorable price realization is more than offset by higher manufacturing costs and unfavorable mix impacts. Again, as a reminder, this detail is provided to help you model the first quarter and does not impact our expectations for the full year that I set out earlier, which is a slight decrease in sales and revenues for the year and margins in the top half of the target range. Turning to Slide 19, let me summarize. Adjusted profit per share of $21.90 exceeded last year\u2019s record by 3%. This was our third straight year with record adjusted profit per share. Adjusted operating profit margin of 20.7% exceeded the top of our target range. ME&T free cash flow of $9.4 billion was near the top of the target range of $5 billion to $10 billion. For 2025, while we expect a slight drop in sales, we expect to be in the top half of the adjusted operating profit margin range and the top half of the ME&T free cash flow target range, and we anticipate another year of services growth. We continue to execute our strategy for long term profitable growth, and with that, we\u2019ll take your questions.","evidence_gemma_new":null,"evidence_llama_3_3":"financial products revenues fourth quarter","evidence_qwen_3_30b":"financial products revenues 4th quarter 4% increase","gemma_new_max":null,"gemma_new_min":null,"llama_3_3_max":1000000000.0,"llama_3_3_min":1000000000.0,"qwen_3_30b_max":1000000000.0,"qwen_3_30b_min":1000000000.0}
{"symbol":"CAT","year":2023,"quarter":4,"date":"2020-FY","chunk_id":30,"sub_chunk_id":0,"centroid_label":"free cash flows","agreed_value":3000000000.0,"count":2,"chunk":"Jim Umpleby: Well, Jerry, you recall when we launched our strategy in 2017, we really focused very heavily on OPACC, operating profit after capital charge. And we're really challenging our teams to work to ensure that we get a return for every dollar of capital that we invest. And we've also worked hard to reduce our structural costs. And again, with OPACC as our measure, that obviously helps us produce more cash. Again, we demonstrated the ability to produce higher free cash flows. If I remember the numbers correctly, between 2019 and 2022, we produced $5 billion to $6 billion of free cash flow. And then in 2020, we had a 22% decline in our top line. And even that year, even during the COVID year, when our top line dropped more than 20%, we still produced $3 billion of free cash flow. So again, we have the whole organization based on OPACC, and that's working all those levers every single day, and that helps us drive increased free cash flow.","evidence_gemma_new":null,"evidence_llama_3_3":"free cash flows 2020","evidence_qwen_3_30b":"free cash flow 2020","gemma_new_max":null,"gemma_new_min":null,"llama_3_3_max":3000000000.0,"llama_3_3_min":3000000000.0,"qwen_3_30b_max":3000000000.0,"qwen_3_30b_min":3000000000.0}
{"symbol":"CAT","year":2023,"quarter":2,"date":"2023-FY","chunk_id":2,"sub_chunk_id":0,"centroid_label":"free cash flows","agreed_value":6000000000.0,"count":2,"chunk":"James Umpleby: Thanks, Ryan. Good morning, everyone. Thank you for joining us. As we close out the first half of 2023, I want to recognize our global team for delivering a very strong second quarter. This included double-digit top-line growth, higher adjusted operating profit margin, record adjusted profit per share and robust ME&T free cash flow. Our results continued to reflect healthy demand across most end markets for our products and services. We remain focused on executing our strategy and continue to invest for long-term profitable growth. In today's call, I'll begin with my perspectives on our performance in the quarter. I'll then provide some insights on our end markets. Lastly, I'll provide an update on our sustainability journey. It was another strong quarter. Sales and revenues increased 22% in the second quarter versus last year. Adjusted operating profit margin improved 21.3%, up sequentially and year-over-year. We also generated $2.6 billion of ME&T free cash flow in the quarter. Our second quarter results were better than we expected for sales and revenues, adjusted operating profit margin, and ME&T free cash flow. In addition, we ended the quarter with a healthy backlog of $30.7 billion. We continue to see improvement in the supply chain, which allowed us to increase production in the quarter. However, areas of challenge remain, particularly for large engines, which impacts energy and transportation and some of our larger machines. While we continue to closely monitor global macroeconomic conditions, we now expect our 2023 results to be better than we had previously anticipated. Turning to Slide 4. In the second quarter of 2023, sales and revenues increased by 22% to $17.3 billion. This was primarily due to higher sales volume and price realization. Sales volumes were higher than we expected, largely due to an increase in dealer inventory relating to energy and transportation, which is supported by customer orders. We saw double-digit increases in sales and revenues in each of our three primary segments. Compared with the second quarter of 2022, overall sales to users increased 16%. For machines, which includes Construction Industries and Resource Industries, sales to users rose by 8%. Energy & Transportation was up 47%. Sales to users in Construction Industries were up 3%. North American sales to users increased and were better than expected as demand remained healthy for non-residential and residential construction. Non-residential continue to benefit from government-related infrastructure and construction projects. Residential sales to users in North America also increased in the quarter. EAME saw lower sales to users due to weaker than expected market conditions in Europe. The Middle East continued to demonstrate strong construction activity. In Latin America and Asia\/Pacific, sales to users declined in the quarter. In Resource Industries, sales to users increased 26%. In mining, sales to users increased, supported by commodities remaining above investment thresholds. Within heavy construction and quarry and aggregates, sales to users also increased, supported by growth for infrastructure-related projects. In Energy & Transportation, sales to users increased by 47% in the second quarter. All applications saw higher sales to users in the quarter. Oil and gas sales to users benefited from strong sales of turbines and turbine-related services. We also saw continued strength in sales of reciprocating engines into oil and gas applications, such as Tier 4 dynamic gas blending, gas compression, and repowering active well servicing fleets. Power generation sales to users continued to remain positive due to favorable market conditions, including strong data center growth. Industrial and transportation sales to users also increased. Dealer inventories increased by $600 million in the quarter, led by energy and transportation. We are very comfortable with the total level of dealer inventory, which remains in the typical range. Adjusted operating profit margin increased to 21.3% in the second quarter as we saw improvements, both on a sequential and year-over-year basis. Adjusted operating profit margin was better than we had anticipated, primarily due to better than expected volume growth and lower than expected manufacturing costs, including freight. Moving to Slide 5. We generated strong ME&T free cash flow of $2.6 billion in the second quarter. We returned $2 billion to shareholders, which included about $1.4 billion in repurchase stock and $600 million in dividends. In June, we announced an 8% dividend increase. Since May of 2019, when we introduced our current capital allocation strategy, we have increased the quarterly dividend per share by 51%. We remain proud of our dividend aristocrat status and continue to expect to return to substantially all ME&T free cash flow to shareholders over time through dividends and share repurchases. Now on Slide 6, I'll describe our expectations moving forward. While we continue to closely monitor global macroeconomic conditions, our second quarter results lead us to expect that full-year 2023 will now be even better than we described during our last earnings call. We now expect adjusted operating profit margins to be close to the top of the targeted range relative to the corresponding expected level of sales. This positive operating performance increases our expectations for ME&T free cash flow, which we now expect to be around the top of the $4 billion to $8 billion range for the full-year. Our current expectations for adjusted operating profit margin and ME&T free cash flow reflect continuing healthy customer demand and our strong operating performance. Now I'll discuss our outlook for key end markets this year, starting with the Construction Industries. In North America, overall, we continue to see positive momentum in 2023. We expect continued growth in non-residential construction in North America due to the positive impact of government-related infrastructure investments and a healthy pipeline of construction projects. Although residential construction growth has moderated, we expect the rest of 2023 to remain healthy. In Asia\/Pacific, excluding China, we expect growth in Construction Industries due to public infrastructure spending in support of commodity prices. We mentioned during our last earnings call that we expected sales in China to be below the typical 5% to 10% of our enterprise sales. We now expect further weakness as the 10-tons and above excavator industry has declined even more than we anticipated. In EAME, we anticipate that it will be flat to slightly up overall, with the Middle East exhibiting strong construction demand, whereas Europe is expected to be down. Construction activity in Latin America is expected to be down in 2023 versus a strong 2022 performance. In Resource Industries, we expect healthy mining demand to continue as commodity prices remain above investment thresholds. As I've mentioned previously, customers remain capital disciplined, which supports a gradual increase in mining over time. We anticipate production and utilization levels will remain elevated. We also expect the age of the fleet and the low level of park trucks to support future demand for our equipment and services. We continue to believe the energy transition will support increased commodity demand, expanding our total addressable market and providing further opportunities for profitable growth. In heavy construction and quarry and aggregates, we anticipate continued growth due to major infrastructure in non-residential construction projects. Now I'll discuss Energy & Transportation. For Cat reciprocating engines and oil and gas applications, although customers remain disciplined, we are encouraged by continuing strong demand for gas compression. Cat reciprocating engine demand for power generation is expected to remain healthy, including strong data center growth. New equipment orders and services for solar turbines in both oil and gas and power generation remain robust. Industrial continues to be healthy. In transportation, we anticipate strength in high speed marine as customers continued to upgrade aging fleets. Moving to Slide 7. We continued to advance our sustainability journey. Since our last quarterly earnings call, we published our 2022 sustainability report, which disclosed our estimated Scope 3 greenhouse gas emissions for the first time. We also published our first ever task force on climate-related financial disclosures report. We're helping our customers achieve their climate-related goals by continuing to invest in new products, technologies and services that facilitate fuel flexibility, increased operational efficiency and reduced emissions. For example, a customer in Chile is realizing fuel savings and lower emissions after purchasing our Cat D6 XE, the world's first high drive diesel-electric drive dozer. The customer reported a 30% reduction in fuel consumption versus the previous model working in the same operation. This example reinforces our ongoing sustainability leadership in how we help our customers build a better, more sustainable world. With that, I'll turn the call over to Andrew.","evidence_gemma_new":"ME&T free cash flow full-year 2023","evidence_llama_3_3":"expect ME&T free cash flow 2023","evidence_qwen_3_30b":null,"gemma_new_max":6000000000.0,"gemma_new_min":6000000000.0,"llama_3_3_max":6000000000.0,"llama_3_3_min":6000000000.0,"qwen_3_30b_max":null,"qwen_3_30b_min":null}
{"symbol":"CAT","year":2023,"quarter":1,"date":"2023-Q1","chunk_id":2,"sub_chunk_id":0,"centroid_label":"free cash flows","agreed_value":1400000000.0,"count":3,"chunk":"Jim Umpleby: Thanks, Ryan. Good morning, everyone. Thank you for joining us. I'd like to start by thanking our global team for a strong first quarter, including double-digit top line growth, higher operating profit margins, record adjusted profit per share and strong ME&T free cash flow. Our results reflect healthy customer demand to most end markets for our products and services. We remain focused on executing our strategy and continue to invest for long-term profitable growth. In today's call, I'll begin with my perspectives on our performance in the quarter. I'll then provide some insights on our end markets. Lastly, I'll provide an update on our sustainability journey. It was a very strong quarter. Sales and revenues were better than we expected, with price realization, dealer inventory and sales to users each slightly better than we anticipated. Sales to users were higher than expected in Energy & Transportation and Resource Industries. Overall, sales and revenues rose by 17% versus the first quarter of 2022. The year-over-year increase was due to strong price realization and volume growth, which was driven by higher sales of equipment to end users. We achieved double-digit top line increases in each of our three primary segments. Adjusted operating profit margins increased to 21.1% in the first quarter, as we saw margins improve, both on a sequential and year-over-year basis. The adjusted operating profit margins were significantly better than we had anticipated primarily due to better-than-expected manufacturing costs, including efficiencies and absorption, stronger price realization and volume growth. Andrew will discuss in detail later. Backlog ended the quarter at $30.4 billion, flat relative to the fourth quarter of 2022. Equipment availability increased during the quarter due to improving supply chain conditions. While dealer order rates are lower, they remain at healthy levels. As you know, as availability improves, order rates typically normalize, as dealers can wait longer to place orders for long lead time items. Our healthy backlog continues to underpin our constructive views about our end markets. Despite the improvement in supply chain, pockets of challenge remain as we increase production, particularly for large engines, which impacts energy and transportation and some of our larger machines. We delivered a strong first quarter, which positions us well for an even better year in 2023 than we previously anticipated. While we continue to closely monitor global macroeconomic conditions, overall demand remains healthy across our products and services. Turning to Slide 4, in the first quarter of 2023, sales and revenues increased 17% versus last year at $15.9 billion. This was primarily due to favorable price and volume growth. Compared with the first quarter of 2022, overall sales to users increased 13%. For Construction Industries and Resource Industries, sales to users rose by 5%, while Energy & Transportation was up 39%. Sales to users in Construction Industries were flat, in line with our expectations. North American sales to users increased, as demand remained healthy for both nonresidential and residential, despite some moderation of the growth rate in residential. Overall, our North American sales to users were better than we expected. EAME also saw higher sales to users, led by strength in the Middle East. In Latin America and Asia Pacific, sales to users declined in the quarter. The decline in Asia Pacific included further weakening in China. In Resource Industries, sales to users increased 18%, which was our third consecutive quarter of accelerating sales to users. In Mining, sales to users benefited from a higher level of commissioning in the quarter. Within heavy construction and quarry and aggregates, sales to users also increased, supported by growth for infrastructure-related projects. In Energy & Transportation, sales to users increased by 39%. In the first quarter, oil and gas sales to users benefited from continued strength in new engine sales to customers, including repowering active fleets, upgrading technology to Tier 4 Dynamic Gas Blending and adding incremental gas compression units. We also saw strong sales of turbines and turbine-related services. Power Generation and Industrial sales to users continue to remain positive due to favorable market conditions. Transportation declined from a relatively low base primarily due to timing in marine deliveries, which was partially offset by deliveries of international locomotives. Dealer inventory increased by about $1.4 billion in the first quarter, which was slightly above our expectations compared to a $1.3 billion increase in the same quarter last year. In Construction Industries, the increase in dealer inventory was primarily due to stronger North American shipments, which remains our most constrained region. As we mentioned last quarter, over 70% of the combined dealer inventory in Resource Industries and Energy & Transportation is supported by customer orders. Moving to Slide 5, we generated strong ME&T free cash flow of $1.4 billion in the first quarter. We returned $1 billion to shareholders, which included about $600 million in dividends and $400 million in repurchase stock. We remain proud of our dividend aristocrat status and continue to expect to return substantially all ME&T free cash flow to shareholders over time through dividends and share repurchases. Now on Slide 6, I'll share some commentary on our expectations moving forward. While we continue to closely monitor global macroeconomic conditions, our first quarter results lead us to expect that 2023 will be even better than we had previously anticipated on both the top and bottom line. For 2023, we currently expect to be in the top half of the targeted range for both adjusted operating profit margin and ME&T free cash flow. Andrew will provide additional color. Before I discuss our outlook for key end markets, I'll provide some color on how we expect our top line to progress through this year. As I mentioned, we expect a strong top line for 2023, supported by price and higher sales to users, with healthy underlying end markets. We expect higher sales in the second quarter compared to the first, as is the typical seasonal pattern. Looking to the second half of 2023, it is important to highlight the second half of last year included the dealer inventory build of $1.4 billion, as dealers began to restock their inventories. We are not planning for this trend to repeat. Instead, we expect to see dealers decrease inventories compared to the first quarter levels and end 2023 about flat relative to the end of 2022. Although we expect sales to users to remain positive for our primary segments in each quarter, our planning assumption is that Caterpillar second half sales will have a dealer inventory impact. Let me explain. First, although dealer inventory in some products and regions have normalized, others remain constrained. For example, in North America, dealer inventory remains below the typical range for many products. However, there is greater excavator inventory in a few regions, as supply dynamics improved in 2022, which, coupled with the slowing in China, has resulted in improved excavation product availability. Given the improved availability of excavators, we expect that dealers will scale back their levels of excavator inventory in the second half of the year, even though demand remains healthy. As a reminder, dealers are independent businesses and control their own inventory. Second, in late 2023, we have scheduled a couple of new product changeovers in construction industry factories that will also impact the second half. Now I'll discuss our outlook for key end markets this year, starting with Construction Industries. In North America, overall, we continue to see positive momentum in 2023. We expect growth in nonresidential construction in North America due to the positive impact of government-related infrastructure investments and a healthy pipeline of construction projects. Although residential construction housing starts have softened, the growth rate of our residential construction equipment remains positive as the supply chain pressures alleviate. In Asia Pacific, excluding China, we expect growth in Construction Industries due to public infrastructure spending and supportive commodity prices. As we mentioned during our previous earnings calls, we expect China\u2019s above ten-ton excavator industry to remain below 2022 levels due to low construction activity. In 2023, sales in China are expected to be below the typical range of 5% to 10% of total Caterpillar sales. In the EAME, business activity is now expected to increase versus last year based on healthy construction project activity, particularly strong construction demand in the Middle East. Although uncertain economic conditions remain, European construction is proving to be more resilient than we previously anticipated. Construction activity in Latin America is expected to be down in 2023 versus the strong 2022 performance. There is some concern about the potential impact of a commercial real estate slowdown. We estimate that North American commercial real estate accounts for about 1% of total construction industry sales. Any slowdown related to this sector should not have a significant impact on Construction Industries. In Resource Industries, we expect healthy mining demand to continue, as commodity prices remain above investment thresholds. As I have mentioned during the last few years, customers remain capital disciplined, which supports a gradual increase in mining over time. We anticipate production utilization levels will remain elevated. We also expect the aging of the fleet and a lower level of parked trucks to support future demand for our equipment and services. We continue to believe the energy transition will support increased commodity demand, expanding our total addressable market and providing further opportunities for profitable growth. In heavy construction and quarry and aggregates, we anticipate continued growth due to major infrastructure and nonresidential construction projects. In Energy & Transportation, we expect to follow our normal seasonal pattern, with higher sales in the second half of the year versus the first half. In oil and gas, reciprocating engines, although customers remain disciplined, we are encouraged by continued strength and demand for both well servicing and gas compression. Power generation reciprocating engine demand is expected to remain healthy, including strong data center growth. New equipment orders and services for solar turbines in both oil and gas and power generation are robust. Industrial remains healthy. In transportation, we anticipate strength in high-speed Marine as customers continue to upgrade aging fleets. Moving to Slide 7. We are contributing to a reduced carbon future and continue to invest in new products, technologies and services to help our customers achieve their climate-related objectives. We recently completed and upgraded more than 50 models across our entire next-generation hydraulic excavator line. The new models reduced fuel consumption by up to 25% compared to previous models and provide another option for customers to lower emissions, while improving operational efficiency. A customer can realize meaningful emissions reductions by simply moving to the newest next-gen model. This example reinforces our ongoing sustainability leadership and how we help our customers build a better, more sustainable world. In addition, we look forward to issuing our 18th annual sustainability report in May. With that, I'll turn the call over to Andrew.","evidence_gemma_new":"ME&T free cash flow","evidence_llama_3_3":"ME&T free cash flow first quarter 2023","evidence_qwen_3_30b":"ME&T free cash flow $1.4 billion first quarter","gemma_new_max":1400000000.0,"gemma_new_min":1400000000.0,"llama_3_3_max":1400000000.0,"llama_3_3_min":1400000000.0,"qwen_3_30b_max":1400000000.0,"qwen_3_30b_min":1400000000.0}
{"symbol":"CAT","year":2023,"quarter":2,"date":"2023-Q2","chunk_id":2,"sub_chunk_id":0,"centroid_label":"free cash flows","agreed_value":2600000000.0,"count":3,"chunk":"James Umpleby: Thanks, Ryan. Good morning, everyone. Thank you for joining us. As we close out the first half of 2023, I want to recognize our global team for delivering a very strong second quarter. This included double-digit top-line growth, higher adjusted operating profit margin, record adjusted profit per share and robust ME&T free cash flow. Our results continued to reflect healthy demand across most end markets for our products and services. We remain focused on executing our strategy and continue to invest for long-term profitable growth. In today's call, I'll begin with my perspectives on our performance in the quarter. I'll then provide some insights on our end markets. Lastly, I'll provide an update on our sustainability journey. It was another strong quarter. Sales and revenues increased 22% in the second quarter versus last year. Adjusted operating profit margin improved 21.3%, up sequentially and year-over-year. We also generated $2.6 billion of ME&T free cash flow in the quarter. Our second quarter results were better than we expected for sales and revenues, adjusted operating profit margin, and ME&T free cash flow. In addition, we ended the quarter with a healthy backlog of $30.7 billion. We continue to see improvement in the supply chain, which allowed us to increase production in the quarter. However, areas of challenge remain, particularly for large engines, which impacts energy and transportation and some of our larger machines. While we continue to closely monitor global macroeconomic conditions, we now expect our 2023 results to be better than we had previously anticipated. Turning to Slide 4. In the second quarter of 2023, sales and revenues increased by 22% to $17.3 billion. This was primarily due to higher sales volume and price realization. Sales volumes were higher than we expected, largely due to an increase in dealer inventory relating to energy and transportation, which is supported by customer orders. We saw double-digit increases in sales and revenues in each of our three primary segments. Compared with the second quarter of 2022, overall sales to users increased 16%. For machines, which includes Construction Industries and Resource Industries, sales to users rose by 8%. Energy & Transportation was up 47%. Sales to users in Construction Industries were up 3%. North American sales to users increased and were better than expected as demand remained healthy for non-residential and residential construction. Non-residential continue to benefit from government-related infrastructure and construction projects. Residential sales to users in North America also increased in the quarter. EAME saw lower sales to users due to weaker than expected market conditions in Europe. The Middle East continued to demonstrate strong construction activity. In Latin America and Asia\/Pacific, sales to users declined in the quarter. In Resource Industries, sales to users increased 26%. In mining, sales to users increased, supported by commodities remaining above investment thresholds. Within heavy construction and quarry and aggregates, sales to users also increased, supported by growth for infrastructure-related projects. In Energy & Transportation, sales to users increased by 47% in the second quarter. All applications saw higher sales to users in the quarter. Oil and gas sales to users benefited from strong sales of turbines and turbine-related services. We also saw continued strength in sales of reciprocating engines into oil and gas applications, such as Tier 4 dynamic gas blending, gas compression, and repowering active well servicing fleets. Power generation sales to users continued to remain positive due to favorable market conditions, including strong data center growth. Industrial and transportation sales to users also increased. Dealer inventories increased by $600 million in the quarter, led by energy and transportation. We are very comfortable with the total level of dealer inventory, which remains in the typical range. Adjusted operating profit margin increased to 21.3% in the second quarter as we saw improvements, both on a sequential and year-over-year basis. Adjusted operating profit margin was better than we had anticipated, primarily due to better than expected volume growth and lower than expected manufacturing costs, including freight. Moving to Slide 5. We generated strong ME&T free cash flow of $2.6 billion in the second quarter. We returned $2 billion to shareholders, which included about $1.4 billion in repurchase stock and $600 million in dividends. In June, we announced an 8% dividend increase. Since May of 2019, when we introduced our current capital allocation strategy, we have increased the quarterly dividend per share by 51%. We remain proud of our dividend aristocrat status and continue to expect to return to substantially all ME&T free cash flow to shareholders over time through dividends and share repurchases. Now on Slide 6, I'll describe our expectations moving forward. While we continue to closely monitor global macroeconomic conditions, our second quarter results lead us to expect that full-year 2023 will now be even better than we described during our last earnings call. We now expect adjusted operating profit margins to be close to the top of the targeted range relative to the corresponding expected level of sales. This positive operating performance increases our expectations for ME&T free cash flow, which we now expect to be around the top of the $4 billion to $8 billion range for the full-year. Our current expectations for adjusted operating profit margin and ME&T free cash flow reflect continuing healthy customer demand and our strong operating performance. Now I'll discuss our outlook for key end markets this year, starting with the Construction Industries. In North America, overall, we continue to see positive momentum in 2023. We expect continued growth in non-residential construction in North America due to the positive impact of government-related infrastructure investments and a healthy pipeline of construction projects. Although residential construction growth has moderated, we expect the rest of 2023 to remain healthy. In Asia\/Pacific, excluding China, we expect growth in Construction Industries due to public infrastructure spending in support of commodity prices. We mentioned during our last earnings call that we expected sales in China to be below the typical 5% to 10% of our enterprise sales. We now expect further weakness as the 10-tons and above excavator industry has declined even more than we anticipated. In EAME, we anticipate that it will be flat to slightly up overall, with the Middle East exhibiting strong construction demand, whereas Europe is expected to be down. Construction activity in Latin America is expected to be down in 2023 versus a strong 2022 performance. In Resource Industries, we expect healthy mining demand to continue as commodity prices remain above investment thresholds. As I've mentioned previously, customers remain capital disciplined, which supports a gradual increase in mining over time. We anticipate production and utilization levels will remain elevated. We also expect the age of the fleet and the low level of park trucks to support future demand for our equipment and services. We continue to believe the energy transition will support increased commodity demand, expanding our total addressable market and providing further opportunities for profitable growth. In heavy construction and quarry and aggregates, we anticipate continued growth due to major infrastructure in non-residential construction projects. Now I'll discuss Energy & Transportation. For Cat reciprocating engines and oil and gas applications, although customers remain disciplined, we are encouraged by continuing strong demand for gas compression. Cat reciprocating engine demand for power generation is expected to remain healthy, including strong data center growth. New equipment orders and services for solar turbines in both oil and gas and power generation remain robust. Industrial continues to be healthy. In transportation, we anticipate strength in high speed marine as customers continued to upgrade aging fleets. Moving to Slide 7. We continued to advance our sustainability journey. Since our last quarterly earnings call, we published our 2022 sustainability report, which disclosed our estimated Scope 3 greenhouse gas emissions for the first time. We also published our first ever task force on climate-related financial disclosures report. We're helping our customers achieve their climate-related goals by continuing to invest in new products, technologies and services that facilitate fuel flexibility, increased operational efficiency and reduced emissions. For example, a customer in Chile is realizing fuel savings and lower emissions after purchasing our Cat D6 XE, the world's first high drive diesel-electric drive dozer. The customer reported a 30% reduction in fuel consumption versus the previous model working in the same operation. This example reinforces our ongoing sustainability leadership in how we help our customers build a better, more sustainable world. With that, I'll turn the call over to Andrew.","evidence_gemma_new":"ME&T free cash flow","evidence_llama_3_3":"ME&T free cash flow second quarter","evidence_qwen_3_30b":"ME&T free cash flow second quarter","gemma_new_max":2600000000.0,"gemma_new_min":2600000000.0,"llama_3_3_max":2600000000.0,"llama_3_3_min":2600000000.0,"qwen_3_30b_max":2600000000.0,"qwen_3_30b_min":2600000000.0}
{"symbol":"CAT","year":2023,"quarter":2,"date":"2023-Q2","chunk_id":3,"sub_chunk_id":0,"centroid_label":"free cash flows","agreed_value":6000000000.0,"count":3,"chunk":"Andrew Bonfield: Thank you, Jim, and good morning, everyone. I'll begin with commentary on the second quarter results, including the performance of our business segments. Then I'll discuss the balance sheet and free cash flow before concluding with our assumptions for the remainder of the year, including color on the third quarter. Beginning on Slide 8. Our team delivered a very strong second quarter as overall results exceeded our expectations on strong operating performance. We saw a healthy top-line growth, improved operating margins and robust ME&T free cash flow. For the year, we now expect our adjusted operating profit margin to be close to the top of the targeted range at our anticipated sales level. We also expect ME&T free cash flow to be around the top of our $4 billion to $8 billion target range. To summarize the results, sales and revenues increased by 22% or $3.1 billion to $17.3 billion. Sales increase versus the prior year was due to higher sales volume and price realization. Operating profit increased by 88% or $1.7 billion to $3.7 billion. The adjusted operating profit margin was 21.3%, an increase of 750 basis points versus the prior year. Adjusted profit per share increased by 75% to $5.55 in the second quarter compared to $3.18 last year. Profit per share was $5.67 in the second quarter of this year. This included a discrete deferred tax benefit of $0.17 per share, while restructuring costs were $0.05 per share, flat compared to the prior year. We continue to expect restructuring expenses of about $700 million for the full-year. Other income of $127 million in the quarter was lower than the second quarter of 2022 by $133 million. The year-over-year decline was primarily driven by an unfavorable currency impact related to ME&T balance sheet translation and a recurring increase in quarterly pension expense of approximately $80 million, which we initially spoke to you about in January. Higher investment and interest income acted as a partial offset. The provision for income tax in the second quarter, excluding discrete items reflected a global annual effective tax rate of approximately 23%, which remains our expectation for the full-year. Moving on to Slide 9. The 22% increase in the top-line versus the prior year was due to higher sales volume and price. Volume improved as sales to users increased by 16% and from changes in dealer inventory. Sales for the quarter were higher than we had anticipated, mostly due to volume. The volume outperformance reflected a dealer inventory increase, which was primarily due to our stronger than expected shipments in Energy & Transportation, particularly in power generation, which is in line with strong data center demand. Price realization was in line with our expectations for the quarter. As I mentioned, sales to users grew by 16% in the quarter. As Jim has discussed, demand remains healthy across most end markets for all our products and services and is supported by a healthy order backlog. Moving to Slide 10. Second quarter operating profit increased by 88%, while adjusted operating profit increased by 87% to $3.7 billion. Year-over-year favorable price realization and higher sales volume were partially offset by higher manufacturing costs, which largely reflected higher material costs. An increase in SG&A and R&D expenses included higher strategic investment spend. The adjusted operating profit margin of 21.3% was better than we had anticipated. Volume exceeded our expectations, which supported the margin outperformance. In addition, manufacturing costs increased less than we expected due to lower freight costs and a lower than anticipated impact from cost absorption. SG&A and R&D expenses were about in line. Moving to Slide 11. I'll review the segment performance. Construction Industries sales increased by 19% in the second quarter to $7.2 billion due to price realization and higher sales volume. By region, sales in North America rose by 32% due to higher sales volume and price realization. Stronger demand and supply chain improvements enabled stronger than expected shipments in North America. This supported stronger sales of equipment to end users and some delivery stocking in what remains our most constrained region. Sales in Latin America decreased by 11%, primarily due to lower sales volume, partially offset by price realization. In EAME, sales increased by 20%, primarily the result of higher sales volume and price realization. Sales in Asia\/Pacific were about flat. Second quarter profit for Construction Industries increased by 82% versus the prior year to $1.8 billion. The increase was mainly due to price realization and higher sales volume. The segment's operating margin of 25.2% was an increase of 880 basis points versus last year. Margin exceeded our expectations, largely due to better than expected volume of freight costs, which were lower than we had anticipated. Turning to Slide 12. Resource Industries sales grew by 20% in the second quarter to $3.6 billion. The increase was primarily due to price realization and higher sales volume. Volume increased due to higher sales of equipment to end users. Although aftermarket sales volumes were lower, dealer sales to customers for services remained positive. Second quarter profit for Resource Industries increased by 108% versus the prior year to $740 million, mainly due to price realization and higher sales volume. This was partially offset by unfavorable manufacturing costs, largely material costs. The segment's operating margin of 20.8% was an increase of 880 basis points versus last year. The segment's margin was better than we had expected, primarily due to favorable volume, timing of SG&A and R&D spend and lower than anticipated freight costs. Now on Slide 13. Energy & Transportation sales increased by 27% in the second quarter to $7.2 billion. Sales were up double-digits across all applications. Oil and gas sales increased by 43%, power generation sales increased by 39%, industrial sales rose by 18% and transportation sales increased by 12%. Second quarter profit for Energy & Transportation increased by 93% versus the prior year to $1.3 billion. The increase was mainly due to higher sales volume and price realization, partially offset by unfavorable manufacturing costs and higher SG&A and R&D expenses. The segment's operating margin of 17.6% was an increase of 600 basis points versus last year. The margin was generally in line with our expectations. Moving to Slide 14. Financial Products revenue increased by 16% to $923 million, primarily due to higher average financing rates across all regions. Segment profit increased by 11% to $240 million. The increase was mainly due to a lower provision for credit losses at Cat Financial, partially offset by an increase in SG&A expense. Business activity remains strong, and our portfolio continues to perform well. Past dues in the quarter were 2.15%, a 4 basis points improvement compared to the second quarter of 2022. This is the lowest second quarter past dues percentage since 2007. Retail new business volume performed well, increasing versus the prior year and the first quarter. In addition, we continue to see strong demand for used equipment. Now on Slide 15. Our ME&T free cash flow generation was again robust as we generated $2.6 billion in the quarter. This was an increase of $1.5 billion compared to the prior year. With approximately $4 billion generated in the first half, we now expect ME&T free cash flow to be around the top of our $4 billion to $8 billion target range for the full-year. CapEx in the second quarter was about $300 million, and we still expect to spend around $1.5 billion for the full-year. As Jim mentioned, we returned about $2 billion through share repurchases and dividends in the second quarter. Our balance sheet remains strong. We have ample liquidity with an enterprise cash balance of $7.4 billion, and we also hold an additional $2 billion in slightly longer-dated liquid marketable securities to improve yields on that cash. Now turning to Slide 16. I will share some high level assumptions for the second half and the third quarter. In the second half of 2023, we expect higher total sales and revenues as compared to the second half of last year. We anticipate both sales to users and price realization will be positive in the second half. Keep in mind that on a comparative basis, we start to lap the stronger price we saw from the third quarter onwards last year. Caterpillar sales will be impacted by changes in dealer inventories as dealers increased their inventories in the second half of last year, which is not typical, versus our expectation of a more typical reduction in the second half of 2023. I want to spend just a few moments talking about dealer inventories. Dealers are independent businesses, and they make their own decisions around the level of inventory they hold. We obviously work closely with them because this impacts our production levels. As Jim mentioned, we are very comfortable with the levels of inventory that dealers are holding. We talk about dealer inventory in aggregate. This is difficult to predict with certainty as it arises from three different business segments, over 150 dealers and hundreds of different products. In Resource Industries and Energy & Transportation, dealer inventory is mainly a function of the commissioning pipeline. Keep in mind that over 70% of dealer inventory in these segments is backed by firm customer orders. For Construction Industries, dealer inventory is principally a function of end user demand and availability from the factory. In Construction Industries, dealers typically increase inventories during the first half of the year. Around 60% of the $2 billion increase during the first half of this year was from products in this segment. The remaining 40% is in Resource Industries and Energy & Transportation. For Resource Industries and Energy Transportation, we currently anticipate a slight reduction in levels in the second-half, but this is dependent on commissioning. In Construction Industries, dealers are currently holding around the midpoint of the typical three to four months range. Some dealers would like to increase inventories of certain products, such as BCP and earth moving due to strong customer demand. Conversely, some dealers would like to reduce the levels of excavated inventory because of high availability. In addition, we are scheduled to replace third-party engines with Cat engines and certain products, which will impact production in these products during the second half. Our current planning assumption for the Construction Industries is that dealers will reduce their overall levels in inventory in the second half of 2023 with a principal focus on excavators. Overall, at the enterprise level, we currently expect dealer inventory should be slightly higher at the end of 2023 versus last year. Moving on. On this slide, we provide our adjusted profit margins target charge to assist you in your modeling process. Based on our current planning assumptions, we anticipate full-year adjusted operating profit margin to be close to the top of that 300 basis points target range at our expected sales level. Your expectation for total enterprise sales this year will inform you where on the curve margins should finish for the year. Specific to the second half, we anticipate adjusted operating profit margins in the remaining quarters of the year will be above the year ago levels, although they will be lower than the levels we saw in the first two quarters of this year. As compared to the first half, we anticipate a margin headwind from cost absorption in the second half. We do not expect to build our inventory as we did in the first half and anticipate that there will be some inventory reduction if we continue to see sustained supply chain improvement. In addition, spend related to the strategic growth initiatives should continue to ramp. Price realization should remain positive that the magnitude of the favorability versus the prior year is expected to be lower in the second half as we lap the more favorable pricing trends from last year. Therefore, the increases in margins that we have occurred -- that have occurred from price outpacing manufacturing cost inflation should moderate in the second half of this year. Now let's move on to our assumptions that are specific to the third quarter. We anticipate third quarter sales to be higher than the third quarter of 2022, but to exhibit the typical sequential decline when compared to the second quarter of 2023. In Construction Industries, as is our normal seasonal end, we expect lower sales compared to the second quarter. In Resource Industries, which can be lumpy, we anticipate slightly lower sales compared to the second quarter. We expect sales in Energy & Transportation will increase slightly compared to the second quarter. Specific to third quarter margins versus the prior year, adjusted operating profit margins at the enterprise level and segment margins should be stronger. However, we do expect lower enterprise adjusted operating profit margins in the third quarter compared to the second quarter of this year on lower volume and impacts from cost absorption. We also anticipate investment spend will ramp across our primary segments as we continue to accelerate our strategic investments in area like autonomy, alternative fuels, connectivity and digital and electrification. At the segment level, for Construction Industries, we expect a lower margin compared to the second quarter as is typical. This is largely due to lower quarter-on-quarter volume, increased investment in strategic initiatives and slightly higher manufacturing costs, including a headwind from cost absorption. Favorable price realization will act as a partial offset. We also anticipate lower third quarter margins in Resource Industries compared to the second quarter, primarily due to lower volume quarter-on-quarter. Conversely, we expect third quarter margins in Energy & Transportation will be slightly higher compared to the second quarter on higher volume and stronger price realization, partially offset by higher manufacturing costs and spend relating to strategic initiatives. Now turning to Slide 13, let me summarize. We generated strong adjusted operating profit margin with a 750 basis point increase to 21.3%. We now expect to be close to the top of the targeted range for adjusted operating margin -- profit margin for the full-year based on our expected sales levels. ME&T free cash flow generation was robust at $2.6 billion in the quarter. We returned $2 billion to shareholders through share repurchases and dividends. We now expect ME&T free cash flow to be around the top of our $4 billion to $8 billion range for the full-year. Lastly, we continue to execute our strategy for long-term profitable growth. And with that, we'll now take your questions.","evidence_gemma_new":"ME&T free cash flow","evidence_llama_3_3":"expect ME&T free cash flow full-year","evidence_qwen_3_30b":"ME&T free cash flow around the top of our $4 billion to $8 billion target range","gemma_new_max":6000000000.0,"gemma_new_min":6000000000.0,"llama_3_3_max":6000000000.0,"llama_3_3_min":6000000000.0,"qwen_3_30b_max":6000000000.0,"qwen_3_30b_min":6000000000.0}
{"symbol":"CAT","year":2023,"quarter":3,"date":"2023-Q3","chunk_id":2,"sub_chunk_id":0,"centroid_label":"free cash flows","agreed_value":2900000000.0,"count":3,"chunk":"Jim Umpleby: Thanks, Ryan. Good morning, everyone. Thank you for joining us. Before discussing our results, I'd like to take a moment to acknowledge the tragic events in the Middle East. We are deeply saddened by the loss of life, and are hopeful for a quick and peaceful resolution. The Caterpillar Foundation is donating $1 million to the American Red Cross, and its network of Red Crescent Societies in the region, to support the humanitarian needs of those impacted. As we closed out the third quarter, I want to thank our global team for delivering another strong quarter. This included double-digit top line growth, strong adjusted operating profit margin, and robust ME&T free cash flow. Our results continue to reflect healthy demand across most of our end markets for our products and services. We remain focused on executing our strategy, and continue to invest for long-term profitable growth. I'll begin with my perspectives about our performance in the quarter. I'll then provide some insights about our end markets. Lastly, I'll provide an update on our sustainability journey. Moving to quarterly results, it was another strong quarter. Sales and revenues increased 12% in the third quarter versus last year. Adjusted operating profit margin improved to 20.8%, up significantly year-over-year. We also generated $2.9 billion of ME&T free cash flow in the quarter. Sales were generally in line with our expectations, while both adjusted operating profit margin, and ME&T free cash flow in the third quarter were better than we expected. In addition, we ended the quarter with a healthy backlog of $28.1 billion. Backlog is a function of demand and lead times. As I've mentioned, demand remains healthy in most of our end markets. Due to improving supply chain conditions, product availability and lead times have improved for many products. Dealers and customers can wait longer to place orders, which has led to a moderation in order rates, as expected. In addition, we have seen a reduction in dealer orders for building construction products, which we anticipated, due to the changeover to CAT engines that we previously discussed, and for excavation, in anticipation of dealers reducing their inventories in the fourth quarter. Although, our backlog declined as expected, it still remains elevated as a percentage of revenues compared to historic levels. While we continue to closely monitor global macroeconomic conditions, we now expect our full-year 2023 results to be better than we anticipated during our last earnings call. Turning to Slide 4. In the third quarter of 2023, sales and revenues increased by 12% to $16.8 billion, driven primarily by favorable price realization, as well as volume growth. Sales increased in each of our three primary segments. Compared with the third quarter of 2022, overall sales to users increased 13%, which was below our expectations. Energy & Transportation sales to users increased 34%, but was lower than expected due to some supply chain challenges for large engines, and the timing of gas turbine in international locomotive deliveries. For machines, which includes Construction Industries and Resource Industries, sales to users rose by 7%, in line with expectations. Sales to users in Construction Industries were up 6%. North American sales to users increased as demand remained healthy for non-residential, and residential construction. Non-residential continued to benefit from government-related infrastructure and construction projects. Residential sales to users in North America also increased in the quarter. EAME sales to users were up slightly, primarily due to continuing strength in Middle East construction activity. In Latin America and Asia-Pacific, sales to users declined in the quarter. In Resource Industries, sales to users increased 10%. In mining, sales to users increased with commodities remaining above investment thresholds. Within heavy construction, and quarry and aggregates, sales to users also increased, supported by growth for infrastructure-related projects. In Energy & Transportation, sales to users increased by 34%. All applications saw higher sales to users in the quarter. Oil and gas sales to users benefited from strong sales of turbines, and turbine-related services. We also saw continued strength in sales of reciprocating engines into oil and gas applications such as Tier 4 dynamic gas blending, repowering well servicing fleets and gas compression. Power generation sales to users continued to remain positive, due to favorable market conditions, including strong data center growth. Industrial and transportation sales to users also increased. Dealer inventories increased by $600 million in the quarter, led by Construction Industries and followed by Energy & Transportation. In Construction Industries, the increase was in North America in some of our most constrained product lines including BCP and Earthmoving. We remain very comfortable with the total level of dealer inventory, which is within the typical range. Andrew will provide more color later in the call. Adjusted operating profit margin increased to 20.8% in the third quarter, a 430 basis point increase over last year. Adjusted operating profit margin was better than we had anticipated. Relative to our expectations, we saw lower-than-expected manufacturing costs, including freight, as well as slightly favorable price realization, which included the positive impact from geographic mix. Moving to Slide 5. We generated strong ME&T free cash flow of $2.9 billion in the third quarter, and $6.8 billion in the first three quarters of 2023. Year-to-date, we returned $4.1 billion to shareholders, which included about $2.2 billion of repurchased stock, and $1.9 billion in dividends. We remain proud of our Dividend Aristocrat status, and continue to expect to return substantially all ME&T free cash flow to shareholders over time through dividends and share repurchases. Now on Slide 6, I'll describe our expectations moving forward. As I mentioned earlier, we now anticipate the full year to be better than we previously expected. We expect our adjusted operating profit margin to be slightly above the targeted range relative to the corresponding level of sales. This positive operating performance increases our expectations for ME&T free cash flow, which we now expect will exceed the $4 billion to $8 billion target range for the full year. This outlook for the adjusted operating profit margin, and ME&T free cash flow, reflects healthy customer demand and our strong operating performance. Now, I'll discuss our outlook for key end markets starting with Construction Industries. In North America overall, we continue to see positive momentum. We expect continued growth in non-residential construction in North America due to the impact of government-related infrastructure investments, and a healthy pipeline of construction projects. Although, residential construction growth has moderated, we expect it to remain healthy. In Asia Pacific, excluding China, we expect growth in Construction Industries due to public infrastructure spending, in support of commodity prices. As we have mentioned during previous earnings calls, we anticipate continued weakness in China, and expect it to remain well below our typical range of 5% to 10% of enterprise sales. In EAME, we anticipate the region will be slightly down as weakness continues in Europe, partially offset by continuing strong construction demand in the Middle East. Construction activity in Latin America is expected to be about flat versus strong 2022 performance. In Resource Industries, we continue to see a high level of quoting activity. In mining, customer product utilization remains high. The number of parked trucks remains low, and the age of the fleet remains elevated. Order rates are slightly lower than we expected at this time, reflecting continued capital discipline by our customers. We continue to believe the energy transition will support increased commodity demand over time, expanding our total addressable market, and providing further opportunities for long-term profitable growth. In addition, customer acceptance of our autonomous solutions continues to grow. This is evidenced by the announcement this morning with Freeport-McMoRan, who will convert their fleet of Cat 793 large mining trucks at an Arizona copper mine to autonomous haulage using Cat MineStar Command. We also expect heavy construction, and quarry and aggregates to remain in healthy levels due to major infrastructure in non-residential construction projects. Moving to Energy & Transportation. In oil and gas, we remain encouraged by continuing strong demand for Cat reciprocating engines and gas compression. As we said last quarter, well servicing in North America is showing some short-term moderation, but we remain optimistic about future demand. Cat reciprocating engine demand for power generation is expected to remain strong, primarily driven by data center growth. New equipment and services for solar turbines in both oil and gas and power generation remain robust. Industrial demand is expected to soften slightly from recent high levels, but remains well above our historical averages. In transportation, we anticipate strength in high-speed marine as customers continue to upgrade aging fleets. As we've described, we continue to see strength in most of our end markets. Based on our backlog, dealer inventory, and current market conditions, we expect to have another good year in 2024. We will provide additional information during our fourth quarter call. Moving to Slide 7. We continue to advance our sustainability journey. We're helping our customers achieve their climate related objectives by continuing to invest in new products, technologies, and services, that facilitate fuel flexibility, increased operational efficiency, and reduced emissions. For example, Caterpillar provides a number of low-carbon intensity solutions to customers. In Construction Industries, the Cat 980 XE Wheel Loader, which features a Cat designed and manufactured continuous variable transmission, improves fuel efficiency by as much as 35%, and reduces CO2 emissions by as much as 17% compared to the previous model. We also introduced the new Cat G3600 Gen 2 engine, the latest evolution of the powerful G3600 series, offering lower emissions. With more than 8,500 Cat G3600 units in the field, the Gen 2 engine is designed to build upon the platform's robust performance, to provide a 10% increase in power, and lower emissions compared to the previous model. We've also made several joint announcements with customers that demonstrate our commitment to supporting their climate-related objectives. I'll highlight one here. In September, Caterpillar and Albemarle introduced a unique collaboration, aimed to support their efforts to establish Kings Mountain, North Carolina as the first-ever zero emissions lithium mine in North America, while also making lithium available for use in Caterpillar battery production. These examples reinforce our ongoing sustainability leadership, and how we're helping our customers build a better, more sustainable world. With that, I will turn it over to Andrew.","evidence_gemma_new":"ME&T free cash flow third quarter","evidence_llama_3_3":"ME&T free cash flow $2.9 billion third quarter","evidence_qwen_3_30b":"ME&T free cash flow $2.9 billion third quarter","gemma_new_max":2900000000.0,"gemma_new_min":2900000000.0,"llama_3_3_max":2900000000.0,"llama_3_3_min":2900000000.0,"qwen_3_30b_max":2900000000.0,"qwen_3_30b_min":2900000000.0}
{"symbol":"CAT","year":2023,"quarter":3,"date":"2023-Q3","chunk_id":2,"sub_chunk_id":0,"centroid_label":"free cash flows","agreed_value":6000000000.0,"count":3,"chunk":"Jim Umpleby: Thanks, Ryan. Good morning, everyone. Thank you for joining us. Before discussing our results, I'd like to take a moment to acknowledge the tragic events in the Middle East. We are deeply saddened by the loss of life, and are hopeful for a quick and peaceful resolution. The Caterpillar Foundation is donating $1 million to the American Red Cross, and its network of Red Crescent Societies in the region, to support the humanitarian needs of those impacted. As we closed out the third quarter, I want to thank our global team for delivering another strong quarter. This included double-digit top line growth, strong adjusted operating profit margin, and robust ME&T free cash flow. Our results continue to reflect healthy demand across most of our end markets for our products and services. We remain focused on executing our strategy, and continue to invest for long-term profitable growth. I'll begin with my perspectives about our performance in the quarter. I'll then provide some insights about our end markets. Lastly, I'll provide an update on our sustainability journey. Moving to quarterly results, it was another strong quarter. Sales and revenues increased 12% in the third quarter versus last year. Adjusted operating profit margin improved to 20.8%, up significantly year-over-year. We also generated $2.9 billion of ME&T free cash flow in the quarter. Sales were generally in line with our expectations, while both adjusted operating profit margin, and ME&T free cash flow in the third quarter were better than we expected. In addition, we ended the quarter with a healthy backlog of $28.1 billion. Backlog is a function of demand and lead times. As I've mentioned, demand remains healthy in most of our end markets. Due to improving supply chain conditions, product availability and lead times have improved for many products. Dealers and customers can wait longer to place orders, which has led to a moderation in order rates, as expected. In addition, we have seen a reduction in dealer orders for building construction products, which we anticipated, due to the changeover to CAT engines that we previously discussed, and for excavation, in anticipation of dealers reducing their inventories in the fourth quarter. Although, our backlog declined as expected, it still remains elevated as a percentage of revenues compared to historic levels. While we continue to closely monitor global macroeconomic conditions, we now expect our full-year 2023 results to be better than we anticipated during our last earnings call. Turning to Slide 4. In the third quarter of 2023, sales and revenues increased by 12% to $16.8 billion, driven primarily by favorable price realization, as well as volume growth. Sales increased in each of our three primary segments. Compared with the third quarter of 2022, overall sales to users increased 13%, which was below our expectations. Energy & Transportation sales to users increased 34%, but was lower than expected due to some supply chain challenges for large engines, and the timing of gas turbine in international locomotive deliveries. For machines, which includes Construction Industries and Resource Industries, sales to users rose by 7%, in line with expectations. Sales to users in Construction Industries were up 6%. North American sales to users increased as demand remained healthy for non-residential, and residential construction. Non-residential continued to benefit from government-related infrastructure and construction projects. Residential sales to users in North America also increased in the quarter. EAME sales to users were up slightly, primarily due to continuing strength in Middle East construction activity. In Latin America and Asia-Pacific, sales to users declined in the quarter. In Resource Industries, sales to users increased 10%. In mining, sales to users increased with commodities remaining above investment thresholds. Within heavy construction, and quarry and aggregates, sales to users also increased, supported by growth for infrastructure-related projects. In Energy & Transportation, sales to users increased by 34%. All applications saw higher sales to users in the quarter. Oil and gas sales to users benefited from strong sales of turbines, and turbine-related services. We also saw continued strength in sales of reciprocating engines into oil and gas applications such as Tier 4 dynamic gas blending, repowering well servicing fleets and gas compression. Power generation sales to users continued to remain positive, due to favorable market conditions, including strong data center growth. Industrial and transportation sales to users also increased. Dealer inventories increased by $600 million in the quarter, led by Construction Industries and followed by Energy & Transportation. In Construction Industries, the increase was in North America in some of our most constrained product lines including BCP and Earthmoving. We remain very comfortable with the total level of dealer inventory, which is within the typical range. Andrew will provide more color later in the call. Adjusted operating profit margin increased to 20.8% in the third quarter, a 430 basis point increase over last year. Adjusted operating profit margin was better than we had anticipated. Relative to our expectations, we saw lower-than-expected manufacturing costs, including freight, as well as slightly favorable price realization, which included the positive impact from geographic mix. Moving to Slide 5. We generated strong ME&T free cash flow of $2.9 billion in the third quarter, and $6.8 billion in the first three quarters of 2023. Year-to-date, we returned $4.1 billion to shareholders, which included about $2.2 billion of repurchased stock, and $1.9 billion in dividends. We remain proud of our Dividend Aristocrat status, and continue to expect to return substantially all ME&T free cash flow to shareholders over time through dividends and share repurchases. Now on Slide 6, I'll describe our expectations moving forward. As I mentioned earlier, we now anticipate the full year to be better than we previously expected. We expect our adjusted operating profit margin to be slightly above the targeted range relative to the corresponding level of sales. This positive operating performance increases our expectations for ME&T free cash flow, which we now expect will exceed the $4 billion to $8 billion target range for the full year. This outlook for the adjusted operating profit margin, and ME&T free cash flow, reflects healthy customer demand and our strong operating performance. Now, I'll discuss our outlook for key end markets starting with Construction Industries. In North America overall, we continue to see positive momentum. We expect continued growth in non-residential construction in North America due to the impact of government-related infrastructure investments, and a healthy pipeline of construction projects. Although, residential construction growth has moderated, we expect it to remain healthy. In Asia Pacific, excluding China, we expect growth in Construction Industries due to public infrastructure spending, in support of commodity prices. As we have mentioned during previous earnings calls, we anticipate continued weakness in China, and expect it to remain well below our typical range of 5% to 10% of enterprise sales. In EAME, we anticipate the region will be slightly down as weakness continues in Europe, partially offset by continuing strong construction demand in the Middle East. Construction activity in Latin America is expected to be about flat versus strong 2022 performance. In Resource Industries, we continue to see a high level of quoting activity. In mining, customer product utilization remains high. The number of parked trucks remains low, and the age of the fleet remains elevated. Order rates are slightly lower than we expected at this time, reflecting continued capital discipline by our customers. We continue to believe the energy transition will support increased commodity demand over time, expanding our total addressable market, and providing further opportunities for long-term profitable growth. In addition, customer acceptance of our autonomous solutions continues to grow. This is evidenced by the announcement this morning with Freeport-McMoRan, who will convert their fleet of Cat 793 large mining trucks at an Arizona copper mine to autonomous haulage using Cat MineStar Command. We also expect heavy construction, and quarry and aggregates to remain in healthy levels due to major infrastructure in non-residential construction projects. Moving to Energy & Transportation. In oil and gas, we remain encouraged by continuing strong demand for Cat reciprocating engines and gas compression. As we said last quarter, well servicing in North America is showing some short-term moderation, but we remain optimistic about future demand. Cat reciprocating engine demand for power generation is expected to remain strong, primarily driven by data center growth. New equipment and services for solar turbines in both oil and gas and power generation remain robust. Industrial demand is expected to soften slightly from recent high levels, but remains well above our historical averages. In transportation, we anticipate strength in high-speed marine as customers continue to upgrade aging fleets. As we've described, we continue to see strength in most of our end markets. Based on our backlog, dealer inventory, and current market conditions, we expect to have another good year in 2024. We will provide additional information during our fourth quarter call. Moving to Slide 7. We continue to advance our sustainability journey. We're helping our customers achieve their climate related objectives by continuing to invest in new products, technologies, and services, that facilitate fuel flexibility, increased operational efficiency, and reduced emissions. For example, Caterpillar provides a number of low-carbon intensity solutions to customers. In Construction Industries, the Cat 980 XE Wheel Loader, which features a Cat designed and manufactured continuous variable transmission, improves fuel efficiency by as much as 35%, and reduces CO2 emissions by as much as 17% compared to the previous model. We also introduced the new Cat G3600 Gen 2 engine, the latest evolution of the powerful G3600 series, offering lower emissions. With more than 8,500 Cat G3600 units in the field, the Gen 2 engine is designed to build upon the platform's robust performance, to provide a 10% increase in power, and lower emissions compared to the previous model. We've also made several joint announcements with customers that demonstrate our commitment to supporting their climate-related objectives. I'll highlight one here. In September, Caterpillar and Albemarle introduced a unique collaboration, aimed to support their efforts to establish Kings Mountain, North Carolina as the first-ever zero emissions lithium mine in North America, while also making lithium available for use in Caterpillar battery production. These examples reinforce our ongoing sustainability leadership, and how we're helping our customers build a better, more sustainable world. With that, I will turn it over to Andrew.","evidence_gemma_new":"ME&T free cash flow","evidence_llama_3_3":"expect ME&T free cash flow $4 billion to $8 billion full year","evidence_qwen_3_30b":"anticipate ME&T free cash flow","gemma_new_max":6000000000.0,"gemma_new_min":6000000000.0,"llama_3_3_max":6000000000.0,"llama_3_3_min":6000000000.0,"qwen_3_30b_max":6000000000.0,"qwen_3_30b_min":6000000000.0}
{"symbol":"CAT","year":2023,"quarter":4,"date":"2023-Q4","chunk_id":2,"sub_chunk_id":0,"centroid_label":"free cash flows","agreed_value":3200000000.0,"count":2,"chunk":"Jim Umpleby: Thanks, Ryan. Good morning, everyone. Thank you for joining us. As we close out 2023, I'd like to start by recognizing our global team for delivering another strong quarter and the best year in our 98-year history. For the year, we delivered record sales and revenues, record adjusted profit margin, record adjusted profit per share, and record ME&T free cash flow. Our results continue to reflect healthy demand across most of our end markets for our products and services. We remain focused on executing our strategy and continue to invest for long-term profitable growth. I'll begin with my perspectives about our performance in the quarter and for the full year. I'll then provide some insights about our end markets, followed by an update on our strategy. I'll then provide some insights about our end markets, followed by an update on our strategy and sustainability journey. Moving to quarterly results, it was another strong quarter. While sales and revenues increased 3% in the fourth quarter versus a strong quarter last year, our adjust operating profit increased by 15%. Adjusted operating profit margin improved to 18.9%, up 190 basis points versus last year. We also generated $3.2 billion of ME&T free cash flow in the quarter. Sales, adjusted operating profit margin, adjusted profit per share and ME&T free cash flow in the fourth quarter were all better than we expected. For the full year, we generated a 13% increase in total sales and revenues to $67.1 billion. Services also increased by 5% to $23 billion, a record. We generated $13.7 billion of adjusted operating profit in 2023, up 51% from 2022. Adjusted operating profit margin for the full year was 20.5%, a 510 basis point increase over the prior year. This exceeded the top end of our target margin range for this level of sales by 80 basis points. Adjusted profit per share in 2023 was $21.21, a 53% increase over 2022. In addition, we also generated $10 billion of ME&T free cash flow, exceeding the high end of our target range by over $2 billion for the full year. This performance led to continued growth in absolute OPACC dollars, which is our internal measure of profitable growth. As a result of our strong execution and record financial performance, we are increasing our target range for adjusted operating profit margin and ME&T free cash flow. We are increasing the top end of our adjusted operating profit margin range by 100 basis points relative to the corresponding level of sales. Moving to ME&T free cash flow, we've generated more than $30 billion over the last five years, including a record $10 billion in 2023. Based on our demonstrated ability to generate strong free cash flow, we are raising our ME&T free cash flow target range to $5 billion to $10 billion, up from $4 billion to $8 billion. Andrew will provide additional details around these updated targets. Turning to Slide 4. In the fourth quarter of 2023, sales and revenues increased by 3% to $17.1 billion, driven by favorable price realization and partially offset by lower volume. Both price and volume were slightly better than we expected. Compared to the fourth quarter of 2022, overall sales to users increased 8%, slightly better than our expectations. Energy & Transportation sales to users increased 20%. For machines, which includes Construction Industries and Resource Industries, sales to users rose by 3%. Sales to users in Construction Industries were up 4%. North American sales to users increased as demand remained healthy for non-residential and residential construction. Non-residential continued to benefit from government related infrastructure and construction projects. Residential sales to users in North America also increased in the quarter. Sales to users in EAME and Latin America were down slightly relative to a strong comparative. In Asia Pacific, sales to users declined in the quarter. In Resource Industries, sales to users increased 1%. In mining, sales to users also increased and in heavy construction and quarry and aggregates, sales to users declined against a strong comparative in 2022. In Energy & Transportation, sales to users increased by 20%. Oil and gas sales to users benefited from strong sales of turbines and turbine related services. We also saw continued strength in sales of reciprocating engines into gas compression and well servicing oil and gas applications, including the Tier 4 dynamic gas blending engines used in well servicing fleets. Power generation sales to users increased -- excuse me, power generation sales to users continued to remain positive due to favorable market conditions, including strong data center growth. Transportation sales to users also increased, while industrial declined from historically strong levels in 2022. Dealer inventory decreased by $900 million versus the third quarter. Machines declined by $1.4 billion, slightly more than we expected. We saw the largest decline in Construction Industries as dealer inventory decreased across all regions. The largest decline was in excavators. We remain comfortable with the total level of machine dealer inventory, which is within the typical range. Adjusted operating profit margin increased to 18.9% in the fourth quarter, a 190 basis point increase over last year. Adjusted operating profit margin was slightly better than we had anticipated. Relative to our margin expectations, we saw higher price realization and higher sales volume, both marginally better than expected. Turning to Slide 5, I'll now provide full year highlights. In 2023, we generated sales and revenues of $67.1 billion, up 13% versus last year. This was due to favorable price and higher sales volume, driven primarily by higher sales of equipment to end users. As I mentioned, we generated $23 billion of services revenue in 2023, a 5% increase over 2022. We continue to see improvement of customer value agreements with new equipment, which remains an important part of our services growth initiatives. We saw strong e-commerce sales growth as we continued to enhance our digital tools to make it easier for customers to identify and purchase the right parts. We added more than 100,000 new customers to our online channel. We also exceeded the e-commerce goal we shared at our May 2022 Investor Day. By combining the data from more than 1.5 million connected assets with our engineering expertise, advanced analytics and AI, we are helping customers avoid unplanned downtime through intelligent leads, which we call prioritized service events, or PSEs. We continue to execute our various service initiatives as we strive to achieve our 2026 target of $28 billion. Our full-year adjusted operating profit margin was 20.5%, a 510 basis point increase over 2022. Moving to Slide 6. We generated strong ME&T free cash flow of $10 billion in 2023, a $3.7 billion, or 58% increase over our previous record. We returned a record $7.5 billion to shareholders through repurchase stock and dividends. We remain proud of our Dividend Aristocrat status and continue to expect to return substantially all ME&T free cash flow to shareholders over time through dividends and share repurchases. Now on Slide 7, I'll describe our expectations moving forward. Overall demand remains healthy across most of our end markets for our products and services. We ended 2023 with a backlog of $27.5 billion, which remains elevated as a percentage of revenues compared to historical levels. We currently anticipate 2024 sales and revenues to be broadly similar to the record 2023 level. We expect continued strength in end user demand, including services growth, and a slight benefit from carryover pricing, offset by a dealer inventory headwind, which was a $2.1 billion benefit in 2023. We currently do not anticipate a significant change in dealer inventory of machines in 2024 as compared to an increase in 2023. Now, I'll discuss our outlook for key end markets, starting with construction industries. In North America, after a very strong 2023, we expect the region to remain healthy in 2024. We expect non-residential construction to remain at similar demand levels due to government-related infrastructure investments. Residential construction is expected to remain healthy relative to historical levels. In Asia Pacific, excluding China, we are seeing some softening in economic conditions. We anticipate China will remain at a relatively low level for the above 10-ton excavator industry. In EAME, we anticipate the region will be slightly down due to economic uncertainty in Europe, somewhat offset by continuing strong construction demand in the Middle East. Construction activity in Latin America is expected to increase due to easing financial conditions. In addition, we also anticipate the ongoing benefit of our services initiatives will positively impact construction industries in 2024. Next, I'll discuss Resource Industries. After strong performance in 2023 in mining, heavy construction and quarry and aggregates, we anticipate lower machine volume versus last year, primarily due to off-highway and articulated trucks. In addition, we anticipate a small decrease in dealer inventory during 2024 versus a slight increase in dealer inventory last year. While we continue to see a high level of quoting activity overall, we anticipate lower order rates as customers display capital discipline. We expect to see higher services revenues, including robust rebuild activity. Customer product utilization remains high, the number of parked trucks remains low, the age of the fleet remains elevated, and our autonomous solutions continue to see strong customer acceptance. We continue to believe the energy transition will support increased commodity demand over time, expanding our total addressable market and providing further opportunities for long-term profitable growth. Moving to Energy & Transportation. In oil and gas, we expect reciprocating engines and services to increase slightly after a strong 2023. As we said during the last two quarters, well servicing in North America is showing some short-term moderation. Gas compression order backlog remains healthy. And overall, we continue to remain optimistic about future demand. Cat reciprocating engine demand for power generation is expected to remain strong due to continued data center growth. Solar Turbines has a strong backlog and continues to experience robust quoting activity. As we said in the last quarter, industrial demand is expected to soften in the near term from a strong 2023. In transportation, we anticipate high-speed marine to increase slightly as customers continue to upgrade aging fleets. Moving to Slide 8. Now I'll provide an update on our strategy and sustainability journey. Over the past year, we have discussed constraints for our large engines, given the robust demand in power generation for data centers and in oil and gas. We believe that our total addressable market is expanding due to the secular growth trend for data centers relating to cloud computing and Generative AI. We also expect the energy transition to create opportunities for distributed generation. As more renewables are added to the grid, our reciprocating engine and gas turbine generator sets can help provide grid stability. We are making a large multiyear capital investment in our large engine division, including increasing capacity for both new engines and aftermarket parts. This will help us satisfy growing customer demand and contribute to future absolute OPACC dollar growth, which we believe has the highest correlation to total shareholder return over time. We continued to advance our sustainability journey in 2023. I'll highlight some recent announcements demonstrating our commitment to a reduced carbon future. Caterpillar had a goal that 100% of new products will be more sustainable than the previous generation, including by lowering fuel consumption and thus, corresponding emissions. One recent example is our 420 XE Backhoe Loader with the Cat 3.6 engine. Through internal testing in a typical mix of applications, it consumed up to 10% less fuel and produced up to 10% less tail pipe emissions than the previous model. Earlier this year, we announced the success of our collaboration with Microsoft and Ballard Power Systems to demonstrate the viability of using large-format hydrogen fuel cells to supply reliable and sustainable backup power for data centers. The demonstration validated the hydrogen fuel cell power systems performance in more than 6,000 feet above sea level and in below freezing conditions. Caterpillar led the project, providing the overall system integration, power electronics and microgrid controls that form the central structure of the hydrogen power solution. These examples reinforce our ongoing sustainability leadership. With that, I'll turn it over to Andrew.","evidence_gemma_new":null,"evidence_llama_3_3":"ME&T free cash flow fourth quarter","evidence_qwen_3_30b":"ME&T free cash flow 3.2 billion quarter","gemma_new_max":null,"gemma_new_min":null,"llama_3_3_max":3200000000.0,"llama_3_3_min":3200000000.0,"qwen_3_30b_max":3200000000.0,"qwen_3_30b_min":3200000000.0}
{"symbol":"CAT","year":2023,"quarter":4,"date":"2023-Q4","chunk_id":2,"sub_chunk_id":0,"centroid_label":"free cash flows","agreed_value":10000000000.0,"count":3,"chunk":"Jim Umpleby: Thanks, Ryan. Good morning, everyone. Thank you for joining us. As we close out 2023, I'd like to start by recognizing our global team for delivering another strong quarter and the best year in our 98-year history. For the year, we delivered record sales and revenues, record adjusted profit margin, record adjusted profit per share, and record ME&T free cash flow. Our results continue to reflect healthy demand across most of our end markets for our products and services. We remain focused on executing our strategy and continue to invest for long-term profitable growth. I'll begin with my perspectives about our performance in the quarter and for the full year. I'll then provide some insights about our end markets, followed by an update on our strategy. I'll then provide some insights about our end markets, followed by an update on our strategy and sustainability journey. Moving to quarterly results, it was another strong quarter. While sales and revenues increased 3% in the fourth quarter versus a strong quarter last year, our adjust operating profit increased by 15%. Adjusted operating profit margin improved to 18.9%, up 190 basis points versus last year. We also generated $3.2 billion of ME&T free cash flow in the quarter. Sales, adjusted operating profit margin, adjusted profit per share and ME&T free cash flow in the fourth quarter were all better than we expected. For the full year, we generated a 13% increase in total sales and revenues to $67.1 billion. Services also increased by 5% to $23 billion, a record. We generated $13.7 billion of adjusted operating profit in 2023, up 51% from 2022. Adjusted operating profit margin for the full year was 20.5%, a 510 basis point increase over the prior year. This exceeded the top end of our target margin range for this level of sales by 80 basis points. Adjusted profit per share in 2023 was $21.21, a 53% increase over 2022. In addition, we also generated $10 billion of ME&T free cash flow, exceeding the high end of our target range by over $2 billion for the full year. This performance led to continued growth in absolute OPACC dollars, which is our internal measure of profitable growth. As a result of our strong execution and record financial performance, we are increasing our target range for adjusted operating profit margin and ME&T free cash flow. We are increasing the top end of our adjusted operating profit margin range by 100 basis points relative to the corresponding level of sales. Moving to ME&T free cash flow, we've generated more than $30 billion over the last five years, including a record $10 billion in 2023. Based on our demonstrated ability to generate strong free cash flow, we are raising our ME&T free cash flow target range to $5 billion to $10 billion, up from $4 billion to $8 billion. Andrew will provide additional details around these updated targets. Turning to Slide 4. In the fourth quarter of 2023, sales and revenues increased by 3% to $17.1 billion, driven by favorable price realization and partially offset by lower volume. Both price and volume were slightly better than we expected. Compared to the fourth quarter of 2022, overall sales to users increased 8%, slightly better than our expectations. Energy & Transportation sales to users increased 20%. For machines, which includes Construction Industries and Resource Industries, sales to users rose by 3%. Sales to users in Construction Industries were up 4%. North American sales to users increased as demand remained healthy for non-residential and residential construction. Non-residential continued to benefit from government related infrastructure and construction projects. Residential sales to users in North America also increased in the quarter. Sales to users in EAME and Latin America were down slightly relative to a strong comparative. In Asia Pacific, sales to users declined in the quarter. In Resource Industries, sales to users increased 1%. In mining, sales to users also increased and in heavy construction and quarry and aggregates, sales to users declined against a strong comparative in 2022. In Energy & Transportation, sales to users increased by 20%. Oil and gas sales to users benefited from strong sales of turbines and turbine related services. We also saw continued strength in sales of reciprocating engines into gas compression and well servicing oil and gas applications, including the Tier 4 dynamic gas blending engines used in well servicing fleets. Power generation sales to users increased -- excuse me, power generation sales to users continued to remain positive due to favorable market conditions, including strong data center growth. Transportation sales to users also increased, while industrial declined from historically strong levels in 2022. Dealer inventory decreased by $900 million versus the third quarter. Machines declined by $1.4 billion, slightly more than we expected. We saw the largest decline in Construction Industries as dealer inventory decreased across all regions. The largest decline was in excavators. We remain comfortable with the total level of machine dealer inventory, which is within the typical range. Adjusted operating profit margin increased to 18.9% in the fourth quarter, a 190 basis point increase over last year. Adjusted operating profit margin was slightly better than we had anticipated. Relative to our margin expectations, we saw higher price realization and higher sales volume, both marginally better than expected. Turning to Slide 5, I'll now provide full year highlights. In 2023, we generated sales and revenues of $67.1 billion, up 13% versus last year. This was due to favorable price and higher sales volume, driven primarily by higher sales of equipment to end users. As I mentioned, we generated $23 billion of services revenue in 2023, a 5% increase over 2022. We continue to see improvement of customer value agreements with new equipment, which remains an important part of our services growth initiatives. We saw strong e-commerce sales growth as we continued to enhance our digital tools to make it easier for customers to identify and purchase the right parts. We added more than 100,000 new customers to our online channel. We also exceeded the e-commerce goal we shared at our May 2022 Investor Day. By combining the data from more than 1.5 million connected assets with our engineering expertise, advanced analytics and AI, we are helping customers avoid unplanned downtime through intelligent leads, which we call prioritized service events, or PSEs. We continue to execute our various service initiatives as we strive to achieve our 2026 target of $28 billion. Our full-year adjusted operating profit margin was 20.5%, a 510 basis point increase over 2022. Moving to Slide 6. We generated strong ME&T free cash flow of $10 billion in 2023, a $3.7 billion, or 58% increase over our previous record. We returned a record $7.5 billion to shareholders through repurchase stock and dividends. We remain proud of our Dividend Aristocrat status and continue to expect to return substantially all ME&T free cash flow to shareholders over time through dividends and share repurchases. Now on Slide 7, I'll describe our expectations moving forward. Overall demand remains healthy across most of our end markets for our products and services. We ended 2023 with a backlog of $27.5 billion, which remains elevated as a percentage of revenues compared to historical levels. We currently anticipate 2024 sales and revenues to be broadly similar to the record 2023 level. We expect continued strength in end user demand, including services growth, and a slight benefit from carryover pricing, offset by a dealer inventory headwind, which was a $2.1 billion benefit in 2023. We currently do not anticipate a significant change in dealer inventory of machines in 2024 as compared to an increase in 2023. Now, I'll discuss our outlook for key end markets, starting with construction industries. In North America, after a very strong 2023, we expect the region to remain healthy in 2024. We expect non-residential construction to remain at similar demand levels due to government-related infrastructure investments. Residential construction is expected to remain healthy relative to historical levels. In Asia Pacific, excluding China, we are seeing some softening in economic conditions. We anticipate China will remain at a relatively low level for the above 10-ton excavator industry. In EAME, we anticipate the region will be slightly down due to economic uncertainty in Europe, somewhat offset by continuing strong construction demand in the Middle East. Construction activity in Latin America is expected to increase due to easing financial conditions. In addition, we also anticipate the ongoing benefit of our services initiatives will positively impact construction industries in 2024. Next, I'll discuss Resource Industries. After strong performance in 2023 in mining, heavy construction and quarry and aggregates, we anticipate lower machine volume versus last year, primarily due to off-highway and articulated trucks. In addition, we anticipate a small decrease in dealer inventory during 2024 versus a slight increase in dealer inventory last year. While we continue to see a high level of quoting activity overall, we anticipate lower order rates as customers display capital discipline. We expect to see higher services revenues, including robust rebuild activity. Customer product utilization remains high, the number of parked trucks remains low, the age of the fleet remains elevated, and our autonomous solutions continue to see strong customer acceptance. We continue to believe the energy transition will support increased commodity demand over time, expanding our total addressable market and providing further opportunities for long-term profitable growth. Moving to Energy & Transportation. In oil and gas, we expect reciprocating engines and services to increase slightly after a strong 2023. As we said during the last two quarters, well servicing in North America is showing some short-term moderation. Gas compression order backlog remains healthy. And overall, we continue to remain optimistic about future demand. Cat reciprocating engine demand for power generation is expected to remain strong due to continued data center growth. Solar Turbines has a strong backlog and continues to experience robust quoting activity. As we said in the last quarter, industrial demand is expected to soften in the near term from a strong 2023. In transportation, we anticipate high-speed marine to increase slightly as customers continue to upgrade aging fleets. Moving to Slide 8. Now I'll provide an update on our strategy and sustainability journey. Over the past year, we have discussed constraints for our large engines, given the robust demand in power generation for data centers and in oil and gas. We believe that our total addressable market is expanding due to the secular growth trend for data centers relating to cloud computing and Generative AI. We also expect the energy transition to create opportunities for distributed generation. As more renewables are added to the grid, our reciprocating engine and gas turbine generator sets can help provide grid stability. We are making a large multiyear capital investment in our large engine division, including increasing capacity for both new engines and aftermarket parts. This will help us satisfy growing customer demand and contribute to future absolute OPACC dollar growth, which we believe has the highest correlation to total shareholder return over time. We continued to advance our sustainability journey in 2023. I'll highlight some recent announcements demonstrating our commitment to a reduced carbon future. Caterpillar had a goal that 100% of new products will be more sustainable than the previous generation, including by lowering fuel consumption and thus, corresponding emissions. One recent example is our 420 XE Backhoe Loader with the Cat 3.6 engine. Through internal testing in a typical mix of applications, it consumed up to 10% less fuel and produced up to 10% less tail pipe emissions than the previous model. Earlier this year, we announced the success of our collaboration with Microsoft and Ballard Power Systems to demonstrate the viability of using large-format hydrogen fuel cells to supply reliable and sustainable backup power for data centers. The demonstration validated the hydrogen fuel cell power systems performance in more than 6,000 feet above sea level and in below freezing conditions. Caterpillar led the project, providing the overall system integration, power electronics and microgrid controls that form the central structure of the hydrogen power solution. These examples reinforce our ongoing sustainability leadership. With that, I'll turn it over to Andrew.","evidence_gemma_new":"ME&T free cash flow $10 billion","evidence_llama_3_3":"ME&T free cash flow full year","evidence_qwen_3_30b":"ME&T free cash flow 10 billion high end of our target range over $2 billion full year","gemma_new_max":10000000000.0,"gemma_new_min":10000000000.0,"llama_3_3_max":10000000000.0,"llama_3_3_min":10000000000.0,"qwen_3_30b_max":10000000000.0,"qwen_3_30b_min":10000000000.0}
{"symbol":"CAT","year":2023,"quarter":4,"date":"2023-Q4","chunk_id":30,"sub_chunk_id":0,"centroid_label":"free cash flows","agreed_value":5500000000.0,"count":2,"chunk":"Jim Umpleby: Well, Jerry, you recall when we launched our strategy in 2017, we really focused very heavily on OPACC, operating profit after capital charge. And we're really challenging our teams to work to ensure that we get a return for every dollar of capital that we invest. And we've also worked hard to reduce our structural costs. And again, with OPACC as our measure, that obviously helps us produce more cash. Again, we demonstrated the ability to produce higher free cash flows. If I remember the numbers correctly, between 2019 and 2022, we produced $5 billion to $6 billion of free cash flow. And then in 2020, we had a 22% decline in our top line. And even that year, even during the COVID year, when our top line dropped more than 20%, we still produced $3 billion of free cash flow. So again, we have the whole organization based on OPACC, and that's working all those levers every single day, and that helps us drive increased free cash flow.","evidence_gemma_new":"free cash flow 2019 2022","evidence_llama_3_3":"free cash flows 2019 2022","evidence_qwen_3_30b":null,"gemma_new_max":5500000000.0,"gemma_new_min":5500000000.0,"llama_3_3_max":5500000000.0,"llama_3_3_min":5500000000.0,"qwen_3_30b_max":null,"qwen_3_30b_min":null}
{"symbol":"CAT","year":2023,"quarter":4,"date":"2023-Q4","chunk_id":53,"sub_chunk_id":0,"centroid_label":"free cash flows","agreed_value":1500000000.0,"count":3,"chunk":"Stanley Elliott: Hey, good morning everyone. Thank you very much for fitting me in and congratulations. And can you talk a little bit more about the free cash flow? I mean, you got $1 billion to $2 billion more additional that you're looking at and targeting. You've done a very nice job of increasing the dividend on a steady basis. Should we think of this as accelerated repurchase activity into '24? Is there something on the M&A front? Any color there would be greatly helpful. Thank you.","evidence_gemma_new":"free cash flow","evidence_llama_3_3":"targeting free cash flow '24","evidence_qwen_3_30b":"free cash flow targeting '24","gemma_new_max":1500000000.0,"gemma_new_min":1500000000.0,"llama_3_3_max":1500000000.0,"llama_3_3_min":1500000000.0,"qwen_3_30b_max":1500000000.0,"qwen_3_30b_min":1500000000.0}
{"symbol":"CAT","year":2023,"quarter":4,"date":"2023-Q4","chunk_id":2,"sub_chunk_id":0,"centroid_label":"free cash flows","agreed_value":7500000000.0,"count":2,"chunk":"Jim Umpleby: Thanks, Ryan. Good morning, everyone. Thank you for joining us. As we close out 2023, I'd like to start by recognizing our global team for delivering another strong quarter and the best year in our 98-year history. For the year, we delivered record sales and revenues, record adjusted profit margin, record adjusted profit per share, and record ME&T free cash flow. Our results continue to reflect healthy demand across most of our end markets for our products and services. We remain focused on executing our strategy and continue to invest for long-term profitable growth. I'll begin with my perspectives about our performance in the quarter and for the full year. I'll then provide some insights about our end markets, followed by an update on our strategy. I'll then provide some insights about our end markets, followed by an update on our strategy and sustainability journey. Moving to quarterly results, it was another strong quarter. While sales and revenues increased 3% in the fourth quarter versus a strong quarter last year, our adjust operating profit increased by 15%. Adjusted operating profit margin improved to 18.9%, up 190 basis points versus last year. We also generated $3.2 billion of ME&T free cash flow in the quarter. Sales, adjusted operating profit margin, adjusted profit per share and ME&T free cash flow in the fourth quarter were all better than we expected. For the full year, we generated a 13% increase in total sales and revenues to $67.1 billion. Services also increased by 5% to $23 billion, a record. We generated $13.7 billion of adjusted operating profit in 2023, up 51% from 2022. Adjusted operating profit margin for the full year was 20.5%, a 510 basis point increase over the prior year. This exceeded the top end of our target margin range for this level of sales by 80 basis points. Adjusted profit per share in 2023 was $21.21, a 53% increase over 2022. In addition, we also generated $10 billion of ME&T free cash flow, exceeding the high end of our target range by over $2 billion for the full year. This performance led to continued growth in absolute OPACC dollars, which is our internal measure of profitable growth. As a result of our strong execution and record financial performance, we are increasing our target range for adjusted operating profit margin and ME&T free cash flow. We are increasing the top end of our adjusted operating profit margin range by 100 basis points relative to the corresponding level of sales. Moving to ME&T free cash flow, we've generated more than $30 billion over the last five years, including a record $10 billion in 2023. Based on our demonstrated ability to generate strong free cash flow, we are raising our ME&T free cash flow target range to $5 billion to $10 billion, up from $4 billion to $8 billion. Andrew will provide additional details around these updated targets. Turning to Slide 4. In the fourth quarter of 2023, sales and revenues increased by 3% to $17.1 billion, driven by favorable price realization and partially offset by lower volume. Both price and volume were slightly better than we expected. Compared to the fourth quarter of 2022, overall sales to users increased 8%, slightly better than our expectations. Energy & Transportation sales to users increased 20%. For machines, which includes Construction Industries and Resource Industries, sales to users rose by 3%. Sales to users in Construction Industries were up 4%. North American sales to users increased as demand remained healthy for non-residential and residential construction. Non-residential continued to benefit from government related infrastructure and construction projects. Residential sales to users in North America also increased in the quarter. Sales to users in EAME and Latin America were down slightly relative to a strong comparative. In Asia Pacific, sales to users declined in the quarter. In Resource Industries, sales to users increased 1%. In mining, sales to users also increased and in heavy construction and quarry and aggregates, sales to users declined against a strong comparative in 2022. In Energy & Transportation, sales to users increased by 20%. Oil and gas sales to users benefited from strong sales of turbines and turbine related services. We also saw continued strength in sales of reciprocating engines into gas compression and well servicing oil and gas applications, including the Tier 4 dynamic gas blending engines used in well servicing fleets. Power generation sales to users increased -- excuse me, power generation sales to users continued to remain positive due to favorable market conditions, including strong data center growth. Transportation sales to users also increased, while industrial declined from historically strong levels in 2022. Dealer inventory decreased by $900 million versus the third quarter. Machines declined by $1.4 billion, slightly more than we expected. We saw the largest decline in Construction Industries as dealer inventory decreased across all regions. The largest decline was in excavators. We remain comfortable with the total level of machine dealer inventory, which is within the typical range. Adjusted operating profit margin increased to 18.9% in the fourth quarter, a 190 basis point increase over last year. Adjusted operating profit margin was slightly better than we had anticipated. Relative to our margin expectations, we saw higher price realization and higher sales volume, both marginally better than expected. Turning to Slide 5, I'll now provide full year highlights. In 2023, we generated sales and revenues of $67.1 billion, up 13% versus last year. This was due to favorable price and higher sales volume, driven primarily by higher sales of equipment to end users. As I mentioned, we generated $23 billion of services revenue in 2023, a 5% increase over 2022. We continue to see improvement of customer value agreements with new equipment, which remains an important part of our services growth initiatives. We saw strong e-commerce sales growth as we continued to enhance our digital tools to make it easier for customers to identify and purchase the right parts. We added more than 100,000 new customers to our online channel. We also exceeded the e-commerce goal we shared at our May 2022 Investor Day. By combining the data from more than 1.5 million connected assets with our engineering expertise, advanced analytics and AI, we are helping customers avoid unplanned downtime through intelligent leads, which we call prioritized service events, or PSEs. We continue to execute our various service initiatives as we strive to achieve our 2026 target of $28 billion. Our full-year adjusted operating profit margin was 20.5%, a 510 basis point increase over 2022. Moving to Slide 6. We generated strong ME&T free cash flow of $10 billion in 2023, a $3.7 billion, or 58% increase over our previous record. We returned a record $7.5 billion to shareholders through repurchase stock and dividends. We remain proud of our Dividend Aristocrat status and continue to expect to return substantially all ME&T free cash flow to shareholders over time through dividends and share repurchases. Now on Slide 7, I'll describe our expectations moving forward. Overall demand remains healthy across most of our end markets for our products and services. We ended 2023 with a backlog of $27.5 billion, which remains elevated as a percentage of revenues compared to historical levels. We currently anticipate 2024 sales and revenues to be broadly similar to the record 2023 level. We expect continued strength in end user demand, including services growth, and a slight benefit from carryover pricing, offset by a dealer inventory headwind, which was a $2.1 billion benefit in 2023. We currently do not anticipate a significant change in dealer inventory of machines in 2024 as compared to an increase in 2023. Now, I'll discuss our outlook for key end markets, starting with construction industries. In North America, after a very strong 2023, we expect the region to remain healthy in 2024. We expect non-residential construction to remain at similar demand levels due to government-related infrastructure investments. Residential construction is expected to remain healthy relative to historical levels. In Asia Pacific, excluding China, we are seeing some softening in economic conditions. We anticipate China will remain at a relatively low level for the above 10-ton excavator industry. In EAME, we anticipate the region will be slightly down due to economic uncertainty in Europe, somewhat offset by continuing strong construction demand in the Middle East. Construction activity in Latin America is expected to increase due to easing financial conditions. In addition, we also anticipate the ongoing benefit of our services initiatives will positively impact construction industries in 2024. Next, I'll discuss Resource Industries. After strong performance in 2023 in mining, heavy construction and quarry and aggregates, we anticipate lower machine volume versus last year, primarily due to off-highway and articulated trucks. In addition, we anticipate a small decrease in dealer inventory during 2024 versus a slight increase in dealer inventory last year. While we continue to see a high level of quoting activity overall, we anticipate lower order rates as customers display capital discipline. We expect to see higher services revenues, including robust rebuild activity. Customer product utilization remains high, the number of parked trucks remains low, the age of the fleet remains elevated, and our autonomous solutions continue to see strong customer acceptance. We continue to believe the energy transition will support increased commodity demand over time, expanding our total addressable market and providing further opportunities for long-term profitable growth. Moving to Energy & Transportation. In oil and gas, we expect reciprocating engines and services to increase slightly after a strong 2023. As we said during the last two quarters, well servicing in North America is showing some short-term moderation. Gas compression order backlog remains healthy. And overall, we continue to remain optimistic about future demand. Cat reciprocating engine demand for power generation is expected to remain strong due to continued data center growth. Solar Turbines has a strong backlog and continues to experience robust quoting activity. As we said in the last quarter, industrial demand is expected to soften in the near term from a strong 2023. In transportation, we anticipate high-speed marine to increase slightly as customers continue to upgrade aging fleets. Moving to Slide 8. Now I'll provide an update on our strategy and sustainability journey. Over the past year, we have discussed constraints for our large engines, given the robust demand in power generation for data centers and in oil and gas. We believe that our total addressable market is expanding due to the secular growth trend for data centers relating to cloud computing and Generative AI. We also expect the energy transition to create opportunities for distributed generation. As more renewables are added to the grid, our reciprocating engine and gas turbine generator sets can help provide grid stability. We are making a large multiyear capital investment in our large engine division, including increasing capacity for both new engines and aftermarket parts. This will help us satisfy growing customer demand and contribute to future absolute OPACC dollar growth, which we believe has the highest correlation to total shareholder return over time. We continued to advance our sustainability journey in 2023. I'll highlight some recent announcements demonstrating our commitment to a reduced carbon future. Caterpillar had a goal that 100% of new products will be more sustainable than the previous generation, including by lowering fuel consumption and thus, corresponding emissions. One recent example is our 420 XE Backhoe Loader with the Cat 3.6 engine. Through internal testing in a typical mix of applications, it consumed up to 10% less fuel and produced up to 10% less tail pipe emissions than the previous model. Earlier this year, we announced the success of our collaboration with Microsoft and Ballard Power Systems to demonstrate the viability of using large-format hydrogen fuel cells to supply reliable and sustainable backup power for data centers. The demonstration validated the hydrogen fuel cell power systems performance in more than 6,000 feet above sea level and in below freezing conditions. Caterpillar led the project, providing the overall system integration, power electronics and microgrid controls that form the central structure of the hydrogen power solution. These examples reinforce our ongoing sustainability leadership. With that, I'll turn it over to Andrew.","evidence_gemma_new":"ME&T free cash flow $5 billion to $10 billion","evidence_llama_3_3":null,"evidence_qwen_3_30b":"ME&T free cash flow $5 billion to $10 billion","gemma_new_max":7500000000.0,"gemma_new_min":7500000000.0,"llama_3_3_max":null,"llama_3_3_min":null,"qwen_3_30b_max":7500000000.0,"qwen_3_30b_min":7500000000.0}
{"symbol":"CAT","year":2024,"quarter":4,"date":"2024-FY","chunk_id":2,"sub_chunk_id":0,"centroid_label":"free cash flows","agreed_value":9400000000.0,"count":2,"chunk":"Jim Umpleby: Thanks Alex. Good morning everyone. Thank you for joining us. As we close out 2024, I want to thank our global team for their strong execution in delivering another good year. Our results continued to reflect the benefit of the diversity of our end markets and the disciplined execution of our strategy for long term profitable growth. For the year, we delivered record adjusted profit per share and higher adjusted operating profit margin that exceeded the top of our target range. Although our top line decreased in the year, services revenue grew to a record level. We also generated ME&T free cash flow near the top of the target range. Our robust ME&T free cash flow along with our strong balance sheet allowed us to deploy over $10 million to shareholders through share repurchases and dividends during the year. I\u2019ll begin with my perspectives about our performance in the quarter and for the full year. I\u2019ll then provide some insights about our end markets followed by an update on our sustainability journey. For the fourth quarter, sales and revenues were down 5% versus last year, primarily due to lower sales volume. This was slightly below our expectations mainly due to services growing at a slightly slower rate than we expected and some delivery delays in energy and transportation. Services revenues did increase in the quarter compared to 2023. Stronger than expected machine sales to users drove a higher than anticipated dealer inventory reduction which offset each other, resulting in a minimal impact to sales. Fourth quarter adjusted operating profit margin was below our expectations at 18.3%, primarily due to lower volume and an unfavorable mix of products. We achieved quarterly adjusted profit per share of $5.14 and generated $3 billion of ME&T free cash flow. Since last quarter end, our backlog increased by $1.3 billion to $30 billion. For the full year, total sales and revenues were $64.8 billion, a decrease of 3% compared to 2023. Services revenues increased 4% to $24 billion. Adjusted operating profit margin of 20.7% exceeded the top end of the target range, as we expected, and represents a slight improvement from 2023. We achieved record adjusted profit per share in 2024 of $21.90, a 3% increase over 2023. In addition, we generated $9.4 billion of ME&T free cash flow, which was near the top of our target range, as we expected. Since 2019, we have generated approximately $40 billion of ME&T free cash flow, including $10.3 billion in 2024. Our strong and consistent ME&T free cash flow has allowed us to reduce the average number of shares outstanding by approximately 18% since the beginning of 2019. Turning to Slide 4, as I mentioned earlier, sales and revenues declined 5% in the fourth quarter to $16.2 billion. Compared to the fourth quarter of 2023, machine sales to users, which includes construction industries and resource industries, declined by 3% but was better than our expectations. Energy and transportation continued to grow as sales to users increased 2%. Sales to users in construction industries were down 3% year-over-year. In North America, sales to users were slightly lower, but better than we expected. Sales to users grew in residential construction, while non-residential was down slightly. Rental fleet loading was down but in line with expectations, as we described during our last earnings call. Dealers\u2019 rental revenue continued to grow in the quarter. Sales to users declined in EAME and Asia Pacific in line with our expectations. Sales to users in Latin America continued to grow but at a lower rate than we expected. In resource industries, sales to users declined 3%, which was better than we expected. Mining was better than expected due to large mining and off-highway trucks being placed into service earlier than we anticipated. Heavy construction and coring aggregates were in line with expectations. In energy and transportation, sales to users increased by 2%. Power generation sales to users grew 27% as conditions remained favorable for both reciprocating engines and turbines and turbine-related services. Sales to users for reciprocating engines used in oil and gas applications declined primarily due to a challenging comparative to the fourth quarter of 2023. For solar turbines and turbine-related services, fourth quarter sales were down in oil and gas compared to strong shipments in the fourth quarter of 2023. Most of solar\u2019s fourth quarter decline in oil and gas was offset by growth in power generation. Transportation sales to users increased, while industrial declined. Moving to dealer inventory and backlog, in total dealer inventory decreased by $1.3 billion versus the third quarter of 2024. For machines, dealer inventory decreased by $1.6 billion. The decrease was more than we had anticipated due to better than expected sales to users, particularly for construction industries in North America and resource industries. As I mentioned, backlog increased versus the third quarter to $30 billion, led by energy and transportation. This is a $2.5 billion increase versus 2023 year-end. Our backlog remains elevated as a percentage of revenues compared to historical levels. We continue to see strong order activity for both reciprocating engines and power generation and turbines and turbine-related services in both oil and gas and power generation. Turning to Slide 5, I\u2019ll now provide full year highlights. In 2024, we generated sales and revenues of $64.8 billion, down 3% versus last year. This was due to lower sales volume partially offset by favorable price realization. Our adjusted operating profit margin was 20.7%, a 20 basis point increase over 2023 despite lower sales and revenues. Adjusted profit per share in 2024 was $21.90. As I mentioned, services revenue increased to $24 billion in 2024, a 4% increase over 2023. Services continued to grow as we focus on making our customers successful. Working with our dealers, we are leveraging over 1.5 million connected reporting assets and digital tools. Our Cat digital tools allow customers to more efficiently improve uptime, manage their fleets, and transact on our ecommerce platforms. For example, this year we launched an internal generative AI solution designed to optimize the creation of intelligent leads, which we call Prioritize Service Events, or PSEs. This tool significantly reduces the time and effort required for service recommendations, helping customers avoid unplanned downtime by clearly identifying the recommended repair options and timing for customers. In 2024, we delivered more than two-thirds of new equipment with a customer value agreement, which remains an important part of our services growth initiatives. We also experienced better than expected growth in our ecommerce platforms and have focused on improving our customer on-boarding to include key digital products. Also in 2024, we saw record usage of Vision Link, our equipment management application, on-boarding and activating thousands of new customers throughout the year. Services growth remains resilient despite the decline in our overall top line. We continued to execute our various services initiatives as we strive towards our aspirational target of $28 billion in services revenues. Moving to Slide 6, we generated robust ME&T free cash flow of $9.4 billion for the full year. We deployed $10.3 billion to shareholders through $7.7 billion of share repurchases and $2.6 billion of dividends paid. We remain proud of our dividend aristocrat status as we have paid higher annual dividends for 31 consecutive years. We continue to expect to return substantially all ME&T free cash flow to shareholders over time through dividends and share repurchases. Now on Slide 7, I\u2019ll describe our expectations moving forward. Overall, we currently anticipate 2025 sales and revenues to be slightly lower compared to 2024. In 2025, we expect continued strength in energy and transportation to mostly offset lower sales in construction industries and resource industries. We also expect services revenues to grow in 2025, including growth across all three primary segments. We currently expect machine dealer inventory to end 2025 at similar levels to year-end 2024. Full year adjusted operating profit margin is expected to be lower than 2024, but it is anticipated to be in the top half of the target range based on the corresponding level of sales and revenues. Finally, we expect ME&T free cash flow to be in the top half of our target range of $5 billion to $10 billion. Now I\u2019ll discuss our outlook for key end markets, starting with construction industries. In North America, we expect moderately lower sales to users in 2025 versus last year. Construction spend in North America remains healthy, primarily driven by large multi-year projects and government-related infrastructure investments supported by funding from the IIJA. Although we anticipate the combined non-residential and residential construction spend to remain similar to 2024 levels, our current planning assumptions reflect lower demand for new equipment. We also expect lower dealer rental fleet loading compared to 2024, although dealer revenue is expected to grow. Overall, we remain positive about the medium and longer term outlook in North America. In Asia Pacific outside of China, we expect soft economic conditions to continue into 2025. We anticipate China to remain at relatively low levels for the above-10 ton excavator industry. In EAME, we anticipate weak economic conditions in Europe will continue and a healthy level of construction activity in Africa and the Middle East. Construction activity in Latin America is expected to decline moderately. We also anticipate the ongoing benefit of our services initiatives will positively impact construction industries in 2025. Moving to resource industries, we anticipate lower sales to users in 2025 compared to last year, partially offset by higher services revenues including robust rebuild activity. Customers continue to display capital discipline, although key commodities remain above investment thresholds. Customer product utilization remains high. The number of parked trucks remains relatively low. The age of the fleet remains elevated and our autonomous solutions continue to see strong customer acceptance. We continue to believe the energy transition will support increased commodity demand over time, expanding our total addressable market and providing further opportunities for long term profitable growth. Moving to energy and transportation, demand is expected to remain strong in power generation, and we expect growth for both Cat reciprocating engines and solar turbines. Overall strength in power generation for both prime and backup power applications continues to be driven by increasing energy demand to support data center growth related to cloud computing and generative AI. Through continued focus on improving manufacturing efficiencies, along with initial stages of our investment to increase large engine output capacity, we expect growth in reciprocating engines for power generation in 2025. We also expect growth in solar turbines for power generation driven by increased customer demand. For oil and gas, after a flat year in 2024, we expect moderate growth in 2025. We expect reciprocating engines and services to be slightly down in 2025 due to continuing capital discipline by our customers, industry consolidation, and efficiency improvements in our customers\u2019 operations. Solar turbines\u2019 oil and gas backlog remains strong, and we see continued healthy order and inquiry activity. We expect growth for turbines and turbine-related services in oil and gas. Demand for our products in industrial applications is expected to remain at a relatively low level, similar to 2024. In transportation, we anticipate full year growth driven by rail services. Moving to Slide 8, I\u2019ll now provide an update on our sustainability journey. Caterpillar\u2019s legacy of sustainable innovation spans nearly a century. Throughout that time, we have provided products and services that improve the quality of life and the environment while helping customers fulfill society\u2019s need for infrastructure in a sustainable way. Earlier this month, Caterpillar kicked off its year-long centennial celebration at CES 2025 with the theme, The Next Hundred Years: Experience What\u2019s Possible. We showcased our continuous investment in the core technologies of autonomy, alternative fuels, connectivity and digital, and electrification. Our ability to provide these solutions reflects investments of more than $30 billion in R&D over the past 20 years to deliver best-in-class innovation. Taking center stage at the Caterpillar CES exhibit was a Cat 972 wheel loader retrofitted to be an extended range electrified machine hybrid technical demonstrator. The demonstrator can run fully battery electric with zero exhaust emissions for several hours. It has an on-board generator and charger that enables full day uptime without requiring an investment in direct current, or DC charging infrastructure. In initial testing, the demonstrator maintains or exceeds the performance of a Cat 972 internal combustion machine while providing customers with the benefits of a hybrid system. With that, I\u2019ll turn it over to Andrew.","evidence_gemma_new":null,"evidence_llama_3_3":"ME&T free cash flow 2024","evidence_qwen_3_30b":"ME&T free cash flow 2024","gemma_new_max":null,"gemma_new_min":null,"llama_3_3_max":9400000000.0,"llama_3_3_min":9400000000.0,"qwen_3_30b_max":9400000000.0,"qwen_3_30b_min":9400000000.0}
{"symbol":"CAT","year":2024,"quarter":1,"date":"2024-Q1","chunk_id":2,"sub_chunk_id":0,"centroid_label":"free cash flows","agreed_value":1300000000.0,"count":3,"chunk":"Jim Umpleby : Thanks, Ryan. Good morning, everyone. Thank you for joining us. I'd like to start by thanking our global team for delivering another strong quarter, including higher adjusted operating profit margin, record adjusted profit per share, and strong ME&T free cash flow. Our strong balance sheet and ME&T free cash flow allowed us to deploy a record $5.1 billion of cash for share repurchases and dividends in the first quarter. Our results reflect a continuation of healthy demand for our products and services across most of our end markets. We remain focused on executing our strategy and continue to invest for long-term profitable growth. I'll begin with my perspectives about our performance in the quarter. I'll then provide some insights about our end markets, followed by an update on our sustainability journey. It was another strong quarter. Sales and revenues were about flat in the quarter versus last year, broadly in line with our expectations. Services revenues increased in the quarter. Our adjusted operating profit increased by 5% to $3.5 billion. Adjusted operating profit margin was slightly better than we expected and improved to 22.2% up a 110 basis points versus last year. We achieved a record adjusted profit per share of $5.60 up 14%. We also generated strong ME&T free cash flow in the quarter of $1.3 billion. In addition, our backlog increased to $27.9 billion up $400 million versus the fourth quarter of 2023. We continue to expect 2024 sales and revenues to be broadly similar to the record 2023 level. We have revised our full year 2024 segment expectations to reflect a slightly stronger top line in Energy & Transportation offset by softening in the European market for Construction Industries. We anticipate services to be higher in 2024 as we strive to achieve our 2026 target of $28 billion. For the year, we continue to expect adjusted operating profit margin and ME&T free cash flow to be in the top half of our target ranges. Turning to slide four. In the first quarter of 2024 sales and revenues remained about flat at $15.8 billion. Compared to our expectations, sales volume was slightly lower while price realization, including geographic mix, was better than we anticipated. Compared to the first quarter of 2023, overall sales to users decreased by 5%. This was slightly lower than we expected, mainly due to weakness in Europe for Construction Industries. Energy & Transportation continued to show strength, where sales to users increased 9%. For machines, which includes Construction Industries and Resource Industries, sales to users declined by 9%. Focusing on Construction Industries, sales to users were down 5%. In North America, our largest geographic region for Construction Industries, sales to users increased as expected, and demand remained healthy for both non-residential and residential construction. Construction projects, as well as government related infrastructure, continue to benefit non-residential demand. Although residential sales to users in North America were down slightly, demand for new housing remained strong. Sales to users declined in EAME primarily due to weakness in Europe related to residential construction and economic conditions. Latin America and Asia Pacific sales to users also saw some declines. In Resource Industries, sales to users declined 17% in the first quarter compared to a very strong first quarter in 2023. Mining, as well as heavy construction and quarry and aggregates were lower, mainly due to softness in off-highway and articulated trucks that we mentioned during our last earnings call. In Energy & Transportation, sales to users increased by 9%. Oil and gas sales to users benefited from strong sales of turbines and turbine-related services. We also saw increased sales of reciprocating engines in the gas compression and well servicing oil and gas applications. Power generation sales to users grew as market conditions remained favorable, including strong data center growth. Transportation sales to users increased while industrial declined as we expected from strong levels last year. In total, dealer inventory increased by $1.4 billion versus the fourth quarter. For machines, dealer inventory increased by $1.1 billion, which was slightly higher than our expectations, largely due to sales to users being modestly lower than anticipated. The increase in machine dealer inventory is consistent with normal seasonal patterns of which Construction Industries products accounted for the majority of the increase. The total level of machine dealer inventory is comfortably within the typical range. As I mentioned, backlog increased to $27.9 billion, up $400 million versus the fourth quarter of 2023, led by Energy & Transportation. Backlog remains elevated as a percentage of revenues compared to historical levels. Adjusted operating profit margin increased to 22.2% in the first quarter, a 110 basis point increase over last year, which was slightly better than we anticipated. This was primarily due to better than expected manufacturing costs, mainly related to freight. Moving to slide five. We generated strong ME&T free cash flow of $1.3 billion in the first quarter. We deployed $5.1 billion of cash for share repurchases and dividends in the first quarter, including the initiation of a $3.5 billion accelerated share repurchase program which may last up to nine months. We remain proud of our Dividend Aristocrat status and continue to expect to return substantially all ME&T free cash flow to shareholders over time through dividends and share repurchases. Now on slide six, I'll describe our expectations moving forward. We expect a continuation of healthy demand across most of our end markets for our products and services. We continue to anticipate 2024 sales and revenues to be broadly similar to the record 2023 level. As I mentioned, we expect services to continue to grow in 2024. We currently do not anticipate a significant change in dealer inventory in machines in 2024, compared to a $700 million increase in 2023. This is expected to be a headwind to sales in 2024. As a reminder, dealers are independent businesses and manage their own inventories. The vast majority of dealer inventories in Energy & Transportation are backed by firm customer orders. The timing of these products being recognized as sales to users is impacted by dealer packaging and commissioning, which is why it is difficult to predict dealer inventory in E&T. This is why we have become more explicit about the differentiation between machine dealer inventory and total dealer inventory. As I mentioned, we anticipate that our 2024 results will be within the top half of our target ranges for both adjusted operating profit margin and ME&T free cash flow. Our strong results continue to reflect the diversity of our end markets, as well as the disciplined execution of our strategy for profitable growth. Now, I'll discuss our outlook for key end markets starting with Construction Industries. In North America, after a very strong 2023, we continue to expect demand in the region will remain healthy in 2024 for both non-residential and residential construction. We anticipate non-residential construction to remain at similar levels to slightly higher demand levels compared to last year due to construction projects, as well as government related infrastructure. Residential construction demand is expected to be flat to slightly down versus last year, which remains strong in comparison to historical levels. In Asia Pacific, outside of China, we are seeing some softening in economic conditions. We anticipate demand in China will remain at a relatively low level for the above 10-ton excavator industry. In EAME, we anticipate that weak economic conditions in Europe will continue, somewhat offset by strong construction activity in the Middle East. Construction activity in Latin America remains mixed, but overall, we are expecting modest growth. In addition, we expect the ongoing benefit of our services initiatives will positively impact Construction Industries in 2024. Next, I'll discuss Resource Industries. After strong performance in 2023 in mining, as well as heavy construction and quarry and aggregates, we anticipate lower machine volume versus last year, primarily due to off-highway and articulated trucks. In addition, we anticipate a small decrease in resource industry dealer inventories during 2024 versus a slight increase last year. While we continue to see a high level of quoting activity overall, we anticipate lower order rates as customers display capital discipline. We expect to see higher services revenues, including robust rebuild activity. Customer product utilization remains high, the number of parked trucks remains low, and the age of the fleet remains elevated, and our autonomous solutions continue to see strong customer acceptance. We continue to believe the energy transition will support increased commodity demand over time, expanding our total addressable market, and providing further opportunities for long-term profitable growth. Moving to Energy & Transportation. In oil and gas, we expect reciprocating engines and services to be about flat after strong 2023 performance. We expect reciprocating gas compression demand to be higher in 2024 than it was in 2023. While servicing demand in North America is expected to soften, Cat reciprocating engine demand for power generation is expected to remain strong, largely due to continued data center growth relating to Cloud Computing and Generative AI. Last quarter, I mentioned we are making a multi-year capital investment in our large reciprocating engine division, including increasing capacity for both new engines and aftermarket parts. This investment will approximately double output for large engines and aftermarket parts as compared to 2023. We leverage these large engines across a variety of applications, including data centers, oil and gas, large mining trucks, and distributed power generation. For Solar Turbines, our backlog and quoting activity both remain strong for oil and gas and power generation. As we said previously, industrial demand is expected to soften relative to a strong 2023. In transportation, we anticipate high-speed marine to increase as customers continue to upgrade aging fleets. Moving to slide seven, I'll provide an update on our sustainability journey. We are contributing to a reduced carbon future and continue to invest in new products technologies and services, to help our customers achieve their climate related objectives. In January we announced the signing of an electrification strategic agreement with CRH to advance the deployment of Caterpillar\u2018s Zero-Exhaust Emissions Solutions. CRH is the number one aggregate producer in North America and the first company in that industry to sign such an agreement with Caterpillar. The agreement is focused on accelerating the deployment of Caterpillar\u2019s 70-ton to 100-ton class battery electric off-highway trucks and charging solutions at a CRH site in North America. Through the agreement CRH will participate in Caterpillar\u2019s early learner program for battery electric off-highway trucks. In February Caterpillar oil and gas announced the launch of the Cat Hybrid Energy Storage Solution to help drillers and operators cut fuel consumption, lower total cost of ownership and reduce emissions in oil and gas operations. The custom designed energy storage system stores excess power from the job site and then discharges it as needed. In a hybrid system that combines the Cat Hybrid Energy Storage Solution in a natural gas fuel generator set, the transient response is even quicker than a conventional diesel only rigs. Depending upon site configuration the Hybrid Energy Storage Solution has proven to deliver up to 30% fuel cost savings with natural gas, 85% fuel cost savings with fuel gas, and up to an 80% reduction in nitrogen oxides. Carbon dioxide equivalent reductions up to 11% and 7% are possible with natural gas and fuel gas respectively. In addition, we look forward to issuing our 19th Annual Sustainability Report in May. The material in our report reinforce our ongoing commitment to sustainability. With that I'll turn it over to Andrew.","evidence_gemma_new":"ME&T free cash flow","evidence_llama_3_3":"ME&T free cash flow quarter","evidence_qwen_3_30b":"ME&T free cash flow $1.3 billion","gemma_new_max":1300000000.0,"gemma_new_min":1300000000.0,"llama_3_3_max":1300000000.0,"llama_3_3_min":1300000000.0,"qwen_3_30b_max":1300000000.0,"qwen_3_30b_min":1300000000.0}
{"symbol":"CAT","year":2024,"quarter":2,"date":"2024-Q2","chunk_id":2,"sub_chunk_id":0,"centroid_label":"free cash flows","agreed_value":2500000000.0,"count":3,"chunk":"James Umpleby: Thanks, Ryan. Good morning, everyone. Thank you for joining us. I'd like to start by thanking our global team for their strong execution in the first half of the year. In the second quarter, we achieved higher adjusted operating profit margin, record adjusted profit per share and generated robust ME&T free cash flow. Our results continue to reflect the benefit of the diversity of our end-markets as well as the disciplined execution of our strategy for long-term profitable growth. I'll begin with my perspectives about our performance in the quarter and we'll provide an update on our full year expectations. I'll then provide some insights about our end-markets, followed by an update on our sustainability journey. Moving to quarterly results. Sales and revenues were down 4% in the second quarter versus last year, slightly below our expectations. Services increased in the quarter. Our adjusted operating profit increased to $3.7 billion, a record. Adjusted operating profit margin was better than we expected and improved to 22.4% up 110 basis points versus last year. We achieved a record quarterly adjusted profit per share of $5.99, up 8%. We also generated $2.5 billion of ME&T free cash flow in the quarter. In addition, our backlog increased to $28.6 billion, up $700 million versus the first quarter of 2024. Before I get into the detail of the quarter and outlook for our segments, I'll update our expectations for the full year based on our first half results. Earlier in the year, we estimated that sales and revenues would be broadly similar for the full year. For the first half, the top-line came in marginally below our expectations and ended 2% below the prior year. We now anticipate our sales and revenues will decline at a roughly similar rate in the second half versus the prior year, in-part due to our latest assumptions for dealer inventory, principally into Resource Industries. Overall sales to users and construction industries are running slightly lower than we anticipated, partially offset by stronger-than-expected sales in Energy and Transportation. Service revenues continue to grow. Although sales and revenues have been marginally below our expectations, adjusted operating profit margins have been stronger than we anticipated. Earlier in the year, we expected our adjusted operating profit margin to be in the top half of the target range at the corresponding level of sales. Due to the strength of our performance in the first half of the year, we now expect overall adjusted operating profit margins to be above the top of the target range for the full year. For the second half, we expect adjusted operating profit margins to be better than we previously anticipated or about flat to the second half of 2023, which Andrew will describe. The strength of our performance to date and our improved second half adjusted operating profit margin expectations give us confidence to guide above our target range. Overall, our expectations for full year adjusted operating profit and adjusted profit per share are now higher than it was during our last earnings call. We also anticipate that ME&T free cash flow will remain in the top half of the free cash flow target range. Turning to Slide 4 and our second quarter results. In the second quarter of 2024, sales and revenues declined 4% to $16.7 billion. Sales volume declined slightly more than we expected, while price realization, including geographic mix was better than we anticipated. Dealer inventory also declined in the second quarter. Compared to the second quarter of 2023, overall sales to users decreased 3%, slightly below expectations. For machines, which includes Construction Industries and Resource Industries, sales to users declined by 8%, slightly more than expected. Energy and transportation continued to show strength as sales to users increased 10%. Sales to users in Construction Industries were down 5%. In North America, sales to users were slightly lower than anticipated, primarily due to weaker than expected rental fleet loading. Government related infrastructure projects remained healthy. Residential sales to users in North America were up as demand for new housing remained resilient. Sales to users declined in the EAME, primarily due to weakness in Europe relating to residential construction and economic conditions. Sales to users in Asia Pacific declined, while Latin America increased. In Resource Industries, sales to users declined 15%, a slightly smaller decline than we expected versus a very strong second quarter in 2023. Mining as well as heavy construction and quarry and aggregates were lower, mainly due to softness we previously discussed for two products, articulated trucks and off-highway trucks. In Energy and Transportation, despite the ongoing weakness in industrial, sales to users increased by 10% as we continue to see strength across most applications. Oil and gas sales to users benefited from strong sales of turbines and turbine related services. We also saw increased sales of reciprocating engines into gas compression, while well servicing oil and gas applications were lower. Power generation sales to users grew as market conditions remained favorable, including strong data center growth. Transportation sales to users increased, while industrial declined as expected from the strong levels last year. Our results continue to reflect the benefit of the diversity of our end-markets as well as the disciplined execution of our strategy for long-term profitable growth. Moving to dealer inventory. In total, dealer inventory decreased by $200 million versus the first quarter. For machines, dealer inventory decreased by $400 million and remains within our typical range. As I mentioned, backlog increased to $28.6 billion, up $700 million versus the first quarter of 2024. Energy & Transportation drove the increase as we continue to see strong demand for solar turbines and reciprocating engines for power generation. Adjusted operating profit margin increased to 22.4% in the second quarter, a 110 basis point increase over last year, which was better than we anticipated. Margin exceeded our expectations, primarily due to lower than expected manufacturing costs and slightly better than expected price. Moving to Slide 5, we generated ME&T free cash flow of $2.5 billion in the second quarter. We deployed more than $1.8 billion of cash for share repurchases and about $600 million in dividends in the second quarter. In June, we announced an additional $20 billion share repurchase authorization with no expiration date. We remain committed to consistent share repurchases. Since 2019, when we communicated our intention to return substantially all ME&T free cash flow to shareholders over time, our net share count has decreased by approximately 18%. In addition, we increased our dividend by 8% in the second quarter, which is our fourth straight year of a high single-digit quarterly increase. We remain proud of our Dividend Aristocrat status and continue to expect to return substantially all ME&T free cash to shareholders over time through dividends and share repurchases. Now on Slide 6. I'll describe our expectations for our three primary segments moving forward. In Construction Industries, after a record 2023, sales to users in the second half are now expected to decline slightly versus last year. In North America, we now anticipate slightly lower construction industry sales to users for full year 2024 than we did previously, primarily due to weaker than expected rental fleet loading. Government related infrastructure projects are expected to remain healthy. In Asia Pacific, outside of China, we still expect soft economic conditions to continue. We anticipate demand in China will remain at a relatively low level for the above 10 ton excavator industry. In the EAME, we anticipate that weak economic conditions in Europe will continue, somewhat offset by continued healthy construction demand in the Middle East. Construction activity in Latin America remains mixed, but overall, we are expecting modest growth. In addition, we are expecting the ongoing benefit of our services initiatives will positively impact Construction Industries. Next, I'll discuss Resource Industries. After strong performance in 2023 in mining as well as heavy construction, in quarry and aggregates, we continue to anticipate lower machine volume versus last year, primarily due to off-highway and articulated trucks. We currently anticipate a decrease in Resource Industries dealer inventories in 2024 versus a slight increase last year. We expect to see higher services revenues, including robust rebuild activity. Customer product utilization remains high, the number of parked trucks remains low and the age of the fleet remains elevated and our autonomous solutions continue to see strong customer acceptance. Customers continue to display capital discipline, however, we continue to believe the energy transition will support increased commodity demand over time, expanding our total addressable market and providing further opportunities for long-term profitable growth. Moving to Energy & Transportation. In oil and gas, in total, we expect a stronger year overall in 2024 versus last year. After a strong 2023, we expect reciprocating engine sales in oil and gas to be flat to slightly down, primarily due to ongoing softness in well servicing. We still expect gas compression to be up for the full year, however, we expect it to soften in the second half. For solar turbines, we continue to expect volume growth in the second half as our backlog remains strong for oil and gas. CAT reciprocating engine and solar turbine demand for power generation is expected to remain strong, largely due to continued data center growth relating to cloud computing and Generative AI. Industrial demand is expected to remain at a relatively low level compared to 2023 in the second half. In Transportation, we anticipate growth as the year progresses in both high speed marine and rail services. Moving to Slide 7. I'll provide an update on our sustainability journey. We are contributing to a reduced carbon future and continue to invest in new products, technologies and services to help our customers achieve their climate related objectives. In April, Caterpillar and Vale signed an agreement to test battery-electric large mining trucks as well as to conduct studies on ethanol powered trucks. Progress has been made on both initiatives since the agreement was signed, including conducting a joint study on a dual-fuel solution for haul trucks operating on ethanol and diesel fuel. We are supporting Vale's sustainability objectives. In June, we added CAT CG260 Gas Generator sets to our portfolio of commercially available power solutions capable of running on hydrogen fuel. Previously, our portfolio with this capability ranged from 400 KW to 2,500 KW. The addition of the CG260 now provides up to 4,500 KW of electric power for continuous, prime and load management requirements and is approved to operate on gas containing up to 25% hydrogen by volume. Caterpillar offers retrofit kits to upgrade CG260 Generator sets already installed with these same hydrogen capabilities. In addition to our hydrogen capabilities and reciprocating engines, solar turbines has been a leader with its ability to burn a wide variety of fuels, including hydrogen, natural gas and biofuels. Today, Caterpillar has a large and growing lineup of technologies to support customers in their sustainability journey. These two examples highlight how we are helping our customers build a better, more sustainable world. With that, I'll turn it over to Andrew.","evidence_gemma_new":"ME&T free cash flow the quarter","evidence_llama_3_3":"ME&T free cash flow second quarter","evidence_qwen_3_30b":"ME&T free cash flow $2.5 billion second quarter","gemma_new_max":2500000000.0,"gemma_new_min":2500000000.0,"llama_3_3_max":2500000000.0,"llama_3_3_min":2500000000.0,"qwen_3_30b_max":2500000000.0,"qwen_3_30b_min":2500000000.0}
{"symbol":"CAT","year":2024,"quarter":2,"date":"2024-Q2","chunk_id":3,"sub_chunk_id":0,"centroid_label":"free cash flows","agreed_value":8750000000.0,"count":2,"chunk":"Andrew Bonfield: Thank you, Jim, and good morning, everyone. I'll begin with a high level summary of the quarter. Then I'll provide more detailed comments on our second quarter results, including the performance of the segments. Next, I'll discuss the balance sheet and free cash flow and then conclude with comments on our assumptions for the remainder of the year. Beginning on Slide 8. Although sales and revenues were slightly below our expectations, we had strong operating performance in the quarter, including higher adjusted operating profit margin and record adjusted profit per share, both of which were stronger than we had anticipated. Sales and revenues of $16.7 billion decreased by about 4% compared to the prior year. Adjusted operating profit increased by 2% to $3.7 billion. And the adjusted operating profit margin was 22.4%, an increase of 110 basis points versus the prior year. Profit per share was $5.48 in the second quarter compared to $5.67 in the second quarter of last year. Adjusted profit per share increased by 8% to $5.99 in the quarter compared to $5.55 last year. Adjusted profit per share excluded restructuring costs of $0.51 per share mainly due to a loss on the divestiture of two non-US entities. This compares to restructuring costs of $0.05 per share and a discrete deferred tax benefit of $0.17 per share, which were both excluded in the second quarter of 2023. Other income of $155 million for the quarter was a $28 million benefit versus the prior year and was primarily driven by favorable impacts from commodity hedges. The provision for income taxes in the second quarter, excluding discrete items, reflected a global annual effective tax rate of 22.5% compared with 23% in the second quarter of 2023. Finally, the year-over-year impact from the reduction in the average number of shares outstanding primarily due to share repurchases over the past year had a favorable impact on adjusted profit per share of approximately $0.29. Moving on to Slide 9. I'll discuss our top line results in the second quarter. Sales and revenues decreased by 4% compared to the prior year as lower volume was partially offset by favorable price realization. Lower volume was mainly driven by the impact from the changes in dealer inventories. As you may recall, we anticipated a sales decline this quarter versus last year as an atypical dealer inventory increase in the second quarter of 2023 made for a challenging comparison. To explain, dealer inventory decreased by about $200 million in the second quarter. In comparison, we saw an increase of $600 million in the second quarter of last year. For machines only, dealer inventory followed the typical seasonal trend this quarter with a decrease of $400 million as compared to a $200 million increase in the second quarter of last year. Sales were slightly below our expectations due to lower-than-expected volume being partially offset by better-than-expected price realization, including geographic mix. Moving to operating profit on Slide 10. Operating profit in the second quarter decreased by 5% to $3.5 billion. This included a $227 million unfavorable impact from higher restructuring costs. Adjusted operating profit increased by 2% to $3.7 billion. Price realization benefited the quarter while the profit impact of lower sales volume acted as a partial offset. The adjusted operating profit margin of 22.4% improved by 110 basis points versus the prior year. Margins were better than we expected mainly due to favorable manufacturing costs, product mix and price. Versus our expectation, price was slightly better than we anticipated driven by Energy & Transportation. On Slide 11, Construction Industries sales decreased by 7% in the second quarter to $6.7 billion. This is primarily due to lower sales volume, partially offset by favorable price realization. Sales volume was impacted by unfavorable changes in dealer inventories. Dealer inventory was about flat in the second quarter of 2024 versus an increase in the second quarter of last year. Lower sales to users also impacted volume. Sales in Construction Industries were lower than we had anticipated due to lower-than-expected rental fleet loading in North America and continued weakness in Europe. By region, sales in North America were about flat and Latin America sales increased by 20%. Sales in the EAME region decreased by 27%. In Asia Pacific, sales declined by 15%. Second quarter profit for Construction Industries was $1.7 billion, a 3% decrease versus the prior year. This was mainly due to lower sales volume, partially offset by favorable price realization, which benefited from geographic mix effects. Favorable manufacturing costs provided some tailwind as well largely reflecting lower material costs. The segment's margin of 26.1% was an increase of 90 basis points versus last year. Margin was better than we had expected primarily due to a favorable product mix and the timing of planned SG&A and R&D spend. Price was in line with our expectations. Turning to Slide 12. Resource Industries sales decreased by 10% in the second quarter to $3.2 billion, which was about in line with our expectations. The decline was primarily due to lower sales volume, partially offset by favorable price realization. Sales volume was impacted by changes in dealer inventories as dealer inventory decreased more during the second quarter of 2024 than during the second quarter of last year. In addition, we saw lower sales to users in the segment as anticipated given the challenging comparison. Second quarter profit for Resource Industries decreased by 3% versus the prior year to $718 million. This is mainly due to lower sales volume, partially offset by favorable impacts from price realization and manufacturing costs, including lower freight. The segment's margin of 22.4% was an increase of 160 basis points versus last year. Margin was better than we had expected mainly driven by the timing of planned SG&A and R&D spend and a favorable product mix. Now on Slide 13. Energy & Transportation sales increased by 2% in the second quarter to $7.3 billion. The increase was due to favorable price realization, which was partially offset by lower sales volume driven by industrial, which declined in line with our expectations. The segment sales were slightly better than we had anticipated primarily driven by price. By application, power generation sales increased by 15%. Transportation sales were higher by 7%. Oil and gas sales improved by 4%, while industrial sales decreased by 21%. Second quarter profit for Energy & Transportation increased by 20% versus the prior year to $1.5 billion. The increase was primarily due to favorable price. The segment's margin of 20.8% was an increase of 320 basis points versus the prior year. Margin was significantly stronger than we had anticipated due to better price and lower-than-expected manufacturing costs, which largely reflected favorable inventory absorption, lower freight and lower material costs. Moving to Slide 14. Financial Products revenues increased by 9% to about $1 billion primarily due to higher average financing rates across all regions and higher average earning assets in North America. Segment profit decreased by 5% to $227 million. This was mainly due to a higher provision for credit losses, which largely reflected the absence of a nonrecurring reserve release from the prior year. The portfolio remains healthy as past dues of 1.74% on near historic lows and reflect a 41 basis point improvement compared to the prior year. In addition, the allowance rate was 0.89% our lowest rate on record. Business activity remains healthy as new business volume increased versus the prior year primarily driven by North America. We also continue to see healthy demand for used equipment where inventories remain close to historical low levels. Moving on to Slide 15. We generated $2.5 billion in ME&T free cash flow in the second quarter and we expect our full year free cash flow to be in the top half of our annual target range of between $7.5 billion to $10 billion. Our expectations for CapEx remain between $2 billion and $2.5 billion for the year. On share repurchases, the more than $1.8 billion deployed in the second quarter included a $1 billion accelerated share repurchase agreement. Approximately 75% of those shares were delivered to the company upfront with the balance to be delivered when the agreement is terminated prior to year-end. Note that we also had an ME&T bond maturity of $1 billion in the second quarter. And given our healthy liquidity position, we did not issue new bonds. Our balance sheet remains strong with an enterprise cash balance of $4.3 billion. In addition, we hold $1.8 billion in slightly longer-dated liquid marketable securities to improve yields on that cash. Now on Slides 16 and 17, I will show our high-level assumptions for the remainder of the year. As Jim mentioned, we now anticipate sales and revenues to be slightly lower this year versus the record 2023 level. This compares to our previous expectation for broadly similar sales. This change reflects an updated assumption of a slight reduction in machine dealer inventory, primarily in Resource Industries and lower-than-expected sales to users in Construction Industries mainly due to lower rental fleet loading in North America. Now specific to our second half assumptions. We typically see higher sales in the second half as compared to the first and we expect sales to follow that normal seasonable trend this year. As compared to the prior year, we now anticipate slightly lower sales in the second half driven by lower machine sales to users. Changes in dealer inventories and machines are expected to have a nominal impact as the decrease in the second half of this year should be similar to the decrease observed in the second half of 2023, which was about $1 billion. However, note that machine dealer inventory changes will impact the quarters differently as we expect a sales headwind in the third quarter as dealers built their inventories in the third quarter of 2023 and a sales tailwind in the fourth quarter due to a smaller inventory decline than the prior year. Finally, we continue to anticipate services growth in the second half of the year as we strive to achieve our 2026 target of $28 billion in services revenues. Moving on to our margin expectations. As Jim mentioned, the strength of our first half performance combined with the more favorable expectations for the second half mean that we now anticipate overall adjusted operating profit margin to be above the top end of the target range for the full year. Specific to second half margins, despite higher sales, we do expect lower margins versus the first half, which follows a typical seasonable trend. However, keep in mind that first half margins were at record levels and the magnitude of the second half decline may be slightly larger than is typical. As compared to the prior year, we expect our adjusted operating profit margin in the second half will be similar to the prior year level. While we anticipate some favorability in manufacturing costs on improved operational efficiencies, we do expect slightly lower volumes and a slight headwind from price in the second half versus a year ago. On price, the impact of lapping the increases taken in the second half of 2023 means that the benefit in the second half of this year will be significantly lower. In addition, we expect that improved availability across the industry will result in the normalization of the pricing environment. To assist you with your modeling for the full year, please note that we now anticipate restructuring costs of around $450 million and that our expectations for the annual effective tax rate, excluding discrete items, remains at 22.5%. Now on Slide 18. I'll provide a few comments on the third quarter, starting on the top line. We expect slightly lower sales and revenues in the third quarter compared to the prior year as we anticipate a dealer inventory headwind for machines, which will impact volumes. We expect dealer inventory machines to be flattish to slightly lower in the third quarter as is typical, which compares to the atypical $400 million increase in the prior year. We also anticipate lower machine sales to users versus a strong comparison. We expect flattish price realization in the third quarter versus the prior year due to the normalization that I mentioned a moment ago. We also anticipate that the ongoing benefit of our service initiatives will positively impact sales in the third quarter. By segment in the third quarter compared to the prior year, we anticipate lower sales in Construction Industries primarily due to a headwind from changes in dealer inventories. In Resource Industries, we expect lower sales as sales to users are impacted by a challenging comparison similar to that which we have observed in the first two quarters of this year. In Energy & Transportation, we anticipate higher sales versus the prior year, supported by strengthen in power generation, oil and gas and transportation. Lower sales in industrial should act as a partial offset. For enterprise margins in the third quarter, we expect similar adjusted operating profit margin compared to the prior year as we anticipate lower volume will be offset primarily by favorable manufacturing costs. By segment in the third quarter, in Construction Industries, we anticipate lower margin compared to the prior year on lower volume and slightly unfavorable price realization. Favorable manufacturing costs should act as a partial offset. For Resource Industries, we anticipate slightly lower margins in the third quarter compared to the prior year due to unfavorable volume and higher SG&A and R&D spend. In Energy & Transportation, we expect a higher margin versus the prior year and stronger volumes and favorable price realization. So turning to Slide 19, let me summarize. Strong execution and operating performance continued in the second quarter. Higher adjusted operating profit margin of 22.4% offset the decrease in sales and revenues and led to a record adjusted profit per share of $5.99. We now expect overall adjusted operating profit margin to be above the top end of the target range for the full year based on our expected sales levels, which should now be slightly lower than levels in 2023. The net of these factors leads to our current expectation for higher adjusted operating profit and adjusted profit per share as compared to what we contemplated at the beginning of the year. ME&T free cash flow generation was $2.5 billion in the quarter. We continue to expect to be in the top half of our target range for the full year. We have deployed $7.6 billion to shareholders through share repurchases and dividends in the first half of 2024. We continue to execute our strategy for long-term profitable growth. And with that we'll take your questions.","evidence_gemma_new":"free cash flow","evidence_llama_3_3":"expect full year free cash flow year","evidence_qwen_3_30b":null,"gemma_new_max":8750000000.0,"gemma_new_min":8750000000.0,"llama_3_3_max":8750000000.0,"llama_3_3_min":8750000000.0,"qwen_3_30b_max":null,"qwen_3_30b_min":null}
{"symbol":"CAT","year":2024,"quarter":3,"date":"2024-Q3","chunk_id":2,"sub_chunk_id":0,"centroid_label":"free cash flows","agreed_value":2700000000.0,"count":3,"chunk":"Jim Umpleby: Thanks, Ryan. Good morning, everyone. Thank you for joining us. As we close out the third quarter, I want to thank our global team for another good quarter as our results reflect the benefit of the diversity of our end markets. We delivered strong adjusted operating profit margin and adjusted profit per share, which were consistent with our expectations, although our top-line was lower than we anticipated. We also generated ME&T free cash flow of $2.7 billion in the third quarter. Our robust ME&T free cash flow, along with our strong balance sheet, allowed us to deploy over $9 billion to shareholders through share repurchases and dividends during the first three quarters of the year, including $1.5 billion this quarter. We continue to remain disciplined in the execution of our strategy for long-term profitable growth. I'll begin with my perspectives about our performance in the quarter and will provide an update on our full year expectations. I'll then provide some insights about our end markets, followed by an update on our strategy and sustainability journey. Moving to quarterly results. Sales and revenues were down 4% in the third quarter versus last year, below our expectations due to the impact of lower-than-expected sales to users in Construction Industries and timing of deliveries in Resource Industries and Energy & Transportation. Services increased in the quarter compared to 2023. Adjusted operating profit margin was generally in line with our expectations at 20%. We achieved quarterly adjusted profit per share of $5.17, in line with our expectations at the time of the last earnings call. In addition, our backlog increased slightly to $28.7 billion and remains at a very healthy level. For the full year, although we updated our expectations since our last earnings call to reflect sales being slightly below our prior estimate, our expected adjusted operating profit margin is unchanged and remains above the top of the range. Also, our expectation for adjusted profit per share is unchanged. We are increasing our expectations for ME&T free cash flow and now anticipate it will be near the top of our target range of $5 billion to $10 billion. Turning to Slide 4. In the third quarter of 2024, sales and revenues declined 4% to $16.1 billion due to lower sales volume. Compared to the third quarter of 2023, overall sales to users decreased 6%. For Machines, which includes Construction Industries and Resource Industries, sales to users declined by 10%, which was below our expectations. Energy & Transportation continued to grow as sales to users increased 5%. Sales to users in Construction Industries were down 7% year-over-year. In North America, sales to users were down primarily due to lower rental fleet loading and the absence of a large pipeline deal in the third quarter of 2023. Excluding these two items, sales to users were about flat versus the prior year. Compared to our expectations, sales to users were lower than expected, impacted by rental fleet loading. Our dealers' rental revenue continued to grow in the quarter. Sales to users declined in EAME, primarily due to ongoing weakness in construction activity in Europe. Sales to users in Asia Pacific declined, while Latin America increased. In Resource Industries, sales to users declined 18%, generally in line with our expectations versus a strong third quarter in 2023. Mining, as well as heavy construction, and quarry and aggregates were lower, mainly due to softness we previously discussed for two products, articulated trucks and off-highway trucks. In Energy & Transportation, sales to users increased by 5%, and we continue to see growth in all applications except industrial. Power generation sales to users grew strongly as market conditions remained favorable for both reciprocating engines and solar turbines and turbine-related services. Oil and gas sales to users benefited from strong sales of turbines and turbine-related services. For reciprocating engines in oil and gas applications, sales to users were higher for gas compression but lower in well servicing. Transportation sales to users increased, while industrial declined as we expected. Our results continue to reflect the benefit of the diversity of our end markets, as well as the disciplined execution of our strategy for long-term profitable growth. Moving to dealer inventory and our backlog. In total, dealer inventory increased by $400 million versus the second quarter of 2024. For Machines, dealer inventory increased by $100 million, slightly more than we had anticipated. Looking ahead to the fourth quarter, our current planning assumptions forecast a reduction in machine dealer inventory, and we expect machine dealer inventory to end the year around the same level as year-end 2023. Dealers are independent businesses and make stocking decisions across a wide range of products based on multiple factors across the product portfolio. While machine dealer inventory is currently around the top end of the typical range, we remain comfortable with the overall level of dealer inventory. As I mentioned, backlog increased slightly versus the second quarter to $28.7 billion. Energy & Transportation increased as we continue to see strong demand for solar turbines in oil and gas and power generation, as well as strong demand for reciprocating engines for power generation. Moving to Slide 5, we generated robust ME&T free cash flow of $2.7 billion in the third quarter and $6.4 billion in the first three quarters of 2024. As I mentioned, year-to-date, we deployed more than $9 billion to shareholders through share repurchases and dividends. We remain proud of our dividend aristocrat status and continue to expect to return substantially all ME&T free cash flow to shareholders over time through dividends and share repurchases. Now, on Slide 6, I'll describe our expectations for our three primary segments moving forward. In Construction Industries, we expect lower sales to users in the fourth quarter, but remain positive about the longer-term demand outlook. During our August earnings call, we noted a lower level of rental fleet loading in North America, which continued into the third quarter, and we now expect the trend to persist in the fourth quarter. Although we have lowered our expectations for sales to users in the fourth quarter, primarily due to lower rental fleet loading, dealer rental revenue continues to grow. In addition, government-related infrastructure projects are expected to remain healthy, supported by funding yet to be spent from the IIJA. In Asia Pacific, outside of China, we expect soft economic conditions to continue. We anticipate demand in China will remain at a relatively low level for the above 10-ton excavator industry. In EAME, we anticipate that weak economic conditions in Europe will continue, partially offset by continued healthy construction demand in the Middle East. Construction activity in Latin America remains healthy, and we are expecting modest growth to continue. In addition, we expect the ongoing benefit of our services initiatives will positively impact Construction Industries. Next, I'll discuss Resource Industries. After strong performance in 2023 in mining as well as heavy construction and quarry and aggregates, we continue to anticipate lower machine volume in the fourth quarter of 2024 versus last year. However, the rate of decline for sales to users in the fourth quarter is expected to moderate versus the previous quarters. We expect to see higher services revenues, including robust rebuild activity. Customer product utilization remains high, the number of parked trucks remains relatively low, the age of the fleet remains elevated, and our autonomous solutions continue to see strong customer acceptance. Customers continue to display capital discipline. However, we continue to believe the energy transition will support increased commodity demand over time, expanding our total addressable market and providing further opportunities for long-term profitable growth. Moving to Energy & Transportation. For power generation, demand is expected to remain strong, and we expect robust growth in the fourth quarter and full year sales for both reciprocating engines and solar turbines. Overall strength in power generation continues to be driven by data center growth related to cloud computing and generative AI, and we expect this trend to continue. In oil and gas, in total, we continue to expect a stronger year overall in 2024 versus 2023. For solar turbines used in oil and gas applications, we expect a strong fourth quarter, but sales are expected to be lower than the fourth quarter of 2023 due to the timing of deliveries. The increase in power generation at solar will mostly offset solar's decline in oil and gas, so we expect solar's total sales in the fourth quarter to be roughly flat compared to last year. Solar has a strong backlog as well as healthy order and inquiry activity, and we continue to expect full year growth for solar in oil and gas. After a strong 2023, we expect reciprocating engine sales in oil and gas to be slightly down this year, primarily due to ongoing softness in well servicing. We still expect gas compression to be up for the full year. However, we expect it to soften in the near term as equipment lead times have normalized. As we had previously mentioned, we can leverage our large engine platforms across a variety of applications. Based on current market conditions and well servicing applications, we are able to serve additional power generation demand as we continue to meet oil and gas customer needs while optimizing our overall large engine capacity. Industrial demand has continued to remain at a relatively low level compared to 2023. In transportation, we anticipate full year growth in both rail services and marine applications. Moving to Slide 7, now, I'll provide an update on our strategy and sustainability journey. In February of 2024, we announced a multiyear capital investment in our large reciprocating engine division to approximately double output capability compared to 2023 for new engines and aftermarket parts. Based on increasing expectations of future demand growth, today, we are announcing an additional multiyear investment to further expand our large engine volume output capability to more than 125% compared to 2023. As I mentioned, we leverage these large engines across a variety of applications, including data centers, oil and gas, large mining trucks, and distributed power generation. Moving on to sustainability. We continue to invest in new product, technologies and services to help our customers achieve their climate-related objectives. In September, we unveiled an innovative solution to help solve one of the most complex aspects of the mining industry's energy transition, energy management. Cat Dynamic Energy Transfer, or DET, is a fully Caterpillar developed system that can transfer energy to both diesel electric and battery electric large mining trucks while they are working around them on-site. It can also charge batteries while operating with increased speed on grade, improving operational efficiency and machine uptime. Cat DET is comprised of a series of integrated elements, including a power module that converts energy from a mine site's power source, an electrified rail system to transmit the energy, and a machine system to transfer the energy to the truck's powertrain. Cat DET will integrate with the Cat MineStar Command for hauling solution, merging autonomy and electrification technologies to provide a holistic site solution. We believe mine sites will benefit from enhanced efficiency with the integration of electrification and automation. When combined, these technologies will help miners achieve production targets, while simultaneously managing energy demands. This example highlights how we leverage our industry-leading technology through an integrated approach across our portfolio to help our customers build a better, more sustainable world. With that, I'll turn it over to Andrew.","evidence_gemma_new":"ME&T free cash flow third quarter","evidence_llama_3_3":"ME&T free cash flow third quarter","evidence_qwen_3_30b":"ME&T free cash flow $2.7 billion third quarter $6.4 billion first three quarters of 2024","gemma_new_max":2700000000.0,"gemma_new_min":2700000000.0,"llama_3_3_max":2700000000.0,"llama_3_3_min":2700000000.0,"qwen_3_30b_max":2700000000.0,"qwen_3_30b_min":2700000000.0}
{"symbol":"CAT","year":2024,"quarter":3,"date":"2024-Q3","chunk_id":2,"sub_chunk_id":0,"centroid_label":"free cash flows","agreed_value":7500000000.0,"count":3,"chunk":"Jim Umpleby: Thanks, Ryan. Good morning, everyone. Thank you for joining us. As we close out the third quarter, I want to thank our global team for another good quarter as our results reflect the benefit of the diversity of our end markets. We delivered strong adjusted operating profit margin and adjusted profit per share, which were consistent with our expectations, although our top-line was lower than we anticipated. We also generated ME&T free cash flow of $2.7 billion in the third quarter. Our robust ME&T free cash flow, along with our strong balance sheet, allowed us to deploy over $9 billion to shareholders through share repurchases and dividends during the first three quarters of the year, including $1.5 billion this quarter. We continue to remain disciplined in the execution of our strategy for long-term profitable growth. I'll begin with my perspectives about our performance in the quarter and will provide an update on our full year expectations. I'll then provide some insights about our end markets, followed by an update on our strategy and sustainability journey. Moving to quarterly results. Sales and revenues were down 4% in the third quarter versus last year, below our expectations due to the impact of lower-than-expected sales to users in Construction Industries and timing of deliveries in Resource Industries and Energy & Transportation. Services increased in the quarter compared to 2023. Adjusted operating profit margin was generally in line with our expectations at 20%. We achieved quarterly adjusted profit per share of $5.17, in line with our expectations at the time of the last earnings call. In addition, our backlog increased slightly to $28.7 billion and remains at a very healthy level. For the full year, although we updated our expectations since our last earnings call to reflect sales being slightly below our prior estimate, our expected adjusted operating profit margin is unchanged and remains above the top of the range. Also, our expectation for adjusted profit per share is unchanged. We are increasing our expectations for ME&T free cash flow and now anticipate it will be near the top of our target range of $5 billion to $10 billion. Turning to Slide 4. In the third quarter of 2024, sales and revenues declined 4% to $16.1 billion due to lower sales volume. Compared to the third quarter of 2023, overall sales to users decreased 6%. For Machines, which includes Construction Industries and Resource Industries, sales to users declined by 10%, which was below our expectations. Energy & Transportation continued to grow as sales to users increased 5%. Sales to users in Construction Industries were down 7% year-over-year. In North America, sales to users were down primarily due to lower rental fleet loading and the absence of a large pipeline deal in the third quarter of 2023. Excluding these two items, sales to users were about flat versus the prior year. Compared to our expectations, sales to users were lower than expected, impacted by rental fleet loading. Our dealers' rental revenue continued to grow in the quarter. Sales to users declined in EAME, primarily due to ongoing weakness in construction activity in Europe. Sales to users in Asia Pacific declined, while Latin America increased. In Resource Industries, sales to users declined 18%, generally in line with our expectations versus a strong third quarter in 2023. Mining, as well as heavy construction, and quarry and aggregates were lower, mainly due to softness we previously discussed for two products, articulated trucks and off-highway trucks. In Energy & Transportation, sales to users increased by 5%, and we continue to see growth in all applications except industrial. Power generation sales to users grew strongly as market conditions remained favorable for both reciprocating engines and solar turbines and turbine-related services. Oil and gas sales to users benefited from strong sales of turbines and turbine-related services. For reciprocating engines in oil and gas applications, sales to users were higher for gas compression but lower in well servicing. Transportation sales to users increased, while industrial declined as we expected. Our results continue to reflect the benefit of the diversity of our end markets, as well as the disciplined execution of our strategy for long-term profitable growth. Moving to dealer inventory and our backlog. In total, dealer inventory increased by $400 million versus the second quarter of 2024. For Machines, dealer inventory increased by $100 million, slightly more than we had anticipated. Looking ahead to the fourth quarter, our current planning assumptions forecast a reduction in machine dealer inventory, and we expect machine dealer inventory to end the year around the same level as year-end 2023. Dealers are independent businesses and make stocking decisions across a wide range of products based on multiple factors across the product portfolio. While machine dealer inventory is currently around the top end of the typical range, we remain comfortable with the overall level of dealer inventory. As I mentioned, backlog increased slightly versus the second quarter to $28.7 billion. Energy & Transportation increased as we continue to see strong demand for solar turbines in oil and gas and power generation, as well as strong demand for reciprocating engines for power generation. Moving to Slide 5, we generated robust ME&T free cash flow of $2.7 billion in the third quarter and $6.4 billion in the first three quarters of 2024. As I mentioned, year-to-date, we deployed more than $9 billion to shareholders through share repurchases and dividends. We remain proud of our dividend aristocrat status and continue to expect to return substantially all ME&T free cash flow to shareholders over time through dividends and share repurchases. Now, on Slide 6, I'll describe our expectations for our three primary segments moving forward. In Construction Industries, we expect lower sales to users in the fourth quarter, but remain positive about the longer-term demand outlook. During our August earnings call, we noted a lower level of rental fleet loading in North America, which continued into the third quarter, and we now expect the trend to persist in the fourth quarter. Although we have lowered our expectations for sales to users in the fourth quarter, primarily due to lower rental fleet loading, dealer rental revenue continues to grow. In addition, government-related infrastructure projects are expected to remain healthy, supported by funding yet to be spent from the IIJA. In Asia Pacific, outside of China, we expect soft economic conditions to continue. We anticipate demand in China will remain at a relatively low level for the above 10-ton excavator industry. In EAME, we anticipate that weak economic conditions in Europe will continue, partially offset by continued healthy construction demand in the Middle East. Construction activity in Latin America remains healthy, and we are expecting modest growth to continue. In addition, we expect the ongoing benefit of our services initiatives will positively impact Construction Industries. Next, I'll discuss Resource Industries. After strong performance in 2023 in mining as well as heavy construction and quarry and aggregates, we continue to anticipate lower machine volume in the fourth quarter of 2024 versus last year. However, the rate of decline for sales to users in the fourth quarter is expected to moderate versus the previous quarters. We expect to see higher services revenues, including robust rebuild activity. Customer product utilization remains high, the number of parked trucks remains relatively low, the age of the fleet remains elevated, and our autonomous solutions continue to see strong customer acceptance. Customers continue to display capital discipline. However, we continue to believe the energy transition will support increased commodity demand over time, expanding our total addressable market and providing further opportunities for long-term profitable growth. Moving to Energy & Transportation. For power generation, demand is expected to remain strong, and we expect robust growth in the fourth quarter and full year sales for both reciprocating engines and solar turbines. Overall strength in power generation continues to be driven by data center growth related to cloud computing and generative AI, and we expect this trend to continue. In oil and gas, in total, we continue to expect a stronger year overall in 2024 versus 2023. For solar turbines used in oil and gas applications, we expect a strong fourth quarter, but sales are expected to be lower than the fourth quarter of 2023 due to the timing of deliveries. The increase in power generation at solar will mostly offset solar's decline in oil and gas, so we expect solar's total sales in the fourth quarter to be roughly flat compared to last year. Solar has a strong backlog as well as healthy order and inquiry activity, and we continue to expect full year growth for solar in oil and gas. After a strong 2023, we expect reciprocating engine sales in oil and gas to be slightly down this year, primarily due to ongoing softness in well servicing. We still expect gas compression to be up for the full year. However, we expect it to soften in the near term as equipment lead times have normalized. As we had previously mentioned, we can leverage our large engine platforms across a variety of applications. Based on current market conditions and well servicing applications, we are able to serve additional power generation demand as we continue to meet oil and gas customer needs while optimizing our overall large engine capacity. Industrial demand has continued to remain at a relatively low level compared to 2023. In transportation, we anticipate full year growth in both rail services and marine applications. Moving to Slide 7, now, I'll provide an update on our strategy and sustainability journey. In February of 2024, we announced a multiyear capital investment in our large reciprocating engine division to approximately double output capability compared to 2023 for new engines and aftermarket parts. Based on increasing expectations of future demand growth, today, we are announcing an additional multiyear investment to further expand our large engine volume output capability to more than 125% compared to 2023. As I mentioned, we leverage these large engines across a variety of applications, including data centers, oil and gas, large mining trucks, and distributed power generation. Moving on to sustainability. We continue to invest in new product, technologies and services to help our customers achieve their climate-related objectives. In September, we unveiled an innovative solution to help solve one of the most complex aspects of the mining industry's energy transition, energy management. Cat Dynamic Energy Transfer, or DET, is a fully Caterpillar developed system that can transfer energy to both diesel electric and battery electric large mining trucks while they are working around them on-site. It can also charge batteries while operating with increased speed on grade, improving operational efficiency and machine uptime. Cat DET is comprised of a series of integrated elements, including a power module that converts energy from a mine site's power source, an electrified rail system to transmit the energy, and a machine system to transfer the energy to the truck's powertrain. Cat DET will integrate with the Cat MineStar Command for hauling solution, merging autonomy and electrification technologies to provide a holistic site solution. We believe mine sites will benefit from enhanced efficiency with the integration of electrification and automation. When combined, these technologies will help miners achieve production targets, while simultaneously managing energy demands. This example highlights how we leverage our industry-leading technology through an integrated approach across our portfolio to help our customers build a better, more sustainable world. With that, I'll turn it over to Andrew.","evidence_gemma_new":"ME&T free cash flow","evidence_llama_3_3":"expect ME&T free cash flow full year","evidence_qwen_3_30b":"increasing our expectations ME&T free cash flow near the top of our target range","gemma_new_max":7500000000.0,"gemma_new_min":7500000000.0,"llama_3_3_max":7500000000.0,"llama_3_3_min":7500000000.0,"qwen_3_30b_max":7500000000.0,"qwen_3_30b_min":7500000000.0}
{"symbol":"CAT","year":2024,"quarter":4,"date":"2024-Q4","chunk_id":2,"sub_chunk_id":0,"centroid_label":"free cash flows","agreed_value":9400000000.0,"count":2,"chunk":"Jim Umpleby: Thanks Alex. Good morning everyone. Thank you for joining us. As we close out 2024, I want to thank our global team for their strong execution in delivering another good year. Our results continued to reflect the benefit of the diversity of our end markets and the disciplined execution of our strategy for long term profitable growth. For the year, we delivered record adjusted profit per share and higher adjusted operating profit margin that exceeded the top of our target range. Although our top line decreased in the year, services revenue grew to a record level. We also generated ME&T free cash flow near the top of the target range. Our robust ME&T free cash flow along with our strong balance sheet allowed us to deploy over $10 million to shareholders through share repurchases and dividends during the year. I\u2019ll begin with my perspectives about our performance in the quarter and for the full year. I\u2019ll then provide some insights about our end markets followed by an update on our sustainability journey. For the fourth quarter, sales and revenues were down 5% versus last year, primarily due to lower sales volume. This was slightly below our expectations mainly due to services growing at a slightly slower rate than we expected and some delivery delays in energy and transportation. Services revenues did increase in the quarter compared to 2023. Stronger than expected machine sales to users drove a higher than anticipated dealer inventory reduction which offset each other, resulting in a minimal impact to sales. Fourth quarter adjusted operating profit margin was below our expectations at 18.3%, primarily due to lower volume and an unfavorable mix of products. We achieved quarterly adjusted profit per share of $5.14 and generated $3 billion of ME&T free cash flow. Since last quarter end, our backlog increased by $1.3 billion to $30 billion. For the full year, total sales and revenues were $64.8 billion, a decrease of 3% compared to 2023. Services revenues increased 4% to $24 billion. Adjusted operating profit margin of 20.7% exceeded the top end of the target range, as we expected, and represents a slight improvement from 2023. We achieved record adjusted profit per share in 2024 of $21.90, a 3% increase over 2023. In addition, we generated $9.4 billion of ME&T free cash flow, which was near the top of our target range, as we expected. Since 2019, we have generated approximately $40 billion of ME&T free cash flow, including $10.3 billion in 2024. Our strong and consistent ME&T free cash flow has allowed us to reduce the average number of shares outstanding by approximately 18% since the beginning of 2019. Turning to Slide 4, as I mentioned earlier, sales and revenues declined 5% in the fourth quarter to $16.2 billion. Compared to the fourth quarter of 2023, machine sales to users, which includes construction industries and resource industries, declined by 3% but was better than our expectations. Energy and transportation continued to grow as sales to users increased 2%. Sales to users in construction industries were down 3% year-over-year. In North America, sales to users were slightly lower, but better than we expected. Sales to users grew in residential construction, while non-residential was down slightly. Rental fleet loading was down but in line with expectations, as we described during our last earnings call. Dealers\u2019 rental revenue continued to grow in the quarter. Sales to users declined in EAME and Asia Pacific in line with our expectations. Sales to users in Latin America continued to grow but at a lower rate than we expected. In resource industries, sales to users declined 3%, which was better than we expected. Mining was better than expected due to large mining and off-highway trucks being placed into service earlier than we anticipated. Heavy construction and coring aggregates were in line with expectations. In energy and transportation, sales to users increased by 2%. Power generation sales to users grew 27% as conditions remained favorable for both reciprocating engines and turbines and turbine-related services. Sales to users for reciprocating engines used in oil and gas applications declined primarily due to a challenging comparative to the fourth quarter of 2023. For solar turbines and turbine-related services, fourth quarter sales were down in oil and gas compared to strong shipments in the fourth quarter of 2023. Most of solar\u2019s fourth quarter decline in oil and gas was offset by growth in power generation. Transportation sales to users increased, while industrial declined. Moving to dealer inventory and backlog, in total dealer inventory decreased by $1.3 billion versus the third quarter of 2024. For machines, dealer inventory decreased by $1.6 billion. The decrease was more than we had anticipated due to better than expected sales to users, particularly for construction industries in North America and resource industries. As I mentioned, backlog increased versus the third quarter to $30 billion, led by energy and transportation. This is a $2.5 billion increase versus 2023 year-end. Our backlog remains elevated as a percentage of revenues compared to historical levels. We continue to see strong order activity for both reciprocating engines and power generation and turbines and turbine-related services in both oil and gas and power generation. Turning to Slide 5, I\u2019ll now provide full year highlights. In 2024, we generated sales and revenues of $64.8 billion, down 3% versus last year. This was due to lower sales volume partially offset by favorable price realization. Our adjusted operating profit margin was 20.7%, a 20 basis point increase over 2023 despite lower sales and revenues. Adjusted profit per share in 2024 was $21.90. As I mentioned, services revenue increased to $24 billion in 2024, a 4% increase over 2023. Services continued to grow as we focus on making our customers successful. Working with our dealers, we are leveraging over 1.5 million connected reporting assets and digital tools. Our Cat digital tools allow customers to more efficiently improve uptime, manage their fleets, and transact on our ecommerce platforms. For example, this year we launched an internal generative AI solution designed to optimize the creation of intelligent leads, which we call Prioritize Service Events, or PSEs. This tool significantly reduces the time and effort required for service recommendations, helping customers avoid unplanned downtime by clearly identifying the recommended repair options and timing for customers. In 2024, we delivered more than two-thirds of new equipment with a customer value agreement, which remains an important part of our services growth initiatives. We also experienced better than expected growth in our ecommerce platforms and have focused on improving our customer on-boarding to include key digital products. Also in 2024, we saw record usage of Vision Link, our equipment management application, on-boarding and activating thousands of new customers throughout the year. Services growth remains resilient despite the decline in our overall top line. We continued to execute our various services initiatives as we strive towards our aspirational target of $28 billion in services revenues. Moving to Slide 6, we generated robust ME&T free cash flow of $9.4 billion for the full year. We deployed $10.3 billion to shareholders through $7.7 billion of share repurchases and $2.6 billion of dividends paid. We remain proud of our dividend aristocrat status as we have paid higher annual dividends for 31 consecutive years. We continue to expect to return substantially all ME&T free cash flow to shareholders over time through dividends and share repurchases. Now on Slide 7, I\u2019ll describe our expectations moving forward. Overall, we currently anticipate 2025 sales and revenues to be slightly lower compared to 2024. In 2025, we expect continued strength in energy and transportation to mostly offset lower sales in construction industries and resource industries. We also expect services revenues to grow in 2025, including growth across all three primary segments. We currently expect machine dealer inventory to end 2025 at similar levels to year-end 2024. Full year adjusted operating profit margin is expected to be lower than 2024, but it is anticipated to be in the top half of the target range based on the corresponding level of sales and revenues. Finally, we expect ME&T free cash flow to be in the top half of our target range of $5 billion to $10 billion. Now I\u2019ll discuss our outlook for key end markets, starting with construction industries. In North America, we expect moderately lower sales to users in 2025 versus last year. Construction spend in North America remains healthy, primarily driven by large multi-year projects and government-related infrastructure investments supported by funding from the IIJA. Although we anticipate the combined non-residential and residential construction spend to remain similar to 2024 levels, our current planning assumptions reflect lower demand for new equipment. We also expect lower dealer rental fleet loading compared to 2024, although dealer revenue is expected to grow. Overall, we remain positive about the medium and longer term outlook in North America. In Asia Pacific outside of China, we expect soft economic conditions to continue into 2025. We anticipate China to remain at relatively low levels for the above-10 ton excavator industry. In EAME, we anticipate weak economic conditions in Europe will continue and a healthy level of construction activity in Africa and the Middle East. Construction activity in Latin America is expected to decline moderately. We also anticipate the ongoing benefit of our services initiatives will positively impact construction industries in 2025. Moving to resource industries, we anticipate lower sales to users in 2025 compared to last year, partially offset by higher services revenues including robust rebuild activity. Customers continue to display capital discipline, although key commodities remain above investment thresholds. Customer product utilization remains high. The number of parked trucks remains relatively low. The age of the fleet remains elevated and our autonomous solutions continue to see strong customer acceptance. We continue to believe the energy transition will support increased commodity demand over time, expanding our total addressable market and providing further opportunities for long term profitable growth. Moving to energy and transportation, demand is expected to remain strong in power generation, and we expect growth for both Cat reciprocating engines and solar turbines. Overall strength in power generation for both prime and backup power applications continues to be driven by increasing energy demand to support data center growth related to cloud computing and generative AI. Through continued focus on improving manufacturing efficiencies, along with initial stages of our investment to increase large engine output capacity, we expect growth in reciprocating engines for power generation in 2025. We also expect growth in solar turbines for power generation driven by increased customer demand. For oil and gas, after a flat year in 2024, we expect moderate growth in 2025. We expect reciprocating engines and services to be slightly down in 2025 due to continuing capital discipline by our customers, industry consolidation, and efficiency improvements in our customers\u2019 operations. Solar turbines\u2019 oil and gas backlog remains strong, and we see continued healthy order and inquiry activity. We expect growth for turbines and turbine-related services in oil and gas. Demand for our products in industrial applications is expected to remain at a relatively low level, similar to 2024. In transportation, we anticipate full year growth driven by rail services. Moving to Slide 8, I\u2019ll now provide an update on our sustainability journey. Caterpillar\u2019s legacy of sustainable innovation spans nearly a century. Throughout that time, we have provided products and services that improve the quality of life and the environment while helping customers fulfill society\u2019s need for infrastructure in a sustainable way. Earlier this month, Caterpillar kicked off its year-long centennial celebration at CES 2025 with the theme, The Next Hundred Years: Experience What\u2019s Possible. We showcased our continuous investment in the core technologies of autonomy, alternative fuels, connectivity and digital, and electrification. Our ability to provide these solutions reflects investments of more than $30 billion in R&D over the past 20 years to deliver best-in-class innovation. Taking center stage at the Caterpillar CES exhibit was a Cat 972 wheel loader retrofitted to be an extended range electrified machine hybrid technical demonstrator. The demonstrator can run fully battery electric with zero exhaust emissions for several hours. It has an on-board generator and charger that enables full day uptime without requiring an investment in direct current, or DC charging infrastructure. In initial testing, the demonstrator maintains or exceeds the performance of a Cat 972 internal combustion machine while providing customers with the benefits of a hybrid system. With that, I\u2019ll turn it over to Andrew.","evidence_gemma_new":"ME&T free cash flow","evidence_llama_3_3":null,"evidence_qwen_3_30b":"ME&T free cash flow 4th quarter near the top of the target range of $5 billion to $10 billion","gemma_new_max":9400000000.0,"gemma_new_min":9400000000.0,"llama_3_3_max":null,"llama_3_3_min":null,"qwen_3_30b_max":9400000000.0,"qwen_3_30b_min":9400000000.0}
{"symbol":"CAT","year":2024,"quarter":4,"date":"2024-Q4","chunk_id":2,"sub_chunk_id":0,"centroid_label":"free cash flows","agreed_value":3000000000.0,"count":2,"chunk":"Jim Umpleby: Thanks Alex. Good morning everyone. Thank you for joining us. As we close out 2024, I want to thank our global team for their strong execution in delivering another good year. Our results continued to reflect the benefit of the diversity of our end markets and the disciplined execution of our strategy for long term profitable growth. For the year, we delivered record adjusted profit per share and higher adjusted operating profit margin that exceeded the top of our target range. Although our top line decreased in the year, services revenue grew to a record level. We also generated ME&T free cash flow near the top of the target range. Our robust ME&T free cash flow along with our strong balance sheet allowed us to deploy over $10 million to shareholders through share repurchases and dividends during the year. I\u2019ll begin with my perspectives about our performance in the quarter and for the full year. I\u2019ll then provide some insights about our end markets followed by an update on our sustainability journey. For the fourth quarter, sales and revenues were down 5% versus last year, primarily due to lower sales volume. This was slightly below our expectations mainly due to services growing at a slightly slower rate than we expected and some delivery delays in energy and transportation. Services revenues did increase in the quarter compared to 2023. Stronger than expected machine sales to users drove a higher than anticipated dealer inventory reduction which offset each other, resulting in a minimal impact to sales. Fourth quarter adjusted operating profit margin was below our expectations at 18.3%, primarily due to lower volume and an unfavorable mix of products. We achieved quarterly adjusted profit per share of $5.14 and generated $3 billion of ME&T free cash flow. Since last quarter end, our backlog increased by $1.3 billion to $30 billion. For the full year, total sales and revenues were $64.8 billion, a decrease of 3% compared to 2023. Services revenues increased 4% to $24 billion. Adjusted operating profit margin of 20.7% exceeded the top end of the target range, as we expected, and represents a slight improvement from 2023. We achieved record adjusted profit per share in 2024 of $21.90, a 3% increase over 2023. In addition, we generated $9.4 billion of ME&T free cash flow, which was near the top of our target range, as we expected. Since 2019, we have generated approximately $40 billion of ME&T free cash flow, including $10.3 billion in 2024. Our strong and consistent ME&T free cash flow has allowed us to reduce the average number of shares outstanding by approximately 18% since the beginning of 2019. Turning to Slide 4, as I mentioned earlier, sales and revenues declined 5% in the fourth quarter to $16.2 billion. Compared to the fourth quarter of 2023, machine sales to users, which includes construction industries and resource industries, declined by 3% but was better than our expectations. Energy and transportation continued to grow as sales to users increased 2%. Sales to users in construction industries were down 3% year-over-year. In North America, sales to users were slightly lower, but better than we expected. Sales to users grew in residential construction, while non-residential was down slightly. Rental fleet loading was down but in line with expectations, as we described during our last earnings call. Dealers\u2019 rental revenue continued to grow in the quarter. Sales to users declined in EAME and Asia Pacific in line with our expectations. Sales to users in Latin America continued to grow but at a lower rate than we expected. In resource industries, sales to users declined 3%, which was better than we expected. Mining was better than expected due to large mining and off-highway trucks being placed into service earlier than we anticipated. Heavy construction and coring aggregates were in line with expectations. In energy and transportation, sales to users increased by 2%. Power generation sales to users grew 27% as conditions remained favorable for both reciprocating engines and turbines and turbine-related services. Sales to users for reciprocating engines used in oil and gas applications declined primarily due to a challenging comparative to the fourth quarter of 2023. For solar turbines and turbine-related services, fourth quarter sales were down in oil and gas compared to strong shipments in the fourth quarter of 2023. Most of solar\u2019s fourth quarter decline in oil and gas was offset by growth in power generation. Transportation sales to users increased, while industrial declined. Moving to dealer inventory and backlog, in total dealer inventory decreased by $1.3 billion versus the third quarter of 2024. For machines, dealer inventory decreased by $1.6 billion. The decrease was more than we had anticipated due to better than expected sales to users, particularly for construction industries in North America and resource industries. As I mentioned, backlog increased versus the third quarter to $30 billion, led by energy and transportation. This is a $2.5 billion increase versus 2023 year-end. Our backlog remains elevated as a percentage of revenues compared to historical levels. We continue to see strong order activity for both reciprocating engines and power generation and turbines and turbine-related services in both oil and gas and power generation. Turning to Slide 5, I\u2019ll now provide full year highlights. In 2024, we generated sales and revenues of $64.8 billion, down 3% versus last year. This was due to lower sales volume partially offset by favorable price realization. Our adjusted operating profit margin was 20.7%, a 20 basis point increase over 2023 despite lower sales and revenues. Adjusted profit per share in 2024 was $21.90. As I mentioned, services revenue increased to $24 billion in 2024, a 4% increase over 2023. Services continued to grow as we focus on making our customers successful. Working with our dealers, we are leveraging over 1.5 million connected reporting assets and digital tools. Our Cat digital tools allow customers to more efficiently improve uptime, manage their fleets, and transact on our ecommerce platforms. For example, this year we launched an internal generative AI solution designed to optimize the creation of intelligent leads, which we call Prioritize Service Events, or PSEs. This tool significantly reduces the time and effort required for service recommendations, helping customers avoid unplanned downtime by clearly identifying the recommended repair options and timing for customers. In 2024, we delivered more than two-thirds of new equipment with a customer value agreement, which remains an important part of our services growth initiatives. We also experienced better than expected growth in our ecommerce platforms and have focused on improving our customer on-boarding to include key digital products. Also in 2024, we saw record usage of Vision Link, our equipment management application, on-boarding and activating thousands of new customers throughout the year. Services growth remains resilient despite the decline in our overall top line. We continued to execute our various services initiatives as we strive towards our aspirational target of $28 billion in services revenues. Moving to Slide 6, we generated robust ME&T free cash flow of $9.4 billion for the full year. We deployed $10.3 billion to shareholders through $7.7 billion of share repurchases and $2.6 billion of dividends paid. We remain proud of our dividend aristocrat status as we have paid higher annual dividends for 31 consecutive years. We continue to expect to return substantially all ME&T free cash flow to shareholders over time through dividends and share repurchases. Now on Slide 7, I\u2019ll describe our expectations moving forward. Overall, we currently anticipate 2025 sales and revenues to be slightly lower compared to 2024. In 2025, we expect continued strength in energy and transportation to mostly offset lower sales in construction industries and resource industries. We also expect services revenues to grow in 2025, including growth across all three primary segments. We currently expect machine dealer inventory to end 2025 at similar levels to year-end 2024. Full year adjusted operating profit margin is expected to be lower than 2024, but it is anticipated to be in the top half of the target range based on the corresponding level of sales and revenues. Finally, we expect ME&T free cash flow to be in the top half of our target range of $5 billion to $10 billion. Now I\u2019ll discuss our outlook for key end markets, starting with construction industries. In North America, we expect moderately lower sales to users in 2025 versus last year. Construction spend in North America remains healthy, primarily driven by large multi-year projects and government-related infrastructure investments supported by funding from the IIJA. Although we anticipate the combined non-residential and residential construction spend to remain similar to 2024 levels, our current planning assumptions reflect lower demand for new equipment. We also expect lower dealer rental fleet loading compared to 2024, although dealer revenue is expected to grow. Overall, we remain positive about the medium and longer term outlook in North America. In Asia Pacific outside of China, we expect soft economic conditions to continue into 2025. We anticipate China to remain at relatively low levels for the above-10 ton excavator industry. In EAME, we anticipate weak economic conditions in Europe will continue and a healthy level of construction activity in Africa and the Middle East. Construction activity in Latin America is expected to decline moderately. We also anticipate the ongoing benefit of our services initiatives will positively impact construction industries in 2025. Moving to resource industries, we anticipate lower sales to users in 2025 compared to last year, partially offset by higher services revenues including robust rebuild activity. Customers continue to display capital discipline, although key commodities remain above investment thresholds. Customer product utilization remains high. The number of parked trucks remains relatively low. The age of the fleet remains elevated and our autonomous solutions continue to see strong customer acceptance. We continue to believe the energy transition will support increased commodity demand over time, expanding our total addressable market and providing further opportunities for long term profitable growth. Moving to energy and transportation, demand is expected to remain strong in power generation, and we expect growth for both Cat reciprocating engines and solar turbines. Overall strength in power generation for both prime and backup power applications continues to be driven by increasing energy demand to support data center growth related to cloud computing and generative AI. Through continued focus on improving manufacturing efficiencies, along with initial stages of our investment to increase large engine output capacity, we expect growth in reciprocating engines for power generation in 2025. We also expect growth in solar turbines for power generation driven by increased customer demand. For oil and gas, after a flat year in 2024, we expect moderate growth in 2025. We expect reciprocating engines and services to be slightly down in 2025 due to continuing capital discipline by our customers, industry consolidation, and efficiency improvements in our customers\u2019 operations. Solar turbines\u2019 oil and gas backlog remains strong, and we see continued healthy order and inquiry activity. We expect growth for turbines and turbine-related services in oil and gas. Demand for our products in industrial applications is expected to remain at a relatively low level, similar to 2024. In transportation, we anticipate full year growth driven by rail services. Moving to Slide 8, I\u2019ll now provide an update on our sustainability journey. Caterpillar\u2019s legacy of sustainable innovation spans nearly a century. Throughout that time, we have provided products and services that improve the quality of life and the environment while helping customers fulfill society\u2019s need for infrastructure in a sustainable way. Earlier this month, Caterpillar kicked off its year-long centennial celebration at CES 2025 with the theme, The Next Hundred Years: Experience What\u2019s Possible. We showcased our continuous investment in the core technologies of autonomy, alternative fuels, connectivity and digital, and electrification. Our ability to provide these solutions reflects investments of more than $30 billion in R&D over the past 20 years to deliver best-in-class innovation. Taking center stage at the Caterpillar CES exhibit was a Cat 972 wheel loader retrofitted to be an extended range electrified machine hybrid technical demonstrator. The demonstrator can run fully battery electric with zero exhaust emissions for several hours. It has an on-board generator and charger that enables full day uptime without requiring an investment in direct current, or DC charging infrastructure. In initial testing, the demonstrator maintains or exceeds the performance of a Cat 972 internal combustion machine while providing customers with the benefits of a hybrid system. With that, I\u2019ll turn it over to Andrew.","evidence_gemma_new":"ME&T free cash flow","evidence_llama_3_3":null,"evidence_qwen_3_30b":"ME&T free cash flow fourth quarter","gemma_new_max":3000000000.0,"gemma_new_min":3000000000.0,"llama_3_3_max":null,"llama_3_3_min":null,"qwen_3_30b_max":3000000000.0,"qwen_3_30b_min":3000000000.0}
{"symbol":"CAT","year":2023,"quarter":3,"date":"2023-Q3","chunk_id":3,"sub_chunk_id":0,"centroid_label":"profit per share","agreed_value":5.45,"count":3,"chunk":"Andrew Bonfield: Thank you, Jim, and good morning, everyone. I'll begin with commentary on the third quarter results, including the performance of our segments. Then, I'll discuss the balance sheet and cash flow, before concluding with our assumptions for the fourth quarter and full year. Beginning on Slide 8. Our overall operating performance was strong. Adjusted operating profit margin, adjusted profit per share, and ME&T free cash flow, all were better than we expected, while sales grew in line with our expectations. Based on the strong third quarter, and year-to-date operating performance, we now expect that the adjusted operating profit margin for the year will be slightly above the top end of our target range, at the corresponding level of sales. We also anticipate that ME&T free cash flow will exceed the target range of $4 billion to $8 billion. In summary, sales and revenues increased by 12% or $1.8 billion to $16.8 billion. The sales increase versus the prior year was driven by -- primarily by price realization, as well as higher sales volume. Operating profit increased by 42% or $1 billion to $3.4 billion. The adjusted operating profit margin was 20.8%, an increase of 430 basis points versus the prior year. Profit per share was $5.45 in the third quarter of this year. This included restructuring costs of $0.07 per share as compared to $0.08 in the prior year. We continue to expect restructuring expenses of about $700 million for the full year. Adjusted profit per share increased by 40% to $5.52 in the third quarter compared to $3.95 last year. Other income of $195 million was lower than that -- than the third quarter of 2022 by $47 million. The decline was driven by less favorable currency impacts in the quarter, related to ME&T balance sheet translation, as compared to the prior year, along with the recurring increase and a pension expense of approximately $18 million per quarter. Higher investment and interest income acted as a partial offset. The provision for income taxes in the third quarter, excluding discrete items, reflected a global annual effective tax rate of 22.5%, which is the rate we now expect for the full year. The slightly lower-than-expected tax rate, along with discrete items, added about $0.14 to profit per share in the quarter. Moving on to Slide 9. As I mentioned, the 12% increase in the top line versus the prior year was primarily due to price realization, as well as higher sales volume. Volume improved as sales to users increased by 13% while year-over-year changes in dealer inventory acted as a slight offset. Overall, the magnitude of the sales increase was in line with our expectations. However, by segment, construction Industries sales were higher, Resource Industries sales were in line, and Energy & Transportation sales were lower than we had anticipated. Services revenues increased in the third quarter. We will update you with our progress towards our services growth target when we report our fourth quarter results, and as is our normal practice. Price realization was slightly better than we had anticipated for the quarter. However, as we anticipated, we did see the magnitude of the year-over-year price effects moderate compared to the second quarter, as we lap the prior-year price increases. Volume was slightly below our expectations. As Jim mentioned, sales to users were lower than we had anticipated, principally in Energy & Transportation. However, this was nearly offset by the increase in dealer inventory versus our expectations of being about flat for the quarter. The increase in dealer inventory was driven primarily by Construction Industries. There, we had stronger-than-expected shipments in North America, particularly in building construction products, and earthmoving. Within North America, these products remain constrained, and are near the bottom end of the typical dealer inventory range of three to four months of sales. We also saw some dealer inventory increase in Energy & Transportation within the quarter. I'll remind you that dealer inventory in Energy & Transportation and Resource Industries is mainly a function of the commissioning pipeline, with over 70% of dealer inventory in these segments backed by firm customer orders. Because dealer inventory is more a functioning -- function of commissioning in Resource Industries and Energy & Transportation, it is difficult for us to predict in these two segments. I will discuss further our full-year expectations for dealer inventories a little bit later. Moving to Slide 10. Third quarter operating profit increased by 42% to $3.4 billion, while adjusted operating profit increased by 41% to $3.5 billion. Price realization, which included a slight benefit from a shift in the geographic mix of sales and sales volume were favorable in the quarter. Our largest headwinds to operating profit were higher SG&A and R&D expenses, and higher manufacturing costs. SG&A and R&D expenses included higher strategic investment spend. Manufacturing cost increases included higher material costs, and unfavorable cost absorption, as we reduced our inventories compared to a corresponding increase in the third quarter of 2022. Lower freight costs acted as a partial offset within manufacturing costs. The adjusted operating profit margin of 20.8% improved by 430 basis points. This was better than we had anticipated, primarily due to favorable manufacturing costs, of which freight was the largest contributor. Also, the slightly better-than-expected price helped margins. Now, I'll discuss the performance of the segments. On Slide 11, Construction Industries sales increased by 12% in the third quarter to $7 billion, primarily due to favorable price realization. By region, sales in North America rose by 31% due to higher sales volume and favorable price. As I mentioned, supply chain improvements enabled stronger-than-expected shipments in North America, which supported some dealer restocking. Sales of equipment to end users were in line with our expectations for the region. Sales in Latin America decreased by 31%, primarily due to lower sales volume, partially offset by favorable price. In EAME, sales increased by 8%, mainly due to favorable price and currency impacts. Sales in Asia Pacific decreased by 8%, primarily due to lower sales volume, driven by lower sales of equipment to end users. Third quarter profit for Construction Industries increased by 53% versus the prior year to $1.8 billion. The increase was mainly due to favorable price realization. The segment's operating margin of 26.4% was an increase of 710 basis points versus last year. Margin exceeded our expectations on better volume, price, and lower-than-anticipated manufacturing costs, primarily freight. Turning to Slide 12, Resource Industries sales grew by 9% in the third quarter to $3.4 billion. The increase was primarily due to favorable price realization, partially offset by lower sales volume. Volume decreased as higher sales of equipment to end users were more than offset by lower aftermarket [sale parts] (ph) volume, which reflected changes in dealer buying patterns. Third quarter profit for Resource Industries increased by 44% versus the prior year to $730 million, mainly due to favorable price realization. Profit was partially offset by the by the impact of lower sales volume, which included unfavorable product mix. The segment's operating margin of 21.8% was an increase of 540 basis points versus last year. Margin was better than we had expected, primarily due to lower-than-anticipated manufacturing costs, driven by freight and price. Now on Slide 13. Energy & Transportation sales increased by 11% in the third quarter to $6.9 billion. Sales were up across all applications. Oil and gas sales increased by 26%, power generation sales were higher by 21%, industrial sales rose by 5% and transportation sales increased by 6%. Third quarter profit for Energy & Transportation increased by 26% versus the prior year to $1.2 billion. The increase was mainly due to favorable price realization, and higher sales volume, partially offset by higher SG&A and R&D expenses, unfavorable manufacturing costs, and currency impacts. SG&A and R&D expenses reflected ramping investments related to strategic growth initiatives. As a reminder, the most of our strategic investments relating to electrification and alternative fuels occur in this segment, which impacts reported margins. The segment's operating margin of 17.2% was an increase of 210 basis points versus the prior year. Margin was lower than we had anticipated, primarily due to lower-than-expected sales volume, impacted by supply chain challenges for large engines, and delivery delays for solar turbines. Moving to Slide 14. Financial Products revenue increased by 20% to $979 million, primarily due to higher average financing rates across all regions. Segment profit decreased by 8% to $203 million. The decrease was mainly due to a higher provision for credit losses at Cat Financial. The unfavorable impact reflects a challenging comparison as we had reserve releases in the prior year, as compared to a more typical provision expense in the third quarter of 2023. Of note though, through the third quarter of this year, provision expense for a comparable nine-month period is at the lowest level for over 20 years. Business activity remains strong with our -- and our portfolio continues to perform well, with past dues and write-offs at historic low levels. Past dues in the quarter were 1.96%, a 4 basis point improvement compared to the third quarter of 2022, and a decrease of 19 basis points compared to the second quarter. Retail new business volume increased versus the prior year, and though it declined compared to the second quarter, this follows the typical seasonal pattern. In addition, we continue to see strong demand for used equipment, and used inventory remains at low levels. Now on Slide 15. Our ME&T free cash flow has been robust this year with another $2.9 billion generated during the third quarter. With $6.8 billion generated through the first three quarters of this year, we expect to exceed our target of $4 billion to $8 billion this year. From a working capital perspective, we had a small inventory decrease of around $200 million in the quarter. Looking ahead, we expect our inventory levels will continue to decrease as we've seen sustained supply chain improvement. CapEx in the third quarter was around $400 million. With about $1.1 billion in CapEx through the first three quarters, we continue to expect around $1.5 billion for the full year. Our balance sheet remains strong. We have ample liquidity with an enterprise cash balance of $6.5 billion, and we hold an additional $4.3 billion in slightly longer-dated liquid marketable securities to improve yields on that cash. Now on Slide 16. I will share some high-level assumptions for the fourth quarter and the full year. During the fourth quarter, we anticipate slightly higher sales as compared to the prior year. Price should remain favorable. We expect sales to users to continue to support good underlying growth, though, changes in dealer inventories should act as an offset. As a reminder, we saw dealers increase inventories by $700 million in the fourth quarter of 2022, whilst we expect a decrease in the fourth quarter of this year. Specifically in Construction Industries, we do not expect the seasonal sales increase typically seen from the third to the fourth quarter. Those sales to users are expected to increase on both a sequential and year-over-year basis. Instead, we anticipate lower shipment volumes, as we complete the Cat engine changeover in building construction products, and dealers reduced their inventories, principally of excavators. This compares to a dealer inventory increase in the fourth quarter of 2022. Though we now expect that dealer inventory in Construction Industries will be higher at the end of 2023 than it was at year end 2022, we still expect it to be within the typical three to four months of sales range. A reminder, this is an average across all dealers and all products in Construction Industries, and it's difficult to predict with precision, given over 150 independent dealers, and hundreds of different products. Similar to last quarter, there are still areas and\/or products where dealers would like to have more inventory. As Jim has mentioned, we are very comfortable with the level of inventory held by dealers overall. In Resource Industries, we anticipate slightly lower sales as compared to the third quarter, as a result of improvements in availability. We also expect lower sales versus the prior year, driven by changes in dealer inventory. In the fourth quarter of 2022, there was an increase in dealer inventories for Resource Industries, while we expect a decrease in the fourth quarter of this year. We expect sales in Energy & Transportation to increase in the fourth quarter as compared to the third quarter, with higher solar turbines and rail deliveries. However, keep in mind that we continue to work through supply chain challenges, primarily impacting large engines. We also anticipate some moderation in industrial sales during the fourth quarter, compared to recent high levels. Now, I'll comment on our expectations for margins. We provided our adjusted operating profit margin target charge to assist you in your modeling process. Based on our current planning assumptions, we anticipate the adjusted operating profit margin to be slightly above the target range for the full year 2023. This is based on the corresponding estimated level of sales. Your expectation for total enterprise sales this year will inform where margins could finish for the year. Specific to the fourth quarter, we anticipate the adjusted operating profit margin to be lower than the third quarter. We anticipate lower-than-normal volume leverage, particularly impacting Construction Industries, for the reasons I mentioned previously. We also anticipate a negative segment mix impact to impact operating margins, as Construction Industries sales would be a lower proportion of total sales, as compared to the third quarter. Price realization should remain positive, though we expect the magnitude of the favorability versus the prior year to moderate as we continue to lap more favorable pricing trends from last year. Therefore, the increases in margins that have occurred from price outpacing manufacturing cost inflation, should moderate in the fourth quarter. In addition, as you look down the income statement for the prior year, there are a couple of points to note. First, short-term incentive expense in the fourth quarter of 2022 was lower than normal due to the true up for the final outcomes for the financial year. This will be a headwind for year-over-year operating margins. However, this will be partially offset by favorability in other operating income and expense, as we do not expect the significant currency translation losses that we saw in the fourth quarter of last year to recur. By segment, in Construction Industries, we expect slightly lower margin compared to the third quarter, assuming lower volume. We also anticipate lower sequential margins in Resource Industries, as is typical, impacted by cost absorption, along with higher spend, relating to strategic investments. In Energy & Transportation, we expect margins will be similar to the third quarter, with stronger volume offset by manufacturing costs, and an unfavorable mix of products, which includes international locomotive deliveries in rail. Now turning to Slide 17, let me summarize. Adjusted profit per share was $15.98 through the first three quarters of the year, which already exceeds our previous full year record by 15%. We generated strong adjusted operating profit margin, with a 430 basis point increase to 20.8%. We now expect to be slightly above the targeted range for adjusted operating profit margin for the full year, based on our expected sales levels. ME&T free cash flow remained robust with $6.8 billion year-to-date. We now expect ME&T free cash flow to exceed our $4 billion to $8 billion target range for the full year. We continue to execute our strategy for long-term profitable growth. And with that, we'll take your questions.","evidence_gemma_new":"Profit per share third quarter","evidence_llama_3_3":"profit per share third quarter of this year","evidence_qwen_3_30b":"profit per share third quarter","gemma_new_max":5.45,"gemma_new_min":5.45,"llama_3_3_max":5.45,"llama_3_3_min":5.45,"qwen_3_30b_max":5.45,"qwen_3_30b_min":5.45}
{"symbol":"CAT","year":2023,"quarter":4,"date":"2023-Q4","chunk_id":3,"sub_chunk_id":0,"centroid_label":"profit per share","agreed_value":5.28,"count":2,"chunk":"Andrew Bonfield: Thanks, Jim, and good morning, everyone. I'll begin with commentary on the fourth quarter results, including the performance of our segments. Then I'll discuss the balance sheet and cash flow, followed by an update to our target ranges for adjusted operating profit margins and ME&T free cash flow. I'll conclude with our high-level assumptions for 2024 and our expectations for the first quarter. Beginning on Slide 9. Strong operating performance continued in the fourth quarter as sales and revenues, adjusted operating profit margin, adjusted profit per share and ME&T free cash flow were all better than we had expected. In summary, sales and revenues increased by 3% to $17.1 billion. Adjusted operating profit increased by 15% to $3.2 billion. The adjusted operating profit margin was 18.9%, an increase of 190 basis points versus the prior year. Profit per share was $5.28 in the fourth quarter compared to $2.79 in the fourth quarter of last year. Profit per share in the quarter included favorable mark-to-market gains of $0.14 for the remeasurement of pension and OPEB plans and certain favorable deferred tax valuation adjustments of $0.04. It also included restructuring costs of $92 million or $0.13. Adjusted profit per share increased by 35% to $5.23 in the fourth quarter compared to $3.86 last year. The provision for income taxes in the fourth quarter, excluding the amounts related to mark-to-market and discrete items, reflected a global annual effective tax rate of 21.4%. This was lower than we had expected a quarter ago due to favorable changes in the geographic mix of profits. The lower rate benefited performance in the quarter by about $0.24. Moving on to Slide 10. I'll discuss top line results in the fourth quarter. The 3% sales increase versus the prior year was primarily driven by price realization, partially offset by lower volume as impacts from dealer inventory changes more than offset the 8% increase in sales to users. Both price and volume was slightly better than we had anticipated. The dealer inventory change resulted in an unfavorable sales impact of $1.6 billion versus the prior year. Dealer inventory decreased in the fourth quarter by $900 million overall compared to an increase of approximately $700 million during the fourth quarter of 2022. The dealer inventory decrease in the fourth quarter was led by Construction Industries, where the reduction was at the high end of our expectations. The decrease in this segment was led by excavators and the impact of the Cat engine changeover in building construction products that we have mentioned in previous earnings calls. Dealers also reduced their inventories in resource industries. Overall, the decrease in dealer inventory of machines was $1.4 billion in the quarter. Conversely, dealer inventory in Energy & Transportation increased mostly due to extended commissioning time lines, resulting from strong shipments, which was supported by healthy demand. As a reminder, dealer inventory in both Energy & Transportation and Resource Industries is mainly a function of the commissioning pipeline, and over 70% of dealer inventory in these segments is backed by firm customer orders. Looking at sales by segment. Sales in Construction Industries and Energy Transportation was slightly higher than we had anticipated, while sales in Resource Industries were about in line with our expectations. Moving to operating profit on Slide 11. Adjusted operating profit increased by 15% to $3.2 billion. Price realization and favorable manufacturing costs benefited the quarter, while higher SG&A and R&D expenses and lower sales volumes acted as a partial offset. The increase in SG&A and R&D expenses was primarily driven by higher short-term incentive compensation expense and strategic investment spend. The adjusted operating profit margin of 18.9% improved by 190 basis points versus the prior year. Margins were slightly higher than we had anticipated on volumes and price being marginally better than we had expected. Now on Slide 12. Construction Industries sales decreased by 5% in the fourth quarter to $6.5 billion due to lower sales volume, partially offset by favorable price realization. Lower sales volume was primarily due to the changes in dealer inventories that I mentioned earlier and more than offset the favorable sales to users. The dealer inventory changes impacted all of the regions. By region, sales in North America increased by 4%. In Latin America, sales decreased by 25%. Sales in EAME increased -- decreased by 18%. This region accounted for the largest dealer inventory decline in the quarter. In Asia Pacific, sales decreased by 4%. Fourth quarter profit for Construction Industries was $1.5 billion, an increase by 3% versus the prior year. The increase was primarily due to favorable price, partially offset by the profit impact from lower sales volume. The segment's operating margin of 23.5% was an increase of 180 basis points versus last year. This was broadly in line with our expectations. Turning to Slide 13. Resource Industries sales decreased by 6% in the fourth quarter to $3.2 billion. The decrease was primarily due to lower sales volume, partially offset by favorable price realization. Lower volume was impacted by changes in dealer inventories as dealers decreased inventories during the fourth quarter of 2023 compared to an increase in the prior year's quarter. Volume was also impacted by slightly lower aftermarket market part sales volume, partly due to dealer buying patterns. Fourth quarter profit for Resource Industries decreased by 1% versus the prior year to $600 million. The segment's operating margin of 18.5% was an increase of 90 basis points versus last year and was in line with our expectations. Now on Slide 14. Energy & Transportation sales increased by 12% in the fourth quarter to $7.7 billion. The increase was primarily due to higher sales volume and favorable price realization. Sales volume benefited from higher shipments of large engines and solar turbines and turbine-related services in the quarter. By application, oil and gas sales increased by 23%, power generation sales were higher by 29%, industrial sales decreased by 5% and transportation sales increased by 11%. While industrial sales decreased, they remain at healthy levels. Fourth quarter profit for Energy & Transportation increased by 21% versus the prior year to $1.4 billion. The increase was primarily due to favorable price and higher sales volume, partially offset by higher SG&A and R&D expenses, currency impacts and unfavorable manufacturing costs. The increase in SG&A and R&D expenses reflected ramping investments related to strategic growth initiatives and higher short-term incentive compensation expense. As a reminder, most of our strategic investments relating to electrification and alternative fuels are in Energy & Transportation, which therefore impacts this segment's margin. The operating margin of 18.6% was an increase of 130 basis points versus the prior year. Margin exceeded our expectations on higher volume, including favorable mix and price. Moving to Slide 15. Financial Products revenues increased by 15% to $981 million, primarily due to higher average financing rates across all regions and higher average earning assets in North America. Segment profit increased by 24% to $234 million. The increase was mainly due to lower provision for credit losses at Cat Financial, higher average earning assets and a higher net yield on average earning assets. Our portfolio continues to perform well with past dues near historic levels of 1.79%. We saw a 10 basis point improvement compared to the fourth quarter of 2022 and a 17 basis point improvement compared to the third quarter. This is the lowest fourth quarter past dues percentage since 2006. The year-end allowance rate was our lowest fourth quarter rate on record of 1.18% and was the second lowest quarterly rate ever. In addition, provision expense in 2023 was at the lowest level we've seen in over 20 years. Business activity remains strong, as retail new business volume increased versus the prior year and the third quarter. The increase versus the prior year reflected higher end user sales and rental conversions in the US. In addition, we continue to see strong demand for used equipment. Though used inventories have ticked up slightly, they remain close to historically low levels. Despite some moderation in used pricing on improved availability, it is still comfortably above historic norms. Moving on to Slide 16. The record $10 billion in ME&T free cash flow for the year included $3.2 billion in the fourth quarter, an increase of $200 million versus the prior year. On CapEx, we continue to make disciplined investments that are right for our business, governed by our focus on growing absolute OPACC dollars. We spent about $1.7 billion in 2023. Looking to 2024, we expect CapEx in the range of $2 billion to $2.5 billion. This is higher than our recent run rate and includes the investment in large engine capacity, which Jim referenced a moment ago. We also plan to invest more around AACE, which is autonomy, alternative fuels, connectivity and, digital and electrification. In addition, we are investing to make our supply chain more resilient. Moving to capital deployment. We returned $3.4 billion to shareholders in the fourth quarter, including $2.8 billion in share repurchases. Our net share count has decreased by approximately 14% since 2019, when we shared our intention to return substantially all ME&T free cash flow to shareholders over time and on a consistent basis. Our dividend remains a priority as we increased our quarterly payout by 8% in 2023. You will recall from our Investor Day in 2022, we shared that we expected to increase our dividend by at least high single digits for the next three years. The increase in 2023 reflected the second of those three years. Our balance sheet remains strong. We have ample liquidity with an enterprise cash balance of $7 billion, and we hold an additional $3.8 billion in slightly longer-dated liquid marketable securities to improve yields on that cash. Now on Slide 17, I'll discuss our revised adjusted operating profit margin targets. We exceeded our progressive target range in 2023, and we are confident that our strong execution and operating performance supports the potential for higher top end adjusted operating profit margins than were reflected in the prior range. Therefore, we have increased the top end of the range by 100 basis points relative to the corresponding level of sales. Achieving the top end of the range will remain challenging, as we are committed to increase investments in our strategic initiatives supporting long-term profitable growth. The bottom end of the target range remains unchanged. To explain, while higher gross margin support increasing the top end of the range, they actually pressure our margins in periods of decreasing volume. For that reason, we believe that the bottom end of the range remains challenging, but achievable. We will now target adjusted operating profit margins of 10% to 14% at $42 billion of sales and revenues, increasing to 18% to 22% at $72 billion of sales and revenues. Now on Slide 18. When I joined Caterpillar just over five years ago, I was impressed with the potential of our business to deliver higher, more consistent ME&T free cash flow as a result of the operating and execution model and our focus on generating absolute OPACC dollars. This is how we define winning at Caterpillar. We believe increasing absolute OPACC dollars will lead to higher shareholder returns over time. Since the beginning of 2019, we have generated $30 billion in ME&T free cash flow, including a record $10 billion in 2023. We are confident in our ability to consistently generate positive ME&T free cash flow over time. Therefore, we are introducing an updated target range for ME&T free cash flow, which is between $5 billion and $10 billion. Our strong operating performance as well as confidence in our future execution supports the higher range. The updated target range still maintains our flexibility to invest in our strategic initiatives, which is a priority. We also continue to expect to return substantially all of our ME&T free cash flow to shareholders over time through dividends and share repurchases. Moving to Slide 19. I will share our high-level assumptions for the full year. As Jim mentioned, in 2024, we anticipate sales and revenues will be broadly similar to 2023. We expect slightly favorable price realization and continued healthy underlying demand across the business as a whole. We anticipate another year of services growth as we continue to target $28 billion by 2026. We do not expect a significant change in dealer inventory for machines by the end of this year. And for Energy & Transportation, it is difficult to predict with certainty what will happen to dealer inventory as we have discussed previously. In total, dealer inventory increased by $2.1 billion in 2023. By segment, in Construction Industries, sales of equipment to end users should remain roughly similar compared to the strong year we saw in 2023. However, we do not expect a dealer inventory build as we saw last year. We also anticipate our services initiatives will benefit the segment in 2024. In Resource Industries, we anticipate lower sales versus 2023, impacted by lower machine volume primarily in off-highway and articulated trucks. We had strong sales of these products in 2023 as we converted our elevated backlog into sales, making for a challenging comparison. We also anticipate an unfavorable year-over-year change in dealer inventories. However, we expect services revenues will increase in this segment. In Energy & Transportation, we expect slightly higher sales in 2024. Power generation, oil and gas, and transportation sales should be positive, while industrial sales are expected to be lower compared to our historically strong levels in 2023. On full year adjusted operating profit margin, we currently expect to be in the top half of the updated margin target range at our expected sales levels. I'll discuss some of the puts and takes. In 2024, we expect a small pricing benefit weighted towards the first half of the year given carryover from increases taken in the second half of 2023. For the full year, we expect price to modestly exceed manufacturing costs. Versus last year, price in absolute dollar terms should moderate as we let the more favorable pricing trends from 2023. Short-term incentive compensation expense was about $1.7 billion in 2023, while we anticipate $1.2 billion in 2024. We expect the benefit of that low expense will be offset by increases in SG&A and R&D expenses as we continue to invest in strategic initiatives and of future long-term profitable growth. Investments are focused in services, new product introductions and AACE. We also anticipate there may be some negative margin impact due to mix this year. I'll explain. During 2023, when availability was somewhat challenged, we biased our production and shipments to products with the highest OPACC potential. Given that availability has improved, we anticipate a more normalized mix of products in 2024. We may also see an impact on margins from the mix of different segments as we anticipate in sales in 2024 will be slightly more weighted towards Energy & Transportation than they were in 2023. Moving on, we expect to be within the top half of our updated ME&T free cash flow target range of $5 billion to $10 billion. As you consider our cash position, keep in mind, the $1.7 billion cash outflow in the first quarter related to the payout of last year's incentive compensation expense. We also anticipate restructuring charges of $300 million to $450 million this year. Finally, we expect global effective tax rate in the range of 22.5% to 23.5%, an increase versus the 21.4% in 2023. Now on Slide 20. Our expectations for the first quarter, starting with the top line. We expect first quarter sales and revenues to be broadly similar to the prior year. We anticipate price to be favorable, although significantly less in absolute dollar terms than had occurred through 2023. We expect demand to remain healthy. However, we anticipate a slightly lower dealer inventory build for machines in the first quarter compared to a $1.1 billion build in the first quarter of 2023. This will act as a headwind to sales. At the segment level, in Construction Industries, we anticipate flattish to slightly higher first quarter sales versus the prior year, primarily due to favorable price. We anticipate lower sales in Resource Industries compared to the prior year, driven by lower volume, partially offset by favorable price. In Energy & Transportation, we expect flattish to slightly higher sales versus the prior year, with updated favorable volume benefiting the upside scenario. On margins, we expect the enterprise adjusted operating profit margin in the first quarter to be broadly similar to the first -- prior year. Price should more than offset manufacturing costs as price actions from 2023 rolled into 2024. We expect price will be lower in absolute dollar terms versus the prior year. We anticipate manufacturing costs to increase compared to last year, principally impacted by cost absorption as we do not expect an inventory build like we saw in the first quarter of 2023. We also anticipate an increase in SG&A and R&D expenses related to the strategic investment spend. By segment, in Construction Industries, we anticipate a similar margin as compared to the prior year. We expect price to offset strategic investment spend and slightly higher manufacturing costs, including cost absorption. In Resource Industries, we expect a lower margin compared to the prior year, impacted by lower volume, partially offset by favorable price. In Energy & Transportation, we anticipate a similar margin versus prior year, a slightly stronger price should be offset by higher manufacturing costs. Turning to Slide 21. Let me summarize. Adjusted profit per share of $21.21 exceeded our previous full year record by 53%. We exceeded the top end of our targeted ranges for adjusted operating profit margin and ME&T free cash flow. We have increased the top end of our adjusted profit margin range, and we have raised our ME&T free cash flow target range. We expect to be in the top half of our updated margin and ME&T free cash flow target ranges in 2024, and we anticipate another year of services growth as we continue to execute our strategy for long-term profitable growth. And with that, we'll take your questions.","evidence_gemma_new":"profit per share","evidence_llama_3_3":null,"evidence_qwen_3_30b":"profit per share fourth quarter","gemma_new_max":5.28,"gemma_new_min":5.28,"llama_3_3_max":null,"llama_3_3_min":null,"qwen_3_30b_max":5.28,"qwen_3_30b_min":5.28}
{"symbol":"CAT","year":2024,"quarter":1,"date":"2024-Q1","chunk_id":3,"sub_chunk_id":0,"centroid_label":"profit per share","agreed_value":5.75,"count":2,"chunk":"Andrew Bonfield: Thank you, Jim. Good morning everyone. I'll begin by commenting on the first quarter results, including the performance of our segments. Then I'll discuss the balance sheet and ME&T free cash flow before concluding with a few comments on the full year and our assumptions for the second quarter. Beginning on slide eight. Our operating performance was strong with both adjusted operating profit margin and adjusted profit per share, being better than we had expected. Sales and revenues of $15.8 billion were about flat compared to the prior year, broadly in line with our expectations. Adjusted operating profit increased by 5% to $3.5 billion and the adjusted operating profit margin was 22.2% an increase of 110 basis points versus the prior year which was slightly better than we had expected. Profit per share was $5.75 in the first quarter, compared to $3.74 in the first quarter of last year Adjusted profit per share increased by 14% to $5.60 in the first quarter, compared to $4.91 last year. Adjusted profit per share excluded net restructuring income of $0.15 per share, this compares to restructuring expense of $1.17 which was excluded in the first quarter of 2023. Other income of $156 million for the quarter, was higher than the first quarter of 2023 by $124 million, this primary related to favorable ME&T balance sheet translation. The provision for income taxes in the first quarter excluding discrete items, reflected a global annual effective tax rate of 22.5% compared with 23% in the first quarter of 2023. Included in profit per share and adjusted profit per share was a benefit of $38 million or $0.08 for a discrete tax item related to stock based compensation. A comparable benefit of $32 million or $0.06 per share was included in the first quarter of 2023. The year-over-year impact of a reduction in the number of shares primarily due to share repurchases over the past year, had a favorable impact on adjusted profit per share of approximately $0.24. This included a favorable impact from the initial shares we received, from the $3.5 billion accelerated share repurchase agreement that Jim mentioned earlier. Before, I move on you will have seen some additional detail on earnings release segment commentaries. We continue to highlight the primary drivers of year-over-year changes in sales and profit by segment, as we have done previously, but in addition we are now also quantifying those significant variances. You will also find some additional information on historical dealer inventory, including at the machines level in the appendix of today's slides Moving to slide nine. I'll discuss our top line results in the first quarter. Sales remained about flat compared to the prior year, as lower volume was largely offset by favorable price realization. The decline in volume was primarily due to lower sales to users. As Jim mentioned, the 5% decrease in sales to users was slightly more than our expectations, mainly driven by weakness in Europe for Construction Industries. Changes in total dealer inventories did not have a significant impact on sales, as the increase of $1.4 billion in the quarter was similar to the increase last year. As Jim mentioned, the $1.1 billion increase for machines was slightly higher than we had anticipated, primarily as sales to users were modestly lower than we had expected. As compared to our expectations for the quarter, sales were broadly in line. Sales volume was slightly lower than we had anticipated, while price realization, including geographic mix, was better than we had expected. By segment, sales in Construction Industries were lower than we had anticipated, while sales in Energy & Transportation exceeded our expectations. Resource Industry sales were about in line. Moving to operating profit on Slide 10. The first quarter operating profit increased by 29% to $3.5 billion. As a reminder, the prior year included a $586 million charge that arose from the divestiture of the company's long-haul business. Adjusted operating profit increased by 5% to $3.5 billion. Price realization benefited the quarter, while lower sales volume acted as a partial offset. The adjusted operating profit margin of 22.2% improved by 110 basis points versus the prior year. Margins were slightly better than we had anticipated, mainly due to favorable manufacturing costs, as freight costs were lower than we had expected. Price, including a benefit from geographic mix, was also better than we had anticipated. Now on slide 11, I'll review segment performance, starting with Construction Industries. Sales decreased by 5% in the first quarter to $6.4 billion, primarily due to lower sales volume, partially offset by favorable price realization. Sales were slightly lower than we had anticipated. Sales in North America increased by 6% in the quarter. In the EAME region, sales fell by 25%, and in particular, Europe was lower than we had anticipated, impacted by weakness in residential construction and economic conditions. In Latin America, sales decreased by 1%. In Asia Pacific, sales decreased by 14%. First quarter profit for Construction Industries was $1.8 billion, a slight decrease versus the prior year. The decrease was mainly due to lower sales volume, partially offset by favorable price realization and manufacturing costs. The segments margin of 27.5% was an increase of 100 basis points versus the last year. This was better than we had expected due to favorable manufacturing costs, which largely reflected lower freight costs. Turning to slide 12, Resource Industries sales decreased by 7% in the first quarter to $3.2 billion, which was about in line with our expectations. The decrease was primarily due to lower sales volume, partially offset by favorable price realization. The decrease in sales volume was mainly driven by lower sales of equipment to end users, which Jim explained. First quarter profit for Resource Industries decreased by 4% versus the prior year to $730 million. The decrease was mainly due to lower sales volume, partially offset by favorable price realization. The segments margin of 22.9% was an increase of 60 basis points versus last year. This is better than we had expected on stronger price and favorable manufacturing costs, driven mainly by lower freight costs. Now on slide 13, Energy & Transportation sales increased by 7% in the first quarter to $6.7 billion. The increase was primarily due to higher sales volume and favorable price. Sales were stronger than we had expected, mostly due to increased deliveries of large engines. By application, power generation sales increased by 26%, oil and gas sales improved by 19%, transportation sales were higher by 9%, while industrial sales decreased by 21%. First quarter profit for Energy & Transportation increased by 23% versus the prior year to $1.3 billion. The increase was primarily due to favorable price realization. The segments margin of 19.5% was an increase of 260 basis points versus the prior year. The margin was significantly stronger than we had anticipated due to lower than expected manufacturing costs, higher volume, and better price. Moving to slide 14, Financial Products revenues increased by 10% to $991 million, primarily due to higher average financing rates across all regions and higher average net earning assets in North America. Segment profit was strong, increasing by 26% to $293 million. The increase was mainly due to an insurance settlement and a favorable impact from equity securities. Our portfolio continues to perform well as past dues remain near historic lows at 1.78%, a 22 basis point improvement compared to the first quarter of 2023. This is the lowest first quarter past dues since 2006. In addition, the allowance rate was our lowest on record at 1.01%. Business activity remains strong as new business volume increased versus the prior year, primarily driven by North America. We continue to see strong demand for used equipment and inventories remain close to historically low levels, with just slight increases over recent quarters. Moving on to slide 15. As Jim mentioned, our ME&T free cash flow remains strong. We generated $1.3 billion in the quarter after taking into account the $1.7 billion payments made for 2023 short-term incentive compensation and CapEx spend of about $500 million. Spend for both short-term incentive compensation and CapEx was higher than it was in the first quarter of 2023. For the full year, we expect to be in the top half of our ME&T free cash flow target range, which correlates to between $7.5 billion and $10 billion. We still expect to spend between $2 billion and $2.5 billion in CapEx, and we will continue to prioritize investments around AACE, which is autonomy, alternative fuels, connectivity, and digital and electrification. Moving to capital deployment. We continue to expect to return substantially all our ME&T free cash flow to shareholders over time through dividends and share repurchases. Of the record $5.1 billion of cash deployed in the first quarter, share repurchase spend was $4.5 billion, including the $3.5 billion accelerated share repurchase, or ASR. The $3.5 billion were deployed in the first quarter, and the ASR agreement may last for up to nine months. The ASR provides us with favorable pricing as compared to shorter-term ASRs, which we have carried out previously, which makes it more attractive. Price is finally determined relative to the volume-weighted average price, or VWAP, over the duration of the agreement. Approximately 70% of the shares were delivered to the company up front, but the balance calculated when the agreement is terminated based on the actual average VWAP. As a reminder, our objective is to be in the market on a more consistent basis with share repurchases, so this is a great mechanism for us to use. As I mentioned, our balance sheet remains strong. We have ample liquidity with an enterprise cash balance of $5 billion, and we hold an additional $2.2 billion in slightly longer-dated liquid marketable securities to improve yields on that cash. Moving to slide 16, I will share our high-level assumptions for the full year. As compared to a quarter ago, our assumptions for the full year generally remain unchanged. On the top line, we anticipate broadly similar sales and revenues as compared to the record 2023 level, consistent with what we mentioned last quarter. Although our top-level sales expectations remain the same, segment inputs have shifted a bit. We now see a slightly stronger top line in Energy & Transportation after a strong first quarter, while our expectations have been tampered slightly in Construction Industries due to economic conditions in the European market. We continue to expect slightly favorable price realization versus the prior year. Our expectations on dealer inventory also remain unchanged. We currently do not expect a significant change in dealer inventory of machines in 2024 compared to a $700 million increase in 2023. This is expected to be a headwind to sales. We also continue to anticipate another year of services growth across each of our primary segments as we strive to achieve our 2026 target of $28 billion in services revenues. At the segment level, we now expect Construction Industries sales to users to be slightly lower compared to 2023 due to the softer economic conditions in Europe. We expect demand in North America to remain at healthy levels, as Jim discussed. We also anticipate changes in dealer inventory to act as a headwind to Construction Industries sales in 2024. We expect sales service revenues to be positive versus the prior year. In Resource Industries, we continue to expect lower sales impacted by lower machine volume, primarily in off-highway and articulated trucks, where the comparison versus the prior year is challenging. We anticipate changes in dealer inventory to act as a headwind to sales in this segment as well. In Energy & Transportation, our 2024 sales expectations have increased slightly after the strong first quarter. We continue to see strong demand for reciprocating engines in power generation, as well as healthy order and quoting activity for Solar Turbines for both oil and gas and power generation. This supports our improved optimism for higher sales in Energy & Transportation in 2024. Also, as typical seasonality would suggest, we expect to see some sales ramp in Energy & Transportation as we move through the full year. On full year adjusted operating profit margin, we continue to expect to be in the top half of the margin target range at our expected sales levels. As I mentioned last quarter, we expect a relatively small pricing benefit to be weighted towards the first half of the year, given carryover from increases in the second half of last year. We now expect flattish manufacturing costs this year versus the prior year, as we anticipate more favorable freight costs, although the unfavorable impact from cost absorption could act as a partial offset. As I mentioned a quarter ago, given better availability this year, we anticipate shipping a more normal mix of products this year. We anticipate this dynamic may act as a slight headwind to margins. SG&A and R&D expenses are expected to ramp through the remainder of the year as we continue to invest in strategic initiatives aimed at future long-term profitable growth. This will be offset by the benefit of lower short-term incentive compensation. In addition, from a segment perspective, keep in mind that margins in Construction Industries tend to trend lower as the year progresses. Finally, we continue to anticipate restructuring costs of $300 million to $450 million this year, and our expectation for annual effective tax rate, excluding discrete items, is now 22.5%. Now on slide 17, I'll discuss our expectations for the second quarter, starting with the top line. We expect lower sales in the second quarter compared to the prior year, as we anticipate a headwind due to changes in dealer inventory of machines which will impact volumes. We expect dealer inventory of machines to decline this quarter in line with normal seasonal trends, versus the atypical $200 million increase that occurred in the second quarter of 2023. However, we anticipate a continuation of healthy demand across most of our end markets for our products and services, and prices expected to remain positive year-over-year. Following the typical seasonable pattern, we do expect higher sales in the second quarter as compared to the first. By segment compared to the prior year, we anticipate lower sales in Construction Industries as we expect changes in dealer inventory to act as a headwind. Favorable price should that provide a partial offset. We expect lower sales in resource industries versus the prior year, driven by lower volume, partially offset by favorable price. In Energy & Transportation, we anticipate similar sales versus the prior year. On enterprise margins in the second quarter, we expect the adjusted operating profit margin to be similar to the prior year, and lower versus the first quarter, following the typical seasonable pattern. As compared to the prior year, we could expect that price will remain favorable from the continued carryover benefit from increases taken in the second half of 2023. We expect flattish manufacturing costs compared to the prior year, as favorable freight is expected to offset the impacts of unfavorable cost absorption. We also anticipate an increase in SG&A and R&D expenses related to strategic investments, although this will be offset by lower short-term incentive compensation. By segment, in both Construction Industries and Resource Industries, we expect similar margins in the second quarter compared to the prior year, as we expect favorable price to be offset by lower volume. In Energy & Transportation, we expect a higher margin versus the prior year on better price and favorable mix. Unfavorable manufacturing costs and SG&A and R&D spend related to strategic investments are expected to act as a partial offset in this segment. Note that we expect a headwind to enterprise margins and corporate costs in the quarter, where we anticipate unfavorable year-over-year impacts from timing differences. So turning to slide 18, let me summarize. The strong operating performance continued in this quarter, with the adjusted operating profit margin at 22.2%, and record adjusted profit per share of $5.60. We deployed a record $5.1 billion of cash per share repurchases and dividends in the quarter. Our assumptions for the full year remain similar, and we expect to be in the top half of our target ranges for both adjusted operating profit margin and ME&T free cash flow. We continue to execute our strategy for the long-term profitable growth. And with that, we'll take your questions.","evidence_gemma_new":"Profit per share","evidence_llama_3_3":"profit per share first quarter","evidence_qwen_3_30b":null,"gemma_new_max":5.75,"gemma_new_min":5.75,"llama_3_3_max":5.75,"llama_3_3_min":5.75,"qwen_3_30b_max":null,"qwen_3_30b_min":null}
{"symbol":"CAT","year":2024,"quarter":2,"date":"2024-Q2","chunk_id":3,"sub_chunk_id":0,"centroid_label":"profit per share","agreed_value":5.48,"count":3,"chunk":"Andrew Bonfield: Thank you, Jim, and good morning, everyone. I'll begin with a high level summary of the quarter. Then I'll provide more detailed comments on our second quarter results, including the performance of the segments. Next, I'll discuss the balance sheet and free cash flow and then conclude with comments on our assumptions for the remainder of the year. Beginning on Slide 8. Although sales and revenues were slightly below our expectations, we had strong operating performance in the quarter, including higher adjusted operating profit margin and record adjusted profit per share, both of which were stronger than we had anticipated. Sales and revenues of $16.7 billion decreased by about 4% compared to the prior year. Adjusted operating profit increased by 2% to $3.7 billion. And the adjusted operating profit margin was 22.4%, an increase of 110 basis points versus the prior year. Profit per share was $5.48 in the second quarter compared to $5.67 in the second quarter of last year. Adjusted profit per share increased by 8% to $5.99 in the quarter compared to $5.55 last year. Adjusted profit per share excluded restructuring costs of $0.51 per share mainly due to a loss on the divestiture of two non-US entities. This compares to restructuring costs of $0.05 per share and a discrete deferred tax benefit of $0.17 per share, which were both excluded in the second quarter of 2023. Other income of $155 million for the quarter was a $28 million benefit versus the prior year and was primarily driven by favorable impacts from commodity hedges. The provision for income taxes in the second quarter, excluding discrete items, reflected a global annual effective tax rate of 22.5% compared with 23% in the second quarter of 2023. Finally, the year-over-year impact from the reduction in the average number of shares outstanding primarily due to share repurchases over the past year had a favorable impact on adjusted profit per share of approximately $0.29. Moving on to Slide 9. I'll discuss our top line results in the second quarter. Sales and revenues decreased by 4% compared to the prior year as lower volume was partially offset by favorable price realization. Lower volume was mainly driven by the impact from the changes in dealer inventories. As you may recall, we anticipated a sales decline this quarter versus last year as an atypical dealer inventory increase in the second quarter of 2023 made for a challenging comparison. To explain, dealer inventory decreased by about $200 million in the second quarter. In comparison, we saw an increase of $600 million in the second quarter of last year. For machines only, dealer inventory followed the typical seasonal trend this quarter with a decrease of $400 million as compared to a $200 million increase in the second quarter of last year. Sales were slightly below our expectations due to lower-than-expected volume being partially offset by better-than-expected price realization, including geographic mix. Moving to operating profit on Slide 10. Operating profit in the second quarter decreased by 5% to $3.5 billion. This included a $227 million unfavorable impact from higher restructuring costs. Adjusted operating profit increased by 2% to $3.7 billion. Price realization benefited the quarter while the profit impact of lower sales volume acted as a partial offset. The adjusted operating profit margin of 22.4% improved by 110 basis points versus the prior year. Margins were better than we expected mainly due to favorable manufacturing costs, product mix and price. Versus our expectation, price was slightly better than we anticipated driven by Energy & Transportation. On Slide 11, Construction Industries sales decreased by 7% in the second quarter to $6.7 billion. This is primarily due to lower sales volume, partially offset by favorable price realization. Sales volume was impacted by unfavorable changes in dealer inventories. Dealer inventory was about flat in the second quarter of 2024 versus an increase in the second quarter of last year. Lower sales to users also impacted volume. Sales in Construction Industries were lower than we had anticipated due to lower-than-expected rental fleet loading in North America and continued weakness in Europe. By region, sales in North America were about flat and Latin America sales increased by 20%. Sales in the EAME region decreased by 27%. In Asia Pacific, sales declined by 15%. Second quarter profit for Construction Industries was $1.7 billion, a 3% decrease versus the prior year. This was mainly due to lower sales volume, partially offset by favorable price realization, which benefited from geographic mix effects. Favorable manufacturing costs provided some tailwind as well largely reflecting lower material costs. The segment's margin of 26.1% was an increase of 90 basis points versus last year. Margin was better than we had expected primarily due to a favorable product mix and the timing of planned SG&A and R&D spend. Price was in line with our expectations. Turning to Slide 12. Resource Industries sales decreased by 10% in the second quarter to $3.2 billion, which was about in line with our expectations. The decline was primarily due to lower sales volume, partially offset by favorable price realization. Sales volume was impacted by changes in dealer inventories as dealer inventory decreased more during the second quarter of 2024 than during the second quarter of last year. In addition, we saw lower sales to users in the segment as anticipated given the challenging comparison. Second quarter profit for Resource Industries decreased by 3% versus the prior year to $718 million. This is mainly due to lower sales volume, partially offset by favorable impacts from price realization and manufacturing costs, including lower freight. The segment's margin of 22.4% was an increase of 160 basis points versus last year. Margin was better than we had expected mainly driven by the timing of planned SG&A and R&D spend and a favorable product mix. Now on Slide 13. Energy & Transportation sales increased by 2% in the second quarter to $7.3 billion. The increase was due to favorable price realization, which was partially offset by lower sales volume driven by industrial, which declined in line with our expectations. The segment sales were slightly better than we had anticipated primarily driven by price. By application, power generation sales increased by 15%. Transportation sales were higher by 7%. Oil and gas sales improved by 4%, while industrial sales decreased by 21%. Second quarter profit for Energy & Transportation increased by 20% versus the prior year to $1.5 billion. The increase was primarily due to favorable price. The segment's margin of 20.8% was an increase of 320 basis points versus the prior year. Margin was significantly stronger than we had anticipated due to better price and lower-than-expected manufacturing costs, which largely reflected favorable inventory absorption, lower freight and lower material costs. Moving to Slide 14. Financial Products revenues increased by 9% to about $1 billion primarily due to higher average financing rates across all regions and higher average earning assets in North America. Segment profit decreased by 5% to $227 million. This was mainly due to a higher provision for credit losses, which largely reflected the absence of a nonrecurring reserve release from the prior year. The portfolio remains healthy as past dues of 1.74% on near historic lows and reflect a 41 basis point improvement compared to the prior year. In addition, the allowance rate was 0.89% our lowest rate on record. Business activity remains healthy as new business volume increased versus the prior year primarily driven by North America. We also continue to see healthy demand for used equipment where inventories remain close to historical low levels. Moving on to Slide 15. We generated $2.5 billion in ME&T free cash flow in the second quarter and we expect our full year free cash flow to be in the top half of our annual target range of between $7.5 billion to $10 billion. Our expectations for CapEx remain between $2 billion and $2.5 billion for the year. On share repurchases, the more than $1.8 billion deployed in the second quarter included a $1 billion accelerated share repurchase agreement. Approximately 75% of those shares were delivered to the company upfront with the balance to be delivered when the agreement is terminated prior to year-end. Note that we also had an ME&T bond maturity of $1 billion in the second quarter. And given our healthy liquidity position, we did not issue new bonds. Our balance sheet remains strong with an enterprise cash balance of $4.3 billion. In addition, we hold $1.8 billion in slightly longer-dated liquid marketable securities to improve yields on that cash. Now on Slides 16 and 17, I will show our high-level assumptions for the remainder of the year. As Jim mentioned, we now anticipate sales and revenues to be slightly lower this year versus the record 2023 level. This compares to our previous expectation for broadly similar sales. This change reflects an updated assumption of a slight reduction in machine dealer inventory, primarily in Resource Industries and lower-than-expected sales to users in Construction Industries mainly due to lower rental fleet loading in North America. Now specific to our second half assumptions. We typically see higher sales in the second half as compared to the first and we expect sales to follow that normal seasonable trend this year. As compared to the prior year, we now anticipate slightly lower sales in the second half driven by lower machine sales to users. Changes in dealer inventories and machines are expected to have a nominal impact as the decrease in the second half of this year should be similar to the decrease observed in the second half of 2023, which was about $1 billion. However, note that machine dealer inventory changes will impact the quarters differently as we expect a sales headwind in the third quarter as dealers built their inventories in the third quarter of 2023 and a sales tailwind in the fourth quarter due to a smaller inventory decline than the prior year. Finally, we continue to anticipate services growth in the second half of the year as we strive to achieve our 2026 target of $28 billion in services revenues. Moving on to our margin expectations. As Jim mentioned, the strength of our first half performance combined with the more favorable expectations for the second half mean that we now anticipate overall adjusted operating profit margin to be above the top end of the target range for the full year. Specific to second half margins, despite higher sales, we do expect lower margins versus the first half, which follows a typical seasonable trend. However, keep in mind that first half margins were at record levels and the magnitude of the second half decline may be slightly larger than is typical. As compared to the prior year, we expect our adjusted operating profit margin in the second half will be similar to the prior year level. While we anticipate some favorability in manufacturing costs on improved operational efficiencies, we do expect slightly lower volumes and a slight headwind from price in the second half versus a year ago. On price, the impact of lapping the increases taken in the second half of 2023 means that the benefit in the second half of this year will be significantly lower. In addition, we expect that improved availability across the industry will result in the normalization of the pricing environment. To assist you with your modeling for the full year, please note that we now anticipate restructuring costs of around $450 million and that our expectations for the annual effective tax rate, excluding discrete items, remains at 22.5%. Now on Slide 18. I'll provide a few comments on the third quarter, starting on the top line. We expect slightly lower sales and revenues in the third quarter compared to the prior year as we anticipate a dealer inventory headwind for machines, which will impact volumes. We expect dealer inventory machines to be flattish to slightly lower in the third quarter as is typical, which compares to the atypical $400 million increase in the prior year. We also anticipate lower machine sales to users versus a strong comparison. We expect flattish price realization in the third quarter versus the prior year due to the normalization that I mentioned a moment ago. We also anticipate that the ongoing benefit of our service initiatives will positively impact sales in the third quarter. By segment in the third quarter compared to the prior year, we anticipate lower sales in Construction Industries primarily due to a headwind from changes in dealer inventories. In Resource Industries, we expect lower sales as sales to users are impacted by a challenging comparison similar to that which we have observed in the first two quarters of this year. In Energy & Transportation, we anticipate higher sales versus the prior year, supported by strengthen in power generation, oil and gas and transportation. Lower sales in industrial should act as a partial offset. For enterprise margins in the third quarter, we expect similar adjusted operating profit margin compared to the prior year as we anticipate lower volume will be offset primarily by favorable manufacturing costs. By segment in the third quarter, in Construction Industries, we anticipate lower margin compared to the prior year on lower volume and slightly unfavorable price realization. Favorable manufacturing costs should act as a partial offset. For Resource Industries, we anticipate slightly lower margins in the third quarter compared to the prior year due to unfavorable volume and higher SG&A and R&D spend. In Energy & Transportation, we expect a higher margin versus the prior year and stronger volumes and favorable price realization. So turning to Slide 19, let me summarize. Strong execution and operating performance continued in the second quarter. Higher adjusted operating profit margin of 22.4% offset the decrease in sales and revenues and led to a record adjusted profit per share of $5.99. We now expect overall adjusted operating profit margin to be above the top end of the target range for the full year based on our expected sales levels, which should now be slightly lower than levels in 2023. The net of these factors leads to our current expectation for higher adjusted operating profit and adjusted profit per share as compared to what we contemplated at the beginning of the year. ME&T free cash flow generation was $2.5 billion in the quarter. We continue to expect to be in the top half of our target range for the full year. We have deployed $7.6 billion to shareholders through share repurchases and dividends in the first half of 2024. We continue to execute our strategy for long-term profitable growth. And with that we'll take your questions.","evidence_gemma_new":"profit per share","evidence_llama_3_3":"profit per share second quarter","evidence_qwen_3_30b":"profit per share $5.48 decreased by about 3%","gemma_new_max":5.48,"gemma_new_min":5.48,"llama_3_3_max":5.48,"llama_3_3_min":5.48,"qwen_3_30b_max":5.48,"qwen_3_30b_min":5.48}
{"symbol":"CAT","year":2024,"quarter":3,"date":"2024-Q3","chunk_id":3,"sub_chunk_id":0,"centroid_label":"profit per share","agreed_value":5.06,"count":3,"chunk":"Andrew Bonfield: Thank you, Jim, and good morning, everyone. As usual, I'll begin with a high-level summary of the third quarter, and then provide more detailed comments, including the performance of the segments. I'll then, discuss the balance sheet and free cash flow, before concluding with comments on our assumptions for the full year and the fourth quarter. Beginning on Slide 8, although sales and revenues were lower than we had expected, our adjusted operating profit margin was 20.0%, generally in line with what we had anticipated. Adjusted profit per share was in line with our expectations despite adjusted operating profit being impacted by the lower sales and revenues. I will highlight a few of the moving parts in a moment. As Jim mentioned, our full year margin expectations remain unchanged, and we continue to anticipate the adjusted operating profit margin will be above the top end of the target range despite the slightly lower outlook for the top-line. Our expectations for adjusted profit per share remain unchanged versus our expectations at the time of our last earnings call. Also, we have increased our expectations for ME&T free cash flow for the year, which we now anticipate will be near the top of our $5 billion to $10 billion target range. In the third quarter, sales and revenues of $16.1 billion decreased by 4% compared to the prior year. The adjusted operating profit margin of 20.0% was 80 basis points lower when compared to the prior year. Profit per share was $5.06 in the third quarter compared to $5.45 in the third quarter of last year. Restructuring costs were $0.11 in the quarter versus $0.07 in the prior year. Adjusted profit per share was $5.17 in the quarter compared to $5.52 last year. Other income and expense was $119 million headwind versus the prior year, mostly driven by an unfavorable currency impact related to ME&T balance sheet translation. We do not forecast the impact of foreign currency translation on our adjusted profit per share, so this acted as a headwind compared to our expectations for the quarter. Excluding discrete items, the provision for income taxes in the third quarter in both 2023 and 2024 reflected a global annual effective tax rate of 22.5%. We recorded a discrete tax benefit, which had an $0.11 favorable impact within the quarter. We do not anticipate discrete items. Finally, the year-over-year impact from the reduction in the average number of shares outstanding, primarily due to share repurchases, resulted in a favorable impact on adjusted profit per share of approximately $0.26 as compared to the third quarter 2023. This was slightly better than we had expected. Moving to Slide 9, I'll discuss our top-line results for the third quarter. Sales and revenues decreased by 4% compared to the prior year, primarily impacted by lower sales volume as a result of lower sales to users and impacts from changes in dealer inventories. Total sales to users decreased by 6% as a 10% decrease from Machines was partially offset by a 5% increase for Energy & Transportation. The impact from changes in total dealer inventories acted as a sales headwind of about $200 million in the quarter. For Machines-only, dealer inventory increased by about $100 million, a smaller increase than the $400 million increase in the prior year, but slightly above our expectations of being flattish to slightly lower. Service revenues increased versus the prior year, as we had anticipated. Moving to operating profit on Slide 10. Operating profit in the third quarter decreased by 9% to $3.1 billion. Adjusted operating profit decreased by 8% to $3.2 billion, mainly due to the impact of lower sales volume, partially offset by favorable price realization and manufacturing costs. Since early 2022, price realization has been a strong -- has been strong and often exceeded our expectations. Over the past several quarters, we have highlighted that price will begin to moderate in the second half of this year. In the third quarter, this moderation began to occur as price realization was lower than previous quarters and generally in line with our expectations. As I mentioned, for the third quarter, the adjusted operating profit margin was 20.0%, which was generally in line with our expectations. By segment, margin in Construction Industries and Resource Industries was slightly below our expectations on lower volume, while Energy & Transportation was about in line. Financial products had a slightly stronger quarter than we had expected. On Slide 11, Construction Industries sales decreased by 9% in the third quarter to $6.3 billion, slightly below our expectations. The decrease versus the prior year was primarily due to lower sales volume and unfavorable price realization. The decrease in sales volume was mainly driven by lower sales of equipment to end users. Changes in dealer inventories also acted as a slight headwind to sales. By region, Construction Industries sales in North America decreased by 11%; in Latin America, sales increased by 19%; sales in the EAME region decreased by 15%; in Asia Pacific, sales declined by 12%. Third quarter profit for Construction Industries was $1.5 billion, a 20% decrease versus the prior year. This is mainly due to the profit impact of lower sales volume and unfavorable price realization. The segment's margin of 23.4% was a decrease of 300 basis points versus the prior year. Turning to Slide 12, Resource Industries sales decreased by 10% in the third quarter to $3.0 billion, which was slightly point below our expectations. The decline versus the prior year was primarily due to lower sales volume, mainly driven by lower sales of equipment to end users given a challenging comparison to the prior year. Third quarter profit for Resource Industries decreased by 15% versus the prior year to $619 million. This was mainly due to the profit impact of lower sales volume. The segment's margin of 20.4% was a decrease of 140 basis points versus the prior year. Now, on Slide 13, Energy & Transportation sales increased by 5% in the third quarter to $7.2 billion, slightly lower than we had expected, driven by the timing of deliveries. The increase versus the prior year was primarily due to favorable price realization and higher sales volume, including higher intersegment sales. By application, power generation sales increased by 26%, transportation sales were higher by 3%, oil and gas sales decreased by 1%, and industrial sales decreased by 16%. Third quarter profit for Energy & Transportation increased by 21% versus the prior year to $1.4 billion. The increase was mainly due to favorable price realization. The segment's margin of 19.9% was an increase of 270 basis points versus the prior year. Moving to Slide 14, financial products revenues increased by 6% to about $1 billion, primarily due to higher average earning assets driven by North America and higher average financing rates across all regions. Segment profit increased by 21% to $246 million. This is mainly due to a favorable impact from equity securities and a lower provision for credit losses. Our customers' financial health is strong. Past dues remain near historic lows of 1.74% in the quarter, down 22 basis points versus the prior year. Our allowance rate was 0.87%, our lowest on record. Business activity at Cat Financial remains healthy. Our retail new business volume increased by 17% versus the prior year, supported by our financing packages for customers choosing to buy Caterpillar equipment. Though Caterpillar's retail machine sales volume was lower, proportionately more sales have been financed through Cat Financial, which highlights the attractiveness of the financing options we are offering to our customers. We also continue to see healthy demand for used equipment and inventories remain at low levels. Conversion rates are also strong as customers choose to buy equipment at the end of their lease term. Moving on to Slide 15, we generated about $2.7 billion in ME&T free cash flow in the third quarter and deployed about $1.5 billion in share repurchases and dividends. Our balance sheet remains strong with an enterprise cash balance of $5.6 billion. In addition, we hold $1.8 billion in slightly longer dated liquid marketable securities to improve yields on that cash. Now, on Slide 16, I will share our high-level assumptions for the full year. For the full year, we have updated our outlook to reflect sales and revenues that are slightly lower than our expectations at the time of our last earnings call, driven by lower-than-expected third quarter sales and an update to our expectations for dealer rental fleet loading in Construction Industries. We continue to anticipate services growth in 2024. As I mentioned earlier, our full year expectations for adjusted operating profit margin and adjusted profit per share remain unchanged compared to our last earnings call. We continue to expect adjusted operating profit margin to be above the top end of the target range. In addition, we are increasing our expectations for ME&T free cash flow for the year, which we now anticipate to be near the top of our $5 billion to $10 billion target range. To assist you with your modeling for the full year, we now anticipate CapEx of around $2 billion and restructuring costs of approximately $400 million. Our expectation for the global annual effective tax rate, excluding discrete items, remains at 22.5%. Turning to Slide 17, I'll provide a few comments on the fourth quarter, starting with the top-line. We expect slightly lower sales and revenues in the fourth quarter compared to the prior year, impacted by lower machine sales to users versus a strong comparison. On machine dealer inventory, our planning assumptions include the expectation that dealers will reduce their inventories in the fourth quarter while balancing their need to be prepared for 2025. The magnitude of the decline for machine dealer inventory is expected to be less than the $1.4 billion decrease we saw in the fourth quarter of 2023. For perspective, we expect machine dealer inventory to end the year around the same level as year-end 2023. Also, the ongoing benefit of our services initiatives is expected to positively impact sales in the fourth quarter. By segment, in the fourth quarter, compared to the prior year, we anticipate a sales decrease in Construction Industries. This is impacted by lower sales to users, which Jim mentioned, along with unfavorable price realization. In Resource Industries, we expect slightly lower sales, impacted by lower sales to users versus a strong fourth quarter of 2023. In Energy & Transportation, we anticipate slightly higher sales versus the prior year, supported by power generation. Enterprise margin in the fourth quarter is expected to trend lower compared to the third quarter, following the typical seasonable pattern. However, versus the prior year, we expect a modestly higher adjusted operating profit margin despite lower sales. We anticipate favorable manufacturing costs and lower SG&A and R&D expenses will more than offset the profit impact of lower sales volume. Lower SG&A and R&D expenses are primarily driven by the benefit of lower short-term incentive compensation versus a high expense in the prior year quarter. Price realization for Machines is expected to trend lower as the pricing environment continues to normalize, though price in Energy & Transportation should act as a partial offset. Regarding price expectations for Machines, it is important to note that discounts to dealers occur through post sales merchandising programs, which impact our results over time. This includes financing support from Cat Financial, which is an effective way of supporting our customers, and we recover a portion of that support over the life of the deal. Let me explain. Based on the current level of price discounting support, we reserve the anticipated payments to dealers for these merchandising programs. At times, there is a lag between the timing of the invoice of the dealer and when the dealer invoices the customer, which impacts the reserve. Over the next few quarters, we expect the impact from these merchandising programs to drive a headwind to Machine price realization as we continue to adjust the reserve to reflect the current level of price discounting support. By segment, in the fourth quarter, in Construction Industries, we anticipate lower margin compared to the prior year primarily due to unfavorable price realization, partially offset by favorable manufacturing costs. In Resource Industries, we anticipate lower margin in the fourth quarter compared to the prior year, mainly due to lower volume and prioritization of strategic investments around services growth and AACE, which is autonomy, alternative fuels, connectivity and digital, and electrification. Favorable manufacturing costs should act as a partial offset. In Energy & Transportation, we expect a higher margin versus the prior year, primarily impacted by favorable price realization. So, turning to Slide 18, let me summarize. Although sales and revenues were lower than we had expected, adjusted operating profit margin and adjusted profit per share were generally in line with our expectations. We now anticipate our top-line for the full year will be slightly below our prior estimate. Our backlog increased slightly and remains at a very healthy level. Our expectations for full year adjusted operating profit margin and adjusted profit per share remain unchanged compared to a quarter ago. We continue to expect adjusted operating profit margin to be above the top end of the target range for the full year based on our expected sales levels. We are now increasing our expectations for ME&T free cash flow, which we anticipate to be near the top of our target range for the full year. Our team executed well in the quarter, and our results continue to benefit -- to reflect the benefit of the diversity of our end markets and the disciplined execution of our strategy for long-term profitable growth. And with that, we'll now take your questions.","evidence_gemma_new":"Profit per share","evidence_llama_3_3":"profit per share third quarter","evidence_qwen_3_30b":"profit per share $5.06 third quarter","gemma_new_max":5.06,"gemma_new_min":5.06,"llama_3_3_max":5.06,"llama_3_3_min":5.06,"qwen_3_30b_max":5.06,"qwen_3_30b_min":5.06}
{"symbol":"CAT","year":2024,"quarter":4,"date":"2024-Q4","chunk_id":3,"sub_chunk_id":0,"centroid_label":"profit per share","agreed_value":5.78,"count":3,"chunk":"Andrew Bonfield: Thank you Jim, and good morning everyone. I\u2019ll begin with a summary of the fourth quarter and then provide more detailed comments, including some on the performance of the segments. Next, I\u2019ll discuss the balance sheet and free cash flow before concluding with comments on our high level assumptions for 2025, as well as expectations for the first quarter. Beginning on Slide 9, sales and revenues were $16.2 billion, a 5% decrease versus the prior year. As Jim mentioned, sales were slightly lower than we had anticipated, which together with unfavorable mix resulted in lower than expected margins for the quarter. Adjusted operating profit was $3 billion and our adjusted operating profit margin was 18.3%. Profit per share was $5.78 in the fourth quarter compared to $5.28 in the fourth quarter of last year. Adjusted profit per share was $5.14 in the quarter, a 2% decrease compared to $5.23 last year. Adjusted profit per share excluded a discrete tax benefit of $0.46 for a tax law change related to currency translation. Mark to market gains of $0.23 for the re-measurement of pension and other post-employment plans was also excluded, in addition to restructuring costs of $0.05 in the quarter. Other income expense was $185 million favorable versus the prior year, mostly driven by a positive currency impact related to ME&T balance sheet translation, which compared to a negative impact in the fourth quarter last year. As I have mentioned previously, we do not anticipate currency translation movements, so the positive impact on the fourth quarter of 2024 helped to offset the impact of operating profit being lower than expected. Excluding discrete items, the provision for income taxes in the fourth quarter of 2024 reflected a global annual effective tax rate of 22.2%. This was slightly lower than we had expected a quarter ago and benefited the quarter by $0.09. Finally, the year-over-year impact from the reduction in the average number of shares outstanding, primarily due to share repurchases, resulted in a favorable impact on adjusted profit per share of approximately $0.24 as compared to the fourth quarter of 2023. Moving onto Slide 10, I\u2019ll discuss the top line results for the fourth quarter. Sales and revenues decreased by 5% compared to the prior year, primarily impacted by lower sales volume. Price was unfavorable year-over-year and about in line with what we had expected. Lower volume was driven by the impact from changes in dealer inventories and a 2% year-over-year decrease in total sales to users. Total machine dealer inventory decreased by $1.6 billion in the quarter compared to $1.4 billion decrease in the prior year. The decrease in machine dealer inventory was larger than we had expected, and it\u2019s mostly a function of higher than anticipated sales to users across both construction industries in North America and resource industries. Service revenues increased in the quarter compared to 2023. As I mentioned, the sales decrease in the quarter was slightly larger than we had anticipated. This was mostly due to services growing at a slightly slower rate than we had expected and some delivery delays in energy and transportation. Moving to operating profit on Slide 11, operating profit in the fourth quarter decreased by 7% to $2.9 billion. Adjusted operating profit decreased by 8% to $3 billion mainly due to the profit impact of lower than expected sales volume. As I mentioned, for the fourth quarter the adjusted operating profit margin was 18.3%, a 60 basis point decrease compared to the prior year. This was lower than we had anticipated mainly due to a lower than expected sales volume and the impact of unfavorable mix. On Slide 12, construction industry sales decreased by 8% in the fourth quarter to $6 billion. This was slightly below our expectations on lower than anticipated volume. Compared to the prior year, the 8% sales decrease was primarily due to unfavorable price realization and lower sales volume. The decrease in sales volume was mainly driven by lower sales of equipment to end users and dealers reducing their inventory by slightly more than they did during the fourth quarter of 2023. By region, construction industry sales in North America decreased by 14%. In Latin America, sales increased by 6%. Sales in the EAME region decreased by 1%, and Asia Pacific sales decreased by 2%. Fourth quarter profit for construction industries was $1.2 billion, a 24% decrease versus the prior year. This was primarily due to unfavorable price realization as a result of the impact of the post-sales merchandising programs that we discussed with you in October. The segment\u2019s margin of 19.6% was a decrease of 390 basis points versus the prior year. The margin was lower than we had anticipated, primarily impacted by lower volume and unfavorable mix. Manufacturing costs were also unfavorable versus our expectations, principally due to a headwind from cost absorption as our inventory in construction industries declined. Turning to Slide 13, resource industry sales decreased by 9% in the fourth quarter to $3 billion. This was below our expectations mainly due to services growing at a slightly lower rate than we had anticipated. As we compare to the prior year, the 9% sales decrease was primarily due to lower sales volume mainly driven by the impact from changes in dealer inventories. Dealer inventory decreased more in the fourth quarter of 2024 than it did in the fourth quarter of 2023. Fourth quarter profit for resource industries decreased by 22% versus the prior year to $466 million. This was mainly due to the profit impact of lower sales volume. The segment\u2019s margin of 15.7% was a decrease of 280 basis points versus the prior year. This was lower than we had anticipated, primarily due to lower volume. Now on Slide 14, energy and transportation sales of $7.6 billion were about flat versus the prior year. Sales were slightly below our expectations to a lower than expected services growth rate, largely in oil and gas, and the timing of deliveries of international locomotives. Compared to the prior year, sales were roughly flat as the impact of lower sales volume was mostly offset by favorable price realization. By application, power generation sales increased by 22%, transportation sales were lower by 1%, oil and gas sales decreased by 14%, and industrial sales decreased by 14%. Fourth quarter profit for energy and transportation increased by 3% versus the prior year to $1.5 billion. The increase was primarily due to favorable price realization partially offset by the profit impact of lower sales volume. The segment\u2019s margin of 19.3% was an increase of 70 basis points versus the prior year. This was lower than we had anticipated, primarily due to lower than expected volume and an unfavorable mix of products. Moving to Slide 15, financial products revenues increased by 4% versus the prior year to about $1 billion, primarily due to higher average earning assets in North America and higher average financing rates across all regions, except North America. Segment profit decreased by 29% to $166 million. This was mainly due to an unfavorable impact from equities securities in addition to lower margin and a higher provision for credit losses. Our customers\u2019 financial health remains strong. Past dues were 1.56% in the quarter, down 23 basis points versus the prior year and our lowest level since 2005. The allowance rate was 0.91%, remaining near historic lows. Business activity at Cat Financial remains healthy. Retail credit applications increased and our retail new business volume grew by 3% versus the prior year. This was our highest level since 2012, supported by attractive finance packages for customers choosing to buy Caterpillar equipment. We continue to see proportionately more of our sales financed through Cat Financial; in addition, demand for used equipment remains healthy and inventories remain at low levels. Conversion rates were above historical averages as customers choose to buy equipment at the end of their lease term. Moving onto Slide 16, we continue to generate strong ME&T free cash flow. The $9.4 billion in 2024 was near the top end of our target range and just slightly lower than the prior year despite a larger payment for short term incentive compensation and higher capital expenditure. CapEx for the year was about $2 billion, which was in line with our expectations. Moving to capital deployment, in 2024 we returned $10.3 billion to shareholders through repurchased stock and dividends. On share repurchases, we deployed $7.7 billion as we continue to fulfill our objective to be in the market on a more consistent basis. Our balance sheet remains strong with an enterprise cash balance of $6.9 billion. In addition, we hold $2 billion in slightly longer dated liquid marketable securities to improve yields on that cash. Now on Slide 17, let me start with a high level overview of our expectations for the full year. We expect a slight decrease in sales for 2025 with an unfavorable impact from both volume and price. Due to the impact of post-sales merchandising programs, price realization should account for about a 1% decrease in sales for the full year. On margins, the impact of price together with high depreciation costs due to the investments we are making should result in adjusted operating profit margins being in the top half of the target range with the expected level of sales, rather than being above the top end of the range, as occurred in 2024. Our margin targets are progressive, so while we would expect volume to have an impact on absolute margins, our target is adjusted for lower sales. We expect a slight headwind in other income and expense in 2025 primarily due to lower interest income, mostly due to lower interest rates, as well as the absence of the positive currency benefit from ME&T balance sheet translation that occurred in 2024. As I mentioned, we do not anticipate translation movements in our expectations. We expect restructuring costs of approximately $150 million to $200 million in 2025. We anticipate a global annual effective tax rate of 23% for 2025, excluding discrete items. While the impact of the share buyback should be positive, we expect to have less ME&T free cash flow to deploy in 2025. This implies a less favorable impact to profit per share in 2025 as compared to 2024. By segment, lower sales in construction industries and resource industries will be partially offset by sales growth in energy and transportation. For construction industries, we expect lower sales in 2025 based on the outlook Jim described and unfavorable price realization. In resource industries, we anticipate slightly lower sales versus 2024 driven by unfavorable price realization and slightly lower volume. Higher volumes and favorable price in energy and transportation should drive sales growth, though sales remain constrained until the benefits of the investments we are making in large engines begin to flow through beyond 2025. We also anticipate another year of services growth in each of our primary segments. Currently, we do not anticipate a significant change in dealer inventory in machines by the end of 2025. Moving onto ME&T free cash flow, we expect to be in the top half of our target range of $5 billion to $10 billion. The first quarter of 2025 will be impacted by a $1.4 billion cash outflow related to the payout of last year\u2019s incentive compensation. We anticipate CapEx of about $2.5 billion in 2025 as we continue to make disciplined investments that are right for our business, governed by a focus on growing absolute OPACC [ph] dollars. This includes the multi-year capital investment to expand our large engine volume output capability that we mentioned last year. Turning to Slide 18, to assist with your modeling, I\u2019ll provide some color on the first quarter, starting with the top line. We expect lower sales versus the prior year. For perspective, in a typical year we see our lowest sales in the first quarter of the year. In 2025, we anticipate that trend to continue to be more pronounced as sales in the first quarter should account for a lower percentage of full year sales than is typical by about 100 basis points. This decrease is mainly due to our expectations for dealer inventory movements and price, which primarily impacts machines. Energy and transportation is expected to show normal seasonality with sales growing throughout the year. Let me explain. Although dealers did reduce machine inventory significantly in the fourth quarter, they remain around the top end of the range as we enter 2025. This compares with dealer inventories in construction industries being towards the middle of the range at the beginning of 2024. As a result, we expect them to build correspondingly less inventory during the first quarter than the $1.1 billion that they built in the first quarter of 2024. As we expect dealer inventory to be about flat by year end, we should see a tailwind to sales in the fourth quarter as we don\u2019t expect a similar machine dealer inventory change as we have seen in the last two years. We also expect unfavorable price realization for machines in the first quarter due to the impact of post-sales merchandising programs. We would expect these price impacts to be greater for machines in the first half of the year as the noticeable impact of post-sales merchandising programs started in the third quarter of 2024, making for an easier comparison in the second half. To pull together the impact by segment, we anticipate lower sales in construction industries in the first quarter, impacted by lower sales to users, the headwind from changes in dealer inventory and price, the impact of which should be similar to what we saw in the fourth quarter of 2024. In resource industries in the first quarter, we expect lower sales volume versus the prior year, impacted by lower volume and unfavorable price realization. In energy and transportation, we anticipate similar sales in the first quarter versus the prior year as continued strength in power generation is about offset by lower oil and gas and transportation sales. Price should be positive for energy and transportation. Now I\u2019ll provide some color on first quarter margin expectations. Though enterprise margins are typically stronger in the first quarter compared to with the remaining quarters of the year, we do not expect this seasonal trend to occur in 2025. Compared to the prior year, we anticipate a lower enterprise adjusted operating profit margin in the first quarter due primarily to lower than usual volume and price. Volume is impacted by the lower build of machine dealer inventory and slightly lower sales to users for machines. Unfavorable price realization for machines is principally due to the factors I\u2019ve discussed previously, which will be partially offset by favorable price in energy and transportation. We expect there will be improvement in first quarter margins offsetting the volume impact in the first quarter due to stronger volume in the fourth quarter than is typical. By segment, in the first quarter in construction industries, we anticipate lower margins compared to the prior year due primarily to lower volume and price. We do not expect to see the margin benefit we typically see in the first quarter of the year as compared to the fourth quarter of the prior year, which is generally in the range of 100 to 200 basis points. Again, some of this will be offset in the fourth quarter as volume is favorable and price more neutral. In resource industries, we anticipate lower margin in the first quarter compared to the prior year, mainly due to lower volume and unfavorable price realization. In energy and transportation, we expect slightly lower margin versus the prior year as favorable price realization is more than offset by higher manufacturing costs and unfavorable mix impacts. Again, as a reminder, this detail is provided to help you model the first quarter and does not impact our expectations for the full year that I set out earlier, which is a slight decrease in sales and revenues for the year and margins in the top half of the target range. Turning to Slide 19, let me summarize. Adjusted profit per share of $21.90 exceeded last year\u2019s record by 3%. This was our third straight year with record adjusted profit per share. Adjusted operating profit margin of 20.7% exceeded the top of our target range. ME&T free cash flow of $9.4 billion was near the top of the target range of $5 billion to $10 billion. For 2025, while we expect a slight drop in sales, we expect to be in the top half of the adjusted operating profit margin range and the top half of the ME&T free cash flow target range, and we anticipate another year of services growth. We continue to execute our strategy for long term profitable growth, and with that, we\u2019ll take your questions.","evidence_gemma_new":"profit per share","evidence_llama_3_3":"profit per share fourth quarter","evidence_qwen_3_30b":"profit per share 4th quarter","gemma_new_max":5.78,"gemma_new_min":5.78,"llama_3_3_max":5.78,"llama_3_3_min":5.78,"qwen_3_30b_max":5.78,"qwen_3_30b_min":5.78}
{"symbol":"CAT","year":2023,"quarter":1,"date":"2023-Q1","chunk_id":3,"sub_chunk_id":0,"centroid_label":"resource industries sales","agreed_value":3400000000.0,"count":3,"chunk":"Andrew Bonfield: Thanks, Jim, and good morning, everyone. I'll begin by providing further color on the first quarter results, including the performance of our segments. Then I'll cover the balance sheet and ME&T free cash flow before concluding with a few comments on the full year and our assumptions for the second quarter. Beginning on Slide 8. Sales and revenues for the first quarter increased by 17% or $2.3 billion to $15.9 billion, the sales increase versus the prior year was due to strong price realization and higher volume, partially offset by currency impacts. Sales were higher than we had expected in January, with price realization, dealer inventory and end user demand each slightly better than we had anticipated. Operating profit increased by 47% by $876 million to $2.7 billion, which includes the impact of the divestiture of the company's longwall business. Adjusted operating profit increased by 79% or $1.5 billion to $3.3 billion. Favorable price realization and higher volume was partially offset by higher manufacturing costs. The adjusted operating profit margin was 21.1%, an increase of 740 basis points versus the prior year. As Jim mentioned, the adjusted operating margin was much better than we had anticipated. Lower-than-expected manufacturing costs, including efficiencies and absorption were the largest variable, while price realization and volume were also stronger than we had envisioned. I'll provide additional color in a moment. Adjusted profit per share increased by 70% to $4.91 in the first quarter compared to $2.88 in the first quarter of last year. Adjusted profit per share in the first quarter of 2023 excluded pretax restructuring costs of $611 million, most of this related to the noncash charge from the divestiture of the company's longwall business. This compares to pretax restructuring costs of $13 million in the first quarter of 2022. Other income of $32 million in the quarter was lower than the first quarter of 2022 by $221 million. The year-over-year decline included about $100 million unfavorable currency impact related to ME&T balance sheet translation and an adverse impact of $80 million for pension expense. The dollar strengthened marginally since our last earnings call, so the currency impact within the first quarter of 2023 was about $30 million better than we had anticipated than when we spoke to you in January. Finally, the provision for income tax in the first quarter, excluding discrete items, reflected a global annual effective tax rate of 23%. Moving on to Slide 9. The 17% increase in the top line versus the prior year was driven by favorable price realization and higher sales volume, while currency remained a headwind to sales. Volume improved in part due to a 13% increase in sales to users. The impact from changes in dealer inventory was minimal, as the $1.4 billion build in the first quarter was similar to that seen in the first quarter of 2022. Services sales volume was slightly down, mainly due to dealer ordering patterns while services to their customers remain positive. Compared to our expectations a quarter ago, sales were higher than we anticipated, largely due to slightly stronger volume and better-than-expected price realization. On volume, sales to users outpaced our expectations due to strong demand. In addition, the improving supply chain supported higher levels of production across our primary segments. This enabled dealers to increase their inventory levels ahead of the selling season by slightly more than we had expected. Moving to Slide 10. First quarter operating profit increased by 47% to $2.7 billion. Adjusted operating profit increased by 79% versus the prior year quarter as favorable price realization outpaced higher manufacturing costs. Sales volume was also a benefit. Our first quarter adjusted operating profit margin of 21.1% was a 740 basis point increase versus the prior year. Now let me explain why our adjusted operating profit margin was so much better than we had expected. While manufacturing costs did increase year-over-year, the increase was less than we had than anticipated and was the most important factor in the quarter. As we have mentioned, volumes were better than expected due to favorable demand and improvements in the supply chain. This helped manufacturing cost as both factory efficiency and cost absorption were better than expected. Freight costs were also lower than we had anticipated due to lower premium freight utilization and rate reductions. Material costs were in line with our expectations and did not impact the margin outperformance. In addition to lower manufacturing costs, price realization was also stronger than we had anticipated a quarter ago. Stronger-than-anticipated volume had a smaller beneficial impact on margins. Spend on strategic investments was also lower than expected, as project spend ramps up slower than we had planned. Moving to Slide 11, I'll review segment performance. Starting with Construction Industries, sales increased by 10% in the first quarter to $6.7 billion due to favorable price realization, partially offset by lower sales volume and unfavorable currency impacts. The decrease in sales volume was driven by the impact from changes in dealer inventories, which increased by less in the first quarter of 2023 than compared to the prior year. Compared to our expectations, sales were higher due to stronger volumes. While sales to end users were as we'd anticipated, the dealer inventory increase was slightly above our expectations. By region, sales in North America rose by 33% due to favorable price realization and higher sales volume. Supply chain improvements enabled stronger-than-expected shipments in North America, supporting dealer restocking in the region. This is a positive, as North America continues to be our most constrained region from a dealer inventory perspective. Sales in Latin America decreased by 4% primarily due to lower sales volume, partially offset by favorable price realization. In EAME, sales increased by 5% on favorable price realization, partially offset by favorable currency impacts. Sales in Asia-Pacific decreased by 21% primarily due to lower sales volume and unfavorable currency impacts, partially offset by favorable price realization. First quarter profit for Construction Industries increased by 69% versus the prior year to $1.8 billion, price realization mainly drove the increase. This was partially offset by lower sales volume, including an unfavorable product mix and higher manufacturing costs. The segment's operating margin of 26.5% was an increase of 920 basis points versus last year. The segment margin for the quarter exceeded our expectations on moderating manufacturing costs and better-than-expected price and volume. Manufacturing costs were lower than we had expected on favorable freight, manufacturing efficiencies and absorption. Production volume was more favorable than we had anticipated, which drove the usual favorable benefits margins from the fourth quarter to the first. You will recall that in January, we said we did not expect that to happen. Turning to Slide 12. Resource Industries sales grew by 21% in the first quarter to $3.4 billion. The increase was primarily due to favorable price realization and higher sales volume. Although, aftermarket sales volumes were lower in resource industries due to dealer buying patterns, dealer services to customers remain positive. First quarter profit for Resource Industries increased by 112% versus the prior year to $764 million, mainly due to favorable price realization and higher sales volume. This was partially offset by unfavorable manufacturing costs. The segment's operating margin of 22.3% was an increase of 950 basis points versus last year. Segment margin was better than we expected due to lower manufacturing costs, including favorable absorption, efficiencies and freight. Price realization and volume benefits also exceeded our expectations. Now on Slide 13. Energy & Transportation sales increased by 24% in the first quarter to $6.3 billion, with sales up double-digits across all applications. Oil and gas sales increased by 39%, power generation sales by 27%, industrial sales rose by 23%. And finally, transportation sales increased by 14%. First quarter profit for Energy & Transportation increased by 96% versus the prior year to $1.1 billion. The increase was mainly due to favorable price realization and higher sales volume. Unfavorable manufacturing costs and higher SG&A and R&D expenses acted as a partial offset. SG&A and R&D expenses increased primarily due to investments aligned with our strategic initiatives, including electrification and services growth. The segment's operating margin of 16.9% was an increase of 620 basis points versus last year, but lower than the fourth quarter as is typical from a seasonality perspective. Compared to our expectations last quarter, margin was better than anticipated on lower manufacturing costs due in part to favorable absorption. Volume was also modestly stronger than we had expected. Moving to Slide 14. Financial Products revenue increased by 15% to $902 million primarily due to higher average financing rates across all regions. Segment profit decreased by 3% to $232 million. The slight profit decrease was mainly due to unfavorable impacts from equity securities, currency exchange losses and mark-to-market adjustments on derivative contracts. However, higher net yield on average earning assets and lower provision for credit losses acted as a partial offset. Business activity remains strong, and our portfolio continues to perform well. Past dues in the quarter were 2.00%, a 5 basis point improvement compared to the first quarter of 2022. This is the lowest first quarter past dues percentage since 2006. And whilst retail new business volume declined compared to the first quarter of 2022, this was expected as high interest rates drove more cash deals and increased competition from banks. Finally, we continue to see strong demand for used equipment, as prices remain elevated while used equipment inventory is at historic lows. Before I move on, I want to point out that CAT Financial has strong liquidity and broad access to funding. We are funded through the wholesale debt markets rather than from customer deposits, and we match assets and liabilities based on duration, currency and interest rate profile. As we have mentioned previously, in a rising interest rate environment, banks are able to provide more competitive interest rates than CAT Financial, and we tend to lose some share of the machines financed. In the event of a slowdown in lending from regional banks, we are well positioned to step in and fund creditworthy customers, so they can purchase their machines. Now on Slide 15. We continue to generate strong ME&T free cash flows. ME&T free cash flow of $1.4 billion in the quarter was about a $1.8 billion increase compared to an outflow in the prior year. The increase was primarily driven by higher profit. This increase is notable in the quarter that included our annual short-term incentive payout and a rise in working capital impacted by an increase in Caterpillar inventory. As Jim mentioned, following the strong half \u2013 first \u2013 strong first quarter, we expect to end the year in the top half of our ME&T free cash flow range of $4 billion to $8 billion. CapEx was around $400 million in the quarter, and we still expect to spend around $1.5 billion for the year. As Jim mentioned, capital deployment was about $1 billion in the quarter for dividends and share repurchases. Our balance sheet remains strong, and we have ample liquidity with an enterprise cash balance of $6.8 billion. Now on Slide 16, I will share some high-level assumptions for the full year, followed by the second quarter. Looking at the full year, we expect a strong top-line supported by price and higher sales to users, with healthy underlying end markets. As Jim mentioned, we expect full year reported sales for Construction Industries to be impacted by dealer inventory movements, particularly in the second half of the year. Underlying demand remains strong and as we do expect Construction Industries sales to users to show positive growth in the next three quarters. We anticipate continued strength in Resource Industries end markets and stronger end user sales in 2023. In addition, as typical seasonality would suggest, we expect to see some sales ramp in the second half in Energy & Transportation given strong demand for large engines and turbines. Moving on to margins. Based on our current planning assumptions, we anticipate full year adjusted operating profit margins to be in the top half of our target range. Given the favorable impact of cost absorption in the first quarter, which we do not expect to recur, we anticipate margins in the remaining quarters of the year will be lower than the first quarter level, while underlying demand and end markets remain strong. Also despite the slower-than-expected start, we anticipate the spend related to strategic investments within SG&A and R&D will ramp through the year. We expect price to continue to be favorable, although the absolute dollar value of the year-over-year price increases will moderate as we lap through the increases put through in 2022. We also expect the relationship between price and manufacturing costs for machines to normalize as the year progresses, as we\u2019ve now caught up to the manufacturing cost increases, which have outpaced price in late 2021 and early 2022. This means that the benefit to margins of price outpacing manufacturing cost inflation will moderate tempering the possibility of further margin expansion. Keep in mind, similar to the first quarter, we still anticipate a headwind of about $80 million per quarter at the corporate level related to pension expense. We also continue to anticipate restructuring expenses of around $700 million this year, with around $100 million remaining following the first quarter. And the global effective tax rate should be around 23%, excluding discrete items. Now on to our assumptions for the second quarter. We expect higher sales in the second quarter compared to the prior year on strong sales to users and price. Following the typical seasonal pattern, we expect higher sales in the second quarter as compared to the first. We expect Energy & Transportation sales will accelerate given strong sales to users, which are supported by healthy demand. We expect to report flattish sales levels compared to the first quarter in Construction Industries and Resource Industries. Both segments are expected to report positive sales to users. In the second quarter of 2022, we saw a decrease in dealer inventory of $400 million. We expect a smaller decrease in the second quarter of 2023. Specific to second quarter margins versus the prior year, adjusted operating margins at the enterprise and segment level should be substantially stronger than the prior year on favorable price and volume. However, we do expect to see a return to the typical seasonal pattern of lower second quarter margins compared to the first quarter, despite higher sales. We expect the year-over-year benefit of price realization in the second quarter to moderate compared to the benefit we saw in the first quarter, as we lapped prior year increases. In addition, SG&A and R&D investment spend should increase, as we continue to accelerate our strategic investments in areas like autonomy, alternative fuels, connectivity, digital and electrification. Finally, we do not anticipate that the favorable absorption impact that we saw in the first quarter will be repeated. At the segment level, in Construction Industries, we expect lower second quarter margins compared to the first quarter largely due to the lack of a favorable impact from absorption and a ramp-up in strategic investment spend. Likewise, second quarter margins in Resource Industries were likely to be lower than the first quarter as is the typical seasonal pattern. Conversely, Energy & Transportation should see a slight margin improvement compared to the first quarter levels, supported by stronger sales volume as demand remains healthy. Now turning to Slide 17, let me summarize. Sales grew by 17% led by strong price realization and volume gains. The adjusted operating profit margin increased by 740 basis points to 21.1%. ME&T free cash flow was strong at $1.4 billion, and we expect to be at the top half of our ME&T free cash flow range of $4 billion to $8 billion for the full year. After a strong first quarter, we currently expect our 2023 adjusted operating profit margins will be in the top half of our target range. The environment remains positive with improving supply chain dynamics, a strong backlog and healthy underlying end markets. We will continue to execute our strategy for long-term profitable growth. And with that, we\u2019ll take your questions.","evidence_gemma_new":"Resource Industries sales first quarter","evidence_llama_3_3":"Resource Industries sales first quarter 2023","evidence_qwen_3_30b":"resource industries sales 21% first quarter","gemma_new_max":3400000000.0,"gemma_new_min":3400000000.0,"llama_3_3_max":3400000000.0,"llama_3_3_min":3400000000.0,"qwen_3_30b_max":3400000000.0,"qwen_3_30b_min":3400000000.0}
{"symbol":"CAT","year":2023,"quarter":2,"date":"2023-Q2","chunk_id":3,"sub_chunk_id":0,"centroid_label":"resource industries sales","agreed_value":3600000000.0,"count":2,"chunk":"Andrew Bonfield: Thank you, Jim, and good morning, everyone. I'll begin with commentary on the second quarter results, including the performance of our business segments. Then I'll discuss the balance sheet and free cash flow before concluding with our assumptions for the remainder of the year, including color on the third quarter. Beginning on Slide 8. Our team delivered a very strong second quarter as overall results exceeded our expectations on strong operating performance. We saw a healthy top-line growth, improved operating margins and robust ME&T free cash flow. For the year, we now expect our adjusted operating profit margin to be close to the top of the targeted range at our anticipated sales level. We also expect ME&T free cash flow to be around the top of our $4 billion to $8 billion target range. To summarize the results, sales and revenues increased by 22% or $3.1 billion to $17.3 billion. Sales increase versus the prior year was due to higher sales volume and price realization. Operating profit increased by 88% or $1.7 billion to $3.7 billion. The adjusted operating profit margin was 21.3%, an increase of 750 basis points versus the prior year. Adjusted profit per share increased by 75% to $5.55 in the second quarter compared to $3.18 last year. Profit per share was $5.67 in the second quarter of this year. This included a discrete deferred tax benefit of $0.17 per share, while restructuring costs were $0.05 per share, flat compared to the prior year. We continue to expect restructuring expenses of about $700 million for the full-year. Other income of $127 million in the quarter was lower than the second quarter of 2022 by $133 million. The year-over-year decline was primarily driven by an unfavorable currency impact related to ME&T balance sheet translation and a recurring increase in quarterly pension expense of approximately $80 million, which we initially spoke to you about in January. Higher investment and interest income acted as a partial offset. The provision for income tax in the second quarter, excluding discrete items reflected a global annual effective tax rate of approximately 23%, which remains our expectation for the full-year. Moving on to Slide 9. The 22% increase in the top-line versus the prior year was due to higher sales volume and price. Volume improved as sales to users increased by 16% and from changes in dealer inventory. Sales for the quarter were higher than we had anticipated, mostly due to volume. The volume outperformance reflected a dealer inventory increase, which was primarily due to our stronger than expected shipments in Energy & Transportation, particularly in power generation, which is in line with strong data center demand. Price realization was in line with our expectations for the quarter. As I mentioned, sales to users grew by 16% in the quarter. As Jim has discussed, demand remains healthy across most end markets for all our products and services and is supported by a healthy order backlog. Moving to Slide 10. Second quarter operating profit increased by 88%, while adjusted operating profit increased by 87% to $3.7 billion. Year-over-year favorable price realization and higher sales volume were partially offset by higher manufacturing costs, which largely reflected higher material costs. An increase in SG&A and R&D expenses included higher strategic investment spend. The adjusted operating profit margin of 21.3% was better than we had anticipated. Volume exceeded our expectations, which supported the margin outperformance. In addition, manufacturing costs increased less than we expected due to lower freight costs and a lower than anticipated impact from cost absorption. SG&A and R&D expenses were about in line. Moving to Slide 11. I'll review the segment performance. Construction Industries sales increased by 19% in the second quarter to $7.2 billion due to price realization and higher sales volume. By region, sales in North America rose by 32% due to higher sales volume and price realization. Stronger demand and supply chain improvements enabled stronger than expected shipments in North America. This supported stronger sales of equipment to end users and some delivery stocking in what remains our most constrained region. Sales in Latin America decreased by 11%, primarily due to lower sales volume, partially offset by price realization. In EAME, sales increased by 20%, primarily the result of higher sales volume and price realization. Sales in Asia\/Pacific were about flat. Second quarter profit for Construction Industries increased by 82% versus the prior year to $1.8 billion. The increase was mainly due to price realization and higher sales volume. The segment's operating margin of 25.2% was an increase of 880 basis points versus last year. Margin exceeded our expectations, largely due to better than expected volume of freight costs, which were lower than we had anticipated. Turning to Slide 12. Resource Industries sales grew by 20% in the second quarter to $3.6 billion. The increase was primarily due to price realization and higher sales volume. Volume increased due to higher sales of equipment to end users. Although aftermarket sales volumes were lower, dealer sales to customers for services remained positive. Second quarter profit for Resource Industries increased by 108% versus the prior year to $740 million, mainly due to price realization and higher sales volume. This was partially offset by unfavorable manufacturing costs, largely material costs. The segment's operating margin of 20.8% was an increase of 880 basis points versus last year. The segment's margin was better than we had expected, primarily due to favorable volume, timing of SG&A and R&D spend and lower than anticipated freight costs. Now on Slide 13. Energy & Transportation sales increased by 27% in the second quarter to $7.2 billion. Sales were up double-digits across all applications. Oil and gas sales increased by 43%, power generation sales increased by 39%, industrial sales rose by 18% and transportation sales increased by 12%. Second quarter profit for Energy & Transportation increased by 93% versus the prior year to $1.3 billion. The increase was mainly due to higher sales volume and price realization, partially offset by unfavorable manufacturing costs and higher SG&A and R&D expenses. The segment's operating margin of 17.6% was an increase of 600 basis points versus last year. The margin was generally in line with our expectations. Moving to Slide 14. Financial Products revenue increased by 16% to $923 million, primarily due to higher average financing rates across all regions. Segment profit increased by 11% to $240 million. The increase was mainly due to a lower provision for credit losses at Cat Financial, partially offset by an increase in SG&A expense. Business activity remains strong, and our portfolio continues to perform well. Past dues in the quarter were 2.15%, a 4 basis points improvement compared to the second quarter of 2022. This is the lowest second quarter past dues percentage since 2007. Retail new business volume performed well, increasing versus the prior year and the first quarter. In addition, we continue to see strong demand for used equipment. Now on Slide 15. Our ME&T free cash flow generation was again robust as we generated $2.6 billion in the quarter. This was an increase of $1.5 billion compared to the prior year. With approximately $4 billion generated in the first half, we now expect ME&T free cash flow to be around the top of our $4 billion to $8 billion target range for the full-year. CapEx in the second quarter was about $300 million, and we still expect to spend around $1.5 billion for the full-year. As Jim mentioned, we returned about $2 billion through share repurchases and dividends in the second quarter. Our balance sheet remains strong. We have ample liquidity with an enterprise cash balance of $7.4 billion, and we also hold an additional $2 billion in slightly longer-dated liquid marketable securities to improve yields on that cash. Now turning to Slide 16. I will share some high level assumptions for the second half and the third quarter. In the second half of 2023, we expect higher total sales and revenues as compared to the second half of last year. We anticipate both sales to users and price realization will be positive in the second half. Keep in mind that on a comparative basis, we start to lap the stronger price we saw from the third quarter onwards last year. Caterpillar sales will be impacted by changes in dealer inventories as dealers increased their inventories in the second half of last year, which is not typical, versus our expectation of a more typical reduction in the second half of 2023. I want to spend just a few moments talking about dealer inventories. Dealers are independent businesses, and they make their own decisions around the level of inventory they hold. We obviously work closely with them because this impacts our production levels. As Jim mentioned, we are very comfortable with the levels of inventory that dealers are holding. We talk about dealer inventory in aggregate. This is difficult to predict with certainty as it arises from three different business segments, over 150 dealers and hundreds of different products. In Resource Industries and Energy & Transportation, dealer inventory is mainly a function of the commissioning pipeline. Keep in mind that over 70% of dealer inventory in these segments is backed by firm customer orders. For Construction Industries, dealer inventory is principally a function of end user demand and availability from the factory. In Construction Industries, dealers typically increase inventories during the first half of the year. Around 60% of the $2 billion increase during the first half of this year was from products in this segment. The remaining 40% is in Resource Industries and Energy & Transportation. For Resource Industries and Energy Transportation, we currently anticipate a slight reduction in levels in the second-half, but this is dependent on commissioning. In Construction Industries, dealers are currently holding around the midpoint of the typical three to four months range. Some dealers would like to increase inventories of certain products, such as BCP and earth moving due to strong customer demand. Conversely, some dealers would like to reduce the levels of excavated inventory because of high availability. In addition, we are scheduled to replace third-party engines with Cat engines and certain products, which will impact production in these products during the second half. Our current planning assumption for the Construction Industries is that dealers will reduce their overall levels in inventory in the second half of 2023 with a principal focus on excavators. Overall, at the enterprise level, we currently expect dealer inventory should be slightly higher at the end of 2023 versus last year. Moving on. On this slide, we provide our adjusted profit margins target charge to assist you in your modeling process. Based on our current planning assumptions, we anticipate full-year adjusted operating profit margin to be close to the top of that 300 basis points target range at our expected sales level. Your expectation for total enterprise sales this year will inform you where on the curve margins should finish for the year. Specific to the second half, we anticipate adjusted operating profit margins in the remaining quarters of the year will be above the year ago levels, although they will be lower than the levels we saw in the first two quarters of this year. As compared to the first half, we anticipate a margin headwind from cost absorption in the second half. We do not expect to build our inventory as we did in the first half and anticipate that there will be some inventory reduction if we continue to see sustained supply chain improvement. In addition, spend related to the strategic growth initiatives should continue to ramp. Price realization should remain positive that the magnitude of the favorability versus the prior year is expected to be lower in the second half as we lap the more favorable pricing trends from last year. Therefore, the increases in margins that we have occurred -- that have occurred from price outpacing manufacturing cost inflation should moderate in the second half of this year. Now let's move on to our assumptions that are specific to the third quarter. We anticipate third quarter sales to be higher than the third quarter of 2022, but to exhibit the typical sequential decline when compared to the second quarter of 2023. In Construction Industries, as is our normal seasonal end, we expect lower sales compared to the second quarter. In Resource Industries, which can be lumpy, we anticipate slightly lower sales compared to the second quarter. We expect sales in Energy & Transportation will increase slightly compared to the second quarter. Specific to third quarter margins versus the prior year, adjusted operating profit margins at the enterprise level and segment margins should be stronger. However, we do expect lower enterprise adjusted operating profit margins in the third quarter compared to the second quarter of this year on lower volume and impacts from cost absorption. We also anticipate investment spend will ramp across our primary segments as we continue to accelerate our strategic investments in area like autonomy, alternative fuels, connectivity and digital and electrification. At the segment level, for Construction Industries, we expect a lower margin compared to the second quarter as is typical. This is largely due to lower quarter-on-quarter volume, increased investment in strategic initiatives and slightly higher manufacturing costs, including a headwind from cost absorption. Favorable price realization will act as a partial offset. We also anticipate lower third quarter margins in Resource Industries compared to the second quarter, primarily due to lower volume quarter-on-quarter. Conversely, we expect third quarter margins in Energy & Transportation will be slightly higher compared to the second quarter on higher volume and stronger price realization, partially offset by higher manufacturing costs and spend relating to strategic initiatives. Now turning to Slide 13, let me summarize. We generated strong adjusted operating profit margin with a 750 basis point increase to 21.3%. We now expect to be close to the top of the targeted range for adjusted operating margin -- profit margin for the full-year based on our expected sales levels. ME&T free cash flow generation was robust at $2.6 billion in the quarter. We returned $2 billion to shareholders through share repurchases and dividends. We now expect ME&T free cash flow to be around the top of our $4 billion to $8 billion range for the full-year. Lastly, we continue to execute our strategy for long-term profitable growth. And with that, we'll now take your questions.","evidence_gemma_new":"Resource Industries sales second quarter","evidence_llama_3_3":"Resource Industries sales second quarter","evidence_qwen_3_30b":null,"gemma_new_max":3600000000.0,"gemma_new_min":3600000000.0,"llama_3_3_max":3600000000.0,"llama_3_3_min":3600000000.0,"qwen_3_30b_max":null,"qwen_3_30b_min":null}
{"symbol":"CAT","year":2024,"quarter":2,"date":"2024-Q2","chunk_id":3,"sub_chunk_id":0,"centroid_label":"resource industries sales","agreed_value":3200000000.0,"count":2,"chunk":"Andrew Bonfield: Thank you, Jim, and good morning, everyone. I'll begin with a high level summary of the quarter. Then I'll provide more detailed comments on our second quarter results, including the performance of the segments. Next, I'll discuss the balance sheet and free cash flow and then conclude with comments on our assumptions for the remainder of the year. Beginning on Slide 8. Although sales and revenues were slightly below our expectations, we had strong operating performance in the quarter, including higher adjusted operating profit margin and record adjusted profit per share, both of which were stronger than we had anticipated. Sales and revenues of $16.7 billion decreased by about 4% compared to the prior year. Adjusted operating profit increased by 2% to $3.7 billion. And the adjusted operating profit margin was 22.4%, an increase of 110 basis points versus the prior year. Profit per share was $5.48 in the second quarter compared to $5.67 in the second quarter of last year. Adjusted profit per share increased by 8% to $5.99 in the quarter compared to $5.55 last year. Adjusted profit per share excluded restructuring costs of $0.51 per share mainly due to a loss on the divestiture of two non-US entities. This compares to restructuring costs of $0.05 per share and a discrete deferred tax benefit of $0.17 per share, which were both excluded in the second quarter of 2023. Other income of $155 million for the quarter was a $28 million benefit versus the prior year and was primarily driven by favorable impacts from commodity hedges. The provision for income taxes in the second quarter, excluding discrete items, reflected a global annual effective tax rate of 22.5% compared with 23% in the second quarter of 2023. Finally, the year-over-year impact from the reduction in the average number of shares outstanding primarily due to share repurchases over the past year had a favorable impact on adjusted profit per share of approximately $0.29. Moving on to Slide 9. I'll discuss our top line results in the second quarter. Sales and revenues decreased by 4% compared to the prior year as lower volume was partially offset by favorable price realization. Lower volume was mainly driven by the impact from the changes in dealer inventories. As you may recall, we anticipated a sales decline this quarter versus last year as an atypical dealer inventory increase in the second quarter of 2023 made for a challenging comparison. To explain, dealer inventory decreased by about $200 million in the second quarter. In comparison, we saw an increase of $600 million in the second quarter of last year. For machines only, dealer inventory followed the typical seasonal trend this quarter with a decrease of $400 million as compared to a $200 million increase in the second quarter of last year. Sales were slightly below our expectations due to lower-than-expected volume being partially offset by better-than-expected price realization, including geographic mix. Moving to operating profit on Slide 10. Operating profit in the second quarter decreased by 5% to $3.5 billion. This included a $227 million unfavorable impact from higher restructuring costs. Adjusted operating profit increased by 2% to $3.7 billion. Price realization benefited the quarter while the profit impact of lower sales volume acted as a partial offset. The adjusted operating profit margin of 22.4% improved by 110 basis points versus the prior year. Margins were better than we expected mainly due to favorable manufacturing costs, product mix and price. Versus our expectation, price was slightly better than we anticipated driven by Energy & Transportation. On Slide 11, Construction Industries sales decreased by 7% in the second quarter to $6.7 billion. This is primarily due to lower sales volume, partially offset by favorable price realization. Sales volume was impacted by unfavorable changes in dealer inventories. Dealer inventory was about flat in the second quarter of 2024 versus an increase in the second quarter of last year. Lower sales to users also impacted volume. Sales in Construction Industries were lower than we had anticipated due to lower-than-expected rental fleet loading in North America and continued weakness in Europe. By region, sales in North America were about flat and Latin America sales increased by 20%. Sales in the EAME region decreased by 27%. In Asia Pacific, sales declined by 15%. Second quarter profit for Construction Industries was $1.7 billion, a 3% decrease versus the prior year. This was mainly due to lower sales volume, partially offset by favorable price realization, which benefited from geographic mix effects. Favorable manufacturing costs provided some tailwind as well largely reflecting lower material costs. The segment's margin of 26.1% was an increase of 90 basis points versus last year. Margin was better than we had expected primarily due to a favorable product mix and the timing of planned SG&A and R&D spend. Price was in line with our expectations. Turning to Slide 12. Resource Industries sales decreased by 10% in the second quarter to $3.2 billion, which was about in line with our expectations. The decline was primarily due to lower sales volume, partially offset by favorable price realization. Sales volume was impacted by changes in dealer inventories as dealer inventory decreased more during the second quarter of 2024 than during the second quarter of last year. In addition, we saw lower sales to users in the segment as anticipated given the challenging comparison. Second quarter profit for Resource Industries decreased by 3% versus the prior year to $718 million. This is mainly due to lower sales volume, partially offset by favorable impacts from price realization and manufacturing costs, including lower freight. The segment's margin of 22.4% was an increase of 160 basis points versus last year. Margin was better than we had expected mainly driven by the timing of planned SG&A and R&D spend and a favorable product mix. Now on Slide 13. Energy & Transportation sales increased by 2% in the second quarter to $7.3 billion. The increase was due to favorable price realization, which was partially offset by lower sales volume driven by industrial, which declined in line with our expectations. The segment sales were slightly better than we had anticipated primarily driven by price. By application, power generation sales increased by 15%. Transportation sales were higher by 7%. Oil and gas sales improved by 4%, while industrial sales decreased by 21%. Second quarter profit for Energy & Transportation increased by 20% versus the prior year to $1.5 billion. The increase was primarily due to favorable price. The segment's margin of 20.8% was an increase of 320 basis points versus the prior year. Margin was significantly stronger than we had anticipated due to better price and lower-than-expected manufacturing costs, which largely reflected favorable inventory absorption, lower freight and lower material costs. Moving to Slide 14. Financial Products revenues increased by 9% to about $1 billion primarily due to higher average financing rates across all regions and higher average earning assets in North America. Segment profit decreased by 5% to $227 million. This was mainly due to a higher provision for credit losses, which largely reflected the absence of a nonrecurring reserve release from the prior year. The portfolio remains healthy as past dues of 1.74% on near historic lows and reflect a 41 basis point improvement compared to the prior year. In addition, the allowance rate was 0.89% our lowest rate on record. Business activity remains healthy as new business volume increased versus the prior year primarily driven by North America. We also continue to see healthy demand for used equipment where inventories remain close to historical low levels. Moving on to Slide 15. We generated $2.5 billion in ME&T free cash flow in the second quarter and we expect our full year free cash flow to be in the top half of our annual target range of between $7.5 billion to $10 billion. Our expectations for CapEx remain between $2 billion and $2.5 billion for the year. On share repurchases, the more than $1.8 billion deployed in the second quarter included a $1 billion accelerated share repurchase agreement. Approximately 75% of those shares were delivered to the company upfront with the balance to be delivered when the agreement is terminated prior to year-end. Note that we also had an ME&T bond maturity of $1 billion in the second quarter. And given our healthy liquidity position, we did not issue new bonds. Our balance sheet remains strong with an enterprise cash balance of $4.3 billion. In addition, we hold $1.8 billion in slightly longer-dated liquid marketable securities to improve yields on that cash. Now on Slides 16 and 17, I will show our high-level assumptions for the remainder of the year. As Jim mentioned, we now anticipate sales and revenues to be slightly lower this year versus the record 2023 level. This compares to our previous expectation for broadly similar sales. This change reflects an updated assumption of a slight reduction in machine dealer inventory, primarily in Resource Industries and lower-than-expected sales to users in Construction Industries mainly due to lower rental fleet loading in North America. Now specific to our second half assumptions. We typically see higher sales in the second half as compared to the first and we expect sales to follow that normal seasonable trend this year. As compared to the prior year, we now anticipate slightly lower sales in the second half driven by lower machine sales to users. Changes in dealer inventories and machines are expected to have a nominal impact as the decrease in the second half of this year should be similar to the decrease observed in the second half of 2023, which was about $1 billion. However, note that machine dealer inventory changes will impact the quarters differently as we expect a sales headwind in the third quarter as dealers built their inventories in the third quarter of 2023 and a sales tailwind in the fourth quarter due to a smaller inventory decline than the prior year. Finally, we continue to anticipate services growth in the second half of the year as we strive to achieve our 2026 target of $28 billion in services revenues. Moving on to our margin expectations. As Jim mentioned, the strength of our first half performance combined with the more favorable expectations for the second half mean that we now anticipate overall adjusted operating profit margin to be above the top end of the target range for the full year. Specific to second half margins, despite higher sales, we do expect lower margins versus the first half, which follows a typical seasonable trend. However, keep in mind that first half margins were at record levels and the magnitude of the second half decline may be slightly larger than is typical. As compared to the prior year, we expect our adjusted operating profit margin in the second half will be similar to the prior year level. While we anticipate some favorability in manufacturing costs on improved operational efficiencies, we do expect slightly lower volumes and a slight headwind from price in the second half versus a year ago. On price, the impact of lapping the increases taken in the second half of 2023 means that the benefit in the second half of this year will be significantly lower. In addition, we expect that improved availability across the industry will result in the normalization of the pricing environment. To assist you with your modeling for the full year, please note that we now anticipate restructuring costs of around $450 million and that our expectations for the annual effective tax rate, excluding discrete items, remains at 22.5%. Now on Slide 18. I'll provide a few comments on the third quarter, starting on the top line. We expect slightly lower sales and revenues in the third quarter compared to the prior year as we anticipate a dealer inventory headwind for machines, which will impact volumes. We expect dealer inventory machines to be flattish to slightly lower in the third quarter as is typical, which compares to the atypical $400 million increase in the prior year. We also anticipate lower machine sales to users versus a strong comparison. We expect flattish price realization in the third quarter versus the prior year due to the normalization that I mentioned a moment ago. We also anticipate that the ongoing benefit of our service initiatives will positively impact sales in the third quarter. By segment in the third quarter compared to the prior year, we anticipate lower sales in Construction Industries primarily due to a headwind from changes in dealer inventories. In Resource Industries, we expect lower sales as sales to users are impacted by a challenging comparison similar to that which we have observed in the first two quarters of this year. In Energy & Transportation, we anticipate higher sales versus the prior year, supported by strengthen in power generation, oil and gas and transportation. Lower sales in industrial should act as a partial offset. For enterprise margins in the third quarter, we expect similar adjusted operating profit margin compared to the prior year as we anticipate lower volume will be offset primarily by favorable manufacturing costs. By segment in the third quarter, in Construction Industries, we anticipate lower margin compared to the prior year on lower volume and slightly unfavorable price realization. Favorable manufacturing costs should act as a partial offset. For Resource Industries, we anticipate slightly lower margins in the third quarter compared to the prior year due to unfavorable volume and higher SG&A and R&D spend. In Energy & Transportation, we expect a higher margin versus the prior year and stronger volumes and favorable price realization. So turning to Slide 19, let me summarize. Strong execution and operating performance continued in the second quarter. Higher adjusted operating profit margin of 22.4% offset the decrease in sales and revenues and led to a record adjusted profit per share of $5.99. We now expect overall adjusted operating profit margin to be above the top end of the target range for the full year based on our expected sales levels, which should now be slightly lower than levels in 2023. The net of these factors leads to our current expectation for higher adjusted operating profit and adjusted profit per share as compared to what we contemplated at the beginning of the year. ME&T free cash flow generation was $2.5 billion in the quarter. We continue to expect to be in the top half of our target range for the full year. We have deployed $7.6 billion to shareholders through share repurchases and dividends in the first half of 2024. We continue to execute our strategy for long-term profitable growth. And with that we'll take your questions.","evidence_gemma_new":null,"evidence_llama_3_3":"Resource Industries sales second quarter","evidence_qwen_3_30b":"Resource Industries sales $3.2 billion decreased by 10%","gemma_new_max":null,"gemma_new_min":null,"llama_3_3_max":3200000000.0,"llama_3_3_min":3200000000.0,"qwen_3_30b_max":3200000000.0,"qwen_3_30b_min":3200000000.0}
{"symbol":"CAT","year":2024,"quarter":3,"date":"2024-Q3","chunk_id":3,"sub_chunk_id":0,"centroid_label":"resource industries sales","agreed_value":3000000000.0,"count":3,"chunk":"Andrew Bonfield: Thank you, Jim, and good morning, everyone. As usual, I'll begin with a high-level summary of the third quarter, and then provide more detailed comments, including the performance of the segments. I'll then, discuss the balance sheet and free cash flow, before concluding with comments on our assumptions for the full year and the fourth quarter. Beginning on Slide 8, although sales and revenues were lower than we had expected, our adjusted operating profit margin was 20.0%, generally in line with what we had anticipated. Adjusted profit per share was in line with our expectations despite adjusted operating profit being impacted by the lower sales and revenues. I will highlight a few of the moving parts in a moment. As Jim mentioned, our full year margin expectations remain unchanged, and we continue to anticipate the adjusted operating profit margin will be above the top end of the target range despite the slightly lower outlook for the top-line. Our expectations for adjusted profit per share remain unchanged versus our expectations at the time of our last earnings call. Also, we have increased our expectations for ME&T free cash flow for the year, which we now anticipate will be near the top of our $5 billion to $10 billion target range. In the third quarter, sales and revenues of $16.1 billion decreased by 4% compared to the prior year. The adjusted operating profit margin of 20.0% was 80 basis points lower when compared to the prior year. Profit per share was $5.06 in the third quarter compared to $5.45 in the third quarter of last year. Restructuring costs were $0.11 in the quarter versus $0.07 in the prior year. Adjusted profit per share was $5.17 in the quarter compared to $5.52 last year. Other income and expense was $119 million headwind versus the prior year, mostly driven by an unfavorable currency impact related to ME&T balance sheet translation. We do not forecast the impact of foreign currency translation on our adjusted profit per share, so this acted as a headwind compared to our expectations for the quarter. Excluding discrete items, the provision for income taxes in the third quarter in both 2023 and 2024 reflected a global annual effective tax rate of 22.5%. We recorded a discrete tax benefit, which had an $0.11 favorable impact within the quarter. We do not anticipate discrete items. Finally, the year-over-year impact from the reduction in the average number of shares outstanding, primarily due to share repurchases, resulted in a favorable impact on adjusted profit per share of approximately $0.26 as compared to the third quarter 2023. This was slightly better than we had expected. Moving to Slide 9, I'll discuss our top-line results for the third quarter. Sales and revenues decreased by 4% compared to the prior year, primarily impacted by lower sales volume as a result of lower sales to users and impacts from changes in dealer inventories. Total sales to users decreased by 6% as a 10% decrease from Machines was partially offset by a 5% increase for Energy & Transportation. The impact from changes in total dealer inventories acted as a sales headwind of about $200 million in the quarter. For Machines-only, dealer inventory increased by about $100 million, a smaller increase than the $400 million increase in the prior year, but slightly above our expectations of being flattish to slightly lower. Service revenues increased versus the prior year, as we had anticipated. Moving to operating profit on Slide 10. Operating profit in the third quarter decreased by 9% to $3.1 billion. Adjusted operating profit decreased by 8% to $3.2 billion, mainly due to the impact of lower sales volume, partially offset by favorable price realization and manufacturing costs. Since early 2022, price realization has been a strong -- has been strong and often exceeded our expectations. Over the past several quarters, we have highlighted that price will begin to moderate in the second half of this year. In the third quarter, this moderation began to occur as price realization was lower than previous quarters and generally in line with our expectations. As I mentioned, for the third quarter, the adjusted operating profit margin was 20.0%, which was generally in line with our expectations. By segment, margin in Construction Industries and Resource Industries was slightly below our expectations on lower volume, while Energy & Transportation was about in line. Financial products had a slightly stronger quarter than we had expected. On Slide 11, Construction Industries sales decreased by 9% in the third quarter to $6.3 billion, slightly below our expectations. The decrease versus the prior year was primarily due to lower sales volume and unfavorable price realization. The decrease in sales volume was mainly driven by lower sales of equipment to end users. Changes in dealer inventories also acted as a slight headwind to sales. By region, Construction Industries sales in North America decreased by 11%; in Latin America, sales increased by 19%; sales in the EAME region decreased by 15%; in Asia Pacific, sales declined by 12%. Third quarter profit for Construction Industries was $1.5 billion, a 20% decrease versus the prior year. This is mainly due to the profit impact of lower sales volume and unfavorable price realization. The segment's margin of 23.4% was a decrease of 300 basis points versus the prior year. Turning to Slide 12, Resource Industries sales decreased by 10% in the third quarter to $3.0 billion, which was slightly point below our expectations. The decline versus the prior year was primarily due to lower sales volume, mainly driven by lower sales of equipment to end users given a challenging comparison to the prior year. Third quarter profit for Resource Industries decreased by 15% versus the prior year to $619 million. This was mainly due to the profit impact of lower sales volume. The segment's margin of 20.4% was a decrease of 140 basis points versus the prior year. Now, on Slide 13, Energy & Transportation sales increased by 5% in the third quarter to $7.2 billion, slightly lower than we had expected, driven by the timing of deliveries. The increase versus the prior year was primarily due to favorable price realization and higher sales volume, including higher intersegment sales. By application, power generation sales increased by 26%, transportation sales were higher by 3%, oil and gas sales decreased by 1%, and industrial sales decreased by 16%. Third quarter profit for Energy & Transportation increased by 21% versus the prior year to $1.4 billion. The increase was mainly due to favorable price realization. The segment's margin of 19.9% was an increase of 270 basis points versus the prior year. Moving to Slide 14, financial products revenues increased by 6% to about $1 billion, primarily due to higher average earning assets driven by North America and higher average financing rates across all regions. Segment profit increased by 21% to $246 million. This is mainly due to a favorable impact from equity securities and a lower provision for credit losses. Our customers' financial health is strong. Past dues remain near historic lows of 1.74% in the quarter, down 22 basis points versus the prior year. Our allowance rate was 0.87%, our lowest on record. Business activity at Cat Financial remains healthy. Our retail new business volume increased by 17% versus the prior year, supported by our financing packages for customers choosing to buy Caterpillar equipment. Though Caterpillar's retail machine sales volume was lower, proportionately more sales have been financed through Cat Financial, which highlights the attractiveness of the financing options we are offering to our customers. We also continue to see healthy demand for used equipment and inventories remain at low levels. Conversion rates are also strong as customers choose to buy equipment at the end of their lease term. Moving on to Slide 15, we generated about $2.7 billion in ME&T free cash flow in the third quarter and deployed about $1.5 billion in share repurchases and dividends. Our balance sheet remains strong with an enterprise cash balance of $5.6 billion. In addition, we hold $1.8 billion in slightly longer dated liquid marketable securities to improve yields on that cash. Now, on Slide 16, I will share our high-level assumptions for the full year. For the full year, we have updated our outlook to reflect sales and revenues that are slightly lower than our expectations at the time of our last earnings call, driven by lower-than-expected third quarter sales and an update to our expectations for dealer rental fleet loading in Construction Industries. We continue to anticipate services growth in 2024. As I mentioned earlier, our full year expectations for adjusted operating profit margin and adjusted profit per share remain unchanged compared to our last earnings call. We continue to expect adjusted operating profit margin to be above the top end of the target range. In addition, we are increasing our expectations for ME&T free cash flow for the year, which we now anticipate to be near the top of our $5 billion to $10 billion target range. To assist you with your modeling for the full year, we now anticipate CapEx of around $2 billion and restructuring costs of approximately $400 million. Our expectation for the global annual effective tax rate, excluding discrete items, remains at 22.5%. Turning to Slide 17, I'll provide a few comments on the fourth quarter, starting with the top-line. We expect slightly lower sales and revenues in the fourth quarter compared to the prior year, impacted by lower machine sales to users versus a strong comparison. On machine dealer inventory, our planning assumptions include the expectation that dealers will reduce their inventories in the fourth quarter while balancing their need to be prepared for 2025. The magnitude of the decline for machine dealer inventory is expected to be less than the $1.4 billion decrease we saw in the fourth quarter of 2023. For perspective, we expect machine dealer inventory to end the year around the same level as year-end 2023. Also, the ongoing benefit of our services initiatives is expected to positively impact sales in the fourth quarter. By segment, in the fourth quarter, compared to the prior year, we anticipate a sales decrease in Construction Industries. This is impacted by lower sales to users, which Jim mentioned, along with unfavorable price realization. In Resource Industries, we expect slightly lower sales, impacted by lower sales to users versus a strong fourth quarter of 2023. In Energy & Transportation, we anticipate slightly higher sales versus the prior year, supported by power generation. Enterprise margin in the fourth quarter is expected to trend lower compared to the third quarter, following the typical seasonable pattern. However, versus the prior year, we expect a modestly higher adjusted operating profit margin despite lower sales. We anticipate favorable manufacturing costs and lower SG&A and R&D expenses will more than offset the profit impact of lower sales volume. Lower SG&A and R&D expenses are primarily driven by the benefit of lower short-term incentive compensation versus a high expense in the prior year quarter. Price realization for Machines is expected to trend lower as the pricing environment continues to normalize, though price in Energy & Transportation should act as a partial offset. Regarding price expectations for Machines, it is important to note that discounts to dealers occur through post sales merchandising programs, which impact our results over time. This includes financing support from Cat Financial, which is an effective way of supporting our customers, and we recover a portion of that support over the life of the deal. Let me explain. Based on the current level of price discounting support, we reserve the anticipated payments to dealers for these merchandising programs. At times, there is a lag between the timing of the invoice of the dealer and when the dealer invoices the customer, which impacts the reserve. Over the next few quarters, we expect the impact from these merchandising programs to drive a headwind to Machine price realization as we continue to adjust the reserve to reflect the current level of price discounting support. By segment, in the fourth quarter, in Construction Industries, we anticipate lower margin compared to the prior year primarily due to unfavorable price realization, partially offset by favorable manufacturing costs. In Resource Industries, we anticipate lower margin in the fourth quarter compared to the prior year, mainly due to lower volume and prioritization of strategic investments around services growth and AACE, which is autonomy, alternative fuels, connectivity and digital, and electrification. Favorable manufacturing costs should act as a partial offset. In Energy & Transportation, we expect a higher margin versus the prior year, primarily impacted by favorable price realization. So, turning to Slide 18, let me summarize. Although sales and revenues were lower than we had expected, adjusted operating profit margin and adjusted profit per share were generally in line with our expectations. We now anticipate our top-line for the full year will be slightly below our prior estimate. Our backlog increased slightly and remains at a very healthy level. Our expectations for full year adjusted operating profit margin and adjusted profit per share remain unchanged compared to a quarter ago. We continue to expect adjusted operating profit margin to be above the top end of the target range for the full year based on our expected sales levels. We are now increasing our expectations for ME&T free cash flow, which we anticipate to be near the top of our target range for the full year. Our team executed well in the quarter, and our results continue to benefit -- to reflect the benefit of the diversity of our end markets and the disciplined execution of our strategy for long-term profitable growth. And with that, we'll now take your questions.","evidence_gemma_new":"Resource Industries sales","evidence_llama_3_3":"Resource Industries sales third quarter","evidence_qwen_3_30b":"Resource Industries sales decreased by 10% third quarter","gemma_new_max":3000000000.0,"gemma_new_min":3000000000.0,"llama_3_3_max":3000000000.0,"llama_3_3_min":3000000000.0,"qwen_3_30b_max":3000000000.0,"qwen_3_30b_min":3000000000.0}
{"symbol":"CAT","year":2024,"quarter":4,"date":"2024-Q4","chunk_id":3,"sub_chunk_id":0,"centroid_label":"resource industries sales","agreed_value":3000000000.0,"count":2,"chunk":"Andrew Bonfield: Thank you Jim, and good morning everyone. I\u2019ll begin with a summary of the fourth quarter and then provide more detailed comments, including some on the performance of the segments. Next, I\u2019ll discuss the balance sheet and free cash flow before concluding with comments on our high level assumptions for 2025, as well as expectations for the first quarter. Beginning on Slide 9, sales and revenues were $16.2 billion, a 5% decrease versus the prior year. As Jim mentioned, sales were slightly lower than we had anticipated, which together with unfavorable mix resulted in lower than expected margins for the quarter. Adjusted operating profit was $3 billion and our adjusted operating profit margin was 18.3%. Profit per share was $5.78 in the fourth quarter compared to $5.28 in the fourth quarter of last year. Adjusted profit per share was $5.14 in the quarter, a 2% decrease compared to $5.23 last year. Adjusted profit per share excluded a discrete tax benefit of $0.46 for a tax law change related to currency translation. Mark to market gains of $0.23 for the re-measurement of pension and other post-employment plans was also excluded, in addition to restructuring costs of $0.05 in the quarter. Other income expense was $185 million favorable versus the prior year, mostly driven by a positive currency impact related to ME&T balance sheet translation, which compared to a negative impact in the fourth quarter last year. As I have mentioned previously, we do not anticipate currency translation movements, so the positive impact on the fourth quarter of 2024 helped to offset the impact of operating profit being lower than expected. Excluding discrete items, the provision for income taxes in the fourth quarter of 2024 reflected a global annual effective tax rate of 22.2%. This was slightly lower than we had expected a quarter ago and benefited the quarter by $0.09. Finally, the year-over-year impact from the reduction in the average number of shares outstanding, primarily due to share repurchases, resulted in a favorable impact on adjusted profit per share of approximately $0.24 as compared to the fourth quarter of 2023. Moving onto Slide 10, I\u2019ll discuss the top line results for the fourth quarter. Sales and revenues decreased by 5% compared to the prior year, primarily impacted by lower sales volume. Price was unfavorable year-over-year and about in line with what we had expected. Lower volume was driven by the impact from changes in dealer inventories and a 2% year-over-year decrease in total sales to users. Total machine dealer inventory decreased by $1.6 billion in the quarter compared to $1.4 billion decrease in the prior year. The decrease in machine dealer inventory was larger than we had expected, and it\u2019s mostly a function of higher than anticipated sales to users across both construction industries in North America and resource industries. Service revenues increased in the quarter compared to 2023. As I mentioned, the sales decrease in the quarter was slightly larger than we had anticipated. This was mostly due to services growing at a slightly slower rate than we had expected and some delivery delays in energy and transportation. Moving to operating profit on Slide 11, operating profit in the fourth quarter decreased by 7% to $2.9 billion. Adjusted operating profit decreased by 8% to $3 billion mainly due to the profit impact of lower than expected sales volume. As I mentioned, for the fourth quarter the adjusted operating profit margin was 18.3%, a 60 basis point decrease compared to the prior year. This was lower than we had anticipated mainly due to a lower than expected sales volume and the impact of unfavorable mix. On Slide 12, construction industry sales decreased by 8% in the fourth quarter to $6 billion. This was slightly below our expectations on lower than anticipated volume. Compared to the prior year, the 8% sales decrease was primarily due to unfavorable price realization and lower sales volume. The decrease in sales volume was mainly driven by lower sales of equipment to end users and dealers reducing their inventory by slightly more than they did during the fourth quarter of 2023. By region, construction industry sales in North America decreased by 14%. In Latin America, sales increased by 6%. Sales in the EAME region decreased by 1%, and Asia Pacific sales decreased by 2%. Fourth quarter profit for construction industries was $1.2 billion, a 24% decrease versus the prior year. This was primarily due to unfavorable price realization as a result of the impact of the post-sales merchandising programs that we discussed with you in October. The segment\u2019s margin of 19.6% was a decrease of 390 basis points versus the prior year. The margin was lower than we had anticipated, primarily impacted by lower volume and unfavorable mix. Manufacturing costs were also unfavorable versus our expectations, principally due to a headwind from cost absorption as our inventory in construction industries declined. Turning to Slide 13, resource industry sales decreased by 9% in the fourth quarter to $3 billion. This was below our expectations mainly due to services growing at a slightly lower rate than we had anticipated. As we compare to the prior year, the 9% sales decrease was primarily due to lower sales volume mainly driven by the impact from changes in dealer inventories. Dealer inventory decreased more in the fourth quarter of 2024 than it did in the fourth quarter of 2023. Fourth quarter profit for resource industries decreased by 22% versus the prior year to $466 million. This was mainly due to the profit impact of lower sales volume. The segment\u2019s margin of 15.7% was a decrease of 280 basis points versus the prior year. This was lower than we had anticipated, primarily due to lower volume. Now on Slide 14, energy and transportation sales of $7.6 billion were about flat versus the prior year. Sales were slightly below our expectations to a lower than expected services growth rate, largely in oil and gas, and the timing of deliveries of international locomotives. Compared to the prior year, sales were roughly flat as the impact of lower sales volume was mostly offset by favorable price realization. By application, power generation sales increased by 22%, transportation sales were lower by 1%, oil and gas sales decreased by 14%, and industrial sales decreased by 14%. Fourth quarter profit for energy and transportation increased by 3% versus the prior year to $1.5 billion. The increase was primarily due to favorable price realization partially offset by the profit impact of lower sales volume. The segment\u2019s margin of 19.3% was an increase of 70 basis points versus the prior year. This was lower than we had anticipated, primarily due to lower than expected volume and an unfavorable mix of products. Moving to Slide 15, financial products revenues increased by 4% versus the prior year to about $1 billion, primarily due to higher average earning assets in North America and higher average financing rates across all regions, except North America. Segment profit decreased by 29% to $166 million. This was mainly due to an unfavorable impact from equities securities in addition to lower margin and a higher provision for credit losses. Our customers\u2019 financial health remains strong. Past dues were 1.56% in the quarter, down 23 basis points versus the prior year and our lowest level since 2005. The allowance rate was 0.91%, remaining near historic lows. Business activity at Cat Financial remains healthy. Retail credit applications increased and our retail new business volume grew by 3% versus the prior year. This was our highest level since 2012, supported by attractive finance packages for customers choosing to buy Caterpillar equipment. We continue to see proportionately more of our sales financed through Cat Financial; in addition, demand for used equipment remains healthy and inventories remain at low levels. Conversion rates were above historical averages as customers choose to buy equipment at the end of their lease term. Moving onto Slide 16, we continue to generate strong ME&T free cash flow. The $9.4 billion in 2024 was near the top end of our target range and just slightly lower than the prior year despite a larger payment for short term incentive compensation and higher capital expenditure. CapEx for the year was about $2 billion, which was in line with our expectations. Moving to capital deployment, in 2024 we returned $10.3 billion to shareholders through repurchased stock and dividends. On share repurchases, we deployed $7.7 billion as we continue to fulfill our objective to be in the market on a more consistent basis. Our balance sheet remains strong with an enterprise cash balance of $6.9 billion. In addition, we hold $2 billion in slightly longer dated liquid marketable securities to improve yields on that cash. Now on Slide 17, let me start with a high level overview of our expectations for the full year. We expect a slight decrease in sales for 2025 with an unfavorable impact from both volume and price. Due to the impact of post-sales merchandising programs, price realization should account for about a 1% decrease in sales for the full year. On margins, the impact of price together with high depreciation costs due to the investments we are making should result in adjusted operating profit margins being in the top half of the target range with the expected level of sales, rather than being above the top end of the range, as occurred in 2024. Our margin targets are progressive, so while we would expect volume to have an impact on absolute margins, our target is adjusted for lower sales. We expect a slight headwind in other income and expense in 2025 primarily due to lower interest income, mostly due to lower interest rates, as well as the absence of the positive currency benefit from ME&T balance sheet translation that occurred in 2024. As I mentioned, we do not anticipate translation movements in our expectations. We expect restructuring costs of approximately $150 million to $200 million in 2025. We anticipate a global annual effective tax rate of 23% for 2025, excluding discrete items. While the impact of the share buyback should be positive, we expect to have less ME&T free cash flow to deploy in 2025. This implies a less favorable impact to profit per share in 2025 as compared to 2024. By segment, lower sales in construction industries and resource industries will be partially offset by sales growth in energy and transportation. For construction industries, we expect lower sales in 2025 based on the outlook Jim described and unfavorable price realization. In resource industries, we anticipate slightly lower sales versus 2024 driven by unfavorable price realization and slightly lower volume. Higher volumes and favorable price in energy and transportation should drive sales growth, though sales remain constrained until the benefits of the investments we are making in large engines begin to flow through beyond 2025. We also anticipate another year of services growth in each of our primary segments. Currently, we do not anticipate a significant change in dealer inventory in machines by the end of 2025. Moving onto ME&T free cash flow, we expect to be in the top half of our target range of $5 billion to $10 billion. The first quarter of 2025 will be impacted by a $1.4 billion cash outflow related to the payout of last year\u2019s incentive compensation. We anticipate CapEx of about $2.5 billion in 2025 as we continue to make disciplined investments that are right for our business, governed by a focus on growing absolute OPACC [ph] dollars. This includes the multi-year capital investment to expand our large engine volume output capability that we mentioned last year. Turning to Slide 18, to assist with your modeling, I\u2019ll provide some color on the first quarter, starting with the top line. We expect lower sales versus the prior year. For perspective, in a typical year we see our lowest sales in the first quarter of the year. In 2025, we anticipate that trend to continue to be more pronounced as sales in the first quarter should account for a lower percentage of full year sales than is typical by about 100 basis points. This decrease is mainly due to our expectations for dealer inventory movements and price, which primarily impacts machines. Energy and transportation is expected to show normal seasonality with sales growing throughout the year. Let me explain. Although dealers did reduce machine inventory significantly in the fourth quarter, they remain around the top end of the range as we enter 2025. This compares with dealer inventories in construction industries being towards the middle of the range at the beginning of 2024. As a result, we expect them to build correspondingly less inventory during the first quarter than the $1.1 billion that they built in the first quarter of 2024. As we expect dealer inventory to be about flat by year end, we should see a tailwind to sales in the fourth quarter as we don\u2019t expect a similar machine dealer inventory change as we have seen in the last two years. We also expect unfavorable price realization for machines in the first quarter due to the impact of post-sales merchandising programs. We would expect these price impacts to be greater for machines in the first half of the year as the noticeable impact of post-sales merchandising programs started in the third quarter of 2024, making for an easier comparison in the second half. To pull together the impact by segment, we anticipate lower sales in construction industries in the first quarter, impacted by lower sales to users, the headwind from changes in dealer inventory and price, the impact of which should be similar to what we saw in the fourth quarter of 2024. In resource industries in the first quarter, we expect lower sales volume versus the prior year, impacted by lower volume and unfavorable price realization. In energy and transportation, we anticipate similar sales in the first quarter versus the prior year as continued strength in power generation is about offset by lower oil and gas and transportation sales. Price should be positive for energy and transportation. Now I\u2019ll provide some color on first quarter margin expectations. Though enterprise margins are typically stronger in the first quarter compared to with the remaining quarters of the year, we do not expect this seasonal trend to occur in 2025. Compared to the prior year, we anticipate a lower enterprise adjusted operating profit margin in the first quarter due primarily to lower than usual volume and price. Volume is impacted by the lower build of machine dealer inventory and slightly lower sales to users for machines. Unfavorable price realization for machines is principally due to the factors I\u2019ve discussed previously, which will be partially offset by favorable price in energy and transportation. We expect there will be improvement in first quarter margins offsetting the volume impact in the first quarter due to stronger volume in the fourth quarter than is typical. By segment, in the first quarter in construction industries, we anticipate lower margins compared to the prior year due primarily to lower volume and price. We do not expect to see the margin benefit we typically see in the first quarter of the year as compared to the fourth quarter of the prior year, which is generally in the range of 100 to 200 basis points. Again, some of this will be offset in the fourth quarter as volume is favorable and price more neutral. In resource industries, we anticipate lower margin in the first quarter compared to the prior year, mainly due to lower volume and unfavorable price realization. In energy and transportation, we expect slightly lower margin versus the prior year as favorable price realization is more than offset by higher manufacturing costs and unfavorable mix impacts. Again, as a reminder, this detail is provided to help you model the first quarter and does not impact our expectations for the full year that I set out earlier, which is a slight decrease in sales and revenues for the year and margins in the top half of the target range. Turning to Slide 19, let me summarize. Adjusted profit per share of $21.90 exceeded last year\u2019s record by 3%. This was our third straight year with record adjusted profit per share. Adjusted operating profit margin of 20.7% exceeded the top of our target range. ME&T free cash flow of $9.4 billion was near the top of the target range of $5 billion to $10 billion. For 2025, while we expect a slight drop in sales, we expect to be in the top half of the adjusted operating profit margin range and the top half of the ME&T free cash flow target range, and we anticipate another year of services growth. We continue to execute our strategy for long term profitable growth, and with that, we\u2019ll take your questions.","evidence_gemma_new":null,"evidence_llama_3_3":"resource industry sales fourth quarter","evidence_qwen_3_30b":"resource industry sales 4th quarter 9% decrease","gemma_new_max":null,"gemma_new_min":null,"llama_3_3_max":3000000000.0,"llama_3_3_min":3000000000.0,"qwen_3_30b_max":3000000000.0,"qwen_3_30b_min":3000000000.0}
{"symbol":"CAT","year":2023,"quarter":1,"date":"2022-Q1","chunk_id":2,"sub_chunk_id":0,"centroid_label":"sales and revenues","agreed_value":17.0,"count":2,"chunk":"Jim Umpleby: Thanks, Ryan. Good morning, everyone. Thank you for joining us. I'd like to start by thanking our global team for a strong first quarter, including double-digit top line growth, higher operating profit margins, record adjusted profit per share and strong ME&T free cash flow. Our results reflect healthy customer demand to most end markets for our products and services. We remain focused on executing our strategy and continue to invest for long-term profitable growth. In today's call, I'll begin with my perspectives on our performance in the quarter. I'll then provide some insights on our end markets. Lastly, I'll provide an update on our sustainability journey. It was a very strong quarter. Sales and revenues were better than we expected, with price realization, dealer inventory and sales to users each slightly better than we anticipated. Sales to users were higher than expected in Energy & Transportation and Resource Industries. Overall, sales and revenues rose by 17% versus the first quarter of 2022. The year-over-year increase was due to strong price realization and volume growth, which was driven by higher sales of equipment to end users. We achieved double-digit top line increases in each of our three primary segments. Adjusted operating profit margins increased to 21.1% in the first quarter, as we saw margins improve, both on a sequential and year-over-year basis. The adjusted operating profit margins were significantly better than we had anticipated primarily due to better-than-expected manufacturing costs, including efficiencies and absorption, stronger price realization and volume growth. Andrew will discuss in detail later. Backlog ended the quarter at $30.4 billion, flat relative to the fourth quarter of 2022. Equipment availability increased during the quarter due to improving supply chain conditions. While dealer order rates are lower, they remain at healthy levels. As you know, as availability improves, order rates typically normalize, as dealers can wait longer to place orders for long lead time items. Our healthy backlog continues to underpin our constructive views about our end markets. Despite the improvement in supply chain, pockets of challenge remain as we increase production, particularly for large engines, which impacts energy and transportation and some of our larger machines. We delivered a strong first quarter, which positions us well for an even better year in 2023 than we previously anticipated. While we continue to closely monitor global macroeconomic conditions, overall demand remains healthy across our products and services. Turning to Slide 4, in the first quarter of 2023, sales and revenues increased 17% versus last year at $15.9 billion. This was primarily due to favorable price and volume growth. Compared with the first quarter of 2022, overall sales to users increased 13%. For Construction Industries and Resource Industries, sales to users rose by 5%, while Energy & Transportation was up 39%. Sales to users in Construction Industries were flat, in line with our expectations. North American sales to users increased, as demand remained healthy for both nonresidential and residential, despite some moderation of the growth rate in residential. Overall, our North American sales to users were better than we expected. EAME also saw higher sales to users, led by strength in the Middle East. In Latin America and Asia Pacific, sales to users declined in the quarter. The decline in Asia Pacific included further weakening in China. In Resource Industries, sales to users increased 18%, which was our third consecutive quarter of accelerating sales to users. In Mining, sales to users benefited from a higher level of commissioning in the quarter. Within heavy construction and quarry and aggregates, sales to users also increased, supported by growth for infrastructure-related projects. In Energy & Transportation, sales to users increased by 39%. In the first quarter, oil and gas sales to users benefited from continued strength in new engine sales to customers, including repowering active fleets, upgrading technology to Tier 4 Dynamic Gas Blending and adding incremental gas compression units. We also saw strong sales of turbines and turbine-related services. Power Generation and Industrial sales to users continue to remain positive due to favorable market conditions. Transportation declined from a relatively low base primarily due to timing in marine deliveries, which was partially offset by deliveries of international locomotives. Dealer inventory increased by about $1.4 billion in the first quarter, which was slightly above our expectations compared to a $1.3 billion increase in the same quarter last year. In Construction Industries, the increase in dealer inventory was primarily due to stronger North American shipments, which remains our most constrained region. As we mentioned last quarter, over 70% of the combined dealer inventory in Resource Industries and Energy & Transportation is supported by customer orders. Moving to Slide 5, we generated strong ME&T free cash flow of $1.4 billion in the first quarter. We returned $1 billion to shareholders, which included about $600 million in dividends and $400 million in repurchase stock. We remain proud of our dividend aristocrat status and continue to expect to return substantially all ME&T free cash flow to shareholders over time through dividends and share repurchases. Now on Slide 6, I'll share some commentary on our expectations moving forward. While we continue to closely monitor global macroeconomic conditions, our first quarter results lead us to expect that 2023 will be even better than we had previously anticipated on both the top and bottom line. For 2023, we currently expect to be in the top half of the targeted range for both adjusted operating profit margin and ME&T free cash flow. Andrew will provide additional color. Before I discuss our outlook for key end markets, I'll provide some color on how we expect our top line to progress through this year. As I mentioned, we expect a strong top line for 2023, supported by price and higher sales to users, with healthy underlying end markets. We expect higher sales in the second quarter compared to the first, as is the typical seasonal pattern. Looking to the second half of 2023, it is important to highlight the second half of last year included the dealer inventory build of $1.4 billion, as dealers began to restock their inventories. We are not planning for this trend to repeat. Instead, we expect to see dealers decrease inventories compared to the first quarter levels and end 2023 about flat relative to the end of 2022. Although we expect sales to users to remain positive for our primary segments in each quarter, our planning assumption is that Caterpillar second half sales will have a dealer inventory impact. Let me explain. First, although dealer inventory in some products and regions have normalized, others remain constrained. For example, in North America, dealer inventory remains below the typical range for many products. However, there is greater excavator inventory in a few regions, as supply dynamics improved in 2022, which, coupled with the slowing in China, has resulted in improved excavation product availability. Given the improved availability of excavators, we expect that dealers will scale back their levels of excavator inventory in the second half of the year, even though demand remains healthy. As a reminder, dealers are independent businesses and control their own inventory. Second, in late 2023, we have scheduled a couple of new product changeovers in construction industry factories that will also impact the second half. Now I'll discuss our outlook for key end markets this year, starting with Construction Industries. In North America, overall, we continue to see positive momentum in 2023. We expect growth in nonresidential construction in North America due to the positive impact of government-related infrastructure investments and a healthy pipeline of construction projects. Although residential construction housing starts have softened, the growth rate of our residential construction equipment remains positive as the supply chain pressures alleviate. In Asia Pacific, excluding China, we expect growth in Construction Industries due to public infrastructure spending and supportive commodity prices. As we mentioned during our previous earnings calls, we expect China\u2019s above ten-ton excavator industry to remain below 2022 levels due to low construction activity. In 2023, sales in China are expected to be below the typical range of 5% to 10% of total Caterpillar sales. In the EAME, business activity is now expected to increase versus last year based on healthy construction project activity, particularly strong construction demand in the Middle East. Although uncertain economic conditions remain, European construction is proving to be more resilient than we previously anticipated. Construction activity in Latin America is expected to be down in 2023 versus the strong 2022 performance. There is some concern about the potential impact of a commercial real estate slowdown. We estimate that North American commercial real estate accounts for about 1% of total construction industry sales. Any slowdown related to this sector should not have a significant impact on Construction Industries. In Resource Industries, we expect healthy mining demand to continue, as commodity prices remain above investment thresholds. As I have mentioned during the last few years, customers remain capital disciplined, which supports a gradual increase in mining over time. We anticipate production utilization levels will remain elevated. We also expect the aging of the fleet and a lower level of parked trucks to support future demand for our equipment and services. We continue to believe the energy transition will support increased commodity demand, expanding our total addressable market and providing further opportunities for profitable growth. In heavy construction and quarry and aggregates, we anticipate continued growth due to major infrastructure and nonresidential construction projects. In Energy & Transportation, we expect to follow our normal seasonal pattern, with higher sales in the second half of the year versus the first half. In oil and gas, reciprocating engines, although customers remain disciplined, we are encouraged by continued strength and demand for both well servicing and gas compression. Power generation reciprocating engine demand is expected to remain healthy, including strong data center growth. New equipment orders and services for solar turbines in both oil and gas and power generation are robust. Industrial remains healthy. In transportation, we anticipate strength in high-speed Marine as customers continue to upgrade aging fleets. Moving to Slide 7. We are contributing to a reduced carbon future and continue to invest in new products, technologies and services to help our customers achieve their climate-related objectives. We recently completed and upgraded more than 50 models across our entire next-generation hydraulic excavator line. The new models reduced fuel consumption by up to 25% compared to previous models and provide another option for customers to lower emissions, while improving operational efficiency. A customer can realize meaningful emissions reductions by simply moving to the newest next-gen model. This example reinforces our ongoing sustainability leadership and how we help our customers build a better, more sustainable world. In addition, we look forward to issuing our 18th annual sustainability report in May. With that, I'll turn the call over to Andrew.","evidence_gemma_new":null,"evidence_llama_3_3":"sales and revenues first quarter of 2022","evidence_qwen_3_30b":"sales and revenues 17% first quarter of 2022","gemma_new_max":null,"gemma_new_min":null,"llama_3_3_max":17.0,"llama_3_3_min":17.0,"qwen_3_30b_max":17.0,"qwen_3_30b_min":17.0}
{"symbol":"CAT","year":2023,"quarter":1,"date":"2023-Q1","chunk_id":2,"sub_chunk_id":0,"centroid_label":"sales and revenues","agreed_value":15900000000.0,"count":2,"chunk":"Jim Umpleby: Thanks, Ryan. Good morning, everyone. Thank you for joining us. I'd like to start by thanking our global team for a strong first quarter, including double-digit top line growth, higher operating profit margins, record adjusted profit per share and strong ME&T free cash flow. Our results reflect healthy customer demand to most end markets for our products and services. We remain focused on executing our strategy and continue to invest for long-term profitable growth. In today's call, I'll begin with my perspectives on our performance in the quarter. I'll then provide some insights on our end markets. Lastly, I'll provide an update on our sustainability journey. It was a very strong quarter. Sales and revenues were better than we expected, with price realization, dealer inventory and sales to users each slightly better than we anticipated. Sales to users were higher than expected in Energy & Transportation and Resource Industries. Overall, sales and revenues rose by 17% versus the first quarter of 2022. The year-over-year increase was due to strong price realization and volume growth, which was driven by higher sales of equipment to end users. We achieved double-digit top line increases in each of our three primary segments. Adjusted operating profit margins increased to 21.1% in the first quarter, as we saw margins improve, both on a sequential and year-over-year basis. The adjusted operating profit margins were significantly better than we had anticipated primarily due to better-than-expected manufacturing costs, including efficiencies and absorption, stronger price realization and volume growth. Andrew will discuss in detail later. Backlog ended the quarter at $30.4 billion, flat relative to the fourth quarter of 2022. Equipment availability increased during the quarter due to improving supply chain conditions. While dealer order rates are lower, they remain at healthy levels. As you know, as availability improves, order rates typically normalize, as dealers can wait longer to place orders for long lead time items. Our healthy backlog continues to underpin our constructive views about our end markets. Despite the improvement in supply chain, pockets of challenge remain as we increase production, particularly for large engines, which impacts energy and transportation and some of our larger machines. We delivered a strong first quarter, which positions us well for an even better year in 2023 than we previously anticipated. While we continue to closely monitor global macroeconomic conditions, overall demand remains healthy across our products and services. Turning to Slide 4, in the first quarter of 2023, sales and revenues increased 17% versus last year at $15.9 billion. This was primarily due to favorable price and volume growth. Compared with the first quarter of 2022, overall sales to users increased 13%. For Construction Industries and Resource Industries, sales to users rose by 5%, while Energy & Transportation was up 39%. Sales to users in Construction Industries were flat, in line with our expectations. North American sales to users increased, as demand remained healthy for both nonresidential and residential, despite some moderation of the growth rate in residential. Overall, our North American sales to users were better than we expected. EAME also saw higher sales to users, led by strength in the Middle East. In Latin America and Asia Pacific, sales to users declined in the quarter. The decline in Asia Pacific included further weakening in China. In Resource Industries, sales to users increased 18%, which was our third consecutive quarter of accelerating sales to users. In Mining, sales to users benefited from a higher level of commissioning in the quarter. Within heavy construction and quarry and aggregates, sales to users also increased, supported by growth for infrastructure-related projects. In Energy & Transportation, sales to users increased by 39%. In the first quarter, oil and gas sales to users benefited from continued strength in new engine sales to customers, including repowering active fleets, upgrading technology to Tier 4 Dynamic Gas Blending and adding incremental gas compression units. We also saw strong sales of turbines and turbine-related services. Power Generation and Industrial sales to users continue to remain positive due to favorable market conditions. Transportation declined from a relatively low base primarily due to timing in marine deliveries, which was partially offset by deliveries of international locomotives. Dealer inventory increased by about $1.4 billion in the first quarter, which was slightly above our expectations compared to a $1.3 billion increase in the same quarter last year. In Construction Industries, the increase in dealer inventory was primarily due to stronger North American shipments, which remains our most constrained region. As we mentioned last quarter, over 70% of the combined dealer inventory in Resource Industries and Energy & Transportation is supported by customer orders. Moving to Slide 5, we generated strong ME&T free cash flow of $1.4 billion in the first quarter. We returned $1 billion to shareholders, which included about $600 million in dividends and $400 million in repurchase stock. We remain proud of our dividend aristocrat status and continue to expect to return substantially all ME&T free cash flow to shareholders over time through dividends and share repurchases. Now on Slide 6, I'll share some commentary on our expectations moving forward. While we continue to closely monitor global macroeconomic conditions, our first quarter results lead us to expect that 2023 will be even better than we had previously anticipated on both the top and bottom line. For 2023, we currently expect to be in the top half of the targeted range for both adjusted operating profit margin and ME&T free cash flow. Andrew will provide additional color. Before I discuss our outlook for key end markets, I'll provide some color on how we expect our top line to progress through this year. As I mentioned, we expect a strong top line for 2023, supported by price and higher sales to users, with healthy underlying end markets. We expect higher sales in the second quarter compared to the first, as is the typical seasonal pattern. Looking to the second half of 2023, it is important to highlight the second half of last year included the dealer inventory build of $1.4 billion, as dealers began to restock their inventories. We are not planning for this trend to repeat. Instead, we expect to see dealers decrease inventories compared to the first quarter levels and end 2023 about flat relative to the end of 2022. Although we expect sales to users to remain positive for our primary segments in each quarter, our planning assumption is that Caterpillar second half sales will have a dealer inventory impact. Let me explain. First, although dealer inventory in some products and regions have normalized, others remain constrained. For example, in North America, dealer inventory remains below the typical range for many products. However, there is greater excavator inventory in a few regions, as supply dynamics improved in 2022, which, coupled with the slowing in China, has resulted in improved excavation product availability. Given the improved availability of excavators, we expect that dealers will scale back their levels of excavator inventory in the second half of the year, even though demand remains healthy. As a reminder, dealers are independent businesses and control their own inventory. Second, in late 2023, we have scheduled a couple of new product changeovers in construction industry factories that will also impact the second half. Now I'll discuss our outlook for key end markets this year, starting with Construction Industries. In North America, overall, we continue to see positive momentum in 2023. We expect growth in nonresidential construction in North America due to the positive impact of government-related infrastructure investments and a healthy pipeline of construction projects. Although residential construction housing starts have softened, the growth rate of our residential construction equipment remains positive as the supply chain pressures alleviate. In Asia Pacific, excluding China, we expect growth in Construction Industries due to public infrastructure spending and supportive commodity prices. As we mentioned during our previous earnings calls, we expect China\u2019s above ten-ton excavator industry to remain below 2022 levels due to low construction activity. In 2023, sales in China are expected to be below the typical range of 5% to 10% of total Caterpillar sales. In the EAME, business activity is now expected to increase versus last year based on healthy construction project activity, particularly strong construction demand in the Middle East. Although uncertain economic conditions remain, European construction is proving to be more resilient than we previously anticipated. Construction activity in Latin America is expected to be down in 2023 versus the strong 2022 performance. There is some concern about the potential impact of a commercial real estate slowdown. We estimate that North American commercial real estate accounts for about 1% of total construction industry sales. Any slowdown related to this sector should not have a significant impact on Construction Industries. In Resource Industries, we expect healthy mining demand to continue, as commodity prices remain above investment thresholds. As I have mentioned during the last few years, customers remain capital disciplined, which supports a gradual increase in mining over time. We anticipate production utilization levels will remain elevated. We also expect the aging of the fleet and a lower level of parked trucks to support future demand for our equipment and services. We continue to believe the energy transition will support increased commodity demand, expanding our total addressable market and providing further opportunities for profitable growth. In heavy construction and quarry and aggregates, we anticipate continued growth due to major infrastructure and nonresidential construction projects. In Energy & Transportation, we expect to follow our normal seasonal pattern, with higher sales in the second half of the year versus the first half. In oil and gas, reciprocating engines, although customers remain disciplined, we are encouraged by continued strength and demand for both well servicing and gas compression. Power generation reciprocating engine demand is expected to remain healthy, including strong data center growth. New equipment orders and services for solar turbines in both oil and gas and power generation are robust. Industrial remains healthy. In transportation, we anticipate strength in high-speed Marine as customers continue to upgrade aging fleets. Moving to Slide 7. We are contributing to a reduced carbon future and continue to invest in new products, technologies and services to help our customers achieve their climate-related objectives. We recently completed and upgraded more than 50 models across our entire next-generation hydraulic excavator line. The new models reduced fuel consumption by up to 25% compared to previous models and provide another option for customers to lower emissions, while improving operational efficiency. A customer can realize meaningful emissions reductions by simply moving to the newest next-gen model. This example reinforces our ongoing sustainability leadership and how we help our customers build a better, more sustainable world. In addition, we look forward to issuing our 18th annual sustainability report in May. With that, I'll turn the call over to Andrew.","evidence_gemma_new":null,"evidence_llama_3_3":"sales and revenues first quarter of 2023","evidence_qwen_3_30b":"sales and revenues 17% first quarter of 2023","gemma_new_max":null,"gemma_new_min":null,"llama_3_3_max":15900000000.0,"llama_3_3_min":15900000000.0,"qwen_3_30b_max":15900000000.0,"qwen_3_30b_min":15900000000.0}
{"symbol":"CAT","year":2023,"quarter":2,"date":"2023-Q2","chunk_id":2,"sub_chunk_id":0,"centroid_label":"sales and revenues","agreed_value":0.22,"count":2,"chunk":"James Umpleby: Thanks, Ryan. Good morning, everyone. Thank you for joining us. As we close out the first half of 2023, I want to recognize our global team for delivering a very strong second quarter. This included double-digit top-line growth, higher adjusted operating profit margin, record adjusted profit per share and robust ME&T free cash flow. Our results continued to reflect healthy demand across most end markets for our products and services. We remain focused on executing our strategy and continue to invest for long-term profitable growth. In today's call, I'll begin with my perspectives on our performance in the quarter. I'll then provide some insights on our end markets. Lastly, I'll provide an update on our sustainability journey. It was another strong quarter. Sales and revenues increased 22% in the second quarter versus last year. Adjusted operating profit margin improved 21.3%, up sequentially and year-over-year. We also generated $2.6 billion of ME&T free cash flow in the quarter. Our second quarter results were better than we expected for sales and revenues, adjusted operating profit margin, and ME&T free cash flow. In addition, we ended the quarter with a healthy backlog of $30.7 billion. We continue to see improvement in the supply chain, which allowed us to increase production in the quarter. However, areas of challenge remain, particularly for large engines, which impacts energy and transportation and some of our larger machines. While we continue to closely monitor global macroeconomic conditions, we now expect our 2023 results to be better than we had previously anticipated. Turning to Slide 4. In the second quarter of 2023, sales and revenues increased by 22% to $17.3 billion. This was primarily due to higher sales volume and price realization. Sales volumes were higher than we expected, largely due to an increase in dealer inventory relating to energy and transportation, which is supported by customer orders. We saw double-digit increases in sales and revenues in each of our three primary segments. Compared with the second quarter of 2022, overall sales to users increased 16%. For machines, which includes Construction Industries and Resource Industries, sales to users rose by 8%. Energy & Transportation was up 47%. Sales to users in Construction Industries were up 3%. North American sales to users increased and were better than expected as demand remained healthy for non-residential and residential construction. Non-residential continue to benefit from government-related infrastructure and construction projects. Residential sales to users in North America also increased in the quarter. EAME saw lower sales to users due to weaker than expected market conditions in Europe. The Middle East continued to demonstrate strong construction activity. In Latin America and Asia\/Pacific, sales to users declined in the quarter. In Resource Industries, sales to users increased 26%. In mining, sales to users increased, supported by commodities remaining above investment thresholds. Within heavy construction and quarry and aggregates, sales to users also increased, supported by growth for infrastructure-related projects. In Energy & Transportation, sales to users increased by 47% in the second quarter. All applications saw higher sales to users in the quarter. Oil and gas sales to users benefited from strong sales of turbines and turbine-related services. We also saw continued strength in sales of reciprocating engines into oil and gas applications, such as Tier 4 dynamic gas blending, gas compression, and repowering active well servicing fleets. Power generation sales to users continued to remain positive due to favorable market conditions, including strong data center growth. Industrial and transportation sales to users also increased. Dealer inventories increased by $600 million in the quarter, led by energy and transportation. We are very comfortable with the total level of dealer inventory, which remains in the typical range. Adjusted operating profit margin increased to 21.3% in the second quarter as we saw improvements, both on a sequential and year-over-year basis. Adjusted operating profit margin was better than we had anticipated, primarily due to better than expected volume growth and lower than expected manufacturing costs, including freight. Moving to Slide 5. We generated strong ME&T free cash flow of $2.6 billion in the second quarter. We returned $2 billion to shareholders, which included about $1.4 billion in repurchase stock and $600 million in dividends. In June, we announced an 8% dividend increase. Since May of 2019, when we introduced our current capital allocation strategy, we have increased the quarterly dividend per share by 51%. We remain proud of our dividend aristocrat status and continue to expect to return to substantially all ME&T free cash flow to shareholders over time through dividends and share repurchases. Now on Slide 6, I'll describe our expectations moving forward. While we continue to closely monitor global macroeconomic conditions, our second quarter results lead us to expect that full-year 2023 will now be even better than we described during our last earnings call. We now expect adjusted operating profit margins to be close to the top of the targeted range relative to the corresponding expected level of sales. This positive operating performance increases our expectations for ME&T free cash flow, which we now expect to be around the top of the $4 billion to $8 billion range for the full-year. Our current expectations for adjusted operating profit margin and ME&T free cash flow reflect continuing healthy customer demand and our strong operating performance. Now I'll discuss our outlook for key end markets this year, starting with the Construction Industries. In North America, overall, we continue to see positive momentum in 2023. We expect continued growth in non-residential construction in North America due to the positive impact of government-related infrastructure investments and a healthy pipeline of construction projects. Although residential construction growth has moderated, we expect the rest of 2023 to remain healthy. In Asia\/Pacific, excluding China, we expect growth in Construction Industries due to public infrastructure spending in support of commodity prices. We mentioned during our last earnings call that we expected sales in China to be below the typical 5% to 10% of our enterprise sales. We now expect further weakness as the 10-tons and above excavator industry has declined even more than we anticipated. In EAME, we anticipate that it will be flat to slightly up overall, with the Middle East exhibiting strong construction demand, whereas Europe is expected to be down. Construction activity in Latin America is expected to be down in 2023 versus a strong 2022 performance. In Resource Industries, we expect healthy mining demand to continue as commodity prices remain above investment thresholds. As I've mentioned previously, customers remain capital disciplined, which supports a gradual increase in mining over time. We anticipate production and utilization levels will remain elevated. We also expect the age of the fleet and the low level of park trucks to support future demand for our equipment and services. We continue to believe the energy transition will support increased commodity demand, expanding our total addressable market and providing further opportunities for profitable growth. In heavy construction and quarry and aggregates, we anticipate continued growth due to major infrastructure in non-residential construction projects. Now I'll discuss Energy & Transportation. For Cat reciprocating engines and oil and gas applications, although customers remain disciplined, we are encouraged by continuing strong demand for gas compression. Cat reciprocating engine demand for power generation is expected to remain healthy, including strong data center growth. New equipment orders and services for solar turbines in both oil and gas and power generation remain robust. Industrial continues to be healthy. In transportation, we anticipate strength in high speed marine as customers continued to upgrade aging fleets. Moving to Slide 7. We continued to advance our sustainability journey. Since our last quarterly earnings call, we published our 2022 sustainability report, which disclosed our estimated Scope 3 greenhouse gas emissions for the first time. We also published our first ever task force on climate-related financial disclosures report. We're helping our customers achieve their climate-related goals by continuing to invest in new products, technologies and services that facilitate fuel flexibility, increased operational efficiency and reduced emissions. For example, a customer in Chile is realizing fuel savings and lower emissions after purchasing our Cat D6 XE, the world's first high drive diesel-electric drive dozer. The customer reported a 30% reduction in fuel consumption versus the previous model working in the same operation. This example reinforces our ongoing sustainability leadership in how we help our customers build a better, more sustainable world. With that, I'll turn the call over to Andrew.","evidence_gemma_new":"Sales and revenues second quarter","evidence_llama_3_3":"sales and revenues second quarter","evidence_qwen_3_30b":null,"gemma_new_max":0.22,"gemma_new_min":0.22,"llama_3_3_max":0.22,"llama_3_3_min":0.22,"qwen_3_30b_max":null,"qwen_3_30b_min":null}
{"symbol":"CAT","year":2023,"quarter":2,"date":"2023-Q2","chunk_id":2,"sub_chunk_id":0,"centroid_label":"sales and revenues","agreed_value":17300000000.0,"count":2,"chunk":"James Umpleby: Thanks, Ryan. Good morning, everyone. Thank you for joining us. As we close out the first half of 2023, I want to recognize our global team for delivering a very strong second quarter. This included double-digit top-line growth, higher adjusted operating profit margin, record adjusted profit per share and robust ME&T free cash flow. Our results continued to reflect healthy demand across most end markets for our products and services. We remain focused on executing our strategy and continue to invest for long-term profitable growth. In today's call, I'll begin with my perspectives on our performance in the quarter. I'll then provide some insights on our end markets. Lastly, I'll provide an update on our sustainability journey. It was another strong quarter. Sales and revenues increased 22% in the second quarter versus last year. Adjusted operating profit margin improved 21.3%, up sequentially and year-over-year. We also generated $2.6 billion of ME&T free cash flow in the quarter. Our second quarter results were better than we expected for sales and revenues, adjusted operating profit margin, and ME&T free cash flow. In addition, we ended the quarter with a healthy backlog of $30.7 billion. We continue to see improvement in the supply chain, which allowed us to increase production in the quarter. However, areas of challenge remain, particularly for large engines, which impacts energy and transportation and some of our larger machines. While we continue to closely monitor global macroeconomic conditions, we now expect our 2023 results to be better than we had previously anticipated. Turning to Slide 4. In the second quarter of 2023, sales and revenues increased by 22% to $17.3 billion. This was primarily due to higher sales volume and price realization. Sales volumes were higher than we expected, largely due to an increase in dealer inventory relating to energy and transportation, which is supported by customer orders. We saw double-digit increases in sales and revenues in each of our three primary segments. Compared with the second quarter of 2022, overall sales to users increased 16%. For machines, which includes Construction Industries and Resource Industries, sales to users rose by 8%. Energy & Transportation was up 47%. Sales to users in Construction Industries were up 3%. North American sales to users increased and were better than expected as demand remained healthy for non-residential and residential construction. Non-residential continue to benefit from government-related infrastructure and construction projects. Residential sales to users in North America also increased in the quarter. EAME saw lower sales to users due to weaker than expected market conditions in Europe. The Middle East continued to demonstrate strong construction activity. In Latin America and Asia\/Pacific, sales to users declined in the quarter. In Resource Industries, sales to users increased 26%. In mining, sales to users increased, supported by commodities remaining above investment thresholds. Within heavy construction and quarry and aggregates, sales to users also increased, supported by growth for infrastructure-related projects. In Energy & Transportation, sales to users increased by 47% in the second quarter. All applications saw higher sales to users in the quarter. Oil and gas sales to users benefited from strong sales of turbines and turbine-related services. We also saw continued strength in sales of reciprocating engines into oil and gas applications, such as Tier 4 dynamic gas blending, gas compression, and repowering active well servicing fleets. Power generation sales to users continued to remain positive due to favorable market conditions, including strong data center growth. Industrial and transportation sales to users also increased. Dealer inventories increased by $600 million in the quarter, led by energy and transportation. We are very comfortable with the total level of dealer inventory, which remains in the typical range. Adjusted operating profit margin increased to 21.3% in the second quarter as we saw improvements, both on a sequential and year-over-year basis. Adjusted operating profit margin was better than we had anticipated, primarily due to better than expected volume growth and lower than expected manufacturing costs, including freight. Moving to Slide 5. We generated strong ME&T free cash flow of $2.6 billion in the second quarter. We returned $2 billion to shareholders, which included about $1.4 billion in repurchase stock and $600 million in dividends. In June, we announced an 8% dividend increase. Since May of 2019, when we introduced our current capital allocation strategy, we have increased the quarterly dividend per share by 51%. We remain proud of our dividend aristocrat status and continue to expect to return to substantially all ME&T free cash flow to shareholders over time through dividends and share repurchases. Now on Slide 6, I'll describe our expectations moving forward. While we continue to closely monitor global macroeconomic conditions, our second quarter results lead us to expect that full-year 2023 will now be even better than we described during our last earnings call. We now expect adjusted operating profit margins to be close to the top of the targeted range relative to the corresponding expected level of sales. This positive operating performance increases our expectations for ME&T free cash flow, which we now expect to be around the top of the $4 billion to $8 billion range for the full-year. Our current expectations for adjusted operating profit margin and ME&T free cash flow reflect continuing healthy customer demand and our strong operating performance. Now I'll discuss our outlook for key end markets this year, starting with the Construction Industries. In North America, overall, we continue to see positive momentum in 2023. We expect continued growth in non-residential construction in North America due to the positive impact of government-related infrastructure investments and a healthy pipeline of construction projects. Although residential construction growth has moderated, we expect the rest of 2023 to remain healthy. In Asia\/Pacific, excluding China, we expect growth in Construction Industries due to public infrastructure spending in support of commodity prices. We mentioned during our last earnings call that we expected sales in China to be below the typical 5% to 10% of our enterprise sales. We now expect further weakness as the 10-tons and above excavator industry has declined even more than we anticipated. In EAME, we anticipate that it will be flat to slightly up overall, with the Middle East exhibiting strong construction demand, whereas Europe is expected to be down. Construction activity in Latin America is expected to be down in 2023 versus a strong 2022 performance. In Resource Industries, we expect healthy mining demand to continue as commodity prices remain above investment thresholds. As I've mentioned previously, customers remain capital disciplined, which supports a gradual increase in mining over time. We anticipate production and utilization levels will remain elevated. We also expect the age of the fleet and the low level of park trucks to support future demand for our equipment and services. We continue to believe the energy transition will support increased commodity demand, expanding our total addressable market and providing further opportunities for profitable growth. In heavy construction and quarry and aggregates, we anticipate continued growth due to major infrastructure in non-residential construction projects. Now I'll discuss Energy & Transportation. For Cat reciprocating engines and oil and gas applications, although customers remain disciplined, we are encouraged by continuing strong demand for gas compression. Cat reciprocating engine demand for power generation is expected to remain healthy, including strong data center growth. New equipment orders and services for solar turbines in both oil and gas and power generation remain robust. Industrial continues to be healthy. In transportation, we anticipate strength in high speed marine as customers continued to upgrade aging fleets. Moving to Slide 7. We continued to advance our sustainability journey. Since our last quarterly earnings call, we published our 2022 sustainability report, which disclosed our estimated Scope 3 greenhouse gas emissions for the first time. We also published our first ever task force on climate-related financial disclosures report. We're helping our customers achieve their climate-related goals by continuing to invest in new products, technologies and services that facilitate fuel flexibility, increased operational efficiency and reduced emissions. For example, a customer in Chile is realizing fuel savings and lower emissions after purchasing our Cat D6 XE, the world's first high drive diesel-electric drive dozer. The customer reported a 30% reduction in fuel consumption versus the previous model working in the same operation. This example reinforces our ongoing sustainability leadership in how we help our customers build a better, more sustainable world. With that, I'll turn the call over to Andrew.","evidence_gemma_new":null,"evidence_llama_3_3":"sales and revenues second quarter","evidence_qwen_3_30b":"sales and revenues second quarter of 2023","gemma_new_max":null,"gemma_new_min":null,"llama_3_3_max":17300000000.0,"llama_3_3_min":17300000000.0,"qwen_3_30b_max":17300000000.0,"qwen_3_30b_min":17300000000.0}
{"symbol":"CAT","year":2023,"quarter":2,"date":"2023-Q2","chunk_id":3,"sub_chunk_id":0,"centroid_label":"sales and revenues","agreed_value":10200000000.0,"count":2,"chunk":"Andrew Bonfield: Thank you, Jim, and good morning, everyone. I'll begin with commentary on the second quarter results, including the performance of our business segments. Then I'll discuss the balance sheet and free cash flow before concluding with our assumptions for the remainder of the year, including color on the third quarter. Beginning on Slide 8. Our team delivered a very strong second quarter as overall results exceeded our expectations on strong operating performance. We saw a healthy top-line growth, improved operating margins and robust ME&T free cash flow. For the year, we now expect our adjusted operating profit margin to be close to the top of the targeted range at our anticipated sales level. We also expect ME&T free cash flow to be around the top of our $4 billion to $8 billion target range. To summarize the results, sales and revenues increased by 22% or $3.1 billion to $17.3 billion. Sales increase versus the prior year was due to higher sales volume and price realization. Operating profit increased by 88% or $1.7 billion to $3.7 billion. The adjusted operating profit margin was 21.3%, an increase of 750 basis points versus the prior year. Adjusted profit per share increased by 75% to $5.55 in the second quarter compared to $3.18 last year. Profit per share was $5.67 in the second quarter of this year. This included a discrete deferred tax benefit of $0.17 per share, while restructuring costs were $0.05 per share, flat compared to the prior year. We continue to expect restructuring expenses of about $700 million for the full-year. Other income of $127 million in the quarter was lower than the second quarter of 2022 by $133 million. The year-over-year decline was primarily driven by an unfavorable currency impact related to ME&T balance sheet translation and a recurring increase in quarterly pension expense of approximately $80 million, which we initially spoke to you about in January. Higher investment and interest income acted as a partial offset. The provision for income tax in the second quarter, excluding discrete items reflected a global annual effective tax rate of approximately 23%, which remains our expectation for the full-year. Moving on to Slide 9. The 22% increase in the top-line versus the prior year was due to higher sales volume and price. Volume improved as sales to users increased by 16% and from changes in dealer inventory. Sales for the quarter were higher than we had anticipated, mostly due to volume. The volume outperformance reflected a dealer inventory increase, which was primarily due to our stronger than expected shipments in Energy & Transportation, particularly in power generation, which is in line with strong data center demand. Price realization was in line with our expectations for the quarter. As I mentioned, sales to users grew by 16% in the quarter. As Jim has discussed, demand remains healthy across most end markets for all our products and services and is supported by a healthy order backlog. Moving to Slide 10. Second quarter operating profit increased by 88%, while adjusted operating profit increased by 87% to $3.7 billion. Year-over-year favorable price realization and higher sales volume were partially offset by higher manufacturing costs, which largely reflected higher material costs. An increase in SG&A and R&D expenses included higher strategic investment spend. The adjusted operating profit margin of 21.3% was better than we had anticipated. Volume exceeded our expectations, which supported the margin outperformance. In addition, manufacturing costs increased less than we expected due to lower freight costs and a lower than anticipated impact from cost absorption. SG&A and R&D expenses were about in line. Moving to Slide 11. I'll review the segment performance. Construction Industries sales increased by 19% in the second quarter to $7.2 billion due to price realization and higher sales volume. By region, sales in North America rose by 32% due to higher sales volume and price realization. Stronger demand and supply chain improvements enabled stronger than expected shipments in North America. This supported stronger sales of equipment to end users and some delivery stocking in what remains our most constrained region. Sales in Latin America decreased by 11%, primarily due to lower sales volume, partially offset by price realization. In EAME, sales increased by 20%, primarily the result of higher sales volume and price realization. Sales in Asia\/Pacific were about flat. Second quarter profit for Construction Industries increased by 82% versus the prior year to $1.8 billion. The increase was mainly due to price realization and higher sales volume. The segment's operating margin of 25.2% was an increase of 880 basis points versus last year. Margin exceeded our expectations, largely due to better than expected volume of freight costs, which were lower than we had anticipated. Turning to Slide 12. Resource Industries sales grew by 20% in the second quarter to $3.6 billion. The increase was primarily due to price realization and higher sales volume. Volume increased due to higher sales of equipment to end users. Although aftermarket sales volumes were lower, dealer sales to customers for services remained positive. Second quarter profit for Resource Industries increased by 108% versus the prior year to $740 million, mainly due to price realization and higher sales volume. This was partially offset by unfavorable manufacturing costs, largely material costs. The segment's operating margin of 20.8% was an increase of 880 basis points versus last year. The segment's margin was better than we had expected, primarily due to favorable volume, timing of SG&A and R&D spend and lower than anticipated freight costs. Now on Slide 13. Energy & Transportation sales increased by 27% in the second quarter to $7.2 billion. Sales were up double-digits across all applications. Oil and gas sales increased by 43%, power generation sales increased by 39%, industrial sales rose by 18% and transportation sales increased by 12%. Second quarter profit for Energy & Transportation increased by 93% versus the prior year to $1.3 billion. The increase was mainly due to higher sales volume and price realization, partially offset by unfavorable manufacturing costs and higher SG&A and R&D expenses. The segment's operating margin of 17.6% was an increase of 600 basis points versus last year. The margin was generally in line with our expectations. Moving to Slide 14. Financial Products revenue increased by 16% to $923 million, primarily due to higher average financing rates across all regions. Segment profit increased by 11% to $240 million. The increase was mainly due to a lower provision for credit losses at Cat Financial, partially offset by an increase in SG&A expense. Business activity remains strong, and our portfolio continues to perform well. Past dues in the quarter were 2.15%, a 4 basis points improvement compared to the second quarter of 2022. This is the lowest second quarter past dues percentage since 2007. Retail new business volume performed well, increasing versus the prior year and the first quarter. In addition, we continue to see strong demand for used equipment. Now on Slide 15. Our ME&T free cash flow generation was again robust as we generated $2.6 billion in the quarter. This was an increase of $1.5 billion compared to the prior year. With approximately $4 billion generated in the first half, we now expect ME&T free cash flow to be around the top of our $4 billion to $8 billion target range for the full-year. CapEx in the second quarter was about $300 million, and we still expect to spend around $1.5 billion for the full-year. As Jim mentioned, we returned about $2 billion through share repurchases and dividends in the second quarter. Our balance sheet remains strong. We have ample liquidity with an enterprise cash balance of $7.4 billion, and we also hold an additional $2 billion in slightly longer-dated liquid marketable securities to improve yields on that cash. Now turning to Slide 16. I will share some high level assumptions for the second half and the third quarter. In the second half of 2023, we expect higher total sales and revenues as compared to the second half of last year. We anticipate both sales to users and price realization will be positive in the second half. Keep in mind that on a comparative basis, we start to lap the stronger price we saw from the third quarter onwards last year. Caterpillar sales will be impacted by changes in dealer inventories as dealers increased their inventories in the second half of last year, which is not typical, versus our expectation of a more typical reduction in the second half of 2023. I want to spend just a few moments talking about dealer inventories. Dealers are independent businesses, and they make their own decisions around the level of inventory they hold. We obviously work closely with them because this impacts our production levels. As Jim mentioned, we are very comfortable with the levels of inventory that dealers are holding. We talk about dealer inventory in aggregate. This is difficult to predict with certainty as it arises from three different business segments, over 150 dealers and hundreds of different products. In Resource Industries and Energy & Transportation, dealer inventory is mainly a function of the commissioning pipeline. Keep in mind that over 70% of dealer inventory in these segments is backed by firm customer orders. For Construction Industries, dealer inventory is principally a function of end user demand and availability from the factory. In Construction Industries, dealers typically increase inventories during the first half of the year. Around 60% of the $2 billion increase during the first half of this year was from products in this segment. The remaining 40% is in Resource Industries and Energy & Transportation. For Resource Industries and Energy Transportation, we currently anticipate a slight reduction in levels in the second-half, but this is dependent on commissioning. In Construction Industries, dealers are currently holding around the midpoint of the typical three to four months range. Some dealers would like to increase inventories of certain products, such as BCP and earth moving due to strong customer demand. Conversely, some dealers would like to reduce the levels of excavated inventory because of high availability. In addition, we are scheduled to replace third-party engines with Cat engines and certain products, which will impact production in these products during the second half. Our current planning assumption for the Construction Industries is that dealers will reduce their overall levels in inventory in the second half of 2023 with a principal focus on excavators. Overall, at the enterprise level, we currently expect dealer inventory should be slightly higher at the end of 2023 versus last year. Moving on. On this slide, we provide our adjusted profit margins target charge to assist you in your modeling process. Based on our current planning assumptions, we anticipate full-year adjusted operating profit margin to be close to the top of that 300 basis points target range at our expected sales level. Your expectation for total enterprise sales this year will inform you where on the curve margins should finish for the year. Specific to the second half, we anticipate adjusted operating profit margins in the remaining quarters of the year will be above the year ago levels, although they will be lower than the levels we saw in the first two quarters of this year. As compared to the first half, we anticipate a margin headwind from cost absorption in the second half. We do not expect to build our inventory as we did in the first half and anticipate that there will be some inventory reduction if we continue to see sustained supply chain improvement. In addition, spend related to the strategic growth initiatives should continue to ramp. Price realization should remain positive that the magnitude of the favorability versus the prior year is expected to be lower in the second half as we lap the more favorable pricing trends from last year. Therefore, the increases in margins that we have occurred -- that have occurred from price outpacing manufacturing cost inflation should moderate in the second half of this year. Now let's move on to our assumptions that are specific to the third quarter. We anticipate third quarter sales to be higher than the third quarter of 2022, but to exhibit the typical sequential decline when compared to the second quarter of 2023. In Construction Industries, as is our normal seasonal end, we expect lower sales compared to the second quarter. In Resource Industries, which can be lumpy, we anticipate slightly lower sales compared to the second quarter. We expect sales in Energy & Transportation will increase slightly compared to the second quarter. Specific to third quarter margins versus the prior year, adjusted operating profit margins at the enterprise level and segment margins should be stronger. However, we do expect lower enterprise adjusted operating profit margins in the third quarter compared to the second quarter of this year on lower volume and impacts from cost absorption. We also anticipate investment spend will ramp across our primary segments as we continue to accelerate our strategic investments in area like autonomy, alternative fuels, connectivity and digital and electrification. At the segment level, for Construction Industries, we expect a lower margin compared to the second quarter as is typical. This is largely due to lower quarter-on-quarter volume, increased investment in strategic initiatives and slightly higher manufacturing costs, including a headwind from cost absorption. Favorable price realization will act as a partial offset. We also anticipate lower third quarter margins in Resource Industries compared to the second quarter, primarily due to lower volume quarter-on-quarter. Conversely, we expect third quarter margins in Energy & Transportation will be slightly higher compared to the second quarter on higher volume and stronger price realization, partially offset by higher manufacturing costs and spend relating to strategic initiatives. Now turning to Slide 13, let me summarize. We generated strong adjusted operating profit margin with a 750 basis point increase to 21.3%. We now expect to be close to the top of the targeted range for adjusted operating margin -- profit margin for the full-year based on our expected sales levels. ME&T free cash flow generation was robust at $2.6 billion in the quarter. We returned $2 billion to shareholders through share repurchases and dividends. We now expect ME&T free cash flow to be around the top of our $4 billion to $8 billion range for the full-year. Lastly, we continue to execute our strategy for long-term profitable growth. And with that, we'll now take your questions.","evidence_gemma_new":"sales and revenues","evidence_llama_3_3":null,"evidence_qwen_3_30b":"sales and revenues 22% $3.1 billion $17.3 billion","gemma_new_max":10200000000.0,"gemma_new_min":10200000000.0,"llama_3_3_max":null,"llama_3_3_min":null,"qwen_3_30b_max":10200000000.0,"qwen_3_30b_min":10200000000.0}
{"symbol":"CAT","year":2023,"quarter":4,"date":"2023-Q4","chunk_id":3,"sub_chunk_id":0,"centroid_label":"sales and revenues","agreed_value":17100000000.0,"count":2,"chunk":"Andrew Bonfield: Thanks, Jim, and good morning, everyone. I'll begin with commentary on the fourth quarter results, including the performance of our segments. Then I'll discuss the balance sheet and cash flow, followed by an update to our target ranges for adjusted operating profit margins and ME&T free cash flow. I'll conclude with our high-level assumptions for 2024 and our expectations for the first quarter. Beginning on Slide 9. Strong operating performance continued in the fourth quarter as sales and revenues, adjusted operating profit margin, adjusted profit per share and ME&T free cash flow were all better than we had expected. In summary, sales and revenues increased by 3% to $17.1 billion. Adjusted operating profit increased by 15% to $3.2 billion. The adjusted operating profit margin was 18.9%, an increase of 190 basis points versus the prior year. Profit per share was $5.28 in the fourth quarter compared to $2.79 in the fourth quarter of last year. Profit per share in the quarter included favorable mark-to-market gains of $0.14 for the remeasurement of pension and OPEB plans and certain favorable deferred tax valuation adjustments of $0.04. It also included restructuring costs of $92 million or $0.13. Adjusted profit per share increased by 35% to $5.23 in the fourth quarter compared to $3.86 last year. The provision for income taxes in the fourth quarter, excluding the amounts related to mark-to-market and discrete items, reflected a global annual effective tax rate of 21.4%. This was lower than we had expected a quarter ago due to favorable changes in the geographic mix of profits. The lower rate benefited performance in the quarter by about $0.24. Moving on to Slide 10. I'll discuss top line results in the fourth quarter. The 3% sales increase versus the prior year was primarily driven by price realization, partially offset by lower volume as impacts from dealer inventory changes more than offset the 8% increase in sales to users. Both price and volume was slightly better than we had anticipated. The dealer inventory change resulted in an unfavorable sales impact of $1.6 billion versus the prior year. Dealer inventory decreased in the fourth quarter by $900 million overall compared to an increase of approximately $700 million during the fourth quarter of 2022. The dealer inventory decrease in the fourth quarter was led by Construction Industries, where the reduction was at the high end of our expectations. The decrease in this segment was led by excavators and the impact of the Cat engine changeover in building construction products that we have mentioned in previous earnings calls. Dealers also reduced their inventories in resource industries. Overall, the decrease in dealer inventory of machines was $1.4 billion in the quarter. Conversely, dealer inventory in Energy & Transportation increased mostly due to extended commissioning time lines, resulting from strong shipments, which was supported by healthy demand. As a reminder, dealer inventory in both Energy & Transportation and Resource Industries is mainly a function of the commissioning pipeline, and over 70% of dealer inventory in these segments is backed by firm customer orders. Looking at sales by segment. Sales in Construction Industries and Energy Transportation was slightly higher than we had anticipated, while sales in Resource Industries were about in line with our expectations. Moving to operating profit on Slide 11. Adjusted operating profit increased by 15% to $3.2 billion. Price realization and favorable manufacturing costs benefited the quarter, while higher SG&A and R&D expenses and lower sales volumes acted as a partial offset. The increase in SG&A and R&D expenses was primarily driven by higher short-term incentive compensation expense and strategic investment spend. The adjusted operating profit margin of 18.9% improved by 190 basis points versus the prior year. Margins were slightly higher than we had anticipated on volumes and price being marginally better than we had expected. Now on Slide 12. Construction Industries sales decreased by 5% in the fourth quarter to $6.5 billion due to lower sales volume, partially offset by favorable price realization. Lower sales volume was primarily due to the changes in dealer inventories that I mentioned earlier and more than offset the favorable sales to users. The dealer inventory changes impacted all of the regions. By region, sales in North America increased by 4%. In Latin America, sales decreased by 25%. Sales in EAME increased -- decreased by 18%. This region accounted for the largest dealer inventory decline in the quarter. In Asia Pacific, sales decreased by 4%. Fourth quarter profit for Construction Industries was $1.5 billion, an increase by 3% versus the prior year. The increase was primarily due to favorable price, partially offset by the profit impact from lower sales volume. The segment's operating margin of 23.5% was an increase of 180 basis points versus last year. This was broadly in line with our expectations. Turning to Slide 13. Resource Industries sales decreased by 6% in the fourth quarter to $3.2 billion. The decrease was primarily due to lower sales volume, partially offset by favorable price realization. Lower volume was impacted by changes in dealer inventories as dealers decreased inventories during the fourth quarter of 2023 compared to an increase in the prior year's quarter. Volume was also impacted by slightly lower aftermarket market part sales volume, partly due to dealer buying patterns. Fourth quarter profit for Resource Industries decreased by 1% versus the prior year to $600 million. The segment's operating margin of 18.5% was an increase of 90 basis points versus last year and was in line with our expectations. Now on Slide 14. Energy & Transportation sales increased by 12% in the fourth quarter to $7.7 billion. The increase was primarily due to higher sales volume and favorable price realization. Sales volume benefited from higher shipments of large engines and solar turbines and turbine-related services in the quarter. By application, oil and gas sales increased by 23%, power generation sales were higher by 29%, industrial sales decreased by 5% and transportation sales increased by 11%. While industrial sales decreased, they remain at healthy levels. Fourth quarter profit for Energy & Transportation increased by 21% versus the prior year to $1.4 billion. The increase was primarily due to favorable price and higher sales volume, partially offset by higher SG&A and R&D expenses, currency impacts and unfavorable manufacturing costs. The increase in SG&A and R&D expenses reflected ramping investments related to strategic growth initiatives and higher short-term incentive compensation expense. As a reminder, most of our strategic investments relating to electrification and alternative fuels are in Energy & Transportation, which therefore impacts this segment's margin. The operating margin of 18.6% was an increase of 130 basis points versus the prior year. Margin exceeded our expectations on higher volume, including favorable mix and price. Moving to Slide 15. Financial Products revenues increased by 15% to $981 million, primarily due to higher average financing rates across all regions and higher average earning assets in North America. Segment profit increased by 24% to $234 million. The increase was mainly due to lower provision for credit losses at Cat Financial, higher average earning assets and a higher net yield on average earning assets. Our portfolio continues to perform well with past dues near historic levels of 1.79%. We saw a 10 basis point improvement compared to the fourth quarter of 2022 and a 17 basis point improvement compared to the third quarter. This is the lowest fourth quarter past dues percentage since 2006. The year-end allowance rate was our lowest fourth quarter rate on record of 1.18% and was the second lowest quarterly rate ever. In addition, provision expense in 2023 was at the lowest level we've seen in over 20 years. Business activity remains strong, as retail new business volume increased versus the prior year and the third quarter. The increase versus the prior year reflected higher end user sales and rental conversions in the US. In addition, we continue to see strong demand for used equipment. Though used inventories have ticked up slightly, they remain close to historically low levels. Despite some moderation in used pricing on improved availability, it is still comfortably above historic norms. Moving on to Slide 16. The record $10 billion in ME&T free cash flow for the year included $3.2 billion in the fourth quarter, an increase of $200 million versus the prior year. On CapEx, we continue to make disciplined investments that are right for our business, governed by our focus on growing absolute OPACC dollars. We spent about $1.7 billion in 2023. Looking to 2024, we expect CapEx in the range of $2 billion to $2.5 billion. This is higher than our recent run rate and includes the investment in large engine capacity, which Jim referenced a moment ago. We also plan to invest more around AACE, which is autonomy, alternative fuels, connectivity and, digital and electrification. In addition, we are investing to make our supply chain more resilient. Moving to capital deployment. We returned $3.4 billion to shareholders in the fourth quarter, including $2.8 billion in share repurchases. Our net share count has decreased by approximately 14% since 2019, when we shared our intention to return substantially all ME&T free cash flow to shareholders over time and on a consistent basis. Our dividend remains a priority as we increased our quarterly payout by 8% in 2023. You will recall from our Investor Day in 2022, we shared that we expected to increase our dividend by at least high single digits for the next three years. The increase in 2023 reflected the second of those three years. Our balance sheet remains strong. We have ample liquidity with an enterprise cash balance of $7 billion, and we hold an additional $3.8 billion in slightly longer-dated liquid marketable securities to improve yields on that cash. Now on Slide 17, I'll discuss our revised adjusted operating profit margin targets. We exceeded our progressive target range in 2023, and we are confident that our strong execution and operating performance supports the potential for higher top end adjusted operating profit margins than were reflected in the prior range. Therefore, we have increased the top end of the range by 100 basis points relative to the corresponding level of sales. Achieving the top end of the range will remain challenging, as we are committed to increase investments in our strategic initiatives supporting long-term profitable growth. The bottom end of the target range remains unchanged. To explain, while higher gross margin support increasing the top end of the range, they actually pressure our margins in periods of decreasing volume. For that reason, we believe that the bottom end of the range remains challenging, but achievable. We will now target adjusted operating profit margins of 10% to 14% at $42 billion of sales and revenues, increasing to 18% to 22% at $72 billion of sales and revenues. Now on Slide 18. When I joined Caterpillar just over five years ago, I was impressed with the potential of our business to deliver higher, more consistent ME&T free cash flow as a result of the operating and execution model and our focus on generating absolute OPACC dollars. This is how we define winning at Caterpillar. We believe increasing absolute OPACC dollars will lead to higher shareholder returns over time. Since the beginning of 2019, we have generated $30 billion in ME&T free cash flow, including a record $10 billion in 2023. We are confident in our ability to consistently generate positive ME&T free cash flow over time. Therefore, we are introducing an updated target range for ME&T free cash flow, which is between $5 billion and $10 billion. Our strong operating performance as well as confidence in our future execution supports the higher range. The updated target range still maintains our flexibility to invest in our strategic initiatives, which is a priority. We also continue to expect to return substantially all of our ME&T free cash flow to shareholders over time through dividends and share repurchases. Moving to Slide 19. I will share our high-level assumptions for the full year. As Jim mentioned, in 2024, we anticipate sales and revenues will be broadly similar to 2023. We expect slightly favorable price realization and continued healthy underlying demand across the business as a whole. We anticipate another year of services growth as we continue to target $28 billion by 2026. We do not expect a significant change in dealer inventory for machines by the end of this year. And for Energy & Transportation, it is difficult to predict with certainty what will happen to dealer inventory as we have discussed previously. In total, dealer inventory increased by $2.1 billion in 2023. By segment, in Construction Industries, sales of equipment to end users should remain roughly similar compared to the strong year we saw in 2023. However, we do not expect a dealer inventory build as we saw last year. We also anticipate our services initiatives will benefit the segment in 2024. In Resource Industries, we anticipate lower sales versus 2023, impacted by lower machine volume primarily in off-highway and articulated trucks. We had strong sales of these products in 2023 as we converted our elevated backlog into sales, making for a challenging comparison. We also anticipate an unfavorable year-over-year change in dealer inventories. However, we expect services revenues will increase in this segment. In Energy & Transportation, we expect slightly higher sales in 2024. Power generation, oil and gas, and transportation sales should be positive, while industrial sales are expected to be lower compared to our historically strong levels in 2023. On full year adjusted operating profit margin, we currently expect to be in the top half of the updated margin target range at our expected sales levels. I'll discuss some of the puts and takes. In 2024, we expect a small pricing benefit weighted towards the first half of the year given carryover from increases taken in the second half of 2023. For the full year, we expect price to modestly exceed manufacturing costs. Versus last year, price in absolute dollar terms should moderate as we let the more favorable pricing trends from 2023. Short-term incentive compensation expense was about $1.7 billion in 2023, while we anticipate $1.2 billion in 2024. We expect the benefit of that low expense will be offset by increases in SG&A and R&D expenses as we continue to invest in strategic initiatives and of future long-term profitable growth. Investments are focused in services, new product introductions and AACE. We also anticipate there may be some negative margin impact due to mix this year. I'll explain. During 2023, when availability was somewhat challenged, we biased our production and shipments to products with the highest OPACC potential. Given that availability has improved, we anticipate a more normalized mix of products in 2024. We may also see an impact on margins from the mix of different segments as we anticipate in sales in 2024 will be slightly more weighted towards Energy & Transportation than they were in 2023. Moving on, we expect to be within the top half of our updated ME&T free cash flow target range of $5 billion to $10 billion. As you consider our cash position, keep in mind, the $1.7 billion cash outflow in the first quarter related to the payout of last year's incentive compensation expense. We also anticipate restructuring charges of $300 million to $450 million this year. Finally, we expect global effective tax rate in the range of 22.5% to 23.5%, an increase versus the 21.4% in 2023. Now on Slide 20. Our expectations for the first quarter, starting with the top line. We expect first quarter sales and revenues to be broadly similar to the prior year. We anticipate price to be favorable, although significantly less in absolute dollar terms than had occurred through 2023. We expect demand to remain healthy. However, we anticipate a slightly lower dealer inventory build for machines in the first quarter compared to a $1.1 billion build in the first quarter of 2023. This will act as a headwind to sales. At the segment level, in Construction Industries, we anticipate flattish to slightly higher first quarter sales versus the prior year, primarily due to favorable price. We anticipate lower sales in Resource Industries compared to the prior year, driven by lower volume, partially offset by favorable price. In Energy & Transportation, we expect flattish to slightly higher sales versus the prior year, with updated favorable volume benefiting the upside scenario. On margins, we expect the enterprise adjusted operating profit margin in the first quarter to be broadly similar to the first -- prior year. Price should more than offset manufacturing costs as price actions from 2023 rolled into 2024. We expect price will be lower in absolute dollar terms versus the prior year. We anticipate manufacturing costs to increase compared to last year, principally impacted by cost absorption as we do not expect an inventory build like we saw in the first quarter of 2023. We also anticipate an increase in SG&A and R&D expenses related to the strategic investment spend. By segment, in Construction Industries, we anticipate a similar margin as compared to the prior year. We expect price to offset strategic investment spend and slightly higher manufacturing costs, including cost absorption. In Resource Industries, we expect a lower margin compared to the prior year, impacted by lower volume, partially offset by favorable price. In Energy & Transportation, we anticipate a similar margin versus prior year, a slightly stronger price should be offset by higher manufacturing costs. Turning to Slide 21. Let me summarize. Adjusted profit per share of $21.21 exceeded our previous full year record by 53%. We exceeded the top end of our targeted ranges for adjusted operating profit margin and ME&T free cash flow. We have increased the top end of our adjusted profit margin range, and we have raised our ME&T free cash flow target range. We expect to be in the top half of our updated margin and ME&T free cash flow target ranges in 2024, and we anticipate another year of services growth as we continue to execute our strategy for long-term profitable growth. And with that, we'll take your questions.","evidence_gemma_new":"sales and revenues","evidence_llama_3_3":null,"evidence_qwen_3_30b":"sales and revenues fourth quarter","gemma_new_max":17100000000.0,"gemma_new_min":17100000000.0,"llama_3_3_max":null,"llama_3_3_min":null,"qwen_3_30b_max":17100000000.0,"qwen_3_30b_min":17100000000.0}
{"symbol":"CAT","year":2024,"quarter":1,"date":"2024-Q1","chunk_id":2,"sub_chunk_id":0,"centroid_label":"sales and revenues","agreed_value":15800000000.0,"count":3,"chunk":"Jim Umpleby : Thanks, Ryan. Good morning, everyone. Thank you for joining us. I'd like to start by thanking our global team for delivering another strong quarter, including higher adjusted operating profit margin, record adjusted profit per share, and strong ME&T free cash flow. Our strong balance sheet and ME&T free cash flow allowed us to deploy a record $5.1 billion of cash for share repurchases and dividends in the first quarter. Our results reflect a continuation of healthy demand for our products and services across most of our end markets. We remain focused on executing our strategy and continue to invest for long-term profitable growth. I'll begin with my perspectives about our performance in the quarter. I'll then provide some insights about our end markets, followed by an update on our sustainability journey. It was another strong quarter. Sales and revenues were about flat in the quarter versus last year, broadly in line with our expectations. Services revenues increased in the quarter. Our adjusted operating profit increased by 5% to $3.5 billion. Adjusted operating profit margin was slightly better than we expected and improved to 22.2% up a 110 basis points versus last year. We achieved a record adjusted profit per share of $5.60 up 14%. We also generated strong ME&T free cash flow in the quarter of $1.3 billion. In addition, our backlog increased to $27.9 billion up $400 million versus the fourth quarter of 2023. We continue to expect 2024 sales and revenues to be broadly similar to the record 2023 level. We have revised our full year 2024 segment expectations to reflect a slightly stronger top line in Energy & Transportation offset by softening in the European market for Construction Industries. We anticipate services to be higher in 2024 as we strive to achieve our 2026 target of $28 billion. For the year, we continue to expect adjusted operating profit margin and ME&T free cash flow to be in the top half of our target ranges. Turning to slide four. In the first quarter of 2024 sales and revenues remained about flat at $15.8 billion. Compared to our expectations, sales volume was slightly lower while price realization, including geographic mix, was better than we anticipated. Compared to the first quarter of 2023, overall sales to users decreased by 5%. This was slightly lower than we expected, mainly due to weakness in Europe for Construction Industries. Energy & Transportation continued to show strength, where sales to users increased 9%. For machines, which includes Construction Industries and Resource Industries, sales to users declined by 9%. Focusing on Construction Industries, sales to users were down 5%. In North America, our largest geographic region for Construction Industries, sales to users increased as expected, and demand remained healthy for both non-residential and residential construction. Construction projects, as well as government related infrastructure, continue to benefit non-residential demand. Although residential sales to users in North America were down slightly, demand for new housing remained strong. Sales to users declined in EAME primarily due to weakness in Europe related to residential construction and economic conditions. Latin America and Asia Pacific sales to users also saw some declines. In Resource Industries, sales to users declined 17% in the first quarter compared to a very strong first quarter in 2023. Mining, as well as heavy construction and quarry and aggregates were lower, mainly due to softness in off-highway and articulated trucks that we mentioned during our last earnings call. In Energy & Transportation, sales to users increased by 9%. Oil and gas sales to users benefited from strong sales of turbines and turbine-related services. We also saw increased sales of reciprocating engines in the gas compression and well servicing oil and gas applications. Power generation sales to users grew as market conditions remained favorable, including strong data center growth. Transportation sales to users increased while industrial declined as we expected from strong levels last year. In total, dealer inventory increased by $1.4 billion versus the fourth quarter. For machines, dealer inventory increased by $1.1 billion, which was slightly higher than our expectations, largely due to sales to users being modestly lower than anticipated. The increase in machine dealer inventory is consistent with normal seasonal patterns of which Construction Industries products accounted for the majority of the increase. The total level of machine dealer inventory is comfortably within the typical range. As I mentioned, backlog increased to $27.9 billion, up $400 million versus the fourth quarter of 2023, led by Energy & Transportation. Backlog remains elevated as a percentage of revenues compared to historical levels. Adjusted operating profit margin increased to 22.2% in the first quarter, a 110 basis point increase over last year, which was slightly better than we anticipated. This was primarily due to better than expected manufacturing costs, mainly related to freight. Moving to slide five. We generated strong ME&T free cash flow of $1.3 billion in the first quarter. We deployed $5.1 billion of cash for share repurchases and dividends in the first quarter, including the initiation of a $3.5 billion accelerated share repurchase program which may last up to nine months. We remain proud of our Dividend Aristocrat status and continue to expect to return substantially all ME&T free cash flow to shareholders over time through dividends and share repurchases. Now on slide six, I'll describe our expectations moving forward. We expect a continuation of healthy demand across most of our end markets for our products and services. We continue to anticipate 2024 sales and revenues to be broadly similar to the record 2023 level. As I mentioned, we expect services to continue to grow in 2024. We currently do not anticipate a significant change in dealer inventory in machines in 2024, compared to a $700 million increase in 2023. This is expected to be a headwind to sales in 2024. As a reminder, dealers are independent businesses and manage their own inventories. The vast majority of dealer inventories in Energy & Transportation are backed by firm customer orders. The timing of these products being recognized as sales to users is impacted by dealer packaging and commissioning, which is why it is difficult to predict dealer inventory in E&T. This is why we have become more explicit about the differentiation between machine dealer inventory and total dealer inventory. As I mentioned, we anticipate that our 2024 results will be within the top half of our target ranges for both adjusted operating profit margin and ME&T free cash flow. Our strong results continue to reflect the diversity of our end markets, as well as the disciplined execution of our strategy for profitable growth. Now, I'll discuss our outlook for key end markets starting with Construction Industries. In North America, after a very strong 2023, we continue to expect demand in the region will remain healthy in 2024 for both non-residential and residential construction. We anticipate non-residential construction to remain at similar levels to slightly higher demand levels compared to last year due to construction projects, as well as government related infrastructure. Residential construction demand is expected to be flat to slightly down versus last year, which remains strong in comparison to historical levels. In Asia Pacific, outside of China, we are seeing some softening in economic conditions. We anticipate demand in China will remain at a relatively low level for the above 10-ton excavator industry. In EAME, we anticipate that weak economic conditions in Europe will continue, somewhat offset by strong construction activity in the Middle East. Construction activity in Latin America remains mixed, but overall, we are expecting modest growth. In addition, we expect the ongoing benefit of our services initiatives will positively impact Construction Industries in 2024. Next, I'll discuss Resource Industries. After strong performance in 2023 in mining, as well as heavy construction and quarry and aggregates, we anticipate lower machine volume versus last year, primarily due to off-highway and articulated trucks. In addition, we anticipate a small decrease in resource industry dealer inventories during 2024 versus a slight increase last year. While we continue to see a high level of quoting activity overall, we anticipate lower order rates as customers display capital discipline. We expect to see higher services revenues, including robust rebuild activity. Customer product utilization remains high, the number of parked trucks remains low, and the age of the fleet remains elevated, and our autonomous solutions continue to see strong customer acceptance. We continue to believe the energy transition will support increased commodity demand over time, expanding our total addressable market, and providing further opportunities for long-term profitable growth. Moving to Energy & Transportation. In oil and gas, we expect reciprocating engines and services to be about flat after strong 2023 performance. We expect reciprocating gas compression demand to be higher in 2024 than it was in 2023. While servicing demand in North America is expected to soften, Cat reciprocating engine demand for power generation is expected to remain strong, largely due to continued data center growth relating to Cloud Computing and Generative AI. Last quarter, I mentioned we are making a multi-year capital investment in our large reciprocating engine division, including increasing capacity for both new engines and aftermarket parts. This investment will approximately double output for large engines and aftermarket parts as compared to 2023. We leverage these large engines across a variety of applications, including data centers, oil and gas, large mining trucks, and distributed power generation. For Solar Turbines, our backlog and quoting activity both remain strong for oil and gas and power generation. As we said previously, industrial demand is expected to soften relative to a strong 2023. In transportation, we anticipate high-speed marine to increase as customers continue to upgrade aging fleets. Moving to slide seven, I'll provide an update on our sustainability journey. We are contributing to a reduced carbon future and continue to invest in new products technologies and services, to help our customers achieve their climate related objectives. In January we announced the signing of an electrification strategic agreement with CRH to advance the deployment of Caterpillar\u2018s Zero-Exhaust Emissions Solutions. CRH is the number one aggregate producer in North America and the first company in that industry to sign such an agreement with Caterpillar. The agreement is focused on accelerating the deployment of Caterpillar\u2019s 70-ton to 100-ton class battery electric off-highway trucks and charging solutions at a CRH site in North America. Through the agreement CRH will participate in Caterpillar\u2019s early learner program for battery electric off-highway trucks. In February Caterpillar oil and gas announced the launch of the Cat Hybrid Energy Storage Solution to help drillers and operators cut fuel consumption, lower total cost of ownership and reduce emissions in oil and gas operations. The custom designed energy storage system stores excess power from the job site and then discharges it as needed. In a hybrid system that combines the Cat Hybrid Energy Storage Solution in a natural gas fuel generator set, the transient response is even quicker than a conventional diesel only rigs. Depending upon site configuration the Hybrid Energy Storage Solution has proven to deliver up to 30% fuel cost savings with natural gas, 85% fuel cost savings with fuel gas, and up to an 80% reduction in nitrogen oxides. Carbon dioxide equivalent reductions up to 11% and 7% are possible with natural gas and fuel gas respectively. In addition, we look forward to issuing our 19th Annual Sustainability Report in May. The material in our report reinforce our ongoing commitment to sustainability. With that I'll turn it over to Andrew.","evidence_gemma_new":"Sales and revenues","evidence_llama_3_3":"sales and revenues first quarter","evidence_qwen_3_30b":"sales and revenues $15.8 billion","gemma_new_max":15800000000.0,"gemma_new_min":15800000000.0,"llama_3_3_max":15800000000.0,"llama_3_3_min":15800000000.0,"qwen_3_30b_max":15800000000.0,"qwen_3_30b_min":15800000000.0}
{"symbol":"CAT","year":2024,"quarter":4,"date":"2024-Q1","chunk_id":37,"sub_chunk_id":0,"centroid_label":"sales and revenues","agreed_value":1000000000.0,"count":2,"chunk":"Andrew Bonfield: Yes, so obviously normally what you would see in CI is a first quarter benefit on sales and revenues, mainly due to dealer inventory builds. The last couple of years, that\u2019s been around a billion dollars. We expect that to be significantly less in the first quarter of this year. Correspondingly, we\u2019ve actually seen quite a significant dealer inventory reduction in the fourth quarter - that will be a little bit less, so this is really just a non-operating--actually as we look at underlying sales to users, they will be pretty much in line throughout the whole of the year and will be down slightly for the full year, so that is the underlying characteristics on the top line. The other overlay is really around price. Price will impact the first half. Impact from price, as you saw in the--for CI in the fourth quarter was around $300 million. That will be the impact, the estimated impact on the first quarter; and obviously as we go through the rest of the year and particularly in the second half, the comps become easier and that will actually neutralize as we get into the second half. It\u2019s really just--overall, just really a timing issue related to dealer inventory mostly and the timing of price. When you take those two things out, effectively sales to users should actually be broadly much the same, first half to second half. There is no demand change we\u2019re expecting as we go through the year.","evidence_gemma_new":"sales and revenues first quarter","evidence_llama_3_3":null,"evidence_qwen_3_30b":"sales and revenues dealer inventory builds first quarter","gemma_new_max":1000000000.0,"gemma_new_min":1000000000.0,"llama_3_3_max":null,"llama_3_3_min":null,"qwen_3_30b_max":1000000000.0,"qwen_3_30b_min":1000000000.0}
{"symbol":"CAT","year":2024,"quarter":2,"date":"2024-Q2","chunk_id":2,"sub_chunk_id":0,"centroid_label":"sales and revenues","agreed_value":16700000000.0,"count":3,"chunk":"James Umpleby: Thanks, Ryan. Good morning, everyone. Thank you for joining us. I'd like to start by thanking our global team for their strong execution in the first half of the year. In the second quarter, we achieved higher adjusted operating profit margin, record adjusted profit per share and generated robust ME&T free cash flow. Our results continue to reflect the benefit of the diversity of our end-markets as well as the disciplined execution of our strategy for long-term profitable growth. I'll begin with my perspectives about our performance in the quarter and we'll provide an update on our full year expectations. I'll then provide some insights about our end-markets, followed by an update on our sustainability journey. Moving to quarterly results. Sales and revenues were down 4% in the second quarter versus last year, slightly below our expectations. Services increased in the quarter. Our adjusted operating profit increased to $3.7 billion, a record. Adjusted operating profit margin was better than we expected and improved to 22.4% up 110 basis points versus last year. We achieved a record quarterly adjusted profit per share of $5.99, up 8%. We also generated $2.5 billion of ME&T free cash flow in the quarter. In addition, our backlog increased to $28.6 billion, up $700 million versus the first quarter of 2024. Before I get into the detail of the quarter and outlook for our segments, I'll update our expectations for the full year based on our first half results. Earlier in the year, we estimated that sales and revenues would be broadly similar for the full year. For the first half, the top-line came in marginally below our expectations and ended 2% below the prior year. We now anticipate our sales and revenues will decline at a roughly similar rate in the second half versus the prior year, in-part due to our latest assumptions for dealer inventory, principally into Resource Industries. Overall sales to users and construction industries are running slightly lower than we anticipated, partially offset by stronger-than-expected sales in Energy and Transportation. Service revenues continue to grow. Although sales and revenues have been marginally below our expectations, adjusted operating profit margins have been stronger than we anticipated. Earlier in the year, we expected our adjusted operating profit margin to be in the top half of the target range at the corresponding level of sales. Due to the strength of our performance in the first half of the year, we now expect overall adjusted operating profit margins to be above the top of the target range for the full year. For the second half, we expect adjusted operating profit margins to be better than we previously anticipated or about flat to the second half of 2023, which Andrew will describe. The strength of our performance to date and our improved second half adjusted operating profit margin expectations give us confidence to guide above our target range. Overall, our expectations for full year adjusted operating profit and adjusted profit per share are now higher than it was during our last earnings call. We also anticipate that ME&T free cash flow will remain in the top half of the free cash flow target range. Turning to Slide 4 and our second quarter results. In the second quarter of 2024, sales and revenues declined 4% to $16.7 billion. Sales volume declined slightly more than we expected, while price realization, including geographic mix was better than we anticipated. Dealer inventory also declined in the second quarter. Compared to the second quarter of 2023, overall sales to users decreased 3%, slightly below expectations. For machines, which includes Construction Industries and Resource Industries, sales to users declined by 8%, slightly more than expected. Energy and transportation continued to show strength as sales to users increased 10%. Sales to users in Construction Industries were down 5%. In North America, sales to users were slightly lower than anticipated, primarily due to weaker than expected rental fleet loading. Government related infrastructure projects remained healthy. Residential sales to users in North America were up as demand for new housing remained resilient. Sales to users declined in the EAME, primarily due to weakness in Europe relating to residential construction and economic conditions. Sales to users in Asia Pacific declined, while Latin America increased. In Resource Industries, sales to users declined 15%, a slightly smaller decline than we expected versus a very strong second quarter in 2023. Mining as well as heavy construction and quarry and aggregates were lower, mainly due to softness we previously discussed for two products, articulated trucks and off-highway trucks. In Energy and Transportation, despite the ongoing weakness in industrial, sales to users increased by 10% as we continue to see strength across most applications. Oil and gas sales to users benefited from strong sales of turbines and turbine related services. We also saw increased sales of reciprocating engines into gas compression, while well servicing oil and gas applications were lower. Power generation sales to users grew as market conditions remained favorable, including strong data center growth. Transportation sales to users increased, while industrial declined as expected from the strong levels last year. Our results continue to reflect the benefit of the diversity of our end-markets as well as the disciplined execution of our strategy for long-term profitable growth. Moving to dealer inventory. In total, dealer inventory decreased by $200 million versus the first quarter. For machines, dealer inventory decreased by $400 million and remains within our typical range. As I mentioned, backlog increased to $28.6 billion, up $700 million versus the first quarter of 2024. Energy & Transportation drove the increase as we continue to see strong demand for solar turbines and reciprocating engines for power generation. Adjusted operating profit margin increased to 22.4% in the second quarter, a 110 basis point increase over last year, which was better than we anticipated. Margin exceeded our expectations, primarily due to lower than expected manufacturing costs and slightly better than expected price. Moving to Slide 5, we generated ME&T free cash flow of $2.5 billion in the second quarter. We deployed more than $1.8 billion of cash for share repurchases and about $600 million in dividends in the second quarter. In June, we announced an additional $20 billion share repurchase authorization with no expiration date. We remain committed to consistent share repurchases. Since 2019, when we communicated our intention to return substantially all ME&T free cash flow to shareholders over time, our net share count has decreased by approximately 18%. In addition, we increased our dividend by 8% in the second quarter, which is our fourth straight year of a high single-digit quarterly increase. We remain proud of our Dividend Aristocrat status and continue to expect to return substantially all ME&T free cash to shareholders over time through dividends and share repurchases. Now on Slide 6. I'll describe our expectations for our three primary segments moving forward. In Construction Industries, after a record 2023, sales to users in the second half are now expected to decline slightly versus last year. In North America, we now anticipate slightly lower construction industry sales to users for full year 2024 than we did previously, primarily due to weaker than expected rental fleet loading. Government related infrastructure projects are expected to remain healthy. In Asia Pacific, outside of China, we still expect soft economic conditions to continue. We anticipate demand in China will remain at a relatively low level for the above 10 ton excavator industry. In the EAME, we anticipate that weak economic conditions in Europe will continue, somewhat offset by continued healthy construction demand in the Middle East. Construction activity in Latin America remains mixed, but overall, we are expecting modest growth. In addition, we are expecting the ongoing benefit of our services initiatives will positively impact Construction Industries. Next, I'll discuss Resource Industries. After strong performance in 2023 in mining as well as heavy construction, in quarry and aggregates, we continue to anticipate lower machine volume versus last year, primarily due to off-highway and articulated trucks. We currently anticipate a decrease in Resource Industries dealer inventories in 2024 versus a slight increase last year. We expect to see higher services revenues, including robust rebuild activity. Customer product utilization remains high, the number of parked trucks remains low and the age of the fleet remains elevated and our autonomous solutions continue to see strong customer acceptance. Customers continue to display capital discipline, however, we continue to believe the energy transition will support increased commodity demand over time, expanding our total addressable market and providing further opportunities for long-term profitable growth. Moving to Energy & Transportation. In oil and gas, in total, we expect a stronger year overall in 2024 versus last year. After a strong 2023, we expect reciprocating engine sales in oil and gas to be flat to slightly down, primarily due to ongoing softness in well servicing. We still expect gas compression to be up for the full year, however, we expect it to soften in the second half. For solar turbines, we continue to expect volume growth in the second half as our backlog remains strong for oil and gas. CAT reciprocating engine and solar turbine demand for power generation is expected to remain strong, largely due to continued data center growth relating to cloud computing and Generative AI. Industrial demand is expected to remain at a relatively low level compared to 2023 in the second half. In Transportation, we anticipate growth as the year progresses in both high speed marine and rail services. Moving to Slide 7. I'll provide an update on our sustainability journey. We are contributing to a reduced carbon future and continue to invest in new products, technologies and services to help our customers achieve their climate related objectives. In April, Caterpillar and Vale signed an agreement to test battery-electric large mining trucks as well as to conduct studies on ethanol powered trucks. Progress has been made on both initiatives since the agreement was signed, including conducting a joint study on a dual-fuel solution for haul trucks operating on ethanol and diesel fuel. We are supporting Vale's sustainability objectives. In June, we added CAT CG260 Gas Generator sets to our portfolio of commercially available power solutions capable of running on hydrogen fuel. Previously, our portfolio with this capability ranged from 400 KW to 2,500 KW. The addition of the CG260 now provides up to 4,500 KW of electric power for continuous, prime and load management requirements and is approved to operate on gas containing up to 25% hydrogen by volume. Caterpillar offers retrofit kits to upgrade CG260 Generator sets already installed with these same hydrogen capabilities. In addition to our hydrogen capabilities and reciprocating engines, solar turbines has been a leader with its ability to burn a wide variety of fuels, including hydrogen, natural gas and biofuels. Today, Caterpillar has a large and growing lineup of technologies to support customers in their sustainability journey. These two examples highlight how we are helping our customers build a better, more sustainable world. With that, I'll turn it over to Andrew.","evidence_gemma_new":"sales and revenues","evidence_llama_3_3":"sales and revenues second quarter","evidence_qwen_3_30b":"sales and revenues $16.7 billion decreased by about 4%","gemma_new_max":16700000000.0,"gemma_new_min":16700000000.0,"llama_3_3_max":16700000000.0,"llama_3_3_min":16700000000.0,"qwen_3_30b_max":16700000000.0,"qwen_3_30b_min":16700000000.0}
{"symbol":"CAT","year":2024,"quarter":3,"date":"2024-Q3","chunk_id":3,"sub_chunk_id":0,"centroid_label":"sales and revenues","agreed_value":16100000000.0,"count":3,"chunk":"Andrew Bonfield: Thank you, Jim, and good morning, everyone. As usual, I'll begin with a high-level summary of the third quarter, and then provide more detailed comments, including the performance of the segments. I'll then, discuss the balance sheet and free cash flow, before concluding with comments on our assumptions for the full year and the fourth quarter. Beginning on Slide 8, although sales and revenues were lower than we had expected, our adjusted operating profit margin was 20.0%, generally in line with what we had anticipated. Adjusted profit per share was in line with our expectations despite adjusted operating profit being impacted by the lower sales and revenues. I will highlight a few of the moving parts in a moment. As Jim mentioned, our full year margin expectations remain unchanged, and we continue to anticipate the adjusted operating profit margin will be above the top end of the target range despite the slightly lower outlook for the top-line. Our expectations for adjusted profit per share remain unchanged versus our expectations at the time of our last earnings call. Also, we have increased our expectations for ME&T free cash flow for the year, which we now anticipate will be near the top of our $5 billion to $10 billion target range. In the third quarter, sales and revenues of $16.1 billion decreased by 4% compared to the prior year. The adjusted operating profit margin of 20.0% was 80 basis points lower when compared to the prior year. Profit per share was $5.06 in the third quarter compared to $5.45 in the third quarter of last year. Restructuring costs were $0.11 in the quarter versus $0.07 in the prior year. Adjusted profit per share was $5.17 in the quarter compared to $5.52 last year. Other income and expense was $119 million headwind versus the prior year, mostly driven by an unfavorable currency impact related to ME&T balance sheet translation. We do not forecast the impact of foreign currency translation on our adjusted profit per share, so this acted as a headwind compared to our expectations for the quarter. Excluding discrete items, the provision for income taxes in the third quarter in both 2023 and 2024 reflected a global annual effective tax rate of 22.5%. We recorded a discrete tax benefit, which had an $0.11 favorable impact within the quarter. We do not anticipate discrete items. Finally, the year-over-year impact from the reduction in the average number of shares outstanding, primarily due to share repurchases, resulted in a favorable impact on adjusted profit per share of approximately $0.26 as compared to the third quarter 2023. This was slightly better than we had expected. Moving to Slide 9, I'll discuss our top-line results for the third quarter. Sales and revenues decreased by 4% compared to the prior year, primarily impacted by lower sales volume as a result of lower sales to users and impacts from changes in dealer inventories. Total sales to users decreased by 6% as a 10% decrease from Machines was partially offset by a 5% increase for Energy & Transportation. The impact from changes in total dealer inventories acted as a sales headwind of about $200 million in the quarter. For Machines-only, dealer inventory increased by about $100 million, a smaller increase than the $400 million increase in the prior year, but slightly above our expectations of being flattish to slightly lower. Service revenues increased versus the prior year, as we had anticipated. Moving to operating profit on Slide 10. Operating profit in the third quarter decreased by 9% to $3.1 billion. Adjusted operating profit decreased by 8% to $3.2 billion, mainly due to the impact of lower sales volume, partially offset by favorable price realization and manufacturing costs. Since early 2022, price realization has been a strong -- has been strong and often exceeded our expectations. Over the past several quarters, we have highlighted that price will begin to moderate in the second half of this year. In the third quarter, this moderation began to occur as price realization was lower than previous quarters and generally in line with our expectations. As I mentioned, for the third quarter, the adjusted operating profit margin was 20.0%, which was generally in line with our expectations. By segment, margin in Construction Industries and Resource Industries was slightly below our expectations on lower volume, while Energy & Transportation was about in line. Financial products had a slightly stronger quarter than we had expected. On Slide 11, Construction Industries sales decreased by 9% in the third quarter to $6.3 billion, slightly below our expectations. The decrease versus the prior year was primarily due to lower sales volume and unfavorable price realization. The decrease in sales volume was mainly driven by lower sales of equipment to end users. Changes in dealer inventories also acted as a slight headwind to sales. By region, Construction Industries sales in North America decreased by 11%; in Latin America, sales increased by 19%; sales in the EAME region decreased by 15%; in Asia Pacific, sales declined by 12%. Third quarter profit for Construction Industries was $1.5 billion, a 20% decrease versus the prior year. This is mainly due to the profit impact of lower sales volume and unfavorable price realization. The segment's margin of 23.4% was a decrease of 300 basis points versus the prior year. Turning to Slide 12, Resource Industries sales decreased by 10% in the third quarter to $3.0 billion, which was slightly point below our expectations. The decline versus the prior year was primarily due to lower sales volume, mainly driven by lower sales of equipment to end users given a challenging comparison to the prior year. Third quarter profit for Resource Industries decreased by 15% versus the prior year to $619 million. This was mainly due to the profit impact of lower sales volume. The segment's margin of 20.4% was a decrease of 140 basis points versus the prior year. Now, on Slide 13, Energy & Transportation sales increased by 5% in the third quarter to $7.2 billion, slightly lower than we had expected, driven by the timing of deliveries. The increase versus the prior year was primarily due to favorable price realization and higher sales volume, including higher intersegment sales. By application, power generation sales increased by 26%, transportation sales were higher by 3%, oil and gas sales decreased by 1%, and industrial sales decreased by 16%. Third quarter profit for Energy & Transportation increased by 21% versus the prior year to $1.4 billion. The increase was mainly due to favorable price realization. The segment's margin of 19.9% was an increase of 270 basis points versus the prior year. Moving to Slide 14, financial products revenues increased by 6% to about $1 billion, primarily due to higher average earning assets driven by North America and higher average financing rates across all regions. Segment profit increased by 21% to $246 million. This is mainly due to a favorable impact from equity securities and a lower provision for credit losses. Our customers' financial health is strong. Past dues remain near historic lows of 1.74% in the quarter, down 22 basis points versus the prior year. Our allowance rate was 0.87%, our lowest on record. Business activity at Cat Financial remains healthy. Our retail new business volume increased by 17% versus the prior year, supported by our financing packages for customers choosing to buy Caterpillar equipment. Though Caterpillar's retail machine sales volume was lower, proportionately more sales have been financed through Cat Financial, which highlights the attractiveness of the financing options we are offering to our customers. We also continue to see healthy demand for used equipment and inventories remain at low levels. Conversion rates are also strong as customers choose to buy equipment at the end of their lease term. Moving on to Slide 15, we generated about $2.7 billion in ME&T free cash flow in the third quarter and deployed about $1.5 billion in share repurchases and dividends. Our balance sheet remains strong with an enterprise cash balance of $5.6 billion. In addition, we hold $1.8 billion in slightly longer dated liquid marketable securities to improve yields on that cash. Now, on Slide 16, I will share our high-level assumptions for the full year. For the full year, we have updated our outlook to reflect sales and revenues that are slightly lower than our expectations at the time of our last earnings call, driven by lower-than-expected third quarter sales and an update to our expectations for dealer rental fleet loading in Construction Industries. We continue to anticipate services growth in 2024. As I mentioned earlier, our full year expectations for adjusted operating profit margin and adjusted profit per share remain unchanged compared to our last earnings call. We continue to expect adjusted operating profit margin to be above the top end of the target range. In addition, we are increasing our expectations for ME&T free cash flow for the year, which we now anticipate to be near the top of our $5 billion to $10 billion target range. To assist you with your modeling for the full year, we now anticipate CapEx of around $2 billion and restructuring costs of approximately $400 million. Our expectation for the global annual effective tax rate, excluding discrete items, remains at 22.5%. Turning to Slide 17, I'll provide a few comments on the fourth quarter, starting with the top-line. We expect slightly lower sales and revenues in the fourth quarter compared to the prior year, impacted by lower machine sales to users versus a strong comparison. On machine dealer inventory, our planning assumptions include the expectation that dealers will reduce their inventories in the fourth quarter while balancing their need to be prepared for 2025. The magnitude of the decline for machine dealer inventory is expected to be less than the $1.4 billion decrease we saw in the fourth quarter of 2023. For perspective, we expect machine dealer inventory to end the year around the same level as year-end 2023. Also, the ongoing benefit of our services initiatives is expected to positively impact sales in the fourth quarter. By segment, in the fourth quarter, compared to the prior year, we anticipate a sales decrease in Construction Industries. This is impacted by lower sales to users, which Jim mentioned, along with unfavorable price realization. In Resource Industries, we expect slightly lower sales, impacted by lower sales to users versus a strong fourth quarter of 2023. In Energy & Transportation, we anticipate slightly higher sales versus the prior year, supported by power generation. Enterprise margin in the fourth quarter is expected to trend lower compared to the third quarter, following the typical seasonable pattern. However, versus the prior year, we expect a modestly higher adjusted operating profit margin despite lower sales. We anticipate favorable manufacturing costs and lower SG&A and R&D expenses will more than offset the profit impact of lower sales volume. Lower SG&A and R&D expenses are primarily driven by the benefit of lower short-term incentive compensation versus a high expense in the prior year quarter. Price realization for Machines is expected to trend lower as the pricing environment continues to normalize, though price in Energy & Transportation should act as a partial offset. Regarding price expectations for Machines, it is important to note that discounts to dealers occur through post sales merchandising programs, which impact our results over time. This includes financing support from Cat Financial, which is an effective way of supporting our customers, and we recover a portion of that support over the life of the deal. Let me explain. Based on the current level of price discounting support, we reserve the anticipated payments to dealers for these merchandising programs. At times, there is a lag between the timing of the invoice of the dealer and when the dealer invoices the customer, which impacts the reserve. Over the next few quarters, we expect the impact from these merchandising programs to drive a headwind to Machine price realization as we continue to adjust the reserve to reflect the current level of price discounting support. By segment, in the fourth quarter, in Construction Industries, we anticipate lower margin compared to the prior year primarily due to unfavorable price realization, partially offset by favorable manufacturing costs. In Resource Industries, we anticipate lower margin in the fourth quarter compared to the prior year, mainly due to lower volume and prioritization of strategic investments around services growth and AACE, which is autonomy, alternative fuels, connectivity and digital, and electrification. Favorable manufacturing costs should act as a partial offset. In Energy & Transportation, we expect a higher margin versus the prior year, primarily impacted by favorable price realization. So, turning to Slide 18, let me summarize. Although sales and revenues were lower than we had expected, adjusted operating profit margin and adjusted profit per share were generally in line with our expectations. We now anticipate our top-line for the full year will be slightly below our prior estimate. Our backlog increased slightly and remains at a very healthy level. Our expectations for full year adjusted operating profit margin and adjusted profit per share remain unchanged compared to a quarter ago. We continue to expect adjusted operating profit margin to be above the top end of the target range for the full year based on our expected sales levels. We are now increasing our expectations for ME&T free cash flow, which we anticipate to be near the top of our target range for the full year. Our team executed well in the quarter, and our results continue to benefit -- to reflect the benefit of the diversity of our end markets and the disciplined execution of our strategy for long-term profitable growth. And with that, we'll now take your questions.","evidence_gemma_new":"sales and revenues third quarter of 2024","evidence_llama_3_3":"sales and revenues third quarter","evidence_qwen_3_30b":"sales and revenues 4% third quarter","gemma_new_max":16100000000.0,"gemma_new_min":16100000000.0,"llama_3_3_max":16100000000.0,"llama_3_3_min":16100000000.0,"qwen_3_30b_max":16100000000.0,"qwen_3_30b_min":16100000000.0}
{"symbol":"CAT","year":2024,"quarter":4,"date":"2024-Q4","chunk_id":3,"sub_chunk_id":0,"centroid_label":"sales and revenues","agreed_value":16200000000.0,"count":3,"chunk":"Andrew Bonfield: Thank you Jim, and good morning everyone. I\u2019ll begin with a summary of the fourth quarter and then provide more detailed comments, including some on the performance of the segments. Next, I\u2019ll discuss the balance sheet and free cash flow before concluding with comments on our high level assumptions for 2025, as well as expectations for the first quarter. Beginning on Slide 9, sales and revenues were $16.2 billion, a 5% decrease versus the prior year. As Jim mentioned, sales were slightly lower than we had anticipated, which together with unfavorable mix resulted in lower than expected margins for the quarter. Adjusted operating profit was $3 billion and our adjusted operating profit margin was 18.3%. Profit per share was $5.78 in the fourth quarter compared to $5.28 in the fourth quarter of last year. Adjusted profit per share was $5.14 in the quarter, a 2% decrease compared to $5.23 last year. Adjusted profit per share excluded a discrete tax benefit of $0.46 for a tax law change related to currency translation. Mark to market gains of $0.23 for the re-measurement of pension and other post-employment plans was also excluded, in addition to restructuring costs of $0.05 in the quarter. Other income expense was $185 million favorable versus the prior year, mostly driven by a positive currency impact related to ME&T balance sheet translation, which compared to a negative impact in the fourth quarter last year. As I have mentioned previously, we do not anticipate currency translation movements, so the positive impact on the fourth quarter of 2024 helped to offset the impact of operating profit being lower than expected. Excluding discrete items, the provision for income taxes in the fourth quarter of 2024 reflected a global annual effective tax rate of 22.2%. This was slightly lower than we had expected a quarter ago and benefited the quarter by $0.09. Finally, the year-over-year impact from the reduction in the average number of shares outstanding, primarily due to share repurchases, resulted in a favorable impact on adjusted profit per share of approximately $0.24 as compared to the fourth quarter of 2023. Moving onto Slide 10, I\u2019ll discuss the top line results for the fourth quarter. Sales and revenues decreased by 5% compared to the prior year, primarily impacted by lower sales volume. Price was unfavorable year-over-year and about in line with what we had expected. Lower volume was driven by the impact from changes in dealer inventories and a 2% year-over-year decrease in total sales to users. Total machine dealer inventory decreased by $1.6 billion in the quarter compared to $1.4 billion decrease in the prior year. The decrease in machine dealer inventory was larger than we had expected, and it\u2019s mostly a function of higher than anticipated sales to users across both construction industries in North America and resource industries. Service revenues increased in the quarter compared to 2023. As I mentioned, the sales decrease in the quarter was slightly larger than we had anticipated. This was mostly due to services growing at a slightly slower rate than we had expected and some delivery delays in energy and transportation. Moving to operating profit on Slide 11, operating profit in the fourth quarter decreased by 7% to $2.9 billion. Adjusted operating profit decreased by 8% to $3 billion mainly due to the profit impact of lower than expected sales volume. As I mentioned, for the fourth quarter the adjusted operating profit margin was 18.3%, a 60 basis point decrease compared to the prior year. This was lower than we had anticipated mainly due to a lower than expected sales volume and the impact of unfavorable mix. On Slide 12, construction industry sales decreased by 8% in the fourth quarter to $6 billion. This was slightly below our expectations on lower than anticipated volume. Compared to the prior year, the 8% sales decrease was primarily due to unfavorable price realization and lower sales volume. The decrease in sales volume was mainly driven by lower sales of equipment to end users and dealers reducing their inventory by slightly more than they did during the fourth quarter of 2023. By region, construction industry sales in North America decreased by 14%. In Latin America, sales increased by 6%. Sales in the EAME region decreased by 1%, and Asia Pacific sales decreased by 2%. Fourth quarter profit for construction industries was $1.2 billion, a 24% decrease versus the prior year. This was primarily due to unfavorable price realization as a result of the impact of the post-sales merchandising programs that we discussed with you in October. The segment\u2019s margin of 19.6% was a decrease of 390 basis points versus the prior year. The margin was lower than we had anticipated, primarily impacted by lower volume and unfavorable mix. Manufacturing costs were also unfavorable versus our expectations, principally due to a headwind from cost absorption as our inventory in construction industries declined. Turning to Slide 13, resource industry sales decreased by 9% in the fourth quarter to $3 billion. This was below our expectations mainly due to services growing at a slightly lower rate than we had anticipated. As we compare to the prior year, the 9% sales decrease was primarily due to lower sales volume mainly driven by the impact from changes in dealer inventories. Dealer inventory decreased more in the fourth quarter of 2024 than it did in the fourth quarter of 2023. Fourth quarter profit for resource industries decreased by 22% versus the prior year to $466 million. This was mainly due to the profit impact of lower sales volume. The segment\u2019s margin of 15.7% was a decrease of 280 basis points versus the prior year. This was lower than we had anticipated, primarily due to lower volume. Now on Slide 14, energy and transportation sales of $7.6 billion were about flat versus the prior year. Sales were slightly below our expectations to a lower than expected services growth rate, largely in oil and gas, and the timing of deliveries of international locomotives. Compared to the prior year, sales were roughly flat as the impact of lower sales volume was mostly offset by favorable price realization. By application, power generation sales increased by 22%, transportation sales were lower by 1%, oil and gas sales decreased by 14%, and industrial sales decreased by 14%. Fourth quarter profit for energy and transportation increased by 3% versus the prior year to $1.5 billion. The increase was primarily due to favorable price realization partially offset by the profit impact of lower sales volume. The segment\u2019s margin of 19.3% was an increase of 70 basis points versus the prior year. This was lower than we had anticipated, primarily due to lower than expected volume and an unfavorable mix of products. Moving to Slide 15, financial products revenues increased by 4% versus the prior year to about $1 billion, primarily due to higher average earning assets in North America and higher average financing rates across all regions, except North America. Segment profit decreased by 29% to $166 million. This was mainly due to an unfavorable impact from equities securities in addition to lower margin and a higher provision for credit losses. Our customers\u2019 financial health remains strong. Past dues were 1.56% in the quarter, down 23 basis points versus the prior year and our lowest level since 2005. The allowance rate was 0.91%, remaining near historic lows. Business activity at Cat Financial remains healthy. Retail credit applications increased and our retail new business volume grew by 3% versus the prior year. This was our highest level since 2012, supported by attractive finance packages for customers choosing to buy Caterpillar equipment. We continue to see proportionately more of our sales financed through Cat Financial; in addition, demand for used equipment remains healthy and inventories remain at low levels. Conversion rates were above historical averages as customers choose to buy equipment at the end of their lease term. Moving onto Slide 16, we continue to generate strong ME&T free cash flow. The $9.4 billion in 2024 was near the top end of our target range and just slightly lower than the prior year despite a larger payment for short term incentive compensation and higher capital expenditure. CapEx for the year was about $2 billion, which was in line with our expectations. Moving to capital deployment, in 2024 we returned $10.3 billion to shareholders through repurchased stock and dividends. On share repurchases, we deployed $7.7 billion as we continue to fulfill our objective to be in the market on a more consistent basis. Our balance sheet remains strong with an enterprise cash balance of $6.9 billion. In addition, we hold $2 billion in slightly longer dated liquid marketable securities to improve yields on that cash. Now on Slide 17, let me start with a high level overview of our expectations for the full year. We expect a slight decrease in sales for 2025 with an unfavorable impact from both volume and price. Due to the impact of post-sales merchandising programs, price realization should account for about a 1% decrease in sales for the full year. On margins, the impact of price together with high depreciation costs due to the investments we are making should result in adjusted operating profit margins being in the top half of the target range with the expected level of sales, rather than being above the top end of the range, as occurred in 2024. Our margin targets are progressive, so while we would expect volume to have an impact on absolute margins, our target is adjusted for lower sales. We expect a slight headwind in other income and expense in 2025 primarily due to lower interest income, mostly due to lower interest rates, as well as the absence of the positive currency benefit from ME&T balance sheet translation that occurred in 2024. As I mentioned, we do not anticipate translation movements in our expectations. We expect restructuring costs of approximately $150 million to $200 million in 2025. We anticipate a global annual effective tax rate of 23% for 2025, excluding discrete items. While the impact of the share buyback should be positive, we expect to have less ME&T free cash flow to deploy in 2025. This implies a less favorable impact to profit per share in 2025 as compared to 2024. By segment, lower sales in construction industries and resource industries will be partially offset by sales growth in energy and transportation. For construction industries, we expect lower sales in 2025 based on the outlook Jim described and unfavorable price realization. In resource industries, we anticipate slightly lower sales versus 2024 driven by unfavorable price realization and slightly lower volume. Higher volumes and favorable price in energy and transportation should drive sales growth, though sales remain constrained until the benefits of the investments we are making in large engines begin to flow through beyond 2025. We also anticipate another year of services growth in each of our primary segments. Currently, we do not anticipate a significant change in dealer inventory in machines by the end of 2025. Moving onto ME&T free cash flow, we expect to be in the top half of our target range of $5 billion to $10 billion. The first quarter of 2025 will be impacted by a $1.4 billion cash outflow related to the payout of last year\u2019s incentive compensation. We anticipate CapEx of about $2.5 billion in 2025 as we continue to make disciplined investments that are right for our business, governed by a focus on growing absolute OPACC [ph] dollars. This includes the multi-year capital investment to expand our large engine volume output capability that we mentioned last year. Turning to Slide 18, to assist with your modeling, I\u2019ll provide some color on the first quarter, starting with the top line. We expect lower sales versus the prior year. For perspective, in a typical year we see our lowest sales in the first quarter of the year. In 2025, we anticipate that trend to continue to be more pronounced as sales in the first quarter should account for a lower percentage of full year sales than is typical by about 100 basis points. This decrease is mainly due to our expectations for dealer inventory movements and price, which primarily impacts machines. Energy and transportation is expected to show normal seasonality with sales growing throughout the year. Let me explain. Although dealers did reduce machine inventory significantly in the fourth quarter, they remain around the top end of the range as we enter 2025. This compares with dealer inventories in construction industries being towards the middle of the range at the beginning of 2024. As a result, we expect them to build correspondingly less inventory during the first quarter than the $1.1 billion that they built in the first quarter of 2024. As we expect dealer inventory to be about flat by year end, we should see a tailwind to sales in the fourth quarter as we don\u2019t expect a similar machine dealer inventory change as we have seen in the last two years. We also expect unfavorable price realization for machines in the first quarter due to the impact of post-sales merchandising programs. We would expect these price impacts to be greater for machines in the first half of the year as the noticeable impact of post-sales merchandising programs started in the third quarter of 2024, making for an easier comparison in the second half. To pull together the impact by segment, we anticipate lower sales in construction industries in the first quarter, impacted by lower sales to users, the headwind from changes in dealer inventory and price, the impact of which should be similar to what we saw in the fourth quarter of 2024. In resource industries in the first quarter, we expect lower sales volume versus the prior year, impacted by lower volume and unfavorable price realization. In energy and transportation, we anticipate similar sales in the first quarter versus the prior year as continued strength in power generation is about offset by lower oil and gas and transportation sales. Price should be positive for energy and transportation. Now I\u2019ll provide some color on first quarter margin expectations. Though enterprise margins are typically stronger in the first quarter compared to with the remaining quarters of the year, we do not expect this seasonal trend to occur in 2025. Compared to the prior year, we anticipate a lower enterprise adjusted operating profit margin in the first quarter due primarily to lower than usual volume and price. Volume is impacted by the lower build of machine dealer inventory and slightly lower sales to users for machines. Unfavorable price realization for machines is principally due to the factors I\u2019ve discussed previously, which will be partially offset by favorable price in energy and transportation. We expect there will be improvement in first quarter margins offsetting the volume impact in the first quarter due to stronger volume in the fourth quarter than is typical. By segment, in the first quarter in construction industries, we anticipate lower margins compared to the prior year due primarily to lower volume and price. We do not expect to see the margin benefit we typically see in the first quarter of the year as compared to the fourth quarter of the prior year, which is generally in the range of 100 to 200 basis points. Again, some of this will be offset in the fourth quarter as volume is favorable and price more neutral. In resource industries, we anticipate lower margin in the first quarter compared to the prior year, mainly due to lower volume and unfavorable price realization. In energy and transportation, we expect slightly lower margin versus the prior year as favorable price realization is more than offset by higher manufacturing costs and unfavorable mix impacts. Again, as a reminder, this detail is provided to help you model the first quarter and does not impact our expectations for the full year that I set out earlier, which is a slight decrease in sales and revenues for the year and margins in the top half of the target range. Turning to Slide 19, let me summarize. Adjusted profit per share of $21.90 exceeded last year\u2019s record by 3%. This was our third straight year with record adjusted profit per share. Adjusted operating profit margin of 20.7% exceeded the top of our target range. ME&T free cash flow of $9.4 billion was near the top of the target range of $5 billion to $10 billion. For 2025, while we expect a slight drop in sales, we expect to be in the top half of the adjusted operating profit margin range and the top half of the ME&T free cash flow target range, and we anticipate another year of services growth. We continue to execute our strategy for long term profitable growth, and with that, we\u2019ll take your questions.","evidence_gemma_new":"sales and revenues","evidence_llama_3_3":"sales and revenues fourth quarter","evidence_qwen_3_30b":"sales and revenues fourth quarter","gemma_new_max":16200000000.0,"gemma_new_min":16200000000.0,"llama_3_3_max":16200000000.0,"llama_3_3_min":16200000000.0,"qwen_3_30b_max":16200000000.0,"qwen_3_30b_min":16200000000.0}
{"symbol":"CVX","year":2023,"quarter":3,"date":"2023-Q3","chunk_id":22,"sub_chunk_id":0,"centroid_label":"VAL barrels a day","agreed_value":130000.0,"count":2,"chunk":"Michael Wirth: Sure. So yes, we have seen some action now from the U.S. government. We had been previously operating under an OFAC license, which was modified at the beginning of this year, a general license. There's some specific licenses that go with that, that define the terms under which we can operate. The recent action in the new general license issued by OFAC really kind of opens up operating room for others more so than it does for us. We already \u2013 it doesn't materially change our circumstances here. And so I think what you'll see is some more people lifting crude, bring it to the \u2013 you'll see more crude flow to the U.S. I don't think the \u2013 the impact on our operations really is not particularly significant. We are up to something around 130,000 barrels a day from maybe 60,000 barrels a day earlier this year. We still think we can get to 150,000 or so by year-end. So we are seeing improvements and expect there's some more that we can see through the balance of the year. And that's driving \u2013 the cash from that is going to pay legitimate operating expenses, tax and royalties, recover some past dues that we are owed. And we're really working on what I would call pretty straightforward field maintenance and things to restore production that aren't particularly long cycle or capital-intensive and staying within the kind of cash that's being generated from those sales in order to fund that. I would expect that's the posture we'll remain in for a while here until we see how the longer-term sanctions environment plays out, the political situation in the country with elections and the like and continue to make progress on recovery of the past dues that I mentioned. And so not a lot of change, I guess, I would say, from our point of view. Pierre, maybe you want to comment on the cash and production.","evidence_gemma_new":"barrels a day","evidence_llama_3_3":"barrels a day earlier this year","evidence_qwen_3_30b":null,"gemma_new_max":130000.0,"gemma_new_min":130000.0,"llama_3_3_max":130000.0,"llama_3_3_min":130000.0,"qwen_3_30b_max":null,"qwen_3_30b_min":null}
{"symbol":"CVX","year":2023,"quarter":4,"date":"2023-Q4","chunk_id":32,"sub_chunk_id":0,"centroid_label":"VAL barrels a day","agreed_value":200000.0,"count":2,"chunk":"Nitin Kumar: Hi, good morning, everyone and thanks for taking my question. So it's a party in Part A and Part B type of question, but really on the Permian, Mike, in your slides, you highlight that optimize well spacing and maybe coring up where you were drilling in 2023 help the well productivity. At the Analyst Day, you had talked about some technologies and I'm just curious where any of the improvements you saw in '23 related to those and then Part B very quickly, you're growing almost 200,000 barrels from here until in the next two years. Last core, you had some infrastructure issues. What are you doing to get ahead of those infrastructure issues that don't resurface over that plan period?","evidence_gemma_new":"200,000 barrels next two years","evidence_llama_3_3":"200,000 barrels next two years","evidence_qwen_3_30b":null,"gemma_new_max":200000.0,"gemma_new_min":200000.0,"llama_3_3_max":200000.0,"llama_3_3_min":200000.0,"qwen_3_30b_max":null,"qwen_3_30b_min":null}
{"symbol":"CVX","year":2023,"quarter":4,"date":"2023-Q4","chunk_id":48,"sub_chunk_id":0,"centroid_label":"VAL barrels a day","agreed_value":400000.0,"count":2,"chunk":"Mike Wirth: Yeah, so we've now got a fourth quarter is the first full quarter with PDC. The third quarter we had two months out of the three with PDC in there. And you can see we came in in the fourth quarter a little bit over 400,000 barrels a day, which is our plans are to hold the DJ around 400,000 barrels a day going forward in a highly efficient factory and fourth quarter was maybe even a little stronger than we might have expected. There wasn't as much weather related downtime in November and December and then there were some accounting adjustments that were booked into the fourth quarter that were not really related to operations. So the above 400 is there's a few things contributing to that that probably are not repeating or going to pull back a little bit. But we're confident we can hold around 400,000 barrels a day. We're still executing the well design and well spacing that was in the PDC basis of design, which is a little bit different than ours. A little few more wells and tighter spacing and driven more to drive volume. Our basis of design is more focused on return on invested capital and so it's wider spacing. It's bigger fracks, but it's less capital overall and higher return and so as we transition to a standardized, more standardized basis of design across the basin, you'll see that roll into the numbers. We got four rigs that are going. We got permits out for multiple years, nearly to the end of the decade and so we're very, very pleased and we're learning things. I got to tell you, you know, there's some stuff that we've learned from PDC that will apply not only in the rest of the DJ, but it's going to apply in the Permian as well. It's going to help us. So, going forward, these are high cash margin, low break even barrels. We plan to hold it at a plateau around 400 and we've -- synergies are on track there. We've got virtually all the CapEx synergies are essentially in the bag. We're already down to $1 billion there. OpEx is very close to the $100 million we got into. We're now seeing some procurement synergies, which we hadn't originally envisioned. So everything about it is at or better than what we had guided to.","evidence_gemma_new":null,"evidence_llama_3_3":"DJ barrels a day fourth quarter","evidence_qwen_3_30b":"DJ 400,000 barrels a day fourth quarter","gemma_new_max":null,"gemma_new_min":null,"llama_3_3_max":400000.0,"llama_3_3_min":400000.0,"qwen_3_30b_max":400000.0,"qwen_3_30b_min":400000.0}
{"symbol":"CVX","year":2024,"quarter":3,"date":"2024-Q3","chunk_id":27,"sub_chunk_id":0,"centroid_label":"VAL barrels a day","agreed_value":400000.0,"count":2,"chunk":"Michael Wirth: Thanks. Yeah. So just to quickly touch on AOSP, you know, there was one kind of most logical buyer. Right? And it was the operator, and we have had discussions over the years and have not been able to really get to a common view on value. And so that is what has changed. And so if you want to see that as opportunistic, that is fine. But we really wanted to realize the value that we saw in that asset, and we have been able to do that. The DJ, look, you know, the first thing I will say is the integration there and the synergy delivery continues to track record that we have had over a long time of exceeding our synergy commitments. And, you know, when we do a deal and we come out with a target, it is intended to give you a high confidence number that you can use, and we have done the diligence we have at that point in, you know, our track record as we find more and we deliver more. We are very happy with the quality of the asset and the ability to drive strong performance. We have learned from each of the companies that we have acquired. I talked a little bit about the lower carbon footprint there. We have seen some other things like gas lift and new laterals that have been used. Some of these companies that we are starting to work with in some of our other parts of our portfolio. And the last thing I will say is the team there does a wonderful job of balancing the multi-step permitting process, and I know there has been some concern expressed by people about the regulatory environments. You know, we are working very closely with the regulator in Colorado to ensure that we can achieve their objectives and that we can achieve our objectives. And I would say that is a very constructive relationship. We have got comprehensive area plans in place that derisk the longer-term development. And the quality of the assets, you know, 400,000 barrels a day out through the end of the decade. You know, three years ago, we had zero in the DJ Basin. And so very pleased with it. We are big there. We are the biggest operator there. The question was, are you going to acquire some additional positions there? I would not say that is high on the priority list. The real key is to drive value out of this asset.","evidence_gemma_new":"DJ Basin 400,000 barrels a day end of the decade","evidence_llama_3_3":"DJ Basin 400,000 barrels a day end of the decade","evidence_qwen_3_30b":null,"gemma_new_max":400000.0,"gemma_new_min":400000.0,"llama_3_3_max":400000.0,"llama_3_3_min":400000.0,"qwen_3_30b_max":null,"qwen_3_30b_min":null}
{"symbol":"CVX","year":2024,"quarter":4,"date":"2024-Q4","chunk_id":28,"sub_chunk_id":0,"centroid_label":"VAL barrels a day","agreed_value":400000.0,"count":2,"chunk":"Mike Wirth : Yeah. So let me start. I'm really pleased with our team in the Permian and the performance again in the fourth quarter. We delivered 992,000 barrels a day in the fourth quarter. We were over 1 million barrels a day in December. For the full year, we saw a growth of 18% and really, really strong performance across all aspects of the Permian. And we expect to continue to grow even as we've now passed our peak investments, and we've started to bring capital investment down. We still expect to see a 9% or 10% production growth in 2025. Something a little bit less than that, probably in 2026. And we're headed towards a lower rate of growth. And at some point, you can't grow a position like this infinitely. That was the criticism of the industry last decade is companies only focused on growing, and they never focused on generating free cash flow and returning to shareholders. And that's always been our plan to do just that. So we'll have an asset that will produce something over 1 million barrels a day for many, many years into the future. And as we can maintain that with a lower rate of capital investment than we've required to get to where we are, that really opens up the free cash flow off of that asset. So we are very pleased with that. We've got 400,000 barrels a day, give or take now in the DJ Basin, which is kind of in that plateau phase where we can draw free cash flow off of that. We closed Hess. There's another couple of hundred thousand barrels a day in the Bakken. You bring Argentina in, and now you're talking 1.7 million barrels a day or so. And this year, we produced 3.3 in change. And so it's kind of 50% of the portfolio. And the nice thing about that is that very modest CapEx you can hold that production flat for quite some time and use that as a big cash generator. And so that is the intent. There's always the prospects that we see technology breakthroughs. We're working on improved recoveries that if economic could open a new phase of growth. And I don't want to predict that, but I certainly wouldn't want to rule that out. And so as we continue to get better and better at this and develop technologies to improve recoveries, we can extend the plateau, we could raise plateaus, but this is a highly economic asset that is a core position that will generate production and cash long into the future. And of course, in the Permian, the royalty advantage that we have is kind of icing on top of that cake. And so that's how we think about it. I can't give you a magic formula, a percentage. But it's -- like I said, it's approaching 50% of our overall production, which is a significant piece. Thanks, Steve.","evidence_gemma_new":null,"evidence_llama_3_3":"DJ Basin 400,000 barrels a day","evidence_qwen_3_30b":"DJ Basin 400,000 barrels a day plateau phase","gemma_new_max":null,"gemma_new_min":null,"llama_3_3_max":400000.0,"llama_3_3_min":400000.0,"qwen_3_30b_max":400000.0,"qwen_3_30b_min":400000.0}
{"symbol":"CVX","year":2024,"quarter":4,"date":"2024-Q4","chunk_id":28,"sub_chunk_id":0,"centroid_label":"VAL barrels a day","agreed_value":1700000.0,"count":2,"chunk":"Mike Wirth : Yeah. So let me start. I'm really pleased with our team in the Permian and the performance again in the fourth quarter. We delivered 992,000 barrels a day in the fourth quarter. We were over 1 million barrels a day in December. For the full year, we saw a growth of 18% and really, really strong performance across all aspects of the Permian. And we expect to continue to grow even as we've now passed our peak investments, and we've started to bring capital investment down. We still expect to see a 9% or 10% production growth in 2025. Something a little bit less than that, probably in 2026. And we're headed towards a lower rate of growth. And at some point, you can't grow a position like this infinitely. That was the criticism of the industry last decade is companies only focused on growing, and they never focused on generating free cash flow and returning to shareholders. And that's always been our plan to do just that. So we'll have an asset that will produce something over 1 million barrels a day for many, many years into the future. And as we can maintain that with a lower rate of capital investment than we've required to get to where we are, that really opens up the free cash flow off of that asset. So we are very pleased with that. We've got 400,000 barrels a day, give or take now in the DJ Basin, which is kind of in that plateau phase where we can draw free cash flow off of that. We closed Hess. There's another couple of hundred thousand barrels a day in the Bakken. You bring Argentina in, and now you're talking 1.7 million barrels a day or so. And this year, we produced 3.3 in change. And so it's kind of 50% of the portfolio. And the nice thing about that is that very modest CapEx you can hold that production flat for quite some time and use that as a big cash generator. And so that is the intent. There's always the prospects that we see technology breakthroughs. We're working on improved recoveries that if economic could open a new phase of growth. And I don't want to predict that, but I certainly wouldn't want to rule that out. And so as we continue to get better and better at this and develop technologies to improve recoveries, we can extend the plateau, we could raise plateaus, but this is a highly economic asset that is a core position that will generate production and cash long into the future. And of course, in the Permian, the royalty advantage that we have is kind of icing on top of that cake. And so that's how we think about it. I can't give you a magic formula, a percentage. But it's -- like I said, it's approaching 50% of our overall production, which is a significant piece. Thanks, Steve.","evidence_gemma_new":null,"evidence_llama_3_3":"Argentina 1.7 million barrels a day","evidence_qwen_3_30b":"Argentina 1.7 million barrels a day","gemma_new_max":null,"gemma_new_min":null,"llama_3_3_max":1700000.0,"llama_3_3_min":1700000.0,"qwen_3_30b_max":1700000.0,"qwen_3_30b_min":1700000.0}
{"symbol":"CVX","year":2024,"quarter":4,"date":"2024-Q4","chunk_id":28,"sub_chunk_id":0,"centroid_label":"VAL barrels a day","agreed_value":1000000.0,"count":2,"chunk":"Mike Wirth : Yeah. So let me start. I'm really pleased with our team in the Permian and the performance again in the fourth quarter. We delivered 992,000 barrels a day in the fourth quarter. We were over 1 million barrels a day in December. For the full year, we saw a growth of 18% and really, really strong performance across all aspects of the Permian. And we expect to continue to grow even as we've now passed our peak investments, and we've started to bring capital investment down. We still expect to see a 9% or 10% production growth in 2025. Something a little bit less than that, probably in 2026. And we're headed towards a lower rate of growth. And at some point, you can't grow a position like this infinitely. That was the criticism of the industry last decade is companies only focused on growing, and they never focused on generating free cash flow and returning to shareholders. And that's always been our plan to do just that. So we'll have an asset that will produce something over 1 million barrels a day for many, many years into the future. And as we can maintain that with a lower rate of capital investment than we've required to get to where we are, that really opens up the free cash flow off of that asset. So we are very pleased with that. We've got 400,000 barrels a day, give or take now in the DJ Basin, which is kind of in that plateau phase where we can draw free cash flow off of that. We closed Hess. There's another couple of hundred thousand barrels a day in the Bakken. You bring Argentina in, and now you're talking 1.7 million barrels a day or so. And this year, we produced 3.3 in change. And so it's kind of 50% of the portfolio. And the nice thing about that is that very modest CapEx you can hold that production flat for quite some time and use that as a big cash generator. And so that is the intent. There's always the prospects that we see technology breakthroughs. We're working on improved recoveries that if economic could open a new phase of growth. And I don't want to predict that, but I certainly wouldn't want to rule that out. And so as we continue to get better and better at this and develop technologies to improve recoveries, we can extend the plateau, we could raise plateaus, but this is a highly economic asset that is a core position that will generate production and cash long into the future. And of course, in the Permian, the royalty advantage that we have is kind of icing on top of that cake. And so that's how we think about it. I can't give you a magic formula, a percentage. But it's -- like I said, it's approaching 50% of our overall production, which is a significant piece. Thanks, Steve.","evidence_gemma_new":"1 million barrels a day","evidence_llama_3_3":null,"evidence_qwen_3_30b":"1 million barrels a day December","gemma_new_max":1000000.0,"gemma_new_min":1000000.0,"llama_3_3_max":null,"llama_3_3_min":null,"qwen_3_30b_max":1000000.0,"qwen_3_30b_min":1000000.0}
{"symbol":"CVX","year":2023,"quarter":1,"date":"2023-Q1","chunk_id":3,"sub_chunk_id":0,"centroid_label":"adjusted earnings","agreed_value":6700000000.0,"count":3,"chunk":"Pierre Breber : Thanks, Mike. We reported first quarter earnings of $6.6 billion, or $3.46 per share. Adjusted earnings were $6.7 billion, or $3.55 per share. We had one special item this quarter related to changes in the energy profits tax in the United Kingdom. The appendix of this presentation contains a reconciliation of non-GAAP measures. Strong operating cash flow enabled Chevron to deliver on its financial priorities during the quarter a 6% per share dividend increase, higher CapEx within budget, net debt ratio under 5%, share repurchases at the top of our prior guidance range. Adjusted first quarter earnings were up over $200 million versus last year despite 20% lower oil prices. Adjusted Upstream earnings were lower mainly due to realizations and adjusted downstream earnings increased primarily due to higher refining margins. Both segments benefitted from a change in timing effects. Higher interest income and lower accruals for stock-based compensation decreased all other charges. Compared with last quarter, adjusted earnings were down $1.1 billion. Adjusted Upstream earnings decreased primarily due to lower realizations. Other items include the absence of last quarter\u2019s dividend withholding tax at TCO and lower exploration and transportation expenses. Adjusted Downstream earnings were essentially flat. Lower margins and volumes were offset with higher chemical earnings and other favorable items including trading results. Lower accruals for incentive-based compensation decreased All Other net charges and also benefitted the operating segments First quarter oil equivalent production was down about 80,000 barrels per day from last year due to the expiration of a contract in Thailand and the sale of our Eagle Ford asset. This was partially offset by growth in the Permian. We expect 2023 production growth in the Permian to be back-end loaded as wells put on production, POPs increase across both operated and non-operated areas. We expect our royalty production to be roughly flat. As discussed during our Investor Day, we\u2019re increasing activity in New Mexico. All four company-operated rigs added this year, one each quarter, will be in New Mexico, leading to more POPs expected in the second half of the year and into 2024. We also continue to be active in Texas. Last year, about half of our company-operated production was in the Delaware Basin in Texas with the remainder split about evenly between the Midland Basin and New Mexico. More than half of our non-operated production is with five major operators in large, contiguous positions in core areas with multiyear development programs, where we have visibility to capex and execution schedules and a royalty benefit compared to the operator. The balance is with dozens of other operators where we have a little less visibility, but similar predictability from greater diversification. More than half of our royalty production comes from the Pecos River area in the heart of the Delaware Basin. The balance of our royalty position is in the remainder of the Delaware and Midland Basins, also with well-known operators. In summary, Chevron has a large, diverse position in the Permian with a unique royalty advantage where we learn from our own operations and from others. Now, looking ahead. In the second quarter, we expect planned turnarounds at Gorgon and in the Gulf of Mexico along with downtime at a FSO in Thailand and a number of planned refinery turnarounds. Also, we expect share buybacks to increase to a $17.5 billion annual rate. In summary, 1Q was another quarter with strong financial results, continued capital discipline, and a steady return of cash to shareholders. We\u2019re confident that consistent and straightforward management, through commodity cycles, will create value for stakeholders. Back to you, Jake.","evidence_gemma_new":"Adjusted earnings","evidence_llama_3_3":"Chevron Adjusted earnings first quarter","evidence_qwen_3_30b":"adjusted earnings","gemma_new_max":6700000000.0,"gemma_new_min":6700000000.0,"llama_3_3_max":6700000000.0,"llama_3_3_min":6700000000.0,"qwen_3_30b_max":6700000000.0,"qwen_3_30b_min":6700000000.0}
{"symbol":"CVX","year":2023,"quarter":1,"date":"2023-Q1","chunk_id":3,"sub_chunk_id":0,"centroid_label":"adjusted earnings","agreed_value":1100000000.0,"count":3,"chunk":"Pierre Breber : Thanks, Mike. We reported first quarter earnings of $6.6 billion, or $3.46 per share. Adjusted earnings were $6.7 billion, or $3.55 per share. We had one special item this quarter related to changes in the energy profits tax in the United Kingdom. The appendix of this presentation contains a reconciliation of non-GAAP measures. Strong operating cash flow enabled Chevron to deliver on its financial priorities during the quarter a 6% per share dividend increase, higher CapEx within budget, net debt ratio under 5%, share repurchases at the top of our prior guidance range. Adjusted first quarter earnings were up over $200 million versus last year despite 20% lower oil prices. Adjusted Upstream earnings were lower mainly due to realizations and adjusted downstream earnings increased primarily due to higher refining margins. Both segments benefitted from a change in timing effects. Higher interest income and lower accruals for stock-based compensation decreased all other charges. Compared with last quarter, adjusted earnings were down $1.1 billion. Adjusted Upstream earnings decreased primarily due to lower realizations. Other items include the absence of last quarter\u2019s dividend withholding tax at TCO and lower exploration and transportation expenses. Adjusted Downstream earnings were essentially flat. Lower margins and volumes were offset with higher chemical earnings and other favorable items including trading results. Lower accruals for incentive-based compensation decreased All Other net charges and also benefitted the operating segments First quarter oil equivalent production was down about 80,000 barrels per day from last year due to the expiration of a contract in Thailand and the sale of our Eagle Ford asset. This was partially offset by growth in the Permian. We expect 2023 production growth in the Permian to be back-end loaded as wells put on production, POPs increase across both operated and non-operated areas. We expect our royalty production to be roughly flat. As discussed during our Investor Day, we\u2019re increasing activity in New Mexico. All four company-operated rigs added this year, one each quarter, will be in New Mexico, leading to more POPs expected in the second half of the year and into 2024. We also continue to be active in Texas. Last year, about half of our company-operated production was in the Delaware Basin in Texas with the remainder split about evenly between the Midland Basin and New Mexico. More than half of our non-operated production is with five major operators in large, contiguous positions in core areas with multiyear development programs, where we have visibility to capex and execution schedules and a royalty benefit compared to the operator. The balance is with dozens of other operators where we have a little less visibility, but similar predictability from greater diversification. More than half of our royalty production comes from the Pecos River area in the heart of the Delaware Basin. The balance of our royalty position is in the remainder of the Delaware and Midland Basins, also with well-known operators. In summary, Chevron has a large, diverse position in the Permian with a unique royalty advantage where we learn from our own operations and from others. Now, looking ahead. In the second quarter, we expect planned turnarounds at Gorgon and in the Gulf of Mexico along with downtime at a FSO in Thailand and a number of planned refinery turnarounds. Also, we expect share buybacks to increase to a $17.5 billion annual rate. In summary, 1Q was another quarter with strong financial results, continued capital discipline, and a steady return of cash to shareholders. We\u2019re confident that consistent and straightforward management, through commodity cycles, will create value for stakeholders. Back to you, Jake.","evidence_gemma_new":"adjusted earnings","evidence_llama_3_3":"Chevron Adjusted earnings last quarter","evidence_qwen_3_30b":"adjusted earnings last quarter","gemma_new_max":1100000000.0,"gemma_new_min":1100000000.0,"llama_3_3_max":1100000000.0,"llama_3_3_min":1100000000.0,"qwen_3_30b_max":1100000000.0,"qwen_3_30b_min":1100000000.0}
{"symbol":"CVX","year":2023,"quarter":2,"date":"2023-Q2","chunk_id":3,"sub_chunk_id":0,"centroid_label":"adjusted earnings","agreed_value":900000000.0,"count":2,"chunk":"Pierre Breber: As Mike said, strong, consistent financial performance enabled Chevron to return record cash to shareholders this quarter, while also investing within our CapEx budget and paying down debt. Working capital lowered cash flow primarily due to true-up tax payments outside the US. Excluding tax payments, working capital movements are variable. Our typical pattern in the second half of the year is to draw down working capital. Chevron's net debt ratio ended the quarter at 7%, significantly below the low end of our guidance range. Surplus cash on the balance sheet was reduced during the quarter, with cash balances ending at $9.6 billion, well above the cash required to run the company. Adjusted second quarter earnings were down $5.6 billion versus the same quarter last year. Adjusted Upstream earnings were lower mainly due to realizations, partly offset by higher liftings. Other includes primarily favorable tax items and income from Venezuela non-equity investments. Adjusted Downstream earnings decreased primarily due to lower refining margins. OpEx was up mainly due to higher transportation costs and the inclusion of REG. Compared with last quarter, adjusted earnings were down $900 million. Adjusted Upstream earnings decreased primarily due to lower realizations. This was partially offset by higher production in the US and non-recurring tax benefits. Adjusted Downstream earnings were down modestly, lower margins were partially offset with higher volumes. Second quarter oil equivalent production was down about 20,000 barrels per day from last quarter, primarily due to planned turnarounds at Gorgon and in the Gulf of Mexico and downtime associated with the Canadian wildfires. This was mostly offset by growth in the Permian. Now, looking ahead. In the third quarter, we have a planned turnaround at TCO and a planned pitstop at Gorgon, completed earlier this week. Our full-year production outlook is trending near the low end of the annual guidance range. Since PDC's proxy solicitation on July 7th, we've not been permitted to buy back our shares. After we close the acquisition in August, we plan to resume buybacks at the $17.5 billion annual rate, which we expect to continue through the fourth quarter. We do not expect a dividend from TCO until the fourth quarter. Full-year affiliate dividends are expected to be near the low end of our guidance. Putting it all together, we delivered another quarter with solid financial results, strong project execution and continued return of cash to shareholders. Our approach is consistent and you can see that in our actions and results. Back to you, Jake.","evidence_gemma_new":"adjusted earnings","evidence_llama_3_3":null,"evidence_qwen_3_30b":"adjusted earnings down $900 million last quarter","gemma_new_max":900000000.0,"gemma_new_min":900000000.0,"llama_3_3_max":null,"llama_3_3_min":null,"qwen_3_30b_max":900000000.0,"qwen_3_30b_min":900000000.0}
{"symbol":"CVX","year":2023,"quarter":3,"date":"2023-Q3","chunk_id":3,"sub_chunk_id":0,"centroid_label":"adjusted earnings","agreed_value":50000000.0,"count":3,"chunk":"Pierre Breber: Thanks, Mike. We delivered another quarter with strong earnings, cash flow and ROCE. This quarter's results included two special items: a one-time tax benefit of $560 million in Nigeria and pension settlement costs of $40 million. Foreign currency benefits were $285 million. The appendix of this presentation contains a reconciliation of non-GAAP measures. Organic CapEx this quarter included about $200 million for PDC legacy operations after closing in August. Our balance sheet remains strong, ending the quarter with a net debt ratio in the single digits. Another quarter of solid cash flow enabled us to deliver on all of our financial priorities. Despite restrictions during the PDC transaction, we were able to repurchase well over $3 billion in Chevron shares. Cash used to reduce debt was primarily related to PDC's higher cost borrowing. Cash balances ended the quarter near $6 billion, a little above what's needed to run our businesses. Adjusted third quarter earnings were down $5.1 billion versus the same quarter last year. Adjusted upstream earnings were lower mainly due to realizations and negative timing effects. Higher unfavorable discrete tax charges and exploration expenses were partly offset by lower DD&A, Venezuela cash recoveries and other favorable items. Adjusted downstream earnings decreased primarily due to a negative swing in timing effects and lower marketing margins. Compared with last quarter, adjusted earnings were down just over $50 million. Adjusted upstream earnings were roughly flat as higher prices and volumes were offset by unfavorable discrete tax charges and negative timing effects due to the rise in prices. DD&A and OpEx were both higher in part due to the addition of PDC legacy assets for two months in the quarter. Adjusted downstream earnings increased primarily due to higher refining margins, partially offset by unfavorable timing effects. All other was down on unfavorable tax items and decreased interest income in line with lower cash balances. Third quarter oil equivalent production was up 6% over last quarter primarily due to two months of legacy PDC production. This was partly offset by a planned turnaround at TCO and pitstop at Gorgon. The Permian, excluding legacy PDC, was down 2% due to lower non-operated production; company-operated production was flat with the second quarter. Now, looking ahead. Our fourth quarter estimate for turnarounds and downtime includes approximately 30,000 barrels of oil equivalent per day for Tamar. We anticipate affiliate dividends in the fourth quarter to be largely from TCO. As a reminder, we record a 15% withholding tax on TCO dividends. Due to the pending transaction with Hess, share repurchases will be restricted pursuant to SEC regulations. Chevron expects share repurchases in the fourth quarter to be around $3 billion plus or minus 20%, depending primarily on the timing of the Hess definitive proxy statement mailing. In summary, our actions and performance show that Chevron keeps delivering strong results. With a strategy that remains clear and consistent, we are well positioned to deliver value to our shareholders in any environment. With that, I'll turn it back to Jake.","evidence_gemma_new":"adjusted earnings","evidence_llama_3_3":"adjusted earnings","evidence_qwen_3_30b":"adjusted earnings just over $50 million last quarter","gemma_new_max":50000000.0,"gemma_new_min":50000000.0,"llama_3_3_max":50000000.0,"llama_3_3_min":50000000.0,"qwen_3_30b_max":50000000.0,"qwen_3_30b_min":50000000.0}
{"symbol":"CVX","year":2023,"quarter":4,"date":"2023-Q4","chunk_id":3,"sub_chunk_id":0,"centroid_label":"adjusted earnings","agreed_value":6500000000.0,"count":3,"chunk":"Pierre Breber: Thanks Mike. We reported fourth quarter earnings of $2.3 billion, or $1.22 per share. Adjusted earnings were $6.5 billion, or $3.45 per share. Included in the quarter were $3.7 billion in charges pre-announced in January. Foreign currency charges were almost $480 million. Our 2023 CapEx included $650 million of inorganic acquisitions and around $450 million invested in legacy PDC assets post-closing. Excluding these items, CapEx was about 5% above budget after three consecutive years below. Share repurchases matched the third quarter. Our balance sheet remains strong, ending the year with a net debt ratio comfortably in the single digits. Turning to the quarter, adjusted earnings were higher than last quarter by roughly $730 million. Adjusted upstream earnings improved due to higher liftings, in line with record quarterly production, and favorable timing effects. Adjusted Downstream earnings decreased on lower refining margins, partially offset by a favorable swing in timing effects. All Other benefited from lower corporate taxes and employee costs. For the full year, adjusted earnings decreased nearly $12 billion compared to the prior year. Adjusted Upstream earnings decreased primarily due to lower prices. Adjusted Downstream earnings were lower largely due to declining refining margins. Other segment earnings improved on lower employee costs and higher interest income. Solid financial performance enabled Chevron to deliver, again, on all four of its financial priorities. We announced an 8% increase in our dividend, reflecting our confidence in expected future free cash flow growth. We maintained capital discipline in both traditional and new energies. We reduced debt by over $4 billion, including all debt assumed in the PDC acquisition and we repurchased about 5% of our shares outstanding. Last year, we produced more oil and gas than any other year in the company\u2019s history, including a record number of LNG cargoes out of Australia. We expect 2024 production to be higher again, by 4% to 7%. Our plans include production growth in the DJ Basin, with a full year of legacy PDC operations and continued organic growth in the Permian. Our guidance this year includes an estimated impact from asset sales as we further high-grade our portfolio. Looking ahead, our first quarter downtime estimate includes around 20 thousand barrels of oil equivalent per day associated with January\u2019s cold weather in North America. Earnings estimates from refinery turnarounds are mostly driven by Pascagoula. Share repurchases in the quarter will continue to be restricted under SEC regulations. Depending on commodity prices and margins, affiliate dividends are estimated around $4 billion, roughly flat with last year. We do not expect significant affiliate dividends in the first quarter. The difference between affiliate earnings and dividends is expected to decrease in the second half of the year after TCO\u2019s start-up of WPMP. Our CapEx guidance range is unchanged from the December budget announcement. In prior years, our CapEx rate in the first half of the year was about 20% lower than the second half. Our price sensitivities have increased at higher production levels. About 20% of the Brent sensitivity relates to oil-linked LNG sales and less than 10% relates to North America natural gas liquids. Back to you, Mike.","evidence_gemma_new":"Adjusted earnings","evidence_llama_3_3":"Adjusted earnings","evidence_qwen_3_30b":"adjusted earnings","gemma_new_max":6500000000.0,"gemma_new_min":6500000000.0,"llama_3_3_max":6500000000.0,"llama_3_3_min":6500000000.0,"qwen_3_30b_max":6500000000.0,"qwen_3_30b_min":6500000000.0}
{"symbol":"CVX","year":2023,"quarter":4,"date":"2023-Q4","chunk_id":3,"sub_chunk_id":0,"centroid_label":"adjusted earnings","agreed_value":730000000.0,"count":2,"chunk":"Pierre Breber: Thanks Mike. We reported fourth quarter earnings of $2.3 billion, or $1.22 per share. Adjusted earnings were $6.5 billion, or $3.45 per share. Included in the quarter were $3.7 billion in charges pre-announced in January. Foreign currency charges were almost $480 million. Our 2023 CapEx included $650 million of inorganic acquisitions and around $450 million invested in legacy PDC assets post-closing. Excluding these items, CapEx was about 5% above budget after three consecutive years below. Share repurchases matched the third quarter. Our balance sheet remains strong, ending the year with a net debt ratio comfortably in the single digits. Turning to the quarter, adjusted earnings were higher than last quarter by roughly $730 million. Adjusted upstream earnings improved due to higher liftings, in line with record quarterly production, and favorable timing effects. Adjusted Downstream earnings decreased on lower refining margins, partially offset by a favorable swing in timing effects. All Other benefited from lower corporate taxes and employee costs. For the full year, adjusted earnings decreased nearly $12 billion compared to the prior year. Adjusted Upstream earnings decreased primarily due to lower prices. Adjusted Downstream earnings were lower largely due to declining refining margins. Other segment earnings improved on lower employee costs and higher interest income. Solid financial performance enabled Chevron to deliver, again, on all four of its financial priorities. We announced an 8% increase in our dividend, reflecting our confidence in expected future free cash flow growth. We maintained capital discipline in both traditional and new energies. We reduced debt by over $4 billion, including all debt assumed in the PDC acquisition and we repurchased about 5% of our shares outstanding. Last year, we produced more oil and gas than any other year in the company\u2019s history, including a record number of LNG cargoes out of Australia. We expect 2024 production to be higher again, by 4% to 7%. Our plans include production growth in the DJ Basin, with a full year of legacy PDC operations and continued organic growth in the Permian. Our guidance this year includes an estimated impact from asset sales as we further high-grade our portfolio. Looking ahead, our first quarter downtime estimate includes around 20 thousand barrels of oil equivalent per day associated with January\u2019s cold weather in North America. Earnings estimates from refinery turnarounds are mostly driven by Pascagoula. Share repurchases in the quarter will continue to be restricted under SEC regulations. Depending on commodity prices and margins, affiliate dividends are estimated around $4 billion, roughly flat with last year. We do not expect significant affiliate dividends in the first quarter. The difference between affiliate earnings and dividends is expected to decrease in the second half of the year after TCO\u2019s start-up of WPMP. Our CapEx guidance range is unchanged from the December budget announcement. In prior years, our CapEx rate in the first half of the year was about 20% lower than the second half. Our price sensitivities have increased at higher production levels. About 20% of the Brent sensitivity relates to oil-linked LNG sales and less than 10% relates to North America natural gas liquids. Back to you, Mike.","evidence_gemma_new":"adjusted earnings","evidence_llama_3_3":"adjusted earnings","evidence_qwen_3_30b":null,"gemma_new_max":730000000.0,"gemma_new_min":730000000.0,"llama_3_3_max":730000000.0,"llama_3_3_min":730000000.0,"qwen_3_30b_max":null,"qwen_3_30b_min":null}
{"symbol":"CVX","year":2023,"quarter":4,"date":"2023-Q4","chunk_id":3,"sub_chunk_id":0,"centroid_label":"adjusted earnings","agreed_value":12000000000.0,"count":2,"chunk":"Pierre Breber: Thanks Mike. We reported fourth quarter earnings of $2.3 billion, or $1.22 per share. Adjusted earnings were $6.5 billion, or $3.45 per share. Included in the quarter were $3.7 billion in charges pre-announced in January. Foreign currency charges were almost $480 million. Our 2023 CapEx included $650 million of inorganic acquisitions and around $450 million invested in legacy PDC assets post-closing. Excluding these items, CapEx was about 5% above budget after three consecutive years below. Share repurchases matched the third quarter. Our balance sheet remains strong, ending the year with a net debt ratio comfortably in the single digits. Turning to the quarter, adjusted earnings were higher than last quarter by roughly $730 million. Adjusted upstream earnings improved due to higher liftings, in line with record quarterly production, and favorable timing effects. Adjusted Downstream earnings decreased on lower refining margins, partially offset by a favorable swing in timing effects. All Other benefited from lower corporate taxes and employee costs. For the full year, adjusted earnings decreased nearly $12 billion compared to the prior year. Adjusted Upstream earnings decreased primarily due to lower prices. Adjusted Downstream earnings were lower largely due to declining refining margins. Other segment earnings improved on lower employee costs and higher interest income. Solid financial performance enabled Chevron to deliver, again, on all four of its financial priorities. We announced an 8% increase in our dividend, reflecting our confidence in expected future free cash flow growth. We maintained capital discipline in both traditional and new energies. We reduced debt by over $4 billion, including all debt assumed in the PDC acquisition and we repurchased about 5% of our shares outstanding. Last year, we produced more oil and gas than any other year in the company\u2019s history, including a record number of LNG cargoes out of Australia. We expect 2024 production to be higher again, by 4% to 7%. Our plans include production growth in the DJ Basin, with a full year of legacy PDC operations and continued organic growth in the Permian. Our guidance this year includes an estimated impact from asset sales as we further high-grade our portfolio. Looking ahead, our first quarter downtime estimate includes around 20 thousand barrels of oil equivalent per day associated with January\u2019s cold weather in North America. Earnings estimates from refinery turnarounds are mostly driven by Pascagoula. Share repurchases in the quarter will continue to be restricted under SEC regulations. Depending on commodity prices and margins, affiliate dividends are estimated around $4 billion, roughly flat with last year. We do not expect significant affiliate dividends in the first quarter. The difference between affiliate earnings and dividends is expected to decrease in the second half of the year after TCO\u2019s start-up of WPMP. Our CapEx guidance range is unchanged from the December budget announcement. In prior years, our CapEx rate in the first half of the year was about 20% lower than the second half. Our price sensitivities have increased at higher production levels. About 20% of the Brent sensitivity relates to oil-linked LNG sales and less than 10% relates to North America natural gas liquids. Back to you, Mike.","evidence_gemma_new":"adjusted earnings full year","evidence_llama_3_3":"adjusted earnings","evidence_qwen_3_30b":null,"gemma_new_max":12000000000.0,"gemma_new_min":12000000000.0,"llama_3_3_max":12000000000.0,"llama_3_3_min":12000000000.0,"qwen_3_30b_max":null,"qwen_3_30b_min":null}
{"symbol":"CVX","year":2024,"quarter":1,"date":"2024-Q1","chunk_id":2,"sub_chunk_id":0,"centroid_label":"adjusted earnings","agreed_value":5000000000.0,"count":3,"chunk":"Michael Wirth: Thanks, Jake, and thank you, everyone, for joining us today. Chevron continues to deliver strong operational performance, maintain cost and capital discipline and consistently return cash to shareholders. First quarter marked 9 consecutive quarters with adjusted earnings over $5 billion and adjusted ROCE above 12%. During the quarter, we also returned $6 billion in cash to shareholders, the eighth straight quarter over $5 billion. We also grew production more than 10% from the same quarter last year and announced final investment decisions to grow our renewable fuels and hydrogen businesses. Earlier this month, we announced our third Future Energy Fund focused on venture investments in lower-carbon technologies. The merger with Hess is advancing, and we intend to certify substantial compliance with the FTC second request in the coming weeks. We believe that a preemption right does not apply to this transaction and are confident this will be affirmed in arbitration. We expect the proxy for the Hess shareholder vote to be mailed in April with a special meeting date in late May. This strategic combination creates a premier energy company with world-class capabilities and assets to deliver superior shareholder value, and we look forward to bringing the 2 companies together. At TCO, we had achieved start-up of WPMP this month with the first inlet separator and pressure boost compressor in service and conversion of the first metering station to low pressure now complete. Later this quarter, we expect a second pressure boost compressor online and a third gas turbine generator to provide power to the Tengiz grid. Metering station conversions are planned through the remainder of the year as additional pressure boost compressors start up, keeping the existing plants full around planned SGI and KTL turnarounds.","evidence_gemma_new":"adjusted earnings 9 consecutive quarters","evidence_llama_3_3":"Chevron adjusted earnings First quarter","evidence_qwen_3_30b":"adjusted earnings First quarter","gemma_new_max":5000000000.0,"gemma_new_min":5000000000.0,"llama_3_3_max":5000000000.0,"llama_3_3_min":5000000000.0,"qwen_3_30b_max":5000000000.0,"qwen_3_30b_min":5000000000.0}
{"symbol":"CVX","year":2024,"quarter":1,"date":"2024-Q1","chunk_id":3,"sub_chunk_id":0,"centroid_label":"adjusted earnings","agreed_value":5400000000.0,"count":3,"chunk":"We continue to make significant progress on FGP and expect to have additional major equipment ready for operations in the third quarter. Costs and scheduled guidance remain unchanged with FGP expected to start up in the first half of 2025. Now over to Eimear to discuss the financials. Eimear Bonner: Thanks, Mike. We delivered another quarter of strong earnings, ROCE and cash returns to shareholders. We reported first quarter earnings of $5.5 billion or $2.97 per share. Adjusted earnings were $5.4 billion or $2.93 per share. Cash flow from operations was impacted by an approximate $300 million international upstream ARO settlement payment and $200 million for the expansion of the retail marketing network. We also had a working capital build during the quarter consistent with historical trends. Chevron delivered on all of its financial priorities during the quarter, an 8% increase in dividend per share; organic CapEx aligned with ratable budget inclusive of progress payments for new LNG ships; sustained net debt in the single digits while issuing commercial paper to manage timing of affiliate dividends and working capital; and share repurchases of $3 billion. Adjusted earnings were lower by $1 billion versus last quarter. Adjusted upstream earnings were down due to lower realization and liquids liftings. Partly offsetting were favorable tax impacts. Adjusted downstream earnings were lower mainly due to timing effects associated with the rising commodity price environment. All other decreased on higher employee costs and an unfavorable swing in tax items. Adjusted first quarter earnings were down $1.3 billion versus last year. Adjusted upstream earnings were down modestly. Higher liftings were more than offset by lower natural gas realizations. DD&A was higher due to the PDC acquisition and Permian growth. Adjusted downstream earnings were lower mainly due to lower refining margins and timing effects. Worldwide oil equivalent production was the highest first quarter in our company's history. Production was up over 12% from last year, including an increase of 35% in the United States largely due to the PDC Energy acquisition and organic growth in the Permian Basin. Looking ahead to the second quarter, we have planned turnarounds at TCO and several Gulf of Mexico assets. Following another strong quarter in the Permian, production is trending better than our previous guidance, and we now expect first half production to be down less than 2% from the fourth quarter. Impacts from refinery turnarounds are mostly driven by El Segundo and Richmond. We anticipate higher affiliate dividends in the second quarter largely from TCO. With the start-up of WPMP, we expect TCO's DD&A to increase by approximately $400 million over the remainder of the year. Share repurchases are restricted under SEC regulations through the Hess shareholder vote, after which we intend to resume buybacks at the $17.5 billion annual rate. We've published a new document with our consolidated guidance and sensitivities that will be updated quarterly and posted to our website the month prior to our earnings call. Back to you, Jake.","evidence_gemma_new":"Adjusted earnings","evidence_llama_3_3":"adjusted earnings first quarter","evidence_qwen_3_30b":"adjusted earnings $5.4 billion or $2.93 per share","gemma_new_max":5400000000.0,"gemma_new_min":5400000000.0,"llama_3_3_max":5400000000.0,"llama_3_3_min":5400000000.0,"qwen_3_30b_max":5400000000.0,"qwen_3_30b_min":5400000000.0}
{"symbol":"CVX","year":2024,"quarter":1,"date":"2024-Q1","chunk_id":3,"sub_chunk_id":0,"centroid_label":"adjusted earnings","agreed_value":1000000000.0,"count":2,"chunk":"We continue to make significant progress on FGP and expect to have additional major equipment ready for operations in the third quarter. Costs and scheduled guidance remain unchanged with FGP expected to start up in the first half of 2025. Now over to Eimear to discuss the financials. Eimear Bonner: Thanks, Mike. We delivered another quarter of strong earnings, ROCE and cash returns to shareholders. We reported first quarter earnings of $5.5 billion or $2.97 per share. Adjusted earnings were $5.4 billion or $2.93 per share. Cash flow from operations was impacted by an approximate $300 million international upstream ARO settlement payment and $200 million for the expansion of the retail marketing network. We also had a working capital build during the quarter consistent with historical trends. Chevron delivered on all of its financial priorities during the quarter, an 8% increase in dividend per share; organic CapEx aligned with ratable budget inclusive of progress payments for new LNG ships; sustained net debt in the single digits while issuing commercial paper to manage timing of affiliate dividends and working capital; and share repurchases of $3 billion. Adjusted earnings were lower by $1 billion versus last quarter. Adjusted upstream earnings were down due to lower realization and liquids liftings. Partly offsetting were favorable tax impacts. Adjusted downstream earnings were lower mainly due to timing effects associated with the rising commodity price environment. All other decreased on higher employee costs and an unfavorable swing in tax items. Adjusted first quarter earnings were down $1.3 billion versus last year. Adjusted upstream earnings were down modestly. Higher liftings were more than offset by lower natural gas realizations. DD&A was higher due to the PDC acquisition and Permian growth. Adjusted downstream earnings were lower mainly due to lower refining margins and timing effects. Worldwide oil equivalent production was the highest first quarter in our company's history. Production was up over 12% from last year, including an increase of 35% in the United States largely due to the PDC Energy acquisition and organic growth in the Permian Basin. Looking ahead to the second quarter, we have planned turnarounds at TCO and several Gulf of Mexico assets. Following another strong quarter in the Permian, production is trending better than our previous guidance, and we now expect first half production to be down less than 2% from the fourth quarter. Impacts from refinery turnarounds are mostly driven by El Segundo and Richmond. We anticipate higher affiliate dividends in the second quarter largely from TCO. With the start-up of WPMP, we expect TCO's DD&A to increase by approximately $400 million over the remainder of the year. Share repurchases are restricted under SEC regulations through the Hess shareholder vote, after which we intend to resume buybacks at the $17.5 billion annual rate. We've published a new document with our consolidated guidance and sensitivities that will be updated quarterly and posted to our website the month prior to our earnings call. Back to you, Jake.","evidence_gemma_new":"Adjusted earnings","evidence_llama_3_3":"adjusted earnings first quarter","evidence_qwen_3_30b":null,"gemma_new_max":1000000000.0,"gemma_new_min":1000000000.0,"llama_3_3_max":1000000000.0,"llama_3_3_min":1000000000.0,"qwen_3_30b_max":null,"qwen_3_30b_min":null}
{"symbol":"CVX","year":2024,"quarter":2,"date":"2024-Q2","chunk_id":3,"sub_chunk_id":0,"centroid_label":"adjusted earnings","agreed_value":4700000000.0,"count":3,"chunk":"Eimear P. Bonner: Thanks, Mike. We reported second quarter earnings of $4.4 billion, or $2.43 per share. Adjusted earnings were $4.7 billion, or $2.55 per share. Results in the quarter were impacted by downtime in Upstream that weighed on realizations, higher exploration expense and Downstream turnaround timing. Organic CapEx was $3.9 billion, in-line with budget. Our balance sheet remains one of the strongest in the industry, ending the quarter with a net debt ratio of 10.7%. Chevron generated solid cash flow of nearly $9 billion excluding working capital. Working capital lowered cash flow due to tax true-up payments outside the U.S. and a build in inventories. We expect about half of the working capital to unwind in the second half of this year, primarily in the fourth quarter. We again demonstrated our consistent approach to returning cash to shareholders with $6 billion of dividends and share repurchases. Adjusted earnings were lower by $700 million versus last quarter. Adjusted Upstream earnings were down mainly due to lower liftings, higher exploration expense and absence of favorable tax impacts from the prior quarter. Partly offsetting were higher realizations. Adjusted Downstream earnings were down due to lower margins and reduced capture rates, this was partially offset by timing effects. All Other decreased mainly due to a tax true-up. Versus last year, adjusted second quarter earnings were down $1.1 billion. Adjusted Upstream earnings were flat, higher realizations and liftings were mostly offset with higher DD&A due to the PDC acquisition and the absence of prior year favorable tax items. Adjusted Downstream earnings decreased mainly due to lower refining margins and higher turnaround and transportation OpEx. The Other segment was down primarily due to state tax adjustments. Worldwide oil equivalent production was up over 11% from last year due to the acquisition of PDC Energy and significant growth in the Permian Basin. Now, looking ahead. The third quarter will have heavier than usual maintenance with several turnarounds at Upstream assets, including TCO and Gorgon. Impacts from refinery turnarounds are mostly driven by El Segundo. There will be a one-time payment related to discontinued operations of around $600 million. We anticipate affiliate dividends to be around $1 billion this quarter. With the project in Kazakhstan nearing completion, we expect quarterly dividends from TCO moving forward. As a reminder, Chevron pays a 15% withholding tax on dividends from TCO which lowers both earnings and cash flow. Share repurchases are targeting the $17.5 billion annual guidance rate. Asset sales in the second half of the year are expected to be aligned with full-year guidance. Back to you, Mike.","evidence_gemma_new":"Adjusted earnings","evidence_llama_3_3":"adjusted earnings second quarter","evidence_qwen_3_30b":"adjusted earnings","gemma_new_max":4700000000.0,"gemma_new_min":4700000000.0,"llama_3_3_max":4700000000.0,"llama_3_3_min":4700000000.0,"qwen_3_30b_max":4700000000.0,"qwen_3_30b_min":4700000000.0}
{"symbol":"CVX","year":2024,"quarter":2,"date":"2024-Q2","chunk_id":3,"sub_chunk_id":0,"centroid_label":"adjusted earnings","agreed_value":700000000.0,"count":3,"chunk":"Eimear P. Bonner: Thanks, Mike. We reported second quarter earnings of $4.4 billion, or $2.43 per share. Adjusted earnings were $4.7 billion, or $2.55 per share. Results in the quarter were impacted by downtime in Upstream that weighed on realizations, higher exploration expense and Downstream turnaround timing. Organic CapEx was $3.9 billion, in-line with budget. Our balance sheet remains one of the strongest in the industry, ending the quarter with a net debt ratio of 10.7%. Chevron generated solid cash flow of nearly $9 billion excluding working capital. Working capital lowered cash flow due to tax true-up payments outside the U.S. and a build in inventories. We expect about half of the working capital to unwind in the second half of this year, primarily in the fourth quarter. We again demonstrated our consistent approach to returning cash to shareholders with $6 billion of dividends and share repurchases. Adjusted earnings were lower by $700 million versus last quarter. Adjusted Upstream earnings were down mainly due to lower liftings, higher exploration expense and absence of favorable tax impacts from the prior quarter. Partly offsetting were higher realizations. Adjusted Downstream earnings were down due to lower margins and reduced capture rates, this was partially offset by timing effects. All Other decreased mainly due to a tax true-up. Versus last year, adjusted second quarter earnings were down $1.1 billion. Adjusted Upstream earnings were flat, higher realizations and liftings were mostly offset with higher DD&A due to the PDC acquisition and the absence of prior year favorable tax items. Adjusted Downstream earnings decreased mainly due to lower refining margins and higher turnaround and transportation OpEx. The Other segment was down primarily due to state tax adjustments. Worldwide oil equivalent production was up over 11% from last year due to the acquisition of PDC Energy and significant growth in the Permian Basin. Now, looking ahead. The third quarter will have heavier than usual maintenance with several turnarounds at Upstream assets, including TCO and Gorgon. Impacts from refinery turnarounds are mostly driven by El Segundo. There will be a one-time payment related to discontinued operations of around $600 million. We anticipate affiliate dividends to be around $1 billion this quarter. With the project in Kazakhstan nearing completion, we expect quarterly dividends from TCO moving forward. As a reminder, Chevron pays a 15% withholding tax on dividends from TCO which lowers both earnings and cash flow. Share repurchases are targeting the $17.5 billion annual guidance rate. Asset sales in the second half of the year are expected to be aligned with full-year guidance. Back to you, Mike.","evidence_gemma_new":"Adjusted earnings last quarter","evidence_llama_3_3":"adjusted earnings last quarter","evidence_qwen_3_30b":"adjusted earnings versus last quarter","gemma_new_max":700000000.0,"gemma_new_min":700000000.0,"llama_3_3_max":700000000.0,"llama_3_3_min":700000000.0,"qwen_3_30b_max":700000000.0,"qwen_3_30b_min":700000000.0}
{"symbol":"CVX","year":2024,"quarter":3,"date":"2024-Q3","chunk_id":3,"sub_chunk_id":0,"centroid_label":"adjusted earnings","agreed_value":4500000000.0,"count":3,"chunk":"Eimear Bonner: Thanks, Mike. We reported third-quarter earnings of $4.5 billion or $2.48 per share. Adjusted earnings were $4.5 billion or $2.51 per share. Organic CapEx was $4 billion for the quarter, in line with our budget. Our balance sheet remains one of the strongest in the industry, ending the quarter with a net debt ratio under 12%. Cash flow in the third quarter was the highest for the year despite lower oil prices. Working capital decreased by $1.4 billion on lower inventory levels. Share repurchases were a record $4.7 billion at the top end of our quarterly guidance range. Our financial priorities are unchanged, and we plan to use our strong balance sheet towards shareholders consistently through commodity cycles. Compared with last quarter, adjusted earnings were down about $150 million. Adjusted upstream earnings were down mainly due to lower realization and high dividend at TCO, partly offset by higher lifting. Adjusted downstream earnings increased primarily due to favorable timing effects and higher US volumes. This was partially offset by lower US refining margins. Adjusted third-quarter earnings were down $1.2 billion versus the same quarter last year. Adjusted upstream earnings were flat. Lower liquids realizations and higher DD&A were mostly offset by higher liftings and timing effects. Adjusted downstream earnings decreased mainly due to lower refining margins. All other was down primarily due to interest expense. Third-quarter oil equivalent production was up around 75,000 barrels per day from last quarter. Strong production in the Permian, primarily in our company-operated New Mexico assets, was the main driver. We expect full-year average production growth to finish at the top end of our guidance range of 4% to 7%. Costs always matter in a commodity business. We have a track record of managing unit costs well below inflation while successfully integrating several acquisitions. Higher returns require competitive costs and safe and reliable operations. Executing turnarounds on budget and on schedule is a key performance driver, and we have delivered outstanding performance in 2024. Our teams have collaborated across upstream and downstream to standardize the approach to these complex maintenance events, increasing the days our facilities are online and lowering unit costs. While we anticipate significant volume growth in the years ahead, we also expect to deliver $2 to $3 billion in structural cost reductions by the end of 2026. These cost savings will largely come from optimizing the portfolio, leveraging technology to enhance productivity, and changing how and where work is performed, including the expanded use of global capability centers. Now looking ahead, in the fourth quarter, Upstream will have downtime, which is expected to be split between US and international operations. Impacts to production from divestments are expected to be around 45,000 barrels of oil equivalent per day for the quarter. Downstream, we will have higher planned maintenance primarily at El Segundo and Pasadena. We will also have a shutdown at the Pasadena refinery, enabling the light tight oil expansion to come online. We anticipate affiliate dividends to be around $1 billion this quarter. Share repurchases are expected to be between $4 and $4.75 billion in the fourth quarter, unchanged from prior guidance. Proceeds from asset sales are expected to be about $8 billion before taxes. Back to you, Jake.","evidence_gemma_new":"Adjusted earnings","evidence_llama_3_3":"Adjusted earnings","evidence_qwen_3_30b":"adjusted earnings","gemma_new_max":4500000000.0,"gemma_new_min":4500000000.0,"llama_3_3_max":4500000000.0,"llama_3_3_min":4500000000.0,"qwen_3_30b_max":4500000000.0,"qwen_3_30b_min":4500000000.0}
{"symbol":"CVX","year":2024,"quarter":3,"date":"2024-Q3","chunk_id":3,"sub_chunk_id":0,"centroid_label":"adjusted earnings","agreed_value":150000000.0,"count":3,"chunk":"Eimear Bonner: Thanks, Mike. We reported third-quarter earnings of $4.5 billion or $2.48 per share. Adjusted earnings were $4.5 billion or $2.51 per share. Organic CapEx was $4 billion for the quarter, in line with our budget. Our balance sheet remains one of the strongest in the industry, ending the quarter with a net debt ratio under 12%. Cash flow in the third quarter was the highest for the year despite lower oil prices. Working capital decreased by $1.4 billion on lower inventory levels. Share repurchases were a record $4.7 billion at the top end of our quarterly guidance range. Our financial priorities are unchanged, and we plan to use our strong balance sheet towards shareholders consistently through commodity cycles. Compared with last quarter, adjusted earnings were down about $150 million. Adjusted upstream earnings were down mainly due to lower realization and high dividend at TCO, partly offset by higher lifting. Adjusted downstream earnings increased primarily due to favorable timing effects and higher US volumes. This was partially offset by lower US refining margins. Adjusted third-quarter earnings were down $1.2 billion versus the same quarter last year. Adjusted upstream earnings were flat. Lower liquids realizations and higher DD&A were mostly offset by higher liftings and timing effects. Adjusted downstream earnings decreased mainly due to lower refining margins. All other was down primarily due to interest expense. Third-quarter oil equivalent production was up around 75,000 barrels per day from last quarter. Strong production in the Permian, primarily in our company-operated New Mexico assets, was the main driver. We expect full-year average production growth to finish at the top end of our guidance range of 4% to 7%. Costs always matter in a commodity business. We have a track record of managing unit costs well below inflation while successfully integrating several acquisitions. Higher returns require competitive costs and safe and reliable operations. Executing turnarounds on budget and on schedule is a key performance driver, and we have delivered outstanding performance in 2024. Our teams have collaborated across upstream and downstream to standardize the approach to these complex maintenance events, increasing the days our facilities are online and lowering unit costs. While we anticipate significant volume growth in the years ahead, we also expect to deliver $2 to $3 billion in structural cost reductions by the end of 2026. These cost savings will largely come from optimizing the portfolio, leveraging technology to enhance productivity, and changing how and where work is performed, including the expanded use of global capability centers. Now looking ahead, in the fourth quarter, Upstream will have downtime, which is expected to be split between US and international operations. Impacts to production from divestments are expected to be around 45,000 barrels of oil equivalent per day for the quarter. Downstream, we will have higher planned maintenance primarily at El Segundo and Pasadena. We will also have a shutdown at the Pasadena refinery, enabling the light tight oil expansion to come online. We anticipate affiliate dividends to be around $1 billion this quarter. Share repurchases are expected to be between $4 and $4.75 billion in the fourth quarter, unchanged from prior guidance. Proceeds from asset sales are expected to be about $8 billion before taxes. Back to you, Jake.","evidence_gemma_new":"adjusted earnings","evidence_llama_3_3":"adjusted earnings","evidence_qwen_3_30b":"adjusted earnings down last quarter","gemma_new_max":150000000.0,"gemma_new_min":150000000.0,"llama_3_3_max":150000000.0,"llama_3_3_min":150000000.0,"qwen_3_30b_max":150000000.0,"qwen_3_30b_min":150000000.0}
{"symbol":"CVX","year":2024,"quarter":3,"date":"2024-Q3","chunk_id":3,"sub_chunk_id":0,"centroid_label":"adjusted earnings","agreed_value":2.51,"count":2,"chunk":"Eimear Bonner: Thanks, Mike. We reported third-quarter earnings of $4.5 billion or $2.48 per share. Adjusted earnings were $4.5 billion or $2.51 per share. Organic CapEx was $4 billion for the quarter, in line with our budget. Our balance sheet remains one of the strongest in the industry, ending the quarter with a net debt ratio under 12%. Cash flow in the third quarter was the highest for the year despite lower oil prices. Working capital decreased by $1.4 billion on lower inventory levels. Share repurchases were a record $4.7 billion at the top end of our quarterly guidance range. Our financial priorities are unchanged, and we plan to use our strong balance sheet towards shareholders consistently through commodity cycles. Compared with last quarter, adjusted earnings were down about $150 million. Adjusted upstream earnings were down mainly due to lower realization and high dividend at TCO, partly offset by higher lifting. Adjusted downstream earnings increased primarily due to favorable timing effects and higher US volumes. This was partially offset by lower US refining margins. Adjusted third-quarter earnings were down $1.2 billion versus the same quarter last year. Adjusted upstream earnings were flat. Lower liquids realizations and higher DD&A were mostly offset by higher liftings and timing effects. Adjusted downstream earnings decreased mainly due to lower refining margins. All other was down primarily due to interest expense. Third-quarter oil equivalent production was up around 75,000 barrels per day from last quarter. Strong production in the Permian, primarily in our company-operated New Mexico assets, was the main driver. We expect full-year average production growth to finish at the top end of our guidance range of 4% to 7%. Costs always matter in a commodity business. We have a track record of managing unit costs well below inflation while successfully integrating several acquisitions. Higher returns require competitive costs and safe and reliable operations. Executing turnarounds on budget and on schedule is a key performance driver, and we have delivered outstanding performance in 2024. Our teams have collaborated across upstream and downstream to standardize the approach to these complex maintenance events, increasing the days our facilities are online and lowering unit costs. While we anticipate significant volume growth in the years ahead, we also expect to deliver $2 to $3 billion in structural cost reductions by the end of 2026. These cost savings will largely come from optimizing the portfolio, leveraging technology to enhance productivity, and changing how and where work is performed, including the expanded use of global capability centers. Now looking ahead, in the fourth quarter, Upstream will have downtime, which is expected to be split between US and international operations. Impacts to production from divestments are expected to be around 45,000 barrels of oil equivalent per day for the quarter. Downstream, we will have higher planned maintenance primarily at El Segundo and Pasadena. We will also have a shutdown at the Pasadena refinery, enabling the light tight oil expansion to come online. We anticipate affiliate dividends to be around $1 billion this quarter. Share repurchases are expected to be between $4 and $4.75 billion in the fourth quarter, unchanged from prior guidance. Proceeds from asset sales are expected to be about $8 billion before taxes. Back to you, Jake.","evidence_gemma_new":"Adjusted earnings","evidence_llama_3_3":null,"evidence_qwen_3_30b":"adjusted earnings per share","gemma_new_max":2.51,"gemma_new_min":2.51,"llama_3_3_max":null,"llama_3_3_min":null,"qwen_3_30b_max":2.51,"qwen_3_30b_min":2.51}
{"symbol":"CVX","year":2024,"quarter":4,"date":"2024-Q4","chunk_id":3,"sub_chunk_id":0,"centroid_label":"adjusted earnings","agreed_value":3600000000.0,"count":3,"chunk":"Eimear Bonner : Thanks, Mike. Chevron reported fourth quarter earnings of $3.2 billion, or $1.84 per share. Adjusted earnings were $3.6 billion, or $2.06 per share. Included in the quarter were special items totaling $1.1 billion related to restructuring and impairment charges. Foreign currency gains were $720 million. Full-year organic CapEx was aligned with our announced $16 billion budget. Inorganic CapEx of $530 million related mostly to lease acquisitions and new energies investments. We maintained double digit returns with adjusted ROCE of 10.5% for the year. Compared with last quarter, adjusted earnings were $900 million lower. Adjusted upstream earnings were impacted by revisions to asset retirement obligations and timing effects, including year-end inventory valuation. Adjusted Downstream earnings were lower due to softer refining and chemicals margins and timing effects. Chevron\u2019s cash generation continued to position the company for long-term success while rewarding shareholders. In 2024, we Invested capital efficiently, growing production by 7%; Generated nearly $8 billion in proceeds from asset sales; sustained our long track record of dividend increases and repurchased 5% of shares outstanding; and maintained a strong balance sheet, ending the year with a net debt ratio of 10%. Chevron\u2019s long-standing financial priorities have created value for shareholders. They have guided our actions through multiple commodity and investment cycles and will continue to govern how we allocate capital. Over the past five years we have grown our dividend faster than the S&P 500 and nearly double the rate of our closest peer. Today, we announced a 5% increase in the dividend, marking the 38th consecutive year with an annual increase to dividend payment per share. We\u2019re committed to capital discipline. Only the most competitive projects in our portfolio will get funded. Where assets don\u2019t compete for capital, we have a history of generating value commercially. The balance sheet is in excellent health, with net debt below our historical levels. We\u2019ve repurchased shares 17 of the last 21 years and intend to maintain a buyback range of $10 to $20 billion per year depending on market conditions. Compared to our peers, we\u2019re delivering growth with less capital and returning more cash to shareholders. In the past three years, we\u2019ve returned $75 billion in cash to shareholders via dividends and share buybacks. Now, I\u2019ll hand it back over to Mike to cover our near-term outlook.","evidence_gemma_new":"Adjusted earnings","evidence_llama_3_3":"adjusted earnings fourth quarter","evidence_qwen_3_30b":"adjusted earnings","gemma_new_max":3600000000.0,"gemma_new_min":3600000000.0,"llama_3_3_max":3600000000.0,"llama_3_3_min":3600000000.0,"qwen_3_30b_max":3600000000.0,"qwen_3_30b_min":3600000000.0}
{"symbol":"CVX","year":2024,"quarter":4,"date":"2024-Q4","chunk_id":3,"sub_chunk_id":0,"centroid_label":"adjusted earnings","agreed_value":900000000.0,"count":3,"chunk":"Eimear Bonner : Thanks, Mike. Chevron reported fourth quarter earnings of $3.2 billion, or $1.84 per share. Adjusted earnings were $3.6 billion, or $2.06 per share. Included in the quarter were special items totaling $1.1 billion related to restructuring and impairment charges. Foreign currency gains were $720 million. Full-year organic CapEx was aligned with our announced $16 billion budget. Inorganic CapEx of $530 million related mostly to lease acquisitions and new energies investments. We maintained double digit returns with adjusted ROCE of 10.5% for the year. Compared with last quarter, adjusted earnings were $900 million lower. Adjusted upstream earnings were impacted by revisions to asset retirement obligations and timing effects, including year-end inventory valuation. Adjusted Downstream earnings were lower due to softer refining and chemicals margins and timing effects. Chevron\u2019s cash generation continued to position the company for long-term success while rewarding shareholders. In 2024, we Invested capital efficiently, growing production by 7%; Generated nearly $8 billion in proceeds from asset sales; sustained our long track record of dividend increases and repurchased 5% of shares outstanding; and maintained a strong balance sheet, ending the year with a net debt ratio of 10%. Chevron\u2019s long-standing financial priorities have created value for shareholders. They have guided our actions through multiple commodity and investment cycles and will continue to govern how we allocate capital. Over the past five years we have grown our dividend faster than the S&P 500 and nearly double the rate of our closest peer. Today, we announced a 5% increase in the dividend, marking the 38th consecutive year with an annual increase to dividend payment per share. We\u2019re committed to capital discipline. Only the most competitive projects in our portfolio will get funded. Where assets don\u2019t compete for capital, we have a history of generating value commercially. The balance sheet is in excellent health, with net debt below our historical levels. We\u2019ve repurchased shares 17 of the last 21 years and intend to maintain a buyback range of $10 to $20 billion per year depending on market conditions. Compared to our peers, we\u2019re delivering growth with less capital and returning more cash to shareholders. In the past three years, we\u2019ve returned $75 billion in cash to shareholders via dividends and share buybacks. Now, I\u2019ll hand it back over to Mike to cover our near-term outlook.","evidence_gemma_new":"adjusted earnings","evidence_llama_3_3":"adjusted earnings last quarter","evidence_qwen_3_30b":"adjusted earnings last quarter","gemma_new_max":900000000.0,"gemma_new_min":900000000.0,"llama_3_3_max":900000000.0,"llama_3_3_min":900000000.0,"qwen_3_30b_max":900000000.0,"qwen_3_30b_min":900000000.0}
{"symbol":"CVX","year":2023,"quarter":3,"date":"2023-Q3","chunk_id":13,"sub_chunk_id":0,"centroid_label":"capex","agreed_value":5000000000.0,"count":2,"chunk":"Michael Wirth: Yes. So Josh, there's going to be some more capital, we said 3% to 5%. So think about around $1 billion Chevron share over 2024 and 2025, probably a little more weighted to 2024 than 2025. Cash flow from the operations will be lower by about $1.5 billion at $60 Brent in total over the next two years really due to the delay in the project. So it's equivalent to about 50,000 barrels a day in net production in each of those years. So in total, we expect our share of dividends to be lower by about $2.5 billion across 2024 and 2025 from the prior guidance. And so it's a combination of those things. And so we had previously guided to above $5 billion. We're now seeing above $4 billion and a little more of that coming from production and cash flow from ops as opposed to CapEx.","evidence_gemma_new":null,"evidence_llama_3_3":"prior guidance CapEx","evidence_qwen_3_30b":"above $5 billion previously guided","gemma_new_max":null,"gemma_new_min":null,"llama_3_3_max":5000000000.0,"llama_3_3_min":5000000000.0,"qwen_3_30b_max":5000000000.0,"qwen_3_30b_min":5000000000.0}
{"symbol":"CVX","year":2023,"quarter":3,"date":"2023-Q3","chunk_id":13,"sub_chunk_id":0,"centroid_label":"capex","agreed_value":4000000000.0,"count":2,"chunk":"Michael Wirth: Yes. So Josh, there's going to be some more capital, we said 3% to 5%. So think about around $1 billion Chevron share over 2024 and 2025, probably a little more weighted to 2024 than 2025. Cash flow from the operations will be lower by about $1.5 billion at $60 Brent in total over the next two years really due to the delay in the project. So it's equivalent to about 50,000 barrels a day in net production in each of those years. So in total, we expect our share of dividends to be lower by about $2.5 billion across 2024 and 2025 from the prior guidance. And so it's a combination of those things. And so we had previously guided to above $5 billion. We're now seeing above $4 billion and a little more of that coming from production and cash flow from ops as opposed to CapEx.","evidence_gemma_new":null,"evidence_llama_3_3":"CapEx","evidence_qwen_3_30b":"above $4 billion now seeing","gemma_new_max":null,"gemma_new_min":null,"llama_3_3_max":4000000000.0,"llama_3_3_min":4000000000.0,"qwen_3_30b_max":4000000000.0,"qwen_3_30b_min":4000000000.0}
{"symbol":"CVX","year":2024,"quarter":1,"date":"2024-Q1","chunk_id":41,"sub_chunk_id":0,"centroid_label":"capex","agreed_value":500000000.0,"count":3,"chunk":"Eimear Bonner: Yes. It's been about 9 months since we closed with PDC Energy. We're really pleased with the progress that we're seeing, the synergies. On the CapEx side, to date, we've captured $500 million, which is $100 million more than what we had initially guided to. We're also seeing capture on the OpEx side as well. So we're nearing $100 million there. The teams are continuing to integrate. We're bringing the best of both companies together and building a development playbook focused on optimizing returns in the basin. We're realizing strong free cash flow from these assets. So we're ahead of pace for the incremental $1 billion in annual free cash flow that we guided to.","evidence_gemma_new":"CapEx $500 million","evidence_llama_3_3":"CapEx","evidence_qwen_3_30b":"CapEx $500 million initially guided","gemma_new_max":500000000.0,"gemma_new_min":500000000.0,"llama_3_3_max":500000000.0,"llama_3_3_min":500000000.0,"qwen_3_30b_max":500000000.0,"qwen_3_30b_min":500000000.0}
{"symbol":"CVX","year":2024,"quarter":3,"date":"2024-Q3","chunk_id":40,"sub_chunk_id":0,"centroid_label":"capex","agreed_value":18250000000.0,"count":3,"chunk":"Lucas Hermann: Yeah. Thanks very much. And afternoon, Mike and Eimear. A fairly obvious question, I guess. I just wanted to talk to you. I wondered if both of you could talk a little bit more about CapEx going forward, and maybe it is an inappropriate time, and December will be better. But if I look at what is happening with the business, you know, obviously, Tengiz starts up. You have got your assets in the Gulf coming on, you are talking about, you know, driving for free cash or driving for NPV value in the Permian CapEx coming down there. If I think about the current rate of CapEx spend including, you know, associates, it feels as though it is around $18, $18.5 billion if you got at the beginning of the year. If I look at the opportunities for that CapEx to start to fall as projects or as plateau or projects come on, it feels as though, you know, maybe $3, $4 billion of CapEx opportunity sits there or opportunities to support CapEx decline. Yes. It is there. What is really hard, Mike, is to see, you know, where that goes. Particularly given, obviously, everything going on in the Eastern Meds at the moment. So, you know, is it right now to start thinking about CapEx coming down very materially as we move forward over the next two, three years, and you are really starting to benefit more emphatically from a portfolio that, in essence, is, you know, deep in resource but pretty long duration.","evidence_gemma_new":"CapEx","evidence_llama_3_3":"CapEx","evidence_qwen_3_30b":"CapEx $18 billion to $18.5 billion","gemma_new_max":18250000000.0,"gemma_new_min":18250000000.0,"llama_3_3_max":18150000000.0,"llama_3_3_min":18150000000.0,"qwen_3_30b_max":18250000000.0,"qwen_3_30b_min":18250000000.0}
{"symbol":"CVX","year":2024,"quarter":3,"date":"2024-Q3","chunk_id":40,"sub_chunk_id":0,"centroid_label":"capex","agreed_value":3500000000.0,"count":3,"chunk":"Lucas Hermann: Yeah. Thanks very much. And afternoon, Mike and Eimear. A fairly obvious question, I guess. I just wanted to talk to you. I wondered if both of you could talk a little bit more about CapEx going forward, and maybe it is an inappropriate time, and December will be better. But if I look at what is happening with the business, you know, obviously, Tengiz starts up. You have got your assets in the Gulf coming on, you are talking about, you know, driving for free cash or driving for NPV value in the Permian CapEx coming down there. If I think about the current rate of CapEx spend including, you know, associates, it feels as though it is around $18, $18.5 billion if you got at the beginning of the year. If I look at the opportunities for that CapEx to start to fall as projects or as plateau or projects come on, it feels as though, you know, maybe $3, $4 billion of CapEx opportunity sits there or opportunities to support CapEx decline. Yes. It is there. What is really hard, Mike, is to see, you know, where that goes. Particularly given, obviously, everything going on in the Eastern Meds at the moment. So, you know, is it right now to start thinking about CapEx coming down very materially as we move forward over the next two, three years, and you are really starting to benefit more emphatically from a portfolio that, in essence, is, you know, deep in resource but pretty long duration.","evidence_gemma_new":"CapEx","evidence_llama_3_3":"CapEx opportunity","evidence_qwen_3_30b":"CapEx $3 billion to $4 billion","gemma_new_max":3500000000.0,"gemma_new_min":3500000000.0,"llama_3_3_max":3500000000.0,"llama_3_3_min":3500000000.0,"qwen_3_30b_max":3500000000.0,"qwen_3_30b_min":3500000000.0}
{"symbol":"CVX","year":2024,"quarter":3,"date":"2024-Q3","chunk_id":41,"sub_chunk_id":0,"centroid_label":"capex","agreed_value":4000000000.0,"count":2,"chunk":"Michael Wirth: Yeah. So you have covered a lot of waterfront there, Lucas. Let me try to address some of it, then let Eimear share some of her thoughts. Number one, I think an important point is if you look at the rateability of our CapEx, we used to have a program that had a lot of big long-duration capital projects. There was a pattern where the back half of the year, fourth quarter in particular, tended to be a little bit heavier at first. Quarter a little bit lighter. We are very ratable now. We have been about $4 billion on our organic CapEx, you know, all three quarters this year. So it has become much more ratable and predictable. That is a reflection of the nature of the projects that we are doing. Point two, you talked about CapEx coming down. A decade ago, our CapEx was $40 billion. Today, you bring in affiliates, as you say, it is $18 something, $18.5 or whatever that number is. So it is less than half of where we were. So it has come down substantially even as production has grown, as the company generates more cash. We are doing it in a much more capital-efficient manner than we ever have before. And then point three is, yes, we will continue to seek further ways to optimize and improve the capital efficiency of our company. A larger portfolio does over time require capital to maintain it, and so, there lies the trade-offs that you evaluate as you look at your capital investment opportunities, the readiness of those, to move into execution. And I think in the near term, what is very clear is our affiliate CapEx will come down next year as the project in Kazakhstan concludes. So you will see affiliate CapEx come off. You know, we are in the process right now of finalizing our business plan for 2025. And so it is a bit premature for me to guide you to that number, but we are looking at all the trade-offs and then we will know more about that after we complete our planning process. But our intent is to stay very disciplined, which I think is something we have demonstrated here over, you know, many, many years now. Our guidance range of $14 to $16 billion is unchanged. And I think you should expect us to respect that. And if that does change, by some quantum and you throw out some larger numbers there, you know, we will cover that with everybody and talk about how it has changed, why it has changed, and how you should think about what that means going forward. Do you want to add anything to that?","evidence_gemma_new":"CapEx three quarters","evidence_llama_3_3":"CapEx this year","evidence_qwen_3_30b":null,"gemma_new_max":4000000000.0,"gemma_new_min":4000000000.0,"llama_3_3_max":4000000000.0,"llama_3_3_min":4000000000.0,"qwen_3_30b_max":null,"qwen_3_30b_min":null}
{"symbol":"CVX","year":2024,"quarter":3,"date":"2024-Q3","chunk_id":41,"sub_chunk_id":0,"centroid_label":"capex","agreed_value":40000000000.0,"count":3,"chunk":"Michael Wirth: Yeah. So you have covered a lot of waterfront there, Lucas. Let me try to address some of it, then let Eimear share some of her thoughts. Number one, I think an important point is if you look at the rateability of our CapEx, we used to have a program that had a lot of big long-duration capital projects. There was a pattern where the back half of the year, fourth quarter in particular, tended to be a little bit heavier at first. Quarter a little bit lighter. We are very ratable now. We have been about $4 billion on our organic CapEx, you know, all three quarters this year. So it has become much more ratable and predictable. That is a reflection of the nature of the projects that we are doing. Point two, you talked about CapEx coming down. A decade ago, our CapEx was $40 billion. Today, you bring in affiliates, as you say, it is $18 something, $18.5 or whatever that number is. So it is less than half of where we were. So it has come down substantially even as production has grown, as the company generates more cash. We are doing it in a much more capital-efficient manner than we ever have before. And then point three is, yes, we will continue to seek further ways to optimize and improve the capital efficiency of our company. A larger portfolio does over time require capital to maintain it, and so, there lies the trade-offs that you evaluate as you look at your capital investment opportunities, the readiness of those, to move into execution. And I think in the near term, what is very clear is our affiliate CapEx will come down next year as the project in Kazakhstan concludes. So you will see affiliate CapEx come off. You know, we are in the process right now of finalizing our business plan for 2025. And so it is a bit premature for me to guide you to that number, but we are looking at all the trade-offs and then we will know more about that after we complete our planning process. But our intent is to stay very disciplined, which I think is something we have demonstrated here over, you know, many, many years now. Our guidance range of $14 to $16 billion is unchanged. And I think you should expect us to respect that. And if that does change, by some quantum and you throw out some larger numbers there, you know, we will cover that with everybody and talk about how it has changed, why it has changed, and how you should think about what that means going forward. Do you want to add anything to that?","evidence_gemma_new":"CapEx","evidence_llama_3_3":"CapEx a decade ago","evidence_qwen_3_30b":"CapEx a decade ago","gemma_new_max":40000000000.0,"gemma_new_min":40000000000.0,"llama_3_3_max":40000000000.0,"llama_3_3_min":40000000000.0,"qwen_3_30b_max":40000000000.0,"qwen_3_30b_min":40000000000.0}
{"symbol":"CVX","year":2023,"quarter":3,"date":"2025-FY","chunk_id":43,"sub_chunk_id":0,"centroid_label":"capex","agreed_value":4000000000.0,"count":2,"chunk":"Pierre Breber: And I'll just add some comments on affiliate dividends. So we've given a guide on fourth quarter affiliate dividends, which falls short of the full-year guide that we did at the start of the year. That shortfall is not from TCO, that's from CPChem, Chevron Phillips Chemical Company, on lower petchem margins. It's also from Angola LNG on lower TTF prices than we had assumed. We've also had some of the Angola LNG cash has come back to us as return to capital. In terms of TCO, we had a $600 million dividend Chevron share in the second quarter. We can't get ahead of the TCO Board on the fourth quarter. But 90% or so of the fourth quarter guide is related TCO. I'll remind you last year that TCO dividend was $1.6 billion Chevron share. All these numbers are before the withholding tax. So we'll see a pretty significant increase in the total year TCO dividend. Now some of that was the \u2013 getting some of the excess cash off the balance sheet like we were talking about. But if you go back to the period prior to the start of this construction, so the period into 2015, we're seeing dividends now \u2013 or this year's dividend will be similar to what we saw from that time period. So the inflection is happening after five years of either not receiving dividends or, in fact, putting cash out, essentially having negative free cash flow. So we know production is going to be down next year. We showed that. So you'd expect dividends to reflect that a little bit. We have a little bit of increase in CapEx. And then we'll be heading to this more than $4 billion in 2025. And all of that is \u2013 that guidance is at $60. So we're seeing some positive news in terms of the cash flow coming out. Clearly disappointing news on the revised schedule, but we're going to work hard to deliver it in the front end of the range. Thanks, Paul.","evidence_gemma_new":"CapEx $4 billion 2025","evidence_llama_3_3":"CapEx 2025","evidence_qwen_3_30b":null,"gemma_new_max":4000000000.0,"gemma_new_min":4000000000.0,"llama_3_3_max":4000000000.0,"llama_3_3_min":4000000000.0,"qwen_3_30b_max":null,"qwen_3_30b_min":null}
{"symbol":"CVX","year":2023,"quarter":4,"date":"2025-FY","chunk_id":20,"sub_chunk_id":0,"centroid_label":"capex","agreed_value":5500000000.0,"count":2,"chunk":"Josh Silverstein: Thanks. Good morning, guys. Going back to the Permian you're stepping up the CapEx this year to about $5 billion versus $4 billion last year to help you deliver the year-over-year growth. As you continue to ramp towards the million BOE per day target, what's needed from a CapEx standpoint to deliver this growth? Can you stay closer to the $5 billion range or does that step up towards $6 billion in 2025 because you have an accelerating pace to hit that? Thanks.","evidence_gemma_new":null,"evidence_llama_3_3":"CapEx 2025","evidence_qwen_3_30b":"CapEx $5 billion to $6 billion 2025","gemma_new_max":null,"gemma_new_min":null,"llama_3_3_max":5500000000.0,"llama_3_3_min":5500000000.0,"qwen_3_30b_max":5500000000.0,"qwen_3_30b_min":5500000000.0}
{"symbol":"CVX","year":2023,"quarter":3,"date":"2023-Q3","chunk_id":23,"sub_chunk_id":0,"centroid_label":"cash flow","agreed_value":0.01,"count":3,"chunk":"Pierre Breber: Yes. Consistent with what Mike just said, we're continuing to do cost affiliate accounting, which means we are not \u2013 we don't record production or reserves, right? So that's not reflected in our numbers. And we only record earnings when we receive cash. So we're not \u2013 we're recording a proportionate share of equity earnings, but only what we actually receive in cash. And that's something that we'll continue to look at. And as Mike said, depending on all those potential triggers down the road, elections and such, we could go back to equity accounting at some point in time. But we have not made that decision yet. In terms of cash flow, it's about 1% of our cash flow. So it's modest, of course. But it's more than it was before. And so as Mike said, operations there are continuing well. And we're getting a little bit of cash. And we'll just see where it goes from here.","evidence_gemma_new":"cash flow","evidence_llama_3_3":"cash flow","evidence_qwen_3_30b":"cash flow 1% modest","gemma_new_max":0.01,"gemma_new_min":0.01,"llama_3_3_max":0.01,"llama_3_3_min":0.01,"qwen_3_30b_max":0.01,"qwen_3_30b_min":0.01}
{"symbol":"CVX","year":2024,"quarter":1,"date":"2024-Q1","chunk_id":21,"sub_chunk_id":0,"centroid_label":"cash flow","agreed_value":5000000000.0,"count":2,"chunk":"Eimear Bonner: Yes. Josh, yes, so we had some commercial paper issued in the first quarter, and it was just to manage short-term liquidity. Timing of affiliate dividends can be a bit lumpy, repatriation of cash can be a bit lumpy. So this was normal business for us in the first quarter. I think in terms of what to expect in terms of cash on the balance sheet, I mean, we target to hold about $5 billion in cash, and that will bounce around as well. But I think $5 billion is a good number. We have access to lots of liquidity and commercial paper, bond investors, credit facilities. So while we've had higher cash in the balance sheet in the past, holding excess cash with low debt and lots of access to liquidity can be a drag in returns. So we're quite comfortable with the $5 billion cash, and that's a good number for you to focus on there.","evidence_gemma_new":"cash","evidence_llama_3_3":"target cash","evidence_qwen_3_30b":null,"gemma_new_max":5000000000.0,"gemma_new_min":5000000000.0,"llama_3_3_max":5000000000.0,"llama_3_3_min":5000000000.0,"qwen_3_30b_max":null,"qwen_3_30b_min":null}
{"symbol":"CVX","year":2024,"quarter":2,"date":"2024-Q2","chunk_id":3,"sub_chunk_id":0,"centroid_label":"cash flow","agreed_value":9000000000.0,"count":2,"chunk":"Eimear P. Bonner: Thanks, Mike. We reported second quarter earnings of $4.4 billion, or $2.43 per share. Adjusted earnings were $4.7 billion, or $2.55 per share. Results in the quarter were impacted by downtime in Upstream that weighed on realizations, higher exploration expense and Downstream turnaround timing. Organic CapEx was $3.9 billion, in-line with budget. Our balance sheet remains one of the strongest in the industry, ending the quarter with a net debt ratio of 10.7%. Chevron generated solid cash flow of nearly $9 billion excluding working capital. Working capital lowered cash flow due to tax true-up payments outside the U.S. and a build in inventories. We expect about half of the working capital to unwind in the second half of this year, primarily in the fourth quarter. We again demonstrated our consistent approach to returning cash to shareholders with $6 billion of dividends and share repurchases. Adjusted earnings were lower by $700 million versus last quarter. Adjusted Upstream earnings were down mainly due to lower liftings, higher exploration expense and absence of favorable tax impacts from the prior quarter. Partly offsetting were higher realizations. Adjusted Downstream earnings were down due to lower margins and reduced capture rates, this was partially offset by timing effects. All Other decreased mainly due to a tax true-up. Versus last year, adjusted second quarter earnings were down $1.1 billion. Adjusted Upstream earnings were flat, higher realizations and liftings were mostly offset with higher DD&A due to the PDC acquisition and the absence of prior year favorable tax items. Adjusted Downstream earnings decreased mainly due to lower refining margins and higher turnaround and transportation OpEx. The Other segment was down primarily due to state tax adjustments. Worldwide oil equivalent production was up over 11% from last year due to the acquisition of PDC Energy and significant growth in the Permian Basin. Now, looking ahead. The third quarter will have heavier than usual maintenance with several turnarounds at Upstream assets, including TCO and Gorgon. Impacts from refinery turnarounds are mostly driven by El Segundo. There will be a one-time payment related to discontinued operations of around $600 million. We anticipate affiliate dividends to be around $1 billion this quarter. With the project in Kazakhstan nearing completion, we expect quarterly dividends from TCO moving forward. As a reminder, Chevron pays a 15% withholding tax on dividends from TCO which lowers both earnings and cash flow. Share repurchases are targeting the $17.5 billion annual guidance rate. Asset sales in the second half of the year are expected to be aligned with full-year guidance. Back to you, Mike.","evidence_gemma_new":"cash flow","evidence_llama_3_3":"cash flow second quarter","evidence_qwen_3_30b":null,"gemma_new_max":9000000000.0,"gemma_new_min":9000000000.0,"llama_3_3_max":9000000000.0,"llama_3_3_min":9000000000.0,"qwen_3_30b_max":null,"qwen_3_30b_min":null}
{"symbol":"CVX","year":2024,"quarter":4,"date":"2024-Q4","chunk_id":9,"sub_chunk_id":0,"centroid_label":"cash flow","agreed_value":2500000000.0,"count":2,"chunk":"Eimear Bonner : Hi, Biraj, thanks for the question. You're right. Cash flow, excluding working capital, was impacted by some non-recurring and accounting items this past quarter. So let me step you through the big ones. Maybe the first is we recognized some tax charges and earnings related to our recently completed Canadian asset sale, and that was around $1.5 billion. It's important to note that these tax charges are offset in working capital. But if you exclude the working capital when you're looking at cash flow, you're still going to see that tax charge. So that's a big one. That's the main one. The second one is we also recorded some charges in the quarter that for earnings, we had identified those as special items. We disclosed them back in December and our capital release. However, we don't make the same adjustments for these items and cash flow. So you're seeing some of that flow through to the bottom line, and that's about a $500 million headwind. Beyond those two items, we did have some other impacts, the combination of affiliate distributions, some unique commercial activity, and that's another $500 million. So when you add up the three elements, that's about $2.5 billion to take into consideration for the cash flow this quarter. So if you've got any additional questions on those pieces acknowledging they're a bit unusual this quarter. I mean Jake can follow up with you after the call and sure you how everything flows through. Thanks.","evidence_gemma_new":"cash flow this quarter","evidence_llama_3_3":"cash flow this past quarter","evidence_qwen_3_30b":null,"gemma_new_max":2500000000.0,"gemma_new_min":2500000000.0,"llama_3_3_max":2500000000.0,"llama_3_3_min":2500000000.0,"qwen_3_30b_max":null,"qwen_3_30b_min":null}
{"symbol":"CVX","year":2024,"quarter":4,"date":"2024-Q4","chunk_id":8,"sub_chunk_id":0,"centroid_label":"cash flow","agreed_value":5300000000.0,"count":2,"chunk":"Biraj Borkhataria : Hi, thanks for taking my question. Firstly, congrats on getting FGP online. I know it\u2019s a big project. So I wanted to ask about sort of underlying cash flow, excluding working capital. This quarter, at least versus our model the $5.3 billion was quite a bit with what we expected. So could you just walk me through how I should think about any one-offs in there? And help me understand what the sort of underlying basis should be as we think about \u201825? Thank you.","evidence_gemma_new":"cash flow This quarter","evidence_llama_3_3":null,"evidence_qwen_3_30b":"underlying cash flow excluding working capital this quarter","gemma_new_max":5300000000.0,"gemma_new_min":5300000000.0,"llama_3_3_max":null,"llama_3_3_min":null,"qwen_3_30b_max":5300000000.0,"qwen_3_30b_min":5300000000.0}
{"symbol":"CVX","year":2023,"quarter":3,"date":"2025-FY","chunk_id":12,"sub_chunk_id":0,"centroid_label":"cash flow","agreed_value":4000000000.0,"count":3,"chunk":"Joshua Silverstein: Yes. Thanks. Good morning, guys. On the TCO, you had mentioned that in 2025, you expect the cash flow to be about $1 billion lower, around $4 billion versus $5 billion previously. Is that just due to the project delays? Or is there higher cost estimates now in that, so it would be lower distributions from there? Or is there something else that's driving that?","evidence_gemma_new":"expect cash flow 2025","evidence_llama_3_3":"expect cash flow 2025","evidence_qwen_3_30b":"expect cash flow 2025","gemma_new_max":4000000000.0,"gemma_new_min":4000000000.0,"llama_3_3_max":4000000000.0,"llama_3_3_min":4000000000.0,"qwen_3_30b_max":4000000000.0,"qwen_3_30b_min":4000000000.0}
{"symbol":"CVX","year":2023,"quarter":3,"date":"2025-FY","chunk_id":12,"sub_chunk_id":0,"centroid_label":"cash flow","agreed_value":5000000000.0,"count":2,"chunk":"Joshua Silverstein: Yes. Thanks. Good morning, guys. On the TCO, you had mentioned that in 2025, you expect the cash flow to be about $1 billion lower, around $4 billion versus $5 billion previously. Is that just due to the project delays? Or is there higher cost estimates now in that, so it would be lower distributions from there? Or is there something else that's driving that?","evidence_gemma_new":null,"evidence_llama_3_3":"expect cash flow 2025","evidence_qwen_3_30b":"cash flow 2025","gemma_new_max":null,"gemma_new_min":null,"llama_3_3_max":5000000000.0,"llama_3_3_min":5000000000.0,"qwen_3_30b_max":5000000000.0,"qwen_3_30b_min":5000000000.0}
{"symbol":"CVX","year":2023,"quarter":1,"date":"2023-Q1","chunk_id":3,"sub_chunk_id":0,"centroid_label":"earnings","agreed_value":6600000000.0,"count":2,"chunk":"Pierre Breber : Thanks, Mike. We reported first quarter earnings of $6.6 billion, or $3.46 per share. Adjusted earnings were $6.7 billion, or $3.55 per share. We had one special item this quarter related to changes in the energy profits tax in the United Kingdom. The appendix of this presentation contains a reconciliation of non-GAAP measures. Strong operating cash flow enabled Chevron to deliver on its financial priorities during the quarter a 6% per share dividend increase, higher CapEx within budget, net debt ratio under 5%, share repurchases at the top of our prior guidance range. Adjusted first quarter earnings were up over $200 million versus last year despite 20% lower oil prices. Adjusted Upstream earnings were lower mainly due to realizations and adjusted downstream earnings increased primarily due to higher refining margins. Both segments benefitted from a change in timing effects. Higher interest income and lower accruals for stock-based compensation decreased all other charges. Compared with last quarter, adjusted earnings were down $1.1 billion. Adjusted Upstream earnings decreased primarily due to lower realizations. Other items include the absence of last quarter\u2019s dividend withholding tax at TCO and lower exploration and transportation expenses. Adjusted Downstream earnings were essentially flat. Lower margins and volumes were offset with higher chemical earnings and other favorable items including trading results. Lower accruals for incentive-based compensation decreased All Other net charges and also benefitted the operating segments First quarter oil equivalent production was down about 80,000 barrels per day from last year due to the expiration of a contract in Thailand and the sale of our Eagle Ford asset. This was partially offset by growth in the Permian. We expect 2023 production growth in the Permian to be back-end loaded as wells put on production, POPs increase across both operated and non-operated areas. We expect our royalty production to be roughly flat. As discussed during our Investor Day, we\u2019re increasing activity in New Mexico. All four company-operated rigs added this year, one each quarter, will be in New Mexico, leading to more POPs expected in the second half of the year and into 2024. We also continue to be active in Texas. Last year, about half of our company-operated production was in the Delaware Basin in Texas with the remainder split about evenly between the Midland Basin and New Mexico. More than half of our non-operated production is with five major operators in large, contiguous positions in core areas with multiyear development programs, where we have visibility to capex and execution schedules and a royalty benefit compared to the operator. The balance is with dozens of other operators where we have a little less visibility, but similar predictability from greater diversification. More than half of our royalty production comes from the Pecos River area in the heart of the Delaware Basin. The balance of our royalty position is in the remainder of the Delaware and Midland Basins, also with well-known operators. In summary, Chevron has a large, diverse position in the Permian with a unique royalty advantage where we learn from our own operations and from others. Now, looking ahead. In the second quarter, we expect planned turnarounds at Gorgon and in the Gulf of Mexico along with downtime at a FSO in Thailand and a number of planned refinery turnarounds. Also, we expect share buybacks to increase to a $17.5 billion annual rate. In summary, 1Q was another quarter with strong financial results, continued capital discipline, and a steady return of cash to shareholders. We\u2019re confident that consistent and straightforward management, through commodity cycles, will create value for stakeholders. Back to you, Jake.","evidence_gemma_new":"earnings first quarter","evidence_llama_3_3":null,"evidence_qwen_3_30b":"earnings first quarter","gemma_new_max":6600000000.0,"gemma_new_min":6600000000.0,"llama_3_3_max":null,"llama_3_3_min":null,"qwen_3_30b_max":6600000000.0,"qwen_3_30b_min":6600000000.0}
{"symbol":"CVX","year":2024,"quarter":1,"date":"2024-Q1","chunk_id":3,"sub_chunk_id":0,"centroid_label":"earnings","agreed_value":5500000000.0,"count":2,"chunk":"We continue to make significant progress on FGP and expect to have additional major equipment ready for operations in the third quarter. Costs and scheduled guidance remain unchanged with FGP expected to start up in the first half of 2025. Now over to Eimear to discuss the financials. Eimear Bonner: Thanks, Mike. We delivered another quarter of strong earnings, ROCE and cash returns to shareholders. We reported first quarter earnings of $5.5 billion or $2.97 per share. Adjusted earnings were $5.4 billion or $2.93 per share. Cash flow from operations was impacted by an approximate $300 million international upstream ARO settlement payment and $200 million for the expansion of the retail marketing network. We also had a working capital build during the quarter consistent with historical trends. Chevron delivered on all of its financial priorities during the quarter, an 8% increase in dividend per share; organic CapEx aligned with ratable budget inclusive of progress payments for new LNG ships; sustained net debt in the single digits while issuing commercial paper to manage timing of affiliate dividends and working capital; and share repurchases of $3 billion. Adjusted earnings were lower by $1 billion versus last quarter. Adjusted upstream earnings were down due to lower realization and liquids liftings. Partly offsetting were favorable tax impacts. Adjusted downstream earnings were lower mainly due to timing effects associated with the rising commodity price environment. All other decreased on higher employee costs and an unfavorable swing in tax items. Adjusted first quarter earnings were down $1.3 billion versus last year. Adjusted upstream earnings were down modestly. Higher liftings were more than offset by lower natural gas realizations. DD&A was higher due to the PDC acquisition and Permian growth. Adjusted downstream earnings were lower mainly due to lower refining margins and timing effects. Worldwide oil equivalent production was the highest first quarter in our company's history. Production was up over 12% from last year, including an increase of 35% in the United States largely due to the PDC Energy acquisition and organic growth in the Permian Basin. Looking ahead to the second quarter, we have planned turnarounds at TCO and several Gulf of Mexico assets. Following another strong quarter in the Permian, production is trending better than our previous guidance, and we now expect first half production to be down less than 2% from the fourth quarter. Impacts from refinery turnarounds are mostly driven by El Segundo and Richmond. We anticipate higher affiliate dividends in the second quarter largely from TCO. With the start-up of WPMP, we expect TCO's DD&A to increase by approximately $400 million over the remainder of the year. Share repurchases are restricted under SEC regulations through the Hess shareholder vote, after which we intend to resume buybacks at the $17.5 billion annual rate. We've published a new document with our consolidated guidance and sensitivities that will be updated quarterly and posted to our website the month prior to our earnings call. Back to you, Jake.","evidence_gemma_new":"earnings first quarter","evidence_llama_3_3":"earnings first quarter","evidence_qwen_3_30b":null,"gemma_new_max":5500000000.0,"gemma_new_min":5500000000.0,"llama_3_3_max":5500000000.0,"llama_3_3_min":5500000000.0,"qwen_3_30b_max":null,"qwen_3_30b_min":null}
{"symbol":"CVX","year":2024,"quarter":2,"date":"2024-Q2","chunk_id":3,"sub_chunk_id":0,"centroid_label":"earnings","agreed_value":4400000000.0,"count":2,"chunk":"Eimear P. Bonner: Thanks, Mike. We reported second quarter earnings of $4.4 billion, or $2.43 per share. Adjusted earnings were $4.7 billion, or $2.55 per share. Results in the quarter were impacted by downtime in Upstream that weighed on realizations, higher exploration expense and Downstream turnaround timing. Organic CapEx was $3.9 billion, in-line with budget. Our balance sheet remains one of the strongest in the industry, ending the quarter with a net debt ratio of 10.7%. Chevron generated solid cash flow of nearly $9 billion excluding working capital. Working capital lowered cash flow due to tax true-up payments outside the U.S. and a build in inventories. We expect about half of the working capital to unwind in the second half of this year, primarily in the fourth quarter. We again demonstrated our consistent approach to returning cash to shareholders with $6 billion of dividends and share repurchases. Adjusted earnings were lower by $700 million versus last quarter. Adjusted Upstream earnings were down mainly due to lower liftings, higher exploration expense and absence of favorable tax impacts from the prior quarter. Partly offsetting were higher realizations. Adjusted Downstream earnings were down due to lower margins and reduced capture rates, this was partially offset by timing effects. All Other decreased mainly due to a tax true-up. Versus last year, adjusted second quarter earnings were down $1.1 billion. Adjusted Upstream earnings were flat, higher realizations and liftings were mostly offset with higher DD&A due to the PDC acquisition and the absence of prior year favorable tax items. Adjusted Downstream earnings decreased mainly due to lower refining margins and higher turnaround and transportation OpEx. The Other segment was down primarily due to state tax adjustments. Worldwide oil equivalent production was up over 11% from last year due to the acquisition of PDC Energy and significant growth in the Permian Basin. Now, looking ahead. The third quarter will have heavier than usual maintenance with several turnarounds at Upstream assets, including TCO and Gorgon. Impacts from refinery turnarounds are mostly driven by El Segundo. There will be a one-time payment related to discontinued operations of around $600 million. We anticipate affiliate dividends to be around $1 billion this quarter. With the project in Kazakhstan nearing completion, we expect quarterly dividends from TCO moving forward. As a reminder, Chevron pays a 15% withholding tax on dividends from TCO which lowers both earnings and cash flow. Share repurchases are targeting the $17.5 billion annual guidance rate. Asset sales in the second half of the year are expected to be aligned with full-year guidance. Back to you, Mike.","evidence_gemma_new":"earnings second quarter","evidence_llama_3_3":null,"evidence_qwen_3_30b":"earnings second quarter","gemma_new_max":4400000000.0,"gemma_new_min":4400000000.0,"llama_3_3_max":null,"llama_3_3_min":null,"qwen_3_30b_max":4400000000.0,"qwen_3_30b_min":4400000000.0}
{"symbol":"CVX","year":2024,"quarter":3,"date":"2024-Q3","chunk_id":3,"sub_chunk_id":0,"centroid_label":"earnings","agreed_value":4500000000.0,"count":2,"chunk":"Eimear Bonner: Thanks, Mike. We reported third-quarter earnings of $4.5 billion or $2.48 per share. Adjusted earnings were $4.5 billion or $2.51 per share. Organic CapEx was $4 billion for the quarter, in line with our budget. Our balance sheet remains one of the strongest in the industry, ending the quarter with a net debt ratio under 12%. Cash flow in the third quarter was the highest for the year despite lower oil prices. Working capital decreased by $1.4 billion on lower inventory levels. Share repurchases were a record $4.7 billion at the top end of our quarterly guidance range. Our financial priorities are unchanged, and we plan to use our strong balance sheet towards shareholders consistently through commodity cycles. Compared with last quarter, adjusted earnings were down about $150 million. Adjusted upstream earnings were down mainly due to lower realization and high dividend at TCO, partly offset by higher lifting. Adjusted downstream earnings increased primarily due to favorable timing effects and higher US volumes. This was partially offset by lower US refining margins. Adjusted third-quarter earnings were down $1.2 billion versus the same quarter last year. Adjusted upstream earnings were flat. Lower liquids realizations and higher DD&A were mostly offset by higher liftings and timing effects. Adjusted downstream earnings decreased mainly due to lower refining margins. All other was down primarily due to interest expense. Third-quarter oil equivalent production was up around 75,000 barrels per day from last quarter. Strong production in the Permian, primarily in our company-operated New Mexico assets, was the main driver. We expect full-year average production growth to finish at the top end of our guidance range of 4% to 7%. Costs always matter in a commodity business. We have a track record of managing unit costs well below inflation while successfully integrating several acquisitions. Higher returns require competitive costs and safe and reliable operations. Executing turnarounds on budget and on schedule is a key performance driver, and we have delivered outstanding performance in 2024. Our teams have collaborated across upstream and downstream to standardize the approach to these complex maintenance events, increasing the days our facilities are online and lowering unit costs. While we anticipate significant volume growth in the years ahead, we also expect to deliver $2 to $3 billion in structural cost reductions by the end of 2026. These cost savings will largely come from optimizing the portfolio, leveraging technology to enhance productivity, and changing how and where work is performed, including the expanded use of global capability centers. Now looking ahead, in the fourth quarter, Upstream will have downtime, which is expected to be split between US and international operations. Impacts to production from divestments are expected to be around 45,000 barrels of oil equivalent per day for the quarter. Downstream, we will have higher planned maintenance primarily at El Segundo and Pasadena. We will also have a shutdown at the Pasadena refinery, enabling the light tight oil expansion to come online. We anticipate affiliate dividends to be around $1 billion this quarter. Share repurchases are expected to be between $4 and $4.75 billion in the fourth quarter, unchanged from prior guidance. Proceeds from asset sales are expected to be about $8 billion before taxes. Back to you, Jake.","evidence_gemma_new":"earnings third-quarter","evidence_llama_3_3":null,"evidence_qwen_3_30b":"earnings third-quarter","gemma_new_max":4500000000.0,"gemma_new_min":4500000000.0,"llama_3_3_max":null,"llama_3_3_min":null,"qwen_3_30b_max":4500000000.0,"qwen_3_30b_min":4500000000.0}
{"symbol":"CVX","year":2024,"quarter":3,"date":"2024-Q3","chunk_id":3,"sub_chunk_id":0,"centroid_label":"earnings","agreed_value":2.48,"count":2,"chunk":"Eimear Bonner: Thanks, Mike. We reported third-quarter earnings of $4.5 billion or $2.48 per share. Adjusted earnings were $4.5 billion or $2.51 per share. Organic CapEx was $4 billion for the quarter, in line with our budget. Our balance sheet remains one of the strongest in the industry, ending the quarter with a net debt ratio under 12%. Cash flow in the third quarter was the highest for the year despite lower oil prices. Working capital decreased by $1.4 billion on lower inventory levels. Share repurchases were a record $4.7 billion at the top end of our quarterly guidance range. Our financial priorities are unchanged, and we plan to use our strong balance sheet towards shareholders consistently through commodity cycles. Compared with last quarter, adjusted earnings were down about $150 million. Adjusted upstream earnings were down mainly due to lower realization and high dividend at TCO, partly offset by higher lifting. Adjusted downstream earnings increased primarily due to favorable timing effects and higher US volumes. This was partially offset by lower US refining margins. Adjusted third-quarter earnings were down $1.2 billion versus the same quarter last year. Adjusted upstream earnings were flat. Lower liquids realizations and higher DD&A were mostly offset by higher liftings and timing effects. Adjusted downstream earnings decreased mainly due to lower refining margins. All other was down primarily due to interest expense. Third-quarter oil equivalent production was up around 75,000 barrels per day from last quarter. Strong production in the Permian, primarily in our company-operated New Mexico assets, was the main driver. We expect full-year average production growth to finish at the top end of our guidance range of 4% to 7%. Costs always matter in a commodity business. We have a track record of managing unit costs well below inflation while successfully integrating several acquisitions. Higher returns require competitive costs and safe and reliable operations. Executing turnarounds on budget and on schedule is a key performance driver, and we have delivered outstanding performance in 2024. Our teams have collaborated across upstream and downstream to standardize the approach to these complex maintenance events, increasing the days our facilities are online and lowering unit costs. While we anticipate significant volume growth in the years ahead, we also expect to deliver $2 to $3 billion in structural cost reductions by the end of 2026. These cost savings will largely come from optimizing the portfolio, leveraging technology to enhance productivity, and changing how and where work is performed, including the expanded use of global capability centers. Now looking ahead, in the fourth quarter, Upstream will have downtime, which is expected to be split between US and international operations. Impacts to production from divestments are expected to be around 45,000 barrels of oil equivalent per day for the quarter. Downstream, we will have higher planned maintenance primarily at El Segundo and Pasadena. We will also have a shutdown at the Pasadena refinery, enabling the light tight oil expansion to come online. We anticipate affiliate dividends to be around $1 billion this quarter. Share repurchases are expected to be between $4 and $4.75 billion in the fourth quarter, unchanged from prior guidance. Proceeds from asset sales are expected to be about $8 billion before taxes. Back to you, Jake.","evidence_gemma_new":"earnings third-quarter","evidence_llama_3_3":null,"evidence_qwen_3_30b":"earnings per share third-quarter","gemma_new_max":2.48,"gemma_new_min":2.48,"llama_3_3_max":null,"llama_3_3_min":null,"qwen_3_30b_max":2.48,"qwen_3_30b_min":2.48}
{"symbol":"CVX","year":2023,"quarter":2,"date":"2023-Q2","chunk_id":26,"sub_chunk_id":0,"centroid_label":"free cash flow","agreed_value":20000000000.0,"count":3,"chunk":"Biraj Borkhataria: My first one is on portfolio concentration. So at your Analyst Day, you talked about just over $20 billion of free cash flow at $60 a barrel. And looking through today's slides, roughly half of that in the medium term will come from the Permian plus TCO. So I understand that you want every dollar to go to the highest level of return, which is completely sensible. But I was wondering if you can talk about portfolio concentration because it is quite unusual for a super major to have that level of concentration in terms of free cash flow. So how do you think about portfolio diversity? And is this something you're actively trying to address going forward? And I've got a follow-up on a different topic.","evidence_gemma_new":"free cash flow","evidence_llama_3_3":"free cash flow","evidence_qwen_3_30b":"free cash flow $20 billion $60 a barrel","gemma_new_max":20000000000.0,"gemma_new_min":20000000000.0,"llama_3_3_max":20000000000.0,"llama_3_3_min":20000000000.0,"qwen_3_30b_max":20000000000.0,"qwen_3_30b_min":20000000000.0}
{"symbol":"CVX","year":2023,"quarter":2,"date":"2023-Q2","chunk_id":28,"sub_chunk_id":0,"centroid_label":"free cash flow","agreed_value":0.1,"count":2,"chunk":"Pierre Breber: If I can just build off that and go to the return of capital question that Neil asked and that's what gives us confidence not only on the buyback, but on the track record of dividend growth. So, we guided to 10% annual free cash flow coming from all those businesses. Some are holding cash constant, some are growing cash flow that Mike covered. And that goes to leading dividend growth where we've grown the dividend over the last five years at rates double our closest peer and much higher than others, and where we have a buyback that is nearly 6% of our shares outstanding annually. Our business is built for $50. So part of the confidence in our ability \u2013 currently, if you look at our breakeven and adjust for working capital this quarter, if you look at the last four quarters, it's actually probably a little bit lower than that with the strong refining margins that we've been seeing. So we're built for lower prices. Free cash flow is going to grow from this base. That should give investors confidence in our ability to continue to grow the dividend at leading rates and to maintain buybacks at also very high rates.","evidence_gemma_new":"annual free cash flow","evidence_llama_3_3":"annual free cash flow","evidence_qwen_3_30b":null,"gemma_new_max":0.1,"gemma_new_min":0.1,"llama_3_3_max":0.1,"llama_3_3_min":0.1,"qwen_3_30b_max":null,"qwen_3_30b_min":null}
{"symbol":"CVX","year":2024,"quarter":1,"date":"2024-Q1","chunk_id":41,"sub_chunk_id":0,"centroid_label":"free cash flow","agreed_value":1000000000.0,"count":3,"chunk":"Eimear Bonner: Yes. It's been about 9 months since we closed with PDC Energy. We're really pleased with the progress that we're seeing, the synergies. On the CapEx side, to date, we've captured $500 million, which is $100 million more than what we had initially guided to. We're also seeing capture on the OpEx side as well. So we're nearing $100 million there. The teams are continuing to integrate. We're bringing the best of both companies together and building a development playbook focused on optimizing returns in the basin. We're realizing strong free cash flow from these assets. So we're ahead of pace for the incremental $1 billion in annual free cash flow that we guided to.","evidence_gemma_new":"annual free cash flow","evidence_llama_3_3":"free cash flow guided to","evidence_qwen_3_30b":"free cash flow incremental $1 billion annual guided to","gemma_new_max":1000000000.0,"gemma_new_min":1000000000.0,"llama_3_3_max":1000000000.0,"llama_3_3_min":1000000000.0,"qwen_3_30b_max":1000000000.0,"qwen_3_30b_min":1000000000.0}
{"symbol":"CVX","year":2024,"quarter":2,"date":"2024-Q2","chunk_id":11,"sub_chunk_id":0,"centroid_label":"free cash flow","agreed_value":0.1,"count":2,"chunk":"Michael K. Wirth: Yes. You could do something else if you wanted to. This is the transaction, that\u2019s the right transaction for us. And so, we\u2019re very focused on it, Alastair, and we\u2019ve made good progress with the shareholder vote, we\u2019re steadily marching along with the FTC, and I\u2019ve already mentioned the timeline on the arbitration. So, it\u2019s sometimes good things you have to work for and this will take a little bit more time than we had anticipated, but we remain confident in the outcome. And, as I tried to cover in our prepared remarks, we\u2019ve got a really strong queue of organic growth opportunities in flight right now. We didn\u2019t mention the Eastern Med, which is another one. So, we\u2019ve got projects in multiple regions of the world that are poised to deliver growth over the next three years, absent it we be at 10% growth in free cash flow, we\u2019ve got projects coming on in numerous basins in the world and in our chemicals business as well. So, we\u2019re really focused on that and creating value there. But, if another opportunity were to present itself that were compelling, we\u2019re certainly in a position to consider it. Thanks for the question.","evidence_gemma_new":"free cash flow next three years","evidence_llama_3_3":"free cash flow next three years","evidence_qwen_3_30b":null,"gemma_new_max":0.1,"gemma_new_min":0.1,"llama_3_3_max":0.1,"llama_3_3_min":0.1,"qwen_3_30b_max":null,"qwen_3_30b_min":null}
{"symbol":"CVX","year":2023,"quarter":2,"date":"2025-FY","chunk_id":2,"sub_chunk_id":0,"centroid_label":"free cash flow","agreed_value":5000000000.0,"count":3,"chunk":"Michael Wirth: Thank you, Jake. And thank you, everyone, for joining us today. Earlier this week, we announced several senior leadership changes, including Pierre's plans to retire next year, along with second quarter performance highlights. In a few minutes, Pierre will share more details on our financials, which included return on capital employed greater than 12% for the eighth consecutive quarter and another quarterly record in shareholder distributions of more than $7 billion. At TCO, we're making good progress with commissioning and pre-start up activities, including introducing fuel gas to new facilities. In the third quarter, we expect mechanical completion for the Future Growth Project and to complete a major turnaround. Cost and schedule guidance is unchanged. Conversion of the field from high-pressure to low-pressure is expected to begin late this year and FGP is on track to start up by mid-next year. We have unused contingency which gives us confidence that we'll complete the project within the total budget. After completion of these projects, TCO is expected to deliver production greater than 1 million barrels of oil equivalent per day and generate about $5 billion of free cash flow \u2013 Chevron share at $60 Brent \u2013 in 2025. Chevron's Permian production set another record in the second quarter, about 5% above the previous quarterly high. We expect next quarter's production to be roughly flat before growing again in the fourth quarter, on track with our full-year guidance. Early 2023 well performance in our company-operated assets, in all three areas, is consistent with our plans. In New Mexico, we've put on production at 10 wells. Before year-end, we expect to POP an additional 30 wells with higher expected production rates. As a reminder, about half of Chevron's Permian production is company operated, with the balance non-operated and royalty production. While short-term well performance is one measure, we're focused on maximizing value from our unique, large resource base that is expected to deliver decades of high-return production. Over the next five years, we expect to develop over 2,200 net new wells, growing production while delivering return on capital employed near 30% and free cash flow greater than $5 billion in 2027 at $60 Brent. Longer term, we've identified well over 6,000 economic net well locations that support a plateau greater than 1 million barrels per day through the end of next decade. Our deep resource inventory and advantaged royalty position allow us to optimize our development plans for high returns, incorporating learnings and technology improvements, as we expect to deliver strong free cash flow for years to come. In the deepwater Gulf of Mexico, the floating production unit at Anchor is on location and the project remains on track for first oil next year. We continue to build on our exploration success and were awarded the highest number of blocks in the most recent lease round. In the Eastern Med, our Aphrodite appraisal well in Cyprus met our expectations and we've submitted a development concept to the government. At Leviathan, we're expanding pipeline capacity to nearly 1.4 BCF per day. We expect to close our acquisition of PDC Energy in August after their shareholder vote next week. Our teams are working on integration plans and we look forward to welcoming PDC's talented employees to Chevron. Now, over to Pierre.","evidence_gemma_new":"free cash flow 2025","evidence_llama_3_3":"free cash flow 2025","evidence_qwen_3_30b":"clean year free cash flow 2025","gemma_new_max":5000000000.0,"gemma_new_min":5000000000.0,"llama_3_3_max":5000000000.0,"llama_3_3_min":5000000000.0,"qwen_3_30b_max":5000000000.0,"qwen_3_30b_min":5000000000.0}
{"symbol":"CVX","year":2024,"quarter":1,"date":"2026-FY","chunk_id":8,"sub_chunk_id":0,"centroid_label":"free cash flow","agreed_value":5000000000.0,"count":2,"chunk":"Eimear Bonner: Yes. Thanks, Mike. Yes, Sam, well, after years of investing, as the project starts up over the next couple of years, we do expect the CapEx profile to continue to decline, and that will enable free cash flow over the next couple of years to grow. With WPMP, it will keep the plants full. So this will allow IBS business to generate significant cash, and that will be available for distribution. With the second phase of the project then next year in '25, TCOs free cash flow is going to grow even further because with that phase of the project, we get incremental production. So what does this mean for Chevron? Well, we expect $4 billion of free cash flow in 2025 and $5 billion in 2026. This is a $60 Brent. This will flow to us through a combination of dividends, so you'll see this come through cash flow from operations and loan repayments, which will flow through cash for investing. So we do expect dividends this year. We have guidance -- affiliate guidance to dividends for 2024. But we've also included in the deck today the outlook for affiliate dividends for the second quarter, $1 billion to $1.5 billion. And a significant portion of that is an assumption around TCO.","evidence_gemma_new":"free cash flow 2026","evidence_llama_3_3":"expect free cash flow 2026","evidence_qwen_3_30b":null,"gemma_new_max":5000000000.0,"gemma_new_min":5000000000.0,"llama_3_3_max":5000000000.0,"llama_3_3_min":5000000000.0,"qwen_3_30b_max":null,"qwen_3_30b_min":null}
{"symbol":"CVX","year":2024,"quarter":4,"date":"2026-FY","chunk_id":4,"sub_chunk_id":0,"centroid_label":"free cash flow","agreed_value":10000000000.0,"count":2,"chunk":"Mike Wirth : Thanks, Eimear. Chevron is in a strong position today, with near-term catalysts that are expected to drive the company to even better performance in 2025 and 2026. Our objective is unchanged, to safely deliver higher returns and lower carbon. In the next two years, we plan to achieve industry leading free cash flow growth; further strengthen our portfolio, including the expected completion of the Hess transaction in the third quarter; advance opportunities in renewable fuels, hydrogen, CCUS and power; while maintaining cost and capital discipline. It's important to note that the guidance provided today exclude tests, we continue to be very confident in assets position in arbitration. We plan to host our next Investor day with the longer term outlook after we close the transaction later this year. Chevron is poised for industry-leading free cash flow growth. We expect to add $10 billion of annual free cash flow in 2026, led by growth and advantaged upstream assets. With additional production from FGP and a further reduction in affiliate CapEx, we expect a sustained increase in distributions from TCO going forward. In the Gulf of America, where we produce some of the highest margin barrels in our portfolio, we'll have additional growth as Anchor and Whale continue to ramp up and we bring Balimore online. And in the Permian, we're focused on operational efficiency and free cash flow, positioning the asset as a core cash generator for the company. We're also executing plans to deliver stronger results across the entire portfolio, including cash savings from our targeted $2 billion to $3 billion reduction in structural costs and improved returns in our Downstream and Chemicals businesses. At TCO, we achieved first oil at FGP last week. This important milestone is the result of consistent, disciplined execution by the project and operations teams. Our focus remains on a safe and reliable ramp-up of the plant. FGP adds 260,000 barrels of oil production capacity to the existing plants. We expect to achieve full production rates 1 million barrels of oil equivalent per day \u2013 within the next three months. At $70 Brent, expected free cash flow to Chevron is $5 billion in 2025 and $6 billion in 2026. This includes fixed loan repayments and quarterly dividends. We are proud to bring this large, complex project online for the benefit of our shareholders and the Republic of Kazakhstan and look forward to future collaboration to maximize the long-term value of the Tengiz reservoir. In 2024, execution efficiencies led to strong well and base business performance, helping us achieve another record for Permian production. Over the last five years, we\u2019ve delivered compound annual growth of 16% while continuing to capture efficiencies. Through optimized pad and drilling designs, and completions improvements like triple frac, we\u2019re able to achieve these production levels with 40% fewer company-operated rigs than our plans included just a few years ago. We expect production to reach one million barrels of oil equivalent per day in 2025, and plan to moderate growth and CapEx to drive predictable and durable free cash flow generation. Our Permian portfolio delivers superior returns due to royalty advantaged acreage across all of the sub-basins, which add to both the top and bottom-line. We\u2019re continuing to develop and deploy technologies to enhance efficiencies and recoveries. We\u2019re leveraging our strengths in advanced chemicals and stimulation and scaling them across our shale and tight portfolio. Our world-class upstream assets provide further growth opportunities that are poised to deliver value for decades. In the Gulf of America, where we expect to grow production to 300,000 barrels of oil equivalent a day, we achieved first oil at the Anchor and Whale projects, and Ballymore is expected to come online around the middle of this year. In Western Australia, our discovered resource has the ability to keep our LNG plants full for decades. Last month, we announced an asset swap that will increase our equity in Wheatstone, which enables long-term asset development and monetization. In West Africa, we have a queue of low-cost developments that are expected to sustain production for many years. We recently extended leases in Nigeria and had a shelf discovery that will tie back to existing infrastructure. In Angola, we achieved first gas at the Sanha Lean Gas Connection project, and we plan to bring online our South N\u2019dola development later this year. In the Eastern Mediterranean, we have a significant resource position we\u2019re continuing to unlock. Expansion projects at Leviathan and Tamar are expected to come online through the end of the decade. Turning to our Downstream and Chemicals businesses, we\u2019re focused on operating reliably and efficiently while executing competitive projects that extend our value chains and capture market synergies. The recently completed expansion at our Pasadena refinery enhances our integrated value chain by running more Permian crude, supplying more products to our regional marketing business and expanding synergies with the Pascagoula refinery. Our petrochemical growth projects in the U.S. and Qatar are more than 50% complete and are expected to contribute to further cash flow growth beyond 2026. Both projects are feedstock advantaged, have competitive cost structures and are well-positioned to serve growing demand. We have several projects in our New Energies business that are expected to achieve key milestones in the next two years. In renewable fuels, we\u2019re in final commissioning of the Geismar renewable diesel expansion and at our Bunge joint venture, construction continues at the new oilseed processing plant in Louisiana, increasing our exposure across the renewable fuels value chain. We\u2019re working towards start-up of the ACES green hydrogen project in Utah later this year, which will produce hydrogen from water and excess renewable power and store it underground for dispatchable lower carbon power generation. The project is one of the world\u2019s largest hydrogen storage projects and will have over 200 megawatts of electrolyzer capacity. In carbon capture and storage, Bayou Bend is working towards a FEED decision for the offshore project, and we\u2019re also developing plans to capture and store CO2 from our Pascagoula refinery. Earlier this week we announced plans to jointly develop scalable, reliable power solutions to support growing energy demand from U.S. data centers. Chevron is positioned to participate in this growth and generate competitive returns through integration with our U.S. natural gas business; Experience in building and operating nearly five gigawatts of reliable, behind-themeter power; and Expertise in technologies that can help provide a pathway to reduce GHG emissions. We've secured slot reservations to purchase seven natural gas fired turbines from GE Vernova with deliveries beginning late 2026, and we\u2019re advancing site selection and engineering work while engaging customers. We look forward to sharing more as our plans develop. I\u2019ll hand it back to Eimear to close out our guidance for 2025 and 2026.","evidence_gemma_new":"annual free cash flow 2026","evidence_llama_3_3":"expect annual free cash flow 2026","evidence_qwen_3_30b":null,"gemma_new_max":10000000000.0,"gemma_new_min":10000000000.0,"llama_3_3_max":10000000000.0,"llama_3_3_min":10000000000.0,"qwen_3_30b_max":null,"qwen_3_30b_min":null}
{"symbol":"CVX","year":2024,"quarter":4,"date":"2026-FY","chunk_id":31,"sub_chunk_id":0,"centroid_label":"free cash flow","agreed_value":6000000000.0,"count":2,"chunk":"Eimear Bonner : Jason, yes, I can talk to that. The free cash flow inflection that's coming with -- which is actually upon us now that the asset has started up. So we shared in the slide, $5 billion for 2025 and $6 billion for 2026. What's contributing there is obviously the production but also the affiliate CapEx is coming down. So with the project completing and the affiliate CapEx is reducing significantly. And so that's resulted in the free cash flow. We also anticipate that as the plant gets [indiscernible] and the safe and reliable start-up completes that they'll be focused as well on operational OpEx and optimizing that, given the new base business of 1 million barrels a day that they will have. So that can move around a little bit during the year. But generally, we have OpEx coming down there, too. So those are two things that are contributing to the free cash flow in addition to the production.","evidence_gemma_new":"free cash flow 2026","evidence_llama_3_3":"free cash flow 2026","evidence_qwen_3_30b":null,"gemma_new_max":6000000000.0,"gemma_new_min":6000000000.0,"llama_3_3_max":6000000000.0,"llama_3_3_min":6000000000.0,"qwen_3_30b_max":null,"qwen_3_30b_min":null}
{"symbol":"CVX","year":2023,"quarter":1,"date":"2023-Q1","chunk_id":85,"sub_chunk_id":0,"centroid_label":"production","agreed_value":100000.0,"count":3,"chunk":"Mike Wirth : Is -- there a maximum -- I mean it's limited by our position there and the entities that we're involved in and what our portion of that production that we're entitled to market is. We're currently seeing about 100,000 barrels a day of production up from about 50 when the license term changed. That actually go up further this year, maybe another 50% if everything goes well. The rude comes to the U.S., and we're finding a market for the crude. And yeah, it's a six-month license from OPEC, and we have to bear that in mind. So that's why we are proceeding, as you said, which is we've got some past receivables that are being paid from some of these proceeds and there's a lot of relatively straightforward workover and other activity that can help bring production up at -- without major capital commitments. And so that's the current model. We'll see how things unfold and hopefully pointed in a good direction, but it's been a bit of an up and down situation, and we have to -- we just have to take this one step at a time.","evidence_gemma_new":"production","evidence_llama_3_3":"production","evidence_qwen_3_30b":"production current","gemma_new_max":100000.0,"gemma_new_min":100000.0,"llama_3_3_max":100000.0,"llama_3_3_min":100000.0,"qwen_3_30b_max":100000.0,"qwen_3_30b_min":100000.0}
{"symbol":"CVX","year":2023,"quarter":3,"date":"2023-Q3","chunk_id":28,"sub_chunk_id":0,"centroid_label":"production","agreed_value":0.02,"count":2,"chunk":"Michael Wirth: Yes. And I might give you some kind of broader commentary on Permian performance as well. Overall, production was down just a little bit, about 2% in the quarter. That was entirely driven by non-operated joint ventures. And primarily, a couple of the operators had delays in putting wells online due to frac hits and some other factors. There was also some takeaway capacity on the Permian highway that \u2013 constraints that resulted in some unplanned downtime. So co-op production in the third quarter was essentially flat from the prior quarter, which is what we had guided to. And that's despite having some wells that were choked back due to some surface constraints. In one development area, we're seeing higher-than-expected CO2 content in the gas and others in the area are as well. So we've got third-party handling and process facilities that are constrained by that and can't handle all the CO2. So we're choking wells back. There's a new federal regulation that I won't get into the details. But it affects how we meter production. And it prevents co-mingling. And so we've got wells choked back until we can get some new meters in place. And then we've got some produced water limits that have come into effect in some areas. So there's a number of things that are not indicative of well performance, but other surface realities that we're working on our way through that are impacting co-op production a little bit. In New Mexico, you're right. We got more POPs in the second half of the year. We've POP-ed about 60% of the planned wells in New Mexico. So the balance, almost half, come on in the fourth quarter. POP performance has generally been strong. Some of those wells are hit by the facility constraints that I've talked about. But overall, well performance is aligned with our type curve expectations. I think when we get to the fourth quarter call, Biraj, we'll come back with some more detail on type curves. We'll have enough of them online. We'll have enough months that we can start to give you some of the same kind of evidence that we did last quarter to show you the performance.","evidence_gemma_new":"production the quarter","evidence_llama_3_3":"production the quarter","evidence_qwen_3_30b":null,"gemma_new_max":0.02,"gemma_new_min":0.02,"llama_3_3_max":0.02,"llama_3_3_min":0.02,"qwen_3_30b_max":null,"qwen_3_30b_min":null}
{"symbol":"CVX","year":2024,"quarter":1,"date":"2024-Q1","chunk_id":2,"sub_chunk_id":0,"centroid_label":"production","agreed_value":0.1,"count":2,"chunk":"Michael Wirth: Thanks, Jake, and thank you, everyone, for joining us today. Chevron continues to deliver strong operational performance, maintain cost and capital discipline and consistently return cash to shareholders. First quarter marked 9 consecutive quarters with adjusted earnings over $5 billion and adjusted ROCE above 12%. During the quarter, we also returned $6 billion in cash to shareholders, the eighth straight quarter over $5 billion. We also grew production more than 10% from the same quarter last year and announced final investment decisions to grow our renewable fuels and hydrogen businesses. Earlier this month, we announced our third Future Energy Fund focused on venture investments in lower-carbon technologies. The merger with Hess is advancing, and we intend to certify substantial compliance with the FTC second request in the coming weeks. We believe that a preemption right does not apply to this transaction and are confident this will be affirmed in arbitration. We expect the proxy for the Hess shareholder vote to be mailed in April with a special meeting date in late May. This strategic combination creates a premier energy company with world-class capabilities and assets to deliver superior shareholder value, and we look forward to bringing the 2 companies together. At TCO, we had achieved start-up of WPMP this month with the first inlet separator and pressure boost compressor in service and conversion of the first metering station to low pressure now complete. Later this quarter, we expect a second pressure boost compressor online and a third gas turbine generator to provide power to the Tengiz grid. Metering station conversions are planned through the remainder of the year as additional pressure boost compressors start up, keeping the existing plants full around planned SGI and KTL turnarounds.","evidence_gemma_new":"production same quarter last year","evidence_llama_3_3":"Chevron production First quarter","evidence_qwen_3_30b":null,"gemma_new_max":0.1,"gemma_new_min":0.1,"llama_3_3_max":0.1,"llama_3_3_min":0.1,"qwen_3_30b_max":null,"qwen_3_30b_min":null}
{"symbol":"CVX","year":2024,"quarter":3,"date":"2024-Q3","chunk_id":2,"sub_chunk_id":0,"centroid_label":"production","agreed_value":400000.0,"count":2,"chunk":"Michael Wirth: Alright. Thanks, Jake. This quarter, Chevron delivered strong financial and operational results, returned record cash to shareholders, and achieved project milestones that are expected to deliver production and cash flow growth over the coming years. We continue to see strong performance in the Permian, executed major turnarounds at TCO and Gorgon ahead of schedule. Worldwide production increased by 7% from the prior year and set a third-quarter record. We started up the high-pressure anchor project and began water injection to boost production at the Jack Saint Melo and Tahedi fields. These projects, combined with additional project startups through 2025, are expected to grow Gulf of Mexico production to 300,000 barrels per day by 2026. We have expanded our CO2 storage portfolio, adding over two million acres offshore Western Australia. In September, the FTC completed its review of the company's merger with Hess. We also recently announced several asset sales as part of our ongoing portfolio optimization efforts. This quarter marked the one-year anniversary of the PDC Energia Position. We have successfully combined the two companies, taking best practices from both and applying them across our shale and tight portfolio. We have exceeded our guidance of $500 million in combined capital and cost synergies by more than 30% and have delivered more than $1 billion in incremental free cash flow since acquiring PDC. Jurn's well performance is 40% better than the DJ Basin average, and we continue to optimize development plans. We have advantaged inventory, with around 75% of locations at a breakeven below $50 per barrel. We expect to hold production at a plateau around 400,000 barrels of oil equivalent per day through the end of the decade. Our operations in Colorado are among the lowest carbon intensity in the industry, benefiting from tankless production facilities that lower greenhouse gas emissions by 90% compared to older designs. Where possible, we utilize grid-powered rigs that reduce more than 60% of our on-site greenhouse gas emissions from drilling. At TCO, the team continues to deliver consistent progress on project milestones. All four Pressure Boost facilities are now online and operating with high reliability. All production is flowing through these facilities, which allows optimization of existing plants and enabled the highest daily production in the field's 31 years of service. Remaining metering stations are all under conversion, and we are confident in the incremental well capacity that will feed FGP. We have initiated final leak testing for the wet sour gas compressors and are preparing the crude processing systems for operation. Complex commissioning activities will continue over the coming months, leading into initial startup activities in the first quarter of 2025. We continue to divest non-core positions at significant value. We have announced asset sales in Canada, Alaska, and Congo, which will contribute before-tax proceeds of approximately $8 billion pending regulatory approvals. We expect to close these transactions in the fourth quarter. In Canada, we received a compelling offer for our Kaybob Duvernay shale position and non-operated interest in the Athabasca Oil Sands project. Both are good assets, and we have a long history there, but they are a better fit for a reputable counterparty and an attractive deal value for Chevron. Now, I will turn it over to Eimear to discuss the financials.","evidence_gemma_new":"production end of the decade","evidence_llama_3_3":"production end of the decade","evidence_qwen_3_30b":null,"gemma_new_max":400000.0,"gemma_new_min":400000.0,"llama_3_3_max":400000.0,"llama_3_3_min":400000.0,"qwen_3_30b_max":null,"qwen_3_30b_min":null}
{"symbol":"CVX","year":2024,"quarter":4,"date":"2024-Q4","chunk_id":45,"sub_chunk_id":0,"centroid_label":"production","agreed_value":0.25,"count":2,"chunk":"Mike Wirth : Yeah. So first of all, we're really pleased to see tensions diminishing in the region and hopefully a lasting piece for the people there. The headline is there's no real change to our plans, John. We expect projects that are in execution at both Tamar and Leviathan to come online by the end of the year or into early 2026. There was a pipelay vessel that was demobilized during kind of the height of the conflict. That vessel will be remobilized here during the first half of this year to complete the work that it had underway. So the next leg of growth after those two projects would be a Leviathan expansion. We're currently in feed for that. It would be a significant growth in production for Leviathan. Still work to be done but that's a project that would come online towards the end of this decade and continue to step up the production on that asset significantly. So despite all the activity we've seen in that region, we'll see production up by 25% over the next two years and something closer to 50% by 2030.","evidence_gemma_new":"production next two years","evidence_llama_3_3":"expect production next two years","evidence_qwen_3_30b":null,"gemma_new_max":0.25,"gemma_new_min":0.25,"llama_3_3_max":0.25,"llama_3_3_min":0.25,"qwen_3_30b_max":null,"qwen_3_30b_min":null}
{"symbol":"CVX","year":2024,"quarter":4,"date":"2025-FY","chunk_id":4,"sub_chunk_id":0,"centroid_label":"production","agreed_value":1000000.0,"count":2,"chunk":"Mike Wirth : Thanks, Eimear. Chevron is in a strong position today, with near-term catalysts that are expected to drive the company to even better performance in 2025 and 2026. Our objective is unchanged, to safely deliver higher returns and lower carbon. In the next two years, we plan to achieve industry leading free cash flow growth; further strengthen our portfolio, including the expected completion of the Hess transaction in the third quarter; advance opportunities in renewable fuels, hydrogen, CCUS and power; while maintaining cost and capital discipline. It's important to note that the guidance provided today exclude tests, we continue to be very confident in assets position in arbitration. We plan to host our next Investor day with the longer term outlook after we close the transaction later this year. Chevron is poised for industry-leading free cash flow growth. We expect to add $10 billion of annual free cash flow in 2026, led by growth and advantaged upstream assets. With additional production from FGP and a further reduction in affiliate CapEx, we expect a sustained increase in distributions from TCO going forward. In the Gulf of America, where we produce some of the highest margin barrels in our portfolio, we'll have additional growth as Anchor and Whale continue to ramp up and we bring Balimore online. And in the Permian, we're focused on operational efficiency and free cash flow, positioning the asset as a core cash generator for the company. We're also executing plans to deliver stronger results across the entire portfolio, including cash savings from our targeted $2 billion to $3 billion reduction in structural costs and improved returns in our Downstream and Chemicals businesses. At TCO, we achieved first oil at FGP last week. This important milestone is the result of consistent, disciplined execution by the project and operations teams. Our focus remains on a safe and reliable ramp-up of the plant. FGP adds 260,000 barrels of oil production capacity to the existing plants. We expect to achieve full production rates 1 million barrels of oil equivalent per day \u2013 within the next three months. At $70 Brent, expected free cash flow to Chevron is $5 billion in 2025 and $6 billion in 2026. This includes fixed loan repayments and quarterly dividends. We are proud to bring this large, complex project online for the benefit of our shareholders and the Republic of Kazakhstan and look forward to future collaboration to maximize the long-term value of the Tengiz reservoir. In 2024, execution efficiencies led to strong well and base business performance, helping us achieve another record for Permian production. Over the last five years, we\u2019ve delivered compound annual growth of 16% while continuing to capture efficiencies. Through optimized pad and drilling designs, and completions improvements like triple frac, we\u2019re able to achieve these production levels with 40% fewer company-operated rigs than our plans included just a few years ago. We expect production to reach one million barrels of oil equivalent per day in 2025, and plan to moderate growth and CapEx to drive predictable and durable free cash flow generation. Our Permian portfolio delivers superior returns due to royalty advantaged acreage across all of the sub-basins, which add to both the top and bottom-line. We\u2019re continuing to develop and deploy technologies to enhance efficiencies and recoveries. We\u2019re leveraging our strengths in advanced chemicals and stimulation and scaling them across our shale and tight portfolio. Our world-class upstream assets provide further growth opportunities that are poised to deliver value for decades. In the Gulf of America, where we expect to grow production to 300,000 barrels of oil equivalent a day, we achieved first oil at the Anchor and Whale projects, and Ballymore is expected to come online around the middle of this year. In Western Australia, our discovered resource has the ability to keep our LNG plants full for decades. Last month, we announced an asset swap that will increase our equity in Wheatstone, which enables long-term asset development and monetization. In West Africa, we have a queue of low-cost developments that are expected to sustain production for many years. We recently extended leases in Nigeria and had a shelf discovery that will tie back to existing infrastructure. In Angola, we achieved first gas at the Sanha Lean Gas Connection project, and we plan to bring online our South N\u2019dola development later this year. In the Eastern Mediterranean, we have a significant resource position we\u2019re continuing to unlock. Expansion projects at Leviathan and Tamar are expected to come online through the end of the decade. Turning to our Downstream and Chemicals businesses, we\u2019re focused on operating reliably and efficiently while executing competitive projects that extend our value chains and capture market synergies. The recently completed expansion at our Pasadena refinery enhances our integrated value chain by running more Permian crude, supplying more products to our regional marketing business and expanding synergies with the Pascagoula refinery. Our petrochemical growth projects in the U.S. and Qatar are more than 50% complete and are expected to contribute to further cash flow growth beyond 2026. Both projects are feedstock advantaged, have competitive cost structures and are well-positioned to serve growing demand. We have several projects in our New Energies business that are expected to achieve key milestones in the next two years. In renewable fuels, we\u2019re in final commissioning of the Geismar renewable diesel expansion and at our Bunge joint venture, construction continues at the new oilseed processing plant in Louisiana, increasing our exposure across the renewable fuels value chain. We\u2019re working towards start-up of the ACES green hydrogen project in Utah later this year, which will produce hydrogen from water and excess renewable power and store it underground for dispatchable lower carbon power generation. The project is one of the world\u2019s largest hydrogen storage projects and will have over 200 megawatts of electrolyzer capacity. In carbon capture and storage, Bayou Bend is working towards a FEED decision for the offshore project, and we\u2019re also developing plans to capture and store CO2 from our Pascagoula refinery. Earlier this week we announced plans to jointly develop scalable, reliable power solutions to support growing energy demand from U.S. data centers. Chevron is positioned to participate in this growth and generate competitive returns through integration with our U.S. natural gas business; Experience in building and operating nearly five gigawatts of reliable, behind-themeter power; and Expertise in technologies that can help provide a pathway to reduce GHG emissions. We've secured slot reservations to purchase seven natural gas fired turbines from GE Vernova with deliveries beginning late 2026, and we\u2019re advancing site selection and engineering work while engaging customers. We look forward to sharing more as our plans develop. I\u2019ll hand it back to Eimear to close out our guidance for 2025 and 2026.","evidence_gemma_new":"production 2025","evidence_llama_3_3":"production 2025","evidence_qwen_3_30b":null,"gemma_new_max":1000000.0,"gemma_new_min":1000000.0,"llama_3_3_max":1000000.0,"llama_3_3_min":1000000.0,"qwen_3_30b_max":null,"qwen_3_30b_min":null}
{"symbol":"CVX","year":2024,"quarter":4,"date":"2026-FY","chunk_id":5,"sub_chunk_id":0,"centroid_label":"production","agreed_value":0.06,"count":2,"chunk":"Eimear Bonner : Thanks, Mike. In a cyclical commodity business, capital and cost discipline always matter. Chevron\u2019s CapEx and affiliate capex budgets reflect our commitment to capital efficiency while funding a balanced portfolio of short and long-cycle investments. Organic CapEx is expected to remain within our $14-16 billion guidance range. As spend in the Permian and Gulf of America comes down, capital will flow elsewhere within the portfolio to support continued growth. Affiliate c is expected to trend down further as investments at TCO and CPChem come online. We\u2019re targeting $2 billion to $3 billion in structural cost reductions by the end of 2026. Work is underway to deliver these savings through asset sales; scaling technology solutions, such as expanding the use of robotics; and changing how we work to improve efficiencies. We\u2019re executing our plans to lower absolute costs while delivering growth. Last year, worldwide oil equivalent production was the highest in our history, benefitting from a larger position in the DJ Basin following our acquisition of PDC Energy and nearly 18% growth in the Permian. Excluding asset sales, we expect production to grow around 6% annually through 2026. In 2025, we expect growth to be weighted towards the second half of the year as key projects in Tengiz and the Gulf of America come online and ramp throughout the year. We\u2019re excited about the year ahead. We\u2019re focused on delivering growth across advantaged assets and value chains while reducing absolute costs; starting up profitable New Energies projects and advancing new behind-the-meter power solutions; and continuing to reward our shareholders with higher returns and a differentiated value proposition. I\u2019ll now hand it off to Jake.","evidence_gemma_new":"expect production annually through 2026","evidence_llama_3_3":"production 6% 2026","evidence_qwen_3_30b":null,"gemma_new_max":0.06,"gemma_new_min":0.06,"llama_3_3_max":0.06,"llama_3_3_min":0.06,"qwen_3_30b_max":null,"qwen_3_30b_min":null}
{"symbol":"CVX","year":2024,"quarter":2,"date":"2026-FY","chunk_id":2,"sub_chunk_id":0,"centroid_label":"production","agreed_value":300000.0,"count":2,"chunk":"Michael K. Wirth: Thanks, Jake. This quarter, Chevron delivered strong production and extended our track record of consistent shareholder returns. Production increased by more than 11% from the prior year and included a new quarterly record in the Permian. Over the past two years we\u2019ve returned over $50 billion to shareholders, approximately 18% of our market cap. We continued to advance growth opportunities in our traditional and new energies businesses through adding new exploration plays in West Africa and South America, achieving key milestones on the ACES green hydrogen project and commissioning of the Geismar renewable diesel plant expansion, which is expected to come online by the end of the year. The merger with Hess achieved a successful shareholder vote, and we now expect the FTC review process to conclude in the third quarter. The arbitration panel addressing the Stabroek JOA has set a hearing for next year. Hess had requested an earlier hearing, but the panel ultimately sets the schedule. We remain confident this is a straightforward matter and the outcome will affirm a preemption right does not apply. We\u2019re committed to the merger and look forward to combining the two companies. In the Gulf of Mexico, we\u2019re leveraging our deepwater expertise with plans to deliver high cash-margin, low carbon intensity production growth. First oil at Anchor is imminent, delivering the industry\u2019s first deepwater 20,000 pound development. The project is on-track to come in under budget while deploying multiple breakthrough technologies. After Anchor, three more projects are scheduled to come online and we expect production to grow to 300,000 barrels a day by 2026. Our developments have become more capital-efficient, unit drilling costs have come down and facility designs are optimized for high returns. As one of the largest leaseholders in the basin, we\u2019re well-positioned for the future with leading technology capability and attractive exploration opportunities near existing infrastructure and in frontier areas. In the Permian, base business performance continues to improve, with higher reliability and lower decline rates. Development activity continues to get more efficient. We\u2019re one of the first operators to deploy triple-frac, delivering cost reductions of more than 10% and shortening completion times by 25% where applied. In the Delaware Basin, company-operated well performance continues to improve as we optimize development strategies. In the Midland Basin, early well results are lower versus last year, our program in the second half of the year is more heavily weighted to development targets that we expect to perform better. With strong momentum in our operated portfolio and predictable results from our non-operated and royalty acreage, we now expect full-year production growth of about 15% and fourth quarter production to average around 940,000 barrels per day. At TCO, cost and schedule guidance is unchanged, with FGP expected to start up in the first half of 2025. We continue to bring major equipment online and complete key project milestones. Eight out of 21 metering stations have been converted to low pressure. Three Pressure Boost Facility compressors are in operation. A third gas turbine generator is in service. The first 3GP process system is ready for operation, and we completed the SGI turnaround on time and under budget. The wells converted to low pressure are meeting expectations and the Pressure Boost Facilities are operating with high reliability. Over the next two quarters, we\u2019ll continue converting the field to low pressure while further commissioning key equipment for FGP. The project team remains focused on completing the project safely and starting up reliably to deliver value to Kazakhstan, TCO and shareholders. This quarter was a little light due to some operational and other discrete items that impacted results, but I remain confident we\u2019re well-positioned to deliver on long-term earnings and cash flow growth. Now, I\u2019ll turn it over to Eimear to cover the details.","evidence_gemma_new":"production 2026","evidence_llama_3_3":null,"evidence_qwen_3_30b":"production growth 300,000 barrels a day by 2026","gemma_new_max":300000.0,"gemma_new_min":300000.0,"llama_3_3_max":null,"llama_3_3_min":null,"qwen_3_30b_max":300000.0,"qwen_3_30b_min":300000.0}
{"symbol":"CVX","year":2024,"quarter":4,"date":"2030-FY","chunk_id":45,"sub_chunk_id":0,"centroid_label":"production","agreed_value":0.5,"count":2,"chunk":"Mike Wirth : Yeah. So first of all, we're really pleased to see tensions diminishing in the region and hopefully a lasting piece for the people there. The headline is there's no real change to our plans, John. We expect projects that are in execution at both Tamar and Leviathan to come online by the end of the year or into early 2026. There was a pipelay vessel that was demobilized during kind of the height of the conflict. That vessel will be remobilized here during the first half of this year to complete the work that it had underway. So the next leg of growth after those two projects would be a Leviathan expansion. We're currently in feed for that. It would be a significant growth in production for Leviathan. Still work to be done but that's a project that would come online towards the end of this decade and continue to step up the production on that asset significantly. So despite all the activity we've seen in that region, we'll see production up by 25% over the next two years and something closer to 50% by 2030.","evidence_gemma_new":"production 2030","evidence_llama_3_3":"production 2030","evidence_qwen_3_30b":null,"gemma_new_max":0.5,"gemma_new_min":0.5,"llama_3_3_max":0.5,"llama_3_3_min":0.5,"qwen_3_30b_max":null,"qwen_3_30b_min":null}
{"symbol":"CVX","year":2023,"quarter":3,"date":"2023-Q3","chunk_id":3,"sub_chunk_id":0,"centroid_label":"share repurchase","agreed_value":3000000000.0,"count":2,"chunk":"Pierre Breber: Thanks, Mike. We delivered another quarter with strong earnings, cash flow and ROCE. This quarter's results included two special items: a one-time tax benefit of $560 million in Nigeria and pension settlement costs of $40 million. Foreign currency benefits were $285 million. The appendix of this presentation contains a reconciliation of non-GAAP measures. Organic CapEx this quarter included about $200 million for PDC legacy operations after closing in August. Our balance sheet remains strong, ending the quarter with a net debt ratio in the single digits. Another quarter of solid cash flow enabled us to deliver on all of our financial priorities. Despite restrictions during the PDC transaction, we were able to repurchase well over $3 billion in Chevron shares. Cash used to reduce debt was primarily related to PDC's higher cost borrowing. Cash balances ended the quarter near $6 billion, a little above what's needed to run our businesses. Adjusted third quarter earnings were down $5.1 billion versus the same quarter last year. Adjusted upstream earnings were lower mainly due to realizations and negative timing effects. Higher unfavorable discrete tax charges and exploration expenses were partly offset by lower DD&A, Venezuela cash recoveries and other favorable items. Adjusted downstream earnings decreased primarily due to a negative swing in timing effects and lower marketing margins. Compared with last quarter, adjusted earnings were down just over $50 million. Adjusted upstream earnings were roughly flat as higher prices and volumes were offset by unfavorable discrete tax charges and negative timing effects due to the rise in prices. DD&A and OpEx were both higher in part due to the addition of PDC legacy assets for two months in the quarter. Adjusted downstream earnings increased primarily due to higher refining margins, partially offset by unfavorable timing effects. All other was down on unfavorable tax items and decreased interest income in line with lower cash balances. Third quarter oil equivalent production was up 6% over last quarter primarily due to two months of legacy PDC production. This was partly offset by a planned turnaround at TCO and pitstop at Gorgon. The Permian, excluding legacy PDC, was down 2% due to lower non-operated production; company-operated production was flat with the second quarter. Now, looking ahead. Our fourth quarter estimate for turnarounds and downtime includes approximately 30,000 barrels of oil equivalent per day for Tamar. We anticipate affiliate dividends in the fourth quarter to be largely from TCO. As a reminder, we record a 15% withholding tax on TCO dividends. Due to the pending transaction with Hess, share repurchases will be restricted pursuant to SEC regulations. Chevron expects share repurchases in the fourth quarter to be around $3 billion plus or minus 20%, depending primarily on the timing of the Hess definitive proxy statement mailing. In summary, our actions and performance show that Chevron keeps delivering strong results. With a strategy that remains clear and consistent, we are well positioned to deliver value to our shareholders in any environment. With that, I'll turn it back to Jake.","evidence_gemma_new":"share repurchases","evidence_llama_3_3":"share repurchase","evidence_qwen_3_30b":null,"gemma_new_max":3000000000.0,"gemma_new_min":3000000000.0,"llama_3_3_max":3000000000.0,"llama_3_3_min":3000000000.0,"qwen_3_30b_max":null,"qwen_3_30b_min":null}
{"symbol":"CVX","year":2023,"quarter":3,"date":"2023-Q3","chunk_id":85,"sub_chunk_id":0,"centroid_label":"share repurchase","agreed_value":15000000000.0,"count":3,"chunk":"Michael Wirth: Yes. We've had a very consistent set of financial priorities for many, many years. The first of which is to sustain and grow the dividend, 36 consecutive years now of per share dividend payouts for the last five years has been a 6% CAGR. Actually, I think the last 15 years have been a 6% CAGR and an announcement of 8% early next year, subject to Board approval. I think there's a strong track record there you can expect to continue. Second is to be disciplined in organic reinvestment into the business to grow those cash flows. You can be confident that we will continue to be disciplined in that reinvestment to drive returns and value. Number three is a strong balance sheet. Pierre mentioned we're single-digit net debt ratio today. That's lower than we have guided to over time. And so over time, you can expect the balance sheet to move back towards the 20% to 25% gearing range that we've identified as where we're comfortable through the cycle. And then the fourth are the share repurchases. And we've got a range now of $10 billion to $20 billion. We're at the high end of that range when we close the transaction with Hess with $17.5 billion annually. Today, that's 5% to 6% of our float each and every year. And we've \u2013 I won't go through the details, but we've indicated we can sustain that in a lower price environment. And that's where the lower end of that range would apply. And certainly in a higher price environment, which is where we find ourselves today, we're at the high end of that range. And so we would expect to be consistent, predictable and to sustain that. I mean, consistent and durable being the keywords here. So I think the broad framework is likely to remain unchanged. And I think our behavior will be very consistent with what you've come to see from us historically.","evidence_gemma_new":"share repurchases","evidence_llama_3_3":"share repurchases $10 billion $20 billion","evidence_qwen_3_30b":"share repurchases $10 billion to $20 billion","gemma_new_max":15000000000.0,"gemma_new_min":15000000000.0,"llama_3_3_max":15000000000.0,"llama_3_3_min":15000000000.0,"qwen_3_30b_max":15000000000.0,"qwen_3_30b_min":15000000000.0}
{"symbol":"CVX","year":2024,"quarter":1,"date":"2024-Q1","chunk_id":3,"sub_chunk_id":0,"centroid_label":"share repurchase","agreed_value":3000000000.0,"count":2,"chunk":"We continue to make significant progress on FGP and expect to have additional major equipment ready for operations in the third quarter. Costs and scheduled guidance remain unchanged with FGP expected to start up in the first half of 2025. Now over to Eimear to discuss the financials. Eimear Bonner: Thanks, Mike. We delivered another quarter of strong earnings, ROCE and cash returns to shareholders. We reported first quarter earnings of $5.5 billion or $2.97 per share. Adjusted earnings were $5.4 billion or $2.93 per share. Cash flow from operations was impacted by an approximate $300 million international upstream ARO settlement payment and $200 million for the expansion of the retail marketing network. We also had a working capital build during the quarter consistent with historical trends. Chevron delivered on all of its financial priorities during the quarter, an 8% increase in dividend per share; organic CapEx aligned with ratable budget inclusive of progress payments for new LNG ships; sustained net debt in the single digits while issuing commercial paper to manage timing of affiliate dividends and working capital; and share repurchases of $3 billion. Adjusted earnings were lower by $1 billion versus last quarter. Adjusted upstream earnings were down due to lower realization and liquids liftings. Partly offsetting were favorable tax impacts. Adjusted downstream earnings were lower mainly due to timing effects associated with the rising commodity price environment. All other decreased on higher employee costs and an unfavorable swing in tax items. Adjusted first quarter earnings were down $1.3 billion versus last year. Adjusted upstream earnings were down modestly. Higher liftings were more than offset by lower natural gas realizations. DD&A was higher due to the PDC acquisition and Permian growth. Adjusted downstream earnings were lower mainly due to lower refining margins and timing effects. Worldwide oil equivalent production was the highest first quarter in our company's history. Production was up over 12% from last year, including an increase of 35% in the United States largely due to the PDC Energy acquisition and organic growth in the Permian Basin. Looking ahead to the second quarter, we have planned turnarounds at TCO and several Gulf of Mexico assets. Following another strong quarter in the Permian, production is trending better than our previous guidance, and we now expect first half production to be down less than 2% from the fourth quarter. Impacts from refinery turnarounds are mostly driven by El Segundo and Richmond. We anticipate higher affiliate dividends in the second quarter largely from TCO. With the start-up of WPMP, we expect TCO's DD&A to increase by approximately $400 million over the remainder of the year. Share repurchases are restricted under SEC regulations through the Hess shareholder vote, after which we intend to resume buybacks at the $17.5 billion annual rate. We've published a new document with our consolidated guidance and sensitivities that will be updated quarterly and posted to our website the month prior to our earnings call. Back to you, Jake.","evidence_gemma_new":"share repurchases","evidence_llama_3_3":"share repurchases first quarter","evidence_qwen_3_30b":null,"gemma_new_max":3000000000.0,"gemma_new_min":3000000000.0,"llama_3_3_max":3000000000.0,"llama_3_3_min":3000000000.0,"qwen_3_30b_max":null,"qwen_3_30b_min":null}
{"symbol":"CVX","year":2024,"quarter":1,"date":"2024-Q1","chunk_id":3,"sub_chunk_id":0,"centroid_label":"share repurchase","agreed_value":17500000000.0,"count":2,"chunk":"We continue to make significant progress on FGP and expect to have additional major equipment ready for operations in the third quarter. Costs and scheduled guidance remain unchanged with FGP expected to start up in the first half of 2025. Now over to Eimear to discuss the financials. Eimear Bonner: Thanks, Mike. We delivered another quarter of strong earnings, ROCE and cash returns to shareholders. We reported first quarter earnings of $5.5 billion or $2.97 per share. Adjusted earnings were $5.4 billion or $2.93 per share. Cash flow from operations was impacted by an approximate $300 million international upstream ARO settlement payment and $200 million for the expansion of the retail marketing network. We also had a working capital build during the quarter consistent with historical trends. Chevron delivered on all of its financial priorities during the quarter, an 8% increase in dividend per share; organic CapEx aligned with ratable budget inclusive of progress payments for new LNG ships; sustained net debt in the single digits while issuing commercial paper to manage timing of affiliate dividends and working capital; and share repurchases of $3 billion. Adjusted earnings were lower by $1 billion versus last quarter. Adjusted upstream earnings were down due to lower realization and liquids liftings. Partly offsetting were favorable tax impacts. Adjusted downstream earnings were lower mainly due to timing effects associated with the rising commodity price environment. All other decreased on higher employee costs and an unfavorable swing in tax items. Adjusted first quarter earnings were down $1.3 billion versus last year. Adjusted upstream earnings were down modestly. Higher liftings were more than offset by lower natural gas realizations. DD&A was higher due to the PDC acquisition and Permian growth. Adjusted downstream earnings were lower mainly due to lower refining margins and timing effects. Worldwide oil equivalent production was the highest first quarter in our company's history. Production was up over 12% from last year, including an increase of 35% in the United States largely due to the PDC Energy acquisition and organic growth in the Permian Basin. Looking ahead to the second quarter, we have planned turnarounds at TCO and several Gulf of Mexico assets. Following another strong quarter in the Permian, production is trending better than our previous guidance, and we now expect first half production to be down less than 2% from the fourth quarter. Impacts from refinery turnarounds are mostly driven by El Segundo and Richmond. We anticipate higher affiliate dividends in the second quarter largely from TCO. With the start-up of WPMP, we expect TCO's DD&A to increase by approximately $400 million over the remainder of the year. Share repurchases are restricted under SEC regulations through the Hess shareholder vote, after which we intend to resume buybacks at the $17.5 billion annual rate. We've published a new document with our consolidated guidance and sensitivities that will be updated quarterly and posted to our website the month prior to our earnings call. Back to you, Jake.","evidence_gemma_new":"share repurchases annual rate","evidence_llama_3_3":"share repurchases annual rate","evidence_qwen_3_30b":null,"gemma_new_max":17500000000.0,"gemma_new_min":17500000000.0,"llama_3_3_max":17500000000.0,"llama_3_3_min":17500000000.0,"qwen_3_30b_max":null,"qwen_3_30b_min":null}
{"symbol":"CVX","year":2024,"quarter":2,"date":"2024-Q2","chunk_id":3,"sub_chunk_id":0,"centroid_label":"share repurchase","agreed_value":17500000000.0,"count":2,"chunk":"Eimear P. Bonner: Thanks, Mike. We reported second quarter earnings of $4.4 billion, or $2.43 per share. Adjusted earnings were $4.7 billion, or $2.55 per share. Results in the quarter were impacted by downtime in Upstream that weighed on realizations, higher exploration expense and Downstream turnaround timing. Organic CapEx was $3.9 billion, in-line with budget. Our balance sheet remains one of the strongest in the industry, ending the quarter with a net debt ratio of 10.7%. Chevron generated solid cash flow of nearly $9 billion excluding working capital. Working capital lowered cash flow due to tax true-up payments outside the U.S. and a build in inventories. We expect about half of the working capital to unwind in the second half of this year, primarily in the fourth quarter. We again demonstrated our consistent approach to returning cash to shareholders with $6 billion of dividends and share repurchases. Adjusted earnings were lower by $700 million versus last quarter. Adjusted Upstream earnings were down mainly due to lower liftings, higher exploration expense and absence of favorable tax impacts from the prior quarter. Partly offsetting were higher realizations. Adjusted Downstream earnings were down due to lower margins and reduced capture rates, this was partially offset by timing effects. All Other decreased mainly due to a tax true-up. Versus last year, adjusted second quarter earnings were down $1.1 billion. Adjusted Upstream earnings were flat, higher realizations and liftings were mostly offset with higher DD&A due to the PDC acquisition and the absence of prior year favorable tax items. Adjusted Downstream earnings decreased mainly due to lower refining margins and higher turnaround and transportation OpEx. The Other segment was down primarily due to state tax adjustments. Worldwide oil equivalent production was up over 11% from last year due to the acquisition of PDC Energy and significant growth in the Permian Basin. Now, looking ahead. The third quarter will have heavier than usual maintenance with several turnarounds at Upstream assets, including TCO and Gorgon. Impacts from refinery turnarounds are mostly driven by El Segundo. There will be a one-time payment related to discontinued operations of around $600 million. We anticipate affiliate dividends to be around $1 billion this quarter. With the project in Kazakhstan nearing completion, we expect quarterly dividends from TCO moving forward. As a reminder, Chevron pays a 15% withholding tax on dividends from TCO which lowers both earnings and cash flow. Share repurchases are targeting the $17.5 billion annual guidance rate. Asset sales in the second half of the year are expected to be aligned with full-year guidance. Back to you, Mike.","evidence_gemma_new":"share repurchases annual","evidence_llama_3_3":"share repurchases second half of the year","evidence_qwen_3_30b":null,"gemma_new_max":17500000000.0,"gemma_new_min":17500000000.0,"llama_3_3_max":17500000000.0,"llama_3_3_min":17500000000.0,"qwen_3_30b_max":null,"qwen_3_30b_min":null}
{"symbol":"CVX","year":2024,"quarter":3,"date":"2024-Q3","chunk_id":3,"sub_chunk_id":0,"centroid_label":"share repurchase","agreed_value":4700000000.0,"count":3,"chunk":"Eimear Bonner: Thanks, Mike. We reported third-quarter earnings of $4.5 billion or $2.48 per share. Adjusted earnings were $4.5 billion or $2.51 per share. Organic CapEx was $4 billion for the quarter, in line with our budget. Our balance sheet remains one of the strongest in the industry, ending the quarter with a net debt ratio under 12%. Cash flow in the third quarter was the highest for the year despite lower oil prices. Working capital decreased by $1.4 billion on lower inventory levels. Share repurchases were a record $4.7 billion at the top end of our quarterly guidance range. Our financial priorities are unchanged, and we plan to use our strong balance sheet towards shareholders consistently through commodity cycles. Compared with last quarter, adjusted earnings were down about $150 million. Adjusted upstream earnings were down mainly due to lower realization and high dividend at TCO, partly offset by higher lifting. Adjusted downstream earnings increased primarily due to favorable timing effects and higher US volumes. This was partially offset by lower US refining margins. Adjusted third-quarter earnings were down $1.2 billion versus the same quarter last year. Adjusted upstream earnings were flat. Lower liquids realizations and higher DD&A were mostly offset by higher liftings and timing effects. Adjusted downstream earnings decreased mainly due to lower refining margins. All other was down primarily due to interest expense. Third-quarter oil equivalent production was up around 75,000 barrels per day from last quarter. Strong production in the Permian, primarily in our company-operated New Mexico assets, was the main driver. We expect full-year average production growth to finish at the top end of our guidance range of 4% to 7%. Costs always matter in a commodity business. We have a track record of managing unit costs well below inflation while successfully integrating several acquisitions. Higher returns require competitive costs and safe and reliable operations. Executing turnarounds on budget and on schedule is a key performance driver, and we have delivered outstanding performance in 2024. Our teams have collaborated across upstream and downstream to standardize the approach to these complex maintenance events, increasing the days our facilities are online and lowering unit costs. While we anticipate significant volume growth in the years ahead, we also expect to deliver $2 to $3 billion in structural cost reductions by the end of 2026. These cost savings will largely come from optimizing the portfolio, leveraging technology to enhance productivity, and changing how and where work is performed, including the expanded use of global capability centers. Now looking ahead, in the fourth quarter, Upstream will have downtime, which is expected to be split between US and international operations. Impacts to production from divestments are expected to be around 45,000 barrels of oil equivalent per day for the quarter. Downstream, we will have higher planned maintenance primarily at El Segundo and Pasadena. We will also have a shutdown at the Pasadena refinery, enabling the light tight oil expansion to come online. We anticipate affiliate dividends to be around $1 billion this quarter. Share repurchases are expected to be between $4 and $4.75 billion in the fourth quarter, unchanged from prior guidance. Proceeds from asset sales are expected to be about $8 billion before taxes. Back to you, Jake.","evidence_gemma_new":"Share repurchases","evidence_llama_3_3":"Share repurchases","evidence_qwen_3_30b":"share repurchases record","gemma_new_max":4700000000.0,"gemma_new_min":4700000000.0,"llama_3_3_max":4700000000.0,"llama_3_3_min":4700000000.0,"qwen_3_30b_max":4700000000.0,"qwen_3_30b_min":4700000000.0}
{"symbol":"CVX","year":2024,"quarter":3,"date":"2024-Q3","chunk_id":3,"sub_chunk_id":0,"centroid_label":"share repurchase","agreed_value":4375000000.0,"count":2,"chunk":"Eimear Bonner: Thanks, Mike. We reported third-quarter earnings of $4.5 billion or $2.48 per share. Adjusted earnings were $4.5 billion or $2.51 per share. Organic CapEx was $4 billion for the quarter, in line with our budget. Our balance sheet remains one of the strongest in the industry, ending the quarter with a net debt ratio under 12%. Cash flow in the third quarter was the highest for the year despite lower oil prices. Working capital decreased by $1.4 billion on lower inventory levels. Share repurchases were a record $4.7 billion at the top end of our quarterly guidance range. Our financial priorities are unchanged, and we plan to use our strong balance sheet towards shareholders consistently through commodity cycles. Compared with last quarter, adjusted earnings were down about $150 million. Adjusted upstream earnings were down mainly due to lower realization and high dividend at TCO, partly offset by higher lifting. Adjusted downstream earnings increased primarily due to favorable timing effects and higher US volumes. This was partially offset by lower US refining margins. Adjusted third-quarter earnings were down $1.2 billion versus the same quarter last year. Adjusted upstream earnings were flat. Lower liquids realizations and higher DD&A were mostly offset by higher liftings and timing effects. Adjusted downstream earnings decreased mainly due to lower refining margins. All other was down primarily due to interest expense. Third-quarter oil equivalent production was up around 75,000 barrels per day from last quarter. Strong production in the Permian, primarily in our company-operated New Mexico assets, was the main driver. We expect full-year average production growth to finish at the top end of our guidance range of 4% to 7%. Costs always matter in a commodity business. We have a track record of managing unit costs well below inflation while successfully integrating several acquisitions. Higher returns require competitive costs and safe and reliable operations. Executing turnarounds on budget and on schedule is a key performance driver, and we have delivered outstanding performance in 2024. Our teams have collaborated across upstream and downstream to standardize the approach to these complex maintenance events, increasing the days our facilities are online and lowering unit costs. While we anticipate significant volume growth in the years ahead, we also expect to deliver $2 to $3 billion in structural cost reductions by the end of 2026. These cost savings will largely come from optimizing the portfolio, leveraging technology to enhance productivity, and changing how and where work is performed, including the expanded use of global capability centers. Now looking ahead, in the fourth quarter, Upstream will have downtime, which is expected to be split between US and international operations. Impacts to production from divestments are expected to be around 45,000 barrels of oil equivalent per day for the quarter. Downstream, we will have higher planned maintenance primarily at El Segundo and Pasadena. We will also have a shutdown at the Pasadena refinery, enabling the light tight oil expansion to come online. We anticipate affiliate dividends to be around $1 billion this quarter. Share repurchases are expected to be between $4 and $4.75 billion in the fourth quarter, unchanged from prior guidance. Proceeds from asset sales are expected to be about $8 billion before taxes. Back to you, Jake.","evidence_gemma_new":"expected Share repurchases","evidence_llama_3_3":"Share repurchases","evidence_qwen_3_30b":null,"gemma_new_max":4375000000.0,"gemma_new_min":4375000000.0,"llama_3_3_max":4375000000.0,"llama_3_3_min":4375000000.0,"qwen_3_30b_max":null,"qwen_3_30b_min":null}
{"symbol":"DOW","year":2023,"quarter":3,"date":"2023-FY","chunk_id":3,"sub_chunk_id":0,"centroid_label":"1 billion","agreed_value":1000000000.0,"count":2,"chunk":"Howard Ungerleider: Thank you, Jim. We expect the challenging macroeconomic dynamics to continue through the fourth quarter, including sluggish industrial activity. Global Manufacturing PMI has declined for the 13 consecutive month in September. It also includes weak demand in Europe and a slower-than-expected recovery in China. While inflation continues to moderate, it remains at elevated levels, resulting in a continuation of a tighter monetary policy. In the U.S., we're seeing some mixed indicators as September manufacturing PMI improved to 49.8. Retail sales growth remains positive, while consumer confidence has declined for the last two months. In Europe, industrial and consumer demand remains weak despite sharply lower inflation. PMI has contracted for 15 consecutive months through September, and consumer confidence remains low. With that said, automotive demand is showing signs of resilience. In China, while manufacturing PMI remained in expansionary territory in September, China exports fell for the fifth straight month. Automotive sales and production are a bright spot, rising in August, both sequentially and over the prior year in September. Around the rest of the world, India's manufacturing PMI remains expansionary, while in Mexico, industrial production rose for more than 20 months in August. However, ASEAN manufacturing PMI contracted for the first time in two years in September. Against this macroeconomic backdrop, we will continue to take a disciplined approach to managing our operations while leveraging our diverse global portfolio and our cost-advantaged assets. Turning to Slide 6. Our commitment to financial and operational discipline continues to be reflected in the proactive actions we are implementing to lower our costs and maximize cash flow. We achieved $700 million in cost savings year-to-date and remain on track to deliver our $1 billion commitment in 2023. In addition, we are further enhancing our financial flexibility as we execute on our capital allocation priorities across the economic cycle. For example, we're implementing continued actions to improve our working capital to maximize cash flow. As a result, our cash conversion cycle has improved by approximately eight days from pre-COVID levels and we have unlocked approximately $600 million of cash from working capital in the third quarter. Since Spin, we have taken actions to strengthen our balance sheet, ensuring ample liquidity while reducing net debt and pension liabilities, and we are continuing to take actions to further derisk our pension plans. Now pension-funded status has greatly improved, driven primarily by changes in the discount rate and the $1 billion voluntary contribution we made in 2021. Our decision to freeze the U.S. deferred benefit plans at year-end '23 further reduced the pension liability. We expect to pursue additional derisking opportunities for our pension plans in the fourth quarter, including annuitization and risk transfer of some pension liabilities. If these transactions are executed, we expect to record a onetime noncash and nonoperating settlement charge in the range of $500 million to $1 billion in the fourth quarter of 2023. All in, our targeted actions have given us the ability to continue investing in growth while delivering more than 80% of operating income back to our shareholders, well above our 65% target. Turning to our outlook for the fourth quarter on Slide 7. In the Packaging & Specialty Plastics segment, industry data shows a continued decline in U.S. Gulf Coast inventory levels driven by resilient domestic demand and export market strength. Higher polyethylene prices and elevated oil to gas spreads continue to favor our cost advantaged footprint and are expected to generate $100 million tailwind in the quarter. Additionally, we expect a $25 million tailwind as we complete planned maintenance activity at our cracker in St. Charles, Louisiana. We also expect a $50 million headwind to equity earnings due to a planned turnaround at our joint venture in Thailand. In the Industrial Intermediates & Infrastructure segment, we expect seasonal demand increases in deicing fluid to offset seasonal volume declines in building and construction end markets. Additionally, we expect a headwind of $25 million due to elevated energy and feedstock costs, particularly in Europe impacting our polyurethanes and our construction chemicals businesses. In the Performance Materials & Coatings segment, we expect the current macroeconomic conditions to limit consumer discretionary spending in nonservice areas. We also expect margin pressure to continue in upstream siloxanes from competitive supply additions, which will result in a $25 million headwind. Additionally, the seasonal decline in building and construction demand is expected to contribute an approximately $50 million headwind in the quarter. All in, we expect fourth quarter earnings to be in line with the third quarter. Next, I'll turn it back to Jim.","evidence_gemma_new":"$1 billion 2023","evidence_llama_3_3":null,"evidence_qwen_3_30b":"cost savings $1 billion 2023","gemma_new_max":1000000000.0,"gemma_new_min":1000000000.0,"llama_3_3_max":null,"llama_3_3_min":null,"qwen_3_30b_max":1000000000.0,"qwen_3_30b_min":1000000000.0}
{"symbol":"DOW","year":2023,"quarter":2,"date":"2023-Q2","chunk_id":2,"sub_chunk_id":0,"centroid_label":"1 billion","agreed_value":1000000000.0,"count":2,"chunk":"Jim Fitterling: Thank you, Pankaj. Beginning on Slide 3, we continued to navigate a challenging macroeconomic environment with slow global growth in the second quarter. Despite lower year-over-year sales and earnings, Team Dow delivered sequential earnings improvement by executing on our financial and operational playbook. We leveraged our diverse portfolio to capitalize on gains in packaging and modestly higher seasonal demand in building and construction. This resulted in a sequential improvement in volume. In addition, we continue to implement our $1 billion of proactive and targeted cost savings actions delivering $250 million of savings in the quarter and $350 year to date. Net sales were $11.4 billion, down 27% versus the year ago period, reflecting lower demand and prices due to slower macroeconomic activity. Sales were down 4% sequentially, as volume gains were more than offset by lower local prices. Volume decreased 8% year-over-year, led by a 14% decline in Europe, the Middle East, Africa, and India, or EMEA. Volume was up 1% sequentially, driven by gains in Asia Pacific and Latin America, as well as in industrial intermediates and infrastructure and performance materials and coatings. Local price decreased 18% year-over-year and 5% sequentially due to lower demand on weak macroeconomic activity, as well as lower global raw material costs. Operating EBIT for the quarter was $885 million, down from $2.4 billion in the year ago period, primarily driven by lower local prices. Operating EBIT increased $177 million sequentially, driven by gains in packaging and specialty plastics. We generated cash flow from operations of more than $1.3 billion, up more than $800 million versus the prior quarter, driven by improved working capital. On a trailing 12 month basis, our cash flow conversion is 98%. Our strong financial position gives us the flexibility to continue to advance our long term strategic priorities, supported by our disciplined and balanced capital allocation strategy. In the quarter, we returned $743 million to shareholders through dividends and share repurchases. Year to date, we've returned nearly $1.4 billion. And our balance sheet remains healthy, supported by strong investment grade credit ratings. We also published our 2022 INtersections Report in June. The report once again received limited assurance by our external audit firm and showcases Dow's continued progress on our ambition to be the most innovative customer centric, inclusive and sustainable material science company in the world. Now turning to our operating segment performance on Slide 4. In the Packaging and Specialty Plastics segment, operating EBIT was $918 million compared to $1.4 billion in the year ago period. Local price declines were driven by lower global energy and feedstock costs, which in turn impacted polyethylene prices across all regions. Volume declines, primarily in EMEA, were driven by lower demand for olefins and aromatics. Sequentially operating EBIT improved by $276 million, driven by lower energy and feedstock costs. Moving to the Industrial Intermediates and Infrastructure segment, operating EBIT was a loss of $35 million, compared to earnings of 426 million in the year ago period. Results were driven by lower local prices and demand in both businesses. Volume declines were primarily driven by lower demand for consumer durables, building and construction, and industrial applications. Sequentially, operating EBIT was down $158 million due to lower local prices and increased planned maintenance turnaround activity. And in the Performance Materials and Coatings segment, operating EBIT was $66 million compared to $561 million in the year ago period. Local price decreases were driven primarily by declines for siloxanes and acrylic monomers. Volume was down on lower global demand for silicones and coatings applications. Sequentially, operating EBIT increased $31 million, driven primarily by seasonally higher volumes. Next, I'll turn it over to Howard to review our outlook and actions on Slide 5.","evidence_gemma_new":"$1 billion cost savings year to date","evidence_llama_3_3":null,"evidence_qwen_3_30b":"$1 billion annually","gemma_new_max":1000000000.0,"gemma_new_min":1000000000.0,"llama_3_3_max":null,"llama_3_3_min":null,"qwen_3_30b_max":1000000000.0,"qwen_3_30b_min":1000000000.0}
{"symbol":"DOW","year":2023,"quarter":3,"date":"2023-Q3","chunk_id":15,"sub_chunk_id":0,"centroid_label":"1 billion","agreed_value":1000000000.0,"count":2,"chunk":"Vincent Andrews: Thank you. And let me also echo the prior remarks and congratulations to you, Howard. Very exciting for you. If I could ask just looking at Slide 9 on the CapEx. I just want to make sure I understand -- I mean, obviously, we know where '23 is, it looks like '24 is going to go to that D&A line. And then that '25 to '27, it looks like there's quite a -- there's sort of a zone there. Could you speak to a little bit of maybe a range that you could give us to make sure we have that right in our models and sort of what would define it at the lower end or the upper end of the range? Because I see you do have Alberta at about $1 billion a year, but is it maybe going to be a bit chunkier in some of those years? Or just how should we be thinking about the cadence and the range of CapEx during that period of time.","evidence_gemma_new":"Alberta $1 billion","evidence_llama_3_3":null,"evidence_qwen_3_30b":"$1 billion since Spin","gemma_new_max":1000000000.0,"gemma_new_min":1000000000.0,"llama_3_3_max":null,"llama_3_3_min":null,"qwen_3_30b_max":1000000000.0,"qwen_3_30b_min":1000000000.0}
{"symbol":"DOW","year":2023,"quarter":4,"date":"2023-Q4","chunk_id":20,"sub_chunk_id":0,"centroid_label":"1 billion","agreed_value":1000000000.0,"count":2,"chunk":"Jim Fitterling: Sure. I'll take the cold snap, and then, Jeff, I'll have you take a look at the costs. Look, on the freeze, Jeff, I just want to go back, two years ago, this is the third consecutive year of freeze on the Gulf Coast. And we've improved plans every year to be able to be ready for that. This year will be the lowest impact we've had of any of the three years. And so, the big impacts that hit us were at Deer Park and at Seadrift, but almost all of that is back up and running now. So, we were able to rebound pretty quickly. You never go completely unscathed, but I think we managed through it pretty well. We haven't had to disrupt any customers because of downtime. And I think we're going to recover pretty strong here and be running hard by the end of this month. So, I feel that we've navigated it pretty well. And we didn't see enough of an impact that we put that into first quarter estimates. I think our biggest delta in first quarter is we've got quite a few turnarounds in the first quarter, and so that's our biggest impact about $200 million of turnarounds in the quarter -- $150 million. And then, we expect some margin and some seasonality in first quarter, say, plus $200 million on margins and minus $150 million on turnarounds in the quarter. So that's the biggest net-net on the first quarter '24 guidance. Jeff, do you want to hit how the $1 billion costs fell across the business?","evidence_gemma_new":"$1 billion","evidence_llama_3_3":"$1 billion","evidence_qwen_3_30b":null,"gemma_new_max":1000000000.0,"gemma_new_min":1000000000.0,"llama_3_3_max":1000000000.0,"llama_3_3_min":1000000000.0,"qwen_3_30b_max":null,"qwen_3_30b_min":null}
{"symbol":"DOW","year":2024,"quarter":1,"date":"2024-Q1","chunk_id":60,"sub_chunk_id":0,"centroid_label":"1 billion","agreed_value":1000000000.0,"count":3,"chunk":"Jeffrey Tate: Yes, Arun, I think you're right on top of the run rate. So no comments there. I do think mid-cycle -- I mean, our view of mid-cycle is probably closer to $9 billion. And so to get to that mid-cycle run rate, obviously, we have to have another couple of step-ups to get there. Volume is a big part of it. So as I mentioned, all the projects, on the call that some that we've already put in place that equal $800 million of the step-up and the rest that we're in flight right now, that's another $1.2 billion of step-up. So that $2 billion of improved margins is all volume. And most of that CapEx is either been or will be finished this year and beginning of next year. So I feel good about that. Obviously, the Path2Zero in Alberta comes later. So I think you can see that $1 billion more towards as we're getting to the next peak. That's a '27 to '29 time frame where that's coming in, '27 is Phase 1, '29 is Phase 2. And so if we've got our timing right and that's what we intended, was we got that up and running before we get into the next peak. And so I think we've got the line of sight to the volume that's going to come from here to mid-cycle. When we get to Investor Day on May 16, we're going to unpack all that volume and that trajectory. And then we've got the line of sight into the stuff that gets us greater than $3 billion by 2030, which is next peak type economics. And from where we are, that's excellent growth rates for both of them. And so I feel like we've been through the worst of it here on the slowdown in the cycle. And so it should be more upside than downside from here out.","evidence_gemma_new":"$1 billion","evidence_llama_3_3":"$1 billion '27 to '29","evidence_qwen_3_30b":"$1 billion next peak","gemma_new_max":1000000000.0,"gemma_new_min":1000000000.0,"llama_3_3_max":1000000000.0,"llama_3_3_min":1000000000.0,"qwen_3_30b_max":1000000000.0,"qwen_3_30b_min":1000000000.0}
{"symbol":"DOW","year":2024,"quarter":3,"date":"2024-Q3","chunk_id":3,"sub_chunk_id":0,"centroid_label":"1 billion","agreed_value":1000000000.0,"count":2,"chunk":"Jeff Tate : Thank you, Jim, and good morning to everyone joining our call today. Moving to Slide 7, we continue to experience muted demand across some end-markets and regions with the greatest pressure in Europe and China. Global manufacturing PMI has been decelerating over the past three months and consumer spending remains pressured by persistent inflation. That said, we're monitoring the impact of rate cuts in the US and Europe, as well as recent stimulus plans in China to boost economic activity, which could provide some positive momentum for 2025. Looking specifically across our four market verticals, in packaging, domestic demand in North America is resilient and exports are robust, despite decelerating last month. Demand in Europe remains soft, consistent with manufacturing PMI at the lowest point year-to-date. In addition, China's manufacturing PMI returned to contractionary levels in September after improving in August. Infrastructure demand primarily in residential construction remains low. In the US, housing starts decelerated to negative 0.7% year-over-year in September. Eurozone construction PMI remained soft and new home prices in China declined year-over-year for the 15th consecutive month. Consumer spending has slowed across the globe, reflecting affordability challenges. We've seen consumer confidence weaken in the United States, remain negative in Europe, and decline in China for the fifth consecutive month. And in mobility, demand has softened globally. In the US, auto sales were slightly up year-over-year in September after decreasing in August. And in the EU, new car registrations declined in September after reaching a three-year low in August. China auto production declined for the fourth consecutive month, reflecting weak domestic demand, as well as exports due to tariffs imposed in Europe. Now turning to our outlook on Slide 8. We expect fourth quarter earnings to be approximately $1.3 billion, up year-over-year and lower quarter-over-quarter, as normal seasonality plays out. Now looking into the sequential drivers by segment. In the packaging and specialty plastic segment, lower integrated margins stemming from higher feedstock costs and lower licensing revenue will be a headwind. Following an unplanned event in July, we restarted our Texas-8 cracker at the end of the third quarter, and we expect to ramp operating rates steadily throughout fourth quarter. This will generate an add-back of approximately $100 million in the fourth quarter. We also expect lower planned maintenance activity across multiple sites along the US Gulf Coast and in Europe to provide a tailwind sequentially. In the industrial, intermediates, and infrastructure segments, conditions remain mixed. Demand in building and construction end-markets, will be seasonally lower, but we expect the ongoing ramp of our plant at Louisiana operations, as well as the seasonal uptick in demand for deicing fluid, to offset this decline. In addition, we anticipate a $50 million tailwind through the lower planned maintenance activity along the US Gulf Coast. And in the Performance Materials and Coatings segment, we see continued growth in downstream silicone applications across most end-markets. However, this is expected to be offset by ongoing weakness in the China property sector. In addition, lower seasonal demand for building and construction end markets is expected to be a headwind of approximately $125 million. Moving to Slide 9. Team Dow has built a very compelling investment opportunity even as our industry has faced volatile market conditions over the past few years. By continuing to execute our playbook, deliver on our financial priorities and advance our strategy, we are positioning Dow for long-term value growth. Importantly, we have built the financial flexibility to continue disciplined investment in areas that will raise our underlying earnings, reduce emissions and advance customer circularity needs to drive growth. As it relates to our financial strength, Dow has ample liquidity and a strong investment grade-credit profile. Nearly all of our long-term debt is at a fixed rate and we have no substantive maturity until 2027. We also expect to enhance our near-term cash flow generation through the execution of unique to Dow cash flow levers And we are making solid progress on the evaluation of strategic options for our non-product producing infrastructure assets. As previously mentioned, we anticipate generating over $1 billion in proceeds from the transaction and we expect to share further progress yet this year. Dow's strong financial flexibility, allows us to advance our long-term growth strategy. Notably in the Q3, the team is making good progress on the construction of our Path2Zero project in Fort Saskatchewan. Major foundation work began and approximately 40% of cracker pilings are complete. Aligned to our capital deployment schedule for the project, we expect to receive more than $1.5 billion in cash and tax incentives with more than 80% received by 2030. Our near-term growth projects remain on track to deliver more than $2 billion of underlying EBITDA. This includes capacity expansions in silicones this year that will deliver approximately $70 million of annual EBITDA at full run rates. In our Transform the Waste strategy is expected to deliver more than $500 million of EBITDA by 2030. In the third quarter, we added new products to our growing circular portfolio. This includes REVOLOOP Recycled Plastic Resins that incorporate post-consumer recycled material into cable jacketing. We also introduced the 1st Bio Circular Engage REN polyolefin elastomers for carpet tile backing. And with that, I will turn the call back over to Jim.","evidence_gemma_new":"over $1 billion","evidence_llama_3_3":"$1 billion","evidence_qwen_3_30b":null,"gemma_new_max":1000000000.0,"gemma_new_min":1000000000.0,"llama_3_3_max":1000000000.0,"llama_3_3_min":1000000000.0,"qwen_3_30b_max":null,"qwen_3_30b_min":null}
{"symbol":"DOW","year":2023,"quarter":1,"date":"2023-Q1","chunk_id":4,"sub_chunk_id":0,"centroid_label":"VAL step up","agreed_value":0.05,"count":2,"chunk":"Jim Fitterling: Thank you, Howard. Moving to Slide 7. While we expect near term conditions to remain challenging through the year, we continue to see positive underlying demand trends driving above GDP growth across our attractive market verticals over the next few years. Packaging is vital to delivering a lower carbon footprint. Through our $3 million metric ton Transform the Waste commitment, we will capture demand growth for recycled polyethylene, which is accelerating as brand owners and customers increasingly seek more circular products. In Infrastructure, more than $3 trillion in investments will be needed to meet global infrastructure plans. Green buildings are driving demand for Dow products, including low carbon footprint silicone sealants for high rise buildings, reflective roof coatings and lower carbon emissions cement additives. An expanding middle class will support growth in consumer spending where our products help deliver a lower carbon footprint and enable more sustainable materials through technology, such as biodegradable polymers or bio-based surfactants for home care and thermal conductive silicone gels and adhesives for electronics and batteries. And in mobility, stable global vehicle production growth is expected with increasing demand for electric vehicles which contained 3 times to 4 times more silicone content than internal combustion engine vehicles. Lighter weight vehicles are also aided by our high value polyurethane systems and EPDM technologies. Further, we continue to execute our targeted suite of higher return, lower risk projects, which are expected to add $2 billion in underlying EBITDA by the middle of the decade. These investments put us in an advantaged position to capture demand as economies recover and raise our underlying earnings profile. Turning to Slide 8. With growing consumer and brand owner demand for more sustainable and circular products, leading in the transition to a more sustainable future remains critical to our strategy to drive growth and shareholder value creation. In collaboration with X-energy, in the second quarter we expect to select an analysis site in the U.S. Gulf Coast to develop a small modular nuclear energy facility by 2030. Nuclear technology will be key in generating safe and reliable power and steam at our sites, while enabling zero CO2 emissions manufacturing. In Alberta, we recently awarded Fluor with a contract to provide front end engineering and design services for our Path2Zero project. Today, we achieved another key milestone by selecting Linde as our industrial gas supplier to supply nitrogen and clean hydrogen for the site. Securing partner agreements and subsidies is our next step. All of these actions are critical to reaching a final investment decision this year. As a reminder, this investment for the world's first net zero CO2 emissions ethylene and derivatives complex will decarbonize 20% of our global ethylene capacity. At the same time, it will grow our global polyethylene supply by 15% and triple our Alberta site polyethylene capacity. We're also taking a capital efficient approach to meet increasing demand for more circular solutions as we scale up production for both advanced and mechanical recycling with strategic partners like Valoregen, Mura Technology, and WM among others. Valoregen's 15 kiloton mechanical recycling facility in France will start up during the second half of this year. This hybrid recycling plant is expected to process up to 70 kilotons of plastic waste per year by 2025. And Mura remains on track to start up the first of its kind, 20 kiloton per year advanced recycling plant in Teesside in the United Kingdom in the second half of this year. This is the first step in our strategic partnership with Mura to launch as much as 600 kilotons per year of advanced recycling capacity by 2030. As the key off taker of post-consumer and advanced recycled feed from both of these partnerships, Dow well commercialize circular polymers in high demand from global brands. Altogether by 2030, we are on track to deliver an additional $1 billion in underlying EBITDA improvement through our Alberta project, commercialize 3 million metric tons per year of circular and renewable solutions and reduce Scope 1 and 2 CO2 emissions by 5 million metric tons compared to our 2020 levels. Turning to Slide 9. We remain focused on delivering on our commitments with transparency, accountability and a culture of benchmarking. Today, we published our annual benchmarking update as we have every year since spin, which can be found in the appendix of this presentation and is posted on our website. The results, once again, demonstrate our strong performance relative to peers. In particular, Dow delivered best-in-class free cash flow yield and net debt reduction since spin. We also achieved above peer median return on invested capital and returns to shareholders. Taking a closer look at the results on Slide 10, our free cash flow yield on a three year average is nearly 2 times the peer average and 3 times the sector and market averages. Our differentiated portfolio, cost advantaged assets and operating discipline have resulted in three year EBITDA margins and return on invested capital well above the peer median. This includes our 15% return on invested capital, which is above our 13% target across the economic cycle. Our focus on cash flow generation has supported strong shareholder returns and our strengthened balance sheet has resulted in improved credit ratings and outlooks. Additionally, all operating segments achieved best-in-class or top quartile free cash conversion and cost performance. Notably, Packaging & Specialty Plastics further expanded its outperformance over the next best peer on an EBITDA per pound of polyolefin basis by $0.05 per pound. It also delivered five year average EBITDA margins 500 basis points above the peer median. Looking forward, our growth investments throughout the decade will further enhance our competitive advantages and shareholder value creation. Closing, on Slide 11. Dow continues to execute with consistency and discipline to deliver resilient performance in the near term and sustainable growth in cash flow generation over the long-term. We're implementing targeted actions across the enterprise to reduce costs and maximize cash. Our strong balance sheet provides financial flexibility as we continue to deliver against our capital allocation priorities and our Decarbonize and Grow and Transform the Waste strategies will raise our underlying earnings profile, while reducing our carbon footprint and increasing recycled content. All combined, we are confident in our ability to continue delivering against our financial targets across the economic cycle. With that, I'll turn it back to Pankaj to open up the Q&A.","evidence_gemma_new":"$0.05 April","evidence_llama_3_3":null,"evidence_qwen_3_30b":"$0.05 April","gemma_new_max":0.05,"gemma_new_min":0.05,"llama_3_3_max":null,"llama_3_3_min":null,"qwen_3_30b_max":0.05,"qwen_3_30b_min":0.05}
{"symbol":"DOW","year":2023,"quarter":2,"date":"2023-Q2","chunk_id":37,"sub_chunk_id":0,"centroid_label":"VAL step up","agreed_value":150000000.0,"count":2,"chunk":"Howard Ungerleider: Duffy. Look, I would just say at a very high level, if you think about it -- if you take a step back at the enterprise and think about what we're trying to guide to. It really is on an operating basis, essentially flat sequentially. You've got our self-help, which we're guiding $100 million increase in cost savings. We expect that that will be eaten up by the margin compression that Begleiter talked about that the third party indices are projecting. And then that leaves you with $150 million of stuff that either happened in the second quarter that won't recur. So the project driven licensing sales from the innovation, we're not -- we don't expect another $100 million in the third quarter although the team continues to work on additional licensing and then the $50 million turnaround headwind at an enterprise level, which is net. And so, that's operationally flat. And then, of course, we're still -- we've got to repair and restore the Plaquemines glycol plant, as Jim said. So we're guiding on that $100 million kind of a one-time impact on margin on lost sales and then the cost to rebuild and recommission and get that return to operations. That's a preliminary number and as we learn more through the root cause investigation and the implementation plan to get restart and we'll give a further update.","evidence_gemma_new":"$150 million","evidence_llama_3_3":null,"evidence_qwen_3_30b":"$150 million second quarter","gemma_new_max":150000000.0,"gemma_new_min":150000000.0,"llama_3_3_max":null,"llama_3_3_min":null,"qwen_3_30b_max":150000000.0,"qwen_3_30b_min":150000000.0}
{"symbol":"DOW","year":2023,"quarter":2,"date":"2024-FY","chunk_id":50,"sub_chunk_id":0,"centroid_label":"VAL step up","agreed_value":150000000.0,"count":2,"chunk":"Jim Fitterling: Yes. I think when we looked at the guide for the third quarter, there's $100 million step-up from second quarter. So that will be on a year-over-year basis, about $350 million of cost saves. And I think fourth quarter is going to be in that $300 million to $350 million as well. So two-thirds of the $1 billion, $650 million to $700 million comes out in the back half of this year. Obviously, there's some sequential carryover into next year. So you got about $150 million in the first quarter of next year from the sequential carryover. So the kind of the year-over-year and first quarter will be a step up as well. And those are the spending impacts and then obviously, the businesses are all working on margin improvement within their portfolios. And then Howard mentioned, in addition to the $1 billion of cost saves, we're working on $1 billion of cash levers, unique to Dow cash levers. And I think he just outlined them on the previous question. So I'd say, net-net, we're focusing on cash, both on the cost side and on the cash levers where we can liberate some cash and also improving mix within the businesses and taking advantage of our low-cost positions and running those assets are and then trimming on the high-cost side where we can to set ourselves up for the ramp-up in 2024.","evidence_gemma_new":"first quarter of next year $150 million","evidence_llama_3_3":null,"evidence_qwen_3_30b":"first quarter of next year $150 million","gemma_new_max":150000000.0,"gemma_new_min":150000000.0,"llama_3_3_max":null,"llama_3_3_min":null,"qwen_3_30b_max":150000000.0,"qwen_3_30b_min":150000000.0}
{"symbol":"DOW","year":2024,"quarter":1,"date":"2024-Q1","chunk_id":11,"sub_chunk_id":0,"centroid_label":"VAL step up","agreed_value":200000000.0,"count":3,"chunk":"James Fitterling: David, I think with the first quarter results and the $200 million that Jeff mentioned on the call, we're right on track. I would add that, as you go into third quarter, now that we'll have another $100 million from the restart of Glycol 2 in Plaquemine, so $100 million third quarter, $100 million fourth quarter kind of numbers. So we're starting to see that run rate and that run rate right in line with what we need to deliver that $6.4 billion. And then I would say the underlying chemical demand, I talked about in last quarter, it felt like destocking slowed. Inventory levels for us in December were lowest they've ever been. They continue to be low at the end of first quarter and chemical production and chemical shipments are up. And so when you look at those numbers, you say this volume growth right now feels like it's demand driven, not restocking driven. And so I think as we start to move up this thing, hopefully, the economy keeps with us here and we start to see us pick up some momentum on this trend.","evidence_gemma_new":"first quarter $200 million","evidence_llama_3_3":"first quarter $200 million","evidence_qwen_3_30b":"first quarter $200 million","gemma_new_max":200000000.0,"gemma_new_min":200000000.0,"llama_3_3_max":200000000.0,"llama_3_3_min":200000000.0,"qwen_3_30b_max":200000000.0,"qwen_3_30b_min":200000000.0}
{"symbol":"DOW","year":2024,"quarter":1,"date":"2024-Q1","chunk_id":14,"sub_chunk_id":0,"centroid_label":"VAL step up","agreed_value":175000000.0,"count":3,"chunk":"James Fitterling: Yes. Vincent, thank you. And it's mostly a step-up in integrated margins. I think we're looking at about $0.03 a pound globally in integrated margin increase. North America -- Europe may be a little bit more than [ 3 ], rest of the world is pretty flat. We've got, obviously, kind of a one-time improvement. We had Bah\u00eda Blanca down, as mentioned, in the first quarter -- for part of first quarter to the -- beginning of it because of the storm they had in December. But it's back. And so you'll see a $25 million improvement there. So those 2 positives are $175 million. We have higher turnaround costs in the quarter. We're doing the turnaround at Sabine this quarter. That's about $75 million. So net-net, you've got about $100 million up in P&SP for the second quarter. And the volume numbers are good. The margin numbers are good. Exports are good out of the U.S. Gulf Coast. Product is flowing. Operating rates are good. So we're starting to see the positive impacts of all those things.","evidence_gemma_new":"$175 million","evidence_llama_3_3":"$175 million","evidence_qwen_3_30b":"$175 million","gemma_new_max":175000000.0,"gemma_new_min":175000000.0,"llama_3_3_max":175000000.0,"llama_3_3_min":175000000.0,"qwen_3_30b_max":175000000.0,"qwen_3_30b_min":175000000.0}
{"symbol":"DOW","year":2024,"quarter":2,"date":"2024-Q2","chunk_id":3,"sub_chunk_id":0,"centroid_label":"VAL step up","agreed_value":50000000.0,"count":2,"chunk":"Jeff Tate: Thank you, Jim. And good morning to everyone joining our call today. Moving to slide five, in the near-term, we expect macro-dynamics to remain largely unchanged. While global manufacturing PMI has been positive since February 2024, the pace of the global economic recovery has decelerated slightly. This is primarily led by China, where economic growth in the second quarter was lower than the market expected. Overall, we continue to keep a close eye on the weight of inflation on U.S. consumer, global interest rates, and geopolitical tensions. Looking across our four market verticals, packaging demand is seeing global growth, primarily in the U.S. and Canada as the industry experiences robust domestic and export demand for polyethylene. In Europe, soft demand across the value chain is reflected in manufacturing PMI levels, which despite stabilizing, remain in contractionary territory. And in Asia, packaging demand has remained steady, but the reason has been impacted by poor congestion and rising transportation costs. Infrastructure demand, primarily residential construction, continues to be soft across most regions. In June, existing U.S. home sales, which tend to drive residential paint sales for both buyers and sellers, were below prior year levels. And building permits were down slightly year-to-date through June. Eurozone construction PMI remains in contractionary territory and declined to 41.8 last month, down from 42.9 in May. And in China, new home prices were down 4.5% year-over-year in June. Consumer spending has shown resilience in most regions except Europe where consumer confidence remained negative in July. In the U.S., retail sales are up 2.3% year-to-date through June, but furniture and bedding sales remain low. In China, retail sales increased by 2% year-over-year in June, but marked the first month of deceleration since July 2023. And in mobility, China auto production was down 2.1% year-over-year in June amidst the potential for tariff increases and flow to materialized incentives. In the U.S., auto sales were down year-over-year in June after increasing by more than 2% in May. Against this backdrop, we delivered the third consecutive quarter of year-over-year volume growth and will continue to leverage our differentiated portfolio to capitalize on areas of demand strength, while maintaining operating and financial discipline. And I'll touch on these actions in more detail shortly. Now turning to our outlook on slide six. We expect third quarter earnings to be slightly above second quarter performance, continuing our string of sequential improvement. We experience minimal disruption from Hurricane Berly in the U.S. Gulf Coast, and we expect the positive sequential signals in some markets will continue. In the packaging, especially plastic segment, we expect modest top line sequential growth. Domestic and export demand for polyethylene in North America will remain robust, and EMEA will experience typical lower demand seasonality from the summer holidays. In addition, the completion of our cracker turnaround into being Texas in the second quarter will be offset by another planned turnaround at our St. Charles, Louisiana cracker in the third quarter. In the industrial, intermediates and infrastructure segment, market conditions remain mixed. Demand in energy and pharma end markets remains resilient, but consumer durable demand has not shown any significant signs of inflection. We expect an approximately $25 million headwind due to the planned maintenance activity in the U.S. Gulf Coast. Importantly, at the end of June, we successfully started up our glycol 2 facility at Louisiana operations, which will ramp through the quarter and provide a sequential tailwind of $75 million. In the performance materials and coating segment, we continue to see growth in downstream silicone applications across most end markets, but the siloxane prices are still under pressure. Lower seasonal demand for building and construction end markets are expected to be a headwind of approximately $50 million, while lower planned maintenance activity will contribute a $25 million tailwind. Moving to slide seven. As we navigate the current market conditions, we are focused on executing our proven playbook to deliver increased value over the cycle. We benefit from our global asset footprint with leading positions in every region. This is particularly true in the cost-advantaged America, where approximately 65% of our global production capacity is located, and we expect to reach 70% by 2030. With leading low-cost feedstock positions, trust our industry-leading feedstock flexibility, Dow is well positioned to capture growing global demand for our products. And supported by our solid financial position, we remain on track to deliver our countercyclical growth investments. Team Dow continues to operate with discipline as we maintain our low cost to serve mindset, focus on maximizing cash flow, and further strengthen our financial positions. Our actions include continued de-risking of our pension liabilities with minimal, if any, cash outlay. In fact, this month we initiated the termination process for two of our U.S. pension plans by the end of 2025. While not impacting previously earned benefits, Dow is able to provide a secure, cost-effective way of paying pension benefits and reducing administrative costs and risks to the company. Lastly, in the near-term, we expect to enhance our cash flow generation by executing over $1.5 billion in unique-to-Dow levers. We plan to use the proceeds to support our strategic growth investment, including our Path2Zero project in Fort Saskatchewan. In addition, we expect to receive more than $1.5 billion in cash and tax incentives by 2030, which is closely aligned with our CapEx deployment for the project. With that, I'll turn it back to Jim.","evidence_gemma_new":"$50 million","evidence_llama_3_3":"$50 million","evidence_qwen_3_30b":null,"gemma_new_max":50000000.0,"gemma_new_min":50000000.0,"llama_3_3_max":50000000.0,"llama_3_3_min":50000000.0,"qwen_3_30b_max":null,"qwen_3_30b_min":null}
{"symbol":"DOW","year":2024,"quarter":1,"date":"2024-Q3","chunk_id":11,"sub_chunk_id":0,"centroid_label":"VAL step up","agreed_value":100000000.0,"count":2,"chunk":"James Fitterling: David, I think with the first quarter results and the $200 million that Jeff mentioned on the call, we're right on track. I would add that, as you go into third quarter, now that we'll have another $100 million from the restart of Glycol 2 in Plaquemine, so $100 million third quarter, $100 million fourth quarter kind of numbers. So we're starting to see that run rate and that run rate right in line with what we need to deliver that $6.4 billion. And then I would say the underlying chemical demand, I talked about in last quarter, it felt like destocking slowed. Inventory levels for us in December were lowest they've ever been. They continue to be low at the end of first quarter and chemical production and chemical shipments are up. And so when you look at those numbers, you say this volume growth right now feels like it's demand driven, not restocking driven. And so I think as we start to move up this thing, hopefully, the economy keeps with us here and we start to see us pick up some momentum on this trend.","evidence_gemma_new":"$100 million","evidence_llama_3_3":"third quarter $100 million","evidence_qwen_3_30b":null,"gemma_new_max":100000000.0,"gemma_new_min":100000000.0,"llama_3_3_max":100000000.0,"llama_3_3_min":100000000.0,"qwen_3_30b_max":null,"qwen_3_30b_min":null}
{"symbol":"DOW","year":2024,"quarter":3,"date":"2024-Q3","chunk_id":3,"sub_chunk_id":0,"centroid_label":"VAL step up","agreed_value":50000000.0,"count":2,"chunk":"Jeff Tate : Thank you, Jim, and good morning to everyone joining our call today. Moving to Slide 7, we continue to experience muted demand across some end-markets and regions with the greatest pressure in Europe and China. Global manufacturing PMI has been decelerating over the past three months and consumer spending remains pressured by persistent inflation. That said, we're monitoring the impact of rate cuts in the US and Europe, as well as recent stimulus plans in China to boost economic activity, which could provide some positive momentum for 2025. Looking specifically across our four market verticals, in packaging, domestic demand in North America is resilient and exports are robust, despite decelerating last month. Demand in Europe remains soft, consistent with manufacturing PMI at the lowest point year-to-date. In addition, China's manufacturing PMI returned to contractionary levels in September after improving in August. Infrastructure demand primarily in residential construction remains low. In the US, housing starts decelerated to negative 0.7% year-over-year in September. Eurozone construction PMI remained soft and new home prices in China declined year-over-year for the 15th consecutive month. Consumer spending has slowed across the globe, reflecting affordability challenges. We've seen consumer confidence weaken in the United States, remain negative in Europe, and decline in China for the fifth consecutive month. And in mobility, demand has softened globally. In the US, auto sales were slightly up year-over-year in September after decreasing in August. And in the EU, new car registrations declined in September after reaching a three-year low in August. China auto production declined for the fourth consecutive month, reflecting weak domestic demand, as well as exports due to tariffs imposed in Europe. Now turning to our outlook on Slide 8. We expect fourth quarter earnings to be approximately $1.3 billion, up year-over-year and lower quarter-over-quarter, as normal seasonality plays out. Now looking into the sequential drivers by segment. In the packaging and specialty plastic segment, lower integrated margins stemming from higher feedstock costs and lower licensing revenue will be a headwind. Following an unplanned event in July, we restarted our Texas-8 cracker at the end of the third quarter, and we expect to ramp operating rates steadily throughout fourth quarter. This will generate an add-back of approximately $100 million in the fourth quarter. We also expect lower planned maintenance activity across multiple sites along the US Gulf Coast and in Europe to provide a tailwind sequentially. In the industrial, intermediates, and infrastructure segments, conditions remain mixed. Demand in building and construction end-markets, will be seasonally lower, but we expect the ongoing ramp of our plant at Louisiana operations, as well as the seasonal uptick in demand for deicing fluid, to offset this decline. In addition, we anticipate a $50 million tailwind through the lower planned maintenance activity along the US Gulf Coast. And in the Performance Materials and Coatings segment, we see continued growth in downstream silicone applications across most end-markets. However, this is expected to be offset by ongoing weakness in the China property sector. In addition, lower seasonal demand for building and construction end markets is expected to be a headwind of approximately $125 million. Moving to Slide 9. Team Dow has built a very compelling investment opportunity even as our industry has faced volatile market conditions over the past few years. By continuing to execute our playbook, deliver on our financial priorities and advance our strategy, we are positioning Dow for long-term value growth. Importantly, we have built the financial flexibility to continue disciplined investment in areas that will raise our underlying earnings, reduce emissions and advance customer circularity needs to drive growth. As it relates to our financial strength, Dow has ample liquidity and a strong investment grade-credit profile. Nearly all of our long-term debt is at a fixed rate and we have no substantive maturity until 2027. We also expect to enhance our near-term cash flow generation through the execution of unique to Dow cash flow levers And we are making solid progress on the evaluation of strategic options for our non-product producing infrastructure assets. As previously mentioned, we anticipate generating over $1 billion in proceeds from the transaction and we expect to share further progress yet this year. Dow's strong financial flexibility, allows us to advance our long-term growth strategy. Notably in the Q3, the team is making good progress on the construction of our Path2Zero project in Fort Saskatchewan. Major foundation work began and approximately 40% of cracker pilings are complete. Aligned to our capital deployment schedule for the project, we expect to receive more than $1.5 billion in cash and tax incentives with more than 80% received by 2030. Our near-term growth projects remain on track to deliver more than $2 billion of underlying EBITDA. This includes capacity expansions in silicones this year that will deliver approximately $70 million of annual EBITDA at full run rates. In our Transform the Waste strategy is expected to deliver more than $500 million of EBITDA by 2030. In the third quarter, we added new products to our growing circular portfolio. This includes REVOLOOP Recycled Plastic Resins that incorporate post-consumer recycled material into cable jacketing. We also introduced the 1st Bio Circular Engage REN polyolefin elastomers for carpet tile backing. And with that, I will turn the call back over to Jim.","evidence_gemma_new":"$50 million","evidence_llama_3_3":"$50 million","evidence_qwen_3_30b":null,"gemma_new_max":50000000.0,"gemma_new_min":50000000.0,"llama_3_3_max":50000000.0,"llama_3_3_min":50000000.0,"qwen_3_30b_max":null,"qwen_3_30b_min":null}
{"symbol":"DOW","year":2024,"quarter":3,"date":"2024-Q3","chunk_id":3,"sub_chunk_id":0,"centroid_label":"VAL step up","agreed_value":125000000.0,"count":2,"chunk":"Jeff Tate : Thank you, Jim, and good morning to everyone joining our call today. Moving to Slide 7, we continue to experience muted demand across some end-markets and regions with the greatest pressure in Europe and China. Global manufacturing PMI has been decelerating over the past three months and consumer spending remains pressured by persistent inflation. That said, we're monitoring the impact of rate cuts in the US and Europe, as well as recent stimulus plans in China to boost economic activity, which could provide some positive momentum for 2025. Looking specifically across our four market verticals, in packaging, domestic demand in North America is resilient and exports are robust, despite decelerating last month. Demand in Europe remains soft, consistent with manufacturing PMI at the lowest point year-to-date. In addition, China's manufacturing PMI returned to contractionary levels in September after improving in August. Infrastructure demand primarily in residential construction remains low. In the US, housing starts decelerated to negative 0.7% year-over-year in September. Eurozone construction PMI remained soft and new home prices in China declined year-over-year for the 15th consecutive month. Consumer spending has slowed across the globe, reflecting affordability challenges. We've seen consumer confidence weaken in the United States, remain negative in Europe, and decline in China for the fifth consecutive month. And in mobility, demand has softened globally. In the US, auto sales were slightly up year-over-year in September after decreasing in August. And in the EU, new car registrations declined in September after reaching a three-year low in August. China auto production declined for the fourth consecutive month, reflecting weak domestic demand, as well as exports due to tariffs imposed in Europe. Now turning to our outlook on Slide 8. We expect fourth quarter earnings to be approximately $1.3 billion, up year-over-year and lower quarter-over-quarter, as normal seasonality plays out. Now looking into the sequential drivers by segment. In the packaging and specialty plastic segment, lower integrated margins stemming from higher feedstock costs and lower licensing revenue will be a headwind. Following an unplanned event in July, we restarted our Texas-8 cracker at the end of the third quarter, and we expect to ramp operating rates steadily throughout fourth quarter. This will generate an add-back of approximately $100 million in the fourth quarter. We also expect lower planned maintenance activity across multiple sites along the US Gulf Coast and in Europe to provide a tailwind sequentially. In the industrial, intermediates, and infrastructure segments, conditions remain mixed. Demand in building and construction end-markets, will be seasonally lower, but we expect the ongoing ramp of our plant at Louisiana operations, as well as the seasonal uptick in demand for deicing fluid, to offset this decline. In addition, we anticipate a $50 million tailwind through the lower planned maintenance activity along the US Gulf Coast. And in the Performance Materials and Coatings segment, we see continued growth in downstream silicone applications across most end-markets. However, this is expected to be offset by ongoing weakness in the China property sector. In addition, lower seasonal demand for building and construction end markets is expected to be a headwind of approximately $125 million. Moving to Slide 9. Team Dow has built a very compelling investment opportunity even as our industry has faced volatile market conditions over the past few years. By continuing to execute our playbook, deliver on our financial priorities and advance our strategy, we are positioning Dow for long-term value growth. Importantly, we have built the financial flexibility to continue disciplined investment in areas that will raise our underlying earnings, reduce emissions and advance customer circularity needs to drive growth. As it relates to our financial strength, Dow has ample liquidity and a strong investment grade-credit profile. Nearly all of our long-term debt is at a fixed rate and we have no substantive maturity until 2027. We also expect to enhance our near-term cash flow generation through the execution of unique to Dow cash flow levers And we are making solid progress on the evaluation of strategic options for our non-product producing infrastructure assets. As previously mentioned, we anticipate generating over $1 billion in proceeds from the transaction and we expect to share further progress yet this year. Dow's strong financial flexibility, allows us to advance our long-term growth strategy. Notably in the Q3, the team is making good progress on the construction of our Path2Zero project in Fort Saskatchewan. Major foundation work began and approximately 40% of cracker pilings are complete. Aligned to our capital deployment schedule for the project, we expect to receive more than $1.5 billion in cash and tax incentives with more than 80% received by 2030. Our near-term growth projects remain on track to deliver more than $2 billion of underlying EBITDA. This includes capacity expansions in silicones this year that will deliver approximately $70 million of annual EBITDA at full run rates. In our Transform the Waste strategy is expected to deliver more than $500 million of EBITDA by 2030. In the third quarter, we added new products to our growing circular portfolio. This includes REVOLOOP Recycled Plastic Resins that incorporate post-consumer recycled material into cable jacketing. We also introduced the 1st Bio Circular Engage REN polyolefin elastomers for carpet tile backing. And with that, I will turn the call back over to Jim.","evidence_gemma_new":"$125 million","evidence_llama_3_3":"$125 million","evidence_qwen_3_30b":null,"gemma_new_max":125000000.0,"gemma_new_min":125000000.0,"llama_3_3_max":125000000.0,"llama_3_3_min":125000000.0,"qwen_3_30b_max":null,"qwen_3_30b_min":null}
{"symbol":"DOW","year":2024,"quarter":3,"date":"2024-Q3","chunk_id":8,"sub_chunk_id":0,"centroid_label":"VAL step up","agreed_value":0.03,"count":2,"chunk":"Jim Fitterling: Good morning, Vince, yes, I think you are reading it overall correctly. We've got an outlook for flat pricing for the quarter, where you have got some obviously expectations that we might see some higher feedstock costs, but still very competitive feedstocks here in the US Gulf Coast. I would think we've got moves out there announced for $0.03 in October and $0.03 in November. And I think our view is typically, that's when we tend to see the movement pricing up and then things soften towards the end of the year.","evidence_gemma_new":"$0.03 November","evidence_llama_3_3":"November $0.03","evidence_qwen_3_30b":null,"gemma_new_max":0.03,"gemma_new_min":0.03,"llama_3_3_max":0.03,"llama_3_3_min":0.03,"qwen_3_30b_max":null,"qwen_3_30b_min":null}
{"symbol":"DOW","year":2024,"quarter":3,"date":"2024-Q3","chunk_id":14,"sub_chunk_id":0,"centroid_label":"VAL step up","agreed_value":300000000.0,"count":2,"chunk":"Jim Fitterling: Yes, Michael, good question -- Richard, I'm sorry. Good question. On P&SP, we -- even -- despite the issues we have at Texas-8 in the third quarter, we still see strong volume growth downstream. So we were able to pull a lot of levers to make that happen. Demand is still good. I\u2019d say, we had a little bit of a slowdown at the end of the quarter with exports because of the dock strikes that were going on at the time. But overall, downstream demand and volume has been good. So operating rates are continuing to tighten up and the cost advantage assets are running strong. As we look forward into 2025, I think you're going to see some continued growth in volume. So we are looking at about 3% organic growth and volume going into next year. We are going to see some benefit from higher operating rates. So from a basis of about $5.6 billion consensus for 2024, that would add maybe $400 million to that. We have add back for two unplanned events. We've got the full year Glycol-2 being fully ramped up, as well as the Texas-8 unplanned outage we had in the third quarter. So the add back of those two is about $300 million. And then from our growth investments, we've got about $150 million from polyethylene and functional polymers debottlenecks, incremental growth projects there. About $75 million from alkoxylates capacity that's coming on in the US Gulf Coast and the full ramp-up of Thailand PG in Asia. And then about $75 million from Consumer Solutions, growth investments in debottlenecks. And they had a strong third quarter, with 6% year-over-year volume growth in silicones downstream specialty applications, so that's another $300 million there. So all-in-all, that's about $1 billion higher, and then you've got some upsides and downsides depending on things that would happen within the window.","evidence_gemma_new":"$300 million","evidence_llama_3_3":"$300 million","evidence_qwen_3_30b":null,"gemma_new_max":300000000.0,"gemma_new_min":300000000.0,"llama_3_3_max":300000000.0,"llama_3_3_min":300000000.0,"qwen_3_30b_max":null,"qwen_3_30b_min":null}
{"symbol":"DOW","year":2024,"quarter":2,"date":"2024-Q4","chunk_id":37,"sub_chunk_id":0,"centroid_label":"VAL step up","agreed_value":100000000.0,"count":3,"chunk":"Frank Mitsch: Thank you, good morning. And happy to hear that the sound quality on the answers has gotten materially better. But I believe the first answer that you gave concerned polyethylene, and that came through fairly garbled. So I was just wondering, Jim, since you were very accurate in forecasting the April price increase. Obviously, June didn't go through, but I'm curious as to what your thoughts are with respect to July and the third quarter in general in terms of polyethylene pricing and margins? And then also on the Glycol-2 restart, there was an expectation that it would add about $100 million in the third quarter and $100 million in the fourth quarter. You're indicating today that it's $75 million in the third quarter, which makes sense as it ramps up, would you anticipate that $100 million coming through in the fourth quarter?","evidence_gemma_new":"$100 million fourth quarter","evidence_llama_3_3":"fourth quarter $100 million","evidence_qwen_3_30b":"$100 million fourth quarter","gemma_new_max":100000000.0,"gemma_new_min":100000000.0,"llama_3_3_max":100000000.0,"llama_3_3_min":100000000.0,"qwen_3_30b_max":100000000.0,"qwen_3_30b_min":100000000.0}
{"symbol":"DOW","year":2023,"quarter":1,"date":"2023-Q1","chunk_id":2,"sub_chunk_id":0,"centroid_label":"cash flow from operations","agreed_value":531000000.0,"count":3,"chunk":"Jim Fitterling: Thank you, Pankaj. Beginning on Slide 3. In the first quarter, Team Dow demonstrated its agility, delivering sequential earnings improvement in what continues to be a challenging environment. These results reflect our competitive advantages and operating discipline as we leveraged our structurally advantaged feedstock positions, proactively aligned our operating rates with market demand and focused on higher-value products where pockets of demand remain resilient, such as pharmaceutical applications, energy, commercial building and construction and mobility end markets. Additionally, our actions to deliver $1 billion in cost savings in 2023 are progressing with $100 million achieved in the first quarter. These actions will ensure we continue to focus on cash flow generation through our low-cost to serve operating model. Turning to the details of the quarter. Net sales were $11.9 billion, down 22% year-over-year. Declines in all operating segments were driven by continued soft global macroeconomic activity. Sales were flat sequentially, as gains in performance materials and coatings and packaging and specialty plastics offset declines in industrial intermediates and infrastructure. Volume decreased 11% year-over-year, led by declines in Europe, the Middle East, Africa and India or EMEA. However, volumes increased 2% sequentially on gains in performance materials and coatings and packaging and specialty plastics. Local price declined 10% year-over-year and 4% quarter-over-quarter, due to industry supply additions in some businesses amidst soft global economic conditions. Operating EBIT for the quarter was $708 million, down year-over-year due to lower local prices and volumes. Sequentially, operating EBIT improved by $107 million, with gains primarily driven by performance materials and coatings. Cash flow from operations was $531 million in the quarter. On a trailing 12-month basis, cash flow conversion was 85%. With ample financial flexibility and a strong balance sheet, we are continuing to execute on our strategy as we advance our disciplined and balanced capital allocation priorities for long-term value creation. We returned $621 million to shareholders through dividends and share repurchases during the quarter and our balance sheet continues to have no substantive long-term debt maturities until 2027. Now turning to operating segment performance on Slide 4. In the Packaging & Specialty Plastics segment, operating EBIT was $642 million compared to $1.2 billion in the year ago period, primarily due to lower integrated polyethylene margins. Continued margin resilience in functional polymers was more than offset by lower polyethylene and olefins margins. Volume declines were primarily driven by lower consumer demand in EMEA. Sadara also had lower export volumes due to planned maintenance activity. Sequentially, operating EBIT was down by $13 million. Improved input costs and higher operating rates in our most cost advantage assets were more than offset by lower sales from non-recurring licensing activity and lower equity earnings. Moving to the Industrial Intermediates & Infrastructure segment. Operating EBIT for the segment was $123 million compared to $661 million in the year ago period. Results were driven by lower pricing and demand, as well as higher energy costs, particularly in EMEA. Sequentially, operating EBIT was down $41 million. Lower energy costs were more than offset by decreased demand and pricing for propylene oxide, its derivatives, and in isocyanates, in polyurethanes and construction chemicals. Industrial Solutions experienced lower volumes due to weather-related impacts and a third-party supply outage combined with lower demand in industrial end markets. And in the Performance Materials and Coatings segment, operating EBIT for the segment was $35 million compared to $595 million in the year ago period. Local price declines for siloxanes were driven by competitive pricing pressure from supply additions in China. Volume was down as resilient demand for commercial building and construction, mobility and industrial coatings was more than offset by volume declines in siloxanes and architectural coatings. Sequentially, operating EBIT increased $165 million, driven by improved supply availability, seasonally higher volumes, and reduced value chain destocking. Next, I'll turn it over to Howard to review our outlooks and actions on Slide 5.","evidence_gemma_new":"Cash flow from operations","evidence_llama_3_3":"cash flow from operations first quarter","evidence_qwen_3_30b":"cash flow from operations $531 million","gemma_new_max":531000000.0,"gemma_new_min":531000000.0,"llama_3_3_max":531000000.0,"llama_3_3_min":531000000.0,"qwen_3_30b_max":531000000.0,"qwen_3_30b_min":531000000.0}
{"symbol":"DOW","year":2023,"quarter":3,"date":"2023-Q3","chunk_id":12,"sub_chunk_id":0,"centroid_label":"cash flow from operations","agreed_value":300000000.0,"count":3,"chunk":"Jim Fitterling: Good morning, David. Good question. Obviously, we're about 12 to 15 months into this economic slowdown, and typically, when we see a slowdown like we saw starting mid last year, about 12 to 18 months, we start to see things turn to a positive direction. Inflation is the thing that's weighing on people's minds right now. We're continuing to invest in our organic growth, while at the same time, manage our costs. We've got investments in all three segments, both incremental investments as well as new plant investments. They will start up through this year. This year, we expect those add an underlying $400 million to $500 million of EBITDA mid-cycle run rate to the bottom line. On top of that, we're continuing to see strength in areas like telecommunications and data centers, automotive, even in the face of the strikes is holding up relatively well. And our view is that it should bounce back once the agreements are made between the UAW and the auto workers. Our cost positions are good. And so I think that we're positioned that once the weight of inflation starts to moderate that things start to turn back in a positive direction. And our view is that we could be in a better shape for 2024. Additionally, we've taken $1 billion of cost out since Spin. So if you think about where we're operating today, we're able to meet all of our capital allocation requirements, be free cash flow before financing breakeven, you saw a $300 million improvement this quarter in operating cash flows, and we were still able to opportunistically buy back some shares in the third quarter. So we've done our best to really manage to be able to get through the bottom of the cycle, and it's the right time for us to continue to make organic investments to get the benefit in the next up cycle.","evidence_gemma_new":"free cash flow third quarter","evidence_llama_3_3":"operating cash flow","evidence_qwen_3_30b":"operating cash flow sequential","gemma_new_max":300000000.0,"gemma_new_min":300000000.0,"llama_3_3_max":300000000.0,"llama_3_3_min":300000000.0,"qwen_3_30b_max":300000000.0,"qwen_3_30b_min":300000000.0}
{"symbol":"DOW","year":2023,"quarter":4,"date":"2023-Q4","chunk_id":2,"sub_chunk_id":0,"centroid_label":"cash flow from operations","agreed_value":1600000000.0,"count":3,"chunk":"Jim Fitterling: Thank you, Pankaj. Beginning on Slide 3, in the fourth quarter, we continue to execute with discipline and advance our long-term strategy in face of a dynamic macroeconomic environment. Net sales were $10.6 billion, down 10% versus the year-ago period, reflecting declines in all operating segments. Sales were down 1% sequentially as volume gains in Packaging & Specialty Plastics were more than offset by seasonal demand declines in Performance Materials & Coatings. Volume increased 2% year-over-year, with gains across all regions except Asia Pacific, which was flat. Sequentially volume decreased by 1%, including the impact of an unplanned event from a storm that was equivalent to a Category 1 hurricane at our Bah\u00eda Blanca site in Argentina. Local price decreased 13% year-over-year, with declines in all operating segments due to lower feedstocks and energy costs. Sequentially, price was flat, reflecting modest gains in most regions. Operating EBIT for the quarter was $559 million, down $42 million year-over-year, primarily driven by lower prices. Sequentially, operating EBIT was down $67 million, as gains in Packaging & Specialty Plastics were more than offset by seasonally lower volumes in Performance Materials & Coatings. Our cash flow generation and working capital management enabled us to deliver cash flow from operations of $1.6 billion in the quarter. We continued to reduce costs and focused on cash generation, completing our $1 billion of cost savings for the year. And in the fourth quarter, we pursued additional de-risking opportunities for our pension plans, including annuitization and risk transfer of $1.7 billion in pension liability and a one-time non-cash and non-operating settlement charge of $642 million. We also advanced our long-term strategy while returning $616 million to shareholders. And we reached final investment decision with our Board of Directors for our Path2Zero project in Fort Saskatchewan, Alberta. Now, turning to our full year performance on Slide 4. Our 2023 results demonstrate strong execution and a commitment to financial discipline. Against the dynamic macroeconomic backdrop, Team Dow continued to take proactive actions. As a result, we generated $5.2 billion in cash flow from operations for the year, reflecting a cash flow conversion of 96%. We also returned $2.6 billion to shareholders through dividends and share repurchases. Our efforts continue to be recognized externally through industry-leading awards, certifications and recognitions, and we continue to outpace our peers on leadership diversity. I'm proud of how Team Dow is delivering for our customers, driving shareholder value and supporting our communities as we progress our long-term strategy. Now, turning to operating segment performance on Slide 5. In the Packaging & Specialty Plastics segment, operating EBIT was $664 million, up $9 million compared to the year-ago period. Results were driven by lower input costs and higher operating rates, where we closed out the year strong and hit record ethylene production levels on a full-year basis. Local price declines were driven by lower global prices, while volume increases were led by higher packaging demand, primarily in the U.S., Canada and Latin America. Sequentially, operating EBIT increased by $188 million. This was driven by higher integrated polyethylene margins, the impact of planned maintenance activity in the third quarter and higher licensing revenue. Moving to the Industrial Intermediates & Infrastructure segment, operating EBIT was $15 million compared to $164 million in the year-ago period. Results were driven by lower local prices in both businesses as well as reduced supply availability in Industrial Solution. Sequentially, operating EBIT was down $6 million, driven by seasonally lower volumes in building and construction end markets, which were partially offset by seasonally higher demand for deicing fluid and higher demand for mobility applications. And in the Performance Materials & Coatings segment, operating EBIT was a loss of $61 million compared to a loss of $130 million in the year-ago period, driven by lower costs and reduced planned maintenance turnaround activity. Volume was up year-over-year, driven by higher demand in project-driven building and construction end markets. Sequentially, operating EBIT decreased $240 million, primarily due to seasonally lower volumes. Next, I'll turn it over to Jeff to review our outlook and actions on Slide 6.","evidence_gemma_new":"cash flow from operations quarter","evidence_llama_3_3":"Cash flow from operations fourth quarter","evidence_qwen_3_30b":"cash flow from operations fourth quarter","gemma_new_max":1600000000.0,"gemma_new_min":1600000000.0,"llama_3_3_max":1600000000.0,"llama_3_3_min":1600000000.0,"qwen_3_30b_max":1600000000.0,"qwen_3_30b_min":1600000000.0}
{"symbol":"DOW","year":2023,"quarter":4,"date":"2023-Q4","chunk_id":2,"sub_chunk_id":0,"centroid_label":"cash flow from operations","agreed_value":5200000000.0,"count":2,"chunk":"Jim Fitterling: Thank you, Pankaj. Beginning on Slide 3, in the fourth quarter, we continue to execute with discipline and advance our long-term strategy in face of a dynamic macroeconomic environment. Net sales were $10.6 billion, down 10% versus the year-ago period, reflecting declines in all operating segments. Sales were down 1% sequentially as volume gains in Packaging & Specialty Plastics were more than offset by seasonal demand declines in Performance Materials & Coatings. Volume increased 2% year-over-year, with gains across all regions except Asia Pacific, which was flat. Sequentially volume decreased by 1%, including the impact of an unplanned event from a storm that was equivalent to a Category 1 hurricane at our Bah\u00eda Blanca site in Argentina. Local price decreased 13% year-over-year, with declines in all operating segments due to lower feedstocks and energy costs. Sequentially, price was flat, reflecting modest gains in most regions. Operating EBIT for the quarter was $559 million, down $42 million year-over-year, primarily driven by lower prices. Sequentially, operating EBIT was down $67 million, as gains in Packaging & Specialty Plastics were more than offset by seasonally lower volumes in Performance Materials & Coatings. Our cash flow generation and working capital management enabled us to deliver cash flow from operations of $1.6 billion in the quarter. We continued to reduce costs and focused on cash generation, completing our $1 billion of cost savings for the year. And in the fourth quarter, we pursued additional de-risking opportunities for our pension plans, including annuitization and risk transfer of $1.7 billion in pension liability and a one-time non-cash and non-operating settlement charge of $642 million. We also advanced our long-term strategy while returning $616 million to shareholders. And we reached final investment decision with our Board of Directors for our Path2Zero project in Fort Saskatchewan, Alberta. Now, turning to our full year performance on Slide 4. Our 2023 results demonstrate strong execution and a commitment to financial discipline. Against the dynamic macroeconomic backdrop, Team Dow continued to take proactive actions. As a result, we generated $5.2 billion in cash flow from operations for the year, reflecting a cash flow conversion of 96%. We also returned $2.6 billion to shareholders through dividends and share repurchases. Our efforts continue to be recognized externally through industry-leading awards, certifications and recognitions, and we continue to outpace our peers on leadership diversity. I'm proud of how Team Dow is delivering for our customers, driving shareholder value and supporting our communities as we progress our long-term strategy. Now, turning to operating segment performance on Slide 5. In the Packaging & Specialty Plastics segment, operating EBIT was $664 million, up $9 million compared to the year-ago period. Results were driven by lower input costs and higher operating rates, where we closed out the year strong and hit record ethylene production levels on a full-year basis. Local price declines were driven by lower global prices, while volume increases were led by higher packaging demand, primarily in the U.S., Canada and Latin America. Sequentially, operating EBIT increased by $188 million. This was driven by higher integrated polyethylene margins, the impact of planned maintenance activity in the third quarter and higher licensing revenue. Moving to the Industrial Intermediates & Infrastructure segment, operating EBIT was $15 million compared to $164 million in the year-ago period. Results were driven by lower local prices in both businesses as well as reduced supply availability in Industrial Solution. Sequentially, operating EBIT was down $6 million, driven by seasonally lower volumes in building and construction end markets, which were partially offset by seasonally higher demand for deicing fluid and higher demand for mobility applications. And in the Performance Materials & Coatings segment, operating EBIT was a loss of $61 million compared to a loss of $130 million in the year-ago period, driven by lower costs and reduced planned maintenance turnaround activity. Volume was up year-over-year, driven by higher demand in project-driven building and construction end markets. Sequentially, operating EBIT decreased $240 million, primarily due to seasonally lower volumes. Next, I'll turn it over to Jeff to review our outlook and actions on Slide 6.","evidence_gemma_new":"cash flow from operations year","evidence_llama_3_3":"Cash flow from operations year","evidence_qwen_3_30b":null,"gemma_new_max":5200000000.0,"gemma_new_min":5200000000.0,"llama_3_3_max":5200000000.0,"llama_3_3_min":5200000000.0,"qwen_3_30b_max":null,"qwen_3_30b_min":null}
{"symbol":"DOW","year":2024,"quarter":1,"date":"2024-Q1","chunk_id":2,"sub_chunk_id":0,"centroid_label":"cash flow from operations","agreed_value":460000000.0,"count":3,"chunk":"Now let me turn the call over to Jim. James Fitterling: Thank you, Pankaj. Beginning on Slide 3. In the first quarter, Team Dow delivered sequential volume growth and margin expansion. We strategically increased operating rates to capture improving demand, we maintained pricing and we benefited from lower feedstock and energy costs. These results reflect the strength of our advantaged portfolio, including our participation in diverse end markets and our cost advantage positions around the world. Net sales were $10.8 billion, down 9% versus the year ago period but up 1% sequentially, driven by gains in Performance Materials & Coatings and Industrial Intermediates & Infrastructure. Volume increased 1% year-over-year. And excluding Hydrocarbons & Energy, volume increased 5%, with gains in all regions. This marks the second consecutive quarter of year-over-year volume growth. Sequentially, volume increased 1% and excluding Hydrocarbons & Energy, was up 3%, led by gains in Performance Materials and Coatings. Local price decreased 10% year-over-year and was flat sequentially as modest gains in Europe, the Middle East, Africa and India, or EMEAI, were offset by declines in Asia Pacific, the United States and Canada. Operating EBIT for the quarter was $674 million, down $34 million year-over-year driven by lower prices in all regions. Sequentially, operating EBIT was up $115 million, reflecting gains in Performance Materials & Coatings and Industrial Intermediates & Infrastructure. We delivered cash flow from operations of $460 million in the quarter, resulting in a 94% cash flow conversion on a trailing 12-month basis. This reflects our focus on cash flow generation and enabled $693 million in returns to shareholders. We also advanced our long-term strategy with our higher return, highly capital-efficient Path2Zero project in Fort Saskatchewan, Alberta, where construction started earlier this month. Now turning to our operating segment performance on Slide 4. In the Packaging & Specialty Plastics segment, operating EBIT was $605 million, down $37 million compared to the year ago period, primarily due to lower integrated margins. Local price declines were primarily driven by lower energy and feedstock costs globally. Volume decreased year-over-year driven by declines in the Hydrocarbons & Energy business. This was primarily due to prioritizing higher-value downstream derivative polymer sales as well as lighter feed slate cracking in Europe. Sequentially, operating EBIT decreased by $59 million as improved polyethylene integrated margins were more than offset by expected lower nonrecurring licensing revenue and higher planned maintenance activity. Moving to the Industrial Intermediates & Infrastructure segment. Operating EBIT was $87 million compared to $123 million in the year ago period. Results were driven by lower prices in both businesses, which were partly offset by 3 items: lower energy and feedstock costs, improved equity earnings and volume gains in Polyurethanes & Construction Chemicals. Sequentially, operating EBIT was up $72 million driven by improved equity earnings and lower energy and feedstock costs, primarily in EMEAI. And in the Performance Materials & Coatings segment, operating EBIT was $41 million, up $6 million compared to the year ago period, driven by volume growth and higher operating rates. Volume was up year-over-year driven by gains primarily in the United States, Canada and Latin America. Sequentially, operating EBIT increased $102 million driven by higher seasonal volumes and overall improved demand. Now I'll turn it over to Jeff to review our outlook and actions.","evidence_gemma_new":"cash flow from operations","evidence_llama_3_3":"Cash flow from operations","evidence_qwen_3_30b":"cash flow from operations $460 million 94% cash flow conversion on a trailing 12-month basis","gemma_new_max":460000000.0,"gemma_new_min":460000000.0,"llama_3_3_max":460000000.0,"llama_3_3_min":460000000.0,"qwen_3_30b_max":460000000.0,"qwen_3_30b_min":460000000.0}
{"symbol":"DOW","year":2024,"quarter":2,"date":"2024-Q2","chunk_id":2,"sub_chunk_id":0,"centroid_label":"cash flow from operations","agreed_value":832000000.0,"count":3,"chunk":"Jim Fitterling: Thank you, Andrew. Beginning on slide three, in the second quarter, team Dow delivered sequential top and bottom line growth, as well as the third consecutive quarter of year-over-year volume growth. We achieved this despite a slower-than-expected global macroeconomic recovery, particularly in areas like building and construction and consumer durables. Net sales were $10.9 billion, down 4% versus the year ago period and up 1% sequentially, driven by gains in packaging and specialty plastics and performance materials and coatings. Volume increased 1% versus the year ago period with gains led by the United States and Canada. Excluding hydrocarbons and energy sales, which were down primarily due to lighter feed slate cracking in Europe, volume increased 4%. Sequentially, volume increased 1% with gains in all regions except Asia Pacific, which was flat. Local price decreased 4% year-over-year. Sequentially, local price increased 1% led by gains in Europe, the Middle East, Africa, and India or EMEA. Operating EBIT was $819 million, up $145 million sequentially, reflecting gains in packaging and specialty plastics and performance materials and coatings. Cash flow from operations was $832 million on higher earnings and an efficient release of working capital, resulting in an 85% cash flow conversion on a trailing 12-month basis. Our focus on cash flow generation enabled $691 million in returns to shareholders, including $491 million through dividends and $200 million in share repurchases. In June, we published our 2023 Intersections Progress Report. This report showcases the positive impact that we are making on the environment and society and importantly, how those actions support long-term profitable growth. Now turning to our operating segment performance on slide four. In the packaging and specialty plastic segment, operating EBIT was $703 million, down $215 million a year-over-year, this was driven by lower integrated margins, higher planned maintenance activity, and lower non-recurring licensing sales. Local peak declines were due to lower downstream polymer prices, primarily in Asia Pacific. Volume decreased year-over-year as higher demand for functional polymers and polyethylene was more than offset by lower merchant hydrocarbon sales, primarily due to lighter feed slate cracking in Europe. Sequentially, operating EBIT increased by $98 million, primarily due to higher integrated margins behind both price and volume gain. Moving to the Industrial Intermediates & Infrastructure segment, operating EBIT was $7 million, an improvement of $42 million versus the year-ago period. Results were driven by improved equity earnings, partly offset by lower integrated margins. Local price declined year-over-year, but volume was up, driven by gains in polyurethane and construction chemicals. Sequentially operating EBIT decreased $80 million, driven by higher planned maintenance activity and higher equity losses, as well as lower volumes. And in the performance materials and coating segment, operating EBIT was $146 million, up $80 million, compared to the year-ago period, driven by broad-based business and geographic volume growth. Local price declined year-over-year, but volume was up, driven by gains in both businesses and all geographic regions. Sequentially operating EBIT increased to $105 million, driven by volume and price gains in both businesses and lower planned maintenance activity. Now I'll turn it over to Jeff to review our outlook and share some examples of our playbook in action.","evidence_gemma_new":"Cash flow from operations","evidence_llama_3_3":"Cash flow from operations second quarter","evidence_qwen_3_30b":"cash flow from operations second quarter","gemma_new_max":832000000.0,"gemma_new_min":832000000.0,"llama_3_3_max":832000000.0,"llama_3_3_min":832000000.0,"qwen_3_30b_max":832000000.0,"qwen_3_30b_min":832000000.0}
{"symbol":"DOW","year":2024,"quarter":2,"date":"2024-Q2","chunk_id":24,"sub_chunk_id":0,"centroid_label":"cash flow from operations","agreed_value":800000000.0,"count":3,"chunk":"Jeff Tate: Yes. Good morning, Mike, thanks for the question. From our perspective, first of all, when you look at the second quarter, we saw some really positive side, where would deliver over $800 million in cash from operations. Our conversion rate was at 55% and our free cash flow was a positive $109 million. All of those are sequential improvements over what we delivered in the first quarter. So we're really trending well. As we think about the full-year, Mike, one of the things that we would act is from a working capital standpoint, you can expect the use of cash anywhere from the $600 million to $800 million range. You've seen in our slide deck here, we got some guidance on some of the other key levers related to full year cash flow. But 1 of the areas where we're pleased about is our ability and the joint ventures to be able to get greater dividends out of debt, which we're focused on moving forward as well as our -- looking at our liquidity right now, we're in a really good position. We've got well over $3 billion of cash and cash equivalents and total liquidity of $13 billion. And right now, we don't have any debt maturities of substantive levels until 2027. And the other thing I'd also like to remind you of as well is the fact that over the past several years, DOW has done a solid job of being able to deliver what we like to call unique-to-Dow cash levers of anywhere from $1 billion to $3 billion. And our expectation is that we'll deliver at least $1.5 billion of those levers here in 2024.","evidence_gemma_new":"cash from operations","evidence_llama_3_3":"cash from operations second quarter","evidence_qwen_3_30b":"cash from operations second quarter","gemma_new_max":800000000.0,"gemma_new_min":800000000.0,"llama_3_3_max":800000000.0,"llama_3_3_min":800000000.0,"qwen_3_30b_max":800000000.0,"qwen_3_30b_min":800000000.0}
{"symbol":"DOW","year":2024,"quarter":3,"date":"2024-Q3","chunk_id":29,"sub_chunk_id":0,"centroid_label":"cash flow from operations","agreed_value":800000000.0,"count":2,"chunk":"Jeff Tate: Hi, good morning Chris, thanks for the question. For us when we look at third quarter, we generated $800 million in cash flow from operations, which gave us an almost 60% conversion rate, which led to actually positive free cash flow in the quarter, which is pretty similar in terms of the range that we had for second quarter. So we've seen some stability there. A couple of other puts and takes that I think are important is that we've been able to maintain our cash conversion cycle at 42 days, which is top quartile in comparison to our peers. And so that's an eight-day improvement that we've been able to achieve versus pre-COVID levels. Another thing that's important here is that our cash balance at almost $3 billion, as well as the additional liquidity that we have of another $10 billion, gives us total liquidity of $13 billion to-date, and we have no subsequent debt maturities due until 2027. And the other thing I would also remind you of Chris, is the fact that we continue to make the commitment of unique to Dow cash levers and being able to deliver at least $1 billion of those cash levers here each and every year, and we still maintain that commitment moving forward.","evidence_gemma_new":"cash flow from operations third quarter","evidence_llama_3_3":null,"evidence_qwen_3_30b":"cash flow from operations third quarter","gemma_new_max":800000000.0,"gemma_new_min":800000000.0,"llama_3_3_max":null,"llama_3_3_min":null,"qwen_3_30b_max":800000000.0,"qwen_3_30b_min":800000000.0}
{"symbol":"DOW","year":2024,"quarter":4,"date":"2024-Q4","chunk_id":23,"sub_chunk_id":0,"centroid_label":"cash flow from operations","agreed_value":800000000.0,"count":2,"chunk":"Jeff Tate: Yes. Thanks, Jen, and good morning, Jeff. Yes, a couple of things here on the cash flow. In the fourth quarter, we did generate $800 million in cash from operations. And our cash conversion rate was approximately 67%. One of the things that we did intentionally do in the fourth quarter is because of our first quarter 2025 on heavy turnaround activity, we did purposely and intentionally build some additional inventory, especially as some of those turnarounds are going to be in some of our high-growth areas from a business perspective. So some of that was very intentional, Jeff, in terms of the build of the inventory that we saw. In addition to that, we continue to maintain a really strong cash conversion cycle that we've taken out eight days since span and we continue to be very disciplined in our approach to maintaining that ability to not only get the eight days out, but look for opportunities to get maybe another one or two days moving forward.","evidence_gemma_new":null,"evidence_llama_3_3":"cash from operations fourth quarter","evidence_qwen_3_30b":"cash from operations In the fourth quarter","gemma_new_max":null,"gemma_new_min":null,"llama_3_3_max":800000000.0,"llama_3_3_min":800000000.0,"qwen_3_30b_max":800000000.0,"qwen_3_30b_min":800000000.0}
{"symbol":"DOW","year":2023,"quarter":1,"date":"2023-FY","chunk_id":2,"sub_chunk_id":0,"centroid_label":"cost savings","agreed_value":1000000000.0,"count":3,"chunk":"Jim Fitterling: Thank you, Pankaj. Beginning on Slide 3. In the first quarter, Team Dow demonstrated its agility, delivering sequential earnings improvement in what continues to be a challenging environment. These results reflect our competitive advantages and operating discipline as we leveraged our structurally advantaged feedstock positions, proactively aligned our operating rates with market demand and focused on higher-value products where pockets of demand remain resilient, such as pharmaceutical applications, energy, commercial building and construction and mobility end markets. Additionally, our actions to deliver $1 billion in cost savings in 2023 are progressing with $100 million achieved in the first quarter. These actions will ensure we continue to focus on cash flow generation through our low-cost to serve operating model. Turning to the details of the quarter. Net sales were $11.9 billion, down 22% year-over-year. Declines in all operating segments were driven by continued soft global macroeconomic activity. Sales were flat sequentially, as gains in performance materials and coatings and packaging and specialty plastics offset declines in industrial intermediates and infrastructure. Volume decreased 11% year-over-year, led by declines in Europe, the Middle East, Africa and India or EMEA. However, volumes increased 2% sequentially on gains in performance materials and coatings and packaging and specialty plastics. Local price declined 10% year-over-year and 4% quarter-over-quarter, due to industry supply additions in some businesses amidst soft global economic conditions. Operating EBIT for the quarter was $708 million, down year-over-year due to lower local prices and volumes. Sequentially, operating EBIT improved by $107 million, with gains primarily driven by performance materials and coatings. Cash flow from operations was $531 million in the quarter. On a trailing 12-month basis, cash flow conversion was 85%. With ample financial flexibility and a strong balance sheet, we are continuing to execute on our strategy as we advance our disciplined and balanced capital allocation priorities for long-term value creation. We returned $621 million to shareholders through dividends and share repurchases during the quarter and our balance sheet continues to have no substantive long-term debt maturities until 2027. Now turning to operating segment performance on Slide 4. In the Packaging & Specialty Plastics segment, operating EBIT was $642 million compared to $1.2 billion in the year ago period, primarily due to lower integrated polyethylene margins. Continued margin resilience in functional polymers was more than offset by lower polyethylene and olefins margins. Volume declines were primarily driven by lower consumer demand in EMEA. Sadara also had lower export volumes due to planned maintenance activity. Sequentially, operating EBIT was down by $13 million. Improved input costs and higher operating rates in our most cost advantage assets were more than offset by lower sales from non-recurring licensing activity and lower equity earnings. Moving to the Industrial Intermediates & Infrastructure segment. Operating EBIT for the segment was $123 million compared to $661 million in the year ago period. Results were driven by lower pricing and demand, as well as higher energy costs, particularly in EMEA. Sequentially, operating EBIT was down $41 million. Lower energy costs were more than offset by decreased demand and pricing for propylene oxide, its derivatives, and in isocyanates, in polyurethanes and construction chemicals. Industrial Solutions experienced lower volumes due to weather-related impacts and a third-party supply outage combined with lower demand in industrial end markets. And in the Performance Materials and Coatings segment, operating EBIT for the segment was $35 million compared to $595 million in the year ago period. Local price declines for siloxanes were driven by competitive pricing pressure from supply additions in China. Volume was down as resilient demand for commercial building and construction, mobility and industrial coatings was more than offset by volume declines in siloxanes and architectural coatings. Sequentially, operating EBIT increased $165 million, driven by improved supply availability, seasonally higher volumes, and reduced value chain destocking. Next, I'll turn it over to Howard to review our outlooks and actions on Slide 5.","evidence_gemma_new":"cost savings 2023","evidence_llama_3_3":"cost savings 2023","evidence_qwen_3_30b":"cost savings 2023","gemma_new_max":1000000000.0,"gemma_new_min":1000000000.0,"llama_3_3_max":1000000000.0,"llama_3_3_min":1000000000.0,"qwen_3_30b_max":1000000000.0,"qwen_3_30b_min":1000000000.0}
{"symbol":"DOW","year":2023,"quarter":1,"date":"2023-Q1","chunk_id":57,"sub_chunk_id":0,"centroid_label":"cost savings","agreed_value":1000000000.0,"count":2,"chunk":"Howard Ungerleider: Yes. No, I think -- I mean, Arun, you're thinking about it right in terms of the walk from Q1 to Q2. I would say my perspective, Jim, you may have your own view. But -- look, I think $2 billion is light from a normalized basis. We're still looking at that 6 to 12 current portfolio view from trough to peak, and that's heading in the middle of the decade, that should be more like 7.5 or 8 to as much as 13 or eventually 14 once we add in the Alberta project. So I think a more normalized EBITDA for us is in that $9 million to $10 million range in a normalized macro. So, when you're looking at $1.5 billion, plus or minus, you're still -- you're right around the floor of the earnings quarter on an annualized basis. And then, obviously, that $1 billion of cost saves that will ramp, 65% that will get us -- will come to the bottom line in the second half of the year, that just is there to protect and ensure that we can deliver in that $6 billion plus or minus range.","evidence_gemma_new":"target cost saving","evidence_llama_3_3":"cost saving $1 billion","evidence_qwen_3_30b":null,"gemma_new_max":1000000000.0,"gemma_new_min":1000000000.0,"llama_3_3_max":1000000000.0,"llama_3_3_min":1000000000.0,"qwen_3_30b_max":null,"qwen_3_30b_min":null}
{"symbol":"DOW","year":2023,"quarter":1,"date":"2023-Q1","chunk_id":3,"sub_chunk_id":0,"centroid_label":"cost savings","agreed_value":35.0,"count":2,"chunk":"Howard Ungerleider: Thank you, Jim, and good morning, everyone. In the second quarter, we expect to continue navigating challenging macro conditions around the world. While the pace of inflation has slowed, elevated levels continue to pressure both input costs and demand, particularly in industrials, durable goods, and housing. On the bright side, demand in agriculture and energy markets remains resilient, as does consumer demand for personal care and household items. In the U.S., consumer spending continues to moderate while retail sales were up 2.9% year-over-year in March. After contracting for five straight months, normalizing value chain inventories are driving improvements in manufacturing PMI, which reached 50.4 in April. Residential building and construction markets remain under pressure, with housing starts and building permit down around 20% year-over-year in March. However, builder confidence increased for the fourth straight month in April on growing demand in the new home market due to limited resale inventory. In Europe, while energy prices have remained lower than previously anticipated, higher inflation levels continue to weigh on both consumer and business sentiment with manufacturing PMI continuing to contract since July of last year. In China, March industrial production rose 3.9% year-over-year and is recovering gradually with manufacturing PMI now at 50. March retail sales also rose 10.6% year-over-year at their fastest pace since July 2021. Though recovery following the pandemic lockdowns has been slow, we continue expect growth over the medium term. Against this backdrop, we continue to take disciplined actions to manage our costs and deliver our target of $1 billion in cost savings in 2023. We're implementing our global workforce reduction program of approximately 2,000 roles. Notifications have begun and 75% of the impacted roles will exit by the end of the second quarter. We're also continuing to review our global asset footprint on a business by business and region by region approach, rationalizing select higher cost, lower return assets in line with market fundamentals. Additionally, we're executing opportunities to reduce operating costs. This includes decreasing maintenance turnaround spending by $300 million year-over-year and driving efficiencies through the value chain, including streamlining our logistics networks and reducing our spend of purchased raw materials and contract services. All in, we expect to deliver approximately 35% of our cost savings in the first half of the year and the remaining 65% in the second half of the year. Turning to our outlook for the second quarter on Slide 6. In the Packaging & Specialty Plastic segment, we see signs of improving domestic demand versus the start of the year, as well as continued easing in marine pack cargo allowing for increased export volumes. We expect healthy oil to gas spreads to continue to favor cost advantaged positions as rates increase to meet seasonally higher demand levels. All in, we expect these factors to have a $75 million tailwind versus the prior quarter, along with another approximately $70 million tailwind from cost savings actions. We anticipate these will be partly offset by a $25 million headwind from a seasonal increase in planned maintenance activity. In the Industrial Intermediates & Infrastructure segment, demand remains resilient in energy and pharmaceutical end markets. However, we expect continued demand pressure in consumer durables, and building and construction, which is also driving a decline in cost pricing from its recent peak. We anticipate a $25 million tailwind from improved volumes in Industrial Solutions following third party outages and the winter weather related impacts, as well as a $20 million tailwind from cost savings actions. Additionally, Dow will begin to turn around at our Louisiana Glycols facility, which is projected to be a $50 million headwind for the segment. In the Performance Materials & Coatings segment, while demand for consumer electronics and industrial end markets is softening, we're seeing a seasonal increase in demand for coating applications as well as improvement in mobility. Our cost saving action will deliver a $50 million tailwind for the segment. The completion of our first quarter turnaround at our Deer Park acrylic monomers facility will be offset by impacts from the planned maintenance at our Carrollton and our Zhangjiagang siloxanes facilities. All in, with puts and takes mentioned and listed on our model and guidance slide, we expect a sequential earnings improvement of $150 million to $200 million versus the prior quarter. With that, I'll turn it back to Jim.","evidence_gemma_new":"cost savings first half of the year","evidence_llama_3_3":null,"evidence_qwen_3_30b":"cost savings first half of the year","gemma_new_max":35.0,"gemma_new_min":35.0,"llama_3_3_max":null,"llama_3_3_min":null,"qwen_3_30b_max":35.0,"qwen_3_30b_min":35.0}
{"symbol":"DOW","year":2023,"quarter":2,"date":"2023-Q2","chunk_id":36,"sub_chunk_id":0,"centroid_label":"cost savings","agreed_value":50000000.0,"count":3,"chunk":"Jim Fitterling: Good morning, Duffy. Well, obviously, on the on the top line, I think sales, obviously, are going to be down about 5% on the high side. It could be down as much as 9%. I think you're going to see -- obviously, we talked a lot about feedstocks and packaging, especially plastics, that'll be one element. We have the one time related items from second quarter to third quarter that won't repeat on licensing, so that's about a $100 million. Cost savings is about $50 million to the positive. And then we just finished -- we just have the turnaround at the cracker St. Charles, which is a $100 million. So I'd say on price, volume -- my expectation is, volume is going to continue to move as we've seen in the second quarter. We have advantaged cost positions around the world and we're taking advantage of that. They're running at high rates and we're able to export. And so, we're going to take advantage of that in the third quarter, and then we're going to navigate the price and, obviously, the headwinds that we have on raw material. I would say the team's already shifting on flexibility. We've got butane in some cases and propane back in the slate in some areas to mitigate some of the higher ethane costs. If you look at II&I, obviously, the big impact will be the loss of capacity out of glycol in Plaquemann. So that'll be a $100 million headwind. That's partly lost margin on those sales and partly the cost of rebuilding the asset and getting it back operational. Cost savings and maintenance activities are actually about a $40 million tailwind. And then we'll continue to see how demand holds up. Automotive demand has been relatively good, but housing and construction has been relatively weak on the polyurethane side. Performance Materials and Coatings, I think volumes are going to hold up well. The price pressure in siloxanes has been the biggest headwind there. Although it's flattened and if it maintains flat, then we may not see as much of a headwind there. Cost savings and lower plan maintenance activity are about a $60 million tailwind for them. So on PM&C, I'd say the other seasonal impact will be a slower seasonal return to kind of a normal seasonal outlook for coatings, because architectural coatings have been relatively weaker. Industrial coatings have been strong, but architectural coatings compared to last year have been relatively weaker. That's kind of the outlook on all three. I'd expect at the high end, all three of them will be down, primarily due to price not so much on volume. And then as obviously demand returns, we'll start to see some pricing power come back in.","evidence_gemma_new":"cost savings $50 million","evidence_llama_3_3":"cost savings third quarter","evidence_qwen_3_30b":"tailwind $50 million cost savings actions","gemma_new_max":50000000.0,"gemma_new_min":50000000.0,"llama_3_3_max":50000000.0,"llama_3_3_min":50000000.0,"qwen_3_30b_max":50000000.0,"qwen_3_30b_min":50000000.0}
{"symbol":"DOW","year":2023,"quarter":2,"date":"2023-Q2","chunk_id":50,"sub_chunk_id":0,"centroid_label":"cost savings","agreed_value":100000000.0,"count":3,"chunk":"Jim Fitterling: Yes. I think when we looked at the guide for the third quarter, there's $100 million step-up from second quarter. So that will be on a year-over-year basis, about $350 million of cost saves. And I think fourth quarter is going to be in that $300 million to $350 million as well. So two-thirds of the $1 billion, $650 million to $700 million comes out in the back half of this year. Obviously, there's some sequential carryover into next year. So you got about $150 million in the first quarter of next year from the sequential carryover. So the kind of the year-over-year and first quarter will be a step up as well. And those are the spending impacts and then obviously, the businesses are all working on margin improvement within their portfolios. And then Howard mentioned, in addition to the $1 billion of cost saves, we're working on $1 billion of cash levers, unique to Dow cash levers. And I think he just outlined them on the previous question. So I'd say, net-net, we're focusing on cash, both on the cost side and on the cash levers where we can liberate some cash and also improving mix within the businesses and taking advantage of our low-cost positions and running those assets are and then trimming on the high-cost side where we can to set ourselves up for the ramp-up in 2024.","evidence_gemma_new":"cost savings","evidence_llama_3_3":"expect cost savings","evidence_qwen_3_30b":"guiding cost savings","gemma_new_max":100000000.0,"gemma_new_min":100000000.0,"llama_3_3_max":100000000.0,"llama_3_3_min":100000000.0,"qwen_3_30b_max":100000000.0,"qwen_3_30b_min":100000000.0}
{"symbol":"DOW","year":2023,"quarter":2,"date":"2023-Q2","chunk_id":50,"sub_chunk_id":0,"centroid_label":"cost savings","agreed_value":350000000.0,"count":2,"chunk":"Jim Fitterling: Yes. I think when we looked at the guide for the third quarter, there's $100 million step-up from second quarter. So that will be on a year-over-year basis, about $350 million of cost saves. And I think fourth quarter is going to be in that $300 million to $350 million as well. So two-thirds of the $1 billion, $650 million to $700 million comes out in the back half of this year. Obviously, there's some sequential carryover into next year. So you got about $150 million in the first quarter of next year from the sequential carryover. So the kind of the year-over-year and first quarter will be a step up as well. And those are the spending impacts and then obviously, the businesses are all working on margin improvement within their portfolios. And then Howard mentioned, in addition to the $1 billion of cost saves, we're working on $1 billion of cash levers, unique to Dow cash levers. And I think he just outlined them on the previous question. So I'd say, net-net, we're focusing on cash, both on the cost side and on the cash levers where we can liberate some cash and also improving mix within the businesses and taking advantage of our low-cost positions and running those assets are and then trimming on the high-cost side where we can to set ourselves up for the ramp-up in 2024.","evidence_gemma_new":"year-over-year basis $350 million cost saves","evidence_llama_3_3":"cost saves year-over-year","evidence_qwen_3_30b":null,"gemma_new_max":350000000.0,"gemma_new_min":350000000.0,"llama_3_3_max":350000000.0,"llama_3_3_min":350000000.0,"qwen_3_30b_max":null,"qwen_3_30b_min":null}
{"symbol":"DOW","year":2023,"quarter":2,"date":"2023-Q2","chunk_id":36,"sub_chunk_id":0,"centroid_label":"cost savings","agreed_value":40000000.0,"count":2,"chunk":"Jim Fitterling: Good morning, Duffy. Well, obviously, on the on the top line, I think sales, obviously, are going to be down about 5% on the high side. It could be down as much as 9%. I think you're going to see -- obviously, we talked a lot about feedstocks and packaging, especially plastics, that'll be one element. We have the one time related items from second quarter to third quarter that won't repeat on licensing, so that's about a $100 million. Cost savings is about $50 million to the positive. And then we just finished -- we just have the turnaround at the cracker St. Charles, which is a $100 million. So I'd say on price, volume -- my expectation is, volume is going to continue to move as we've seen in the second quarter. We have advantaged cost positions around the world and we're taking advantage of that. They're running at high rates and we're able to export. And so, we're going to take advantage of that in the third quarter, and then we're going to navigate the price and, obviously, the headwinds that we have on raw material. I would say the team's already shifting on flexibility. We've got butane in some cases and propane back in the slate in some areas to mitigate some of the higher ethane costs. If you look at II&I, obviously, the big impact will be the loss of capacity out of glycol in Plaquemann. So that'll be a $100 million headwind. That's partly lost margin on those sales and partly the cost of rebuilding the asset and getting it back operational. Cost savings and maintenance activities are actually about a $40 million tailwind. And then we'll continue to see how demand holds up. Automotive demand has been relatively good, but housing and construction has been relatively weak on the polyurethane side. Performance Materials and Coatings, I think volumes are going to hold up well. The price pressure in siloxanes has been the biggest headwind there. Although it's flattened and if it maintains flat, then we may not see as much of a headwind there. Cost savings and lower plan maintenance activity are about a $60 million tailwind for them. So on PM&C, I'd say the other seasonal impact will be a slower seasonal return to kind of a normal seasonal outlook for coatings, because architectural coatings have been relatively weaker. Industrial coatings have been strong, but architectural coatings compared to last year have been relatively weaker. That's kind of the outlook on all three. I'd expect at the high end, all three of them will be down, primarily due to price not so much on volume. And then as obviously demand returns, we'll start to see some pricing power come back in.","evidence_gemma_new":"cost savings $40 million","evidence_llama_3_3":null,"evidence_qwen_3_30b":"cost savings maintenance activities $40 million","gemma_new_max":40000000.0,"gemma_new_min":40000000.0,"llama_3_3_max":null,"llama_3_3_min":null,"qwen_3_30b_max":40000000.0,"qwen_3_30b_min":40000000.0}
{"symbol":"DOW","year":2023,"quarter":3,"date":"2023-Q3","chunk_id":47,"sub_chunk_id":0,"centroid_label":"cost savings","agreed_value":60000000.0,"count":2,"chunk":"Jim Fitterling: Yes. So - if you look at II&I, the Louisiana outage was obviously a headwind. And then you had some turnaround tailwinds and cost savings, about $40 million. Variable costs on the benzene and propylene side really compress there - and then equity earnings from Sadara were a little bit better. So, those were the moving parts. In PM&C, you had tailwinds of about $60 million from the turnaround in cost savings. So that's to the positive. You had some seasonality and lower siloxane prices to the negative and we had also improved supply availability of siloxanes and some opportunistic monomer sales in the coating side of the business, acrylates were strong in the quarter. So that was - those were the things that net-net made the swing in those two segments.","evidence_gemma_new":null,"evidence_llama_3_3":"PM&C cost savings the quarter","evidence_qwen_3_30b":"PM&C cost savings","gemma_new_max":null,"gemma_new_min":null,"llama_3_3_max":60000000.0,"llama_3_3_min":60000000.0,"qwen_3_30b_max":60000000.0,"qwen_3_30b_min":60000000.0}
{"symbol":"DOW","year":2023,"quarter":3,"date":"2023-Q3","chunk_id":2,"sub_chunk_id":0,"centroid_label":"cost savings","agreed_value":1000000000.0,"count":2,"chunk":"Jim Fitterling: Thank you, Pankaj. Beginning on Slide 3. For the third quarter, we continued to advance our long-term strategy while also taking action to reduce costs and maximize cash generation in the face of slow global macroeconomic activity and higher sequential feedstock costs. In particular, we continue to implement targeted actions to deliver $1 billion in cost savings in 2023 and delivered a sequential improvement to operating cash flow of more than $300 million. Net sales were $10.7 billion, down 24% versus the year ago period reflecting declines in all operating segments due to slower global macroeconomic activity. Sales were down 6% sequentially as volume gains were more than offset by lower local prices. Volume decreased 6% year-over-year, mainly due to lower merchant Hydrocarbons and Energy sales. Volume was up 1% sequentially, led by gains in Industrial Intermediates & Infrastructure and Performance Materials & Coatings. Volume was up 3% sequentially, excluding merchant sales and Hydrocarbons & Energy with gains across all operating segments. Local price decreased 18% year-over-year with declines in all operating segments and regions, primarily due to lower feedstock and energy costs. Sequentially, price was down 7%, primarily in Europe, the Middle East, Africa and India or EMEAI. Operating EBIT for the quarter was $626 million, down from $1.2 billion in the year ago period and $885 million in the prior quarter. Our consistent focus on cash flow generation and working capital management enabled team Dow to generate cash flow from operations of $1.7 billion, resulting in a cash flow conversion of 129% for the quarter and 103% on a trailing 12-month basis. We continue to invest in our long-term strategic priority while also returning $617 million to shareholders in the quarter through dividends and share repurchases. Year-to-date, we've returned nearly $2 billion to shareholders. Our cash flow generation continues to enable Dow to fully cover its capital allocation priorities. And our balance sheet remains the best it has been in four decades, supported by strong investment-grade credit ratings with no substantive long-term debt maturities due until 2027. Now turning to our operating segment performance on Slide 4. In the Packaging & Specialty Plastics segment, operating EBIT was $476 million compared to $785 million in the year ago period. Local price declines were driven by lower polyethylene and olefin prices in all regions, primarily as a result of lower global energy costs. Volume declined as increased polyethylene demand across all regions was more than offset by lower volumes in merchant hydrocarbons and energy sales. Sequentially, operating EBIT decreased by $442 million, driven by lower integrated polyethylene margins, increased planned maintenance activity and lower licensing revenue. Moving to the Industrial Intermediates & Infrastructure segment, operating EBIT was $21 million compared to $167 million in the year ago period. Results were driven by lower prices and demand in both businesses as well as reduced supply availability due to an unplanned event in Industrial Solutions at our Louisiana operations. Sequentially, operating EBIT was up $56 million driven by volume gains and lower costs, which were partly offset by the Louisiana event. And in the Performance Materials & Coatings segment, operating EBIT was $179 million compared to $302 million in the year ago period, driven by local price declines in both businesses. Volume was down as gains in commercial building and construction end markets were more than offset by lower demand for personal care and coatings applications and residential construction. Sequentially, operating EBIT increased $113 million, driven by higher operating rates and cost savings. Next, I'll turn it over to Howard to review our outlook and actions on Slide 5.","evidence_gemma_new":"cost savings third quarter","evidence_llama_3_3":null,"evidence_qwen_3_30b":"cost savings third quarter 2023","gemma_new_max":1000000000.0,"gemma_new_min":1000000000.0,"llama_3_3_max":null,"llama_3_3_min":null,"qwen_3_30b_max":1000000000.0,"qwen_3_30b_min":1000000000.0}
{"symbol":"DOW","year":2023,"quarter":4,"date":"2023-Q4","chunk_id":2,"sub_chunk_id":0,"centroid_label":"cost savings","agreed_value":1000000000.0,"count":2,"chunk":"Jim Fitterling: Thank you, Pankaj. Beginning on Slide 3, in the fourth quarter, we continue to execute with discipline and advance our long-term strategy in face of a dynamic macroeconomic environment. Net sales were $10.6 billion, down 10% versus the year-ago period, reflecting declines in all operating segments. Sales were down 1% sequentially as volume gains in Packaging & Specialty Plastics were more than offset by seasonal demand declines in Performance Materials & Coatings. Volume increased 2% year-over-year, with gains across all regions except Asia Pacific, which was flat. Sequentially volume decreased by 1%, including the impact of an unplanned event from a storm that was equivalent to a Category 1 hurricane at our Bah\u00eda Blanca site in Argentina. Local price decreased 13% year-over-year, with declines in all operating segments due to lower feedstocks and energy costs. Sequentially, price was flat, reflecting modest gains in most regions. Operating EBIT for the quarter was $559 million, down $42 million year-over-year, primarily driven by lower prices. Sequentially, operating EBIT was down $67 million, as gains in Packaging & Specialty Plastics were more than offset by seasonally lower volumes in Performance Materials & Coatings. Our cash flow generation and working capital management enabled us to deliver cash flow from operations of $1.6 billion in the quarter. We continued to reduce costs and focused on cash generation, completing our $1 billion of cost savings for the year. And in the fourth quarter, we pursued additional de-risking opportunities for our pension plans, including annuitization and risk transfer of $1.7 billion in pension liability and a one-time non-cash and non-operating settlement charge of $642 million. We also advanced our long-term strategy while returning $616 million to shareholders. And we reached final investment decision with our Board of Directors for our Path2Zero project in Fort Saskatchewan, Alberta. Now, turning to our full year performance on Slide 4. Our 2023 results demonstrate strong execution and a commitment to financial discipline. Against the dynamic macroeconomic backdrop, Team Dow continued to take proactive actions. As a result, we generated $5.2 billion in cash flow from operations for the year, reflecting a cash flow conversion of 96%. We also returned $2.6 billion to shareholders through dividends and share repurchases. Our efforts continue to be recognized externally through industry-leading awards, certifications and recognitions, and we continue to outpace our peers on leadership diversity. I'm proud of how Team Dow is delivering for our customers, driving shareholder value and supporting our communities as we progress our long-term strategy. Now, turning to operating segment performance on Slide 5. In the Packaging & Specialty Plastics segment, operating EBIT was $664 million, up $9 million compared to the year-ago period. Results were driven by lower input costs and higher operating rates, where we closed out the year strong and hit record ethylene production levels on a full-year basis. Local price declines were driven by lower global prices, while volume increases were led by higher packaging demand, primarily in the U.S., Canada and Latin America. Sequentially, operating EBIT increased by $188 million. This was driven by higher integrated polyethylene margins, the impact of planned maintenance activity in the third quarter and higher licensing revenue. Moving to the Industrial Intermediates & Infrastructure segment, operating EBIT was $15 million compared to $164 million in the year-ago period. Results were driven by lower local prices in both businesses as well as reduced supply availability in Industrial Solution. Sequentially, operating EBIT was down $6 million, driven by seasonally lower volumes in building and construction end markets, which were partially offset by seasonally higher demand for deicing fluid and higher demand for mobility applications. And in the Performance Materials & Coatings segment, operating EBIT was a loss of $61 million compared to a loss of $130 million in the year-ago period, driven by lower costs and reduced planned maintenance turnaround activity. Volume was up year-over-year, driven by higher demand in project-driven building and construction end markets. Sequentially, operating EBIT decreased $240 million, primarily due to seasonally lower volumes. Next, I'll turn it over to Jeff to review our outlook and actions on Slide 6.","evidence_gemma_new":"cost savings year","evidence_llama_3_3":"cost savings","evidence_qwen_3_30b":null,"gemma_new_max":1000000000.0,"gemma_new_min":1000000000.0,"llama_3_3_max":1000000000.0,"llama_3_3_min":1000000000.0,"qwen_3_30b_max":null,"qwen_3_30b_min":null}
{"symbol":"DOW","year":2023,"quarter":4,"date":"2023-Q4","chunk_id":21,"sub_chunk_id":0,"centroid_label":"cost savings","agreed_value":0.5,"count":2,"chunk":"Jeff Tate: Absolutely, Jim. In the simplest terms, about 50% of those cost savings are in P&FP, 20% to 25% are in the other two segments, respectively, and we also have a little bit in corporate as well. So, pretty well distributed based on our operations and our revenues as well.","evidence_gemma_new":"P&FP cost savings","evidence_llama_3_3":"P&FP cost savings","evidence_qwen_3_30b":null,"gemma_new_max":0.5,"gemma_new_min":0.5,"llama_3_3_max":0.5,"llama_3_3_min":0.5,"qwen_3_30b_max":null,"qwen_3_30b_min":null}
{"symbol":"DOW","year":2023,"quarter":4,"date":"2024-FY","chunk_id":22,"sub_chunk_id":0,"centroid_label":"cost savings","agreed_value":400000000.0,"count":3,"chunk":"Jim Fitterling: We ended the year at a $1.4 billion run rate on that. So, if you look at full year 2024, Jeff, we still got another $400 million coming in in terms of the cost savings for '24, but we have $200 million of higher turnarounds in 2024, so net-net $200 million coming into 2024. I hope that covers what you're looking for.","evidence_gemma_new":"cost savings full year 2024","evidence_llama_3_3":"cost savings full year 2024","evidence_qwen_3_30b":"cost savings full year 2024","gemma_new_max":400000000.0,"gemma_new_min":400000000.0,"llama_3_3_max":400000000.0,"llama_3_3_min":400000000.0,"qwen_3_30b_max":400000000.0,"qwen_3_30b_min":400000000.0}
{"symbol":"DOW","year":2023,"quarter":4,"date":"2023-FY","chunk_id":37,"sub_chunk_id":0,"centroid_label":"ebitda","agreed_value":5400000000.0,"count":2,"chunk":"Jim Fitterling: Yeah. Good question, Kevin. I would say if you look back at 2023, in the first half of the year, really the limit on PE export volumes and prices were just more on the volume side, on the supply chain side, it was the ability to get marine pack cargo moving. That improved considerably as we worked through the year. In fact, December was one of the highest months of the year for PE export sales and we've got the export channel full and lined up. And overall, we're running Canada, United States, Argentina as hard as we can. We ran at rates on crackers above 90% for the back part of the year, especially in fourth quarter. And so, to your point, unconstrained, if there's no freeze impact or anything else, we're going to be running them hard. The arbitrage is open. The volumes are there. We had up double-digit volumes for the year in plastics going to China. We actually were up year-over-year in China on P&SP as well as Industrial Solutions, and I think a little bit in Coatings -- Consumer Solutions, I'm sorry, in Consumer Solutions. So, we were off in Industrial Solutions because of Plaquemine outage, but we were up in -- slightly up in PE, slightly up in Consumer Solutions, and up double digits in P&SP. So, I think the market is there and that is -- everybody is talking about China being relatively light GDP last year and we can move those kind of volumes. My expectations are taking actions that are going to help 2024 be better. As we do the walk on 2024 for the full year EBITDA walk, we've got about $300 million of margin expansion. So, we start with $5.4 billion in 2023 of EBITDA. We have about $300 million from margin expansion. We've got about $800 million from volume growth that's in all three segments. We've got turnarounds which cost us $200 million. And then we've got about $100 million of improvement from equity earnings in the JVs. So, net-net, you're walking it up to the $6.4 billion, $6.5 billion, kind of a range for 2024. And I think with soft landing scenario in the United States, that will help domestic market. We saw good domestic volume in PE as well here.","evidence_gemma_new":"EBITDA 2023","evidence_llama_3_3":"EBITDA 2023","evidence_qwen_3_30b":null,"gemma_new_max":5400000000.0,"gemma_new_min":5400000000.0,"llama_3_3_max":5400000000.0,"llama_3_3_min":5400000000.0,"qwen_3_30b_max":null,"qwen_3_30b_min":null}
{"symbol":"DOW","year":2023,"quarter":4,"date":"2023-Q1","chunk_id":59,"sub_chunk_id":0,"centroid_label":"ebitda","agreed_value":1300000000.0,"count":3,"chunk":"Arun Viswanathan: Great. Thanks for taking my question. So that's a good segue actually to what I was thinking but it was -- if you think about the guidance that you're issuing here for Q1, it looks to be in the $1.3 billion or so level for EBITDA, give or take a little bit. But annualizing that will get you to $5.2 billion and then maybe add in a little bit for seasonality, it gets you to closer to $6 billion. Would you consider that kind of trough-like conditions? And as you move through the year in '24, what are some of the things that makes you excited that we could maybe achieve mid-cycle by -- when you're exiting the year? And I guess maybe if you can just comment on what your expectations are for China growth going forward? Obviously, we'll likely see maybe a slower growth environment for the next four or five years versus the last four or five years. Just wanted to get your thoughts on that as well. Thanks.","evidence_gemma_new":"guidance EBITDA Q1","evidence_llama_3_3":"guidance EBITDA Q1","evidence_qwen_3_30b":"EBITDA Q1","gemma_new_max":1300000000.0,"gemma_new_min":1300000000.0,"llama_3_3_max":1300000000.0,"llama_3_3_min":1300000000.0,"qwen_3_30b_max":1300000000.0,"qwen_3_30b_min":1300000000.0}
{"symbol":"DOW","year":2023,"quarter":3,"date":"2023-Q2","chunk_id":11,"sub_chunk_id":0,"centroid_label":"ebitda","agreed_value":5000000000.0,"count":2,"chunk":"David Begleiter: Thank you. Again, Howard has been an absolute pleasure and best of luck. Jim, Howard, second half EBITDA is running around $5 billion annualized, maybe a little bit more than that. How do you grow -- if the macro stays the same as it is today, how does EBITDA increase materially next year?","evidence_gemma_new":null,"evidence_llama_3_3":"EBITDA annualized second half","evidence_qwen_3_30b":"EBITDA second half annualized","gemma_new_max":null,"gemma_new_min":null,"llama_3_3_max":5000000000.0,"llama_3_3_min":5000000000.0,"qwen_3_30b_max":5000000000.0,"qwen_3_30b_min":5000000000.0}
{"symbol":"DOW","year":2023,"quarter":4,"date":"2023-Q4","chunk_id":59,"sub_chunk_id":0,"centroid_label":"ebitda","agreed_value":5200000000.0,"count":2,"chunk":"Arun Viswanathan: Great. Thanks for taking my question. So that's a good segue actually to what I was thinking but it was -- if you think about the guidance that you're issuing here for Q1, it looks to be in the $1.3 billion or so level for EBITDA, give or take a little bit. But annualizing that will get you to $5.2 billion and then maybe add in a little bit for seasonality, it gets you to closer to $6 billion. Would you consider that kind of trough-like conditions? And as you move through the year in '24, what are some of the things that makes you excited that we could maybe achieve mid-cycle by -- when you're exiting the year? And I guess maybe if you can just comment on what your expectations are for China growth going forward? Obviously, we'll likely see maybe a slower growth environment for the next four or five years versus the last four or five years. Just wanted to get your thoughts on that as well. Thanks.","evidence_gemma_new":"EBITDA","evidence_llama_3_3":"EBITDA '24","evidence_qwen_3_30b":null,"gemma_new_max":5200000000.0,"gemma_new_min":5200000000.0,"llama_3_3_max":5200000000.0,"llama_3_3_min":5200000000.0,"qwen_3_30b_max":null,"qwen_3_30b_min":null}
{"symbol":"DOW","year":2024,"quarter":1,"date":"2024-Q1","chunk_id":10,"sub_chunk_id":0,"centroid_label":"ebitda","agreed_value":6450000000.0,"count":3,"chunk":"David Begleiter: Jim, last quarter, you gave a bit of an earnings walk up to about $6.4 billion, $6.5 billion of EBITDA this year. Do you still believe that number is achievable, if not beatable, given the solid Q1 results?","evidence_gemma_new":"EBITDA last quarter","evidence_llama_3_3":"EBITDA this year","evidence_qwen_3_30b":"EBITDA last quarter this year","gemma_new_max":6450000000.0,"gemma_new_min":6450000000.0,"llama_3_3_max":6450000000.0,"llama_3_3_min":6450000000.0,"qwen_3_30b_max":6450000000.0,"qwen_3_30b_min":6450000000.0}
{"symbol":"DOW","year":2024,"quarter":2,"date":"2024-Q4","chunk_id":34,"sub_chunk_id":0,"centroid_label":"ebitda","agreed_value":150000000.0,"count":3,"chunk":"Josh Spector: Yes, hi. Good morning. I was wondering if you could give some early thoughts on fourth quarter. So a couple of quarters ago, you thought that there'd be some maybe unseasonal improvement as volumes improve. As we sit today, would you think about a normal seasonal in fourth quarter, call it, down $100 million, $200 million in EBITDA sequentially? Or are there other factors you call out that would buck that trend? Thank you.","evidence_gemma_new":"EBITDA fourth quarter","evidence_llama_3_3":"fourth quarter EBITDA","evidence_qwen_3_30b":"EBITDA fourth quarter","gemma_new_max":150000000.0,"gemma_new_min":150000000.0,"llama_3_3_max":150000000.0,"llama_3_3_min":150000000.0,"qwen_3_30b_max":150000000.0,"qwen_3_30b_min":150000000.0}
{"symbol":"DOW","year":2024,"quarter":3,"date":"2025-FY","chunk_id":46,"sub_chunk_id":0,"centroid_label":"ebitda","agreed_value":1000000000.0,"count":2,"chunk":"Mike Leithead: Great. Thank you. Good morning guys. Question maybe for Jeff around 2025. It seems like Jim earlier talked about $1 billion of year-over-year improvement in EBITDA [Technical Difficulty] $6.6 billion -- budget cash outflows in 2025. [indiscernible] CapEx [indiscernible] dividend, interest [indiscernible]. So are there further you need to [indiscernible] cash items you'd expect next year? Or should we expect net debt to remain relatively flat? Just how should we think about net cash flow next year, and sort of how does this impact the pacing of your buyback activity from here?","evidence_gemma_new":null,"evidence_llama_3_3":"EBITDA 2025","evidence_qwen_3_30b":"EBITDA year-over-year improvement 2025","gemma_new_max":null,"gemma_new_min":null,"llama_3_3_max":1000000000.0,"llama_3_3_min":1000000000.0,"qwen_3_30b_max":1000000000.0,"qwen_3_30b_min":1000000000.0}
{"symbol":"DOW","year":2023,"quarter":3,"date":"2023-Q3","chunk_id":2,"sub_chunk_id":0,"centroid_label":"industrial intermediates infrastructure segment operating ebit","agreed_value":21000000.0,"count":2,"chunk":"Jim Fitterling: Thank you, Pankaj. Beginning on Slide 3. For the third quarter, we continued to advance our long-term strategy while also taking action to reduce costs and maximize cash generation in the face of slow global macroeconomic activity and higher sequential feedstock costs. In particular, we continue to implement targeted actions to deliver $1 billion in cost savings in 2023 and delivered a sequential improvement to operating cash flow of more than $300 million. Net sales were $10.7 billion, down 24% versus the year ago period reflecting declines in all operating segments due to slower global macroeconomic activity. Sales were down 6% sequentially as volume gains were more than offset by lower local prices. Volume decreased 6% year-over-year, mainly due to lower merchant Hydrocarbons and Energy sales. Volume was up 1% sequentially, led by gains in Industrial Intermediates & Infrastructure and Performance Materials & Coatings. Volume was up 3% sequentially, excluding merchant sales and Hydrocarbons & Energy with gains across all operating segments. Local price decreased 18% year-over-year with declines in all operating segments and regions, primarily due to lower feedstock and energy costs. Sequentially, price was down 7%, primarily in Europe, the Middle East, Africa and India or EMEAI. Operating EBIT for the quarter was $626 million, down from $1.2 billion in the year ago period and $885 million in the prior quarter. Our consistent focus on cash flow generation and working capital management enabled team Dow to generate cash flow from operations of $1.7 billion, resulting in a cash flow conversion of 129% for the quarter and 103% on a trailing 12-month basis. We continue to invest in our long-term strategic priority while also returning $617 million to shareholders in the quarter through dividends and share repurchases. Year-to-date, we've returned nearly $2 billion to shareholders. Our cash flow generation continues to enable Dow to fully cover its capital allocation priorities. And our balance sheet remains the best it has been in four decades, supported by strong investment-grade credit ratings with no substantive long-term debt maturities due until 2027. Now turning to our operating segment performance on Slide 4. In the Packaging & Specialty Plastics segment, operating EBIT was $476 million compared to $785 million in the year ago period. Local price declines were driven by lower polyethylene and olefin prices in all regions, primarily as a result of lower global energy costs. Volume declined as increased polyethylene demand across all regions was more than offset by lower volumes in merchant hydrocarbons and energy sales. Sequentially, operating EBIT decreased by $442 million, driven by lower integrated polyethylene margins, increased planned maintenance activity and lower licensing revenue. Moving to the Industrial Intermediates & Infrastructure segment, operating EBIT was $21 million compared to $167 million in the year ago period. Results were driven by lower prices and demand in both businesses as well as reduced supply availability due to an unplanned event in Industrial Solutions at our Louisiana operations. Sequentially, operating EBIT was up $56 million driven by volume gains and lower costs, which were partly offset by the Louisiana event. And in the Performance Materials & Coatings segment, operating EBIT was $179 million compared to $302 million in the year ago period, driven by local price declines in both businesses. Volume was down as gains in commercial building and construction end markets were more than offset by lower demand for personal care and coatings applications and residential construction. Sequentially, operating EBIT increased $113 million, driven by higher operating rates and cost savings. Next, I'll turn it over to Howard to review our outlook and actions on Slide 5.","evidence_gemma_new":null,"evidence_llama_3_3":"Industrial Intermediates & Infrastructure segment operating EBIT year ago period","evidence_qwen_3_30b":"Industrial Intermediates & Infrastructure segment operating EBIT year ago period","gemma_new_max":null,"gemma_new_min":null,"llama_3_3_max":21000000.0,"llama_3_3_min":21000000.0,"qwen_3_30b_max":21000000.0,"qwen_3_30b_min":21000000.0}
{"symbol":"DOW","year":2023,"quarter":4,"date":"2023-Q4","chunk_id":2,"sub_chunk_id":0,"centroid_label":"industrial intermediates infrastructure segment operating ebit","agreed_value":15000000.0,"count":3,"chunk":"Jim Fitterling: Thank you, Pankaj. Beginning on Slide 3, in the fourth quarter, we continue to execute with discipline and advance our long-term strategy in face of a dynamic macroeconomic environment. Net sales were $10.6 billion, down 10% versus the year-ago period, reflecting declines in all operating segments. Sales were down 1% sequentially as volume gains in Packaging & Specialty Plastics were more than offset by seasonal demand declines in Performance Materials & Coatings. Volume increased 2% year-over-year, with gains across all regions except Asia Pacific, which was flat. Sequentially volume decreased by 1%, including the impact of an unplanned event from a storm that was equivalent to a Category 1 hurricane at our Bah\u00eda Blanca site in Argentina. Local price decreased 13% year-over-year, with declines in all operating segments due to lower feedstocks and energy costs. Sequentially, price was flat, reflecting modest gains in most regions. Operating EBIT for the quarter was $559 million, down $42 million year-over-year, primarily driven by lower prices. Sequentially, operating EBIT was down $67 million, as gains in Packaging & Specialty Plastics were more than offset by seasonally lower volumes in Performance Materials & Coatings. Our cash flow generation and working capital management enabled us to deliver cash flow from operations of $1.6 billion in the quarter. We continued to reduce costs and focused on cash generation, completing our $1 billion of cost savings for the year. And in the fourth quarter, we pursued additional de-risking opportunities for our pension plans, including annuitization and risk transfer of $1.7 billion in pension liability and a one-time non-cash and non-operating settlement charge of $642 million. We also advanced our long-term strategy while returning $616 million to shareholders. And we reached final investment decision with our Board of Directors for our Path2Zero project in Fort Saskatchewan, Alberta. Now, turning to our full year performance on Slide 4. Our 2023 results demonstrate strong execution and a commitment to financial discipline. Against the dynamic macroeconomic backdrop, Team Dow continued to take proactive actions. As a result, we generated $5.2 billion in cash flow from operations for the year, reflecting a cash flow conversion of 96%. We also returned $2.6 billion to shareholders through dividends and share repurchases. Our efforts continue to be recognized externally through industry-leading awards, certifications and recognitions, and we continue to outpace our peers on leadership diversity. I'm proud of how Team Dow is delivering for our customers, driving shareholder value and supporting our communities as we progress our long-term strategy. Now, turning to operating segment performance on Slide 5. In the Packaging & Specialty Plastics segment, operating EBIT was $664 million, up $9 million compared to the year-ago period. Results were driven by lower input costs and higher operating rates, where we closed out the year strong and hit record ethylene production levels on a full-year basis. Local price declines were driven by lower global prices, while volume increases were led by higher packaging demand, primarily in the U.S., Canada and Latin America. Sequentially, operating EBIT increased by $188 million. This was driven by higher integrated polyethylene margins, the impact of planned maintenance activity in the third quarter and higher licensing revenue. Moving to the Industrial Intermediates & Infrastructure segment, operating EBIT was $15 million compared to $164 million in the year-ago period. Results were driven by lower local prices in both businesses as well as reduced supply availability in Industrial Solution. Sequentially, operating EBIT was down $6 million, driven by seasonally lower volumes in building and construction end markets, which were partially offset by seasonally higher demand for deicing fluid and higher demand for mobility applications. And in the Performance Materials & Coatings segment, operating EBIT was a loss of $61 million compared to a loss of $130 million in the year-ago period, driven by lower costs and reduced planned maintenance turnaround activity. Volume was up year-over-year, driven by higher demand in project-driven building and construction end markets. Sequentially, operating EBIT decreased $240 million, primarily due to seasonally lower volumes. Next, I'll turn it over to Jeff to review our outlook and actions on Slide 6.","evidence_gemma_new":"Industrial Intermediates & Infrastructure operating EBIT year-ago period","evidence_llama_3_3":"Industrial Intermediates & Infrastructure Operating EBIT year-ago period","evidence_qwen_3_30b":"Industrial Intermediates & Infrastructure segment operating EBIT year-over-year","gemma_new_max":15000000.0,"gemma_new_min":15000000.0,"llama_3_3_max":15000000.0,"llama_3_3_min":15000000.0,"qwen_3_30b_max":15000000.0,"qwen_3_30b_min":15000000.0}
{"symbol":"DOW","year":2024,"quarter":1,"date":"2024-Q1","chunk_id":2,"sub_chunk_id":0,"centroid_label":"industrial intermediates infrastructure segment operating ebit","agreed_value":87000000.0,"count":3,"chunk":"Now let me turn the call over to Jim. James Fitterling: Thank you, Pankaj. Beginning on Slide 3. In the first quarter, Team Dow delivered sequential volume growth and margin expansion. We strategically increased operating rates to capture improving demand, we maintained pricing and we benefited from lower feedstock and energy costs. These results reflect the strength of our advantaged portfolio, including our participation in diverse end markets and our cost advantage positions around the world. Net sales were $10.8 billion, down 9% versus the year ago period but up 1% sequentially, driven by gains in Performance Materials & Coatings and Industrial Intermediates & Infrastructure. Volume increased 1% year-over-year. And excluding Hydrocarbons & Energy, volume increased 5%, with gains in all regions. This marks the second consecutive quarter of year-over-year volume growth. Sequentially, volume increased 1% and excluding Hydrocarbons & Energy, was up 3%, led by gains in Performance Materials and Coatings. Local price decreased 10% year-over-year and was flat sequentially as modest gains in Europe, the Middle East, Africa and India, or EMEAI, were offset by declines in Asia Pacific, the United States and Canada. Operating EBIT for the quarter was $674 million, down $34 million year-over-year driven by lower prices in all regions. Sequentially, operating EBIT was up $115 million, reflecting gains in Performance Materials & Coatings and Industrial Intermediates & Infrastructure. We delivered cash flow from operations of $460 million in the quarter, resulting in a 94% cash flow conversion on a trailing 12-month basis. This reflects our focus on cash flow generation and enabled $693 million in returns to shareholders. We also advanced our long-term strategy with our higher return, highly capital-efficient Path2Zero project in Fort Saskatchewan, Alberta, where construction started earlier this month. Now turning to our operating segment performance on Slide 4. In the Packaging & Specialty Plastics segment, operating EBIT was $605 million, down $37 million compared to the year ago period, primarily due to lower integrated margins. Local price declines were primarily driven by lower energy and feedstock costs globally. Volume decreased year-over-year driven by declines in the Hydrocarbons & Energy business. This was primarily due to prioritizing higher-value downstream derivative polymer sales as well as lighter feed slate cracking in Europe. Sequentially, operating EBIT decreased by $59 million as improved polyethylene integrated margins were more than offset by expected lower nonrecurring licensing revenue and higher planned maintenance activity. Moving to the Industrial Intermediates & Infrastructure segment. Operating EBIT was $87 million compared to $123 million in the year ago period. Results were driven by lower prices in both businesses, which were partly offset by 3 items: lower energy and feedstock costs, improved equity earnings and volume gains in Polyurethanes & Construction Chemicals. Sequentially, operating EBIT was up $72 million driven by improved equity earnings and lower energy and feedstock costs, primarily in EMEAI. And in the Performance Materials & Coatings segment, operating EBIT was $41 million, up $6 million compared to the year ago period, driven by volume growth and higher operating rates. Volume was up year-over-year driven by gains primarily in the United States, Canada and Latin America. Sequentially, operating EBIT increased $102 million driven by higher seasonal volumes and overall improved demand. Now I'll turn it over to Jeff to review our outlook and actions.","evidence_gemma_new":"Industrial Intermediates & Infrastructure segment Operating EBIT","evidence_llama_3_3":"Industrial Intermediates & Infrastructure Operating EBIT","evidence_qwen_3_30b":"Industrial Intermediates & Infrastructure segment Operating EBIT $87 million $123 million in the year ago period","gemma_new_max":87000000.0,"gemma_new_min":87000000.0,"llama_3_3_max":87000000.0,"llama_3_3_min":87000000.0,"qwen_3_30b_max":87000000.0,"qwen_3_30b_min":87000000.0}
{"symbol":"DOW","year":2024,"quarter":2,"date":"2024-Q2","chunk_id":2,"sub_chunk_id":0,"centroid_label":"industrial intermediates infrastructure segment operating ebit","agreed_value":7000000.0,"count":2,"chunk":"Jim Fitterling: Thank you, Andrew. Beginning on slide three, in the second quarter, team Dow delivered sequential top and bottom line growth, as well as the third consecutive quarter of year-over-year volume growth. We achieved this despite a slower-than-expected global macroeconomic recovery, particularly in areas like building and construction and consumer durables. Net sales were $10.9 billion, down 4% versus the year ago period and up 1% sequentially, driven by gains in packaging and specialty plastics and performance materials and coatings. Volume increased 1% versus the year ago period with gains led by the United States and Canada. Excluding hydrocarbons and energy sales, which were down primarily due to lighter feed slate cracking in Europe, volume increased 4%. Sequentially, volume increased 1% with gains in all regions except Asia Pacific, which was flat. Local price decreased 4% year-over-year. Sequentially, local price increased 1% led by gains in Europe, the Middle East, Africa, and India or EMEA. Operating EBIT was $819 million, up $145 million sequentially, reflecting gains in packaging and specialty plastics and performance materials and coatings. Cash flow from operations was $832 million on higher earnings and an efficient release of working capital, resulting in an 85% cash flow conversion on a trailing 12-month basis. Our focus on cash flow generation enabled $691 million in returns to shareholders, including $491 million through dividends and $200 million in share repurchases. In June, we published our 2023 Intersections Progress Report. This report showcases the positive impact that we are making on the environment and society and importantly, how those actions support long-term profitable growth. Now turning to our operating segment performance on slide four. In the packaging and specialty plastic segment, operating EBIT was $703 million, down $215 million a year-over-year, this was driven by lower integrated margins, higher planned maintenance activity, and lower non-recurring licensing sales. Local peak declines were due to lower downstream polymer prices, primarily in Asia Pacific. Volume decreased year-over-year as higher demand for functional polymers and polyethylene was more than offset by lower merchant hydrocarbon sales, primarily due to lighter feed slate cracking in Europe. Sequentially, operating EBIT increased by $98 million, primarily due to higher integrated margins behind both price and volume gain. Moving to the Industrial Intermediates & Infrastructure segment, operating EBIT was $7 million, an improvement of $42 million versus the year-ago period. Results were driven by improved equity earnings, partly offset by lower integrated margins. Local price declined year-over-year, but volume was up, driven by gains in polyurethane and construction chemicals. Sequentially operating EBIT decreased $80 million, driven by higher planned maintenance activity and higher equity losses, as well as lower volumes. And in the performance materials and coating segment, operating EBIT was $146 million, up $80 million, compared to the year-ago period, driven by broad-based business and geographic volume growth. Local price declined year-over-year, but volume was up, driven by gains in both businesses and all geographic regions. Sequentially operating EBIT increased to $105 million, driven by volume and price gains in both businesses and lower planned maintenance activity. Now I'll turn it over to Jeff to review our outlook and share some examples of our playbook in action.","evidence_gemma_new":"Industrial Intermediates & Infrastructure segment operating EBIT year-ago period","evidence_llama_3_3":"Industrial Intermediates & Infrastructure segment operating EBIT second quarter","evidence_qwen_3_30b":null,"gemma_new_max":7000000.0,"gemma_new_min":7000000.0,"llama_3_3_max":7000000.0,"llama_3_3_min":7000000.0,"qwen_3_30b_max":null,"qwen_3_30b_min":null}
{"symbol":"DOW","year":2024,"quarter":4,"date":"2024-Q4","chunk_id":3,"sub_chunk_id":0,"centroid_label":"industrial intermediates infrastructure segment operating ebit","agreed_value":69000000.0,"count":2,"chunk":"Karen S. Carter: Thank you, Jim. I'm pleased to join you all today. And before I begin, I'd like to mention what an honor it is to be named Dow's Chief Operating Officer. I look forward to engaging with many of you, our owners, in the near future. In my more than 30 years at Dow, I have progressed through the organization to most recently leading PNSP, the company's largest operating segment. And I have worked across a broad range of businesses and functions, including global leadership positions within the building and construction and consumer electronics and markets, as well as Dow's polyethylene franchise. This has given me a deep appreciation for our company's competitive advantages, the strength of our innovation engine, and our commitment to delivering profitable growth. As COO, my priorities are to further strengthen our customer engagement, accelerate the commercialization of Dow's innovation pipeline, and enhance reliability and productivity. I am committed to driving business and operational results, while progressing our strategic priorities to deliver long-term value for our shareholders. Now, let's move to our operating segment results. In the Packaging & Specialty Plastics segment, we entered the fourth quarter with a challenging backdrop of ample industry supply, high feedstock costs and a typical seasonal slowdown in demand. Segment results reflected a decrease in local price both year-over-year and sequentially. This was primarily driven by lower functional polymers and polyethylene prices as a result of the October price decline reflected in the market indices and other competitive price pressures throughout the quarter. Despite higher demand for flexible food and specialty packaging in all regions except Latin-America, volume for this segment was down 1% year-over-year. This was primarily driven by lower third-party hydrocarbon sales and non-recurring licensing revenue. Operating EBIT was $447 million, a decrease of $217 million compared to the year-ago period. This was primarily driven by lower integrated margins and licensing revenue. Moving to the Industrial Intermediates & Infrastructure segment. We benefited from strong global energy demand, as well as stable consumer and pharma demand. We also experienced typical seasonal improvements for deicing, while agricultural and coatings applications saw normal seasonal declines. Looking at fourth quarter results, local price declined 1% year-over-year, while volume was up 1% year-over-year. This was driven by improved supply availability in our Industrial Solutions business as we finished ramping-up our Glycol-2 unit ahead of schedule. Those gains were partly offset by continued softness in the Polyurethanes and Construction Chemicals business. Operating EBIT for the segment increased $69 million versus the year-ago period. Results were primarily driven by higher operating rates and improved supply availability in the Industrial Solutions business. And in the Performance Materials & Coating segment, volume was up 5% with strong gains across both architectural coatings and downstream silicones. We achieved this despite global weakness in building and construction end-markets as high-interest rates continue to pressure spending in residential markets. Operating EBIT increased $52 million compared to the year-ago period, driven by volume gains and lower fixed costs. Now, I'll turn the call over to Jeff, who will provide an overview of the macros and our outlook.","evidence_gemma_new":"Industrial Intermediates & Infrastructure segment Operating EBIT year-ago period","evidence_llama_3_3":"Industrial Intermediates & Infrastructure segment Operating EBIT","evidence_qwen_3_30b":null,"gemma_new_max":69000000.0,"gemma_new_min":69000000.0,"llama_3_3_max":69000000.0,"llama_3_3_min":69000000.0,"qwen_3_30b_max":null,"qwen_3_30b_min":null}
{"symbol":"DOW","year":2023,"quarter":1,"date":"2023-Q1","chunk_id":2,"sub_chunk_id":0,"centroid_label":"net sales","agreed_value":11900000000.0,"count":3,"chunk":"Jim Fitterling: Thank you, Pankaj. Beginning on Slide 3. In the first quarter, Team Dow demonstrated its agility, delivering sequential earnings improvement in what continues to be a challenging environment. These results reflect our competitive advantages and operating discipline as we leveraged our structurally advantaged feedstock positions, proactively aligned our operating rates with market demand and focused on higher-value products where pockets of demand remain resilient, such as pharmaceutical applications, energy, commercial building and construction and mobility end markets. Additionally, our actions to deliver $1 billion in cost savings in 2023 are progressing with $100 million achieved in the first quarter. These actions will ensure we continue to focus on cash flow generation through our low-cost to serve operating model. Turning to the details of the quarter. Net sales were $11.9 billion, down 22% year-over-year. Declines in all operating segments were driven by continued soft global macroeconomic activity. Sales were flat sequentially, as gains in performance materials and coatings and packaging and specialty plastics offset declines in industrial intermediates and infrastructure. Volume decreased 11% year-over-year, led by declines in Europe, the Middle East, Africa and India or EMEA. However, volumes increased 2% sequentially on gains in performance materials and coatings and packaging and specialty plastics. Local price declined 10% year-over-year and 4% quarter-over-quarter, due to industry supply additions in some businesses amidst soft global economic conditions. Operating EBIT for the quarter was $708 million, down year-over-year due to lower local prices and volumes. Sequentially, operating EBIT improved by $107 million, with gains primarily driven by performance materials and coatings. Cash flow from operations was $531 million in the quarter. On a trailing 12-month basis, cash flow conversion was 85%. With ample financial flexibility and a strong balance sheet, we are continuing to execute on our strategy as we advance our disciplined and balanced capital allocation priorities for long-term value creation. We returned $621 million to shareholders through dividends and share repurchases during the quarter and our balance sheet continues to have no substantive long-term debt maturities until 2027. Now turning to operating segment performance on Slide 4. In the Packaging & Specialty Plastics segment, operating EBIT was $642 million compared to $1.2 billion in the year ago period, primarily due to lower integrated polyethylene margins. Continued margin resilience in functional polymers was more than offset by lower polyethylene and olefins margins. Volume declines were primarily driven by lower consumer demand in EMEA. Sadara also had lower export volumes due to planned maintenance activity. Sequentially, operating EBIT was down by $13 million. Improved input costs and higher operating rates in our most cost advantage assets were more than offset by lower sales from non-recurring licensing activity and lower equity earnings. Moving to the Industrial Intermediates & Infrastructure segment. Operating EBIT for the segment was $123 million compared to $661 million in the year ago period. Results were driven by lower pricing and demand, as well as higher energy costs, particularly in EMEA. Sequentially, operating EBIT was down $41 million. Lower energy costs were more than offset by decreased demand and pricing for propylene oxide, its derivatives, and in isocyanates, in polyurethanes and construction chemicals. Industrial Solutions experienced lower volumes due to weather-related impacts and a third-party supply outage combined with lower demand in industrial end markets. And in the Performance Materials and Coatings segment, operating EBIT for the segment was $35 million compared to $595 million in the year ago period. Local price declines for siloxanes were driven by competitive pricing pressure from supply additions in China. Volume was down as resilient demand for commercial building and construction, mobility and industrial coatings was more than offset by volume declines in siloxanes and architectural coatings. Sequentially, operating EBIT increased $165 million, driven by improved supply availability, seasonally higher volumes, and reduced value chain destocking. Next, I'll turn it over to Howard to review our outlooks and actions on Slide 5.","evidence_gemma_new":"net sales year-over-year","evidence_llama_3_3":"Net sales first quarter","evidence_qwen_3_30b":"Net sales $11.9 billion down 22% year-over-year","gemma_new_max":11900000000.0,"gemma_new_min":11900000000.0,"llama_3_3_max":11900000000.0,"llama_3_3_min":11900000000.0,"qwen_3_30b_max":11900000000.0,"qwen_3_30b_min":11900000000.0}
{"symbol":"DOW","year":2023,"quarter":2,"date":"2023-Q2","chunk_id":2,"sub_chunk_id":0,"centroid_label":"net sales","agreed_value":11400000000.0,"count":2,"chunk":"Jim Fitterling: Thank you, Pankaj. Beginning on Slide 3, we continued to navigate a challenging macroeconomic environment with slow global growth in the second quarter. Despite lower year-over-year sales and earnings, Team Dow delivered sequential earnings improvement by executing on our financial and operational playbook. We leveraged our diverse portfolio to capitalize on gains in packaging and modestly higher seasonal demand in building and construction. This resulted in a sequential improvement in volume. In addition, we continue to implement our $1 billion of proactive and targeted cost savings actions delivering $250 million of savings in the quarter and $350 year to date. Net sales were $11.4 billion, down 27% versus the year ago period, reflecting lower demand and prices due to slower macroeconomic activity. Sales were down 4% sequentially, as volume gains were more than offset by lower local prices. Volume decreased 8% year-over-year, led by a 14% decline in Europe, the Middle East, Africa, and India, or EMEA. Volume was up 1% sequentially, driven by gains in Asia Pacific and Latin America, as well as in industrial intermediates and infrastructure and performance materials and coatings. Local price decreased 18% year-over-year and 5% sequentially due to lower demand on weak macroeconomic activity, as well as lower global raw material costs. Operating EBIT for the quarter was $885 million, down from $2.4 billion in the year ago period, primarily driven by lower local prices. Operating EBIT increased $177 million sequentially, driven by gains in packaging and specialty plastics. We generated cash flow from operations of more than $1.3 billion, up more than $800 million versus the prior quarter, driven by improved working capital. On a trailing 12 month basis, our cash flow conversion is 98%. Our strong financial position gives us the flexibility to continue to advance our long term strategic priorities, supported by our disciplined and balanced capital allocation strategy. In the quarter, we returned $743 million to shareholders through dividends and share repurchases. Year to date, we've returned nearly $1.4 billion. And our balance sheet remains healthy, supported by strong investment grade credit ratings. We also published our 2022 INtersections Report in June. The report once again received limited assurance by our external audit firm and showcases Dow's continued progress on our ambition to be the most innovative customer centric, inclusive and sustainable material science company in the world. Now turning to our operating segment performance on Slide 4. In the Packaging and Specialty Plastics segment, operating EBIT was $918 million compared to $1.4 billion in the year ago period. Local price declines were driven by lower global energy and feedstock costs, which in turn impacted polyethylene prices across all regions. Volume declines, primarily in EMEA, were driven by lower demand for olefins and aromatics. Sequentially operating EBIT improved by $276 million, driven by lower energy and feedstock costs. Moving to the Industrial Intermediates and Infrastructure segment, operating EBIT was a loss of $35 million, compared to earnings of 426 million in the year ago period. Results were driven by lower local prices and demand in both businesses. Volume declines were primarily driven by lower demand for consumer durables, building and construction, and industrial applications. Sequentially, operating EBIT was down $158 million due to lower local prices and increased planned maintenance turnaround activity. And in the Performance Materials and Coatings segment, operating EBIT was $66 million compared to $561 million in the year ago period. Local price decreases were driven primarily by declines for siloxanes and acrylic monomers. Volume was down on lower global demand for silicones and coatings applications. Sequentially, operating EBIT increased $31 million, driven primarily by seasonally higher volumes. Next, I'll turn it over to Howard to review our outlook and actions on Slide 5.","evidence_gemma_new":"Net sales","evidence_llama_3_3":null,"evidence_qwen_3_30b":"Net sales","gemma_new_max":11400000000.0,"gemma_new_min":11400000000.0,"llama_3_3_max":null,"llama_3_3_min":null,"qwen_3_30b_max":11400000000.0,"qwen_3_30b_min":11400000000.0}
{"symbol":"DOW","year":2023,"quarter":3,"date":"2023-Q3","chunk_id":2,"sub_chunk_id":0,"centroid_label":"net sales","agreed_value":10700000000.0,"count":3,"chunk":"Jim Fitterling: Thank you, Pankaj. Beginning on Slide 3. For the third quarter, we continued to advance our long-term strategy while also taking action to reduce costs and maximize cash generation in the face of slow global macroeconomic activity and higher sequential feedstock costs. In particular, we continue to implement targeted actions to deliver $1 billion in cost savings in 2023 and delivered a sequential improvement to operating cash flow of more than $300 million. Net sales were $10.7 billion, down 24% versus the year ago period reflecting declines in all operating segments due to slower global macroeconomic activity. Sales were down 6% sequentially as volume gains were more than offset by lower local prices. Volume decreased 6% year-over-year, mainly due to lower merchant Hydrocarbons and Energy sales. Volume was up 1% sequentially, led by gains in Industrial Intermediates & Infrastructure and Performance Materials & Coatings. Volume was up 3% sequentially, excluding merchant sales and Hydrocarbons & Energy with gains across all operating segments. Local price decreased 18% year-over-year with declines in all operating segments and regions, primarily due to lower feedstock and energy costs. Sequentially, price was down 7%, primarily in Europe, the Middle East, Africa and India or EMEAI. Operating EBIT for the quarter was $626 million, down from $1.2 billion in the year ago period and $885 million in the prior quarter. Our consistent focus on cash flow generation and working capital management enabled team Dow to generate cash flow from operations of $1.7 billion, resulting in a cash flow conversion of 129% for the quarter and 103% on a trailing 12-month basis. We continue to invest in our long-term strategic priority while also returning $617 million to shareholders in the quarter through dividends and share repurchases. Year-to-date, we've returned nearly $2 billion to shareholders. Our cash flow generation continues to enable Dow to fully cover its capital allocation priorities. And our balance sheet remains the best it has been in four decades, supported by strong investment-grade credit ratings with no substantive long-term debt maturities due until 2027. Now turning to our operating segment performance on Slide 4. In the Packaging & Specialty Plastics segment, operating EBIT was $476 million compared to $785 million in the year ago period. Local price declines were driven by lower polyethylene and olefin prices in all regions, primarily as a result of lower global energy costs. Volume declined as increased polyethylene demand across all regions was more than offset by lower volumes in merchant hydrocarbons and energy sales. Sequentially, operating EBIT decreased by $442 million, driven by lower integrated polyethylene margins, increased planned maintenance activity and lower licensing revenue. Moving to the Industrial Intermediates & Infrastructure segment, operating EBIT was $21 million compared to $167 million in the year ago period. Results were driven by lower prices and demand in both businesses as well as reduced supply availability due to an unplanned event in Industrial Solutions at our Louisiana operations. Sequentially, operating EBIT was up $56 million driven by volume gains and lower costs, which were partly offset by the Louisiana event. And in the Performance Materials & Coatings segment, operating EBIT was $179 million compared to $302 million in the year ago period, driven by local price declines in both businesses. Volume was down as gains in commercial building and construction end markets were more than offset by lower demand for personal care and coatings applications and residential construction. Sequentially, operating EBIT increased $113 million, driven by higher operating rates and cost savings. Next, I'll turn it over to Howard to review our outlook and actions on Slide 5.","evidence_gemma_new":"Net sales","evidence_llama_3_3":"Net sales year ago period","evidence_qwen_3_30b":"Net sales down 24% year ago period","gemma_new_max":10700000000.0,"gemma_new_min":10700000000.0,"llama_3_3_max":10700000000.0,"llama_3_3_min":10700000000.0,"qwen_3_30b_max":10700000000.0,"qwen_3_30b_min":10700000000.0}
{"symbol":"DOW","year":2023,"quarter":4,"date":"2023-Q4","chunk_id":2,"sub_chunk_id":0,"centroid_label":"net sales","agreed_value":10600000000.0,"count":2,"chunk":"Jim Fitterling: Thank you, Pankaj. Beginning on Slide 3, in the fourth quarter, we continue to execute with discipline and advance our long-term strategy in face of a dynamic macroeconomic environment. Net sales were $10.6 billion, down 10% versus the year-ago period, reflecting declines in all operating segments. Sales were down 1% sequentially as volume gains in Packaging & Specialty Plastics were more than offset by seasonal demand declines in Performance Materials & Coatings. Volume increased 2% year-over-year, with gains across all regions except Asia Pacific, which was flat. Sequentially volume decreased by 1%, including the impact of an unplanned event from a storm that was equivalent to a Category 1 hurricane at our Bah\u00eda Blanca site in Argentina. Local price decreased 13% year-over-year, with declines in all operating segments due to lower feedstocks and energy costs. Sequentially, price was flat, reflecting modest gains in most regions. Operating EBIT for the quarter was $559 million, down $42 million year-over-year, primarily driven by lower prices. Sequentially, operating EBIT was down $67 million, as gains in Packaging & Specialty Plastics were more than offset by seasonally lower volumes in Performance Materials & Coatings. Our cash flow generation and working capital management enabled us to deliver cash flow from operations of $1.6 billion in the quarter. We continued to reduce costs and focused on cash generation, completing our $1 billion of cost savings for the year. And in the fourth quarter, we pursued additional de-risking opportunities for our pension plans, including annuitization and risk transfer of $1.7 billion in pension liability and a one-time non-cash and non-operating settlement charge of $642 million. We also advanced our long-term strategy while returning $616 million to shareholders. And we reached final investment decision with our Board of Directors for our Path2Zero project in Fort Saskatchewan, Alberta. Now, turning to our full year performance on Slide 4. Our 2023 results demonstrate strong execution and a commitment to financial discipline. Against the dynamic macroeconomic backdrop, Team Dow continued to take proactive actions. As a result, we generated $5.2 billion in cash flow from operations for the year, reflecting a cash flow conversion of 96%. We also returned $2.6 billion to shareholders through dividends and share repurchases. Our efforts continue to be recognized externally through industry-leading awards, certifications and recognitions, and we continue to outpace our peers on leadership diversity. I'm proud of how Team Dow is delivering for our customers, driving shareholder value and supporting our communities as we progress our long-term strategy. Now, turning to operating segment performance on Slide 5. In the Packaging & Specialty Plastics segment, operating EBIT was $664 million, up $9 million compared to the year-ago period. Results were driven by lower input costs and higher operating rates, where we closed out the year strong and hit record ethylene production levels on a full-year basis. Local price declines were driven by lower global prices, while volume increases were led by higher packaging demand, primarily in the U.S., Canada and Latin America. Sequentially, operating EBIT increased by $188 million. This was driven by higher integrated polyethylene margins, the impact of planned maintenance activity in the third quarter and higher licensing revenue. Moving to the Industrial Intermediates & Infrastructure segment, operating EBIT was $15 million compared to $164 million in the year-ago period. Results were driven by lower local prices in both businesses as well as reduced supply availability in Industrial Solution. Sequentially, operating EBIT was down $6 million, driven by seasonally lower volumes in building and construction end markets, which were partially offset by seasonally higher demand for deicing fluid and higher demand for mobility applications. And in the Performance Materials & Coatings segment, operating EBIT was a loss of $61 million compared to a loss of $130 million in the year-ago period, driven by lower costs and reduced planned maintenance turnaround activity. Volume was up year-over-year, driven by higher demand in project-driven building and construction end markets. Sequentially, operating EBIT decreased $240 million, primarily due to seasonally lower volumes. Next, I'll turn it over to Jeff to review our outlook and actions on Slide 6.","evidence_gemma_new":"Net sales year-ago period","evidence_llama_3_3":"Net sales fourth quarter","evidence_qwen_3_30b":null,"gemma_new_max":10600000000.0,"gemma_new_min":10600000000.0,"llama_3_3_max":10600000000.0,"llama_3_3_min":10600000000.0,"qwen_3_30b_max":null,"qwen_3_30b_min":null}
{"symbol":"DOW","year":2024,"quarter":1,"date":"2024-Q1","chunk_id":2,"sub_chunk_id":0,"centroid_label":"net sales","agreed_value":10800000000.0,"count":2,"chunk":"Now let me turn the call over to Jim. James Fitterling: Thank you, Pankaj. Beginning on Slide 3. In the first quarter, Team Dow delivered sequential volume growth and margin expansion. We strategically increased operating rates to capture improving demand, we maintained pricing and we benefited from lower feedstock and energy costs. These results reflect the strength of our advantaged portfolio, including our participation in diverse end markets and our cost advantage positions around the world. Net sales were $10.8 billion, down 9% versus the year ago period but up 1% sequentially, driven by gains in Performance Materials & Coatings and Industrial Intermediates & Infrastructure. Volume increased 1% year-over-year. And excluding Hydrocarbons & Energy, volume increased 5%, with gains in all regions. This marks the second consecutive quarter of year-over-year volume growth. Sequentially, volume increased 1% and excluding Hydrocarbons & Energy, was up 3%, led by gains in Performance Materials and Coatings. Local price decreased 10% year-over-year and was flat sequentially as modest gains in Europe, the Middle East, Africa and India, or EMEAI, were offset by declines in Asia Pacific, the United States and Canada. Operating EBIT for the quarter was $674 million, down $34 million year-over-year driven by lower prices in all regions. Sequentially, operating EBIT was up $115 million, reflecting gains in Performance Materials & Coatings and Industrial Intermediates & Infrastructure. We delivered cash flow from operations of $460 million in the quarter, resulting in a 94% cash flow conversion on a trailing 12-month basis. This reflects our focus on cash flow generation and enabled $693 million in returns to shareholders. We also advanced our long-term strategy with our higher return, highly capital-efficient Path2Zero project in Fort Saskatchewan, Alberta, where construction started earlier this month. Now turning to our operating segment performance on Slide 4. In the Packaging & Specialty Plastics segment, operating EBIT was $605 million, down $37 million compared to the year ago period, primarily due to lower integrated margins. Local price declines were primarily driven by lower energy and feedstock costs globally. Volume decreased year-over-year driven by declines in the Hydrocarbons & Energy business. This was primarily due to prioritizing higher-value downstream derivative polymer sales as well as lighter feed slate cracking in Europe. Sequentially, operating EBIT decreased by $59 million as improved polyethylene integrated margins were more than offset by expected lower nonrecurring licensing revenue and higher planned maintenance activity. Moving to the Industrial Intermediates & Infrastructure segment. Operating EBIT was $87 million compared to $123 million in the year ago period. Results were driven by lower prices in both businesses, which were partly offset by 3 items: lower energy and feedstock costs, improved equity earnings and volume gains in Polyurethanes & Construction Chemicals. Sequentially, operating EBIT was up $72 million driven by improved equity earnings and lower energy and feedstock costs, primarily in EMEAI. And in the Performance Materials & Coatings segment, operating EBIT was $41 million, up $6 million compared to the year ago period, driven by volume growth and higher operating rates. Volume was up year-over-year driven by gains primarily in the United States, Canada and Latin America. Sequentially, operating EBIT increased $102 million driven by higher seasonal volumes and overall improved demand. Now I'll turn it over to Jeff to review our outlook and actions.","evidence_gemma_new":"Net sales year ago period sequentially","evidence_llama_3_3":"Net sales versus the year ago period","evidence_qwen_3_30b":null,"gemma_new_max":10800000000.0,"gemma_new_min":10800000000.0,"llama_3_3_max":10800000000.0,"llama_3_3_min":10800000000.0,"qwen_3_30b_max":null,"qwen_3_30b_min":null}
{"symbol":"DOW","year":2024,"quarter":2,"date":"2024-Q2","chunk_id":2,"sub_chunk_id":0,"centroid_label":"net sales","agreed_value":10900000000.0,"count":2,"chunk":"Jim Fitterling: Thank you, Andrew. Beginning on slide three, in the second quarter, team Dow delivered sequential top and bottom line growth, as well as the third consecutive quarter of year-over-year volume growth. We achieved this despite a slower-than-expected global macroeconomic recovery, particularly in areas like building and construction and consumer durables. Net sales were $10.9 billion, down 4% versus the year ago period and up 1% sequentially, driven by gains in packaging and specialty plastics and performance materials and coatings. Volume increased 1% versus the year ago period with gains led by the United States and Canada. Excluding hydrocarbons and energy sales, which were down primarily due to lighter feed slate cracking in Europe, volume increased 4%. Sequentially, volume increased 1% with gains in all regions except Asia Pacific, which was flat. Local price decreased 4% year-over-year. Sequentially, local price increased 1% led by gains in Europe, the Middle East, Africa, and India or EMEA. Operating EBIT was $819 million, up $145 million sequentially, reflecting gains in packaging and specialty plastics and performance materials and coatings. Cash flow from operations was $832 million on higher earnings and an efficient release of working capital, resulting in an 85% cash flow conversion on a trailing 12-month basis. Our focus on cash flow generation enabled $691 million in returns to shareholders, including $491 million through dividends and $200 million in share repurchases. In June, we published our 2023 Intersections Progress Report. This report showcases the positive impact that we are making on the environment and society and importantly, how those actions support long-term profitable growth. Now turning to our operating segment performance on slide four. In the packaging and specialty plastic segment, operating EBIT was $703 million, down $215 million a year-over-year, this was driven by lower integrated margins, higher planned maintenance activity, and lower non-recurring licensing sales. Local peak declines were due to lower downstream polymer prices, primarily in Asia Pacific. Volume decreased year-over-year as higher demand for functional polymers and polyethylene was more than offset by lower merchant hydrocarbon sales, primarily due to lighter feed slate cracking in Europe. Sequentially, operating EBIT increased by $98 million, primarily due to higher integrated margins behind both price and volume gain. Moving to the Industrial Intermediates & Infrastructure segment, operating EBIT was $7 million, an improvement of $42 million versus the year-ago period. Results were driven by improved equity earnings, partly offset by lower integrated margins. Local price declined year-over-year, but volume was up, driven by gains in polyurethane and construction chemicals. Sequentially operating EBIT decreased $80 million, driven by higher planned maintenance activity and higher equity losses, as well as lower volumes. And in the performance materials and coating segment, operating EBIT was $146 million, up $80 million, compared to the year-ago period, driven by broad-based business and geographic volume growth. Local price declined year-over-year, but volume was up, driven by gains in both businesses and all geographic regions. Sequentially operating EBIT increased to $105 million, driven by volume and price gains in both businesses and lower planned maintenance activity. Now I'll turn it over to Jeff to review our outlook and share some examples of our playbook in action.","evidence_gemma_new":"Net sales year ago period","evidence_llama_3_3":"Net sales second quarter","evidence_qwen_3_30b":null,"gemma_new_max":10900000000.0,"gemma_new_min":10900000000.0,"llama_3_3_max":10900000000.0,"llama_3_3_min":10900000000.0,"qwen_3_30b_max":null,"qwen_3_30b_min":null}
{"symbol":"DOW","year":2024,"quarter":3,"date":"2024-Q3","chunk_id":2,"sub_chunk_id":0,"centroid_label":"net sales","agreed_value":10900000000.0,"count":3,"chunk":"Jim Fitterling : Thank you, Andrew. Beginning on Slide 3, our cost advantage footprint in the Americas continues to provide strong competitive edge capturing demand growth in attractive markets and regions. In the third quarter, Team Dow delivered our fourth consecutive quarter of year-over-year volume growth. We delivered this despite a soft macroeconomic environment, primarily in Europe and China, as well as an unplanned cracker outage in Texas, which has been successfully restarted and is running well. Net sales in the Q3 were $10.9 billion, this is up 1% versus the year ago period led by higher demand and local prices in the United States and Canada. Volume increased 1% versus the year ago period and prior periods. Sequentially, we saw gains in Packaging and Specialty Plastics and Industrial Intermediates and Infrastructure. Local price was flat year-over-year as gains in Packaging and Specialty Plastics were offset by decreases in Performance Materials and Coatings. Sequentially, local price was down 1% due to minor declines across all segments. Operating EBIT was $641 million, up $15 million year-over-year, reflecting higher integrated margins in Packaging and Specialty Plastics, which were partly offset by the impact of the unplanned cracker outage in Texas and higher planned maintenance activity. Cash flow from continuing operations was $800 million down year-over-year, primarily due to higher inventories to support both sales growth and labor related supply chain disruptions. Shareholder remuneration for the quarter was $584 million including dividends and share repurchases. In addition, we progressed our long-term growth strategy including signing a long-term agreement with Linde for the supply of clean hydrogen for our Path2Zero project in Fort Saskatchewan. We also completed the acquisition of US based polyethylene recycler Circulus. This will add capacity of 50,000 metric tons of recycled materials annually to Dow's portfolio. Now turning to our operating segment performance on Slide 4. In the Packaging and Specialty Plastics segment, local price increased year-over-year led by higher polyethylene prices in all regions except Latin America, which was flat. Volume was flat year-over-year as higher demand for functional polymers in all regions was offset by lower polyethylene volumes. Operating EBIT was $618 million an increase of $142 million year-over-year. This was primarily driven by higher integrated margins, which were partly offset by the impact of the unplanned cracker outage I mentioned earlier. Moving to the Industrial Intermediates and Infrastructure segment, local price was flat year-over-year. In addition, volume was down 2%. This was driven by lower volumes in Polyurethanes and Construction chemicals, which were primarily due to a force majeure in MDI following a third-party supplier outage. Operating EBIT decreased $74 million versus the year ago period. Results were driven by higher planned maintenance activity and lower integrated margins, which were partly offset by improved equity earnings. And in the Performance Materials and Coatings segment, local price declined year-over-year, while volume was up 5% with gains in both businesses and across all geographic regions. Operating EBIT was $140 million down $39 million compared to the year ago period, driven by higher raw material costs, which were partly offset by higher volumes. Moving to Slide 5. The strength of Dow's differentiated portfolio is defined by our strategic and purpose built asset footprint which leverages low cost feedstock positions, primarily in the Americas. Our growth investments are concentrated in higher value businesses and regions, particularly where demand is resilient and we have a competitive cost advantage. Over the past few years, we've demonstrated our commitment to operating with the best owner mindset by taking proactive actions with select higher cost assets aligned with the evolving market dynamics. Since 2023, we have undertaken more than 20 asset actions. These include targeted rationalization of our global polyols capacity, shutting down our propylene oxide unit in Freeport, Texas in 2025 to reduce lower value merchant PO exposure, strengthening our coatings footprint with select asset closures and announcing the sale of our laminating adhesives business for $150 million including two manufacturing sites in Italy, which we expect to finalize in the fourth quarter of this year. Overall, these actions have been primarily focused on our industrial, intermediates and infrastructure segment and in the EMEA region. On Slide 6, current market dynamics are impacting Europe, including continued soft demand, coupled with a persistent lack of long-term regulatory policy. This ongoing absence of clear, consistent, and competitive regulatory policy in Europe has resulted in many challenges for our industry. These challenges have been acknowledged in statements by EU government leaders, top economists, and our peers. And while a demand recovery in other parts of the world was expected to provide swift upside across the markets we serve, this alone is unlikely to be enough in Europe. Given these dynamics, we've begun a strategic review of select European assets, primarily those in our polyurethane business. This review includes all value-creating options for these assets and currently consists of approximately 20% of our sales in the EMEA region. We expect to complete this review by mid-2025. We continue to engage with governments both directly as well as through our leadership in trade associations to improve the industry's overall competitiveness in the region. Decisions regarding the strategic review, similar to our prior actions, will focus on strengthening Dow's global portfolio. This enables us to invest in the most attractive opportunities and create long-term value growth for our shareholders. Now, I'll turn it over to Jeff to review our outlook and guidance.","evidence_gemma_new":"Q3 Net sales","evidence_llama_3_3":"Net sales Q3","evidence_qwen_3_30b":"Net sales Q3","gemma_new_max":10900000000.0,"gemma_new_min":10900000000.0,"llama_3_3_max":10900000000.0,"llama_3_3_min":10900000000.0,"qwen_3_30b_max":10900000000.0,"qwen_3_30b_min":10900000000.0}
{"symbol":"DOW","year":2024,"quarter":4,"date":"2024-Q4","chunk_id":2,"sub_chunk_id":0,"centroid_label":"net sales","agreed_value":10400000000.0,"count":2,"chunk":"Jim Fitterling: Thank you, Andrew. Beginning on Slide 3, there's a lot to unpack in our results this quarter, so let me first walk through the headlines. In the fourth quarter, Team Dow delivered our fifth consecutive quarter of year-over-year volume growth despite continued weak macroeconomic conditions. Net sales were $10.4 billion, which is down 2% versus the year ago period, and reflects pricing pressure seen across the industry in the quarter. Local price was down 3% year-over-year and sequentially with declines across all our operating segments. Operating EBITDA was $1.2 billion, which is approximately flat compared to the same period last year. Cash flow from continuing operations was $811 million, resulting in free cash flow of $44 million. Returns to shareholders totaled $492 million of dividends in the quarter, and our total CapEx spend was $767 million. As you saw in our numbers this quarter, we also had a non-cash tax adjustment impacting net income and EPS. Jeff will provide more details on that later in this call. Throughout the quarter, we announced additional actions that continued to support the optimization of our global portfolio for growth, while maintaining a best owner mindset. For example, we continued to ramp up operating rates at our Texas-8 cracker and Glycol 2 unit. We completed the sale of our flexible packaging laminating adhesive business to Arkema for an enterprise value of approximately $150 million. And we've designed a definitive agreement with Macquarie Asset Management for the sale of a minority stake in select U.S. Gulf Coast infrastructure assets for which we expect to receive cash proceeds of up to $3 billion. And driven by persistently weak global macroeconomic conditions, we announced a strategic review of select European assets, primarily in our polyurethanes business, where demand has been structurally challenged over the past five years, making it the highest cost region for several of our key businesses. We are also postponing a maintenance turnaround at one of our ethylene crackers in Europe. This decision will result in us idling this asset starting in second quarter until market dynamics improve. And today we announced targeted actions to reduce our costs by $1 billion and our CapEx by $300 million to $500 million. Collectively, the additional actions are focused on reinforcing our long-term competitiveness as we continue to navigate this prolonged economic downturn. Turning to Slide 4. In 2024, Team Dow continued to advance both our near-term priorities and our long-term strategy to become a stronger, more innovative company. We delivered net sales of $43 billion, operating EBIT of $2.6 billion, and year-over-year volume growth of 3%, excluding merchant hydrocarbon sales. Earlier in 2024, we began construction at our Path2Zero investment in Fort Saskatchewan, Alberta. When complete, the project is expected to generate approximately $1 billion in incremental EBITDA annually by 2030. Dow is also recognized externally through industry-leading awards and certifications. Last year, we earned 12 Edison Awards for Innovation and Great Place to Work and Fortune, named out as one of the top 25 world's best workplaces. Team Dow navigated several challenges over the past year, including weather-related and supply chain disruptions, and continued uncertainty in many regions and markets that we serve. And in response to evolving market dynamics and sluggish demand recovery in Europe, we demonstrated our best owner mindset with more than 20 proactive actions to address higher cost assets. I remain confident in our company's ability to foster a sustainable future, achieve long-term profitable growth, and enhance shareholder returns. Now, I'm pleased to turn it over to Karen S. Carter, Dow's Chief Operating Officer, who will provide an overview of our operating segment performance on Slide 5.","evidence_gemma_new":"Net sales the fourth quarter","evidence_llama_3_3":null,"evidence_qwen_3_30b":"Net sales down 2% fourth quarter","gemma_new_max":10400000000.0,"gemma_new_min":10400000000.0,"llama_3_3_max":null,"llama_3_3_min":null,"qwen_3_30b_max":10400000000.0,"qwen_3_30b_min":10400000000.0}
{"symbol":"DOW","year":2024,"quarter":4,"date":"2024-Q4","chunk_id":2,"sub_chunk_id":0,"centroid_label":"net sales","agreed_value":43000000000.0,"count":2,"chunk":"Jim Fitterling: Thank you, Andrew. Beginning on Slide 3, there's a lot to unpack in our results this quarter, so let me first walk through the headlines. In the fourth quarter, Team Dow delivered our fifth consecutive quarter of year-over-year volume growth despite continued weak macroeconomic conditions. Net sales were $10.4 billion, which is down 2% versus the year ago period, and reflects pricing pressure seen across the industry in the quarter. Local price was down 3% year-over-year and sequentially with declines across all our operating segments. Operating EBITDA was $1.2 billion, which is approximately flat compared to the same period last year. Cash flow from continuing operations was $811 million, resulting in free cash flow of $44 million. Returns to shareholders totaled $492 million of dividends in the quarter, and our total CapEx spend was $767 million. As you saw in our numbers this quarter, we also had a non-cash tax adjustment impacting net income and EPS. Jeff will provide more details on that later in this call. Throughout the quarter, we announced additional actions that continued to support the optimization of our global portfolio for growth, while maintaining a best owner mindset. For example, we continued to ramp up operating rates at our Texas-8 cracker and Glycol 2 unit. We completed the sale of our flexible packaging laminating adhesive business to Arkema for an enterprise value of approximately $150 million. And we've designed a definitive agreement with Macquarie Asset Management for the sale of a minority stake in select U.S. Gulf Coast infrastructure assets for which we expect to receive cash proceeds of up to $3 billion. And driven by persistently weak global macroeconomic conditions, we announced a strategic review of select European assets, primarily in our polyurethanes business, where demand has been structurally challenged over the past five years, making it the highest cost region for several of our key businesses. We are also postponing a maintenance turnaround at one of our ethylene crackers in Europe. This decision will result in us idling this asset starting in second quarter until market dynamics improve. And today we announced targeted actions to reduce our costs by $1 billion and our CapEx by $300 million to $500 million. Collectively, the additional actions are focused on reinforcing our long-term competitiveness as we continue to navigate this prolonged economic downturn. Turning to Slide 4. In 2024, Team Dow continued to advance both our near-term priorities and our long-term strategy to become a stronger, more innovative company. We delivered net sales of $43 billion, operating EBIT of $2.6 billion, and year-over-year volume growth of 3%, excluding merchant hydrocarbon sales. Earlier in 2024, we began construction at our Path2Zero investment in Fort Saskatchewan, Alberta. When complete, the project is expected to generate approximately $1 billion in incremental EBITDA annually by 2030. Dow is also recognized externally through industry-leading awards and certifications. Last year, we earned 12 Edison Awards for Innovation and Great Place to Work and Fortune, named out as one of the top 25 world's best workplaces. Team Dow navigated several challenges over the past year, including weather-related and supply chain disruptions, and continued uncertainty in many regions and markets that we serve. And in response to evolving market dynamics and sluggish demand recovery in Europe, we demonstrated our best owner mindset with more than 20 proactive actions to address higher cost assets. I remain confident in our company's ability to foster a sustainable future, achieve long-term profitable growth, and enhance shareholder returns. Now, I'm pleased to turn it over to Karen S. Carter, Dow's Chief Operating Officer, who will provide an overview of our operating segment performance on Slide 5.","evidence_gemma_new":"net sales","evidence_llama_3_3":null,"evidence_qwen_3_30b":"net sales operating EBIT year-over-year volume growth of 3% excluding merchant hydrocarbon sales 2024","gemma_new_max":43000000000.0,"gemma_new_min":43000000000.0,"llama_3_3_max":null,"llama_3_3_min":null,"qwen_3_30b_max":43000000000.0,"qwen_3_30b_min":43000000000.0}
{"symbol":"DOW","year":2023,"quarter":1,"date":"2023-Q1","chunk_id":2,"sub_chunk_id":0,"centroid_label":"operating ebitda","agreed_value":708000000.0,"count":3,"chunk":"Jim Fitterling: Thank you, Pankaj. Beginning on Slide 3. In the first quarter, Team Dow demonstrated its agility, delivering sequential earnings improvement in what continues to be a challenging environment. These results reflect our competitive advantages and operating discipline as we leveraged our structurally advantaged feedstock positions, proactively aligned our operating rates with market demand and focused on higher-value products where pockets of demand remain resilient, such as pharmaceutical applications, energy, commercial building and construction and mobility end markets. Additionally, our actions to deliver $1 billion in cost savings in 2023 are progressing with $100 million achieved in the first quarter. These actions will ensure we continue to focus on cash flow generation through our low-cost to serve operating model. Turning to the details of the quarter. Net sales were $11.9 billion, down 22% year-over-year. Declines in all operating segments were driven by continued soft global macroeconomic activity. Sales were flat sequentially, as gains in performance materials and coatings and packaging and specialty plastics offset declines in industrial intermediates and infrastructure. Volume decreased 11% year-over-year, led by declines in Europe, the Middle East, Africa and India or EMEA. However, volumes increased 2% sequentially on gains in performance materials and coatings and packaging and specialty plastics. Local price declined 10% year-over-year and 4% quarter-over-quarter, due to industry supply additions in some businesses amidst soft global economic conditions. Operating EBIT for the quarter was $708 million, down year-over-year due to lower local prices and volumes. Sequentially, operating EBIT improved by $107 million, with gains primarily driven by performance materials and coatings. Cash flow from operations was $531 million in the quarter. On a trailing 12-month basis, cash flow conversion was 85%. With ample financial flexibility and a strong balance sheet, we are continuing to execute on our strategy as we advance our disciplined and balanced capital allocation priorities for long-term value creation. We returned $621 million to shareholders through dividends and share repurchases during the quarter and our balance sheet continues to have no substantive long-term debt maturities until 2027. Now turning to operating segment performance on Slide 4. In the Packaging & Specialty Plastics segment, operating EBIT was $642 million compared to $1.2 billion in the year ago period, primarily due to lower integrated polyethylene margins. Continued margin resilience in functional polymers was more than offset by lower polyethylene and olefins margins. Volume declines were primarily driven by lower consumer demand in EMEA. Sadara also had lower export volumes due to planned maintenance activity. Sequentially, operating EBIT was down by $13 million. Improved input costs and higher operating rates in our most cost advantage assets were more than offset by lower sales from non-recurring licensing activity and lower equity earnings. Moving to the Industrial Intermediates & Infrastructure segment. Operating EBIT for the segment was $123 million compared to $661 million in the year ago period. Results were driven by lower pricing and demand, as well as higher energy costs, particularly in EMEA. Sequentially, operating EBIT was down $41 million. Lower energy costs were more than offset by decreased demand and pricing for propylene oxide, its derivatives, and in isocyanates, in polyurethanes and construction chemicals. Industrial Solutions experienced lower volumes due to weather-related impacts and a third-party supply outage combined with lower demand in industrial end markets. And in the Performance Materials and Coatings segment, operating EBIT for the segment was $35 million compared to $595 million in the year ago period. Local price declines for siloxanes were driven by competitive pricing pressure from supply additions in China. Volume was down as resilient demand for commercial building and construction, mobility and industrial coatings was more than offset by volume declines in siloxanes and architectural coatings. Sequentially, operating EBIT increased $165 million, driven by improved supply availability, seasonally higher volumes, and reduced value chain destocking. Next, I'll turn it over to Howard to review our outlooks and actions on Slide 5.","evidence_gemma_new":"Operating EBIT year-over-year","evidence_llama_3_3":"Operating EBIT first quarter","evidence_qwen_3_30b":"operating EBIT $708 million down year-over-year","gemma_new_max":708000000.0,"gemma_new_min":708000000.0,"llama_3_3_max":708000000.0,"llama_3_3_min":708000000.0,"qwen_3_30b_max":708000000.0,"qwen_3_30b_min":708000000.0}
{"symbol":"DOW","year":2023,"quarter":1,"date":"2023-Q1","chunk_id":2,"sub_chunk_id":0,"centroid_label":"operating ebitda","agreed_value":123000000.0,"count":2,"chunk":"Jim Fitterling: Thank you, Pankaj. Beginning on Slide 3. In the first quarter, Team Dow demonstrated its agility, delivering sequential earnings improvement in what continues to be a challenging environment. These results reflect our competitive advantages and operating discipline as we leveraged our structurally advantaged feedstock positions, proactively aligned our operating rates with market demand and focused on higher-value products where pockets of demand remain resilient, such as pharmaceutical applications, energy, commercial building and construction and mobility end markets. Additionally, our actions to deliver $1 billion in cost savings in 2023 are progressing with $100 million achieved in the first quarter. These actions will ensure we continue to focus on cash flow generation through our low-cost to serve operating model. Turning to the details of the quarter. Net sales were $11.9 billion, down 22% year-over-year. Declines in all operating segments were driven by continued soft global macroeconomic activity. Sales were flat sequentially, as gains in performance materials and coatings and packaging and specialty plastics offset declines in industrial intermediates and infrastructure. Volume decreased 11% year-over-year, led by declines in Europe, the Middle East, Africa and India or EMEA. However, volumes increased 2% sequentially on gains in performance materials and coatings and packaging and specialty plastics. Local price declined 10% year-over-year and 4% quarter-over-quarter, due to industry supply additions in some businesses amidst soft global economic conditions. Operating EBIT for the quarter was $708 million, down year-over-year due to lower local prices and volumes. Sequentially, operating EBIT improved by $107 million, with gains primarily driven by performance materials and coatings. Cash flow from operations was $531 million in the quarter. On a trailing 12-month basis, cash flow conversion was 85%. With ample financial flexibility and a strong balance sheet, we are continuing to execute on our strategy as we advance our disciplined and balanced capital allocation priorities for long-term value creation. We returned $621 million to shareholders through dividends and share repurchases during the quarter and our balance sheet continues to have no substantive long-term debt maturities until 2027. Now turning to operating segment performance on Slide 4. In the Packaging & Specialty Plastics segment, operating EBIT was $642 million compared to $1.2 billion in the year ago period, primarily due to lower integrated polyethylene margins. Continued margin resilience in functional polymers was more than offset by lower polyethylene and olefins margins. Volume declines were primarily driven by lower consumer demand in EMEA. Sadara also had lower export volumes due to planned maintenance activity. Sequentially, operating EBIT was down by $13 million. Improved input costs and higher operating rates in our most cost advantage assets were more than offset by lower sales from non-recurring licensing activity and lower equity earnings. Moving to the Industrial Intermediates & Infrastructure segment. Operating EBIT for the segment was $123 million compared to $661 million in the year ago period. Results were driven by lower pricing and demand, as well as higher energy costs, particularly in EMEA. Sequentially, operating EBIT was down $41 million. Lower energy costs were more than offset by decreased demand and pricing for propylene oxide, its derivatives, and in isocyanates, in polyurethanes and construction chemicals. Industrial Solutions experienced lower volumes due to weather-related impacts and a third-party supply outage combined with lower demand in industrial end markets. And in the Performance Materials and Coatings segment, operating EBIT for the segment was $35 million compared to $595 million in the year ago period. Local price declines for siloxanes were driven by competitive pricing pressure from supply additions in China. Volume was down as resilient demand for commercial building and construction, mobility and industrial coatings was more than offset by volume declines in siloxanes and architectural coatings. Sequentially, operating EBIT increased $165 million, driven by improved supply availability, seasonally higher volumes, and reduced value chain destocking. Next, I'll turn it over to Howard to review our outlooks and actions on Slide 5.","evidence_gemma_new":"Operating EBIT year ago period","evidence_llama_3_3":null,"evidence_qwen_3_30b":"operating EBIT $123 million $661 million","gemma_new_max":123000000.0,"gemma_new_min":123000000.0,"llama_3_3_max":null,"llama_3_3_min":null,"qwen_3_30b_max":123000000.0,"qwen_3_30b_min":123000000.0}
{"symbol":"DOW","year":2023,"quarter":2,"date":"2023-Q2","chunk_id":2,"sub_chunk_id":0,"centroid_label":"operating ebitda","agreed_value":885000000.0,"count":2,"chunk":"Jim Fitterling: Thank you, Pankaj. Beginning on Slide 3, we continued to navigate a challenging macroeconomic environment with slow global growth in the second quarter. Despite lower year-over-year sales and earnings, Team Dow delivered sequential earnings improvement by executing on our financial and operational playbook. We leveraged our diverse portfolio to capitalize on gains in packaging and modestly higher seasonal demand in building and construction. This resulted in a sequential improvement in volume. In addition, we continue to implement our $1 billion of proactive and targeted cost savings actions delivering $250 million of savings in the quarter and $350 year to date. Net sales were $11.4 billion, down 27% versus the year ago period, reflecting lower demand and prices due to slower macroeconomic activity. Sales were down 4% sequentially, as volume gains were more than offset by lower local prices. Volume decreased 8% year-over-year, led by a 14% decline in Europe, the Middle East, Africa, and India, or EMEA. Volume was up 1% sequentially, driven by gains in Asia Pacific and Latin America, as well as in industrial intermediates and infrastructure and performance materials and coatings. Local price decreased 18% year-over-year and 5% sequentially due to lower demand on weak macroeconomic activity, as well as lower global raw material costs. Operating EBIT for the quarter was $885 million, down from $2.4 billion in the year ago period, primarily driven by lower local prices. Operating EBIT increased $177 million sequentially, driven by gains in packaging and specialty plastics. We generated cash flow from operations of more than $1.3 billion, up more than $800 million versus the prior quarter, driven by improved working capital. On a trailing 12 month basis, our cash flow conversion is 98%. Our strong financial position gives us the flexibility to continue to advance our long term strategic priorities, supported by our disciplined and balanced capital allocation strategy. In the quarter, we returned $743 million to shareholders through dividends and share repurchases. Year to date, we've returned nearly $1.4 billion. And our balance sheet remains healthy, supported by strong investment grade credit ratings. We also published our 2022 INtersections Report in June. The report once again received limited assurance by our external audit firm and showcases Dow's continued progress on our ambition to be the most innovative customer centric, inclusive and sustainable material science company in the world. Now turning to our operating segment performance on Slide 4. In the Packaging and Specialty Plastics segment, operating EBIT was $918 million compared to $1.4 billion in the year ago period. Local price declines were driven by lower global energy and feedstock costs, which in turn impacted polyethylene prices across all regions. Volume declines, primarily in EMEA, were driven by lower demand for olefins and aromatics. Sequentially operating EBIT improved by $276 million, driven by lower energy and feedstock costs. Moving to the Industrial Intermediates and Infrastructure segment, operating EBIT was a loss of $35 million, compared to earnings of 426 million in the year ago period. Results were driven by lower local prices and demand in both businesses. Volume declines were primarily driven by lower demand for consumer durables, building and construction, and industrial applications. Sequentially, operating EBIT was down $158 million due to lower local prices and increased planned maintenance turnaround activity. And in the Performance Materials and Coatings segment, operating EBIT was $66 million compared to $561 million in the year ago period. Local price decreases were driven primarily by declines for siloxanes and acrylic monomers. Volume was down on lower global demand for silicones and coatings applications. Sequentially, operating EBIT increased $31 million, driven primarily by seasonally higher volumes. Next, I'll turn it over to Howard to review our outlook and actions on Slide 5.","evidence_gemma_new":"Operating EBIT the quarter","evidence_llama_3_3":null,"evidence_qwen_3_30b":"Operating EBIT","gemma_new_max":885000000.0,"gemma_new_min":885000000.0,"llama_3_3_max":null,"llama_3_3_min":null,"qwen_3_30b_max":885000000.0,"qwen_3_30b_min":885000000.0}
{"symbol":"DOW","year":2023,"quarter":3,"date":"2023-Q3","chunk_id":2,"sub_chunk_id":0,"centroid_label":"operating ebitda","agreed_value":626000000.0,"count":3,"chunk":"Jim Fitterling: Thank you, Pankaj. Beginning on Slide 3. For the third quarter, we continued to advance our long-term strategy while also taking action to reduce costs and maximize cash generation in the face of slow global macroeconomic activity and higher sequential feedstock costs. In particular, we continue to implement targeted actions to deliver $1 billion in cost savings in 2023 and delivered a sequential improvement to operating cash flow of more than $300 million. Net sales were $10.7 billion, down 24% versus the year ago period reflecting declines in all operating segments due to slower global macroeconomic activity. Sales were down 6% sequentially as volume gains were more than offset by lower local prices. Volume decreased 6% year-over-year, mainly due to lower merchant Hydrocarbons and Energy sales. Volume was up 1% sequentially, led by gains in Industrial Intermediates & Infrastructure and Performance Materials & Coatings. Volume was up 3% sequentially, excluding merchant sales and Hydrocarbons & Energy with gains across all operating segments. Local price decreased 18% year-over-year with declines in all operating segments and regions, primarily due to lower feedstock and energy costs. Sequentially, price was down 7%, primarily in Europe, the Middle East, Africa and India or EMEAI. Operating EBIT for the quarter was $626 million, down from $1.2 billion in the year ago period and $885 million in the prior quarter. Our consistent focus on cash flow generation and working capital management enabled team Dow to generate cash flow from operations of $1.7 billion, resulting in a cash flow conversion of 129% for the quarter and 103% on a trailing 12-month basis. We continue to invest in our long-term strategic priority while also returning $617 million to shareholders in the quarter through dividends and share repurchases. Year-to-date, we've returned nearly $2 billion to shareholders. Our cash flow generation continues to enable Dow to fully cover its capital allocation priorities. And our balance sheet remains the best it has been in four decades, supported by strong investment-grade credit ratings with no substantive long-term debt maturities due until 2027. Now turning to our operating segment performance on Slide 4. In the Packaging & Specialty Plastics segment, operating EBIT was $476 million compared to $785 million in the year ago period. Local price declines were driven by lower polyethylene and olefin prices in all regions, primarily as a result of lower global energy costs. Volume declined as increased polyethylene demand across all regions was more than offset by lower volumes in merchant hydrocarbons and energy sales. Sequentially, operating EBIT decreased by $442 million, driven by lower integrated polyethylene margins, increased planned maintenance activity and lower licensing revenue. Moving to the Industrial Intermediates & Infrastructure segment, operating EBIT was $21 million compared to $167 million in the year ago period. Results were driven by lower prices and demand in both businesses as well as reduced supply availability due to an unplanned event in Industrial Solutions at our Louisiana operations. Sequentially, operating EBIT was up $56 million driven by volume gains and lower costs, which were partly offset by the Louisiana event. And in the Performance Materials & Coatings segment, operating EBIT was $179 million compared to $302 million in the year ago period, driven by local price declines in both businesses. Volume was down as gains in commercial building and construction end markets were more than offset by lower demand for personal care and coatings applications and residential construction. Sequentially, operating EBIT increased $113 million, driven by higher operating rates and cost savings. Next, I'll turn it over to Howard to review our outlook and actions on Slide 5.","evidence_gemma_new":"Operating EBIT third quarter","evidence_llama_3_3":"Operating EBIT year ago period","evidence_qwen_3_30b":"Operating EBIT $626 million year ago period","gemma_new_max":626000000.0,"gemma_new_min":626000000.0,"llama_3_3_max":626000000.0,"llama_3_3_min":626000000.0,"qwen_3_30b_max":626000000.0,"qwen_3_30b_min":626000000.0}
{"symbol":"DOW","year":2023,"quarter":4,"date":"2023-Q4","chunk_id":2,"sub_chunk_id":0,"centroid_label":"operating ebitda","agreed_value":559000000.0,"count":3,"chunk":"Jim Fitterling: Thank you, Pankaj. Beginning on Slide 3, in the fourth quarter, we continue to execute with discipline and advance our long-term strategy in face of a dynamic macroeconomic environment. Net sales were $10.6 billion, down 10% versus the year-ago period, reflecting declines in all operating segments. Sales were down 1% sequentially as volume gains in Packaging & Specialty Plastics were more than offset by seasonal demand declines in Performance Materials & Coatings. Volume increased 2% year-over-year, with gains across all regions except Asia Pacific, which was flat. Sequentially volume decreased by 1%, including the impact of an unplanned event from a storm that was equivalent to a Category 1 hurricane at our Bah\u00eda Blanca site in Argentina. Local price decreased 13% year-over-year, with declines in all operating segments due to lower feedstocks and energy costs. Sequentially, price was flat, reflecting modest gains in most regions. Operating EBIT for the quarter was $559 million, down $42 million year-over-year, primarily driven by lower prices. Sequentially, operating EBIT was down $67 million, as gains in Packaging & Specialty Plastics were more than offset by seasonally lower volumes in Performance Materials & Coatings. Our cash flow generation and working capital management enabled us to deliver cash flow from operations of $1.6 billion in the quarter. We continued to reduce costs and focused on cash generation, completing our $1 billion of cost savings for the year. And in the fourth quarter, we pursued additional de-risking opportunities for our pension plans, including annuitization and risk transfer of $1.7 billion in pension liability and a one-time non-cash and non-operating settlement charge of $642 million. We also advanced our long-term strategy while returning $616 million to shareholders. And we reached final investment decision with our Board of Directors for our Path2Zero project in Fort Saskatchewan, Alberta. Now, turning to our full year performance on Slide 4. Our 2023 results demonstrate strong execution and a commitment to financial discipline. Against the dynamic macroeconomic backdrop, Team Dow continued to take proactive actions. As a result, we generated $5.2 billion in cash flow from operations for the year, reflecting a cash flow conversion of 96%. We also returned $2.6 billion to shareholders through dividends and share repurchases. Our efforts continue to be recognized externally through industry-leading awards, certifications and recognitions, and we continue to outpace our peers on leadership diversity. I'm proud of how Team Dow is delivering for our customers, driving shareholder value and supporting our communities as we progress our long-term strategy. Now, turning to operating segment performance on Slide 5. In the Packaging & Specialty Plastics segment, operating EBIT was $664 million, up $9 million compared to the year-ago period. Results were driven by lower input costs and higher operating rates, where we closed out the year strong and hit record ethylene production levels on a full-year basis. Local price declines were driven by lower global prices, while volume increases were led by higher packaging demand, primarily in the U.S., Canada and Latin America. Sequentially, operating EBIT increased by $188 million. This was driven by higher integrated polyethylene margins, the impact of planned maintenance activity in the third quarter and higher licensing revenue. Moving to the Industrial Intermediates & Infrastructure segment, operating EBIT was $15 million compared to $164 million in the year-ago period. Results were driven by lower local prices in both businesses as well as reduced supply availability in Industrial Solution. Sequentially, operating EBIT was down $6 million, driven by seasonally lower volumes in building and construction end markets, which were partially offset by seasonally higher demand for deicing fluid and higher demand for mobility applications. And in the Performance Materials & Coatings segment, operating EBIT was a loss of $61 million compared to a loss of $130 million in the year-ago period, driven by lower costs and reduced planned maintenance turnaround activity. Volume was up year-over-year, driven by higher demand in project-driven building and construction end markets. Sequentially, operating EBIT decreased $240 million, primarily due to seasonally lower volumes. Next, I'll turn it over to Jeff to review our outlook and actions on Slide 6.","evidence_gemma_new":"Operating EBIT quarter year-over-year","evidence_llama_3_3":"Operating EBIT year-over-year","evidence_qwen_3_30b":"Operating EBIT fourth quarter","gemma_new_max":559000000.0,"gemma_new_min":559000000.0,"llama_3_3_max":559000000.0,"llama_3_3_min":559000000.0,"qwen_3_30b_max":559000000.0,"qwen_3_30b_min":559000000.0}
{"symbol":"DOW","year":2024,"quarter":1,"date":"2024-Q1","chunk_id":2,"sub_chunk_id":0,"centroid_label":"operating ebitda","agreed_value":674000000.0,"count":2,"chunk":"Now let me turn the call over to Jim. James Fitterling: Thank you, Pankaj. Beginning on Slide 3. In the first quarter, Team Dow delivered sequential volume growth and margin expansion. We strategically increased operating rates to capture improving demand, we maintained pricing and we benefited from lower feedstock and energy costs. These results reflect the strength of our advantaged portfolio, including our participation in diverse end markets and our cost advantage positions around the world. Net sales were $10.8 billion, down 9% versus the year ago period but up 1% sequentially, driven by gains in Performance Materials & Coatings and Industrial Intermediates & Infrastructure. Volume increased 1% year-over-year. And excluding Hydrocarbons & Energy, volume increased 5%, with gains in all regions. This marks the second consecutive quarter of year-over-year volume growth. Sequentially, volume increased 1% and excluding Hydrocarbons & Energy, was up 3%, led by gains in Performance Materials and Coatings. Local price decreased 10% year-over-year and was flat sequentially as modest gains in Europe, the Middle East, Africa and India, or EMEAI, were offset by declines in Asia Pacific, the United States and Canada. Operating EBIT for the quarter was $674 million, down $34 million year-over-year driven by lower prices in all regions. Sequentially, operating EBIT was up $115 million, reflecting gains in Performance Materials & Coatings and Industrial Intermediates & Infrastructure. We delivered cash flow from operations of $460 million in the quarter, resulting in a 94% cash flow conversion on a trailing 12-month basis. This reflects our focus on cash flow generation and enabled $693 million in returns to shareholders. We also advanced our long-term strategy with our higher return, highly capital-efficient Path2Zero project in Fort Saskatchewan, Alberta, where construction started earlier this month. Now turning to our operating segment performance on Slide 4. In the Packaging & Specialty Plastics segment, operating EBIT was $605 million, down $37 million compared to the year ago period, primarily due to lower integrated margins. Local price declines were primarily driven by lower energy and feedstock costs globally. Volume decreased year-over-year driven by declines in the Hydrocarbons & Energy business. This was primarily due to prioritizing higher-value downstream derivative polymer sales as well as lighter feed slate cracking in Europe. Sequentially, operating EBIT decreased by $59 million as improved polyethylene integrated margins were more than offset by expected lower nonrecurring licensing revenue and higher planned maintenance activity. Moving to the Industrial Intermediates & Infrastructure segment. Operating EBIT was $87 million compared to $123 million in the year ago period. Results were driven by lower prices in both businesses, which were partly offset by 3 items: lower energy and feedstock costs, improved equity earnings and volume gains in Polyurethanes & Construction Chemicals. Sequentially, operating EBIT was up $72 million driven by improved equity earnings and lower energy and feedstock costs, primarily in EMEAI. And in the Performance Materials & Coatings segment, operating EBIT was $41 million, up $6 million compared to the year ago period, driven by volume growth and higher operating rates. Volume was up year-over-year driven by gains primarily in the United States, Canada and Latin America. Sequentially, operating EBIT increased $102 million driven by higher seasonal volumes and overall improved demand. Now I'll turn it over to Jeff to review our outlook and actions.","evidence_gemma_new":"Operating EBIT year-over-year","evidence_llama_3_3":"Operating EBIT year-over-year","evidence_qwen_3_30b":null,"gemma_new_max":674000000.0,"gemma_new_min":674000000.0,"llama_3_3_max":674000000.0,"llama_3_3_min":674000000.0,"qwen_3_30b_max":null,"qwen_3_30b_min":null}
{"symbol":"DOW","year":2024,"quarter":2,"date":"2024-Q2","chunk_id":2,"sub_chunk_id":0,"centroid_label":"operating ebitda","agreed_value":819000000.0,"count":2,"chunk":"Jim Fitterling: Thank you, Andrew. Beginning on slide three, in the second quarter, team Dow delivered sequential top and bottom line growth, as well as the third consecutive quarter of year-over-year volume growth. We achieved this despite a slower-than-expected global macroeconomic recovery, particularly in areas like building and construction and consumer durables. Net sales were $10.9 billion, down 4% versus the year ago period and up 1% sequentially, driven by gains in packaging and specialty plastics and performance materials and coatings. Volume increased 1% versus the year ago period with gains led by the United States and Canada. Excluding hydrocarbons and energy sales, which were down primarily due to lighter feed slate cracking in Europe, volume increased 4%. Sequentially, volume increased 1% with gains in all regions except Asia Pacific, which was flat. Local price decreased 4% year-over-year. Sequentially, local price increased 1% led by gains in Europe, the Middle East, Africa, and India or EMEA. Operating EBIT was $819 million, up $145 million sequentially, reflecting gains in packaging and specialty plastics and performance materials and coatings. Cash flow from operations was $832 million on higher earnings and an efficient release of working capital, resulting in an 85% cash flow conversion on a trailing 12-month basis. Our focus on cash flow generation enabled $691 million in returns to shareholders, including $491 million through dividends and $200 million in share repurchases. In June, we published our 2023 Intersections Progress Report. This report showcases the positive impact that we are making on the environment and society and importantly, how those actions support long-term profitable growth. Now turning to our operating segment performance on slide four. In the packaging and specialty plastic segment, operating EBIT was $703 million, down $215 million a year-over-year, this was driven by lower integrated margins, higher planned maintenance activity, and lower non-recurring licensing sales. Local peak declines were due to lower downstream polymer prices, primarily in Asia Pacific. Volume decreased year-over-year as higher demand for functional polymers and polyethylene was more than offset by lower merchant hydrocarbon sales, primarily due to lighter feed slate cracking in Europe. Sequentially, operating EBIT increased by $98 million, primarily due to higher integrated margins behind both price and volume gain. Moving to the Industrial Intermediates & Infrastructure segment, operating EBIT was $7 million, an improvement of $42 million versus the year-ago period. Results were driven by improved equity earnings, partly offset by lower integrated margins. Local price declined year-over-year, but volume was up, driven by gains in polyurethane and construction chemicals. Sequentially operating EBIT decreased $80 million, driven by higher planned maintenance activity and higher equity losses, as well as lower volumes. And in the performance materials and coating segment, operating EBIT was $146 million, up $80 million, compared to the year-ago period, driven by broad-based business and geographic volume growth. Local price declined year-over-year, but volume was up, driven by gains in both businesses and all geographic regions. Sequentially operating EBIT increased to $105 million, driven by volume and price gains in both businesses and lower planned maintenance activity. Now I'll turn it over to Jeff to review our outlook and share some examples of our playbook in action.","evidence_gemma_new":"Operating EBIT sequentially","evidence_llama_3_3":"Operating EBIT second quarter","evidence_qwen_3_30b":null,"gemma_new_max":819000000.0,"gemma_new_min":819000000.0,"llama_3_3_max":819000000.0,"llama_3_3_min":819000000.0,"qwen_3_30b_max":null,"qwen_3_30b_min":null}
{"symbol":"DOW","year":2024,"quarter":4,"date":"2024-Q4","chunk_id":2,"sub_chunk_id":0,"centroid_label":"operating ebitda","agreed_value":1200000000.0,"count":3,"chunk":"Jim Fitterling: Thank you, Andrew. Beginning on Slide 3, there's a lot to unpack in our results this quarter, so let me first walk through the headlines. In the fourth quarter, Team Dow delivered our fifth consecutive quarter of year-over-year volume growth despite continued weak macroeconomic conditions. Net sales were $10.4 billion, which is down 2% versus the year ago period, and reflects pricing pressure seen across the industry in the quarter. Local price was down 3% year-over-year and sequentially with declines across all our operating segments. Operating EBITDA was $1.2 billion, which is approximately flat compared to the same period last year. Cash flow from continuing operations was $811 million, resulting in free cash flow of $44 million. Returns to shareholders totaled $492 million of dividends in the quarter, and our total CapEx spend was $767 million. As you saw in our numbers this quarter, we also had a non-cash tax adjustment impacting net income and EPS. Jeff will provide more details on that later in this call. Throughout the quarter, we announced additional actions that continued to support the optimization of our global portfolio for growth, while maintaining a best owner mindset. For example, we continued to ramp up operating rates at our Texas-8 cracker and Glycol 2 unit. We completed the sale of our flexible packaging laminating adhesive business to Arkema for an enterprise value of approximately $150 million. And we've designed a definitive agreement with Macquarie Asset Management for the sale of a minority stake in select U.S. Gulf Coast infrastructure assets for which we expect to receive cash proceeds of up to $3 billion. And driven by persistently weak global macroeconomic conditions, we announced a strategic review of select European assets, primarily in our polyurethanes business, where demand has been structurally challenged over the past five years, making it the highest cost region for several of our key businesses. We are also postponing a maintenance turnaround at one of our ethylene crackers in Europe. This decision will result in us idling this asset starting in second quarter until market dynamics improve. And today we announced targeted actions to reduce our costs by $1 billion and our CapEx by $300 million to $500 million. Collectively, the additional actions are focused on reinforcing our long-term competitiveness as we continue to navigate this prolonged economic downturn. Turning to Slide 4. In 2024, Team Dow continued to advance both our near-term priorities and our long-term strategy to become a stronger, more innovative company. We delivered net sales of $43 billion, operating EBIT of $2.6 billion, and year-over-year volume growth of 3%, excluding merchant hydrocarbon sales. Earlier in 2024, we began construction at our Path2Zero investment in Fort Saskatchewan, Alberta. When complete, the project is expected to generate approximately $1 billion in incremental EBITDA annually by 2030. Dow is also recognized externally through industry-leading awards and certifications. Last year, we earned 12 Edison Awards for Innovation and Great Place to Work and Fortune, named out as one of the top 25 world's best workplaces. Team Dow navigated several challenges over the past year, including weather-related and supply chain disruptions, and continued uncertainty in many regions and markets that we serve. And in response to evolving market dynamics and sluggish demand recovery in Europe, we demonstrated our best owner mindset with more than 20 proactive actions to address higher cost assets. I remain confident in our company's ability to foster a sustainable future, achieve long-term profitable growth, and enhance shareholder returns. Now, I'm pleased to turn it over to Karen S. Carter, Dow's Chief Operating Officer, who will provide an overview of our operating segment performance on Slide 5.","evidence_gemma_new":"Operating EBITDA same period last year","evidence_llama_3_3":"Operating EBITDA fourth quarter","evidence_qwen_3_30b":"Operating EBITDA approximately flat same period last year","gemma_new_max":1200000000.0,"gemma_new_min":1200000000.0,"llama_3_3_max":1200000000.0,"llama_3_3_min":1200000000.0,"qwen_3_30b_max":1200000000.0,"qwen_3_30b_min":1200000000.0}
{"symbol":"DOW","year":2023,"quarter":1,"date":"2023-Q1","chunk_id":2,"sub_chunk_id":0,"centroid_label":"packaging and specialty plastic segment operating ebit","agreed_value":642000000.0,"count":2,"chunk":"Jim Fitterling: Thank you, Pankaj. Beginning on Slide 3. In the first quarter, Team Dow demonstrated its agility, delivering sequential earnings improvement in what continues to be a challenging environment. These results reflect our competitive advantages and operating discipline as we leveraged our structurally advantaged feedstock positions, proactively aligned our operating rates with market demand and focused on higher-value products where pockets of demand remain resilient, such as pharmaceutical applications, energy, commercial building and construction and mobility end markets. Additionally, our actions to deliver $1 billion in cost savings in 2023 are progressing with $100 million achieved in the first quarter. These actions will ensure we continue to focus on cash flow generation through our low-cost to serve operating model. Turning to the details of the quarter. Net sales were $11.9 billion, down 22% year-over-year. Declines in all operating segments were driven by continued soft global macroeconomic activity. Sales were flat sequentially, as gains in performance materials and coatings and packaging and specialty plastics offset declines in industrial intermediates and infrastructure. Volume decreased 11% year-over-year, led by declines in Europe, the Middle East, Africa and India or EMEA. However, volumes increased 2% sequentially on gains in performance materials and coatings and packaging and specialty plastics. Local price declined 10% year-over-year and 4% quarter-over-quarter, due to industry supply additions in some businesses amidst soft global economic conditions. Operating EBIT for the quarter was $708 million, down year-over-year due to lower local prices and volumes. Sequentially, operating EBIT improved by $107 million, with gains primarily driven by performance materials and coatings. Cash flow from operations was $531 million in the quarter. On a trailing 12-month basis, cash flow conversion was 85%. With ample financial flexibility and a strong balance sheet, we are continuing to execute on our strategy as we advance our disciplined and balanced capital allocation priorities for long-term value creation. We returned $621 million to shareholders through dividends and share repurchases during the quarter and our balance sheet continues to have no substantive long-term debt maturities until 2027. Now turning to operating segment performance on Slide 4. In the Packaging & Specialty Plastics segment, operating EBIT was $642 million compared to $1.2 billion in the year ago period, primarily due to lower integrated polyethylene margins. Continued margin resilience in functional polymers was more than offset by lower polyethylene and olefins margins. Volume declines were primarily driven by lower consumer demand in EMEA. Sadara also had lower export volumes due to planned maintenance activity. Sequentially, operating EBIT was down by $13 million. Improved input costs and higher operating rates in our most cost advantage assets were more than offset by lower sales from non-recurring licensing activity and lower equity earnings. Moving to the Industrial Intermediates & Infrastructure segment. Operating EBIT for the segment was $123 million compared to $661 million in the year ago period. Results were driven by lower pricing and demand, as well as higher energy costs, particularly in EMEA. Sequentially, operating EBIT was down $41 million. Lower energy costs were more than offset by decreased demand and pricing for propylene oxide, its derivatives, and in isocyanates, in polyurethanes and construction chemicals. Industrial Solutions experienced lower volumes due to weather-related impacts and a third-party supply outage combined with lower demand in industrial end markets. And in the Performance Materials and Coatings segment, operating EBIT for the segment was $35 million compared to $595 million in the year ago period. Local price declines for siloxanes were driven by competitive pricing pressure from supply additions in China. Volume was down as resilient demand for commercial building and construction, mobility and industrial coatings was more than offset by volume declines in siloxanes and architectural coatings. Sequentially, operating EBIT increased $165 million, driven by improved supply availability, seasonally higher volumes, and reduced value chain destocking. Next, I'll turn it over to Howard to review our outlooks and actions on Slide 5.","evidence_gemma_new":null,"evidence_llama_3_3":"Packaging & Specialty Plastics segment operating EBIT","evidence_qwen_3_30b":"Packaging & Specialty Plastics segment operating EBIT $642 million lower integrated polyethylene margins","gemma_new_max":null,"gemma_new_min":null,"llama_3_3_max":642000000.0,"llama_3_3_min":642000000.0,"qwen_3_30b_max":642000000.0,"qwen_3_30b_min":642000000.0}
{"symbol":"DOW","year":2023,"quarter":2,"date":"2023-Q2","chunk_id":2,"sub_chunk_id":0,"centroid_label":"packaging and specialty plastic segment operating ebit","agreed_value":918000000.0,"count":2,"chunk":"Jim Fitterling: Thank you, Pankaj. Beginning on Slide 3, we continued to navigate a challenging macroeconomic environment with slow global growth in the second quarter. Despite lower year-over-year sales and earnings, Team Dow delivered sequential earnings improvement by executing on our financial and operational playbook. We leveraged our diverse portfolio to capitalize on gains in packaging and modestly higher seasonal demand in building and construction. This resulted in a sequential improvement in volume. In addition, we continue to implement our $1 billion of proactive and targeted cost savings actions delivering $250 million of savings in the quarter and $350 year to date. Net sales were $11.4 billion, down 27% versus the year ago period, reflecting lower demand and prices due to slower macroeconomic activity. Sales were down 4% sequentially, as volume gains were more than offset by lower local prices. Volume decreased 8% year-over-year, led by a 14% decline in Europe, the Middle East, Africa, and India, or EMEA. Volume was up 1% sequentially, driven by gains in Asia Pacific and Latin America, as well as in industrial intermediates and infrastructure and performance materials and coatings. Local price decreased 18% year-over-year and 5% sequentially due to lower demand on weak macroeconomic activity, as well as lower global raw material costs. Operating EBIT for the quarter was $885 million, down from $2.4 billion in the year ago period, primarily driven by lower local prices. Operating EBIT increased $177 million sequentially, driven by gains in packaging and specialty plastics. We generated cash flow from operations of more than $1.3 billion, up more than $800 million versus the prior quarter, driven by improved working capital. On a trailing 12 month basis, our cash flow conversion is 98%. Our strong financial position gives us the flexibility to continue to advance our long term strategic priorities, supported by our disciplined and balanced capital allocation strategy. In the quarter, we returned $743 million to shareholders through dividends and share repurchases. Year to date, we've returned nearly $1.4 billion. And our balance sheet remains healthy, supported by strong investment grade credit ratings. We also published our 2022 INtersections Report in June. The report once again received limited assurance by our external audit firm and showcases Dow's continued progress on our ambition to be the most innovative customer centric, inclusive and sustainable material science company in the world. Now turning to our operating segment performance on Slide 4. In the Packaging and Specialty Plastics segment, operating EBIT was $918 million compared to $1.4 billion in the year ago period. Local price declines were driven by lower global energy and feedstock costs, which in turn impacted polyethylene prices across all regions. Volume declines, primarily in EMEA, were driven by lower demand for olefins and aromatics. Sequentially operating EBIT improved by $276 million, driven by lower energy and feedstock costs. Moving to the Industrial Intermediates and Infrastructure segment, operating EBIT was a loss of $35 million, compared to earnings of 426 million in the year ago period. Results were driven by lower local prices and demand in both businesses. Volume declines were primarily driven by lower demand for consumer durables, building and construction, and industrial applications. Sequentially, operating EBIT was down $158 million due to lower local prices and increased planned maintenance turnaround activity. And in the Performance Materials and Coatings segment, operating EBIT was $66 million compared to $561 million in the year ago period. Local price decreases were driven primarily by declines for siloxanes and acrylic monomers. Volume was down on lower global demand for silicones and coatings applications. Sequentially, operating EBIT increased $31 million, driven primarily by seasonally higher volumes. Next, I'll turn it over to Howard to review our outlook and actions on Slide 5.","evidence_gemma_new":null,"evidence_llama_3_3":"Packaging and Specialty Plastics operating EBIT","evidence_qwen_3_30b":"Packaging and Specialty Plastics segment operating EBIT","gemma_new_max":null,"gemma_new_min":null,"llama_3_3_max":918000000.0,"llama_3_3_min":918000000.0,"qwen_3_30b_max":918000000.0,"qwen_3_30b_min":918000000.0}
{"symbol":"DOW","year":2023,"quarter":3,"date":"2023-Q3","chunk_id":2,"sub_chunk_id":0,"centroid_label":"packaging and specialty plastic segment operating ebit","agreed_value":476000000.0,"count":2,"chunk":"Jim Fitterling: Thank you, Pankaj. Beginning on Slide 3. For the third quarter, we continued to advance our long-term strategy while also taking action to reduce costs and maximize cash generation in the face of slow global macroeconomic activity and higher sequential feedstock costs. In particular, we continue to implement targeted actions to deliver $1 billion in cost savings in 2023 and delivered a sequential improvement to operating cash flow of more than $300 million. Net sales were $10.7 billion, down 24% versus the year ago period reflecting declines in all operating segments due to slower global macroeconomic activity. Sales were down 6% sequentially as volume gains were more than offset by lower local prices. Volume decreased 6% year-over-year, mainly due to lower merchant Hydrocarbons and Energy sales. Volume was up 1% sequentially, led by gains in Industrial Intermediates & Infrastructure and Performance Materials & Coatings. Volume was up 3% sequentially, excluding merchant sales and Hydrocarbons & Energy with gains across all operating segments. Local price decreased 18% year-over-year with declines in all operating segments and regions, primarily due to lower feedstock and energy costs. Sequentially, price was down 7%, primarily in Europe, the Middle East, Africa and India or EMEAI. Operating EBIT for the quarter was $626 million, down from $1.2 billion in the year ago period and $885 million in the prior quarter. Our consistent focus on cash flow generation and working capital management enabled team Dow to generate cash flow from operations of $1.7 billion, resulting in a cash flow conversion of 129% for the quarter and 103% on a trailing 12-month basis. We continue to invest in our long-term strategic priority while also returning $617 million to shareholders in the quarter through dividends and share repurchases. Year-to-date, we've returned nearly $2 billion to shareholders. Our cash flow generation continues to enable Dow to fully cover its capital allocation priorities. And our balance sheet remains the best it has been in four decades, supported by strong investment-grade credit ratings with no substantive long-term debt maturities due until 2027. Now turning to our operating segment performance on Slide 4. In the Packaging & Specialty Plastics segment, operating EBIT was $476 million compared to $785 million in the year ago period. Local price declines were driven by lower polyethylene and olefin prices in all regions, primarily as a result of lower global energy costs. Volume declined as increased polyethylene demand across all regions was more than offset by lower volumes in merchant hydrocarbons and energy sales. Sequentially, operating EBIT decreased by $442 million, driven by lower integrated polyethylene margins, increased planned maintenance activity and lower licensing revenue. Moving to the Industrial Intermediates & Infrastructure segment, operating EBIT was $21 million compared to $167 million in the year ago period. Results were driven by lower prices and demand in both businesses as well as reduced supply availability due to an unplanned event in Industrial Solutions at our Louisiana operations. Sequentially, operating EBIT was up $56 million driven by volume gains and lower costs, which were partly offset by the Louisiana event. And in the Performance Materials & Coatings segment, operating EBIT was $179 million compared to $302 million in the year ago period, driven by local price declines in both businesses. Volume was down as gains in commercial building and construction end markets were more than offset by lower demand for personal care and coatings applications and residential construction. Sequentially, operating EBIT increased $113 million, driven by higher operating rates and cost savings. Next, I'll turn it over to Howard to review our outlook and actions on Slide 5.","evidence_gemma_new":null,"evidence_llama_3_3":"Packaging & Specialty Plastics segment operating EBIT year ago period","evidence_qwen_3_30b":"Packaging & Specialty Plastics segment operating EBIT year ago period","gemma_new_max":null,"gemma_new_min":null,"llama_3_3_max":476000000.0,"llama_3_3_min":476000000.0,"qwen_3_30b_max":476000000.0,"qwen_3_30b_min":476000000.0}
{"symbol":"DOW","year":2023,"quarter":4,"date":"2023-Q4","chunk_id":2,"sub_chunk_id":0,"centroid_label":"packaging and specialty plastic segment operating ebit","agreed_value":664000000.0,"count":3,"chunk":"Jim Fitterling: Thank you, Pankaj. Beginning on Slide 3, in the fourth quarter, we continue to execute with discipline and advance our long-term strategy in face of a dynamic macroeconomic environment. Net sales were $10.6 billion, down 10% versus the year-ago period, reflecting declines in all operating segments. Sales were down 1% sequentially as volume gains in Packaging & Specialty Plastics were more than offset by seasonal demand declines in Performance Materials & Coatings. Volume increased 2% year-over-year, with gains across all regions except Asia Pacific, which was flat. Sequentially volume decreased by 1%, including the impact of an unplanned event from a storm that was equivalent to a Category 1 hurricane at our Bah\u00eda Blanca site in Argentina. Local price decreased 13% year-over-year, with declines in all operating segments due to lower feedstocks and energy costs. Sequentially, price was flat, reflecting modest gains in most regions. Operating EBIT for the quarter was $559 million, down $42 million year-over-year, primarily driven by lower prices. Sequentially, operating EBIT was down $67 million, as gains in Packaging & Specialty Plastics were more than offset by seasonally lower volumes in Performance Materials & Coatings. Our cash flow generation and working capital management enabled us to deliver cash flow from operations of $1.6 billion in the quarter. We continued to reduce costs and focused on cash generation, completing our $1 billion of cost savings for the year. And in the fourth quarter, we pursued additional de-risking opportunities for our pension plans, including annuitization and risk transfer of $1.7 billion in pension liability and a one-time non-cash and non-operating settlement charge of $642 million. We also advanced our long-term strategy while returning $616 million to shareholders. And we reached final investment decision with our Board of Directors for our Path2Zero project in Fort Saskatchewan, Alberta. Now, turning to our full year performance on Slide 4. Our 2023 results demonstrate strong execution and a commitment to financial discipline. Against the dynamic macroeconomic backdrop, Team Dow continued to take proactive actions. As a result, we generated $5.2 billion in cash flow from operations for the year, reflecting a cash flow conversion of 96%. We also returned $2.6 billion to shareholders through dividends and share repurchases. Our efforts continue to be recognized externally through industry-leading awards, certifications and recognitions, and we continue to outpace our peers on leadership diversity. I'm proud of how Team Dow is delivering for our customers, driving shareholder value and supporting our communities as we progress our long-term strategy. Now, turning to operating segment performance on Slide 5. In the Packaging & Specialty Plastics segment, operating EBIT was $664 million, up $9 million compared to the year-ago period. Results were driven by lower input costs and higher operating rates, where we closed out the year strong and hit record ethylene production levels on a full-year basis. Local price declines were driven by lower global prices, while volume increases were led by higher packaging demand, primarily in the U.S., Canada and Latin America. Sequentially, operating EBIT increased by $188 million. This was driven by higher integrated polyethylene margins, the impact of planned maintenance activity in the third quarter and higher licensing revenue. Moving to the Industrial Intermediates & Infrastructure segment, operating EBIT was $15 million compared to $164 million in the year-ago period. Results were driven by lower local prices in both businesses as well as reduced supply availability in Industrial Solution. Sequentially, operating EBIT was down $6 million, driven by seasonally lower volumes in building and construction end markets, which were partially offset by seasonally higher demand for deicing fluid and higher demand for mobility applications. And in the Performance Materials & Coatings segment, operating EBIT was a loss of $61 million compared to a loss of $130 million in the year-ago period, driven by lower costs and reduced planned maintenance turnaround activity. Volume was up year-over-year, driven by higher demand in project-driven building and construction end markets. Sequentially, operating EBIT decreased $240 million, primarily due to seasonally lower volumes. Next, I'll turn it over to Jeff to review our outlook and actions on Slide 6.","evidence_gemma_new":"Packaging & Specialty Plastics operating EBIT year-ago period","evidence_llama_3_3":"Packaging & Specialty Plastics Operating EBIT year-ago period","evidence_qwen_3_30b":"Packaging & Specialty Plastics segment operating EBIT year-over-year","gemma_new_max":664000000.0,"gemma_new_min":664000000.0,"llama_3_3_max":664000000.0,"llama_3_3_min":664000000.0,"qwen_3_30b_max":664000000.0,"qwen_3_30b_min":664000000.0}
{"symbol":"DOW","year":2024,"quarter":1,"date":"2024-Q1","chunk_id":2,"sub_chunk_id":0,"centroid_label":"packaging and specialty plastic segment operating ebit","agreed_value":605000000.0,"count":3,"chunk":"Now let me turn the call over to Jim. James Fitterling: Thank you, Pankaj. Beginning on Slide 3. In the first quarter, Team Dow delivered sequential volume growth and margin expansion. We strategically increased operating rates to capture improving demand, we maintained pricing and we benefited from lower feedstock and energy costs. These results reflect the strength of our advantaged portfolio, including our participation in diverse end markets and our cost advantage positions around the world. Net sales were $10.8 billion, down 9% versus the year ago period but up 1% sequentially, driven by gains in Performance Materials & Coatings and Industrial Intermediates & Infrastructure. Volume increased 1% year-over-year. And excluding Hydrocarbons & Energy, volume increased 5%, with gains in all regions. This marks the second consecutive quarter of year-over-year volume growth. Sequentially, volume increased 1% and excluding Hydrocarbons & Energy, was up 3%, led by gains in Performance Materials and Coatings. Local price decreased 10% year-over-year and was flat sequentially as modest gains in Europe, the Middle East, Africa and India, or EMEAI, were offset by declines in Asia Pacific, the United States and Canada. Operating EBIT for the quarter was $674 million, down $34 million year-over-year driven by lower prices in all regions. Sequentially, operating EBIT was up $115 million, reflecting gains in Performance Materials & Coatings and Industrial Intermediates & Infrastructure. We delivered cash flow from operations of $460 million in the quarter, resulting in a 94% cash flow conversion on a trailing 12-month basis. This reflects our focus on cash flow generation and enabled $693 million in returns to shareholders. We also advanced our long-term strategy with our higher return, highly capital-efficient Path2Zero project in Fort Saskatchewan, Alberta, where construction started earlier this month. Now turning to our operating segment performance on Slide 4. In the Packaging & Specialty Plastics segment, operating EBIT was $605 million, down $37 million compared to the year ago period, primarily due to lower integrated margins. Local price declines were primarily driven by lower energy and feedstock costs globally. Volume decreased year-over-year driven by declines in the Hydrocarbons & Energy business. This was primarily due to prioritizing higher-value downstream derivative polymer sales as well as lighter feed slate cracking in Europe. Sequentially, operating EBIT decreased by $59 million as improved polyethylene integrated margins were more than offset by expected lower nonrecurring licensing revenue and higher planned maintenance activity. Moving to the Industrial Intermediates & Infrastructure segment. Operating EBIT was $87 million compared to $123 million in the year ago period. Results were driven by lower prices in both businesses, which were partly offset by 3 items: lower energy and feedstock costs, improved equity earnings and volume gains in Polyurethanes & Construction Chemicals. Sequentially, operating EBIT was up $72 million driven by improved equity earnings and lower energy and feedstock costs, primarily in EMEAI. And in the Performance Materials & Coatings segment, operating EBIT was $41 million, up $6 million compared to the year ago period, driven by volume growth and higher operating rates. Volume was up year-over-year driven by gains primarily in the United States, Canada and Latin America. Sequentially, operating EBIT increased $102 million driven by higher seasonal volumes and overall improved demand. Now I'll turn it over to Jeff to review our outlook and actions.","evidence_gemma_new":"Packaging & Specialty Plastics segment operating EBIT","evidence_llama_3_3":"Packaging & Specialty Plastics Operating EBIT","evidence_qwen_3_30b":"Packaging & Specialty Plastics segment operating EBIT $605 million down $37 million compared to the year ago period","gemma_new_max":605000000.0,"gemma_new_min":605000000.0,"llama_3_3_max":605000000.0,"llama_3_3_min":605000000.0,"qwen_3_30b_max":605000000.0,"qwen_3_30b_min":605000000.0}
{"symbol":"DOW","year":2024,"quarter":2,"date":"2024-Q2","chunk_id":2,"sub_chunk_id":0,"centroid_label":"packaging and specialty plastic segment operating ebit","agreed_value":703000000.0,"count":3,"chunk":"Jim Fitterling: Thank you, Andrew. Beginning on slide three, in the second quarter, team Dow delivered sequential top and bottom line growth, as well as the third consecutive quarter of year-over-year volume growth. We achieved this despite a slower-than-expected global macroeconomic recovery, particularly in areas like building and construction and consumer durables. Net sales were $10.9 billion, down 4% versus the year ago period and up 1% sequentially, driven by gains in packaging and specialty plastics and performance materials and coatings. Volume increased 1% versus the year ago period with gains led by the United States and Canada. Excluding hydrocarbons and energy sales, which were down primarily due to lighter feed slate cracking in Europe, volume increased 4%. Sequentially, volume increased 1% with gains in all regions except Asia Pacific, which was flat. Local price decreased 4% year-over-year. Sequentially, local price increased 1% led by gains in Europe, the Middle East, Africa, and India or EMEA. Operating EBIT was $819 million, up $145 million sequentially, reflecting gains in packaging and specialty plastics and performance materials and coatings. Cash flow from operations was $832 million on higher earnings and an efficient release of working capital, resulting in an 85% cash flow conversion on a trailing 12-month basis. Our focus on cash flow generation enabled $691 million in returns to shareholders, including $491 million through dividends and $200 million in share repurchases. In June, we published our 2023 Intersections Progress Report. This report showcases the positive impact that we are making on the environment and society and importantly, how those actions support long-term profitable growth. Now turning to our operating segment performance on slide four. In the packaging and specialty plastic segment, operating EBIT was $703 million, down $215 million a year-over-year, this was driven by lower integrated margins, higher planned maintenance activity, and lower non-recurring licensing sales. Local peak declines were due to lower downstream polymer prices, primarily in Asia Pacific. Volume decreased year-over-year as higher demand for functional polymers and polyethylene was more than offset by lower merchant hydrocarbon sales, primarily due to lighter feed slate cracking in Europe. Sequentially, operating EBIT increased by $98 million, primarily due to higher integrated margins behind both price and volume gain. Moving to the Industrial Intermediates & Infrastructure segment, operating EBIT was $7 million, an improvement of $42 million versus the year-ago period. Results were driven by improved equity earnings, partly offset by lower integrated margins. Local price declined year-over-year, but volume was up, driven by gains in polyurethane and construction chemicals. Sequentially operating EBIT decreased $80 million, driven by higher planned maintenance activity and higher equity losses, as well as lower volumes. And in the performance materials and coating segment, operating EBIT was $146 million, up $80 million, compared to the year-ago period, driven by broad-based business and geographic volume growth. Local price declined year-over-year, but volume was up, driven by gains in both businesses and all geographic regions. Sequentially operating EBIT increased to $105 million, driven by volume and price gains in both businesses and lower planned maintenance activity. Now I'll turn it over to Jeff to review our outlook and share some examples of our playbook in action.","evidence_gemma_new":"packaging and specialty plastic segment operating EBIT year-over-year","evidence_llama_3_3":"packaging and specialty plastic segment operating EBIT second quarter","evidence_qwen_3_30b":"Operating EBIT packaging and specialty plastic segment second quarter","gemma_new_max":703000000.0,"gemma_new_min":703000000.0,"llama_3_3_max":703000000.0,"llama_3_3_min":703000000.0,"qwen_3_30b_max":703000000.0,"qwen_3_30b_min":703000000.0}
{"symbol":"DOW","year":2024,"quarter":4,"date":"2024-Q4","chunk_id":3,"sub_chunk_id":0,"centroid_label":"packaging and specialty plastic segment operating ebit","agreed_value":447000000.0,"count":2,"chunk":"Karen S. Carter: Thank you, Jim. I'm pleased to join you all today. And before I begin, I'd like to mention what an honor it is to be named Dow's Chief Operating Officer. I look forward to engaging with many of you, our owners, in the near future. In my more than 30 years at Dow, I have progressed through the organization to most recently leading PNSP, the company's largest operating segment. And I have worked across a broad range of businesses and functions, including global leadership positions within the building and construction and consumer electronics and markets, as well as Dow's polyethylene franchise. This has given me a deep appreciation for our company's competitive advantages, the strength of our innovation engine, and our commitment to delivering profitable growth. As COO, my priorities are to further strengthen our customer engagement, accelerate the commercialization of Dow's innovation pipeline, and enhance reliability and productivity. I am committed to driving business and operational results, while progressing our strategic priorities to deliver long-term value for our shareholders. Now, let's move to our operating segment results. In the Packaging & Specialty Plastics segment, we entered the fourth quarter with a challenging backdrop of ample industry supply, high feedstock costs and a typical seasonal slowdown in demand. Segment results reflected a decrease in local price both year-over-year and sequentially. This was primarily driven by lower functional polymers and polyethylene prices as a result of the October price decline reflected in the market indices and other competitive price pressures throughout the quarter. Despite higher demand for flexible food and specialty packaging in all regions except Latin-America, volume for this segment was down 1% year-over-year. This was primarily driven by lower third-party hydrocarbon sales and non-recurring licensing revenue. Operating EBIT was $447 million, a decrease of $217 million compared to the year-ago period. This was primarily driven by lower integrated margins and licensing revenue. Moving to the Industrial Intermediates & Infrastructure segment. We benefited from strong global energy demand, as well as stable consumer and pharma demand. We also experienced typical seasonal improvements for deicing, while agricultural and coatings applications saw normal seasonal declines. Looking at fourth quarter results, local price declined 1% year-over-year, while volume was up 1% year-over-year. This was driven by improved supply availability in our Industrial Solutions business as we finished ramping-up our Glycol-2 unit ahead of schedule. Those gains were partly offset by continued softness in the Polyurethanes and Construction Chemicals business. Operating EBIT for the segment increased $69 million versus the year-ago period. Results were primarily driven by higher operating rates and improved supply availability in the Industrial Solutions business. And in the Performance Materials & Coating segment, volume was up 5% with strong gains across both architectural coatings and downstream silicones. We achieved this despite global weakness in building and construction end-markets as high-interest rates continue to pressure spending in residential markets. Operating EBIT increased $52 million compared to the year-ago period, driven by volume gains and lower fixed costs. Now, I'll turn the call over to Jeff, who will provide an overview of the macros and our outlook.","evidence_gemma_new":"Packaging & Specialty Plastics segment Operating EBIT year-ago period","evidence_llama_3_3":"Packaging & Specialty Plastics segment Operating EBIT","evidence_qwen_3_30b":null,"gemma_new_max":447000000.0,"gemma_new_min":447000000.0,"llama_3_3_max":447000000.0,"llama_3_3_min":447000000.0,"qwen_3_30b_max":null,"qwen_3_30b_min":null}
{"symbol":"DOW","year":2023,"quarter":1,"date":"2023-Q1","chunk_id":2,"sub_chunk_id":0,"centroid_label":"performance materials coatings segment operating ebit","agreed_value":35000000.0,"count":2,"chunk":"Jim Fitterling: Thank you, Pankaj. Beginning on Slide 3. In the first quarter, Team Dow demonstrated its agility, delivering sequential earnings improvement in what continues to be a challenging environment. These results reflect our competitive advantages and operating discipline as we leveraged our structurally advantaged feedstock positions, proactively aligned our operating rates with market demand and focused on higher-value products where pockets of demand remain resilient, such as pharmaceutical applications, energy, commercial building and construction and mobility end markets. Additionally, our actions to deliver $1 billion in cost savings in 2023 are progressing with $100 million achieved in the first quarter. These actions will ensure we continue to focus on cash flow generation through our low-cost to serve operating model. Turning to the details of the quarter. Net sales were $11.9 billion, down 22% year-over-year. Declines in all operating segments were driven by continued soft global macroeconomic activity. Sales were flat sequentially, as gains in performance materials and coatings and packaging and specialty plastics offset declines in industrial intermediates and infrastructure. Volume decreased 11% year-over-year, led by declines in Europe, the Middle East, Africa and India or EMEA. However, volumes increased 2% sequentially on gains in performance materials and coatings and packaging and specialty plastics. Local price declined 10% year-over-year and 4% quarter-over-quarter, due to industry supply additions in some businesses amidst soft global economic conditions. Operating EBIT for the quarter was $708 million, down year-over-year due to lower local prices and volumes. Sequentially, operating EBIT improved by $107 million, with gains primarily driven by performance materials and coatings. Cash flow from operations was $531 million in the quarter. On a trailing 12-month basis, cash flow conversion was 85%. With ample financial flexibility and a strong balance sheet, we are continuing to execute on our strategy as we advance our disciplined and balanced capital allocation priorities for long-term value creation. We returned $621 million to shareholders through dividends and share repurchases during the quarter and our balance sheet continues to have no substantive long-term debt maturities until 2027. Now turning to operating segment performance on Slide 4. In the Packaging & Specialty Plastics segment, operating EBIT was $642 million compared to $1.2 billion in the year ago period, primarily due to lower integrated polyethylene margins. Continued margin resilience in functional polymers was more than offset by lower polyethylene and olefins margins. Volume declines were primarily driven by lower consumer demand in EMEA. Sadara also had lower export volumes due to planned maintenance activity. Sequentially, operating EBIT was down by $13 million. Improved input costs and higher operating rates in our most cost advantage assets were more than offset by lower sales from non-recurring licensing activity and lower equity earnings. Moving to the Industrial Intermediates & Infrastructure segment. Operating EBIT for the segment was $123 million compared to $661 million in the year ago period. Results were driven by lower pricing and demand, as well as higher energy costs, particularly in EMEA. Sequentially, operating EBIT was down $41 million. Lower energy costs were more than offset by decreased demand and pricing for propylene oxide, its derivatives, and in isocyanates, in polyurethanes and construction chemicals. Industrial Solutions experienced lower volumes due to weather-related impacts and a third-party supply outage combined with lower demand in industrial end markets. And in the Performance Materials and Coatings segment, operating EBIT for the segment was $35 million compared to $595 million in the year ago period. Local price declines for siloxanes were driven by competitive pricing pressure from supply additions in China. Volume was down as resilient demand for commercial building and construction, mobility and industrial coatings was more than offset by volume declines in siloxanes and architectural coatings. Sequentially, operating EBIT increased $165 million, driven by improved supply availability, seasonally higher volumes, and reduced value chain destocking. Next, I'll turn it over to Howard to review our outlooks and actions on Slide 5.","evidence_gemma_new":null,"evidence_llama_3_3":"Performance Materials and Coatings segment operating EBIT","evidence_qwen_3_30b":"Performance Materials and Coatings segment operating EBIT $35 million $595 million","gemma_new_max":null,"gemma_new_min":null,"llama_3_3_max":35000000.0,"llama_3_3_min":35000000.0,"qwen_3_30b_max":35000000.0,"qwen_3_30b_min":35000000.0}
{"symbol":"DOW","year":2023,"quarter":2,"date":"2023-Q2","chunk_id":2,"sub_chunk_id":0,"centroid_label":"performance materials coatings segment operating ebit","agreed_value":66000000.0,"count":2,"chunk":"Jim Fitterling: Thank you, Pankaj. Beginning on Slide 3, we continued to navigate a challenging macroeconomic environment with slow global growth in the second quarter. Despite lower year-over-year sales and earnings, Team Dow delivered sequential earnings improvement by executing on our financial and operational playbook. We leveraged our diverse portfolio to capitalize on gains in packaging and modestly higher seasonal demand in building and construction. This resulted in a sequential improvement in volume. In addition, we continue to implement our $1 billion of proactive and targeted cost savings actions delivering $250 million of savings in the quarter and $350 year to date. Net sales were $11.4 billion, down 27% versus the year ago period, reflecting lower demand and prices due to slower macroeconomic activity. Sales were down 4% sequentially, as volume gains were more than offset by lower local prices. Volume decreased 8% year-over-year, led by a 14% decline in Europe, the Middle East, Africa, and India, or EMEA. Volume was up 1% sequentially, driven by gains in Asia Pacific and Latin America, as well as in industrial intermediates and infrastructure and performance materials and coatings. Local price decreased 18% year-over-year and 5% sequentially due to lower demand on weak macroeconomic activity, as well as lower global raw material costs. Operating EBIT for the quarter was $885 million, down from $2.4 billion in the year ago period, primarily driven by lower local prices. Operating EBIT increased $177 million sequentially, driven by gains in packaging and specialty plastics. We generated cash flow from operations of more than $1.3 billion, up more than $800 million versus the prior quarter, driven by improved working capital. On a trailing 12 month basis, our cash flow conversion is 98%. Our strong financial position gives us the flexibility to continue to advance our long term strategic priorities, supported by our disciplined and balanced capital allocation strategy. In the quarter, we returned $743 million to shareholders through dividends and share repurchases. Year to date, we've returned nearly $1.4 billion. And our balance sheet remains healthy, supported by strong investment grade credit ratings. We also published our 2022 INtersections Report in June. The report once again received limited assurance by our external audit firm and showcases Dow's continued progress on our ambition to be the most innovative customer centric, inclusive and sustainable material science company in the world. Now turning to our operating segment performance on Slide 4. In the Packaging and Specialty Plastics segment, operating EBIT was $918 million compared to $1.4 billion in the year ago period. Local price declines were driven by lower global energy and feedstock costs, which in turn impacted polyethylene prices across all regions. Volume declines, primarily in EMEA, were driven by lower demand for olefins and aromatics. Sequentially operating EBIT improved by $276 million, driven by lower energy and feedstock costs. Moving to the Industrial Intermediates and Infrastructure segment, operating EBIT was a loss of $35 million, compared to earnings of 426 million in the year ago period. Results were driven by lower local prices and demand in both businesses. Volume declines were primarily driven by lower demand for consumer durables, building and construction, and industrial applications. Sequentially, operating EBIT was down $158 million due to lower local prices and increased planned maintenance turnaround activity. And in the Performance Materials and Coatings segment, operating EBIT was $66 million compared to $561 million in the year ago period. Local price decreases were driven primarily by declines for siloxanes and acrylic monomers. Volume was down on lower global demand for silicones and coatings applications. Sequentially, operating EBIT increased $31 million, driven primarily by seasonally higher volumes. Next, I'll turn it over to Howard to review our outlook and actions on Slide 5.","evidence_gemma_new":null,"evidence_llama_3_3":"Performance Materials and Coatings operating EBIT","evidence_qwen_3_30b":"Performance Materials and Coatings segment operating EBIT","gemma_new_max":null,"gemma_new_min":null,"llama_3_3_max":66000000.0,"llama_3_3_min":66000000.0,"qwen_3_30b_max":66000000.0,"qwen_3_30b_min":66000000.0}
{"symbol":"DOW","year":2023,"quarter":3,"date":"2023-Q3","chunk_id":2,"sub_chunk_id":0,"centroid_label":"performance materials coatings segment operating ebit","agreed_value":179000000.0,"count":2,"chunk":"Jim Fitterling: Thank you, Pankaj. Beginning on Slide 3. For the third quarter, we continued to advance our long-term strategy while also taking action to reduce costs and maximize cash generation in the face of slow global macroeconomic activity and higher sequential feedstock costs. In particular, we continue to implement targeted actions to deliver $1 billion in cost savings in 2023 and delivered a sequential improvement to operating cash flow of more than $300 million. Net sales were $10.7 billion, down 24% versus the year ago period reflecting declines in all operating segments due to slower global macroeconomic activity. Sales were down 6% sequentially as volume gains were more than offset by lower local prices. Volume decreased 6% year-over-year, mainly due to lower merchant Hydrocarbons and Energy sales. Volume was up 1% sequentially, led by gains in Industrial Intermediates & Infrastructure and Performance Materials & Coatings. Volume was up 3% sequentially, excluding merchant sales and Hydrocarbons & Energy with gains across all operating segments. Local price decreased 18% year-over-year with declines in all operating segments and regions, primarily due to lower feedstock and energy costs. Sequentially, price was down 7%, primarily in Europe, the Middle East, Africa and India or EMEAI. Operating EBIT for the quarter was $626 million, down from $1.2 billion in the year ago period and $885 million in the prior quarter. Our consistent focus on cash flow generation and working capital management enabled team Dow to generate cash flow from operations of $1.7 billion, resulting in a cash flow conversion of 129% for the quarter and 103% on a trailing 12-month basis. We continue to invest in our long-term strategic priority while also returning $617 million to shareholders in the quarter through dividends and share repurchases. Year-to-date, we've returned nearly $2 billion to shareholders. Our cash flow generation continues to enable Dow to fully cover its capital allocation priorities. And our balance sheet remains the best it has been in four decades, supported by strong investment-grade credit ratings with no substantive long-term debt maturities due until 2027. Now turning to our operating segment performance on Slide 4. In the Packaging & Specialty Plastics segment, operating EBIT was $476 million compared to $785 million in the year ago period. Local price declines were driven by lower polyethylene and olefin prices in all regions, primarily as a result of lower global energy costs. Volume declined as increased polyethylene demand across all regions was more than offset by lower volumes in merchant hydrocarbons and energy sales. Sequentially, operating EBIT decreased by $442 million, driven by lower integrated polyethylene margins, increased planned maintenance activity and lower licensing revenue. Moving to the Industrial Intermediates & Infrastructure segment, operating EBIT was $21 million compared to $167 million in the year ago period. Results were driven by lower prices and demand in both businesses as well as reduced supply availability due to an unplanned event in Industrial Solutions at our Louisiana operations. Sequentially, operating EBIT was up $56 million driven by volume gains and lower costs, which were partly offset by the Louisiana event. And in the Performance Materials & Coatings segment, operating EBIT was $179 million compared to $302 million in the year ago period, driven by local price declines in both businesses. Volume was down as gains in commercial building and construction end markets were more than offset by lower demand for personal care and coatings applications and residential construction. Sequentially, operating EBIT increased $113 million, driven by higher operating rates and cost savings. Next, I'll turn it over to Howard to review our outlook and actions on Slide 5.","evidence_gemma_new":null,"evidence_llama_3_3":"Performance Materials & Coatings segment operating EBIT year ago period","evidence_qwen_3_30b":"Performance Materials & Coatings segment operating EBIT year ago period","gemma_new_max":null,"gemma_new_min":null,"llama_3_3_max":179000000.0,"llama_3_3_min":179000000.0,"qwen_3_30b_max":179000000.0,"qwen_3_30b_min":179000000.0}
{"symbol":"DOW","year":2023,"quarter":4,"date":"2023-Q4","chunk_id":2,"sub_chunk_id":0,"centroid_label":"performance materials coatings segment operating ebit","agreed_value":61000000.0,"count":2,"chunk":"Jim Fitterling: Thank you, Pankaj. Beginning on Slide 3, in the fourth quarter, we continue to execute with discipline and advance our long-term strategy in face of a dynamic macroeconomic environment. Net sales were $10.6 billion, down 10% versus the year-ago period, reflecting declines in all operating segments. Sales were down 1% sequentially as volume gains in Packaging & Specialty Plastics were more than offset by seasonal demand declines in Performance Materials & Coatings. Volume increased 2% year-over-year, with gains across all regions except Asia Pacific, which was flat. Sequentially volume decreased by 1%, including the impact of an unplanned event from a storm that was equivalent to a Category 1 hurricane at our Bah\u00eda Blanca site in Argentina. Local price decreased 13% year-over-year, with declines in all operating segments due to lower feedstocks and energy costs. Sequentially, price was flat, reflecting modest gains in most regions. Operating EBIT for the quarter was $559 million, down $42 million year-over-year, primarily driven by lower prices. Sequentially, operating EBIT was down $67 million, as gains in Packaging & Specialty Plastics were more than offset by seasonally lower volumes in Performance Materials & Coatings. Our cash flow generation and working capital management enabled us to deliver cash flow from operations of $1.6 billion in the quarter. We continued to reduce costs and focused on cash generation, completing our $1 billion of cost savings for the year. And in the fourth quarter, we pursued additional de-risking opportunities for our pension plans, including annuitization and risk transfer of $1.7 billion in pension liability and a one-time non-cash and non-operating settlement charge of $642 million. We also advanced our long-term strategy while returning $616 million to shareholders. And we reached final investment decision with our Board of Directors for our Path2Zero project in Fort Saskatchewan, Alberta. Now, turning to our full year performance on Slide 4. Our 2023 results demonstrate strong execution and a commitment to financial discipline. Against the dynamic macroeconomic backdrop, Team Dow continued to take proactive actions. As a result, we generated $5.2 billion in cash flow from operations for the year, reflecting a cash flow conversion of 96%. We also returned $2.6 billion to shareholders through dividends and share repurchases. Our efforts continue to be recognized externally through industry-leading awards, certifications and recognitions, and we continue to outpace our peers on leadership diversity. I'm proud of how Team Dow is delivering for our customers, driving shareholder value and supporting our communities as we progress our long-term strategy. Now, turning to operating segment performance on Slide 5. In the Packaging & Specialty Plastics segment, operating EBIT was $664 million, up $9 million compared to the year-ago period. Results were driven by lower input costs and higher operating rates, where we closed out the year strong and hit record ethylene production levels on a full-year basis. Local price declines were driven by lower global prices, while volume increases were led by higher packaging demand, primarily in the U.S., Canada and Latin America. Sequentially, operating EBIT increased by $188 million. This was driven by higher integrated polyethylene margins, the impact of planned maintenance activity in the third quarter and higher licensing revenue. Moving to the Industrial Intermediates & Infrastructure segment, operating EBIT was $15 million compared to $164 million in the year-ago period. Results were driven by lower local prices in both businesses as well as reduced supply availability in Industrial Solution. Sequentially, operating EBIT was down $6 million, driven by seasonally lower volumes in building and construction end markets, which were partially offset by seasonally higher demand for deicing fluid and higher demand for mobility applications. And in the Performance Materials & Coatings segment, operating EBIT was a loss of $61 million compared to a loss of $130 million in the year-ago period, driven by lower costs and reduced planned maintenance turnaround activity. Volume was up year-over-year, driven by higher demand in project-driven building and construction end markets. Sequentially, operating EBIT decreased $240 million, primarily due to seasonally lower volumes. Next, I'll turn it over to Jeff to review our outlook and actions on Slide 6.","evidence_gemma_new":"Performance Materials & Coatings operating EBIT year-ago period","evidence_llama_3_3":"Performance Materials & Coatings Operating EBIT year-ago period","evidence_qwen_3_30b":null,"gemma_new_max":61000000.0,"gemma_new_min":61000000.0,"llama_3_3_max":61000000.0,"llama_3_3_min":61000000.0,"qwen_3_30b_max":null,"qwen_3_30b_min":null}
{"symbol":"DOW","year":2024,"quarter":1,"date":"2024-Q1","chunk_id":2,"sub_chunk_id":0,"centroid_label":"performance materials coatings segment operating ebit","agreed_value":41000000.0,"count":3,"chunk":"Now let me turn the call over to Jim. James Fitterling: Thank you, Pankaj. Beginning on Slide 3. In the first quarter, Team Dow delivered sequential volume growth and margin expansion. We strategically increased operating rates to capture improving demand, we maintained pricing and we benefited from lower feedstock and energy costs. These results reflect the strength of our advantaged portfolio, including our participation in diverse end markets and our cost advantage positions around the world. Net sales were $10.8 billion, down 9% versus the year ago period but up 1% sequentially, driven by gains in Performance Materials & Coatings and Industrial Intermediates & Infrastructure. Volume increased 1% year-over-year. And excluding Hydrocarbons & Energy, volume increased 5%, with gains in all regions. This marks the second consecutive quarter of year-over-year volume growth. Sequentially, volume increased 1% and excluding Hydrocarbons & Energy, was up 3%, led by gains in Performance Materials and Coatings. Local price decreased 10% year-over-year and was flat sequentially as modest gains in Europe, the Middle East, Africa and India, or EMEAI, were offset by declines in Asia Pacific, the United States and Canada. Operating EBIT for the quarter was $674 million, down $34 million year-over-year driven by lower prices in all regions. Sequentially, operating EBIT was up $115 million, reflecting gains in Performance Materials & Coatings and Industrial Intermediates & Infrastructure. We delivered cash flow from operations of $460 million in the quarter, resulting in a 94% cash flow conversion on a trailing 12-month basis. This reflects our focus on cash flow generation and enabled $693 million in returns to shareholders. We also advanced our long-term strategy with our higher return, highly capital-efficient Path2Zero project in Fort Saskatchewan, Alberta, where construction started earlier this month. Now turning to our operating segment performance on Slide 4. In the Packaging & Specialty Plastics segment, operating EBIT was $605 million, down $37 million compared to the year ago period, primarily due to lower integrated margins. Local price declines were primarily driven by lower energy and feedstock costs globally. Volume decreased year-over-year driven by declines in the Hydrocarbons & Energy business. This was primarily due to prioritizing higher-value downstream derivative polymer sales as well as lighter feed slate cracking in Europe. Sequentially, operating EBIT decreased by $59 million as improved polyethylene integrated margins were more than offset by expected lower nonrecurring licensing revenue and higher planned maintenance activity. Moving to the Industrial Intermediates & Infrastructure segment. Operating EBIT was $87 million compared to $123 million in the year ago period. Results were driven by lower prices in both businesses, which were partly offset by 3 items: lower energy and feedstock costs, improved equity earnings and volume gains in Polyurethanes & Construction Chemicals. Sequentially, operating EBIT was up $72 million driven by improved equity earnings and lower energy and feedstock costs, primarily in EMEAI. And in the Performance Materials & Coatings segment, operating EBIT was $41 million, up $6 million compared to the year ago period, driven by volume growth and higher operating rates. Volume was up year-over-year driven by gains primarily in the United States, Canada and Latin America. Sequentially, operating EBIT increased $102 million driven by higher seasonal volumes and overall improved demand. Now I'll turn it over to Jeff to review our outlook and actions.","evidence_gemma_new":"Performance Materials & Coatings segment operating EBIT","evidence_llama_3_3":"Performance Materials & Coatings Operating EBIT","evidence_qwen_3_30b":"Performance Materials & Coatings segment operating EBIT $41 million up $6 million compared to the year ago period","gemma_new_max":41000000.0,"gemma_new_min":41000000.0,"llama_3_3_max":41000000.0,"llama_3_3_min":41000000.0,"qwen_3_30b_max":41000000.0,"qwen_3_30b_min":41000000.0}
{"symbol":"DOW","year":2024,"quarter":2,"date":"2024-Q2","chunk_id":2,"sub_chunk_id":0,"centroid_label":"performance materials coatings segment operating ebit","agreed_value":146000000.0,"count":2,"chunk":"Jim Fitterling: Thank you, Andrew. Beginning on slide three, in the second quarter, team Dow delivered sequential top and bottom line growth, as well as the third consecutive quarter of year-over-year volume growth. We achieved this despite a slower-than-expected global macroeconomic recovery, particularly in areas like building and construction and consumer durables. Net sales were $10.9 billion, down 4% versus the year ago period and up 1% sequentially, driven by gains in packaging and specialty plastics and performance materials and coatings. Volume increased 1% versus the year ago period with gains led by the United States and Canada. Excluding hydrocarbons and energy sales, which were down primarily due to lighter feed slate cracking in Europe, volume increased 4%. Sequentially, volume increased 1% with gains in all regions except Asia Pacific, which was flat. Local price decreased 4% year-over-year. Sequentially, local price increased 1% led by gains in Europe, the Middle East, Africa, and India or EMEA. Operating EBIT was $819 million, up $145 million sequentially, reflecting gains in packaging and specialty plastics and performance materials and coatings. Cash flow from operations was $832 million on higher earnings and an efficient release of working capital, resulting in an 85% cash flow conversion on a trailing 12-month basis. Our focus on cash flow generation enabled $691 million in returns to shareholders, including $491 million through dividends and $200 million in share repurchases. In June, we published our 2023 Intersections Progress Report. This report showcases the positive impact that we are making on the environment and society and importantly, how those actions support long-term profitable growth. Now turning to our operating segment performance on slide four. In the packaging and specialty plastic segment, operating EBIT was $703 million, down $215 million a year-over-year, this was driven by lower integrated margins, higher planned maintenance activity, and lower non-recurring licensing sales. Local peak declines were due to lower downstream polymer prices, primarily in Asia Pacific. Volume decreased year-over-year as higher demand for functional polymers and polyethylene was more than offset by lower merchant hydrocarbon sales, primarily due to lighter feed slate cracking in Europe. Sequentially, operating EBIT increased by $98 million, primarily due to higher integrated margins behind both price and volume gain. Moving to the Industrial Intermediates & Infrastructure segment, operating EBIT was $7 million, an improvement of $42 million versus the year-ago period. Results were driven by improved equity earnings, partly offset by lower integrated margins. Local price declined year-over-year, but volume was up, driven by gains in polyurethane and construction chemicals. Sequentially operating EBIT decreased $80 million, driven by higher planned maintenance activity and higher equity losses, as well as lower volumes. And in the performance materials and coating segment, operating EBIT was $146 million, up $80 million, compared to the year-ago period, driven by broad-based business and geographic volume growth. Local price declined year-over-year, but volume was up, driven by gains in both businesses and all geographic regions. Sequentially operating EBIT increased to $105 million, driven by volume and price gains in both businesses and lower planned maintenance activity. Now I'll turn it over to Jeff to review our outlook and share some examples of our playbook in action.","evidence_gemma_new":"performance materials and coating segment operating EBIT year-ago period","evidence_llama_3_3":"performance materials and coating segment operating EBIT second quarter","evidence_qwen_3_30b":null,"gemma_new_max":146000000.0,"gemma_new_min":146000000.0,"llama_3_3_max":146000000.0,"llama_3_3_min":146000000.0,"qwen_3_30b_max":null,"qwen_3_30b_min":null}
{"symbol":"DOW","year":2024,"quarter":4,"date":"2024-Q4","chunk_id":3,"sub_chunk_id":0,"centroid_label":"performance materials coatings segment operating ebit","agreed_value":52000000.0,"count":2,"chunk":"Karen S. Carter: Thank you, Jim. I'm pleased to join you all today. And before I begin, I'd like to mention what an honor it is to be named Dow's Chief Operating Officer. I look forward to engaging with many of you, our owners, in the near future. In my more than 30 years at Dow, I have progressed through the organization to most recently leading PNSP, the company's largest operating segment. And I have worked across a broad range of businesses and functions, including global leadership positions within the building and construction and consumer electronics and markets, as well as Dow's polyethylene franchise. This has given me a deep appreciation for our company's competitive advantages, the strength of our innovation engine, and our commitment to delivering profitable growth. As COO, my priorities are to further strengthen our customer engagement, accelerate the commercialization of Dow's innovation pipeline, and enhance reliability and productivity. I am committed to driving business and operational results, while progressing our strategic priorities to deliver long-term value for our shareholders. Now, let's move to our operating segment results. In the Packaging & Specialty Plastics segment, we entered the fourth quarter with a challenging backdrop of ample industry supply, high feedstock costs and a typical seasonal slowdown in demand. Segment results reflected a decrease in local price both year-over-year and sequentially. This was primarily driven by lower functional polymers and polyethylene prices as a result of the October price decline reflected in the market indices and other competitive price pressures throughout the quarter. Despite higher demand for flexible food and specialty packaging in all regions except Latin-America, volume for this segment was down 1% year-over-year. This was primarily driven by lower third-party hydrocarbon sales and non-recurring licensing revenue. Operating EBIT was $447 million, a decrease of $217 million compared to the year-ago period. This was primarily driven by lower integrated margins and licensing revenue. Moving to the Industrial Intermediates & Infrastructure segment. We benefited from strong global energy demand, as well as stable consumer and pharma demand. We also experienced typical seasonal improvements for deicing, while agricultural and coatings applications saw normal seasonal declines. Looking at fourth quarter results, local price declined 1% year-over-year, while volume was up 1% year-over-year. This was driven by improved supply availability in our Industrial Solutions business as we finished ramping-up our Glycol-2 unit ahead of schedule. Those gains were partly offset by continued softness in the Polyurethanes and Construction Chemicals business. Operating EBIT for the segment increased $69 million versus the year-ago period. Results were primarily driven by higher operating rates and improved supply availability in the Industrial Solutions business. And in the Performance Materials & Coating segment, volume was up 5% with strong gains across both architectural coatings and downstream silicones. We achieved this despite global weakness in building and construction end-markets as high-interest rates continue to pressure spending in residential markets. Operating EBIT increased $52 million compared to the year-ago period, driven by volume gains and lower fixed costs. Now, I'll turn the call over to Jeff, who will provide an overview of the macros and our outlook.","evidence_gemma_new":"Performance Materials & Coating segment Operating EBIT year-ago period","evidence_llama_3_3":"Performance Materials & Coating segment Operating EBIT","evidence_qwen_3_30b":null,"gemma_new_max":52000000.0,"gemma_new_min":52000000.0,"llama_3_3_max":52000000.0,"llama_3_3_min":52000000.0,"qwen_3_30b_max":null,"qwen_3_30b_min":null}
{"symbol":"DUK","year":2023,"quarter":4,"date":"2023-FY","chunk_id":2,"sub_chunk_id":0,"centroid_label":"adjusted earnings per share","agreed_value":5.56,"count":2,"chunk":"Lynn Good: Abby, thank you, and good morning everyone. Today, we announced 2023 adjusted earnings per share of $5.56, finishing the year within our guidance range and demonstrating once again our ability to exercise agility in managing our business and meeting our commitments. We also announced 2024 guidance of $5.85 to $6.10 with the midpoint of $5.98. This represents 6% growth from our original 2023 guidance and we extended our 5% to 7% EPS growth rate through 2028 off the midpoint of our 2024 range. We entered the year with significant momentum. 2024 marks a fundamental repositioning of our investment proposition. With the commercial renewable sale, we've transformed our business to become a fully regulated utility for the first time in decades. Along with improved regulatory constructs, we're poised to deliver on our simplified 100% regulated growth plan. Our Southeast and Midwest utilities operate in some of the fastest growing and most attractive jurisdictions across the US. We expect growth in our service territories to accelerate, as we move further into the energy transition driving substantial investment. We are now projecting $73 billion in CapEx over the next five years, an $8 billion increase versus our previous plan. Turning to slide 5, 2023 marked another year of outstanding accomplishments across our business, building on our compelling growth story as we move into '24. As I mentioned, we completed our portfolio repositioning and delivered multiple constructive regulatory outcomes, while maintaining our commitment to safety and customers. We executed five rate cases and I'm proud of the constructive results the team has delivered. We received orders approving $45 billion in historic and future rate base investments that will provide growth to customers for years to come. There was also a recognition of the rising cost of capital with improving ROEs and equity ratios. And in North Carolina, we implemented forward-looking multiyear rate plans for the first time ever. The performance-based regulations authorized by HB 951, provides certainty, predictability and value to customers and the company. This milestone was accomplished through years of work with policymaker\u2019s, legislators and other stakeholders. Shifting to operations. Our teams performed well throughout the year, serving our customers in extreme weather conditions and restoring power following historic storms in Indiana and Florida. Providing safe reliable power in all seasons and circumstances remains our mission. In fact, in 2023, Duke Energy Florida had its best reliability performance in more than a decade, largely due to our significant storm protection plan investments. These investments also aided restoration efforts in Hurricane Adalia, saving outage minutes and speeding return to service. In the Carolinas, our nuclear fleet continues to generate safe, reliable carbon-free power, achieving a capacity factor of 96%, the 25th year in a row above 90%. And underpinning all of this in a hallmark of our commitment to operational excellence, 2023 marked our best safety performance in company history, as measured by a total incident case rate of 0.31. Safety is a core value at Duke Energy and I'm proud of our employees' commitment to event-free operations. Finally, the Piedmont team continues to excel in customer service. For the second year in a row, J.D. Power ranked Piedmont number one in residential customer satisfaction for natural gas services in the Southeast. And our Carolinas electric utilities continue to achieve strong results as well, remaining in the top quartile. Moving to Slide 6, we start the year entering the next phase of our energy transition, a period of execution and record infrastructure build to meet the evolving energy needs of our customers and communities. We're working with stakeholders to develop resource plans to support the phenomenal growth in our communities. In the Carolinas, demand is already outpacing the forecast used in our August resource plan filings and we filed supplemental portfolios in January. We're committed to meeting this growth with a diverse and increasingly clean energy mix that includes renewables, natural gas, next-generation nuclear and storage resources, as well as energy efficiency and demand response tools. We're also taking steps to build new generation in North Carolina, we'll file CPCNs for over two gigawatts of new natural gas generation in 2024. We'll continue to advance annual solar procurements targeting one gigawatt per year. And in Indiana we'll file CPCNs for new generation resources around midyear. These new facilities will add to our diverse mix of resources and are critical to meeting growing customer demand as we reliably exit coal by 2035. From a regulatory perspective, we've announced two rate cases in 2024 starting with DEC South Carolina in early January. Since the last case in 2018, we've invested more than $1.5 billion to improve reliability and resiliency and meet the growing energy needs of our more than 650,000 customers. And in Florida, we notified the commission of our intent to file a rate case in April. Similar to our current multiyear rate plan, which runs through 2024, this filing will cover three years of investments beginning in 2025. Our plan will add over 1000 megawatts of new solar and include over $3 billion of grid investments to serve population growth, increased reliability and reduced storm-related outages. Finally since our last rate cases at Duke Energy Indiana and Piedmont North Carolina, we've continued to make investments to strengthen our system and we're evaluating the timing of our next filings in these jurisdictions. In closing, I'll move to Slide 7, which depicts the transition of Duke Energy over the last many years to the premier regulated utility than it is today. The strategic and financial clarity provided by optimizing our portfolio over the last decade has simplified Duke Energy to a powerful, core regulated business operating in vibrant jurisdictions, growing through population migration and strong commercial and industrial economic development. Our growth potential is the highest it's been in decades and is reflected in our $73 billion capital plan. This plan is driven by grid investments to transform the largest T&D system in the US and IRP-related generation investments to support our growing jurisdictions and fleet transition. An efficient recovery mechanisms allow us to translate these investments into customer and investor value. In closing, we have positioned Duke for long-term value creation and our path forward is clear as we navigate the coming decade of record infrastructure build. This pivotal point in our history drives a differentiated low-risk, total return proposition going forward and I'm confident we will deliver. With that let me turn the call over to Brian.","evidence_gemma_new":"adjusted earnings per share 2023","evidence_llama_3_3":"adjusted earnings per share 2023","evidence_qwen_3_30b":null,"gemma_new_max":5.56,"gemma_new_min":5.56,"llama_3_3_max":5.56,"llama_3_3_min":5.56,"qwen_3_30b_max":null,"qwen_3_30b_min":null}
{"symbol":"DUK","year":2023,"quarter":1,"date":"2023-Q1","chunk_id":2,"sub_chunk_id":0,"centroid_label":"adjusted earnings per share","agreed_value":1.2,"count":3,"chunk":"Lynn Good: Abby. Thank you, and good morning, everyone. Today, we announced adjusted earnings per share of $1.20 for the first quarter. These results reflect a $0.22 headwind from weather with January and February ranking among the warmest winter months on record across our service territories. In fact, DEP had its warmest January and February in the last 32 years. In response, we've already taken action activating agility measures across the enterprise, which Brian will walk through with you in just a moment. With three quarters remaining, including our strongest quarters still ahead, we are reaffirming our 2023 guidance range of $5.55 to $5.75 with a midpoint of $5.65. We're also on track to deliver our long-term EPS growth rate of 5% to 7% through 2027 off the midpoint of the 2023 range. Before I turn to our regulated utilities, I would like to provide an update on the sale of our commercial renewables business. As you know, we have separate sales processes underway for the utility scale business and the distributed energy business. We are in the late stage of the process for both transactions and we'll look to update you in the near future. We continue to anticipate proceeds in the second half of the year. Moving to Slide 5, we're making meaningful progress in our strategic initiatives in each of our jurisdictions. In North Carolina, we recently reached a partial settlement with public staff [indiscernible], who represents DEP's industrial customers and the Duke Energy Progress rate case. With agreement on approximately $3.5 billion of forward-looking capital investments in the multi-year rate plan, the settlement represents a significant milestone on our journey to modernize recovery mechanisms in North Carolina. It positions us well to continue delivering value to customers, while supporting the cash flows of the company. The settlement also provides clarity on retail rate base of approximately $12.2 billion for the historic base case and depreciation rates that largely align with DEP's proposal. Further, we reached agreement on performance incentive metrics and residential decoupling. We were pleased to be able to work with public staff in [indiscernible] to narrow the open items in the case. These settlements are subject to approval by the North Carolina Utilities Commission. Evidentiary hearings began May 4 and are expected to conclude later this month. Interim rates will be implemented in June subject to refund, and we expect permanent rates to be effective October 1. The Duke Energy Carolina's rate case is about three months behind the DEP case and hearings scheduled to begin on August 21. Moving to South Carolina, the commission approved a comprehensive settlement in our Duke Energy progress rate case in February. Revised rates went into effect in April. We also recently received commission approval to securitize approximately $170 million of past storm costs at Duke Energy Progress. In Florida, the commission approved our fuel capacity and storm cost request in March. Rates were updated in April and reflect recovery of deferred fuel costs over 21 months with a debt return. We\u2019ll recover storm costs associated with hurricanes Ian and Nicole, as well as replenish the storm reserve over 12 months. We also continue to expand our renewable fleet in the study and responsible manner, adding four solar projects in March and April, totalling 300 megawatts. With these additions, we now operate 1200 megawatts of solar in Florida with plans to continuing adding approximately 300 megawatts a year going forward. In Indiana, we've had an active legislative session. The legislature passed several energy bills, including House Bill 1421, which was signed into law and allows quip and rate base for natural gas generation. These bills support our ability to execute our energy transition in Indiana while maintaining reliable and affordable power for customers. We are in the process of finalizing CPCNs, which we expect to begin filing with the Indiana Commission later this quarter. In Ohio, we reached a comprehensive settlement with the PUCO staff and multiple other parties in our natural gas rate case. The settlement, which is subject to commission approval, includes agreement on expanded revenue caps for the Capital Expenditure Program Rider. An evidentiary hearing is scheduled to begin on May 23. And in Kentucky, the commission is conducting an evidentiary hearing today on the electric rate case filed in December. If approved, new rates are anticipated to go into effect in July. We are making great progress on our strategy across our entire service territory, meeting our commitments, and advancing investments in a balanced way to better serve our customers. Our strong track record is reflected in our impact report, Duke Energy's 17th Annual Disclosure on Sustainability Topics. This comprehensive report was published in April and includes our goals and progress on a broad range of topics, including the energy transition. It also outlines our corporate citizenship and the value we're creating for employees, customers, and communities from economic development to environmental justice and to rescaling and redeploying workers. Before I turn the call over to Brian, let me take a moment to talk about our grid investment plan, which is $36 billion accounts for over half of our five-year capital plan. The grid is a critical part of our energy transition and with more than 320,000 line miles. We operate the largest transmission and distribution system in the nation. The foundation of our grid plan is focused on improving reliability and resiliency, preparing the grid for renewables, and enabling electrification. Our reliability and resiliency investments are centered on strengthening the grid against storms and security trusts and improving the ability to rapidly restore power when there's an outage. We're making targeted investments across a variety of programs, including self-optimize growth technologies targeted undergrounding, physical and cybersecurity upgrades, and upgrading lines and substations. Our investments are already making a difference as evidenced by our response to Hurricane Ian last fall, where we restored power in less than half the time of our Hurricane Irma restoration efforts in 2017. As highlighted on the slide, we've made great progress in establishing constructive recovery mechanisms across our jurisdictions. These mechanisms will also assist in recovering growth investments in a timely manner, mitigating lag and supporting balance sheet strength while delivering benefits to our customers. From grid improvements to installing renewables to advancing policy, we're taking collective action to transform and ready the system for the future. We have a clear path forward and are confident our investment plan will deliver sustainable value and 5% to 7% earnings growth. With that, let me turn the call over to Brian.","evidence_gemma_new":"adjusted earnings per share","evidence_llama_3_3":"adjusted earnings per share last year","evidence_qwen_3_30b":"adjusted earnings per share first quarter","gemma_new_max":1.2,"gemma_new_min":1.2,"llama_3_3_max":1.2,"llama_3_3_min":1.2,"qwen_3_30b_max":1.2,"qwen_3_30b_min":1.2}
{"symbol":"DUK","year":2023,"quarter":1,"date":"2023-Q1","chunk_id":3,"sub_chunk_id":0,"centroid_label":"adjusted earnings per share","agreed_value":1.29,"count":2,"chunk":"Brian Savoy: Thanks, Lynn, and good morning, everyone. I'll start with quarterly results and highlight key variances to the prior year. As shown on Slide 7, our first quarter reported earnings per share were $1.01 and adjusted earnings per share were $1.20. This compares to reported and adjusted earnings per share of $1.08 and $1.29 last year. Adjusted results exclude the impact of commercial renewables, which is reflected in discontinued operations. Within the segments, Electric Utilities & Infrastructure was down $0.14 compared to last year. As Lynn mentioned, these results reflect extremely mild weather in January and February, which drove a $0.22 headwind compared to normal. This is the most significant weather impact we've seen in recent memory. In addition to weather, lower volumes and higher interest expenses were partially offset by lower O&M and growth from rate cases and riders. Rate case impacts in the quarter were primarily driven by our Florida utility. Consistent with our current settlement terms, in January, we had an annual step-up under the multiyear rate plan as well as the impact of a 25 basis point ROE increase as a result of rising interest rates. Moving to Gas Utilities & Infrastructure, results were $0.04 higher year-over-year, primarily due to growth from riders and customer additions. Before discussing retail volumes, I'd like to take a moment to talk about our 2023 cost mitigation efforts and full-year expectations. We're currently executing the $300 million in O&M reductions that we shared previously, which were incorporated into our base plan to address interest rate and inflation headwinds. As we've said, 75% of these savings are structural and will be sustainable into future years. In response to mild weather in Q1, we've already activated agility measures, leveraging our scope and scale to identify further savings opportunities. As we've done in the past, we're looking to tactical O&M efforts and other levers. These include deferring noncritical work, reducing spend on outside services and limiting nonessential travel and over time, among others. We will be thoughtful about these efforts, keeping our unwavering commitment to reliability and customer service at the forefront of our approach. Looking ahead, residential decoupling in North Carolina will be fully implemented by 2024. But until then, we will continue to flex the agility muscle that we have done so successfully in the past. Turning to volumes on Slide 8. As expected, on a rolling 12-month basis, load growth has moderated closer to pre-COVID trends. When comparing to 2022, it's important to note that we had a very robust first quarter last year, which saw nearly 6% growth. In addition, nearly all of the Q1 weakness this year was seen in January and February when weather was extreme. In these situations, it can be challenging to precisely estimate the weather component of total volume variances. In March and April, when weather was closer to normal, volume trends were more consistent with expectations, giving us confidence that the full-year 2023 load growth will be in the neighborhood of 0.5%. Continued strong customer growth in the residential class also supports confidence in our outlook. The population migration we've seen into our service territory remains as strong as ever. In the industrial class, we're seeing some weakness in the textile sector as well as an isolated plant closure by an electronics manufacturer in the Carolinas. Lingering supply chain impacts also continue to be a factor impacting usage. With that said, fundamental growth remains strong. Many of our larger industrial customers are expanding, and economic development in our service territories continues to be robust. For example, our recently released impact report highlighted our final economic development results for 2022. Over the year, we partnered with our states to attract over 29,000 new jobs and $23 billion in capital investments to our service territories. These new customers, which represent several key sectors such as battery, EVs and semiconductors, will provide meaningful load growth as operations ramp up. We\u2019re proud of these accomplishments, which support the communities we serve and give us further confidence in the long-term economic outlook for our service territories. Moving on to financial activities on Slide 9. We had a productive first quarter completing around 60% of our planned 2023 issuances. We\u2019ve also been opportunistic taking advantage of market dynamics, which made convertible notes an attractive option. In April, we issued $1.7 billion of these notes to reduce our commercial paper balance and lower interest expense. Importantly, we made good progress on fuel proceedings during the quarter as well. In Florida, we received approval for a full recovery of the 2022 deferred fuel balance with rates updated April 1. We also filed in February for a recovery of approximately $1 billion of deferred fuel in DEC North Carolina. We expect to receive an order in August and for rates to be implemented in September. Filings over the summer will round out the Carolinas addressing the remaining uncollected costs. In addition, we continue to expect proceeds from the sale of commercial renewables in the second half of this year, which will be used for debt avoidance at the holding company. Combined, we expect these two items fuel collections and the completed sale will positively impact FFO to debt by 50 basis points to 75 basis points by year end. I know the balance sheet is top of mind for investors, and credit is at the forefront of our planning as well. In fact, our efforts and commitment to the balance sheet were recently recognized by Moody\u2019s. In April following their Annual Meeting, Moody\u2019s reaffirmed our current credit ratings and stable outlook at the holding company. This is further evidence that we have the right plan in place and are taking appropriate steps to maintain our strong balance sheet as we advance our energy transition and execute our capital plan. Moving to Slide 12. We remain confident in delivering our 2023 earnings guidance range of $5.55 to $5.75 and growth of 5% to 7% through 2027. We operate in constructive growing jurisdictions and the fundamentals of our business are strong. Our progress on key initiatives in the first quarter positions us well to deliver on our commitments as we execute the priorities that are important to our customers, communities and shareholders. With that, we\u2019ll open the line for your questions.","evidence_gemma_new":"adjusted earnings per share","evidence_llama_3_3":"adjusted earnings per share last year","evidence_qwen_3_30b":null,"gemma_new_max":1.29,"gemma_new_min":1.29,"llama_3_3_max":1.29,"llama_3_3_min":1.29,"qwen_3_30b_max":null,"qwen_3_30b_min":null}
{"symbol":"DUK","year":2023,"quarter":2,"date":"2023-Q2","chunk_id":2,"sub_chunk_id":0,"centroid_label":"adjusted earnings per share","agreed_value":0.91,"count":3,"chunk":"Lynn Good: Abby, thank you, and good morning, everyone. Today we announced adjusted earnings per share of $0.91 for the quarter. For the second quarter in a row mild weather impacted results. For perspective in the Carolinas January and February were the mildest in the last 30 years. And May and June were in the top five. Through June we're facing a weather headwind of nearly $0.30. Agility measures have been put in place which add to the $300 million O&M reduction that was targeted and in place coming into 2023. Our cost initiatives are grounded in our culture of safety and serving our customers with excellence while maintaining our assets for the future. Brian will provide more on cost management in a moment. We've had an early look at July and as you would expect July whether is positive consistent with the trend across the U.S. and August and September are in front of us. With our largest quarter ahead, we are reaffirming our guidance range for 2023 and we'll have more to say on projected results for the year on the third quarter call. As we look ahead, the fundamentals of our business are strong, and we are reaffirming our 5% to 7% growth rate. Turning to Slide five, you'll see highlights of the strategic portfolio repositioning we've executed over the last decade. With the announcement of the commercial renewable sale which we expect to close by the end of the year, we're a fully regulated company operating in constructive and growing jurisdictions with a wealth of clean energy investments driving growth for years to come. The regulatory constructs in our states have also meaningfully improved over this time, including landmark bipartisan energy legislation passed in North Carolina in 2021. Modern constructs like those in HB951 allow us to invest for the benefit of our customers, while preserving returns for our investors. We are pleased that today 90% of our electric utility investments are eligible for modern recovery mechanisms that mitigate regulatory lag. Our growth story is an organic one, with over 145 billion of clean energy grid and LDC investments over the next decade. With the portfolio repositioning complete our sole focus is on our regulated businesses, and the work we have underway to pursue the largest energy transition in our industry. Let me now turn to Slide six, to provide an update on our progress in each jurisdiction. In North Carolina, we continue to work toward resolution of the Duke Energy progress rate case. We implemented interim rates June 1, subject to refund, with rates for typical residential customers increasing about 5%. We expect the commission to issue an order later this month for the final DEP rates going into effect October 1. We're also preparing for the Duke Energy Carolinas hearing which is scheduled to begin August 28. Our energy transition in the Carolinas remains a top strategic priority and we're working diligently on updated resource plans to be filed with the Public Service Commission of South Carolina and the North Carolina Utilities Commission respectively in mid-August. Similar to previous filings, the plans are based on significant stakeholder engagement, and will outline multiple portfolios, each of which preserve affordability and reliability while transitioning to cleaner energy resources. IRA benefits will be incorporated into the analysis for the first time, as well as increasing load from numerous economic development announcements, and continued strong population migration into the Carolinas. Our modeling will also reflect higher reserve margins as a result of our continuous evaluation of resource adequacy. Later this year, we will begin the CPCN Process in North Carolina for replacement gas generation. At the same time, solar procurement will continue on an annual basis. In fact, our 2022 solar procurement was recently finalized, with nearly 1000 megawatts to be placed in service by 2027. And our 2023 Solar RFP targeting 1400 megawatts was recently approved by the NCUC, with bids to be received later this year. Following the resource plan filings, each commission will hear from interested parties through a transparent regulatory process as they consider our proposals. We expect an order from the South Carolina Commission in mid \u201824, and an order from the North Carolina Commission by the end of \u201824. Turning to Florida, we're executing us on our investment plan to benefit customers. We've added 300 megawatts of new solar this year and now operate 1200 megawatts in the state, with plans to continue adding about 300 megawatts per year over the next decade. We\u2019re hardening the grid through our storm protection plan and already seeing benefits from improved reliability. With robust customer growth and timely recovery of investments, our Florida utility continues to deliver strong returns. In Kentucky we've partnered with Amazon to install a two megawatt solar plant on top of their fulfillment center in Northern Kentucky, the largest rooftop solar site in the state. This partnership supports the carbon reduction goals of both Duke Energy and Amazon. And it's just one example of how we're working with our customers to meet their energy needs. Turning to Indiana, I'd like to take a moment to thank the nearly 2000 crew members that work tirelessly over the July 4 Holiday following multiple storms. The widespread storm systems extended across our entire service territory, and led to a multi-day effort to restore over 370,000 outages. And in fact today in the Carolinas, our crews are also working to restore outages that resulted from the strong storms in the eastern seaboard and are doing so safely timely, and in close communication with our customers and stakeholders. As with all operations, the safety of our employee\u2019s environment and communities remain front and center and I'm proud to say that for the eighth consecutive year, we've led the industry in safety as measured by total incident case rate. On the federal side, we're taking advantage of multiple incentives and other opportunities to benefit our customers. We're incorporating IRA tax benefits and resource plans and rate adjustments across our jurisdictions to lower costs for customers and federal funding from the infrastructure investment and Jobs Act creates opportunity to advance new resources and spur economic development. We have put forward multiple proposals through the IIJA, including for methane reduction, carbon capture long duration storage, hydrogen and grid modernization. And we'll continue to evaluate opportunities as funding is announced. We continue to advocate for federal and state support that recognizes the importance of a responsible energy transition. And in fact, later today, we will file comments on EPAs proposed 111 rule. While we support EPAs commitment to a cleaner energy future. We believe an orderly transition requires a diverse mix of energy resources, and must align with the pace of technology development. We will continue to actively work with policymakers, industry peers, state partners and others in support of a reliable affordable energy transition. In closing, we've navigated the first half of the year with agility taking swift action in the face of record mild weather while maintaining our focus on our strategic priorities. With our portfolio repositioning complete we offer an attractive fully regulated organic growth proposition. We have a clear strategy ahead of us as we invest to satisfy increasing demand for clean, affordable and reliable energy across our growing regions. Our long term fundamentals remain as strong as ever, and we're well positioned to deliver sustainable value and 5% to 7% earnings growth over the next five years. And with that, let me turn the call over to Brian.","evidence_gemma_new":"adjusted earnings per share the quarter","evidence_llama_3_3":"adjusted earnings per share for the quarter","evidence_qwen_3_30b":"adjusted earnings per share quarter","gemma_new_max":0.91,"gemma_new_min":0.91,"llama_3_3_max":0.91,"llama_3_3_min":0.91,"qwen_3_30b_max":0.91,"qwen_3_30b_min":0.91}
{"symbol":"DUK","year":2023,"quarter":3,"date":"2023-Q3","chunk_id":3,"sub_chunk_id":0,"centroid_label":"adjusted earnings per share","agreed_value":1.94,"count":2,"chunk":"Brian Savoy: Thanks, Lynn, and good morning, everyone. I'll start with a discussion on quarterly results. As shown on Slide 8, our third quarter reported earnings per share were $1.59, and our adjusted earnings per share were $1.94. This compares to reported and adjusted earnings per share of $1.81 and $1.78 last year. Please see the non-GAAP reconciliation in today's materials for additional details. Within the operating segments, Electric Utilities and Infrastructure results were down $0.01 per share compared to last year. We experienced earnings growth from rate cases and riders, favorable weather and lower O&M from our cost mitigation initiatives, which I will discuss further in a moment. These positive items were offset by lower weather-normalized volumes, higher storm costs and higher interest expense. Shifting to Gas Utilities and Infrastructure, results were up $0.01 due to riders and customer growth. And within the Other segment, we were up $0.16 over the prior year, primarily due to a lower effective tax rate which reflects the ongoing tax efficiency efforts in the Company. We expect our full year 2023 effective tax rate to be at the low end of our 11% to 13% guidance range. As Lynn mentioned, we are tightening our full year 2023 guidance range to $5.55 to $5.65. We entered the year with one of the mildest winters on record. And although weather improved in the third quarter, we remain $0.20 below normal. We also continued to see weakness in volumes estimated at approximately $0.20 year-to-date, some of which may be attributable to weather, but also to a softening of industrial load and return to work for residential customers. To mitigate the impact, we have increased our 2023 agility target to $0.30, which includes tactical O&M savings a lower effective tax rate and other levers. As we look to the fourth quarter, we expect a strong finish to the year, targeting $1.50 to $1.60 per share. Our original plan was back-end loaded due to growth from rate cases and riders. We will also see the benefit of our ongoing cost management efforts. We are closely monitoring volume trends and have included fourth quarter drivers in the appendix. Turning to Slide 9. Let me discuss more specifics on volume trends. Volumes are down 1.2% on a rolling 12-month basis. Many of our industrial customers are acknowledging a near-term pullback, managing inventory levels and cost in a disciplined way due to uncertainty in the broader economy. Most are describing the pullback is temporary, and there is optimism about a turnaround in mid- to late 2024 and into 2025. We continue to see strong customer growth from population migration and robust economic development, giving us confidence in growth over the long term. Based on recent success in economic development efforts in key sectors such as battery, EVs, semiconductors and data centers, we see meaningful load growth over the next several years as outlined on Slide 9. For example, in 2024, we expect economic development projects coming online will add between 1,000 and 2,000 gigawatt hours. As we look further out, we have line of sight to 7,000 to 9,000 gigawatt hours by the end of 2027, giving us confidence in our 0.5 to 1% growth rate. Turning to Slide 10. Let me spend a few minutes on 2024. Consistent with historical practice, we will provide 2024 earnings guidance and our detailed capital and financing plans in our February update. Today, we have provided growth drivers for 2024. We've executed an active regulatory calendar this year that has yielded constructive outcomes as we head into next year. The multiyear rate plan in DEP will be in effect for a full year and we expect permanent rates under the DEC multiyear rate plan to be effective in January. In Florida, we will see the impact of the third year of our multiyear rate plan and growth from storm protection plan investments. In the Midwest, we'll see the impact of our Kentucky rate case and grid riders in Indiana and Ohio. In the gas segment, we will see robust growth from rate cases, integrity management investments and customer additions. From a load perspective, we project a pickup in 2024 from return to normal weather. Additionally, while we continue to closely monitor customer usage trends, we expect higher weather-normalized volumes driven by economic development activity and residential customer growth. Recall, residential decoupling will be in place in 2024 in North Carolina. So both DEC and DEP revenue growth will be based on customer increases, which have been robust. We expect interest rates to be higher for longer, resulting in increased financing cost in 2024. For O&M, we have aggressive efforts underway to sustain all cost savings identified in 2022 for 2023 as well as about half of the agility efforts we identified during the course of 2023 to mitigate weather and volumes. As we continue to pursue a technology-enabled, best-in-class cost structure, we expect our culture of continuous improvement to drive 2024 O&M to be lower than 2023 and significantly below our spending level in 2022. Moving to Slide 11. Let me highlight some of the credit supportive actions we've taken to maintain balance sheet strength. We continue to collect deferred fuel balances and have filed for recovery of all remaining uncollected 2022 fuel costs with about 90% approved and in rates. We're on pace to recover $1.7 billion of deferred fuel costs in 2023 and expect our deferred fuel balance to be back in line with our historical average by the end of 2024. As Lynn mentioned, we completed the sale of our commercial renewables business in October. With that, about $1.5 billion of commercial renewable debt will come off the balance sheet, further supporting our credit metrics. In August, as part of our ongoing DEC North Carolina rate case, we reached a settlement with public staff on the treatment of nuclear PTCs related to the Inflation Reduction Act. The settlement provides for the flowback of annual PTCs to customers over a four-year amortization period. If approved by the commission, this settlement would provide savings for customers and be supportive to our credit metrics. We intend to utilize the transferability provisions of the IRA and have engaged an external advisor to run a formal auction-style process, providing access to a broad range of qualified buyers. With these positive developments, we are targeting FFO to debt between 13% and 14% in 2023 and 14% in 2024 through 2027. Finally, as I mentioned, we will provide an update in February on our financing plan, along with a comprehensive refresh and roll forward of our five-year capital plan. We expect our capital plan to increase as we move further into the energy transition. We will take a balanced approach to funding the incremental capital, supporting our growth rate and balance sheet strength. As part of this balanced approach, we will evaluate modest funding through our dividend reinvestment plan and at the market program. The growth potential in our business is at a level we haven't seen in decades. For customers, we will achieve the right balance of affordability, reliability and increasing clean energy. And for investors, we will achieve growth while maintaining balance sheet strength. Moving to Slide 12, we're executing on our priorities and are excited about the path ahead as a fully regulated company. We operate in constructive growing jurisdictions, which combined with our $65 billion five-year capital plan, strong operations and cost efficiency capabilities give us confidence in our 5% to 7% growth rate through 2027. Our attractive dividend yield, coupled with long-term earnings growth from investments in our regulated utilities, provide a compelling risk-adjusted return for shareholders. With that, we'll open the line for your questions.","evidence_gemma_new":null,"evidence_llama_3_3":"adjusted earnings per share third quarter","evidence_qwen_3_30b":"adjusted earnings per share third quarter","gemma_new_max":null,"gemma_new_min":null,"llama_3_3_max":1.94,"llama_3_3_min":1.94,"qwen_3_30b_max":1.94,"qwen_3_30b_min":1.94}
{"symbol":"DUK","year":2024,"quarter":4,"date":"2024-FY","chunk_id":3,"sub_chunk_id":0,"centroid_label":"adjusted earnings per share","agreed_value":5.9,"count":3,"chunk":"Abby Motsinger: Chair and CEO. Along with Harry Sideris, President, and Brian Savoy, CFO. Today's discussion will include the use of non-GAAP financial measures and forward-looking information. Actual results may differ from forward-looking statements due to factors disclosed in today's materials and in Duke Energy's SEC filings. The appendix of today's presentation includes supplemental information along with a reconciliation of non-GAAP financial measures. That, let me turn the call over to Lynn. Andy, thank you, and good morning, everyone. Today, we announced 2024 adjusted earnings per share of $5.90, finishing within our guidance range. 2024 was a year of great accomplishment, and in many ways, was defined by our response to hurricanes Helene and Milton. We were moved by our community's outpouring of support and appreciation for our work during these historic storms. We also announced updated guidance today, including a 2025 earnings per share range of $6.17 to $6.42, with a midpoint of $6.30. An $83 billion capital plan, which drives 7.7% earnings-based growth. This capital represents infrastructure spending driven by growing jurisdictions and underpinned by robust regulatory processes, such as integrated resource plans and approved grid investments. And finally, the continuation of our 5% to 7% EPS growth rate through 2029 with the potential to earn higher in the range as the years progress. Duke Energy enters the back part of this decade in a position of strength, and we're excited about the future. We're committed to delivering strong earnings and earnings growth and cash flows for our investors and superior service to our customers and communities. Before we get further into 2025 guidance, let me acknowledge our key achievements in 2024. Turning to slide five, we continued our track record of regulatory execution with the approval of $45 billion of rate-based investments. The regulatory work of the last two years minimizes rate case exposure in 2025 and 2026. We also advanced generation and transmission through our integrated resource plans and CPCN approvals. And we continue to add solar in Florida with 1,500 megawatts now in service. And finally, I'd like to acknowledge the Piedmont Natural Gas team. For the third consecutive year, the team earned the J.D. Power number one customer satisfaction ranking for natural gas service in the Southeast. And let me also just take a moment and acknowledge last month's announcement. Effective April 1, Harry will become CEO and President of Duke Energy, and Ted Craver will assume the role of independent chair of the board. Therefore, today will be my last earnings call prior to retirement. It's been an honor to lead this company, and I appreciate everyone who's been on the journey with me. To our employees, thank you for your commitment to our company and customers. To our shareholders, thank you for your investment in Duke Energy. The capital you provide powers our success and makes the work we do possible. And to the analysts who cover our company, you play a valuable role in the investment community, and I've appreciated your thoughtful research. And to Harry, thank you for being an incredible leader and adviser to me. As many of you know, Harry is a 29-year veteran of the company. Experience in nearly every facet of our business, Harry raised his hand for every challenging assignment and has led this company to great success, thanks to his commitment to our investors, our employees, and our customers. With Harry as CEO and a strong experienced leadership team around him, Duke Energy is well positioned to execute the next phase of our business strategy, and I'm confident in all that the company will achieve. So with that, I'd like to turn the call over to Harry.","evidence_gemma_new":"guidance adjusted earnings per share 2024","evidence_llama_3_3":"adjusted earnings per share 2024","evidence_qwen_3_30b":"adjusted earnings per share 2024","gemma_new_max":5.9,"gemma_new_min":5.9,"llama_3_3_max":5.9,"llama_3_3_min":5.9,"qwen_3_30b_max":5.9,"qwen_3_30b_min":5.9}
{"symbol":"DUK","year":2024,"quarter":1,"date":"2024-Q1","chunk_id":2,"sub_chunk_id":0,"centroid_label":"adjusted earnings per share","agreed_value":1.44,"count":2,"chunk":"Lynn Good: Abby, thank you, and good morning, everyone. Today, we announced first quarter adjusted earnings per share of $1.44, delivering a strong start to the year. These results are $0.24 above last year, driven by growth from rate activity across our jurisdictions, strengthening retail volumes and improved weather. We remain confident in our outlook and are reaffirming our 2024 guidance range of $5.85 to $6.10 and our long-term EPS growth rate of 5% to 7% through 2028. We have a clear path forward as a fully regulated utility operating in some of the most attractive and fastest-growing areas of the country. Our strategy will drive continued growth, underpinned by our 5-year $73 billion capital plan, efficient recovery mechanisms and track record of constructive regulatory outcomes. Moving to Slide 5. Our jurisdictions are experiencing unprecedented growth from population migration and economic development. We're committed to meeting these increasing customer demand through an all-of-the-above strategy that preserves affordability and reliability as we decarbonize. In doing so, 2024 marks an important stage in our fleet transition as we move from the planning phase to project execution. In Florida, we're on track to have 1,500 megawatts of utility-owned solar in service by year-end. And in our recently filed 10-year site plan, we expect to more than triple the amount of solar on our system by 2033. In the Carolinas, we're completing annual solar procurements that will add approximately 1,500 megawatts to the grid each year beginning in 2027. These investments are part of our goal to have 30,000 megawatts of regulated renewables on our system by 2035. In the Carolinas, we filed certificates of Public Convenience and Necessity in March to build more than 2 gigawatts of new, advanced class of natural gas generation. The filings with the NCUC include 2 simple-cycle combustion turbines and 1 combined cycle plant, consistent with the Carolinas resource plan. Pending regulatory approvals, construction is planned to start in 2026 with all units operational by the end of 2028. Each of these new facilities will be sited in existing coal plants and will provide needed dispatchable generation when those units retire. We recognize there's a lot of attention on natural gas in its role in achieving net zero. We believe natural gas must be a part of not just Duke's, but our nation's energy transition strategy in the face of unprecedented demand from AI data centers, chips manufacturers and other economic development, natural gas remains an essential tool to provide reliable and affordable energy for customers and complements our substantial investments in renewables and energy storage. As you know, EPA recently released rules that placed limits on certain baseload generation sources. While the state of this rule will soon be in the hands of the courts, we will continue to advocate for solutions to reliably and affordably serve the growing energy needs of our customers and communities. As we step into this period of significant infrastructure build for the company, we recently appointed Harry Sideris, President of Duke Energy. As President, Harry has responsibility for all of our electric and gas utilities, including all aspects of operations and regulatory activities. Harry is a 28-year company veteran and has an exceptional track record of accomplishment and leadership across many functions. He began his career in generation, led environmental health and safety, served as the President of our Florida utility and most recently led transmission, distribution and customer operations, including economic development. Harry is a trusted member of the executive leadership team and in his new role, he remains committed to delivering value to our customers and our investors. I'm pleased to introduce him for the first time on an earnings call and his new role as President. And with that, Harry, I'll turn it over to you to go through the jurisdictional highlights.","evidence_gemma_new":"adjusted earnings per share first quarter","evidence_llama_3_3":null,"evidence_qwen_3_30b":"adjusted earnings per share first quarter","gemma_new_max":1.44,"gemma_new_min":1.44,"llama_3_3_max":null,"llama_3_3_min":null,"qwen_3_30b_max":1.44,"qwen_3_30b_min":1.44}
{"symbol":"DUK","year":2024,"quarter":2,"date":"2024-Q2","chunk_id":2,"sub_chunk_id":0,"centroid_label":"adjusted earnings per share","agreed_value":1.18,"count":3,"chunk":"Lynn Good: Abby, thank you, and good morning, everyone. Before I begin, I'd like to take a moment and recognize the work of our team responding to Hurricane Debby. The storm made landfall in Florida yesterday morning and caused outages for about 330,000 customers. We had crews in position over the weekend, and our teams are working around the clock to restore power. As of this morning, we've restored 90% of our impacted customers. Based on its current track, we expect the storm to impact the Eastern and Central parts of the Carolinas later this week. Along with tropical storm forced winds, the system is bringing heavy rains. We're staging crews and implementing flood mitigation plans to be able to safely and quickly respond to expected customer outages. Now let me turn to our second quarter results and the significant progress we're making across the company. Our simplified fully regulated portfolio of Southeast and Midwestern utilities combined with our strong track record of constructive regulatory outcomes positions us well to deliver long-term value for shareholders. We have clear growth visibility driven by our $73 billion capital plan, which is focused on grid and generation investments to support the growing communities we serve. In a moment, Harry will provide an update on recent regulatory activity and operational highlights from across the business; and later in the call, Brian will walk through detailed financial results and our long-term sales outlook. But let me begin with the results for the quarter. Turning to Slide 5. Today, we announced adjusted earnings per share of $1.18, building on our strong start to the year. These results were $0.27 above last year, driven by growth across our electric utilities and improved weather. We continue to deliver consistent outcomes, carrying positive momentum into the back half of the year. We are reaffirming our 2024 guidance range of $5.85 to $6.10. We are also reaffirming our long-term EPS growth rate of 5% to 7% through 2028 based off of $5.98 midpoint for 2024. With that, I'd like to hand the call over to Harry.","evidence_gemma_new":"adjusted earnings per share","evidence_llama_3_3":"adjusted earnings per share second quarter","evidence_qwen_3_30b":"adjusted earnings per share last year","gemma_new_max":1.18,"gemma_new_min":1.18,"llama_3_3_max":1.18,"llama_3_3_min":1.18,"qwen_3_30b_max":1.18,"qwen_3_30b_min":1.18}
{"symbol":"DUK","year":2024,"quarter":2,"date":"2024-Q2","chunk_id":4,"sub_chunk_id":0,"centroid_label":"adjusted earnings per share","agreed_value":0.91,"count":2,"chunk":"Brian Savoy: Thanks, Harry, and good morning, everyone. Turning to Slide 8. We had a strong second quarter with reported and adjusted earnings per share of $1.13 and $1.18, respectively. This is up from adjusted earnings per share of $0.91 in the second quarter last year. Within the segments, Electric Utilities & Infrastructure was up $0.34. Growth was driven by rate increases in riders, higher sales volumes and warmer-than-normal weather across our service territories, which is a complete reversal of the extremely mild weather in the second quarter of 2023. Partially offsetting these items were higher interest expense and depreciation. Moving to Gas Utilities & Infrastructure. Results were down $0.02 compared to last year as favorable rider revenue was offset by higher interest expense and depreciation. And finally, the Other segment was down $0.05, primarily due to higher interest expense. Turning to Slide 9. I'd like to take a moment to discuss our earnings profile for the remainder of the year. As a reminder, last year had an atypical earnings shape with record mild weather in the first half of the year, which was mitigated with agility measures in the second half. With that in mind, the strong performance we've demonstrated so far this year is aligned with our planning assumptions. I'm incredibly proud for the team for delivering an impressive first half, and we are on track to achieve full year results within our guidance range. Turning to Slide 10. We were pleased to see weather normal volumes increased 1.9% versus last year, in line with our full year projection. Customer growth remains robust, led by the Carolinas and Florida, which grew 2.4% through the first half of the year. We're also encouraged to see improving residential usage across our jurisdictions. Commercial and industrial volumes were up over 1% versus last year, driven by strength in the commercial sector. Commercial sales volumes have exceeded our projections through the first half, offsetting a slower rebound in industrial sales. As economic development projects continue to come online throughout the second half of the year, we expect C&I load growth to accelerate. We operate in some of the most attractive jurisdictions for both the economic development and customer migration, which provide conviction in our 2% load growth forecast in 2024, and 1.5% to 2% load growth CAGR over the 5-year planning horizon. Turning to Slide 11. We are forecasting unprecedented growth in power demand from advanced manufacturing projects across multiple sectors as well as data centers. As we evaluate which economic development opportunities to include in our forecast. It's important to remember that we take a risk-adjusted approach. We utilize discrete project level analysis to evaluate and probability weight potential opportunities, resulting in a subset of projects being included in our current projections. We have a robust pipeline of projects that continue to progress and will be reflected in our plans when the projects mature. This pipeline provides a runway for growth well into the future. We are committed to serving this new load in a way that prioritizes reliability and affordability for all our customers. To that end, we recently executed MoUs with Google, Microsoft, Nucor and Amazon to explore tailored solutions to meet large-scale energy needs and develop rate structures to lower the long-term cost of investing in clean energy technologies. These voluntary programs, which are subject to commission approval, would be open to any large customer and would include protections for nonparticipating customers. We look forward to continued collaboration with all stakeholders as we work to meet the accelerating demand in our service territories. Turning to Slide 12. We recognize the importance of a strong balance sheet as we advance our strategic priorities and fund investments that will be foundational to our growth. We are on track to achieve 14% FFO to debt by the end of this year, which represents 100 basis points of cushion to our Moody's downgrade threshold. Our constructive regulatory outcomes, combined with the collection of remaining deferred fuel balances, monetization of tax credits and programmatic equity issuances, provide clear line of sight to achieving our target. As disclosed in February, we expect to issue $500 million of common equity annually over the 5-year plan via our DRIP and ATM programs. We've completed over half of our $500 million target, having priced $285 million year-to-date. We've also completed approximately 80% of our planned long-term debt issuances for 2024. As we've demonstrated over many years, our commitment to our current credit ratings and a strong balance sheet is unwavering and will continue to be a top priority as we execute our growth objectives. Moving to Slide 13. We remain confident in delivering our 2024 earnings guidance range of $5.85 to $6.10 and growth of 5% to 7% through 2028. We operate in constructive growing jurisdictions and the fundamentals of our business are stronger than ever. We are well positioned to achieve our growth targets, which, combined with our attractive dividend yield, provide a compelling risk-adjusted return for shareholders. With that, we'll open the line for your questions.","evidence_gemma_new":null,"evidence_llama_3_3":"adjusted earnings per share second quarter last year","evidence_qwen_3_30b":"adjusted earnings per share second quarter last year","gemma_new_max":null,"gemma_new_min":null,"llama_3_3_max":0.91,"llama_3_3_min":0.91,"qwen_3_30b_max":0.91,"qwen_3_30b_min":0.91}
{"symbol":"DUK","year":2024,"quarter":3,"date":"2024-Q3","chunk_id":2,"sub_chunk_id":0,"centroid_label":"adjusted earnings per share","agreed_value":1.62,"count":3,"chunk":"Lynn Good: Abby, thank you, and good morning, everyone. Before I get into the third quarter results, I wanted to take a moment and recognize the extraordinary hurricane season that we've responded to this year. We've had three consecutive hurricanes: Debby, Helene, and Milton, each of which devastated parts of our communities. And my heart goes out to all of those who are directly impacted by these catastrophic storms, especially those who lost loved ones, homes, or businesses. Harry will provide further details on our restoration efforts in a moment and Brian will share cost estimates and plans for cost recovery later in the call. But I want to first commend our employees and utility partners, many of whom were personally affected by the devastation, for their remarkable response. Our field teams rose to the challenge working around the clock to restore outages as safely and quickly as possible. And our customer care representatives, corporate responders, community relations managers and state President offices worked tirelessly to keep customers and policymakers informed. I'd also like to thank our state and local leaders, including Governor Cooper, Governor DeSantis and Governor McMaster and officials in our emergency operation centers for their partnership and coordination. I could not be more proud of our teammates and our partners for their unwavering commitment to our customers and communities. It's important to note that our regulators and policymakers recognize the extraordinary efforts of our company in responding to these events and the feedback we have received has been overwhelmingly positive. We recognize that our work is not done. It will take time for some of our communities to get back on their feet and we'll be with them every step of the way. Turning to quarterly results on Slide 5. Today, we announced adjusted earnings per share of $1.62 for the third quarter compared to $1.94 last year. Brian will discuss the results in more detail, but I wanted to highlight a few things influencing this comparison. As you know, 2023 was impacted by historically weak weather early in the year and mitigation in the second half of the year. Significant mitigation efforts positively impacted third-quarter 2023 results. Third quarter of 2024 includes the full impact of Hurricane Debby and the mobilization of resources for Hurricane Helene. Helene and Milton will impact the fourth quarter. And for both storms, we're working with preliminary cost estimates which we will finalize by year-end. Hurricane costs are largely deferred or capitalized. However, there are a few exceptions and there's no recovery mechanism for lost revenues. As a result and based on what we know today, we are reaffirming our 2024 guidance range, trending to the lower half. We are actively pursuing mitigation measures, some of which will naturally occur because of the resources devoted to the storms and others we will trigger through controlled spending through the balance of the year. And we will look for every opportunity without compromising on our commitment to safety and to our customers. As we look ahead to 2025 and beyond, we have strong momentum driven by our track record of constructive regulatory outcomes, including our recent IRP approvals in the Carolinas, as well as our robust growth in our attractive jurisdictions. These tailwinds give us confidence in our long-term outlook and we are reaffirming our 5% to 7% EPS growth rate through 2028, up the midpoint of our 2024 range. And with that, I'll hand the call over to Harry.","evidence_gemma_new":"adjusted earnings per share third quarter","evidence_llama_3_3":"adjusted earnings per share third quarter 2024","evidence_qwen_3_30b":"adjusted earnings per share third quarter","gemma_new_max":1.62,"gemma_new_min":1.62,"llama_3_3_max":1.62,"llama_3_3_min":1.62,"qwen_3_30b_max":1.62,"qwen_3_30b_min":1.62}
{"symbol":"DUK","year":2023,"quarter":1,"date":"2023-Q1","chunk_id":3,"sub_chunk_id":0,"centroid_label":"electric utilities infrastructure up VAL","agreed_value":0.14,"count":2,"chunk":"Brian Savoy: Thanks, Lynn, and good morning, everyone. I'll start with quarterly results and highlight key variances to the prior year. As shown on Slide 7, our first quarter reported earnings per share were $1.01 and adjusted earnings per share were $1.20. This compares to reported and adjusted earnings per share of $1.08 and $1.29 last year. Adjusted results exclude the impact of commercial renewables, which is reflected in discontinued operations. Within the segments, Electric Utilities & Infrastructure was down $0.14 compared to last year. As Lynn mentioned, these results reflect extremely mild weather in January and February, which drove a $0.22 headwind compared to normal. This is the most significant weather impact we've seen in recent memory. In addition to weather, lower volumes and higher interest expenses were partially offset by lower O&M and growth from rate cases and riders. Rate case impacts in the quarter were primarily driven by our Florida utility. Consistent with our current settlement terms, in January, we had an annual step-up under the multiyear rate plan as well as the impact of a 25 basis point ROE increase as a result of rising interest rates. Moving to Gas Utilities & Infrastructure, results were $0.04 higher year-over-year, primarily due to growth from riders and customer additions. Before discussing retail volumes, I'd like to take a moment to talk about our 2023 cost mitigation efforts and full-year expectations. We're currently executing the $300 million in O&M reductions that we shared previously, which were incorporated into our base plan to address interest rate and inflation headwinds. As we've said, 75% of these savings are structural and will be sustainable into future years. In response to mild weather in Q1, we've already activated agility measures, leveraging our scope and scale to identify further savings opportunities. As we've done in the past, we're looking to tactical O&M efforts and other levers. These include deferring noncritical work, reducing spend on outside services and limiting nonessential travel and over time, among others. We will be thoughtful about these efforts, keeping our unwavering commitment to reliability and customer service at the forefront of our approach. Looking ahead, residential decoupling in North Carolina will be fully implemented by 2024. But until then, we will continue to flex the agility muscle that we have done so successfully in the past. Turning to volumes on Slide 8. As expected, on a rolling 12-month basis, load growth has moderated closer to pre-COVID trends. When comparing to 2022, it's important to note that we had a very robust first quarter last year, which saw nearly 6% growth. In addition, nearly all of the Q1 weakness this year was seen in January and February when weather was extreme. In these situations, it can be challenging to precisely estimate the weather component of total volume variances. In March and April, when weather was closer to normal, volume trends were more consistent with expectations, giving us confidence that the full-year 2023 load growth will be in the neighborhood of 0.5%. Continued strong customer growth in the residential class also supports confidence in our outlook. The population migration we've seen into our service territory remains as strong as ever. In the industrial class, we're seeing some weakness in the textile sector as well as an isolated plant closure by an electronics manufacturer in the Carolinas. Lingering supply chain impacts also continue to be a factor impacting usage. With that said, fundamental growth remains strong. Many of our larger industrial customers are expanding, and economic development in our service territories continues to be robust. For example, our recently released impact report highlighted our final economic development results for 2022. Over the year, we partnered with our states to attract over 29,000 new jobs and $23 billion in capital investments to our service territories. These new customers, which represent several key sectors such as battery, EVs and semiconductors, will provide meaningful load growth as operations ramp up. We\u2019re proud of these accomplishments, which support the communities we serve and give us further confidence in the long-term economic outlook for our service territories. Moving on to financial activities on Slide 9. We had a productive first quarter completing around 60% of our planned 2023 issuances. We\u2019ve also been opportunistic taking advantage of market dynamics, which made convertible notes an attractive option. In April, we issued $1.7 billion of these notes to reduce our commercial paper balance and lower interest expense. Importantly, we made good progress on fuel proceedings during the quarter as well. In Florida, we received approval for a full recovery of the 2022 deferred fuel balance with rates updated April 1. We also filed in February for a recovery of approximately $1 billion of deferred fuel in DEC North Carolina. We expect to receive an order in August and for rates to be implemented in September. Filings over the summer will round out the Carolinas addressing the remaining uncollected costs. In addition, we continue to expect proceeds from the sale of commercial renewables in the second half of this year, which will be used for debt avoidance at the holding company. Combined, we expect these two items fuel collections and the completed sale will positively impact FFO to debt by 50 basis points to 75 basis points by year end. I know the balance sheet is top of mind for investors, and credit is at the forefront of our planning as well. In fact, our efforts and commitment to the balance sheet were recently recognized by Moody\u2019s. In April following their Annual Meeting, Moody\u2019s reaffirmed our current credit ratings and stable outlook at the holding company. This is further evidence that we have the right plan in place and are taking appropriate steps to maintain our strong balance sheet as we advance our energy transition and execute our capital plan. Moving to Slide 12. We remain confident in delivering our 2023 earnings guidance range of $5.55 to $5.75 and growth of 5% to 7% through 2027. We operate in constructive growing jurisdictions and the fundamentals of our business are strong. Our progress on key initiatives in the first quarter positions us well to deliver on our commitments as we execute the priorities that are important to our customers, communities and shareholders. With that, we\u2019ll open the line for your questions.","evidence_gemma_new":"Electric Utilities & Infrastructure","evidence_llama_3_3":"Electric Utilities & Infrastructure last year","evidence_qwen_3_30b":null,"gemma_new_max":0.14,"gemma_new_min":0.14,"llama_3_3_max":0.14,"llama_3_3_min":0.14,"qwen_3_30b_max":null,"qwen_3_30b_min":null}
{"symbol":"DUK","year":2023,"quarter":2,"date":"2023-Q2","chunk_id":3,"sub_chunk_id":0,"centroid_label":"electric utilities infrastructure up VAL","agreed_value":0.14,"count":3,"chunk":"Brian Savoy: Thanks, Lynn. And good morning, everyone. I'll start with quarterly results and highlight key variances to the prior year. As shown on Slide seven, we reported a second quarter loss of $0.32 per share, and adjusted earnings of $0.91 per share. This compares to reported and adjusted EPS of $1.14 and $1.09 last year. GAAP reported results include an impairment of approximately $1 billion related to the commercial renewable sale, which is reflected in discontinued operations. Announcing the sale agreements represents a key milestone, and I'm pleased with the progress we've made to-date on this important strategic move. Within the operating segments, electric utilities and infrastructure was down $0.14 compared to last year driven by $0.16 of unfavorable weather. Absent the weather, we saw growth from rate cases and riders and lower O&M partially offset by lower volumes and higher interest expense. Moving to gas utilities and infrastructure, results were up a $0.01 due to higher margins and customer growth. And within the other segment, we were $0.05 lower primarily due to higher interest expense partially offset by higher market returns on certain benefit plans. Turning to Slide eight. Cost management has become part of the Duke Energy DNA, and continues to produce sustainable savings. We're leveraging digital innovation, data analytics and process improvements to increase efficiency, making targeted capital investments to reduce maintenance costs and reshaping our operations to streamline work and lower costs. We've established a proven track record and in 2022, we're an industry leader across key O&M cost efficiency measures. Coming into 2023 we implemented a $300 million cost mitigation initiative to address interest rate and inflation headwinds. These reductions which were incorporated into our base plan are focused on corporate and support areas and remain on track. And as we said 75% of these savings are structural and will be sustainable in the future years. As Lynn mentioned, we've seen record mild weather in the first half of the year. We\u2019ve taken action to offset these pressures, including launching significant business agility in the first quarter. We're looking to tactical O&M reductions and other levers, including deferring non-critical work, reducing spend on outside services, and limiting non-essential travel and overtime. We expect about $0.20 of mitigation from these measures weighted toward the fourth quarter. We will be thoughtful about these actions keeping our unwavering commitment to safety, reliability and customer service at the forefront of our approach. Looking ahead, residential decoupling in North Carolina will be fully implemented in 2024. But until then, we will continue to flex the agility muscle that we have done so successfully in the past. Turning to Slide nine, I'll touch on electric volumes and economic trends. Volumes are down 0.6% on a rolling 12-month basis. In the residential class, customer growth remained robust at 1.8% but was offset by lower usage per customer. We believe that this partially driven by energy efficiency and a growing trend of returning to the office. In addition, we continue to see most of the weakness in months when weather was extreme. In these situations, it can be challenging to precisely estimate the weather component of total volume variances. The long term residential growth trajectory remains strong. In fact, residential volumes have averaged just under 1% growth per year for the past five years, and are 4% above pre pandemic levels. In the commercial class, second quarter volumes are trending above our full year estimate, supported by continued growth in data centers. In the industrial class, planned investment in our territories continues to be robust. Many of our large customers are expanding, and we partnered with our states to attract over 29,000 new jobs and $23 billion in capital investment in 2022. These investments represent several key sectors such as battery, EVs and semiconductors, and we expect they will provide around 2000 megawatts of demand as operations ramp up. The strength of our service territories was also reflected in CNBCs annual list of America's top states for business, were five of the states we serve ranked in the top 15 and North Carolina ranked number one for the second year in a row. In the near term, we've seen a slight pullback in some of our manufacturing customers due to softening demand in certain sectors of the economy. We're monitoring the impact of macroeconomic trends but the underlying fundamentals, residential customer growth, and commercial and industrial investment continue to support long term growth at roughly 0.5% per year. Moving to slide 10, let me highlight some of the credit supportive actions we've taken to maintain balance sheet strength. We continue to collect deferred fuel balances and filed for recovery of all remaining uncollected 2022 fuel costs. In April, we began recovery of 1.2 billion in Florida over 21 months with a debt return. We also read settlement with the public staff in our DEC North Carolina fuel proceeding and expect to receive an order in the coming weeks. Per the agreement, we would recover approximately 1 billion of deferred fuel by the end of 2024. Across our jurisdictions, we're on pace to recover 1.7 of deferred fuel costs in 2023. And expect our deferred fuel balance to be back in line with our historical average by the end of 2024. As Lynn mentioned, we expect to complete the sale of our commercial renewables business by the end of the year, and will use proceeds for debt avoidance at the holding company. In addition, about $1.5 billion of commercial renewables debt will come off the balance sheet when the transactions close further supporting metrics. These actions are credit positive, and we expect to see continued balance sheet improvement into 2024 as we recover the remaining deferred fuel costs and see the full year impact of both North Carolina rate cases. Moving to slide 11. This year marks the 97th consecutive year of paying a quarterly cash dividend and the 17th consecutive annual increase. Looking forward we're executing on our strategic priorities and are excited about the path ahead as a fully regulated company. We operate in constructive growing jurisdictions, which combined with our $65 billion five-year capital plan give us confidence in our 5% to 7% growth rate through 2027. Our attractive dividend yield coupled with long term earnings growth from investments and our regulated utilities, provide a compelling risk adjusted return for shareholders. With that, we'll open the line for your questions.","evidence_gemma_new":"electric utilities and infrastructure","evidence_llama_3_3":"electric utilities and infrastructure","evidence_qwen_3_30b":"electric utilities and infrastructure $0.14","gemma_new_max":0.14,"gemma_new_min":0.14,"llama_3_3_max":0.14,"llama_3_3_min":0.14,"qwen_3_30b_max":0.14,"qwen_3_30b_min":0.14}
{"symbol":"DUK","year":2024,"quarter":1,"date":"2024-Q1","chunk_id":4,"sub_chunk_id":0,"centroid_label":"electric utilities infrastructure up VAL","agreed_value":0.29,"count":2,"chunk":"Brian Savoy: Thanks, Harry, and good morning, everyone. Turning to Slide 7. Our first quarter reported and adjusted earnings per share were $1.44. This compares to reported and adjusted earnings per share of $1.01 and $1.20 last year. Within the segments, Electric Utilities & Infrastructure was up $0.29 compared to last year. Growth was driven by rate increases, higher volumes and improved weather. Partially offsetting these items were higher interest expense and depreciation on a growing asset base. As a reminder, residential decoupling was in effect for both of our North Carolina utilities this quarter, which moderated the impact of a mild winter in the Carolinas. Moving to Gas Utilities & Infrastructure, results were flat compared to last year. And finally, the Other segment was down $0.05, primarily due to higher interest expense. With a strong start to the year, we're on track to deliver on our 2024 EPS guidance range. Turning to Slide 8. We were pleased to see solid growth in weather-normal volumes this quarter versus last year. Customer growth remains robust in our jurisdictions, led by the Carolinas and Florida, which both grew 2.4%. We're also encouraged to see improving residential usage across our jurisdictions. Commercial and industrial volumes were up over 1% versus last year, driven by strength in the commercial sector. We are closely monitoring economic trends and remain in regular conversations with our largest customers. Notably, these customers continue to convey expectations for growing power needs in the second half of the year. Combined with new economic development projects coming online, we expect growth to accelerate throughout the year. Turning to Slide 9. The impact of economic development activity in our jurisdictions cannot be overstated. We are gearing up to serve up to 18,000 gigawatt hours of additional load from these projects in 2028. This is up 2,000 gigawatt hours from the projection we just shared in February, demonstrating the strength of our economic development pipeline. As a reminder, we take a risk-adjusted approach to our forecast and generally only include the most mature and committed projects. We've included a few photos that showcased the impressive size and scale of the construction activity underway. Pictured at the top of the slide is a substation that will serve Wolfspeed's $5 billion semiconductor manufacturing facility in North Carolina. The new factory will bring about 1,800 jobs to the state. We've recently energized the initial transformer bank in the substation, and Wolfspeed expects the facility to begin production by early next year. This project and others across many sectors, including batteries, data centers, EVs and pharmaceuticals to name a few, are making tangible progress and will provide meaningful load growth in our service territories. We operate in some of the most attractive jurisdictions for both economic development and customer migration, which underpins our confidence in our 2% volume growth forecast in 2024 and 1.5% to 2% growth rate over the 5-year planning horizon. Turning to Slide 10. We recognize the importance of a strong balance sheet as we execute one of the sector's largest capital programs. We are on track to achieve 14% FFO to debt by the end of this year, which represents 100 basis points of cushion to our Moody's downgrade threshold. The biggest driver of our FFO improvement is the implementation of the North Carolina rate cases, which add nearly $700 million of annual revenues. Combined with the collection of remaining deferred fuel balances, monetization of tax credits and programmatic equity issuances, we have clear line of sight to achieving our target. As disclosed in February, we expect to issue $500 million of common equity annually over the 5-year plan via our DRIP and ATM programs. We're off to a great start, having priced just over $100 million year-to-date. We also completed approximately 65% of our planned, long-term debt issuances for 2024 in the first quarter, which helps to derisk our plan. We've raised $4.6 billion in long-term debt with an average interest rate of 5.19% and an average tenure of 13 years. We've been strategic in our approach, reducing floating rate exposure amid a rising rate environment and further diversifying our investor base with the euro offering in April. As we have demonstrated this quarter and over many years, we are committed to our credit ratings and a strong balance sheet as we execute our growth objectives. Moving to Slide 11. We remain confident in delivering our 2024 earnings guidance range of $5.85 to $6.10 and growth of 5% to 7% through 2028. We operate in constructive, growing jurisdictions, and the fundamentals of our business are stronger than ever. We are well positioned to achieve our growth targets for the year, which combined with our attractive dividend yields provide a compelling risk-adjusted return for shareholders. With that, we'll open the line for your questions.","evidence_gemma_new":"Electric Utilities & Infrastructure","evidence_llama_3_3":null,"evidence_qwen_3_30b":"Electric Utilities & Infrastructure up last year","gemma_new_max":0.29,"gemma_new_min":0.29,"llama_3_3_max":null,"llama_3_3_min":null,"qwen_3_30b_max":0.29,"qwen_3_30b_min":0.29}
{"symbol":"DUK","year":2024,"quarter":2,"date":"2024-Q2","chunk_id":4,"sub_chunk_id":0,"centroid_label":"electric utilities infrastructure up VAL","agreed_value":0.34,"count":2,"chunk":"Brian Savoy: Thanks, Harry, and good morning, everyone. Turning to Slide 8. We had a strong second quarter with reported and adjusted earnings per share of $1.13 and $1.18, respectively. This is up from adjusted earnings per share of $0.91 in the second quarter last year. Within the segments, Electric Utilities & Infrastructure was up $0.34. Growth was driven by rate increases in riders, higher sales volumes and warmer-than-normal weather across our service territories, which is a complete reversal of the extremely mild weather in the second quarter of 2023. Partially offsetting these items were higher interest expense and depreciation. Moving to Gas Utilities & Infrastructure. Results were down $0.02 compared to last year as favorable rider revenue was offset by higher interest expense and depreciation. And finally, the Other segment was down $0.05, primarily due to higher interest expense. Turning to Slide 9. I'd like to take a moment to discuss our earnings profile for the remainder of the year. As a reminder, last year had an atypical earnings shape with record mild weather in the first half of the year, which was mitigated with agility measures in the second half. With that in mind, the strong performance we've demonstrated so far this year is aligned with our planning assumptions. I'm incredibly proud for the team for delivering an impressive first half, and we are on track to achieve full year results within our guidance range. Turning to Slide 10. We were pleased to see weather normal volumes increased 1.9% versus last year, in line with our full year projection. Customer growth remains robust, led by the Carolinas and Florida, which grew 2.4% through the first half of the year. We're also encouraged to see improving residential usage across our jurisdictions. Commercial and industrial volumes were up over 1% versus last year, driven by strength in the commercial sector. Commercial sales volumes have exceeded our projections through the first half, offsetting a slower rebound in industrial sales. As economic development projects continue to come online throughout the second half of the year, we expect C&I load growth to accelerate. We operate in some of the most attractive jurisdictions for both the economic development and customer migration, which provide conviction in our 2% load growth forecast in 2024, and 1.5% to 2% load growth CAGR over the 5-year planning horizon. Turning to Slide 11. We are forecasting unprecedented growth in power demand from advanced manufacturing projects across multiple sectors as well as data centers. As we evaluate which economic development opportunities to include in our forecast. It's important to remember that we take a risk-adjusted approach. We utilize discrete project level analysis to evaluate and probability weight potential opportunities, resulting in a subset of projects being included in our current projections. We have a robust pipeline of projects that continue to progress and will be reflected in our plans when the projects mature. This pipeline provides a runway for growth well into the future. We are committed to serving this new load in a way that prioritizes reliability and affordability for all our customers. To that end, we recently executed MoUs with Google, Microsoft, Nucor and Amazon to explore tailored solutions to meet large-scale energy needs and develop rate structures to lower the long-term cost of investing in clean energy technologies. These voluntary programs, which are subject to commission approval, would be open to any large customer and would include protections for nonparticipating customers. We look forward to continued collaboration with all stakeholders as we work to meet the accelerating demand in our service territories. Turning to Slide 12. We recognize the importance of a strong balance sheet as we advance our strategic priorities and fund investments that will be foundational to our growth. We are on track to achieve 14% FFO to debt by the end of this year, which represents 100 basis points of cushion to our Moody's downgrade threshold. Our constructive regulatory outcomes, combined with the collection of remaining deferred fuel balances, monetization of tax credits and programmatic equity issuances, provide clear line of sight to achieving our target. As disclosed in February, we expect to issue $500 million of common equity annually over the 5-year plan via our DRIP and ATM programs. We've completed over half of our $500 million target, having priced $285 million year-to-date. We've also completed approximately 80% of our planned long-term debt issuances for 2024. As we've demonstrated over many years, our commitment to our current credit ratings and a strong balance sheet is unwavering and will continue to be a top priority as we execute our growth objectives. Moving to Slide 13. We remain confident in delivering our 2024 earnings guidance range of $5.85 to $6.10 and growth of 5% to 7% through 2028. We operate in constructive growing jurisdictions and the fundamentals of our business are stronger than ever. We are well positioned to achieve our growth targets, which, combined with our attractive dividend yield, provide a compelling risk-adjusted return for shareholders. With that, we'll open the line for your questions.","evidence_gemma_new":"Electric Utilities & Infrastructure","evidence_llama_3_3":null,"evidence_qwen_3_30b":"Electric Utilities & Infrastructure up $0.34","gemma_new_max":0.34,"gemma_new_min":0.34,"llama_3_3_max":null,"llama_3_3_min":null,"qwen_3_30b_max":0.34,"qwen_3_30b_min":0.34}
{"symbol":"DUK","year":2024,"quarter":3,"date":"2024-Q3","chunk_id":4,"sub_chunk_id":0,"centroid_label":"electric utilities infrastructure up VAL","agreed_value":0.09,"count":2,"chunk":"Brian Savoy: Thanks, Harry, and good morning, everyone. As shown on Slide 8, our third quarter reported and adjusted earnings per share were $1.60 and $1.62, respectively. This compares to reported and adjusted earnings per share of $1.59 and $1.94 last year. Within the segments, Electric Utilities and Infrastructure was down $0.09. O&M was higher in the quarter, largely due to unplanned hurricane restoration costs from Debby and Helene. Results were also impacted by lost revenue from storm-related outages and evacuations. As expected, growth from rate increases and riders were partially offset by higher depreciation and interest expense. Moving to Gas Utilities and Infrastructure. Results were down $0.04 compared to last year, mainly due to higher interest expense and depreciation on a growing asset base. And finally, the other segment was down $0.19, primarily due to planned to a planned higher effective tax rate, which reflects tax efficiency efforts realized in 2023. Our 2024 effective tax rate is tracking in line with our full-year guidance of 12% to 14%. Turning to storms, our preliminary total cost estimate for the three hurricanes is between $2.4 billion to $2.9 billion for the year, and we recognized approximately $750 million in the third quarter. Most of these costs will either be deferred for future recovery or relate to capital projects to rebuild portions of the system. We are advancing cost recovery strategies through established mechanisms and have a long track record of constructive outcomes. We're targeting rider recovery in Florida beginning in early 2025 and receipt of securitization proceeds in the Carolinas by the end of next year. Looking ahead to the remainder of 2024, we expect fourth-quarter adjusted EPS to be higher than last year due to growth from rate increases in the electric and gas segments and higher sales volumes. And as Lynn mentioned, we have cost agility initiatives underway to reduce spending, which will drive O&M lower in the fourth quarter compared to last year. We've outlined our fourth-quarter drivers in the appendix of the presentation. With these drivers in mind, we are reaffirming our 2024 guidance range of $585 million to $610 million. Based on what we know today, we are trending to the lower half of the range, primarily due to storm impacts, including restoration costs and lost revenues from record customer outages. Moving to Slide 9. Third quarter weather normal volumes increased 1.1% versus last year, driven by strong commercial volumes and residential customer growth. In the Carolinas, We've added approximately 75,000 residential customers year to date, roughly 10,000 more than the same period last year. And in Florida, We've added nearly 30,000 residential customers, also outpacing last year. We continue to see robust economic development activity and in the past month have signed letter agreements for 2 gigawatts of data centers. These agreements are emblematic of conversations we are having with large customers all around our service territories and represent continued advancement of projects in our pipeline. As a result, we've increased the high end of our 2028 economic development forecast to up to 20,000 gigawatt hours of incremental load. This represents a 2,000 gigawatt hours increase since our second quarter update. As a reminder, we take a risk-adjusted approach as we evaluate which economic development opportunities to include in our forecast. In the near term, we continue to see a slower rebound in certain industrial sectors. We are in frequent dialogue with our largest customers and they continue to signal expectations for a recovery, but the timing has shifted into 2025. Additionally, as with any extreme weather period, third-quarter weather normal volumes likely reflect some impact from the major storms. Overall, we're seeing steady improvement in our rolling 12-month volumes and are trending toward our 2024 load growth target of 2%. And over the long term, we see load growth at the top end of our 1.5% to 2% CAGR through 2028, with annual load growth accelerating in 2027 and 2028 as large economic development projects come online. Turning to Slide 10. We have provided key growth drivers for 2025. We've executed an active regulatory calendar over the past two years that has yielded constructive outcomes and positioned us well as we head into next year. Beginning with the Electric segment, in Florida, we'll implement the new multi-year rate plan with an updated 10.3% ROE in January. In the Carolinas, we'll implement the second year of the North Carolina multi-year rate plans and see a full-year impact from the DEC South Carolina rate case. And in the Midwest, we expect the Indiana rate case to be effective in March. Finally, we'll see retail sales growth from economic development and population migration in addition to increases in rider revenues. In the Gas segment, we'll see growth from the Piedmont North Carolina rate case, integrity management investments and customer additions. We will provide 2025 earnings guidance in February along with updated load growth expectations and our refreshed capital and financing plans. As we signaled, we expect our capital plan to increase as we move further into the energy transition. We also expect capital to increase in the near term as a result of a higher pace of customer additions and refresh cost estimates for generation investments that ramp up in the remainder of the decade. We are well positioned for the opportunities presented by this unprecedented demand growth and we will take a balanced approach to funding the incremental capital, supporting our growth rate and balance sheet strength. Moving to Slide 11. We've made significant progress on credit-supportive initiatives. The constructive regulatory outcomes we've achieved with increasing ROEs and timely recovery of investments have driven considerable improvement in our operating cash flow. And in October, we efficiently monetized nearly $200 million of energy tax credits that will benefit customers over time. We expect additional transactions in the fourth quarter. We've collected over $3 billion of deferred fuel since 2023 and are on track to be at our normal level by year-end. We've also completed over 80% of our planned $500 million equity issuances through the DRIP and ATM programs, having priced $400 million year-to-date. As I mentioned earlier, we will pursue storm cost recovery through established mechanisms in our states, including securitization in the Carolinas and our storm rider in Florida. We expect a temporary credit impact in 2024 and are targeting 14% FFO to debt in 2025, 100 basis points above our Moody's downgrade threshold. In reports issued in October, both Moody's and S&P concurred that the impacts from the storm will not have a long -- any long-term credit implications. As we demonstrated over many years, our commitment to our current credit ratings and our strong balance sheet will continue to be a top priority as we execute our growth objectives. Turning to Slide 12. We operate in constructive growing jurisdictions and the fundamentals of our business remain strong. Our track record of regulatory execution has us well-positioned to achieve our long-term 5% to 7% growth target through 2028, which combined with our attractive dividend yield, provide a compelling risk-adjusted return for shareholders. With that, we will open the line for your questions.","evidence_gemma_new":"Electric Utilities and Infrastructure","evidence_llama_3_3":"Electric Utilities and Infrastructure third quarter","evidence_qwen_3_30b":null,"gemma_new_max":0.09,"gemma_new_min":0.09,"llama_3_3_max":0.09,"llama_3_3_min":0.09,"qwen_3_30b_max":null,"qwen_3_30b_min":null}
{"symbol":"DUK","year":2023,"quarter":2,"date":"2023-Q2","chunk_id":17,"sub_chunk_id":0,"centroid_label":"ffo to debt level","agreed_value":13.5,"count":2,"chunk":"David Arcaro : Hey, good morning. Thanks for taking my question. Thanks about the FFO to debt range and the target 13% to 14% for this year. I was wondering if you could give a sense of kind of where in that range you're tracking given some of the pressures that you've been experiencing so far? And also just latest thinking on timing for when you can get comfortably above that 14% level?","evidence_gemma_new":"FFO to debt this year","evidence_llama_3_3":null,"evidence_qwen_3_30b":"FFO to debt range this year","gemma_new_max":13.5,"gemma_new_min":13.5,"llama_3_3_max":null,"llama_3_3_min":null,"qwen_3_30b_max":13.5,"qwen_3_30b_min":13.5}
{"symbol":"DUK","year":2024,"quarter":1,"date":"2024-Q1","chunk_id":34,"sub_chunk_id":0,"centroid_label":"ffo to debt level","agreed_value":0.14,"count":2,"chunk":"Carly Davenport: Got it. That's really helpful. And then maybe just a quick follow-up on the balance sheet question. Can you just update us on where you currently stand? And then just relative to the walk that you sort of laid out last quarter, are any of the buckets that bridge the gap of getting to that 14% FFO to debt level changing at all relative to what we saw last quarter?","evidence_gemma_new":"FFO to debt","evidence_llama_3_3":"FFO to debt level last quarter","evidence_qwen_3_30b":null,"gemma_new_max":0.14,"gemma_new_min":0.14,"llama_3_3_max":0.14,"llama_3_3_min":0.14,"qwen_3_30b_max":null,"qwen_3_30b_min":null}
{"symbol":"DUK","year":2024,"quarter":2,"date":"2024-Q2","chunk_id":4,"sub_chunk_id":0,"centroid_label":"ffo to debt level","agreed_value":14.0,"count":2,"chunk":"Brian Savoy: Thanks, Harry, and good morning, everyone. Turning to Slide 8. We had a strong second quarter with reported and adjusted earnings per share of $1.13 and $1.18, respectively. This is up from adjusted earnings per share of $0.91 in the second quarter last year. Within the segments, Electric Utilities & Infrastructure was up $0.34. Growth was driven by rate increases in riders, higher sales volumes and warmer-than-normal weather across our service territories, which is a complete reversal of the extremely mild weather in the second quarter of 2023. Partially offsetting these items were higher interest expense and depreciation. Moving to Gas Utilities & Infrastructure. Results were down $0.02 compared to last year as favorable rider revenue was offset by higher interest expense and depreciation. And finally, the Other segment was down $0.05, primarily due to higher interest expense. Turning to Slide 9. I'd like to take a moment to discuss our earnings profile for the remainder of the year. As a reminder, last year had an atypical earnings shape with record mild weather in the first half of the year, which was mitigated with agility measures in the second half. With that in mind, the strong performance we've demonstrated so far this year is aligned with our planning assumptions. I'm incredibly proud for the team for delivering an impressive first half, and we are on track to achieve full year results within our guidance range. Turning to Slide 10. We were pleased to see weather normal volumes increased 1.9% versus last year, in line with our full year projection. Customer growth remains robust, led by the Carolinas and Florida, which grew 2.4% through the first half of the year. We're also encouraged to see improving residential usage across our jurisdictions. Commercial and industrial volumes were up over 1% versus last year, driven by strength in the commercial sector. Commercial sales volumes have exceeded our projections through the first half, offsetting a slower rebound in industrial sales. As economic development projects continue to come online throughout the second half of the year, we expect C&I load growth to accelerate. We operate in some of the most attractive jurisdictions for both the economic development and customer migration, which provide conviction in our 2% load growth forecast in 2024, and 1.5% to 2% load growth CAGR over the 5-year planning horizon. Turning to Slide 11. We are forecasting unprecedented growth in power demand from advanced manufacturing projects across multiple sectors as well as data centers. As we evaluate which economic development opportunities to include in our forecast. It's important to remember that we take a risk-adjusted approach. We utilize discrete project level analysis to evaluate and probability weight potential opportunities, resulting in a subset of projects being included in our current projections. We have a robust pipeline of projects that continue to progress and will be reflected in our plans when the projects mature. This pipeline provides a runway for growth well into the future. We are committed to serving this new load in a way that prioritizes reliability and affordability for all our customers. To that end, we recently executed MoUs with Google, Microsoft, Nucor and Amazon to explore tailored solutions to meet large-scale energy needs and develop rate structures to lower the long-term cost of investing in clean energy technologies. These voluntary programs, which are subject to commission approval, would be open to any large customer and would include protections for nonparticipating customers. We look forward to continued collaboration with all stakeholders as we work to meet the accelerating demand in our service territories. Turning to Slide 12. We recognize the importance of a strong balance sheet as we advance our strategic priorities and fund investments that will be foundational to our growth. We are on track to achieve 14% FFO to debt by the end of this year, which represents 100 basis points of cushion to our Moody's downgrade threshold. Our constructive regulatory outcomes, combined with the collection of remaining deferred fuel balances, monetization of tax credits and programmatic equity issuances, provide clear line of sight to achieving our target. As disclosed in February, we expect to issue $500 million of common equity annually over the 5-year plan via our DRIP and ATM programs. We've completed over half of our $500 million target, having priced $285 million year-to-date. We've also completed approximately 80% of our planned long-term debt issuances for 2024. As we've demonstrated over many years, our commitment to our current credit ratings and a strong balance sheet is unwavering and will continue to be a top priority as we execute our growth objectives. Moving to Slide 13. We remain confident in delivering our 2024 earnings guidance range of $5.85 to $6.10 and growth of 5% to 7% through 2028. We operate in constructive growing jurisdictions and the fundamentals of our business are stronger than ever. We are well positioned to achieve our growth targets, which, combined with our attractive dividend yield, provide a compelling risk-adjusted return for shareholders. With that, we'll open the line for your questions.","evidence_gemma_new":"FFO to debt","evidence_llama_3_3":"FFO to debt end of this year","evidence_qwen_3_30b":null,"gemma_new_max":14.0,"gemma_new_min":14.0,"llama_3_3_max":14.0,"llama_3_3_min":14.0,"qwen_3_30b_max":null,"qwen_3_30b_min":null}
{"symbol":"DUK","year":2024,"quarter":3,"date":"2024-Q3","chunk_id":37,"sub_chunk_id":0,"centroid_label":"ffo to debt level","agreed_value":50.0,"count":3,"chunk":"Brian Savoy: That's very good, Julien. This is Brian. I'll take that. So what we're seeing in the tax credit market, it's deepening. And the discounts that we're being able to realize on our tax credits are very attractive. So think about mid-90s or even slightly above. So I think there's a lot of taxpayers that are looking to reduce their tax bill and they're lining up to get high-quality credits from good credit quality sellers, right? So the -- we did $200 million in the past month and we've geared up our process to close the rest this year and the size that we were targeting coming into the year, Julien, was around $300 million to $500 million. We're trending to the upper part of that range, right? And the market has been growing and deepening, and we've not seen any hesitation by buyers. And what that equates to is about 40 basis points to 60 basis points in the FFO to debt, right? And a big chunk of that is nuclear tax credits and there's also some solar PTCs inside of that figure. And as we look to next year, we'll have more of both, right, more nuclear, more solar. And so you see it being accretive to the FFO for a few years to come.","evidence_gemma_new":"FFO to debt","evidence_llama_3_3":"FFO to debt 40 basis points to 60 basis points","evidence_qwen_3_30b":"FFO to debt 40 basis points to 60 basis points","gemma_new_max":50.0,"gemma_new_min":50.0,"llama_3_3_max":50.0,"llama_3_3_min":50.0,"qwen_3_30b_max":50.0,"qwen_3_30b_min":50.0}
{"symbol":"DUK","year":2024,"quarter":4,"date":"2024-Q4","chunk_id":67,"sub_chunk_id":0,"centroid_label":"ffo to debt level","agreed_value":0.14,"count":2,"chunk":"Brian Savoy: It may be the same question. I guess one is in and I wanna part you know, I'm not looking to hold you down. I know you addressed a little bit with Shar. On slide eleven, you talk about FFO to debt to improve above 14% over the five-year plan. What's a reasonable cushion to assume that that like, you would improve by. And the second question is more so as you've talked about in the back end of the plan, you tend you expect to be towards the high end of the 5% to 7% earnings growth. How do you think about the income statement you know, maybe we raise the earnings growth rate or we work on improving the balance sheet maybe to the upgrade trigger. I and it may be the same question, so I'll leave it there.","evidence_gemma_new":"FFO to debt five-year plan","evidence_llama_3_3":"FFO to debt five-year plan","evidence_qwen_3_30b":null,"gemma_new_max":0.14,"gemma_new_min":0.14,"llama_3_3_max":0.14,"llama_3_3_min":0.14,"qwen_3_30b_max":null,"qwen_3_30b_min":null}
{"symbol":"DUK","year":2023,"quarter":3,"date":"2023-Q3","chunk_id":20,"sub_chunk_id":0,"centroid_label":"growth","agreed_value":6.0,"count":2,"chunk":"Lynn Good: So Nick, I would confirm that it does underpin our confidence in 5% to 7% growth. This modernized construct in the Carolinas is consequential. It's kind of a first in the history of the utility that we will have multiyear rate plans, the ability to set price as we go forward, of course, delivering value to customers every step of the way, but also more closely matching the expenditure of capital with return. And I would add to that, our confidence in the capital underpinning that 5% to 7% growth, very transparent, integrated resource plans, the outline what it's going to be necessary to serve this growing state. So the Carolinas are very well positioned for the future. And as Brian mentioned a moment ago, continue to see extraordinary growth in Florida. And we have strong capital in Florida and grid and solar will be updating our multiyear rate plan, and our investment in the Midwest continues well along both generation and grid in Ohio, for example. So, I feel like we've got all of the elements to underpin our confidence in the growth and the jurisdictions are constructive jurisdictions that find the right balance between benefits to customers and investors, and we're confident in the future.","evidence_gemma_new":"growth","evidence_llama_3_3":null,"evidence_qwen_3_30b":"confidence growth","gemma_new_max":6.0,"gemma_new_min":6.0,"llama_3_3_max":null,"llama_3_3_min":null,"qwen_3_30b_max":6.0,"qwen_3_30b_min":6.0}
{"symbol":"DUK","year":2024,"quarter":1,"date":"2024-FY","chunk_id":40,"sub_chunk_id":0,"centroid_label":"growth","agreed_value":0.02,"count":2,"chunk":"Brian Savoy: Jeremy, it's a good item to talk through. And on the commercial growth, we saw strength across our regions in the commercial sector. Data center growth was a key driver in that in the quarter, and we expect that to continue throughout the year. On the industrial side of things, we have some plants that are retooling for new products. So they're off-line in the first quarter. And they signaled to us that, look, this is a temporary thing, and we're going to be changing our lines and by mid-Q2, late Q2, we're coming back on in full. And we're talking to these customers on a frequent basis to ensure we're there to meet their needs when they need it, and they're tracking on our plan. And we kind of expected this trend to continue because we saw this lag in industrial last year, and we thought by mid-2024, we'd see the tide turn. And then lastly, economic development projects that are coming online in 2024. Those were slated for the second half as well, and those are tracking as planned. So we are on track for our 2% growth in 2024, and we'll keep you apprised as we learn more.","evidence_gemma_new":"growth in 2024","evidence_llama_3_3":"2% growth 2024","evidence_qwen_3_30b":null,"gemma_new_max":0.02,"gemma_new_min":0.02,"llama_3_3_max":0.02,"llama_3_3_min":0.02,"qwen_3_30b_max":null,"qwen_3_30b_min":null}
{"symbol":"DUK","year":2024,"quarter":2,"date":"2028-FY","chunk_id":4,"sub_chunk_id":0,"centroid_label":"growth","agreed_value":6.0,"count":2,"chunk":"Brian Savoy: Thanks, Harry, and good morning, everyone. Turning to Slide 8. We had a strong second quarter with reported and adjusted earnings per share of $1.13 and $1.18, respectively. This is up from adjusted earnings per share of $0.91 in the second quarter last year. Within the segments, Electric Utilities & Infrastructure was up $0.34. Growth was driven by rate increases in riders, higher sales volumes and warmer-than-normal weather across our service territories, which is a complete reversal of the extremely mild weather in the second quarter of 2023. Partially offsetting these items were higher interest expense and depreciation. Moving to Gas Utilities & Infrastructure. Results were down $0.02 compared to last year as favorable rider revenue was offset by higher interest expense and depreciation. And finally, the Other segment was down $0.05, primarily due to higher interest expense. Turning to Slide 9. I'd like to take a moment to discuss our earnings profile for the remainder of the year. As a reminder, last year had an atypical earnings shape with record mild weather in the first half of the year, which was mitigated with agility measures in the second half. With that in mind, the strong performance we've demonstrated so far this year is aligned with our planning assumptions. I'm incredibly proud for the team for delivering an impressive first half, and we are on track to achieve full year results within our guidance range. Turning to Slide 10. We were pleased to see weather normal volumes increased 1.9% versus last year, in line with our full year projection. Customer growth remains robust, led by the Carolinas and Florida, which grew 2.4% through the first half of the year. We're also encouraged to see improving residential usage across our jurisdictions. Commercial and industrial volumes were up over 1% versus last year, driven by strength in the commercial sector. Commercial sales volumes have exceeded our projections through the first half, offsetting a slower rebound in industrial sales. As economic development projects continue to come online throughout the second half of the year, we expect C&I load growth to accelerate. We operate in some of the most attractive jurisdictions for both the economic development and customer migration, which provide conviction in our 2% load growth forecast in 2024, and 1.5% to 2% load growth CAGR over the 5-year planning horizon. Turning to Slide 11. We are forecasting unprecedented growth in power demand from advanced manufacturing projects across multiple sectors as well as data centers. As we evaluate which economic development opportunities to include in our forecast. It's important to remember that we take a risk-adjusted approach. We utilize discrete project level analysis to evaluate and probability weight potential opportunities, resulting in a subset of projects being included in our current projections. We have a robust pipeline of projects that continue to progress and will be reflected in our plans when the projects mature. This pipeline provides a runway for growth well into the future. We are committed to serving this new load in a way that prioritizes reliability and affordability for all our customers. To that end, we recently executed MoUs with Google, Microsoft, Nucor and Amazon to explore tailored solutions to meet large-scale energy needs and develop rate structures to lower the long-term cost of investing in clean energy technologies. These voluntary programs, which are subject to commission approval, would be open to any large customer and would include protections for nonparticipating customers. We look forward to continued collaboration with all stakeholders as we work to meet the accelerating demand in our service territories. Turning to Slide 12. We recognize the importance of a strong balance sheet as we advance our strategic priorities and fund investments that will be foundational to our growth. We are on track to achieve 14% FFO to debt by the end of this year, which represents 100 basis points of cushion to our Moody's downgrade threshold. Our constructive regulatory outcomes, combined with the collection of remaining deferred fuel balances, monetization of tax credits and programmatic equity issuances, provide clear line of sight to achieving our target. As disclosed in February, we expect to issue $500 million of common equity annually over the 5-year plan via our DRIP and ATM programs. We've completed over half of our $500 million target, having priced $285 million year-to-date. We've also completed approximately 80% of our planned long-term debt issuances for 2024. As we've demonstrated over many years, our commitment to our current credit ratings and a strong balance sheet is unwavering and will continue to be a top priority as we execute our growth objectives. Moving to Slide 13. We remain confident in delivering our 2024 earnings guidance range of $5.85 to $6.10 and growth of 5% to 7% through 2028. We operate in constructive growing jurisdictions and the fundamentals of our business are stronger than ever. We are well positioned to achieve our growth targets, which, combined with our attractive dividend yield, provide a compelling risk-adjusted return for shareholders. With that, we'll open the line for your questions.","evidence_gemma_new":"growth 2028","evidence_llama_3_3":"growth 2028","evidence_qwen_3_30b":null,"gemma_new_max":6.0,"gemma_new_min":6.0,"llama_3_3_max":6.0,"llama_3_3_min":6.0,"qwen_3_30b_max":null,"qwen_3_30b_min":null}
{"symbol":"DUK","year":2024,"quarter":4,"date":"2029-FY","chunk_id":5,"sub_chunk_id":0,"centroid_label":"growth","agreed_value":6.0,"count":2,"chunk":"Brian Savoy: Thanks, Harry, and good morning, everyone. As Lynn mentioned, our full-year adjusted earnings per share of $5.90 was within our 2024 guidance range. For the year, we saw top-line growth from rate cases and riders across our jurisdictions, which was partially offset by the impacts of a historic hurricane season. For additional details on 2024 results, please refer to supporting materials in today's news release. Moving to slide eight. We set our 2025 EPS guidance range at $6.17 to $6.42. The $6.30 midpoint represents around 7% growth over 2024. This trend is a continuation of the 6% annual growth we've delivered since 2022. Within the electric segment, constructive rate case outcomes over the past two years will continue to drive results. In January, we implemented our new multi-year rate plan in Florida and entered year two of our multi-year rate plan in North Carolina. See benefits from the DEC South Carolina rate case and our recently approved Indiana rate case, as well as growth from grid riders in the Midwest and Florida. In addition to rate activity, our plan assumes normal weather and retail sales growth of 1.5% to 2% in 2025. Growth in our gas segment will be driven by the Piedmont, North Carolina rate case, and annual rate mechanisms in South Carolina and Tennessee, as well as customer additions and integrity management investments. Finally, we expect results of the other segment to be driven by higher interest expense and modest share dilution to fund our growing capital plan. Turning to slide nine, beginning in 2027, we see an acceleration in volumes, with annual load growth increasing to 3% to 4% at the enterprise. Our confidence in this forecast is underpinned by significant economic development projects coming online, particularly in the Carolinas, which we see growing at 4% to 5% over the same period. Our economic development pipeline reflects advanced manufacturing projects across multiple sectors, as well as data centers. As a reminder, we take a risk-adjusted approach as we evaluate which projects to include in our forecast. We incorporate just a portion of our total pipeline, focusing on those with letter agreements or in very late-stage development. We then utilize discrete project-level analysis to ensure confidence in when the projects will begin commercial operation and require energy supply. In the near term, we're planning for annual load growth between 1.5% to 2% at the enterprise. Our forecast is supported by strong residential customer growth, improving industrial activity, and the expansion of new and existing businesses across our service territories. Moving to slide ten. Our five-year capital plan is now $83 billion, a 12% increase versus our prior plan. The majority of the increase is driven by generation investments reflected in our plan. These investments ramp up over the five-year period as load accelerates and we replace aging infrastructure. In addition, grid investments represent around 45% of our capital plan as we continue to improve the reliability and resiliency of our system. With our updated capital plan, we now expect roughly 7.7% annual earnings base growth through 2029, a 50 basis point increase from our prior plan. Supporting this growth are efficient recovery mechanisms, which are critical to maintaining a healthy balance sheet, mitigating regulatory lag, and smoothing customer rate impacts. The need for infrastructure to support our growing regions is not limited to this five-year plan. We have a long runway of investment opportunities that extend well into the next decade. Turning to slide eleven, as we have demonstrated over many years, our commitment to our current credit ratings and a strong balance sheet will continue to be a top priority. We are targeting 14% FFO to debt by the end of 2025 and expect to improve above 14% over the five-year plan. Our long-term target provides over 100 basis points of cushion above our Moody's downgrade threshold and over 200 basis points above our S&P downgrade threshold. To support these credit objectives and fund accretive growth, we increased equity funding to $6.5 billion over the next five years. This increase in equity funds approximately 40% of our capital plan. We will continue to use our at-the-market and dividend reinvestment programs to efficiently fund our equity needs. As Harry mentioned, we've delivered many constructive regulatory outcomes over the past two years. These results enable timely recovery of investments and drive considerable improvement in our operating cash flow. In addition, we continue to see a strong market for energy tax credits. In 2024, we efficiently monetized over $500 million of credits that will benefit customers over time. Before we open it up for questions, let me close with slide twelve. With a strong track record of regulatory execution, we begin 2025 with confidence in our plan, and our commitment to the dividend remains unchanged. We understand its importance to our shareholders, and this year marks the 99th consecutive year of paying a quarterly cash dividend. As we look ahead, our robust capital plan, strong customer growth, and constructive jurisdictions position us to deliver 5% to 7% growth through 2029 with the potential to earn higher in the range as load growth accelerates in the back end of the plan. Look forward to updating you on our progress throughout the year. That, we'll open the line for your questions.","evidence_gemma_new":"growth 2029","evidence_llama_3_3":"growth 2029","evidence_qwen_3_30b":null,"gemma_new_max":6.0,"gemma_new_min":6.0,"llama_3_3_max":6.0,"llama_3_3_min":6.0,"qwen_3_30b_max":null,"qwen_3_30b_min":null}
{"symbol":"GOOGL","year":2023,"quarter":4,"date":"2023-Q4","chunk_id":25,"sub_chunk_id":0,"centroid_label":"capex","agreed_value":11000000000.0,"count":2,"chunk":"Ruth Porat: And with respect to CapEx, the CapEx of $11 billion in the fourth quarter, as I indicated, was overwhelmingly investment in our technical infrastructure. To your question, there was no onetime item in there. It really reflects is our outlook for everything Sundar and Philipp and I have been talking about, the extraordinary applications of AI within Google DeepMind, Google Services, Google Cloud, it's across the board for users, for advertisers, developers, cloud enterprise customers, governments. And it's really the long-term opportunity that offers. So last quarter, we did note that CapEx would continue to grow in 2024. We do expect 2024 full year CapEx to be notably larger than 2023. As a note, I think you all know this, but timing of cash payments can affect the quarterly CapEx number. But the main point is we're continuing to invest.","evidence_gemma_new":"CapEx","evidence_llama_3_3":"CapEx","evidence_qwen_3_30b":null,"gemma_new_max":11000000000.0,"gemma_new_min":11000000000.0,"llama_3_3_max":11000000000.0,"llama_3_3_min":11000000000.0,"qwen_3_30b_max":null,"qwen_3_30b_min":null}
{"symbol":"GOOGL","year":2024,"quarter":1,"date":"2024-Q1","chunk_id":12,"sub_chunk_id":0,"centroid_label":"capex","agreed_value":12000000000.0,"count":3,"chunk":"Ruth Porat: And then in terms of CapEx, as I said in opening comments, we do expect the quarterly CapEx throughout the year to be roughly at or above the $12 billion cash CapEx we had here in Q1. As I said, you can always have variability in the reported quarterly CapEx just due to the timing of cash payments, but roughly at or above this level. And it really goes to Sundar's opening comment that we're very committed to making the investments required to keep us at the leading edge in technical infrastructure to support the growth in Cloud, all the innovation in Search that he and Philipp has spoken about and our lead with Gemini. I will note that nearly all of the CapEx was in our technical infrastructure. We expect that our investment in office facilities will be about less than 10% of the total CapEx in 2024, roughly flat with our CapEx in 2023, but is still there. And then with respect to 2025, as you said, it's premature to comment so nothing to add on that.","evidence_gemma_new":"CapEx first quarter","evidence_llama_3_3":"expect CapEx Q1 2024","evidence_qwen_3_30b":"CapEx at or above $12 billion Q1","gemma_new_max":12000000000.0,"gemma_new_min":12000000000.0,"llama_3_3_max":12000000000.0,"llama_3_3_min":12000000000.0,"qwen_3_30b_max":12000000000.0,"qwen_3_30b_min":12000000000.0}
{"symbol":"GOOGL","year":2024,"quarter":2,"date":"2024-Q2","chunk_id":4,"sub_chunk_id":0,"centroid_label":"capex","agreed_value":13000000000.0,"count":2,"chunk":"Ruth Porat : Thank you, Philipp, and thanks, Sundar, for those kind words. We had another strong quarter, driven in particular by performance in Search and Cloud, as well as the ongoing efforts to durably reengineer our cost base. My comments will be on year-over-year comparisons for the second quarter unless I state otherwise. I will start with results at the Alphabet level followed by segment results and conclude with our outlook. For the second quarter, our consolidated revenues were $84.7 billion, up 14% or up 15% in constant currency. Search remained the largest contributor to revenue growth. In terms of expenses, total cost of revenues was $35.5 billion, up 11%. Other cost of revenues was $22.1 billion, up 14%, with the increase driven primarily by content acquisition costs, followed by depreciation as well as the impact of the Canadian digital services tax, which was applied retroactively. Operating expenses were $21.8 billion up 5%, primarily reflecting an increase in R&D partially offset by a decline in G&A with sales and marketing essentially flat to the second quarter last year. The increase in R&D was driven primarily by compensation which was affected by lapping a reduction in valuation-based compensation liabilities in certain other bets in the second quarter last year followed by depreciation. The largest single factor in the year-on-year decline in G&A expenses was lower charges related to legal matters. Operating income was $27.4 billion, up 26% and our operating margin was 32%. Net income was $23.6 billion and EPS was $1.89. We delivered free cash flow of $13.5 billion in the second quarter and $60.8 billion for the trailing 12 months. As a reminder, last year, we had a timing benefit in the second and third quarters from a $10.5 billion deferred cash tax payment made in the fourth quarter, which depressed reported free cash flow growth this quarter, and we'll do so again next quarter. We ended the quarter with $101 billion in cash and marketable securities. Turning to segment results. Within Google Services, revenues were $73.9 billion, up 12%. Google Search and other advertising revenues of $48.5 billion in the quarter were up 14%, led again by growth in retail, followed by the financial services vertical. YouTube advertising revenues of $8.7 billion were up 13% driven by brand followed by direct response advertising. Network advertising revenues of $7.4 billion were down 5%. Subscription platforms and devices revenues were $9.3 billion up 14%, primarily reflecting growth in YouTube subscription revenues. TAC was $13.4 billion, up 7%. Google Services operating income was $29.7 billion up 27% and the operating margin was 40%. Turning to the Google Cloud segment. Revenues were $10.3 billion for the quarter, up 29%, reflecting first significant growth in GCP, which was above growth for cloud overall and includes an increasing contribution from AI. And second, strong Google Workspace growth, primarily driven by increases in average revenue per seat. Google Cloud delivered operating income of $1.2 billion and an operating margin of 11%. As to our Other Bets for the second quarter, revenues were $365 million and the operating loss was $1.1 billion. Turning to our outlook for the business. With respect to Google Services, First, within advertising. The strong performance of search was broad-based across verticals. In YouTube, we are pleased with the growth in the quarter. We had healthy watch time growth continued to close the monetization gap in Shorts and had continued momentum in Connected TV, with brand benefiting in part from an ongoing shift in budgets from linear television to digital. As we look forward to the third quarter, we will be lapping the increasing strength in advertising revenues in the second half of 2023, in part from APAC based retailers. Turning to subscriptions, platforms and devices. First, we continue to have significant growth in our subscriptions business which drives the majority of revenue growth in this line. However, there was a sequential decline in the year-on-year growth rate, as we anniversaried the impact of a price increase for YouTubeTV in the second quarter last year. The impact will persist through the balance of the year. Second, with regard to platforms. We are pleased with the performance in play driven by an increase in buyers. Finally, with respect to devices. The most important point as we look forward is that our Made by Google launches have been pulled forward into the third quarter from the fourth quarter last year benefiting revenues in Q3 this year. Turning to cloud, which continued to deliver very strong results. For the first time, Cloud crossed $10 billion in quarterly revenues and $1 billion in quarterly operating profit. As Sundar noted year-to-date, our AI infrastructure and generative AI solutions for cloud customers have already generated billions in revenues and are being used by more than 2 million developers. We're particularly encouraged that the majority of our top 100 customers are already using our generative AI solutions. We continue to invest aggressively in the business. Turning to margins. The margin expansion in Q2 versus last year reflects our ongoing efforts to durably reengineer our cost base, as well as revenue strength. Our leadership team remains focused on our efforts to moderate the pace of expense growth in order to create capacity for the increases in depreciation and expenses associated with the higher levels of investment in our technical infrastructure. Once again headcount declined quarter-on-quarter, which reflects both actions we have taken in the first half of the year and a much slower pace of hiring. Looking ahead, we expect a slight increase in headcount in the third quarter, as we bring on new graduates. As we have discussed previously, we\u2019re continuing to invest in top engineering and technical talent, particularly in cloud and technical infrastructure. Looking forward, we continue to expect to deliver full-year 2024 Alphabet operating margin expansion relative to 2023. However, in the third quarter operating margins will reflect the impact of both the increases in depreciation and expenses associated with the higher levels of investment in our technical infrastructure, as well as the increase in cost of revenues due to the pull-forward of hardware launches into Q3. With respect to CapEx, our reported CapEx in the second quarter was $13 billion, once again driven overwhelmingly by investment in our technical infrastructure with the largest component for servers followed by data centers. Looking ahead, we continue to expect quarterly CapEx throughout the year to be roughly at or above the Q1 CapEx of $12 billion keeping in mind that the timing of cash payments can cause variability in quarterly reported CapEx. With regard to other bets, we continue to focus on improving overall efficiencies, as we invest for long-term returns. Waymo is an important example of this, with its technical leadership coupled with progress on operational performance. As you will see in the 10-Q, we have chosen to commit to a new multi-year investment of $5 billion. This new round of funding, which is consistent with recent annual investment levels will enable Waymo to continue to build the world's leading autonomous driving technology company. To close, this is my 56th and last earnings call, 37 of them at Alphabet. So I have a few closing thoughts of gratitude. I've been so proud to be at Google and Alphabet as CFO and to work with some of the smartest people in the world every day. I think, we have accomplished a lot in the last nine plus years, and I am confident that progress will continue. Of course, I'm not going far and I'm honored to have my new role, which I've been slowly working my way into during the past 11 months and I look forward to continuing to work with Sundar, and our great team. Being CFO of one of the most important companies in the world has been the opportunity and responsibility of a lifetime. Google's Mission of advancing technology and bringing information to people throughout the world is as relevant today as it was when I worked on its IPO. Technology has been a catalyst for economic growth throughout human history. The people on this call know that if a technological advancement is not the focus of every business and government, they will be left behind. Underpinning this is the need for sound and responsible investment. That has never been more important than today and certainly, that is Google and Alphabet's focus. I want to end by thanking Googlers around the world for the innovation and commitment that has enabled us to deliver such extraordinary products and services globally. I also want to thank our investors and analysts for your long-term support and your feedback. Thank you. Sundar, Philipp and I will now take your questions.","evidence_gemma_new":"CapEx","evidence_llama_3_3":"CapEx second quarter","evidence_qwen_3_30b":null,"gemma_new_max":13000000000.0,"gemma_new_min":13000000000.0,"llama_3_3_max":13000000000.0,"llama_3_3_min":13000000000.0,"qwen_3_30b_max":null,"qwen_3_30b_min":null}
{"symbol":"GOOGL","year":2024,"quarter":3,"date":"2024-Q3","chunk_id":11,"sub_chunk_id":0,"centroid_label":"capex","agreed_value":13000000000.0,"count":2,"chunk":"Anat Ashkenazi: Yeah, sure. So let me provide a little more color on our capital investments and certainly an important area in the - this time of investments in AI. As you saw in the quarter, we invested $13 billion in CapEx across the company. And as you think about it, really it's divided into two categories. One is our technical infrastructure, and that's the majority of that $13 billion. And the other one goes into areas such as facilities, the Bets and other areas across the company. Within TI, we have investments in servers, which includes both TPUs and GPUs. And then the second categories are data centers and networking equipment. This quarter, approximately 60% of that investment in technical infrastructure went towards servers and about 40% towards data center and networking equipment. And as you think about them, we offer both GPUs and TPUs both internally and to our customers. So we have choices and options based on what our customer needs and what our internal needs are. And as you think about the next quarter and going into next year, as I mentioned in my prepared remarks, we will be investing in Q4 at approximately the same level of what we've invested in Q3, approximately $13 billion. And as we think into 2025, we do see an increase coming in 2025, and we will provide more color on that on the Q4 call, likely not the same percent step-up that we saw between '23 and '24, but additional increase.","evidence_gemma_new":"CapEx","evidence_llama_3_3":null,"evidence_qwen_3_30b":"CapEx quarter","gemma_new_max":13000000000.0,"gemma_new_min":13000000000.0,"llama_3_3_max":null,"llama_3_3_min":null,"qwen_3_30b_max":13000000000.0,"qwen_3_30b_min":13000000000.0}
{"symbol":"GOOGL","year":2024,"quarter":4,"date":"2024-Q4","chunk_id":4,"sub_chunk_id":0,"centroid_label":"capex","agreed_value":14000000000.0,"count":3,"chunk":"Anat Ashkenazi: Thank you, Philipp. We're pleased with the continued momentum we're seeing across the business as Alphabet revenue for 2024 reached $350 billion, up 14% on a reported basis and 15% in constant currency versus 2023. My comments will focus on year-over-year comparisons for the fourth quarter, unless I state otherwise. I will start with the results at the Alphabet level and we'll then cover our segment results. I'll end with some commentary and expectations over the first quarter and full year 2025. We had another strong quarter in Q4 with robust momentum across the business. Consolidated revenue of $96.5 billion, increased by 12% in both reported and constant currency. Search remained the largest contributor to revenue growth, followed by Cloud. Total cost of revenue was $40.6 billion, up 8%. Tech was $14.8 billion, up 6%. We continue to see a revenue mix shift with Google Search growing at double-digit levels, while network revenues, which have a much higher tech rate, declined. Other cost of revenue was $25.8 billion, up 9%, with the increase primarily driven by content acquisitions costs, primarily for YouTube, followed by depreciation, due to increasing investments in our technical infrastructure. Growth in content acquisition and depreciation were partially offset by our year-over-year decline in hardware costs due to the shift in timing of our made-by-Google launches to the third quarter 2024 compared to the fourth quarter of 2023. In terms of total expenses, the year-over-year comparisons reflect $1.2 billion in exit charges that we took in the fourth quarter of 2023 in connection with actions to optimize our global office space. As previously disclosed, those charges were allocated across the expense lines in other costs of revenue and OpEx based on associated headcount. Total operating expenses decreased 1% to $24.9 billion. R&D investments increased by 8%, primarily driven by increase in compensation and depreciation expenses, partially offset by the impact of charges for office [ph] space optimization in the fourth quarter of 2023. Sales and marketing expenses decreased 5%, primarily reflecting the optimization charges last year, as well as declines in compensation and in ads and promotion expenses due to the timing shift of the Pixel launch from Q4 to Q3. G&A expenses declined by 15%, reflecting a shift of timing in our charitable contributions, as well as the optimization charges last year. Operating income increased 31%, the score [ph] to $31 billion, and operating margin increased to 32%, representing 4.6 points of margin expansion. Net income increased 28% to $26.5 billion, and earnings per share increased 31% to $2.15. We delivered free cash flow of $24.8 billion in the fourth quarter and $72.8 billion for the full year 2024. We ended the quarter with $96 billion in cash and marketable securities. Turning to segment results. Google Service revenues increased 10% to $84.1 billion, reflecting the strong momentum across Google Search and YouTube ads. Google Search and other advertising revenues increased by 13% to $54 billion. The robust performance of Search was once again broad-based across verticals, led by the financial service vertical due to strength in insurance, followed by retail. YouTube advertising revenue increased 14% to $10.5 billion, driven by brand, followed by direct response advertising. Network advertising revenue of $8 billion, were down 4%. In the fourth quarter, the year-over-year comparison in all of our advertising revenue lines was impacted by the increase in strength in advertising revenue in Q4 2023, in part from APAC-based retailers. Subscription platforms and device revenues increase 8% to $11.6 billion, primarily reflecting growth in subscription revenues, partially offset by the shift in timing of the launch of our made by Google devices to the third quarter, compared with the fourth quarter in 2023. We continue to have significant growth in our subscription products, primarily due to increase in the number of paid subscribers across YouTube TV, YouTube Music Premium, and Google One. With regards to Platform, we saw a slight increase in the growth rate in Play, primarily due to a strong increase in the number of buyers. Google's service operating income increased 23% to $32.8 billion, and operating margin increased from 35% to 39%, representing a meaningful margin expansion. Turning to the Google Cloud segment, which continued to deliver very strong results this quarter. Revenue increased by 30% to $12 billion in the fourth quarter, reflecting growth in GCP across core GCP products, AI infrastructure, and generative AI solutions. Once again, GCP grew at a rate that was much higher than cloud overall. Healthy Google Workspace growth was primarily driven by increase in average revenue per seat. Google Cloud operating income increased to $2.1 billion, and operating margin increased from 9.4% to 17.5%. We're pleased with the work the cloud team is doing to deliver valuable solutions to the customer and generate revenue growth, as well as its continued focus on driving efficiencies across the cloud business. As for Other Bets, for the fourth quarter, revenue were $400 million, and the operating loss was $1.2 billion. The year-over-year decline in revenue and increase in operating loss primarily reflect the milestone payment in the fourth quarter of 2023 for one of the Other Bets. Turning to Alphabet level activities, the largest component of this line is our investments in AI research and development activities which support all of Alphabet. As a reminder, Alphabet level activities have included nearly all severance charges from reductions in workforce and office space charges. In the fourth quarter of 2024, the biggest factor in year-over-year comparison is the $1.2 billion in charges in the fourth quarter of 2023, almost entirely in connection with office space optimization. With respect to CapEx, our reported CapEx in the fourth quarter was $14 billion, primarily reflecting investments in our technical infrastructure, with the largest component being investment in servers, followed by data centers, to support the growth of our business across Google Services, Google Cloud, and Google DeepMind. In Q4, we returned value to shareholders in the form of $15 billion in share purchases and $2.4 billion in dividend payments. Overall, we returned a total of nearly $70 billion to shareholders in 2024. Turning to 2025, I would like to provide some commentary on several factors that will impact our business performance in both the first quarter and the full year 2025. First in terms of revenue, I'll highlight two items that will have meaningful impact on Q1 revenue across the company. First in terms of revenues, I'll highlight two items that will have meaningful impact on Q1 revenues across the company. The first is the impact of foreign exchange rates. At the current spot rates, we expect a larger headwind to our revenues from the strengthening of the U.S dollar relative to key currencies in Q1 versus Q4 2024. Second is the impact of leap year. We expect a headwind from having one less day of revenue in Q1 2025 compared with leap year in the first quarter of 2024. As for our segments, Google Services, advertising revenue in 2025 will be impacted by lapping the strength we experience in the financial service vertical throughout 2024. And in Cloud, given the revenues are correlated with the timing of deployment of new capacity, we could see variability in cloud revenue growth rates depending on when new capacity comes online during 2025. Moving to investments, starting with our expectation for CapEx for the full year 2025. As we mentioned on the Q3 call, as we expand our AI efforts, we expect to increase our investments in capital expenditure for technical infrastructure, primarily for servers, followed by data centers and networking. We expect to invest approximately $75 billion in CapEx in 2025 with approximately $16 billion to $18 billion of debt in the first quarter. The expected total investment level may fluctuate from quarter-to-quarter, primarily due to timing of deliveries and construction schedules. In terms of expenses, first, the increase in our investment in CapEx over the past few years will increase pressure on the P&L, primarily in the form of higher depreciation. In 2024, we saw 28% year-over-year growth in depreciation as we put more technical infrastructure assets into service. Given the increase in CapEx investments over the past few years, we expect the growth rate and depreciation to accelerate in 2025. Second, we expect some headcount growth in 2025 in key investment areas such as AI and cloud. As you just heard from Sundar, we're delivering products and solutions to customer at a rapid pace, building, testing, and launching products faster than ever before. And as I mentioned on the Q3 call, we're doing that while also focusing on driving further efficiencies in how we operate the business. Before we take questions, I'd like to recap the financial results for the year. For the full year 2024, revenue grew by 14% or by $43 billion, reaching $350 billion. Google Services and Google Cloud each continue to see double-digit revenue growth coupled with margin extension. YouTube and cloud revenues combined, ended the year at $110 billion annual run rate. And in 2024, we generate total income of $112 billion, an increase of 33% from 2023. We're pleased with the momentum we're seeing in AI innovation and monetization. We've been using AI to improve the performance of our ads business for well over a decade, and Cloud is generating billions in annual revenue from AI infrastructure and generative AI solutions. We're also excited about the potential to bring new experiences to users that will provide additional opportunities for monetization. And I look forward to sharing more in our progress throughout the year. Sundar, Philipp, and I will now take your questions.","evidence_gemma_new":"CapEx","evidence_llama_3_3":"CapEx fourth quarter","evidence_qwen_3_30b":"CapEx Q4 2024","gemma_new_max":14000000000.0,"gemma_new_min":14000000000.0,"llama_3_3_max":14000000000.0,"llama_3_3_min":14000000000.0,"qwen_3_30b_max":14000000000.0,"qwen_3_30b_min":14000000000.0}
{"symbol":"GOOGL","year":2024,"quarter":4,"date":"2024-Q4","chunk_id":8,"sub_chunk_id":0,"centroid_label":"capex","agreed_value":75000000000.0,"count":2,"chunk":"Anat Ashkenazi: Thanks. And for the question with regards to where do we see or where do I see leverage moving forward and some of the comments I've made on the previous call. I certainly see opportunities for further productivity and efficiency, and this is one of our priority areas. And we're going to do that so that we can make sure we continue to invest in areas such as AI and cloud where we see potential for continued growth. I'll remain focused on areas that I've mentioned before, which include the technical infrastructure, so the $75 billion in CapEx I mentioned for this year, the majority of that is going to go towards our technical infrastructure, which includes servers and data centers. So ensuring we do that in the most efficient way is critical. Second is managing headcount growth, and we're going to be investing in areas of growth, such as AI and cloud, but looking across the organization and moderating that growth will be important. Optimizing the real estate footprint is one of the areas I've mentioned. We're continuing to focus on that. As well as looking at how we simplify the organization, we've previously mentioned bringing like areas together. Sundar talked about bringing some of the AI research teams together so that we can operate with increased speed, but also how we operate within the organization. Using our own AI tools to how we run the business, whether it's the code that Sundar mentioned on the previous call, writing code with AI, or even running some of our key processes using AI tools. So we're looking at all that. It's going to -- it's -- this is not a one-quarter type of effort. It's going to continue throughout the year, and we're going to continue to focus on that so that we can support the growth in other areas.","evidence_gemma_new":"CapEx this year","evidence_llama_3_3":"CapEx this year","evidence_qwen_3_30b":null,"gemma_new_max":75000000000.0,"gemma_new_min":75000000000.0,"llama_3_3_max":75000000000.0,"llama_3_3_min":75000000000.0,"qwen_3_30b_max":null,"qwen_3_30b_min":null}
{"symbol":"GOOGL","year":2023,"quarter":1,"date":"2023-Q1","chunk_id":5,"sub_chunk_id":0,"centroid_label":"cash and marketable securities","agreed_value":115000000000.0,"count":2,"chunk":"Ruth Porat: Thank you, Philipp. Our financial results for the first quarter reflect continued healthy fundamental growth in Search and momentum in Cloud. As I go through the discussion today, I will reference some changes to our reporting and disclosures that are covered more fully in the 8-K we filed last week. I will conclude with our outlook. For the first quarter, our consolidated revenues were $69.8 billion, up 3% or up 6% in constant currency. Search remained the largest contributor to revenue growth on a constant currency basis. In terms of expenses and profitability, year-on-year comparisons are impacted by 3 factors: first, the $2.6 billion in charges we took in the first quarter related to workforce and office space reductions. We provided a table in our earnings release that shows the impact of those charges on cost of revenues and operating expenses. Second, the adjustment we made to the estimated useful lives of servers and certain network equipment at the beginning of 2023. As you can see in our earnings release, the effect for the first quarter was a reduction in depreciation expense of $988 million. Third, the shift in timing of our annual employee stock-based compensation awards from January to March delays the step-up in SBC from Q1 to Q2. This shift in timing does not affect the total amount of SBC over the full year 2023. Total cost of revenues was $30.6 billion, up 3%, driven by other cost of revenues of $18.9 billion, which was up 7%, the biggest factor of which was compensation costs associated with data centers and other operations and followed by content acquisition costs. Operating expenses were $21.8 billion, up 19%, with a significant impact from the charges related to workforce and office space reductions. Operating income was $17.4 billion, down 13%, and our operating margin was 25%. Net income was $15.1 billion. We delivered free cash flow of $17.2 billion in the first quarter and $62 billion for the trailing 12 months. We ended the quarter with $115 billion in cash and marketable securities. Turning to our segment results. These were affected by 2 additional changes outlined in our 8-K filing. First, reflecting the increasing collaboration between DeepMind and Google Services, Google Cloud, and Other Bets, as of Q1, DeepMind is reported as part of Alphabet's unallocated corporate costs. And second, beginning in the first quarter, we updated our cost allocation methodologies to provide our business leaders with increased transparency for decision-making. In our filing, we provided a recast of prior period results for the segment for these 2 changes. The highlights of the year-on-year performance of our segments that I will review reflect these recast results. Starting with Google Services. Revenues were $62 billion, up 1%. Google Search and other advertising revenues of $40.4 billion in the quarter were up 2%. YouTube advertising revenues of $6.7 billion were down 3%. Network advertising revenues of $7.5 billion were down 8%. Other revenues were $7.4 billion, up 9%, reflecting primarily ongoing significant subscriber growth in YouTube TV and YouTube Music Premium. TAC was $11.7 billion, down 2%, primarily reflecting a mix shift between Search and Network. Google Services operating income was $21.7 billion, down 1%, and the operating margin was 35%. Turning to the Google Cloud segment. Revenues were $7.5 billion for the quarter, up 28%. Growth in GCP remained strong across geographies, industries and products. Google Workspace's strong results were driven by increases in both seats and average revenue per seat. Google Cloud had operating income of $191 million, and the operating margin was 2.6%. As to our Other Bets, for the first quarter, revenues were $288 million, and the operating loss was $1.2 billion. Turning to our outlook for the business. In terms of the operating environment, our results in the first quarter reflected ongoing headwinds due to a challenging economic environment, and the outlook remains uncertain. Foreign exchange headwinds have moderated, and we expect less of a foreign exchange headwind in the second quarter based on current spot rates. With respect to Google Services, within advertising, Q1 results reflect the resilience of Search with its unique ability to surface demand and deliver measurable ROI. Excluding the impact of foreign exchange, the revenue growth of Search was similar to last quarter. In YouTube, we saw signs of stabilization in ad spend on a sequential basis. We continue to prioritize growth in Shorts engagement where we are encouraged by progress in monetization. As to other revenues, in YouTube subscriptions, we are pleased with the significant ongoing subscriber growth in both YouTube Music Premium and YouTube TV. In Play, revenues were down year-on-year, primarily due to the continued impact of foreign exchange in APAC, although results have improved as we lapped the impact from our introduction of fee reductions last year. Turning to Google Cloud. Our investments in product innovation, our go-to-market organization and our partner ecosystem delivered strong results as customers across industries and geographies increasingly rely on Google Cloud to digitally transform their businesses. That being said, in Q1, we continued to see slower growth of consumption as customers optimized GCP costs, reflecting the macro backdrop which remains uncertain. In terms of operating performance, we remain focused on driving long-term profitable growth in Cloud while continuing to invest given the substantial opportunity. Moving to Other Bets. In the first quarter, we similarly worked to refine strategies and prioritize efforts across the portfolio, including reductions to head count. I will now walk you through an update on our efforts to reengineer our cost base, slowing the pace of operating expense growth while creating capacity for key investment areas, particularly in support of AI across the company. First, as discussed on the fourth quarter call, we have efforts underway in 3 broad categories: number one, using AI and automation to improve productivity across Alphabet for operational tasks as well as the efficiency of our technical infrastructure; number two, managing our spend with suppliers and vendors more effectively; and number three, continuing to optimize how and where we work. As we've noted previously, all 3 work streams are ramping up this year, and we plan to build on these efforts in 2024 and in subsequent years. Second, with respect to head count growth. The reported number of employees at the end of the first quarter includes almost all of the employees impacted by the workforce reduction we announced in January. We expect most of the impacted individuals will no longer be reflected in our head count by the end of the second quarter. In terms of the outlook for head count for the year, as we shared last quarter, we are meaningfully slowing the pace of hiring in 2023 while still investing in priority areas, particularly for top engineering and technical talent. In terms of our investments in AI, we are excited about the creation of Google DeepMind, combining the Brain Team from Google Research with DeepMind, with the goal to accelerate innovation and impact. Beginning in the second quarter of 2023, the costs associated with teams and activities transferred from Google Research will move from Google Services to Google DeepMind within Alphabet's unallocated corporate costs. Finally, as it relates to CapEx, for 2023, we now expect total CapEx to be modestly higher than in 2022. As discussed last quarter, CapEx this year will include a meaningful increase in technical infrastructure versus a decline in office facilities. We expect the pace of investment in both data center construction and servers to step up in the second quarter and continue to increase throughout the year. Thank you. Sundar, Philipp and I will now take your questions.","evidence_gemma_new":"cash and marketable securities","evidence_llama_3_3":null,"evidence_qwen_3_30b":"cash and marketable securities first quarter","gemma_new_max":115000000000.0,"gemma_new_min":115000000000.0,"llama_3_3_max":null,"llama_3_3_min":null,"qwen_3_30b_max":115000000000.0,"qwen_3_30b_min":115000000000.0}
{"symbol":"GOOGL","year":2023,"quarter":2,"date":"2023-Q2","chunk_id":4,"sub_chunk_id":0,"centroid_label":"cash and marketable securities","agreed_value":118000000000.0,"count":2,"chunk":"Ruth Porat: Thank you, Philipp. Before I go into the results, first, Sundar, thank you very much for the opportunity. I'm very excited about the new role, and I look forward to it. So turning to the results. We're very pleased with our financial results for the second quarter, which reflect an acceleration of growth in Search and momentum in Cloud. My comments will be on year-over-year comparisons for the second quarter unless I state otherwise. I will start with results at the Alphabet level followed by segment results and conclude with our outlook. For the second quarter, our consolidated revenues were $74.6 billion, up 7% or up 9% in constant currency. Search remained the largest contributor to revenue growth. Total cost of revenues was $31.9 billion, up 6%, driven by other cost of revenues of $19.4 billion, which was up 8%. Growth here was driven by content acquisition costs, primarily for YouTube subscription offerings, followed by hardware costs associated with Pixel family launches in the second quarter. As noted in our earnings release, the overall increase in data center and other operations costs was partially offset by a reduction in depreciation expense due to the change in estimated useful lives we discussed last quarter. Operating expenses were $20.9 billion, up 4%. Operating income was $21.8 billion, up 12%, and our operating margin was 29%. I will cover our expense and margin performance in our outlook. Other income and expense was $65 million. Net income was $18.4 billion. We delivered free cash flow of $21.8 billion in the second quarter and $71 billion for the trailing 12 months, reflecting improved operating performance as well as the deferral of certain tax payments to the fourth quarter of 2023 as noted in our earnings release. We ended the quarter with $118 billion in cash and marketable securities. Turning to our segment results. Prior period results have been recast for 2 changes that we made as of the first quarter. First, DeepMind is now reported as part of Alphabet's unallocated corporate costs. Second, we updated our cost allocation methodologies. In the second quarter, we then combined the Brain team from Google Research with DeepMind to form Google DeepMind. Costs associated with the Brain team, which were previously included in Google Services, are now reported as part of Alphabet's unallocated corporate costs. We have not recast prior period results to reflect this additional change. Within Google Services, revenues were $66.3 billion, up 5%. Google Search and other advertising revenues of $42.6 billion in the quarter were up 5%, led by growth in retail. YouTube advertising revenues of $7.7 billion were up 4%, driven by brand advertising, followed by direct response reflecting further stabilization in spending by advertisers. Network advertising revenues of $7.9 billion were down 5%. Other revenues were $8.1 billion, up 24%, reflecting growth in YouTube non-advertising revenues, primarily from subscription growth in YouTube Music Premium and YouTube TV followed by growth in hardware revenues primarily driven by the launch of the Pixel 7a in the second quarter. Finally, Play returned to positive growth in the second quarter. TAC was $12.5 billion, up 3%. Google Services operating income was $23.5 billion, up 8%, and the operating margin was 35%. Turning to the Google Cloud segment. Revenues were $8 billion for the quarter, up 28%. GCP revenue growth remained strong across geographies, industries and products. That being said, we saw a continued moderation in the rate of consumption growth as consumers optimize their spend. Google Workspace strong revenue growth was driven by increases in both seats and average revenue per seat. Google Cloud had operating income of $395 million and the operating margin was 5%. As to our Other Bets, for the second quarter, revenues were $285 million, and the operating loss was $813 million. The decrease in operating loss was primarily driven by a reduction in valuation-based compensation liabilities related to certain Other Bets. Turning to our outlook for the business. With respect to Google Services, first, within advertising. We were pleased with the acceleration of Search advertising revenue growth in the second quarter. Our continued ability to generate sustained growth reflects our unparalleled engineering innovation that creates extraordinary experiences for users and capabilities for advertisers and delivered with the deep expertise of our go-to-market team. And in YouTube, we saw ongoing signs of stabilization in advertiser spending. We are prioritizing product focus on increasing quality consumption of video content with both Shorts and in the living room, which is translating into improved monetization. Second, within other revenues. In our YouTube subscription products, the sustained, strong growth in revenues reflects significant subscriber growth. You may have seen that last week, we increased subscription prices for YouTube Music and Premium, which underscores the value of the products. Strong year-on-year growth in hardware revenues was due, in large part, to a timing change given the Pixel 7a was launched in the second quarter, whereas the Pixel 6a launch occurred in the third quarter last year. Looking ahead, the launch timing change will be a headwind to hardware revenue growth in the third quarter. Play returned to positive growth in the second quarter, driven primarily by a solid increase in the number of buyers. Turning to Google Cloud. We are particularly excited about the customer interest in our AI-optimized infrastructure, our large language models, our AI platform services and our new generative AI offerings such as Duet AI for Google Workspace, although we are still clearly in the early days. At the same time, we continue to experience headwinds in the second quarter for moderation in consumption growth as customers optimize their spend. We continue to invest aggressively while remaining focused on profitable growth. In terms of expenses and profitability, we remain very focused on durably reengineering our cost base. Most evident to date are the actions we have taken to reduce the pace of headcount growth, including the workforce reductions we announced in the first quarter and a slower pace of organic hiring, in part given our focus on reallocating talent from within to fuel our growth priorities. A quick comment on the sequential improvement in operating margins in the second quarter. There are 2 factors to note. First, the benefit from an acceleration in search advertising revenue growth in the second quarter. Second, the vast majority of the charges related to our workforce reduction and optimization of our global office space were taken in Q1. Finally, as it relates to CapEx, in Q2, the largest component was for servers, which included a meaningful increase in our investments in AI compute. The sequential step-up in the second quarter was lower than anticipated for 2 reasons. First, with respect to office facilities, we continue to moderate the pace of fit-outs and ground-up construction to reflect the slower expected pace of headcount growth. Second, there were delays in certain data center construction projects. We expect elevated levels of investment in our technical infrastructure increasing through the back half of 2023 and continuing to grow in 2024. The primary driver is to support the opportunities we see in AI across Alphabet, including investments in GPUs and proprietary TPUs as well as data center capacity. With all that said, we remain committed to durably reengineering our cost base in order to help create capacity for these investments in support of long-term, sustainable financial value. Thank you. Sundar, Philipp and I will now take your questions.","evidence_gemma_new":"cash and marketable securities","evidence_llama_3_3":null,"evidence_qwen_3_30b":"cash and marketable securities second quarter","gemma_new_max":118000000000.0,"gemma_new_min":118000000000.0,"llama_3_3_max":null,"llama_3_3_min":null,"qwen_3_30b_max":118000000000.0,"qwen_3_30b_min":118000000000.0}
{"symbol":"GOOGL","year":2023,"quarter":3,"date":"2023-Q3","chunk_id":4,"sub_chunk_id":0,"centroid_label":"cash and marketable securities","agreed_value":120000000000.0,"count":2,"chunk":"Ruth Porat: Thank you, Philipp. We are very pleased with our financial results for the third quarter, driven by meaningful growth in Search and YouTube and momentum in Cloud. My comments will be on year-over-year comparisons for the third quarter, unless I state otherwise. I will start with results at the Alphabet level followed by segment results and conclude with our outlook. For the third quarter, our consolidated revenues were $76.7 billion, up 11% in both reported and constant currency. Search remained the largest contributor to revenue growth. In terms of expenses, total cost of revenues was $33.2 billion, up 7%, primarily reflecting other cost of revenues of $20.6 billion, which was up 6%. Growth here was primarily driven by content acquisition costs mainly for YouTube subscription offerings. As noted in our earnings release, the overall increase in data center and other operations costs was partially offset by a reduction in depreciation expense due to the change in estimated useful lives we made starting in the first quarter of the year. Operating expenses were $22.1 billion, up 6% reflecting the following. First, an increase in R&D expenses, driven primarily by compensation. Second, an increase in G&A expenses, reflecting the impact of charges related to legal matters. And finally, sales and marketing expenses, which were relatively flat to last year. Operating income was $21.3 billion, up 25%, and our operating margin was 28%. Other income and expense was a loss of $146 million. Net income was $19.7 billion. This reflects an effective tax rate of 7% in the third quarter from an IRS change related to the use of foreign tax credits, which had an outsized impact on the third quarter rate because the change resulted in a catch-up for prior periods. We delivered free cash flow of $22.6 billion in the third quarter and $78 million for the trailing 12 months. We ended the quarter with $120 billion in cash and marketable securities. As a reminder, our cash balance and free cash flow in the second and third quarters benefited from the deferral of certain tax payments to the fourth quarter of 2023. As noted in our earnings release, on October 16, we made an estimated tax payment of $10.5 billion related to this deferral, which will be reflected in our cash balance and free cash flow in the fourth quarter. Turning to segment results. Within Google Services, revenues were $68 billion, up 11%. Google Search and other advertising revenues of $44 billion in the quarter were up 11%, led again by growth in retail. YouTube advertising revenues of $8 billion were up 12%, driven by both brand advertising and direct response. Network advertising revenues of $7.7 billion were down 3%. Other revenues were $8.3 billion, up 21%, primarily reflecting growth in YouTube non-advertising revenues driven by subscriber growth in YouTube TV followed by YouTube Music Premium. TAC was $12.6 billion, up 7%. Google Services operating income was $23.9 billion, up 27% and the operating margin was 35%. Turning to the Google Cloud segment. Revenues were $8.4 billion for the quarter, up 22%. GCP revenue growth remained strong across geographies, industries and products, although the Q3 year-on-year growth rate reflects the impact of customer optimization efforts. Google Workspace also delivered strong revenue growth, primarily driven by increases in average revenue per seat. Google Cloud had operating income of $266 million, and the operating margin was 3%. As to our Other Bets, for the third quarter, revenues were $297 million and the operating loss was $1.2 billion. Turning to our outlook for the business. With respect to Google Services. First, within advertising. After a period of historic volatility, we were pleased with the year-on-year revenue growth of Search and YouTube advertising in the third quarter. Second, within other revenues, in our YouTube subscription products the substantial growth in revenues primarily reflects subscriber growth. Looking ahead, a full quarter of NFL Sunday Ticket revenues as well as associated content acquisition costs will be reflected in Q4 results compared to only a few weeks in the third quarter. Play had growth in the third quarter, driven primarily by an increase in the number of buyers. With respect to hardware, there is a headwind to revenues in the fourth quarter, reflecting efforts to optimize the portfolio with tighter targeting of our go-to-market investments as well as the ongoing impact from the difference in launch timing for the Pixel 6a and 7a that we mentioned last quarter. Turning to Google Cloud. We are pleased with the ongoing customer engagement with GCP and Workspace and the potential benefit of our AI solutions including infrastructure and services such as Vertex AI and Duet. We continue to invest aggressively given the significant potential we see while remaining focused on profitable growth. In terms of expenses and profitability, we're pleased with our operating performance. As we have repeatedly stressed, we remain focused on durably reengineering our cost base to create investment capacity to support our growth priorities, most important of which is with AI. We have a number of workstreams in place. First, we are maintaining a slower pace of headcount growth, reflecting product prioritization and reallocation of talent to support our most important growth opportunities. Second, we remain focused on optimizing our real estate footprint, including how and where we work to reduce our expense growth. As you can see from our earnings release, we incurred $207 million in accelerated rent and depreciation in the third quarter related to these actions. Third, we have engineering work streams underway to improve productivity across Alphabet. Given the magnitude of investment in our technical infrastructure, we have a superb team focused on efficiency of our operations there. We are also making progress in streamlining operations across Alphabet through the use of AI. Finally, there are ongoing workstreams that are improving the efficiency of our spend with suppliers and vendors through our central procurement organization. And to be clear, across the portfolio of other bet companies, we have also been working to identify opportunities to create sharper focus and to operate more efficiently and effectively. With respect to sequential quarter-on-quarter trends, two further points. First, cost of sales in the fourth quarter will reflect both higher hardware costs given Pixel family launches as well as increased CAC for YouTube as previously noted. Second, as usual, we expect sales and marketing expenses to be more heavily weighted to the end of the year, in part to support product launches in the holiday season. Finally, our reported CapEx in Q3 was $8 billion, driven overwhelmingly by investment in our technical infrastructure with the largest component for servers, followed by data centers, reflecting a meaningful increase in our investments in AI compute. The growth in reported cash CapEx in Q3 is somewhat muted due to the timing of supplier payments, which can cause variability from quarter-to-quarter. We continue to invest meaningfully in the technical infrastructure needed to support the opportunities we see in AI across Alphabet and expect elevated levels of investment, increasing in the fourth quarter of 2023 and continuing to grow in 2024. In closing, we remain very excited about the opportunities ahead and committed to deliver sustainable financial value. Thank you. Sundar, Philipp and I will now take your questions.","evidence_gemma_new":"cash and marketable securities","evidence_llama_3_3":null,"evidence_qwen_3_30b":"cash and marketable securities third quarter","gemma_new_max":120000000000.0,"gemma_new_min":120000000000.0,"llama_3_3_max":null,"llama_3_3_min":null,"qwen_3_30b_max":120000000000.0,"qwen_3_30b_min":120000000000.0}
{"symbol":"GOOGL","year":2023,"quarter":4,"date":"2023-Q4","chunk_id":4,"sub_chunk_id":0,"centroid_label":"cash and marketable securities","agreed_value":111000000000.0,"count":2,"chunk":"Ruth Porat: Thank you, Philipp. We are very pleased with our full year results with 2023 Alphabet revenues of $307 billion, up 9% versus 2022, which added $25 billion to revenues for the year. We ended with a strong fourth quarter with consolidated revenues of $86.3 billion, up 13% versus last year in both reported and constant currency. Search remained the largest contributor to revenue growth. My comments will be on year-over-year comparisons for the fourth quarter, unless I state otherwise. Total cost of revenues was $37.6 billion, up 6%. Other cost of revenues was $23.6 billion, up 5%, with the increase driven primarily by content acquisition costs associated with YouTube subscription offerings. The growth rate also reflects the offsetting benefit of lapping $1.2 billion in inventory-related charges that we called out in the fourth quarter last year as well as a reduction in depreciation expense due to changes in estimated useful lives we made starting in the first quarter of 2023. In terms of total expenses, the year-on-year comparisons reflect an additional $1.2 billion in exit charges that we took in the fourth quarter of 2023 in connection with actions to optimize our global office space. As you can see in our earnings release, these charges were allocated across the expense lines in other cost of revenues and OpEx based on associated head count. Operating expenses were $25 billion, up 11%, primarily reflecting an increase in R&D expenses, which were driven by the real estate charges, followed by compensation. Operating income was $23.7 billion, up 30%, and our operating margin was 27%. Net income was $20.7 billion, and EPS was $1.64. We delivered free cash flow of $7.9 billion, which was affected by the timing of the $10.5 billion tax payment we made on October 16 that we called out previously related to the deferral of certain tax payments to the fourth quarter. For the full year 2023, free cash flow was $69 billion. We repurchased a total of $62 billion of our Class A and Class C shares in 2023 and ended the year with $111 billion in cash and marketable securities. Turning to segment results. Within Google Services, revenues were $76.3 billion, up 12%. Google Search and other advertising revenues of $48 billion in the quarter were up 13%, led again by growth in retail. YouTube advertising revenues of $9.2 billion were up 16% driven by both direct response and brand advertising. Network advertising revenues of $8.3 billion were down 2%. Subscriptions, platforms and devices revenues, which we previously referred to as other revenues, were $10.8 billion, up 23%, primarily reflecting growth in YouTube subscription revenues. TAC was $14 billion, up 8%. Google Services' operating income was $26.7 billion, up 32%, and the operating margin was 35%. Turning to the Google Cloud segment. Revenues were $9.2 billion for the quarter, up 26%. We're very pleased with the momentum of GCP with an increasing contribution from AI. Google Workspace also delivered strong revenue growth primarily driven by increases in average revenue per seat. Google Cloud delivered operating income of $864 million and an operating margin of 9%. As to our Other Bets, for the full year 2023, revenues were $1.5 billion and the operating loss was $4.1 billion. Results in the fourth quarter benefited from a milestone payment in one of the Other Bets. Turning to our outlook for the business. With respect to Google Services, first, within advertising. We were pleased with the sequential revenue growth of Search and YouTube advertising throughout 2023, which reflects the extraordinary work across our teams to drive improved experiences for users and attractive ROI for advertisers. As we enter 2024 with advertising revenues of more than $100 billion higher than 2019, we remain focused on sustaining healthy growth on this larger base. Second, within subscriptions, platforms and devices, our total revenues from subscription products reached $15 billion for the full year 2023 driven primarily by substantial growth in subscribers for our YouTube subscription offerings. The substantial increase in our subscription revenues over the past few years demonstrates the ability of our teams to deliver high value-add offerings and provides a strong base on which to build, including through YouTube and newer services like Google One. Play had solid growth again in the fourth quarter driven primarily by an increase in the number of buyers. In devices, we continue to make sizable investments with increased emphasis on our Pixel family, particularly with AI-powered innovation while driving further efficiencies across the portfolio. Turning to Google Cloud. We are pleased with operating performance in the year. Full year revenues of $33 billion were up 26% versus prior year, ending with strong Q4 performance. The Cloud team is intensely focused on bringing the benefits of Gemini, our industry-leading AI technology, to enterprises and governments globally, and we are gratified with the level of engagement. The strong demand we are seeing for our vertically integrated AI portfolio is creating new opportunities for Google Cloud across every product area. In terms of profitability, the improvement in 2023 reflects sustained focus across the team with the intent to maintain healthy profitability while we continue to invest to support long-term growth. Turning to margins and expenses. As we have repeatedly stressed, we remain committed to our framework to durably reengineer our cost base as we invest to support our growth priorities. Key contributors to moderating our expense growth include: first, product and process prioritization to ensure we have the right resources behind our most important opportunities and to reallocate resources where we can; second, organizational efficiency and structure. We're focused on removing layers to simplify execution and drive velocity. Both product prioritization and the organization design efforts result in a slower pace of hiring, as you can see with our head count down year-on-year, reflecting the reductions we announced in the first quarter of 2023 and a much slower pace of hiring. We will continue to invest in top technical and engineering talent. Finally, we continue to execute the other work streams to slow expense growth, including improving efficiency in our technical infrastructure, streamlining operations across Alphabet through the use of AI, increasing efficiency of our spend with suppliers and vendors through our central procurement organization and optimizing our real estate portfolio. With respect to CapEx, our reported CapEx in the fourth quarter was $11 billion, driven overwhelmingly by investment in our technical infrastructure with the largest component for servers followed by data centers. The step-up in CapEx in Q4 reflects our outlook for the extraordinary applications of AI to deliver for users, advertisers, developers, cloud enterprise customers and governments globally and the long-term growth opportunities that offers. In 2024, we expect investment in CapEx will be notably larger than in 2023. With regard to Other Bets, we've been working to sharpen our investment focus while capturing the upside given compelling technology breakthroughs across the portfolio. For example, last week, Alphabet's X announced that it would be moving to spin out more projects as independent companies through external capital, giving X the opportunity to bring more focus to the breakthrough technologies it is working on to address some of the world's most pressing challenges. Thank you. Sundar, Philipp and I will now take your questions.","evidence_gemma_new":"cash and marketable securities","evidence_llama_3_3":"cash and marketable securities","evidence_qwen_3_30b":null,"gemma_new_max":111000000000.0,"gemma_new_min":111000000000.0,"llama_3_3_max":111000000000.0,"llama_3_3_min":111000000000.0,"qwen_3_30b_max":null,"qwen_3_30b_min":null}
{"symbol":"GOOGL","year":2024,"quarter":1,"date":"2024-Q1","chunk_id":4,"sub_chunk_id":0,"centroid_label":"cash and marketable securities","agreed_value":108000000000.0,"count":2,"chunk":"Ruth Porat: Thank you, Philipp. We are very pleased with our financial results for the first quarter driven, in particular, by strength in Search and Cloud as well as the ongoing efforts to durably reengineer our cost base. My comments will be on year-over-year comparisons for the first quarter unless I state otherwise. I will start with results at the Alphabet level, followed by segment results and conclude with our outlook. For the first quarter, our consolidated revenues were $80.5 billion, up 15% or up 16% in constant currency. Search remained the largest contributor to revenue growth. In terms of total expenses, the year-on-year comparisons reflect the impact of the restructuring charges we took in the first quarter of 2023 of $2.6 billion as well as the $716 million in employee severance and related charges in the first quarter of 2024. As you can see in our earnings release, these charges were allocated across the expense lines in other cost of revenues and OpEx based on associated head count. To help with year-on-year comparisons, we included a table in our earnings release to adjust other cost of revenues, operating expenses, operating income, and operating margin to exclude the impact of severance and related office space charges in the first quarter of 2023 versus 2024. In terms of expenses, total cost of revenues was $33.7 billion, up 10%. Other cost of revenues was $20.8 billion, up 10% on a reported basis, with the increase driven primarily by content acquisition costs associated with YouTube given the very strong revenue growth in both subscription offerings and ad-supported content. On an adjusted basis, other cost of revenues were up 13% year-on-year. Operating expenses were $21.4 billion, down 2% on a reported basis, primarily reflecting expense decreases in sales and marketing and G&A, offset by an increase in R&D. The largest single factor in the year-on-year decline in G&A expenses was lower charges related to legal matters. On an adjusted basis, operating expenses were up 5%, reflecting, first, in R&D, an increase in compensation expense, primarily for Google DeepMind and Cloud; and second, in sales and marketing, a slight increase year-on-year, reflecting increases in compensation expense primarily for Cloud sales. Operating income was $25.5 billion, up 46% on a reported basis, and our operating margin was 32%. On an adjusted basis, operating income was up 31%, and our operating margin was 33%. Net income was $23.7 billion and EPS was $1.89. We delivered free cash flow of $16.8 billion in the first quarter and $69.1 billion for the trailing 12 months. We ended the quarter with $108 billion in cash and marketable securities. Turning to segment results. Within Google Services, revenues were $70.4 billion, up 14%. Google Search and other advertising revenues of $46.2 billion in the quarter were up 14% led again by growth in retail. YouTube advertising revenues of $8.1 billion were up 21% driven by both direct response and brand advertising. Network advertising revenues of $7.4 billion were down 1%. Subscriptions, platforms and devices revenues were $8.7 billion, up 18%, primarily reflecting growth in YouTube subscription revenues. TAC was $12.9 billion, up 10%. Google Services operating income was $27.9 billion, up 28%. And the operating margin was 40%. Turning to the Google Cloud segment. Revenues were $9.6 billion for the quarter, up 28%, reflecting significant growth in GCP with an increasing contribution from AI and strong Google Workspace growth, primarily driven by increases in average revenue per seat. Google Cloud delivered operating income of $900 million and an operating margin of 9%. As to our Other Bets, for the first quarter, revenues were $495 million, benefiting from a milestone payment in one of the Other Bets. The operating loss was $1 billion. Turning to our outlook for the business. With respect to Google Services, first, within Advertising, we are very pleased with the momentum of our Ads businesses. Search had broad-based strength across verticals. In YouTube, we had acceleration in revenue growth driven by brand and direct response. Looking ahead, two points to call out: first, results in our advertising business in Q1 continued to reflect strength in spend from APAC-based retailers, a trend that began in the second quarter of 2023 and continued through Q1, which means we will begin lapping that impact in the second quarter; second, the YouTube acceleration in revenue growth in Q1 reflects, in part, lapping the negative year-on-year growth we experienced in the first quarter of 2023. Turning to subscriptions, platforms, and devices. We continue to deliver significant growth in our subscriptions business, which drives the majority of revenue growth in this line. The sequential quarterly decline in year-on-year revenue growth for the line in Q1 versus Q4 reflects, in part, the fact that we had only 1 week of Sunday Ticket subscription revenue in Q1 versus 14 weeks in Q4. Looking forward, we will anniversary last year's price increase in YouTube TV starting in May. With regard to platforms, we are pleased with the performance in Play driven by an increase in buyers. With respect to Google Cloud, performance in Q1 reflects strong demand for our GCP infrastructure and solutions as well as the contribution from our Workspace productivity tools. The growth we are seeing across Cloud is underpinned by the benefit AI provides for our customers. We continue to invest aggressively while remaining focused on profitable growth. As we look ahead, two points that will affect sequential year-on-year revenue growth comparisons across Alphabet: first, Q1 results reflect the benefit of leap year, which contributed slightly more than 1 point to our revenue growth rate at the consolidated level in the first quarter; second, at current spot rates, we expect a larger headwind from foreign exchange in Q2 versus Q1. Turning to margins. Our efforts to durably reengineer our cost base are reflected in a 400 basis point expansion of our Alphabet operating margin year-on-year, excluding the impact of restructuring and severance charges in both periods. You can also see the impact in the quarter-on-quarter decline in head count in Q1, which reflects both actions we have taken over the past few months and a much slower pace of hiring. As we have discussed previously, we are continuing to invest in top engineering and technical talent, particularly in Cloud, Google DeepMind and technical infrastructure. Looking ahead, we remain focused on our efforts to moderate the pace of expense growth in order to create capacity for the increases in depreciation and expenses associated with the higher levels of investment in our technical infrastructure. We believe these efforts will enable us to deliver full year 2024 Alphabet operating margin expansion relative to 2023. With respect to CapEx, our reported CapEx in the first quarter was $12 billion, once again driven overwhelmingly by investment in our technical infrastructure, with the largest component for servers followed by data centers. The significant year-on-year growth in CapEx in recent quarters reflects our confidence in the opportunities offered by AI across our business. Looking ahead, we expect quarterly CapEx throughout the year to be roughly at or above the Q1 level, keeping in mind that the timing of cash payments can cause variability in quarterly reported CapEx. With regard to Other Bets, we similarly have work streams underway to enhance overall returns. Finally, as I trust you saw in the press release, we are very pleased to be adding a quarterly dividend of $0.20 per share to our capital return program as well as a new $70 billion authorization in share repurchases. The core of our capital allocation framework remains the same, beginning with investing aggressively in our business as you have heard us talk about today. Given the extraordinary opportunities ahead, we view the introduction of the dividend as further strengthening our overall capital return program. Thank you. Sundar, Philipp, and I will now take your questions.","evidence_gemma_new":null,"evidence_llama_3_3":"Alphabet cash and marketable securities first quarter","evidence_qwen_3_30b":"cash and marketable securities","gemma_new_max":null,"gemma_new_min":null,"llama_3_3_max":108000000000.0,"llama_3_3_min":108000000000.0,"qwen_3_30b_max":108000000000.0,"qwen_3_30b_min":108000000000.0}
{"symbol":"GOOGL","year":2024,"quarter":2,"date":"2024-Q2","chunk_id":4,"sub_chunk_id":0,"centroid_label":"cash and marketable securities","agreed_value":101000000000.0,"count":3,"chunk":"Ruth Porat : Thank you, Philipp, and thanks, Sundar, for those kind words. We had another strong quarter, driven in particular by performance in Search and Cloud, as well as the ongoing efforts to durably reengineer our cost base. My comments will be on year-over-year comparisons for the second quarter unless I state otherwise. I will start with results at the Alphabet level followed by segment results and conclude with our outlook. For the second quarter, our consolidated revenues were $84.7 billion, up 14% or up 15% in constant currency. Search remained the largest contributor to revenue growth. In terms of expenses, total cost of revenues was $35.5 billion, up 11%. Other cost of revenues was $22.1 billion, up 14%, with the increase driven primarily by content acquisition costs, followed by depreciation as well as the impact of the Canadian digital services tax, which was applied retroactively. Operating expenses were $21.8 billion up 5%, primarily reflecting an increase in R&D partially offset by a decline in G&A with sales and marketing essentially flat to the second quarter last year. The increase in R&D was driven primarily by compensation which was affected by lapping a reduction in valuation-based compensation liabilities in certain other bets in the second quarter last year followed by depreciation. The largest single factor in the year-on-year decline in G&A expenses was lower charges related to legal matters. Operating income was $27.4 billion, up 26% and our operating margin was 32%. Net income was $23.6 billion and EPS was $1.89. We delivered free cash flow of $13.5 billion in the second quarter and $60.8 billion for the trailing 12 months. As a reminder, last year, we had a timing benefit in the second and third quarters from a $10.5 billion deferred cash tax payment made in the fourth quarter, which depressed reported free cash flow growth this quarter, and we'll do so again next quarter. We ended the quarter with $101 billion in cash and marketable securities. Turning to segment results. Within Google Services, revenues were $73.9 billion, up 12%. Google Search and other advertising revenues of $48.5 billion in the quarter were up 14%, led again by growth in retail, followed by the financial services vertical. YouTube advertising revenues of $8.7 billion were up 13% driven by brand followed by direct response advertising. Network advertising revenues of $7.4 billion were down 5%. Subscription platforms and devices revenues were $9.3 billion up 14%, primarily reflecting growth in YouTube subscription revenues. TAC was $13.4 billion, up 7%. Google Services operating income was $29.7 billion up 27% and the operating margin was 40%. Turning to the Google Cloud segment. Revenues were $10.3 billion for the quarter, up 29%, reflecting first significant growth in GCP, which was above growth for cloud overall and includes an increasing contribution from AI. And second, strong Google Workspace growth, primarily driven by increases in average revenue per seat. Google Cloud delivered operating income of $1.2 billion and an operating margin of 11%. As to our Other Bets for the second quarter, revenues were $365 million and the operating loss was $1.1 billion. Turning to our outlook for the business. With respect to Google Services, First, within advertising. The strong performance of search was broad-based across verticals. In YouTube, we are pleased with the growth in the quarter. We had healthy watch time growth continued to close the monetization gap in Shorts and had continued momentum in Connected TV, with brand benefiting in part from an ongoing shift in budgets from linear television to digital. As we look forward to the third quarter, we will be lapping the increasing strength in advertising revenues in the second half of 2023, in part from APAC based retailers. Turning to subscriptions, platforms and devices. First, we continue to have significant growth in our subscriptions business which drives the majority of revenue growth in this line. However, there was a sequential decline in the year-on-year growth rate, as we anniversaried the impact of a price increase for YouTubeTV in the second quarter last year. The impact will persist through the balance of the year. Second, with regard to platforms. We are pleased with the performance in play driven by an increase in buyers. Finally, with respect to devices. The most important point as we look forward is that our Made by Google launches have been pulled forward into the third quarter from the fourth quarter last year benefiting revenues in Q3 this year. Turning to cloud, which continued to deliver very strong results. For the first time, Cloud crossed $10 billion in quarterly revenues and $1 billion in quarterly operating profit. As Sundar noted year-to-date, our AI infrastructure and generative AI solutions for cloud customers have already generated billions in revenues and are being used by more than 2 million developers. We're particularly encouraged that the majority of our top 100 customers are already using our generative AI solutions. We continue to invest aggressively in the business. Turning to margins. The margin expansion in Q2 versus last year reflects our ongoing efforts to durably reengineer our cost base, as well as revenue strength. Our leadership team remains focused on our efforts to moderate the pace of expense growth in order to create capacity for the increases in depreciation and expenses associated with the higher levels of investment in our technical infrastructure. Once again headcount declined quarter-on-quarter, which reflects both actions we have taken in the first half of the year and a much slower pace of hiring. Looking ahead, we expect a slight increase in headcount in the third quarter, as we bring on new graduates. As we have discussed previously, we\u2019re continuing to invest in top engineering and technical talent, particularly in cloud and technical infrastructure. Looking forward, we continue to expect to deliver full-year 2024 Alphabet operating margin expansion relative to 2023. However, in the third quarter operating margins will reflect the impact of both the increases in depreciation and expenses associated with the higher levels of investment in our technical infrastructure, as well as the increase in cost of revenues due to the pull-forward of hardware launches into Q3. With respect to CapEx, our reported CapEx in the second quarter was $13 billion, once again driven overwhelmingly by investment in our technical infrastructure with the largest component for servers followed by data centers. Looking ahead, we continue to expect quarterly CapEx throughout the year to be roughly at or above the Q1 CapEx of $12 billion keeping in mind that the timing of cash payments can cause variability in quarterly reported CapEx. With regard to other bets, we continue to focus on improving overall efficiencies, as we invest for long-term returns. Waymo is an important example of this, with its technical leadership coupled with progress on operational performance. As you will see in the 10-Q, we have chosen to commit to a new multi-year investment of $5 billion. This new round of funding, which is consistent with recent annual investment levels will enable Waymo to continue to build the world's leading autonomous driving technology company. To close, this is my 56th and last earnings call, 37 of them at Alphabet. So I have a few closing thoughts of gratitude. I've been so proud to be at Google and Alphabet as CFO and to work with some of the smartest people in the world every day. I think, we have accomplished a lot in the last nine plus years, and I am confident that progress will continue. Of course, I'm not going far and I'm honored to have my new role, which I've been slowly working my way into during the past 11 months and I look forward to continuing to work with Sundar, and our great team. Being CFO of one of the most important companies in the world has been the opportunity and responsibility of a lifetime. Google's Mission of advancing technology and bringing information to people throughout the world is as relevant today as it was when I worked on its IPO. Technology has been a catalyst for economic growth throughout human history. The people on this call know that if a technological advancement is not the focus of every business and government, they will be left behind. Underpinning this is the need for sound and responsible investment. That has never been more important than today and certainly, that is Google and Alphabet's focus. I want to end by thanking Googlers around the world for the innovation and commitment that has enabled us to deliver such extraordinary products and services globally. I also want to thank our investors and analysts for your long-term support and your feedback. Thank you. Sundar, Philipp and I will now take your questions.","evidence_gemma_new":"cash and marketable securities","evidence_llama_3_3":"cash and marketable securities second quarter","evidence_qwen_3_30b":"cash and marketable securities second quarter","gemma_new_max":101000000000.0,"gemma_new_min":101000000000.0,"llama_3_3_max":101000000000.0,"llama_3_3_min":101000000000.0,"qwen_3_30b_max":101000000000.0,"qwen_3_30b_min":101000000000.0}
{"symbol":"GOOGL","year":2024,"quarter":3,"date":"2024-Q3","chunk_id":4,"sub_chunk_id":0,"centroid_label":"cash and marketable securities","agreed_value":93000000000.0,"count":2,"chunk":"Anat Ashkenazi: Thank you, Philipp. And thanks, Sundar, for the words of welcome. My comments will focus on year-over-year comparisons for the third quarter, unless I state otherwise. I will start with the results at the Alphabet level and will then cover our segment results. I'll end with high-level commentary on investment at the Alphabet level. We had another strong quarter in Q3 with robust momentum across the business. Consolidated revenue increased by 15% or 16% in constant currency. Search remained the largest contributor to revenue growth, followed by a robust 35% growth in cloud. Total cost of revenue was $36.5 billion, up 10%. Tech was $13.7 billion, up 9%. We continue to see a revenue mix shift with Google Search growing at double-digit levels, while network revenue, which have a much higher TAC rate declined. Other cost of revenue was $22.8 billion, up 11%, with the increase primarily driven by content acquisition costs, primarily for YouTube, an increase in depreciation associated with higher level of investment in our technical infrastructure and higher hardware costs associated with the pull forward of our Made by Google launches from the fourth to the third quarter. Total operating expenses increased 5% to $23.3 billion. The increase was primarily driven by facilities-related charges as results of actions were taken to further optimize our office space footprint globally, followed by depreciation, partially offset by year-on-year decline in charges for legal and other matters. R&D investments increased by 11%, primarily driven by increases in compensation and depreciation expenses. Sales and marketing expenses increased 5%, primarily reflecting investment in advertising and promotional efforts related to the Made by Google launches, as well as for AI and Gemini. G&A expenses declined by 10%, primarily due to lower charges for legal and other matters. Operating income increased 34% to $28.5 billion and operating margin increased to 32%. Net income increased 34% to $26.3 billion and earnings per share increased 37% to $2.12. We're pleased with the progress we're making in reengineering our cost structure, which is reflected in our operating margin expansion this quarter, while also continuing to invest in the business to bring innovation to consumers, creators and enterprises. We delivered free cash flow of $17.6 billion for the third quarter and $55.8 billion for the trailing 12 months. Year-on-year free cash flow was negatively impacted by the following items. In 2023, we deferred cash tax payments from the second and third quarter to the fourth quarter. And in Q3 2024, we made a $3 billion cash payment related to the 2017 EC shopping fine. We ended the quarter with $93 billion in cash and marketable securities. Now turning to segment results. Google Services revenue increased 13% to $76.5 billion. Google Search and other advertising revenue increased by 12% to $49.4 billion. The robust performance of search was broad-based across verticals, led by the financial services vertical due to strength in insurance followed by retail. YouTube advertising revenue increased 12% to $8.9 billion, driven by brand, followed by direct response advertising. As Philipp mentioned, we're seeing strong momentum in YouTube, including robust growth in watch time across the platform and are excited about the new features and products we're bringing to creators. Network advertising revenue of $7.5 billion were down 2%. In the third quarter, the year-on-year growth in all our advertising revenue lines was impacted by the increase in strength in advertising revenue in Q3 of last year, in part from APAC-based retailers. Subscription platforms and devices revenue increased 28% to $10.7 billion, reflecting growth in subscription revenues, as well as the launch of our Made by Google devices in the third quarter. We continue to have significant growth in our subscription products, driven primarily by YouTube TV and YouTube Music Premium, as well as Google One, primarily due to increases in the number of paid subscribers. With regards to platforms, we're pleased with the performance in play, primarily driven by an increase in buyers. Google Service operating income increased by 29% to $30.9 billion, and operating margin was 40%. Turning to the Google Cloud segment, which continued to deliver very strong results this quarter. Revenue increased by 35% to $11.4 billion in the third quarter, reflecting accelerated growth in GCP across AI infrastructure, generative AI solutions and core GCP products. Once again, GCP grew at a rate that was higher than cloud overall. We also saw strong Google Workspace growth, primarily driven by increases in average revenue per seat. As you just heard from Sundar, the robust innovation and expanded AI offerings within our cloud business are allowing existing and new customers to realize measurable business benefits, including reduced cost, greater customer engagement, faster response time and better revenue conversion. Google Cloud operating income increased to $1.9 billion and operating margin increased to 17%. The operating margin expansion was driven by strong revenue performance across cloud AI products, core GCP and Workspace, as well as ongoing efficiency initiatives. As to our Other Bets, for the third quarter revenue were $388 million and operating loss was $1.1 billion. I'll highlight just a couple of accomplishments in the quarter for Waymo and Wing. We're excited about the progress we're seeing in Waymo, as Sundar mentioned, and the increase in the number of paid rides. We're planning to continue to expand our geographic coverage and reach more customers in existing markets and new markets. Wing, our drone delivery company, recently passed the 1-year anniversary of scaling its partnership with Walmart in the Dallas-Fort Worth area, now operating in 11 stores and serving 26 different cities and towns. Turning to Alphabet level activities. The largest component of this line is our investment in AI research and development activities, which support all of Alphabet. There were two notable items that impacted the operating loss in Alphabet level activities. First, a $607 million charge related to decisions we've made to further optimize our physical footprint and office space globally; and second, our ongoing investments in AI R&D, including the full quarter effect of the organizational changes we've made in May to move some additional AI teams from Google Services to Google DeepMind. With respect to CapEx, our reported CapEx in the third quarter was $13 billion, reflecting investment in our technical infrastructure with the largest component being investment in servers, followed by data centers and networking equipment. Looking ahead, we expect quarterly CapEx in the fourth quarter to be at similar levels to Q3, keeping in mind that the timing of cash payments can cause variability in quarterly reported CapEx. Our expansion of data center capacity is expected to bring economic benefits to countries and communities where we are investing. In the third quarter alone, we made announcements of over $7 billion in planned data center investments with nearly $6 billion of that in the U.S. In Q3, we also returned value to shareholders in the form of $15.3 billion in share repurchases and $2.5 billion in dividend payments. Overall, we returned a total of nearly $70 billion over the trailing 12 months to shareholders. As we look forward, we're working to balance our investments in AI and other growth areas with the cost discipline needed to fund those activities. As we think about the remainder of 2024, there are a couple of dynamics to consider. In terms of revenue, year-on-year growth in advertising revenue will continue to be impacted by the increasing strength in advertising revenue in the second half of 2023, in part from APAC-based retailers. And there will be a headwind to year-over-year growth in subscription platforms and devices revenue in the fourth quarter due to the pull forward of our Made by Google launches into the third quarter this year. In terms of expenses, we'll continue to see increases in depreciation and expenses associated with higher level of investment in our technical infrastructure, partially offset by a slight benefit from the cost revenue associated with our devices due to the pull forward of hardware launches into Q3. Now before going into Q&A, as the new CFO, I would like to share a few thoughts on how I'm approaching and thinking through growth, cost structure and capital allocation and expect to hear more from me on these topics in the coming quarters. As I look at the business, I see opportunities for further growth propelled by AI and the underlying momentum across the business. You heard about some of these on the call today. I also believe that we are well positioned to deliver meaningful innovation, which will translate to revenue given our strength in the core pillars that are required to succeed in AI at scale. Realizing those opportunities and great innovation in AI requires global reach, which we have through our products and platforms, as well as continued meaningful capital investment. And while we have a strong balance sheet to be able to support these investments, we will be looking for efficiencies so that we can fund innovation in priority areas. Sundar, Ruth and our leadership team started important work to reengineer our cost structure including efforts such as optimizing our headcount growth, our physical footprint, improving the efficiencies of our technical infrastructure and streamlining operations across the company through the use of AI. I plan to build on these efforts, but also evaluate where we might be able to accelerate work and where we might need to pivot to free up capital for more attractive opportunities. Thank you. Sundar, Philipp and I will now take your questions.","evidence_gemma_new":"cash and marketable securities","evidence_llama_3_3":null,"evidence_qwen_3_30b":"cash and marketable securities end of quarter","gemma_new_max":93000000000.0,"gemma_new_min":93000000000.0,"llama_3_3_max":null,"llama_3_3_min":null,"qwen_3_30b_max":93000000000.0,"qwen_3_30b_min":93000000000.0}
{"symbol":"GOOGL","year":2024,"quarter":4,"date":"2024-Q4","chunk_id":4,"sub_chunk_id":0,"centroid_label":"cash and marketable securities","agreed_value":96000000000.0,"count":3,"chunk":"Anat Ashkenazi: Thank you, Philipp. We're pleased with the continued momentum we're seeing across the business as Alphabet revenue for 2024 reached $350 billion, up 14% on a reported basis and 15% in constant currency versus 2023. My comments will focus on year-over-year comparisons for the fourth quarter, unless I state otherwise. I will start with the results at the Alphabet level and we'll then cover our segment results. I'll end with some commentary and expectations over the first quarter and full year 2025. We had another strong quarter in Q4 with robust momentum across the business. Consolidated revenue of $96.5 billion, increased by 12% in both reported and constant currency. Search remained the largest contributor to revenue growth, followed by Cloud. Total cost of revenue was $40.6 billion, up 8%. Tech was $14.8 billion, up 6%. We continue to see a revenue mix shift with Google Search growing at double-digit levels, while network revenues, which have a much higher tech rate, declined. Other cost of revenue was $25.8 billion, up 9%, with the increase primarily driven by content acquisitions costs, primarily for YouTube, followed by depreciation, due to increasing investments in our technical infrastructure. Growth in content acquisition and depreciation were partially offset by our year-over-year decline in hardware costs due to the shift in timing of our made-by-Google launches to the third quarter 2024 compared to the fourth quarter of 2023. In terms of total expenses, the year-over-year comparisons reflect $1.2 billion in exit charges that we took in the fourth quarter of 2023 in connection with actions to optimize our global office space. As previously disclosed, those charges were allocated across the expense lines in other costs of revenue and OpEx based on associated headcount. Total operating expenses decreased 1% to $24.9 billion. R&D investments increased by 8%, primarily driven by increase in compensation and depreciation expenses, partially offset by the impact of charges for office [ph] space optimization in the fourth quarter of 2023. Sales and marketing expenses decreased 5%, primarily reflecting the optimization charges last year, as well as declines in compensation and in ads and promotion expenses due to the timing shift of the Pixel launch from Q4 to Q3. G&A expenses declined by 15%, reflecting a shift of timing in our charitable contributions, as well as the optimization charges last year. Operating income increased 31%, the score [ph] to $31 billion, and operating margin increased to 32%, representing 4.6 points of margin expansion. Net income increased 28% to $26.5 billion, and earnings per share increased 31% to $2.15. We delivered free cash flow of $24.8 billion in the fourth quarter and $72.8 billion for the full year 2024. We ended the quarter with $96 billion in cash and marketable securities. Turning to segment results. Google Service revenues increased 10% to $84.1 billion, reflecting the strong momentum across Google Search and YouTube ads. Google Search and other advertising revenues increased by 13% to $54 billion. The robust performance of Search was once again broad-based across verticals, led by the financial service vertical due to strength in insurance, followed by retail. YouTube advertising revenue increased 14% to $10.5 billion, driven by brand, followed by direct response advertising. Network advertising revenue of $8 billion, were down 4%. In the fourth quarter, the year-over-year comparison in all of our advertising revenue lines was impacted by the increase in strength in advertising revenue in Q4 2023, in part from APAC-based retailers. Subscription platforms and device revenues increase 8% to $11.6 billion, primarily reflecting growth in subscription revenues, partially offset by the shift in timing of the launch of our made by Google devices to the third quarter, compared with the fourth quarter in 2023. We continue to have significant growth in our subscription products, primarily due to increase in the number of paid subscribers across YouTube TV, YouTube Music Premium, and Google One. With regards to Platform, we saw a slight increase in the growth rate in Play, primarily due to a strong increase in the number of buyers. Google's service operating income increased 23% to $32.8 billion, and operating margin increased from 35% to 39%, representing a meaningful margin expansion. Turning to the Google Cloud segment, which continued to deliver very strong results this quarter. Revenue increased by 30% to $12 billion in the fourth quarter, reflecting growth in GCP across core GCP products, AI infrastructure, and generative AI solutions. Once again, GCP grew at a rate that was much higher than cloud overall. Healthy Google Workspace growth was primarily driven by increase in average revenue per seat. Google Cloud operating income increased to $2.1 billion, and operating margin increased from 9.4% to 17.5%. We're pleased with the work the cloud team is doing to deliver valuable solutions to the customer and generate revenue growth, as well as its continued focus on driving efficiencies across the cloud business. As for Other Bets, for the fourth quarter, revenue were $400 million, and the operating loss was $1.2 billion. The year-over-year decline in revenue and increase in operating loss primarily reflect the milestone payment in the fourth quarter of 2023 for one of the Other Bets. Turning to Alphabet level activities, the largest component of this line is our investments in AI research and development activities which support all of Alphabet. As a reminder, Alphabet level activities have included nearly all severance charges from reductions in workforce and office space charges. In the fourth quarter of 2024, the biggest factor in year-over-year comparison is the $1.2 billion in charges in the fourth quarter of 2023, almost entirely in connection with office space optimization. With respect to CapEx, our reported CapEx in the fourth quarter was $14 billion, primarily reflecting investments in our technical infrastructure, with the largest component being investment in servers, followed by data centers, to support the growth of our business across Google Services, Google Cloud, and Google DeepMind. In Q4, we returned value to shareholders in the form of $15 billion in share purchases and $2.4 billion in dividend payments. Overall, we returned a total of nearly $70 billion to shareholders in 2024. Turning to 2025, I would like to provide some commentary on several factors that will impact our business performance in both the first quarter and the full year 2025. First in terms of revenue, I'll highlight two items that will have meaningful impact on Q1 revenue across the company. First in terms of revenues, I'll highlight two items that will have meaningful impact on Q1 revenues across the company. The first is the impact of foreign exchange rates. At the current spot rates, we expect a larger headwind to our revenues from the strengthening of the U.S dollar relative to key currencies in Q1 versus Q4 2024. Second is the impact of leap year. We expect a headwind from having one less day of revenue in Q1 2025 compared with leap year in the first quarter of 2024. As for our segments, Google Services, advertising revenue in 2025 will be impacted by lapping the strength we experience in the financial service vertical throughout 2024. And in Cloud, given the revenues are correlated with the timing of deployment of new capacity, we could see variability in cloud revenue growth rates depending on when new capacity comes online during 2025. Moving to investments, starting with our expectation for CapEx for the full year 2025. As we mentioned on the Q3 call, as we expand our AI efforts, we expect to increase our investments in capital expenditure for technical infrastructure, primarily for servers, followed by data centers and networking. We expect to invest approximately $75 billion in CapEx in 2025 with approximately $16 billion to $18 billion of debt in the first quarter. The expected total investment level may fluctuate from quarter-to-quarter, primarily due to timing of deliveries and construction schedules. In terms of expenses, first, the increase in our investment in CapEx over the past few years will increase pressure on the P&L, primarily in the form of higher depreciation. In 2024, we saw 28% year-over-year growth in depreciation as we put more technical infrastructure assets into service. Given the increase in CapEx investments over the past few years, we expect the growth rate and depreciation to accelerate in 2025. Second, we expect some headcount growth in 2025 in key investment areas such as AI and cloud. As you just heard from Sundar, we're delivering products and solutions to customer at a rapid pace, building, testing, and launching products faster than ever before. And as I mentioned on the Q3 call, we're doing that while also focusing on driving further efficiencies in how we operate the business. Before we take questions, I'd like to recap the financial results for the year. For the full year 2024, revenue grew by 14% or by $43 billion, reaching $350 billion. Google Services and Google Cloud each continue to see double-digit revenue growth coupled with margin extension. YouTube and cloud revenues combined, ended the year at $110 billion annual run rate. And in 2024, we generate total income of $112 billion, an increase of 33% from 2023. We're pleased with the momentum we're seeing in AI innovation and monetization. We've been using AI to improve the performance of our ads business for well over a decade, and Cloud is generating billions in annual revenue from AI infrastructure and generative AI solutions. We're also excited about the potential to bring new experiences to users that will provide additional opportunities for monetization. And I look forward to sharing more in our progress throughout the year. Sundar, Philipp, and I will now take your questions.","evidence_gemma_new":"cash and marketable securities","evidence_llama_3_3":"cash and marketable securities fourth quarter","evidence_qwen_3_30b":"cash and marketable securities","gemma_new_max":96000000000.0,"gemma_new_min":96000000000.0,"llama_3_3_max":96000000000.0,"llama_3_3_min":96000000000.0,"qwen_3_30b_max":96000000000.0,"qwen_3_30b_min":96000000000.0}
{"symbol":"GOOGL","year":2023,"quarter":4,"date":"2023-FY","chunk_id":4,"sub_chunk_id":0,"centroid_label":"free cash flow","agreed_value":69000000000.0,"count":2,"chunk":"Ruth Porat: Thank you, Philipp. We are very pleased with our full year results with 2023 Alphabet revenues of $307 billion, up 9% versus 2022, which added $25 billion to revenues for the year. We ended with a strong fourth quarter with consolidated revenues of $86.3 billion, up 13% versus last year in both reported and constant currency. Search remained the largest contributor to revenue growth. My comments will be on year-over-year comparisons for the fourth quarter, unless I state otherwise. Total cost of revenues was $37.6 billion, up 6%. Other cost of revenues was $23.6 billion, up 5%, with the increase driven primarily by content acquisition costs associated with YouTube subscription offerings. The growth rate also reflects the offsetting benefit of lapping $1.2 billion in inventory-related charges that we called out in the fourth quarter last year as well as a reduction in depreciation expense due to changes in estimated useful lives we made starting in the first quarter of 2023. In terms of total expenses, the year-on-year comparisons reflect an additional $1.2 billion in exit charges that we took in the fourth quarter of 2023 in connection with actions to optimize our global office space. As you can see in our earnings release, these charges were allocated across the expense lines in other cost of revenues and OpEx based on associated head count. Operating expenses were $25 billion, up 11%, primarily reflecting an increase in R&D expenses, which were driven by the real estate charges, followed by compensation. Operating income was $23.7 billion, up 30%, and our operating margin was 27%. Net income was $20.7 billion, and EPS was $1.64. We delivered free cash flow of $7.9 billion, which was affected by the timing of the $10.5 billion tax payment we made on October 16 that we called out previously related to the deferral of certain tax payments to the fourth quarter. For the full year 2023, free cash flow was $69 billion. We repurchased a total of $62 billion of our Class A and Class C shares in 2023 and ended the year with $111 billion in cash and marketable securities. Turning to segment results. Within Google Services, revenues were $76.3 billion, up 12%. Google Search and other advertising revenues of $48 billion in the quarter were up 13%, led again by growth in retail. YouTube advertising revenues of $9.2 billion were up 16% driven by both direct response and brand advertising. Network advertising revenues of $8.3 billion were down 2%. Subscriptions, platforms and devices revenues, which we previously referred to as other revenues, were $10.8 billion, up 23%, primarily reflecting growth in YouTube subscription revenues. TAC was $14 billion, up 8%. Google Services' operating income was $26.7 billion, up 32%, and the operating margin was 35%. Turning to the Google Cloud segment. Revenues were $9.2 billion for the quarter, up 26%. We're very pleased with the momentum of GCP with an increasing contribution from AI. Google Workspace also delivered strong revenue growth primarily driven by increases in average revenue per seat. Google Cloud delivered operating income of $864 million and an operating margin of 9%. As to our Other Bets, for the full year 2023, revenues were $1.5 billion and the operating loss was $4.1 billion. Results in the fourth quarter benefited from a milestone payment in one of the Other Bets. Turning to our outlook for the business. With respect to Google Services, first, within advertising. We were pleased with the sequential revenue growth of Search and YouTube advertising throughout 2023, which reflects the extraordinary work across our teams to drive improved experiences for users and attractive ROI for advertisers. As we enter 2024 with advertising revenues of more than $100 billion higher than 2019, we remain focused on sustaining healthy growth on this larger base. Second, within subscriptions, platforms and devices, our total revenues from subscription products reached $15 billion for the full year 2023 driven primarily by substantial growth in subscribers for our YouTube subscription offerings. The substantial increase in our subscription revenues over the past few years demonstrates the ability of our teams to deliver high value-add offerings and provides a strong base on which to build, including through YouTube and newer services like Google One. Play had solid growth again in the fourth quarter driven primarily by an increase in the number of buyers. In devices, we continue to make sizable investments with increased emphasis on our Pixel family, particularly with AI-powered innovation while driving further efficiencies across the portfolio. Turning to Google Cloud. We are pleased with operating performance in the year. Full year revenues of $33 billion were up 26% versus prior year, ending with strong Q4 performance. The Cloud team is intensely focused on bringing the benefits of Gemini, our industry-leading AI technology, to enterprises and governments globally, and we are gratified with the level of engagement. The strong demand we are seeing for our vertically integrated AI portfolio is creating new opportunities for Google Cloud across every product area. In terms of profitability, the improvement in 2023 reflects sustained focus across the team with the intent to maintain healthy profitability while we continue to invest to support long-term growth. Turning to margins and expenses. As we have repeatedly stressed, we remain committed to our framework to durably reengineer our cost base as we invest to support our growth priorities. Key contributors to moderating our expense growth include: first, product and process prioritization to ensure we have the right resources behind our most important opportunities and to reallocate resources where we can; second, organizational efficiency and structure. We're focused on removing layers to simplify execution and drive velocity. Both product prioritization and the organization design efforts result in a slower pace of hiring, as you can see with our head count down year-on-year, reflecting the reductions we announced in the first quarter of 2023 and a much slower pace of hiring. We will continue to invest in top technical and engineering talent. Finally, we continue to execute the other work streams to slow expense growth, including improving efficiency in our technical infrastructure, streamlining operations across Alphabet through the use of AI, increasing efficiency of our spend with suppliers and vendors through our central procurement organization and optimizing our real estate portfolio. With respect to CapEx, our reported CapEx in the fourth quarter was $11 billion, driven overwhelmingly by investment in our technical infrastructure with the largest component for servers followed by data centers. The step-up in CapEx in Q4 reflects our outlook for the extraordinary applications of AI to deliver for users, advertisers, developers, cloud enterprise customers and governments globally and the long-term growth opportunities that offers. In 2024, we expect investment in CapEx will be notably larger than in 2023. With regard to Other Bets, we've been working to sharpen our investment focus while capturing the upside given compelling technology breakthroughs across the portfolio. For example, last week, Alphabet's X announced that it would be moving to spin out more projects as independent companies through external capital, giving X the opportunity to bring more focus to the breakthrough technologies it is working on to address some of the world's most pressing challenges. Thank you. Sundar, Philipp and I will now take your questions.","evidence_gemma_new":null,"evidence_llama_3_3":"free cash flow 2023","evidence_qwen_3_30b":"free cash flow full year 2023","gemma_new_max":null,"gemma_new_min":null,"llama_3_3_max":69000000000.0,"llama_3_3_min":69000000000.0,"qwen_3_30b_max":69000000000.0,"qwen_3_30b_min":69000000000.0}
{"symbol":"GOOGL","year":2023,"quarter":1,"date":"2023-Q1","chunk_id":5,"sub_chunk_id":0,"centroid_label":"free cash flow","agreed_value":17200000000.0,"count":3,"chunk":"Ruth Porat: Thank you, Philipp. Our financial results for the first quarter reflect continued healthy fundamental growth in Search and momentum in Cloud. As I go through the discussion today, I will reference some changes to our reporting and disclosures that are covered more fully in the 8-K we filed last week. I will conclude with our outlook. For the first quarter, our consolidated revenues were $69.8 billion, up 3% or up 6% in constant currency. Search remained the largest contributor to revenue growth on a constant currency basis. In terms of expenses and profitability, year-on-year comparisons are impacted by 3 factors: first, the $2.6 billion in charges we took in the first quarter related to workforce and office space reductions. We provided a table in our earnings release that shows the impact of those charges on cost of revenues and operating expenses. Second, the adjustment we made to the estimated useful lives of servers and certain network equipment at the beginning of 2023. As you can see in our earnings release, the effect for the first quarter was a reduction in depreciation expense of $988 million. Third, the shift in timing of our annual employee stock-based compensation awards from January to March delays the step-up in SBC from Q1 to Q2. This shift in timing does not affect the total amount of SBC over the full year 2023. Total cost of revenues was $30.6 billion, up 3%, driven by other cost of revenues of $18.9 billion, which was up 7%, the biggest factor of which was compensation costs associated with data centers and other operations and followed by content acquisition costs. Operating expenses were $21.8 billion, up 19%, with a significant impact from the charges related to workforce and office space reductions. Operating income was $17.4 billion, down 13%, and our operating margin was 25%. Net income was $15.1 billion. We delivered free cash flow of $17.2 billion in the first quarter and $62 billion for the trailing 12 months. We ended the quarter with $115 billion in cash and marketable securities. Turning to our segment results. These were affected by 2 additional changes outlined in our 8-K filing. First, reflecting the increasing collaboration between DeepMind and Google Services, Google Cloud, and Other Bets, as of Q1, DeepMind is reported as part of Alphabet's unallocated corporate costs. And second, beginning in the first quarter, we updated our cost allocation methodologies to provide our business leaders with increased transparency for decision-making. In our filing, we provided a recast of prior period results for the segment for these 2 changes. The highlights of the year-on-year performance of our segments that I will review reflect these recast results. Starting with Google Services. Revenues were $62 billion, up 1%. Google Search and other advertising revenues of $40.4 billion in the quarter were up 2%. YouTube advertising revenues of $6.7 billion were down 3%. Network advertising revenues of $7.5 billion were down 8%. Other revenues were $7.4 billion, up 9%, reflecting primarily ongoing significant subscriber growth in YouTube TV and YouTube Music Premium. TAC was $11.7 billion, down 2%, primarily reflecting a mix shift between Search and Network. Google Services operating income was $21.7 billion, down 1%, and the operating margin was 35%. Turning to the Google Cloud segment. Revenues were $7.5 billion for the quarter, up 28%. Growth in GCP remained strong across geographies, industries and products. Google Workspace's strong results were driven by increases in both seats and average revenue per seat. Google Cloud had operating income of $191 million, and the operating margin was 2.6%. As to our Other Bets, for the first quarter, revenues were $288 million, and the operating loss was $1.2 billion. Turning to our outlook for the business. In terms of the operating environment, our results in the first quarter reflected ongoing headwinds due to a challenging economic environment, and the outlook remains uncertain. Foreign exchange headwinds have moderated, and we expect less of a foreign exchange headwind in the second quarter based on current spot rates. With respect to Google Services, within advertising, Q1 results reflect the resilience of Search with its unique ability to surface demand and deliver measurable ROI. Excluding the impact of foreign exchange, the revenue growth of Search was similar to last quarter. In YouTube, we saw signs of stabilization in ad spend on a sequential basis. We continue to prioritize growth in Shorts engagement where we are encouraged by progress in monetization. As to other revenues, in YouTube subscriptions, we are pleased with the significant ongoing subscriber growth in both YouTube Music Premium and YouTube TV. In Play, revenues were down year-on-year, primarily due to the continued impact of foreign exchange in APAC, although results have improved as we lapped the impact from our introduction of fee reductions last year. Turning to Google Cloud. Our investments in product innovation, our go-to-market organization and our partner ecosystem delivered strong results as customers across industries and geographies increasingly rely on Google Cloud to digitally transform their businesses. That being said, in Q1, we continued to see slower growth of consumption as customers optimized GCP costs, reflecting the macro backdrop which remains uncertain. In terms of operating performance, we remain focused on driving long-term profitable growth in Cloud while continuing to invest given the substantial opportunity. Moving to Other Bets. In the first quarter, we similarly worked to refine strategies and prioritize efforts across the portfolio, including reductions to head count. I will now walk you through an update on our efforts to reengineer our cost base, slowing the pace of operating expense growth while creating capacity for key investment areas, particularly in support of AI across the company. First, as discussed on the fourth quarter call, we have efforts underway in 3 broad categories: number one, using AI and automation to improve productivity across Alphabet for operational tasks as well as the efficiency of our technical infrastructure; number two, managing our spend with suppliers and vendors more effectively; and number three, continuing to optimize how and where we work. As we've noted previously, all 3 work streams are ramping up this year, and we plan to build on these efforts in 2024 and in subsequent years. Second, with respect to head count growth. The reported number of employees at the end of the first quarter includes almost all of the employees impacted by the workforce reduction we announced in January. We expect most of the impacted individuals will no longer be reflected in our head count by the end of the second quarter. In terms of the outlook for head count for the year, as we shared last quarter, we are meaningfully slowing the pace of hiring in 2023 while still investing in priority areas, particularly for top engineering and technical talent. In terms of our investments in AI, we are excited about the creation of Google DeepMind, combining the Brain Team from Google Research with DeepMind, with the goal to accelerate innovation and impact. Beginning in the second quarter of 2023, the costs associated with teams and activities transferred from Google Research will move from Google Services to Google DeepMind within Alphabet's unallocated corporate costs. Finally, as it relates to CapEx, for 2023, we now expect total CapEx to be modestly higher than in 2022. As discussed last quarter, CapEx this year will include a meaningful increase in technical infrastructure versus a decline in office facilities. We expect the pace of investment in both data center construction and servers to step up in the second quarter and continue to increase throughout the year. Thank you. Sundar, Philipp and I will now take your questions.","evidence_gemma_new":"free cash flow first quarter","evidence_llama_3_3":"free cash flow first quarter","evidence_qwen_3_30b":"free cash flow first quarter","gemma_new_max":17200000000.0,"gemma_new_min":17200000000.0,"llama_3_3_max":17200000000.0,"llama_3_3_min":17200000000.0,"qwen_3_30b_max":17200000000.0,"qwen_3_30b_min":17200000000.0}
{"symbol":"GOOGL","year":2023,"quarter":2,"date":"2023-Q2","chunk_id":4,"sub_chunk_id":0,"centroid_label":"free cash flow","agreed_value":21800000000.0,"count":2,"chunk":"Ruth Porat: Thank you, Philipp. Before I go into the results, first, Sundar, thank you very much for the opportunity. I'm very excited about the new role, and I look forward to it. So turning to the results. We're very pleased with our financial results for the second quarter, which reflect an acceleration of growth in Search and momentum in Cloud. My comments will be on year-over-year comparisons for the second quarter unless I state otherwise. I will start with results at the Alphabet level followed by segment results and conclude with our outlook. For the second quarter, our consolidated revenues were $74.6 billion, up 7% or up 9% in constant currency. Search remained the largest contributor to revenue growth. Total cost of revenues was $31.9 billion, up 6%, driven by other cost of revenues of $19.4 billion, which was up 8%. Growth here was driven by content acquisition costs, primarily for YouTube subscription offerings, followed by hardware costs associated with Pixel family launches in the second quarter. As noted in our earnings release, the overall increase in data center and other operations costs was partially offset by a reduction in depreciation expense due to the change in estimated useful lives we discussed last quarter. Operating expenses were $20.9 billion, up 4%. Operating income was $21.8 billion, up 12%, and our operating margin was 29%. I will cover our expense and margin performance in our outlook. Other income and expense was $65 million. Net income was $18.4 billion. We delivered free cash flow of $21.8 billion in the second quarter and $71 billion for the trailing 12 months, reflecting improved operating performance as well as the deferral of certain tax payments to the fourth quarter of 2023 as noted in our earnings release. We ended the quarter with $118 billion in cash and marketable securities. Turning to our segment results. Prior period results have been recast for 2 changes that we made as of the first quarter. First, DeepMind is now reported as part of Alphabet's unallocated corporate costs. Second, we updated our cost allocation methodologies. In the second quarter, we then combined the Brain team from Google Research with DeepMind to form Google DeepMind. Costs associated with the Brain team, which were previously included in Google Services, are now reported as part of Alphabet's unallocated corporate costs. We have not recast prior period results to reflect this additional change. Within Google Services, revenues were $66.3 billion, up 5%. Google Search and other advertising revenues of $42.6 billion in the quarter were up 5%, led by growth in retail. YouTube advertising revenues of $7.7 billion were up 4%, driven by brand advertising, followed by direct response reflecting further stabilization in spending by advertisers. Network advertising revenues of $7.9 billion were down 5%. Other revenues were $8.1 billion, up 24%, reflecting growth in YouTube non-advertising revenues, primarily from subscription growth in YouTube Music Premium and YouTube TV followed by growth in hardware revenues primarily driven by the launch of the Pixel 7a in the second quarter. Finally, Play returned to positive growth in the second quarter. TAC was $12.5 billion, up 3%. Google Services operating income was $23.5 billion, up 8%, and the operating margin was 35%. Turning to the Google Cloud segment. Revenues were $8 billion for the quarter, up 28%. GCP revenue growth remained strong across geographies, industries and products. That being said, we saw a continued moderation in the rate of consumption growth as consumers optimize their spend. Google Workspace strong revenue growth was driven by increases in both seats and average revenue per seat. Google Cloud had operating income of $395 million and the operating margin was 5%. As to our Other Bets, for the second quarter, revenues were $285 million, and the operating loss was $813 million. The decrease in operating loss was primarily driven by a reduction in valuation-based compensation liabilities related to certain Other Bets. Turning to our outlook for the business. With respect to Google Services, first, within advertising. We were pleased with the acceleration of Search advertising revenue growth in the second quarter. Our continued ability to generate sustained growth reflects our unparalleled engineering innovation that creates extraordinary experiences for users and capabilities for advertisers and delivered with the deep expertise of our go-to-market team. And in YouTube, we saw ongoing signs of stabilization in advertiser spending. We are prioritizing product focus on increasing quality consumption of video content with both Shorts and in the living room, which is translating into improved monetization. Second, within other revenues. In our YouTube subscription products, the sustained, strong growth in revenues reflects significant subscriber growth. You may have seen that last week, we increased subscription prices for YouTube Music and Premium, which underscores the value of the products. Strong year-on-year growth in hardware revenues was due, in large part, to a timing change given the Pixel 7a was launched in the second quarter, whereas the Pixel 6a launch occurred in the third quarter last year. Looking ahead, the launch timing change will be a headwind to hardware revenue growth in the third quarter. Play returned to positive growth in the second quarter, driven primarily by a solid increase in the number of buyers. Turning to Google Cloud. We are particularly excited about the customer interest in our AI-optimized infrastructure, our large language models, our AI platform services and our new generative AI offerings such as Duet AI for Google Workspace, although we are still clearly in the early days. At the same time, we continue to experience headwinds in the second quarter for moderation in consumption growth as customers optimize their spend. We continue to invest aggressively while remaining focused on profitable growth. In terms of expenses and profitability, we remain very focused on durably reengineering our cost base. Most evident to date are the actions we have taken to reduce the pace of headcount growth, including the workforce reductions we announced in the first quarter and a slower pace of organic hiring, in part given our focus on reallocating talent from within to fuel our growth priorities. A quick comment on the sequential improvement in operating margins in the second quarter. There are 2 factors to note. First, the benefit from an acceleration in search advertising revenue growth in the second quarter. Second, the vast majority of the charges related to our workforce reduction and optimization of our global office space were taken in Q1. Finally, as it relates to CapEx, in Q2, the largest component was for servers, which included a meaningful increase in our investments in AI compute. The sequential step-up in the second quarter was lower than anticipated for 2 reasons. First, with respect to office facilities, we continue to moderate the pace of fit-outs and ground-up construction to reflect the slower expected pace of headcount growth. Second, there were delays in certain data center construction projects. We expect elevated levels of investment in our technical infrastructure increasing through the back half of 2023 and continuing to grow in 2024. The primary driver is to support the opportunities we see in AI across Alphabet, including investments in GPUs and proprietary TPUs as well as data center capacity. With all that said, we remain committed to durably reengineering our cost base in order to help create capacity for these investments in support of long-term, sustainable financial value. Thank you. Sundar, Philipp and I will now take your questions.","evidence_gemma_new":"free cash flow","evidence_llama_3_3":null,"evidence_qwen_3_30b":"free cash flow second quarter","gemma_new_max":21800000000.0,"gemma_new_min":21800000000.0,"llama_3_3_max":null,"llama_3_3_min":null,"qwen_3_30b_max":21800000000.0,"qwen_3_30b_min":21800000000.0}
{"symbol":"GOOGL","year":2023,"quarter":3,"date":"2023-Q3","chunk_id":4,"sub_chunk_id":0,"centroid_label":"free cash flow","agreed_value":22600000000.0,"count":2,"chunk":"Ruth Porat: Thank you, Philipp. We are very pleased with our financial results for the third quarter, driven by meaningful growth in Search and YouTube and momentum in Cloud. My comments will be on year-over-year comparisons for the third quarter, unless I state otherwise. I will start with results at the Alphabet level followed by segment results and conclude with our outlook. For the third quarter, our consolidated revenues were $76.7 billion, up 11% in both reported and constant currency. Search remained the largest contributor to revenue growth. In terms of expenses, total cost of revenues was $33.2 billion, up 7%, primarily reflecting other cost of revenues of $20.6 billion, which was up 6%. Growth here was primarily driven by content acquisition costs mainly for YouTube subscription offerings. As noted in our earnings release, the overall increase in data center and other operations costs was partially offset by a reduction in depreciation expense due to the change in estimated useful lives we made starting in the first quarter of the year. Operating expenses were $22.1 billion, up 6% reflecting the following. First, an increase in R&D expenses, driven primarily by compensation. Second, an increase in G&A expenses, reflecting the impact of charges related to legal matters. And finally, sales and marketing expenses, which were relatively flat to last year. Operating income was $21.3 billion, up 25%, and our operating margin was 28%. Other income and expense was a loss of $146 million. Net income was $19.7 billion. This reflects an effective tax rate of 7% in the third quarter from an IRS change related to the use of foreign tax credits, which had an outsized impact on the third quarter rate because the change resulted in a catch-up for prior periods. We delivered free cash flow of $22.6 billion in the third quarter and $78 million for the trailing 12 months. We ended the quarter with $120 billion in cash and marketable securities. As a reminder, our cash balance and free cash flow in the second and third quarters benefited from the deferral of certain tax payments to the fourth quarter of 2023. As noted in our earnings release, on October 16, we made an estimated tax payment of $10.5 billion related to this deferral, which will be reflected in our cash balance and free cash flow in the fourth quarter. Turning to segment results. Within Google Services, revenues were $68 billion, up 11%. Google Search and other advertising revenues of $44 billion in the quarter were up 11%, led again by growth in retail. YouTube advertising revenues of $8 billion were up 12%, driven by both brand advertising and direct response. Network advertising revenues of $7.7 billion were down 3%. Other revenues were $8.3 billion, up 21%, primarily reflecting growth in YouTube non-advertising revenues driven by subscriber growth in YouTube TV followed by YouTube Music Premium. TAC was $12.6 billion, up 7%. Google Services operating income was $23.9 billion, up 27% and the operating margin was 35%. Turning to the Google Cloud segment. Revenues were $8.4 billion for the quarter, up 22%. GCP revenue growth remained strong across geographies, industries and products, although the Q3 year-on-year growth rate reflects the impact of customer optimization efforts. Google Workspace also delivered strong revenue growth, primarily driven by increases in average revenue per seat. Google Cloud had operating income of $266 million, and the operating margin was 3%. As to our Other Bets, for the third quarter, revenues were $297 million and the operating loss was $1.2 billion. Turning to our outlook for the business. With respect to Google Services. First, within advertising. After a period of historic volatility, we were pleased with the year-on-year revenue growth of Search and YouTube advertising in the third quarter. Second, within other revenues, in our YouTube subscription products the substantial growth in revenues primarily reflects subscriber growth. Looking ahead, a full quarter of NFL Sunday Ticket revenues as well as associated content acquisition costs will be reflected in Q4 results compared to only a few weeks in the third quarter. Play had growth in the third quarter, driven primarily by an increase in the number of buyers. With respect to hardware, there is a headwind to revenues in the fourth quarter, reflecting efforts to optimize the portfolio with tighter targeting of our go-to-market investments as well as the ongoing impact from the difference in launch timing for the Pixel 6a and 7a that we mentioned last quarter. Turning to Google Cloud. We are pleased with the ongoing customer engagement with GCP and Workspace and the potential benefit of our AI solutions including infrastructure and services such as Vertex AI and Duet. We continue to invest aggressively given the significant potential we see while remaining focused on profitable growth. In terms of expenses and profitability, we're pleased with our operating performance. As we have repeatedly stressed, we remain focused on durably reengineering our cost base to create investment capacity to support our growth priorities, most important of which is with AI. We have a number of workstreams in place. First, we are maintaining a slower pace of headcount growth, reflecting product prioritization and reallocation of talent to support our most important growth opportunities. Second, we remain focused on optimizing our real estate footprint, including how and where we work to reduce our expense growth. As you can see from our earnings release, we incurred $207 million in accelerated rent and depreciation in the third quarter related to these actions. Third, we have engineering work streams underway to improve productivity across Alphabet. Given the magnitude of investment in our technical infrastructure, we have a superb team focused on efficiency of our operations there. We are also making progress in streamlining operations across Alphabet through the use of AI. Finally, there are ongoing workstreams that are improving the efficiency of our spend with suppliers and vendors through our central procurement organization. And to be clear, across the portfolio of other bet companies, we have also been working to identify opportunities to create sharper focus and to operate more efficiently and effectively. With respect to sequential quarter-on-quarter trends, two further points. First, cost of sales in the fourth quarter will reflect both higher hardware costs given Pixel family launches as well as increased CAC for YouTube as previously noted. Second, as usual, we expect sales and marketing expenses to be more heavily weighted to the end of the year, in part to support product launches in the holiday season. Finally, our reported CapEx in Q3 was $8 billion, driven overwhelmingly by investment in our technical infrastructure with the largest component for servers, followed by data centers, reflecting a meaningful increase in our investments in AI compute. The growth in reported cash CapEx in Q3 is somewhat muted due to the timing of supplier payments, which can cause variability from quarter-to-quarter. We continue to invest meaningfully in the technical infrastructure needed to support the opportunities we see in AI across Alphabet and expect elevated levels of investment, increasing in the fourth quarter of 2023 and continuing to grow in 2024. In closing, we remain very excited about the opportunities ahead and committed to deliver sustainable financial value. Thank you. Sundar, Philipp and I will now take your questions.","evidence_gemma_new":"free cash flow","evidence_llama_3_3":null,"evidence_qwen_3_30b":"free cash flow third quarter","gemma_new_max":22600000000.0,"gemma_new_min":22600000000.0,"llama_3_3_max":null,"llama_3_3_min":null,"qwen_3_30b_max":22600000000.0,"qwen_3_30b_min":22600000000.0}
{"symbol":"GOOGL","year":2023,"quarter":4,"date":"2023-Q4","chunk_id":4,"sub_chunk_id":0,"centroid_label":"free cash flow","agreed_value":7900000000.0,"count":3,"chunk":"Ruth Porat: Thank you, Philipp. We are very pleased with our full year results with 2023 Alphabet revenues of $307 billion, up 9% versus 2022, which added $25 billion to revenues for the year. We ended with a strong fourth quarter with consolidated revenues of $86.3 billion, up 13% versus last year in both reported and constant currency. Search remained the largest contributor to revenue growth. My comments will be on year-over-year comparisons for the fourth quarter, unless I state otherwise. Total cost of revenues was $37.6 billion, up 6%. Other cost of revenues was $23.6 billion, up 5%, with the increase driven primarily by content acquisition costs associated with YouTube subscription offerings. The growth rate also reflects the offsetting benefit of lapping $1.2 billion in inventory-related charges that we called out in the fourth quarter last year as well as a reduction in depreciation expense due to changes in estimated useful lives we made starting in the first quarter of 2023. In terms of total expenses, the year-on-year comparisons reflect an additional $1.2 billion in exit charges that we took in the fourth quarter of 2023 in connection with actions to optimize our global office space. As you can see in our earnings release, these charges were allocated across the expense lines in other cost of revenues and OpEx based on associated head count. Operating expenses were $25 billion, up 11%, primarily reflecting an increase in R&D expenses, which were driven by the real estate charges, followed by compensation. Operating income was $23.7 billion, up 30%, and our operating margin was 27%. Net income was $20.7 billion, and EPS was $1.64. We delivered free cash flow of $7.9 billion, which was affected by the timing of the $10.5 billion tax payment we made on October 16 that we called out previously related to the deferral of certain tax payments to the fourth quarter. For the full year 2023, free cash flow was $69 billion. We repurchased a total of $62 billion of our Class A and Class C shares in 2023 and ended the year with $111 billion in cash and marketable securities. Turning to segment results. Within Google Services, revenues were $76.3 billion, up 12%. Google Search and other advertising revenues of $48 billion in the quarter were up 13%, led again by growth in retail. YouTube advertising revenues of $9.2 billion were up 16% driven by both direct response and brand advertising. Network advertising revenues of $8.3 billion were down 2%. Subscriptions, platforms and devices revenues, which we previously referred to as other revenues, were $10.8 billion, up 23%, primarily reflecting growth in YouTube subscription revenues. TAC was $14 billion, up 8%. Google Services' operating income was $26.7 billion, up 32%, and the operating margin was 35%. Turning to the Google Cloud segment. Revenues were $9.2 billion for the quarter, up 26%. We're very pleased with the momentum of GCP with an increasing contribution from AI. Google Workspace also delivered strong revenue growth primarily driven by increases in average revenue per seat. Google Cloud delivered operating income of $864 million and an operating margin of 9%. As to our Other Bets, for the full year 2023, revenues were $1.5 billion and the operating loss was $4.1 billion. Results in the fourth quarter benefited from a milestone payment in one of the Other Bets. Turning to our outlook for the business. With respect to Google Services, first, within advertising. We were pleased with the sequential revenue growth of Search and YouTube advertising throughout 2023, which reflects the extraordinary work across our teams to drive improved experiences for users and attractive ROI for advertisers. As we enter 2024 with advertising revenues of more than $100 billion higher than 2019, we remain focused on sustaining healthy growth on this larger base. Second, within subscriptions, platforms and devices, our total revenues from subscription products reached $15 billion for the full year 2023 driven primarily by substantial growth in subscribers for our YouTube subscription offerings. The substantial increase in our subscription revenues over the past few years demonstrates the ability of our teams to deliver high value-add offerings and provides a strong base on which to build, including through YouTube and newer services like Google One. Play had solid growth again in the fourth quarter driven primarily by an increase in the number of buyers. In devices, we continue to make sizable investments with increased emphasis on our Pixel family, particularly with AI-powered innovation while driving further efficiencies across the portfolio. Turning to Google Cloud. We are pleased with operating performance in the year. Full year revenues of $33 billion were up 26% versus prior year, ending with strong Q4 performance. The Cloud team is intensely focused on bringing the benefits of Gemini, our industry-leading AI technology, to enterprises and governments globally, and we are gratified with the level of engagement. The strong demand we are seeing for our vertically integrated AI portfolio is creating new opportunities for Google Cloud across every product area. In terms of profitability, the improvement in 2023 reflects sustained focus across the team with the intent to maintain healthy profitability while we continue to invest to support long-term growth. Turning to margins and expenses. As we have repeatedly stressed, we remain committed to our framework to durably reengineer our cost base as we invest to support our growth priorities. Key contributors to moderating our expense growth include: first, product and process prioritization to ensure we have the right resources behind our most important opportunities and to reallocate resources where we can; second, organizational efficiency and structure. We're focused on removing layers to simplify execution and drive velocity. Both product prioritization and the organization design efforts result in a slower pace of hiring, as you can see with our head count down year-on-year, reflecting the reductions we announced in the first quarter of 2023 and a much slower pace of hiring. We will continue to invest in top technical and engineering talent. Finally, we continue to execute the other work streams to slow expense growth, including improving efficiency in our technical infrastructure, streamlining operations across Alphabet through the use of AI, increasing efficiency of our spend with suppliers and vendors through our central procurement organization and optimizing our real estate portfolio. With respect to CapEx, our reported CapEx in the fourth quarter was $11 billion, driven overwhelmingly by investment in our technical infrastructure with the largest component for servers followed by data centers. The step-up in CapEx in Q4 reflects our outlook for the extraordinary applications of AI to deliver for users, advertisers, developers, cloud enterprise customers and governments globally and the long-term growth opportunities that offers. In 2024, we expect investment in CapEx will be notably larger than in 2023. With regard to Other Bets, we've been working to sharpen our investment focus while capturing the upside given compelling technology breakthroughs across the portfolio. For example, last week, Alphabet's X announced that it would be moving to spin out more projects as independent companies through external capital, giving X the opportunity to bring more focus to the breakthrough technologies it is working on to address some of the world's most pressing challenges. Thank you. Sundar, Philipp and I will now take your questions.","evidence_gemma_new":"free cash flow","evidence_llama_3_3":"free cash flow","evidence_qwen_3_30b":"free cash flow","gemma_new_max":7900000000.0,"gemma_new_min":7900000000.0,"llama_3_3_max":7900000000.0,"llama_3_3_min":7900000000.0,"qwen_3_30b_max":7900000000.0,"qwen_3_30b_min":7900000000.0}
{"symbol":"GOOGL","year":2024,"quarter":1,"date":"2024-Q1","chunk_id":4,"sub_chunk_id":0,"centroid_label":"free cash flow","agreed_value":16800000000.0,"count":3,"chunk":"Ruth Porat: Thank you, Philipp. We are very pleased with our financial results for the first quarter driven, in particular, by strength in Search and Cloud as well as the ongoing efforts to durably reengineer our cost base. My comments will be on year-over-year comparisons for the first quarter unless I state otherwise. I will start with results at the Alphabet level, followed by segment results and conclude with our outlook. For the first quarter, our consolidated revenues were $80.5 billion, up 15% or up 16% in constant currency. Search remained the largest contributor to revenue growth. In terms of total expenses, the year-on-year comparisons reflect the impact of the restructuring charges we took in the first quarter of 2023 of $2.6 billion as well as the $716 million in employee severance and related charges in the first quarter of 2024. As you can see in our earnings release, these charges were allocated across the expense lines in other cost of revenues and OpEx based on associated head count. To help with year-on-year comparisons, we included a table in our earnings release to adjust other cost of revenues, operating expenses, operating income, and operating margin to exclude the impact of severance and related office space charges in the first quarter of 2023 versus 2024. In terms of expenses, total cost of revenues was $33.7 billion, up 10%. Other cost of revenues was $20.8 billion, up 10% on a reported basis, with the increase driven primarily by content acquisition costs associated with YouTube given the very strong revenue growth in both subscription offerings and ad-supported content. On an adjusted basis, other cost of revenues were up 13% year-on-year. Operating expenses were $21.4 billion, down 2% on a reported basis, primarily reflecting expense decreases in sales and marketing and G&A, offset by an increase in R&D. The largest single factor in the year-on-year decline in G&A expenses was lower charges related to legal matters. On an adjusted basis, operating expenses were up 5%, reflecting, first, in R&D, an increase in compensation expense, primarily for Google DeepMind and Cloud; and second, in sales and marketing, a slight increase year-on-year, reflecting increases in compensation expense primarily for Cloud sales. Operating income was $25.5 billion, up 46% on a reported basis, and our operating margin was 32%. On an adjusted basis, operating income was up 31%, and our operating margin was 33%. Net income was $23.7 billion and EPS was $1.89. We delivered free cash flow of $16.8 billion in the first quarter and $69.1 billion for the trailing 12 months. We ended the quarter with $108 billion in cash and marketable securities. Turning to segment results. Within Google Services, revenues were $70.4 billion, up 14%. Google Search and other advertising revenues of $46.2 billion in the quarter were up 14% led again by growth in retail. YouTube advertising revenues of $8.1 billion were up 21% driven by both direct response and brand advertising. Network advertising revenues of $7.4 billion were down 1%. Subscriptions, platforms and devices revenues were $8.7 billion, up 18%, primarily reflecting growth in YouTube subscription revenues. TAC was $12.9 billion, up 10%. Google Services operating income was $27.9 billion, up 28%. And the operating margin was 40%. Turning to the Google Cloud segment. Revenues were $9.6 billion for the quarter, up 28%, reflecting significant growth in GCP with an increasing contribution from AI and strong Google Workspace growth, primarily driven by increases in average revenue per seat. Google Cloud delivered operating income of $900 million and an operating margin of 9%. As to our Other Bets, for the first quarter, revenues were $495 million, benefiting from a milestone payment in one of the Other Bets. The operating loss was $1 billion. Turning to our outlook for the business. With respect to Google Services, first, within Advertising, we are very pleased with the momentum of our Ads businesses. Search had broad-based strength across verticals. In YouTube, we had acceleration in revenue growth driven by brand and direct response. Looking ahead, two points to call out: first, results in our advertising business in Q1 continued to reflect strength in spend from APAC-based retailers, a trend that began in the second quarter of 2023 and continued through Q1, which means we will begin lapping that impact in the second quarter; second, the YouTube acceleration in revenue growth in Q1 reflects, in part, lapping the negative year-on-year growth we experienced in the first quarter of 2023. Turning to subscriptions, platforms, and devices. We continue to deliver significant growth in our subscriptions business, which drives the majority of revenue growth in this line. The sequential quarterly decline in year-on-year revenue growth for the line in Q1 versus Q4 reflects, in part, the fact that we had only 1 week of Sunday Ticket subscription revenue in Q1 versus 14 weeks in Q4. Looking forward, we will anniversary last year's price increase in YouTube TV starting in May. With regard to platforms, we are pleased with the performance in Play driven by an increase in buyers. With respect to Google Cloud, performance in Q1 reflects strong demand for our GCP infrastructure and solutions as well as the contribution from our Workspace productivity tools. The growth we are seeing across Cloud is underpinned by the benefit AI provides for our customers. We continue to invest aggressively while remaining focused on profitable growth. As we look ahead, two points that will affect sequential year-on-year revenue growth comparisons across Alphabet: first, Q1 results reflect the benefit of leap year, which contributed slightly more than 1 point to our revenue growth rate at the consolidated level in the first quarter; second, at current spot rates, we expect a larger headwind from foreign exchange in Q2 versus Q1. Turning to margins. Our efforts to durably reengineer our cost base are reflected in a 400 basis point expansion of our Alphabet operating margin year-on-year, excluding the impact of restructuring and severance charges in both periods. You can also see the impact in the quarter-on-quarter decline in head count in Q1, which reflects both actions we have taken over the past few months and a much slower pace of hiring. As we have discussed previously, we are continuing to invest in top engineering and technical talent, particularly in Cloud, Google DeepMind and technical infrastructure. Looking ahead, we remain focused on our efforts to moderate the pace of expense growth in order to create capacity for the increases in depreciation and expenses associated with the higher levels of investment in our technical infrastructure. We believe these efforts will enable us to deliver full year 2024 Alphabet operating margin expansion relative to 2023. With respect to CapEx, our reported CapEx in the first quarter was $12 billion, once again driven overwhelmingly by investment in our technical infrastructure, with the largest component for servers followed by data centers. The significant year-on-year growth in CapEx in recent quarters reflects our confidence in the opportunities offered by AI across our business. Looking ahead, we expect quarterly CapEx throughout the year to be roughly at or above the Q1 level, keeping in mind that the timing of cash payments can cause variability in quarterly reported CapEx. With regard to Other Bets, we similarly have work streams underway to enhance overall returns. Finally, as I trust you saw in the press release, we are very pleased to be adding a quarterly dividend of $0.20 per share to our capital return program as well as a new $70 billion authorization in share repurchases. The core of our capital allocation framework remains the same, beginning with investing aggressively in our business as you have heard us talk about today. Given the extraordinary opportunities ahead, we view the introduction of the dividend as further strengthening our overall capital return program. Thank you. Sundar, Philipp, and I will now take your questions.","evidence_gemma_new":"free cash flow","evidence_llama_3_3":"Alphabet free cash flow first quarter","evidence_qwen_3_30b":"free cash flow first quarter","gemma_new_max":16800000000.0,"gemma_new_min":16800000000.0,"llama_3_3_max":16800000000.0,"llama_3_3_min":16800000000.0,"qwen_3_30b_max":16800000000.0,"qwen_3_30b_min":16800000000.0}
{"symbol":"GOOGL","year":2024,"quarter":2,"date":"2024-Q2","chunk_id":4,"sub_chunk_id":0,"centroid_label":"free cash flow","agreed_value":13500000000.0,"count":3,"chunk":"Ruth Porat : Thank you, Philipp, and thanks, Sundar, for those kind words. We had another strong quarter, driven in particular by performance in Search and Cloud, as well as the ongoing efforts to durably reengineer our cost base. My comments will be on year-over-year comparisons for the second quarter unless I state otherwise. I will start with results at the Alphabet level followed by segment results and conclude with our outlook. For the second quarter, our consolidated revenues were $84.7 billion, up 14% or up 15% in constant currency. Search remained the largest contributor to revenue growth. In terms of expenses, total cost of revenues was $35.5 billion, up 11%. Other cost of revenues was $22.1 billion, up 14%, with the increase driven primarily by content acquisition costs, followed by depreciation as well as the impact of the Canadian digital services tax, which was applied retroactively. Operating expenses were $21.8 billion up 5%, primarily reflecting an increase in R&D partially offset by a decline in G&A with sales and marketing essentially flat to the second quarter last year. The increase in R&D was driven primarily by compensation which was affected by lapping a reduction in valuation-based compensation liabilities in certain other bets in the second quarter last year followed by depreciation. The largest single factor in the year-on-year decline in G&A expenses was lower charges related to legal matters. Operating income was $27.4 billion, up 26% and our operating margin was 32%. Net income was $23.6 billion and EPS was $1.89. We delivered free cash flow of $13.5 billion in the second quarter and $60.8 billion for the trailing 12 months. As a reminder, last year, we had a timing benefit in the second and third quarters from a $10.5 billion deferred cash tax payment made in the fourth quarter, which depressed reported free cash flow growth this quarter, and we'll do so again next quarter. We ended the quarter with $101 billion in cash and marketable securities. Turning to segment results. Within Google Services, revenues were $73.9 billion, up 12%. Google Search and other advertising revenues of $48.5 billion in the quarter were up 14%, led again by growth in retail, followed by the financial services vertical. YouTube advertising revenues of $8.7 billion were up 13% driven by brand followed by direct response advertising. Network advertising revenues of $7.4 billion were down 5%. Subscription platforms and devices revenues were $9.3 billion up 14%, primarily reflecting growth in YouTube subscription revenues. TAC was $13.4 billion, up 7%. Google Services operating income was $29.7 billion up 27% and the operating margin was 40%. Turning to the Google Cloud segment. Revenues were $10.3 billion for the quarter, up 29%, reflecting first significant growth in GCP, which was above growth for cloud overall and includes an increasing contribution from AI. And second, strong Google Workspace growth, primarily driven by increases in average revenue per seat. Google Cloud delivered operating income of $1.2 billion and an operating margin of 11%. As to our Other Bets for the second quarter, revenues were $365 million and the operating loss was $1.1 billion. Turning to our outlook for the business. With respect to Google Services, First, within advertising. The strong performance of search was broad-based across verticals. In YouTube, we are pleased with the growth in the quarter. We had healthy watch time growth continued to close the monetization gap in Shorts and had continued momentum in Connected TV, with brand benefiting in part from an ongoing shift in budgets from linear television to digital. As we look forward to the third quarter, we will be lapping the increasing strength in advertising revenues in the second half of 2023, in part from APAC based retailers. Turning to subscriptions, platforms and devices. First, we continue to have significant growth in our subscriptions business which drives the majority of revenue growth in this line. However, there was a sequential decline in the year-on-year growth rate, as we anniversaried the impact of a price increase for YouTubeTV in the second quarter last year. The impact will persist through the balance of the year. Second, with regard to platforms. We are pleased with the performance in play driven by an increase in buyers. Finally, with respect to devices. The most important point as we look forward is that our Made by Google launches have been pulled forward into the third quarter from the fourth quarter last year benefiting revenues in Q3 this year. Turning to cloud, which continued to deliver very strong results. For the first time, Cloud crossed $10 billion in quarterly revenues and $1 billion in quarterly operating profit. As Sundar noted year-to-date, our AI infrastructure and generative AI solutions for cloud customers have already generated billions in revenues and are being used by more than 2 million developers. We're particularly encouraged that the majority of our top 100 customers are already using our generative AI solutions. We continue to invest aggressively in the business. Turning to margins. The margin expansion in Q2 versus last year reflects our ongoing efforts to durably reengineer our cost base, as well as revenue strength. Our leadership team remains focused on our efforts to moderate the pace of expense growth in order to create capacity for the increases in depreciation and expenses associated with the higher levels of investment in our technical infrastructure. Once again headcount declined quarter-on-quarter, which reflects both actions we have taken in the first half of the year and a much slower pace of hiring. Looking ahead, we expect a slight increase in headcount in the third quarter, as we bring on new graduates. As we have discussed previously, we\u2019re continuing to invest in top engineering and technical talent, particularly in cloud and technical infrastructure. Looking forward, we continue to expect to deliver full-year 2024 Alphabet operating margin expansion relative to 2023. However, in the third quarter operating margins will reflect the impact of both the increases in depreciation and expenses associated with the higher levels of investment in our technical infrastructure, as well as the increase in cost of revenues due to the pull-forward of hardware launches into Q3. With respect to CapEx, our reported CapEx in the second quarter was $13 billion, once again driven overwhelmingly by investment in our technical infrastructure with the largest component for servers followed by data centers. Looking ahead, we continue to expect quarterly CapEx throughout the year to be roughly at or above the Q1 CapEx of $12 billion keeping in mind that the timing of cash payments can cause variability in quarterly reported CapEx. With regard to other bets, we continue to focus on improving overall efficiencies, as we invest for long-term returns. Waymo is an important example of this, with its technical leadership coupled with progress on operational performance. As you will see in the 10-Q, we have chosen to commit to a new multi-year investment of $5 billion. This new round of funding, which is consistent with recent annual investment levels will enable Waymo to continue to build the world's leading autonomous driving technology company. To close, this is my 56th and last earnings call, 37 of them at Alphabet. So I have a few closing thoughts of gratitude. I've been so proud to be at Google and Alphabet as CFO and to work with some of the smartest people in the world every day. I think, we have accomplished a lot in the last nine plus years, and I am confident that progress will continue. Of course, I'm not going far and I'm honored to have my new role, which I've been slowly working my way into during the past 11 months and I look forward to continuing to work with Sundar, and our great team. Being CFO of one of the most important companies in the world has been the opportunity and responsibility of a lifetime. Google's Mission of advancing technology and bringing information to people throughout the world is as relevant today as it was when I worked on its IPO. Technology has been a catalyst for economic growth throughout human history. The people on this call know that if a technological advancement is not the focus of every business and government, they will be left behind. Underpinning this is the need for sound and responsible investment. That has never been more important than today and certainly, that is Google and Alphabet's focus. I want to end by thanking Googlers around the world for the innovation and commitment that has enabled us to deliver such extraordinary products and services globally. I also want to thank our investors and analysts for your long-term support and your feedback. Thank you. Sundar, Philipp and I will now take your questions.","evidence_gemma_new":"free cash flow","evidence_llama_3_3":"free cash flow second quarter","evidence_qwen_3_30b":"free cash flow second quarter","gemma_new_max":13500000000.0,"gemma_new_min":13500000000.0,"llama_3_3_max":13500000000.0,"llama_3_3_min":13500000000.0,"qwen_3_30b_max":13500000000.0,"qwen_3_30b_min":13500000000.0}
{"symbol":"GOOGL","year":2024,"quarter":3,"date":"2024-Q3","chunk_id":4,"sub_chunk_id":0,"centroid_label":"free cash flow","agreed_value":17600000000.0,"count":2,"chunk":"Anat Ashkenazi: Thank you, Philipp. And thanks, Sundar, for the words of welcome. My comments will focus on year-over-year comparisons for the third quarter, unless I state otherwise. I will start with the results at the Alphabet level and will then cover our segment results. I'll end with high-level commentary on investment at the Alphabet level. We had another strong quarter in Q3 with robust momentum across the business. Consolidated revenue increased by 15% or 16% in constant currency. Search remained the largest contributor to revenue growth, followed by a robust 35% growth in cloud. Total cost of revenue was $36.5 billion, up 10%. Tech was $13.7 billion, up 9%. We continue to see a revenue mix shift with Google Search growing at double-digit levels, while network revenue, which have a much higher TAC rate declined. Other cost of revenue was $22.8 billion, up 11%, with the increase primarily driven by content acquisition costs, primarily for YouTube, an increase in depreciation associated with higher level of investment in our technical infrastructure and higher hardware costs associated with the pull forward of our Made by Google launches from the fourth to the third quarter. Total operating expenses increased 5% to $23.3 billion. The increase was primarily driven by facilities-related charges as results of actions were taken to further optimize our office space footprint globally, followed by depreciation, partially offset by year-on-year decline in charges for legal and other matters. R&D investments increased by 11%, primarily driven by increases in compensation and depreciation expenses. Sales and marketing expenses increased 5%, primarily reflecting investment in advertising and promotional efforts related to the Made by Google launches, as well as for AI and Gemini. G&A expenses declined by 10%, primarily due to lower charges for legal and other matters. Operating income increased 34% to $28.5 billion and operating margin increased to 32%. Net income increased 34% to $26.3 billion and earnings per share increased 37% to $2.12. We're pleased with the progress we're making in reengineering our cost structure, which is reflected in our operating margin expansion this quarter, while also continuing to invest in the business to bring innovation to consumers, creators and enterprises. We delivered free cash flow of $17.6 billion for the third quarter and $55.8 billion for the trailing 12 months. Year-on-year free cash flow was negatively impacted by the following items. In 2023, we deferred cash tax payments from the second and third quarter to the fourth quarter. And in Q3 2024, we made a $3 billion cash payment related to the 2017 EC shopping fine. We ended the quarter with $93 billion in cash and marketable securities. Now turning to segment results. Google Services revenue increased 13% to $76.5 billion. Google Search and other advertising revenue increased by 12% to $49.4 billion. The robust performance of search was broad-based across verticals, led by the financial services vertical due to strength in insurance followed by retail. YouTube advertising revenue increased 12% to $8.9 billion, driven by brand, followed by direct response advertising. As Philipp mentioned, we're seeing strong momentum in YouTube, including robust growth in watch time across the platform and are excited about the new features and products we're bringing to creators. Network advertising revenue of $7.5 billion were down 2%. In the third quarter, the year-on-year growth in all our advertising revenue lines was impacted by the increase in strength in advertising revenue in Q3 of last year, in part from APAC-based retailers. Subscription platforms and devices revenue increased 28% to $10.7 billion, reflecting growth in subscription revenues, as well as the launch of our Made by Google devices in the third quarter. We continue to have significant growth in our subscription products, driven primarily by YouTube TV and YouTube Music Premium, as well as Google One, primarily due to increases in the number of paid subscribers. With regards to platforms, we're pleased with the performance in play, primarily driven by an increase in buyers. Google Service operating income increased by 29% to $30.9 billion, and operating margin was 40%. Turning to the Google Cloud segment, which continued to deliver very strong results this quarter. Revenue increased by 35% to $11.4 billion in the third quarter, reflecting accelerated growth in GCP across AI infrastructure, generative AI solutions and core GCP products. Once again, GCP grew at a rate that was higher than cloud overall. We also saw strong Google Workspace growth, primarily driven by increases in average revenue per seat. As you just heard from Sundar, the robust innovation and expanded AI offerings within our cloud business are allowing existing and new customers to realize measurable business benefits, including reduced cost, greater customer engagement, faster response time and better revenue conversion. Google Cloud operating income increased to $1.9 billion and operating margin increased to 17%. The operating margin expansion was driven by strong revenue performance across cloud AI products, core GCP and Workspace, as well as ongoing efficiency initiatives. As to our Other Bets, for the third quarter revenue were $388 million and operating loss was $1.1 billion. I'll highlight just a couple of accomplishments in the quarter for Waymo and Wing. We're excited about the progress we're seeing in Waymo, as Sundar mentioned, and the increase in the number of paid rides. We're planning to continue to expand our geographic coverage and reach more customers in existing markets and new markets. Wing, our drone delivery company, recently passed the 1-year anniversary of scaling its partnership with Walmart in the Dallas-Fort Worth area, now operating in 11 stores and serving 26 different cities and towns. Turning to Alphabet level activities. The largest component of this line is our investment in AI research and development activities, which support all of Alphabet. There were two notable items that impacted the operating loss in Alphabet level activities. First, a $607 million charge related to decisions we've made to further optimize our physical footprint and office space globally; and second, our ongoing investments in AI R&D, including the full quarter effect of the organizational changes we've made in May to move some additional AI teams from Google Services to Google DeepMind. With respect to CapEx, our reported CapEx in the third quarter was $13 billion, reflecting investment in our technical infrastructure with the largest component being investment in servers, followed by data centers and networking equipment. Looking ahead, we expect quarterly CapEx in the fourth quarter to be at similar levels to Q3, keeping in mind that the timing of cash payments can cause variability in quarterly reported CapEx. Our expansion of data center capacity is expected to bring economic benefits to countries and communities where we are investing. In the third quarter alone, we made announcements of over $7 billion in planned data center investments with nearly $6 billion of that in the U.S. In Q3, we also returned value to shareholders in the form of $15.3 billion in share repurchases and $2.5 billion in dividend payments. Overall, we returned a total of nearly $70 billion over the trailing 12 months to shareholders. As we look forward, we're working to balance our investments in AI and other growth areas with the cost discipline needed to fund those activities. As we think about the remainder of 2024, there are a couple of dynamics to consider. In terms of revenue, year-on-year growth in advertising revenue will continue to be impacted by the increasing strength in advertising revenue in the second half of 2023, in part from APAC-based retailers. And there will be a headwind to year-over-year growth in subscription platforms and devices revenue in the fourth quarter due to the pull forward of our Made by Google launches into the third quarter this year. In terms of expenses, we'll continue to see increases in depreciation and expenses associated with higher level of investment in our technical infrastructure, partially offset by a slight benefit from the cost revenue associated with our devices due to the pull forward of hardware launches into Q3. Now before going into Q&A, as the new CFO, I would like to share a few thoughts on how I'm approaching and thinking through growth, cost structure and capital allocation and expect to hear more from me on these topics in the coming quarters. As I look at the business, I see opportunities for further growth propelled by AI and the underlying momentum across the business. You heard about some of these on the call today. I also believe that we are well positioned to deliver meaningful innovation, which will translate to revenue given our strength in the core pillars that are required to succeed in AI at scale. Realizing those opportunities and great innovation in AI requires global reach, which we have through our products and platforms, as well as continued meaningful capital investment. And while we have a strong balance sheet to be able to support these investments, we will be looking for efficiencies so that we can fund innovation in priority areas. Sundar, Ruth and our leadership team started important work to reengineer our cost structure including efforts such as optimizing our headcount growth, our physical footprint, improving the efficiencies of our technical infrastructure and streamlining operations across the company through the use of AI. I plan to build on these efforts, but also evaluate where we might be able to accelerate work and where we might need to pivot to free up capital for more attractive opportunities. Thank you. Sundar, Philipp and I will now take your questions.","evidence_gemma_new":"free cash flow","evidence_llama_3_3":null,"evidence_qwen_3_30b":"free cash flow third quarter","gemma_new_max":17600000000.0,"gemma_new_min":17600000000.0,"llama_3_3_max":null,"llama_3_3_min":null,"qwen_3_30b_max":17600000000.0,"qwen_3_30b_min":17600000000.0}
{"symbol":"GOOGL","year":2024,"quarter":4,"date":"2024-Q4","chunk_id":4,"sub_chunk_id":0,"centroid_label":"free cash flow","agreed_value":24800000000.0,"count":2,"chunk":"Anat Ashkenazi: Thank you, Philipp. We're pleased with the continued momentum we're seeing across the business as Alphabet revenue for 2024 reached $350 billion, up 14% on a reported basis and 15% in constant currency versus 2023. My comments will focus on year-over-year comparisons for the fourth quarter, unless I state otherwise. I will start with the results at the Alphabet level and we'll then cover our segment results. I'll end with some commentary and expectations over the first quarter and full year 2025. We had another strong quarter in Q4 with robust momentum across the business. Consolidated revenue of $96.5 billion, increased by 12% in both reported and constant currency. Search remained the largest contributor to revenue growth, followed by Cloud. Total cost of revenue was $40.6 billion, up 8%. Tech was $14.8 billion, up 6%. We continue to see a revenue mix shift with Google Search growing at double-digit levels, while network revenues, which have a much higher tech rate, declined. Other cost of revenue was $25.8 billion, up 9%, with the increase primarily driven by content acquisitions costs, primarily for YouTube, followed by depreciation, due to increasing investments in our technical infrastructure. Growth in content acquisition and depreciation were partially offset by our year-over-year decline in hardware costs due to the shift in timing of our made-by-Google launches to the third quarter 2024 compared to the fourth quarter of 2023. In terms of total expenses, the year-over-year comparisons reflect $1.2 billion in exit charges that we took in the fourth quarter of 2023 in connection with actions to optimize our global office space. As previously disclosed, those charges were allocated across the expense lines in other costs of revenue and OpEx based on associated headcount. Total operating expenses decreased 1% to $24.9 billion. R&D investments increased by 8%, primarily driven by increase in compensation and depreciation expenses, partially offset by the impact of charges for office [ph] space optimization in the fourth quarter of 2023. Sales and marketing expenses decreased 5%, primarily reflecting the optimization charges last year, as well as declines in compensation and in ads and promotion expenses due to the timing shift of the Pixel launch from Q4 to Q3. G&A expenses declined by 15%, reflecting a shift of timing in our charitable contributions, as well as the optimization charges last year. Operating income increased 31%, the score [ph] to $31 billion, and operating margin increased to 32%, representing 4.6 points of margin expansion. Net income increased 28% to $26.5 billion, and earnings per share increased 31% to $2.15. We delivered free cash flow of $24.8 billion in the fourth quarter and $72.8 billion for the full year 2024. We ended the quarter with $96 billion in cash and marketable securities. Turning to segment results. Google Service revenues increased 10% to $84.1 billion, reflecting the strong momentum across Google Search and YouTube ads. Google Search and other advertising revenues increased by 13% to $54 billion. The robust performance of Search was once again broad-based across verticals, led by the financial service vertical due to strength in insurance, followed by retail. YouTube advertising revenue increased 14% to $10.5 billion, driven by brand, followed by direct response advertising. Network advertising revenue of $8 billion, were down 4%. In the fourth quarter, the year-over-year comparison in all of our advertising revenue lines was impacted by the increase in strength in advertising revenue in Q4 2023, in part from APAC-based retailers. Subscription platforms and device revenues increase 8% to $11.6 billion, primarily reflecting growth in subscription revenues, partially offset by the shift in timing of the launch of our made by Google devices to the third quarter, compared with the fourth quarter in 2023. We continue to have significant growth in our subscription products, primarily due to increase in the number of paid subscribers across YouTube TV, YouTube Music Premium, and Google One. With regards to Platform, we saw a slight increase in the growth rate in Play, primarily due to a strong increase in the number of buyers. Google's service operating income increased 23% to $32.8 billion, and operating margin increased from 35% to 39%, representing a meaningful margin expansion. Turning to the Google Cloud segment, which continued to deliver very strong results this quarter. Revenue increased by 30% to $12 billion in the fourth quarter, reflecting growth in GCP across core GCP products, AI infrastructure, and generative AI solutions. Once again, GCP grew at a rate that was much higher than cloud overall. Healthy Google Workspace growth was primarily driven by increase in average revenue per seat. Google Cloud operating income increased to $2.1 billion, and operating margin increased from 9.4% to 17.5%. We're pleased with the work the cloud team is doing to deliver valuable solutions to the customer and generate revenue growth, as well as its continued focus on driving efficiencies across the cloud business. As for Other Bets, for the fourth quarter, revenue were $400 million, and the operating loss was $1.2 billion. The year-over-year decline in revenue and increase in operating loss primarily reflect the milestone payment in the fourth quarter of 2023 for one of the Other Bets. Turning to Alphabet level activities, the largest component of this line is our investments in AI research and development activities which support all of Alphabet. As a reminder, Alphabet level activities have included nearly all severance charges from reductions in workforce and office space charges. In the fourth quarter of 2024, the biggest factor in year-over-year comparison is the $1.2 billion in charges in the fourth quarter of 2023, almost entirely in connection with office space optimization. With respect to CapEx, our reported CapEx in the fourth quarter was $14 billion, primarily reflecting investments in our technical infrastructure, with the largest component being investment in servers, followed by data centers, to support the growth of our business across Google Services, Google Cloud, and Google DeepMind. In Q4, we returned value to shareholders in the form of $15 billion in share purchases and $2.4 billion in dividend payments. Overall, we returned a total of nearly $70 billion to shareholders in 2024. Turning to 2025, I would like to provide some commentary on several factors that will impact our business performance in both the first quarter and the full year 2025. First in terms of revenue, I'll highlight two items that will have meaningful impact on Q1 revenue across the company. First in terms of revenues, I'll highlight two items that will have meaningful impact on Q1 revenues across the company. The first is the impact of foreign exchange rates. At the current spot rates, we expect a larger headwind to our revenues from the strengthening of the U.S dollar relative to key currencies in Q1 versus Q4 2024. Second is the impact of leap year. We expect a headwind from having one less day of revenue in Q1 2025 compared with leap year in the first quarter of 2024. As for our segments, Google Services, advertising revenue in 2025 will be impacted by lapping the strength we experience in the financial service vertical throughout 2024. And in Cloud, given the revenues are correlated with the timing of deployment of new capacity, we could see variability in cloud revenue growth rates depending on when new capacity comes online during 2025. Moving to investments, starting with our expectation for CapEx for the full year 2025. As we mentioned on the Q3 call, as we expand our AI efforts, we expect to increase our investments in capital expenditure for technical infrastructure, primarily for servers, followed by data centers and networking. We expect to invest approximately $75 billion in CapEx in 2025 with approximately $16 billion to $18 billion of debt in the first quarter. The expected total investment level may fluctuate from quarter-to-quarter, primarily due to timing of deliveries and construction schedules. In terms of expenses, first, the increase in our investment in CapEx over the past few years will increase pressure on the P&L, primarily in the form of higher depreciation. In 2024, we saw 28% year-over-year growth in depreciation as we put more technical infrastructure assets into service. Given the increase in CapEx investments over the past few years, we expect the growth rate and depreciation to accelerate in 2025. Second, we expect some headcount growth in 2025 in key investment areas such as AI and cloud. As you just heard from Sundar, we're delivering products and solutions to customer at a rapid pace, building, testing, and launching products faster than ever before. And as I mentioned on the Q3 call, we're doing that while also focusing on driving further efficiencies in how we operate the business. Before we take questions, I'd like to recap the financial results for the year. For the full year 2024, revenue grew by 14% or by $43 billion, reaching $350 billion. Google Services and Google Cloud each continue to see double-digit revenue growth coupled with margin extension. YouTube and cloud revenues combined, ended the year at $110 billion annual run rate. And in 2024, we generate total income of $112 billion, an increase of 33% from 2023. We're pleased with the momentum we're seeing in AI innovation and monetization. We've been using AI to improve the performance of our ads business for well over a decade, and Cloud is generating billions in annual revenue from AI infrastructure and generative AI solutions. We're also excited about the potential to bring new experiences to users that will provide additional opportunities for monetization. And I look forward to sharing more in our progress throughout the year. Sundar, Philipp, and I will now take your questions.","evidence_gemma_new":null,"evidence_llama_3_3":"free cash flow fourth quarter","evidence_qwen_3_30b":"free cash flow Q4","gemma_new_max":null,"gemma_new_min":null,"llama_3_3_max":24800000000.0,"llama_3_3_min":24800000000.0,"qwen_3_30b_max":24800000000.0,"qwen_3_30b_min":24800000000.0}
{"symbol":"GOOGL","year":2023,"quarter":1,"date":"2023-Q1","chunk_id":5,"sub_chunk_id":0,"centroid_label":"google service google s service operating income","agreed_value":21700000000.0,"count":3,"chunk":"Ruth Porat: Thank you, Philipp. Our financial results for the first quarter reflect continued healthy fundamental growth in Search and momentum in Cloud. As I go through the discussion today, I will reference some changes to our reporting and disclosures that are covered more fully in the 8-K we filed last week. I will conclude with our outlook. For the first quarter, our consolidated revenues were $69.8 billion, up 3% or up 6% in constant currency. Search remained the largest contributor to revenue growth on a constant currency basis. In terms of expenses and profitability, year-on-year comparisons are impacted by 3 factors: first, the $2.6 billion in charges we took in the first quarter related to workforce and office space reductions. We provided a table in our earnings release that shows the impact of those charges on cost of revenues and operating expenses. Second, the adjustment we made to the estimated useful lives of servers and certain network equipment at the beginning of 2023. As you can see in our earnings release, the effect for the first quarter was a reduction in depreciation expense of $988 million. Third, the shift in timing of our annual employee stock-based compensation awards from January to March delays the step-up in SBC from Q1 to Q2. This shift in timing does not affect the total amount of SBC over the full year 2023. Total cost of revenues was $30.6 billion, up 3%, driven by other cost of revenues of $18.9 billion, which was up 7%, the biggest factor of which was compensation costs associated with data centers and other operations and followed by content acquisition costs. Operating expenses were $21.8 billion, up 19%, with a significant impact from the charges related to workforce and office space reductions. Operating income was $17.4 billion, down 13%, and our operating margin was 25%. Net income was $15.1 billion. We delivered free cash flow of $17.2 billion in the first quarter and $62 billion for the trailing 12 months. We ended the quarter with $115 billion in cash and marketable securities. Turning to our segment results. These were affected by 2 additional changes outlined in our 8-K filing. First, reflecting the increasing collaboration between DeepMind and Google Services, Google Cloud, and Other Bets, as of Q1, DeepMind is reported as part of Alphabet's unallocated corporate costs. And second, beginning in the first quarter, we updated our cost allocation methodologies to provide our business leaders with increased transparency for decision-making. In our filing, we provided a recast of prior period results for the segment for these 2 changes. The highlights of the year-on-year performance of our segments that I will review reflect these recast results. Starting with Google Services. Revenues were $62 billion, up 1%. Google Search and other advertising revenues of $40.4 billion in the quarter were up 2%. YouTube advertising revenues of $6.7 billion were down 3%. Network advertising revenues of $7.5 billion were down 8%. Other revenues were $7.4 billion, up 9%, reflecting primarily ongoing significant subscriber growth in YouTube TV and YouTube Music Premium. TAC was $11.7 billion, down 2%, primarily reflecting a mix shift between Search and Network. Google Services operating income was $21.7 billion, down 1%, and the operating margin was 35%. Turning to the Google Cloud segment. Revenues were $7.5 billion for the quarter, up 28%. Growth in GCP remained strong across geographies, industries and products. Google Workspace's strong results were driven by increases in both seats and average revenue per seat. Google Cloud had operating income of $191 million, and the operating margin was 2.6%. As to our Other Bets, for the first quarter, revenues were $288 million, and the operating loss was $1.2 billion. Turning to our outlook for the business. In terms of the operating environment, our results in the first quarter reflected ongoing headwinds due to a challenging economic environment, and the outlook remains uncertain. Foreign exchange headwinds have moderated, and we expect less of a foreign exchange headwind in the second quarter based on current spot rates. With respect to Google Services, within advertising, Q1 results reflect the resilience of Search with its unique ability to surface demand and deliver measurable ROI. Excluding the impact of foreign exchange, the revenue growth of Search was similar to last quarter. In YouTube, we saw signs of stabilization in ad spend on a sequential basis. We continue to prioritize growth in Shorts engagement where we are encouraged by progress in monetization. As to other revenues, in YouTube subscriptions, we are pleased with the significant ongoing subscriber growth in both YouTube Music Premium and YouTube TV. In Play, revenues were down year-on-year, primarily due to the continued impact of foreign exchange in APAC, although results have improved as we lapped the impact from our introduction of fee reductions last year. Turning to Google Cloud. Our investments in product innovation, our go-to-market organization and our partner ecosystem delivered strong results as customers across industries and geographies increasingly rely on Google Cloud to digitally transform their businesses. That being said, in Q1, we continued to see slower growth of consumption as customers optimized GCP costs, reflecting the macro backdrop which remains uncertain. In terms of operating performance, we remain focused on driving long-term profitable growth in Cloud while continuing to invest given the substantial opportunity. Moving to Other Bets. In the first quarter, we similarly worked to refine strategies and prioritize efforts across the portfolio, including reductions to head count. I will now walk you through an update on our efforts to reengineer our cost base, slowing the pace of operating expense growth while creating capacity for key investment areas, particularly in support of AI across the company. First, as discussed on the fourth quarter call, we have efforts underway in 3 broad categories: number one, using AI and automation to improve productivity across Alphabet for operational tasks as well as the efficiency of our technical infrastructure; number two, managing our spend with suppliers and vendors more effectively; and number three, continuing to optimize how and where we work. As we've noted previously, all 3 work streams are ramping up this year, and we plan to build on these efforts in 2024 and in subsequent years. Second, with respect to head count growth. The reported number of employees at the end of the first quarter includes almost all of the employees impacted by the workforce reduction we announced in January. We expect most of the impacted individuals will no longer be reflected in our head count by the end of the second quarter. In terms of the outlook for head count for the year, as we shared last quarter, we are meaningfully slowing the pace of hiring in 2023 while still investing in priority areas, particularly for top engineering and technical talent. In terms of our investments in AI, we are excited about the creation of Google DeepMind, combining the Brain Team from Google Research with DeepMind, with the goal to accelerate innovation and impact. Beginning in the second quarter of 2023, the costs associated with teams and activities transferred from Google Research will move from Google Services to Google DeepMind within Alphabet's unallocated corporate costs. Finally, as it relates to CapEx, for 2023, we now expect total CapEx to be modestly higher than in 2022. As discussed last quarter, CapEx this year will include a meaningful increase in technical infrastructure versus a decline in office facilities. We expect the pace of investment in both data center construction and servers to step up in the second quarter and continue to increase throughout the year. Thank you. Sundar, Philipp and I will now take your questions.","evidence_gemma_new":"Google Services operating income","evidence_llama_3_3":"Google Services operating income first quarter","evidence_qwen_3_30b":"Google Services operating income first quarter","gemma_new_max":21700000000.0,"gemma_new_min":21700000000.0,"llama_3_3_max":21700000000.0,"llama_3_3_min":21700000000.0,"qwen_3_30b_max":21700000000.0,"qwen_3_30b_min":21700000000.0}
{"symbol":"GOOGL","year":2023,"quarter":1,"date":"2023-Q1","chunk_id":5,"sub_chunk_id":0,"centroid_label":"google service google s service operating income","agreed_value":191000000.0,"count":2,"chunk":"Ruth Porat: Thank you, Philipp. Our financial results for the first quarter reflect continued healthy fundamental growth in Search and momentum in Cloud. As I go through the discussion today, I will reference some changes to our reporting and disclosures that are covered more fully in the 8-K we filed last week. I will conclude with our outlook. For the first quarter, our consolidated revenues were $69.8 billion, up 3% or up 6% in constant currency. Search remained the largest contributor to revenue growth on a constant currency basis. In terms of expenses and profitability, year-on-year comparisons are impacted by 3 factors: first, the $2.6 billion in charges we took in the first quarter related to workforce and office space reductions. We provided a table in our earnings release that shows the impact of those charges on cost of revenues and operating expenses. Second, the adjustment we made to the estimated useful lives of servers and certain network equipment at the beginning of 2023. As you can see in our earnings release, the effect for the first quarter was a reduction in depreciation expense of $988 million. Third, the shift in timing of our annual employee stock-based compensation awards from January to March delays the step-up in SBC from Q1 to Q2. This shift in timing does not affect the total amount of SBC over the full year 2023. Total cost of revenues was $30.6 billion, up 3%, driven by other cost of revenues of $18.9 billion, which was up 7%, the biggest factor of which was compensation costs associated with data centers and other operations and followed by content acquisition costs. Operating expenses were $21.8 billion, up 19%, with a significant impact from the charges related to workforce and office space reductions. Operating income was $17.4 billion, down 13%, and our operating margin was 25%. Net income was $15.1 billion. We delivered free cash flow of $17.2 billion in the first quarter and $62 billion for the trailing 12 months. We ended the quarter with $115 billion in cash and marketable securities. Turning to our segment results. These were affected by 2 additional changes outlined in our 8-K filing. First, reflecting the increasing collaboration between DeepMind and Google Services, Google Cloud, and Other Bets, as of Q1, DeepMind is reported as part of Alphabet's unallocated corporate costs. And second, beginning in the first quarter, we updated our cost allocation methodologies to provide our business leaders with increased transparency for decision-making. In our filing, we provided a recast of prior period results for the segment for these 2 changes. The highlights of the year-on-year performance of our segments that I will review reflect these recast results. Starting with Google Services. Revenues were $62 billion, up 1%. Google Search and other advertising revenues of $40.4 billion in the quarter were up 2%. YouTube advertising revenues of $6.7 billion were down 3%. Network advertising revenues of $7.5 billion were down 8%. Other revenues were $7.4 billion, up 9%, reflecting primarily ongoing significant subscriber growth in YouTube TV and YouTube Music Premium. TAC was $11.7 billion, down 2%, primarily reflecting a mix shift between Search and Network. Google Services operating income was $21.7 billion, down 1%, and the operating margin was 35%. Turning to the Google Cloud segment. Revenues were $7.5 billion for the quarter, up 28%. Growth in GCP remained strong across geographies, industries and products. Google Workspace's strong results were driven by increases in both seats and average revenue per seat. Google Cloud had operating income of $191 million, and the operating margin was 2.6%. As to our Other Bets, for the first quarter, revenues were $288 million, and the operating loss was $1.2 billion. Turning to our outlook for the business. In terms of the operating environment, our results in the first quarter reflected ongoing headwinds due to a challenging economic environment, and the outlook remains uncertain. Foreign exchange headwinds have moderated, and we expect less of a foreign exchange headwind in the second quarter based on current spot rates. With respect to Google Services, within advertising, Q1 results reflect the resilience of Search with its unique ability to surface demand and deliver measurable ROI. Excluding the impact of foreign exchange, the revenue growth of Search was similar to last quarter. In YouTube, we saw signs of stabilization in ad spend on a sequential basis. We continue to prioritize growth in Shorts engagement where we are encouraged by progress in monetization. As to other revenues, in YouTube subscriptions, we are pleased with the significant ongoing subscriber growth in both YouTube Music Premium and YouTube TV. In Play, revenues were down year-on-year, primarily due to the continued impact of foreign exchange in APAC, although results have improved as we lapped the impact from our introduction of fee reductions last year. Turning to Google Cloud. Our investments in product innovation, our go-to-market organization and our partner ecosystem delivered strong results as customers across industries and geographies increasingly rely on Google Cloud to digitally transform their businesses. That being said, in Q1, we continued to see slower growth of consumption as customers optimized GCP costs, reflecting the macro backdrop which remains uncertain. In terms of operating performance, we remain focused on driving long-term profitable growth in Cloud while continuing to invest given the substantial opportunity. Moving to Other Bets. In the first quarter, we similarly worked to refine strategies and prioritize efforts across the portfolio, including reductions to head count. I will now walk you through an update on our efforts to reengineer our cost base, slowing the pace of operating expense growth while creating capacity for key investment areas, particularly in support of AI across the company. First, as discussed on the fourth quarter call, we have efforts underway in 3 broad categories: number one, using AI and automation to improve productivity across Alphabet for operational tasks as well as the efficiency of our technical infrastructure; number two, managing our spend with suppliers and vendors more effectively; and number three, continuing to optimize how and where we work. As we've noted previously, all 3 work streams are ramping up this year, and we plan to build on these efforts in 2024 and in subsequent years. Second, with respect to head count growth. The reported number of employees at the end of the first quarter includes almost all of the employees impacted by the workforce reduction we announced in January. We expect most of the impacted individuals will no longer be reflected in our head count by the end of the second quarter. In terms of the outlook for head count for the year, as we shared last quarter, we are meaningfully slowing the pace of hiring in 2023 while still investing in priority areas, particularly for top engineering and technical talent. In terms of our investments in AI, we are excited about the creation of Google DeepMind, combining the Brain Team from Google Research with DeepMind, with the goal to accelerate innovation and impact. Beginning in the second quarter of 2023, the costs associated with teams and activities transferred from Google Research will move from Google Services to Google DeepMind within Alphabet's unallocated corporate costs. Finally, as it relates to CapEx, for 2023, we now expect total CapEx to be modestly higher than in 2022. As discussed last quarter, CapEx this year will include a meaningful increase in technical infrastructure versus a decline in office facilities. We expect the pace of investment in both data center construction and servers to step up in the second quarter and continue to increase throughout the year. Thank you. Sundar, Philipp and I will now take your questions.","evidence_gemma_new":null,"evidence_llama_3_3":"Google Cloud operating income first quarter","evidence_qwen_3_30b":"Google Cloud had operating income first quarter","gemma_new_max":null,"gemma_new_min":null,"llama_3_3_max":191000000.0,"llama_3_3_min":191000000.0,"qwen_3_30b_max":191000000.0,"qwen_3_30b_min":191000000.0}
{"symbol":"GOOGL","year":2023,"quarter":2,"date":"2023-Q2","chunk_id":4,"sub_chunk_id":0,"centroid_label":"google service google s service operating income","agreed_value":23500000000.0,"count":2,"chunk":"Ruth Porat: Thank you, Philipp. Before I go into the results, first, Sundar, thank you very much for the opportunity. I'm very excited about the new role, and I look forward to it. So turning to the results. We're very pleased with our financial results for the second quarter, which reflect an acceleration of growth in Search and momentum in Cloud. My comments will be on year-over-year comparisons for the second quarter unless I state otherwise. I will start with results at the Alphabet level followed by segment results and conclude with our outlook. For the second quarter, our consolidated revenues were $74.6 billion, up 7% or up 9% in constant currency. Search remained the largest contributor to revenue growth. Total cost of revenues was $31.9 billion, up 6%, driven by other cost of revenues of $19.4 billion, which was up 8%. Growth here was driven by content acquisition costs, primarily for YouTube subscription offerings, followed by hardware costs associated with Pixel family launches in the second quarter. As noted in our earnings release, the overall increase in data center and other operations costs was partially offset by a reduction in depreciation expense due to the change in estimated useful lives we discussed last quarter. Operating expenses were $20.9 billion, up 4%. Operating income was $21.8 billion, up 12%, and our operating margin was 29%. I will cover our expense and margin performance in our outlook. Other income and expense was $65 million. Net income was $18.4 billion. We delivered free cash flow of $21.8 billion in the second quarter and $71 billion for the trailing 12 months, reflecting improved operating performance as well as the deferral of certain tax payments to the fourth quarter of 2023 as noted in our earnings release. We ended the quarter with $118 billion in cash and marketable securities. Turning to our segment results. Prior period results have been recast for 2 changes that we made as of the first quarter. First, DeepMind is now reported as part of Alphabet's unallocated corporate costs. Second, we updated our cost allocation methodologies. In the second quarter, we then combined the Brain team from Google Research with DeepMind to form Google DeepMind. Costs associated with the Brain team, which were previously included in Google Services, are now reported as part of Alphabet's unallocated corporate costs. We have not recast prior period results to reflect this additional change. Within Google Services, revenues were $66.3 billion, up 5%. Google Search and other advertising revenues of $42.6 billion in the quarter were up 5%, led by growth in retail. YouTube advertising revenues of $7.7 billion were up 4%, driven by brand advertising, followed by direct response reflecting further stabilization in spending by advertisers. Network advertising revenues of $7.9 billion were down 5%. Other revenues were $8.1 billion, up 24%, reflecting growth in YouTube non-advertising revenues, primarily from subscription growth in YouTube Music Premium and YouTube TV followed by growth in hardware revenues primarily driven by the launch of the Pixel 7a in the second quarter. Finally, Play returned to positive growth in the second quarter. TAC was $12.5 billion, up 3%. Google Services operating income was $23.5 billion, up 8%, and the operating margin was 35%. Turning to the Google Cloud segment. Revenues were $8 billion for the quarter, up 28%. GCP revenue growth remained strong across geographies, industries and products. That being said, we saw a continued moderation in the rate of consumption growth as consumers optimize their spend. Google Workspace strong revenue growth was driven by increases in both seats and average revenue per seat. Google Cloud had operating income of $395 million and the operating margin was 5%. As to our Other Bets, for the second quarter, revenues were $285 million, and the operating loss was $813 million. The decrease in operating loss was primarily driven by a reduction in valuation-based compensation liabilities related to certain Other Bets. Turning to our outlook for the business. With respect to Google Services, first, within advertising. We were pleased with the acceleration of Search advertising revenue growth in the second quarter. Our continued ability to generate sustained growth reflects our unparalleled engineering innovation that creates extraordinary experiences for users and capabilities for advertisers and delivered with the deep expertise of our go-to-market team. And in YouTube, we saw ongoing signs of stabilization in advertiser spending. We are prioritizing product focus on increasing quality consumption of video content with both Shorts and in the living room, which is translating into improved monetization. Second, within other revenues. In our YouTube subscription products, the sustained, strong growth in revenues reflects significant subscriber growth. You may have seen that last week, we increased subscription prices for YouTube Music and Premium, which underscores the value of the products. Strong year-on-year growth in hardware revenues was due, in large part, to a timing change given the Pixel 7a was launched in the second quarter, whereas the Pixel 6a launch occurred in the third quarter last year. Looking ahead, the launch timing change will be a headwind to hardware revenue growth in the third quarter. Play returned to positive growth in the second quarter, driven primarily by a solid increase in the number of buyers. Turning to Google Cloud. We are particularly excited about the customer interest in our AI-optimized infrastructure, our large language models, our AI platform services and our new generative AI offerings such as Duet AI for Google Workspace, although we are still clearly in the early days. At the same time, we continue to experience headwinds in the second quarter for moderation in consumption growth as customers optimize their spend. We continue to invest aggressively while remaining focused on profitable growth. In terms of expenses and profitability, we remain very focused on durably reengineering our cost base. Most evident to date are the actions we have taken to reduce the pace of headcount growth, including the workforce reductions we announced in the first quarter and a slower pace of organic hiring, in part given our focus on reallocating talent from within to fuel our growth priorities. A quick comment on the sequential improvement in operating margins in the second quarter. There are 2 factors to note. First, the benefit from an acceleration in search advertising revenue growth in the second quarter. Second, the vast majority of the charges related to our workforce reduction and optimization of our global office space were taken in Q1. Finally, as it relates to CapEx, in Q2, the largest component was for servers, which included a meaningful increase in our investments in AI compute. The sequential step-up in the second quarter was lower than anticipated for 2 reasons. First, with respect to office facilities, we continue to moderate the pace of fit-outs and ground-up construction to reflect the slower expected pace of headcount growth. Second, there were delays in certain data center construction projects. We expect elevated levels of investment in our technical infrastructure increasing through the back half of 2023 and continuing to grow in 2024. The primary driver is to support the opportunities we see in AI across Alphabet, including investments in GPUs and proprietary TPUs as well as data center capacity. With all that said, we remain committed to durably reengineering our cost base in order to help create capacity for these investments in support of long-term, sustainable financial value. Thank you. Sundar, Philipp and I will now take your questions.","evidence_gemma_new":"Google Services operating income","evidence_llama_3_3":"Google Services operating income second quarter","evidence_qwen_3_30b":null,"gemma_new_max":23500000000.0,"gemma_new_min":23500000000.0,"llama_3_3_max":23500000000.0,"llama_3_3_min":23500000000.0,"qwen_3_30b_max":null,"qwen_3_30b_min":null}
{"symbol":"GOOGL","year":2023,"quarter":2,"date":"2023-Q2","chunk_id":4,"sub_chunk_id":0,"centroid_label":"google service google s service operating income","agreed_value":395000000.0,"count":3,"chunk":"Ruth Porat: Thank you, Philipp. Before I go into the results, first, Sundar, thank you very much for the opportunity. I'm very excited about the new role, and I look forward to it. So turning to the results. We're very pleased with our financial results for the second quarter, which reflect an acceleration of growth in Search and momentum in Cloud. My comments will be on year-over-year comparisons for the second quarter unless I state otherwise. I will start with results at the Alphabet level followed by segment results and conclude with our outlook. For the second quarter, our consolidated revenues were $74.6 billion, up 7% or up 9% in constant currency. Search remained the largest contributor to revenue growth. Total cost of revenues was $31.9 billion, up 6%, driven by other cost of revenues of $19.4 billion, which was up 8%. Growth here was driven by content acquisition costs, primarily for YouTube subscription offerings, followed by hardware costs associated with Pixel family launches in the second quarter. As noted in our earnings release, the overall increase in data center and other operations costs was partially offset by a reduction in depreciation expense due to the change in estimated useful lives we discussed last quarter. Operating expenses were $20.9 billion, up 4%. Operating income was $21.8 billion, up 12%, and our operating margin was 29%. I will cover our expense and margin performance in our outlook. Other income and expense was $65 million. Net income was $18.4 billion. We delivered free cash flow of $21.8 billion in the second quarter and $71 billion for the trailing 12 months, reflecting improved operating performance as well as the deferral of certain tax payments to the fourth quarter of 2023 as noted in our earnings release. We ended the quarter with $118 billion in cash and marketable securities. Turning to our segment results. Prior period results have been recast for 2 changes that we made as of the first quarter. First, DeepMind is now reported as part of Alphabet's unallocated corporate costs. Second, we updated our cost allocation methodologies. In the second quarter, we then combined the Brain team from Google Research with DeepMind to form Google DeepMind. Costs associated with the Brain team, which were previously included in Google Services, are now reported as part of Alphabet's unallocated corporate costs. We have not recast prior period results to reflect this additional change. Within Google Services, revenues were $66.3 billion, up 5%. Google Search and other advertising revenues of $42.6 billion in the quarter were up 5%, led by growth in retail. YouTube advertising revenues of $7.7 billion were up 4%, driven by brand advertising, followed by direct response reflecting further stabilization in spending by advertisers. Network advertising revenues of $7.9 billion were down 5%. Other revenues were $8.1 billion, up 24%, reflecting growth in YouTube non-advertising revenues, primarily from subscription growth in YouTube Music Premium and YouTube TV followed by growth in hardware revenues primarily driven by the launch of the Pixel 7a in the second quarter. Finally, Play returned to positive growth in the second quarter. TAC was $12.5 billion, up 3%. Google Services operating income was $23.5 billion, up 8%, and the operating margin was 35%. Turning to the Google Cloud segment. Revenues were $8 billion for the quarter, up 28%. GCP revenue growth remained strong across geographies, industries and products. That being said, we saw a continued moderation in the rate of consumption growth as consumers optimize their spend. Google Workspace strong revenue growth was driven by increases in both seats and average revenue per seat. Google Cloud had operating income of $395 million and the operating margin was 5%. As to our Other Bets, for the second quarter, revenues were $285 million, and the operating loss was $813 million. The decrease in operating loss was primarily driven by a reduction in valuation-based compensation liabilities related to certain Other Bets. Turning to our outlook for the business. With respect to Google Services, first, within advertising. We were pleased with the acceleration of Search advertising revenue growth in the second quarter. Our continued ability to generate sustained growth reflects our unparalleled engineering innovation that creates extraordinary experiences for users and capabilities for advertisers and delivered with the deep expertise of our go-to-market team. And in YouTube, we saw ongoing signs of stabilization in advertiser spending. We are prioritizing product focus on increasing quality consumption of video content with both Shorts and in the living room, which is translating into improved monetization. Second, within other revenues. In our YouTube subscription products, the sustained, strong growth in revenues reflects significant subscriber growth. You may have seen that last week, we increased subscription prices for YouTube Music and Premium, which underscores the value of the products. Strong year-on-year growth in hardware revenues was due, in large part, to a timing change given the Pixel 7a was launched in the second quarter, whereas the Pixel 6a launch occurred in the third quarter last year. Looking ahead, the launch timing change will be a headwind to hardware revenue growth in the third quarter. Play returned to positive growth in the second quarter, driven primarily by a solid increase in the number of buyers. Turning to Google Cloud. We are particularly excited about the customer interest in our AI-optimized infrastructure, our large language models, our AI platform services and our new generative AI offerings such as Duet AI for Google Workspace, although we are still clearly in the early days. At the same time, we continue to experience headwinds in the second quarter for moderation in consumption growth as customers optimize their spend. We continue to invest aggressively while remaining focused on profitable growth. In terms of expenses and profitability, we remain very focused on durably reengineering our cost base. Most evident to date are the actions we have taken to reduce the pace of headcount growth, including the workforce reductions we announced in the first quarter and a slower pace of organic hiring, in part given our focus on reallocating talent from within to fuel our growth priorities. A quick comment on the sequential improvement in operating margins in the second quarter. There are 2 factors to note. First, the benefit from an acceleration in search advertising revenue growth in the second quarter. Second, the vast majority of the charges related to our workforce reduction and optimization of our global office space were taken in Q1. Finally, as it relates to CapEx, in Q2, the largest component was for servers, which included a meaningful increase in our investments in AI compute. The sequential step-up in the second quarter was lower than anticipated for 2 reasons. First, with respect to office facilities, we continue to moderate the pace of fit-outs and ground-up construction to reflect the slower expected pace of headcount growth. Second, there were delays in certain data center construction projects. We expect elevated levels of investment in our technical infrastructure increasing through the back half of 2023 and continuing to grow in 2024. The primary driver is to support the opportunities we see in AI across Alphabet, including investments in GPUs and proprietary TPUs as well as data center capacity. With all that said, we remain committed to durably reengineering our cost base in order to help create capacity for these investments in support of long-term, sustainable financial value. Thank you. Sundar, Philipp and I will now take your questions.","evidence_gemma_new":"Google Cloud operating income","evidence_llama_3_3":"Google Cloud operating income second quarter","evidence_qwen_3_30b":"Google Cloud operating income second quarter","gemma_new_max":395000000.0,"gemma_new_min":395000000.0,"llama_3_3_max":395000000.0,"llama_3_3_min":395000000.0,"qwen_3_30b_max":395000000.0,"qwen_3_30b_min":395000000.0}
{"symbol":"GOOGL","year":2023,"quarter":3,"date":"2023-Q3","chunk_id":4,"sub_chunk_id":0,"centroid_label":"google service google s service operating income","agreed_value":23900000000.0,"count":3,"chunk":"Ruth Porat: Thank you, Philipp. We are very pleased with our financial results for the third quarter, driven by meaningful growth in Search and YouTube and momentum in Cloud. My comments will be on year-over-year comparisons for the third quarter, unless I state otherwise. I will start with results at the Alphabet level followed by segment results and conclude with our outlook. For the third quarter, our consolidated revenues were $76.7 billion, up 11% in both reported and constant currency. Search remained the largest contributor to revenue growth. In terms of expenses, total cost of revenues was $33.2 billion, up 7%, primarily reflecting other cost of revenues of $20.6 billion, which was up 6%. Growth here was primarily driven by content acquisition costs mainly for YouTube subscription offerings. As noted in our earnings release, the overall increase in data center and other operations costs was partially offset by a reduction in depreciation expense due to the change in estimated useful lives we made starting in the first quarter of the year. Operating expenses were $22.1 billion, up 6% reflecting the following. First, an increase in R&D expenses, driven primarily by compensation. Second, an increase in G&A expenses, reflecting the impact of charges related to legal matters. And finally, sales and marketing expenses, which were relatively flat to last year. Operating income was $21.3 billion, up 25%, and our operating margin was 28%. Other income and expense was a loss of $146 million. Net income was $19.7 billion. This reflects an effective tax rate of 7% in the third quarter from an IRS change related to the use of foreign tax credits, which had an outsized impact on the third quarter rate because the change resulted in a catch-up for prior periods. We delivered free cash flow of $22.6 billion in the third quarter and $78 million for the trailing 12 months. We ended the quarter with $120 billion in cash and marketable securities. As a reminder, our cash balance and free cash flow in the second and third quarters benefited from the deferral of certain tax payments to the fourth quarter of 2023. As noted in our earnings release, on October 16, we made an estimated tax payment of $10.5 billion related to this deferral, which will be reflected in our cash balance and free cash flow in the fourth quarter. Turning to segment results. Within Google Services, revenues were $68 billion, up 11%. Google Search and other advertising revenues of $44 billion in the quarter were up 11%, led again by growth in retail. YouTube advertising revenues of $8 billion were up 12%, driven by both brand advertising and direct response. Network advertising revenues of $7.7 billion were down 3%. Other revenues were $8.3 billion, up 21%, primarily reflecting growth in YouTube non-advertising revenues driven by subscriber growth in YouTube TV followed by YouTube Music Premium. TAC was $12.6 billion, up 7%. Google Services operating income was $23.9 billion, up 27% and the operating margin was 35%. Turning to the Google Cloud segment. Revenues were $8.4 billion for the quarter, up 22%. GCP revenue growth remained strong across geographies, industries and products, although the Q3 year-on-year growth rate reflects the impact of customer optimization efforts. Google Workspace also delivered strong revenue growth, primarily driven by increases in average revenue per seat. Google Cloud had operating income of $266 million, and the operating margin was 3%. As to our Other Bets, for the third quarter, revenues were $297 million and the operating loss was $1.2 billion. Turning to our outlook for the business. With respect to Google Services. First, within advertising. After a period of historic volatility, we were pleased with the year-on-year revenue growth of Search and YouTube advertising in the third quarter. Second, within other revenues, in our YouTube subscription products the substantial growth in revenues primarily reflects subscriber growth. Looking ahead, a full quarter of NFL Sunday Ticket revenues as well as associated content acquisition costs will be reflected in Q4 results compared to only a few weeks in the third quarter. Play had growth in the third quarter, driven primarily by an increase in the number of buyers. With respect to hardware, there is a headwind to revenues in the fourth quarter, reflecting efforts to optimize the portfolio with tighter targeting of our go-to-market investments as well as the ongoing impact from the difference in launch timing for the Pixel 6a and 7a that we mentioned last quarter. Turning to Google Cloud. We are pleased with the ongoing customer engagement with GCP and Workspace and the potential benefit of our AI solutions including infrastructure and services such as Vertex AI and Duet. We continue to invest aggressively given the significant potential we see while remaining focused on profitable growth. In terms of expenses and profitability, we're pleased with our operating performance. As we have repeatedly stressed, we remain focused on durably reengineering our cost base to create investment capacity to support our growth priorities, most important of which is with AI. We have a number of workstreams in place. First, we are maintaining a slower pace of headcount growth, reflecting product prioritization and reallocation of talent to support our most important growth opportunities. Second, we remain focused on optimizing our real estate footprint, including how and where we work to reduce our expense growth. As you can see from our earnings release, we incurred $207 million in accelerated rent and depreciation in the third quarter related to these actions. Third, we have engineering work streams underway to improve productivity across Alphabet. Given the magnitude of investment in our technical infrastructure, we have a superb team focused on efficiency of our operations there. We are also making progress in streamlining operations across Alphabet through the use of AI. Finally, there are ongoing workstreams that are improving the efficiency of our spend with suppliers and vendors through our central procurement organization. And to be clear, across the portfolio of other bet companies, we have also been working to identify opportunities to create sharper focus and to operate more efficiently and effectively. With respect to sequential quarter-on-quarter trends, two further points. First, cost of sales in the fourth quarter will reflect both higher hardware costs given Pixel family launches as well as increased CAC for YouTube as previously noted. Second, as usual, we expect sales and marketing expenses to be more heavily weighted to the end of the year, in part to support product launches in the holiday season. Finally, our reported CapEx in Q3 was $8 billion, driven overwhelmingly by investment in our technical infrastructure with the largest component for servers, followed by data centers, reflecting a meaningful increase in our investments in AI compute. The growth in reported cash CapEx in Q3 is somewhat muted due to the timing of supplier payments, which can cause variability from quarter-to-quarter. We continue to invest meaningfully in the technical infrastructure needed to support the opportunities we see in AI across Alphabet and expect elevated levels of investment, increasing in the fourth quarter of 2023 and continuing to grow in 2024. In closing, we remain very excited about the opportunities ahead and committed to deliver sustainable financial value. Thank you. Sundar, Philipp and I will now take your questions.","evidence_gemma_new":"Google Services operating income","evidence_llama_3_3":"Google Services operating income third quarter","evidence_qwen_3_30b":"Google Services operating income operating margin third quarter","gemma_new_max":23900000000.0,"gemma_new_min":23900000000.0,"llama_3_3_max":23900000000.0,"llama_3_3_min":23900000000.0,"qwen_3_30b_max":23900000000.0,"qwen_3_30b_min":23900000000.0}
{"symbol":"GOOGL","year":2023,"quarter":3,"date":"2023-Q3","chunk_id":4,"sub_chunk_id":0,"centroid_label":"google service google s service operating income","agreed_value":266000000.0,"count":3,"chunk":"Ruth Porat: Thank you, Philipp. We are very pleased with our financial results for the third quarter, driven by meaningful growth in Search and YouTube and momentum in Cloud. My comments will be on year-over-year comparisons for the third quarter, unless I state otherwise. I will start with results at the Alphabet level followed by segment results and conclude with our outlook. For the third quarter, our consolidated revenues were $76.7 billion, up 11% in both reported and constant currency. Search remained the largest contributor to revenue growth. In terms of expenses, total cost of revenues was $33.2 billion, up 7%, primarily reflecting other cost of revenues of $20.6 billion, which was up 6%. Growth here was primarily driven by content acquisition costs mainly for YouTube subscription offerings. As noted in our earnings release, the overall increase in data center and other operations costs was partially offset by a reduction in depreciation expense due to the change in estimated useful lives we made starting in the first quarter of the year. Operating expenses were $22.1 billion, up 6% reflecting the following. First, an increase in R&D expenses, driven primarily by compensation. Second, an increase in G&A expenses, reflecting the impact of charges related to legal matters. And finally, sales and marketing expenses, which were relatively flat to last year. Operating income was $21.3 billion, up 25%, and our operating margin was 28%. Other income and expense was a loss of $146 million. Net income was $19.7 billion. This reflects an effective tax rate of 7% in the third quarter from an IRS change related to the use of foreign tax credits, which had an outsized impact on the third quarter rate because the change resulted in a catch-up for prior periods. We delivered free cash flow of $22.6 billion in the third quarter and $78 million for the trailing 12 months. We ended the quarter with $120 billion in cash and marketable securities. As a reminder, our cash balance and free cash flow in the second and third quarters benefited from the deferral of certain tax payments to the fourth quarter of 2023. As noted in our earnings release, on October 16, we made an estimated tax payment of $10.5 billion related to this deferral, which will be reflected in our cash balance and free cash flow in the fourth quarter. Turning to segment results. Within Google Services, revenues were $68 billion, up 11%. Google Search and other advertising revenues of $44 billion in the quarter were up 11%, led again by growth in retail. YouTube advertising revenues of $8 billion were up 12%, driven by both brand advertising and direct response. Network advertising revenues of $7.7 billion were down 3%. Other revenues were $8.3 billion, up 21%, primarily reflecting growth in YouTube non-advertising revenues driven by subscriber growth in YouTube TV followed by YouTube Music Premium. TAC was $12.6 billion, up 7%. Google Services operating income was $23.9 billion, up 27% and the operating margin was 35%. Turning to the Google Cloud segment. Revenues were $8.4 billion for the quarter, up 22%. GCP revenue growth remained strong across geographies, industries and products, although the Q3 year-on-year growth rate reflects the impact of customer optimization efforts. Google Workspace also delivered strong revenue growth, primarily driven by increases in average revenue per seat. Google Cloud had operating income of $266 million, and the operating margin was 3%. As to our Other Bets, for the third quarter, revenues were $297 million and the operating loss was $1.2 billion. Turning to our outlook for the business. With respect to Google Services. First, within advertising. After a period of historic volatility, we were pleased with the year-on-year revenue growth of Search and YouTube advertising in the third quarter. Second, within other revenues, in our YouTube subscription products the substantial growth in revenues primarily reflects subscriber growth. Looking ahead, a full quarter of NFL Sunday Ticket revenues as well as associated content acquisition costs will be reflected in Q4 results compared to only a few weeks in the third quarter. Play had growth in the third quarter, driven primarily by an increase in the number of buyers. With respect to hardware, there is a headwind to revenues in the fourth quarter, reflecting efforts to optimize the portfolio with tighter targeting of our go-to-market investments as well as the ongoing impact from the difference in launch timing for the Pixel 6a and 7a that we mentioned last quarter. Turning to Google Cloud. We are pleased with the ongoing customer engagement with GCP and Workspace and the potential benefit of our AI solutions including infrastructure and services such as Vertex AI and Duet. We continue to invest aggressively given the significant potential we see while remaining focused on profitable growth. In terms of expenses and profitability, we're pleased with our operating performance. As we have repeatedly stressed, we remain focused on durably reengineering our cost base to create investment capacity to support our growth priorities, most important of which is with AI. We have a number of workstreams in place. First, we are maintaining a slower pace of headcount growth, reflecting product prioritization and reallocation of talent to support our most important growth opportunities. Second, we remain focused on optimizing our real estate footprint, including how and where we work to reduce our expense growth. As you can see from our earnings release, we incurred $207 million in accelerated rent and depreciation in the third quarter related to these actions. Third, we have engineering work streams underway to improve productivity across Alphabet. Given the magnitude of investment in our technical infrastructure, we have a superb team focused on efficiency of our operations there. We are also making progress in streamlining operations across Alphabet through the use of AI. Finally, there are ongoing workstreams that are improving the efficiency of our spend with suppliers and vendors through our central procurement organization. And to be clear, across the portfolio of other bet companies, we have also been working to identify opportunities to create sharper focus and to operate more efficiently and effectively. With respect to sequential quarter-on-quarter trends, two further points. First, cost of sales in the fourth quarter will reflect both higher hardware costs given Pixel family launches as well as increased CAC for YouTube as previously noted. Second, as usual, we expect sales and marketing expenses to be more heavily weighted to the end of the year, in part to support product launches in the holiday season. Finally, our reported CapEx in Q3 was $8 billion, driven overwhelmingly by investment in our technical infrastructure with the largest component for servers, followed by data centers, reflecting a meaningful increase in our investments in AI compute. The growth in reported cash CapEx in Q3 is somewhat muted due to the timing of supplier payments, which can cause variability from quarter-to-quarter. We continue to invest meaningfully in the technical infrastructure needed to support the opportunities we see in AI across Alphabet and expect elevated levels of investment, increasing in the fourth quarter of 2023 and continuing to grow in 2024. In closing, we remain very excited about the opportunities ahead and committed to deliver sustainable financial value. Thank you. Sundar, Philipp and I will now take your questions.","evidence_gemma_new":"Google Cloud operating income","evidence_llama_3_3":"Google Cloud operating income third quarter","evidence_qwen_3_30b":"Google Cloud operating income third quarter","gemma_new_max":266000000.0,"gemma_new_min":266000000.0,"llama_3_3_max":266000000.0,"llama_3_3_min":266000000.0,"qwen_3_30b_max":266000000.0,"qwen_3_30b_min":266000000.0}
{"symbol":"GOOGL","year":2023,"quarter":4,"date":"2023-Q4","chunk_id":4,"sub_chunk_id":0,"centroid_label":"google service google s service operating income","agreed_value":26700000000.0,"count":3,"chunk":"Ruth Porat: Thank you, Philipp. We are very pleased with our full year results with 2023 Alphabet revenues of $307 billion, up 9% versus 2022, which added $25 billion to revenues for the year. We ended with a strong fourth quarter with consolidated revenues of $86.3 billion, up 13% versus last year in both reported and constant currency. Search remained the largest contributor to revenue growth. My comments will be on year-over-year comparisons for the fourth quarter, unless I state otherwise. Total cost of revenues was $37.6 billion, up 6%. Other cost of revenues was $23.6 billion, up 5%, with the increase driven primarily by content acquisition costs associated with YouTube subscription offerings. The growth rate also reflects the offsetting benefit of lapping $1.2 billion in inventory-related charges that we called out in the fourth quarter last year as well as a reduction in depreciation expense due to changes in estimated useful lives we made starting in the first quarter of 2023. In terms of total expenses, the year-on-year comparisons reflect an additional $1.2 billion in exit charges that we took in the fourth quarter of 2023 in connection with actions to optimize our global office space. As you can see in our earnings release, these charges were allocated across the expense lines in other cost of revenues and OpEx based on associated head count. Operating expenses were $25 billion, up 11%, primarily reflecting an increase in R&D expenses, which were driven by the real estate charges, followed by compensation. Operating income was $23.7 billion, up 30%, and our operating margin was 27%. Net income was $20.7 billion, and EPS was $1.64. We delivered free cash flow of $7.9 billion, which was affected by the timing of the $10.5 billion tax payment we made on October 16 that we called out previously related to the deferral of certain tax payments to the fourth quarter. For the full year 2023, free cash flow was $69 billion. We repurchased a total of $62 billion of our Class A and Class C shares in 2023 and ended the year with $111 billion in cash and marketable securities. Turning to segment results. Within Google Services, revenues were $76.3 billion, up 12%. Google Search and other advertising revenues of $48 billion in the quarter were up 13%, led again by growth in retail. YouTube advertising revenues of $9.2 billion were up 16% driven by both direct response and brand advertising. Network advertising revenues of $8.3 billion were down 2%. Subscriptions, platforms and devices revenues, which we previously referred to as other revenues, were $10.8 billion, up 23%, primarily reflecting growth in YouTube subscription revenues. TAC was $14 billion, up 8%. Google Services' operating income was $26.7 billion, up 32%, and the operating margin was 35%. Turning to the Google Cloud segment. Revenues were $9.2 billion for the quarter, up 26%. We're very pleased with the momentum of GCP with an increasing contribution from AI. Google Workspace also delivered strong revenue growth primarily driven by increases in average revenue per seat. Google Cloud delivered operating income of $864 million and an operating margin of 9%. As to our Other Bets, for the full year 2023, revenues were $1.5 billion and the operating loss was $4.1 billion. Results in the fourth quarter benefited from a milestone payment in one of the Other Bets. Turning to our outlook for the business. With respect to Google Services, first, within advertising. We were pleased with the sequential revenue growth of Search and YouTube advertising throughout 2023, which reflects the extraordinary work across our teams to drive improved experiences for users and attractive ROI for advertisers. As we enter 2024 with advertising revenues of more than $100 billion higher than 2019, we remain focused on sustaining healthy growth on this larger base. Second, within subscriptions, platforms and devices, our total revenues from subscription products reached $15 billion for the full year 2023 driven primarily by substantial growth in subscribers for our YouTube subscription offerings. The substantial increase in our subscription revenues over the past few years demonstrates the ability of our teams to deliver high value-add offerings and provides a strong base on which to build, including through YouTube and newer services like Google One. Play had solid growth again in the fourth quarter driven primarily by an increase in the number of buyers. In devices, we continue to make sizable investments with increased emphasis on our Pixel family, particularly with AI-powered innovation while driving further efficiencies across the portfolio. Turning to Google Cloud. We are pleased with operating performance in the year. Full year revenues of $33 billion were up 26% versus prior year, ending with strong Q4 performance. The Cloud team is intensely focused on bringing the benefits of Gemini, our industry-leading AI technology, to enterprises and governments globally, and we are gratified with the level of engagement. The strong demand we are seeing for our vertically integrated AI portfolio is creating new opportunities for Google Cloud across every product area. In terms of profitability, the improvement in 2023 reflects sustained focus across the team with the intent to maintain healthy profitability while we continue to invest to support long-term growth. Turning to margins and expenses. As we have repeatedly stressed, we remain committed to our framework to durably reengineer our cost base as we invest to support our growth priorities. Key contributors to moderating our expense growth include: first, product and process prioritization to ensure we have the right resources behind our most important opportunities and to reallocate resources where we can; second, organizational efficiency and structure. We're focused on removing layers to simplify execution and drive velocity. Both product prioritization and the organization design efforts result in a slower pace of hiring, as you can see with our head count down year-on-year, reflecting the reductions we announced in the first quarter of 2023 and a much slower pace of hiring. We will continue to invest in top technical and engineering talent. Finally, we continue to execute the other work streams to slow expense growth, including improving efficiency in our technical infrastructure, streamlining operations across Alphabet through the use of AI, increasing efficiency of our spend with suppliers and vendors through our central procurement organization and optimizing our real estate portfolio. With respect to CapEx, our reported CapEx in the fourth quarter was $11 billion, driven overwhelmingly by investment in our technical infrastructure with the largest component for servers followed by data centers. The step-up in CapEx in Q4 reflects our outlook for the extraordinary applications of AI to deliver for users, advertisers, developers, cloud enterprise customers and governments globally and the long-term growth opportunities that offers. In 2024, we expect investment in CapEx will be notably larger than in 2023. With regard to Other Bets, we've been working to sharpen our investment focus while capturing the upside given compelling technology breakthroughs across the portfolio. For example, last week, Alphabet's X announced that it would be moving to spin out more projects as independent companies through external capital, giving X the opportunity to bring more focus to the breakthrough technologies it is working on to address some of the world's most pressing challenges. Thank you. Sundar, Philipp and I will now take your questions.","evidence_gemma_new":"Google Services' operating income","evidence_llama_3_3":"Google Services operating income","evidence_qwen_3_30b":"Google Services' operating income","gemma_new_max":26700000000.0,"gemma_new_min":26700000000.0,"llama_3_3_max":26700000000.0,"llama_3_3_min":26700000000.0,"qwen_3_30b_max":26700000000.0,"qwen_3_30b_min":26700000000.0}
{"symbol":"GOOGL","year":2023,"quarter":4,"date":"2023-Q4","chunk_id":4,"sub_chunk_id":0,"centroid_label":"google service google s service operating income","agreed_value":864000000.0,"count":3,"chunk":"Ruth Porat: Thank you, Philipp. We are very pleased with our full year results with 2023 Alphabet revenues of $307 billion, up 9% versus 2022, which added $25 billion to revenues for the year. We ended with a strong fourth quarter with consolidated revenues of $86.3 billion, up 13% versus last year in both reported and constant currency. Search remained the largest contributor to revenue growth. My comments will be on year-over-year comparisons for the fourth quarter, unless I state otherwise. Total cost of revenues was $37.6 billion, up 6%. Other cost of revenues was $23.6 billion, up 5%, with the increase driven primarily by content acquisition costs associated with YouTube subscription offerings. The growth rate also reflects the offsetting benefit of lapping $1.2 billion in inventory-related charges that we called out in the fourth quarter last year as well as a reduction in depreciation expense due to changes in estimated useful lives we made starting in the first quarter of 2023. In terms of total expenses, the year-on-year comparisons reflect an additional $1.2 billion in exit charges that we took in the fourth quarter of 2023 in connection with actions to optimize our global office space. As you can see in our earnings release, these charges were allocated across the expense lines in other cost of revenues and OpEx based on associated head count. Operating expenses were $25 billion, up 11%, primarily reflecting an increase in R&D expenses, which were driven by the real estate charges, followed by compensation. Operating income was $23.7 billion, up 30%, and our operating margin was 27%. Net income was $20.7 billion, and EPS was $1.64. We delivered free cash flow of $7.9 billion, which was affected by the timing of the $10.5 billion tax payment we made on October 16 that we called out previously related to the deferral of certain tax payments to the fourth quarter. For the full year 2023, free cash flow was $69 billion. We repurchased a total of $62 billion of our Class A and Class C shares in 2023 and ended the year with $111 billion in cash and marketable securities. Turning to segment results. Within Google Services, revenues were $76.3 billion, up 12%. Google Search and other advertising revenues of $48 billion in the quarter were up 13%, led again by growth in retail. YouTube advertising revenues of $9.2 billion were up 16% driven by both direct response and brand advertising. Network advertising revenues of $8.3 billion were down 2%. Subscriptions, platforms and devices revenues, which we previously referred to as other revenues, were $10.8 billion, up 23%, primarily reflecting growth in YouTube subscription revenues. TAC was $14 billion, up 8%. Google Services' operating income was $26.7 billion, up 32%, and the operating margin was 35%. Turning to the Google Cloud segment. Revenues were $9.2 billion for the quarter, up 26%. We're very pleased with the momentum of GCP with an increasing contribution from AI. Google Workspace also delivered strong revenue growth primarily driven by increases in average revenue per seat. Google Cloud delivered operating income of $864 million and an operating margin of 9%. As to our Other Bets, for the full year 2023, revenues were $1.5 billion and the operating loss was $4.1 billion. Results in the fourth quarter benefited from a milestone payment in one of the Other Bets. Turning to our outlook for the business. With respect to Google Services, first, within advertising. We were pleased with the sequential revenue growth of Search and YouTube advertising throughout 2023, which reflects the extraordinary work across our teams to drive improved experiences for users and attractive ROI for advertisers. As we enter 2024 with advertising revenues of more than $100 billion higher than 2019, we remain focused on sustaining healthy growth on this larger base. Second, within subscriptions, platforms and devices, our total revenues from subscription products reached $15 billion for the full year 2023 driven primarily by substantial growth in subscribers for our YouTube subscription offerings. The substantial increase in our subscription revenues over the past few years demonstrates the ability of our teams to deliver high value-add offerings and provides a strong base on which to build, including through YouTube and newer services like Google One. Play had solid growth again in the fourth quarter driven primarily by an increase in the number of buyers. In devices, we continue to make sizable investments with increased emphasis on our Pixel family, particularly with AI-powered innovation while driving further efficiencies across the portfolio. Turning to Google Cloud. We are pleased with operating performance in the year. Full year revenues of $33 billion were up 26% versus prior year, ending with strong Q4 performance. The Cloud team is intensely focused on bringing the benefits of Gemini, our industry-leading AI technology, to enterprises and governments globally, and we are gratified with the level of engagement. The strong demand we are seeing for our vertically integrated AI portfolio is creating new opportunities for Google Cloud across every product area. In terms of profitability, the improvement in 2023 reflects sustained focus across the team with the intent to maintain healthy profitability while we continue to invest to support long-term growth. Turning to margins and expenses. As we have repeatedly stressed, we remain committed to our framework to durably reengineer our cost base as we invest to support our growth priorities. Key contributors to moderating our expense growth include: first, product and process prioritization to ensure we have the right resources behind our most important opportunities and to reallocate resources where we can; second, organizational efficiency and structure. We're focused on removing layers to simplify execution and drive velocity. Both product prioritization and the organization design efforts result in a slower pace of hiring, as you can see with our head count down year-on-year, reflecting the reductions we announced in the first quarter of 2023 and a much slower pace of hiring. We will continue to invest in top technical and engineering talent. Finally, we continue to execute the other work streams to slow expense growth, including improving efficiency in our technical infrastructure, streamlining operations across Alphabet through the use of AI, increasing efficiency of our spend with suppliers and vendors through our central procurement organization and optimizing our real estate portfolio. With respect to CapEx, our reported CapEx in the fourth quarter was $11 billion, driven overwhelmingly by investment in our technical infrastructure with the largest component for servers followed by data centers. The step-up in CapEx in Q4 reflects our outlook for the extraordinary applications of AI to deliver for users, advertisers, developers, cloud enterprise customers and governments globally and the long-term growth opportunities that offers. In 2024, we expect investment in CapEx will be notably larger than in 2023. With regard to Other Bets, we've been working to sharpen our investment focus while capturing the upside given compelling technology breakthroughs across the portfolio. For example, last week, Alphabet's X announced that it would be moving to spin out more projects as independent companies through external capital, giving X the opportunity to bring more focus to the breakthrough technologies it is working on to address some of the world's most pressing challenges. Thank you. Sundar, Philipp and I will now take your questions.","evidence_gemma_new":"Google Cloud operating income","evidence_llama_3_3":"Google Cloud operating income","evidence_qwen_3_30b":"Google Cloud delivered operating income","gemma_new_max":864000000.0,"gemma_new_min":864000000.0,"llama_3_3_max":864000000.0,"llama_3_3_min":864000000.0,"qwen_3_30b_max":864000000.0,"qwen_3_30b_min":864000000.0}
{"symbol":"GOOGL","year":2024,"quarter":1,"date":"2024-Q1","chunk_id":4,"sub_chunk_id":0,"centroid_label":"google service google s service operating income","agreed_value":27900000000.0,"count":3,"chunk":"Ruth Porat: Thank you, Philipp. We are very pleased with our financial results for the first quarter driven, in particular, by strength in Search and Cloud as well as the ongoing efforts to durably reengineer our cost base. My comments will be on year-over-year comparisons for the first quarter unless I state otherwise. I will start with results at the Alphabet level, followed by segment results and conclude with our outlook. For the first quarter, our consolidated revenues were $80.5 billion, up 15% or up 16% in constant currency. Search remained the largest contributor to revenue growth. In terms of total expenses, the year-on-year comparisons reflect the impact of the restructuring charges we took in the first quarter of 2023 of $2.6 billion as well as the $716 million in employee severance and related charges in the first quarter of 2024. As you can see in our earnings release, these charges were allocated across the expense lines in other cost of revenues and OpEx based on associated head count. To help with year-on-year comparisons, we included a table in our earnings release to adjust other cost of revenues, operating expenses, operating income, and operating margin to exclude the impact of severance and related office space charges in the first quarter of 2023 versus 2024. In terms of expenses, total cost of revenues was $33.7 billion, up 10%. Other cost of revenues was $20.8 billion, up 10% on a reported basis, with the increase driven primarily by content acquisition costs associated with YouTube given the very strong revenue growth in both subscription offerings and ad-supported content. On an adjusted basis, other cost of revenues were up 13% year-on-year. Operating expenses were $21.4 billion, down 2% on a reported basis, primarily reflecting expense decreases in sales and marketing and G&A, offset by an increase in R&D. The largest single factor in the year-on-year decline in G&A expenses was lower charges related to legal matters. On an adjusted basis, operating expenses were up 5%, reflecting, first, in R&D, an increase in compensation expense, primarily for Google DeepMind and Cloud; and second, in sales and marketing, a slight increase year-on-year, reflecting increases in compensation expense primarily for Cloud sales. Operating income was $25.5 billion, up 46% on a reported basis, and our operating margin was 32%. On an adjusted basis, operating income was up 31%, and our operating margin was 33%. Net income was $23.7 billion and EPS was $1.89. We delivered free cash flow of $16.8 billion in the first quarter and $69.1 billion for the trailing 12 months. We ended the quarter with $108 billion in cash and marketable securities. Turning to segment results. Within Google Services, revenues were $70.4 billion, up 14%. Google Search and other advertising revenues of $46.2 billion in the quarter were up 14% led again by growth in retail. YouTube advertising revenues of $8.1 billion were up 21% driven by both direct response and brand advertising. Network advertising revenues of $7.4 billion were down 1%. Subscriptions, platforms and devices revenues were $8.7 billion, up 18%, primarily reflecting growth in YouTube subscription revenues. TAC was $12.9 billion, up 10%. Google Services operating income was $27.9 billion, up 28%. And the operating margin was 40%. Turning to the Google Cloud segment. Revenues were $9.6 billion for the quarter, up 28%, reflecting significant growth in GCP with an increasing contribution from AI and strong Google Workspace growth, primarily driven by increases in average revenue per seat. Google Cloud delivered operating income of $900 million and an operating margin of 9%. As to our Other Bets, for the first quarter, revenues were $495 million, benefiting from a milestone payment in one of the Other Bets. The operating loss was $1 billion. Turning to our outlook for the business. With respect to Google Services, first, within Advertising, we are very pleased with the momentum of our Ads businesses. Search had broad-based strength across verticals. In YouTube, we had acceleration in revenue growth driven by brand and direct response. Looking ahead, two points to call out: first, results in our advertising business in Q1 continued to reflect strength in spend from APAC-based retailers, a trend that began in the second quarter of 2023 and continued through Q1, which means we will begin lapping that impact in the second quarter; second, the YouTube acceleration in revenue growth in Q1 reflects, in part, lapping the negative year-on-year growth we experienced in the first quarter of 2023. Turning to subscriptions, platforms, and devices. We continue to deliver significant growth in our subscriptions business, which drives the majority of revenue growth in this line. The sequential quarterly decline in year-on-year revenue growth for the line in Q1 versus Q4 reflects, in part, the fact that we had only 1 week of Sunday Ticket subscription revenue in Q1 versus 14 weeks in Q4. Looking forward, we will anniversary last year's price increase in YouTube TV starting in May. With regard to platforms, we are pleased with the performance in Play driven by an increase in buyers. With respect to Google Cloud, performance in Q1 reflects strong demand for our GCP infrastructure and solutions as well as the contribution from our Workspace productivity tools. The growth we are seeing across Cloud is underpinned by the benefit AI provides for our customers. We continue to invest aggressively while remaining focused on profitable growth. As we look ahead, two points that will affect sequential year-on-year revenue growth comparisons across Alphabet: first, Q1 results reflect the benefit of leap year, which contributed slightly more than 1 point to our revenue growth rate at the consolidated level in the first quarter; second, at current spot rates, we expect a larger headwind from foreign exchange in Q2 versus Q1. Turning to margins. Our efforts to durably reengineer our cost base are reflected in a 400 basis point expansion of our Alphabet operating margin year-on-year, excluding the impact of restructuring and severance charges in both periods. You can also see the impact in the quarter-on-quarter decline in head count in Q1, which reflects both actions we have taken over the past few months and a much slower pace of hiring. As we have discussed previously, we are continuing to invest in top engineering and technical talent, particularly in Cloud, Google DeepMind and technical infrastructure. Looking ahead, we remain focused on our efforts to moderate the pace of expense growth in order to create capacity for the increases in depreciation and expenses associated with the higher levels of investment in our technical infrastructure. We believe these efforts will enable us to deliver full year 2024 Alphabet operating margin expansion relative to 2023. With respect to CapEx, our reported CapEx in the first quarter was $12 billion, once again driven overwhelmingly by investment in our technical infrastructure, with the largest component for servers followed by data centers. The significant year-on-year growth in CapEx in recent quarters reflects our confidence in the opportunities offered by AI across our business. Looking ahead, we expect quarterly CapEx throughout the year to be roughly at or above the Q1 level, keeping in mind that the timing of cash payments can cause variability in quarterly reported CapEx. With regard to Other Bets, we similarly have work streams underway to enhance overall returns. Finally, as I trust you saw in the press release, we are very pleased to be adding a quarterly dividend of $0.20 per share to our capital return program as well as a new $70 billion authorization in share repurchases. The core of our capital allocation framework remains the same, beginning with investing aggressively in our business as you have heard us talk about today. Given the extraordinary opportunities ahead, we view the introduction of the dividend as further strengthening our overall capital return program. Thank you. Sundar, Philipp, and I will now take your questions.","evidence_gemma_new":"Google Services operating income","evidence_llama_3_3":"Google Services operating income first quarter","evidence_qwen_3_30b":"Google Services operating income","gemma_new_max":27900000000.0,"gemma_new_min":27900000000.0,"llama_3_3_max":27900000000.0,"llama_3_3_min":27900000000.0,"qwen_3_30b_max":27900000000.0,"qwen_3_30b_min":27900000000.0}
{"symbol":"GOOGL","year":2024,"quarter":1,"date":"2024-Q1","chunk_id":4,"sub_chunk_id":0,"centroid_label":"google service google s service operating income","agreed_value":900000000.0,"count":3,"chunk":"Ruth Porat: Thank you, Philipp. We are very pleased with our financial results for the first quarter driven, in particular, by strength in Search and Cloud as well as the ongoing efforts to durably reengineer our cost base. My comments will be on year-over-year comparisons for the first quarter unless I state otherwise. I will start with results at the Alphabet level, followed by segment results and conclude with our outlook. For the first quarter, our consolidated revenues were $80.5 billion, up 15% or up 16% in constant currency. Search remained the largest contributor to revenue growth. In terms of total expenses, the year-on-year comparisons reflect the impact of the restructuring charges we took in the first quarter of 2023 of $2.6 billion as well as the $716 million in employee severance and related charges in the first quarter of 2024. As you can see in our earnings release, these charges were allocated across the expense lines in other cost of revenues and OpEx based on associated head count. To help with year-on-year comparisons, we included a table in our earnings release to adjust other cost of revenues, operating expenses, operating income, and operating margin to exclude the impact of severance and related office space charges in the first quarter of 2023 versus 2024. In terms of expenses, total cost of revenues was $33.7 billion, up 10%. Other cost of revenues was $20.8 billion, up 10% on a reported basis, with the increase driven primarily by content acquisition costs associated with YouTube given the very strong revenue growth in both subscription offerings and ad-supported content. On an adjusted basis, other cost of revenues were up 13% year-on-year. Operating expenses were $21.4 billion, down 2% on a reported basis, primarily reflecting expense decreases in sales and marketing and G&A, offset by an increase in R&D. The largest single factor in the year-on-year decline in G&A expenses was lower charges related to legal matters. On an adjusted basis, operating expenses were up 5%, reflecting, first, in R&D, an increase in compensation expense, primarily for Google DeepMind and Cloud; and second, in sales and marketing, a slight increase year-on-year, reflecting increases in compensation expense primarily for Cloud sales. Operating income was $25.5 billion, up 46% on a reported basis, and our operating margin was 32%. On an adjusted basis, operating income was up 31%, and our operating margin was 33%. Net income was $23.7 billion and EPS was $1.89. We delivered free cash flow of $16.8 billion in the first quarter and $69.1 billion for the trailing 12 months. We ended the quarter with $108 billion in cash and marketable securities. Turning to segment results. Within Google Services, revenues were $70.4 billion, up 14%. Google Search and other advertising revenues of $46.2 billion in the quarter were up 14% led again by growth in retail. YouTube advertising revenues of $8.1 billion were up 21% driven by both direct response and brand advertising. Network advertising revenues of $7.4 billion were down 1%. Subscriptions, platforms and devices revenues were $8.7 billion, up 18%, primarily reflecting growth in YouTube subscription revenues. TAC was $12.9 billion, up 10%. Google Services operating income was $27.9 billion, up 28%. And the operating margin was 40%. Turning to the Google Cloud segment. Revenues were $9.6 billion for the quarter, up 28%, reflecting significant growth in GCP with an increasing contribution from AI and strong Google Workspace growth, primarily driven by increases in average revenue per seat. Google Cloud delivered operating income of $900 million and an operating margin of 9%. As to our Other Bets, for the first quarter, revenues were $495 million, benefiting from a milestone payment in one of the Other Bets. The operating loss was $1 billion. Turning to our outlook for the business. With respect to Google Services, first, within Advertising, we are very pleased with the momentum of our Ads businesses. Search had broad-based strength across verticals. In YouTube, we had acceleration in revenue growth driven by brand and direct response. Looking ahead, two points to call out: first, results in our advertising business in Q1 continued to reflect strength in spend from APAC-based retailers, a trend that began in the second quarter of 2023 and continued through Q1, which means we will begin lapping that impact in the second quarter; second, the YouTube acceleration in revenue growth in Q1 reflects, in part, lapping the negative year-on-year growth we experienced in the first quarter of 2023. Turning to subscriptions, platforms, and devices. We continue to deliver significant growth in our subscriptions business, which drives the majority of revenue growth in this line. The sequential quarterly decline in year-on-year revenue growth for the line in Q1 versus Q4 reflects, in part, the fact that we had only 1 week of Sunday Ticket subscription revenue in Q1 versus 14 weeks in Q4. Looking forward, we will anniversary last year's price increase in YouTube TV starting in May. With regard to platforms, we are pleased with the performance in Play driven by an increase in buyers. With respect to Google Cloud, performance in Q1 reflects strong demand for our GCP infrastructure and solutions as well as the contribution from our Workspace productivity tools. The growth we are seeing across Cloud is underpinned by the benefit AI provides for our customers. We continue to invest aggressively while remaining focused on profitable growth. As we look ahead, two points that will affect sequential year-on-year revenue growth comparisons across Alphabet: first, Q1 results reflect the benefit of leap year, which contributed slightly more than 1 point to our revenue growth rate at the consolidated level in the first quarter; second, at current spot rates, we expect a larger headwind from foreign exchange in Q2 versus Q1. Turning to margins. Our efforts to durably reengineer our cost base are reflected in a 400 basis point expansion of our Alphabet operating margin year-on-year, excluding the impact of restructuring and severance charges in both periods. You can also see the impact in the quarter-on-quarter decline in head count in Q1, which reflects both actions we have taken over the past few months and a much slower pace of hiring. As we have discussed previously, we are continuing to invest in top engineering and technical talent, particularly in Cloud, Google DeepMind and technical infrastructure. Looking ahead, we remain focused on our efforts to moderate the pace of expense growth in order to create capacity for the increases in depreciation and expenses associated with the higher levels of investment in our technical infrastructure. We believe these efforts will enable us to deliver full year 2024 Alphabet operating margin expansion relative to 2023. With respect to CapEx, our reported CapEx in the first quarter was $12 billion, once again driven overwhelmingly by investment in our technical infrastructure, with the largest component for servers followed by data centers. The significant year-on-year growth in CapEx in recent quarters reflects our confidence in the opportunities offered by AI across our business. Looking ahead, we expect quarterly CapEx throughout the year to be roughly at or above the Q1 level, keeping in mind that the timing of cash payments can cause variability in quarterly reported CapEx. With regard to Other Bets, we similarly have work streams underway to enhance overall returns. Finally, as I trust you saw in the press release, we are very pleased to be adding a quarterly dividend of $0.20 per share to our capital return program as well as a new $70 billion authorization in share repurchases. The core of our capital allocation framework remains the same, beginning with investing aggressively in our business as you have heard us talk about today. Given the extraordinary opportunities ahead, we view the introduction of the dividend as further strengthening our overall capital return program. Thank you. Sundar, Philipp, and I will now take your questions.","evidence_gemma_new":"Google Cloud delivered operating income","evidence_llama_3_3":"Google Cloud operating income first quarter","evidence_qwen_3_30b":"Google Cloud operating income","gemma_new_max":900000000.0,"gemma_new_min":900000000.0,"llama_3_3_max":900000000.0,"llama_3_3_min":900000000.0,"qwen_3_30b_max":900000000.0,"qwen_3_30b_min":900000000.0}
{"symbol":"GOOGL","year":2024,"quarter":2,"date":"2024-Q2","chunk_id":4,"sub_chunk_id":0,"centroid_label":"google service google s service operating income","agreed_value":29700000000.0,"count":3,"chunk":"Ruth Porat : Thank you, Philipp, and thanks, Sundar, for those kind words. We had another strong quarter, driven in particular by performance in Search and Cloud, as well as the ongoing efforts to durably reengineer our cost base. My comments will be on year-over-year comparisons for the second quarter unless I state otherwise. I will start with results at the Alphabet level followed by segment results and conclude with our outlook. For the second quarter, our consolidated revenues were $84.7 billion, up 14% or up 15% in constant currency. Search remained the largest contributor to revenue growth. In terms of expenses, total cost of revenues was $35.5 billion, up 11%. Other cost of revenues was $22.1 billion, up 14%, with the increase driven primarily by content acquisition costs, followed by depreciation as well as the impact of the Canadian digital services tax, which was applied retroactively. Operating expenses were $21.8 billion up 5%, primarily reflecting an increase in R&D partially offset by a decline in G&A with sales and marketing essentially flat to the second quarter last year. The increase in R&D was driven primarily by compensation which was affected by lapping a reduction in valuation-based compensation liabilities in certain other bets in the second quarter last year followed by depreciation. The largest single factor in the year-on-year decline in G&A expenses was lower charges related to legal matters. Operating income was $27.4 billion, up 26% and our operating margin was 32%. Net income was $23.6 billion and EPS was $1.89. We delivered free cash flow of $13.5 billion in the second quarter and $60.8 billion for the trailing 12 months. As a reminder, last year, we had a timing benefit in the second and third quarters from a $10.5 billion deferred cash tax payment made in the fourth quarter, which depressed reported free cash flow growth this quarter, and we'll do so again next quarter. We ended the quarter with $101 billion in cash and marketable securities. Turning to segment results. Within Google Services, revenues were $73.9 billion, up 12%. Google Search and other advertising revenues of $48.5 billion in the quarter were up 14%, led again by growth in retail, followed by the financial services vertical. YouTube advertising revenues of $8.7 billion were up 13% driven by brand followed by direct response advertising. Network advertising revenues of $7.4 billion were down 5%. Subscription platforms and devices revenues were $9.3 billion up 14%, primarily reflecting growth in YouTube subscription revenues. TAC was $13.4 billion, up 7%. Google Services operating income was $29.7 billion up 27% and the operating margin was 40%. Turning to the Google Cloud segment. Revenues were $10.3 billion for the quarter, up 29%, reflecting first significant growth in GCP, which was above growth for cloud overall and includes an increasing contribution from AI. And second, strong Google Workspace growth, primarily driven by increases in average revenue per seat. Google Cloud delivered operating income of $1.2 billion and an operating margin of 11%. As to our Other Bets for the second quarter, revenues were $365 million and the operating loss was $1.1 billion. Turning to our outlook for the business. With respect to Google Services, First, within advertising. The strong performance of search was broad-based across verticals. In YouTube, we are pleased with the growth in the quarter. We had healthy watch time growth continued to close the monetization gap in Shorts and had continued momentum in Connected TV, with brand benefiting in part from an ongoing shift in budgets from linear television to digital. As we look forward to the third quarter, we will be lapping the increasing strength in advertising revenues in the second half of 2023, in part from APAC based retailers. Turning to subscriptions, platforms and devices. First, we continue to have significant growth in our subscriptions business which drives the majority of revenue growth in this line. However, there was a sequential decline in the year-on-year growth rate, as we anniversaried the impact of a price increase for YouTubeTV in the second quarter last year. The impact will persist through the balance of the year. Second, with regard to platforms. We are pleased with the performance in play driven by an increase in buyers. Finally, with respect to devices. The most important point as we look forward is that our Made by Google launches have been pulled forward into the third quarter from the fourth quarter last year benefiting revenues in Q3 this year. Turning to cloud, which continued to deliver very strong results. For the first time, Cloud crossed $10 billion in quarterly revenues and $1 billion in quarterly operating profit. As Sundar noted year-to-date, our AI infrastructure and generative AI solutions for cloud customers have already generated billions in revenues and are being used by more than 2 million developers. We're particularly encouraged that the majority of our top 100 customers are already using our generative AI solutions. We continue to invest aggressively in the business. Turning to margins. The margin expansion in Q2 versus last year reflects our ongoing efforts to durably reengineer our cost base, as well as revenue strength. Our leadership team remains focused on our efforts to moderate the pace of expense growth in order to create capacity for the increases in depreciation and expenses associated with the higher levels of investment in our technical infrastructure. Once again headcount declined quarter-on-quarter, which reflects both actions we have taken in the first half of the year and a much slower pace of hiring. Looking ahead, we expect a slight increase in headcount in the third quarter, as we bring on new graduates. As we have discussed previously, we\u2019re continuing to invest in top engineering and technical talent, particularly in cloud and technical infrastructure. Looking forward, we continue to expect to deliver full-year 2024 Alphabet operating margin expansion relative to 2023. However, in the third quarter operating margins will reflect the impact of both the increases in depreciation and expenses associated with the higher levels of investment in our technical infrastructure, as well as the increase in cost of revenues due to the pull-forward of hardware launches into Q3. With respect to CapEx, our reported CapEx in the second quarter was $13 billion, once again driven overwhelmingly by investment in our technical infrastructure with the largest component for servers followed by data centers. Looking ahead, we continue to expect quarterly CapEx throughout the year to be roughly at or above the Q1 CapEx of $12 billion keeping in mind that the timing of cash payments can cause variability in quarterly reported CapEx. With regard to other bets, we continue to focus on improving overall efficiencies, as we invest for long-term returns. Waymo is an important example of this, with its technical leadership coupled with progress on operational performance. As you will see in the 10-Q, we have chosen to commit to a new multi-year investment of $5 billion. This new round of funding, which is consistent with recent annual investment levels will enable Waymo to continue to build the world's leading autonomous driving technology company. To close, this is my 56th and last earnings call, 37 of them at Alphabet. So I have a few closing thoughts of gratitude. I've been so proud to be at Google and Alphabet as CFO and to work with some of the smartest people in the world every day. I think, we have accomplished a lot in the last nine plus years, and I am confident that progress will continue. Of course, I'm not going far and I'm honored to have my new role, which I've been slowly working my way into during the past 11 months and I look forward to continuing to work with Sundar, and our great team. Being CFO of one of the most important companies in the world has been the opportunity and responsibility of a lifetime. Google's Mission of advancing technology and bringing information to people throughout the world is as relevant today as it was when I worked on its IPO. Technology has been a catalyst for economic growth throughout human history. The people on this call know that if a technological advancement is not the focus of every business and government, they will be left behind. Underpinning this is the need for sound and responsible investment. That has never been more important than today and certainly, that is Google and Alphabet's focus. I want to end by thanking Googlers around the world for the innovation and commitment that has enabled us to deliver such extraordinary products and services globally. I also want to thank our investors and analysts for your long-term support and your feedback. Thank you. Sundar, Philipp and I will now take your questions.","evidence_gemma_new":"Google Services operating income","evidence_llama_3_3":"Google Services operating income second quarter","evidence_qwen_3_30b":"Google Services operating income second quarter","gemma_new_max":29700000000.0,"gemma_new_min":29700000000.0,"llama_3_3_max":29700000000.0,"llama_3_3_min":29700000000.0,"qwen_3_30b_max":29700000000.0,"qwen_3_30b_min":29700000000.0}
{"symbol":"GOOGL","year":2024,"quarter":2,"date":"2024-Q2","chunk_id":4,"sub_chunk_id":0,"centroid_label":"google service google s service operating income","agreed_value":1200000000.0,"count":2,"chunk":"Ruth Porat : Thank you, Philipp, and thanks, Sundar, for those kind words. We had another strong quarter, driven in particular by performance in Search and Cloud, as well as the ongoing efforts to durably reengineer our cost base. My comments will be on year-over-year comparisons for the second quarter unless I state otherwise. I will start with results at the Alphabet level followed by segment results and conclude with our outlook. For the second quarter, our consolidated revenues were $84.7 billion, up 14% or up 15% in constant currency. Search remained the largest contributor to revenue growth. In terms of expenses, total cost of revenues was $35.5 billion, up 11%. Other cost of revenues was $22.1 billion, up 14%, with the increase driven primarily by content acquisition costs, followed by depreciation as well as the impact of the Canadian digital services tax, which was applied retroactively. Operating expenses were $21.8 billion up 5%, primarily reflecting an increase in R&D partially offset by a decline in G&A with sales and marketing essentially flat to the second quarter last year. The increase in R&D was driven primarily by compensation which was affected by lapping a reduction in valuation-based compensation liabilities in certain other bets in the second quarter last year followed by depreciation. The largest single factor in the year-on-year decline in G&A expenses was lower charges related to legal matters. Operating income was $27.4 billion, up 26% and our operating margin was 32%. Net income was $23.6 billion and EPS was $1.89. We delivered free cash flow of $13.5 billion in the second quarter and $60.8 billion for the trailing 12 months. As a reminder, last year, we had a timing benefit in the second and third quarters from a $10.5 billion deferred cash tax payment made in the fourth quarter, which depressed reported free cash flow growth this quarter, and we'll do so again next quarter. We ended the quarter with $101 billion in cash and marketable securities. Turning to segment results. Within Google Services, revenues were $73.9 billion, up 12%. Google Search and other advertising revenues of $48.5 billion in the quarter were up 14%, led again by growth in retail, followed by the financial services vertical. YouTube advertising revenues of $8.7 billion were up 13% driven by brand followed by direct response advertising. Network advertising revenues of $7.4 billion were down 5%. Subscription platforms and devices revenues were $9.3 billion up 14%, primarily reflecting growth in YouTube subscription revenues. TAC was $13.4 billion, up 7%. Google Services operating income was $29.7 billion up 27% and the operating margin was 40%. Turning to the Google Cloud segment. Revenues were $10.3 billion for the quarter, up 29%, reflecting first significant growth in GCP, which was above growth for cloud overall and includes an increasing contribution from AI. And second, strong Google Workspace growth, primarily driven by increases in average revenue per seat. Google Cloud delivered operating income of $1.2 billion and an operating margin of 11%. As to our Other Bets for the second quarter, revenues were $365 million and the operating loss was $1.1 billion. Turning to our outlook for the business. With respect to Google Services, First, within advertising. The strong performance of search was broad-based across verticals. In YouTube, we are pleased with the growth in the quarter. We had healthy watch time growth continued to close the monetization gap in Shorts and had continued momentum in Connected TV, with brand benefiting in part from an ongoing shift in budgets from linear television to digital. As we look forward to the third quarter, we will be lapping the increasing strength in advertising revenues in the second half of 2023, in part from APAC based retailers. Turning to subscriptions, platforms and devices. First, we continue to have significant growth in our subscriptions business which drives the majority of revenue growth in this line. However, there was a sequential decline in the year-on-year growth rate, as we anniversaried the impact of a price increase for YouTubeTV in the second quarter last year. The impact will persist through the balance of the year. Second, with regard to platforms. We are pleased with the performance in play driven by an increase in buyers. Finally, with respect to devices. The most important point as we look forward is that our Made by Google launches have been pulled forward into the third quarter from the fourth quarter last year benefiting revenues in Q3 this year. Turning to cloud, which continued to deliver very strong results. For the first time, Cloud crossed $10 billion in quarterly revenues and $1 billion in quarterly operating profit. As Sundar noted year-to-date, our AI infrastructure and generative AI solutions for cloud customers have already generated billions in revenues and are being used by more than 2 million developers. We're particularly encouraged that the majority of our top 100 customers are already using our generative AI solutions. We continue to invest aggressively in the business. Turning to margins. The margin expansion in Q2 versus last year reflects our ongoing efforts to durably reengineer our cost base, as well as revenue strength. Our leadership team remains focused on our efforts to moderate the pace of expense growth in order to create capacity for the increases in depreciation and expenses associated with the higher levels of investment in our technical infrastructure. Once again headcount declined quarter-on-quarter, which reflects both actions we have taken in the first half of the year and a much slower pace of hiring. Looking ahead, we expect a slight increase in headcount in the third quarter, as we bring on new graduates. As we have discussed previously, we\u2019re continuing to invest in top engineering and technical talent, particularly in cloud and technical infrastructure. Looking forward, we continue to expect to deliver full-year 2024 Alphabet operating margin expansion relative to 2023. However, in the third quarter operating margins will reflect the impact of both the increases in depreciation and expenses associated with the higher levels of investment in our technical infrastructure, as well as the increase in cost of revenues due to the pull-forward of hardware launches into Q3. With respect to CapEx, our reported CapEx in the second quarter was $13 billion, once again driven overwhelmingly by investment in our technical infrastructure with the largest component for servers followed by data centers. Looking ahead, we continue to expect quarterly CapEx throughout the year to be roughly at or above the Q1 CapEx of $12 billion keeping in mind that the timing of cash payments can cause variability in quarterly reported CapEx. With regard to other bets, we continue to focus on improving overall efficiencies, as we invest for long-term returns. Waymo is an important example of this, with its technical leadership coupled with progress on operational performance. As you will see in the 10-Q, we have chosen to commit to a new multi-year investment of $5 billion. This new round of funding, which is consistent with recent annual investment levels will enable Waymo to continue to build the world's leading autonomous driving technology company. To close, this is my 56th and last earnings call, 37 of them at Alphabet. So I have a few closing thoughts of gratitude. I've been so proud to be at Google and Alphabet as CFO and to work with some of the smartest people in the world every day. I think, we have accomplished a lot in the last nine plus years, and I am confident that progress will continue. Of course, I'm not going far and I'm honored to have my new role, which I've been slowly working my way into during the past 11 months and I look forward to continuing to work with Sundar, and our great team. Being CFO of one of the most important companies in the world has been the opportunity and responsibility of a lifetime. Google's Mission of advancing technology and bringing information to people throughout the world is as relevant today as it was when I worked on its IPO. Technology has been a catalyst for economic growth throughout human history. The people on this call know that if a technological advancement is not the focus of every business and government, they will be left behind. Underpinning this is the need for sound and responsible investment. That has never been more important than today and certainly, that is Google and Alphabet's focus. I want to end by thanking Googlers around the world for the innovation and commitment that has enabled us to deliver such extraordinary products and services globally. I also want to thank our investors and analysts for your long-term support and your feedback. Thank you. Sundar, Philipp and I will now take your questions.","evidence_gemma_new":"Google Cloud operating income","evidence_llama_3_3":"Google Cloud operating income second quarter","evidence_qwen_3_30b":null,"gemma_new_max":1200000000.0,"gemma_new_min":1200000000.0,"llama_3_3_max":1200000000.0,"llama_3_3_min":1200000000.0,"qwen_3_30b_max":null,"qwen_3_30b_min":null}
{"symbol":"GOOGL","year":2024,"quarter":3,"date":"2024-Q3","chunk_id":4,"sub_chunk_id":0,"centroid_label":"google service google s service operating income","agreed_value":30900000000.0,"count":2,"chunk":"Anat Ashkenazi: Thank you, Philipp. And thanks, Sundar, for the words of welcome. My comments will focus on year-over-year comparisons for the third quarter, unless I state otherwise. I will start with the results at the Alphabet level and will then cover our segment results. I'll end with high-level commentary on investment at the Alphabet level. We had another strong quarter in Q3 with robust momentum across the business. Consolidated revenue increased by 15% or 16% in constant currency. Search remained the largest contributor to revenue growth, followed by a robust 35% growth in cloud. Total cost of revenue was $36.5 billion, up 10%. Tech was $13.7 billion, up 9%. We continue to see a revenue mix shift with Google Search growing at double-digit levels, while network revenue, which have a much higher TAC rate declined. Other cost of revenue was $22.8 billion, up 11%, with the increase primarily driven by content acquisition costs, primarily for YouTube, an increase in depreciation associated with higher level of investment in our technical infrastructure and higher hardware costs associated with the pull forward of our Made by Google launches from the fourth to the third quarter. Total operating expenses increased 5% to $23.3 billion. The increase was primarily driven by facilities-related charges as results of actions were taken to further optimize our office space footprint globally, followed by depreciation, partially offset by year-on-year decline in charges for legal and other matters. R&D investments increased by 11%, primarily driven by increases in compensation and depreciation expenses. Sales and marketing expenses increased 5%, primarily reflecting investment in advertising and promotional efforts related to the Made by Google launches, as well as for AI and Gemini. G&A expenses declined by 10%, primarily due to lower charges for legal and other matters. Operating income increased 34% to $28.5 billion and operating margin increased to 32%. Net income increased 34% to $26.3 billion and earnings per share increased 37% to $2.12. We're pleased with the progress we're making in reengineering our cost structure, which is reflected in our operating margin expansion this quarter, while also continuing to invest in the business to bring innovation to consumers, creators and enterprises. We delivered free cash flow of $17.6 billion for the third quarter and $55.8 billion for the trailing 12 months. Year-on-year free cash flow was negatively impacted by the following items. In 2023, we deferred cash tax payments from the second and third quarter to the fourth quarter. And in Q3 2024, we made a $3 billion cash payment related to the 2017 EC shopping fine. We ended the quarter with $93 billion in cash and marketable securities. Now turning to segment results. Google Services revenue increased 13% to $76.5 billion. Google Search and other advertising revenue increased by 12% to $49.4 billion. The robust performance of search was broad-based across verticals, led by the financial services vertical due to strength in insurance followed by retail. YouTube advertising revenue increased 12% to $8.9 billion, driven by brand, followed by direct response advertising. As Philipp mentioned, we're seeing strong momentum in YouTube, including robust growth in watch time across the platform and are excited about the new features and products we're bringing to creators. Network advertising revenue of $7.5 billion were down 2%. In the third quarter, the year-on-year growth in all our advertising revenue lines was impacted by the increase in strength in advertising revenue in Q3 of last year, in part from APAC-based retailers. Subscription platforms and devices revenue increased 28% to $10.7 billion, reflecting growth in subscription revenues, as well as the launch of our Made by Google devices in the third quarter. We continue to have significant growth in our subscription products, driven primarily by YouTube TV and YouTube Music Premium, as well as Google One, primarily due to increases in the number of paid subscribers. With regards to platforms, we're pleased with the performance in play, primarily driven by an increase in buyers. Google Service operating income increased by 29% to $30.9 billion, and operating margin was 40%. Turning to the Google Cloud segment, which continued to deliver very strong results this quarter. Revenue increased by 35% to $11.4 billion in the third quarter, reflecting accelerated growth in GCP across AI infrastructure, generative AI solutions and core GCP products. Once again, GCP grew at a rate that was higher than cloud overall. We also saw strong Google Workspace growth, primarily driven by increases in average revenue per seat. As you just heard from Sundar, the robust innovation and expanded AI offerings within our cloud business are allowing existing and new customers to realize measurable business benefits, including reduced cost, greater customer engagement, faster response time and better revenue conversion. Google Cloud operating income increased to $1.9 billion and operating margin increased to 17%. The operating margin expansion was driven by strong revenue performance across cloud AI products, core GCP and Workspace, as well as ongoing efficiency initiatives. As to our Other Bets, for the third quarter revenue were $388 million and operating loss was $1.1 billion. I'll highlight just a couple of accomplishments in the quarter for Waymo and Wing. We're excited about the progress we're seeing in Waymo, as Sundar mentioned, and the increase in the number of paid rides. We're planning to continue to expand our geographic coverage and reach more customers in existing markets and new markets. Wing, our drone delivery company, recently passed the 1-year anniversary of scaling its partnership with Walmart in the Dallas-Fort Worth area, now operating in 11 stores and serving 26 different cities and towns. Turning to Alphabet level activities. The largest component of this line is our investment in AI research and development activities, which support all of Alphabet. There were two notable items that impacted the operating loss in Alphabet level activities. First, a $607 million charge related to decisions we've made to further optimize our physical footprint and office space globally; and second, our ongoing investments in AI R&D, including the full quarter effect of the organizational changes we've made in May to move some additional AI teams from Google Services to Google DeepMind. With respect to CapEx, our reported CapEx in the third quarter was $13 billion, reflecting investment in our technical infrastructure with the largest component being investment in servers, followed by data centers and networking equipment. Looking ahead, we expect quarterly CapEx in the fourth quarter to be at similar levels to Q3, keeping in mind that the timing of cash payments can cause variability in quarterly reported CapEx. Our expansion of data center capacity is expected to bring economic benefits to countries and communities where we are investing. In the third quarter alone, we made announcements of over $7 billion in planned data center investments with nearly $6 billion of that in the U.S. In Q3, we also returned value to shareholders in the form of $15.3 billion in share repurchases and $2.5 billion in dividend payments. Overall, we returned a total of nearly $70 billion over the trailing 12 months to shareholders. As we look forward, we're working to balance our investments in AI and other growth areas with the cost discipline needed to fund those activities. As we think about the remainder of 2024, there are a couple of dynamics to consider. In terms of revenue, year-on-year growth in advertising revenue will continue to be impacted by the increasing strength in advertising revenue in the second half of 2023, in part from APAC-based retailers. And there will be a headwind to year-over-year growth in subscription platforms and devices revenue in the fourth quarter due to the pull forward of our Made by Google launches into the third quarter this year. In terms of expenses, we'll continue to see increases in depreciation and expenses associated with higher level of investment in our technical infrastructure, partially offset by a slight benefit from the cost revenue associated with our devices due to the pull forward of hardware launches into Q3. Now before going into Q&A, as the new CFO, I would like to share a few thoughts on how I'm approaching and thinking through growth, cost structure and capital allocation and expect to hear more from me on these topics in the coming quarters. As I look at the business, I see opportunities for further growth propelled by AI and the underlying momentum across the business. You heard about some of these on the call today. I also believe that we are well positioned to deliver meaningful innovation, which will translate to revenue given our strength in the core pillars that are required to succeed in AI at scale. Realizing those opportunities and great innovation in AI requires global reach, which we have through our products and platforms, as well as continued meaningful capital investment. And while we have a strong balance sheet to be able to support these investments, we will be looking for efficiencies so that we can fund innovation in priority areas. Sundar, Ruth and our leadership team started important work to reengineer our cost structure including efforts such as optimizing our headcount growth, our physical footprint, improving the efficiencies of our technical infrastructure and streamlining operations across the company through the use of AI. I plan to build on these efforts, but also evaluate where we might be able to accelerate work and where we might need to pivot to free up capital for more attractive opportunities. Thank you. Sundar, Philipp and I will now take your questions.","evidence_gemma_new":"Google Service operating income","evidence_llama_3_3":"Google Services Operating income third quarter","evidence_qwen_3_30b":null,"gemma_new_max":30900000000.0,"gemma_new_min":30900000000.0,"llama_3_3_max":30900000000.0,"llama_3_3_min":30900000000.0,"qwen_3_30b_max":null,"qwen_3_30b_min":null}
{"symbol":"GOOGL","year":2024,"quarter":3,"date":"2024-Q3","chunk_id":4,"sub_chunk_id":0,"centroid_label":"google service google s service operating income","agreed_value":1900000000.0,"count":2,"chunk":"Anat Ashkenazi: Thank you, Philipp. And thanks, Sundar, for the words of welcome. My comments will focus on year-over-year comparisons for the third quarter, unless I state otherwise. I will start with the results at the Alphabet level and will then cover our segment results. I'll end with high-level commentary on investment at the Alphabet level. We had another strong quarter in Q3 with robust momentum across the business. Consolidated revenue increased by 15% or 16% in constant currency. Search remained the largest contributor to revenue growth, followed by a robust 35% growth in cloud. Total cost of revenue was $36.5 billion, up 10%. Tech was $13.7 billion, up 9%. We continue to see a revenue mix shift with Google Search growing at double-digit levels, while network revenue, which have a much higher TAC rate declined. Other cost of revenue was $22.8 billion, up 11%, with the increase primarily driven by content acquisition costs, primarily for YouTube, an increase in depreciation associated with higher level of investment in our technical infrastructure and higher hardware costs associated with the pull forward of our Made by Google launches from the fourth to the third quarter. Total operating expenses increased 5% to $23.3 billion. The increase was primarily driven by facilities-related charges as results of actions were taken to further optimize our office space footprint globally, followed by depreciation, partially offset by year-on-year decline in charges for legal and other matters. R&D investments increased by 11%, primarily driven by increases in compensation and depreciation expenses. Sales and marketing expenses increased 5%, primarily reflecting investment in advertising and promotional efforts related to the Made by Google launches, as well as for AI and Gemini. G&A expenses declined by 10%, primarily due to lower charges for legal and other matters. Operating income increased 34% to $28.5 billion and operating margin increased to 32%. Net income increased 34% to $26.3 billion and earnings per share increased 37% to $2.12. We're pleased with the progress we're making in reengineering our cost structure, which is reflected in our operating margin expansion this quarter, while also continuing to invest in the business to bring innovation to consumers, creators and enterprises. We delivered free cash flow of $17.6 billion for the third quarter and $55.8 billion for the trailing 12 months. Year-on-year free cash flow was negatively impacted by the following items. In 2023, we deferred cash tax payments from the second and third quarter to the fourth quarter. And in Q3 2024, we made a $3 billion cash payment related to the 2017 EC shopping fine. We ended the quarter with $93 billion in cash and marketable securities. Now turning to segment results. Google Services revenue increased 13% to $76.5 billion. Google Search and other advertising revenue increased by 12% to $49.4 billion. The robust performance of search was broad-based across verticals, led by the financial services vertical due to strength in insurance followed by retail. YouTube advertising revenue increased 12% to $8.9 billion, driven by brand, followed by direct response advertising. As Philipp mentioned, we're seeing strong momentum in YouTube, including robust growth in watch time across the platform and are excited about the new features and products we're bringing to creators. Network advertising revenue of $7.5 billion were down 2%. In the third quarter, the year-on-year growth in all our advertising revenue lines was impacted by the increase in strength in advertising revenue in Q3 of last year, in part from APAC-based retailers. Subscription platforms and devices revenue increased 28% to $10.7 billion, reflecting growth in subscription revenues, as well as the launch of our Made by Google devices in the third quarter. We continue to have significant growth in our subscription products, driven primarily by YouTube TV and YouTube Music Premium, as well as Google One, primarily due to increases in the number of paid subscribers. With regards to platforms, we're pleased with the performance in play, primarily driven by an increase in buyers. Google Service operating income increased by 29% to $30.9 billion, and operating margin was 40%. Turning to the Google Cloud segment, which continued to deliver very strong results this quarter. Revenue increased by 35% to $11.4 billion in the third quarter, reflecting accelerated growth in GCP across AI infrastructure, generative AI solutions and core GCP products. Once again, GCP grew at a rate that was higher than cloud overall. We also saw strong Google Workspace growth, primarily driven by increases in average revenue per seat. As you just heard from Sundar, the robust innovation and expanded AI offerings within our cloud business are allowing existing and new customers to realize measurable business benefits, including reduced cost, greater customer engagement, faster response time and better revenue conversion. Google Cloud operating income increased to $1.9 billion and operating margin increased to 17%. The operating margin expansion was driven by strong revenue performance across cloud AI products, core GCP and Workspace, as well as ongoing efficiency initiatives. As to our Other Bets, for the third quarter revenue were $388 million and operating loss was $1.1 billion. I'll highlight just a couple of accomplishments in the quarter for Waymo and Wing. We're excited about the progress we're seeing in Waymo, as Sundar mentioned, and the increase in the number of paid rides. We're planning to continue to expand our geographic coverage and reach more customers in existing markets and new markets. Wing, our drone delivery company, recently passed the 1-year anniversary of scaling its partnership with Walmart in the Dallas-Fort Worth area, now operating in 11 stores and serving 26 different cities and towns. Turning to Alphabet level activities. The largest component of this line is our investment in AI research and development activities, which support all of Alphabet. There were two notable items that impacted the operating loss in Alphabet level activities. First, a $607 million charge related to decisions we've made to further optimize our physical footprint and office space globally; and second, our ongoing investments in AI R&D, including the full quarter effect of the organizational changes we've made in May to move some additional AI teams from Google Services to Google DeepMind. With respect to CapEx, our reported CapEx in the third quarter was $13 billion, reflecting investment in our technical infrastructure with the largest component being investment in servers, followed by data centers and networking equipment. Looking ahead, we expect quarterly CapEx in the fourth quarter to be at similar levels to Q3, keeping in mind that the timing of cash payments can cause variability in quarterly reported CapEx. Our expansion of data center capacity is expected to bring economic benefits to countries and communities where we are investing. In the third quarter alone, we made announcements of over $7 billion in planned data center investments with nearly $6 billion of that in the U.S. In Q3, we also returned value to shareholders in the form of $15.3 billion in share repurchases and $2.5 billion in dividend payments. Overall, we returned a total of nearly $70 billion over the trailing 12 months to shareholders. As we look forward, we're working to balance our investments in AI and other growth areas with the cost discipline needed to fund those activities. As we think about the remainder of 2024, there are a couple of dynamics to consider. In terms of revenue, year-on-year growth in advertising revenue will continue to be impacted by the increasing strength in advertising revenue in the second half of 2023, in part from APAC-based retailers. And there will be a headwind to year-over-year growth in subscription platforms and devices revenue in the fourth quarter due to the pull forward of our Made by Google launches into the third quarter this year. In terms of expenses, we'll continue to see increases in depreciation and expenses associated with higher level of investment in our technical infrastructure, partially offset by a slight benefit from the cost revenue associated with our devices due to the pull forward of hardware launches into Q3. Now before going into Q&A, as the new CFO, I would like to share a few thoughts on how I'm approaching and thinking through growth, cost structure and capital allocation and expect to hear more from me on these topics in the coming quarters. As I look at the business, I see opportunities for further growth propelled by AI and the underlying momentum across the business. You heard about some of these on the call today. I also believe that we are well positioned to deliver meaningful innovation, which will translate to revenue given our strength in the core pillars that are required to succeed in AI at scale. Realizing those opportunities and great innovation in AI requires global reach, which we have through our products and platforms, as well as continued meaningful capital investment. And while we have a strong balance sheet to be able to support these investments, we will be looking for efficiencies so that we can fund innovation in priority areas. Sundar, Ruth and our leadership team started important work to reengineer our cost structure including efforts such as optimizing our headcount growth, our physical footprint, improving the efficiencies of our technical infrastructure and streamlining operations across the company through the use of AI. I plan to build on these efforts, but also evaluate where we might be able to accelerate work and where we might need to pivot to free up capital for more attractive opportunities. Thank you. Sundar, Philipp and I will now take your questions.","evidence_gemma_new":"Google Cloud operating income","evidence_llama_3_3":"Google Cloud segment Operating income third quarter","evidence_qwen_3_30b":null,"gemma_new_max":1900000000.0,"gemma_new_min":1900000000.0,"llama_3_3_max":1900000000.0,"llama_3_3_min":1900000000.0,"qwen_3_30b_max":null,"qwen_3_30b_min":null}
{"symbol":"GOOGL","year":2024,"quarter":4,"date":"2024-Q4","chunk_id":4,"sub_chunk_id":0,"centroid_label":"google service google s service operating income","agreed_value":32800000000.0,"count":2,"chunk":"Anat Ashkenazi: Thank you, Philipp. We're pleased with the continued momentum we're seeing across the business as Alphabet revenue for 2024 reached $350 billion, up 14% on a reported basis and 15% in constant currency versus 2023. My comments will focus on year-over-year comparisons for the fourth quarter, unless I state otherwise. I will start with the results at the Alphabet level and we'll then cover our segment results. I'll end with some commentary and expectations over the first quarter and full year 2025. We had another strong quarter in Q4 with robust momentum across the business. Consolidated revenue of $96.5 billion, increased by 12% in both reported and constant currency. Search remained the largest contributor to revenue growth, followed by Cloud. Total cost of revenue was $40.6 billion, up 8%. Tech was $14.8 billion, up 6%. We continue to see a revenue mix shift with Google Search growing at double-digit levels, while network revenues, which have a much higher tech rate, declined. Other cost of revenue was $25.8 billion, up 9%, with the increase primarily driven by content acquisitions costs, primarily for YouTube, followed by depreciation, due to increasing investments in our technical infrastructure. Growth in content acquisition and depreciation were partially offset by our year-over-year decline in hardware costs due to the shift in timing of our made-by-Google launches to the third quarter 2024 compared to the fourth quarter of 2023. In terms of total expenses, the year-over-year comparisons reflect $1.2 billion in exit charges that we took in the fourth quarter of 2023 in connection with actions to optimize our global office space. As previously disclosed, those charges were allocated across the expense lines in other costs of revenue and OpEx based on associated headcount. Total operating expenses decreased 1% to $24.9 billion. R&D investments increased by 8%, primarily driven by increase in compensation and depreciation expenses, partially offset by the impact of charges for office [ph] space optimization in the fourth quarter of 2023. Sales and marketing expenses decreased 5%, primarily reflecting the optimization charges last year, as well as declines in compensation and in ads and promotion expenses due to the timing shift of the Pixel launch from Q4 to Q3. G&A expenses declined by 15%, reflecting a shift of timing in our charitable contributions, as well as the optimization charges last year. Operating income increased 31%, the score [ph] to $31 billion, and operating margin increased to 32%, representing 4.6 points of margin expansion. Net income increased 28% to $26.5 billion, and earnings per share increased 31% to $2.15. We delivered free cash flow of $24.8 billion in the fourth quarter and $72.8 billion for the full year 2024. We ended the quarter with $96 billion in cash and marketable securities. Turning to segment results. Google Service revenues increased 10% to $84.1 billion, reflecting the strong momentum across Google Search and YouTube ads. Google Search and other advertising revenues increased by 13% to $54 billion. The robust performance of Search was once again broad-based across verticals, led by the financial service vertical due to strength in insurance, followed by retail. YouTube advertising revenue increased 14% to $10.5 billion, driven by brand, followed by direct response advertising. Network advertising revenue of $8 billion, were down 4%. In the fourth quarter, the year-over-year comparison in all of our advertising revenue lines was impacted by the increase in strength in advertising revenue in Q4 2023, in part from APAC-based retailers. Subscription platforms and device revenues increase 8% to $11.6 billion, primarily reflecting growth in subscription revenues, partially offset by the shift in timing of the launch of our made by Google devices to the third quarter, compared with the fourth quarter in 2023. We continue to have significant growth in our subscription products, primarily due to increase in the number of paid subscribers across YouTube TV, YouTube Music Premium, and Google One. With regards to Platform, we saw a slight increase in the growth rate in Play, primarily due to a strong increase in the number of buyers. Google's service operating income increased 23% to $32.8 billion, and operating margin increased from 35% to 39%, representing a meaningful margin expansion. Turning to the Google Cloud segment, which continued to deliver very strong results this quarter. Revenue increased by 30% to $12 billion in the fourth quarter, reflecting growth in GCP across core GCP products, AI infrastructure, and generative AI solutions. Once again, GCP grew at a rate that was much higher than cloud overall. Healthy Google Workspace growth was primarily driven by increase in average revenue per seat. Google Cloud operating income increased to $2.1 billion, and operating margin increased from 9.4% to 17.5%. We're pleased with the work the cloud team is doing to deliver valuable solutions to the customer and generate revenue growth, as well as its continued focus on driving efficiencies across the cloud business. As for Other Bets, for the fourth quarter, revenue were $400 million, and the operating loss was $1.2 billion. The year-over-year decline in revenue and increase in operating loss primarily reflect the milestone payment in the fourth quarter of 2023 for one of the Other Bets. Turning to Alphabet level activities, the largest component of this line is our investments in AI research and development activities which support all of Alphabet. As a reminder, Alphabet level activities have included nearly all severance charges from reductions in workforce and office space charges. In the fourth quarter of 2024, the biggest factor in year-over-year comparison is the $1.2 billion in charges in the fourth quarter of 2023, almost entirely in connection with office space optimization. With respect to CapEx, our reported CapEx in the fourth quarter was $14 billion, primarily reflecting investments in our technical infrastructure, with the largest component being investment in servers, followed by data centers, to support the growth of our business across Google Services, Google Cloud, and Google DeepMind. In Q4, we returned value to shareholders in the form of $15 billion in share purchases and $2.4 billion in dividend payments. Overall, we returned a total of nearly $70 billion to shareholders in 2024. Turning to 2025, I would like to provide some commentary on several factors that will impact our business performance in both the first quarter and the full year 2025. First in terms of revenue, I'll highlight two items that will have meaningful impact on Q1 revenue across the company. First in terms of revenues, I'll highlight two items that will have meaningful impact on Q1 revenues across the company. The first is the impact of foreign exchange rates. At the current spot rates, we expect a larger headwind to our revenues from the strengthening of the U.S dollar relative to key currencies in Q1 versus Q4 2024. Second is the impact of leap year. We expect a headwind from having one less day of revenue in Q1 2025 compared with leap year in the first quarter of 2024. As for our segments, Google Services, advertising revenue in 2025 will be impacted by lapping the strength we experience in the financial service vertical throughout 2024. And in Cloud, given the revenues are correlated with the timing of deployment of new capacity, we could see variability in cloud revenue growth rates depending on when new capacity comes online during 2025. Moving to investments, starting with our expectation for CapEx for the full year 2025. As we mentioned on the Q3 call, as we expand our AI efforts, we expect to increase our investments in capital expenditure for technical infrastructure, primarily for servers, followed by data centers and networking. We expect to invest approximately $75 billion in CapEx in 2025 with approximately $16 billion to $18 billion of debt in the first quarter. The expected total investment level may fluctuate from quarter-to-quarter, primarily due to timing of deliveries and construction schedules. In terms of expenses, first, the increase in our investment in CapEx over the past few years will increase pressure on the P&L, primarily in the form of higher depreciation. In 2024, we saw 28% year-over-year growth in depreciation as we put more technical infrastructure assets into service. Given the increase in CapEx investments over the past few years, we expect the growth rate and depreciation to accelerate in 2025. Second, we expect some headcount growth in 2025 in key investment areas such as AI and cloud. As you just heard from Sundar, we're delivering products and solutions to customer at a rapid pace, building, testing, and launching products faster than ever before. And as I mentioned on the Q3 call, we're doing that while also focusing on driving further efficiencies in how we operate the business. Before we take questions, I'd like to recap the financial results for the year. For the full year 2024, revenue grew by 14% or by $43 billion, reaching $350 billion. Google Services and Google Cloud each continue to see double-digit revenue growth coupled with margin extension. YouTube and cloud revenues combined, ended the year at $110 billion annual run rate. And in 2024, we generate total income of $112 billion, an increase of 33% from 2023. We're pleased with the momentum we're seeing in AI innovation and monetization. We've been using AI to improve the performance of our ads business for well over a decade, and Cloud is generating billions in annual revenue from AI infrastructure and generative AI solutions. We're also excited about the potential to bring new experiences to users that will provide additional opportunities for monetization. And I look forward to sharing more in our progress throughout the year. Sundar, Philipp, and I will now take your questions.","evidence_gemma_new":"Google's service operating income","evidence_llama_3_3":"Google Service Google's service operating income fourth quarter","evidence_qwen_3_30b":null,"gemma_new_max":32800000000.0,"gemma_new_min":32800000000.0,"llama_3_3_max":32800000000.0,"llama_3_3_min":32800000000.0,"qwen_3_30b_max":null,"qwen_3_30b_min":null}
{"symbol":"GOOGL","year":2024,"quarter":4,"date":"2024-Q4","chunk_id":4,"sub_chunk_id":0,"centroid_label":"google service google s service operating income","agreed_value":2100000000.0,"count":3,"chunk":"Anat Ashkenazi: Thank you, Philipp. We're pleased with the continued momentum we're seeing across the business as Alphabet revenue for 2024 reached $350 billion, up 14% on a reported basis and 15% in constant currency versus 2023. My comments will focus on year-over-year comparisons for the fourth quarter, unless I state otherwise. I will start with the results at the Alphabet level and we'll then cover our segment results. I'll end with some commentary and expectations over the first quarter and full year 2025. We had another strong quarter in Q4 with robust momentum across the business. Consolidated revenue of $96.5 billion, increased by 12% in both reported and constant currency. Search remained the largest contributor to revenue growth, followed by Cloud. Total cost of revenue was $40.6 billion, up 8%. Tech was $14.8 billion, up 6%. We continue to see a revenue mix shift with Google Search growing at double-digit levels, while network revenues, which have a much higher tech rate, declined. Other cost of revenue was $25.8 billion, up 9%, with the increase primarily driven by content acquisitions costs, primarily for YouTube, followed by depreciation, due to increasing investments in our technical infrastructure. Growth in content acquisition and depreciation were partially offset by our year-over-year decline in hardware costs due to the shift in timing of our made-by-Google launches to the third quarter 2024 compared to the fourth quarter of 2023. In terms of total expenses, the year-over-year comparisons reflect $1.2 billion in exit charges that we took in the fourth quarter of 2023 in connection with actions to optimize our global office space. As previously disclosed, those charges were allocated across the expense lines in other costs of revenue and OpEx based on associated headcount. Total operating expenses decreased 1% to $24.9 billion. R&D investments increased by 8%, primarily driven by increase in compensation and depreciation expenses, partially offset by the impact of charges for office [ph] space optimization in the fourth quarter of 2023. Sales and marketing expenses decreased 5%, primarily reflecting the optimization charges last year, as well as declines in compensation and in ads and promotion expenses due to the timing shift of the Pixel launch from Q4 to Q3. G&A expenses declined by 15%, reflecting a shift of timing in our charitable contributions, as well as the optimization charges last year. Operating income increased 31%, the score [ph] to $31 billion, and operating margin increased to 32%, representing 4.6 points of margin expansion. Net income increased 28% to $26.5 billion, and earnings per share increased 31% to $2.15. We delivered free cash flow of $24.8 billion in the fourth quarter and $72.8 billion for the full year 2024. We ended the quarter with $96 billion in cash and marketable securities. Turning to segment results. Google Service revenues increased 10% to $84.1 billion, reflecting the strong momentum across Google Search and YouTube ads. Google Search and other advertising revenues increased by 13% to $54 billion. The robust performance of Search was once again broad-based across verticals, led by the financial service vertical due to strength in insurance, followed by retail. YouTube advertising revenue increased 14% to $10.5 billion, driven by brand, followed by direct response advertising. Network advertising revenue of $8 billion, were down 4%. In the fourth quarter, the year-over-year comparison in all of our advertising revenue lines was impacted by the increase in strength in advertising revenue in Q4 2023, in part from APAC-based retailers. Subscription platforms and device revenues increase 8% to $11.6 billion, primarily reflecting growth in subscription revenues, partially offset by the shift in timing of the launch of our made by Google devices to the third quarter, compared with the fourth quarter in 2023. We continue to have significant growth in our subscription products, primarily due to increase in the number of paid subscribers across YouTube TV, YouTube Music Premium, and Google One. With regards to Platform, we saw a slight increase in the growth rate in Play, primarily due to a strong increase in the number of buyers. Google's service operating income increased 23% to $32.8 billion, and operating margin increased from 35% to 39%, representing a meaningful margin expansion. Turning to the Google Cloud segment, which continued to deliver very strong results this quarter. Revenue increased by 30% to $12 billion in the fourth quarter, reflecting growth in GCP across core GCP products, AI infrastructure, and generative AI solutions. Once again, GCP grew at a rate that was much higher than cloud overall. Healthy Google Workspace growth was primarily driven by increase in average revenue per seat. Google Cloud operating income increased to $2.1 billion, and operating margin increased from 9.4% to 17.5%. We're pleased with the work the cloud team is doing to deliver valuable solutions to the customer and generate revenue growth, as well as its continued focus on driving efficiencies across the cloud business. As for Other Bets, for the fourth quarter, revenue were $400 million, and the operating loss was $1.2 billion. The year-over-year decline in revenue and increase in operating loss primarily reflect the milestone payment in the fourth quarter of 2023 for one of the Other Bets. Turning to Alphabet level activities, the largest component of this line is our investments in AI research and development activities which support all of Alphabet. As a reminder, Alphabet level activities have included nearly all severance charges from reductions in workforce and office space charges. In the fourth quarter of 2024, the biggest factor in year-over-year comparison is the $1.2 billion in charges in the fourth quarter of 2023, almost entirely in connection with office space optimization. With respect to CapEx, our reported CapEx in the fourth quarter was $14 billion, primarily reflecting investments in our technical infrastructure, with the largest component being investment in servers, followed by data centers, to support the growth of our business across Google Services, Google Cloud, and Google DeepMind. In Q4, we returned value to shareholders in the form of $15 billion in share purchases and $2.4 billion in dividend payments. Overall, we returned a total of nearly $70 billion to shareholders in 2024. Turning to 2025, I would like to provide some commentary on several factors that will impact our business performance in both the first quarter and the full year 2025. First in terms of revenue, I'll highlight two items that will have meaningful impact on Q1 revenue across the company. First in terms of revenues, I'll highlight two items that will have meaningful impact on Q1 revenues across the company. The first is the impact of foreign exchange rates. At the current spot rates, we expect a larger headwind to our revenues from the strengthening of the U.S dollar relative to key currencies in Q1 versus Q4 2024. Second is the impact of leap year. We expect a headwind from having one less day of revenue in Q1 2025 compared with leap year in the first quarter of 2024. As for our segments, Google Services, advertising revenue in 2025 will be impacted by lapping the strength we experience in the financial service vertical throughout 2024. And in Cloud, given the revenues are correlated with the timing of deployment of new capacity, we could see variability in cloud revenue growth rates depending on when new capacity comes online during 2025. Moving to investments, starting with our expectation for CapEx for the full year 2025. As we mentioned on the Q3 call, as we expand our AI efforts, we expect to increase our investments in capital expenditure for technical infrastructure, primarily for servers, followed by data centers and networking. We expect to invest approximately $75 billion in CapEx in 2025 with approximately $16 billion to $18 billion of debt in the first quarter. The expected total investment level may fluctuate from quarter-to-quarter, primarily due to timing of deliveries and construction schedules. In terms of expenses, first, the increase in our investment in CapEx over the past few years will increase pressure on the P&L, primarily in the form of higher depreciation. In 2024, we saw 28% year-over-year growth in depreciation as we put more technical infrastructure assets into service. Given the increase in CapEx investments over the past few years, we expect the growth rate and depreciation to accelerate in 2025. Second, we expect some headcount growth in 2025 in key investment areas such as AI and cloud. As you just heard from Sundar, we're delivering products and solutions to customer at a rapid pace, building, testing, and launching products faster than ever before. And as I mentioned on the Q3 call, we're doing that while also focusing on driving further efficiencies in how we operate the business. Before we take questions, I'd like to recap the financial results for the year. For the full year 2024, revenue grew by 14% or by $43 billion, reaching $350 billion. Google Services and Google Cloud each continue to see double-digit revenue growth coupled with margin extension. YouTube and cloud revenues combined, ended the year at $110 billion annual run rate. And in 2024, we generate total income of $112 billion, an increase of 33% from 2023. We're pleased with the momentum we're seeing in AI innovation and monetization. We've been using AI to improve the performance of our ads business for well over a decade, and Cloud is generating billions in annual revenue from AI infrastructure and generative AI solutions. We're also excited about the potential to bring new experiences to users that will provide additional opportunities for monetization. And I look forward to sharing more in our progress throughout the year. Sundar, Philipp, and I will now take your questions.","evidence_gemma_new":"Google Cloud operating income","evidence_llama_3_3":"Google Cloud Google Cloud operating income fourth quarter","evidence_qwen_3_30b":"Google Cloud operating income Q4","gemma_new_max":2100000000.0,"gemma_new_min":2100000000.0,"llama_3_3_max":2100000000.0,"llama_3_3_min":2100000000.0,"qwen_3_30b_max":2100000000.0,"qwen_3_30b_min":2100000000.0}
{"symbol":"GOOGL","year":2023,"quarter":1,"date":"2023-Q1","chunk_id":3,"sub_chunk_id":0,"centroid_label":"google service google service revenues","agreed_value":62000000000.0,"count":3,"chunk":"Philipp Schindler: Thanks, Sundar, and hey, everyone. It's great to be here today. I'll kick off with Google Services' performance in the first quarter, then provide color into our key opportunity areas and then turn it over to Ruth for more on our financial performance. Google Services revenue of $62 billion were up 1% year-on-year, including the effect of a modest foreign exchange headwind. In Google Advertising, Search and Other, revenues grew 2% year-over-year, reflecting an increase in the travel and retail verticals, offset partially by a decline in finance as well as in media and entertainment. In YouTube Ads, we saw signs of stabilization and performance, while in network, there was an incremental pullback in advertiser spend. Google Other revenues were up 9% year-over-year led by strong growth in YouTube subscriptions revenues. Now let's double-click into the 3 areas I laid out last quarter where we see clear opportunities for long-term growth in advertising: number one, Google AI; number two, retail, which cuts across all of our ads products and services; and number three, YouTube. First, Google AI. I've said before, AI has long been an important driver of our business. Advancements are powering our ability to help businesses, big and small, respond in real time to rapidly changing market and consumer shifts and deliver measurable ROI when it's needed most. In Q1, we continue to innovate across our products. Take Core Search, for example. In targeting, we updated search keyword relevance using the latest natural language AI from MUM models to improve the relevance and performance of shown ads when there are multiple overlapping keywords eligible for an auction. In bidding, we improved our Smart Bidding models to bid more accurately based on differences in search ad formats. In other words, bid more effectively depending on how a user wants to engage with an ad. In Creatives, we opened our Automatically Created Assets beta to all advertisers in English. ACA generates text assets alongside your responsive search ads and uses AI to help reduce the amount of manual work to keep creatives fresh and relevant to users' query, context and to the advertisers' business. To then unlock Core Search further and maximize conversions across all of Google, we're actively helping more advertisers paired together with Performance Max. Advertisers who use PMax are, on average, achieving over 18% more conversions at a similar CPA. This is up 5 points in just 14 months, thanks to advances in the AI underlying bidding, creatives, search query matching and new formats like YouTube Shorts. I mentioned earlier that travel was a contributor to growth. In March, we launched PMax for travel goals. Now even the smallest hoteliers can benefit from the expanded reach of hotel ads in PMax, like family-run Corissia Hotels Group, who drove a 32% increase in revenue and a 26% increase in total direct bookings within just 1 month of using PMax for travel goals. There's more to come here as we add even more AI product features. Stay tuned for more at Google Marketing Live in May.","evidence_gemma_new":"Google Services revenue year-on-year","evidence_llama_3_3":"Google Services revenues first quarter","evidence_qwen_3_30b":"Google Services Revenues first quarter","gemma_new_max":62000000000.0,"gemma_new_min":62000000000.0,"llama_3_3_max":62000000000.0,"llama_3_3_min":62000000000.0,"qwen_3_30b_max":62000000000.0,"qwen_3_30b_min":62000000000.0}
{"symbol":"GOOGL","year":2023,"quarter":1,"date":"2023-Q1","chunk_id":5,"sub_chunk_id":0,"centroid_label":"google service google service revenues","agreed_value":7500000000.0,"count":2,"chunk":"Ruth Porat: Thank you, Philipp. Our financial results for the first quarter reflect continued healthy fundamental growth in Search and momentum in Cloud. As I go through the discussion today, I will reference some changes to our reporting and disclosures that are covered more fully in the 8-K we filed last week. I will conclude with our outlook. For the first quarter, our consolidated revenues were $69.8 billion, up 3% or up 6% in constant currency. Search remained the largest contributor to revenue growth on a constant currency basis. In terms of expenses and profitability, year-on-year comparisons are impacted by 3 factors: first, the $2.6 billion in charges we took in the first quarter related to workforce and office space reductions. We provided a table in our earnings release that shows the impact of those charges on cost of revenues and operating expenses. Second, the adjustment we made to the estimated useful lives of servers and certain network equipment at the beginning of 2023. As you can see in our earnings release, the effect for the first quarter was a reduction in depreciation expense of $988 million. Third, the shift in timing of our annual employee stock-based compensation awards from January to March delays the step-up in SBC from Q1 to Q2. This shift in timing does not affect the total amount of SBC over the full year 2023. Total cost of revenues was $30.6 billion, up 3%, driven by other cost of revenues of $18.9 billion, which was up 7%, the biggest factor of which was compensation costs associated with data centers and other operations and followed by content acquisition costs. Operating expenses were $21.8 billion, up 19%, with a significant impact from the charges related to workforce and office space reductions. Operating income was $17.4 billion, down 13%, and our operating margin was 25%. Net income was $15.1 billion. We delivered free cash flow of $17.2 billion in the first quarter and $62 billion for the trailing 12 months. We ended the quarter with $115 billion in cash and marketable securities. Turning to our segment results. These were affected by 2 additional changes outlined in our 8-K filing. First, reflecting the increasing collaboration between DeepMind and Google Services, Google Cloud, and Other Bets, as of Q1, DeepMind is reported as part of Alphabet's unallocated corporate costs. And second, beginning in the first quarter, we updated our cost allocation methodologies to provide our business leaders with increased transparency for decision-making. In our filing, we provided a recast of prior period results for the segment for these 2 changes. The highlights of the year-on-year performance of our segments that I will review reflect these recast results. Starting with Google Services. Revenues were $62 billion, up 1%. Google Search and other advertising revenues of $40.4 billion in the quarter were up 2%. YouTube advertising revenues of $6.7 billion were down 3%. Network advertising revenues of $7.5 billion were down 8%. Other revenues were $7.4 billion, up 9%, reflecting primarily ongoing significant subscriber growth in YouTube TV and YouTube Music Premium. TAC was $11.7 billion, down 2%, primarily reflecting a mix shift between Search and Network. Google Services operating income was $21.7 billion, down 1%, and the operating margin was 35%. Turning to the Google Cloud segment. Revenues were $7.5 billion for the quarter, up 28%. Growth in GCP remained strong across geographies, industries and products. Google Workspace's strong results were driven by increases in both seats and average revenue per seat. Google Cloud had operating income of $191 million, and the operating margin was 2.6%. As to our Other Bets, for the first quarter, revenues were $288 million, and the operating loss was $1.2 billion. Turning to our outlook for the business. In terms of the operating environment, our results in the first quarter reflected ongoing headwinds due to a challenging economic environment, and the outlook remains uncertain. Foreign exchange headwinds have moderated, and we expect less of a foreign exchange headwind in the second quarter based on current spot rates. With respect to Google Services, within advertising, Q1 results reflect the resilience of Search with its unique ability to surface demand and deliver measurable ROI. Excluding the impact of foreign exchange, the revenue growth of Search was similar to last quarter. In YouTube, we saw signs of stabilization in ad spend on a sequential basis. We continue to prioritize growth in Shorts engagement where we are encouraged by progress in monetization. As to other revenues, in YouTube subscriptions, we are pleased with the significant ongoing subscriber growth in both YouTube Music Premium and YouTube TV. In Play, revenues were down year-on-year, primarily due to the continued impact of foreign exchange in APAC, although results have improved as we lapped the impact from our introduction of fee reductions last year. Turning to Google Cloud. Our investments in product innovation, our go-to-market organization and our partner ecosystem delivered strong results as customers across industries and geographies increasingly rely on Google Cloud to digitally transform their businesses. That being said, in Q1, we continued to see slower growth of consumption as customers optimized GCP costs, reflecting the macro backdrop which remains uncertain. In terms of operating performance, we remain focused on driving long-term profitable growth in Cloud while continuing to invest given the substantial opportunity. Moving to Other Bets. In the first quarter, we similarly worked to refine strategies and prioritize efforts across the portfolio, including reductions to head count. I will now walk you through an update on our efforts to reengineer our cost base, slowing the pace of operating expense growth while creating capacity for key investment areas, particularly in support of AI across the company. First, as discussed on the fourth quarter call, we have efforts underway in 3 broad categories: number one, using AI and automation to improve productivity across Alphabet for operational tasks as well as the efficiency of our technical infrastructure; number two, managing our spend with suppliers and vendors more effectively; and number three, continuing to optimize how and where we work. As we've noted previously, all 3 work streams are ramping up this year, and we plan to build on these efforts in 2024 and in subsequent years. Second, with respect to head count growth. The reported number of employees at the end of the first quarter includes almost all of the employees impacted by the workforce reduction we announced in January. We expect most of the impacted individuals will no longer be reflected in our head count by the end of the second quarter. In terms of the outlook for head count for the year, as we shared last quarter, we are meaningfully slowing the pace of hiring in 2023 while still investing in priority areas, particularly for top engineering and technical talent. In terms of our investments in AI, we are excited about the creation of Google DeepMind, combining the Brain Team from Google Research with DeepMind, with the goal to accelerate innovation and impact. Beginning in the second quarter of 2023, the costs associated with teams and activities transferred from Google Research will move from Google Services to Google DeepMind within Alphabet's unallocated corporate costs. Finally, as it relates to CapEx, for 2023, we now expect total CapEx to be modestly higher than in 2022. As discussed last quarter, CapEx this year will include a meaningful increase in technical infrastructure versus a decline in office facilities. We expect the pace of investment in both data center construction and servers to step up in the second quarter and continue to increase throughout the year. Thank you. Sundar, Philipp and I will now take your questions.","evidence_gemma_new":null,"evidence_llama_3_3":"Google Cloud revenues first quarter","evidence_qwen_3_30b":"Google Cloud Revenues first quarter","gemma_new_max":null,"gemma_new_min":null,"llama_3_3_max":7500000000.0,"llama_3_3_min":7500000000.0,"qwen_3_30b_max":7500000000.0,"qwen_3_30b_min":7500000000.0}
{"symbol":"GOOGL","year":2023,"quarter":2,"date":"2023-Q2","chunk_id":4,"sub_chunk_id":0,"centroid_label":"google service google service revenues","agreed_value":8000000000.0,"count":3,"chunk":"Ruth Porat: Thank you, Philipp. Before I go into the results, first, Sundar, thank you very much for the opportunity. I'm very excited about the new role, and I look forward to it. So turning to the results. We're very pleased with our financial results for the second quarter, which reflect an acceleration of growth in Search and momentum in Cloud. My comments will be on year-over-year comparisons for the second quarter unless I state otherwise. I will start with results at the Alphabet level followed by segment results and conclude with our outlook. For the second quarter, our consolidated revenues were $74.6 billion, up 7% or up 9% in constant currency. Search remained the largest contributor to revenue growth. Total cost of revenues was $31.9 billion, up 6%, driven by other cost of revenues of $19.4 billion, which was up 8%. Growth here was driven by content acquisition costs, primarily for YouTube subscription offerings, followed by hardware costs associated with Pixel family launches in the second quarter. As noted in our earnings release, the overall increase in data center and other operations costs was partially offset by a reduction in depreciation expense due to the change in estimated useful lives we discussed last quarter. Operating expenses were $20.9 billion, up 4%. Operating income was $21.8 billion, up 12%, and our operating margin was 29%. I will cover our expense and margin performance in our outlook. Other income and expense was $65 million. Net income was $18.4 billion. We delivered free cash flow of $21.8 billion in the second quarter and $71 billion for the trailing 12 months, reflecting improved operating performance as well as the deferral of certain tax payments to the fourth quarter of 2023 as noted in our earnings release. We ended the quarter with $118 billion in cash and marketable securities. Turning to our segment results. Prior period results have been recast for 2 changes that we made as of the first quarter. First, DeepMind is now reported as part of Alphabet's unallocated corporate costs. Second, we updated our cost allocation methodologies. In the second quarter, we then combined the Brain team from Google Research with DeepMind to form Google DeepMind. Costs associated with the Brain team, which were previously included in Google Services, are now reported as part of Alphabet's unallocated corporate costs. We have not recast prior period results to reflect this additional change. Within Google Services, revenues were $66.3 billion, up 5%. Google Search and other advertising revenues of $42.6 billion in the quarter were up 5%, led by growth in retail. YouTube advertising revenues of $7.7 billion were up 4%, driven by brand advertising, followed by direct response reflecting further stabilization in spending by advertisers. Network advertising revenues of $7.9 billion were down 5%. Other revenues were $8.1 billion, up 24%, reflecting growth in YouTube non-advertising revenues, primarily from subscription growth in YouTube Music Premium and YouTube TV followed by growth in hardware revenues primarily driven by the launch of the Pixel 7a in the second quarter. Finally, Play returned to positive growth in the second quarter. TAC was $12.5 billion, up 3%. Google Services operating income was $23.5 billion, up 8%, and the operating margin was 35%. Turning to the Google Cloud segment. Revenues were $8 billion for the quarter, up 28%. GCP revenue growth remained strong across geographies, industries and products. That being said, we saw a continued moderation in the rate of consumption growth as consumers optimize their spend. Google Workspace strong revenue growth was driven by increases in both seats and average revenue per seat. Google Cloud had operating income of $395 million and the operating margin was 5%. As to our Other Bets, for the second quarter, revenues were $285 million, and the operating loss was $813 million. The decrease in operating loss was primarily driven by a reduction in valuation-based compensation liabilities related to certain Other Bets. Turning to our outlook for the business. With respect to Google Services, first, within advertising. We were pleased with the acceleration of Search advertising revenue growth in the second quarter. Our continued ability to generate sustained growth reflects our unparalleled engineering innovation that creates extraordinary experiences for users and capabilities for advertisers and delivered with the deep expertise of our go-to-market team. And in YouTube, we saw ongoing signs of stabilization in advertiser spending. We are prioritizing product focus on increasing quality consumption of video content with both Shorts and in the living room, which is translating into improved monetization. Second, within other revenues. In our YouTube subscription products, the sustained, strong growth in revenues reflects significant subscriber growth. You may have seen that last week, we increased subscription prices for YouTube Music and Premium, which underscores the value of the products. Strong year-on-year growth in hardware revenues was due, in large part, to a timing change given the Pixel 7a was launched in the second quarter, whereas the Pixel 6a launch occurred in the third quarter last year. Looking ahead, the launch timing change will be a headwind to hardware revenue growth in the third quarter. Play returned to positive growth in the second quarter, driven primarily by a solid increase in the number of buyers. Turning to Google Cloud. We are particularly excited about the customer interest in our AI-optimized infrastructure, our large language models, our AI platform services and our new generative AI offerings such as Duet AI for Google Workspace, although we are still clearly in the early days. At the same time, we continue to experience headwinds in the second quarter for moderation in consumption growth as customers optimize their spend. We continue to invest aggressively while remaining focused on profitable growth. In terms of expenses and profitability, we remain very focused on durably reengineering our cost base. Most evident to date are the actions we have taken to reduce the pace of headcount growth, including the workforce reductions we announced in the first quarter and a slower pace of organic hiring, in part given our focus on reallocating talent from within to fuel our growth priorities. A quick comment on the sequential improvement in operating margins in the second quarter. There are 2 factors to note. First, the benefit from an acceleration in search advertising revenue growth in the second quarter. Second, the vast majority of the charges related to our workforce reduction and optimization of our global office space were taken in Q1. Finally, as it relates to CapEx, in Q2, the largest component was for servers, which included a meaningful increase in our investments in AI compute. The sequential step-up in the second quarter was lower than anticipated for 2 reasons. First, with respect to office facilities, we continue to moderate the pace of fit-outs and ground-up construction to reflect the slower expected pace of headcount growth. Second, there were delays in certain data center construction projects. We expect elevated levels of investment in our technical infrastructure increasing through the back half of 2023 and continuing to grow in 2024. The primary driver is to support the opportunities we see in AI across Alphabet, including investments in GPUs and proprietary TPUs as well as data center capacity. With all that said, we remain committed to durably reengineering our cost base in order to help create capacity for these investments in support of long-term, sustainable financial value. Thank you. Sundar, Philipp and I will now take your questions.","evidence_gemma_new":"Google Cloud revenues","evidence_llama_3_3":"Google Cloud revenue Q2","evidence_qwen_3_30b":"Google Cloud revenue Q2","gemma_new_max":8000000000.0,"gemma_new_min":8000000000.0,"llama_3_3_max":8000000000.0,"llama_3_3_min":8000000000.0,"qwen_3_30b_max":8000000000.0,"qwen_3_30b_min":8000000000.0}
{"symbol":"GOOGL","year":2023,"quarter":2,"date":"2023-Q2","chunk_id":4,"sub_chunk_id":0,"centroid_label":"google service google service revenues","agreed_value":66300000000.0,"count":3,"chunk":"Ruth Porat: Thank you, Philipp. Before I go into the results, first, Sundar, thank you very much for the opportunity. I'm very excited about the new role, and I look forward to it. So turning to the results. We're very pleased with our financial results for the second quarter, which reflect an acceleration of growth in Search and momentum in Cloud. My comments will be on year-over-year comparisons for the second quarter unless I state otherwise. I will start with results at the Alphabet level followed by segment results and conclude with our outlook. For the second quarter, our consolidated revenues were $74.6 billion, up 7% or up 9% in constant currency. Search remained the largest contributor to revenue growth. Total cost of revenues was $31.9 billion, up 6%, driven by other cost of revenues of $19.4 billion, which was up 8%. Growth here was driven by content acquisition costs, primarily for YouTube subscription offerings, followed by hardware costs associated with Pixel family launches in the second quarter. As noted in our earnings release, the overall increase in data center and other operations costs was partially offset by a reduction in depreciation expense due to the change in estimated useful lives we discussed last quarter. Operating expenses were $20.9 billion, up 4%. Operating income was $21.8 billion, up 12%, and our operating margin was 29%. I will cover our expense and margin performance in our outlook. Other income and expense was $65 million. Net income was $18.4 billion. We delivered free cash flow of $21.8 billion in the second quarter and $71 billion for the trailing 12 months, reflecting improved operating performance as well as the deferral of certain tax payments to the fourth quarter of 2023 as noted in our earnings release. We ended the quarter with $118 billion in cash and marketable securities. Turning to our segment results. Prior period results have been recast for 2 changes that we made as of the first quarter. First, DeepMind is now reported as part of Alphabet's unallocated corporate costs. Second, we updated our cost allocation methodologies. In the second quarter, we then combined the Brain team from Google Research with DeepMind to form Google DeepMind. Costs associated with the Brain team, which were previously included in Google Services, are now reported as part of Alphabet's unallocated corporate costs. We have not recast prior period results to reflect this additional change. Within Google Services, revenues were $66.3 billion, up 5%. Google Search and other advertising revenues of $42.6 billion in the quarter were up 5%, led by growth in retail. YouTube advertising revenues of $7.7 billion were up 4%, driven by brand advertising, followed by direct response reflecting further stabilization in spending by advertisers. Network advertising revenues of $7.9 billion were down 5%. Other revenues were $8.1 billion, up 24%, reflecting growth in YouTube non-advertising revenues, primarily from subscription growth in YouTube Music Premium and YouTube TV followed by growth in hardware revenues primarily driven by the launch of the Pixel 7a in the second quarter. Finally, Play returned to positive growth in the second quarter. TAC was $12.5 billion, up 3%. Google Services operating income was $23.5 billion, up 8%, and the operating margin was 35%. Turning to the Google Cloud segment. Revenues were $8 billion for the quarter, up 28%. GCP revenue growth remained strong across geographies, industries and products. That being said, we saw a continued moderation in the rate of consumption growth as consumers optimize their spend. Google Workspace strong revenue growth was driven by increases in both seats and average revenue per seat. Google Cloud had operating income of $395 million and the operating margin was 5%. As to our Other Bets, for the second quarter, revenues were $285 million, and the operating loss was $813 million. The decrease in operating loss was primarily driven by a reduction in valuation-based compensation liabilities related to certain Other Bets. Turning to our outlook for the business. With respect to Google Services, first, within advertising. We were pleased with the acceleration of Search advertising revenue growth in the second quarter. Our continued ability to generate sustained growth reflects our unparalleled engineering innovation that creates extraordinary experiences for users and capabilities for advertisers and delivered with the deep expertise of our go-to-market team. And in YouTube, we saw ongoing signs of stabilization in advertiser spending. We are prioritizing product focus on increasing quality consumption of video content with both Shorts and in the living room, which is translating into improved monetization. Second, within other revenues. In our YouTube subscription products, the sustained, strong growth in revenues reflects significant subscriber growth. You may have seen that last week, we increased subscription prices for YouTube Music and Premium, which underscores the value of the products. Strong year-on-year growth in hardware revenues was due, in large part, to a timing change given the Pixel 7a was launched in the second quarter, whereas the Pixel 6a launch occurred in the third quarter last year. Looking ahead, the launch timing change will be a headwind to hardware revenue growth in the third quarter. Play returned to positive growth in the second quarter, driven primarily by a solid increase in the number of buyers. Turning to Google Cloud. We are particularly excited about the customer interest in our AI-optimized infrastructure, our large language models, our AI platform services and our new generative AI offerings such as Duet AI for Google Workspace, although we are still clearly in the early days. At the same time, we continue to experience headwinds in the second quarter for moderation in consumption growth as customers optimize their spend. We continue to invest aggressively while remaining focused on profitable growth. In terms of expenses and profitability, we remain very focused on durably reengineering our cost base. Most evident to date are the actions we have taken to reduce the pace of headcount growth, including the workforce reductions we announced in the first quarter and a slower pace of organic hiring, in part given our focus on reallocating talent from within to fuel our growth priorities. A quick comment on the sequential improvement in operating margins in the second quarter. There are 2 factors to note. First, the benefit from an acceleration in search advertising revenue growth in the second quarter. Second, the vast majority of the charges related to our workforce reduction and optimization of our global office space were taken in Q1. Finally, as it relates to CapEx, in Q2, the largest component was for servers, which included a meaningful increase in our investments in AI compute. The sequential step-up in the second quarter was lower than anticipated for 2 reasons. First, with respect to office facilities, we continue to moderate the pace of fit-outs and ground-up construction to reflect the slower expected pace of headcount growth. Second, there were delays in certain data center construction projects. We expect elevated levels of investment in our technical infrastructure increasing through the back half of 2023 and continuing to grow in 2024. The primary driver is to support the opportunities we see in AI across Alphabet, including investments in GPUs and proprietary TPUs as well as data center capacity. With all that said, we remain committed to durably reengineering our cost base in order to help create capacity for these investments in support of long-term, sustainable financial value. Thank you. Sundar, Philipp and I will now take your questions.","evidence_gemma_new":"Google Services revenues year-on-year","evidence_llama_3_3":"Google Services revenues","evidence_qwen_3_30b":"Google Services revenues year-on-year","gemma_new_max":66000000000.0,"gemma_new_min":66000000000.0,"llama_3_3_max":66000000000.0,"llama_3_3_min":66000000000.0,"qwen_3_30b_max":66000000000.0,"qwen_3_30b_min":66000000000.0}
{"symbol":"GOOGL","year":2023,"quarter":3,"date":"2023-Q3","chunk_id":2,"sub_chunk_id":0,"centroid_label":"google service google service revenues","agreed_value":8400000000.0,"count":2,"chunk":"Sundar Pichai: Thank you, Jim, and hello, everyone. I'm pleased with our business results this quarter, which demonstrates strong growth in Search and YouTube and momentum in Cloud. Google turned 25 in September, which offered an opportunity to reflect on our progress over the last quarter century and to look ahead to the opportunities enabled by AI we are so excited and confident about. Our product momentum continued this quarter, as you saw with Cloud Next, Made on YouTube and Made by Google. It's all part of our focus on making AI more helpful for everyone, and we are making good progress across the four areas that we shared last quarter. First, improving knowledge and learning. This includes our work with the Search Generative Experience, which is our experiment to bring Generative AI capabilities into Search. We have learned a lot from people trying it, and we have added new capabilities, like incorporating videos and images into responses and generating imagery. We've also made it easier to understand and debug generated code. Direct user feedback has been positive with strong growth and adoption. In August, we opened up availability to India and Japan with more countries and languages to come. As we add features and expand into new markets, we are engaging with the broader ecosystem and will continue to prioritize approaches that add value for our users, send valuable traffic to publishers, and support a healthy open Internet. With Generative AI applied to Search, we can serve a wider range of information needs and answer new types of questions, including those that benefit from multiple perspectives. We are surfacing more links with SGE and linking to a wider range of sources on the results page, creating new opportunities for content to be discovered. Of course, ads will continue to play an important role in this new Search experience. People are finding ads helpful here as they provide useful options to take action and connect with businesses. We'll experiment with new formats native to SGE that use Generative AI to create relevant high-quality ads customized to every step of the Search journey. The second area we are focused on is boosting creativity and productivity. Bard is particularly helpful here. It's a direct interface to a conversational LLM, and we think of it as an early experiment and complementary experience to Google Search. Bard can now integrate with Google apps and services, showing relevant information from Workspace, Maps, YouTube, and Google Flights and Hotels. We've also improved the Google it feature. It provides other sources to help people evaluate Bard's responses and explore information across the web. Earlier this month, we announced Assistant with Bard, a personal assistant powered by Generative AI. It combines Bard's generative and reasoning capabilities with Assistant's personalized help. You can interact with it through text, voice, or images, and in the coming months, you'll be able to opt in on Android and iOS mobile devices. Our collaborative tools in Workspace and YouTube are also part of how we boost creativity and productivity, and they are seeing great initial traction. Third, we are enabling developers, businesses, and other organizations to build their own transformative products and services. For example, thousands of customers and partners are already using Google Cloud to capture the potential of AI and we'll share more there in a minute. And fourth, we are building and deploying AI responsibly, so that everyone can benefit. One area we are focused on is making sure people can more easily identify when they are encountering AI-generated content online. Using new technology powered by Google DeepMind SynthID, images generated by Vertex AI can be watermarked in a way that is invisible to the human eye without reducing the image quality. Underlying all this work is the foundational research done by our teams at Google DeepMind and Google Research. We are excited to roll out more of what they've been working on soon. As we expand access to our new AI services, we continue to make meaningful investments in support of our AI efforts. We remain committed to durably re-engineering our cost base in order to help create capacity for these investments in support of long-term sustainable financial value. Across Alphabet, teams are looking at ways to operate as effectively as possible focused on their biggest priorities. Turning next to YouTube, which saw solid momentum in both its ads and subscription businesses in Q3. NFL Sunday Ticket is now live and receiving excellent reviews. Fans love our multi-view feature, which can live stream up to four games on a single screen. We\u2019ve heard positive feedback from our partners at the NFL about the new features and live stream reliability. This is a clear example of our ability to execute big partnerships with excellence and at scale. I'm really pleased with the growth and engagement on YouTube Shorts. We continue to work on closing the monetization gap here. Shorts now average over 70 billion daily views and are watched by over 2 billion signed-in users every month. At Made on YouTube in September, we announced new tools that make it easier to create engaging content. Dreamscreen is an experimental feature that allows creators to add AI-generated video or image backgrounds to shorts. And YouTube Create is a new mobile app with a suite of production tools for editing shorts, longer videos, or both. Next, Google Cloud. We see continued growth with Q3 revenue of $8.4 billion, up 22%. Today, more than 60% of the world's 1,000 largest companies are Google Cloud customers. At Cloud Next, we showcased amazing innovations across our entire portfolio of infrastructure, data and AI, workspace collaboration, and cybersecurity solutions. We offer advanced AI-optimized infrastructure to train and serve models at scale. And today, more than half of all funded Generative AI startups are Google Cloud customers. This includes AI21 Labs, Contextual, Elemental Cognition, Rytr, and more. We continue to provide the widest choice of accelerator options. Our A3 VMs powered by NVIDIA's H100 GPU are generally available, and we are winning customers with Cloud TPU v5e, our most cost efficient and versatile accelerator to date. On top of our infrastructure, our Vertex AI platform helps customers build, deploy, and scale AI-powered applications. We offer more than 100 models, including popular third-party and open source models, as well as tools to quickly build, search, and conversation use cases. From Q2 to Q3, the number of active Generative AI projects on Vertex AI grew by 7x, including Highmark Health, which is creating more personalized member materials. Duet AI was created using Google's leading large foundation models and especially trained to help users to be more productive on Google Cloud. We continue expanding its capabilities and integrating it across a wide range of cloud products and services. With Duet AI, we are helping leading brands like PayPal and Deutsche Bank boost developer productivity. And we are enabling retailers like Aritzia and Gymshark to gain new insights for better and faster business results. In fact, companies are increasingly using AI for the purpose of analyzing data. And customers are choosing Google Cloud because we are the only large cloud provider with a unified platform to analyze structured and unstructured data. In Workspace, thousands of companies and more than a million trusted testers have used Duet AI. They are writing and refining content in Gmail and Docs, creating original images from text within slides, organizing data in Sheets and more. These innovations enable us to provide new services and grow our base of 10 million paying customers, including enterprises like Grupo Boticario, Unilever and Warner Music. We also integrated Duvet AI across our cybersecurity portfolio to differentiate in the marketplace, providing Generative AI-powered assistance in Mandiant Threat Intelligence, Chronicle Security Operations, and Security Command Center. This reduces the time security teams spend writing, running, and refining searches by seven times. We are the only leading security provider that combines frontline intelligence and expertise, a modern security operations platform, and a trusted cloud foundation, all infused with Generative AI, helping protect customers and partners like BT, Jack Henry & Associates, and CoverMyMeds. Turning to hardware. We unveiled our new products this month. We introduced our new Pixel 8, Pixel 8 Pro, and Pixel Watch 2 to very positive consumer feedback and reviews. Pixel is the fastest growing smartphone brand in our top markets and the only one that grew in units sold year-over-year. Our portfolio of Pixel products are brought to life, thanks to our combination of foundational technologies, AI, Android, and Google Tensor. Google Tensor G3 is the third generation of our tailor-built chip. It's designed to power transformative experiences by bringing the latest in Google AI research directly to our newest phones. A new AI-powered editing features in Google Photos on Pixel 8 and Pixel 8 Pro remove distractions, generate the best shot from multiple images and reduce distracting sounds in videos. Pixel and our third-party ecosystem are powered by Android. We just released Android 14 with more accessibility features. I also want to mention Chromebook Plus, a new category which provides the best of Chrome on great hardware with built-in Google Apps and powerful AI capabilities. We also shared that Chromebooks will now get regular automatic updates for 10 years, more than any other operating system. In Other Bets, Waymo is onboarding more riders to its commercial ride hailing service as it gradually adds over 100,000 people from its San Francisco waitlist. Austin will follow as its next ride hail city. Wing and Walmart announced a new partnership to provide drone delivery service in the Dallas-Fort Worth area. Before handing over to Philipp, I want to thank our employees around the world who are working to create innovative products and provide great services to people and businesses who use our products. Philipp?","evidence_gemma_new":"Google Cloud revenues","evidence_llama_3_3":"Google Cloud revenues third quarter","evidence_qwen_3_30b":null,"gemma_new_max":8400000000.0,"gemma_new_min":8400000000.0,"llama_3_3_max":8400000000.0,"llama_3_3_min":8400000000.0,"qwen_3_30b_max":null,"qwen_3_30b_min":null}
{"symbol":"GOOGL","year":2023,"quarter":3,"date":"2023-Q3","chunk_id":4,"sub_chunk_id":0,"centroid_label":"google service google service revenues","agreed_value":68000000000.0,"count":3,"chunk":"Ruth Porat: Thank you, Philipp. We are very pleased with our financial results for the third quarter, driven by meaningful growth in Search and YouTube and momentum in Cloud. My comments will be on year-over-year comparisons for the third quarter, unless I state otherwise. I will start with results at the Alphabet level followed by segment results and conclude with our outlook. For the third quarter, our consolidated revenues were $76.7 billion, up 11% in both reported and constant currency. Search remained the largest contributor to revenue growth. In terms of expenses, total cost of revenues was $33.2 billion, up 7%, primarily reflecting other cost of revenues of $20.6 billion, which was up 6%. Growth here was primarily driven by content acquisition costs mainly for YouTube subscription offerings. As noted in our earnings release, the overall increase in data center and other operations costs was partially offset by a reduction in depreciation expense due to the change in estimated useful lives we made starting in the first quarter of the year. Operating expenses were $22.1 billion, up 6% reflecting the following. First, an increase in R&D expenses, driven primarily by compensation. Second, an increase in G&A expenses, reflecting the impact of charges related to legal matters. And finally, sales and marketing expenses, which were relatively flat to last year. Operating income was $21.3 billion, up 25%, and our operating margin was 28%. Other income and expense was a loss of $146 million. Net income was $19.7 billion. This reflects an effective tax rate of 7% in the third quarter from an IRS change related to the use of foreign tax credits, which had an outsized impact on the third quarter rate because the change resulted in a catch-up for prior periods. We delivered free cash flow of $22.6 billion in the third quarter and $78 million for the trailing 12 months. We ended the quarter with $120 billion in cash and marketable securities. As a reminder, our cash balance and free cash flow in the second and third quarters benefited from the deferral of certain tax payments to the fourth quarter of 2023. As noted in our earnings release, on October 16, we made an estimated tax payment of $10.5 billion related to this deferral, which will be reflected in our cash balance and free cash flow in the fourth quarter. Turning to segment results. Within Google Services, revenues were $68 billion, up 11%. Google Search and other advertising revenues of $44 billion in the quarter were up 11%, led again by growth in retail. YouTube advertising revenues of $8 billion were up 12%, driven by both brand advertising and direct response. Network advertising revenues of $7.7 billion were down 3%. Other revenues were $8.3 billion, up 21%, primarily reflecting growth in YouTube non-advertising revenues driven by subscriber growth in YouTube TV followed by YouTube Music Premium. TAC was $12.6 billion, up 7%. Google Services operating income was $23.9 billion, up 27% and the operating margin was 35%. Turning to the Google Cloud segment. Revenues were $8.4 billion for the quarter, up 22%. GCP revenue growth remained strong across geographies, industries and products, although the Q3 year-on-year growth rate reflects the impact of customer optimization efforts. Google Workspace also delivered strong revenue growth, primarily driven by increases in average revenue per seat. Google Cloud had operating income of $266 million, and the operating margin was 3%. As to our Other Bets, for the third quarter, revenues were $297 million and the operating loss was $1.2 billion. Turning to our outlook for the business. With respect to Google Services. First, within advertising. After a period of historic volatility, we were pleased with the year-on-year revenue growth of Search and YouTube advertising in the third quarter. Second, within other revenues, in our YouTube subscription products the substantial growth in revenues primarily reflects subscriber growth. Looking ahead, a full quarter of NFL Sunday Ticket revenues as well as associated content acquisition costs will be reflected in Q4 results compared to only a few weeks in the third quarter. Play had growth in the third quarter, driven primarily by an increase in the number of buyers. With respect to hardware, there is a headwind to revenues in the fourth quarter, reflecting efforts to optimize the portfolio with tighter targeting of our go-to-market investments as well as the ongoing impact from the difference in launch timing for the Pixel 6a and 7a that we mentioned last quarter. Turning to Google Cloud. We are pleased with the ongoing customer engagement with GCP and Workspace and the potential benefit of our AI solutions including infrastructure and services such as Vertex AI and Duet. We continue to invest aggressively given the significant potential we see while remaining focused on profitable growth. In terms of expenses and profitability, we're pleased with our operating performance. As we have repeatedly stressed, we remain focused on durably reengineering our cost base to create investment capacity to support our growth priorities, most important of which is with AI. We have a number of workstreams in place. First, we are maintaining a slower pace of headcount growth, reflecting product prioritization and reallocation of talent to support our most important growth opportunities. Second, we remain focused on optimizing our real estate footprint, including how and where we work to reduce our expense growth. As you can see from our earnings release, we incurred $207 million in accelerated rent and depreciation in the third quarter related to these actions. Third, we have engineering work streams underway to improve productivity across Alphabet. Given the magnitude of investment in our technical infrastructure, we have a superb team focused on efficiency of our operations there. We are also making progress in streamlining operations across Alphabet through the use of AI. Finally, there are ongoing workstreams that are improving the efficiency of our spend with suppliers and vendors through our central procurement organization. And to be clear, across the portfolio of other bet companies, we have also been working to identify opportunities to create sharper focus and to operate more efficiently and effectively. With respect to sequential quarter-on-quarter trends, two further points. First, cost of sales in the fourth quarter will reflect both higher hardware costs given Pixel family launches as well as increased CAC for YouTube as previously noted. Second, as usual, we expect sales and marketing expenses to be more heavily weighted to the end of the year, in part to support product launches in the holiday season. Finally, our reported CapEx in Q3 was $8 billion, driven overwhelmingly by investment in our technical infrastructure with the largest component for servers, followed by data centers, reflecting a meaningful increase in our investments in AI compute. The growth in reported cash CapEx in Q3 is somewhat muted due to the timing of supplier payments, which can cause variability from quarter-to-quarter. We continue to invest meaningfully in the technical infrastructure needed to support the opportunities we see in AI across Alphabet and expect elevated levels of investment, increasing in the fourth quarter of 2023 and continuing to grow in 2024. In closing, we remain very excited about the opportunities ahead and committed to deliver sustainable financial value. Thank you. Sundar, Philipp and I will now take your questions.","evidence_gemma_new":"Google Services revenues year-on-year","evidence_llama_3_3":"Google Services revenues year-on-year","evidence_qwen_3_30b":"Google Services revenues","gemma_new_max":68000000000.0,"gemma_new_min":68000000000.0,"llama_3_3_max":68000000000.0,"llama_3_3_min":68000000000.0,"qwen_3_30b_max":68000000000.0,"qwen_3_30b_min":68000000000.0}
{"symbol":"GOOGL","year":2023,"quarter":4,"date":"2023-Q4","chunk_id":3,"sub_chunk_id":0,"centroid_label":"google service google service revenues","agreed_value":76000000000.0,"count":3,"chunk":"Philipp Schindler: Thanks, Sundar, and hi, everyone. Google Services revenues of $76 billion were up 12% year-on-year. In Google advertising, Search and other revenues grew 13% year-on-year, led again by solid growth in the retail vertical. We had particular strength in retail in APAC, a trend that began in the second quarter of 2023 and continued through the end of the year. YouTube ads revenue were up 16% year-on-year driven by growth in both direct response and brand. And network revenues declined 2% year-on-year. In subscriptions, platforms and devices, which was previously named Google Other, year-on-year revenues increased 23% driven by strong growth in subscriptions. Now for some color on the quarter and where we see continued upside for long-term advertising growth. Over the last few calls, I have consistently highlighted how we're putting Google AI to work for our customers to deliver profitability and help them achieve their goals in a do-more-with-less environment. From a product perspective, in Q4, Performance Max remained a bright spot. We're also excited about demand gen momentum. This is our big bet to help social advertisers find and convert consumers via immersive, relevant visual creatives across YouTube, including YouTube Shorts, Gmail and Discover. In a single campaign, you get access to over 3 billion users as they stream, scroll, connect and decide what to buy. Tens of thousands of advertisers are testing and on average seeing 6% more conversions per dollar versus image-only ads and discovery campaigns. As we look ahead, we're also starting to put generative AI in the hands of more and more businesses to help them build better campaigns and even better performing ads. Automatically created assets help advertisers show more relevant search ads by creating tailored headlines and descriptions based on each ad's context. Adoption was up with strong feedback in Q4. In addition to now being available in 8 languages, more advanced GenAI-powered capabilities are coming to ACA. And then last week's big news was that Gemini will power new conversational experience in Google Ads. This is open and beta to U.S. and U.K. advertisers. Early tests show advertisers are building higher-quality search campaigns with less effort, especially SMBs who are 42% more likely to publish a campaign with good or excellent ad strength. We can't wait to see how this continues to drive performance and level the playing field for advertisers of all sizes. As we shared last quarter, Ads will continue to play an important role in the new search experience, and we'll continue to experiment with new formats native to SGE. SGE is creating new opportunities for us to improve commercial journeys for people by showing relevant ads alongside search results. We've also found that people are finding ads either above or below the AI-powered overview helpful as they provide useful options for people to take action and connect with businesses. Looking at our strong Search performance for the fourth quarter. Retail was a highlight. We continue to see a stronger start to the season up to and including Cyber Five. In Q3, we indicated that we were seeing early trends of consumers being very price-conscious, and we saw this play out in Q4. With promotional demand at an all-time high, deal seekers using Google had access to 2x the deals in the U.S. versus last season as well as a better shopping experience. Launches included a one-stop shop deals destination, new filters like [ Get it Fast ] and AI-generated gifting recommendations in SGE. These new features drove incremental query growth during key shopping moments like Cyber Five. Our proven AI-powered ad solutions were also a win for retailers looking to accelerate omni growth and capture holiday demand. Quick examples include a large U.S. big-box retailer who drove a 60%-plus increase in omni ROAS and a 22%-plus increase in store traffic using Performance Max during Cyber Five; and a well-known global fashion brand, who drove a 15%-plus higher omnichannel conversion rate versus regular shopping traffic by showcasing its store pickup offering across top markets through pickup later on shopping ads. Moving on to YouTube. We're obviously pleased with YouTube's advertising revenue growth in Q4 and also significant growth in our subscription revenue. I'll reiterate what I have said before: YouTube's success starts with creator success. We give millions of creators more ways to create content and connect with fans and more ways to make money and build their own businesses than any other platform. More creators means more content, which leads to more viewers. And via ads and subscriptions, these viewers fund our creators and drive the eyeballs and engagement our advertisers want. To keep this momentum going, we're focused on delivering value across 4 pillars: creation, viewers, monetization and responsibility. First, creation, which increasingly takes place on mobile devices. We've invested in a full suite of tools, including our new YouTube Create app for Shorts, to help people make everything from 15-second Shorts to 15-minute videos to 15-hour live streams with a production studio in the palm of their hands. GenAI is supercharging these capabilities. Anyone with a phone can swap in a new backdrop, remove background extras, translate their video into dozens of languages, all without a big studio budget. We're excited about our first products in this area from Dream Screen for AI-generated backgrounds to Aloud for AI-powered dubbing. There is more to come. Number two, viewers. We continue to grow watch time across YouTube with strong growth in Shorts and connected TV. Shorts remains a top priority. We have 2 billion-plus logged-in users every month, and we are averaging 70 billion in daily views. Connected TVs, or what we refer to as the living room, is where viewership is growing the fastest. We're investing to make this experience even better with interactive features tailored to TVs, plus the content people love: our creators, NFL Sunday Ticket and the range of live sports and studio content via YouTube TV and Primetime Channels. Put this all together and YouTube is the must-have app on every connected TV. Monetization is pillar #3 and realized through a combination of ad-supported and subscription offerings. Advertising generates the bulk of our revenue, and we continue to invest heavily here. We've rolled out CTV-first formats like 30-second nonskippable ads and pause experiences as well as an industry-first send-to-phone experience that lets people use a second screen to engage with ads. For Shorts, we've developed new formats that are less interruptive to viewers. It's early. We're learning but excited by the opportunities for ads this can unlock. Shorts monetization continues to progress nicely. Our AI-powered video formats from video reach and video view campaigns to demand gen and video action continue to make advertiser dollars go further and drive results across the funnel. We're also introducing new and existing advertisers to YouTube via sports content. 90-plus upfront and scatter advertisers, including Unilever, are partnering with YouTube in our first year across NFL Sunday Ticket in-game advertising opportunities. Our subscription offerings are also growing at a healthy clip. YouTube Music and Premium performed well. Premium users are delivering more value to our partners and YouTube than even ad-supported users do. On average, each additional Premium sign-up boost earnings for creators, music and media partners and YouTube itself. And we've made Premium even more attractive with new features, bundles and other enhancements. We're also pleased with our first season of NFL Sunday Ticket. It gave creators new opportunities to create content and feed user engagement across traditional user content and professional sports content. Feedback on the user experience, including multiview, has been great. We're excited to continue to innovate here. Responsibility is our fourth pillar, and it underlines everything we do across YouTube. We continue to focus relentlessly on this. As always, deepening our relationships with key partners to bring them the best of Google is a key priority for us, and we continue to do this across industries in Q4. We just talked about the NFL. Sundar mentioned Samsung, among others earlier. Another highlight was our expanded partnership with Porsche to enhance customers' digital experiences with a deeper in-vehicle integration of Google built-in services, including Google Maps and Play. Whether it's continued collaboration with our partners and key ecosystems, we're putting Google AI to work for more customers. I'm excited about the opportunities for continued impact in 2024. I'll wrap with a huge note of gratitude to our customers and partners. Our success is only possible because of their success and then to our Googlers for their outstanding work and focus this year. Ruth, over to you.","evidence_gemma_new":"Google Services revenues","evidence_llama_3_3":"Google Services revenues","evidence_qwen_3_30b":"Google Services revenues 12% year-on-year","gemma_new_max":76300000000.0,"gemma_new_min":76300000000.0,"llama_3_3_max":76000000000.0,"llama_3_3_min":76000000000.0,"qwen_3_30b_max":76000000000.0,"qwen_3_30b_min":76000000000.0}
{"symbol":"GOOGL","year":2023,"quarter":4,"date":"2023-Q4","chunk_id":4,"sub_chunk_id":0,"centroid_label":"google service google service revenues","agreed_value":9200000000.0,"count":2,"chunk":"Ruth Porat: Thank you, Philipp. We are very pleased with our full year results with 2023 Alphabet revenues of $307 billion, up 9% versus 2022, which added $25 billion to revenues for the year. We ended with a strong fourth quarter with consolidated revenues of $86.3 billion, up 13% versus last year in both reported and constant currency. Search remained the largest contributor to revenue growth. My comments will be on year-over-year comparisons for the fourth quarter, unless I state otherwise. Total cost of revenues was $37.6 billion, up 6%. Other cost of revenues was $23.6 billion, up 5%, with the increase driven primarily by content acquisition costs associated with YouTube subscription offerings. The growth rate also reflects the offsetting benefit of lapping $1.2 billion in inventory-related charges that we called out in the fourth quarter last year as well as a reduction in depreciation expense due to changes in estimated useful lives we made starting in the first quarter of 2023. In terms of total expenses, the year-on-year comparisons reflect an additional $1.2 billion in exit charges that we took in the fourth quarter of 2023 in connection with actions to optimize our global office space. As you can see in our earnings release, these charges were allocated across the expense lines in other cost of revenues and OpEx based on associated head count. Operating expenses were $25 billion, up 11%, primarily reflecting an increase in R&D expenses, which were driven by the real estate charges, followed by compensation. Operating income was $23.7 billion, up 30%, and our operating margin was 27%. Net income was $20.7 billion, and EPS was $1.64. We delivered free cash flow of $7.9 billion, which was affected by the timing of the $10.5 billion tax payment we made on October 16 that we called out previously related to the deferral of certain tax payments to the fourth quarter. For the full year 2023, free cash flow was $69 billion. We repurchased a total of $62 billion of our Class A and Class C shares in 2023 and ended the year with $111 billion in cash and marketable securities. Turning to segment results. Within Google Services, revenues were $76.3 billion, up 12%. Google Search and other advertising revenues of $48 billion in the quarter were up 13%, led again by growth in retail. YouTube advertising revenues of $9.2 billion were up 16% driven by both direct response and brand advertising. Network advertising revenues of $8.3 billion were down 2%. Subscriptions, platforms and devices revenues, which we previously referred to as other revenues, were $10.8 billion, up 23%, primarily reflecting growth in YouTube subscription revenues. TAC was $14 billion, up 8%. Google Services' operating income was $26.7 billion, up 32%, and the operating margin was 35%. Turning to the Google Cloud segment. Revenues were $9.2 billion for the quarter, up 26%. We're very pleased with the momentum of GCP with an increasing contribution from AI. Google Workspace also delivered strong revenue growth primarily driven by increases in average revenue per seat. Google Cloud delivered operating income of $864 million and an operating margin of 9%. As to our Other Bets, for the full year 2023, revenues were $1.5 billion and the operating loss was $4.1 billion. Results in the fourth quarter benefited from a milestone payment in one of the Other Bets. Turning to our outlook for the business. With respect to Google Services, first, within advertising. We were pleased with the sequential revenue growth of Search and YouTube advertising throughout 2023, which reflects the extraordinary work across our teams to drive improved experiences for users and attractive ROI for advertisers. As we enter 2024 with advertising revenues of more than $100 billion higher than 2019, we remain focused on sustaining healthy growth on this larger base. Second, within subscriptions, platforms and devices, our total revenues from subscription products reached $15 billion for the full year 2023 driven primarily by substantial growth in subscribers for our YouTube subscription offerings. The substantial increase in our subscription revenues over the past few years demonstrates the ability of our teams to deliver high value-add offerings and provides a strong base on which to build, including through YouTube and newer services like Google One. Play had solid growth again in the fourth quarter driven primarily by an increase in the number of buyers. In devices, we continue to make sizable investments with increased emphasis on our Pixel family, particularly with AI-powered innovation while driving further efficiencies across the portfolio. Turning to Google Cloud. We are pleased with operating performance in the year. Full year revenues of $33 billion were up 26% versus prior year, ending with strong Q4 performance. The Cloud team is intensely focused on bringing the benefits of Gemini, our industry-leading AI technology, to enterprises and governments globally, and we are gratified with the level of engagement. The strong demand we are seeing for our vertically integrated AI portfolio is creating new opportunities for Google Cloud across every product area. In terms of profitability, the improvement in 2023 reflects sustained focus across the team with the intent to maintain healthy profitability while we continue to invest to support long-term growth. Turning to margins and expenses. As we have repeatedly stressed, we remain committed to our framework to durably reengineer our cost base as we invest to support our growth priorities. Key contributors to moderating our expense growth include: first, product and process prioritization to ensure we have the right resources behind our most important opportunities and to reallocate resources where we can; second, organizational efficiency and structure. We're focused on removing layers to simplify execution and drive velocity. Both product prioritization and the organization design efforts result in a slower pace of hiring, as you can see with our head count down year-on-year, reflecting the reductions we announced in the first quarter of 2023 and a much slower pace of hiring. We will continue to invest in top technical and engineering talent. Finally, we continue to execute the other work streams to slow expense growth, including improving efficiency in our technical infrastructure, streamlining operations across Alphabet through the use of AI, increasing efficiency of our spend with suppliers and vendors through our central procurement organization and optimizing our real estate portfolio. With respect to CapEx, our reported CapEx in the fourth quarter was $11 billion, driven overwhelmingly by investment in our technical infrastructure with the largest component for servers followed by data centers. The step-up in CapEx in Q4 reflects our outlook for the extraordinary applications of AI to deliver for users, advertisers, developers, cloud enterprise customers and governments globally and the long-term growth opportunities that offers. In 2024, we expect investment in CapEx will be notably larger than in 2023. With regard to Other Bets, we've been working to sharpen our investment focus while capturing the upside given compelling technology breakthroughs across the portfolio. For example, last week, Alphabet's X announced that it would be moving to spin out more projects as independent companies through external capital, giving X the opportunity to bring more focus to the breakthrough technologies it is working on to address some of the world's most pressing challenges. Thank you. Sundar, Philipp and I will now take your questions.","evidence_gemma_new":"Google Cloud revenues","evidence_llama_3_3":"Google Cloud revenues","evidence_qwen_3_30b":null,"gemma_new_max":9200000000.0,"gemma_new_min":9200000000.0,"llama_3_3_max":9200000000.0,"llama_3_3_min":9200000000.0,"qwen_3_30b_max":null,"qwen_3_30b_min":null}
{"symbol":"GOOGL","year":2024,"quarter":1,"date":"2024-Q1","chunk_id":4,"sub_chunk_id":0,"centroid_label":"google service google service revenues","agreed_value":70400000000.0,"count":3,"chunk":"Ruth Porat: Thank you, Philipp. We are very pleased with our financial results for the first quarter driven, in particular, by strength in Search and Cloud as well as the ongoing efforts to durably reengineer our cost base. My comments will be on year-over-year comparisons for the first quarter unless I state otherwise. I will start with results at the Alphabet level, followed by segment results and conclude with our outlook. For the first quarter, our consolidated revenues were $80.5 billion, up 15% or up 16% in constant currency. Search remained the largest contributor to revenue growth. In terms of total expenses, the year-on-year comparisons reflect the impact of the restructuring charges we took in the first quarter of 2023 of $2.6 billion as well as the $716 million in employee severance and related charges in the first quarter of 2024. As you can see in our earnings release, these charges were allocated across the expense lines in other cost of revenues and OpEx based on associated head count. To help with year-on-year comparisons, we included a table in our earnings release to adjust other cost of revenues, operating expenses, operating income, and operating margin to exclude the impact of severance and related office space charges in the first quarter of 2023 versus 2024. In terms of expenses, total cost of revenues was $33.7 billion, up 10%. Other cost of revenues was $20.8 billion, up 10% on a reported basis, with the increase driven primarily by content acquisition costs associated with YouTube given the very strong revenue growth in both subscription offerings and ad-supported content. On an adjusted basis, other cost of revenues were up 13% year-on-year. Operating expenses were $21.4 billion, down 2% on a reported basis, primarily reflecting expense decreases in sales and marketing and G&A, offset by an increase in R&D. The largest single factor in the year-on-year decline in G&A expenses was lower charges related to legal matters. On an adjusted basis, operating expenses were up 5%, reflecting, first, in R&D, an increase in compensation expense, primarily for Google DeepMind and Cloud; and second, in sales and marketing, a slight increase year-on-year, reflecting increases in compensation expense primarily for Cloud sales. Operating income was $25.5 billion, up 46% on a reported basis, and our operating margin was 32%. On an adjusted basis, operating income was up 31%, and our operating margin was 33%. Net income was $23.7 billion and EPS was $1.89. We delivered free cash flow of $16.8 billion in the first quarter and $69.1 billion for the trailing 12 months. We ended the quarter with $108 billion in cash and marketable securities. Turning to segment results. Within Google Services, revenues were $70.4 billion, up 14%. Google Search and other advertising revenues of $46.2 billion in the quarter were up 14% led again by growth in retail. YouTube advertising revenues of $8.1 billion were up 21% driven by both direct response and brand advertising. Network advertising revenues of $7.4 billion were down 1%. Subscriptions, platforms and devices revenues were $8.7 billion, up 18%, primarily reflecting growth in YouTube subscription revenues. TAC was $12.9 billion, up 10%. Google Services operating income was $27.9 billion, up 28%. And the operating margin was 40%. Turning to the Google Cloud segment. Revenues were $9.6 billion for the quarter, up 28%, reflecting significant growth in GCP with an increasing contribution from AI and strong Google Workspace growth, primarily driven by increases in average revenue per seat. Google Cloud delivered operating income of $900 million and an operating margin of 9%. As to our Other Bets, for the first quarter, revenues were $495 million, benefiting from a milestone payment in one of the Other Bets. The operating loss was $1 billion. Turning to our outlook for the business. With respect to Google Services, first, within Advertising, we are very pleased with the momentum of our Ads businesses. Search had broad-based strength across verticals. In YouTube, we had acceleration in revenue growth driven by brand and direct response. Looking ahead, two points to call out: first, results in our advertising business in Q1 continued to reflect strength in spend from APAC-based retailers, a trend that began in the second quarter of 2023 and continued through Q1, which means we will begin lapping that impact in the second quarter; second, the YouTube acceleration in revenue growth in Q1 reflects, in part, lapping the negative year-on-year growth we experienced in the first quarter of 2023. Turning to subscriptions, platforms, and devices. We continue to deliver significant growth in our subscriptions business, which drives the majority of revenue growth in this line. The sequential quarterly decline in year-on-year revenue growth for the line in Q1 versus Q4 reflects, in part, the fact that we had only 1 week of Sunday Ticket subscription revenue in Q1 versus 14 weeks in Q4. Looking forward, we will anniversary last year's price increase in YouTube TV starting in May. With regard to platforms, we are pleased with the performance in Play driven by an increase in buyers. With respect to Google Cloud, performance in Q1 reflects strong demand for our GCP infrastructure and solutions as well as the contribution from our Workspace productivity tools. The growth we are seeing across Cloud is underpinned by the benefit AI provides for our customers. We continue to invest aggressively while remaining focused on profitable growth. As we look ahead, two points that will affect sequential year-on-year revenue growth comparisons across Alphabet: first, Q1 results reflect the benefit of leap year, which contributed slightly more than 1 point to our revenue growth rate at the consolidated level in the first quarter; second, at current spot rates, we expect a larger headwind from foreign exchange in Q2 versus Q1. Turning to margins. Our efforts to durably reengineer our cost base are reflected in a 400 basis point expansion of our Alphabet operating margin year-on-year, excluding the impact of restructuring and severance charges in both periods. You can also see the impact in the quarter-on-quarter decline in head count in Q1, which reflects both actions we have taken over the past few months and a much slower pace of hiring. As we have discussed previously, we are continuing to invest in top engineering and technical talent, particularly in Cloud, Google DeepMind and technical infrastructure. Looking ahead, we remain focused on our efforts to moderate the pace of expense growth in order to create capacity for the increases in depreciation and expenses associated with the higher levels of investment in our technical infrastructure. We believe these efforts will enable us to deliver full year 2024 Alphabet operating margin expansion relative to 2023. With respect to CapEx, our reported CapEx in the first quarter was $12 billion, once again driven overwhelmingly by investment in our technical infrastructure, with the largest component for servers followed by data centers. The significant year-on-year growth in CapEx in recent quarters reflects our confidence in the opportunities offered by AI across our business. Looking ahead, we expect quarterly CapEx throughout the year to be roughly at or above the Q1 level, keeping in mind that the timing of cash payments can cause variability in quarterly reported CapEx. With regard to Other Bets, we similarly have work streams underway to enhance overall returns. Finally, as I trust you saw in the press release, we are very pleased to be adding a quarterly dividend of $0.20 per share to our capital return program as well as a new $70 billion authorization in share repurchases. The core of our capital allocation framework remains the same, beginning with investing aggressively in our business as you have heard us talk about today. Given the extraordinary opportunities ahead, we view the introduction of the dividend as further strengthening our overall capital return program. Thank you. Sundar, Philipp, and I will now take your questions.","evidence_gemma_new":"Google Services revenues","evidence_llama_3_3":"Google Services revenues first quarter","evidence_qwen_3_30b":"Google Services revenues","gemma_new_max":70400000000.0,"gemma_new_min":70400000000.0,"llama_3_3_max":70400000000.0,"llama_3_3_min":70400000000.0,"qwen_3_30b_max":70400000000.0,"qwen_3_30b_min":70400000000.0}
{"symbol":"GOOGL","year":2024,"quarter":1,"date":"2024-Q1","chunk_id":4,"sub_chunk_id":0,"centroid_label":"google service google service revenues","agreed_value":9600000000.0,"count":3,"chunk":"Ruth Porat: Thank you, Philipp. We are very pleased with our financial results for the first quarter driven, in particular, by strength in Search and Cloud as well as the ongoing efforts to durably reengineer our cost base. My comments will be on year-over-year comparisons for the first quarter unless I state otherwise. I will start with results at the Alphabet level, followed by segment results and conclude with our outlook. For the first quarter, our consolidated revenues were $80.5 billion, up 15% or up 16% in constant currency. Search remained the largest contributor to revenue growth. In terms of total expenses, the year-on-year comparisons reflect the impact of the restructuring charges we took in the first quarter of 2023 of $2.6 billion as well as the $716 million in employee severance and related charges in the first quarter of 2024. As you can see in our earnings release, these charges were allocated across the expense lines in other cost of revenues and OpEx based on associated head count. To help with year-on-year comparisons, we included a table in our earnings release to adjust other cost of revenues, operating expenses, operating income, and operating margin to exclude the impact of severance and related office space charges in the first quarter of 2023 versus 2024. In terms of expenses, total cost of revenues was $33.7 billion, up 10%. Other cost of revenues was $20.8 billion, up 10% on a reported basis, with the increase driven primarily by content acquisition costs associated with YouTube given the very strong revenue growth in both subscription offerings and ad-supported content. On an adjusted basis, other cost of revenues were up 13% year-on-year. Operating expenses were $21.4 billion, down 2% on a reported basis, primarily reflecting expense decreases in sales and marketing and G&A, offset by an increase in R&D. The largest single factor in the year-on-year decline in G&A expenses was lower charges related to legal matters. On an adjusted basis, operating expenses were up 5%, reflecting, first, in R&D, an increase in compensation expense, primarily for Google DeepMind and Cloud; and second, in sales and marketing, a slight increase year-on-year, reflecting increases in compensation expense primarily for Cloud sales. Operating income was $25.5 billion, up 46% on a reported basis, and our operating margin was 32%. On an adjusted basis, operating income was up 31%, and our operating margin was 33%. Net income was $23.7 billion and EPS was $1.89. We delivered free cash flow of $16.8 billion in the first quarter and $69.1 billion for the trailing 12 months. We ended the quarter with $108 billion in cash and marketable securities. Turning to segment results. Within Google Services, revenues were $70.4 billion, up 14%. Google Search and other advertising revenues of $46.2 billion in the quarter were up 14% led again by growth in retail. YouTube advertising revenues of $8.1 billion were up 21% driven by both direct response and brand advertising. Network advertising revenues of $7.4 billion were down 1%. Subscriptions, platforms and devices revenues were $8.7 billion, up 18%, primarily reflecting growth in YouTube subscription revenues. TAC was $12.9 billion, up 10%. Google Services operating income was $27.9 billion, up 28%. And the operating margin was 40%. Turning to the Google Cloud segment. Revenues were $9.6 billion for the quarter, up 28%, reflecting significant growth in GCP with an increasing contribution from AI and strong Google Workspace growth, primarily driven by increases in average revenue per seat. Google Cloud delivered operating income of $900 million and an operating margin of 9%. As to our Other Bets, for the first quarter, revenues were $495 million, benefiting from a milestone payment in one of the Other Bets. The operating loss was $1 billion. Turning to our outlook for the business. With respect to Google Services, first, within Advertising, we are very pleased with the momentum of our Ads businesses. Search had broad-based strength across verticals. In YouTube, we had acceleration in revenue growth driven by brand and direct response. Looking ahead, two points to call out: first, results in our advertising business in Q1 continued to reflect strength in spend from APAC-based retailers, a trend that began in the second quarter of 2023 and continued through Q1, which means we will begin lapping that impact in the second quarter; second, the YouTube acceleration in revenue growth in Q1 reflects, in part, lapping the negative year-on-year growth we experienced in the first quarter of 2023. Turning to subscriptions, platforms, and devices. We continue to deliver significant growth in our subscriptions business, which drives the majority of revenue growth in this line. The sequential quarterly decline in year-on-year revenue growth for the line in Q1 versus Q4 reflects, in part, the fact that we had only 1 week of Sunday Ticket subscription revenue in Q1 versus 14 weeks in Q4. Looking forward, we will anniversary last year's price increase in YouTube TV starting in May. With regard to platforms, we are pleased with the performance in Play driven by an increase in buyers. With respect to Google Cloud, performance in Q1 reflects strong demand for our GCP infrastructure and solutions as well as the contribution from our Workspace productivity tools. The growth we are seeing across Cloud is underpinned by the benefit AI provides for our customers. We continue to invest aggressively while remaining focused on profitable growth. As we look ahead, two points that will affect sequential year-on-year revenue growth comparisons across Alphabet: first, Q1 results reflect the benefit of leap year, which contributed slightly more than 1 point to our revenue growth rate at the consolidated level in the first quarter; second, at current spot rates, we expect a larger headwind from foreign exchange in Q2 versus Q1. Turning to margins. Our efforts to durably reengineer our cost base are reflected in a 400 basis point expansion of our Alphabet operating margin year-on-year, excluding the impact of restructuring and severance charges in both periods. You can also see the impact in the quarter-on-quarter decline in head count in Q1, which reflects both actions we have taken over the past few months and a much slower pace of hiring. As we have discussed previously, we are continuing to invest in top engineering and technical talent, particularly in Cloud, Google DeepMind and technical infrastructure. Looking ahead, we remain focused on our efforts to moderate the pace of expense growth in order to create capacity for the increases in depreciation and expenses associated with the higher levels of investment in our technical infrastructure. We believe these efforts will enable us to deliver full year 2024 Alphabet operating margin expansion relative to 2023. With respect to CapEx, our reported CapEx in the first quarter was $12 billion, once again driven overwhelmingly by investment in our technical infrastructure, with the largest component for servers followed by data centers. The significant year-on-year growth in CapEx in recent quarters reflects our confidence in the opportunities offered by AI across our business. Looking ahead, we expect quarterly CapEx throughout the year to be roughly at or above the Q1 level, keeping in mind that the timing of cash payments can cause variability in quarterly reported CapEx. With regard to Other Bets, we similarly have work streams underway to enhance overall returns. Finally, as I trust you saw in the press release, we are very pleased to be adding a quarterly dividend of $0.20 per share to our capital return program as well as a new $70 billion authorization in share repurchases. The core of our capital allocation framework remains the same, beginning with investing aggressively in our business as you have heard us talk about today. Given the extraordinary opportunities ahead, we view the introduction of the dividend as further strengthening our overall capital return program. Thank you. Sundar, Philipp, and I will now take your questions.","evidence_gemma_new":"Google Cloud revenues","evidence_llama_3_3":"Google Cloud revenues first quarter","evidence_qwen_3_30b":"Google Cloud revenues","gemma_new_max":9600000000.0,"gemma_new_min":9600000000.0,"llama_3_3_max":9600000000.0,"llama_3_3_min":9600000000.0,"qwen_3_30b_max":9600000000.0,"qwen_3_30b_min":9600000000.0}
{"symbol":"GOOGL","year":2024,"quarter":2,"date":"2024-Q2","chunk_id":3,"sub_chunk_id":0,"centroid_label":"google service google service revenues","agreed_value":73900000000.0,"count":3,"chunk":"Philipp Schindler : Thanks, Sundar, and hello, everyone. Starting with performance, Google Services delivered revenues of $73.9 billion for the quarter, up 12% year-on-year. Search and other revenues grew 14% year-on-year, led by growth in the retail vertical, followed by financial services. YouTube ads revenues were up 13% year-on-year driven by growth and brand as well as direct response. Network revenues declined 5% year-on-year. In subscriptions, platforms, and devices, year-on-year revenues increased 14%, driven again by strong growth in YouTube subscriptions. For the rest of my remarks, I want to double click on two topics. First, how we're applying AI across the marketing process to deliver an even stronger ads experience. Second, YouTube's position as the leading multi-format platform. So let me start by sharing some of the ways we are applying AI to bring more performance benefits to even more businesses. Q2 brought several major opportunities to meet and learn from users, developers, creators, and customers. From I\/O to Brandcast, Google Marketing Live and Can, a growing number of our customers and partners are looking to understand how to successfully incorporate AI into their businesses. This quarter, we announced over 30 new ads features, and products to help advertisers leverage AI and keep pace with the evolving expectations of customers and users. Across Search, PMax, DemandGen, and Retail, we're applying AI to streamline workflows, enhance creative asset production, and provide more engaging experiences for consumers. Listening to our customers, retailers in particular have welcomed AI-powered features to help scale the depth and breadth of their assets. For example, as part of a new and easier-to-use merchant center, we've expanded Product Studio, with tools that bring the power of Google AI to every business owner. You can upload a product image from the AI with something like, feature this product with Paris skyline in the background and Product Studio will generate campaign ready assets. I also hear great feedback from our customers on many of our other new AI-powered features. We're beta testing, virtual try on and shopping ads and plan to roll it out widely later this year. Feedback shows this feature gets 60% more high-quality views than other images and a higher click-out to retailer sites. Retailers love it because it drives purchasing decisions and fewer returns. Our AI-driven profit optimization tools have been expanded to performance max and standard shopping campaigns. Advertisers use profit optimization and smart bidding see a 15% uplift in profit on average compared to revenue-only bidding. Lastly, DemandGen is rolling out to Display in Video 360 and Search Ads 360 in the coming months with new generative image tools that create stunning high-quality image assets for social marketers. As we said at GML, when paired with Search or PMax, DemandGen delivers an average of 14% more conversions. The use cases we're seeing across the industry show the incredible potential of these AI-enabled products to improve performance. Let me briefly share two examples with you. Luxury jewelry retailer Tiffany leveraged DemandGen during the holiday season and saw 2.5% brand lift in consideration and actions, such as adding items to cards and booking appointments. The campaign drove a 5.6 times more efficient cost per click compared to social media benchmarks. Our own Google marketing team used DemandGen to create nearly 4,500 ad variations for a Pixel 8 campaign shown across YouTube, Discover, and Gmail, delivering twice the click-through rate at nearly a quarter of the cost. In addition to strengthening our ads products for customers, we continue to evolve our existing systems and products with improved models delivering further performance gains. In just six months, AI-driven improvements to quality, relevance, and language understanding have improved Broad Match performance by 10% for advertisers using Smart Bidding. Also, advertisers who adopt PMax to Broad Match and Smart Bidding in their Search campaigns, see an average increase of over 25% more conversions or value at a similar cost. We'll continue to listen to our customers and use their feedback to drive innovation across our products. As you can hear, I continue to be excited about the AI era for ads. Now let's turn to YouTube. I've talked before about our approach to making YouTube the best place to create, watch and monetize. First, the best place to create. What sets YouTube apart from every other platform are the creators and the connection they have with their fans. Audiences tuning in to watch their favorite creators continue to grow. For example, two weeks ago, Mr. Beast's channel hit more than 300 million subscribers. Next, the best place to watch. Our long-term investment in CTV continues to deliver. Views on CTV have increased more than 130% in the last three years. According to Nielsen, YouTube is the Number #1 most watched streaming platform on TV screens in the US for the 17th consecutive month. Zooming out, when you look not just at streaming, but at all media companies and their combined TV viewership, YouTube is the second most watched after Disney. And this growth is happening in multiple verticals, including sports, which has seen CTV watch time on YouTube grow 30% year-over-year. Lastly, the best place to monetize. CTV on YouTube is continuing to benefit from a combination of strong watch time growth, viewer and advertiser innovation and a shift in brand advertising budgets from linear TV to YouTube. Our largest advertisers across verticals, including retail, entertainment, telco and home and personal care, are partnering with creators on ads and organic integrations. Verizon, for example, worked with a YouTube creator and Verizon customer to show them many ways that plans and offerings can be customized to fit people\u2019s lives. Using AI-powered formats, they created sketches in multiple lengths and orientations to serve the right creative to the right viewer and drive people to their site. Verizon's creator ads had a 15% lower CPA and a 38% higher conversion rate versus other ads. Turning to Shorts. Last quarter, I shared that in the US, the monetization rate of YouTube Shorts relative to in-stream viewing is showing a healthy rate of growth. Again, this quarter, we continue to see an improvement in Shorts monetization, particularly in the US. We are also seeing a very encouraging contribution from brand advertising on Shorts, which we launched on the product in Q4 last year. Lastly, a few words on shopping. Last year, viewers watched 30 billion hours of shopping-related videos, and we saw a 25% increase in watch time for videos that help people shop. While it is early days, shopping remains a key area of investment. At GML, we rolled out several product updates to YouTube shopping, helping creators sell products to their viewers. These updates included; product tagging where creators can tag products in their videos for viewers to discover and purchase, product collections and a new affiliate hub, a one-stop shop for creators to find deals and promotional offers from brands and track their affiliate earnings. With that, I'll finish by saying a huge thank you to Google's everywhere for their extraordinary commitment and to our customers and partners for their continued collaboration and trust. And Ruth, thanks for your amazing leadership and partnership over all these years. Now for one last time, it's over to you.","evidence_gemma_new":"Google Services revenues for the quarter","evidence_llama_3_3":"Google Services revenues second quarter","evidence_qwen_3_30b":"Google Services revenues quarter","gemma_new_max":73900000000.0,"gemma_new_min":73900000000.0,"llama_3_3_max":73900000000.0,"llama_3_3_min":73900000000.0,"qwen_3_30b_max":73900000000.0,"qwen_3_30b_min":73900000000.0}
{"symbol":"GOOGL","year":2024,"quarter":2,"date":"2024-Q2","chunk_id":4,"sub_chunk_id":0,"centroid_label":"google service google service revenues","agreed_value":10300000000.0,"count":2,"chunk":"Ruth Porat : Thank you, Philipp, and thanks, Sundar, for those kind words. We had another strong quarter, driven in particular by performance in Search and Cloud, as well as the ongoing efforts to durably reengineer our cost base. My comments will be on year-over-year comparisons for the second quarter unless I state otherwise. I will start with results at the Alphabet level followed by segment results and conclude with our outlook. For the second quarter, our consolidated revenues were $84.7 billion, up 14% or up 15% in constant currency. Search remained the largest contributor to revenue growth. In terms of expenses, total cost of revenues was $35.5 billion, up 11%. Other cost of revenues was $22.1 billion, up 14%, with the increase driven primarily by content acquisition costs, followed by depreciation as well as the impact of the Canadian digital services tax, which was applied retroactively. Operating expenses were $21.8 billion up 5%, primarily reflecting an increase in R&D partially offset by a decline in G&A with sales and marketing essentially flat to the second quarter last year. The increase in R&D was driven primarily by compensation which was affected by lapping a reduction in valuation-based compensation liabilities in certain other bets in the second quarter last year followed by depreciation. The largest single factor in the year-on-year decline in G&A expenses was lower charges related to legal matters. Operating income was $27.4 billion, up 26% and our operating margin was 32%. Net income was $23.6 billion and EPS was $1.89. We delivered free cash flow of $13.5 billion in the second quarter and $60.8 billion for the trailing 12 months. As a reminder, last year, we had a timing benefit in the second and third quarters from a $10.5 billion deferred cash tax payment made in the fourth quarter, which depressed reported free cash flow growth this quarter, and we'll do so again next quarter. We ended the quarter with $101 billion in cash and marketable securities. Turning to segment results. Within Google Services, revenues were $73.9 billion, up 12%. Google Search and other advertising revenues of $48.5 billion in the quarter were up 14%, led again by growth in retail, followed by the financial services vertical. YouTube advertising revenues of $8.7 billion were up 13% driven by brand followed by direct response advertising. Network advertising revenues of $7.4 billion were down 5%. Subscription platforms and devices revenues were $9.3 billion up 14%, primarily reflecting growth in YouTube subscription revenues. TAC was $13.4 billion, up 7%. Google Services operating income was $29.7 billion up 27% and the operating margin was 40%. Turning to the Google Cloud segment. Revenues were $10.3 billion for the quarter, up 29%, reflecting first significant growth in GCP, which was above growth for cloud overall and includes an increasing contribution from AI. And second, strong Google Workspace growth, primarily driven by increases in average revenue per seat. Google Cloud delivered operating income of $1.2 billion and an operating margin of 11%. As to our Other Bets for the second quarter, revenues were $365 million and the operating loss was $1.1 billion. Turning to our outlook for the business. With respect to Google Services, First, within advertising. The strong performance of search was broad-based across verticals. In YouTube, we are pleased with the growth in the quarter. We had healthy watch time growth continued to close the monetization gap in Shorts and had continued momentum in Connected TV, with brand benefiting in part from an ongoing shift in budgets from linear television to digital. As we look forward to the third quarter, we will be lapping the increasing strength in advertising revenues in the second half of 2023, in part from APAC based retailers. Turning to subscriptions, platforms and devices. First, we continue to have significant growth in our subscriptions business which drives the majority of revenue growth in this line. However, there was a sequential decline in the year-on-year growth rate, as we anniversaried the impact of a price increase for YouTubeTV in the second quarter last year. The impact will persist through the balance of the year. Second, with regard to platforms. We are pleased with the performance in play driven by an increase in buyers. Finally, with respect to devices. The most important point as we look forward is that our Made by Google launches have been pulled forward into the third quarter from the fourth quarter last year benefiting revenues in Q3 this year. Turning to cloud, which continued to deliver very strong results. For the first time, Cloud crossed $10 billion in quarterly revenues and $1 billion in quarterly operating profit. As Sundar noted year-to-date, our AI infrastructure and generative AI solutions for cloud customers have already generated billions in revenues and are being used by more than 2 million developers. We're particularly encouraged that the majority of our top 100 customers are already using our generative AI solutions. We continue to invest aggressively in the business. Turning to margins. The margin expansion in Q2 versus last year reflects our ongoing efforts to durably reengineer our cost base, as well as revenue strength. Our leadership team remains focused on our efforts to moderate the pace of expense growth in order to create capacity for the increases in depreciation and expenses associated with the higher levels of investment in our technical infrastructure. Once again headcount declined quarter-on-quarter, which reflects both actions we have taken in the first half of the year and a much slower pace of hiring. Looking ahead, we expect a slight increase in headcount in the third quarter, as we bring on new graduates. As we have discussed previously, we\u2019re continuing to invest in top engineering and technical talent, particularly in cloud and technical infrastructure. Looking forward, we continue to expect to deliver full-year 2024 Alphabet operating margin expansion relative to 2023. However, in the third quarter operating margins will reflect the impact of both the increases in depreciation and expenses associated with the higher levels of investment in our technical infrastructure, as well as the increase in cost of revenues due to the pull-forward of hardware launches into Q3. With respect to CapEx, our reported CapEx in the second quarter was $13 billion, once again driven overwhelmingly by investment in our technical infrastructure with the largest component for servers followed by data centers. Looking ahead, we continue to expect quarterly CapEx throughout the year to be roughly at or above the Q1 CapEx of $12 billion keeping in mind that the timing of cash payments can cause variability in quarterly reported CapEx. With regard to other bets, we continue to focus on improving overall efficiencies, as we invest for long-term returns. Waymo is an important example of this, with its technical leadership coupled with progress on operational performance. As you will see in the 10-Q, we have chosen to commit to a new multi-year investment of $5 billion. This new round of funding, which is consistent with recent annual investment levels will enable Waymo to continue to build the world's leading autonomous driving technology company. To close, this is my 56th and last earnings call, 37 of them at Alphabet. So I have a few closing thoughts of gratitude. I've been so proud to be at Google and Alphabet as CFO and to work with some of the smartest people in the world every day. I think, we have accomplished a lot in the last nine plus years, and I am confident that progress will continue. Of course, I'm not going far and I'm honored to have my new role, which I've been slowly working my way into during the past 11 months and I look forward to continuing to work with Sundar, and our great team. Being CFO of one of the most important companies in the world has been the opportunity and responsibility of a lifetime. Google's Mission of advancing technology and bringing information to people throughout the world is as relevant today as it was when I worked on its IPO. Technology has been a catalyst for economic growth throughout human history. The people on this call know that if a technological advancement is not the focus of every business and government, they will be left behind. Underpinning this is the need for sound and responsible investment. That has never been more important than today and certainly, that is Google and Alphabet's focus. I want to end by thanking Googlers around the world for the innovation and commitment that has enabled us to deliver such extraordinary products and services globally. I also want to thank our investors and analysts for your long-term support and your feedback. Thank you. Sundar, Philipp and I will now take your questions.","evidence_gemma_new":"Google Cloud revenues","evidence_llama_3_3":"Google Cloud revenues second quarter","evidence_qwen_3_30b":null,"gemma_new_max":10300000000.0,"gemma_new_min":10300000000.0,"llama_3_3_max":10300000000.0,"llama_3_3_min":10300000000.0,"qwen_3_30b_max":null,"qwen_3_30b_min":null}
{"symbol":"GOOGL","year":2024,"quarter":3,"date":"2024-Q3","chunk_id":4,"sub_chunk_id":0,"centroid_label":"google service google service revenues","agreed_value":11400000000.0,"count":2,"chunk":"Anat Ashkenazi: Thank you, Philipp. And thanks, Sundar, for the words of welcome. My comments will focus on year-over-year comparisons for the third quarter, unless I state otherwise. I will start with the results at the Alphabet level and will then cover our segment results. I'll end with high-level commentary on investment at the Alphabet level. We had another strong quarter in Q3 with robust momentum across the business. Consolidated revenue increased by 15% or 16% in constant currency. Search remained the largest contributor to revenue growth, followed by a robust 35% growth in cloud. Total cost of revenue was $36.5 billion, up 10%. Tech was $13.7 billion, up 9%. We continue to see a revenue mix shift with Google Search growing at double-digit levels, while network revenue, which have a much higher TAC rate declined. Other cost of revenue was $22.8 billion, up 11%, with the increase primarily driven by content acquisition costs, primarily for YouTube, an increase in depreciation associated with higher level of investment in our technical infrastructure and higher hardware costs associated with the pull forward of our Made by Google launches from the fourth to the third quarter. Total operating expenses increased 5% to $23.3 billion. The increase was primarily driven by facilities-related charges as results of actions were taken to further optimize our office space footprint globally, followed by depreciation, partially offset by year-on-year decline in charges for legal and other matters. R&D investments increased by 11%, primarily driven by increases in compensation and depreciation expenses. Sales and marketing expenses increased 5%, primarily reflecting investment in advertising and promotional efforts related to the Made by Google launches, as well as for AI and Gemini. G&A expenses declined by 10%, primarily due to lower charges for legal and other matters. Operating income increased 34% to $28.5 billion and operating margin increased to 32%. Net income increased 34% to $26.3 billion and earnings per share increased 37% to $2.12. We're pleased with the progress we're making in reengineering our cost structure, which is reflected in our operating margin expansion this quarter, while also continuing to invest in the business to bring innovation to consumers, creators and enterprises. We delivered free cash flow of $17.6 billion for the third quarter and $55.8 billion for the trailing 12 months. Year-on-year free cash flow was negatively impacted by the following items. In 2023, we deferred cash tax payments from the second and third quarter to the fourth quarter. And in Q3 2024, we made a $3 billion cash payment related to the 2017 EC shopping fine. We ended the quarter with $93 billion in cash and marketable securities. Now turning to segment results. Google Services revenue increased 13% to $76.5 billion. Google Search and other advertising revenue increased by 12% to $49.4 billion. The robust performance of search was broad-based across verticals, led by the financial services vertical due to strength in insurance followed by retail. YouTube advertising revenue increased 12% to $8.9 billion, driven by brand, followed by direct response advertising. As Philipp mentioned, we're seeing strong momentum in YouTube, including robust growth in watch time across the platform and are excited about the new features and products we're bringing to creators. Network advertising revenue of $7.5 billion were down 2%. In the third quarter, the year-on-year growth in all our advertising revenue lines was impacted by the increase in strength in advertising revenue in Q3 of last year, in part from APAC-based retailers. Subscription platforms and devices revenue increased 28% to $10.7 billion, reflecting growth in subscription revenues, as well as the launch of our Made by Google devices in the third quarter. We continue to have significant growth in our subscription products, driven primarily by YouTube TV and YouTube Music Premium, as well as Google One, primarily due to increases in the number of paid subscribers. With regards to platforms, we're pleased with the performance in play, primarily driven by an increase in buyers. Google Service operating income increased by 29% to $30.9 billion, and operating margin was 40%. Turning to the Google Cloud segment, which continued to deliver very strong results this quarter. Revenue increased by 35% to $11.4 billion in the third quarter, reflecting accelerated growth in GCP across AI infrastructure, generative AI solutions and core GCP products. Once again, GCP grew at a rate that was higher than cloud overall. We also saw strong Google Workspace growth, primarily driven by increases in average revenue per seat. As you just heard from Sundar, the robust innovation and expanded AI offerings within our cloud business are allowing existing and new customers to realize measurable business benefits, including reduced cost, greater customer engagement, faster response time and better revenue conversion. Google Cloud operating income increased to $1.9 billion and operating margin increased to 17%. The operating margin expansion was driven by strong revenue performance across cloud AI products, core GCP and Workspace, as well as ongoing efficiency initiatives. As to our Other Bets, for the third quarter revenue were $388 million and operating loss was $1.1 billion. I'll highlight just a couple of accomplishments in the quarter for Waymo and Wing. We're excited about the progress we're seeing in Waymo, as Sundar mentioned, and the increase in the number of paid rides. We're planning to continue to expand our geographic coverage and reach more customers in existing markets and new markets. Wing, our drone delivery company, recently passed the 1-year anniversary of scaling its partnership with Walmart in the Dallas-Fort Worth area, now operating in 11 stores and serving 26 different cities and towns. Turning to Alphabet level activities. The largest component of this line is our investment in AI research and development activities, which support all of Alphabet. There were two notable items that impacted the operating loss in Alphabet level activities. First, a $607 million charge related to decisions we've made to further optimize our physical footprint and office space globally; and second, our ongoing investments in AI R&D, including the full quarter effect of the organizational changes we've made in May to move some additional AI teams from Google Services to Google DeepMind. With respect to CapEx, our reported CapEx in the third quarter was $13 billion, reflecting investment in our technical infrastructure with the largest component being investment in servers, followed by data centers and networking equipment. Looking ahead, we expect quarterly CapEx in the fourth quarter to be at similar levels to Q3, keeping in mind that the timing of cash payments can cause variability in quarterly reported CapEx. Our expansion of data center capacity is expected to bring economic benefits to countries and communities where we are investing. In the third quarter alone, we made announcements of over $7 billion in planned data center investments with nearly $6 billion of that in the U.S. In Q3, we also returned value to shareholders in the form of $15.3 billion in share repurchases and $2.5 billion in dividend payments. Overall, we returned a total of nearly $70 billion over the trailing 12 months to shareholders. As we look forward, we're working to balance our investments in AI and other growth areas with the cost discipline needed to fund those activities. As we think about the remainder of 2024, there are a couple of dynamics to consider. In terms of revenue, year-on-year growth in advertising revenue will continue to be impacted by the increasing strength in advertising revenue in the second half of 2023, in part from APAC-based retailers. And there will be a headwind to year-over-year growth in subscription platforms and devices revenue in the fourth quarter due to the pull forward of our Made by Google launches into the third quarter this year. In terms of expenses, we'll continue to see increases in depreciation and expenses associated with higher level of investment in our technical infrastructure, partially offset by a slight benefit from the cost revenue associated with our devices due to the pull forward of hardware launches into Q3. Now before going into Q&A, as the new CFO, I would like to share a few thoughts on how I'm approaching and thinking through growth, cost structure and capital allocation and expect to hear more from me on these topics in the coming quarters. As I look at the business, I see opportunities for further growth propelled by AI and the underlying momentum across the business. You heard about some of these on the call today. I also believe that we are well positioned to deliver meaningful innovation, which will translate to revenue given our strength in the core pillars that are required to succeed in AI at scale. Realizing those opportunities and great innovation in AI requires global reach, which we have through our products and platforms, as well as continued meaningful capital investment. And while we have a strong balance sheet to be able to support these investments, we will be looking for efficiencies so that we can fund innovation in priority areas. Sundar, Ruth and our leadership team started important work to reengineer our cost structure including efforts such as optimizing our headcount growth, our physical footprint, improving the efficiencies of our technical infrastructure and streamlining operations across the company through the use of AI. I plan to build on these efforts, but also evaluate where we might be able to accelerate work and where we might need to pivot to free up capital for more attractive opportunities. Thank you. Sundar, Philipp and I will now take your questions.","evidence_gemma_new":"Google Cloud segment Revenue","evidence_llama_3_3":"Google Cloud segment Revenue third quarter","evidence_qwen_3_30b":null,"gemma_new_max":11400000000.0,"gemma_new_min":11400000000.0,"llama_3_3_max":11400000000.0,"llama_3_3_min":11400000000.0,"qwen_3_30b_max":null,"qwen_3_30b_min":null}
{"symbol":"GOOGL","year":2024,"quarter":3,"date":"2024-Q3","chunk_id":4,"sub_chunk_id":0,"centroid_label":"google service google service revenues","agreed_value":76500000000.0,"count":3,"chunk":"Anat Ashkenazi: Thank you, Philipp. And thanks, Sundar, for the words of welcome. My comments will focus on year-over-year comparisons for the third quarter, unless I state otherwise. I will start with the results at the Alphabet level and will then cover our segment results. I'll end with high-level commentary on investment at the Alphabet level. We had another strong quarter in Q3 with robust momentum across the business. Consolidated revenue increased by 15% or 16% in constant currency. Search remained the largest contributor to revenue growth, followed by a robust 35% growth in cloud. Total cost of revenue was $36.5 billion, up 10%. Tech was $13.7 billion, up 9%. We continue to see a revenue mix shift with Google Search growing at double-digit levels, while network revenue, which have a much higher TAC rate declined. Other cost of revenue was $22.8 billion, up 11%, with the increase primarily driven by content acquisition costs, primarily for YouTube, an increase in depreciation associated with higher level of investment in our technical infrastructure and higher hardware costs associated with the pull forward of our Made by Google launches from the fourth to the third quarter. Total operating expenses increased 5% to $23.3 billion. The increase was primarily driven by facilities-related charges as results of actions were taken to further optimize our office space footprint globally, followed by depreciation, partially offset by year-on-year decline in charges for legal and other matters. R&D investments increased by 11%, primarily driven by increases in compensation and depreciation expenses. Sales and marketing expenses increased 5%, primarily reflecting investment in advertising and promotional efforts related to the Made by Google launches, as well as for AI and Gemini. G&A expenses declined by 10%, primarily due to lower charges for legal and other matters. Operating income increased 34% to $28.5 billion and operating margin increased to 32%. Net income increased 34% to $26.3 billion and earnings per share increased 37% to $2.12. We're pleased with the progress we're making in reengineering our cost structure, which is reflected in our operating margin expansion this quarter, while also continuing to invest in the business to bring innovation to consumers, creators and enterprises. We delivered free cash flow of $17.6 billion for the third quarter and $55.8 billion for the trailing 12 months. Year-on-year free cash flow was negatively impacted by the following items. In 2023, we deferred cash tax payments from the second and third quarter to the fourth quarter. And in Q3 2024, we made a $3 billion cash payment related to the 2017 EC shopping fine. We ended the quarter with $93 billion in cash and marketable securities. Now turning to segment results. Google Services revenue increased 13% to $76.5 billion. Google Search and other advertising revenue increased by 12% to $49.4 billion. The robust performance of search was broad-based across verticals, led by the financial services vertical due to strength in insurance followed by retail. YouTube advertising revenue increased 12% to $8.9 billion, driven by brand, followed by direct response advertising. As Philipp mentioned, we're seeing strong momentum in YouTube, including robust growth in watch time across the platform and are excited about the new features and products we're bringing to creators. Network advertising revenue of $7.5 billion were down 2%. In the third quarter, the year-on-year growth in all our advertising revenue lines was impacted by the increase in strength in advertising revenue in Q3 of last year, in part from APAC-based retailers. Subscription platforms and devices revenue increased 28% to $10.7 billion, reflecting growth in subscription revenues, as well as the launch of our Made by Google devices in the third quarter. We continue to have significant growth in our subscription products, driven primarily by YouTube TV and YouTube Music Premium, as well as Google One, primarily due to increases in the number of paid subscribers. With regards to platforms, we're pleased with the performance in play, primarily driven by an increase in buyers. Google Service operating income increased by 29% to $30.9 billion, and operating margin was 40%. Turning to the Google Cloud segment, which continued to deliver very strong results this quarter. Revenue increased by 35% to $11.4 billion in the third quarter, reflecting accelerated growth in GCP across AI infrastructure, generative AI solutions and core GCP products. Once again, GCP grew at a rate that was higher than cloud overall. We also saw strong Google Workspace growth, primarily driven by increases in average revenue per seat. As you just heard from Sundar, the robust innovation and expanded AI offerings within our cloud business are allowing existing and new customers to realize measurable business benefits, including reduced cost, greater customer engagement, faster response time and better revenue conversion. Google Cloud operating income increased to $1.9 billion and operating margin increased to 17%. The operating margin expansion was driven by strong revenue performance across cloud AI products, core GCP and Workspace, as well as ongoing efficiency initiatives. As to our Other Bets, for the third quarter revenue were $388 million and operating loss was $1.1 billion. I'll highlight just a couple of accomplishments in the quarter for Waymo and Wing. We're excited about the progress we're seeing in Waymo, as Sundar mentioned, and the increase in the number of paid rides. We're planning to continue to expand our geographic coverage and reach more customers in existing markets and new markets. Wing, our drone delivery company, recently passed the 1-year anniversary of scaling its partnership with Walmart in the Dallas-Fort Worth area, now operating in 11 stores and serving 26 different cities and towns. Turning to Alphabet level activities. The largest component of this line is our investment in AI research and development activities, which support all of Alphabet. There were two notable items that impacted the operating loss in Alphabet level activities. First, a $607 million charge related to decisions we've made to further optimize our physical footprint and office space globally; and second, our ongoing investments in AI R&D, including the full quarter effect of the organizational changes we've made in May to move some additional AI teams from Google Services to Google DeepMind. With respect to CapEx, our reported CapEx in the third quarter was $13 billion, reflecting investment in our technical infrastructure with the largest component being investment in servers, followed by data centers and networking equipment. Looking ahead, we expect quarterly CapEx in the fourth quarter to be at similar levels to Q3, keeping in mind that the timing of cash payments can cause variability in quarterly reported CapEx. Our expansion of data center capacity is expected to bring economic benefits to countries and communities where we are investing. In the third quarter alone, we made announcements of over $7 billion in planned data center investments with nearly $6 billion of that in the U.S. In Q3, we also returned value to shareholders in the form of $15.3 billion in share repurchases and $2.5 billion in dividend payments. Overall, we returned a total of nearly $70 billion over the trailing 12 months to shareholders. As we look forward, we're working to balance our investments in AI and other growth areas with the cost discipline needed to fund those activities. As we think about the remainder of 2024, there are a couple of dynamics to consider. In terms of revenue, year-on-year growth in advertising revenue will continue to be impacted by the increasing strength in advertising revenue in the second half of 2023, in part from APAC-based retailers. And there will be a headwind to year-over-year growth in subscription platforms and devices revenue in the fourth quarter due to the pull forward of our Made by Google launches into the third quarter this year. In terms of expenses, we'll continue to see increases in depreciation and expenses associated with higher level of investment in our technical infrastructure, partially offset by a slight benefit from the cost revenue associated with our devices due to the pull forward of hardware launches into Q3. Now before going into Q&A, as the new CFO, I would like to share a few thoughts on how I'm approaching and thinking through growth, cost structure and capital allocation and expect to hear more from me on these topics in the coming quarters. As I look at the business, I see opportunities for further growth propelled by AI and the underlying momentum across the business. You heard about some of these on the call today. I also believe that we are well positioned to deliver meaningful innovation, which will translate to revenue given our strength in the core pillars that are required to succeed in AI at scale. Realizing those opportunities and great innovation in AI requires global reach, which we have through our products and platforms, as well as continued meaningful capital investment. And while we have a strong balance sheet to be able to support these investments, we will be looking for efficiencies so that we can fund innovation in priority areas. Sundar, Ruth and our leadership team started important work to reengineer our cost structure including efforts such as optimizing our headcount growth, our physical footprint, improving the efficiencies of our technical infrastructure and streamlining operations across the company through the use of AI. I plan to build on these efforts, but also evaluate where we might be able to accelerate work and where we might need to pivot to free up capital for more attractive opportunities. Thank you. Sundar, Philipp and I will now take your questions.","evidence_gemma_new":"Google Services revenues the quarter","evidence_llama_3_3":"Google Services revenues the quarter","evidence_qwen_3_30b":"Google Services revenues quarter","gemma_new_max":76500000000.0,"gemma_new_min":76500000000.0,"llama_3_3_max":76500000000.0,"llama_3_3_min":76500000000.0,"qwen_3_30b_max":76500000000.0,"qwen_3_30b_min":76500000000.0}
{"symbol":"GOOGL","year":2024,"quarter":4,"date":"2024-Q4","chunk_id":3,"sub_chunk_id":0,"centroid_label":"google service google service revenues","agreed_value":84000000000.0,"count":3,"chunk":"Philipp Schindler: Thanks, Sundar, and hello, everyone. I will quickly cover performance for the quarter, then frame the rest of my remarks around the progress we are delivering across Search, Ads, YouTube and Partnerships, highlighting the impact AI is having on our business and our customers. Google Services revenues were $84 billion for the quarter, up 10%, driven primarily by 11% year-on-year growth in advertising revenues. Strong growth in Search and YouTube advertising was partially offset by year-over-year decline in network revenues. In terms of vertical performance, the 13% increase in Search and other revenues was led by financial services followed by retail. The 14% growth in YouTube advertising revenues was driven by strong spend on U.S. election advertising, with combined spend from both parties almost doubling from what we saw in the 2020 elections. Now, in Q4, we saw continued strong growth in revenues from Search. We had lots of exciting updates in December, and we're rapidly integrating our AI innovation into our consumer experiences. We've already started testing Gemini 2.0 in AI overviews and plan to roll it out more broadly later in the year. In Search, we're seeing people increasingly ask entirely new questions using their voice, camera, or in ways that were not possible before, like with Circle to Search. We're making these benefits available to more consumers. Google is already present in over half of journeys where a new brand, product, or retailer are discovered. By offering new ways for people to Search, we're expanding commercial opportunities for our advertisers. Shoppers can now take a photo of a product and, using lens, quickly find information about the product, reviews, similar products, and where they can get it for a great price. Lens is used for over 20 billion visual search queries every month, and the majority of these searches are incremental. Retail was particularly strong this holiday season, especially on Black Friday and Cyber Monday, which each generated over $1 billion in ad revenue. Interestingly, despite the U.S. holiday shopping season being the shortest since 2019, retail sales began much earlier, in October, causing the season to extend longer than anticipated. People shop more than a billion times a day across Google. Last quarter, we introduced a reinvented Google shopping experience, rebuilt from the ground up with AI. This December saw roughly 13% more daily active users on Google shopping in the U.S. compared to the same period in 2023. Closing out on Search with travel, and sharing another interesting trend where we saw spend expand to travel Tuesday. This contributed to 20% year-on-year revenue growth for travel advertisers across Cyber Monday and Travel Tuesday. Moving to Ads. We continue investing in AI capabilities across media buying, creative and measurement. As I said before, we believe that AI will revolutionize every part of the marketing value chain, and over the past quarter, we've seen how our customers are increasingly focusing on optimizing their use of AI. As an example, Petco used DemandGen campaigns across targeting, creative generation, and bidding to find new pet parent audiences across YouTube. They achieved a 275% higher return on ad spend and a 74% higher click through rate than their social benchmarks. On media buying, we made YouTube select creator takeovers generally available in the U.S. and will be expanding to more markets this year. Creators know their audience the best and creator takeovers help businesses connect with consumers through authentic and relevant content. Looking at Creative, we introduced new controls and made reporting easier in PMAX, helping customers better understand and reinvest into their best performing assets. Using asset generation in PMAX. Event Ticket Center achieved a 5x increase in production of creative assets, saving time and effort. They also increased convergence by 300% compared to the previous period when they used manual assets. And finally, Measurement. Last week, we made Meridian, our marketing mix model, generally available for customers, helping more business reinvest into creative and media buying strategies that they know work. Based on a Nielsen meta-analysis of marketing mix models, on average, Google AI-powered video campaigns on YouTube deliver 17% higher return on advertising spend than manual campaigns. Turning to YouTube. We saw robust revenue growth backed by continued growth and watch time across ad supported and premium experiences. Our focus here remains on building a streaming platform that enables creators to thrive and unlock the full potential of AI. Expanding on our state-of-the-art video generation model, we announced Veo 2, which creates incredibly high quality video in a wide range of subjects and styles. It's been inspiring to see how people are experimenting with it. We'll make it available to creators on YouTube in the coming months. We continue to invest in helping YouTube creators work with brands. All advertisers globally can now promote YouTube creator videos and ad campaigns across all AI-powered campaign types in Google Ads. And creators can tag partners in their brand videos. Sephora used DemandGen's Shorts-Only channel to boost traffic and brand searches for the Holiday Gift Guide campaign and leverage creator collaborations to find the best gift. This drove an 82% relative uplift in searches for Sephora Holiday. Shorts continues its ascent and is closing the gap with long form. In 2024, the monetization rate of Shorts relative to in-stream viewing increased by more than 30 percentage points in the U.S., and we expect to make additional progress in 2025. We're making it easier for advertisers to benefit from Shorts on all screens. We're particularly excited by its success on connected TV, which now makes up 15% of shorts viewing in the U.S. Using a combination of ad formats, Louis Vuitton reached their overall objectives on both long-form and short-form content. Their shorts exceeded luxury goods benchmark for average view duration by 89% for equivalent video lengths, while their long-form content exceeded the benchmark by over 15%, with strong engagement from Gen Z and Millennials. Looking into the living room, we continue to be number one in streaming watch time in the U.S for nearly two years, according to Nielsen, and our share of streaming is at a record high. Viewers globally streamed over 1 billion hours of YouTube content daily on their TVs in 2024. YouTube makes multi-year investments to tap into shifting consumer behavior. The current surge in living room viewership directly reflects years of work to build the right products and partnerships. Creators are now prioritizing high-quality viewing experiences that truly shine on TV screens, inspiring even more viewers to tune in. In fact, the number of creators making majority of revenue from TV is up over 30% year-on-year. We have also invested in podcasts, where popular shows like Club Shay Shay and Lex Friedman are increasingly a visual format. YouTube creators and viewers are embracing this. In 2024, people watched over 400 million hours of podcasts each month on living room devices alone. YouTube is now the most popular service for podcast listening in the U.S., according to Edison. As always, let me wrap with the strong momentum we're seeing in partnerships, where the breadth of what Google has to offer is increasingly being recognized. Sundar mentioned our deepening partnership with Samsung. Another expanding partnership is with Citi, who is modernizing its technology infrastructure with Google Cloud to transform employee and customer experiences. Using Google Cloud, it will improve its digital products, streamline employee workflows, and use advanced high-performance computing to enable millions of daily computations. This partnership also fuels Citi's generative AI initiatives across customer service, document summarization, and search to reduce manual processing. With that, allow me a moment to thank Googlers everywhere for their extraordinary commitment and to our customers and partners for their continued trust. Anat, over to you.","evidence_gemma_new":"Google Service revenues","evidence_llama_3_3":"Google Service Google Service revenues fourth quarter","evidence_qwen_3_30b":"Google Services revenues for the quarter","gemma_new_max":84100000000.0,"gemma_new_min":84100000000.0,"llama_3_3_max":84100000000.0,"llama_3_3_min":84100000000.0,"qwen_3_30b_max":84000000000.0,"qwen_3_30b_min":84000000000.0}
{"symbol":"GOOGL","year":2023,"quarter":1,"date":"2023-Q1","chunk_id":5,"sub_chunk_id":0,"centroid_label":"google services google search and other advertising revenue","agreed_value":40400000000.0,"count":2,"chunk":"Ruth Porat: Thank you, Philipp. Our financial results for the first quarter reflect continued healthy fundamental growth in Search and momentum in Cloud. As I go through the discussion today, I will reference some changes to our reporting and disclosures that are covered more fully in the 8-K we filed last week. I will conclude with our outlook. For the first quarter, our consolidated revenues were $69.8 billion, up 3% or up 6% in constant currency. Search remained the largest contributor to revenue growth on a constant currency basis. In terms of expenses and profitability, year-on-year comparisons are impacted by 3 factors: first, the $2.6 billion in charges we took in the first quarter related to workforce and office space reductions. We provided a table in our earnings release that shows the impact of those charges on cost of revenues and operating expenses. Second, the adjustment we made to the estimated useful lives of servers and certain network equipment at the beginning of 2023. As you can see in our earnings release, the effect for the first quarter was a reduction in depreciation expense of $988 million. Third, the shift in timing of our annual employee stock-based compensation awards from January to March delays the step-up in SBC from Q1 to Q2. This shift in timing does not affect the total amount of SBC over the full year 2023. Total cost of revenues was $30.6 billion, up 3%, driven by other cost of revenues of $18.9 billion, which was up 7%, the biggest factor of which was compensation costs associated with data centers and other operations and followed by content acquisition costs. Operating expenses were $21.8 billion, up 19%, with a significant impact from the charges related to workforce and office space reductions. Operating income was $17.4 billion, down 13%, and our operating margin was 25%. Net income was $15.1 billion. We delivered free cash flow of $17.2 billion in the first quarter and $62 billion for the trailing 12 months. We ended the quarter with $115 billion in cash and marketable securities. Turning to our segment results. These were affected by 2 additional changes outlined in our 8-K filing. First, reflecting the increasing collaboration between DeepMind and Google Services, Google Cloud, and Other Bets, as of Q1, DeepMind is reported as part of Alphabet's unallocated corporate costs. And second, beginning in the first quarter, we updated our cost allocation methodologies to provide our business leaders with increased transparency for decision-making. In our filing, we provided a recast of prior period results for the segment for these 2 changes. The highlights of the year-on-year performance of our segments that I will review reflect these recast results. Starting with Google Services. Revenues were $62 billion, up 1%. Google Search and other advertising revenues of $40.4 billion in the quarter were up 2%. YouTube advertising revenues of $6.7 billion were down 3%. Network advertising revenues of $7.5 billion were down 8%. Other revenues were $7.4 billion, up 9%, reflecting primarily ongoing significant subscriber growth in YouTube TV and YouTube Music Premium. TAC was $11.7 billion, down 2%, primarily reflecting a mix shift between Search and Network. Google Services operating income was $21.7 billion, down 1%, and the operating margin was 35%. Turning to the Google Cloud segment. Revenues were $7.5 billion for the quarter, up 28%. Growth in GCP remained strong across geographies, industries and products. Google Workspace's strong results were driven by increases in both seats and average revenue per seat. Google Cloud had operating income of $191 million, and the operating margin was 2.6%. As to our Other Bets, for the first quarter, revenues were $288 million, and the operating loss was $1.2 billion. Turning to our outlook for the business. In terms of the operating environment, our results in the first quarter reflected ongoing headwinds due to a challenging economic environment, and the outlook remains uncertain. Foreign exchange headwinds have moderated, and we expect less of a foreign exchange headwind in the second quarter based on current spot rates. With respect to Google Services, within advertising, Q1 results reflect the resilience of Search with its unique ability to surface demand and deliver measurable ROI. Excluding the impact of foreign exchange, the revenue growth of Search was similar to last quarter. In YouTube, we saw signs of stabilization in ad spend on a sequential basis. We continue to prioritize growth in Shorts engagement where we are encouraged by progress in monetization. As to other revenues, in YouTube subscriptions, we are pleased with the significant ongoing subscriber growth in both YouTube Music Premium and YouTube TV. In Play, revenues were down year-on-year, primarily due to the continued impact of foreign exchange in APAC, although results have improved as we lapped the impact from our introduction of fee reductions last year. Turning to Google Cloud. Our investments in product innovation, our go-to-market organization and our partner ecosystem delivered strong results as customers across industries and geographies increasingly rely on Google Cloud to digitally transform their businesses. That being said, in Q1, we continued to see slower growth of consumption as customers optimized GCP costs, reflecting the macro backdrop which remains uncertain. In terms of operating performance, we remain focused on driving long-term profitable growth in Cloud while continuing to invest given the substantial opportunity. Moving to Other Bets. In the first quarter, we similarly worked to refine strategies and prioritize efforts across the portfolio, including reductions to head count. I will now walk you through an update on our efforts to reengineer our cost base, slowing the pace of operating expense growth while creating capacity for key investment areas, particularly in support of AI across the company. First, as discussed on the fourth quarter call, we have efforts underway in 3 broad categories: number one, using AI and automation to improve productivity across Alphabet for operational tasks as well as the efficiency of our technical infrastructure; number two, managing our spend with suppliers and vendors more effectively; and number three, continuing to optimize how and where we work. As we've noted previously, all 3 work streams are ramping up this year, and we plan to build on these efforts in 2024 and in subsequent years. Second, with respect to head count growth. The reported number of employees at the end of the first quarter includes almost all of the employees impacted by the workforce reduction we announced in January. We expect most of the impacted individuals will no longer be reflected in our head count by the end of the second quarter. In terms of the outlook for head count for the year, as we shared last quarter, we are meaningfully slowing the pace of hiring in 2023 while still investing in priority areas, particularly for top engineering and technical talent. In terms of our investments in AI, we are excited about the creation of Google DeepMind, combining the Brain Team from Google Research with DeepMind, with the goal to accelerate innovation and impact. Beginning in the second quarter of 2023, the costs associated with teams and activities transferred from Google Research will move from Google Services to Google DeepMind within Alphabet's unallocated corporate costs. Finally, as it relates to CapEx, for 2023, we now expect total CapEx to be modestly higher than in 2022. As discussed last quarter, CapEx this year will include a meaningful increase in technical infrastructure versus a decline in office facilities. We expect the pace of investment in both data center construction and servers to step up in the second quarter and continue to increase throughout the year. Thank you. Sundar, Philipp and I will now take your questions.","evidence_gemma_new":"Google Search and other advertising revenues","evidence_llama_3_3":null,"evidence_qwen_3_30b":"Google Search and other advertising revenues first quarter","gemma_new_max":40400000000.0,"gemma_new_min":40400000000.0,"llama_3_3_max":null,"llama_3_3_min":null,"qwen_3_30b_max":40400000000.0,"qwen_3_30b_min":40400000000.0}
{"symbol":"GOOGL","year":2023,"quarter":3,"date":"2023-Q3","chunk_id":4,"sub_chunk_id":0,"centroid_label":"google services google search and other advertising revenue","agreed_value":44000000000.0,"count":3,"chunk":"Ruth Porat: Thank you, Philipp. We are very pleased with our financial results for the third quarter, driven by meaningful growth in Search and YouTube and momentum in Cloud. My comments will be on year-over-year comparisons for the third quarter, unless I state otherwise. I will start with results at the Alphabet level followed by segment results and conclude with our outlook. For the third quarter, our consolidated revenues were $76.7 billion, up 11% in both reported and constant currency. Search remained the largest contributor to revenue growth. In terms of expenses, total cost of revenues was $33.2 billion, up 7%, primarily reflecting other cost of revenues of $20.6 billion, which was up 6%. Growth here was primarily driven by content acquisition costs mainly for YouTube subscription offerings. As noted in our earnings release, the overall increase in data center and other operations costs was partially offset by a reduction in depreciation expense due to the change in estimated useful lives we made starting in the first quarter of the year. Operating expenses were $22.1 billion, up 6% reflecting the following. First, an increase in R&D expenses, driven primarily by compensation. Second, an increase in G&A expenses, reflecting the impact of charges related to legal matters. And finally, sales and marketing expenses, which were relatively flat to last year. Operating income was $21.3 billion, up 25%, and our operating margin was 28%. Other income and expense was a loss of $146 million. Net income was $19.7 billion. This reflects an effective tax rate of 7% in the third quarter from an IRS change related to the use of foreign tax credits, which had an outsized impact on the third quarter rate because the change resulted in a catch-up for prior periods. We delivered free cash flow of $22.6 billion in the third quarter and $78 million for the trailing 12 months. We ended the quarter with $120 billion in cash and marketable securities. As a reminder, our cash balance and free cash flow in the second and third quarters benefited from the deferral of certain tax payments to the fourth quarter of 2023. As noted in our earnings release, on October 16, we made an estimated tax payment of $10.5 billion related to this deferral, which will be reflected in our cash balance and free cash flow in the fourth quarter. Turning to segment results. Within Google Services, revenues were $68 billion, up 11%. Google Search and other advertising revenues of $44 billion in the quarter were up 11%, led again by growth in retail. YouTube advertising revenues of $8 billion were up 12%, driven by both brand advertising and direct response. Network advertising revenues of $7.7 billion were down 3%. Other revenues were $8.3 billion, up 21%, primarily reflecting growth in YouTube non-advertising revenues driven by subscriber growth in YouTube TV followed by YouTube Music Premium. TAC was $12.6 billion, up 7%. Google Services operating income was $23.9 billion, up 27% and the operating margin was 35%. Turning to the Google Cloud segment. Revenues were $8.4 billion for the quarter, up 22%. GCP revenue growth remained strong across geographies, industries and products, although the Q3 year-on-year growth rate reflects the impact of customer optimization efforts. Google Workspace also delivered strong revenue growth, primarily driven by increases in average revenue per seat. Google Cloud had operating income of $266 million, and the operating margin was 3%. As to our Other Bets, for the third quarter, revenues were $297 million and the operating loss was $1.2 billion. Turning to our outlook for the business. With respect to Google Services. First, within advertising. After a period of historic volatility, we were pleased with the year-on-year revenue growth of Search and YouTube advertising in the third quarter. Second, within other revenues, in our YouTube subscription products the substantial growth in revenues primarily reflects subscriber growth. Looking ahead, a full quarter of NFL Sunday Ticket revenues as well as associated content acquisition costs will be reflected in Q4 results compared to only a few weeks in the third quarter. Play had growth in the third quarter, driven primarily by an increase in the number of buyers. With respect to hardware, there is a headwind to revenues in the fourth quarter, reflecting efforts to optimize the portfolio with tighter targeting of our go-to-market investments as well as the ongoing impact from the difference in launch timing for the Pixel 6a and 7a that we mentioned last quarter. Turning to Google Cloud. We are pleased with the ongoing customer engagement with GCP and Workspace and the potential benefit of our AI solutions including infrastructure and services such as Vertex AI and Duet. We continue to invest aggressively given the significant potential we see while remaining focused on profitable growth. In terms of expenses and profitability, we're pleased with our operating performance. As we have repeatedly stressed, we remain focused on durably reengineering our cost base to create investment capacity to support our growth priorities, most important of which is with AI. We have a number of workstreams in place. First, we are maintaining a slower pace of headcount growth, reflecting product prioritization and reallocation of talent to support our most important growth opportunities. Second, we remain focused on optimizing our real estate footprint, including how and where we work to reduce our expense growth. As you can see from our earnings release, we incurred $207 million in accelerated rent and depreciation in the third quarter related to these actions. Third, we have engineering work streams underway to improve productivity across Alphabet. Given the magnitude of investment in our technical infrastructure, we have a superb team focused on efficiency of our operations there. We are also making progress in streamlining operations across Alphabet through the use of AI. Finally, there are ongoing workstreams that are improving the efficiency of our spend with suppliers and vendors through our central procurement organization. And to be clear, across the portfolio of other bet companies, we have also been working to identify opportunities to create sharper focus and to operate more efficiently and effectively. With respect to sequential quarter-on-quarter trends, two further points. First, cost of sales in the fourth quarter will reflect both higher hardware costs given Pixel family launches as well as increased CAC for YouTube as previously noted. Second, as usual, we expect sales and marketing expenses to be more heavily weighted to the end of the year, in part to support product launches in the holiday season. Finally, our reported CapEx in Q3 was $8 billion, driven overwhelmingly by investment in our technical infrastructure with the largest component for servers, followed by data centers, reflecting a meaningful increase in our investments in AI compute. The growth in reported cash CapEx in Q3 is somewhat muted due to the timing of supplier payments, which can cause variability from quarter-to-quarter. We continue to invest meaningfully in the technical infrastructure needed to support the opportunities we see in AI across Alphabet and expect elevated levels of investment, increasing in the fourth quarter of 2023 and continuing to grow in 2024. In closing, we remain very excited about the opportunities ahead and committed to deliver sustainable financial value. Thank you. Sundar, Philipp and I will now take your questions.","evidence_gemma_new":"Google Search and other advertising revenues","evidence_llama_3_3":"Google Services Google Search and other advertising revenues third quarter","evidence_qwen_3_30b":"Google Search and other advertising revenues third quarter","gemma_new_max":44000000000.0,"gemma_new_min":44000000000.0,"llama_3_3_max":44000000000.0,"llama_3_3_min":44000000000.0,"qwen_3_30b_max":44000000000.0,"qwen_3_30b_min":44000000000.0}
{"symbol":"GOOGL","year":2023,"quarter":4,"date":"2023-Q4","chunk_id":4,"sub_chunk_id":0,"centroid_label":"google services google search and other advertising revenue","agreed_value":48000000000.0,"count":2,"chunk":"Ruth Porat: Thank you, Philipp. We are very pleased with our full year results with 2023 Alphabet revenues of $307 billion, up 9% versus 2022, which added $25 billion to revenues for the year. We ended with a strong fourth quarter with consolidated revenues of $86.3 billion, up 13% versus last year in both reported and constant currency. Search remained the largest contributor to revenue growth. My comments will be on year-over-year comparisons for the fourth quarter, unless I state otherwise. Total cost of revenues was $37.6 billion, up 6%. Other cost of revenues was $23.6 billion, up 5%, with the increase driven primarily by content acquisition costs associated with YouTube subscription offerings. The growth rate also reflects the offsetting benefit of lapping $1.2 billion in inventory-related charges that we called out in the fourth quarter last year as well as a reduction in depreciation expense due to changes in estimated useful lives we made starting in the first quarter of 2023. In terms of total expenses, the year-on-year comparisons reflect an additional $1.2 billion in exit charges that we took in the fourth quarter of 2023 in connection with actions to optimize our global office space. As you can see in our earnings release, these charges were allocated across the expense lines in other cost of revenues and OpEx based on associated head count. Operating expenses were $25 billion, up 11%, primarily reflecting an increase in R&D expenses, which were driven by the real estate charges, followed by compensation. Operating income was $23.7 billion, up 30%, and our operating margin was 27%. Net income was $20.7 billion, and EPS was $1.64. We delivered free cash flow of $7.9 billion, which was affected by the timing of the $10.5 billion tax payment we made on October 16 that we called out previously related to the deferral of certain tax payments to the fourth quarter. For the full year 2023, free cash flow was $69 billion. We repurchased a total of $62 billion of our Class A and Class C shares in 2023 and ended the year with $111 billion in cash and marketable securities. Turning to segment results. Within Google Services, revenues were $76.3 billion, up 12%. Google Search and other advertising revenues of $48 billion in the quarter were up 13%, led again by growth in retail. YouTube advertising revenues of $9.2 billion were up 16% driven by both direct response and brand advertising. Network advertising revenues of $8.3 billion were down 2%. Subscriptions, platforms and devices revenues, which we previously referred to as other revenues, were $10.8 billion, up 23%, primarily reflecting growth in YouTube subscription revenues. TAC was $14 billion, up 8%. Google Services' operating income was $26.7 billion, up 32%, and the operating margin was 35%. Turning to the Google Cloud segment. Revenues were $9.2 billion for the quarter, up 26%. We're very pleased with the momentum of GCP with an increasing contribution from AI. Google Workspace also delivered strong revenue growth primarily driven by increases in average revenue per seat. Google Cloud delivered operating income of $864 million and an operating margin of 9%. As to our Other Bets, for the full year 2023, revenues were $1.5 billion and the operating loss was $4.1 billion. Results in the fourth quarter benefited from a milestone payment in one of the Other Bets. Turning to our outlook for the business. With respect to Google Services, first, within advertising. We were pleased with the sequential revenue growth of Search and YouTube advertising throughout 2023, which reflects the extraordinary work across our teams to drive improved experiences for users and attractive ROI for advertisers. As we enter 2024 with advertising revenues of more than $100 billion higher than 2019, we remain focused on sustaining healthy growth on this larger base. Second, within subscriptions, platforms and devices, our total revenues from subscription products reached $15 billion for the full year 2023 driven primarily by substantial growth in subscribers for our YouTube subscription offerings. The substantial increase in our subscription revenues over the past few years demonstrates the ability of our teams to deliver high value-add offerings and provides a strong base on which to build, including through YouTube and newer services like Google One. Play had solid growth again in the fourth quarter driven primarily by an increase in the number of buyers. In devices, we continue to make sizable investments with increased emphasis on our Pixel family, particularly with AI-powered innovation while driving further efficiencies across the portfolio. Turning to Google Cloud. We are pleased with operating performance in the year. Full year revenues of $33 billion were up 26% versus prior year, ending with strong Q4 performance. The Cloud team is intensely focused on bringing the benefits of Gemini, our industry-leading AI technology, to enterprises and governments globally, and we are gratified with the level of engagement. The strong demand we are seeing for our vertically integrated AI portfolio is creating new opportunities for Google Cloud across every product area. In terms of profitability, the improvement in 2023 reflects sustained focus across the team with the intent to maintain healthy profitability while we continue to invest to support long-term growth. Turning to margins and expenses. As we have repeatedly stressed, we remain committed to our framework to durably reengineer our cost base as we invest to support our growth priorities. Key contributors to moderating our expense growth include: first, product and process prioritization to ensure we have the right resources behind our most important opportunities and to reallocate resources where we can; second, organizational efficiency and structure. We're focused on removing layers to simplify execution and drive velocity. Both product prioritization and the organization design efforts result in a slower pace of hiring, as you can see with our head count down year-on-year, reflecting the reductions we announced in the first quarter of 2023 and a much slower pace of hiring. We will continue to invest in top technical and engineering talent. Finally, we continue to execute the other work streams to slow expense growth, including improving efficiency in our technical infrastructure, streamlining operations across Alphabet through the use of AI, increasing efficiency of our spend with suppliers and vendors through our central procurement organization and optimizing our real estate portfolio. With respect to CapEx, our reported CapEx in the fourth quarter was $11 billion, driven overwhelmingly by investment in our technical infrastructure with the largest component for servers followed by data centers. The step-up in CapEx in Q4 reflects our outlook for the extraordinary applications of AI to deliver for users, advertisers, developers, cloud enterprise customers and governments globally and the long-term growth opportunities that offers. In 2024, we expect investment in CapEx will be notably larger than in 2023. With regard to Other Bets, we've been working to sharpen our investment focus while capturing the upside given compelling technology breakthroughs across the portfolio. For example, last week, Alphabet's X announced that it would be moving to spin out more projects as independent companies through external capital, giving X the opportunity to bring more focus to the breakthrough technologies it is working on to address some of the world's most pressing challenges. Thank you. Sundar, Philipp and I will now take your questions.","evidence_gemma_new":"Google Search and other advertising revenues","evidence_llama_3_3":"Google Search and other advertising revenues","evidence_qwen_3_30b":null,"gemma_new_max":48000000000.0,"gemma_new_min":48000000000.0,"llama_3_3_max":48000000000.0,"llama_3_3_min":48000000000.0,"qwen_3_30b_max":null,"qwen_3_30b_min":null}
{"symbol":"GOOGL","year":2024,"quarter":1,"date":"2024-Q1","chunk_id":4,"sub_chunk_id":0,"centroid_label":"google services google search and other advertising revenue","agreed_value":46200000000.0,"count":3,"chunk":"Ruth Porat: Thank you, Philipp. We are very pleased with our financial results for the first quarter driven, in particular, by strength in Search and Cloud as well as the ongoing efforts to durably reengineer our cost base. My comments will be on year-over-year comparisons for the first quarter unless I state otherwise. I will start with results at the Alphabet level, followed by segment results and conclude with our outlook. For the first quarter, our consolidated revenues were $80.5 billion, up 15% or up 16% in constant currency. Search remained the largest contributor to revenue growth. In terms of total expenses, the year-on-year comparisons reflect the impact of the restructuring charges we took in the first quarter of 2023 of $2.6 billion as well as the $716 million in employee severance and related charges in the first quarter of 2024. As you can see in our earnings release, these charges were allocated across the expense lines in other cost of revenues and OpEx based on associated head count. To help with year-on-year comparisons, we included a table in our earnings release to adjust other cost of revenues, operating expenses, operating income, and operating margin to exclude the impact of severance and related office space charges in the first quarter of 2023 versus 2024. In terms of expenses, total cost of revenues was $33.7 billion, up 10%. Other cost of revenues was $20.8 billion, up 10% on a reported basis, with the increase driven primarily by content acquisition costs associated with YouTube given the very strong revenue growth in both subscription offerings and ad-supported content. On an adjusted basis, other cost of revenues were up 13% year-on-year. Operating expenses were $21.4 billion, down 2% on a reported basis, primarily reflecting expense decreases in sales and marketing and G&A, offset by an increase in R&D. The largest single factor in the year-on-year decline in G&A expenses was lower charges related to legal matters. On an adjusted basis, operating expenses were up 5%, reflecting, first, in R&D, an increase in compensation expense, primarily for Google DeepMind and Cloud; and second, in sales and marketing, a slight increase year-on-year, reflecting increases in compensation expense primarily for Cloud sales. Operating income was $25.5 billion, up 46% on a reported basis, and our operating margin was 32%. On an adjusted basis, operating income was up 31%, and our operating margin was 33%. Net income was $23.7 billion and EPS was $1.89. We delivered free cash flow of $16.8 billion in the first quarter and $69.1 billion for the trailing 12 months. We ended the quarter with $108 billion in cash and marketable securities. Turning to segment results. Within Google Services, revenues were $70.4 billion, up 14%. Google Search and other advertising revenues of $46.2 billion in the quarter were up 14% led again by growth in retail. YouTube advertising revenues of $8.1 billion were up 21% driven by both direct response and brand advertising. Network advertising revenues of $7.4 billion were down 1%. Subscriptions, platforms and devices revenues were $8.7 billion, up 18%, primarily reflecting growth in YouTube subscription revenues. TAC was $12.9 billion, up 10%. Google Services operating income was $27.9 billion, up 28%. And the operating margin was 40%. Turning to the Google Cloud segment. Revenues were $9.6 billion for the quarter, up 28%, reflecting significant growth in GCP with an increasing contribution from AI and strong Google Workspace growth, primarily driven by increases in average revenue per seat. Google Cloud delivered operating income of $900 million and an operating margin of 9%. As to our Other Bets, for the first quarter, revenues were $495 million, benefiting from a milestone payment in one of the Other Bets. The operating loss was $1 billion. Turning to our outlook for the business. With respect to Google Services, first, within Advertising, we are very pleased with the momentum of our Ads businesses. Search had broad-based strength across verticals. In YouTube, we had acceleration in revenue growth driven by brand and direct response. Looking ahead, two points to call out: first, results in our advertising business in Q1 continued to reflect strength in spend from APAC-based retailers, a trend that began in the second quarter of 2023 and continued through Q1, which means we will begin lapping that impact in the second quarter; second, the YouTube acceleration in revenue growth in Q1 reflects, in part, lapping the negative year-on-year growth we experienced in the first quarter of 2023. Turning to subscriptions, platforms, and devices. We continue to deliver significant growth in our subscriptions business, which drives the majority of revenue growth in this line. The sequential quarterly decline in year-on-year revenue growth for the line in Q1 versus Q4 reflects, in part, the fact that we had only 1 week of Sunday Ticket subscription revenue in Q1 versus 14 weeks in Q4. Looking forward, we will anniversary last year's price increase in YouTube TV starting in May. With regard to platforms, we are pleased with the performance in Play driven by an increase in buyers. With respect to Google Cloud, performance in Q1 reflects strong demand for our GCP infrastructure and solutions as well as the contribution from our Workspace productivity tools. The growth we are seeing across Cloud is underpinned by the benefit AI provides for our customers. We continue to invest aggressively while remaining focused on profitable growth. As we look ahead, two points that will affect sequential year-on-year revenue growth comparisons across Alphabet: first, Q1 results reflect the benefit of leap year, which contributed slightly more than 1 point to our revenue growth rate at the consolidated level in the first quarter; second, at current spot rates, we expect a larger headwind from foreign exchange in Q2 versus Q1. Turning to margins. Our efforts to durably reengineer our cost base are reflected in a 400 basis point expansion of our Alphabet operating margin year-on-year, excluding the impact of restructuring and severance charges in both periods. You can also see the impact in the quarter-on-quarter decline in head count in Q1, which reflects both actions we have taken over the past few months and a much slower pace of hiring. As we have discussed previously, we are continuing to invest in top engineering and technical talent, particularly in Cloud, Google DeepMind and technical infrastructure. Looking ahead, we remain focused on our efforts to moderate the pace of expense growth in order to create capacity for the increases in depreciation and expenses associated with the higher levels of investment in our technical infrastructure. We believe these efforts will enable us to deliver full year 2024 Alphabet operating margin expansion relative to 2023. With respect to CapEx, our reported CapEx in the first quarter was $12 billion, once again driven overwhelmingly by investment in our technical infrastructure, with the largest component for servers followed by data centers. The significant year-on-year growth in CapEx in recent quarters reflects our confidence in the opportunities offered by AI across our business. Looking ahead, we expect quarterly CapEx throughout the year to be roughly at or above the Q1 level, keeping in mind that the timing of cash payments can cause variability in quarterly reported CapEx. With regard to Other Bets, we similarly have work streams underway to enhance overall returns. Finally, as I trust you saw in the press release, we are very pleased to be adding a quarterly dividend of $0.20 per share to our capital return program as well as a new $70 billion authorization in share repurchases. The core of our capital allocation framework remains the same, beginning with investing aggressively in our business as you have heard us talk about today. Given the extraordinary opportunities ahead, we view the introduction of the dividend as further strengthening our overall capital return program. Thank you. Sundar, Philipp, and I will now take your questions.","evidence_gemma_new":"Google Search and other advertising revenues","evidence_llama_3_3":"Google Services Google Search and other advertising revenues first quarter","evidence_qwen_3_30b":"Google Search and other advertising revenues","gemma_new_max":46200000000.0,"gemma_new_min":46200000000.0,"llama_3_3_max":46200000000.0,"llama_3_3_min":46200000000.0,"qwen_3_30b_max":46200000000.0,"qwen_3_30b_min":46200000000.0}
{"symbol":"GOOGL","year":2024,"quarter":2,"date":"2024-Q2","chunk_id":4,"sub_chunk_id":0,"centroid_label":"google services google search and other advertising revenue","agreed_value":48500000000.0,"count":2,"chunk":"Ruth Porat : Thank you, Philipp, and thanks, Sundar, for those kind words. We had another strong quarter, driven in particular by performance in Search and Cloud, as well as the ongoing efforts to durably reengineer our cost base. My comments will be on year-over-year comparisons for the second quarter unless I state otherwise. I will start with results at the Alphabet level followed by segment results and conclude with our outlook. For the second quarter, our consolidated revenues were $84.7 billion, up 14% or up 15% in constant currency. Search remained the largest contributor to revenue growth. In terms of expenses, total cost of revenues was $35.5 billion, up 11%. Other cost of revenues was $22.1 billion, up 14%, with the increase driven primarily by content acquisition costs, followed by depreciation as well as the impact of the Canadian digital services tax, which was applied retroactively. Operating expenses were $21.8 billion up 5%, primarily reflecting an increase in R&D partially offset by a decline in G&A with sales and marketing essentially flat to the second quarter last year. The increase in R&D was driven primarily by compensation which was affected by lapping a reduction in valuation-based compensation liabilities in certain other bets in the second quarter last year followed by depreciation. The largest single factor in the year-on-year decline in G&A expenses was lower charges related to legal matters. Operating income was $27.4 billion, up 26% and our operating margin was 32%. Net income was $23.6 billion and EPS was $1.89. We delivered free cash flow of $13.5 billion in the second quarter and $60.8 billion for the trailing 12 months. As a reminder, last year, we had a timing benefit in the second and third quarters from a $10.5 billion deferred cash tax payment made in the fourth quarter, which depressed reported free cash flow growth this quarter, and we'll do so again next quarter. We ended the quarter with $101 billion in cash and marketable securities. Turning to segment results. Within Google Services, revenues were $73.9 billion, up 12%. Google Search and other advertising revenues of $48.5 billion in the quarter were up 14%, led again by growth in retail, followed by the financial services vertical. YouTube advertising revenues of $8.7 billion were up 13% driven by brand followed by direct response advertising. Network advertising revenues of $7.4 billion were down 5%. Subscription platforms and devices revenues were $9.3 billion up 14%, primarily reflecting growth in YouTube subscription revenues. TAC was $13.4 billion, up 7%. Google Services operating income was $29.7 billion up 27% and the operating margin was 40%. Turning to the Google Cloud segment. Revenues were $10.3 billion for the quarter, up 29%, reflecting first significant growth in GCP, which was above growth for cloud overall and includes an increasing contribution from AI. And second, strong Google Workspace growth, primarily driven by increases in average revenue per seat. Google Cloud delivered operating income of $1.2 billion and an operating margin of 11%. As to our Other Bets for the second quarter, revenues were $365 million and the operating loss was $1.1 billion. Turning to our outlook for the business. With respect to Google Services, First, within advertising. The strong performance of search was broad-based across verticals. In YouTube, we are pleased with the growth in the quarter. We had healthy watch time growth continued to close the monetization gap in Shorts and had continued momentum in Connected TV, with brand benefiting in part from an ongoing shift in budgets from linear television to digital. As we look forward to the third quarter, we will be lapping the increasing strength in advertising revenues in the second half of 2023, in part from APAC based retailers. Turning to subscriptions, platforms and devices. First, we continue to have significant growth in our subscriptions business which drives the majority of revenue growth in this line. However, there was a sequential decline in the year-on-year growth rate, as we anniversaried the impact of a price increase for YouTubeTV in the second quarter last year. The impact will persist through the balance of the year. Second, with regard to platforms. We are pleased with the performance in play driven by an increase in buyers. Finally, with respect to devices. The most important point as we look forward is that our Made by Google launches have been pulled forward into the third quarter from the fourth quarter last year benefiting revenues in Q3 this year. Turning to cloud, which continued to deliver very strong results. For the first time, Cloud crossed $10 billion in quarterly revenues and $1 billion in quarterly operating profit. As Sundar noted year-to-date, our AI infrastructure and generative AI solutions for cloud customers have already generated billions in revenues and are being used by more than 2 million developers. We're particularly encouraged that the majority of our top 100 customers are already using our generative AI solutions. We continue to invest aggressively in the business. Turning to margins. The margin expansion in Q2 versus last year reflects our ongoing efforts to durably reengineer our cost base, as well as revenue strength. Our leadership team remains focused on our efforts to moderate the pace of expense growth in order to create capacity for the increases in depreciation and expenses associated with the higher levels of investment in our technical infrastructure. Once again headcount declined quarter-on-quarter, which reflects both actions we have taken in the first half of the year and a much slower pace of hiring. Looking ahead, we expect a slight increase in headcount in the third quarter, as we bring on new graduates. As we have discussed previously, we\u2019re continuing to invest in top engineering and technical talent, particularly in cloud and technical infrastructure. Looking forward, we continue to expect to deliver full-year 2024 Alphabet operating margin expansion relative to 2023. However, in the third quarter operating margins will reflect the impact of both the increases in depreciation and expenses associated with the higher levels of investment in our technical infrastructure, as well as the increase in cost of revenues due to the pull-forward of hardware launches into Q3. With respect to CapEx, our reported CapEx in the second quarter was $13 billion, once again driven overwhelmingly by investment in our technical infrastructure with the largest component for servers followed by data centers. Looking ahead, we continue to expect quarterly CapEx throughout the year to be roughly at or above the Q1 CapEx of $12 billion keeping in mind that the timing of cash payments can cause variability in quarterly reported CapEx. With regard to other bets, we continue to focus on improving overall efficiencies, as we invest for long-term returns. Waymo is an important example of this, with its technical leadership coupled with progress on operational performance. As you will see in the 10-Q, we have chosen to commit to a new multi-year investment of $5 billion. This new round of funding, which is consistent with recent annual investment levels will enable Waymo to continue to build the world's leading autonomous driving technology company. To close, this is my 56th and last earnings call, 37 of them at Alphabet. So I have a few closing thoughts of gratitude. I've been so proud to be at Google and Alphabet as CFO and to work with some of the smartest people in the world every day. I think, we have accomplished a lot in the last nine plus years, and I am confident that progress will continue. Of course, I'm not going far and I'm honored to have my new role, which I've been slowly working my way into during the past 11 months and I look forward to continuing to work with Sundar, and our great team. Being CFO of one of the most important companies in the world has been the opportunity and responsibility of a lifetime. Google's Mission of advancing technology and bringing information to people throughout the world is as relevant today as it was when I worked on its IPO. Technology has been a catalyst for economic growth throughout human history. The people on this call know that if a technological advancement is not the focus of every business and government, they will be left behind. Underpinning this is the need for sound and responsible investment. That has never been more important than today and certainly, that is Google and Alphabet's focus. I want to end by thanking Googlers around the world for the innovation and commitment that has enabled us to deliver such extraordinary products and services globally. I also want to thank our investors and analysts for your long-term support and your feedback. Thank you. Sundar, Philipp and I will now take your questions.","evidence_gemma_new":"Google Search and other advertising revenues","evidence_llama_3_3":"Google Search and other advertising revenues revenues second quarter","evidence_qwen_3_30b":null,"gemma_new_max":48500000000.0,"gemma_new_min":48500000000.0,"llama_3_3_max":48500000000.0,"llama_3_3_min":48500000000.0,"qwen_3_30b_max":null,"qwen_3_30b_min":null}
{"symbol":"GOOGL","year":2024,"quarter":3,"date":"2024-Q3","chunk_id":4,"sub_chunk_id":0,"centroid_label":"google services google search and other advertising revenue","agreed_value":49400000000.0,"count":2,"chunk":"Anat Ashkenazi: Thank you, Philipp. And thanks, Sundar, for the words of welcome. My comments will focus on year-over-year comparisons for the third quarter, unless I state otherwise. I will start with the results at the Alphabet level and will then cover our segment results. I'll end with high-level commentary on investment at the Alphabet level. We had another strong quarter in Q3 with robust momentum across the business. Consolidated revenue increased by 15% or 16% in constant currency. Search remained the largest contributor to revenue growth, followed by a robust 35% growth in cloud. Total cost of revenue was $36.5 billion, up 10%. Tech was $13.7 billion, up 9%. We continue to see a revenue mix shift with Google Search growing at double-digit levels, while network revenue, which have a much higher TAC rate declined. Other cost of revenue was $22.8 billion, up 11%, with the increase primarily driven by content acquisition costs, primarily for YouTube, an increase in depreciation associated with higher level of investment in our technical infrastructure and higher hardware costs associated with the pull forward of our Made by Google launches from the fourth to the third quarter. Total operating expenses increased 5% to $23.3 billion. The increase was primarily driven by facilities-related charges as results of actions were taken to further optimize our office space footprint globally, followed by depreciation, partially offset by year-on-year decline in charges for legal and other matters. R&D investments increased by 11%, primarily driven by increases in compensation and depreciation expenses. Sales and marketing expenses increased 5%, primarily reflecting investment in advertising and promotional efforts related to the Made by Google launches, as well as for AI and Gemini. G&A expenses declined by 10%, primarily due to lower charges for legal and other matters. Operating income increased 34% to $28.5 billion and operating margin increased to 32%. Net income increased 34% to $26.3 billion and earnings per share increased 37% to $2.12. We're pleased with the progress we're making in reengineering our cost structure, which is reflected in our operating margin expansion this quarter, while also continuing to invest in the business to bring innovation to consumers, creators and enterprises. We delivered free cash flow of $17.6 billion for the third quarter and $55.8 billion for the trailing 12 months. Year-on-year free cash flow was negatively impacted by the following items. In 2023, we deferred cash tax payments from the second and third quarter to the fourth quarter. And in Q3 2024, we made a $3 billion cash payment related to the 2017 EC shopping fine. We ended the quarter with $93 billion in cash and marketable securities. Now turning to segment results. Google Services revenue increased 13% to $76.5 billion. Google Search and other advertising revenue increased by 12% to $49.4 billion. The robust performance of search was broad-based across verticals, led by the financial services vertical due to strength in insurance followed by retail. YouTube advertising revenue increased 12% to $8.9 billion, driven by brand, followed by direct response advertising. As Philipp mentioned, we're seeing strong momentum in YouTube, including robust growth in watch time across the platform and are excited about the new features and products we're bringing to creators. Network advertising revenue of $7.5 billion were down 2%. In the third quarter, the year-on-year growth in all our advertising revenue lines was impacted by the increase in strength in advertising revenue in Q3 of last year, in part from APAC-based retailers. Subscription platforms and devices revenue increased 28% to $10.7 billion, reflecting growth in subscription revenues, as well as the launch of our Made by Google devices in the third quarter. We continue to have significant growth in our subscription products, driven primarily by YouTube TV and YouTube Music Premium, as well as Google One, primarily due to increases in the number of paid subscribers. With regards to platforms, we're pleased with the performance in play, primarily driven by an increase in buyers. Google Service operating income increased by 29% to $30.9 billion, and operating margin was 40%. Turning to the Google Cloud segment, which continued to deliver very strong results this quarter. Revenue increased by 35% to $11.4 billion in the third quarter, reflecting accelerated growth in GCP across AI infrastructure, generative AI solutions and core GCP products. Once again, GCP grew at a rate that was higher than cloud overall. We also saw strong Google Workspace growth, primarily driven by increases in average revenue per seat. As you just heard from Sundar, the robust innovation and expanded AI offerings within our cloud business are allowing existing and new customers to realize measurable business benefits, including reduced cost, greater customer engagement, faster response time and better revenue conversion. Google Cloud operating income increased to $1.9 billion and operating margin increased to 17%. The operating margin expansion was driven by strong revenue performance across cloud AI products, core GCP and Workspace, as well as ongoing efficiency initiatives. As to our Other Bets, for the third quarter revenue were $388 million and operating loss was $1.1 billion. I'll highlight just a couple of accomplishments in the quarter for Waymo and Wing. We're excited about the progress we're seeing in Waymo, as Sundar mentioned, and the increase in the number of paid rides. We're planning to continue to expand our geographic coverage and reach more customers in existing markets and new markets. Wing, our drone delivery company, recently passed the 1-year anniversary of scaling its partnership with Walmart in the Dallas-Fort Worth area, now operating in 11 stores and serving 26 different cities and towns. Turning to Alphabet level activities. The largest component of this line is our investment in AI research and development activities, which support all of Alphabet. There were two notable items that impacted the operating loss in Alphabet level activities. First, a $607 million charge related to decisions we've made to further optimize our physical footprint and office space globally; and second, our ongoing investments in AI R&D, including the full quarter effect of the organizational changes we've made in May to move some additional AI teams from Google Services to Google DeepMind. With respect to CapEx, our reported CapEx in the third quarter was $13 billion, reflecting investment in our technical infrastructure with the largest component being investment in servers, followed by data centers and networking equipment. Looking ahead, we expect quarterly CapEx in the fourth quarter to be at similar levels to Q3, keeping in mind that the timing of cash payments can cause variability in quarterly reported CapEx. Our expansion of data center capacity is expected to bring economic benefits to countries and communities where we are investing. In the third quarter alone, we made announcements of over $7 billion in planned data center investments with nearly $6 billion of that in the U.S. In Q3, we also returned value to shareholders in the form of $15.3 billion in share repurchases and $2.5 billion in dividend payments. Overall, we returned a total of nearly $70 billion over the trailing 12 months to shareholders. As we look forward, we're working to balance our investments in AI and other growth areas with the cost discipline needed to fund those activities. As we think about the remainder of 2024, there are a couple of dynamics to consider. In terms of revenue, year-on-year growth in advertising revenue will continue to be impacted by the increasing strength in advertising revenue in the second half of 2023, in part from APAC-based retailers. And there will be a headwind to year-over-year growth in subscription platforms and devices revenue in the fourth quarter due to the pull forward of our Made by Google launches into the third quarter this year. In terms of expenses, we'll continue to see increases in depreciation and expenses associated with higher level of investment in our technical infrastructure, partially offset by a slight benefit from the cost revenue associated with our devices due to the pull forward of hardware launches into Q3. Now before going into Q&A, as the new CFO, I would like to share a few thoughts on how I'm approaching and thinking through growth, cost structure and capital allocation and expect to hear more from me on these topics in the coming quarters. As I look at the business, I see opportunities for further growth propelled by AI and the underlying momentum across the business. You heard about some of these on the call today. I also believe that we are well positioned to deliver meaningful innovation, which will translate to revenue given our strength in the core pillars that are required to succeed in AI at scale. Realizing those opportunities and great innovation in AI requires global reach, which we have through our products and platforms, as well as continued meaningful capital investment. And while we have a strong balance sheet to be able to support these investments, we will be looking for efficiencies so that we can fund innovation in priority areas. Sundar, Ruth and our leadership team started important work to reengineer our cost structure including efforts such as optimizing our headcount growth, our physical footprint, improving the efficiencies of our technical infrastructure and streamlining operations across the company through the use of AI. I plan to build on these efforts, but also evaluate where we might be able to accelerate work and where we might need to pivot to free up capital for more attractive opportunities. Thank you. Sundar, Philipp and I will now take your questions.","evidence_gemma_new":"Google Search and other advertising revenue","evidence_llama_3_3":"Google Services Google Search and other advertising revenue third quarter","evidence_qwen_3_30b":null,"gemma_new_max":49400000000.0,"gemma_new_min":49400000000.0,"llama_3_3_max":49400000000.0,"llama_3_3_min":49400000000.0,"qwen_3_30b_max":null,"qwen_3_30b_min":null}
{"symbol":"GOOGL","year":2024,"quarter":4,"date":"2024-Q4","chunk_id":4,"sub_chunk_id":0,"centroid_label":"google services google search and other advertising revenue","agreed_value":54000000000.0,"count":2,"chunk":"Anat Ashkenazi: Thank you, Philipp. We're pleased with the continued momentum we're seeing across the business as Alphabet revenue for 2024 reached $350 billion, up 14% on a reported basis and 15% in constant currency versus 2023. My comments will focus on year-over-year comparisons for the fourth quarter, unless I state otherwise. I will start with the results at the Alphabet level and we'll then cover our segment results. I'll end with some commentary and expectations over the first quarter and full year 2025. We had another strong quarter in Q4 with robust momentum across the business. Consolidated revenue of $96.5 billion, increased by 12% in both reported and constant currency. Search remained the largest contributor to revenue growth, followed by Cloud. Total cost of revenue was $40.6 billion, up 8%. Tech was $14.8 billion, up 6%. We continue to see a revenue mix shift with Google Search growing at double-digit levels, while network revenues, which have a much higher tech rate, declined. Other cost of revenue was $25.8 billion, up 9%, with the increase primarily driven by content acquisitions costs, primarily for YouTube, followed by depreciation, due to increasing investments in our technical infrastructure. Growth in content acquisition and depreciation were partially offset by our year-over-year decline in hardware costs due to the shift in timing of our made-by-Google launches to the third quarter 2024 compared to the fourth quarter of 2023. In terms of total expenses, the year-over-year comparisons reflect $1.2 billion in exit charges that we took in the fourth quarter of 2023 in connection with actions to optimize our global office space. As previously disclosed, those charges were allocated across the expense lines in other costs of revenue and OpEx based on associated headcount. Total operating expenses decreased 1% to $24.9 billion. R&D investments increased by 8%, primarily driven by increase in compensation and depreciation expenses, partially offset by the impact of charges for office [ph] space optimization in the fourth quarter of 2023. Sales and marketing expenses decreased 5%, primarily reflecting the optimization charges last year, as well as declines in compensation and in ads and promotion expenses due to the timing shift of the Pixel launch from Q4 to Q3. G&A expenses declined by 15%, reflecting a shift of timing in our charitable contributions, as well as the optimization charges last year. Operating income increased 31%, the score [ph] to $31 billion, and operating margin increased to 32%, representing 4.6 points of margin expansion. Net income increased 28% to $26.5 billion, and earnings per share increased 31% to $2.15. We delivered free cash flow of $24.8 billion in the fourth quarter and $72.8 billion for the full year 2024. We ended the quarter with $96 billion in cash and marketable securities. Turning to segment results. Google Service revenues increased 10% to $84.1 billion, reflecting the strong momentum across Google Search and YouTube ads. Google Search and other advertising revenues increased by 13% to $54 billion. The robust performance of Search was once again broad-based across verticals, led by the financial service vertical due to strength in insurance, followed by retail. YouTube advertising revenue increased 14% to $10.5 billion, driven by brand, followed by direct response advertising. Network advertising revenue of $8 billion, were down 4%. In the fourth quarter, the year-over-year comparison in all of our advertising revenue lines was impacted by the increase in strength in advertising revenue in Q4 2023, in part from APAC-based retailers. Subscription platforms and device revenues increase 8% to $11.6 billion, primarily reflecting growth in subscription revenues, partially offset by the shift in timing of the launch of our made by Google devices to the third quarter, compared with the fourth quarter in 2023. We continue to have significant growth in our subscription products, primarily due to increase in the number of paid subscribers across YouTube TV, YouTube Music Premium, and Google One. With regards to Platform, we saw a slight increase in the growth rate in Play, primarily due to a strong increase in the number of buyers. Google's service operating income increased 23% to $32.8 billion, and operating margin increased from 35% to 39%, representing a meaningful margin expansion. Turning to the Google Cloud segment, which continued to deliver very strong results this quarter. Revenue increased by 30% to $12 billion in the fourth quarter, reflecting growth in GCP across core GCP products, AI infrastructure, and generative AI solutions. Once again, GCP grew at a rate that was much higher than cloud overall. Healthy Google Workspace growth was primarily driven by increase in average revenue per seat. Google Cloud operating income increased to $2.1 billion, and operating margin increased from 9.4% to 17.5%. We're pleased with the work the cloud team is doing to deliver valuable solutions to the customer and generate revenue growth, as well as its continued focus on driving efficiencies across the cloud business. As for Other Bets, for the fourth quarter, revenue were $400 million, and the operating loss was $1.2 billion. The year-over-year decline in revenue and increase in operating loss primarily reflect the milestone payment in the fourth quarter of 2023 for one of the Other Bets. Turning to Alphabet level activities, the largest component of this line is our investments in AI research and development activities which support all of Alphabet. As a reminder, Alphabet level activities have included nearly all severance charges from reductions in workforce and office space charges. In the fourth quarter of 2024, the biggest factor in year-over-year comparison is the $1.2 billion in charges in the fourth quarter of 2023, almost entirely in connection with office space optimization. With respect to CapEx, our reported CapEx in the fourth quarter was $14 billion, primarily reflecting investments in our technical infrastructure, with the largest component being investment in servers, followed by data centers, to support the growth of our business across Google Services, Google Cloud, and Google DeepMind. In Q4, we returned value to shareholders in the form of $15 billion in share purchases and $2.4 billion in dividend payments. Overall, we returned a total of nearly $70 billion to shareholders in 2024. Turning to 2025, I would like to provide some commentary on several factors that will impact our business performance in both the first quarter and the full year 2025. First in terms of revenue, I'll highlight two items that will have meaningful impact on Q1 revenue across the company. First in terms of revenues, I'll highlight two items that will have meaningful impact on Q1 revenues across the company. The first is the impact of foreign exchange rates. At the current spot rates, we expect a larger headwind to our revenues from the strengthening of the U.S dollar relative to key currencies in Q1 versus Q4 2024. Second is the impact of leap year. We expect a headwind from having one less day of revenue in Q1 2025 compared with leap year in the first quarter of 2024. As for our segments, Google Services, advertising revenue in 2025 will be impacted by lapping the strength we experience in the financial service vertical throughout 2024. And in Cloud, given the revenues are correlated with the timing of deployment of new capacity, we could see variability in cloud revenue growth rates depending on when new capacity comes online during 2025. Moving to investments, starting with our expectation for CapEx for the full year 2025. As we mentioned on the Q3 call, as we expand our AI efforts, we expect to increase our investments in capital expenditure for technical infrastructure, primarily for servers, followed by data centers and networking. We expect to invest approximately $75 billion in CapEx in 2025 with approximately $16 billion to $18 billion of debt in the first quarter. The expected total investment level may fluctuate from quarter-to-quarter, primarily due to timing of deliveries and construction schedules. In terms of expenses, first, the increase in our investment in CapEx over the past few years will increase pressure on the P&L, primarily in the form of higher depreciation. In 2024, we saw 28% year-over-year growth in depreciation as we put more technical infrastructure assets into service. Given the increase in CapEx investments over the past few years, we expect the growth rate and depreciation to accelerate in 2025. Second, we expect some headcount growth in 2025 in key investment areas such as AI and cloud. As you just heard from Sundar, we're delivering products and solutions to customer at a rapid pace, building, testing, and launching products faster than ever before. And as I mentioned on the Q3 call, we're doing that while also focusing on driving further efficiencies in how we operate the business. Before we take questions, I'd like to recap the financial results for the year. For the full year 2024, revenue grew by 14% or by $43 billion, reaching $350 billion. Google Services and Google Cloud each continue to see double-digit revenue growth coupled with margin extension. YouTube and cloud revenues combined, ended the year at $110 billion annual run rate. And in 2024, we generate total income of $112 billion, an increase of 33% from 2023. We're pleased with the momentum we're seeing in AI innovation and monetization. We've been using AI to improve the performance of our ads business for well over a decade, and Cloud is generating billions in annual revenue from AI infrastructure and generative AI solutions. We're also excited about the potential to bring new experiences to users that will provide additional opportunities for monetization. And I look forward to sharing more in our progress throughout the year. Sundar, Philipp, and I will now take your questions.","evidence_gemma_new":"Google Search and other advertising revenues","evidence_llama_3_3":"Google Service Google Search and other advertising revenues fourth quarter","evidence_qwen_3_30b":null,"gemma_new_max":54000000000.0,"gemma_new_min":54000000000.0,"llama_3_3_max":54000000000.0,"llama_3_3_min":54000000000.0,"qwen_3_30b_max":null,"qwen_3_30b_min":null}
{"symbol":"GOOGL","year":2023,"quarter":1,"date":"2023-Q1","chunk_id":5,"sub_chunk_id":0,"centroid_label":"net income","agreed_value":15100000000.0,"count":3,"chunk":"Ruth Porat: Thank you, Philipp. Our financial results for the first quarter reflect continued healthy fundamental growth in Search and momentum in Cloud. As I go through the discussion today, I will reference some changes to our reporting and disclosures that are covered more fully in the 8-K we filed last week. I will conclude with our outlook. For the first quarter, our consolidated revenues were $69.8 billion, up 3% or up 6% in constant currency. Search remained the largest contributor to revenue growth on a constant currency basis. In terms of expenses and profitability, year-on-year comparisons are impacted by 3 factors: first, the $2.6 billion in charges we took in the first quarter related to workforce and office space reductions. We provided a table in our earnings release that shows the impact of those charges on cost of revenues and operating expenses. Second, the adjustment we made to the estimated useful lives of servers and certain network equipment at the beginning of 2023. As you can see in our earnings release, the effect for the first quarter was a reduction in depreciation expense of $988 million. Third, the shift in timing of our annual employee stock-based compensation awards from January to March delays the step-up in SBC from Q1 to Q2. This shift in timing does not affect the total amount of SBC over the full year 2023. Total cost of revenues was $30.6 billion, up 3%, driven by other cost of revenues of $18.9 billion, which was up 7%, the biggest factor of which was compensation costs associated with data centers and other operations and followed by content acquisition costs. Operating expenses were $21.8 billion, up 19%, with a significant impact from the charges related to workforce and office space reductions. Operating income was $17.4 billion, down 13%, and our operating margin was 25%. Net income was $15.1 billion. We delivered free cash flow of $17.2 billion in the first quarter and $62 billion for the trailing 12 months. We ended the quarter with $115 billion in cash and marketable securities. Turning to our segment results. These were affected by 2 additional changes outlined in our 8-K filing. First, reflecting the increasing collaboration between DeepMind and Google Services, Google Cloud, and Other Bets, as of Q1, DeepMind is reported as part of Alphabet's unallocated corporate costs. And second, beginning in the first quarter, we updated our cost allocation methodologies to provide our business leaders with increased transparency for decision-making. In our filing, we provided a recast of prior period results for the segment for these 2 changes. The highlights of the year-on-year performance of our segments that I will review reflect these recast results. Starting with Google Services. Revenues were $62 billion, up 1%. Google Search and other advertising revenues of $40.4 billion in the quarter were up 2%. YouTube advertising revenues of $6.7 billion were down 3%. Network advertising revenues of $7.5 billion were down 8%. Other revenues were $7.4 billion, up 9%, reflecting primarily ongoing significant subscriber growth in YouTube TV and YouTube Music Premium. TAC was $11.7 billion, down 2%, primarily reflecting a mix shift between Search and Network. Google Services operating income was $21.7 billion, down 1%, and the operating margin was 35%. Turning to the Google Cloud segment. Revenues were $7.5 billion for the quarter, up 28%. Growth in GCP remained strong across geographies, industries and products. Google Workspace's strong results were driven by increases in both seats and average revenue per seat. Google Cloud had operating income of $191 million, and the operating margin was 2.6%. As to our Other Bets, for the first quarter, revenues were $288 million, and the operating loss was $1.2 billion. Turning to our outlook for the business. In terms of the operating environment, our results in the first quarter reflected ongoing headwinds due to a challenging economic environment, and the outlook remains uncertain. Foreign exchange headwinds have moderated, and we expect less of a foreign exchange headwind in the second quarter based on current spot rates. With respect to Google Services, within advertising, Q1 results reflect the resilience of Search with its unique ability to surface demand and deliver measurable ROI. Excluding the impact of foreign exchange, the revenue growth of Search was similar to last quarter. In YouTube, we saw signs of stabilization in ad spend on a sequential basis. We continue to prioritize growth in Shorts engagement where we are encouraged by progress in monetization. As to other revenues, in YouTube subscriptions, we are pleased with the significant ongoing subscriber growth in both YouTube Music Premium and YouTube TV. In Play, revenues were down year-on-year, primarily due to the continued impact of foreign exchange in APAC, although results have improved as we lapped the impact from our introduction of fee reductions last year. Turning to Google Cloud. Our investments in product innovation, our go-to-market organization and our partner ecosystem delivered strong results as customers across industries and geographies increasingly rely on Google Cloud to digitally transform their businesses. That being said, in Q1, we continued to see slower growth of consumption as customers optimized GCP costs, reflecting the macro backdrop which remains uncertain. In terms of operating performance, we remain focused on driving long-term profitable growth in Cloud while continuing to invest given the substantial opportunity. Moving to Other Bets. In the first quarter, we similarly worked to refine strategies and prioritize efforts across the portfolio, including reductions to head count. I will now walk you through an update on our efforts to reengineer our cost base, slowing the pace of operating expense growth while creating capacity for key investment areas, particularly in support of AI across the company. First, as discussed on the fourth quarter call, we have efforts underway in 3 broad categories: number one, using AI and automation to improve productivity across Alphabet for operational tasks as well as the efficiency of our technical infrastructure; number two, managing our spend with suppliers and vendors more effectively; and number three, continuing to optimize how and where we work. As we've noted previously, all 3 work streams are ramping up this year, and we plan to build on these efforts in 2024 and in subsequent years. Second, with respect to head count growth. The reported number of employees at the end of the first quarter includes almost all of the employees impacted by the workforce reduction we announced in January. We expect most of the impacted individuals will no longer be reflected in our head count by the end of the second quarter. In terms of the outlook for head count for the year, as we shared last quarter, we are meaningfully slowing the pace of hiring in 2023 while still investing in priority areas, particularly for top engineering and technical talent. In terms of our investments in AI, we are excited about the creation of Google DeepMind, combining the Brain Team from Google Research with DeepMind, with the goal to accelerate innovation and impact. Beginning in the second quarter of 2023, the costs associated with teams and activities transferred from Google Research will move from Google Services to Google DeepMind within Alphabet's unallocated corporate costs. Finally, as it relates to CapEx, for 2023, we now expect total CapEx to be modestly higher than in 2022. As discussed last quarter, CapEx this year will include a meaningful increase in technical infrastructure versus a decline in office facilities. We expect the pace of investment in both data center construction and servers to step up in the second quarter and continue to increase throughout the year. Thank you. Sundar, Philipp and I will now take your questions.","evidence_gemma_new":"Net income","evidence_llama_3_3":"net income first quarter","evidence_qwen_3_30b":"Net income first quarter","gemma_new_max":15100000000.0,"gemma_new_min":15100000000.0,"llama_3_3_max":15100000000.0,"llama_3_3_min":15100000000.0,"qwen_3_30b_max":15100000000.0,"qwen_3_30b_min":15100000000.0}
{"symbol":"GOOGL","year":2023,"quarter":2,"date":"2023-Q2","chunk_id":4,"sub_chunk_id":0,"centroid_label":"net income","agreed_value":18400000000.0,"count":2,"chunk":"Ruth Porat: Thank you, Philipp. Before I go into the results, first, Sundar, thank you very much for the opportunity. I'm very excited about the new role, and I look forward to it. So turning to the results. We're very pleased with our financial results for the second quarter, which reflect an acceleration of growth in Search and momentum in Cloud. My comments will be on year-over-year comparisons for the second quarter unless I state otherwise. I will start with results at the Alphabet level followed by segment results and conclude with our outlook. For the second quarter, our consolidated revenues were $74.6 billion, up 7% or up 9% in constant currency. Search remained the largest contributor to revenue growth. Total cost of revenues was $31.9 billion, up 6%, driven by other cost of revenues of $19.4 billion, which was up 8%. Growth here was driven by content acquisition costs, primarily for YouTube subscription offerings, followed by hardware costs associated with Pixel family launches in the second quarter. As noted in our earnings release, the overall increase in data center and other operations costs was partially offset by a reduction in depreciation expense due to the change in estimated useful lives we discussed last quarter. Operating expenses were $20.9 billion, up 4%. Operating income was $21.8 billion, up 12%, and our operating margin was 29%. I will cover our expense and margin performance in our outlook. Other income and expense was $65 million. Net income was $18.4 billion. We delivered free cash flow of $21.8 billion in the second quarter and $71 billion for the trailing 12 months, reflecting improved operating performance as well as the deferral of certain tax payments to the fourth quarter of 2023 as noted in our earnings release. We ended the quarter with $118 billion in cash and marketable securities. Turning to our segment results. Prior period results have been recast for 2 changes that we made as of the first quarter. First, DeepMind is now reported as part of Alphabet's unallocated corporate costs. Second, we updated our cost allocation methodologies. In the second quarter, we then combined the Brain team from Google Research with DeepMind to form Google DeepMind. Costs associated with the Brain team, which were previously included in Google Services, are now reported as part of Alphabet's unallocated corporate costs. We have not recast prior period results to reflect this additional change. Within Google Services, revenues were $66.3 billion, up 5%. Google Search and other advertising revenues of $42.6 billion in the quarter were up 5%, led by growth in retail. YouTube advertising revenues of $7.7 billion were up 4%, driven by brand advertising, followed by direct response reflecting further stabilization in spending by advertisers. Network advertising revenues of $7.9 billion were down 5%. Other revenues were $8.1 billion, up 24%, reflecting growth in YouTube non-advertising revenues, primarily from subscription growth in YouTube Music Premium and YouTube TV followed by growth in hardware revenues primarily driven by the launch of the Pixel 7a in the second quarter. Finally, Play returned to positive growth in the second quarter. TAC was $12.5 billion, up 3%. Google Services operating income was $23.5 billion, up 8%, and the operating margin was 35%. Turning to the Google Cloud segment. Revenues were $8 billion for the quarter, up 28%. GCP revenue growth remained strong across geographies, industries and products. That being said, we saw a continued moderation in the rate of consumption growth as consumers optimize their spend. Google Workspace strong revenue growth was driven by increases in both seats and average revenue per seat. Google Cloud had operating income of $395 million and the operating margin was 5%. As to our Other Bets, for the second quarter, revenues were $285 million, and the operating loss was $813 million. The decrease in operating loss was primarily driven by a reduction in valuation-based compensation liabilities related to certain Other Bets. Turning to our outlook for the business. With respect to Google Services, first, within advertising. We were pleased with the acceleration of Search advertising revenue growth in the second quarter. Our continued ability to generate sustained growth reflects our unparalleled engineering innovation that creates extraordinary experiences for users and capabilities for advertisers and delivered with the deep expertise of our go-to-market team. And in YouTube, we saw ongoing signs of stabilization in advertiser spending. We are prioritizing product focus on increasing quality consumption of video content with both Shorts and in the living room, which is translating into improved monetization. Second, within other revenues. In our YouTube subscription products, the sustained, strong growth in revenues reflects significant subscriber growth. You may have seen that last week, we increased subscription prices for YouTube Music and Premium, which underscores the value of the products. Strong year-on-year growth in hardware revenues was due, in large part, to a timing change given the Pixel 7a was launched in the second quarter, whereas the Pixel 6a launch occurred in the third quarter last year. Looking ahead, the launch timing change will be a headwind to hardware revenue growth in the third quarter. Play returned to positive growth in the second quarter, driven primarily by a solid increase in the number of buyers. Turning to Google Cloud. We are particularly excited about the customer interest in our AI-optimized infrastructure, our large language models, our AI platform services and our new generative AI offerings such as Duet AI for Google Workspace, although we are still clearly in the early days. At the same time, we continue to experience headwinds in the second quarter for moderation in consumption growth as customers optimize their spend. We continue to invest aggressively while remaining focused on profitable growth. In terms of expenses and profitability, we remain very focused on durably reengineering our cost base. Most evident to date are the actions we have taken to reduce the pace of headcount growth, including the workforce reductions we announced in the first quarter and a slower pace of organic hiring, in part given our focus on reallocating talent from within to fuel our growth priorities. A quick comment on the sequential improvement in operating margins in the second quarter. There are 2 factors to note. First, the benefit from an acceleration in search advertising revenue growth in the second quarter. Second, the vast majority of the charges related to our workforce reduction and optimization of our global office space were taken in Q1. Finally, as it relates to CapEx, in Q2, the largest component was for servers, which included a meaningful increase in our investments in AI compute. The sequential step-up in the second quarter was lower than anticipated for 2 reasons. First, with respect to office facilities, we continue to moderate the pace of fit-outs and ground-up construction to reflect the slower expected pace of headcount growth. Second, there were delays in certain data center construction projects. We expect elevated levels of investment in our technical infrastructure increasing through the back half of 2023 and continuing to grow in 2024. The primary driver is to support the opportunities we see in AI across Alphabet, including investments in GPUs and proprietary TPUs as well as data center capacity. With all that said, we remain committed to durably reengineering our cost base in order to help create capacity for these investments in support of long-term, sustainable financial value. Thank you. Sundar, Philipp and I will now take your questions.","evidence_gemma_new":"net income","evidence_llama_3_3":null,"evidence_qwen_3_30b":"net income second quarter","gemma_new_max":18400000000.0,"gemma_new_min":18400000000.0,"llama_3_3_max":null,"llama_3_3_min":null,"qwen_3_30b_max":18400000000.0,"qwen_3_30b_min":18400000000.0}
{"symbol":"GOOGL","year":2023,"quarter":3,"date":"2023-Q3","chunk_id":4,"sub_chunk_id":0,"centroid_label":"net income","agreed_value":19700000000.0,"count":2,"chunk":"Ruth Porat: Thank you, Philipp. We are very pleased with our financial results for the third quarter, driven by meaningful growth in Search and YouTube and momentum in Cloud. My comments will be on year-over-year comparisons for the third quarter, unless I state otherwise. I will start with results at the Alphabet level followed by segment results and conclude with our outlook. For the third quarter, our consolidated revenues were $76.7 billion, up 11% in both reported and constant currency. Search remained the largest contributor to revenue growth. In terms of expenses, total cost of revenues was $33.2 billion, up 7%, primarily reflecting other cost of revenues of $20.6 billion, which was up 6%. Growth here was primarily driven by content acquisition costs mainly for YouTube subscription offerings. As noted in our earnings release, the overall increase in data center and other operations costs was partially offset by a reduction in depreciation expense due to the change in estimated useful lives we made starting in the first quarter of the year. Operating expenses were $22.1 billion, up 6% reflecting the following. First, an increase in R&D expenses, driven primarily by compensation. Second, an increase in G&A expenses, reflecting the impact of charges related to legal matters. And finally, sales and marketing expenses, which were relatively flat to last year. Operating income was $21.3 billion, up 25%, and our operating margin was 28%. Other income and expense was a loss of $146 million. Net income was $19.7 billion. This reflects an effective tax rate of 7% in the third quarter from an IRS change related to the use of foreign tax credits, which had an outsized impact on the third quarter rate because the change resulted in a catch-up for prior periods. We delivered free cash flow of $22.6 billion in the third quarter and $78 million for the trailing 12 months. We ended the quarter with $120 billion in cash and marketable securities. As a reminder, our cash balance and free cash flow in the second and third quarters benefited from the deferral of certain tax payments to the fourth quarter of 2023. As noted in our earnings release, on October 16, we made an estimated tax payment of $10.5 billion related to this deferral, which will be reflected in our cash balance and free cash flow in the fourth quarter. Turning to segment results. Within Google Services, revenues were $68 billion, up 11%. Google Search and other advertising revenues of $44 billion in the quarter were up 11%, led again by growth in retail. YouTube advertising revenues of $8 billion were up 12%, driven by both brand advertising and direct response. Network advertising revenues of $7.7 billion were down 3%. Other revenues were $8.3 billion, up 21%, primarily reflecting growth in YouTube non-advertising revenues driven by subscriber growth in YouTube TV followed by YouTube Music Premium. TAC was $12.6 billion, up 7%. Google Services operating income was $23.9 billion, up 27% and the operating margin was 35%. Turning to the Google Cloud segment. Revenues were $8.4 billion for the quarter, up 22%. GCP revenue growth remained strong across geographies, industries and products, although the Q3 year-on-year growth rate reflects the impact of customer optimization efforts. Google Workspace also delivered strong revenue growth, primarily driven by increases in average revenue per seat. Google Cloud had operating income of $266 million, and the operating margin was 3%. As to our Other Bets, for the third quarter, revenues were $297 million and the operating loss was $1.2 billion. Turning to our outlook for the business. With respect to Google Services. First, within advertising. After a period of historic volatility, we were pleased with the year-on-year revenue growth of Search and YouTube advertising in the third quarter. Second, within other revenues, in our YouTube subscription products the substantial growth in revenues primarily reflects subscriber growth. Looking ahead, a full quarter of NFL Sunday Ticket revenues as well as associated content acquisition costs will be reflected in Q4 results compared to only a few weeks in the third quarter. Play had growth in the third quarter, driven primarily by an increase in the number of buyers. With respect to hardware, there is a headwind to revenues in the fourth quarter, reflecting efforts to optimize the portfolio with tighter targeting of our go-to-market investments as well as the ongoing impact from the difference in launch timing for the Pixel 6a and 7a that we mentioned last quarter. Turning to Google Cloud. We are pleased with the ongoing customer engagement with GCP and Workspace and the potential benefit of our AI solutions including infrastructure and services such as Vertex AI and Duet. We continue to invest aggressively given the significant potential we see while remaining focused on profitable growth. In terms of expenses and profitability, we're pleased with our operating performance. As we have repeatedly stressed, we remain focused on durably reengineering our cost base to create investment capacity to support our growth priorities, most important of which is with AI. We have a number of workstreams in place. First, we are maintaining a slower pace of headcount growth, reflecting product prioritization and reallocation of talent to support our most important growth opportunities. Second, we remain focused on optimizing our real estate footprint, including how and where we work to reduce our expense growth. As you can see from our earnings release, we incurred $207 million in accelerated rent and depreciation in the third quarter related to these actions. Third, we have engineering work streams underway to improve productivity across Alphabet. Given the magnitude of investment in our technical infrastructure, we have a superb team focused on efficiency of our operations there. We are also making progress in streamlining operations across Alphabet through the use of AI. Finally, there are ongoing workstreams that are improving the efficiency of our spend with suppliers and vendors through our central procurement organization. And to be clear, across the portfolio of other bet companies, we have also been working to identify opportunities to create sharper focus and to operate more efficiently and effectively. With respect to sequential quarter-on-quarter trends, two further points. First, cost of sales in the fourth quarter will reflect both higher hardware costs given Pixel family launches as well as increased CAC for YouTube as previously noted. Second, as usual, we expect sales and marketing expenses to be more heavily weighted to the end of the year, in part to support product launches in the holiday season. Finally, our reported CapEx in Q3 was $8 billion, driven overwhelmingly by investment in our technical infrastructure with the largest component for servers, followed by data centers, reflecting a meaningful increase in our investments in AI compute. The growth in reported cash CapEx in Q3 is somewhat muted due to the timing of supplier payments, which can cause variability from quarter-to-quarter. We continue to invest meaningfully in the technical infrastructure needed to support the opportunities we see in AI across Alphabet and expect elevated levels of investment, increasing in the fourth quarter of 2023 and continuing to grow in 2024. In closing, we remain very excited about the opportunities ahead and committed to deliver sustainable financial value. Thank you. Sundar, Philipp and I will now take your questions.","evidence_gemma_new":"Net income","evidence_llama_3_3":null,"evidence_qwen_3_30b":"net income effective tax rate third quarter","gemma_new_max":19700000000.0,"gemma_new_min":19700000000.0,"llama_3_3_max":null,"llama_3_3_min":null,"qwen_3_30b_max":19700000000.0,"qwen_3_30b_min":19700000000.0}
{"symbol":"GOOGL","year":2023,"quarter":4,"date":"2023-Q4","chunk_id":4,"sub_chunk_id":0,"centroid_label":"net income","agreed_value":20700000000.0,"count":3,"chunk":"Ruth Porat: Thank you, Philipp. We are very pleased with our full year results with 2023 Alphabet revenues of $307 billion, up 9% versus 2022, which added $25 billion to revenues for the year. We ended with a strong fourth quarter with consolidated revenues of $86.3 billion, up 13% versus last year in both reported and constant currency. Search remained the largest contributor to revenue growth. My comments will be on year-over-year comparisons for the fourth quarter, unless I state otherwise. Total cost of revenues was $37.6 billion, up 6%. Other cost of revenues was $23.6 billion, up 5%, with the increase driven primarily by content acquisition costs associated with YouTube subscription offerings. The growth rate also reflects the offsetting benefit of lapping $1.2 billion in inventory-related charges that we called out in the fourth quarter last year as well as a reduction in depreciation expense due to changes in estimated useful lives we made starting in the first quarter of 2023. In terms of total expenses, the year-on-year comparisons reflect an additional $1.2 billion in exit charges that we took in the fourth quarter of 2023 in connection with actions to optimize our global office space. As you can see in our earnings release, these charges were allocated across the expense lines in other cost of revenues and OpEx based on associated head count. Operating expenses were $25 billion, up 11%, primarily reflecting an increase in R&D expenses, which were driven by the real estate charges, followed by compensation. Operating income was $23.7 billion, up 30%, and our operating margin was 27%. Net income was $20.7 billion, and EPS was $1.64. We delivered free cash flow of $7.9 billion, which was affected by the timing of the $10.5 billion tax payment we made on October 16 that we called out previously related to the deferral of certain tax payments to the fourth quarter. For the full year 2023, free cash flow was $69 billion. We repurchased a total of $62 billion of our Class A and Class C shares in 2023 and ended the year with $111 billion in cash and marketable securities. Turning to segment results. Within Google Services, revenues were $76.3 billion, up 12%. Google Search and other advertising revenues of $48 billion in the quarter were up 13%, led again by growth in retail. YouTube advertising revenues of $9.2 billion were up 16% driven by both direct response and brand advertising. Network advertising revenues of $8.3 billion were down 2%. Subscriptions, platforms and devices revenues, which we previously referred to as other revenues, were $10.8 billion, up 23%, primarily reflecting growth in YouTube subscription revenues. TAC was $14 billion, up 8%. Google Services' operating income was $26.7 billion, up 32%, and the operating margin was 35%. Turning to the Google Cloud segment. Revenues were $9.2 billion for the quarter, up 26%. We're very pleased with the momentum of GCP with an increasing contribution from AI. Google Workspace also delivered strong revenue growth primarily driven by increases in average revenue per seat. Google Cloud delivered operating income of $864 million and an operating margin of 9%. As to our Other Bets, for the full year 2023, revenues were $1.5 billion and the operating loss was $4.1 billion. Results in the fourth quarter benefited from a milestone payment in one of the Other Bets. Turning to our outlook for the business. With respect to Google Services, first, within advertising. We were pleased with the sequential revenue growth of Search and YouTube advertising throughout 2023, which reflects the extraordinary work across our teams to drive improved experiences for users and attractive ROI for advertisers. As we enter 2024 with advertising revenues of more than $100 billion higher than 2019, we remain focused on sustaining healthy growth on this larger base. Second, within subscriptions, platforms and devices, our total revenues from subscription products reached $15 billion for the full year 2023 driven primarily by substantial growth in subscribers for our YouTube subscription offerings. The substantial increase in our subscription revenues over the past few years demonstrates the ability of our teams to deliver high value-add offerings and provides a strong base on which to build, including through YouTube and newer services like Google One. Play had solid growth again in the fourth quarter driven primarily by an increase in the number of buyers. In devices, we continue to make sizable investments with increased emphasis on our Pixel family, particularly with AI-powered innovation while driving further efficiencies across the portfolio. Turning to Google Cloud. We are pleased with operating performance in the year. Full year revenues of $33 billion were up 26% versus prior year, ending with strong Q4 performance. The Cloud team is intensely focused on bringing the benefits of Gemini, our industry-leading AI technology, to enterprises and governments globally, and we are gratified with the level of engagement. The strong demand we are seeing for our vertically integrated AI portfolio is creating new opportunities for Google Cloud across every product area. In terms of profitability, the improvement in 2023 reflects sustained focus across the team with the intent to maintain healthy profitability while we continue to invest to support long-term growth. Turning to margins and expenses. As we have repeatedly stressed, we remain committed to our framework to durably reengineer our cost base as we invest to support our growth priorities. Key contributors to moderating our expense growth include: first, product and process prioritization to ensure we have the right resources behind our most important opportunities and to reallocate resources where we can; second, organizational efficiency and structure. We're focused on removing layers to simplify execution and drive velocity. Both product prioritization and the organization design efforts result in a slower pace of hiring, as you can see with our head count down year-on-year, reflecting the reductions we announced in the first quarter of 2023 and a much slower pace of hiring. We will continue to invest in top technical and engineering talent. Finally, we continue to execute the other work streams to slow expense growth, including improving efficiency in our technical infrastructure, streamlining operations across Alphabet through the use of AI, increasing efficiency of our spend with suppliers and vendors through our central procurement organization and optimizing our real estate portfolio. With respect to CapEx, our reported CapEx in the fourth quarter was $11 billion, driven overwhelmingly by investment in our technical infrastructure with the largest component for servers followed by data centers. The step-up in CapEx in Q4 reflects our outlook for the extraordinary applications of AI to deliver for users, advertisers, developers, cloud enterprise customers and governments globally and the long-term growth opportunities that offers. In 2024, we expect investment in CapEx will be notably larger than in 2023. With regard to Other Bets, we've been working to sharpen our investment focus while capturing the upside given compelling technology breakthroughs across the portfolio. For example, last week, Alphabet's X announced that it would be moving to spin out more projects as independent companies through external capital, giving X the opportunity to bring more focus to the breakthrough technologies it is working on to address some of the world's most pressing challenges. Thank you. Sundar, Philipp and I will now take your questions.","evidence_gemma_new":"Net income","evidence_llama_3_3":"Net income","evidence_qwen_3_30b":"net income","gemma_new_max":20700000000.0,"gemma_new_min":20700000000.0,"llama_3_3_max":20700000000.0,"llama_3_3_min":20700000000.0,"qwen_3_30b_max":20700000000.0,"qwen_3_30b_min":20700000000.0}
{"symbol":"GOOGL","year":2024,"quarter":1,"date":"2024-Q1","chunk_id":4,"sub_chunk_id":0,"centroid_label":"net income","agreed_value":23700000000.0,"count":3,"chunk":"Ruth Porat: Thank you, Philipp. We are very pleased with our financial results for the first quarter driven, in particular, by strength in Search and Cloud as well as the ongoing efforts to durably reengineer our cost base. My comments will be on year-over-year comparisons for the first quarter unless I state otherwise. I will start with results at the Alphabet level, followed by segment results and conclude with our outlook. For the first quarter, our consolidated revenues were $80.5 billion, up 15% or up 16% in constant currency. Search remained the largest contributor to revenue growth. In terms of total expenses, the year-on-year comparisons reflect the impact of the restructuring charges we took in the first quarter of 2023 of $2.6 billion as well as the $716 million in employee severance and related charges in the first quarter of 2024. As you can see in our earnings release, these charges were allocated across the expense lines in other cost of revenues and OpEx based on associated head count. To help with year-on-year comparisons, we included a table in our earnings release to adjust other cost of revenues, operating expenses, operating income, and operating margin to exclude the impact of severance and related office space charges in the first quarter of 2023 versus 2024. In terms of expenses, total cost of revenues was $33.7 billion, up 10%. Other cost of revenues was $20.8 billion, up 10% on a reported basis, with the increase driven primarily by content acquisition costs associated with YouTube given the very strong revenue growth in both subscription offerings and ad-supported content. On an adjusted basis, other cost of revenues were up 13% year-on-year. Operating expenses were $21.4 billion, down 2% on a reported basis, primarily reflecting expense decreases in sales and marketing and G&A, offset by an increase in R&D. The largest single factor in the year-on-year decline in G&A expenses was lower charges related to legal matters. On an adjusted basis, operating expenses were up 5%, reflecting, first, in R&D, an increase in compensation expense, primarily for Google DeepMind and Cloud; and second, in sales and marketing, a slight increase year-on-year, reflecting increases in compensation expense primarily for Cloud sales. Operating income was $25.5 billion, up 46% on a reported basis, and our operating margin was 32%. On an adjusted basis, operating income was up 31%, and our operating margin was 33%. Net income was $23.7 billion and EPS was $1.89. We delivered free cash flow of $16.8 billion in the first quarter and $69.1 billion for the trailing 12 months. We ended the quarter with $108 billion in cash and marketable securities. Turning to segment results. Within Google Services, revenues were $70.4 billion, up 14%. Google Search and other advertising revenues of $46.2 billion in the quarter were up 14% led again by growth in retail. YouTube advertising revenues of $8.1 billion were up 21% driven by both direct response and brand advertising. Network advertising revenues of $7.4 billion were down 1%. Subscriptions, platforms and devices revenues were $8.7 billion, up 18%, primarily reflecting growth in YouTube subscription revenues. TAC was $12.9 billion, up 10%. Google Services operating income was $27.9 billion, up 28%. And the operating margin was 40%. Turning to the Google Cloud segment. Revenues were $9.6 billion for the quarter, up 28%, reflecting significant growth in GCP with an increasing contribution from AI and strong Google Workspace growth, primarily driven by increases in average revenue per seat. Google Cloud delivered operating income of $900 million and an operating margin of 9%. As to our Other Bets, for the first quarter, revenues were $495 million, benefiting from a milestone payment in one of the Other Bets. The operating loss was $1 billion. Turning to our outlook for the business. With respect to Google Services, first, within Advertising, we are very pleased with the momentum of our Ads businesses. Search had broad-based strength across verticals. In YouTube, we had acceleration in revenue growth driven by brand and direct response. Looking ahead, two points to call out: first, results in our advertising business in Q1 continued to reflect strength in spend from APAC-based retailers, a trend that began in the second quarter of 2023 and continued through Q1, which means we will begin lapping that impact in the second quarter; second, the YouTube acceleration in revenue growth in Q1 reflects, in part, lapping the negative year-on-year growth we experienced in the first quarter of 2023. Turning to subscriptions, platforms, and devices. We continue to deliver significant growth in our subscriptions business, which drives the majority of revenue growth in this line. The sequential quarterly decline in year-on-year revenue growth for the line in Q1 versus Q4 reflects, in part, the fact that we had only 1 week of Sunday Ticket subscription revenue in Q1 versus 14 weeks in Q4. Looking forward, we will anniversary last year's price increase in YouTube TV starting in May. With regard to platforms, we are pleased with the performance in Play driven by an increase in buyers. With respect to Google Cloud, performance in Q1 reflects strong demand for our GCP infrastructure and solutions as well as the contribution from our Workspace productivity tools. The growth we are seeing across Cloud is underpinned by the benefit AI provides for our customers. We continue to invest aggressively while remaining focused on profitable growth. As we look ahead, two points that will affect sequential year-on-year revenue growth comparisons across Alphabet: first, Q1 results reflect the benefit of leap year, which contributed slightly more than 1 point to our revenue growth rate at the consolidated level in the first quarter; second, at current spot rates, we expect a larger headwind from foreign exchange in Q2 versus Q1. Turning to margins. Our efforts to durably reengineer our cost base are reflected in a 400 basis point expansion of our Alphabet operating margin year-on-year, excluding the impact of restructuring and severance charges in both periods. You can also see the impact in the quarter-on-quarter decline in head count in Q1, which reflects both actions we have taken over the past few months and a much slower pace of hiring. As we have discussed previously, we are continuing to invest in top engineering and technical talent, particularly in Cloud, Google DeepMind and technical infrastructure. Looking ahead, we remain focused on our efforts to moderate the pace of expense growth in order to create capacity for the increases in depreciation and expenses associated with the higher levels of investment in our technical infrastructure. We believe these efforts will enable us to deliver full year 2024 Alphabet operating margin expansion relative to 2023. With respect to CapEx, our reported CapEx in the first quarter was $12 billion, once again driven overwhelmingly by investment in our technical infrastructure, with the largest component for servers followed by data centers. The significant year-on-year growth in CapEx in recent quarters reflects our confidence in the opportunities offered by AI across our business. Looking ahead, we expect quarterly CapEx throughout the year to be roughly at or above the Q1 level, keeping in mind that the timing of cash payments can cause variability in quarterly reported CapEx. With regard to Other Bets, we similarly have work streams underway to enhance overall returns. Finally, as I trust you saw in the press release, we are very pleased to be adding a quarterly dividend of $0.20 per share to our capital return program as well as a new $70 billion authorization in share repurchases. The core of our capital allocation framework remains the same, beginning with investing aggressively in our business as you have heard us talk about today. Given the extraordinary opportunities ahead, we view the introduction of the dividend as further strengthening our overall capital return program. Thank you. Sundar, Philipp, and I will now take your questions.","evidence_gemma_new":"net income","evidence_llama_3_3":"Alphabet net income first quarter","evidence_qwen_3_30b":"net income","gemma_new_max":23700000000.0,"gemma_new_min":23700000000.0,"llama_3_3_max":23700000000.0,"llama_3_3_min":23700000000.0,"qwen_3_30b_max":23700000000.0,"qwen_3_30b_min":23700000000.0}
{"symbol":"GOOGL","year":2024,"quarter":2,"date":"2024-Q2","chunk_id":4,"sub_chunk_id":0,"centroid_label":"net income","agreed_value":23600000000.0,"count":3,"chunk":"Ruth Porat : Thank you, Philipp, and thanks, Sundar, for those kind words. We had another strong quarter, driven in particular by performance in Search and Cloud, as well as the ongoing efforts to durably reengineer our cost base. My comments will be on year-over-year comparisons for the second quarter unless I state otherwise. I will start with results at the Alphabet level followed by segment results and conclude with our outlook. For the second quarter, our consolidated revenues were $84.7 billion, up 14% or up 15% in constant currency. Search remained the largest contributor to revenue growth. In terms of expenses, total cost of revenues was $35.5 billion, up 11%. Other cost of revenues was $22.1 billion, up 14%, with the increase driven primarily by content acquisition costs, followed by depreciation as well as the impact of the Canadian digital services tax, which was applied retroactively. Operating expenses were $21.8 billion up 5%, primarily reflecting an increase in R&D partially offset by a decline in G&A with sales and marketing essentially flat to the second quarter last year. The increase in R&D was driven primarily by compensation which was affected by lapping a reduction in valuation-based compensation liabilities in certain other bets in the second quarter last year followed by depreciation. The largest single factor in the year-on-year decline in G&A expenses was lower charges related to legal matters. Operating income was $27.4 billion, up 26% and our operating margin was 32%. Net income was $23.6 billion and EPS was $1.89. We delivered free cash flow of $13.5 billion in the second quarter and $60.8 billion for the trailing 12 months. As a reminder, last year, we had a timing benefit in the second and third quarters from a $10.5 billion deferred cash tax payment made in the fourth quarter, which depressed reported free cash flow growth this quarter, and we'll do so again next quarter. We ended the quarter with $101 billion in cash and marketable securities. Turning to segment results. Within Google Services, revenues were $73.9 billion, up 12%. Google Search and other advertising revenues of $48.5 billion in the quarter were up 14%, led again by growth in retail, followed by the financial services vertical. YouTube advertising revenues of $8.7 billion were up 13% driven by brand followed by direct response advertising. Network advertising revenues of $7.4 billion were down 5%. Subscription platforms and devices revenues were $9.3 billion up 14%, primarily reflecting growth in YouTube subscription revenues. TAC was $13.4 billion, up 7%. Google Services operating income was $29.7 billion up 27% and the operating margin was 40%. Turning to the Google Cloud segment. Revenues were $10.3 billion for the quarter, up 29%, reflecting first significant growth in GCP, which was above growth for cloud overall and includes an increasing contribution from AI. And second, strong Google Workspace growth, primarily driven by increases in average revenue per seat. Google Cloud delivered operating income of $1.2 billion and an operating margin of 11%. As to our Other Bets for the second quarter, revenues were $365 million and the operating loss was $1.1 billion. Turning to our outlook for the business. With respect to Google Services, First, within advertising. The strong performance of search was broad-based across verticals. In YouTube, we are pleased with the growth in the quarter. We had healthy watch time growth continued to close the monetization gap in Shorts and had continued momentum in Connected TV, with brand benefiting in part from an ongoing shift in budgets from linear television to digital. As we look forward to the third quarter, we will be lapping the increasing strength in advertising revenues in the second half of 2023, in part from APAC based retailers. Turning to subscriptions, platforms and devices. First, we continue to have significant growth in our subscriptions business which drives the majority of revenue growth in this line. However, there was a sequential decline in the year-on-year growth rate, as we anniversaried the impact of a price increase for YouTubeTV in the second quarter last year. The impact will persist through the balance of the year. Second, with regard to platforms. We are pleased with the performance in play driven by an increase in buyers. Finally, with respect to devices. The most important point as we look forward is that our Made by Google launches have been pulled forward into the third quarter from the fourth quarter last year benefiting revenues in Q3 this year. Turning to cloud, which continued to deliver very strong results. For the first time, Cloud crossed $10 billion in quarterly revenues and $1 billion in quarterly operating profit. As Sundar noted year-to-date, our AI infrastructure and generative AI solutions for cloud customers have already generated billions in revenues and are being used by more than 2 million developers. We're particularly encouraged that the majority of our top 100 customers are already using our generative AI solutions. We continue to invest aggressively in the business. Turning to margins. The margin expansion in Q2 versus last year reflects our ongoing efforts to durably reengineer our cost base, as well as revenue strength. Our leadership team remains focused on our efforts to moderate the pace of expense growth in order to create capacity for the increases in depreciation and expenses associated with the higher levels of investment in our technical infrastructure. Once again headcount declined quarter-on-quarter, which reflects both actions we have taken in the first half of the year and a much slower pace of hiring. Looking ahead, we expect a slight increase in headcount in the third quarter, as we bring on new graduates. As we have discussed previously, we\u2019re continuing to invest in top engineering and technical talent, particularly in cloud and technical infrastructure. Looking forward, we continue to expect to deliver full-year 2024 Alphabet operating margin expansion relative to 2023. However, in the third quarter operating margins will reflect the impact of both the increases in depreciation and expenses associated with the higher levels of investment in our technical infrastructure, as well as the increase in cost of revenues due to the pull-forward of hardware launches into Q3. With respect to CapEx, our reported CapEx in the second quarter was $13 billion, once again driven overwhelmingly by investment in our technical infrastructure with the largest component for servers followed by data centers. Looking ahead, we continue to expect quarterly CapEx throughout the year to be roughly at or above the Q1 CapEx of $12 billion keeping in mind that the timing of cash payments can cause variability in quarterly reported CapEx. With regard to other bets, we continue to focus on improving overall efficiencies, as we invest for long-term returns. Waymo is an important example of this, with its technical leadership coupled with progress on operational performance. As you will see in the 10-Q, we have chosen to commit to a new multi-year investment of $5 billion. This new round of funding, which is consistent with recent annual investment levels will enable Waymo to continue to build the world's leading autonomous driving technology company. To close, this is my 56th and last earnings call, 37 of them at Alphabet. So I have a few closing thoughts of gratitude. I've been so proud to be at Google and Alphabet as CFO and to work with some of the smartest people in the world every day. I think, we have accomplished a lot in the last nine plus years, and I am confident that progress will continue. Of course, I'm not going far and I'm honored to have my new role, which I've been slowly working my way into during the past 11 months and I look forward to continuing to work with Sundar, and our great team. Being CFO of one of the most important companies in the world has been the opportunity and responsibility of a lifetime. Google's Mission of advancing technology and bringing information to people throughout the world is as relevant today as it was when I worked on its IPO. Technology has been a catalyst for economic growth throughout human history. The people on this call know that if a technological advancement is not the focus of every business and government, they will be left behind. Underpinning this is the need for sound and responsible investment. That has never been more important than today and certainly, that is Google and Alphabet's focus. I want to end by thanking Googlers around the world for the innovation and commitment that has enabled us to deliver such extraordinary products and services globally. I also want to thank our investors and analysts for your long-term support and your feedback. Thank you. Sundar, Philipp and I will now take your questions.","evidence_gemma_new":"Net income","evidence_llama_3_3":"net income second quarter","evidence_qwen_3_30b":"net income second quarter","gemma_new_max":23600000000.0,"gemma_new_min":23600000000.0,"llama_3_3_max":23600000000.0,"llama_3_3_min":23600000000.0,"qwen_3_30b_max":23600000000.0,"qwen_3_30b_min":23600000000.0}
{"symbol":"GOOGL","year":2024,"quarter":4,"date":"2024-Q4","chunk_id":4,"sub_chunk_id":0,"centroid_label":"net income","agreed_value":26500000000.0,"count":2,"chunk":"Anat Ashkenazi: Thank you, Philipp. We're pleased with the continued momentum we're seeing across the business as Alphabet revenue for 2024 reached $350 billion, up 14% on a reported basis and 15% in constant currency versus 2023. My comments will focus on year-over-year comparisons for the fourth quarter, unless I state otherwise. I will start with the results at the Alphabet level and we'll then cover our segment results. I'll end with some commentary and expectations over the first quarter and full year 2025. We had another strong quarter in Q4 with robust momentum across the business. Consolidated revenue of $96.5 billion, increased by 12% in both reported and constant currency. Search remained the largest contributor to revenue growth, followed by Cloud. Total cost of revenue was $40.6 billion, up 8%. Tech was $14.8 billion, up 6%. We continue to see a revenue mix shift with Google Search growing at double-digit levels, while network revenues, which have a much higher tech rate, declined. Other cost of revenue was $25.8 billion, up 9%, with the increase primarily driven by content acquisitions costs, primarily for YouTube, followed by depreciation, due to increasing investments in our technical infrastructure. Growth in content acquisition and depreciation were partially offset by our year-over-year decline in hardware costs due to the shift in timing of our made-by-Google launches to the third quarter 2024 compared to the fourth quarter of 2023. In terms of total expenses, the year-over-year comparisons reflect $1.2 billion in exit charges that we took in the fourth quarter of 2023 in connection with actions to optimize our global office space. As previously disclosed, those charges were allocated across the expense lines in other costs of revenue and OpEx based on associated headcount. Total operating expenses decreased 1% to $24.9 billion. R&D investments increased by 8%, primarily driven by increase in compensation and depreciation expenses, partially offset by the impact of charges for office [ph] space optimization in the fourth quarter of 2023. Sales and marketing expenses decreased 5%, primarily reflecting the optimization charges last year, as well as declines in compensation and in ads and promotion expenses due to the timing shift of the Pixel launch from Q4 to Q3. G&A expenses declined by 15%, reflecting a shift of timing in our charitable contributions, as well as the optimization charges last year. Operating income increased 31%, the score [ph] to $31 billion, and operating margin increased to 32%, representing 4.6 points of margin expansion. Net income increased 28% to $26.5 billion, and earnings per share increased 31% to $2.15. We delivered free cash flow of $24.8 billion in the fourth quarter and $72.8 billion for the full year 2024. We ended the quarter with $96 billion in cash and marketable securities. Turning to segment results. Google Service revenues increased 10% to $84.1 billion, reflecting the strong momentum across Google Search and YouTube ads. Google Search and other advertising revenues increased by 13% to $54 billion. The robust performance of Search was once again broad-based across verticals, led by the financial service vertical due to strength in insurance, followed by retail. YouTube advertising revenue increased 14% to $10.5 billion, driven by brand, followed by direct response advertising. Network advertising revenue of $8 billion, were down 4%. In the fourth quarter, the year-over-year comparison in all of our advertising revenue lines was impacted by the increase in strength in advertising revenue in Q4 2023, in part from APAC-based retailers. Subscription platforms and device revenues increase 8% to $11.6 billion, primarily reflecting growth in subscription revenues, partially offset by the shift in timing of the launch of our made by Google devices to the third quarter, compared with the fourth quarter in 2023. We continue to have significant growth in our subscription products, primarily due to increase in the number of paid subscribers across YouTube TV, YouTube Music Premium, and Google One. With regards to Platform, we saw a slight increase in the growth rate in Play, primarily due to a strong increase in the number of buyers. Google's service operating income increased 23% to $32.8 billion, and operating margin increased from 35% to 39%, representing a meaningful margin expansion. Turning to the Google Cloud segment, which continued to deliver very strong results this quarter. Revenue increased by 30% to $12 billion in the fourth quarter, reflecting growth in GCP across core GCP products, AI infrastructure, and generative AI solutions. Once again, GCP grew at a rate that was much higher than cloud overall. Healthy Google Workspace growth was primarily driven by increase in average revenue per seat. Google Cloud operating income increased to $2.1 billion, and operating margin increased from 9.4% to 17.5%. We're pleased with the work the cloud team is doing to deliver valuable solutions to the customer and generate revenue growth, as well as its continued focus on driving efficiencies across the cloud business. As for Other Bets, for the fourth quarter, revenue were $400 million, and the operating loss was $1.2 billion. The year-over-year decline in revenue and increase in operating loss primarily reflect the milestone payment in the fourth quarter of 2023 for one of the Other Bets. Turning to Alphabet level activities, the largest component of this line is our investments in AI research and development activities which support all of Alphabet. As a reminder, Alphabet level activities have included nearly all severance charges from reductions in workforce and office space charges. In the fourth quarter of 2024, the biggest factor in year-over-year comparison is the $1.2 billion in charges in the fourth quarter of 2023, almost entirely in connection with office space optimization. With respect to CapEx, our reported CapEx in the fourth quarter was $14 billion, primarily reflecting investments in our technical infrastructure, with the largest component being investment in servers, followed by data centers, to support the growth of our business across Google Services, Google Cloud, and Google DeepMind. In Q4, we returned value to shareholders in the form of $15 billion in share purchases and $2.4 billion in dividend payments. Overall, we returned a total of nearly $70 billion to shareholders in 2024. Turning to 2025, I would like to provide some commentary on several factors that will impact our business performance in both the first quarter and the full year 2025. First in terms of revenue, I'll highlight two items that will have meaningful impact on Q1 revenue across the company. First in terms of revenues, I'll highlight two items that will have meaningful impact on Q1 revenues across the company. The first is the impact of foreign exchange rates. At the current spot rates, we expect a larger headwind to our revenues from the strengthening of the U.S dollar relative to key currencies in Q1 versus Q4 2024. Second is the impact of leap year. We expect a headwind from having one less day of revenue in Q1 2025 compared with leap year in the first quarter of 2024. As for our segments, Google Services, advertising revenue in 2025 will be impacted by lapping the strength we experience in the financial service vertical throughout 2024. And in Cloud, given the revenues are correlated with the timing of deployment of new capacity, we could see variability in cloud revenue growth rates depending on when new capacity comes online during 2025. Moving to investments, starting with our expectation for CapEx for the full year 2025. As we mentioned on the Q3 call, as we expand our AI efforts, we expect to increase our investments in capital expenditure for technical infrastructure, primarily for servers, followed by data centers and networking. We expect to invest approximately $75 billion in CapEx in 2025 with approximately $16 billion to $18 billion of debt in the first quarter. The expected total investment level may fluctuate from quarter-to-quarter, primarily due to timing of deliveries and construction schedules. In terms of expenses, first, the increase in our investment in CapEx over the past few years will increase pressure on the P&L, primarily in the form of higher depreciation. In 2024, we saw 28% year-over-year growth in depreciation as we put more technical infrastructure assets into service. Given the increase in CapEx investments over the past few years, we expect the growth rate and depreciation to accelerate in 2025. Second, we expect some headcount growth in 2025 in key investment areas such as AI and cloud. As you just heard from Sundar, we're delivering products and solutions to customer at a rapid pace, building, testing, and launching products faster than ever before. And as I mentioned on the Q3 call, we're doing that while also focusing on driving further efficiencies in how we operate the business. Before we take questions, I'd like to recap the financial results for the year. For the full year 2024, revenue grew by 14% or by $43 billion, reaching $350 billion. Google Services and Google Cloud each continue to see double-digit revenue growth coupled with margin extension. YouTube and cloud revenues combined, ended the year at $110 billion annual run rate. And in 2024, we generate total income of $112 billion, an increase of 33% from 2023. We're pleased with the momentum we're seeing in AI innovation and monetization. We've been using AI to improve the performance of our ads business for well over a decade, and Cloud is generating billions in annual revenue from AI infrastructure and generative AI solutions. We're also excited about the potential to bring new experiences to users that will provide additional opportunities for monetization. And I look forward to sharing more in our progress throughout the year. Sundar, Philipp, and I will now take your questions.","evidence_gemma_new":"Net income","evidence_llama_3_3":"net income fourth quarter","evidence_qwen_3_30b":null,"gemma_new_max":26500000000.0,"gemma_new_min":26500000000.0,"llama_3_3_max":26500000000.0,"llama_3_3_min":26500000000.0,"qwen_3_30b_max":null,"qwen_3_30b_min":null}
{"symbol":"GOOGL","year":2023,"quarter":1,"date":"2023-Q1","chunk_id":5,"sub_chunk_id":0,"centroid_label":"network advertising revenues revenues","agreed_value":7500000000.0,"count":2,"chunk":"Ruth Porat: Thank you, Philipp. Our financial results for the first quarter reflect continued healthy fundamental growth in Search and momentum in Cloud. As I go through the discussion today, I will reference some changes to our reporting and disclosures that are covered more fully in the 8-K we filed last week. I will conclude with our outlook. For the first quarter, our consolidated revenues were $69.8 billion, up 3% or up 6% in constant currency. Search remained the largest contributor to revenue growth on a constant currency basis. In terms of expenses and profitability, year-on-year comparisons are impacted by 3 factors: first, the $2.6 billion in charges we took in the first quarter related to workforce and office space reductions. We provided a table in our earnings release that shows the impact of those charges on cost of revenues and operating expenses. Second, the adjustment we made to the estimated useful lives of servers and certain network equipment at the beginning of 2023. As you can see in our earnings release, the effect for the first quarter was a reduction in depreciation expense of $988 million. Third, the shift in timing of our annual employee stock-based compensation awards from January to March delays the step-up in SBC from Q1 to Q2. This shift in timing does not affect the total amount of SBC over the full year 2023. Total cost of revenues was $30.6 billion, up 3%, driven by other cost of revenues of $18.9 billion, which was up 7%, the biggest factor of which was compensation costs associated with data centers and other operations and followed by content acquisition costs. Operating expenses were $21.8 billion, up 19%, with a significant impact from the charges related to workforce and office space reductions. Operating income was $17.4 billion, down 13%, and our operating margin was 25%. Net income was $15.1 billion. We delivered free cash flow of $17.2 billion in the first quarter and $62 billion for the trailing 12 months. We ended the quarter with $115 billion in cash and marketable securities. Turning to our segment results. These were affected by 2 additional changes outlined in our 8-K filing. First, reflecting the increasing collaboration between DeepMind and Google Services, Google Cloud, and Other Bets, as of Q1, DeepMind is reported as part of Alphabet's unallocated corporate costs. And second, beginning in the first quarter, we updated our cost allocation methodologies to provide our business leaders with increased transparency for decision-making. In our filing, we provided a recast of prior period results for the segment for these 2 changes. The highlights of the year-on-year performance of our segments that I will review reflect these recast results. Starting with Google Services. Revenues were $62 billion, up 1%. Google Search and other advertising revenues of $40.4 billion in the quarter were up 2%. YouTube advertising revenues of $6.7 billion were down 3%. Network advertising revenues of $7.5 billion were down 8%. Other revenues were $7.4 billion, up 9%, reflecting primarily ongoing significant subscriber growth in YouTube TV and YouTube Music Premium. TAC was $11.7 billion, down 2%, primarily reflecting a mix shift between Search and Network. Google Services operating income was $21.7 billion, down 1%, and the operating margin was 35%. Turning to the Google Cloud segment. Revenues were $7.5 billion for the quarter, up 28%. Growth in GCP remained strong across geographies, industries and products. Google Workspace's strong results were driven by increases in both seats and average revenue per seat. Google Cloud had operating income of $191 million, and the operating margin was 2.6%. As to our Other Bets, for the first quarter, revenues were $288 million, and the operating loss was $1.2 billion. Turning to our outlook for the business. In terms of the operating environment, our results in the first quarter reflected ongoing headwinds due to a challenging economic environment, and the outlook remains uncertain. Foreign exchange headwinds have moderated, and we expect less of a foreign exchange headwind in the second quarter based on current spot rates. With respect to Google Services, within advertising, Q1 results reflect the resilience of Search with its unique ability to surface demand and deliver measurable ROI. Excluding the impact of foreign exchange, the revenue growth of Search was similar to last quarter. In YouTube, we saw signs of stabilization in ad spend on a sequential basis. We continue to prioritize growth in Shorts engagement where we are encouraged by progress in monetization. As to other revenues, in YouTube subscriptions, we are pleased with the significant ongoing subscriber growth in both YouTube Music Premium and YouTube TV. In Play, revenues were down year-on-year, primarily due to the continued impact of foreign exchange in APAC, although results have improved as we lapped the impact from our introduction of fee reductions last year. Turning to Google Cloud. Our investments in product innovation, our go-to-market organization and our partner ecosystem delivered strong results as customers across industries and geographies increasingly rely on Google Cloud to digitally transform their businesses. That being said, in Q1, we continued to see slower growth of consumption as customers optimized GCP costs, reflecting the macro backdrop which remains uncertain. In terms of operating performance, we remain focused on driving long-term profitable growth in Cloud while continuing to invest given the substantial opportunity. Moving to Other Bets. In the first quarter, we similarly worked to refine strategies and prioritize efforts across the portfolio, including reductions to head count. I will now walk you through an update on our efforts to reengineer our cost base, slowing the pace of operating expense growth while creating capacity for key investment areas, particularly in support of AI across the company. First, as discussed on the fourth quarter call, we have efforts underway in 3 broad categories: number one, using AI and automation to improve productivity across Alphabet for operational tasks as well as the efficiency of our technical infrastructure; number two, managing our spend with suppliers and vendors more effectively; and number three, continuing to optimize how and where we work. As we've noted previously, all 3 work streams are ramping up this year, and we plan to build on these efforts in 2024 and in subsequent years. Second, with respect to head count growth. The reported number of employees at the end of the first quarter includes almost all of the employees impacted by the workforce reduction we announced in January. We expect most of the impacted individuals will no longer be reflected in our head count by the end of the second quarter. In terms of the outlook for head count for the year, as we shared last quarter, we are meaningfully slowing the pace of hiring in 2023 while still investing in priority areas, particularly for top engineering and technical talent. In terms of our investments in AI, we are excited about the creation of Google DeepMind, combining the Brain Team from Google Research with DeepMind, with the goal to accelerate innovation and impact. Beginning in the second quarter of 2023, the costs associated with teams and activities transferred from Google Research will move from Google Services to Google DeepMind within Alphabet's unallocated corporate costs. Finally, as it relates to CapEx, for 2023, we now expect total CapEx to be modestly higher than in 2022. As discussed last quarter, CapEx this year will include a meaningful increase in technical infrastructure versus a decline in office facilities. We expect the pace of investment in both data center construction and servers to step up in the second quarter and continue to increase throughout the year. Thank you. Sundar, Philipp and I will now take your questions.","evidence_gemma_new":"Network advertising revenues","evidence_llama_3_3":null,"evidence_qwen_3_30b":"Network advertising revenues first quarter","gemma_new_max":7500000000.0,"gemma_new_min":7500000000.0,"llama_3_3_max":null,"llama_3_3_min":null,"qwen_3_30b_max":7500000000.0,"qwen_3_30b_min":7500000000.0}
{"symbol":"GOOGL","year":2023,"quarter":2,"date":"2023-Q2","chunk_id":4,"sub_chunk_id":0,"centroid_label":"network advertising revenues revenues","agreed_value":7900000000.0,"count":3,"chunk":"Ruth Porat: Thank you, Philipp. Before I go into the results, first, Sundar, thank you very much for the opportunity. I'm very excited about the new role, and I look forward to it. So turning to the results. We're very pleased with our financial results for the second quarter, which reflect an acceleration of growth in Search and momentum in Cloud. My comments will be on year-over-year comparisons for the second quarter unless I state otherwise. I will start with results at the Alphabet level followed by segment results and conclude with our outlook. For the second quarter, our consolidated revenues were $74.6 billion, up 7% or up 9% in constant currency. Search remained the largest contributor to revenue growth. Total cost of revenues was $31.9 billion, up 6%, driven by other cost of revenues of $19.4 billion, which was up 8%. Growth here was driven by content acquisition costs, primarily for YouTube subscription offerings, followed by hardware costs associated with Pixel family launches in the second quarter. As noted in our earnings release, the overall increase in data center and other operations costs was partially offset by a reduction in depreciation expense due to the change in estimated useful lives we discussed last quarter. Operating expenses were $20.9 billion, up 4%. Operating income was $21.8 billion, up 12%, and our operating margin was 29%. I will cover our expense and margin performance in our outlook. Other income and expense was $65 million. Net income was $18.4 billion. We delivered free cash flow of $21.8 billion in the second quarter and $71 billion for the trailing 12 months, reflecting improved operating performance as well as the deferral of certain tax payments to the fourth quarter of 2023 as noted in our earnings release. We ended the quarter with $118 billion in cash and marketable securities. Turning to our segment results. Prior period results have been recast for 2 changes that we made as of the first quarter. First, DeepMind is now reported as part of Alphabet's unallocated corporate costs. Second, we updated our cost allocation methodologies. In the second quarter, we then combined the Brain team from Google Research with DeepMind to form Google DeepMind. Costs associated with the Brain team, which were previously included in Google Services, are now reported as part of Alphabet's unallocated corporate costs. We have not recast prior period results to reflect this additional change. Within Google Services, revenues were $66.3 billion, up 5%. Google Search and other advertising revenues of $42.6 billion in the quarter were up 5%, led by growth in retail. YouTube advertising revenues of $7.7 billion were up 4%, driven by brand advertising, followed by direct response reflecting further stabilization in spending by advertisers. Network advertising revenues of $7.9 billion were down 5%. Other revenues were $8.1 billion, up 24%, reflecting growth in YouTube non-advertising revenues, primarily from subscription growth in YouTube Music Premium and YouTube TV followed by growth in hardware revenues primarily driven by the launch of the Pixel 7a in the second quarter. Finally, Play returned to positive growth in the second quarter. TAC was $12.5 billion, up 3%. Google Services operating income was $23.5 billion, up 8%, and the operating margin was 35%. Turning to the Google Cloud segment. Revenues were $8 billion for the quarter, up 28%. GCP revenue growth remained strong across geographies, industries and products. That being said, we saw a continued moderation in the rate of consumption growth as consumers optimize their spend. Google Workspace strong revenue growth was driven by increases in both seats and average revenue per seat. Google Cloud had operating income of $395 million and the operating margin was 5%. As to our Other Bets, for the second quarter, revenues were $285 million, and the operating loss was $813 million. The decrease in operating loss was primarily driven by a reduction in valuation-based compensation liabilities related to certain Other Bets. Turning to our outlook for the business. With respect to Google Services, first, within advertising. We were pleased with the acceleration of Search advertising revenue growth in the second quarter. Our continued ability to generate sustained growth reflects our unparalleled engineering innovation that creates extraordinary experiences for users and capabilities for advertisers and delivered with the deep expertise of our go-to-market team. And in YouTube, we saw ongoing signs of stabilization in advertiser spending. We are prioritizing product focus on increasing quality consumption of video content with both Shorts and in the living room, which is translating into improved monetization. Second, within other revenues. In our YouTube subscription products, the sustained, strong growth in revenues reflects significant subscriber growth. You may have seen that last week, we increased subscription prices for YouTube Music and Premium, which underscores the value of the products. Strong year-on-year growth in hardware revenues was due, in large part, to a timing change given the Pixel 7a was launched in the second quarter, whereas the Pixel 6a launch occurred in the third quarter last year. Looking ahead, the launch timing change will be a headwind to hardware revenue growth in the third quarter. Play returned to positive growth in the second quarter, driven primarily by a solid increase in the number of buyers. Turning to Google Cloud. We are particularly excited about the customer interest in our AI-optimized infrastructure, our large language models, our AI platform services and our new generative AI offerings such as Duet AI for Google Workspace, although we are still clearly in the early days. At the same time, we continue to experience headwinds in the second quarter for moderation in consumption growth as customers optimize their spend. We continue to invest aggressively while remaining focused on profitable growth. In terms of expenses and profitability, we remain very focused on durably reengineering our cost base. Most evident to date are the actions we have taken to reduce the pace of headcount growth, including the workforce reductions we announced in the first quarter and a slower pace of organic hiring, in part given our focus on reallocating talent from within to fuel our growth priorities. A quick comment on the sequential improvement in operating margins in the second quarter. There are 2 factors to note. First, the benefit from an acceleration in search advertising revenue growth in the second quarter. Second, the vast majority of the charges related to our workforce reduction and optimization of our global office space were taken in Q1. Finally, as it relates to CapEx, in Q2, the largest component was for servers, which included a meaningful increase in our investments in AI compute. The sequential step-up in the second quarter was lower than anticipated for 2 reasons. First, with respect to office facilities, we continue to moderate the pace of fit-outs and ground-up construction to reflect the slower expected pace of headcount growth. Second, there were delays in certain data center construction projects. We expect elevated levels of investment in our technical infrastructure increasing through the back half of 2023 and continuing to grow in 2024. The primary driver is to support the opportunities we see in AI across Alphabet, including investments in GPUs and proprietary TPUs as well as data center capacity. With all that said, we remain committed to durably reengineering our cost base in order to help create capacity for these investments in support of long-term, sustainable financial value. Thank you. Sundar, Philipp and I will now take your questions.","evidence_gemma_new":"Network advertising revenues","evidence_llama_3_3":"Network advertising revenues second quarter","evidence_qwen_3_30b":"network advertising revenues second quarter","gemma_new_max":7900000000.0,"gemma_new_min":7900000000.0,"llama_3_3_max":7900000000.0,"llama_3_3_min":7900000000.0,"qwen_3_30b_max":7900000000.0,"qwen_3_30b_min":7900000000.0}
{"symbol":"GOOGL","year":2023,"quarter":3,"date":"2023-Q3","chunk_id":4,"sub_chunk_id":0,"centroid_label":"network advertising revenues revenues","agreed_value":7700000000.0,"count":2,"chunk":"Ruth Porat: Thank you, Philipp. We are very pleased with our financial results for the third quarter, driven by meaningful growth in Search and YouTube and momentum in Cloud. My comments will be on year-over-year comparisons for the third quarter, unless I state otherwise. I will start with results at the Alphabet level followed by segment results and conclude with our outlook. For the third quarter, our consolidated revenues were $76.7 billion, up 11% in both reported and constant currency. Search remained the largest contributor to revenue growth. In terms of expenses, total cost of revenues was $33.2 billion, up 7%, primarily reflecting other cost of revenues of $20.6 billion, which was up 6%. Growth here was primarily driven by content acquisition costs mainly for YouTube subscription offerings. As noted in our earnings release, the overall increase in data center and other operations costs was partially offset by a reduction in depreciation expense due to the change in estimated useful lives we made starting in the first quarter of the year. Operating expenses were $22.1 billion, up 6% reflecting the following. First, an increase in R&D expenses, driven primarily by compensation. Second, an increase in G&A expenses, reflecting the impact of charges related to legal matters. And finally, sales and marketing expenses, which were relatively flat to last year. Operating income was $21.3 billion, up 25%, and our operating margin was 28%. Other income and expense was a loss of $146 million. Net income was $19.7 billion. This reflects an effective tax rate of 7% in the third quarter from an IRS change related to the use of foreign tax credits, which had an outsized impact on the third quarter rate because the change resulted in a catch-up for prior periods. We delivered free cash flow of $22.6 billion in the third quarter and $78 million for the trailing 12 months. We ended the quarter with $120 billion in cash and marketable securities. As a reminder, our cash balance and free cash flow in the second and third quarters benefited from the deferral of certain tax payments to the fourth quarter of 2023. As noted in our earnings release, on October 16, we made an estimated tax payment of $10.5 billion related to this deferral, which will be reflected in our cash balance and free cash flow in the fourth quarter. Turning to segment results. Within Google Services, revenues were $68 billion, up 11%. Google Search and other advertising revenues of $44 billion in the quarter were up 11%, led again by growth in retail. YouTube advertising revenues of $8 billion were up 12%, driven by both brand advertising and direct response. Network advertising revenues of $7.7 billion were down 3%. Other revenues were $8.3 billion, up 21%, primarily reflecting growth in YouTube non-advertising revenues driven by subscriber growth in YouTube TV followed by YouTube Music Premium. TAC was $12.6 billion, up 7%. Google Services operating income was $23.9 billion, up 27% and the operating margin was 35%. Turning to the Google Cloud segment. Revenues were $8.4 billion for the quarter, up 22%. GCP revenue growth remained strong across geographies, industries and products, although the Q3 year-on-year growth rate reflects the impact of customer optimization efforts. Google Workspace also delivered strong revenue growth, primarily driven by increases in average revenue per seat. Google Cloud had operating income of $266 million, and the operating margin was 3%. As to our Other Bets, for the third quarter, revenues were $297 million and the operating loss was $1.2 billion. Turning to our outlook for the business. With respect to Google Services. First, within advertising. After a period of historic volatility, we were pleased with the year-on-year revenue growth of Search and YouTube advertising in the third quarter. Second, within other revenues, in our YouTube subscription products the substantial growth in revenues primarily reflects subscriber growth. Looking ahead, a full quarter of NFL Sunday Ticket revenues as well as associated content acquisition costs will be reflected in Q4 results compared to only a few weeks in the third quarter. Play had growth in the third quarter, driven primarily by an increase in the number of buyers. With respect to hardware, there is a headwind to revenues in the fourth quarter, reflecting efforts to optimize the portfolio with tighter targeting of our go-to-market investments as well as the ongoing impact from the difference in launch timing for the Pixel 6a and 7a that we mentioned last quarter. Turning to Google Cloud. We are pleased with the ongoing customer engagement with GCP and Workspace and the potential benefit of our AI solutions including infrastructure and services such as Vertex AI and Duet. We continue to invest aggressively given the significant potential we see while remaining focused on profitable growth. In terms of expenses and profitability, we're pleased with our operating performance. As we have repeatedly stressed, we remain focused on durably reengineering our cost base to create investment capacity to support our growth priorities, most important of which is with AI. We have a number of workstreams in place. First, we are maintaining a slower pace of headcount growth, reflecting product prioritization and reallocation of talent to support our most important growth opportunities. Second, we remain focused on optimizing our real estate footprint, including how and where we work to reduce our expense growth. As you can see from our earnings release, we incurred $207 million in accelerated rent and depreciation in the third quarter related to these actions. Third, we have engineering work streams underway to improve productivity across Alphabet. Given the magnitude of investment in our technical infrastructure, we have a superb team focused on efficiency of our operations there. We are also making progress in streamlining operations across Alphabet through the use of AI. Finally, there are ongoing workstreams that are improving the efficiency of our spend with suppliers and vendors through our central procurement organization. And to be clear, across the portfolio of other bet companies, we have also been working to identify opportunities to create sharper focus and to operate more efficiently and effectively. With respect to sequential quarter-on-quarter trends, two further points. First, cost of sales in the fourth quarter will reflect both higher hardware costs given Pixel family launches as well as increased CAC for YouTube as previously noted. Second, as usual, we expect sales and marketing expenses to be more heavily weighted to the end of the year, in part to support product launches in the holiday season. Finally, our reported CapEx in Q3 was $8 billion, driven overwhelmingly by investment in our technical infrastructure with the largest component for servers, followed by data centers, reflecting a meaningful increase in our investments in AI compute. The growth in reported cash CapEx in Q3 is somewhat muted due to the timing of supplier payments, which can cause variability from quarter-to-quarter. We continue to invest meaningfully in the technical infrastructure needed to support the opportunities we see in AI across Alphabet and expect elevated levels of investment, increasing in the fourth quarter of 2023 and continuing to grow in 2024. In closing, we remain very excited about the opportunities ahead and committed to deliver sustainable financial value. Thank you. Sundar, Philipp and I will now take your questions.","evidence_gemma_new":"Network advertising revenues","evidence_llama_3_3":null,"evidence_qwen_3_30b":"Network advertising revenues third quarter","gemma_new_max":7700000000.0,"gemma_new_min":7700000000.0,"llama_3_3_max":null,"llama_3_3_min":null,"qwen_3_30b_max":7700000000.0,"qwen_3_30b_min":7700000000.0}
{"symbol":"GOOGL","year":2023,"quarter":4,"date":"2023-Q4","chunk_id":4,"sub_chunk_id":0,"centroid_label":"network advertising revenues revenues","agreed_value":8300000000.0,"count":3,"chunk":"Ruth Porat: Thank you, Philipp. We are very pleased with our full year results with 2023 Alphabet revenues of $307 billion, up 9% versus 2022, which added $25 billion to revenues for the year. We ended with a strong fourth quarter with consolidated revenues of $86.3 billion, up 13% versus last year in both reported and constant currency. Search remained the largest contributor to revenue growth. My comments will be on year-over-year comparisons for the fourth quarter, unless I state otherwise. Total cost of revenues was $37.6 billion, up 6%. Other cost of revenues was $23.6 billion, up 5%, with the increase driven primarily by content acquisition costs associated with YouTube subscription offerings. The growth rate also reflects the offsetting benefit of lapping $1.2 billion in inventory-related charges that we called out in the fourth quarter last year as well as a reduction in depreciation expense due to changes in estimated useful lives we made starting in the first quarter of 2023. In terms of total expenses, the year-on-year comparisons reflect an additional $1.2 billion in exit charges that we took in the fourth quarter of 2023 in connection with actions to optimize our global office space. As you can see in our earnings release, these charges were allocated across the expense lines in other cost of revenues and OpEx based on associated head count. Operating expenses were $25 billion, up 11%, primarily reflecting an increase in R&D expenses, which were driven by the real estate charges, followed by compensation. Operating income was $23.7 billion, up 30%, and our operating margin was 27%. Net income was $20.7 billion, and EPS was $1.64. We delivered free cash flow of $7.9 billion, which was affected by the timing of the $10.5 billion tax payment we made on October 16 that we called out previously related to the deferral of certain tax payments to the fourth quarter. For the full year 2023, free cash flow was $69 billion. We repurchased a total of $62 billion of our Class A and Class C shares in 2023 and ended the year with $111 billion in cash and marketable securities. Turning to segment results. Within Google Services, revenues were $76.3 billion, up 12%. Google Search and other advertising revenues of $48 billion in the quarter were up 13%, led again by growth in retail. YouTube advertising revenues of $9.2 billion were up 16% driven by both direct response and brand advertising. Network advertising revenues of $8.3 billion were down 2%. Subscriptions, platforms and devices revenues, which we previously referred to as other revenues, were $10.8 billion, up 23%, primarily reflecting growth in YouTube subscription revenues. TAC was $14 billion, up 8%. Google Services' operating income was $26.7 billion, up 32%, and the operating margin was 35%. Turning to the Google Cloud segment. Revenues were $9.2 billion for the quarter, up 26%. We're very pleased with the momentum of GCP with an increasing contribution from AI. Google Workspace also delivered strong revenue growth primarily driven by increases in average revenue per seat. Google Cloud delivered operating income of $864 million and an operating margin of 9%. As to our Other Bets, for the full year 2023, revenues were $1.5 billion and the operating loss was $4.1 billion. Results in the fourth quarter benefited from a milestone payment in one of the Other Bets. Turning to our outlook for the business. With respect to Google Services, first, within advertising. We were pleased with the sequential revenue growth of Search and YouTube advertising throughout 2023, which reflects the extraordinary work across our teams to drive improved experiences for users and attractive ROI for advertisers. As we enter 2024 with advertising revenues of more than $100 billion higher than 2019, we remain focused on sustaining healthy growth on this larger base. Second, within subscriptions, platforms and devices, our total revenues from subscription products reached $15 billion for the full year 2023 driven primarily by substantial growth in subscribers for our YouTube subscription offerings. The substantial increase in our subscription revenues over the past few years demonstrates the ability of our teams to deliver high value-add offerings and provides a strong base on which to build, including through YouTube and newer services like Google One. Play had solid growth again in the fourth quarter driven primarily by an increase in the number of buyers. In devices, we continue to make sizable investments with increased emphasis on our Pixel family, particularly with AI-powered innovation while driving further efficiencies across the portfolio. Turning to Google Cloud. We are pleased with operating performance in the year. Full year revenues of $33 billion were up 26% versus prior year, ending with strong Q4 performance. The Cloud team is intensely focused on bringing the benefits of Gemini, our industry-leading AI technology, to enterprises and governments globally, and we are gratified with the level of engagement. The strong demand we are seeing for our vertically integrated AI portfolio is creating new opportunities for Google Cloud across every product area. In terms of profitability, the improvement in 2023 reflects sustained focus across the team with the intent to maintain healthy profitability while we continue to invest to support long-term growth. Turning to margins and expenses. As we have repeatedly stressed, we remain committed to our framework to durably reengineer our cost base as we invest to support our growth priorities. Key contributors to moderating our expense growth include: first, product and process prioritization to ensure we have the right resources behind our most important opportunities and to reallocate resources where we can; second, organizational efficiency and structure. We're focused on removing layers to simplify execution and drive velocity. Both product prioritization and the organization design efforts result in a slower pace of hiring, as you can see with our head count down year-on-year, reflecting the reductions we announced in the first quarter of 2023 and a much slower pace of hiring. We will continue to invest in top technical and engineering talent. Finally, we continue to execute the other work streams to slow expense growth, including improving efficiency in our technical infrastructure, streamlining operations across Alphabet through the use of AI, increasing efficiency of our spend with suppliers and vendors through our central procurement organization and optimizing our real estate portfolio. With respect to CapEx, our reported CapEx in the fourth quarter was $11 billion, driven overwhelmingly by investment in our technical infrastructure with the largest component for servers followed by data centers. The step-up in CapEx in Q4 reflects our outlook for the extraordinary applications of AI to deliver for users, advertisers, developers, cloud enterprise customers and governments globally and the long-term growth opportunities that offers. In 2024, we expect investment in CapEx will be notably larger than in 2023. With regard to Other Bets, we've been working to sharpen our investment focus while capturing the upside given compelling technology breakthroughs across the portfolio. For example, last week, Alphabet's X announced that it would be moving to spin out more projects as independent companies through external capital, giving X the opportunity to bring more focus to the breakthrough technologies it is working on to address some of the world's most pressing challenges. Thank you. Sundar, Philipp and I will now take your questions.","evidence_gemma_new":"Network advertising revenues","evidence_llama_3_3":"Network advertising revenues","evidence_qwen_3_30b":"Network advertising revenues","gemma_new_max":8300000000.0,"gemma_new_min":8300000000.0,"llama_3_3_max":8300000000.0,"llama_3_3_min":8300000000.0,"qwen_3_30b_max":8300000000.0,"qwen_3_30b_min":8300000000.0}
{"symbol":"GOOGL","year":2024,"quarter":1,"date":"2024-Q1","chunk_id":4,"sub_chunk_id":0,"centroid_label":"network advertising revenues revenues","agreed_value":7400000000.0,"count":2,"chunk":"Ruth Porat: Thank you, Philipp. We are very pleased with our financial results for the first quarter driven, in particular, by strength in Search and Cloud as well as the ongoing efforts to durably reengineer our cost base. My comments will be on year-over-year comparisons for the first quarter unless I state otherwise. I will start with results at the Alphabet level, followed by segment results and conclude with our outlook. For the first quarter, our consolidated revenues were $80.5 billion, up 15% or up 16% in constant currency. Search remained the largest contributor to revenue growth. In terms of total expenses, the year-on-year comparisons reflect the impact of the restructuring charges we took in the first quarter of 2023 of $2.6 billion as well as the $716 million in employee severance and related charges in the first quarter of 2024. As you can see in our earnings release, these charges were allocated across the expense lines in other cost of revenues and OpEx based on associated head count. To help with year-on-year comparisons, we included a table in our earnings release to adjust other cost of revenues, operating expenses, operating income, and operating margin to exclude the impact of severance and related office space charges in the first quarter of 2023 versus 2024. In terms of expenses, total cost of revenues was $33.7 billion, up 10%. Other cost of revenues was $20.8 billion, up 10% on a reported basis, with the increase driven primarily by content acquisition costs associated with YouTube given the very strong revenue growth in both subscription offerings and ad-supported content. On an adjusted basis, other cost of revenues were up 13% year-on-year. Operating expenses were $21.4 billion, down 2% on a reported basis, primarily reflecting expense decreases in sales and marketing and G&A, offset by an increase in R&D. The largest single factor in the year-on-year decline in G&A expenses was lower charges related to legal matters. On an adjusted basis, operating expenses were up 5%, reflecting, first, in R&D, an increase in compensation expense, primarily for Google DeepMind and Cloud; and second, in sales and marketing, a slight increase year-on-year, reflecting increases in compensation expense primarily for Cloud sales. Operating income was $25.5 billion, up 46% on a reported basis, and our operating margin was 32%. On an adjusted basis, operating income was up 31%, and our operating margin was 33%. Net income was $23.7 billion and EPS was $1.89. We delivered free cash flow of $16.8 billion in the first quarter and $69.1 billion for the trailing 12 months. We ended the quarter with $108 billion in cash and marketable securities. Turning to segment results. Within Google Services, revenues were $70.4 billion, up 14%. Google Search and other advertising revenues of $46.2 billion in the quarter were up 14% led again by growth in retail. YouTube advertising revenues of $8.1 billion were up 21% driven by both direct response and brand advertising. Network advertising revenues of $7.4 billion were down 1%. Subscriptions, platforms and devices revenues were $8.7 billion, up 18%, primarily reflecting growth in YouTube subscription revenues. TAC was $12.9 billion, up 10%. Google Services operating income was $27.9 billion, up 28%. And the operating margin was 40%. Turning to the Google Cloud segment. Revenues were $9.6 billion for the quarter, up 28%, reflecting significant growth in GCP with an increasing contribution from AI and strong Google Workspace growth, primarily driven by increases in average revenue per seat. Google Cloud delivered operating income of $900 million and an operating margin of 9%. As to our Other Bets, for the first quarter, revenues were $495 million, benefiting from a milestone payment in one of the Other Bets. The operating loss was $1 billion. Turning to our outlook for the business. With respect to Google Services, first, within Advertising, we are very pleased with the momentum of our Ads businesses. Search had broad-based strength across verticals. In YouTube, we had acceleration in revenue growth driven by brand and direct response. Looking ahead, two points to call out: first, results in our advertising business in Q1 continued to reflect strength in spend from APAC-based retailers, a trend that began in the second quarter of 2023 and continued through Q1, which means we will begin lapping that impact in the second quarter; second, the YouTube acceleration in revenue growth in Q1 reflects, in part, lapping the negative year-on-year growth we experienced in the first quarter of 2023. Turning to subscriptions, platforms, and devices. We continue to deliver significant growth in our subscriptions business, which drives the majority of revenue growth in this line. The sequential quarterly decline in year-on-year revenue growth for the line in Q1 versus Q4 reflects, in part, the fact that we had only 1 week of Sunday Ticket subscription revenue in Q1 versus 14 weeks in Q4. Looking forward, we will anniversary last year's price increase in YouTube TV starting in May. With regard to platforms, we are pleased with the performance in Play driven by an increase in buyers. With respect to Google Cloud, performance in Q1 reflects strong demand for our GCP infrastructure and solutions as well as the contribution from our Workspace productivity tools. The growth we are seeing across Cloud is underpinned by the benefit AI provides for our customers. We continue to invest aggressively while remaining focused on profitable growth. As we look ahead, two points that will affect sequential year-on-year revenue growth comparisons across Alphabet: first, Q1 results reflect the benefit of leap year, which contributed slightly more than 1 point to our revenue growth rate at the consolidated level in the first quarter; second, at current spot rates, we expect a larger headwind from foreign exchange in Q2 versus Q1. Turning to margins. Our efforts to durably reengineer our cost base are reflected in a 400 basis point expansion of our Alphabet operating margin year-on-year, excluding the impact of restructuring and severance charges in both periods. You can also see the impact in the quarter-on-quarter decline in head count in Q1, which reflects both actions we have taken over the past few months and a much slower pace of hiring. As we have discussed previously, we are continuing to invest in top engineering and technical talent, particularly in Cloud, Google DeepMind and technical infrastructure. Looking ahead, we remain focused on our efforts to moderate the pace of expense growth in order to create capacity for the increases in depreciation and expenses associated with the higher levels of investment in our technical infrastructure. We believe these efforts will enable us to deliver full year 2024 Alphabet operating margin expansion relative to 2023. With respect to CapEx, our reported CapEx in the first quarter was $12 billion, once again driven overwhelmingly by investment in our technical infrastructure, with the largest component for servers followed by data centers. The significant year-on-year growth in CapEx in recent quarters reflects our confidence in the opportunities offered by AI across our business. Looking ahead, we expect quarterly CapEx throughout the year to be roughly at or above the Q1 level, keeping in mind that the timing of cash payments can cause variability in quarterly reported CapEx. With regard to Other Bets, we similarly have work streams underway to enhance overall returns. Finally, as I trust you saw in the press release, we are very pleased to be adding a quarterly dividend of $0.20 per share to our capital return program as well as a new $70 billion authorization in share repurchases. The core of our capital allocation framework remains the same, beginning with investing aggressively in our business as you have heard us talk about today. Given the extraordinary opportunities ahead, we view the introduction of the dividend as further strengthening our overall capital return program. Thank you. Sundar, Philipp, and I will now take your questions.","evidence_gemma_new":"Network advertising revenues","evidence_llama_3_3":null,"evidence_qwen_3_30b":"Network advertising revenues","gemma_new_max":7400000000.0,"gemma_new_min":7400000000.0,"llama_3_3_max":null,"llama_3_3_min":null,"qwen_3_30b_max":7400000000.0,"qwen_3_30b_min":7400000000.0}
{"symbol":"GOOGL","year":2024,"quarter":2,"date":"2024-Q2","chunk_id":4,"sub_chunk_id":0,"centroid_label":"network advertising revenues revenues","agreed_value":7400000000.0,"count":3,"chunk":"Ruth Porat : Thank you, Philipp, and thanks, Sundar, for those kind words. We had another strong quarter, driven in particular by performance in Search and Cloud, as well as the ongoing efforts to durably reengineer our cost base. My comments will be on year-over-year comparisons for the second quarter unless I state otherwise. I will start with results at the Alphabet level followed by segment results and conclude with our outlook. For the second quarter, our consolidated revenues were $84.7 billion, up 14% or up 15% in constant currency. Search remained the largest contributor to revenue growth. In terms of expenses, total cost of revenues was $35.5 billion, up 11%. Other cost of revenues was $22.1 billion, up 14%, with the increase driven primarily by content acquisition costs, followed by depreciation as well as the impact of the Canadian digital services tax, which was applied retroactively. Operating expenses were $21.8 billion up 5%, primarily reflecting an increase in R&D partially offset by a decline in G&A with sales and marketing essentially flat to the second quarter last year. The increase in R&D was driven primarily by compensation which was affected by lapping a reduction in valuation-based compensation liabilities in certain other bets in the second quarter last year followed by depreciation. The largest single factor in the year-on-year decline in G&A expenses was lower charges related to legal matters. Operating income was $27.4 billion, up 26% and our operating margin was 32%. Net income was $23.6 billion and EPS was $1.89. We delivered free cash flow of $13.5 billion in the second quarter and $60.8 billion for the trailing 12 months. As a reminder, last year, we had a timing benefit in the second and third quarters from a $10.5 billion deferred cash tax payment made in the fourth quarter, which depressed reported free cash flow growth this quarter, and we'll do so again next quarter. We ended the quarter with $101 billion in cash and marketable securities. Turning to segment results. Within Google Services, revenues were $73.9 billion, up 12%. Google Search and other advertising revenues of $48.5 billion in the quarter were up 14%, led again by growth in retail, followed by the financial services vertical. YouTube advertising revenues of $8.7 billion were up 13% driven by brand followed by direct response advertising. Network advertising revenues of $7.4 billion were down 5%. Subscription platforms and devices revenues were $9.3 billion up 14%, primarily reflecting growth in YouTube subscription revenues. TAC was $13.4 billion, up 7%. Google Services operating income was $29.7 billion up 27% and the operating margin was 40%. Turning to the Google Cloud segment. Revenues were $10.3 billion for the quarter, up 29%, reflecting first significant growth in GCP, which was above growth for cloud overall and includes an increasing contribution from AI. And second, strong Google Workspace growth, primarily driven by increases in average revenue per seat. Google Cloud delivered operating income of $1.2 billion and an operating margin of 11%. As to our Other Bets for the second quarter, revenues were $365 million and the operating loss was $1.1 billion. Turning to our outlook for the business. With respect to Google Services, First, within advertising. The strong performance of search was broad-based across verticals. In YouTube, we are pleased with the growth in the quarter. We had healthy watch time growth continued to close the monetization gap in Shorts and had continued momentum in Connected TV, with brand benefiting in part from an ongoing shift in budgets from linear television to digital. As we look forward to the third quarter, we will be lapping the increasing strength in advertising revenues in the second half of 2023, in part from APAC based retailers. Turning to subscriptions, platforms and devices. First, we continue to have significant growth in our subscriptions business which drives the majority of revenue growth in this line. However, there was a sequential decline in the year-on-year growth rate, as we anniversaried the impact of a price increase for YouTubeTV in the second quarter last year. The impact will persist through the balance of the year. Second, with regard to platforms. We are pleased with the performance in play driven by an increase in buyers. Finally, with respect to devices. The most important point as we look forward is that our Made by Google launches have been pulled forward into the third quarter from the fourth quarter last year benefiting revenues in Q3 this year. Turning to cloud, which continued to deliver very strong results. For the first time, Cloud crossed $10 billion in quarterly revenues and $1 billion in quarterly operating profit. As Sundar noted year-to-date, our AI infrastructure and generative AI solutions for cloud customers have already generated billions in revenues and are being used by more than 2 million developers. We're particularly encouraged that the majority of our top 100 customers are already using our generative AI solutions. We continue to invest aggressively in the business. Turning to margins. The margin expansion in Q2 versus last year reflects our ongoing efforts to durably reengineer our cost base, as well as revenue strength. Our leadership team remains focused on our efforts to moderate the pace of expense growth in order to create capacity for the increases in depreciation and expenses associated with the higher levels of investment in our technical infrastructure. Once again headcount declined quarter-on-quarter, which reflects both actions we have taken in the first half of the year and a much slower pace of hiring. Looking ahead, we expect a slight increase in headcount in the third quarter, as we bring on new graduates. As we have discussed previously, we\u2019re continuing to invest in top engineering and technical talent, particularly in cloud and technical infrastructure. Looking forward, we continue to expect to deliver full-year 2024 Alphabet operating margin expansion relative to 2023. However, in the third quarter operating margins will reflect the impact of both the increases in depreciation and expenses associated with the higher levels of investment in our technical infrastructure, as well as the increase in cost of revenues due to the pull-forward of hardware launches into Q3. With respect to CapEx, our reported CapEx in the second quarter was $13 billion, once again driven overwhelmingly by investment in our technical infrastructure with the largest component for servers followed by data centers. Looking ahead, we continue to expect quarterly CapEx throughout the year to be roughly at or above the Q1 CapEx of $12 billion keeping in mind that the timing of cash payments can cause variability in quarterly reported CapEx. With regard to other bets, we continue to focus on improving overall efficiencies, as we invest for long-term returns. Waymo is an important example of this, with its technical leadership coupled with progress on operational performance. As you will see in the 10-Q, we have chosen to commit to a new multi-year investment of $5 billion. This new round of funding, which is consistent with recent annual investment levels will enable Waymo to continue to build the world's leading autonomous driving technology company. To close, this is my 56th and last earnings call, 37 of them at Alphabet. So I have a few closing thoughts of gratitude. I've been so proud to be at Google and Alphabet as CFO and to work with some of the smartest people in the world every day. I think, we have accomplished a lot in the last nine plus years, and I am confident that progress will continue. Of course, I'm not going far and I'm honored to have my new role, which I've been slowly working my way into during the past 11 months and I look forward to continuing to work with Sundar, and our great team. Being CFO of one of the most important companies in the world has been the opportunity and responsibility of a lifetime. Google's Mission of advancing technology and bringing information to people throughout the world is as relevant today as it was when I worked on its IPO. Technology has been a catalyst for economic growth throughout human history. The people on this call know that if a technological advancement is not the focus of every business and government, they will be left behind. Underpinning this is the need for sound and responsible investment. That has never been more important than today and certainly, that is Google and Alphabet's focus. I want to end by thanking Googlers around the world for the innovation and commitment that has enabled us to deliver such extraordinary products and services globally. I also want to thank our investors and analysts for your long-term support and your feedback. Thank you. Sundar, Philipp and I will now take your questions.","evidence_gemma_new":"Network advertising revenues","evidence_llama_3_3":"Network advertising revenues revenues second quarter","evidence_qwen_3_30b":"Network advertising revenues second quarter","gemma_new_max":7400000000.0,"gemma_new_min":7400000000.0,"llama_3_3_max":7400000000.0,"llama_3_3_min":7400000000.0,"qwen_3_30b_max":7400000000.0,"qwen_3_30b_min":7400000000.0}
{"symbol":"GOOGL","year":2023,"quarter":1,"date":"2023-Q1","chunk_id":5,"sub_chunk_id":0,"centroid_label":"operating expenses","agreed_value":21800000000.0,"count":2,"chunk":"Ruth Porat: Thank you, Philipp. Our financial results for the first quarter reflect continued healthy fundamental growth in Search and momentum in Cloud. As I go through the discussion today, I will reference some changes to our reporting and disclosures that are covered more fully in the 8-K we filed last week. I will conclude with our outlook. For the first quarter, our consolidated revenues were $69.8 billion, up 3% or up 6% in constant currency. Search remained the largest contributor to revenue growth on a constant currency basis. In terms of expenses and profitability, year-on-year comparisons are impacted by 3 factors: first, the $2.6 billion in charges we took in the first quarter related to workforce and office space reductions. We provided a table in our earnings release that shows the impact of those charges on cost of revenues and operating expenses. Second, the adjustment we made to the estimated useful lives of servers and certain network equipment at the beginning of 2023. As you can see in our earnings release, the effect for the first quarter was a reduction in depreciation expense of $988 million. Third, the shift in timing of our annual employee stock-based compensation awards from January to March delays the step-up in SBC from Q1 to Q2. This shift in timing does not affect the total amount of SBC over the full year 2023. Total cost of revenues was $30.6 billion, up 3%, driven by other cost of revenues of $18.9 billion, which was up 7%, the biggest factor of which was compensation costs associated with data centers and other operations and followed by content acquisition costs. Operating expenses were $21.8 billion, up 19%, with a significant impact from the charges related to workforce and office space reductions. Operating income was $17.4 billion, down 13%, and our operating margin was 25%. Net income was $15.1 billion. We delivered free cash flow of $17.2 billion in the first quarter and $62 billion for the trailing 12 months. We ended the quarter with $115 billion in cash and marketable securities. Turning to our segment results. These were affected by 2 additional changes outlined in our 8-K filing. First, reflecting the increasing collaboration between DeepMind and Google Services, Google Cloud, and Other Bets, as of Q1, DeepMind is reported as part of Alphabet's unallocated corporate costs. And second, beginning in the first quarter, we updated our cost allocation methodologies to provide our business leaders with increased transparency for decision-making. In our filing, we provided a recast of prior period results for the segment for these 2 changes. The highlights of the year-on-year performance of our segments that I will review reflect these recast results. Starting with Google Services. Revenues were $62 billion, up 1%. Google Search and other advertising revenues of $40.4 billion in the quarter were up 2%. YouTube advertising revenues of $6.7 billion were down 3%. Network advertising revenues of $7.5 billion were down 8%. Other revenues were $7.4 billion, up 9%, reflecting primarily ongoing significant subscriber growth in YouTube TV and YouTube Music Premium. TAC was $11.7 billion, down 2%, primarily reflecting a mix shift between Search and Network. Google Services operating income was $21.7 billion, down 1%, and the operating margin was 35%. Turning to the Google Cloud segment. Revenues were $7.5 billion for the quarter, up 28%. Growth in GCP remained strong across geographies, industries and products. Google Workspace's strong results were driven by increases in both seats and average revenue per seat. Google Cloud had operating income of $191 million, and the operating margin was 2.6%. As to our Other Bets, for the first quarter, revenues were $288 million, and the operating loss was $1.2 billion. Turning to our outlook for the business. In terms of the operating environment, our results in the first quarter reflected ongoing headwinds due to a challenging economic environment, and the outlook remains uncertain. Foreign exchange headwinds have moderated, and we expect less of a foreign exchange headwind in the second quarter based on current spot rates. With respect to Google Services, within advertising, Q1 results reflect the resilience of Search with its unique ability to surface demand and deliver measurable ROI. Excluding the impact of foreign exchange, the revenue growth of Search was similar to last quarter. In YouTube, we saw signs of stabilization in ad spend on a sequential basis. We continue to prioritize growth in Shorts engagement where we are encouraged by progress in monetization. As to other revenues, in YouTube subscriptions, we are pleased with the significant ongoing subscriber growth in both YouTube Music Premium and YouTube TV. In Play, revenues were down year-on-year, primarily due to the continued impact of foreign exchange in APAC, although results have improved as we lapped the impact from our introduction of fee reductions last year. Turning to Google Cloud. Our investments in product innovation, our go-to-market organization and our partner ecosystem delivered strong results as customers across industries and geographies increasingly rely on Google Cloud to digitally transform their businesses. That being said, in Q1, we continued to see slower growth of consumption as customers optimized GCP costs, reflecting the macro backdrop which remains uncertain. In terms of operating performance, we remain focused on driving long-term profitable growth in Cloud while continuing to invest given the substantial opportunity. Moving to Other Bets. In the first quarter, we similarly worked to refine strategies and prioritize efforts across the portfolio, including reductions to head count. I will now walk you through an update on our efforts to reengineer our cost base, slowing the pace of operating expense growth while creating capacity for key investment areas, particularly in support of AI across the company. First, as discussed on the fourth quarter call, we have efforts underway in 3 broad categories: number one, using AI and automation to improve productivity across Alphabet for operational tasks as well as the efficiency of our technical infrastructure; number two, managing our spend with suppliers and vendors more effectively; and number three, continuing to optimize how and where we work. As we've noted previously, all 3 work streams are ramping up this year, and we plan to build on these efforts in 2024 and in subsequent years. Second, with respect to head count growth. The reported number of employees at the end of the first quarter includes almost all of the employees impacted by the workforce reduction we announced in January. We expect most of the impacted individuals will no longer be reflected in our head count by the end of the second quarter. In terms of the outlook for head count for the year, as we shared last quarter, we are meaningfully slowing the pace of hiring in 2023 while still investing in priority areas, particularly for top engineering and technical talent. In terms of our investments in AI, we are excited about the creation of Google DeepMind, combining the Brain Team from Google Research with DeepMind, with the goal to accelerate innovation and impact. Beginning in the second quarter of 2023, the costs associated with teams and activities transferred from Google Research will move from Google Services to Google DeepMind within Alphabet's unallocated corporate costs. Finally, as it relates to CapEx, for 2023, we now expect total CapEx to be modestly higher than in 2022. As discussed last quarter, CapEx this year will include a meaningful increase in technical infrastructure versus a decline in office facilities. We expect the pace of investment in both data center construction and servers to step up in the second quarter and continue to increase throughout the year. Thank you. Sundar, Philipp and I will now take your questions.","evidence_gemma_new":"Operating expenses up 19%","evidence_llama_3_3":"operating expenses first quarter","evidence_qwen_3_30b":null,"gemma_new_max":21800000000.0,"gemma_new_min":21800000000.0,"llama_3_3_max":21800000000.0,"llama_3_3_min":21800000000.0,"qwen_3_30b_max":null,"qwen_3_30b_min":null}
{"symbol":"GOOGL","year":2023,"quarter":4,"date":"2023-Q4","chunk_id":4,"sub_chunk_id":0,"centroid_label":"operating expenses","agreed_value":25000000000.0,"count":3,"chunk":"Ruth Porat: Thank you, Philipp. We are very pleased with our full year results with 2023 Alphabet revenues of $307 billion, up 9% versus 2022, which added $25 billion to revenues for the year. We ended with a strong fourth quarter with consolidated revenues of $86.3 billion, up 13% versus last year in both reported and constant currency. Search remained the largest contributor to revenue growth. My comments will be on year-over-year comparisons for the fourth quarter, unless I state otherwise. Total cost of revenues was $37.6 billion, up 6%. Other cost of revenues was $23.6 billion, up 5%, with the increase driven primarily by content acquisition costs associated with YouTube subscription offerings. The growth rate also reflects the offsetting benefit of lapping $1.2 billion in inventory-related charges that we called out in the fourth quarter last year as well as a reduction in depreciation expense due to changes in estimated useful lives we made starting in the first quarter of 2023. In terms of total expenses, the year-on-year comparisons reflect an additional $1.2 billion in exit charges that we took in the fourth quarter of 2023 in connection with actions to optimize our global office space. As you can see in our earnings release, these charges were allocated across the expense lines in other cost of revenues and OpEx based on associated head count. Operating expenses were $25 billion, up 11%, primarily reflecting an increase in R&D expenses, which were driven by the real estate charges, followed by compensation. Operating income was $23.7 billion, up 30%, and our operating margin was 27%. Net income was $20.7 billion, and EPS was $1.64. We delivered free cash flow of $7.9 billion, which was affected by the timing of the $10.5 billion tax payment we made on October 16 that we called out previously related to the deferral of certain tax payments to the fourth quarter. For the full year 2023, free cash flow was $69 billion. We repurchased a total of $62 billion of our Class A and Class C shares in 2023 and ended the year with $111 billion in cash and marketable securities. Turning to segment results. Within Google Services, revenues were $76.3 billion, up 12%. Google Search and other advertising revenues of $48 billion in the quarter were up 13%, led again by growth in retail. YouTube advertising revenues of $9.2 billion were up 16% driven by both direct response and brand advertising. Network advertising revenues of $8.3 billion were down 2%. Subscriptions, platforms and devices revenues, which we previously referred to as other revenues, were $10.8 billion, up 23%, primarily reflecting growth in YouTube subscription revenues. TAC was $14 billion, up 8%. Google Services' operating income was $26.7 billion, up 32%, and the operating margin was 35%. Turning to the Google Cloud segment. Revenues were $9.2 billion for the quarter, up 26%. We're very pleased with the momentum of GCP with an increasing contribution from AI. Google Workspace also delivered strong revenue growth primarily driven by increases in average revenue per seat. Google Cloud delivered operating income of $864 million and an operating margin of 9%. As to our Other Bets, for the full year 2023, revenues were $1.5 billion and the operating loss was $4.1 billion. Results in the fourth quarter benefited from a milestone payment in one of the Other Bets. Turning to our outlook for the business. With respect to Google Services, first, within advertising. We were pleased with the sequential revenue growth of Search and YouTube advertising throughout 2023, which reflects the extraordinary work across our teams to drive improved experiences for users and attractive ROI for advertisers. As we enter 2024 with advertising revenues of more than $100 billion higher than 2019, we remain focused on sustaining healthy growth on this larger base. Second, within subscriptions, platforms and devices, our total revenues from subscription products reached $15 billion for the full year 2023 driven primarily by substantial growth in subscribers for our YouTube subscription offerings. The substantial increase in our subscription revenues over the past few years demonstrates the ability of our teams to deliver high value-add offerings and provides a strong base on which to build, including through YouTube and newer services like Google One. Play had solid growth again in the fourth quarter driven primarily by an increase in the number of buyers. In devices, we continue to make sizable investments with increased emphasis on our Pixel family, particularly with AI-powered innovation while driving further efficiencies across the portfolio. Turning to Google Cloud. We are pleased with operating performance in the year. Full year revenues of $33 billion were up 26% versus prior year, ending with strong Q4 performance. The Cloud team is intensely focused on bringing the benefits of Gemini, our industry-leading AI technology, to enterprises and governments globally, and we are gratified with the level of engagement. The strong demand we are seeing for our vertically integrated AI portfolio is creating new opportunities for Google Cloud across every product area. In terms of profitability, the improvement in 2023 reflects sustained focus across the team with the intent to maintain healthy profitability while we continue to invest to support long-term growth. Turning to margins and expenses. As we have repeatedly stressed, we remain committed to our framework to durably reengineer our cost base as we invest to support our growth priorities. Key contributors to moderating our expense growth include: first, product and process prioritization to ensure we have the right resources behind our most important opportunities and to reallocate resources where we can; second, organizational efficiency and structure. We're focused on removing layers to simplify execution and drive velocity. Both product prioritization and the organization design efforts result in a slower pace of hiring, as you can see with our head count down year-on-year, reflecting the reductions we announced in the first quarter of 2023 and a much slower pace of hiring. We will continue to invest in top technical and engineering talent. Finally, we continue to execute the other work streams to slow expense growth, including improving efficiency in our technical infrastructure, streamlining operations across Alphabet through the use of AI, increasing efficiency of our spend with suppliers and vendors through our central procurement organization and optimizing our real estate portfolio. With respect to CapEx, our reported CapEx in the fourth quarter was $11 billion, driven overwhelmingly by investment in our technical infrastructure with the largest component for servers followed by data centers. The step-up in CapEx in Q4 reflects our outlook for the extraordinary applications of AI to deliver for users, advertisers, developers, cloud enterprise customers and governments globally and the long-term growth opportunities that offers. In 2024, we expect investment in CapEx will be notably larger than in 2023. With regard to Other Bets, we've been working to sharpen our investment focus while capturing the upside given compelling technology breakthroughs across the portfolio. For example, last week, Alphabet's X announced that it would be moving to spin out more projects as independent companies through external capital, giving X the opportunity to bring more focus to the breakthrough technologies it is working on to address some of the world's most pressing challenges. Thank you. Sundar, Philipp and I will now take your questions.","evidence_gemma_new":"Operating expenses","evidence_llama_3_3":"Operating expenses","evidence_qwen_3_30b":"operating expenses","gemma_new_max":25000000000.0,"gemma_new_min":25000000000.0,"llama_3_3_max":25000000000.0,"llama_3_3_min":25000000000.0,"qwen_3_30b_max":25000000000.0,"qwen_3_30b_min":25000000000.0}
{"symbol":"GOOGL","year":2024,"quarter":1,"date":"2024-Q1","chunk_id":4,"sub_chunk_id":0,"centroid_label":"operating expenses","agreed_value":21400000000.0,"count":3,"chunk":"Ruth Porat: Thank you, Philipp. We are very pleased with our financial results for the first quarter driven, in particular, by strength in Search and Cloud as well as the ongoing efforts to durably reengineer our cost base. My comments will be on year-over-year comparisons for the first quarter unless I state otherwise. I will start with results at the Alphabet level, followed by segment results and conclude with our outlook. For the first quarter, our consolidated revenues were $80.5 billion, up 15% or up 16% in constant currency. Search remained the largest contributor to revenue growth. In terms of total expenses, the year-on-year comparisons reflect the impact of the restructuring charges we took in the first quarter of 2023 of $2.6 billion as well as the $716 million in employee severance and related charges in the first quarter of 2024. As you can see in our earnings release, these charges were allocated across the expense lines in other cost of revenues and OpEx based on associated head count. To help with year-on-year comparisons, we included a table in our earnings release to adjust other cost of revenues, operating expenses, operating income, and operating margin to exclude the impact of severance and related office space charges in the first quarter of 2023 versus 2024. In terms of expenses, total cost of revenues was $33.7 billion, up 10%. Other cost of revenues was $20.8 billion, up 10% on a reported basis, with the increase driven primarily by content acquisition costs associated with YouTube given the very strong revenue growth in both subscription offerings and ad-supported content. On an adjusted basis, other cost of revenues were up 13% year-on-year. Operating expenses were $21.4 billion, down 2% on a reported basis, primarily reflecting expense decreases in sales and marketing and G&A, offset by an increase in R&D. The largest single factor in the year-on-year decline in G&A expenses was lower charges related to legal matters. On an adjusted basis, operating expenses were up 5%, reflecting, first, in R&D, an increase in compensation expense, primarily for Google DeepMind and Cloud; and second, in sales and marketing, a slight increase year-on-year, reflecting increases in compensation expense primarily for Cloud sales. Operating income was $25.5 billion, up 46% on a reported basis, and our operating margin was 32%. On an adjusted basis, operating income was up 31%, and our operating margin was 33%. Net income was $23.7 billion and EPS was $1.89. We delivered free cash flow of $16.8 billion in the first quarter and $69.1 billion for the trailing 12 months. We ended the quarter with $108 billion in cash and marketable securities. Turning to segment results. Within Google Services, revenues were $70.4 billion, up 14%. Google Search and other advertising revenues of $46.2 billion in the quarter were up 14% led again by growth in retail. YouTube advertising revenues of $8.1 billion were up 21% driven by both direct response and brand advertising. Network advertising revenues of $7.4 billion were down 1%. Subscriptions, platforms and devices revenues were $8.7 billion, up 18%, primarily reflecting growth in YouTube subscription revenues. TAC was $12.9 billion, up 10%. Google Services operating income was $27.9 billion, up 28%. And the operating margin was 40%. Turning to the Google Cloud segment. Revenues were $9.6 billion for the quarter, up 28%, reflecting significant growth in GCP with an increasing contribution from AI and strong Google Workspace growth, primarily driven by increases in average revenue per seat. Google Cloud delivered operating income of $900 million and an operating margin of 9%. As to our Other Bets, for the first quarter, revenues were $495 million, benefiting from a milestone payment in one of the Other Bets. The operating loss was $1 billion. Turning to our outlook for the business. With respect to Google Services, first, within Advertising, we are very pleased with the momentum of our Ads businesses. Search had broad-based strength across verticals. In YouTube, we had acceleration in revenue growth driven by brand and direct response. Looking ahead, two points to call out: first, results in our advertising business in Q1 continued to reflect strength in spend from APAC-based retailers, a trend that began in the second quarter of 2023 and continued through Q1, which means we will begin lapping that impact in the second quarter; second, the YouTube acceleration in revenue growth in Q1 reflects, in part, lapping the negative year-on-year growth we experienced in the first quarter of 2023. Turning to subscriptions, platforms, and devices. We continue to deliver significant growth in our subscriptions business, which drives the majority of revenue growth in this line. The sequential quarterly decline in year-on-year revenue growth for the line in Q1 versus Q4 reflects, in part, the fact that we had only 1 week of Sunday Ticket subscription revenue in Q1 versus 14 weeks in Q4. Looking forward, we will anniversary last year's price increase in YouTube TV starting in May. With regard to platforms, we are pleased with the performance in Play driven by an increase in buyers. With respect to Google Cloud, performance in Q1 reflects strong demand for our GCP infrastructure and solutions as well as the contribution from our Workspace productivity tools. The growth we are seeing across Cloud is underpinned by the benefit AI provides for our customers. We continue to invest aggressively while remaining focused on profitable growth. As we look ahead, two points that will affect sequential year-on-year revenue growth comparisons across Alphabet: first, Q1 results reflect the benefit of leap year, which contributed slightly more than 1 point to our revenue growth rate at the consolidated level in the first quarter; second, at current spot rates, we expect a larger headwind from foreign exchange in Q2 versus Q1. Turning to margins. Our efforts to durably reengineer our cost base are reflected in a 400 basis point expansion of our Alphabet operating margin year-on-year, excluding the impact of restructuring and severance charges in both periods. You can also see the impact in the quarter-on-quarter decline in head count in Q1, which reflects both actions we have taken over the past few months and a much slower pace of hiring. As we have discussed previously, we are continuing to invest in top engineering and technical talent, particularly in Cloud, Google DeepMind and technical infrastructure. Looking ahead, we remain focused on our efforts to moderate the pace of expense growth in order to create capacity for the increases in depreciation and expenses associated with the higher levels of investment in our technical infrastructure. We believe these efforts will enable us to deliver full year 2024 Alphabet operating margin expansion relative to 2023. With respect to CapEx, our reported CapEx in the first quarter was $12 billion, once again driven overwhelmingly by investment in our technical infrastructure, with the largest component for servers followed by data centers. The significant year-on-year growth in CapEx in recent quarters reflects our confidence in the opportunities offered by AI across our business. Looking ahead, we expect quarterly CapEx throughout the year to be roughly at or above the Q1 level, keeping in mind that the timing of cash payments can cause variability in quarterly reported CapEx. With regard to Other Bets, we similarly have work streams underway to enhance overall returns. Finally, as I trust you saw in the press release, we are very pleased to be adding a quarterly dividend of $0.20 per share to our capital return program as well as a new $70 billion authorization in share repurchases. The core of our capital allocation framework remains the same, beginning with investing aggressively in our business as you have heard us talk about today. Given the extraordinary opportunities ahead, we view the introduction of the dividend as further strengthening our overall capital return program. Thank you. Sundar, Philipp, and I will now take your questions.","evidence_gemma_new":"operating expenses","evidence_llama_3_3":"Alphabet operating expenses first quarter","evidence_qwen_3_30b":"operating expenses","gemma_new_max":21400000000.0,"gemma_new_min":21400000000.0,"llama_3_3_max":21400000000.0,"llama_3_3_min":21400000000.0,"qwen_3_30b_max":21400000000.0,"qwen_3_30b_min":21400000000.0}
{"symbol":"GOOGL","year":2024,"quarter":2,"date":"2024-Q2","chunk_id":4,"sub_chunk_id":0,"centroid_label":"operating expenses","agreed_value":21800000000.0,"count":3,"chunk":"Ruth Porat : Thank you, Philipp, and thanks, Sundar, for those kind words. We had another strong quarter, driven in particular by performance in Search and Cloud, as well as the ongoing efforts to durably reengineer our cost base. My comments will be on year-over-year comparisons for the second quarter unless I state otherwise. I will start with results at the Alphabet level followed by segment results and conclude with our outlook. For the second quarter, our consolidated revenues were $84.7 billion, up 14% or up 15% in constant currency. Search remained the largest contributor to revenue growth. In terms of expenses, total cost of revenues was $35.5 billion, up 11%. Other cost of revenues was $22.1 billion, up 14%, with the increase driven primarily by content acquisition costs, followed by depreciation as well as the impact of the Canadian digital services tax, which was applied retroactively. Operating expenses were $21.8 billion up 5%, primarily reflecting an increase in R&D partially offset by a decline in G&A with sales and marketing essentially flat to the second quarter last year. The increase in R&D was driven primarily by compensation which was affected by lapping a reduction in valuation-based compensation liabilities in certain other bets in the second quarter last year followed by depreciation. The largest single factor in the year-on-year decline in G&A expenses was lower charges related to legal matters. Operating income was $27.4 billion, up 26% and our operating margin was 32%. Net income was $23.6 billion and EPS was $1.89. We delivered free cash flow of $13.5 billion in the second quarter and $60.8 billion for the trailing 12 months. As a reminder, last year, we had a timing benefit in the second and third quarters from a $10.5 billion deferred cash tax payment made in the fourth quarter, which depressed reported free cash flow growth this quarter, and we'll do so again next quarter. We ended the quarter with $101 billion in cash and marketable securities. Turning to segment results. Within Google Services, revenues were $73.9 billion, up 12%. Google Search and other advertising revenues of $48.5 billion in the quarter were up 14%, led again by growth in retail, followed by the financial services vertical. YouTube advertising revenues of $8.7 billion were up 13% driven by brand followed by direct response advertising. Network advertising revenues of $7.4 billion were down 5%. Subscription platforms and devices revenues were $9.3 billion up 14%, primarily reflecting growth in YouTube subscription revenues. TAC was $13.4 billion, up 7%. Google Services operating income was $29.7 billion up 27% and the operating margin was 40%. Turning to the Google Cloud segment. Revenues were $10.3 billion for the quarter, up 29%, reflecting first significant growth in GCP, which was above growth for cloud overall and includes an increasing contribution from AI. And second, strong Google Workspace growth, primarily driven by increases in average revenue per seat. Google Cloud delivered operating income of $1.2 billion and an operating margin of 11%. As to our Other Bets for the second quarter, revenues were $365 million and the operating loss was $1.1 billion. Turning to our outlook for the business. With respect to Google Services, First, within advertising. The strong performance of search was broad-based across verticals. In YouTube, we are pleased with the growth in the quarter. We had healthy watch time growth continued to close the monetization gap in Shorts and had continued momentum in Connected TV, with brand benefiting in part from an ongoing shift in budgets from linear television to digital. As we look forward to the third quarter, we will be lapping the increasing strength in advertising revenues in the second half of 2023, in part from APAC based retailers. Turning to subscriptions, platforms and devices. First, we continue to have significant growth in our subscriptions business which drives the majority of revenue growth in this line. However, there was a sequential decline in the year-on-year growth rate, as we anniversaried the impact of a price increase for YouTubeTV in the second quarter last year. The impact will persist through the balance of the year. Second, with regard to platforms. We are pleased with the performance in play driven by an increase in buyers. Finally, with respect to devices. The most important point as we look forward is that our Made by Google launches have been pulled forward into the third quarter from the fourth quarter last year benefiting revenues in Q3 this year. Turning to cloud, which continued to deliver very strong results. For the first time, Cloud crossed $10 billion in quarterly revenues and $1 billion in quarterly operating profit. As Sundar noted year-to-date, our AI infrastructure and generative AI solutions for cloud customers have already generated billions in revenues and are being used by more than 2 million developers. We're particularly encouraged that the majority of our top 100 customers are already using our generative AI solutions. We continue to invest aggressively in the business. Turning to margins. The margin expansion in Q2 versus last year reflects our ongoing efforts to durably reengineer our cost base, as well as revenue strength. Our leadership team remains focused on our efforts to moderate the pace of expense growth in order to create capacity for the increases in depreciation and expenses associated with the higher levels of investment in our technical infrastructure. Once again headcount declined quarter-on-quarter, which reflects both actions we have taken in the first half of the year and a much slower pace of hiring. Looking ahead, we expect a slight increase in headcount in the third quarter, as we bring on new graduates. As we have discussed previously, we\u2019re continuing to invest in top engineering and technical talent, particularly in cloud and technical infrastructure. Looking forward, we continue to expect to deliver full-year 2024 Alphabet operating margin expansion relative to 2023. However, in the third quarter operating margins will reflect the impact of both the increases in depreciation and expenses associated with the higher levels of investment in our technical infrastructure, as well as the increase in cost of revenues due to the pull-forward of hardware launches into Q3. With respect to CapEx, our reported CapEx in the second quarter was $13 billion, once again driven overwhelmingly by investment in our technical infrastructure with the largest component for servers followed by data centers. Looking ahead, we continue to expect quarterly CapEx throughout the year to be roughly at or above the Q1 CapEx of $12 billion keeping in mind that the timing of cash payments can cause variability in quarterly reported CapEx. With regard to other bets, we continue to focus on improving overall efficiencies, as we invest for long-term returns. Waymo is an important example of this, with its technical leadership coupled with progress on operational performance. As you will see in the 10-Q, we have chosen to commit to a new multi-year investment of $5 billion. This new round of funding, which is consistent with recent annual investment levels will enable Waymo to continue to build the world's leading autonomous driving technology company. To close, this is my 56th and last earnings call, 37 of them at Alphabet. So I have a few closing thoughts of gratitude. I've been so proud to be at Google and Alphabet as CFO and to work with some of the smartest people in the world every day. I think, we have accomplished a lot in the last nine plus years, and I am confident that progress will continue. Of course, I'm not going far and I'm honored to have my new role, which I've been slowly working my way into during the past 11 months and I look forward to continuing to work with Sundar, and our great team. Being CFO of one of the most important companies in the world has been the opportunity and responsibility of a lifetime. Google's Mission of advancing technology and bringing information to people throughout the world is as relevant today as it was when I worked on its IPO. Technology has been a catalyst for economic growth throughout human history. The people on this call know that if a technological advancement is not the focus of every business and government, they will be left behind. Underpinning this is the need for sound and responsible investment. That has never been more important than today and certainly, that is Google and Alphabet's focus. I want to end by thanking Googlers around the world for the innovation and commitment that has enabled us to deliver such extraordinary products and services globally. I also want to thank our investors and analysts for your long-term support and your feedback. Thank you. Sundar, Philipp and I will now take your questions.","evidence_gemma_new":"Operating expenses","evidence_llama_3_3":"operating expenses second quarter","evidence_qwen_3_30b":"operating expenses second quarter","gemma_new_max":21800000000.0,"gemma_new_min":21800000000.0,"llama_3_3_max":21800000000.0,"llama_3_3_min":21800000000.0,"qwen_3_30b_max":21800000000.0,"qwen_3_30b_min":21800000000.0}
{"symbol":"GOOGL","year":2023,"quarter":1,"date":"2023-Q1","chunk_id":5,"sub_chunk_id":0,"centroid_label":"operating income","agreed_value":17400000000.0,"count":3,"chunk":"Ruth Porat: Thank you, Philipp. Our financial results for the first quarter reflect continued healthy fundamental growth in Search and momentum in Cloud. As I go through the discussion today, I will reference some changes to our reporting and disclosures that are covered more fully in the 8-K we filed last week. I will conclude with our outlook. For the first quarter, our consolidated revenues were $69.8 billion, up 3% or up 6% in constant currency. Search remained the largest contributor to revenue growth on a constant currency basis. In terms of expenses and profitability, year-on-year comparisons are impacted by 3 factors: first, the $2.6 billion in charges we took in the first quarter related to workforce and office space reductions. We provided a table in our earnings release that shows the impact of those charges on cost of revenues and operating expenses. Second, the adjustment we made to the estimated useful lives of servers and certain network equipment at the beginning of 2023. As you can see in our earnings release, the effect for the first quarter was a reduction in depreciation expense of $988 million. Third, the shift in timing of our annual employee stock-based compensation awards from January to March delays the step-up in SBC from Q1 to Q2. This shift in timing does not affect the total amount of SBC over the full year 2023. Total cost of revenues was $30.6 billion, up 3%, driven by other cost of revenues of $18.9 billion, which was up 7%, the biggest factor of which was compensation costs associated with data centers and other operations and followed by content acquisition costs. Operating expenses were $21.8 billion, up 19%, with a significant impact from the charges related to workforce and office space reductions. Operating income was $17.4 billion, down 13%, and our operating margin was 25%. Net income was $15.1 billion. We delivered free cash flow of $17.2 billion in the first quarter and $62 billion for the trailing 12 months. We ended the quarter with $115 billion in cash and marketable securities. Turning to our segment results. These were affected by 2 additional changes outlined in our 8-K filing. First, reflecting the increasing collaboration between DeepMind and Google Services, Google Cloud, and Other Bets, as of Q1, DeepMind is reported as part of Alphabet's unallocated corporate costs. And second, beginning in the first quarter, we updated our cost allocation methodologies to provide our business leaders with increased transparency for decision-making. In our filing, we provided a recast of prior period results for the segment for these 2 changes. The highlights of the year-on-year performance of our segments that I will review reflect these recast results. Starting with Google Services. Revenues were $62 billion, up 1%. Google Search and other advertising revenues of $40.4 billion in the quarter were up 2%. YouTube advertising revenues of $6.7 billion were down 3%. Network advertising revenues of $7.5 billion were down 8%. Other revenues were $7.4 billion, up 9%, reflecting primarily ongoing significant subscriber growth in YouTube TV and YouTube Music Premium. TAC was $11.7 billion, down 2%, primarily reflecting a mix shift between Search and Network. Google Services operating income was $21.7 billion, down 1%, and the operating margin was 35%. Turning to the Google Cloud segment. Revenues were $7.5 billion for the quarter, up 28%. Growth in GCP remained strong across geographies, industries and products. Google Workspace's strong results were driven by increases in both seats and average revenue per seat. Google Cloud had operating income of $191 million, and the operating margin was 2.6%. As to our Other Bets, for the first quarter, revenues were $288 million, and the operating loss was $1.2 billion. Turning to our outlook for the business. In terms of the operating environment, our results in the first quarter reflected ongoing headwinds due to a challenging economic environment, and the outlook remains uncertain. Foreign exchange headwinds have moderated, and we expect less of a foreign exchange headwind in the second quarter based on current spot rates. With respect to Google Services, within advertising, Q1 results reflect the resilience of Search with its unique ability to surface demand and deliver measurable ROI. Excluding the impact of foreign exchange, the revenue growth of Search was similar to last quarter. In YouTube, we saw signs of stabilization in ad spend on a sequential basis. We continue to prioritize growth in Shorts engagement where we are encouraged by progress in monetization. As to other revenues, in YouTube subscriptions, we are pleased with the significant ongoing subscriber growth in both YouTube Music Premium and YouTube TV. In Play, revenues were down year-on-year, primarily due to the continued impact of foreign exchange in APAC, although results have improved as we lapped the impact from our introduction of fee reductions last year. Turning to Google Cloud. Our investments in product innovation, our go-to-market organization and our partner ecosystem delivered strong results as customers across industries and geographies increasingly rely on Google Cloud to digitally transform their businesses. That being said, in Q1, we continued to see slower growth of consumption as customers optimized GCP costs, reflecting the macro backdrop which remains uncertain. In terms of operating performance, we remain focused on driving long-term profitable growth in Cloud while continuing to invest given the substantial opportunity. Moving to Other Bets. In the first quarter, we similarly worked to refine strategies and prioritize efforts across the portfolio, including reductions to head count. I will now walk you through an update on our efforts to reengineer our cost base, slowing the pace of operating expense growth while creating capacity for key investment areas, particularly in support of AI across the company. First, as discussed on the fourth quarter call, we have efforts underway in 3 broad categories: number one, using AI and automation to improve productivity across Alphabet for operational tasks as well as the efficiency of our technical infrastructure; number two, managing our spend with suppliers and vendors more effectively; and number three, continuing to optimize how and where we work. As we've noted previously, all 3 work streams are ramping up this year, and we plan to build on these efforts in 2024 and in subsequent years. Second, with respect to head count growth. The reported number of employees at the end of the first quarter includes almost all of the employees impacted by the workforce reduction we announced in January. We expect most of the impacted individuals will no longer be reflected in our head count by the end of the second quarter. In terms of the outlook for head count for the year, as we shared last quarter, we are meaningfully slowing the pace of hiring in 2023 while still investing in priority areas, particularly for top engineering and technical talent. In terms of our investments in AI, we are excited about the creation of Google DeepMind, combining the Brain Team from Google Research with DeepMind, with the goal to accelerate innovation and impact. Beginning in the second quarter of 2023, the costs associated with teams and activities transferred from Google Research will move from Google Services to Google DeepMind within Alphabet's unallocated corporate costs. Finally, as it relates to CapEx, for 2023, we now expect total CapEx to be modestly higher than in 2022. As discussed last quarter, CapEx this year will include a meaningful increase in technical infrastructure versus a decline in office facilities. We expect the pace of investment in both data center construction and servers to step up in the second quarter and continue to increase throughout the year. Thank you. Sundar, Philipp and I will now take your questions.","evidence_gemma_new":"Operating income down 13%","evidence_llama_3_3":"operating income first quarter","evidence_qwen_3_30b":"Operating income first quarter","gemma_new_max":17400000000.0,"gemma_new_min":17400000000.0,"llama_3_3_max":17400000000.0,"llama_3_3_min":17400000000.0,"qwen_3_30b_max":17400000000.0,"qwen_3_30b_min":17400000000.0}
{"symbol":"GOOGL","year":2023,"quarter":2,"date":"2023-Q2","chunk_id":4,"sub_chunk_id":0,"centroid_label":"operating income","agreed_value":21800000000.0,"count":2,"chunk":"Ruth Porat: Thank you, Philipp. Before I go into the results, first, Sundar, thank you very much for the opportunity. I'm very excited about the new role, and I look forward to it. So turning to the results. We're very pleased with our financial results for the second quarter, which reflect an acceleration of growth in Search and momentum in Cloud. My comments will be on year-over-year comparisons for the second quarter unless I state otherwise. I will start with results at the Alphabet level followed by segment results and conclude with our outlook. For the second quarter, our consolidated revenues were $74.6 billion, up 7% or up 9% in constant currency. Search remained the largest contributor to revenue growth. Total cost of revenues was $31.9 billion, up 6%, driven by other cost of revenues of $19.4 billion, which was up 8%. Growth here was driven by content acquisition costs, primarily for YouTube subscription offerings, followed by hardware costs associated with Pixel family launches in the second quarter. As noted in our earnings release, the overall increase in data center and other operations costs was partially offset by a reduction in depreciation expense due to the change in estimated useful lives we discussed last quarter. Operating expenses were $20.9 billion, up 4%. Operating income was $21.8 billion, up 12%, and our operating margin was 29%. I will cover our expense and margin performance in our outlook. Other income and expense was $65 million. Net income was $18.4 billion. We delivered free cash flow of $21.8 billion in the second quarter and $71 billion for the trailing 12 months, reflecting improved operating performance as well as the deferral of certain tax payments to the fourth quarter of 2023 as noted in our earnings release. We ended the quarter with $118 billion in cash and marketable securities. Turning to our segment results. Prior period results have been recast for 2 changes that we made as of the first quarter. First, DeepMind is now reported as part of Alphabet's unallocated corporate costs. Second, we updated our cost allocation methodologies. In the second quarter, we then combined the Brain team from Google Research with DeepMind to form Google DeepMind. Costs associated with the Brain team, which were previously included in Google Services, are now reported as part of Alphabet's unallocated corporate costs. We have not recast prior period results to reflect this additional change. Within Google Services, revenues were $66.3 billion, up 5%. Google Search and other advertising revenues of $42.6 billion in the quarter were up 5%, led by growth in retail. YouTube advertising revenues of $7.7 billion were up 4%, driven by brand advertising, followed by direct response reflecting further stabilization in spending by advertisers. Network advertising revenues of $7.9 billion were down 5%. Other revenues were $8.1 billion, up 24%, reflecting growth in YouTube non-advertising revenues, primarily from subscription growth in YouTube Music Premium and YouTube TV followed by growth in hardware revenues primarily driven by the launch of the Pixel 7a in the second quarter. Finally, Play returned to positive growth in the second quarter. TAC was $12.5 billion, up 3%. Google Services operating income was $23.5 billion, up 8%, and the operating margin was 35%. Turning to the Google Cloud segment. Revenues were $8 billion for the quarter, up 28%. GCP revenue growth remained strong across geographies, industries and products. That being said, we saw a continued moderation in the rate of consumption growth as consumers optimize their spend. Google Workspace strong revenue growth was driven by increases in both seats and average revenue per seat. Google Cloud had operating income of $395 million and the operating margin was 5%. As to our Other Bets, for the second quarter, revenues were $285 million, and the operating loss was $813 million. The decrease in operating loss was primarily driven by a reduction in valuation-based compensation liabilities related to certain Other Bets. Turning to our outlook for the business. With respect to Google Services, first, within advertising. We were pleased with the acceleration of Search advertising revenue growth in the second quarter. Our continued ability to generate sustained growth reflects our unparalleled engineering innovation that creates extraordinary experiences for users and capabilities for advertisers and delivered with the deep expertise of our go-to-market team. And in YouTube, we saw ongoing signs of stabilization in advertiser spending. We are prioritizing product focus on increasing quality consumption of video content with both Shorts and in the living room, which is translating into improved monetization. Second, within other revenues. In our YouTube subscription products, the sustained, strong growth in revenues reflects significant subscriber growth. You may have seen that last week, we increased subscription prices for YouTube Music and Premium, which underscores the value of the products. Strong year-on-year growth in hardware revenues was due, in large part, to a timing change given the Pixel 7a was launched in the second quarter, whereas the Pixel 6a launch occurred in the third quarter last year. Looking ahead, the launch timing change will be a headwind to hardware revenue growth in the third quarter. Play returned to positive growth in the second quarter, driven primarily by a solid increase in the number of buyers. Turning to Google Cloud. We are particularly excited about the customer interest in our AI-optimized infrastructure, our large language models, our AI platform services and our new generative AI offerings such as Duet AI for Google Workspace, although we are still clearly in the early days. At the same time, we continue to experience headwinds in the second quarter for moderation in consumption growth as customers optimize their spend. We continue to invest aggressively while remaining focused on profitable growth. In terms of expenses and profitability, we remain very focused on durably reengineering our cost base. Most evident to date are the actions we have taken to reduce the pace of headcount growth, including the workforce reductions we announced in the first quarter and a slower pace of organic hiring, in part given our focus on reallocating talent from within to fuel our growth priorities. A quick comment on the sequential improvement in operating margins in the second quarter. There are 2 factors to note. First, the benefit from an acceleration in search advertising revenue growth in the second quarter. Second, the vast majority of the charges related to our workforce reduction and optimization of our global office space were taken in Q1. Finally, as it relates to CapEx, in Q2, the largest component was for servers, which included a meaningful increase in our investments in AI compute. The sequential step-up in the second quarter was lower than anticipated for 2 reasons. First, with respect to office facilities, we continue to moderate the pace of fit-outs and ground-up construction to reflect the slower expected pace of headcount growth. Second, there were delays in certain data center construction projects. We expect elevated levels of investment in our technical infrastructure increasing through the back half of 2023 and continuing to grow in 2024. The primary driver is to support the opportunities we see in AI across Alphabet, including investments in GPUs and proprietary TPUs as well as data center capacity. With all that said, we remain committed to durably reengineering our cost base in order to help create capacity for these investments in support of long-term, sustainable financial value. Thank you. Sundar, Philipp and I will now take your questions.","evidence_gemma_new":"operating income","evidence_llama_3_3":null,"evidence_qwen_3_30b":"operating income second quarter","gemma_new_max":21800000000.0,"gemma_new_min":21800000000.0,"llama_3_3_max":null,"llama_3_3_min":null,"qwen_3_30b_max":21800000000.0,"qwen_3_30b_min":21800000000.0}
{"symbol":"GOOGL","year":2023,"quarter":3,"date":"2023-Q3","chunk_id":4,"sub_chunk_id":0,"centroid_label":"operating income","agreed_value":21300000000.0,"count":2,"chunk":"Ruth Porat: Thank you, Philipp. We are very pleased with our financial results for the third quarter, driven by meaningful growth in Search and YouTube and momentum in Cloud. My comments will be on year-over-year comparisons for the third quarter, unless I state otherwise. I will start with results at the Alphabet level followed by segment results and conclude with our outlook. For the third quarter, our consolidated revenues were $76.7 billion, up 11% in both reported and constant currency. Search remained the largest contributor to revenue growth. In terms of expenses, total cost of revenues was $33.2 billion, up 7%, primarily reflecting other cost of revenues of $20.6 billion, which was up 6%. Growth here was primarily driven by content acquisition costs mainly for YouTube subscription offerings. As noted in our earnings release, the overall increase in data center and other operations costs was partially offset by a reduction in depreciation expense due to the change in estimated useful lives we made starting in the first quarter of the year. Operating expenses were $22.1 billion, up 6% reflecting the following. First, an increase in R&D expenses, driven primarily by compensation. Second, an increase in G&A expenses, reflecting the impact of charges related to legal matters. And finally, sales and marketing expenses, which were relatively flat to last year. Operating income was $21.3 billion, up 25%, and our operating margin was 28%. Other income and expense was a loss of $146 million. Net income was $19.7 billion. This reflects an effective tax rate of 7% in the third quarter from an IRS change related to the use of foreign tax credits, which had an outsized impact on the third quarter rate because the change resulted in a catch-up for prior periods. We delivered free cash flow of $22.6 billion in the third quarter and $78 million for the trailing 12 months. We ended the quarter with $120 billion in cash and marketable securities. As a reminder, our cash balance and free cash flow in the second and third quarters benefited from the deferral of certain tax payments to the fourth quarter of 2023. As noted in our earnings release, on October 16, we made an estimated tax payment of $10.5 billion related to this deferral, which will be reflected in our cash balance and free cash flow in the fourth quarter. Turning to segment results. Within Google Services, revenues were $68 billion, up 11%. Google Search and other advertising revenues of $44 billion in the quarter were up 11%, led again by growth in retail. YouTube advertising revenues of $8 billion were up 12%, driven by both brand advertising and direct response. Network advertising revenues of $7.7 billion were down 3%. Other revenues were $8.3 billion, up 21%, primarily reflecting growth in YouTube non-advertising revenues driven by subscriber growth in YouTube TV followed by YouTube Music Premium. TAC was $12.6 billion, up 7%. Google Services operating income was $23.9 billion, up 27% and the operating margin was 35%. Turning to the Google Cloud segment. Revenues were $8.4 billion for the quarter, up 22%. GCP revenue growth remained strong across geographies, industries and products, although the Q3 year-on-year growth rate reflects the impact of customer optimization efforts. Google Workspace also delivered strong revenue growth, primarily driven by increases in average revenue per seat. Google Cloud had operating income of $266 million, and the operating margin was 3%. As to our Other Bets, for the third quarter, revenues were $297 million and the operating loss was $1.2 billion. Turning to our outlook for the business. With respect to Google Services. First, within advertising. After a period of historic volatility, we were pleased with the year-on-year revenue growth of Search and YouTube advertising in the third quarter. Second, within other revenues, in our YouTube subscription products the substantial growth in revenues primarily reflects subscriber growth. Looking ahead, a full quarter of NFL Sunday Ticket revenues as well as associated content acquisition costs will be reflected in Q4 results compared to only a few weeks in the third quarter. Play had growth in the third quarter, driven primarily by an increase in the number of buyers. With respect to hardware, there is a headwind to revenues in the fourth quarter, reflecting efforts to optimize the portfolio with tighter targeting of our go-to-market investments as well as the ongoing impact from the difference in launch timing for the Pixel 6a and 7a that we mentioned last quarter. Turning to Google Cloud. We are pleased with the ongoing customer engagement with GCP and Workspace and the potential benefit of our AI solutions including infrastructure and services such as Vertex AI and Duet. We continue to invest aggressively given the significant potential we see while remaining focused on profitable growth. In terms of expenses and profitability, we're pleased with our operating performance. As we have repeatedly stressed, we remain focused on durably reengineering our cost base to create investment capacity to support our growth priorities, most important of which is with AI. We have a number of workstreams in place. First, we are maintaining a slower pace of headcount growth, reflecting product prioritization and reallocation of talent to support our most important growth opportunities. Second, we remain focused on optimizing our real estate footprint, including how and where we work to reduce our expense growth. As you can see from our earnings release, we incurred $207 million in accelerated rent and depreciation in the third quarter related to these actions. Third, we have engineering work streams underway to improve productivity across Alphabet. Given the magnitude of investment in our technical infrastructure, we have a superb team focused on efficiency of our operations there. We are also making progress in streamlining operations across Alphabet through the use of AI. Finally, there are ongoing workstreams that are improving the efficiency of our spend with suppliers and vendors through our central procurement organization. And to be clear, across the portfolio of other bet companies, we have also been working to identify opportunities to create sharper focus and to operate more efficiently and effectively. With respect to sequential quarter-on-quarter trends, two further points. First, cost of sales in the fourth quarter will reflect both higher hardware costs given Pixel family launches as well as increased CAC for YouTube as previously noted. Second, as usual, we expect sales and marketing expenses to be more heavily weighted to the end of the year, in part to support product launches in the holiday season. Finally, our reported CapEx in Q3 was $8 billion, driven overwhelmingly by investment in our technical infrastructure with the largest component for servers, followed by data centers, reflecting a meaningful increase in our investments in AI compute. The growth in reported cash CapEx in Q3 is somewhat muted due to the timing of supplier payments, which can cause variability from quarter-to-quarter. We continue to invest meaningfully in the technical infrastructure needed to support the opportunities we see in AI across Alphabet and expect elevated levels of investment, increasing in the fourth quarter of 2023 and continuing to grow in 2024. In closing, we remain very excited about the opportunities ahead and committed to deliver sustainable financial value. Thank you. Sundar, Philipp and I will now take your questions.","evidence_gemma_new":"Operating income","evidence_llama_3_3":null,"evidence_qwen_3_30b":"operating income operating margin third quarter","gemma_new_max":21300000000.0,"gemma_new_min":21300000000.0,"llama_3_3_max":null,"llama_3_3_min":null,"qwen_3_30b_max":21300000000.0,"qwen_3_30b_min":21300000000.0}
{"symbol":"GOOGL","year":2023,"quarter":4,"date":"2023-Q4","chunk_id":4,"sub_chunk_id":0,"centroid_label":"operating income","agreed_value":23700000000.0,"count":3,"chunk":"Ruth Porat: Thank you, Philipp. We are very pleased with our full year results with 2023 Alphabet revenues of $307 billion, up 9% versus 2022, which added $25 billion to revenues for the year. We ended with a strong fourth quarter with consolidated revenues of $86.3 billion, up 13% versus last year in both reported and constant currency. Search remained the largest contributor to revenue growth. My comments will be on year-over-year comparisons for the fourth quarter, unless I state otherwise. Total cost of revenues was $37.6 billion, up 6%. Other cost of revenues was $23.6 billion, up 5%, with the increase driven primarily by content acquisition costs associated with YouTube subscription offerings. The growth rate also reflects the offsetting benefit of lapping $1.2 billion in inventory-related charges that we called out in the fourth quarter last year as well as a reduction in depreciation expense due to changes in estimated useful lives we made starting in the first quarter of 2023. In terms of total expenses, the year-on-year comparisons reflect an additional $1.2 billion in exit charges that we took in the fourth quarter of 2023 in connection with actions to optimize our global office space. As you can see in our earnings release, these charges were allocated across the expense lines in other cost of revenues and OpEx based on associated head count. Operating expenses were $25 billion, up 11%, primarily reflecting an increase in R&D expenses, which were driven by the real estate charges, followed by compensation. Operating income was $23.7 billion, up 30%, and our operating margin was 27%. Net income was $20.7 billion, and EPS was $1.64. We delivered free cash flow of $7.9 billion, which was affected by the timing of the $10.5 billion tax payment we made on October 16 that we called out previously related to the deferral of certain tax payments to the fourth quarter. For the full year 2023, free cash flow was $69 billion. We repurchased a total of $62 billion of our Class A and Class C shares in 2023 and ended the year with $111 billion in cash and marketable securities. Turning to segment results. Within Google Services, revenues were $76.3 billion, up 12%. Google Search and other advertising revenues of $48 billion in the quarter were up 13%, led again by growth in retail. YouTube advertising revenues of $9.2 billion were up 16% driven by both direct response and brand advertising. Network advertising revenues of $8.3 billion were down 2%. Subscriptions, platforms and devices revenues, which we previously referred to as other revenues, were $10.8 billion, up 23%, primarily reflecting growth in YouTube subscription revenues. TAC was $14 billion, up 8%. Google Services' operating income was $26.7 billion, up 32%, and the operating margin was 35%. Turning to the Google Cloud segment. Revenues were $9.2 billion for the quarter, up 26%. We're very pleased with the momentum of GCP with an increasing contribution from AI. Google Workspace also delivered strong revenue growth primarily driven by increases in average revenue per seat. Google Cloud delivered operating income of $864 million and an operating margin of 9%. As to our Other Bets, for the full year 2023, revenues were $1.5 billion and the operating loss was $4.1 billion. Results in the fourth quarter benefited from a milestone payment in one of the Other Bets. Turning to our outlook for the business. With respect to Google Services, first, within advertising. We were pleased with the sequential revenue growth of Search and YouTube advertising throughout 2023, which reflects the extraordinary work across our teams to drive improved experiences for users and attractive ROI for advertisers. As we enter 2024 with advertising revenues of more than $100 billion higher than 2019, we remain focused on sustaining healthy growth on this larger base. Second, within subscriptions, platforms and devices, our total revenues from subscription products reached $15 billion for the full year 2023 driven primarily by substantial growth in subscribers for our YouTube subscription offerings. The substantial increase in our subscription revenues over the past few years demonstrates the ability of our teams to deliver high value-add offerings and provides a strong base on which to build, including through YouTube and newer services like Google One. Play had solid growth again in the fourth quarter driven primarily by an increase in the number of buyers. In devices, we continue to make sizable investments with increased emphasis on our Pixel family, particularly with AI-powered innovation while driving further efficiencies across the portfolio. Turning to Google Cloud. We are pleased with operating performance in the year. Full year revenues of $33 billion were up 26% versus prior year, ending with strong Q4 performance. The Cloud team is intensely focused on bringing the benefits of Gemini, our industry-leading AI technology, to enterprises and governments globally, and we are gratified with the level of engagement. The strong demand we are seeing for our vertically integrated AI portfolio is creating new opportunities for Google Cloud across every product area. In terms of profitability, the improvement in 2023 reflects sustained focus across the team with the intent to maintain healthy profitability while we continue to invest to support long-term growth. Turning to margins and expenses. As we have repeatedly stressed, we remain committed to our framework to durably reengineer our cost base as we invest to support our growth priorities. Key contributors to moderating our expense growth include: first, product and process prioritization to ensure we have the right resources behind our most important opportunities and to reallocate resources where we can; second, organizational efficiency and structure. We're focused on removing layers to simplify execution and drive velocity. Both product prioritization and the organization design efforts result in a slower pace of hiring, as you can see with our head count down year-on-year, reflecting the reductions we announced in the first quarter of 2023 and a much slower pace of hiring. We will continue to invest in top technical and engineering talent. Finally, we continue to execute the other work streams to slow expense growth, including improving efficiency in our technical infrastructure, streamlining operations across Alphabet through the use of AI, increasing efficiency of our spend with suppliers and vendors through our central procurement organization and optimizing our real estate portfolio. With respect to CapEx, our reported CapEx in the fourth quarter was $11 billion, driven overwhelmingly by investment in our technical infrastructure with the largest component for servers followed by data centers. The step-up in CapEx in Q4 reflects our outlook for the extraordinary applications of AI to deliver for users, advertisers, developers, cloud enterprise customers and governments globally and the long-term growth opportunities that offers. In 2024, we expect investment in CapEx will be notably larger than in 2023. With regard to Other Bets, we've been working to sharpen our investment focus while capturing the upside given compelling technology breakthroughs across the portfolio. For example, last week, Alphabet's X announced that it would be moving to spin out more projects as independent companies through external capital, giving X the opportunity to bring more focus to the breakthrough technologies it is working on to address some of the world's most pressing challenges. Thank you. Sundar, Philipp and I will now take your questions.","evidence_gemma_new":"Operating income","evidence_llama_3_3":"Operating income","evidence_qwen_3_30b":"operating income","gemma_new_max":23700000000.0,"gemma_new_min":23700000000.0,"llama_3_3_max":23700000000.0,"llama_3_3_min":23700000000.0,"qwen_3_30b_max":23700000000.0,"qwen_3_30b_min":23700000000.0}
{"symbol":"GOOGL","year":2024,"quarter":1,"date":"2024-Q1","chunk_id":4,"sub_chunk_id":0,"centroid_label":"operating income","agreed_value":25500000000.0,"count":3,"chunk":"Ruth Porat: Thank you, Philipp. We are very pleased with our financial results for the first quarter driven, in particular, by strength in Search and Cloud as well as the ongoing efforts to durably reengineer our cost base. My comments will be on year-over-year comparisons for the first quarter unless I state otherwise. I will start with results at the Alphabet level, followed by segment results and conclude with our outlook. For the first quarter, our consolidated revenues were $80.5 billion, up 15% or up 16% in constant currency. Search remained the largest contributor to revenue growth. In terms of total expenses, the year-on-year comparisons reflect the impact of the restructuring charges we took in the first quarter of 2023 of $2.6 billion as well as the $716 million in employee severance and related charges in the first quarter of 2024. As you can see in our earnings release, these charges were allocated across the expense lines in other cost of revenues and OpEx based on associated head count. To help with year-on-year comparisons, we included a table in our earnings release to adjust other cost of revenues, operating expenses, operating income, and operating margin to exclude the impact of severance and related office space charges in the first quarter of 2023 versus 2024. In terms of expenses, total cost of revenues was $33.7 billion, up 10%. Other cost of revenues was $20.8 billion, up 10% on a reported basis, with the increase driven primarily by content acquisition costs associated with YouTube given the very strong revenue growth in both subscription offerings and ad-supported content. On an adjusted basis, other cost of revenues were up 13% year-on-year. Operating expenses were $21.4 billion, down 2% on a reported basis, primarily reflecting expense decreases in sales and marketing and G&A, offset by an increase in R&D. The largest single factor in the year-on-year decline in G&A expenses was lower charges related to legal matters. On an adjusted basis, operating expenses were up 5%, reflecting, first, in R&D, an increase in compensation expense, primarily for Google DeepMind and Cloud; and second, in sales and marketing, a slight increase year-on-year, reflecting increases in compensation expense primarily for Cloud sales. Operating income was $25.5 billion, up 46% on a reported basis, and our operating margin was 32%. On an adjusted basis, operating income was up 31%, and our operating margin was 33%. Net income was $23.7 billion and EPS was $1.89. We delivered free cash flow of $16.8 billion in the first quarter and $69.1 billion for the trailing 12 months. We ended the quarter with $108 billion in cash and marketable securities. Turning to segment results. Within Google Services, revenues were $70.4 billion, up 14%. Google Search and other advertising revenues of $46.2 billion in the quarter were up 14% led again by growth in retail. YouTube advertising revenues of $8.1 billion were up 21% driven by both direct response and brand advertising. Network advertising revenues of $7.4 billion were down 1%. Subscriptions, platforms and devices revenues were $8.7 billion, up 18%, primarily reflecting growth in YouTube subscription revenues. TAC was $12.9 billion, up 10%. Google Services operating income was $27.9 billion, up 28%. And the operating margin was 40%. Turning to the Google Cloud segment. Revenues were $9.6 billion for the quarter, up 28%, reflecting significant growth in GCP with an increasing contribution from AI and strong Google Workspace growth, primarily driven by increases in average revenue per seat. Google Cloud delivered operating income of $900 million and an operating margin of 9%. As to our Other Bets, for the first quarter, revenues were $495 million, benefiting from a milestone payment in one of the Other Bets. The operating loss was $1 billion. Turning to our outlook for the business. With respect to Google Services, first, within Advertising, we are very pleased with the momentum of our Ads businesses. Search had broad-based strength across verticals. In YouTube, we had acceleration in revenue growth driven by brand and direct response. Looking ahead, two points to call out: first, results in our advertising business in Q1 continued to reflect strength in spend from APAC-based retailers, a trend that began in the second quarter of 2023 and continued through Q1, which means we will begin lapping that impact in the second quarter; second, the YouTube acceleration in revenue growth in Q1 reflects, in part, lapping the negative year-on-year growth we experienced in the first quarter of 2023. Turning to subscriptions, platforms, and devices. We continue to deliver significant growth in our subscriptions business, which drives the majority of revenue growth in this line. The sequential quarterly decline in year-on-year revenue growth for the line in Q1 versus Q4 reflects, in part, the fact that we had only 1 week of Sunday Ticket subscription revenue in Q1 versus 14 weeks in Q4. Looking forward, we will anniversary last year's price increase in YouTube TV starting in May. With regard to platforms, we are pleased with the performance in Play driven by an increase in buyers. With respect to Google Cloud, performance in Q1 reflects strong demand for our GCP infrastructure and solutions as well as the contribution from our Workspace productivity tools. The growth we are seeing across Cloud is underpinned by the benefit AI provides for our customers. We continue to invest aggressively while remaining focused on profitable growth. As we look ahead, two points that will affect sequential year-on-year revenue growth comparisons across Alphabet: first, Q1 results reflect the benefit of leap year, which contributed slightly more than 1 point to our revenue growth rate at the consolidated level in the first quarter; second, at current spot rates, we expect a larger headwind from foreign exchange in Q2 versus Q1. Turning to margins. Our efforts to durably reengineer our cost base are reflected in a 400 basis point expansion of our Alphabet operating margin year-on-year, excluding the impact of restructuring and severance charges in both periods. You can also see the impact in the quarter-on-quarter decline in head count in Q1, which reflects both actions we have taken over the past few months and a much slower pace of hiring. As we have discussed previously, we are continuing to invest in top engineering and technical talent, particularly in Cloud, Google DeepMind and technical infrastructure. Looking ahead, we remain focused on our efforts to moderate the pace of expense growth in order to create capacity for the increases in depreciation and expenses associated with the higher levels of investment in our technical infrastructure. We believe these efforts will enable us to deliver full year 2024 Alphabet operating margin expansion relative to 2023. With respect to CapEx, our reported CapEx in the first quarter was $12 billion, once again driven overwhelmingly by investment in our technical infrastructure, with the largest component for servers followed by data centers. The significant year-on-year growth in CapEx in recent quarters reflects our confidence in the opportunities offered by AI across our business. Looking ahead, we expect quarterly CapEx throughout the year to be roughly at or above the Q1 level, keeping in mind that the timing of cash payments can cause variability in quarterly reported CapEx. With regard to Other Bets, we similarly have work streams underway to enhance overall returns. Finally, as I trust you saw in the press release, we are very pleased to be adding a quarterly dividend of $0.20 per share to our capital return program as well as a new $70 billion authorization in share repurchases. The core of our capital allocation framework remains the same, beginning with investing aggressively in our business as you have heard us talk about today. Given the extraordinary opportunities ahead, we view the introduction of the dividend as further strengthening our overall capital return program. Thank you. Sundar, Philipp, and I will now take your questions.","evidence_gemma_new":"operating income","evidence_llama_3_3":"Alphabet operating income first quarter","evidence_qwen_3_30b":"operating income","gemma_new_max":25500000000.0,"gemma_new_min":25500000000.0,"llama_3_3_max":25500000000.0,"llama_3_3_min":25500000000.0,"qwen_3_30b_max":25500000000.0,"qwen_3_30b_min":25500000000.0}
{"symbol":"GOOGL","year":2024,"quarter":2,"date":"2024-Q2","chunk_id":4,"sub_chunk_id":0,"centroid_label":"operating income","agreed_value":27400000000.0,"count":3,"chunk":"Ruth Porat : Thank you, Philipp, and thanks, Sundar, for those kind words. We had another strong quarter, driven in particular by performance in Search and Cloud, as well as the ongoing efforts to durably reengineer our cost base. My comments will be on year-over-year comparisons for the second quarter unless I state otherwise. I will start with results at the Alphabet level followed by segment results and conclude with our outlook. For the second quarter, our consolidated revenues were $84.7 billion, up 14% or up 15% in constant currency. Search remained the largest contributor to revenue growth. In terms of expenses, total cost of revenues was $35.5 billion, up 11%. Other cost of revenues was $22.1 billion, up 14%, with the increase driven primarily by content acquisition costs, followed by depreciation as well as the impact of the Canadian digital services tax, which was applied retroactively. Operating expenses were $21.8 billion up 5%, primarily reflecting an increase in R&D partially offset by a decline in G&A with sales and marketing essentially flat to the second quarter last year. The increase in R&D was driven primarily by compensation which was affected by lapping a reduction in valuation-based compensation liabilities in certain other bets in the second quarter last year followed by depreciation. The largest single factor in the year-on-year decline in G&A expenses was lower charges related to legal matters. Operating income was $27.4 billion, up 26% and our operating margin was 32%. Net income was $23.6 billion and EPS was $1.89. We delivered free cash flow of $13.5 billion in the second quarter and $60.8 billion for the trailing 12 months. As a reminder, last year, we had a timing benefit in the second and third quarters from a $10.5 billion deferred cash tax payment made in the fourth quarter, which depressed reported free cash flow growth this quarter, and we'll do so again next quarter. We ended the quarter with $101 billion in cash and marketable securities. Turning to segment results. Within Google Services, revenues were $73.9 billion, up 12%. Google Search and other advertising revenues of $48.5 billion in the quarter were up 14%, led again by growth in retail, followed by the financial services vertical. YouTube advertising revenues of $8.7 billion were up 13% driven by brand followed by direct response advertising. Network advertising revenues of $7.4 billion were down 5%. Subscription platforms and devices revenues were $9.3 billion up 14%, primarily reflecting growth in YouTube subscription revenues. TAC was $13.4 billion, up 7%. Google Services operating income was $29.7 billion up 27% and the operating margin was 40%. Turning to the Google Cloud segment. Revenues were $10.3 billion for the quarter, up 29%, reflecting first significant growth in GCP, which was above growth for cloud overall and includes an increasing contribution from AI. And second, strong Google Workspace growth, primarily driven by increases in average revenue per seat. Google Cloud delivered operating income of $1.2 billion and an operating margin of 11%. As to our Other Bets for the second quarter, revenues were $365 million and the operating loss was $1.1 billion. Turning to our outlook for the business. With respect to Google Services, First, within advertising. The strong performance of search was broad-based across verticals. In YouTube, we are pleased with the growth in the quarter. We had healthy watch time growth continued to close the monetization gap in Shorts and had continued momentum in Connected TV, with brand benefiting in part from an ongoing shift in budgets from linear television to digital. As we look forward to the third quarter, we will be lapping the increasing strength in advertising revenues in the second half of 2023, in part from APAC based retailers. Turning to subscriptions, platforms and devices. First, we continue to have significant growth in our subscriptions business which drives the majority of revenue growth in this line. However, there was a sequential decline in the year-on-year growth rate, as we anniversaried the impact of a price increase for YouTubeTV in the second quarter last year. The impact will persist through the balance of the year. Second, with regard to platforms. We are pleased with the performance in play driven by an increase in buyers. Finally, with respect to devices. The most important point as we look forward is that our Made by Google launches have been pulled forward into the third quarter from the fourth quarter last year benefiting revenues in Q3 this year. Turning to cloud, which continued to deliver very strong results. For the first time, Cloud crossed $10 billion in quarterly revenues and $1 billion in quarterly operating profit. As Sundar noted year-to-date, our AI infrastructure and generative AI solutions for cloud customers have already generated billions in revenues and are being used by more than 2 million developers. We're particularly encouraged that the majority of our top 100 customers are already using our generative AI solutions. We continue to invest aggressively in the business. Turning to margins. The margin expansion in Q2 versus last year reflects our ongoing efforts to durably reengineer our cost base, as well as revenue strength. Our leadership team remains focused on our efforts to moderate the pace of expense growth in order to create capacity for the increases in depreciation and expenses associated with the higher levels of investment in our technical infrastructure. Once again headcount declined quarter-on-quarter, which reflects both actions we have taken in the first half of the year and a much slower pace of hiring. Looking ahead, we expect a slight increase in headcount in the third quarter, as we bring on new graduates. As we have discussed previously, we\u2019re continuing to invest in top engineering and technical talent, particularly in cloud and technical infrastructure. Looking forward, we continue to expect to deliver full-year 2024 Alphabet operating margin expansion relative to 2023. However, in the third quarter operating margins will reflect the impact of both the increases in depreciation and expenses associated with the higher levels of investment in our technical infrastructure, as well as the increase in cost of revenues due to the pull-forward of hardware launches into Q3. With respect to CapEx, our reported CapEx in the second quarter was $13 billion, once again driven overwhelmingly by investment in our technical infrastructure with the largest component for servers followed by data centers. Looking ahead, we continue to expect quarterly CapEx throughout the year to be roughly at or above the Q1 CapEx of $12 billion keeping in mind that the timing of cash payments can cause variability in quarterly reported CapEx. With regard to other bets, we continue to focus on improving overall efficiencies, as we invest for long-term returns. Waymo is an important example of this, with its technical leadership coupled with progress on operational performance. As you will see in the 10-Q, we have chosen to commit to a new multi-year investment of $5 billion. This new round of funding, which is consistent with recent annual investment levels will enable Waymo to continue to build the world's leading autonomous driving technology company. To close, this is my 56th and last earnings call, 37 of them at Alphabet. So I have a few closing thoughts of gratitude. I've been so proud to be at Google and Alphabet as CFO and to work with some of the smartest people in the world every day. I think, we have accomplished a lot in the last nine plus years, and I am confident that progress will continue. Of course, I'm not going far and I'm honored to have my new role, which I've been slowly working my way into during the past 11 months and I look forward to continuing to work with Sundar, and our great team. Being CFO of one of the most important companies in the world has been the opportunity and responsibility of a lifetime. Google's Mission of advancing technology and bringing information to people throughout the world is as relevant today as it was when I worked on its IPO. Technology has been a catalyst for economic growth throughout human history. The people on this call know that if a technological advancement is not the focus of every business and government, they will be left behind. Underpinning this is the need for sound and responsible investment. That has never been more important than today and certainly, that is Google and Alphabet's focus. I want to end by thanking Googlers around the world for the innovation and commitment that has enabled us to deliver such extraordinary products and services globally. I also want to thank our investors and analysts for your long-term support and your feedback. Thank you. Sundar, Philipp and I will now take your questions.","evidence_gemma_new":"Operating income","evidence_llama_3_3":"operating income second quarter","evidence_qwen_3_30b":"operating income second quarter","gemma_new_max":27400000000.0,"gemma_new_min":27400000000.0,"llama_3_3_max":27400000000.0,"llama_3_3_min":27400000000.0,"qwen_3_30b_max":27400000000.0,"qwen_3_30b_min":27400000000.0}
{"symbol":"GOOGL","year":2024,"quarter":4,"date":"2024-Q4","chunk_id":4,"sub_chunk_id":0,"centroid_label":"operating income","agreed_value":31000000000.0,"count":2,"chunk":"Anat Ashkenazi: Thank you, Philipp. We're pleased with the continued momentum we're seeing across the business as Alphabet revenue for 2024 reached $350 billion, up 14% on a reported basis and 15% in constant currency versus 2023. My comments will focus on year-over-year comparisons for the fourth quarter, unless I state otherwise. I will start with the results at the Alphabet level and we'll then cover our segment results. I'll end with some commentary and expectations over the first quarter and full year 2025. We had another strong quarter in Q4 with robust momentum across the business. Consolidated revenue of $96.5 billion, increased by 12% in both reported and constant currency. Search remained the largest contributor to revenue growth, followed by Cloud. Total cost of revenue was $40.6 billion, up 8%. Tech was $14.8 billion, up 6%. We continue to see a revenue mix shift with Google Search growing at double-digit levels, while network revenues, which have a much higher tech rate, declined. Other cost of revenue was $25.8 billion, up 9%, with the increase primarily driven by content acquisitions costs, primarily for YouTube, followed by depreciation, due to increasing investments in our technical infrastructure. Growth in content acquisition and depreciation were partially offset by our year-over-year decline in hardware costs due to the shift in timing of our made-by-Google launches to the third quarter 2024 compared to the fourth quarter of 2023. In terms of total expenses, the year-over-year comparisons reflect $1.2 billion in exit charges that we took in the fourth quarter of 2023 in connection with actions to optimize our global office space. As previously disclosed, those charges were allocated across the expense lines in other costs of revenue and OpEx based on associated headcount. Total operating expenses decreased 1% to $24.9 billion. R&D investments increased by 8%, primarily driven by increase in compensation and depreciation expenses, partially offset by the impact of charges for office [ph] space optimization in the fourth quarter of 2023. Sales and marketing expenses decreased 5%, primarily reflecting the optimization charges last year, as well as declines in compensation and in ads and promotion expenses due to the timing shift of the Pixel launch from Q4 to Q3. G&A expenses declined by 15%, reflecting a shift of timing in our charitable contributions, as well as the optimization charges last year. Operating income increased 31%, the score [ph] to $31 billion, and operating margin increased to 32%, representing 4.6 points of margin expansion. Net income increased 28% to $26.5 billion, and earnings per share increased 31% to $2.15. We delivered free cash flow of $24.8 billion in the fourth quarter and $72.8 billion for the full year 2024. We ended the quarter with $96 billion in cash and marketable securities. Turning to segment results. Google Service revenues increased 10% to $84.1 billion, reflecting the strong momentum across Google Search and YouTube ads. Google Search and other advertising revenues increased by 13% to $54 billion. The robust performance of Search was once again broad-based across verticals, led by the financial service vertical due to strength in insurance, followed by retail. YouTube advertising revenue increased 14% to $10.5 billion, driven by brand, followed by direct response advertising. Network advertising revenue of $8 billion, were down 4%. In the fourth quarter, the year-over-year comparison in all of our advertising revenue lines was impacted by the increase in strength in advertising revenue in Q4 2023, in part from APAC-based retailers. Subscription platforms and device revenues increase 8% to $11.6 billion, primarily reflecting growth in subscription revenues, partially offset by the shift in timing of the launch of our made by Google devices to the third quarter, compared with the fourth quarter in 2023. We continue to have significant growth in our subscription products, primarily due to increase in the number of paid subscribers across YouTube TV, YouTube Music Premium, and Google One. With regards to Platform, we saw a slight increase in the growth rate in Play, primarily due to a strong increase in the number of buyers. Google's service operating income increased 23% to $32.8 billion, and operating margin increased from 35% to 39%, representing a meaningful margin expansion. Turning to the Google Cloud segment, which continued to deliver very strong results this quarter. Revenue increased by 30% to $12 billion in the fourth quarter, reflecting growth in GCP across core GCP products, AI infrastructure, and generative AI solutions. Once again, GCP grew at a rate that was much higher than cloud overall. Healthy Google Workspace growth was primarily driven by increase in average revenue per seat. Google Cloud operating income increased to $2.1 billion, and operating margin increased from 9.4% to 17.5%. We're pleased with the work the cloud team is doing to deliver valuable solutions to the customer and generate revenue growth, as well as its continued focus on driving efficiencies across the cloud business. As for Other Bets, for the fourth quarter, revenue were $400 million, and the operating loss was $1.2 billion. The year-over-year decline in revenue and increase in operating loss primarily reflect the milestone payment in the fourth quarter of 2023 for one of the Other Bets. Turning to Alphabet level activities, the largest component of this line is our investments in AI research and development activities which support all of Alphabet. As a reminder, Alphabet level activities have included nearly all severance charges from reductions in workforce and office space charges. In the fourth quarter of 2024, the biggest factor in year-over-year comparison is the $1.2 billion in charges in the fourth quarter of 2023, almost entirely in connection with office space optimization. With respect to CapEx, our reported CapEx in the fourth quarter was $14 billion, primarily reflecting investments in our technical infrastructure, with the largest component being investment in servers, followed by data centers, to support the growth of our business across Google Services, Google Cloud, and Google DeepMind. In Q4, we returned value to shareholders in the form of $15 billion in share purchases and $2.4 billion in dividend payments. Overall, we returned a total of nearly $70 billion to shareholders in 2024. Turning to 2025, I would like to provide some commentary on several factors that will impact our business performance in both the first quarter and the full year 2025. First in terms of revenue, I'll highlight two items that will have meaningful impact on Q1 revenue across the company. First in terms of revenues, I'll highlight two items that will have meaningful impact on Q1 revenues across the company. The first is the impact of foreign exchange rates. At the current spot rates, we expect a larger headwind to our revenues from the strengthening of the U.S dollar relative to key currencies in Q1 versus Q4 2024. Second is the impact of leap year. We expect a headwind from having one less day of revenue in Q1 2025 compared with leap year in the first quarter of 2024. As for our segments, Google Services, advertising revenue in 2025 will be impacted by lapping the strength we experience in the financial service vertical throughout 2024. And in Cloud, given the revenues are correlated with the timing of deployment of new capacity, we could see variability in cloud revenue growth rates depending on when new capacity comes online during 2025. Moving to investments, starting with our expectation for CapEx for the full year 2025. As we mentioned on the Q3 call, as we expand our AI efforts, we expect to increase our investments in capital expenditure for technical infrastructure, primarily for servers, followed by data centers and networking. We expect to invest approximately $75 billion in CapEx in 2025 with approximately $16 billion to $18 billion of debt in the first quarter. The expected total investment level may fluctuate from quarter-to-quarter, primarily due to timing of deliveries and construction schedules. In terms of expenses, first, the increase in our investment in CapEx over the past few years will increase pressure on the P&L, primarily in the form of higher depreciation. In 2024, we saw 28% year-over-year growth in depreciation as we put more technical infrastructure assets into service. Given the increase in CapEx investments over the past few years, we expect the growth rate and depreciation to accelerate in 2025. Second, we expect some headcount growth in 2025 in key investment areas such as AI and cloud. As you just heard from Sundar, we're delivering products and solutions to customer at a rapid pace, building, testing, and launching products faster than ever before. And as I mentioned on the Q3 call, we're doing that while also focusing on driving further efficiencies in how we operate the business. Before we take questions, I'd like to recap the financial results for the year. For the full year 2024, revenue grew by 14% or by $43 billion, reaching $350 billion. Google Services and Google Cloud each continue to see double-digit revenue growth coupled with margin extension. YouTube and cloud revenues combined, ended the year at $110 billion annual run rate. And in 2024, we generate total income of $112 billion, an increase of 33% from 2023. We're pleased with the momentum we're seeing in AI innovation and monetization. We've been using AI to improve the performance of our ads business for well over a decade, and Cloud is generating billions in annual revenue from AI infrastructure and generative AI solutions. We're also excited about the potential to bring new experiences to users that will provide additional opportunities for monetization. And I look forward to sharing more in our progress throughout the year. Sundar, Philipp, and I will now take your questions.","evidence_gemma_new":"Operating income","evidence_llama_3_3":"operating income fourth quarter","evidence_qwen_3_30b":null,"gemma_new_max":31000000000.0,"gemma_new_min":31000000000.0,"llama_3_3_max":31000000000.0,"llama_3_3_min":31000000000.0,"qwen_3_30b_max":null,"qwen_3_30b_min":null}
{"symbol":"GOOGL","year":2023,"quarter":1,"date":"2023-Q1","chunk_id":5,"sub_chunk_id":0,"centroid_label":"other bets revenues","agreed_value":288000000.0,"count":2,"chunk":"Ruth Porat: Thank you, Philipp. Our financial results for the first quarter reflect continued healthy fundamental growth in Search and momentum in Cloud. As I go through the discussion today, I will reference some changes to our reporting and disclosures that are covered more fully in the 8-K we filed last week. I will conclude with our outlook. For the first quarter, our consolidated revenues were $69.8 billion, up 3% or up 6% in constant currency. Search remained the largest contributor to revenue growth on a constant currency basis. In terms of expenses and profitability, year-on-year comparisons are impacted by 3 factors: first, the $2.6 billion in charges we took in the first quarter related to workforce and office space reductions. We provided a table in our earnings release that shows the impact of those charges on cost of revenues and operating expenses. Second, the adjustment we made to the estimated useful lives of servers and certain network equipment at the beginning of 2023. As you can see in our earnings release, the effect for the first quarter was a reduction in depreciation expense of $988 million. Third, the shift in timing of our annual employee stock-based compensation awards from January to March delays the step-up in SBC from Q1 to Q2. This shift in timing does not affect the total amount of SBC over the full year 2023. Total cost of revenues was $30.6 billion, up 3%, driven by other cost of revenues of $18.9 billion, which was up 7%, the biggest factor of which was compensation costs associated with data centers and other operations and followed by content acquisition costs. Operating expenses were $21.8 billion, up 19%, with a significant impact from the charges related to workforce and office space reductions. Operating income was $17.4 billion, down 13%, and our operating margin was 25%. Net income was $15.1 billion. We delivered free cash flow of $17.2 billion in the first quarter and $62 billion for the trailing 12 months. We ended the quarter with $115 billion in cash and marketable securities. Turning to our segment results. These were affected by 2 additional changes outlined in our 8-K filing. First, reflecting the increasing collaboration between DeepMind and Google Services, Google Cloud, and Other Bets, as of Q1, DeepMind is reported as part of Alphabet's unallocated corporate costs. And second, beginning in the first quarter, we updated our cost allocation methodologies to provide our business leaders with increased transparency for decision-making. In our filing, we provided a recast of prior period results for the segment for these 2 changes. The highlights of the year-on-year performance of our segments that I will review reflect these recast results. Starting with Google Services. Revenues were $62 billion, up 1%. Google Search and other advertising revenues of $40.4 billion in the quarter were up 2%. YouTube advertising revenues of $6.7 billion were down 3%. Network advertising revenues of $7.5 billion were down 8%. Other revenues were $7.4 billion, up 9%, reflecting primarily ongoing significant subscriber growth in YouTube TV and YouTube Music Premium. TAC was $11.7 billion, down 2%, primarily reflecting a mix shift between Search and Network. Google Services operating income was $21.7 billion, down 1%, and the operating margin was 35%. Turning to the Google Cloud segment. Revenues were $7.5 billion for the quarter, up 28%. Growth in GCP remained strong across geographies, industries and products. Google Workspace's strong results were driven by increases in both seats and average revenue per seat. Google Cloud had operating income of $191 million, and the operating margin was 2.6%. As to our Other Bets, for the first quarter, revenues were $288 million, and the operating loss was $1.2 billion. Turning to our outlook for the business. In terms of the operating environment, our results in the first quarter reflected ongoing headwinds due to a challenging economic environment, and the outlook remains uncertain. Foreign exchange headwinds have moderated, and we expect less of a foreign exchange headwind in the second quarter based on current spot rates. With respect to Google Services, within advertising, Q1 results reflect the resilience of Search with its unique ability to surface demand and deliver measurable ROI. Excluding the impact of foreign exchange, the revenue growth of Search was similar to last quarter. In YouTube, we saw signs of stabilization in ad spend on a sequential basis. We continue to prioritize growth in Shorts engagement where we are encouraged by progress in monetization. As to other revenues, in YouTube subscriptions, we are pleased with the significant ongoing subscriber growth in both YouTube Music Premium and YouTube TV. In Play, revenues were down year-on-year, primarily due to the continued impact of foreign exchange in APAC, although results have improved as we lapped the impact from our introduction of fee reductions last year. Turning to Google Cloud. Our investments in product innovation, our go-to-market organization and our partner ecosystem delivered strong results as customers across industries and geographies increasingly rely on Google Cloud to digitally transform their businesses. That being said, in Q1, we continued to see slower growth of consumption as customers optimized GCP costs, reflecting the macro backdrop which remains uncertain. In terms of operating performance, we remain focused on driving long-term profitable growth in Cloud while continuing to invest given the substantial opportunity. Moving to Other Bets. In the first quarter, we similarly worked to refine strategies and prioritize efforts across the portfolio, including reductions to head count. I will now walk you through an update on our efforts to reengineer our cost base, slowing the pace of operating expense growth while creating capacity for key investment areas, particularly in support of AI across the company. First, as discussed on the fourth quarter call, we have efforts underway in 3 broad categories: number one, using AI and automation to improve productivity across Alphabet for operational tasks as well as the efficiency of our technical infrastructure; number two, managing our spend with suppliers and vendors more effectively; and number three, continuing to optimize how and where we work. As we've noted previously, all 3 work streams are ramping up this year, and we plan to build on these efforts in 2024 and in subsequent years. Second, with respect to head count growth. The reported number of employees at the end of the first quarter includes almost all of the employees impacted by the workforce reduction we announced in January. We expect most of the impacted individuals will no longer be reflected in our head count by the end of the second quarter. In terms of the outlook for head count for the year, as we shared last quarter, we are meaningfully slowing the pace of hiring in 2023 while still investing in priority areas, particularly for top engineering and technical talent. In terms of our investments in AI, we are excited about the creation of Google DeepMind, combining the Brain Team from Google Research with DeepMind, with the goal to accelerate innovation and impact. Beginning in the second quarter of 2023, the costs associated with teams and activities transferred from Google Research will move from Google Services to Google DeepMind within Alphabet's unallocated corporate costs. Finally, as it relates to CapEx, for 2023, we now expect total CapEx to be modestly higher than in 2022. As discussed last quarter, CapEx this year will include a meaningful increase in technical infrastructure versus a decline in office facilities. We expect the pace of investment in both data center construction and servers to step up in the second quarter and continue to increase throughout the year. Thank you. Sundar, Philipp and I will now take your questions.","evidence_gemma_new":null,"evidence_llama_3_3":"Other Bets revenues first quarter","evidence_qwen_3_30b":"Other Bets revenues first quarter","gemma_new_max":null,"gemma_new_min":null,"llama_3_3_max":288000000.0,"llama_3_3_min":288000000.0,"qwen_3_30b_max":288000000.0,"qwen_3_30b_min":288000000.0}
{"symbol":"GOOGL","year":2023,"quarter":2,"date":"2023-Q2","chunk_id":4,"sub_chunk_id":0,"centroid_label":"other bets revenues","agreed_value":285000000.0,"count":3,"chunk":"Ruth Porat: Thank you, Philipp. Before I go into the results, first, Sundar, thank you very much for the opportunity. I'm very excited about the new role, and I look forward to it. So turning to the results. We're very pleased with our financial results for the second quarter, which reflect an acceleration of growth in Search and momentum in Cloud. My comments will be on year-over-year comparisons for the second quarter unless I state otherwise. I will start with results at the Alphabet level followed by segment results and conclude with our outlook. For the second quarter, our consolidated revenues were $74.6 billion, up 7% or up 9% in constant currency. Search remained the largest contributor to revenue growth. Total cost of revenues was $31.9 billion, up 6%, driven by other cost of revenues of $19.4 billion, which was up 8%. Growth here was driven by content acquisition costs, primarily for YouTube subscription offerings, followed by hardware costs associated with Pixel family launches in the second quarter. As noted in our earnings release, the overall increase in data center and other operations costs was partially offset by a reduction in depreciation expense due to the change in estimated useful lives we discussed last quarter. Operating expenses were $20.9 billion, up 4%. Operating income was $21.8 billion, up 12%, and our operating margin was 29%. I will cover our expense and margin performance in our outlook. Other income and expense was $65 million. Net income was $18.4 billion. We delivered free cash flow of $21.8 billion in the second quarter and $71 billion for the trailing 12 months, reflecting improved operating performance as well as the deferral of certain tax payments to the fourth quarter of 2023 as noted in our earnings release. We ended the quarter with $118 billion in cash and marketable securities. Turning to our segment results. Prior period results have been recast for 2 changes that we made as of the first quarter. First, DeepMind is now reported as part of Alphabet's unallocated corporate costs. Second, we updated our cost allocation methodologies. In the second quarter, we then combined the Brain team from Google Research with DeepMind to form Google DeepMind. Costs associated with the Brain team, which were previously included in Google Services, are now reported as part of Alphabet's unallocated corporate costs. We have not recast prior period results to reflect this additional change. Within Google Services, revenues were $66.3 billion, up 5%. Google Search and other advertising revenues of $42.6 billion in the quarter were up 5%, led by growth in retail. YouTube advertising revenues of $7.7 billion were up 4%, driven by brand advertising, followed by direct response reflecting further stabilization in spending by advertisers. Network advertising revenues of $7.9 billion were down 5%. Other revenues were $8.1 billion, up 24%, reflecting growth in YouTube non-advertising revenues, primarily from subscription growth in YouTube Music Premium and YouTube TV followed by growth in hardware revenues primarily driven by the launch of the Pixel 7a in the second quarter. Finally, Play returned to positive growth in the second quarter. TAC was $12.5 billion, up 3%. Google Services operating income was $23.5 billion, up 8%, and the operating margin was 35%. Turning to the Google Cloud segment. Revenues were $8 billion for the quarter, up 28%. GCP revenue growth remained strong across geographies, industries and products. That being said, we saw a continued moderation in the rate of consumption growth as consumers optimize their spend. Google Workspace strong revenue growth was driven by increases in both seats and average revenue per seat. Google Cloud had operating income of $395 million and the operating margin was 5%. As to our Other Bets, for the second quarter, revenues were $285 million, and the operating loss was $813 million. The decrease in operating loss was primarily driven by a reduction in valuation-based compensation liabilities related to certain Other Bets. Turning to our outlook for the business. With respect to Google Services, first, within advertising. We were pleased with the acceleration of Search advertising revenue growth in the second quarter. Our continued ability to generate sustained growth reflects our unparalleled engineering innovation that creates extraordinary experiences for users and capabilities for advertisers and delivered with the deep expertise of our go-to-market team. And in YouTube, we saw ongoing signs of stabilization in advertiser spending. We are prioritizing product focus on increasing quality consumption of video content with both Shorts and in the living room, which is translating into improved monetization. Second, within other revenues. In our YouTube subscription products, the sustained, strong growth in revenues reflects significant subscriber growth. You may have seen that last week, we increased subscription prices for YouTube Music and Premium, which underscores the value of the products. Strong year-on-year growth in hardware revenues was due, in large part, to a timing change given the Pixel 7a was launched in the second quarter, whereas the Pixel 6a launch occurred in the third quarter last year. Looking ahead, the launch timing change will be a headwind to hardware revenue growth in the third quarter. Play returned to positive growth in the second quarter, driven primarily by a solid increase in the number of buyers. Turning to Google Cloud. We are particularly excited about the customer interest in our AI-optimized infrastructure, our large language models, our AI platform services and our new generative AI offerings such as Duet AI for Google Workspace, although we are still clearly in the early days. At the same time, we continue to experience headwinds in the second quarter for moderation in consumption growth as customers optimize their spend. We continue to invest aggressively while remaining focused on profitable growth. In terms of expenses and profitability, we remain very focused on durably reengineering our cost base. Most evident to date are the actions we have taken to reduce the pace of headcount growth, including the workforce reductions we announced in the first quarter and a slower pace of organic hiring, in part given our focus on reallocating talent from within to fuel our growth priorities. A quick comment on the sequential improvement in operating margins in the second quarter. There are 2 factors to note. First, the benefit from an acceleration in search advertising revenue growth in the second quarter. Second, the vast majority of the charges related to our workforce reduction and optimization of our global office space were taken in Q1. Finally, as it relates to CapEx, in Q2, the largest component was for servers, which included a meaningful increase in our investments in AI compute. The sequential step-up in the second quarter was lower than anticipated for 2 reasons. First, with respect to office facilities, we continue to moderate the pace of fit-outs and ground-up construction to reflect the slower expected pace of headcount growth. Second, there were delays in certain data center construction projects. We expect elevated levels of investment in our technical infrastructure increasing through the back half of 2023 and continuing to grow in 2024. The primary driver is to support the opportunities we see in AI across Alphabet, including investments in GPUs and proprietary TPUs as well as data center capacity. With all that said, we remain committed to durably reengineering our cost base in order to help create capacity for these investments in support of long-term, sustainable financial value. Thank you. Sundar, Philipp and I will now take your questions.","evidence_gemma_new":"Other Bets revenues","evidence_llama_3_3":"Other Bets revenues second quarter","evidence_qwen_3_30b":"Other Bets revenues second quarter","gemma_new_max":285000000.0,"gemma_new_min":285000000.0,"llama_3_3_max":285000000.0,"llama_3_3_min":285000000.0,"qwen_3_30b_max":285000000.0,"qwen_3_30b_min":285000000.0}
{"symbol":"GOOGL","year":2023,"quarter":3,"date":"2023-Q3","chunk_id":4,"sub_chunk_id":0,"centroid_label":"other bets revenues","agreed_value":297000000.0,"count":2,"chunk":"Ruth Porat: Thank you, Philipp. We are very pleased with our financial results for the third quarter, driven by meaningful growth in Search and YouTube and momentum in Cloud. My comments will be on year-over-year comparisons for the third quarter, unless I state otherwise. I will start with results at the Alphabet level followed by segment results and conclude with our outlook. For the third quarter, our consolidated revenues were $76.7 billion, up 11% in both reported and constant currency. Search remained the largest contributor to revenue growth. In terms of expenses, total cost of revenues was $33.2 billion, up 7%, primarily reflecting other cost of revenues of $20.6 billion, which was up 6%. Growth here was primarily driven by content acquisition costs mainly for YouTube subscription offerings. As noted in our earnings release, the overall increase in data center and other operations costs was partially offset by a reduction in depreciation expense due to the change in estimated useful lives we made starting in the first quarter of the year. Operating expenses were $22.1 billion, up 6% reflecting the following. First, an increase in R&D expenses, driven primarily by compensation. Second, an increase in G&A expenses, reflecting the impact of charges related to legal matters. And finally, sales and marketing expenses, which were relatively flat to last year. Operating income was $21.3 billion, up 25%, and our operating margin was 28%. Other income and expense was a loss of $146 million. Net income was $19.7 billion. This reflects an effective tax rate of 7% in the third quarter from an IRS change related to the use of foreign tax credits, which had an outsized impact on the third quarter rate because the change resulted in a catch-up for prior periods. We delivered free cash flow of $22.6 billion in the third quarter and $78 million for the trailing 12 months. We ended the quarter with $120 billion in cash and marketable securities. As a reminder, our cash balance and free cash flow in the second and third quarters benefited from the deferral of certain tax payments to the fourth quarter of 2023. As noted in our earnings release, on October 16, we made an estimated tax payment of $10.5 billion related to this deferral, which will be reflected in our cash balance and free cash flow in the fourth quarter. Turning to segment results. Within Google Services, revenues were $68 billion, up 11%. Google Search and other advertising revenues of $44 billion in the quarter were up 11%, led again by growth in retail. YouTube advertising revenues of $8 billion were up 12%, driven by both brand advertising and direct response. Network advertising revenues of $7.7 billion were down 3%. Other revenues were $8.3 billion, up 21%, primarily reflecting growth in YouTube non-advertising revenues driven by subscriber growth in YouTube TV followed by YouTube Music Premium. TAC was $12.6 billion, up 7%. Google Services operating income was $23.9 billion, up 27% and the operating margin was 35%. Turning to the Google Cloud segment. Revenues were $8.4 billion for the quarter, up 22%. GCP revenue growth remained strong across geographies, industries and products, although the Q3 year-on-year growth rate reflects the impact of customer optimization efforts. Google Workspace also delivered strong revenue growth, primarily driven by increases in average revenue per seat. Google Cloud had operating income of $266 million, and the operating margin was 3%. As to our Other Bets, for the third quarter, revenues were $297 million and the operating loss was $1.2 billion. Turning to our outlook for the business. With respect to Google Services. First, within advertising. After a period of historic volatility, we were pleased with the year-on-year revenue growth of Search and YouTube advertising in the third quarter. Second, within other revenues, in our YouTube subscription products the substantial growth in revenues primarily reflects subscriber growth. Looking ahead, a full quarter of NFL Sunday Ticket revenues as well as associated content acquisition costs will be reflected in Q4 results compared to only a few weeks in the third quarter. Play had growth in the third quarter, driven primarily by an increase in the number of buyers. With respect to hardware, there is a headwind to revenues in the fourth quarter, reflecting efforts to optimize the portfolio with tighter targeting of our go-to-market investments as well as the ongoing impact from the difference in launch timing for the Pixel 6a and 7a that we mentioned last quarter. Turning to Google Cloud. We are pleased with the ongoing customer engagement with GCP and Workspace and the potential benefit of our AI solutions including infrastructure and services such as Vertex AI and Duet. We continue to invest aggressively given the significant potential we see while remaining focused on profitable growth. In terms of expenses and profitability, we're pleased with our operating performance. As we have repeatedly stressed, we remain focused on durably reengineering our cost base to create investment capacity to support our growth priorities, most important of which is with AI. We have a number of workstreams in place. First, we are maintaining a slower pace of headcount growth, reflecting product prioritization and reallocation of talent to support our most important growth opportunities. Second, we remain focused on optimizing our real estate footprint, including how and where we work to reduce our expense growth. As you can see from our earnings release, we incurred $207 million in accelerated rent and depreciation in the third quarter related to these actions. Third, we have engineering work streams underway to improve productivity across Alphabet. Given the magnitude of investment in our technical infrastructure, we have a superb team focused on efficiency of our operations there. We are also making progress in streamlining operations across Alphabet through the use of AI. Finally, there are ongoing workstreams that are improving the efficiency of our spend with suppliers and vendors through our central procurement organization. And to be clear, across the portfolio of other bet companies, we have also been working to identify opportunities to create sharper focus and to operate more efficiently and effectively. With respect to sequential quarter-on-quarter trends, two further points. First, cost of sales in the fourth quarter will reflect both higher hardware costs given Pixel family launches as well as increased CAC for YouTube as previously noted. Second, as usual, we expect sales and marketing expenses to be more heavily weighted to the end of the year, in part to support product launches in the holiday season. Finally, our reported CapEx in Q3 was $8 billion, driven overwhelmingly by investment in our technical infrastructure with the largest component for servers, followed by data centers, reflecting a meaningful increase in our investments in AI compute. The growth in reported cash CapEx in Q3 is somewhat muted due to the timing of supplier payments, which can cause variability from quarter-to-quarter. We continue to invest meaningfully in the technical infrastructure needed to support the opportunities we see in AI across Alphabet and expect elevated levels of investment, increasing in the fourth quarter of 2023 and continuing to grow in 2024. In closing, we remain very excited about the opportunities ahead and committed to deliver sustainable financial value. Thank you. Sundar, Philipp and I will now take your questions.","evidence_gemma_new":"Other Bets revenues","evidence_llama_3_3":"Other Bets revenues third quarter","evidence_qwen_3_30b":null,"gemma_new_max":297000000.0,"gemma_new_min":297000000.0,"llama_3_3_max":297000000.0,"llama_3_3_min":297000000.0,"qwen_3_30b_max":null,"qwen_3_30b_min":null}
{"symbol":"GOOGL","year":2024,"quarter":1,"date":"2024-Q1","chunk_id":4,"sub_chunk_id":0,"centroid_label":"other bets revenues","agreed_value":495000000.0,"count":3,"chunk":"Ruth Porat: Thank you, Philipp. We are very pleased with our financial results for the first quarter driven, in particular, by strength in Search and Cloud as well as the ongoing efforts to durably reengineer our cost base. My comments will be on year-over-year comparisons for the first quarter unless I state otherwise. I will start with results at the Alphabet level, followed by segment results and conclude with our outlook. For the first quarter, our consolidated revenues were $80.5 billion, up 15% or up 16% in constant currency. Search remained the largest contributor to revenue growth. In terms of total expenses, the year-on-year comparisons reflect the impact of the restructuring charges we took in the first quarter of 2023 of $2.6 billion as well as the $716 million in employee severance and related charges in the first quarter of 2024. As you can see in our earnings release, these charges were allocated across the expense lines in other cost of revenues and OpEx based on associated head count. To help with year-on-year comparisons, we included a table in our earnings release to adjust other cost of revenues, operating expenses, operating income, and operating margin to exclude the impact of severance and related office space charges in the first quarter of 2023 versus 2024. In terms of expenses, total cost of revenues was $33.7 billion, up 10%. Other cost of revenues was $20.8 billion, up 10% on a reported basis, with the increase driven primarily by content acquisition costs associated with YouTube given the very strong revenue growth in both subscription offerings and ad-supported content. On an adjusted basis, other cost of revenues were up 13% year-on-year. Operating expenses were $21.4 billion, down 2% on a reported basis, primarily reflecting expense decreases in sales and marketing and G&A, offset by an increase in R&D. The largest single factor in the year-on-year decline in G&A expenses was lower charges related to legal matters. On an adjusted basis, operating expenses were up 5%, reflecting, first, in R&D, an increase in compensation expense, primarily for Google DeepMind and Cloud; and second, in sales and marketing, a slight increase year-on-year, reflecting increases in compensation expense primarily for Cloud sales. Operating income was $25.5 billion, up 46% on a reported basis, and our operating margin was 32%. On an adjusted basis, operating income was up 31%, and our operating margin was 33%. Net income was $23.7 billion and EPS was $1.89. We delivered free cash flow of $16.8 billion in the first quarter and $69.1 billion for the trailing 12 months. We ended the quarter with $108 billion in cash and marketable securities. Turning to segment results. Within Google Services, revenues were $70.4 billion, up 14%. Google Search and other advertising revenues of $46.2 billion in the quarter were up 14% led again by growth in retail. YouTube advertising revenues of $8.1 billion were up 21% driven by both direct response and brand advertising. Network advertising revenues of $7.4 billion were down 1%. Subscriptions, platforms and devices revenues were $8.7 billion, up 18%, primarily reflecting growth in YouTube subscription revenues. TAC was $12.9 billion, up 10%. Google Services operating income was $27.9 billion, up 28%. And the operating margin was 40%. Turning to the Google Cloud segment. Revenues were $9.6 billion for the quarter, up 28%, reflecting significant growth in GCP with an increasing contribution from AI and strong Google Workspace growth, primarily driven by increases in average revenue per seat. Google Cloud delivered operating income of $900 million and an operating margin of 9%. As to our Other Bets, for the first quarter, revenues were $495 million, benefiting from a milestone payment in one of the Other Bets. The operating loss was $1 billion. Turning to our outlook for the business. With respect to Google Services, first, within Advertising, we are very pleased with the momentum of our Ads businesses. Search had broad-based strength across verticals. In YouTube, we had acceleration in revenue growth driven by brand and direct response. Looking ahead, two points to call out: first, results in our advertising business in Q1 continued to reflect strength in spend from APAC-based retailers, a trend that began in the second quarter of 2023 and continued through Q1, which means we will begin lapping that impact in the second quarter; second, the YouTube acceleration in revenue growth in Q1 reflects, in part, lapping the negative year-on-year growth we experienced in the first quarter of 2023. Turning to subscriptions, platforms, and devices. We continue to deliver significant growth in our subscriptions business, which drives the majority of revenue growth in this line. The sequential quarterly decline in year-on-year revenue growth for the line in Q1 versus Q4 reflects, in part, the fact that we had only 1 week of Sunday Ticket subscription revenue in Q1 versus 14 weeks in Q4. Looking forward, we will anniversary last year's price increase in YouTube TV starting in May. With regard to platforms, we are pleased with the performance in Play driven by an increase in buyers. With respect to Google Cloud, performance in Q1 reflects strong demand for our GCP infrastructure and solutions as well as the contribution from our Workspace productivity tools. The growth we are seeing across Cloud is underpinned by the benefit AI provides for our customers. We continue to invest aggressively while remaining focused on profitable growth. As we look ahead, two points that will affect sequential year-on-year revenue growth comparisons across Alphabet: first, Q1 results reflect the benefit of leap year, which contributed slightly more than 1 point to our revenue growth rate at the consolidated level in the first quarter; second, at current spot rates, we expect a larger headwind from foreign exchange in Q2 versus Q1. Turning to margins. Our efforts to durably reengineer our cost base are reflected in a 400 basis point expansion of our Alphabet operating margin year-on-year, excluding the impact of restructuring and severance charges in both periods. You can also see the impact in the quarter-on-quarter decline in head count in Q1, which reflects both actions we have taken over the past few months and a much slower pace of hiring. As we have discussed previously, we are continuing to invest in top engineering and technical talent, particularly in Cloud, Google DeepMind and technical infrastructure. Looking ahead, we remain focused on our efforts to moderate the pace of expense growth in order to create capacity for the increases in depreciation and expenses associated with the higher levels of investment in our technical infrastructure. We believe these efforts will enable us to deliver full year 2024 Alphabet operating margin expansion relative to 2023. With respect to CapEx, our reported CapEx in the first quarter was $12 billion, once again driven overwhelmingly by investment in our technical infrastructure, with the largest component for servers followed by data centers. The significant year-on-year growth in CapEx in recent quarters reflects our confidence in the opportunities offered by AI across our business. Looking ahead, we expect quarterly CapEx throughout the year to be roughly at or above the Q1 level, keeping in mind that the timing of cash payments can cause variability in quarterly reported CapEx. With regard to Other Bets, we similarly have work streams underway to enhance overall returns. Finally, as I trust you saw in the press release, we are very pleased to be adding a quarterly dividend of $0.20 per share to our capital return program as well as a new $70 billion authorization in share repurchases. The core of our capital allocation framework remains the same, beginning with investing aggressively in our business as you have heard us talk about today. Given the extraordinary opportunities ahead, we view the introduction of the dividend as further strengthening our overall capital return program. Thank you. Sundar, Philipp, and I will now take your questions.","evidence_gemma_new":"Other Bets revenues","evidence_llama_3_3":"Other Bets revenues first quarter","evidence_qwen_3_30b":"Other Bets revenues","gemma_new_max":495000000.0,"gemma_new_min":495000000.0,"llama_3_3_max":495000000.0,"llama_3_3_min":495000000.0,"qwen_3_30b_max":495000000.0,"qwen_3_30b_min":495000000.0}
{"symbol":"GOOGL","year":2024,"quarter":2,"date":"2024-Q2","chunk_id":4,"sub_chunk_id":0,"centroid_label":"other bets revenues","agreed_value":365000000.0,"count":2,"chunk":"Ruth Porat : Thank you, Philipp, and thanks, Sundar, for those kind words. We had another strong quarter, driven in particular by performance in Search and Cloud, as well as the ongoing efforts to durably reengineer our cost base. My comments will be on year-over-year comparisons for the second quarter unless I state otherwise. I will start with results at the Alphabet level followed by segment results and conclude with our outlook. For the second quarter, our consolidated revenues were $84.7 billion, up 14% or up 15% in constant currency. Search remained the largest contributor to revenue growth. In terms of expenses, total cost of revenues was $35.5 billion, up 11%. Other cost of revenues was $22.1 billion, up 14%, with the increase driven primarily by content acquisition costs, followed by depreciation as well as the impact of the Canadian digital services tax, which was applied retroactively. Operating expenses were $21.8 billion up 5%, primarily reflecting an increase in R&D partially offset by a decline in G&A with sales and marketing essentially flat to the second quarter last year. The increase in R&D was driven primarily by compensation which was affected by lapping a reduction in valuation-based compensation liabilities in certain other bets in the second quarter last year followed by depreciation. The largest single factor in the year-on-year decline in G&A expenses was lower charges related to legal matters. Operating income was $27.4 billion, up 26% and our operating margin was 32%. Net income was $23.6 billion and EPS was $1.89. We delivered free cash flow of $13.5 billion in the second quarter and $60.8 billion for the trailing 12 months. As a reminder, last year, we had a timing benefit in the second and third quarters from a $10.5 billion deferred cash tax payment made in the fourth quarter, which depressed reported free cash flow growth this quarter, and we'll do so again next quarter. We ended the quarter with $101 billion in cash and marketable securities. Turning to segment results. Within Google Services, revenues were $73.9 billion, up 12%. Google Search and other advertising revenues of $48.5 billion in the quarter were up 14%, led again by growth in retail, followed by the financial services vertical. YouTube advertising revenues of $8.7 billion were up 13% driven by brand followed by direct response advertising. Network advertising revenues of $7.4 billion were down 5%. Subscription platforms and devices revenues were $9.3 billion up 14%, primarily reflecting growth in YouTube subscription revenues. TAC was $13.4 billion, up 7%. Google Services operating income was $29.7 billion up 27% and the operating margin was 40%. Turning to the Google Cloud segment. Revenues were $10.3 billion for the quarter, up 29%, reflecting first significant growth in GCP, which was above growth for cloud overall and includes an increasing contribution from AI. And second, strong Google Workspace growth, primarily driven by increases in average revenue per seat. Google Cloud delivered operating income of $1.2 billion and an operating margin of 11%. As to our Other Bets for the second quarter, revenues were $365 million and the operating loss was $1.1 billion. Turning to our outlook for the business. With respect to Google Services, First, within advertising. The strong performance of search was broad-based across verticals. In YouTube, we are pleased with the growth in the quarter. We had healthy watch time growth continued to close the monetization gap in Shorts and had continued momentum in Connected TV, with brand benefiting in part from an ongoing shift in budgets from linear television to digital. As we look forward to the third quarter, we will be lapping the increasing strength in advertising revenues in the second half of 2023, in part from APAC based retailers. Turning to subscriptions, platforms and devices. First, we continue to have significant growth in our subscriptions business which drives the majority of revenue growth in this line. However, there was a sequential decline in the year-on-year growth rate, as we anniversaried the impact of a price increase for YouTubeTV in the second quarter last year. The impact will persist through the balance of the year. Second, with regard to platforms. We are pleased with the performance in play driven by an increase in buyers. Finally, with respect to devices. The most important point as we look forward is that our Made by Google launches have been pulled forward into the third quarter from the fourth quarter last year benefiting revenues in Q3 this year. Turning to cloud, which continued to deliver very strong results. For the first time, Cloud crossed $10 billion in quarterly revenues and $1 billion in quarterly operating profit. As Sundar noted year-to-date, our AI infrastructure and generative AI solutions for cloud customers have already generated billions in revenues and are being used by more than 2 million developers. We're particularly encouraged that the majority of our top 100 customers are already using our generative AI solutions. We continue to invest aggressively in the business. Turning to margins. The margin expansion in Q2 versus last year reflects our ongoing efforts to durably reengineer our cost base, as well as revenue strength. Our leadership team remains focused on our efforts to moderate the pace of expense growth in order to create capacity for the increases in depreciation and expenses associated with the higher levels of investment in our technical infrastructure. Once again headcount declined quarter-on-quarter, which reflects both actions we have taken in the first half of the year and a much slower pace of hiring. Looking ahead, we expect a slight increase in headcount in the third quarter, as we bring on new graduates. As we have discussed previously, we\u2019re continuing to invest in top engineering and technical talent, particularly in cloud and technical infrastructure. Looking forward, we continue to expect to deliver full-year 2024 Alphabet operating margin expansion relative to 2023. However, in the third quarter operating margins will reflect the impact of both the increases in depreciation and expenses associated with the higher levels of investment in our technical infrastructure, as well as the increase in cost of revenues due to the pull-forward of hardware launches into Q3. With respect to CapEx, our reported CapEx in the second quarter was $13 billion, once again driven overwhelmingly by investment in our technical infrastructure with the largest component for servers followed by data centers. Looking ahead, we continue to expect quarterly CapEx throughout the year to be roughly at or above the Q1 CapEx of $12 billion keeping in mind that the timing of cash payments can cause variability in quarterly reported CapEx. With regard to other bets, we continue to focus on improving overall efficiencies, as we invest for long-term returns. Waymo is an important example of this, with its technical leadership coupled with progress on operational performance. As you will see in the 10-Q, we have chosen to commit to a new multi-year investment of $5 billion. This new round of funding, which is consistent with recent annual investment levels will enable Waymo to continue to build the world's leading autonomous driving technology company. To close, this is my 56th and last earnings call, 37 of them at Alphabet. So I have a few closing thoughts of gratitude. I've been so proud to be at Google and Alphabet as CFO and to work with some of the smartest people in the world every day. I think, we have accomplished a lot in the last nine plus years, and I am confident that progress will continue. Of course, I'm not going far and I'm honored to have my new role, which I've been slowly working my way into during the past 11 months and I look forward to continuing to work with Sundar, and our great team. Being CFO of one of the most important companies in the world has been the opportunity and responsibility of a lifetime. Google's Mission of advancing technology and bringing information to people throughout the world is as relevant today as it was when I worked on its IPO. Technology has been a catalyst for economic growth throughout human history. The people on this call know that if a technological advancement is not the focus of every business and government, they will be left behind. Underpinning this is the need for sound and responsible investment. That has never been more important than today and certainly, that is Google and Alphabet's focus. I want to end by thanking Googlers around the world for the innovation and commitment that has enabled us to deliver such extraordinary products and services globally. I also want to thank our investors and analysts for your long-term support and your feedback. Thank you. Sundar, Philipp and I will now take your questions.","evidence_gemma_new":"Other Bets revenues","evidence_llama_3_3":"Other Bets revenues second quarter","evidence_qwen_3_30b":null,"gemma_new_max":365000000.0,"gemma_new_min":365000000.0,"llama_3_3_max":365000000.0,"llama_3_3_min":365000000.0,"qwen_3_30b_max":null,"qwen_3_30b_min":null}
{"symbol":"GOOGL","year":2024,"quarter":3,"date":"2024-Q3","chunk_id":4,"sub_chunk_id":0,"centroid_label":"other bets revenues","agreed_value":388000000.0,"count":3,"chunk":"Anat Ashkenazi: Thank you, Philipp. And thanks, Sundar, for the words of welcome. My comments will focus on year-over-year comparisons for the third quarter, unless I state otherwise. I will start with the results at the Alphabet level and will then cover our segment results. I'll end with high-level commentary on investment at the Alphabet level. We had another strong quarter in Q3 with robust momentum across the business. Consolidated revenue increased by 15% or 16% in constant currency. Search remained the largest contributor to revenue growth, followed by a robust 35% growth in cloud. Total cost of revenue was $36.5 billion, up 10%. Tech was $13.7 billion, up 9%. We continue to see a revenue mix shift with Google Search growing at double-digit levels, while network revenue, which have a much higher TAC rate declined. Other cost of revenue was $22.8 billion, up 11%, with the increase primarily driven by content acquisition costs, primarily for YouTube, an increase in depreciation associated with higher level of investment in our technical infrastructure and higher hardware costs associated with the pull forward of our Made by Google launches from the fourth to the third quarter. Total operating expenses increased 5% to $23.3 billion. The increase was primarily driven by facilities-related charges as results of actions were taken to further optimize our office space footprint globally, followed by depreciation, partially offset by year-on-year decline in charges for legal and other matters. R&D investments increased by 11%, primarily driven by increases in compensation and depreciation expenses. Sales and marketing expenses increased 5%, primarily reflecting investment in advertising and promotional efforts related to the Made by Google launches, as well as for AI and Gemini. G&A expenses declined by 10%, primarily due to lower charges for legal and other matters. Operating income increased 34% to $28.5 billion and operating margin increased to 32%. Net income increased 34% to $26.3 billion and earnings per share increased 37% to $2.12. We're pleased with the progress we're making in reengineering our cost structure, which is reflected in our operating margin expansion this quarter, while also continuing to invest in the business to bring innovation to consumers, creators and enterprises. We delivered free cash flow of $17.6 billion for the third quarter and $55.8 billion for the trailing 12 months. Year-on-year free cash flow was negatively impacted by the following items. In 2023, we deferred cash tax payments from the second and third quarter to the fourth quarter. And in Q3 2024, we made a $3 billion cash payment related to the 2017 EC shopping fine. We ended the quarter with $93 billion in cash and marketable securities. Now turning to segment results. Google Services revenue increased 13% to $76.5 billion. Google Search and other advertising revenue increased by 12% to $49.4 billion. The robust performance of search was broad-based across verticals, led by the financial services vertical due to strength in insurance followed by retail. YouTube advertising revenue increased 12% to $8.9 billion, driven by brand, followed by direct response advertising. As Philipp mentioned, we're seeing strong momentum in YouTube, including robust growth in watch time across the platform and are excited about the new features and products we're bringing to creators. Network advertising revenue of $7.5 billion were down 2%. In the third quarter, the year-on-year growth in all our advertising revenue lines was impacted by the increase in strength in advertising revenue in Q3 of last year, in part from APAC-based retailers. Subscription platforms and devices revenue increased 28% to $10.7 billion, reflecting growth in subscription revenues, as well as the launch of our Made by Google devices in the third quarter. We continue to have significant growth in our subscription products, driven primarily by YouTube TV and YouTube Music Premium, as well as Google One, primarily due to increases in the number of paid subscribers. With regards to platforms, we're pleased with the performance in play, primarily driven by an increase in buyers. Google Service operating income increased by 29% to $30.9 billion, and operating margin was 40%. Turning to the Google Cloud segment, which continued to deliver very strong results this quarter. Revenue increased by 35% to $11.4 billion in the third quarter, reflecting accelerated growth in GCP across AI infrastructure, generative AI solutions and core GCP products. Once again, GCP grew at a rate that was higher than cloud overall. We also saw strong Google Workspace growth, primarily driven by increases in average revenue per seat. As you just heard from Sundar, the robust innovation and expanded AI offerings within our cloud business are allowing existing and new customers to realize measurable business benefits, including reduced cost, greater customer engagement, faster response time and better revenue conversion. Google Cloud operating income increased to $1.9 billion and operating margin increased to 17%. The operating margin expansion was driven by strong revenue performance across cloud AI products, core GCP and Workspace, as well as ongoing efficiency initiatives. As to our Other Bets, for the third quarter revenue were $388 million and operating loss was $1.1 billion. I'll highlight just a couple of accomplishments in the quarter for Waymo and Wing. We're excited about the progress we're seeing in Waymo, as Sundar mentioned, and the increase in the number of paid rides. We're planning to continue to expand our geographic coverage and reach more customers in existing markets and new markets. Wing, our drone delivery company, recently passed the 1-year anniversary of scaling its partnership with Walmart in the Dallas-Fort Worth area, now operating in 11 stores and serving 26 different cities and towns. Turning to Alphabet level activities. The largest component of this line is our investment in AI research and development activities, which support all of Alphabet. There were two notable items that impacted the operating loss in Alphabet level activities. First, a $607 million charge related to decisions we've made to further optimize our physical footprint and office space globally; and second, our ongoing investments in AI R&D, including the full quarter effect of the organizational changes we've made in May to move some additional AI teams from Google Services to Google DeepMind. With respect to CapEx, our reported CapEx in the third quarter was $13 billion, reflecting investment in our technical infrastructure with the largest component being investment in servers, followed by data centers and networking equipment. Looking ahead, we expect quarterly CapEx in the fourth quarter to be at similar levels to Q3, keeping in mind that the timing of cash payments can cause variability in quarterly reported CapEx. Our expansion of data center capacity is expected to bring economic benefits to countries and communities where we are investing. In the third quarter alone, we made announcements of over $7 billion in planned data center investments with nearly $6 billion of that in the U.S. In Q3, we also returned value to shareholders in the form of $15.3 billion in share repurchases and $2.5 billion in dividend payments. Overall, we returned a total of nearly $70 billion over the trailing 12 months to shareholders. As we look forward, we're working to balance our investments in AI and other growth areas with the cost discipline needed to fund those activities. As we think about the remainder of 2024, there are a couple of dynamics to consider. In terms of revenue, year-on-year growth in advertising revenue will continue to be impacted by the increasing strength in advertising revenue in the second half of 2023, in part from APAC-based retailers. And there will be a headwind to year-over-year growth in subscription platforms and devices revenue in the fourth quarter due to the pull forward of our Made by Google launches into the third quarter this year. In terms of expenses, we'll continue to see increases in depreciation and expenses associated with higher level of investment in our technical infrastructure, partially offset by a slight benefit from the cost revenue associated with our devices due to the pull forward of hardware launches into Q3. Now before going into Q&A, as the new CFO, I would like to share a few thoughts on how I'm approaching and thinking through growth, cost structure and capital allocation and expect to hear more from me on these topics in the coming quarters. As I look at the business, I see opportunities for further growth propelled by AI and the underlying momentum across the business. You heard about some of these on the call today. I also believe that we are well positioned to deliver meaningful innovation, which will translate to revenue given our strength in the core pillars that are required to succeed in AI at scale. Realizing those opportunities and great innovation in AI requires global reach, which we have through our products and platforms, as well as continued meaningful capital investment. And while we have a strong balance sheet to be able to support these investments, we will be looking for efficiencies so that we can fund innovation in priority areas. Sundar, Ruth and our leadership team started important work to reengineer our cost structure including efforts such as optimizing our headcount growth, our physical footprint, improving the efficiencies of our technical infrastructure and streamlining operations across the company through the use of AI. I plan to build on these efforts, but also evaluate where we might be able to accelerate work and where we might need to pivot to free up capital for more attractive opportunities. Thank you. Sundar, Philipp and I will now take your questions.","evidence_gemma_new":"Other Bets revenue","evidence_llama_3_3":"Other Bets Revenue third quarter","evidence_qwen_3_30b":"Other Bets revenue third quarter","gemma_new_max":388000000.0,"gemma_new_min":388000000.0,"llama_3_3_max":388000000.0,"llama_3_3_min":388000000.0,"qwen_3_30b_max":388000000.0,"qwen_3_30b_min":388000000.0}
{"symbol":"GOOGL","year":2024,"quarter":4,"date":"2024-Q4","chunk_id":4,"sub_chunk_id":0,"centroid_label":"other bets revenues","agreed_value":400000000.0,"count":2,"chunk":"Anat Ashkenazi: Thank you, Philipp. We're pleased with the continued momentum we're seeing across the business as Alphabet revenue for 2024 reached $350 billion, up 14% on a reported basis and 15% in constant currency versus 2023. My comments will focus on year-over-year comparisons for the fourth quarter, unless I state otherwise. I will start with the results at the Alphabet level and we'll then cover our segment results. I'll end with some commentary and expectations over the first quarter and full year 2025. We had another strong quarter in Q4 with robust momentum across the business. Consolidated revenue of $96.5 billion, increased by 12% in both reported and constant currency. Search remained the largest contributor to revenue growth, followed by Cloud. Total cost of revenue was $40.6 billion, up 8%. Tech was $14.8 billion, up 6%. We continue to see a revenue mix shift with Google Search growing at double-digit levels, while network revenues, which have a much higher tech rate, declined. Other cost of revenue was $25.8 billion, up 9%, with the increase primarily driven by content acquisitions costs, primarily for YouTube, followed by depreciation, due to increasing investments in our technical infrastructure. Growth in content acquisition and depreciation were partially offset by our year-over-year decline in hardware costs due to the shift in timing of our made-by-Google launches to the third quarter 2024 compared to the fourth quarter of 2023. In terms of total expenses, the year-over-year comparisons reflect $1.2 billion in exit charges that we took in the fourth quarter of 2023 in connection with actions to optimize our global office space. As previously disclosed, those charges were allocated across the expense lines in other costs of revenue and OpEx based on associated headcount. Total operating expenses decreased 1% to $24.9 billion. R&D investments increased by 8%, primarily driven by increase in compensation and depreciation expenses, partially offset by the impact of charges for office [ph] space optimization in the fourth quarter of 2023. Sales and marketing expenses decreased 5%, primarily reflecting the optimization charges last year, as well as declines in compensation and in ads and promotion expenses due to the timing shift of the Pixel launch from Q4 to Q3. G&A expenses declined by 15%, reflecting a shift of timing in our charitable contributions, as well as the optimization charges last year. Operating income increased 31%, the score [ph] to $31 billion, and operating margin increased to 32%, representing 4.6 points of margin expansion. Net income increased 28% to $26.5 billion, and earnings per share increased 31% to $2.15. We delivered free cash flow of $24.8 billion in the fourth quarter and $72.8 billion for the full year 2024. We ended the quarter with $96 billion in cash and marketable securities. Turning to segment results. Google Service revenues increased 10% to $84.1 billion, reflecting the strong momentum across Google Search and YouTube ads. Google Search and other advertising revenues increased by 13% to $54 billion. The robust performance of Search was once again broad-based across verticals, led by the financial service vertical due to strength in insurance, followed by retail. YouTube advertising revenue increased 14% to $10.5 billion, driven by brand, followed by direct response advertising. Network advertising revenue of $8 billion, were down 4%. In the fourth quarter, the year-over-year comparison in all of our advertising revenue lines was impacted by the increase in strength in advertising revenue in Q4 2023, in part from APAC-based retailers. Subscription platforms and device revenues increase 8% to $11.6 billion, primarily reflecting growth in subscription revenues, partially offset by the shift in timing of the launch of our made by Google devices to the third quarter, compared with the fourth quarter in 2023. We continue to have significant growth in our subscription products, primarily due to increase in the number of paid subscribers across YouTube TV, YouTube Music Premium, and Google One. With regards to Platform, we saw a slight increase in the growth rate in Play, primarily due to a strong increase in the number of buyers. Google's service operating income increased 23% to $32.8 billion, and operating margin increased from 35% to 39%, representing a meaningful margin expansion. Turning to the Google Cloud segment, which continued to deliver very strong results this quarter. Revenue increased by 30% to $12 billion in the fourth quarter, reflecting growth in GCP across core GCP products, AI infrastructure, and generative AI solutions. Once again, GCP grew at a rate that was much higher than cloud overall. Healthy Google Workspace growth was primarily driven by increase in average revenue per seat. Google Cloud operating income increased to $2.1 billion, and operating margin increased from 9.4% to 17.5%. We're pleased with the work the cloud team is doing to deliver valuable solutions to the customer and generate revenue growth, as well as its continued focus on driving efficiencies across the cloud business. As for Other Bets, for the fourth quarter, revenue were $400 million, and the operating loss was $1.2 billion. The year-over-year decline in revenue and increase in operating loss primarily reflect the milestone payment in the fourth quarter of 2023 for one of the Other Bets. Turning to Alphabet level activities, the largest component of this line is our investments in AI research and development activities which support all of Alphabet. As a reminder, Alphabet level activities have included nearly all severance charges from reductions in workforce and office space charges. In the fourth quarter of 2024, the biggest factor in year-over-year comparison is the $1.2 billion in charges in the fourth quarter of 2023, almost entirely in connection with office space optimization. With respect to CapEx, our reported CapEx in the fourth quarter was $14 billion, primarily reflecting investments in our technical infrastructure, with the largest component being investment in servers, followed by data centers, to support the growth of our business across Google Services, Google Cloud, and Google DeepMind. In Q4, we returned value to shareholders in the form of $15 billion in share purchases and $2.4 billion in dividend payments. Overall, we returned a total of nearly $70 billion to shareholders in 2024. Turning to 2025, I would like to provide some commentary on several factors that will impact our business performance in both the first quarter and the full year 2025. First in terms of revenue, I'll highlight two items that will have meaningful impact on Q1 revenue across the company. First in terms of revenues, I'll highlight two items that will have meaningful impact on Q1 revenues across the company. The first is the impact of foreign exchange rates. At the current spot rates, we expect a larger headwind to our revenues from the strengthening of the U.S dollar relative to key currencies in Q1 versus Q4 2024. Second is the impact of leap year. We expect a headwind from having one less day of revenue in Q1 2025 compared with leap year in the first quarter of 2024. As for our segments, Google Services, advertising revenue in 2025 will be impacted by lapping the strength we experience in the financial service vertical throughout 2024. And in Cloud, given the revenues are correlated with the timing of deployment of new capacity, we could see variability in cloud revenue growth rates depending on when new capacity comes online during 2025. Moving to investments, starting with our expectation for CapEx for the full year 2025. As we mentioned on the Q3 call, as we expand our AI efforts, we expect to increase our investments in capital expenditure for technical infrastructure, primarily for servers, followed by data centers and networking. We expect to invest approximately $75 billion in CapEx in 2025 with approximately $16 billion to $18 billion of debt in the first quarter. The expected total investment level may fluctuate from quarter-to-quarter, primarily due to timing of deliveries and construction schedules. In terms of expenses, first, the increase in our investment in CapEx over the past few years will increase pressure on the P&L, primarily in the form of higher depreciation. In 2024, we saw 28% year-over-year growth in depreciation as we put more technical infrastructure assets into service. Given the increase in CapEx investments over the past few years, we expect the growth rate and depreciation to accelerate in 2025. Second, we expect some headcount growth in 2025 in key investment areas such as AI and cloud. As you just heard from Sundar, we're delivering products and solutions to customer at a rapid pace, building, testing, and launching products faster than ever before. And as I mentioned on the Q3 call, we're doing that while also focusing on driving further efficiencies in how we operate the business. Before we take questions, I'd like to recap the financial results for the year. For the full year 2024, revenue grew by 14% or by $43 billion, reaching $350 billion. Google Services and Google Cloud each continue to see double-digit revenue growth coupled with margin extension. YouTube and cloud revenues combined, ended the year at $110 billion annual run rate. And in 2024, we generate total income of $112 billion, an increase of 33% from 2023. We're pleased with the momentum we're seeing in AI innovation and monetization. We've been using AI to improve the performance of our ads business for well over a decade, and Cloud is generating billions in annual revenue from AI infrastructure and generative AI solutions. We're also excited about the potential to bring new experiences to users that will provide additional opportunities for monetization. And I look forward to sharing more in our progress throughout the year. Sundar, Philipp, and I will now take your questions.","evidence_gemma_new":null,"evidence_llama_3_3":"Other Bets revenue fourth quarter","evidence_qwen_3_30b":"Other Bets revenue Q4","gemma_new_max":null,"gemma_new_min":null,"llama_3_3_max":400000000.0,"llama_3_3_min":400000000.0,"qwen_3_30b_max":400000000.0,"qwen_3_30b_min":400000000.0}
{"symbol":"GOOGL","year":2023,"quarter":3,"date":"2023-Q3","chunk_id":4,"sub_chunk_id":0,"centroid_label":"other cost of revenues","agreed_value":8300000000.0,"count":2,"chunk":"Ruth Porat: Thank you, Philipp. We are very pleased with our financial results for the third quarter, driven by meaningful growth in Search and YouTube and momentum in Cloud. My comments will be on year-over-year comparisons for the third quarter, unless I state otherwise. I will start with results at the Alphabet level followed by segment results and conclude with our outlook. For the third quarter, our consolidated revenues were $76.7 billion, up 11% in both reported and constant currency. Search remained the largest contributor to revenue growth. In terms of expenses, total cost of revenues was $33.2 billion, up 7%, primarily reflecting other cost of revenues of $20.6 billion, which was up 6%. Growth here was primarily driven by content acquisition costs mainly for YouTube subscription offerings. As noted in our earnings release, the overall increase in data center and other operations costs was partially offset by a reduction in depreciation expense due to the change in estimated useful lives we made starting in the first quarter of the year. Operating expenses were $22.1 billion, up 6% reflecting the following. First, an increase in R&D expenses, driven primarily by compensation. Second, an increase in G&A expenses, reflecting the impact of charges related to legal matters. And finally, sales and marketing expenses, which were relatively flat to last year. Operating income was $21.3 billion, up 25%, and our operating margin was 28%. Other income and expense was a loss of $146 million. Net income was $19.7 billion. This reflects an effective tax rate of 7% in the third quarter from an IRS change related to the use of foreign tax credits, which had an outsized impact on the third quarter rate because the change resulted in a catch-up for prior periods. We delivered free cash flow of $22.6 billion in the third quarter and $78 million for the trailing 12 months. We ended the quarter with $120 billion in cash and marketable securities. As a reminder, our cash balance and free cash flow in the second and third quarters benefited from the deferral of certain tax payments to the fourth quarter of 2023. As noted in our earnings release, on October 16, we made an estimated tax payment of $10.5 billion related to this deferral, which will be reflected in our cash balance and free cash flow in the fourth quarter. Turning to segment results. Within Google Services, revenues were $68 billion, up 11%. Google Search and other advertising revenues of $44 billion in the quarter were up 11%, led again by growth in retail. YouTube advertising revenues of $8 billion were up 12%, driven by both brand advertising and direct response. Network advertising revenues of $7.7 billion were down 3%. Other revenues were $8.3 billion, up 21%, primarily reflecting growth in YouTube non-advertising revenues driven by subscriber growth in YouTube TV followed by YouTube Music Premium. TAC was $12.6 billion, up 7%. Google Services operating income was $23.9 billion, up 27% and the operating margin was 35%. Turning to the Google Cloud segment. Revenues were $8.4 billion for the quarter, up 22%. GCP revenue growth remained strong across geographies, industries and products, although the Q3 year-on-year growth rate reflects the impact of customer optimization efforts. Google Workspace also delivered strong revenue growth, primarily driven by increases in average revenue per seat. Google Cloud had operating income of $266 million, and the operating margin was 3%. As to our Other Bets, for the third quarter, revenues were $297 million and the operating loss was $1.2 billion. Turning to our outlook for the business. With respect to Google Services. First, within advertising. After a period of historic volatility, we were pleased with the year-on-year revenue growth of Search and YouTube advertising in the third quarter. Second, within other revenues, in our YouTube subscription products the substantial growth in revenues primarily reflects subscriber growth. Looking ahead, a full quarter of NFL Sunday Ticket revenues as well as associated content acquisition costs will be reflected in Q4 results compared to only a few weeks in the third quarter. Play had growth in the third quarter, driven primarily by an increase in the number of buyers. With respect to hardware, there is a headwind to revenues in the fourth quarter, reflecting efforts to optimize the portfolio with tighter targeting of our go-to-market investments as well as the ongoing impact from the difference in launch timing for the Pixel 6a and 7a that we mentioned last quarter. Turning to Google Cloud. We are pleased with the ongoing customer engagement with GCP and Workspace and the potential benefit of our AI solutions including infrastructure and services such as Vertex AI and Duet. We continue to invest aggressively given the significant potential we see while remaining focused on profitable growth. In terms of expenses and profitability, we're pleased with our operating performance. As we have repeatedly stressed, we remain focused on durably reengineering our cost base to create investment capacity to support our growth priorities, most important of which is with AI. We have a number of workstreams in place. First, we are maintaining a slower pace of headcount growth, reflecting product prioritization and reallocation of talent to support our most important growth opportunities. Second, we remain focused on optimizing our real estate footprint, including how and where we work to reduce our expense growth. As you can see from our earnings release, we incurred $207 million in accelerated rent and depreciation in the third quarter related to these actions. Third, we have engineering work streams underway to improve productivity across Alphabet. Given the magnitude of investment in our technical infrastructure, we have a superb team focused on efficiency of our operations there. We are also making progress in streamlining operations across Alphabet through the use of AI. Finally, there are ongoing workstreams that are improving the efficiency of our spend with suppliers and vendors through our central procurement organization. And to be clear, across the portfolio of other bet companies, we have also been working to identify opportunities to create sharper focus and to operate more efficiently and effectively. With respect to sequential quarter-on-quarter trends, two further points. First, cost of sales in the fourth quarter will reflect both higher hardware costs given Pixel family launches as well as increased CAC for YouTube as previously noted. Second, as usual, we expect sales and marketing expenses to be more heavily weighted to the end of the year, in part to support product launches in the holiday season. Finally, our reported CapEx in Q3 was $8 billion, driven overwhelmingly by investment in our technical infrastructure with the largest component for servers, followed by data centers, reflecting a meaningful increase in our investments in AI compute. The growth in reported cash CapEx in Q3 is somewhat muted due to the timing of supplier payments, which can cause variability from quarter-to-quarter. We continue to invest meaningfully in the technical infrastructure needed to support the opportunities we see in AI across Alphabet and expect elevated levels of investment, increasing in the fourth quarter of 2023 and continuing to grow in 2024. In closing, we remain very excited about the opportunities ahead and committed to deliver sustainable financial value. Thank you. Sundar, Philipp and I will now take your questions.","evidence_gemma_new":"Other revenues","evidence_llama_3_3":null,"evidence_qwen_3_30b":"Other revenues third quarter","gemma_new_max":8300000000.0,"gemma_new_min":8300000000.0,"llama_3_3_max":null,"llama_3_3_min":null,"qwen_3_30b_max":8300000000.0,"qwen_3_30b_min":8300000000.0}
{"symbol":"GOOGL","year":2023,"quarter":4,"date":"2023-Q4","chunk_id":4,"sub_chunk_id":0,"centroid_label":"other cost of revenues","agreed_value":23600000000.0,"count":2,"chunk":"Ruth Porat: Thank you, Philipp. We are very pleased with our full year results with 2023 Alphabet revenues of $307 billion, up 9% versus 2022, which added $25 billion to revenues for the year. We ended with a strong fourth quarter with consolidated revenues of $86.3 billion, up 13% versus last year in both reported and constant currency. Search remained the largest contributor to revenue growth. My comments will be on year-over-year comparisons for the fourth quarter, unless I state otherwise. Total cost of revenues was $37.6 billion, up 6%. Other cost of revenues was $23.6 billion, up 5%, with the increase driven primarily by content acquisition costs associated with YouTube subscription offerings. The growth rate also reflects the offsetting benefit of lapping $1.2 billion in inventory-related charges that we called out in the fourth quarter last year as well as a reduction in depreciation expense due to changes in estimated useful lives we made starting in the first quarter of 2023. In terms of total expenses, the year-on-year comparisons reflect an additional $1.2 billion in exit charges that we took in the fourth quarter of 2023 in connection with actions to optimize our global office space. As you can see in our earnings release, these charges were allocated across the expense lines in other cost of revenues and OpEx based on associated head count. Operating expenses were $25 billion, up 11%, primarily reflecting an increase in R&D expenses, which were driven by the real estate charges, followed by compensation. Operating income was $23.7 billion, up 30%, and our operating margin was 27%. Net income was $20.7 billion, and EPS was $1.64. We delivered free cash flow of $7.9 billion, which was affected by the timing of the $10.5 billion tax payment we made on October 16 that we called out previously related to the deferral of certain tax payments to the fourth quarter. For the full year 2023, free cash flow was $69 billion. We repurchased a total of $62 billion of our Class A and Class C shares in 2023 and ended the year with $111 billion in cash and marketable securities. Turning to segment results. Within Google Services, revenues were $76.3 billion, up 12%. Google Search and other advertising revenues of $48 billion in the quarter were up 13%, led again by growth in retail. YouTube advertising revenues of $9.2 billion were up 16% driven by both direct response and brand advertising. Network advertising revenues of $8.3 billion were down 2%. Subscriptions, platforms and devices revenues, which we previously referred to as other revenues, were $10.8 billion, up 23%, primarily reflecting growth in YouTube subscription revenues. TAC was $14 billion, up 8%. Google Services' operating income was $26.7 billion, up 32%, and the operating margin was 35%. Turning to the Google Cloud segment. Revenues were $9.2 billion for the quarter, up 26%. We're very pleased with the momentum of GCP with an increasing contribution from AI. Google Workspace also delivered strong revenue growth primarily driven by increases in average revenue per seat. Google Cloud delivered operating income of $864 million and an operating margin of 9%. As to our Other Bets, for the full year 2023, revenues were $1.5 billion and the operating loss was $4.1 billion. Results in the fourth quarter benefited from a milestone payment in one of the Other Bets. Turning to our outlook for the business. With respect to Google Services, first, within advertising. We were pleased with the sequential revenue growth of Search and YouTube advertising throughout 2023, which reflects the extraordinary work across our teams to drive improved experiences for users and attractive ROI for advertisers. As we enter 2024 with advertising revenues of more than $100 billion higher than 2019, we remain focused on sustaining healthy growth on this larger base. Second, within subscriptions, platforms and devices, our total revenues from subscription products reached $15 billion for the full year 2023 driven primarily by substantial growth in subscribers for our YouTube subscription offerings. The substantial increase in our subscription revenues over the past few years demonstrates the ability of our teams to deliver high value-add offerings and provides a strong base on which to build, including through YouTube and newer services like Google One. Play had solid growth again in the fourth quarter driven primarily by an increase in the number of buyers. In devices, we continue to make sizable investments with increased emphasis on our Pixel family, particularly with AI-powered innovation while driving further efficiencies across the portfolio. Turning to Google Cloud. We are pleased with operating performance in the year. Full year revenues of $33 billion were up 26% versus prior year, ending with strong Q4 performance. The Cloud team is intensely focused on bringing the benefits of Gemini, our industry-leading AI technology, to enterprises and governments globally, and we are gratified with the level of engagement. The strong demand we are seeing for our vertically integrated AI portfolio is creating new opportunities for Google Cloud across every product area. In terms of profitability, the improvement in 2023 reflects sustained focus across the team with the intent to maintain healthy profitability while we continue to invest to support long-term growth. Turning to margins and expenses. As we have repeatedly stressed, we remain committed to our framework to durably reengineer our cost base as we invest to support our growth priorities. Key contributors to moderating our expense growth include: first, product and process prioritization to ensure we have the right resources behind our most important opportunities and to reallocate resources where we can; second, organizational efficiency and structure. We're focused on removing layers to simplify execution and drive velocity. Both product prioritization and the organization design efforts result in a slower pace of hiring, as you can see with our head count down year-on-year, reflecting the reductions we announced in the first quarter of 2023 and a much slower pace of hiring. We will continue to invest in top technical and engineering talent. Finally, we continue to execute the other work streams to slow expense growth, including improving efficiency in our technical infrastructure, streamlining operations across Alphabet through the use of AI, increasing efficiency of our spend with suppliers and vendors through our central procurement organization and optimizing our real estate portfolio. With respect to CapEx, our reported CapEx in the fourth quarter was $11 billion, driven overwhelmingly by investment in our technical infrastructure with the largest component for servers followed by data centers. The step-up in CapEx in Q4 reflects our outlook for the extraordinary applications of AI to deliver for users, advertisers, developers, cloud enterprise customers and governments globally and the long-term growth opportunities that offers. In 2024, we expect investment in CapEx will be notably larger than in 2023. With regard to Other Bets, we've been working to sharpen our investment focus while capturing the upside given compelling technology breakthroughs across the portfolio. For example, last week, Alphabet's X announced that it would be moving to spin out more projects as independent companies through external capital, giving X the opportunity to bring more focus to the breakthrough technologies it is working on to address some of the world's most pressing challenges. Thank you. Sundar, Philipp and I will now take your questions.","evidence_gemma_new":"Other cost of revenues","evidence_llama_3_3":"Other cost of revenues","evidence_qwen_3_30b":null,"gemma_new_max":23600000000.0,"gemma_new_min":23600000000.0,"llama_3_3_max":23600000000.0,"llama_3_3_min":23600000000.0,"qwen_3_30b_max":null,"qwen_3_30b_min":null}
{"symbol":"GOOGL","year":2024,"quarter":1,"date":"2024-Q1","chunk_id":4,"sub_chunk_id":0,"centroid_label":"other cost of revenues","agreed_value":20800000000.0,"count":3,"chunk":"Ruth Porat: Thank you, Philipp. We are very pleased with our financial results for the first quarter driven, in particular, by strength in Search and Cloud as well as the ongoing efforts to durably reengineer our cost base. My comments will be on year-over-year comparisons for the first quarter unless I state otherwise. I will start with results at the Alphabet level, followed by segment results and conclude with our outlook. For the first quarter, our consolidated revenues were $80.5 billion, up 15% or up 16% in constant currency. Search remained the largest contributor to revenue growth. In terms of total expenses, the year-on-year comparisons reflect the impact of the restructuring charges we took in the first quarter of 2023 of $2.6 billion as well as the $716 million in employee severance and related charges in the first quarter of 2024. As you can see in our earnings release, these charges were allocated across the expense lines in other cost of revenues and OpEx based on associated head count. To help with year-on-year comparisons, we included a table in our earnings release to adjust other cost of revenues, operating expenses, operating income, and operating margin to exclude the impact of severance and related office space charges in the first quarter of 2023 versus 2024. In terms of expenses, total cost of revenues was $33.7 billion, up 10%. Other cost of revenues was $20.8 billion, up 10% on a reported basis, with the increase driven primarily by content acquisition costs associated with YouTube given the very strong revenue growth in both subscription offerings and ad-supported content. On an adjusted basis, other cost of revenues were up 13% year-on-year. Operating expenses were $21.4 billion, down 2% on a reported basis, primarily reflecting expense decreases in sales and marketing and G&A, offset by an increase in R&D. The largest single factor in the year-on-year decline in G&A expenses was lower charges related to legal matters. On an adjusted basis, operating expenses were up 5%, reflecting, first, in R&D, an increase in compensation expense, primarily for Google DeepMind and Cloud; and second, in sales and marketing, a slight increase year-on-year, reflecting increases in compensation expense primarily for Cloud sales. Operating income was $25.5 billion, up 46% on a reported basis, and our operating margin was 32%. On an adjusted basis, operating income was up 31%, and our operating margin was 33%. Net income was $23.7 billion and EPS was $1.89. We delivered free cash flow of $16.8 billion in the first quarter and $69.1 billion for the trailing 12 months. We ended the quarter with $108 billion in cash and marketable securities. Turning to segment results. Within Google Services, revenues were $70.4 billion, up 14%. Google Search and other advertising revenues of $46.2 billion in the quarter were up 14% led again by growth in retail. YouTube advertising revenues of $8.1 billion were up 21% driven by both direct response and brand advertising. Network advertising revenues of $7.4 billion were down 1%. Subscriptions, platforms and devices revenues were $8.7 billion, up 18%, primarily reflecting growth in YouTube subscription revenues. TAC was $12.9 billion, up 10%. Google Services operating income was $27.9 billion, up 28%. And the operating margin was 40%. Turning to the Google Cloud segment. Revenues were $9.6 billion for the quarter, up 28%, reflecting significant growth in GCP with an increasing contribution from AI and strong Google Workspace growth, primarily driven by increases in average revenue per seat. Google Cloud delivered operating income of $900 million and an operating margin of 9%. As to our Other Bets, for the first quarter, revenues were $495 million, benefiting from a milestone payment in one of the Other Bets. The operating loss was $1 billion. Turning to our outlook for the business. With respect to Google Services, first, within Advertising, we are very pleased with the momentum of our Ads businesses. Search had broad-based strength across verticals. In YouTube, we had acceleration in revenue growth driven by brand and direct response. Looking ahead, two points to call out: first, results in our advertising business in Q1 continued to reflect strength in spend from APAC-based retailers, a trend that began in the second quarter of 2023 and continued through Q1, which means we will begin lapping that impact in the second quarter; second, the YouTube acceleration in revenue growth in Q1 reflects, in part, lapping the negative year-on-year growth we experienced in the first quarter of 2023. Turning to subscriptions, platforms, and devices. We continue to deliver significant growth in our subscriptions business, which drives the majority of revenue growth in this line. The sequential quarterly decline in year-on-year revenue growth for the line in Q1 versus Q4 reflects, in part, the fact that we had only 1 week of Sunday Ticket subscription revenue in Q1 versus 14 weeks in Q4. Looking forward, we will anniversary last year's price increase in YouTube TV starting in May. With regard to platforms, we are pleased with the performance in Play driven by an increase in buyers. With respect to Google Cloud, performance in Q1 reflects strong demand for our GCP infrastructure and solutions as well as the contribution from our Workspace productivity tools. The growth we are seeing across Cloud is underpinned by the benefit AI provides for our customers. We continue to invest aggressively while remaining focused on profitable growth. As we look ahead, two points that will affect sequential year-on-year revenue growth comparisons across Alphabet: first, Q1 results reflect the benefit of leap year, which contributed slightly more than 1 point to our revenue growth rate at the consolidated level in the first quarter; second, at current spot rates, we expect a larger headwind from foreign exchange in Q2 versus Q1. Turning to margins. Our efforts to durably reengineer our cost base are reflected in a 400 basis point expansion of our Alphabet operating margin year-on-year, excluding the impact of restructuring and severance charges in both periods. You can also see the impact in the quarter-on-quarter decline in head count in Q1, which reflects both actions we have taken over the past few months and a much slower pace of hiring. As we have discussed previously, we are continuing to invest in top engineering and technical talent, particularly in Cloud, Google DeepMind and technical infrastructure. Looking ahead, we remain focused on our efforts to moderate the pace of expense growth in order to create capacity for the increases in depreciation and expenses associated with the higher levels of investment in our technical infrastructure. We believe these efforts will enable us to deliver full year 2024 Alphabet operating margin expansion relative to 2023. With respect to CapEx, our reported CapEx in the first quarter was $12 billion, once again driven overwhelmingly by investment in our technical infrastructure, with the largest component for servers followed by data centers. The significant year-on-year growth in CapEx in recent quarters reflects our confidence in the opportunities offered by AI across our business. Looking ahead, we expect quarterly CapEx throughout the year to be roughly at or above the Q1 level, keeping in mind that the timing of cash payments can cause variability in quarterly reported CapEx. With regard to Other Bets, we similarly have work streams underway to enhance overall returns. Finally, as I trust you saw in the press release, we are very pleased to be adding a quarterly dividend of $0.20 per share to our capital return program as well as a new $70 billion authorization in share repurchases. The core of our capital allocation framework remains the same, beginning with investing aggressively in our business as you have heard us talk about today. Given the extraordinary opportunities ahead, we view the introduction of the dividend as further strengthening our overall capital return program. Thank you. Sundar, Philipp, and I will now take your questions.","evidence_gemma_new":"Other cost of revenues","evidence_llama_3_3":"Alphabet other cost of revenues first quarter","evidence_qwen_3_30b":"other cost of revenues","gemma_new_max":20800000000.0,"gemma_new_min":20800000000.0,"llama_3_3_max":20800000000.0,"llama_3_3_min":20800000000.0,"qwen_3_30b_max":20800000000.0,"qwen_3_30b_min":20800000000.0}
{"symbol":"GOOGL","year":2024,"quarter":2,"date":"2024-Q2","chunk_id":4,"sub_chunk_id":0,"centroid_label":"other cost of revenues","agreed_value":22100000000.0,"count":3,"chunk":"Ruth Porat : Thank you, Philipp, and thanks, Sundar, for those kind words. We had another strong quarter, driven in particular by performance in Search and Cloud, as well as the ongoing efforts to durably reengineer our cost base. My comments will be on year-over-year comparisons for the second quarter unless I state otherwise. I will start with results at the Alphabet level followed by segment results and conclude with our outlook. For the second quarter, our consolidated revenues were $84.7 billion, up 14% or up 15% in constant currency. Search remained the largest contributor to revenue growth. In terms of expenses, total cost of revenues was $35.5 billion, up 11%. Other cost of revenues was $22.1 billion, up 14%, with the increase driven primarily by content acquisition costs, followed by depreciation as well as the impact of the Canadian digital services tax, which was applied retroactively. Operating expenses were $21.8 billion up 5%, primarily reflecting an increase in R&D partially offset by a decline in G&A with sales and marketing essentially flat to the second quarter last year. The increase in R&D was driven primarily by compensation which was affected by lapping a reduction in valuation-based compensation liabilities in certain other bets in the second quarter last year followed by depreciation. The largest single factor in the year-on-year decline in G&A expenses was lower charges related to legal matters. Operating income was $27.4 billion, up 26% and our operating margin was 32%. Net income was $23.6 billion and EPS was $1.89. We delivered free cash flow of $13.5 billion in the second quarter and $60.8 billion for the trailing 12 months. As a reminder, last year, we had a timing benefit in the second and third quarters from a $10.5 billion deferred cash tax payment made in the fourth quarter, which depressed reported free cash flow growth this quarter, and we'll do so again next quarter. We ended the quarter with $101 billion in cash and marketable securities. Turning to segment results. Within Google Services, revenues were $73.9 billion, up 12%. Google Search and other advertising revenues of $48.5 billion in the quarter were up 14%, led again by growth in retail, followed by the financial services vertical. YouTube advertising revenues of $8.7 billion were up 13% driven by brand followed by direct response advertising. Network advertising revenues of $7.4 billion were down 5%. Subscription platforms and devices revenues were $9.3 billion up 14%, primarily reflecting growth in YouTube subscription revenues. TAC was $13.4 billion, up 7%. Google Services operating income was $29.7 billion up 27% and the operating margin was 40%. Turning to the Google Cloud segment. Revenues were $10.3 billion for the quarter, up 29%, reflecting first significant growth in GCP, which was above growth for cloud overall and includes an increasing contribution from AI. And second, strong Google Workspace growth, primarily driven by increases in average revenue per seat. Google Cloud delivered operating income of $1.2 billion and an operating margin of 11%. As to our Other Bets for the second quarter, revenues were $365 million and the operating loss was $1.1 billion. Turning to our outlook for the business. With respect to Google Services, First, within advertising. The strong performance of search was broad-based across verticals. In YouTube, we are pleased with the growth in the quarter. We had healthy watch time growth continued to close the monetization gap in Shorts and had continued momentum in Connected TV, with brand benefiting in part from an ongoing shift in budgets from linear television to digital. As we look forward to the third quarter, we will be lapping the increasing strength in advertising revenues in the second half of 2023, in part from APAC based retailers. Turning to subscriptions, platforms and devices. First, we continue to have significant growth in our subscriptions business which drives the majority of revenue growth in this line. However, there was a sequential decline in the year-on-year growth rate, as we anniversaried the impact of a price increase for YouTubeTV in the second quarter last year. The impact will persist through the balance of the year. Second, with regard to platforms. We are pleased with the performance in play driven by an increase in buyers. Finally, with respect to devices. The most important point as we look forward is that our Made by Google launches have been pulled forward into the third quarter from the fourth quarter last year benefiting revenues in Q3 this year. Turning to cloud, which continued to deliver very strong results. For the first time, Cloud crossed $10 billion in quarterly revenues and $1 billion in quarterly operating profit. As Sundar noted year-to-date, our AI infrastructure and generative AI solutions for cloud customers have already generated billions in revenues and are being used by more than 2 million developers. We're particularly encouraged that the majority of our top 100 customers are already using our generative AI solutions. We continue to invest aggressively in the business. Turning to margins. The margin expansion in Q2 versus last year reflects our ongoing efforts to durably reengineer our cost base, as well as revenue strength. Our leadership team remains focused on our efforts to moderate the pace of expense growth in order to create capacity for the increases in depreciation and expenses associated with the higher levels of investment in our technical infrastructure. Once again headcount declined quarter-on-quarter, which reflects both actions we have taken in the first half of the year and a much slower pace of hiring. Looking ahead, we expect a slight increase in headcount in the third quarter, as we bring on new graduates. As we have discussed previously, we\u2019re continuing to invest in top engineering and technical talent, particularly in cloud and technical infrastructure. Looking forward, we continue to expect to deliver full-year 2024 Alphabet operating margin expansion relative to 2023. However, in the third quarter operating margins will reflect the impact of both the increases in depreciation and expenses associated with the higher levels of investment in our technical infrastructure, as well as the increase in cost of revenues due to the pull-forward of hardware launches into Q3. With respect to CapEx, our reported CapEx in the second quarter was $13 billion, once again driven overwhelmingly by investment in our technical infrastructure with the largest component for servers followed by data centers. Looking ahead, we continue to expect quarterly CapEx throughout the year to be roughly at or above the Q1 CapEx of $12 billion keeping in mind that the timing of cash payments can cause variability in quarterly reported CapEx. With regard to other bets, we continue to focus on improving overall efficiencies, as we invest for long-term returns. Waymo is an important example of this, with its technical leadership coupled with progress on operational performance. As you will see in the 10-Q, we have chosen to commit to a new multi-year investment of $5 billion. This new round of funding, which is consistent with recent annual investment levels will enable Waymo to continue to build the world's leading autonomous driving technology company. To close, this is my 56th and last earnings call, 37 of them at Alphabet. So I have a few closing thoughts of gratitude. I've been so proud to be at Google and Alphabet as CFO and to work with some of the smartest people in the world every day. I think, we have accomplished a lot in the last nine plus years, and I am confident that progress will continue. Of course, I'm not going far and I'm honored to have my new role, which I've been slowly working my way into during the past 11 months and I look forward to continuing to work with Sundar, and our great team. Being CFO of one of the most important companies in the world has been the opportunity and responsibility of a lifetime. Google's Mission of advancing technology and bringing information to people throughout the world is as relevant today as it was when I worked on its IPO. Technology has been a catalyst for economic growth throughout human history. The people on this call know that if a technological advancement is not the focus of every business and government, they will be left behind. Underpinning this is the need for sound and responsible investment. That has never been more important than today and certainly, that is Google and Alphabet's focus. I want to end by thanking Googlers around the world for the innovation and commitment that has enabled us to deliver such extraordinary products and services globally. I also want to thank our investors and analysts for your long-term support and your feedback. Thank you. Sundar, Philipp and I will now take your questions.","evidence_gemma_new":"Other cost of revenues","evidence_llama_3_3":"Other cost of revenues second quarter","evidence_qwen_3_30b":"other cost of revenues second quarter","gemma_new_max":22100000000.0,"gemma_new_min":22100000000.0,"llama_3_3_max":22100000000.0,"llama_3_3_min":22100000000.0,"qwen_3_30b_max":22100000000.0,"qwen_3_30b_min":22100000000.0}
{"symbol":"GOOGL","year":2024,"quarter":4,"date":"2024-Q4","chunk_id":4,"sub_chunk_id":0,"centroid_label":"other cost of revenues","agreed_value":25800000000.0,"count":3,"chunk":"Anat Ashkenazi: Thank you, Philipp. We're pleased with the continued momentum we're seeing across the business as Alphabet revenue for 2024 reached $350 billion, up 14% on a reported basis and 15% in constant currency versus 2023. My comments will focus on year-over-year comparisons for the fourth quarter, unless I state otherwise. I will start with the results at the Alphabet level and we'll then cover our segment results. I'll end with some commentary and expectations over the first quarter and full year 2025. We had another strong quarter in Q4 with robust momentum across the business. Consolidated revenue of $96.5 billion, increased by 12% in both reported and constant currency. Search remained the largest contributor to revenue growth, followed by Cloud. Total cost of revenue was $40.6 billion, up 8%. Tech was $14.8 billion, up 6%. We continue to see a revenue mix shift with Google Search growing at double-digit levels, while network revenues, which have a much higher tech rate, declined. Other cost of revenue was $25.8 billion, up 9%, with the increase primarily driven by content acquisitions costs, primarily for YouTube, followed by depreciation, due to increasing investments in our technical infrastructure. Growth in content acquisition and depreciation were partially offset by our year-over-year decline in hardware costs due to the shift in timing of our made-by-Google launches to the third quarter 2024 compared to the fourth quarter of 2023. In terms of total expenses, the year-over-year comparisons reflect $1.2 billion in exit charges that we took in the fourth quarter of 2023 in connection with actions to optimize our global office space. As previously disclosed, those charges were allocated across the expense lines in other costs of revenue and OpEx based on associated headcount. Total operating expenses decreased 1% to $24.9 billion. R&D investments increased by 8%, primarily driven by increase in compensation and depreciation expenses, partially offset by the impact of charges for office [ph] space optimization in the fourth quarter of 2023. Sales and marketing expenses decreased 5%, primarily reflecting the optimization charges last year, as well as declines in compensation and in ads and promotion expenses due to the timing shift of the Pixel launch from Q4 to Q3. G&A expenses declined by 15%, reflecting a shift of timing in our charitable contributions, as well as the optimization charges last year. Operating income increased 31%, the score [ph] to $31 billion, and operating margin increased to 32%, representing 4.6 points of margin expansion. Net income increased 28% to $26.5 billion, and earnings per share increased 31% to $2.15. We delivered free cash flow of $24.8 billion in the fourth quarter and $72.8 billion for the full year 2024. We ended the quarter with $96 billion in cash and marketable securities. Turning to segment results. Google Service revenues increased 10% to $84.1 billion, reflecting the strong momentum across Google Search and YouTube ads. Google Search and other advertising revenues increased by 13% to $54 billion. The robust performance of Search was once again broad-based across verticals, led by the financial service vertical due to strength in insurance, followed by retail. YouTube advertising revenue increased 14% to $10.5 billion, driven by brand, followed by direct response advertising. Network advertising revenue of $8 billion, were down 4%. In the fourth quarter, the year-over-year comparison in all of our advertising revenue lines was impacted by the increase in strength in advertising revenue in Q4 2023, in part from APAC-based retailers. Subscription platforms and device revenues increase 8% to $11.6 billion, primarily reflecting growth in subscription revenues, partially offset by the shift in timing of the launch of our made by Google devices to the third quarter, compared with the fourth quarter in 2023. We continue to have significant growth in our subscription products, primarily due to increase in the number of paid subscribers across YouTube TV, YouTube Music Premium, and Google One. With regards to Platform, we saw a slight increase in the growth rate in Play, primarily due to a strong increase in the number of buyers. Google's service operating income increased 23% to $32.8 billion, and operating margin increased from 35% to 39%, representing a meaningful margin expansion. Turning to the Google Cloud segment, which continued to deliver very strong results this quarter. Revenue increased by 30% to $12 billion in the fourth quarter, reflecting growth in GCP across core GCP products, AI infrastructure, and generative AI solutions. Once again, GCP grew at a rate that was much higher than cloud overall. Healthy Google Workspace growth was primarily driven by increase in average revenue per seat. Google Cloud operating income increased to $2.1 billion, and operating margin increased from 9.4% to 17.5%. We're pleased with the work the cloud team is doing to deliver valuable solutions to the customer and generate revenue growth, as well as its continued focus on driving efficiencies across the cloud business. As for Other Bets, for the fourth quarter, revenue were $400 million, and the operating loss was $1.2 billion. The year-over-year decline in revenue and increase in operating loss primarily reflect the milestone payment in the fourth quarter of 2023 for one of the Other Bets. Turning to Alphabet level activities, the largest component of this line is our investments in AI research and development activities which support all of Alphabet. As a reminder, Alphabet level activities have included nearly all severance charges from reductions in workforce and office space charges. In the fourth quarter of 2024, the biggest factor in year-over-year comparison is the $1.2 billion in charges in the fourth quarter of 2023, almost entirely in connection with office space optimization. With respect to CapEx, our reported CapEx in the fourth quarter was $14 billion, primarily reflecting investments in our technical infrastructure, with the largest component being investment in servers, followed by data centers, to support the growth of our business across Google Services, Google Cloud, and Google DeepMind. In Q4, we returned value to shareholders in the form of $15 billion in share purchases and $2.4 billion in dividend payments. Overall, we returned a total of nearly $70 billion to shareholders in 2024. Turning to 2025, I would like to provide some commentary on several factors that will impact our business performance in both the first quarter and the full year 2025. First in terms of revenue, I'll highlight two items that will have meaningful impact on Q1 revenue across the company. First in terms of revenues, I'll highlight two items that will have meaningful impact on Q1 revenues across the company. The first is the impact of foreign exchange rates. At the current spot rates, we expect a larger headwind to our revenues from the strengthening of the U.S dollar relative to key currencies in Q1 versus Q4 2024. Second is the impact of leap year. We expect a headwind from having one less day of revenue in Q1 2025 compared with leap year in the first quarter of 2024. As for our segments, Google Services, advertising revenue in 2025 will be impacted by lapping the strength we experience in the financial service vertical throughout 2024. And in Cloud, given the revenues are correlated with the timing of deployment of new capacity, we could see variability in cloud revenue growth rates depending on when new capacity comes online during 2025. Moving to investments, starting with our expectation for CapEx for the full year 2025. As we mentioned on the Q3 call, as we expand our AI efforts, we expect to increase our investments in capital expenditure for technical infrastructure, primarily for servers, followed by data centers and networking. We expect to invest approximately $75 billion in CapEx in 2025 with approximately $16 billion to $18 billion of debt in the first quarter. The expected total investment level may fluctuate from quarter-to-quarter, primarily due to timing of deliveries and construction schedules. In terms of expenses, first, the increase in our investment in CapEx over the past few years will increase pressure on the P&L, primarily in the form of higher depreciation. In 2024, we saw 28% year-over-year growth in depreciation as we put more technical infrastructure assets into service. Given the increase in CapEx investments over the past few years, we expect the growth rate and depreciation to accelerate in 2025. Second, we expect some headcount growth in 2025 in key investment areas such as AI and cloud. As you just heard from Sundar, we're delivering products and solutions to customer at a rapid pace, building, testing, and launching products faster than ever before. And as I mentioned on the Q3 call, we're doing that while also focusing on driving further efficiencies in how we operate the business. Before we take questions, I'd like to recap the financial results for the year. For the full year 2024, revenue grew by 14% or by $43 billion, reaching $350 billion. Google Services and Google Cloud each continue to see double-digit revenue growth coupled with margin extension. YouTube and cloud revenues combined, ended the year at $110 billion annual run rate. And in 2024, we generate total income of $112 billion, an increase of 33% from 2023. We're pleased with the momentum we're seeing in AI innovation and monetization. We've been using AI to improve the performance of our ads business for well over a decade, and Cloud is generating billions in annual revenue from AI infrastructure and generative AI solutions. We're also excited about the potential to bring new experiences to users that will provide additional opportunities for monetization. And I look forward to sharing more in our progress throughout the year. Sundar, Philipp, and I will now take your questions.","evidence_gemma_new":"Other cost of revenue","evidence_llama_3_3":"other cost of revenue fourth quarter","evidence_qwen_3_30b":"Other cost of revenue Q4","gemma_new_max":25800000000.0,"gemma_new_min":25800000000.0,"llama_3_3_max":25800000000.0,"llama_3_3_min":25800000000.0,"qwen_3_30b_max":25800000000.0,"qwen_3_30b_min":25800000000.0}
{"symbol":"GOOGL","year":2023,"quarter":4,"date":"2023-Q4","chunk_id":4,"sub_chunk_id":0,"centroid_label":"subscription platforms and device revenues","agreed_value":10800000000.0,"count":2,"chunk":"Ruth Porat: Thank you, Philipp. We are very pleased with our full year results with 2023 Alphabet revenues of $307 billion, up 9% versus 2022, which added $25 billion to revenues for the year. We ended with a strong fourth quarter with consolidated revenues of $86.3 billion, up 13% versus last year in both reported and constant currency. Search remained the largest contributor to revenue growth. My comments will be on year-over-year comparisons for the fourth quarter, unless I state otherwise. Total cost of revenues was $37.6 billion, up 6%. Other cost of revenues was $23.6 billion, up 5%, with the increase driven primarily by content acquisition costs associated with YouTube subscription offerings. The growth rate also reflects the offsetting benefit of lapping $1.2 billion in inventory-related charges that we called out in the fourth quarter last year as well as a reduction in depreciation expense due to changes in estimated useful lives we made starting in the first quarter of 2023. In terms of total expenses, the year-on-year comparisons reflect an additional $1.2 billion in exit charges that we took in the fourth quarter of 2023 in connection with actions to optimize our global office space. As you can see in our earnings release, these charges were allocated across the expense lines in other cost of revenues and OpEx based on associated head count. Operating expenses were $25 billion, up 11%, primarily reflecting an increase in R&D expenses, which were driven by the real estate charges, followed by compensation. Operating income was $23.7 billion, up 30%, and our operating margin was 27%. Net income was $20.7 billion, and EPS was $1.64. We delivered free cash flow of $7.9 billion, which was affected by the timing of the $10.5 billion tax payment we made on October 16 that we called out previously related to the deferral of certain tax payments to the fourth quarter. For the full year 2023, free cash flow was $69 billion. We repurchased a total of $62 billion of our Class A and Class C shares in 2023 and ended the year with $111 billion in cash and marketable securities. Turning to segment results. Within Google Services, revenues were $76.3 billion, up 12%. Google Search and other advertising revenues of $48 billion in the quarter were up 13%, led again by growth in retail. YouTube advertising revenues of $9.2 billion were up 16% driven by both direct response and brand advertising. Network advertising revenues of $8.3 billion were down 2%. Subscriptions, platforms and devices revenues, which we previously referred to as other revenues, were $10.8 billion, up 23%, primarily reflecting growth in YouTube subscription revenues. TAC was $14 billion, up 8%. Google Services' operating income was $26.7 billion, up 32%, and the operating margin was 35%. Turning to the Google Cloud segment. Revenues were $9.2 billion for the quarter, up 26%. We're very pleased with the momentum of GCP with an increasing contribution from AI. Google Workspace also delivered strong revenue growth primarily driven by increases in average revenue per seat. Google Cloud delivered operating income of $864 million and an operating margin of 9%. As to our Other Bets, for the full year 2023, revenues were $1.5 billion and the operating loss was $4.1 billion. Results in the fourth quarter benefited from a milestone payment in one of the Other Bets. Turning to our outlook for the business. With respect to Google Services, first, within advertising. We were pleased with the sequential revenue growth of Search and YouTube advertising throughout 2023, which reflects the extraordinary work across our teams to drive improved experiences for users and attractive ROI for advertisers. As we enter 2024 with advertising revenues of more than $100 billion higher than 2019, we remain focused on sustaining healthy growth on this larger base. Second, within subscriptions, platforms and devices, our total revenues from subscription products reached $15 billion for the full year 2023 driven primarily by substantial growth in subscribers for our YouTube subscription offerings. The substantial increase in our subscription revenues over the past few years demonstrates the ability of our teams to deliver high value-add offerings and provides a strong base on which to build, including through YouTube and newer services like Google One. Play had solid growth again in the fourth quarter driven primarily by an increase in the number of buyers. In devices, we continue to make sizable investments with increased emphasis on our Pixel family, particularly with AI-powered innovation while driving further efficiencies across the portfolio. Turning to Google Cloud. We are pleased with operating performance in the year. Full year revenues of $33 billion were up 26% versus prior year, ending with strong Q4 performance. The Cloud team is intensely focused on bringing the benefits of Gemini, our industry-leading AI technology, to enterprises and governments globally, and we are gratified with the level of engagement. The strong demand we are seeing for our vertically integrated AI portfolio is creating new opportunities for Google Cloud across every product area. In terms of profitability, the improvement in 2023 reflects sustained focus across the team with the intent to maintain healthy profitability while we continue to invest to support long-term growth. Turning to margins and expenses. As we have repeatedly stressed, we remain committed to our framework to durably reengineer our cost base as we invest to support our growth priorities. Key contributors to moderating our expense growth include: first, product and process prioritization to ensure we have the right resources behind our most important opportunities and to reallocate resources where we can; second, organizational efficiency and structure. We're focused on removing layers to simplify execution and drive velocity. Both product prioritization and the organization design efforts result in a slower pace of hiring, as you can see with our head count down year-on-year, reflecting the reductions we announced in the first quarter of 2023 and a much slower pace of hiring. We will continue to invest in top technical and engineering talent. Finally, we continue to execute the other work streams to slow expense growth, including improving efficiency in our technical infrastructure, streamlining operations across Alphabet through the use of AI, increasing efficiency of our spend with suppliers and vendors through our central procurement organization and optimizing our real estate portfolio. With respect to CapEx, our reported CapEx in the fourth quarter was $11 billion, driven overwhelmingly by investment in our technical infrastructure with the largest component for servers followed by data centers. The step-up in CapEx in Q4 reflects our outlook for the extraordinary applications of AI to deliver for users, advertisers, developers, cloud enterprise customers and governments globally and the long-term growth opportunities that offers. In 2024, we expect investment in CapEx will be notably larger than in 2023. With regard to Other Bets, we've been working to sharpen our investment focus while capturing the upside given compelling technology breakthroughs across the portfolio. For example, last week, Alphabet's X announced that it would be moving to spin out more projects as independent companies through external capital, giving X the opportunity to bring more focus to the breakthrough technologies it is working on to address some of the world's most pressing challenges. Thank you. Sundar, Philipp and I will now take your questions.","evidence_gemma_new":"Subscriptions, platforms and devices revenues","evidence_llama_3_3":"Subscriptions, platforms and devices revenues","evidence_qwen_3_30b":null,"gemma_new_max":10800000000.0,"gemma_new_min":10800000000.0,"llama_3_3_max":10800000000.0,"llama_3_3_min":10800000000.0,"qwen_3_30b_max":null,"qwen_3_30b_min":null}
{"symbol":"GOOGL","year":2024,"quarter":1,"date":"2024-Q1","chunk_id":4,"sub_chunk_id":0,"centroid_label":"subscription platforms and device revenues","agreed_value":8700000000.0,"count":2,"chunk":"Ruth Porat: Thank you, Philipp. We are very pleased with our financial results for the first quarter driven, in particular, by strength in Search and Cloud as well as the ongoing efforts to durably reengineer our cost base. My comments will be on year-over-year comparisons for the first quarter unless I state otherwise. I will start with results at the Alphabet level, followed by segment results and conclude with our outlook. For the first quarter, our consolidated revenues were $80.5 billion, up 15% or up 16% in constant currency. Search remained the largest contributor to revenue growth. In terms of total expenses, the year-on-year comparisons reflect the impact of the restructuring charges we took in the first quarter of 2023 of $2.6 billion as well as the $716 million in employee severance and related charges in the first quarter of 2024. As you can see in our earnings release, these charges were allocated across the expense lines in other cost of revenues and OpEx based on associated head count. To help with year-on-year comparisons, we included a table in our earnings release to adjust other cost of revenues, operating expenses, operating income, and operating margin to exclude the impact of severance and related office space charges in the first quarter of 2023 versus 2024. In terms of expenses, total cost of revenues was $33.7 billion, up 10%. Other cost of revenues was $20.8 billion, up 10% on a reported basis, with the increase driven primarily by content acquisition costs associated with YouTube given the very strong revenue growth in both subscription offerings and ad-supported content. On an adjusted basis, other cost of revenues were up 13% year-on-year. Operating expenses were $21.4 billion, down 2% on a reported basis, primarily reflecting expense decreases in sales and marketing and G&A, offset by an increase in R&D. The largest single factor in the year-on-year decline in G&A expenses was lower charges related to legal matters. On an adjusted basis, operating expenses were up 5%, reflecting, first, in R&D, an increase in compensation expense, primarily for Google DeepMind and Cloud; and second, in sales and marketing, a slight increase year-on-year, reflecting increases in compensation expense primarily for Cloud sales. Operating income was $25.5 billion, up 46% on a reported basis, and our operating margin was 32%. On an adjusted basis, operating income was up 31%, and our operating margin was 33%. Net income was $23.7 billion and EPS was $1.89. We delivered free cash flow of $16.8 billion in the first quarter and $69.1 billion for the trailing 12 months. We ended the quarter with $108 billion in cash and marketable securities. Turning to segment results. Within Google Services, revenues were $70.4 billion, up 14%. Google Search and other advertising revenues of $46.2 billion in the quarter were up 14% led again by growth in retail. YouTube advertising revenues of $8.1 billion were up 21% driven by both direct response and brand advertising. Network advertising revenues of $7.4 billion were down 1%. Subscriptions, platforms and devices revenues were $8.7 billion, up 18%, primarily reflecting growth in YouTube subscription revenues. TAC was $12.9 billion, up 10%. Google Services operating income was $27.9 billion, up 28%. And the operating margin was 40%. Turning to the Google Cloud segment. Revenues were $9.6 billion for the quarter, up 28%, reflecting significant growth in GCP with an increasing contribution from AI and strong Google Workspace growth, primarily driven by increases in average revenue per seat. Google Cloud delivered operating income of $900 million and an operating margin of 9%. As to our Other Bets, for the first quarter, revenues were $495 million, benefiting from a milestone payment in one of the Other Bets. The operating loss was $1 billion. Turning to our outlook for the business. With respect to Google Services, first, within Advertising, we are very pleased with the momentum of our Ads businesses. Search had broad-based strength across verticals. In YouTube, we had acceleration in revenue growth driven by brand and direct response. Looking ahead, two points to call out: first, results in our advertising business in Q1 continued to reflect strength in spend from APAC-based retailers, a trend that began in the second quarter of 2023 and continued through Q1, which means we will begin lapping that impact in the second quarter; second, the YouTube acceleration in revenue growth in Q1 reflects, in part, lapping the negative year-on-year growth we experienced in the first quarter of 2023. Turning to subscriptions, platforms, and devices. We continue to deliver significant growth in our subscriptions business, which drives the majority of revenue growth in this line. The sequential quarterly decline in year-on-year revenue growth for the line in Q1 versus Q4 reflects, in part, the fact that we had only 1 week of Sunday Ticket subscription revenue in Q1 versus 14 weeks in Q4. Looking forward, we will anniversary last year's price increase in YouTube TV starting in May. With regard to platforms, we are pleased with the performance in Play driven by an increase in buyers. With respect to Google Cloud, performance in Q1 reflects strong demand for our GCP infrastructure and solutions as well as the contribution from our Workspace productivity tools. The growth we are seeing across Cloud is underpinned by the benefit AI provides for our customers. We continue to invest aggressively while remaining focused on profitable growth. As we look ahead, two points that will affect sequential year-on-year revenue growth comparisons across Alphabet: first, Q1 results reflect the benefit of leap year, which contributed slightly more than 1 point to our revenue growth rate at the consolidated level in the first quarter; second, at current spot rates, we expect a larger headwind from foreign exchange in Q2 versus Q1. Turning to margins. Our efforts to durably reengineer our cost base are reflected in a 400 basis point expansion of our Alphabet operating margin year-on-year, excluding the impact of restructuring and severance charges in both periods. You can also see the impact in the quarter-on-quarter decline in head count in Q1, which reflects both actions we have taken over the past few months and a much slower pace of hiring. As we have discussed previously, we are continuing to invest in top engineering and technical talent, particularly in Cloud, Google DeepMind and technical infrastructure. Looking ahead, we remain focused on our efforts to moderate the pace of expense growth in order to create capacity for the increases in depreciation and expenses associated with the higher levels of investment in our technical infrastructure. We believe these efforts will enable us to deliver full year 2024 Alphabet operating margin expansion relative to 2023. With respect to CapEx, our reported CapEx in the first quarter was $12 billion, once again driven overwhelmingly by investment in our technical infrastructure, with the largest component for servers followed by data centers. The significant year-on-year growth in CapEx in recent quarters reflects our confidence in the opportunities offered by AI across our business. Looking ahead, we expect quarterly CapEx throughout the year to be roughly at or above the Q1 level, keeping in mind that the timing of cash payments can cause variability in quarterly reported CapEx. With regard to Other Bets, we similarly have work streams underway to enhance overall returns. Finally, as I trust you saw in the press release, we are very pleased to be adding a quarterly dividend of $0.20 per share to our capital return program as well as a new $70 billion authorization in share repurchases. The core of our capital allocation framework remains the same, beginning with investing aggressively in our business as you have heard us talk about today. Given the extraordinary opportunities ahead, we view the introduction of the dividend as further strengthening our overall capital return program. Thank you. Sundar, Philipp, and I will now take your questions.","evidence_gemma_new":"Subscriptions, platforms and devices revenues","evidence_llama_3_3":null,"evidence_qwen_3_30b":"subscriptions, platforms and devices revenues","gemma_new_max":8700000000.0,"gemma_new_min":8700000000.0,"llama_3_3_max":null,"llama_3_3_min":null,"qwen_3_30b_max":8700000000.0,"qwen_3_30b_min":8700000000.0}
{"symbol":"GOOGL","year":2024,"quarter":2,"date":"2024-Q2","chunk_id":4,"sub_chunk_id":0,"centroid_label":"subscription platforms and device revenues","agreed_value":9300000000.0,"count":2,"chunk":"Ruth Porat : Thank you, Philipp, and thanks, Sundar, for those kind words. We had another strong quarter, driven in particular by performance in Search and Cloud, as well as the ongoing efforts to durably reengineer our cost base. My comments will be on year-over-year comparisons for the second quarter unless I state otherwise. I will start with results at the Alphabet level followed by segment results and conclude with our outlook. For the second quarter, our consolidated revenues were $84.7 billion, up 14% or up 15% in constant currency. Search remained the largest contributor to revenue growth. In terms of expenses, total cost of revenues was $35.5 billion, up 11%. Other cost of revenues was $22.1 billion, up 14%, with the increase driven primarily by content acquisition costs, followed by depreciation as well as the impact of the Canadian digital services tax, which was applied retroactively. Operating expenses were $21.8 billion up 5%, primarily reflecting an increase in R&D partially offset by a decline in G&A with sales and marketing essentially flat to the second quarter last year. The increase in R&D was driven primarily by compensation which was affected by lapping a reduction in valuation-based compensation liabilities in certain other bets in the second quarter last year followed by depreciation. The largest single factor in the year-on-year decline in G&A expenses was lower charges related to legal matters. Operating income was $27.4 billion, up 26% and our operating margin was 32%. Net income was $23.6 billion and EPS was $1.89. We delivered free cash flow of $13.5 billion in the second quarter and $60.8 billion for the trailing 12 months. As a reminder, last year, we had a timing benefit in the second and third quarters from a $10.5 billion deferred cash tax payment made in the fourth quarter, which depressed reported free cash flow growth this quarter, and we'll do so again next quarter. We ended the quarter with $101 billion in cash and marketable securities. Turning to segment results. Within Google Services, revenues were $73.9 billion, up 12%. Google Search and other advertising revenues of $48.5 billion in the quarter were up 14%, led again by growth in retail, followed by the financial services vertical. YouTube advertising revenues of $8.7 billion were up 13% driven by brand followed by direct response advertising. Network advertising revenues of $7.4 billion were down 5%. Subscription platforms and devices revenues were $9.3 billion up 14%, primarily reflecting growth in YouTube subscription revenues. TAC was $13.4 billion, up 7%. Google Services operating income was $29.7 billion up 27% and the operating margin was 40%. Turning to the Google Cloud segment. Revenues were $10.3 billion for the quarter, up 29%, reflecting first significant growth in GCP, which was above growth for cloud overall and includes an increasing contribution from AI. And second, strong Google Workspace growth, primarily driven by increases in average revenue per seat. Google Cloud delivered operating income of $1.2 billion and an operating margin of 11%. As to our Other Bets for the second quarter, revenues were $365 million and the operating loss was $1.1 billion. Turning to our outlook for the business. With respect to Google Services, First, within advertising. The strong performance of search was broad-based across verticals. In YouTube, we are pleased with the growth in the quarter. We had healthy watch time growth continued to close the monetization gap in Shorts and had continued momentum in Connected TV, with brand benefiting in part from an ongoing shift in budgets from linear television to digital. As we look forward to the third quarter, we will be lapping the increasing strength in advertising revenues in the second half of 2023, in part from APAC based retailers. Turning to subscriptions, platforms and devices. First, we continue to have significant growth in our subscriptions business which drives the majority of revenue growth in this line. However, there was a sequential decline in the year-on-year growth rate, as we anniversaried the impact of a price increase for YouTubeTV in the second quarter last year. The impact will persist through the balance of the year. Second, with regard to platforms. We are pleased with the performance in play driven by an increase in buyers. Finally, with respect to devices. The most important point as we look forward is that our Made by Google launches have been pulled forward into the third quarter from the fourth quarter last year benefiting revenues in Q3 this year. Turning to cloud, which continued to deliver very strong results. For the first time, Cloud crossed $10 billion in quarterly revenues and $1 billion in quarterly operating profit. As Sundar noted year-to-date, our AI infrastructure and generative AI solutions for cloud customers have already generated billions in revenues and are being used by more than 2 million developers. We're particularly encouraged that the majority of our top 100 customers are already using our generative AI solutions. We continue to invest aggressively in the business. Turning to margins. The margin expansion in Q2 versus last year reflects our ongoing efforts to durably reengineer our cost base, as well as revenue strength. Our leadership team remains focused on our efforts to moderate the pace of expense growth in order to create capacity for the increases in depreciation and expenses associated with the higher levels of investment in our technical infrastructure. Once again headcount declined quarter-on-quarter, which reflects both actions we have taken in the first half of the year and a much slower pace of hiring. Looking ahead, we expect a slight increase in headcount in the third quarter, as we bring on new graduates. As we have discussed previously, we\u2019re continuing to invest in top engineering and technical talent, particularly in cloud and technical infrastructure. Looking forward, we continue to expect to deliver full-year 2024 Alphabet operating margin expansion relative to 2023. However, in the third quarter operating margins will reflect the impact of both the increases in depreciation and expenses associated with the higher levels of investment in our technical infrastructure, as well as the increase in cost of revenues due to the pull-forward of hardware launches into Q3. With respect to CapEx, our reported CapEx in the second quarter was $13 billion, once again driven overwhelmingly by investment in our technical infrastructure with the largest component for servers followed by data centers. Looking ahead, we continue to expect quarterly CapEx throughout the year to be roughly at or above the Q1 CapEx of $12 billion keeping in mind that the timing of cash payments can cause variability in quarterly reported CapEx. With regard to other bets, we continue to focus on improving overall efficiencies, as we invest for long-term returns. Waymo is an important example of this, with its technical leadership coupled with progress on operational performance. As you will see in the 10-Q, we have chosen to commit to a new multi-year investment of $5 billion. This new round of funding, which is consistent with recent annual investment levels will enable Waymo to continue to build the world's leading autonomous driving technology company. To close, this is my 56th and last earnings call, 37 of them at Alphabet. So I have a few closing thoughts of gratitude. I've been so proud to be at Google and Alphabet as CFO and to work with some of the smartest people in the world every day. I think, we have accomplished a lot in the last nine plus years, and I am confident that progress will continue. Of course, I'm not going far and I'm honored to have my new role, which I've been slowly working my way into during the past 11 months and I look forward to continuing to work with Sundar, and our great team. Being CFO of one of the most important companies in the world has been the opportunity and responsibility of a lifetime. Google's Mission of advancing technology and bringing information to people throughout the world is as relevant today as it was when I worked on its IPO. Technology has been a catalyst for economic growth throughout human history. The people on this call know that if a technological advancement is not the focus of every business and government, they will be left behind. Underpinning this is the need for sound and responsible investment. That has never been more important than today and certainly, that is Google and Alphabet's focus. I want to end by thanking Googlers around the world for the innovation and commitment that has enabled us to deliver such extraordinary products and services globally. I also want to thank our investors and analysts for your long-term support and your feedback. Thank you. Sundar, Philipp and I will now take your questions.","evidence_gemma_new":"Subscription platforms and devices revenues","evidence_llama_3_3":"Subscription platforms and devices revenues revenues second quarter","evidence_qwen_3_30b":null,"gemma_new_max":9300000000.0,"gemma_new_min":9300000000.0,"llama_3_3_max":9300000000.0,"llama_3_3_min":9300000000.0,"qwen_3_30b_max":null,"qwen_3_30b_min":null}
{"symbol":"GOOGL","year":2024,"quarter":3,"date":"2024-Q3","chunk_id":3,"sub_chunk_id":0,"centroid_label":"subscription platforms and device revenues","agreed_value":0.28,"count":2,"chunk":"Philipp Schindler: Thanks, Sundar, and hello, everyone. I'll start with performance for the quarter and then describe the progress we're seeing across ads, YouTube and partnerships, highlighting the impact AI is already having on our business. Google Services delivered revenues of $76.5 billion for the quarter, up 13% year-on-year. Search and other revenues grew 12% year-on-year, led by growth in the financial services vertical due to strength in insurance, followed by retail. YouTube ads revenues grew 12% year-on-year, driven by brand, closely followed by direct response. Network revenues were down 2% year-on-year. In subscriptions, platforms and devices, year-on-year revenues were up 28%, driven by growth in subscriptions as well as the launch of our Made by Google devices in the third quarter. Before I double-click into ads, YouTube and partnerships, a few comments on search. Whether they're using their voice to find answers on the go or opening their camera to explore the world around them, people are expanding how they ask questions in search as well as the type of questions they ask. New behaviors create new opportunities to help us connect businesses and consumers via amazing commercial experiences. As GenAI expands what's possible, we continue to see a significant opportunity in search. Let me take a minute to explain why. AI really supercharges search. Our new AI-powered features make searches more helpful, and we continue to see great feedback, particularly from younger users. For example, with Circle to Search, where we see higher engagement from users aged 18 to 24. AI is expanding our ability to understand intent and connect it to our advertisers. This allows us to connect highly relevant users with the most helpful ad and deliver business impact to our customers. Let me share two new ad experiences we have rolled out alongside our popular AI-powered features in search. First, as you heard from Sundar, every month, Lens is used for almost 20 billion visual searches with 1 in 4 of these searches having commercial intent. In early October, we announced product search on Google Lens. And in testing this feature, we found that shoppers are more likely to engage with content in this new format. We're also seeing that people are turning to Lens more often to run complex multimodal queries, voicing a question or inputting text in addition to a visual. Given these new user behaviors, earlier this month, we announced the rollout of shopping ads above and alongside relevant Lens visual search results to help better connect consumers and businesses. Second, AI Overviews, where we have now started showing search and shopping ads within the overview for mobile users in the U.S. As you remember, we've already been running ads above and below AI Overviews. We're now seeing that people find ads directly within AI Overviews helpful because they can quickly connect with relevant businesses, products and services to take the next step at the exact moment they need. As I've said before, we believe AI will revolutionize every part of the marketing value chain. Let's start with creative. Advertisers now use our Gemini-powered tools to build and test a larger variety of relevant creatives at scale. Audi used our AI tools to generate multiple video image and text assets in different links and orientations out of existing long-form videos. It then fed the newly generated creatives into demand gen to drive reach, traffic and booking to their driving experience. The campaign increased website visits by 80% and increased clicks by 2.7 times, delivering a lift in their sales. Last week, we updated image generation at Google Ads with our most advanced text-to-image model, Imagine 3, which we tuned using ads performance data from multiple industries to help customers produce high-quality imagery for their campaigns. Advertisers can now create even higher-performing assets for PMax, Demand Gen app and Display campaigns. Turning to media buying. AI-powered campaigns help advertisers get faster feedback on what creatives work, where and redirect their media buying. Using Demand Gen, DoorDash tested a mix of image and video assets to drive more impact across Google and YouTube's visually immersive surfaces. They saw a 15 times higher conversion rate at a 50% more efficient cost per action when compared to video action campaigns alone. Last and most importantly, measurement. This quarter, we extended availability of our open source marketing mix model, Meridian to more customers, helping to scale measurement of cross-channel budgets to drive better business outcomes. On YouTube, we remain focused on building a platform that enables creators to thrive and unlocking a whole new world of creativity with AI. Creators are at the heart of the YouTube ecosystem and the content they are making is driving robust growth in watch time across the platform. We're also using AI to greatly improve recommendations on YouTube. Driven by Gemini, our large language models have a deeper understanding of video content and viewers' preferences. As a result, they can recommend more relevant, fresher and personalized content to the viewer. Short-form creation continues to thrive on YouTube. Shorts monetization improved again this quarter, and we continue to significantly close the gap with in-stream video, particularly in the U.S. and other more highly monetizing markets. Of all the channels uploading to YouTube each month, 70% are uploading shorts. And we recently announced a top requested feature, the ability to upload shorts up to 3 minutes long. Also, advertisers can now book first position on Shorts blocks in close to 40 markets. We're unlocking more opportunities in the living room. Our momentum here continues as we maintain our status as the number one streamer in the U.S. according to Nielsen. This is driven by the strength of our creators, such as Michelle Carr and Rhett & Link, who are increasingly crafting experiences designed specifically for the big screen, and it's paying off. The number of creators making the majority of the YouTube revenue on TV screens is up more than 30% year-on-year. YouTube is becoming a premier destination for sports watching. People come for the game and stay for the commentary and around the game content from creators like Evelyn Gonzalez, Adam W and Brad Coleman. During the Olympics, content from Paris 2024 had over 12 billion views on YouTube. More than 850 million unique viewers watched over 40 billion minutes of content with 35% on their TV screens. And recently, we kicked off our second season of NFL Sunday Ticket on YouTube TV, which continues to receive a positive reception from advertisers, our partners at the NFL and fans. We have continued to invest in our product experience with improvements to multiview and deeper integrations for fantasy football fans. Following up on my remarks from last quarter about Brandcast, we had a strong upfront performance with commitments up about 20% year-on-year. As always, let me wrap with the strong momentum we're seeing in partnerships. More and more of our partners are recognizing the breadth of our technologies and building solutions that leverage the very best of Google. For example, our recently announced strategic partnership with Vodafone Group spans Google Cloud, AI, Android ads and digital services. This multibillion-dollar partnership will bring these technologies to more than 330 million customers across Europe and Africa. We are collaborating on more than 30 initiatives across 7 areas, including generative AI from consumers, a best-in-class TV platform, hardware and cybersecurity. With that, a heartfelt thank you to Google everywhere for their extraordinary commitment and to our customers and partners for their continued collaboration and trust. Anat, welcome to the team. It's great to have you with us. Over to you.","evidence_gemma_new":"subscriptions platforms and devices year-on-year","evidence_llama_3_3":"subscriptions, platforms and devices year-on-year","evidence_qwen_3_30b":null,"gemma_new_max":0.28,"gemma_new_min":0.28,"llama_3_3_max":0.28,"llama_3_3_min":0.28,"qwen_3_30b_max":null,"qwen_3_30b_min":null}
{"symbol":"GOOGL","year":2023,"quarter":2,"date":"2023-Q2","chunk_id":4,"sub_chunk_id":0,"centroid_label":"tac","agreed_value":12500000000.0,"count":2,"chunk":"Ruth Porat: Thank you, Philipp. Before I go into the results, first, Sundar, thank you very much for the opportunity. I'm very excited about the new role, and I look forward to it. So turning to the results. We're very pleased with our financial results for the second quarter, which reflect an acceleration of growth in Search and momentum in Cloud. My comments will be on year-over-year comparisons for the second quarter unless I state otherwise. I will start with results at the Alphabet level followed by segment results and conclude with our outlook. For the second quarter, our consolidated revenues were $74.6 billion, up 7% or up 9% in constant currency. Search remained the largest contributor to revenue growth. Total cost of revenues was $31.9 billion, up 6%, driven by other cost of revenues of $19.4 billion, which was up 8%. Growth here was driven by content acquisition costs, primarily for YouTube subscription offerings, followed by hardware costs associated with Pixel family launches in the second quarter. As noted in our earnings release, the overall increase in data center and other operations costs was partially offset by a reduction in depreciation expense due to the change in estimated useful lives we discussed last quarter. Operating expenses were $20.9 billion, up 4%. Operating income was $21.8 billion, up 12%, and our operating margin was 29%. I will cover our expense and margin performance in our outlook. Other income and expense was $65 million. Net income was $18.4 billion. We delivered free cash flow of $21.8 billion in the second quarter and $71 billion for the trailing 12 months, reflecting improved operating performance as well as the deferral of certain tax payments to the fourth quarter of 2023 as noted in our earnings release. We ended the quarter with $118 billion in cash and marketable securities. Turning to our segment results. Prior period results have been recast for 2 changes that we made as of the first quarter. First, DeepMind is now reported as part of Alphabet's unallocated corporate costs. Second, we updated our cost allocation methodologies. In the second quarter, we then combined the Brain team from Google Research with DeepMind to form Google DeepMind. Costs associated with the Brain team, which were previously included in Google Services, are now reported as part of Alphabet's unallocated corporate costs. We have not recast prior period results to reflect this additional change. Within Google Services, revenues were $66.3 billion, up 5%. Google Search and other advertising revenues of $42.6 billion in the quarter were up 5%, led by growth in retail. YouTube advertising revenues of $7.7 billion were up 4%, driven by brand advertising, followed by direct response reflecting further stabilization in spending by advertisers. Network advertising revenues of $7.9 billion were down 5%. Other revenues were $8.1 billion, up 24%, reflecting growth in YouTube non-advertising revenues, primarily from subscription growth in YouTube Music Premium and YouTube TV followed by growth in hardware revenues primarily driven by the launch of the Pixel 7a in the second quarter. Finally, Play returned to positive growth in the second quarter. TAC was $12.5 billion, up 3%. Google Services operating income was $23.5 billion, up 8%, and the operating margin was 35%. Turning to the Google Cloud segment. Revenues were $8 billion for the quarter, up 28%. GCP revenue growth remained strong across geographies, industries and products. That being said, we saw a continued moderation in the rate of consumption growth as consumers optimize their spend. Google Workspace strong revenue growth was driven by increases in both seats and average revenue per seat. Google Cloud had operating income of $395 million and the operating margin was 5%. As to our Other Bets, for the second quarter, revenues were $285 million, and the operating loss was $813 million. The decrease in operating loss was primarily driven by a reduction in valuation-based compensation liabilities related to certain Other Bets. Turning to our outlook for the business. With respect to Google Services, first, within advertising. We were pleased with the acceleration of Search advertising revenue growth in the second quarter. Our continued ability to generate sustained growth reflects our unparalleled engineering innovation that creates extraordinary experiences for users and capabilities for advertisers and delivered with the deep expertise of our go-to-market team. And in YouTube, we saw ongoing signs of stabilization in advertiser spending. We are prioritizing product focus on increasing quality consumption of video content with both Shorts and in the living room, which is translating into improved monetization. Second, within other revenues. In our YouTube subscription products, the sustained, strong growth in revenues reflects significant subscriber growth. You may have seen that last week, we increased subscription prices for YouTube Music and Premium, which underscores the value of the products. Strong year-on-year growth in hardware revenues was due, in large part, to a timing change given the Pixel 7a was launched in the second quarter, whereas the Pixel 6a launch occurred in the third quarter last year. Looking ahead, the launch timing change will be a headwind to hardware revenue growth in the third quarter. Play returned to positive growth in the second quarter, driven primarily by a solid increase in the number of buyers. Turning to Google Cloud. We are particularly excited about the customer interest in our AI-optimized infrastructure, our large language models, our AI platform services and our new generative AI offerings such as Duet AI for Google Workspace, although we are still clearly in the early days. At the same time, we continue to experience headwinds in the second quarter for moderation in consumption growth as customers optimize their spend. We continue to invest aggressively while remaining focused on profitable growth. In terms of expenses and profitability, we remain very focused on durably reengineering our cost base. Most evident to date are the actions we have taken to reduce the pace of headcount growth, including the workforce reductions we announced in the first quarter and a slower pace of organic hiring, in part given our focus on reallocating talent from within to fuel our growth priorities. A quick comment on the sequential improvement in operating margins in the second quarter. There are 2 factors to note. First, the benefit from an acceleration in search advertising revenue growth in the second quarter. Second, the vast majority of the charges related to our workforce reduction and optimization of our global office space were taken in Q1. Finally, as it relates to CapEx, in Q2, the largest component was for servers, which included a meaningful increase in our investments in AI compute. The sequential step-up in the second quarter was lower than anticipated for 2 reasons. First, with respect to office facilities, we continue to moderate the pace of fit-outs and ground-up construction to reflect the slower expected pace of headcount growth. Second, there were delays in certain data center construction projects. We expect elevated levels of investment in our technical infrastructure increasing through the back half of 2023 and continuing to grow in 2024. The primary driver is to support the opportunities we see in AI across Alphabet, including investments in GPUs and proprietary TPUs as well as data center capacity. With all that said, we remain committed to durably reengineering our cost base in order to help create capacity for these investments in support of long-term, sustainable financial value. Thank you. Sundar, Philipp and I will now take your questions.","evidence_gemma_new":"TAC","evidence_llama_3_3":null,"evidence_qwen_3_30b":"Google Services TAC second quarter","gemma_new_max":12500000000.0,"gemma_new_min":12500000000.0,"llama_3_3_max":null,"llama_3_3_min":null,"qwen_3_30b_max":12500000000.0,"qwen_3_30b_min":12500000000.0}
{"symbol":"GOOGL","year":2023,"quarter":3,"date":"2023-Q3","chunk_id":4,"sub_chunk_id":0,"centroid_label":"tac","agreed_value":12600000000.0,"count":2,"chunk":"Ruth Porat: Thank you, Philipp. We are very pleased with our financial results for the third quarter, driven by meaningful growth in Search and YouTube and momentum in Cloud. My comments will be on year-over-year comparisons for the third quarter, unless I state otherwise. I will start with results at the Alphabet level followed by segment results and conclude with our outlook. For the third quarter, our consolidated revenues were $76.7 billion, up 11% in both reported and constant currency. Search remained the largest contributor to revenue growth. In terms of expenses, total cost of revenues was $33.2 billion, up 7%, primarily reflecting other cost of revenues of $20.6 billion, which was up 6%. Growth here was primarily driven by content acquisition costs mainly for YouTube subscription offerings. As noted in our earnings release, the overall increase in data center and other operations costs was partially offset by a reduction in depreciation expense due to the change in estimated useful lives we made starting in the first quarter of the year. Operating expenses were $22.1 billion, up 6% reflecting the following. First, an increase in R&D expenses, driven primarily by compensation. Second, an increase in G&A expenses, reflecting the impact of charges related to legal matters. And finally, sales and marketing expenses, which were relatively flat to last year. Operating income was $21.3 billion, up 25%, and our operating margin was 28%. Other income and expense was a loss of $146 million. Net income was $19.7 billion. This reflects an effective tax rate of 7% in the third quarter from an IRS change related to the use of foreign tax credits, which had an outsized impact on the third quarter rate because the change resulted in a catch-up for prior periods. We delivered free cash flow of $22.6 billion in the third quarter and $78 million for the trailing 12 months. We ended the quarter with $120 billion in cash and marketable securities. As a reminder, our cash balance and free cash flow in the second and third quarters benefited from the deferral of certain tax payments to the fourth quarter of 2023. As noted in our earnings release, on October 16, we made an estimated tax payment of $10.5 billion related to this deferral, which will be reflected in our cash balance and free cash flow in the fourth quarter. Turning to segment results. Within Google Services, revenues were $68 billion, up 11%. Google Search and other advertising revenues of $44 billion in the quarter were up 11%, led again by growth in retail. YouTube advertising revenues of $8 billion were up 12%, driven by both brand advertising and direct response. Network advertising revenues of $7.7 billion were down 3%. Other revenues were $8.3 billion, up 21%, primarily reflecting growth in YouTube non-advertising revenues driven by subscriber growth in YouTube TV followed by YouTube Music Premium. TAC was $12.6 billion, up 7%. Google Services operating income was $23.9 billion, up 27% and the operating margin was 35%. Turning to the Google Cloud segment. Revenues were $8.4 billion for the quarter, up 22%. GCP revenue growth remained strong across geographies, industries and products, although the Q3 year-on-year growth rate reflects the impact of customer optimization efforts. Google Workspace also delivered strong revenue growth, primarily driven by increases in average revenue per seat. Google Cloud had operating income of $266 million, and the operating margin was 3%. As to our Other Bets, for the third quarter, revenues were $297 million and the operating loss was $1.2 billion. Turning to our outlook for the business. With respect to Google Services. First, within advertising. After a period of historic volatility, we were pleased with the year-on-year revenue growth of Search and YouTube advertising in the third quarter. Second, within other revenues, in our YouTube subscription products the substantial growth in revenues primarily reflects subscriber growth. Looking ahead, a full quarter of NFL Sunday Ticket revenues as well as associated content acquisition costs will be reflected in Q4 results compared to only a few weeks in the third quarter. Play had growth in the third quarter, driven primarily by an increase in the number of buyers. With respect to hardware, there is a headwind to revenues in the fourth quarter, reflecting efforts to optimize the portfolio with tighter targeting of our go-to-market investments as well as the ongoing impact from the difference in launch timing for the Pixel 6a and 7a that we mentioned last quarter. Turning to Google Cloud. We are pleased with the ongoing customer engagement with GCP and Workspace and the potential benefit of our AI solutions including infrastructure and services such as Vertex AI and Duet. We continue to invest aggressively given the significant potential we see while remaining focused on profitable growth. In terms of expenses and profitability, we're pleased with our operating performance. As we have repeatedly stressed, we remain focused on durably reengineering our cost base to create investment capacity to support our growth priorities, most important of which is with AI. We have a number of workstreams in place. First, we are maintaining a slower pace of headcount growth, reflecting product prioritization and reallocation of talent to support our most important growth opportunities. Second, we remain focused on optimizing our real estate footprint, including how and where we work to reduce our expense growth. As you can see from our earnings release, we incurred $207 million in accelerated rent and depreciation in the third quarter related to these actions. Third, we have engineering work streams underway to improve productivity across Alphabet. Given the magnitude of investment in our technical infrastructure, we have a superb team focused on efficiency of our operations there. We are also making progress in streamlining operations across Alphabet through the use of AI. Finally, there are ongoing workstreams that are improving the efficiency of our spend with suppliers and vendors through our central procurement organization. And to be clear, across the portfolio of other bet companies, we have also been working to identify opportunities to create sharper focus and to operate more efficiently and effectively. With respect to sequential quarter-on-quarter trends, two further points. First, cost of sales in the fourth quarter will reflect both higher hardware costs given Pixel family launches as well as increased CAC for YouTube as previously noted. Second, as usual, we expect sales and marketing expenses to be more heavily weighted to the end of the year, in part to support product launches in the holiday season. Finally, our reported CapEx in Q3 was $8 billion, driven overwhelmingly by investment in our technical infrastructure with the largest component for servers, followed by data centers, reflecting a meaningful increase in our investments in AI compute. The growth in reported cash CapEx in Q3 is somewhat muted due to the timing of supplier payments, which can cause variability from quarter-to-quarter. We continue to invest meaningfully in the technical infrastructure needed to support the opportunities we see in AI across Alphabet and expect elevated levels of investment, increasing in the fourth quarter of 2023 and continuing to grow in 2024. In closing, we remain very excited about the opportunities ahead and committed to deliver sustainable financial value. Thank you. Sundar, Philipp and I will now take your questions.","evidence_gemma_new":"TAC","evidence_llama_3_3":null,"evidence_qwen_3_30b":"TAC third quarter","gemma_new_max":12600000000.0,"gemma_new_min":12600000000.0,"llama_3_3_max":null,"llama_3_3_min":null,"qwen_3_30b_max":12600000000.0,"qwen_3_30b_min":12600000000.0}
{"symbol":"GOOGL","year":2023,"quarter":4,"date":"2023-Q4","chunk_id":4,"sub_chunk_id":0,"centroid_label":"tac","agreed_value":14000000000.0,"count":3,"chunk":"Ruth Porat: Thank you, Philipp. We are very pleased with our full year results with 2023 Alphabet revenues of $307 billion, up 9% versus 2022, which added $25 billion to revenues for the year. We ended with a strong fourth quarter with consolidated revenues of $86.3 billion, up 13% versus last year in both reported and constant currency. Search remained the largest contributor to revenue growth. My comments will be on year-over-year comparisons for the fourth quarter, unless I state otherwise. Total cost of revenues was $37.6 billion, up 6%. Other cost of revenues was $23.6 billion, up 5%, with the increase driven primarily by content acquisition costs associated with YouTube subscription offerings. The growth rate also reflects the offsetting benefit of lapping $1.2 billion in inventory-related charges that we called out in the fourth quarter last year as well as a reduction in depreciation expense due to changes in estimated useful lives we made starting in the first quarter of 2023. In terms of total expenses, the year-on-year comparisons reflect an additional $1.2 billion in exit charges that we took in the fourth quarter of 2023 in connection with actions to optimize our global office space. As you can see in our earnings release, these charges were allocated across the expense lines in other cost of revenues and OpEx based on associated head count. Operating expenses were $25 billion, up 11%, primarily reflecting an increase in R&D expenses, which were driven by the real estate charges, followed by compensation. Operating income was $23.7 billion, up 30%, and our operating margin was 27%. Net income was $20.7 billion, and EPS was $1.64. We delivered free cash flow of $7.9 billion, which was affected by the timing of the $10.5 billion tax payment we made on October 16 that we called out previously related to the deferral of certain tax payments to the fourth quarter. For the full year 2023, free cash flow was $69 billion. We repurchased a total of $62 billion of our Class A and Class C shares in 2023 and ended the year with $111 billion in cash and marketable securities. Turning to segment results. Within Google Services, revenues were $76.3 billion, up 12%. Google Search and other advertising revenues of $48 billion in the quarter were up 13%, led again by growth in retail. YouTube advertising revenues of $9.2 billion were up 16% driven by both direct response and brand advertising. Network advertising revenues of $8.3 billion were down 2%. Subscriptions, platforms and devices revenues, which we previously referred to as other revenues, were $10.8 billion, up 23%, primarily reflecting growth in YouTube subscription revenues. TAC was $14 billion, up 8%. Google Services' operating income was $26.7 billion, up 32%, and the operating margin was 35%. Turning to the Google Cloud segment. Revenues were $9.2 billion for the quarter, up 26%. We're very pleased with the momentum of GCP with an increasing contribution from AI. Google Workspace also delivered strong revenue growth primarily driven by increases in average revenue per seat. Google Cloud delivered operating income of $864 million and an operating margin of 9%. As to our Other Bets, for the full year 2023, revenues were $1.5 billion and the operating loss was $4.1 billion. Results in the fourth quarter benefited from a milestone payment in one of the Other Bets. Turning to our outlook for the business. With respect to Google Services, first, within advertising. We were pleased with the sequential revenue growth of Search and YouTube advertising throughout 2023, which reflects the extraordinary work across our teams to drive improved experiences for users and attractive ROI for advertisers. As we enter 2024 with advertising revenues of more than $100 billion higher than 2019, we remain focused on sustaining healthy growth on this larger base. Second, within subscriptions, platforms and devices, our total revenues from subscription products reached $15 billion for the full year 2023 driven primarily by substantial growth in subscribers for our YouTube subscription offerings. The substantial increase in our subscription revenues over the past few years demonstrates the ability of our teams to deliver high value-add offerings and provides a strong base on which to build, including through YouTube and newer services like Google One. Play had solid growth again in the fourth quarter driven primarily by an increase in the number of buyers. In devices, we continue to make sizable investments with increased emphasis on our Pixel family, particularly with AI-powered innovation while driving further efficiencies across the portfolio. Turning to Google Cloud. We are pleased with operating performance in the year. Full year revenues of $33 billion were up 26% versus prior year, ending with strong Q4 performance. The Cloud team is intensely focused on bringing the benefits of Gemini, our industry-leading AI technology, to enterprises and governments globally, and we are gratified with the level of engagement. The strong demand we are seeing for our vertically integrated AI portfolio is creating new opportunities for Google Cloud across every product area. In terms of profitability, the improvement in 2023 reflects sustained focus across the team with the intent to maintain healthy profitability while we continue to invest to support long-term growth. Turning to margins and expenses. As we have repeatedly stressed, we remain committed to our framework to durably reengineer our cost base as we invest to support our growth priorities. Key contributors to moderating our expense growth include: first, product and process prioritization to ensure we have the right resources behind our most important opportunities and to reallocate resources where we can; second, organizational efficiency and structure. We're focused on removing layers to simplify execution and drive velocity. Both product prioritization and the organization design efforts result in a slower pace of hiring, as you can see with our head count down year-on-year, reflecting the reductions we announced in the first quarter of 2023 and a much slower pace of hiring. We will continue to invest in top technical and engineering talent. Finally, we continue to execute the other work streams to slow expense growth, including improving efficiency in our technical infrastructure, streamlining operations across Alphabet through the use of AI, increasing efficiency of our spend with suppliers and vendors through our central procurement organization and optimizing our real estate portfolio. With respect to CapEx, our reported CapEx in the fourth quarter was $11 billion, driven overwhelmingly by investment in our technical infrastructure with the largest component for servers followed by data centers. The step-up in CapEx in Q4 reflects our outlook for the extraordinary applications of AI to deliver for users, advertisers, developers, cloud enterprise customers and governments globally and the long-term growth opportunities that offers. In 2024, we expect investment in CapEx will be notably larger than in 2023. With regard to Other Bets, we've been working to sharpen our investment focus while capturing the upside given compelling technology breakthroughs across the portfolio. For example, last week, Alphabet's X announced that it would be moving to spin out more projects as independent companies through external capital, giving X the opportunity to bring more focus to the breakthrough technologies it is working on to address some of the world's most pressing challenges. Thank you. Sundar, Philipp and I will now take your questions.","evidence_gemma_new":"TAC","evidence_llama_3_3":"TAC","evidence_qwen_3_30b":"TAC","gemma_new_max":14000000000.0,"gemma_new_min":14000000000.0,"llama_3_3_max":14000000000.0,"llama_3_3_min":14000000000.0,"qwen_3_30b_max":14000000000.0,"qwen_3_30b_min":14000000000.0}
{"symbol":"GOOGL","year":2024,"quarter":1,"date":"2024-Q1","chunk_id":4,"sub_chunk_id":0,"centroid_label":"tac","agreed_value":12900000000.0,"count":2,"chunk":"Ruth Porat: Thank you, Philipp. We are very pleased with our financial results for the first quarter driven, in particular, by strength in Search and Cloud as well as the ongoing efforts to durably reengineer our cost base. My comments will be on year-over-year comparisons for the first quarter unless I state otherwise. I will start with results at the Alphabet level, followed by segment results and conclude with our outlook. For the first quarter, our consolidated revenues were $80.5 billion, up 15% or up 16% in constant currency. Search remained the largest contributor to revenue growth. In terms of total expenses, the year-on-year comparisons reflect the impact of the restructuring charges we took in the first quarter of 2023 of $2.6 billion as well as the $716 million in employee severance and related charges in the first quarter of 2024. As you can see in our earnings release, these charges were allocated across the expense lines in other cost of revenues and OpEx based on associated head count. To help with year-on-year comparisons, we included a table in our earnings release to adjust other cost of revenues, operating expenses, operating income, and operating margin to exclude the impact of severance and related office space charges in the first quarter of 2023 versus 2024. In terms of expenses, total cost of revenues was $33.7 billion, up 10%. Other cost of revenues was $20.8 billion, up 10% on a reported basis, with the increase driven primarily by content acquisition costs associated with YouTube given the very strong revenue growth in both subscription offerings and ad-supported content. On an adjusted basis, other cost of revenues were up 13% year-on-year. Operating expenses were $21.4 billion, down 2% on a reported basis, primarily reflecting expense decreases in sales and marketing and G&A, offset by an increase in R&D. The largest single factor in the year-on-year decline in G&A expenses was lower charges related to legal matters. On an adjusted basis, operating expenses were up 5%, reflecting, first, in R&D, an increase in compensation expense, primarily for Google DeepMind and Cloud; and second, in sales and marketing, a slight increase year-on-year, reflecting increases in compensation expense primarily for Cloud sales. Operating income was $25.5 billion, up 46% on a reported basis, and our operating margin was 32%. On an adjusted basis, operating income was up 31%, and our operating margin was 33%. Net income was $23.7 billion and EPS was $1.89. We delivered free cash flow of $16.8 billion in the first quarter and $69.1 billion for the trailing 12 months. We ended the quarter with $108 billion in cash and marketable securities. Turning to segment results. Within Google Services, revenues were $70.4 billion, up 14%. Google Search and other advertising revenues of $46.2 billion in the quarter were up 14% led again by growth in retail. YouTube advertising revenues of $8.1 billion were up 21% driven by both direct response and brand advertising. Network advertising revenues of $7.4 billion were down 1%. Subscriptions, platforms and devices revenues were $8.7 billion, up 18%, primarily reflecting growth in YouTube subscription revenues. TAC was $12.9 billion, up 10%. Google Services operating income was $27.9 billion, up 28%. And the operating margin was 40%. Turning to the Google Cloud segment. Revenues were $9.6 billion for the quarter, up 28%, reflecting significant growth in GCP with an increasing contribution from AI and strong Google Workspace growth, primarily driven by increases in average revenue per seat. Google Cloud delivered operating income of $900 million and an operating margin of 9%. As to our Other Bets, for the first quarter, revenues were $495 million, benefiting from a milestone payment in one of the Other Bets. The operating loss was $1 billion. Turning to our outlook for the business. With respect to Google Services, first, within Advertising, we are very pleased with the momentum of our Ads businesses. Search had broad-based strength across verticals. In YouTube, we had acceleration in revenue growth driven by brand and direct response. Looking ahead, two points to call out: first, results in our advertising business in Q1 continued to reflect strength in spend from APAC-based retailers, a trend that began in the second quarter of 2023 and continued through Q1, which means we will begin lapping that impact in the second quarter; second, the YouTube acceleration in revenue growth in Q1 reflects, in part, lapping the negative year-on-year growth we experienced in the first quarter of 2023. Turning to subscriptions, platforms, and devices. We continue to deliver significant growth in our subscriptions business, which drives the majority of revenue growth in this line. The sequential quarterly decline in year-on-year revenue growth for the line in Q1 versus Q4 reflects, in part, the fact that we had only 1 week of Sunday Ticket subscription revenue in Q1 versus 14 weeks in Q4. Looking forward, we will anniversary last year's price increase in YouTube TV starting in May. With regard to platforms, we are pleased with the performance in Play driven by an increase in buyers. With respect to Google Cloud, performance in Q1 reflects strong demand for our GCP infrastructure and solutions as well as the contribution from our Workspace productivity tools. The growth we are seeing across Cloud is underpinned by the benefit AI provides for our customers. We continue to invest aggressively while remaining focused on profitable growth. As we look ahead, two points that will affect sequential year-on-year revenue growth comparisons across Alphabet: first, Q1 results reflect the benefit of leap year, which contributed slightly more than 1 point to our revenue growth rate at the consolidated level in the first quarter; second, at current spot rates, we expect a larger headwind from foreign exchange in Q2 versus Q1. Turning to margins. Our efforts to durably reengineer our cost base are reflected in a 400 basis point expansion of our Alphabet operating margin year-on-year, excluding the impact of restructuring and severance charges in both periods. You can also see the impact in the quarter-on-quarter decline in head count in Q1, which reflects both actions we have taken over the past few months and a much slower pace of hiring. As we have discussed previously, we are continuing to invest in top engineering and technical talent, particularly in Cloud, Google DeepMind and technical infrastructure. Looking ahead, we remain focused on our efforts to moderate the pace of expense growth in order to create capacity for the increases in depreciation and expenses associated with the higher levels of investment in our technical infrastructure. We believe these efforts will enable us to deliver full year 2024 Alphabet operating margin expansion relative to 2023. With respect to CapEx, our reported CapEx in the first quarter was $12 billion, once again driven overwhelmingly by investment in our technical infrastructure, with the largest component for servers followed by data centers. The significant year-on-year growth in CapEx in recent quarters reflects our confidence in the opportunities offered by AI across our business. Looking ahead, we expect quarterly CapEx throughout the year to be roughly at or above the Q1 level, keeping in mind that the timing of cash payments can cause variability in quarterly reported CapEx. With regard to Other Bets, we similarly have work streams underway to enhance overall returns. Finally, as I trust you saw in the press release, we are very pleased to be adding a quarterly dividend of $0.20 per share to our capital return program as well as a new $70 billion authorization in share repurchases. The core of our capital allocation framework remains the same, beginning with investing aggressively in our business as you have heard us talk about today. Given the extraordinary opportunities ahead, we view the introduction of the dividend as further strengthening our overall capital return program. Thank you. Sundar, Philipp, and I will now take your questions.","evidence_gemma_new":"TAC","evidence_llama_3_3":null,"evidence_qwen_3_30b":"TAC","gemma_new_max":12900000000.0,"gemma_new_min":12900000000.0,"llama_3_3_max":null,"llama_3_3_min":null,"qwen_3_30b_max":12900000000.0,"qwen_3_30b_min":12900000000.0}
{"symbol":"GOOGL","year":2024,"quarter":2,"date":"2024-Q2","chunk_id":4,"sub_chunk_id":0,"centroid_label":"tac","agreed_value":13400000000.0,"count":3,"chunk":"Ruth Porat : Thank you, Philipp, and thanks, Sundar, for those kind words. We had another strong quarter, driven in particular by performance in Search and Cloud, as well as the ongoing efforts to durably reengineer our cost base. My comments will be on year-over-year comparisons for the second quarter unless I state otherwise. I will start with results at the Alphabet level followed by segment results and conclude with our outlook. For the second quarter, our consolidated revenues were $84.7 billion, up 14% or up 15% in constant currency. Search remained the largest contributor to revenue growth. In terms of expenses, total cost of revenues was $35.5 billion, up 11%. Other cost of revenues was $22.1 billion, up 14%, with the increase driven primarily by content acquisition costs, followed by depreciation as well as the impact of the Canadian digital services tax, which was applied retroactively. Operating expenses were $21.8 billion up 5%, primarily reflecting an increase in R&D partially offset by a decline in G&A with sales and marketing essentially flat to the second quarter last year. The increase in R&D was driven primarily by compensation which was affected by lapping a reduction in valuation-based compensation liabilities in certain other bets in the second quarter last year followed by depreciation. The largest single factor in the year-on-year decline in G&A expenses was lower charges related to legal matters. Operating income was $27.4 billion, up 26% and our operating margin was 32%. Net income was $23.6 billion and EPS was $1.89. We delivered free cash flow of $13.5 billion in the second quarter and $60.8 billion for the trailing 12 months. As a reminder, last year, we had a timing benefit in the second and third quarters from a $10.5 billion deferred cash tax payment made in the fourth quarter, which depressed reported free cash flow growth this quarter, and we'll do so again next quarter. We ended the quarter with $101 billion in cash and marketable securities. Turning to segment results. Within Google Services, revenues were $73.9 billion, up 12%. Google Search and other advertising revenues of $48.5 billion in the quarter were up 14%, led again by growth in retail, followed by the financial services vertical. YouTube advertising revenues of $8.7 billion were up 13% driven by brand followed by direct response advertising. Network advertising revenues of $7.4 billion were down 5%. Subscription platforms and devices revenues were $9.3 billion up 14%, primarily reflecting growth in YouTube subscription revenues. TAC was $13.4 billion, up 7%. Google Services operating income was $29.7 billion up 27% and the operating margin was 40%. Turning to the Google Cloud segment. Revenues were $10.3 billion for the quarter, up 29%, reflecting first significant growth in GCP, which was above growth for cloud overall and includes an increasing contribution from AI. And second, strong Google Workspace growth, primarily driven by increases in average revenue per seat. Google Cloud delivered operating income of $1.2 billion and an operating margin of 11%. As to our Other Bets for the second quarter, revenues were $365 million and the operating loss was $1.1 billion. Turning to our outlook for the business. With respect to Google Services, First, within advertising. The strong performance of search was broad-based across verticals. In YouTube, we are pleased with the growth in the quarter. We had healthy watch time growth continued to close the monetization gap in Shorts and had continued momentum in Connected TV, with brand benefiting in part from an ongoing shift in budgets from linear television to digital. As we look forward to the third quarter, we will be lapping the increasing strength in advertising revenues in the second half of 2023, in part from APAC based retailers. Turning to subscriptions, platforms and devices. First, we continue to have significant growth in our subscriptions business which drives the majority of revenue growth in this line. However, there was a sequential decline in the year-on-year growth rate, as we anniversaried the impact of a price increase for YouTubeTV in the second quarter last year. The impact will persist through the balance of the year. Second, with regard to platforms. We are pleased with the performance in play driven by an increase in buyers. Finally, with respect to devices. The most important point as we look forward is that our Made by Google launches have been pulled forward into the third quarter from the fourth quarter last year benefiting revenues in Q3 this year. Turning to cloud, which continued to deliver very strong results. For the first time, Cloud crossed $10 billion in quarterly revenues and $1 billion in quarterly operating profit. As Sundar noted year-to-date, our AI infrastructure and generative AI solutions for cloud customers have already generated billions in revenues and are being used by more than 2 million developers. We're particularly encouraged that the majority of our top 100 customers are already using our generative AI solutions. We continue to invest aggressively in the business. Turning to margins. The margin expansion in Q2 versus last year reflects our ongoing efforts to durably reengineer our cost base, as well as revenue strength. Our leadership team remains focused on our efforts to moderate the pace of expense growth in order to create capacity for the increases in depreciation and expenses associated with the higher levels of investment in our technical infrastructure. Once again headcount declined quarter-on-quarter, which reflects both actions we have taken in the first half of the year and a much slower pace of hiring. Looking ahead, we expect a slight increase in headcount in the third quarter, as we bring on new graduates. As we have discussed previously, we\u2019re continuing to invest in top engineering and technical talent, particularly in cloud and technical infrastructure. Looking forward, we continue to expect to deliver full-year 2024 Alphabet operating margin expansion relative to 2023. However, in the third quarter operating margins will reflect the impact of both the increases in depreciation and expenses associated with the higher levels of investment in our technical infrastructure, as well as the increase in cost of revenues due to the pull-forward of hardware launches into Q3. With respect to CapEx, our reported CapEx in the second quarter was $13 billion, once again driven overwhelmingly by investment in our technical infrastructure with the largest component for servers followed by data centers. Looking ahead, we continue to expect quarterly CapEx throughout the year to be roughly at or above the Q1 CapEx of $12 billion keeping in mind that the timing of cash payments can cause variability in quarterly reported CapEx. With regard to other bets, we continue to focus on improving overall efficiencies, as we invest for long-term returns. Waymo is an important example of this, with its technical leadership coupled with progress on operational performance. As you will see in the 10-Q, we have chosen to commit to a new multi-year investment of $5 billion. This new round of funding, which is consistent with recent annual investment levels will enable Waymo to continue to build the world's leading autonomous driving technology company. To close, this is my 56th and last earnings call, 37 of them at Alphabet. So I have a few closing thoughts of gratitude. I've been so proud to be at Google and Alphabet as CFO and to work with some of the smartest people in the world every day. I think, we have accomplished a lot in the last nine plus years, and I am confident that progress will continue. Of course, I'm not going far and I'm honored to have my new role, which I've been slowly working my way into during the past 11 months and I look forward to continuing to work with Sundar, and our great team. Being CFO of one of the most important companies in the world has been the opportunity and responsibility of a lifetime. Google's Mission of advancing technology and bringing information to people throughout the world is as relevant today as it was when I worked on its IPO. Technology has been a catalyst for economic growth throughout human history. The people on this call know that if a technological advancement is not the focus of every business and government, they will be left behind. Underpinning this is the need for sound and responsible investment. That has never been more important than today and certainly, that is Google and Alphabet's focus. I want to end by thanking Googlers around the world for the innovation and commitment that has enabled us to deliver such extraordinary products and services globally. I also want to thank our investors and analysts for your long-term support and your feedback. Thank you. Sundar, Philipp and I will now take your questions.","evidence_gemma_new":"TAC","evidence_llama_3_3":"TAC second quarter","evidence_qwen_3_30b":"TAC second quarter","gemma_new_max":13400000000.0,"gemma_new_min":13400000000.0,"llama_3_3_max":13400000000.0,"llama_3_3_min":13400000000.0,"qwen_3_30b_max":13400000000.0,"qwen_3_30b_min":13400000000.0}
{"symbol":"GOOGL","year":2023,"quarter":1,"date":"2023-Q1","chunk_id":5,"sub_chunk_id":0,"centroid_label":"total cost of revenues","agreed_value":30600000000.0,"count":2,"chunk":"Ruth Porat: Thank you, Philipp. Our financial results for the first quarter reflect continued healthy fundamental growth in Search and momentum in Cloud. As I go through the discussion today, I will reference some changes to our reporting and disclosures that are covered more fully in the 8-K we filed last week. I will conclude with our outlook. For the first quarter, our consolidated revenues were $69.8 billion, up 3% or up 6% in constant currency. Search remained the largest contributor to revenue growth on a constant currency basis. In terms of expenses and profitability, year-on-year comparisons are impacted by 3 factors: first, the $2.6 billion in charges we took in the first quarter related to workforce and office space reductions. We provided a table in our earnings release that shows the impact of those charges on cost of revenues and operating expenses. Second, the adjustment we made to the estimated useful lives of servers and certain network equipment at the beginning of 2023. As you can see in our earnings release, the effect for the first quarter was a reduction in depreciation expense of $988 million. Third, the shift in timing of our annual employee stock-based compensation awards from January to March delays the step-up in SBC from Q1 to Q2. This shift in timing does not affect the total amount of SBC over the full year 2023. Total cost of revenues was $30.6 billion, up 3%, driven by other cost of revenues of $18.9 billion, which was up 7%, the biggest factor of which was compensation costs associated with data centers and other operations and followed by content acquisition costs. Operating expenses were $21.8 billion, up 19%, with a significant impact from the charges related to workforce and office space reductions. Operating income was $17.4 billion, down 13%, and our operating margin was 25%. Net income was $15.1 billion. We delivered free cash flow of $17.2 billion in the first quarter and $62 billion for the trailing 12 months. We ended the quarter with $115 billion in cash and marketable securities. Turning to our segment results. These were affected by 2 additional changes outlined in our 8-K filing. First, reflecting the increasing collaboration between DeepMind and Google Services, Google Cloud, and Other Bets, as of Q1, DeepMind is reported as part of Alphabet's unallocated corporate costs. And second, beginning in the first quarter, we updated our cost allocation methodologies to provide our business leaders with increased transparency for decision-making. In our filing, we provided a recast of prior period results for the segment for these 2 changes. The highlights of the year-on-year performance of our segments that I will review reflect these recast results. Starting with Google Services. Revenues were $62 billion, up 1%. Google Search and other advertising revenues of $40.4 billion in the quarter were up 2%. YouTube advertising revenues of $6.7 billion were down 3%. Network advertising revenues of $7.5 billion were down 8%. Other revenues were $7.4 billion, up 9%, reflecting primarily ongoing significant subscriber growth in YouTube TV and YouTube Music Premium. TAC was $11.7 billion, down 2%, primarily reflecting a mix shift between Search and Network. Google Services operating income was $21.7 billion, down 1%, and the operating margin was 35%. Turning to the Google Cloud segment. Revenues were $7.5 billion for the quarter, up 28%. Growth in GCP remained strong across geographies, industries and products. Google Workspace's strong results were driven by increases in both seats and average revenue per seat. Google Cloud had operating income of $191 million, and the operating margin was 2.6%. As to our Other Bets, for the first quarter, revenues were $288 million, and the operating loss was $1.2 billion. Turning to our outlook for the business. In terms of the operating environment, our results in the first quarter reflected ongoing headwinds due to a challenging economic environment, and the outlook remains uncertain. Foreign exchange headwinds have moderated, and we expect less of a foreign exchange headwind in the second quarter based on current spot rates. With respect to Google Services, within advertising, Q1 results reflect the resilience of Search with its unique ability to surface demand and deliver measurable ROI. Excluding the impact of foreign exchange, the revenue growth of Search was similar to last quarter. In YouTube, we saw signs of stabilization in ad spend on a sequential basis. We continue to prioritize growth in Shorts engagement where we are encouraged by progress in monetization. As to other revenues, in YouTube subscriptions, we are pleased with the significant ongoing subscriber growth in both YouTube Music Premium and YouTube TV. In Play, revenues were down year-on-year, primarily due to the continued impact of foreign exchange in APAC, although results have improved as we lapped the impact from our introduction of fee reductions last year. Turning to Google Cloud. Our investments in product innovation, our go-to-market organization and our partner ecosystem delivered strong results as customers across industries and geographies increasingly rely on Google Cloud to digitally transform their businesses. That being said, in Q1, we continued to see slower growth of consumption as customers optimized GCP costs, reflecting the macro backdrop which remains uncertain. In terms of operating performance, we remain focused on driving long-term profitable growth in Cloud while continuing to invest given the substantial opportunity. Moving to Other Bets. In the first quarter, we similarly worked to refine strategies and prioritize efforts across the portfolio, including reductions to head count. I will now walk you through an update on our efforts to reengineer our cost base, slowing the pace of operating expense growth while creating capacity for key investment areas, particularly in support of AI across the company. First, as discussed on the fourth quarter call, we have efforts underway in 3 broad categories: number one, using AI and automation to improve productivity across Alphabet for operational tasks as well as the efficiency of our technical infrastructure; number two, managing our spend with suppliers and vendors more effectively; and number three, continuing to optimize how and where we work. As we've noted previously, all 3 work streams are ramping up this year, and we plan to build on these efforts in 2024 and in subsequent years. Second, with respect to head count growth. The reported number of employees at the end of the first quarter includes almost all of the employees impacted by the workforce reduction we announced in January. We expect most of the impacted individuals will no longer be reflected in our head count by the end of the second quarter. In terms of the outlook for head count for the year, as we shared last quarter, we are meaningfully slowing the pace of hiring in 2023 while still investing in priority areas, particularly for top engineering and technical talent. In terms of our investments in AI, we are excited about the creation of Google DeepMind, combining the Brain Team from Google Research with DeepMind, with the goal to accelerate innovation and impact. Beginning in the second quarter of 2023, the costs associated with teams and activities transferred from Google Research will move from Google Services to Google DeepMind within Alphabet's unallocated corporate costs. Finally, as it relates to CapEx, for 2023, we now expect total CapEx to be modestly higher than in 2022. As discussed last quarter, CapEx this year will include a meaningful increase in technical infrastructure versus a decline in office facilities. We expect the pace of investment in both data center construction and servers to step up in the second quarter and continue to increase throughout the year. Thank you. Sundar, Philipp and I will now take your questions.","evidence_gemma_new":"Total cost of revenues up 3%","evidence_llama_3_3":null,"evidence_qwen_3_30b":"Total cost of revenues first quarter","gemma_new_max":30600000000.0,"gemma_new_min":30600000000.0,"llama_3_3_max":null,"llama_3_3_min":null,"qwen_3_30b_max":30600000000.0,"qwen_3_30b_min":30600000000.0}
{"symbol":"GOOGL","year":2023,"quarter":4,"date":"2023-Q4","chunk_id":4,"sub_chunk_id":0,"centroid_label":"total cost of revenues","agreed_value":37600000000.0,"count":3,"chunk":"Ruth Porat: Thank you, Philipp. We are very pleased with our full year results with 2023 Alphabet revenues of $307 billion, up 9% versus 2022, which added $25 billion to revenues for the year. We ended with a strong fourth quarter with consolidated revenues of $86.3 billion, up 13% versus last year in both reported and constant currency. Search remained the largest contributor to revenue growth. My comments will be on year-over-year comparisons for the fourth quarter, unless I state otherwise. Total cost of revenues was $37.6 billion, up 6%. Other cost of revenues was $23.6 billion, up 5%, with the increase driven primarily by content acquisition costs associated with YouTube subscription offerings. The growth rate also reflects the offsetting benefit of lapping $1.2 billion in inventory-related charges that we called out in the fourth quarter last year as well as a reduction in depreciation expense due to changes in estimated useful lives we made starting in the first quarter of 2023. In terms of total expenses, the year-on-year comparisons reflect an additional $1.2 billion in exit charges that we took in the fourth quarter of 2023 in connection with actions to optimize our global office space. As you can see in our earnings release, these charges were allocated across the expense lines in other cost of revenues and OpEx based on associated head count. Operating expenses were $25 billion, up 11%, primarily reflecting an increase in R&D expenses, which were driven by the real estate charges, followed by compensation. Operating income was $23.7 billion, up 30%, and our operating margin was 27%. Net income was $20.7 billion, and EPS was $1.64. We delivered free cash flow of $7.9 billion, which was affected by the timing of the $10.5 billion tax payment we made on October 16 that we called out previously related to the deferral of certain tax payments to the fourth quarter. For the full year 2023, free cash flow was $69 billion. We repurchased a total of $62 billion of our Class A and Class C shares in 2023 and ended the year with $111 billion in cash and marketable securities. Turning to segment results. Within Google Services, revenues were $76.3 billion, up 12%. Google Search and other advertising revenues of $48 billion in the quarter were up 13%, led again by growth in retail. YouTube advertising revenues of $9.2 billion were up 16% driven by both direct response and brand advertising. Network advertising revenues of $8.3 billion were down 2%. Subscriptions, platforms and devices revenues, which we previously referred to as other revenues, were $10.8 billion, up 23%, primarily reflecting growth in YouTube subscription revenues. TAC was $14 billion, up 8%. Google Services' operating income was $26.7 billion, up 32%, and the operating margin was 35%. Turning to the Google Cloud segment. Revenues were $9.2 billion for the quarter, up 26%. We're very pleased with the momentum of GCP with an increasing contribution from AI. Google Workspace also delivered strong revenue growth primarily driven by increases in average revenue per seat. Google Cloud delivered operating income of $864 million and an operating margin of 9%. As to our Other Bets, for the full year 2023, revenues were $1.5 billion and the operating loss was $4.1 billion. Results in the fourth quarter benefited from a milestone payment in one of the Other Bets. Turning to our outlook for the business. With respect to Google Services, first, within advertising. We were pleased with the sequential revenue growth of Search and YouTube advertising throughout 2023, which reflects the extraordinary work across our teams to drive improved experiences for users and attractive ROI for advertisers. As we enter 2024 with advertising revenues of more than $100 billion higher than 2019, we remain focused on sustaining healthy growth on this larger base. Second, within subscriptions, platforms and devices, our total revenues from subscription products reached $15 billion for the full year 2023 driven primarily by substantial growth in subscribers for our YouTube subscription offerings. The substantial increase in our subscription revenues over the past few years demonstrates the ability of our teams to deliver high value-add offerings and provides a strong base on which to build, including through YouTube and newer services like Google One. Play had solid growth again in the fourth quarter driven primarily by an increase in the number of buyers. In devices, we continue to make sizable investments with increased emphasis on our Pixel family, particularly with AI-powered innovation while driving further efficiencies across the portfolio. Turning to Google Cloud. We are pleased with operating performance in the year. Full year revenues of $33 billion were up 26% versus prior year, ending with strong Q4 performance. The Cloud team is intensely focused on bringing the benefits of Gemini, our industry-leading AI technology, to enterprises and governments globally, and we are gratified with the level of engagement. The strong demand we are seeing for our vertically integrated AI portfolio is creating new opportunities for Google Cloud across every product area. In terms of profitability, the improvement in 2023 reflects sustained focus across the team with the intent to maintain healthy profitability while we continue to invest to support long-term growth. Turning to margins and expenses. As we have repeatedly stressed, we remain committed to our framework to durably reengineer our cost base as we invest to support our growth priorities. Key contributors to moderating our expense growth include: first, product and process prioritization to ensure we have the right resources behind our most important opportunities and to reallocate resources where we can; second, organizational efficiency and structure. We're focused on removing layers to simplify execution and drive velocity. Both product prioritization and the organization design efforts result in a slower pace of hiring, as you can see with our head count down year-on-year, reflecting the reductions we announced in the first quarter of 2023 and a much slower pace of hiring. We will continue to invest in top technical and engineering talent. Finally, we continue to execute the other work streams to slow expense growth, including improving efficiency in our technical infrastructure, streamlining operations across Alphabet through the use of AI, increasing efficiency of our spend with suppliers and vendors through our central procurement organization and optimizing our real estate portfolio. With respect to CapEx, our reported CapEx in the fourth quarter was $11 billion, driven overwhelmingly by investment in our technical infrastructure with the largest component for servers followed by data centers. The step-up in CapEx in Q4 reflects our outlook for the extraordinary applications of AI to deliver for users, advertisers, developers, cloud enterprise customers and governments globally and the long-term growth opportunities that offers. In 2024, we expect investment in CapEx will be notably larger than in 2023. With regard to Other Bets, we've been working to sharpen our investment focus while capturing the upside given compelling technology breakthroughs across the portfolio. For example, last week, Alphabet's X announced that it would be moving to spin out more projects as independent companies through external capital, giving X the opportunity to bring more focus to the breakthrough technologies it is working on to address some of the world's most pressing challenges. Thank you. Sundar, Philipp and I will now take your questions.","evidence_gemma_new":"Total cost of revenues","evidence_llama_3_3":"Total cost of revenues","evidence_qwen_3_30b":"total cost of revenues","gemma_new_max":37600000000.0,"gemma_new_min":37600000000.0,"llama_3_3_max":37600000000.0,"llama_3_3_min":37600000000.0,"qwen_3_30b_max":37600000000.0,"qwen_3_30b_min":37600000000.0}
{"symbol":"GOOGL","year":2024,"quarter":1,"date":"2024-Q1","chunk_id":4,"sub_chunk_id":0,"centroid_label":"total cost of revenues","agreed_value":33700000000.0,"count":2,"chunk":"Ruth Porat: Thank you, Philipp. We are very pleased with our financial results for the first quarter driven, in particular, by strength in Search and Cloud as well as the ongoing efforts to durably reengineer our cost base. My comments will be on year-over-year comparisons for the first quarter unless I state otherwise. I will start with results at the Alphabet level, followed by segment results and conclude with our outlook. For the first quarter, our consolidated revenues were $80.5 billion, up 15% or up 16% in constant currency. Search remained the largest contributor to revenue growth. In terms of total expenses, the year-on-year comparisons reflect the impact of the restructuring charges we took in the first quarter of 2023 of $2.6 billion as well as the $716 million in employee severance and related charges in the first quarter of 2024. As you can see in our earnings release, these charges were allocated across the expense lines in other cost of revenues and OpEx based on associated head count. To help with year-on-year comparisons, we included a table in our earnings release to adjust other cost of revenues, operating expenses, operating income, and operating margin to exclude the impact of severance and related office space charges in the first quarter of 2023 versus 2024. In terms of expenses, total cost of revenues was $33.7 billion, up 10%. Other cost of revenues was $20.8 billion, up 10% on a reported basis, with the increase driven primarily by content acquisition costs associated with YouTube given the very strong revenue growth in both subscription offerings and ad-supported content. On an adjusted basis, other cost of revenues were up 13% year-on-year. Operating expenses were $21.4 billion, down 2% on a reported basis, primarily reflecting expense decreases in sales and marketing and G&A, offset by an increase in R&D. The largest single factor in the year-on-year decline in G&A expenses was lower charges related to legal matters. On an adjusted basis, operating expenses were up 5%, reflecting, first, in R&D, an increase in compensation expense, primarily for Google DeepMind and Cloud; and second, in sales and marketing, a slight increase year-on-year, reflecting increases in compensation expense primarily for Cloud sales. Operating income was $25.5 billion, up 46% on a reported basis, and our operating margin was 32%. On an adjusted basis, operating income was up 31%, and our operating margin was 33%. Net income was $23.7 billion and EPS was $1.89. We delivered free cash flow of $16.8 billion in the first quarter and $69.1 billion for the trailing 12 months. We ended the quarter with $108 billion in cash and marketable securities. Turning to segment results. Within Google Services, revenues were $70.4 billion, up 14%. Google Search and other advertising revenues of $46.2 billion in the quarter were up 14% led again by growth in retail. YouTube advertising revenues of $8.1 billion were up 21% driven by both direct response and brand advertising. Network advertising revenues of $7.4 billion were down 1%. Subscriptions, platforms and devices revenues were $8.7 billion, up 18%, primarily reflecting growth in YouTube subscription revenues. TAC was $12.9 billion, up 10%. Google Services operating income was $27.9 billion, up 28%. And the operating margin was 40%. Turning to the Google Cloud segment. Revenues were $9.6 billion for the quarter, up 28%, reflecting significant growth in GCP with an increasing contribution from AI and strong Google Workspace growth, primarily driven by increases in average revenue per seat. Google Cloud delivered operating income of $900 million and an operating margin of 9%. As to our Other Bets, for the first quarter, revenues were $495 million, benefiting from a milestone payment in one of the Other Bets. The operating loss was $1 billion. Turning to our outlook for the business. With respect to Google Services, first, within Advertising, we are very pleased with the momentum of our Ads businesses. Search had broad-based strength across verticals. In YouTube, we had acceleration in revenue growth driven by brand and direct response. Looking ahead, two points to call out: first, results in our advertising business in Q1 continued to reflect strength in spend from APAC-based retailers, a trend that began in the second quarter of 2023 and continued through Q1, which means we will begin lapping that impact in the second quarter; second, the YouTube acceleration in revenue growth in Q1 reflects, in part, lapping the negative year-on-year growth we experienced in the first quarter of 2023. Turning to subscriptions, platforms, and devices. We continue to deliver significant growth in our subscriptions business, which drives the majority of revenue growth in this line. The sequential quarterly decline in year-on-year revenue growth for the line in Q1 versus Q4 reflects, in part, the fact that we had only 1 week of Sunday Ticket subscription revenue in Q1 versus 14 weeks in Q4. Looking forward, we will anniversary last year's price increase in YouTube TV starting in May. With regard to platforms, we are pleased with the performance in Play driven by an increase in buyers. With respect to Google Cloud, performance in Q1 reflects strong demand for our GCP infrastructure and solutions as well as the contribution from our Workspace productivity tools. The growth we are seeing across Cloud is underpinned by the benefit AI provides for our customers. We continue to invest aggressively while remaining focused on profitable growth. As we look ahead, two points that will affect sequential year-on-year revenue growth comparisons across Alphabet: first, Q1 results reflect the benefit of leap year, which contributed slightly more than 1 point to our revenue growth rate at the consolidated level in the first quarter; second, at current spot rates, we expect a larger headwind from foreign exchange in Q2 versus Q1. Turning to margins. Our efforts to durably reengineer our cost base are reflected in a 400 basis point expansion of our Alphabet operating margin year-on-year, excluding the impact of restructuring and severance charges in both periods. You can also see the impact in the quarter-on-quarter decline in head count in Q1, which reflects both actions we have taken over the past few months and a much slower pace of hiring. As we have discussed previously, we are continuing to invest in top engineering and technical talent, particularly in Cloud, Google DeepMind and technical infrastructure. Looking ahead, we remain focused on our efforts to moderate the pace of expense growth in order to create capacity for the increases in depreciation and expenses associated with the higher levels of investment in our technical infrastructure. We believe these efforts will enable us to deliver full year 2024 Alphabet operating margin expansion relative to 2023. With respect to CapEx, our reported CapEx in the first quarter was $12 billion, once again driven overwhelmingly by investment in our technical infrastructure, with the largest component for servers followed by data centers. The significant year-on-year growth in CapEx in recent quarters reflects our confidence in the opportunities offered by AI across our business. Looking ahead, we expect quarterly CapEx throughout the year to be roughly at or above the Q1 level, keeping in mind that the timing of cash payments can cause variability in quarterly reported CapEx. With regard to Other Bets, we similarly have work streams underway to enhance overall returns. Finally, as I trust you saw in the press release, we are very pleased to be adding a quarterly dividend of $0.20 per share to our capital return program as well as a new $70 billion authorization in share repurchases. The core of our capital allocation framework remains the same, beginning with investing aggressively in our business as you have heard us talk about today. Given the extraordinary opportunities ahead, we view the introduction of the dividend as further strengthening our overall capital return program. Thank you. Sundar, Philipp, and I will now take your questions.","evidence_gemma_new":null,"evidence_llama_3_3":"Alphabet total cost of revenues first quarter","evidence_qwen_3_30b":"total cost of revenues","gemma_new_max":null,"gemma_new_min":null,"llama_3_3_max":33700000000.0,"llama_3_3_min":33700000000.0,"qwen_3_30b_max":33700000000.0,"qwen_3_30b_min":33700000000.0}
{"symbol":"GOOGL","year":2024,"quarter":2,"date":"2024-Q2","chunk_id":4,"sub_chunk_id":0,"centroid_label":"total cost of revenues","agreed_value":35500000000.0,"count":2,"chunk":"Ruth Porat : Thank you, Philipp, and thanks, Sundar, for those kind words. We had another strong quarter, driven in particular by performance in Search and Cloud, as well as the ongoing efforts to durably reengineer our cost base. My comments will be on year-over-year comparisons for the second quarter unless I state otherwise. I will start with results at the Alphabet level followed by segment results and conclude with our outlook. For the second quarter, our consolidated revenues were $84.7 billion, up 14% or up 15% in constant currency. Search remained the largest contributor to revenue growth. In terms of expenses, total cost of revenues was $35.5 billion, up 11%. Other cost of revenues was $22.1 billion, up 14%, with the increase driven primarily by content acquisition costs, followed by depreciation as well as the impact of the Canadian digital services tax, which was applied retroactively. Operating expenses were $21.8 billion up 5%, primarily reflecting an increase in R&D partially offset by a decline in G&A with sales and marketing essentially flat to the second quarter last year. The increase in R&D was driven primarily by compensation which was affected by lapping a reduction in valuation-based compensation liabilities in certain other bets in the second quarter last year followed by depreciation. The largest single factor in the year-on-year decline in G&A expenses was lower charges related to legal matters. Operating income was $27.4 billion, up 26% and our operating margin was 32%. Net income was $23.6 billion and EPS was $1.89. We delivered free cash flow of $13.5 billion in the second quarter and $60.8 billion for the trailing 12 months. As a reminder, last year, we had a timing benefit in the second and third quarters from a $10.5 billion deferred cash tax payment made in the fourth quarter, which depressed reported free cash flow growth this quarter, and we'll do so again next quarter. We ended the quarter with $101 billion in cash and marketable securities. Turning to segment results. Within Google Services, revenues were $73.9 billion, up 12%. Google Search and other advertising revenues of $48.5 billion in the quarter were up 14%, led again by growth in retail, followed by the financial services vertical. YouTube advertising revenues of $8.7 billion were up 13% driven by brand followed by direct response advertising. Network advertising revenues of $7.4 billion were down 5%. Subscription platforms and devices revenues were $9.3 billion up 14%, primarily reflecting growth in YouTube subscription revenues. TAC was $13.4 billion, up 7%. Google Services operating income was $29.7 billion up 27% and the operating margin was 40%. Turning to the Google Cloud segment. Revenues were $10.3 billion for the quarter, up 29%, reflecting first significant growth in GCP, which was above growth for cloud overall and includes an increasing contribution from AI. And second, strong Google Workspace growth, primarily driven by increases in average revenue per seat. Google Cloud delivered operating income of $1.2 billion and an operating margin of 11%. As to our Other Bets for the second quarter, revenues were $365 million and the operating loss was $1.1 billion. Turning to our outlook for the business. With respect to Google Services, First, within advertising. The strong performance of search was broad-based across verticals. In YouTube, we are pleased with the growth in the quarter. We had healthy watch time growth continued to close the monetization gap in Shorts and had continued momentum in Connected TV, with brand benefiting in part from an ongoing shift in budgets from linear television to digital. As we look forward to the third quarter, we will be lapping the increasing strength in advertising revenues in the second half of 2023, in part from APAC based retailers. Turning to subscriptions, platforms and devices. First, we continue to have significant growth in our subscriptions business which drives the majority of revenue growth in this line. However, there was a sequential decline in the year-on-year growth rate, as we anniversaried the impact of a price increase for YouTubeTV in the second quarter last year. The impact will persist through the balance of the year. Second, with regard to platforms. We are pleased with the performance in play driven by an increase in buyers. Finally, with respect to devices. The most important point as we look forward is that our Made by Google launches have been pulled forward into the third quarter from the fourth quarter last year benefiting revenues in Q3 this year. Turning to cloud, which continued to deliver very strong results. For the first time, Cloud crossed $10 billion in quarterly revenues and $1 billion in quarterly operating profit. As Sundar noted year-to-date, our AI infrastructure and generative AI solutions for cloud customers have already generated billions in revenues and are being used by more than 2 million developers. We're particularly encouraged that the majority of our top 100 customers are already using our generative AI solutions. We continue to invest aggressively in the business. Turning to margins. The margin expansion in Q2 versus last year reflects our ongoing efforts to durably reengineer our cost base, as well as revenue strength. Our leadership team remains focused on our efforts to moderate the pace of expense growth in order to create capacity for the increases in depreciation and expenses associated with the higher levels of investment in our technical infrastructure. Once again headcount declined quarter-on-quarter, which reflects both actions we have taken in the first half of the year and a much slower pace of hiring. Looking ahead, we expect a slight increase in headcount in the third quarter, as we bring on new graduates. As we have discussed previously, we\u2019re continuing to invest in top engineering and technical talent, particularly in cloud and technical infrastructure. Looking forward, we continue to expect to deliver full-year 2024 Alphabet operating margin expansion relative to 2023. However, in the third quarter operating margins will reflect the impact of both the increases in depreciation and expenses associated with the higher levels of investment in our technical infrastructure, as well as the increase in cost of revenues due to the pull-forward of hardware launches into Q3. With respect to CapEx, our reported CapEx in the second quarter was $13 billion, once again driven overwhelmingly by investment in our technical infrastructure with the largest component for servers followed by data centers. Looking ahead, we continue to expect quarterly CapEx throughout the year to be roughly at or above the Q1 CapEx of $12 billion keeping in mind that the timing of cash payments can cause variability in quarterly reported CapEx. With regard to other bets, we continue to focus on improving overall efficiencies, as we invest for long-term returns. Waymo is an important example of this, with its technical leadership coupled with progress on operational performance. As you will see in the 10-Q, we have chosen to commit to a new multi-year investment of $5 billion. This new round of funding, which is consistent with recent annual investment levels will enable Waymo to continue to build the world's leading autonomous driving technology company. To close, this is my 56th and last earnings call, 37 of them at Alphabet. So I have a few closing thoughts of gratitude. I've been so proud to be at Google and Alphabet as CFO and to work with some of the smartest people in the world every day. I think, we have accomplished a lot in the last nine plus years, and I am confident that progress will continue. Of course, I'm not going far and I'm honored to have my new role, which I've been slowly working my way into during the past 11 months and I look forward to continuing to work with Sundar, and our great team. Being CFO of one of the most important companies in the world has been the opportunity and responsibility of a lifetime. Google's Mission of advancing technology and bringing information to people throughout the world is as relevant today as it was when I worked on its IPO. Technology has been a catalyst for economic growth throughout human history. The people on this call know that if a technological advancement is not the focus of every business and government, they will be left behind. Underpinning this is the need for sound and responsible investment. That has never been more important than today and certainly, that is Google and Alphabet's focus. I want to end by thanking Googlers around the world for the innovation and commitment that has enabled us to deliver such extraordinary products and services globally. I also want to thank our investors and analysts for your long-term support and your feedback. Thank you. Sundar, Philipp and I will now take your questions.","evidence_gemma_new":null,"evidence_llama_3_3":"total cost of revenues second quarter","evidence_qwen_3_30b":"total cost of revenues second quarter","gemma_new_max":null,"gemma_new_min":null,"llama_3_3_max":35500000000.0,"llama_3_3_min":35500000000.0,"qwen_3_30b_max":35500000000.0,"qwen_3_30b_min":35500000000.0}
{"symbol":"GOOGL","year":2024,"quarter":4,"date":"2024-Q4","chunk_id":4,"sub_chunk_id":0,"centroid_label":"total cost of revenues","agreed_value":40600000000.0,"count":2,"chunk":"Anat Ashkenazi: Thank you, Philipp. We're pleased with the continued momentum we're seeing across the business as Alphabet revenue for 2024 reached $350 billion, up 14% on a reported basis and 15% in constant currency versus 2023. My comments will focus on year-over-year comparisons for the fourth quarter, unless I state otherwise. I will start with the results at the Alphabet level and we'll then cover our segment results. I'll end with some commentary and expectations over the first quarter and full year 2025. We had another strong quarter in Q4 with robust momentum across the business. Consolidated revenue of $96.5 billion, increased by 12% in both reported and constant currency. Search remained the largest contributor to revenue growth, followed by Cloud. Total cost of revenue was $40.6 billion, up 8%. Tech was $14.8 billion, up 6%. We continue to see a revenue mix shift with Google Search growing at double-digit levels, while network revenues, which have a much higher tech rate, declined. Other cost of revenue was $25.8 billion, up 9%, with the increase primarily driven by content acquisitions costs, primarily for YouTube, followed by depreciation, due to increasing investments in our technical infrastructure. Growth in content acquisition and depreciation were partially offset by our year-over-year decline in hardware costs due to the shift in timing of our made-by-Google launches to the third quarter 2024 compared to the fourth quarter of 2023. In terms of total expenses, the year-over-year comparisons reflect $1.2 billion in exit charges that we took in the fourth quarter of 2023 in connection with actions to optimize our global office space. As previously disclosed, those charges were allocated across the expense lines in other costs of revenue and OpEx based on associated headcount. Total operating expenses decreased 1% to $24.9 billion. R&D investments increased by 8%, primarily driven by increase in compensation and depreciation expenses, partially offset by the impact of charges for office [ph] space optimization in the fourth quarter of 2023. Sales and marketing expenses decreased 5%, primarily reflecting the optimization charges last year, as well as declines in compensation and in ads and promotion expenses due to the timing shift of the Pixel launch from Q4 to Q3. G&A expenses declined by 15%, reflecting a shift of timing in our charitable contributions, as well as the optimization charges last year. Operating income increased 31%, the score [ph] to $31 billion, and operating margin increased to 32%, representing 4.6 points of margin expansion. Net income increased 28% to $26.5 billion, and earnings per share increased 31% to $2.15. We delivered free cash flow of $24.8 billion in the fourth quarter and $72.8 billion for the full year 2024. We ended the quarter with $96 billion in cash and marketable securities. Turning to segment results. Google Service revenues increased 10% to $84.1 billion, reflecting the strong momentum across Google Search and YouTube ads. Google Search and other advertising revenues increased by 13% to $54 billion. The robust performance of Search was once again broad-based across verticals, led by the financial service vertical due to strength in insurance, followed by retail. YouTube advertising revenue increased 14% to $10.5 billion, driven by brand, followed by direct response advertising. Network advertising revenue of $8 billion, were down 4%. In the fourth quarter, the year-over-year comparison in all of our advertising revenue lines was impacted by the increase in strength in advertising revenue in Q4 2023, in part from APAC-based retailers. Subscription platforms and device revenues increase 8% to $11.6 billion, primarily reflecting growth in subscription revenues, partially offset by the shift in timing of the launch of our made by Google devices to the third quarter, compared with the fourth quarter in 2023. We continue to have significant growth in our subscription products, primarily due to increase in the number of paid subscribers across YouTube TV, YouTube Music Premium, and Google One. With regards to Platform, we saw a slight increase in the growth rate in Play, primarily due to a strong increase in the number of buyers. Google's service operating income increased 23% to $32.8 billion, and operating margin increased from 35% to 39%, representing a meaningful margin expansion. Turning to the Google Cloud segment, which continued to deliver very strong results this quarter. Revenue increased by 30% to $12 billion in the fourth quarter, reflecting growth in GCP across core GCP products, AI infrastructure, and generative AI solutions. Once again, GCP grew at a rate that was much higher than cloud overall. Healthy Google Workspace growth was primarily driven by increase in average revenue per seat. Google Cloud operating income increased to $2.1 billion, and operating margin increased from 9.4% to 17.5%. We're pleased with the work the cloud team is doing to deliver valuable solutions to the customer and generate revenue growth, as well as its continued focus on driving efficiencies across the cloud business. As for Other Bets, for the fourth quarter, revenue were $400 million, and the operating loss was $1.2 billion. The year-over-year decline in revenue and increase in operating loss primarily reflect the milestone payment in the fourth quarter of 2023 for one of the Other Bets. Turning to Alphabet level activities, the largest component of this line is our investments in AI research and development activities which support all of Alphabet. As a reminder, Alphabet level activities have included nearly all severance charges from reductions in workforce and office space charges. In the fourth quarter of 2024, the biggest factor in year-over-year comparison is the $1.2 billion in charges in the fourth quarter of 2023, almost entirely in connection with office space optimization. With respect to CapEx, our reported CapEx in the fourth quarter was $14 billion, primarily reflecting investments in our technical infrastructure, with the largest component being investment in servers, followed by data centers, to support the growth of our business across Google Services, Google Cloud, and Google DeepMind. In Q4, we returned value to shareholders in the form of $15 billion in share purchases and $2.4 billion in dividend payments. Overall, we returned a total of nearly $70 billion to shareholders in 2024. Turning to 2025, I would like to provide some commentary on several factors that will impact our business performance in both the first quarter and the full year 2025. First in terms of revenue, I'll highlight two items that will have meaningful impact on Q1 revenue across the company. First in terms of revenues, I'll highlight two items that will have meaningful impact on Q1 revenues across the company. The first is the impact of foreign exchange rates. At the current spot rates, we expect a larger headwind to our revenues from the strengthening of the U.S dollar relative to key currencies in Q1 versus Q4 2024. Second is the impact of leap year. We expect a headwind from having one less day of revenue in Q1 2025 compared with leap year in the first quarter of 2024. As for our segments, Google Services, advertising revenue in 2025 will be impacted by lapping the strength we experience in the financial service vertical throughout 2024. And in Cloud, given the revenues are correlated with the timing of deployment of new capacity, we could see variability in cloud revenue growth rates depending on when new capacity comes online during 2025. Moving to investments, starting with our expectation for CapEx for the full year 2025. As we mentioned on the Q3 call, as we expand our AI efforts, we expect to increase our investments in capital expenditure for technical infrastructure, primarily for servers, followed by data centers and networking. We expect to invest approximately $75 billion in CapEx in 2025 with approximately $16 billion to $18 billion of debt in the first quarter. The expected total investment level may fluctuate from quarter-to-quarter, primarily due to timing of deliveries and construction schedules. In terms of expenses, first, the increase in our investment in CapEx over the past few years will increase pressure on the P&L, primarily in the form of higher depreciation. In 2024, we saw 28% year-over-year growth in depreciation as we put more technical infrastructure assets into service. Given the increase in CapEx investments over the past few years, we expect the growth rate and depreciation to accelerate in 2025. Second, we expect some headcount growth in 2025 in key investment areas such as AI and cloud. As you just heard from Sundar, we're delivering products and solutions to customer at a rapid pace, building, testing, and launching products faster than ever before. And as I mentioned on the Q3 call, we're doing that while also focusing on driving further efficiencies in how we operate the business. Before we take questions, I'd like to recap the financial results for the year. For the full year 2024, revenue grew by 14% or by $43 billion, reaching $350 billion. Google Services and Google Cloud each continue to see double-digit revenue growth coupled with margin extension. YouTube and cloud revenues combined, ended the year at $110 billion annual run rate. And in 2024, we generate total income of $112 billion, an increase of 33% from 2023. We're pleased with the momentum we're seeing in AI innovation and monetization. We've been using AI to improve the performance of our ads business for well over a decade, and Cloud is generating billions in annual revenue from AI infrastructure and generative AI solutions. We're also excited about the potential to bring new experiences to users that will provide additional opportunities for monetization. And I look forward to sharing more in our progress throughout the year. Sundar, Philipp, and I will now take your questions.","evidence_gemma_new":"Total cost of revenue","evidence_llama_3_3":"total cost of revenue fourth quarter","evidence_qwen_3_30b":null,"gemma_new_max":40600000000.0,"gemma_new_min":40600000000.0,"llama_3_3_max":40600000000.0,"llama_3_3_min":40600000000.0,"qwen_3_30b_max":null,"qwen_3_30b_min":null}
{"symbol":"GOOGL","year":2023,"quarter":1,"date":"2023-Q1","chunk_id":5,"sub_chunk_id":0,"centroid_label":"youtube advertising revenues revenues","agreed_value":6700000000.0,"count":2,"chunk":"Ruth Porat: Thank you, Philipp. Our financial results for the first quarter reflect continued healthy fundamental growth in Search and momentum in Cloud. As I go through the discussion today, I will reference some changes to our reporting and disclosures that are covered more fully in the 8-K we filed last week. I will conclude with our outlook. For the first quarter, our consolidated revenues were $69.8 billion, up 3% or up 6% in constant currency. Search remained the largest contributor to revenue growth on a constant currency basis. In terms of expenses and profitability, year-on-year comparisons are impacted by 3 factors: first, the $2.6 billion in charges we took in the first quarter related to workforce and office space reductions. We provided a table in our earnings release that shows the impact of those charges on cost of revenues and operating expenses. Second, the adjustment we made to the estimated useful lives of servers and certain network equipment at the beginning of 2023. As you can see in our earnings release, the effect for the first quarter was a reduction in depreciation expense of $988 million. Third, the shift in timing of our annual employee stock-based compensation awards from January to March delays the step-up in SBC from Q1 to Q2. This shift in timing does not affect the total amount of SBC over the full year 2023. Total cost of revenues was $30.6 billion, up 3%, driven by other cost of revenues of $18.9 billion, which was up 7%, the biggest factor of which was compensation costs associated with data centers and other operations and followed by content acquisition costs. Operating expenses were $21.8 billion, up 19%, with a significant impact from the charges related to workforce and office space reductions. Operating income was $17.4 billion, down 13%, and our operating margin was 25%. Net income was $15.1 billion. We delivered free cash flow of $17.2 billion in the first quarter and $62 billion for the trailing 12 months. We ended the quarter with $115 billion in cash and marketable securities. Turning to our segment results. These were affected by 2 additional changes outlined in our 8-K filing. First, reflecting the increasing collaboration between DeepMind and Google Services, Google Cloud, and Other Bets, as of Q1, DeepMind is reported as part of Alphabet's unallocated corporate costs. And second, beginning in the first quarter, we updated our cost allocation methodologies to provide our business leaders with increased transparency for decision-making. In our filing, we provided a recast of prior period results for the segment for these 2 changes. The highlights of the year-on-year performance of our segments that I will review reflect these recast results. Starting with Google Services. Revenues were $62 billion, up 1%. Google Search and other advertising revenues of $40.4 billion in the quarter were up 2%. YouTube advertising revenues of $6.7 billion were down 3%. Network advertising revenues of $7.5 billion were down 8%. Other revenues were $7.4 billion, up 9%, reflecting primarily ongoing significant subscriber growth in YouTube TV and YouTube Music Premium. TAC was $11.7 billion, down 2%, primarily reflecting a mix shift between Search and Network. Google Services operating income was $21.7 billion, down 1%, and the operating margin was 35%. Turning to the Google Cloud segment. Revenues were $7.5 billion for the quarter, up 28%. Growth in GCP remained strong across geographies, industries and products. Google Workspace's strong results were driven by increases in both seats and average revenue per seat. Google Cloud had operating income of $191 million, and the operating margin was 2.6%. As to our Other Bets, for the first quarter, revenues were $288 million, and the operating loss was $1.2 billion. Turning to our outlook for the business. In terms of the operating environment, our results in the first quarter reflected ongoing headwinds due to a challenging economic environment, and the outlook remains uncertain. Foreign exchange headwinds have moderated, and we expect less of a foreign exchange headwind in the second quarter based on current spot rates. With respect to Google Services, within advertising, Q1 results reflect the resilience of Search with its unique ability to surface demand and deliver measurable ROI. Excluding the impact of foreign exchange, the revenue growth of Search was similar to last quarter. In YouTube, we saw signs of stabilization in ad spend on a sequential basis. We continue to prioritize growth in Shorts engagement where we are encouraged by progress in monetization. As to other revenues, in YouTube subscriptions, we are pleased with the significant ongoing subscriber growth in both YouTube Music Premium and YouTube TV. In Play, revenues were down year-on-year, primarily due to the continued impact of foreign exchange in APAC, although results have improved as we lapped the impact from our introduction of fee reductions last year. Turning to Google Cloud. Our investments in product innovation, our go-to-market organization and our partner ecosystem delivered strong results as customers across industries and geographies increasingly rely on Google Cloud to digitally transform their businesses. That being said, in Q1, we continued to see slower growth of consumption as customers optimized GCP costs, reflecting the macro backdrop which remains uncertain. In terms of operating performance, we remain focused on driving long-term profitable growth in Cloud while continuing to invest given the substantial opportunity. Moving to Other Bets. In the first quarter, we similarly worked to refine strategies and prioritize efforts across the portfolio, including reductions to head count. I will now walk you through an update on our efforts to reengineer our cost base, slowing the pace of operating expense growth while creating capacity for key investment areas, particularly in support of AI across the company. First, as discussed on the fourth quarter call, we have efforts underway in 3 broad categories: number one, using AI and automation to improve productivity across Alphabet for operational tasks as well as the efficiency of our technical infrastructure; number two, managing our spend with suppliers and vendors more effectively; and number three, continuing to optimize how and where we work. As we've noted previously, all 3 work streams are ramping up this year, and we plan to build on these efforts in 2024 and in subsequent years. Second, with respect to head count growth. The reported number of employees at the end of the first quarter includes almost all of the employees impacted by the workforce reduction we announced in January. We expect most of the impacted individuals will no longer be reflected in our head count by the end of the second quarter. In terms of the outlook for head count for the year, as we shared last quarter, we are meaningfully slowing the pace of hiring in 2023 while still investing in priority areas, particularly for top engineering and technical talent. In terms of our investments in AI, we are excited about the creation of Google DeepMind, combining the Brain Team from Google Research with DeepMind, with the goal to accelerate innovation and impact. Beginning in the second quarter of 2023, the costs associated with teams and activities transferred from Google Research will move from Google Services to Google DeepMind within Alphabet's unallocated corporate costs. Finally, as it relates to CapEx, for 2023, we now expect total CapEx to be modestly higher than in 2022. As discussed last quarter, CapEx this year will include a meaningful increase in technical infrastructure versus a decline in office facilities. We expect the pace of investment in both data center construction and servers to step up in the second quarter and continue to increase throughout the year. Thank you. Sundar, Philipp and I will now take your questions.","evidence_gemma_new":"YouTube advertising revenues","evidence_llama_3_3":null,"evidence_qwen_3_30b":"YouTube advertising revenues first quarter","gemma_new_max":6700000000.0,"gemma_new_min":6700000000.0,"llama_3_3_max":null,"llama_3_3_min":null,"qwen_3_30b_max":6700000000.0,"qwen_3_30b_min":6700000000.0}
{"symbol":"GOOGL","year":2023,"quarter":2,"date":"2023-Q2","chunk_id":4,"sub_chunk_id":0,"centroid_label":"youtube advertising revenues revenues","agreed_value":7700000000.0,"count":2,"chunk":"Ruth Porat: Thank you, Philipp. Before I go into the results, first, Sundar, thank you very much for the opportunity. I'm very excited about the new role, and I look forward to it. So turning to the results. We're very pleased with our financial results for the second quarter, which reflect an acceleration of growth in Search and momentum in Cloud. My comments will be on year-over-year comparisons for the second quarter unless I state otherwise. I will start with results at the Alphabet level followed by segment results and conclude with our outlook. For the second quarter, our consolidated revenues were $74.6 billion, up 7% or up 9% in constant currency. Search remained the largest contributor to revenue growth. Total cost of revenues was $31.9 billion, up 6%, driven by other cost of revenues of $19.4 billion, which was up 8%. Growth here was driven by content acquisition costs, primarily for YouTube subscription offerings, followed by hardware costs associated with Pixel family launches in the second quarter. As noted in our earnings release, the overall increase in data center and other operations costs was partially offset by a reduction in depreciation expense due to the change in estimated useful lives we discussed last quarter. Operating expenses were $20.9 billion, up 4%. Operating income was $21.8 billion, up 12%, and our operating margin was 29%. I will cover our expense and margin performance in our outlook. Other income and expense was $65 million. Net income was $18.4 billion. We delivered free cash flow of $21.8 billion in the second quarter and $71 billion for the trailing 12 months, reflecting improved operating performance as well as the deferral of certain tax payments to the fourth quarter of 2023 as noted in our earnings release. We ended the quarter with $118 billion in cash and marketable securities. Turning to our segment results. Prior period results have been recast for 2 changes that we made as of the first quarter. First, DeepMind is now reported as part of Alphabet's unallocated corporate costs. Second, we updated our cost allocation methodologies. In the second quarter, we then combined the Brain team from Google Research with DeepMind to form Google DeepMind. Costs associated with the Brain team, which were previously included in Google Services, are now reported as part of Alphabet's unallocated corporate costs. We have not recast prior period results to reflect this additional change. Within Google Services, revenues were $66.3 billion, up 5%. Google Search and other advertising revenues of $42.6 billion in the quarter were up 5%, led by growth in retail. YouTube advertising revenues of $7.7 billion were up 4%, driven by brand advertising, followed by direct response reflecting further stabilization in spending by advertisers. Network advertising revenues of $7.9 billion were down 5%. Other revenues were $8.1 billion, up 24%, reflecting growth in YouTube non-advertising revenues, primarily from subscription growth in YouTube Music Premium and YouTube TV followed by growth in hardware revenues primarily driven by the launch of the Pixel 7a in the second quarter. Finally, Play returned to positive growth in the second quarter. TAC was $12.5 billion, up 3%. Google Services operating income was $23.5 billion, up 8%, and the operating margin was 35%. Turning to the Google Cloud segment. Revenues were $8 billion for the quarter, up 28%. GCP revenue growth remained strong across geographies, industries and products. That being said, we saw a continued moderation in the rate of consumption growth as consumers optimize their spend. Google Workspace strong revenue growth was driven by increases in both seats and average revenue per seat. Google Cloud had operating income of $395 million and the operating margin was 5%. As to our Other Bets, for the second quarter, revenues were $285 million, and the operating loss was $813 million. The decrease in operating loss was primarily driven by a reduction in valuation-based compensation liabilities related to certain Other Bets. Turning to our outlook for the business. With respect to Google Services, first, within advertising. We were pleased with the acceleration of Search advertising revenue growth in the second quarter. Our continued ability to generate sustained growth reflects our unparalleled engineering innovation that creates extraordinary experiences for users and capabilities for advertisers and delivered with the deep expertise of our go-to-market team. And in YouTube, we saw ongoing signs of stabilization in advertiser spending. We are prioritizing product focus on increasing quality consumption of video content with both Shorts and in the living room, which is translating into improved monetization. Second, within other revenues. In our YouTube subscription products, the sustained, strong growth in revenues reflects significant subscriber growth. You may have seen that last week, we increased subscription prices for YouTube Music and Premium, which underscores the value of the products. Strong year-on-year growth in hardware revenues was due, in large part, to a timing change given the Pixel 7a was launched in the second quarter, whereas the Pixel 6a launch occurred in the third quarter last year. Looking ahead, the launch timing change will be a headwind to hardware revenue growth in the third quarter. Play returned to positive growth in the second quarter, driven primarily by a solid increase in the number of buyers. Turning to Google Cloud. We are particularly excited about the customer interest in our AI-optimized infrastructure, our large language models, our AI platform services and our new generative AI offerings such as Duet AI for Google Workspace, although we are still clearly in the early days. At the same time, we continue to experience headwinds in the second quarter for moderation in consumption growth as customers optimize their spend. We continue to invest aggressively while remaining focused on profitable growth. In terms of expenses and profitability, we remain very focused on durably reengineering our cost base. Most evident to date are the actions we have taken to reduce the pace of headcount growth, including the workforce reductions we announced in the first quarter and a slower pace of organic hiring, in part given our focus on reallocating talent from within to fuel our growth priorities. A quick comment on the sequential improvement in operating margins in the second quarter. There are 2 factors to note. First, the benefit from an acceleration in search advertising revenue growth in the second quarter. Second, the vast majority of the charges related to our workforce reduction and optimization of our global office space were taken in Q1. Finally, as it relates to CapEx, in Q2, the largest component was for servers, which included a meaningful increase in our investments in AI compute. The sequential step-up in the second quarter was lower than anticipated for 2 reasons. First, with respect to office facilities, we continue to moderate the pace of fit-outs and ground-up construction to reflect the slower expected pace of headcount growth. Second, there were delays in certain data center construction projects. We expect elevated levels of investment in our technical infrastructure increasing through the back half of 2023 and continuing to grow in 2024. The primary driver is to support the opportunities we see in AI across Alphabet, including investments in GPUs and proprietary TPUs as well as data center capacity. With all that said, we remain committed to durably reengineering our cost base in order to help create capacity for these investments in support of long-term, sustainable financial value. Thank you. Sundar, Philipp and I will now take your questions.","evidence_gemma_new":"YouTube advertising revenues","evidence_llama_3_3":"YouTube advertising revenues second quarter","evidence_qwen_3_30b":null,"gemma_new_max":7700000000.0,"gemma_new_min":7700000000.0,"llama_3_3_max":7700000000.0,"llama_3_3_min":7700000000.0,"qwen_3_30b_max":null,"qwen_3_30b_min":null}
{"symbol":"GOOGL","year":2023,"quarter":3,"date":"2023-Q3","chunk_id":4,"sub_chunk_id":0,"centroid_label":"youtube advertising revenues revenues","agreed_value":8000000000.0,"count":2,"chunk":"Ruth Porat: Thank you, Philipp. We are very pleased with our financial results for the third quarter, driven by meaningful growth in Search and YouTube and momentum in Cloud. My comments will be on year-over-year comparisons for the third quarter, unless I state otherwise. I will start with results at the Alphabet level followed by segment results and conclude with our outlook. For the third quarter, our consolidated revenues were $76.7 billion, up 11% in both reported and constant currency. Search remained the largest contributor to revenue growth. In terms of expenses, total cost of revenues was $33.2 billion, up 7%, primarily reflecting other cost of revenues of $20.6 billion, which was up 6%. Growth here was primarily driven by content acquisition costs mainly for YouTube subscription offerings. As noted in our earnings release, the overall increase in data center and other operations costs was partially offset by a reduction in depreciation expense due to the change in estimated useful lives we made starting in the first quarter of the year. Operating expenses were $22.1 billion, up 6% reflecting the following. First, an increase in R&D expenses, driven primarily by compensation. Second, an increase in G&A expenses, reflecting the impact of charges related to legal matters. And finally, sales and marketing expenses, which were relatively flat to last year. Operating income was $21.3 billion, up 25%, and our operating margin was 28%. Other income and expense was a loss of $146 million. Net income was $19.7 billion. This reflects an effective tax rate of 7% in the third quarter from an IRS change related to the use of foreign tax credits, which had an outsized impact on the third quarter rate because the change resulted in a catch-up for prior periods. We delivered free cash flow of $22.6 billion in the third quarter and $78 million for the trailing 12 months. We ended the quarter with $120 billion in cash and marketable securities. As a reminder, our cash balance and free cash flow in the second and third quarters benefited from the deferral of certain tax payments to the fourth quarter of 2023. As noted in our earnings release, on October 16, we made an estimated tax payment of $10.5 billion related to this deferral, which will be reflected in our cash balance and free cash flow in the fourth quarter. Turning to segment results. Within Google Services, revenues were $68 billion, up 11%. Google Search and other advertising revenues of $44 billion in the quarter were up 11%, led again by growth in retail. YouTube advertising revenues of $8 billion were up 12%, driven by both brand advertising and direct response. Network advertising revenues of $7.7 billion were down 3%. Other revenues were $8.3 billion, up 21%, primarily reflecting growth in YouTube non-advertising revenues driven by subscriber growth in YouTube TV followed by YouTube Music Premium. TAC was $12.6 billion, up 7%. Google Services operating income was $23.9 billion, up 27% and the operating margin was 35%. Turning to the Google Cloud segment. Revenues were $8.4 billion for the quarter, up 22%. GCP revenue growth remained strong across geographies, industries and products, although the Q3 year-on-year growth rate reflects the impact of customer optimization efforts. Google Workspace also delivered strong revenue growth, primarily driven by increases in average revenue per seat. Google Cloud had operating income of $266 million, and the operating margin was 3%. As to our Other Bets, for the third quarter, revenues were $297 million and the operating loss was $1.2 billion. Turning to our outlook for the business. With respect to Google Services. First, within advertising. After a period of historic volatility, we were pleased with the year-on-year revenue growth of Search and YouTube advertising in the third quarter. Second, within other revenues, in our YouTube subscription products the substantial growth in revenues primarily reflects subscriber growth. Looking ahead, a full quarter of NFL Sunday Ticket revenues as well as associated content acquisition costs will be reflected in Q4 results compared to only a few weeks in the third quarter. Play had growth in the third quarter, driven primarily by an increase in the number of buyers. With respect to hardware, there is a headwind to revenues in the fourth quarter, reflecting efforts to optimize the portfolio with tighter targeting of our go-to-market investments as well as the ongoing impact from the difference in launch timing for the Pixel 6a and 7a that we mentioned last quarter. Turning to Google Cloud. We are pleased with the ongoing customer engagement with GCP and Workspace and the potential benefit of our AI solutions including infrastructure and services such as Vertex AI and Duet. We continue to invest aggressively given the significant potential we see while remaining focused on profitable growth. In terms of expenses and profitability, we're pleased with our operating performance. As we have repeatedly stressed, we remain focused on durably reengineering our cost base to create investment capacity to support our growth priorities, most important of which is with AI. We have a number of workstreams in place. First, we are maintaining a slower pace of headcount growth, reflecting product prioritization and reallocation of talent to support our most important growth opportunities. Second, we remain focused on optimizing our real estate footprint, including how and where we work to reduce our expense growth. As you can see from our earnings release, we incurred $207 million in accelerated rent and depreciation in the third quarter related to these actions. Third, we have engineering work streams underway to improve productivity across Alphabet. Given the magnitude of investment in our technical infrastructure, we have a superb team focused on efficiency of our operations there. We are also making progress in streamlining operations across Alphabet through the use of AI. Finally, there are ongoing workstreams that are improving the efficiency of our spend with suppliers and vendors through our central procurement organization. And to be clear, across the portfolio of other bet companies, we have also been working to identify opportunities to create sharper focus and to operate more efficiently and effectively. With respect to sequential quarter-on-quarter trends, two further points. First, cost of sales in the fourth quarter will reflect both higher hardware costs given Pixel family launches as well as increased CAC for YouTube as previously noted. Second, as usual, we expect sales and marketing expenses to be more heavily weighted to the end of the year, in part to support product launches in the holiday season. Finally, our reported CapEx in Q3 was $8 billion, driven overwhelmingly by investment in our technical infrastructure with the largest component for servers, followed by data centers, reflecting a meaningful increase in our investments in AI compute. The growth in reported cash CapEx in Q3 is somewhat muted due to the timing of supplier payments, which can cause variability from quarter-to-quarter. We continue to invest meaningfully in the technical infrastructure needed to support the opportunities we see in AI across Alphabet and expect elevated levels of investment, increasing in the fourth quarter of 2023 and continuing to grow in 2024. In closing, we remain very excited about the opportunities ahead and committed to deliver sustainable financial value. Thank you. Sundar, Philipp and I will now take your questions.","evidence_gemma_new":"YouTube advertising revenues","evidence_llama_3_3":null,"evidence_qwen_3_30b":"YouTube advertising revenues third quarter","gemma_new_max":8000000000.0,"gemma_new_min":8000000000.0,"llama_3_3_max":null,"llama_3_3_min":null,"qwen_3_30b_max":8000000000.0,"qwen_3_30b_min":8000000000.0}
{"symbol":"GOOGL","year":2023,"quarter":4,"date":"2023-Q4","chunk_id":4,"sub_chunk_id":0,"centroid_label":"youtube advertising revenues revenues","agreed_value":9200000000.0,"count":2,"chunk":"Ruth Porat: Thank you, Philipp. We are very pleased with our full year results with 2023 Alphabet revenues of $307 billion, up 9% versus 2022, which added $25 billion to revenues for the year. We ended with a strong fourth quarter with consolidated revenues of $86.3 billion, up 13% versus last year in both reported and constant currency. Search remained the largest contributor to revenue growth. My comments will be on year-over-year comparisons for the fourth quarter, unless I state otherwise. Total cost of revenues was $37.6 billion, up 6%. Other cost of revenues was $23.6 billion, up 5%, with the increase driven primarily by content acquisition costs associated with YouTube subscription offerings. The growth rate also reflects the offsetting benefit of lapping $1.2 billion in inventory-related charges that we called out in the fourth quarter last year as well as a reduction in depreciation expense due to changes in estimated useful lives we made starting in the first quarter of 2023. In terms of total expenses, the year-on-year comparisons reflect an additional $1.2 billion in exit charges that we took in the fourth quarter of 2023 in connection with actions to optimize our global office space. As you can see in our earnings release, these charges were allocated across the expense lines in other cost of revenues and OpEx based on associated head count. Operating expenses were $25 billion, up 11%, primarily reflecting an increase in R&D expenses, which were driven by the real estate charges, followed by compensation. Operating income was $23.7 billion, up 30%, and our operating margin was 27%. Net income was $20.7 billion, and EPS was $1.64. We delivered free cash flow of $7.9 billion, which was affected by the timing of the $10.5 billion tax payment we made on October 16 that we called out previously related to the deferral of certain tax payments to the fourth quarter. For the full year 2023, free cash flow was $69 billion. We repurchased a total of $62 billion of our Class A and Class C shares in 2023 and ended the year with $111 billion in cash and marketable securities. Turning to segment results. Within Google Services, revenues were $76.3 billion, up 12%. Google Search and other advertising revenues of $48 billion in the quarter were up 13%, led again by growth in retail. YouTube advertising revenues of $9.2 billion were up 16% driven by both direct response and brand advertising. Network advertising revenues of $8.3 billion were down 2%. Subscriptions, platforms and devices revenues, which we previously referred to as other revenues, were $10.8 billion, up 23%, primarily reflecting growth in YouTube subscription revenues. TAC was $14 billion, up 8%. Google Services' operating income was $26.7 billion, up 32%, and the operating margin was 35%. Turning to the Google Cloud segment. Revenues were $9.2 billion for the quarter, up 26%. We're very pleased with the momentum of GCP with an increasing contribution from AI. Google Workspace also delivered strong revenue growth primarily driven by increases in average revenue per seat. Google Cloud delivered operating income of $864 million and an operating margin of 9%. As to our Other Bets, for the full year 2023, revenues were $1.5 billion and the operating loss was $4.1 billion. Results in the fourth quarter benefited from a milestone payment in one of the Other Bets. Turning to our outlook for the business. With respect to Google Services, first, within advertising. We were pleased with the sequential revenue growth of Search and YouTube advertising throughout 2023, which reflects the extraordinary work across our teams to drive improved experiences for users and attractive ROI for advertisers. As we enter 2024 with advertising revenues of more than $100 billion higher than 2019, we remain focused on sustaining healthy growth on this larger base. Second, within subscriptions, platforms and devices, our total revenues from subscription products reached $15 billion for the full year 2023 driven primarily by substantial growth in subscribers for our YouTube subscription offerings. The substantial increase in our subscription revenues over the past few years demonstrates the ability of our teams to deliver high value-add offerings and provides a strong base on which to build, including through YouTube and newer services like Google One. Play had solid growth again in the fourth quarter driven primarily by an increase in the number of buyers. In devices, we continue to make sizable investments with increased emphasis on our Pixel family, particularly with AI-powered innovation while driving further efficiencies across the portfolio. Turning to Google Cloud. We are pleased with operating performance in the year. Full year revenues of $33 billion were up 26% versus prior year, ending with strong Q4 performance. The Cloud team is intensely focused on bringing the benefits of Gemini, our industry-leading AI technology, to enterprises and governments globally, and we are gratified with the level of engagement. The strong demand we are seeing for our vertically integrated AI portfolio is creating new opportunities for Google Cloud across every product area. In terms of profitability, the improvement in 2023 reflects sustained focus across the team with the intent to maintain healthy profitability while we continue to invest to support long-term growth. Turning to margins and expenses. As we have repeatedly stressed, we remain committed to our framework to durably reengineer our cost base as we invest to support our growth priorities. Key contributors to moderating our expense growth include: first, product and process prioritization to ensure we have the right resources behind our most important opportunities and to reallocate resources where we can; second, organizational efficiency and structure. We're focused on removing layers to simplify execution and drive velocity. Both product prioritization and the organization design efforts result in a slower pace of hiring, as you can see with our head count down year-on-year, reflecting the reductions we announced in the first quarter of 2023 and a much slower pace of hiring. We will continue to invest in top technical and engineering talent. Finally, we continue to execute the other work streams to slow expense growth, including improving efficiency in our technical infrastructure, streamlining operations across Alphabet through the use of AI, increasing efficiency of our spend with suppliers and vendors through our central procurement organization and optimizing our real estate portfolio. With respect to CapEx, our reported CapEx in the fourth quarter was $11 billion, driven overwhelmingly by investment in our technical infrastructure with the largest component for servers followed by data centers. The step-up in CapEx in Q4 reflects our outlook for the extraordinary applications of AI to deliver for users, advertisers, developers, cloud enterprise customers and governments globally and the long-term growth opportunities that offers. In 2024, we expect investment in CapEx will be notably larger than in 2023. With regard to Other Bets, we've been working to sharpen our investment focus while capturing the upside given compelling technology breakthroughs across the portfolio. For example, last week, Alphabet's X announced that it would be moving to spin out more projects as independent companies through external capital, giving X the opportunity to bring more focus to the breakthrough technologies it is working on to address some of the world's most pressing challenges. Thank you. Sundar, Philipp and I will now take your questions.","evidence_gemma_new":"YouTube advertising revenues","evidence_llama_3_3":"YouTube advertising revenues","evidence_qwen_3_30b":null,"gemma_new_max":9200000000.0,"gemma_new_min":9200000000.0,"llama_3_3_max":9200000000.0,"llama_3_3_min":9200000000.0,"qwen_3_30b_max":null,"qwen_3_30b_min":null}
{"symbol":"GOOGL","year":2024,"quarter":1,"date":"2024-Q1","chunk_id":4,"sub_chunk_id":0,"centroid_label":"youtube advertising revenues revenues","agreed_value":8100000000.0,"count":2,"chunk":"Ruth Porat: Thank you, Philipp. We are very pleased with our financial results for the first quarter driven, in particular, by strength in Search and Cloud as well as the ongoing efforts to durably reengineer our cost base. My comments will be on year-over-year comparisons for the first quarter unless I state otherwise. I will start with results at the Alphabet level, followed by segment results and conclude with our outlook. For the first quarter, our consolidated revenues were $80.5 billion, up 15% or up 16% in constant currency. Search remained the largest contributor to revenue growth. In terms of total expenses, the year-on-year comparisons reflect the impact of the restructuring charges we took in the first quarter of 2023 of $2.6 billion as well as the $716 million in employee severance and related charges in the first quarter of 2024. As you can see in our earnings release, these charges were allocated across the expense lines in other cost of revenues and OpEx based on associated head count. To help with year-on-year comparisons, we included a table in our earnings release to adjust other cost of revenues, operating expenses, operating income, and operating margin to exclude the impact of severance and related office space charges in the first quarter of 2023 versus 2024. In terms of expenses, total cost of revenues was $33.7 billion, up 10%. Other cost of revenues was $20.8 billion, up 10% on a reported basis, with the increase driven primarily by content acquisition costs associated with YouTube given the very strong revenue growth in both subscription offerings and ad-supported content. On an adjusted basis, other cost of revenues were up 13% year-on-year. Operating expenses were $21.4 billion, down 2% on a reported basis, primarily reflecting expense decreases in sales and marketing and G&A, offset by an increase in R&D. The largest single factor in the year-on-year decline in G&A expenses was lower charges related to legal matters. On an adjusted basis, operating expenses were up 5%, reflecting, first, in R&D, an increase in compensation expense, primarily for Google DeepMind and Cloud; and second, in sales and marketing, a slight increase year-on-year, reflecting increases in compensation expense primarily for Cloud sales. Operating income was $25.5 billion, up 46% on a reported basis, and our operating margin was 32%. On an adjusted basis, operating income was up 31%, and our operating margin was 33%. Net income was $23.7 billion and EPS was $1.89. We delivered free cash flow of $16.8 billion in the first quarter and $69.1 billion for the trailing 12 months. We ended the quarter with $108 billion in cash and marketable securities. Turning to segment results. Within Google Services, revenues were $70.4 billion, up 14%. Google Search and other advertising revenues of $46.2 billion in the quarter were up 14% led again by growth in retail. YouTube advertising revenues of $8.1 billion were up 21% driven by both direct response and brand advertising. Network advertising revenues of $7.4 billion were down 1%. Subscriptions, platforms and devices revenues were $8.7 billion, up 18%, primarily reflecting growth in YouTube subscription revenues. TAC was $12.9 billion, up 10%. Google Services operating income was $27.9 billion, up 28%. And the operating margin was 40%. Turning to the Google Cloud segment. Revenues were $9.6 billion for the quarter, up 28%, reflecting significant growth in GCP with an increasing contribution from AI and strong Google Workspace growth, primarily driven by increases in average revenue per seat. Google Cloud delivered operating income of $900 million and an operating margin of 9%. As to our Other Bets, for the first quarter, revenues were $495 million, benefiting from a milestone payment in one of the Other Bets. The operating loss was $1 billion. Turning to our outlook for the business. With respect to Google Services, first, within Advertising, we are very pleased with the momentum of our Ads businesses. Search had broad-based strength across verticals. In YouTube, we had acceleration in revenue growth driven by brand and direct response. Looking ahead, two points to call out: first, results in our advertising business in Q1 continued to reflect strength in spend from APAC-based retailers, a trend that began in the second quarter of 2023 and continued through Q1, which means we will begin lapping that impact in the second quarter; second, the YouTube acceleration in revenue growth in Q1 reflects, in part, lapping the negative year-on-year growth we experienced in the first quarter of 2023. Turning to subscriptions, platforms, and devices. We continue to deliver significant growth in our subscriptions business, which drives the majority of revenue growth in this line. The sequential quarterly decline in year-on-year revenue growth for the line in Q1 versus Q4 reflects, in part, the fact that we had only 1 week of Sunday Ticket subscription revenue in Q1 versus 14 weeks in Q4. Looking forward, we will anniversary last year's price increase in YouTube TV starting in May. With regard to platforms, we are pleased with the performance in Play driven by an increase in buyers. With respect to Google Cloud, performance in Q1 reflects strong demand for our GCP infrastructure and solutions as well as the contribution from our Workspace productivity tools. The growth we are seeing across Cloud is underpinned by the benefit AI provides for our customers. We continue to invest aggressively while remaining focused on profitable growth. As we look ahead, two points that will affect sequential year-on-year revenue growth comparisons across Alphabet: first, Q1 results reflect the benefit of leap year, which contributed slightly more than 1 point to our revenue growth rate at the consolidated level in the first quarter; second, at current spot rates, we expect a larger headwind from foreign exchange in Q2 versus Q1. Turning to margins. Our efforts to durably reengineer our cost base are reflected in a 400 basis point expansion of our Alphabet operating margin year-on-year, excluding the impact of restructuring and severance charges in both periods. You can also see the impact in the quarter-on-quarter decline in head count in Q1, which reflects both actions we have taken over the past few months and a much slower pace of hiring. As we have discussed previously, we are continuing to invest in top engineering and technical talent, particularly in Cloud, Google DeepMind and technical infrastructure. Looking ahead, we remain focused on our efforts to moderate the pace of expense growth in order to create capacity for the increases in depreciation and expenses associated with the higher levels of investment in our technical infrastructure. We believe these efforts will enable us to deliver full year 2024 Alphabet operating margin expansion relative to 2023. With respect to CapEx, our reported CapEx in the first quarter was $12 billion, once again driven overwhelmingly by investment in our technical infrastructure, with the largest component for servers followed by data centers. The significant year-on-year growth in CapEx in recent quarters reflects our confidence in the opportunities offered by AI across our business. Looking ahead, we expect quarterly CapEx throughout the year to be roughly at or above the Q1 level, keeping in mind that the timing of cash payments can cause variability in quarterly reported CapEx. With regard to Other Bets, we similarly have work streams underway to enhance overall returns. Finally, as I trust you saw in the press release, we are very pleased to be adding a quarterly dividend of $0.20 per share to our capital return program as well as a new $70 billion authorization in share repurchases. The core of our capital allocation framework remains the same, beginning with investing aggressively in our business as you have heard us talk about today. Given the extraordinary opportunities ahead, we view the introduction of the dividend as further strengthening our overall capital return program. Thank you. Sundar, Philipp, and I will now take your questions.","evidence_gemma_new":"YouTube advertising revenues","evidence_llama_3_3":null,"evidence_qwen_3_30b":"YouTube advertising revenues","gemma_new_max":8100000000.0,"gemma_new_min":8100000000.0,"llama_3_3_max":null,"llama_3_3_min":null,"qwen_3_30b_max":8100000000.0,"qwen_3_30b_min":8100000000.0}
{"symbol":"GOOGL","year":2024,"quarter":2,"date":"2024-Q2","chunk_id":4,"sub_chunk_id":0,"centroid_label":"youtube advertising revenues revenues","agreed_value":8700000000.0,"count":2,"chunk":"Ruth Porat : Thank you, Philipp, and thanks, Sundar, for those kind words. We had another strong quarter, driven in particular by performance in Search and Cloud, as well as the ongoing efforts to durably reengineer our cost base. My comments will be on year-over-year comparisons for the second quarter unless I state otherwise. I will start with results at the Alphabet level followed by segment results and conclude with our outlook. For the second quarter, our consolidated revenues were $84.7 billion, up 14% or up 15% in constant currency. Search remained the largest contributor to revenue growth. In terms of expenses, total cost of revenues was $35.5 billion, up 11%. Other cost of revenues was $22.1 billion, up 14%, with the increase driven primarily by content acquisition costs, followed by depreciation as well as the impact of the Canadian digital services tax, which was applied retroactively. Operating expenses were $21.8 billion up 5%, primarily reflecting an increase in R&D partially offset by a decline in G&A with sales and marketing essentially flat to the second quarter last year. The increase in R&D was driven primarily by compensation which was affected by lapping a reduction in valuation-based compensation liabilities in certain other bets in the second quarter last year followed by depreciation. The largest single factor in the year-on-year decline in G&A expenses was lower charges related to legal matters. Operating income was $27.4 billion, up 26% and our operating margin was 32%. Net income was $23.6 billion and EPS was $1.89. We delivered free cash flow of $13.5 billion in the second quarter and $60.8 billion for the trailing 12 months. As a reminder, last year, we had a timing benefit in the second and third quarters from a $10.5 billion deferred cash tax payment made in the fourth quarter, which depressed reported free cash flow growth this quarter, and we'll do so again next quarter. We ended the quarter with $101 billion in cash and marketable securities. Turning to segment results. Within Google Services, revenues were $73.9 billion, up 12%. Google Search and other advertising revenues of $48.5 billion in the quarter were up 14%, led again by growth in retail, followed by the financial services vertical. YouTube advertising revenues of $8.7 billion were up 13% driven by brand followed by direct response advertising. Network advertising revenues of $7.4 billion were down 5%. Subscription platforms and devices revenues were $9.3 billion up 14%, primarily reflecting growth in YouTube subscription revenues. TAC was $13.4 billion, up 7%. Google Services operating income was $29.7 billion up 27% and the operating margin was 40%. Turning to the Google Cloud segment. Revenues were $10.3 billion for the quarter, up 29%, reflecting first significant growth in GCP, which was above growth for cloud overall and includes an increasing contribution from AI. And second, strong Google Workspace growth, primarily driven by increases in average revenue per seat. Google Cloud delivered operating income of $1.2 billion and an operating margin of 11%. As to our Other Bets for the second quarter, revenues were $365 million and the operating loss was $1.1 billion. Turning to our outlook for the business. With respect to Google Services, First, within advertising. The strong performance of search was broad-based across verticals. In YouTube, we are pleased with the growth in the quarter. We had healthy watch time growth continued to close the monetization gap in Shorts and had continued momentum in Connected TV, with brand benefiting in part from an ongoing shift in budgets from linear television to digital. As we look forward to the third quarter, we will be lapping the increasing strength in advertising revenues in the second half of 2023, in part from APAC based retailers. Turning to subscriptions, platforms and devices. First, we continue to have significant growth in our subscriptions business which drives the majority of revenue growth in this line. However, there was a sequential decline in the year-on-year growth rate, as we anniversaried the impact of a price increase for YouTubeTV in the second quarter last year. The impact will persist through the balance of the year. Second, with regard to platforms. We are pleased with the performance in play driven by an increase in buyers. Finally, with respect to devices. The most important point as we look forward is that our Made by Google launches have been pulled forward into the third quarter from the fourth quarter last year benefiting revenues in Q3 this year. Turning to cloud, which continued to deliver very strong results. For the first time, Cloud crossed $10 billion in quarterly revenues and $1 billion in quarterly operating profit. As Sundar noted year-to-date, our AI infrastructure and generative AI solutions for cloud customers have already generated billions in revenues and are being used by more than 2 million developers. We're particularly encouraged that the majority of our top 100 customers are already using our generative AI solutions. We continue to invest aggressively in the business. Turning to margins. The margin expansion in Q2 versus last year reflects our ongoing efforts to durably reengineer our cost base, as well as revenue strength. Our leadership team remains focused on our efforts to moderate the pace of expense growth in order to create capacity for the increases in depreciation and expenses associated with the higher levels of investment in our technical infrastructure. Once again headcount declined quarter-on-quarter, which reflects both actions we have taken in the first half of the year and a much slower pace of hiring. Looking ahead, we expect a slight increase in headcount in the third quarter, as we bring on new graduates. As we have discussed previously, we\u2019re continuing to invest in top engineering and technical talent, particularly in cloud and technical infrastructure. Looking forward, we continue to expect to deliver full-year 2024 Alphabet operating margin expansion relative to 2023. However, in the third quarter operating margins will reflect the impact of both the increases in depreciation and expenses associated with the higher levels of investment in our technical infrastructure, as well as the increase in cost of revenues due to the pull-forward of hardware launches into Q3. With respect to CapEx, our reported CapEx in the second quarter was $13 billion, once again driven overwhelmingly by investment in our technical infrastructure with the largest component for servers followed by data centers. Looking ahead, we continue to expect quarterly CapEx throughout the year to be roughly at or above the Q1 CapEx of $12 billion keeping in mind that the timing of cash payments can cause variability in quarterly reported CapEx. With regard to other bets, we continue to focus on improving overall efficiencies, as we invest for long-term returns. Waymo is an important example of this, with its technical leadership coupled with progress on operational performance. As you will see in the 10-Q, we have chosen to commit to a new multi-year investment of $5 billion. This new round of funding, which is consistent with recent annual investment levels will enable Waymo to continue to build the world's leading autonomous driving technology company. To close, this is my 56th and last earnings call, 37 of them at Alphabet. So I have a few closing thoughts of gratitude. I've been so proud to be at Google and Alphabet as CFO and to work with some of the smartest people in the world every day. I think, we have accomplished a lot in the last nine plus years, and I am confident that progress will continue. Of course, I'm not going far and I'm honored to have my new role, which I've been slowly working my way into during the past 11 months and I look forward to continuing to work with Sundar, and our great team. Being CFO of one of the most important companies in the world has been the opportunity and responsibility of a lifetime. Google's Mission of advancing technology and bringing information to people throughout the world is as relevant today as it was when I worked on its IPO. Technology has been a catalyst for economic growth throughout human history. The people on this call know that if a technological advancement is not the focus of every business and government, they will be left behind. Underpinning this is the need for sound and responsible investment. That has never been more important than today and certainly, that is Google and Alphabet's focus. I want to end by thanking Googlers around the world for the innovation and commitment that has enabled us to deliver such extraordinary products and services globally. I also want to thank our investors and analysts for your long-term support and your feedback. Thank you. Sundar, Philipp and I will now take your questions.","evidence_gemma_new":"YouTube advertising revenues","evidence_llama_3_3":"YouTube advertising revenues revenues second quarter","evidence_qwen_3_30b":null,"gemma_new_max":8700000000.0,"gemma_new_min":8700000000.0,"llama_3_3_max":8700000000.0,"llama_3_3_min":8700000000.0,"qwen_3_30b_max":null,"qwen_3_30b_min":null}
{"symbol":"GOOGL","year":2024,"quarter":3,"date":"2024-Q3","chunk_id":3,"sub_chunk_id":0,"centroid_label":"youtube advertising revenues revenues","agreed_value":0.12,"count":2,"chunk":"Philipp Schindler: Thanks, Sundar, and hello, everyone. I'll start with performance for the quarter and then describe the progress we're seeing across ads, YouTube and partnerships, highlighting the impact AI is already having on our business. Google Services delivered revenues of $76.5 billion for the quarter, up 13% year-on-year. Search and other revenues grew 12% year-on-year, led by growth in the financial services vertical due to strength in insurance, followed by retail. YouTube ads revenues grew 12% year-on-year, driven by brand, closely followed by direct response. Network revenues were down 2% year-on-year. In subscriptions, platforms and devices, year-on-year revenues were up 28%, driven by growth in subscriptions as well as the launch of our Made by Google devices in the third quarter. Before I double-click into ads, YouTube and partnerships, a few comments on search. Whether they're using their voice to find answers on the go or opening their camera to explore the world around them, people are expanding how they ask questions in search as well as the type of questions they ask. New behaviors create new opportunities to help us connect businesses and consumers via amazing commercial experiences. As GenAI expands what's possible, we continue to see a significant opportunity in search. Let me take a minute to explain why. AI really supercharges search. Our new AI-powered features make searches more helpful, and we continue to see great feedback, particularly from younger users. For example, with Circle to Search, where we see higher engagement from users aged 18 to 24. AI is expanding our ability to understand intent and connect it to our advertisers. This allows us to connect highly relevant users with the most helpful ad and deliver business impact to our customers. Let me share two new ad experiences we have rolled out alongside our popular AI-powered features in search. First, as you heard from Sundar, every month, Lens is used for almost 20 billion visual searches with 1 in 4 of these searches having commercial intent. In early October, we announced product search on Google Lens. And in testing this feature, we found that shoppers are more likely to engage with content in this new format. We're also seeing that people are turning to Lens more often to run complex multimodal queries, voicing a question or inputting text in addition to a visual. Given these new user behaviors, earlier this month, we announced the rollout of shopping ads above and alongside relevant Lens visual search results to help better connect consumers and businesses. Second, AI Overviews, where we have now started showing search and shopping ads within the overview for mobile users in the U.S. As you remember, we've already been running ads above and below AI Overviews. We're now seeing that people find ads directly within AI Overviews helpful because they can quickly connect with relevant businesses, products and services to take the next step at the exact moment they need. As I've said before, we believe AI will revolutionize every part of the marketing value chain. Let's start with creative. Advertisers now use our Gemini-powered tools to build and test a larger variety of relevant creatives at scale. Audi used our AI tools to generate multiple video image and text assets in different links and orientations out of existing long-form videos. It then fed the newly generated creatives into demand gen to drive reach, traffic and booking to their driving experience. The campaign increased website visits by 80% and increased clicks by 2.7 times, delivering a lift in their sales. Last week, we updated image generation at Google Ads with our most advanced text-to-image model, Imagine 3, which we tuned using ads performance data from multiple industries to help customers produce high-quality imagery for their campaigns. Advertisers can now create even higher-performing assets for PMax, Demand Gen app and Display campaigns. Turning to media buying. AI-powered campaigns help advertisers get faster feedback on what creatives work, where and redirect their media buying. Using Demand Gen, DoorDash tested a mix of image and video assets to drive more impact across Google and YouTube's visually immersive surfaces. They saw a 15 times higher conversion rate at a 50% more efficient cost per action when compared to video action campaigns alone. Last and most importantly, measurement. This quarter, we extended availability of our open source marketing mix model, Meridian to more customers, helping to scale measurement of cross-channel budgets to drive better business outcomes. On YouTube, we remain focused on building a platform that enables creators to thrive and unlocking a whole new world of creativity with AI. Creators are at the heart of the YouTube ecosystem and the content they are making is driving robust growth in watch time across the platform. We're also using AI to greatly improve recommendations on YouTube. Driven by Gemini, our large language models have a deeper understanding of video content and viewers' preferences. As a result, they can recommend more relevant, fresher and personalized content to the viewer. Short-form creation continues to thrive on YouTube. Shorts monetization improved again this quarter, and we continue to significantly close the gap with in-stream video, particularly in the U.S. and other more highly monetizing markets. Of all the channels uploading to YouTube each month, 70% are uploading shorts. And we recently announced a top requested feature, the ability to upload shorts up to 3 minutes long. Also, advertisers can now book first position on Shorts blocks in close to 40 markets. We're unlocking more opportunities in the living room. Our momentum here continues as we maintain our status as the number one streamer in the U.S. according to Nielsen. This is driven by the strength of our creators, such as Michelle Carr and Rhett & Link, who are increasingly crafting experiences designed specifically for the big screen, and it's paying off. The number of creators making the majority of the YouTube revenue on TV screens is up more than 30% year-on-year. YouTube is becoming a premier destination for sports watching. People come for the game and stay for the commentary and around the game content from creators like Evelyn Gonzalez, Adam W and Brad Coleman. During the Olympics, content from Paris 2024 had over 12 billion views on YouTube. More than 850 million unique viewers watched over 40 billion minutes of content with 35% on their TV screens. And recently, we kicked off our second season of NFL Sunday Ticket on YouTube TV, which continues to receive a positive reception from advertisers, our partners at the NFL and fans. We have continued to invest in our product experience with improvements to multiview and deeper integrations for fantasy football fans. Following up on my remarks from last quarter about Brandcast, we had a strong upfront performance with commitments up about 20% year-on-year. As always, let me wrap with the strong momentum we're seeing in partnerships. More and more of our partners are recognizing the breadth of our technologies and building solutions that leverage the very best of Google. For example, our recently announced strategic partnership with Vodafone Group spans Google Cloud, AI, Android ads and digital services. This multibillion-dollar partnership will bring these technologies to more than 330 million customers across Europe and Africa. We are collaborating on more than 30 initiatives across 7 areas, including generative AI from consumers, a best-in-class TV platform, hardware and cybersecurity. With that, a heartfelt thank you to Google everywhere for their extraordinary commitment and to our customers and partners for their continued collaboration and trust. Anat, welcome to the team. It's great to have you with us. Over to you.","evidence_gemma_new":"YouTube ads revenues year-on-year","evidence_llama_3_3":"YouTube ads revenues year-on-year","evidence_qwen_3_30b":null,"gemma_new_max":0.12,"gemma_new_min":0.12,"llama_3_3_max":0.12,"llama_3_3_min":0.12,"qwen_3_30b_max":null,"qwen_3_30b_min":null}
{"symbol":"GOOGL","year":2024,"quarter":4,"date":"2024-Q4","chunk_id":3,"sub_chunk_id":0,"centroid_label":"youtube advertising revenues revenues","agreed_value":14.0,"count":2,"chunk":"Philipp Schindler: Thanks, Sundar, and hello, everyone. I will quickly cover performance for the quarter, then frame the rest of my remarks around the progress we are delivering across Search, Ads, YouTube and Partnerships, highlighting the impact AI is having on our business and our customers. Google Services revenues were $84 billion for the quarter, up 10%, driven primarily by 11% year-on-year growth in advertising revenues. Strong growth in Search and YouTube advertising was partially offset by year-over-year decline in network revenues. In terms of vertical performance, the 13% increase in Search and other revenues was led by financial services followed by retail. The 14% growth in YouTube advertising revenues was driven by strong spend on U.S. election advertising, with combined spend from both parties almost doubling from what we saw in the 2020 elections. Now, in Q4, we saw continued strong growth in revenues from Search. We had lots of exciting updates in December, and we're rapidly integrating our AI innovation into our consumer experiences. We've already started testing Gemini 2.0 in AI overviews and plan to roll it out more broadly later in the year. In Search, we're seeing people increasingly ask entirely new questions using their voice, camera, or in ways that were not possible before, like with Circle to Search. We're making these benefits available to more consumers. Google is already present in over half of journeys where a new brand, product, or retailer are discovered. By offering new ways for people to Search, we're expanding commercial opportunities for our advertisers. Shoppers can now take a photo of a product and, using lens, quickly find information about the product, reviews, similar products, and where they can get it for a great price. Lens is used for over 20 billion visual search queries every month, and the majority of these searches are incremental. Retail was particularly strong this holiday season, especially on Black Friday and Cyber Monday, which each generated over $1 billion in ad revenue. Interestingly, despite the U.S. holiday shopping season being the shortest since 2019, retail sales began much earlier, in October, causing the season to extend longer than anticipated. People shop more than a billion times a day across Google. Last quarter, we introduced a reinvented Google shopping experience, rebuilt from the ground up with AI. This December saw roughly 13% more daily active users on Google shopping in the U.S. compared to the same period in 2023. Closing out on Search with travel, and sharing another interesting trend where we saw spend expand to travel Tuesday. This contributed to 20% year-on-year revenue growth for travel advertisers across Cyber Monday and Travel Tuesday. Moving to Ads. We continue investing in AI capabilities across media buying, creative and measurement. As I said before, we believe that AI will revolutionize every part of the marketing value chain, and over the past quarter, we've seen how our customers are increasingly focusing on optimizing their use of AI. As an example, Petco used DemandGen campaigns across targeting, creative generation, and bidding to find new pet parent audiences across YouTube. They achieved a 275% higher return on ad spend and a 74% higher click through rate than their social benchmarks. On media buying, we made YouTube select creator takeovers generally available in the U.S. and will be expanding to more markets this year. Creators know their audience the best and creator takeovers help businesses connect with consumers through authentic and relevant content. Looking at Creative, we introduced new controls and made reporting easier in PMAX, helping customers better understand and reinvest into their best performing assets. Using asset generation in PMAX. Event Ticket Center achieved a 5x increase in production of creative assets, saving time and effort. They also increased convergence by 300% compared to the previous period when they used manual assets. And finally, Measurement. Last week, we made Meridian, our marketing mix model, generally available for customers, helping more business reinvest into creative and media buying strategies that they know work. Based on a Nielsen meta-analysis of marketing mix models, on average, Google AI-powered video campaigns on YouTube deliver 17% higher return on advertising spend than manual campaigns. Turning to YouTube. We saw robust revenue growth backed by continued growth and watch time across ad supported and premium experiences. Our focus here remains on building a streaming platform that enables creators to thrive and unlock the full potential of AI. Expanding on our state-of-the-art video generation model, we announced Veo 2, which creates incredibly high quality video in a wide range of subjects and styles. It's been inspiring to see how people are experimenting with it. We'll make it available to creators on YouTube in the coming months. We continue to invest in helping YouTube creators work with brands. All advertisers globally can now promote YouTube creator videos and ad campaigns across all AI-powered campaign types in Google Ads. And creators can tag partners in their brand videos. Sephora used DemandGen's Shorts-Only channel to boost traffic and brand searches for the Holiday Gift Guide campaign and leverage creator collaborations to find the best gift. This drove an 82% relative uplift in searches for Sephora Holiday. Shorts continues its ascent and is closing the gap with long form. In 2024, the monetization rate of Shorts relative to in-stream viewing increased by more than 30 percentage points in the U.S., and we expect to make additional progress in 2025. We're making it easier for advertisers to benefit from Shorts on all screens. We're particularly excited by its success on connected TV, which now makes up 15% of shorts viewing in the U.S. Using a combination of ad formats, Louis Vuitton reached their overall objectives on both long-form and short-form content. Their shorts exceeded luxury goods benchmark for average view duration by 89% for equivalent video lengths, while their long-form content exceeded the benchmark by over 15%, with strong engagement from Gen Z and Millennials. Looking into the living room, we continue to be number one in streaming watch time in the U.S for nearly two years, according to Nielsen, and our share of streaming is at a record high. Viewers globally streamed over 1 billion hours of YouTube content daily on their TVs in 2024. YouTube makes multi-year investments to tap into shifting consumer behavior. The current surge in living room viewership directly reflects years of work to build the right products and partnerships. Creators are now prioritizing high-quality viewing experiences that truly shine on TV screens, inspiring even more viewers to tune in. In fact, the number of creators making majority of revenue from TV is up over 30% year-on-year. We have also invested in podcasts, where popular shows like Club Shay Shay and Lex Friedman are increasingly a visual format. YouTube creators and viewers are embracing this. In 2024, people watched over 400 million hours of podcasts each month on living room devices alone. YouTube is now the most popular service for podcast listening in the U.S., according to Edison. As always, let me wrap with the strong momentum we're seeing in partnerships, where the breadth of what Google has to offer is increasingly being recognized. Sundar mentioned our deepening partnership with Samsung. Another expanding partnership is with Citi, who is modernizing its technology infrastructure with Google Cloud to transform employee and customer experiences. Using Google Cloud, it will improve its digital products, streamline employee workflows, and use advanced high-performance computing to enable millions of daily computations. This partnership also fuels Citi's generative AI initiatives across customer service, document summarization, and search to reduce manual processing. With that, allow me a moment to thank Googlers everywhere for their extraordinary commitment and to our customers and partners for their continued trust. Anat, over to you.","evidence_gemma_new":"YouTube advertising revenues","evidence_llama_3_3":null,"evidence_qwen_3_30b":"YouTube advertising revenue Q4","gemma_new_max":14.0,"gemma_new_min":14.0,"llama_3_3_max":null,"llama_3_3_min":null,"qwen_3_30b_max":14.0,"qwen_3_30b_min":14.0}
{"symbol":"HD","year":2024,"quarter":2,"date":"2023-FY","chunk_id":5,"sub_chunk_id":0,"centroid_label":"adjusted diluted earnings per share percent","agreed_value":-3.0,"count":2,"chunk":"Richard McPhail: Thank you, Billy, and good morning, everyone. In the second quarter, Total sales were $43.2 billion, an increase of approximately 0.6% from last year. Total sales include $1.3 billion from the recent acquisition of SRS, which represents approximately six weeks of sales in the quarter. During the second quarter, our total company comps were negative 3.3%, with comps of negative 3.7% in May, negative 0.9% in June and negative 4.9% in July. Comps in the U.S. were negative 3.6% for the quarter, with comps of negative 4.1% in May, negative 1.4% in June and negative 5% in July. In the second quarter, our gross margin was approximately 33.4%, an increase of 40 basis points from the second quarter last year, primarily driven by benefits from lower transportation costs and shrink, partially offset by mix as a result of the SRS acquisition. During the second quarter, operating expense as a percent of sales increased approximately 65 basis points to 18.3% compared to the second quarter of 2023. Our operating expense performance was in line with our expectations. Beginning this quarter, in addition to our GAAP measures, we are providing the following non-GAAP measures: adjusted operating income, adjusted operating margin and adjusted diluted earnings per share, which excludes noncash amortization of acquired intangible assets. We believe these supplemental measures will help investors better understand and analyze our performance. Our operating margin for the second quarter was 15.1% compared to 15.4% in the second quarter of 2023. In the quarter, pretax intangible asset amortization was $90 million, including $39 million related to SRS. Excluding the intangible asset amortization in the quarter, our adjusted operating margin for the second quarter was 15.3% and compared to 15.5% in the second quarter of 2023. Interest and other expense for the second quarter increased by $61 million to $489 million due primarily to higher debt balances than a year ago. In the second quarter, our effective tax rate was 24.5%, compared to 24.4% in the second quarter of fiscal 2023. Our diluted earnings per share for the second quarter were $4.60, a decrease of approximately 1% compared to the second quarter of 2023. Excluding intangible asset amortization, our adjusted diluted earnings per share for the second quarter were $4.67, essentially flat compared to the second quarter of 2023. During the second quarter, we opened three new stores, bringing our total store count to 2,340. Retail selling square footage was approximately 243 million square feet. At the end of the quarter, merchandise inventories or $23.1 billion, down approximately $200 million compared to the second quarter of 2023, and inventory turns were 4.9x, up from 4.4x last year. Turning to capital allocation. During the second quarter, we invested approximately $720 million back into our business in the form of capital expenditures. And during the quarter, we paid approximately $2.2 billion in dividends to our shareholders. Our disciplined approach to capital allocation remains unchanged. First and foremost, we will invest in the business and expect capital expenditures of approximately 2% of sales on an annual basis. After investing in the business, we plan to pay the dividend and it is our intent to return any excess cash to shareholders in the form of share repurchases. Computed on the average of beginning and ending long-term debt and equity for the trailing 12 months, return on invested capital was approximately 31.9%, down from 41.5% in the second quarter of fiscal 2023. Now, I will comment on our updated outlook for fiscal 2024. As you heard from Ted, given the softer-than-expected performance in the first half of the year, and reflecting continued uncertainty around underlying consumer demand, we believe a more cautious outlook for the year is warranted. With the recent closing of the SRS acquisition, we are now including their results in our consolidated outlook for the year. For the period matching our first half, which includes periods prior to the acquisition and not fully reflected in our financial statements, SRS generated high single-digit percentage sales growth with operating income growing largely in line with sales. We believe that over the next several years, SRS on its own, and through our combined Pro efforts, will help accelerate sales and earnings growth for our company. Updating our fiscal 2024 guidance for the factors we just discussed. We now expect total sales growth between 2.5% and 3.5%, including the SRS acquisition and the 53rd week. The 53rd week is projected to add approximately $2.3 billion to total sales. SRS is expected to contribute approximately $6.4 billion in incremental sales. Comparable sales are expected to decline between negative 3% and negative 4% for the 52-week period. The high end of our range implies a consumer demand environment consistent with the first half of fiscal 2024. While comparable sales for the Company are not currently on the trajectory for the low end of the range, a negative 4% comp implies incremental pressure on consumer demand beyond what we are seeing today. We expect to open approximately 12 new stores. Our gross margin is expected to be approximately 33.5%. We expect operating margin to be between 13.5% and 13.6%, and adjusted operating margin to be between 13.8% and 13.9%. Our effective tax rate is targeted at approximately 24%. We expect net interest expense of approximately $2.2 billion. Our diluted earnings per share percent will decline between negative 2% and negative 4% compared to fiscal 2023, with the extra week contributing approximately $0.30. We expect our adjusted diluted earnings per share percent to decline between negative 1% and negative 3%, compared to fiscal 2023, with the extra week contributing approximately $0.30. We believe that we have positioned ourselves to meet the needs of our customers in any environment. The investments we've made in our business have enabled agility in our operating model. As we look forward, we will continue to invest to strengthen our position with our customers, leverage our scale and low-cost position to drive growth faster than the market and deliver shareholder value. Thank you for your participation in today's call. And Christine, we are now ready for questions.","evidence_gemma_new":"diluted earnings per share fiscal 2023","evidence_llama_3_3":null,"evidence_qwen_3_30b":"projected diluted earnings per share percent","gemma_new_max":-3.0,"gemma_new_min":-3.0,"llama_3_3_max":null,"llama_3_3_min":null,"qwen_3_30b_max":-3.0,"qwen_3_30b_min":-3.0}
{"symbol":"HD","year":2024,"quarter":3,"date":"2023-FY","chunk_id":5,"sub_chunk_id":0,"centroid_label":"adjusted diluted earnings per share percent","agreed_value":-2.0,"count":2,"chunk":"Richard McPhail: Thank you, Billy, and good morning, everyone. In the third quarter, total sales were $40.2 billion, an increase of approximately 6.6% from last year. During the third quarter, our total company comps were negative 1.3% with comps of negative 3.3% in August, negative 2.3% in September and positive 1% in October. Comps in the U.S. were negative 1.2% for the quarter, with comps of negative 3.5% in August, negative 2.2% in September, and positive 1.4% in October. The progression of our monthly comps reflects in large part hurricane related sales. Our results for the third quarter include a net contribution of approximately $200 million in hurricane related sales, which positively impacted total company comps by approximately 55 basis points for the quarter and approximately 120 basis points for October. In the third quarter, our gross margin was approximately 33.4%, a decrease of approximately 40 basis points from the third quarter last year, primarily driven by mix as a result of the SRS acquisition, partially offset by benefits from lower shrink. During the third quarter, operating expense as a percent of sales increased approximately 45 basis points to 19.9% compared to the third quarter of 2023. Our operating expense performance was in-line with our expectations. Our operating margin for the third quarter was 13.5% compared to 14.3% in the third quarter of 2023. In the quarter, pre-tax intangible asset amortization was $138 million including $86 million related to SRS. Excluding the intangible asset amortization in the quarter, our adjusted operating margin for the third quarter was 13.8% compared to 14.5% in the third quarter of 2023. Interest and other expense for the third quarter increased by $157 million to $595 million due primarily to higher debt balances than a year ago. In the third quarter, our effective tax rate was 24.4% compared to 23.3% in the third quarter of fiscal 2023. Our diluted earnings per share for the third quarter were $3.67, a decrease of approximately 4% compared to the third quarter of 2023. Excluding intangible asset amortization, our adjusted diluted earnings per share for the third quarter were $3.78, a decrease of approximately 2% compared to the third quarter of 2023. During the third quarter, we opened five new stores, bringing our total store count to 2, 345. Retail selling square footage was approximately 243 million square feet. At the end of the quarter, merchandise inventories were $23.9 billion up approximately $1.1 billion compared to the third quarter of 2023, and inventory turns were 4.8 times, up from 4.3 times last year. Turning to capital allocation. During the third quarter, we invested approximately $820 million back into our business in the form of capital expenditures. And during the quarter, we paid approximately $2.2 billion in dividends to our shareholders. Compute on the average of beginning and ending long-term debt and equity for the trailing 12-months, return on invested capital was approximately 31.5%, down from 38.7% in the third quarter of fiscal 2023. Now, I will comment on our updated outlook for fiscal 2024. As you heard from Ted, while macro uncertainty remains and continues to pressure home improvement demand, our performance in the third quarter was better than expected. Our performance reflects hurricane related sales in the third quarter, and we expect some hurricane related sales in the fourth quarter. Given the better than expected performance in the third quarter and incremental hurricane related sales, we have updated our fiscal 2024 guidance. We now expect total sales growth of approximately 4%, including SRS in the 53rd week. The 53rd week is projected to add approximately $2.3 billion to total sales and SRS is expected to contribute approximately $6.4 billion in incremental sales. Comparable sales are expected to decline approximately 2.5% for the 52 week period. We expect to open approximately 12 new stores. Our gross margin is expected to be approximately 33.5%. We expect operating margin to be approximately 13.5% and adjusted operating margin to be approximately 13.8%. Our effective tax rate is targeted at approximately 24%. We expect net interest expense of approximately $2.1 billion. We expect our diluted earnings per share to decline approximately 2% compared to fiscal 2023 with the extra week contributing approximately $0.30 per share. And, we expect our adjusted diluted earnings per share to decline approximately 1% compared to fiscal 2023 with the extra week contributing approximately $0.30 per share. We believe that we will grow market share in any environment. We are continuing to invest to strengthen our competitive position with our customers and leverage our scale and low cost position to drive growth faster than the market and deliver shareholder value. Thank you for your participation in today\u2019s call. And Christine, we are now ready for questions.","evidence_gemma_new":"adjusted diluted earnings per share fiscal 2023","evidence_llama_3_3":null,"evidence_qwen_3_30b":"expected adjusted diluted earnings per share percent","gemma_new_max":-2.0,"gemma_new_min":-2.0,"llama_3_3_max":null,"llama_3_3_min":null,"qwen_3_30b_max":-2.0,"qwen_3_30b_min":-2.0}
{"symbol":"HD","year":2023,"quarter":1,"date":"2023-Q1","chunk_id":5,"sub_chunk_id":0,"centroid_label":"adjusted diluted earnings per share percent","agreed_value":3.82,"count":3,"chunk":"Richard McPhail: Thank you, Ann, and good morning, everyone. In the first quarter, total sales were $37.3 billion a decrease of approximately $1.7 billion or 4.2% from last year. During the first quarter, our total company comps were negative 4.5% with comps of negative 2.5% in February, negative 7.5% in March and negative 3.7% in April. Comps in the U.S. were negative 4.6% for the quarter with comps of negative 2.8% in February, negative 7.5% in March and negative 3.7% in April. Our first quarter comp sales missed our own expectations, particularly in the months of March and April, driven primarily by 2 notable factors. First, lumber deflation drove a negative comp impact of approximately 220 basis points versus the first quarter of 2022. Second, unfavorable weather, particularly in our Western division further impacted our results. In the first quarter, our gross margin was 33.7% a decrease of 8 basis points from the first quarter last year, primarily driven by increased pressure from shrink. We continue to successfully offset supply chain and product cost pressures while maintaining our position as the customer\u2019s advocate for value. During the first quarter, operating expense as a percent of sales increased approximately 25 basis points to 18.8% compared to the first quarter of 2022. Our operating expense performance during the first quarter reflects the planned compensation increases announced during our fourth quarter 2022 call as well as a onetime benefit from a legal settlement. Our operating margin for the first quarter was 14.9% compared to 15.2% in the first quarter of 2022. Interest and other expense for the first quarter increased by $72 million to $441 million due primarily to interest on our floating rate debt as well as higher debt balances than a year ago. In the first quarter, our effective tax rate was 24.2%, up from 23.9% in the first quarter of fiscal 2022. Our diluted earnings per share for the first quarter or $3.82, a decrease of 6.6% compared to the first quarter of 2022. During the first quarter, we opened 2 new stores, bringing our total store count to 2,324. Retail selling square footage was approximately 241 million square feet. At the end of the quarter, merchandise inventories were $25.4 billion, essentially flat compared to the first quarter of 2022 and inventory turns were 3.9x down from 4.4x last year. Turning to capital allocation. After investing in our business and paying our dividend, it is our intent to return excess cash to shareholders in the form of share repurchases. During the first quarter, we invested approximately $900 million back into our business in the form of capital expenditures. And during the quarter, we paid approximately $2.1 billion in dividends to our shareholders, and we returned approximately $3 billion to shareholders in the form of share repurchases. Computed on the average of beginning and ending long-term debt and equity for the trailing 12 months, return on invested capital was approximately 43.6%, down from 45.3% and in the first quarter of fiscal 2022. Now I will comment on our guidance for fiscal 2023. As you may recall, last quarter, we provided flat sales and comp guidance for fiscal 2023. As we mentioned last quarter, our guidance did not include potential impacts from lumber deflation, which we noted could negatively impact our performance for the quarter and the year. As a result, lumber negatively impacted comps by approximately 220 basis points in the first quarter. Given the negative impact of the first quarter sales from lumber and weather, further softening of demand relative to our expectations and continued uncertainty regarding consumer demand patterns, we are updating our guidance to reflect a range of potential outcomes. We now expect fiscal 2023 sales and comp sales to decline between 2% and 5%. As a result of the change in our sales outlook, we are now targeting an operating margin between 14.3% and 14.0% for the year. Our effective tax rate is targeted at approximately 24.5%. We expect interest expense of approximately $1.8 billion, and we are anticipating between a 7% and 13% decline in diluted earnings per share compared to fiscal 2022. As Ted mentioned, we expected 2023 to be a year of moderation in the home improvement market, driven by monetary policy actions to dampen overall consumer demand. In our view, we are in a transitional period in the consumer economy. Setting the short-term impacts of monetary policy aside, we know that the home improvement customer is healthy and we believe the medium to long-term underlying fundamentals of home improvement make it one of the most attractive markets in retail and the economy as a whole. We believe that we are well positioned to meet the needs of our customers with a broad assortment of products, strong in-stock levels and knowledgeable associates. The investments we\u2019ve made in our business have enabled agility in our operating model. As we look forward, we will continue to prudently invest to strengthen our competitive position, leverage our scale and low-cost position to outperform our market and deliver shareholder value. Thank you for your participation in today\u2019s call. And Christine, we are now ready for questions.","evidence_gemma_new":"Diluted earnings per share first quarter","evidence_llama_3_3":"Diluted earnings per share first quarter","evidence_qwen_3_30b":"Diluted earnings per share first quarter","gemma_new_max":3.82,"gemma_new_min":3.82,"llama_3_3_max":3.82,"llama_3_3_min":3.82,"qwen_3_30b_max":3.82,"qwen_3_30b_min":3.82}
{"symbol":"HD","year":2024,"quarter":2,"date":"2023-Q2","chunk_id":5,"sub_chunk_id":0,"centroid_label":"adjusted diluted earnings per share percent","agreed_value":4.67,"count":3,"chunk":"Richard McPhail: Thank you, Billy, and good morning, everyone. In the second quarter, Total sales were $43.2 billion, an increase of approximately 0.6% from last year. Total sales include $1.3 billion from the recent acquisition of SRS, which represents approximately six weeks of sales in the quarter. During the second quarter, our total company comps were negative 3.3%, with comps of negative 3.7% in May, negative 0.9% in June and negative 4.9% in July. Comps in the U.S. were negative 3.6% for the quarter, with comps of negative 4.1% in May, negative 1.4% in June and negative 5% in July. In the second quarter, our gross margin was approximately 33.4%, an increase of 40 basis points from the second quarter last year, primarily driven by benefits from lower transportation costs and shrink, partially offset by mix as a result of the SRS acquisition. During the second quarter, operating expense as a percent of sales increased approximately 65 basis points to 18.3% compared to the second quarter of 2023. Our operating expense performance was in line with our expectations. Beginning this quarter, in addition to our GAAP measures, we are providing the following non-GAAP measures: adjusted operating income, adjusted operating margin and adjusted diluted earnings per share, which excludes noncash amortization of acquired intangible assets. We believe these supplemental measures will help investors better understand and analyze our performance. Our operating margin for the second quarter was 15.1% compared to 15.4% in the second quarter of 2023. In the quarter, pretax intangible asset amortization was $90 million, including $39 million related to SRS. Excluding the intangible asset amortization in the quarter, our adjusted operating margin for the second quarter was 15.3% and compared to 15.5% in the second quarter of 2023. Interest and other expense for the second quarter increased by $61 million to $489 million due primarily to higher debt balances than a year ago. In the second quarter, our effective tax rate was 24.5%, compared to 24.4% in the second quarter of fiscal 2023. Our diluted earnings per share for the second quarter were $4.60, a decrease of approximately 1% compared to the second quarter of 2023. Excluding intangible asset amortization, our adjusted diluted earnings per share for the second quarter were $4.67, essentially flat compared to the second quarter of 2023. During the second quarter, we opened three new stores, bringing our total store count to 2,340. Retail selling square footage was approximately 243 million square feet. At the end of the quarter, merchandise inventories or $23.1 billion, down approximately $200 million compared to the second quarter of 2023, and inventory turns were 4.9x, up from 4.4x last year. Turning to capital allocation. During the second quarter, we invested approximately $720 million back into our business in the form of capital expenditures. And during the quarter, we paid approximately $2.2 billion in dividends to our shareholders. Our disciplined approach to capital allocation remains unchanged. First and foremost, we will invest in the business and expect capital expenditures of approximately 2% of sales on an annual basis. After investing in the business, we plan to pay the dividend and it is our intent to return any excess cash to shareholders in the form of share repurchases. Computed on the average of beginning and ending long-term debt and equity for the trailing 12 months, return on invested capital was approximately 31.9%, down from 41.5% in the second quarter of fiscal 2023. Now, I will comment on our updated outlook for fiscal 2024. As you heard from Ted, given the softer-than-expected performance in the first half of the year, and reflecting continued uncertainty around underlying consumer demand, we believe a more cautious outlook for the year is warranted. With the recent closing of the SRS acquisition, we are now including their results in our consolidated outlook for the year. For the period matching our first half, which includes periods prior to the acquisition and not fully reflected in our financial statements, SRS generated high single-digit percentage sales growth with operating income growing largely in line with sales. We believe that over the next several years, SRS on its own, and through our combined Pro efforts, will help accelerate sales and earnings growth for our company. Updating our fiscal 2024 guidance for the factors we just discussed. We now expect total sales growth between 2.5% and 3.5%, including the SRS acquisition and the 53rd week. The 53rd week is projected to add approximately $2.3 billion to total sales. SRS is expected to contribute approximately $6.4 billion in incremental sales. Comparable sales are expected to decline between negative 3% and negative 4% for the 52-week period. The high end of our range implies a consumer demand environment consistent with the first half of fiscal 2024. While comparable sales for the Company are not currently on the trajectory for the low end of the range, a negative 4% comp implies incremental pressure on consumer demand beyond what we are seeing today. We expect to open approximately 12 new stores. Our gross margin is expected to be approximately 33.5%. We expect operating margin to be between 13.5% and 13.6%, and adjusted operating margin to be between 13.8% and 13.9%. Our effective tax rate is targeted at approximately 24%. We expect net interest expense of approximately $2.2 billion. Our diluted earnings per share percent will decline between negative 2% and negative 4% compared to fiscal 2023, with the extra week contributing approximately $0.30. We expect our adjusted diluted earnings per share percent to decline between negative 1% and negative 3%, compared to fiscal 2023, with the extra week contributing approximately $0.30. We believe that we have positioned ourselves to meet the needs of our customers in any environment. The investments we've made in our business have enabled agility in our operating model. As we look forward, we will continue to invest to strengthen our position with our customers, leverage our scale and low-cost position to drive growth faster than the market and deliver shareholder value. Thank you for your participation in today's call. And Christine, we are now ready for questions.","evidence_gemma_new":"diluted earnings per share second quarter","evidence_llama_3_3":"diluted earnings per share second quarter","evidence_qwen_3_30b":"diluted earnings per share second quarter","gemma_new_max":4.65,"gemma_new_min":4.65,"llama_3_3_max":4.65,"llama_3_3_min":4.65,"qwen_3_30b_max":4.65,"qwen_3_30b_min":4.65}
{"symbol":"HD","year":2023,"quarter":3,"date":"2023-Q3","chunk_id":2,"sub_chunk_id":0,"centroid_label":"adjusted diluted earnings per share percent","agreed_value":3.81,"count":3,"chunk":"Edward Decker: Thank you, Isabel, and good morning, everyone. Sales for the third quarter were $37.7 billion, down 3% from the same period last year. Comp sales declined 3.1% from the same period last year and our U.S. stores had negative comps of 3.5%. Diluted earnings per share were $3.81 in the third quarter compared to $4.24 in the third quarter last year. The third quarter was in line with our expectations. Similar to the second quarter, we saw continued customer engagement with smaller projects and experienced pressure in certain big-ticket discretionary categories. In addition, lumber and copper and wire deflation and storm-related overlaps negatively impacted results in the quarter. Billy will discuss these and other business trends shortly. During the third quarter, our Pro customer outperformed our DIY customer. While internal and external surveys suggest that Pro backlogs are lower than they were a year ago, they are still healthy and elevated relative to historical norms. There is only 1 quarter left in the year, we believe the endpoints for our previous guidance range are no longer likely outcomes. As a result, and as we announced in this morning's press release, we narrowed our guidance range for fiscal 2023. Richard will take you through the details in a moment. As we've discussed, this year reflects a period of moderation. However, we are confident in our ability to navigate through this unique environment. We remain very excited about our strategic initiatives and are committed to investing in the business to deliver the best interconnected shopping experience, capture wallet share with the Pro and grow our store footprint. As we discussed at the investor conference in June, we continue to invest and focus on creating a frictionless interconnected shopping experience for our customers. We are pleased with the progress we are making. homedepot.com is one of the largest retail websites in the United States, and our digital app is one of the most highly rated in all of retail. And yet, we believe there is still opportunity to reduce pain points across the shopping journey. Our teams are identifying areas of improvement like better communication throughout the shopping journey and an easier returns process and the ability to seamlessly and intuitively make changes to an order once placed. For our Pros, we're investing in a multitude of initiatives. We remain focused on building out our unique ecosystem of products and services. As a result, we are evolving our organizational structure and recently elevated Ann-Marie Campbell to Senior Executive Vice President, better aligning our outside sales and service business in the global stores organization. Pro is one of our biggest growth opportunities, and this organizational change will allow us to better serve them by leveraging our full ecosystem of expertise, product assortment, fulfillment and operations. Our merchants, store MET teams, supplier partners and supply chain teams did an outstanding job delivering value and service to our customers throughout the quarter, and I'd like to close by thanking them for their dedication and hard work. In addition, the Home Depot is proud to have tens of thousands of veterans, service members and military spouses and orange aprons. Last week, we announced The Home Depot Foundation surpassed the goal of $500 million invested in veterans causes and also increased the total commitment to $750 million by 2030. And with that, I'd like to turn the call over to Anne.","evidence_gemma_new":"Diluted earnings per share third quarter","evidence_llama_3_3":"Diluted earnings per share third quarter","evidence_qwen_3_30b":"diluted earnings per share third quarter","gemma_new_max":3.81,"gemma_new_min":3.81,"llama_3_3_max":3.81,"llama_3_3_min":3.81,"qwen_3_30b_max":3.81,"qwen_3_30b_min":3.81}
{"symbol":"HD","year":2023,"quarter":4,"date":"2023-Q4","chunk_id":5,"sub_chunk_id":0,"centroid_label":"adjusted diluted earnings per share percent","agreed_value":2.82,"count":3,"chunk":"Richard McPhail: Thank you, Billy, and good morning, everyone. In the fourth quarter, total sales were $34.8 billion, a decrease of 2.9% from last year. During the fourth quarter, our total company comps were negative 3.5% with comps of negative 2.5% in November, positive 1.1% in December and negative 8.5% in January. Comps in the U.S. were negative 4% for the quarter with comps of negative 2.7% in November, positive 0.6% in December and negative 9.1% in January. In local currency, Mexico and Canada posted comps above the company average with Mexico posting positive comps. It is important to note that adjusting for holiday shifts and weather-related impacts in January, monthly comps relatively consistent across the quarter. For the year, our sales totaled $152.7 billion, a decrease of 3% versus fiscal 2022. For the year, total company comp sales decreased 3.2% and U.S. comp sales decreased 3.5%. In the fourth quarter, our gross margin was approximately 33.1%, a decrease of 20 basis points from last year. For the year, our gross margin was approximately 33.4%, a decrease of 15 basis points from last year, which was in line with our expectations. During the fourth quarter, operating expenses as a percentage of sales increased approximately 115 basis points to 21.2% compared to the fourth quarter of 2022. Our operating expense performance during the fourth quarter reflects our previously executed compensation increases for hourly associates as well as deleverage from our top line results. For the year, operating expenses were approximately 19.2% of sales, representing an increase of approximately 90 basis points from fiscal 2022. Our operating margin for the fourth quarter was approximately 11.9% and for the year was approximately 14.2%. Interest and other expense for the fourth quarter increased by $50 million to $458 million. In the fourth quarter and for fiscal 2023, our effective tax rate was 24%. Our diluted earnings per share for the fourth quarter were $2.82, a decrease of 14.5% compared to the fourth quarter of 2022. Diluted earnings per share for fiscal 2023 were $15.11, a decrease of 9.5% compared to fiscal 2022. At the end of the quarter, merchandise inventories were $21 billion, down $3.9 billion or approximately 16% versus last year, and inventory turns were 4.3x, up from 4.2x from the second period last year. Moving on to capital allocation. During the fourth quarter, we invested approximately $860 million back into our business in the form of capital expenditures. This brings total capital expenditures for fiscal 2023 to approximately $3.2 billion. During the year, we opened 13 new stores, bringing our store count to 2,335 at the end of fiscal 2023. Retail selling square footage was approximately 242 million square feet and total sales per retail square foot were approximately $605 in fiscal 2023. Additionally, we invested approximately $1.5 billion on three acquisitions during fiscal 2023, accelerating our strategic initiatives and providing us with better capabilities to serve our customers. During the year, we paid approximately $8.4 billion of dividends to our shareholders. Today, we announced our Board of Directors increased our quarterly dividend by 7.7% to $2.25 per share, which equates to an annual dividend of $9 per share. And finally, during fiscal 2023, we returned approximately $8 billion to our shareholders in the form of share repurchases, including $1.5 billion in the fourth quarter. Computed on the average of beginning and ending long-term debt and equity for the trailing 12 months, return on invested capital was 36.7% compared to 44.6% at the end of the fourth quarter of fiscal 2022. Now I'll comment on our outlook for 2024. First, let me point out that fiscal 2024 will include a 53rd week, so the fourth quarter of fiscal 2024 will consist of 14 weeks. We will continue to report comps on a 52-week basis, but we will base our overall guidance on 53 weeks. As you heard from Ted, we feel great about the actions we took in 2023 to position us well heading into 2024. And while there are signs that the economy is on the way towards normalization, the home improvement market still faces headwinds as we look ahead to fiscal 2024. We considered several factors that informed our outlook for fiscal 2024. On the positive side, we faced a number of pressures in fiscal 2023 that are unlikely to repeat in fiscal 2024. In 2023, we saw four increases in the Fed funds rate, a sharp decline in existing home sales and approximately 110 basis points of comp pressure from lumber deflation. However, we still expect pressures to our business in fiscal 2024. Personal consumption growth as measured by PCE is expected to decelerate compared to 2023. Our share of PCE also remains slightly elevated relative to 2019 and has been on a glide path towards 2019 levels. Higher interest rates at the beginning of 2024 relative to last year will likely continue to pressure demand for larger projects. And the effects from pull forward of demand during the pandemic as well as some project deferral could impact demand into 2024. As we consider these influences on home improvement demand, we are planning for a year of continued moderation but with slightly less pressure to comp sales than what we faced in fiscal 2023. Our fiscal 2024 outlook is for total sales growth to outpace sales comp with sales growth of approximately positive 1% and comp sales of approximately negative 1% compared to fiscal 2023. Total sales growth will benefit from a 53rd week as well as from the acquisitions we made and the new stores we opened in fiscal 2023 and the stores we plan to open in fiscal 2024. We expect the 53rd week will contribute approximately $2.3 billion in sales. Our gross margin is expected to be approximately 33.9%, an increase of approximately 50 basis points compared to fiscal 2023. This primarily reflects a lower product and transportation cost environment relative to fiscal 2023 as well as benefits from a portion of the approximately $500 million in reduced fixed costs that we will realize in fiscal 2024. Further, we expect operating margin of approximately 14.1%. This reflects deleverage from sales and pressure from targeted incentive compensation as we are overlapping lower incentive compensation paid than planned in 2023. This will be partially offset by the benefits from the approximately $500 million in fixed costs that we will realize in fiscal 2024 in both cost of goods sold and operating expenses. Our effective tax rate is targeted at approximately 24.5%. We expect net interest expense of approximately $1.8 billion. Our diluted earnings per share percent growth is targeted to be approximately 1% compared to fiscal 2023, with the extra week contributing approximately $0.30. We plan to continue investing in our business with capital expenditures of approximately 2% of sales on an annual basis. After investing in our business and paying our dividend, it is our intent to return excess cash to shareholders in the form of share repurchases. We believe we have positioned ourselves to meet the needs of our customers in any environment. The investments we've made in our business have enabled agility in our operating model. As we look forward, we will continue to invest to strengthen our position with our customers, leverage our scale and low-cost position to drive growth faster than the market and deliver shareholder value. Thank you for your participation in today's call. And Christine, we are now ready for questions.","evidence_gemma_new":"diluted earnings per share fourth quarter","evidence_llama_3_3":"diluted earnings per share fourth quarter","evidence_qwen_3_30b":"diluted earnings per share fourth quarter","gemma_new_max":2.82,"gemma_new_min":2.82,"llama_3_3_max":2.82,"llama_3_3_min":2.82,"qwen_3_30b_max":2.82,"qwen_3_30b_min":2.82}
{"symbol":"HD","year":2023,"quarter":4,"date":"2023-Q4","chunk_id":5,"sub_chunk_id":0,"centroid_label":"adjusted diluted earnings per share percent","agreed_value":15.11,"count":3,"chunk":"Richard McPhail: Thank you, Billy, and good morning, everyone. In the fourth quarter, total sales were $34.8 billion, a decrease of 2.9% from last year. During the fourth quarter, our total company comps were negative 3.5% with comps of negative 2.5% in November, positive 1.1% in December and negative 8.5% in January. Comps in the U.S. were negative 4% for the quarter with comps of negative 2.7% in November, positive 0.6% in December and negative 9.1% in January. In local currency, Mexico and Canada posted comps above the company average with Mexico posting positive comps. It is important to note that adjusting for holiday shifts and weather-related impacts in January, monthly comps relatively consistent across the quarter. For the year, our sales totaled $152.7 billion, a decrease of 3% versus fiscal 2022. For the year, total company comp sales decreased 3.2% and U.S. comp sales decreased 3.5%. In the fourth quarter, our gross margin was approximately 33.1%, a decrease of 20 basis points from last year. For the year, our gross margin was approximately 33.4%, a decrease of 15 basis points from last year, which was in line with our expectations. During the fourth quarter, operating expenses as a percentage of sales increased approximately 115 basis points to 21.2% compared to the fourth quarter of 2022. Our operating expense performance during the fourth quarter reflects our previously executed compensation increases for hourly associates as well as deleverage from our top line results. For the year, operating expenses were approximately 19.2% of sales, representing an increase of approximately 90 basis points from fiscal 2022. Our operating margin for the fourth quarter was approximately 11.9% and for the year was approximately 14.2%. Interest and other expense for the fourth quarter increased by $50 million to $458 million. In the fourth quarter and for fiscal 2023, our effective tax rate was 24%. Our diluted earnings per share for the fourth quarter were $2.82, a decrease of 14.5% compared to the fourth quarter of 2022. Diluted earnings per share for fiscal 2023 were $15.11, a decrease of 9.5% compared to fiscal 2022. At the end of the quarter, merchandise inventories were $21 billion, down $3.9 billion or approximately 16% versus last year, and inventory turns were 4.3x, up from 4.2x from the second period last year. Moving on to capital allocation. During the fourth quarter, we invested approximately $860 million back into our business in the form of capital expenditures. This brings total capital expenditures for fiscal 2023 to approximately $3.2 billion. During the year, we opened 13 new stores, bringing our store count to 2,335 at the end of fiscal 2023. Retail selling square footage was approximately 242 million square feet and total sales per retail square foot were approximately $605 in fiscal 2023. Additionally, we invested approximately $1.5 billion on three acquisitions during fiscal 2023, accelerating our strategic initiatives and providing us with better capabilities to serve our customers. During the year, we paid approximately $8.4 billion of dividends to our shareholders. Today, we announced our Board of Directors increased our quarterly dividend by 7.7% to $2.25 per share, which equates to an annual dividend of $9 per share. And finally, during fiscal 2023, we returned approximately $8 billion to our shareholders in the form of share repurchases, including $1.5 billion in the fourth quarter. Computed on the average of beginning and ending long-term debt and equity for the trailing 12 months, return on invested capital was 36.7% compared to 44.6% at the end of the fourth quarter of fiscal 2022. Now I'll comment on our outlook for 2024. First, let me point out that fiscal 2024 will include a 53rd week, so the fourth quarter of fiscal 2024 will consist of 14 weeks. We will continue to report comps on a 52-week basis, but we will base our overall guidance on 53 weeks. As you heard from Ted, we feel great about the actions we took in 2023 to position us well heading into 2024. And while there are signs that the economy is on the way towards normalization, the home improvement market still faces headwinds as we look ahead to fiscal 2024. We considered several factors that informed our outlook for fiscal 2024. On the positive side, we faced a number of pressures in fiscal 2023 that are unlikely to repeat in fiscal 2024. In 2023, we saw four increases in the Fed funds rate, a sharp decline in existing home sales and approximately 110 basis points of comp pressure from lumber deflation. However, we still expect pressures to our business in fiscal 2024. Personal consumption growth as measured by PCE is expected to decelerate compared to 2023. Our share of PCE also remains slightly elevated relative to 2019 and has been on a glide path towards 2019 levels. Higher interest rates at the beginning of 2024 relative to last year will likely continue to pressure demand for larger projects. And the effects from pull forward of demand during the pandemic as well as some project deferral could impact demand into 2024. As we consider these influences on home improvement demand, we are planning for a year of continued moderation but with slightly less pressure to comp sales than what we faced in fiscal 2023. Our fiscal 2024 outlook is for total sales growth to outpace sales comp with sales growth of approximately positive 1% and comp sales of approximately negative 1% compared to fiscal 2023. Total sales growth will benefit from a 53rd week as well as from the acquisitions we made and the new stores we opened in fiscal 2023 and the stores we plan to open in fiscal 2024. We expect the 53rd week will contribute approximately $2.3 billion in sales. Our gross margin is expected to be approximately 33.9%, an increase of approximately 50 basis points compared to fiscal 2023. This primarily reflects a lower product and transportation cost environment relative to fiscal 2023 as well as benefits from a portion of the approximately $500 million in reduced fixed costs that we will realize in fiscal 2024. Further, we expect operating margin of approximately 14.1%. This reflects deleverage from sales and pressure from targeted incentive compensation as we are overlapping lower incentive compensation paid than planned in 2023. This will be partially offset by the benefits from the approximately $500 million in fixed costs that we will realize in fiscal 2024 in both cost of goods sold and operating expenses. Our effective tax rate is targeted at approximately 24.5%. We expect net interest expense of approximately $1.8 billion. Our diluted earnings per share percent growth is targeted to be approximately 1% compared to fiscal 2023, with the extra week contributing approximately $0.30. We plan to continue investing in our business with capital expenditures of approximately 2% of sales on an annual basis. After investing in our business and paying our dividend, it is our intent to return excess cash to shareholders in the form of share repurchases. We believe we have positioned ourselves to meet the needs of our customers in any environment. The investments we've made in our business have enabled agility in our operating model. As we look forward, we will continue to invest to strengthen our position with our customers, leverage our scale and low-cost position to drive growth faster than the market and deliver shareholder value. Thank you for your participation in today's call. And Christine, we are now ready for questions.","evidence_gemma_new":"Diluted earnings per share prior year","evidence_llama_3_3":"diluted earnings per share year","evidence_qwen_3_30b":"diluted earnings per share","gemma_new_max":15.11,"gemma_new_min":15.11,"llama_3_3_max":15.11,"llama_3_3_min":15.11,"qwen_3_30b_max":15.11,"qwen_3_30b_min":15.11}
{"symbol":"HD","year":2024,"quarter":1,"date":"2024-Q1","chunk_id":2,"sub_chunk_id":0,"centroid_label":"adjusted diluted earnings per share percent","agreed_value":3.63,"count":3,"chunk":"Ted Decker: Thank you, Isabel, and good morning everyone. Sales for the first quarter were $36.4 billion, down 2.3% from the same period last year. Comp sales declined 2.8% from the same period last year and our U.S. stores had negative comps of 3.2%. Diluted earnings per share were $3.63 in the first quarter compared to $3.82 in the first quarter last year. The team executed a high level in the quarter, continued to grow market share. While the quarter was impacted by a delayed start to spring and continued softness in certain larger discretionary projects, we feel great about our store readiness, product assortment and associate engagement. Our associates are energized and ready to serve our customers as spring breaks across the country. As you will hear from Billy, where weather was favorable, we saw good customer engagement and strength in outdoor projects. In addition, our focus remains on creating the best interconnected experience growing Pro wallet share with a differentiated set of capabilities in building new stores, driving sales growth with our Pro customers remains one of our top focus areas. Remember, we operate in a $45 trillion asset class, which represents the installed base of homes in the United States and we serve a highly fragmented addressable market of approximately $1 trillion. Within that TAM, the greatest opportunity is with the residential Pro contractor, who shops across many categories of home improvement products while working on complex projects. We've defined that specific opportunity as an approximately $250 billion TAM, of which we have relatively little share today. We also know that to effectively serve this TAM, we need an expanded set of capabilities and services that we refer to as our Pro ecosystem. And while the store remains the center of that ecosystem, we are developing more fulfillment options, a dedicated sales force, specific digital assets, trade credit and order management capabilities geared at the residential Pro who shops across categories. As we've shared with you before, our more mature markets with this Pro ecosystem have seen great success, so we're expanding to other markets. As you heard last quarter, we'll have the foundational elements of our ecosystem in 17 markets by the end of the fiscal year. And while these 17 markets are currently at different maturity levels, they are outperforming our other large Pro markets in aggregate. Earlier this quarter, we announced our intent to acquire SRS, a residential, specialty trade distributor with a leading position in three large, highly fragmented specialty trade verticals serving the roofer, the pool contractor and the landscape professional. SRS is complementary to the ecosystem we've been building, giving us another avenue to more effectively serve the complex project occasion. They also give us the right to win with a specialty trade Pro customer. SRS does an exceptional job serving the specialty trade Pro who typically only shops one category and needs specialized capabilities to complete their project. In addition, SRS is an exceptionally well run business with a world-class management team. As we build out our own ecosystem, we can leverage their expertise in deep product catalog in the verticals in which they operate. We have significant growth opportunities in front of us and we are very happy with the operational execution in our core business. And despite pressure in the market, we continue to invest in our business. We are gaining share of wallet with our customers whether they are shopping in our stores, on our digital assets, or through our Pro ecosystem. Our merchants, store and MET teams, supplier partners and supply chain teams are always ready to serve in any environment. They did an outstanding job delivering value and service to our customers throughout the quarter and I'd like to close by thanking them for their dedication and hard work. With that, let me turn the call over to Ann.","evidence_gemma_new":"Diluted earnings per share first quarter","evidence_llama_3_3":"diluted earnings per share first quarter","evidence_qwen_3_30b":"diluted earnings per share first quarter","gemma_new_max":3.63,"gemma_new_min":3.63,"llama_3_3_max":3.63,"llama_3_3_min":3.63,"qwen_3_30b_max":3.63,"qwen_3_30b_min":3.63}
{"symbol":"HD","year":2024,"quarter":2,"date":"2024-Q2","chunk_id":5,"sub_chunk_id":0,"centroid_label":"adjusted diluted earnings per share percent","agreed_value":4.67,"count":3,"chunk":"Richard McPhail: Thank you, Billy, and good morning, everyone. In the second quarter, Total sales were $43.2 billion, an increase of approximately 0.6% from last year. Total sales include $1.3 billion from the recent acquisition of SRS, which represents approximately six weeks of sales in the quarter. During the second quarter, our total company comps were negative 3.3%, with comps of negative 3.7% in May, negative 0.9% in June and negative 4.9% in July. Comps in the U.S. were negative 3.6% for the quarter, with comps of negative 4.1% in May, negative 1.4% in June and negative 5% in July. In the second quarter, our gross margin was approximately 33.4%, an increase of 40 basis points from the second quarter last year, primarily driven by benefits from lower transportation costs and shrink, partially offset by mix as a result of the SRS acquisition. During the second quarter, operating expense as a percent of sales increased approximately 65 basis points to 18.3% compared to the second quarter of 2023. Our operating expense performance was in line with our expectations. Beginning this quarter, in addition to our GAAP measures, we are providing the following non-GAAP measures: adjusted operating income, adjusted operating margin and adjusted diluted earnings per share, which excludes noncash amortization of acquired intangible assets. We believe these supplemental measures will help investors better understand and analyze our performance. Our operating margin for the second quarter was 15.1% compared to 15.4% in the second quarter of 2023. In the quarter, pretax intangible asset amortization was $90 million, including $39 million related to SRS. Excluding the intangible asset amortization in the quarter, our adjusted operating margin for the second quarter was 15.3% and compared to 15.5% in the second quarter of 2023. Interest and other expense for the second quarter increased by $61 million to $489 million due primarily to higher debt balances than a year ago. In the second quarter, our effective tax rate was 24.5%, compared to 24.4% in the second quarter of fiscal 2023. Our diluted earnings per share for the second quarter were $4.60, a decrease of approximately 1% compared to the second quarter of 2023. Excluding intangible asset amortization, our adjusted diluted earnings per share for the second quarter were $4.67, essentially flat compared to the second quarter of 2023. During the second quarter, we opened three new stores, bringing our total store count to 2,340. Retail selling square footage was approximately 243 million square feet. At the end of the quarter, merchandise inventories or $23.1 billion, down approximately $200 million compared to the second quarter of 2023, and inventory turns were 4.9x, up from 4.4x last year. Turning to capital allocation. During the second quarter, we invested approximately $720 million back into our business in the form of capital expenditures. And during the quarter, we paid approximately $2.2 billion in dividends to our shareholders. Our disciplined approach to capital allocation remains unchanged. First and foremost, we will invest in the business and expect capital expenditures of approximately 2% of sales on an annual basis. After investing in the business, we plan to pay the dividend and it is our intent to return any excess cash to shareholders in the form of share repurchases. Computed on the average of beginning and ending long-term debt and equity for the trailing 12 months, return on invested capital was approximately 31.9%, down from 41.5% in the second quarter of fiscal 2023. Now, I will comment on our updated outlook for fiscal 2024. As you heard from Ted, given the softer-than-expected performance in the first half of the year, and reflecting continued uncertainty around underlying consumer demand, we believe a more cautious outlook for the year is warranted. With the recent closing of the SRS acquisition, we are now including their results in our consolidated outlook for the year. For the period matching our first half, which includes periods prior to the acquisition and not fully reflected in our financial statements, SRS generated high single-digit percentage sales growth with operating income growing largely in line with sales. We believe that over the next several years, SRS on its own, and through our combined Pro efforts, will help accelerate sales and earnings growth for our company. Updating our fiscal 2024 guidance for the factors we just discussed. We now expect total sales growth between 2.5% and 3.5%, including the SRS acquisition and the 53rd week. The 53rd week is projected to add approximately $2.3 billion to total sales. SRS is expected to contribute approximately $6.4 billion in incremental sales. Comparable sales are expected to decline between negative 3% and negative 4% for the 52-week period. The high end of our range implies a consumer demand environment consistent with the first half of fiscal 2024. While comparable sales for the Company are not currently on the trajectory for the low end of the range, a negative 4% comp implies incremental pressure on consumer demand beyond what we are seeing today. We expect to open approximately 12 new stores. Our gross margin is expected to be approximately 33.5%. We expect operating margin to be between 13.5% and 13.6%, and adjusted operating margin to be between 13.8% and 13.9%. Our effective tax rate is targeted at approximately 24%. We expect net interest expense of approximately $2.2 billion. Our diluted earnings per share percent will decline between negative 2% and negative 4% compared to fiscal 2023, with the extra week contributing approximately $0.30. We expect our adjusted diluted earnings per share percent to decline between negative 1% and negative 3%, compared to fiscal 2023, with the extra week contributing approximately $0.30. We believe that we have positioned ourselves to meet the needs of our customers in any environment. The investments we've made in our business have enabled agility in our operating model. As we look forward, we will continue to invest to strengthen our position with our customers, leverage our scale and low-cost position to drive growth faster than the market and deliver shareholder value. Thank you for your participation in today's call. And Christine, we are now ready for questions.","evidence_gemma_new":"Adjusted diluted earnings per share second quarter","evidence_llama_3_3":"Adjusted diluted earnings per share second quarter of last year","evidence_qwen_3_30b":"adjusted diluted earnings per share second quarter","gemma_new_max":4.67,"gemma_new_min":4.67,"llama_3_3_max":4.68,"llama_3_3_min":4.68,"qwen_3_30b_max":4.67,"qwen_3_30b_min":4.67}
{"symbol":"HD","year":2024,"quarter":2,"date":"2024-Q2","chunk_id":5,"sub_chunk_id":0,"centroid_label":"adjusted diluted earnings per share percent","agreed_value":4.6,"count":2,"chunk":"Richard McPhail: Thank you, Billy, and good morning, everyone. In the second quarter, Total sales were $43.2 billion, an increase of approximately 0.6% from last year. Total sales include $1.3 billion from the recent acquisition of SRS, which represents approximately six weeks of sales in the quarter. During the second quarter, our total company comps were negative 3.3%, with comps of negative 3.7% in May, negative 0.9% in June and negative 4.9% in July. Comps in the U.S. were negative 3.6% for the quarter, with comps of negative 4.1% in May, negative 1.4% in June and negative 5% in July. In the second quarter, our gross margin was approximately 33.4%, an increase of 40 basis points from the second quarter last year, primarily driven by benefits from lower transportation costs and shrink, partially offset by mix as a result of the SRS acquisition. During the second quarter, operating expense as a percent of sales increased approximately 65 basis points to 18.3% compared to the second quarter of 2023. Our operating expense performance was in line with our expectations. Beginning this quarter, in addition to our GAAP measures, we are providing the following non-GAAP measures: adjusted operating income, adjusted operating margin and adjusted diluted earnings per share, which excludes noncash amortization of acquired intangible assets. We believe these supplemental measures will help investors better understand and analyze our performance. Our operating margin for the second quarter was 15.1% compared to 15.4% in the second quarter of 2023. In the quarter, pretax intangible asset amortization was $90 million, including $39 million related to SRS. Excluding the intangible asset amortization in the quarter, our adjusted operating margin for the second quarter was 15.3% and compared to 15.5% in the second quarter of 2023. Interest and other expense for the second quarter increased by $61 million to $489 million due primarily to higher debt balances than a year ago. In the second quarter, our effective tax rate was 24.5%, compared to 24.4% in the second quarter of fiscal 2023. Our diluted earnings per share for the second quarter were $4.60, a decrease of approximately 1% compared to the second quarter of 2023. Excluding intangible asset amortization, our adjusted diluted earnings per share for the second quarter were $4.67, essentially flat compared to the second quarter of 2023. During the second quarter, we opened three new stores, bringing our total store count to 2,340. Retail selling square footage was approximately 243 million square feet. At the end of the quarter, merchandise inventories or $23.1 billion, down approximately $200 million compared to the second quarter of 2023, and inventory turns were 4.9x, up from 4.4x last year. Turning to capital allocation. During the second quarter, we invested approximately $720 million back into our business in the form of capital expenditures. And during the quarter, we paid approximately $2.2 billion in dividends to our shareholders. Our disciplined approach to capital allocation remains unchanged. First and foremost, we will invest in the business and expect capital expenditures of approximately 2% of sales on an annual basis. After investing in the business, we plan to pay the dividend and it is our intent to return any excess cash to shareholders in the form of share repurchases. Computed on the average of beginning and ending long-term debt and equity for the trailing 12 months, return on invested capital was approximately 31.9%, down from 41.5% in the second quarter of fiscal 2023. Now, I will comment on our updated outlook for fiscal 2024. As you heard from Ted, given the softer-than-expected performance in the first half of the year, and reflecting continued uncertainty around underlying consumer demand, we believe a more cautious outlook for the year is warranted. With the recent closing of the SRS acquisition, we are now including their results in our consolidated outlook for the year. For the period matching our first half, which includes periods prior to the acquisition and not fully reflected in our financial statements, SRS generated high single-digit percentage sales growth with operating income growing largely in line with sales. We believe that over the next several years, SRS on its own, and through our combined Pro efforts, will help accelerate sales and earnings growth for our company. Updating our fiscal 2024 guidance for the factors we just discussed. We now expect total sales growth between 2.5% and 3.5%, including the SRS acquisition and the 53rd week. The 53rd week is projected to add approximately $2.3 billion to total sales. SRS is expected to contribute approximately $6.4 billion in incremental sales. Comparable sales are expected to decline between negative 3% and negative 4% for the 52-week period. The high end of our range implies a consumer demand environment consistent with the first half of fiscal 2024. While comparable sales for the Company are not currently on the trajectory for the low end of the range, a negative 4% comp implies incremental pressure on consumer demand beyond what we are seeing today. We expect to open approximately 12 new stores. Our gross margin is expected to be approximately 33.5%. We expect operating margin to be between 13.5% and 13.6%, and adjusted operating margin to be between 13.8% and 13.9%. Our effective tax rate is targeted at approximately 24%. We expect net interest expense of approximately $2.2 billion. Our diluted earnings per share percent will decline between negative 2% and negative 4% compared to fiscal 2023, with the extra week contributing approximately $0.30. We expect our adjusted diluted earnings per share percent to decline between negative 1% and negative 3%, compared to fiscal 2023, with the extra week contributing approximately $0.30. We believe that we have positioned ourselves to meet the needs of our customers in any environment. The investments we've made in our business have enabled agility in our operating model. As we look forward, we will continue to invest to strengthen our position with our customers, leverage our scale and low-cost position to drive growth faster than the market and deliver shareholder value. Thank you for your participation in today's call. And Christine, we are now ready for questions.","evidence_gemma_new":"diluted earnings per share second quarter","evidence_llama_3_3":"diluted earnings per share second quarter","evidence_qwen_3_30b":null,"gemma_new_max":4.6,"gemma_new_min":4.6,"llama_3_3_max":4.6,"llama_3_3_min":4.6,"qwen_3_30b_max":null,"qwen_3_30b_min":null}
{"symbol":"HD","year":2024,"quarter":3,"date":"2024-Q3","chunk_id":2,"sub_chunk_id":0,"centroid_label":"adjusted diluted earnings per share percent","agreed_value":3.78,"count":3,"chunk":"Ted Decker: Thank you, Isabel, and good morning, everyone. Sales for the third quarter were $40.2 billion an increase of 6.6% from the same period last year. Comp sales declined 1.3% from the same period last year and our U.S. stores had negative comps of 1.2%. Adjusted diluted earnings per share were $3.78 in the third quarter compared to $3.85 in the third quarter last year. From a geographical perspective, storms and more favorable weather throughout the quarter drove a higher degree of variability in the performance across our divisions and four of our 19 U.S. regions delivered positive comps. In local currency, Mexico and Canada posted comps above the company average, with Mexico posting positive comps in the quarter. In the third quarter, our associates and communities were impacted by two hurricanes. As you\u2019ll hear from Ann, our associates and supplier partners worked tirelessly under difficult circumstances to serve our customers and communities. Our thoughts continue to be with those impacted by hurricanes Helene and Milton. Excluding the impacts from the hurricanes, our third quarter performance exceeded our expectations. As weather normalized, we saw better engagement across seasonal goods in certain outdoor projects. But as Billy will detail, we continue to see pressure on larger remodeling projects driven by the higher interest rate environment and continued macroeconomic uncertainty. Today, we updated our guidance primarily as a result of the better performance in the third quarter as well as expected hurricane related demand in the fourth quarter. For fiscal 2024, we now expect our sales to grow approximately 4%, comps to decline approximately 2.5% and adjusted diluted earnings per share to decline approximately 1%. Richard will take you through the details in a moment. Despite the continued uncertainty in the macroeconomic environment, our focus remains on creating the best interconnected experience, growing Pro wallet share through a differentiated set of capabilities in building new stores. Today, I would like to highlight where we are improving the interconnected experience. Recall that over the last several years, we built a network of downstream supply chain facilities, including 19 direct fulfillment centers, allowing us to reach 90% of the U.S. population with same or next day delivery. Recently, we expanded our assortment in these facilities to allow for faster delivery speeds across more products. We made significant website enhancements to better communicate faster delivery options. Many customers were not aware of our robust delivery options. In the third quarter, we launched a marketing campaign that builds awareness of our faster delivery speeds. While this is just launched, we are seeing the intended results, greater customer engagement, higher conversion and incremental sales. This is also the first quarter that reflects a full period of SRS in our financials. SRS gives us the right to win with the specialty trade Pro customer who need specialized capabilities to complete their project. The SRS team did an exceptional job in the quarter and is on track to deliver $6.4 billion in sales for the approximately seven months we\u2019ll owe them in fiscal 2024. As you would expect, the immediate focus with SRS is supporting their growth both organically and through acquisitions. However, we are also seeing incremental cross-sale opportunities from our distinct product catalogs and competitive advantages. As you can tell, we remain excited about the growth opportunities in front of us. We are committed to investing in our capabilities to continue growing share in any environment. Our merchants, store and MET teams, supplier partners and supply chain teams did an outstanding job executing throughout the quarter. I\u2019d like to thank them for their dedication and hard work. Before I turn the call over to, Ann, I\u2019d like to take a moment to reflect on the legacy of our Co-Founder, Bernie Marcus. We owe an immeasurable debt of gratitude to Bernie. He was a master merchant and a retail visionary. But even more importantly, he valued our associates, customers and communities above all. He\u2019s left us with an invaluable legacy in the backbone of our company, our values and culture. The entire Home Depot family is deeply saddened by his passing. He will be missed. With that, let me turn the call over to, Ann.","evidence_gemma_new":"Adjusted diluted earnings per share third quarter","evidence_llama_3_3":"adjusted diluted earnings per share third quarter","evidence_qwen_3_30b":"adjusted diluted earnings per share third quarter","gemma_new_max":3.78,"gemma_new_min":3.78,"llama_3_3_max":3.78,"llama_3_3_min":3.78,"qwen_3_30b_max":3.78,"qwen_3_30b_min":3.78}
{"symbol":"HD","year":2024,"quarter":3,"date":"2024-Q3","chunk_id":5,"sub_chunk_id":0,"centroid_label":"adjusted diluted earnings per share percent","agreed_value":3.67,"count":3,"chunk":"Richard McPhail: Thank you, Billy, and good morning, everyone. In the third quarter, total sales were $40.2 billion, an increase of approximately 6.6% from last year. During the third quarter, our total company comps were negative 1.3% with comps of negative 3.3% in August, negative 2.3% in September and positive 1% in October. Comps in the U.S. were negative 1.2% for the quarter, with comps of negative 3.5% in August, negative 2.2% in September, and positive 1.4% in October. The progression of our monthly comps reflects in large part hurricane related sales. Our results for the third quarter include a net contribution of approximately $200 million in hurricane related sales, which positively impacted total company comps by approximately 55 basis points for the quarter and approximately 120 basis points for October. In the third quarter, our gross margin was approximately 33.4%, a decrease of approximately 40 basis points from the third quarter last year, primarily driven by mix as a result of the SRS acquisition, partially offset by benefits from lower shrink. During the third quarter, operating expense as a percent of sales increased approximately 45 basis points to 19.9% compared to the third quarter of 2023. Our operating expense performance was in-line with our expectations. Our operating margin for the third quarter was 13.5% compared to 14.3% in the third quarter of 2023. In the quarter, pre-tax intangible asset amortization was $138 million including $86 million related to SRS. Excluding the intangible asset amortization in the quarter, our adjusted operating margin for the third quarter was 13.8% compared to 14.5% in the third quarter of 2023. Interest and other expense for the third quarter increased by $157 million to $595 million due primarily to higher debt balances than a year ago. In the third quarter, our effective tax rate was 24.4% compared to 23.3% in the third quarter of fiscal 2023. Our diluted earnings per share for the third quarter were $3.67, a decrease of approximately 4% compared to the third quarter of 2023. Excluding intangible asset amortization, our adjusted diluted earnings per share for the third quarter were $3.78, a decrease of approximately 2% compared to the third quarter of 2023. During the third quarter, we opened five new stores, bringing our total store count to 2, 345. Retail selling square footage was approximately 243 million square feet. At the end of the quarter, merchandise inventories were $23.9 billion up approximately $1.1 billion compared to the third quarter of 2023, and inventory turns were 4.8 times, up from 4.3 times last year. Turning to capital allocation. During the third quarter, we invested approximately $820 million back into our business in the form of capital expenditures. And during the quarter, we paid approximately $2.2 billion in dividends to our shareholders. Compute on the average of beginning and ending long-term debt and equity for the trailing 12-months, return on invested capital was approximately 31.5%, down from 38.7% in the third quarter of fiscal 2023. Now, I will comment on our updated outlook for fiscal 2024. As you heard from Ted, while macro uncertainty remains and continues to pressure home improvement demand, our performance in the third quarter was better than expected. Our performance reflects hurricane related sales in the third quarter, and we expect some hurricane related sales in the fourth quarter. Given the better than expected performance in the third quarter and incremental hurricane related sales, we have updated our fiscal 2024 guidance. We now expect total sales growth of approximately 4%, including SRS in the 53rd week. The 53rd week is projected to add approximately $2.3 billion to total sales and SRS is expected to contribute approximately $6.4 billion in incremental sales. Comparable sales are expected to decline approximately 2.5% for the 52 week period. We expect to open approximately 12 new stores. Our gross margin is expected to be approximately 33.5%. We expect operating margin to be approximately 13.5% and adjusted operating margin to be approximately 13.8%. Our effective tax rate is targeted at approximately 24%. We expect net interest expense of approximately $2.1 billion. We expect our diluted earnings per share to decline approximately 2% compared to fiscal 2023 with the extra week contributing approximately $0.30 per share. And, we expect our adjusted diluted earnings per share to decline approximately 1% compared to fiscal 2023 with the extra week contributing approximately $0.30 per share. We believe that we will grow market share in any environment. We are continuing to invest to strengthen our competitive position with our customers and leverage our scale and low cost position to drive growth faster than the market and deliver shareholder value. Thank you for your participation in today\u2019s call. And Christine, we are now ready for questions.","evidence_gemma_new":"diluted earnings per share third quarter","evidence_llama_3_3":"diluted earnings per share third quarter","evidence_qwen_3_30b":"diluted earnings per share third quarter","gemma_new_max":3.67,"gemma_new_min":3.67,"llama_3_3_max":3.67,"llama_3_3_min":3.67,"qwen_3_30b_max":3.67,"qwen_3_30b_min":3.67}
{"symbol":"HD","year":2024,"quarter":4,"date":"2024-Q4","chunk_id":1,"sub_chunk_id":0,"centroid_label":"adjusted diluted earnings per share percent","agreed_value":3.13,"count":3,"chunk":"Ted Decker: Thank you, Isabelle and good morning everyone. Sales for fiscal 2024 were $159.5 billion an increase of 4.5% from the same period last year. Comp sales declined 1.8% from the same period last year. And our U.S. Stores had negative comps of 1.8%. Adjusted diluted earnings per share were $15.24 compared to $15.25 in the prior year. In the fourth quarter, comp sales increased 0.8% from last year. And comps in our U.S. Stores were up 1.3%. Adjusted diluted earnings per share were $3.13 compared to $2.86 in the prior year. The quarter, we saw broad-based engagement across our geographies. As fifteen of our nineteen U.S. Regions delivered positive comps. In addition, both Canada and Mexico reported positive comps in local currency. Our fourth quarter results exceeded our expectations as we saw greater engagement home improvement spend despite ongoing pressure on large remodeling projects. Throughout the year, we remained steadfast in our investments across our strategic initiatives. Despite uncertain macroeconomic conditions and a higher interest rate environment that impacted home improvement demand. Our strategic priorities remain creating the best interconnected shopping experience, growing our pro wallet share through a unique ecosystem of capabilities, and building new stores. We are always improving our interconnect shopping experience. We know that our customers want faster delivery than ever before. Recall that last quarter I shared the progress we made with our investment in our downstream supply chain. Including an expanded assortment in our DFCs to allow for faster delivery speeds across more products. We also began leveraging our stores to offer more delivery options. Our delivery speeds are now the fastest they've ever been and customers are increasing their spend. Billy will take you through these results in a moment. Growing our share of wallet with our pro customers is a key part of our growth strategy. We've continued investing in our store experience, fulfillment options and sales teams. These investments are delivering incremental sales growth and Anne will discuss this in detail shortly. In June, we completed the acquisition of SRS, And while we've only owned them for seven months, could not be happier with the business. The capabilities that SRS brings are both additive and complementary to our strategic efforts. As expected for fiscal 2024, SRS contributed $6.4 billion in sales for the seven months we owned them. And since we acquired them in June, they have opened over twenty greenfield locations, and completed four tuck-in acquisitions. We're also focusing on many cross-sell opportunities with SRS. As an example, we've talked about the opportunity with QuoteCenter. Our platform that provides real-time quote pricing in different fulfillment options for larger job lot quantities. SRS was already in quote center but not in all markets. Today, they are in nearly every market with their roofing products. And since making this change, have seen SRS's sales and quote center more than triple Going forward, we will continue to support SRS' momentum. We expect their organic sales to grow mid-single digits in fiscal 2025. Our real estate footprint remains one of our distinct competitive advantages. We are expanding that footprint by investing in new stores in areas that have experienced population growth or where it makes sense to relieve pressure on existing high volume stores. In fiscal 2024, we opened twelve new stores. Ten in the US and two in Mexico. We are seeing great results from these stores which are outperforming our expectations. For fiscal 2025, we plan to open thirteen new stores. For fiscal 2025, we expect total sales growth of comparable sales growth of approximately one percent, and adjusted diluted earnings per share to decline approximately two percent. We remain excited about all our growth opportunities. We feel confident that the investments we are making will set us up for continued success. I wanna close by thanking our associates for their hard work and dedication to our customers in the fourth quarter and throughout the year. Our results reflect strong execution by our stores, merchants and supply chain teams. As well as our vendor partners as they remain focused on delivering value and service to our customers. With that, let me turn the call over to Anne.","evidence_gemma_new":"Adjusted diluted earnings per share prior year","evidence_llama_3_3":"adjusted diluted earnings per share fourth quarter","evidence_qwen_3_30b":"adjusted diluted earnings per share","gemma_new_max":3.13,"gemma_new_min":3.13,"llama_3_3_max":3.13,"llama_3_3_min":3.13,"qwen_3_30b_max":3.13,"qwen_3_30b_min":3.13}
{"symbol":"HD","year":2024,"quarter":4,"date":"2024-Q4","chunk_id":1,"sub_chunk_id":0,"centroid_label":"adjusted diluted earnings per share percent","agreed_value":15.24,"count":2,"chunk":"Ted Decker: Thank you, Isabelle and good morning everyone. Sales for fiscal 2024 were $159.5 billion an increase of 4.5% from the same period last year. Comp sales declined 1.8% from the same period last year. And our U.S. Stores had negative comps of 1.8%. Adjusted diluted earnings per share were $15.24 compared to $15.25 in the prior year. In the fourth quarter, comp sales increased 0.8% from last year. And comps in our U.S. Stores were up 1.3%. Adjusted diluted earnings per share were $3.13 compared to $2.86 in the prior year. The quarter, we saw broad-based engagement across our geographies. As fifteen of our nineteen U.S. Regions delivered positive comps. In addition, both Canada and Mexico reported positive comps in local currency. Our fourth quarter results exceeded our expectations as we saw greater engagement home improvement spend despite ongoing pressure on large remodeling projects. Throughout the year, we remained steadfast in our investments across our strategic initiatives. Despite uncertain macroeconomic conditions and a higher interest rate environment that impacted home improvement demand. Our strategic priorities remain creating the best interconnected shopping experience, growing our pro wallet share through a unique ecosystem of capabilities, and building new stores. We are always improving our interconnect shopping experience. We know that our customers want faster delivery than ever before. Recall that last quarter I shared the progress we made with our investment in our downstream supply chain. Including an expanded assortment in our DFCs to allow for faster delivery speeds across more products. We also began leveraging our stores to offer more delivery options. Our delivery speeds are now the fastest they've ever been and customers are increasing their spend. Billy will take you through these results in a moment. Growing our share of wallet with our pro customers is a key part of our growth strategy. We've continued investing in our store experience, fulfillment options and sales teams. These investments are delivering incremental sales growth and Anne will discuss this in detail shortly. In June, we completed the acquisition of SRS, And while we've only owned them for seven months, could not be happier with the business. The capabilities that SRS brings are both additive and complementary to our strategic efforts. As expected for fiscal 2024, SRS contributed $6.4 billion in sales for the seven months we owned them. And since we acquired them in June, they have opened over twenty greenfield locations, and completed four tuck-in acquisitions. We're also focusing on many cross-sell opportunities with SRS. As an example, we've talked about the opportunity with QuoteCenter. Our platform that provides real-time quote pricing in different fulfillment options for larger job lot quantities. SRS was already in quote center but not in all markets. Today, they are in nearly every market with their roofing products. And since making this change, have seen SRS's sales and quote center more than triple Going forward, we will continue to support SRS' momentum. We expect their organic sales to grow mid-single digits in fiscal 2025. Our real estate footprint remains one of our distinct competitive advantages. We are expanding that footprint by investing in new stores in areas that have experienced population growth or where it makes sense to relieve pressure on existing high volume stores. In fiscal 2024, we opened twelve new stores. Ten in the US and two in Mexico. We are seeing great results from these stores which are outperforming our expectations. For fiscal 2025, we plan to open thirteen new stores. For fiscal 2025, we expect total sales growth of comparable sales growth of approximately one percent, and adjusted diluted earnings per share to decline approximately two percent. We remain excited about all our growth opportunities. We feel confident that the investments we are making will set us up for continued success. I wanna close by thanking our associates for their hard work and dedication to our customers in the fourth quarter and throughout the year. Our results reflect strong execution by our stores, merchants and supply chain teams. As well as our vendor partners as they remain focused on delivering value and service to our customers. With that, let me turn the call over to Anne.","evidence_gemma_new":"Adjusted diluted earnings per share prior year","evidence_llama_3_3":null,"evidence_qwen_3_30b":"adjusted diluted earnings per share","gemma_new_max":15.24,"gemma_new_min":15.24,"llama_3_3_max":null,"llama_3_3_min":null,"qwen_3_30b_max":15.24,"qwen_3_30b_min":15.24}
{"symbol":"HD","year":2023,"quarter":1,"date":"2023-Q1","chunk_id":3,"sub_chunk_id":0,"centroid_label":"average ticket","agreed_value":0.002,"count":2,"chunk":"Billy Bastek: Thank you, Ted, and good morning, everyone. I want to start by also thanking all of our associates and supplier partners for their ongoing commitment to serving our customers and communities. As you heard from Ted, during the first quarter, our sales were below our expectations, primarily driven by lumber deflation and unfavorable weather. We also saw a continuation of the trend we observed in the fourth quarter with consumers pulling back on big ticket and some discretionary type purchases. However, where weather was favorable, we saw strength in smaller ticket outdoor projects. Turning to our department comp performance for the first quarter, 4 of our 14 merchandising departments posted positive comps, which are building materials, hardware, plumbing and millwork. During the first quarter, our comp average ticket increased 0.2% and comp transactions decreased 5%. Excluding core commodities comp average ticket was primarily impacted by inflation across several product categories as well as the demand for new and innovative products. Deflation from core commodity categories negatively impacted our average ticket growth by approximately 335 basis points during the first quarter driven primarily by deflation in lumber. During the first quarter, we saw a significant decline in lumber prices relative to a year ago. As an example, on average, framing lumber was approximately $420 per thousand board feet compared to approximately $1,170 in the first quarter of 2022, which is a decrease of 64%. Turning to total company online sales. Sales leveraging our digital platforms decreased approximately 2.9% compared to the first quarter of last year. For those customers that chose to transact with us online during the first quarter, over 45% of our online orders were fulfilled through our stores. DIY customers outperformed the Pro in the quarter, but both were negative. Pro results experienced a disproportionate impact as a result of lumber deflation and a wet start spring \u2013 wet start to spring negatively impacted both customer cohorts. Big ticket comp transactions or those over $1,000 were down 6.5% compared to the first quarter of last year. We saw some big ticket strength across Pro-heavy categories like portable power, gypsum and pipe and fittings. After a couple of years of unprecedented demand in the home improvement market, we continue to see softness in big-ticket discretionary categories like patio, grills and appliances that likely reflects deferral of these single item purchases and pull forward. In addition, we\u2019ve seen demand soften across other parts of the business, including flooring, kitchen and bath. This softer demand may reflect consumers moving away from larger to smaller projects. And while there are factors impacting the home improvement market, our merchandising organization will continue to focus on being our customers\u2019 advocate for value. This means continuing to provide a broad assortment of best-in-class products that are in stock and available for our customers when they need it. We will also continue to lean into products that simplify the project, saving our customers time and money. That\u2019s why I\u2019m so excited about the innovation we\u2019re bringing to the market, whether it\u2019s Leviton\u2019s Decora Edge, Viega Copper press fittings or the launch of Behr Dynasty exterior paint, just to name a few. At our upcoming investor conference, I look forward to sharing more about these products and some of my favorite product innovations with you in person. It\u2019s the power of our vendor relationships, coupled with our best-in-class merchant organization that allows us to offer our customers the best brands with the most innovation to solve pain points, increase functionality or enhance performance at the best value in the market. Now let\u2019s turn our attention to spring. While we\u2019ve had a slower start to the season, we continue to be excited about the lineup of products we have for our customers and remain ready to help them with their outdoor projects or outdoor living needs. As you\u2019ve heard us say many times, we have a great lineup of outdoor power products and our assortment of RYOBI, Milwaukee, DEWALT and Makita offers something for everyone building on an ecosystem of innovative tools powered by the same battery platforms, and our live goods look incredible. We\u2019re ready for spring with everything from shrubs to a variety of flowers, herbs, vegetables for every type of gardener. With that, I\u2019d like to turn the call over to Ann.","evidence_gemma_new":"average ticket first quarter","evidence_llama_3_3":null,"evidence_qwen_3_30b":"comp average ticket comp transactions first quarter","gemma_new_max":0.002,"gemma_new_min":0.002,"llama_3_3_max":null,"llama_3_3_min":null,"qwen_3_30b_max":0.002,"qwen_3_30b_min":0.002}
{"symbol":"HD","year":2023,"quarter":3,"date":"2023-Q3","chunk_id":45,"sub_chunk_id":0,"centroid_label":"average ticket","agreed_value":67.0,"count":3,"chunk":"Peter Benedict: Another one on average ticket here. So pre-COVID average ticket around $67. I think now it's kind of trending closer to $90, so up 35%. Richard, I just wonder if you have any perspective on kind of the like-for-like SKU inflation component there versus the big-ticket mix? It sounds like your like-for-like inflation is -- seems to be stabilizing. I know there's innovation that can make things not like-for-like. But just curious, as you think about the big-ticket exposure there and what could potentially play out there? How big of a deal is that?","evidence_gemma_new":"average ticket","evidence_llama_3_3":"average ticket","evidence_qwen_3_30b":"average ticket pre-COVID","gemma_new_max":67.0,"gemma_new_min":67.0,"llama_3_3_max":67.0,"llama_3_3_min":67.0,"qwen_3_30b_max":67.0,"qwen_3_30b_min":67.0}
{"symbol":"HD","year":2023,"quarter":3,"date":"2023-Q3","chunk_id":45,"sub_chunk_id":0,"centroid_label":"average ticket","agreed_value":90.0,"count":3,"chunk":"Peter Benedict: Another one on average ticket here. So pre-COVID average ticket around $67. I think now it's kind of trending closer to $90, so up 35%. Richard, I just wonder if you have any perspective on kind of the like-for-like SKU inflation component there versus the big-ticket mix? It sounds like your like-for-like inflation is -- seems to be stabilizing. I know there's innovation that can make things not like-for-like. But just curious, as you think about the big-ticket exposure there and what could potentially play out there? How big of a deal is that?","evidence_gemma_new":"average ticket","evidence_llama_3_3":"average ticket","evidence_qwen_3_30b":"average ticket","gemma_new_max":90.0,"gemma_new_min":90.0,"llama_3_3_max":90.0,"llama_3_3_min":90.0,"qwen_3_30b_max":90.0,"qwen_3_30b_min":90.0}
{"symbol":"HD","year":2024,"quarter":1,"date":"2024-Q1","chunk_id":4,"sub_chunk_id":0,"centroid_label":"average ticket","agreed_value":0.013,"count":2,"chunk":"Billy Bastek: Thank you, Ann. And good morning, everyone. I want to start by also thanking all of our associates and supplier partners for their ongoing commitment to serving our customers and communities. As you heard from Ted, during the first quarter, our sales were impacted by a delayed start to spring and continued softness in certain larger, discretionary projects. However, where weather was favorable, we saw good customer engagement and strength in outdoor projects. Before providing commentary on our comp performance, it's important to note that we made some merchandising department changes to more closely reflect how our customers shop our categories and better align with our merchandising growth efforts. We now have 16 departments, up from 14 previously and have separated electrical and lighting; and kitchen and bath. Additionally, we have renamed our tools department to power and included outdoor power equipment to capture synergies and maximize the strength of our battery-powered platforms. Turning to our department comp performance for the first quarter, our building materials and power departments posted positive comps, while outdoor garden, paint, lumber, plumbing and hardware were all above the company average. During the first quarter, our comp transactions decreased 1.5% and comp average ticket decreased 1.3%. However, we continue to see our customers trading up for new and innovative products. Big ticket count transactions or those over $1,000 were down 6.5% compared to the first quarter of last year. We continue to see softer engagement in larger discretionary \u2013 projects where customers typically use financing to fund the projects such as kitchen and bath remodels. Turning to total company online sales, sales leveraging our digital platforms increased 3.3% compared to the first quarter of last year. For those customers that chose to transact with us online during the first quarter nearly half of our online orders were fulfilled through our stores. We are incredibly focused on removing friction for our customers to create an excellent, interconnected shopping experience. We continue to work on improving our online search functionality and serving the most relevant product offerings to our customers. To do this, we rolled out an intent-based search engine that combines keywords, behaviors and intent to deliver more targeted results. And we enhanced our filtering capabilities, improving the customers\u2019 ability to find exactly what they are looking for. All of these initiatives work together to drive strong results in our online business. Pro and DIY customers\u2019 performance was relatively in line with one another, but both were negative for the quarter. While Pro backlogs remain relatively stable, we hear from our Pros that homeowners continue to take on smaller projects. The investments we are making are resonating with our Pros as we see increased engagement. For example, we have made significant progress with the Pro Paint [ph] and continue to see share gains with this customer. Our partnerships with Bayer and PPG as well as enhanced capabilities around their in-store service and job site delivery capabilities are helping to remove friction from their experience. During the end of the first quarter, we hosted our annual Spring Black Friday and Spring Gift Center events and saw strong performance across both events. Our merchants did a fantastic job curating the best products and we saw strong engagement with our customers throughout the events. We are pleased with the results we saw, particularly in categories like riding lawnmowers and outdoor power equipment, where we had experienced some discretionary pull forward over the last couple of years. The trend away from gas to battery-powered products is continuing, and we are well positioned with our assortment. We have the brands our customers are looking for, whether it's RYOBI, Milwaukee, DEWALT, Makita or RIDGID. We estimate that there are nearly 500 million batteries in the market today, and our assortment covers the vast majority of these batteries. In fact, more than 70% of batteries with brands that are exclusive to The Home Depot in the big box channel with hundreds of products across each of these platforms, this is one of the best loyalty programs that keeps customers coming back to The Home Depot. And our live goods category looks incredible. We are ready for spring with everything from shrubs to a variety of flowers, herbs and vegetables for every type of gardener. We're excited about spring breaking across the country, and we remain ready to help our customers with all of their outdoor projects and outdoor living needs. With that, I'd like to turn the call over to Richard.","evidence_gemma_new":"comp average ticket","evidence_llama_3_3":"comp average ticket first quarter","evidence_qwen_3_30b":null,"gemma_new_max":0.013,"gemma_new_min":0.013,"llama_3_3_max":0.013,"llama_3_3_min":0.013,"qwen_3_30b_max":null,"qwen_3_30b_min":null}
{"symbol":"HD","year":2024,"quarter":3,"date":"2024-Q3","chunk_id":4,"sub_chunk_id":0,"centroid_label":"average ticket","agreed_value":-0.008,"count":2,"chunk":"Billy Bastek: Thank you, Ann, and good morning, everyone. I want to start by also thanking all of our associates and supplier partners for their ongoing commitment to serving our customers and communities. As you heard from Ted, our performance during the third quarter exceeded our expectations as we saw better engagement in some seasonal leasing categories as a result of more favorable weather throughout the quarter. In addition, we also saw incremental sales as a result of the hurricanes. However, the higher interest rate environment and greater macroeconomic uncertainty continues to pressure overall project demand. Turning to our merchandising department comp performance for the third quarter, our power, outdoor garden, building materials, indoor garden and paint departments posted positive comps, while lumber, plumbing and hardware were all above the company average. During the third quarter, our comp transactions decreased 0.6% and comp average ticket decreased 0.8%. However, we continue to see our customers trading up for new and innovative products. Big ticket comp transactions or those over a $1,000 were down 6.8% compared to the third quarter of last year. We continue to see softer engagement in larger discretionary projects where customers typically use financing to fund the project, such as kitchen and bath remodels. During the third quarter, pro sales were positive and outpaced the DIY customer. And, those pros engaging with elements of our Pro Ecosystem, who also have a dedicated salesperson, were our strongest performing pros in the quarter. Turning to total company online sales. Sales leveraging our digital platforms increased 4% compared to the third quarter of last year. And, for those customers that chose to transact with us online during the third quarter, nearly half of our online orders were fulfilled through our stores. In addition, as you heard from Ted, we are focused on continuing to improve our interconnected retail experience, whether it is our faster delivery speeds, our more relevant and personalized search results or our enhanced product review summaries powered by AI, all of which are leading to greater purchasing confidence for our customers. During the third quarter, we hosted our Annual Supplier Partnership Meeting, where we focused on how we will continue to work together to bring the best products to market, deliver innovative solutions that simplify the project and offer great value with best-in-class features and benefits. At the event, we recognized a number of vendors across categories who continue to transform the industry with the innovation they bring to our customers on a daily basis, this included Starlink, Milwaukee, RYOBI, WAGO, Glacier Bay, Henry Roofing and many more. We are proud of the innovation and partnership that our suppliers bring to The Home Depot and the value that we\u2019re able to offer both our Pro and DIY customers. We also hosted our Annual Labor Day and Halloween events and we\u2019re pleased with the results. During our Labor Day event, we were encouraged with the customers\u2019 engagement across a number of categories, including grills, which had positive comps for the quarter led by Traeger. And, 2024 was another record sales year for our Halloween program, both in-store and online as our customers continue to add to their collection with our unique and exclusive product assortment. As we turn our attention to the fourth quarter, we plan to maintain our momentum with our annual holiday, Black Friday and Gift Center events. In our Gift Center event, we continue to lean into brands that matter most for our customers with our assortment of Milwaukee, RYOBI, Makita, DEWALT, RIDGID, Husky and more. We\u2019ll have something for everyone, whether it\u2019s our wide assortment of cordless RYOBI tools, Milwaukee M18 FUEL Toolkits and our new Husky BITE Tools. We are bringing more innovation in batteries with RYOBI Edge, DEWALT XR and the expansion of the Milwaukee Forge lineup with new 8 and 12 amp hour batteries, all designed to bring more power to our customers. And, the innovative Husky BITE tool technology offers increased grip on new and rounded fasteners, better access, more torque and more leverage, making them a great addition to any toolbox at a great value. And, they are exclusive to The Home Depot. Our merchandising organization remains focused on being our customers\u2019 advocate for value. This means continuing to provide a broad assortment of best-in-class products that are in-stock and available for our customers when they need it. We will also continue to provide innovative product solutions that simplify the project, saving our customers time and money. That\u2019s why I\u2019m so excited about the innovation we continue to bring to the market. And with that, I\u2019d like to turn the call over to, Richard.","evidence_gemma_new":"comp average ticket third quarter","evidence_llama_3_3":"comp average ticket third quarter","evidence_qwen_3_30b":null,"gemma_new_max":-0.008,"gemma_new_min":-0.008,"llama_3_3_max":-0.008,"llama_3_3_min":-0.008,"qwen_3_30b_max":null,"qwen_3_30b_min":null}
{"symbol":"HD","year":2024,"quarter":4,"date":"2024-Q4","chunk_id":3,"sub_chunk_id":0,"centroid_label":"average ticket","agreed_value":0.002,"count":2,"chunk":"Billy Bastek: Thank you, Anne, and good morning, everyone. Wanna start by also thanking all of our associates and supplier partners for their ongoing commitment to serving our customers and communities. As you heard from Ted, our performance during the fourth quarter exceeded our expectations as we saw broader engagement across home improvement related projects. In addition, we also saw incremental sales as a result of the ongoing hurricane recovery effort, However, higher interest rate environment continues to pressure larger remodeling projects. Turning to our merchandising department. Comp performance for the fourth quarter, Ten of our sixteen departments posted positive comps including appliances, indoor garden, Lumber. Power. Building materials, Paint. Outdoor garden, storage, hardware, and plumbing. During the fourth quarter, our comp transactions increased 0.6% and comp average ticket increased 0.2%. Inflation from core commodity categories positively impacted our average ticket by approximately twenty basis points driven by inflation in lumber and copper wire. Additionally, during the quarter, we continue to see our customers trading up for new and innovative products. Big ticket comp transactions are those over a thousand dollars we're up. Point nine percent. Compared to the fourth quarter of last year. We were pleased with the performance we saw in categories such as appliances, building materials and lumber. However, we continue to see softer engagement in larger discretionary projects for customers typically use financing to fund the project such as kitchen and bath remodels. During the fourth quarter, both pro and DIY comp sales were positive. With pro outpacing the DIY customer. In the fourth quarter, we saw strength across many pro heavy categories like gypsum, decking. Concrete. In fencing. Turning to total company online sales, excluding the impact of the extra week compared to the fourth quarter of last year. Are a lot of drivers to our online success. From the focus on continuously improving the shopping and browsing experience, to enhancing the delivery and post delivery experience experience leveraging AI to enhance our chat features, product descriptions, and creating rating summaries for our customers. This quarter, I'd like to talk more specifically about delivery. As you heard from Ted, we remain focused on continuing to improve our interconnected experience. And have made significant progress on the delivery experience for our customers. We have invested in a broader assortment across our nineteen DFCs established partnerships with third party last mile providers, and made technology improvements across our two thousand plus stores to better utilize all of our assets for the benefit of our customers. Today, we have the fastest delivery speeds across the greatest number of products in company history. Our customers also have more fulfillment options than ever before. They can choose what they want, when they want. Including same day and next day delivery. We know that driving a superior customer experience, including speed of delivery, drives greater customer satisfaction, higher engagement, higher conversion, Nope. Ultimately, more sales. We've seen these customers who are engaging in our delivery capabilities meaningfully increase their overall spend with us across all purchase occasions and channels. During the fourth quarter, we hosted our appliance gift center, decorative holiday and a Black Friday event. We saw strong engagement across all of these events with our appliance and gift center events posting record sales years. We're looking forward to the year ahead, particularly with the spring selling season right around the corner and we have a great lineup of new and innovative products from live goods to outdoor power equipment. We continue to see an industry wide shift from gas powered to battery powered tools and we have been leaning into this trend for some time. We have the brands that matter most to our customers, including Ryobi, Milwaukee. DeWalt, and Nikita. In our spring gift center event, we will provide our largest assortment of battery powered products with longer run times and enhanced performance across a number of battery RIAVI one, Milwaukee, m eighteen forge, DEWALT XR PowerPack and Power Stack, and Makita LXT to name a few. We're also excited about our live goods program. Each year, our merchants partner with a wide network of regional and local growers to ensure that our customers have new and improved varieties in the right localized assortment to enhance the overall garden experience. Investing in our relationships with our growers will allow us to continue to drive innovation to meet our customers' needs and improve their shopping experience while building loyalty to the Home Depot. As we look forward to spring, we are excited about continuing to provide a broad assortment of best in class products that are in stock and available for our when and how they need it. With that, I'd like to turn the call over to Richard.","evidence_gemma_new":"comp average ticket","evidence_llama_3_3":"comp average ticket fourth quarter","evidence_qwen_3_30b":null,"gemma_new_max":0.002,"gemma_new_min":0.002,"llama_3_3_max":0.002,"llama_3_3_min":0.002,"qwen_3_30b_max":null,"qwen_3_30b_min":null}
{"symbol":"HD","year":2023,"quarter":3,"date":"2023-Q3","chunk_id":4,"sub_chunk_id":0,"centroid_label":"big ticket comp transactions","agreed_value":5.2,"count":2,"chunk":"William Bastek: Thank you, Ann, and good morning, everyone. I want to start by also thanking all of our associates and supplier partners for their ongoing commitment to serving our customers and communities. As you heard from Ted, during the third quarter, our sales were in line with our expectations. However, we did have some unfavorable impacts from core commodity deflation and storm-related overlaps. We saw the continuation of the trend that we have been observing throughout the year with softness in certain big-ticket, discretionary-type purchases. Instead of engaging in larger projects, customers continued to take on smaller projects. Turning to our department comp performance for the third quarter. Our Building Materials department posted a positive comp and 7 of our remaining 13 merchandising departments posted comps above the company average, including plumbing, appliances, hardware, outdoor garden, millwork, tools and paint. During the third quarter, our comp transactions decreased 2.7% and comp average ticket decreased 0.3%. Excluding deflation from core commodities, we experienced comp average ticket growth, primarily driven by demand for new and innovative products. Deflation from core commodity categories negatively impacted our average ticket growth by approximately 60 basis points during the third quarter, driven by deflation in lumber and copper. During the third quarter, we continued to see a decline in lumber prices relative to a year ago. As an example, on average, framing lumber was approximately $420 per thousand board feet compared to approximately $545 in the third quarter of 2022, representing a decrease of over 20%. Big-ticket comp transactions or those over $1,000 were down 5.2% compared to the third quarter of last year. We continue to see softer engagement in big-ticket discretionary categories like flooring, countertops and cabinets. However, we saw big ticket strength in Pro-heavy categories like roofing, insulation and portable power. Turning to total company online sales. Sales leveraging our digital platforms increased approximately 5% compared to the third quarter of last year. We continued to invest in the digital experience across our website and app and released a variety of enhancements in the third quarter. These range from simple improvements to help customers track orders to more complex things like updating our search and recommendation algorithms. For those customers that transacted with us online during the third quarter nearly half of our online orders were fulfilled through our stores. During the third quarter, we hosted our Annual Labor Day appliance in Halloween events, and we're pleased with the results. In appliances, we were encouraged with the customers' engagement during the event. And 2023 was another record sales year for our Halloween program, both in-store and online, as our customers continued to add to their collection with our unique and exclusive product assortment. As we turn our attention to the fourth quarter, we intend to continue this momentum with our annual holiday, Black Friday and gift center events. In our gift center, we continued to lean into brands that matter most for our customers with our assortment of Milwaukee, RYOBI, Makita, DEWALT, RIDGID, Husky and more. We will have something for everyone, whether it's our wide assortment of cordless RYOBI tools, DEWALT Atomic Drill and impact kits or our new Milwaukee M18 FORGE batteries. These new M18 FORGE batteries will be a game changer for our Pro customer, providing the most powerful fastest-charging and longest life of any battery on the Milwaukee M18 platform. This quarter, I'm also excited to announce the addition of WAGO to our powerhouse assortment of Pro brands including Milwaukee, USG, Custom Building Products, Leviton and QEP to name a few. It is these strategic vendor relationships that make us the product authority in home improvement and the addition of WAGO will help extend our position. WAGO is one of the top requested most innovative Pro brands in the wire connector segment that features a releasable level log wire connector that speeds up installation and save space in tight applications. We recently launched a number of SKUs in our stores, which are exclusive to The Home Depot in the national big box retail channel. Our merchandising organization remains focused on being our customers' advocate for value. This means continuing to provide a broad assortment of best-in-class products that are in stock and available for our customers when they need it. We will also continue to lean into products that simplify the project, saving our customers time and money. That's why I'm so excited about the innovation we continue to bring to the market. With that said, I'd like to turn the call over to Richard.","evidence_gemma_new":"big-ticket comp transactions third quarter","evidence_llama_3_3":null,"evidence_qwen_3_30b":"big-ticket comp transactions third quarter","gemma_new_max":5.2,"gemma_new_min":5.2,"llama_3_3_max":null,"llama_3_3_min":null,"qwen_3_30b_max":5.2,"qwen_3_30b_min":5.2}
{"symbol":"HD","year":2023,"quarter":4,"date":"2023-Q4","chunk_id":4,"sub_chunk_id":0,"centroid_label":"big ticket comp transactions","agreed_value":6.9,"count":2,"chunk":"William Bastek: Thank you, Ann, and good morning, everyone. I want to start by also thanking all of our associates and supplier partners for their ongoing commitment to serving our customers and communities. As you heard from Ted, during the fourth quarter, our sales were largely in line with our expectations. However, we did have some unfavorable impacts from weather in January and core commodity deflation. We saw a continuation of the trend that we've been observing throughout the year, with softness in certain big ticket discretionary type purchases. Our customers continue to take on smaller projects while still deferring larger projects. Turning to our department comp performance for the fourth quarter, our building materials and outdoor garden departments posted positive comps and 6 of our remaining 12 merchandising departments posted comps above the company average, including appliances, plumbing, tools, paint, indoor garden, and hardware. During the fourth quarter, our comp transactions decreased 2.1% and comp average ticket decreased 1.3%. However, we continue to see our customers trading up for new and innovative products. Deflation from core commodity categories negatively impacted our average ticket by 35 basis points during the fourth quarter, driven by deflation in lumber and copper wire. During the fourth quarter, we continued to see, on average, a decline in lumber prices relative to a year ago. However, framing and panel lumber pricing experienced the most stable pricing levels during the quarter in some time. As an example, framing lumber started the quarter at approximately $370 per 1,000 board feet compared to ending the quarter at approximately $395, representing a change of less than 7%. The big ticket comp transactions or those over $1,000, were down 6.9% compared to the fourth quarter of last year. We continued to see softer engagement in big-ticket discretionary categories like flooring, countertops and cabinets. During the fourth quarter, our Pro and DIY customers performance was relatively in line with one another. While internal and external surveys suggest that Pro backlogs are lower than they were a year ago, they have remained stable and elevated relative to historical norms. Turning to total company online sales. Sales leveraging our digital platforms increased approximately 2% compared to the fourth quarter of last year. We continue to enhance our digital customer experience with a number of new capabilities, including an enhanced browsing experience featuring the best sellers in a local market and new product discovery zones, which highlights what's trending based on new and highly rated products. For those customers that transacted with us online during the fourth quarter, nearly half of our online orders were fulfilled through our stores. During the fourth quarter, we hosted our annual decorative holiday, Gift Center and Black Friday events. We saw strong engagement across all these events with our decorative holiday event posting a record sales year. As Ted mentioned, 2023 marked the year of significant progress for our inventory management and on-shelf availability while effectively navigating a disinflationary pricing environment and maintaining our position as the customer's advocate for value. Today, we are in a great position regarding our inventory levels. Our in-stocks are the best they've been in a number of years, and we are delivering a compelling assortment for our customers' home improvement needs. We are looking forward to the year ahead, particularly with the spring selling season right around the corner, and we have a great lineup of new and innovative products in live goods to outdoor power equipment. We're excited to expand our offering of Pro outdoor tools with the launch of our new cordless battery powered, Milwaukee, M18, backpack blower and straight shaft trimmer, broadening our assortment for the Pro landscaper. And our Spring Gift Center event continues to lean into cordless technology with a wide variety of products from RYOBI, Milwaukee, Makita and DEWALT, many of which are exclusive to the Home Depot and the big box retail channel. We're also excited about our live goods program. Each year, our merchants partner with our national and regional growers to provide our customers with new and improved varieties to enhance the overall garden experience. We've made significant investments in partnership with our growers to bring new varieties to our customers that are more disease resistant, tolerant to different climates and require less watering. Investing in our relationships with our growers will allow us to continue to drive innovation to meet our customers' needs and improve their shopping experience while building loyalty to the Home Depot. As we look forward to spring, we're excited about continuing to provide a broad assortment of best-in-class products that are in stock and available for our customers when and how they need it. With that, I'd like to turn the call over to Richard.","evidence_gemma_new":"big ticket comp transactions fourth quarter","evidence_llama_3_3":null,"evidence_qwen_3_30b":"big ticket comp transactions fourth quarter","gemma_new_max":6.9,"gemma_new_min":6.9,"llama_3_3_max":null,"llama_3_3_min":null,"qwen_3_30b_max":6.9,"qwen_3_30b_min":6.9}
{"symbol":"HD","year":2024,"quarter":3,"date":"2024-Q3","chunk_id":4,"sub_chunk_id":0,"centroid_label":"big ticket comp transactions","agreed_value":-0.068,"count":2,"chunk":"Billy Bastek: Thank you, Ann, and good morning, everyone. I want to start by also thanking all of our associates and supplier partners for their ongoing commitment to serving our customers and communities. As you heard from Ted, our performance during the third quarter exceeded our expectations as we saw better engagement in some seasonal leasing categories as a result of more favorable weather throughout the quarter. In addition, we also saw incremental sales as a result of the hurricanes. However, the higher interest rate environment and greater macroeconomic uncertainty continues to pressure overall project demand. Turning to our merchandising department comp performance for the third quarter, our power, outdoor garden, building materials, indoor garden and paint departments posted positive comps, while lumber, plumbing and hardware were all above the company average. During the third quarter, our comp transactions decreased 0.6% and comp average ticket decreased 0.8%. However, we continue to see our customers trading up for new and innovative products. Big ticket comp transactions or those over a $1,000 were down 6.8% compared to the third quarter of last year. We continue to see softer engagement in larger discretionary projects where customers typically use financing to fund the project, such as kitchen and bath remodels. During the third quarter, pro sales were positive and outpaced the DIY customer. And, those pros engaging with elements of our Pro Ecosystem, who also have a dedicated salesperson, were our strongest performing pros in the quarter. Turning to total company online sales. Sales leveraging our digital platforms increased 4% compared to the third quarter of last year. And, for those customers that chose to transact with us online during the third quarter, nearly half of our online orders were fulfilled through our stores. In addition, as you heard from Ted, we are focused on continuing to improve our interconnected retail experience, whether it is our faster delivery speeds, our more relevant and personalized search results or our enhanced product review summaries powered by AI, all of which are leading to greater purchasing confidence for our customers. During the third quarter, we hosted our Annual Supplier Partnership Meeting, where we focused on how we will continue to work together to bring the best products to market, deliver innovative solutions that simplify the project and offer great value with best-in-class features and benefits. At the event, we recognized a number of vendors across categories who continue to transform the industry with the innovation they bring to our customers on a daily basis, this included Starlink, Milwaukee, RYOBI, WAGO, Glacier Bay, Henry Roofing and many more. We are proud of the innovation and partnership that our suppliers bring to The Home Depot and the value that we\u2019re able to offer both our Pro and DIY customers. We also hosted our Annual Labor Day and Halloween events and we\u2019re pleased with the results. During our Labor Day event, we were encouraged with the customers\u2019 engagement across a number of categories, including grills, which had positive comps for the quarter led by Traeger. And, 2024 was another record sales year for our Halloween program, both in-store and online as our customers continue to add to their collection with our unique and exclusive product assortment. As we turn our attention to the fourth quarter, we plan to maintain our momentum with our annual holiday, Black Friday and Gift Center events. In our Gift Center event, we continue to lean into brands that matter most for our customers with our assortment of Milwaukee, RYOBI, Makita, DEWALT, RIDGID, Husky and more. We\u2019ll have something for everyone, whether it\u2019s our wide assortment of cordless RYOBI tools, Milwaukee M18 FUEL Toolkits and our new Husky BITE Tools. We are bringing more innovation in batteries with RYOBI Edge, DEWALT XR and the expansion of the Milwaukee Forge lineup with new 8 and 12 amp hour batteries, all designed to bring more power to our customers. And, the innovative Husky BITE tool technology offers increased grip on new and rounded fasteners, better access, more torque and more leverage, making them a great addition to any toolbox at a great value. And, they are exclusive to The Home Depot. Our merchandising organization remains focused on being our customers\u2019 advocate for value. This means continuing to provide a broad assortment of best-in-class products that are in-stock and available for our customers when they need it. We will also continue to provide innovative product solutions that simplify the project, saving our customers time and money. That\u2019s why I\u2019m so excited about the innovation we continue to bring to the market. And with that, I\u2019d like to turn the call over to, Richard.","evidence_gemma_new":"big ticket comp transactions third quarter","evidence_llama_3_3":"big ticket comp transactions third quarter","evidence_qwen_3_30b":null,"gemma_new_max":-0.068,"gemma_new_min":-0.068,"llama_3_3_max":-0.068,"llama_3_3_min":-0.068,"qwen_3_30b_max":null,"qwen_3_30b_min":null}
{"symbol":"HD","year":2024,"quarter":4,"date":"2024-Q4","chunk_id":3,"sub_chunk_id":0,"centroid_label":"big ticket comp transactions","agreed_value":0.009,"count":2,"chunk":"Billy Bastek: Thank you, Anne, and good morning, everyone. Wanna start by also thanking all of our associates and supplier partners for their ongoing commitment to serving our customers and communities. As you heard from Ted, our performance during the fourth quarter exceeded our expectations as we saw broader engagement across home improvement related projects. In addition, we also saw incremental sales as a result of the ongoing hurricane recovery effort, However, higher interest rate environment continues to pressure larger remodeling projects. Turning to our merchandising department. Comp performance for the fourth quarter, Ten of our sixteen departments posted positive comps including appliances, indoor garden, Lumber. Power. Building materials, Paint. Outdoor garden, storage, hardware, and plumbing. During the fourth quarter, our comp transactions increased 0.6% and comp average ticket increased 0.2%. Inflation from core commodity categories positively impacted our average ticket by approximately twenty basis points driven by inflation in lumber and copper wire. Additionally, during the quarter, we continue to see our customers trading up for new and innovative products. Big ticket comp transactions are those over a thousand dollars we're up. Point nine percent. Compared to the fourth quarter of last year. We were pleased with the performance we saw in categories such as appliances, building materials and lumber. However, we continue to see softer engagement in larger discretionary projects for customers typically use financing to fund the project such as kitchen and bath remodels. During the fourth quarter, both pro and DIY comp sales were positive. With pro outpacing the DIY customer. In the fourth quarter, we saw strength across many pro heavy categories like gypsum, decking. Concrete. In fencing. Turning to total company online sales, excluding the impact of the extra week compared to the fourth quarter of last year. Are a lot of drivers to our online success. From the focus on continuously improving the shopping and browsing experience, to enhancing the delivery and post delivery experience experience leveraging AI to enhance our chat features, product descriptions, and creating rating summaries for our customers. This quarter, I'd like to talk more specifically about delivery. As you heard from Ted, we remain focused on continuing to improve our interconnected experience. And have made significant progress on the delivery experience for our customers. We have invested in a broader assortment across our nineteen DFCs established partnerships with third party last mile providers, and made technology improvements across our two thousand plus stores to better utilize all of our assets for the benefit of our customers. Today, we have the fastest delivery speeds across the greatest number of products in company history. Our customers also have more fulfillment options than ever before. They can choose what they want, when they want. Including same day and next day delivery. We know that driving a superior customer experience, including speed of delivery, drives greater customer satisfaction, higher engagement, higher conversion, Nope. Ultimately, more sales. We've seen these customers who are engaging in our delivery capabilities meaningfully increase their overall spend with us across all purchase occasions and channels. During the fourth quarter, we hosted our appliance gift center, decorative holiday and a Black Friday event. We saw strong engagement across all of these events with our appliance and gift center events posting record sales years. We're looking forward to the year ahead, particularly with the spring selling season right around the corner and we have a great lineup of new and innovative products from live goods to outdoor power equipment. We continue to see an industry wide shift from gas powered to battery powered tools and we have been leaning into this trend for some time. We have the brands that matter most to our customers, including Ryobi, Milwaukee. DeWalt, and Nikita. In our spring gift center event, we will provide our largest assortment of battery powered products with longer run times and enhanced performance across a number of battery RIAVI one, Milwaukee, m eighteen forge, DEWALT XR PowerPack and Power Stack, and Makita LXT to name a few. We're also excited about our live goods program. Each year, our merchants partner with a wide network of regional and local growers to ensure that our customers have new and improved varieties in the right localized assortment to enhance the overall garden experience. Investing in our relationships with our growers will allow us to continue to drive innovation to meet our customers' needs and improve their shopping experience while building loyalty to the Home Depot. As we look forward to spring, we are excited about continuing to provide a broad assortment of best in class products that are in stock and available for our when and how they need it. With that, I'd like to turn the call over to Richard.","evidence_gemma_new":"big ticket comp transactions","evidence_llama_3_3":"Big ticket comp transactions fourth quarter","evidence_qwen_3_30b":null,"gemma_new_max":0.009,"gemma_new_min":0.009,"llama_3_3_max":0.009,"llama_3_3_min":0.009,"qwen_3_30b_max":null,"qwen_3_30b_min":null}
{"symbol":"HD","year":2023,"quarter":4,"date":"2023-FY","chunk_id":5,"sub_chunk_id":0,"centroid_label":"capital expenditures","agreed_value":3200000000.0,"count":2,"chunk":"Richard McPhail: Thank you, Billy, and good morning, everyone. In the fourth quarter, total sales were $34.8 billion, a decrease of 2.9% from last year. During the fourth quarter, our total company comps were negative 3.5% with comps of negative 2.5% in November, positive 1.1% in December and negative 8.5% in January. Comps in the U.S. were negative 4% for the quarter with comps of negative 2.7% in November, positive 0.6% in December and negative 9.1% in January. In local currency, Mexico and Canada posted comps above the company average with Mexico posting positive comps. It is important to note that adjusting for holiday shifts and weather-related impacts in January, monthly comps relatively consistent across the quarter. For the year, our sales totaled $152.7 billion, a decrease of 3% versus fiscal 2022. For the year, total company comp sales decreased 3.2% and U.S. comp sales decreased 3.5%. In the fourth quarter, our gross margin was approximately 33.1%, a decrease of 20 basis points from last year. For the year, our gross margin was approximately 33.4%, a decrease of 15 basis points from last year, which was in line with our expectations. During the fourth quarter, operating expenses as a percentage of sales increased approximately 115 basis points to 21.2% compared to the fourth quarter of 2022. Our operating expense performance during the fourth quarter reflects our previously executed compensation increases for hourly associates as well as deleverage from our top line results. For the year, operating expenses were approximately 19.2% of sales, representing an increase of approximately 90 basis points from fiscal 2022. Our operating margin for the fourth quarter was approximately 11.9% and for the year was approximately 14.2%. Interest and other expense for the fourth quarter increased by $50 million to $458 million. In the fourth quarter and for fiscal 2023, our effective tax rate was 24%. Our diluted earnings per share for the fourth quarter were $2.82, a decrease of 14.5% compared to the fourth quarter of 2022. Diluted earnings per share for fiscal 2023 were $15.11, a decrease of 9.5% compared to fiscal 2022. At the end of the quarter, merchandise inventories were $21 billion, down $3.9 billion or approximately 16% versus last year, and inventory turns were 4.3x, up from 4.2x from the second period last year. Moving on to capital allocation. During the fourth quarter, we invested approximately $860 million back into our business in the form of capital expenditures. This brings total capital expenditures for fiscal 2023 to approximately $3.2 billion. During the year, we opened 13 new stores, bringing our store count to 2,335 at the end of fiscal 2023. Retail selling square footage was approximately 242 million square feet and total sales per retail square foot were approximately $605 in fiscal 2023. Additionally, we invested approximately $1.5 billion on three acquisitions during fiscal 2023, accelerating our strategic initiatives and providing us with better capabilities to serve our customers. During the year, we paid approximately $8.4 billion of dividends to our shareholders. Today, we announced our Board of Directors increased our quarterly dividend by 7.7% to $2.25 per share, which equates to an annual dividend of $9 per share. And finally, during fiscal 2023, we returned approximately $8 billion to our shareholders in the form of share repurchases, including $1.5 billion in the fourth quarter. Computed on the average of beginning and ending long-term debt and equity for the trailing 12 months, return on invested capital was 36.7% compared to 44.6% at the end of the fourth quarter of fiscal 2022. Now I'll comment on our outlook for 2024. First, let me point out that fiscal 2024 will include a 53rd week, so the fourth quarter of fiscal 2024 will consist of 14 weeks. We will continue to report comps on a 52-week basis, but we will base our overall guidance on 53 weeks. As you heard from Ted, we feel great about the actions we took in 2023 to position us well heading into 2024. And while there are signs that the economy is on the way towards normalization, the home improvement market still faces headwinds as we look ahead to fiscal 2024. We considered several factors that informed our outlook for fiscal 2024. On the positive side, we faced a number of pressures in fiscal 2023 that are unlikely to repeat in fiscal 2024. In 2023, we saw four increases in the Fed funds rate, a sharp decline in existing home sales and approximately 110 basis points of comp pressure from lumber deflation. However, we still expect pressures to our business in fiscal 2024. Personal consumption growth as measured by PCE is expected to decelerate compared to 2023. Our share of PCE also remains slightly elevated relative to 2019 and has been on a glide path towards 2019 levels. Higher interest rates at the beginning of 2024 relative to last year will likely continue to pressure demand for larger projects. And the effects from pull forward of demand during the pandemic as well as some project deferral could impact demand into 2024. As we consider these influences on home improvement demand, we are planning for a year of continued moderation but with slightly less pressure to comp sales than what we faced in fiscal 2023. Our fiscal 2024 outlook is for total sales growth to outpace sales comp with sales growth of approximately positive 1% and comp sales of approximately negative 1% compared to fiscal 2023. Total sales growth will benefit from a 53rd week as well as from the acquisitions we made and the new stores we opened in fiscal 2023 and the stores we plan to open in fiscal 2024. We expect the 53rd week will contribute approximately $2.3 billion in sales. Our gross margin is expected to be approximately 33.9%, an increase of approximately 50 basis points compared to fiscal 2023. This primarily reflects a lower product and transportation cost environment relative to fiscal 2023 as well as benefits from a portion of the approximately $500 million in reduced fixed costs that we will realize in fiscal 2024. Further, we expect operating margin of approximately 14.1%. This reflects deleverage from sales and pressure from targeted incentive compensation as we are overlapping lower incentive compensation paid than planned in 2023. This will be partially offset by the benefits from the approximately $500 million in fixed costs that we will realize in fiscal 2024 in both cost of goods sold and operating expenses. Our effective tax rate is targeted at approximately 24.5%. We expect net interest expense of approximately $1.8 billion. Our diluted earnings per share percent growth is targeted to be approximately 1% compared to fiscal 2023, with the extra week contributing approximately $0.30. We plan to continue investing in our business with capital expenditures of approximately 2% of sales on an annual basis. After investing in our business and paying our dividend, it is our intent to return excess cash to shareholders in the form of share repurchases. We believe we have positioned ourselves to meet the needs of our customers in any environment. The investments we've made in our business have enabled agility in our operating model. As we look forward, we will continue to invest to strengthen our position with our customers, leverage our scale and low-cost position to drive growth faster than the market and deliver shareholder value. Thank you for your participation in today's call. And Christine, we are now ready for questions.","evidence_gemma_new":null,"evidence_llama_3_3":"capital expenditures fiscal 2023","evidence_qwen_3_30b":"capital expenditures fiscal 2023","gemma_new_max":null,"gemma_new_min":null,"llama_3_3_max":3200000000.0,"llama_3_3_min":3200000000.0,"qwen_3_30b_max":3200000000.0,"qwen_3_30b_min":3200000000.0}
{"symbol":"HD","year":2023,"quarter":2,"date":"2023-Q2","chunk_id":5,"sub_chunk_id":0,"centroid_label":"capital expenditures","agreed_value":800000000.0,"count":3,"chunk":"Richard McPhail: Thank you, Ann, and good morning, everyone. In the second quarter, total sales were $42.9 billion, a decrease of approximately $900 million or 2% from last year. During the second quarter, our total company comps were negative 2% with comps of negative 2.6% in May, negative 3.3% in June and negative 0.2% in July. Comps in the U.S. were negative 2% for the quarter with comps of negative 2.6% in May, negative 3.3% in June and negative 0.4% in July. As you heard from Billy, during the second quarter, we continued to experience lumber deflation compared to the prior year. While lumber prices were down, we saw an improvement in unit productivity, resulting in a net negative comp impact of approximately 85 basis points versus the second quarter of 2022. In the second quarter, our gross margin was 33%, a decrease of 8 basis points from the second quarter last year, primarily driven by pressure from shrink. During the second quarter, operating expense as a percent of sales increased approximately 100 basis points to 17.6% compared to the second quarter of 2022. Our operating expense performance during the second quarter reflects our previously executed compensation increases for hourly associates as well as deleverage from our top line results. Our operating margin for the second quarter was 15.4% compared to 16.5% in the second quarter of 2022. Interest and other expense for the second quarter increased by $49 million to $428 million due primarily to interest on our floating rate debt as well as higher debt balances than a year ago. In the second quarter, our effective tax rate was 24.4%, up from 24.3% in the second quarter of fiscal 2022. Our diluted earnings per share for the second quarter were $4.65, a decrease of 7.9% compared to the second quarter of 2022. During the second quarter, we opened two new stores, bringing our total store count to 2,326. Retail selling square footage was approximately 241 million square feet. At the end of the quarter, merchandise inventories were $23.3 billion, down $2.8 billion compared to the second quarter of 2022. And inventory turns were 4.4x, down from 4.5x last year. Turning to capital allocation. After investing in our business and paying our dividend, it is our intent to return excess cash to shareholders in the form of share repurchases. During the second quarter, we invested approximately $800 million back into our business in the form of capital expenditures. And during the quarter, we paid approximately $2.1 billion in dividends to our shareholders, and we returned approximately $2 billion to shareholders in the form of share repurchases. Computed on the average of beginning and ending long-term debt and equity for the trailing 12 months, return on invested capital was approximately 41.5%, down from 45.6% in the second quarter of fiscal 2022. Now I\u2019ll comment on our guidance for fiscal 2023. Today, we are reaffirming our guidance for 2023. We expect fiscal 2023 sales and comp sales to decline between 2% and 5%. We are targeting an operating margin between 14.3% and 14% for the year. Our effective tax rate is targeted at approximately 24.5%. We expect interest expense of approximately $1.8 billion and we are anticipating between a 7% and 13% decline in diluted earnings per share compared to fiscal 2022. In addition, we continue to focus on driving productivity in the business and feel confident that we will realize the previously announced $500 million in annualized cost savings in 2024. We also remain focused on meeting the needs of our customers with our leading product authority in home improvement, strong in-stock levels and knowledgeable associates. We will continue to prudently invest to strengthen our competitive position and leverage our scale and low-cost position to outperform our market and deliver shareholder value. Thank you for your participation in today\u2019s call. And Christine, we are now ready for questions.","evidence_gemma_new":"capital expenditures","evidence_llama_3_3":"capital expenditures second quarter","evidence_qwen_3_30b":"capital expenditures second quarter","gemma_new_max":800000000.0,"gemma_new_min":800000000.0,"llama_3_3_max":800000000.0,"llama_3_3_min":800000000.0,"qwen_3_30b_max":800000000.0,"qwen_3_30b_min":800000000.0}
{"symbol":"HD","year":2023,"quarter":3,"date":"2023-Q3","chunk_id":5,"sub_chunk_id":0,"centroid_label":"capital expenditures","agreed_value":670000000.0,"count":2,"chunk":"Richard McPhail: Thank you, Billy, and good morning, everyone. In the third quarter, total sales were $37.7 billion, a decrease of approximately $1.2 billion or 3% from last year. During the third quarter, our total company comps were negative 3.1% with comps of negative 2.1% in August, negative 3.4% in September and negative 3.7% in October. Comps in the U.S. were negative 3.5% for the quarter with comps of negative 2.5% in August, negative 3.8% in September and negative 4.1% in October. In local currency, Mexico and Canada posted comps above the company average. It is important to note that adjusting for storm-related overlaps and some seasonal shift, monthly comps were relatively consistent across the quarter. In the third quarter, our gross margin was 33.8%, a decrease of approximately 20 basis points from the third quarter last year, which was in line with our expectations. During the third quarter, operating expense as a percent of sales increased approximately 120 basis points to 19.4% compared to the third quarter of 2022. Our operating expense performance during the third quarter reflects our previously executed compensation increases for hourly associates as well as deleverage from our top line results. Our operating margin for the third quarter was 14.3% compared to 15.8% in the third quarter of 2022. Interest and other expense for the third quarter increased by approximately $30 million to $438 million. In the third quarter, our effective tax rate was 23.3%, down from 24.4% in the third quarter of fiscal 2022. Our diluted earnings per share for the third quarter were $3.81, a decrease of 10.1% compared to the third quarter of 2022. During the third quarter, we opened 7 new stores, bringing our total store count to 2,333. Retail selling square footage was approximately 242 million square feet. At the end of the quarter, merchandise inventories were $22.8 billion, down $2.9 billion or 11% compared to the third quarter of 2022. And inventory turns were 4.3x flat to 1 year ago. Turning to capital allocation. After investing in our business and paying our dividend, it is our intent to return excess cash to shareholders in the form of share repurchases. During the quarter, we invested approximately $670 million back into our business in the form of capital expenditures. And during the quarter, we paid approximately $2.1 billion in dividends to our shareholders, and we returned approximately $1.5 billion to shareholders in the form of share repurchases. Computed on the average of beginning and ending long-term debt and equity for the trailing 12 months, return on invested capital was approximately 38.7%, down from 43.3% in the third quarter of fiscal 2022. Now I will comment on our guidance for fiscal 2023. As you heard from Ted, with one quarter remaining in fiscal 2023, we no longer expect the end points of our previous guidance range as likely outcomes, and therefore, we are narrowing our guidance for 2023. We expect fiscal 2023 sales and comp sales to decline between 3% and 4%. We are targeting an operating margin between 14.2% and 14.1% for the year. Our effective tax rate is targeted at approximately 24.5%. We expect interest expense of approximately $1.8 billion. And we are anticipating between a 9% and 11% decline in diluted earnings per share compared to fiscal 2022. In addition, as you heard from Ann, we continue to focus on driving productivity in the business. We have taken a number of actions that will help us realize the previously announced $500 million in annualized cost savings in 2024 and are fully confident that we will deliver on this commitment. We also remain focused on meeting the needs of our customers with our leading product authority in home improvement, strong in-stock levels and knowledgeable associates. We will continue to prudently invest to strengthen our competitive position and leverage our scale and low-cost position to outperform our market and deliver shareholder value. Thank you for your participation in today's call. And Christine, we are now ready for questions.","evidence_gemma_new":null,"evidence_llama_3_3":"capital expenditures third quarter","evidence_qwen_3_30b":"capital expenditures","gemma_new_max":null,"gemma_new_min":null,"llama_3_3_max":670000000.0,"llama_3_3_min":670000000.0,"qwen_3_30b_max":670000000.0,"qwen_3_30b_min":670000000.0}
{"symbol":"HD","year":2023,"quarter":4,"date":"2023-Q4","chunk_id":5,"sub_chunk_id":0,"centroid_label":"capital expenditures","agreed_value":860000000.0,"count":3,"chunk":"Richard McPhail: Thank you, Billy, and good morning, everyone. In the fourth quarter, total sales were $34.8 billion, a decrease of 2.9% from last year. During the fourth quarter, our total company comps were negative 3.5% with comps of negative 2.5% in November, positive 1.1% in December and negative 8.5% in January. Comps in the U.S. were negative 4% for the quarter with comps of negative 2.7% in November, positive 0.6% in December and negative 9.1% in January. In local currency, Mexico and Canada posted comps above the company average with Mexico posting positive comps. It is important to note that adjusting for holiday shifts and weather-related impacts in January, monthly comps relatively consistent across the quarter. For the year, our sales totaled $152.7 billion, a decrease of 3% versus fiscal 2022. For the year, total company comp sales decreased 3.2% and U.S. comp sales decreased 3.5%. In the fourth quarter, our gross margin was approximately 33.1%, a decrease of 20 basis points from last year. For the year, our gross margin was approximately 33.4%, a decrease of 15 basis points from last year, which was in line with our expectations. During the fourth quarter, operating expenses as a percentage of sales increased approximately 115 basis points to 21.2% compared to the fourth quarter of 2022. Our operating expense performance during the fourth quarter reflects our previously executed compensation increases for hourly associates as well as deleverage from our top line results. For the year, operating expenses were approximately 19.2% of sales, representing an increase of approximately 90 basis points from fiscal 2022. Our operating margin for the fourth quarter was approximately 11.9% and for the year was approximately 14.2%. Interest and other expense for the fourth quarter increased by $50 million to $458 million. In the fourth quarter and for fiscal 2023, our effective tax rate was 24%. Our diluted earnings per share for the fourth quarter were $2.82, a decrease of 14.5% compared to the fourth quarter of 2022. Diluted earnings per share for fiscal 2023 were $15.11, a decrease of 9.5% compared to fiscal 2022. At the end of the quarter, merchandise inventories were $21 billion, down $3.9 billion or approximately 16% versus last year, and inventory turns were 4.3x, up from 4.2x from the second period last year. Moving on to capital allocation. During the fourth quarter, we invested approximately $860 million back into our business in the form of capital expenditures. This brings total capital expenditures for fiscal 2023 to approximately $3.2 billion. During the year, we opened 13 new stores, bringing our store count to 2,335 at the end of fiscal 2023. Retail selling square footage was approximately 242 million square feet and total sales per retail square foot were approximately $605 in fiscal 2023. Additionally, we invested approximately $1.5 billion on three acquisitions during fiscal 2023, accelerating our strategic initiatives and providing us with better capabilities to serve our customers. During the year, we paid approximately $8.4 billion of dividends to our shareholders. Today, we announced our Board of Directors increased our quarterly dividend by 7.7% to $2.25 per share, which equates to an annual dividend of $9 per share. And finally, during fiscal 2023, we returned approximately $8 billion to our shareholders in the form of share repurchases, including $1.5 billion in the fourth quarter. Computed on the average of beginning and ending long-term debt and equity for the trailing 12 months, return on invested capital was 36.7% compared to 44.6% at the end of the fourth quarter of fiscal 2022. Now I'll comment on our outlook for 2024. First, let me point out that fiscal 2024 will include a 53rd week, so the fourth quarter of fiscal 2024 will consist of 14 weeks. We will continue to report comps on a 52-week basis, but we will base our overall guidance on 53 weeks. As you heard from Ted, we feel great about the actions we took in 2023 to position us well heading into 2024. And while there are signs that the economy is on the way towards normalization, the home improvement market still faces headwinds as we look ahead to fiscal 2024. We considered several factors that informed our outlook for fiscal 2024. On the positive side, we faced a number of pressures in fiscal 2023 that are unlikely to repeat in fiscal 2024. In 2023, we saw four increases in the Fed funds rate, a sharp decline in existing home sales and approximately 110 basis points of comp pressure from lumber deflation. However, we still expect pressures to our business in fiscal 2024. Personal consumption growth as measured by PCE is expected to decelerate compared to 2023. Our share of PCE also remains slightly elevated relative to 2019 and has been on a glide path towards 2019 levels. Higher interest rates at the beginning of 2024 relative to last year will likely continue to pressure demand for larger projects. And the effects from pull forward of demand during the pandemic as well as some project deferral could impact demand into 2024. As we consider these influences on home improvement demand, we are planning for a year of continued moderation but with slightly less pressure to comp sales than what we faced in fiscal 2023. Our fiscal 2024 outlook is for total sales growth to outpace sales comp with sales growth of approximately positive 1% and comp sales of approximately negative 1% compared to fiscal 2023. Total sales growth will benefit from a 53rd week as well as from the acquisitions we made and the new stores we opened in fiscal 2023 and the stores we plan to open in fiscal 2024. We expect the 53rd week will contribute approximately $2.3 billion in sales. Our gross margin is expected to be approximately 33.9%, an increase of approximately 50 basis points compared to fiscal 2023. This primarily reflects a lower product and transportation cost environment relative to fiscal 2023 as well as benefits from a portion of the approximately $500 million in reduced fixed costs that we will realize in fiscal 2024. Further, we expect operating margin of approximately 14.1%. This reflects deleverage from sales and pressure from targeted incentive compensation as we are overlapping lower incentive compensation paid than planned in 2023. This will be partially offset by the benefits from the approximately $500 million in fixed costs that we will realize in fiscal 2024 in both cost of goods sold and operating expenses. Our effective tax rate is targeted at approximately 24.5%. We expect net interest expense of approximately $1.8 billion. Our diluted earnings per share percent growth is targeted to be approximately 1% compared to fiscal 2023, with the extra week contributing approximately $0.30. We plan to continue investing in our business with capital expenditures of approximately 2% of sales on an annual basis. After investing in our business and paying our dividend, it is our intent to return excess cash to shareholders in the form of share repurchases. We believe we have positioned ourselves to meet the needs of our customers in any environment. The investments we've made in our business have enabled agility in our operating model. As we look forward, we will continue to invest to strengthen our position with our customers, leverage our scale and low-cost position to drive growth faster than the market and deliver shareholder value. Thank you for your participation in today's call. And Christine, we are now ready for questions.","evidence_gemma_new":"capital expenditures fourth quarter","evidence_llama_3_3":"capital expenditures fourth quarter","evidence_qwen_3_30b":"capital expenditures fourth quarter","gemma_new_max":860000000.0,"gemma_new_min":860000000.0,"llama_3_3_max":860000000.0,"llama_3_3_min":860000000.0,"qwen_3_30b_max":860000000.0,"qwen_3_30b_min":860000000.0}
{"symbol":"HD","year":2024,"quarter":1,"date":"2024-Q1","chunk_id":5,"sub_chunk_id":0,"centroid_label":"capital expenditures","agreed_value":850000000.0,"count":3,"chunk":"Richard McPhail: Thank you, Billy, and good morning, everyone. In the first quarter, total sales were $36.4 billion, a decrease of approximately 2.3% from last year. During the first quarter, our total company comps were negative 2.8% with comps of negative 4% in February, negative 0.8% in March, and negative 3.3% in April. Comps in the U.S. were negative 3.2% for the quarter with comps of negative 4.8% in February, negative 1.3% in March, and negative 3.6% in April. For the quarter, Mexico posted positive comps, whereas Canada was slightly below the company average. In the first quarter, our gross margin was 34.1%, an increase of approximately 45 basis points from the first quarter last year, primarily driven by benefits from lower transportation cost and shrink. During the first quarter, operating expense as a percent of sales increased approximately 140 basis points to 20.2% compared to the first quarter of 2023. The increase was primarily driven by a benefit from a legal settlement that we are overlapping from the first quarter of fiscal 2023, as well as deleverage from our top line results. Our operating expense performance was in line with our expectations. Our operating margin for the first quarter was 13.9% compared to 14.9% in the first quarter of 2023. Interest and other expense for the first quarter decreased by $13 million to $428 million. In the first quarter, our effective tax rate was 22.6% compared to 24.2% in the first quarter of fiscal 2023. Our diluted earnings per share for the first quarter were $3.63, a decrease of 5% compared to the first quarter of 2023. During the first quarter, we opened two new stores, bringing our total store count to 2,337. Retail selling square footage was approximately 242 million square feet. At the end of the quarter, merchandise inventories were $22.4 billion, down approximately $3 billion, or 12% compared to the first quarter of 2023, and inventory turns were 4.5x, up from 3.9x last year. Turning to capital allocation. During the first quarter, we invested approximately $850 million back into our business in the form of capital expenditures. And during the quarter, we paid approximately $2.2 billion in dividends to our shareholders and we returned approximately $600 million to shareholders in the form of share repurchases. As a reminder, in March we announced our intent to acquire SRS Distribution and as a result, we paused share repurchases. As you've heard us say many times, we maintain a disciplined approach to capital allocation and that is not changing. First and foremost, we will invest in the business and expect capital expenditures of approximately 2% of sales on an annual basis. After investing in the business, we plan to pay the dividend and it is our intent to return any excess cash to shareholders in the form of share repurchases. From time to time, we will also invest in the business through acquisitions to enhance our capabilities and to accelerate our strategic objectives. Computed on the average of beginning and ending long-term debt and equity for the trailing 12 months, return on invested capital was 37.1%, down from 43.6% \u2013 excuse me, down from 43.6% in the first quarter of fiscal 2023. Now, I will comment on our guidance for fiscal 2024. Today, we are reaffirming our guidance for 2024. As a reminder, our guidance does not currently reflect any impact from the announced acquisition of SRS. The acquisition is currently under regulatory review and we expect it to close by the end of fiscal 2024. We expect total sales growth to outpace sales comp with sales growth of approximately positive 1% and comp sales of approximately negative 1%. Total sales growth will benefit from a 53rd week and we expect the 53rd week will contribute approximately $2.3 billion in sales. Our gross margin is expected to be approximately 33.9%, an increase of approximately 50 basis points, compared to fiscal 2023. We expect operating margin of approximately 14.1%. Our effective tax rate is targeted at approximately 24.5%. We expect net interest expense of approximately $1.8 billion, and our diluted earnings per share percent growth is targeted to be approximately 1% compared to fiscal 2023. It\u2019s our intent to update guidance as appropriate once the SRS transaction closes. We believe that we have positioned ourselves to meet the needs of our customers in any environment. The investments we\u2019ve made in our business have enabled agility in our operating model. As we look forward, we will continue to invest to strengthen our position with our customers, leverage our scale and low-cost position to drive growth faster than the market and deliver shareholder value. Thank you for your participation in today\u2019s call. And Christine, we are now ready for questions.","evidence_gemma_new":"capital expenditures first quarter","evidence_llama_3_3":"capital expenditures first quarter","evidence_qwen_3_30b":"capital expenditures first quarter","gemma_new_max":850000000.0,"gemma_new_min":850000000.0,"llama_3_3_max":850000000.0,"llama_3_3_min":850000000.0,"qwen_3_30b_max":850000000.0,"qwen_3_30b_min":850000000.0}
{"symbol":"HD","year":2024,"quarter":2,"date":"2024-Q2","chunk_id":5,"sub_chunk_id":0,"centroid_label":"capital expenditures","agreed_value":720000000.0,"count":3,"chunk":"Richard McPhail: Thank you, Billy, and good morning, everyone. In the second quarter, Total sales were $43.2 billion, an increase of approximately 0.6% from last year. Total sales include $1.3 billion from the recent acquisition of SRS, which represents approximately six weeks of sales in the quarter. During the second quarter, our total company comps were negative 3.3%, with comps of negative 3.7% in May, negative 0.9% in June and negative 4.9% in July. Comps in the U.S. were negative 3.6% for the quarter, with comps of negative 4.1% in May, negative 1.4% in June and negative 5% in July. In the second quarter, our gross margin was approximately 33.4%, an increase of 40 basis points from the second quarter last year, primarily driven by benefits from lower transportation costs and shrink, partially offset by mix as a result of the SRS acquisition. During the second quarter, operating expense as a percent of sales increased approximately 65 basis points to 18.3% compared to the second quarter of 2023. Our operating expense performance was in line with our expectations. Beginning this quarter, in addition to our GAAP measures, we are providing the following non-GAAP measures: adjusted operating income, adjusted operating margin and adjusted diluted earnings per share, which excludes noncash amortization of acquired intangible assets. We believe these supplemental measures will help investors better understand and analyze our performance. Our operating margin for the second quarter was 15.1% compared to 15.4% in the second quarter of 2023. In the quarter, pretax intangible asset amortization was $90 million, including $39 million related to SRS. Excluding the intangible asset amortization in the quarter, our adjusted operating margin for the second quarter was 15.3% and compared to 15.5% in the second quarter of 2023. Interest and other expense for the second quarter increased by $61 million to $489 million due primarily to higher debt balances than a year ago. In the second quarter, our effective tax rate was 24.5%, compared to 24.4% in the second quarter of fiscal 2023. Our diluted earnings per share for the second quarter were $4.60, a decrease of approximately 1% compared to the second quarter of 2023. Excluding intangible asset amortization, our adjusted diluted earnings per share for the second quarter were $4.67, essentially flat compared to the second quarter of 2023. During the second quarter, we opened three new stores, bringing our total store count to 2,340. Retail selling square footage was approximately 243 million square feet. At the end of the quarter, merchandise inventories or $23.1 billion, down approximately $200 million compared to the second quarter of 2023, and inventory turns were 4.9x, up from 4.4x last year. Turning to capital allocation. During the second quarter, we invested approximately $720 million back into our business in the form of capital expenditures. And during the quarter, we paid approximately $2.2 billion in dividends to our shareholders. Our disciplined approach to capital allocation remains unchanged. First and foremost, we will invest in the business and expect capital expenditures of approximately 2% of sales on an annual basis. After investing in the business, we plan to pay the dividend and it is our intent to return any excess cash to shareholders in the form of share repurchases. Computed on the average of beginning and ending long-term debt and equity for the trailing 12 months, return on invested capital was approximately 31.9%, down from 41.5% in the second quarter of fiscal 2023. Now, I will comment on our updated outlook for fiscal 2024. As you heard from Ted, given the softer-than-expected performance in the first half of the year, and reflecting continued uncertainty around underlying consumer demand, we believe a more cautious outlook for the year is warranted. With the recent closing of the SRS acquisition, we are now including their results in our consolidated outlook for the year. For the period matching our first half, which includes periods prior to the acquisition and not fully reflected in our financial statements, SRS generated high single-digit percentage sales growth with operating income growing largely in line with sales. We believe that over the next several years, SRS on its own, and through our combined Pro efforts, will help accelerate sales and earnings growth for our company. Updating our fiscal 2024 guidance for the factors we just discussed. We now expect total sales growth between 2.5% and 3.5%, including the SRS acquisition and the 53rd week. The 53rd week is projected to add approximately $2.3 billion to total sales. SRS is expected to contribute approximately $6.4 billion in incremental sales. Comparable sales are expected to decline between negative 3% and negative 4% for the 52-week period. The high end of our range implies a consumer demand environment consistent with the first half of fiscal 2024. While comparable sales for the Company are not currently on the trajectory for the low end of the range, a negative 4% comp implies incremental pressure on consumer demand beyond what we are seeing today. We expect to open approximately 12 new stores. Our gross margin is expected to be approximately 33.5%. We expect operating margin to be between 13.5% and 13.6%, and adjusted operating margin to be between 13.8% and 13.9%. Our effective tax rate is targeted at approximately 24%. We expect net interest expense of approximately $2.2 billion. Our diluted earnings per share percent will decline between negative 2% and negative 4% compared to fiscal 2023, with the extra week contributing approximately $0.30. We expect our adjusted diluted earnings per share percent to decline between negative 1% and negative 3%, compared to fiscal 2023, with the extra week contributing approximately $0.30. We believe that we have positioned ourselves to meet the needs of our customers in any environment. The investments we've made in our business have enabled agility in our operating model. As we look forward, we will continue to invest to strengthen our position with our customers, leverage our scale and low-cost position to drive growth faster than the market and deliver shareholder value. Thank you for your participation in today's call. And Christine, we are now ready for questions.","evidence_gemma_new":"capital expenditures second quarter","evidence_llama_3_3":"capital expenditures second quarter","evidence_qwen_3_30b":"capital expenditures second quarter","gemma_new_max":720000000.0,"gemma_new_min":720000000.0,"llama_3_3_max":720000000.0,"llama_3_3_min":720000000.0,"qwen_3_30b_max":720000000.0,"qwen_3_30b_min":720000000.0}
{"symbol":"HD","year":2024,"quarter":3,"date":"2024-Q3","chunk_id":5,"sub_chunk_id":0,"centroid_label":"capital expenditures","agreed_value":820000000.0,"count":3,"chunk":"Richard McPhail: Thank you, Billy, and good morning, everyone. In the third quarter, total sales were $40.2 billion, an increase of approximately 6.6% from last year. During the third quarter, our total company comps were negative 1.3% with comps of negative 3.3% in August, negative 2.3% in September and positive 1% in October. Comps in the U.S. were negative 1.2% for the quarter, with comps of negative 3.5% in August, negative 2.2% in September, and positive 1.4% in October. The progression of our monthly comps reflects in large part hurricane related sales. Our results for the third quarter include a net contribution of approximately $200 million in hurricane related sales, which positively impacted total company comps by approximately 55 basis points for the quarter and approximately 120 basis points for October. In the third quarter, our gross margin was approximately 33.4%, a decrease of approximately 40 basis points from the third quarter last year, primarily driven by mix as a result of the SRS acquisition, partially offset by benefits from lower shrink. During the third quarter, operating expense as a percent of sales increased approximately 45 basis points to 19.9% compared to the third quarter of 2023. Our operating expense performance was in-line with our expectations. Our operating margin for the third quarter was 13.5% compared to 14.3% in the third quarter of 2023. In the quarter, pre-tax intangible asset amortization was $138 million including $86 million related to SRS. Excluding the intangible asset amortization in the quarter, our adjusted operating margin for the third quarter was 13.8% compared to 14.5% in the third quarter of 2023. Interest and other expense for the third quarter increased by $157 million to $595 million due primarily to higher debt balances than a year ago. In the third quarter, our effective tax rate was 24.4% compared to 23.3% in the third quarter of fiscal 2023. Our diluted earnings per share for the third quarter were $3.67, a decrease of approximately 4% compared to the third quarter of 2023. Excluding intangible asset amortization, our adjusted diluted earnings per share for the third quarter were $3.78, a decrease of approximately 2% compared to the third quarter of 2023. During the third quarter, we opened five new stores, bringing our total store count to 2, 345. Retail selling square footage was approximately 243 million square feet. At the end of the quarter, merchandise inventories were $23.9 billion up approximately $1.1 billion compared to the third quarter of 2023, and inventory turns were 4.8 times, up from 4.3 times last year. Turning to capital allocation. During the third quarter, we invested approximately $820 million back into our business in the form of capital expenditures. And during the quarter, we paid approximately $2.2 billion in dividends to our shareholders. Compute on the average of beginning and ending long-term debt and equity for the trailing 12-months, return on invested capital was approximately 31.5%, down from 38.7% in the third quarter of fiscal 2023. Now, I will comment on our updated outlook for fiscal 2024. As you heard from Ted, while macro uncertainty remains and continues to pressure home improvement demand, our performance in the third quarter was better than expected. Our performance reflects hurricane related sales in the third quarter, and we expect some hurricane related sales in the fourth quarter. Given the better than expected performance in the third quarter and incremental hurricane related sales, we have updated our fiscal 2024 guidance. We now expect total sales growth of approximately 4%, including SRS in the 53rd week. The 53rd week is projected to add approximately $2.3 billion to total sales and SRS is expected to contribute approximately $6.4 billion in incremental sales. Comparable sales are expected to decline approximately 2.5% for the 52 week period. We expect to open approximately 12 new stores. Our gross margin is expected to be approximately 33.5%. We expect operating margin to be approximately 13.5% and adjusted operating margin to be approximately 13.8%. Our effective tax rate is targeted at approximately 24%. We expect net interest expense of approximately $2.1 billion. We expect our diluted earnings per share to decline approximately 2% compared to fiscal 2023 with the extra week contributing approximately $0.30 per share. And, we expect our adjusted diluted earnings per share to decline approximately 1% compared to fiscal 2023 with the extra week contributing approximately $0.30 per share. We believe that we will grow market share in any environment. We are continuing to invest to strengthen our competitive position with our customers and leverage our scale and low cost position to drive growth faster than the market and deliver shareholder value. Thank you for your participation in today\u2019s call. And Christine, we are now ready for questions.","evidence_gemma_new":"capital expenditures third quarter","evidence_llama_3_3":"capital expenditures third quarter","evidence_qwen_3_30b":"capital expenditures third quarter","gemma_new_max":820000000.0,"gemma_new_min":820000000.0,"llama_3_3_max":820000000.0,"llama_3_3_min":820000000.0,"qwen_3_30b_max":820000000.0,"qwen_3_30b_min":820000000.0}
{"symbol":"HD","year":2023,"quarter":3,"date":"2023-Q3","chunk_id":4,"sub_chunk_id":0,"centroid_label":"comp transactions","agreed_value":2.7,"count":2,"chunk":"William Bastek: Thank you, Ann, and good morning, everyone. I want to start by also thanking all of our associates and supplier partners for their ongoing commitment to serving our customers and communities. As you heard from Ted, during the third quarter, our sales were in line with our expectations. However, we did have some unfavorable impacts from core commodity deflation and storm-related overlaps. We saw the continuation of the trend that we have been observing throughout the year with softness in certain big-ticket, discretionary-type purchases. Instead of engaging in larger projects, customers continued to take on smaller projects. Turning to our department comp performance for the third quarter. Our Building Materials department posted a positive comp and 7 of our remaining 13 merchandising departments posted comps above the company average, including plumbing, appliances, hardware, outdoor garden, millwork, tools and paint. During the third quarter, our comp transactions decreased 2.7% and comp average ticket decreased 0.3%. Excluding deflation from core commodities, we experienced comp average ticket growth, primarily driven by demand for new and innovative products. Deflation from core commodity categories negatively impacted our average ticket growth by approximately 60 basis points during the third quarter, driven by deflation in lumber and copper. During the third quarter, we continued to see a decline in lumber prices relative to a year ago. As an example, on average, framing lumber was approximately $420 per thousand board feet compared to approximately $545 in the third quarter of 2022, representing a decrease of over 20%. Big-ticket comp transactions or those over $1,000 were down 5.2% compared to the third quarter of last year. We continue to see softer engagement in big-ticket discretionary categories like flooring, countertops and cabinets. However, we saw big ticket strength in Pro-heavy categories like roofing, insulation and portable power. Turning to total company online sales. Sales leveraging our digital platforms increased approximately 5% compared to the third quarter of last year. We continued to invest in the digital experience across our website and app and released a variety of enhancements in the third quarter. These range from simple improvements to help customers track orders to more complex things like updating our search and recommendation algorithms. For those customers that transacted with us online during the third quarter nearly half of our online orders were fulfilled through our stores. During the third quarter, we hosted our Annual Labor Day appliance in Halloween events, and we're pleased with the results. In appliances, we were encouraged with the customers' engagement during the event. And 2023 was another record sales year for our Halloween program, both in-store and online, as our customers continued to add to their collection with our unique and exclusive product assortment. As we turn our attention to the fourth quarter, we intend to continue this momentum with our annual holiday, Black Friday and gift center events. In our gift center, we continued to lean into brands that matter most for our customers with our assortment of Milwaukee, RYOBI, Makita, DEWALT, RIDGID, Husky and more. We will have something for everyone, whether it's our wide assortment of cordless RYOBI tools, DEWALT Atomic Drill and impact kits or our new Milwaukee M18 FORGE batteries. These new M18 FORGE batteries will be a game changer for our Pro customer, providing the most powerful fastest-charging and longest life of any battery on the Milwaukee M18 platform. This quarter, I'm also excited to announce the addition of WAGO to our powerhouse assortment of Pro brands including Milwaukee, USG, Custom Building Products, Leviton and QEP to name a few. It is these strategic vendor relationships that make us the product authority in home improvement and the addition of WAGO will help extend our position. WAGO is one of the top requested most innovative Pro brands in the wire connector segment that features a releasable level log wire connector that speeds up installation and save space in tight applications. We recently launched a number of SKUs in our stores, which are exclusive to The Home Depot in the national big box retail channel. Our merchandising organization remains focused on being our customers' advocate for value. This means continuing to provide a broad assortment of best-in-class products that are in stock and available for our customers when they need it. We will also continue to lean into products that simplify the project, saving our customers time and money. That's why I'm so excited about the innovation we continue to bring to the market. With that said, I'd like to turn the call over to Richard.","evidence_gemma_new":"comp transactions third quarter","evidence_llama_3_3":null,"evidence_qwen_3_30b":"comp transactions third quarter comp average ticket third quarter","gemma_new_max":2.7,"gemma_new_min":2.7,"llama_3_3_max":null,"llama_3_3_min":null,"qwen_3_30b_max":2.7,"qwen_3_30b_min":2.7}
{"symbol":"HD","year":2023,"quarter":4,"date":"2023-Q4","chunk_id":4,"sub_chunk_id":0,"centroid_label":"comp transactions","agreed_value":2.1,"count":2,"chunk":"William Bastek: Thank you, Ann, and good morning, everyone. I want to start by also thanking all of our associates and supplier partners for their ongoing commitment to serving our customers and communities. As you heard from Ted, during the fourth quarter, our sales were largely in line with our expectations. However, we did have some unfavorable impacts from weather in January and core commodity deflation. We saw a continuation of the trend that we've been observing throughout the year, with softness in certain big ticket discretionary type purchases. Our customers continue to take on smaller projects while still deferring larger projects. Turning to our department comp performance for the fourth quarter, our building materials and outdoor garden departments posted positive comps and 6 of our remaining 12 merchandising departments posted comps above the company average, including appliances, plumbing, tools, paint, indoor garden, and hardware. During the fourth quarter, our comp transactions decreased 2.1% and comp average ticket decreased 1.3%. However, we continue to see our customers trading up for new and innovative products. Deflation from core commodity categories negatively impacted our average ticket by 35 basis points during the fourth quarter, driven by deflation in lumber and copper wire. During the fourth quarter, we continued to see, on average, a decline in lumber prices relative to a year ago. However, framing and panel lumber pricing experienced the most stable pricing levels during the quarter in some time. As an example, framing lumber started the quarter at approximately $370 per 1,000 board feet compared to ending the quarter at approximately $395, representing a change of less than 7%. The big ticket comp transactions or those over $1,000, were down 6.9% compared to the fourth quarter of last year. We continued to see softer engagement in big-ticket discretionary categories like flooring, countertops and cabinets. During the fourth quarter, our Pro and DIY customers performance was relatively in line with one another. While internal and external surveys suggest that Pro backlogs are lower than they were a year ago, they have remained stable and elevated relative to historical norms. Turning to total company online sales. Sales leveraging our digital platforms increased approximately 2% compared to the fourth quarter of last year. We continue to enhance our digital customer experience with a number of new capabilities, including an enhanced browsing experience featuring the best sellers in a local market and new product discovery zones, which highlights what's trending based on new and highly rated products. For those customers that transacted with us online during the fourth quarter, nearly half of our online orders were fulfilled through our stores. During the fourth quarter, we hosted our annual decorative holiday, Gift Center and Black Friday events. We saw strong engagement across all these events with our decorative holiday event posting a record sales year. As Ted mentioned, 2023 marked the year of significant progress for our inventory management and on-shelf availability while effectively navigating a disinflationary pricing environment and maintaining our position as the customer's advocate for value. Today, we are in a great position regarding our inventory levels. Our in-stocks are the best they've been in a number of years, and we are delivering a compelling assortment for our customers' home improvement needs. We are looking forward to the year ahead, particularly with the spring selling season right around the corner, and we have a great lineup of new and innovative products in live goods to outdoor power equipment. We're excited to expand our offering of Pro outdoor tools with the launch of our new cordless battery powered, Milwaukee, M18, backpack blower and straight shaft trimmer, broadening our assortment for the Pro landscaper. And our Spring Gift Center event continues to lean into cordless technology with a wide variety of products from RYOBI, Milwaukee, Makita and DEWALT, many of which are exclusive to the Home Depot and the big box retail channel. We're also excited about our live goods program. Each year, our merchants partner with our national and regional growers to provide our customers with new and improved varieties to enhance the overall garden experience. We've made significant investments in partnership with our growers to bring new varieties to our customers that are more disease resistant, tolerant to different climates and require less watering. Investing in our relationships with our growers will allow us to continue to drive innovation to meet our customers' needs and improve their shopping experience while building loyalty to the Home Depot. As we look forward to spring, we're excited about continuing to provide a broad assortment of best-in-class products that are in stock and available for our customers when and how they need it. With that, I'd like to turn the call over to Richard.","evidence_gemma_new":"comp transactions fourth quarter","evidence_llama_3_3":null,"evidence_qwen_3_30b":"comp transactions comp average ticket fourth quarter","gemma_new_max":2.1,"gemma_new_min":2.1,"llama_3_3_max":null,"llama_3_3_min":null,"qwen_3_30b_max":2.1,"qwen_3_30b_min":2.1}
{"symbol":"HD","year":2024,"quarter":1,"date":"2024-Q1","chunk_id":4,"sub_chunk_id":0,"centroid_label":"comp transactions","agreed_value":0.015,"count":2,"chunk":"Billy Bastek: Thank you, Ann. And good morning, everyone. I want to start by also thanking all of our associates and supplier partners for their ongoing commitment to serving our customers and communities. As you heard from Ted, during the first quarter, our sales were impacted by a delayed start to spring and continued softness in certain larger, discretionary projects. However, where weather was favorable, we saw good customer engagement and strength in outdoor projects. Before providing commentary on our comp performance, it's important to note that we made some merchandising department changes to more closely reflect how our customers shop our categories and better align with our merchandising growth efforts. We now have 16 departments, up from 14 previously and have separated electrical and lighting; and kitchen and bath. Additionally, we have renamed our tools department to power and included outdoor power equipment to capture synergies and maximize the strength of our battery-powered platforms. Turning to our department comp performance for the first quarter, our building materials and power departments posted positive comps, while outdoor garden, paint, lumber, plumbing and hardware were all above the company average. During the first quarter, our comp transactions decreased 1.5% and comp average ticket decreased 1.3%. However, we continue to see our customers trading up for new and innovative products. Big ticket count transactions or those over $1,000 were down 6.5% compared to the first quarter of last year. We continue to see softer engagement in larger discretionary \u2013 projects where customers typically use financing to fund the projects such as kitchen and bath remodels. Turning to total company online sales, sales leveraging our digital platforms increased 3.3% compared to the first quarter of last year. For those customers that chose to transact with us online during the first quarter nearly half of our online orders were fulfilled through our stores. We are incredibly focused on removing friction for our customers to create an excellent, interconnected shopping experience. We continue to work on improving our online search functionality and serving the most relevant product offerings to our customers. To do this, we rolled out an intent-based search engine that combines keywords, behaviors and intent to deliver more targeted results. And we enhanced our filtering capabilities, improving the customers\u2019 ability to find exactly what they are looking for. All of these initiatives work together to drive strong results in our online business. Pro and DIY customers\u2019 performance was relatively in line with one another, but both were negative for the quarter. While Pro backlogs remain relatively stable, we hear from our Pros that homeowners continue to take on smaller projects. The investments we are making are resonating with our Pros as we see increased engagement. For example, we have made significant progress with the Pro Paint [ph] and continue to see share gains with this customer. Our partnerships with Bayer and PPG as well as enhanced capabilities around their in-store service and job site delivery capabilities are helping to remove friction from their experience. During the end of the first quarter, we hosted our annual Spring Black Friday and Spring Gift Center events and saw strong performance across both events. Our merchants did a fantastic job curating the best products and we saw strong engagement with our customers throughout the events. We are pleased with the results we saw, particularly in categories like riding lawnmowers and outdoor power equipment, where we had experienced some discretionary pull forward over the last couple of years. The trend away from gas to battery-powered products is continuing, and we are well positioned with our assortment. We have the brands our customers are looking for, whether it's RYOBI, Milwaukee, DEWALT, Makita or RIDGID. We estimate that there are nearly 500 million batteries in the market today, and our assortment covers the vast majority of these batteries. In fact, more than 70% of batteries with brands that are exclusive to The Home Depot in the big box channel with hundreds of products across each of these platforms, this is one of the best loyalty programs that keeps customers coming back to The Home Depot. And our live goods category looks incredible. We are ready for spring with everything from shrubs to a variety of flowers, herbs and vegetables for every type of gardener. We're excited about spring breaking across the country, and we remain ready to help our customers with all of their outdoor projects and outdoor living needs. With that, I'd like to turn the call over to Richard.","evidence_gemma_new":"comp transactions first quarter","evidence_llama_3_3":"comp transactions first quarter","evidence_qwen_3_30b":null,"gemma_new_max":0.015,"gemma_new_min":0.015,"llama_3_3_max":0.015,"llama_3_3_min":0.015,"qwen_3_30b_max":null,"qwen_3_30b_min":null}
{"symbol":"HD","year":2024,"quarter":3,"date":"2024-Q3","chunk_id":4,"sub_chunk_id":0,"centroid_label":"comp transactions","agreed_value":-0.006,"count":2,"chunk":"Billy Bastek: Thank you, Ann, and good morning, everyone. I want to start by also thanking all of our associates and supplier partners for their ongoing commitment to serving our customers and communities. As you heard from Ted, our performance during the third quarter exceeded our expectations as we saw better engagement in some seasonal leasing categories as a result of more favorable weather throughout the quarter. In addition, we also saw incremental sales as a result of the hurricanes. However, the higher interest rate environment and greater macroeconomic uncertainty continues to pressure overall project demand. Turning to our merchandising department comp performance for the third quarter, our power, outdoor garden, building materials, indoor garden and paint departments posted positive comps, while lumber, plumbing and hardware were all above the company average. During the third quarter, our comp transactions decreased 0.6% and comp average ticket decreased 0.8%. However, we continue to see our customers trading up for new and innovative products. Big ticket comp transactions or those over a $1,000 were down 6.8% compared to the third quarter of last year. We continue to see softer engagement in larger discretionary projects where customers typically use financing to fund the project, such as kitchen and bath remodels. During the third quarter, pro sales were positive and outpaced the DIY customer. And, those pros engaging with elements of our Pro Ecosystem, who also have a dedicated salesperson, were our strongest performing pros in the quarter. Turning to total company online sales. Sales leveraging our digital platforms increased 4% compared to the third quarter of last year. And, for those customers that chose to transact with us online during the third quarter, nearly half of our online orders were fulfilled through our stores. In addition, as you heard from Ted, we are focused on continuing to improve our interconnected retail experience, whether it is our faster delivery speeds, our more relevant and personalized search results or our enhanced product review summaries powered by AI, all of which are leading to greater purchasing confidence for our customers. During the third quarter, we hosted our Annual Supplier Partnership Meeting, where we focused on how we will continue to work together to bring the best products to market, deliver innovative solutions that simplify the project and offer great value with best-in-class features and benefits. At the event, we recognized a number of vendors across categories who continue to transform the industry with the innovation they bring to our customers on a daily basis, this included Starlink, Milwaukee, RYOBI, WAGO, Glacier Bay, Henry Roofing and many more. We are proud of the innovation and partnership that our suppliers bring to The Home Depot and the value that we\u2019re able to offer both our Pro and DIY customers. We also hosted our Annual Labor Day and Halloween events and we\u2019re pleased with the results. During our Labor Day event, we were encouraged with the customers\u2019 engagement across a number of categories, including grills, which had positive comps for the quarter led by Traeger. And, 2024 was another record sales year for our Halloween program, both in-store and online as our customers continue to add to their collection with our unique and exclusive product assortment. As we turn our attention to the fourth quarter, we plan to maintain our momentum with our annual holiday, Black Friday and Gift Center events. In our Gift Center event, we continue to lean into brands that matter most for our customers with our assortment of Milwaukee, RYOBI, Makita, DEWALT, RIDGID, Husky and more. We\u2019ll have something for everyone, whether it\u2019s our wide assortment of cordless RYOBI tools, Milwaukee M18 FUEL Toolkits and our new Husky BITE Tools. We are bringing more innovation in batteries with RYOBI Edge, DEWALT XR and the expansion of the Milwaukee Forge lineup with new 8 and 12 amp hour batteries, all designed to bring more power to our customers. And, the innovative Husky BITE tool technology offers increased grip on new and rounded fasteners, better access, more torque and more leverage, making them a great addition to any toolbox at a great value. And, they are exclusive to The Home Depot. Our merchandising organization remains focused on being our customers\u2019 advocate for value. This means continuing to provide a broad assortment of best-in-class products that are in-stock and available for our customers when they need it. We will also continue to provide innovative product solutions that simplify the project, saving our customers time and money. That\u2019s why I\u2019m so excited about the innovation we continue to bring to the market. And with that, I\u2019d like to turn the call over to, Richard.","evidence_gemma_new":"comp transactions third quarter","evidence_llama_3_3":"comp transactions third quarter","evidence_qwen_3_30b":null,"gemma_new_max":-0.006,"gemma_new_min":-0.006,"llama_3_3_max":-0.006,"llama_3_3_min":-0.006,"qwen_3_30b_max":null,"qwen_3_30b_min":null}
{"symbol":"HD","year":2024,"quarter":4,"date":"2024-Q4","chunk_id":3,"sub_chunk_id":0,"centroid_label":"comp transactions","agreed_value":0.006,"count":3,"chunk":"Billy Bastek: Thank you, Anne, and good morning, everyone. Wanna start by also thanking all of our associates and supplier partners for their ongoing commitment to serving our customers and communities. As you heard from Ted, our performance during the fourth quarter exceeded our expectations as we saw broader engagement across home improvement related projects. In addition, we also saw incremental sales as a result of the ongoing hurricane recovery effort, However, higher interest rate environment continues to pressure larger remodeling projects. Turning to our merchandising department. Comp performance for the fourth quarter, Ten of our sixteen departments posted positive comps including appliances, indoor garden, Lumber. Power. Building materials, Paint. Outdoor garden, storage, hardware, and plumbing. During the fourth quarter, our comp transactions increased 0.6% and comp average ticket increased 0.2%. Inflation from core commodity categories positively impacted our average ticket by approximately twenty basis points driven by inflation in lumber and copper wire. Additionally, during the quarter, we continue to see our customers trading up for new and innovative products. Big ticket comp transactions are those over a thousand dollars we're up. Point nine percent. Compared to the fourth quarter of last year. We were pleased with the performance we saw in categories such as appliances, building materials and lumber. However, we continue to see softer engagement in larger discretionary projects for customers typically use financing to fund the project such as kitchen and bath remodels. During the fourth quarter, both pro and DIY comp sales were positive. With pro outpacing the DIY customer. In the fourth quarter, we saw strength across many pro heavy categories like gypsum, decking. Concrete. In fencing. Turning to total company online sales, excluding the impact of the extra week compared to the fourth quarter of last year. Are a lot of drivers to our online success. From the focus on continuously improving the shopping and browsing experience, to enhancing the delivery and post delivery experience experience leveraging AI to enhance our chat features, product descriptions, and creating rating summaries for our customers. This quarter, I'd like to talk more specifically about delivery. As you heard from Ted, we remain focused on continuing to improve our interconnected experience. And have made significant progress on the delivery experience for our customers. We have invested in a broader assortment across our nineteen DFCs established partnerships with third party last mile providers, and made technology improvements across our two thousand plus stores to better utilize all of our assets for the benefit of our customers. Today, we have the fastest delivery speeds across the greatest number of products in company history. Our customers also have more fulfillment options than ever before. They can choose what they want, when they want. Including same day and next day delivery. We know that driving a superior customer experience, including speed of delivery, drives greater customer satisfaction, higher engagement, higher conversion, Nope. Ultimately, more sales. We've seen these customers who are engaging in our delivery capabilities meaningfully increase their overall spend with us across all purchase occasions and channels. During the fourth quarter, we hosted our appliance gift center, decorative holiday and a Black Friday event. We saw strong engagement across all of these events with our appliance and gift center events posting record sales years. We're looking forward to the year ahead, particularly with the spring selling season right around the corner and we have a great lineup of new and innovative products from live goods to outdoor power equipment. We continue to see an industry wide shift from gas powered to battery powered tools and we have been leaning into this trend for some time. We have the brands that matter most to our customers, including Ryobi, Milwaukee. DeWalt, and Nikita. In our spring gift center event, we will provide our largest assortment of battery powered products with longer run times and enhanced performance across a number of battery RIAVI one, Milwaukee, m eighteen forge, DEWALT XR PowerPack and Power Stack, and Makita LXT to name a few. We're also excited about our live goods program. Each year, our merchants partner with a wide network of regional and local growers to ensure that our customers have new and improved varieties in the right localized assortment to enhance the overall garden experience. Investing in our relationships with our growers will allow us to continue to drive innovation to meet our customers' needs and improve their shopping experience while building loyalty to the Home Depot. As we look forward to spring, we are excited about continuing to provide a broad assortment of best in class products that are in stock and available for our when and how they need it. With that, I'd like to turn the call over to Richard.","evidence_gemma_new":"comp transactions","evidence_llama_3_3":"comp transactions fourth quarter","evidence_qwen_3_30b":"comp transactions Fourth quarter","gemma_new_max":0.006,"gemma_new_min":0.006,"llama_3_3_max":0.006,"llama_3_3_min":0.006,"qwen_3_30b_max":0.006,"qwen_3_30b_min":0.006}
{"symbol":"HD","year":2023,"quarter":2,"date":"2023-Q2","chunk_id":5,"sub_chunk_id":0,"centroid_label":"dividends","agreed_value":2100000000.0,"count":3,"chunk":"Richard McPhail: Thank you, Ann, and good morning, everyone. In the second quarter, total sales were $42.9 billion, a decrease of approximately $900 million or 2% from last year. During the second quarter, our total company comps were negative 2% with comps of negative 2.6% in May, negative 3.3% in June and negative 0.2% in July. Comps in the U.S. were negative 2% for the quarter with comps of negative 2.6% in May, negative 3.3% in June and negative 0.4% in July. As you heard from Billy, during the second quarter, we continued to experience lumber deflation compared to the prior year. While lumber prices were down, we saw an improvement in unit productivity, resulting in a net negative comp impact of approximately 85 basis points versus the second quarter of 2022. In the second quarter, our gross margin was 33%, a decrease of 8 basis points from the second quarter last year, primarily driven by pressure from shrink. During the second quarter, operating expense as a percent of sales increased approximately 100 basis points to 17.6% compared to the second quarter of 2022. Our operating expense performance during the second quarter reflects our previously executed compensation increases for hourly associates as well as deleverage from our top line results. Our operating margin for the second quarter was 15.4% compared to 16.5% in the second quarter of 2022. Interest and other expense for the second quarter increased by $49 million to $428 million due primarily to interest on our floating rate debt as well as higher debt balances than a year ago. In the second quarter, our effective tax rate was 24.4%, up from 24.3% in the second quarter of fiscal 2022. Our diluted earnings per share for the second quarter were $4.65, a decrease of 7.9% compared to the second quarter of 2022. During the second quarter, we opened two new stores, bringing our total store count to 2,326. Retail selling square footage was approximately 241 million square feet. At the end of the quarter, merchandise inventories were $23.3 billion, down $2.8 billion compared to the second quarter of 2022. And inventory turns were 4.4x, down from 4.5x last year. Turning to capital allocation. After investing in our business and paying our dividend, it is our intent to return excess cash to shareholders in the form of share repurchases. During the second quarter, we invested approximately $800 million back into our business in the form of capital expenditures. And during the quarter, we paid approximately $2.1 billion in dividends to our shareholders, and we returned approximately $2 billion to shareholders in the form of share repurchases. Computed on the average of beginning and ending long-term debt and equity for the trailing 12 months, return on invested capital was approximately 41.5%, down from 45.6% in the second quarter of fiscal 2022. Now I\u2019ll comment on our guidance for fiscal 2023. Today, we are reaffirming our guidance for 2023. We expect fiscal 2023 sales and comp sales to decline between 2% and 5%. We are targeting an operating margin between 14.3% and 14% for the year. Our effective tax rate is targeted at approximately 24.5%. We expect interest expense of approximately $1.8 billion and we are anticipating between a 7% and 13% decline in diluted earnings per share compared to fiscal 2022. In addition, we continue to focus on driving productivity in the business and feel confident that we will realize the previously announced $500 million in annualized cost savings in 2024. We also remain focused on meeting the needs of our customers with our leading product authority in home improvement, strong in-stock levels and knowledgeable associates. We will continue to prudently invest to strengthen our competitive position and leverage our scale and low-cost position to outperform our market and deliver shareholder value. Thank you for your participation in today\u2019s call. And Christine, we are now ready for questions.","evidence_gemma_new":"dividends","evidence_llama_3_3":"dividends second quarter","evidence_qwen_3_30b":"dividends second quarter","gemma_new_max":2100000000.0,"gemma_new_min":2100000000.0,"llama_3_3_max":2100000000.0,"llama_3_3_min":2100000000.0,"qwen_3_30b_max":2100000000.0,"qwen_3_30b_min":2100000000.0}
{"symbol":"HD","year":2023,"quarter":3,"date":"2023-Q3","chunk_id":5,"sub_chunk_id":0,"centroid_label":"dividends","agreed_value":2100000000.0,"count":2,"chunk":"Richard McPhail: Thank you, Billy, and good morning, everyone. In the third quarter, total sales were $37.7 billion, a decrease of approximately $1.2 billion or 3% from last year. During the third quarter, our total company comps were negative 3.1% with comps of negative 2.1% in August, negative 3.4% in September and negative 3.7% in October. Comps in the U.S. were negative 3.5% for the quarter with comps of negative 2.5% in August, negative 3.8% in September and negative 4.1% in October. In local currency, Mexico and Canada posted comps above the company average. It is important to note that adjusting for storm-related overlaps and some seasonal shift, monthly comps were relatively consistent across the quarter. In the third quarter, our gross margin was 33.8%, a decrease of approximately 20 basis points from the third quarter last year, which was in line with our expectations. During the third quarter, operating expense as a percent of sales increased approximately 120 basis points to 19.4% compared to the third quarter of 2022. Our operating expense performance during the third quarter reflects our previously executed compensation increases for hourly associates as well as deleverage from our top line results. Our operating margin for the third quarter was 14.3% compared to 15.8% in the third quarter of 2022. Interest and other expense for the third quarter increased by approximately $30 million to $438 million. In the third quarter, our effective tax rate was 23.3%, down from 24.4% in the third quarter of fiscal 2022. Our diluted earnings per share for the third quarter were $3.81, a decrease of 10.1% compared to the third quarter of 2022. During the third quarter, we opened 7 new stores, bringing our total store count to 2,333. Retail selling square footage was approximately 242 million square feet. At the end of the quarter, merchandise inventories were $22.8 billion, down $2.9 billion or 11% compared to the third quarter of 2022. And inventory turns were 4.3x flat to 1 year ago. Turning to capital allocation. After investing in our business and paying our dividend, it is our intent to return excess cash to shareholders in the form of share repurchases. During the quarter, we invested approximately $670 million back into our business in the form of capital expenditures. And during the quarter, we paid approximately $2.1 billion in dividends to our shareholders, and we returned approximately $1.5 billion to shareholders in the form of share repurchases. Computed on the average of beginning and ending long-term debt and equity for the trailing 12 months, return on invested capital was approximately 38.7%, down from 43.3% in the third quarter of fiscal 2022. Now I will comment on our guidance for fiscal 2023. As you heard from Ted, with one quarter remaining in fiscal 2023, we no longer expect the end points of our previous guidance range as likely outcomes, and therefore, we are narrowing our guidance for 2023. We expect fiscal 2023 sales and comp sales to decline between 3% and 4%. We are targeting an operating margin between 14.2% and 14.1% for the year. Our effective tax rate is targeted at approximately 24.5%. We expect interest expense of approximately $1.8 billion. And we are anticipating between a 9% and 11% decline in diluted earnings per share compared to fiscal 2022. In addition, as you heard from Ann, we continue to focus on driving productivity in the business. We have taken a number of actions that will help us realize the previously announced $500 million in annualized cost savings in 2024 and are fully confident that we will deliver on this commitment. We also remain focused on meeting the needs of our customers with our leading product authority in home improvement, strong in-stock levels and knowledgeable associates. We will continue to prudently invest to strengthen our competitive position and leverage our scale and low-cost position to outperform our market and deliver shareholder value. Thank you for your participation in today's call. And Christine, we are now ready for questions.","evidence_gemma_new":null,"evidence_llama_3_3":"dividends third quarter","evidence_qwen_3_30b":"dividends","gemma_new_max":null,"gemma_new_min":null,"llama_3_3_max":2100000000.0,"llama_3_3_min":2100000000.0,"qwen_3_30b_max":2100000000.0,"qwen_3_30b_min":2100000000.0}
{"symbol":"HD","year":2023,"quarter":4,"date":"2023-Q4","chunk_id":5,"sub_chunk_id":0,"centroid_label":"dividends","agreed_value":8400000000.0,"count":2,"chunk":"Richard McPhail: Thank you, Billy, and good morning, everyone. In the fourth quarter, total sales were $34.8 billion, a decrease of 2.9% from last year. During the fourth quarter, our total company comps were negative 3.5% with comps of negative 2.5% in November, positive 1.1% in December and negative 8.5% in January. Comps in the U.S. were negative 4% for the quarter with comps of negative 2.7% in November, positive 0.6% in December and negative 9.1% in January. In local currency, Mexico and Canada posted comps above the company average with Mexico posting positive comps. It is important to note that adjusting for holiday shifts and weather-related impacts in January, monthly comps relatively consistent across the quarter. For the year, our sales totaled $152.7 billion, a decrease of 3% versus fiscal 2022. For the year, total company comp sales decreased 3.2% and U.S. comp sales decreased 3.5%. In the fourth quarter, our gross margin was approximately 33.1%, a decrease of 20 basis points from last year. For the year, our gross margin was approximately 33.4%, a decrease of 15 basis points from last year, which was in line with our expectations. During the fourth quarter, operating expenses as a percentage of sales increased approximately 115 basis points to 21.2% compared to the fourth quarter of 2022. Our operating expense performance during the fourth quarter reflects our previously executed compensation increases for hourly associates as well as deleverage from our top line results. For the year, operating expenses were approximately 19.2% of sales, representing an increase of approximately 90 basis points from fiscal 2022. Our operating margin for the fourth quarter was approximately 11.9% and for the year was approximately 14.2%. Interest and other expense for the fourth quarter increased by $50 million to $458 million. In the fourth quarter and for fiscal 2023, our effective tax rate was 24%. Our diluted earnings per share for the fourth quarter were $2.82, a decrease of 14.5% compared to the fourth quarter of 2022. Diluted earnings per share for fiscal 2023 were $15.11, a decrease of 9.5% compared to fiscal 2022. At the end of the quarter, merchandise inventories were $21 billion, down $3.9 billion or approximately 16% versus last year, and inventory turns were 4.3x, up from 4.2x from the second period last year. Moving on to capital allocation. During the fourth quarter, we invested approximately $860 million back into our business in the form of capital expenditures. This brings total capital expenditures for fiscal 2023 to approximately $3.2 billion. During the year, we opened 13 new stores, bringing our store count to 2,335 at the end of fiscal 2023. Retail selling square footage was approximately 242 million square feet and total sales per retail square foot were approximately $605 in fiscal 2023. Additionally, we invested approximately $1.5 billion on three acquisitions during fiscal 2023, accelerating our strategic initiatives and providing us with better capabilities to serve our customers. During the year, we paid approximately $8.4 billion of dividends to our shareholders. Today, we announced our Board of Directors increased our quarterly dividend by 7.7% to $2.25 per share, which equates to an annual dividend of $9 per share. And finally, during fiscal 2023, we returned approximately $8 billion to our shareholders in the form of share repurchases, including $1.5 billion in the fourth quarter. Computed on the average of beginning and ending long-term debt and equity for the trailing 12 months, return on invested capital was 36.7% compared to 44.6% at the end of the fourth quarter of fiscal 2022. Now I'll comment on our outlook for 2024. First, let me point out that fiscal 2024 will include a 53rd week, so the fourth quarter of fiscal 2024 will consist of 14 weeks. We will continue to report comps on a 52-week basis, but we will base our overall guidance on 53 weeks. As you heard from Ted, we feel great about the actions we took in 2023 to position us well heading into 2024. And while there are signs that the economy is on the way towards normalization, the home improvement market still faces headwinds as we look ahead to fiscal 2024. We considered several factors that informed our outlook for fiscal 2024. On the positive side, we faced a number of pressures in fiscal 2023 that are unlikely to repeat in fiscal 2024. In 2023, we saw four increases in the Fed funds rate, a sharp decline in existing home sales and approximately 110 basis points of comp pressure from lumber deflation. However, we still expect pressures to our business in fiscal 2024. Personal consumption growth as measured by PCE is expected to decelerate compared to 2023. Our share of PCE also remains slightly elevated relative to 2019 and has been on a glide path towards 2019 levels. Higher interest rates at the beginning of 2024 relative to last year will likely continue to pressure demand for larger projects. And the effects from pull forward of demand during the pandemic as well as some project deferral could impact demand into 2024. As we consider these influences on home improvement demand, we are planning for a year of continued moderation but with slightly less pressure to comp sales than what we faced in fiscal 2023. Our fiscal 2024 outlook is for total sales growth to outpace sales comp with sales growth of approximately positive 1% and comp sales of approximately negative 1% compared to fiscal 2023. Total sales growth will benefit from a 53rd week as well as from the acquisitions we made and the new stores we opened in fiscal 2023 and the stores we plan to open in fiscal 2024. We expect the 53rd week will contribute approximately $2.3 billion in sales. Our gross margin is expected to be approximately 33.9%, an increase of approximately 50 basis points compared to fiscal 2023. This primarily reflects a lower product and transportation cost environment relative to fiscal 2023 as well as benefits from a portion of the approximately $500 million in reduced fixed costs that we will realize in fiscal 2024. Further, we expect operating margin of approximately 14.1%. This reflects deleverage from sales and pressure from targeted incentive compensation as we are overlapping lower incentive compensation paid than planned in 2023. This will be partially offset by the benefits from the approximately $500 million in fixed costs that we will realize in fiscal 2024 in both cost of goods sold and operating expenses. Our effective tax rate is targeted at approximately 24.5%. We expect net interest expense of approximately $1.8 billion. Our diluted earnings per share percent growth is targeted to be approximately 1% compared to fiscal 2023, with the extra week contributing approximately $0.30. We plan to continue investing in our business with capital expenditures of approximately 2% of sales on an annual basis. After investing in our business and paying our dividend, it is our intent to return excess cash to shareholders in the form of share repurchases. We believe we have positioned ourselves to meet the needs of our customers in any environment. The investments we've made in our business have enabled agility in our operating model. As we look forward, we will continue to invest to strengthen our position with our customers, leverage our scale and low-cost position to drive growth faster than the market and deliver shareholder value. Thank you for your participation in today's call. And Christine, we are now ready for questions.","evidence_gemma_new":null,"evidence_llama_3_3":"dividends year","evidence_qwen_3_30b":"dividends year","gemma_new_max":null,"gemma_new_min":null,"llama_3_3_max":8400000000.0,"llama_3_3_min":8400000000.0,"qwen_3_30b_max":8400000000.0,"qwen_3_30b_min":8400000000.0}
{"symbol":"HD","year":2024,"quarter":1,"date":"2024-Q1","chunk_id":5,"sub_chunk_id":0,"centroid_label":"dividends","agreed_value":2200000000.0,"count":3,"chunk":"Richard McPhail: Thank you, Billy, and good morning, everyone. In the first quarter, total sales were $36.4 billion, a decrease of approximately 2.3% from last year. During the first quarter, our total company comps were negative 2.8% with comps of negative 4% in February, negative 0.8% in March, and negative 3.3% in April. Comps in the U.S. were negative 3.2% for the quarter with comps of negative 4.8% in February, negative 1.3% in March, and negative 3.6% in April. For the quarter, Mexico posted positive comps, whereas Canada was slightly below the company average. In the first quarter, our gross margin was 34.1%, an increase of approximately 45 basis points from the first quarter last year, primarily driven by benefits from lower transportation cost and shrink. During the first quarter, operating expense as a percent of sales increased approximately 140 basis points to 20.2% compared to the first quarter of 2023. The increase was primarily driven by a benefit from a legal settlement that we are overlapping from the first quarter of fiscal 2023, as well as deleverage from our top line results. Our operating expense performance was in line with our expectations. Our operating margin for the first quarter was 13.9% compared to 14.9% in the first quarter of 2023. Interest and other expense for the first quarter decreased by $13 million to $428 million. In the first quarter, our effective tax rate was 22.6% compared to 24.2% in the first quarter of fiscal 2023. Our diluted earnings per share for the first quarter were $3.63, a decrease of 5% compared to the first quarter of 2023. During the first quarter, we opened two new stores, bringing our total store count to 2,337. Retail selling square footage was approximately 242 million square feet. At the end of the quarter, merchandise inventories were $22.4 billion, down approximately $3 billion, or 12% compared to the first quarter of 2023, and inventory turns were 4.5x, up from 3.9x last year. Turning to capital allocation. During the first quarter, we invested approximately $850 million back into our business in the form of capital expenditures. And during the quarter, we paid approximately $2.2 billion in dividends to our shareholders and we returned approximately $600 million to shareholders in the form of share repurchases. As a reminder, in March we announced our intent to acquire SRS Distribution and as a result, we paused share repurchases. As you've heard us say many times, we maintain a disciplined approach to capital allocation and that is not changing. First and foremost, we will invest in the business and expect capital expenditures of approximately 2% of sales on an annual basis. After investing in the business, we plan to pay the dividend and it is our intent to return any excess cash to shareholders in the form of share repurchases. From time to time, we will also invest in the business through acquisitions to enhance our capabilities and to accelerate our strategic objectives. Computed on the average of beginning and ending long-term debt and equity for the trailing 12 months, return on invested capital was 37.1%, down from 43.6% \u2013 excuse me, down from 43.6% in the first quarter of fiscal 2023. Now, I will comment on our guidance for fiscal 2024. Today, we are reaffirming our guidance for 2024. As a reminder, our guidance does not currently reflect any impact from the announced acquisition of SRS. The acquisition is currently under regulatory review and we expect it to close by the end of fiscal 2024. We expect total sales growth to outpace sales comp with sales growth of approximately positive 1% and comp sales of approximately negative 1%. Total sales growth will benefit from a 53rd week and we expect the 53rd week will contribute approximately $2.3 billion in sales. Our gross margin is expected to be approximately 33.9%, an increase of approximately 50 basis points, compared to fiscal 2023. We expect operating margin of approximately 14.1%. Our effective tax rate is targeted at approximately 24.5%. We expect net interest expense of approximately $1.8 billion, and our diluted earnings per share percent growth is targeted to be approximately 1% compared to fiscal 2023. It\u2019s our intent to update guidance as appropriate once the SRS transaction closes. We believe that we have positioned ourselves to meet the needs of our customers in any environment. The investments we\u2019ve made in our business have enabled agility in our operating model. As we look forward, we will continue to invest to strengthen our position with our customers, leverage our scale and low-cost position to drive growth faster than the market and deliver shareholder value. Thank you for your participation in today\u2019s call. And Christine, we are now ready for questions.","evidence_gemma_new":"dividends","evidence_llama_3_3":"dividends first quarter","evidence_qwen_3_30b":"dividends first quarter","gemma_new_max":2200000000.0,"gemma_new_min":2200000000.0,"llama_3_3_max":2200000000.0,"llama_3_3_min":2200000000.0,"qwen_3_30b_max":2200000000.0,"qwen_3_30b_min":2200000000.0}
{"symbol":"HD","year":2024,"quarter":2,"date":"2024-Q2","chunk_id":5,"sub_chunk_id":0,"centroid_label":"dividends","agreed_value":2200000000.0,"count":3,"chunk":"Richard McPhail: Thank you, Billy, and good morning, everyone. In the second quarter, Total sales were $43.2 billion, an increase of approximately 0.6% from last year. Total sales include $1.3 billion from the recent acquisition of SRS, which represents approximately six weeks of sales in the quarter. During the second quarter, our total company comps were negative 3.3%, with comps of negative 3.7% in May, negative 0.9% in June and negative 4.9% in July. Comps in the U.S. were negative 3.6% for the quarter, with comps of negative 4.1% in May, negative 1.4% in June and negative 5% in July. In the second quarter, our gross margin was approximately 33.4%, an increase of 40 basis points from the second quarter last year, primarily driven by benefits from lower transportation costs and shrink, partially offset by mix as a result of the SRS acquisition. During the second quarter, operating expense as a percent of sales increased approximately 65 basis points to 18.3% compared to the second quarter of 2023. Our operating expense performance was in line with our expectations. Beginning this quarter, in addition to our GAAP measures, we are providing the following non-GAAP measures: adjusted operating income, adjusted operating margin and adjusted diluted earnings per share, which excludes noncash amortization of acquired intangible assets. We believe these supplemental measures will help investors better understand and analyze our performance. Our operating margin for the second quarter was 15.1% compared to 15.4% in the second quarter of 2023. In the quarter, pretax intangible asset amortization was $90 million, including $39 million related to SRS. Excluding the intangible asset amortization in the quarter, our adjusted operating margin for the second quarter was 15.3% and compared to 15.5% in the second quarter of 2023. Interest and other expense for the second quarter increased by $61 million to $489 million due primarily to higher debt balances than a year ago. In the second quarter, our effective tax rate was 24.5%, compared to 24.4% in the second quarter of fiscal 2023. Our diluted earnings per share for the second quarter were $4.60, a decrease of approximately 1% compared to the second quarter of 2023. Excluding intangible asset amortization, our adjusted diluted earnings per share for the second quarter were $4.67, essentially flat compared to the second quarter of 2023. During the second quarter, we opened three new stores, bringing our total store count to 2,340. Retail selling square footage was approximately 243 million square feet. At the end of the quarter, merchandise inventories or $23.1 billion, down approximately $200 million compared to the second quarter of 2023, and inventory turns were 4.9x, up from 4.4x last year. Turning to capital allocation. During the second quarter, we invested approximately $720 million back into our business in the form of capital expenditures. And during the quarter, we paid approximately $2.2 billion in dividends to our shareholders. Our disciplined approach to capital allocation remains unchanged. First and foremost, we will invest in the business and expect capital expenditures of approximately 2% of sales on an annual basis. After investing in the business, we plan to pay the dividend and it is our intent to return any excess cash to shareholders in the form of share repurchases. Computed on the average of beginning and ending long-term debt and equity for the trailing 12 months, return on invested capital was approximately 31.9%, down from 41.5% in the second quarter of fiscal 2023. Now, I will comment on our updated outlook for fiscal 2024. As you heard from Ted, given the softer-than-expected performance in the first half of the year, and reflecting continued uncertainty around underlying consumer demand, we believe a more cautious outlook for the year is warranted. With the recent closing of the SRS acquisition, we are now including their results in our consolidated outlook for the year. For the period matching our first half, which includes periods prior to the acquisition and not fully reflected in our financial statements, SRS generated high single-digit percentage sales growth with operating income growing largely in line with sales. We believe that over the next several years, SRS on its own, and through our combined Pro efforts, will help accelerate sales and earnings growth for our company. Updating our fiscal 2024 guidance for the factors we just discussed. We now expect total sales growth between 2.5% and 3.5%, including the SRS acquisition and the 53rd week. The 53rd week is projected to add approximately $2.3 billion to total sales. SRS is expected to contribute approximately $6.4 billion in incremental sales. Comparable sales are expected to decline between negative 3% and negative 4% for the 52-week period. The high end of our range implies a consumer demand environment consistent with the first half of fiscal 2024. While comparable sales for the Company are not currently on the trajectory for the low end of the range, a negative 4% comp implies incremental pressure on consumer demand beyond what we are seeing today. We expect to open approximately 12 new stores. Our gross margin is expected to be approximately 33.5%. We expect operating margin to be between 13.5% and 13.6%, and adjusted operating margin to be between 13.8% and 13.9%. Our effective tax rate is targeted at approximately 24%. We expect net interest expense of approximately $2.2 billion. Our diluted earnings per share percent will decline between negative 2% and negative 4% compared to fiscal 2023, with the extra week contributing approximately $0.30. We expect our adjusted diluted earnings per share percent to decline between negative 1% and negative 3%, compared to fiscal 2023, with the extra week contributing approximately $0.30. We believe that we have positioned ourselves to meet the needs of our customers in any environment. The investments we've made in our business have enabled agility in our operating model. As we look forward, we will continue to invest to strengthen our position with our customers, leverage our scale and low-cost position to drive growth faster than the market and deliver shareholder value. Thank you for your participation in today's call. And Christine, we are now ready for questions.","evidence_gemma_new":"dividends second quarter","evidence_llama_3_3":"dividends second quarter","evidence_qwen_3_30b":"dividends second quarter","gemma_new_max":2200000000.0,"gemma_new_min":2200000000.0,"llama_3_3_max":2200000000.0,"llama_3_3_min":2200000000.0,"qwen_3_30b_max":2200000000.0,"qwen_3_30b_min":2200000000.0}
{"symbol":"HD","year":2024,"quarter":3,"date":"2024-Q3","chunk_id":5,"sub_chunk_id":0,"centroid_label":"dividends","agreed_value":2200000000.0,"count":2,"chunk":"Richard McPhail: Thank you, Billy, and good morning, everyone. In the third quarter, total sales were $40.2 billion, an increase of approximately 6.6% from last year. During the third quarter, our total company comps were negative 1.3% with comps of negative 3.3% in August, negative 2.3% in September and positive 1% in October. Comps in the U.S. were negative 1.2% for the quarter, with comps of negative 3.5% in August, negative 2.2% in September, and positive 1.4% in October. The progression of our monthly comps reflects in large part hurricane related sales. Our results for the third quarter include a net contribution of approximately $200 million in hurricane related sales, which positively impacted total company comps by approximately 55 basis points for the quarter and approximately 120 basis points for October. In the third quarter, our gross margin was approximately 33.4%, a decrease of approximately 40 basis points from the third quarter last year, primarily driven by mix as a result of the SRS acquisition, partially offset by benefits from lower shrink. During the third quarter, operating expense as a percent of sales increased approximately 45 basis points to 19.9% compared to the third quarter of 2023. Our operating expense performance was in-line with our expectations. Our operating margin for the third quarter was 13.5% compared to 14.3% in the third quarter of 2023. In the quarter, pre-tax intangible asset amortization was $138 million including $86 million related to SRS. Excluding the intangible asset amortization in the quarter, our adjusted operating margin for the third quarter was 13.8% compared to 14.5% in the third quarter of 2023. Interest and other expense for the third quarter increased by $157 million to $595 million due primarily to higher debt balances than a year ago. In the third quarter, our effective tax rate was 24.4% compared to 23.3% in the third quarter of fiscal 2023. Our diluted earnings per share for the third quarter were $3.67, a decrease of approximately 4% compared to the third quarter of 2023. Excluding intangible asset amortization, our adjusted diluted earnings per share for the third quarter were $3.78, a decrease of approximately 2% compared to the third quarter of 2023. During the third quarter, we opened five new stores, bringing our total store count to 2, 345. Retail selling square footage was approximately 243 million square feet. At the end of the quarter, merchandise inventories were $23.9 billion up approximately $1.1 billion compared to the third quarter of 2023, and inventory turns were 4.8 times, up from 4.3 times last year. Turning to capital allocation. During the third quarter, we invested approximately $820 million back into our business in the form of capital expenditures. And during the quarter, we paid approximately $2.2 billion in dividends to our shareholders. Compute on the average of beginning and ending long-term debt and equity for the trailing 12-months, return on invested capital was approximately 31.5%, down from 38.7% in the third quarter of fiscal 2023. Now, I will comment on our updated outlook for fiscal 2024. As you heard from Ted, while macro uncertainty remains and continues to pressure home improvement demand, our performance in the third quarter was better than expected. Our performance reflects hurricane related sales in the third quarter, and we expect some hurricane related sales in the fourth quarter. Given the better than expected performance in the third quarter and incremental hurricane related sales, we have updated our fiscal 2024 guidance. We now expect total sales growth of approximately 4%, including SRS in the 53rd week. The 53rd week is projected to add approximately $2.3 billion to total sales and SRS is expected to contribute approximately $6.4 billion in incremental sales. Comparable sales are expected to decline approximately 2.5% for the 52 week period. We expect to open approximately 12 new stores. Our gross margin is expected to be approximately 33.5%. We expect operating margin to be approximately 13.5% and adjusted operating margin to be approximately 13.8%. Our effective tax rate is targeted at approximately 24%. We expect net interest expense of approximately $2.1 billion. We expect our diluted earnings per share to decline approximately 2% compared to fiscal 2023 with the extra week contributing approximately $0.30 per share. And, we expect our adjusted diluted earnings per share to decline approximately 1% compared to fiscal 2023 with the extra week contributing approximately $0.30 per share. We believe that we will grow market share in any environment. We are continuing to invest to strengthen our competitive position with our customers and leverage our scale and low cost position to drive growth faster than the market and deliver shareholder value. Thank you for your participation in today\u2019s call. And Christine, we are now ready for questions.","evidence_gemma_new":"dividends third quarter","evidence_llama_3_3":"dividends third quarter","evidence_qwen_3_30b":null,"gemma_new_max":2200000000.0,"gemma_new_min":2200000000.0,"llama_3_3_max":2200000000.0,"llama_3_3_min":2200000000.0,"qwen_3_30b_max":null,"qwen_3_30b_min":null}
{"symbol":"HD","year":2023,"quarter":3,"date":"2023-FY","chunk_id":5,"sub_chunk_id":0,"centroid_label":"effective tax rate","agreed_value":24.5,"count":2,"chunk":"Richard McPhail: Thank you, Billy, and good morning, everyone. In the third quarter, total sales were $37.7 billion, a decrease of approximately $1.2 billion or 3% from last year. During the third quarter, our total company comps were negative 3.1% with comps of negative 2.1% in August, negative 3.4% in September and negative 3.7% in October. Comps in the U.S. were negative 3.5% for the quarter with comps of negative 2.5% in August, negative 3.8% in September and negative 4.1% in October. In local currency, Mexico and Canada posted comps above the company average. It is important to note that adjusting for storm-related overlaps and some seasonal shift, monthly comps were relatively consistent across the quarter. In the third quarter, our gross margin was 33.8%, a decrease of approximately 20 basis points from the third quarter last year, which was in line with our expectations. During the third quarter, operating expense as a percent of sales increased approximately 120 basis points to 19.4% compared to the third quarter of 2022. Our operating expense performance during the third quarter reflects our previously executed compensation increases for hourly associates as well as deleverage from our top line results. Our operating margin for the third quarter was 14.3% compared to 15.8% in the third quarter of 2022. Interest and other expense for the third quarter increased by approximately $30 million to $438 million. In the third quarter, our effective tax rate was 23.3%, down from 24.4% in the third quarter of fiscal 2022. Our diluted earnings per share for the third quarter were $3.81, a decrease of 10.1% compared to the third quarter of 2022. During the third quarter, we opened 7 new stores, bringing our total store count to 2,333. Retail selling square footage was approximately 242 million square feet. At the end of the quarter, merchandise inventories were $22.8 billion, down $2.9 billion or 11% compared to the third quarter of 2022. And inventory turns were 4.3x flat to 1 year ago. Turning to capital allocation. After investing in our business and paying our dividend, it is our intent to return excess cash to shareholders in the form of share repurchases. During the quarter, we invested approximately $670 million back into our business in the form of capital expenditures. And during the quarter, we paid approximately $2.1 billion in dividends to our shareholders, and we returned approximately $1.5 billion to shareholders in the form of share repurchases. Computed on the average of beginning and ending long-term debt and equity for the trailing 12 months, return on invested capital was approximately 38.7%, down from 43.3% in the third quarter of fiscal 2022. Now I will comment on our guidance for fiscal 2023. As you heard from Ted, with one quarter remaining in fiscal 2023, we no longer expect the end points of our previous guidance range as likely outcomes, and therefore, we are narrowing our guidance for 2023. We expect fiscal 2023 sales and comp sales to decline between 3% and 4%. We are targeting an operating margin between 14.2% and 14.1% for the year. Our effective tax rate is targeted at approximately 24.5%. We expect interest expense of approximately $1.8 billion. And we are anticipating between a 9% and 11% decline in diluted earnings per share compared to fiscal 2022. In addition, as you heard from Ann, we continue to focus on driving productivity in the business. We have taken a number of actions that will help us realize the previously announced $500 million in annualized cost savings in 2024 and are fully confident that we will deliver on this commitment. We also remain focused on meeting the needs of our customers with our leading product authority in home improvement, strong in-stock levels and knowledgeable associates. We will continue to prudently invest to strengthen our competitive position and leverage our scale and low-cost position to outperform our market and deliver shareholder value. Thank you for your participation in today's call. And Christine, we are now ready for questions.","evidence_gemma_new":null,"evidence_llama_3_3":"effective tax rate fiscal 2023","evidence_qwen_3_30b":"effective tax rate fiscal 2023","gemma_new_max":null,"gemma_new_min":null,"llama_3_3_max":24.5,"llama_3_3_min":24.5,"qwen_3_30b_max":24.5,"qwen_3_30b_min":24.5}
{"symbol":"HD","year":2023,"quarter":2,"date":"2023-Q2","chunk_id":5,"sub_chunk_id":0,"centroid_label":"effective tax rate","agreed_value":0.244,"count":2,"chunk":"Richard McPhail: Thank you, Ann, and good morning, everyone. In the second quarter, total sales were $42.9 billion, a decrease of approximately $900 million or 2% from last year. During the second quarter, our total company comps were negative 2% with comps of negative 2.6% in May, negative 3.3% in June and negative 0.2% in July. Comps in the U.S. were negative 2% for the quarter with comps of negative 2.6% in May, negative 3.3% in June and negative 0.4% in July. As you heard from Billy, during the second quarter, we continued to experience lumber deflation compared to the prior year. While lumber prices were down, we saw an improvement in unit productivity, resulting in a net negative comp impact of approximately 85 basis points versus the second quarter of 2022. In the second quarter, our gross margin was 33%, a decrease of 8 basis points from the second quarter last year, primarily driven by pressure from shrink. During the second quarter, operating expense as a percent of sales increased approximately 100 basis points to 17.6% compared to the second quarter of 2022. Our operating expense performance during the second quarter reflects our previously executed compensation increases for hourly associates as well as deleverage from our top line results. Our operating margin for the second quarter was 15.4% compared to 16.5% in the second quarter of 2022. Interest and other expense for the second quarter increased by $49 million to $428 million due primarily to interest on our floating rate debt as well as higher debt balances than a year ago. In the second quarter, our effective tax rate was 24.4%, up from 24.3% in the second quarter of fiscal 2022. Our diluted earnings per share for the second quarter were $4.65, a decrease of 7.9% compared to the second quarter of 2022. During the second quarter, we opened two new stores, bringing our total store count to 2,326. Retail selling square footage was approximately 241 million square feet. At the end of the quarter, merchandise inventories were $23.3 billion, down $2.8 billion compared to the second quarter of 2022. And inventory turns were 4.4x, down from 4.5x last year. Turning to capital allocation. After investing in our business and paying our dividend, it is our intent to return excess cash to shareholders in the form of share repurchases. During the second quarter, we invested approximately $800 million back into our business in the form of capital expenditures. And during the quarter, we paid approximately $2.1 billion in dividends to our shareholders, and we returned approximately $2 billion to shareholders in the form of share repurchases. Computed on the average of beginning and ending long-term debt and equity for the trailing 12 months, return on invested capital was approximately 41.5%, down from 45.6% in the second quarter of fiscal 2022. Now I\u2019ll comment on our guidance for fiscal 2023. Today, we are reaffirming our guidance for 2023. We expect fiscal 2023 sales and comp sales to decline between 2% and 5%. We are targeting an operating margin between 14.3% and 14% for the year. Our effective tax rate is targeted at approximately 24.5%. We expect interest expense of approximately $1.8 billion and we are anticipating between a 7% and 13% decline in diluted earnings per share compared to fiscal 2022. In addition, we continue to focus on driving productivity in the business and feel confident that we will realize the previously announced $500 million in annualized cost savings in 2024. We also remain focused on meeting the needs of our customers with our leading product authority in home improvement, strong in-stock levels and knowledgeable associates. We will continue to prudently invest to strengthen our competitive position and leverage our scale and low-cost position to outperform our market and deliver shareholder value. Thank you for your participation in today\u2019s call. And Christine, we are now ready for questions.","evidence_gemma_new":"effective tax rate","evidence_llama_3_3":"effective tax rate second quarter","evidence_qwen_3_30b":null,"gemma_new_max":0.245,"gemma_new_min":0.245,"llama_3_3_max":0.244,"llama_3_3_min":0.244,"qwen_3_30b_max":null,"qwen_3_30b_min":null}
{"symbol":"HD","year":2023,"quarter":3,"date":"2023-Q3","chunk_id":5,"sub_chunk_id":0,"centroid_label":"effective tax rate","agreed_value":23.3,"count":2,"chunk":"Richard McPhail: Thank you, Billy, and good morning, everyone. In the third quarter, total sales were $37.7 billion, a decrease of approximately $1.2 billion or 3% from last year. During the third quarter, our total company comps were negative 3.1% with comps of negative 2.1% in August, negative 3.4% in September and negative 3.7% in October. Comps in the U.S. were negative 3.5% for the quarter with comps of negative 2.5% in August, negative 3.8% in September and negative 4.1% in October. In local currency, Mexico and Canada posted comps above the company average. It is important to note that adjusting for storm-related overlaps and some seasonal shift, monthly comps were relatively consistent across the quarter. In the third quarter, our gross margin was 33.8%, a decrease of approximately 20 basis points from the third quarter last year, which was in line with our expectations. During the third quarter, operating expense as a percent of sales increased approximately 120 basis points to 19.4% compared to the third quarter of 2022. Our operating expense performance during the third quarter reflects our previously executed compensation increases for hourly associates as well as deleverage from our top line results. Our operating margin for the third quarter was 14.3% compared to 15.8% in the third quarter of 2022. Interest and other expense for the third quarter increased by approximately $30 million to $438 million. In the third quarter, our effective tax rate was 23.3%, down from 24.4% in the third quarter of fiscal 2022. Our diluted earnings per share for the third quarter were $3.81, a decrease of 10.1% compared to the third quarter of 2022. During the third quarter, we opened 7 new stores, bringing our total store count to 2,333. Retail selling square footage was approximately 242 million square feet. At the end of the quarter, merchandise inventories were $22.8 billion, down $2.9 billion or 11% compared to the third quarter of 2022. And inventory turns were 4.3x flat to 1 year ago. Turning to capital allocation. After investing in our business and paying our dividend, it is our intent to return excess cash to shareholders in the form of share repurchases. During the quarter, we invested approximately $670 million back into our business in the form of capital expenditures. And during the quarter, we paid approximately $2.1 billion in dividends to our shareholders, and we returned approximately $1.5 billion to shareholders in the form of share repurchases. Computed on the average of beginning and ending long-term debt and equity for the trailing 12 months, return on invested capital was approximately 38.7%, down from 43.3% in the third quarter of fiscal 2022. Now I will comment on our guidance for fiscal 2023. As you heard from Ted, with one quarter remaining in fiscal 2023, we no longer expect the end points of our previous guidance range as likely outcomes, and therefore, we are narrowing our guidance for 2023. We expect fiscal 2023 sales and comp sales to decline between 3% and 4%. We are targeting an operating margin between 14.2% and 14.1% for the year. Our effective tax rate is targeted at approximately 24.5%. We expect interest expense of approximately $1.8 billion. And we are anticipating between a 9% and 11% decline in diluted earnings per share compared to fiscal 2022. In addition, as you heard from Ann, we continue to focus on driving productivity in the business. We have taken a number of actions that will help us realize the previously announced $500 million in annualized cost savings in 2024 and are fully confident that we will deliver on this commitment. We also remain focused on meeting the needs of our customers with our leading product authority in home improvement, strong in-stock levels and knowledgeable associates. We will continue to prudently invest to strengthen our competitive position and leverage our scale and low-cost position to outperform our market and deliver shareholder value. Thank you for your participation in today's call. And Christine, we are now ready for questions.","evidence_gemma_new":null,"evidence_llama_3_3":"effective tax rate third quarter","evidence_qwen_3_30b":"effective tax rate third quarter","gemma_new_max":null,"gemma_new_min":null,"llama_3_3_max":23.3,"llama_3_3_min":23.3,"qwen_3_30b_max":23.3,"qwen_3_30b_min":23.3}
{"symbol":"HD","year":2024,"quarter":1,"date":"2024-Q1","chunk_id":5,"sub_chunk_id":0,"centroid_label":"effective tax rate","agreed_value":0.226,"count":2,"chunk":"Richard McPhail: Thank you, Billy, and good morning, everyone. In the first quarter, total sales were $36.4 billion, a decrease of approximately 2.3% from last year. During the first quarter, our total company comps were negative 2.8% with comps of negative 4% in February, negative 0.8% in March, and negative 3.3% in April. Comps in the U.S. were negative 3.2% for the quarter with comps of negative 4.8% in February, negative 1.3% in March, and negative 3.6% in April. For the quarter, Mexico posted positive comps, whereas Canada was slightly below the company average. In the first quarter, our gross margin was 34.1%, an increase of approximately 45 basis points from the first quarter last year, primarily driven by benefits from lower transportation cost and shrink. During the first quarter, operating expense as a percent of sales increased approximately 140 basis points to 20.2% compared to the first quarter of 2023. The increase was primarily driven by a benefit from a legal settlement that we are overlapping from the first quarter of fiscal 2023, as well as deleverage from our top line results. Our operating expense performance was in line with our expectations. Our operating margin for the first quarter was 13.9% compared to 14.9% in the first quarter of 2023. Interest and other expense for the first quarter decreased by $13 million to $428 million. In the first quarter, our effective tax rate was 22.6% compared to 24.2% in the first quarter of fiscal 2023. Our diluted earnings per share for the first quarter were $3.63, a decrease of 5% compared to the first quarter of 2023. During the first quarter, we opened two new stores, bringing our total store count to 2,337. Retail selling square footage was approximately 242 million square feet. At the end of the quarter, merchandise inventories were $22.4 billion, down approximately $3 billion, or 12% compared to the first quarter of 2023, and inventory turns were 4.5x, up from 3.9x last year. Turning to capital allocation. During the first quarter, we invested approximately $850 million back into our business in the form of capital expenditures. And during the quarter, we paid approximately $2.2 billion in dividends to our shareholders and we returned approximately $600 million to shareholders in the form of share repurchases. As a reminder, in March we announced our intent to acquire SRS Distribution and as a result, we paused share repurchases. As you've heard us say many times, we maintain a disciplined approach to capital allocation and that is not changing. First and foremost, we will invest in the business and expect capital expenditures of approximately 2% of sales on an annual basis. After investing in the business, we plan to pay the dividend and it is our intent to return any excess cash to shareholders in the form of share repurchases. From time to time, we will also invest in the business through acquisitions to enhance our capabilities and to accelerate our strategic objectives. Computed on the average of beginning and ending long-term debt and equity for the trailing 12 months, return on invested capital was 37.1%, down from 43.6% \u2013 excuse me, down from 43.6% in the first quarter of fiscal 2023. Now, I will comment on our guidance for fiscal 2024. Today, we are reaffirming our guidance for 2024. As a reminder, our guidance does not currently reflect any impact from the announced acquisition of SRS. The acquisition is currently under regulatory review and we expect it to close by the end of fiscal 2024. We expect total sales growth to outpace sales comp with sales growth of approximately positive 1% and comp sales of approximately negative 1%. Total sales growth will benefit from a 53rd week and we expect the 53rd week will contribute approximately $2.3 billion in sales. Our gross margin is expected to be approximately 33.9%, an increase of approximately 50 basis points, compared to fiscal 2023. We expect operating margin of approximately 14.1%. Our effective tax rate is targeted at approximately 24.5%. We expect net interest expense of approximately $1.8 billion, and our diluted earnings per share percent growth is targeted to be approximately 1% compared to fiscal 2023. It\u2019s our intent to update guidance as appropriate once the SRS transaction closes. We believe that we have positioned ourselves to meet the needs of our customers in any environment. The investments we\u2019ve made in our business have enabled agility in our operating model. As we look forward, we will continue to invest to strengthen our position with our customers, leverage our scale and low-cost position to drive growth faster than the market and deliver shareholder value. Thank you for your participation in today\u2019s call. And Christine, we are now ready for questions.","evidence_gemma_new":null,"evidence_llama_3_3":"effective tax rate first quarter","evidence_qwen_3_30b":"effective tax rate first quarter","gemma_new_max":null,"gemma_new_min":null,"llama_3_3_max":0.226,"llama_3_3_min":0.226,"qwen_3_30b_max":0.226,"qwen_3_30b_min":0.226}
{"symbol":"HD","year":2024,"quarter":2,"date":"2024-Q2","chunk_id":5,"sub_chunk_id":0,"centroid_label":"effective tax rate","agreed_value":24.0,"count":2,"chunk":"Richard McPhail: Thank you, Billy, and good morning, everyone. In the second quarter, Total sales were $43.2 billion, an increase of approximately 0.6% from last year. Total sales include $1.3 billion from the recent acquisition of SRS, which represents approximately six weeks of sales in the quarter. During the second quarter, our total company comps were negative 3.3%, with comps of negative 3.7% in May, negative 0.9% in June and negative 4.9% in July. Comps in the U.S. were negative 3.6% for the quarter, with comps of negative 4.1% in May, negative 1.4% in June and negative 5% in July. In the second quarter, our gross margin was approximately 33.4%, an increase of 40 basis points from the second quarter last year, primarily driven by benefits from lower transportation costs and shrink, partially offset by mix as a result of the SRS acquisition. During the second quarter, operating expense as a percent of sales increased approximately 65 basis points to 18.3% compared to the second quarter of 2023. Our operating expense performance was in line with our expectations. Beginning this quarter, in addition to our GAAP measures, we are providing the following non-GAAP measures: adjusted operating income, adjusted operating margin and adjusted diluted earnings per share, which excludes noncash amortization of acquired intangible assets. We believe these supplemental measures will help investors better understand and analyze our performance. Our operating margin for the second quarter was 15.1% compared to 15.4% in the second quarter of 2023. In the quarter, pretax intangible asset amortization was $90 million, including $39 million related to SRS. Excluding the intangible asset amortization in the quarter, our adjusted operating margin for the second quarter was 15.3% and compared to 15.5% in the second quarter of 2023. Interest and other expense for the second quarter increased by $61 million to $489 million due primarily to higher debt balances than a year ago. In the second quarter, our effective tax rate was 24.5%, compared to 24.4% in the second quarter of fiscal 2023. Our diluted earnings per share for the second quarter were $4.60, a decrease of approximately 1% compared to the second quarter of 2023. Excluding intangible asset amortization, our adjusted diluted earnings per share for the second quarter were $4.67, essentially flat compared to the second quarter of 2023. During the second quarter, we opened three new stores, bringing our total store count to 2,340. Retail selling square footage was approximately 243 million square feet. At the end of the quarter, merchandise inventories or $23.1 billion, down approximately $200 million compared to the second quarter of 2023, and inventory turns were 4.9x, up from 4.4x last year. Turning to capital allocation. During the second quarter, we invested approximately $720 million back into our business in the form of capital expenditures. And during the quarter, we paid approximately $2.2 billion in dividends to our shareholders. Our disciplined approach to capital allocation remains unchanged. First and foremost, we will invest in the business and expect capital expenditures of approximately 2% of sales on an annual basis. After investing in the business, we plan to pay the dividend and it is our intent to return any excess cash to shareholders in the form of share repurchases. Computed on the average of beginning and ending long-term debt and equity for the trailing 12 months, return on invested capital was approximately 31.9%, down from 41.5% in the second quarter of fiscal 2023. Now, I will comment on our updated outlook for fiscal 2024. As you heard from Ted, given the softer-than-expected performance in the first half of the year, and reflecting continued uncertainty around underlying consumer demand, we believe a more cautious outlook for the year is warranted. With the recent closing of the SRS acquisition, we are now including their results in our consolidated outlook for the year. For the period matching our first half, which includes periods prior to the acquisition and not fully reflected in our financial statements, SRS generated high single-digit percentage sales growth with operating income growing largely in line with sales. We believe that over the next several years, SRS on its own, and through our combined Pro efforts, will help accelerate sales and earnings growth for our company. Updating our fiscal 2024 guidance for the factors we just discussed. We now expect total sales growth between 2.5% and 3.5%, including the SRS acquisition and the 53rd week. The 53rd week is projected to add approximately $2.3 billion to total sales. SRS is expected to contribute approximately $6.4 billion in incremental sales. Comparable sales are expected to decline between negative 3% and negative 4% for the 52-week period. The high end of our range implies a consumer demand environment consistent with the first half of fiscal 2024. While comparable sales for the Company are not currently on the trajectory for the low end of the range, a negative 4% comp implies incremental pressure on consumer demand beyond what we are seeing today. We expect to open approximately 12 new stores. Our gross margin is expected to be approximately 33.5%. We expect operating margin to be between 13.5% and 13.6%, and adjusted operating margin to be between 13.8% and 13.9%. Our effective tax rate is targeted at approximately 24%. We expect net interest expense of approximately $2.2 billion. Our diluted earnings per share percent will decline between negative 2% and negative 4% compared to fiscal 2023, with the extra week contributing approximately $0.30. We expect our adjusted diluted earnings per share percent to decline between negative 1% and negative 3%, compared to fiscal 2023, with the extra week contributing approximately $0.30. We believe that we have positioned ourselves to meet the needs of our customers in any environment. The investments we've made in our business have enabled agility in our operating model. As we look forward, we will continue to invest to strengthen our position with our customers, leverage our scale and low-cost position to drive growth faster than the market and deliver shareholder value. Thank you for your participation in today's call. And Christine, we are now ready for questions.","evidence_gemma_new":"effective tax rate","evidence_llama_3_3":null,"evidence_qwen_3_30b":"targeted effective tax rate","gemma_new_max":24.0,"gemma_new_min":24.0,"llama_3_3_max":null,"llama_3_3_min":null,"qwen_3_30b_max":24.0,"qwen_3_30b_min":24.0}
{"symbol":"HD","year":2024,"quarter":3,"date":"2024-Q3","chunk_id":5,"sub_chunk_id":0,"centroid_label":"effective tax rate","agreed_value":0.244,"count":2,"chunk":"Richard McPhail: Thank you, Billy, and good morning, everyone. In the third quarter, total sales were $40.2 billion, an increase of approximately 6.6% from last year. During the third quarter, our total company comps were negative 1.3% with comps of negative 3.3% in August, negative 2.3% in September and positive 1% in October. Comps in the U.S. were negative 1.2% for the quarter, with comps of negative 3.5% in August, negative 2.2% in September, and positive 1.4% in October. The progression of our monthly comps reflects in large part hurricane related sales. Our results for the third quarter include a net contribution of approximately $200 million in hurricane related sales, which positively impacted total company comps by approximately 55 basis points for the quarter and approximately 120 basis points for October. In the third quarter, our gross margin was approximately 33.4%, a decrease of approximately 40 basis points from the third quarter last year, primarily driven by mix as a result of the SRS acquisition, partially offset by benefits from lower shrink. During the third quarter, operating expense as a percent of sales increased approximately 45 basis points to 19.9% compared to the third quarter of 2023. Our operating expense performance was in-line with our expectations. Our operating margin for the third quarter was 13.5% compared to 14.3% in the third quarter of 2023. In the quarter, pre-tax intangible asset amortization was $138 million including $86 million related to SRS. Excluding the intangible asset amortization in the quarter, our adjusted operating margin for the third quarter was 13.8% compared to 14.5% in the third quarter of 2023. Interest and other expense for the third quarter increased by $157 million to $595 million due primarily to higher debt balances than a year ago. In the third quarter, our effective tax rate was 24.4% compared to 23.3% in the third quarter of fiscal 2023. Our diluted earnings per share for the third quarter were $3.67, a decrease of approximately 4% compared to the third quarter of 2023. Excluding intangible asset amortization, our adjusted diluted earnings per share for the third quarter were $3.78, a decrease of approximately 2% compared to the third quarter of 2023. During the third quarter, we opened five new stores, bringing our total store count to 2, 345. Retail selling square footage was approximately 243 million square feet. At the end of the quarter, merchandise inventories were $23.9 billion up approximately $1.1 billion compared to the third quarter of 2023, and inventory turns were 4.8 times, up from 4.3 times last year. Turning to capital allocation. During the third quarter, we invested approximately $820 million back into our business in the form of capital expenditures. And during the quarter, we paid approximately $2.2 billion in dividends to our shareholders. Compute on the average of beginning and ending long-term debt and equity for the trailing 12-months, return on invested capital was approximately 31.5%, down from 38.7% in the third quarter of fiscal 2023. Now, I will comment on our updated outlook for fiscal 2024. As you heard from Ted, while macro uncertainty remains and continues to pressure home improvement demand, our performance in the third quarter was better than expected. Our performance reflects hurricane related sales in the third quarter, and we expect some hurricane related sales in the fourth quarter. Given the better than expected performance in the third quarter and incremental hurricane related sales, we have updated our fiscal 2024 guidance. We now expect total sales growth of approximately 4%, including SRS in the 53rd week. The 53rd week is projected to add approximately $2.3 billion to total sales and SRS is expected to contribute approximately $6.4 billion in incremental sales. Comparable sales are expected to decline approximately 2.5% for the 52 week period. We expect to open approximately 12 new stores. Our gross margin is expected to be approximately 33.5%. We expect operating margin to be approximately 13.5% and adjusted operating margin to be approximately 13.8%. Our effective tax rate is targeted at approximately 24%. We expect net interest expense of approximately $2.1 billion. We expect our diluted earnings per share to decline approximately 2% compared to fiscal 2023 with the extra week contributing approximately $0.30 per share. And, we expect our adjusted diluted earnings per share to decline approximately 1% compared to fiscal 2023 with the extra week contributing approximately $0.30 per share. We believe that we will grow market share in any environment. We are continuing to invest to strengthen our competitive position with our customers and leverage our scale and low cost position to drive growth faster than the market and deliver shareholder value. Thank you for your participation in today\u2019s call. And Christine, we are now ready for questions.","evidence_gemma_new":null,"evidence_llama_3_3":"effective tax rate third quarter","evidence_qwen_3_30b":"effective tax rate third quarter","gemma_new_max":null,"gemma_new_min":null,"llama_3_3_max":0.244,"llama_3_3_min":0.244,"qwen_3_30b_max":0.244,"qwen_3_30b_min":0.244}
{"symbol":"HD","year":2023,"quarter":2,"date":"2023-Q2","chunk_id":5,"sub_chunk_id":0,"centroid_label":"gross margins","agreed_value":0.33,"count":2,"chunk":"Richard McPhail: Thank you, Ann, and good morning, everyone. In the second quarter, total sales were $42.9 billion, a decrease of approximately $900 million or 2% from last year. During the second quarter, our total company comps were negative 2% with comps of negative 2.6% in May, negative 3.3% in June and negative 0.2% in July. Comps in the U.S. were negative 2% for the quarter with comps of negative 2.6% in May, negative 3.3% in June and negative 0.4% in July. As you heard from Billy, during the second quarter, we continued to experience lumber deflation compared to the prior year. While lumber prices were down, we saw an improvement in unit productivity, resulting in a net negative comp impact of approximately 85 basis points versus the second quarter of 2022. In the second quarter, our gross margin was 33%, a decrease of 8 basis points from the second quarter last year, primarily driven by pressure from shrink. During the second quarter, operating expense as a percent of sales increased approximately 100 basis points to 17.6% compared to the second quarter of 2022. Our operating expense performance during the second quarter reflects our previously executed compensation increases for hourly associates as well as deleverage from our top line results. Our operating margin for the second quarter was 15.4% compared to 16.5% in the second quarter of 2022. Interest and other expense for the second quarter increased by $49 million to $428 million due primarily to interest on our floating rate debt as well as higher debt balances than a year ago. In the second quarter, our effective tax rate was 24.4%, up from 24.3% in the second quarter of fiscal 2022. Our diluted earnings per share for the second quarter were $4.65, a decrease of 7.9% compared to the second quarter of 2022. During the second quarter, we opened two new stores, bringing our total store count to 2,326. Retail selling square footage was approximately 241 million square feet. At the end of the quarter, merchandise inventories were $23.3 billion, down $2.8 billion compared to the second quarter of 2022. And inventory turns were 4.4x, down from 4.5x last year. Turning to capital allocation. After investing in our business and paying our dividend, it is our intent to return excess cash to shareholders in the form of share repurchases. During the second quarter, we invested approximately $800 million back into our business in the form of capital expenditures. And during the quarter, we paid approximately $2.1 billion in dividends to our shareholders, and we returned approximately $2 billion to shareholders in the form of share repurchases. Computed on the average of beginning and ending long-term debt and equity for the trailing 12 months, return on invested capital was approximately 41.5%, down from 45.6% in the second quarter of fiscal 2022. Now I\u2019ll comment on our guidance for fiscal 2023. Today, we are reaffirming our guidance for 2023. We expect fiscal 2023 sales and comp sales to decline between 2% and 5%. We are targeting an operating margin between 14.3% and 14% for the year. Our effective tax rate is targeted at approximately 24.5%. We expect interest expense of approximately $1.8 billion and we are anticipating between a 7% and 13% decline in diluted earnings per share compared to fiscal 2022. In addition, we continue to focus on driving productivity in the business and feel confident that we will realize the previously announced $500 million in annualized cost savings in 2024. We also remain focused on meeting the needs of our customers with our leading product authority in home improvement, strong in-stock levels and knowledgeable associates. We will continue to prudently invest to strengthen our competitive position and leverage our scale and low-cost position to outperform our market and deliver shareholder value. Thank you for your participation in today\u2019s call. And Christine, we are now ready for questions.","evidence_gemma_new":"gross margin second quarter","evidence_llama_3_3":"gross margin second quarter","evidence_qwen_3_30b":null,"gemma_new_max":0.33,"gemma_new_min":0.33,"llama_3_3_max":0.33,"llama_3_3_min":0.33,"qwen_3_30b_max":null,"qwen_3_30b_min":null}
{"symbol":"HD","year":2023,"quarter":3,"date":"2023-Q3","chunk_id":5,"sub_chunk_id":0,"centroid_label":"gross margins","agreed_value":33.8,"count":3,"chunk":"Richard McPhail: Thank you, Billy, and good morning, everyone. In the third quarter, total sales were $37.7 billion, a decrease of approximately $1.2 billion or 3% from last year. During the third quarter, our total company comps were negative 3.1% with comps of negative 2.1% in August, negative 3.4% in September and negative 3.7% in October. Comps in the U.S. were negative 3.5% for the quarter with comps of negative 2.5% in August, negative 3.8% in September and negative 4.1% in October. In local currency, Mexico and Canada posted comps above the company average. It is important to note that adjusting for storm-related overlaps and some seasonal shift, monthly comps were relatively consistent across the quarter. In the third quarter, our gross margin was 33.8%, a decrease of approximately 20 basis points from the third quarter last year, which was in line with our expectations. During the third quarter, operating expense as a percent of sales increased approximately 120 basis points to 19.4% compared to the third quarter of 2022. Our operating expense performance during the third quarter reflects our previously executed compensation increases for hourly associates as well as deleverage from our top line results. Our operating margin for the third quarter was 14.3% compared to 15.8% in the third quarter of 2022. Interest and other expense for the third quarter increased by approximately $30 million to $438 million. In the third quarter, our effective tax rate was 23.3%, down from 24.4% in the third quarter of fiscal 2022. Our diluted earnings per share for the third quarter were $3.81, a decrease of 10.1% compared to the third quarter of 2022. During the third quarter, we opened 7 new stores, bringing our total store count to 2,333. Retail selling square footage was approximately 242 million square feet. At the end of the quarter, merchandise inventories were $22.8 billion, down $2.9 billion or 11% compared to the third quarter of 2022. And inventory turns were 4.3x flat to 1 year ago. Turning to capital allocation. After investing in our business and paying our dividend, it is our intent to return excess cash to shareholders in the form of share repurchases. During the quarter, we invested approximately $670 million back into our business in the form of capital expenditures. And during the quarter, we paid approximately $2.1 billion in dividends to our shareholders, and we returned approximately $1.5 billion to shareholders in the form of share repurchases. Computed on the average of beginning and ending long-term debt and equity for the trailing 12 months, return on invested capital was approximately 38.7%, down from 43.3% in the third quarter of fiscal 2022. Now I will comment on our guidance for fiscal 2023. As you heard from Ted, with one quarter remaining in fiscal 2023, we no longer expect the end points of our previous guidance range as likely outcomes, and therefore, we are narrowing our guidance for 2023. We expect fiscal 2023 sales and comp sales to decline between 3% and 4%. We are targeting an operating margin between 14.2% and 14.1% for the year. Our effective tax rate is targeted at approximately 24.5%. We expect interest expense of approximately $1.8 billion. And we are anticipating between a 9% and 11% decline in diluted earnings per share compared to fiscal 2022. In addition, as you heard from Ann, we continue to focus on driving productivity in the business. We have taken a number of actions that will help us realize the previously announced $500 million in annualized cost savings in 2024 and are fully confident that we will deliver on this commitment. We also remain focused on meeting the needs of our customers with our leading product authority in home improvement, strong in-stock levels and knowledgeable associates. We will continue to prudently invest to strengthen our competitive position and leverage our scale and low-cost position to outperform our market and deliver shareholder value. Thank you for your participation in today's call. And Christine, we are now ready for questions.","evidence_gemma_new":"gross margin third quarter last year","evidence_llama_3_3":"gross margin third quarter","evidence_qwen_3_30b":"gross margin third quarter","gemma_new_max":33.8,"gemma_new_min":33.8,"llama_3_3_max":33.8,"llama_3_3_min":33.8,"qwen_3_30b_max":33.8,"qwen_3_30b_min":33.8}
{"symbol":"HD","year":2023,"quarter":4,"date":"2023-Q4","chunk_id":5,"sub_chunk_id":0,"centroid_label":"gross margins","agreed_value":33.1,"count":2,"chunk":"Richard McPhail: Thank you, Billy, and good morning, everyone. In the fourth quarter, total sales were $34.8 billion, a decrease of 2.9% from last year. During the fourth quarter, our total company comps were negative 3.5% with comps of negative 2.5% in November, positive 1.1% in December and negative 8.5% in January. Comps in the U.S. were negative 4% for the quarter with comps of negative 2.7% in November, positive 0.6% in December and negative 9.1% in January. In local currency, Mexico and Canada posted comps above the company average with Mexico posting positive comps. It is important to note that adjusting for holiday shifts and weather-related impacts in January, monthly comps relatively consistent across the quarter. For the year, our sales totaled $152.7 billion, a decrease of 3% versus fiscal 2022. For the year, total company comp sales decreased 3.2% and U.S. comp sales decreased 3.5%. In the fourth quarter, our gross margin was approximately 33.1%, a decrease of 20 basis points from last year. For the year, our gross margin was approximately 33.4%, a decrease of 15 basis points from last year, which was in line with our expectations. During the fourth quarter, operating expenses as a percentage of sales increased approximately 115 basis points to 21.2% compared to the fourth quarter of 2022. Our operating expense performance during the fourth quarter reflects our previously executed compensation increases for hourly associates as well as deleverage from our top line results. For the year, operating expenses were approximately 19.2% of sales, representing an increase of approximately 90 basis points from fiscal 2022. Our operating margin for the fourth quarter was approximately 11.9% and for the year was approximately 14.2%. Interest and other expense for the fourth quarter increased by $50 million to $458 million. In the fourth quarter and for fiscal 2023, our effective tax rate was 24%. Our diluted earnings per share for the fourth quarter were $2.82, a decrease of 14.5% compared to the fourth quarter of 2022. Diluted earnings per share for fiscal 2023 were $15.11, a decrease of 9.5% compared to fiscal 2022. At the end of the quarter, merchandise inventories were $21 billion, down $3.9 billion or approximately 16% versus last year, and inventory turns were 4.3x, up from 4.2x from the second period last year. Moving on to capital allocation. During the fourth quarter, we invested approximately $860 million back into our business in the form of capital expenditures. This brings total capital expenditures for fiscal 2023 to approximately $3.2 billion. During the year, we opened 13 new stores, bringing our store count to 2,335 at the end of fiscal 2023. Retail selling square footage was approximately 242 million square feet and total sales per retail square foot were approximately $605 in fiscal 2023. Additionally, we invested approximately $1.5 billion on three acquisitions during fiscal 2023, accelerating our strategic initiatives and providing us with better capabilities to serve our customers. During the year, we paid approximately $8.4 billion of dividends to our shareholders. Today, we announced our Board of Directors increased our quarterly dividend by 7.7% to $2.25 per share, which equates to an annual dividend of $9 per share. And finally, during fiscal 2023, we returned approximately $8 billion to our shareholders in the form of share repurchases, including $1.5 billion in the fourth quarter. Computed on the average of beginning and ending long-term debt and equity for the trailing 12 months, return on invested capital was 36.7% compared to 44.6% at the end of the fourth quarter of fiscal 2022. Now I'll comment on our outlook for 2024. First, let me point out that fiscal 2024 will include a 53rd week, so the fourth quarter of fiscal 2024 will consist of 14 weeks. We will continue to report comps on a 52-week basis, but we will base our overall guidance on 53 weeks. As you heard from Ted, we feel great about the actions we took in 2023 to position us well heading into 2024. And while there are signs that the economy is on the way towards normalization, the home improvement market still faces headwinds as we look ahead to fiscal 2024. We considered several factors that informed our outlook for fiscal 2024. On the positive side, we faced a number of pressures in fiscal 2023 that are unlikely to repeat in fiscal 2024. In 2023, we saw four increases in the Fed funds rate, a sharp decline in existing home sales and approximately 110 basis points of comp pressure from lumber deflation. However, we still expect pressures to our business in fiscal 2024. Personal consumption growth as measured by PCE is expected to decelerate compared to 2023. Our share of PCE also remains slightly elevated relative to 2019 and has been on a glide path towards 2019 levels. Higher interest rates at the beginning of 2024 relative to last year will likely continue to pressure demand for larger projects. And the effects from pull forward of demand during the pandemic as well as some project deferral could impact demand into 2024. As we consider these influences on home improvement demand, we are planning for a year of continued moderation but with slightly less pressure to comp sales than what we faced in fiscal 2023. Our fiscal 2024 outlook is for total sales growth to outpace sales comp with sales growth of approximately positive 1% and comp sales of approximately negative 1% compared to fiscal 2023. Total sales growth will benefit from a 53rd week as well as from the acquisitions we made and the new stores we opened in fiscal 2023 and the stores we plan to open in fiscal 2024. We expect the 53rd week will contribute approximately $2.3 billion in sales. Our gross margin is expected to be approximately 33.9%, an increase of approximately 50 basis points compared to fiscal 2023. This primarily reflects a lower product and transportation cost environment relative to fiscal 2023 as well as benefits from a portion of the approximately $500 million in reduced fixed costs that we will realize in fiscal 2024. Further, we expect operating margin of approximately 14.1%. This reflects deleverage from sales and pressure from targeted incentive compensation as we are overlapping lower incentive compensation paid than planned in 2023. This will be partially offset by the benefits from the approximately $500 million in fixed costs that we will realize in fiscal 2024 in both cost of goods sold and operating expenses. Our effective tax rate is targeted at approximately 24.5%. We expect net interest expense of approximately $1.8 billion. Our diluted earnings per share percent growth is targeted to be approximately 1% compared to fiscal 2023, with the extra week contributing approximately $0.30. We plan to continue investing in our business with capital expenditures of approximately 2% of sales on an annual basis. After investing in our business and paying our dividend, it is our intent to return excess cash to shareholders in the form of share repurchases. We believe we have positioned ourselves to meet the needs of our customers in any environment. The investments we've made in our business have enabled agility in our operating model. As we look forward, we will continue to invest to strengthen our position with our customers, leverage our scale and low-cost position to drive growth faster than the market and deliver shareholder value. Thank you for your participation in today's call. And Christine, we are now ready for questions.","evidence_gemma_new":"gross margin fourth quarter","evidence_llama_3_3":null,"evidence_qwen_3_30b":"gross margin year","gemma_new_max":33.1,"gemma_new_min":33.1,"llama_3_3_max":null,"llama_3_3_min":null,"qwen_3_30b_max":33.4,"qwen_3_30b_min":33.4}
{"symbol":"HD","year":2024,"quarter":1,"date":"2024-Q1","chunk_id":46,"sub_chunk_id":0,"centroid_label":"gross margins","agreed_value":0.339,"count":3,"chunk":"Chuck Grom: Okay. Thanks very much. And then, Richard, one for you. Just you spoke to confirming the 33.9% gross margin rate for the year. Is there anything today that makes you feel better or maybe worse about the underlying assumptions that got you there 90 days ago in terms of shrink, transportation mix?","evidence_gemma_new":"gross margin rate for the year","evidence_llama_3_3":"gross margin rate for the year","evidence_qwen_3_30b":"gross margin first quarter","gemma_new_max":0.339,"gemma_new_min":0.339,"llama_3_3_max":0.339,"llama_3_3_min":0.339,"qwen_3_30b_max":0.341,"qwen_3_30b_min":0.341}
{"symbol":"HD","year":2024,"quarter":2,"date":"2024-Q2","chunk_id":5,"sub_chunk_id":0,"centroid_label":"gross margins","agreed_value":33.5,"count":2,"chunk":"Richard McPhail: Thank you, Billy, and good morning, everyone. In the second quarter, Total sales were $43.2 billion, an increase of approximately 0.6% from last year. Total sales include $1.3 billion from the recent acquisition of SRS, which represents approximately six weeks of sales in the quarter. During the second quarter, our total company comps were negative 3.3%, with comps of negative 3.7% in May, negative 0.9% in June and negative 4.9% in July. Comps in the U.S. were negative 3.6% for the quarter, with comps of negative 4.1% in May, negative 1.4% in June and negative 5% in July. In the second quarter, our gross margin was approximately 33.4%, an increase of 40 basis points from the second quarter last year, primarily driven by benefits from lower transportation costs and shrink, partially offset by mix as a result of the SRS acquisition. During the second quarter, operating expense as a percent of sales increased approximately 65 basis points to 18.3% compared to the second quarter of 2023. Our operating expense performance was in line with our expectations. Beginning this quarter, in addition to our GAAP measures, we are providing the following non-GAAP measures: adjusted operating income, adjusted operating margin and adjusted diluted earnings per share, which excludes noncash amortization of acquired intangible assets. We believe these supplemental measures will help investors better understand and analyze our performance. Our operating margin for the second quarter was 15.1% compared to 15.4% in the second quarter of 2023. In the quarter, pretax intangible asset amortization was $90 million, including $39 million related to SRS. Excluding the intangible asset amortization in the quarter, our adjusted operating margin for the second quarter was 15.3% and compared to 15.5% in the second quarter of 2023. Interest and other expense for the second quarter increased by $61 million to $489 million due primarily to higher debt balances than a year ago. In the second quarter, our effective tax rate was 24.5%, compared to 24.4% in the second quarter of fiscal 2023. Our diluted earnings per share for the second quarter were $4.60, a decrease of approximately 1% compared to the second quarter of 2023. Excluding intangible asset amortization, our adjusted diluted earnings per share for the second quarter were $4.67, essentially flat compared to the second quarter of 2023. During the second quarter, we opened three new stores, bringing our total store count to 2,340. Retail selling square footage was approximately 243 million square feet. At the end of the quarter, merchandise inventories or $23.1 billion, down approximately $200 million compared to the second quarter of 2023, and inventory turns were 4.9x, up from 4.4x last year. Turning to capital allocation. During the second quarter, we invested approximately $720 million back into our business in the form of capital expenditures. And during the quarter, we paid approximately $2.2 billion in dividends to our shareholders. Our disciplined approach to capital allocation remains unchanged. First and foremost, we will invest in the business and expect capital expenditures of approximately 2% of sales on an annual basis. After investing in the business, we plan to pay the dividend and it is our intent to return any excess cash to shareholders in the form of share repurchases. Computed on the average of beginning and ending long-term debt and equity for the trailing 12 months, return on invested capital was approximately 31.9%, down from 41.5% in the second quarter of fiscal 2023. Now, I will comment on our updated outlook for fiscal 2024. As you heard from Ted, given the softer-than-expected performance in the first half of the year, and reflecting continued uncertainty around underlying consumer demand, we believe a more cautious outlook for the year is warranted. With the recent closing of the SRS acquisition, we are now including their results in our consolidated outlook for the year. For the period matching our first half, which includes periods prior to the acquisition and not fully reflected in our financial statements, SRS generated high single-digit percentage sales growth with operating income growing largely in line with sales. We believe that over the next several years, SRS on its own, and through our combined Pro efforts, will help accelerate sales and earnings growth for our company. Updating our fiscal 2024 guidance for the factors we just discussed. We now expect total sales growth between 2.5% and 3.5%, including the SRS acquisition and the 53rd week. The 53rd week is projected to add approximately $2.3 billion to total sales. SRS is expected to contribute approximately $6.4 billion in incremental sales. Comparable sales are expected to decline between negative 3% and negative 4% for the 52-week period. The high end of our range implies a consumer demand environment consistent with the first half of fiscal 2024. While comparable sales for the Company are not currently on the trajectory for the low end of the range, a negative 4% comp implies incremental pressure on consumer demand beyond what we are seeing today. We expect to open approximately 12 new stores. Our gross margin is expected to be approximately 33.5%. We expect operating margin to be between 13.5% and 13.6%, and adjusted operating margin to be between 13.8% and 13.9%. Our effective tax rate is targeted at approximately 24%. We expect net interest expense of approximately $2.2 billion. Our diluted earnings per share percent will decline between negative 2% and negative 4% compared to fiscal 2023, with the extra week contributing approximately $0.30. We expect our adjusted diluted earnings per share percent to decline between negative 1% and negative 3%, compared to fiscal 2023, with the extra week contributing approximately $0.30. We believe that we have positioned ourselves to meet the needs of our customers in any environment. The investments we've made in our business have enabled agility in our operating model. As we look forward, we will continue to invest to strengthen our position with our customers, leverage our scale and low-cost position to drive growth faster than the market and deliver shareholder value. Thank you for your participation in today's call. And Christine, we are now ready for questions.","evidence_gemma_new":"gross margin second quarter","evidence_llama_3_3":null,"evidence_qwen_3_30b":"expected gross margin","gemma_new_max":33.4,"gemma_new_min":33.4,"llama_3_3_max":null,"llama_3_3_min":null,"qwen_3_30b_max":33.5,"qwen_3_30b_min":33.5}
{"symbol":"HD","year":2024,"quarter":3,"date":"2024-Q3","chunk_id":5,"sub_chunk_id":0,"centroid_label":"gross margins","agreed_value":0.334,"count":2,"chunk":"Richard McPhail: Thank you, Billy, and good morning, everyone. In the third quarter, total sales were $40.2 billion, an increase of approximately 6.6% from last year. During the third quarter, our total company comps were negative 1.3% with comps of negative 3.3% in August, negative 2.3% in September and positive 1% in October. Comps in the U.S. were negative 1.2% for the quarter, with comps of negative 3.5% in August, negative 2.2% in September, and positive 1.4% in October. The progression of our monthly comps reflects in large part hurricane related sales. Our results for the third quarter include a net contribution of approximately $200 million in hurricane related sales, which positively impacted total company comps by approximately 55 basis points for the quarter and approximately 120 basis points for October. In the third quarter, our gross margin was approximately 33.4%, a decrease of approximately 40 basis points from the third quarter last year, primarily driven by mix as a result of the SRS acquisition, partially offset by benefits from lower shrink. During the third quarter, operating expense as a percent of sales increased approximately 45 basis points to 19.9% compared to the third quarter of 2023. Our operating expense performance was in-line with our expectations. Our operating margin for the third quarter was 13.5% compared to 14.3% in the third quarter of 2023. In the quarter, pre-tax intangible asset amortization was $138 million including $86 million related to SRS. Excluding the intangible asset amortization in the quarter, our adjusted operating margin for the third quarter was 13.8% compared to 14.5% in the third quarter of 2023. Interest and other expense for the third quarter increased by $157 million to $595 million due primarily to higher debt balances than a year ago. In the third quarter, our effective tax rate was 24.4% compared to 23.3% in the third quarter of fiscal 2023. Our diluted earnings per share for the third quarter were $3.67, a decrease of approximately 4% compared to the third quarter of 2023. Excluding intangible asset amortization, our adjusted diluted earnings per share for the third quarter were $3.78, a decrease of approximately 2% compared to the third quarter of 2023. During the third quarter, we opened five new stores, bringing our total store count to 2, 345. Retail selling square footage was approximately 243 million square feet. At the end of the quarter, merchandise inventories were $23.9 billion up approximately $1.1 billion compared to the third quarter of 2023, and inventory turns were 4.8 times, up from 4.3 times last year. Turning to capital allocation. During the third quarter, we invested approximately $820 million back into our business in the form of capital expenditures. And during the quarter, we paid approximately $2.2 billion in dividends to our shareholders. Compute on the average of beginning and ending long-term debt and equity for the trailing 12-months, return on invested capital was approximately 31.5%, down from 38.7% in the third quarter of fiscal 2023. Now, I will comment on our updated outlook for fiscal 2024. As you heard from Ted, while macro uncertainty remains and continues to pressure home improvement demand, our performance in the third quarter was better than expected. Our performance reflects hurricane related sales in the third quarter, and we expect some hurricane related sales in the fourth quarter. Given the better than expected performance in the third quarter and incremental hurricane related sales, we have updated our fiscal 2024 guidance. We now expect total sales growth of approximately 4%, including SRS in the 53rd week. The 53rd week is projected to add approximately $2.3 billion to total sales and SRS is expected to contribute approximately $6.4 billion in incremental sales. Comparable sales are expected to decline approximately 2.5% for the 52 week period. We expect to open approximately 12 new stores. Our gross margin is expected to be approximately 33.5%. We expect operating margin to be approximately 13.5% and adjusted operating margin to be approximately 13.8%. Our effective tax rate is targeted at approximately 24%. We expect net interest expense of approximately $2.1 billion. We expect our diluted earnings per share to decline approximately 2% compared to fiscal 2023 with the extra week contributing approximately $0.30 per share. And, we expect our adjusted diluted earnings per share to decline approximately 1% compared to fiscal 2023 with the extra week contributing approximately $0.30 per share. We believe that we will grow market share in any environment. We are continuing to invest to strengthen our competitive position with our customers and leverage our scale and low cost position to drive growth faster than the market and deliver shareholder value. Thank you for your participation in today\u2019s call. And Christine, we are now ready for questions.","evidence_gemma_new":null,"evidence_llama_3_3":"gross margin third quarter","evidence_qwen_3_30b":"updated outlook for fiscal 2024 gross margin","gemma_new_max":null,"gemma_new_min":null,"llama_3_3_max":0.334,"llama_3_3_min":0.334,"qwen_3_30b_max":0.335,"qwen_3_30b_min":0.335}
{"symbol":"HD","year":2024,"quarter":3,"date":"2024-Q3","chunk_id":26,"sub_chunk_id":0,"centroid_label":"gross margins","agreed_value":0.8,"count":3,"chunk":"Richard McPhail: Sure. Well, so specifically, look when you look year-over-year, the major impact in gross margin versus last year was simply the mix impact from SRS. And so, that was actually an 80 basis point impact for the quarter. So, let\u2019s talk about gross margin. It was in-line with our expectations. In fact, our guidance for gross margin for the full-year has not changed. So again, in Q3, the impact was around 80 basis points from SRS. So, you can do the math and see that the remainder of the business was up significantly and was in-line with our expectations, and that also reflected benefits from shrink that Ann had mentioned. And, just to remind you, SRS will be for the year 2024, it will have about a 45 basis point impact on the year because remember, we will have only owned them for about seven months. But, an annualized number for SRS impact to gross margin is about 70 basis points. So, if you just allow me a second to make sure everyone got that, that\u2019s 70 basis points of expected shift in our gross margin profile from adding them to our business. Our gross margin again was right where we expected it to be. Transportation expense or rather benefits from decreasing transportation expense were dynamic in the first half of the year, but that\u2019s largely sort of gone away as year-over-year comparisons flatten out. And so, we were very pleased with our margin performance. And as I said, we have not changed our guidance for the full-year gross margin. Look, as far as long-term goes, in June of 2023, at our Investor Conference, we laid out a base case that in essence said, look, we anticipate flat gross margin as part of our operating model. There\u2019s a ton of productivity that our amazing supply chain team drives every single year that we reinvest in that gross margin, but that\u2019s reflective of our position as the sharpest value in the market for our customers and that\u2019s our intention. But again, the acquisition of SRS does present a shift in our margin base for the business.","evidence_gemma_new":"SRS gross margin year-over-year Q3","evidence_llama_3_3":"SRS gross margin Q3","evidence_qwen_3_30b":"gross margin SRS year-over-year","gemma_new_max":0.8,"gemma_new_min":0.8,"llama_3_3_max":0.8,"llama_3_3_min":0.8,"qwen_3_30b_max":0.8,"qwen_3_30b_min":0.8}
{"symbol":"HD","year":2024,"quarter":3,"date":"2024-Q3","chunk_id":26,"sub_chunk_id":0,"centroid_label":"gross margins","agreed_value":0.7,"count":2,"chunk":"Richard McPhail: Sure. Well, so specifically, look when you look year-over-year, the major impact in gross margin versus last year was simply the mix impact from SRS. And so, that was actually an 80 basis point impact for the quarter. So, let\u2019s talk about gross margin. It was in-line with our expectations. In fact, our guidance for gross margin for the full-year has not changed. So again, in Q3, the impact was around 80 basis points from SRS. So, you can do the math and see that the remainder of the business was up significantly and was in-line with our expectations, and that also reflected benefits from shrink that Ann had mentioned. And, just to remind you, SRS will be for the year 2024, it will have about a 45 basis point impact on the year because remember, we will have only owned them for about seven months. But, an annualized number for SRS impact to gross margin is about 70 basis points. So, if you just allow me a second to make sure everyone got that, that\u2019s 70 basis points of expected shift in our gross margin profile from adding them to our business. Our gross margin again was right where we expected it to be. Transportation expense or rather benefits from decreasing transportation expense were dynamic in the first half of the year, but that\u2019s largely sort of gone away as year-over-year comparisons flatten out. And so, we were very pleased with our margin performance. And as I said, we have not changed our guidance for the full-year gross margin. Look, as far as long-term goes, in June of 2023, at our Investor Conference, we laid out a base case that in essence said, look, we anticipate flat gross margin as part of our operating model. There\u2019s a ton of productivity that our amazing supply chain team drives every single year that we reinvest in that gross margin, but that\u2019s reflective of our position as the sharpest value in the market for our customers and that\u2019s our intention. But again, the acquisition of SRS does present a shift in our margin base for the business.","evidence_gemma_new":"SRS gross margin","evidence_llama_3_3":null,"evidence_qwen_3_30b":"SRS gross margin expected shift","gemma_new_max":0.7,"gemma_new_min":0.7,"llama_3_3_max":null,"llama_3_3_min":null,"qwen_3_30b_max":0.7,"qwen_3_30b_min":0.7}
{"symbol":"HD","year":2023,"quarter":1,"date":"2023-Q1","chunk_id":5,"sub_chunk_id":0,"centroid_label":"interest and other expense","agreed_value":441000000.0,"count":2,"chunk":"Richard McPhail: Thank you, Ann, and good morning, everyone. In the first quarter, total sales were $37.3 billion a decrease of approximately $1.7 billion or 4.2% from last year. During the first quarter, our total company comps were negative 4.5% with comps of negative 2.5% in February, negative 7.5% in March and negative 3.7% in April. Comps in the U.S. were negative 4.6% for the quarter with comps of negative 2.8% in February, negative 7.5% in March and negative 3.7% in April. Our first quarter comp sales missed our own expectations, particularly in the months of March and April, driven primarily by 2 notable factors. First, lumber deflation drove a negative comp impact of approximately 220 basis points versus the first quarter of 2022. Second, unfavorable weather, particularly in our Western division further impacted our results. In the first quarter, our gross margin was 33.7% a decrease of 8 basis points from the first quarter last year, primarily driven by increased pressure from shrink. We continue to successfully offset supply chain and product cost pressures while maintaining our position as the customer\u2019s advocate for value. During the first quarter, operating expense as a percent of sales increased approximately 25 basis points to 18.8% compared to the first quarter of 2022. Our operating expense performance during the first quarter reflects the planned compensation increases announced during our fourth quarter 2022 call as well as a onetime benefit from a legal settlement. Our operating margin for the first quarter was 14.9% compared to 15.2% in the first quarter of 2022. Interest and other expense for the first quarter increased by $72 million to $441 million due primarily to interest on our floating rate debt as well as higher debt balances than a year ago. In the first quarter, our effective tax rate was 24.2%, up from 23.9% in the first quarter of fiscal 2022. Our diluted earnings per share for the first quarter or $3.82, a decrease of 6.6% compared to the first quarter of 2022. During the first quarter, we opened 2 new stores, bringing our total store count to 2,324. Retail selling square footage was approximately 241 million square feet. At the end of the quarter, merchandise inventories were $25.4 billion, essentially flat compared to the first quarter of 2022 and inventory turns were 3.9x down from 4.4x last year. Turning to capital allocation. After investing in our business and paying our dividend, it is our intent to return excess cash to shareholders in the form of share repurchases. During the first quarter, we invested approximately $900 million back into our business in the form of capital expenditures. And during the quarter, we paid approximately $2.1 billion in dividends to our shareholders, and we returned approximately $3 billion to shareholders in the form of share repurchases. Computed on the average of beginning and ending long-term debt and equity for the trailing 12 months, return on invested capital was approximately 43.6%, down from 45.3% and in the first quarter of fiscal 2022. Now I will comment on our guidance for fiscal 2023. As you may recall, last quarter, we provided flat sales and comp guidance for fiscal 2023. As we mentioned last quarter, our guidance did not include potential impacts from lumber deflation, which we noted could negatively impact our performance for the quarter and the year. As a result, lumber negatively impacted comps by approximately 220 basis points in the first quarter. Given the negative impact of the first quarter sales from lumber and weather, further softening of demand relative to our expectations and continued uncertainty regarding consumer demand patterns, we are updating our guidance to reflect a range of potential outcomes. We now expect fiscal 2023 sales and comp sales to decline between 2% and 5%. As a result of the change in our sales outlook, we are now targeting an operating margin between 14.3% and 14.0% for the year. Our effective tax rate is targeted at approximately 24.5%. We expect interest expense of approximately $1.8 billion, and we are anticipating between a 7% and 13% decline in diluted earnings per share compared to fiscal 2022. As Ted mentioned, we expected 2023 to be a year of moderation in the home improvement market, driven by monetary policy actions to dampen overall consumer demand. In our view, we are in a transitional period in the consumer economy. Setting the short-term impacts of monetary policy aside, we know that the home improvement customer is healthy and we believe the medium to long-term underlying fundamentals of home improvement make it one of the most attractive markets in retail and the economy as a whole. We believe that we are well positioned to meet the needs of our customers with a broad assortment of products, strong in-stock levels and knowledgeable associates. The investments we\u2019ve made in our business have enabled agility in our operating model. As we look forward, we will continue to prudently invest to strengthen our competitive position, leverage our scale and low-cost position to outperform our market and deliver shareholder value. Thank you for your participation in today\u2019s call. And Christine, we are now ready for questions.","evidence_gemma_new":"Interest and other expense first quarter","evidence_llama_3_3":"interest and other expense first quarter","evidence_qwen_3_30b":null,"gemma_new_max":441000000.0,"gemma_new_min":441000000.0,"llama_3_3_max":441000000.0,"llama_3_3_min":441000000.0,"qwen_3_30b_max":null,"qwen_3_30b_min":null}
{"symbol":"HD","year":2023,"quarter":2,"date":"2023-Q2","chunk_id":5,"sub_chunk_id":0,"centroid_label":"interest and other expense","agreed_value":428000000.0,"count":2,"chunk":"Richard McPhail: Thank you, Ann, and good morning, everyone. In the second quarter, total sales were $42.9 billion, a decrease of approximately $900 million or 2% from last year. During the second quarter, our total company comps were negative 2% with comps of negative 2.6% in May, negative 3.3% in June and negative 0.2% in July. Comps in the U.S. were negative 2% for the quarter with comps of negative 2.6% in May, negative 3.3% in June and negative 0.4% in July. As you heard from Billy, during the second quarter, we continued to experience lumber deflation compared to the prior year. While lumber prices were down, we saw an improvement in unit productivity, resulting in a net negative comp impact of approximately 85 basis points versus the second quarter of 2022. In the second quarter, our gross margin was 33%, a decrease of 8 basis points from the second quarter last year, primarily driven by pressure from shrink. During the second quarter, operating expense as a percent of sales increased approximately 100 basis points to 17.6% compared to the second quarter of 2022. Our operating expense performance during the second quarter reflects our previously executed compensation increases for hourly associates as well as deleverage from our top line results. Our operating margin for the second quarter was 15.4% compared to 16.5% in the second quarter of 2022. Interest and other expense for the second quarter increased by $49 million to $428 million due primarily to interest on our floating rate debt as well as higher debt balances than a year ago. In the second quarter, our effective tax rate was 24.4%, up from 24.3% in the second quarter of fiscal 2022. Our diluted earnings per share for the second quarter were $4.65, a decrease of 7.9% compared to the second quarter of 2022. During the second quarter, we opened two new stores, bringing our total store count to 2,326. Retail selling square footage was approximately 241 million square feet. At the end of the quarter, merchandise inventories were $23.3 billion, down $2.8 billion compared to the second quarter of 2022. And inventory turns were 4.4x, down from 4.5x last year. Turning to capital allocation. After investing in our business and paying our dividend, it is our intent to return excess cash to shareholders in the form of share repurchases. During the second quarter, we invested approximately $800 million back into our business in the form of capital expenditures. And during the quarter, we paid approximately $2.1 billion in dividends to our shareholders, and we returned approximately $2 billion to shareholders in the form of share repurchases. Computed on the average of beginning and ending long-term debt and equity for the trailing 12 months, return on invested capital was approximately 41.5%, down from 45.6% in the second quarter of fiscal 2022. Now I\u2019ll comment on our guidance for fiscal 2023. Today, we are reaffirming our guidance for 2023. We expect fiscal 2023 sales and comp sales to decline between 2% and 5%. We are targeting an operating margin between 14.3% and 14% for the year. Our effective tax rate is targeted at approximately 24.5%. We expect interest expense of approximately $1.8 billion and we are anticipating between a 7% and 13% decline in diluted earnings per share compared to fiscal 2022. In addition, we continue to focus on driving productivity in the business and feel confident that we will realize the previously announced $500 million in annualized cost savings in 2024. We also remain focused on meeting the needs of our customers with our leading product authority in home improvement, strong in-stock levels and knowledgeable associates. We will continue to prudently invest to strengthen our competitive position and leverage our scale and low-cost position to outperform our market and deliver shareholder value. Thank you for your participation in today\u2019s call. And Christine, we are now ready for questions.","evidence_gemma_new":"Interest and other expense second quarter","evidence_llama_3_3":"interest and other expense second quarter","evidence_qwen_3_30b":null,"gemma_new_max":428000000.0,"gemma_new_min":428000000.0,"llama_3_3_max":428000000.0,"llama_3_3_min":428000000.0,"qwen_3_30b_max":null,"qwen_3_30b_min":null}
{"symbol":"HD","year":2023,"quarter":3,"date":"2023-Q3","chunk_id":5,"sub_chunk_id":0,"centroid_label":"interest and other expense","agreed_value":438000000.0,"count":3,"chunk":"Richard McPhail: Thank you, Billy, and good morning, everyone. In the third quarter, total sales were $37.7 billion, a decrease of approximately $1.2 billion or 3% from last year. During the third quarter, our total company comps were negative 3.1% with comps of negative 2.1% in August, negative 3.4% in September and negative 3.7% in October. Comps in the U.S. were negative 3.5% for the quarter with comps of negative 2.5% in August, negative 3.8% in September and negative 4.1% in October. In local currency, Mexico and Canada posted comps above the company average. It is important to note that adjusting for storm-related overlaps and some seasonal shift, monthly comps were relatively consistent across the quarter. In the third quarter, our gross margin was 33.8%, a decrease of approximately 20 basis points from the third quarter last year, which was in line with our expectations. During the third quarter, operating expense as a percent of sales increased approximately 120 basis points to 19.4% compared to the third quarter of 2022. Our operating expense performance during the third quarter reflects our previously executed compensation increases for hourly associates as well as deleverage from our top line results. Our operating margin for the third quarter was 14.3% compared to 15.8% in the third quarter of 2022. Interest and other expense for the third quarter increased by approximately $30 million to $438 million. In the third quarter, our effective tax rate was 23.3%, down from 24.4% in the third quarter of fiscal 2022. Our diluted earnings per share for the third quarter were $3.81, a decrease of 10.1% compared to the third quarter of 2022. During the third quarter, we opened 7 new stores, bringing our total store count to 2,333. Retail selling square footage was approximately 242 million square feet. At the end of the quarter, merchandise inventories were $22.8 billion, down $2.9 billion or 11% compared to the third quarter of 2022. And inventory turns were 4.3x flat to 1 year ago. Turning to capital allocation. After investing in our business and paying our dividend, it is our intent to return excess cash to shareholders in the form of share repurchases. During the quarter, we invested approximately $670 million back into our business in the form of capital expenditures. And during the quarter, we paid approximately $2.1 billion in dividends to our shareholders, and we returned approximately $1.5 billion to shareholders in the form of share repurchases. Computed on the average of beginning and ending long-term debt and equity for the trailing 12 months, return on invested capital was approximately 38.7%, down from 43.3% in the third quarter of fiscal 2022. Now I will comment on our guidance for fiscal 2023. As you heard from Ted, with one quarter remaining in fiscal 2023, we no longer expect the end points of our previous guidance range as likely outcomes, and therefore, we are narrowing our guidance for 2023. We expect fiscal 2023 sales and comp sales to decline between 3% and 4%. We are targeting an operating margin between 14.2% and 14.1% for the year. Our effective tax rate is targeted at approximately 24.5%. We expect interest expense of approximately $1.8 billion. And we are anticipating between a 9% and 11% decline in diluted earnings per share compared to fiscal 2022. In addition, as you heard from Ann, we continue to focus on driving productivity in the business. We have taken a number of actions that will help us realize the previously announced $500 million in annualized cost savings in 2024 and are fully confident that we will deliver on this commitment. We also remain focused on meeting the needs of our customers with our leading product authority in home improvement, strong in-stock levels and knowledgeable associates. We will continue to prudently invest to strengthen our competitive position and leverage our scale and low-cost position to outperform our market and deliver shareholder value. Thank you for your participation in today's call. And Christine, we are now ready for questions.","evidence_gemma_new":"Interest and other expense third quarter","evidence_llama_3_3":"Interest and other expense third quarter","evidence_qwen_3_30b":"Interest and other expense third quarter","gemma_new_max":438000000.0,"gemma_new_min":438000000.0,"llama_3_3_max":438000000.0,"llama_3_3_min":438000000.0,"qwen_3_30b_max":438000000.0,"qwen_3_30b_min":438000000.0}
{"symbol":"HD","year":2023,"quarter":4,"date":"2023-Q4","chunk_id":5,"sub_chunk_id":0,"centroid_label":"interest and other expense","agreed_value":458000000.0,"count":2,"chunk":"Richard McPhail: Thank you, Billy, and good morning, everyone. In the fourth quarter, total sales were $34.8 billion, a decrease of 2.9% from last year. During the fourth quarter, our total company comps were negative 3.5% with comps of negative 2.5% in November, positive 1.1% in December and negative 8.5% in January. Comps in the U.S. were negative 4% for the quarter with comps of negative 2.7% in November, positive 0.6% in December and negative 9.1% in January. In local currency, Mexico and Canada posted comps above the company average with Mexico posting positive comps. It is important to note that adjusting for holiday shifts and weather-related impacts in January, monthly comps relatively consistent across the quarter. For the year, our sales totaled $152.7 billion, a decrease of 3% versus fiscal 2022. For the year, total company comp sales decreased 3.2% and U.S. comp sales decreased 3.5%. In the fourth quarter, our gross margin was approximately 33.1%, a decrease of 20 basis points from last year. For the year, our gross margin was approximately 33.4%, a decrease of 15 basis points from last year, which was in line with our expectations. During the fourth quarter, operating expenses as a percentage of sales increased approximately 115 basis points to 21.2% compared to the fourth quarter of 2022. Our operating expense performance during the fourth quarter reflects our previously executed compensation increases for hourly associates as well as deleverage from our top line results. For the year, operating expenses were approximately 19.2% of sales, representing an increase of approximately 90 basis points from fiscal 2022. Our operating margin for the fourth quarter was approximately 11.9% and for the year was approximately 14.2%. Interest and other expense for the fourth quarter increased by $50 million to $458 million. In the fourth quarter and for fiscal 2023, our effective tax rate was 24%. Our diluted earnings per share for the fourth quarter were $2.82, a decrease of 14.5% compared to the fourth quarter of 2022. Diluted earnings per share for fiscal 2023 were $15.11, a decrease of 9.5% compared to fiscal 2022. At the end of the quarter, merchandise inventories were $21 billion, down $3.9 billion or approximately 16% versus last year, and inventory turns were 4.3x, up from 4.2x from the second period last year. Moving on to capital allocation. During the fourth quarter, we invested approximately $860 million back into our business in the form of capital expenditures. This brings total capital expenditures for fiscal 2023 to approximately $3.2 billion. During the year, we opened 13 new stores, bringing our store count to 2,335 at the end of fiscal 2023. Retail selling square footage was approximately 242 million square feet and total sales per retail square foot were approximately $605 in fiscal 2023. Additionally, we invested approximately $1.5 billion on three acquisitions during fiscal 2023, accelerating our strategic initiatives and providing us with better capabilities to serve our customers. During the year, we paid approximately $8.4 billion of dividends to our shareholders. Today, we announced our Board of Directors increased our quarterly dividend by 7.7% to $2.25 per share, which equates to an annual dividend of $9 per share. And finally, during fiscal 2023, we returned approximately $8 billion to our shareholders in the form of share repurchases, including $1.5 billion in the fourth quarter. Computed on the average of beginning and ending long-term debt and equity for the trailing 12 months, return on invested capital was 36.7% compared to 44.6% at the end of the fourth quarter of fiscal 2022. Now I'll comment on our outlook for 2024. First, let me point out that fiscal 2024 will include a 53rd week, so the fourth quarter of fiscal 2024 will consist of 14 weeks. We will continue to report comps on a 52-week basis, but we will base our overall guidance on 53 weeks. As you heard from Ted, we feel great about the actions we took in 2023 to position us well heading into 2024. And while there are signs that the economy is on the way towards normalization, the home improvement market still faces headwinds as we look ahead to fiscal 2024. We considered several factors that informed our outlook for fiscal 2024. On the positive side, we faced a number of pressures in fiscal 2023 that are unlikely to repeat in fiscal 2024. In 2023, we saw four increases in the Fed funds rate, a sharp decline in existing home sales and approximately 110 basis points of comp pressure from lumber deflation. However, we still expect pressures to our business in fiscal 2024. Personal consumption growth as measured by PCE is expected to decelerate compared to 2023. Our share of PCE also remains slightly elevated relative to 2019 and has been on a glide path towards 2019 levels. Higher interest rates at the beginning of 2024 relative to last year will likely continue to pressure demand for larger projects. And the effects from pull forward of demand during the pandemic as well as some project deferral could impact demand into 2024. As we consider these influences on home improvement demand, we are planning for a year of continued moderation but with slightly less pressure to comp sales than what we faced in fiscal 2023. Our fiscal 2024 outlook is for total sales growth to outpace sales comp with sales growth of approximately positive 1% and comp sales of approximately negative 1% compared to fiscal 2023. Total sales growth will benefit from a 53rd week as well as from the acquisitions we made and the new stores we opened in fiscal 2023 and the stores we plan to open in fiscal 2024. We expect the 53rd week will contribute approximately $2.3 billion in sales. Our gross margin is expected to be approximately 33.9%, an increase of approximately 50 basis points compared to fiscal 2023. This primarily reflects a lower product and transportation cost environment relative to fiscal 2023 as well as benefits from a portion of the approximately $500 million in reduced fixed costs that we will realize in fiscal 2024. Further, we expect operating margin of approximately 14.1%. This reflects deleverage from sales and pressure from targeted incentive compensation as we are overlapping lower incentive compensation paid than planned in 2023. This will be partially offset by the benefits from the approximately $500 million in fixed costs that we will realize in fiscal 2024 in both cost of goods sold and operating expenses. Our effective tax rate is targeted at approximately 24.5%. We expect net interest expense of approximately $1.8 billion. Our diluted earnings per share percent growth is targeted to be approximately 1% compared to fiscal 2023, with the extra week contributing approximately $0.30. We plan to continue investing in our business with capital expenditures of approximately 2% of sales on an annual basis. After investing in our business and paying our dividend, it is our intent to return excess cash to shareholders in the form of share repurchases. We believe we have positioned ourselves to meet the needs of our customers in any environment. The investments we've made in our business have enabled agility in our operating model. As we look forward, we will continue to invest to strengthen our position with our customers, leverage our scale and low-cost position to drive growth faster than the market and deliver shareholder value. Thank you for your participation in today's call. And Christine, we are now ready for questions.","evidence_gemma_new":null,"evidence_llama_3_3":"interest and other expense fourth quarter","evidence_qwen_3_30b":"interest and other expense fourth quarter","gemma_new_max":null,"gemma_new_min":null,"llama_3_3_max":458000000.0,"llama_3_3_min":458000000.0,"qwen_3_30b_max":458000000.0,"qwen_3_30b_min":458000000.0}
{"symbol":"HD","year":2024,"quarter":1,"date":"2024-Q1","chunk_id":5,"sub_chunk_id":0,"centroid_label":"interest and other expense","agreed_value":428000000.0,"count":3,"chunk":"Richard McPhail: Thank you, Billy, and good morning, everyone. In the first quarter, total sales were $36.4 billion, a decrease of approximately 2.3% from last year. During the first quarter, our total company comps were negative 2.8% with comps of negative 4% in February, negative 0.8% in March, and negative 3.3% in April. Comps in the U.S. were negative 3.2% for the quarter with comps of negative 4.8% in February, negative 1.3% in March, and negative 3.6% in April. For the quarter, Mexico posted positive comps, whereas Canada was slightly below the company average. In the first quarter, our gross margin was 34.1%, an increase of approximately 45 basis points from the first quarter last year, primarily driven by benefits from lower transportation cost and shrink. During the first quarter, operating expense as a percent of sales increased approximately 140 basis points to 20.2% compared to the first quarter of 2023. The increase was primarily driven by a benefit from a legal settlement that we are overlapping from the first quarter of fiscal 2023, as well as deleverage from our top line results. Our operating expense performance was in line with our expectations. Our operating margin for the first quarter was 13.9% compared to 14.9% in the first quarter of 2023. Interest and other expense for the first quarter decreased by $13 million to $428 million. In the first quarter, our effective tax rate was 22.6% compared to 24.2% in the first quarter of fiscal 2023. Our diluted earnings per share for the first quarter were $3.63, a decrease of 5% compared to the first quarter of 2023. During the first quarter, we opened two new stores, bringing our total store count to 2,337. Retail selling square footage was approximately 242 million square feet. At the end of the quarter, merchandise inventories were $22.4 billion, down approximately $3 billion, or 12% compared to the first quarter of 2023, and inventory turns were 4.5x, up from 3.9x last year. Turning to capital allocation. During the first quarter, we invested approximately $850 million back into our business in the form of capital expenditures. And during the quarter, we paid approximately $2.2 billion in dividends to our shareholders and we returned approximately $600 million to shareholders in the form of share repurchases. As a reminder, in March we announced our intent to acquire SRS Distribution and as a result, we paused share repurchases. As you've heard us say many times, we maintain a disciplined approach to capital allocation and that is not changing. First and foremost, we will invest in the business and expect capital expenditures of approximately 2% of sales on an annual basis. After investing in the business, we plan to pay the dividend and it is our intent to return any excess cash to shareholders in the form of share repurchases. From time to time, we will also invest in the business through acquisitions to enhance our capabilities and to accelerate our strategic objectives. Computed on the average of beginning and ending long-term debt and equity for the trailing 12 months, return on invested capital was 37.1%, down from 43.6% \u2013 excuse me, down from 43.6% in the first quarter of fiscal 2023. Now, I will comment on our guidance for fiscal 2024. Today, we are reaffirming our guidance for 2024. As a reminder, our guidance does not currently reflect any impact from the announced acquisition of SRS. The acquisition is currently under regulatory review and we expect it to close by the end of fiscal 2024. We expect total sales growth to outpace sales comp with sales growth of approximately positive 1% and comp sales of approximately negative 1%. Total sales growth will benefit from a 53rd week and we expect the 53rd week will contribute approximately $2.3 billion in sales. Our gross margin is expected to be approximately 33.9%, an increase of approximately 50 basis points, compared to fiscal 2023. We expect operating margin of approximately 14.1%. Our effective tax rate is targeted at approximately 24.5%. We expect net interest expense of approximately $1.8 billion, and our diluted earnings per share percent growth is targeted to be approximately 1% compared to fiscal 2023. It\u2019s our intent to update guidance as appropriate once the SRS transaction closes. We believe that we have positioned ourselves to meet the needs of our customers in any environment. The investments we\u2019ve made in our business have enabled agility in our operating model. As we look forward, we will continue to invest to strengthen our position with our customers, leverage our scale and low-cost position to drive growth faster than the market and deliver shareholder value. Thank you for your participation in today\u2019s call. And Christine, we are now ready for questions.","evidence_gemma_new":"Interest and other expense first quarter","evidence_llama_3_3":"interest and other expense first quarter","evidence_qwen_3_30b":"interest and other expense first quarter","gemma_new_max":428000000.0,"gemma_new_min":428000000.0,"llama_3_3_max":428000000.0,"llama_3_3_min":428000000.0,"qwen_3_30b_max":428000000.0,"qwen_3_30b_min":428000000.0}
{"symbol":"HD","year":2024,"quarter":3,"date":"2024-Q3","chunk_id":5,"sub_chunk_id":0,"centroid_label":"interest and other expense","agreed_value":595000000.0,"count":3,"chunk":"Richard McPhail: Thank you, Billy, and good morning, everyone. In the third quarter, total sales were $40.2 billion, an increase of approximately 6.6% from last year. During the third quarter, our total company comps were negative 1.3% with comps of negative 3.3% in August, negative 2.3% in September and positive 1% in October. Comps in the U.S. were negative 1.2% for the quarter, with comps of negative 3.5% in August, negative 2.2% in September, and positive 1.4% in October. The progression of our monthly comps reflects in large part hurricane related sales. Our results for the third quarter include a net contribution of approximately $200 million in hurricane related sales, which positively impacted total company comps by approximately 55 basis points for the quarter and approximately 120 basis points for October. In the third quarter, our gross margin was approximately 33.4%, a decrease of approximately 40 basis points from the third quarter last year, primarily driven by mix as a result of the SRS acquisition, partially offset by benefits from lower shrink. During the third quarter, operating expense as a percent of sales increased approximately 45 basis points to 19.9% compared to the third quarter of 2023. Our operating expense performance was in-line with our expectations. Our operating margin for the third quarter was 13.5% compared to 14.3% in the third quarter of 2023. In the quarter, pre-tax intangible asset amortization was $138 million including $86 million related to SRS. Excluding the intangible asset amortization in the quarter, our adjusted operating margin for the third quarter was 13.8% compared to 14.5% in the third quarter of 2023. Interest and other expense for the third quarter increased by $157 million to $595 million due primarily to higher debt balances than a year ago. In the third quarter, our effective tax rate was 24.4% compared to 23.3% in the third quarter of fiscal 2023. Our diluted earnings per share for the third quarter were $3.67, a decrease of approximately 4% compared to the third quarter of 2023. Excluding intangible asset amortization, our adjusted diluted earnings per share for the third quarter were $3.78, a decrease of approximately 2% compared to the third quarter of 2023. During the third quarter, we opened five new stores, bringing our total store count to 2, 345. Retail selling square footage was approximately 243 million square feet. At the end of the quarter, merchandise inventories were $23.9 billion up approximately $1.1 billion compared to the third quarter of 2023, and inventory turns were 4.8 times, up from 4.3 times last year. Turning to capital allocation. During the third quarter, we invested approximately $820 million back into our business in the form of capital expenditures. And during the quarter, we paid approximately $2.2 billion in dividends to our shareholders. Compute on the average of beginning and ending long-term debt and equity for the trailing 12-months, return on invested capital was approximately 31.5%, down from 38.7% in the third quarter of fiscal 2023. Now, I will comment on our updated outlook for fiscal 2024. As you heard from Ted, while macro uncertainty remains and continues to pressure home improvement demand, our performance in the third quarter was better than expected. Our performance reflects hurricane related sales in the third quarter, and we expect some hurricane related sales in the fourth quarter. Given the better than expected performance in the third quarter and incremental hurricane related sales, we have updated our fiscal 2024 guidance. We now expect total sales growth of approximately 4%, including SRS in the 53rd week. The 53rd week is projected to add approximately $2.3 billion to total sales and SRS is expected to contribute approximately $6.4 billion in incremental sales. Comparable sales are expected to decline approximately 2.5% for the 52 week period. We expect to open approximately 12 new stores. Our gross margin is expected to be approximately 33.5%. We expect operating margin to be approximately 13.5% and adjusted operating margin to be approximately 13.8%. Our effective tax rate is targeted at approximately 24%. We expect net interest expense of approximately $2.1 billion. We expect our diluted earnings per share to decline approximately 2% compared to fiscal 2023 with the extra week contributing approximately $0.30 per share. And, we expect our adjusted diluted earnings per share to decline approximately 1% compared to fiscal 2023 with the extra week contributing approximately $0.30 per share. We believe that we will grow market share in any environment. We are continuing to invest to strengthen our competitive position with our customers and leverage our scale and low cost position to drive growth faster than the market and deliver shareholder value. Thank you for your participation in today\u2019s call. And Christine, we are now ready for questions.","evidence_gemma_new":"Interest and other expense third quarter","evidence_llama_3_3":"interest and other expense third quarter","evidence_qwen_3_30b":"interest and other expense third quarter","gemma_new_max":595000000.0,"gemma_new_min":595000000.0,"llama_3_3_max":595000000.0,"llama_3_3_min":595000000.0,"qwen_3_30b_max":595000000.0,"qwen_3_30b_min":595000000.0}
{"symbol":"HD","year":2023,"quarter":1,"date":"2023-Q1","chunk_id":5,"sub_chunk_id":0,"centroid_label":"merchandise inventories","agreed_value":25400000000.0,"count":2,"chunk":"Richard McPhail: Thank you, Ann, and good morning, everyone. In the first quarter, total sales were $37.3 billion a decrease of approximately $1.7 billion or 4.2% from last year. During the first quarter, our total company comps were negative 4.5% with comps of negative 2.5% in February, negative 7.5% in March and negative 3.7% in April. Comps in the U.S. were negative 4.6% for the quarter with comps of negative 2.8% in February, negative 7.5% in March and negative 3.7% in April. Our first quarter comp sales missed our own expectations, particularly in the months of March and April, driven primarily by 2 notable factors. First, lumber deflation drove a negative comp impact of approximately 220 basis points versus the first quarter of 2022. Second, unfavorable weather, particularly in our Western division further impacted our results. In the first quarter, our gross margin was 33.7% a decrease of 8 basis points from the first quarter last year, primarily driven by increased pressure from shrink. We continue to successfully offset supply chain and product cost pressures while maintaining our position as the customer\u2019s advocate for value. During the first quarter, operating expense as a percent of sales increased approximately 25 basis points to 18.8% compared to the first quarter of 2022. Our operating expense performance during the first quarter reflects the planned compensation increases announced during our fourth quarter 2022 call as well as a onetime benefit from a legal settlement. Our operating margin for the first quarter was 14.9% compared to 15.2% in the first quarter of 2022. Interest and other expense for the first quarter increased by $72 million to $441 million due primarily to interest on our floating rate debt as well as higher debt balances than a year ago. In the first quarter, our effective tax rate was 24.2%, up from 23.9% in the first quarter of fiscal 2022. Our diluted earnings per share for the first quarter or $3.82, a decrease of 6.6% compared to the first quarter of 2022. During the first quarter, we opened 2 new stores, bringing our total store count to 2,324. Retail selling square footage was approximately 241 million square feet. At the end of the quarter, merchandise inventories were $25.4 billion, essentially flat compared to the first quarter of 2022 and inventory turns were 3.9x down from 4.4x last year. Turning to capital allocation. After investing in our business and paying our dividend, it is our intent to return excess cash to shareholders in the form of share repurchases. During the first quarter, we invested approximately $900 million back into our business in the form of capital expenditures. And during the quarter, we paid approximately $2.1 billion in dividends to our shareholders, and we returned approximately $3 billion to shareholders in the form of share repurchases. Computed on the average of beginning and ending long-term debt and equity for the trailing 12 months, return on invested capital was approximately 43.6%, down from 45.3% and in the first quarter of fiscal 2022. Now I will comment on our guidance for fiscal 2023. As you may recall, last quarter, we provided flat sales and comp guidance for fiscal 2023. As we mentioned last quarter, our guidance did not include potential impacts from lumber deflation, which we noted could negatively impact our performance for the quarter and the year. As a result, lumber negatively impacted comps by approximately 220 basis points in the first quarter. Given the negative impact of the first quarter sales from lumber and weather, further softening of demand relative to our expectations and continued uncertainty regarding consumer demand patterns, we are updating our guidance to reflect a range of potential outcomes. We now expect fiscal 2023 sales and comp sales to decline between 2% and 5%. As a result of the change in our sales outlook, we are now targeting an operating margin between 14.3% and 14.0% for the year. Our effective tax rate is targeted at approximately 24.5%. We expect interest expense of approximately $1.8 billion, and we are anticipating between a 7% and 13% decline in diluted earnings per share compared to fiscal 2022. As Ted mentioned, we expected 2023 to be a year of moderation in the home improvement market, driven by monetary policy actions to dampen overall consumer demand. In our view, we are in a transitional period in the consumer economy. Setting the short-term impacts of monetary policy aside, we know that the home improvement customer is healthy and we believe the medium to long-term underlying fundamentals of home improvement make it one of the most attractive markets in retail and the economy as a whole. We believe that we are well positioned to meet the needs of our customers with a broad assortment of products, strong in-stock levels and knowledgeable associates. The investments we\u2019ve made in our business have enabled agility in our operating model. As we look forward, we will continue to prudently invest to strengthen our competitive position, leverage our scale and low-cost position to outperform our market and deliver shareholder value. Thank you for your participation in today\u2019s call. And Christine, we are now ready for questions.","evidence_gemma_new":"merchandise inventories","evidence_llama_3_3":"merchandise inventories first quarter","evidence_qwen_3_30b":null,"gemma_new_max":25400000000.0,"gemma_new_min":25400000000.0,"llama_3_3_max":25400000000.0,"llama_3_3_min":25400000000.0,"qwen_3_30b_max":null,"qwen_3_30b_min":null}
{"symbol":"HD","year":2023,"quarter":2,"date":"2023-Q2","chunk_id":5,"sub_chunk_id":0,"centroid_label":"merchandise inventories","agreed_value":23300000000.0,"count":3,"chunk":"Richard McPhail: Thank you, Ann, and good morning, everyone. In the second quarter, total sales were $42.9 billion, a decrease of approximately $900 million or 2% from last year. During the second quarter, our total company comps were negative 2% with comps of negative 2.6% in May, negative 3.3% in June and negative 0.2% in July. Comps in the U.S. were negative 2% for the quarter with comps of negative 2.6% in May, negative 3.3% in June and negative 0.4% in July. As you heard from Billy, during the second quarter, we continued to experience lumber deflation compared to the prior year. While lumber prices were down, we saw an improvement in unit productivity, resulting in a net negative comp impact of approximately 85 basis points versus the second quarter of 2022. In the second quarter, our gross margin was 33%, a decrease of 8 basis points from the second quarter last year, primarily driven by pressure from shrink. During the second quarter, operating expense as a percent of sales increased approximately 100 basis points to 17.6% compared to the second quarter of 2022. Our operating expense performance during the second quarter reflects our previously executed compensation increases for hourly associates as well as deleverage from our top line results. Our operating margin for the second quarter was 15.4% compared to 16.5% in the second quarter of 2022. Interest and other expense for the second quarter increased by $49 million to $428 million due primarily to interest on our floating rate debt as well as higher debt balances than a year ago. In the second quarter, our effective tax rate was 24.4%, up from 24.3% in the second quarter of fiscal 2022. Our diluted earnings per share for the second quarter were $4.65, a decrease of 7.9% compared to the second quarter of 2022. During the second quarter, we opened two new stores, bringing our total store count to 2,326. Retail selling square footage was approximately 241 million square feet. At the end of the quarter, merchandise inventories were $23.3 billion, down $2.8 billion compared to the second quarter of 2022. And inventory turns were 4.4x, down from 4.5x last year. Turning to capital allocation. After investing in our business and paying our dividend, it is our intent to return excess cash to shareholders in the form of share repurchases. During the second quarter, we invested approximately $800 million back into our business in the form of capital expenditures. And during the quarter, we paid approximately $2.1 billion in dividends to our shareholders, and we returned approximately $2 billion to shareholders in the form of share repurchases. Computed on the average of beginning and ending long-term debt and equity for the trailing 12 months, return on invested capital was approximately 41.5%, down from 45.6% in the second quarter of fiscal 2022. Now I\u2019ll comment on our guidance for fiscal 2023. Today, we are reaffirming our guidance for 2023. We expect fiscal 2023 sales and comp sales to decline between 2% and 5%. We are targeting an operating margin between 14.3% and 14% for the year. Our effective tax rate is targeted at approximately 24.5%. We expect interest expense of approximately $1.8 billion and we are anticipating between a 7% and 13% decline in diluted earnings per share compared to fiscal 2022. In addition, we continue to focus on driving productivity in the business and feel confident that we will realize the previously announced $500 million in annualized cost savings in 2024. We also remain focused on meeting the needs of our customers with our leading product authority in home improvement, strong in-stock levels and knowledgeable associates. We will continue to prudently invest to strengthen our competitive position and leverage our scale and low-cost position to outperform our market and deliver shareholder value. Thank you for your participation in today\u2019s call. And Christine, we are now ready for questions.","evidence_gemma_new":"merchandise inventories","evidence_llama_3_3":"merchandise inventories second quarter","evidence_qwen_3_30b":"merchandise inventories second quarter","gemma_new_max":23300000000.0,"gemma_new_min":23300000000.0,"llama_3_3_max":23300000000.0,"llama_3_3_min":23300000000.0,"qwen_3_30b_max":23100000000.0,"qwen_3_30b_min":23100000000.0}
{"symbol":"HD","year":2023,"quarter":3,"date":"2023-Q3","chunk_id":5,"sub_chunk_id":0,"centroid_label":"merchandise inventories","agreed_value":22800000000.0,"count":2,"chunk":"Richard McPhail: Thank you, Billy, and good morning, everyone. In the third quarter, total sales were $37.7 billion, a decrease of approximately $1.2 billion or 3% from last year. During the third quarter, our total company comps were negative 3.1% with comps of negative 2.1% in August, negative 3.4% in September and negative 3.7% in October. Comps in the U.S. were negative 3.5% for the quarter with comps of negative 2.5% in August, negative 3.8% in September and negative 4.1% in October. In local currency, Mexico and Canada posted comps above the company average. It is important to note that adjusting for storm-related overlaps and some seasonal shift, monthly comps were relatively consistent across the quarter. In the third quarter, our gross margin was 33.8%, a decrease of approximately 20 basis points from the third quarter last year, which was in line with our expectations. During the third quarter, operating expense as a percent of sales increased approximately 120 basis points to 19.4% compared to the third quarter of 2022. Our operating expense performance during the third quarter reflects our previously executed compensation increases for hourly associates as well as deleverage from our top line results. Our operating margin for the third quarter was 14.3% compared to 15.8% in the third quarter of 2022. Interest and other expense for the third quarter increased by approximately $30 million to $438 million. In the third quarter, our effective tax rate was 23.3%, down from 24.4% in the third quarter of fiscal 2022. Our diluted earnings per share for the third quarter were $3.81, a decrease of 10.1% compared to the third quarter of 2022. During the third quarter, we opened 7 new stores, bringing our total store count to 2,333. Retail selling square footage was approximately 242 million square feet. At the end of the quarter, merchandise inventories were $22.8 billion, down $2.9 billion or 11% compared to the third quarter of 2022. And inventory turns were 4.3x flat to 1 year ago. Turning to capital allocation. After investing in our business and paying our dividend, it is our intent to return excess cash to shareholders in the form of share repurchases. During the quarter, we invested approximately $670 million back into our business in the form of capital expenditures. And during the quarter, we paid approximately $2.1 billion in dividends to our shareholders, and we returned approximately $1.5 billion to shareholders in the form of share repurchases. Computed on the average of beginning and ending long-term debt and equity for the trailing 12 months, return on invested capital was approximately 38.7%, down from 43.3% in the third quarter of fiscal 2022. Now I will comment on our guidance for fiscal 2023. As you heard from Ted, with one quarter remaining in fiscal 2023, we no longer expect the end points of our previous guidance range as likely outcomes, and therefore, we are narrowing our guidance for 2023. We expect fiscal 2023 sales and comp sales to decline between 3% and 4%. We are targeting an operating margin between 14.2% and 14.1% for the year. Our effective tax rate is targeted at approximately 24.5%. We expect interest expense of approximately $1.8 billion. And we are anticipating between a 9% and 11% decline in diluted earnings per share compared to fiscal 2022. In addition, as you heard from Ann, we continue to focus on driving productivity in the business. We have taken a number of actions that will help us realize the previously announced $500 million in annualized cost savings in 2024 and are fully confident that we will deliver on this commitment. We also remain focused on meeting the needs of our customers with our leading product authority in home improvement, strong in-stock levels and knowledgeable associates. We will continue to prudently invest to strengthen our competitive position and leverage our scale and low-cost position to outperform our market and deliver shareholder value. Thank you for your participation in today's call. And Christine, we are now ready for questions.","evidence_gemma_new":null,"evidence_llama_3_3":"merchandise inventories third quarter","evidence_qwen_3_30b":"merchandise inventories third quarter","gemma_new_max":null,"gemma_new_min":null,"llama_3_3_max":22800000000.0,"llama_3_3_min":22800000000.0,"qwen_3_30b_max":22800000000.0,"qwen_3_30b_min":22800000000.0}
{"symbol":"HD","year":2023,"quarter":4,"date":"2023-Q4","chunk_id":5,"sub_chunk_id":0,"centroid_label":"merchandise inventories","agreed_value":21000000000.0,"count":3,"chunk":"Richard McPhail: Thank you, Billy, and good morning, everyone. In the fourth quarter, total sales were $34.8 billion, a decrease of 2.9% from last year. During the fourth quarter, our total company comps were negative 3.5% with comps of negative 2.5% in November, positive 1.1% in December and negative 8.5% in January. Comps in the U.S. were negative 4% for the quarter with comps of negative 2.7% in November, positive 0.6% in December and negative 9.1% in January. In local currency, Mexico and Canada posted comps above the company average with Mexico posting positive comps. It is important to note that adjusting for holiday shifts and weather-related impacts in January, monthly comps relatively consistent across the quarter. For the year, our sales totaled $152.7 billion, a decrease of 3% versus fiscal 2022. For the year, total company comp sales decreased 3.2% and U.S. comp sales decreased 3.5%. In the fourth quarter, our gross margin was approximately 33.1%, a decrease of 20 basis points from last year. For the year, our gross margin was approximately 33.4%, a decrease of 15 basis points from last year, which was in line with our expectations. During the fourth quarter, operating expenses as a percentage of sales increased approximately 115 basis points to 21.2% compared to the fourth quarter of 2022. Our operating expense performance during the fourth quarter reflects our previously executed compensation increases for hourly associates as well as deleverage from our top line results. For the year, operating expenses were approximately 19.2% of sales, representing an increase of approximately 90 basis points from fiscal 2022. Our operating margin for the fourth quarter was approximately 11.9% and for the year was approximately 14.2%. Interest and other expense for the fourth quarter increased by $50 million to $458 million. In the fourth quarter and for fiscal 2023, our effective tax rate was 24%. Our diluted earnings per share for the fourth quarter were $2.82, a decrease of 14.5% compared to the fourth quarter of 2022. Diluted earnings per share for fiscal 2023 were $15.11, a decrease of 9.5% compared to fiscal 2022. At the end of the quarter, merchandise inventories were $21 billion, down $3.9 billion or approximately 16% versus last year, and inventory turns were 4.3x, up from 4.2x from the second period last year. Moving on to capital allocation. During the fourth quarter, we invested approximately $860 million back into our business in the form of capital expenditures. This brings total capital expenditures for fiscal 2023 to approximately $3.2 billion. During the year, we opened 13 new stores, bringing our store count to 2,335 at the end of fiscal 2023. Retail selling square footage was approximately 242 million square feet and total sales per retail square foot were approximately $605 in fiscal 2023. Additionally, we invested approximately $1.5 billion on three acquisitions during fiscal 2023, accelerating our strategic initiatives and providing us with better capabilities to serve our customers. During the year, we paid approximately $8.4 billion of dividends to our shareholders. Today, we announced our Board of Directors increased our quarterly dividend by 7.7% to $2.25 per share, which equates to an annual dividend of $9 per share. And finally, during fiscal 2023, we returned approximately $8 billion to our shareholders in the form of share repurchases, including $1.5 billion in the fourth quarter. Computed on the average of beginning and ending long-term debt and equity for the trailing 12 months, return on invested capital was 36.7% compared to 44.6% at the end of the fourth quarter of fiscal 2022. Now I'll comment on our outlook for 2024. First, let me point out that fiscal 2024 will include a 53rd week, so the fourth quarter of fiscal 2024 will consist of 14 weeks. We will continue to report comps on a 52-week basis, but we will base our overall guidance on 53 weeks. As you heard from Ted, we feel great about the actions we took in 2023 to position us well heading into 2024. And while there are signs that the economy is on the way towards normalization, the home improvement market still faces headwinds as we look ahead to fiscal 2024. We considered several factors that informed our outlook for fiscal 2024. On the positive side, we faced a number of pressures in fiscal 2023 that are unlikely to repeat in fiscal 2024. In 2023, we saw four increases in the Fed funds rate, a sharp decline in existing home sales and approximately 110 basis points of comp pressure from lumber deflation. However, we still expect pressures to our business in fiscal 2024. Personal consumption growth as measured by PCE is expected to decelerate compared to 2023. Our share of PCE also remains slightly elevated relative to 2019 and has been on a glide path towards 2019 levels. Higher interest rates at the beginning of 2024 relative to last year will likely continue to pressure demand for larger projects. And the effects from pull forward of demand during the pandemic as well as some project deferral could impact demand into 2024. As we consider these influences on home improvement demand, we are planning for a year of continued moderation but with slightly less pressure to comp sales than what we faced in fiscal 2023. Our fiscal 2024 outlook is for total sales growth to outpace sales comp with sales growth of approximately positive 1% and comp sales of approximately negative 1% compared to fiscal 2023. Total sales growth will benefit from a 53rd week as well as from the acquisitions we made and the new stores we opened in fiscal 2023 and the stores we plan to open in fiscal 2024. We expect the 53rd week will contribute approximately $2.3 billion in sales. Our gross margin is expected to be approximately 33.9%, an increase of approximately 50 basis points compared to fiscal 2023. This primarily reflects a lower product and transportation cost environment relative to fiscal 2023 as well as benefits from a portion of the approximately $500 million in reduced fixed costs that we will realize in fiscal 2024. Further, we expect operating margin of approximately 14.1%. This reflects deleverage from sales and pressure from targeted incentive compensation as we are overlapping lower incentive compensation paid than planned in 2023. This will be partially offset by the benefits from the approximately $500 million in fixed costs that we will realize in fiscal 2024 in both cost of goods sold and operating expenses. Our effective tax rate is targeted at approximately 24.5%. We expect net interest expense of approximately $1.8 billion. Our diluted earnings per share percent growth is targeted to be approximately 1% compared to fiscal 2023, with the extra week contributing approximately $0.30. We plan to continue investing in our business with capital expenditures of approximately 2% of sales on an annual basis. After investing in our business and paying our dividend, it is our intent to return excess cash to shareholders in the form of share repurchases. We believe we have positioned ourselves to meet the needs of our customers in any environment. The investments we've made in our business have enabled agility in our operating model. As we look forward, we will continue to invest to strengthen our position with our customers, leverage our scale and low-cost position to drive growth faster than the market and deliver shareholder value. Thank you for your participation in today's call. And Christine, we are now ready for questions.","evidence_gemma_new":"merchandise inventories","evidence_llama_3_3":"merchandise inventories end of the quarter","evidence_qwen_3_30b":"merchandise inventories quarter","gemma_new_max":21000000000.0,"gemma_new_min":21000000000.0,"llama_3_3_max":21000000000.0,"llama_3_3_min":21000000000.0,"qwen_3_30b_max":21000000000.0,"qwen_3_30b_min":21000000000.0}
{"symbol":"HD","year":2024,"quarter":1,"date":"2024-Q1","chunk_id":5,"sub_chunk_id":0,"centroid_label":"merchandise inventories","agreed_value":22400000000.0,"count":3,"chunk":"Richard McPhail: Thank you, Billy, and good morning, everyone. In the first quarter, total sales were $36.4 billion, a decrease of approximately 2.3% from last year. During the first quarter, our total company comps were negative 2.8% with comps of negative 4% in February, negative 0.8% in March, and negative 3.3% in April. Comps in the U.S. were negative 3.2% for the quarter with comps of negative 4.8% in February, negative 1.3% in March, and negative 3.6% in April. For the quarter, Mexico posted positive comps, whereas Canada was slightly below the company average. In the first quarter, our gross margin was 34.1%, an increase of approximately 45 basis points from the first quarter last year, primarily driven by benefits from lower transportation cost and shrink. During the first quarter, operating expense as a percent of sales increased approximately 140 basis points to 20.2% compared to the first quarter of 2023. The increase was primarily driven by a benefit from a legal settlement that we are overlapping from the first quarter of fiscal 2023, as well as deleverage from our top line results. Our operating expense performance was in line with our expectations. Our operating margin for the first quarter was 13.9% compared to 14.9% in the first quarter of 2023. Interest and other expense for the first quarter decreased by $13 million to $428 million. In the first quarter, our effective tax rate was 22.6% compared to 24.2% in the first quarter of fiscal 2023. Our diluted earnings per share for the first quarter were $3.63, a decrease of 5% compared to the first quarter of 2023. During the first quarter, we opened two new stores, bringing our total store count to 2,337. Retail selling square footage was approximately 242 million square feet. At the end of the quarter, merchandise inventories were $22.4 billion, down approximately $3 billion, or 12% compared to the first quarter of 2023, and inventory turns were 4.5x, up from 3.9x last year. Turning to capital allocation. During the first quarter, we invested approximately $850 million back into our business in the form of capital expenditures. And during the quarter, we paid approximately $2.2 billion in dividends to our shareholders and we returned approximately $600 million to shareholders in the form of share repurchases. As a reminder, in March we announced our intent to acquire SRS Distribution and as a result, we paused share repurchases. As you've heard us say many times, we maintain a disciplined approach to capital allocation and that is not changing. First and foremost, we will invest in the business and expect capital expenditures of approximately 2% of sales on an annual basis. After investing in the business, we plan to pay the dividend and it is our intent to return any excess cash to shareholders in the form of share repurchases. From time to time, we will also invest in the business through acquisitions to enhance our capabilities and to accelerate our strategic objectives. Computed on the average of beginning and ending long-term debt and equity for the trailing 12 months, return on invested capital was 37.1%, down from 43.6% \u2013 excuse me, down from 43.6% in the first quarter of fiscal 2023. Now, I will comment on our guidance for fiscal 2024. Today, we are reaffirming our guidance for 2024. As a reminder, our guidance does not currently reflect any impact from the announced acquisition of SRS. The acquisition is currently under regulatory review and we expect it to close by the end of fiscal 2024. We expect total sales growth to outpace sales comp with sales growth of approximately positive 1% and comp sales of approximately negative 1%. Total sales growth will benefit from a 53rd week and we expect the 53rd week will contribute approximately $2.3 billion in sales. Our gross margin is expected to be approximately 33.9%, an increase of approximately 50 basis points, compared to fiscal 2023. We expect operating margin of approximately 14.1%. Our effective tax rate is targeted at approximately 24.5%. We expect net interest expense of approximately $1.8 billion, and our diluted earnings per share percent growth is targeted to be approximately 1% compared to fiscal 2023. It\u2019s our intent to update guidance as appropriate once the SRS transaction closes. We believe that we have positioned ourselves to meet the needs of our customers in any environment. The investments we\u2019ve made in our business have enabled agility in our operating model. As we look forward, we will continue to invest to strengthen our position with our customers, leverage our scale and low-cost position to drive growth faster than the market and deliver shareholder value. Thank you for your participation in today\u2019s call. And Christine, we are now ready for questions.","evidence_gemma_new":"merchandise inventories first quarter","evidence_llama_3_3":"merchandise inventories end of the quarter","evidence_qwen_3_30b":"merchandise inventories first quarter","gemma_new_max":22400000000.0,"gemma_new_min":22400000000.0,"llama_3_3_max":22400000000.0,"llama_3_3_min":22400000000.0,"qwen_3_30b_max":22400000000.0,"qwen_3_30b_min":22400000000.0}
{"symbol":"HD","year":2024,"quarter":2,"date":"2024-Q2","chunk_id":5,"sub_chunk_id":0,"centroid_label":"merchandise inventories","agreed_value":23100000000.0,"count":2,"chunk":"Richard McPhail: Thank you, Billy, and good morning, everyone. In the second quarter, Total sales were $43.2 billion, an increase of approximately 0.6% from last year. Total sales include $1.3 billion from the recent acquisition of SRS, which represents approximately six weeks of sales in the quarter. During the second quarter, our total company comps were negative 3.3%, with comps of negative 3.7% in May, negative 0.9% in June and negative 4.9% in July. Comps in the U.S. were negative 3.6% for the quarter, with comps of negative 4.1% in May, negative 1.4% in June and negative 5% in July. In the second quarter, our gross margin was approximately 33.4%, an increase of 40 basis points from the second quarter last year, primarily driven by benefits from lower transportation costs and shrink, partially offset by mix as a result of the SRS acquisition. During the second quarter, operating expense as a percent of sales increased approximately 65 basis points to 18.3% compared to the second quarter of 2023. Our operating expense performance was in line with our expectations. Beginning this quarter, in addition to our GAAP measures, we are providing the following non-GAAP measures: adjusted operating income, adjusted operating margin and adjusted diluted earnings per share, which excludes noncash amortization of acquired intangible assets. We believe these supplemental measures will help investors better understand and analyze our performance. Our operating margin for the second quarter was 15.1% compared to 15.4% in the second quarter of 2023. In the quarter, pretax intangible asset amortization was $90 million, including $39 million related to SRS. Excluding the intangible asset amortization in the quarter, our adjusted operating margin for the second quarter was 15.3% and compared to 15.5% in the second quarter of 2023. Interest and other expense for the second quarter increased by $61 million to $489 million due primarily to higher debt balances than a year ago. In the second quarter, our effective tax rate was 24.5%, compared to 24.4% in the second quarter of fiscal 2023. Our diluted earnings per share for the second quarter were $4.60, a decrease of approximately 1% compared to the second quarter of 2023. Excluding intangible asset amortization, our adjusted diluted earnings per share for the second quarter were $4.67, essentially flat compared to the second quarter of 2023. During the second quarter, we opened three new stores, bringing our total store count to 2,340. Retail selling square footage was approximately 243 million square feet. At the end of the quarter, merchandise inventories or $23.1 billion, down approximately $200 million compared to the second quarter of 2023, and inventory turns were 4.9x, up from 4.4x last year. Turning to capital allocation. During the second quarter, we invested approximately $720 million back into our business in the form of capital expenditures. And during the quarter, we paid approximately $2.2 billion in dividends to our shareholders. Our disciplined approach to capital allocation remains unchanged. First and foremost, we will invest in the business and expect capital expenditures of approximately 2% of sales on an annual basis. After investing in the business, we plan to pay the dividend and it is our intent to return any excess cash to shareholders in the form of share repurchases. Computed on the average of beginning and ending long-term debt and equity for the trailing 12 months, return on invested capital was approximately 31.9%, down from 41.5% in the second quarter of fiscal 2023. Now, I will comment on our updated outlook for fiscal 2024. As you heard from Ted, given the softer-than-expected performance in the first half of the year, and reflecting continued uncertainty around underlying consumer demand, we believe a more cautious outlook for the year is warranted. With the recent closing of the SRS acquisition, we are now including their results in our consolidated outlook for the year. For the period matching our first half, which includes periods prior to the acquisition and not fully reflected in our financial statements, SRS generated high single-digit percentage sales growth with operating income growing largely in line with sales. We believe that over the next several years, SRS on its own, and through our combined Pro efforts, will help accelerate sales and earnings growth for our company. Updating our fiscal 2024 guidance for the factors we just discussed. We now expect total sales growth between 2.5% and 3.5%, including the SRS acquisition and the 53rd week. The 53rd week is projected to add approximately $2.3 billion to total sales. SRS is expected to contribute approximately $6.4 billion in incremental sales. Comparable sales are expected to decline between negative 3% and negative 4% for the 52-week period. The high end of our range implies a consumer demand environment consistent with the first half of fiscal 2024. While comparable sales for the Company are not currently on the trajectory for the low end of the range, a negative 4% comp implies incremental pressure on consumer demand beyond what we are seeing today. We expect to open approximately 12 new stores. Our gross margin is expected to be approximately 33.5%. We expect operating margin to be between 13.5% and 13.6%, and adjusted operating margin to be between 13.8% and 13.9%. Our effective tax rate is targeted at approximately 24%. We expect net interest expense of approximately $2.2 billion. Our diluted earnings per share percent will decline between negative 2% and negative 4% compared to fiscal 2023, with the extra week contributing approximately $0.30. We expect our adjusted diluted earnings per share percent to decline between negative 1% and negative 3%, compared to fiscal 2023, with the extra week contributing approximately $0.30. We believe that we have positioned ourselves to meet the needs of our customers in any environment. The investments we've made in our business have enabled agility in our operating model. As we look forward, we will continue to invest to strengthen our position with our customers, leverage our scale and low-cost position to drive growth faster than the market and deliver shareholder value. Thank you for your participation in today's call. And Christine, we are now ready for questions.","evidence_gemma_new":"merchandise inventories second quarter","evidence_llama_3_3":"merchandise inventories second quarter","evidence_qwen_3_30b":null,"gemma_new_max":23100000000.0,"gemma_new_min":23100000000.0,"llama_3_3_max":23100000000.0,"llama_3_3_min":23100000000.0,"qwen_3_30b_max":null,"qwen_3_30b_min":null}
{"symbol":"HD","year":2024,"quarter":3,"date":"2024-Q3","chunk_id":5,"sub_chunk_id":0,"centroid_label":"merchandise inventories","agreed_value":23900000000.0,"count":3,"chunk":"Richard McPhail: Thank you, Billy, and good morning, everyone. In the third quarter, total sales were $40.2 billion, an increase of approximately 6.6% from last year. During the third quarter, our total company comps were negative 1.3% with comps of negative 3.3% in August, negative 2.3% in September and positive 1% in October. Comps in the U.S. were negative 1.2% for the quarter, with comps of negative 3.5% in August, negative 2.2% in September, and positive 1.4% in October. The progression of our monthly comps reflects in large part hurricane related sales. Our results for the third quarter include a net contribution of approximately $200 million in hurricane related sales, which positively impacted total company comps by approximately 55 basis points for the quarter and approximately 120 basis points for October. In the third quarter, our gross margin was approximately 33.4%, a decrease of approximately 40 basis points from the third quarter last year, primarily driven by mix as a result of the SRS acquisition, partially offset by benefits from lower shrink. During the third quarter, operating expense as a percent of sales increased approximately 45 basis points to 19.9% compared to the third quarter of 2023. Our operating expense performance was in-line with our expectations. Our operating margin for the third quarter was 13.5% compared to 14.3% in the third quarter of 2023. In the quarter, pre-tax intangible asset amortization was $138 million including $86 million related to SRS. Excluding the intangible asset amortization in the quarter, our adjusted operating margin for the third quarter was 13.8% compared to 14.5% in the third quarter of 2023. Interest and other expense for the third quarter increased by $157 million to $595 million due primarily to higher debt balances than a year ago. In the third quarter, our effective tax rate was 24.4% compared to 23.3% in the third quarter of fiscal 2023. Our diluted earnings per share for the third quarter were $3.67, a decrease of approximately 4% compared to the third quarter of 2023. Excluding intangible asset amortization, our adjusted diluted earnings per share for the third quarter were $3.78, a decrease of approximately 2% compared to the third quarter of 2023. During the third quarter, we opened five new stores, bringing our total store count to 2, 345. Retail selling square footage was approximately 243 million square feet. At the end of the quarter, merchandise inventories were $23.9 billion up approximately $1.1 billion compared to the third quarter of 2023, and inventory turns were 4.8 times, up from 4.3 times last year. Turning to capital allocation. During the third quarter, we invested approximately $820 million back into our business in the form of capital expenditures. And during the quarter, we paid approximately $2.2 billion in dividends to our shareholders. Compute on the average of beginning and ending long-term debt and equity for the trailing 12-months, return on invested capital was approximately 31.5%, down from 38.7% in the third quarter of fiscal 2023. Now, I will comment on our updated outlook for fiscal 2024. As you heard from Ted, while macro uncertainty remains and continues to pressure home improvement demand, our performance in the third quarter was better than expected. Our performance reflects hurricane related sales in the third quarter, and we expect some hurricane related sales in the fourth quarter. Given the better than expected performance in the third quarter and incremental hurricane related sales, we have updated our fiscal 2024 guidance. We now expect total sales growth of approximately 4%, including SRS in the 53rd week. The 53rd week is projected to add approximately $2.3 billion to total sales and SRS is expected to contribute approximately $6.4 billion in incremental sales. Comparable sales are expected to decline approximately 2.5% for the 52 week period. We expect to open approximately 12 new stores. Our gross margin is expected to be approximately 33.5%. We expect operating margin to be approximately 13.5% and adjusted operating margin to be approximately 13.8%. Our effective tax rate is targeted at approximately 24%. We expect net interest expense of approximately $2.1 billion. We expect our diluted earnings per share to decline approximately 2% compared to fiscal 2023 with the extra week contributing approximately $0.30 per share. And, we expect our adjusted diluted earnings per share to decline approximately 1% compared to fiscal 2023 with the extra week contributing approximately $0.30 per share. We believe that we will grow market share in any environment. We are continuing to invest to strengthen our competitive position with our customers and leverage our scale and low cost position to drive growth faster than the market and deliver shareholder value. Thank you for your participation in today\u2019s call. And Christine, we are now ready for questions.","evidence_gemma_new":"merchandise inventories third quarter","evidence_llama_3_3":"merchandise inventories third quarter","evidence_qwen_3_30b":"merchandise inventories third quarter","gemma_new_max":23900000000.0,"gemma_new_min":23900000000.0,"llama_3_3_max":23900000000.0,"llama_3_3_min":23900000000.0,"qwen_3_30b_max":23900000000.0,"qwen_3_30b_min":23900000000.0}
{"symbol":"HD","year":2023,"quarter":1,"date":"2022-FY","chunk_id":22,"sub_chunk_id":0,"centroid_label":"operating margin","agreed_value":14.9,"count":2,"chunk":"Richard McPhail: Yes, Zach. Thanks for the question. So let\u2019s first walk from 15.3%, which is our actual operating margin in 2022 to our original guide of 14.5% margin. At a flat comp, particularly in an inflationary environment, our business will see a degree of deleverage in expenses. And so there are really three factors. Natural deleverage in the business, a $1 billion investment in wage, which has proven to, as Ann said, provide real benefit from a customer experience point of view. And then productivity initiatives designed to offset some of that deleverage. And so when you net all those three against each other, that led to our guide of 14.5% at a flat comp. As we reflect on the revision to guidance, the range of operating margin that we have guided toward reflects the natural operating margin at these negative comp levels. In other words, there is \u2013 there are levers that help blunt de-leverage, but there is de-leverage still in our model. The greatest mitigator is that we have an activity-based payroll model. And so as activity in our stores decreases, so does our lever \u2013 sorry, our level of payroll. So you do have a natural buffer there. Began, the 14.3% to the 14.0% would be the natural operating margin at the negative 2 and the negative 5. When we think about the one-time legal settlement, so we did realize a large one-time benefit from a legal settlement our guidance assumes this benefit will be offset during the remainder of the year. And so that\u2019s just a simplified assumption. We will protect that 14% operating margin, we\u2019d agree with \u2013 operate with a degree of financial flexibility. And as the year progresses, we will be evaluating the levers available to us against the backdrop of the environment.","evidence_gemma_new":"operating margin 2022","evidence_llama_3_3":null,"evidence_qwen_3_30b":"actual operating margin 2022 original guide","gemma_new_max":14.9,"gemma_new_min":14.9,"llama_3_3_max":null,"llama_3_3_min":null,"qwen_3_30b_max":14.9,"qwen_3_30b_min":14.9}
{"symbol":"HD","year":2023,"quarter":1,"date":"2023-Q1","chunk_id":47,"sub_chunk_id":0,"centroid_label":"operating margin","agreed_value":0.14,"count":2,"chunk":"Scot Ciccarelli: Good morning guys. So, Richard, you talked about protecting a 14% operating margin even with the wage investments that you guys have made this year at this point. What other \u2013 I mean, how much flexibility do you think you have on the SG&A line, because I know labor is your biggest kind of plus bucket, but you are actually investing more in labor, not less. So, like how should we think about how you guys are managing that component?","evidence_gemma_new":"operating margin","evidence_llama_3_3":"operating margin","evidence_qwen_3_30b":null,"gemma_new_max":0.14,"gemma_new_min":0.14,"llama_3_3_max":0.14,"llama_3_3_min":0.14,"qwen_3_30b_max":null,"qwen_3_30b_min":null}
{"symbol":"HD","year":2023,"quarter":2,"date":"2023-Q2","chunk_id":5,"sub_chunk_id":0,"centroid_label":"operating margin","agreed_value":0.154,"count":2,"chunk":"Richard McPhail: Thank you, Ann, and good morning, everyone. In the second quarter, total sales were $42.9 billion, a decrease of approximately $900 million or 2% from last year. During the second quarter, our total company comps were negative 2% with comps of negative 2.6% in May, negative 3.3% in June and negative 0.2% in July. Comps in the U.S. were negative 2% for the quarter with comps of negative 2.6% in May, negative 3.3% in June and negative 0.4% in July. As you heard from Billy, during the second quarter, we continued to experience lumber deflation compared to the prior year. While lumber prices were down, we saw an improvement in unit productivity, resulting in a net negative comp impact of approximately 85 basis points versus the second quarter of 2022. In the second quarter, our gross margin was 33%, a decrease of 8 basis points from the second quarter last year, primarily driven by pressure from shrink. During the second quarter, operating expense as a percent of sales increased approximately 100 basis points to 17.6% compared to the second quarter of 2022. Our operating expense performance during the second quarter reflects our previously executed compensation increases for hourly associates as well as deleverage from our top line results. Our operating margin for the second quarter was 15.4% compared to 16.5% in the second quarter of 2022. Interest and other expense for the second quarter increased by $49 million to $428 million due primarily to interest on our floating rate debt as well as higher debt balances than a year ago. In the second quarter, our effective tax rate was 24.4%, up from 24.3% in the second quarter of fiscal 2022. Our diluted earnings per share for the second quarter were $4.65, a decrease of 7.9% compared to the second quarter of 2022. During the second quarter, we opened two new stores, bringing our total store count to 2,326. Retail selling square footage was approximately 241 million square feet. At the end of the quarter, merchandise inventories were $23.3 billion, down $2.8 billion compared to the second quarter of 2022. And inventory turns were 4.4x, down from 4.5x last year. Turning to capital allocation. After investing in our business and paying our dividend, it is our intent to return excess cash to shareholders in the form of share repurchases. During the second quarter, we invested approximately $800 million back into our business in the form of capital expenditures. And during the quarter, we paid approximately $2.1 billion in dividends to our shareholders, and we returned approximately $2 billion to shareholders in the form of share repurchases. Computed on the average of beginning and ending long-term debt and equity for the trailing 12 months, return on invested capital was approximately 41.5%, down from 45.6% in the second quarter of fiscal 2022. Now I\u2019ll comment on our guidance for fiscal 2023. Today, we are reaffirming our guidance for 2023. We expect fiscal 2023 sales and comp sales to decline between 2% and 5%. We are targeting an operating margin between 14.3% and 14% for the year. Our effective tax rate is targeted at approximately 24.5%. We expect interest expense of approximately $1.8 billion and we are anticipating between a 7% and 13% decline in diluted earnings per share compared to fiscal 2022. In addition, we continue to focus on driving productivity in the business and feel confident that we will realize the previously announced $500 million in annualized cost savings in 2024. We also remain focused on meeting the needs of our customers with our leading product authority in home improvement, strong in-stock levels and knowledgeable associates. We will continue to prudently invest to strengthen our competitive position and leverage our scale and low-cost position to outperform our market and deliver shareholder value. Thank you for your participation in today\u2019s call. And Christine, we are now ready for questions.","evidence_gemma_new":"operating margin second quarter","evidence_llama_3_3":"operating margin second quarter","evidence_qwen_3_30b":null,"gemma_new_max":0.154,"gemma_new_min":0.154,"llama_3_3_max":0.154,"llama_3_3_min":0.154,"qwen_3_30b_max":null,"qwen_3_30b_min":null}
{"symbol":"HD","year":2023,"quarter":3,"date":"2023-Q3","chunk_id":5,"sub_chunk_id":0,"centroid_label":"operating margin","agreed_value":14.3,"count":2,"chunk":"Richard McPhail: Thank you, Billy, and good morning, everyone. In the third quarter, total sales were $37.7 billion, a decrease of approximately $1.2 billion or 3% from last year. During the third quarter, our total company comps were negative 3.1% with comps of negative 2.1% in August, negative 3.4% in September and negative 3.7% in October. Comps in the U.S. were negative 3.5% for the quarter with comps of negative 2.5% in August, negative 3.8% in September and negative 4.1% in October. In local currency, Mexico and Canada posted comps above the company average. It is important to note that adjusting for storm-related overlaps and some seasonal shift, monthly comps were relatively consistent across the quarter. In the third quarter, our gross margin was 33.8%, a decrease of approximately 20 basis points from the third quarter last year, which was in line with our expectations. During the third quarter, operating expense as a percent of sales increased approximately 120 basis points to 19.4% compared to the third quarter of 2022. Our operating expense performance during the third quarter reflects our previously executed compensation increases for hourly associates as well as deleverage from our top line results. Our operating margin for the third quarter was 14.3% compared to 15.8% in the third quarter of 2022. Interest and other expense for the third quarter increased by approximately $30 million to $438 million. In the third quarter, our effective tax rate was 23.3%, down from 24.4% in the third quarter of fiscal 2022. Our diluted earnings per share for the third quarter were $3.81, a decrease of 10.1% compared to the third quarter of 2022. During the third quarter, we opened 7 new stores, bringing our total store count to 2,333. Retail selling square footage was approximately 242 million square feet. At the end of the quarter, merchandise inventories were $22.8 billion, down $2.9 billion or 11% compared to the third quarter of 2022. And inventory turns were 4.3x flat to 1 year ago. Turning to capital allocation. After investing in our business and paying our dividend, it is our intent to return excess cash to shareholders in the form of share repurchases. During the quarter, we invested approximately $670 million back into our business in the form of capital expenditures. And during the quarter, we paid approximately $2.1 billion in dividends to our shareholders, and we returned approximately $1.5 billion to shareholders in the form of share repurchases. Computed on the average of beginning and ending long-term debt and equity for the trailing 12 months, return on invested capital was approximately 38.7%, down from 43.3% in the third quarter of fiscal 2022. Now I will comment on our guidance for fiscal 2023. As you heard from Ted, with one quarter remaining in fiscal 2023, we no longer expect the end points of our previous guidance range as likely outcomes, and therefore, we are narrowing our guidance for 2023. We expect fiscal 2023 sales and comp sales to decline between 3% and 4%. We are targeting an operating margin between 14.2% and 14.1% for the year. Our effective tax rate is targeted at approximately 24.5%. We expect interest expense of approximately $1.8 billion. And we are anticipating between a 9% and 11% decline in diluted earnings per share compared to fiscal 2022. In addition, as you heard from Ann, we continue to focus on driving productivity in the business. We have taken a number of actions that will help us realize the previously announced $500 million in annualized cost savings in 2024 and are fully confident that we will deliver on this commitment. We also remain focused on meeting the needs of our customers with our leading product authority in home improvement, strong in-stock levels and knowledgeable associates. We will continue to prudently invest to strengthen our competitive position and leverage our scale and low-cost position to outperform our market and deliver shareholder value. Thank you for your participation in today's call. And Christine, we are now ready for questions.","evidence_gemma_new":null,"evidence_llama_3_3":"operating margin third quarter","evidence_qwen_3_30b":"operating margin third quarter","gemma_new_max":null,"gemma_new_min":null,"llama_3_3_max":14.3,"llama_3_3_min":14.3,"qwen_3_30b_max":14.3,"qwen_3_30b_min":14.3}
{"symbol":"HD","year":2023,"quarter":4,"date":"2023-Q4","chunk_id":5,"sub_chunk_id":0,"centroid_label":"operating margin","agreed_value":11.9,"count":2,"chunk":"Richard McPhail: Thank you, Billy, and good morning, everyone. In the fourth quarter, total sales were $34.8 billion, a decrease of 2.9% from last year. During the fourth quarter, our total company comps were negative 3.5% with comps of negative 2.5% in November, positive 1.1% in December and negative 8.5% in January. Comps in the U.S. were negative 4% for the quarter with comps of negative 2.7% in November, positive 0.6% in December and negative 9.1% in January. In local currency, Mexico and Canada posted comps above the company average with Mexico posting positive comps. It is important to note that adjusting for holiday shifts and weather-related impacts in January, monthly comps relatively consistent across the quarter. For the year, our sales totaled $152.7 billion, a decrease of 3% versus fiscal 2022. For the year, total company comp sales decreased 3.2% and U.S. comp sales decreased 3.5%. In the fourth quarter, our gross margin was approximately 33.1%, a decrease of 20 basis points from last year. For the year, our gross margin was approximately 33.4%, a decrease of 15 basis points from last year, which was in line with our expectations. During the fourth quarter, operating expenses as a percentage of sales increased approximately 115 basis points to 21.2% compared to the fourth quarter of 2022. Our operating expense performance during the fourth quarter reflects our previously executed compensation increases for hourly associates as well as deleverage from our top line results. For the year, operating expenses were approximately 19.2% of sales, representing an increase of approximately 90 basis points from fiscal 2022. Our operating margin for the fourth quarter was approximately 11.9% and for the year was approximately 14.2%. Interest and other expense for the fourth quarter increased by $50 million to $458 million. In the fourth quarter and for fiscal 2023, our effective tax rate was 24%. Our diluted earnings per share for the fourth quarter were $2.82, a decrease of 14.5% compared to the fourth quarter of 2022. Diluted earnings per share for fiscal 2023 were $15.11, a decrease of 9.5% compared to fiscal 2022. At the end of the quarter, merchandise inventories were $21 billion, down $3.9 billion or approximately 16% versus last year, and inventory turns were 4.3x, up from 4.2x from the second period last year. Moving on to capital allocation. During the fourth quarter, we invested approximately $860 million back into our business in the form of capital expenditures. This brings total capital expenditures for fiscal 2023 to approximately $3.2 billion. During the year, we opened 13 new stores, bringing our store count to 2,335 at the end of fiscal 2023. Retail selling square footage was approximately 242 million square feet and total sales per retail square foot were approximately $605 in fiscal 2023. Additionally, we invested approximately $1.5 billion on three acquisitions during fiscal 2023, accelerating our strategic initiatives and providing us with better capabilities to serve our customers. During the year, we paid approximately $8.4 billion of dividends to our shareholders. Today, we announced our Board of Directors increased our quarterly dividend by 7.7% to $2.25 per share, which equates to an annual dividend of $9 per share. And finally, during fiscal 2023, we returned approximately $8 billion to our shareholders in the form of share repurchases, including $1.5 billion in the fourth quarter. Computed on the average of beginning and ending long-term debt and equity for the trailing 12 months, return on invested capital was 36.7% compared to 44.6% at the end of the fourth quarter of fiscal 2022. Now I'll comment on our outlook for 2024. First, let me point out that fiscal 2024 will include a 53rd week, so the fourth quarter of fiscal 2024 will consist of 14 weeks. We will continue to report comps on a 52-week basis, but we will base our overall guidance on 53 weeks. As you heard from Ted, we feel great about the actions we took in 2023 to position us well heading into 2024. And while there are signs that the economy is on the way towards normalization, the home improvement market still faces headwinds as we look ahead to fiscal 2024. We considered several factors that informed our outlook for fiscal 2024. On the positive side, we faced a number of pressures in fiscal 2023 that are unlikely to repeat in fiscal 2024. In 2023, we saw four increases in the Fed funds rate, a sharp decline in existing home sales and approximately 110 basis points of comp pressure from lumber deflation. However, we still expect pressures to our business in fiscal 2024. Personal consumption growth as measured by PCE is expected to decelerate compared to 2023. Our share of PCE also remains slightly elevated relative to 2019 and has been on a glide path towards 2019 levels. Higher interest rates at the beginning of 2024 relative to last year will likely continue to pressure demand for larger projects. And the effects from pull forward of demand during the pandemic as well as some project deferral could impact demand into 2024. As we consider these influences on home improvement demand, we are planning for a year of continued moderation but with slightly less pressure to comp sales than what we faced in fiscal 2023. Our fiscal 2024 outlook is for total sales growth to outpace sales comp with sales growth of approximately positive 1% and comp sales of approximately negative 1% compared to fiscal 2023. Total sales growth will benefit from a 53rd week as well as from the acquisitions we made and the new stores we opened in fiscal 2023 and the stores we plan to open in fiscal 2024. We expect the 53rd week will contribute approximately $2.3 billion in sales. Our gross margin is expected to be approximately 33.9%, an increase of approximately 50 basis points compared to fiscal 2023. This primarily reflects a lower product and transportation cost environment relative to fiscal 2023 as well as benefits from a portion of the approximately $500 million in reduced fixed costs that we will realize in fiscal 2024. Further, we expect operating margin of approximately 14.1%. This reflects deleverage from sales and pressure from targeted incentive compensation as we are overlapping lower incentive compensation paid than planned in 2023. This will be partially offset by the benefits from the approximately $500 million in fixed costs that we will realize in fiscal 2024 in both cost of goods sold and operating expenses. Our effective tax rate is targeted at approximately 24.5%. We expect net interest expense of approximately $1.8 billion. Our diluted earnings per share percent growth is targeted to be approximately 1% compared to fiscal 2023, with the extra week contributing approximately $0.30. We plan to continue investing in our business with capital expenditures of approximately 2% of sales on an annual basis. After investing in our business and paying our dividend, it is our intent to return excess cash to shareholders in the form of share repurchases. We believe we have positioned ourselves to meet the needs of our customers in any environment. The investments we've made in our business have enabled agility in our operating model. As we look forward, we will continue to invest to strengthen our position with our customers, leverage our scale and low-cost position to drive growth faster than the market and deliver shareholder value. Thank you for your participation in today's call. And Christine, we are now ready for questions.","evidence_gemma_new":"operating margin fourth quarter","evidence_llama_3_3":null,"evidence_qwen_3_30b":"operating margin fourth quarter","gemma_new_max":11.9,"gemma_new_min":11.9,"llama_3_3_max":null,"llama_3_3_min":null,"qwen_3_30b_max":11.9,"qwen_3_30b_min":11.9}
{"symbol":"HD","year":2024,"quarter":1,"date":"2024-Q1","chunk_id":5,"sub_chunk_id":0,"centroid_label":"operating margin","agreed_value":0.139,"count":2,"chunk":"Richard McPhail: Thank you, Billy, and good morning, everyone. In the first quarter, total sales were $36.4 billion, a decrease of approximately 2.3% from last year. During the first quarter, our total company comps were negative 2.8% with comps of negative 4% in February, negative 0.8% in March, and negative 3.3% in April. Comps in the U.S. were negative 3.2% for the quarter with comps of negative 4.8% in February, negative 1.3% in March, and negative 3.6% in April. For the quarter, Mexico posted positive comps, whereas Canada was slightly below the company average. In the first quarter, our gross margin was 34.1%, an increase of approximately 45 basis points from the first quarter last year, primarily driven by benefits from lower transportation cost and shrink. During the first quarter, operating expense as a percent of sales increased approximately 140 basis points to 20.2% compared to the first quarter of 2023. The increase was primarily driven by a benefit from a legal settlement that we are overlapping from the first quarter of fiscal 2023, as well as deleverage from our top line results. Our operating expense performance was in line with our expectations. Our operating margin for the first quarter was 13.9% compared to 14.9% in the first quarter of 2023. Interest and other expense for the first quarter decreased by $13 million to $428 million. In the first quarter, our effective tax rate was 22.6% compared to 24.2% in the first quarter of fiscal 2023. Our diluted earnings per share for the first quarter were $3.63, a decrease of 5% compared to the first quarter of 2023. During the first quarter, we opened two new stores, bringing our total store count to 2,337. Retail selling square footage was approximately 242 million square feet. At the end of the quarter, merchandise inventories were $22.4 billion, down approximately $3 billion, or 12% compared to the first quarter of 2023, and inventory turns were 4.5x, up from 3.9x last year. Turning to capital allocation. During the first quarter, we invested approximately $850 million back into our business in the form of capital expenditures. And during the quarter, we paid approximately $2.2 billion in dividends to our shareholders and we returned approximately $600 million to shareholders in the form of share repurchases. As a reminder, in March we announced our intent to acquire SRS Distribution and as a result, we paused share repurchases. As you've heard us say many times, we maintain a disciplined approach to capital allocation and that is not changing. First and foremost, we will invest in the business and expect capital expenditures of approximately 2% of sales on an annual basis. After investing in the business, we plan to pay the dividend and it is our intent to return any excess cash to shareholders in the form of share repurchases. From time to time, we will also invest in the business through acquisitions to enhance our capabilities and to accelerate our strategic objectives. Computed on the average of beginning and ending long-term debt and equity for the trailing 12 months, return on invested capital was 37.1%, down from 43.6% \u2013 excuse me, down from 43.6% in the first quarter of fiscal 2023. Now, I will comment on our guidance for fiscal 2024. Today, we are reaffirming our guidance for 2024. As a reminder, our guidance does not currently reflect any impact from the announced acquisition of SRS. The acquisition is currently under regulatory review and we expect it to close by the end of fiscal 2024. We expect total sales growth to outpace sales comp with sales growth of approximately positive 1% and comp sales of approximately negative 1%. Total sales growth will benefit from a 53rd week and we expect the 53rd week will contribute approximately $2.3 billion in sales. Our gross margin is expected to be approximately 33.9%, an increase of approximately 50 basis points, compared to fiscal 2023. We expect operating margin of approximately 14.1%. Our effective tax rate is targeted at approximately 24.5%. We expect net interest expense of approximately $1.8 billion, and our diluted earnings per share percent growth is targeted to be approximately 1% compared to fiscal 2023. It\u2019s our intent to update guidance as appropriate once the SRS transaction closes. We believe that we have positioned ourselves to meet the needs of our customers in any environment. The investments we\u2019ve made in our business have enabled agility in our operating model. As we look forward, we will continue to invest to strengthen our position with our customers, leverage our scale and low-cost position to drive growth faster than the market and deliver shareholder value. Thank you for your participation in today\u2019s call. And Christine, we are now ready for questions.","evidence_gemma_new":null,"evidence_llama_3_3":"operating margin first quarter","evidence_qwen_3_30b":"operating margin first quarter","gemma_new_max":null,"gemma_new_min":null,"llama_3_3_max":0.139,"llama_3_3_min":0.139,"qwen_3_30b_max":0.139,"qwen_3_30b_min":0.139}
{"symbol":"HD","year":2024,"quarter":2,"date":"2024-Q2","chunk_id":29,"sub_chunk_id":0,"centroid_label":"operating margin","agreed_value":0.139,"count":3,"chunk":"Richard McPhail: And just to tie it all up together, that 13.6% corresponds with our adjusted operating margin of 13.9%. So, for the year, when we eliminate non-cash amortization expense on intangible assets, we expect to report operating margin of 13.9% on a comp of negative 3%.","evidence_gemma_new":"expect operating margin year","evidence_llama_3_3":"expect adjusted operating margin for the year","evidence_qwen_3_30b":"expect operating margin for the year","gemma_new_max":0.139,"gemma_new_min":0.139,"llama_3_3_max":0.139,"llama_3_3_min":0.139,"qwen_3_30b_max":0.139,"qwen_3_30b_min":0.139}
{"symbol":"HD","year":2024,"quarter":2,"date":"2024-Q2","chunk_id":5,"sub_chunk_id":0,"centroid_label":"operating margin","agreed_value":13.55,"count":2,"chunk":"Richard McPhail: Thank you, Billy, and good morning, everyone. In the second quarter, Total sales were $43.2 billion, an increase of approximately 0.6% from last year. Total sales include $1.3 billion from the recent acquisition of SRS, which represents approximately six weeks of sales in the quarter. During the second quarter, our total company comps were negative 3.3%, with comps of negative 3.7% in May, negative 0.9% in June and negative 4.9% in July. Comps in the U.S. were negative 3.6% for the quarter, with comps of negative 4.1% in May, negative 1.4% in June and negative 5% in July. In the second quarter, our gross margin was approximately 33.4%, an increase of 40 basis points from the second quarter last year, primarily driven by benefits from lower transportation costs and shrink, partially offset by mix as a result of the SRS acquisition. During the second quarter, operating expense as a percent of sales increased approximately 65 basis points to 18.3% compared to the second quarter of 2023. Our operating expense performance was in line with our expectations. Beginning this quarter, in addition to our GAAP measures, we are providing the following non-GAAP measures: adjusted operating income, adjusted operating margin and adjusted diluted earnings per share, which excludes noncash amortization of acquired intangible assets. We believe these supplemental measures will help investors better understand and analyze our performance. Our operating margin for the second quarter was 15.1% compared to 15.4% in the second quarter of 2023. In the quarter, pretax intangible asset amortization was $90 million, including $39 million related to SRS. Excluding the intangible asset amortization in the quarter, our adjusted operating margin for the second quarter was 15.3% and compared to 15.5% in the second quarter of 2023. Interest and other expense for the second quarter increased by $61 million to $489 million due primarily to higher debt balances than a year ago. In the second quarter, our effective tax rate was 24.5%, compared to 24.4% in the second quarter of fiscal 2023. Our diluted earnings per share for the second quarter were $4.60, a decrease of approximately 1% compared to the second quarter of 2023. Excluding intangible asset amortization, our adjusted diluted earnings per share for the second quarter were $4.67, essentially flat compared to the second quarter of 2023. During the second quarter, we opened three new stores, bringing our total store count to 2,340. Retail selling square footage was approximately 243 million square feet. At the end of the quarter, merchandise inventories or $23.1 billion, down approximately $200 million compared to the second quarter of 2023, and inventory turns were 4.9x, up from 4.4x last year. Turning to capital allocation. During the second quarter, we invested approximately $720 million back into our business in the form of capital expenditures. And during the quarter, we paid approximately $2.2 billion in dividends to our shareholders. Our disciplined approach to capital allocation remains unchanged. First and foremost, we will invest in the business and expect capital expenditures of approximately 2% of sales on an annual basis. After investing in the business, we plan to pay the dividend and it is our intent to return any excess cash to shareholders in the form of share repurchases. Computed on the average of beginning and ending long-term debt and equity for the trailing 12 months, return on invested capital was approximately 31.9%, down from 41.5% in the second quarter of fiscal 2023. Now, I will comment on our updated outlook for fiscal 2024. As you heard from Ted, given the softer-than-expected performance in the first half of the year, and reflecting continued uncertainty around underlying consumer demand, we believe a more cautious outlook for the year is warranted. With the recent closing of the SRS acquisition, we are now including their results in our consolidated outlook for the year. For the period matching our first half, which includes periods prior to the acquisition and not fully reflected in our financial statements, SRS generated high single-digit percentage sales growth with operating income growing largely in line with sales. We believe that over the next several years, SRS on its own, and through our combined Pro efforts, will help accelerate sales and earnings growth for our company. Updating our fiscal 2024 guidance for the factors we just discussed. We now expect total sales growth between 2.5% and 3.5%, including the SRS acquisition and the 53rd week. The 53rd week is projected to add approximately $2.3 billion to total sales. SRS is expected to contribute approximately $6.4 billion in incremental sales. Comparable sales are expected to decline between negative 3% and negative 4% for the 52-week period. The high end of our range implies a consumer demand environment consistent with the first half of fiscal 2024. While comparable sales for the Company are not currently on the trajectory for the low end of the range, a negative 4% comp implies incremental pressure on consumer demand beyond what we are seeing today. We expect to open approximately 12 new stores. Our gross margin is expected to be approximately 33.5%. We expect operating margin to be between 13.5% and 13.6%, and adjusted operating margin to be between 13.8% and 13.9%. Our effective tax rate is targeted at approximately 24%. We expect net interest expense of approximately $2.2 billion. Our diluted earnings per share percent will decline between negative 2% and negative 4% compared to fiscal 2023, with the extra week contributing approximately $0.30. We expect our adjusted diluted earnings per share percent to decline between negative 1% and negative 3%, compared to fiscal 2023, with the extra week contributing approximately $0.30. We believe that we have positioned ourselves to meet the needs of our customers in any environment. The investments we've made in our business have enabled agility in our operating model. As we look forward, we will continue to invest to strengthen our position with our customers, leverage our scale and low-cost position to drive growth faster than the market and deliver shareholder value. Thank you for your participation in today's call. And Christine, we are now ready for questions.","evidence_gemma_new":"operating margin","evidence_llama_3_3":null,"evidence_qwen_3_30b":"expected operating margin","gemma_new_max":13.55,"gemma_new_min":13.55,"llama_3_3_max":null,"llama_3_3_min":null,"qwen_3_30b_max":13.55,"qwen_3_30b_min":13.55}
{"symbol":"HD","year":2024,"quarter":2,"date":"2024-Q2","chunk_id":29,"sub_chunk_id":0,"centroid_label":"operating margin","agreed_value":0.136,"count":2,"chunk":"Richard McPhail: And just to tie it all up together, that 13.6% corresponds with our adjusted operating margin of 13.9%. So, for the year, when we eliminate non-cash amortization expense on intangible assets, we expect to report operating margin of 13.9% on a comp of negative 3%.","evidence_gemma_new":"adjusted operating margin","evidence_llama_3_3":null,"evidence_qwen_3_30b":"adjusted operating margin 13.6%","gemma_new_max":0.136,"gemma_new_min":0.136,"llama_3_3_max":null,"llama_3_3_min":null,"qwen_3_30b_max":0.136,"qwen_3_30b_min":0.136}
{"symbol":"HD","year":2024,"quarter":3,"date":"2024-Q3","chunk_id":5,"sub_chunk_id":0,"centroid_label":"operating margin","agreed_value":0.135,"count":2,"chunk":"Richard McPhail: Thank you, Billy, and good morning, everyone. In the third quarter, total sales were $40.2 billion, an increase of approximately 6.6% from last year. During the third quarter, our total company comps were negative 1.3% with comps of negative 3.3% in August, negative 2.3% in September and positive 1% in October. Comps in the U.S. were negative 1.2% for the quarter, with comps of negative 3.5% in August, negative 2.2% in September, and positive 1.4% in October. The progression of our monthly comps reflects in large part hurricane related sales. Our results for the third quarter include a net contribution of approximately $200 million in hurricane related sales, which positively impacted total company comps by approximately 55 basis points for the quarter and approximately 120 basis points for October. In the third quarter, our gross margin was approximately 33.4%, a decrease of approximately 40 basis points from the third quarter last year, primarily driven by mix as a result of the SRS acquisition, partially offset by benefits from lower shrink. During the third quarter, operating expense as a percent of sales increased approximately 45 basis points to 19.9% compared to the third quarter of 2023. Our operating expense performance was in-line with our expectations. Our operating margin for the third quarter was 13.5% compared to 14.3% in the third quarter of 2023. In the quarter, pre-tax intangible asset amortization was $138 million including $86 million related to SRS. Excluding the intangible asset amortization in the quarter, our adjusted operating margin for the third quarter was 13.8% compared to 14.5% in the third quarter of 2023. Interest and other expense for the third quarter increased by $157 million to $595 million due primarily to higher debt balances than a year ago. In the third quarter, our effective tax rate was 24.4% compared to 23.3% in the third quarter of fiscal 2023. Our diluted earnings per share for the third quarter were $3.67, a decrease of approximately 4% compared to the third quarter of 2023. Excluding intangible asset amortization, our adjusted diluted earnings per share for the third quarter were $3.78, a decrease of approximately 2% compared to the third quarter of 2023. During the third quarter, we opened five new stores, bringing our total store count to 2, 345. Retail selling square footage was approximately 243 million square feet. At the end of the quarter, merchandise inventories were $23.9 billion up approximately $1.1 billion compared to the third quarter of 2023, and inventory turns were 4.8 times, up from 4.3 times last year. Turning to capital allocation. During the third quarter, we invested approximately $820 million back into our business in the form of capital expenditures. And during the quarter, we paid approximately $2.2 billion in dividends to our shareholders. Compute on the average of beginning and ending long-term debt and equity for the trailing 12-months, return on invested capital was approximately 31.5%, down from 38.7% in the third quarter of fiscal 2023. Now, I will comment on our updated outlook for fiscal 2024. As you heard from Ted, while macro uncertainty remains and continues to pressure home improvement demand, our performance in the third quarter was better than expected. Our performance reflects hurricane related sales in the third quarter, and we expect some hurricane related sales in the fourth quarter. Given the better than expected performance in the third quarter and incremental hurricane related sales, we have updated our fiscal 2024 guidance. We now expect total sales growth of approximately 4%, including SRS in the 53rd week. The 53rd week is projected to add approximately $2.3 billion to total sales and SRS is expected to contribute approximately $6.4 billion in incremental sales. Comparable sales are expected to decline approximately 2.5% for the 52 week period. We expect to open approximately 12 new stores. Our gross margin is expected to be approximately 33.5%. We expect operating margin to be approximately 13.5% and adjusted operating margin to be approximately 13.8%. Our effective tax rate is targeted at approximately 24%. We expect net interest expense of approximately $2.1 billion. We expect our diluted earnings per share to decline approximately 2% compared to fiscal 2023 with the extra week contributing approximately $0.30 per share. And, we expect our adjusted diluted earnings per share to decline approximately 1% compared to fiscal 2023 with the extra week contributing approximately $0.30 per share. We believe that we will grow market share in any environment. We are continuing to invest to strengthen our competitive position with our customers and leverage our scale and low cost position to drive growth faster than the market and deliver shareholder value. Thank you for your participation in today\u2019s call. And Christine, we are now ready for questions.","evidence_gemma_new":null,"evidence_llama_3_3":"operating margin third quarter","evidence_qwen_3_30b":"operating margin third quarter","gemma_new_max":null,"gemma_new_min":null,"llama_3_3_max":0.135,"llama_3_3_min":0.135,"qwen_3_30b_max":0.135,"qwen_3_30b_min":0.135}
{"symbol":"HD","year":2024,"quarter":3,"date":"2024-Q3","chunk_id":5,"sub_chunk_id":0,"centroid_label":"operating margin","agreed_value":0.138,"count":2,"chunk":"Richard McPhail: Thank you, Billy, and good morning, everyone. In the third quarter, total sales were $40.2 billion, an increase of approximately 6.6% from last year. During the third quarter, our total company comps were negative 1.3% with comps of negative 3.3% in August, negative 2.3% in September and positive 1% in October. Comps in the U.S. were negative 1.2% for the quarter, with comps of negative 3.5% in August, negative 2.2% in September, and positive 1.4% in October. The progression of our monthly comps reflects in large part hurricane related sales. Our results for the third quarter include a net contribution of approximately $200 million in hurricane related sales, which positively impacted total company comps by approximately 55 basis points for the quarter and approximately 120 basis points for October. In the third quarter, our gross margin was approximately 33.4%, a decrease of approximately 40 basis points from the third quarter last year, primarily driven by mix as a result of the SRS acquisition, partially offset by benefits from lower shrink. During the third quarter, operating expense as a percent of sales increased approximately 45 basis points to 19.9% compared to the third quarter of 2023. Our operating expense performance was in-line with our expectations. Our operating margin for the third quarter was 13.5% compared to 14.3% in the third quarter of 2023. In the quarter, pre-tax intangible asset amortization was $138 million including $86 million related to SRS. Excluding the intangible asset amortization in the quarter, our adjusted operating margin for the third quarter was 13.8% compared to 14.5% in the third quarter of 2023. Interest and other expense for the third quarter increased by $157 million to $595 million due primarily to higher debt balances than a year ago. In the third quarter, our effective tax rate was 24.4% compared to 23.3% in the third quarter of fiscal 2023. Our diluted earnings per share for the third quarter were $3.67, a decrease of approximately 4% compared to the third quarter of 2023. Excluding intangible asset amortization, our adjusted diluted earnings per share for the third quarter were $3.78, a decrease of approximately 2% compared to the third quarter of 2023. During the third quarter, we opened five new stores, bringing our total store count to 2, 345. Retail selling square footage was approximately 243 million square feet. At the end of the quarter, merchandise inventories were $23.9 billion up approximately $1.1 billion compared to the third quarter of 2023, and inventory turns were 4.8 times, up from 4.3 times last year. Turning to capital allocation. During the third quarter, we invested approximately $820 million back into our business in the form of capital expenditures. And during the quarter, we paid approximately $2.2 billion in dividends to our shareholders. Compute on the average of beginning and ending long-term debt and equity for the trailing 12-months, return on invested capital was approximately 31.5%, down from 38.7% in the third quarter of fiscal 2023. Now, I will comment on our updated outlook for fiscal 2024. As you heard from Ted, while macro uncertainty remains and continues to pressure home improvement demand, our performance in the third quarter was better than expected. Our performance reflects hurricane related sales in the third quarter, and we expect some hurricane related sales in the fourth quarter. Given the better than expected performance in the third quarter and incremental hurricane related sales, we have updated our fiscal 2024 guidance. We now expect total sales growth of approximately 4%, including SRS in the 53rd week. The 53rd week is projected to add approximately $2.3 billion to total sales and SRS is expected to contribute approximately $6.4 billion in incremental sales. Comparable sales are expected to decline approximately 2.5% for the 52 week period. We expect to open approximately 12 new stores. Our gross margin is expected to be approximately 33.5%. We expect operating margin to be approximately 13.5% and adjusted operating margin to be approximately 13.8%. Our effective tax rate is targeted at approximately 24%. We expect net interest expense of approximately $2.1 billion. We expect our diluted earnings per share to decline approximately 2% compared to fiscal 2023 with the extra week contributing approximately $0.30 per share. And, we expect our adjusted diluted earnings per share to decline approximately 1% compared to fiscal 2023 with the extra week contributing approximately $0.30 per share. We believe that we will grow market share in any environment. We are continuing to invest to strengthen our competitive position with our customers and leverage our scale and low cost position to drive growth faster than the market and deliver shareholder value. Thank you for your participation in today\u2019s call. And Christine, we are now ready for questions.","evidence_gemma_new":null,"evidence_llama_3_3":"adjusted operating margin third quarter","evidence_qwen_3_30b":"adjusted operating margin third quarter","gemma_new_max":null,"gemma_new_min":null,"llama_3_3_max":0.138,"llama_3_3_min":0.138,"qwen_3_30b_max":0.138,"qwen_3_30b_min":0.138}
{"symbol":"HD","year":2024,"quarter":4,"date":"2024-Q4","chunk_id":42,"sub_chunk_id":0,"centroid_label":"operating margin","agreed_value":0.134,"count":2,"chunk":"Billy Bastek: Well, thanks, Steven. It's Billy. Listen. As it relates to the just the general pricing environment, and then I'll talk for a minute about tariffs. Mean, we are in a very rational Market just by definition. And, you know, prices, as we've mentioned on the last couple of calls really have settled to your point. And the promotional activity is is the same as it's been, you know, kind of pre COVID as well. So no differences in that. And and as I mentioned, again, the last couple quarters pricing is is settled into the market accordingly. As it relates to to tariffs, and we've spoken a little bit about it this morning. I mean, listen. We've been through this before. We'll continue to assess, you know, just you know, how these impact our business from a go forward standpoint. We've been focused on diversifying sourcing for several years. So we'll continue to assess that going forward. But our number one job in merchandising is to be the customer's advocate for value. We have great, great vendor relationships. And with our scale, we feel that we're as well or better positioned to than anyone in the market place to navigate the environment going forward. And, actually, I wanna go back one question and just follow-up on Steven's question. So Steven, just to to put a a year over year comparison together for you and and talk about how SRS impacts year over year from an operating margin perspective. So as you can as you've seen our guidance, we're guiding to a thirteen point four percent adjusted operating margin from a thirteen point eight that's a forty basis point decrease. Here's how that forty basis points breaks down. Coincidental to the pro form a impact, but the year over year is different. So that forty reflects twenty basis points of natural deleverage. And recall, we think this business leverages about a three percent comp. At a one percent comp, we're getting about two comp points of deleverage. So two times about ten basis points per is twenty basis points. Then the inclusion of twelve months of ownership of SRS compared to seven months of ownership, is reflected in fifteen basis points of mix shift. So you've got about a fifteen basis point impact of that year over year comparison of twelve months versus seven months. And then finally, the comparison versus a fifty-three week year also shifts margin by five basis points. So you've got twenty bps from naturally leverage, You've got fifteen from SRS, impact, and you've got five from the fifty-third week comparison. Within that, I think it's worth saying, but we are leaning into investments We're paying for those investments through productivity. And so that's also within that operating margin guidance. There's there's productivity inside it as well as as leaning into investment. And I hope that makes it a little bit more clear.","evidence_gemma_new":"adjusted operating margin","evidence_llama_3_3":"adjusted operating margin guiding year over year","evidence_qwen_3_30b":null,"gemma_new_max":0.134,"gemma_new_min":0.134,"llama_3_3_max":0.134,"llama_3_3_min":0.134,"qwen_3_30b_max":null,"qwen_3_30b_min":null}
{"symbol":"HD","year":2023,"quarter":2,"date":"2023-Q2","chunk_id":59,"sub_chunk_id":0,"centroid_label":"reduce fixed costs","agreed_value":1000000000.0,"count":2,"chunk":"Ted Decker: I mean broadly on the inflation piece, well, we still expect that the overall year will have a net inflationary impact on our costs in retails. But as we go into the second half, it is moderating. And when you look at just the activity of cost increase requests, I mean they are negligible. I mean there are a couple. And we were in the billions of dollars at one point of cost in. And so net new requests for cost and certainly cost increases in the supply chain, that\u2019s all completely abated. As we go into the second half, when you think of product cost, transportation, overall transportation costs and then what would ultimately do in retails, inflation has certainly abated. Commodity is certainly down meaningfully from the peak as well as year-over-year as well as even shorter term. But beyond commodity and the fact that we don\u2019t have increased inflation, we are not expecting a deflationary environment. I think Richard used the term settling. We are kind of settling into these non-commodity price levels. And as the Pro and consumer customer has gotten used to those over the last few years, you are seeing the normalization in transactions, as Richard called out. So, we are encouraged that the cycle of inflation is essentially behind us. And Richard, I don\u2019t know if you \u2013 or Billy, if you have anything else to add to that.","evidence_gemma_new":"cost billions of dollars","evidence_llama_3_3":"cost in billions of dollars","evidence_qwen_3_30b":null,"gemma_new_max":1000000000.0,"gemma_new_min":1000000000.0,"llama_3_3_max":1000000000.0,"llama_3_3_min":1000000000.0,"qwen_3_30b_max":null,"qwen_3_30b_min":null}
{"symbol":"HD","year":2023,"quarter":4,"date":"2023-Q4","chunk_id":38,"sub_chunk_id":0,"centroid_label":"reduce fixed costs","agreed_value":500000000.0,"count":2,"chunk":"Richard McPhail: Thanks, Michael. Well, first, I certainly want to center you back to the comments we made at the Investor Conference in June where we call out a base case once we return to market normalization, a base case of 3% to 4% sales growth, flat gross margin, an assumption of operating expense and operating margin leverage and growth and EPS growth of mid- to high single-digit percentages. Within that, obviously, is sort of an implied leverage per comp point on our OpEx. I'm giving you a, what I would call, loose rule of thumb. It would apply for the most part to our sort of business model today, it certainly applies in the past and I would expect it to apply it loosely in the future. Embedded in that is a normal rate of productivity and efficiency that our teams delivered every single year. I mean underneath all this guidance and our results for 2023, which we were so pleased with, is an enormous amount of work on behalf of our team, think about the efficiency in our supply chain, you think about the efficiencies that our merchants bring every year in product cost. Of particular note, the productivity in our stores with some of the tools that are unleashing the power of AI and putting that in the hands of our associates, those are standard fair for us. They feed into what I would call normal operating leverage for the Home Depot, and it\u2019s something that we\u2019ve come to expect of ourselves. So that\u2019s a long way of saying, we always intend to lever OpEx at a certain point of sales growth. And I would stick with the basic rule of thumb, maybe higher, maybe slightly lower in some periods from time to time. On the question about what actions there may be, but we always operate with a degree of financial flexibility in the P&L. Although, I would tell you that we did our very best, and I think we accomplished our objective of reducing fixed costs towards the end of \u201823 that had built up during the pandemic, hence the $500 million in cost savings implied in our guide. There are always levers. We have to determine what environment we are operating in before we decide what levers to pull. And so for now, we\u2019ve provided what we would call our central case for 2024, but we\u2019re going to manage the business with the best interest of our long-term shareholders in mind.","evidence_gemma_new":"fixed costs","evidence_llama_3_3":"Home Depot cost savings","evidence_qwen_3_30b":null,"gemma_new_max":500000000.0,"gemma_new_min":500000000.0,"llama_3_3_max":500000000.0,"llama_3_3_min":500000000.0,"qwen_3_30b_max":null,"qwen_3_30b_min":null}
{"symbol":"HD","year":2023,"quarter":4,"date":"2024-FY","chunk_id":38,"sub_chunk_id":0,"centroid_label":"reduce fixed costs","agreed_value":500000000.0,"count":2,"chunk":"Richard McPhail: Thanks, Michael. Well, first, I certainly want to center you back to the comments we made at the Investor Conference in June where we call out a base case once we return to market normalization, a base case of 3% to 4% sales growth, flat gross margin, an assumption of operating expense and operating margin leverage and growth and EPS growth of mid- to high single-digit percentages. Within that, obviously, is sort of an implied leverage per comp point on our OpEx. I'm giving you a, what I would call, loose rule of thumb. It would apply for the most part to our sort of business model today, it certainly applies in the past and I would expect it to apply it loosely in the future. Embedded in that is a normal rate of productivity and efficiency that our teams delivered every single year. I mean underneath all this guidance and our results for 2023, which we were so pleased with, is an enormous amount of work on behalf of our team, think about the efficiency in our supply chain, you think about the efficiencies that our merchants bring every year in product cost. Of particular note, the productivity in our stores with some of the tools that are unleashing the power of AI and putting that in the hands of our associates, those are standard fair for us. They feed into what I would call normal operating leverage for the Home Depot, and it\u2019s something that we\u2019ve come to expect of ourselves. So that\u2019s a long way of saying, we always intend to lever OpEx at a certain point of sales growth. And I would stick with the basic rule of thumb, maybe higher, maybe slightly lower in some periods from time to time. On the question about what actions there may be, but we always operate with a degree of financial flexibility in the P&L. Although, I would tell you that we did our very best, and I think we accomplished our objective of reducing fixed costs towards the end of \u201823 that had built up during the pandemic, hence the $500 million in cost savings implied in our guide. There are always levers. We have to determine what environment we are operating in before we decide what levers to pull. And so for now, we\u2019ve provided what we would call our central case for 2024, but we\u2019re going to manage the business with the best interest of our long-term shareholders in mind.","evidence_gemma_new":"annualized cost savings 2024","evidence_llama_3_3":null,"evidence_qwen_3_30b":"cost savings 2024","gemma_new_max":500000000.0,"gemma_new_min":500000000.0,"llama_3_3_max":null,"llama_3_3_min":null,"qwen_3_30b_max":500000000.0,"qwen_3_30b_min":500000000.0}
{"symbol":"HD","year":2024,"quarter":2,"date":"2026-FY","chunk_id":49,"sub_chunk_id":0,"centroid_label":"reduce fixed costs","agreed_value":2026.0,"count":2,"chunk":"Richard McPhail: Well, let's talk about share repurchases. So, as we announced, as part of the SRS acquisition, we financed the acquisition with $10 billion in bond issuances and then some short-term commercial paper raising. We are currently at a 2.6x debt-to-EBITDA ratio. We like to see that ratio around 2.0x. It's our intent to delever over time before we restart repurchases. That's going to take us likely into the year 2026, and we will obviously update our investors on how that looks over time. But that would be the kind of the current calculation, sometime in 2026, we have returned. And then from a long-term structural perspective, when we laid out our basin in an accelerated case, we said to the base case. Look, we anticipate, in the base case, that we will always generate some degree of operating leverage. And that will always remain true. We're not going to talk about a high watermark. And we will continue to update you on our views. But for now, we're executing with exceptional expense management, exceptional measurement and cost of goods sold. And we are delivering -- over delivering really on the profitability we would have expected at this top line rate. So, we are happy that we're running the business as it should be run. And we believe that in those base case and accelerated cases that we laid out in June.","evidence_gemma_new":"2026","evidence_llama_3_3":"2026","evidence_qwen_3_30b":null,"gemma_new_max":2026.0,"gemma_new_min":2026.0,"llama_3_3_max":2026.0,"llama_3_3_min":2026.0,"qwen_3_30b_max":null,"qwen_3_30b_min":null}
{"symbol":"HD","year":2023,"quarter":2,"date":"2023-Q2","chunk_id":5,"sub_chunk_id":0,"centroid_label":"retail selling square footage","agreed_value":241000000.0,"count":2,"chunk":"Richard McPhail: Thank you, Ann, and good morning, everyone. In the second quarter, total sales were $42.9 billion, a decrease of approximately $900 million or 2% from last year. During the second quarter, our total company comps were negative 2% with comps of negative 2.6% in May, negative 3.3% in June and negative 0.2% in July. Comps in the U.S. were negative 2% for the quarter with comps of negative 2.6% in May, negative 3.3% in June and negative 0.4% in July. As you heard from Billy, during the second quarter, we continued to experience lumber deflation compared to the prior year. While lumber prices were down, we saw an improvement in unit productivity, resulting in a net negative comp impact of approximately 85 basis points versus the second quarter of 2022. In the second quarter, our gross margin was 33%, a decrease of 8 basis points from the second quarter last year, primarily driven by pressure from shrink. During the second quarter, operating expense as a percent of sales increased approximately 100 basis points to 17.6% compared to the second quarter of 2022. Our operating expense performance during the second quarter reflects our previously executed compensation increases for hourly associates as well as deleverage from our top line results. Our operating margin for the second quarter was 15.4% compared to 16.5% in the second quarter of 2022. Interest and other expense for the second quarter increased by $49 million to $428 million due primarily to interest on our floating rate debt as well as higher debt balances than a year ago. In the second quarter, our effective tax rate was 24.4%, up from 24.3% in the second quarter of fiscal 2022. Our diluted earnings per share for the second quarter were $4.65, a decrease of 7.9% compared to the second quarter of 2022. During the second quarter, we opened two new stores, bringing our total store count to 2,326. Retail selling square footage was approximately 241 million square feet. At the end of the quarter, merchandise inventories were $23.3 billion, down $2.8 billion compared to the second quarter of 2022. And inventory turns were 4.4x, down from 4.5x last year. Turning to capital allocation. After investing in our business and paying our dividend, it is our intent to return excess cash to shareholders in the form of share repurchases. During the second quarter, we invested approximately $800 million back into our business in the form of capital expenditures. And during the quarter, we paid approximately $2.1 billion in dividends to our shareholders, and we returned approximately $2 billion to shareholders in the form of share repurchases. Computed on the average of beginning and ending long-term debt and equity for the trailing 12 months, return on invested capital was approximately 41.5%, down from 45.6% in the second quarter of fiscal 2022. Now I\u2019ll comment on our guidance for fiscal 2023. Today, we are reaffirming our guidance for 2023. We expect fiscal 2023 sales and comp sales to decline between 2% and 5%. We are targeting an operating margin between 14.3% and 14% for the year. Our effective tax rate is targeted at approximately 24.5%. We expect interest expense of approximately $1.8 billion and we are anticipating between a 7% and 13% decline in diluted earnings per share compared to fiscal 2022. In addition, we continue to focus on driving productivity in the business and feel confident that we will realize the previously announced $500 million in annualized cost savings in 2024. We also remain focused on meeting the needs of our customers with our leading product authority in home improvement, strong in-stock levels and knowledgeable associates. We will continue to prudently invest to strengthen our competitive position and leverage our scale and low-cost position to outperform our market and deliver shareholder value. Thank you for your participation in today\u2019s call. And Christine, we are now ready for questions.","evidence_gemma_new":null,"evidence_llama_3_3":"retail selling square footage second quarter","evidence_qwen_3_30b":"retail selling square footage","gemma_new_max":null,"gemma_new_min":null,"llama_3_3_max":241000000.0,"llama_3_3_min":241000000.0,"qwen_3_30b_max":241000000.0,"qwen_3_30b_min":241000000.0}
{"symbol":"HD","year":2023,"quarter":3,"date":"2023-Q3","chunk_id":5,"sub_chunk_id":0,"centroid_label":"retail selling square footage","agreed_value":242000000.0,"count":2,"chunk":"Richard McPhail: Thank you, Billy, and good morning, everyone. In the third quarter, total sales were $37.7 billion, a decrease of approximately $1.2 billion or 3% from last year. During the third quarter, our total company comps were negative 3.1% with comps of negative 2.1% in August, negative 3.4% in September and negative 3.7% in October. Comps in the U.S. were negative 3.5% for the quarter with comps of negative 2.5% in August, negative 3.8% in September and negative 4.1% in October. In local currency, Mexico and Canada posted comps above the company average. It is important to note that adjusting for storm-related overlaps and some seasonal shift, monthly comps were relatively consistent across the quarter. In the third quarter, our gross margin was 33.8%, a decrease of approximately 20 basis points from the third quarter last year, which was in line with our expectations. During the third quarter, operating expense as a percent of sales increased approximately 120 basis points to 19.4% compared to the third quarter of 2022. Our operating expense performance during the third quarter reflects our previously executed compensation increases for hourly associates as well as deleverage from our top line results. Our operating margin for the third quarter was 14.3% compared to 15.8% in the third quarter of 2022. Interest and other expense for the third quarter increased by approximately $30 million to $438 million. In the third quarter, our effective tax rate was 23.3%, down from 24.4% in the third quarter of fiscal 2022. Our diluted earnings per share for the third quarter were $3.81, a decrease of 10.1% compared to the third quarter of 2022. During the third quarter, we opened 7 new stores, bringing our total store count to 2,333. Retail selling square footage was approximately 242 million square feet. At the end of the quarter, merchandise inventories were $22.8 billion, down $2.9 billion or 11% compared to the third quarter of 2022. And inventory turns were 4.3x flat to 1 year ago. Turning to capital allocation. After investing in our business and paying our dividend, it is our intent to return excess cash to shareholders in the form of share repurchases. During the quarter, we invested approximately $670 million back into our business in the form of capital expenditures. And during the quarter, we paid approximately $2.1 billion in dividends to our shareholders, and we returned approximately $1.5 billion to shareholders in the form of share repurchases. Computed on the average of beginning and ending long-term debt and equity for the trailing 12 months, return on invested capital was approximately 38.7%, down from 43.3% in the third quarter of fiscal 2022. Now I will comment on our guidance for fiscal 2023. As you heard from Ted, with one quarter remaining in fiscal 2023, we no longer expect the end points of our previous guidance range as likely outcomes, and therefore, we are narrowing our guidance for 2023. We expect fiscal 2023 sales and comp sales to decline between 3% and 4%. We are targeting an operating margin between 14.2% and 14.1% for the year. Our effective tax rate is targeted at approximately 24.5%. We expect interest expense of approximately $1.8 billion. And we are anticipating between a 9% and 11% decline in diluted earnings per share compared to fiscal 2022. In addition, as you heard from Ann, we continue to focus on driving productivity in the business. We have taken a number of actions that will help us realize the previously announced $500 million in annualized cost savings in 2024 and are fully confident that we will deliver on this commitment. We also remain focused on meeting the needs of our customers with our leading product authority in home improvement, strong in-stock levels and knowledgeable associates. We will continue to prudently invest to strengthen our competitive position and leverage our scale and low-cost position to outperform our market and deliver shareholder value. Thank you for your participation in today's call. And Christine, we are now ready for questions.","evidence_gemma_new":"Retail selling square footage","evidence_llama_3_3":null,"evidence_qwen_3_30b":"retail selling square footage","gemma_new_max":242000000.0,"gemma_new_min":242000000.0,"llama_3_3_max":null,"llama_3_3_min":null,"qwen_3_30b_max":242000000.0,"qwen_3_30b_min":242000000.0}
{"symbol":"HD","year":2024,"quarter":1,"date":"2024-Q1","chunk_id":5,"sub_chunk_id":0,"centroid_label":"retail selling square footage","agreed_value":242000000.0,"count":3,"chunk":"Richard McPhail: Thank you, Billy, and good morning, everyone. In the first quarter, total sales were $36.4 billion, a decrease of approximately 2.3% from last year. During the first quarter, our total company comps were negative 2.8% with comps of negative 4% in February, negative 0.8% in March, and negative 3.3% in April. Comps in the U.S. were negative 3.2% for the quarter with comps of negative 4.8% in February, negative 1.3% in March, and negative 3.6% in April. For the quarter, Mexico posted positive comps, whereas Canada was slightly below the company average. In the first quarter, our gross margin was 34.1%, an increase of approximately 45 basis points from the first quarter last year, primarily driven by benefits from lower transportation cost and shrink. During the first quarter, operating expense as a percent of sales increased approximately 140 basis points to 20.2% compared to the first quarter of 2023. The increase was primarily driven by a benefit from a legal settlement that we are overlapping from the first quarter of fiscal 2023, as well as deleverage from our top line results. Our operating expense performance was in line with our expectations. Our operating margin for the first quarter was 13.9% compared to 14.9% in the first quarter of 2023. Interest and other expense for the first quarter decreased by $13 million to $428 million. In the first quarter, our effective tax rate was 22.6% compared to 24.2% in the first quarter of fiscal 2023. Our diluted earnings per share for the first quarter were $3.63, a decrease of 5% compared to the first quarter of 2023. During the first quarter, we opened two new stores, bringing our total store count to 2,337. Retail selling square footage was approximately 242 million square feet. At the end of the quarter, merchandise inventories were $22.4 billion, down approximately $3 billion, or 12% compared to the first quarter of 2023, and inventory turns were 4.5x, up from 3.9x last year. Turning to capital allocation. During the first quarter, we invested approximately $850 million back into our business in the form of capital expenditures. And during the quarter, we paid approximately $2.2 billion in dividends to our shareholders and we returned approximately $600 million to shareholders in the form of share repurchases. As a reminder, in March we announced our intent to acquire SRS Distribution and as a result, we paused share repurchases. As you've heard us say many times, we maintain a disciplined approach to capital allocation and that is not changing. First and foremost, we will invest in the business and expect capital expenditures of approximately 2% of sales on an annual basis. After investing in the business, we plan to pay the dividend and it is our intent to return any excess cash to shareholders in the form of share repurchases. From time to time, we will also invest in the business through acquisitions to enhance our capabilities and to accelerate our strategic objectives. Computed on the average of beginning and ending long-term debt and equity for the trailing 12 months, return on invested capital was 37.1%, down from 43.6% \u2013 excuse me, down from 43.6% in the first quarter of fiscal 2023. Now, I will comment on our guidance for fiscal 2024. Today, we are reaffirming our guidance for 2024. As a reminder, our guidance does not currently reflect any impact from the announced acquisition of SRS. The acquisition is currently under regulatory review and we expect it to close by the end of fiscal 2024. We expect total sales growth to outpace sales comp with sales growth of approximately positive 1% and comp sales of approximately negative 1%. Total sales growth will benefit from a 53rd week and we expect the 53rd week will contribute approximately $2.3 billion in sales. Our gross margin is expected to be approximately 33.9%, an increase of approximately 50 basis points, compared to fiscal 2023. We expect operating margin of approximately 14.1%. Our effective tax rate is targeted at approximately 24.5%. We expect net interest expense of approximately $1.8 billion, and our diluted earnings per share percent growth is targeted to be approximately 1% compared to fiscal 2023. It\u2019s our intent to update guidance as appropriate once the SRS transaction closes. We believe that we have positioned ourselves to meet the needs of our customers in any environment. The investments we\u2019ve made in our business have enabled agility in our operating model. As we look forward, we will continue to invest to strengthen our position with our customers, leverage our scale and low-cost position to drive growth faster than the market and deliver shareholder value. Thank you for your participation in today\u2019s call. And Christine, we are now ready for questions.","evidence_gemma_new":"Retail selling square footage","evidence_llama_3_3":"retail selling square footage end of the quarter","evidence_qwen_3_30b":"retail selling square footage","gemma_new_max":242000000.0,"gemma_new_min":242000000.0,"llama_3_3_max":242000000.0,"llama_3_3_min":242000000.0,"qwen_3_30b_max":242000000.0,"qwen_3_30b_min":242000000.0}
{"symbol":"HD","year":2024,"quarter":2,"date":"2024-Q2","chunk_id":5,"sub_chunk_id":0,"centroid_label":"retail selling square footage","agreed_value":243000000.0,"count":3,"chunk":"Richard McPhail: Thank you, Billy, and good morning, everyone. In the second quarter, Total sales were $43.2 billion, an increase of approximately 0.6% from last year. Total sales include $1.3 billion from the recent acquisition of SRS, which represents approximately six weeks of sales in the quarter. During the second quarter, our total company comps were negative 3.3%, with comps of negative 3.7% in May, negative 0.9% in June and negative 4.9% in July. Comps in the U.S. were negative 3.6% for the quarter, with comps of negative 4.1% in May, negative 1.4% in June and negative 5% in July. In the second quarter, our gross margin was approximately 33.4%, an increase of 40 basis points from the second quarter last year, primarily driven by benefits from lower transportation costs and shrink, partially offset by mix as a result of the SRS acquisition. During the second quarter, operating expense as a percent of sales increased approximately 65 basis points to 18.3% compared to the second quarter of 2023. Our operating expense performance was in line with our expectations. Beginning this quarter, in addition to our GAAP measures, we are providing the following non-GAAP measures: adjusted operating income, adjusted operating margin and adjusted diluted earnings per share, which excludes noncash amortization of acquired intangible assets. We believe these supplemental measures will help investors better understand and analyze our performance. Our operating margin for the second quarter was 15.1% compared to 15.4% in the second quarter of 2023. In the quarter, pretax intangible asset amortization was $90 million, including $39 million related to SRS. Excluding the intangible asset amortization in the quarter, our adjusted operating margin for the second quarter was 15.3% and compared to 15.5% in the second quarter of 2023. Interest and other expense for the second quarter increased by $61 million to $489 million due primarily to higher debt balances than a year ago. In the second quarter, our effective tax rate was 24.5%, compared to 24.4% in the second quarter of fiscal 2023. Our diluted earnings per share for the second quarter were $4.60, a decrease of approximately 1% compared to the second quarter of 2023. Excluding intangible asset amortization, our adjusted diluted earnings per share for the second quarter were $4.67, essentially flat compared to the second quarter of 2023. During the second quarter, we opened three new stores, bringing our total store count to 2,340. Retail selling square footage was approximately 243 million square feet. At the end of the quarter, merchandise inventories or $23.1 billion, down approximately $200 million compared to the second quarter of 2023, and inventory turns were 4.9x, up from 4.4x last year. Turning to capital allocation. During the second quarter, we invested approximately $720 million back into our business in the form of capital expenditures. And during the quarter, we paid approximately $2.2 billion in dividends to our shareholders. Our disciplined approach to capital allocation remains unchanged. First and foremost, we will invest in the business and expect capital expenditures of approximately 2% of sales on an annual basis. After investing in the business, we plan to pay the dividend and it is our intent to return any excess cash to shareholders in the form of share repurchases. Computed on the average of beginning and ending long-term debt and equity for the trailing 12 months, return on invested capital was approximately 31.9%, down from 41.5% in the second quarter of fiscal 2023. Now, I will comment on our updated outlook for fiscal 2024. As you heard from Ted, given the softer-than-expected performance in the first half of the year, and reflecting continued uncertainty around underlying consumer demand, we believe a more cautious outlook for the year is warranted. With the recent closing of the SRS acquisition, we are now including their results in our consolidated outlook for the year. For the period matching our first half, which includes periods prior to the acquisition and not fully reflected in our financial statements, SRS generated high single-digit percentage sales growth with operating income growing largely in line with sales. We believe that over the next several years, SRS on its own, and through our combined Pro efforts, will help accelerate sales and earnings growth for our company. Updating our fiscal 2024 guidance for the factors we just discussed. We now expect total sales growth between 2.5% and 3.5%, including the SRS acquisition and the 53rd week. The 53rd week is projected to add approximately $2.3 billion to total sales. SRS is expected to contribute approximately $6.4 billion in incremental sales. Comparable sales are expected to decline between negative 3% and negative 4% for the 52-week period. The high end of our range implies a consumer demand environment consistent with the first half of fiscal 2024. While comparable sales for the Company are not currently on the trajectory for the low end of the range, a negative 4% comp implies incremental pressure on consumer demand beyond what we are seeing today. We expect to open approximately 12 new stores. Our gross margin is expected to be approximately 33.5%. We expect operating margin to be between 13.5% and 13.6%, and adjusted operating margin to be between 13.8% and 13.9%. Our effective tax rate is targeted at approximately 24%. We expect net interest expense of approximately $2.2 billion. Our diluted earnings per share percent will decline between negative 2% and negative 4% compared to fiscal 2023, with the extra week contributing approximately $0.30. We expect our adjusted diluted earnings per share percent to decline between negative 1% and negative 3%, compared to fiscal 2023, with the extra week contributing approximately $0.30. We believe that we have positioned ourselves to meet the needs of our customers in any environment. The investments we've made in our business have enabled agility in our operating model. As we look forward, we will continue to invest to strengthen our position with our customers, leverage our scale and low-cost position to drive growth faster than the market and deliver shareholder value. Thank you for your participation in today's call. And Christine, we are now ready for questions.","evidence_gemma_new":"Retail selling square footage","evidence_llama_3_3":"retail selling square footage second quarter","evidence_qwen_3_30b":"retail selling square footage second quarter","gemma_new_max":243000000.0,"gemma_new_min":243000000.0,"llama_3_3_max":243000000.0,"llama_3_3_min":243000000.0,"qwen_3_30b_max":243000000.0,"qwen_3_30b_min":243000000.0}
{"symbol":"HD","year":2024,"quarter":3,"date":"2024-Q3","chunk_id":5,"sub_chunk_id":0,"centroid_label":"retail selling square footage","agreed_value":243000000.0,"count":2,"chunk":"Richard McPhail: Thank you, Billy, and good morning, everyone. In the third quarter, total sales were $40.2 billion, an increase of approximately 6.6% from last year. During the third quarter, our total company comps were negative 1.3% with comps of negative 3.3% in August, negative 2.3% in September and positive 1% in October. Comps in the U.S. were negative 1.2% for the quarter, with comps of negative 3.5% in August, negative 2.2% in September, and positive 1.4% in October. The progression of our monthly comps reflects in large part hurricane related sales. Our results for the third quarter include a net contribution of approximately $200 million in hurricane related sales, which positively impacted total company comps by approximately 55 basis points for the quarter and approximately 120 basis points for October. In the third quarter, our gross margin was approximately 33.4%, a decrease of approximately 40 basis points from the third quarter last year, primarily driven by mix as a result of the SRS acquisition, partially offset by benefits from lower shrink. During the third quarter, operating expense as a percent of sales increased approximately 45 basis points to 19.9% compared to the third quarter of 2023. Our operating expense performance was in-line with our expectations. Our operating margin for the third quarter was 13.5% compared to 14.3% in the third quarter of 2023. In the quarter, pre-tax intangible asset amortization was $138 million including $86 million related to SRS. Excluding the intangible asset amortization in the quarter, our adjusted operating margin for the third quarter was 13.8% compared to 14.5% in the third quarter of 2023. Interest and other expense for the third quarter increased by $157 million to $595 million due primarily to higher debt balances than a year ago. In the third quarter, our effective tax rate was 24.4% compared to 23.3% in the third quarter of fiscal 2023. Our diluted earnings per share for the third quarter were $3.67, a decrease of approximately 4% compared to the third quarter of 2023. Excluding intangible asset amortization, our adjusted diluted earnings per share for the third quarter were $3.78, a decrease of approximately 2% compared to the third quarter of 2023. During the third quarter, we opened five new stores, bringing our total store count to 2, 345. Retail selling square footage was approximately 243 million square feet. At the end of the quarter, merchandise inventories were $23.9 billion up approximately $1.1 billion compared to the third quarter of 2023, and inventory turns were 4.8 times, up from 4.3 times last year. Turning to capital allocation. During the third quarter, we invested approximately $820 million back into our business in the form of capital expenditures. And during the quarter, we paid approximately $2.2 billion in dividends to our shareholders. Compute on the average of beginning and ending long-term debt and equity for the trailing 12-months, return on invested capital was approximately 31.5%, down from 38.7% in the third quarter of fiscal 2023. Now, I will comment on our updated outlook for fiscal 2024. As you heard from Ted, while macro uncertainty remains and continues to pressure home improvement demand, our performance in the third quarter was better than expected. Our performance reflects hurricane related sales in the third quarter, and we expect some hurricane related sales in the fourth quarter. Given the better than expected performance in the third quarter and incremental hurricane related sales, we have updated our fiscal 2024 guidance. We now expect total sales growth of approximately 4%, including SRS in the 53rd week. The 53rd week is projected to add approximately $2.3 billion to total sales and SRS is expected to contribute approximately $6.4 billion in incremental sales. Comparable sales are expected to decline approximately 2.5% for the 52 week period. We expect to open approximately 12 new stores. Our gross margin is expected to be approximately 33.5%. We expect operating margin to be approximately 13.5% and adjusted operating margin to be approximately 13.8%. Our effective tax rate is targeted at approximately 24%. We expect net interest expense of approximately $2.1 billion. We expect our diluted earnings per share to decline approximately 2% compared to fiscal 2023 with the extra week contributing approximately $0.30 per share. And, we expect our adjusted diluted earnings per share to decline approximately 1% compared to fiscal 2023 with the extra week contributing approximately $0.30 per share. We believe that we will grow market share in any environment. We are continuing to invest to strengthen our competitive position with our customers and leverage our scale and low cost position to drive growth faster than the market and deliver shareholder value. Thank you for your participation in today\u2019s call. And Christine, we are now ready for questions.","evidence_gemma_new":"Retail selling square footage","evidence_llama_3_3":"retail selling square footage third quarter","evidence_qwen_3_30b":null,"gemma_new_max":243000000.0,"gemma_new_min":243000000.0,"llama_3_3_max":243000000.0,"llama_3_3_min":243000000.0,"qwen_3_30b_max":null,"qwen_3_30b_min":null}
{"symbol":"HD","year":2023,"quarter":2,"date":"2023-Q2","chunk_id":5,"sub_chunk_id":0,"centroid_label":"return on invested capital","agreed_value":0.415,"count":2,"chunk":"Richard McPhail: Thank you, Ann, and good morning, everyone. In the second quarter, total sales were $42.9 billion, a decrease of approximately $900 million or 2% from last year. During the second quarter, our total company comps were negative 2% with comps of negative 2.6% in May, negative 3.3% in June and negative 0.2% in July. Comps in the U.S. were negative 2% for the quarter with comps of negative 2.6% in May, negative 3.3% in June and negative 0.4% in July. As you heard from Billy, during the second quarter, we continued to experience lumber deflation compared to the prior year. While lumber prices were down, we saw an improvement in unit productivity, resulting in a net negative comp impact of approximately 85 basis points versus the second quarter of 2022. In the second quarter, our gross margin was 33%, a decrease of 8 basis points from the second quarter last year, primarily driven by pressure from shrink. During the second quarter, operating expense as a percent of sales increased approximately 100 basis points to 17.6% compared to the second quarter of 2022. Our operating expense performance during the second quarter reflects our previously executed compensation increases for hourly associates as well as deleverage from our top line results. Our operating margin for the second quarter was 15.4% compared to 16.5% in the second quarter of 2022. Interest and other expense for the second quarter increased by $49 million to $428 million due primarily to interest on our floating rate debt as well as higher debt balances than a year ago. In the second quarter, our effective tax rate was 24.4%, up from 24.3% in the second quarter of fiscal 2022. Our diluted earnings per share for the second quarter were $4.65, a decrease of 7.9% compared to the second quarter of 2022. During the second quarter, we opened two new stores, bringing our total store count to 2,326. Retail selling square footage was approximately 241 million square feet. At the end of the quarter, merchandise inventories were $23.3 billion, down $2.8 billion compared to the second quarter of 2022. And inventory turns were 4.4x, down from 4.5x last year. Turning to capital allocation. After investing in our business and paying our dividend, it is our intent to return excess cash to shareholders in the form of share repurchases. During the second quarter, we invested approximately $800 million back into our business in the form of capital expenditures. And during the quarter, we paid approximately $2.1 billion in dividends to our shareholders, and we returned approximately $2 billion to shareholders in the form of share repurchases. Computed on the average of beginning and ending long-term debt and equity for the trailing 12 months, return on invested capital was approximately 41.5%, down from 45.6% in the second quarter of fiscal 2022. Now I\u2019ll comment on our guidance for fiscal 2023. Today, we are reaffirming our guidance for 2023. We expect fiscal 2023 sales and comp sales to decline between 2% and 5%. We are targeting an operating margin between 14.3% and 14% for the year. Our effective tax rate is targeted at approximately 24.5%. We expect interest expense of approximately $1.8 billion and we are anticipating between a 7% and 13% decline in diluted earnings per share compared to fiscal 2022. In addition, we continue to focus on driving productivity in the business and feel confident that we will realize the previously announced $500 million in annualized cost savings in 2024. We also remain focused on meeting the needs of our customers with our leading product authority in home improvement, strong in-stock levels and knowledgeable associates. We will continue to prudently invest to strengthen our competitive position and leverage our scale and low-cost position to outperform our market and deliver shareholder value. Thank you for your participation in today\u2019s call. And Christine, we are now ready for questions.","evidence_gemma_new":"return on invested capital","evidence_llama_3_3":"return on invested capital second quarter","evidence_qwen_3_30b":null,"gemma_new_max":0.415,"gemma_new_min":0.415,"llama_3_3_max":0.415,"llama_3_3_min":0.415,"qwen_3_30b_max":null,"qwen_3_30b_min":null}
{"symbol":"HD","year":2023,"quarter":3,"date":"2023-Q3","chunk_id":5,"sub_chunk_id":0,"centroid_label":"return on invested capital","agreed_value":38.7,"count":2,"chunk":"Richard McPhail: Thank you, Billy, and good morning, everyone. In the third quarter, total sales were $37.7 billion, a decrease of approximately $1.2 billion or 3% from last year. During the third quarter, our total company comps were negative 3.1% with comps of negative 2.1% in August, negative 3.4% in September and negative 3.7% in October. Comps in the U.S. were negative 3.5% for the quarter with comps of negative 2.5% in August, negative 3.8% in September and negative 4.1% in October. In local currency, Mexico and Canada posted comps above the company average. It is important to note that adjusting for storm-related overlaps and some seasonal shift, monthly comps were relatively consistent across the quarter. In the third quarter, our gross margin was 33.8%, a decrease of approximately 20 basis points from the third quarter last year, which was in line with our expectations. During the third quarter, operating expense as a percent of sales increased approximately 120 basis points to 19.4% compared to the third quarter of 2022. Our operating expense performance during the third quarter reflects our previously executed compensation increases for hourly associates as well as deleverage from our top line results. Our operating margin for the third quarter was 14.3% compared to 15.8% in the third quarter of 2022. Interest and other expense for the third quarter increased by approximately $30 million to $438 million. In the third quarter, our effective tax rate was 23.3%, down from 24.4% in the third quarter of fiscal 2022. Our diluted earnings per share for the third quarter were $3.81, a decrease of 10.1% compared to the third quarter of 2022. During the third quarter, we opened 7 new stores, bringing our total store count to 2,333. Retail selling square footage was approximately 242 million square feet. At the end of the quarter, merchandise inventories were $22.8 billion, down $2.9 billion or 11% compared to the third quarter of 2022. And inventory turns were 4.3x flat to 1 year ago. Turning to capital allocation. After investing in our business and paying our dividend, it is our intent to return excess cash to shareholders in the form of share repurchases. During the quarter, we invested approximately $670 million back into our business in the form of capital expenditures. And during the quarter, we paid approximately $2.1 billion in dividends to our shareholders, and we returned approximately $1.5 billion to shareholders in the form of share repurchases. Computed on the average of beginning and ending long-term debt and equity for the trailing 12 months, return on invested capital was approximately 38.7%, down from 43.3% in the third quarter of fiscal 2022. Now I will comment on our guidance for fiscal 2023. As you heard from Ted, with one quarter remaining in fiscal 2023, we no longer expect the end points of our previous guidance range as likely outcomes, and therefore, we are narrowing our guidance for 2023. We expect fiscal 2023 sales and comp sales to decline between 3% and 4%. We are targeting an operating margin between 14.2% and 14.1% for the year. Our effective tax rate is targeted at approximately 24.5%. We expect interest expense of approximately $1.8 billion. And we are anticipating between a 9% and 11% decline in diluted earnings per share compared to fiscal 2022. In addition, as you heard from Ann, we continue to focus on driving productivity in the business. We have taken a number of actions that will help us realize the previously announced $500 million in annualized cost savings in 2024 and are fully confident that we will deliver on this commitment. We also remain focused on meeting the needs of our customers with our leading product authority in home improvement, strong in-stock levels and knowledgeable associates. We will continue to prudently invest to strengthen our competitive position and leverage our scale and low-cost position to outperform our market and deliver shareholder value. Thank you for your participation in today's call. And Christine, we are now ready for questions.","evidence_gemma_new":null,"evidence_llama_3_3":"return on invested capital third quarter","evidence_qwen_3_30b":"return on invested capital trailing 12 months","gemma_new_max":null,"gemma_new_min":null,"llama_3_3_max":38.7,"llama_3_3_min":38.7,"qwen_3_30b_max":38.7,"qwen_3_30b_min":38.7}
{"symbol":"HD","year":2024,"quarter":1,"date":"2024-Q1","chunk_id":5,"sub_chunk_id":0,"centroid_label":"return on invested capital","agreed_value":0.371,"count":2,"chunk":"Richard McPhail: Thank you, Billy, and good morning, everyone. In the first quarter, total sales were $36.4 billion, a decrease of approximately 2.3% from last year. During the first quarter, our total company comps were negative 2.8% with comps of negative 4% in February, negative 0.8% in March, and negative 3.3% in April. Comps in the U.S. were negative 3.2% for the quarter with comps of negative 4.8% in February, negative 1.3% in March, and negative 3.6% in April. For the quarter, Mexico posted positive comps, whereas Canada was slightly below the company average. In the first quarter, our gross margin was 34.1%, an increase of approximately 45 basis points from the first quarter last year, primarily driven by benefits from lower transportation cost and shrink. During the first quarter, operating expense as a percent of sales increased approximately 140 basis points to 20.2% compared to the first quarter of 2023. The increase was primarily driven by a benefit from a legal settlement that we are overlapping from the first quarter of fiscal 2023, as well as deleverage from our top line results. Our operating expense performance was in line with our expectations. Our operating margin for the first quarter was 13.9% compared to 14.9% in the first quarter of 2023. Interest and other expense for the first quarter decreased by $13 million to $428 million. In the first quarter, our effective tax rate was 22.6% compared to 24.2% in the first quarter of fiscal 2023. Our diluted earnings per share for the first quarter were $3.63, a decrease of 5% compared to the first quarter of 2023. During the first quarter, we opened two new stores, bringing our total store count to 2,337. Retail selling square footage was approximately 242 million square feet. At the end of the quarter, merchandise inventories were $22.4 billion, down approximately $3 billion, or 12% compared to the first quarter of 2023, and inventory turns were 4.5x, up from 3.9x last year. Turning to capital allocation. During the first quarter, we invested approximately $850 million back into our business in the form of capital expenditures. And during the quarter, we paid approximately $2.2 billion in dividends to our shareholders and we returned approximately $600 million to shareholders in the form of share repurchases. As a reminder, in March we announced our intent to acquire SRS Distribution and as a result, we paused share repurchases. As you've heard us say many times, we maintain a disciplined approach to capital allocation and that is not changing. First and foremost, we will invest in the business and expect capital expenditures of approximately 2% of sales on an annual basis. After investing in the business, we plan to pay the dividend and it is our intent to return any excess cash to shareholders in the form of share repurchases. From time to time, we will also invest in the business through acquisitions to enhance our capabilities and to accelerate our strategic objectives. Computed on the average of beginning and ending long-term debt and equity for the trailing 12 months, return on invested capital was 37.1%, down from 43.6% \u2013 excuse me, down from 43.6% in the first quarter of fiscal 2023. Now, I will comment on our guidance for fiscal 2024. Today, we are reaffirming our guidance for 2024. As a reminder, our guidance does not currently reflect any impact from the announced acquisition of SRS. The acquisition is currently under regulatory review and we expect it to close by the end of fiscal 2024. We expect total sales growth to outpace sales comp with sales growth of approximately positive 1% and comp sales of approximately negative 1%. Total sales growth will benefit from a 53rd week and we expect the 53rd week will contribute approximately $2.3 billion in sales. Our gross margin is expected to be approximately 33.9%, an increase of approximately 50 basis points, compared to fiscal 2023. We expect operating margin of approximately 14.1%. Our effective tax rate is targeted at approximately 24.5%. We expect net interest expense of approximately $1.8 billion, and our diluted earnings per share percent growth is targeted to be approximately 1% compared to fiscal 2023. It\u2019s our intent to update guidance as appropriate once the SRS transaction closes. We believe that we have positioned ourselves to meet the needs of our customers in any environment. The investments we\u2019ve made in our business have enabled agility in our operating model. As we look forward, we will continue to invest to strengthen our position with our customers, leverage our scale and low-cost position to drive growth faster than the market and deliver shareholder value. Thank you for your participation in today\u2019s call. And Christine, we are now ready for questions.","evidence_gemma_new":null,"evidence_llama_3_3":"return on invested capital first quarter","evidence_qwen_3_30b":"return on invested capital","gemma_new_max":null,"gemma_new_min":null,"llama_3_3_max":0.371,"llama_3_3_min":0.371,"qwen_3_30b_max":0.371,"qwen_3_30b_min":0.371}
{"symbol":"HD","year":2024,"quarter":3,"date":"2024-Q3","chunk_id":5,"sub_chunk_id":0,"centroid_label":"return on invested capital","agreed_value":0.315,"count":2,"chunk":"Richard McPhail: Thank you, Billy, and good morning, everyone. In the third quarter, total sales were $40.2 billion, an increase of approximately 6.6% from last year. During the third quarter, our total company comps were negative 1.3% with comps of negative 3.3% in August, negative 2.3% in September and positive 1% in October. Comps in the U.S. were negative 1.2% for the quarter, with comps of negative 3.5% in August, negative 2.2% in September, and positive 1.4% in October. The progression of our monthly comps reflects in large part hurricane related sales. Our results for the third quarter include a net contribution of approximately $200 million in hurricane related sales, which positively impacted total company comps by approximately 55 basis points for the quarter and approximately 120 basis points for October. In the third quarter, our gross margin was approximately 33.4%, a decrease of approximately 40 basis points from the third quarter last year, primarily driven by mix as a result of the SRS acquisition, partially offset by benefits from lower shrink. During the third quarter, operating expense as a percent of sales increased approximately 45 basis points to 19.9% compared to the third quarter of 2023. Our operating expense performance was in-line with our expectations. Our operating margin for the third quarter was 13.5% compared to 14.3% in the third quarter of 2023. In the quarter, pre-tax intangible asset amortization was $138 million including $86 million related to SRS. Excluding the intangible asset amortization in the quarter, our adjusted operating margin for the third quarter was 13.8% compared to 14.5% in the third quarter of 2023. Interest and other expense for the third quarter increased by $157 million to $595 million due primarily to higher debt balances than a year ago. In the third quarter, our effective tax rate was 24.4% compared to 23.3% in the third quarter of fiscal 2023. Our diluted earnings per share for the third quarter were $3.67, a decrease of approximately 4% compared to the third quarter of 2023. Excluding intangible asset amortization, our adjusted diluted earnings per share for the third quarter were $3.78, a decrease of approximately 2% compared to the third quarter of 2023. During the third quarter, we opened five new stores, bringing our total store count to 2, 345. Retail selling square footage was approximately 243 million square feet. At the end of the quarter, merchandise inventories were $23.9 billion up approximately $1.1 billion compared to the third quarter of 2023, and inventory turns were 4.8 times, up from 4.3 times last year. Turning to capital allocation. During the third quarter, we invested approximately $820 million back into our business in the form of capital expenditures. And during the quarter, we paid approximately $2.2 billion in dividends to our shareholders. Compute on the average of beginning and ending long-term debt and equity for the trailing 12-months, return on invested capital was approximately 31.5%, down from 38.7% in the third quarter of fiscal 2023. Now, I will comment on our updated outlook for fiscal 2024. As you heard from Ted, while macro uncertainty remains and continues to pressure home improvement demand, our performance in the third quarter was better than expected. Our performance reflects hurricane related sales in the third quarter, and we expect some hurricane related sales in the fourth quarter. Given the better than expected performance in the third quarter and incremental hurricane related sales, we have updated our fiscal 2024 guidance. We now expect total sales growth of approximately 4%, including SRS in the 53rd week. The 53rd week is projected to add approximately $2.3 billion to total sales and SRS is expected to contribute approximately $6.4 billion in incremental sales. Comparable sales are expected to decline approximately 2.5% for the 52 week period. We expect to open approximately 12 new stores. Our gross margin is expected to be approximately 33.5%. We expect operating margin to be approximately 13.5% and adjusted operating margin to be approximately 13.8%. Our effective tax rate is targeted at approximately 24%. We expect net interest expense of approximately $2.1 billion. We expect our diluted earnings per share to decline approximately 2% compared to fiscal 2023 with the extra week contributing approximately $0.30 per share. And, we expect our adjusted diluted earnings per share to decline approximately 1% compared to fiscal 2023 with the extra week contributing approximately $0.30 per share. We believe that we will grow market share in any environment. We are continuing to invest to strengthen our competitive position with our customers and leverage our scale and low cost position to drive growth faster than the market and deliver shareholder value. Thank you for your participation in today\u2019s call. And Christine, we are now ready for questions.","evidence_gemma_new":null,"evidence_llama_3_3":"return on invested capital third quarter","evidence_qwen_3_30b":"return on invested capital third quarter","gemma_new_max":null,"gemma_new_min":null,"llama_3_3_max":0.315,"llama_3_3_min":0.315,"qwen_3_30b_max":0.315,"qwen_3_30b_min":0.315}
{"symbol":"HD","year":2023,"quarter":4,"date":"2023-FY","chunk_id":2,"sub_chunk_id":0,"centroid_label":"sales","agreed_value":152700000000.0,"count":2,"chunk":"Edward Decker : Thank you, Isabel, and good morning, everyone. As you'll hear from the team shortly, the fourth quarter of fiscal 2023 was largely in line with our expectations. For fiscal 2023, sales were $152.7 billion, down 3% from the prior year. Comp sales declined 3.2% versus last year, and our U.S. stores had negative comps of 3.5%. Diluted earnings per share were $15.11 compared to $16.69 in the prior year. After three years of exceptional growth for our business, 2023 was a year of moderation. It was also a year of opportunity. We focused on several operational improvements to strengthen the business, while also staying true to the growth opportunities detailed at our Investor Conference in June. As we reflect on 2023, we are better positioned in four key areas. We invested in our associates, the heartbeat of our company and the storage of customer service, effectively manage disinflation, while maintaining a strong value proposition for our customers, right sized our inventory position in increased in-stock and on-shelf availability levels, and we reduced fixed costs in the business that were introduced during the pandemic. As you know, at the beginning of 2023, we announced an approximately $1 billion investment in increased annualized compensation for our frontline hourly associates. This allowed us to improve customer service, position ourselves favorably in the market, attract and retain the most qualified talent, drive greater efficiency and productivity across the business, and improve safely broadly. We also navigated a unique disinflationary environment. We did this by leveraging our best-in-class cost finance team in merchants to effectively manage cost movements, while also being our customers advocate for value. And we believe prices have essentially settled in the marketplace. After several years of unprecedented sales growth, we entered 2023 with more inventory than we would've preferred. While the products we sell have low obsolescence, our teams work throughout the year to improve inventory productivity while delivering the highest in-stock and on-shelf availability rates since the pandemic. Today, we feel very good about our inventory position heading into 2024. Productivity and efficiency are hallmarks of the Home Depot, and as you heard at our Investor Conference in June, we announced our commitment to reduce fixed costs by approximately $500 million to be fully realized in 2024. We've now taken the necessary actions to achieve this cost benefit, which Richard will detail in a moment. As we look forward to 2024, we remain focused on our strategic opportunities of creating the best interconnected experience, growing our Pro wallet share through our unique ecosystem of capabilities and building new stores. In December 2023, we made a strategic acquisition of Construction Resources, a leading distributor of design-oriented surfaces, appliances, and architectural specialty products for Pro contractors focused on renovation, remodeling, and residential home building. This acquisition adds to our robust product offering of products and services. It allows our complex Pro\u2019s to easily shop across aesthetic product categories in a showroom setting, which is how they're accustomed to shopping for these types of goods. We are excited to welcome Construction Resources into the Home Depot family. In 2024, we will continue learning and building out new capabilities for the complex Pro. We are expanding our assortments, fulfillment options and our outside sales force and just recently began piloting trade credit options. In addition, we continue to work on new order management capabilities to better manage complex Pro orders. For the complex Pro opportunity, this means that by the end of 2024, we will have 17 of our top Pro markets equipped with new fulfillment options, localized product assortment and expanded sales force and enhanced digital capabilities with trade credit and order management in pilot for development. What I hope you take away today is how great we feel about our business and how well we are positioning the business for the future. We remain excited about the opportunity to grow our share of a fragmented $950 billion-plus market. Our associates and supplier partners have continually demonstrated agility and resilience, and I want to thank them for their hard work and dedication to serving our customers and communities. And with that, I'd like to turn the call over to Ann.","evidence_gemma_new":"sales fiscal 2023","evidence_llama_3_3":null,"evidence_qwen_3_30b":"sales fiscal 2023","gemma_new_max":152700000000.0,"gemma_new_min":152700000000.0,"llama_3_3_max":null,"llama_3_3_min":null,"qwen_3_30b_max":152700000000.0,"qwen_3_30b_min":152700000000.0}
{"symbol":"HD","year":2023,"quarter":2,"date":"2023-Q2","chunk_id":2,"sub_chunk_id":0,"centroid_label":"sales","agreed_value":42900000000.0,"count":3,"chunk":"Ted Decker: Thank you, Isabel and good morning everyone. Sales for the second quarter were $42.9 billion, down 2% from the same period last year. Comp sales for the total company as well as our U.S. stores also declined 2% from the same period last year. Diluted earnings per share were $4.65 in the second quarter compared to $5.05 in the second quarter last year. All three of our U.S. divisions posted low single-digit negative comps in the quarter. Our geographic variability narrowed significantly on a sequential basis as weather normalized, particularly in our Western division and spring-related categories rebounded relative to the first quarter. While there was strength in project-related categories like building materials, hardware and plumbing, we continue to see pressure in certain big ticket discretionary categories. Pro sales performance was slightly negative in the second quarter and outperformed the DIY customer. While surveys suggest that Pro backlogs are lower than they were a year ago, they are still healthy and elevated relative to historical norms. Additionally, projects in these backlogs are generally smaller in scale and scope. In the second quarter, we are pleased with the consumers\u2019 engagement with home improvement, particularly across small projects, which Billy will discuss in greater detail. Going forward, as we continue to navigate a unique and uncertain environment, our focus continues to be on operating with agility as we respond to evolving customer dynamics while also driving productivity and efficiency throughout the business. In addition and as we mentioned at our investor conference in June, we operate in a large and fragmented $950 billion plus addressable market. We remain committed to growing the business and believe we are well positioned to continue capturing market share. To that end, I am pleased to announce HD Supply\u2019s acquisition of Redi Carpet, a national MRO flooring provider with a proven track record. This acquisition, which closed at the beginning of the third quarter, extends our current product offering in the multifamily customer vertical with 34 locations strategically located throughout the U.S. Our team will continue to focus on what is most important: our associates and customers. Our merchants, store and met teams, supplier partners and supply chain teams did an outstanding job delivering value and service to our customers throughout the quarter. And I\u2019d like to thank them for their dedication and hard work. Before I close, I would like to send our thoughts and prayers to the people of Maui. While we are thankful that our people on the island are all accounted for, we are heartbroken by the loss of life and extreme devastation that the community must now navigate and we stand ready to help in the days, months and years ahead. And with that, I\u2019d like to turn the call over to Billy.","evidence_gemma_new":"Sales second quarter","evidence_llama_3_3":"Sales second quarter","evidence_qwen_3_30b":"Sales second quarter","gemma_new_max":42900000000.0,"gemma_new_min":42900000000.0,"llama_3_3_max":42900000000.0,"llama_3_3_min":42900000000.0,"qwen_3_30b_max":42900000000.0,"qwen_3_30b_min":42900000000.0}
{"symbol":"HD","year":2023,"quarter":3,"date":"2023-Q3","chunk_id":2,"sub_chunk_id":0,"centroid_label":"sales","agreed_value":37700000000.0,"count":3,"chunk":"Edward Decker: Thank you, Isabel, and good morning, everyone. Sales for the third quarter were $37.7 billion, down 3% from the same period last year. Comp sales declined 3.1% from the same period last year and our U.S. stores had negative comps of 3.5%. Diluted earnings per share were $3.81 in the third quarter compared to $4.24 in the third quarter last year. The third quarter was in line with our expectations. Similar to the second quarter, we saw continued customer engagement with smaller projects and experienced pressure in certain big-ticket discretionary categories. In addition, lumber and copper and wire deflation and storm-related overlaps negatively impacted results in the quarter. Billy will discuss these and other business trends shortly. During the third quarter, our Pro customer outperformed our DIY customer. While internal and external surveys suggest that Pro backlogs are lower than they were a year ago, they are still healthy and elevated relative to historical norms. There is only 1 quarter left in the year, we believe the endpoints for our previous guidance range are no longer likely outcomes. As a result, and as we announced in this morning's press release, we narrowed our guidance range for fiscal 2023. Richard will take you through the details in a moment. As we've discussed, this year reflects a period of moderation. However, we are confident in our ability to navigate through this unique environment. We remain very excited about our strategic initiatives and are committed to investing in the business to deliver the best interconnected shopping experience, capture wallet share with the Pro and grow our store footprint. As we discussed at the investor conference in June, we continue to invest and focus on creating a frictionless interconnected shopping experience for our customers. We are pleased with the progress we are making. homedepot.com is one of the largest retail websites in the United States, and our digital app is one of the most highly rated in all of retail. And yet, we believe there is still opportunity to reduce pain points across the shopping journey. Our teams are identifying areas of improvement like better communication throughout the shopping journey and an easier returns process and the ability to seamlessly and intuitively make changes to an order once placed. For our Pros, we're investing in a multitude of initiatives. We remain focused on building out our unique ecosystem of products and services. As a result, we are evolving our organizational structure and recently elevated Ann-Marie Campbell to Senior Executive Vice President, better aligning our outside sales and service business in the global stores organization. Pro is one of our biggest growth opportunities, and this organizational change will allow us to better serve them by leveraging our full ecosystem of expertise, product assortment, fulfillment and operations. Our merchants, store MET teams, supplier partners and supply chain teams did an outstanding job delivering value and service to our customers throughout the quarter, and I'd like to close by thanking them for their dedication and hard work. In addition, the Home Depot is proud to have tens of thousands of veterans, service members and military spouses and orange aprons. Last week, we announced The Home Depot Foundation surpassed the goal of $500 million invested in veterans causes and also increased the total commitment to $750 million by 2030. And with that, I'd like to turn the call over to Anne.","evidence_gemma_new":"Sales third quarter","evidence_llama_3_3":"Sales third quarter","evidence_qwen_3_30b":"Sales third quarter","gemma_new_max":37700000000.0,"gemma_new_min":37700000000.0,"llama_3_3_max":37700000000.0,"llama_3_3_min":37700000000.0,"qwen_3_30b_max":37700000000.0,"qwen_3_30b_min":37700000000.0}
{"symbol":"HD","year":2023,"quarter":4,"date":"2023-Q4","chunk_id":5,"sub_chunk_id":0,"centroid_label":"sales","agreed_value":152700000000.0,"count":2,"chunk":"Richard McPhail: Thank you, Billy, and good morning, everyone. In the fourth quarter, total sales were $34.8 billion, a decrease of 2.9% from last year. During the fourth quarter, our total company comps were negative 3.5% with comps of negative 2.5% in November, positive 1.1% in December and negative 8.5% in January. Comps in the U.S. were negative 4% for the quarter with comps of negative 2.7% in November, positive 0.6% in December and negative 9.1% in January. In local currency, Mexico and Canada posted comps above the company average with Mexico posting positive comps. It is important to note that adjusting for holiday shifts and weather-related impacts in January, monthly comps relatively consistent across the quarter. For the year, our sales totaled $152.7 billion, a decrease of 3% versus fiscal 2022. For the year, total company comp sales decreased 3.2% and U.S. comp sales decreased 3.5%. In the fourth quarter, our gross margin was approximately 33.1%, a decrease of 20 basis points from last year. For the year, our gross margin was approximately 33.4%, a decrease of 15 basis points from last year, which was in line with our expectations. During the fourth quarter, operating expenses as a percentage of sales increased approximately 115 basis points to 21.2% compared to the fourth quarter of 2022. Our operating expense performance during the fourth quarter reflects our previously executed compensation increases for hourly associates as well as deleverage from our top line results. For the year, operating expenses were approximately 19.2% of sales, representing an increase of approximately 90 basis points from fiscal 2022. Our operating margin for the fourth quarter was approximately 11.9% and for the year was approximately 14.2%. Interest and other expense for the fourth quarter increased by $50 million to $458 million. In the fourth quarter and for fiscal 2023, our effective tax rate was 24%. Our diluted earnings per share for the fourth quarter were $2.82, a decrease of 14.5% compared to the fourth quarter of 2022. Diluted earnings per share for fiscal 2023 were $15.11, a decrease of 9.5% compared to fiscal 2022. At the end of the quarter, merchandise inventories were $21 billion, down $3.9 billion or approximately 16% versus last year, and inventory turns were 4.3x, up from 4.2x from the second period last year. Moving on to capital allocation. During the fourth quarter, we invested approximately $860 million back into our business in the form of capital expenditures. This brings total capital expenditures for fiscal 2023 to approximately $3.2 billion. During the year, we opened 13 new stores, bringing our store count to 2,335 at the end of fiscal 2023. Retail selling square footage was approximately 242 million square feet and total sales per retail square foot were approximately $605 in fiscal 2023. Additionally, we invested approximately $1.5 billion on three acquisitions during fiscal 2023, accelerating our strategic initiatives and providing us with better capabilities to serve our customers. During the year, we paid approximately $8.4 billion of dividends to our shareholders. Today, we announced our Board of Directors increased our quarterly dividend by 7.7% to $2.25 per share, which equates to an annual dividend of $9 per share. And finally, during fiscal 2023, we returned approximately $8 billion to our shareholders in the form of share repurchases, including $1.5 billion in the fourth quarter. Computed on the average of beginning and ending long-term debt and equity for the trailing 12 months, return on invested capital was 36.7% compared to 44.6% at the end of the fourth quarter of fiscal 2022. Now I'll comment on our outlook for 2024. First, let me point out that fiscal 2024 will include a 53rd week, so the fourth quarter of fiscal 2024 will consist of 14 weeks. We will continue to report comps on a 52-week basis, but we will base our overall guidance on 53 weeks. As you heard from Ted, we feel great about the actions we took in 2023 to position us well heading into 2024. And while there are signs that the economy is on the way towards normalization, the home improvement market still faces headwinds as we look ahead to fiscal 2024. We considered several factors that informed our outlook for fiscal 2024. On the positive side, we faced a number of pressures in fiscal 2023 that are unlikely to repeat in fiscal 2024. In 2023, we saw four increases in the Fed funds rate, a sharp decline in existing home sales and approximately 110 basis points of comp pressure from lumber deflation. However, we still expect pressures to our business in fiscal 2024. Personal consumption growth as measured by PCE is expected to decelerate compared to 2023. Our share of PCE also remains slightly elevated relative to 2019 and has been on a glide path towards 2019 levels. Higher interest rates at the beginning of 2024 relative to last year will likely continue to pressure demand for larger projects. And the effects from pull forward of demand during the pandemic as well as some project deferral could impact demand into 2024. As we consider these influences on home improvement demand, we are planning for a year of continued moderation but with slightly less pressure to comp sales than what we faced in fiscal 2023. Our fiscal 2024 outlook is for total sales growth to outpace sales comp with sales growth of approximately positive 1% and comp sales of approximately negative 1% compared to fiscal 2023. Total sales growth will benefit from a 53rd week as well as from the acquisitions we made and the new stores we opened in fiscal 2023 and the stores we plan to open in fiscal 2024. We expect the 53rd week will contribute approximately $2.3 billion in sales. Our gross margin is expected to be approximately 33.9%, an increase of approximately 50 basis points compared to fiscal 2023. This primarily reflects a lower product and transportation cost environment relative to fiscal 2023 as well as benefits from a portion of the approximately $500 million in reduced fixed costs that we will realize in fiscal 2024. Further, we expect operating margin of approximately 14.1%. This reflects deleverage from sales and pressure from targeted incentive compensation as we are overlapping lower incentive compensation paid than planned in 2023. This will be partially offset by the benefits from the approximately $500 million in fixed costs that we will realize in fiscal 2024 in both cost of goods sold and operating expenses. Our effective tax rate is targeted at approximately 24.5%. We expect net interest expense of approximately $1.8 billion. Our diluted earnings per share percent growth is targeted to be approximately 1% compared to fiscal 2023, with the extra week contributing approximately $0.30. We plan to continue investing in our business with capital expenditures of approximately 2% of sales on an annual basis. After investing in our business and paying our dividend, it is our intent to return excess cash to shareholders in the form of share repurchases. We believe we have positioned ourselves to meet the needs of our customers in any environment. The investments we've made in our business have enabled agility in our operating model. As we look forward, we will continue to invest to strengthen our position with our customers, leverage our scale and low-cost position to drive growth faster than the market and deliver shareholder value. Thank you for your participation in today's call. And Christine, we are now ready for questions.","evidence_gemma_new":null,"evidence_llama_3_3":"sales year","evidence_qwen_3_30b":"sales year","gemma_new_max":null,"gemma_new_min":null,"llama_3_3_max":152700000000.0,"llama_3_3_min":152700000000.0,"qwen_3_30b_max":152700000000.0,"qwen_3_30b_min":152700000000.0}
{"symbol":"HD","year":2024,"quarter":4,"date":"2024-FY","chunk_id":1,"sub_chunk_id":0,"centroid_label":"sales","agreed_value":159500000000.0,"count":3,"chunk":"Ted Decker: Thank you, Isabelle and good morning everyone. Sales for fiscal 2024 were $159.5 billion an increase of 4.5% from the same period last year. Comp sales declined 1.8% from the same period last year. And our U.S. Stores had negative comps of 1.8%. Adjusted diluted earnings per share were $15.24 compared to $15.25 in the prior year. In the fourth quarter, comp sales increased 0.8% from last year. And comps in our U.S. Stores were up 1.3%. Adjusted diluted earnings per share were $3.13 compared to $2.86 in the prior year. The quarter, we saw broad-based engagement across our geographies. As fifteen of our nineteen U.S. Regions delivered positive comps. In addition, both Canada and Mexico reported positive comps in local currency. Our fourth quarter results exceeded our expectations as we saw greater engagement home improvement spend despite ongoing pressure on large remodeling projects. Throughout the year, we remained steadfast in our investments across our strategic initiatives. Despite uncertain macroeconomic conditions and a higher interest rate environment that impacted home improvement demand. Our strategic priorities remain creating the best interconnected shopping experience, growing our pro wallet share through a unique ecosystem of capabilities, and building new stores. We are always improving our interconnect shopping experience. We know that our customers want faster delivery than ever before. Recall that last quarter I shared the progress we made with our investment in our downstream supply chain. Including an expanded assortment in our DFCs to allow for faster delivery speeds across more products. We also began leveraging our stores to offer more delivery options. Our delivery speeds are now the fastest they've ever been and customers are increasing their spend. Billy will take you through these results in a moment. Growing our share of wallet with our pro customers is a key part of our growth strategy. We've continued investing in our store experience, fulfillment options and sales teams. These investments are delivering incremental sales growth and Anne will discuss this in detail shortly. In June, we completed the acquisition of SRS, And while we've only owned them for seven months, could not be happier with the business. The capabilities that SRS brings are both additive and complementary to our strategic efforts. As expected for fiscal 2024, SRS contributed $6.4 billion in sales for the seven months we owned them. And since we acquired them in June, they have opened over twenty greenfield locations, and completed four tuck-in acquisitions. We're also focusing on many cross-sell opportunities with SRS. As an example, we've talked about the opportunity with QuoteCenter. Our platform that provides real-time quote pricing in different fulfillment options for larger job lot quantities. SRS was already in quote center but not in all markets. Today, they are in nearly every market with their roofing products. And since making this change, have seen SRS's sales and quote center more than triple Going forward, we will continue to support SRS' momentum. We expect their organic sales to grow mid-single digits in fiscal 2025. Our real estate footprint remains one of our distinct competitive advantages. We are expanding that footprint by investing in new stores in areas that have experienced population growth or where it makes sense to relieve pressure on existing high volume stores. In fiscal 2024, we opened twelve new stores. Ten in the US and two in Mexico. We are seeing great results from these stores which are outperforming our expectations. For fiscal 2025, we plan to open thirteen new stores. For fiscal 2025, we expect total sales growth of comparable sales growth of approximately one percent, and adjusted diluted earnings per share to decline approximately two percent. We remain excited about all our growth opportunities. We feel confident that the investments we are making will set us up for continued success. I wanna close by thanking our associates for their hard work and dedication to our customers in the fourth quarter and throughout the year. Our results reflect strong execution by our stores, merchants and supply chain teams. As well as our vendor partners as they remain focused on delivering value and service to our customers. With that, let me turn the call over to Anne.","evidence_gemma_new":"Sales fiscal 2024","evidence_llama_3_3":"sales fiscal 2024","evidence_qwen_3_30b":"Sales fiscal 2024","gemma_new_max":159500000000.0,"gemma_new_min":159500000000.0,"llama_3_3_max":159500000000.0,"llama_3_3_min":159500000000.0,"qwen_3_30b_max":159500000000.0,"qwen_3_30b_min":159500000000.0}
{"symbol":"HD","year":2024,"quarter":1,"date":"2024-Q1","chunk_id":2,"sub_chunk_id":0,"centroid_label":"sales","agreed_value":36400000000.0,"count":3,"chunk":"Ted Decker: Thank you, Isabel, and good morning everyone. Sales for the first quarter were $36.4 billion, down 2.3% from the same period last year. Comp sales declined 2.8% from the same period last year and our U.S. stores had negative comps of 3.2%. Diluted earnings per share were $3.63 in the first quarter compared to $3.82 in the first quarter last year. The team executed a high level in the quarter, continued to grow market share. While the quarter was impacted by a delayed start to spring and continued softness in certain larger discretionary projects, we feel great about our store readiness, product assortment and associate engagement. Our associates are energized and ready to serve our customers as spring breaks across the country. As you will hear from Billy, where weather was favorable, we saw good customer engagement and strength in outdoor projects. In addition, our focus remains on creating the best interconnected experience growing Pro wallet share with a differentiated set of capabilities in building new stores, driving sales growth with our Pro customers remains one of our top focus areas. Remember, we operate in a $45 trillion asset class, which represents the installed base of homes in the United States and we serve a highly fragmented addressable market of approximately $1 trillion. Within that TAM, the greatest opportunity is with the residential Pro contractor, who shops across many categories of home improvement products while working on complex projects. We've defined that specific opportunity as an approximately $250 billion TAM, of which we have relatively little share today. We also know that to effectively serve this TAM, we need an expanded set of capabilities and services that we refer to as our Pro ecosystem. And while the store remains the center of that ecosystem, we are developing more fulfillment options, a dedicated sales force, specific digital assets, trade credit and order management capabilities geared at the residential Pro who shops across categories. As we've shared with you before, our more mature markets with this Pro ecosystem have seen great success, so we're expanding to other markets. As you heard last quarter, we'll have the foundational elements of our ecosystem in 17 markets by the end of the fiscal year. And while these 17 markets are currently at different maturity levels, they are outperforming our other large Pro markets in aggregate. Earlier this quarter, we announced our intent to acquire SRS, a residential, specialty trade distributor with a leading position in three large, highly fragmented specialty trade verticals serving the roofer, the pool contractor and the landscape professional. SRS is complementary to the ecosystem we've been building, giving us another avenue to more effectively serve the complex project occasion. They also give us the right to win with a specialty trade Pro customer. SRS does an exceptional job serving the specialty trade Pro who typically only shops one category and needs specialized capabilities to complete their project. In addition, SRS is an exceptionally well run business with a world-class management team. As we build out our own ecosystem, we can leverage their expertise in deep product catalog in the verticals in which they operate. We have significant growth opportunities in front of us and we are very happy with the operational execution in our core business. And despite pressure in the market, we continue to invest in our business. We are gaining share of wallet with our customers whether they are shopping in our stores, on our digital assets, or through our Pro ecosystem. Our merchants, store and MET teams, supplier partners and supply chain teams are always ready to serve in any environment. They did an outstanding job delivering value and service to our customers throughout the quarter and I'd like to close by thanking them for their dedication and hard work. With that, let me turn the call over to Ann.","evidence_gemma_new":"Sales first quarter","evidence_llama_3_3":"Sales first quarter","evidence_qwen_3_30b":"Sales first quarter down 2.3% same period last year","gemma_new_max":36400000000.0,"gemma_new_min":36400000000.0,"llama_3_3_max":36400000000.0,"llama_3_3_min":36400000000.0,"qwen_3_30b_max":36400000000.0,"qwen_3_30b_min":36400000000.0}
{"symbol":"HD","year":2024,"quarter":2,"date":"2024-Q2","chunk_id":2,"sub_chunk_id":0,"centroid_label":"sales","agreed_value":43200000000.0,"count":2,"chunk":"Ted Decker: Thank you, Isabel, and good morning, everyone. Sales for the second quarter were $43.2 billion, an increase of 0.6% from the same period last year. Our sales in the quarter include $1.3 billion from SRS. Recall that we closed on the SRS acquisition on June 18, and we've included approximately six weeks of their performance in our consolidated results. Comp sales declined 3.3% from the same period last year, and our U.S. stores had negative comps of 3.6%. Adjusted diluted earnings per share were $4.67 in the second quarter, compared to $4.68 in the second quarter of last year. The team continues to navigate this unique environment while executing at a high level. During the quarter, higher interest rates and greater macroeconomic uncertainty pressured consumer demand more broadly, resulting in weaker spend across home improvement projects. Additionally, we saw continued softness in spring projects, which were also impacted by the extreme weather changes throughout the quarter. When we look at the performance in the first six months of the year, as well as continued uncertainty around underlying consumer demand, we believe a more cautious sales outlook is warranted for the year. Richard will take you through the details in a moment, but we are now guiding to a comp sales decline of approximately 3% to 4% for fiscal 2024. Regardless of the current pressure in the environment, our team remains focused on serving our customers and ensuring we have the right products at the right values. And we remain focused on long-term share growth in the highly fragmented approximately $1 trillion home improvement market. Remember, we operate in one of the largest asset classes which is estimated at approximately $45 trillion, representing the installed base of homes in the United States. Today, we have roughly 17% market share with tremendous growth potential. That is why we have been investing and executing on our strategy to create the best interconnected experience for a Pro wallet share through a differentiated set of capabilities and build new stores. Now I'll take a few moments to comment on our acquisition of SRS Distribution. SRS has an exceptional team with a proven growth track record, and we are thrilled to welcome them into The Home Depot family. While our financials only reflect a portion of their first half performance for the first six-month period matching our first half, they generated high single-digit top line growth while growing operating income largely in line with sales compared to the previous year. We are incredibly excited about what we can achieve together by leveraging our combined assets, capabilities and competitive advantages. We plan to drive incremental growth through several sales and cross synergy opportunities. We'll make their more comprehensive product offering in roofing, pool and landscape available to all our customers through our Pro desk, and we will offer SRS customers a form of credit tied to their account, which will make purchases at Home Depot stores much more convenient. The fundamentals of the home improvement market remain strong, and we have significant growth opportunities in front of us. We are gaining share of wallet with our customers whether they are shopping in our stores, on our digital assets or through our Pro ecosystem. Our merchants, store and MET teams, supplier partners and supply chain teams are always ready to serve in any environment. They did an outstanding job delivering value and service to our customers throughout the quarter, and I'd like to close by thanking them for their dedication and hard work. With that, let me turn the call over to Ann.","evidence_gemma_new":null,"evidence_llama_3_3":"Sales second quarter","evidence_qwen_3_30b":"Sales second quarter","gemma_new_max":null,"gemma_new_min":null,"llama_3_3_max":43200000000.0,"llama_3_3_min":43200000000.0,"qwen_3_30b_max":43200000000.0,"qwen_3_30b_min":43200000000.0}
{"symbol":"HD","year":2024,"quarter":3,"date":"2024-Q3","chunk_id":2,"sub_chunk_id":0,"centroid_label":"sales","agreed_value":40200000000.0,"count":3,"chunk":"Ted Decker: Thank you, Isabel, and good morning, everyone. Sales for the third quarter were $40.2 billion an increase of 6.6% from the same period last year. Comp sales declined 1.3% from the same period last year and our U.S. stores had negative comps of 1.2%. Adjusted diluted earnings per share were $3.78 in the third quarter compared to $3.85 in the third quarter last year. From a geographical perspective, storms and more favorable weather throughout the quarter drove a higher degree of variability in the performance across our divisions and four of our 19 U.S. regions delivered positive comps. In local currency, Mexico and Canada posted comps above the company average, with Mexico posting positive comps in the quarter. In the third quarter, our associates and communities were impacted by two hurricanes. As you\u2019ll hear from Ann, our associates and supplier partners worked tirelessly under difficult circumstances to serve our customers and communities. Our thoughts continue to be with those impacted by hurricanes Helene and Milton. Excluding the impacts from the hurricanes, our third quarter performance exceeded our expectations. As weather normalized, we saw better engagement across seasonal goods in certain outdoor projects. But as Billy will detail, we continue to see pressure on larger remodeling projects driven by the higher interest rate environment and continued macroeconomic uncertainty. Today, we updated our guidance primarily as a result of the better performance in the third quarter as well as expected hurricane related demand in the fourth quarter. For fiscal 2024, we now expect our sales to grow approximately 4%, comps to decline approximately 2.5% and adjusted diluted earnings per share to decline approximately 1%. Richard will take you through the details in a moment. Despite the continued uncertainty in the macroeconomic environment, our focus remains on creating the best interconnected experience, growing Pro wallet share through a differentiated set of capabilities in building new stores. Today, I would like to highlight where we are improving the interconnected experience. Recall that over the last several years, we built a network of downstream supply chain facilities, including 19 direct fulfillment centers, allowing us to reach 90% of the U.S. population with same or next day delivery. Recently, we expanded our assortment in these facilities to allow for faster delivery speeds across more products. We made significant website enhancements to better communicate faster delivery options. Many customers were not aware of our robust delivery options. In the third quarter, we launched a marketing campaign that builds awareness of our faster delivery speeds. While this is just launched, we are seeing the intended results, greater customer engagement, higher conversion and incremental sales. This is also the first quarter that reflects a full period of SRS in our financials. SRS gives us the right to win with the specialty trade Pro customer who need specialized capabilities to complete their project. The SRS team did an exceptional job in the quarter and is on track to deliver $6.4 billion in sales for the approximately seven months we\u2019ll owe them in fiscal 2024. As you would expect, the immediate focus with SRS is supporting their growth both organically and through acquisitions. However, we are also seeing incremental cross-sale opportunities from our distinct product catalogs and competitive advantages. As you can tell, we remain excited about the growth opportunities in front of us. We are committed to investing in our capabilities to continue growing share in any environment. Our merchants, store and MET teams, supplier partners and supply chain teams did an outstanding job executing throughout the quarter. I\u2019d like to thank them for their dedication and hard work. Before I turn the call over to, Ann, I\u2019d like to take a moment to reflect on the legacy of our Co-Founder, Bernie Marcus. We owe an immeasurable debt of gratitude to Bernie. He was a master merchant and a retail visionary. But even more importantly, he valued our associates, customers and communities above all. He\u2019s left us with an invaluable legacy in the backbone of our company, our values and culture. The entire Home Depot family is deeply saddened by his passing. He will be missed. With that, let me turn the call over to, Ann.","evidence_gemma_new":"Sales third quarter","evidence_llama_3_3":"Sales third quarter","evidence_qwen_3_30b":"Sales third quarter","gemma_new_max":40200000000.0,"gemma_new_min":40200000000.0,"llama_3_3_max":40200000000.0,"llama_3_3_min":40200000000.0,"qwen_3_30b_max":40200000000.0,"qwen_3_30b_min":40200000000.0}
{"symbol":"HD","year":2024,"quarter":4,"date":"2024-Q4","chunk_id":45,"sub_chunk_id":0,"centroid_label":"sales","agreed_value":45.0,"count":2,"chunk":"Seth Sigman: Thanks. Good morning, everyone. I do want to follow-up on that last point around the flow through you step back and look at your sales over the last several years, I think since twenty nineteen, sales are up maybe forty five percent, s g and a is actually up a similar percent. Along the way, there have been investments and plenty of cost pressures I guess the real question is to the extent that comps start to improve here, they progress throughout twenty twenty five. Are we at that point where sales should grow faster than expenses you can really start to see that flow through come through. Seth, you know what? I would point you back to our investor conference back in twenty twenty three, right, Once this market normalizes, we would expect a base case of three to four percent top line growth We would expect and and and within that, we expect flat gross margin is kind of a base expectation. And then we do expect operating expense leverage. And so that Takes you to the the the earnings per share expectation of mid to high single digit growth once our market is normalized and once we are back to that level of sales growth. And that view hasn't changed since twenty twenty three.","evidence_gemma_new":"sales twenty nineteen","evidence_llama_3_3":null,"evidence_qwen_3_30b":"sales forty five percent twenty nineteen","gemma_new_max":45.0,"gemma_new_min":45.0,"llama_3_3_max":null,"llama_3_3_min":null,"qwen_3_30b_max":45.0,"qwen_3_30b_min":45.0}
{"symbol":"HD","year":2023,"quarter":2,"date":"2023-Q2","chunk_id":5,"sub_chunk_id":0,"centroid_label":"total sales","agreed_value":42900000000.0,"count":2,"chunk":"Richard McPhail: Thank you, Ann, and good morning, everyone. In the second quarter, total sales were $42.9 billion, a decrease of approximately $900 million or 2% from last year. During the second quarter, our total company comps were negative 2% with comps of negative 2.6% in May, negative 3.3% in June and negative 0.2% in July. Comps in the U.S. were negative 2% for the quarter with comps of negative 2.6% in May, negative 3.3% in June and negative 0.4% in July. As you heard from Billy, during the second quarter, we continued to experience lumber deflation compared to the prior year. While lumber prices were down, we saw an improvement in unit productivity, resulting in a net negative comp impact of approximately 85 basis points versus the second quarter of 2022. In the second quarter, our gross margin was 33%, a decrease of 8 basis points from the second quarter last year, primarily driven by pressure from shrink. During the second quarter, operating expense as a percent of sales increased approximately 100 basis points to 17.6% compared to the second quarter of 2022. Our operating expense performance during the second quarter reflects our previously executed compensation increases for hourly associates as well as deleverage from our top line results. Our operating margin for the second quarter was 15.4% compared to 16.5% in the second quarter of 2022. Interest and other expense for the second quarter increased by $49 million to $428 million due primarily to interest on our floating rate debt as well as higher debt balances than a year ago. In the second quarter, our effective tax rate was 24.4%, up from 24.3% in the second quarter of fiscal 2022. Our diluted earnings per share for the second quarter were $4.65, a decrease of 7.9% compared to the second quarter of 2022. During the second quarter, we opened two new stores, bringing our total store count to 2,326. Retail selling square footage was approximately 241 million square feet. At the end of the quarter, merchandise inventories were $23.3 billion, down $2.8 billion compared to the second quarter of 2022. And inventory turns were 4.4x, down from 4.5x last year. Turning to capital allocation. After investing in our business and paying our dividend, it is our intent to return excess cash to shareholders in the form of share repurchases. During the second quarter, we invested approximately $800 million back into our business in the form of capital expenditures. And during the quarter, we paid approximately $2.1 billion in dividends to our shareholders, and we returned approximately $2 billion to shareholders in the form of share repurchases. Computed on the average of beginning and ending long-term debt and equity for the trailing 12 months, return on invested capital was approximately 41.5%, down from 45.6% in the second quarter of fiscal 2022. Now I\u2019ll comment on our guidance for fiscal 2023. Today, we are reaffirming our guidance for 2023. We expect fiscal 2023 sales and comp sales to decline between 2% and 5%. We are targeting an operating margin between 14.3% and 14% for the year. Our effective tax rate is targeted at approximately 24.5%. We expect interest expense of approximately $1.8 billion and we are anticipating between a 7% and 13% decline in diluted earnings per share compared to fiscal 2022. In addition, we continue to focus on driving productivity in the business and feel confident that we will realize the previously announced $500 million in annualized cost savings in 2024. We also remain focused on meeting the needs of our customers with our leading product authority in home improvement, strong in-stock levels and knowledgeable associates. We will continue to prudently invest to strengthen our competitive position and leverage our scale and low-cost position to outperform our market and deliver shareholder value. Thank you for your participation in today\u2019s call. And Christine, we are now ready for questions.","evidence_gemma_new":null,"evidence_llama_3_3":"total sales second quarter","evidence_qwen_3_30b":"total sales second quarter","gemma_new_max":null,"gemma_new_min":null,"llama_3_3_max":42900000000.0,"llama_3_3_min":42900000000.0,"qwen_3_30b_max":42900000000.0,"qwen_3_30b_min":42900000000.0}
{"symbol":"HD","year":2023,"quarter":3,"date":"2023-Q3","chunk_id":5,"sub_chunk_id":0,"centroid_label":"total sales","agreed_value":37700000000.0,"count":2,"chunk":"Richard McPhail: Thank you, Billy, and good morning, everyone. In the third quarter, total sales were $37.7 billion, a decrease of approximately $1.2 billion or 3% from last year. During the third quarter, our total company comps were negative 3.1% with comps of negative 2.1% in August, negative 3.4% in September and negative 3.7% in October. Comps in the U.S. were negative 3.5% for the quarter with comps of negative 2.5% in August, negative 3.8% in September and negative 4.1% in October. In local currency, Mexico and Canada posted comps above the company average. It is important to note that adjusting for storm-related overlaps and some seasonal shift, monthly comps were relatively consistent across the quarter. In the third quarter, our gross margin was 33.8%, a decrease of approximately 20 basis points from the third quarter last year, which was in line with our expectations. During the third quarter, operating expense as a percent of sales increased approximately 120 basis points to 19.4% compared to the third quarter of 2022. Our operating expense performance during the third quarter reflects our previously executed compensation increases for hourly associates as well as deleverage from our top line results. Our operating margin for the third quarter was 14.3% compared to 15.8% in the third quarter of 2022. Interest and other expense for the third quarter increased by approximately $30 million to $438 million. In the third quarter, our effective tax rate was 23.3%, down from 24.4% in the third quarter of fiscal 2022. Our diluted earnings per share for the third quarter were $3.81, a decrease of 10.1% compared to the third quarter of 2022. During the third quarter, we opened 7 new stores, bringing our total store count to 2,333. Retail selling square footage was approximately 242 million square feet. At the end of the quarter, merchandise inventories were $22.8 billion, down $2.9 billion or 11% compared to the third quarter of 2022. And inventory turns were 4.3x flat to 1 year ago. Turning to capital allocation. After investing in our business and paying our dividend, it is our intent to return excess cash to shareholders in the form of share repurchases. During the quarter, we invested approximately $670 million back into our business in the form of capital expenditures. And during the quarter, we paid approximately $2.1 billion in dividends to our shareholders, and we returned approximately $1.5 billion to shareholders in the form of share repurchases. Computed on the average of beginning and ending long-term debt and equity for the trailing 12 months, return on invested capital was approximately 38.7%, down from 43.3% in the third quarter of fiscal 2022. Now I will comment on our guidance for fiscal 2023. As you heard from Ted, with one quarter remaining in fiscal 2023, we no longer expect the end points of our previous guidance range as likely outcomes, and therefore, we are narrowing our guidance for 2023. We expect fiscal 2023 sales and comp sales to decline between 3% and 4%. We are targeting an operating margin between 14.2% and 14.1% for the year. Our effective tax rate is targeted at approximately 24.5%. We expect interest expense of approximately $1.8 billion. And we are anticipating between a 9% and 11% decline in diluted earnings per share compared to fiscal 2022. In addition, as you heard from Ann, we continue to focus on driving productivity in the business. We have taken a number of actions that will help us realize the previously announced $500 million in annualized cost savings in 2024 and are fully confident that we will deliver on this commitment. We also remain focused on meeting the needs of our customers with our leading product authority in home improvement, strong in-stock levels and knowledgeable associates. We will continue to prudently invest to strengthen our competitive position and leverage our scale and low-cost position to outperform our market and deliver shareholder value. Thank you for your participation in today's call. And Christine, we are now ready for questions.","evidence_gemma_new":null,"evidence_llama_3_3":"total sales third quarter","evidence_qwen_3_30b":"total sales third quarter","gemma_new_max":null,"gemma_new_min":null,"llama_3_3_max":37700000000.0,"llama_3_3_min":37700000000.0,"qwen_3_30b_max":37700000000.0,"qwen_3_30b_min":37700000000.0}
{"symbol":"HD","year":2023,"quarter":4,"date":"2023-Q4","chunk_id":5,"sub_chunk_id":0,"centroid_label":"total sales","agreed_value":34800000000.0,"count":2,"chunk":"Richard McPhail: Thank you, Billy, and good morning, everyone. In the fourth quarter, total sales were $34.8 billion, a decrease of 2.9% from last year. During the fourth quarter, our total company comps were negative 3.5% with comps of negative 2.5% in November, positive 1.1% in December and negative 8.5% in January. Comps in the U.S. were negative 4% for the quarter with comps of negative 2.7% in November, positive 0.6% in December and negative 9.1% in January. In local currency, Mexico and Canada posted comps above the company average with Mexico posting positive comps. It is important to note that adjusting for holiday shifts and weather-related impacts in January, monthly comps relatively consistent across the quarter. For the year, our sales totaled $152.7 billion, a decrease of 3% versus fiscal 2022. For the year, total company comp sales decreased 3.2% and U.S. comp sales decreased 3.5%. In the fourth quarter, our gross margin was approximately 33.1%, a decrease of 20 basis points from last year. For the year, our gross margin was approximately 33.4%, a decrease of 15 basis points from last year, which was in line with our expectations. During the fourth quarter, operating expenses as a percentage of sales increased approximately 115 basis points to 21.2% compared to the fourth quarter of 2022. Our operating expense performance during the fourth quarter reflects our previously executed compensation increases for hourly associates as well as deleverage from our top line results. For the year, operating expenses were approximately 19.2% of sales, representing an increase of approximately 90 basis points from fiscal 2022. Our operating margin for the fourth quarter was approximately 11.9% and for the year was approximately 14.2%. Interest and other expense for the fourth quarter increased by $50 million to $458 million. In the fourth quarter and for fiscal 2023, our effective tax rate was 24%. Our diluted earnings per share for the fourth quarter were $2.82, a decrease of 14.5% compared to the fourth quarter of 2022. Diluted earnings per share for fiscal 2023 were $15.11, a decrease of 9.5% compared to fiscal 2022. At the end of the quarter, merchandise inventories were $21 billion, down $3.9 billion or approximately 16% versus last year, and inventory turns were 4.3x, up from 4.2x from the second period last year. Moving on to capital allocation. During the fourth quarter, we invested approximately $860 million back into our business in the form of capital expenditures. This brings total capital expenditures for fiscal 2023 to approximately $3.2 billion. During the year, we opened 13 new stores, bringing our store count to 2,335 at the end of fiscal 2023. Retail selling square footage was approximately 242 million square feet and total sales per retail square foot were approximately $605 in fiscal 2023. Additionally, we invested approximately $1.5 billion on three acquisitions during fiscal 2023, accelerating our strategic initiatives and providing us with better capabilities to serve our customers. During the year, we paid approximately $8.4 billion of dividends to our shareholders. Today, we announced our Board of Directors increased our quarterly dividend by 7.7% to $2.25 per share, which equates to an annual dividend of $9 per share. And finally, during fiscal 2023, we returned approximately $8 billion to our shareholders in the form of share repurchases, including $1.5 billion in the fourth quarter. Computed on the average of beginning and ending long-term debt and equity for the trailing 12 months, return on invested capital was 36.7% compared to 44.6% at the end of the fourth quarter of fiscal 2022. Now I'll comment on our outlook for 2024. First, let me point out that fiscal 2024 will include a 53rd week, so the fourth quarter of fiscal 2024 will consist of 14 weeks. We will continue to report comps on a 52-week basis, but we will base our overall guidance on 53 weeks. As you heard from Ted, we feel great about the actions we took in 2023 to position us well heading into 2024. And while there are signs that the economy is on the way towards normalization, the home improvement market still faces headwinds as we look ahead to fiscal 2024. We considered several factors that informed our outlook for fiscal 2024. On the positive side, we faced a number of pressures in fiscal 2023 that are unlikely to repeat in fiscal 2024. In 2023, we saw four increases in the Fed funds rate, a sharp decline in existing home sales and approximately 110 basis points of comp pressure from lumber deflation. However, we still expect pressures to our business in fiscal 2024. Personal consumption growth as measured by PCE is expected to decelerate compared to 2023. Our share of PCE also remains slightly elevated relative to 2019 and has been on a glide path towards 2019 levels. Higher interest rates at the beginning of 2024 relative to last year will likely continue to pressure demand for larger projects. And the effects from pull forward of demand during the pandemic as well as some project deferral could impact demand into 2024. As we consider these influences on home improvement demand, we are planning for a year of continued moderation but with slightly less pressure to comp sales than what we faced in fiscal 2023. Our fiscal 2024 outlook is for total sales growth to outpace sales comp with sales growth of approximately positive 1% and comp sales of approximately negative 1% compared to fiscal 2023. Total sales growth will benefit from a 53rd week as well as from the acquisitions we made and the new stores we opened in fiscal 2023 and the stores we plan to open in fiscal 2024. We expect the 53rd week will contribute approximately $2.3 billion in sales. Our gross margin is expected to be approximately 33.9%, an increase of approximately 50 basis points compared to fiscal 2023. This primarily reflects a lower product and transportation cost environment relative to fiscal 2023 as well as benefits from a portion of the approximately $500 million in reduced fixed costs that we will realize in fiscal 2024. Further, we expect operating margin of approximately 14.1%. This reflects deleverage from sales and pressure from targeted incentive compensation as we are overlapping lower incentive compensation paid than planned in 2023. This will be partially offset by the benefits from the approximately $500 million in fixed costs that we will realize in fiscal 2024 in both cost of goods sold and operating expenses. Our effective tax rate is targeted at approximately 24.5%. We expect net interest expense of approximately $1.8 billion. Our diluted earnings per share percent growth is targeted to be approximately 1% compared to fiscal 2023, with the extra week contributing approximately $0.30. We plan to continue investing in our business with capital expenditures of approximately 2% of sales on an annual basis. After investing in our business and paying our dividend, it is our intent to return excess cash to shareholders in the form of share repurchases. We believe we have positioned ourselves to meet the needs of our customers in any environment. The investments we've made in our business have enabled agility in our operating model. As we look forward, we will continue to invest to strengthen our position with our customers, leverage our scale and low-cost position to drive growth faster than the market and deliver shareholder value. Thank you for your participation in today's call. And Christine, we are now ready for questions.","evidence_gemma_new":null,"evidence_llama_3_3":"total sales fourth quarter","evidence_qwen_3_30b":"total sales fourth quarter","gemma_new_max":null,"gemma_new_min":null,"llama_3_3_max":34800000000.0,"llama_3_3_min":34800000000.0,"qwen_3_30b_max":34800000000.0,"qwen_3_30b_min":34800000000.0}
{"symbol":"HD","year":2024,"quarter":1,"date":"2024-Q1","chunk_id":5,"sub_chunk_id":0,"centroid_label":"total sales","agreed_value":36400000000.0,"count":2,"chunk":"Richard McPhail: Thank you, Billy, and good morning, everyone. In the first quarter, total sales were $36.4 billion, a decrease of approximately 2.3% from last year. During the first quarter, our total company comps were negative 2.8% with comps of negative 4% in February, negative 0.8% in March, and negative 3.3% in April. Comps in the U.S. were negative 3.2% for the quarter with comps of negative 4.8% in February, negative 1.3% in March, and negative 3.6% in April. For the quarter, Mexico posted positive comps, whereas Canada was slightly below the company average. In the first quarter, our gross margin was 34.1%, an increase of approximately 45 basis points from the first quarter last year, primarily driven by benefits from lower transportation cost and shrink. During the first quarter, operating expense as a percent of sales increased approximately 140 basis points to 20.2% compared to the first quarter of 2023. The increase was primarily driven by a benefit from a legal settlement that we are overlapping from the first quarter of fiscal 2023, as well as deleverage from our top line results. Our operating expense performance was in line with our expectations. Our operating margin for the first quarter was 13.9% compared to 14.9% in the first quarter of 2023. Interest and other expense for the first quarter decreased by $13 million to $428 million. In the first quarter, our effective tax rate was 22.6% compared to 24.2% in the first quarter of fiscal 2023. Our diluted earnings per share for the first quarter were $3.63, a decrease of 5% compared to the first quarter of 2023. During the first quarter, we opened two new stores, bringing our total store count to 2,337. Retail selling square footage was approximately 242 million square feet. At the end of the quarter, merchandise inventories were $22.4 billion, down approximately $3 billion, or 12% compared to the first quarter of 2023, and inventory turns were 4.5x, up from 3.9x last year. Turning to capital allocation. During the first quarter, we invested approximately $850 million back into our business in the form of capital expenditures. And during the quarter, we paid approximately $2.2 billion in dividends to our shareholders and we returned approximately $600 million to shareholders in the form of share repurchases. As a reminder, in March we announced our intent to acquire SRS Distribution and as a result, we paused share repurchases. As you've heard us say many times, we maintain a disciplined approach to capital allocation and that is not changing. First and foremost, we will invest in the business and expect capital expenditures of approximately 2% of sales on an annual basis. After investing in the business, we plan to pay the dividend and it is our intent to return any excess cash to shareholders in the form of share repurchases. From time to time, we will also invest in the business through acquisitions to enhance our capabilities and to accelerate our strategic objectives. Computed on the average of beginning and ending long-term debt and equity for the trailing 12 months, return on invested capital was 37.1%, down from 43.6% \u2013 excuse me, down from 43.6% in the first quarter of fiscal 2023. Now, I will comment on our guidance for fiscal 2024. Today, we are reaffirming our guidance for 2024. As a reminder, our guidance does not currently reflect any impact from the announced acquisition of SRS. The acquisition is currently under regulatory review and we expect it to close by the end of fiscal 2024. We expect total sales growth to outpace sales comp with sales growth of approximately positive 1% and comp sales of approximately negative 1%. Total sales growth will benefit from a 53rd week and we expect the 53rd week will contribute approximately $2.3 billion in sales. Our gross margin is expected to be approximately 33.9%, an increase of approximately 50 basis points, compared to fiscal 2023. We expect operating margin of approximately 14.1%. Our effective tax rate is targeted at approximately 24.5%. We expect net interest expense of approximately $1.8 billion, and our diluted earnings per share percent growth is targeted to be approximately 1% compared to fiscal 2023. It\u2019s our intent to update guidance as appropriate once the SRS transaction closes. We believe that we have positioned ourselves to meet the needs of our customers in any environment. The investments we\u2019ve made in our business have enabled agility in our operating model. As we look forward, we will continue to invest to strengthen our position with our customers, leverage our scale and low-cost position to drive growth faster than the market and deliver shareholder value. Thank you for your participation in today\u2019s call. And Christine, we are now ready for questions.","evidence_gemma_new":null,"evidence_llama_3_3":"total sales first quarter","evidence_qwen_3_30b":"total sales first quarter","gemma_new_max":null,"gemma_new_min":null,"llama_3_3_max":36400000000.0,"llama_3_3_min":36400000000.0,"qwen_3_30b_max":36400000000.0,"qwen_3_30b_min":36400000000.0}
{"symbol":"HD","year":2024,"quarter":2,"date":"2024-Q2","chunk_id":5,"sub_chunk_id":0,"centroid_label":"total sales","agreed_value":43200000000.0,"count":2,"chunk":"Richard McPhail: Thank you, Billy, and good morning, everyone. In the second quarter, Total sales were $43.2 billion, an increase of approximately 0.6% from last year. Total sales include $1.3 billion from the recent acquisition of SRS, which represents approximately six weeks of sales in the quarter. During the second quarter, our total company comps were negative 3.3%, with comps of negative 3.7% in May, negative 0.9% in June and negative 4.9% in July. Comps in the U.S. were negative 3.6% for the quarter, with comps of negative 4.1% in May, negative 1.4% in June and negative 5% in July. In the second quarter, our gross margin was approximately 33.4%, an increase of 40 basis points from the second quarter last year, primarily driven by benefits from lower transportation costs and shrink, partially offset by mix as a result of the SRS acquisition. During the second quarter, operating expense as a percent of sales increased approximately 65 basis points to 18.3% compared to the second quarter of 2023. Our operating expense performance was in line with our expectations. Beginning this quarter, in addition to our GAAP measures, we are providing the following non-GAAP measures: adjusted operating income, adjusted operating margin and adjusted diluted earnings per share, which excludes noncash amortization of acquired intangible assets. We believe these supplemental measures will help investors better understand and analyze our performance. Our operating margin for the second quarter was 15.1% compared to 15.4% in the second quarter of 2023. In the quarter, pretax intangible asset amortization was $90 million, including $39 million related to SRS. Excluding the intangible asset amortization in the quarter, our adjusted operating margin for the second quarter was 15.3% and compared to 15.5% in the second quarter of 2023. Interest and other expense for the second quarter increased by $61 million to $489 million due primarily to higher debt balances than a year ago. In the second quarter, our effective tax rate was 24.5%, compared to 24.4% in the second quarter of fiscal 2023. Our diluted earnings per share for the second quarter were $4.60, a decrease of approximately 1% compared to the second quarter of 2023. Excluding intangible asset amortization, our adjusted diluted earnings per share for the second quarter were $4.67, essentially flat compared to the second quarter of 2023. During the second quarter, we opened three new stores, bringing our total store count to 2,340. Retail selling square footage was approximately 243 million square feet. At the end of the quarter, merchandise inventories or $23.1 billion, down approximately $200 million compared to the second quarter of 2023, and inventory turns were 4.9x, up from 4.4x last year. Turning to capital allocation. During the second quarter, we invested approximately $720 million back into our business in the form of capital expenditures. And during the quarter, we paid approximately $2.2 billion in dividends to our shareholders. Our disciplined approach to capital allocation remains unchanged. First and foremost, we will invest in the business and expect capital expenditures of approximately 2% of sales on an annual basis. After investing in the business, we plan to pay the dividend and it is our intent to return any excess cash to shareholders in the form of share repurchases. Computed on the average of beginning and ending long-term debt and equity for the trailing 12 months, return on invested capital was approximately 31.9%, down from 41.5% in the second quarter of fiscal 2023. Now, I will comment on our updated outlook for fiscal 2024. As you heard from Ted, given the softer-than-expected performance in the first half of the year, and reflecting continued uncertainty around underlying consumer demand, we believe a more cautious outlook for the year is warranted. With the recent closing of the SRS acquisition, we are now including their results in our consolidated outlook for the year. For the period matching our first half, which includes periods prior to the acquisition and not fully reflected in our financial statements, SRS generated high single-digit percentage sales growth with operating income growing largely in line with sales. We believe that over the next several years, SRS on its own, and through our combined Pro efforts, will help accelerate sales and earnings growth for our company. Updating our fiscal 2024 guidance for the factors we just discussed. We now expect total sales growth between 2.5% and 3.5%, including the SRS acquisition and the 53rd week. The 53rd week is projected to add approximately $2.3 billion to total sales. SRS is expected to contribute approximately $6.4 billion in incremental sales. Comparable sales are expected to decline between negative 3% and negative 4% for the 52-week period. The high end of our range implies a consumer demand environment consistent with the first half of fiscal 2024. While comparable sales for the Company are not currently on the trajectory for the low end of the range, a negative 4% comp implies incremental pressure on consumer demand beyond what we are seeing today. We expect to open approximately 12 new stores. Our gross margin is expected to be approximately 33.5%. We expect operating margin to be between 13.5% and 13.6%, and adjusted operating margin to be between 13.8% and 13.9%. Our effective tax rate is targeted at approximately 24%. We expect net interest expense of approximately $2.2 billion. Our diluted earnings per share percent will decline between negative 2% and negative 4% compared to fiscal 2023, with the extra week contributing approximately $0.30. We expect our adjusted diluted earnings per share percent to decline between negative 1% and negative 3%, compared to fiscal 2023, with the extra week contributing approximately $0.30. We believe that we have positioned ourselves to meet the needs of our customers in any environment. The investments we've made in our business have enabled agility in our operating model. As we look forward, we will continue to invest to strengthen our position with our customers, leverage our scale and low-cost position to drive growth faster than the market and deliver shareholder value. Thank you for your participation in today's call. And Christine, we are now ready for questions.","evidence_gemma_new":null,"evidence_llama_3_3":"Total sales second quarter","evidence_qwen_3_30b":"Total sales second quarter","gemma_new_max":null,"gemma_new_min":null,"llama_3_3_max":43200000000.0,"llama_3_3_min":43200000000.0,"qwen_3_30b_max":43200000000.0,"qwen_3_30b_min":43200000000.0}
{"symbol":"HD","year":2024,"quarter":2,"date":"2024-Q2","chunk_id":5,"sub_chunk_id":0,"centroid_label":"total sales","agreed_value":2300000000.0,"count":2,"chunk":"Richard McPhail: Thank you, Billy, and good morning, everyone. In the second quarter, Total sales were $43.2 billion, an increase of approximately 0.6% from last year. Total sales include $1.3 billion from the recent acquisition of SRS, which represents approximately six weeks of sales in the quarter. During the second quarter, our total company comps were negative 3.3%, with comps of negative 3.7% in May, negative 0.9% in June and negative 4.9% in July. Comps in the U.S. were negative 3.6% for the quarter, with comps of negative 4.1% in May, negative 1.4% in June and negative 5% in July. In the second quarter, our gross margin was approximately 33.4%, an increase of 40 basis points from the second quarter last year, primarily driven by benefits from lower transportation costs and shrink, partially offset by mix as a result of the SRS acquisition. During the second quarter, operating expense as a percent of sales increased approximately 65 basis points to 18.3% compared to the second quarter of 2023. Our operating expense performance was in line with our expectations. Beginning this quarter, in addition to our GAAP measures, we are providing the following non-GAAP measures: adjusted operating income, adjusted operating margin and adjusted diluted earnings per share, which excludes noncash amortization of acquired intangible assets. We believe these supplemental measures will help investors better understand and analyze our performance. Our operating margin for the second quarter was 15.1% compared to 15.4% in the second quarter of 2023. In the quarter, pretax intangible asset amortization was $90 million, including $39 million related to SRS. Excluding the intangible asset amortization in the quarter, our adjusted operating margin for the second quarter was 15.3% and compared to 15.5% in the second quarter of 2023. Interest and other expense for the second quarter increased by $61 million to $489 million due primarily to higher debt balances than a year ago. In the second quarter, our effective tax rate was 24.5%, compared to 24.4% in the second quarter of fiscal 2023. Our diluted earnings per share for the second quarter were $4.60, a decrease of approximately 1% compared to the second quarter of 2023. Excluding intangible asset amortization, our adjusted diluted earnings per share for the second quarter were $4.67, essentially flat compared to the second quarter of 2023. During the second quarter, we opened three new stores, bringing our total store count to 2,340. Retail selling square footage was approximately 243 million square feet. At the end of the quarter, merchandise inventories or $23.1 billion, down approximately $200 million compared to the second quarter of 2023, and inventory turns were 4.9x, up from 4.4x last year. Turning to capital allocation. During the second quarter, we invested approximately $720 million back into our business in the form of capital expenditures. And during the quarter, we paid approximately $2.2 billion in dividends to our shareholders. Our disciplined approach to capital allocation remains unchanged. First and foremost, we will invest in the business and expect capital expenditures of approximately 2% of sales on an annual basis. After investing in the business, we plan to pay the dividend and it is our intent to return any excess cash to shareholders in the form of share repurchases. Computed on the average of beginning and ending long-term debt and equity for the trailing 12 months, return on invested capital was approximately 31.9%, down from 41.5% in the second quarter of fiscal 2023. Now, I will comment on our updated outlook for fiscal 2024. As you heard from Ted, given the softer-than-expected performance in the first half of the year, and reflecting continued uncertainty around underlying consumer demand, we believe a more cautious outlook for the year is warranted. With the recent closing of the SRS acquisition, we are now including their results in our consolidated outlook for the year. For the period matching our first half, which includes periods prior to the acquisition and not fully reflected in our financial statements, SRS generated high single-digit percentage sales growth with operating income growing largely in line with sales. We believe that over the next several years, SRS on its own, and through our combined Pro efforts, will help accelerate sales and earnings growth for our company. Updating our fiscal 2024 guidance for the factors we just discussed. We now expect total sales growth between 2.5% and 3.5%, including the SRS acquisition and the 53rd week. The 53rd week is projected to add approximately $2.3 billion to total sales. SRS is expected to contribute approximately $6.4 billion in incremental sales. Comparable sales are expected to decline between negative 3% and negative 4% for the 52-week period. The high end of our range implies a consumer demand environment consistent with the first half of fiscal 2024. While comparable sales for the Company are not currently on the trajectory for the low end of the range, a negative 4% comp implies incremental pressure on consumer demand beyond what we are seeing today. We expect to open approximately 12 new stores. Our gross margin is expected to be approximately 33.5%. We expect operating margin to be between 13.5% and 13.6%, and adjusted operating margin to be between 13.8% and 13.9%. Our effective tax rate is targeted at approximately 24%. We expect net interest expense of approximately $2.2 billion. Our diluted earnings per share percent will decline between negative 2% and negative 4% compared to fiscal 2023, with the extra week contributing approximately $0.30. We expect our adjusted diluted earnings per share percent to decline between negative 1% and negative 3%, compared to fiscal 2023, with the extra week contributing approximately $0.30. We believe that we have positioned ourselves to meet the needs of our customers in any environment. The investments we've made in our business have enabled agility in our operating model. As we look forward, we will continue to invest to strengthen our position with our customers, leverage our scale and low-cost position to drive growth faster than the market and deliver shareholder value. Thank you for your participation in today's call. And Christine, we are now ready for questions.","evidence_gemma_new":"total sales 53rd week","evidence_llama_3_3":null,"evidence_qwen_3_30b":"projected total sales 53rd week","gemma_new_max":2300000000.0,"gemma_new_min":2300000000.0,"llama_3_3_max":null,"llama_3_3_min":null,"qwen_3_30b_max":2300000000.0,"qwen_3_30b_min":2300000000.0}
{"symbol":"HD","year":2024,"quarter":3,"date":"2024-Q3","chunk_id":5,"sub_chunk_id":0,"centroid_label":"total sales","agreed_value":40200000000.0,"count":2,"chunk":"Richard McPhail: Thank you, Billy, and good morning, everyone. In the third quarter, total sales were $40.2 billion, an increase of approximately 6.6% from last year. During the third quarter, our total company comps were negative 1.3% with comps of negative 3.3% in August, negative 2.3% in September and positive 1% in October. Comps in the U.S. were negative 1.2% for the quarter, with comps of negative 3.5% in August, negative 2.2% in September, and positive 1.4% in October. The progression of our monthly comps reflects in large part hurricane related sales. Our results for the third quarter include a net contribution of approximately $200 million in hurricane related sales, which positively impacted total company comps by approximately 55 basis points for the quarter and approximately 120 basis points for October. In the third quarter, our gross margin was approximately 33.4%, a decrease of approximately 40 basis points from the third quarter last year, primarily driven by mix as a result of the SRS acquisition, partially offset by benefits from lower shrink. During the third quarter, operating expense as a percent of sales increased approximately 45 basis points to 19.9% compared to the third quarter of 2023. Our operating expense performance was in-line with our expectations. Our operating margin for the third quarter was 13.5% compared to 14.3% in the third quarter of 2023. In the quarter, pre-tax intangible asset amortization was $138 million including $86 million related to SRS. Excluding the intangible asset amortization in the quarter, our adjusted operating margin for the third quarter was 13.8% compared to 14.5% in the third quarter of 2023. Interest and other expense for the third quarter increased by $157 million to $595 million due primarily to higher debt balances than a year ago. In the third quarter, our effective tax rate was 24.4% compared to 23.3% in the third quarter of fiscal 2023. Our diluted earnings per share for the third quarter were $3.67, a decrease of approximately 4% compared to the third quarter of 2023. Excluding intangible asset amortization, our adjusted diluted earnings per share for the third quarter were $3.78, a decrease of approximately 2% compared to the third quarter of 2023. During the third quarter, we opened five new stores, bringing our total store count to 2, 345. Retail selling square footage was approximately 243 million square feet. At the end of the quarter, merchandise inventories were $23.9 billion up approximately $1.1 billion compared to the third quarter of 2023, and inventory turns were 4.8 times, up from 4.3 times last year. Turning to capital allocation. During the third quarter, we invested approximately $820 million back into our business in the form of capital expenditures. And during the quarter, we paid approximately $2.2 billion in dividends to our shareholders. Compute on the average of beginning and ending long-term debt and equity for the trailing 12-months, return on invested capital was approximately 31.5%, down from 38.7% in the third quarter of fiscal 2023. Now, I will comment on our updated outlook for fiscal 2024. As you heard from Ted, while macro uncertainty remains and continues to pressure home improvement demand, our performance in the third quarter was better than expected. Our performance reflects hurricane related sales in the third quarter, and we expect some hurricane related sales in the fourth quarter. Given the better than expected performance in the third quarter and incremental hurricane related sales, we have updated our fiscal 2024 guidance. We now expect total sales growth of approximately 4%, including SRS in the 53rd week. The 53rd week is projected to add approximately $2.3 billion to total sales and SRS is expected to contribute approximately $6.4 billion in incremental sales. Comparable sales are expected to decline approximately 2.5% for the 52 week period. We expect to open approximately 12 new stores. Our gross margin is expected to be approximately 33.5%. We expect operating margin to be approximately 13.5% and adjusted operating margin to be approximately 13.8%. Our effective tax rate is targeted at approximately 24%. We expect net interest expense of approximately $2.1 billion. We expect our diluted earnings per share to decline approximately 2% compared to fiscal 2023 with the extra week contributing approximately $0.30 per share. And, we expect our adjusted diluted earnings per share to decline approximately 1% compared to fiscal 2023 with the extra week contributing approximately $0.30 per share. We believe that we will grow market share in any environment. We are continuing to invest to strengthen our competitive position with our customers and leverage our scale and low cost position to drive growth faster than the market and deliver shareholder value. Thank you for your participation in today\u2019s call. And Christine, we are now ready for questions.","evidence_gemma_new":null,"evidence_llama_3_3":"total sales third quarter","evidence_qwen_3_30b":"total sales third quarter","gemma_new_max":null,"gemma_new_min":null,"llama_3_3_max":40200000000.0,"llama_3_3_min":40200000000.0,"qwen_3_30b_max":40200000000.0,"qwen_3_30b_min":40200000000.0}
{"symbol":"HD","year":2024,"quarter":4,"date":"2024-Q4","chunk_id":4,"sub_chunk_id":0,"centroid_label":"total sales","agreed_value":39700000000.0,"count":2,"chunk":"Richard McPhail: In the fourth quarter, total sales were $39.7 billion an increase of $4.9 billion or approximately fourteen percent from last year. Fiscal 2024 included a fifty-third week which added approximately $2.5 billion in sales for the quarter and the year. During the first during the fourth quarter, our total company comps were positive 0.8% with comps of negative 1.7% in November positive 6.6% in December, and negative 2% in January. Comps in the US were positive 1.3% for the quarter, with comps of negative 2% in November positive 8% in December, and negative 1.4% in January. It is important to note that holiday shifts positively impacted December while negatively impacting November and January. Our results for the fourth quarter include a net contribution of approximately $220 million in hurricane related sales, which paused positively impacted total company comps by approximately sixty-five basis points for the quarter. Additionally, foreign exchange rates negatively impacted total company comps by approximately seventy basis points for the quarter. For the year, our sales totaled $159.5 billion an increase of $6.8 billion or 4.5% versus fiscal 2023. For the year, total company comp sales decreased 1.8% and US comp sales decreased 1.8%. In the fourth quarter, our gross margin was approximately 32.8% a decrease of twenty-five basis points from the fourth quarter last year, Reflecting a change in mix as a result of the SRS acquisition, which was in line with our expectations. For the year, our gross margin was an increase of approximately five basis points from last year, which was in line with our expectations. During the fourth quarter, operating expense as a percent of sales increased approximately thirty basis points to 21.5% compared to the fourth quarter of 2023. Our operating expense performance was in line with our expectations. For the year, operating expenses were approximately nine representing an increase of seventy-five basis points from fiscal 2023. Our operating margin for the fourth quarter was 11.3% compared to 11.9% in the fourth quarter of 2023. Excluding intangible asset amortization in the quarter, our adjusted operating margin for the fourth quarter was 11.7% compared to 12.1% in the fourth quarter of 2023. Our operating margin for the year was 13.5% compared to 14.2% in 2023. Excluding intangible asset amortization, our adjusted operating margin for the year was 13.8% compared to 14.3% in 2023. Interest and other expense for the fourth quarter increased by $150 million to $608 million due primarily to higher debt balances than a year ago. In the fourth quarter, our effective tax rate was 22.9% and for the year was approximately 23.7%. Our diluted earnings per share for the fourth quarter were $3.02 an increase of approximately 7% compared to the fourth quarter of 2023. Diluted earnings per share for fiscal 2024 were $14.91 a decrease of 1.3% compared to fiscal 2023. Excluding intangible asset amortization, our adjusted diluted earnings per share for the fourth quarter were $3.13, an increase of approximately 9.4% compared to the fourth quarter of 2023. Adjusted diluted earnings per share for fiscal 2024 were $15.24 essentially flat compared to fiscal 2023. During the year, we opened twelve new stores bringing our store count to two thousand three hundred forty-seven at the end of fiscal 2024. Retail selling square footage was approximately two hundred forty-three million square feet and total sales per retail square foot approximately six hundred dollars in fiscal 2024. At the end of the quarter, merchandise inventories were $23.5 billion up approximately $2.5 billion versus last year and inventory turns were 4.7 times up from 4.3 times last year. Turning to capital allocation. During the fourth quarter, we invested approximately $1.1 billion back into our business in the form of capital expenditures. This brings total capital expenditures for fiscal 2024 to approximately $3.5 billion. And during the year, we paid approximately $8.9 billion in dividends to our shareholders. Today, we announced our board of directors increased our quarterly dividend by 2.2% to $2.30 per share which equates to an annual dividend of $9.20. Per share. And finally, during fiscal 2024, we returned approximately $600 million to our shareholders in the form of share repurchases. Computed on the average of beginning and ending long-term debt and equity for the trailing twelve months, Return on invested capital. Was approximately 31.3% down from 36.7% in the fourth quarter of fiscal 2023. Now I'll comment on our outlook for 2025. As you heard from Ted, we feel great about the investments we made in 2024 the progress we've made throughout the year, and the significant opportunities we have as we look ahead. And while there are signs that the home improvement market is on the way towards normalization, Uncertainties still remain. As we look ahead to fiscal 2025, We expect the underlying momentum in the business that we saw in the back half of 2024 to continue into 2025. However, we are not assuming any meaningful changes to the macroeconomic environment. We expect our consumer will remain healthy We are not assuming a change in the rate environment nor improvements in housing turnover. As a result, we would expect continued pressure on larger remodeling projects. Given these factors, our fiscal 2025 outlook is for total sales growth to outpace sales comp with sales growth of approximately positive 2.8% and comp sales growth of approximately positive 1%. Compared to fiscal 2024. Total sales growth will benefit from the SRS acquisition, The new stores we opened in fiscal 2024 and plan to open in fiscal 2025. And for the year, we expect SRS to deliver mid-single digit organic Growth. Our gross margin is expected to be approximately 33.4% essentially flat compared to fiscal 2024. Further, we expect operating margin of approximately 13% and adjusted operating margin of approximately 13.4%. This primarily reflects natural deleverage from sales and continued investments across the business as well as reflecting the mix impact from the SRS acquisition. Our effective tax rate is targeted approximately 24.5% We expect net interest expense of approximately $2.2 billion We expect our diluted earnings per share to decline approximately 3% compared to fiscal 2024 when comparing the fifty-two weeks in fiscal 2025 to the fifty-three weeks in fiscal 2024. We expect our adjusted diluted earnings per share to decline approximately 2% compared to fiscal 2024. On a fifty-two week basis, it would be essentially flat compared to fiscal 2024. We plan to continue investing in our business with capital expenditures of approximately 2.5% of sales for fiscal 2025. We believe that we will grow market share in any environment by strengthening our competitive position with our customers delivering the best customer experience and home improvement. Before opening the call for questions, we are pleased to announce that we will be holding an investor conference on December 9, 2025 in New York City. We will share more details in the future but for now, please hold the date. Thank you for your participation in today's call. And Christine we are now ready for questions.","evidence_gemma_new":null,"evidence_llama_3_3":"total sales fourth quarter","evidence_qwen_3_30b":"total sales In the fourth quarter","gemma_new_max":null,"gemma_new_min":null,"llama_3_3_max":39700000000.0,"llama_3_3_min":39700000000.0,"qwen_3_30b_max":39700000000.0,"qwen_3_30b_min":39700000000.0}
{"symbol":"HD","year":2023,"quarter":3,"date":"2023-Q3","chunk_id":5,"sub_chunk_id":0,"centroid_label":"u s total company comps","agreed_value":-3.1,"count":2,"chunk":"Richard McPhail: Thank you, Billy, and good morning, everyone. In the third quarter, total sales were $37.7 billion, a decrease of approximately $1.2 billion or 3% from last year. During the third quarter, our total company comps were negative 3.1% with comps of negative 2.1% in August, negative 3.4% in September and negative 3.7% in October. Comps in the U.S. were negative 3.5% for the quarter with comps of negative 2.5% in August, negative 3.8% in September and negative 4.1% in October. In local currency, Mexico and Canada posted comps above the company average. It is important to note that adjusting for storm-related overlaps and some seasonal shift, monthly comps were relatively consistent across the quarter. In the third quarter, our gross margin was 33.8%, a decrease of approximately 20 basis points from the third quarter last year, which was in line with our expectations. During the third quarter, operating expense as a percent of sales increased approximately 120 basis points to 19.4% compared to the third quarter of 2022. Our operating expense performance during the third quarter reflects our previously executed compensation increases for hourly associates as well as deleverage from our top line results. Our operating margin for the third quarter was 14.3% compared to 15.8% in the third quarter of 2022. Interest and other expense for the third quarter increased by approximately $30 million to $438 million. In the third quarter, our effective tax rate was 23.3%, down from 24.4% in the third quarter of fiscal 2022. Our diluted earnings per share for the third quarter were $3.81, a decrease of 10.1% compared to the third quarter of 2022. During the third quarter, we opened 7 new stores, bringing our total store count to 2,333. Retail selling square footage was approximately 242 million square feet. At the end of the quarter, merchandise inventories were $22.8 billion, down $2.9 billion or 11% compared to the third quarter of 2022. And inventory turns were 4.3x flat to 1 year ago. Turning to capital allocation. After investing in our business and paying our dividend, it is our intent to return excess cash to shareholders in the form of share repurchases. During the quarter, we invested approximately $670 million back into our business in the form of capital expenditures. And during the quarter, we paid approximately $2.1 billion in dividends to our shareholders, and we returned approximately $1.5 billion to shareholders in the form of share repurchases. Computed on the average of beginning and ending long-term debt and equity for the trailing 12 months, return on invested capital was approximately 38.7%, down from 43.3% in the third quarter of fiscal 2022. Now I will comment on our guidance for fiscal 2023. As you heard from Ted, with one quarter remaining in fiscal 2023, we no longer expect the end points of our previous guidance range as likely outcomes, and therefore, we are narrowing our guidance for 2023. We expect fiscal 2023 sales and comp sales to decline between 3% and 4%. We are targeting an operating margin between 14.2% and 14.1% for the year. Our effective tax rate is targeted at approximately 24.5%. We expect interest expense of approximately $1.8 billion. And we are anticipating between a 9% and 11% decline in diluted earnings per share compared to fiscal 2022. In addition, as you heard from Ann, we continue to focus on driving productivity in the business. We have taken a number of actions that will help us realize the previously announced $500 million in annualized cost savings in 2024 and are fully confident that we will deliver on this commitment. We also remain focused on meeting the needs of our customers with our leading product authority in home improvement, strong in-stock levels and knowledgeable associates. We will continue to prudently invest to strengthen our competitive position and leverage our scale and low-cost position to outperform our market and deliver shareholder value. Thank you for your participation in today's call. And Christine, we are now ready for questions.","evidence_gemma_new":"total company comps August","evidence_llama_3_3":null,"evidence_qwen_3_30b":"total company comps third quarter","gemma_new_max":-3.1,"gemma_new_min":-3.1,"llama_3_3_max":null,"llama_3_3_min":null,"qwen_3_30b_max":-3.1,"qwen_3_30b_min":-3.1}
{"symbol":"HD","year":2023,"quarter":4,"date":"2023-Q4","chunk_id":5,"sub_chunk_id":0,"centroid_label":"u s total company comps","agreed_value":-3.5,"count":2,"chunk":"Richard McPhail: Thank you, Billy, and good morning, everyone. In the fourth quarter, total sales were $34.8 billion, a decrease of 2.9% from last year. During the fourth quarter, our total company comps were negative 3.5% with comps of negative 2.5% in November, positive 1.1% in December and negative 8.5% in January. Comps in the U.S. were negative 4% for the quarter with comps of negative 2.7% in November, positive 0.6% in December and negative 9.1% in January. In local currency, Mexico and Canada posted comps above the company average with Mexico posting positive comps. It is important to note that adjusting for holiday shifts and weather-related impacts in January, monthly comps relatively consistent across the quarter. For the year, our sales totaled $152.7 billion, a decrease of 3% versus fiscal 2022. For the year, total company comp sales decreased 3.2% and U.S. comp sales decreased 3.5%. In the fourth quarter, our gross margin was approximately 33.1%, a decrease of 20 basis points from last year. For the year, our gross margin was approximately 33.4%, a decrease of 15 basis points from last year, which was in line with our expectations. During the fourth quarter, operating expenses as a percentage of sales increased approximately 115 basis points to 21.2% compared to the fourth quarter of 2022. Our operating expense performance during the fourth quarter reflects our previously executed compensation increases for hourly associates as well as deleverage from our top line results. For the year, operating expenses were approximately 19.2% of sales, representing an increase of approximately 90 basis points from fiscal 2022. Our operating margin for the fourth quarter was approximately 11.9% and for the year was approximately 14.2%. Interest and other expense for the fourth quarter increased by $50 million to $458 million. In the fourth quarter and for fiscal 2023, our effective tax rate was 24%. Our diluted earnings per share for the fourth quarter were $2.82, a decrease of 14.5% compared to the fourth quarter of 2022. Diluted earnings per share for fiscal 2023 were $15.11, a decrease of 9.5% compared to fiscal 2022. At the end of the quarter, merchandise inventories were $21 billion, down $3.9 billion or approximately 16% versus last year, and inventory turns were 4.3x, up from 4.2x from the second period last year. Moving on to capital allocation. During the fourth quarter, we invested approximately $860 million back into our business in the form of capital expenditures. This brings total capital expenditures for fiscal 2023 to approximately $3.2 billion. During the year, we opened 13 new stores, bringing our store count to 2,335 at the end of fiscal 2023. Retail selling square footage was approximately 242 million square feet and total sales per retail square foot were approximately $605 in fiscal 2023. Additionally, we invested approximately $1.5 billion on three acquisitions during fiscal 2023, accelerating our strategic initiatives and providing us with better capabilities to serve our customers. During the year, we paid approximately $8.4 billion of dividends to our shareholders. Today, we announced our Board of Directors increased our quarterly dividend by 7.7% to $2.25 per share, which equates to an annual dividend of $9 per share. And finally, during fiscal 2023, we returned approximately $8 billion to our shareholders in the form of share repurchases, including $1.5 billion in the fourth quarter. Computed on the average of beginning and ending long-term debt and equity for the trailing 12 months, return on invested capital was 36.7% compared to 44.6% at the end of the fourth quarter of fiscal 2022. Now I'll comment on our outlook for 2024. First, let me point out that fiscal 2024 will include a 53rd week, so the fourth quarter of fiscal 2024 will consist of 14 weeks. We will continue to report comps on a 52-week basis, but we will base our overall guidance on 53 weeks. As you heard from Ted, we feel great about the actions we took in 2023 to position us well heading into 2024. And while there are signs that the economy is on the way towards normalization, the home improvement market still faces headwinds as we look ahead to fiscal 2024. We considered several factors that informed our outlook for fiscal 2024. On the positive side, we faced a number of pressures in fiscal 2023 that are unlikely to repeat in fiscal 2024. In 2023, we saw four increases in the Fed funds rate, a sharp decline in existing home sales and approximately 110 basis points of comp pressure from lumber deflation. However, we still expect pressures to our business in fiscal 2024. Personal consumption growth as measured by PCE is expected to decelerate compared to 2023. Our share of PCE also remains slightly elevated relative to 2019 and has been on a glide path towards 2019 levels. Higher interest rates at the beginning of 2024 relative to last year will likely continue to pressure demand for larger projects. And the effects from pull forward of demand during the pandemic as well as some project deferral could impact demand into 2024. As we consider these influences on home improvement demand, we are planning for a year of continued moderation but with slightly less pressure to comp sales than what we faced in fiscal 2023. Our fiscal 2024 outlook is for total sales growth to outpace sales comp with sales growth of approximately positive 1% and comp sales of approximately negative 1% compared to fiscal 2023. Total sales growth will benefit from a 53rd week as well as from the acquisitions we made and the new stores we opened in fiscal 2023 and the stores we plan to open in fiscal 2024. We expect the 53rd week will contribute approximately $2.3 billion in sales. Our gross margin is expected to be approximately 33.9%, an increase of approximately 50 basis points compared to fiscal 2023. This primarily reflects a lower product and transportation cost environment relative to fiscal 2023 as well as benefits from a portion of the approximately $500 million in reduced fixed costs that we will realize in fiscal 2024. Further, we expect operating margin of approximately 14.1%. This reflects deleverage from sales and pressure from targeted incentive compensation as we are overlapping lower incentive compensation paid than planned in 2023. This will be partially offset by the benefits from the approximately $500 million in fixed costs that we will realize in fiscal 2024 in both cost of goods sold and operating expenses. Our effective tax rate is targeted at approximately 24.5%. We expect net interest expense of approximately $1.8 billion. Our diluted earnings per share percent growth is targeted to be approximately 1% compared to fiscal 2023, with the extra week contributing approximately $0.30. We plan to continue investing in our business with capital expenditures of approximately 2% of sales on an annual basis. After investing in our business and paying our dividend, it is our intent to return excess cash to shareholders in the form of share repurchases. We believe we have positioned ourselves to meet the needs of our customers in any environment. The investments we've made in our business have enabled agility in our operating model. As we look forward, we will continue to invest to strengthen our position with our customers, leverage our scale and low-cost position to drive growth faster than the market and deliver shareholder value. Thank you for your participation in today's call. And Christine, we are now ready for questions.","evidence_gemma_new":"total company comps fourth quarter","evidence_llama_3_3":null,"evidence_qwen_3_30b":"total company comps fourth quarter","gemma_new_max":-3.5,"gemma_new_min":-3.5,"llama_3_3_max":null,"llama_3_3_min":null,"qwen_3_30b_max":-3.5,"qwen_3_30b_min":-3.5}
{"symbol":"HD","year":2024,"quarter":1,"date":"2024-Q1","chunk_id":5,"sub_chunk_id":0,"centroid_label":"u s total company comps","agreed_value":-0.028,"count":2,"chunk":"Richard McPhail: Thank you, Billy, and good morning, everyone. In the first quarter, total sales were $36.4 billion, a decrease of approximately 2.3% from last year. During the first quarter, our total company comps were negative 2.8% with comps of negative 4% in February, negative 0.8% in March, and negative 3.3% in April. Comps in the U.S. were negative 3.2% for the quarter with comps of negative 4.8% in February, negative 1.3% in March, and negative 3.6% in April. For the quarter, Mexico posted positive comps, whereas Canada was slightly below the company average. In the first quarter, our gross margin was 34.1%, an increase of approximately 45 basis points from the first quarter last year, primarily driven by benefits from lower transportation cost and shrink. During the first quarter, operating expense as a percent of sales increased approximately 140 basis points to 20.2% compared to the first quarter of 2023. The increase was primarily driven by a benefit from a legal settlement that we are overlapping from the first quarter of fiscal 2023, as well as deleverage from our top line results. Our operating expense performance was in line with our expectations. Our operating margin for the first quarter was 13.9% compared to 14.9% in the first quarter of 2023. Interest and other expense for the first quarter decreased by $13 million to $428 million. In the first quarter, our effective tax rate was 22.6% compared to 24.2% in the first quarter of fiscal 2023. Our diluted earnings per share for the first quarter were $3.63, a decrease of 5% compared to the first quarter of 2023. During the first quarter, we opened two new stores, bringing our total store count to 2,337. Retail selling square footage was approximately 242 million square feet. At the end of the quarter, merchandise inventories were $22.4 billion, down approximately $3 billion, or 12% compared to the first quarter of 2023, and inventory turns were 4.5x, up from 3.9x last year. Turning to capital allocation. During the first quarter, we invested approximately $850 million back into our business in the form of capital expenditures. And during the quarter, we paid approximately $2.2 billion in dividends to our shareholders and we returned approximately $600 million to shareholders in the form of share repurchases. As a reminder, in March we announced our intent to acquire SRS Distribution and as a result, we paused share repurchases. As you've heard us say many times, we maintain a disciplined approach to capital allocation and that is not changing. First and foremost, we will invest in the business and expect capital expenditures of approximately 2% of sales on an annual basis. After investing in the business, we plan to pay the dividend and it is our intent to return any excess cash to shareholders in the form of share repurchases. From time to time, we will also invest in the business through acquisitions to enhance our capabilities and to accelerate our strategic objectives. Computed on the average of beginning and ending long-term debt and equity for the trailing 12 months, return on invested capital was 37.1%, down from 43.6% \u2013 excuse me, down from 43.6% in the first quarter of fiscal 2023. Now, I will comment on our guidance for fiscal 2024. Today, we are reaffirming our guidance for 2024. As a reminder, our guidance does not currently reflect any impact from the announced acquisition of SRS. The acquisition is currently under regulatory review and we expect it to close by the end of fiscal 2024. We expect total sales growth to outpace sales comp with sales growth of approximately positive 1% and comp sales of approximately negative 1%. Total sales growth will benefit from a 53rd week and we expect the 53rd week will contribute approximately $2.3 billion in sales. Our gross margin is expected to be approximately 33.9%, an increase of approximately 50 basis points, compared to fiscal 2023. We expect operating margin of approximately 14.1%. Our effective tax rate is targeted at approximately 24.5%. We expect net interest expense of approximately $1.8 billion, and our diluted earnings per share percent growth is targeted to be approximately 1% compared to fiscal 2023. It\u2019s our intent to update guidance as appropriate once the SRS transaction closes. We believe that we have positioned ourselves to meet the needs of our customers in any environment. The investments we\u2019ve made in our business have enabled agility in our operating model. As we look forward, we will continue to invest to strengthen our position with our customers, leverage our scale and low-cost position to drive growth faster than the market and deliver shareholder value. Thank you for your participation in today\u2019s call. And Christine, we are now ready for questions.","evidence_gemma_new":null,"evidence_llama_3_3":"total company comps first quarter","evidence_qwen_3_30b":"total company comps first quarter","gemma_new_max":null,"gemma_new_min":null,"llama_3_3_max":-0.028,"llama_3_3_min":-0.028,"qwen_3_30b_max":-0.028,"qwen_3_30b_min":-0.028}
{"symbol":"HD","year":2024,"quarter":2,"date":"2024-Q2","chunk_id":5,"sub_chunk_id":0,"centroid_label":"u s total company comps","agreed_value":-3.3,"count":2,"chunk":"Richard McPhail: Thank you, Billy, and good morning, everyone. In the second quarter, Total sales were $43.2 billion, an increase of approximately 0.6% from last year. Total sales include $1.3 billion from the recent acquisition of SRS, which represents approximately six weeks of sales in the quarter. During the second quarter, our total company comps were negative 3.3%, with comps of negative 3.7% in May, negative 0.9% in June and negative 4.9% in July. Comps in the U.S. were negative 3.6% for the quarter, with comps of negative 4.1% in May, negative 1.4% in June and negative 5% in July. In the second quarter, our gross margin was approximately 33.4%, an increase of 40 basis points from the second quarter last year, primarily driven by benefits from lower transportation costs and shrink, partially offset by mix as a result of the SRS acquisition. During the second quarter, operating expense as a percent of sales increased approximately 65 basis points to 18.3% compared to the second quarter of 2023. Our operating expense performance was in line with our expectations. Beginning this quarter, in addition to our GAAP measures, we are providing the following non-GAAP measures: adjusted operating income, adjusted operating margin and adjusted diluted earnings per share, which excludes noncash amortization of acquired intangible assets. We believe these supplemental measures will help investors better understand and analyze our performance. Our operating margin for the second quarter was 15.1% compared to 15.4% in the second quarter of 2023. In the quarter, pretax intangible asset amortization was $90 million, including $39 million related to SRS. Excluding the intangible asset amortization in the quarter, our adjusted operating margin for the second quarter was 15.3% and compared to 15.5% in the second quarter of 2023. Interest and other expense for the second quarter increased by $61 million to $489 million due primarily to higher debt balances than a year ago. In the second quarter, our effective tax rate was 24.5%, compared to 24.4% in the second quarter of fiscal 2023. Our diluted earnings per share for the second quarter were $4.60, a decrease of approximately 1% compared to the second quarter of 2023. Excluding intangible asset amortization, our adjusted diluted earnings per share for the second quarter were $4.67, essentially flat compared to the second quarter of 2023. During the second quarter, we opened three new stores, bringing our total store count to 2,340. Retail selling square footage was approximately 243 million square feet. At the end of the quarter, merchandise inventories or $23.1 billion, down approximately $200 million compared to the second quarter of 2023, and inventory turns were 4.9x, up from 4.4x last year. Turning to capital allocation. During the second quarter, we invested approximately $720 million back into our business in the form of capital expenditures. And during the quarter, we paid approximately $2.2 billion in dividends to our shareholders. Our disciplined approach to capital allocation remains unchanged. First and foremost, we will invest in the business and expect capital expenditures of approximately 2% of sales on an annual basis. After investing in the business, we plan to pay the dividend and it is our intent to return any excess cash to shareholders in the form of share repurchases. Computed on the average of beginning and ending long-term debt and equity for the trailing 12 months, return on invested capital was approximately 31.9%, down from 41.5% in the second quarter of fiscal 2023. Now, I will comment on our updated outlook for fiscal 2024. As you heard from Ted, given the softer-than-expected performance in the first half of the year, and reflecting continued uncertainty around underlying consumer demand, we believe a more cautious outlook for the year is warranted. With the recent closing of the SRS acquisition, we are now including their results in our consolidated outlook for the year. For the period matching our first half, which includes periods prior to the acquisition and not fully reflected in our financial statements, SRS generated high single-digit percentage sales growth with operating income growing largely in line with sales. We believe that over the next several years, SRS on its own, and through our combined Pro efforts, will help accelerate sales and earnings growth for our company. Updating our fiscal 2024 guidance for the factors we just discussed. We now expect total sales growth between 2.5% and 3.5%, including the SRS acquisition and the 53rd week. The 53rd week is projected to add approximately $2.3 billion to total sales. SRS is expected to contribute approximately $6.4 billion in incremental sales. Comparable sales are expected to decline between negative 3% and negative 4% for the 52-week period. The high end of our range implies a consumer demand environment consistent with the first half of fiscal 2024. While comparable sales for the Company are not currently on the trajectory for the low end of the range, a negative 4% comp implies incremental pressure on consumer demand beyond what we are seeing today. We expect to open approximately 12 new stores. Our gross margin is expected to be approximately 33.5%. We expect operating margin to be between 13.5% and 13.6%, and adjusted operating margin to be between 13.8% and 13.9%. Our effective tax rate is targeted at approximately 24%. We expect net interest expense of approximately $2.2 billion. Our diluted earnings per share percent will decline between negative 2% and negative 4% compared to fiscal 2023, with the extra week contributing approximately $0.30. We expect our adjusted diluted earnings per share percent to decline between negative 1% and negative 3%, compared to fiscal 2023, with the extra week contributing approximately $0.30. We believe that we have positioned ourselves to meet the needs of our customers in any environment. The investments we've made in our business have enabled agility in our operating model. As we look forward, we will continue to invest to strengthen our position with our customers, leverage our scale and low-cost position to drive growth faster than the market and deliver shareholder value. Thank you for your participation in today's call. And Christine, we are now ready for questions.","evidence_gemma_new":"total company comps second quarter","evidence_llama_3_3":null,"evidence_qwen_3_30b":"total company comps second quarter","gemma_new_max":-3.3,"gemma_new_min":-3.3,"llama_3_3_max":null,"llama_3_3_min":null,"qwen_3_30b_max":-3.3,"qwen_3_30b_min":-3.3}
{"symbol":"HD","year":2024,"quarter":3,"date":"2024-Q3","chunk_id":5,"sub_chunk_id":0,"centroid_label":"u s total company comps","agreed_value":-0.013,"count":2,"chunk":"Richard McPhail: Thank you, Billy, and good morning, everyone. In the third quarter, total sales were $40.2 billion, an increase of approximately 6.6% from last year. During the third quarter, our total company comps were negative 1.3% with comps of negative 3.3% in August, negative 2.3% in September and positive 1% in October. Comps in the U.S. were negative 1.2% for the quarter, with comps of negative 3.5% in August, negative 2.2% in September, and positive 1.4% in October. The progression of our monthly comps reflects in large part hurricane related sales. Our results for the third quarter include a net contribution of approximately $200 million in hurricane related sales, which positively impacted total company comps by approximately 55 basis points for the quarter and approximately 120 basis points for October. In the third quarter, our gross margin was approximately 33.4%, a decrease of approximately 40 basis points from the third quarter last year, primarily driven by mix as a result of the SRS acquisition, partially offset by benefits from lower shrink. During the third quarter, operating expense as a percent of sales increased approximately 45 basis points to 19.9% compared to the third quarter of 2023. Our operating expense performance was in-line with our expectations. Our operating margin for the third quarter was 13.5% compared to 14.3% in the third quarter of 2023. In the quarter, pre-tax intangible asset amortization was $138 million including $86 million related to SRS. Excluding the intangible asset amortization in the quarter, our adjusted operating margin for the third quarter was 13.8% compared to 14.5% in the third quarter of 2023. Interest and other expense for the third quarter increased by $157 million to $595 million due primarily to higher debt balances than a year ago. In the third quarter, our effective tax rate was 24.4% compared to 23.3% in the third quarter of fiscal 2023. Our diluted earnings per share for the third quarter were $3.67, a decrease of approximately 4% compared to the third quarter of 2023. Excluding intangible asset amortization, our adjusted diluted earnings per share for the third quarter were $3.78, a decrease of approximately 2% compared to the third quarter of 2023. During the third quarter, we opened five new stores, bringing our total store count to 2, 345. Retail selling square footage was approximately 243 million square feet. At the end of the quarter, merchandise inventories were $23.9 billion up approximately $1.1 billion compared to the third quarter of 2023, and inventory turns were 4.8 times, up from 4.3 times last year. Turning to capital allocation. During the third quarter, we invested approximately $820 million back into our business in the form of capital expenditures. And during the quarter, we paid approximately $2.2 billion in dividends to our shareholders. Compute on the average of beginning and ending long-term debt and equity for the trailing 12-months, return on invested capital was approximately 31.5%, down from 38.7% in the third quarter of fiscal 2023. Now, I will comment on our updated outlook for fiscal 2024. As you heard from Ted, while macro uncertainty remains and continues to pressure home improvement demand, our performance in the third quarter was better than expected. Our performance reflects hurricane related sales in the third quarter, and we expect some hurricane related sales in the fourth quarter. Given the better than expected performance in the third quarter and incremental hurricane related sales, we have updated our fiscal 2024 guidance. We now expect total sales growth of approximately 4%, including SRS in the 53rd week. The 53rd week is projected to add approximately $2.3 billion to total sales and SRS is expected to contribute approximately $6.4 billion in incremental sales. Comparable sales are expected to decline approximately 2.5% for the 52 week period. We expect to open approximately 12 new stores. Our gross margin is expected to be approximately 33.5%. We expect operating margin to be approximately 13.5% and adjusted operating margin to be approximately 13.8%. Our effective tax rate is targeted at approximately 24%. We expect net interest expense of approximately $2.1 billion. We expect our diluted earnings per share to decline approximately 2% compared to fiscal 2023 with the extra week contributing approximately $0.30 per share. And, we expect our adjusted diluted earnings per share to decline approximately 1% compared to fiscal 2023 with the extra week contributing approximately $0.30 per share. We believe that we will grow market share in any environment. We are continuing to invest to strengthen our competitive position with our customers and leverage our scale and low cost position to drive growth faster than the market and deliver shareholder value. Thank you for your participation in today\u2019s call. And Christine, we are now ready for questions.","evidence_gemma_new":null,"evidence_llama_3_3":"total company comps third quarter","evidence_qwen_3_30b":"total company comps third quarter","gemma_new_max":null,"gemma_new_min":null,"llama_3_3_max":-0.013,"llama_3_3_min":-0.013,"qwen_3_30b_max":-0.013,"qwen_3_30b_min":-0.013}
{"symbol":"HD","year":2023,"quarter":4,"date":"2023-FY","chunk_id":3,"sub_chunk_id":0,"centroid_label":"us new stores","agreed_value":13.0,"count":2,"chunk":"Ann-Marie Campbell: Thanks, Ted, and good morning, everyone. I couldn\u2019t be more pleased with our operational excellence and the investments we continue to make in the business. As you heard from Ted, we remain focused on three main strategic opportunities of creating the best interconnected experience, growing our Pro wallet share through our unique ecosystem of capabilities and build in new stores. As we continue to create the best interconnected experience and remove friction from our customers shopping journey, one of our biggest areas of opportunity is within our post-sale experience. For the majority of our customers, this process has largely been unchanged for the last 44 years, and we have opportunities to improve this experience. In 2023, we made significant progress taking friction out of our online order management process. Today, we have enhanced our systems to better allow our customers to both modify orders and self-service online returns. In 2024, we will focus on building more robust capabilities to support an interconnected self-service returns process where customers will have the ability to start a return online and complete that return via mail or in-store. We have just begun all of this work in earnest and are very excited about the friction we will remove through this process while realizing significant productivity benefits over the long term. Through these enhancements and new capabilities in our returns process, we gain efficiencies by reducing transaction time and improving on-shelf availability, enabling better inventory management. We also improved customer service by allowing the customer to start and complete their return, however they want. As you've heard us say many times, we are focused on making our interconnected experience better and more convenient no matter how our customers choose to engage with us. As we mentioned at our Investor Conference in June, we plan to open approximately 80 new stores over the next five years. Our current network of over 2,300 stores throughout North America makes the Home Depot the most convenient physical destination for customers to shop for their home improvement products. We have a premier real estate footprint that provides convenience for the customer that we believe is nearly impossible to replicate. And we will continue to build out this footprint in a very strategic way by investing in new stores in areas that have experienced significant population growth or where it makes sense to relieve some pressure on existing high-volume stores. In fiscal 2023, we opened 13 new stores. Eight in the U.S. and five in Mexico. In the U.S., our eight new stores were roughly split between stores relieving pressure from higher volume existing stores and stores where we identified void in new high-growth areas. As an example, we are already seeing great results for many of these new stores and are particularly pleased with our Mapunapuna store in Honolulu, which allows us to better serve the Honolulu market. For fiscal 2024, we plan to open approximately 12 new stores. Beyond our focus on removing friction and growing to new stores, we have a lot of initiatives in 2024 geared at growing our share of wallet with the Pro. My new organization will be focused on better enabling alignment so we can more seamlessly deliver on our unique value proposition for all Pros. When we invest in new assets and capabilities to better serve the complex Pro, this also improves our Pro experience in our stores. For example, more job site delivery orders fulfilled from our distribution centers means less congestion in our stores and less time dedicated to picking, packing and staging orders for delivery. This gives our in-store Pro sales associates more time to dedicate to our Pros. Additionally, the ability to fulfill large orders through our distribution network also means that we have more product in stock and available for sale for all those Pros shopping in our stores. These improvements benefit our associates and all of our Pros. Our investments in these strategic initiatives as well as the investments in our associates has set us up for success. Recall that at the beginning of the year, we announced a significant investment of approximately $1 billion in increased annualized compensation for frontline hourly associates. As a result of this investment, we saw what we intended to see meaningful improvement in our attrition rates, particularly among our most tenured associates, which drove improved customer service, productivity and safety. I'm excited to see all of our initiatives gaining traction, and I want to thank our amazing associates for all that they do. With that, let me turn the call over to Billy.","evidence_gemma_new":"new stores in fiscal 2023","evidence_llama_3_3":"new stores fiscal 2023","evidence_qwen_3_30b":null,"gemma_new_max":13.0,"gemma_new_min":13.0,"llama_3_3_max":13.0,"llama_3_3_min":13.0,"qwen_3_30b_max":null,"qwen_3_30b_min":null}
{"symbol":"HD","year":2024,"quarter":4,"date":"2024-FY","chunk_id":1,"sub_chunk_id":0,"centroid_label":"us new stores","agreed_value":12.0,"count":2,"chunk":"Ted Decker: Thank you, Isabelle and good morning everyone. Sales for fiscal 2024 were $159.5 billion an increase of 4.5% from the same period last year. Comp sales declined 1.8% from the same period last year. And our U.S. Stores had negative comps of 1.8%. Adjusted diluted earnings per share were $15.24 compared to $15.25 in the prior year. In the fourth quarter, comp sales increased 0.8% from last year. And comps in our U.S. Stores were up 1.3%. Adjusted diluted earnings per share were $3.13 compared to $2.86 in the prior year. The quarter, we saw broad-based engagement across our geographies. As fifteen of our nineteen U.S. Regions delivered positive comps. In addition, both Canada and Mexico reported positive comps in local currency. Our fourth quarter results exceeded our expectations as we saw greater engagement home improvement spend despite ongoing pressure on large remodeling projects. Throughout the year, we remained steadfast in our investments across our strategic initiatives. Despite uncertain macroeconomic conditions and a higher interest rate environment that impacted home improvement demand. Our strategic priorities remain creating the best interconnected shopping experience, growing our pro wallet share through a unique ecosystem of capabilities, and building new stores. We are always improving our interconnect shopping experience. We know that our customers want faster delivery than ever before. Recall that last quarter I shared the progress we made with our investment in our downstream supply chain. Including an expanded assortment in our DFCs to allow for faster delivery speeds across more products. We also began leveraging our stores to offer more delivery options. Our delivery speeds are now the fastest they've ever been and customers are increasing their spend. Billy will take you through these results in a moment. Growing our share of wallet with our pro customers is a key part of our growth strategy. We've continued investing in our store experience, fulfillment options and sales teams. These investments are delivering incremental sales growth and Anne will discuss this in detail shortly. In June, we completed the acquisition of SRS, And while we've only owned them for seven months, could not be happier with the business. The capabilities that SRS brings are both additive and complementary to our strategic efforts. As expected for fiscal 2024, SRS contributed $6.4 billion in sales for the seven months we owned them. And since we acquired them in June, they have opened over twenty greenfield locations, and completed four tuck-in acquisitions. We're also focusing on many cross-sell opportunities with SRS. As an example, we've talked about the opportunity with QuoteCenter. Our platform that provides real-time quote pricing in different fulfillment options for larger job lot quantities. SRS was already in quote center but not in all markets. Today, they are in nearly every market with their roofing products. And since making this change, have seen SRS's sales and quote center more than triple Going forward, we will continue to support SRS' momentum. We expect their organic sales to grow mid-single digits in fiscal 2025. Our real estate footprint remains one of our distinct competitive advantages. We are expanding that footprint by investing in new stores in areas that have experienced population growth or where it makes sense to relieve pressure on existing high volume stores. In fiscal 2024, we opened twelve new stores. Ten in the US and two in Mexico. We are seeing great results from these stores which are outperforming our expectations. For fiscal 2025, we plan to open thirteen new stores. For fiscal 2025, we expect total sales growth of comparable sales growth of approximately one percent, and adjusted diluted earnings per share to decline approximately two percent. We remain excited about all our growth opportunities. We feel confident that the investments we are making will set us up for continued success. I wanna close by thanking our associates for their hard work and dedication to our customers in the fourth quarter and throughout the year. Our results reflect strong execution by our stores, merchants and supply chain teams. As well as our vendor partners as they remain focused on delivering value and service to our customers. With that, let me turn the call over to Anne.","evidence_gemma_new":"new stores for fiscal 2024","evidence_llama_3_3":"new stores fiscal 2024","evidence_qwen_3_30b":null,"gemma_new_max":12.0,"gemma_new_min":12.0,"llama_3_3_max":12.0,"llama_3_3_min":12.0,"qwen_3_30b_max":null,"qwen_3_30b_min":null}
{"symbol":"HD","year":2024,"quarter":1,"date":"2024-Q1","chunk_id":5,"sub_chunk_id":0,"centroid_label":"us new stores","agreed_value":2.0,"count":2,"chunk":"Richard McPhail: Thank you, Billy, and good morning, everyone. In the first quarter, total sales were $36.4 billion, a decrease of approximately 2.3% from last year. During the first quarter, our total company comps were negative 2.8% with comps of negative 4% in February, negative 0.8% in March, and negative 3.3% in April. Comps in the U.S. were negative 3.2% for the quarter with comps of negative 4.8% in February, negative 1.3% in March, and negative 3.6% in April. For the quarter, Mexico posted positive comps, whereas Canada was slightly below the company average. In the first quarter, our gross margin was 34.1%, an increase of approximately 45 basis points from the first quarter last year, primarily driven by benefits from lower transportation cost and shrink. During the first quarter, operating expense as a percent of sales increased approximately 140 basis points to 20.2% compared to the first quarter of 2023. The increase was primarily driven by a benefit from a legal settlement that we are overlapping from the first quarter of fiscal 2023, as well as deleverage from our top line results. Our operating expense performance was in line with our expectations. Our operating margin for the first quarter was 13.9% compared to 14.9% in the first quarter of 2023. Interest and other expense for the first quarter decreased by $13 million to $428 million. In the first quarter, our effective tax rate was 22.6% compared to 24.2% in the first quarter of fiscal 2023. Our diluted earnings per share for the first quarter were $3.63, a decrease of 5% compared to the first quarter of 2023. During the first quarter, we opened two new stores, bringing our total store count to 2,337. Retail selling square footage was approximately 242 million square feet. At the end of the quarter, merchandise inventories were $22.4 billion, down approximately $3 billion, or 12% compared to the first quarter of 2023, and inventory turns were 4.5x, up from 3.9x last year. Turning to capital allocation. During the first quarter, we invested approximately $850 million back into our business in the form of capital expenditures. And during the quarter, we paid approximately $2.2 billion in dividends to our shareholders and we returned approximately $600 million to shareholders in the form of share repurchases. As a reminder, in March we announced our intent to acquire SRS Distribution and as a result, we paused share repurchases. As you've heard us say many times, we maintain a disciplined approach to capital allocation and that is not changing. First and foremost, we will invest in the business and expect capital expenditures of approximately 2% of sales on an annual basis. After investing in the business, we plan to pay the dividend and it is our intent to return any excess cash to shareholders in the form of share repurchases. From time to time, we will also invest in the business through acquisitions to enhance our capabilities and to accelerate our strategic objectives. Computed on the average of beginning and ending long-term debt and equity for the trailing 12 months, return on invested capital was 37.1%, down from 43.6% \u2013 excuse me, down from 43.6% in the first quarter of fiscal 2023. Now, I will comment on our guidance for fiscal 2024. Today, we are reaffirming our guidance for 2024. As a reminder, our guidance does not currently reflect any impact from the announced acquisition of SRS. The acquisition is currently under regulatory review and we expect it to close by the end of fiscal 2024. We expect total sales growth to outpace sales comp with sales growth of approximately positive 1% and comp sales of approximately negative 1%. Total sales growth will benefit from a 53rd week and we expect the 53rd week will contribute approximately $2.3 billion in sales. Our gross margin is expected to be approximately 33.9%, an increase of approximately 50 basis points, compared to fiscal 2023. We expect operating margin of approximately 14.1%. Our effective tax rate is targeted at approximately 24.5%. We expect net interest expense of approximately $1.8 billion, and our diluted earnings per share percent growth is targeted to be approximately 1% compared to fiscal 2023. It\u2019s our intent to update guidance as appropriate once the SRS transaction closes. We believe that we have positioned ourselves to meet the needs of our customers in any environment. The investments we\u2019ve made in our business have enabled agility in our operating model. As we look forward, we will continue to invest to strengthen our position with our customers, leverage our scale and low-cost position to drive growth faster than the market and deliver shareholder value. Thank you for your participation in today\u2019s call. And Christine, we are now ready for questions.","evidence_gemma_new":"new stores first quarter","evidence_llama_3_3":"new stores first quarter","evidence_qwen_3_30b":null,"gemma_new_max":2.0,"gemma_new_min":2.0,"llama_3_3_max":2.0,"llama_3_3_min":2.0,"qwen_3_30b_max":null,"qwen_3_30b_min":null}
{"symbol":"HD","year":2024,"quarter":2,"date":"2024-Q2","chunk_id":5,"sub_chunk_id":0,"centroid_label":"us new stores","agreed_value":3.0,"count":3,"chunk":"Richard McPhail: Thank you, Billy, and good morning, everyone. In the second quarter, Total sales were $43.2 billion, an increase of approximately 0.6% from last year. Total sales include $1.3 billion from the recent acquisition of SRS, which represents approximately six weeks of sales in the quarter. During the second quarter, our total company comps were negative 3.3%, with comps of negative 3.7% in May, negative 0.9% in June and negative 4.9% in July. Comps in the U.S. were negative 3.6% for the quarter, with comps of negative 4.1% in May, negative 1.4% in June and negative 5% in July. In the second quarter, our gross margin was approximately 33.4%, an increase of 40 basis points from the second quarter last year, primarily driven by benefits from lower transportation costs and shrink, partially offset by mix as a result of the SRS acquisition. During the second quarter, operating expense as a percent of sales increased approximately 65 basis points to 18.3% compared to the second quarter of 2023. Our operating expense performance was in line with our expectations. Beginning this quarter, in addition to our GAAP measures, we are providing the following non-GAAP measures: adjusted operating income, adjusted operating margin and adjusted diluted earnings per share, which excludes noncash amortization of acquired intangible assets. We believe these supplemental measures will help investors better understand and analyze our performance. Our operating margin for the second quarter was 15.1% compared to 15.4% in the second quarter of 2023. In the quarter, pretax intangible asset amortization was $90 million, including $39 million related to SRS. Excluding the intangible asset amortization in the quarter, our adjusted operating margin for the second quarter was 15.3% and compared to 15.5% in the second quarter of 2023. Interest and other expense for the second quarter increased by $61 million to $489 million due primarily to higher debt balances than a year ago. In the second quarter, our effective tax rate was 24.5%, compared to 24.4% in the second quarter of fiscal 2023. Our diluted earnings per share for the second quarter were $4.60, a decrease of approximately 1% compared to the second quarter of 2023. Excluding intangible asset amortization, our adjusted diluted earnings per share for the second quarter were $4.67, essentially flat compared to the second quarter of 2023. During the second quarter, we opened three new stores, bringing our total store count to 2,340. Retail selling square footage was approximately 243 million square feet. At the end of the quarter, merchandise inventories or $23.1 billion, down approximately $200 million compared to the second quarter of 2023, and inventory turns were 4.9x, up from 4.4x last year. Turning to capital allocation. During the second quarter, we invested approximately $720 million back into our business in the form of capital expenditures. And during the quarter, we paid approximately $2.2 billion in dividends to our shareholders. Our disciplined approach to capital allocation remains unchanged. First and foremost, we will invest in the business and expect capital expenditures of approximately 2% of sales on an annual basis. After investing in the business, we plan to pay the dividend and it is our intent to return any excess cash to shareholders in the form of share repurchases. Computed on the average of beginning and ending long-term debt and equity for the trailing 12 months, return on invested capital was approximately 31.9%, down from 41.5% in the second quarter of fiscal 2023. Now, I will comment on our updated outlook for fiscal 2024. As you heard from Ted, given the softer-than-expected performance in the first half of the year, and reflecting continued uncertainty around underlying consumer demand, we believe a more cautious outlook for the year is warranted. With the recent closing of the SRS acquisition, we are now including their results in our consolidated outlook for the year. For the period matching our first half, which includes periods prior to the acquisition and not fully reflected in our financial statements, SRS generated high single-digit percentage sales growth with operating income growing largely in line with sales. We believe that over the next several years, SRS on its own, and through our combined Pro efforts, will help accelerate sales and earnings growth for our company. Updating our fiscal 2024 guidance for the factors we just discussed. We now expect total sales growth between 2.5% and 3.5%, including the SRS acquisition and the 53rd week. The 53rd week is projected to add approximately $2.3 billion to total sales. SRS is expected to contribute approximately $6.4 billion in incremental sales. Comparable sales are expected to decline between negative 3% and negative 4% for the 52-week period. The high end of our range implies a consumer demand environment consistent with the first half of fiscal 2024. While comparable sales for the Company are not currently on the trajectory for the low end of the range, a negative 4% comp implies incremental pressure on consumer demand beyond what we are seeing today. We expect to open approximately 12 new stores. Our gross margin is expected to be approximately 33.5%. We expect operating margin to be between 13.5% and 13.6%, and adjusted operating margin to be between 13.8% and 13.9%. Our effective tax rate is targeted at approximately 24%. We expect net interest expense of approximately $2.2 billion. Our diluted earnings per share percent will decline between negative 2% and negative 4% compared to fiscal 2023, with the extra week contributing approximately $0.30. We expect our adjusted diluted earnings per share percent to decline between negative 1% and negative 3%, compared to fiscal 2023, with the extra week contributing approximately $0.30. We believe that we have positioned ourselves to meet the needs of our customers in any environment. The investments we've made in our business have enabled agility in our operating model. As we look forward, we will continue to invest to strengthen our position with our customers, leverage our scale and low-cost position to drive growth faster than the market and deliver shareholder value. Thank you for your participation in today's call. And Christine, we are now ready for questions.","evidence_gemma_new":"new stores second quarter","evidence_llama_3_3":"new stores second quarter","evidence_qwen_3_30b":"new stores second quarter","gemma_new_max":3.0,"gemma_new_min":3.0,"llama_3_3_max":3.0,"llama_3_3_min":3.0,"qwen_3_30b_max":3.0,"qwen_3_30b_min":3.0}
{"symbol":"HD","year":2024,"quarter":3,"date":"2024-Q3","chunk_id":5,"sub_chunk_id":0,"centroid_label":"us new stores","agreed_value":5.0,"count":2,"chunk":"Richard McPhail: Thank you, Billy, and good morning, everyone. In the third quarter, total sales were $40.2 billion, an increase of approximately 6.6% from last year. During the third quarter, our total company comps were negative 1.3% with comps of negative 3.3% in August, negative 2.3% in September and positive 1% in October. Comps in the U.S. were negative 1.2% for the quarter, with comps of negative 3.5% in August, negative 2.2% in September, and positive 1.4% in October. The progression of our monthly comps reflects in large part hurricane related sales. Our results for the third quarter include a net contribution of approximately $200 million in hurricane related sales, which positively impacted total company comps by approximately 55 basis points for the quarter and approximately 120 basis points for October. In the third quarter, our gross margin was approximately 33.4%, a decrease of approximately 40 basis points from the third quarter last year, primarily driven by mix as a result of the SRS acquisition, partially offset by benefits from lower shrink. During the third quarter, operating expense as a percent of sales increased approximately 45 basis points to 19.9% compared to the third quarter of 2023. Our operating expense performance was in-line with our expectations. Our operating margin for the third quarter was 13.5% compared to 14.3% in the third quarter of 2023. In the quarter, pre-tax intangible asset amortization was $138 million including $86 million related to SRS. Excluding the intangible asset amortization in the quarter, our adjusted operating margin for the third quarter was 13.8% compared to 14.5% in the third quarter of 2023. Interest and other expense for the third quarter increased by $157 million to $595 million due primarily to higher debt balances than a year ago. In the third quarter, our effective tax rate was 24.4% compared to 23.3% in the third quarter of fiscal 2023. Our diluted earnings per share for the third quarter were $3.67, a decrease of approximately 4% compared to the third quarter of 2023. Excluding intangible asset amortization, our adjusted diluted earnings per share for the third quarter were $3.78, a decrease of approximately 2% compared to the third quarter of 2023. During the third quarter, we opened five new stores, bringing our total store count to 2, 345. Retail selling square footage was approximately 243 million square feet. At the end of the quarter, merchandise inventories were $23.9 billion up approximately $1.1 billion compared to the third quarter of 2023, and inventory turns were 4.8 times, up from 4.3 times last year. Turning to capital allocation. During the third quarter, we invested approximately $820 million back into our business in the form of capital expenditures. And during the quarter, we paid approximately $2.2 billion in dividends to our shareholders. Compute on the average of beginning and ending long-term debt and equity for the trailing 12-months, return on invested capital was approximately 31.5%, down from 38.7% in the third quarter of fiscal 2023. Now, I will comment on our updated outlook for fiscal 2024. As you heard from Ted, while macro uncertainty remains and continues to pressure home improvement demand, our performance in the third quarter was better than expected. Our performance reflects hurricane related sales in the third quarter, and we expect some hurricane related sales in the fourth quarter. Given the better than expected performance in the third quarter and incremental hurricane related sales, we have updated our fiscal 2024 guidance. We now expect total sales growth of approximately 4%, including SRS in the 53rd week. The 53rd week is projected to add approximately $2.3 billion to total sales and SRS is expected to contribute approximately $6.4 billion in incremental sales. Comparable sales are expected to decline approximately 2.5% for the 52 week period. We expect to open approximately 12 new stores. Our gross margin is expected to be approximately 33.5%. We expect operating margin to be approximately 13.5% and adjusted operating margin to be approximately 13.8%. Our effective tax rate is targeted at approximately 24%. We expect net interest expense of approximately $2.1 billion. We expect our diluted earnings per share to decline approximately 2% compared to fiscal 2023 with the extra week contributing approximately $0.30 per share. And, we expect our adjusted diluted earnings per share to decline approximately 1% compared to fiscal 2023 with the extra week contributing approximately $0.30 per share. We believe that we will grow market share in any environment. We are continuing to invest to strengthen our competitive position with our customers and leverage our scale and low cost position to drive growth faster than the market and deliver shareholder value. Thank you for your participation in today\u2019s call. And Christine, we are now ready for questions.","evidence_gemma_new":"new stores third quarter","evidence_llama_3_3":"new stores third quarter","evidence_qwen_3_30b":null,"gemma_new_max":5.0,"gemma_new_min":5.0,"llama_3_3_max":5.0,"llama_3_3_min":5.0,"qwen_3_30b_max":null,"qwen_3_30b_min":null}
{"symbol":"JNJ","year":2023,"quarter":1,"date":"2022-Q1","chunk_id":1,"sub_chunk_id":0,"centroid_label":"adjusted net earnings","agreed_value":7100000000.0,"count":2,"chunk":"Jessica Moore: Good morning. This is Jessica Moore, Vice President of Investor Relations for Johnson & Johnson. Welcome to our company's review of the 2023 first quarter business results and full year financial outlook. Joining me on today's call are Joe Wolk, Executive Vice President, Chief Financial Officer; and Ashley McEvoy, Executive Vice President, Worldwide Chairman of MedTech. Unfortunately, Jennifer Taubert, Executive Vice President, Worldwide Chairman of Pharmaceuticals is not feeling well and is unable to join us today. A few logistics before we get into the details. As a reminder, you can find additional materials, including today's presentation and associated schedules on the Investor Relations section of the Johnson & Johnson website at investor.jnj.com. Please note that today's meeting contains forward-looking statements regarding, among other things, the company's future operating and financial performance, product development, market position and business strategy and the anticipated separation of the company's Consumer Health business. You are cautioned not to rely on these forward-looking statements, which are based on current expectations of future events using the information available as of today's date and are subject to certain risks and uncertainties that may cause the company's actual results to differ materially from those projected. A description of these risks, uncertainties and other factors can be found in our SEC filings, including our 2022 Form 10-K, which is available at investor.jnj.com and on the SEC's website. Additionally, several of the products and compounds discussed today are being developed in collaboration with strategic partners or licensed from other companies. This slide acknowledges those relationships. Moving to today's agenda, I will review the first quarter sales and P&L results for the corporation and highlights related to the three segments. Joe will then provide additional business and financial commentary before sharing an overview of our cash position, capital allocation priorities and updated guidance for 2023. The remaining time will be available for your questions. We anticipate the webcast will last approximately 60 minutes. Now let's turn to our first quarter results. Worldwide sales were $24.7 billion for the first quarter of 2023, an increase of 5.6% versus the first quarter of 2022. Operational sales, which excludes the effect of translational currency, increased 9% as currency had a negative impact of 3.4 points. In the U.S., sales increased 9.7%. In regions outside the U.S., our reported sales increased 1.8%. Operational sales outside the U.S. increased 8.3% with currency negatively impacting our reported OUS results by 6.5 points. Excluding the net impact of acquisitions and divestitures, adjusted operational sales growth was 7.6% worldwide, 7.4% in the U.S. and 7.9% outside the U.S. with all three segments growing sequentially over the fourth quarter. Turning now to earnings. For the quarter, net loss was $68 million and basic loss per share was $0.03 versus diluted earnings per share of $1.93 one-year ago primarily driven by the $6.9 billion charge related to the Talc Settlement proposal. Excluding after-tax intangible asset amortization expense and special items for both periods, adjusted net earnings for the quarter were $7.1 billion, and adjusted diluted earnings per share was $2.68, representing a decrease of 0.9% and an increase of 0.4%, respectively, compared to the first quarter of 2022. On an operational basis, adjusted diluted earnings per share increased 3%. I will now comment on business segment sales performance highlights for the quarter. Unless otherwise stated, percentages quoted represent the operational sales change in comparison to the first quarter of 2022 and therefore, exclude the impact currency translation. Beginning with Consumer Health. Worldwide Consumer Health sales of $3.9 billion increased 7.4% with an increase of 11.4% in the U.S. and an increase of 4.4% outside the U.S. Worldwide operational sales increased 11.3% and outside the U.S., operational sales increased 11.3%. Results were primarily driven by global strategic price increases across all franchises. Volume growth in OTC was due to an exceptionally strong cough, cold and flu season most pronounced in Europe, coupled with one-time retailer restocking primarily in the U.S. related to low inventory levels due to tripledemic demand. Skin Health\/Beauty delivered double-digit growth driven by price actions, lapping prior year supply constraints and current quarter restocking as well as strong NEUTROGENA and AVEENO e-commerce and club channel performance and new product innovations. Moving on to our Pharmaceutical segment. Worldwide Pharmaceutical sales of $13.4 billion increased 4.2% with growth of 5.9% in the U.S. and 2.4% outside of the U.S. Worldwide operational sales increased 7.2% and outside the U.S., operational sales increased 8.6%. Excluding the COVID-19 vaccine sales, worldwide operational sales increased 4.9%, U.S. operational sales increased 7.1%, and outside the U.S., operational sales increased 2.4%. Pharmaceutical growth excluding the COVID-19 vaccine was driven by our key brands and continued uptake in our recently launched products with eight assets delivering double-digit growth. We continue to drive strong sales growth for both DARZALEX and ERLEADA with increases of 25.7% and 40.3%, respectively. STELARA grew 9.6% driven by market growth and share gains in Crohn's disease and ulcerative colitis, with gains of 2.2 points and 4.8 points in the U.S., respectively, partially offset by unfavorable patient mix and price. TREMFYA grew 11% driven by market growth and share gains in psoriasis and psoriatic arthritis, with gains of 0.9 points and 2.1 points in the U.S., respectively, partially offset by unfavorable patient mix. Turning to newly launched products. We are excited to disclose CARVYKTI and SPRAVATO sales for the first-time this quarter. We continue to make progress on our thoughtful and phased launch of CARVYKTI and continue to expand access and reimbursement for SPRAVATO. Also, we are encouraged by the early success of our launch of TECVAYLI, sales of which are included in other oncology. This sales growth was partially offset by the loss of exclusivity in REMICADE and ZYTIGA, along with a decrease in IMBRUVICA sales due to competitive pressures. IMBRUVICA maintains its market leadership position worldwide. I'll now turn your attention to the MedTech segment. Worldwide MedTech sales of $7.5 billion increased by 7.3% with growth of 16.6% in the U.S. and a decline of 0.6% outside of the U.S. Worldwide operational sales increased 11% and outside the U.S., operational sales increased 6.2%. Abiomed contributed 4.6% to operational growth. Excluding the impact of acquisition and divestitures, worldwide adjusted operational sales growth was 6.4%. Sales in the first quarter accelerated sequentially from Q4 for all four MedTech businesses, driven by global procedure growth, continued uptake of recently launched products, and commercial execution. As anticipated, in China, procedure volumes improved as the quarter progressed. Partially offsetting growth in the quarter was the impact of volume-based procurement in China as well as supply constraints. The Interventional Solutions franchise delivered operational growth of 41.9%, which includes $324 million related to Abiomed. We are excited about the progress of the integration to which Joe will provide additional context. Excluding the impact of the acquisition, this franchise delivered another quarter of double-digit worldwide growth at 12.3%. As we continue to increase our reporting transparency, beginning this quarter, we are providing visibility to electrophysiology sales. Electrophysiology continued to deliver double-digit sales growth in all regions with the exception of Asia-Pacific, which reflects impacts related to volume-based procurement in China. Orthopaedics operational growth of 5.1% reflects the strong procedure recovery and success of recently launched products especially digital and enabling technologies driving pull-through sales in areas like hips and knees. Growth was partially offset by the impact of volume based procurement in China, primarily in hips and spine. Global growth of 9.3% in contact lens and other reflects continued penetration of our ACUVUE OASYS 1-Day family of products, including the recent launch of ACUVUE OASYS MAX 1-Day, strong commercial execution and strategic price actions. Growth in contact lens and U.S. surgical vision was tempered by continued supply challenges. Now turning to our consolidated statement of earnings for the first quarter of 2023. I'd like to highlight a few noteworthy items that have changed compared to the same quarter of last year. Cost of products sold deleveraged by 150 basis points driven by one-time COVID-19 vaccine manufacturing exit related costs in the Pharmaceutical business and commodity inflation and acquisition-related items in the MedTech business. Selling, marketing and administrative margins leveraged by 60 basis points driven by proactive management of costs given the current inflationary environment. We continue to invest strategically in research and development at competitive levels, investing 14.4% of sales this quarter. The $3.6 billion invested was a 2.9% increase versus the prior year. The other income and expense line was an expense of $7.2 billion in the first quarter of 2023 compared to net income of $100 million in the first quarter of 2022. The increase in expense was the result of the $6.9 billion charge related to the Talc Settlement proposal recorded in the first quarter of 2023 as previously disclosed. Regarding taxes in the quarter, our effective tax rate was 90.8% versus 12.2% in the same period last year, primarily driven by the $6.9 billion accrual for the Talc Settlement proposal. Excluding special items, the effective tax rate was 16.5% versus 13.3% in the same period last year. I encourage you to review our upcoming first quarter 10-Q filing for additional details on specific tax matters. Lastly, I'll direct your attention to the box section of the slide, where we have also provided our income before tax, net earnings and earnings per share adjusted to exclude the impact of intangible amortization expense and special items. Now let's look at the adjusted income before tax by segment. In the first quarter of 2023, our adjusted income before tax for the enterprise as a percentage of sales decreased from 35.1% to 34.2%. Pharmaceutical margins declined from 44.1% to 43.2% driven primarily by mix, partially offset by proactive management of costs. MedTech margins remained flat at 27% driven primarily by inflationary impacts, offset by proactive management of costs. Finally, Consumer Health margins improved from 22.1% to 22.3% driven primarily by strategic price actions, partially offset by input cost inflation. This concludes the sales and earnings portion of the Johnson & Johnson first quarter 2023 results. I am now pleased to turn the call over to Joe Wolk. Joe?","evidence_gemma_new":"adjusted net earnings first quarter of 2022","evidence_llama_3_3":null,"evidence_qwen_3_30b":"adjusted net earnings $7.1 billion","gemma_new_max":7100000000.0,"gemma_new_min":7100000000.0,"llama_3_3_max":null,"llama_3_3_min":null,"qwen_3_30b_max":7100000000.0,"qwen_3_30b_min":7100000000.0}
{"symbol":"JNJ","year":2023,"quarter":4,"date":"2023-FY","chunk_id":3,"sub_chunk_id":0,"centroid_label":"adjusted net earnings","agreed_value":25400000000.0,"count":3,"chunk":"Jessica Moore: Thanks, Joaquin. Unless otherwise stated, the financial results and guidance highlighted reflects the continuing operations of Johnson & Johnson. We will report the consumer health financial results as discontinued operations. Furthermore, the percentages quoted represent operational results and therefore, exclude the impact of currency translation. Starting with Q4 2023 sales results. Worldwide sales were $21.4 billion for the fourth quarter of 2023. Sales increased 7.2%, with 11% in the U.S. and 2.7% outside of the U.S. Excluding the net impact of acquisitions and divestitures, adjusted operational sales growth was 5.7% worldwide, 8.8% in the U.S. and 2.1% outside the U.S. It is important to note that sales in Europe were negatively impacted by the COVID-19 vaccine and loss of exclusivity of ZYTIGA by approximately 1,500 basis points operationally. Turning now to earnings. For the quarter, net earnings were $4.1 billion, and diluted earnings per share was $1.70 versus diluted earnings per share of $1.22 a year ago. Excluding after-tax intangible asset amortization expense and special items for both periods, adjusted net earnings for the quarter were $5.6 billion and the diluted earnings per share was $2.29, representing increases of 2.4% and 11.7%, respectively, compared to the fourth quarter of 2022. On an operational basis, adjusted diluted earnings per share increased 11.2%. For the full year 2023, sales were $85.2 billion. Sales grew 7.4%, with 10.6% in the U.S. and 3.8% outside of the U.S. Excluding the net impact of acquisitions and divestitures, adjusted operational sales growth was 5.9% worldwide, 8.2% in the U.S. and 3.4% outside the U.S. Sales in Europe were negatively impacted by the COVID-19 vaccine and loss of exclusivity of ZYTIGA by approximately 1,000 basis points operationally. Net earnings for the full year 2023 were $13.3 billion and diluted earnings per share was $5.20 versus diluted earnings per share of $6.14 a year ago. Full year 2023 adjusted net earnings were $25.4 billion, and adjusted diluted earnings per share was $9.92, representing increases of 6.8% and 11.1%, respectively, versus full year 2022. On an operational basis, adjusted diluted earnings per share increased by 10.8%. I will now comment on business sales performance in the quarter. Beginning with Innovative Medicine. Worldwide Innovative Medicine sales of $13.7 billion increased 4% with growth of 9.5% in the U.S. and a decline of 3.1% outside of the U.S. Excluding COVID-19 vaccine sales, worldwide and U.S. sales growth was 9.5%, and growth outside of the U.S. was 9.4%. Sales outside the U.S., excluding the COVID-19 vaccine were negatively impacted by approximately 120 basis points due to the loss of exclusivity of ZYTIGA in Europe. Innovative Medicine growth was driven by our key brands and continued uptake from recently launched products, with nine assets delivering double-digit growth. We continue to drive strong sales growth for both DARZALEX and ERLEADA, with increases of 22.2% and 19%, respectively. Within immunology, we saw sales growth in both STELARA and TREMFYA, with increases of 14.5% and 20.5%, respectively. This growth was driven by market growth and share gains as well as favorable patient mix in TREMFYA. Growth of 17.4% in pulmonary hypertension was driven by favorable patient mix, share gains and market growth. Turning to newly launched products. We continue to make progress on our launches of CARVYKTI and SPRAVATO. We are also encouraged by the early success of our launches of TECVAYLI and TALVEY, sales of which are driving the growth in other Oncology. As a reminder, we expect to begin disclosing TECVAYLI sales in Q1 2024. Total Innovative Medicine sales growth was partially offset by unfavorable patient mix in XARELTO, a decrease in IMBRUVICA sales due to competitive pressures and a loss of exclusivity of ZYTIGA, REMICADE and PREZISTA. I'll now turn your attention to MedTech. Worldwide MedTech sales of $7.7 billion increased 13.4% with Abiomed contributing 4.5% to growth. Growth in the U.S. was 14.1% and 12.8% outside of the U.S. Excluding the impact of acquisitions and divestitures, worldwide adjusted operational sales growth was 9.1%. MedTech was negatively impacted by international sanctions in Russia worth approximately 50 basis points, primarily in Advanced Surgery and Vision. Electrophysiology delivered double-digit growth of 25.2% with strong growth in all regions, including Europe. This growth was driven by our global market leading portfolio, including the most recently launched QDOT RF ablation and OCTARAY catheters. Abiomed contributed $340 million in sales within the quarter driven by continued strong adoption of Impella 5.5 technology. Growth of 6.4% in surgery was driven primarily by procedure recovery and strength of our biosurgery and wound closure portfolios. Growth was partially offset by volume based procurement in China, primarily in Endocutters. Orthopaedics growth of 5% reflects procedure growth, success of recently launched products such as the global expansion of our VELYS digital solutions and expansion in ambulatory surgical centers, as well as lapping of prior year China\u2019s VBP price concessions in Spine. Growth of 6.6% in Vision was driven by price actions and contact lenses, as well as strength of new products including ACUVUE OASYS 1-Day family of products and contact lenses and TECNIS EYHANCE, our monofocal interocular lens and surgical vision. Growth of contact lenses was partially offset by U.S. stocking dynamics. Global Vision growth was negatively impacted by 140 basis points due to the Blink divestiture in Q3. Now turning to our consolidated statement of earnings for the fourth quarter of 2023. I'd like to highlight a few noteworthy items that have changed compared to the same quarter of last year. Cost of products sold margin deleveraged by 130 basis points due to commodity inflation and unfavorable product mix in MedTech, partially offset by favorable patient mix and lower COVID-19 vaccine supply network related exit cost in Innovative Medicine. We continue to invest strategically in research and development at competitive levels, investing $4.5 billion or 20.9% of sales this quarter. We invested $3.4 billion or 24.5% of sales in Innovative Medicine with the increase in investment being driven by higher milestones, partially offset by portfolio prioritization. In MedTech, R&D investment was $1.1 billion or 14.6% of sales with the increase in investment primarily driven by the Laminar acquisition. Interest income was $212 million in the fourth quarter of 2023 as compared to $77 million of income in the fourth quarter of 2022. The increase in income was driven by higher interest rates earned on cash balances and a lower average debt balance. The other income and expense line was income of $421 million in the fourth quarter of 2023 compared to an expense of $795 million in the fourth quarter of 2022. This was primarily driven by higher unrealized gains on securities and lower (ph) COVID-19 vaccine-related exit costs. Regarding taxes in the quarter, our effective tax rate was 14.4% versus 16% in the same period last year. This decrease was primarily driven by the net decrease of tax liabilities, including the settlement of the 2013 through 2016 U.S. tax audit. Excluding special items, the effective tax rate was 10.8% versus 16.2% in the same period last year. I encourage you to review our upcoming 2023 10-K filing for additional details on specific tax-related matters. Lastly, I will direct your attention to the box section of the slide, where we have also provided our income before tax, net earnings and earnings per share adjusted to exclude the impact of intangible amortization expense and special items. Now let's look at adjusted income before tax by segment. In the fourth quarter of 2023, our adjusted income before tax for the enterprise as a percentage of sales decreased from 32.5% to 29.2%. Innovative Medicine margins declined from 37.7% to 37.4%, primarily driven by higher R&D milestones, partially offset by favorable patient mix and leveraging and selling and marketing expense. MedTech margins declined from 24.5% to 15.5% primarily driven by in-process research and development expense from the Laminar acquisition, commodity inflation and unfavorable product mix, partially offset by selling and marketing expense leverage. This concludes the sale and earnings portion of the call. I'm now pleased to turn it over to Joe.","evidence_gemma_new":"adjusted net earnings Full year 2023","evidence_llama_3_3":"adjusted net earnings full year 2023","evidence_qwen_3_30b":"adjusted net earnings full year 2023","gemma_new_max":25400000000.0,"gemma_new_min":25400000000.0,"llama_3_3_max":25400000000.0,"llama_3_3_min":25400000000.0,"qwen_3_30b_max":25400000000.0,"qwen_3_30b_min":25400000000.0}
{"symbol":"JNJ","year":2023,"quarter":3,"date":"2023-Q3","chunk_id":1,"sub_chunk_id":0,"centroid_label":"adjusted net earnings","agreed_value":6800000000.0,"count":3,"chunk":"Jessica Moore: Good morning. This is Jessica Moore, Vice President of Investor Relations for Johnson & Johnson. Welcome to our company's review of the 2023 third quarter business results and full-year financial outlook. A few logistics before we get into the details. As a reminder, you can find additional materials, including today's presentation and associated schedules, on the Investor Relations section of the Johnson & Johnson website at investor.jnj.com. Please note that this presentation contains forward-looking statements regarding, among other things, the company's future operating and financial performance, market position and business strategy. You are cautioned not to rely on these forward-looking statements, which are based on current expectations of future events using the information available as of the date of this recording and are subject to certain risk and uncertainties that may cause the company's actual results to differ materially from those projected. A description of these risks, uncertainties and other factors can be found in our SEC filings, including our 2022 Form 10-K, which is available at investor.jnj.com and on the SECs website. Additionally, several of the products and compounds discussed today are being developed in collaboration with strategic partners or licensed from other companies. This slide acknowledges those relationships. Moving to today's agenda. I will start by reviewing the third quarter sales and P&L results for the corporation and highlights related to our two businesses. Joe Wolk, our CFO will then provide additional business and financial commentary before sharing an overview of our cash position, capital allocation priorities, and updated guidance for 2023. The remaining time will be available for your questions. Joaquin Duato, our chairman and CEO; John Reed, and Ahmet Tezel, our Innovative Medicine and MedTech R&D leaders, as well as Erik Haas, our VP of Litigation, will be joining us for Q&A. To ensure we provide enough time to address your questions, we anticipate the webcast will last approximately 60 minutes. As a reminder, on August 23, 2023, Johnson & Johnson announced the final results of the exchange offer and completion of the separation of Kenvue Inc. Unless otherwise stated, the financial results and guidance highlighted today reflect the continuing operations of Johnson & Johnson. We will report the consumer health financial results as discontinued operations. Additionally, going forward, the pharmaceutical segment will be referred to as innovative medicine. Starting with Q3 2023 sales results. Worldwide sales were $21.4 billion for the third quarter of 2023, an increase of 6.8% versus the third quarter of 2022. Operational sales growth, which excludes the effect of translational currency, increased 6.4% as currency had a positive impact of 0.4 points. In the U.S., sales increased 11.1%. In regions outside the U.S., our reported growth was 1.6%. Operational sales growth outside the U.S. was 0.7% with currency positively impacting our reported OUS results by 0.9 points. It is important to note that operational sales in Europe were negatively impacted by the COVID-19 vaccine and loss of exclusivity of ZYTIGA. Excluding the net impact of acquisition and divestitures, adjusted operational sales growth was 4.9% worldwide, 8.9% in the U.S., and 0.3% outside the U.S. Turning now to earnings. For the quarter, net earnings were $4.3 billion and diluted earnings per share was $1.69 versus diluted earnings per share of $1.62 a year ago. Excluding after-tax and tangible asset amortization expense and special items for both periods, adjusted net earnings for the quarter were $6.8 billion and adjusted diluted earnings per share was $2.66, representing increases of 14.1% and 19.3% respectively, compared to the third quarter of 2022. On an operational basis, adjusted diluted earnings per share increased 13.9%. I will now comment on business sales performance. Unless otherwise stated percentages quoted represent the operational sales change in comparison to the third quarter of 2022 and therefore exclude the impact of currency translation. Beginning with innovative medicine. Worldwide innovative medicine sales of $13.9 billion, increased 5.1% with growth of 10.9% in the U.S. and a decline of 2.3% outside of the U.S. Operational sales growth increased 4.3% as currency had a positive impact of 0.8 points. Excluding COVID-19 vaccine sales, worldwide operational sales growth was 8.2%, with growth of 10.9% in the U.S. and growth of 4.3% outside of the U.S. Sales outside the U.S., excluding the COVID-19 vaccine, were negatively impacted by approximately 500 basis points, due to the loss of exclusivity of ZYTIGA in Europe. Innovative medicine growth was driven by our key brands and continued uptake from a recently launched products with 11 assets delivering double-digit growth. We continue to drive strong sales growth for both DARZALEX and ERLEADA with increases of 20.7% and 27% respectively, due to continued share gains and market growth. Within immunology, we saw growth in STELARA and TREMFYA, with increases of 15.8% and 21.5% respectively. This growth was predominantly driven by favorable patient mix and market growth. Turning to newly launched products, we continue to make progress on our launches of CARVYKTI and SPRAVATO. We are also encouraged by the early success of our launches of TECVAYLI and TALVEY, sales of which are driving the growth and other oncology. We expect to begin disclosing TECVAYLI sales in Q1 2024. Total innovative medicine sales growth was partially offset by the loss of exclusivity of ZYTIGA and REMICADE, along with a decrease in IMBRUVICA sales, due to competitive pressures. I'll now turn your attention to MedTech. Worldwide MedTech sales of $7.5 billion increased 10% with growth of 11.6% in the U.S., and 8.3% outside of the U.S. Operational sales growth increased 10.4% as currency had a negative impact of 0.4 points. Abiomed contributed 4.6% to operational growth, excluding the impact of acquisition and divestitures, worldwide adjusted operational sales growth was 6%. On a pro forma basis, utilizing sales in the prior year from Abiomed as a standalone company, MedTech's growth for the quarter would be 6.4%. MedTech was negatively impacted across all platforms by international sanctions in Russia worth approximately 60 basis points in volume-based procurement in China, primarily in five MedTech platforms: Spine, Trauma, Endocutters, Energy, and Electrophysiology. As communicated last quarter, we saw the return to more normalized seasonality with moderate deceleration in the third quarter. The Interventional Solutions franchise delivered operational growth of 48.1%, which includes $311 million related to Abiomed. This reflects growth in Abiomed patient procedures in the high-teens and continued strong adoption of Impella 5.5 technology in surgery. Electrophysiology is a major contributor to this growth with a double-digit increase of 20.3%. This reflects strong growth in all regions, including Europe, driven by our global market leading portfolio, including the most recently launched QDOT RF ablation and OPTRELL Mapping Catheters. Operational growth of 3.2% in surgery was driven primarily by procedure recovery and strength of our biosurgery and wound closure portfolios. Growth was partially offset by the impacts of volume-based procurement in China and supply challenges. Global growth of 5.4% in vision was driven by price actions and contact lenses and other, as well as strength of new products including ACUVUE OASYS 1-Day family of products and contact lenses and TECNIS Eyhance, our monofocal interocular lens and surgical vision. Growth of contact lenses was partially offset by strategic portfolio choices and supply challenges, although these continue to improve. Global vision growth was negatively impacted by 100 basis points, due to the Blink divestiture. Orthopedics operational growth of 2.6% reflects procedure growth, success of recently launched products, such as the global expansion of our VELYS digital solutions, and expansion in ambulatory surgical centers, partially offset by the impacts of volume-based procurement in China in Spine and Trauma. Now turning to our consolidated statement of earnings for the third quarter of 2023, I'd like to highlight a few noteworthy items that have changed, compared to the same quarter of last year. Cost of product sold margin was flat due to favorable patient mix and lower COVID-19 vaccine supply network related exit costs in the innovative medicine business, partially offset by commodity inflation, unfavorable product mix, and restructuring related to excess inventory costs in the MedTech business. Selling, marketing, and administrative margins deleveraged 40 basis points, driven by increased expenses across the enterprise. We continue to invest strategically in research and development at competitive levels, investing $3.4 billion or 16.2% of sales this quarter. R&D was leveraged by 120 basis points, primarily driven by portfolio prioritization, partially offset by higher milestone payments in the innovative medicine business. Additionally, IPR&D impairments were $206 million in the third quarter of 2023. Interest income was $182 million in the third quarter of 2023, as compared to $99 million of income in the third quarter of 2022. The increase in income was driven by higher interest rates earned on cash balances, partially offset by higher interest rates on debt balances. The other income and expense line was an expense of $499 million in the third quarter of 2023, compared to an expense of $226 million in the third quarter of 2022. This was primarily driven by higher unrealized mark-to-market losses on public securities partially offset by the lower COVID-19 vaccine-related exit costs and lower litigation expense. Restructuring in the third quarter was $158 million, primarily related to the innovative medicine restructuring program announced in the first quarter. Regarding taxes in the quarter, our effective tax rate was 17.4% versus 16.7% in the same period last year. This increase was primarily driven by a non-deductible, non-recurring pre-tax charge that occurred in the current quarter. Excluding special items, the effective tax rate was 15.6% versus 15.9% in the same period last year. As a result of the completion of the exchange offer, Johnson & Johnson is presenting the consumer health business financial results as discontinuing operations, including a gain of approximately $21 billion. I encourage you to review our upcoming third quarter 10-Q filing for additional details on specific tax and separation-related matters. Lastly, I'll direct your attention to the box section of the slide where we have also provided our income before tax, net earnings, and earnings per share adjusted to exclude the impact of intangible amortization expense and special items. Now let's look at adjusted income before tax by segment. In the third quarter of 2023, our adjusted income before tax for the enterprise as a percentage of sales increased from 35.3% to 37.6%, primarily driven by favorable patient mix and innovative medicine, partially offset by unfavorable product mix and commodity inflation in MedTech. Innovative medicine margins improved from 41.4% to 45.4%, primarily driven by favorable patient mix and R&D portfolio prioritization. MedTech margins declined from 25% to 24.7%, primarily driven by commodity inflation and unfavorable product mix partially offset by a divestiture gain. This concludes the sales and earnings portion of the Johnson & Johnson third quarter results. I'm now pleased to turn the call over to Joe Wolk. Joe?","evidence_gemma_new":"adjusted net earnings adjusted diluted earnings per share","evidence_llama_3_3":"adjusted net earnings third quarter of 2023","evidence_qwen_3_30b":"adjusted net earnings adjusted diluted earnings per share","gemma_new_max":6800000000.0,"gemma_new_min":6800000000.0,"llama_3_3_max":6800000000.0,"llama_3_3_min":6800000000.0,"qwen_3_30b_max":6800000000.0,"qwen_3_30b_min":6800000000.0}
{"symbol":"JNJ","year":2023,"quarter":4,"date":"2023-Q4","chunk_id":3,"sub_chunk_id":0,"centroid_label":"adjusted net earnings","agreed_value":5600000000.0,"count":3,"chunk":"Jessica Moore: Thanks, Joaquin. Unless otherwise stated, the financial results and guidance highlighted reflects the continuing operations of Johnson & Johnson. We will report the consumer health financial results as discontinued operations. Furthermore, the percentages quoted represent operational results and therefore, exclude the impact of currency translation. Starting with Q4 2023 sales results. Worldwide sales were $21.4 billion for the fourth quarter of 2023. Sales increased 7.2%, with 11% in the U.S. and 2.7% outside of the U.S. Excluding the net impact of acquisitions and divestitures, adjusted operational sales growth was 5.7% worldwide, 8.8% in the U.S. and 2.1% outside the U.S. It is important to note that sales in Europe were negatively impacted by the COVID-19 vaccine and loss of exclusivity of ZYTIGA by approximately 1,500 basis points operationally. Turning now to earnings. For the quarter, net earnings were $4.1 billion, and diluted earnings per share was $1.70 versus diluted earnings per share of $1.22 a year ago. Excluding after-tax intangible asset amortization expense and special items for both periods, adjusted net earnings for the quarter were $5.6 billion and the diluted earnings per share was $2.29, representing increases of 2.4% and 11.7%, respectively, compared to the fourth quarter of 2022. On an operational basis, adjusted diluted earnings per share increased 11.2%. For the full year 2023, sales were $85.2 billion. Sales grew 7.4%, with 10.6% in the U.S. and 3.8% outside of the U.S. Excluding the net impact of acquisitions and divestitures, adjusted operational sales growth was 5.9% worldwide, 8.2% in the U.S. and 3.4% outside the U.S. Sales in Europe were negatively impacted by the COVID-19 vaccine and loss of exclusivity of ZYTIGA by approximately 1,000 basis points operationally. Net earnings for the full year 2023 were $13.3 billion and diluted earnings per share was $5.20 versus diluted earnings per share of $6.14 a year ago. Full year 2023 adjusted net earnings were $25.4 billion, and adjusted diluted earnings per share was $9.92, representing increases of 6.8% and 11.1%, respectively, versus full year 2022. On an operational basis, adjusted diluted earnings per share increased by 10.8%. I will now comment on business sales performance in the quarter. Beginning with Innovative Medicine. Worldwide Innovative Medicine sales of $13.7 billion increased 4% with growth of 9.5% in the U.S. and a decline of 3.1% outside of the U.S. Excluding COVID-19 vaccine sales, worldwide and U.S. sales growth was 9.5%, and growth outside of the U.S. was 9.4%. Sales outside the U.S., excluding the COVID-19 vaccine were negatively impacted by approximately 120 basis points due to the loss of exclusivity of ZYTIGA in Europe. Innovative Medicine growth was driven by our key brands and continued uptake from recently launched products, with nine assets delivering double-digit growth. We continue to drive strong sales growth for both DARZALEX and ERLEADA, with increases of 22.2% and 19%, respectively. Within immunology, we saw sales growth in both STELARA and TREMFYA, with increases of 14.5% and 20.5%, respectively. This growth was driven by market growth and share gains as well as favorable patient mix in TREMFYA. Growth of 17.4% in pulmonary hypertension was driven by favorable patient mix, share gains and market growth. Turning to newly launched products. We continue to make progress on our launches of CARVYKTI and SPRAVATO. We are also encouraged by the early success of our launches of TECVAYLI and TALVEY, sales of which are driving the growth in other Oncology. As a reminder, we expect to begin disclosing TECVAYLI sales in Q1 2024. Total Innovative Medicine sales growth was partially offset by unfavorable patient mix in XARELTO, a decrease in IMBRUVICA sales due to competitive pressures and a loss of exclusivity of ZYTIGA, REMICADE and PREZISTA. I'll now turn your attention to MedTech. Worldwide MedTech sales of $7.7 billion increased 13.4% with Abiomed contributing 4.5% to growth. Growth in the U.S. was 14.1% and 12.8% outside of the U.S. Excluding the impact of acquisitions and divestitures, worldwide adjusted operational sales growth was 9.1%. MedTech was negatively impacted by international sanctions in Russia worth approximately 50 basis points, primarily in Advanced Surgery and Vision. Electrophysiology delivered double-digit growth of 25.2% with strong growth in all regions, including Europe. This growth was driven by our global market leading portfolio, including the most recently launched QDOT RF ablation and OCTARAY catheters. Abiomed contributed $340 million in sales within the quarter driven by continued strong adoption of Impella 5.5 technology. Growth of 6.4% in surgery was driven primarily by procedure recovery and strength of our biosurgery and wound closure portfolios. Growth was partially offset by volume based procurement in China, primarily in Endocutters. Orthopaedics growth of 5% reflects procedure growth, success of recently launched products such as the global expansion of our VELYS digital solutions and expansion in ambulatory surgical centers, as well as lapping of prior year China\u2019s VBP price concessions in Spine. Growth of 6.6% in Vision was driven by price actions and contact lenses, as well as strength of new products including ACUVUE OASYS 1-Day family of products and contact lenses and TECNIS EYHANCE, our monofocal interocular lens and surgical vision. Growth of contact lenses was partially offset by U.S. stocking dynamics. Global Vision growth was negatively impacted by 140 basis points due to the Blink divestiture in Q3. Now turning to our consolidated statement of earnings for the fourth quarter of 2023. I'd like to highlight a few noteworthy items that have changed compared to the same quarter of last year. Cost of products sold margin deleveraged by 130 basis points due to commodity inflation and unfavorable product mix in MedTech, partially offset by favorable patient mix and lower COVID-19 vaccine supply network related exit cost in Innovative Medicine. We continue to invest strategically in research and development at competitive levels, investing $4.5 billion or 20.9% of sales this quarter. We invested $3.4 billion or 24.5% of sales in Innovative Medicine with the increase in investment being driven by higher milestones, partially offset by portfolio prioritization. In MedTech, R&D investment was $1.1 billion or 14.6% of sales with the increase in investment primarily driven by the Laminar acquisition. Interest income was $212 million in the fourth quarter of 2023 as compared to $77 million of income in the fourth quarter of 2022. The increase in income was driven by higher interest rates earned on cash balances and a lower average debt balance. The other income and expense line was income of $421 million in the fourth quarter of 2023 compared to an expense of $795 million in the fourth quarter of 2022. This was primarily driven by higher unrealized gains on securities and lower (ph) COVID-19 vaccine-related exit costs. Regarding taxes in the quarter, our effective tax rate was 14.4% versus 16% in the same period last year. This decrease was primarily driven by the net decrease of tax liabilities, including the settlement of the 2013 through 2016 U.S. tax audit. Excluding special items, the effective tax rate was 10.8% versus 16.2% in the same period last year. I encourage you to review our upcoming 2023 10-K filing for additional details on specific tax-related matters. Lastly, I will direct your attention to the box section of the slide, where we have also provided our income before tax, net earnings and earnings per share adjusted to exclude the impact of intangible amortization expense and special items. Now let's look at adjusted income before tax by segment. In the fourth quarter of 2023, our adjusted income before tax for the enterprise as a percentage of sales decreased from 32.5% to 29.2%. Innovative Medicine margins declined from 37.7% to 37.4%, primarily driven by higher R&D milestones, partially offset by favorable patient mix and leveraging and selling and marketing expense. MedTech margins declined from 24.5% to 15.5% primarily driven by in-process research and development expense from the Laminar acquisition, commodity inflation and unfavorable product mix, partially offset by selling and marketing expense leverage. This concludes the sale and earnings portion of the call. I'm now pleased to turn it over to Joe.","evidence_gemma_new":"adjusted net earnings for the quarter","evidence_llama_3_3":"adjusted net earnings Q4 2023","evidence_qwen_3_30b":"adjusted net earnings Q4 2023","gemma_new_max":5600000000.0,"gemma_new_min":5600000000.0,"llama_3_3_max":5600000000.0,"llama_3_3_min":5600000000.0,"qwen_3_30b_max":5600000000.0,"qwen_3_30b_min":5600000000.0}
{"symbol":"JNJ","year":2024,"quarter":1,"date":"2024-Q1","chunk_id":1,"sub_chunk_id":0,"centroid_label":"adjusted net earnings","agreed_value":6600000000.0,"count":2,"chunk":"Jessica Moore: Hello everyone. This is Jessica Moore, Vice President of Investor Relations for Johnson & Johnson. Welcome to our company's review of the first quarter business results and our full year financial outlook for 2024. A few logistics before we get into the details. As a reminder you can find additional materials including today\u2019s presentation and associated schedules on the Investor Relations section of the Johnson & Johnson website at investor.jnj.com. Please note that this presentation contains forward-looking statements regarding, among other things, the company's future operating and financial performance, market position and business strategy. You are cautioned not to rely on these forward-looking statements, which are based on the current expectations of future events using the information available as of the date of this recording, and are subject to certain risk and uncertainties that may cause the company's actual results to differ materially from those projected. A description of these risks, uncertainties and other factors can be found in our SEC filings, including our 2023 Form 10-K, which is available at investor.jnj.com and on the SECs website. Additionally, several of the products and compounds discussed today are being developed in collaboration with strategic partners or licensed from other companies. This slide acknowledges those relationships. Moving to today's agenda I will start by reviewing the first quarter sales and P&L results for the corporation as well as highlights related to our two businesses. Joe Wolk our CFO will then provide additional business and financial commentary before sharing an overview of our cash position, capital allocation priorities, and guidance for 2024. The remaining time will be available for your questions. Joaquin Duato our Chairman and CEO as well as Jennifer Taubert, John Reed, and Tim Schmid, our Innovative Medicine and MedTech leaders will be joining us for Q&A. To ensure we provide enough time to address your questions, we anticipate the webcast will last approximately 60 minutes. Unless otherwise stated the financial results and guidance highlighted today reflect the continuing operations of Johnson & Johnson. Furthermore, the percentages quoted represent operational results and therefore exclude the impact of currency translation. Turning to our first quarter sales results. Worldwide sales were $21.4 billion for the first quarter of 2024. Sales increased 3.9% with growth of 7.8% in the U.S. and a decline of 0.3% outside of the U.S. Excluding the impact of the COVID-19 vaccine, operational sales growth was 7.6% worldwide and 7.4% outside of the U.S. Sales growth in Europe excluding the COVID-19 vaccine was 6%. Turning now to earnings. For the quarter net earnings were $5.4 billion and diluted earnings per share was $2.20 versus basic loss per share of $0.19 a year ago. Excluding after tax intangible asset amortization expense and special items for both periods, adjusted net earnings for the quarter were $6.6 billion, and adjusted diluted earnings per share was $2.71, representing increases of 3.8% and 12.4%, respectively compared to the first quarter of 2023. On an operational basis, adjusted diluted earnings per share increased 12.8%. I will now comment on business sales performance in the quarter. Beginning with Innovative Medicine, worldwide Innovative Medicine sales of $13.6 billion increased 2.5%, with growth of 8.4% in the U.S. and a decline of 4% outside of the U.S. Excluding the impact of the COVID-19 vaccine, operational sales growth was 8.3%, both worldwide and outside of the U.S. Innovative Medicine growth was driven by our key brands and continued uptake from recently launched products, with nine assets delivering double-digit growth. We continued to drive strong sales growth across our multiple myeloma portfolio. DARZALEX growth was 21%, primarily driven by share gains of six points across all lines of therapy and ten points in the front line setting. As of this quarter, we are now disclosing TECVAYLI sales, which were previously reported in other oncology. Sales achieved $133 million in the quarter, compared to $63 million in the first quarter of last year, reflecting a strong launch in the relapsed refractory setting. CARVYKTI achieved sales of $157 million, compared to $72 million in the first quarter of last year, driven by continued capacity expansion, manufacturing efficiencies, and strong demand. While sequential growth was roughly flat due to phasing, we continued to anticipate quarter-over-quarter growth with acceleration in the back half of the year. Other oncology growth was driven by continuing strong uptake of TALVEY, our GPRC5D bispecific, and RYBREVANT our bispecific antibody for non-small cell lung cancer. Also in oncology, ERLEADA continues to deliver strong growth of 28.4%, primarily driven by share gains. Growth of 22.4% in pulmonary hypertension was driven by favorable patient mix, share gains, and market growth for both OPSUMIT and UPTRAVI. As a reminder, favorable patient mix was a driver in Q2 2023 through Q1 2024. Therefore, while we still anticipate growth, we expect to lap this dynamic beginning in Q2 2024. Within immunology, we saw sales growth in TREMFYA of 27.6%, driven by market growth and share gains. STELARA growth of 1.1% was driven by market growth and share gains in IBD, partially offset by unfavorable patient mix in the U.S. and as expected, share loss in PSO and PSA. We anticipate continued volume growth largely offset by price declines as we move towards biosimilar entry. In neuroscience SPRAVATO growth of 72% continues to be driven by share gains and additional market launches. Total Innovative Medicine sales growth was partially offset by unfavorable patient mix in XARELTO, which we anticipate continuing throughout the year, as well as a decrease in IMBRUVICA due to competitive pressures, partially offset by stocking dynamics in the U.S. Finally, it is worth noting distribution rights for REMICADE and SIMPONI in Europe will be returned in Q4. I'll now turn your attention to MedTech. Worldwide Med1ech sales of $7.8 billion increased 6.3%, with growth in the U.S. of 6.6% and 6.1% outside of the U.S. In the quarter, worldwide MedTech growth was negatively impacted by approximately 80 basis points due to fewer selling days, disproportionately impacting orthopedics. In cardiovascular previously referred to as Interventional Solutions, electrophysiology delivered double-digit growth of 25.9%, with strong growth in all regions. Performance was driven by global procedure growth, new product uptake, commercial execution, and a onetime inventory build in Asia-Pacific, impacting worldwide growth by approximately 370 basis points. In addition, Abiomed delivered growth of 15%, driven by continued strong adoption of Impella 5.5 and Impella RP technology. Orthopedics growth of 4.8% includes a onetime revenue recognition timing change related to certain products across all platforms in the U.S. positively impacting worldwide growth by approximately 300 basis points. As a reminder, orthopedics was over indexed by the impact of reduced selling days in the quarter. Strong performance in hips and knees was driven by procedure recovery, growth of new products, and commercial execution. While trauma and spine were negatively impacted by competitive pressures and core trauma was further impacted by weather related softness in the U.S. Growth of 1.9% in surgery was driven primarily by procedure recovery and strength of our bio surgery and wound closure portfolios, partially offset by competitive pressures in China volume based procurement and energy and endo cutters. Contact lenses declined 2.3%, driven by U.S. stocking dynamics, partially offset by strong performance in ACUVUE OASYS 1-day family of products. Worldwide growth was negatively impacted by 120 basis points due to the Blink divestiture in Q3 2023. Surgical Vision grew 1.1%, driven by CNIS EYHANCE, a monofocal intraocular lens partially offset by China's VBP. Now turning to our consolidated statement of earnings for the first quarter of 2024. I'd like to highlight a few noteworthy items that have changed compared to the same quarter of last year. Cost of product sold margin leveraged by 160 basis points, primarily driven by lower COVID-19 supply network related exit cost. Selling, marketing, and administrative margins deleveraged 110 basis points, driven primarily by timing of marketing investment in the Innovative Medicine business. We continued to invest strategically in research and development at competitive levels investing $3.5 billion, or 16.6% of sales this quarter. We invested $2.9 billion, or 21.4% of sales in Innovative Medicine, with the increase in investment being driven by continued pipeline progression. In MedTech, R&D investment was $0.6 billion, or 8.3% of sales, a slight decrease driven by phasing. Interest income was $209 million in the first quarter of 2024, as compared to $14 million of expense in the first quarter of 2023. The increase in income was driven by a lower average debt balance and higher interest rates earned on cash balances. Other income and expense was income of $322 million in the first quarter of 2024, compared to an expense of $6.9 billion in the first quarter of 2023. This change was primarily due to the $6.9 billion charge related to the talc settlement proposal recorded in the first quarter of 2023. Regarding taxes in the quarter, our effective tax rate was 16.9% versus 61.8% in the same period last year, which was primarily driven by the tax benefit on the talc settlement proposal recorded in the first quarter of 2023. Excluding special items, the effective tax rate was 16.5% versus 15.9% in the same period last year. I encourage you to review our upcoming first quarter 10-Q filing for additional details on specific tax related matters. Lastly, I'll direct your attention to the box section of the slide, where we have also provided our income before tax, net earnings, and earnings per share adjusted to exclude the impact of intangible amortization expense and special items. Now let's look at adjusted income before tax by segment. In the first quarter of 2024 our adjusted income before tax for the enterprise, as a percentage of sales increased from 36.1% to 36.8%, primarily driven by an increase in non-allocated interest income with both Innovative Medicine and MedTech margins remaining relatively flat year-over-year. When comparing against the fourth quarter and full year 2023, Innovative Medicine and MedTech adjusted income before tax margins have improved. This concludes the sales and earnings portion of the call. I am now pleased to turn it over to Joe.","evidence_gemma_new":"adjusted net earnings adjusted diluted earnings per share","evidence_llama_3_3":null,"evidence_qwen_3_30b":"adjusted net earnings $6.6 billion","gemma_new_max":6600000000.0,"gemma_new_min":6600000000.0,"llama_3_3_max":null,"llama_3_3_min":null,"qwen_3_30b_max":6600000000.0,"qwen_3_30b_min":6600000000.0}
{"symbol":"JNJ","year":2024,"quarter":2,"date":"2024-Q2","chunk_id":1,"sub_chunk_id":0,"centroid_label":"adjusted net earnings","agreed_value":6800000000.0,"count":2,"chunk":"Jessica Moore: Hello, everyone. This is Jessica Moore, Vice President of Investor Relations for Johnson & Johnson. Welcome to our company's review of the second quarter business results and our full-year financial outlook for 2024. A few logistics before we get into the details. As a reminder you can find additional materials including today\u2019s presentation and associated schedules on the investor relations section of the Johnson & Johnson website at investor.jnj.com. Please note that this presentation contains forward-looking statements regarding among other things, the company\u2019s future operating and financial performance, market position, and business strategy. You are cautioned not to rely on these forward-looking statements, which are based on the current expectations of future events using the information available as of the date of this recording and are subject to certain risk and uncertainties that may cause the company's actual results to differ materially from those projected. A description of these risks, uncertainties, and other factors can be found in our SEC filings, including our 2023 Form 10-K, which is available at investor.jnj.com and on the SEC's website. Additionally, several of the products and compounds discussed today are being developed in collaboration with strategic partners or licensed from other companies. This slide acknowledges those relationships. Moving to today's agenda, I will start by reviewing the second quarter sales and P&L results for the corporation, as well as highlights related to our two businesses. Joe Wolk, our CFO, will then provide additional business and financial commentary before sharing an overview of our cash position, capital allocation priorities, and guidance for 2024. Joaquin Duato, our Chairman and CEO, will then provide some closing remarks before we open it up for questions. Jennifer Taubert, John Reed, and Tim Schmid, our innovative medicine and MedTech leaders will be joining us for Q&A. To ensure we provide enough time to address your questions, we anticipate the webcast will last approximately 60 minutes. Unless otherwise stated, the financial results and guidance highlighted today reflect the continuing operations of Johnson & Johnson. Furthermore, the percentages quoted represent operational results and therefore exclude the impact of currency translation. Turning to our second quarter sales results. Worldwide sales were $22.4 billion for the second quarter of 2024. Sales increased 6.6%, with growth of 7.8% in the U.S. and 5.1% outside of the U.S. Excluding the impact of the COVID-19 vaccine, sales growth was 7.2% worldwide and growth of 6.4% outside of the U.S. Sales growth in Europe, excluding the COVID-19 vaccine was 6%. Turning now to earnings. For the quarter, net earnings were $4.7 billion and diluted earnings per share was $1.93 versus diluted earnings per share of $2.05 a year ago. Excluding after-tax intangible asset amortization expense and special items for both periods, adjusted net earnings for the quarter were $6.8 billion and adjusted diluted earnings per share was $2.82, representing increases of 1.6% and 10.2%, respectively, compared to the second quarter of 2023. I'll now comment on business sales performance in the quarter. Beginning with Innovative Medicine, worldwide Innovative Medicine sales of $14.5 billion increased 7.8%, with growth of 8.9% in the U.S. and 6.4% outside of the U.S. Excluding the impact of the COVID-19 vaccine, operational sales growth was 8.8% worldwide and 8.7% outside of the U.S. Innovative Medicine growth was driven by our key brands and continued uptake from recently launched products with 10 assets delivering double-digit growth. We continue to drive strong sales growth across our multiple myeloma portfolio. DARZALEX growth was 21.3%, primarily driven by share gains of 4.6 points across all lines of therapy and 9.4 points in the frontline setting, as well as market growth. CARVYKTI achieved sales of $186 million, with growth of 59.9%, driven by continued capacity expansion, manufacturing efficiencies, and strong demand. TECVAYLI sales achieved $135 million in the quarter, with growth of 43.5%, reflecting a strong launch in the relapsed-refractory setting. Demand remained strong while sequential growth slowed due to adoption of recently approved longer-duration dosing intervals. ERLEADA continues to deliver strong growth of 32.5%, primarily driven by share gains and market growth in metastatic castrate-sensitive prostate cancer. Other oncology growth was driven by continued strong uptake of TALVEY, our GPRC5D bispecific, and RYBREVANT, our bispecific antibody for non-small cell lung cancer. Within immunology, we saw sales growth in TREMFYA of 30.7%, driven by market growth, share gains in PSO and PSA, and favorable patient mix. STELARA growth of 4.9% was driven by market growth, partially offset by net unfavorable patient mix. We continue to anticipate biosimilar entry in Europe later this month, while in the U.S., we expect continued volume growth largely offset by price declines as we move towards biosimilar entry in 2025. In neuroscience, SPRAVATO growth of 60.8% continues to be driven by increased physician and patient confidence. In pulmonary hypertension, OPSUMIT grew 9.1% due to share gains and market growth, partially offset by unfavorable mix. UPTRAVI growth of 8.1% was driven by market growth and share gains, partially offset by inventory dynamics. Total Innovative Medicine sales growth was partially offset by a decline in other neuroscience, unfavorable patient mix in Xarelto and competitive pressures in IMBRUVICA. I'll now turn your attention to MedTech. Worldwide MedTech sales of $8 billion increased 4.4%, with growth in the U.S. of 5.7% and 3.2% outside of the U.S. Acquisitions and divestitures had a positive impact of 40 basis points on sales growth in the quarter. Growth was driven by commercial execution, strength of new product introductions, and continued strong procedure volume, partially offset by performance in China and competitive pressures in US distributor stocking dynamics and vision. In cardiovascular, electrophysiology delivered a double-digit growth of 13.4% with strong growth across all regions. The performance was driven by global procedure growth, new product uptake, and commercial execution, partially offset by the previous one-time inventory build in Asia-Pacific from the prior quarter. In addition, Abiomed delivered growth of 15.4%, driven by double-digit growth in all regions and continued strong adoption of Impella 5.5 and Impella RP technology. Results include $77 million associated with the acquisition of Shockwave, which closed on May 31. Contact lenses adjusted operational sales growth, excluding the Blink divestiture was 2.1%. Growth was driven by strong performance in the ACUVUE OASYS 1-Day family of products, partially offset by U.S. distributor stocking dynamics and competitive pressures, and Japan macroeconomic pressures. The Blink divestiture negatively impacted growth by approximately 130 basis points. Surgical vision grew 1.2%, driven by TECNIS Eyhance, our monofocal interocular lens, partially offset by China VBP and refractive softness in the U.S. Surgery adjusted operational sales growth, excluding the Acclarent divestiture was approximately flat. Performance was driven primarily by competitive pressures in energy and endocutters, China VBP, prior year China recovery, EMEA tender timing across advanced surgery and supply constraints, and wound closure. This was partially offset by strength of new products. The Acclarent divestiture negatively impacted growth by approximately 110 basis points. Orthopedics growth of 3.3% was driven by strong performance in hips and knees, due to procedure growth, strength of new products, and EMEA tender timing in knees. This growth was partially offset by competitive pressures and impacts of China VBP in spine and sports. Now, turning to our consolidated statement of earnings for the second quarter of 2024. I'd like to highlight a few noteworthy items that have changed, compared to the same quarter of last year. Cost of product sold margin deleveraged by 60 basis points, primarily driven by product mix within innovative medicine and macroeconomic factors across both sectors. We continue to invest strategically in research and development at competitive levels, investing $3.4 billion or 15.3% of sales this quarter. We invested $2.7 billion or 18.8% of sales in innovative medicine, compared to 22.2% of sales in 2023. As a reminder, last year included an upfront payment of $245 million associated with the AbelZeta partnership. In MedTech, R&D investment was $0.7 billion or 9% of sales, an increase driven by continued investment in strategic platforms. Other income and expense was a net expense of $653 million in the second quarter of 2024, compared to income of $384 million in the second quarter of 2023. The increase in expense was primarily driven by costs related to the closing of the Shockwave acquisition, the loss on the completion of the debt for equity exchange of the retained stake in Kenvue and prior year favorable intellectual property litigation settlements in MedTech. This was partially offset by the gain on the Acclarent divestiture. Regarding taxes in the quarter, our effective tax rate was 18.5% versus 14.7% in the same period last year. This increase was primarily driven by unfavorable one-time international audit settlements and the continued impact from Pillar 2. Excluding special items, the effective tax rate was 18.6% versus 15.9% in the same period last year. I encourage you to review our upcoming second-quarter 10-Q filing for additional details on specific tax-related matters. Lastly, I'll direct your attention to the box section of the slide, where we have also provided our income before tax, net earnings, and earnings per share adjusted to exclude the impact of intangible amortization expense and special items. Now let's look at adjusted income before tax by segment. In the second quarter of 2024, our adjusted income before tax for the enterprise as a percentage of sales increased from 37.2% to 37.4%. Innovative Medicine margin improved from 42.3% to 44.6%, primarily driven by an upfront payment of $245 million associated with the AbelZeta partnership in 2023, partially offset by product mix and cost of products sold. MedTech margin declined from 28.2% to 25.7%, driven by prior year favorable intellectual property litigation settlements worth approximately 300 basis points. This concludes the sales and earnings portion of the call. I'm now pleased to turn it over to Joe.","evidence_gemma_new":"adjusted net earnings adjusted diluted earnings per share","evidence_llama_3_3":null,"evidence_qwen_3_30b":"adjusted net earnings $6.8 billion second quarter","gemma_new_max":6800000000.0,"gemma_new_min":6800000000.0,"llama_3_3_max":null,"llama_3_3_min":null,"qwen_3_30b_max":6800000000.0,"qwen_3_30b_min":6800000000.0}
{"symbol":"JNJ","year":2024,"quarter":4,"date":"2024-Q4","chunk_id":3,"sub_chunk_id":0,"centroid_label":"adjusted net earnings","agreed_value":4900000000.0,"count":2,"chunk":"Jessica Moore: Thank you, Joaquin. Moving to our financial results. Unless otherwise stated, the results and guidance highlighted today reflect the continuing operations of Johnson & Johnson. Furthermore, the percentages quoted represent operational results and therefore excludes the impact of currency translation. Starting with Q4 2024 sales results. Worldwide sales were $22.5 billion for the quarter. Sales increased 6.7% with growth of 10% in the US and 2.5% outside of the US. Worldwide growth was negatively impacted by 290 basis points due to STELARA and positively impacted by 100 basis points due to acquisitions and divestitures. It's important to note growth in Europe was negatively impacted by 720 basis points due to the loss of exclusivity of STELARA and the COVID-19 vaccine. Turning now to earnings. For the quarter, net earnings were $3.4 billion and diluted earnings per share was $1.41 versus diluted earnings per share of $1.70 a year ago. Excluding after tax intangible asset amortization expense and special items for both periods, adjusted net earnings for the quarter were $4.9 billion and adjusted diluted earnings per share was $2.04, representing decreases of 11.1% and 10.9%, respectively, compared to the fourth quarter of 2023. Earnings per share in the quarter was negatively impacted by $0.22 of acquired IPR&D expense related to the V-Wave acquisition. For the full year 2024, sales were $88.8 billion. Sales grew 5.9% with growth of 8.3% in the US and 2.9% outside of the US. STELARA and the COVID-19 vaccine negatively impacted worldwide growth by 260 basis points. Acquisition and divestitures positively impacted worldwide growth by 50 basis points. Growth in Europe was negatively impacted by 670 basis points due to the COVID-19 vaccine and the loss of exclusivity of STELARA. Net earnings for the full year 2024 were $14.1 billion and diluted earnings per share was $5.79 versus diluted earnings per share of $5.20 a year ago. Full year 2024 adjusted net earnings were $24.2 billion and adjusted diluted earnings per share was $9.98, representing a decrease of 4.6% and an increase of 0.6% respectively versus full year 2023. Earnings per share in the year was negatively impacted by $0.67 due to acquired IPR&D charges on various transactions throughout the year. I will now comment on business sales performance in the quarter. Beginning with Innovative Medicine. Worldwide sales of $14.3 billion increased 6.5% excluding the COVID-19 vaccine with growth of 11.1% in the US and a decline of 0.3% outside of the US. STELARA negatively impacted worldwide growth by 490 basis points. Innovative Medicine growth was driven by our key brands and continued uptake from recently launched products with 10 assets delivering double-digit growth. Results across the portfolio continue to be positively impacted by price adjustments associated with Argentina hyperinflation consistent with market practice. Starting with oncology. We continue to drive strong sales growth across our multiple myeloma portfolio. DARZALEX growth was 23.5%, primarily driven by share gains of over three points across all lines of therapy and six points in the frontline setting as well as market growth. This marks Johnson & Johnson's first brand to achieve over $3 billion in sales in a quarter. CARVYKTI achieved sales of $334 million with growth of over 100% driven by share gains and capacity expansion. This reflects sequential growth of 17.3% aligned with our expectations of accelerating growth in the back half of the year. TECVAYLI sales were $146 million in the quarter with growth of 18%, reflecting a strong launch in the relapsed refractory setting. Demand remains strong despite continued adoption of longer duration dosing intervals. Finally, within our multiple myeloma portfolio, TALVEY continued its launch trajectory with another quarter of strong growth. As a reminder, we anticipate disclosing TALVEY sales in the first quarter of 2025, which are currently reported in the category Other Oncology. ERLEADA continues to deliver strong growth of 22.7%, primarily driven by share gains and market growth, reaching $3 billion in annual sales for the first time. RYBREVANT, our bispecific antibody for non-small cell lung cancer, contributed to growth in the category Other Oncology as we continue to expand approved indications. We also anticipate disclosing RYBREVANT sales in the first quarter of 2025. Within immunology, we saw sales growth in TREMFYA of 5.6%, driven by strong market growth and share gains in PsO and PsA, partially offset by unfavorable patient mix and inventory dynamics. We are excited about the recent UC launch and expect to see strong uptake of the IBD indications in 2025. STELARA declined 13.6% driven by the impact of current and anticipated biosimilar competition. As a reminder, biosimilar competition has entered the US in January 2025. REMICADE and SIMPONI worldwide sales were positively impacted by return of distribution rights in Europe. In Neuroscience, SPRAVATO growth of 45.3% continues to be driven by increased physician and patient demand. As Joaquin mentioned, SPRAVATO has exceeded $1 billion in annual sales for the first time. Other Neuroscience decline was driven by the loss of a SPINRAZA tender in Europe. In Pulmonary Hypertension, OPSUMIT grew 2.5%, driven by market growth and share gains, partially offset by inventory dynamics in the US and austerity measures in Europe. Starting in 2025, we will begin to report OPSYNVI, which is currently reported in the category Other Pulmonary Hypertension in OPSUMIT. UPTRAVI grew 12. 1%, driven by market growth, patient mix and share gains. Finally, XARELTO sales growth was driven by favorable patient mix. I'll now turn your attention to MedTech. Worldwide sales of $8.2 billion increased 7.6% both in the US and outside of the US. Acquisitions and divestitures had a net positive impact of 300 basis points on worldwide growth, 430 basis points in the US and 150 basis points outside of the US. Overall, MedTech growth was driven by commercial execution and strength of new product introductions, partially offset by increased competitive PFA pressures in US electrophysiology and continued headwinds in Asia Pacific, primarily in China. In Cardiovascular, electrophysiology delivered growth of 7.3%. Performance was driven by global procedure growth, new product uptake and commercial execution, partially offset by competitive PFA ablation catheter uptake in the US and VBP in China. Despite the IV saline shortage in the US, Abiomed delivered growth of 13.2% driven by strong growth in all regions and continued adoption of Impella 5.5 and Impella RP technology. Cardiovascular results also included $258 million associated with the acquisition of Shockwave. Contact Lenses and Other grew 7.4%, driven by trade inventory dynamics, continued strategic price actions, strong performance in ACUVUE OASYS 1-Day family of products as well as lapping prior year impacts from Russia sanctions. Surgical Vision growth of 13.6% was driven by TECNIS PureSee & TECNIS Eyhance. Commercial execution partially offset by competitive pressures in the US. Orthopedics grew 2.5% inclusive of hips growth of 5.6%, primarily driven by the success of recent product launches and commercial execution, partially offset by revenue disruption from the previously announced orthopedics transformation, impacts of China VBP and competitive pressures. Lastly, Surgery grew 0.4% with the Acclarent divestiture negatively impacting results by approximately 130 basis points. Performance was driven primarily by commercial execution, strength of new products across wound closure and biosurgery and continued price adjustments primarily associated with hyperinflation consistent with market practice. Growth was partially offset by competitive pressures in Energy and Endocutters as well as VBP and the anticorruption campaign in China. Now turning to our consolidated statement of earnings for the fourth quarter of 2024. I'd like to highlight a few noteworthy items that have changed compared to the same quarter of last year. We continue to invest strategically in research and development at competitive levels to fortify our future, investing $5.3 billion or nearly 24% of sales, which includes $540 million of acquired IPR&D expense associated with the V-Wave acquisition. Selling, marketing and administrative expense as a percent of sales deleveraged 150 basis points driven by increased commercial investment in the Innovative Medicine business. Interest income and expense was a net income of $144 million as compared to $212 million of income last year driven by lower interest rates earned on a lower average cash balance and higher interest rates on a higher average debt balance. Other income and expense was a net income of $161 million compared to $421 million of income in the prior year. This was primarily driven by lower gains on securities, a lower benefit related to employee benefit programs due to the discount rate, partially offset by lower litigation expense in 2024. Regarding taxes in the quarter, our effective tax rate was 11.7% versus 14.4% in the same period last year. This decrease was primarily driven by post-acquisition integration efforts that allowed the company to deduct certain acquisition costs for tax purposes as well as the resolution of prior tax matters both in jurisdictions outside of the US. Excluding special items, the effective tax rate was 8.8% versus 10.8% in the same period last year. I encourage you to review our upcoming 2024 10-K filing for additional details on specific tax related matters. Lastly, I'll direct your attention to the box section of the slide, where we have also provided our income before tax, net earnings and earnings per share adjusted to exclude the impact of intangible, amortization expense and special items. Now let's look at adjusted income before tax by segment for the quarter. Innovative Medicine margin declined from 37.4% to 32.5% primarily driven by strategic commercial investment and R&D pipeline advancement. MedTech margin declined from 15.5% to 10. 8% primarily driven by acquired IPR&D expense related to the V-Wave acquisition. Please note that the MedTech margin was negatively impacted in both years due to expenses associated with the strategic acquisition of Laminar. When adjusting for these one-time items, MedTech margin was relatively flat. As a result, adjusted income before tax for the enterprise as a percentage of sales decreased from 29.2% to 24.1% with the V-Wave acquired IPR&D expense impacting results by 240 basis points. When looking at the full year, Innovative Medicine, MedTech and the Enterprise adjusted income before tax remained relatively flat year-over-year when adjusting for the one-time items highlighted on the slide, mainly acquired IPR&D expenses on various transactions across both years. This concludes the sales and earnings portion of the call. I am now pleased to turn it over to Joe.","evidence_gemma_new":"adjusted net earnings","evidence_llama_3_3":"adjusted net earnings Q4 2024","evidence_qwen_3_30b":null,"gemma_new_max":4900000000.0,"gemma_new_min":4900000000.0,"llama_3_3_max":4900000000.0,"llama_3_3_min":4900000000.0,"qwen_3_30b_max":null,"qwen_3_30b_min":null}
{"symbol":"JNJ","year":2023,"quarter":2,"date":"2023-Q2","chunk_id":4,"sub_chunk_id":0,"centroid_label":"cash and marketable securities","agreed_value":29000000000.0,"count":2,"chunk":"Joe Wolk: Thank you, Jessica, and thanks, everyone, for joining us today. As previously shared, we reported particularly strong results across all segments for the second quarter and the first-half of 2023. During the second quarter, adjusted operational sales growth by pharmaceuticals excluding COVID-19 revenue accelerated 6.2% over the first quarter of 2023. Similarly, on a sequential basis, MedTech operational sales increased to 4.5% over an already strong first quarter. During the first-half of the year we executed against our long-term business strategy and achieved key clinical and regulatory milestones. These advancements provide a strong foundation for long-term growth and are a testament to the hard work and dedication of our talented colleagues around the world. We also made considerable progress toward the separation of Kenvue. On May 8th, as partial consideration for the transfer of the Consumer Health business, Kenvue paid $13.2 billion to Johnson & Johnson from the net proceeds of the initial public offering and debt financing transactions in connection with the separation. Today, we were pleased to announce an update on our next step toward the separation of Kenvue, subject to market conditions, our intention is to split off Kenvue shares through an exchange offer as our next step in the separation. As part of the proposed exchange offer, Johnson & Johnson's shareholders will have the choice to exchange all some or none of their shares of Johnson & Johnson common stock for shares of Kenvue common stock subject to the terms of an offer. We believe a split off is the most advantageous form of separation for Johnson & Johnson, Kenvue and our shareholders, specifically an exchange offer provides Johnson & Johnson the potential opportunity to acquire a large number of outstanding shares of Johnson & Johnson common stock at one time in a tax free manner for U.S. federal income tax purposes without reducing overall cash or future financial flexibility. Further, following the completion of the exchange offer, Kenvue would most likely have a shareholder base that would have made the election to own its shares. The exact timing of our decision to launch an exchange offer will, as stated earlier, depend on market conditions, but the launch of the tender could occur as early as the coming days. Offer terms for the exchange inclusive of applicable discounts, as well as the duration of the exchange tender period would be set upon launch. We understand that you may have questions on this process. At this point, there are no additional details about the contemplated split off to share, but we are committed to providing timely updates as appropriate. Let's now turn to cash and capital allocation. We ended the second quarter with approximately $29 billion of cash and marketable securities and approximately $46 billion of debt for a net debt position of $17 billion, inclusive of approximately $7 billion of 10 Kenvue net debt. Free cash flow through the second quarter was approximately $5.4 billion, compared to $8.1 billion in the prior year. The second quarter reflects elevated tax payments of approximately $2 billion related to TCJA and past audit related matters. Our capital allocation priorities remain unchanged with continued investment in our business being the highest priority to drive new and better solutions for patients, followed by dividends, increasing on an annual basis, adding strategic opportunities for inorganic growth, and share repurchases when attractive. Our R&D investment in the first-half of 2023 was $7.4 billion or approximately 15% of sales. This includes external investments such as our recently announced partnership with Cellular Biomedicine Group on two next generation CAR-Ts for the treatment of B-cell malignancies further broadening our cell therapy portfolio. In April, we announced our 61st consecutive year of dividend increases and in combination with the completion of our $5 billion share repurchase program authorized by the Board in September of 2022, and completed earlier this year, we returned $8.5 billion to shareholders in the first-half of 2023. Let's discuss our outlook for the balance of 2023. Before I get into the specifics of guidance, in light of the potential Kenvue split off transaction I will remind you that our updated full-year guidance today continues to include results from the Consumer Health Business given Johnson & Johnson remains the majority shareholder of Kenvue. I suspect you already know this, but it would not be accurate to subtract any guidance provided separately by Kenvue from total Johnson & Johnson guidance and assume that the resulting total reflects guidance for the new Johnson & Johnson. When Johnson & Johnson is no longer the majority shareholder of Kenvue, we will provide timely updated new Johnson & Johnson guidance that will reflect among other things the removal of Consumer Health's current contribution to Johnson & Johnson's performance, as well as any updates to Johnson & Johnson's outstanding share count. So with that context, moving on to our full-year guidance. Based on the strong results delivered in the quarter, like we did in April, we are again raising full-year operational sales and EPS guidance, despite some strategic items not accretive to EPS as detailed on this schedule. Specifically the lost income related to the approximate 10% non-controlling interest in Kenvue and the acquired in process research and development cost related to our investment in Cellular Biomedicine Group. We now expect operational sales growth for the full-year 2023 to be in the range of 7% to 8% or up $1.4 billion in the range of $99.3 billion to $100.3 billion on a constant currency basis and adjusted operational sales growth in the range of 6% to 7%. As you know, we don't speculate on future currency movements. Last quarter, we noted that we utilized the Euro spot rate relative to the U.S. dollar at $1.10. The Euro spot rate as of mid-last week remains at $1.10. However, the U.S. dollar has strengthened versus other select currencies such as the Won and the Yen. As such, we now estimate a negative impact of foreign currency translation of approximately 500 basis points resulting in estimated reported sales growth between 6.5% to 7.5%, compared to 2022 with a midpoint of $99.3 billion. Regarding other lines on the P&L, we now anticipate a slight improvement to our adjusted pretax operating margin driven by expense management. We have reduced our other income estimate to be in the range of $1.6 billion to $1.8 billion, primarily related to the company\u2019s 10.4% non-controlling interest in Kenvue. Regarding interest income and expense, we now anticipate a reduction of net interest expense to the range of a $150 million to $250 million, due to interest income on the net proceeds linked to the Kenvue separation. And finally, based on current tax law, we are maintaining our effective tax rate estimate in the range of 15.5% to 16.5%. These changes result in us increasing our adjusted operational earnings per share guidance by $0.10 per share to a range of $10.60 to $10.70 or $10.65 at the midpoint on a constant currency basis. Constant currency growth of 5% at the midpoint. While not predicting the impact of currency movements, assuming recent exchange rates I previously referenced our reported adjusted earnings per share for the year assumes no additional foreign exchange impact. As such, our reported adjusted earnings per share for the year increases by $0.10 per share to a range of $10.70 to $10.80 or $10.75 at the midpoint, reflecting growth of 6% at the midpoint. While we do not provide guidance by segment or on a quarterly basis, let me offer some qualitative considerations to support your modeling. In MedTech, we continue to anticipate stable procedure volumes and healthcare staffing levels in the back half of the year with normal seasonality. We expect continued competitive performance attributable to commercial execution recently launched products and improvement in supply. Headwinds from volume based procurement in China, as well as potential impacts from international sanctions in Russia are expected to be higher in the second-half than the first-half of the year. In Pharmaceuticals, we continue to expect to deliver our 12th consecutive year of above market growth in 2023, driven by key assets and continued uptake of our newly launched products. We expect continued strong growth in the back half of the year slightly higher than the first-half. When modeling consumer health growth rates in 2023, it's important to take into consideration prior year comparisons with lapping price increases in the back half of the year. Given the strong momentum in our pharmaceutical business and the upcoming clinical milestones mentioned earlier we remain very confident in our ability to meet our 2025 pharmaceutical sales target of $57 billion. Looking ahead, we have many important catalysts for the remainder of the year that can drive meaningful near and long-term value. Beyond the separation, in the near-term, we are continuing to drive performance in MedTech with better commercial execution and recently launched innovative products being a significant factor in driving the continued higher growth trajectory across the MedTech business. Many of the solutions mentioned are early in their commercialization, which means there are still significant opportunity ahead. For example, in electrophysiology we are excited to begin the commercialization of the QDOT MICRO Catheter in the U.S. during the second-half of this year. In Orthopaedics, the VELYS robotic assisted solution, recently received regulatory approvals in Europe, and we plan to launch it in key European countries by the end of this year. And in Vision, we are seeing the benefits of our recently launched innovations such as ACUVUE OASYS 1-Day multifocal, which is driving Johnson & Johnson's market share growth in the large and growing presbyopia market. We look forward to continued growth from this and other recent Vision launches. Related to our pharmaceutical business, we are excited about upcoming advancements in our pipeline with a number of important regulatory and clinical milestones for our key future assets, including on the regulatory front there is expected approval of [daratumumab] (ph) in relapsed or refractory multiple myeloma. Clinically, we expect a Phase 3 data for TREMFYA for Crohn's disease and ulcerative colitis. The results of the MARIPOSA study of RYBREVANT plus lazertinib in front line non-small cell lung cancer with the opportunity to potentially present that data at an upcoming major medical meeting. Phase 1 data for TAR-210 in non-muscle invasive bladder cancer, and Phase 2 data for Nipocalimab in rheumatoid arthritis. A couple of other items to highlight. In case you missed them, we recently published our Health For Humanity report our U.S. Pharmaceutical pricing transparency report and our U.S. patent table, all of which can be found on our website. Also, a reminder that we will be hosting an enterprise business review featuring both Pharmaceutical and MedTech at the New York Stock Exchange on December 5th. I'll conclude my prepared remarks by reiterating that we have had a strong first-half of the year both financially and operationally and we expect to continue to build upon that momentum in the second-half of this year. With that, I will now turn the call over to Erik Haas.","evidence_gemma_new":"cash and marketable securities debt net debt","evidence_llama_3_3":"cash and marketable securities second quarter","evidence_qwen_3_30b":null,"gemma_new_max":29000000000.0,"gemma_new_min":29000000000.0,"llama_3_3_max":29000000000.0,"llama_3_3_min":29000000000.0,"qwen_3_30b_max":null,"qwen_3_30b_min":null}
{"symbol":"JNJ","year":2023,"quarter":4,"date":"2023-Q4","chunk_id":4,"sub_chunk_id":0,"centroid_label":"cash and marketable securities","agreed_value":23000000000.0,"count":2,"chunk":"Joseph Wolk: Thank you, Jessica, and thanks, everyone, for joining us today. As Joaquin and Jessica commented, 2023 was a strong year for Johnson & Johnson evidenced by notable top and bottom line performance beats relative to what we guided to 2023 at this time last year. We are particularly proud of the innovation we advanced to strengthen our development pipelines, the continued expansion of our portfolio and investments made for future success. All of this provides us with a strong foundation as we enter 2024. Thus far during the call, you've heard about sales and income performance in 2023. So now let's dive into some detail on capital allocation highlights. We generated free cash flow of more than $18 billion in 2023. At the end of the year, we had approximately $23 billion of cash and marketable securities and approximately $29 billion of debt for a net debt position of $6 billion. We maintained a healthy balance sheet and robust credit rating, underscoring the strength of Johnson & Johnson's financial position, which enables us to strategically invest and deploy capital to unlock value. To that end, we executed against all of our capital allocation priorities in 2023. For starters, we invested more than $15 billion in research and development or 17.7% of sales, an all-time high for the company as we remain one of the top investors in R&D across all industries. Jessica provided R&D investment by business segment, information we will continue to provide on a quarterly basis moving forward. As far as dividends, 2023 marked the 61st consecutive year in which we increased our dividend. We know this use of capital is a priority for our investors, and we plan to continue to increase our dividend annually. We also deployed, announced or committed over $3 billion in strategic value creating inorganic growth opportunities in the last 12 months. This amount includes the recent Ambrx and Laminar transactions as well as more than 50 smaller early-stage licensing deals and partnerships that complement our current Innovative Medicine and MedTech pipelines. Finally, share repurchases. In early 2023, we completed the $5 billion share repurchase program initiated in late 2022 and in combination with our dividend, returned over $14 billion to shareholders last year. Through the Kenvue separation, we further reduced the Johnson & Johnson's outstanding share count by 191 million shares or approximately 7% without the use of cash and in a tax-free manner. Looking ahead to 2024, Johnson & Johnson's robust free cash flow generation should continue to solidify our already strong financial foundation and fuel further investment leading to growth for our business or returns to shareholders. Now turning to our full year 2024 guidance. Today, we are confirming the 2024 guidance for those items previewed at our enterprise business review in early December by filling in some of the details. We expect operational sales growth for the full year to be in the range of 5% to 6% or $88.2 billion to $89 billion. As a reminder, our sales guidance continues to exclude any impact from COVID-19 vaccine sales. In Innovative Medicine, we expect 2024 to deliver a 13th consecutive year of above market growth, driven by market share gains from key brands such as DARZALEX, TREMFYA and ERLEADA as well as continued adoption of recently launched newer products such as CARVYKTI, TECVAYLI, TALVEY and SPRAVATO. In MedTech, we remain focused on executing our key value drivers: first, advancing our differentiated pipeline such as programs in pulse field ablation, Abiomed and surgical robotics, further shifting our portfolio into high-growth markets; second, expanding our reach and scale around the world; and third, building operational resilience across our portfolio. We don't speculate on future currency movements, but utilizing the euro spot rate relative to the U.S. dollar as of last week at $1.09 as well as other major currencies, we estimate there would be a slight unfavorable impact of $400 million or a negative 0.5% on reported sales growth for the year. Turning to other items on our P&L. We expect our 2024 adjusted pretax operating margin to improve by approximately 50 basis points driven primarily by a continuation of efficiency programs across the organization. We expect this to be partially offset by anticipated STELARA biosimilar entrants in Europe in the second half of this year and some lingering inflation impact in MedTech inventory that will flow through 2024's P&L. This margin improvement encompasses dilution of additional investment associated with our planned acquisition of Ambrx, which will be treated as a business combination. Now we do acknowledge that this 50 basis point improvement simply gets us back to what your models expected, given the elevated Q4 2023 R&D investment for new pipeline assets. Regarding other income and expense, we anticipate income to be $1.2 billion to $1.4 billion for 2024. This is less than the 2023 amount driven by the impact of actuarial assumptions on certain employee benefit programs such as lower discount rates. We are comfortable with you modeling net interest income between $450 million and $550 million, consistent with 2023 levels. Finally, we are projecting an effective tax rate for 2024 in the range of 16% to 17% based on current tax laws and anticipated geographic income mix across our businesses. This tax rate takes into account an increase of approximately 1.5% or 150 basis points relative to the recently enacted Pillar 2 legislation. We continue to believe the U.S. Treasury's current perspective on Pillar 2 is harmful, reducing U.S. incentives for innovation and resulting in U.S. based multinational companies paying more tax revenue to foreign governments. Our full year share count calculation for adjusted earnings per share in 2024 will include the remaining benefit equal to approximately 120 million shares from the approximately 191 million net share reduction in outstanding J&J shares following the Kenvue exchange offer. Given all these factors, we expect adjusted operational earnings per share to grow 7.4% at the midpoint for a range of $10.55 to $10.75. Based on the euro spot rate of 1.09 from last week, we do not estimate any currency impact on earnings per share. I'll now provide some qualitative considerations on quarterly phasing for your models. We expect Innovative Medicine sales growth to be slightly stronger in the first half of the year compared to the second half, given the anticipated entry of STELARA biosimilars in Europe towards the middle of the year. This headwind will be partially offset by continued uptake from our recently launched products. We project MedTech operational sales growth to be relatively consistent throughout the year, expecting procedures in 2024 to remain above pre-COVID levels. The first half of the year will continue to have modest impact from Russia sanctions as our licenses are approved. We anticipate China VBP pricing for surgical IOLs and orthopedic sports to begin in 2024 with impacts from 2023 VBP in electrophysiology, Endocutters, Energy, Spine and Trauma to begin to anniversary throughout 2024. Regarding EPS phasing, it is important to highlight that the first half of the year will benefit from the full 191 million net share reduction following the Kenvue exchange offer with only a partial comparative benefit in the third quarter versus Q3 2023 and the fourth quarter being neutral versus Q4 2023. So based on the foundation strengthened in 2023 and numerous catalysts that Joaquin outlined across our business in 2024, we are confident in our ability to achieve both near and long-term financial targets. I'd like to close by thanking our colleagues for their dedication and commitment to benefit patients around the world. It is their effort that enables Johnson & Johnson to deliver innovative therapies and solutions that address serious unmet medical needs and creates long-term sustainable value for shareholders. With that, I\u2019m now pleased to turn the call over to Kevin to begin the Q&A portion of the call.","evidence_gemma_new":"cash and marketable securities debt net debt position","evidence_llama_3_3":null,"evidence_qwen_3_30b":"cash and marketable securities end of the year","gemma_new_max":23000000000.0,"gemma_new_min":23000000000.0,"llama_3_3_max":null,"llama_3_3_min":null,"qwen_3_30b_max":23000000000.0,"qwen_3_30b_min":23000000000.0}
{"symbol":"JNJ","year":2024,"quarter":2,"date":"2024-Q2","chunk_id":2,"sub_chunk_id":0,"centroid_label":"cash and marketable securities","agreed_value":25000000000.0,"count":2,"chunk":"Joe Wolk: Thank you, Jessica, and hello, everyone. Thank you for joining today's call. Overall, Johnson & Johnson delivered solid top and bottom-line, as well as free cash flow growth in the quarter. Our Innovative Medicine business made great progress in the second quarter. We have strong momentum with key end-market products and continue to advance our pipeline with significant clinical and regulatory milestones being attained. Our MedTech business delivered growth that fell below our expectations of growing in the upper range of our markets, which as you recall correlates to a weighted-average market growth rate of 5% to 7% from 2022 through 2027. We came into the year thinking 2024 would be in the upper end of that range. With acceleration planned in the second-half, given some of the first-half dynamics Jessica outlined, we now expect growth closer to 6% for 2024. To me, this reflects the power and breadth of our company, where we can more than offset quarterly volatility in one part with overperformance from another part of our business. Before I get into the numbers, I'd like to provide some qualitative business highlights from the quarter. Starting with innovative Medicine, in oncology, we continue to make meaningful progress across our disease areas of focus. Of note, we received FDA approval for CARVYKTI in earlier lines of therapy and reported positive top-line overall survival results from the CARTITUDE-4 study. We also submitted a filing with the FDA for our subcutaneous formulation of RYBREVANT. We presented updated results for TAR-200 and TAR-210 and we met primary endpoints for two DARZALEX studies, Cepheus and Aquila, where results will be presented at an upcoming major medical meeting. Turning to immunology, we achieved key milestones for TREMFYA in inflammatory bowel disease, including the presentation and filing of Phase III studies in ulcerative colitis and Crohn's disease, as well as the filing of our subcutaneous formulation, which would make TREMFYA the only IL-23 inhibitor with a fully subcutaneous regimen. We also expanded our immunology portfolio with the acquisitions of Proteologix and NM26. These bispecific antibodies will further strengthen our portfolio and enhance our ability to address significant unmet need in atopic dermatitis. Finally, spanning immunology and neuroscience, we presented positive results for nipocalimab in Sjogren's disease and myasthenia gravis. But it doesn't stop with the second quarter. We are excited for what awaits in the second half of this year with the anticipated approval and launch of both RYBREVANT plus Lazertinib in frontline EGFR positive lung cancer and TREMFYA in IBD. We also expect data from JNJ-2113, our targeted oral peptide in psoriasis and ulcerative colitis, JNJ 4804, our co-antibody therapeutic in IBD and nipocalimab in rheumatoid arthritis. As we continue to bring new innovations to market and execute against clinical and regulatory milestones, Innovative Medicine is well-positioned to achieve sustainable growth in both the near and long-term. Turning to MedTech, we continue to advance our pipeline, launch new commercial products and integrate strategic acquisitions that broaden and further differentiate our portfolio. In cardiovascular, we are enhancing our portfolio and shifting into higher growth markets through strategic acquisitions such as Shockwave Medical. In May, we announced the launch of our CARTO 3 Version 8 electroanatomical mapping system. This is the latest version of our 3D heart mapping system, which has machine learning capabilities that increase efficiency, reproducibility, and accuracy in maps electrophysiologists use to treat atrial fibrillation and other arrhythmias. In pulsed field ablation, we initiated the commercial launch of the VARIPULSE platform in the EU and Japan receiving early positive physician feedback in the external evaluation period. We also delivered results from the pivotal phase of the admIRE trial, where the VARIPULSE platform demonstrated 85% peak primary effectiveness with minimal adverse events, short PFA application times and low fluoroscopy exposure. In orthopedics, we received 510(k) FDA clearance for the clinical application of the VELYS Robotic-Assisted Solution in unicompartmental knee arthroplasty. This is designed for both medial and lateral procedures enabling surgeons to guide precise implant placement without a CT scan. In surgery, we launched the ECHELON 3000 in the U.S., which combines 3D stapling and gripping surface technology to enable greater staple line security. This has been shown to deliver 47% fewer leaks, reduce surgical risks and improve surgical outcomes. In surgical vision, we launched TECNIS Odyssey in the U.S., and head into a full market launch in the second-half of 2024. For the remainder of the year, we will continue to advance our electrophysiology and cardiovascular pipelines as we prepare for the anticipated U.S. approval of VARIPULSE, as well as the submission of Impella ECP for regulatory approval. Within robotic surgery, we are on track to submit an investigational device exemption to the FDA for OTTAVA in the second-half of the year. Before turning to cash flow and guidance, I wanted to provide an update on the talc litigation. As announced on May 1, the company has committed to pay ovarian claimants a present value of approximately $6.5 billion or $8 billion nominally over 25-years, resulting 99.75% of all pending talc lawsuits against the company and its affiliates in the United States. We are currently in a voting period for the plan, where for the first time, claimants are able to vote for themselves for or against the plan. The last day of voting is scheduled for July 26. It will then take a few weeks for the vote administrator to vet and tally the votes. Once that process concludes, we plan to make a public announcement on the next steps regarding a pre-packaged bankruptcy filing. Our confidence that we will reach the requisite 75% vote is bolstered by the continued support of council representing the vast majority of claimants with whom the plan was developed, as well as the announcement of support by additional prominent plaintiff law firms recently, including Ailstock, Keller Postman, and Miller. Additionally, in furtherance of our goal of achieving a comprehensive solution, we finalized the previously announced agreements reached with all states that advanced talc claims in the Imerys and Cyprus entities, owners of the mines that supplied talc to the company. In the second quarter, we continued to make progress with mesothelioma claimants with 95% of claimants now settled. Turning to cash and capital allocation. We ended the second quarter with approximately $25 billion of cash and marketable securities and approximately $41 billion of debt for a net debt position of $16 billion. Free cash flow year-to-date was approximately $7.5 billion, compared to $5.5 billion in the prior year period, which included cash flow from the Consumer Health business. During the quarter, we exited our retained stake in Kenvue, bringing the separation to a close. The net proceeds from the secondary offering were $3.6 billion. Our capital allocation priorities remain unchanged. We maintain a strong balance sheet, which continues to enable us to strategically invest in and grow our business, while returning capital to our shareholders. Innovation remains core to our strategy. In the second quarter, we invested more than $3.4 billion or 15.3% of sales in research and development. In terms of acquisitions and licensing, during the first half of 2024, Johnson & Johnson has deployed approximately $17 billion in strategic value creating inorganic growth opportunities. This includes Shockwave, Proteologix and the NM26 bispecific antibody transaction announced last week, as well as more than 20 other smaller complementary business development transactions. While we will always explore strategic deals of any size that can create value, we foresee modest tuck-in deals as the preferred route over the near-term. Now turning to our full-year 2024 guidance. Given the moving parts associated with the acquisitions this quarter, I'll start where I usually end with earnings per share. Before the impact of recent acquisitions, our outlook for adjusted operational EPS performance is once again being increased. As this schedule reflects, we are expecting a $0.05 per share increase in our operational performance. This would result in year-over-year EPS growth of 8.2% at the midpoint. To account for the completion of Shockwave, Proteologix, and the NM26 bispecific antibody transactions, and as previously disclosed, our adjusted operational EPS guidance now includes dilution of $0.68 per share. Combined, all of this yields an updated adjusted operational EPS guidance in the range of $10 to $10.10 per share. In addition to assist with your future models, these transactions are expected to have a smaller impact of $0.33 to adjusted operational EPS in 2025. Now to address all elements of P&L guidance for 2024. As a reminder, our sales guidance continues to exclude any impact from COVID-19 vaccine sales. We are increasing our operational sales guidance for the full-year by $500 million to reflect the completion of the Shockwave acquisition. We now expect growth in the range of 6.1% to 6.6% compared to 2023 with a midpoint of $89.4 billion or 6.4% at the midpoint. Excluding the impact from acquisitions and divestitures, we are maintaining our adjusted operational sales growth to the range of 5.5% to 6.0% compared to 2023. As you know, we don't speculate on future currency movements. We are utilizing a euro spot rate relative to the U.S. dollar of 1.08, consistent with last quarter. However, there have been notable strengthening of the U.S. dollar versus other currencies, specifically the Japanese yen and Chinese yuan. As a result, we estimate an incremental negative foreign currency impact of $500 million, resulting in a full-year impact of $1.2 billion. As such, combined with the Shockwave acquisition, we expect reported sales growth between 4.7% to 5.2%, compared to 2023 with a midpoint of $88.2 billion or 5% growth. Turning to the rest of the P&L. Based solely on the dilution from the transactions, we now anticipate our 2024 adjusted pre-tax operating margin to decline by 120 basis points, more than offsetting the previously communicated 50 basis point improvement. We projected net interest income between $300 million and $400 million, lower than previous guidance driven by interest expense associated with financing of our recent acquisitions. Other income is anticipated to be in the range of $1.5 billion to $1.7 billion, an increase versus previous guidance driven by year-to-date performance. Our effective tax rate is now expected to be between 17.5% and 18.5% for the full-year, much higher than 2023, largely due to the impact of OECD Pillar 2, as well as the non-deductible nature of the recently announced NM26 bispecific antibody acquisition. While we do not provide guidance by segment or on a quarterly basis, I'd like to provide some qualitative considerations to support your modeling. We continue to expect Innovative Medicine sales growth to be lower in the second half of the year compared to the first half, given the anticipated entry of STELARA biosimilars in Europe beginning the last week of July. This headwind will be partially offset by continued uptake from our recently launched products. While we had COVID-19 vaccine sales in the second quarter, we do not anticipate any future sales. Finally, it is worth noting that distribution rights for REMICADE and SIMPONI in Europe will be returned in the fourth quarter. In preparation for this transfer, we expect limited third-quarter sales in Europe. Turning to MedTech, as previously stated, we expect growth to accelerate back in line with our long-term expectations in the second-half of the year. This will be driven by recovery in contact lenses, evidenced by sequential monthly improvement within Q2. Further expansion into high-growth segments, including the integration of Shockwave and continued growth of new products and commercial execution across the portfolio. As you think about our adjusted operating margin, we continue to expect it to be higher in the first-half of the year, compared to the second-half. Again, this is due to the IP R&D charge for the NM26 bispecific antibody transaction in Q3 as well as the anticipated entry of STELARA biosimilars in Europe later this month. Lastly, as a reminder on share count, we only expect a partial benefit in the third quarter resulting from the share count reduction following the Kenvue exchange offer in August of 2023 with the fourth quarter being neutral. As we move forward, we remain focused on advancing our differentiated portfolio and achieving key clinical and regulatory milestones across Innovative Medicine and MedTech. We remain confident in our ability to deliver sustained growth and long-term value for patients, customers, and shareholders. With that, I am now pleased to turn the call over to Joaquin for concluding remarks before taking your questions.","evidence_gemma_new":null,"evidence_llama_3_3":"Johnson & Johnson cash and marketable securities","evidence_qwen_3_30b":"cash and marketable securities $25 billion debt $41 billion net debt position $16 billion","gemma_new_max":null,"gemma_new_min":null,"llama_3_3_max":25000000000.0,"llama_3_3_min":25000000000.0,"qwen_3_30b_max":25000000000.0,"qwen_3_30b_min":25000000000.0}
{"symbol":"JNJ","year":2024,"quarter":3,"date":"2024-Q3","chunk_id":4,"sub_chunk_id":0,"centroid_label":"cash and marketable securities","agreed_value":20000000000.0,"count":2,"chunk":"Joe Wolk: Thank you, Jessica. In the third quarter, Johnson & Johnson delivered results that illustrate not only the breadth of the business, but our ability to consistently beat financial expectations. Innovative Medicine continued to build on strong first-half revenue momentum. We are advancing our pharmaceutical pipeline, achieving significant clinical and regulatory milestones across key therapeutic areas. Our MedTech business, with the addition of Shockwave, delivered operational growth of 6.4% in the quarter, but did experience headwinds in the Asia Pacific region. We continue to fortify our future advancing the OTTAVA robotic surgery system to IDE, expanding VELYS use and launching new intraocular lenses. Due to dynamics in the Asia Pacific region, specifically in China, we are taking a responsibly conservative approach by assuming no material improvement in that part of the business for the remainder of this year. And as such, we expect MedTech adjusted operational sales growth for the full year 2024 to be closer to 5% versus the 6% we referenced last quarter. The strength of a diversified business enables us to more than offset volatility in one part of our business, but yet be in a position to once again increase 2024 guidance for the enterprise. Before diving into the results, I'll take a moment to touch on some enterprise-wide updates from the quarter. We are making progress towards resolving talc litigation. Our pre-packaged bankruptcy plan received overwhelming support from the current claimants of roughly 83% as well as the future claimants representative. As announced last Thursday, the case will be heard in the Texas Bankruptcy Court. And while we remain committed to bringing this matter to a resolution, it would be premature to speculate on timing. In addition to the pipeline highlights Joaquin mentioned, there are some additional notable advancements throughout the quarter. In oncology, we received U.S. and EU regulatory approval for RYBREVANT in combination with chemotherapy as a second line treatment for adults with advanced EGFR-mutated non-small cell lung cancer. With FDA priority review underway for a subcutaneous formulation of RYBREVANT, along with data supporting a treatment regimen to reduce adverse events, we are building a best-in-class EGFR portfolio. We also presented Phase 1 data for RYBREVANT with chemotherapy in metastatic colorectal cancer patients, extending the asset's potential beyond lung cancer. In multiple myeloma, we advanced our leadership position with FDA approval and filing of two DARZALEX FASPRO quad-based regimens for newly diagnosed patients. With CARVYKTI, we announced three-year follow-up data showing significantly extended overall survival and gained approval for commercial production at our Ghent facility, further expanding supply capacity. Finally, in oncology, we added to the growing evidence base for our TARIS platform with positive Phase 2b data in patients with high-risk non-muscle invasive bladder cancer and positive interim to Phase 2 data in patients with muscle invasive bladder cancer. In neuroscience, we submitted to the U.S. and European regulatory bodies for what would be the first global approval of nipocalimab for the treatment of people living with generalized myasthenia gravis. For the remainder of the year, we expect approval of TREMFYA subcu for Crohn's disease and data readouts on JNJ-2113, our targeted oral peptide for psoriasis and ulcerative colitis, JNJ-4804, our co-antibody therapeutic for inflammatory bowel disease, aticaprant for adjunctive major depressive disorder and nipocalimab for rheumatoid arthritis. In MedTech, we completed enrollment of the Omny-IRE clinical trial to evaluate safety and effectiveness in mapping and treating symptomatic paroxysmal atrial fibrillation during standard ablation procedures. Also in Cardiovascular, we are preparing for the anticipated approval of VARIPULSE in the U.S. and the submission of Impella ECP for regulatory approval. In Orthopaedics, we launched several exciting new products in the U.S., including our VELYS SPINE robot and VOLT Plating System. The plentiful pipeline progress across our businesses will ensure continued success. Let's now turn to cash and capital allocation. Free cash flow year-to-date was approximately $14 billion compared to $12 billion last year, which included eight months contribution from the Consumer Health business. We ended the third quarter with $20 billion of cash and marketable securities and $36 billion of debt for a net debt position of approximately $16 billion. Our capital allocation priorities remain unchanged. Our strong balance sheet enables us to strategically invest to grow our business while simultaneously returning capital to our shareholders. Innovation remains core to our strategy. During the quarter, we invested nearly $5 billion in research and development. This is an increase over 2023 levels even after excluding acquired in-process R&D expense. Thus far in 2024, Johnson & Johnson has deployed approximately $18 billion for strategic acquisitions and licensing agreements, which includes the recent acquisition of V-Wave, another innovative treatment in heart failure, which closed last week. Turning to our full-year 2024 guidance. Excluding the impact from acquisitions and divestitures, we are increasing our adjusted operational sales guidance. We now expect growth in the range of 5.7% to 6.2% with a midpoint of 6%. We are also increasing operational sales growth by $200 million to a range of 6.3% to 6.8% with a midpoint of $89.6 billion or 6.6%. As you know, we don't speculate on future currency movements. For today's call, we are utilizing a euro spot rate relative to the U.S. dollar of $1.10, slightly above last quarter's guidance. This results in an estimated incremental positive foreign currency impact of $200 million, reducing our previous full-year negative impact to $1 billion. As such, we expect reported sales growth between 5.1% to 5.6% with a midpoint of $88.6 billion or 5.4%. Regarding the rest of the P&L, with the addition of the V-Wave transaction, we now anticipate our 2024 adjusted pre-tax operating margin to decline by approximately 200 basis points. Excluding the impact of asset acquisition accounting and related R&D investment, we would be on track to improve operating margins by 50 basis points, which is consistent with what we guided to at the beginning of the year. As we strive to advance and accelerate our pipeline, you can anticipate elevated levels of investment in the fourth quarter. Net interest income is now projected to be between $450 million and $550 million, $150 million greater than our previous guidance. Other income is anticipated to be in the range of $1.9 billion to $2.1 billion, an increase versus previous guidance, driven by the one-time monetization of royalty rights, which Jessica referenced, that will be utilized for that higher Q4 investment I referenced a moment ago. Our effective tax rate, consistent with previous guidance, is expected to be between 17.5% and 18.5% for the full year. Similar to last quarter, we have provided an EPS bridge to outline the impact from acquisition activity throughout the year. Before the impact of the V-Wave acquisition, our outlook for adjusted operational EPS performance is once again increasing. As the schedule reflects, we are expecting an incremental $0.10 per share increase on our operational performance for a total increase of $0.18 per share for the year. On this basis, when excluding acquisition activity throughout the year, EPS growth is 9.2%. To account for the completion of the V-Wave transaction, as previously disclosed, our adjusted operational EPS guidance now includes dilution of $0.24 per share in the fourth quarter and $0.06 per share in 2025. Combined, this yields an updated 2024 adjusted operational EPS guidance of $9.91 at the midpoint of the range, basically flat year-on-year despite absorbing approximately $0.92 of acquisition activity. While not predicting the impact of currency movements utilizing the recent exchange rates just referenced, our reported adjusted earnings per share for the year now estimates a full year positive impact of $0.02 per share. As such, we expect reported adjusted earnings per share of $9.93 at the midpoint. We are still finalizing our plans for next year, but let me provide you some preliminary qualitative commentary to inform your modeling for 2025. For Innovative Medicine, we remain very confident in our ability to deliver growth despite a significant LOE resulting in sales above the $57 billion commitment we stated in 2021. This will be driven by our end market brands and continued progress from our recently launched products, including TREMFYA in IBD and RYBREVANT in non-small cell lung cancer. Regarding the STELARA LOE, we are planning for biosimilar entries in the U.S. in January, assuming that HUMIRA's erosion curve is a relatively good proxy for your models. We continue to expect a negative impact associated with the Part D redesign. In our pipeline, we anticipate data readouts across all our priority platforms: anticipated approvals of TREMFYA subcu in Crohn's disease, RYBREVANT subcu for lung cancer and nipocalimab in generalized myasthenia gravis, as well as potential filings for TARIS in bladder cancer and aticaprant in major depressive disorder. As a reminder, TREMFYA, RYBREVANT and TARIS continue to be the three largest underappreciated assets in terms of our revenue projections versus what analysts are estimating for the back half of this decade. For MedTech, we continue to expect to deliver on our long-term objective identified at last year's Enterprise Business Review of growing operational sales in the upper end of the 2022 through 2027 weighted average market growth rate of 5% to 7%. We also expect continued adoption of newer products across all MedTech businesses, such as VARIPULSE in electrophysiology, VELYS enabling technology across Orthopaedics, Odyssey and PureSee in Surgical Vision and contributions from our Abiomed and Shockwave integration. Specific to volume-based pricing in China, we expect continued impacts from the rollout of the 2024 tenders in Orthopaedics sports and intraocular lenses and anticipate VBP to continue expanding across provinces and products. Moving to the rest of the P&L. When thinking about operating margin, there are pluses and minuses. Tailwinds include an anticipated reduction of acquired IPR&D expense year-over-year, continued focus on MedTech margin improvement and continued OpEx optimization benefits post the separation. Working against us is unfavorable product mix driven by STELARA biosimilar entrants and Part D redesign. With a brief look at your models last week, the consensus margin does not appear unreasonable, and we'll provide further clarity in January once we complete our 2025 plan. We do not expect to maintain the heightened levels of interest income due to a reduction in interest rates and impact from debt experienced in 2024 related to acquisition activity. Regarding other income and expense, we expect lower net other income due to the non-recurring nature of the monetization of royalty rights experienced in Q3, a lower benefit related to employee benefit programs based on discount rate assumptions, as well as income lost on the Kenvue dividend. Lastly, based on what we know today, under current tax law, we anticipate our 2025 tax rate to be slightly lower than our anticipated 2024 tax rate. To wrap up prior to Q&A, we are pleased with our underlying 2024 performance that simultaneously fortified a strong foundation for continued success heading into 2025. With that, I'll now turn it over to Kevin to open the call for your questions.","evidence_gemma_new":"third quarter cash and marketable securities","evidence_llama_3_3":"cash and marketable securities","evidence_qwen_3_30b":null,"gemma_new_max":20000000000.0,"gemma_new_min":20000000000.0,"llama_3_3_max":20000000000.0,"llama_3_3_min":20000000000.0,"qwen_3_30b_max":null,"qwen_3_30b_min":null}
{"symbol":"JNJ","year":2023,"quarter":2,"date":"2023-Q2","chunk_id":3,"sub_chunk_id":0,"centroid_label":"effective tax rate","agreed_value":23.9,"count":2,"chunk":"Jessica Moore: Thanks, Joaquin. As a reminder on May 8, 2023, Kenvue, Inc., closed its initial public offering. Johnson & Johnson continues to own 89.6% of total outstanding shares of Kenvue\u2019s common stock and remains the majority shareholder. Therefore, the following financial results continue to include the consumer health business with the 10.4% of consumer health's net earnings no longer attributed to Johnson & Johnson being adjusted for in other income and expense from the date of the IPO through the end of the quarter. Starting with Q2 2023 sales results. Worldwide sales were $25.5 billion for the second quarter of 2023, an increase of 6.3% versus the second quarter of 2022. Operational sales growth, which excludes the effect of translational currency, increased 7.5%, as currency had a negative impact of 1.2 points. In the U.S., sales increased 10.2%. In regions outside the U.S., our reported growth was 2.2%. Operational sales growth outside the U.S. was 4.7% with currency negatively impacting our reported OUS results by 2.5 points. Operational sales in Europe were negatively impacted by the COVID-19 vaccine and loss of exclusivity of ZYTIGA. Excluding the net impact of acquisitions and divestitures, adjusted operational sales growth with 6.2% worldwide, 8% in the U.S. and 4.4% outside the U.S. Turning now to earnings. For the quarter, net earnings were $5.1 billion and diluted earnings per share was $1.96 versus diluted earnings per share of $1.80 a year ago. Excluding after tax intangible asset amortization expense and special items for both periods, adjusted net earnings for the quarter were $7.4 billion and adjusted diluted earnings per share was $2.80, representing increases of 6.5% and 8.1%, respectively, compared to the second quarter of 2022. On an operational basis, adjusted diluted earnings per share increased 9.7%. I will now comment on business segment sales performance highlights. Unless otherwise stated, percentages quoted represent the operational sales change in comparison to the second quarter of 2022, and therefore, exclude the impact of currency translation. Beginning with the Pharmaceuticals segment. Worldwide Pharmaceutical sales of $13.7 billion increased 3.1%, with growth of 9.2% in the U.S. and a decline of 4% outside the U.S. Operational sales growth increased 3.8% as currency had a negative impact of 0.7 points. Excluding COVID-19 vaccine sales, Worldwide operational sales growth was 6.2% with growth of 9.9% in the U.S. and growth of 1.5% outside the U.S. Sales outside the U.S., excluding the COVID-19 vaccine, were negatively impacted by approximately 500 basis points, due to the loss of exclusivity of ZYTIGA in Europe. Pharmaceutical growth was driven by our key brands and continued uptake in our recently launched products with nine assets delivering double-digit growth. We continue to drive strong sales growth for both DARZALEX and ERLEADA with increases of 23.4% and 26.9%, respectively. STELARA grew 8%, driven by market growth and IBD share gains in the U.S., partially offset by unfavorable patient mix and increased rebates. TREMFYA grew 18.9%, driven by market growth and share gains in the U.S., partially offset by unfavorable patient mix. Growth of 16.5% in pulmonary hypertension was driven by favorable patient mix, share gains in the U.S. and market growth. Turning to newly launched products. We continue to make progress on our launch of CARVYKTI and continue to expand access and reimbursement for SPRAVATO. We are also encouraged by the early success of our launch of TECVAYLI, sales of which are included in other oncology. Total pharmaceutical sales growth was partially offset by the loss of exclusivity in REMICADE and ZYTIGA, along with a decrease in IMBRUVICA sales due to competitive pressures. IMBRUVICA maintains its market leadership position worldwide. I will now turn your attention to the MedTech segment. Worldwide MedTech sales of $7.8 billion increased 12.9% with growth of 14.6% in the U.S. and 11.3% outside of the U.S. Operational sales growth increased 14.7% as currency had a negative impact of 1.8 points. Abiomed contributed 4.8% to operational growth. Excluding the impact of acquisitions and divestitures, worldwide adjusted operational sales growth was 9.9%. Sales in the second quarter accelerated sequentially from Q1 for all MedTech businesses driven by global procedure growth, recovery in China, continued uptake of recently launched products and commercial execution, partially offsetting growth in the quarter was the impact of volume based procurement in China, as well as supply constraints. The Interventional Solutions franchise delivered operational growth of 56.9%, which includes $331 million related to Abiomed. Electrophysiology is a major contributor to the growth with a double-digit increase of 25.9%. This reflects strong growth in all regions, including Europe, driven by our comprehensive portfolio, including the most recently launched QDOT RS catheter. Orthopedics operational growth of 5.7%, reflects strong procedure recovery, success of recently launched products, such as the enhanced shorter portfolio, as well as global expansion of our digital solutions, such as VELYS Robotic assisted solution. Growth was partially offset by the impact of volume-based procurement in China and continued supply challenges primarily in hips. Operational growth of 8.4% and surgery was driven primarily by procedure recovery and strength of our biosurgery and wound closure portfolios. Growth was partially offset by the impacts of volume-based procurement in China and supply challenges. Global growth of 6.9% in vision was driven by price actions and contact lenses and other, as well as strength of new products, including ACUVUE OASYS 1-Day family of products and contact lenses and TECNIS Eyhance our monofocal intraocular lens and surgical vision. Growth of contact lenses was partially offset by strategic portfolio choices and supply challenges. Although these continue to improve. Moving to the Consumer Health segment. Worldwide Consumer Health sales of $4 billion increased 5.4% with growth of 6% in the U.S. and 5% outside the U.S. Operational sales growth increased 7.7% as currency had a negative impact of 2.3 points. Sales in the second quarter accelerated sequentially from Q1 for all consumer health franchises, primarily driven by strategic price increases and growth in OTC globally, due to strong pain performance, and cold, cough and flu season. Excluding the impact of strategic portfolio decisions and sales of personal care products in Russia, volume across all consumer franchises was relatively flat on strong price actions. For more detailed information, please visit investors.kenvue.com. Now turning to our consolidated statement of earnings for second quarter of 2023, I'd like to highlight a few noteworthy items that have changed compared to the same quarter of last year. Cost of products sold leveraged by 80 basis points, primarily driven by favorable patient mix and lower COVID-19 vaccine supply network related costs in the pharmaceutical business, partially offset by commodity inflation in the consumer and MedTech businesses. Selling, marketing and administrative margins deleveraged 20 basis points, driven by incremental costs to support the standalone consumer health business, partially offset by proactive management of costs. We continue to invest strategically in research and development at competitive levels, investing 15% of sales this quarter. The $3.8 billion invested was a 3.4% increase versus the prior year. The other income and expense line was income of $60 million in the second quarter of 2023, compared to an expense of $273 million in the second quarter of 2022. This was primarily driven by favorable litigation settlements, lower litigation expense, and lower unrealized losses on securities, partially offset by higher COVID-19 vaccine manufacturing exit related cost. And as previously mentioned, the 10.4% of consumer health earnings that are no longer attributable to Johnson & Johnson, which resulted in a $37 million reduction in consolidated earnings. Regarding taxes in the quarter, our effective tax rate was 23.9% versus 17.6% in the same period last year. This increase was primarily driven by 2023 tax cost incurred as part of the planned separation of the consumer health business, due to the internal reorganization of certain international subsidiaries. Excluding special items the effective tax rate was 16.6% versus 15.4% in the same period last year. I encourage you to review our upcoming second quarter 10-Q filing for additional details on specific tax matters. Lastly, I'll direct your attention to the box section of the slide, where we have also provided our income before tax, net earnings and earnings per share adjusted to exclude the impact of intangible amortization expense and special items. Now let's look at adjusted income before tax by segment. In the second quarter of 2023, our adjusted income before tax for the enterprise as a percentage of sales increased from 34% to 34.6%, primarily driven by favorable product and patient mix, partially offset by unfavorable segment mix and commodity inflation. Pharmaceutical margins improved from 42% to 42.7%, primarily driven by favorable patient mix, sales, marketing and administrative expense leverage, and R&D portfolio prioritization, partially offset by higher milestone payments. MedTech margins improved from 26.5% to 28.6%, driven by favorable intellectual property related litigation settlements and cost management initiatives, partially offset by commodity inflation. Finally, consumer health margins declined from 25.9% to 23.5%, due to incremental costs to support the standalone consumer health business, foreign exchange impacts, and commodity inflation, partially offset by supply chain efficiencies. It is important to highlight that the adjusted income before tax for the consumer health business as reported by Johnson & Johnson defers from the financial results reported by Kenvue Inc. this morning. The difference is primarily driven by incremental costs required to run Kenvue as an independent company. Additional differences also exist on an after tax basis, due to the application of different tax rates. This concludes the sales and earnings portion of the Johnson & Johnson second quarter results. I'm now pleased to turn the call over to Joe Wolk. Joe?","evidence_gemma_new":null,"evidence_llama_3_3":"effective tax rate Q2 2023","evidence_qwen_3_30b":"effective tax rate","gemma_new_max":null,"gemma_new_min":null,"llama_3_3_max":23.9,"llama_3_3_min":23.9,"qwen_3_30b_max":23.9,"qwen_3_30b_min":23.9}
{"symbol":"JNJ","year":2023,"quarter":4,"date":"2023-Q4","chunk_id":3,"sub_chunk_id":0,"centroid_label":"effective tax rate","agreed_value":0.144,"count":2,"chunk":"Jessica Moore: Thanks, Joaquin. Unless otherwise stated, the financial results and guidance highlighted reflects the continuing operations of Johnson & Johnson. We will report the consumer health financial results as discontinued operations. Furthermore, the percentages quoted represent operational results and therefore, exclude the impact of currency translation. Starting with Q4 2023 sales results. Worldwide sales were $21.4 billion for the fourth quarter of 2023. Sales increased 7.2%, with 11% in the U.S. and 2.7% outside of the U.S. Excluding the net impact of acquisitions and divestitures, adjusted operational sales growth was 5.7% worldwide, 8.8% in the U.S. and 2.1% outside the U.S. It is important to note that sales in Europe were negatively impacted by the COVID-19 vaccine and loss of exclusivity of ZYTIGA by approximately 1,500 basis points operationally. Turning now to earnings. For the quarter, net earnings were $4.1 billion, and diluted earnings per share was $1.70 versus diluted earnings per share of $1.22 a year ago. Excluding after-tax intangible asset amortization expense and special items for both periods, adjusted net earnings for the quarter were $5.6 billion and the diluted earnings per share was $2.29, representing increases of 2.4% and 11.7%, respectively, compared to the fourth quarter of 2022. On an operational basis, adjusted diluted earnings per share increased 11.2%. For the full year 2023, sales were $85.2 billion. Sales grew 7.4%, with 10.6% in the U.S. and 3.8% outside of the U.S. Excluding the net impact of acquisitions and divestitures, adjusted operational sales growth was 5.9% worldwide, 8.2% in the U.S. and 3.4% outside the U.S. Sales in Europe were negatively impacted by the COVID-19 vaccine and loss of exclusivity of ZYTIGA by approximately 1,000 basis points operationally. Net earnings for the full year 2023 were $13.3 billion and diluted earnings per share was $5.20 versus diluted earnings per share of $6.14 a year ago. Full year 2023 adjusted net earnings were $25.4 billion, and adjusted diluted earnings per share was $9.92, representing increases of 6.8% and 11.1%, respectively, versus full year 2022. On an operational basis, adjusted diluted earnings per share increased by 10.8%. I will now comment on business sales performance in the quarter. Beginning with Innovative Medicine. Worldwide Innovative Medicine sales of $13.7 billion increased 4% with growth of 9.5% in the U.S. and a decline of 3.1% outside of the U.S. Excluding COVID-19 vaccine sales, worldwide and U.S. sales growth was 9.5%, and growth outside of the U.S. was 9.4%. Sales outside the U.S., excluding the COVID-19 vaccine were negatively impacted by approximately 120 basis points due to the loss of exclusivity of ZYTIGA in Europe. Innovative Medicine growth was driven by our key brands and continued uptake from recently launched products, with nine assets delivering double-digit growth. We continue to drive strong sales growth for both DARZALEX and ERLEADA, with increases of 22.2% and 19%, respectively. Within immunology, we saw sales growth in both STELARA and TREMFYA, with increases of 14.5% and 20.5%, respectively. This growth was driven by market growth and share gains as well as favorable patient mix in TREMFYA. Growth of 17.4% in pulmonary hypertension was driven by favorable patient mix, share gains and market growth. Turning to newly launched products. We continue to make progress on our launches of CARVYKTI and SPRAVATO. We are also encouraged by the early success of our launches of TECVAYLI and TALVEY, sales of which are driving the growth in other Oncology. As a reminder, we expect to begin disclosing TECVAYLI sales in Q1 2024. Total Innovative Medicine sales growth was partially offset by unfavorable patient mix in XARELTO, a decrease in IMBRUVICA sales due to competitive pressures and a loss of exclusivity of ZYTIGA, REMICADE and PREZISTA. I'll now turn your attention to MedTech. Worldwide MedTech sales of $7.7 billion increased 13.4% with Abiomed contributing 4.5% to growth. Growth in the U.S. was 14.1% and 12.8% outside of the U.S. Excluding the impact of acquisitions and divestitures, worldwide adjusted operational sales growth was 9.1%. MedTech was negatively impacted by international sanctions in Russia worth approximately 50 basis points, primarily in Advanced Surgery and Vision. Electrophysiology delivered double-digit growth of 25.2% with strong growth in all regions, including Europe. This growth was driven by our global market leading portfolio, including the most recently launched QDOT RF ablation and OCTARAY catheters. Abiomed contributed $340 million in sales within the quarter driven by continued strong adoption of Impella 5.5 technology. Growth of 6.4% in surgery was driven primarily by procedure recovery and strength of our biosurgery and wound closure portfolios. Growth was partially offset by volume based procurement in China, primarily in Endocutters. Orthopaedics growth of 5% reflects procedure growth, success of recently launched products such as the global expansion of our VELYS digital solutions and expansion in ambulatory surgical centers, as well as lapping of prior year China\u2019s VBP price concessions in Spine. Growth of 6.6% in Vision was driven by price actions and contact lenses, as well as strength of new products including ACUVUE OASYS 1-Day family of products and contact lenses and TECNIS EYHANCE, our monofocal interocular lens and surgical vision. Growth of contact lenses was partially offset by U.S. stocking dynamics. Global Vision growth was negatively impacted by 140 basis points due to the Blink divestiture in Q3. Now turning to our consolidated statement of earnings for the fourth quarter of 2023. I'd like to highlight a few noteworthy items that have changed compared to the same quarter of last year. Cost of products sold margin deleveraged by 130 basis points due to commodity inflation and unfavorable product mix in MedTech, partially offset by favorable patient mix and lower COVID-19 vaccine supply network related exit cost in Innovative Medicine. We continue to invest strategically in research and development at competitive levels, investing $4.5 billion or 20.9% of sales this quarter. We invested $3.4 billion or 24.5% of sales in Innovative Medicine with the increase in investment being driven by higher milestones, partially offset by portfolio prioritization. In MedTech, R&D investment was $1.1 billion or 14.6% of sales with the increase in investment primarily driven by the Laminar acquisition. Interest income was $212 million in the fourth quarter of 2023 as compared to $77 million of income in the fourth quarter of 2022. The increase in income was driven by higher interest rates earned on cash balances and a lower average debt balance. The other income and expense line was income of $421 million in the fourth quarter of 2023 compared to an expense of $795 million in the fourth quarter of 2022. This was primarily driven by higher unrealized gains on securities and lower (ph) COVID-19 vaccine-related exit costs. Regarding taxes in the quarter, our effective tax rate was 14.4% versus 16% in the same period last year. This decrease was primarily driven by the net decrease of tax liabilities, including the settlement of the 2013 through 2016 U.S. tax audit. Excluding special items, the effective tax rate was 10.8% versus 16.2% in the same period last year. I encourage you to review our upcoming 2023 10-K filing for additional details on specific tax-related matters. Lastly, I will direct your attention to the box section of the slide, where we have also provided our income before tax, net earnings and earnings per share adjusted to exclude the impact of intangible amortization expense and special items. Now let's look at adjusted income before tax by segment. In the fourth quarter of 2023, our adjusted income before tax for the enterprise as a percentage of sales decreased from 32.5% to 29.2%. Innovative Medicine margins declined from 37.7% to 37.4%, primarily driven by higher R&D milestones, partially offset by favorable patient mix and leveraging and selling and marketing expense. MedTech margins declined from 24.5% to 15.5% primarily driven by in-process research and development expense from the Laminar acquisition, commodity inflation and unfavorable product mix, partially offset by selling and marketing expense leverage. This concludes the sale and earnings portion of the call. I'm now pleased to turn it over to Joe.","evidence_gemma_new":null,"evidence_llama_3_3":"effective tax rate","evidence_qwen_3_30b":"effective tax rate Q4 2023","gemma_new_max":null,"gemma_new_min":null,"llama_3_3_max":0.144,"llama_3_3_min":0.144,"qwen_3_30b_max":0.144,"qwen_3_30b_min":0.144}
{"symbol":"JNJ","year":2024,"quarter":1,"date":"2024-Q1","chunk_id":1,"sub_chunk_id":0,"centroid_label":"effective tax rate","agreed_value":16.9,"count":2,"chunk":"Jessica Moore: Hello everyone. This is Jessica Moore, Vice President of Investor Relations for Johnson & Johnson. Welcome to our company's review of the first quarter business results and our full year financial outlook for 2024. A few logistics before we get into the details. As a reminder you can find additional materials including today\u2019s presentation and associated schedules on the Investor Relations section of the Johnson & Johnson website at investor.jnj.com. Please note that this presentation contains forward-looking statements regarding, among other things, the company's future operating and financial performance, market position and business strategy. You are cautioned not to rely on these forward-looking statements, which are based on the current expectations of future events using the information available as of the date of this recording, and are subject to certain risk and uncertainties that may cause the company's actual results to differ materially from those projected. A description of these risks, uncertainties and other factors can be found in our SEC filings, including our 2023 Form 10-K, which is available at investor.jnj.com and on the SECs website. Additionally, several of the products and compounds discussed today are being developed in collaboration with strategic partners or licensed from other companies. This slide acknowledges those relationships. Moving to today's agenda I will start by reviewing the first quarter sales and P&L results for the corporation as well as highlights related to our two businesses. Joe Wolk our CFO will then provide additional business and financial commentary before sharing an overview of our cash position, capital allocation priorities, and guidance for 2024. The remaining time will be available for your questions. Joaquin Duato our Chairman and CEO as well as Jennifer Taubert, John Reed, and Tim Schmid, our Innovative Medicine and MedTech leaders will be joining us for Q&A. To ensure we provide enough time to address your questions, we anticipate the webcast will last approximately 60 minutes. Unless otherwise stated the financial results and guidance highlighted today reflect the continuing operations of Johnson & Johnson. Furthermore, the percentages quoted represent operational results and therefore exclude the impact of currency translation. Turning to our first quarter sales results. Worldwide sales were $21.4 billion for the first quarter of 2024. Sales increased 3.9% with growth of 7.8% in the U.S. and a decline of 0.3% outside of the U.S. Excluding the impact of the COVID-19 vaccine, operational sales growth was 7.6% worldwide and 7.4% outside of the U.S. Sales growth in Europe excluding the COVID-19 vaccine was 6%. Turning now to earnings. For the quarter net earnings were $5.4 billion and diluted earnings per share was $2.20 versus basic loss per share of $0.19 a year ago. Excluding after tax intangible asset amortization expense and special items for both periods, adjusted net earnings for the quarter were $6.6 billion, and adjusted diluted earnings per share was $2.71, representing increases of 3.8% and 12.4%, respectively compared to the first quarter of 2023. On an operational basis, adjusted diluted earnings per share increased 12.8%. I will now comment on business sales performance in the quarter. Beginning with Innovative Medicine, worldwide Innovative Medicine sales of $13.6 billion increased 2.5%, with growth of 8.4% in the U.S. and a decline of 4% outside of the U.S. Excluding the impact of the COVID-19 vaccine, operational sales growth was 8.3%, both worldwide and outside of the U.S. Innovative Medicine growth was driven by our key brands and continued uptake from recently launched products, with nine assets delivering double-digit growth. We continued to drive strong sales growth across our multiple myeloma portfolio. DARZALEX growth was 21%, primarily driven by share gains of six points across all lines of therapy and ten points in the front line setting. As of this quarter, we are now disclosing TECVAYLI sales, which were previously reported in other oncology. Sales achieved $133 million in the quarter, compared to $63 million in the first quarter of last year, reflecting a strong launch in the relapsed refractory setting. CARVYKTI achieved sales of $157 million, compared to $72 million in the first quarter of last year, driven by continued capacity expansion, manufacturing efficiencies, and strong demand. While sequential growth was roughly flat due to phasing, we continued to anticipate quarter-over-quarter growth with acceleration in the back half of the year. Other oncology growth was driven by continuing strong uptake of TALVEY, our GPRC5D bispecific, and RYBREVANT our bispecific antibody for non-small cell lung cancer. Also in oncology, ERLEADA continues to deliver strong growth of 28.4%, primarily driven by share gains. Growth of 22.4% in pulmonary hypertension was driven by favorable patient mix, share gains, and market growth for both OPSUMIT and UPTRAVI. As a reminder, favorable patient mix was a driver in Q2 2023 through Q1 2024. Therefore, while we still anticipate growth, we expect to lap this dynamic beginning in Q2 2024. Within immunology, we saw sales growth in TREMFYA of 27.6%, driven by market growth and share gains. STELARA growth of 1.1% was driven by market growth and share gains in IBD, partially offset by unfavorable patient mix in the U.S. and as expected, share loss in PSO and PSA. We anticipate continued volume growth largely offset by price declines as we move towards biosimilar entry. In neuroscience SPRAVATO growth of 72% continues to be driven by share gains and additional market launches. Total Innovative Medicine sales growth was partially offset by unfavorable patient mix in XARELTO, which we anticipate continuing throughout the year, as well as a decrease in IMBRUVICA due to competitive pressures, partially offset by stocking dynamics in the U.S. Finally, it is worth noting distribution rights for REMICADE and SIMPONI in Europe will be returned in Q4. I'll now turn your attention to MedTech. Worldwide Med1ech sales of $7.8 billion increased 6.3%, with growth in the U.S. of 6.6% and 6.1% outside of the U.S. In the quarter, worldwide MedTech growth was negatively impacted by approximately 80 basis points due to fewer selling days, disproportionately impacting orthopedics. In cardiovascular previously referred to as Interventional Solutions, electrophysiology delivered double-digit growth of 25.9%, with strong growth in all regions. Performance was driven by global procedure growth, new product uptake, commercial execution, and a onetime inventory build in Asia-Pacific, impacting worldwide growth by approximately 370 basis points. In addition, Abiomed delivered growth of 15%, driven by continued strong adoption of Impella 5.5 and Impella RP technology. Orthopedics growth of 4.8% includes a onetime revenue recognition timing change related to certain products across all platforms in the U.S. positively impacting worldwide growth by approximately 300 basis points. As a reminder, orthopedics was over indexed by the impact of reduced selling days in the quarter. Strong performance in hips and knees was driven by procedure recovery, growth of new products, and commercial execution. While trauma and spine were negatively impacted by competitive pressures and core trauma was further impacted by weather related softness in the U.S. Growth of 1.9% in surgery was driven primarily by procedure recovery and strength of our bio surgery and wound closure portfolios, partially offset by competitive pressures in China volume based procurement and energy and endo cutters. Contact lenses declined 2.3%, driven by U.S. stocking dynamics, partially offset by strong performance in ACUVUE OASYS 1-day family of products. Worldwide growth was negatively impacted by 120 basis points due to the Blink divestiture in Q3 2023. Surgical Vision grew 1.1%, driven by CNIS EYHANCE, a monofocal intraocular lens partially offset by China's VBP. Now turning to our consolidated statement of earnings for the first quarter of 2024. I'd like to highlight a few noteworthy items that have changed compared to the same quarter of last year. Cost of product sold margin leveraged by 160 basis points, primarily driven by lower COVID-19 supply network related exit cost. Selling, marketing, and administrative margins deleveraged 110 basis points, driven primarily by timing of marketing investment in the Innovative Medicine business. We continued to invest strategically in research and development at competitive levels investing $3.5 billion, or 16.6% of sales this quarter. We invested $2.9 billion, or 21.4% of sales in Innovative Medicine, with the increase in investment being driven by continued pipeline progression. In MedTech, R&D investment was $0.6 billion, or 8.3% of sales, a slight decrease driven by phasing. Interest income was $209 million in the first quarter of 2024, as compared to $14 million of expense in the first quarter of 2023. The increase in income was driven by a lower average debt balance and higher interest rates earned on cash balances. Other income and expense was income of $322 million in the first quarter of 2024, compared to an expense of $6.9 billion in the first quarter of 2023. This change was primarily due to the $6.9 billion charge related to the talc settlement proposal recorded in the first quarter of 2023. Regarding taxes in the quarter, our effective tax rate was 16.9% versus 61.8% in the same period last year, which was primarily driven by the tax benefit on the talc settlement proposal recorded in the first quarter of 2023. Excluding special items, the effective tax rate was 16.5% versus 15.9% in the same period last year. I encourage you to review our upcoming first quarter 10-Q filing for additional details on specific tax related matters. Lastly, I'll direct your attention to the box section of the slide, where we have also provided our income before tax, net earnings, and earnings per share adjusted to exclude the impact of intangible amortization expense and special items. Now let's look at adjusted income before tax by segment. In the first quarter of 2024 our adjusted income before tax for the enterprise, as a percentage of sales increased from 36.1% to 36.8%, primarily driven by an increase in non-allocated interest income with both Innovative Medicine and MedTech margins remaining relatively flat year-over-year. When comparing against the fourth quarter and full year 2023, Innovative Medicine and MedTech adjusted income before tax margins have improved. This concludes the sales and earnings portion of the call. I am now pleased to turn it over to Joe.","evidence_gemma_new":null,"evidence_llama_3_3":"effective tax rate first quarter of 2024","evidence_qwen_3_30b":"effective tax rate 16.9%","gemma_new_max":null,"gemma_new_min":null,"llama_3_3_max":16.9,"llama_3_3_min":16.9,"qwen_3_30b_max":16.9,"qwen_3_30b_min":16.9}
{"symbol":"JNJ","year":2024,"quarter":4,"date":"2024-Q4","chunk_id":3,"sub_chunk_id":0,"centroid_label":"effective tax rate","agreed_value":11.7,"count":2,"chunk":"Jessica Moore: Thank you, Joaquin. Moving to our financial results. Unless otherwise stated, the results and guidance highlighted today reflect the continuing operations of Johnson & Johnson. Furthermore, the percentages quoted represent operational results and therefore excludes the impact of currency translation. Starting with Q4 2024 sales results. Worldwide sales were $22.5 billion for the quarter. Sales increased 6.7% with growth of 10% in the US and 2.5% outside of the US. Worldwide growth was negatively impacted by 290 basis points due to STELARA and positively impacted by 100 basis points due to acquisitions and divestitures. It's important to note growth in Europe was negatively impacted by 720 basis points due to the loss of exclusivity of STELARA and the COVID-19 vaccine. Turning now to earnings. For the quarter, net earnings were $3.4 billion and diluted earnings per share was $1.41 versus diluted earnings per share of $1.70 a year ago. Excluding after tax intangible asset amortization expense and special items for both periods, adjusted net earnings for the quarter were $4.9 billion and adjusted diluted earnings per share was $2.04, representing decreases of 11.1% and 10.9%, respectively, compared to the fourth quarter of 2023. Earnings per share in the quarter was negatively impacted by $0.22 of acquired IPR&D expense related to the V-Wave acquisition. For the full year 2024, sales were $88.8 billion. Sales grew 5.9% with growth of 8.3% in the US and 2.9% outside of the US. STELARA and the COVID-19 vaccine negatively impacted worldwide growth by 260 basis points. Acquisition and divestitures positively impacted worldwide growth by 50 basis points. Growth in Europe was negatively impacted by 670 basis points due to the COVID-19 vaccine and the loss of exclusivity of STELARA. Net earnings for the full year 2024 were $14.1 billion and diluted earnings per share was $5.79 versus diluted earnings per share of $5.20 a year ago. Full year 2024 adjusted net earnings were $24.2 billion and adjusted diluted earnings per share was $9.98, representing a decrease of 4.6% and an increase of 0.6% respectively versus full year 2023. Earnings per share in the year was negatively impacted by $0.67 due to acquired IPR&D charges on various transactions throughout the year. I will now comment on business sales performance in the quarter. Beginning with Innovative Medicine. Worldwide sales of $14.3 billion increased 6.5% excluding the COVID-19 vaccine with growth of 11.1% in the US and a decline of 0.3% outside of the US. STELARA negatively impacted worldwide growth by 490 basis points. Innovative Medicine growth was driven by our key brands and continued uptake from recently launched products with 10 assets delivering double-digit growth. Results across the portfolio continue to be positively impacted by price adjustments associated with Argentina hyperinflation consistent with market practice. Starting with oncology. We continue to drive strong sales growth across our multiple myeloma portfolio. DARZALEX growth was 23.5%, primarily driven by share gains of over three points across all lines of therapy and six points in the frontline setting as well as market growth. This marks Johnson & Johnson's first brand to achieve over $3 billion in sales in a quarter. CARVYKTI achieved sales of $334 million with growth of over 100% driven by share gains and capacity expansion. This reflects sequential growth of 17.3% aligned with our expectations of accelerating growth in the back half of the year. TECVAYLI sales were $146 million in the quarter with growth of 18%, reflecting a strong launch in the relapsed refractory setting. Demand remains strong despite continued adoption of longer duration dosing intervals. Finally, within our multiple myeloma portfolio, TALVEY continued its launch trajectory with another quarter of strong growth. As a reminder, we anticipate disclosing TALVEY sales in the first quarter of 2025, which are currently reported in the category Other Oncology. ERLEADA continues to deliver strong growth of 22.7%, primarily driven by share gains and market growth, reaching $3 billion in annual sales for the first time. RYBREVANT, our bispecific antibody for non-small cell lung cancer, contributed to growth in the category Other Oncology as we continue to expand approved indications. We also anticipate disclosing RYBREVANT sales in the first quarter of 2025. Within immunology, we saw sales growth in TREMFYA of 5.6%, driven by strong market growth and share gains in PsO and PsA, partially offset by unfavorable patient mix and inventory dynamics. We are excited about the recent UC launch and expect to see strong uptake of the IBD indications in 2025. STELARA declined 13.6% driven by the impact of current and anticipated biosimilar competition. As a reminder, biosimilar competition has entered the US in January 2025. REMICADE and SIMPONI worldwide sales were positively impacted by return of distribution rights in Europe. In Neuroscience, SPRAVATO growth of 45.3% continues to be driven by increased physician and patient demand. As Joaquin mentioned, SPRAVATO has exceeded $1 billion in annual sales for the first time. Other Neuroscience decline was driven by the loss of a SPINRAZA tender in Europe. In Pulmonary Hypertension, OPSUMIT grew 2.5%, driven by market growth and share gains, partially offset by inventory dynamics in the US and austerity measures in Europe. Starting in 2025, we will begin to report OPSYNVI, which is currently reported in the category Other Pulmonary Hypertension in OPSUMIT. UPTRAVI grew 12. 1%, driven by market growth, patient mix and share gains. Finally, XARELTO sales growth was driven by favorable patient mix. I'll now turn your attention to MedTech. Worldwide sales of $8.2 billion increased 7.6% both in the US and outside of the US. Acquisitions and divestitures had a net positive impact of 300 basis points on worldwide growth, 430 basis points in the US and 150 basis points outside of the US. Overall, MedTech growth was driven by commercial execution and strength of new product introductions, partially offset by increased competitive PFA pressures in US electrophysiology and continued headwinds in Asia Pacific, primarily in China. In Cardiovascular, electrophysiology delivered growth of 7.3%. Performance was driven by global procedure growth, new product uptake and commercial execution, partially offset by competitive PFA ablation catheter uptake in the US and VBP in China. Despite the IV saline shortage in the US, Abiomed delivered growth of 13.2% driven by strong growth in all regions and continued adoption of Impella 5.5 and Impella RP technology. Cardiovascular results also included $258 million associated with the acquisition of Shockwave. Contact Lenses and Other grew 7.4%, driven by trade inventory dynamics, continued strategic price actions, strong performance in ACUVUE OASYS 1-Day family of products as well as lapping prior year impacts from Russia sanctions. Surgical Vision growth of 13.6% was driven by TECNIS PureSee & TECNIS Eyhance. Commercial execution partially offset by competitive pressures in the US. Orthopedics grew 2.5% inclusive of hips growth of 5.6%, primarily driven by the success of recent product launches and commercial execution, partially offset by revenue disruption from the previously announced orthopedics transformation, impacts of China VBP and competitive pressures. Lastly, Surgery grew 0.4% with the Acclarent divestiture negatively impacting results by approximately 130 basis points. Performance was driven primarily by commercial execution, strength of new products across wound closure and biosurgery and continued price adjustments primarily associated with hyperinflation consistent with market practice. Growth was partially offset by competitive pressures in Energy and Endocutters as well as VBP and the anticorruption campaign in China. Now turning to our consolidated statement of earnings for the fourth quarter of 2024. I'd like to highlight a few noteworthy items that have changed compared to the same quarter of last year. We continue to invest strategically in research and development at competitive levels to fortify our future, investing $5.3 billion or nearly 24% of sales, which includes $540 million of acquired IPR&D expense associated with the V-Wave acquisition. Selling, marketing and administrative expense as a percent of sales deleveraged 150 basis points driven by increased commercial investment in the Innovative Medicine business. Interest income and expense was a net income of $144 million as compared to $212 million of income last year driven by lower interest rates earned on a lower average cash balance and higher interest rates on a higher average debt balance. Other income and expense was a net income of $161 million compared to $421 million of income in the prior year. This was primarily driven by lower gains on securities, a lower benefit related to employee benefit programs due to the discount rate, partially offset by lower litigation expense in 2024. Regarding taxes in the quarter, our effective tax rate was 11.7% versus 14.4% in the same period last year. This decrease was primarily driven by post-acquisition integration efforts that allowed the company to deduct certain acquisition costs for tax purposes as well as the resolution of prior tax matters both in jurisdictions outside of the US. Excluding special items, the effective tax rate was 8.8% versus 10.8% in the same period last year. I encourage you to review our upcoming 2024 10-K filing for additional details on specific tax related matters. Lastly, I'll direct your attention to the box section of the slide, where we have also provided our income before tax, net earnings and earnings per share adjusted to exclude the impact of intangible, amortization expense and special items. Now let's look at adjusted income before tax by segment for the quarter. Innovative Medicine margin declined from 37.4% to 32.5% primarily driven by strategic commercial investment and R&D pipeline advancement. MedTech margin declined from 15.5% to 10. 8% primarily driven by acquired IPR&D expense related to the V-Wave acquisition. Please note that the MedTech margin was negatively impacted in both years due to expenses associated with the strategic acquisition of Laminar. When adjusting for these one-time items, MedTech margin was relatively flat. As a result, adjusted income before tax for the enterprise as a percentage of sales decreased from 29.2% to 24.1% with the V-Wave acquired IPR&D expense impacting results by 240 basis points. When looking at the full year, Innovative Medicine, MedTech and the Enterprise adjusted income before tax remained relatively flat year-over-year when adjusting for the one-time items highlighted on the slide, mainly acquired IPR&D expenses on various transactions across both years. This concludes the sales and earnings portion of the call. I am now pleased to turn it over to Joe.","evidence_gemma_new":null,"evidence_llama_3_3":"effective tax rate Q4 2024","evidence_qwen_3_30b":"effective tax rate Q4 2024","gemma_new_max":null,"gemma_new_min":null,"llama_3_3_max":11.7,"llama_3_3_min":11.7,"qwen_3_30b_max":11.7,"qwen_3_30b_min":11.7}
{"symbol":"JNJ","year":2023,"quarter":4,"date":"2023-FY","chunk_id":4,"sub_chunk_id":0,"centroid_label":"free cash flow","agreed_value":18000000000.0,"count":3,"chunk":"Joseph Wolk: Thank you, Jessica, and thanks, everyone, for joining us today. As Joaquin and Jessica commented, 2023 was a strong year for Johnson & Johnson evidenced by notable top and bottom line performance beats relative to what we guided to 2023 at this time last year. We are particularly proud of the innovation we advanced to strengthen our development pipelines, the continued expansion of our portfolio and investments made for future success. All of this provides us with a strong foundation as we enter 2024. Thus far during the call, you've heard about sales and income performance in 2023. So now let's dive into some detail on capital allocation highlights. We generated free cash flow of more than $18 billion in 2023. At the end of the year, we had approximately $23 billion of cash and marketable securities and approximately $29 billion of debt for a net debt position of $6 billion. We maintained a healthy balance sheet and robust credit rating, underscoring the strength of Johnson & Johnson's financial position, which enables us to strategically invest and deploy capital to unlock value. To that end, we executed against all of our capital allocation priorities in 2023. For starters, we invested more than $15 billion in research and development or 17.7% of sales, an all-time high for the company as we remain one of the top investors in R&D across all industries. Jessica provided R&D investment by business segment, information we will continue to provide on a quarterly basis moving forward. As far as dividends, 2023 marked the 61st consecutive year in which we increased our dividend. We know this use of capital is a priority for our investors, and we plan to continue to increase our dividend annually. We also deployed, announced or committed over $3 billion in strategic value creating inorganic growth opportunities in the last 12 months. This amount includes the recent Ambrx and Laminar transactions as well as more than 50 smaller early-stage licensing deals and partnerships that complement our current Innovative Medicine and MedTech pipelines. Finally, share repurchases. In early 2023, we completed the $5 billion share repurchase program initiated in late 2022 and in combination with our dividend, returned over $14 billion to shareholders last year. Through the Kenvue separation, we further reduced the Johnson & Johnson's outstanding share count by 191 million shares or approximately 7% without the use of cash and in a tax-free manner. Looking ahead to 2024, Johnson & Johnson's robust free cash flow generation should continue to solidify our already strong financial foundation and fuel further investment leading to growth for our business or returns to shareholders. Now turning to our full year 2024 guidance. Today, we are confirming the 2024 guidance for those items previewed at our enterprise business review in early December by filling in some of the details. We expect operational sales growth for the full year to be in the range of 5% to 6% or $88.2 billion to $89 billion. As a reminder, our sales guidance continues to exclude any impact from COVID-19 vaccine sales. In Innovative Medicine, we expect 2024 to deliver a 13th consecutive year of above market growth, driven by market share gains from key brands such as DARZALEX, TREMFYA and ERLEADA as well as continued adoption of recently launched newer products such as CARVYKTI, TECVAYLI, TALVEY and SPRAVATO. In MedTech, we remain focused on executing our key value drivers: first, advancing our differentiated pipeline such as programs in pulse field ablation, Abiomed and surgical robotics, further shifting our portfolio into high-growth markets; second, expanding our reach and scale around the world; and third, building operational resilience across our portfolio. We don't speculate on future currency movements, but utilizing the euro spot rate relative to the U.S. dollar as of last week at $1.09 as well as other major currencies, we estimate there would be a slight unfavorable impact of $400 million or a negative 0.5% on reported sales growth for the year. Turning to other items on our P&L. We expect our 2024 adjusted pretax operating margin to improve by approximately 50 basis points driven primarily by a continuation of efficiency programs across the organization. We expect this to be partially offset by anticipated STELARA biosimilar entrants in Europe in the second half of this year and some lingering inflation impact in MedTech inventory that will flow through 2024's P&L. This margin improvement encompasses dilution of additional investment associated with our planned acquisition of Ambrx, which will be treated as a business combination. Now we do acknowledge that this 50 basis point improvement simply gets us back to what your models expected, given the elevated Q4 2023 R&D investment for new pipeline assets. Regarding other income and expense, we anticipate income to be $1.2 billion to $1.4 billion for 2024. This is less than the 2023 amount driven by the impact of actuarial assumptions on certain employee benefit programs such as lower discount rates. We are comfortable with you modeling net interest income between $450 million and $550 million, consistent with 2023 levels. Finally, we are projecting an effective tax rate for 2024 in the range of 16% to 17% based on current tax laws and anticipated geographic income mix across our businesses. This tax rate takes into account an increase of approximately 1.5% or 150 basis points relative to the recently enacted Pillar 2 legislation. We continue to believe the U.S. Treasury's current perspective on Pillar 2 is harmful, reducing U.S. incentives for innovation and resulting in U.S. based multinational companies paying more tax revenue to foreign governments. Our full year share count calculation for adjusted earnings per share in 2024 will include the remaining benefit equal to approximately 120 million shares from the approximately 191 million net share reduction in outstanding J&J shares following the Kenvue exchange offer. Given all these factors, we expect adjusted operational earnings per share to grow 7.4% at the midpoint for a range of $10.55 to $10.75. Based on the euro spot rate of 1.09 from last week, we do not estimate any currency impact on earnings per share. I'll now provide some qualitative considerations on quarterly phasing for your models. We expect Innovative Medicine sales growth to be slightly stronger in the first half of the year compared to the second half, given the anticipated entry of STELARA biosimilars in Europe towards the middle of the year. This headwind will be partially offset by continued uptake from our recently launched products. We project MedTech operational sales growth to be relatively consistent throughout the year, expecting procedures in 2024 to remain above pre-COVID levels. The first half of the year will continue to have modest impact from Russia sanctions as our licenses are approved. We anticipate China VBP pricing for surgical IOLs and orthopedic sports to begin in 2024 with impacts from 2023 VBP in electrophysiology, Endocutters, Energy, Spine and Trauma to begin to anniversary throughout 2024. Regarding EPS phasing, it is important to highlight that the first half of the year will benefit from the full 191 million net share reduction following the Kenvue exchange offer with only a partial comparative benefit in the third quarter versus Q3 2023 and the fourth quarter being neutral versus Q4 2023. So based on the foundation strengthened in 2023 and numerous catalysts that Joaquin outlined across our business in 2024, we are confident in our ability to achieve both near and long-term financial targets. I'd like to close by thanking our colleagues for their dedication and commitment to benefit patients around the world. It is their effort that enables Johnson & Johnson to deliver innovative therapies and solutions that address serious unmet medical needs and creates long-term sustainable value for shareholders. With that, I\u2019m now pleased to turn the call over to Kevin to begin the Q&A portion of the call.","evidence_gemma_new":"free cash flow 2023","evidence_llama_3_3":"expect free cash flow 2023","evidence_qwen_3_30b":"free cash flow 2023","gemma_new_max":18000000000.0,"gemma_new_min":18000000000.0,"llama_3_3_max":18000000000.0,"llama_3_3_min":18000000000.0,"qwen_3_30b_max":18000000000.0,"qwen_3_30b_min":18000000000.0}
{"symbol":"JNJ","year":2023,"quarter":2,"date":"2023-Q2","chunk_id":4,"sub_chunk_id":0,"centroid_label":"free cash flow","agreed_value":5400000000.0,"count":3,"chunk":"Joe Wolk: Thank you, Jessica, and thanks, everyone, for joining us today. As previously shared, we reported particularly strong results across all segments for the second quarter and the first-half of 2023. During the second quarter, adjusted operational sales growth by pharmaceuticals excluding COVID-19 revenue accelerated 6.2% over the first quarter of 2023. Similarly, on a sequential basis, MedTech operational sales increased to 4.5% over an already strong first quarter. During the first-half of the year we executed against our long-term business strategy and achieved key clinical and regulatory milestones. These advancements provide a strong foundation for long-term growth and are a testament to the hard work and dedication of our talented colleagues around the world. We also made considerable progress toward the separation of Kenvue. On May 8th, as partial consideration for the transfer of the Consumer Health business, Kenvue paid $13.2 billion to Johnson & Johnson from the net proceeds of the initial public offering and debt financing transactions in connection with the separation. Today, we were pleased to announce an update on our next step toward the separation of Kenvue, subject to market conditions, our intention is to split off Kenvue shares through an exchange offer as our next step in the separation. As part of the proposed exchange offer, Johnson & Johnson's shareholders will have the choice to exchange all some or none of their shares of Johnson & Johnson common stock for shares of Kenvue common stock subject to the terms of an offer. We believe a split off is the most advantageous form of separation for Johnson & Johnson, Kenvue and our shareholders, specifically an exchange offer provides Johnson & Johnson the potential opportunity to acquire a large number of outstanding shares of Johnson & Johnson common stock at one time in a tax free manner for U.S. federal income tax purposes without reducing overall cash or future financial flexibility. Further, following the completion of the exchange offer, Kenvue would most likely have a shareholder base that would have made the election to own its shares. The exact timing of our decision to launch an exchange offer will, as stated earlier, depend on market conditions, but the launch of the tender could occur as early as the coming days. Offer terms for the exchange inclusive of applicable discounts, as well as the duration of the exchange tender period would be set upon launch. We understand that you may have questions on this process. At this point, there are no additional details about the contemplated split off to share, but we are committed to providing timely updates as appropriate. Let's now turn to cash and capital allocation. We ended the second quarter with approximately $29 billion of cash and marketable securities and approximately $46 billion of debt for a net debt position of $17 billion, inclusive of approximately $7 billion of 10 Kenvue net debt. Free cash flow through the second quarter was approximately $5.4 billion, compared to $8.1 billion in the prior year. The second quarter reflects elevated tax payments of approximately $2 billion related to TCJA and past audit related matters. Our capital allocation priorities remain unchanged with continued investment in our business being the highest priority to drive new and better solutions for patients, followed by dividends, increasing on an annual basis, adding strategic opportunities for inorganic growth, and share repurchases when attractive. Our R&D investment in the first-half of 2023 was $7.4 billion or approximately 15% of sales. This includes external investments such as our recently announced partnership with Cellular Biomedicine Group on two next generation CAR-Ts for the treatment of B-cell malignancies further broadening our cell therapy portfolio. In April, we announced our 61st consecutive year of dividend increases and in combination with the completion of our $5 billion share repurchase program authorized by the Board in September of 2022, and completed earlier this year, we returned $8.5 billion to shareholders in the first-half of 2023. Let's discuss our outlook for the balance of 2023. Before I get into the specifics of guidance, in light of the potential Kenvue split off transaction I will remind you that our updated full-year guidance today continues to include results from the Consumer Health Business given Johnson & Johnson remains the majority shareholder of Kenvue. I suspect you already know this, but it would not be accurate to subtract any guidance provided separately by Kenvue from total Johnson & Johnson guidance and assume that the resulting total reflects guidance for the new Johnson & Johnson. When Johnson & Johnson is no longer the majority shareholder of Kenvue, we will provide timely updated new Johnson & Johnson guidance that will reflect among other things the removal of Consumer Health's current contribution to Johnson & Johnson's performance, as well as any updates to Johnson & Johnson's outstanding share count. So with that context, moving on to our full-year guidance. Based on the strong results delivered in the quarter, like we did in April, we are again raising full-year operational sales and EPS guidance, despite some strategic items not accretive to EPS as detailed on this schedule. Specifically the lost income related to the approximate 10% non-controlling interest in Kenvue and the acquired in process research and development cost related to our investment in Cellular Biomedicine Group. We now expect operational sales growth for the full-year 2023 to be in the range of 7% to 8% or up $1.4 billion in the range of $99.3 billion to $100.3 billion on a constant currency basis and adjusted operational sales growth in the range of 6% to 7%. As you know, we don't speculate on future currency movements. Last quarter, we noted that we utilized the Euro spot rate relative to the U.S. dollar at $1.10. The Euro spot rate as of mid-last week remains at $1.10. However, the U.S. dollar has strengthened versus other select currencies such as the Won and the Yen. As such, we now estimate a negative impact of foreign currency translation of approximately 500 basis points resulting in estimated reported sales growth between 6.5% to 7.5%, compared to 2022 with a midpoint of $99.3 billion. Regarding other lines on the P&L, we now anticipate a slight improvement to our adjusted pretax operating margin driven by expense management. We have reduced our other income estimate to be in the range of $1.6 billion to $1.8 billion, primarily related to the company\u2019s 10.4% non-controlling interest in Kenvue. Regarding interest income and expense, we now anticipate a reduction of net interest expense to the range of a $150 million to $250 million, due to interest income on the net proceeds linked to the Kenvue separation. And finally, based on current tax law, we are maintaining our effective tax rate estimate in the range of 15.5% to 16.5%. These changes result in us increasing our adjusted operational earnings per share guidance by $0.10 per share to a range of $10.60 to $10.70 or $10.65 at the midpoint on a constant currency basis. Constant currency growth of 5% at the midpoint. While not predicting the impact of currency movements, assuming recent exchange rates I previously referenced our reported adjusted earnings per share for the year assumes no additional foreign exchange impact. As such, our reported adjusted earnings per share for the year increases by $0.10 per share to a range of $10.70 to $10.80 or $10.75 at the midpoint, reflecting growth of 6% at the midpoint. While we do not provide guidance by segment or on a quarterly basis, let me offer some qualitative considerations to support your modeling. In MedTech, we continue to anticipate stable procedure volumes and healthcare staffing levels in the back half of the year with normal seasonality. We expect continued competitive performance attributable to commercial execution recently launched products and improvement in supply. Headwinds from volume based procurement in China, as well as potential impacts from international sanctions in Russia are expected to be higher in the second-half than the first-half of the year. In Pharmaceuticals, we continue to expect to deliver our 12th consecutive year of above market growth in 2023, driven by key assets and continued uptake of our newly launched products. We expect continued strong growth in the back half of the year slightly higher than the first-half. When modeling consumer health growth rates in 2023, it's important to take into consideration prior year comparisons with lapping price increases in the back half of the year. Given the strong momentum in our pharmaceutical business and the upcoming clinical milestones mentioned earlier we remain very confident in our ability to meet our 2025 pharmaceutical sales target of $57 billion. Looking ahead, we have many important catalysts for the remainder of the year that can drive meaningful near and long-term value. Beyond the separation, in the near-term, we are continuing to drive performance in MedTech with better commercial execution and recently launched innovative products being a significant factor in driving the continued higher growth trajectory across the MedTech business. Many of the solutions mentioned are early in their commercialization, which means there are still significant opportunity ahead. For example, in electrophysiology we are excited to begin the commercialization of the QDOT MICRO Catheter in the U.S. during the second-half of this year. In Orthopaedics, the VELYS robotic assisted solution, recently received regulatory approvals in Europe, and we plan to launch it in key European countries by the end of this year. And in Vision, we are seeing the benefits of our recently launched innovations such as ACUVUE OASYS 1-Day multifocal, which is driving Johnson & Johnson's market share growth in the large and growing presbyopia market. We look forward to continued growth from this and other recent Vision launches. Related to our pharmaceutical business, we are excited about upcoming advancements in our pipeline with a number of important regulatory and clinical milestones for our key future assets, including on the regulatory front there is expected approval of [daratumumab] (ph) in relapsed or refractory multiple myeloma. Clinically, we expect a Phase 3 data for TREMFYA for Crohn's disease and ulcerative colitis. The results of the MARIPOSA study of RYBREVANT plus lazertinib in front line non-small cell lung cancer with the opportunity to potentially present that data at an upcoming major medical meeting. Phase 1 data for TAR-210 in non-muscle invasive bladder cancer, and Phase 2 data for Nipocalimab in rheumatoid arthritis. A couple of other items to highlight. In case you missed them, we recently published our Health For Humanity report our U.S. Pharmaceutical pricing transparency report and our U.S. patent table, all of which can be found on our website. Also, a reminder that we will be hosting an enterprise business review featuring both Pharmaceutical and MedTech at the New York Stock Exchange on December 5th. I'll conclude my prepared remarks by reiterating that we have had a strong first-half of the year both financially and operationally and we expect to continue to build upon that momentum in the second-half of this year. With that, I will now turn the call over to Erik Haas.","evidence_gemma_new":"Free cash flow","evidence_llama_3_3":"free cash flow second quarter","evidence_qwen_3_30b":"free cash flow $5.4 billion second quarter","gemma_new_max":5400000000.0,"gemma_new_min":5400000000.0,"llama_3_3_max":5400000000.0,"llama_3_3_min":5400000000.0,"qwen_3_30b_max":5400000000.0,"qwen_3_30b_min":5400000000.0}
{"symbol":"JNJ","year":2023,"quarter":3,"date":"2023-Q3","chunk_id":2,"sub_chunk_id":0,"centroid_label":"free cash flow","agreed_value":12000000000.0,"count":3,"chunk":"Joe Wolk: Thank you, Jessica, and thanks everyone for joining us today. This quarter's call marks a new era for Johnson & Johnson with a sharpened focus on Innovative Medicine and MedTech. What has remained consistent is our Credo and our commitment to patients. We are privileged to build upon our 137-year legacy of tackling the world's most complex healthcare challenges and helping patients with serious unmet health needs around the world. As we look forward, we are well positioned to grow our business and innovate across the spectrum of healthcare. We are excited about what's ahead and what we can achieve in the future. Before we dive into our performance, I want to briefly touch upon other items important to our business. The first is a brief recap of the Kenvue separation, which was formally completed during the quarter. The transaction was executed within our targeted timeframe and under budget, while generating significant cash and value for our shareholders. Through the separation, we raised $13.2 billion in cash proceeds through the Kenvue Debt Offering and IPO. We reduced Johnson & Johnson's outstanding share count by 191 million shares, or approximately 7%, without the use of cash and in a tax-free manner. We maintained our current quarterly dividend per share and we retained approximately 180 million shares of Kenvue stock that provides cash proceeds for future flexibility. We will see the full impact to EPS of the share reduction in 2024. Another item warranting comment is the Inflation Reduction Act. We continue to believe the IRA's price setting provisions are damaging to innovation and will prevent the delivery of transformative therapies and cures to patients. As we await adjudication of legal proceedings initiated by of us and others, we did submit all requested information in compliance with CMS' drug price setting scheme to continue supporting patients' access to our medicines that help them stay healthy and live longer. Moving to segment highlights in the quarter, as Jessica previously shared, our teams delivered strong results in the third quarter, while continuing to advance our pipeline to enhance future growth. Within the innovative medicine business, two important regulatory milestones were announced during the quarter. Specifically, we received European Commission approval for a reduced biweekly dosing frequency for TECVAYLI for eligible patients with relapsed and refractory multiple myeloma. And U.S. FDA and European Commission approval of TALVEY, a first-in-class, bi-specific therapy for the treatment of patients with heavily pre-treated multiple myeloma. Regarding clinical data, we are excited to have an unprecedented seven late breaking abstracts, including three featured in the Presidential Symposium being presented at the European Society of Medical Oncology meeting this weekend. Highlights will include the results from all three Phase III studies of RYBREVANT in lung cancer, including MARIPOSA, MARIPOSA II, and PAPILLON. Additionally, updated data from the Sunrise 1 study of TAR-200 in non-muscle invasive bladder cancer will be shared, as well as the first ever data of TAR-210 in patients with FGFR mutations. We also look forward to presenting Phase II data for Nipocalimab and rheumatoid arthritis at the American College of Rheumatology Annual Meeting in November, and have already launched a Phase II combination study NRA. Lastly, we plan to initiate multiple clinical development programs for our targeted oral peptide JNJ-2113. This includes the initiation of the ANTHEM Phase 2B study in ulcerative colitis, which will begin this month, and the Phase III clinical program titled Iconic for adults with moderate to severe plaque psoriasis expected to begin in November. Moving to MedTech, notable highlights in the quarter include significant advancements in electrophysiology across our cardiac ablation platform. We received FDA clearance from multiple atrial fibrillation ablation products in our portfolio to be used in a workflow without fluoroscopy. This FDA indication is unique to Johnson & Johnson and is a significant advancement where caregivers and patients are not exposed to harmful fluoroscopy-related radiation during their cardiac ablation procedures. It also allows for the removal of heavy lead protective equipment that may lead to orthopedic complications for care teams. In pulse field ablation, we have completed our clinical trial in Europe and submitted for CE mark for our VARIPULSE Catheter. We expect the completion for our U.S. VARIPULSE study to occur in the fourth quarter. We are also simultaneously advancing clinical studies for two additional pulse field ablation catheters, the STSF dual energy catheter, capable of delivering both PF and RF energy through the same device, and Omnipulse, a large tip focal catheter. Beyond electrophysiology, we have completed enrollment in the Abiomed Impella ECP clinical study, a landmark pivotal trial designed to demonstrate the safety and efficacy of the Impella ECP during high-risk PCI procedures. Impella ECP is the world's smallest heart pump and the only heart pump compatible with small bore access and closure techniques. While not a clinical advancement, we have also taken steps in the quarter to improve MedTech's future margin profile, implementing a restructuring program designed to simplify and focus the operations of our orthopedic business. As part of this two-year program, we expect to exit certain markets and product lines across that business. We anticipate some short-term modest revenue disruption in orthopedics of approximately $250 million in total over the next two years, given the market and product line exits, but believe these actions will improve our ability to meet demand, resulting in accelerated growth and enhanced profitability. The program is expected to be completed by the end of 2025, with total program costs estimated to be between $700 million and $800 million. Let's now turn to cash and capital allocation. We ended the third quarter with approximately $24 billion of cash and marketable securities and approximately $30 billion of debt for a net debt position of $6 billion. Free cash flow year-to-date through the third quarter was approximately $12 billion, up from the $5 billion we reported year-to-date in the second quarter of 2023. Our capital allocation priorities remain unchanged. We will continue to execute a strategic and disciplined approach utilizing our strong credit profile and robust free cash flow generation to prioritize continued investment in our business, increasing dividends on an annual basis, executing strategic business development initiatives for inorganic growth, and executing share repurchases when appropriate. Moving onto our 2023 guidance update. Based on the strong results delivered in the quarter and the first nine months of this year, balanced with planned investments in the fourth quarter, we are raising the ranges for full-year sales and EPS guidance. We now expect operational sales growth for the full-year 2023 to be in the range of 8.5% to 9.0%, or up $600 million at the midpoint in the range of $84.4 billion to $84.8 billion on a constant currency basis and adjusted operational sales growth in the range of 7.2% to 7.7%. Just a reminder, our sales guidance continues to exclude any COVID-19 vaccine revenue. While we do not speculate on future currency movements utilizing the euro spot rate as of last week at 1.06, we now anticipate an incremental negative currency impact of $400 million resulting in a full-year impact of negative 1% or $800 million. Looking across the P&L, adjusted pre-tax operating margin is still expected to improve by approximately 50 basis points versus prior year, driven by stronger margin profile and business mix. Net other income is also being maintained, ranging from $1.7 billion to $1.9 billion. Due to higher interest rates earned on our cash, we now expect net interest income in the range of $300 million to $400 million. And finally, based on current tax law, our estimate for the effective tax rate for 2023 will be between 15.0% and 15.5%. These revised estimates translate to an increase in our adjusted operational earnings per share guidance by $0.10 at the midpoint. Our new range is $10.02 to $10.08 or 12.5% growth at the midpoint, and adjusted reported earnings per share in the range of $10.07 to $10.13 or 13% growth at the midpoint. Since January, We've been able to increase our guidance throughout the year for a cumulative impact of $3 billion on operational sales and $0.25 on adjusted operational earnings per share, which includes absorbing $0.10 for our licensing deal with Cellular Biomedicine Group announced in the second quarter of 2023. Now I appreciate that many of you are turning your attention to 2024, and our teams are actively finalizing our plans for next year. With that context, allow me to provide some preliminary perspectives for you to consider. For innovative medicine, we remain confident in our ability to deliver growth from key brands and anticipate continued progress from our newly launched products, all while advancing our robust pipeline with many exciting data readouts, filings, and approvals ahead of us. This includes data presentations and regulatory submissions for TREMFYA in IBD, presenting data from our Phase III study of Nipocalimab in Myasthenia Gravis, and readouts from two Phase III or ELITA trials in early-stage prostate cancer. We do not expect the entry of STELARA Biosimilars in the United States during 2024. However, as a reminder STELARA does have a composition of matter patent expiry in mid-2024 in Europe. For MedTech, we expect our commercial capabilities and continued adoption of recently launched products across all MedTech businesses will continue to drive our growth and improve competitiveness, while continuing to advance our pipeline programs, including innovation in pulse field ablation, Abiomed, and surgical robotics. We expect procedures in 2024 to remain consistent with elevated 2023 levels. With respect to tax, as you may be aware, the European Union member states are in the process of enacting the EU's Pillar 2 Directive, which generally provides for a 15% minimum tax rate as established by the OECD Pillar 2 framework. The first EU effective date for certain aspects of the law is January 1st, 2024. As a result, we currently estimate it up to a 1% tax rate increase in 2024. In addition, the U.S. Treasury's current perspective on Pillar 2 will be harmful as it relates to the treatment of U.S. incentives for innovation and will result in U.S.-based multinational companies paying more tax revenue to foreign governments. Regarding share count given the Kenvue separation, the full benefit of the approximately 191 million net share reduction in Johnson & Johnson shares outstanding from the exchange offer will be reflected in our 2024 financials. And finally, while we don't speculate on future currency impact, utilizing the current euro spot rate would yield an approximate $0.15 negative currency impact on 2024 full-year adjusted earnings per share. We are pleased with our strong performance during the first nine months of this year and have positive momentum as we move into 2024. We look forward to sharing more about the strength of our business, promise of our innovative medicine and MedTech pipelines, and the long-term strategy of Johnson & Johnson at our upcoming Enterprise Business Review on December 5th at the New York Stock Exchange. More information, including an overview of the day's schedule, will be shared shortly. We hope you will be able to join us either in person or on the available webcast. I want to conclude my remarks by thanking our teams around the world for their continued hard work and unwavering commitment to excellence on behalf of our patients. We are confident that our strategy will position us to deliver long-term growth and create significant value for our shareholders. With that, it's my pleasure to turn to Kevin and begin the Q&A portion of the call.","evidence_gemma_new":"Free cash flow $12 billion","evidence_llama_3_3":"free cash flow year-to-date","evidence_qwen_3_30b":"Free cash flow year-to-date third quarter","gemma_new_max":12000000000.0,"gemma_new_min":12000000000.0,"llama_3_3_max":12000000000.0,"llama_3_3_min":12000000000.0,"qwen_3_30b_max":12000000000.0,"qwen_3_30b_min":12000000000.0}
{"symbol":"JNJ","year":2024,"quarter":1,"date":"2024-Q1","chunk_id":2,"sub_chunk_id":0,"centroid_label":"free cash flow","agreed_value":3000000000.0,"count":2,"chunk":"Joseph J. Wolk: Thank you, Jessica. Hello, everyone. As you just heard, we are off to a solid financial start in 2024, complemented by sustained momentum within our Innovative Medicine and MedTech pipelines, marked by significant regulatory and clinical milestones. Before we delve into segment highlights from the quarter, I want to touch upon some important announcements that we made that will further enhance our competitive positioning. Earlier this month, we announced a definitive agreement to acquire Shockwave Medical. Johnson & Johnson has a long history of addressing cardiovascular disease through both our Innovative Medicine and MedTech businesses. The acquisition of Shockwave with its leading intravascular lithotripsy or IVL technology will provide us with a unique opportunity to impact coronary artery and peripheral artery disease, two of the highest growth innovation oriented segments within cardiovascular intervention. This addition is not only adjacent to our other cardiovascular businesses but also consistent with our strategy of becoming a best-in-class MedTech company. During the first quarter, we also expanded our Innovative Medicine portfolio with the completion of the Ambrx acquisition. With its promising pipeline and ADC platform, Ambrx will further strengthen our oncology portfolio and ability to deliver enhanced precision biologics that treat cancer. Now I'll move to segment highlights from the quarter. As Jessica previously shared, our growth in Innovative Medicine continues to be driven by momentum from key brands and the adoption of new products. During the quarter, we hit several regulatory and clinical targets that are key to delivering longer-term growth. Starting with oncology, in multiple myeloma, we received FDA approval and a positive CHMP opinion for CARVYKTI for patients who have received at least one prior therapy, making it the only BCMA targeting treatment available for patients in the second-line setting. We also received biweekly dosing approval from the FDA for TECVAYLI, the only approved BCMA targeting bispecific antibody that provides patients with dosing flexibility. And finally, we submitted an application to the EMA for regulatory approval for DARZALEX-based quadruplet therapy and were granted U.S. priority review by the FDA. In addition, we made significant steps forward in the treatment of patients with EGFR-mutated non-small cell lung cancer. During the quarter, we received FDA approval for RYBREVANT in combination with chemotherapy for the first-line treatment of patients with locally advanced or metastatic non-small cell lung cancer with EGFR Exon 20 Insertion Mutations. The approval was based on data from the Phase III PAPILLON Study. We also received priority review from the FDA and submitted a filing to the EMA for RYBREVANT in combination with lazertinib as a first-line treatment option for adult patients with locally advanced or metastatic EGFR mutation non-small cell lung cancer. The priority review and filing to the EMA are supported by data from the landmark Phase 3 Mariposa Study. Turning to our immunology portfolio, we submitted a supplemental Biologics License Application to the FDA seeking approval for TREMFYA in the treatment of adults with moderate to severe ulcerative colitis. We are looking forward to presenting data from the Phase 3 QUASAR Study evaluating TREMFYA in patients with ulcerative colitis at Digestive Disease Week in May. We also significantly advanced our pipeline with important data readouts including positive top-line results from the Frontier 2 study demonstrating JNJ2113 as the first and only investigational targeted oral peptide that maintains skin clearance in moderate to severe plaque psoriasis through one year. Nipocalimab also delivered positive topline results in Phase 2 and Phase 3 studies in adults with Sj\u00f6gren\u2019s Disease and Myasthenia Gravis, respectively. We also received FDA breakthrough designation in the treatment of HDFN, hemolytic disease of the fetus and newborn, and fast-track designation for FNAIT, a rare and potentially fatal blood disorder in infants. Looking ahead, we expect upcoming data readouts for ERLEADA in localized prostate cancer as well as aticaprant and seltorexant in major depressive disorder. We also expect Phase 2 results for our combination therapy JNJ4804 in psoriatic arthritis as well as pivotal data from TAR-200 in non-muscle invasive bladder cancer which will be presented at the American Urological Association Annual Meeting in May. Lastly, we're excited to present our Phase 3 TREMFYA Crohn's disease data as well as our Sub-Q data for RYBREVANT at upcoming medical meetings. In MedTech, notable highlights in the first quarter includes significant advancements across our cardiovascular portfolio. In Pulsed Field Ablation, we received CE Mark approval for VARIPULSE based on the 12-month INSPIRE Study which demonstrated 80% of patients achieved freedom from recurrence and zero primary adverse events. We filed for U.S. approval of VARIPULSE based on the ADMIRE Study which showed all pilot phase patients achieved acute success and 80% remaining free from atrial arrhythmia recurrence after one year. We also submitted a CE Mark filing for our Dual Energy Smart Touch SF Catheter, which will provide physicians the optionality for RF and PFA energy sources in one catheter. We began enrollment of patients in a pivotal trial evaluating Laminar's left atrial appendage elimination device to reduce the risk of stroke in patients with non-valvular atrial fibrillation and the late-breaking DanGer Shock Study presented at the American College of Cardiology Conference and simultaneously published in the New England Journal of Medicine, confirmed routine use of Abiomed\u2019s Impella CP in patients who have had a heart attack with STEMI cardiogenic shock reduced 180-day mortality by 12.7%. In vision we launched TECNIS PURE C, a next-generation presbyopia-correcting lens for cataract patients in EMEA. We also presented new data for our presbyope correcting IOL, TECNIS Odyssey at the 2024 American Society of Cataract and Refractive Surgery in April. Looking ahead, we will continue to advance our electrophysiology pipeline with the full U.S. market release of the QDOT microcatheter, the U.S. commercial launch of Abiomed Impella RP Flex with SmartAssist as well as the submission of Impella ECP. Within our robotic surgery pipeline, we are on track to submit an investigational device exemption to the FDA for Otava [ph] in the second half of 2024. Turning to financials, starting with cash and capital allocation. We ended the first quarter with $26.2 billion of cash and marketable securities and $33.6 billion of debt for a net debt position of $7.4 billion. We are pleased with our free cash flow generation in the first quarter of approximately $3 billion. This was above the first quarter of 2023, which included the consumer health business cash flow. Also in the first quarter of 2024, we incurred elevated payment levels made in furtherance of achieving a responsible, final, and comprehensive resolution of the talc litigation. We continue to maintain a healthy balance sheet and strong credit rating, underscoring the strength of Johnson & Johnson's financial position and ability to execute against our capital allocation priorities. Innovation continues to be a main priority for the company, as demonstrated by our industry-leading R&D spend. During the first quarter, we invested more than $3.5 billion in research and development or 16.6% of sales. We also remain committed to returning capital directly to shareholders through our dividend. We appreciate the value our investors place on the dividend, and we were pleased to announce this morning that our Board of Directors has authorized a 4.2% increase marking our 62nd consecutive year of dividend increases. As we stated previously, we are disciplined in our approach to inorganic growth and prioritize acquisitions that strategically fit and present meaningful long-term growth opportunities. This is evidenced by the pending transaction in which we are adding a profitable commercialized portfolio of Shockwave Technologies in high-growth markets as well as a robust pipeline. I'll now discuss our full year 2024 guidance, which excludes the recently announced acquisition of Shockwave. As previously communicated, we assume the closing of the transaction will take place by midyear 2024 at which time we will update our guidance to reflect the expected dilution to adjusted earnings per share in 2024 of approximately $0.10 per share driven by financing costs. Based on the results delivered in the first quarter, we are tightening our ranges and increasing the midpoint for our full year operational sales and adjusted operational EPS guidance. As such, we expect operational sales growth for the full year to be in the range of 5.5% to 6.0% or $88.7 billion to $89.1 billion increasing the midpoint by $300 million or 0.3%. As a reminder, our sales guidance continues to exclude any impact from COVID-19 vaccine sales. As you know, we don't speculate on future currency movements. Last quarter, we utilized the Euro spot rate relative to the U.S. dollar of 1.09. As of last week, the Euro spot rate was 1.08, a modest strengthening of the U.S. dollar also experienced by a handful of other currencies. As a result, we now estimate a negative full year foreign currency impact of $700 million resulting in an estimated reported sales growth between 4.7% to 5.2% compared to 2023 with a midpoint of $88.2 billion or 5% at the midpoint, consistent with last quarter's guidance. We are maintaining other elements of our guidance provided on January's earnings call, with the exception of two items, we are increasing interest income to a range of $550 million to $650 million. We are also tightening the range of our adjusted operational earnings per share guidance from $10.60 to $10.75, increasing the midpoint by $0.03 to $10.68, reflecting year-on-year growth of 7.7%. While not predicting the impact of currency movements, utilizing the recent exchange rates I previously referenced, our reported adjusted earnings per share for the year estimates a negative foreign exchange impact of $0.03 per share. As a result, the reported adjusted earnings per share remains unchanged at $10.65, reflecting 7.4% growth versus 2023. While we do not provide guidance by segment or on a quarterly basis, we continue to expect that the same qualitative considerations provided during January's earnings call to remain intact. We anticipate Innovative Medicine sales growth to be slightly stronger in the first half of the year compared to the second half given the anticipated entry of STELARA Biosimilars in Europe midyear. For MedTech we expect operational sales growth to be relatively consistent throughout the year. Looking ahead, we have many important catalysts in the pipeline that will drive meaningful near and long-term growth across both Innovative Medicine and MedTech. We look forward to advancing our pipelines in both segments to deliver innovative treatments, solving some of the most complex health challenges. This wouldn't be possible without our employees around the world, so it's only appropriate before turning to your questions that we recognize and thank our colleagues for their continued hard work, commitment, and dedication to patients. I'm pleased to be joined by Joaquin, Jennifer, John and Tim for the Q&A and kindly ask Kevin to provide instructions to initiate that portion of the call.","evidence_gemma_new":"free cash flow","evidence_llama_3_3":null,"evidence_qwen_3_30b":"free cash flow generation first quarter approximately $3 billion","gemma_new_max":3000000000.0,"gemma_new_min":3000000000.0,"llama_3_3_max":null,"llama_3_3_min":null,"qwen_3_30b_max":3000000000.0,"qwen_3_30b_min":3000000000.0}
{"symbol":"JNJ","year":2024,"quarter":3,"date":"2024-Q3","chunk_id":4,"sub_chunk_id":0,"centroid_label":"free cash flow","agreed_value":14000000000.0,"count":2,"chunk":"Joe Wolk: Thank you, Jessica. In the third quarter, Johnson & Johnson delivered results that illustrate not only the breadth of the business, but our ability to consistently beat financial expectations. Innovative Medicine continued to build on strong first-half revenue momentum. We are advancing our pharmaceutical pipeline, achieving significant clinical and regulatory milestones across key therapeutic areas. Our MedTech business, with the addition of Shockwave, delivered operational growth of 6.4% in the quarter, but did experience headwinds in the Asia Pacific region. We continue to fortify our future advancing the OTTAVA robotic surgery system to IDE, expanding VELYS use and launching new intraocular lenses. Due to dynamics in the Asia Pacific region, specifically in China, we are taking a responsibly conservative approach by assuming no material improvement in that part of the business for the remainder of this year. And as such, we expect MedTech adjusted operational sales growth for the full year 2024 to be closer to 5% versus the 6% we referenced last quarter. The strength of a diversified business enables us to more than offset volatility in one part of our business, but yet be in a position to once again increase 2024 guidance for the enterprise. Before diving into the results, I'll take a moment to touch on some enterprise-wide updates from the quarter. We are making progress towards resolving talc litigation. Our pre-packaged bankruptcy plan received overwhelming support from the current claimants of roughly 83% as well as the future claimants representative. As announced last Thursday, the case will be heard in the Texas Bankruptcy Court. And while we remain committed to bringing this matter to a resolution, it would be premature to speculate on timing. In addition to the pipeline highlights Joaquin mentioned, there are some additional notable advancements throughout the quarter. In oncology, we received U.S. and EU regulatory approval for RYBREVANT in combination with chemotherapy as a second line treatment for adults with advanced EGFR-mutated non-small cell lung cancer. With FDA priority review underway for a subcutaneous formulation of RYBREVANT, along with data supporting a treatment regimen to reduce adverse events, we are building a best-in-class EGFR portfolio. We also presented Phase 1 data for RYBREVANT with chemotherapy in metastatic colorectal cancer patients, extending the asset's potential beyond lung cancer. In multiple myeloma, we advanced our leadership position with FDA approval and filing of two DARZALEX FASPRO quad-based regimens for newly diagnosed patients. With CARVYKTI, we announced three-year follow-up data showing significantly extended overall survival and gained approval for commercial production at our Ghent facility, further expanding supply capacity. Finally, in oncology, we added to the growing evidence base for our TARIS platform with positive Phase 2b data in patients with high-risk non-muscle invasive bladder cancer and positive interim to Phase 2 data in patients with muscle invasive bladder cancer. In neuroscience, we submitted to the U.S. and European regulatory bodies for what would be the first global approval of nipocalimab for the treatment of people living with generalized myasthenia gravis. For the remainder of the year, we expect approval of TREMFYA subcu for Crohn's disease and data readouts on JNJ-2113, our targeted oral peptide for psoriasis and ulcerative colitis, JNJ-4804, our co-antibody therapeutic for inflammatory bowel disease, aticaprant for adjunctive major depressive disorder and nipocalimab for rheumatoid arthritis. In MedTech, we completed enrollment of the Omny-IRE clinical trial to evaluate safety and effectiveness in mapping and treating symptomatic paroxysmal atrial fibrillation during standard ablation procedures. Also in Cardiovascular, we are preparing for the anticipated approval of VARIPULSE in the U.S. and the submission of Impella ECP for regulatory approval. In Orthopaedics, we launched several exciting new products in the U.S., including our VELYS SPINE robot and VOLT Plating System. The plentiful pipeline progress across our businesses will ensure continued success. Let's now turn to cash and capital allocation. Free cash flow year-to-date was approximately $14 billion compared to $12 billion last year, which included eight months contribution from the Consumer Health business. We ended the third quarter with $20 billion of cash and marketable securities and $36 billion of debt for a net debt position of approximately $16 billion. Our capital allocation priorities remain unchanged. Our strong balance sheet enables us to strategically invest to grow our business while simultaneously returning capital to our shareholders. Innovation remains core to our strategy. During the quarter, we invested nearly $5 billion in research and development. This is an increase over 2023 levels even after excluding acquired in-process R&D expense. Thus far in 2024, Johnson & Johnson has deployed approximately $18 billion for strategic acquisitions and licensing agreements, which includes the recent acquisition of V-Wave, another innovative treatment in heart failure, which closed last week. Turning to our full-year 2024 guidance. Excluding the impact from acquisitions and divestitures, we are increasing our adjusted operational sales guidance. We now expect growth in the range of 5.7% to 6.2% with a midpoint of 6%. We are also increasing operational sales growth by $200 million to a range of 6.3% to 6.8% with a midpoint of $89.6 billion or 6.6%. As you know, we don't speculate on future currency movements. For today's call, we are utilizing a euro spot rate relative to the U.S. dollar of $1.10, slightly above last quarter's guidance. This results in an estimated incremental positive foreign currency impact of $200 million, reducing our previous full-year negative impact to $1 billion. As such, we expect reported sales growth between 5.1% to 5.6% with a midpoint of $88.6 billion or 5.4%. Regarding the rest of the P&L, with the addition of the V-Wave transaction, we now anticipate our 2024 adjusted pre-tax operating margin to decline by approximately 200 basis points. Excluding the impact of asset acquisition accounting and related R&D investment, we would be on track to improve operating margins by 50 basis points, which is consistent with what we guided to at the beginning of the year. As we strive to advance and accelerate our pipeline, you can anticipate elevated levels of investment in the fourth quarter. Net interest income is now projected to be between $450 million and $550 million, $150 million greater than our previous guidance. Other income is anticipated to be in the range of $1.9 billion to $2.1 billion, an increase versus previous guidance, driven by the one-time monetization of royalty rights, which Jessica referenced, that will be utilized for that higher Q4 investment I referenced a moment ago. Our effective tax rate, consistent with previous guidance, is expected to be between 17.5% and 18.5% for the full year. Similar to last quarter, we have provided an EPS bridge to outline the impact from acquisition activity throughout the year. Before the impact of the V-Wave acquisition, our outlook for adjusted operational EPS performance is once again increasing. As the schedule reflects, we are expecting an incremental $0.10 per share increase on our operational performance for a total increase of $0.18 per share for the year. On this basis, when excluding acquisition activity throughout the year, EPS growth is 9.2%. To account for the completion of the V-Wave transaction, as previously disclosed, our adjusted operational EPS guidance now includes dilution of $0.24 per share in the fourth quarter and $0.06 per share in 2025. Combined, this yields an updated 2024 adjusted operational EPS guidance of $9.91 at the midpoint of the range, basically flat year-on-year despite absorbing approximately $0.92 of acquisition activity. While not predicting the impact of currency movements utilizing the recent exchange rates just referenced, our reported adjusted earnings per share for the year now estimates a full year positive impact of $0.02 per share. As such, we expect reported adjusted earnings per share of $9.93 at the midpoint. We are still finalizing our plans for next year, but let me provide you some preliminary qualitative commentary to inform your modeling for 2025. For Innovative Medicine, we remain very confident in our ability to deliver growth despite a significant LOE resulting in sales above the $57 billion commitment we stated in 2021. This will be driven by our end market brands and continued progress from our recently launched products, including TREMFYA in IBD and RYBREVANT in non-small cell lung cancer. Regarding the STELARA LOE, we are planning for biosimilar entries in the U.S. in January, assuming that HUMIRA's erosion curve is a relatively good proxy for your models. We continue to expect a negative impact associated with the Part D redesign. In our pipeline, we anticipate data readouts across all our priority platforms: anticipated approvals of TREMFYA subcu in Crohn's disease, RYBREVANT subcu for lung cancer and nipocalimab in generalized myasthenia gravis, as well as potential filings for TARIS in bladder cancer and aticaprant in major depressive disorder. As a reminder, TREMFYA, RYBREVANT and TARIS continue to be the three largest underappreciated assets in terms of our revenue projections versus what analysts are estimating for the back half of this decade. For MedTech, we continue to expect to deliver on our long-term objective identified at last year's Enterprise Business Review of growing operational sales in the upper end of the 2022 through 2027 weighted average market growth rate of 5% to 7%. We also expect continued adoption of newer products across all MedTech businesses, such as VARIPULSE in electrophysiology, VELYS enabling technology across Orthopaedics, Odyssey and PureSee in Surgical Vision and contributions from our Abiomed and Shockwave integration. Specific to volume-based pricing in China, we expect continued impacts from the rollout of the 2024 tenders in Orthopaedics sports and intraocular lenses and anticipate VBP to continue expanding across provinces and products. Moving to the rest of the P&L. When thinking about operating margin, there are pluses and minuses. Tailwinds include an anticipated reduction of acquired IPR&D expense year-over-year, continued focus on MedTech margin improvement and continued OpEx optimization benefits post the separation. Working against us is unfavorable product mix driven by STELARA biosimilar entrants and Part D redesign. With a brief look at your models last week, the consensus margin does not appear unreasonable, and we'll provide further clarity in January once we complete our 2025 plan. We do not expect to maintain the heightened levels of interest income due to a reduction in interest rates and impact from debt experienced in 2024 related to acquisition activity. Regarding other income and expense, we expect lower net other income due to the non-recurring nature of the monetization of royalty rights experienced in Q3, a lower benefit related to employee benefit programs based on discount rate assumptions, as well as income lost on the Kenvue dividend. Lastly, based on what we know today, under current tax law, we anticipate our 2025 tax rate to be slightly lower than our anticipated 2024 tax rate. To wrap up prior to Q&A, we are pleased with our underlying 2024 performance that simultaneously fortified a strong foundation for continued success heading into 2025. With that, I'll now turn it over to Kevin to open the call for your questions.","evidence_gemma_new":null,"evidence_llama_3_3":"free cash flow year-to-date","evidence_qwen_3_30b":"free cash flow year-to-date","gemma_new_max":null,"gemma_new_min":null,"llama_3_3_max":14000000000.0,"llama_3_3_min":14000000000.0,"qwen_3_30b_max":14000000000.0,"qwen_3_30b_min":14000000000.0}
{"symbol":"JNJ","year":2023,"quarter":3,"date":"2023-Q3","chunk_id":1,"sub_chunk_id":0,"centroid_label":"innovative medicine sales growth","agreed_value":13900000000.0,"count":2,"chunk":"Jessica Moore: Good morning. This is Jessica Moore, Vice President of Investor Relations for Johnson & Johnson. Welcome to our company's review of the 2023 third quarter business results and full-year financial outlook. A few logistics before we get into the details. As a reminder, you can find additional materials, including today's presentation and associated schedules, on the Investor Relations section of the Johnson & Johnson website at investor.jnj.com. Please note that this presentation contains forward-looking statements regarding, among other things, the company's future operating and financial performance, market position and business strategy. You are cautioned not to rely on these forward-looking statements, which are based on current expectations of future events using the information available as of the date of this recording and are subject to certain risk and uncertainties that may cause the company's actual results to differ materially from those projected. A description of these risks, uncertainties and other factors can be found in our SEC filings, including our 2022 Form 10-K, which is available at investor.jnj.com and on the SECs website. Additionally, several of the products and compounds discussed today are being developed in collaboration with strategic partners or licensed from other companies. This slide acknowledges those relationships. Moving to today's agenda. I will start by reviewing the third quarter sales and P&L results for the corporation and highlights related to our two businesses. Joe Wolk, our CFO will then provide additional business and financial commentary before sharing an overview of our cash position, capital allocation priorities, and updated guidance for 2023. The remaining time will be available for your questions. Joaquin Duato, our chairman and CEO; John Reed, and Ahmet Tezel, our Innovative Medicine and MedTech R&D leaders, as well as Erik Haas, our VP of Litigation, will be joining us for Q&A. To ensure we provide enough time to address your questions, we anticipate the webcast will last approximately 60 minutes. As a reminder, on August 23, 2023, Johnson & Johnson announced the final results of the exchange offer and completion of the separation of Kenvue Inc. Unless otherwise stated, the financial results and guidance highlighted today reflect the continuing operations of Johnson & Johnson. We will report the consumer health financial results as discontinued operations. Additionally, going forward, the pharmaceutical segment will be referred to as innovative medicine. Starting with Q3 2023 sales results. Worldwide sales were $21.4 billion for the third quarter of 2023, an increase of 6.8% versus the third quarter of 2022. Operational sales growth, which excludes the effect of translational currency, increased 6.4% as currency had a positive impact of 0.4 points. In the U.S., sales increased 11.1%. In regions outside the U.S., our reported growth was 1.6%. Operational sales growth outside the U.S. was 0.7% with currency positively impacting our reported OUS results by 0.9 points. It is important to note that operational sales in Europe were negatively impacted by the COVID-19 vaccine and loss of exclusivity of ZYTIGA. Excluding the net impact of acquisition and divestitures, adjusted operational sales growth was 4.9% worldwide, 8.9% in the U.S., and 0.3% outside the U.S. Turning now to earnings. For the quarter, net earnings were $4.3 billion and diluted earnings per share was $1.69 versus diluted earnings per share of $1.62 a year ago. Excluding after-tax and tangible asset amortization expense and special items for both periods, adjusted net earnings for the quarter were $6.8 billion and adjusted diluted earnings per share was $2.66, representing increases of 14.1% and 19.3% respectively, compared to the third quarter of 2022. On an operational basis, adjusted diluted earnings per share increased 13.9%. I will now comment on business sales performance. Unless otherwise stated percentages quoted represent the operational sales change in comparison to the third quarter of 2022 and therefore exclude the impact of currency translation. Beginning with innovative medicine. Worldwide innovative medicine sales of $13.9 billion, increased 5.1% with growth of 10.9% in the U.S. and a decline of 2.3% outside of the U.S. Operational sales growth increased 4.3% as currency had a positive impact of 0.8 points. Excluding COVID-19 vaccine sales, worldwide operational sales growth was 8.2%, with growth of 10.9% in the U.S. and growth of 4.3% outside of the U.S. Sales outside the U.S., excluding the COVID-19 vaccine, were negatively impacted by approximately 500 basis points, due to the loss of exclusivity of ZYTIGA in Europe. Innovative medicine growth was driven by our key brands and continued uptake from a recently launched products with 11 assets delivering double-digit growth. We continue to drive strong sales growth for both DARZALEX and ERLEADA with increases of 20.7% and 27% respectively, due to continued share gains and market growth. Within immunology, we saw growth in STELARA and TREMFYA, with increases of 15.8% and 21.5% respectively. This growth was predominantly driven by favorable patient mix and market growth. Turning to newly launched products, we continue to make progress on our launches of CARVYKTI and SPRAVATO. We are also encouraged by the early success of our launches of TECVAYLI and TALVEY, sales of which are driving the growth and other oncology. We expect to begin disclosing TECVAYLI sales in Q1 2024. Total innovative medicine sales growth was partially offset by the loss of exclusivity of ZYTIGA and REMICADE, along with a decrease in IMBRUVICA sales, due to competitive pressures. I'll now turn your attention to MedTech. Worldwide MedTech sales of $7.5 billion increased 10% with growth of 11.6% in the U.S., and 8.3% outside of the U.S. Operational sales growth increased 10.4% as currency had a negative impact of 0.4 points. Abiomed contributed 4.6% to operational growth, excluding the impact of acquisition and divestitures, worldwide adjusted operational sales growth was 6%. On a pro forma basis, utilizing sales in the prior year from Abiomed as a standalone company, MedTech's growth for the quarter would be 6.4%. MedTech was negatively impacted across all platforms by international sanctions in Russia worth approximately 60 basis points in volume-based procurement in China, primarily in five MedTech platforms: Spine, Trauma, Endocutters, Energy, and Electrophysiology. As communicated last quarter, we saw the return to more normalized seasonality with moderate deceleration in the third quarter. The Interventional Solutions franchise delivered operational growth of 48.1%, which includes $311 million related to Abiomed. This reflects growth in Abiomed patient procedures in the high-teens and continued strong adoption of Impella 5.5 technology in surgery. Electrophysiology is a major contributor to this growth with a double-digit increase of 20.3%. This reflects strong growth in all regions, including Europe, driven by our global market leading portfolio, including the most recently launched QDOT RF ablation and OPTRELL Mapping Catheters. Operational growth of 3.2% in surgery was driven primarily by procedure recovery and strength of our biosurgery and wound closure portfolios. Growth was partially offset by the impacts of volume-based procurement in China and supply challenges. Global growth of 5.4% in vision was driven by price actions and contact lenses and other, as well as strength of new products including ACUVUE OASYS 1-Day family of products and contact lenses and TECNIS Eyhance, our monofocal interocular lens and surgical vision. Growth of contact lenses was partially offset by strategic portfolio choices and supply challenges, although these continue to improve. Global vision growth was negatively impacted by 100 basis points, due to the Blink divestiture. Orthopedics operational growth of 2.6% reflects procedure growth, success of recently launched products, such as the global expansion of our VELYS digital solutions, and expansion in ambulatory surgical centers, partially offset by the impacts of volume-based procurement in China in Spine and Trauma. Now turning to our consolidated statement of earnings for the third quarter of 2023, I'd like to highlight a few noteworthy items that have changed, compared to the same quarter of last year. Cost of product sold margin was flat due to favorable patient mix and lower COVID-19 vaccine supply network related exit costs in the innovative medicine business, partially offset by commodity inflation, unfavorable product mix, and restructuring related to excess inventory costs in the MedTech business. Selling, marketing, and administrative margins deleveraged 40 basis points, driven by increased expenses across the enterprise. We continue to invest strategically in research and development at competitive levels, investing $3.4 billion or 16.2% of sales this quarter. R&D was leveraged by 120 basis points, primarily driven by portfolio prioritization, partially offset by higher milestone payments in the innovative medicine business. Additionally, IPR&D impairments were $206 million in the third quarter of 2023. Interest income was $182 million in the third quarter of 2023, as compared to $99 million of income in the third quarter of 2022. The increase in income was driven by higher interest rates earned on cash balances, partially offset by higher interest rates on debt balances. The other income and expense line was an expense of $499 million in the third quarter of 2023, compared to an expense of $226 million in the third quarter of 2022. This was primarily driven by higher unrealized mark-to-market losses on public securities partially offset by the lower COVID-19 vaccine-related exit costs and lower litigation expense. Restructuring in the third quarter was $158 million, primarily related to the innovative medicine restructuring program announced in the first quarter. Regarding taxes in the quarter, our effective tax rate was 17.4% versus 16.7% in the same period last year. This increase was primarily driven by a non-deductible, non-recurring pre-tax charge that occurred in the current quarter. Excluding special items, the effective tax rate was 15.6% versus 15.9% in the same period last year. As a result of the completion of the exchange offer, Johnson & Johnson is presenting the consumer health business financial results as discontinuing operations, including a gain of approximately $21 billion. I encourage you to review our upcoming third quarter 10-Q filing for additional details on specific tax and separation-related matters. Lastly, I'll direct your attention to the box section of the slide where we have also provided our income before tax, net earnings, and earnings per share adjusted to exclude the impact of intangible amortization expense and special items. Now let's look at adjusted income before tax by segment. In the third quarter of 2023, our adjusted income before tax for the enterprise as a percentage of sales increased from 35.3% to 37.6%, primarily driven by favorable patient mix and innovative medicine, partially offset by unfavorable product mix and commodity inflation in MedTech. Innovative medicine margins improved from 41.4% to 45.4%, primarily driven by favorable patient mix and R&D portfolio prioritization. MedTech margins declined from 25% to 24.7%, primarily driven by commodity inflation and unfavorable product mix partially offset by a divestiture gain. This concludes the sales and earnings portion of the Johnson & Johnson third quarter results. I'm now pleased to turn the call over to Joe Wolk. Joe?","evidence_gemma_new":"innovative medicine Worldwide innovative medicine sales","evidence_llama_3_3":null,"evidence_qwen_3_30b":"worldwide innovative medicine sales","gemma_new_max":13900000000.0,"gemma_new_min":13900000000.0,"llama_3_3_max":null,"llama_3_3_min":null,"qwen_3_30b_max":13900000000.0,"qwen_3_30b_min":13900000000.0}
{"symbol":"JNJ","year":2023,"quarter":4,"date":"2023-Q4","chunk_id":3,"sub_chunk_id":0,"centroid_label":"innovative medicine sales growth","agreed_value":13700000000.0,"count":3,"chunk":"Jessica Moore: Thanks, Joaquin. Unless otherwise stated, the financial results and guidance highlighted reflects the continuing operations of Johnson & Johnson. We will report the consumer health financial results as discontinued operations. Furthermore, the percentages quoted represent operational results and therefore, exclude the impact of currency translation. Starting with Q4 2023 sales results. Worldwide sales were $21.4 billion for the fourth quarter of 2023. Sales increased 7.2%, with 11% in the U.S. and 2.7% outside of the U.S. Excluding the net impact of acquisitions and divestitures, adjusted operational sales growth was 5.7% worldwide, 8.8% in the U.S. and 2.1% outside the U.S. It is important to note that sales in Europe were negatively impacted by the COVID-19 vaccine and loss of exclusivity of ZYTIGA by approximately 1,500 basis points operationally. Turning now to earnings. For the quarter, net earnings were $4.1 billion, and diluted earnings per share was $1.70 versus diluted earnings per share of $1.22 a year ago. Excluding after-tax intangible asset amortization expense and special items for both periods, adjusted net earnings for the quarter were $5.6 billion and the diluted earnings per share was $2.29, representing increases of 2.4% and 11.7%, respectively, compared to the fourth quarter of 2022. On an operational basis, adjusted diluted earnings per share increased 11.2%. For the full year 2023, sales were $85.2 billion. Sales grew 7.4%, with 10.6% in the U.S. and 3.8% outside of the U.S. Excluding the net impact of acquisitions and divestitures, adjusted operational sales growth was 5.9% worldwide, 8.2% in the U.S. and 3.4% outside the U.S. Sales in Europe were negatively impacted by the COVID-19 vaccine and loss of exclusivity of ZYTIGA by approximately 1,000 basis points operationally. Net earnings for the full year 2023 were $13.3 billion and diluted earnings per share was $5.20 versus diluted earnings per share of $6.14 a year ago. Full year 2023 adjusted net earnings were $25.4 billion, and adjusted diluted earnings per share was $9.92, representing increases of 6.8% and 11.1%, respectively, versus full year 2022. On an operational basis, adjusted diluted earnings per share increased by 10.8%. I will now comment on business sales performance in the quarter. Beginning with Innovative Medicine. Worldwide Innovative Medicine sales of $13.7 billion increased 4% with growth of 9.5% in the U.S. and a decline of 3.1% outside of the U.S. Excluding COVID-19 vaccine sales, worldwide and U.S. sales growth was 9.5%, and growth outside of the U.S. was 9.4%. Sales outside the U.S., excluding the COVID-19 vaccine were negatively impacted by approximately 120 basis points due to the loss of exclusivity of ZYTIGA in Europe. Innovative Medicine growth was driven by our key brands and continued uptake from recently launched products, with nine assets delivering double-digit growth. We continue to drive strong sales growth for both DARZALEX and ERLEADA, with increases of 22.2% and 19%, respectively. Within immunology, we saw sales growth in both STELARA and TREMFYA, with increases of 14.5% and 20.5%, respectively. This growth was driven by market growth and share gains as well as favorable patient mix in TREMFYA. Growth of 17.4% in pulmonary hypertension was driven by favorable patient mix, share gains and market growth. Turning to newly launched products. We continue to make progress on our launches of CARVYKTI and SPRAVATO. We are also encouraged by the early success of our launches of TECVAYLI and TALVEY, sales of which are driving the growth in other Oncology. As a reminder, we expect to begin disclosing TECVAYLI sales in Q1 2024. Total Innovative Medicine sales growth was partially offset by unfavorable patient mix in XARELTO, a decrease in IMBRUVICA sales due to competitive pressures and a loss of exclusivity of ZYTIGA, REMICADE and PREZISTA. I'll now turn your attention to MedTech. Worldwide MedTech sales of $7.7 billion increased 13.4% with Abiomed contributing 4.5% to growth. Growth in the U.S. was 14.1% and 12.8% outside of the U.S. Excluding the impact of acquisitions and divestitures, worldwide adjusted operational sales growth was 9.1%. MedTech was negatively impacted by international sanctions in Russia worth approximately 50 basis points, primarily in Advanced Surgery and Vision. Electrophysiology delivered double-digit growth of 25.2% with strong growth in all regions, including Europe. This growth was driven by our global market leading portfolio, including the most recently launched QDOT RF ablation and OCTARAY catheters. Abiomed contributed $340 million in sales within the quarter driven by continued strong adoption of Impella 5.5 technology. Growth of 6.4% in surgery was driven primarily by procedure recovery and strength of our biosurgery and wound closure portfolios. Growth was partially offset by volume based procurement in China, primarily in Endocutters. Orthopaedics growth of 5% reflects procedure growth, success of recently launched products such as the global expansion of our VELYS digital solutions and expansion in ambulatory surgical centers, as well as lapping of prior year China\u2019s VBP price concessions in Spine. Growth of 6.6% in Vision was driven by price actions and contact lenses, as well as strength of new products including ACUVUE OASYS 1-Day family of products and contact lenses and TECNIS EYHANCE, our monofocal interocular lens and surgical vision. Growth of contact lenses was partially offset by U.S. stocking dynamics. Global Vision growth was negatively impacted by 140 basis points due to the Blink divestiture in Q3. Now turning to our consolidated statement of earnings for the fourth quarter of 2023. I'd like to highlight a few noteworthy items that have changed compared to the same quarter of last year. Cost of products sold margin deleveraged by 130 basis points due to commodity inflation and unfavorable product mix in MedTech, partially offset by favorable patient mix and lower COVID-19 vaccine supply network related exit cost in Innovative Medicine. We continue to invest strategically in research and development at competitive levels, investing $4.5 billion or 20.9% of sales this quarter. We invested $3.4 billion or 24.5% of sales in Innovative Medicine with the increase in investment being driven by higher milestones, partially offset by portfolio prioritization. In MedTech, R&D investment was $1.1 billion or 14.6% of sales with the increase in investment primarily driven by the Laminar acquisition. Interest income was $212 million in the fourth quarter of 2023 as compared to $77 million of income in the fourth quarter of 2022. The increase in income was driven by higher interest rates earned on cash balances and a lower average debt balance. The other income and expense line was income of $421 million in the fourth quarter of 2023 compared to an expense of $795 million in the fourth quarter of 2022. This was primarily driven by higher unrealized gains on securities and lower (ph) COVID-19 vaccine-related exit costs. Regarding taxes in the quarter, our effective tax rate was 14.4% versus 16% in the same period last year. This decrease was primarily driven by the net decrease of tax liabilities, including the settlement of the 2013 through 2016 U.S. tax audit. Excluding special items, the effective tax rate was 10.8% versus 16.2% in the same period last year. I encourage you to review our upcoming 2023 10-K filing for additional details on specific tax-related matters. Lastly, I will direct your attention to the box section of the slide, where we have also provided our income before tax, net earnings and earnings per share adjusted to exclude the impact of intangible amortization expense and special items. Now let's look at adjusted income before tax by segment. In the fourth quarter of 2023, our adjusted income before tax for the enterprise as a percentage of sales decreased from 32.5% to 29.2%. Innovative Medicine margins declined from 37.7% to 37.4%, primarily driven by higher R&D milestones, partially offset by favorable patient mix and leveraging and selling and marketing expense. MedTech margins declined from 24.5% to 15.5% primarily driven by in-process research and development expense from the Laminar acquisition, commodity inflation and unfavorable product mix, partially offset by selling and marketing expense leverage. This concludes the sale and earnings portion of the call. I'm now pleased to turn it over to Joe.","evidence_gemma_new":"Innovative Medicine sales","evidence_llama_3_3":"Innovative Medicine sales","evidence_qwen_3_30b":"worldwide Innovative Medicine sales Q4 2023","gemma_new_max":13700000000.0,"gemma_new_min":13700000000.0,"llama_3_3_max":13700000000.0,"llama_3_3_min":13700000000.0,"qwen_3_30b_max":13700000000.0,"qwen_3_30b_min":13700000000.0}
{"symbol":"JNJ","year":2024,"quarter":1,"date":"2024-Q1","chunk_id":1,"sub_chunk_id":0,"centroid_label":"innovative medicine sales growth","agreed_value":13600000000.0,"count":3,"chunk":"Jessica Moore: Hello everyone. This is Jessica Moore, Vice President of Investor Relations for Johnson & Johnson. Welcome to our company's review of the first quarter business results and our full year financial outlook for 2024. A few logistics before we get into the details. As a reminder you can find additional materials including today\u2019s presentation and associated schedules on the Investor Relations section of the Johnson & Johnson website at investor.jnj.com. Please note that this presentation contains forward-looking statements regarding, among other things, the company's future operating and financial performance, market position and business strategy. You are cautioned not to rely on these forward-looking statements, which are based on the current expectations of future events using the information available as of the date of this recording, and are subject to certain risk and uncertainties that may cause the company's actual results to differ materially from those projected. A description of these risks, uncertainties and other factors can be found in our SEC filings, including our 2023 Form 10-K, which is available at investor.jnj.com and on the SECs website. Additionally, several of the products and compounds discussed today are being developed in collaboration with strategic partners or licensed from other companies. This slide acknowledges those relationships. Moving to today's agenda I will start by reviewing the first quarter sales and P&L results for the corporation as well as highlights related to our two businesses. Joe Wolk our CFO will then provide additional business and financial commentary before sharing an overview of our cash position, capital allocation priorities, and guidance for 2024. The remaining time will be available for your questions. Joaquin Duato our Chairman and CEO as well as Jennifer Taubert, John Reed, and Tim Schmid, our Innovative Medicine and MedTech leaders will be joining us for Q&A. To ensure we provide enough time to address your questions, we anticipate the webcast will last approximately 60 minutes. Unless otherwise stated the financial results and guidance highlighted today reflect the continuing operations of Johnson & Johnson. Furthermore, the percentages quoted represent operational results and therefore exclude the impact of currency translation. Turning to our first quarter sales results. Worldwide sales were $21.4 billion for the first quarter of 2024. Sales increased 3.9% with growth of 7.8% in the U.S. and a decline of 0.3% outside of the U.S. Excluding the impact of the COVID-19 vaccine, operational sales growth was 7.6% worldwide and 7.4% outside of the U.S. Sales growth in Europe excluding the COVID-19 vaccine was 6%. Turning now to earnings. For the quarter net earnings were $5.4 billion and diluted earnings per share was $2.20 versus basic loss per share of $0.19 a year ago. Excluding after tax intangible asset amortization expense and special items for both periods, adjusted net earnings for the quarter were $6.6 billion, and adjusted diluted earnings per share was $2.71, representing increases of 3.8% and 12.4%, respectively compared to the first quarter of 2023. On an operational basis, adjusted diluted earnings per share increased 12.8%. I will now comment on business sales performance in the quarter. Beginning with Innovative Medicine, worldwide Innovative Medicine sales of $13.6 billion increased 2.5%, with growth of 8.4% in the U.S. and a decline of 4% outside of the U.S. Excluding the impact of the COVID-19 vaccine, operational sales growth was 8.3%, both worldwide and outside of the U.S. Innovative Medicine growth was driven by our key brands and continued uptake from recently launched products, with nine assets delivering double-digit growth. We continued to drive strong sales growth across our multiple myeloma portfolio. DARZALEX growth was 21%, primarily driven by share gains of six points across all lines of therapy and ten points in the front line setting. As of this quarter, we are now disclosing TECVAYLI sales, which were previously reported in other oncology. Sales achieved $133 million in the quarter, compared to $63 million in the first quarter of last year, reflecting a strong launch in the relapsed refractory setting. CARVYKTI achieved sales of $157 million, compared to $72 million in the first quarter of last year, driven by continued capacity expansion, manufacturing efficiencies, and strong demand. While sequential growth was roughly flat due to phasing, we continued to anticipate quarter-over-quarter growth with acceleration in the back half of the year. Other oncology growth was driven by continuing strong uptake of TALVEY, our GPRC5D bispecific, and RYBREVANT our bispecific antibody for non-small cell lung cancer. Also in oncology, ERLEADA continues to deliver strong growth of 28.4%, primarily driven by share gains. Growth of 22.4% in pulmonary hypertension was driven by favorable patient mix, share gains, and market growth for both OPSUMIT and UPTRAVI. As a reminder, favorable patient mix was a driver in Q2 2023 through Q1 2024. Therefore, while we still anticipate growth, we expect to lap this dynamic beginning in Q2 2024. Within immunology, we saw sales growth in TREMFYA of 27.6%, driven by market growth and share gains. STELARA growth of 1.1% was driven by market growth and share gains in IBD, partially offset by unfavorable patient mix in the U.S. and as expected, share loss in PSO and PSA. We anticipate continued volume growth largely offset by price declines as we move towards biosimilar entry. In neuroscience SPRAVATO growth of 72% continues to be driven by share gains and additional market launches. Total Innovative Medicine sales growth was partially offset by unfavorable patient mix in XARELTO, which we anticipate continuing throughout the year, as well as a decrease in IMBRUVICA due to competitive pressures, partially offset by stocking dynamics in the U.S. Finally, it is worth noting distribution rights for REMICADE and SIMPONI in Europe will be returned in Q4. I'll now turn your attention to MedTech. Worldwide Med1ech sales of $7.8 billion increased 6.3%, with growth in the U.S. of 6.6% and 6.1% outside of the U.S. In the quarter, worldwide MedTech growth was negatively impacted by approximately 80 basis points due to fewer selling days, disproportionately impacting orthopedics. In cardiovascular previously referred to as Interventional Solutions, electrophysiology delivered double-digit growth of 25.9%, with strong growth in all regions. Performance was driven by global procedure growth, new product uptake, commercial execution, and a onetime inventory build in Asia-Pacific, impacting worldwide growth by approximately 370 basis points. In addition, Abiomed delivered growth of 15%, driven by continued strong adoption of Impella 5.5 and Impella RP technology. Orthopedics growth of 4.8% includes a onetime revenue recognition timing change related to certain products across all platforms in the U.S. positively impacting worldwide growth by approximately 300 basis points. As a reminder, orthopedics was over indexed by the impact of reduced selling days in the quarter. Strong performance in hips and knees was driven by procedure recovery, growth of new products, and commercial execution. While trauma and spine were negatively impacted by competitive pressures and core trauma was further impacted by weather related softness in the U.S. Growth of 1.9% in surgery was driven primarily by procedure recovery and strength of our bio surgery and wound closure portfolios, partially offset by competitive pressures in China volume based procurement and energy and endo cutters. Contact lenses declined 2.3%, driven by U.S. stocking dynamics, partially offset by strong performance in ACUVUE OASYS 1-day family of products. Worldwide growth was negatively impacted by 120 basis points due to the Blink divestiture in Q3 2023. Surgical Vision grew 1.1%, driven by CNIS EYHANCE, a monofocal intraocular lens partially offset by China's VBP. Now turning to our consolidated statement of earnings for the first quarter of 2024. I'd like to highlight a few noteworthy items that have changed compared to the same quarter of last year. Cost of product sold margin leveraged by 160 basis points, primarily driven by lower COVID-19 supply network related exit cost. Selling, marketing, and administrative margins deleveraged 110 basis points, driven primarily by timing of marketing investment in the Innovative Medicine business. We continued to invest strategically in research and development at competitive levels investing $3.5 billion, or 16.6% of sales this quarter. We invested $2.9 billion, or 21.4% of sales in Innovative Medicine, with the increase in investment being driven by continued pipeline progression. In MedTech, R&D investment was $0.6 billion, or 8.3% of sales, a slight decrease driven by phasing. Interest income was $209 million in the first quarter of 2024, as compared to $14 million of expense in the first quarter of 2023. The increase in income was driven by a lower average debt balance and higher interest rates earned on cash balances. Other income and expense was income of $322 million in the first quarter of 2024, compared to an expense of $6.9 billion in the first quarter of 2023. This change was primarily due to the $6.9 billion charge related to the talc settlement proposal recorded in the first quarter of 2023. Regarding taxes in the quarter, our effective tax rate was 16.9% versus 61.8% in the same period last year, which was primarily driven by the tax benefit on the talc settlement proposal recorded in the first quarter of 2023. Excluding special items, the effective tax rate was 16.5% versus 15.9% in the same period last year. I encourage you to review our upcoming first quarter 10-Q filing for additional details on specific tax related matters. Lastly, I'll direct your attention to the box section of the slide, where we have also provided our income before tax, net earnings, and earnings per share adjusted to exclude the impact of intangible amortization expense and special items. Now let's look at adjusted income before tax by segment. In the first quarter of 2024 our adjusted income before tax for the enterprise, as a percentage of sales increased from 36.1% to 36.8%, primarily driven by an increase in non-allocated interest income with both Innovative Medicine and MedTech margins remaining relatively flat year-over-year. When comparing against the fourth quarter and full year 2023, Innovative Medicine and MedTech adjusted income before tax margins have improved. This concludes the sales and earnings portion of the call. I am now pleased to turn it over to Joe.","evidence_gemma_new":"Innovative Medicine sales","evidence_llama_3_3":"Innovative Medicine sales first quarter of 2024","evidence_qwen_3_30b":"Innovative Medicine worldwide Innovative Medicine sales 2.5%","gemma_new_max":13600000000.0,"gemma_new_min":13600000000.0,"llama_3_3_max":13600000000.0,"llama_3_3_min":13600000000.0,"qwen_3_30b_max":13600000000.0,"qwen_3_30b_min":13600000000.0}
{"symbol":"JNJ","year":2024,"quarter":2,"date":"2024-Q2","chunk_id":1,"sub_chunk_id":0,"centroid_label":"innovative medicine sales growth","agreed_value":14500000000.0,"count":2,"chunk":"Jessica Moore: Hello, everyone. This is Jessica Moore, Vice President of Investor Relations for Johnson & Johnson. Welcome to our company's review of the second quarter business results and our full-year financial outlook for 2024. A few logistics before we get into the details. As a reminder you can find additional materials including today\u2019s presentation and associated schedules on the investor relations section of the Johnson & Johnson website at investor.jnj.com. Please note that this presentation contains forward-looking statements regarding among other things, the company\u2019s future operating and financial performance, market position, and business strategy. You are cautioned not to rely on these forward-looking statements, which are based on the current expectations of future events using the information available as of the date of this recording and are subject to certain risk and uncertainties that may cause the company's actual results to differ materially from those projected. A description of these risks, uncertainties, and other factors can be found in our SEC filings, including our 2023 Form 10-K, which is available at investor.jnj.com and on the SEC's website. Additionally, several of the products and compounds discussed today are being developed in collaboration with strategic partners or licensed from other companies. This slide acknowledges those relationships. Moving to today's agenda, I will start by reviewing the second quarter sales and P&L results for the corporation, as well as highlights related to our two businesses. Joe Wolk, our CFO, will then provide additional business and financial commentary before sharing an overview of our cash position, capital allocation priorities, and guidance for 2024. Joaquin Duato, our Chairman and CEO, will then provide some closing remarks before we open it up for questions. Jennifer Taubert, John Reed, and Tim Schmid, our innovative medicine and MedTech leaders will be joining us for Q&A. To ensure we provide enough time to address your questions, we anticipate the webcast will last approximately 60 minutes. Unless otherwise stated, the financial results and guidance highlighted today reflect the continuing operations of Johnson & Johnson. Furthermore, the percentages quoted represent operational results and therefore exclude the impact of currency translation. Turning to our second quarter sales results. Worldwide sales were $22.4 billion for the second quarter of 2024. Sales increased 6.6%, with growth of 7.8% in the U.S. and 5.1% outside of the U.S. Excluding the impact of the COVID-19 vaccine, sales growth was 7.2% worldwide and growth of 6.4% outside of the U.S. Sales growth in Europe, excluding the COVID-19 vaccine was 6%. Turning now to earnings. For the quarter, net earnings were $4.7 billion and diluted earnings per share was $1.93 versus diluted earnings per share of $2.05 a year ago. Excluding after-tax intangible asset amortization expense and special items for both periods, adjusted net earnings for the quarter were $6.8 billion and adjusted diluted earnings per share was $2.82, representing increases of 1.6% and 10.2%, respectively, compared to the second quarter of 2023. I'll now comment on business sales performance in the quarter. Beginning with Innovative Medicine, worldwide Innovative Medicine sales of $14.5 billion increased 7.8%, with growth of 8.9% in the U.S. and 6.4% outside of the U.S. Excluding the impact of the COVID-19 vaccine, operational sales growth was 8.8% worldwide and 8.7% outside of the U.S. Innovative Medicine growth was driven by our key brands and continued uptake from recently launched products with 10 assets delivering double-digit growth. We continue to drive strong sales growth across our multiple myeloma portfolio. DARZALEX growth was 21.3%, primarily driven by share gains of 4.6 points across all lines of therapy and 9.4 points in the frontline setting, as well as market growth. CARVYKTI achieved sales of $186 million, with growth of 59.9%, driven by continued capacity expansion, manufacturing efficiencies, and strong demand. TECVAYLI sales achieved $135 million in the quarter, with growth of 43.5%, reflecting a strong launch in the relapsed-refractory setting. Demand remained strong while sequential growth slowed due to adoption of recently approved longer-duration dosing intervals. ERLEADA continues to deliver strong growth of 32.5%, primarily driven by share gains and market growth in metastatic castrate-sensitive prostate cancer. Other oncology growth was driven by continued strong uptake of TALVEY, our GPRC5D bispecific, and RYBREVANT, our bispecific antibody for non-small cell lung cancer. Within immunology, we saw sales growth in TREMFYA of 30.7%, driven by market growth, share gains in PSO and PSA, and favorable patient mix. STELARA growth of 4.9% was driven by market growth, partially offset by net unfavorable patient mix. We continue to anticipate biosimilar entry in Europe later this month, while in the U.S., we expect continued volume growth largely offset by price declines as we move towards biosimilar entry in 2025. In neuroscience, SPRAVATO growth of 60.8% continues to be driven by increased physician and patient confidence. In pulmonary hypertension, OPSUMIT grew 9.1% due to share gains and market growth, partially offset by unfavorable mix. UPTRAVI growth of 8.1% was driven by market growth and share gains, partially offset by inventory dynamics. Total Innovative Medicine sales growth was partially offset by a decline in other neuroscience, unfavorable patient mix in Xarelto and competitive pressures in IMBRUVICA. I'll now turn your attention to MedTech. Worldwide MedTech sales of $8 billion increased 4.4%, with growth in the U.S. of 5.7% and 3.2% outside of the U.S. Acquisitions and divestitures had a positive impact of 40 basis points on sales growth in the quarter. Growth was driven by commercial execution, strength of new product introductions, and continued strong procedure volume, partially offset by performance in China and competitive pressures in US distributor stocking dynamics and vision. In cardiovascular, electrophysiology delivered a double-digit growth of 13.4% with strong growth across all regions. The performance was driven by global procedure growth, new product uptake, and commercial execution, partially offset by the previous one-time inventory build in Asia-Pacific from the prior quarter. In addition, Abiomed delivered growth of 15.4%, driven by double-digit growth in all regions and continued strong adoption of Impella 5.5 and Impella RP technology. Results include $77 million associated with the acquisition of Shockwave, which closed on May 31. Contact lenses adjusted operational sales growth, excluding the Blink divestiture was 2.1%. Growth was driven by strong performance in the ACUVUE OASYS 1-Day family of products, partially offset by U.S. distributor stocking dynamics and competitive pressures, and Japan macroeconomic pressures. The Blink divestiture negatively impacted growth by approximately 130 basis points. Surgical vision grew 1.2%, driven by TECNIS Eyhance, our monofocal interocular lens, partially offset by China VBP and refractive softness in the U.S. Surgery adjusted operational sales growth, excluding the Acclarent divestiture was approximately flat. Performance was driven primarily by competitive pressures in energy and endocutters, China VBP, prior year China recovery, EMEA tender timing across advanced surgery and supply constraints, and wound closure. This was partially offset by strength of new products. The Acclarent divestiture negatively impacted growth by approximately 110 basis points. Orthopedics growth of 3.3% was driven by strong performance in hips and knees, due to procedure growth, strength of new products, and EMEA tender timing in knees. This growth was partially offset by competitive pressures and impacts of China VBP in spine and sports. Now, turning to our consolidated statement of earnings for the second quarter of 2024. I'd like to highlight a few noteworthy items that have changed, compared to the same quarter of last year. Cost of product sold margin deleveraged by 60 basis points, primarily driven by product mix within innovative medicine and macroeconomic factors across both sectors. We continue to invest strategically in research and development at competitive levels, investing $3.4 billion or 15.3% of sales this quarter. We invested $2.7 billion or 18.8% of sales in innovative medicine, compared to 22.2% of sales in 2023. As a reminder, last year included an upfront payment of $245 million associated with the AbelZeta partnership. In MedTech, R&D investment was $0.7 billion or 9% of sales, an increase driven by continued investment in strategic platforms. Other income and expense was a net expense of $653 million in the second quarter of 2024, compared to income of $384 million in the second quarter of 2023. The increase in expense was primarily driven by costs related to the closing of the Shockwave acquisition, the loss on the completion of the debt for equity exchange of the retained stake in Kenvue and prior year favorable intellectual property litigation settlements in MedTech. This was partially offset by the gain on the Acclarent divestiture. Regarding taxes in the quarter, our effective tax rate was 18.5% versus 14.7% in the same period last year. This increase was primarily driven by unfavorable one-time international audit settlements and the continued impact from Pillar 2. Excluding special items, the effective tax rate was 18.6% versus 15.9% in the same period last year. I encourage you to review our upcoming second-quarter 10-Q filing for additional details on specific tax-related matters. Lastly, I'll direct your attention to the box section of the slide, where we have also provided our income before tax, net earnings, and earnings per share adjusted to exclude the impact of intangible amortization expense and special items. Now let's look at adjusted income before tax by segment. In the second quarter of 2024, our adjusted income before tax for the enterprise as a percentage of sales increased from 37.2% to 37.4%. Innovative Medicine margin improved from 42.3% to 44.6%, primarily driven by an upfront payment of $245 million associated with the AbelZeta partnership in 2023, partially offset by product mix and cost of products sold. MedTech margin declined from 28.2% to 25.7%, driven by prior year favorable intellectual property litigation settlements worth approximately 300 basis points. This concludes the sales and earnings portion of the call. I'm now pleased to turn it over to Joe.","evidence_gemma_new":"Innovative Medicine sales","evidence_llama_3_3":"Innovative Medicine sales second quarter of 2024","evidence_qwen_3_30b":null,"gemma_new_max":14500000000.0,"gemma_new_min":14500000000.0,"llama_3_3_max":14500000000.0,"llama_3_3_min":14500000000.0,"qwen_3_30b_max":null,"qwen_3_30b_min":null}
{"symbol":"JNJ","year":2024,"quarter":3,"date":"2024-Q3","chunk_id":3,"sub_chunk_id":0,"centroid_label":"innovative medicine sales growth","agreed_value":14600000000.0,"count":2,"chunk":"Jessica Moore: Thank you, Joaquin. Moving to our financial results for the quarter. Unless otherwise stated, the financial results and guidance highlighted today reflect the continuing operations of Johnson & Johnson. Furthermore, the percentages quoted represent operational results and, therefore, exclude the impact of currency translation. Worldwide sales were $22.5 billion for the third quarter of 2024. Sales increased 6.3%, with growth of 7.6% in the U.S. and 4.6% outside of the U.S. Acquisitions and divestitures positively impacted worldwide growth by 90 basis points. Turning now to earnings. For the quarter, net earnings were $2.7 billion and diluted earnings per share was $1.11 versus diluted earnings per share of $1.69 a year ago. Results in the quarter were impacted by the updated talc litigation settlement proposal, as well as acquired IPR&D expense associated with the NM26 bispecific antibody. Excluding after-tax intangible asset amortization expense and special items for both periods, adjusted net earnings for the quarter were $5.9 billion and adjusted diluted earnings per share was $2.42, representing decreases of 13.3% and 9%, respectively, compared to the third quarter of 2023. Results were impacted by the acquired IPR&D expense of $1.25 billion or approximately 1,900 basis points associated with the NM26 bispecific antibody. I will now comment on business sales performance in the quarter. Beginning with Innovative Medicine. Worldwide sales of $14.6 billion increased 6.3%, with growth of 7.5% in the U.S. and 4.4% outside of the U.S. Innovative Medicine growth was driven by our key brands and continued uptake from recently launched products, with 11 assets delivering double-digit growth. Results across the portfolio continue to be positively impacted by price increases associated with Argentina hyperinflation, consistent with market practice. We continue to drive strong sales growth across our multiple myeloma portfolio. DARZALEX growth was 22.9%, primarily driven by share gains of 4 points across all lines of therapy, with 7.7 points of growth in the front line setting as well as market growth. CARVYKTI achieved sales of $286 million, with growth of 87.6%, driven by share gains, continued capacity expansion and manufacturing efficiencies. This reflects sequential growth of 53.2% aligned with our expectations of accelerating growth in the back half of the year. TECVAYLI sales were $135 million in the quarter with growth of 21.4%, reflecting a strong launch in the relapsed refractory setting. Demand remained strong, while sequential growth was flat due to continued adoption of longer duration dosing intervals. Finally, within our multiple myeloma portfolio, TALVEY continued its launch trajectory with another quarter of strong growth. We anticipate disclosing TALVEY sales in the first quarter of 2025, which are currently reported in other oncology. ERLEADA continues to deliver strong growth of 26.3%, primarily driven by share gains in metastatic castrate sensitive prostate cancer and favorable inventory dynamics. RYBREVANT, our bispecific antibody for non-small cell lung cancer, contributed to growth in other oncology as we expand approved indications. We also anticipate disclosing RYBREVANT sales in the first quarter of 2025. Within immunology, we saw sales growth in TREMFYA of 14.3%, driven by strong market growth and share gains in PsO and PsA, partially offset by unfavorable patient mix. STELARA declined 5.7%, driven by unfavorable net patient mix and share loss, partially offset by market growth. As a reminder, biosimilar competition has entered Europe as of July, and we anticipate U.S. biosimilar entry in January 2025. In neuroscience, SPRAVATO growth of 55.3% continues to be driven by increased physician and patient confidence. In pulmonary hypertension, OPSUMIT and UPTRAVI grew 17.4% and 15.2%, respectively, driven by market growth, share gains and patient mix. As mentioned last quarter, REMICADE and SIMPONI realized limited sales in Europe as we prepare for the return of distribution rights in Q4. I'll now turn your attention to MedTech. Worldwide sales of $7.9 billion increased 6.4% with growth in the U.S. of 7.8% and 5% outside of the U.S. Acquisitions and divestitures had a net positive impact of 270 basis points on worldwide growth, 360 basis points in the U.S. and 180 basis points outside of the U.S. Overall, MedTech growth was driven by commercial execution and strength of new product introductions, partially offset by continued headwinds in Asia Pacific, specifically in China. In Cardiovascular, electrophysiology delivered double-digit growth of 10.7%. Performance was driven by global procedure growth, new product uptake and commercial execution, partially offset by competitive PFA ablation catheter uptake in the U.S., as well as prior year trade inventory dynamics and VBP in China. Abiomed delivered growth of 16.3%, driven by strong growth in all regions and continued adoption of Impella 5.5 and Impella RP technology. Cardiovascular results also included $229 million associated with the acquisition of Shockwave. Contact lenses and other performance improved to 4.7%, driven by continued strategic price actions, strong performance in ACUVUE OASYS 1-Day family of products, a one-time benefit from a change in U.S. contract shipping terms worth approximately 150 basis points, as well as lapping prior year impacts from Russia sanctions. Surgical Vision grew 1.9%, driven by TECNIS PureSee and TECNIS Eyhance, partially offset by China VBP and softness in the U.S. Surgery declined 0.7%, with the Acclarent divestiture negatively impacting results by approximately 110 basis points. Performance was driven primarily by competitive pressures in energy and endocutters, as well as VBP and the anticorruption campaign in China. This was partially offset by commercial execution, strength of new products across wound closure and biosurgery and continued price increases associated with Argentina hyperinflation consistent with market practice. Orthopaedics growth of 1.3% was primarily driven by success of recent product launches and commercial execution, partially offset by competitive pressures, impacts of China VBP and revenue disruption from the previously announced Orthopaedics transformation. Now, turning to our consolidated statement of earnings for the third quarter of 2024. I'd like to highlight a few noteworthy items that have changed compared to the same quarter of last year. We continue to invest strategically in research and development at competitive levels, investing nearly $5 billion or 22% of sales, which includes a $1.25 billion payment to secure the global rights to NM26 bispecific antibody. Even when excluding this investment, R&D as a percent of sales increased 30 basis points. Selling, marketing and administrative expense as a percent of sales was leveraged 100 basis points, driven by the realization of optimization efforts following the Kenvue separation. Interest income was $99 million as compared to $182 million of income last year, driven by a higher net debt position primarily related to the financing impacts of the Shockwave acquisition. Other income and expense was a net expense of $1.8 billion compared to an expense of $0.5 billion in the prior year. The increase in expense was driven by a $1.75 billion charge related to the talc litigation settlement proposal, partially offset by prior year higher unrealized mark to market losses on public securities, as well as the monetization of royalty rights. Regarding taxes in the quarter, our effective tax rate was 19.3% versus 17.4% in the same period last year. This increase was primarily driven by the tax treatment of the NM26 bispecific antibody acquisition and OECD Pillar 2. Excluding special items, the effective tax rate was 19.3% versus 15.6% in the same period last year. I encourage you to review our upcoming third quarter 10-Q filing for additional details on specific tax-related matters. Lastly, I'll direct your attention to the box section of the slide where we have also provided our income before tax, net earnings and earnings per share adjusted to exclude the impact of intangible amortization expense and special items. Now, let's look at adjusted income before tax [by segment] (ph). Innovative Medicine margin declined from 45.4% to 37.9%, primarily driven by the $1.25 billion acquired IPR&D expense to secure the global rights for NM26 bispecific antibody, partially offset by the monetization of royalty rights. MedTech margin declined from 24.7% to 24.1%, driven by increased R&D investment and lapping of a prior year divestiture gain, partially offset by supply chain efficiencies. As a result, adjusted income before tax for the enterprise as a percentage of sales decreased from 37.6% to 32.4%, with acquired IPR&D expense impacting results by 560 basis points. Starting in 2025, aligned with recent FASB reporting disclosure requirements, we will begin providing additional P&L details by segment. This concludes the sales and earnings portion of the call. I'm now pleased to turn it over to Joe.","evidence_gemma_new":null,"evidence_llama_3_3":"Innovative Medicine worldwide sales third quarter of 2024","evidence_qwen_3_30b":"Innovative Medicine Worldwide sales third quarter of 2024","gemma_new_max":null,"gemma_new_min":null,"llama_3_3_max":14600000000.0,"llama_3_3_min":14600000000.0,"qwen_3_30b_max":14600000000.0,"qwen_3_30b_min":14600000000.0}
{"symbol":"JNJ","year":2023,"quarter":4,"date":"2023-Q4","chunk_id":7,"sub_chunk_id":0,"centroid_label":"medtech adjusted operational sales growth","agreed_value":9.1,"count":3,"chunk":"Joaquin Duato: Thank you, Joanne, and good morning, everyone. First, let me remark the strong close of our MedTech business in 2023. We delivered annually more than $30 billion in sales, which is -- were all-time high in our company history with operational -- adjusted operational growth in the fourth quarter of 9.1. So very strong results across the board in electrophysiology, in heart (ph) recovery, in surgery, in orthopedics and in Vision. So when we think about our results in 2023, we think it's going to be aligned with our competitor composite for the year, but ahead of our competitor composite in the fourth quarter. Now, certainly, COVID-19 impacts have stabilized globally and while we continue to see some challenges, macro challenges from the point of view of inflation, hospital staffing and the like, there is a bolus of patients coming out into the market after COVID-19, which has made 2023 market growth faster than historical averages. And we see that trend continuing into a good part of 2024 and therefore, being a tailwind into 2024. There's a lot of factors playing into that. But overall, we see the amended procedures continuing into at least the first half of 2024. Now we also have a number of tailwinds on our side other than the procedures that make me optimistic about 2024. We have the trajectory of Abiomed in heart recovery, which is very strong with the adoption of Impella 5.5. We file already for our Impella ECP, which is the smaller version of Impella CP. In orthopedics, we continue to move into higher growth markets with the expansion of our VELYS Robotic-Assisted Solution. We obtained CE Mark in Europe. In surgery, we continue to launch innovations across our surgery business with the [indiscernible], in Energy and ECHELON 3000 as a stapler. And we continue to see good expansion of our Plus Sutures too. In our Vision business, we are expanding our TECNIS family into the premium segment of IOLs. And finally, and I know this is an area of interest to you in electrophysiology, we continue to expand our PFA portfolio of catheters. We obtained approval for our VARIPULSE, loop catheter, PFA loop catheter in Japan at the beginning of this year. And we continue to roll out the global launch of QDOT MICRO, our newest radio frequency ablation catheter. So overall, a number of catalysts and tailwinds into our MedTech business into 2024. As we discussed in our Enterprise Business Review, we continue to see our MedTech business growing at the upper end of our markets and becoming a best-in-class competitor in MedTech.","evidence_gemma_new":"MedTech adjusted operational sales Q4","evidence_llama_3_3":"MedTech business operational growth fourth quarter","evidence_qwen_3_30b":"MedTech business adjusted operational growth fourth quarter","gemma_new_max":9.1,"gemma_new_min":9.1,"llama_3_3_max":9.1,"llama_3_3_min":9.1,"qwen_3_30b_max":9.1,"qwen_3_30b_min":9.1}
{"symbol":"JNJ","year":2024,"quarter":1,"date":"2024-Q1","chunk_id":8,"sub_chunk_id":0,"centroid_label":"medtech adjusted operational sales growth","agreed_value":6.5,"count":2,"chunk":"Lawrence Biegelsen: Good morning, thanks for taking the question. A question for Tim. Your MedTech business grew 6.5% on an adjusted operational basis in Q1, but there were a number of onetime items. What was the net impact from those onetime items in your view and what are you seeing around the world from a procedure standpoint and what are your expectations for the rest of the year? Thank you.","evidence_gemma_new":"MedTech business adjusted operational Q1","evidence_llama_3_3":null,"evidence_qwen_3_30b":"MedTech business adjusted operational basis Q1","gemma_new_max":6.5,"gemma_new_min":6.5,"llama_3_3_max":null,"llama_3_3_min":null,"qwen_3_30b_max":6.5,"qwen_3_30b_min":6.5}
{"symbol":"JNJ","year":2024,"quarter":2,"date":"2024-Q2","chunk_id":3,"sub_chunk_id":0,"centroid_label":"medtech adjusted operational sales growth","agreed_value":0.052,"count":2,"chunk":"Joaquin Duato: Thank you, Joe, and hello, everyone. With a strong second quarter, I'm excited about the rest of 2024. Our Innovative Medicine business is on track for a 13th consecutive year of above-market growth. Our success is driven by a portfolio of innovative best and first-in-class medicines, many of which have the potential to change the practice of medicine. Across the board, oncology, immunology, neuroscience, we are reinventing treatment paradigms and transforming lives. As Joe mentioned, we have made significant progress across our pipeline. In particular, I would like to highlight two major milestones on the horizon that will help drive sustained growth through 2025 and beyond. First, the approval and launch of RYBREVANT plus Lazertinib for first-line treatment of EGFR-positive non-small cell lung cancer. And second, the approval and launch of TREMFYA in Inflammatory Bowel Disease or IBD, which follows the recent presentation of data that demonstrated superiority versus STELARA. This represents a meaningful opportunity for TREMFYA as approximately 75% of STELARA sales today come from IBD. We also have regulatory and data milestones for many of the assets that we expect to generate more than $5 billion in peak year sales. As the pipeline and portfolio progress, so too does our confidence in our near and long-term growth trajectory. We are confident in our ability to grow through the upcoming STELARA biosimilar entry and see accelerating momentum through the back half of the decade. In MedTech, year-to-date adjusted operational sales growth of 5.2% reflects continued progress with the portfolio as we move into higher growth markets. As you heard from Joe, we expect MedTech growth to accelerate in the second-half of the year. Growth will accelerate through continued expansion of new products, including ACUVUE OASYS Max 1-Day Contact Lenses, TECNIS Odyssey in the U.S., and VARIPULSE in Europe and Japan. Our confidence in the business outlook remains unchanged. With meaningful outcomes from the danger shock trial in Abiomed and the second quarter close of the shockwave acquisition, we look forward to continue the expansion into high-growth MedTech markets. As you know, Johnson & Johnson is laser-focused on advancing the next wave of medical innovation. We are building on a strong foundation to unlock accelerated growth with a healthy balance sheet and industry-leading investments in the best science and innovation. This enables us to move into the second-half of 2024 from a position of strength. With that, let's open the line for questions.","evidence_gemma_new":"MedTech adjusted operational sales growth year-to-date","evidence_llama_3_3":"MedTech year-to-date adjusted operational sales growth 5.2%","evidence_qwen_3_30b":null,"gemma_new_max":0.052,"gemma_new_min":0.052,"llama_3_3_max":0.052,"llama_3_3_min":0.052,"qwen_3_30b_max":null,"qwen_3_30b_min":null}
{"symbol":"JNJ","year":2024,"quarter":3,"date":"2024-Q3","chunk_id":4,"sub_chunk_id":0,"centroid_label":"medtech adjusted operational sales growth","agreed_value":0.064,"count":2,"chunk":"Joe Wolk: Thank you, Jessica. In the third quarter, Johnson & Johnson delivered results that illustrate not only the breadth of the business, but our ability to consistently beat financial expectations. Innovative Medicine continued to build on strong first-half revenue momentum. We are advancing our pharmaceutical pipeline, achieving significant clinical and regulatory milestones across key therapeutic areas. Our MedTech business, with the addition of Shockwave, delivered operational growth of 6.4% in the quarter, but did experience headwinds in the Asia Pacific region. We continue to fortify our future advancing the OTTAVA robotic surgery system to IDE, expanding VELYS use and launching new intraocular lenses. Due to dynamics in the Asia Pacific region, specifically in China, we are taking a responsibly conservative approach by assuming no material improvement in that part of the business for the remainder of this year. And as such, we expect MedTech adjusted operational sales growth for the full year 2024 to be closer to 5% versus the 6% we referenced last quarter. The strength of a diversified business enables us to more than offset volatility in one part of our business, but yet be in a position to once again increase 2024 guidance for the enterprise. Before diving into the results, I'll take a moment to touch on some enterprise-wide updates from the quarter. We are making progress towards resolving talc litigation. Our pre-packaged bankruptcy plan received overwhelming support from the current claimants of roughly 83% as well as the future claimants representative. As announced last Thursday, the case will be heard in the Texas Bankruptcy Court. And while we remain committed to bringing this matter to a resolution, it would be premature to speculate on timing. In addition to the pipeline highlights Joaquin mentioned, there are some additional notable advancements throughout the quarter. In oncology, we received U.S. and EU regulatory approval for RYBREVANT in combination with chemotherapy as a second line treatment for adults with advanced EGFR-mutated non-small cell lung cancer. With FDA priority review underway for a subcutaneous formulation of RYBREVANT, along with data supporting a treatment regimen to reduce adverse events, we are building a best-in-class EGFR portfolio. We also presented Phase 1 data for RYBREVANT with chemotherapy in metastatic colorectal cancer patients, extending the asset's potential beyond lung cancer. In multiple myeloma, we advanced our leadership position with FDA approval and filing of two DARZALEX FASPRO quad-based regimens for newly diagnosed patients. With CARVYKTI, we announced three-year follow-up data showing significantly extended overall survival and gained approval for commercial production at our Ghent facility, further expanding supply capacity. Finally, in oncology, we added to the growing evidence base for our TARIS platform with positive Phase 2b data in patients with high-risk non-muscle invasive bladder cancer and positive interim to Phase 2 data in patients with muscle invasive bladder cancer. In neuroscience, we submitted to the U.S. and European regulatory bodies for what would be the first global approval of nipocalimab for the treatment of people living with generalized myasthenia gravis. For the remainder of the year, we expect approval of TREMFYA subcu for Crohn's disease and data readouts on JNJ-2113, our targeted oral peptide for psoriasis and ulcerative colitis, JNJ-4804, our co-antibody therapeutic for inflammatory bowel disease, aticaprant for adjunctive major depressive disorder and nipocalimab for rheumatoid arthritis. In MedTech, we completed enrollment of the Omny-IRE clinical trial to evaluate safety and effectiveness in mapping and treating symptomatic paroxysmal atrial fibrillation during standard ablation procedures. Also in Cardiovascular, we are preparing for the anticipated approval of VARIPULSE in the U.S. and the submission of Impella ECP for regulatory approval. In Orthopaedics, we launched several exciting new products in the U.S., including our VELYS SPINE robot and VOLT Plating System. The plentiful pipeline progress across our businesses will ensure continued success. Let's now turn to cash and capital allocation. Free cash flow year-to-date was approximately $14 billion compared to $12 billion last year, which included eight months contribution from the Consumer Health business. We ended the third quarter with $20 billion of cash and marketable securities and $36 billion of debt for a net debt position of approximately $16 billion. Our capital allocation priorities remain unchanged. Our strong balance sheet enables us to strategically invest to grow our business while simultaneously returning capital to our shareholders. Innovation remains core to our strategy. During the quarter, we invested nearly $5 billion in research and development. This is an increase over 2023 levels even after excluding acquired in-process R&D expense. Thus far in 2024, Johnson & Johnson has deployed approximately $18 billion for strategic acquisitions and licensing agreements, which includes the recent acquisition of V-Wave, another innovative treatment in heart failure, which closed last week. Turning to our full-year 2024 guidance. Excluding the impact from acquisitions and divestitures, we are increasing our adjusted operational sales guidance. We now expect growth in the range of 5.7% to 6.2% with a midpoint of 6%. We are also increasing operational sales growth by $200 million to a range of 6.3% to 6.8% with a midpoint of $89.6 billion or 6.6%. As you know, we don't speculate on future currency movements. For today's call, we are utilizing a euro spot rate relative to the U.S. dollar of $1.10, slightly above last quarter's guidance. This results in an estimated incremental positive foreign currency impact of $200 million, reducing our previous full-year negative impact to $1 billion. As such, we expect reported sales growth between 5.1% to 5.6% with a midpoint of $88.6 billion or 5.4%. Regarding the rest of the P&L, with the addition of the V-Wave transaction, we now anticipate our 2024 adjusted pre-tax operating margin to decline by approximately 200 basis points. Excluding the impact of asset acquisition accounting and related R&D investment, we would be on track to improve operating margins by 50 basis points, which is consistent with what we guided to at the beginning of the year. As we strive to advance and accelerate our pipeline, you can anticipate elevated levels of investment in the fourth quarter. Net interest income is now projected to be between $450 million and $550 million, $150 million greater than our previous guidance. Other income is anticipated to be in the range of $1.9 billion to $2.1 billion, an increase versus previous guidance, driven by the one-time monetization of royalty rights, which Jessica referenced, that will be utilized for that higher Q4 investment I referenced a moment ago. Our effective tax rate, consistent with previous guidance, is expected to be between 17.5% and 18.5% for the full year. Similar to last quarter, we have provided an EPS bridge to outline the impact from acquisition activity throughout the year. Before the impact of the V-Wave acquisition, our outlook for adjusted operational EPS performance is once again increasing. As the schedule reflects, we are expecting an incremental $0.10 per share increase on our operational performance for a total increase of $0.18 per share for the year. On this basis, when excluding acquisition activity throughout the year, EPS growth is 9.2%. To account for the completion of the V-Wave transaction, as previously disclosed, our adjusted operational EPS guidance now includes dilution of $0.24 per share in the fourth quarter and $0.06 per share in 2025. Combined, this yields an updated 2024 adjusted operational EPS guidance of $9.91 at the midpoint of the range, basically flat year-on-year despite absorbing approximately $0.92 of acquisition activity. While not predicting the impact of currency movements utilizing the recent exchange rates just referenced, our reported adjusted earnings per share for the year now estimates a full year positive impact of $0.02 per share. As such, we expect reported adjusted earnings per share of $9.93 at the midpoint. We are still finalizing our plans for next year, but let me provide you some preliminary qualitative commentary to inform your modeling for 2025. For Innovative Medicine, we remain very confident in our ability to deliver growth despite a significant LOE resulting in sales above the $57 billion commitment we stated in 2021. This will be driven by our end market brands and continued progress from our recently launched products, including TREMFYA in IBD and RYBREVANT in non-small cell lung cancer. Regarding the STELARA LOE, we are planning for biosimilar entries in the U.S. in January, assuming that HUMIRA's erosion curve is a relatively good proxy for your models. We continue to expect a negative impact associated with the Part D redesign. In our pipeline, we anticipate data readouts across all our priority platforms: anticipated approvals of TREMFYA subcu in Crohn's disease, RYBREVANT subcu for lung cancer and nipocalimab in generalized myasthenia gravis, as well as potential filings for TARIS in bladder cancer and aticaprant in major depressive disorder. As a reminder, TREMFYA, RYBREVANT and TARIS continue to be the three largest underappreciated assets in terms of our revenue projections versus what analysts are estimating for the back half of this decade. For MedTech, we continue to expect to deliver on our long-term objective identified at last year's Enterprise Business Review of growing operational sales in the upper end of the 2022 through 2027 weighted average market growth rate of 5% to 7%. We also expect continued adoption of newer products across all MedTech businesses, such as VARIPULSE in electrophysiology, VELYS enabling technology across Orthopaedics, Odyssey and PureSee in Surgical Vision and contributions from our Abiomed and Shockwave integration. Specific to volume-based pricing in China, we expect continued impacts from the rollout of the 2024 tenders in Orthopaedics sports and intraocular lenses and anticipate VBP to continue expanding across provinces and products. Moving to the rest of the P&L. When thinking about operating margin, there are pluses and minuses. Tailwinds include an anticipated reduction of acquired IPR&D expense year-over-year, continued focus on MedTech margin improvement and continued OpEx optimization benefits post the separation. Working against us is unfavorable product mix driven by STELARA biosimilar entrants and Part D redesign. With a brief look at your models last week, the consensus margin does not appear unreasonable, and we'll provide further clarity in January once we complete our 2025 plan. We do not expect to maintain the heightened levels of interest income due to a reduction in interest rates and impact from debt experienced in 2024 related to acquisition activity. Regarding other income and expense, we expect lower net other income due to the non-recurring nature of the monetization of royalty rights experienced in Q3, a lower benefit related to employee benefit programs based on discount rate assumptions, as well as income lost on the Kenvue dividend. Lastly, based on what we know today, under current tax law, we anticipate our 2025 tax rate to be slightly lower than our anticipated 2024 tax rate. To wrap up prior to Q&A, we are pleased with our underlying 2024 performance that simultaneously fortified a strong foundation for continued success heading into 2025. With that, I'll now turn it over to Kevin to open the call for your questions.","evidence_gemma_new":"MedTech operational growth the quarter","evidence_llama_3_3":"MedTech business operational growth in the quarter","evidence_qwen_3_30b":null,"gemma_new_max":0.064,"gemma_new_min":0.064,"llama_3_3_max":0.064,"llama_3_3_min":0.064,"qwen_3_30b_max":null,"qwen_3_30b_min":null}
{"symbol":"JNJ","year":2023,"quarter":4,"date":"2023-FY","chunk_id":3,"sub_chunk_id":0,"centroid_label":"net earnings","agreed_value":13300000000.0,"count":3,"chunk":"Jessica Moore: Thanks, Joaquin. Unless otherwise stated, the financial results and guidance highlighted reflects the continuing operations of Johnson & Johnson. We will report the consumer health financial results as discontinued operations. Furthermore, the percentages quoted represent operational results and therefore, exclude the impact of currency translation. Starting with Q4 2023 sales results. Worldwide sales were $21.4 billion for the fourth quarter of 2023. Sales increased 7.2%, with 11% in the U.S. and 2.7% outside of the U.S. Excluding the net impact of acquisitions and divestitures, adjusted operational sales growth was 5.7% worldwide, 8.8% in the U.S. and 2.1% outside the U.S. It is important to note that sales in Europe were negatively impacted by the COVID-19 vaccine and loss of exclusivity of ZYTIGA by approximately 1,500 basis points operationally. Turning now to earnings. For the quarter, net earnings were $4.1 billion, and diluted earnings per share was $1.70 versus diluted earnings per share of $1.22 a year ago. Excluding after-tax intangible asset amortization expense and special items for both periods, adjusted net earnings for the quarter were $5.6 billion and the diluted earnings per share was $2.29, representing increases of 2.4% and 11.7%, respectively, compared to the fourth quarter of 2022. On an operational basis, adjusted diluted earnings per share increased 11.2%. For the full year 2023, sales were $85.2 billion. Sales grew 7.4%, with 10.6% in the U.S. and 3.8% outside of the U.S. Excluding the net impact of acquisitions and divestitures, adjusted operational sales growth was 5.9% worldwide, 8.2% in the U.S. and 3.4% outside the U.S. Sales in Europe were negatively impacted by the COVID-19 vaccine and loss of exclusivity of ZYTIGA by approximately 1,000 basis points operationally. Net earnings for the full year 2023 were $13.3 billion and diluted earnings per share was $5.20 versus diluted earnings per share of $6.14 a year ago. Full year 2023 adjusted net earnings were $25.4 billion, and adjusted diluted earnings per share was $9.92, representing increases of 6.8% and 11.1%, respectively, versus full year 2022. On an operational basis, adjusted diluted earnings per share increased by 10.8%. I will now comment on business sales performance in the quarter. Beginning with Innovative Medicine. Worldwide Innovative Medicine sales of $13.7 billion increased 4% with growth of 9.5% in the U.S. and a decline of 3.1% outside of the U.S. Excluding COVID-19 vaccine sales, worldwide and U.S. sales growth was 9.5%, and growth outside of the U.S. was 9.4%. Sales outside the U.S., excluding the COVID-19 vaccine were negatively impacted by approximately 120 basis points due to the loss of exclusivity of ZYTIGA in Europe. Innovative Medicine growth was driven by our key brands and continued uptake from recently launched products, with nine assets delivering double-digit growth. We continue to drive strong sales growth for both DARZALEX and ERLEADA, with increases of 22.2% and 19%, respectively. Within immunology, we saw sales growth in both STELARA and TREMFYA, with increases of 14.5% and 20.5%, respectively. This growth was driven by market growth and share gains as well as favorable patient mix in TREMFYA. Growth of 17.4% in pulmonary hypertension was driven by favorable patient mix, share gains and market growth. Turning to newly launched products. We continue to make progress on our launches of CARVYKTI and SPRAVATO. We are also encouraged by the early success of our launches of TECVAYLI and TALVEY, sales of which are driving the growth in other Oncology. As a reminder, we expect to begin disclosing TECVAYLI sales in Q1 2024. Total Innovative Medicine sales growth was partially offset by unfavorable patient mix in XARELTO, a decrease in IMBRUVICA sales due to competitive pressures and a loss of exclusivity of ZYTIGA, REMICADE and PREZISTA. I'll now turn your attention to MedTech. Worldwide MedTech sales of $7.7 billion increased 13.4% with Abiomed contributing 4.5% to growth. Growth in the U.S. was 14.1% and 12.8% outside of the U.S. Excluding the impact of acquisitions and divestitures, worldwide adjusted operational sales growth was 9.1%. MedTech was negatively impacted by international sanctions in Russia worth approximately 50 basis points, primarily in Advanced Surgery and Vision. Electrophysiology delivered double-digit growth of 25.2% with strong growth in all regions, including Europe. This growth was driven by our global market leading portfolio, including the most recently launched QDOT RF ablation and OCTARAY catheters. Abiomed contributed $340 million in sales within the quarter driven by continued strong adoption of Impella 5.5 technology. Growth of 6.4% in surgery was driven primarily by procedure recovery and strength of our biosurgery and wound closure portfolios. Growth was partially offset by volume based procurement in China, primarily in Endocutters. Orthopaedics growth of 5% reflects procedure growth, success of recently launched products such as the global expansion of our VELYS digital solutions and expansion in ambulatory surgical centers, as well as lapping of prior year China\u2019s VBP price concessions in Spine. Growth of 6.6% in Vision was driven by price actions and contact lenses, as well as strength of new products including ACUVUE OASYS 1-Day family of products and contact lenses and TECNIS EYHANCE, our monofocal interocular lens and surgical vision. Growth of contact lenses was partially offset by U.S. stocking dynamics. Global Vision growth was negatively impacted by 140 basis points due to the Blink divestiture in Q3. Now turning to our consolidated statement of earnings for the fourth quarter of 2023. I'd like to highlight a few noteworthy items that have changed compared to the same quarter of last year. Cost of products sold margin deleveraged by 130 basis points due to commodity inflation and unfavorable product mix in MedTech, partially offset by favorable patient mix and lower COVID-19 vaccine supply network related exit cost in Innovative Medicine. We continue to invest strategically in research and development at competitive levels, investing $4.5 billion or 20.9% of sales this quarter. We invested $3.4 billion or 24.5% of sales in Innovative Medicine with the increase in investment being driven by higher milestones, partially offset by portfolio prioritization. In MedTech, R&D investment was $1.1 billion or 14.6% of sales with the increase in investment primarily driven by the Laminar acquisition. Interest income was $212 million in the fourth quarter of 2023 as compared to $77 million of income in the fourth quarter of 2022. The increase in income was driven by higher interest rates earned on cash balances and a lower average debt balance. The other income and expense line was income of $421 million in the fourth quarter of 2023 compared to an expense of $795 million in the fourth quarter of 2022. This was primarily driven by higher unrealized gains on securities and lower (ph) COVID-19 vaccine-related exit costs. Regarding taxes in the quarter, our effective tax rate was 14.4% versus 16% in the same period last year. This decrease was primarily driven by the net decrease of tax liabilities, including the settlement of the 2013 through 2016 U.S. tax audit. Excluding special items, the effective tax rate was 10.8% versus 16.2% in the same period last year. I encourage you to review our upcoming 2023 10-K filing for additional details on specific tax-related matters. Lastly, I will direct your attention to the box section of the slide, where we have also provided our income before tax, net earnings and earnings per share adjusted to exclude the impact of intangible amortization expense and special items. Now let's look at adjusted income before tax by segment. In the fourth quarter of 2023, our adjusted income before tax for the enterprise as a percentage of sales decreased from 32.5% to 29.2%. Innovative Medicine margins declined from 37.7% to 37.4%, primarily driven by higher R&D milestones, partially offset by favorable patient mix and leveraging and selling and marketing expense. MedTech margins declined from 24.5% to 15.5% primarily driven by in-process research and development expense from the Laminar acquisition, commodity inflation and unfavorable product mix, partially offset by selling and marketing expense leverage. This concludes the sale and earnings portion of the call. I'm now pleased to turn it over to Joe.","evidence_gemma_new":"Net earnings full year 2023","evidence_llama_3_3":"net earnings full year 2023","evidence_qwen_3_30b":"net earnings full year 2023","gemma_new_max":13300000000.0,"gemma_new_min":13300000000.0,"llama_3_3_max":13300000000.0,"llama_3_3_min":13300000000.0,"qwen_3_30b_max":13300000000.0,"qwen_3_30b_min":13300000000.0}
{"symbol":"JNJ","year":2023,"quarter":2,"date":"2023-Q2","chunk_id":3,"sub_chunk_id":0,"centroid_label":"net earnings","agreed_value":5100000000.0,"count":2,"chunk":"Jessica Moore: Thanks, Joaquin. As a reminder on May 8, 2023, Kenvue, Inc., closed its initial public offering. Johnson & Johnson continues to own 89.6% of total outstanding shares of Kenvue\u2019s common stock and remains the majority shareholder. Therefore, the following financial results continue to include the consumer health business with the 10.4% of consumer health's net earnings no longer attributed to Johnson & Johnson being adjusted for in other income and expense from the date of the IPO through the end of the quarter. Starting with Q2 2023 sales results. Worldwide sales were $25.5 billion for the second quarter of 2023, an increase of 6.3% versus the second quarter of 2022. Operational sales growth, which excludes the effect of translational currency, increased 7.5%, as currency had a negative impact of 1.2 points. In the U.S., sales increased 10.2%. In regions outside the U.S., our reported growth was 2.2%. Operational sales growth outside the U.S. was 4.7% with currency negatively impacting our reported OUS results by 2.5 points. Operational sales in Europe were negatively impacted by the COVID-19 vaccine and loss of exclusivity of ZYTIGA. Excluding the net impact of acquisitions and divestitures, adjusted operational sales growth with 6.2% worldwide, 8% in the U.S. and 4.4% outside the U.S. Turning now to earnings. For the quarter, net earnings were $5.1 billion and diluted earnings per share was $1.96 versus diluted earnings per share of $1.80 a year ago. Excluding after tax intangible asset amortization expense and special items for both periods, adjusted net earnings for the quarter were $7.4 billion and adjusted diluted earnings per share was $2.80, representing increases of 6.5% and 8.1%, respectively, compared to the second quarter of 2022. On an operational basis, adjusted diluted earnings per share increased 9.7%. I will now comment on business segment sales performance highlights. Unless otherwise stated, percentages quoted represent the operational sales change in comparison to the second quarter of 2022, and therefore, exclude the impact of currency translation. Beginning with the Pharmaceuticals segment. Worldwide Pharmaceutical sales of $13.7 billion increased 3.1%, with growth of 9.2% in the U.S. and a decline of 4% outside the U.S. Operational sales growth increased 3.8% as currency had a negative impact of 0.7 points. Excluding COVID-19 vaccine sales, Worldwide operational sales growth was 6.2% with growth of 9.9% in the U.S. and growth of 1.5% outside the U.S. Sales outside the U.S., excluding the COVID-19 vaccine, were negatively impacted by approximately 500 basis points, due to the loss of exclusivity of ZYTIGA in Europe. Pharmaceutical growth was driven by our key brands and continued uptake in our recently launched products with nine assets delivering double-digit growth. We continue to drive strong sales growth for both DARZALEX and ERLEADA with increases of 23.4% and 26.9%, respectively. STELARA grew 8%, driven by market growth and IBD share gains in the U.S., partially offset by unfavorable patient mix and increased rebates. TREMFYA grew 18.9%, driven by market growth and share gains in the U.S., partially offset by unfavorable patient mix. Growth of 16.5% in pulmonary hypertension was driven by favorable patient mix, share gains in the U.S. and market growth. Turning to newly launched products. We continue to make progress on our launch of CARVYKTI and continue to expand access and reimbursement for SPRAVATO. We are also encouraged by the early success of our launch of TECVAYLI, sales of which are included in other oncology. Total pharmaceutical sales growth was partially offset by the loss of exclusivity in REMICADE and ZYTIGA, along with a decrease in IMBRUVICA sales due to competitive pressures. IMBRUVICA maintains its market leadership position worldwide. I will now turn your attention to the MedTech segment. Worldwide MedTech sales of $7.8 billion increased 12.9% with growth of 14.6% in the U.S. and 11.3% outside of the U.S. Operational sales growth increased 14.7% as currency had a negative impact of 1.8 points. Abiomed contributed 4.8% to operational growth. Excluding the impact of acquisitions and divestitures, worldwide adjusted operational sales growth was 9.9%. Sales in the second quarter accelerated sequentially from Q1 for all MedTech businesses driven by global procedure growth, recovery in China, continued uptake of recently launched products and commercial execution, partially offsetting growth in the quarter was the impact of volume based procurement in China, as well as supply constraints. The Interventional Solutions franchise delivered operational growth of 56.9%, which includes $331 million related to Abiomed. Electrophysiology is a major contributor to the growth with a double-digit increase of 25.9%. This reflects strong growth in all regions, including Europe, driven by our comprehensive portfolio, including the most recently launched QDOT RS catheter. Orthopedics operational growth of 5.7%, reflects strong procedure recovery, success of recently launched products, such as the enhanced shorter portfolio, as well as global expansion of our digital solutions, such as VELYS Robotic assisted solution. Growth was partially offset by the impact of volume-based procurement in China and continued supply challenges primarily in hips. Operational growth of 8.4% and surgery was driven primarily by procedure recovery and strength of our biosurgery and wound closure portfolios. Growth was partially offset by the impacts of volume-based procurement in China and supply challenges. Global growth of 6.9% in vision was driven by price actions and contact lenses and other, as well as strength of new products, including ACUVUE OASYS 1-Day family of products and contact lenses and TECNIS Eyhance our monofocal intraocular lens and surgical vision. Growth of contact lenses was partially offset by strategic portfolio choices and supply challenges. Although these continue to improve. Moving to the Consumer Health segment. Worldwide Consumer Health sales of $4 billion increased 5.4% with growth of 6% in the U.S. and 5% outside the U.S. Operational sales growth increased 7.7% as currency had a negative impact of 2.3 points. Sales in the second quarter accelerated sequentially from Q1 for all consumer health franchises, primarily driven by strategic price increases and growth in OTC globally, due to strong pain performance, and cold, cough and flu season. Excluding the impact of strategic portfolio decisions and sales of personal care products in Russia, volume across all consumer franchises was relatively flat on strong price actions. For more detailed information, please visit investors.kenvue.com. Now turning to our consolidated statement of earnings for second quarter of 2023, I'd like to highlight a few noteworthy items that have changed compared to the same quarter of last year. Cost of products sold leveraged by 80 basis points, primarily driven by favorable patient mix and lower COVID-19 vaccine supply network related costs in the pharmaceutical business, partially offset by commodity inflation in the consumer and MedTech businesses. Selling, marketing and administrative margins deleveraged 20 basis points, driven by incremental costs to support the standalone consumer health business, partially offset by proactive management of costs. We continue to invest strategically in research and development at competitive levels, investing 15% of sales this quarter. The $3.8 billion invested was a 3.4% increase versus the prior year. The other income and expense line was income of $60 million in the second quarter of 2023, compared to an expense of $273 million in the second quarter of 2022. This was primarily driven by favorable litigation settlements, lower litigation expense, and lower unrealized losses on securities, partially offset by higher COVID-19 vaccine manufacturing exit related cost. And as previously mentioned, the 10.4% of consumer health earnings that are no longer attributable to Johnson & Johnson, which resulted in a $37 million reduction in consolidated earnings. Regarding taxes in the quarter, our effective tax rate was 23.9% versus 17.6% in the same period last year. This increase was primarily driven by 2023 tax cost incurred as part of the planned separation of the consumer health business, due to the internal reorganization of certain international subsidiaries. Excluding special items the effective tax rate was 16.6% versus 15.4% in the same period last year. I encourage you to review our upcoming second quarter 10-Q filing for additional details on specific tax matters. Lastly, I'll direct your attention to the box section of the slide, where we have also provided our income before tax, net earnings and earnings per share adjusted to exclude the impact of intangible amortization expense and special items. Now let's look at adjusted income before tax by segment. In the second quarter of 2023, our adjusted income before tax for the enterprise as a percentage of sales increased from 34% to 34.6%, primarily driven by favorable product and patient mix, partially offset by unfavorable segment mix and commodity inflation. Pharmaceutical margins improved from 42% to 42.7%, primarily driven by favorable patient mix, sales, marketing and administrative expense leverage, and R&D portfolio prioritization, partially offset by higher milestone payments. MedTech margins improved from 26.5% to 28.6%, driven by favorable intellectual property related litigation settlements and cost management initiatives, partially offset by commodity inflation. Finally, consumer health margins declined from 25.9% to 23.5%, due to incremental costs to support the standalone consumer health business, foreign exchange impacts, and commodity inflation, partially offset by supply chain efficiencies. It is important to highlight that the adjusted income before tax for the consumer health business as reported by Johnson & Johnson defers from the financial results reported by Kenvue Inc. this morning. The difference is primarily driven by incremental costs required to run Kenvue as an independent company. Additional differences also exist on an after tax basis, due to the application of different tax rates. This concludes the sales and earnings portion of the Johnson & Johnson second quarter results. I'm now pleased to turn the call over to Joe Wolk. Joe?","evidence_gemma_new":null,"evidence_llama_3_3":"net earnings Q2 2023","evidence_qwen_3_30b":"net earnings","gemma_new_max":null,"gemma_new_min":null,"llama_3_3_max":5100000000.0,"llama_3_3_min":5100000000.0,"qwen_3_30b_max":5100000000.0,"qwen_3_30b_min":5100000000.0}
{"symbol":"JNJ","year":2023,"quarter":3,"date":"2023-Q3","chunk_id":1,"sub_chunk_id":0,"centroid_label":"net earnings","agreed_value":4300000000.0,"count":3,"chunk":"Jessica Moore: Good morning. This is Jessica Moore, Vice President of Investor Relations for Johnson & Johnson. Welcome to our company's review of the 2023 third quarter business results and full-year financial outlook. A few logistics before we get into the details. As a reminder, you can find additional materials, including today's presentation and associated schedules, on the Investor Relations section of the Johnson & Johnson website at investor.jnj.com. Please note that this presentation contains forward-looking statements regarding, among other things, the company's future operating and financial performance, market position and business strategy. You are cautioned not to rely on these forward-looking statements, which are based on current expectations of future events using the information available as of the date of this recording and are subject to certain risk and uncertainties that may cause the company's actual results to differ materially from those projected. A description of these risks, uncertainties and other factors can be found in our SEC filings, including our 2022 Form 10-K, which is available at investor.jnj.com and on the SECs website. Additionally, several of the products and compounds discussed today are being developed in collaboration with strategic partners or licensed from other companies. This slide acknowledges those relationships. Moving to today's agenda. I will start by reviewing the third quarter sales and P&L results for the corporation and highlights related to our two businesses. Joe Wolk, our CFO will then provide additional business and financial commentary before sharing an overview of our cash position, capital allocation priorities, and updated guidance for 2023. The remaining time will be available for your questions. Joaquin Duato, our chairman and CEO; John Reed, and Ahmet Tezel, our Innovative Medicine and MedTech R&D leaders, as well as Erik Haas, our VP of Litigation, will be joining us for Q&A. To ensure we provide enough time to address your questions, we anticipate the webcast will last approximately 60 minutes. As a reminder, on August 23, 2023, Johnson & Johnson announced the final results of the exchange offer and completion of the separation of Kenvue Inc. Unless otherwise stated, the financial results and guidance highlighted today reflect the continuing operations of Johnson & Johnson. We will report the consumer health financial results as discontinued operations. Additionally, going forward, the pharmaceutical segment will be referred to as innovative medicine. Starting with Q3 2023 sales results. Worldwide sales were $21.4 billion for the third quarter of 2023, an increase of 6.8% versus the third quarter of 2022. Operational sales growth, which excludes the effect of translational currency, increased 6.4% as currency had a positive impact of 0.4 points. In the U.S., sales increased 11.1%. In regions outside the U.S., our reported growth was 1.6%. Operational sales growth outside the U.S. was 0.7% with currency positively impacting our reported OUS results by 0.9 points. It is important to note that operational sales in Europe were negatively impacted by the COVID-19 vaccine and loss of exclusivity of ZYTIGA. Excluding the net impact of acquisition and divestitures, adjusted operational sales growth was 4.9% worldwide, 8.9% in the U.S., and 0.3% outside the U.S. Turning now to earnings. For the quarter, net earnings were $4.3 billion and diluted earnings per share was $1.69 versus diluted earnings per share of $1.62 a year ago. Excluding after-tax and tangible asset amortization expense and special items for both periods, adjusted net earnings for the quarter were $6.8 billion and adjusted diluted earnings per share was $2.66, representing increases of 14.1% and 19.3% respectively, compared to the third quarter of 2022. On an operational basis, adjusted diluted earnings per share increased 13.9%. I will now comment on business sales performance. Unless otherwise stated percentages quoted represent the operational sales change in comparison to the third quarter of 2022 and therefore exclude the impact of currency translation. Beginning with innovative medicine. Worldwide innovative medicine sales of $13.9 billion, increased 5.1% with growth of 10.9% in the U.S. and a decline of 2.3% outside of the U.S. Operational sales growth increased 4.3% as currency had a positive impact of 0.8 points. Excluding COVID-19 vaccine sales, worldwide operational sales growth was 8.2%, with growth of 10.9% in the U.S. and growth of 4.3% outside of the U.S. Sales outside the U.S., excluding the COVID-19 vaccine, were negatively impacted by approximately 500 basis points, due to the loss of exclusivity of ZYTIGA in Europe. Innovative medicine growth was driven by our key brands and continued uptake from a recently launched products with 11 assets delivering double-digit growth. We continue to drive strong sales growth for both DARZALEX and ERLEADA with increases of 20.7% and 27% respectively, due to continued share gains and market growth. Within immunology, we saw growth in STELARA and TREMFYA, with increases of 15.8% and 21.5% respectively. This growth was predominantly driven by favorable patient mix and market growth. Turning to newly launched products, we continue to make progress on our launches of CARVYKTI and SPRAVATO. We are also encouraged by the early success of our launches of TECVAYLI and TALVEY, sales of which are driving the growth and other oncology. We expect to begin disclosing TECVAYLI sales in Q1 2024. Total innovative medicine sales growth was partially offset by the loss of exclusivity of ZYTIGA and REMICADE, along with a decrease in IMBRUVICA sales, due to competitive pressures. I'll now turn your attention to MedTech. Worldwide MedTech sales of $7.5 billion increased 10% with growth of 11.6% in the U.S., and 8.3% outside of the U.S. Operational sales growth increased 10.4% as currency had a negative impact of 0.4 points. Abiomed contributed 4.6% to operational growth, excluding the impact of acquisition and divestitures, worldwide adjusted operational sales growth was 6%. On a pro forma basis, utilizing sales in the prior year from Abiomed as a standalone company, MedTech's growth for the quarter would be 6.4%. MedTech was negatively impacted across all platforms by international sanctions in Russia worth approximately 60 basis points in volume-based procurement in China, primarily in five MedTech platforms: Spine, Trauma, Endocutters, Energy, and Electrophysiology. As communicated last quarter, we saw the return to more normalized seasonality with moderate deceleration in the third quarter. The Interventional Solutions franchise delivered operational growth of 48.1%, which includes $311 million related to Abiomed. This reflects growth in Abiomed patient procedures in the high-teens and continued strong adoption of Impella 5.5 technology in surgery. Electrophysiology is a major contributor to this growth with a double-digit increase of 20.3%. This reflects strong growth in all regions, including Europe, driven by our global market leading portfolio, including the most recently launched QDOT RF ablation and OPTRELL Mapping Catheters. Operational growth of 3.2% in surgery was driven primarily by procedure recovery and strength of our biosurgery and wound closure portfolios. Growth was partially offset by the impacts of volume-based procurement in China and supply challenges. Global growth of 5.4% in vision was driven by price actions and contact lenses and other, as well as strength of new products including ACUVUE OASYS 1-Day family of products and contact lenses and TECNIS Eyhance, our monofocal interocular lens and surgical vision. Growth of contact lenses was partially offset by strategic portfolio choices and supply challenges, although these continue to improve. Global vision growth was negatively impacted by 100 basis points, due to the Blink divestiture. Orthopedics operational growth of 2.6% reflects procedure growth, success of recently launched products, such as the global expansion of our VELYS digital solutions, and expansion in ambulatory surgical centers, partially offset by the impacts of volume-based procurement in China in Spine and Trauma. Now turning to our consolidated statement of earnings for the third quarter of 2023, I'd like to highlight a few noteworthy items that have changed, compared to the same quarter of last year. Cost of product sold margin was flat due to favorable patient mix and lower COVID-19 vaccine supply network related exit costs in the innovative medicine business, partially offset by commodity inflation, unfavorable product mix, and restructuring related to excess inventory costs in the MedTech business. Selling, marketing, and administrative margins deleveraged 40 basis points, driven by increased expenses across the enterprise. We continue to invest strategically in research and development at competitive levels, investing $3.4 billion or 16.2% of sales this quarter. R&D was leveraged by 120 basis points, primarily driven by portfolio prioritization, partially offset by higher milestone payments in the innovative medicine business. Additionally, IPR&D impairments were $206 million in the third quarter of 2023. Interest income was $182 million in the third quarter of 2023, as compared to $99 million of income in the third quarter of 2022. The increase in income was driven by higher interest rates earned on cash balances, partially offset by higher interest rates on debt balances. The other income and expense line was an expense of $499 million in the third quarter of 2023, compared to an expense of $226 million in the third quarter of 2022. This was primarily driven by higher unrealized mark-to-market losses on public securities partially offset by the lower COVID-19 vaccine-related exit costs and lower litigation expense. Restructuring in the third quarter was $158 million, primarily related to the innovative medicine restructuring program announced in the first quarter. Regarding taxes in the quarter, our effective tax rate was 17.4% versus 16.7% in the same period last year. This increase was primarily driven by a non-deductible, non-recurring pre-tax charge that occurred in the current quarter. Excluding special items, the effective tax rate was 15.6% versus 15.9% in the same period last year. As a result of the completion of the exchange offer, Johnson & Johnson is presenting the consumer health business financial results as discontinuing operations, including a gain of approximately $21 billion. I encourage you to review our upcoming third quarter 10-Q filing for additional details on specific tax and separation-related matters. Lastly, I'll direct your attention to the box section of the slide where we have also provided our income before tax, net earnings, and earnings per share adjusted to exclude the impact of intangible amortization expense and special items. Now let's look at adjusted income before tax by segment. In the third quarter of 2023, our adjusted income before tax for the enterprise as a percentage of sales increased from 35.3% to 37.6%, primarily driven by favorable patient mix and innovative medicine, partially offset by unfavorable product mix and commodity inflation in MedTech. Innovative medicine margins improved from 41.4% to 45.4%, primarily driven by favorable patient mix and R&D portfolio prioritization. MedTech margins declined from 25% to 24.7%, primarily driven by commodity inflation and unfavorable product mix partially offset by a divestiture gain. This concludes the sales and earnings portion of the Johnson & Johnson third quarter results. I'm now pleased to turn the call over to Joe Wolk. Joe?","evidence_gemma_new":"net earnings diluted earnings per share","evidence_llama_3_3":"net earnings third quarter of 2023","evidence_qwen_3_30b":"net earnings diluted earnings per share","gemma_new_max":4300000000.0,"gemma_new_min":4300000000.0,"llama_3_3_max":4300000000.0,"llama_3_3_min":4300000000.0,"qwen_3_30b_max":4300000000.0,"qwen_3_30b_min":4300000000.0}
{"symbol":"JNJ","year":2023,"quarter":4,"date":"2023-Q4","chunk_id":3,"sub_chunk_id":0,"centroid_label":"net earnings","agreed_value":4100000000.0,"count":3,"chunk":"Jessica Moore: Thanks, Joaquin. Unless otherwise stated, the financial results and guidance highlighted reflects the continuing operations of Johnson & Johnson. We will report the consumer health financial results as discontinued operations. Furthermore, the percentages quoted represent operational results and therefore, exclude the impact of currency translation. Starting with Q4 2023 sales results. Worldwide sales were $21.4 billion for the fourth quarter of 2023. Sales increased 7.2%, with 11% in the U.S. and 2.7% outside of the U.S. Excluding the net impact of acquisitions and divestitures, adjusted operational sales growth was 5.7% worldwide, 8.8% in the U.S. and 2.1% outside the U.S. It is important to note that sales in Europe were negatively impacted by the COVID-19 vaccine and loss of exclusivity of ZYTIGA by approximately 1,500 basis points operationally. Turning now to earnings. For the quarter, net earnings were $4.1 billion, and diluted earnings per share was $1.70 versus diluted earnings per share of $1.22 a year ago. Excluding after-tax intangible asset amortization expense and special items for both periods, adjusted net earnings for the quarter were $5.6 billion and the diluted earnings per share was $2.29, representing increases of 2.4% and 11.7%, respectively, compared to the fourth quarter of 2022. On an operational basis, adjusted diluted earnings per share increased 11.2%. For the full year 2023, sales were $85.2 billion. Sales grew 7.4%, with 10.6% in the U.S. and 3.8% outside of the U.S. Excluding the net impact of acquisitions and divestitures, adjusted operational sales growth was 5.9% worldwide, 8.2% in the U.S. and 3.4% outside the U.S. Sales in Europe were negatively impacted by the COVID-19 vaccine and loss of exclusivity of ZYTIGA by approximately 1,000 basis points operationally. Net earnings for the full year 2023 were $13.3 billion and diluted earnings per share was $5.20 versus diluted earnings per share of $6.14 a year ago. Full year 2023 adjusted net earnings were $25.4 billion, and adjusted diluted earnings per share was $9.92, representing increases of 6.8% and 11.1%, respectively, versus full year 2022. On an operational basis, adjusted diluted earnings per share increased by 10.8%. I will now comment on business sales performance in the quarter. Beginning with Innovative Medicine. Worldwide Innovative Medicine sales of $13.7 billion increased 4% with growth of 9.5% in the U.S. and a decline of 3.1% outside of the U.S. Excluding COVID-19 vaccine sales, worldwide and U.S. sales growth was 9.5%, and growth outside of the U.S. was 9.4%. Sales outside the U.S., excluding the COVID-19 vaccine were negatively impacted by approximately 120 basis points due to the loss of exclusivity of ZYTIGA in Europe. Innovative Medicine growth was driven by our key brands and continued uptake from recently launched products, with nine assets delivering double-digit growth. We continue to drive strong sales growth for both DARZALEX and ERLEADA, with increases of 22.2% and 19%, respectively. Within immunology, we saw sales growth in both STELARA and TREMFYA, with increases of 14.5% and 20.5%, respectively. This growth was driven by market growth and share gains as well as favorable patient mix in TREMFYA. Growth of 17.4% in pulmonary hypertension was driven by favorable patient mix, share gains and market growth. Turning to newly launched products. We continue to make progress on our launches of CARVYKTI and SPRAVATO. We are also encouraged by the early success of our launches of TECVAYLI and TALVEY, sales of which are driving the growth in other Oncology. As a reminder, we expect to begin disclosing TECVAYLI sales in Q1 2024. Total Innovative Medicine sales growth was partially offset by unfavorable patient mix in XARELTO, a decrease in IMBRUVICA sales due to competitive pressures and a loss of exclusivity of ZYTIGA, REMICADE and PREZISTA. I'll now turn your attention to MedTech. Worldwide MedTech sales of $7.7 billion increased 13.4% with Abiomed contributing 4.5% to growth. Growth in the U.S. was 14.1% and 12.8% outside of the U.S. Excluding the impact of acquisitions and divestitures, worldwide adjusted operational sales growth was 9.1%. MedTech was negatively impacted by international sanctions in Russia worth approximately 50 basis points, primarily in Advanced Surgery and Vision. Electrophysiology delivered double-digit growth of 25.2% with strong growth in all regions, including Europe. This growth was driven by our global market leading portfolio, including the most recently launched QDOT RF ablation and OCTARAY catheters. Abiomed contributed $340 million in sales within the quarter driven by continued strong adoption of Impella 5.5 technology. Growth of 6.4% in surgery was driven primarily by procedure recovery and strength of our biosurgery and wound closure portfolios. Growth was partially offset by volume based procurement in China, primarily in Endocutters. Orthopaedics growth of 5% reflects procedure growth, success of recently launched products such as the global expansion of our VELYS digital solutions and expansion in ambulatory surgical centers, as well as lapping of prior year China\u2019s VBP price concessions in Spine. Growth of 6.6% in Vision was driven by price actions and contact lenses, as well as strength of new products including ACUVUE OASYS 1-Day family of products and contact lenses and TECNIS EYHANCE, our monofocal interocular lens and surgical vision. Growth of contact lenses was partially offset by U.S. stocking dynamics. Global Vision growth was negatively impacted by 140 basis points due to the Blink divestiture in Q3. Now turning to our consolidated statement of earnings for the fourth quarter of 2023. I'd like to highlight a few noteworthy items that have changed compared to the same quarter of last year. Cost of products sold margin deleveraged by 130 basis points due to commodity inflation and unfavorable product mix in MedTech, partially offset by favorable patient mix and lower COVID-19 vaccine supply network related exit cost in Innovative Medicine. We continue to invest strategically in research and development at competitive levels, investing $4.5 billion or 20.9% of sales this quarter. We invested $3.4 billion or 24.5% of sales in Innovative Medicine with the increase in investment being driven by higher milestones, partially offset by portfolio prioritization. In MedTech, R&D investment was $1.1 billion or 14.6% of sales with the increase in investment primarily driven by the Laminar acquisition. Interest income was $212 million in the fourth quarter of 2023 as compared to $77 million of income in the fourth quarter of 2022. The increase in income was driven by higher interest rates earned on cash balances and a lower average debt balance. The other income and expense line was income of $421 million in the fourth quarter of 2023 compared to an expense of $795 million in the fourth quarter of 2022. This was primarily driven by higher unrealized gains on securities and lower (ph) COVID-19 vaccine-related exit costs. Regarding taxes in the quarter, our effective tax rate was 14.4% versus 16% in the same period last year. This decrease was primarily driven by the net decrease of tax liabilities, including the settlement of the 2013 through 2016 U.S. tax audit. Excluding special items, the effective tax rate was 10.8% versus 16.2% in the same period last year. I encourage you to review our upcoming 2023 10-K filing for additional details on specific tax-related matters. Lastly, I will direct your attention to the box section of the slide, where we have also provided our income before tax, net earnings and earnings per share adjusted to exclude the impact of intangible amortization expense and special items. Now let's look at adjusted income before tax by segment. In the fourth quarter of 2023, our adjusted income before tax for the enterprise as a percentage of sales decreased from 32.5% to 29.2%. Innovative Medicine margins declined from 37.7% to 37.4%, primarily driven by higher R&D milestones, partially offset by favorable patient mix and leveraging and selling and marketing expense. MedTech margins declined from 24.5% to 15.5% primarily driven by in-process research and development expense from the Laminar acquisition, commodity inflation and unfavorable product mix, partially offset by selling and marketing expense leverage. This concludes the sale and earnings portion of the call. I'm now pleased to turn it over to Joe.","evidence_gemma_new":"net earnings For the quarter","evidence_llama_3_3":"net earnings Q4 2023","evidence_qwen_3_30b":"net earnings Q4 2023","gemma_new_max":4100000000.0,"gemma_new_min":4100000000.0,"llama_3_3_max":4100000000.0,"llama_3_3_min":4100000000.0,"qwen_3_30b_max":4100000000.0,"qwen_3_30b_min":4100000000.0}
{"symbol":"JNJ","year":2024,"quarter":4,"date":"2024-FY","chunk_id":3,"sub_chunk_id":0,"centroid_label":"net earnings","agreed_value":14100000000.0,"count":2,"chunk":"Jessica Moore: Thank you, Joaquin. Moving to our financial results. Unless otherwise stated, the results and guidance highlighted today reflect the continuing operations of Johnson & Johnson. Furthermore, the percentages quoted represent operational results and therefore excludes the impact of currency translation. Starting with Q4 2024 sales results. Worldwide sales were $22.5 billion for the quarter. Sales increased 6.7% with growth of 10% in the US and 2.5% outside of the US. Worldwide growth was negatively impacted by 290 basis points due to STELARA and positively impacted by 100 basis points due to acquisitions and divestitures. It's important to note growth in Europe was negatively impacted by 720 basis points due to the loss of exclusivity of STELARA and the COVID-19 vaccine. Turning now to earnings. For the quarter, net earnings were $3.4 billion and diluted earnings per share was $1.41 versus diluted earnings per share of $1.70 a year ago. Excluding after tax intangible asset amortization expense and special items for both periods, adjusted net earnings for the quarter were $4.9 billion and adjusted diluted earnings per share was $2.04, representing decreases of 11.1% and 10.9%, respectively, compared to the fourth quarter of 2023. Earnings per share in the quarter was negatively impacted by $0.22 of acquired IPR&D expense related to the V-Wave acquisition. For the full year 2024, sales were $88.8 billion. Sales grew 5.9% with growth of 8.3% in the US and 2.9% outside of the US. STELARA and the COVID-19 vaccine negatively impacted worldwide growth by 260 basis points. Acquisition and divestitures positively impacted worldwide growth by 50 basis points. Growth in Europe was negatively impacted by 670 basis points due to the COVID-19 vaccine and the loss of exclusivity of STELARA. Net earnings for the full year 2024 were $14.1 billion and diluted earnings per share was $5.79 versus diluted earnings per share of $5.20 a year ago. Full year 2024 adjusted net earnings were $24.2 billion and adjusted diluted earnings per share was $9.98, representing a decrease of 4.6% and an increase of 0.6% respectively versus full year 2023. Earnings per share in the year was negatively impacted by $0.67 due to acquired IPR&D charges on various transactions throughout the year. I will now comment on business sales performance in the quarter. Beginning with Innovative Medicine. Worldwide sales of $14.3 billion increased 6.5% excluding the COVID-19 vaccine with growth of 11.1% in the US and a decline of 0.3% outside of the US. STELARA negatively impacted worldwide growth by 490 basis points. Innovative Medicine growth was driven by our key brands and continued uptake from recently launched products with 10 assets delivering double-digit growth. Results across the portfolio continue to be positively impacted by price adjustments associated with Argentina hyperinflation consistent with market practice. Starting with oncology. We continue to drive strong sales growth across our multiple myeloma portfolio. DARZALEX growth was 23.5%, primarily driven by share gains of over three points across all lines of therapy and six points in the frontline setting as well as market growth. This marks Johnson & Johnson's first brand to achieve over $3 billion in sales in a quarter. CARVYKTI achieved sales of $334 million with growth of over 100% driven by share gains and capacity expansion. This reflects sequential growth of 17.3% aligned with our expectations of accelerating growth in the back half of the year. TECVAYLI sales were $146 million in the quarter with growth of 18%, reflecting a strong launch in the relapsed refractory setting. Demand remains strong despite continued adoption of longer duration dosing intervals. Finally, within our multiple myeloma portfolio, TALVEY continued its launch trajectory with another quarter of strong growth. As a reminder, we anticipate disclosing TALVEY sales in the first quarter of 2025, which are currently reported in the category Other Oncology. ERLEADA continues to deliver strong growth of 22.7%, primarily driven by share gains and market growth, reaching $3 billion in annual sales for the first time. RYBREVANT, our bispecific antibody for non-small cell lung cancer, contributed to growth in the category Other Oncology as we continue to expand approved indications. We also anticipate disclosing RYBREVANT sales in the first quarter of 2025. Within immunology, we saw sales growth in TREMFYA of 5.6%, driven by strong market growth and share gains in PsO and PsA, partially offset by unfavorable patient mix and inventory dynamics. We are excited about the recent UC launch and expect to see strong uptake of the IBD indications in 2025. STELARA declined 13.6% driven by the impact of current and anticipated biosimilar competition. As a reminder, biosimilar competition has entered the US in January 2025. REMICADE and SIMPONI worldwide sales were positively impacted by return of distribution rights in Europe. In Neuroscience, SPRAVATO growth of 45.3% continues to be driven by increased physician and patient demand. As Joaquin mentioned, SPRAVATO has exceeded $1 billion in annual sales for the first time. Other Neuroscience decline was driven by the loss of a SPINRAZA tender in Europe. In Pulmonary Hypertension, OPSUMIT grew 2.5%, driven by market growth and share gains, partially offset by inventory dynamics in the US and austerity measures in Europe. Starting in 2025, we will begin to report OPSYNVI, which is currently reported in the category Other Pulmonary Hypertension in OPSUMIT. UPTRAVI grew 12. 1%, driven by market growth, patient mix and share gains. Finally, XARELTO sales growth was driven by favorable patient mix. I'll now turn your attention to MedTech. Worldwide sales of $8.2 billion increased 7.6% both in the US and outside of the US. Acquisitions and divestitures had a net positive impact of 300 basis points on worldwide growth, 430 basis points in the US and 150 basis points outside of the US. Overall, MedTech growth was driven by commercial execution and strength of new product introductions, partially offset by increased competitive PFA pressures in US electrophysiology and continued headwinds in Asia Pacific, primarily in China. In Cardiovascular, electrophysiology delivered growth of 7.3%. Performance was driven by global procedure growth, new product uptake and commercial execution, partially offset by competitive PFA ablation catheter uptake in the US and VBP in China. Despite the IV saline shortage in the US, Abiomed delivered growth of 13.2% driven by strong growth in all regions and continued adoption of Impella 5.5 and Impella RP technology. Cardiovascular results also included $258 million associated with the acquisition of Shockwave. Contact Lenses and Other grew 7.4%, driven by trade inventory dynamics, continued strategic price actions, strong performance in ACUVUE OASYS 1-Day family of products as well as lapping prior year impacts from Russia sanctions. Surgical Vision growth of 13.6% was driven by TECNIS PureSee & TECNIS Eyhance. Commercial execution partially offset by competitive pressures in the US. Orthopedics grew 2.5% inclusive of hips growth of 5.6%, primarily driven by the success of recent product launches and commercial execution, partially offset by revenue disruption from the previously announced orthopedics transformation, impacts of China VBP and competitive pressures. Lastly, Surgery grew 0.4% with the Acclarent divestiture negatively impacting results by approximately 130 basis points. Performance was driven primarily by commercial execution, strength of new products across wound closure and biosurgery and continued price adjustments primarily associated with hyperinflation consistent with market practice. Growth was partially offset by competitive pressures in Energy and Endocutters as well as VBP and the anticorruption campaign in China. Now turning to our consolidated statement of earnings for the fourth quarter of 2024. I'd like to highlight a few noteworthy items that have changed compared to the same quarter of last year. We continue to invest strategically in research and development at competitive levels to fortify our future, investing $5.3 billion or nearly 24% of sales, which includes $540 million of acquired IPR&D expense associated with the V-Wave acquisition. Selling, marketing and administrative expense as a percent of sales deleveraged 150 basis points driven by increased commercial investment in the Innovative Medicine business. Interest income and expense was a net income of $144 million as compared to $212 million of income last year driven by lower interest rates earned on a lower average cash balance and higher interest rates on a higher average debt balance. Other income and expense was a net income of $161 million compared to $421 million of income in the prior year. This was primarily driven by lower gains on securities, a lower benefit related to employee benefit programs due to the discount rate, partially offset by lower litigation expense in 2024. Regarding taxes in the quarter, our effective tax rate was 11.7% versus 14.4% in the same period last year. This decrease was primarily driven by post-acquisition integration efforts that allowed the company to deduct certain acquisition costs for tax purposes as well as the resolution of prior tax matters both in jurisdictions outside of the US. Excluding special items, the effective tax rate was 8.8% versus 10.8% in the same period last year. I encourage you to review our upcoming 2024 10-K filing for additional details on specific tax related matters. Lastly, I'll direct your attention to the box section of the slide, where we have also provided our income before tax, net earnings and earnings per share adjusted to exclude the impact of intangible, amortization expense and special items. Now let's look at adjusted income before tax by segment for the quarter. Innovative Medicine margin declined from 37.4% to 32.5% primarily driven by strategic commercial investment and R&D pipeline advancement. MedTech margin declined from 15.5% to 10. 8% primarily driven by acquired IPR&D expense related to the V-Wave acquisition. Please note that the MedTech margin was negatively impacted in both years due to expenses associated with the strategic acquisition of Laminar. When adjusting for these one-time items, MedTech margin was relatively flat. As a result, adjusted income before tax for the enterprise as a percentage of sales decreased from 29.2% to 24.1% with the V-Wave acquired IPR&D expense impacting results by 240 basis points. When looking at the full year, Innovative Medicine, MedTech and the Enterprise adjusted income before tax remained relatively flat year-over-year when adjusting for the one-time items highlighted on the slide, mainly acquired IPR&D expenses on various transactions across both years. This concludes the sales and earnings portion of the call. I am now pleased to turn it over to Joe.","evidence_gemma_new":"full year 2024 net earnings","evidence_llama_3_3":"net earnings 2024","evidence_qwen_3_30b":null,"gemma_new_max":14100000000.0,"gemma_new_min":14100000000.0,"llama_3_3_max":14100000000.0,"llama_3_3_min":14100000000.0,"qwen_3_30b_max":null,"qwen_3_30b_min":null}
{"symbol":"JNJ","year":2024,"quarter":1,"date":"2024-Q1","chunk_id":1,"sub_chunk_id":0,"centroid_label":"net earnings","agreed_value":5400000000.0,"count":2,"chunk":"Jessica Moore: Hello everyone. This is Jessica Moore, Vice President of Investor Relations for Johnson & Johnson. Welcome to our company's review of the first quarter business results and our full year financial outlook for 2024. A few logistics before we get into the details. As a reminder you can find additional materials including today\u2019s presentation and associated schedules on the Investor Relations section of the Johnson & Johnson website at investor.jnj.com. Please note that this presentation contains forward-looking statements regarding, among other things, the company's future operating and financial performance, market position and business strategy. You are cautioned not to rely on these forward-looking statements, which are based on the current expectations of future events using the information available as of the date of this recording, and are subject to certain risk and uncertainties that may cause the company's actual results to differ materially from those projected. A description of these risks, uncertainties and other factors can be found in our SEC filings, including our 2023 Form 10-K, which is available at investor.jnj.com and on the SECs website. Additionally, several of the products and compounds discussed today are being developed in collaboration with strategic partners or licensed from other companies. This slide acknowledges those relationships. Moving to today's agenda I will start by reviewing the first quarter sales and P&L results for the corporation as well as highlights related to our two businesses. Joe Wolk our CFO will then provide additional business and financial commentary before sharing an overview of our cash position, capital allocation priorities, and guidance for 2024. The remaining time will be available for your questions. Joaquin Duato our Chairman and CEO as well as Jennifer Taubert, John Reed, and Tim Schmid, our Innovative Medicine and MedTech leaders will be joining us for Q&A. To ensure we provide enough time to address your questions, we anticipate the webcast will last approximately 60 minutes. Unless otherwise stated the financial results and guidance highlighted today reflect the continuing operations of Johnson & Johnson. Furthermore, the percentages quoted represent operational results and therefore exclude the impact of currency translation. Turning to our first quarter sales results. Worldwide sales were $21.4 billion for the first quarter of 2024. Sales increased 3.9% with growth of 7.8% in the U.S. and a decline of 0.3% outside of the U.S. Excluding the impact of the COVID-19 vaccine, operational sales growth was 7.6% worldwide and 7.4% outside of the U.S. Sales growth in Europe excluding the COVID-19 vaccine was 6%. Turning now to earnings. For the quarter net earnings were $5.4 billion and diluted earnings per share was $2.20 versus basic loss per share of $0.19 a year ago. Excluding after tax intangible asset amortization expense and special items for both periods, adjusted net earnings for the quarter were $6.6 billion, and adjusted diluted earnings per share was $2.71, representing increases of 3.8% and 12.4%, respectively compared to the first quarter of 2023. On an operational basis, adjusted diluted earnings per share increased 12.8%. I will now comment on business sales performance in the quarter. Beginning with Innovative Medicine, worldwide Innovative Medicine sales of $13.6 billion increased 2.5%, with growth of 8.4% in the U.S. and a decline of 4% outside of the U.S. Excluding the impact of the COVID-19 vaccine, operational sales growth was 8.3%, both worldwide and outside of the U.S. Innovative Medicine growth was driven by our key brands and continued uptake from recently launched products, with nine assets delivering double-digit growth. We continued to drive strong sales growth across our multiple myeloma portfolio. DARZALEX growth was 21%, primarily driven by share gains of six points across all lines of therapy and ten points in the front line setting. As of this quarter, we are now disclosing TECVAYLI sales, which were previously reported in other oncology. Sales achieved $133 million in the quarter, compared to $63 million in the first quarter of last year, reflecting a strong launch in the relapsed refractory setting. CARVYKTI achieved sales of $157 million, compared to $72 million in the first quarter of last year, driven by continued capacity expansion, manufacturing efficiencies, and strong demand. While sequential growth was roughly flat due to phasing, we continued to anticipate quarter-over-quarter growth with acceleration in the back half of the year. Other oncology growth was driven by continuing strong uptake of TALVEY, our GPRC5D bispecific, and RYBREVANT our bispecific antibody for non-small cell lung cancer. Also in oncology, ERLEADA continues to deliver strong growth of 28.4%, primarily driven by share gains. Growth of 22.4% in pulmonary hypertension was driven by favorable patient mix, share gains, and market growth for both OPSUMIT and UPTRAVI. As a reminder, favorable patient mix was a driver in Q2 2023 through Q1 2024. Therefore, while we still anticipate growth, we expect to lap this dynamic beginning in Q2 2024. Within immunology, we saw sales growth in TREMFYA of 27.6%, driven by market growth and share gains. STELARA growth of 1.1% was driven by market growth and share gains in IBD, partially offset by unfavorable patient mix in the U.S. and as expected, share loss in PSO and PSA. We anticipate continued volume growth largely offset by price declines as we move towards biosimilar entry. In neuroscience SPRAVATO growth of 72% continues to be driven by share gains and additional market launches. Total Innovative Medicine sales growth was partially offset by unfavorable patient mix in XARELTO, which we anticipate continuing throughout the year, as well as a decrease in IMBRUVICA due to competitive pressures, partially offset by stocking dynamics in the U.S. Finally, it is worth noting distribution rights for REMICADE and SIMPONI in Europe will be returned in Q4. I'll now turn your attention to MedTech. Worldwide Med1ech sales of $7.8 billion increased 6.3%, with growth in the U.S. of 6.6% and 6.1% outside of the U.S. In the quarter, worldwide MedTech growth was negatively impacted by approximately 80 basis points due to fewer selling days, disproportionately impacting orthopedics. In cardiovascular previously referred to as Interventional Solutions, electrophysiology delivered double-digit growth of 25.9%, with strong growth in all regions. Performance was driven by global procedure growth, new product uptake, commercial execution, and a onetime inventory build in Asia-Pacific, impacting worldwide growth by approximately 370 basis points. In addition, Abiomed delivered growth of 15%, driven by continued strong adoption of Impella 5.5 and Impella RP technology. Orthopedics growth of 4.8% includes a onetime revenue recognition timing change related to certain products across all platforms in the U.S. positively impacting worldwide growth by approximately 300 basis points. As a reminder, orthopedics was over indexed by the impact of reduced selling days in the quarter. Strong performance in hips and knees was driven by procedure recovery, growth of new products, and commercial execution. While trauma and spine were negatively impacted by competitive pressures and core trauma was further impacted by weather related softness in the U.S. Growth of 1.9% in surgery was driven primarily by procedure recovery and strength of our bio surgery and wound closure portfolios, partially offset by competitive pressures in China volume based procurement and energy and endo cutters. Contact lenses declined 2.3%, driven by U.S. stocking dynamics, partially offset by strong performance in ACUVUE OASYS 1-day family of products. Worldwide growth was negatively impacted by 120 basis points due to the Blink divestiture in Q3 2023. Surgical Vision grew 1.1%, driven by CNIS EYHANCE, a monofocal intraocular lens partially offset by China's VBP. Now turning to our consolidated statement of earnings for the first quarter of 2024. I'd like to highlight a few noteworthy items that have changed compared to the same quarter of last year. Cost of product sold margin leveraged by 160 basis points, primarily driven by lower COVID-19 supply network related exit cost. Selling, marketing, and administrative margins deleveraged 110 basis points, driven primarily by timing of marketing investment in the Innovative Medicine business. We continued to invest strategically in research and development at competitive levels investing $3.5 billion, or 16.6% of sales this quarter. We invested $2.9 billion, or 21.4% of sales in Innovative Medicine, with the increase in investment being driven by continued pipeline progression. In MedTech, R&D investment was $0.6 billion, or 8.3% of sales, a slight decrease driven by phasing. Interest income was $209 million in the first quarter of 2024, as compared to $14 million of expense in the first quarter of 2023. The increase in income was driven by a lower average debt balance and higher interest rates earned on cash balances. Other income and expense was income of $322 million in the first quarter of 2024, compared to an expense of $6.9 billion in the first quarter of 2023. This change was primarily due to the $6.9 billion charge related to the talc settlement proposal recorded in the first quarter of 2023. Regarding taxes in the quarter, our effective tax rate was 16.9% versus 61.8% in the same period last year, which was primarily driven by the tax benefit on the talc settlement proposal recorded in the first quarter of 2023. Excluding special items, the effective tax rate was 16.5% versus 15.9% in the same period last year. I encourage you to review our upcoming first quarter 10-Q filing for additional details on specific tax related matters. Lastly, I'll direct your attention to the box section of the slide, where we have also provided our income before tax, net earnings, and earnings per share adjusted to exclude the impact of intangible amortization expense and special items. Now let's look at adjusted income before tax by segment. In the first quarter of 2024 our adjusted income before tax for the enterprise, as a percentage of sales increased from 36.1% to 36.8%, primarily driven by an increase in non-allocated interest income with both Innovative Medicine and MedTech margins remaining relatively flat year-over-year. When comparing against the fourth quarter and full year 2023, Innovative Medicine and MedTech adjusted income before tax margins have improved. This concludes the sales and earnings portion of the call. I am now pleased to turn it over to Joe.","evidence_gemma_new":"net earnings diluted earnings per share","evidence_llama_3_3":null,"evidence_qwen_3_30b":"net earnings $5.4 billion","gemma_new_max":5400000000.0,"gemma_new_min":5400000000.0,"llama_3_3_max":null,"llama_3_3_min":null,"qwen_3_30b_max":5400000000.0,"qwen_3_30b_min":5400000000.0}
{"symbol":"JNJ","year":2024,"quarter":2,"date":"2024-Q2","chunk_id":1,"sub_chunk_id":0,"centroid_label":"net earnings","agreed_value":4700000000.0,"count":3,"chunk":"Jessica Moore: Hello, everyone. This is Jessica Moore, Vice President of Investor Relations for Johnson & Johnson. Welcome to our company's review of the second quarter business results and our full-year financial outlook for 2024. A few logistics before we get into the details. As a reminder you can find additional materials including today\u2019s presentation and associated schedules on the investor relations section of the Johnson & Johnson website at investor.jnj.com. Please note that this presentation contains forward-looking statements regarding among other things, the company\u2019s future operating and financial performance, market position, and business strategy. You are cautioned not to rely on these forward-looking statements, which are based on the current expectations of future events using the information available as of the date of this recording and are subject to certain risk and uncertainties that may cause the company's actual results to differ materially from those projected. A description of these risks, uncertainties, and other factors can be found in our SEC filings, including our 2023 Form 10-K, which is available at investor.jnj.com and on the SEC's website. Additionally, several of the products and compounds discussed today are being developed in collaboration with strategic partners or licensed from other companies. This slide acknowledges those relationships. Moving to today's agenda, I will start by reviewing the second quarter sales and P&L results for the corporation, as well as highlights related to our two businesses. Joe Wolk, our CFO, will then provide additional business and financial commentary before sharing an overview of our cash position, capital allocation priorities, and guidance for 2024. Joaquin Duato, our Chairman and CEO, will then provide some closing remarks before we open it up for questions. Jennifer Taubert, John Reed, and Tim Schmid, our innovative medicine and MedTech leaders will be joining us for Q&A. To ensure we provide enough time to address your questions, we anticipate the webcast will last approximately 60 minutes. Unless otherwise stated, the financial results and guidance highlighted today reflect the continuing operations of Johnson & Johnson. Furthermore, the percentages quoted represent operational results and therefore exclude the impact of currency translation. Turning to our second quarter sales results. Worldwide sales were $22.4 billion for the second quarter of 2024. Sales increased 6.6%, with growth of 7.8% in the U.S. and 5.1% outside of the U.S. Excluding the impact of the COVID-19 vaccine, sales growth was 7.2% worldwide and growth of 6.4% outside of the U.S. Sales growth in Europe, excluding the COVID-19 vaccine was 6%. Turning now to earnings. For the quarter, net earnings were $4.7 billion and diluted earnings per share was $1.93 versus diluted earnings per share of $2.05 a year ago. Excluding after-tax intangible asset amortization expense and special items for both periods, adjusted net earnings for the quarter were $6.8 billion and adjusted diluted earnings per share was $2.82, representing increases of 1.6% and 10.2%, respectively, compared to the second quarter of 2023. I'll now comment on business sales performance in the quarter. Beginning with Innovative Medicine, worldwide Innovative Medicine sales of $14.5 billion increased 7.8%, with growth of 8.9% in the U.S. and 6.4% outside of the U.S. Excluding the impact of the COVID-19 vaccine, operational sales growth was 8.8% worldwide and 8.7% outside of the U.S. Innovative Medicine growth was driven by our key brands and continued uptake from recently launched products with 10 assets delivering double-digit growth. We continue to drive strong sales growth across our multiple myeloma portfolio. DARZALEX growth was 21.3%, primarily driven by share gains of 4.6 points across all lines of therapy and 9.4 points in the frontline setting, as well as market growth. CARVYKTI achieved sales of $186 million, with growth of 59.9%, driven by continued capacity expansion, manufacturing efficiencies, and strong demand. TECVAYLI sales achieved $135 million in the quarter, with growth of 43.5%, reflecting a strong launch in the relapsed-refractory setting. Demand remained strong while sequential growth slowed due to adoption of recently approved longer-duration dosing intervals. ERLEADA continues to deliver strong growth of 32.5%, primarily driven by share gains and market growth in metastatic castrate-sensitive prostate cancer. Other oncology growth was driven by continued strong uptake of TALVEY, our GPRC5D bispecific, and RYBREVANT, our bispecific antibody for non-small cell lung cancer. Within immunology, we saw sales growth in TREMFYA of 30.7%, driven by market growth, share gains in PSO and PSA, and favorable patient mix. STELARA growth of 4.9% was driven by market growth, partially offset by net unfavorable patient mix. We continue to anticipate biosimilar entry in Europe later this month, while in the U.S., we expect continued volume growth largely offset by price declines as we move towards biosimilar entry in 2025. In neuroscience, SPRAVATO growth of 60.8% continues to be driven by increased physician and patient confidence. In pulmonary hypertension, OPSUMIT grew 9.1% due to share gains and market growth, partially offset by unfavorable mix. UPTRAVI growth of 8.1% was driven by market growth and share gains, partially offset by inventory dynamics. Total Innovative Medicine sales growth was partially offset by a decline in other neuroscience, unfavorable patient mix in Xarelto and competitive pressures in IMBRUVICA. I'll now turn your attention to MedTech. Worldwide MedTech sales of $8 billion increased 4.4%, with growth in the U.S. of 5.7% and 3.2% outside of the U.S. Acquisitions and divestitures had a positive impact of 40 basis points on sales growth in the quarter. Growth was driven by commercial execution, strength of new product introductions, and continued strong procedure volume, partially offset by performance in China and competitive pressures in US distributor stocking dynamics and vision. In cardiovascular, electrophysiology delivered a double-digit growth of 13.4% with strong growth across all regions. The performance was driven by global procedure growth, new product uptake, and commercial execution, partially offset by the previous one-time inventory build in Asia-Pacific from the prior quarter. In addition, Abiomed delivered growth of 15.4%, driven by double-digit growth in all regions and continued strong adoption of Impella 5.5 and Impella RP technology. Results include $77 million associated with the acquisition of Shockwave, which closed on May 31. Contact lenses adjusted operational sales growth, excluding the Blink divestiture was 2.1%. Growth was driven by strong performance in the ACUVUE OASYS 1-Day family of products, partially offset by U.S. distributor stocking dynamics and competitive pressures, and Japan macroeconomic pressures. The Blink divestiture negatively impacted growth by approximately 130 basis points. Surgical vision grew 1.2%, driven by TECNIS Eyhance, our monofocal interocular lens, partially offset by China VBP and refractive softness in the U.S. Surgery adjusted operational sales growth, excluding the Acclarent divestiture was approximately flat. Performance was driven primarily by competitive pressures in energy and endocutters, China VBP, prior year China recovery, EMEA tender timing across advanced surgery and supply constraints, and wound closure. This was partially offset by strength of new products. The Acclarent divestiture negatively impacted growth by approximately 110 basis points. Orthopedics growth of 3.3% was driven by strong performance in hips and knees, due to procedure growth, strength of new products, and EMEA tender timing in knees. This growth was partially offset by competitive pressures and impacts of China VBP in spine and sports. Now, turning to our consolidated statement of earnings for the second quarter of 2024. I'd like to highlight a few noteworthy items that have changed, compared to the same quarter of last year. Cost of product sold margin deleveraged by 60 basis points, primarily driven by product mix within innovative medicine and macroeconomic factors across both sectors. We continue to invest strategically in research and development at competitive levels, investing $3.4 billion or 15.3% of sales this quarter. We invested $2.7 billion or 18.8% of sales in innovative medicine, compared to 22.2% of sales in 2023. As a reminder, last year included an upfront payment of $245 million associated with the AbelZeta partnership. In MedTech, R&D investment was $0.7 billion or 9% of sales, an increase driven by continued investment in strategic platforms. Other income and expense was a net expense of $653 million in the second quarter of 2024, compared to income of $384 million in the second quarter of 2023. The increase in expense was primarily driven by costs related to the closing of the Shockwave acquisition, the loss on the completion of the debt for equity exchange of the retained stake in Kenvue and prior year favorable intellectual property litigation settlements in MedTech. This was partially offset by the gain on the Acclarent divestiture. Regarding taxes in the quarter, our effective tax rate was 18.5% versus 14.7% in the same period last year. This increase was primarily driven by unfavorable one-time international audit settlements and the continued impact from Pillar 2. Excluding special items, the effective tax rate was 18.6% versus 15.9% in the same period last year. I encourage you to review our upcoming second-quarter 10-Q filing for additional details on specific tax-related matters. Lastly, I'll direct your attention to the box section of the slide, where we have also provided our income before tax, net earnings, and earnings per share adjusted to exclude the impact of intangible amortization expense and special items. Now let's look at adjusted income before tax by segment. In the second quarter of 2024, our adjusted income before tax for the enterprise as a percentage of sales increased from 37.2% to 37.4%. Innovative Medicine margin improved from 42.3% to 44.6%, primarily driven by an upfront payment of $245 million associated with the AbelZeta partnership in 2023, partially offset by product mix and cost of products sold. MedTech margin declined from 28.2% to 25.7%, driven by prior year favorable intellectual property litigation settlements worth approximately 300 basis points. This concludes the sales and earnings portion of the call. I'm now pleased to turn it over to Joe.","evidence_gemma_new":"net earnings diluted earnings per share","evidence_llama_3_3":"net earnings second quarter of 2024","evidence_qwen_3_30b":"net earnings $4.7 billion second quarter","gemma_new_max":4700000000.0,"gemma_new_min":4700000000.0,"llama_3_3_max":4700000000.0,"llama_3_3_min":4700000000.0,"qwen_3_30b_max":4700000000.0,"qwen_3_30b_min":4700000000.0}
{"symbol":"JNJ","year":2024,"quarter":3,"date":"2024-Q3","chunk_id":3,"sub_chunk_id":0,"centroid_label":"net earnings","agreed_value":2700000000.0,"count":2,"chunk":"Jessica Moore: Thank you, Joaquin. Moving to our financial results for the quarter. Unless otherwise stated, the financial results and guidance highlighted today reflect the continuing operations of Johnson & Johnson. Furthermore, the percentages quoted represent operational results and, therefore, exclude the impact of currency translation. Worldwide sales were $22.5 billion for the third quarter of 2024. Sales increased 6.3%, with growth of 7.6% in the U.S. and 4.6% outside of the U.S. Acquisitions and divestitures positively impacted worldwide growth by 90 basis points. Turning now to earnings. For the quarter, net earnings were $2.7 billion and diluted earnings per share was $1.11 versus diluted earnings per share of $1.69 a year ago. Results in the quarter were impacted by the updated talc litigation settlement proposal, as well as acquired IPR&D expense associated with the NM26 bispecific antibody. Excluding after-tax intangible asset amortization expense and special items for both periods, adjusted net earnings for the quarter were $5.9 billion and adjusted diluted earnings per share was $2.42, representing decreases of 13.3% and 9%, respectively, compared to the third quarter of 2023. Results were impacted by the acquired IPR&D expense of $1.25 billion or approximately 1,900 basis points associated with the NM26 bispecific antibody. I will now comment on business sales performance in the quarter. Beginning with Innovative Medicine. Worldwide sales of $14.6 billion increased 6.3%, with growth of 7.5% in the U.S. and 4.4% outside of the U.S. Innovative Medicine growth was driven by our key brands and continued uptake from recently launched products, with 11 assets delivering double-digit growth. Results across the portfolio continue to be positively impacted by price increases associated with Argentina hyperinflation, consistent with market practice. We continue to drive strong sales growth across our multiple myeloma portfolio. DARZALEX growth was 22.9%, primarily driven by share gains of 4 points across all lines of therapy, with 7.7 points of growth in the front line setting as well as market growth. CARVYKTI achieved sales of $286 million, with growth of 87.6%, driven by share gains, continued capacity expansion and manufacturing efficiencies. This reflects sequential growth of 53.2% aligned with our expectations of accelerating growth in the back half of the year. TECVAYLI sales were $135 million in the quarter with growth of 21.4%, reflecting a strong launch in the relapsed refractory setting. Demand remained strong, while sequential growth was flat due to continued adoption of longer duration dosing intervals. Finally, within our multiple myeloma portfolio, TALVEY continued its launch trajectory with another quarter of strong growth. We anticipate disclosing TALVEY sales in the first quarter of 2025, which are currently reported in other oncology. ERLEADA continues to deliver strong growth of 26.3%, primarily driven by share gains in metastatic castrate sensitive prostate cancer and favorable inventory dynamics. RYBREVANT, our bispecific antibody for non-small cell lung cancer, contributed to growth in other oncology as we expand approved indications. We also anticipate disclosing RYBREVANT sales in the first quarter of 2025. Within immunology, we saw sales growth in TREMFYA of 14.3%, driven by strong market growth and share gains in PsO and PsA, partially offset by unfavorable patient mix. STELARA declined 5.7%, driven by unfavorable net patient mix and share loss, partially offset by market growth. As a reminder, biosimilar competition has entered Europe as of July, and we anticipate U.S. biosimilar entry in January 2025. In neuroscience, SPRAVATO growth of 55.3% continues to be driven by increased physician and patient confidence. In pulmonary hypertension, OPSUMIT and UPTRAVI grew 17.4% and 15.2%, respectively, driven by market growth, share gains and patient mix. As mentioned last quarter, REMICADE and SIMPONI realized limited sales in Europe as we prepare for the return of distribution rights in Q4. I'll now turn your attention to MedTech. Worldwide sales of $7.9 billion increased 6.4% with growth in the U.S. of 7.8% and 5% outside of the U.S. Acquisitions and divestitures had a net positive impact of 270 basis points on worldwide growth, 360 basis points in the U.S. and 180 basis points outside of the U.S. Overall, MedTech growth was driven by commercial execution and strength of new product introductions, partially offset by continued headwinds in Asia Pacific, specifically in China. In Cardiovascular, electrophysiology delivered double-digit growth of 10.7%. Performance was driven by global procedure growth, new product uptake and commercial execution, partially offset by competitive PFA ablation catheter uptake in the U.S., as well as prior year trade inventory dynamics and VBP in China. Abiomed delivered growth of 16.3%, driven by strong growth in all regions and continued adoption of Impella 5.5 and Impella RP technology. Cardiovascular results also included $229 million associated with the acquisition of Shockwave. Contact lenses and other performance improved to 4.7%, driven by continued strategic price actions, strong performance in ACUVUE OASYS 1-Day family of products, a one-time benefit from a change in U.S. contract shipping terms worth approximately 150 basis points, as well as lapping prior year impacts from Russia sanctions. Surgical Vision grew 1.9%, driven by TECNIS PureSee and TECNIS Eyhance, partially offset by China VBP and softness in the U.S. Surgery declined 0.7%, with the Acclarent divestiture negatively impacting results by approximately 110 basis points. Performance was driven primarily by competitive pressures in energy and endocutters, as well as VBP and the anticorruption campaign in China. This was partially offset by commercial execution, strength of new products across wound closure and biosurgery and continued price increases associated with Argentina hyperinflation consistent with market practice. Orthopaedics growth of 1.3% was primarily driven by success of recent product launches and commercial execution, partially offset by competitive pressures, impacts of China VBP and revenue disruption from the previously announced Orthopaedics transformation. Now, turning to our consolidated statement of earnings for the third quarter of 2024. I'd like to highlight a few noteworthy items that have changed compared to the same quarter of last year. We continue to invest strategically in research and development at competitive levels, investing nearly $5 billion or 22% of sales, which includes a $1.25 billion payment to secure the global rights to NM26 bispecific antibody. Even when excluding this investment, R&D as a percent of sales increased 30 basis points. Selling, marketing and administrative expense as a percent of sales was leveraged 100 basis points, driven by the realization of optimization efforts following the Kenvue separation. Interest income was $99 million as compared to $182 million of income last year, driven by a higher net debt position primarily related to the financing impacts of the Shockwave acquisition. Other income and expense was a net expense of $1.8 billion compared to an expense of $0.5 billion in the prior year. The increase in expense was driven by a $1.75 billion charge related to the talc litigation settlement proposal, partially offset by prior year higher unrealized mark to market losses on public securities, as well as the monetization of royalty rights. Regarding taxes in the quarter, our effective tax rate was 19.3% versus 17.4% in the same period last year. This increase was primarily driven by the tax treatment of the NM26 bispecific antibody acquisition and OECD Pillar 2. Excluding special items, the effective tax rate was 19.3% versus 15.6% in the same period last year. I encourage you to review our upcoming third quarter 10-Q filing for additional details on specific tax-related matters. Lastly, I'll direct your attention to the box section of the slide where we have also provided our income before tax, net earnings and earnings per share adjusted to exclude the impact of intangible amortization expense and special items. Now, let's look at adjusted income before tax [by segment] (ph). Innovative Medicine margin declined from 45.4% to 37.9%, primarily driven by the $1.25 billion acquired IPR&D expense to secure the global rights for NM26 bispecific antibody, partially offset by the monetization of royalty rights. MedTech margin declined from 24.7% to 24.1%, driven by increased R&D investment and lapping of a prior year divestiture gain, partially offset by supply chain efficiencies. As a result, adjusted income before tax for the enterprise as a percentage of sales decreased from 37.6% to 32.4%, with acquired IPR&D expense impacting results by 560 basis points. Starting in 2025, aligned with recent FASB reporting disclosure requirements, we will begin providing additional P&L details by segment. This concludes the sales and earnings portion of the call. I'm now pleased to turn it over to Joe.","evidence_gemma_new":"net earnings","evidence_llama_3_3":null,"evidence_qwen_3_30b":"net earnings third quarter of 2024","gemma_new_max":2700000000.0,"gemma_new_min":2700000000.0,"llama_3_3_max":null,"llama_3_3_min":null,"qwen_3_30b_max":2700000000.0,"qwen_3_30b_min":2700000000.0}
{"symbol":"JNJ","year":2024,"quarter":4,"date":"2024-Q4","chunk_id":3,"sub_chunk_id":0,"centroid_label":"net earnings","agreed_value":3400000000.0,"count":3,"chunk":"Jessica Moore: Thank you, Joaquin. Moving to our financial results. Unless otherwise stated, the results and guidance highlighted today reflect the continuing operations of Johnson & Johnson. Furthermore, the percentages quoted represent operational results and therefore excludes the impact of currency translation. Starting with Q4 2024 sales results. Worldwide sales were $22.5 billion for the quarter. Sales increased 6.7% with growth of 10% in the US and 2.5% outside of the US. Worldwide growth was negatively impacted by 290 basis points due to STELARA and positively impacted by 100 basis points due to acquisitions and divestitures. It's important to note growth in Europe was negatively impacted by 720 basis points due to the loss of exclusivity of STELARA and the COVID-19 vaccine. Turning now to earnings. For the quarter, net earnings were $3.4 billion and diluted earnings per share was $1.41 versus diluted earnings per share of $1.70 a year ago. Excluding after tax intangible asset amortization expense and special items for both periods, adjusted net earnings for the quarter were $4.9 billion and adjusted diluted earnings per share was $2.04, representing decreases of 11.1% and 10.9%, respectively, compared to the fourth quarter of 2023. Earnings per share in the quarter was negatively impacted by $0.22 of acquired IPR&D expense related to the V-Wave acquisition. For the full year 2024, sales were $88.8 billion. Sales grew 5.9% with growth of 8.3% in the US and 2.9% outside of the US. STELARA and the COVID-19 vaccine negatively impacted worldwide growth by 260 basis points. Acquisition and divestitures positively impacted worldwide growth by 50 basis points. Growth in Europe was negatively impacted by 670 basis points due to the COVID-19 vaccine and the loss of exclusivity of STELARA. Net earnings for the full year 2024 were $14.1 billion and diluted earnings per share was $5.79 versus diluted earnings per share of $5.20 a year ago. Full year 2024 adjusted net earnings were $24.2 billion and adjusted diluted earnings per share was $9.98, representing a decrease of 4.6% and an increase of 0.6% respectively versus full year 2023. Earnings per share in the year was negatively impacted by $0.67 due to acquired IPR&D charges on various transactions throughout the year. I will now comment on business sales performance in the quarter. Beginning with Innovative Medicine. Worldwide sales of $14.3 billion increased 6.5% excluding the COVID-19 vaccine with growth of 11.1% in the US and a decline of 0.3% outside of the US. STELARA negatively impacted worldwide growth by 490 basis points. Innovative Medicine growth was driven by our key brands and continued uptake from recently launched products with 10 assets delivering double-digit growth. Results across the portfolio continue to be positively impacted by price adjustments associated with Argentina hyperinflation consistent with market practice. Starting with oncology. We continue to drive strong sales growth across our multiple myeloma portfolio. DARZALEX growth was 23.5%, primarily driven by share gains of over three points across all lines of therapy and six points in the frontline setting as well as market growth. This marks Johnson & Johnson's first brand to achieve over $3 billion in sales in a quarter. CARVYKTI achieved sales of $334 million with growth of over 100% driven by share gains and capacity expansion. This reflects sequential growth of 17.3% aligned with our expectations of accelerating growth in the back half of the year. TECVAYLI sales were $146 million in the quarter with growth of 18%, reflecting a strong launch in the relapsed refractory setting. Demand remains strong despite continued adoption of longer duration dosing intervals. Finally, within our multiple myeloma portfolio, TALVEY continued its launch trajectory with another quarter of strong growth. As a reminder, we anticipate disclosing TALVEY sales in the first quarter of 2025, which are currently reported in the category Other Oncology. ERLEADA continues to deliver strong growth of 22.7%, primarily driven by share gains and market growth, reaching $3 billion in annual sales for the first time. RYBREVANT, our bispecific antibody for non-small cell lung cancer, contributed to growth in the category Other Oncology as we continue to expand approved indications. We also anticipate disclosing RYBREVANT sales in the first quarter of 2025. Within immunology, we saw sales growth in TREMFYA of 5.6%, driven by strong market growth and share gains in PsO and PsA, partially offset by unfavorable patient mix and inventory dynamics. We are excited about the recent UC launch and expect to see strong uptake of the IBD indications in 2025. STELARA declined 13.6% driven by the impact of current and anticipated biosimilar competition. As a reminder, biosimilar competition has entered the US in January 2025. REMICADE and SIMPONI worldwide sales were positively impacted by return of distribution rights in Europe. In Neuroscience, SPRAVATO growth of 45.3% continues to be driven by increased physician and patient demand. As Joaquin mentioned, SPRAVATO has exceeded $1 billion in annual sales for the first time. Other Neuroscience decline was driven by the loss of a SPINRAZA tender in Europe. In Pulmonary Hypertension, OPSUMIT grew 2.5%, driven by market growth and share gains, partially offset by inventory dynamics in the US and austerity measures in Europe. Starting in 2025, we will begin to report OPSYNVI, which is currently reported in the category Other Pulmonary Hypertension in OPSUMIT. UPTRAVI grew 12. 1%, driven by market growth, patient mix and share gains. Finally, XARELTO sales growth was driven by favorable patient mix. I'll now turn your attention to MedTech. Worldwide sales of $8.2 billion increased 7.6% both in the US and outside of the US. Acquisitions and divestitures had a net positive impact of 300 basis points on worldwide growth, 430 basis points in the US and 150 basis points outside of the US. Overall, MedTech growth was driven by commercial execution and strength of new product introductions, partially offset by increased competitive PFA pressures in US electrophysiology and continued headwinds in Asia Pacific, primarily in China. In Cardiovascular, electrophysiology delivered growth of 7.3%. Performance was driven by global procedure growth, new product uptake and commercial execution, partially offset by competitive PFA ablation catheter uptake in the US and VBP in China. Despite the IV saline shortage in the US, Abiomed delivered growth of 13.2% driven by strong growth in all regions and continued adoption of Impella 5.5 and Impella RP technology. Cardiovascular results also included $258 million associated with the acquisition of Shockwave. Contact Lenses and Other grew 7.4%, driven by trade inventory dynamics, continued strategic price actions, strong performance in ACUVUE OASYS 1-Day family of products as well as lapping prior year impacts from Russia sanctions. Surgical Vision growth of 13.6% was driven by TECNIS PureSee & TECNIS Eyhance. Commercial execution partially offset by competitive pressures in the US. Orthopedics grew 2.5% inclusive of hips growth of 5.6%, primarily driven by the success of recent product launches and commercial execution, partially offset by revenue disruption from the previously announced orthopedics transformation, impacts of China VBP and competitive pressures. Lastly, Surgery grew 0.4% with the Acclarent divestiture negatively impacting results by approximately 130 basis points. Performance was driven primarily by commercial execution, strength of new products across wound closure and biosurgery and continued price adjustments primarily associated with hyperinflation consistent with market practice. Growth was partially offset by competitive pressures in Energy and Endocutters as well as VBP and the anticorruption campaign in China. Now turning to our consolidated statement of earnings for the fourth quarter of 2024. I'd like to highlight a few noteworthy items that have changed compared to the same quarter of last year. We continue to invest strategically in research and development at competitive levels to fortify our future, investing $5.3 billion or nearly 24% of sales, which includes $540 million of acquired IPR&D expense associated with the V-Wave acquisition. Selling, marketing and administrative expense as a percent of sales deleveraged 150 basis points driven by increased commercial investment in the Innovative Medicine business. Interest income and expense was a net income of $144 million as compared to $212 million of income last year driven by lower interest rates earned on a lower average cash balance and higher interest rates on a higher average debt balance. Other income and expense was a net income of $161 million compared to $421 million of income in the prior year. This was primarily driven by lower gains on securities, a lower benefit related to employee benefit programs due to the discount rate, partially offset by lower litigation expense in 2024. Regarding taxes in the quarter, our effective tax rate was 11.7% versus 14.4% in the same period last year. This decrease was primarily driven by post-acquisition integration efforts that allowed the company to deduct certain acquisition costs for tax purposes as well as the resolution of prior tax matters both in jurisdictions outside of the US. Excluding special items, the effective tax rate was 8.8% versus 10.8% in the same period last year. I encourage you to review our upcoming 2024 10-K filing for additional details on specific tax related matters. Lastly, I'll direct your attention to the box section of the slide, where we have also provided our income before tax, net earnings and earnings per share adjusted to exclude the impact of intangible, amortization expense and special items. Now let's look at adjusted income before tax by segment for the quarter. Innovative Medicine margin declined from 37.4% to 32.5% primarily driven by strategic commercial investment and R&D pipeline advancement. MedTech margin declined from 15.5% to 10. 8% primarily driven by acquired IPR&D expense related to the V-Wave acquisition. Please note that the MedTech margin was negatively impacted in both years due to expenses associated with the strategic acquisition of Laminar. When adjusting for these one-time items, MedTech margin was relatively flat. As a result, adjusted income before tax for the enterprise as a percentage of sales decreased from 29.2% to 24.1% with the V-Wave acquired IPR&D expense impacting results by 240 basis points. When looking at the full year, Innovative Medicine, MedTech and the Enterprise adjusted income before tax remained relatively flat year-over-year when adjusting for the one-time items highlighted on the slide, mainly acquired IPR&D expenses on various transactions across both years. This concludes the sales and earnings portion of the call. I am now pleased to turn it over to Joe.","evidence_gemma_new":"net earnings","evidence_llama_3_3":"net earnings Q4 2024","evidence_qwen_3_30b":"net earnings Q4 2024","gemma_new_max":3400000000.0,"gemma_new_min":3400000000.0,"llama_3_3_max":3400000000.0,"llama_3_3_min":3400000000.0,"qwen_3_30b_max":3400000000.0,"qwen_3_30b_min":3400000000.0}
{"symbol":"JNJ","year":2023,"quarter":3,"date":"2023-FY","chunk_id":2,"sub_chunk_id":0,"centroid_label":"operational sales sales growth","agreed_value":8.75,"count":2,"chunk":"Joe Wolk: Thank you, Jessica, and thanks everyone for joining us today. This quarter's call marks a new era for Johnson & Johnson with a sharpened focus on Innovative Medicine and MedTech. What has remained consistent is our Credo and our commitment to patients. We are privileged to build upon our 137-year legacy of tackling the world's most complex healthcare challenges and helping patients with serious unmet health needs around the world. As we look forward, we are well positioned to grow our business and innovate across the spectrum of healthcare. We are excited about what's ahead and what we can achieve in the future. Before we dive into our performance, I want to briefly touch upon other items important to our business. The first is a brief recap of the Kenvue separation, which was formally completed during the quarter. The transaction was executed within our targeted timeframe and under budget, while generating significant cash and value for our shareholders. Through the separation, we raised $13.2 billion in cash proceeds through the Kenvue Debt Offering and IPO. We reduced Johnson & Johnson's outstanding share count by 191 million shares, or approximately 7%, without the use of cash and in a tax-free manner. We maintained our current quarterly dividend per share and we retained approximately 180 million shares of Kenvue stock that provides cash proceeds for future flexibility. We will see the full impact to EPS of the share reduction in 2024. Another item warranting comment is the Inflation Reduction Act. We continue to believe the IRA's price setting provisions are damaging to innovation and will prevent the delivery of transformative therapies and cures to patients. As we await adjudication of legal proceedings initiated by of us and others, we did submit all requested information in compliance with CMS' drug price setting scheme to continue supporting patients' access to our medicines that help them stay healthy and live longer. Moving to segment highlights in the quarter, as Jessica previously shared, our teams delivered strong results in the third quarter, while continuing to advance our pipeline to enhance future growth. Within the innovative medicine business, two important regulatory milestones were announced during the quarter. Specifically, we received European Commission approval for a reduced biweekly dosing frequency for TECVAYLI for eligible patients with relapsed and refractory multiple myeloma. And U.S. FDA and European Commission approval of TALVEY, a first-in-class, bi-specific therapy for the treatment of patients with heavily pre-treated multiple myeloma. Regarding clinical data, we are excited to have an unprecedented seven late breaking abstracts, including three featured in the Presidential Symposium being presented at the European Society of Medical Oncology meeting this weekend. Highlights will include the results from all three Phase III studies of RYBREVANT in lung cancer, including MARIPOSA, MARIPOSA II, and PAPILLON. Additionally, updated data from the Sunrise 1 study of TAR-200 in non-muscle invasive bladder cancer will be shared, as well as the first ever data of TAR-210 in patients with FGFR mutations. We also look forward to presenting Phase II data for Nipocalimab and rheumatoid arthritis at the American College of Rheumatology Annual Meeting in November, and have already launched a Phase II combination study NRA. Lastly, we plan to initiate multiple clinical development programs for our targeted oral peptide JNJ-2113. This includes the initiation of the ANTHEM Phase 2B study in ulcerative colitis, which will begin this month, and the Phase III clinical program titled Iconic for adults with moderate to severe plaque psoriasis expected to begin in November. Moving to MedTech, notable highlights in the quarter include significant advancements in electrophysiology across our cardiac ablation platform. We received FDA clearance from multiple atrial fibrillation ablation products in our portfolio to be used in a workflow without fluoroscopy. This FDA indication is unique to Johnson & Johnson and is a significant advancement where caregivers and patients are not exposed to harmful fluoroscopy-related radiation during their cardiac ablation procedures. It also allows for the removal of heavy lead protective equipment that may lead to orthopedic complications for care teams. In pulse field ablation, we have completed our clinical trial in Europe and submitted for CE mark for our VARIPULSE Catheter. We expect the completion for our U.S. VARIPULSE study to occur in the fourth quarter. We are also simultaneously advancing clinical studies for two additional pulse field ablation catheters, the STSF dual energy catheter, capable of delivering both PF and RF energy through the same device, and Omnipulse, a large tip focal catheter. Beyond electrophysiology, we have completed enrollment in the Abiomed Impella ECP clinical study, a landmark pivotal trial designed to demonstrate the safety and efficacy of the Impella ECP during high-risk PCI procedures. Impella ECP is the world's smallest heart pump and the only heart pump compatible with small bore access and closure techniques. While not a clinical advancement, we have also taken steps in the quarter to improve MedTech's future margin profile, implementing a restructuring program designed to simplify and focus the operations of our orthopedic business. As part of this two-year program, we expect to exit certain markets and product lines across that business. We anticipate some short-term modest revenue disruption in orthopedics of approximately $250 million in total over the next two years, given the market and product line exits, but believe these actions will improve our ability to meet demand, resulting in accelerated growth and enhanced profitability. The program is expected to be completed by the end of 2025, with total program costs estimated to be between $700 million and $800 million. Let's now turn to cash and capital allocation. We ended the third quarter with approximately $24 billion of cash and marketable securities and approximately $30 billion of debt for a net debt position of $6 billion. Free cash flow year-to-date through the third quarter was approximately $12 billion, up from the $5 billion we reported year-to-date in the second quarter of 2023. Our capital allocation priorities remain unchanged. We will continue to execute a strategic and disciplined approach utilizing our strong credit profile and robust free cash flow generation to prioritize continued investment in our business, increasing dividends on an annual basis, executing strategic business development initiatives for inorganic growth, and executing share repurchases when appropriate. Moving onto our 2023 guidance update. Based on the strong results delivered in the quarter and the first nine months of this year, balanced with planned investments in the fourth quarter, we are raising the ranges for full-year sales and EPS guidance. We now expect operational sales growth for the full-year 2023 to be in the range of 8.5% to 9.0%, or up $600 million at the midpoint in the range of $84.4 billion to $84.8 billion on a constant currency basis and adjusted operational sales growth in the range of 7.2% to 7.7%. Just a reminder, our sales guidance continues to exclude any COVID-19 vaccine revenue. While we do not speculate on future currency movements utilizing the euro spot rate as of last week at 1.06, we now anticipate an incremental negative currency impact of $400 million resulting in a full-year impact of negative 1% or $800 million. Looking across the P&L, adjusted pre-tax operating margin is still expected to improve by approximately 50 basis points versus prior year, driven by stronger margin profile and business mix. Net other income is also being maintained, ranging from $1.7 billion to $1.9 billion. Due to higher interest rates earned on our cash, we now expect net interest income in the range of $300 million to $400 million. And finally, based on current tax law, our estimate for the effective tax rate for 2023 will be between 15.0% and 15.5%. These revised estimates translate to an increase in our adjusted operational earnings per share guidance by $0.10 at the midpoint. Our new range is $10.02 to $10.08 or 12.5% growth at the midpoint, and adjusted reported earnings per share in the range of $10.07 to $10.13 or 13% growth at the midpoint. Since January, We've been able to increase our guidance throughout the year for a cumulative impact of $3 billion on operational sales and $0.25 on adjusted operational earnings per share, which includes absorbing $0.10 for our licensing deal with Cellular Biomedicine Group announced in the second quarter of 2023. Now I appreciate that many of you are turning your attention to 2024, and our teams are actively finalizing our plans for next year. With that context, allow me to provide some preliminary perspectives for you to consider. For innovative medicine, we remain confident in our ability to deliver growth from key brands and anticipate continued progress from our newly launched products, all while advancing our robust pipeline with many exciting data readouts, filings, and approvals ahead of us. This includes data presentations and regulatory submissions for TREMFYA in IBD, presenting data from our Phase III study of Nipocalimab in Myasthenia Gravis, and readouts from two Phase III or ELITA trials in early-stage prostate cancer. We do not expect the entry of STELARA Biosimilars in the United States during 2024. However, as a reminder STELARA does have a composition of matter patent expiry in mid-2024 in Europe. For MedTech, we expect our commercial capabilities and continued adoption of recently launched products across all MedTech businesses will continue to drive our growth and improve competitiveness, while continuing to advance our pipeline programs, including innovation in pulse field ablation, Abiomed, and surgical robotics. We expect procedures in 2024 to remain consistent with elevated 2023 levels. With respect to tax, as you may be aware, the European Union member states are in the process of enacting the EU's Pillar 2 Directive, which generally provides for a 15% minimum tax rate as established by the OECD Pillar 2 framework. The first EU effective date for certain aspects of the law is January 1st, 2024. As a result, we currently estimate it up to a 1% tax rate increase in 2024. In addition, the U.S. Treasury's current perspective on Pillar 2 will be harmful as it relates to the treatment of U.S. incentives for innovation and will result in U.S.-based multinational companies paying more tax revenue to foreign governments. Regarding share count given the Kenvue separation, the full benefit of the approximately 191 million net share reduction in Johnson & Johnson shares outstanding from the exchange offer will be reflected in our 2024 financials. And finally, while we don't speculate on future currency impact, utilizing the current euro spot rate would yield an approximate $0.15 negative currency impact on 2024 full-year adjusted earnings per share. We are pleased with our strong performance during the first nine months of this year and have positive momentum as we move into 2024. We look forward to sharing more about the strength of our business, promise of our innovative medicine and MedTech pipelines, and the long-term strategy of Johnson & Johnson at our upcoming Enterprise Business Review on December 5th at the New York Stock Exchange. More information, including an overview of the day's schedule, will be shared shortly. We hope you will be able to join us either in person or on the available webcast. I want to conclude my remarks by thanking our teams around the world for their continued hard work and unwavering commitment to excellence on behalf of our patients. We are confident that our strategy will position us to deliver long-term growth and create significant value for our shareholders. With that, it's my pleasure to turn to Kevin and begin the Q&A portion of the call.","evidence_gemma_new":"2023 operational sales growth","evidence_llama_3_3":null,"evidence_qwen_3_30b":"operational sales growth full-year 2023","gemma_new_max":8.75,"gemma_new_min":8.75,"llama_3_3_max":null,"llama_3_3_min":null,"qwen_3_30b_max":8.75,"qwen_3_30b_min":8.75}
{"symbol":"JNJ","year":2023,"quarter":2,"date":"2023-Q2","chunk_id":4,"sub_chunk_id":0,"centroid_label":"operational sales sales growth","agreed_value":7.5,"count":3,"chunk":"Joe Wolk: Thank you, Jessica, and thanks, everyone, for joining us today. As previously shared, we reported particularly strong results across all segments for the second quarter and the first-half of 2023. During the second quarter, adjusted operational sales growth by pharmaceuticals excluding COVID-19 revenue accelerated 6.2% over the first quarter of 2023. Similarly, on a sequential basis, MedTech operational sales increased to 4.5% over an already strong first quarter. During the first-half of the year we executed against our long-term business strategy and achieved key clinical and regulatory milestones. These advancements provide a strong foundation for long-term growth and are a testament to the hard work and dedication of our talented colleagues around the world. We also made considerable progress toward the separation of Kenvue. On May 8th, as partial consideration for the transfer of the Consumer Health business, Kenvue paid $13.2 billion to Johnson & Johnson from the net proceeds of the initial public offering and debt financing transactions in connection with the separation. Today, we were pleased to announce an update on our next step toward the separation of Kenvue, subject to market conditions, our intention is to split off Kenvue shares through an exchange offer as our next step in the separation. As part of the proposed exchange offer, Johnson & Johnson's shareholders will have the choice to exchange all some or none of their shares of Johnson & Johnson common stock for shares of Kenvue common stock subject to the terms of an offer. We believe a split off is the most advantageous form of separation for Johnson & Johnson, Kenvue and our shareholders, specifically an exchange offer provides Johnson & Johnson the potential opportunity to acquire a large number of outstanding shares of Johnson & Johnson common stock at one time in a tax free manner for U.S. federal income tax purposes without reducing overall cash or future financial flexibility. Further, following the completion of the exchange offer, Kenvue would most likely have a shareholder base that would have made the election to own its shares. The exact timing of our decision to launch an exchange offer will, as stated earlier, depend on market conditions, but the launch of the tender could occur as early as the coming days. Offer terms for the exchange inclusive of applicable discounts, as well as the duration of the exchange tender period would be set upon launch. We understand that you may have questions on this process. At this point, there are no additional details about the contemplated split off to share, but we are committed to providing timely updates as appropriate. Let's now turn to cash and capital allocation. We ended the second quarter with approximately $29 billion of cash and marketable securities and approximately $46 billion of debt for a net debt position of $17 billion, inclusive of approximately $7 billion of 10 Kenvue net debt. Free cash flow through the second quarter was approximately $5.4 billion, compared to $8.1 billion in the prior year. The second quarter reflects elevated tax payments of approximately $2 billion related to TCJA and past audit related matters. Our capital allocation priorities remain unchanged with continued investment in our business being the highest priority to drive new and better solutions for patients, followed by dividends, increasing on an annual basis, adding strategic opportunities for inorganic growth, and share repurchases when attractive. Our R&D investment in the first-half of 2023 was $7.4 billion or approximately 15% of sales. This includes external investments such as our recently announced partnership with Cellular Biomedicine Group on two next generation CAR-Ts for the treatment of B-cell malignancies further broadening our cell therapy portfolio. In April, we announced our 61st consecutive year of dividend increases and in combination with the completion of our $5 billion share repurchase program authorized by the Board in September of 2022, and completed earlier this year, we returned $8.5 billion to shareholders in the first-half of 2023. Let's discuss our outlook for the balance of 2023. Before I get into the specifics of guidance, in light of the potential Kenvue split off transaction I will remind you that our updated full-year guidance today continues to include results from the Consumer Health Business given Johnson & Johnson remains the majority shareholder of Kenvue. I suspect you already know this, but it would not be accurate to subtract any guidance provided separately by Kenvue from total Johnson & Johnson guidance and assume that the resulting total reflects guidance for the new Johnson & Johnson. When Johnson & Johnson is no longer the majority shareholder of Kenvue, we will provide timely updated new Johnson & Johnson guidance that will reflect among other things the removal of Consumer Health's current contribution to Johnson & Johnson's performance, as well as any updates to Johnson & Johnson's outstanding share count. So with that context, moving on to our full-year guidance. Based on the strong results delivered in the quarter, like we did in April, we are again raising full-year operational sales and EPS guidance, despite some strategic items not accretive to EPS as detailed on this schedule. Specifically the lost income related to the approximate 10% non-controlling interest in Kenvue and the acquired in process research and development cost related to our investment in Cellular Biomedicine Group. We now expect operational sales growth for the full-year 2023 to be in the range of 7% to 8% or up $1.4 billion in the range of $99.3 billion to $100.3 billion on a constant currency basis and adjusted operational sales growth in the range of 6% to 7%. As you know, we don't speculate on future currency movements. Last quarter, we noted that we utilized the Euro spot rate relative to the U.S. dollar at $1.10. The Euro spot rate as of mid-last week remains at $1.10. However, the U.S. dollar has strengthened versus other select currencies such as the Won and the Yen. As such, we now estimate a negative impact of foreign currency translation of approximately 500 basis points resulting in estimated reported sales growth between 6.5% to 7.5%, compared to 2022 with a midpoint of $99.3 billion. Regarding other lines on the P&L, we now anticipate a slight improvement to our adjusted pretax operating margin driven by expense management. We have reduced our other income estimate to be in the range of $1.6 billion to $1.8 billion, primarily related to the company\u2019s 10.4% non-controlling interest in Kenvue. Regarding interest income and expense, we now anticipate a reduction of net interest expense to the range of a $150 million to $250 million, due to interest income on the net proceeds linked to the Kenvue separation. And finally, based on current tax law, we are maintaining our effective tax rate estimate in the range of 15.5% to 16.5%. These changes result in us increasing our adjusted operational earnings per share guidance by $0.10 per share to a range of $10.60 to $10.70 or $10.65 at the midpoint on a constant currency basis. Constant currency growth of 5% at the midpoint. While not predicting the impact of currency movements, assuming recent exchange rates I previously referenced our reported adjusted earnings per share for the year assumes no additional foreign exchange impact. As such, our reported adjusted earnings per share for the year increases by $0.10 per share to a range of $10.70 to $10.80 or $10.75 at the midpoint, reflecting growth of 6% at the midpoint. While we do not provide guidance by segment or on a quarterly basis, let me offer some qualitative considerations to support your modeling. In MedTech, we continue to anticipate stable procedure volumes and healthcare staffing levels in the back half of the year with normal seasonality. We expect continued competitive performance attributable to commercial execution recently launched products and improvement in supply. Headwinds from volume based procurement in China, as well as potential impacts from international sanctions in Russia are expected to be higher in the second-half than the first-half of the year. In Pharmaceuticals, we continue to expect to deliver our 12th consecutive year of above market growth in 2023, driven by key assets and continued uptake of our newly launched products. We expect continued strong growth in the back half of the year slightly higher than the first-half. When modeling consumer health growth rates in 2023, it's important to take into consideration prior year comparisons with lapping price increases in the back half of the year. Given the strong momentum in our pharmaceutical business and the upcoming clinical milestones mentioned earlier we remain very confident in our ability to meet our 2025 pharmaceutical sales target of $57 billion. Looking ahead, we have many important catalysts for the remainder of the year that can drive meaningful near and long-term value. Beyond the separation, in the near-term, we are continuing to drive performance in MedTech with better commercial execution and recently launched innovative products being a significant factor in driving the continued higher growth trajectory across the MedTech business. Many of the solutions mentioned are early in their commercialization, which means there are still significant opportunity ahead. For example, in electrophysiology we are excited to begin the commercialization of the QDOT MICRO Catheter in the U.S. during the second-half of this year. In Orthopaedics, the VELYS robotic assisted solution, recently received regulatory approvals in Europe, and we plan to launch it in key European countries by the end of this year. And in Vision, we are seeing the benefits of our recently launched innovations such as ACUVUE OASYS 1-Day multifocal, which is driving Johnson & Johnson's market share growth in the large and growing presbyopia market. We look forward to continued growth from this and other recent Vision launches. Related to our pharmaceutical business, we are excited about upcoming advancements in our pipeline with a number of important regulatory and clinical milestones for our key future assets, including on the regulatory front there is expected approval of [daratumumab] (ph) in relapsed or refractory multiple myeloma. Clinically, we expect a Phase 3 data for TREMFYA for Crohn's disease and ulcerative colitis. The results of the MARIPOSA study of RYBREVANT plus lazertinib in front line non-small cell lung cancer with the opportunity to potentially present that data at an upcoming major medical meeting. Phase 1 data for TAR-210 in non-muscle invasive bladder cancer, and Phase 2 data for Nipocalimab in rheumatoid arthritis. A couple of other items to highlight. In case you missed them, we recently published our Health For Humanity report our U.S. Pharmaceutical pricing transparency report and our U.S. patent table, all of which can be found on our website. Also, a reminder that we will be hosting an enterprise business review featuring both Pharmaceutical and MedTech at the New York Stock Exchange on December 5th. I'll conclude my prepared remarks by reiterating that we have had a strong first-half of the year both financially and operationally and we expect to continue to build upon that momentum in the second-half of this year. With that, I will now turn the call over to Erik Haas.","evidence_gemma_new":"operational sales growth","evidence_llama_3_3":"operational sales growth Q2 2023","evidence_qwen_3_30b":"operational sales growth","gemma_new_max":7.5,"gemma_new_min":7.5,"llama_3_3_max":7.5,"llama_3_3_min":7.5,"qwen_3_30b_max":7.5,"qwen_3_30b_min":7.5}
{"symbol":"JNJ","year":2023,"quarter":2,"date":"2023-Q2","chunk_id":3,"sub_chunk_id":0,"centroid_label":"operational sales sales growth","agreed_value":3.8,"count":2,"chunk":"Jessica Moore: Thanks, Joaquin. As a reminder on May 8, 2023, Kenvue, Inc., closed its initial public offering. Johnson & Johnson continues to own 89.6% of total outstanding shares of Kenvue\u2019s common stock and remains the majority shareholder. Therefore, the following financial results continue to include the consumer health business with the 10.4% of consumer health's net earnings no longer attributed to Johnson & Johnson being adjusted for in other income and expense from the date of the IPO through the end of the quarter. Starting with Q2 2023 sales results. Worldwide sales were $25.5 billion for the second quarter of 2023, an increase of 6.3% versus the second quarter of 2022. Operational sales growth, which excludes the effect of translational currency, increased 7.5%, as currency had a negative impact of 1.2 points. In the U.S., sales increased 10.2%. In regions outside the U.S., our reported growth was 2.2%. Operational sales growth outside the U.S. was 4.7% with currency negatively impacting our reported OUS results by 2.5 points. Operational sales in Europe were negatively impacted by the COVID-19 vaccine and loss of exclusivity of ZYTIGA. Excluding the net impact of acquisitions and divestitures, adjusted operational sales growth with 6.2% worldwide, 8% in the U.S. and 4.4% outside the U.S. Turning now to earnings. For the quarter, net earnings were $5.1 billion and diluted earnings per share was $1.96 versus diluted earnings per share of $1.80 a year ago. Excluding after tax intangible asset amortization expense and special items for both periods, adjusted net earnings for the quarter were $7.4 billion and adjusted diluted earnings per share was $2.80, representing increases of 6.5% and 8.1%, respectively, compared to the second quarter of 2022. On an operational basis, adjusted diluted earnings per share increased 9.7%. I will now comment on business segment sales performance highlights. Unless otherwise stated, percentages quoted represent the operational sales change in comparison to the second quarter of 2022, and therefore, exclude the impact of currency translation. Beginning with the Pharmaceuticals segment. Worldwide Pharmaceutical sales of $13.7 billion increased 3.1%, with growth of 9.2% in the U.S. and a decline of 4% outside the U.S. Operational sales growth increased 3.8% as currency had a negative impact of 0.7 points. Excluding COVID-19 vaccine sales, Worldwide operational sales growth was 6.2% with growth of 9.9% in the U.S. and growth of 1.5% outside the U.S. Sales outside the U.S., excluding the COVID-19 vaccine, were negatively impacted by approximately 500 basis points, due to the loss of exclusivity of ZYTIGA in Europe. Pharmaceutical growth was driven by our key brands and continued uptake in our recently launched products with nine assets delivering double-digit growth. We continue to drive strong sales growth for both DARZALEX and ERLEADA with increases of 23.4% and 26.9%, respectively. STELARA grew 8%, driven by market growth and IBD share gains in the U.S., partially offset by unfavorable patient mix and increased rebates. TREMFYA grew 18.9%, driven by market growth and share gains in the U.S., partially offset by unfavorable patient mix. Growth of 16.5% in pulmonary hypertension was driven by favorable patient mix, share gains in the U.S. and market growth. Turning to newly launched products. We continue to make progress on our launch of CARVYKTI and continue to expand access and reimbursement for SPRAVATO. We are also encouraged by the early success of our launch of TECVAYLI, sales of which are included in other oncology. Total pharmaceutical sales growth was partially offset by the loss of exclusivity in REMICADE and ZYTIGA, along with a decrease in IMBRUVICA sales due to competitive pressures. IMBRUVICA maintains its market leadership position worldwide. I will now turn your attention to the MedTech segment. Worldwide MedTech sales of $7.8 billion increased 12.9% with growth of 14.6% in the U.S. and 11.3% outside of the U.S. Operational sales growth increased 14.7% as currency had a negative impact of 1.8 points. Abiomed contributed 4.8% to operational growth. Excluding the impact of acquisitions and divestitures, worldwide adjusted operational sales growth was 9.9%. Sales in the second quarter accelerated sequentially from Q1 for all MedTech businesses driven by global procedure growth, recovery in China, continued uptake of recently launched products and commercial execution, partially offsetting growth in the quarter was the impact of volume based procurement in China, as well as supply constraints. The Interventional Solutions franchise delivered operational growth of 56.9%, which includes $331 million related to Abiomed. Electrophysiology is a major contributor to the growth with a double-digit increase of 25.9%. This reflects strong growth in all regions, including Europe, driven by our comprehensive portfolio, including the most recently launched QDOT RS catheter. Orthopedics operational growth of 5.7%, reflects strong procedure recovery, success of recently launched products, such as the enhanced shorter portfolio, as well as global expansion of our digital solutions, such as VELYS Robotic assisted solution. Growth was partially offset by the impact of volume-based procurement in China and continued supply challenges primarily in hips. Operational growth of 8.4% and surgery was driven primarily by procedure recovery and strength of our biosurgery and wound closure portfolios. Growth was partially offset by the impacts of volume-based procurement in China and supply challenges. Global growth of 6.9% in vision was driven by price actions and contact lenses and other, as well as strength of new products, including ACUVUE OASYS 1-Day family of products and contact lenses and TECNIS Eyhance our monofocal intraocular lens and surgical vision. Growth of contact lenses was partially offset by strategic portfolio choices and supply challenges. Although these continue to improve. Moving to the Consumer Health segment. Worldwide Consumer Health sales of $4 billion increased 5.4% with growth of 6% in the U.S. and 5% outside the U.S. Operational sales growth increased 7.7% as currency had a negative impact of 2.3 points. Sales in the second quarter accelerated sequentially from Q1 for all consumer health franchises, primarily driven by strategic price increases and growth in OTC globally, due to strong pain performance, and cold, cough and flu season. Excluding the impact of strategic portfolio decisions and sales of personal care products in Russia, volume across all consumer franchises was relatively flat on strong price actions. For more detailed information, please visit investors.kenvue.com. Now turning to our consolidated statement of earnings for second quarter of 2023, I'd like to highlight a few noteworthy items that have changed compared to the same quarter of last year. Cost of products sold leveraged by 80 basis points, primarily driven by favorable patient mix and lower COVID-19 vaccine supply network related costs in the pharmaceutical business, partially offset by commodity inflation in the consumer and MedTech businesses. Selling, marketing and administrative margins deleveraged 20 basis points, driven by incremental costs to support the standalone consumer health business, partially offset by proactive management of costs. We continue to invest strategically in research and development at competitive levels, investing 15% of sales this quarter. The $3.8 billion invested was a 3.4% increase versus the prior year. The other income and expense line was income of $60 million in the second quarter of 2023, compared to an expense of $273 million in the second quarter of 2022. This was primarily driven by favorable litigation settlements, lower litigation expense, and lower unrealized losses on securities, partially offset by higher COVID-19 vaccine manufacturing exit related cost. And as previously mentioned, the 10.4% of consumer health earnings that are no longer attributable to Johnson & Johnson, which resulted in a $37 million reduction in consolidated earnings. Regarding taxes in the quarter, our effective tax rate was 23.9% versus 17.6% in the same period last year. This increase was primarily driven by 2023 tax cost incurred as part of the planned separation of the consumer health business, due to the internal reorganization of certain international subsidiaries. Excluding special items the effective tax rate was 16.6% versus 15.4% in the same period last year. I encourage you to review our upcoming second quarter 10-Q filing for additional details on specific tax matters. Lastly, I'll direct your attention to the box section of the slide, where we have also provided our income before tax, net earnings and earnings per share adjusted to exclude the impact of intangible amortization expense and special items. Now let's look at adjusted income before tax by segment. In the second quarter of 2023, our adjusted income before tax for the enterprise as a percentage of sales increased from 34% to 34.6%, primarily driven by favorable product and patient mix, partially offset by unfavorable segment mix and commodity inflation. Pharmaceutical margins improved from 42% to 42.7%, primarily driven by favorable patient mix, sales, marketing and administrative expense leverage, and R&D portfolio prioritization, partially offset by higher milestone payments. MedTech margins improved from 26.5% to 28.6%, driven by favorable intellectual property related litigation settlements and cost management initiatives, partially offset by commodity inflation. Finally, consumer health margins declined from 25.9% to 23.5%, due to incremental costs to support the standalone consumer health business, foreign exchange impacts, and commodity inflation, partially offset by supply chain efficiencies. It is important to highlight that the adjusted income before tax for the consumer health business as reported by Johnson & Johnson defers from the financial results reported by Kenvue Inc. this morning. The difference is primarily driven by incremental costs required to run Kenvue as an independent company. Additional differences also exist on an after tax basis, due to the application of different tax rates. This concludes the sales and earnings portion of the Johnson & Johnson second quarter results. I'm now pleased to turn the call over to Joe Wolk. Joe?","evidence_gemma_new":null,"evidence_llama_3_3":"operational sales growth Q2 2023","evidence_qwen_3_30b":"operational sales growth","gemma_new_max":null,"gemma_new_min":null,"llama_3_3_max":3.8,"llama_3_3_min":3.8,"qwen_3_30b_max":3.8,"qwen_3_30b_min":3.8}
{"symbol":"JNJ","year":2023,"quarter":2,"date":"2023-Q2","chunk_id":3,"sub_chunk_id":0,"centroid_label":"operational sales sales growth","agreed_value":14.7,"count":2,"chunk":"Jessica Moore: Thanks, Joaquin. As a reminder on May 8, 2023, Kenvue, Inc., closed its initial public offering. Johnson & Johnson continues to own 89.6% of total outstanding shares of Kenvue\u2019s common stock and remains the majority shareholder. Therefore, the following financial results continue to include the consumer health business with the 10.4% of consumer health's net earnings no longer attributed to Johnson & Johnson being adjusted for in other income and expense from the date of the IPO through the end of the quarter. Starting with Q2 2023 sales results. Worldwide sales were $25.5 billion for the second quarter of 2023, an increase of 6.3% versus the second quarter of 2022. Operational sales growth, which excludes the effect of translational currency, increased 7.5%, as currency had a negative impact of 1.2 points. In the U.S., sales increased 10.2%. In regions outside the U.S., our reported growth was 2.2%. Operational sales growth outside the U.S. was 4.7% with currency negatively impacting our reported OUS results by 2.5 points. Operational sales in Europe were negatively impacted by the COVID-19 vaccine and loss of exclusivity of ZYTIGA. Excluding the net impact of acquisitions and divestitures, adjusted operational sales growth with 6.2% worldwide, 8% in the U.S. and 4.4% outside the U.S. Turning now to earnings. For the quarter, net earnings were $5.1 billion and diluted earnings per share was $1.96 versus diluted earnings per share of $1.80 a year ago. Excluding after tax intangible asset amortization expense and special items for both periods, adjusted net earnings for the quarter were $7.4 billion and adjusted diluted earnings per share was $2.80, representing increases of 6.5% and 8.1%, respectively, compared to the second quarter of 2022. On an operational basis, adjusted diluted earnings per share increased 9.7%. I will now comment on business segment sales performance highlights. Unless otherwise stated, percentages quoted represent the operational sales change in comparison to the second quarter of 2022, and therefore, exclude the impact of currency translation. Beginning with the Pharmaceuticals segment. Worldwide Pharmaceutical sales of $13.7 billion increased 3.1%, with growth of 9.2% in the U.S. and a decline of 4% outside the U.S. Operational sales growth increased 3.8% as currency had a negative impact of 0.7 points. Excluding COVID-19 vaccine sales, Worldwide operational sales growth was 6.2% with growth of 9.9% in the U.S. and growth of 1.5% outside the U.S. Sales outside the U.S., excluding the COVID-19 vaccine, were negatively impacted by approximately 500 basis points, due to the loss of exclusivity of ZYTIGA in Europe. Pharmaceutical growth was driven by our key brands and continued uptake in our recently launched products with nine assets delivering double-digit growth. We continue to drive strong sales growth for both DARZALEX and ERLEADA with increases of 23.4% and 26.9%, respectively. STELARA grew 8%, driven by market growth and IBD share gains in the U.S., partially offset by unfavorable patient mix and increased rebates. TREMFYA grew 18.9%, driven by market growth and share gains in the U.S., partially offset by unfavorable patient mix. Growth of 16.5% in pulmonary hypertension was driven by favorable patient mix, share gains in the U.S. and market growth. Turning to newly launched products. We continue to make progress on our launch of CARVYKTI and continue to expand access and reimbursement for SPRAVATO. We are also encouraged by the early success of our launch of TECVAYLI, sales of which are included in other oncology. Total pharmaceutical sales growth was partially offset by the loss of exclusivity in REMICADE and ZYTIGA, along with a decrease in IMBRUVICA sales due to competitive pressures. IMBRUVICA maintains its market leadership position worldwide. I will now turn your attention to the MedTech segment. Worldwide MedTech sales of $7.8 billion increased 12.9% with growth of 14.6% in the U.S. and 11.3% outside of the U.S. Operational sales growth increased 14.7% as currency had a negative impact of 1.8 points. Abiomed contributed 4.8% to operational growth. Excluding the impact of acquisitions and divestitures, worldwide adjusted operational sales growth was 9.9%. Sales in the second quarter accelerated sequentially from Q1 for all MedTech businesses driven by global procedure growth, recovery in China, continued uptake of recently launched products and commercial execution, partially offsetting growth in the quarter was the impact of volume based procurement in China, as well as supply constraints. The Interventional Solutions franchise delivered operational growth of 56.9%, which includes $331 million related to Abiomed. Electrophysiology is a major contributor to the growth with a double-digit increase of 25.9%. This reflects strong growth in all regions, including Europe, driven by our comprehensive portfolio, including the most recently launched QDOT RS catheter. Orthopedics operational growth of 5.7%, reflects strong procedure recovery, success of recently launched products, such as the enhanced shorter portfolio, as well as global expansion of our digital solutions, such as VELYS Robotic assisted solution. Growth was partially offset by the impact of volume-based procurement in China and continued supply challenges primarily in hips. Operational growth of 8.4% and surgery was driven primarily by procedure recovery and strength of our biosurgery and wound closure portfolios. Growth was partially offset by the impacts of volume-based procurement in China and supply challenges. Global growth of 6.9% in vision was driven by price actions and contact lenses and other, as well as strength of new products, including ACUVUE OASYS 1-Day family of products and contact lenses and TECNIS Eyhance our monofocal intraocular lens and surgical vision. Growth of contact lenses was partially offset by strategic portfolio choices and supply challenges. Although these continue to improve. Moving to the Consumer Health segment. Worldwide Consumer Health sales of $4 billion increased 5.4% with growth of 6% in the U.S. and 5% outside the U.S. Operational sales growth increased 7.7% as currency had a negative impact of 2.3 points. Sales in the second quarter accelerated sequentially from Q1 for all consumer health franchises, primarily driven by strategic price increases and growth in OTC globally, due to strong pain performance, and cold, cough and flu season. Excluding the impact of strategic portfolio decisions and sales of personal care products in Russia, volume across all consumer franchises was relatively flat on strong price actions. For more detailed information, please visit investors.kenvue.com. Now turning to our consolidated statement of earnings for second quarter of 2023, I'd like to highlight a few noteworthy items that have changed compared to the same quarter of last year. Cost of products sold leveraged by 80 basis points, primarily driven by favorable patient mix and lower COVID-19 vaccine supply network related costs in the pharmaceutical business, partially offset by commodity inflation in the consumer and MedTech businesses. Selling, marketing and administrative margins deleveraged 20 basis points, driven by incremental costs to support the standalone consumer health business, partially offset by proactive management of costs. We continue to invest strategically in research and development at competitive levels, investing 15% of sales this quarter. The $3.8 billion invested was a 3.4% increase versus the prior year. The other income and expense line was income of $60 million in the second quarter of 2023, compared to an expense of $273 million in the second quarter of 2022. This was primarily driven by favorable litigation settlements, lower litigation expense, and lower unrealized losses on securities, partially offset by higher COVID-19 vaccine manufacturing exit related cost. And as previously mentioned, the 10.4% of consumer health earnings that are no longer attributable to Johnson & Johnson, which resulted in a $37 million reduction in consolidated earnings. Regarding taxes in the quarter, our effective tax rate was 23.9% versus 17.6% in the same period last year. This increase was primarily driven by 2023 tax cost incurred as part of the planned separation of the consumer health business, due to the internal reorganization of certain international subsidiaries. Excluding special items the effective tax rate was 16.6% versus 15.4% in the same period last year. I encourage you to review our upcoming second quarter 10-Q filing for additional details on specific tax matters. Lastly, I'll direct your attention to the box section of the slide, where we have also provided our income before tax, net earnings and earnings per share adjusted to exclude the impact of intangible amortization expense and special items. Now let's look at adjusted income before tax by segment. In the second quarter of 2023, our adjusted income before tax for the enterprise as a percentage of sales increased from 34% to 34.6%, primarily driven by favorable product and patient mix, partially offset by unfavorable segment mix and commodity inflation. Pharmaceutical margins improved from 42% to 42.7%, primarily driven by favorable patient mix, sales, marketing and administrative expense leverage, and R&D portfolio prioritization, partially offset by higher milestone payments. MedTech margins improved from 26.5% to 28.6%, driven by favorable intellectual property related litigation settlements and cost management initiatives, partially offset by commodity inflation. Finally, consumer health margins declined from 25.9% to 23.5%, due to incremental costs to support the standalone consumer health business, foreign exchange impacts, and commodity inflation, partially offset by supply chain efficiencies. It is important to highlight that the adjusted income before tax for the consumer health business as reported by Johnson & Johnson defers from the financial results reported by Kenvue Inc. this morning. The difference is primarily driven by incremental costs required to run Kenvue as an independent company. Additional differences also exist on an after tax basis, due to the application of different tax rates. This concludes the sales and earnings portion of the Johnson & Johnson second quarter results. I'm now pleased to turn the call over to Joe Wolk. Joe?","evidence_gemma_new":null,"evidence_llama_3_3":"operational sales growth Q2 2023","evidence_qwen_3_30b":"operational sales growth","gemma_new_max":null,"gemma_new_min":null,"llama_3_3_max":14.7,"llama_3_3_min":14.7,"qwen_3_30b_max":14.7,"qwen_3_30b_min":14.7}
{"symbol":"JNJ","year":2023,"quarter":2,"date":"2023-Q2","chunk_id":3,"sub_chunk_id":0,"centroid_label":"operational sales sales growth","agreed_value":7.7,"count":2,"chunk":"Jessica Moore: Thanks, Joaquin. As a reminder on May 8, 2023, Kenvue, Inc., closed its initial public offering. Johnson & Johnson continues to own 89.6% of total outstanding shares of Kenvue\u2019s common stock and remains the majority shareholder. Therefore, the following financial results continue to include the consumer health business with the 10.4% of consumer health's net earnings no longer attributed to Johnson & Johnson being adjusted for in other income and expense from the date of the IPO through the end of the quarter. Starting with Q2 2023 sales results. Worldwide sales were $25.5 billion for the second quarter of 2023, an increase of 6.3% versus the second quarter of 2022. Operational sales growth, which excludes the effect of translational currency, increased 7.5%, as currency had a negative impact of 1.2 points. In the U.S., sales increased 10.2%. In regions outside the U.S., our reported growth was 2.2%. Operational sales growth outside the U.S. was 4.7% with currency negatively impacting our reported OUS results by 2.5 points. Operational sales in Europe were negatively impacted by the COVID-19 vaccine and loss of exclusivity of ZYTIGA. Excluding the net impact of acquisitions and divestitures, adjusted operational sales growth with 6.2% worldwide, 8% in the U.S. and 4.4% outside the U.S. Turning now to earnings. For the quarter, net earnings were $5.1 billion and diluted earnings per share was $1.96 versus diluted earnings per share of $1.80 a year ago. Excluding after tax intangible asset amortization expense and special items for both periods, adjusted net earnings for the quarter were $7.4 billion and adjusted diluted earnings per share was $2.80, representing increases of 6.5% and 8.1%, respectively, compared to the second quarter of 2022. On an operational basis, adjusted diluted earnings per share increased 9.7%. I will now comment on business segment sales performance highlights. Unless otherwise stated, percentages quoted represent the operational sales change in comparison to the second quarter of 2022, and therefore, exclude the impact of currency translation. Beginning with the Pharmaceuticals segment. Worldwide Pharmaceutical sales of $13.7 billion increased 3.1%, with growth of 9.2% in the U.S. and a decline of 4% outside the U.S. Operational sales growth increased 3.8% as currency had a negative impact of 0.7 points. Excluding COVID-19 vaccine sales, Worldwide operational sales growth was 6.2% with growth of 9.9% in the U.S. and growth of 1.5% outside the U.S. Sales outside the U.S., excluding the COVID-19 vaccine, were negatively impacted by approximately 500 basis points, due to the loss of exclusivity of ZYTIGA in Europe. Pharmaceutical growth was driven by our key brands and continued uptake in our recently launched products with nine assets delivering double-digit growth. We continue to drive strong sales growth for both DARZALEX and ERLEADA with increases of 23.4% and 26.9%, respectively. STELARA grew 8%, driven by market growth and IBD share gains in the U.S., partially offset by unfavorable patient mix and increased rebates. TREMFYA grew 18.9%, driven by market growth and share gains in the U.S., partially offset by unfavorable patient mix. Growth of 16.5% in pulmonary hypertension was driven by favorable patient mix, share gains in the U.S. and market growth. Turning to newly launched products. We continue to make progress on our launch of CARVYKTI and continue to expand access and reimbursement for SPRAVATO. We are also encouraged by the early success of our launch of TECVAYLI, sales of which are included in other oncology. Total pharmaceutical sales growth was partially offset by the loss of exclusivity in REMICADE and ZYTIGA, along with a decrease in IMBRUVICA sales due to competitive pressures. IMBRUVICA maintains its market leadership position worldwide. I will now turn your attention to the MedTech segment. Worldwide MedTech sales of $7.8 billion increased 12.9% with growth of 14.6% in the U.S. and 11.3% outside of the U.S. Operational sales growth increased 14.7% as currency had a negative impact of 1.8 points. Abiomed contributed 4.8% to operational growth. Excluding the impact of acquisitions and divestitures, worldwide adjusted operational sales growth was 9.9%. Sales in the second quarter accelerated sequentially from Q1 for all MedTech businesses driven by global procedure growth, recovery in China, continued uptake of recently launched products and commercial execution, partially offsetting growth in the quarter was the impact of volume based procurement in China, as well as supply constraints. The Interventional Solutions franchise delivered operational growth of 56.9%, which includes $331 million related to Abiomed. Electrophysiology is a major contributor to the growth with a double-digit increase of 25.9%. This reflects strong growth in all regions, including Europe, driven by our comprehensive portfolio, including the most recently launched QDOT RS catheter. Orthopedics operational growth of 5.7%, reflects strong procedure recovery, success of recently launched products, such as the enhanced shorter portfolio, as well as global expansion of our digital solutions, such as VELYS Robotic assisted solution. Growth was partially offset by the impact of volume-based procurement in China and continued supply challenges primarily in hips. Operational growth of 8.4% and surgery was driven primarily by procedure recovery and strength of our biosurgery and wound closure portfolios. Growth was partially offset by the impacts of volume-based procurement in China and supply challenges. Global growth of 6.9% in vision was driven by price actions and contact lenses and other, as well as strength of new products, including ACUVUE OASYS 1-Day family of products and contact lenses and TECNIS Eyhance our monofocal intraocular lens and surgical vision. Growth of contact lenses was partially offset by strategic portfolio choices and supply challenges. Although these continue to improve. Moving to the Consumer Health segment. Worldwide Consumer Health sales of $4 billion increased 5.4% with growth of 6% in the U.S. and 5% outside the U.S. Operational sales growth increased 7.7% as currency had a negative impact of 2.3 points. Sales in the second quarter accelerated sequentially from Q1 for all consumer health franchises, primarily driven by strategic price increases and growth in OTC globally, due to strong pain performance, and cold, cough and flu season. Excluding the impact of strategic portfolio decisions and sales of personal care products in Russia, volume across all consumer franchises was relatively flat on strong price actions. For more detailed information, please visit investors.kenvue.com. Now turning to our consolidated statement of earnings for second quarter of 2023, I'd like to highlight a few noteworthy items that have changed compared to the same quarter of last year. Cost of products sold leveraged by 80 basis points, primarily driven by favorable patient mix and lower COVID-19 vaccine supply network related costs in the pharmaceutical business, partially offset by commodity inflation in the consumer and MedTech businesses. Selling, marketing and administrative margins deleveraged 20 basis points, driven by incremental costs to support the standalone consumer health business, partially offset by proactive management of costs. We continue to invest strategically in research and development at competitive levels, investing 15% of sales this quarter. The $3.8 billion invested was a 3.4% increase versus the prior year. The other income and expense line was income of $60 million in the second quarter of 2023, compared to an expense of $273 million in the second quarter of 2022. This was primarily driven by favorable litigation settlements, lower litigation expense, and lower unrealized losses on securities, partially offset by higher COVID-19 vaccine manufacturing exit related cost. And as previously mentioned, the 10.4% of consumer health earnings that are no longer attributable to Johnson & Johnson, which resulted in a $37 million reduction in consolidated earnings. Regarding taxes in the quarter, our effective tax rate was 23.9% versus 17.6% in the same period last year. This increase was primarily driven by 2023 tax cost incurred as part of the planned separation of the consumer health business, due to the internal reorganization of certain international subsidiaries. Excluding special items the effective tax rate was 16.6% versus 15.4% in the same period last year. I encourage you to review our upcoming second quarter 10-Q filing for additional details on specific tax matters. Lastly, I'll direct your attention to the box section of the slide, where we have also provided our income before tax, net earnings and earnings per share adjusted to exclude the impact of intangible amortization expense and special items. Now let's look at adjusted income before tax by segment. In the second quarter of 2023, our adjusted income before tax for the enterprise as a percentage of sales increased from 34% to 34.6%, primarily driven by favorable product and patient mix, partially offset by unfavorable segment mix and commodity inflation. Pharmaceutical margins improved from 42% to 42.7%, primarily driven by favorable patient mix, sales, marketing and administrative expense leverage, and R&D portfolio prioritization, partially offset by higher milestone payments. MedTech margins improved from 26.5% to 28.6%, driven by favorable intellectual property related litigation settlements and cost management initiatives, partially offset by commodity inflation. Finally, consumer health margins declined from 25.9% to 23.5%, due to incremental costs to support the standalone consumer health business, foreign exchange impacts, and commodity inflation, partially offset by supply chain efficiencies. It is important to highlight that the adjusted income before tax for the consumer health business as reported by Johnson & Johnson defers from the financial results reported by Kenvue Inc. this morning. The difference is primarily driven by incremental costs required to run Kenvue as an independent company. Additional differences also exist on an after tax basis, due to the application of different tax rates. This concludes the sales and earnings portion of the Johnson & Johnson second quarter results. I'm now pleased to turn the call over to Joe Wolk. Joe?","evidence_gemma_new":null,"evidence_llama_3_3":"operational sales growth Q2 2023","evidence_qwen_3_30b":"operational sales growth","gemma_new_max":null,"gemma_new_min":null,"llama_3_3_max":7.7,"llama_3_3_min":7.7,"qwen_3_30b_max":7.7,"qwen_3_30b_min":7.7}
{"symbol":"JNJ","year":2023,"quarter":4,"date":"2023-Q4","chunk_id":2,"sub_chunk_id":0,"centroid_label":"operational sales sales growth","agreed_value":9.0,"count":2,"chunk":"Joaquin Duato: Thank you, Jess and good morning, everyone. 2023 was a remarkable year for Johnson & Johnson in becoming a two sector company focused on innovative medicine at MedTech, we strengthened our position as an innovation powerhouse. We breakthrough science and transformative technology, we innovate across the entire patient pathway in ways no other company can. And as we share at our Enterprise Business Review, we have a stronger growth margin profile and are more focused and agile than ever before, which is what you see with today's results. I'm particularly proud of our Q4 results with innovative medicine operational sales, excluding the COVID-19 vaccine, growing by 9.5% at MedTech adjusted operational sales growing by an impressive 9.1%. For the full year, we delivered strong and sustained performance with 9% operational sales growth excluding the COVID-19 vaccine and 10.8% adjusted operational earnings per share growth. These results reflect the breadth and competitiveness of our portfolio. And when I look at the milestones we achieved in 2023 and the promise of our pipeline, I have confidence in our guidance for 2024 and beyond. So let's take a deeper look at the business and what we achieved last year. Starting with Innovative Medicine. For the full year, we delivered above-market operational sales growth of 7.2%, excluding the COVID-19 vaccine. Our Innovative Medicine business continues to be fueled by growth from key brands and the acceleration of sales of new products. Our multiple myeloma portfolio is a good example with significant contribution from recently launched products including CARVYKTI, TECVAYLI and TALVEY. Turning to clinical trials. Key results from the year included positive Phase III readout for more than 10 of our in-line and pipeline medicines, including CARVYKTI, in one to three prior lines of therapy in multiple myeloma. DARZALEX in front-line multi myeloma transplant eligible patients. RYBREVANT, in combination with chemotherapy and RYBREVANT plus lazertinib in non-small cell lung cancer. And finally TREMFYA monotherapy in Ulcerative Colitis. In addition, we saw positive Phase 1 and Phase 2 readout for nipocalimab and TAR-200 and TAR-210 and we initiated our Phase 3 clinical development programs for Milvexian and our targeted oral peptide JNJ-2113. Beyond that, we received FDA breakthrough designation for TAR-200 for the treatment of bladder cancer and fast track designations for Milvexian in Atrial Fibrillation, Stroke, and Acute Coronary Syndrome. And with 19 U.S. and EU filings across our Innovative Medicine business in 2023, we have high expectations for the year ahead. Our recent announcement of a definitive agreement to acquire Ambrx to develop next-generation antibody drug conjugates further strengthens our oncology pipeline. Now moving to MedTech. In 2023, we delivered full year operational sales growth of 12.4% and full year adjusted operational sales growth of 7.8%. For the first-time, our MedTech team delivered more than $30 billion in sales, as we continue to build a best-in-class business. We are accelerating growth through commercial execution, differentiated innovation and moving into higher growth markets, as you saw with our successful integration of Abiomed and our recent acquisition of Laminar, which focused on eliminating the left atrial appendage in patients with non-valvular atrial fibrillation. And at the same time, we are making strong progress in our pipeline, including advancing our Ottava surgical robot, MONARCH approval in China for bronchoscopy and continued market expansion for VELYS, our robotic assisted solution for total knee replacement with CE Mark approval in 2023. In electrophysiology, we have a lot of momentum in our post-field ablation portfolio. We announced regulatory approval a few weeks ago for the VARIPULSE PFA platform in Japan and have submitted for CE Mark approval in the EU. The true pulse generator has received approval in the EU and we received first and only approval from the U.S. FDA for a zero fluoroscopy workflow for cardiac ablation. And in the fourth quarter, findings from our QDOT MICRO Catheter Q-FFICIENCY Study showed that very high power, short duration ablations improved quality of life and reduced health care utilization for atrial fibrillation patients. In Vision, we are driving strong performance across our TECNIS IOLs and OASYS 1-day family of contact lenses, including our most premium lens, ACUVUE OASYS MAX 1-Day, which has proven superiority in comfort and clarity versus the competition. Turning to Abiomed. We recently completed our Impella ECP pivotal clinical trial. In Q4, we also enrolled our first patient in the Abiomed RECOVER IV randomized, controlled trial. As we look ahead, I have never been more excited about the future of our business. At our Enterprise Business Review, we shared that we expect our Innovative Medicine business to grow 5% to 7% from 2025 to 2030 with our industry-leading pipeline and portfolio delivering more than 10 assets that have the potential to generate over $5 billion in peak year sales by 2030. We also expect a further 15 assets to have the potential for $1 billion to $5 billion in peak year sales. In 2024, we expect data readouts for many of these assets, including Phase 3 trials for TREMFYA in IBD, ERLEADA in heavy (ph) stage prostate cancer, our targeted oral peptide JNJ-2113 in psoriasis, Nipocalimab in Myasthenia Gravis as well as aticaprant and seltorexant in major depressive disorder. We also expect Phase 2 readouts for our combination therapy, guselkumab and golimumab, JNJ-4804 in psoriatic arthritis, nipocalimab in Sjogren's Disease and TAR-200 in non-muscle invasive bladder cancer. In MedTech, we shared that we expect to grow at the upper range of our markets, which are anticipated to grow by 5% to 7% between 2022 and 2027. And that by 2027, we expect one-third of our revenue to be generated by new products. In 2024, we see strong progress towards these goals. In electrophysiology that includes the full U.S. market release of QDOT MICRO Catheter and we are expecting CE Mark approval for our post-field ablation catheter VARIPULSE in Europe in the first half of 2024. We plan to submit an investigational device exemption to the FDA for Ottava in the second half of 2024. And in Abiomed, we expect U.S. commercial launch of Impella RP Flex with smart assist and an Impella ECP submission in 2024. As you can see, our pipeline is advancing. Our business is transforming. Before I turn the call to Jess and Joe, I want to thank our teams around the world for everything they do help our patients. We have entered 2024 from a position of strength, and I'm confident in our ability to lead the next wave of health innovation. With that, I'll turn the call over to Jess.","evidence_gemma_new":"operational sales growth full year","evidence_llama_3_3":null,"evidence_qwen_3_30b":"9% operational sales growth full year","gemma_new_max":9.0,"gemma_new_min":9.0,"llama_3_3_max":null,"llama_3_3_min":null,"qwen_3_30b_max":9.0,"qwen_3_30b_min":9.0}
{"symbol":"JNJ","year":2024,"quarter":3,"date":"2024-Q3","chunk_id":2,"sub_chunk_id":0,"centroid_label":"operational sales sales growth","agreed_value":6.3,"count":2,"chunk":"Joaquin Duato: Thank you, Jess, and hello, everyone. As you will hear, we delivered strong results in the third quarter with 6.3% operational sales growth. Our performance, once again, reflects the unique breadth of our business and our commitment to delivering the next wave of healthcare innovation to patients around the world. It also reflects the work we have done to shift our pipeline and portfolio to high innovation and high growth markets. That work continues, which you saw with the recently completed acquisitions of Shockwave and V-Wave in MedTech and Ambrx, Proteologix and NM26 bispecific antibody in Innovative Medicine. And we are pleased with the progress we are making. In Innovative Medicine, we reported a second consecutive quarter of sales exceeding $14 billion with 11 key brands growing double-digits. DARZALEX became the first product in our portfolio to reach $3 billion in sales in a single quarter. And as you will hear, our pipeline of high innovation, high growth potential assets is advancing rapidly with five major U.S. and EC approvals in the quarter. This includes FDA approval of RYBREVANT plus LAZCLUZE as first line treatment for EGFR-mutated advanced lung cancer, a transformational step forward for patients, and FDA approval of TREMFYA for active ulcerative colitis, which represents a significant opportunity for Johnson & Johnson, given 75% of STELARA sales today come from inflammatory bowel disease. And with filings and reviews underway for many of our innovative medicines that have the potential to generate $5 billion in peak year sales, we are increasingly confident in our near- and long-term growth trajectory. In MedTech, you can see the impact of our portfolio shift to high innovation, high growth markets, particularly in Cardiovascular. With the recent acquisitions of Shockwave and Abiomed, we are now category leaders in four of the largest and highest growth cardiovascular intervention medtech markets, which in Q3 translated to another quarter of double-digit growth across the Cardiovascular portfolio. And with the full market launch of Shockwave E8 peripheral IVL catheter, we are seeing an immediate impact of the Shockwave acquisition. In Vision, growth is accelerating, and we expect that to continue with the recent full market release of TECNIS Odyssey in the U.S. and ACUVUE OASYS MAX 1-Day contact lenses. We are also excited about the future of our surgery business. As you will recall, in November 2023, we committed to submitting the OTTAVA robotic surgical system for an investigational device exemption, or IDE, to the U.S. FDA in the second half of 2024 to initiate clinical trials. I'm pleased to announce that we have met that milestone with the IDE application submitted in Q3. Looking across the enterprise, our high innovation, high growth strategy is working and our progress this quarter speaks to the strength of our commercial and innovation capabilities. We have increased adjusted operational EPS guidance pre-M&A for the third quarter in a row. We have invested $18 billion in high innovation, high growth M&A this year. Based on this quarter's results, we are confident in our expectations for 2025 through the end of the decade and beyond. And with that, I will turn the call back to Jess.","evidence_gemma_new":"operational sales growth third quarter","evidence_llama_3_3":null,"evidence_qwen_3_30b":"operational sales growth third quarter","gemma_new_max":6.3,"gemma_new_min":6.3,"llama_3_3_max":null,"llama_3_3_min":null,"qwen_3_30b_max":6.3,"qwen_3_30b_min":6.3}
{"symbol":"JNJ","year":2023,"quarter":2,"date":"2023-Q2","chunk_id":3,"sub_chunk_id":0,"centroid_label":"other income and expense","agreed_value":60000000.0,"count":2,"chunk":"Jessica Moore: Thanks, Joaquin. As a reminder on May 8, 2023, Kenvue, Inc., closed its initial public offering. Johnson & Johnson continues to own 89.6% of total outstanding shares of Kenvue\u2019s common stock and remains the majority shareholder. Therefore, the following financial results continue to include the consumer health business with the 10.4% of consumer health's net earnings no longer attributed to Johnson & Johnson being adjusted for in other income and expense from the date of the IPO through the end of the quarter. Starting with Q2 2023 sales results. Worldwide sales were $25.5 billion for the second quarter of 2023, an increase of 6.3% versus the second quarter of 2022. Operational sales growth, which excludes the effect of translational currency, increased 7.5%, as currency had a negative impact of 1.2 points. In the U.S., sales increased 10.2%. In regions outside the U.S., our reported growth was 2.2%. Operational sales growth outside the U.S. was 4.7% with currency negatively impacting our reported OUS results by 2.5 points. Operational sales in Europe were negatively impacted by the COVID-19 vaccine and loss of exclusivity of ZYTIGA. Excluding the net impact of acquisitions and divestitures, adjusted operational sales growth with 6.2% worldwide, 8% in the U.S. and 4.4% outside the U.S. Turning now to earnings. For the quarter, net earnings were $5.1 billion and diluted earnings per share was $1.96 versus diluted earnings per share of $1.80 a year ago. Excluding after tax intangible asset amortization expense and special items for both periods, adjusted net earnings for the quarter were $7.4 billion and adjusted diluted earnings per share was $2.80, representing increases of 6.5% and 8.1%, respectively, compared to the second quarter of 2022. On an operational basis, adjusted diluted earnings per share increased 9.7%. I will now comment on business segment sales performance highlights. Unless otherwise stated, percentages quoted represent the operational sales change in comparison to the second quarter of 2022, and therefore, exclude the impact of currency translation. Beginning with the Pharmaceuticals segment. Worldwide Pharmaceutical sales of $13.7 billion increased 3.1%, with growth of 9.2% in the U.S. and a decline of 4% outside the U.S. Operational sales growth increased 3.8% as currency had a negative impact of 0.7 points. Excluding COVID-19 vaccine sales, Worldwide operational sales growth was 6.2% with growth of 9.9% in the U.S. and growth of 1.5% outside the U.S. Sales outside the U.S., excluding the COVID-19 vaccine, were negatively impacted by approximately 500 basis points, due to the loss of exclusivity of ZYTIGA in Europe. Pharmaceutical growth was driven by our key brands and continued uptake in our recently launched products with nine assets delivering double-digit growth. We continue to drive strong sales growth for both DARZALEX and ERLEADA with increases of 23.4% and 26.9%, respectively. STELARA grew 8%, driven by market growth and IBD share gains in the U.S., partially offset by unfavorable patient mix and increased rebates. TREMFYA grew 18.9%, driven by market growth and share gains in the U.S., partially offset by unfavorable patient mix. Growth of 16.5% in pulmonary hypertension was driven by favorable patient mix, share gains in the U.S. and market growth. Turning to newly launched products. We continue to make progress on our launch of CARVYKTI and continue to expand access and reimbursement for SPRAVATO. We are also encouraged by the early success of our launch of TECVAYLI, sales of which are included in other oncology. Total pharmaceutical sales growth was partially offset by the loss of exclusivity in REMICADE and ZYTIGA, along with a decrease in IMBRUVICA sales due to competitive pressures. IMBRUVICA maintains its market leadership position worldwide. I will now turn your attention to the MedTech segment. Worldwide MedTech sales of $7.8 billion increased 12.9% with growth of 14.6% in the U.S. and 11.3% outside of the U.S. Operational sales growth increased 14.7% as currency had a negative impact of 1.8 points. Abiomed contributed 4.8% to operational growth. Excluding the impact of acquisitions and divestitures, worldwide adjusted operational sales growth was 9.9%. Sales in the second quarter accelerated sequentially from Q1 for all MedTech businesses driven by global procedure growth, recovery in China, continued uptake of recently launched products and commercial execution, partially offsetting growth in the quarter was the impact of volume based procurement in China, as well as supply constraints. The Interventional Solutions franchise delivered operational growth of 56.9%, which includes $331 million related to Abiomed. Electrophysiology is a major contributor to the growth with a double-digit increase of 25.9%. This reflects strong growth in all regions, including Europe, driven by our comprehensive portfolio, including the most recently launched QDOT RS catheter. Orthopedics operational growth of 5.7%, reflects strong procedure recovery, success of recently launched products, such as the enhanced shorter portfolio, as well as global expansion of our digital solutions, such as VELYS Robotic assisted solution. Growth was partially offset by the impact of volume-based procurement in China and continued supply challenges primarily in hips. Operational growth of 8.4% and surgery was driven primarily by procedure recovery and strength of our biosurgery and wound closure portfolios. Growth was partially offset by the impacts of volume-based procurement in China and supply challenges. Global growth of 6.9% in vision was driven by price actions and contact lenses and other, as well as strength of new products, including ACUVUE OASYS 1-Day family of products and contact lenses and TECNIS Eyhance our monofocal intraocular lens and surgical vision. Growth of contact lenses was partially offset by strategic portfolio choices and supply challenges. Although these continue to improve. Moving to the Consumer Health segment. Worldwide Consumer Health sales of $4 billion increased 5.4% with growth of 6% in the U.S. and 5% outside the U.S. Operational sales growth increased 7.7% as currency had a negative impact of 2.3 points. Sales in the second quarter accelerated sequentially from Q1 for all consumer health franchises, primarily driven by strategic price increases and growth in OTC globally, due to strong pain performance, and cold, cough and flu season. Excluding the impact of strategic portfolio decisions and sales of personal care products in Russia, volume across all consumer franchises was relatively flat on strong price actions. For more detailed information, please visit investors.kenvue.com. Now turning to our consolidated statement of earnings for second quarter of 2023, I'd like to highlight a few noteworthy items that have changed compared to the same quarter of last year. Cost of products sold leveraged by 80 basis points, primarily driven by favorable patient mix and lower COVID-19 vaccine supply network related costs in the pharmaceutical business, partially offset by commodity inflation in the consumer and MedTech businesses. Selling, marketing and administrative margins deleveraged 20 basis points, driven by incremental costs to support the standalone consumer health business, partially offset by proactive management of costs. We continue to invest strategically in research and development at competitive levels, investing 15% of sales this quarter. The $3.8 billion invested was a 3.4% increase versus the prior year. The other income and expense line was income of $60 million in the second quarter of 2023, compared to an expense of $273 million in the second quarter of 2022. This was primarily driven by favorable litigation settlements, lower litigation expense, and lower unrealized losses on securities, partially offset by higher COVID-19 vaccine manufacturing exit related cost. And as previously mentioned, the 10.4% of consumer health earnings that are no longer attributable to Johnson & Johnson, which resulted in a $37 million reduction in consolidated earnings. Regarding taxes in the quarter, our effective tax rate was 23.9% versus 17.6% in the same period last year. This increase was primarily driven by 2023 tax cost incurred as part of the planned separation of the consumer health business, due to the internal reorganization of certain international subsidiaries. Excluding special items the effective tax rate was 16.6% versus 15.4% in the same period last year. I encourage you to review our upcoming second quarter 10-Q filing for additional details on specific tax matters. Lastly, I'll direct your attention to the box section of the slide, where we have also provided our income before tax, net earnings and earnings per share adjusted to exclude the impact of intangible amortization expense and special items. Now let's look at adjusted income before tax by segment. In the second quarter of 2023, our adjusted income before tax for the enterprise as a percentage of sales increased from 34% to 34.6%, primarily driven by favorable product and patient mix, partially offset by unfavorable segment mix and commodity inflation. Pharmaceutical margins improved from 42% to 42.7%, primarily driven by favorable patient mix, sales, marketing and administrative expense leverage, and R&D portfolio prioritization, partially offset by higher milestone payments. MedTech margins improved from 26.5% to 28.6%, driven by favorable intellectual property related litigation settlements and cost management initiatives, partially offset by commodity inflation. Finally, consumer health margins declined from 25.9% to 23.5%, due to incremental costs to support the standalone consumer health business, foreign exchange impacts, and commodity inflation, partially offset by supply chain efficiencies. It is important to highlight that the adjusted income before tax for the consumer health business as reported by Johnson & Johnson defers from the financial results reported by Kenvue Inc. this morning. The difference is primarily driven by incremental costs required to run Kenvue as an independent company. Additional differences also exist on an after tax basis, due to the application of different tax rates. This concludes the sales and earnings portion of the Johnson & Johnson second quarter results. I'm now pleased to turn the call over to Joe Wolk. Joe?","evidence_gemma_new":null,"evidence_llama_3_3":"other income and expense line Q2 2023","evidence_qwen_3_30b":"other income and expense line","gemma_new_max":null,"gemma_new_min":null,"llama_3_3_max":60000000.0,"llama_3_3_min":60000000.0,"qwen_3_30b_max":60000000.0,"qwen_3_30b_min":60000000.0}
{"symbol":"JNJ","year":2023,"quarter":3,"date":"2023-Q3","chunk_id":1,"sub_chunk_id":0,"centroid_label":"other income and expense","agreed_value":499000000.0,"count":2,"chunk":"Jessica Moore: Good morning. This is Jessica Moore, Vice President of Investor Relations for Johnson & Johnson. Welcome to our company's review of the 2023 third quarter business results and full-year financial outlook. A few logistics before we get into the details. As a reminder, you can find additional materials, including today's presentation and associated schedules, on the Investor Relations section of the Johnson & Johnson website at investor.jnj.com. Please note that this presentation contains forward-looking statements regarding, among other things, the company's future operating and financial performance, market position and business strategy. You are cautioned not to rely on these forward-looking statements, which are based on current expectations of future events using the information available as of the date of this recording and are subject to certain risk and uncertainties that may cause the company's actual results to differ materially from those projected. A description of these risks, uncertainties and other factors can be found in our SEC filings, including our 2022 Form 10-K, which is available at investor.jnj.com and on the SECs website. Additionally, several of the products and compounds discussed today are being developed in collaboration with strategic partners or licensed from other companies. This slide acknowledges those relationships. Moving to today's agenda. I will start by reviewing the third quarter sales and P&L results for the corporation and highlights related to our two businesses. Joe Wolk, our CFO will then provide additional business and financial commentary before sharing an overview of our cash position, capital allocation priorities, and updated guidance for 2023. The remaining time will be available for your questions. Joaquin Duato, our chairman and CEO; John Reed, and Ahmet Tezel, our Innovative Medicine and MedTech R&D leaders, as well as Erik Haas, our VP of Litigation, will be joining us for Q&A. To ensure we provide enough time to address your questions, we anticipate the webcast will last approximately 60 minutes. As a reminder, on August 23, 2023, Johnson & Johnson announced the final results of the exchange offer and completion of the separation of Kenvue Inc. Unless otherwise stated, the financial results and guidance highlighted today reflect the continuing operations of Johnson & Johnson. We will report the consumer health financial results as discontinued operations. Additionally, going forward, the pharmaceutical segment will be referred to as innovative medicine. Starting with Q3 2023 sales results. Worldwide sales were $21.4 billion for the third quarter of 2023, an increase of 6.8% versus the third quarter of 2022. Operational sales growth, which excludes the effect of translational currency, increased 6.4% as currency had a positive impact of 0.4 points. In the U.S., sales increased 11.1%. In regions outside the U.S., our reported growth was 1.6%. Operational sales growth outside the U.S. was 0.7% with currency positively impacting our reported OUS results by 0.9 points. It is important to note that operational sales in Europe were negatively impacted by the COVID-19 vaccine and loss of exclusivity of ZYTIGA. Excluding the net impact of acquisition and divestitures, adjusted operational sales growth was 4.9% worldwide, 8.9% in the U.S., and 0.3% outside the U.S. Turning now to earnings. For the quarter, net earnings were $4.3 billion and diluted earnings per share was $1.69 versus diluted earnings per share of $1.62 a year ago. Excluding after-tax and tangible asset amortization expense and special items for both periods, adjusted net earnings for the quarter were $6.8 billion and adjusted diluted earnings per share was $2.66, representing increases of 14.1% and 19.3% respectively, compared to the third quarter of 2022. On an operational basis, adjusted diluted earnings per share increased 13.9%. I will now comment on business sales performance. Unless otherwise stated percentages quoted represent the operational sales change in comparison to the third quarter of 2022 and therefore exclude the impact of currency translation. Beginning with innovative medicine. Worldwide innovative medicine sales of $13.9 billion, increased 5.1% with growth of 10.9% in the U.S. and a decline of 2.3% outside of the U.S. Operational sales growth increased 4.3% as currency had a positive impact of 0.8 points. Excluding COVID-19 vaccine sales, worldwide operational sales growth was 8.2%, with growth of 10.9% in the U.S. and growth of 4.3% outside of the U.S. Sales outside the U.S., excluding the COVID-19 vaccine, were negatively impacted by approximately 500 basis points, due to the loss of exclusivity of ZYTIGA in Europe. Innovative medicine growth was driven by our key brands and continued uptake from a recently launched products with 11 assets delivering double-digit growth. We continue to drive strong sales growth for both DARZALEX and ERLEADA with increases of 20.7% and 27% respectively, due to continued share gains and market growth. Within immunology, we saw growth in STELARA and TREMFYA, with increases of 15.8% and 21.5% respectively. This growth was predominantly driven by favorable patient mix and market growth. Turning to newly launched products, we continue to make progress on our launches of CARVYKTI and SPRAVATO. We are also encouraged by the early success of our launches of TECVAYLI and TALVEY, sales of which are driving the growth and other oncology. We expect to begin disclosing TECVAYLI sales in Q1 2024. Total innovative medicine sales growth was partially offset by the loss of exclusivity of ZYTIGA and REMICADE, along with a decrease in IMBRUVICA sales, due to competitive pressures. I'll now turn your attention to MedTech. Worldwide MedTech sales of $7.5 billion increased 10% with growth of 11.6% in the U.S., and 8.3% outside of the U.S. Operational sales growth increased 10.4% as currency had a negative impact of 0.4 points. Abiomed contributed 4.6% to operational growth, excluding the impact of acquisition and divestitures, worldwide adjusted operational sales growth was 6%. On a pro forma basis, utilizing sales in the prior year from Abiomed as a standalone company, MedTech's growth for the quarter would be 6.4%. MedTech was negatively impacted across all platforms by international sanctions in Russia worth approximately 60 basis points in volume-based procurement in China, primarily in five MedTech platforms: Spine, Trauma, Endocutters, Energy, and Electrophysiology. As communicated last quarter, we saw the return to more normalized seasonality with moderate deceleration in the third quarter. The Interventional Solutions franchise delivered operational growth of 48.1%, which includes $311 million related to Abiomed. This reflects growth in Abiomed patient procedures in the high-teens and continued strong adoption of Impella 5.5 technology in surgery. Electrophysiology is a major contributor to this growth with a double-digit increase of 20.3%. This reflects strong growth in all regions, including Europe, driven by our global market leading portfolio, including the most recently launched QDOT RF ablation and OPTRELL Mapping Catheters. Operational growth of 3.2% in surgery was driven primarily by procedure recovery and strength of our biosurgery and wound closure portfolios. Growth was partially offset by the impacts of volume-based procurement in China and supply challenges. Global growth of 5.4% in vision was driven by price actions and contact lenses and other, as well as strength of new products including ACUVUE OASYS 1-Day family of products and contact lenses and TECNIS Eyhance, our monofocal interocular lens and surgical vision. Growth of contact lenses was partially offset by strategic portfolio choices and supply challenges, although these continue to improve. Global vision growth was negatively impacted by 100 basis points, due to the Blink divestiture. Orthopedics operational growth of 2.6% reflects procedure growth, success of recently launched products, such as the global expansion of our VELYS digital solutions, and expansion in ambulatory surgical centers, partially offset by the impacts of volume-based procurement in China in Spine and Trauma. Now turning to our consolidated statement of earnings for the third quarter of 2023, I'd like to highlight a few noteworthy items that have changed, compared to the same quarter of last year. Cost of product sold margin was flat due to favorable patient mix and lower COVID-19 vaccine supply network related exit costs in the innovative medicine business, partially offset by commodity inflation, unfavorable product mix, and restructuring related to excess inventory costs in the MedTech business. Selling, marketing, and administrative margins deleveraged 40 basis points, driven by increased expenses across the enterprise. We continue to invest strategically in research and development at competitive levels, investing $3.4 billion or 16.2% of sales this quarter. R&D was leveraged by 120 basis points, primarily driven by portfolio prioritization, partially offset by higher milestone payments in the innovative medicine business. Additionally, IPR&D impairments were $206 million in the third quarter of 2023. Interest income was $182 million in the third quarter of 2023, as compared to $99 million of income in the third quarter of 2022. The increase in income was driven by higher interest rates earned on cash balances, partially offset by higher interest rates on debt balances. The other income and expense line was an expense of $499 million in the third quarter of 2023, compared to an expense of $226 million in the third quarter of 2022. This was primarily driven by higher unrealized mark-to-market losses on public securities partially offset by the lower COVID-19 vaccine-related exit costs and lower litigation expense. Restructuring in the third quarter was $158 million, primarily related to the innovative medicine restructuring program announced in the first quarter. Regarding taxes in the quarter, our effective tax rate was 17.4% versus 16.7% in the same period last year. This increase was primarily driven by a non-deductible, non-recurring pre-tax charge that occurred in the current quarter. Excluding special items, the effective tax rate was 15.6% versus 15.9% in the same period last year. As a result of the completion of the exchange offer, Johnson & Johnson is presenting the consumer health business financial results as discontinuing operations, including a gain of approximately $21 billion. I encourage you to review our upcoming third quarter 10-Q filing for additional details on specific tax and separation-related matters. Lastly, I'll direct your attention to the box section of the slide where we have also provided our income before tax, net earnings, and earnings per share adjusted to exclude the impact of intangible amortization expense and special items. Now let's look at adjusted income before tax by segment. In the third quarter of 2023, our adjusted income before tax for the enterprise as a percentage of sales increased from 35.3% to 37.6%, primarily driven by favorable patient mix and innovative medicine, partially offset by unfavorable product mix and commodity inflation in MedTech. Innovative medicine margins improved from 41.4% to 45.4%, primarily driven by favorable patient mix and R&D portfolio prioritization. MedTech margins declined from 25% to 24.7%, primarily driven by commodity inflation and unfavorable product mix partially offset by a divestiture gain. This concludes the sales and earnings portion of the Johnson & Johnson third quarter results. I'm now pleased to turn the call over to Joe Wolk. Joe?","evidence_gemma_new":null,"evidence_llama_3_3":"other income and expense third quarter of 2023","evidence_qwen_3_30b":"other income and expense line","gemma_new_max":null,"gemma_new_min":null,"llama_3_3_max":499000000.0,"llama_3_3_min":499000000.0,"qwen_3_30b_max":499000000.0,"qwen_3_30b_min":499000000.0}
{"symbol":"JNJ","year":2023,"quarter":4,"date":"2023-Q4","chunk_id":3,"sub_chunk_id":0,"centroid_label":"other income and expense","agreed_value":421000000.0,"count":2,"chunk":"Jessica Moore: Thanks, Joaquin. Unless otherwise stated, the financial results and guidance highlighted reflects the continuing operations of Johnson & Johnson. We will report the consumer health financial results as discontinued operations. Furthermore, the percentages quoted represent operational results and therefore, exclude the impact of currency translation. Starting with Q4 2023 sales results. Worldwide sales were $21.4 billion for the fourth quarter of 2023. Sales increased 7.2%, with 11% in the U.S. and 2.7% outside of the U.S. Excluding the net impact of acquisitions and divestitures, adjusted operational sales growth was 5.7% worldwide, 8.8% in the U.S. and 2.1% outside the U.S. It is important to note that sales in Europe were negatively impacted by the COVID-19 vaccine and loss of exclusivity of ZYTIGA by approximately 1,500 basis points operationally. Turning now to earnings. For the quarter, net earnings were $4.1 billion, and diluted earnings per share was $1.70 versus diluted earnings per share of $1.22 a year ago. Excluding after-tax intangible asset amortization expense and special items for both periods, adjusted net earnings for the quarter were $5.6 billion and the diluted earnings per share was $2.29, representing increases of 2.4% and 11.7%, respectively, compared to the fourth quarter of 2022. On an operational basis, adjusted diluted earnings per share increased 11.2%. For the full year 2023, sales were $85.2 billion. Sales grew 7.4%, with 10.6% in the U.S. and 3.8% outside of the U.S. Excluding the net impact of acquisitions and divestitures, adjusted operational sales growth was 5.9% worldwide, 8.2% in the U.S. and 3.4% outside the U.S. Sales in Europe were negatively impacted by the COVID-19 vaccine and loss of exclusivity of ZYTIGA by approximately 1,000 basis points operationally. Net earnings for the full year 2023 were $13.3 billion and diluted earnings per share was $5.20 versus diluted earnings per share of $6.14 a year ago. Full year 2023 adjusted net earnings were $25.4 billion, and adjusted diluted earnings per share was $9.92, representing increases of 6.8% and 11.1%, respectively, versus full year 2022. On an operational basis, adjusted diluted earnings per share increased by 10.8%. I will now comment on business sales performance in the quarter. Beginning with Innovative Medicine. Worldwide Innovative Medicine sales of $13.7 billion increased 4% with growth of 9.5% in the U.S. and a decline of 3.1% outside of the U.S. Excluding COVID-19 vaccine sales, worldwide and U.S. sales growth was 9.5%, and growth outside of the U.S. was 9.4%. Sales outside the U.S., excluding the COVID-19 vaccine were negatively impacted by approximately 120 basis points due to the loss of exclusivity of ZYTIGA in Europe. Innovative Medicine growth was driven by our key brands and continued uptake from recently launched products, with nine assets delivering double-digit growth. We continue to drive strong sales growth for both DARZALEX and ERLEADA, with increases of 22.2% and 19%, respectively. Within immunology, we saw sales growth in both STELARA and TREMFYA, with increases of 14.5% and 20.5%, respectively. This growth was driven by market growth and share gains as well as favorable patient mix in TREMFYA. Growth of 17.4% in pulmonary hypertension was driven by favorable patient mix, share gains and market growth. Turning to newly launched products. We continue to make progress on our launches of CARVYKTI and SPRAVATO. We are also encouraged by the early success of our launches of TECVAYLI and TALVEY, sales of which are driving the growth in other Oncology. As a reminder, we expect to begin disclosing TECVAYLI sales in Q1 2024. Total Innovative Medicine sales growth was partially offset by unfavorable patient mix in XARELTO, a decrease in IMBRUVICA sales due to competitive pressures and a loss of exclusivity of ZYTIGA, REMICADE and PREZISTA. I'll now turn your attention to MedTech. Worldwide MedTech sales of $7.7 billion increased 13.4% with Abiomed contributing 4.5% to growth. Growth in the U.S. was 14.1% and 12.8% outside of the U.S. Excluding the impact of acquisitions and divestitures, worldwide adjusted operational sales growth was 9.1%. MedTech was negatively impacted by international sanctions in Russia worth approximately 50 basis points, primarily in Advanced Surgery and Vision. Electrophysiology delivered double-digit growth of 25.2% with strong growth in all regions, including Europe. This growth was driven by our global market leading portfolio, including the most recently launched QDOT RF ablation and OCTARAY catheters. Abiomed contributed $340 million in sales within the quarter driven by continued strong adoption of Impella 5.5 technology. Growth of 6.4% in surgery was driven primarily by procedure recovery and strength of our biosurgery and wound closure portfolios. Growth was partially offset by volume based procurement in China, primarily in Endocutters. Orthopaedics growth of 5% reflects procedure growth, success of recently launched products such as the global expansion of our VELYS digital solutions and expansion in ambulatory surgical centers, as well as lapping of prior year China\u2019s VBP price concessions in Spine. Growth of 6.6% in Vision was driven by price actions and contact lenses, as well as strength of new products including ACUVUE OASYS 1-Day family of products and contact lenses and TECNIS EYHANCE, our monofocal interocular lens and surgical vision. Growth of contact lenses was partially offset by U.S. stocking dynamics. Global Vision growth was negatively impacted by 140 basis points due to the Blink divestiture in Q3. Now turning to our consolidated statement of earnings for the fourth quarter of 2023. I'd like to highlight a few noteworthy items that have changed compared to the same quarter of last year. Cost of products sold margin deleveraged by 130 basis points due to commodity inflation and unfavorable product mix in MedTech, partially offset by favorable patient mix and lower COVID-19 vaccine supply network related exit cost in Innovative Medicine. We continue to invest strategically in research and development at competitive levels, investing $4.5 billion or 20.9% of sales this quarter. We invested $3.4 billion or 24.5% of sales in Innovative Medicine with the increase in investment being driven by higher milestones, partially offset by portfolio prioritization. In MedTech, R&D investment was $1.1 billion or 14.6% of sales with the increase in investment primarily driven by the Laminar acquisition. Interest income was $212 million in the fourth quarter of 2023 as compared to $77 million of income in the fourth quarter of 2022. The increase in income was driven by higher interest rates earned on cash balances and a lower average debt balance. The other income and expense line was income of $421 million in the fourth quarter of 2023 compared to an expense of $795 million in the fourth quarter of 2022. This was primarily driven by higher unrealized gains on securities and lower (ph) COVID-19 vaccine-related exit costs. Regarding taxes in the quarter, our effective tax rate was 14.4% versus 16% in the same period last year. This decrease was primarily driven by the net decrease of tax liabilities, including the settlement of the 2013 through 2016 U.S. tax audit. Excluding special items, the effective tax rate was 10.8% versus 16.2% in the same period last year. I encourage you to review our upcoming 2023 10-K filing for additional details on specific tax-related matters. Lastly, I will direct your attention to the box section of the slide, where we have also provided our income before tax, net earnings and earnings per share adjusted to exclude the impact of intangible amortization expense and special items. Now let's look at adjusted income before tax by segment. In the fourth quarter of 2023, our adjusted income before tax for the enterprise as a percentage of sales decreased from 32.5% to 29.2%. Innovative Medicine margins declined from 37.7% to 37.4%, primarily driven by higher R&D milestones, partially offset by favorable patient mix and leveraging and selling and marketing expense. MedTech margins declined from 24.5% to 15.5% primarily driven by in-process research and development expense from the Laminar acquisition, commodity inflation and unfavorable product mix, partially offset by selling and marketing expense leverage. This concludes the sale and earnings portion of the call. I'm now pleased to turn it over to Joe.","evidence_gemma_new":null,"evidence_llama_3_3":"other income and expense","evidence_qwen_3_30b":"other income and expense Q4 2023","gemma_new_max":null,"gemma_new_min":null,"llama_3_3_max":421000000.0,"llama_3_3_min":421000000.0,"qwen_3_30b_max":421000000.0,"qwen_3_30b_min":421000000.0}
{"symbol":"JNJ","year":2023,"quarter":4,"date":"2024-FY","chunk_id":4,"sub_chunk_id":0,"centroid_label":"other income and expense","agreed_value":1300000000.0,"count":2,"chunk":"Joseph Wolk: Thank you, Jessica, and thanks, everyone, for joining us today. As Joaquin and Jessica commented, 2023 was a strong year for Johnson & Johnson evidenced by notable top and bottom line performance beats relative to what we guided to 2023 at this time last year. We are particularly proud of the innovation we advanced to strengthen our development pipelines, the continued expansion of our portfolio and investments made for future success. All of this provides us with a strong foundation as we enter 2024. Thus far during the call, you've heard about sales and income performance in 2023. So now let's dive into some detail on capital allocation highlights. We generated free cash flow of more than $18 billion in 2023. At the end of the year, we had approximately $23 billion of cash and marketable securities and approximately $29 billion of debt for a net debt position of $6 billion. We maintained a healthy balance sheet and robust credit rating, underscoring the strength of Johnson & Johnson's financial position, which enables us to strategically invest and deploy capital to unlock value. To that end, we executed against all of our capital allocation priorities in 2023. For starters, we invested more than $15 billion in research and development or 17.7% of sales, an all-time high for the company as we remain one of the top investors in R&D across all industries. Jessica provided R&D investment by business segment, information we will continue to provide on a quarterly basis moving forward. As far as dividends, 2023 marked the 61st consecutive year in which we increased our dividend. We know this use of capital is a priority for our investors, and we plan to continue to increase our dividend annually. We also deployed, announced or committed over $3 billion in strategic value creating inorganic growth opportunities in the last 12 months. This amount includes the recent Ambrx and Laminar transactions as well as more than 50 smaller early-stage licensing deals and partnerships that complement our current Innovative Medicine and MedTech pipelines. Finally, share repurchases. In early 2023, we completed the $5 billion share repurchase program initiated in late 2022 and in combination with our dividend, returned over $14 billion to shareholders last year. Through the Kenvue separation, we further reduced the Johnson & Johnson's outstanding share count by 191 million shares or approximately 7% without the use of cash and in a tax-free manner. Looking ahead to 2024, Johnson & Johnson's robust free cash flow generation should continue to solidify our already strong financial foundation and fuel further investment leading to growth for our business or returns to shareholders. Now turning to our full year 2024 guidance. Today, we are confirming the 2024 guidance for those items previewed at our enterprise business review in early December by filling in some of the details. We expect operational sales growth for the full year to be in the range of 5% to 6% or $88.2 billion to $89 billion. As a reminder, our sales guidance continues to exclude any impact from COVID-19 vaccine sales. In Innovative Medicine, we expect 2024 to deliver a 13th consecutive year of above market growth, driven by market share gains from key brands such as DARZALEX, TREMFYA and ERLEADA as well as continued adoption of recently launched newer products such as CARVYKTI, TECVAYLI, TALVEY and SPRAVATO. In MedTech, we remain focused on executing our key value drivers: first, advancing our differentiated pipeline such as programs in pulse field ablation, Abiomed and surgical robotics, further shifting our portfolio into high-growth markets; second, expanding our reach and scale around the world; and third, building operational resilience across our portfolio. We don't speculate on future currency movements, but utilizing the euro spot rate relative to the U.S. dollar as of last week at $1.09 as well as other major currencies, we estimate there would be a slight unfavorable impact of $400 million or a negative 0.5% on reported sales growth for the year. Turning to other items on our P&L. We expect our 2024 adjusted pretax operating margin to improve by approximately 50 basis points driven primarily by a continuation of efficiency programs across the organization. We expect this to be partially offset by anticipated STELARA biosimilar entrants in Europe in the second half of this year and some lingering inflation impact in MedTech inventory that will flow through 2024's P&L. This margin improvement encompasses dilution of additional investment associated with our planned acquisition of Ambrx, which will be treated as a business combination. Now we do acknowledge that this 50 basis point improvement simply gets us back to what your models expected, given the elevated Q4 2023 R&D investment for new pipeline assets. Regarding other income and expense, we anticipate income to be $1.2 billion to $1.4 billion for 2024. This is less than the 2023 amount driven by the impact of actuarial assumptions on certain employee benefit programs such as lower discount rates. We are comfortable with you modeling net interest income between $450 million and $550 million, consistent with 2023 levels. Finally, we are projecting an effective tax rate for 2024 in the range of 16% to 17% based on current tax laws and anticipated geographic income mix across our businesses. This tax rate takes into account an increase of approximately 1.5% or 150 basis points relative to the recently enacted Pillar 2 legislation. We continue to believe the U.S. Treasury's current perspective on Pillar 2 is harmful, reducing U.S. incentives for innovation and resulting in U.S. based multinational companies paying more tax revenue to foreign governments. Our full year share count calculation for adjusted earnings per share in 2024 will include the remaining benefit equal to approximately 120 million shares from the approximately 191 million net share reduction in outstanding J&J shares following the Kenvue exchange offer. Given all these factors, we expect adjusted operational earnings per share to grow 7.4% at the midpoint for a range of $10.55 to $10.75. Based on the euro spot rate of 1.09 from last week, we do not estimate any currency impact on earnings per share. I'll now provide some qualitative considerations on quarterly phasing for your models. We expect Innovative Medicine sales growth to be slightly stronger in the first half of the year compared to the second half, given the anticipated entry of STELARA biosimilars in Europe towards the middle of the year. This headwind will be partially offset by continued uptake from our recently launched products. We project MedTech operational sales growth to be relatively consistent throughout the year, expecting procedures in 2024 to remain above pre-COVID levels. The first half of the year will continue to have modest impact from Russia sanctions as our licenses are approved. We anticipate China VBP pricing for surgical IOLs and orthopedic sports to begin in 2024 with impacts from 2023 VBP in electrophysiology, Endocutters, Energy, Spine and Trauma to begin to anniversary throughout 2024. Regarding EPS phasing, it is important to highlight that the first half of the year will benefit from the full 191 million net share reduction following the Kenvue exchange offer with only a partial comparative benefit in the third quarter versus Q3 2023 and the fourth quarter being neutral versus Q4 2023. So based on the foundation strengthened in 2023 and numerous catalysts that Joaquin outlined across our business in 2024, we are confident in our ability to achieve both near and long-term financial targets. I'd like to close by thanking our colleagues for their dedication and commitment to benefit patients around the world. It is their effort that enables Johnson & Johnson to deliver innovative therapies and solutions that address serious unmet medical needs and creates long-term sustainable value for shareholders. With that, I\u2019m now pleased to turn the call over to Kevin to begin the Q&A portion of the call.","evidence_gemma_new":null,"evidence_llama_3_3":"expect other income and expense 2024","evidence_qwen_3_30b":"other income and expense 2024","gemma_new_max":null,"gemma_new_min":null,"llama_3_3_max":1300000000.0,"llama_3_3_min":1300000000.0,"qwen_3_30b_max":1300000000.0,"qwen_3_30b_min":1300000000.0}
{"symbol":"JNJ","year":2024,"quarter":1,"date":"2024-Q1","chunk_id":1,"sub_chunk_id":0,"centroid_label":"other income and expense","agreed_value":322000000.0,"count":2,"chunk":"Jessica Moore: Hello everyone. This is Jessica Moore, Vice President of Investor Relations for Johnson & Johnson. Welcome to our company's review of the first quarter business results and our full year financial outlook for 2024. A few logistics before we get into the details. As a reminder you can find additional materials including today\u2019s presentation and associated schedules on the Investor Relations section of the Johnson & Johnson website at investor.jnj.com. Please note that this presentation contains forward-looking statements regarding, among other things, the company's future operating and financial performance, market position and business strategy. You are cautioned not to rely on these forward-looking statements, which are based on the current expectations of future events using the information available as of the date of this recording, and are subject to certain risk and uncertainties that may cause the company's actual results to differ materially from those projected. A description of these risks, uncertainties and other factors can be found in our SEC filings, including our 2023 Form 10-K, which is available at investor.jnj.com and on the SECs website. Additionally, several of the products and compounds discussed today are being developed in collaboration with strategic partners or licensed from other companies. This slide acknowledges those relationships. Moving to today's agenda I will start by reviewing the first quarter sales and P&L results for the corporation as well as highlights related to our two businesses. Joe Wolk our CFO will then provide additional business and financial commentary before sharing an overview of our cash position, capital allocation priorities, and guidance for 2024. The remaining time will be available for your questions. Joaquin Duato our Chairman and CEO as well as Jennifer Taubert, John Reed, and Tim Schmid, our Innovative Medicine and MedTech leaders will be joining us for Q&A. To ensure we provide enough time to address your questions, we anticipate the webcast will last approximately 60 minutes. Unless otherwise stated the financial results and guidance highlighted today reflect the continuing operations of Johnson & Johnson. Furthermore, the percentages quoted represent operational results and therefore exclude the impact of currency translation. Turning to our first quarter sales results. Worldwide sales were $21.4 billion for the first quarter of 2024. Sales increased 3.9% with growth of 7.8% in the U.S. and a decline of 0.3% outside of the U.S. Excluding the impact of the COVID-19 vaccine, operational sales growth was 7.6% worldwide and 7.4% outside of the U.S. Sales growth in Europe excluding the COVID-19 vaccine was 6%. Turning now to earnings. For the quarter net earnings were $5.4 billion and diluted earnings per share was $2.20 versus basic loss per share of $0.19 a year ago. Excluding after tax intangible asset amortization expense and special items for both periods, adjusted net earnings for the quarter were $6.6 billion, and adjusted diluted earnings per share was $2.71, representing increases of 3.8% and 12.4%, respectively compared to the first quarter of 2023. On an operational basis, adjusted diluted earnings per share increased 12.8%. I will now comment on business sales performance in the quarter. Beginning with Innovative Medicine, worldwide Innovative Medicine sales of $13.6 billion increased 2.5%, with growth of 8.4% in the U.S. and a decline of 4% outside of the U.S. Excluding the impact of the COVID-19 vaccine, operational sales growth was 8.3%, both worldwide and outside of the U.S. Innovative Medicine growth was driven by our key brands and continued uptake from recently launched products, with nine assets delivering double-digit growth. We continued to drive strong sales growth across our multiple myeloma portfolio. DARZALEX growth was 21%, primarily driven by share gains of six points across all lines of therapy and ten points in the front line setting. As of this quarter, we are now disclosing TECVAYLI sales, which were previously reported in other oncology. Sales achieved $133 million in the quarter, compared to $63 million in the first quarter of last year, reflecting a strong launch in the relapsed refractory setting. CARVYKTI achieved sales of $157 million, compared to $72 million in the first quarter of last year, driven by continued capacity expansion, manufacturing efficiencies, and strong demand. While sequential growth was roughly flat due to phasing, we continued to anticipate quarter-over-quarter growth with acceleration in the back half of the year. Other oncology growth was driven by continuing strong uptake of TALVEY, our GPRC5D bispecific, and RYBREVANT our bispecific antibody for non-small cell lung cancer. Also in oncology, ERLEADA continues to deliver strong growth of 28.4%, primarily driven by share gains. Growth of 22.4% in pulmonary hypertension was driven by favorable patient mix, share gains, and market growth for both OPSUMIT and UPTRAVI. As a reminder, favorable patient mix was a driver in Q2 2023 through Q1 2024. Therefore, while we still anticipate growth, we expect to lap this dynamic beginning in Q2 2024. Within immunology, we saw sales growth in TREMFYA of 27.6%, driven by market growth and share gains. STELARA growth of 1.1% was driven by market growth and share gains in IBD, partially offset by unfavorable patient mix in the U.S. and as expected, share loss in PSO and PSA. We anticipate continued volume growth largely offset by price declines as we move towards biosimilar entry. In neuroscience SPRAVATO growth of 72% continues to be driven by share gains and additional market launches. Total Innovative Medicine sales growth was partially offset by unfavorable patient mix in XARELTO, which we anticipate continuing throughout the year, as well as a decrease in IMBRUVICA due to competitive pressures, partially offset by stocking dynamics in the U.S. Finally, it is worth noting distribution rights for REMICADE and SIMPONI in Europe will be returned in Q4. I'll now turn your attention to MedTech. Worldwide Med1ech sales of $7.8 billion increased 6.3%, with growth in the U.S. of 6.6% and 6.1% outside of the U.S. In the quarter, worldwide MedTech growth was negatively impacted by approximately 80 basis points due to fewer selling days, disproportionately impacting orthopedics. In cardiovascular previously referred to as Interventional Solutions, electrophysiology delivered double-digit growth of 25.9%, with strong growth in all regions. Performance was driven by global procedure growth, new product uptake, commercial execution, and a onetime inventory build in Asia-Pacific, impacting worldwide growth by approximately 370 basis points. In addition, Abiomed delivered growth of 15%, driven by continued strong adoption of Impella 5.5 and Impella RP technology. Orthopedics growth of 4.8% includes a onetime revenue recognition timing change related to certain products across all platforms in the U.S. positively impacting worldwide growth by approximately 300 basis points. As a reminder, orthopedics was over indexed by the impact of reduced selling days in the quarter. Strong performance in hips and knees was driven by procedure recovery, growth of new products, and commercial execution. While trauma and spine were negatively impacted by competitive pressures and core trauma was further impacted by weather related softness in the U.S. Growth of 1.9% in surgery was driven primarily by procedure recovery and strength of our bio surgery and wound closure portfolios, partially offset by competitive pressures in China volume based procurement and energy and endo cutters. Contact lenses declined 2.3%, driven by U.S. stocking dynamics, partially offset by strong performance in ACUVUE OASYS 1-day family of products. Worldwide growth was negatively impacted by 120 basis points due to the Blink divestiture in Q3 2023. Surgical Vision grew 1.1%, driven by CNIS EYHANCE, a monofocal intraocular lens partially offset by China's VBP. Now turning to our consolidated statement of earnings for the first quarter of 2024. I'd like to highlight a few noteworthy items that have changed compared to the same quarter of last year. Cost of product sold margin leveraged by 160 basis points, primarily driven by lower COVID-19 supply network related exit cost. Selling, marketing, and administrative margins deleveraged 110 basis points, driven primarily by timing of marketing investment in the Innovative Medicine business. We continued to invest strategically in research and development at competitive levels investing $3.5 billion, or 16.6% of sales this quarter. We invested $2.9 billion, or 21.4% of sales in Innovative Medicine, with the increase in investment being driven by continued pipeline progression. In MedTech, R&D investment was $0.6 billion, or 8.3% of sales, a slight decrease driven by phasing. Interest income was $209 million in the first quarter of 2024, as compared to $14 million of expense in the first quarter of 2023. The increase in income was driven by a lower average debt balance and higher interest rates earned on cash balances. Other income and expense was income of $322 million in the first quarter of 2024, compared to an expense of $6.9 billion in the first quarter of 2023. This change was primarily due to the $6.9 billion charge related to the talc settlement proposal recorded in the first quarter of 2023. Regarding taxes in the quarter, our effective tax rate was 16.9% versus 61.8% in the same period last year, which was primarily driven by the tax benefit on the talc settlement proposal recorded in the first quarter of 2023. Excluding special items, the effective tax rate was 16.5% versus 15.9% in the same period last year. I encourage you to review our upcoming first quarter 10-Q filing for additional details on specific tax related matters. Lastly, I'll direct your attention to the box section of the slide, where we have also provided our income before tax, net earnings, and earnings per share adjusted to exclude the impact of intangible amortization expense and special items. Now let's look at adjusted income before tax by segment. In the first quarter of 2024 our adjusted income before tax for the enterprise, as a percentage of sales increased from 36.1% to 36.8%, primarily driven by an increase in non-allocated interest income with both Innovative Medicine and MedTech margins remaining relatively flat year-over-year. When comparing against the fourth quarter and full year 2023, Innovative Medicine and MedTech adjusted income before tax margins have improved. This concludes the sales and earnings portion of the call. I am now pleased to turn it over to Joe.","evidence_gemma_new":null,"evidence_llama_3_3":"other income and expense first quarter of 2024","evidence_qwen_3_30b":"Other income and expense $322 million","gemma_new_max":null,"gemma_new_min":null,"llama_3_3_max":322000000.0,"llama_3_3_min":322000000.0,"qwen_3_30b_max":322000000.0,"qwen_3_30b_min":322000000.0}
{"symbol":"JNJ","year":2024,"quarter":4,"date":"2024-Q4","chunk_id":3,"sub_chunk_id":0,"centroid_label":"other income and expense","agreed_value":161000000.0,"count":2,"chunk":"Jessica Moore: Thank you, Joaquin. Moving to our financial results. Unless otherwise stated, the results and guidance highlighted today reflect the continuing operations of Johnson & Johnson. Furthermore, the percentages quoted represent operational results and therefore excludes the impact of currency translation. Starting with Q4 2024 sales results. Worldwide sales were $22.5 billion for the quarter. Sales increased 6.7% with growth of 10% in the US and 2.5% outside of the US. Worldwide growth was negatively impacted by 290 basis points due to STELARA and positively impacted by 100 basis points due to acquisitions and divestitures. It's important to note growth in Europe was negatively impacted by 720 basis points due to the loss of exclusivity of STELARA and the COVID-19 vaccine. Turning now to earnings. For the quarter, net earnings were $3.4 billion and diluted earnings per share was $1.41 versus diluted earnings per share of $1.70 a year ago. Excluding after tax intangible asset amortization expense and special items for both periods, adjusted net earnings for the quarter were $4.9 billion and adjusted diluted earnings per share was $2.04, representing decreases of 11.1% and 10.9%, respectively, compared to the fourth quarter of 2023. Earnings per share in the quarter was negatively impacted by $0.22 of acquired IPR&D expense related to the V-Wave acquisition. For the full year 2024, sales were $88.8 billion. Sales grew 5.9% with growth of 8.3% in the US and 2.9% outside of the US. STELARA and the COVID-19 vaccine negatively impacted worldwide growth by 260 basis points. Acquisition and divestitures positively impacted worldwide growth by 50 basis points. Growth in Europe was negatively impacted by 670 basis points due to the COVID-19 vaccine and the loss of exclusivity of STELARA. Net earnings for the full year 2024 were $14.1 billion and diluted earnings per share was $5.79 versus diluted earnings per share of $5.20 a year ago. Full year 2024 adjusted net earnings were $24.2 billion and adjusted diluted earnings per share was $9.98, representing a decrease of 4.6% and an increase of 0.6% respectively versus full year 2023. Earnings per share in the year was negatively impacted by $0.67 due to acquired IPR&D charges on various transactions throughout the year. I will now comment on business sales performance in the quarter. Beginning with Innovative Medicine. Worldwide sales of $14.3 billion increased 6.5% excluding the COVID-19 vaccine with growth of 11.1% in the US and a decline of 0.3% outside of the US. STELARA negatively impacted worldwide growth by 490 basis points. Innovative Medicine growth was driven by our key brands and continued uptake from recently launched products with 10 assets delivering double-digit growth. Results across the portfolio continue to be positively impacted by price adjustments associated with Argentina hyperinflation consistent with market practice. Starting with oncology. We continue to drive strong sales growth across our multiple myeloma portfolio. DARZALEX growth was 23.5%, primarily driven by share gains of over three points across all lines of therapy and six points in the frontline setting as well as market growth. This marks Johnson & Johnson's first brand to achieve over $3 billion in sales in a quarter. CARVYKTI achieved sales of $334 million with growth of over 100% driven by share gains and capacity expansion. This reflects sequential growth of 17.3% aligned with our expectations of accelerating growth in the back half of the year. TECVAYLI sales were $146 million in the quarter with growth of 18%, reflecting a strong launch in the relapsed refractory setting. Demand remains strong despite continued adoption of longer duration dosing intervals. Finally, within our multiple myeloma portfolio, TALVEY continued its launch trajectory with another quarter of strong growth. As a reminder, we anticipate disclosing TALVEY sales in the first quarter of 2025, which are currently reported in the category Other Oncology. ERLEADA continues to deliver strong growth of 22.7%, primarily driven by share gains and market growth, reaching $3 billion in annual sales for the first time. RYBREVANT, our bispecific antibody for non-small cell lung cancer, contributed to growth in the category Other Oncology as we continue to expand approved indications. We also anticipate disclosing RYBREVANT sales in the first quarter of 2025. Within immunology, we saw sales growth in TREMFYA of 5.6%, driven by strong market growth and share gains in PsO and PsA, partially offset by unfavorable patient mix and inventory dynamics. We are excited about the recent UC launch and expect to see strong uptake of the IBD indications in 2025. STELARA declined 13.6% driven by the impact of current and anticipated biosimilar competition. As a reminder, biosimilar competition has entered the US in January 2025. REMICADE and SIMPONI worldwide sales were positively impacted by return of distribution rights in Europe. In Neuroscience, SPRAVATO growth of 45.3% continues to be driven by increased physician and patient demand. As Joaquin mentioned, SPRAVATO has exceeded $1 billion in annual sales for the first time. Other Neuroscience decline was driven by the loss of a SPINRAZA tender in Europe. In Pulmonary Hypertension, OPSUMIT grew 2.5%, driven by market growth and share gains, partially offset by inventory dynamics in the US and austerity measures in Europe. Starting in 2025, we will begin to report OPSYNVI, which is currently reported in the category Other Pulmonary Hypertension in OPSUMIT. UPTRAVI grew 12. 1%, driven by market growth, patient mix and share gains. Finally, XARELTO sales growth was driven by favorable patient mix. I'll now turn your attention to MedTech. Worldwide sales of $8.2 billion increased 7.6% both in the US and outside of the US. Acquisitions and divestitures had a net positive impact of 300 basis points on worldwide growth, 430 basis points in the US and 150 basis points outside of the US. Overall, MedTech growth was driven by commercial execution and strength of new product introductions, partially offset by increased competitive PFA pressures in US electrophysiology and continued headwinds in Asia Pacific, primarily in China. In Cardiovascular, electrophysiology delivered growth of 7.3%. Performance was driven by global procedure growth, new product uptake and commercial execution, partially offset by competitive PFA ablation catheter uptake in the US and VBP in China. Despite the IV saline shortage in the US, Abiomed delivered growth of 13.2% driven by strong growth in all regions and continued adoption of Impella 5.5 and Impella RP technology. Cardiovascular results also included $258 million associated with the acquisition of Shockwave. Contact Lenses and Other grew 7.4%, driven by trade inventory dynamics, continued strategic price actions, strong performance in ACUVUE OASYS 1-Day family of products as well as lapping prior year impacts from Russia sanctions. Surgical Vision growth of 13.6% was driven by TECNIS PureSee & TECNIS Eyhance. Commercial execution partially offset by competitive pressures in the US. Orthopedics grew 2.5% inclusive of hips growth of 5.6%, primarily driven by the success of recent product launches and commercial execution, partially offset by revenue disruption from the previously announced orthopedics transformation, impacts of China VBP and competitive pressures. Lastly, Surgery grew 0.4% with the Acclarent divestiture negatively impacting results by approximately 130 basis points. Performance was driven primarily by commercial execution, strength of new products across wound closure and biosurgery and continued price adjustments primarily associated with hyperinflation consistent with market practice. Growth was partially offset by competitive pressures in Energy and Endocutters as well as VBP and the anticorruption campaign in China. Now turning to our consolidated statement of earnings for the fourth quarter of 2024. I'd like to highlight a few noteworthy items that have changed compared to the same quarter of last year. We continue to invest strategically in research and development at competitive levels to fortify our future, investing $5.3 billion or nearly 24% of sales, which includes $540 million of acquired IPR&D expense associated with the V-Wave acquisition. Selling, marketing and administrative expense as a percent of sales deleveraged 150 basis points driven by increased commercial investment in the Innovative Medicine business. Interest income and expense was a net income of $144 million as compared to $212 million of income last year driven by lower interest rates earned on a lower average cash balance and higher interest rates on a higher average debt balance. Other income and expense was a net income of $161 million compared to $421 million of income in the prior year. This was primarily driven by lower gains on securities, a lower benefit related to employee benefit programs due to the discount rate, partially offset by lower litigation expense in 2024. Regarding taxes in the quarter, our effective tax rate was 11.7% versus 14.4% in the same period last year. This decrease was primarily driven by post-acquisition integration efforts that allowed the company to deduct certain acquisition costs for tax purposes as well as the resolution of prior tax matters both in jurisdictions outside of the US. Excluding special items, the effective tax rate was 8.8% versus 10.8% in the same period last year. I encourage you to review our upcoming 2024 10-K filing for additional details on specific tax related matters. Lastly, I'll direct your attention to the box section of the slide, where we have also provided our income before tax, net earnings and earnings per share adjusted to exclude the impact of intangible, amortization expense and special items. Now let's look at adjusted income before tax by segment for the quarter. Innovative Medicine margin declined from 37.4% to 32.5% primarily driven by strategic commercial investment and R&D pipeline advancement. MedTech margin declined from 15.5% to 10. 8% primarily driven by acquired IPR&D expense related to the V-Wave acquisition. Please note that the MedTech margin was negatively impacted in both years due to expenses associated with the strategic acquisition of Laminar. When adjusting for these one-time items, MedTech margin was relatively flat. As a result, adjusted income before tax for the enterprise as a percentage of sales decreased from 29.2% to 24.1% with the V-Wave acquired IPR&D expense impacting results by 240 basis points. When looking at the full year, Innovative Medicine, MedTech and the Enterprise adjusted income before tax remained relatively flat year-over-year when adjusting for the one-time items highlighted on the slide, mainly acquired IPR&D expenses on various transactions across both years. This concludes the sales and earnings portion of the call. I am now pleased to turn it over to Joe.","evidence_gemma_new":null,"evidence_llama_3_3":"other income and expense Q4 2024","evidence_qwen_3_30b":"other income and expense Q4 2024","gemma_new_max":null,"gemma_new_min":null,"llama_3_3_max":161000000.0,"llama_3_3_min":161000000.0,"qwen_3_30b_max":161000000.0,"qwen_3_30b_min":161000000.0}
{"symbol":"JNJ","year":2023,"quarter":4,"date":"2023-Q4","chunk_id":3,"sub_chunk_id":0,"centroid_label":"research and development","agreed_value":4500000000.0,"count":2,"chunk":"Jessica Moore: Thanks, Joaquin. Unless otherwise stated, the financial results and guidance highlighted reflects the continuing operations of Johnson & Johnson. We will report the consumer health financial results as discontinued operations. Furthermore, the percentages quoted represent operational results and therefore, exclude the impact of currency translation. Starting with Q4 2023 sales results. Worldwide sales were $21.4 billion for the fourth quarter of 2023. Sales increased 7.2%, with 11% in the U.S. and 2.7% outside of the U.S. Excluding the net impact of acquisitions and divestitures, adjusted operational sales growth was 5.7% worldwide, 8.8% in the U.S. and 2.1% outside the U.S. It is important to note that sales in Europe were negatively impacted by the COVID-19 vaccine and loss of exclusivity of ZYTIGA by approximately 1,500 basis points operationally. Turning now to earnings. For the quarter, net earnings were $4.1 billion, and diluted earnings per share was $1.70 versus diluted earnings per share of $1.22 a year ago. Excluding after-tax intangible asset amortization expense and special items for both periods, adjusted net earnings for the quarter were $5.6 billion and the diluted earnings per share was $2.29, representing increases of 2.4% and 11.7%, respectively, compared to the fourth quarter of 2022. On an operational basis, adjusted diluted earnings per share increased 11.2%. For the full year 2023, sales were $85.2 billion. Sales grew 7.4%, with 10.6% in the U.S. and 3.8% outside of the U.S. Excluding the net impact of acquisitions and divestitures, adjusted operational sales growth was 5.9% worldwide, 8.2% in the U.S. and 3.4% outside the U.S. Sales in Europe were negatively impacted by the COVID-19 vaccine and loss of exclusivity of ZYTIGA by approximately 1,000 basis points operationally. Net earnings for the full year 2023 were $13.3 billion and diluted earnings per share was $5.20 versus diluted earnings per share of $6.14 a year ago. Full year 2023 adjusted net earnings were $25.4 billion, and adjusted diluted earnings per share was $9.92, representing increases of 6.8% and 11.1%, respectively, versus full year 2022. On an operational basis, adjusted diluted earnings per share increased by 10.8%. I will now comment on business sales performance in the quarter. Beginning with Innovative Medicine. Worldwide Innovative Medicine sales of $13.7 billion increased 4% with growth of 9.5% in the U.S. and a decline of 3.1% outside of the U.S. Excluding COVID-19 vaccine sales, worldwide and U.S. sales growth was 9.5%, and growth outside of the U.S. was 9.4%. Sales outside the U.S., excluding the COVID-19 vaccine were negatively impacted by approximately 120 basis points due to the loss of exclusivity of ZYTIGA in Europe. Innovative Medicine growth was driven by our key brands and continued uptake from recently launched products, with nine assets delivering double-digit growth. We continue to drive strong sales growth for both DARZALEX and ERLEADA, with increases of 22.2% and 19%, respectively. Within immunology, we saw sales growth in both STELARA and TREMFYA, with increases of 14.5% and 20.5%, respectively. This growth was driven by market growth and share gains as well as favorable patient mix in TREMFYA. Growth of 17.4% in pulmonary hypertension was driven by favorable patient mix, share gains and market growth. Turning to newly launched products. We continue to make progress on our launches of CARVYKTI and SPRAVATO. We are also encouraged by the early success of our launches of TECVAYLI and TALVEY, sales of which are driving the growth in other Oncology. As a reminder, we expect to begin disclosing TECVAYLI sales in Q1 2024. Total Innovative Medicine sales growth was partially offset by unfavorable patient mix in XARELTO, a decrease in IMBRUVICA sales due to competitive pressures and a loss of exclusivity of ZYTIGA, REMICADE and PREZISTA. I'll now turn your attention to MedTech. Worldwide MedTech sales of $7.7 billion increased 13.4% with Abiomed contributing 4.5% to growth. Growth in the U.S. was 14.1% and 12.8% outside of the U.S. Excluding the impact of acquisitions and divestitures, worldwide adjusted operational sales growth was 9.1%. MedTech was negatively impacted by international sanctions in Russia worth approximately 50 basis points, primarily in Advanced Surgery and Vision. Electrophysiology delivered double-digit growth of 25.2% with strong growth in all regions, including Europe. This growth was driven by our global market leading portfolio, including the most recently launched QDOT RF ablation and OCTARAY catheters. Abiomed contributed $340 million in sales within the quarter driven by continued strong adoption of Impella 5.5 technology. Growth of 6.4% in surgery was driven primarily by procedure recovery and strength of our biosurgery and wound closure portfolios. Growth was partially offset by volume based procurement in China, primarily in Endocutters. Orthopaedics growth of 5% reflects procedure growth, success of recently launched products such as the global expansion of our VELYS digital solutions and expansion in ambulatory surgical centers, as well as lapping of prior year China\u2019s VBP price concessions in Spine. Growth of 6.6% in Vision was driven by price actions and contact lenses, as well as strength of new products including ACUVUE OASYS 1-Day family of products and contact lenses and TECNIS EYHANCE, our monofocal interocular lens and surgical vision. Growth of contact lenses was partially offset by U.S. stocking dynamics. Global Vision growth was negatively impacted by 140 basis points due to the Blink divestiture in Q3. Now turning to our consolidated statement of earnings for the fourth quarter of 2023. I'd like to highlight a few noteworthy items that have changed compared to the same quarter of last year. Cost of products sold margin deleveraged by 130 basis points due to commodity inflation and unfavorable product mix in MedTech, partially offset by favorable patient mix and lower COVID-19 vaccine supply network related exit cost in Innovative Medicine. We continue to invest strategically in research and development at competitive levels, investing $4.5 billion or 20.9% of sales this quarter. We invested $3.4 billion or 24.5% of sales in Innovative Medicine with the increase in investment being driven by higher milestones, partially offset by portfolio prioritization. In MedTech, R&D investment was $1.1 billion or 14.6% of sales with the increase in investment primarily driven by the Laminar acquisition. Interest income was $212 million in the fourth quarter of 2023 as compared to $77 million of income in the fourth quarter of 2022. The increase in income was driven by higher interest rates earned on cash balances and a lower average debt balance. The other income and expense line was income of $421 million in the fourth quarter of 2023 compared to an expense of $795 million in the fourth quarter of 2022. This was primarily driven by higher unrealized gains on securities and lower (ph) COVID-19 vaccine-related exit costs. Regarding taxes in the quarter, our effective tax rate was 14.4% versus 16% in the same period last year. This decrease was primarily driven by the net decrease of tax liabilities, including the settlement of the 2013 through 2016 U.S. tax audit. Excluding special items, the effective tax rate was 10.8% versus 16.2% in the same period last year. I encourage you to review our upcoming 2023 10-K filing for additional details on specific tax-related matters. Lastly, I will direct your attention to the box section of the slide, where we have also provided our income before tax, net earnings and earnings per share adjusted to exclude the impact of intangible amortization expense and special items. Now let's look at adjusted income before tax by segment. In the fourth quarter of 2023, our adjusted income before tax for the enterprise as a percentage of sales decreased from 32.5% to 29.2%. Innovative Medicine margins declined from 37.7% to 37.4%, primarily driven by higher R&D milestones, partially offset by favorable patient mix and leveraging and selling and marketing expense. MedTech margins declined from 24.5% to 15.5% primarily driven by in-process research and development expense from the Laminar acquisition, commodity inflation and unfavorable product mix, partially offset by selling and marketing expense leverage. This concludes the sale and earnings portion of the call. I'm now pleased to turn it over to Joe.","evidence_gemma_new":null,"evidence_llama_3_3":"research and development","evidence_qwen_3_30b":"research and development Q4 2023","gemma_new_max":null,"gemma_new_min":null,"llama_3_3_max":4500000000.0,"llama_3_3_min":4500000000.0,"qwen_3_30b_max":4500000000.0,"qwen_3_30b_min":4500000000.0}
{"symbol":"JNJ","year":2023,"quarter":4,"date":"2023-Q4","chunk_id":4,"sub_chunk_id":0,"centroid_label":"research and development","agreed_value":15000000000.0,"count":2,"chunk":"Joseph Wolk: Thank you, Jessica, and thanks, everyone, for joining us today. As Joaquin and Jessica commented, 2023 was a strong year for Johnson & Johnson evidenced by notable top and bottom line performance beats relative to what we guided to 2023 at this time last year. We are particularly proud of the innovation we advanced to strengthen our development pipelines, the continued expansion of our portfolio and investments made for future success. All of this provides us with a strong foundation as we enter 2024. Thus far during the call, you've heard about sales and income performance in 2023. So now let's dive into some detail on capital allocation highlights. We generated free cash flow of more than $18 billion in 2023. At the end of the year, we had approximately $23 billion of cash and marketable securities and approximately $29 billion of debt for a net debt position of $6 billion. We maintained a healthy balance sheet and robust credit rating, underscoring the strength of Johnson & Johnson's financial position, which enables us to strategically invest and deploy capital to unlock value. To that end, we executed against all of our capital allocation priorities in 2023. For starters, we invested more than $15 billion in research and development or 17.7% of sales, an all-time high for the company as we remain one of the top investors in R&D across all industries. Jessica provided R&D investment by business segment, information we will continue to provide on a quarterly basis moving forward. As far as dividends, 2023 marked the 61st consecutive year in which we increased our dividend. We know this use of capital is a priority for our investors, and we plan to continue to increase our dividend annually. We also deployed, announced or committed over $3 billion in strategic value creating inorganic growth opportunities in the last 12 months. This amount includes the recent Ambrx and Laminar transactions as well as more than 50 smaller early-stage licensing deals and partnerships that complement our current Innovative Medicine and MedTech pipelines. Finally, share repurchases. In early 2023, we completed the $5 billion share repurchase program initiated in late 2022 and in combination with our dividend, returned over $14 billion to shareholders last year. Through the Kenvue separation, we further reduced the Johnson & Johnson's outstanding share count by 191 million shares or approximately 7% without the use of cash and in a tax-free manner. Looking ahead to 2024, Johnson & Johnson's robust free cash flow generation should continue to solidify our already strong financial foundation and fuel further investment leading to growth for our business or returns to shareholders. Now turning to our full year 2024 guidance. Today, we are confirming the 2024 guidance for those items previewed at our enterprise business review in early December by filling in some of the details. We expect operational sales growth for the full year to be in the range of 5% to 6% or $88.2 billion to $89 billion. As a reminder, our sales guidance continues to exclude any impact from COVID-19 vaccine sales. In Innovative Medicine, we expect 2024 to deliver a 13th consecutive year of above market growth, driven by market share gains from key brands such as DARZALEX, TREMFYA and ERLEADA as well as continued adoption of recently launched newer products such as CARVYKTI, TECVAYLI, TALVEY and SPRAVATO. In MedTech, we remain focused on executing our key value drivers: first, advancing our differentiated pipeline such as programs in pulse field ablation, Abiomed and surgical robotics, further shifting our portfolio into high-growth markets; second, expanding our reach and scale around the world; and third, building operational resilience across our portfolio. We don't speculate on future currency movements, but utilizing the euro spot rate relative to the U.S. dollar as of last week at $1.09 as well as other major currencies, we estimate there would be a slight unfavorable impact of $400 million or a negative 0.5% on reported sales growth for the year. Turning to other items on our P&L. We expect our 2024 adjusted pretax operating margin to improve by approximately 50 basis points driven primarily by a continuation of efficiency programs across the organization. We expect this to be partially offset by anticipated STELARA biosimilar entrants in Europe in the second half of this year and some lingering inflation impact in MedTech inventory that will flow through 2024's P&L. This margin improvement encompasses dilution of additional investment associated with our planned acquisition of Ambrx, which will be treated as a business combination. Now we do acknowledge that this 50 basis point improvement simply gets us back to what your models expected, given the elevated Q4 2023 R&D investment for new pipeline assets. Regarding other income and expense, we anticipate income to be $1.2 billion to $1.4 billion for 2024. This is less than the 2023 amount driven by the impact of actuarial assumptions on certain employee benefit programs such as lower discount rates. We are comfortable with you modeling net interest income between $450 million and $550 million, consistent with 2023 levels. Finally, we are projecting an effective tax rate for 2024 in the range of 16% to 17% based on current tax laws and anticipated geographic income mix across our businesses. This tax rate takes into account an increase of approximately 1.5% or 150 basis points relative to the recently enacted Pillar 2 legislation. We continue to believe the U.S. Treasury's current perspective on Pillar 2 is harmful, reducing U.S. incentives for innovation and resulting in U.S. based multinational companies paying more tax revenue to foreign governments. Our full year share count calculation for adjusted earnings per share in 2024 will include the remaining benefit equal to approximately 120 million shares from the approximately 191 million net share reduction in outstanding J&J shares following the Kenvue exchange offer. Given all these factors, we expect adjusted operational earnings per share to grow 7.4% at the midpoint for a range of $10.55 to $10.75. Based on the euro spot rate of 1.09 from last week, we do not estimate any currency impact on earnings per share. I'll now provide some qualitative considerations on quarterly phasing for your models. We expect Innovative Medicine sales growth to be slightly stronger in the first half of the year compared to the second half, given the anticipated entry of STELARA biosimilars in Europe towards the middle of the year. This headwind will be partially offset by continued uptake from our recently launched products. We project MedTech operational sales growth to be relatively consistent throughout the year, expecting procedures in 2024 to remain above pre-COVID levels. The first half of the year will continue to have modest impact from Russia sanctions as our licenses are approved. We anticipate China VBP pricing for surgical IOLs and orthopedic sports to begin in 2024 with impacts from 2023 VBP in electrophysiology, Endocutters, Energy, Spine and Trauma to begin to anniversary throughout 2024. Regarding EPS phasing, it is important to highlight that the first half of the year will benefit from the full 191 million net share reduction following the Kenvue exchange offer with only a partial comparative benefit in the third quarter versus Q3 2023 and the fourth quarter being neutral versus Q4 2023. So based on the foundation strengthened in 2023 and numerous catalysts that Joaquin outlined across our business in 2024, we are confident in our ability to achieve both near and long-term financial targets. I'd like to close by thanking our colleagues for their dedication and commitment to benefit patients around the world. It is their effort that enables Johnson & Johnson to deliver innovative therapies and solutions that address serious unmet medical needs and creates long-term sustainable value for shareholders. With that, I\u2019m now pleased to turn the call over to Kevin to begin the Q&A portion of the call.","evidence_gemma_new":"research and development sales","evidence_llama_3_3":null,"evidence_qwen_3_30b":"research and development 17.7%","gemma_new_max":15000000000.0,"gemma_new_min":15000000000.0,"llama_3_3_max":null,"llama_3_3_min":null,"qwen_3_30b_max":15000000000.0,"qwen_3_30b_min":15000000000.0}
{"symbol":"JNJ","year":2024,"quarter":2,"date":"2024-Q2","chunk_id":1,"sub_chunk_id":0,"centroid_label":"research and development","agreed_value":3400000000.0,"count":3,"chunk":"Jessica Moore: Hello, everyone. This is Jessica Moore, Vice President of Investor Relations for Johnson & Johnson. Welcome to our company's review of the second quarter business results and our full-year financial outlook for 2024. A few logistics before we get into the details. As a reminder you can find additional materials including today\u2019s presentation and associated schedules on the investor relations section of the Johnson & Johnson website at investor.jnj.com. Please note that this presentation contains forward-looking statements regarding among other things, the company\u2019s future operating and financial performance, market position, and business strategy. You are cautioned not to rely on these forward-looking statements, which are based on the current expectations of future events using the information available as of the date of this recording and are subject to certain risk and uncertainties that may cause the company's actual results to differ materially from those projected. A description of these risks, uncertainties, and other factors can be found in our SEC filings, including our 2023 Form 10-K, which is available at investor.jnj.com and on the SEC's website. Additionally, several of the products and compounds discussed today are being developed in collaboration with strategic partners or licensed from other companies. This slide acknowledges those relationships. Moving to today's agenda, I will start by reviewing the second quarter sales and P&L results for the corporation, as well as highlights related to our two businesses. Joe Wolk, our CFO, will then provide additional business and financial commentary before sharing an overview of our cash position, capital allocation priorities, and guidance for 2024. Joaquin Duato, our Chairman and CEO, will then provide some closing remarks before we open it up for questions. Jennifer Taubert, John Reed, and Tim Schmid, our innovative medicine and MedTech leaders will be joining us for Q&A. To ensure we provide enough time to address your questions, we anticipate the webcast will last approximately 60 minutes. Unless otherwise stated, the financial results and guidance highlighted today reflect the continuing operations of Johnson & Johnson. Furthermore, the percentages quoted represent operational results and therefore exclude the impact of currency translation. Turning to our second quarter sales results. Worldwide sales were $22.4 billion for the second quarter of 2024. Sales increased 6.6%, with growth of 7.8% in the U.S. and 5.1% outside of the U.S. Excluding the impact of the COVID-19 vaccine, sales growth was 7.2% worldwide and growth of 6.4% outside of the U.S. Sales growth in Europe, excluding the COVID-19 vaccine was 6%. Turning now to earnings. For the quarter, net earnings were $4.7 billion and diluted earnings per share was $1.93 versus diluted earnings per share of $2.05 a year ago. Excluding after-tax intangible asset amortization expense and special items for both periods, adjusted net earnings for the quarter were $6.8 billion and adjusted diluted earnings per share was $2.82, representing increases of 1.6% and 10.2%, respectively, compared to the second quarter of 2023. I'll now comment on business sales performance in the quarter. Beginning with Innovative Medicine, worldwide Innovative Medicine sales of $14.5 billion increased 7.8%, with growth of 8.9% in the U.S. and 6.4% outside of the U.S. Excluding the impact of the COVID-19 vaccine, operational sales growth was 8.8% worldwide and 8.7% outside of the U.S. Innovative Medicine growth was driven by our key brands and continued uptake from recently launched products with 10 assets delivering double-digit growth. We continue to drive strong sales growth across our multiple myeloma portfolio. DARZALEX growth was 21.3%, primarily driven by share gains of 4.6 points across all lines of therapy and 9.4 points in the frontline setting, as well as market growth. CARVYKTI achieved sales of $186 million, with growth of 59.9%, driven by continued capacity expansion, manufacturing efficiencies, and strong demand. TECVAYLI sales achieved $135 million in the quarter, with growth of 43.5%, reflecting a strong launch in the relapsed-refractory setting. Demand remained strong while sequential growth slowed due to adoption of recently approved longer-duration dosing intervals. ERLEADA continues to deliver strong growth of 32.5%, primarily driven by share gains and market growth in metastatic castrate-sensitive prostate cancer. Other oncology growth was driven by continued strong uptake of TALVEY, our GPRC5D bispecific, and RYBREVANT, our bispecific antibody for non-small cell lung cancer. Within immunology, we saw sales growth in TREMFYA of 30.7%, driven by market growth, share gains in PSO and PSA, and favorable patient mix. STELARA growth of 4.9% was driven by market growth, partially offset by net unfavorable patient mix. We continue to anticipate biosimilar entry in Europe later this month, while in the U.S., we expect continued volume growth largely offset by price declines as we move towards biosimilar entry in 2025. In neuroscience, SPRAVATO growth of 60.8% continues to be driven by increased physician and patient confidence. In pulmonary hypertension, OPSUMIT grew 9.1% due to share gains and market growth, partially offset by unfavorable mix. UPTRAVI growth of 8.1% was driven by market growth and share gains, partially offset by inventory dynamics. Total Innovative Medicine sales growth was partially offset by a decline in other neuroscience, unfavorable patient mix in Xarelto and competitive pressures in IMBRUVICA. I'll now turn your attention to MedTech. Worldwide MedTech sales of $8 billion increased 4.4%, with growth in the U.S. of 5.7% and 3.2% outside of the U.S. Acquisitions and divestitures had a positive impact of 40 basis points on sales growth in the quarter. Growth was driven by commercial execution, strength of new product introductions, and continued strong procedure volume, partially offset by performance in China and competitive pressures in US distributor stocking dynamics and vision. In cardiovascular, electrophysiology delivered a double-digit growth of 13.4% with strong growth across all regions. The performance was driven by global procedure growth, new product uptake, and commercial execution, partially offset by the previous one-time inventory build in Asia-Pacific from the prior quarter. In addition, Abiomed delivered growth of 15.4%, driven by double-digit growth in all regions and continued strong adoption of Impella 5.5 and Impella RP technology. Results include $77 million associated with the acquisition of Shockwave, which closed on May 31. Contact lenses adjusted operational sales growth, excluding the Blink divestiture was 2.1%. Growth was driven by strong performance in the ACUVUE OASYS 1-Day family of products, partially offset by U.S. distributor stocking dynamics and competitive pressures, and Japan macroeconomic pressures. The Blink divestiture negatively impacted growth by approximately 130 basis points. Surgical vision grew 1.2%, driven by TECNIS Eyhance, our monofocal interocular lens, partially offset by China VBP and refractive softness in the U.S. Surgery adjusted operational sales growth, excluding the Acclarent divestiture was approximately flat. Performance was driven primarily by competitive pressures in energy and endocutters, China VBP, prior year China recovery, EMEA tender timing across advanced surgery and supply constraints, and wound closure. This was partially offset by strength of new products. The Acclarent divestiture negatively impacted growth by approximately 110 basis points. Orthopedics growth of 3.3% was driven by strong performance in hips and knees, due to procedure growth, strength of new products, and EMEA tender timing in knees. This growth was partially offset by competitive pressures and impacts of China VBP in spine and sports. Now, turning to our consolidated statement of earnings for the second quarter of 2024. I'd like to highlight a few noteworthy items that have changed, compared to the same quarter of last year. Cost of product sold margin deleveraged by 60 basis points, primarily driven by product mix within innovative medicine and macroeconomic factors across both sectors. We continue to invest strategically in research and development at competitive levels, investing $3.4 billion or 15.3% of sales this quarter. We invested $2.7 billion or 18.8% of sales in innovative medicine, compared to 22.2% of sales in 2023. As a reminder, last year included an upfront payment of $245 million associated with the AbelZeta partnership. In MedTech, R&D investment was $0.7 billion or 9% of sales, an increase driven by continued investment in strategic platforms. Other income and expense was a net expense of $653 million in the second quarter of 2024, compared to income of $384 million in the second quarter of 2023. The increase in expense was primarily driven by costs related to the closing of the Shockwave acquisition, the loss on the completion of the debt for equity exchange of the retained stake in Kenvue and prior year favorable intellectual property litigation settlements in MedTech. This was partially offset by the gain on the Acclarent divestiture. Regarding taxes in the quarter, our effective tax rate was 18.5% versus 14.7% in the same period last year. This increase was primarily driven by unfavorable one-time international audit settlements and the continued impact from Pillar 2. Excluding special items, the effective tax rate was 18.6% versus 15.9% in the same period last year. I encourage you to review our upcoming second-quarter 10-Q filing for additional details on specific tax-related matters. Lastly, I'll direct your attention to the box section of the slide, where we have also provided our income before tax, net earnings, and earnings per share adjusted to exclude the impact of intangible amortization expense and special items. Now let's look at adjusted income before tax by segment. In the second quarter of 2024, our adjusted income before tax for the enterprise as a percentage of sales increased from 37.2% to 37.4%. Innovative Medicine margin improved from 42.3% to 44.6%, primarily driven by an upfront payment of $245 million associated with the AbelZeta partnership in 2023, partially offset by product mix and cost of products sold. MedTech margin declined from 28.2% to 25.7%, driven by prior year favorable intellectual property litigation settlements worth approximately 300 basis points. This concludes the sales and earnings portion of the call. I'm now pleased to turn it over to Joe.","evidence_gemma_new":"research and development","evidence_llama_3_3":"Johnson & Johnson research and development","evidence_qwen_3_30b":"research and development $3.4 billion 15.3% of sales","gemma_new_max":3400000000.0,"gemma_new_min":3400000000.0,"llama_3_3_max":3400000000.0,"llama_3_3_min":3400000000.0,"qwen_3_30b_max":3400000000.0,"qwen_3_30b_min":3400000000.0}
{"symbol":"JNJ","year":2024,"quarter":3,"date":"2024-Q3","chunk_id":4,"sub_chunk_id":0,"centroid_label":"research and development","agreed_value":5000000000.0,"count":2,"chunk":"Joe Wolk: Thank you, Jessica. In the third quarter, Johnson & Johnson delivered results that illustrate not only the breadth of the business, but our ability to consistently beat financial expectations. Innovative Medicine continued to build on strong first-half revenue momentum. We are advancing our pharmaceutical pipeline, achieving significant clinical and regulatory milestones across key therapeutic areas. Our MedTech business, with the addition of Shockwave, delivered operational growth of 6.4% in the quarter, but did experience headwinds in the Asia Pacific region. We continue to fortify our future advancing the OTTAVA robotic surgery system to IDE, expanding VELYS use and launching new intraocular lenses. Due to dynamics in the Asia Pacific region, specifically in China, we are taking a responsibly conservative approach by assuming no material improvement in that part of the business for the remainder of this year. And as such, we expect MedTech adjusted operational sales growth for the full year 2024 to be closer to 5% versus the 6% we referenced last quarter. The strength of a diversified business enables us to more than offset volatility in one part of our business, but yet be in a position to once again increase 2024 guidance for the enterprise. Before diving into the results, I'll take a moment to touch on some enterprise-wide updates from the quarter. We are making progress towards resolving talc litigation. Our pre-packaged bankruptcy plan received overwhelming support from the current claimants of roughly 83% as well as the future claimants representative. As announced last Thursday, the case will be heard in the Texas Bankruptcy Court. And while we remain committed to bringing this matter to a resolution, it would be premature to speculate on timing. In addition to the pipeline highlights Joaquin mentioned, there are some additional notable advancements throughout the quarter. In oncology, we received U.S. and EU regulatory approval for RYBREVANT in combination with chemotherapy as a second line treatment for adults with advanced EGFR-mutated non-small cell lung cancer. With FDA priority review underway for a subcutaneous formulation of RYBREVANT, along with data supporting a treatment regimen to reduce adverse events, we are building a best-in-class EGFR portfolio. We also presented Phase 1 data for RYBREVANT with chemotherapy in metastatic colorectal cancer patients, extending the asset's potential beyond lung cancer. In multiple myeloma, we advanced our leadership position with FDA approval and filing of two DARZALEX FASPRO quad-based regimens for newly diagnosed patients. With CARVYKTI, we announced three-year follow-up data showing significantly extended overall survival and gained approval for commercial production at our Ghent facility, further expanding supply capacity. Finally, in oncology, we added to the growing evidence base for our TARIS platform with positive Phase 2b data in patients with high-risk non-muscle invasive bladder cancer and positive interim to Phase 2 data in patients with muscle invasive bladder cancer. In neuroscience, we submitted to the U.S. and European regulatory bodies for what would be the first global approval of nipocalimab for the treatment of people living with generalized myasthenia gravis. For the remainder of the year, we expect approval of TREMFYA subcu for Crohn's disease and data readouts on JNJ-2113, our targeted oral peptide for psoriasis and ulcerative colitis, JNJ-4804, our co-antibody therapeutic for inflammatory bowel disease, aticaprant for adjunctive major depressive disorder and nipocalimab for rheumatoid arthritis. In MedTech, we completed enrollment of the Omny-IRE clinical trial to evaluate safety and effectiveness in mapping and treating symptomatic paroxysmal atrial fibrillation during standard ablation procedures. Also in Cardiovascular, we are preparing for the anticipated approval of VARIPULSE in the U.S. and the submission of Impella ECP for regulatory approval. In Orthopaedics, we launched several exciting new products in the U.S., including our VELYS SPINE robot and VOLT Plating System. The plentiful pipeline progress across our businesses will ensure continued success. Let's now turn to cash and capital allocation. Free cash flow year-to-date was approximately $14 billion compared to $12 billion last year, which included eight months contribution from the Consumer Health business. We ended the third quarter with $20 billion of cash and marketable securities and $36 billion of debt for a net debt position of approximately $16 billion. Our capital allocation priorities remain unchanged. Our strong balance sheet enables us to strategically invest to grow our business while simultaneously returning capital to our shareholders. Innovation remains core to our strategy. During the quarter, we invested nearly $5 billion in research and development. This is an increase over 2023 levels even after excluding acquired in-process R&D expense. Thus far in 2024, Johnson & Johnson has deployed approximately $18 billion for strategic acquisitions and licensing agreements, which includes the recent acquisition of V-Wave, another innovative treatment in heart failure, which closed last week. Turning to our full-year 2024 guidance. Excluding the impact from acquisitions and divestitures, we are increasing our adjusted operational sales guidance. We now expect growth in the range of 5.7% to 6.2% with a midpoint of 6%. We are also increasing operational sales growth by $200 million to a range of 6.3% to 6.8% with a midpoint of $89.6 billion or 6.6%. As you know, we don't speculate on future currency movements. For today's call, we are utilizing a euro spot rate relative to the U.S. dollar of $1.10, slightly above last quarter's guidance. This results in an estimated incremental positive foreign currency impact of $200 million, reducing our previous full-year negative impact to $1 billion. As such, we expect reported sales growth between 5.1% to 5.6% with a midpoint of $88.6 billion or 5.4%. Regarding the rest of the P&L, with the addition of the V-Wave transaction, we now anticipate our 2024 adjusted pre-tax operating margin to decline by approximately 200 basis points. Excluding the impact of asset acquisition accounting and related R&D investment, we would be on track to improve operating margins by 50 basis points, which is consistent with what we guided to at the beginning of the year. As we strive to advance and accelerate our pipeline, you can anticipate elevated levels of investment in the fourth quarter. Net interest income is now projected to be between $450 million and $550 million, $150 million greater than our previous guidance. Other income is anticipated to be in the range of $1.9 billion to $2.1 billion, an increase versus previous guidance, driven by the one-time monetization of royalty rights, which Jessica referenced, that will be utilized for that higher Q4 investment I referenced a moment ago. Our effective tax rate, consistent with previous guidance, is expected to be between 17.5% and 18.5% for the full year. Similar to last quarter, we have provided an EPS bridge to outline the impact from acquisition activity throughout the year. Before the impact of the V-Wave acquisition, our outlook for adjusted operational EPS performance is once again increasing. As the schedule reflects, we are expecting an incremental $0.10 per share increase on our operational performance for a total increase of $0.18 per share for the year. On this basis, when excluding acquisition activity throughout the year, EPS growth is 9.2%. To account for the completion of the V-Wave transaction, as previously disclosed, our adjusted operational EPS guidance now includes dilution of $0.24 per share in the fourth quarter and $0.06 per share in 2025. Combined, this yields an updated 2024 adjusted operational EPS guidance of $9.91 at the midpoint of the range, basically flat year-on-year despite absorbing approximately $0.92 of acquisition activity. While not predicting the impact of currency movements utilizing the recent exchange rates just referenced, our reported adjusted earnings per share for the year now estimates a full year positive impact of $0.02 per share. As such, we expect reported adjusted earnings per share of $9.93 at the midpoint. We are still finalizing our plans for next year, but let me provide you some preliminary qualitative commentary to inform your modeling for 2025. For Innovative Medicine, we remain very confident in our ability to deliver growth despite a significant LOE resulting in sales above the $57 billion commitment we stated in 2021. This will be driven by our end market brands and continued progress from our recently launched products, including TREMFYA in IBD and RYBREVANT in non-small cell lung cancer. Regarding the STELARA LOE, we are planning for biosimilar entries in the U.S. in January, assuming that HUMIRA's erosion curve is a relatively good proxy for your models. We continue to expect a negative impact associated with the Part D redesign. In our pipeline, we anticipate data readouts across all our priority platforms: anticipated approvals of TREMFYA subcu in Crohn's disease, RYBREVANT subcu for lung cancer and nipocalimab in generalized myasthenia gravis, as well as potential filings for TARIS in bladder cancer and aticaprant in major depressive disorder. As a reminder, TREMFYA, RYBREVANT and TARIS continue to be the three largest underappreciated assets in terms of our revenue projections versus what analysts are estimating for the back half of this decade. For MedTech, we continue to expect to deliver on our long-term objective identified at last year's Enterprise Business Review of growing operational sales in the upper end of the 2022 through 2027 weighted average market growth rate of 5% to 7%. We also expect continued adoption of newer products across all MedTech businesses, such as VARIPULSE in electrophysiology, VELYS enabling technology across Orthopaedics, Odyssey and PureSee in Surgical Vision and contributions from our Abiomed and Shockwave integration. Specific to volume-based pricing in China, we expect continued impacts from the rollout of the 2024 tenders in Orthopaedics sports and intraocular lenses and anticipate VBP to continue expanding across provinces and products. Moving to the rest of the P&L. When thinking about operating margin, there are pluses and minuses. Tailwinds include an anticipated reduction of acquired IPR&D expense year-over-year, continued focus on MedTech margin improvement and continued OpEx optimization benefits post the separation. Working against us is unfavorable product mix driven by STELARA biosimilar entrants and Part D redesign. With a brief look at your models last week, the consensus margin does not appear unreasonable, and we'll provide further clarity in January once we complete our 2025 plan. We do not expect to maintain the heightened levels of interest income due to a reduction in interest rates and impact from debt experienced in 2024 related to acquisition activity. Regarding other income and expense, we expect lower net other income due to the non-recurring nature of the monetization of royalty rights experienced in Q3, a lower benefit related to employee benefit programs based on discount rate assumptions, as well as income lost on the Kenvue dividend. Lastly, based on what we know today, under current tax law, we anticipate our 2025 tax rate to be slightly lower than our anticipated 2024 tax rate. To wrap up prior to Q&A, we are pleased with our underlying 2024 performance that simultaneously fortified a strong foundation for continued success heading into 2025. With that, I'll now turn it over to Kevin to open the call for your questions.","evidence_gemma_new":"research and development","evidence_llama_3_3":"research and development during the quarter","evidence_qwen_3_30b":null,"gemma_new_max":5000000000.0,"gemma_new_min":5000000000.0,"llama_3_3_max":5000000000.0,"llama_3_3_min":5000000000.0,"qwen_3_30b_max":null,"qwen_3_30b_min":null}
{"symbol":"JNJ","year":2024,"quarter":4,"date":"2024-Q4","chunk_id":3,"sub_chunk_id":0,"centroid_label":"research and development","agreed_value":5300000000.0,"count":2,"chunk":"Jessica Moore: Thank you, Joaquin. Moving to our financial results. Unless otherwise stated, the results and guidance highlighted today reflect the continuing operations of Johnson & Johnson. Furthermore, the percentages quoted represent operational results and therefore excludes the impact of currency translation. Starting with Q4 2024 sales results. Worldwide sales were $22.5 billion for the quarter. Sales increased 6.7% with growth of 10% in the US and 2.5% outside of the US. Worldwide growth was negatively impacted by 290 basis points due to STELARA and positively impacted by 100 basis points due to acquisitions and divestitures. It's important to note growth in Europe was negatively impacted by 720 basis points due to the loss of exclusivity of STELARA and the COVID-19 vaccine. Turning now to earnings. For the quarter, net earnings were $3.4 billion and diluted earnings per share was $1.41 versus diluted earnings per share of $1.70 a year ago. Excluding after tax intangible asset amortization expense and special items for both periods, adjusted net earnings for the quarter were $4.9 billion and adjusted diluted earnings per share was $2.04, representing decreases of 11.1% and 10.9%, respectively, compared to the fourth quarter of 2023. Earnings per share in the quarter was negatively impacted by $0.22 of acquired IPR&D expense related to the V-Wave acquisition. For the full year 2024, sales were $88.8 billion. Sales grew 5.9% with growth of 8.3% in the US and 2.9% outside of the US. STELARA and the COVID-19 vaccine negatively impacted worldwide growth by 260 basis points. Acquisition and divestitures positively impacted worldwide growth by 50 basis points. Growth in Europe was negatively impacted by 670 basis points due to the COVID-19 vaccine and the loss of exclusivity of STELARA. Net earnings for the full year 2024 were $14.1 billion and diluted earnings per share was $5.79 versus diluted earnings per share of $5.20 a year ago. Full year 2024 adjusted net earnings were $24.2 billion and adjusted diluted earnings per share was $9.98, representing a decrease of 4.6% and an increase of 0.6% respectively versus full year 2023. Earnings per share in the year was negatively impacted by $0.67 due to acquired IPR&D charges on various transactions throughout the year. I will now comment on business sales performance in the quarter. Beginning with Innovative Medicine. Worldwide sales of $14.3 billion increased 6.5% excluding the COVID-19 vaccine with growth of 11.1% in the US and a decline of 0.3% outside of the US. STELARA negatively impacted worldwide growth by 490 basis points. Innovative Medicine growth was driven by our key brands and continued uptake from recently launched products with 10 assets delivering double-digit growth. Results across the portfolio continue to be positively impacted by price adjustments associated with Argentina hyperinflation consistent with market practice. Starting with oncology. We continue to drive strong sales growth across our multiple myeloma portfolio. DARZALEX growth was 23.5%, primarily driven by share gains of over three points across all lines of therapy and six points in the frontline setting as well as market growth. This marks Johnson & Johnson's first brand to achieve over $3 billion in sales in a quarter. CARVYKTI achieved sales of $334 million with growth of over 100% driven by share gains and capacity expansion. This reflects sequential growth of 17.3% aligned with our expectations of accelerating growth in the back half of the year. TECVAYLI sales were $146 million in the quarter with growth of 18%, reflecting a strong launch in the relapsed refractory setting. Demand remains strong despite continued adoption of longer duration dosing intervals. Finally, within our multiple myeloma portfolio, TALVEY continued its launch trajectory with another quarter of strong growth. As a reminder, we anticipate disclosing TALVEY sales in the first quarter of 2025, which are currently reported in the category Other Oncology. ERLEADA continues to deliver strong growth of 22.7%, primarily driven by share gains and market growth, reaching $3 billion in annual sales for the first time. RYBREVANT, our bispecific antibody for non-small cell lung cancer, contributed to growth in the category Other Oncology as we continue to expand approved indications. We also anticipate disclosing RYBREVANT sales in the first quarter of 2025. Within immunology, we saw sales growth in TREMFYA of 5.6%, driven by strong market growth and share gains in PsO and PsA, partially offset by unfavorable patient mix and inventory dynamics. We are excited about the recent UC launch and expect to see strong uptake of the IBD indications in 2025. STELARA declined 13.6% driven by the impact of current and anticipated biosimilar competition. As a reminder, biosimilar competition has entered the US in January 2025. REMICADE and SIMPONI worldwide sales were positively impacted by return of distribution rights in Europe. In Neuroscience, SPRAVATO growth of 45.3% continues to be driven by increased physician and patient demand. As Joaquin mentioned, SPRAVATO has exceeded $1 billion in annual sales for the first time. Other Neuroscience decline was driven by the loss of a SPINRAZA tender in Europe. In Pulmonary Hypertension, OPSUMIT grew 2.5%, driven by market growth and share gains, partially offset by inventory dynamics in the US and austerity measures in Europe. Starting in 2025, we will begin to report OPSYNVI, which is currently reported in the category Other Pulmonary Hypertension in OPSUMIT. UPTRAVI grew 12. 1%, driven by market growth, patient mix and share gains. Finally, XARELTO sales growth was driven by favorable patient mix. I'll now turn your attention to MedTech. Worldwide sales of $8.2 billion increased 7.6% both in the US and outside of the US. Acquisitions and divestitures had a net positive impact of 300 basis points on worldwide growth, 430 basis points in the US and 150 basis points outside of the US. Overall, MedTech growth was driven by commercial execution and strength of new product introductions, partially offset by increased competitive PFA pressures in US electrophysiology and continued headwinds in Asia Pacific, primarily in China. In Cardiovascular, electrophysiology delivered growth of 7.3%. Performance was driven by global procedure growth, new product uptake and commercial execution, partially offset by competitive PFA ablation catheter uptake in the US and VBP in China. Despite the IV saline shortage in the US, Abiomed delivered growth of 13.2% driven by strong growth in all regions and continued adoption of Impella 5.5 and Impella RP technology. Cardiovascular results also included $258 million associated with the acquisition of Shockwave. Contact Lenses and Other grew 7.4%, driven by trade inventory dynamics, continued strategic price actions, strong performance in ACUVUE OASYS 1-Day family of products as well as lapping prior year impacts from Russia sanctions. Surgical Vision growth of 13.6% was driven by TECNIS PureSee & TECNIS Eyhance. Commercial execution partially offset by competitive pressures in the US. Orthopedics grew 2.5% inclusive of hips growth of 5.6%, primarily driven by the success of recent product launches and commercial execution, partially offset by revenue disruption from the previously announced orthopedics transformation, impacts of China VBP and competitive pressures. Lastly, Surgery grew 0.4% with the Acclarent divestiture negatively impacting results by approximately 130 basis points. Performance was driven primarily by commercial execution, strength of new products across wound closure and biosurgery and continued price adjustments primarily associated with hyperinflation consistent with market practice. Growth was partially offset by competitive pressures in Energy and Endocutters as well as VBP and the anticorruption campaign in China. Now turning to our consolidated statement of earnings for the fourth quarter of 2024. I'd like to highlight a few noteworthy items that have changed compared to the same quarter of last year. We continue to invest strategically in research and development at competitive levels to fortify our future, investing $5.3 billion or nearly 24% of sales, which includes $540 million of acquired IPR&D expense associated with the V-Wave acquisition. Selling, marketing and administrative expense as a percent of sales deleveraged 150 basis points driven by increased commercial investment in the Innovative Medicine business. Interest income and expense was a net income of $144 million as compared to $212 million of income last year driven by lower interest rates earned on a lower average cash balance and higher interest rates on a higher average debt balance. Other income and expense was a net income of $161 million compared to $421 million of income in the prior year. This was primarily driven by lower gains on securities, a lower benefit related to employee benefit programs due to the discount rate, partially offset by lower litigation expense in 2024. Regarding taxes in the quarter, our effective tax rate was 11.7% versus 14.4% in the same period last year. This decrease was primarily driven by post-acquisition integration efforts that allowed the company to deduct certain acquisition costs for tax purposes as well as the resolution of prior tax matters both in jurisdictions outside of the US. Excluding special items, the effective tax rate was 8.8% versus 10.8% in the same period last year. I encourage you to review our upcoming 2024 10-K filing for additional details on specific tax related matters. Lastly, I'll direct your attention to the box section of the slide, where we have also provided our income before tax, net earnings and earnings per share adjusted to exclude the impact of intangible, amortization expense and special items. Now let's look at adjusted income before tax by segment for the quarter. Innovative Medicine margin declined from 37.4% to 32.5% primarily driven by strategic commercial investment and R&D pipeline advancement. MedTech margin declined from 15.5% to 10. 8% primarily driven by acquired IPR&D expense related to the V-Wave acquisition. Please note that the MedTech margin was negatively impacted in both years due to expenses associated with the strategic acquisition of Laminar. When adjusting for these one-time items, MedTech margin was relatively flat. As a result, adjusted income before tax for the enterprise as a percentage of sales decreased from 29.2% to 24.1% with the V-Wave acquired IPR&D expense impacting results by 240 basis points. When looking at the full year, Innovative Medicine, MedTech and the Enterprise adjusted income before tax remained relatively flat year-over-year when adjusting for the one-time items highlighted on the slide, mainly acquired IPR&D expenses on various transactions across both years. This concludes the sales and earnings portion of the call. I am now pleased to turn it over to Joe.","evidence_gemma_new":null,"evidence_llama_3_3":"research and development Q4 2024","evidence_qwen_3_30b":"research and development Q4 2024","gemma_new_max":null,"gemma_new_min":null,"llama_3_3_max":5300000000.0,"llama_3_3_min":5300000000.0,"qwen_3_30b_max":5300000000.0,"qwen_3_30b_min":5300000000.0}
{"symbol":"JNJ","year":2023,"quarter":4,"date":"2023-FY","chunk_id":3,"sub_chunk_id":0,"centroid_label":"sales","agreed_value":85200000000.0,"count":2,"chunk":"Jessica Moore: Thanks, Joaquin. Unless otherwise stated, the financial results and guidance highlighted reflects the continuing operations of Johnson & Johnson. We will report the consumer health financial results as discontinued operations. Furthermore, the percentages quoted represent operational results and therefore, exclude the impact of currency translation. Starting with Q4 2023 sales results. Worldwide sales were $21.4 billion for the fourth quarter of 2023. Sales increased 7.2%, with 11% in the U.S. and 2.7% outside of the U.S. Excluding the net impact of acquisitions and divestitures, adjusted operational sales growth was 5.7% worldwide, 8.8% in the U.S. and 2.1% outside the U.S. It is important to note that sales in Europe were negatively impacted by the COVID-19 vaccine and loss of exclusivity of ZYTIGA by approximately 1,500 basis points operationally. Turning now to earnings. For the quarter, net earnings were $4.1 billion, and diluted earnings per share was $1.70 versus diluted earnings per share of $1.22 a year ago. Excluding after-tax intangible asset amortization expense and special items for both periods, adjusted net earnings for the quarter were $5.6 billion and the diluted earnings per share was $2.29, representing increases of 2.4% and 11.7%, respectively, compared to the fourth quarter of 2022. On an operational basis, adjusted diluted earnings per share increased 11.2%. For the full year 2023, sales were $85.2 billion. Sales grew 7.4%, with 10.6% in the U.S. and 3.8% outside of the U.S. Excluding the net impact of acquisitions and divestitures, adjusted operational sales growth was 5.9% worldwide, 8.2% in the U.S. and 3.4% outside the U.S. Sales in Europe were negatively impacted by the COVID-19 vaccine and loss of exclusivity of ZYTIGA by approximately 1,000 basis points operationally. Net earnings for the full year 2023 were $13.3 billion and diluted earnings per share was $5.20 versus diluted earnings per share of $6.14 a year ago. Full year 2023 adjusted net earnings were $25.4 billion, and adjusted diluted earnings per share was $9.92, representing increases of 6.8% and 11.1%, respectively, versus full year 2022. On an operational basis, adjusted diluted earnings per share increased by 10.8%. I will now comment on business sales performance in the quarter. Beginning with Innovative Medicine. Worldwide Innovative Medicine sales of $13.7 billion increased 4% with growth of 9.5% in the U.S. and a decline of 3.1% outside of the U.S. Excluding COVID-19 vaccine sales, worldwide and U.S. sales growth was 9.5%, and growth outside of the U.S. was 9.4%. Sales outside the U.S., excluding the COVID-19 vaccine were negatively impacted by approximately 120 basis points due to the loss of exclusivity of ZYTIGA in Europe. Innovative Medicine growth was driven by our key brands and continued uptake from recently launched products, with nine assets delivering double-digit growth. We continue to drive strong sales growth for both DARZALEX and ERLEADA, with increases of 22.2% and 19%, respectively. Within immunology, we saw sales growth in both STELARA and TREMFYA, with increases of 14.5% and 20.5%, respectively. This growth was driven by market growth and share gains as well as favorable patient mix in TREMFYA. Growth of 17.4% in pulmonary hypertension was driven by favorable patient mix, share gains and market growth. Turning to newly launched products. We continue to make progress on our launches of CARVYKTI and SPRAVATO. We are also encouraged by the early success of our launches of TECVAYLI and TALVEY, sales of which are driving the growth in other Oncology. As a reminder, we expect to begin disclosing TECVAYLI sales in Q1 2024. Total Innovative Medicine sales growth was partially offset by unfavorable patient mix in XARELTO, a decrease in IMBRUVICA sales due to competitive pressures and a loss of exclusivity of ZYTIGA, REMICADE and PREZISTA. I'll now turn your attention to MedTech. Worldwide MedTech sales of $7.7 billion increased 13.4% with Abiomed contributing 4.5% to growth. Growth in the U.S. was 14.1% and 12.8% outside of the U.S. Excluding the impact of acquisitions and divestitures, worldwide adjusted operational sales growth was 9.1%. MedTech was negatively impacted by international sanctions in Russia worth approximately 50 basis points, primarily in Advanced Surgery and Vision. Electrophysiology delivered double-digit growth of 25.2% with strong growth in all regions, including Europe. This growth was driven by our global market leading portfolio, including the most recently launched QDOT RF ablation and OCTARAY catheters. Abiomed contributed $340 million in sales within the quarter driven by continued strong adoption of Impella 5.5 technology. Growth of 6.4% in surgery was driven primarily by procedure recovery and strength of our biosurgery and wound closure portfolios. Growth was partially offset by volume based procurement in China, primarily in Endocutters. Orthopaedics growth of 5% reflects procedure growth, success of recently launched products such as the global expansion of our VELYS digital solutions and expansion in ambulatory surgical centers, as well as lapping of prior year China\u2019s VBP price concessions in Spine. Growth of 6.6% in Vision was driven by price actions and contact lenses, as well as strength of new products including ACUVUE OASYS 1-Day family of products and contact lenses and TECNIS EYHANCE, our monofocal interocular lens and surgical vision. Growth of contact lenses was partially offset by U.S. stocking dynamics. Global Vision growth was negatively impacted by 140 basis points due to the Blink divestiture in Q3. Now turning to our consolidated statement of earnings for the fourth quarter of 2023. I'd like to highlight a few noteworthy items that have changed compared to the same quarter of last year. Cost of products sold margin deleveraged by 130 basis points due to commodity inflation and unfavorable product mix in MedTech, partially offset by favorable patient mix and lower COVID-19 vaccine supply network related exit cost in Innovative Medicine. We continue to invest strategically in research and development at competitive levels, investing $4.5 billion or 20.9% of sales this quarter. We invested $3.4 billion or 24.5% of sales in Innovative Medicine with the increase in investment being driven by higher milestones, partially offset by portfolio prioritization. In MedTech, R&D investment was $1.1 billion or 14.6% of sales with the increase in investment primarily driven by the Laminar acquisition. Interest income was $212 million in the fourth quarter of 2023 as compared to $77 million of income in the fourth quarter of 2022. The increase in income was driven by higher interest rates earned on cash balances and a lower average debt balance. The other income and expense line was income of $421 million in the fourth quarter of 2023 compared to an expense of $795 million in the fourth quarter of 2022. This was primarily driven by higher unrealized gains on securities and lower (ph) COVID-19 vaccine-related exit costs. Regarding taxes in the quarter, our effective tax rate was 14.4% versus 16% in the same period last year. This decrease was primarily driven by the net decrease of tax liabilities, including the settlement of the 2013 through 2016 U.S. tax audit. Excluding special items, the effective tax rate was 10.8% versus 16.2% in the same period last year. I encourage you to review our upcoming 2023 10-K filing for additional details on specific tax-related matters. Lastly, I will direct your attention to the box section of the slide, where we have also provided our income before tax, net earnings and earnings per share adjusted to exclude the impact of intangible amortization expense and special items. Now let's look at adjusted income before tax by segment. In the fourth quarter of 2023, our adjusted income before tax for the enterprise as a percentage of sales decreased from 32.5% to 29.2%. Innovative Medicine margins declined from 37.7% to 37.4%, primarily driven by higher R&D milestones, partially offset by favorable patient mix and leveraging and selling and marketing expense. MedTech margins declined from 24.5% to 15.5% primarily driven by in-process research and development expense from the Laminar acquisition, commodity inflation and unfavorable product mix, partially offset by selling and marketing expense leverage. This concludes the sale and earnings portion of the call. I'm now pleased to turn it over to Joe.","evidence_gemma_new":"sales full year 2023","evidence_llama_3_3":"sales full year 2023","evidence_qwen_3_30b":null,"gemma_new_max":85200000000.0,"gemma_new_min":85200000000.0,"llama_3_3_max":85200000000.0,"llama_3_3_min":85200000000.0,"qwen_3_30b_max":null,"qwen_3_30b_min":null}
{"symbol":"JNJ","year":2023,"quarter":4,"date":"2023-Q4","chunk_id":3,"sub_chunk_id":0,"centroid_label":"sales","agreed_value":21400000000.0,"count":2,"chunk":"Jessica Moore: Thanks, Joaquin. Unless otherwise stated, the financial results and guidance highlighted reflects the continuing operations of Johnson & Johnson. We will report the consumer health financial results as discontinued operations. Furthermore, the percentages quoted represent operational results and therefore, exclude the impact of currency translation. Starting with Q4 2023 sales results. Worldwide sales were $21.4 billion for the fourth quarter of 2023. Sales increased 7.2%, with 11% in the U.S. and 2.7% outside of the U.S. Excluding the net impact of acquisitions and divestitures, adjusted operational sales growth was 5.7% worldwide, 8.8% in the U.S. and 2.1% outside the U.S. It is important to note that sales in Europe were negatively impacted by the COVID-19 vaccine and loss of exclusivity of ZYTIGA by approximately 1,500 basis points operationally. Turning now to earnings. For the quarter, net earnings were $4.1 billion, and diluted earnings per share was $1.70 versus diluted earnings per share of $1.22 a year ago. Excluding after-tax intangible asset amortization expense and special items for both periods, adjusted net earnings for the quarter were $5.6 billion and the diluted earnings per share was $2.29, representing increases of 2.4% and 11.7%, respectively, compared to the fourth quarter of 2022. On an operational basis, adjusted diluted earnings per share increased 11.2%. For the full year 2023, sales were $85.2 billion. Sales grew 7.4%, with 10.6% in the U.S. and 3.8% outside of the U.S. Excluding the net impact of acquisitions and divestitures, adjusted operational sales growth was 5.9% worldwide, 8.2% in the U.S. and 3.4% outside the U.S. Sales in Europe were negatively impacted by the COVID-19 vaccine and loss of exclusivity of ZYTIGA by approximately 1,000 basis points operationally. Net earnings for the full year 2023 were $13.3 billion and diluted earnings per share was $5.20 versus diluted earnings per share of $6.14 a year ago. Full year 2023 adjusted net earnings were $25.4 billion, and adjusted diluted earnings per share was $9.92, representing increases of 6.8% and 11.1%, respectively, versus full year 2022. On an operational basis, adjusted diluted earnings per share increased by 10.8%. I will now comment on business sales performance in the quarter. Beginning with Innovative Medicine. Worldwide Innovative Medicine sales of $13.7 billion increased 4% with growth of 9.5% in the U.S. and a decline of 3.1% outside of the U.S. Excluding COVID-19 vaccine sales, worldwide and U.S. sales growth was 9.5%, and growth outside of the U.S. was 9.4%. Sales outside the U.S., excluding the COVID-19 vaccine were negatively impacted by approximately 120 basis points due to the loss of exclusivity of ZYTIGA in Europe. Innovative Medicine growth was driven by our key brands and continued uptake from recently launched products, with nine assets delivering double-digit growth. We continue to drive strong sales growth for both DARZALEX and ERLEADA, with increases of 22.2% and 19%, respectively. Within immunology, we saw sales growth in both STELARA and TREMFYA, with increases of 14.5% and 20.5%, respectively. This growth was driven by market growth and share gains as well as favorable patient mix in TREMFYA. Growth of 17.4% in pulmonary hypertension was driven by favorable patient mix, share gains and market growth. Turning to newly launched products. We continue to make progress on our launches of CARVYKTI and SPRAVATO. We are also encouraged by the early success of our launches of TECVAYLI and TALVEY, sales of which are driving the growth in other Oncology. As a reminder, we expect to begin disclosing TECVAYLI sales in Q1 2024. Total Innovative Medicine sales growth was partially offset by unfavorable patient mix in XARELTO, a decrease in IMBRUVICA sales due to competitive pressures and a loss of exclusivity of ZYTIGA, REMICADE and PREZISTA. I'll now turn your attention to MedTech. Worldwide MedTech sales of $7.7 billion increased 13.4% with Abiomed contributing 4.5% to growth. Growth in the U.S. was 14.1% and 12.8% outside of the U.S. Excluding the impact of acquisitions and divestitures, worldwide adjusted operational sales growth was 9.1%. MedTech was negatively impacted by international sanctions in Russia worth approximately 50 basis points, primarily in Advanced Surgery and Vision. Electrophysiology delivered double-digit growth of 25.2% with strong growth in all regions, including Europe. This growth was driven by our global market leading portfolio, including the most recently launched QDOT RF ablation and OCTARAY catheters. Abiomed contributed $340 million in sales within the quarter driven by continued strong adoption of Impella 5.5 technology. Growth of 6.4% in surgery was driven primarily by procedure recovery and strength of our biosurgery and wound closure portfolios. Growth was partially offset by volume based procurement in China, primarily in Endocutters. Orthopaedics growth of 5% reflects procedure growth, success of recently launched products such as the global expansion of our VELYS digital solutions and expansion in ambulatory surgical centers, as well as lapping of prior year China\u2019s VBP price concessions in Spine. Growth of 6.6% in Vision was driven by price actions and contact lenses, as well as strength of new products including ACUVUE OASYS 1-Day family of products and contact lenses and TECNIS EYHANCE, our monofocal interocular lens and surgical vision. Growth of contact lenses was partially offset by U.S. stocking dynamics. Global Vision growth was negatively impacted by 140 basis points due to the Blink divestiture in Q3. Now turning to our consolidated statement of earnings for the fourth quarter of 2023. I'd like to highlight a few noteworthy items that have changed compared to the same quarter of last year. Cost of products sold margin deleveraged by 130 basis points due to commodity inflation and unfavorable product mix in MedTech, partially offset by favorable patient mix and lower COVID-19 vaccine supply network related exit cost in Innovative Medicine. We continue to invest strategically in research and development at competitive levels, investing $4.5 billion or 20.9% of sales this quarter. We invested $3.4 billion or 24.5% of sales in Innovative Medicine with the increase in investment being driven by higher milestones, partially offset by portfolio prioritization. In MedTech, R&D investment was $1.1 billion or 14.6% of sales with the increase in investment primarily driven by the Laminar acquisition. Interest income was $212 million in the fourth quarter of 2023 as compared to $77 million of income in the fourth quarter of 2022. The increase in income was driven by higher interest rates earned on cash balances and a lower average debt balance. The other income and expense line was income of $421 million in the fourth quarter of 2023 compared to an expense of $795 million in the fourth quarter of 2022. This was primarily driven by higher unrealized gains on securities and lower (ph) COVID-19 vaccine-related exit costs. Regarding taxes in the quarter, our effective tax rate was 14.4% versus 16% in the same period last year. This decrease was primarily driven by the net decrease of tax liabilities, including the settlement of the 2013 through 2016 U.S. tax audit. Excluding special items, the effective tax rate was 10.8% versus 16.2% in the same period last year. I encourage you to review our upcoming 2023 10-K filing for additional details on specific tax-related matters. Lastly, I will direct your attention to the box section of the slide, where we have also provided our income before tax, net earnings and earnings per share adjusted to exclude the impact of intangible amortization expense and special items. Now let's look at adjusted income before tax by segment. In the fourth quarter of 2023, our adjusted income before tax for the enterprise as a percentage of sales decreased from 32.5% to 29.2%. Innovative Medicine margins declined from 37.7% to 37.4%, primarily driven by higher R&D milestones, partially offset by favorable patient mix and leveraging and selling and marketing expense. MedTech margins declined from 24.5% to 15.5% primarily driven by in-process research and development expense from the Laminar acquisition, commodity inflation and unfavorable product mix, partially offset by selling and marketing expense leverage. This concludes the sale and earnings portion of the call. I'm now pleased to turn it over to Joe.","evidence_gemma_new":"sales Q4 2023","evidence_llama_3_3":"sales Q4 2023","evidence_qwen_3_30b":null,"gemma_new_max":21400000000.0,"gemma_new_min":21400000000.0,"llama_3_3_max":21400000000.0,"llama_3_3_min":21400000000.0,"qwen_3_30b_max":null,"qwen_3_30b_min":null}
{"symbol":"JNJ","year":2023,"quarter":4,"date":"2024-FY","chunk_id":4,"sub_chunk_id":0,"centroid_label":"sales","agreed_value":88560000000.0,"count":2,"chunk":"Joseph Wolk: Thank you, Jessica, and thanks, everyone, for joining us today. As Joaquin and Jessica commented, 2023 was a strong year for Johnson & Johnson evidenced by notable top and bottom line performance beats relative to what we guided to 2023 at this time last year. We are particularly proud of the innovation we advanced to strengthen our development pipelines, the continued expansion of our portfolio and investments made for future success. All of this provides us with a strong foundation as we enter 2024. Thus far during the call, you've heard about sales and income performance in 2023. So now let's dive into some detail on capital allocation highlights. We generated free cash flow of more than $18 billion in 2023. At the end of the year, we had approximately $23 billion of cash and marketable securities and approximately $29 billion of debt for a net debt position of $6 billion. We maintained a healthy balance sheet and robust credit rating, underscoring the strength of Johnson & Johnson's financial position, which enables us to strategically invest and deploy capital to unlock value. To that end, we executed against all of our capital allocation priorities in 2023. For starters, we invested more than $15 billion in research and development or 17.7% of sales, an all-time high for the company as we remain one of the top investors in R&D across all industries. Jessica provided R&D investment by business segment, information we will continue to provide on a quarterly basis moving forward. As far as dividends, 2023 marked the 61st consecutive year in which we increased our dividend. We know this use of capital is a priority for our investors, and we plan to continue to increase our dividend annually. We also deployed, announced or committed over $3 billion in strategic value creating inorganic growth opportunities in the last 12 months. This amount includes the recent Ambrx and Laminar transactions as well as more than 50 smaller early-stage licensing deals and partnerships that complement our current Innovative Medicine and MedTech pipelines. Finally, share repurchases. In early 2023, we completed the $5 billion share repurchase program initiated in late 2022 and in combination with our dividend, returned over $14 billion to shareholders last year. Through the Kenvue separation, we further reduced the Johnson & Johnson's outstanding share count by 191 million shares or approximately 7% without the use of cash and in a tax-free manner. Looking ahead to 2024, Johnson & Johnson's robust free cash flow generation should continue to solidify our already strong financial foundation and fuel further investment leading to growth for our business or returns to shareholders. Now turning to our full year 2024 guidance. Today, we are confirming the 2024 guidance for those items previewed at our enterprise business review in early December by filling in some of the details. We expect operational sales growth for the full year to be in the range of 5% to 6% or $88.2 billion to $89 billion. As a reminder, our sales guidance continues to exclude any impact from COVID-19 vaccine sales. In Innovative Medicine, we expect 2024 to deliver a 13th consecutive year of above market growth, driven by market share gains from key brands such as DARZALEX, TREMFYA and ERLEADA as well as continued adoption of recently launched newer products such as CARVYKTI, TECVAYLI, TALVEY and SPRAVATO. In MedTech, we remain focused on executing our key value drivers: first, advancing our differentiated pipeline such as programs in pulse field ablation, Abiomed and surgical robotics, further shifting our portfolio into high-growth markets; second, expanding our reach and scale around the world; and third, building operational resilience across our portfolio. We don't speculate on future currency movements, but utilizing the euro spot rate relative to the U.S. dollar as of last week at $1.09 as well as other major currencies, we estimate there would be a slight unfavorable impact of $400 million or a negative 0.5% on reported sales growth for the year. Turning to other items on our P&L. We expect our 2024 adjusted pretax operating margin to improve by approximately 50 basis points driven primarily by a continuation of efficiency programs across the organization. We expect this to be partially offset by anticipated STELARA biosimilar entrants in Europe in the second half of this year and some lingering inflation impact in MedTech inventory that will flow through 2024's P&L. This margin improvement encompasses dilution of additional investment associated with our planned acquisition of Ambrx, which will be treated as a business combination. Now we do acknowledge that this 50 basis point improvement simply gets us back to what your models expected, given the elevated Q4 2023 R&D investment for new pipeline assets. Regarding other income and expense, we anticipate income to be $1.2 billion to $1.4 billion for 2024. This is less than the 2023 amount driven by the impact of actuarial assumptions on certain employee benefit programs such as lower discount rates. We are comfortable with you modeling net interest income between $450 million and $550 million, consistent with 2023 levels. Finally, we are projecting an effective tax rate for 2024 in the range of 16% to 17% based on current tax laws and anticipated geographic income mix across our businesses. This tax rate takes into account an increase of approximately 1.5% or 150 basis points relative to the recently enacted Pillar 2 legislation. We continue to believe the U.S. Treasury's current perspective on Pillar 2 is harmful, reducing U.S. incentives for innovation and resulting in U.S. based multinational companies paying more tax revenue to foreign governments. Our full year share count calculation for adjusted earnings per share in 2024 will include the remaining benefit equal to approximately 120 million shares from the approximately 191 million net share reduction in outstanding J&J shares following the Kenvue exchange offer. Given all these factors, we expect adjusted operational earnings per share to grow 7.4% at the midpoint for a range of $10.55 to $10.75. Based on the euro spot rate of 1.09 from last week, we do not estimate any currency impact on earnings per share. I'll now provide some qualitative considerations on quarterly phasing for your models. We expect Innovative Medicine sales growth to be slightly stronger in the first half of the year compared to the second half, given the anticipated entry of STELARA biosimilars in Europe towards the middle of the year. This headwind will be partially offset by continued uptake from our recently launched products. We project MedTech operational sales growth to be relatively consistent throughout the year, expecting procedures in 2024 to remain above pre-COVID levels. The first half of the year will continue to have modest impact from Russia sanctions as our licenses are approved. We anticipate China VBP pricing for surgical IOLs and orthopedic sports to begin in 2024 with impacts from 2023 VBP in electrophysiology, Endocutters, Energy, Spine and Trauma to begin to anniversary throughout 2024. Regarding EPS phasing, it is important to highlight that the first half of the year will benefit from the full 191 million net share reduction following the Kenvue exchange offer with only a partial comparative benefit in the third quarter versus Q3 2023 and the fourth quarter being neutral versus Q4 2023. So based on the foundation strengthened in 2023 and numerous catalysts that Joaquin outlined across our business in 2024, we are confident in our ability to achieve both near and long-term financial targets. I'd like to close by thanking our colleagues for their dedication and commitment to benefit patients around the world. It is their effort that enables Johnson & Johnson to deliver innovative therapies and solutions that address serious unmet medical needs and creates long-term sustainable value for shareholders. With that, I\u2019m now pleased to turn the call over to Kevin to begin the Q&A portion of the call.","evidence_gemma_new":null,"evidence_llama_3_3":"sales 2024","evidence_qwen_3_30b":"sales full year 2024","gemma_new_max":null,"gemma_new_min":null,"llama_3_3_max":88800000000.0,"llama_3_3_min":88800000000.0,"qwen_3_30b_max":88800000000.0,"qwen_3_30b_min":88800000000.0}
{"symbol":"JNJ","year":2024,"quarter":2,"date":"2024-Q2","chunk_id":20,"sub_chunk_id":0,"centroid_label":"sales","agreed_value":2900000000.0,"count":2,"chunk":"Jennifer Taubert: And we had 21% growth. $2.9 billion in sales and 21% growth. So yes, DARZALEX is our single largest asset now for the corporation.","evidence_gemma_new":"sales $2.9 billion","evidence_llama_3_3":null,"evidence_qwen_3_30b":"DARZALEX sales","gemma_new_max":2900000000.0,"gemma_new_min":2900000000.0,"llama_3_3_max":null,"llama_3_3_min":null,"qwen_3_30b_max":2900000000.0,"qwen_3_30b_min":2900000000.0}
{"symbol":"JNJ","year":2024,"quarter":3,"date":"2024-Q3","chunk_id":3,"sub_chunk_id":0,"centroid_label":"sales","agreed_value":6.3,"count":2,"chunk":"Jessica Moore: Thank you, Joaquin. Moving to our financial results for the quarter. Unless otherwise stated, the financial results and guidance highlighted today reflect the continuing operations of Johnson & Johnson. Furthermore, the percentages quoted represent operational results and, therefore, exclude the impact of currency translation. Worldwide sales were $22.5 billion for the third quarter of 2024. Sales increased 6.3%, with growth of 7.6% in the U.S. and 4.6% outside of the U.S. Acquisitions and divestitures positively impacted worldwide growth by 90 basis points. Turning now to earnings. For the quarter, net earnings were $2.7 billion and diluted earnings per share was $1.11 versus diluted earnings per share of $1.69 a year ago. Results in the quarter were impacted by the updated talc litigation settlement proposal, as well as acquired IPR&D expense associated with the NM26 bispecific antibody. Excluding after-tax intangible asset amortization expense and special items for both periods, adjusted net earnings for the quarter were $5.9 billion and adjusted diluted earnings per share was $2.42, representing decreases of 13.3% and 9%, respectively, compared to the third quarter of 2023. Results were impacted by the acquired IPR&D expense of $1.25 billion or approximately 1,900 basis points associated with the NM26 bispecific antibody. I will now comment on business sales performance in the quarter. Beginning with Innovative Medicine. Worldwide sales of $14.6 billion increased 6.3%, with growth of 7.5% in the U.S. and 4.4% outside of the U.S. Innovative Medicine growth was driven by our key brands and continued uptake from recently launched products, with 11 assets delivering double-digit growth. Results across the portfolio continue to be positively impacted by price increases associated with Argentina hyperinflation, consistent with market practice. We continue to drive strong sales growth across our multiple myeloma portfolio. DARZALEX growth was 22.9%, primarily driven by share gains of 4 points across all lines of therapy, with 7.7 points of growth in the front line setting as well as market growth. CARVYKTI achieved sales of $286 million, with growth of 87.6%, driven by share gains, continued capacity expansion and manufacturing efficiencies. This reflects sequential growth of 53.2% aligned with our expectations of accelerating growth in the back half of the year. TECVAYLI sales were $135 million in the quarter with growth of 21.4%, reflecting a strong launch in the relapsed refractory setting. Demand remained strong, while sequential growth was flat due to continued adoption of longer duration dosing intervals. Finally, within our multiple myeloma portfolio, TALVEY continued its launch trajectory with another quarter of strong growth. We anticipate disclosing TALVEY sales in the first quarter of 2025, which are currently reported in other oncology. ERLEADA continues to deliver strong growth of 26.3%, primarily driven by share gains in metastatic castrate sensitive prostate cancer and favorable inventory dynamics. RYBREVANT, our bispecific antibody for non-small cell lung cancer, contributed to growth in other oncology as we expand approved indications. We also anticipate disclosing RYBREVANT sales in the first quarter of 2025. Within immunology, we saw sales growth in TREMFYA of 14.3%, driven by strong market growth and share gains in PsO and PsA, partially offset by unfavorable patient mix. STELARA declined 5.7%, driven by unfavorable net patient mix and share loss, partially offset by market growth. As a reminder, biosimilar competition has entered Europe as of July, and we anticipate U.S. biosimilar entry in January 2025. In neuroscience, SPRAVATO growth of 55.3% continues to be driven by increased physician and patient confidence. In pulmonary hypertension, OPSUMIT and UPTRAVI grew 17.4% and 15.2%, respectively, driven by market growth, share gains and patient mix. As mentioned last quarter, REMICADE and SIMPONI realized limited sales in Europe as we prepare for the return of distribution rights in Q4. I'll now turn your attention to MedTech. Worldwide sales of $7.9 billion increased 6.4% with growth in the U.S. of 7.8% and 5% outside of the U.S. Acquisitions and divestitures had a net positive impact of 270 basis points on worldwide growth, 360 basis points in the U.S. and 180 basis points outside of the U.S. Overall, MedTech growth was driven by commercial execution and strength of new product introductions, partially offset by continued headwinds in Asia Pacific, specifically in China. In Cardiovascular, electrophysiology delivered double-digit growth of 10.7%. Performance was driven by global procedure growth, new product uptake and commercial execution, partially offset by competitive PFA ablation catheter uptake in the U.S., as well as prior year trade inventory dynamics and VBP in China. Abiomed delivered growth of 16.3%, driven by strong growth in all regions and continued adoption of Impella 5.5 and Impella RP technology. Cardiovascular results also included $229 million associated with the acquisition of Shockwave. Contact lenses and other performance improved to 4.7%, driven by continued strategic price actions, strong performance in ACUVUE OASYS 1-Day family of products, a one-time benefit from a change in U.S. contract shipping terms worth approximately 150 basis points, as well as lapping prior year impacts from Russia sanctions. Surgical Vision grew 1.9%, driven by TECNIS PureSee and TECNIS Eyhance, partially offset by China VBP and softness in the U.S. Surgery declined 0.7%, with the Acclarent divestiture negatively impacting results by approximately 110 basis points. Performance was driven primarily by competitive pressures in energy and endocutters, as well as VBP and the anticorruption campaign in China. This was partially offset by commercial execution, strength of new products across wound closure and biosurgery and continued price increases associated with Argentina hyperinflation consistent with market practice. Orthopaedics growth of 1.3% was primarily driven by success of recent product launches and commercial execution, partially offset by competitive pressures, impacts of China VBP and revenue disruption from the previously announced Orthopaedics transformation. Now, turning to our consolidated statement of earnings for the third quarter of 2024. I'd like to highlight a few noteworthy items that have changed compared to the same quarter of last year. We continue to invest strategically in research and development at competitive levels, investing nearly $5 billion or 22% of sales, which includes a $1.25 billion payment to secure the global rights to NM26 bispecific antibody. Even when excluding this investment, R&D as a percent of sales increased 30 basis points. Selling, marketing and administrative expense as a percent of sales was leveraged 100 basis points, driven by the realization of optimization efforts following the Kenvue separation. Interest income was $99 million as compared to $182 million of income last year, driven by a higher net debt position primarily related to the financing impacts of the Shockwave acquisition. Other income and expense was a net expense of $1.8 billion compared to an expense of $0.5 billion in the prior year. The increase in expense was driven by a $1.75 billion charge related to the talc litigation settlement proposal, partially offset by prior year higher unrealized mark to market losses on public securities, as well as the monetization of royalty rights. Regarding taxes in the quarter, our effective tax rate was 19.3% versus 17.4% in the same period last year. This increase was primarily driven by the tax treatment of the NM26 bispecific antibody acquisition and OECD Pillar 2. Excluding special items, the effective tax rate was 19.3% versus 15.6% in the same period last year. I encourage you to review our upcoming third quarter 10-Q filing for additional details on specific tax-related matters. Lastly, I'll direct your attention to the box section of the slide where we have also provided our income before tax, net earnings and earnings per share adjusted to exclude the impact of intangible amortization expense and special items. Now, let's look at adjusted income before tax [by segment] (ph). Innovative Medicine margin declined from 45.4% to 37.9%, primarily driven by the $1.25 billion acquired IPR&D expense to secure the global rights for NM26 bispecific antibody, partially offset by the monetization of royalty rights. MedTech margin declined from 24.7% to 24.1%, driven by increased R&D investment and lapping of a prior year divestiture gain, partially offset by supply chain efficiencies. As a result, adjusted income before tax for the enterprise as a percentage of sales decreased from 37.6% to 32.4%, with acquired IPR&D expense impacting results by 560 basis points. Starting in 2025, aligned with recent FASB reporting disclosure requirements, we will begin providing additional P&L details by segment. This concludes the sales and earnings portion of the call. I'm now pleased to turn it over to Joe.","evidence_gemma_new":"Sales 6.3%","evidence_llama_3_3":null,"evidence_qwen_3_30b":"Sales third quarter of 2024","gemma_new_max":6.3,"gemma_new_min":6.3,"llama_3_3_max":null,"llama_3_3_min":null,"qwen_3_30b_max":6.3,"qwen_3_30b_min":6.3}
{"symbol":"JNJ","year":2024,"quarter":4,"date":"2024-Q4","chunk_id":3,"sub_chunk_id":0,"centroid_label":"sales","agreed_value":6.7,"count":3,"chunk":"Jessica Moore: Thank you, Joaquin. Moving to our financial results. Unless otherwise stated, the results and guidance highlighted today reflect the continuing operations of Johnson & Johnson. Furthermore, the percentages quoted represent operational results and therefore excludes the impact of currency translation. Starting with Q4 2024 sales results. Worldwide sales were $22.5 billion for the quarter. Sales increased 6.7% with growth of 10% in the US and 2.5% outside of the US. Worldwide growth was negatively impacted by 290 basis points due to STELARA and positively impacted by 100 basis points due to acquisitions and divestitures. It's important to note growth in Europe was negatively impacted by 720 basis points due to the loss of exclusivity of STELARA and the COVID-19 vaccine. Turning now to earnings. For the quarter, net earnings were $3.4 billion and diluted earnings per share was $1.41 versus diluted earnings per share of $1.70 a year ago. Excluding after tax intangible asset amortization expense and special items for both periods, adjusted net earnings for the quarter were $4.9 billion and adjusted diluted earnings per share was $2.04, representing decreases of 11.1% and 10.9%, respectively, compared to the fourth quarter of 2023. Earnings per share in the quarter was negatively impacted by $0.22 of acquired IPR&D expense related to the V-Wave acquisition. For the full year 2024, sales were $88.8 billion. Sales grew 5.9% with growth of 8.3% in the US and 2.9% outside of the US. STELARA and the COVID-19 vaccine negatively impacted worldwide growth by 260 basis points. Acquisition and divestitures positively impacted worldwide growth by 50 basis points. Growth in Europe was negatively impacted by 670 basis points due to the COVID-19 vaccine and the loss of exclusivity of STELARA. Net earnings for the full year 2024 were $14.1 billion and diluted earnings per share was $5.79 versus diluted earnings per share of $5.20 a year ago. Full year 2024 adjusted net earnings were $24.2 billion and adjusted diluted earnings per share was $9.98, representing a decrease of 4.6% and an increase of 0.6% respectively versus full year 2023. Earnings per share in the year was negatively impacted by $0.67 due to acquired IPR&D charges on various transactions throughout the year. I will now comment on business sales performance in the quarter. Beginning with Innovative Medicine. Worldwide sales of $14.3 billion increased 6.5% excluding the COVID-19 vaccine with growth of 11.1% in the US and a decline of 0.3% outside of the US. STELARA negatively impacted worldwide growth by 490 basis points. Innovative Medicine growth was driven by our key brands and continued uptake from recently launched products with 10 assets delivering double-digit growth. Results across the portfolio continue to be positively impacted by price adjustments associated with Argentina hyperinflation consistent with market practice. Starting with oncology. We continue to drive strong sales growth across our multiple myeloma portfolio. DARZALEX growth was 23.5%, primarily driven by share gains of over three points across all lines of therapy and six points in the frontline setting as well as market growth. This marks Johnson & Johnson's first brand to achieve over $3 billion in sales in a quarter. CARVYKTI achieved sales of $334 million with growth of over 100% driven by share gains and capacity expansion. This reflects sequential growth of 17.3% aligned with our expectations of accelerating growth in the back half of the year. TECVAYLI sales were $146 million in the quarter with growth of 18%, reflecting a strong launch in the relapsed refractory setting. Demand remains strong despite continued adoption of longer duration dosing intervals. Finally, within our multiple myeloma portfolio, TALVEY continued its launch trajectory with another quarter of strong growth. As a reminder, we anticipate disclosing TALVEY sales in the first quarter of 2025, which are currently reported in the category Other Oncology. ERLEADA continues to deliver strong growth of 22.7%, primarily driven by share gains and market growth, reaching $3 billion in annual sales for the first time. RYBREVANT, our bispecific antibody for non-small cell lung cancer, contributed to growth in the category Other Oncology as we continue to expand approved indications. We also anticipate disclosing RYBREVANT sales in the first quarter of 2025. Within immunology, we saw sales growth in TREMFYA of 5.6%, driven by strong market growth and share gains in PsO and PsA, partially offset by unfavorable patient mix and inventory dynamics. We are excited about the recent UC launch and expect to see strong uptake of the IBD indications in 2025. STELARA declined 13.6% driven by the impact of current and anticipated biosimilar competition. As a reminder, biosimilar competition has entered the US in January 2025. REMICADE and SIMPONI worldwide sales were positively impacted by return of distribution rights in Europe. In Neuroscience, SPRAVATO growth of 45.3% continues to be driven by increased physician and patient demand. As Joaquin mentioned, SPRAVATO has exceeded $1 billion in annual sales for the first time. Other Neuroscience decline was driven by the loss of a SPINRAZA tender in Europe. In Pulmonary Hypertension, OPSUMIT grew 2.5%, driven by market growth and share gains, partially offset by inventory dynamics in the US and austerity measures in Europe. Starting in 2025, we will begin to report OPSYNVI, which is currently reported in the category Other Pulmonary Hypertension in OPSUMIT. UPTRAVI grew 12. 1%, driven by market growth, patient mix and share gains. Finally, XARELTO sales growth was driven by favorable patient mix. I'll now turn your attention to MedTech. Worldwide sales of $8.2 billion increased 7.6% both in the US and outside of the US. Acquisitions and divestitures had a net positive impact of 300 basis points on worldwide growth, 430 basis points in the US and 150 basis points outside of the US. Overall, MedTech growth was driven by commercial execution and strength of new product introductions, partially offset by increased competitive PFA pressures in US electrophysiology and continued headwinds in Asia Pacific, primarily in China. In Cardiovascular, electrophysiology delivered growth of 7.3%. Performance was driven by global procedure growth, new product uptake and commercial execution, partially offset by competitive PFA ablation catheter uptake in the US and VBP in China. Despite the IV saline shortage in the US, Abiomed delivered growth of 13.2% driven by strong growth in all regions and continued adoption of Impella 5.5 and Impella RP technology. Cardiovascular results also included $258 million associated with the acquisition of Shockwave. Contact Lenses and Other grew 7.4%, driven by trade inventory dynamics, continued strategic price actions, strong performance in ACUVUE OASYS 1-Day family of products as well as lapping prior year impacts from Russia sanctions. Surgical Vision growth of 13.6% was driven by TECNIS PureSee & TECNIS Eyhance. Commercial execution partially offset by competitive pressures in the US. Orthopedics grew 2.5% inclusive of hips growth of 5.6%, primarily driven by the success of recent product launches and commercial execution, partially offset by revenue disruption from the previously announced orthopedics transformation, impacts of China VBP and competitive pressures. Lastly, Surgery grew 0.4% with the Acclarent divestiture negatively impacting results by approximately 130 basis points. Performance was driven primarily by commercial execution, strength of new products across wound closure and biosurgery and continued price adjustments primarily associated with hyperinflation consistent with market practice. Growth was partially offset by competitive pressures in Energy and Endocutters as well as VBP and the anticorruption campaign in China. Now turning to our consolidated statement of earnings for the fourth quarter of 2024. I'd like to highlight a few noteworthy items that have changed compared to the same quarter of last year. We continue to invest strategically in research and development at competitive levels to fortify our future, investing $5.3 billion or nearly 24% of sales, which includes $540 million of acquired IPR&D expense associated with the V-Wave acquisition. Selling, marketing and administrative expense as a percent of sales deleveraged 150 basis points driven by increased commercial investment in the Innovative Medicine business. Interest income and expense was a net income of $144 million as compared to $212 million of income last year driven by lower interest rates earned on a lower average cash balance and higher interest rates on a higher average debt balance. Other income and expense was a net income of $161 million compared to $421 million of income in the prior year. This was primarily driven by lower gains on securities, a lower benefit related to employee benefit programs due to the discount rate, partially offset by lower litigation expense in 2024. Regarding taxes in the quarter, our effective tax rate was 11.7% versus 14.4% in the same period last year. This decrease was primarily driven by post-acquisition integration efforts that allowed the company to deduct certain acquisition costs for tax purposes as well as the resolution of prior tax matters both in jurisdictions outside of the US. Excluding special items, the effective tax rate was 8.8% versus 10.8% in the same period last year. I encourage you to review our upcoming 2024 10-K filing for additional details on specific tax related matters. Lastly, I'll direct your attention to the box section of the slide, where we have also provided our income before tax, net earnings and earnings per share adjusted to exclude the impact of intangible, amortization expense and special items. Now let's look at adjusted income before tax by segment for the quarter. Innovative Medicine margin declined from 37.4% to 32.5% primarily driven by strategic commercial investment and R&D pipeline advancement. MedTech margin declined from 15.5% to 10. 8% primarily driven by acquired IPR&D expense related to the V-Wave acquisition. Please note that the MedTech margin was negatively impacted in both years due to expenses associated with the strategic acquisition of Laminar. When adjusting for these one-time items, MedTech margin was relatively flat. As a result, adjusted income before tax for the enterprise as a percentage of sales decreased from 29.2% to 24.1% with the V-Wave acquired IPR&D expense impacting results by 240 basis points. When looking at the full year, Innovative Medicine, MedTech and the Enterprise adjusted income before tax remained relatively flat year-over-year when adjusting for the one-time items highlighted on the slide, mainly acquired IPR&D expenses on various transactions across both years. This concludes the sales and earnings portion of the call. I am now pleased to turn it over to Joe.","evidence_gemma_new":"Sales 6.7%","evidence_llama_3_3":"Sales Q4 2024","evidence_qwen_3_30b":"sales Q4 2024","gemma_new_max":6.7,"gemma_new_min":6.7,"llama_3_3_max":6.7,"llama_3_3_min":6.7,"qwen_3_30b_max":6.7,"qwen_3_30b_min":6.7}
{"symbol":"JNJ","year":2024,"quarter":4,"date":"2024-Q4","chunk_id":7,"sub_chunk_id":0,"centroid_label":"sales","agreed_value":14000000000.0,"count":2,"chunk":"Jennifer Taubert: Great. Well, good morning, Terence, and hello, everybody. I'd like to start by thanking all of our Innovative Medicine colleagues around the world for a very strong quarter. This was our third quarter with sales over $14 billion with 10 key brands achieving double-digit growth and Terence I will come back to that. That includes brands like DARZALEX, CARVYKTI, TALVEY and TECVAYLI as well as ones such as ERLEADA, SPRAVATO and UPTRAVI. We're making really nice progress on our launches, including TREMFYA in ulcerative colitis and RYBREVANT plus LAZCLUZE in non-small cell lung cancer. And just an important note, we hit our $57 billion target this year, a year early. For those that were here back at our enterprise review, we had made that commitment to hit the $57 billion by 2025 and we cleared that goal this year in 2024. So multiple myeloma is really an extraordinary franchise for us. And maybe I will start with DARZALEX because our quarter was over $3 billion. It was $3.1 billion and 22% growth and we continue to really build out share across the frontline settings in both transplant eligible and ineligible patients and in triplet and quad regimens. And so we're performing very well for DARZALEX and anticipate that to continue. And in fact, with DARZALEX, it's our first brand to hit $3 billion in quarterly sales. So important to note that milestone too. CARVYKTI had a really, really robust quarter as well as year nearing $1 billion for the year, $963 million as we continue to see very strong demand in that second-line plus setting as well as very strong capacity expansion in the US, in Europe and also with a contract manufacturer. And so we've talked before about that being more of a stair step rather than a direct linear line and it is performing very, very well and we're seeing nice continued expansion in the first quarter of this year that will also continue throughout the year. For TEC and TAL both products did well. We report sales, we break out sales on TEC. We don't yet on TAL. Both of these agents are best-in-class bispecifics. They're performing very well from a competitive share standpoint. We've got them nicely being utilized in the academic setting and we're working that out into more of the community setting, which will be important for their continued growth and uptake. So in total, multiple myeloma really is a stronghold for us and we're not stopping there. Because of the strength that we have, the assets that we have, we're also working on multiple additional types of combinations. John, maybe you want to address what we're doing with the bispecifics specifically.","evidence_gemma_new":"sales","evidence_llama_3_3":"Innovative Medicine sales","evidence_qwen_3_30b":null,"gemma_new_max":14000000000.0,"gemma_new_min":14000000000.0,"llama_3_3_max":14000000000.0,"llama_3_3_min":14000000000.0,"qwen_3_30b_max":null,"qwen_3_30b_min":null}
{"symbol":"JNJ","year":2023,"quarter":4,"date":"2023-FY","chunk_id":7,"sub_chunk_id":0,"centroid_label":"worldwide medtech sales","agreed_value":30000000000.0,"count":3,"chunk":"Joaquin Duato: Thank you, Joanne, and good morning, everyone. First, let me remark the strong close of our MedTech business in 2023. We delivered annually more than $30 billion in sales, which is -- were all-time high in our company history with operational -- adjusted operational growth in the fourth quarter of 9.1. So very strong results across the board in electrophysiology, in heart (ph) recovery, in surgery, in orthopedics and in Vision. So when we think about our results in 2023, we think it's going to be aligned with our competitor composite for the year, but ahead of our competitor composite in the fourth quarter. Now, certainly, COVID-19 impacts have stabilized globally and while we continue to see some challenges, macro challenges from the point of view of inflation, hospital staffing and the like, there is a bolus of patients coming out into the market after COVID-19, which has made 2023 market growth faster than historical averages. And we see that trend continuing into a good part of 2024 and therefore, being a tailwind into 2024. There's a lot of factors playing into that. But overall, we see the amended procedures continuing into at least the first half of 2024. Now we also have a number of tailwinds on our side other than the procedures that make me optimistic about 2024. We have the trajectory of Abiomed in heart recovery, which is very strong with the adoption of Impella 5.5. We file already for our Impella ECP, which is the smaller version of Impella CP. In orthopedics, we continue to move into higher growth markets with the expansion of our VELYS Robotic-Assisted Solution. We obtained CE Mark in Europe. In surgery, we continue to launch innovations across our surgery business with the [indiscernible], in Energy and ECHELON 3000 as a stapler. And we continue to see good expansion of our Plus Sutures too. In our Vision business, we are expanding our TECNIS family into the premium segment of IOLs. And finally, and I know this is an area of interest to you in electrophysiology, we continue to expand our PFA portfolio of catheters. We obtained approval for our VARIPULSE, loop catheter, PFA loop catheter in Japan at the beginning of this year. And we continue to roll out the global launch of QDOT MICRO, our newest radio frequency ablation catheter. So overall, a number of catalysts and tailwinds into our MedTech business into 2024. As we discussed in our Enterprise Business Review, we continue to see our MedTech business growing at the upper end of our markets and becoming a best-in-class competitor in MedTech.","evidence_gemma_new":"MedTech sales 2023","evidence_llama_3_3":"MedTech business sales 2023","evidence_qwen_3_30b":"MedTech business sales 2023","gemma_new_max":30000000000.0,"gemma_new_min":30000000000.0,"llama_3_3_max":30000000000.0,"llama_3_3_min":30000000000.0,"qwen_3_30b_max":30000000000.0,"qwen_3_30b_min":30000000000.0}
{"symbol":"JNJ","year":2023,"quarter":1,"date":"2023-Q1","chunk_id":1,"sub_chunk_id":0,"centroid_label":"worldwide medtech sales","agreed_value":7500000000.0,"count":2,"chunk":"Jessica Moore: Good morning. This is Jessica Moore, Vice President of Investor Relations for Johnson & Johnson. Welcome to our company's review of the 2023 first quarter business results and full year financial outlook. Joining me on today's call are Joe Wolk, Executive Vice President, Chief Financial Officer; and Ashley McEvoy, Executive Vice President, Worldwide Chairman of MedTech. Unfortunately, Jennifer Taubert, Executive Vice President, Worldwide Chairman of Pharmaceuticals is not feeling well and is unable to join us today. A few logistics before we get into the details. As a reminder, you can find additional materials, including today's presentation and associated schedules on the Investor Relations section of the Johnson & Johnson website at investor.jnj.com. Please note that today's meeting contains forward-looking statements regarding, among other things, the company's future operating and financial performance, product development, market position and business strategy and the anticipated separation of the company's Consumer Health business. You are cautioned not to rely on these forward-looking statements, which are based on current expectations of future events using the information available as of today's date and are subject to certain risks and uncertainties that may cause the company's actual results to differ materially from those projected. A description of these risks, uncertainties and other factors can be found in our SEC filings, including our 2022 Form 10-K, which is available at investor.jnj.com and on the SEC's website. Additionally, several of the products and compounds discussed today are being developed in collaboration with strategic partners or licensed from other companies. This slide acknowledges those relationships. Moving to today's agenda, I will review the first quarter sales and P&L results for the corporation and highlights related to the three segments. Joe will then provide additional business and financial commentary before sharing an overview of our cash position, capital allocation priorities and updated guidance for 2023. The remaining time will be available for your questions. We anticipate the webcast will last approximately 60 minutes. Now let's turn to our first quarter results. Worldwide sales were $24.7 billion for the first quarter of 2023, an increase of 5.6% versus the first quarter of 2022. Operational sales, which excludes the effect of translational currency, increased 9% as currency had a negative impact of 3.4 points. In the U.S., sales increased 9.7%. In regions outside the U.S., our reported sales increased 1.8%. Operational sales outside the U.S. increased 8.3% with currency negatively impacting our reported OUS results by 6.5 points. Excluding the net impact of acquisitions and divestitures, adjusted operational sales growth was 7.6% worldwide, 7.4% in the U.S. and 7.9% outside the U.S. with all three segments growing sequentially over the fourth quarter. Turning now to earnings. For the quarter, net loss was $68 million and basic loss per share was $0.03 versus diluted earnings per share of $1.93 one-year ago primarily driven by the $6.9 billion charge related to the Talc Settlement proposal. Excluding after-tax intangible asset amortization expense and special items for both periods, adjusted net earnings for the quarter were $7.1 billion, and adjusted diluted earnings per share was $2.68, representing a decrease of 0.9% and an increase of 0.4%, respectively, compared to the first quarter of 2022. On an operational basis, adjusted diluted earnings per share increased 3%. I will now comment on business segment sales performance highlights for the quarter. Unless otherwise stated, percentages quoted represent the operational sales change in comparison to the first quarter of 2022 and therefore, exclude the impact currency translation. Beginning with Consumer Health. Worldwide Consumer Health sales of $3.9 billion increased 7.4% with an increase of 11.4% in the U.S. and an increase of 4.4% outside the U.S. Worldwide operational sales increased 11.3% and outside the U.S., operational sales increased 11.3%. Results were primarily driven by global strategic price increases across all franchises. Volume growth in OTC was due to an exceptionally strong cough, cold and flu season most pronounced in Europe, coupled with one-time retailer restocking primarily in the U.S. related to low inventory levels due to tripledemic demand. Skin Health\/Beauty delivered double-digit growth driven by price actions, lapping prior year supply constraints and current quarter restocking as well as strong NEUTROGENA and AVEENO e-commerce and club channel performance and new product innovations. Moving on to our Pharmaceutical segment. Worldwide Pharmaceutical sales of $13.4 billion increased 4.2% with growth of 5.9% in the U.S. and 2.4% outside of the U.S. Worldwide operational sales increased 7.2% and outside the U.S., operational sales increased 8.6%. Excluding the COVID-19 vaccine sales, worldwide operational sales increased 4.9%, U.S. operational sales increased 7.1%, and outside the U.S., operational sales increased 2.4%. Pharmaceutical growth excluding the COVID-19 vaccine was driven by our key brands and continued uptake in our recently launched products with eight assets delivering double-digit growth. We continue to drive strong sales growth for both DARZALEX and ERLEADA with increases of 25.7% and 40.3%, respectively. STELARA grew 9.6% driven by market growth and share gains in Crohn's disease and ulcerative colitis, with gains of 2.2 points and 4.8 points in the U.S., respectively, partially offset by unfavorable patient mix and price. TREMFYA grew 11% driven by market growth and share gains in psoriasis and psoriatic arthritis, with gains of 0.9 points and 2.1 points in the U.S., respectively, partially offset by unfavorable patient mix. Turning to newly launched products. We are excited to disclose CARVYKTI and SPRAVATO sales for the first-time this quarter. We continue to make progress on our thoughtful and phased launch of CARVYKTI and continue to expand access and reimbursement for SPRAVATO. Also, we are encouraged by the early success of our launch of TECVAYLI, sales of which are included in other oncology. This sales growth was partially offset by the loss of exclusivity in REMICADE and ZYTIGA, along with a decrease in IMBRUVICA sales due to competitive pressures. IMBRUVICA maintains its market leadership position worldwide. I'll now turn your attention to the MedTech segment. Worldwide MedTech sales of $7.5 billion increased by 7.3% with growth of 16.6% in the U.S. and a decline of 0.6% outside of the U.S. Worldwide operational sales increased 11% and outside the U.S., operational sales increased 6.2%. Abiomed contributed 4.6% to operational growth. Excluding the impact of acquisition and divestitures, worldwide adjusted operational sales growth was 6.4%. Sales in the first quarter accelerated sequentially from Q4 for all four MedTech businesses, driven by global procedure growth, continued uptake of recently launched products, and commercial execution. As anticipated, in China, procedure volumes improved as the quarter progressed. Partially offsetting growth in the quarter was the impact of volume-based procurement in China as well as supply constraints. The Interventional Solutions franchise delivered operational growth of 41.9%, which includes $324 million related to Abiomed. We are excited about the progress of the integration to which Joe will provide additional context. Excluding the impact of the acquisition, this franchise delivered another quarter of double-digit worldwide growth at 12.3%. As we continue to increase our reporting transparency, beginning this quarter, we are providing visibility to electrophysiology sales. Electrophysiology continued to deliver double-digit sales growth in all regions with the exception of Asia-Pacific, which reflects impacts related to volume-based procurement in China. Orthopaedics operational growth of 5.1% reflects the strong procedure recovery and success of recently launched products especially digital and enabling technologies driving pull-through sales in areas like hips and knees. Growth was partially offset by the impact of volume based procurement in China, primarily in hips and spine. Global growth of 9.3% in contact lens and other reflects continued penetration of our ACUVUE OASYS 1-Day family of products, including the recent launch of ACUVUE OASYS MAX 1-Day, strong commercial execution and strategic price actions. Growth in contact lens and U.S. surgical vision was tempered by continued supply challenges. Now turning to our consolidated statement of earnings for the first quarter of 2023. I'd like to highlight a few noteworthy items that have changed compared to the same quarter of last year. Cost of products sold deleveraged by 150 basis points driven by one-time COVID-19 vaccine manufacturing exit related costs in the Pharmaceutical business and commodity inflation and acquisition-related items in the MedTech business. Selling, marketing and administrative margins leveraged by 60 basis points driven by proactive management of costs given the current inflationary environment. We continue to invest strategically in research and development at competitive levels, investing 14.4% of sales this quarter. The $3.6 billion invested was a 2.9% increase versus the prior year. The other income and expense line was an expense of $7.2 billion in the first quarter of 2023 compared to net income of $100 million in the first quarter of 2022. The increase in expense was the result of the $6.9 billion charge related to the Talc Settlement proposal recorded in the first quarter of 2023 as previously disclosed. Regarding taxes in the quarter, our effective tax rate was 90.8% versus 12.2% in the same period last year, primarily driven by the $6.9 billion accrual for the Talc Settlement proposal. Excluding special items, the effective tax rate was 16.5% versus 13.3% in the same period last year. I encourage you to review our upcoming first quarter 10-Q filing for additional details on specific tax matters. Lastly, I'll direct your attention to the box section of the slide, where we have also provided our income before tax, net earnings and earnings per share adjusted to exclude the impact of intangible amortization expense and special items. Now let's look at the adjusted income before tax by segment. In the first quarter of 2023, our adjusted income before tax for the enterprise as a percentage of sales decreased from 35.1% to 34.2%. Pharmaceutical margins declined from 44.1% to 43.2% driven primarily by mix, partially offset by proactive management of costs. MedTech margins remained flat at 27% driven primarily by inflationary impacts, offset by proactive management of costs. Finally, Consumer Health margins improved from 22.1% to 22.3% driven primarily by strategic price actions, partially offset by input cost inflation. This concludes the sales and earnings portion of the Johnson & Johnson first quarter 2023 results. I am now pleased to turn the call over to Joe Wolk. Joe?","evidence_gemma_new":"Worldwide MedTech sales","evidence_llama_3_3":"MedTech Worldwide MedTech sales 2023 first quarter","evidence_qwen_3_30b":null,"gemma_new_max":7500000000.0,"gemma_new_min":7500000000.0,"llama_3_3_max":7500000000.0,"llama_3_3_min":7500000000.0,"qwen_3_30b_max":null,"qwen_3_30b_min":null}
{"symbol":"JNJ","year":2023,"quarter":2,"date":"2023-Q1","chunk_id":19,"sub_chunk_id":0,"centroid_label":"worldwide medtech sales","agreed_value":8.0,"count":2,"chunk":"Joaquin Duato: So as I commented in the earlier question, we are pleased with the strength of our MedTech business in the first-half of the year with 8% growth. We -- this is driven by market growth, which we believe it's also slightly elevated this year due to the clearing of the COVID-19 backlog. And at the same time, as I commented to our improved commercial execution and the introduction of new products. Of note, of our $12 billion platforms in MedTech, all of them have grown during the first-half of the year. And we are being quite successful in introducing some important new products in all segments of our business. For example, if I start with electrophysiology, that grew north of 25% in the quarter. We have introduced a new mapping catheter OCTARAY and also a new treatment catheter QDOT, which, as you know, Joanne, we presented results about QDOT. So we increased efficacy and procedure efficiency, too. If we move into Vision, we are in the middle of the launch of ACUVUE OASYS MAX, which is doing well and also the launch of our TECNIS Eyhance, the first mono-focal intraocular lens, which is progressing also very well. Moving into Orthopaedics. The good news is that we have received CE Mark and CA Mark for our Robotic-Assisted System VELYS. And we continue to have an enhanced portfolio of knees and hips with our Cementless knees, the Medial Stabilized and in the area of hips with hip navigation and the recent addition of CUPTIMIZE and we see our market position there also progressing. And moving forward, we will continue to see good evolution also in Orthopaedics. Finally, in Surgery, we continue to enhance our endocutter and our energy portfolio with the launch of ENSEAL jaw curved and also with the launch of ECHELON 3000 in the stapler side. So overall, good reception of our new products. That portend well for a continuation of growth, as I said before, in the second half of the year. And we look forward also to the different readouts of our PFA pipeline, which as we have announced, we have completed the enrollment of our dual energy catheter, which is going to be offering the physicians the comfort of a catheter that is the most well used with the option of having both radio frequency and PFA to adapt to every patient anatomy. And then on the robotic side, we will provide you more updates on our progress on OTTAVA, our soft tissue robotics system, before the end of the year as we committed. And we have also good news on our Monarch system that has already started with the first patient treated in removal of kidney stone. So overall, good progress during the year. Clearly, our MedTech business is doing well, delivering competitive growth. And we have good news in innovation as the year moves forward.","evidence_gemma_new":"MedTech growth first-half of the year","evidence_llama_3_3":null,"evidence_qwen_3_30b":"MedTech growth first-half of the year","gemma_new_max":8.0,"gemma_new_min":8.0,"llama_3_3_max":null,"llama_3_3_min":null,"qwen_3_30b_max":8.0,"qwen_3_30b_min":8.0}
{"symbol":"JNJ","year":2023,"quarter":2,"date":"2023-Q2","chunk_id":3,"sub_chunk_id":0,"centroid_label":"worldwide medtech sales","agreed_value":7800000000.0,"count":2,"chunk":"Jessica Moore: Thanks, Joaquin. As a reminder on May 8, 2023, Kenvue, Inc., closed its initial public offering. Johnson & Johnson continues to own 89.6% of total outstanding shares of Kenvue\u2019s common stock and remains the majority shareholder. Therefore, the following financial results continue to include the consumer health business with the 10.4% of consumer health's net earnings no longer attributed to Johnson & Johnson being adjusted for in other income and expense from the date of the IPO through the end of the quarter. Starting with Q2 2023 sales results. Worldwide sales were $25.5 billion for the second quarter of 2023, an increase of 6.3% versus the second quarter of 2022. Operational sales growth, which excludes the effect of translational currency, increased 7.5%, as currency had a negative impact of 1.2 points. In the U.S., sales increased 10.2%. In regions outside the U.S., our reported growth was 2.2%. Operational sales growth outside the U.S. was 4.7% with currency negatively impacting our reported OUS results by 2.5 points. Operational sales in Europe were negatively impacted by the COVID-19 vaccine and loss of exclusivity of ZYTIGA. Excluding the net impact of acquisitions and divestitures, adjusted operational sales growth with 6.2% worldwide, 8% in the U.S. and 4.4% outside the U.S. Turning now to earnings. For the quarter, net earnings were $5.1 billion and diluted earnings per share was $1.96 versus diluted earnings per share of $1.80 a year ago. Excluding after tax intangible asset amortization expense and special items for both periods, adjusted net earnings for the quarter were $7.4 billion and adjusted diluted earnings per share was $2.80, representing increases of 6.5% and 8.1%, respectively, compared to the second quarter of 2022. On an operational basis, adjusted diluted earnings per share increased 9.7%. I will now comment on business segment sales performance highlights. Unless otherwise stated, percentages quoted represent the operational sales change in comparison to the second quarter of 2022, and therefore, exclude the impact of currency translation. Beginning with the Pharmaceuticals segment. Worldwide Pharmaceutical sales of $13.7 billion increased 3.1%, with growth of 9.2% in the U.S. and a decline of 4% outside the U.S. Operational sales growth increased 3.8% as currency had a negative impact of 0.7 points. Excluding COVID-19 vaccine sales, Worldwide operational sales growth was 6.2% with growth of 9.9% in the U.S. and growth of 1.5% outside the U.S. Sales outside the U.S., excluding the COVID-19 vaccine, were negatively impacted by approximately 500 basis points, due to the loss of exclusivity of ZYTIGA in Europe. Pharmaceutical growth was driven by our key brands and continued uptake in our recently launched products with nine assets delivering double-digit growth. We continue to drive strong sales growth for both DARZALEX and ERLEADA with increases of 23.4% and 26.9%, respectively. STELARA grew 8%, driven by market growth and IBD share gains in the U.S., partially offset by unfavorable patient mix and increased rebates. TREMFYA grew 18.9%, driven by market growth and share gains in the U.S., partially offset by unfavorable patient mix. Growth of 16.5% in pulmonary hypertension was driven by favorable patient mix, share gains in the U.S. and market growth. Turning to newly launched products. We continue to make progress on our launch of CARVYKTI and continue to expand access and reimbursement for SPRAVATO. We are also encouraged by the early success of our launch of TECVAYLI, sales of which are included in other oncology. Total pharmaceutical sales growth was partially offset by the loss of exclusivity in REMICADE and ZYTIGA, along with a decrease in IMBRUVICA sales due to competitive pressures. IMBRUVICA maintains its market leadership position worldwide. I will now turn your attention to the MedTech segment. Worldwide MedTech sales of $7.8 billion increased 12.9% with growth of 14.6% in the U.S. and 11.3% outside of the U.S. Operational sales growth increased 14.7% as currency had a negative impact of 1.8 points. Abiomed contributed 4.8% to operational growth. Excluding the impact of acquisitions and divestitures, worldwide adjusted operational sales growth was 9.9%. Sales in the second quarter accelerated sequentially from Q1 for all MedTech businesses driven by global procedure growth, recovery in China, continued uptake of recently launched products and commercial execution, partially offsetting growth in the quarter was the impact of volume based procurement in China, as well as supply constraints. The Interventional Solutions franchise delivered operational growth of 56.9%, which includes $331 million related to Abiomed. Electrophysiology is a major contributor to the growth with a double-digit increase of 25.9%. This reflects strong growth in all regions, including Europe, driven by our comprehensive portfolio, including the most recently launched QDOT RS catheter. Orthopedics operational growth of 5.7%, reflects strong procedure recovery, success of recently launched products, such as the enhanced shorter portfolio, as well as global expansion of our digital solutions, such as VELYS Robotic assisted solution. Growth was partially offset by the impact of volume-based procurement in China and continued supply challenges primarily in hips. Operational growth of 8.4% and surgery was driven primarily by procedure recovery and strength of our biosurgery and wound closure portfolios. Growth was partially offset by the impacts of volume-based procurement in China and supply challenges. Global growth of 6.9% in vision was driven by price actions and contact lenses and other, as well as strength of new products, including ACUVUE OASYS 1-Day family of products and contact lenses and TECNIS Eyhance our monofocal intraocular lens and surgical vision. Growth of contact lenses was partially offset by strategic portfolio choices and supply challenges. Although these continue to improve. Moving to the Consumer Health segment. Worldwide Consumer Health sales of $4 billion increased 5.4% with growth of 6% in the U.S. and 5% outside the U.S. Operational sales growth increased 7.7% as currency had a negative impact of 2.3 points. Sales in the second quarter accelerated sequentially from Q1 for all consumer health franchises, primarily driven by strategic price increases and growth in OTC globally, due to strong pain performance, and cold, cough and flu season. Excluding the impact of strategic portfolio decisions and sales of personal care products in Russia, volume across all consumer franchises was relatively flat on strong price actions. For more detailed information, please visit investors.kenvue.com. Now turning to our consolidated statement of earnings for second quarter of 2023, I'd like to highlight a few noteworthy items that have changed compared to the same quarter of last year. Cost of products sold leveraged by 80 basis points, primarily driven by favorable patient mix and lower COVID-19 vaccine supply network related costs in the pharmaceutical business, partially offset by commodity inflation in the consumer and MedTech businesses. Selling, marketing and administrative margins deleveraged 20 basis points, driven by incremental costs to support the standalone consumer health business, partially offset by proactive management of costs. We continue to invest strategically in research and development at competitive levels, investing 15% of sales this quarter. The $3.8 billion invested was a 3.4% increase versus the prior year. The other income and expense line was income of $60 million in the second quarter of 2023, compared to an expense of $273 million in the second quarter of 2022. This was primarily driven by favorable litigation settlements, lower litigation expense, and lower unrealized losses on securities, partially offset by higher COVID-19 vaccine manufacturing exit related cost. And as previously mentioned, the 10.4% of consumer health earnings that are no longer attributable to Johnson & Johnson, which resulted in a $37 million reduction in consolidated earnings. Regarding taxes in the quarter, our effective tax rate was 23.9% versus 17.6% in the same period last year. This increase was primarily driven by 2023 tax cost incurred as part of the planned separation of the consumer health business, due to the internal reorganization of certain international subsidiaries. Excluding special items the effective tax rate was 16.6% versus 15.4% in the same period last year. I encourage you to review our upcoming second quarter 10-Q filing for additional details on specific tax matters. Lastly, I'll direct your attention to the box section of the slide, where we have also provided our income before tax, net earnings and earnings per share adjusted to exclude the impact of intangible amortization expense and special items. Now let's look at adjusted income before tax by segment. In the second quarter of 2023, our adjusted income before tax for the enterprise as a percentage of sales increased from 34% to 34.6%, primarily driven by favorable product and patient mix, partially offset by unfavorable segment mix and commodity inflation. Pharmaceutical margins improved from 42% to 42.7%, primarily driven by favorable patient mix, sales, marketing and administrative expense leverage, and R&D portfolio prioritization, partially offset by higher milestone payments. MedTech margins improved from 26.5% to 28.6%, driven by favorable intellectual property related litigation settlements and cost management initiatives, partially offset by commodity inflation. Finally, consumer health margins declined from 25.9% to 23.5%, due to incremental costs to support the standalone consumer health business, foreign exchange impacts, and commodity inflation, partially offset by supply chain efficiencies. It is important to highlight that the adjusted income before tax for the consumer health business as reported by Johnson & Johnson defers from the financial results reported by Kenvue Inc. this morning. The difference is primarily driven by incremental costs required to run Kenvue as an independent company. Additional differences also exist on an after tax basis, due to the application of different tax rates. This concludes the sales and earnings portion of the Johnson & Johnson second quarter results. I'm now pleased to turn the call over to Joe Wolk. Joe?","evidence_gemma_new":null,"evidence_llama_3_3":"MedTech segment MedTech sales Q2 2023","evidence_qwen_3_30b":"worldwide MedTech sales","gemma_new_max":null,"gemma_new_min":null,"llama_3_3_max":7800000000.0,"llama_3_3_min":7800000000.0,"qwen_3_30b_max":7800000000.0,"qwen_3_30b_min":7800000000.0}
{"symbol":"JNJ","year":2023,"quarter":2,"date":"2023-Q2","chunk_id":8,"sub_chunk_id":0,"centroid_label":"worldwide medtech sales","agreed_value":6.0,"count":2,"chunk":"Larry Biegelsen: Good morning. Thanks for taking the question and congratulations on another strong quarter here. For Erik, if Judge Kaplan dismisses the bankruptcy proposal, what's the backup settlement in mind that would proceed outside of bankruptcy that could ring fence the cost? And Joe or Joaquin, in MedTech, how are you thinking about the sustainability of the first half strength where you grew 8% organic? Do you still expect the MedTech market to grow 5% to 7% this year with J&J in that range, it seems conservative? Thanks for taking the question.","evidence_gemma_new":"MedTech market this year","evidence_llama_3_3":null,"evidence_qwen_3_30b":"MedTech market growth this year","gemma_new_max":6.0,"gemma_new_min":6.0,"llama_3_3_max":null,"llama_3_3_min":null,"qwen_3_30b_max":6.0,"qwen_3_30b_min":6.0}
{"symbol":"JNJ","year":2023,"quarter":3,"date":"2023-Q3","chunk_id":1,"sub_chunk_id":0,"centroid_label":"worldwide medtech sales","agreed_value":7500000000.0,"count":3,"chunk":"Jessica Moore: Good morning. This is Jessica Moore, Vice President of Investor Relations for Johnson & Johnson. Welcome to our company's review of the 2023 third quarter business results and full-year financial outlook. A few logistics before we get into the details. As a reminder, you can find additional materials, including today's presentation and associated schedules, on the Investor Relations section of the Johnson & Johnson website at investor.jnj.com. Please note that this presentation contains forward-looking statements regarding, among other things, the company's future operating and financial performance, market position and business strategy. You are cautioned not to rely on these forward-looking statements, which are based on current expectations of future events using the information available as of the date of this recording and are subject to certain risk and uncertainties that may cause the company's actual results to differ materially from those projected. A description of these risks, uncertainties and other factors can be found in our SEC filings, including our 2022 Form 10-K, which is available at investor.jnj.com and on the SECs website. Additionally, several of the products and compounds discussed today are being developed in collaboration with strategic partners or licensed from other companies. This slide acknowledges those relationships. Moving to today's agenda. I will start by reviewing the third quarter sales and P&L results for the corporation and highlights related to our two businesses. Joe Wolk, our CFO will then provide additional business and financial commentary before sharing an overview of our cash position, capital allocation priorities, and updated guidance for 2023. The remaining time will be available for your questions. Joaquin Duato, our chairman and CEO; John Reed, and Ahmet Tezel, our Innovative Medicine and MedTech R&D leaders, as well as Erik Haas, our VP of Litigation, will be joining us for Q&A. To ensure we provide enough time to address your questions, we anticipate the webcast will last approximately 60 minutes. As a reminder, on August 23, 2023, Johnson & Johnson announced the final results of the exchange offer and completion of the separation of Kenvue Inc. Unless otherwise stated, the financial results and guidance highlighted today reflect the continuing operations of Johnson & Johnson. We will report the consumer health financial results as discontinued operations. Additionally, going forward, the pharmaceutical segment will be referred to as innovative medicine. Starting with Q3 2023 sales results. Worldwide sales were $21.4 billion for the third quarter of 2023, an increase of 6.8% versus the third quarter of 2022. Operational sales growth, which excludes the effect of translational currency, increased 6.4% as currency had a positive impact of 0.4 points. In the U.S., sales increased 11.1%. In regions outside the U.S., our reported growth was 1.6%. Operational sales growth outside the U.S. was 0.7% with currency positively impacting our reported OUS results by 0.9 points. It is important to note that operational sales in Europe were negatively impacted by the COVID-19 vaccine and loss of exclusivity of ZYTIGA. Excluding the net impact of acquisition and divestitures, adjusted operational sales growth was 4.9% worldwide, 8.9% in the U.S., and 0.3% outside the U.S. Turning now to earnings. For the quarter, net earnings were $4.3 billion and diluted earnings per share was $1.69 versus diluted earnings per share of $1.62 a year ago. Excluding after-tax and tangible asset amortization expense and special items for both periods, adjusted net earnings for the quarter were $6.8 billion and adjusted diluted earnings per share was $2.66, representing increases of 14.1% and 19.3% respectively, compared to the third quarter of 2022. On an operational basis, adjusted diluted earnings per share increased 13.9%. I will now comment on business sales performance. Unless otherwise stated percentages quoted represent the operational sales change in comparison to the third quarter of 2022 and therefore exclude the impact of currency translation. Beginning with innovative medicine. Worldwide innovative medicine sales of $13.9 billion, increased 5.1% with growth of 10.9% in the U.S. and a decline of 2.3% outside of the U.S. Operational sales growth increased 4.3% as currency had a positive impact of 0.8 points. Excluding COVID-19 vaccine sales, worldwide operational sales growth was 8.2%, with growth of 10.9% in the U.S. and growth of 4.3% outside of the U.S. Sales outside the U.S., excluding the COVID-19 vaccine, were negatively impacted by approximately 500 basis points, due to the loss of exclusivity of ZYTIGA in Europe. Innovative medicine growth was driven by our key brands and continued uptake from a recently launched products with 11 assets delivering double-digit growth. We continue to drive strong sales growth for both DARZALEX and ERLEADA with increases of 20.7% and 27% respectively, due to continued share gains and market growth. Within immunology, we saw growth in STELARA and TREMFYA, with increases of 15.8% and 21.5% respectively. This growth was predominantly driven by favorable patient mix and market growth. Turning to newly launched products, we continue to make progress on our launches of CARVYKTI and SPRAVATO. We are also encouraged by the early success of our launches of TECVAYLI and TALVEY, sales of which are driving the growth and other oncology. We expect to begin disclosing TECVAYLI sales in Q1 2024. Total innovative medicine sales growth was partially offset by the loss of exclusivity of ZYTIGA and REMICADE, along with a decrease in IMBRUVICA sales, due to competitive pressures. I'll now turn your attention to MedTech. Worldwide MedTech sales of $7.5 billion increased 10% with growth of 11.6% in the U.S., and 8.3% outside of the U.S. Operational sales growth increased 10.4% as currency had a negative impact of 0.4 points. Abiomed contributed 4.6% to operational growth, excluding the impact of acquisition and divestitures, worldwide adjusted operational sales growth was 6%. On a pro forma basis, utilizing sales in the prior year from Abiomed as a standalone company, MedTech's growth for the quarter would be 6.4%. MedTech was negatively impacted across all platforms by international sanctions in Russia worth approximately 60 basis points in volume-based procurement in China, primarily in five MedTech platforms: Spine, Trauma, Endocutters, Energy, and Electrophysiology. As communicated last quarter, we saw the return to more normalized seasonality with moderate deceleration in the third quarter. The Interventional Solutions franchise delivered operational growth of 48.1%, which includes $311 million related to Abiomed. This reflects growth in Abiomed patient procedures in the high-teens and continued strong adoption of Impella 5.5 technology in surgery. Electrophysiology is a major contributor to this growth with a double-digit increase of 20.3%. This reflects strong growth in all regions, including Europe, driven by our global market leading portfolio, including the most recently launched QDOT RF ablation and OPTRELL Mapping Catheters. Operational growth of 3.2% in surgery was driven primarily by procedure recovery and strength of our biosurgery and wound closure portfolios. Growth was partially offset by the impacts of volume-based procurement in China and supply challenges. Global growth of 5.4% in vision was driven by price actions and contact lenses and other, as well as strength of new products including ACUVUE OASYS 1-Day family of products and contact lenses and TECNIS Eyhance, our monofocal interocular lens and surgical vision. Growth of contact lenses was partially offset by strategic portfolio choices and supply challenges, although these continue to improve. Global vision growth was negatively impacted by 100 basis points, due to the Blink divestiture. Orthopedics operational growth of 2.6% reflects procedure growth, success of recently launched products, such as the global expansion of our VELYS digital solutions, and expansion in ambulatory surgical centers, partially offset by the impacts of volume-based procurement in China in Spine and Trauma. Now turning to our consolidated statement of earnings for the third quarter of 2023, I'd like to highlight a few noteworthy items that have changed, compared to the same quarter of last year. Cost of product sold margin was flat due to favorable patient mix and lower COVID-19 vaccine supply network related exit costs in the innovative medicine business, partially offset by commodity inflation, unfavorable product mix, and restructuring related to excess inventory costs in the MedTech business. Selling, marketing, and administrative margins deleveraged 40 basis points, driven by increased expenses across the enterprise. We continue to invest strategically in research and development at competitive levels, investing $3.4 billion or 16.2% of sales this quarter. R&D was leveraged by 120 basis points, primarily driven by portfolio prioritization, partially offset by higher milestone payments in the innovative medicine business. Additionally, IPR&D impairments were $206 million in the third quarter of 2023. Interest income was $182 million in the third quarter of 2023, as compared to $99 million of income in the third quarter of 2022. The increase in income was driven by higher interest rates earned on cash balances, partially offset by higher interest rates on debt balances. The other income and expense line was an expense of $499 million in the third quarter of 2023, compared to an expense of $226 million in the third quarter of 2022. This was primarily driven by higher unrealized mark-to-market losses on public securities partially offset by the lower COVID-19 vaccine-related exit costs and lower litigation expense. Restructuring in the third quarter was $158 million, primarily related to the innovative medicine restructuring program announced in the first quarter. Regarding taxes in the quarter, our effective tax rate was 17.4% versus 16.7% in the same period last year. This increase was primarily driven by a non-deductible, non-recurring pre-tax charge that occurred in the current quarter. Excluding special items, the effective tax rate was 15.6% versus 15.9% in the same period last year. As a result of the completion of the exchange offer, Johnson & Johnson is presenting the consumer health business financial results as discontinuing operations, including a gain of approximately $21 billion. I encourage you to review our upcoming third quarter 10-Q filing for additional details on specific tax and separation-related matters. Lastly, I'll direct your attention to the box section of the slide where we have also provided our income before tax, net earnings, and earnings per share adjusted to exclude the impact of intangible amortization expense and special items. Now let's look at adjusted income before tax by segment. In the third quarter of 2023, our adjusted income before tax for the enterprise as a percentage of sales increased from 35.3% to 37.6%, primarily driven by favorable patient mix and innovative medicine, partially offset by unfavorable product mix and commodity inflation in MedTech. Innovative medicine margins improved from 41.4% to 45.4%, primarily driven by favorable patient mix and R&D portfolio prioritization. MedTech margins declined from 25% to 24.7%, primarily driven by commodity inflation and unfavorable product mix partially offset by a divestiture gain. This concludes the sales and earnings portion of the Johnson & Johnson third quarter results. I'm now pleased to turn the call over to Joe Wolk. Joe?","evidence_gemma_new":"MedTech MedTech sales","evidence_llama_3_3":"MedTech sales third quarter of 2023","evidence_qwen_3_30b":"worldwide MedTech sales","gemma_new_max":7500000000.0,"gemma_new_min":7500000000.0,"llama_3_3_max":7500000000.0,"llama_3_3_min":7500000000.0,"qwen_3_30b_max":7500000000.0,"qwen_3_30b_min":7500000000.0}
{"symbol":"JNJ","year":2023,"quarter":3,"date":"2023-Q3","chunk_id":29,"sub_chunk_id":0,"centroid_label":"worldwide medtech sales","agreed_value":6.4,"count":2,"chunk":"Joaquin Duato: Thank you, and thank you Larry. And taking a step back, we see the evolution of our MedTech business in a very positive way. One of our key goals for us is to be a top tier grower in MedTech. When I look at the results of MedTech this year, we are delivering on that. Our growth in the quarter pro forma was 6.4% when you compare with Abiomed as a standalone company. And when you look at our pro forma growth year-to-date in MedTech is 7.9%. So very pleased with the performance of our MedTech business. And we have expectations to continue our progression into 2024, in part fueled by the procedural growth that we see and also, but our continued improvement in our execution and the launch of new products. Some of them we can discuss later. For example, you know, we will be launching our first PFA catheter in Europe into 2024. When it comes to GLP-1s, it's good for patients to have new options for treatment, especially in obesity, which at times has been a stigmatized disease in which patients were not looking for treatment due to the stigmatization of that. Certainly, as you commented, we're seeing some impact in our bariatric business in the short-term. Some patients are reconsidering surgery, expecting to get treatment. But overall, when we talk to surgeons, bariatric surgeons, what they see is a complementary role of surgery and GLP-1s, and many of them comment on the fact that they could see a tailwind for bariatric surgery down the road, given this complementary nature, the increased awareness about obesity, more patients seeking treatment, and many of the patients, about 30% of them, are not going to be tolerating this medication. So they would be another funnel for our bariatric business. In the rest of our MedTech business, at this point, we continue to see robust procedure increase and we don't anticipate that change, that thing -- that trend changing in the foreseeable future.","evidence_gemma_new":"MedTech growth pro forma quarter","evidence_llama_3_3":null,"evidence_qwen_3_30b":"MedTech growth pro forma quarter","gemma_new_max":6.4,"gemma_new_min":6.4,"llama_3_3_max":null,"llama_3_3_min":null,"qwen_3_30b_max":6.4,"qwen_3_30b_min":6.4}
{"symbol":"JNJ","year":2023,"quarter":3,"date":"2023-Q3","chunk_id":29,"sub_chunk_id":0,"centroid_label":"worldwide medtech sales","agreed_value":7.9,"count":2,"chunk":"Joaquin Duato: Thank you, and thank you Larry. And taking a step back, we see the evolution of our MedTech business in a very positive way. One of our key goals for us is to be a top tier grower in MedTech. When I look at the results of MedTech this year, we are delivering on that. Our growth in the quarter pro forma was 6.4% when you compare with Abiomed as a standalone company. And when you look at our pro forma growth year-to-date in MedTech is 7.9%. So very pleased with the performance of our MedTech business. And we have expectations to continue our progression into 2024, in part fueled by the procedural growth that we see and also, but our continued improvement in our execution and the launch of new products. Some of them we can discuss later. For example, you know, we will be launching our first PFA catheter in Europe into 2024. When it comes to GLP-1s, it's good for patients to have new options for treatment, especially in obesity, which at times has been a stigmatized disease in which patients were not looking for treatment due to the stigmatization of that. Certainly, as you commented, we're seeing some impact in our bariatric business in the short-term. Some patients are reconsidering surgery, expecting to get treatment. But overall, when we talk to surgeons, bariatric surgeons, what they see is a complementary role of surgery and GLP-1s, and many of them comment on the fact that they could see a tailwind for bariatric surgery down the road, given this complementary nature, the increased awareness about obesity, more patients seeking treatment, and many of the patients, about 30% of them, are not going to be tolerating this medication. So they would be another funnel for our bariatric business. In the rest of our MedTech business, at this point, we continue to see robust procedure increase and we don't anticipate that change, that thing -- that trend changing in the foreseeable future.","evidence_gemma_new":"MedTech growth pro forma year-to-date","evidence_llama_3_3":null,"evidence_qwen_3_30b":"MedTech growth pro forma year-to-date","gemma_new_max":7.9,"gemma_new_min":7.9,"llama_3_3_max":null,"llama_3_3_min":null,"qwen_3_30b_max":7.9,"qwen_3_30b_min":7.9}
{"symbol":"JNJ","year":2023,"quarter":4,"date":"2023-Q4","chunk_id":3,"sub_chunk_id":0,"centroid_label":"worldwide medtech sales","agreed_value":7700000000.0,"count":3,"chunk":"Jessica Moore: Thanks, Joaquin. Unless otherwise stated, the financial results and guidance highlighted reflects the continuing operations of Johnson & Johnson. We will report the consumer health financial results as discontinued operations. Furthermore, the percentages quoted represent operational results and therefore, exclude the impact of currency translation. Starting with Q4 2023 sales results. Worldwide sales were $21.4 billion for the fourth quarter of 2023. Sales increased 7.2%, with 11% in the U.S. and 2.7% outside of the U.S. Excluding the net impact of acquisitions and divestitures, adjusted operational sales growth was 5.7% worldwide, 8.8% in the U.S. and 2.1% outside the U.S. It is important to note that sales in Europe were negatively impacted by the COVID-19 vaccine and loss of exclusivity of ZYTIGA by approximately 1,500 basis points operationally. Turning now to earnings. For the quarter, net earnings were $4.1 billion, and diluted earnings per share was $1.70 versus diluted earnings per share of $1.22 a year ago. Excluding after-tax intangible asset amortization expense and special items for both periods, adjusted net earnings for the quarter were $5.6 billion and the diluted earnings per share was $2.29, representing increases of 2.4% and 11.7%, respectively, compared to the fourth quarter of 2022. On an operational basis, adjusted diluted earnings per share increased 11.2%. For the full year 2023, sales were $85.2 billion. Sales grew 7.4%, with 10.6% in the U.S. and 3.8% outside of the U.S. Excluding the net impact of acquisitions and divestitures, adjusted operational sales growth was 5.9% worldwide, 8.2% in the U.S. and 3.4% outside the U.S. Sales in Europe were negatively impacted by the COVID-19 vaccine and loss of exclusivity of ZYTIGA by approximately 1,000 basis points operationally. Net earnings for the full year 2023 were $13.3 billion and diluted earnings per share was $5.20 versus diluted earnings per share of $6.14 a year ago. Full year 2023 adjusted net earnings were $25.4 billion, and adjusted diluted earnings per share was $9.92, representing increases of 6.8% and 11.1%, respectively, versus full year 2022. On an operational basis, adjusted diluted earnings per share increased by 10.8%. I will now comment on business sales performance in the quarter. Beginning with Innovative Medicine. Worldwide Innovative Medicine sales of $13.7 billion increased 4% with growth of 9.5% in the U.S. and a decline of 3.1% outside of the U.S. Excluding COVID-19 vaccine sales, worldwide and U.S. sales growth was 9.5%, and growth outside of the U.S. was 9.4%. Sales outside the U.S., excluding the COVID-19 vaccine were negatively impacted by approximately 120 basis points due to the loss of exclusivity of ZYTIGA in Europe. Innovative Medicine growth was driven by our key brands and continued uptake from recently launched products, with nine assets delivering double-digit growth. We continue to drive strong sales growth for both DARZALEX and ERLEADA, with increases of 22.2% and 19%, respectively. Within immunology, we saw sales growth in both STELARA and TREMFYA, with increases of 14.5% and 20.5%, respectively. This growth was driven by market growth and share gains as well as favorable patient mix in TREMFYA. Growth of 17.4% in pulmonary hypertension was driven by favorable patient mix, share gains and market growth. Turning to newly launched products. We continue to make progress on our launches of CARVYKTI and SPRAVATO. We are also encouraged by the early success of our launches of TECVAYLI and TALVEY, sales of which are driving the growth in other Oncology. As a reminder, we expect to begin disclosing TECVAYLI sales in Q1 2024. Total Innovative Medicine sales growth was partially offset by unfavorable patient mix in XARELTO, a decrease in IMBRUVICA sales due to competitive pressures and a loss of exclusivity of ZYTIGA, REMICADE and PREZISTA. I'll now turn your attention to MedTech. Worldwide MedTech sales of $7.7 billion increased 13.4% with Abiomed contributing 4.5% to growth. Growth in the U.S. was 14.1% and 12.8% outside of the U.S. Excluding the impact of acquisitions and divestitures, worldwide adjusted operational sales growth was 9.1%. MedTech was negatively impacted by international sanctions in Russia worth approximately 50 basis points, primarily in Advanced Surgery and Vision. Electrophysiology delivered double-digit growth of 25.2% with strong growth in all regions, including Europe. This growth was driven by our global market leading portfolio, including the most recently launched QDOT RF ablation and OCTARAY catheters. Abiomed contributed $340 million in sales within the quarter driven by continued strong adoption of Impella 5.5 technology. Growth of 6.4% in surgery was driven primarily by procedure recovery and strength of our biosurgery and wound closure portfolios. Growth was partially offset by volume based procurement in China, primarily in Endocutters. Orthopaedics growth of 5% reflects procedure growth, success of recently launched products such as the global expansion of our VELYS digital solutions and expansion in ambulatory surgical centers, as well as lapping of prior year China\u2019s VBP price concessions in Spine. Growth of 6.6% in Vision was driven by price actions and contact lenses, as well as strength of new products including ACUVUE OASYS 1-Day family of products and contact lenses and TECNIS EYHANCE, our monofocal interocular lens and surgical vision. Growth of contact lenses was partially offset by U.S. stocking dynamics. Global Vision growth was negatively impacted by 140 basis points due to the Blink divestiture in Q3. Now turning to our consolidated statement of earnings for the fourth quarter of 2023. I'd like to highlight a few noteworthy items that have changed compared to the same quarter of last year. Cost of products sold margin deleveraged by 130 basis points due to commodity inflation and unfavorable product mix in MedTech, partially offset by favorable patient mix and lower COVID-19 vaccine supply network related exit cost in Innovative Medicine. We continue to invest strategically in research and development at competitive levels, investing $4.5 billion or 20.9% of sales this quarter. We invested $3.4 billion or 24.5% of sales in Innovative Medicine with the increase in investment being driven by higher milestones, partially offset by portfolio prioritization. In MedTech, R&D investment was $1.1 billion or 14.6% of sales with the increase in investment primarily driven by the Laminar acquisition. Interest income was $212 million in the fourth quarter of 2023 as compared to $77 million of income in the fourth quarter of 2022. The increase in income was driven by higher interest rates earned on cash balances and a lower average debt balance. The other income and expense line was income of $421 million in the fourth quarter of 2023 compared to an expense of $795 million in the fourth quarter of 2022. This was primarily driven by higher unrealized gains on securities and lower (ph) COVID-19 vaccine-related exit costs. Regarding taxes in the quarter, our effective tax rate was 14.4% versus 16% in the same period last year. This decrease was primarily driven by the net decrease of tax liabilities, including the settlement of the 2013 through 2016 U.S. tax audit. Excluding special items, the effective tax rate was 10.8% versus 16.2% in the same period last year. I encourage you to review our upcoming 2023 10-K filing for additional details on specific tax-related matters. Lastly, I will direct your attention to the box section of the slide, where we have also provided our income before tax, net earnings and earnings per share adjusted to exclude the impact of intangible amortization expense and special items. Now let's look at adjusted income before tax by segment. In the fourth quarter of 2023, our adjusted income before tax for the enterprise as a percentage of sales decreased from 32.5% to 29.2%. Innovative Medicine margins declined from 37.7% to 37.4%, primarily driven by higher R&D milestones, partially offset by favorable patient mix and leveraging and selling and marketing expense. MedTech margins declined from 24.5% to 15.5% primarily driven by in-process research and development expense from the Laminar acquisition, commodity inflation and unfavorable product mix, partially offset by selling and marketing expense leverage. This concludes the sale and earnings portion of the call. I'm now pleased to turn it over to Joe.","evidence_gemma_new":"MedTech sales","evidence_llama_3_3":"MedTech sales","evidence_qwen_3_30b":"worldwide MedTech sales Q4 2023","gemma_new_max":7700000000.0,"gemma_new_min":7700000000.0,"llama_3_3_max":7700000000.0,"llama_3_3_min":7700000000.0,"qwen_3_30b_max":7700000000.0,"qwen_3_30b_min":7700000000.0}
{"symbol":"JNJ","year":2024,"quarter":1,"date":"2024-Q1","chunk_id":1,"sub_chunk_id":0,"centroid_label":"worldwide medtech sales","agreed_value":7800000000.0,"count":3,"chunk":"Jessica Moore: Hello everyone. This is Jessica Moore, Vice President of Investor Relations for Johnson & Johnson. Welcome to our company's review of the first quarter business results and our full year financial outlook for 2024. A few logistics before we get into the details. As a reminder you can find additional materials including today\u2019s presentation and associated schedules on the Investor Relations section of the Johnson & Johnson website at investor.jnj.com. Please note that this presentation contains forward-looking statements regarding, among other things, the company's future operating and financial performance, market position and business strategy. You are cautioned not to rely on these forward-looking statements, which are based on the current expectations of future events using the information available as of the date of this recording, and are subject to certain risk and uncertainties that may cause the company's actual results to differ materially from those projected. A description of these risks, uncertainties and other factors can be found in our SEC filings, including our 2023 Form 10-K, which is available at investor.jnj.com and on the SECs website. Additionally, several of the products and compounds discussed today are being developed in collaboration with strategic partners or licensed from other companies. This slide acknowledges those relationships. Moving to today's agenda I will start by reviewing the first quarter sales and P&L results for the corporation as well as highlights related to our two businesses. Joe Wolk our CFO will then provide additional business and financial commentary before sharing an overview of our cash position, capital allocation priorities, and guidance for 2024. The remaining time will be available for your questions. Joaquin Duato our Chairman and CEO as well as Jennifer Taubert, John Reed, and Tim Schmid, our Innovative Medicine and MedTech leaders will be joining us for Q&A. To ensure we provide enough time to address your questions, we anticipate the webcast will last approximately 60 minutes. Unless otherwise stated the financial results and guidance highlighted today reflect the continuing operations of Johnson & Johnson. Furthermore, the percentages quoted represent operational results and therefore exclude the impact of currency translation. Turning to our first quarter sales results. Worldwide sales were $21.4 billion for the first quarter of 2024. Sales increased 3.9% with growth of 7.8% in the U.S. and a decline of 0.3% outside of the U.S. Excluding the impact of the COVID-19 vaccine, operational sales growth was 7.6% worldwide and 7.4% outside of the U.S. Sales growth in Europe excluding the COVID-19 vaccine was 6%. Turning now to earnings. For the quarter net earnings were $5.4 billion and diluted earnings per share was $2.20 versus basic loss per share of $0.19 a year ago. Excluding after tax intangible asset amortization expense and special items for both periods, adjusted net earnings for the quarter were $6.6 billion, and adjusted diluted earnings per share was $2.71, representing increases of 3.8% and 12.4%, respectively compared to the first quarter of 2023. On an operational basis, adjusted diluted earnings per share increased 12.8%. I will now comment on business sales performance in the quarter. Beginning with Innovative Medicine, worldwide Innovative Medicine sales of $13.6 billion increased 2.5%, with growth of 8.4% in the U.S. and a decline of 4% outside of the U.S. Excluding the impact of the COVID-19 vaccine, operational sales growth was 8.3%, both worldwide and outside of the U.S. Innovative Medicine growth was driven by our key brands and continued uptake from recently launched products, with nine assets delivering double-digit growth. We continued to drive strong sales growth across our multiple myeloma portfolio. DARZALEX growth was 21%, primarily driven by share gains of six points across all lines of therapy and ten points in the front line setting. As of this quarter, we are now disclosing TECVAYLI sales, which were previously reported in other oncology. Sales achieved $133 million in the quarter, compared to $63 million in the first quarter of last year, reflecting a strong launch in the relapsed refractory setting. CARVYKTI achieved sales of $157 million, compared to $72 million in the first quarter of last year, driven by continued capacity expansion, manufacturing efficiencies, and strong demand. While sequential growth was roughly flat due to phasing, we continued to anticipate quarter-over-quarter growth with acceleration in the back half of the year. Other oncology growth was driven by continuing strong uptake of TALVEY, our GPRC5D bispecific, and RYBREVANT our bispecific antibody for non-small cell lung cancer. Also in oncology, ERLEADA continues to deliver strong growth of 28.4%, primarily driven by share gains. Growth of 22.4% in pulmonary hypertension was driven by favorable patient mix, share gains, and market growth for both OPSUMIT and UPTRAVI. As a reminder, favorable patient mix was a driver in Q2 2023 through Q1 2024. Therefore, while we still anticipate growth, we expect to lap this dynamic beginning in Q2 2024. Within immunology, we saw sales growth in TREMFYA of 27.6%, driven by market growth and share gains. STELARA growth of 1.1% was driven by market growth and share gains in IBD, partially offset by unfavorable patient mix in the U.S. and as expected, share loss in PSO and PSA. We anticipate continued volume growth largely offset by price declines as we move towards biosimilar entry. In neuroscience SPRAVATO growth of 72% continues to be driven by share gains and additional market launches. Total Innovative Medicine sales growth was partially offset by unfavorable patient mix in XARELTO, which we anticipate continuing throughout the year, as well as a decrease in IMBRUVICA due to competitive pressures, partially offset by stocking dynamics in the U.S. Finally, it is worth noting distribution rights for REMICADE and SIMPONI in Europe will be returned in Q4. I'll now turn your attention to MedTech. Worldwide Med1ech sales of $7.8 billion increased 6.3%, with growth in the U.S. of 6.6% and 6.1% outside of the U.S. In the quarter, worldwide MedTech growth was negatively impacted by approximately 80 basis points due to fewer selling days, disproportionately impacting orthopedics. In cardiovascular previously referred to as Interventional Solutions, electrophysiology delivered double-digit growth of 25.9%, with strong growth in all regions. Performance was driven by global procedure growth, new product uptake, commercial execution, and a onetime inventory build in Asia-Pacific, impacting worldwide growth by approximately 370 basis points. In addition, Abiomed delivered growth of 15%, driven by continued strong adoption of Impella 5.5 and Impella RP technology. Orthopedics growth of 4.8% includes a onetime revenue recognition timing change related to certain products across all platforms in the U.S. positively impacting worldwide growth by approximately 300 basis points. As a reminder, orthopedics was over indexed by the impact of reduced selling days in the quarter. Strong performance in hips and knees was driven by procedure recovery, growth of new products, and commercial execution. While trauma and spine were negatively impacted by competitive pressures and core trauma was further impacted by weather related softness in the U.S. Growth of 1.9% in surgery was driven primarily by procedure recovery and strength of our bio surgery and wound closure portfolios, partially offset by competitive pressures in China volume based procurement and energy and endo cutters. Contact lenses declined 2.3%, driven by U.S. stocking dynamics, partially offset by strong performance in ACUVUE OASYS 1-day family of products. Worldwide growth was negatively impacted by 120 basis points due to the Blink divestiture in Q3 2023. Surgical Vision grew 1.1%, driven by CNIS EYHANCE, a monofocal intraocular lens partially offset by China's VBP. Now turning to our consolidated statement of earnings for the first quarter of 2024. I'd like to highlight a few noteworthy items that have changed compared to the same quarter of last year. Cost of product sold margin leveraged by 160 basis points, primarily driven by lower COVID-19 supply network related exit cost. Selling, marketing, and administrative margins deleveraged 110 basis points, driven primarily by timing of marketing investment in the Innovative Medicine business. We continued to invest strategically in research and development at competitive levels investing $3.5 billion, or 16.6% of sales this quarter. We invested $2.9 billion, or 21.4% of sales in Innovative Medicine, with the increase in investment being driven by continued pipeline progression. In MedTech, R&D investment was $0.6 billion, or 8.3% of sales, a slight decrease driven by phasing. Interest income was $209 million in the first quarter of 2024, as compared to $14 million of expense in the first quarter of 2023. The increase in income was driven by a lower average debt balance and higher interest rates earned on cash balances. Other income and expense was income of $322 million in the first quarter of 2024, compared to an expense of $6.9 billion in the first quarter of 2023. This change was primarily due to the $6.9 billion charge related to the talc settlement proposal recorded in the first quarter of 2023. Regarding taxes in the quarter, our effective tax rate was 16.9% versus 61.8% in the same period last year, which was primarily driven by the tax benefit on the talc settlement proposal recorded in the first quarter of 2023. Excluding special items, the effective tax rate was 16.5% versus 15.9% in the same period last year. I encourage you to review our upcoming first quarter 10-Q filing for additional details on specific tax related matters. Lastly, I'll direct your attention to the box section of the slide, where we have also provided our income before tax, net earnings, and earnings per share adjusted to exclude the impact of intangible amortization expense and special items. Now let's look at adjusted income before tax by segment. In the first quarter of 2024 our adjusted income before tax for the enterprise, as a percentage of sales increased from 36.1% to 36.8%, primarily driven by an increase in non-allocated interest income with both Innovative Medicine and MedTech margins remaining relatively flat year-over-year. When comparing against the fourth quarter and full year 2023, Innovative Medicine and MedTech adjusted income before tax margins have improved. This concludes the sales and earnings portion of the call. I am now pleased to turn it over to Joe.","evidence_gemma_new":"MedTech sales","evidence_llama_3_3":"MedTech sales first quarter of 2024","evidence_qwen_3_30b":"MedTech worldwide MedTech sales 6.3%","gemma_new_max":7800000000.0,"gemma_new_min":7800000000.0,"llama_3_3_max":7800000000.0,"llama_3_3_min":7800000000.0,"qwen_3_30b_max":7800000000.0,"qwen_3_30b_min":7800000000.0}
{"symbol":"JNJ","year":2024,"quarter":2,"date":"2024-Q2","chunk_id":1,"sub_chunk_id":0,"centroid_label":"worldwide medtech sales","agreed_value":8000000000.0,"count":2,"chunk":"Jessica Moore: Hello, everyone. This is Jessica Moore, Vice President of Investor Relations for Johnson & Johnson. Welcome to our company's review of the second quarter business results and our full-year financial outlook for 2024. A few logistics before we get into the details. As a reminder you can find additional materials including today\u2019s presentation and associated schedules on the investor relations section of the Johnson & Johnson website at investor.jnj.com. Please note that this presentation contains forward-looking statements regarding among other things, the company\u2019s future operating and financial performance, market position, and business strategy. You are cautioned not to rely on these forward-looking statements, which are based on the current expectations of future events using the information available as of the date of this recording and are subject to certain risk and uncertainties that may cause the company's actual results to differ materially from those projected. A description of these risks, uncertainties, and other factors can be found in our SEC filings, including our 2023 Form 10-K, which is available at investor.jnj.com and on the SEC's website. Additionally, several of the products and compounds discussed today are being developed in collaboration with strategic partners or licensed from other companies. This slide acknowledges those relationships. Moving to today's agenda, I will start by reviewing the second quarter sales and P&L results for the corporation, as well as highlights related to our two businesses. Joe Wolk, our CFO, will then provide additional business and financial commentary before sharing an overview of our cash position, capital allocation priorities, and guidance for 2024. Joaquin Duato, our Chairman and CEO, will then provide some closing remarks before we open it up for questions. Jennifer Taubert, John Reed, and Tim Schmid, our innovative medicine and MedTech leaders will be joining us for Q&A. To ensure we provide enough time to address your questions, we anticipate the webcast will last approximately 60 minutes. Unless otherwise stated, the financial results and guidance highlighted today reflect the continuing operations of Johnson & Johnson. Furthermore, the percentages quoted represent operational results and therefore exclude the impact of currency translation. Turning to our second quarter sales results. Worldwide sales were $22.4 billion for the second quarter of 2024. Sales increased 6.6%, with growth of 7.8% in the U.S. and 5.1% outside of the U.S. Excluding the impact of the COVID-19 vaccine, sales growth was 7.2% worldwide and growth of 6.4% outside of the U.S. Sales growth in Europe, excluding the COVID-19 vaccine was 6%. Turning now to earnings. For the quarter, net earnings were $4.7 billion and diluted earnings per share was $1.93 versus diluted earnings per share of $2.05 a year ago. Excluding after-tax intangible asset amortization expense and special items for both periods, adjusted net earnings for the quarter were $6.8 billion and adjusted diluted earnings per share was $2.82, representing increases of 1.6% and 10.2%, respectively, compared to the second quarter of 2023. I'll now comment on business sales performance in the quarter. Beginning with Innovative Medicine, worldwide Innovative Medicine sales of $14.5 billion increased 7.8%, with growth of 8.9% in the U.S. and 6.4% outside of the U.S. Excluding the impact of the COVID-19 vaccine, operational sales growth was 8.8% worldwide and 8.7% outside of the U.S. Innovative Medicine growth was driven by our key brands and continued uptake from recently launched products with 10 assets delivering double-digit growth. We continue to drive strong sales growth across our multiple myeloma portfolio. DARZALEX growth was 21.3%, primarily driven by share gains of 4.6 points across all lines of therapy and 9.4 points in the frontline setting, as well as market growth. CARVYKTI achieved sales of $186 million, with growth of 59.9%, driven by continued capacity expansion, manufacturing efficiencies, and strong demand. TECVAYLI sales achieved $135 million in the quarter, with growth of 43.5%, reflecting a strong launch in the relapsed-refractory setting. Demand remained strong while sequential growth slowed due to adoption of recently approved longer-duration dosing intervals. ERLEADA continues to deliver strong growth of 32.5%, primarily driven by share gains and market growth in metastatic castrate-sensitive prostate cancer. Other oncology growth was driven by continued strong uptake of TALVEY, our GPRC5D bispecific, and RYBREVANT, our bispecific antibody for non-small cell lung cancer. Within immunology, we saw sales growth in TREMFYA of 30.7%, driven by market growth, share gains in PSO and PSA, and favorable patient mix. STELARA growth of 4.9% was driven by market growth, partially offset by net unfavorable patient mix. We continue to anticipate biosimilar entry in Europe later this month, while in the U.S., we expect continued volume growth largely offset by price declines as we move towards biosimilar entry in 2025. In neuroscience, SPRAVATO growth of 60.8% continues to be driven by increased physician and patient confidence. In pulmonary hypertension, OPSUMIT grew 9.1% due to share gains and market growth, partially offset by unfavorable mix. UPTRAVI growth of 8.1% was driven by market growth and share gains, partially offset by inventory dynamics. Total Innovative Medicine sales growth was partially offset by a decline in other neuroscience, unfavorable patient mix in Xarelto and competitive pressures in IMBRUVICA. I'll now turn your attention to MedTech. Worldwide MedTech sales of $8 billion increased 4.4%, with growth in the U.S. of 5.7% and 3.2% outside of the U.S. Acquisitions and divestitures had a positive impact of 40 basis points on sales growth in the quarter. Growth was driven by commercial execution, strength of new product introductions, and continued strong procedure volume, partially offset by performance in China and competitive pressures in US distributor stocking dynamics and vision. In cardiovascular, electrophysiology delivered a double-digit growth of 13.4% with strong growth across all regions. The performance was driven by global procedure growth, new product uptake, and commercial execution, partially offset by the previous one-time inventory build in Asia-Pacific from the prior quarter. In addition, Abiomed delivered growth of 15.4%, driven by double-digit growth in all regions and continued strong adoption of Impella 5.5 and Impella RP technology. Results include $77 million associated with the acquisition of Shockwave, which closed on May 31. Contact lenses adjusted operational sales growth, excluding the Blink divestiture was 2.1%. Growth was driven by strong performance in the ACUVUE OASYS 1-Day family of products, partially offset by U.S. distributor stocking dynamics and competitive pressures, and Japan macroeconomic pressures. The Blink divestiture negatively impacted growth by approximately 130 basis points. Surgical vision grew 1.2%, driven by TECNIS Eyhance, our monofocal interocular lens, partially offset by China VBP and refractive softness in the U.S. Surgery adjusted operational sales growth, excluding the Acclarent divestiture was approximately flat. Performance was driven primarily by competitive pressures in energy and endocutters, China VBP, prior year China recovery, EMEA tender timing across advanced surgery and supply constraints, and wound closure. This was partially offset by strength of new products. The Acclarent divestiture negatively impacted growth by approximately 110 basis points. Orthopedics growth of 3.3% was driven by strong performance in hips and knees, due to procedure growth, strength of new products, and EMEA tender timing in knees. This growth was partially offset by competitive pressures and impacts of China VBP in spine and sports. Now, turning to our consolidated statement of earnings for the second quarter of 2024. I'd like to highlight a few noteworthy items that have changed, compared to the same quarter of last year. Cost of product sold margin deleveraged by 60 basis points, primarily driven by product mix within innovative medicine and macroeconomic factors across both sectors. We continue to invest strategically in research and development at competitive levels, investing $3.4 billion or 15.3% of sales this quarter. We invested $2.7 billion or 18.8% of sales in innovative medicine, compared to 22.2% of sales in 2023. As a reminder, last year included an upfront payment of $245 million associated with the AbelZeta partnership. In MedTech, R&D investment was $0.7 billion or 9% of sales, an increase driven by continued investment in strategic platforms. Other income and expense was a net expense of $653 million in the second quarter of 2024, compared to income of $384 million in the second quarter of 2023. The increase in expense was primarily driven by costs related to the closing of the Shockwave acquisition, the loss on the completion of the debt for equity exchange of the retained stake in Kenvue and prior year favorable intellectual property litigation settlements in MedTech. This was partially offset by the gain on the Acclarent divestiture. Regarding taxes in the quarter, our effective tax rate was 18.5% versus 14.7% in the same period last year. This increase was primarily driven by unfavorable one-time international audit settlements and the continued impact from Pillar 2. Excluding special items, the effective tax rate was 18.6% versus 15.9% in the same period last year. I encourage you to review our upcoming second-quarter 10-Q filing for additional details on specific tax-related matters. Lastly, I'll direct your attention to the box section of the slide, where we have also provided our income before tax, net earnings, and earnings per share adjusted to exclude the impact of intangible amortization expense and special items. Now let's look at adjusted income before tax by segment. In the second quarter of 2024, our adjusted income before tax for the enterprise as a percentage of sales increased from 37.2% to 37.4%. Innovative Medicine margin improved from 42.3% to 44.6%, primarily driven by an upfront payment of $245 million associated with the AbelZeta partnership in 2023, partially offset by product mix and cost of products sold. MedTech margin declined from 28.2% to 25.7%, driven by prior year favorable intellectual property litigation settlements worth approximately 300 basis points. This concludes the sales and earnings portion of the call. I'm now pleased to turn it over to Joe.","evidence_gemma_new":"MedTech sales","evidence_llama_3_3":"MedTech sales second quarter of 2024","evidence_qwen_3_30b":null,"gemma_new_max":8000000000.0,"gemma_new_min":8000000000.0,"llama_3_3_max":8000000000.0,"llama_3_3_min":8000000000.0,"qwen_3_30b_max":null,"qwen_3_30b_min":null}
{"symbol":"JNJ","year":2023,"quarter":1,"date":"2023-Q1","chunk_id":1,"sub_chunk_id":0,"centroid_label":"worldwide sales","agreed_value":24700000000.0,"count":2,"chunk":"Jessica Moore: Good morning. This is Jessica Moore, Vice President of Investor Relations for Johnson & Johnson. Welcome to our company's review of the 2023 first quarter business results and full year financial outlook. Joining me on today's call are Joe Wolk, Executive Vice President, Chief Financial Officer; and Ashley McEvoy, Executive Vice President, Worldwide Chairman of MedTech. Unfortunately, Jennifer Taubert, Executive Vice President, Worldwide Chairman of Pharmaceuticals is not feeling well and is unable to join us today. A few logistics before we get into the details. As a reminder, you can find additional materials, including today's presentation and associated schedules on the Investor Relations section of the Johnson & Johnson website at investor.jnj.com. Please note that today's meeting contains forward-looking statements regarding, among other things, the company's future operating and financial performance, product development, market position and business strategy and the anticipated separation of the company's Consumer Health business. You are cautioned not to rely on these forward-looking statements, which are based on current expectations of future events using the information available as of today's date and are subject to certain risks and uncertainties that may cause the company's actual results to differ materially from those projected. A description of these risks, uncertainties and other factors can be found in our SEC filings, including our 2022 Form 10-K, which is available at investor.jnj.com and on the SEC's website. Additionally, several of the products and compounds discussed today are being developed in collaboration with strategic partners or licensed from other companies. This slide acknowledges those relationships. Moving to today's agenda, I will review the first quarter sales and P&L results for the corporation and highlights related to the three segments. Joe will then provide additional business and financial commentary before sharing an overview of our cash position, capital allocation priorities and updated guidance for 2023. The remaining time will be available for your questions. We anticipate the webcast will last approximately 60 minutes. Now let's turn to our first quarter results. Worldwide sales were $24.7 billion for the first quarter of 2023, an increase of 5.6% versus the first quarter of 2022. Operational sales, which excludes the effect of translational currency, increased 9% as currency had a negative impact of 3.4 points. In the U.S., sales increased 9.7%. In regions outside the U.S., our reported sales increased 1.8%. Operational sales outside the U.S. increased 8.3% with currency negatively impacting our reported OUS results by 6.5 points. Excluding the net impact of acquisitions and divestitures, adjusted operational sales growth was 7.6% worldwide, 7.4% in the U.S. and 7.9% outside the U.S. with all three segments growing sequentially over the fourth quarter. Turning now to earnings. For the quarter, net loss was $68 million and basic loss per share was $0.03 versus diluted earnings per share of $1.93 one-year ago primarily driven by the $6.9 billion charge related to the Talc Settlement proposal. Excluding after-tax intangible asset amortization expense and special items for both periods, adjusted net earnings for the quarter were $7.1 billion, and adjusted diluted earnings per share was $2.68, representing a decrease of 0.9% and an increase of 0.4%, respectively, compared to the first quarter of 2022. On an operational basis, adjusted diluted earnings per share increased 3%. I will now comment on business segment sales performance highlights for the quarter. Unless otherwise stated, percentages quoted represent the operational sales change in comparison to the first quarter of 2022 and therefore, exclude the impact currency translation. Beginning with Consumer Health. Worldwide Consumer Health sales of $3.9 billion increased 7.4% with an increase of 11.4% in the U.S. and an increase of 4.4% outside the U.S. Worldwide operational sales increased 11.3% and outside the U.S., operational sales increased 11.3%. Results were primarily driven by global strategic price increases across all franchises. Volume growth in OTC was due to an exceptionally strong cough, cold and flu season most pronounced in Europe, coupled with one-time retailer restocking primarily in the U.S. related to low inventory levels due to tripledemic demand. Skin Health\/Beauty delivered double-digit growth driven by price actions, lapping prior year supply constraints and current quarter restocking as well as strong NEUTROGENA and AVEENO e-commerce and club channel performance and new product innovations. Moving on to our Pharmaceutical segment. Worldwide Pharmaceutical sales of $13.4 billion increased 4.2% with growth of 5.9% in the U.S. and 2.4% outside of the U.S. Worldwide operational sales increased 7.2% and outside the U.S., operational sales increased 8.6%. Excluding the COVID-19 vaccine sales, worldwide operational sales increased 4.9%, U.S. operational sales increased 7.1%, and outside the U.S., operational sales increased 2.4%. Pharmaceutical growth excluding the COVID-19 vaccine was driven by our key brands and continued uptake in our recently launched products with eight assets delivering double-digit growth. We continue to drive strong sales growth for both DARZALEX and ERLEADA with increases of 25.7% and 40.3%, respectively. STELARA grew 9.6% driven by market growth and share gains in Crohn's disease and ulcerative colitis, with gains of 2.2 points and 4.8 points in the U.S., respectively, partially offset by unfavorable patient mix and price. TREMFYA grew 11% driven by market growth and share gains in psoriasis and psoriatic arthritis, with gains of 0.9 points and 2.1 points in the U.S., respectively, partially offset by unfavorable patient mix. Turning to newly launched products. We are excited to disclose CARVYKTI and SPRAVATO sales for the first-time this quarter. We continue to make progress on our thoughtful and phased launch of CARVYKTI and continue to expand access and reimbursement for SPRAVATO. Also, we are encouraged by the early success of our launch of TECVAYLI, sales of which are included in other oncology. This sales growth was partially offset by the loss of exclusivity in REMICADE and ZYTIGA, along with a decrease in IMBRUVICA sales due to competitive pressures. IMBRUVICA maintains its market leadership position worldwide. I'll now turn your attention to the MedTech segment. Worldwide MedTech sales of $7.5 billion increased by 7.3% with growth of 16.6% in the U.S. and a decline of 0.6% outside of the U.S. Worldwide operational sales increased 11% and outside the U.S., operational sales increased 6.2%. Abiomed contributed 4.6% to operational growth. Excluding the impact of acquisition and divestitures, worldwide adjusted operational sales growth was 6.4%. Sales in the first quarter accelerated sequentially from Q4 for all four MedTech businesses, driven by global procedure growth, continued uptake of recently launched products, and commercial execution. As anticipated, in China, procedure volumes improved as the quarter progressed. Partially offsetting growth in the quarter was the impact of volume-based procurement in China as well as supply constraints. The Interventional Solutions franchise delivered operational growth of 41.9%, which includes $324 million related to Abiomed. We are excited about the progress of the integration to which Joe will provide additional context. Excluding the impact of the acquisition, this franchise delivered another quarter of double-digit worldwide growth at 12.3%. As we continue to increase our reporting transparency, beginning this quarter, we are providing visibility to electrophysiology sales. Electrophysiology continued to deliver double-digit sales growth in all regions with the exception of Asia-Pacific, which reflects impacts related to volume-based procurement in China. Orthopaedics operational growth of 5.1% reflects the strong procedure recovery and success of recently launched products especially digital and enabling technologies driving pull-through sales in areas like hips and knees. Growth was partially offset by the impact of volume based procurement in China, primarily in hips and spine. Global growth of 9.3% in contact lens and other reflects continued penetration of our ACUVUE OASYS 1-Day family of products, including the recent launch of ACUVUE OASYS MAX 1-Day, strong commercial execution and strategic price actions. Growth in contact lens and U.S. surgical vision was tempered by continued supply challenges. Now turning to our consolidated statement of earnings for the first quarter of 2023. I'd like to highlight a few noteworthy items that have changed compared to the same quarter of last year. Cost of products sold deleveraged by 150 basis points driven by one-time COVID-19 vaccine manufacturing exit related costs in the Pharmaceutical business and commodity inflation and acquisition-related items in the MedTech business. Selling, marketing and administrative margins leveraged by 60 basis points driven by proactive management of costs given the current inflationary environment. We continue to invest strategically in research and development at competitive levels, investing 14.4% of sales this quarter. The $3.6 billion invested was a 2.9% increase versus the prior year. The other income and expense line was an expense of $7.2 billion in the first quarter of 2023 compared to net income of $100 million in the first quarter of 2022. The increase in expense was the result of the $6.9 billion charge related to the Talc Settlement proposal recorded in the first quarter of 2023 as previously disclosed. Regarding taxes in the quarter, our effective tax rate was 90.8% versus 12.2% in the same period last year, primarily driven by the $6.9 billion accrual for the Talc Settlement proposal. Excluding special items, the effective tax rate was 16.5% versus 13.3% in the same period last year. I encourage you to review our upcoming first quarter 10-Q filing for additional details on specific tax matters. Lastly, I'll direct your attention to the box section of the slide, where we have also provided our income before tax, net earnings and earnings per share adjusted to exclude the impact of intangible amortization expense and special items. Now let's look at the adjusted income before tax by segment. In the first quarter of 2023, our adjusted income before tax for the enterprise as a percentage of sales decreased from 35.1% to 34.2%. Pharmaceutical margins declined from 44.1% to 43.2% driven primarily by mix, partially offset by proactive management of costs. MedTech margins remained flat at 27% driven primarily by inflationary impacts, offset by proactive management of costs. Finally, Consumer Health margins improved from 22.1% to 22.3% driven primarily by strategic price actions, partially offset by input cost inflation. This concludes the sales and earnings portion of the Johnson & Johnson first quarter 2023 results. I am now pleased to turn the call over to Joe Wolk. Joe?","evidence_gemma_new":"Worldwide sales first quarter of 2023","evidence_llama_3_3":null,"evidence_qwen_3_30b":"Worldwide sales 2023 first quarter","gemma_new_max":24700000000.0,"gemma_new_min":24700000000.0,"llama_3_3_max":null,"llama_3_3_min":null,"qwen_3_30b_max":24700000000.0,"qwen_3_30b_min":24700000000.0}
{"symbol":"JNJ","year":2023,"quarter":3,"date":"2023-Q3","chunk_id":1,"sub_chunk_id":0,"centroid_label":"worldwide sales","agreed_value":21400000000.0,"count":2,"chunk":"Jessica Moore: Good morning. This is Jessica Moore, Vice President of Investor Relations for Johnson & Johnson. Welcome to our company's review of the 2023 third quarter business results and full-year financial outlook. A few logistics before we get into the details. As a reminder, you can find additional materials, including today's presentation and associated schedules, on the Investor Relations section of the Johnson & Johnson website at investor.jnj.com. Please note that this presentation contains forward-looking statements regarding, among other things, the company's future operating and financial performance, market position and business strategy. You are cautioned not to rely on these forward-looking statements, which are based on current expectations of future events using the information available as of the date of this recording and are subject to certain risk and uncertainties that may cause the company's actual results to differ materially from those projected. A description of these risks, uncertainties and other factors can be found in our SEC filings, including our 2022 Form 10-K, which is available at investor.jnj.com and on the SECs website. Additionally, several of the products and compounds discussed today are being developed in collaboration with strategic partners or licensed from other companies. This slide acknowledges those relationships. Moving to today's agenda. I will start by reviewing the third quarter sales and P&L results for the corporation and highlights related to our two businesses. Joe Wolk, our CFO will then provide additional business and financial commentary before sharing an overview of our cash position, capital allocation priorities, and updated guidance for 2023. The remaining time will be available for your questions. Joaquin Duato, our chairman and CEO; John Reed, and Ahmet Tezel, our Innovative Medicine and MedTech R&D leaders, as well as Erik Haas, our VP of Litigation, will be joining us for Q&A. To ensure we provide enough time to address your questions, we anticipate the webcast will last approximately 60 minutes. As a reminder, on August 23, 2023, Johnson & Johnson announced the final results of the exchange offer and completion of the separation of Kenvue Inc. Unless otherwise stated, the financial results and guidance highlighted today reflect the continuing operations of Johnson & Johnson. We will report the consumer health financial results as discontinued operations. Additionally, going forward, the pharmaceutical segment will be referred to as innovative medicine. Starting with Q3 2023 sales results. Worldwide sales were $21.4 billion for the third quarter of 2023, an increase of 6.8% versus the third quarter of 2022. Operational sales growth, which excludes the effect of translational currency, increased 6.4% as currency had a positive impact of 0.4 points. In the U.S., sales increased 11.1%. In regions outside the U.S., our reported growth was 1.6%. Operational sales growth outside the U.S. was 0.7% with currency positively impacting our reported OUS results by 0.9 points. It is important to note that operational sales in Europe were negatively impacted by the COVID-19 vaccine and loss of exclusivity of ZYTIGA. Excluding the net impact of acquisition and divestitures, adjusted operational sales growth was 4.9% worldwide, 8.9% in the U.S., and 0.3% outside the U.S. Turning now to earnings. For the quarter, net earnings were $4.3 billion and diluted earnings per share was $1.69 versus diluted earnings per share of $1.62 a year ago. Excluding after-tax and tangible asset amortization expense and special items for both periods, adjusted net earnings for the quarter were $6.8 billion and adjusted diluted earnings per share was $2.66, representing increases of 14.1% and 19.3% respectively, compared to the third quarter of 2022. On an operational basis, adjusted diluted earnings per share increased 13.9%. I will now comment on business sales performance. Unless otherwise stated percentages quoted represent the operational sales change in comparison to the third quarter of 2022 and therefore exclude the impact of currency translation. Beginning with innovative medicine. Worldwide innovative medicine sales of $13.9 billion, increased 5.1% with growth of 10.9% in the U.S. and a decline of 2.3% outside of the U.S. Operational sales growth increased 4.3% as currency had a positive impact of 0.8 points. Excluding COVID-19 vaccine sales, worldwide operational sales growth was 8.2%, with growth of 10.9% in the U.S. and growth of 4.3% outside of the U.S. Sales outside the U.S., excluding the COVID-19 vaccine, were negatively impacted by approximately 500 basis points, due to the loss of exclusivity of ZYTIGA in Europe. Innovative medicine growth was driven by our key brands and continued uptake from a recently launched products with 11 assets delivering double-digit growth. We continue to drive strong sales growth for both DARZALEX and ERLEADA with increases of 20.7% and 27% respectively, due to continued share gains and market growth. Within immunology, we saw growth in STELARA and TREMFYA, with increases of 15.8% and 21.5% respectively. This growth was predominantly driven by favorable patient mix and market growth. Turning to newly launched products, we continue to make progress on our launches of CARVYKTI and SPRAVATO. We are also encouraged by the early success of our launches of TECVAYLI and TALVEY, sales of which are driving the growth and other oncology. We expect to begin disclosing TECVAYLI sales in Q1 2024. Total innovative medicine sales growth was partially offset by the loss of exclusivity of ZYTIGA and REMICADE, along with a decrease in IMBRUVICA sales, due to competitive pressures. I'll now turn your attention to MedTech. Worldwide MedTech sales of $7.5 billion increased 10% with growth of 11.6% in the U.S., and 8.3% outside of the U.S. Operational sales growth increased 10.4% as currency had a negative impact of 0.4 points. Abiomed contributed 4.6% to operational growth, excluding the impact of acquisition and divestitures, worldwide adjusted operational sales growth was 6%. On a pro forma basis, utilizing sales in the prior year from Abiomed as a standalone company, MedTech's growth for the quarter would be 6.4%. MedTech was negatively impacted across all platforms by international sanctions in Russia worth approximately 60 basis points in volume-based procurement in China, primarily in five MedTech platforms: Spine, Trauma, Endocutters, Energy, and Electrophysiology. As communicated last quarter, we saw the return to more normalized seasonality with moderate deceleration in the third quarter. The Interventional Solutions franchise delivered operational growth of 48.1%, which includes $311 million related to Abiomed. This reflects growth in Abiomed patient procedures in the high-teens and continued strong adoption of Impella 5.5 technology in surgery. Electrophysiology is a major contributor to this growth with a double-digit increase of 20.3%. This reflects strong growth in all regions, including Europe, driven by our global market leading portfolio, including the most recently launched QDOT RF ablation and OPTRELL Mapping Catheters. Operational growth of 3.2% in surgery was driven primarily by procedure recovery and strength of our biosurgery and wound closure portfolios. Growth was partially offset by the impacts of volume-based procurement in China and supply challenges. Global growth of 5.4% in vision was driven by price actions and contact lenses and other, as well as strength of new products including ACUVUE OASYS 1-Day family of products and contact lenses and TECNIS Eyhance, our monofocal interocular lens and surgical vision. Growth of contact lenses was partially offset by strategic portfolio choices and supply challenges, although these continue to improve. Global vision growth was negatively impacted by 100 basis points, due to the Blink divestiture. Orthopedics operational growth of 2.6% reflects procedure growth, success of recently launched products, such as the global expansion of our VELYS digital solutions, and expansion in ambulatory surgical centers, partially offset by the impacts of volume-based procurement in China in Spine and Trauma. Now turning to our consolidated statement of earnings for the third quarter of 2023, I'd like to highlight a few noteworthy items that have changed, compared to the same quarter of last year. Cost of product sold margin was flat due to favorable patient mix and lower COVID-19 vaccine supply network related exit costs in the innovative medicine business, partially offset by commodity inflation, unfavorable product mix, and restructuring related to excess inventory costs in the MedTech business. Selling, marketing, and administrative margins deleveraged 40 basis points, driven by increased expenses across the enterprise. We continue to invest strategically in research and development at competitive levels, investing $3.4 billion or 16.2% of sales this quarter. R&D was leveraged by 120 basis points, primarily driven by portfolio prioritization, partially offset by higher milestone payments in the innovative medicine business. Additionally, IPR&D impairments were $206 million in the third quarter of 2023. Interest income was $182 million in the third quarter of 2023, as compared to $99 million of income in the third quarter of 2022. The increase in income was driven by higher interest rates earned on cash balances, partially offset by higher interest rates on debt balances. The other income and expense line was an expense of $499 million in the third quarter of 2023, compared to an expense of $226 million in the third quarter of 2022. This was primarily driven by higher unrealized mark-to-market losses on public securities partially offset by the lower COVID-19 vaccine-related exit costs and lower litigation expense. Restructuring in the third quarter was $158 million, primarily related to the innovative medicine restructuring program announced in the first quarter. Regarding taxes in the quarter, our effective tax rate was 17.4% versus 16.7% in the same period last year. This increase was primarily driven by a non-deductible, non-recurring pre-tax charge that occurred in the current quarter. Excluding special items, the effective tax rate was 15.6% versus 15.9% in the same period last year. As a result of the completion of the exchange offer, Johnson & Johnson is presenting the consumer health business financial results as discontinuing operations, including a gain of approximately $21 billion. I encourage you to review our upcoming third quarter 10-Q filing for additional details on specific tax and separation-related matters. Lastly, I'll direct your attention to the box section of the slide where we have also provided our income before tax, net earnings, and earnings per share adjusted to exclude the impact of intangible amortization expense and special items. Now let's look at adjusted income before tax by segment. In the third quarter of 2023, our adjusted income before tax for the enterprise as a percentage of sales increased from 35.3% to 37.6%, primarily driven by favorable patient mix and innovative medicine, partially offset by unfavorable product mix and commodity inflation in MedTech. Innovative medicine margins improved from 41.4% to 45.4%, primarily driven by favorable patient mix and R&D portfolio prioritization. MedTech margins declined from 25% to 24.7%, primarily driven by commodity inflation and unfavorable product mix partially offset by a divestiture gain. This concludes the sales and earnings portion of the Johnson & Johnson third quarter results. I'm now pleased to turn the call over to Joe Wolk. Joe?","evidence_gemma_new":"Worldwide sales third quarter of 2023","evidence_llama_3_3":null,"evidence_qwen_3_30b":"worldwide sales 2023 third quarter","gemma_new_max":21400000000.0,"gemma_new_min":21400000000.0,"llama_3_3_max":null,"llama_3_3_min":null,"qwen_3_30b_max":21400000000.0,"qwen_3_30b_min":21400000000.0}
{"symbol":"JNJ","year":2024,"quarter":3,"date":"2024-Q3","chunk_id":3,"sub_chunk_id":0,"centroid_label":"worldwide sales","agreed_value":22500000000.0,"count":2,"chunk":"Jessica Moore: Thank you, Joaquin. Moving to our financial results for the quarter. Unless otherwise stated, the financial results and guidance highlighted today reflect the continuing operations of Johnson & Johnson. Furthermore, the percentages quoted represent operational results and, therefore, exclude the impact of currency translation. Worldwide sales were $22.5 billion for the third quarter of 2024. Sales increased 6.3%, with growth of 7.6% in the U.S. and 4.6% outside of the U.S. Acquisitions and divestitures positively impacted worldwide growth by 90 basis points. Turning now to earnings. For the quarter, net earnings were $2.7 billion and diluted earnings per share was $1.11 versus diluted earnings per share of $1.69 a year ago. Results in the quarter were impacted by the updated talc litigation settlement proposal, as well as acquired IPR&D expense associated with the NM26 bispecific antibody. Excluding after-tax intangible asset amortization expense and special items for both periods, adjusted net earnings for the quarter were $5.9 billion and adjusted diluted earnings per share was $2.42, representing decreases of 13.3% and 9%, respectively, compared to the third quarter of 2023. Results were impacted by the acquired IPR&D expense of $1.25 billion or approximately 1,900 basis points associated with the NM26 bispecific antibody. I will now comment on business sales performance in the quarter. Beginning with Innovative Medicine. Worldwide sales of $14.6 billion increased 6.3%, with growth of 7.5% in the U.S. and 4.4% outside of the U.S. Innovative Medicine growth was driven by our key brands and continued uptake from recently launched products, with 11 assets delivering double-digit growth. Results across the portfolio continue to be positively impacted by price increases associated with Argentina hyperinflation, consistent with market practice. We continue to drive strong sales growth across our multiple myeloma portfolio. DARZALEX growth was 22.9%, primarily driven by share gains of 4 points across all lines of therapy, with 7.7 points of growth in the front line setting as well as market growth. CARVYKTI achieved sales of $286 million, with growth of 87.6%, driven by share gains, continued capacity expansion and manufacturing efficiencies. This reflects sequential growth of 53.2% aligned with our expectations of accelerating growth in the back half of the year. TECVAYLI sales were $135 million in the quarter with growth of 21.4%, reflecting a strong launch in the relapsed refractory setting. Demand remained strong, while sequential growth was flat due to continued adoption of longer duration dosing intervals. Finally, within our multiple myeloma portfolio, TALVEY continued its launch trajectory with another quarter of strong growth. We anticipate disclosing TALVEY sales in the first quarter of 2025, which are currently reported in other oncology. ERLEADA continues to deliver strong growth of 26.3%, primarily driven by share gains in metastatic castrate sensitive prostate cancer and favorable inventory dynamics. RYBREVANT, our bispecific antibody for non-small cell lung cancer, contributed to growth in other oncology as we expand approved indications. We also anticipate disclosing RYBREVANT sales in the first quarter of 2025. Within immunology, we saw sales growth in TREMFYA of 14.3%, driven by strong market growth and share gains in PsO and PsA, partially offset by unfavorable patient mix. STELARA declined 5.7%, driven by unfavorable net patient mix and share loss, partially offset by market growth. As a reminder, biosimilar competition has entered Europe as of July, and we anticipate U.S. biosimilar entry in January 2025. In neuroscience, SPRAVATO growth of 55.3% continues to be driven by increased physician and patient confidence. In pulmonary hypertension, OPSUMIT and UPTRAVI grew 17.4% and 15.2%, respectively, driven by market growth, share gains and patient mix. As mentioned last quarter, REMICADE and SIMPONI realized limited sales in Europe as we prepare for the return of distribution rights in Q4. I'll now turn your attention to MedTech. Worldwide sales of $7.9 billion increased 6.4% with growth in the U.S. of 7.8% and 5% outside of the U.S. Acquisitions and divestitures had a net positive impact of 270 basis points on worldwide growth, 360 basis points in the U.S. and 180 basis points outside of the U.S. Overall, MedTech growth was driven by commercial execution and strength of new product introductions, partially offset by continued headwinds in Asia Pacific, specifically in China. In Cardiovascular, electrophysiology delivered double-digit growth of 10.7%. Performance was driven by global procedure growth, new product uptake and commercial execution, partially offset by competitive PFA ablation catheter uptake in the U.S., as well as prior year trade inventory dynamics and VBP in China. Abiomed delivered growth of 16.3%, driven by strong growth in all regions and continued adoption of Impella 5.5 and Impella RP technology. Cardiovascular results also included $229 million associated with the acquisition of Shockwave. Contact lenses and other performance improved to 4.7%, driven by continued strategic price actions, strong performance in ACUVUE OASYS 1-Day family of products, a one-time benefit from a change in U.S. contract shipping terms worth approximately 150 basis points, as well as lapping prior year impacts from Russia sanctions. Surgical Vision grew 1.9%, driven by TECNIS PureSee and TECNIS Eyhance, partially offset by China VBP and softness in the U.S. Surgery declined 0.7%, with the Acclarent divestiture negatively impacting results by approximately 110 basis points. Performance was driven primarily by competitive pressures in energy and endocutters, as well as VBP and the anticorruption campaign in China. This was partially offset by commercial execution, strength of new products across wound closure and biosurgery and continued price increases associated with Argentina hyperinflation consistent with market practice. Orthopaedics growth of 1.3% was primarily driven by success of recent product launches and commercial execution, partially offset by competitive pressures, impacts of China VBP and revenue disruption from the previously announced Orthopaedics transformation. Now, turning to our consolidated statement of earnings for the third quarter of 2024. I'd like to highlight a few noteworthy items that have changed compared to the same quarter of last year. We continue to invest strategically in research and development at competitive levels, investing nearly $5 billion or 22% of sales, which includes a $1.25 billion payment to secure the global rights to NM26 bispecific antibody. Even when excluding this investment, R&D as a percent of sales increased 30 basis points. Selling, marketing and administrative expense as a percent of sales was leveraged 100 basis points, driven by the realization of optimization efforts following the Kenvue separation. Interest income was $99 million as compared to $182 million of income last year, driven by a higher net debt position primarily related to the financing impacts of the Shockwave acquisition. Other income and expense was a net expense of $1.8 billion compared to an expense of $0.5 billion in the prior year. The increase in expense was driven by a $1.75 billion charge related to the talc litigation settlement proposal, partially offset by prior year higher unrealized mark to market losses on public securities, as well as the monetization of royalty rights. Regarding taxes in the quarter, our effective tax rate was 19.3% versus 17.4% in the same period last year. This increase was primarily driven by the tax treatment of the NM26 bispecific antibody acquisition and OECD Pillar 2. Excluding special items, the effective tax rate was 19.3% versus 15.6% in the same period last year. I encourage you to review our upcoming third quarter 10-Q filing for additional details on specific tax-related matters. Lastly, I'll direct your attention to the box section of the slide where we have also provided our income before tax, net earnings and earnings per share adjusted to exclude the impact of intangible amortization expense and special items. Now, let's look at adjusted income before tax [by segment] (ph). Innovative Medicine margin declined from 45.4% to 37.9%, primarily driven by the $1.25 billion acquired IPR&D expense to secure the global rights for NM26 bispecific antibody, partially offset by the monetization of royalty rights. MedTech margin declined from 24.7% to 24.1%, driven by increased R&D investment and lapping of a prior year divestiture gain, partially offset by supply chain efficiencies. As a result, adjusted income before tax for the enterprise as a percentage of sales decreased from 37.6% to 32.4%, with acquired IPR&D expense impacting results by 560 basis points. Starting in 2025, aligned with recent FASB reporting disclosure requirements, we will begin providing additional P&L details by segment. This concludes the sales and earnings portion of the call. I'm now pleased to turn it over to Joe.","evidence_gemma_new":"Worldwide sales third quarter of 2024","evidence_llama_3_3":null,"evidence_qwen_3_30b":"Worldwide sales third quarter of 2024","gemma_new_max":22500000000.0,"gemma_new_min":22500000000.0,"llama_3_3_max":null,"llama_3_3_min":null,"qwen_3_30b_max":22500000000.0,"qwen_3_30b_min":22500000000.0}
{"symbol":"JNJ","year":2024,"quarter":4,"date":"2024-Q4","chunk_id":3,"sub_chunk_id":0,"centroid_label":"worldwide sales","agreed_value":22500000000.0,"count":2,"chunk":"Jessica Moore: Thank you, Joaquin. Moving to our financial results. Unless otherwise stated, the results and guidance highlighted today reflect the continuing operations of Johnson & Johnson. Furthermore, the percentages quoted represent operational results and therefore excludes the impact of currency translation. Starting with Q4 2024 sales results. Worldwide sales were $22.5 billion for the quarter. Sales increased 6.7% with growth of 10% in the US and 2.5% outside of the US. Worldwide growth was negatively impacted by 290 basis points due to STELARA and positively impacted by 100 basis points due to acquisitions and divestitures. It's important to note growth in Europe was negatively impacted by 720 basis points due to the loss of exclusivity of STELARA and the COVID-19 vaccine. Turning now to earnings. For the quarter, net earnings were $3.4 billion and diluted earnings per share was $1.41 versus diluted earnings per share of $1.70 a year ago. Excluding after tax intangible asset amortization expense and special items for both periods, adjusted net earnings for the quarter were $4.9 billion and adjusted diluted earnings per share was $2.04, representing decreases of 11.1% and 10.9%, respectively, compared to the fourth quarter of 2023. Earnings per share in the quarter was negatively impacted by $0.22 of acquired IPR&D expense related to the V-Wave acquisition. For the full year 2024, sales were $88.8 billion. Sales grew 5.9% with growth of 8.3% in the US and 2.9% outside of the US. STELARA and the COVID-19 vaccine negatively impacted worldwide growth by 260 basis points. Acquisition and divestitures positively impacted worldwide growth by 50 basis points. Growth in Europe was negatively impacted by 670 basis points due to the COVID-19 vaccine and the loss of exclusivity of STELARA. Net earnings for the full year 2024 were $14.1 billion and diluted earnings per share was $5.79 versus diluted earnings per share of $5.20 a year ago. Full year 2024 adjusted net earnings were $24.2 billion and adjusted diluted earnings per share was $9.98, representing a decrease of 4.6% and an increase of 0.6% respectively versus full year 2023. Earnings per share in the year was negatively impacted by $0.67 due to acquired IPR&D charges on various transactions throughout the year. I will now comment on business sales performance in the quarter. Beginning with Innovative Medicine. Worldwide sales of $14.3 billion increased 6.5% excluding the COVID-19 vaccine with growth of 11.1% in the US and a decline of 0.3% outside of the US. STELARA negatively impacted worldwide growth by 490 basis points. Innovative Medicine growth was driven by our key brands and continued uptake from recently launched products with 10 assets delivering double-digit growth. Results across the portfolio continue to be positively impacted by price adjustments associated with Argentina hyperinflation consistent with market practice. Starting with oncology. We continue to drive strong sales growth across our multiple myeloma portfolio. DARZALEX growth was 23.5%, primarily driven by share gains of over three points across all lines of therapy and six points in the frontline setting as well as market growth. This marks Johnson & Johnson's first brand to achieve over $3 billion in sales in a quarter. CARVYKTI achieved sales of $334 million with growth of over 100% driven by share gains and capacity expansion. This reflects sequential growth of 17.3% aligned with our expectations of accelerating growth in the back half of the year. TECVAYLI sales were $146 million in the quarter with growth of 18%, reflecting a strong launch in the relapsed refractory setting. Demand remains strong despite continued adoption of longer duration dosing intervals. Finally, within our multiple myeloma portfolio, TALVEY continued its launch trajectory with another quarter of strong growth. As a reminder, we anticipate disclosing TALVEY sales in the first quarter of 2025, which are currently reported in the category Other Oncology. ERLEADA continues to deliver strong growth of 22.7%, primarily driven by share gains and market growth, reaching $3 billion in annual sales for the first time. RYBREVANT, our bispecific antibody for non-small cell lung cancer, contributed to growth in the category Other Oncology as we continue to expand approved indications. We also anticipate disclosing RYBREVANT sales in the first quarter of 2025. Within immunology, we saw sales growth in TREMFYA of 5.6%, driven by strong market growth and share gains in PsO and PsA, partially offset by unfavorable patient mix and inventory dynamics. We are excited about the recent UC launch and expect to see strong uptake of the IBD indications in 2025. STELARA declined 13.6% driven by the impact of current and anticipated biosimilar competition. As a reminder, biosimilar competition has entered the US in January 2025. REMICADE and SIMPONI worldwide sales were positively impacted by return of distribution rights in Europe. In Neuroscience, SPRAVATO growth of 45.3% continues to be driven by increased physician and patient demand. As Joaquin mentioned, SPRAVATO has exceeded $1 billion in annual sales for the first time. Other Neuroscience decline was driven by the loss of a SPINRAZA tender in Europe. In Pulmonary Hypertension, OPSUMIT grew 2.5%, driven by market growth and share gains, partially offset by inventory dynamics in the US and austerity measures in Europe. Starting in 2025, we will begin to report OPSYNVI, which is currently reported in the category Other Pulmonary Hypertension in OPSUMIT. UPTRAVI grew 12. 1%, driven by market growth, patient mix and share gains. Finally, XARELTO sales growth was driven by favorable patient mix. I'll now turn your attention to MedTech. Worldwide sales of $8.2 billion increased 7.6% both in the US and outside of the US. Acquisitions and divestitures had a net positive impact of 300 basis points on worldwide growth, 430 basis points in the US and 150 basis points outside of the US. Overall, MedTech growth was driven by commercial execution and strength of new product introductions, partially offset by increased competitive PFA pressures in US electrophysiology and continued headwinds in Asia Pacific, primarily in China. In Cardiovascular, electrophysiology delivered growth of 7.3%. Performance was driven by global procedure growth, new product uptake and commercial execution, partially offset by competitive PFA ablation catheter uptake in the US and VBP in China. Despite the IV saline shortage in the US, Abiomed delivered growth of 13.2% driven by strong growth in all regions and continued adoption of Impella 5.5 and Impella RP technology. Cardiovascular results also included $258 million associated with the acquisition of Shockwave. Contact Lenses and Other grew 7.4%, driven by trade inventory dynamics, continued strategic price actions, strong performance in ACUVUE OASYS 1-Day family of products as well as lapping prior year impacts from Russia sanctions. Surgical Vision growth of 13.6% was driven by TECNIS PureSee & TECNIS Eyhance. Commercial execution partially offset by competitive pressures in the US. Orthopedics grew 2.5% inclusive of hips growth of 5.6%, primarily driven by the success of recent product launches and commercial execution, partially offset by revenue disruption from the previously announced orthopedics transformation, impacts of China VBP and competitive pressures. Lastly, Surgery grew 0.4% with the Acclarent divestiture negatively impacting results by approximately 130 basis points. Performance was driven primarily by commercial execution, strength of new products across wound closure and biosurgery and continued price adjustments primarily associated with hyperinflation consistent with market practice. Growth was partially offset by competitive pressures in Energy and Endocutters as well as VBP and the anticorruption campaign in China. Now turning to our consolidated statement of earnings for the fourth quarter of 2024. I'd like to highlight a few noteworthy items that have changed compared to the same quarter of last year. We continue to invest strategically in research and development at competitive levels to fortify our future, investing $5.3 billion or nearly 24% of sales, which includes $540 million of acquired IPR&D expense associated with the V-Wave acquisition. Selling, marketing and administrative expense as a percent of sales deleveraged 150 basis points driven by increased commercial investment in the Innovative Medicine business. Interest income and expense was a net income of $144 million as compared to $212 million of income last year driven by lower interest rates earned on a lower average cash balance and higher interest rates on a higher average debt balance. Other income and expense was a net income of $161 million compared to $421 million of income in the prior year. This was primarily driven by lower gains on securities, a lower benefit related to employee benefit programs due to the discount rate, partially offset by lower litigation expense in 2024. Regarding taxes in the quarter, our effective tax rate was 11.7% versus 14.4% in the same period last year. This decrease was primarily driven by post-acquisition integration efforts that allowed the company to deduct certain acquisition costs for tax purposes as well as the resolution of prior tax matters both in jurisdictions outside of the US. Excluding special items, the effective tax rate was 8.8% versus 10.8% in the same period last year. I encourage you to review our upcoming 2024 10-K filing for additional details on specific tax related matters. Lastly, I'll direct your attention to the box section of the slide, where we have also provided our income before tax, net earnings and earnings per share adjusted to exclude the impact of intangible, amortization expense and special items. Now let's look at adjusted income before tax by segment for the quarter. Innovative Medicine margin declined from 37.4% to 32.5% primarily driven by strategic commercial investment and R&D pipeline advancement. MedTech margin declined from 15.5% to 10. 8% primarily driven by acquired IPR&D expense related to the V-Wave acquisition. Please note that the MedTech margin was negatively impacted in both years due to expenses associated with the strategic acquisition of Laminar. When adjusting for these one-time items, MedTech margin was relatively flat. As a result, adjusted income before tax for the enterprise as a percentage of sales decreased from 29.2% to 24.1% with the V-Wave acquired IPR&D expense impacting results by 240 basis points. When looking at the full year, Innovative Medicine, MedTech and the Enterprise adjusted income before tax remained relatively flat year-over-year when adjusting for the one-time items highlighted on the slide, mainly acquired IPR&D expenses on various transactions across both years. This concludes the sales and earnings portion of the call. I am now pleased to turn it over to Joe.","evidence_gemma_new":null,"evidence_llama_3_3":"Worldwide sales Q4 2024","evidence_qwen_3_30b":"worldwide sales Q4 2024","gemma_new_max":null,"gemma_new_min":null,"llama_3_3_max":22500000000.0,"llama_3_3_min":22500000000.0,"qwen_3_30b_max":22500000000.0,"qwen_3_30b_min":22500000000.0}
{"symbol":"JPM","year":2023,"quarter":1,"date":"2023-Q1","chunk_id":1,"sub_chunk_id":0,"centroid_label":"buy back stock","agreed_value":1900000000.0,"count":2,"chunk":"Jeremy Barnum: Thanks, and good morning, everyone. The presentation is available on our website, and please refer to the disclaimer in the back. Starting on page 1. The Firm reported net income of $12.6 billion, EPS of $4.10 on revenue of $39.3 billion and delivered an ROTCE of 23%. These results included $868 million of net investment securities losses in corporate. Before reviewing our results for the quarter, let\u2019s talk about the recent bank failures. Jamie has addressed a number of the important themes in his shareholder letter and the recent televised interview. So, I will go straight to the specific impacts on the Firm. As you would expect, we saw significant new account opening activity and meaningful deposit and money market fund inflows, most significantly in the Commercial Bank, Business Banking and AWM. Regarding the deposit inflows, at the Firm-wide level, average deposits were down 3% quarter-on-quarter, while end-of-period deposits were up 2% quarter-on-quarter, implying an intra-quarter reversal of the recent outflow trend as a consequence of the March events. We estimate that we have retained approximately $50 billion of these deposit inflows at quarter-end. It\u2019s important to note that while the sequential period-end deposit increase is higher than we would have otherwise expected, our current full year NII outlook, which I will address at the end, still assumes modest deposit outflows from here. We expect these outflows to be driven by the same factors as last quarter as well as the expectation that we will not retain all of this quarter\u2019s inflows. Now back to the quarter touching on a few highlights. We grew our IB fee wallet share. Consumer spending remained solid with combined debit and credit card spend up 10% year-on-year. And credit continues to normalize, but actual performance remains strong across the Company. On Page 2, we have some more detail. Revenue of $39.3 billion was up $7.7 billion or 25% year-on-year. NII ex markets was up $9.2 billion or 78%, driven by higher rates, partially offset by lower deposit balances. NIR ex markets was down $1.1 billion or 10% driven by the securities losses previously mentioned as well as lower IB fees and lower auto lease income on lower volume. And markets revenue was down $371 million or 4% year-on-year. Expenses of $20.1 billion were up $916 million or 5% year-on-year, driven by compensation-related costs, reflecting the annualization of last year\u2019s headcount growth and wage inflation. These results include the impact of the higher FDIC assessment I mentioned last quarter, which, of course, is unrelated to recent events. And credit costs of $2.3 billion included net charge-offs of $1.1 billion, predominantly in card. The net reserve build of $1.1 billion was largely driven by deterioration in our weighted average economic outlook. Onto balance sheet and capital on page 3. We ended the quarter with a CET1 ratio of 13.8%, up about 60 basis points, which was primarily driven by the benefit of net income less distributions and AOCI gains. And in line with what we previously said, we resumed stock buybacks this quarter and distributed a total of $1.9 billion and net repurchases back to shareholders. Now, let\u2019s go to our businesses, starting with CCB on Page 4. Touching quickly on the health of U.S. consumers and small businesses based on our data. Both continue to show resilience and remain on the path to normalization as expected, but we continue to monitor their activity closely. Spend remains solid, and we have not observed any notable pullback throughout the quarter. Moving to financial results. CCB reported net income of $5.2 billion on revenue of $16.5 billion, which was up 35% year-on-year. In Banking & Wealth Management, revenue was up 67% year-on-year, driven by higher NII on higher rates. Average deposits were down 2% quarter-on-quarter, in line with recent trends. Throughout the quarter, we continued to see customer flows to higher-yielding products, as you would expect, but were encouraged by what we are capturing in CDs and our Wealth Management offerings. Client investment assets were down 1% year-on-year, but up 7% quarter-on-quarter, driven by market performance as well as strong net inflows. In Home Lending, revenue was down 38% year-on-year, largely driven by lower net interest income from tighter loan spreads and lower production revenue. Moving to Card Services & Auto. Revenue was up 14% year-on-year, largely driven by higher Card Services NII on higher revolving balances, partially offset by lower auto lease income. Credit card spend was up 13% year-on-year. Card outstandings were up 21%, driven by strong new account growth and revolve normalization. And in Auto, originations were $9.2 billion, up 10% year-on-year. Expenses of $8.1 billion were up 5% year-on-year, reflecting the impact of wage inflation and higher headcount. In terms of credit performance this quarter, credit costs were $1.4 billion, reflecting reserve builds of $300 million in card and $50 million in Home Lending. Net charge-offs were $1.1 billion, up about $500 million year-on-year, in line with expectations as delinquency levels continue to normalize across portfolios. Next, the CIB on Page 5. CIB reported net income of $4.4 billion on revenue of $13.6 billion. Investment Banking revenue of $1.6 billion was down 24% year-on-year. IB fees were down 19%. We ranked number 1 with first quarter wallet share of 8.7%. In advisory, fees were down 6% compared to a strong first quarter last year. Our underwriting businesses continued to be affected by market conditions with fees down 34% for debt and 6% for equity. In terms of the outlook, the dynamics remain the same. Our pipeline is relatively robust, but conversion is sensitive to market conditions and the economic outlook. We expect the second quarter and the rest of the year to remain challenging. Moving to Markets. Total revenue was $8.4 billion, down 4% year-on-year. Fixed income was flat. Rates was strong during the rally early in the quarter as well as through the elevated volatility in March. Credit was up on the back of higher client flows and currencies in emerging markets was down relative to a very strong first quarter in the prior year. Equity Markets was down 12%, driven by lower revenues in derivatives relative to a strong first quarter in the prior year and lower client activity and cash. Payments revenue was $2.4 billion, up 26% year-on-year. Excluding the net impact of equity investments, primarily a gain in the prior year, it was up 55%, with the growth driven by higher rates, partially offset by lower deposit balances. Securities Services revenue of $1.1 billion was up 7% year-on-year, driven by higher rates, partially offset by lower deposit balances and market levels. Expenses of $7.5 billion were up 2% year-on-year as higher headcount and wage inflation were largely offset by lower revenue-related compensation. Moving to the Commercial Bank on page 6. Commercial Banking reported net income of $1.3 billion. Revenue of $3.5 billion was up 46% year-on-year, driven by higher deposit margins. Payments revenue of $2 billion was up 98% year-on-year driven by higher rates. And gross Investment Banking revenue of $881 million was up 21% year-on-year on increased M&A and bond underwriting from large deal activity. Expenses of $1.3 billion were up 16% year-on-year largely driven by higher compensation expense, including front office hiring and technology investments as well as higher volume-related expense. Average deposits were down 16% year-on-year and 5% quarter-on-quarter, predominantly driven by continued attrition and non-operating deposits as well as seasonally lower balances. Loans were up 13% year-on-year and 1% sequentially. C&I loans were up 1% quarter-on-quarter with somewhat different dynamics based on client size. In middle market banking, higher rates and recession concerns have decreased new loan demand and utilization, which is also leading to weakness in CapEx spending. In Corporate Client Banking, utilization rates increased modestly quarter-on-quarter as capital market conditions led more clients to opt for bank debt. CRE loans were also up 1% sequentially with higher rates creating headwinds for both originations and prepayments. And given the recent focus on commercial real estate, let me remind you that our office sector exposure is less than 10% of our portfolio and is focused in the urban dense markets, and nearly two-thirds of our loans are multifamily, primarily in supply-constrained markets. Finally, credit costs of $417 million included a net reserve build of $379 million, predominantly driven by what I mentioned upfront. Then to complete our lines of business, AWM on page 7. Asset & Wealth Management reported net income of $1.4 billion, pretax margin of 35%. Revenue of $4.8 billion was up 11% year-on-year driven by higher deposit margins on lower balances and a valuation gain on our initial investment triggered by taking full ownership of our asset management joint venture in China, partially offset by the impact of lower average market levels on management fees and lower performance fees. Expenses of $3.1 billion were up 8% year-on-year, predominantly driven by compensation, reflecting growth in our private banking advisory teams, higher revenue-related compensation and the run rate impact of acquisitions. For the quarter, net long-term inflows were $47 billion, led by fixed income and equities. And then liquidity, we saw net inflows of $93 billion, inclusive of our ongoing deposit migration. AUM of $3 trillion was up 2% year-on-year and overall client assets of $4.3 trillion were up 6%, driven by continued net inflows into liquidity and long-term products. And finally, loans were down 1% quarter-on-quarter, driven by lower securities-based lending, while average deposits were down 5%. Turning to Corporate on page 8. Corporate reported net income of $244 million. Revenue was $985 million compared to a net loss of $881 million last year. NII was $1.7 billion, up $2.3 billion year-on-year due to the impact of higher rates. NIR was a loss of $755 million compared with a loss of $345 million in the prior year and included the net investment securities losses I mentioned earlier. Expenses of $160 million were down $24 million year-on-year. And credit costs of $370 million were driven by reserve builds on a couple of single name exposures. Next, the outlook on page 9. We now expect 2023 NII and NII ex-markets to be approximately $81 billion. This increase in guidance is primarily driven by lower rate paid assumptions across both consumer and wholesale in light of the expectation of Fed cuts later in the year as well as slightly higher card revolving balances. Note that in line with my comments at the outset, recent deposit balance increases are not a meaningful contributor to the upward revision in the NII outlook, given that we expect a meaningful portion of the recent inflows to reverse later in the year. I would point out that this outlook still embeds significant reprice lags. We think a more sustainable NII ex-markets run rate in the medium term is well below this quarter\u2019s $84 billion as well as below the $80 billion that is implied for the rest of the year by our full year guidance. And while we don\u2019t know exactly when this lower run rate will be reached, when it happens, we believe it will be around the mid-70s. And of course, as we mentioned last quarter, this NII outlook remains highly sensitive to the uncertainty associated with the timing and the extent of deposit reprice, investment portfolio decisions, the dynamics of QT and RRP, the trajectory of Fed funds as well as the broader macroeconomic environment, including its impact on loan growth. Separately, it\u2019s worth noting that markets NII may start to trend slightly positive towards the end of the year as a function of mix and rate effects. Moving to expenses. Our outlook for 2023 continues to be about $81 billion. Importantly, this does not currently include the impact of the pending FDIC special assessment. And on credit, we continue to expect the 2023 card net charge-off rate to be approximately 2.6%. So to wrap up, our strong results this quarter once again highlight the earnings power of this diversified franchise. We have benefited from our fortress principles and commitment to invest, which we will continue to do as we head into an increasingly uncertain environment. With that, operator, please open the line for Q&A.","evidence_gemma_new":"stock buybacks","evidence_llama_3_3":null,"evidence_qwen_3_30b":"stock buybacks $1.9 billion","gemma_new_max":1900000000.0,"gemma_new_min":1900000000.0,"llama_3_3_max":null,"llama_3_3_min":null,"qwen_3_30b_max":1900000000.0,"qwen_3_30b_min":1900000000.0}
{"symbol":"JPM","year":2023,"quarter":2,"date":"2023-Q2","chunk_id":25,"sub_chunk_id":0,"centroid_label":"buy back stock","agreed_value":12000000000.0,"count":3,"chunk":"Jeremy Barnum: I mean, capital hierarchy again, right. In the end, when we have nothing else to do with the money, we'll do buybacks and we've talked about the $12 billion for this year. Obviously, lot of new moving parts there, although all else equal, given what we've done so far, that's still probably a reasonable number for the full year. But, yes, that's always going to be at the end of the list, but, yes.","evidence_gemma_new":"buybacks this year","evidence_llama_3_3":"buybacks this year","evidence_qwen_3_30b":"capital hierarchy buybacks this year","gemma_new_max":12000000000.0,"gemma_new_min":12000000000.0,"llama_3_3_max":12000000000.0,"llama_3_3_min":12000000000.0,"qwen_3_30b_max":12000000000.0,"qwen_3_30b_min":12000000000.0}
{"symbol":"JPM","year":2023,"quarter":4,"date":"2023-Q4","chunk_id":3,"sub_chunk_id":0,"centroid_label":"buy back stock","agreed_value":2000000000.0,"count":2,"chunk":"Jeremy Barnum: Yes, Matt, not particularly updating. I think you're referring to that $80 billion number that we put out there. And I wouldn't exactly describe that as an outlook. I think it's more just a number that we put out there to try to quantify a little bit the extent of the over-earning. So not particularly necessary to revise the number. But I just would point out again, as we highlighted on the page and as I highlighted in the prepared remarks, that when you look at that $94 billion exit rate and full-year guidance of $88 billion, that implies obviously exiting below $88 billion and some significant sequential decline. So in that sense, you can see us kind of marching on the path to that $80 billion. Whether we ever get to the $80 billion or not and when is maybe a topic for later in the year or next year. Matt O'Connor: Okay. And then just separately, you bought back a couple of billion dollars of stock this quarter. What's your thought process on buybacks, given the strong capital generation, but also some uncertainty on regulatory proposals?","evidence_gemma_new":null,"evidence_llama_3_3":"buybacks strong capital generation some uncertainty a couple of billion dollars","evidence_qwen_3_30b":"buyback $2 billion a quarter","gemma_new_max":null,"gemma_new_min":null,"llama_3_3_max":2000000000.0,"llama_3_3_min":2000000000.0,"qwen_3_30b_max":2000000000.0,"qwen_3_30b_min":2000000000.0}
{"symbol":"JPM","year":2024,"quarter":1,"date":"2024-Q1","chunk_id":5,"sub_chunk_id":0,"centroid_label":"buy back stock","agreed_value":2000000000.0,"count":3,"chunk":"Jeremy Barnum: Betsy, I just wanted to add my welcome back thoughts as well. And just a very minor edit to Jamie's answer. I think he just misspoke when he said $2 billion a year in buybacks, the trajectory. It's $2 billion a quarter.","evidence_gemma_new":"buybacks a quarter","evidence_llama_3_3":"buybacks a quarter","evidence_qwen_3_30b":"buybacks a quarter","gemma_new_max":2000000000.0,"gemma_new_min":2000000000.0,"llama_3_3_max":2000000000.0,"llama_3_3_min":2000000000.0,"qwen_3_30b_max":2000000000.0,"qwen_3_30b_min":2000000000.0}
{"symbol":"JPM","year":2023,"quarter":1,"date":"2023-Q1","chunk_id":1,"sub_chunk_id":0,"centroid_label":"ccb net income","agreed_value":5200000000.0,"count":2,"chunk":"Jeremy Barnum: Thanks, and good morning, everyone. The presentation is available on our website, and please refer to the disclaimer in the back. Starting on page 1. The Firm reported net income of $12.6 billion, EPS of $4.10 on revenue of $39.3 billion and delivered an ROTCE of 23%. These results included $868 million of net investment securities losses in corporate. Before reviewing our results for the quarter, let\u2019s talk about the recent bank failures. Jamie has addressed a number of the important themes in his shareholder letter and the recent televised interview. So, I will go straight to the specific impacts on the Firm. As you would expect, we saw significant new account opening activity and meaningful deposit and money market fund inflows, most significantly in the Commercial Bank, Business Banking and AWM. Regarding the deposit inflows, at the Firm-wide level, average deposits were down 3% quarter-on-quarter, while end-of-period deposits were up 2% quarter-on-quarter, implying an intra-quarter reversal of the recent outflow trend as a consequence of the March events. We estimate that we have retained approximately $50 billion of these deposit inflows at quarter-end. It\u2019s important to note that while the sequential period-end deposit increase is higher than we would have otherwise expected, our current full year NII outlook, which I will address at the end, still assumes modest deposit outflows from here. We expect these outflows to be driven by the same factors as last quarter as well as the expectation that we will not retain all of this quarter\u2019s inflows. Now back to the quarter touching on a few highlights. We grew our IB fee wallet share. Consumer spending remained solid with combined debit and credit card spend up 10% year-on-year. And credit continues to normalize, but actual performance remains strong across the Company. On Page 2, we have some more detail. Revenue of $39.3 billion was up $7.7 billion or 25% year-on-year. NII ex markets was up $9.2 billion or 78%, driven by higher rates, partially offset by lower deposit balances. NIR ex markets was down $1.1 billion or 10% driven by the securities losses previously mentioned as well as lower IB fees and lower auto lease income on lower volume. And markets revenue was down $371 million or 4% year-on-year. Expenses of $20.1 billion were up $916 million or 5% year-on-year, driven by compensation-related costs, reflecting the annualization of last year\u2019s headcount growth and wage inflation. These results include the impact of the higher FDIC assessment I mentioned last quarter, which, of course, is unrelated to recent events. And credit costs of $2.3 billion included net charge-offs of $1.1 billion, predominantly in card. The net reserve build of $1.1 billion was largely driven by deterioration in our weighted average economic outlook. Onto balance sheet and capital on page 3. We ended the quarter with a CET1 ratio of 13.8%, up about 60 basis points, which was primarily driven by the benefit of net income less distributions and AOCI gains. And in line with what we previously said, we resumed stock buybacks this quarter and distributed a total of $1.9 billion and net repurchases back to shareholders. Now, let\u2019s go to our businesses, starting with CCB on Page 4. Touching quickly on the health of U.S. consumers and small businesses based on our data. Both continue to show resilience and remain on the path to normalization as expected, but we continue to monitor their activity closely. Spend remains solid, and we have not observed any notable pullback throughout the quarter. Moving to financial results. CCB reported net income of $5.2 billion on revenue of $16.5 billion, which was up 35% year-on-year. In Banking & Wealth Management, revenue was up 67% year-on-year, driven by higher NII on higher rates. Average deposits were down 2% quarter-on-quarter, in line with recent trends. Throughout the quarter, we continued to see customer flows to higher-yielding products, as you would expect, but were encouraged by what we are capturing in CDs and our Wealth Management offerings. Client investment assets were down 1% year-on-year, but up 7% quarter-on-quarter, driven by market performance as well as strong net inflows. In Home Lending, revenue was down 38% year-on-year, largely driven by lower net interest income from tighter loan spreads and lower production revenue. Moving to Card Services & Auto. Revenue was up 14% year-on-year, largely driven by higher Card Services NII on higher revolving balances, partially offset by lower auto lease income. Credit card spend was up 13% year-on-year. Card outstandings were up 21%, driven by strong new account growth and revolve normalization. And in Auto, originations were $9.2 billion, up 10% year-on-year. Expenses of $8.1 billion were up 5% year-on-year, reflecting the impact of wage inflation and higher headcount. In terms of credit performance this quarter, credit costs were $1.4 billion, reflecting reserve builds of $300 million in card and $50 million in Home Lending. Net charge-offs were $1.1 billion, up about $500 million year-on-year, in line with expectations as delinquency levels continue to normalize across portfolios. Next, the CIB on Page 5. CIB reported net income of $4.4 billion on revenue of $13.6 billion. Investment Banking revenue of $1.6 billion was down 24% year-on-year. IB fees were down 19%. We ranked number 1 with first quarter wallet share of 8.7%. In advisory, fees were down 6% compared to a strong first quarter last year. Our underwriting businesses continued to be affected by market conditions with fees down 34% for debt and 6% for equity. In terms of the outlook, the dynamics remain the same. Our pipeline is relatively robust, but conversion is sensitive to market conditions and the economic outlook. We expect the second quarter and the rest of the year to remain challenging. Moving to Markets. Total revenue was $8.4 billion, down 4% year-on-year. Fixed income was flat. Rates was strong during the rally early in the quarter as well as through the elevated volatility in March. Credit was up on the back of higher client flows and currencies in emerging markets was down relative to a very strong first quarter in the prior year. Equity Markets was down 12%, driven by lower revenues in derivatives relative to a strong first quarter in the prior year and lower client activity and cash. Payments revenue was $2.4 billion, up 26% year-on-year. Excluding the net impact of equity investments, primarily a gain in the prior year, it was up 55%, with the growth driven by higher rates, partially offset by lower deposit balances. Securities Services revenue of $1.1 billion was up 7% year-on-year, driven by higher rates, partially offset by lower deposit balances and market levels. Expenses of $7.5 billion were up 2% year-on-year as higher headcount and wage inflation were largely offset by lower revenue-related compensation. Moving to the Commercial Bank on page 6. Commercial Banking reported net income of $1.3 billion. Revenue of $3.5 billion was up 46% year-on-year, driven by higher deposit margins. Payments revenue of $2 billion was up 98% year-on-year driven by higher rates. And gross Investment Banking revenue of $881 million was up 21% year-on-year on increased M&A and bond underwriting from large deal activity. Expenses of $1.3 billion were up 16% year-on-year largely driven by higher compensation expense, including front office hiring and technology investments as well as higher volume-related expense. Average deposits were down 16% year-on-year and 5% quarter-on-quarter, predominantly driven by continued attrition and non-operating deposits as well as seasonally lower balances. Loans were up 13% year-on-year and 1% sequentially. C&I loans were up 1% quarter-on-quarter with somewhat different dynamics based on client size. In middle market banking, higher rates and recession concerns have decreased new loan demand and utilization, which is also leading to weakness in CapEx spending. In Corporate Client Banking, utilization rates increased modestly quarter-on-quarter as capital market conditions led more clients to opt for bank debt. CRE loans were also up 1% sequentially with higher rates creating headwinds for both originations and prepayments. And given the recent focus on commercial real estate, let me remind you that our office sector exposure is less than 10% of our portfolio and is focused in the urban dense markets, and nearly two-thirds of our loans are multifamily, primarily in supply-constrained markets. Finally, credit costs of $417 million included a net reserve build of $379 million, predominantly driven by what I mentioned upfront. Then to complete our lines of business, AWM on page 7. Asset & Wealth Management reported net income of $1.4 billion, pretax margin of 35%. Revenue of $4.8 billion was up 11% year-on-year driven by higher deposit margins on lower balances and a valuation gain on our initial investment triggered by taking full ownership of our asset management joint venture in China, partially offset by the impact of lower average market levels on management fees and lower performance fees. Expenses of $3.1 billion were up 8% year-on-year, predominantly driven by compensation, reflecting growth in our private banking advisory teams, higher revenue-related compensation and the run rate impact of acquisitions. For the quarter, net long-term inflows were $47 billion, led by fixed income and equities. And then liquidity, we saw net inflows of $93 billion, inclusive of our ongoing deposit migration. AUM of $3 trillion was up 2% year-on-year and overall client assets of $4.3 trillion were up 6%, driven by continued net inflows into liquidity and long-term products. And finally, loans were down 1% quarter-on-quarter, driven by lower securities-based lending, while average deposits were down 5%. Turning to Corporate on page 8. Corporate reported net income of $244 million. Revenue was $985 million compared to a net loss of $881 million last year. NII was $1.7 billion, up $2.3 billion year-on-year due to the impact of higher rates. NIR was a loss of $755 million compared with a loss of $345 million in the prior year and included the net investment securities losses I mentioned earlier. Expenses of $160 million were down $24 million year-on-year. And credit costs of $370 million were driven by reserve builds on a couple of single name exposures. Next, the outlook on page 9. We now expect 2023 NII and NII ex-markets to be approximately $81 billion. This increase in guidance is primarily driven by lower rate paid assumptions across both consumer and wholesale in light of the expectation of Fed cuts later in the year as well as slightly higher card revolving balances. Note that in line with my comments at the outset, recent deposit balance increases are not a meaningful contributor to the upward revision in the NII outlook, given that we expect a meaningful portion of the recent inflows to reverse later in the year. I would point out that this outlook still embeds significant reprice lags. We think a more sustainable NII ex-markets run rate in the medium term is well below this quarter\u2019s $84 billion as well as below the $80 billion that is implied for the rest of the year by our full year guidance. And while we don\u2019t know exactly when this lower run rate will be reached, when it happens, we believe it will be around the mid-70s. And of course, as we mentioned last quarter, this NII outlook remains highly sensitive to the uncertainty associated with the timing and the extent of deposit reprice, investment portfolio decisions, the dynamics of QT and RRP, the trajectory of Fed funds as well as the broader macroeconomic environment, including its impact on loan growth. Separately, it\u2019s worth noting that markets NII may start to trend slightly positive towards the end of the year as a function of mix and rate effects. Moving to expenses. Our outlook for 2023 continues to be about $81 billion. Importantly, this does not currently include the impact of the pending FDIC special assessment. And on credit, we continue to expect the 2023 card net charge-off rate to be approximately 2.6%. So to wrap up, our strong results this quarter once again highlight the earnings power of this diversified franchise. We have benefited from our fortress principles and commitment to invest, which we will continue to do as we head into an increasingly uncertain environment. With that, operator, please open the line for Q&A.","evidence_gemma_new":null,"evidence_llama_3_3":"CCB net income","evidence_qwen_3_30b":"CCB net income $5.2 billion","gemma_new_max":null,"gemma_new_min":null,"llama_3_3_max":5200000000.0,"llama_3_3_min":5200000000.0,"qwen_3_30b_max":5200000000.0,"qwen_3_30b_min":5200000000.0}
{"symbol":"JPM","year":2023,"quarter":4,"date":"2023-Q4","chunk_id":1,"sub_chunk_id":0,"centroid_label":"ccb net income","agreed_value":4400000000.0,"count":2,"chunk":"Jeremy Barnum: Thank you, and good morning, everyone. The presentation is available on our website, and please refer to the disclaimer in the back. Starting on Page 1, the firm reported net income of $9.3 billion, EPS of $3.04 on revenue of $39.9 billion, and delivered an ROTCE of 15%. These results included the $2.9 billion FDIC special assessment and $743 million of net investment securities losses in Corporate. On Page 2, we have more on our fourth quarter results. Similar to prior quarters, we have called out the impact of First Republic, where relevant. You'll also note that we have now allocated certain deposits, which were previously in CCB to the appropriate lines of business. For the quarter, First Republic contributed $1.9 billion of revenue, $890 million of expense, and $647 million of net income. Now, focusing on the firmwide fourth quarter results, excluding First Republic. Revenue of $38.1 billion was up $2.5 billion or 7% year-on-year. NII, ex-Markets was up $2.2 billion or 11%, predominantly driven by higher rates. NIR, ex-Markets was up $139 million or 1% and Markets revenue was up $141 million or 2%. Expenses of $23.6 billion were up $4.6 billion or 24% year-on-year, predominantly driven by the FDIC special assessment and higher compensation, including wage inflation and growth in front office and technology. And credit costs were $2.6 billion, reflecting net charge-offs of $2.2 billion, and a net reserve build for $474 million. Net charge-offs were up $1.3 billion, predominantly driven by Card and single-name exposures in Wholesale, which were largely previously reserved. The net reserve build was primarily driven by loan growth in Card and the deterioration in the outlook related to commercial real-estate valuations in the Commercial Banking. Looking at the full-year results on Page 3. The firm reported net income of $50 billion, EPS of $16.23, and revenue of $162 billion, and we delivered an ROTCE of 21%. Onto balance sheet and capital on Page 4. We ended the quarter with CET1 ratio of 15%, up 70 basis points versus the prior quarter, primarily driven by net income, AOCI gains and lower RWA, partially offset by a continued modest pace of capital distributions as the firm builds towards the proposed Basel III Endgame requirements. Now, let's go to our businesses, starting with CCB on Page 5. Total debit and credit card spend was up 7% year-on-year, driven by strong account growth and consumer spend remained stable. Turning now to the financial results, excluding First Republic. CCB reported net income of $4.4 billion on revenue of $17 billion, which was up 8% year-on-year. In Banking & Wealth Management, revenue was up 6% year-on-year, reflecting higher NII on higher rates, largely offset by lower deposits, with average balances down 8% year-on-year. Client investment assets were up 25%, driven by market performance and strong net inflows. In fact, it's been a record year for retail net new money. In Home Lending revenue was up $230 million, predominantly driven by the absence of an MSR loss this quarter versus the prior year and higher NII. Moving to Card Services & Auto, revenue was up 8% year-on-year, driven by higher card services NII on higher revolving balances, partially offset by lower auto lease income. Card outstandings were up 14% due to strong account acquisition and continued normalization of revolve. And in auto, originations were $9.9 billion, up 32% as we gained market share while retaining strong margins. Expenses of $8.7 billion were up 10% year-on-year, largely driven by compensation, including an increase in employees, primarily in bankers, advisors, and technology, and wage inflation, as well as continued investments in marketing and technology. In terms of credit performance this quarter, credit costs were $2.2 billion, largely driven by net charge-offs which were up $791 million year-on-year, predominantly due to continued normalization in card. The net reserve build of $538 million reflected loan growth in card. Next, the CIB on Page 6. The CIB reported net income of $2.5 billion on revenue of $11 billion. Investment banking revenue of $1.6 billion was up 13% year-on-year. IB fees were also up 13% year-on-year and we ended the year ranked number one with a wallet share of 8.8%. And advisory fees were up 2%. Underwriting fees were up significantly compared to a weak prior year quarter with debt up 21% and equity up 30%. We are starting the year with a healthy pipeline and we are encouraged by the level of capital markets activity, but announced M&A remains a headwind, and the extent as well as the timing of capital markets normalization remains uncertain. Payments revenue was $2.3 billion, up 10% year-on-year. Excluding equity investments, it was flat as fee growth was predominantly offset by deposit-related client credits. Moving to Markets, total revenue was $5.8 billion, up 2% year-on-year. Fixed income was a record fourth quarter, up 8%. It was another strong quarter in our securitized products business, which was partially offset by lower revenue and rates coming off a strong quarter last year. Equity markets was down 8%, driven by lower revenue in derivatives and cash. Security services revenue of $1.2 billion was up 3% year-on-year. Expenses of $6.8 billion were up 4% year-on-year, predominantly driven by the timing of revenue-related compensation. Credit costs were $210 million, reflecting net charge-offs of $121 million and a net reserve build of $89 million. Moving to the Commercial Bank on Page 7. Commercial Banking reported net income of $1.5 billion. Revenue of $3.7 billion was up 7% year-on-year, largely driven by higher NII, where the impact of rates was partially offset by lower deposit balances. Payments revenue of $2 billion was up 2% year-on-year driven by fee growth, largely offset by deposit-related client credits. Gross investment banking and markets revenue of $924 million was up 32% year-on-year, primarily reflecting increased capital markets and M&A activity. Expenses of $1.4 billion were up 9% year-on-year, driven by an increase in employees, including front office and technology investments, as well as higher volume-related expense, including the impact of new client acquisition. Average deposits were down 6% year-on-year, primarily driven by lower non-operating deposits as clients continue to opt for higher-yielding alternatives and flat quarter-on-quarter as client balances are seasonally higher at year-end. Loans were down 1% quarter-on-quarter. C&I loans were down 2%, reflecting lower revolver utilization and muted demand for new loans as clients remained cautious. And CRE loans were flat as higher rates continued to have an impact on originations and payoff activity. Finally, credit costs were $269 million, including net charge-offs of $127 million and a net reserve build of $142 million, driven by deterioration in our commercial real estate valuation outlook. And then to complete our lines of business, AWM on Page 7. Asset & Wealth Management reported net income of $925 million with pretax margin of 28%. Revenue of $4.7 billion was up 2% year-on-year, driven by higher management fees on strong net inflows and higher average market levels, predominantly offset by lower NII. The decrease in NII reflects lower deposit margins and balances partially offset by wider spreads on loans. Expenses of $3.4 billion were up 11% year-on-year, largely driven by higher compensation, including performance-based incentives, continued growth in our private banking advisor teams, the impact of closing JPMorgan Asset Management China acquisition, and the continued investment in global shares. For the quarter, net long-term inflows were $12 billion, positive across equities and fixed income, and $140 billion for the full year. In liquidity, we saw net inflows of $49 billion for the quarter and net inflows of $242 billion for the full year. And we had record client asset net inflows of $489 billion for the year. AUM of $3.4 trillion and client assets of $5 trillion were both up 24% year-on-year, driven by continued net inflows and higher market levels. And finally, loans were up 2% quarter-on-quarter and deposits were up 7% quarter-on-quarter. Turning to Corporate on Page 9. Corporate reported a net loss of $689 million. Revenue of $1.8 billion was up $597 million year-on-year. NII of $2.5 billion was up $1.2 billion year-on-year due to the impact of higher rates and balance sheet mix. NIR was a net loss of $687 million compared to the net loss of $115 million, and included the net investment securities losses I mentioned upfront. And expenses of $3.4 billion were up $3 billion year-on-year, predominantly driven by the FDIC special assessment. With that, let's pivot to the outlook for 2024, starting with NII on Page 10. We expect 2024 NII ex-Markets to be approximately $88 billion. Going through the drivers, the outlook assumes that rates follow the forward curve, which currently includes six cuts this year. On deposits, we expect balances to be very modestly down from current levels. While lower rates should decrease repricing pressure, we remain asset sensitive, and therefore the lower rates will decrease NII, resulting in more normal deposit margins. We expect strong loan growth in Card to continue, but not at the same pace as 2023. Still, this should help offset some of the impact of lower rates. Outside of Card, loan growth will likely remain muted. It's important to note that we just reported a quarterly NII ex-Markets run rate of $94 billion. Combining that with the full-year guidance of approximately $88 billion implies meaningful sequential quarterly declines throughout 2024, consistent with what we've been telling you for some time. And keep in mind that many of the sources of uncertainty that we've highlighted previously surrounding the NII outlook remain. And on total NII, we expect it to be approximately $90 billion for the full-year, reflecting an increase in Markets NII which, as always, you should think of as largely offset in NIR. Now, let's turn to expenses on Page 11. We expect 2024 adjusted expense to be about $90 billion. You'll see on the slide we provided detail by line of business. Generally, you can see that both in dollar terms and in percentage terms, the expense growth is aligned to where the greatest opportunities are, both in terms of share and available returns. And of course, you'll hear more at Investor Day and between now and then. On the right-hand side of the page, we've highlighted some firmwide drivers. Thematically, the biggest driver is what I might call business growth writ large. Within that, narrowly defined volume and revenue-related growth represents about $1 billion of the increase across the company as a result of an improved NIR outlook, compared to about $400 million in 2023. But in addition, the ongoing growth of the company, which continues to produce share gains and additional profitability, is coming with increased expense across a range of categories. The quantum of investment increase is comparable to last year's increase and is driven by all the same themes, bankers, branches, advisors, technology as well as marketing. Net-net, First Republic produces a modest increase in expenses, but with a significantly lower 2024 exit run rate as the result of business integration efforts. Finally, despite significantly lower inflation outlook in the economy as a whole, we still see some residual effects of inflation flowing through most of our expense categories. It's worth noting that both the general business growth and investment growth include decisions that have been executed both in response to market conditions during 2023 and to support the future growth and profitability of the company. We've included the fourth quarter 2023 exit rate on the page to illustrate that a significant portion of the year-on-year increase in expense is already in the run rate. Now, let's turn to Page 12 and cover credit and wrap up. On credit, we continue to expect the 2024 card net charge-off rate to be below 3.5%, consistent with Investor Day guidance. So in closing, we shouldn't leave 2023 without noting what an outstanding year it was, producing record revenue and net income despite some notable significant items. We're very proud of what we accomplished this year and want to thank everyone who made it possible. At the same time, we emphasized throughout 2023 the extent to which we were over-earning, as indicated by an ROTCE that is 4% above our through-the-cycle target. As we turn to 2024, it shouldn't be surprising that our outlook has us beginning to march down the path towards normalization of our returns. But despite the expected dissipation of the 2023 tailwinds and the presence of significant economic and geopolitical uncertainties, we remain optimistic about this franchise's ability to produce superior returns through a broad range of environments. And this management team remains laser-focused on executing for shareholders, clients, and communities. And with that, let's open the line for Q&A.","evidence_gemma_new":null,"evidence_llama_3_3":"CCB net income fourth quarter","evidence_qwen_3_30b":"CCB net income $4.4 billion","gemma_new_max":null,"gemma_new_min":null,"llama_3_3_max":4400000000.0,"llama_3_3_min":4400000000.0,"qwen_3_30b_max":4400000000.0,"qwen_3_30b_min":4400000000.0}
{"symbol":"JPM","year":2024,"quarter":1,"date":"2024-Q1","chunk_id":1,"sub_chunk_id":0,"centroid_label":"ccb net income","agreed_value":4400000000.0,"count":2,"chunk":"Jeremy Barnum: Thank you very much, and good morning, everyone. The presentation is available on our website, and please refer to the disclaimer in the back. Starting on Page 1. The firm reported net income of $13.4 billion, EPS of $4.44 on revenue of $42.5 billion and delivered an ROTCE of 21%. These results included a $725 million increase to the special assessment resulting from the FDIC's updated estimate of expected losses from the closures of Silicon Valley Bank and Signature Bank. Touching on a couple of highlights. Firm-wide IB fees were up 18% year-on-year, reflecting particular strength in underwriting fees. And we have seen strong net inflows across AWM as well as in the CCB and Wealth Management business. On Page 2, we have some more detail. This is the last quarter we'll discuss results excluding First Republic, given that going forward, First Republic results will naturally be included in the prior period, making year-on-year results comparable. For this quarter, First Republic contributed $1.7 billion of revenue, $806 million of expense and $668 million of net income. Now focusing on the firm-wide results excluding First Republic. Revenue of $40.9 billion was up $1.5 billion or 4% year-on-year. NII ex Markets was up $736 million or 4% driven by the impact of balance sheet mix and higher rates as well as higher revolving balances in card, largely offset by deposit margin compression and lower deposit balances in CCB. NIR ex Markets was up $1.2 billion or 12% driven by higher firm-wide asset management and Investment Banking fees as well as lower net investment securities losses. And Markets revenue was down $400 million or 5% year-on-year. Expenses of $22 billion were up $1.8 billion or 9% year-on-year driven by higher compensation, including growth in employees and the increase to the FDIC special assessment. And credit costs were $1.9 billion, reflecting net charge-offs of $2 billion and a net reserve release of $38 million. Net charge-offs were up $116 million predominantly driven by Card. On to balance sheet and capital on Page 3. We ended the quarter with a CET1 ratio of 15%, relatively flat versus the prior quarter, reflecting net income which was predominantly offset by higher RWA and capital distribution. This quarter's higher RWA is largely due to seasonal effects, including higher client activity in Markets and higher risk weights on deferred tax assets, partially offset by lower Card loans. Now let's go to our businesses, starting with CCB on Page 4. Consumers remain financially healthy, supported by a resilient labor market. While cash buffers have largely normalized, balances were still above pre-pandemic levels, and wages are keeping pace with inflation. When looking at a stable cohort of customers, overall spend is in line with the prior year. Turning now to the financial results excluding First Republic. CCB reported net income of $4.4 billion on revenue of $16.6 billion, which was up 1% year-on-year. In Banking & Wealth Management, revenue was down 4% year-on-year, reflecting lower NII on lower deposits with average balances down 7% as our CD mix increased. Client investment assets were up 25% year-on-year driven by market performance and strong net inflows. In Home Lending, revenue was up 10% year-on-year, predominantly driven by higher NII and production revenue. Originations, while still modest, were up 10%. Moving to Card Services & Auto. Revenue was up 8% year-on-year driven by higher Card Services NII on higher revolving balances, partially offset by higher card acquisition costs from new account growth and lower auto lease income. Card outstandings were up 13% due to strong account acquisition and the continued normalization of revolve. And in auto, originations were $8.9 billion, down 3%, while we maintained healthy margins and market share. Expenses of $8.8 billion were up 9% year-on-year, largely driven by field compensation and continued growth in technology and marketing. In terms of credit performance this quarter, credit costs were $1.9 billion, driven by net charge-offs, which were up $825 million year-on-year predominantly due to continued normalization in Card. The net reserve build was $45 million, reflecting the build in Card largely offset by a release in Home Lending. Next, the Corporate & Investment Bank on Page 5. Before reporting CIB's results, I want to note that this will also be the last quarter we will be -- we will report earnings for the CIB and CB as standalone segments. Between now and Investor Day, we will furnish an 8-K with historical results, including 5 quarters and 2 full years of history consistent with the structure of the new Commercial and Investment Bank segment, in line with the reorganization that was announced in January. Turning back to this quarter. CIB reported net income of $4.8 billion on revenue of $13.6 billion. Investment Banking revenue of $2 billion was up 27% year-on-year. IB fees were up 21% year-on-year, and we ranked #1 with year-to-date wallet share of 9.1%. In Advisory, fees were down 21% driven by fewer large completed deals. Underwriting fees were up significantly, benefiting from improved market conditions with debt up 58% and equity up 51%. In terms of the outlook. While we are encouraged by the level of capital markets activity we saw this quarter, we need to be mindful that some meaningful portion of that is likely pulling forward from later in the year. Similarly, while it was encouraging to see some positive momentum in announced M&A in the quarter, it remains to be seen whether that will continue, and the Advisory business still faces structural headwinds from the regulatory environment. Payments revenue was $2.4 billion, down 1% year-on-year, as deposit margin normalization and deposit-related client credits were largely offset by higher fee-based revenue and deposit balances. Moving to Markets. Total revenue was $8 billion, down 5% year-on-year. Fixed income was down 7% driven by lower activity in rates and commodities compared to a strong prior year quarter, partially offset by strong results in Securitized Products. Equity Markets was flat. Securities Services revenue of $1.2 billion was up 3% year-on-year. Expenses of $7.2 billion were down 4% year-on-year predominantly driven by lower legal expense. Moving to the Commercial Bank on Page 6. Commercial Banking reported net income of $1.6 billion. Revenue of $3.6 billion was up 3% year-on-year driven by higher noninterest revenue. Gross Investment Banking and Markets revenue of $913 million was up 4% year-on-year with increased IB fees, largely offset by lower Markets revenue compared to a strong prior year quarter. Payments revenue of $1.9 billion was down 2% year-on-year driven by lower deposit margins and balances, largely offset by fee growth, net of higher deposit-related client credits. Expenses of $1.5 billion were up 13% year-on-year predominantly driven by higher compensation, reflecting an increase in employees, including for office and technology investments, as well as higher volume-related expenses. Average deposits were down 3% year-on-year, primarily driven by lower nonoperating deposits and down 1% quarter-on-quarter, reflecting seasonally lower balances. Loans were flat quarter-on-quarter. C&I loans were down 1%, reflecting muted demand for new loans as clients remain cautious. And CRE loans were flat as higher rates continue to have an impact on originations and sales activity. Finally, credit costs were a net benefit of $35 million, including a net reserve release of $101 million and net charge-offs of $66 million. Then to complete our lines of business, AWM on Page 7. Asset & Wealth Management reported net income of $1 billion with pretax margin of 28%. Revenue of $4.7 billion was down 1% year-on-year. Excluding net investment valuation gains in the prior year, revenue was up 5% driven by higher management fees on strong net inflows and higher average market levels, partially offset by lower NII due to deposit margin compression. Expenses of $3.4 billion were up 11% year-on-year largely driven by higher compensation, including revenue-related compensation; continued growth in our private banking advisor teams; and the impact of the JPMorgan Asset Management China acquisition; as well as higher distribution fees. For the quarter, long-term net inflows were $34 billion, led by equities and fixed income. AUM of $3.6 trillion was up 19% year-on-year. And client assets of $5.2 trillion were up 20% year-on-year driven by higher market levels and continued net inflow. And finally, loans were down 1% quarter-on-quarter and deposits were flat. Turning to Corporate on Page 8. Corporate reported net income of $918 million. Revenue was $2.3 billion, up $1.3 billion year-on-year. NII was $2.5 billion, up $737 million year-on-year driven by the impact of the balance sheet mix and higher rates. NIR was a net loss of $188 million. The current quarter included net investment securities losses of $366 million compared with net securities losses of $868 million in the prior year quarter. Expenses of $1 billion were up $889 million year-on-year predominantly driven by the increase to the FDIC special assessment. To finish up, we have the outlook on Page 9. We now expect NII ex Markets to be approximately $89 billion based on a forward curve that contained 3 rate cuts at quarter end. Our total NII guidance remains approximately $90 billion, which implies a decrease in our Markets NII guidance from around $2 billion to around $1 billion. The primary driver of that reduction is balance sheet growth and mix shift in the Markets business. And as a reminder, changes in Markets NII are generally revenue-neutral. Our outlook for adjusted expense is now about $91 billion, reflecting the increase to the FDIC special assessment I mentioned upfront. And on credit, we continue to expect the 2024 Card net charge-off rate to be below 3.5%. Finally, you may have noticed that our effective tax rate has increased this quarter, and it will likely stay around 23% this year, absent discrete items, which can vary quite a bit. The driver of this change is the firm's adoption of the proportional amortization method for certain tax equity investments. Our managed rate is unchanged, and it should average about 3.5% above the effective tax rate. This is a smaller gap than we've previously observed, and we expect this approximate relationship to persist going forward, although the difference will continue to fluctuate as it has in the past. For the avoidance of doubt, these changes have no meaningful impact on expected annual net income. We're just mentioning this to help with your models. So to wrap up. We're pleased with another quarter of strong operating results even as the journey towards NII normalization begins. While we remain confident in our ability to produce strong returns and manage risk across a range of scenarios, the economic, geopolitical and regulatory uncertainties that we have been talking about for some time remain prominent, and we are focused on being prepared to navigate those challenges as well as any others that may come our way. And with that, let's open up the line for Q&A.","evidence_gemma_new":null,"evidence_llama_3_3":"CCB net income","evidence_qwen_3_30b":"CCB net income $4.4 billion 1% year-on-year","gemma_new_max":null,"gemma_new_min":null,"llama_3_3_max":4400000000.0,"llama_3_3_min":4400000000.0,"qwen_3_30b_max":4400000000.0,"qwen_3_30b_min":4400000000.0}
{"symbol":"JPM","year":2024,"quarter":2,"date":"2024-Q2","chunk_id":1,"sub_chunk_id":0,"centroid_label":"ccb net income","agreed_value":4200000000.0,"count":2,"chunk":"Jeremy Barnum : Thank you and good morning everyone. Starting on Page one, the firm reported net income of $18.1 billion, EPS of $6.12 on revenue of $51 billion with an ROTCE of 28%. These results included the $7.9 billion net gain related to Visa shares and the $1 billion foundation contribution of the appreciated Visa stock. Also included is $546 million of net investment securities losses in corporate. Excluding these items, the firm had net income of $13.1 billion, EPS of $4.40, and an ROTCE of 20%. Touching on a couple of highlights, in the CIB, IB fees were up 50% year-on-year and 17% quarter-on-quarter, and market revenue was up 10% year-on-year. In CCB, we had a record number of first-time investors and strong customer acquisition across checking accounts and card and we've continued to see strong net inflows across AWM. Now before I get more detail on the results I just want to mention that starting this quarter we are no longer explicitly calling out the First Republic contribution in the presentation. Going forward, we'll only specifically call it out if it is a meaningful driver in the year-on-year comparison. As a reminder, we acquired First Republic in May of last year, so the prior year quarter only has two months of First Republic results compared to the full three months this quarter. Also in the prior year quarter most of the expenses were in corporate whereas now they are primarily in the relevant line-of-business. Now turning to Page 2 for the firm-wide results. The firm reported revenue of $51 billion, up $8.6 billion, or 20% year-on-year. Excluding both the Visa gain that I mentioned earlier, as well as last year's First Republic bargain purchase gain of $2.7 billion, revenue of $43.1 billion was up $3.4 billion or 9%. NII ex-Markets was up $568 million or 3%, driven by the impact of balance sheet mix and higher rates, higher revolving balances in card, and the additional month of First Republic related NII, partially offset by deposit margin compression and lower deposit balances. NIR ex-Markets was up $7.3 billion or 56%. Excluding the items I just mentioned, it was up $2.1 billion or 21%, largely driven by higher investment banking revenue and asset management fees. Both periods included net investment securities losses. And markets revenue was up $731 million or 10% year-on-year. Expenses of $23.7 billion were up $2.9 billion or 14% year-on-year. Excluding the foundation contribution I previously mentioned, expenses were up 9% primarily driven by compensation including revenue related compensation and growth in employees. And credit costs were $3.1 billion reflecting net charge-offs of $2.2 billion and a net reserve build of $821 million. Net charge-offs were up $820 million year-on-year, predominantly driven by Card. The net reserve build included $609 million in consumer and $189 million in wholesale. Onto balance sheet and capital on Page 3. We ended the quarter with a CET1 ratio of 15.3% up 30 basis points versus the prior quarter, primarily driven by net income, largely offset by capital distributions and higher RWA. As you know, we completed CCAR a couple of weeks ago and have already disclosed a number of the key points. Let me summarize them again here. Our preliminary SCB is 3.3%, although the final SCB could be higher. The preliminary SCB, which is up from the current requirement of 2.9%, results in a 12.3% standardized CET1 ratio requirement, which goes into effect in the fourth quarter of 2024. And finally the firm announced that the Board intends to increase the quarterly common stock dividend from $1.15 to $1.25 per share in the third quarter of 2024. Now, let's go to our businesses, starting with CCB on Page 4. CCB reported net income of $4.2 billion on revenue of $17.7 billion, which was up 3% year-on-year. In banking and wealth management, revenue was down 5% year-on-year, reflecting lower deposits and deposit margin compression, partially offset by growth and wealth management revenue. Average deposits were down 7% year-on-year and 1% quarter-on-quarter. Client investment assets were up 14% year-on-year, predominantly driven by market performance. In home lending, revenue of $1.3 billion was up 31% year-on-year, predominantly driven by higher NII, including one additional month of the First Republic portfolio. Turning to Card services and Auto, revenue was up 14% year-on-year, predominantly driven by higher Card NII and higher revolving balances. Card outstandings were up 12% due to strong account acquisition and the continued normalization of revolve. And in Auto, originations were $10.8 billion, down 10% coming off strong originations from a year ago, while continuing to maintain healthy margins. Expenses of $9.4 billion were up 13% year-on-year, predominantly driven by First Republic expenses now reflected in the lines-of-business, as I mentioned earlier, as well as field compensation and continued growth in technology and marketing. In terms of credit performance this quarter, credit costs were $2.6 billion reflecting net charge-offs of $2.1 billion up $813 million year-on-year, predominantly driven by Card, as newer vintages season and credit normalization continues. The net reserve build was $579 million, also driven by Card, due to loan growth and updates to certain macroeconomic variables. Next, the Commercial and Investment Bank on Page 5. Our new Commercial and Investment Bank reported net income of $5.9 billion on revenue of $17.9 billion. You'll note that we are disclosing revenue by business, as well as breaking down the banking and payments revenue by client coverage segment in order to best highlight the relevant trends in both important dimensions of the wholesale franchise. This quarter, IB fees were up 50% year-on-year, and we Ranked Number #1 with year-to-date wallet share of 9.5%. And advisory, fees were up 45%, primarily driven by the closing of a few large deals in a week prior year quarter. Underwriting fees were up meaningfully with equity up 56% and debt up 51%, benefiting from favorable market conditions. In terms of the outlook, we're pleased with both the year-on-year and sequential improvement in the quarter. We remain cautiously optimistic about the pipeline, although many of the same headwinds are still in effect. It's also worth noting that pull-forward refinancing activity was a meaningful contributor to the strong performance in the first half of the year. Payments revenue was $4.5 billion, down 4% year-on-year, as deposit margin compression and higher deposit related client credits were largely offset by fee growth. Moving to markets, total revenue was $7.8 billion, up 10% year-on-year. Fixed income was up 5% with continued strength in securitized products. And equity markets was up 21%, with equity derivatives up on improved client activity. We saw record revenue in Prime on growth and client balances amid supportive equity market levels. Security services revenue of $1.3 billion was up 3% year-on-year, driven by higher volumes and market levels, largely offset by deposit margin compression. Expenses of $9.2 billion were up 12% year-on-year, largely driven by higher revenue related compensation, legal expense, and volume related non-compensation expense. In banking and payments, average loans were up 2% year-on-year due to the impact of the First Republic acquisition and flat sequentially. Demand for new loans remains muted as middle market and large corporate clients remain somewhat cautious due to the economic environment, and revolver utilization continues to be below pre-pandemic levels. Also, capital markets are open and are providing an alternative to traditional bank lending for these clients. In CRE, higher rates continue to suppress both loan origination and payoff activity. Average client deposits were up 2% year-on-year and relatively flat sequentially. Finally, credit costs were $384 million. The net reserve build of $220 million was primarily driven by incorporating the First Republic portfolio in the Firm's modeled approach. Net charge-offs were $164 million, of which about half was in office. Then to complete our lines-of-business, AWM on Page 6. Asset and wealth management reported net income of $1.3 billion with pre-tax margin of 32%. Revenue of $5.3 billion was up 6% year-on-year, driven by growth in management fees on higher average market levels and strong net inflows, as well as higher brokerage activity, largely offset by deposit margin compression. Expenses of $3.5 billion were up 12% year-on-year, largely driven by higher compensation, primarily revenue-related compensation, and continued growth in our private banking advisor teams. For the quarter, long-term net inflows were $52 billion, led by equities and fixed income. And in liquidity, we saw net inflows of $16 billion. AUM of $3.7 trillion was up 15% year-on-year. And client assets of $5.4 trillion were up 18% year-on-year, driven by higher market levels and continued net inflows. And finally, loans and deposits were both flat quarter-on-quarter. Turning to corporate on Page 7. Corporate reported net income of $6.8 billion on revenue of $10.1 billion. Excluding this quarter's Visa-related gain and the First Republic bargain purchase gain in the prior year, NIR was up approximately $450 million year-on-year. NII was up $626 million year-on-year, driven by the impact of balance sheet mix and higher rates. Expenses of $1.6 billion were up $427 million year-on-year, excluding foundation contribution expenses were down $573 million year-on-year, largely as a result of moving First Republic related expense out of corporate into the relevant segments. To finish up, we have the outlook on Page 8. Our 2024 guidance, including the drivers, remains unchanged from what we said at Investor Day. We continue to expect NII and NII ex-markets of approximately $91 billion, adjusted expense of about $92 billion, and on credit, Card net charge-off rate of approximately 3.4%. So to wrap up, the reported performance for the quarter was exceptional and actually represents record revenue and net income. But more importantly, after excluding the significant items, the underlying performance continues to be quite strong. And as always, we remain focused on continuing to execute with discipline. And with that, let's open the line for Q&A.","evidence_gemma_new":null,"evidence_llama_3_3":"CCB net income","evidence_qwen_3_30b":"CCB net income 3% year-on-year","gemma_new_max":null,"gemma_new_min":null,"llama_3_3_max":4200000000.0,"llama_3_3_min":4200000000.0,"qwen_3_30b_max":4200000000.0,"qwen_3_30b_min":4200000000.0}
{"symbol":"JPM","year":2024,"quarter":3,"date":"2024-Q3","chunk_id":1,"sub_chunk_id":0,"centroid_label":"ccb net income","agreed_value":4000000000.0,"count":2,"chunk":"Jeremy Barnum: Thank you, and good morning, everyone. Starting on page one, the firm reported net income of $12.9 billion, EPS of $4.37 and revenue of $43.3 billion with an ROTCE of 19%. Touching on a couple of highlights. In CCB, we ranked number one in retail deposit share for the fourth straight year. In CIB, both IB fees and markets revenue were notably up year-on-year reflecting strength across the franchise. In AWM, we had record quarterly revenues and record long-term flows. Now turning to page two for the firm wide results. The firm reported revenue of $43.3 billion, up $2.6 billion or 6% year-on-year. NII ex-markets was up $274 million or 1%, driven by the impact of balance sheet mix and securities reinvestment, higher revolving balances in card and higher wholesale deposit balances, predominantly offset by lower deposit balances in banking and wealth management and deposit margin compression. NIR ex-markets was up $1.8 billion or 17%, but excluding the prior year's net investment securities losses, it was up 10% on higher asset management and investment banking fees and markets revenue was up $535 million or 8% year-on-year. Expenses of $22.6 billion were up $808 million or 4% year-on-year, driven by compensation including revenue related compensation and growth in employees, partially offset by lower legal expense. And credit costs were $3.1 billion, reflecting net charge offs of $2.1 billion and a net reserve bill of $1 billion, which included $882 million in consumer, primarily in card and $144 million in wholesale. Net charge offs were up $590 million year-on-year, predominantly driven by card. On to balance sheet and capital on page three. We ended the quarter with the CET1 ratio of 15.3% flat versus the prior quarter as net income and OCI gains were offset by capital distributions and higher RWA. This quarter's RWA reflects higher lending activity, as well as higher client activity and market moves on the trading side. We added $6 billion of net common share repurchases this quarter, which in part reflects the deployment of the proceeds from the share from the sale of Visa shares as we have previously mentioned. Now let's go to our businesses starting with CCB on page four. CCB reported net income of $4 billion on revenue of $17.8 billion, which was down 3% year-on-year. In Banking and Wealth Management, revenue was down 11% year-on-year, reflecting deposit margin compression and lower deposits partially offset by growth in Wealth Management revenue. Average deposits were down 8% year-on-year and 2% sequentially. We are seeing a slowdown in customer yield seeking activity including CD volumes and expect deposits to be relatively flat for the remainder of the year. Client investment assets were up 21% year-on-year, driven by market performance and we continue to see strong referrals of new wealth management clients from our branch network. In home lending, revenue was up 3% year-on-year driven by higher NII partially offset by lower servicing and production revenue. Turning to Card Services and Auto. Revenue was up 11% year-on-year, driven by higher card NII on higher revolving balances. Card outstandings were up 11% due to strong account acquisition and the continued normalization of revolve. And in Auto, originations were $10 billion, down 2%, while maintaining strong margins and high quality credit. Expenses of $9.6 billion were up 5% year-on-year, predominantly driven by higher field and technology compensation, as well as growth in marketing. In terms of credit performance this quarter, credit costs were $2.8 billion driven by card and reflected net charge offs of $1.9 billion, up $520 million year-on-year and a net reserve build of $876 million predominantly from higher revolving balances. Next the Commercial and Investment Bank on page five. The CIB reported net income of $5.7 billion on revenue of $17 billion. IB fees were up 31% year-on-year and we ranked number one with year-to-date wallet share of 9.1%. In advisory, fees were up 10% benefiting from the closing of a few large deals. Underwriting fees were up meaningfully with debt up 56% and equity up 26%, primarily driven by favorable market conditions. In light of the positive momentum throughout the year, we're optimistic about our pipeline, but the M&A regulatory environment and geopolitical situation are continued sources of uncertainty. Payments revenue was $4.4 billion, up 4% year-on-year, driven by fee growth and higher deposit balances, largely offset by margin compression. Moving to markets, total revenue was $7.2 billion, up 8% year-on-year. Fixed income was flat reflecting outperformance in currencies and emerging markets and lower revenue and rates. Equities was up 27%, reflecting strong performance across regions largely driven by a supportive trading environment in the U.S. and increased late quarter activity in Asia. Securities Services revenue was $1.3 billion, up 9% year-on-year largely driven by fee growth on higher market levels and volumes. Expenses of $8.8 billion were down 1% year-on-year with lower legal expense predominantly offset by higher revenue related compensation, and growth in-place, as well as higher technology spend. Average banking and payments loans were down 2% year-on-year and down 1% sequentially. In the middle market and large corporate client segments, we continue to see softness in both new loan demand and revolver utilization in part due to clients' access to receptive capital markets. In multifamily, while we are seeing encouraging signs in loan originations as long term rates fall, we expect overall growth to remain muted in the near-term as originations are offset by payoff activity. Average client deposits were up 7% year-on-year and 3% sequentially, primarily driven by growth from large corporates in payments and security services. Finally, credit costs were $316 million, driven by higher net lending activity, including in markets and downgrades, partially offset by improved macroeconomic variables. Then to complete our lines of business, AWM on page six. Asset and wealth management reported net income of $1.4 billion with pre-tax margin of 33%. For the quarter, revenue of $5.4 billion was up 9% year-on-year, driven by growth and management fees on higher average market levels and strong net inflows, investment valuation gains, compared to losses in the prior year, and higher brokerage activity, partially offset by deposit margin compression. Expenses of $3.6 billion or up 16% year-on-year, predominantly driven by higher compensation, including revenue-related compensation and continued growth in our private banking advisor teams, as well as higher distribution fees and legal expense. For the quarter, long-term net inflows were $72 billion, led by fixed income inequities. And in liquidity, we saw net inflows of $34 billion. AUM of $3.9 trillion and client assets of $5.7 trillion were both up 23%, driven by higher market levels and continued net inflows. And finally, loans were up 2% quarter-on-quarter, and deposits were up 4% quarter-on-quarter. Turning to corporate on page seven. Corporate reported net income of $1.8 billion. Revenue was $3.1 billion, up $1.5 billion year-on-year. NII was $2.9 billion, up $932 million year-on-year, predominantly driven by the impact of balance sheet mix and securities reinvestment, including from prior quarters. NIR was a net gain of $155 million, compared with a net loss of $425 million in the prior year, predominantly driven by lower net investment securities losses this quarter. Expenses of $589 million were down $107 million year-on-year. To finish up, let's turn to the outlook on page eight. We now expect 2024 NII ex-markets to be approximately $91.5 billion and total NII to be approximately $92.5 billion. Our outlook for adjusted expense is now about $91.5 billion. And given where we are in the year, we included on the page the implied fourth quarter guidance for NII and adjusted expense. And note that the NII numbers imply about $800 million of markets NII in the fourth quarter. On credit, we continue to expect the 2024 Card net charge-off rate to be approximately 3.4%. So to wrap up, we're pleased with another quarter of strong operating performance. As we look ahead to the next few quarters, we expect results will be somewhat challenged as normalization continues. But we remain upbeat and focused on executing in order to continue delivering excellent returns through the cycle. And with that, let's open the line for Q&A.","evidence_gemma_new":null,"evidence_llama_3_3":"CCB net income","evidence_qwen_3_30b":"CCB net income $4 billion down 3% year-on-year","gemma_new_max":null,"gemma_new_min":null,"llama_3_3_max":4000000000.0,"llama_3_3_min":4000000000.0,"qwen_3_30b_max":4000000000.0,"qwen_3_30b_min":4000000000.0}
{"symbol":"JPM","year":2024,"quarter":4,"date":"2024-Q4","chunk_id":1,"sub_chunk_id":0,"centroid_label":"ccb net income","agreed_value":4500000000.0,"count":2,"chunk":"Jeremy Barnum: Thank you, and good morning, everyone. Starting on Page 1, the firm reported net income of $14 billion, EPS of $4.81 on revenue of $43.7 billion with an ROTCE of 21%. On Page 2, we have more on our fourth quarter results. The firm reported revenue of $43.7 billion, up $3.8 billion or 10% year-on-year. NII ex-markets was down $548 million or 2%, driven by the impact of lower rates and the associated deposit margin compression as well as lower deposit balances in CCB, largely offset by the impact of securities reinvestment, higher revolving balances in card and higher wholesale deposit balances. NII ex-markets was up $3.1 billion or 30%. Excluding the prior year's net investment securities losses, it was up 21%, largely on higher asset management fees and investment banking fees. And markets revenue was up $1.2 billion or 21%. Expenses of $22.8 billion were down $1.7 billion or 7% year-on-year. Excluding the prior year's FDIC special assessment, expenses were up $1.2 billion or 5%, predominantly driven by compensation as well as higher brokerage and distribution fees. And credit costs were $2.6 billion, reflecting net charge-offs of $2.4 billion and a net reserve of $267 million. On Page 3, you can see the reported results for the full year, I'll remind you that there were a number of significant items in 2024. Excluding those items, the firm reported net income of $54 billion, EPS of $18.22, revenue of $173 billion and we delivered an ROTCE of 20%. Touching on a couple of highlights for the year, in CCB, we had a record number of first-time investors and acquired nearly 10 million new card accounts. In CIB, we had record revenue in markets, payments, and security services, and in AWM, we had record long-term net inflows of $234 billion, positive across all channels, regions, and asset classes. On to balance sheet and capital on Page 4, we ended the quarter with a CET1 ratio of 15.7%, up 40 basis points versus the prior quarter as net income and lower RWA were largely offset by both OCI losses and capital distributions, which included $4 billion of net common share repurchases this quarter. The $24 billion decrease in RWA reflects a seasonal decline in markets activity and lower wholesale lending, which was predominantly offset by a seasonal increase in card. Now let's go to our businesses, starting with CCB on Page 5. CCB reported net income of $4.5 billion on revenue of $18.4 billion, which was up 1% year-on-year. In Banking and Wealth Management, revenue was down 7% year-on-year on deposit margin compression and lower deposits, partially offset by growth in wealth management revenue. Average deposits were down 4% year-on-year and flat sequentially as consumer balances have stabilized. Client investment assets were up 14% year-on-year, predominantly driven by market performance, and we continue to see healthy flows across branch and digital channels. In Home Lending, revenue was up 12% year-on-year, predominantly driven by higher production revenue. Turning to Card Services & Auto, revenue was up 14% year-on-year, largely driven by Card NII on higher revolving balances. Card outstandings were up 11% due to strong account acquisition and revolver growth. And in Auto, originations were $10.6 billion, up 7%, reflecting higher lease volume on robust new vehicle inventory. Expenses of $9.7 billion were up 4% year-on-year, predominantly driven by field compensation and growth in technology. In terms of credit performance this quarter, credit costs were $2.6 billion, reflecting net charge-offs of $2.1 billion, up $428 million year-on-year, driven by Card. The net reserve build was $557 million, predominantly driven by higher Card revolving balances. Next, the Commercial & Investment Bank on Page 6. CIB reported net income of $6.6 billion on revenue of $17.6 billion. IV fees were up 49% year-on-year and we ranked number one with wallet share of 9.3% for 2024. Advisory fees were up 41%, benefiting from large deals and share growth in a number of key sectors. Underwriting fees were up meaningfully with debt up 56% and equity up 54%, primarily driven by favorable market conditions. In terms of the outlook for the overall investment banking wallet, in light of the positive momentum, we remain optimistic about our pipeline. Payments revenue was $4.7 billion, up 3% year-on-year, excluding equity investments, driven by higher deposit balances and fee growth, largely offset by deposit margin compression. Lending revenue was $1.9 billion, up 9% year-on-year, predominantly driven by lower losses on hedges. Moving to markets, total revenue was $7 billion, up 21% year-on-year. Fixed income was up 20% with better performance in credit as well as continued outperformance in currencies and emerging markets. Equities was up 22% on elevated client activity and derivatives amid increased volatility and higher trading volumes and cash. Security Services revenue was $1.3 billion, up 10% year-on-year, driven by fee growth on higher client activity and market levels as well as higher deposit balances. Expenses of $8.7 billion were up 7% year-on-year, predominantly driven by higher brokerage, technology, and legal expense. Average banking and payments loans were down 2% year-on-year and down 1% sequentially. Global Corporate & Investment Banking loans were down 2% quarter-on-quarter, driven by paydowns in lower short-term financing, primarily offset by new originations. In commercial banking, middle market loans were also down 2%, driven by paydowns, predominantly offset by new originations, and commercial real estate loans were flat as new originations were offset by paydowns. Average client deposits were up 9% year-on-year and 5% sequentially, driven by underlying client growth. Finally, credit costs were $61 million, driven by net downgrade activity and the net impact of charge-offs, offset -- largely offset by a reserve release due to an update to certain loss assumptions. Then to complete our lines of business, Asset & Wealth Management on Page 7. AWM reported net income of $1.5 billion with pre-tax margin of 35%. Revenue of $5.8 billion was up 13% year-on-year, predominantly driven by growth in management fees on higher average market levels and strong net inflows as well as higher performance fees. Expenses of $3.8 billion were up 11% year-on-year, predominantly driven by higher compensation, including revenue-related compensation and continued growth in our private banking advisor teams as well as higher distribution fees. Long-term net inflows were $76 billion for the quarter, positive across all asset classes. In liquidity, we saw net inflows of $94 billion for the quarter and $104 billion for the full year -- $140 billion for the full year, sorry. And we had client asset net inflows of $468 billion for the year. AUM of $4 trillion and client assets of $5.9 trillion were both up 18% year-on-year, driven by continued net inflows and higher market levels. And finally, loans were up 2% quarter-on-quarter and deposits were up 5% quarter-on-quarter. Turning to Corporate on Page 8; Corporate reported net income of $1.3 billion. Revenue of $2 billion was up $223 million year-on-year. NII of $2 billion was down $415 million year-on-year, driven by the impact of lower rates, largely offset by balance sheet actions, primarily securities reinvestment activity. NII was a net loss of $30 million compared to the net loss of $668 million in the prior year, driven by lower net investment securities losses this quarter. And expenses of $550 million were down $3 billion year-on-year, predominantly driven by the absence of the FDIC Special Assessment of $2.9 billion in the prior year. With that, let's pivot to the outlook, starting with NII on Page 9. We expect 2025 NII ex-markets to be approximately $90 billion. Going through the drivers, as usual, the outlook assumes that rates follow the forward curve. It's worth noting that the NII decrease is driven by both the cut expected in 2025 and the impact of the 100 basis points of cuts in the back half of 2024. You can see on the page that we've illustrated the historical trajectory of card loan growth. We expect healthy card loan growth again this year, but below the 12% pace we saw in 2024 as tailwinds from revolve normalization are largely behind us. Turning to deposits; firm-wide deposits have stabilized and we expect to see a more visible growth trend to assert itself in the second half of 2025. It's notable that we can already see that trend in consumer checking deposits. On deposit margin, we expect modest compression due to lower rates. When you put all that together, we expect the NII trough could be sometime in the middle of the year, followed by growth as we illustrated at the bottom of the bar. And for completeness, we expect firm-wide NII to be approximately $94 billion as a function of markets NII increasing to about $4 billion, which you should think of as being primarily offset in NIR. Finally, I want to point out that starting this quarter, we are including an estimate of earnings at risk in the earnings supplement, so you no longer have to wait for the K or the Q to get that number. Now let's turn to expenses on Page 10. We expect 2025 expense to be about $95 billion. Looking at the chart in the middle of the page, I'll touch on the drivers of the year-on-year change, which you'll note are very consistent with what you've been hearing from us recently. The largest increase is volume and revenue-related expense, which is primarily driven by expected growth in auto leasing as well as capital markets. As a reminder, this comes with higher revenues. We continue to hire bankers and advisors to support business growth as well as expand our branch network. The increase in tech spend is primarily business-driven as we continue to invest in new products, features, and customer platforms as well as modernization. Marketing remains a driver of spend as we continue to see attractive opportunities, resulting in strong demand and engagement in our Card business. And finally, while we haven't explicitly called it out in each bar, inflation remains a source of some upward pressure, and as always, we are generating efficiencies to help offset it. Now let's turn to Page 11 to cover credit and wrap-up. On credit, we expect the 2025 card net charge-off rate to be in line with our previous guidance of approximately 3.6%. So, in closing, 2024 was another year of record revenue and net income, and we're proud of what we accomplished. As we look ahead to 2025, we still expect NII normalization, although to a lesser extent than we previously thought. And taking a step back, we think it's important to acknowledge the tension in the risks and uncertainties in the environment and the degree of optimism embedded in asset prices and expectations. In that context, we remain upbeat about the strength of the franchise, but we are focused on being prepared for a wide range of scenarios. Finally, let me say a few words about the wildfires in Los Angeles, while we don't expect much of a financial impact from it, we have a presence in the area across all three lines of business, so we're keeping in close contact with our customers, clients, and employees. We are offering support in a variety of ways, including waiving consumer and business banking fees as well as making a contribution to local relief organizations, offering employee donation matching, and supporting employee volunteer efforts. With that, I'll turn it over to Jamie before we open up the line for Q&A.","evidence_gemma_new":null,"evidence_llama_3_3":"CCB net income","evidence_qwen_3_30b":"CCB net income up 1% year-on-year","gemma_new_max":null,"gemma_new_min":null,"llama_3_3_max":4500000000.0,"llama_3_3_min":4500000000.0,"qwen_3_30b_max":4500000000.0,"qwen_3_30b_min":4500000000.0}
{"symbol":"JPM","year":2023,"quarter":1,"date":"2023-Q1","chunk_id":1,"sub_chunk_id":0,"centroid_label":"cib net income","agreed_value":4400000000.0,"count":2,"chunk":"Jeremy Barnum: Thanks, and good morning, everyone. The presentation is available on our website, and please refer to the disclaimer in the back. Starting on page 1. The Firm reported net income of $12.6 billion, EPS of $4.10 on revenue of $39.3 billion and delivered an ROTCE of 23%. These results included $868 million of net investment securities losses in corporate. Before reviewing our results for the quarter, let\u2019s talk about the recent bank failures. Jamie has addressed a number of the important themes in his shareholder letter and the recent televised interview. So, I will go straight to the specific impacts on the Firm. As you would expect, we saw significant new account opening activity and meaningful deposit and money market fund inflows, most significantly in the Commercial Bank, Business Banking and AWM. Regarding the deposit inflows, at the Firm-wide level, average deposits were down 3% quarter-on-quarter, while end-of-period deposits were up 2% quarter-on-quarter, implying an intra-quarter reversal of the recent outflow trend as a consequence of the March events. We estimate that we have retained approximately $50 billion of these deposit inflows at quarter-end. It\u2019s important to note that while the sequential period-end deposit increase is higher than we would have otherwise expected, our current full year NII outlook, which I will address at the end, still assumes modest deposit outflows from here. We expect these outflows to be driven by the same factors as last quarter as well as the expectation that we will not retain all of this quarter\u2019s inflows. Now back to the quarter touching on a few highlights. We grew our IB fee wallet share. Consumer spending remained solid with combined debit and credit card spend up 10% year-on-year. And credit continues to normalize, but actual performance remains strong across the Company. On Page 2, we have some more detail. Revenue of $39.3 billion was up $7.7 billion or 25% year-on-year. NII ex markets was up $9.2 billion or 78%, driven by higher rates, partially offset by lower deposit balances. NIR ex markets was down $1.1 billion or 10% driven by the securities losses previously mentioned as well as lower IB fees and lower auto lease income on lower volume. And markets revenue was down $371 million or 4% year-on-year. Expenses of $20.1 billion were up $916 million or 5% year-on-year, driven by compensation-related costs, reflecting the annualization of last year\u2019s headcount growth and wage inflation. These results include the impact of the higher FDIC assessment I mentioned last quarter, which, of course, is unrelated to recent events. And credit costs of $2.3 billion included net charge-offs of $1.1 billion, predominantly in card. The net reserve build of $1.1 billion was largely driven by deterioration in our weighted average economic outlook. Onto balance sheet and capital on page 3. We ended the quarter with a CET1 ratio of 13.8%, up about 60 basis points, which was primarily driven by the benefit of net income less distributions and AOCI gains. And in line with what we previously said, we resumed stock buybacks this quarter and distributed a total of $1.9 billion and net repurchases back to shareholders. Now, let\u2019s go to our businesses, starting with CCB on Page 4. Touching quickly on the health of U.S. consumers and small businesses based on our data. Both continue to show resilience and remain on the path to normalization as expected, but we continue to monitor their activity closely. Spend remains solid, and we have not observed any notable pullback throughout the quarter. Moving to financial results. CCB reported net income of $5.2 billion on revenue of $16.5 billion, which was up 35% year-on-year. In Banking & Wealth Management, revenue was up 67% year-on-year, driven by higher NII on higher rates. Average deposits were down 2% quarter-on-quarter, in line with recent trends. Throughout the quarter, we continued to see customer flows to higher-yielding products, as you would expect, but were encouraged by what we are capturing in CDs and our Wealth Management offerings. Client investment assets were down 1% year-on-year, but up 7% quarter-on-quarter, driven by market performance as well as strong net inflows. In Home Lending, revenue was down 38% year-on-year, largely driven by lower net interest income from tighter loan spreads and lower production revenue. Moving to Card Services & Auto. Revenue was up 14% year-on-year, largely driven by higher Card Services NII on higher revolving balances, partially offset by lower auto lease income. Credit card spend was up 13% year-on-year. Card outstandings were up 21%, driven by strong new account growth and revolve normalization. And in Auto, originations were $9.2 billion, up 10% year-on-year. Expenses of $8.1 billion were up 5% year-on-year, reflecting the impact of wage inflation and higher headcount. In terms of credit performance this quarter, credit costs were $1.4 billion, reflecting reserve builds of $300 million in card and $50 million in Home Lending. Net charge-offs were $1.1 billion, up about $500 million year-on-year, in line with expectations as delinquency levels continue to normalize across portfolios. Next, the CIB on Page 5. CIB reported net income of $4.4 billion on revenue of $13.6 billion. Investment Banking revenue of $1.6 billion was down 24% year-on-year. IB fees were down 19%. We ranked number 1 with first quarter wallet share of 8.7%. In advisory, fees were down 6% compared to a strong first quarter last year. Our underwriting businesses continued to be affected by market conditions with fees down 34% for debt and 6% for equity. In terms of the outlook, the dynamics remain the same. Our pipeline is relatively robust, but conversion is sensitive to market conditions and the economic outlook. We expect the second quarter and the rest of the year to remain challenging. Moving to Markets. Total revenue was $8.4 billion, down 4% year-on-year. Fixed income was flat. Rates was strong during the rally early in the quarter as well as through the elevated volatility in March. Credit was up on the back of higher client flows and currencies in emerging markets was down relative to a very strong first quarter in the prior year. Equity Markets was down 12%, driven by lower revenues in derivatives relative to a strong first quarter in the prior year and lower client activity and cash. Payments revenue was $2.4 billion, up 26% year-on-year. Excluding the net impact of equity investments, primarily a gain in the prior year, it was up 55%, with the growth driven by higher rates, partially offset by lower deposit balances. Securities Services revenue of $1.1 billion was up 7% year-on-year, driven by higher rates, partially offset by lower deposit balances and market levels. Expenses of $7.5 billion were up 2% year-on-year as higher headcount and wage inflation were largely offset by lower revenue-related compensation. Moving to the Commercial Bank on page 6. Commercial Banking reported net income of $1.3 billion. Revenue of $3.5 billion was up 46% year-on-year, driven by higher deposit margins. Payments revenue of $2 billion was up 98% year-on-year driven by higher rates. And gross Investment Banking revenue of $881 million was up 21% year-on-year on increased M&A and bond underwriting from large deal activity. Expenses of $1.3 billion were up 16% year-on-year largely driven by higher compensation expense, including front office hiring and technology investments as well as higher volume-related expense. Average deposits were down 16% year-on-year and 5% quarter-on-quarter, predominantly driven by continued attrition and non-operating deposits as well as seasonally lower balances. Loans were up 13% year-on-year and 1% sequentially. C&I loans were up 1% quarter-on-quarter with somewhat different dynamics based on client size. In middle market banking, higher rates and recession concerns have decreased new loan demand and utilization, which is also leading to weakness in CapEx spending. In Corporate Client Banking, utilization rates increased modestly quarter-on-quarter as capital market conditions led more clients to opt for bank debt. CRE loans were also up 1% sequentially with higher rates creating headwinds for both originations and prepayments. And given the recent focus on commercial real estate, let me remind you that our office sector exposure is less than 10% of our portfolio and is focused in the urban dense markets, and nearly two-thirds of our loans are multifamily, primarily in supply-constrained markets. Finally, credit costs of $417 million included a net reserve build of $379 million, predominantly driven by what I mentioned upfront. Then to complete our lines of business, AWM on page 7. Asset & Wealth Management reported net income of $1.4 billion, pretax margin of 35%. Revenue of $4.8 billion was up 11% year-on-year driven by higher deposit margins on lower balances and a valuation gain on our initial investment triggered by taking full ownership of our asset management joint venture in China, partially offset by the impact of lower average market levels on management fees and lower performance fees. Expenses of $3.1 billion were up 8% year-on-year, predominantly driven by compensation, reflecting growth in our private banking advisory teams, higher revenue-related compensation and the run rate impact of acquisitions. For the quarter, net long-term inflows were $47 billion, led by fixed income and equities. And then liquidity, we saw net inflows of $93 billion, inclusive of our ongoing deposit migration. AUM of $3 trillion was up 2% year-on-year and overall client assets of $4.3 trillion were up 6%, driven by continued net inflows into liquidity and long-term products. And finally, loans were down 1% quarter-on-quarter, driven by lower securities-based lending, while average deposits were down 5%. Turning to Corporate on page 8. Corporate reported net income of $244 million. Revenue was $985 million compared to a net loss of $881 million last year. NII was $1.7 billion, up $2.3 billion year-on-year due to the impact of higher rates. NIR was a loss of $755 million compared with a loss of $345 million in the prior year and included the net investment securities losses I mentioned earlier. Expenses of $160 million were down $24 million year-on-year. And credit costs of $370 million were driven by reserve builds on a couple of single name exposures. Next, the outlook on page 9. We now expect 2023 NII and NII ex-markets to be approximately $81 billion. This increase in guidance is primarily driven by lower rate paid assumptions across both consumer and wholesale in light of the expectation of Fed cuts later in the year as well as slightly higher card revolving balances. Note that in line with my comments at the outset, recent deposit balance increases are not a meaningful contributor to the upward revision in the NII outlook, given that we expect a meaningful portion of the recent inflows to reverse later in the year. I would point out that this outlook still embeds significant reprice lags. We think a more sustainable NII ex-markets run rate in the medium term is well below this quarter\u2019s $84 billion as well as below the $80 billion that is implied for the rest of the year by our full year guidance. And while we don\u2019t know exactly when this lower run rate will be reached, when it happens, we believe it will be around the mid-70s. And of course, as we mentioned last quarter, this NII outlook remains highly sensitive to the uncertainty associated with the timing and the extent of deposit reprice, investment portfolio decisions, the dynamics of QT and RRP, the trajectory of Fed funds as well as the broader macroeconomic environment, including its impact on loan growth. Separately, it\u2019s worth noting that markets NII may start to trend slightly positive towards the end of the year as a function of mix and rate effects. Moving to expenses. Our outlook for 2023 continues to be about $81 billion. Importantly, this does not currently include the impact of the pending FDIC special assessment. And on credit, we continue to expect the 2023 card net charge-off rate to be approximately 2.6%. So to wrap up, our strong results this quarter once again highlight the earnings power of this diversified franchise. We have benefited from our fortress principles and commitment to invest, which we will continue to do as we head into an increasingly uncertain environment. With that, operator, please open the line for Q&A.","evidence_gemma_new":null,"evidence_llama_3_3":"CIB net income","evidence_qwen_3_30b":"CIB net income $4.4 billion","gemma_new_max":null,"gemma_new_min":null,"llama_3_3_max":4400000000.0,"llama_3_3_min":4400000000.0,"qwen_3_30b_max":4400000000.0,"qwen_3_30b_min":4400000000.0}
{"symbol":"JPM","year":2023,"quarter":4,"date":"2023-Q4","chunk_id":1,"sub_chunk_id":0,"centroid_label":"cib net income","agreed_value":2500000000.0,"count":2,"chunk":"Jeremy Barnum: Thank you, and good morning, everyone. The presentation is available on our website, and please refer to the disclaimer in the back. Starting on Page 1, the firm reported net income of $9.3 billion, EPS of $3.04 on revenue of $39.9 billion, and delivered an ROTCE of 15%. These results included the $2.9 billion FDIC special assessment and $743 million of net investment securities losses in Corporate. On Page 2, we have more on our fourth quarter results. Similar to prior quarters, we have called out the impact of First Republic, where relevant. You'll also note that we have now allocated certain deposits, which were previously in CCB to the appropriate lines of business. For the quarter, First Republic contributed $1.9 billion of revenue, $890 million of expense, and $647 million of net income. Now, focusing on the firmwide fourth quarter results, excluding First Republic. Revenue of $38.1 billion was up $2.5 billion or 7% year-on-year. NII, ex-Markets was up $2.2 billion or 11%, predominantly driven by higher rates. NIR, ex-Markets was up $139 million or 1% and Markets revenue was up $141 million or 2%. Expenses of $23.6 billion were up $4.6 billion or 24% year-on-year, predominantly driven by the FDIC special assessment and higher compensation, including wage inflation and growth in front office and technology. And credit costs were $2.6 billion, reflecting net charge-offs of $2.2 billion, and a net reserve build for $474 million. Net charge-offs were up $1.3 billion, predominantly driven by Card and single-name exposures in Wholesale, which were largely previously reserved. The net reserve build was primarily driven by loan growth in Card and the deterioration in the outlook related to commercial real-estate valuations in the Commercial Banking. Looking at the full-year results on Page 3. The firm reported net income of $50 billion, EPS of $16.23, and revenue of $162 billion, and we delivered an ROTCE of 21%. Onto balance sheet and capital on Page 4. We ended the quarter with CET1 ratio of 15%, up 70 basis points versus the prior quarter, primarily driven by net income, AOCI gains and lower RWA, partially offset by a continued modest pace of capital distributions as the firm builds towards the proposed Basel III Endgame requirements. Now, let's go to our businesses, starting with CCB on Page 5. Total debit and credit card spend was up 7% year-on-year, driven by strong account growth and consumer spend remained stable. Turning now to the financial results, excluding First Republic. CCB reported net income of $4.4 billion on revenue of $17 billion, which was up 8% year-on-year. In Banking & Wealth Management, revenue was up 6% year-on-year, reflecting higher NII on higher rates, largely offset by lower deposits, with average balances down 8% year-on-year. Client investment assets were up 25%, driven by market performance and strong net inflows. In fact, it's been a record year for retail net new money. In Home Lending revenue was up $230 million, predominantly driven by the absence of an MSR loss this quarter versus the prior year and higher NII. Moving to Card Services & Auto, revenue was up 8% year-on-year, driven by higher card services NII on higher revolving balances, partially offset by lower auto lease income. Card outstandings were up 14% due to strong account acquisition and continued normalization of revolve. And in auto, originations were $9.9 billion, up 32% as we gained market share while retaining strong margins. Expenses of $8.7 billion were up 10% year-on-year, largely driven by compensation, including an increase in employees, primarily in bankers, advisors, and technology, and wage inflation, as well as continued investments in marketing and technology. In terms of credit performance this quarter, credit costs were $2.2 billion, largely driven by net charge-offs which were up $791 million year-on-year, predominantly due to continued normalization in card. The net reserve build of $538 million reflected loan growth in card. Next, the CIB on Page 6. The CIB reported net income of $2.5 billion on revenue of $11 billion. Investment banking revenue of $1.6 billion was up 13% year-on-year. IB fees were also up 13% year-on-year and we ended the year ranked number one with a wallet share of 8.8%. And advisory fees were up 2%. Underwriting fees were up significantly compared to a weak prior year quarter with debt up 21% and equity up 30%. We are starting the year with a healthy pipeline and we are encouraged by the level of capital markets activity, but announced M&A remains a headwind, and the extent as well as the timing of capital markets normalization remains uncertain. Payments revenue was $2.3 billion, up 10% year-on-year. Excluding equity investments, it was flat as fee growth was predominantly offset by deposit-related client credits. Moving to Markets, total revenue was $5.8 billion, up 2% year-on-year. Fixed income was a record fourth quarter, up 8%. It was another strong quarter in our securitized products business, which was partially offset by lower revenue and rates coming off a strong quarter last year. Equity markets was down 8%, driven by lower revenue in derivatives and cash. Security services revenue of $1.2 billion was up 3% year-on-year. Expenses of $6.8 billion were up 4% year-on-year, predominantly driven by the timing of revenue-related compensation. Credit costs were $210 million, reflecting net charge-offs of $121 million and a net reserve build of $89 million. Moving to the Commercial Bank on Page 7. Commercial Banking reported net income of $1.5 billion. Revenue of $3.7 billion was up 7% year-on-year, largely driven by higher NII, where the impact of rates was partially offset by lower deposit balances. Payments revenue of $2 billion was up 2% year-on-year driven by fee growth, largely offset by deposit-related client credits. Gross investment banking and markets revenue of $924 million was up 32% year-on-year, primarily reflecting increased capital markets and M&A activity. Expenses of $1.4 billion were up 9% year-on-year, driven by an increase in employees, including front office and technology investments, as well as higher volume-related expense, including the impact of new client acquisition. Average deposits were down 6% year-on-year, primarily driven by lower non-operating deposits as clients continue to opt for higher-yielding alternatives and flat quarter-on-quarter as client balances are seasonally higher at year-end. Loans were down 1% quarter-on-quarter. C&I loans were down 2%, reflecting lower revolver utilization and muted demand for new loans as clients remained cautious. And CRE loans were flat as higher rates continued to have an impact on originations and payoff activity. Finally, credit costs were $269 million, including net charge-offs of $127 million and a net reserve build of $142 million, driven by deterioration in our commercial real estate valuation outlook. And then to complete our lines of business, AWM on Page 7. Asset & Wealth Management reported net income of $925 million with pretax margin of 28%. Revenue of $4.7 billion was up 2% year-on-year, driven by higher management fees on strong net inflows and higher average market levels, predominantly offset by lower NII. The decrease in NII reflects lower deposit margins and balances partially offset by wider spreads on loans. Expenses of $3.4 billion were up 11% year-on-year, largely driven by higher compensation, including performance-based incentives, continued growth in our private banking advisor teams, the impact of closing JPMorgan Asset Management China acquisition, and the continued investment in global shares. For the quarter, net long-term inflows were $12 billion, positive across equities and fixed income, and $140 billion for the full year. In liquidity, we saw net inflows of $49 billion for the quarter and net inflows of $242 billion for the full year. And we had record client asset net inflows of $489 billion for the year. AUM of $3.4 trillion and client assets of $5 trillion were both up 24% year-on-year, driven by continued net inflows and higher market levels. And finally, loans were up 2% quarter-on-quarter and deposits were up 7% quarter-on-quarter. Turning to Corporate on Page 9. Corporate reported a net loss of $689 million. Revenue of $1.8 billion was up $597 million year-on-year. NII of $2.5 billion was up $1.2 billion year-on-year due to the impact of higher rates and balance sheet mix. NIR was a net loss of $687 million compared to the net loss of $115 million, and included the net investment securities losses I mentioned upfront. And expenses of $3.4 billion were up $3 billion year-on-year, predominantly driven by the FDIC special assessment. With that, let's pivot to the outlook for 2024, starting with NII on Page 10. We expect 2024 NII ex-Markets to be approximately $88 billion. Going through the drivers, the outlook assumes that rates follow the forward curve, which currently includes six cuts this year. On deposits, we expect balances to be very modestly down from current levels. While lower rates should decrease repricing pressure, we remain asset sensitive, and therefore the lower rates will decrease NII, resulting in more normal deposit margins. We expect strong loan growth in Card to continue, but not at the same pace as 2023. Still, this should help offset some of the impact of lower rates. Outside of Card, loan growth will likely remain muted. It's important to note that we just reported a quarterly NII ex-Markets run rate of $94 billion. Combining that with the full-year guidance of approximately $88 billion implies meaningful sequential quarterly declines throughout 2024, consistent with what we've been telling you for some time. And keep in mind that many of the sources of uncertainty that we've highlighted previously surrounding the NII outlook remain. And on total NII, we expect it to be approximately $90 billion for the full-year, reflecting an increase in Markets NII which, as always, you should think of as largely offset in NIR. Now, let's turn to expenses on Page 11. We expect 2024 adjusted expense to be about $90 billion. You'll see on the slide we provided detail by line of business. Generally, you can see that both in dollar terms and in percentage terms, the expense growth is aligned to where the greatest opportunities are, both in terms of share and available returns. And of course, you'll hear more at Investor Day and between now and then. On the right-hand side of the page, we've highlighted some firmwide drivers. Thematically, the biggest driver is what I might call business growth writ large. Within that, narrowly defined volume and revenue-related growth represents about $1 billion of the increase across the company as a result of an improved NIR outlook, compared to about $400 million in 2023. But in addition, the ongoing growth of the company, which continues to produce share gains and additional profitability, is coming with increased expense across a range of categories. The quantum of investment increase is comparable to last year's increase and is driven by all the same themes, bankers, branches, advisors, technology as well as marketing. Net-net, First Republic produces a modest increase in expenses, but with a significantly lower 2024 exit run rate as the result of business integration efforts. Finally, despite significantly lower inflation outlook in the economy as a whole, we still see some residual effects of inflation flowing through most of our expense categories. It's worth noting that both the general business growth and investment growth include decisions that have been executed both in response to market conditions during 2023 and to support the future growth and profitability of the company. We've included the fourth quarter 2023 exit rate on the page to illustrate that a significant portion of the year-on-year increase in expense is already in the run rate. Now, let's turn to Page 12 and cover credit and wrap up. On credit, we continue to expect the 2024 card net charge-off rate to be below 3.5%, consistent with Investor Day guidance. So in closing, we shouldn't leave 2023 without noting what an outstanding year it was, producing record revenue and net income despite some notable significant items. We're very proud of what we accomplished this year and want to thank everyone who made it possible. At the same time, we emphasized throughout 2023 the extent to which we were over-earning, as indicated by an ROTCE that is 4% above our through-the-cycle target. As we turn to 2024, it shouldn't be surprising that our outlook has us beginning to march down the path towards normalization of our returns. But despite the expected dissipation of the 2023 tailwinds and the presence of significant economic and geopolitical uncertainties, we remain optimistic about this franchise's ability to produce superior returns through a broad range of environments. And this management team remains laser-focused on executing for shareholders, clients, and communities. And with that, let's open the line for Q&A.","evidence_gemma_new":null,"evidence_llama_3_3":"CIB net income fourth quarter","evidence_qwen_3_30b":"CIB net income $2.5 billion","gemma_new_max":null,"gemma_new_min":null,"llama_3_3_max":2500000000.0,"llama_3_3_min":2500000000.0,"qwen_3_30b_max":2500000000.0,"qwen_3_30b_min":2500000000.0}
{"symbol":"JPM","year":2024,"quarter":3,"date":"2024-Q3","chunk_id":1,"sub_chunk_id":0,"centroid_label":"cib net income","agreed_value":5700000000.0,"count":2,"chunk":"Jeremy Barnum: Thank you, and good morning, everyone. Starting on page one, the firm reported net income of $12.9 billion, EPS of $4.37 and revenue of $43.3 billion with an ROTCE of 19%. Touching on a couple of highlights. In CCB, we ranked number one in retail deposit share for the fourth straight year. In CIB, both IB fees and markets revenue were notably up year-on-year reflecting strength across the franchise. In AWM, we had record quarterly revenues and record long-term flows. Now turning to page two for the firm wide results. The firm reported revenue of $43.3 billion, up $2.6 billion or 6% year-on-year. NII ex-markets was up $274 million or 1%, driven by the impact of balance sheet mix and securities reinvestment, higher revolving balances in card and higher wholesale deposit balances, predominantly offset by lower deposit balances in banking and wealth management and deposit margin compression. NIR ex-markets was up $1.8 billion or 17%, but excluding the prior year's net investment securities losses, it was up 10% on higher asset management and investment banking fees and markets revenue was up $535 million or 8% year-on-year. Expenses of $22.6 billion were up $808 million or 4% year-on-year, driven by compensation including revenue related compensation and growth in employees, partially offset by lower legal expense. And credit costs were $3.1 billion, reflecting net charge offs of $2.1 billion and a net reserve bill of $1 billion, which included $882 million in consumer, primarily in card and $144 million in wholesale. Net charge offs were up $590 million year-on-year, predominantly driven by card. On to balance sheet and capital on page three. We ended the quarter with the CET1 ratio of 15.3% flat versus the prior quarter as net income and OCI gains were offset by capital distributions and higher RWA. This quarter's RWA reflects higher lending activity, as well as higher client activity and market moves on the trading side. We added $6 billion of net common share repurchases this quarter, which in part reflects the deployment of the proceeds from the share from the sale of Visa shares as we have previously mentioned. Now let's go to our businesses starting with CCB on page four. CCB reported net income of $4 billion on revenue of $17.8 billion, which was down 3% year-on-year. In Banking and Wealth Management, revenue was down 11% year-on-year, reflecting deposit margin compression and lower deposits partially offset by growth in Wealth Management revenue. Average deposits were down 8% year-on-year and 2% sequentially. We are seeing a slowdown in customer yield seeking activity including CD volumes and expect deposits to be relatively flat for the remainder of the year. Client investment assets were up 21% year-on-year, driven by market performance and we continue to see strong referrals of new wealth management clients from our branch network. In home lending, revenue was up 3% year-on-year driven by higher NII partially offset by lower servicing and production revenue. Turning to Card Services and Auto. Revenue was up 11% year-on-year, driven by higher card NII on higher revolving balances. Card outstandings were up 11% due to strong account acquisition and the continued normalization of revolve. And in Auto, originations were $10 billion, down 2%, while maintaining strong margins and high quality credit. Expenses of $9.6 billion were up 5% year-on-year, predominantly driven by higher field and technology compensation, as well as growth in marketing. In terms of credit performance this quarter, credit costs were $2.8 billion driven by card and reflected net charge offs of $1.9 billion, up $520 million year-on-year and a net reserve build of $876 million predominantly from higher revolving balances. Next the Commercial and Investment Bank on page five. The CIB reported net income of $5.7 billion on revenue of $17 billion. IB fees were up 31% year-on-year and we ranked number one with year-to-date wallet share of 9.1%. In advisory, fees were up 10% benefiting from the closing of a few large deals. Underwriting fees were up meaningfully with debt up 56% and equity up 26%, primarily driven by favorable market conditions. In light of the positive momentum throughout the year, we're optimistic about our pipeline, but the M&A regulatory environment and geopolitical situation are continued sources of uncertainty. Payments revenue was $4.4 billion, up 4% year-on-year, driven by fee growth and higher deposit balances, largely offset by margin compression. Moving to markets, total revenue was $7.2 billion, up 8% year-on-year. Fixed income was flat reflecting outperformance in currencies and emerging markets and lower revenue and rates. Equities was up 27%, reflecting strong performance across regions largely driven by a supportive trading environment in the U.S. and increased late quarter activity in Asia. Securities Services revenue was $1.3 billion, up 9% year-on-year largely driven by fee growth on higher market levels and volumes. Expenses of $8.8 billion were down 1% year-on-year with lower legal expense predominantly offset by higher revenue related compensation, and growth in-place, as well as higher technology spend. Average banking and payments loans were down 2% year-on-year and down 1% sequentially. In the middle market and large corporate client segments, we continue to see softness in both new loan demand and revolver utilization in part due to clients' access to receptive capital markets. In multifamily, while we are seeing encouraging signs in loan originations as long term rates fall, we expect overall growth to remain muted in the near-term as originations are offset by payoff activity. Average client deposits were up 7% year-on-year and 3% sequentially, primarily driven by growth from large corporates in payments and security services. Finally, credit costs were $316 million, driven by higher net lending activity, including in markets and downgrades, partially offset by improved macroeconomic variables. Then to complete our lines of business, AWM on page six. Asset and wealth management reported net income of $1.4 billion with pre-tax margin of 33%. For the quarter, revenue of $5.4 billion was up 9% year-on-year, driven by growth and management fees on higher average market levels and strong net inflows, investment valuation gains, compared to losses in the prior year, and higher brokerage activity, partially offset by deposit margin compression. Expenses of $3.6 billion or up 16% year-on-year, predominantly driven by higher compensation, including revenue-related compensation and continued growth in our private banking advisor teams, as well as higher distribution fees and legal expense. For the quarter, long-term net inflows were $72 billion, led by fixed income inequities. And in liquidity, we saw net inflows of $34 billion. AUM of $3.9 trillion and client assets of $5.7 trillion were both up 23%, driven by higher market levels and continued net inflows. And finally, loans were up 2% quarter-on-quarter, and deposits were up 4% quarter-on-quarter. Turning to corporate on page seven. Corporate reported net income of $1.8 billion. Revenue was $3.1 billion, up $1.5 billion year-on-year. NII was $2.9 billion, up $932 million year-on-year, predominantly driven by the impact of balance sheet mix and securities reinvestment, including from prior quarters. NIR was a net gain of $155 million, compared with a net loss of $425 million in the prior year, predominantly driven by lower net investment securities losses this quarter. Expenses of $589 million were down $107 million year-on-year. To finish up, let's turn to the outlook on page eight. We now expect 2024 NII ex-markets to be approximately $91.5 billion and total NII to be approximately $92.5 billion. Our outlook for adjusted expense is now about $91.5 billion. And given where we are in the year, we included on the page the implied fourth quarter guidance for NII and adjusted expense. And note that the NII numbers imply about $800 million of markets NII in the fourth quarter. On credit, we continue to expect the 2024 Card net charge-off rate to be approximately 3.4%. So to wrap up, we're pleased with another quarter of strong operating performance. As we look ahead to the next few quarters, we expect results will be somewhat challenged as normalization continues. But we remain upbeat and focused on executing in order to continue delivering excellent returns through the cycle. And with that, let's open the line for Q&A.","evidence_gemma_new":null,"evidence_llama_3_3":"CIB net income","evidence_qwen_3_30b":"CIB net income $5.7 billion","gemma_new_max":null,"gemma_new_min":null,"llama_3_3_max":5700000000.0,"llama_3_3_min":5700000000.0,"qwen_3_30b_max":5700000000.0,"qwen_3_30b_min":5700000000.0}
{"symbol":"JPM","year":2024,"quarter":4,"date":"2024-Q4","chunk_id":1,"sub_chunk_id":0,"centroid_label":"cib net income","agreed_value":6600000000.0,"count":2,"chunk":"Jeremy Barnum: Thank you, and good morning, everyone. Starting on Page 1, the firm reported net income of $14 billion, EPS of $4.81 on revenue of $43.7 billion with an ROTCE of 21%. On Page 2, we have more on our fourth quarter results. The firm reported revenue of $43.7 billion, up $3.8 billion or 10% year-on-year. NII ex-markets was down $548 million or 2%, driven by the impact of lower rates and the associated deposit margin compression as well as lower deposit balances in CCB, largely offset by the impact of securities reinvestment, higher revolving balances in card and higher wholesale deposit balances. NII ex-markets was up $3.1 billion or 30%. Excluding the prior year's net investment securities losses, it was up 21%, largely on higher asset management fees and investment banking fees. And markets revenue was up $1.2 billion or 21%. Expenses of $22.8 billion were down $1.7 billion or 7% year-on-year. Excluding the prior year's FDIC special assessment, expenses were up $1.2 billion or 5%, predominantly driven by compensation as well as higher brokerage and distribution fees. And credit costs were $2.6 billion, reflecting net charge-offs of $2.4 billion and a net reserve of $267 million. On Page 3, you can see the reported results for the full year, I'll remind you that there were a number of significant items in 2024. Excluding those items, the firm reported net income of $54 billion, EPS of $18.22, revenue of $173 billion and we delivered an ROTCE of 20%. Touching on a couple of highlights for the year, in CCB, we had a record number of first-time investors and acquired nearly 10 million new card accounts. In CIB, we had record revenue in markets, payments, and security services, and in AWM, we had record long-term net inflows of $234 billion, positive across all channels, regions, and asset classes. On to balance sheet and capital on Page 4, we ended the quarter with a CET1 ratio of 15.7%, up 40 basis points versus the prior quarter as net income and lower RWA were largely offset by both OCI losses and capital distributions, which included $4 billion of net common share repurchases this quarter. The $24 billion decrease in RWA reflects a seasonal decline in markets activity and lower wholesale lending, which was predominantly offset by a seasonal increase in card. Now let's go to our businesses, starting with CCB on Page 5. CCB reported net income of $4.5 billion on revenue of $18.4 billion, which was up 1% year-on-year. In Banking and Wealth Management, revenue was down 7% year-on-year on deposit margin compression and lower deposits, partially offset by growth in wealth management revenue. Average deposits were down 4% year-on-year and flat sequentially as consumer balances have stabilized. Client investment assets were up 14% year-on-year, predominantly driven by market performance, and we continue to see healthy flows across branch and digital channels. In Home Lending, revenue was up 12% year-on-year, predominantly driven by higher production revenue. Turning to Card Services & Auto, revenue was up 14% year-on-year, largely driven by Card NII on higher revolving balances. Card outstandings were up 11% due to strong account acquisition and revolver growth. And in Auto, originations were $10.6 billion, up 7%, reflecting higher lease volume on robust new vehicle inventory. Expenses of $9.7 billion were up 4% year-on-year, predominantly driven by field compensation and growth in technology. In terms of credit performance this quarter, credit costs were $2.6 billion, reflecting net charge-offs of $2.1 billion, up $428 million year-on-year, driven by Card. The net reserve build was $557 million, predominantly driven by higher Card revolving balances. Next, the Commercial & Investment Bank on Page 6. CIB reported net income of $6.6 billion on revenue of $17.6 billion. IV fees were up 49% year-on-year and we ranked number one with wallet share of 9.3% for 2024. Advisory fees were up 41%, benefiting from large deals and share growth in a number of key sectors. Underwriting fees were up meaningfully with debt up 56% and equity up 54%, primarily driven by favorable market conditions. In terms of the outlook for the overall investment banking wallet, in light of the positive momentum, we remain optimistic about our pipeline. Payments revenue was $4.7 billion, up 3% year-on-year, excluding equity investments, driven by higher deposit balances and fee growth, largely offset by deposit margin compression. Lending revenue was $1.9 billion, up 9% year-on-year, predominantly driven by lower losses on hedges. Moving to markets, total revenue was $7 billion, up 21% year-on-year. Fixed income was up 20% with better performance in credit as well as continued outperformance in currencies and emerging markets. Equities was up 22% on elevated client activity and derivatives amid increased volatility and higher trading volumes and cash. Security Services revenue was $1.3 billion, up 10% year-on-year, driven by fee growth on higher client activity and market levels as well as higher deposit balances. Expenses of $8.7 billion were up 7% year-on-year, predominantly driven by higher brokerage, technology, and legal expense. Average banking and payments loans were down 2% year-on-year and down 1% sequentially. Global Corporate & Investment Banking loans were down 2% quarter-on-quarter, driven by paydowns in lower short-term financing, primarily offset by new originations. In commercial banking, middle market loans were also down 2%, driven by paydowns, predominantly offset by new originations, and commercial real estate loans were flat as new originations were offset by paydowns. Average client deposits were up 9% year-on-year and 5% sequentially, driven by underlying client growth. Finally, credit costs were $61 million, driven by net downgrade activity and the net impact of charge-offs, offset -- largely offset by a reserve release due to an update to certain loss assumptions. Then to complete our lines of business, Asset & Wealth Management on Page 7. AWM reported net income of $1.5 billion with pre-tax margin of 35%. Revenue of $5.8 billion was up 13% year-on-year, predominantly driven by growth in management fees on higher average market levels and strong net inflows as well as higher performance fees. Expenses of $3.8 billion were up 11% year-on-year, predominantly driven by higher compensation, including revenue-related compensation and continued growth in our private banking advisor teams as well as higher distribution fees. Long-term net inflows were $76 billion for the quarter, positive across all asset classes. In liquidity, we saw net inflows of $94 billion for the quarter and $104 billion for the full year -- $140 billion for the full year, sorry. And we had client asset net inflows of $468 billion for the year. AUM of $4 trillion and client assets of $5.9 trillion were both up 18% year-on-year, driven by continued net inflows and higher market levels. And finally, loans were up 2% quarter-on-quarter and deposits were up 5% quarter-on-quarter. Turning to Corporate on Page 8; Corporate reported net income of $1.3 billion. Revenue of $2 billion was up $223 million year-on-year. NII of $2 billion was down $415 million year-on-year, driven by the impact of lower rates, largely offset by balance sheet actions, primarily securities reinvestment activity. NII was a net loss of $30 million compared to the net loss of $668 million in the prior year, driven by lower net investment securities losses this quarter. And expenses of $550 million were down $3 billion year-on-year, predominantly driven by the absence of the FDIC Special Assessment of $2.9 billion in the prior year. With that, let's pivot to the outlook, starting with NII on Page 9. We expect 2025 NII ex-markets to be approximately $90 billion. Going through the drivers, as usual, the outlook assumes that rates follow the forward curve. It's worth noting that the NII decrease is driven by both the cut expected in 2025 and the impact of the 100 basis points of cuts in the back half of 2024. You can see on the page that we've illustrated the historical trajectory of card loan growth. We expect healthy card loan growth again this year, but below the 12% pace we saw in 2024 as tailwinds from revolve normalization are largely behind us. Turning to deposits; firm-wide deposits have stabilized and we expect to see a more visible growth trend to assert itself in the second half of 2025. It's notable that we can already see that trend in consumer checking deposits. On deposit margin, we expect modest compression due to lower rates. When you put all that together, we expect the NII trough could be sometime in the middle of the year, followed by growth as we illustrated at the bottom of the bar. And for completeness, we expect firm-wide NII to be approximately $94 billion as a function of markets NII increasing to about $4 billion, which you should think of as being primarily offset in NIR. Finally, I want to point out that starting this quarter, we are including an estimate of earnings at risk in the earnings supplement, so you no longer have to wait for the K or the Q to get that number. Now let's turn to expenses on Page 10. We expect 2025 expense to be about $95 billion. Looking at the chart in the middle of the page, I'll touch on the drivers of the year-on-year change, which you'll note are very consistent with what you've been hearing from us recently. The largest increase is volume and revenue-related expense, which is primarily driven by expected growth in auto leasing as well as capital markets. As a reminder, this comes with higher revenues. We continue to hire bankers and advisors to support business growth as well as expand our branch network. The increase in tech spend is primarily business-driven as we continue to invest in new products, features, and customer platforms as well as modernization. Marketing remains a driver of spend as we continue to see attractive opportunities, resulting in strong demand and engagement in our Card business. And finally, while we haven't explicitly called it out in each bar, inflation remains a source of some upward pressure, and as always, we are generating efficiencies to help offset it. Now let's turn to Page 11 to cover credit and wrap-up. On credit, we expect the 2025 card net charge-off rate to be in line with our previous guidance of approximately 3.6%. So, in closing, 2024 was another year of record revenue and net income, and we're proud of what we accomplished. As we look ahead to 2025, we still expect NII normalization, although to a lesser extent than we previously thought. And taking a step back, we think it's important to acknowledge the tension in the risks and uncertainties in the environment and the degree of optimism embedded in asset prices and expectations. In that context, we remain upbeat about the strength of the franchise, but we are focused on being prepared for a wide range of scenarios. Finally, let me say a few words about the wildfires in Los Angeles, while we don't expect much of a financial impact from it, we have a presence in the area across all three lines of business, so we're keeping in close contact with our customers, clients, and employees. We are offering support in a variety of ways, including waiving consumer and business banking fees as well as making a contribution to local relief organizations, offering employee donation matching, and supporting employee volunteer efforts. With that, I'll turn it over to Jamie before we open up the line for Q&A.","evidence_gemma_new":null,"evidence_llama_3_3":"CIB net income","evidence_qwen_3_30b":"CIB net income $6.6 billion","gemma_new_max":null,"gemma_new_min":null,"llama_3_3_max":6600000000.0,"llama_3_3_min":6600000000.0,"qwen_3_30b_max":6600000000.0,"qwen_3_30b_min":6600000000.0}
{"symbol":"JPM","year":2023,"quarter":1,"date":"2023-Q1","chunk_id":1,"sub_chunk_id":0,"centroid_label":"commercial banking net income","agreed_value":1300000000.0,"count":2,"chunk":"Jeremy Barnum: Thanks, and good morning, everyone. The presentation is available on our website, and please refer to the disclaimer in the back. Starting on page 1. The Firm reported net income of $12.6 billion, EPS of $4.10 on revenue of $39.3 billion and delivered an ROTCE of 23%. These results included $868 million of net investment securities losses in corporate. Before reviewing our results for the quarter, let\u2019s talk about the recent bank failures. Jamie has addressed a number of the important themes in his shareholder letter and the recent televised interview. So, I will go straight to the specific impacts on the Firm. As you would expect, we saw significant new account opening activity and meaningful deposit and money market fund inflows, most significantly in the Commercial Bank, Business Banking and AWM. Regarding the deposit inflows, at the Firm-wide level, average deposits were down 3% quarter-on-quarter, while end-of-period deposits were up 2% quarter-on-quarter, implying an intra-quarter reversal of the recent outflow trend as a consequence of the March events. We estimate that we have retained approximately $50 billion of these deposit inflows at quarter-end. It\u2019s important to note that while the sequential period-end deposit increase is higher than we would have otherwise expected, our current full year NII outlook, which I will address at the end, still assumes modest deposit outflows from here. We expect these outflows to be driven by the same factors as last quarter as well as the expectation that we will not retain all of this quarter\u2019s inflows. Now back to the quarter touching on a few highlights. We grew our IB fee wallet share. Consumer spending remained solid with combined debit and credit card spend up 10% year-on-year. And credit continues to normalize, but actual performance remains strong across the Company. On Page 2, we have some more detail. Revenue of $39.3 billion was up $7.7 billion or 25% year-on-year. NII ex markets was up $9.2 billion or 78%, driven by higher rates, partially offset by lower deposit balances. NIR ex markets was down $1.1 billion or 10% driven by the securities losses previously mentioned as well as lower IB fees and lower auto lease income on lower volume. And markets revenue was down $371 million or 4% year-on-year. Expenses of $20.1 billion were up $916 million or 5% year-on-year, driven by compensation-related costs, reflecting the annualization of last year\u2019s headcount growth and wage inflation. These results include the impact of the higher FDIC assessment I mentioned last quarter, which, of course, is unrelated to recent events. And credit costs of $2.3 billion included net charge-offs of $1.1 billion, predominantly in card. The net reserve build of $1.1 billion was largely driven by deterioration in our weighted average economic outlook. Onto balance sheet and capital on page 3. We ended the quarter with a CET1 ratio of 13.8%, up about 60 basis points, which was primarily driven by the benefit of net income less distributions and AOCI gains. And in line with what we previously said, we resumed stock buybacks this quarter and distributed a total of $1.9 billion and net repurchases back to shareholders. Now, let\u2019s go to our businesses, starting with CCB on Page 4. Touching quickly on the health of U.S. consumers and small businesses based on our data. Both continue to show resilience and remain on the path to normalization as expected, but we continue to monitor their activity closely. Spend remains solid, and we have not observed any notable pullback throughout the quarter. Moving to financial results. CCB reported net income of $5.2 billion on revenue of $16.5 billion, which was up 35% year-on-year. In Banking & Wealth Management, revenue was up 67% year-on-year, driven by higher NII on higher rates. Average deposits were down 2% quarter-on-quarter, in line with recent trends. Throughout the quarter, we continued to see customer flows to higher-yielding products, as you would expect, but were encouraged by what we are capturing in CDs and our Wealth Management offerings. Client investment assets were down 1% year-on-year, but up 7% quarter-on-quarter, driven by market performance as well as strong net inflows. In Home Lending, revenue was down 38% year-on-year, largely driven by lower net interest income from tighter loan spreads and lower production revenue. Moving to Card Services & Auto. Revenue was up 14% year-on-year, largely driven by higher Card Services NII on higher revolving balances, partially offset by lower auto lease income. Credit card spend was up 13% year-on-year. Card outstandings were up 21%, driven by strong new account growth and revolve normalization. And in Auto, originations were $9.2 billion, up 10% year-on-year. Expenses of $8.1 billion were up 5% year-on-year, reflecting the impact of wage inflation and higher headcount. In terms of credit performance this quarter, credit costs were $1.4 billion, reflecting reserve builds of $300 million in card and $50 million in Home Lending. Net charge-offs were $1.1 billion, up about $500 million year-on-year, in line with expectations as delinquency levels continue to normalize across portfolios. Next, the CIB on Page 5. CIB reported net income of $4.4 billion on revenue of $13.6 billion. Investment Banking revenue of $1.6 billion was down 24% year-on-year. IB fees were down 19%. We ranked number 1 with first quarter wallet share of 8.7%. In advisory, fees were down 6% compared to a strong first quarter last year. Our underwriting businesses continued to be affected by market conditions with fees down 34% for debt and 6% for equity. In terms of the outlook, the dynamics remain the same. Our pipeline is relatively robust, but conversion is sensitive to market conditions and the economic outlook. We expect the second quarter and the rest of the year to remain challenging. Moving to Markets. Total revenue was $8.4 billion, down 4% year-on-year. Fixed income was flat. Rates was strong during the rally early in the quarter as well as through the elevated volatility in March. Credit was up on the back of higher client flows and currencies in emerging markets was down relative to a very strong first quarter in the prior year. Equity Markets was down 12%, driven by lower revenues in derivatives relative to a strong first quarter in the prior year and lower client activity and cash. Payments revenue was $2.4 billion, up 26% year-on-year. Excluding the net impact of equity investments, primarily a gain in the prior year, it was up 55%, with the growth driven by higher rates, partially offset by lower deposit balances. Securities Services revenue of $1.1 billion was up 7% year-on-year, driven by higher rates, partially offset by lower deposit balances and market levels. Expenses of $7.5 billion were up 2% year-on-year as higher headcount and wage inflation were largely offset by lower revenue-related compensation. Moving to the Commercial Bank on page 6. Commercial Banking reported net income of $1.3 billion. Revenue of $3.5 billion was up 46% year-on-year, driven by higher deposit margins. Payments revenue of $2 billion was up 98% year-on-year driven by higher rates. And gross Investment Banking revenue of $881 million was up 21% year-on-year on increased M&A and bond underwriting from large deal activity. Expenses of $1.3 billion were up 16% year-on-year largely driven by higher compensation expense, including front office hiring and technology investments as well as higher volume-related expense. Average deposits were down 16% year-on-year and 5% quarter-on-quarter, predominantly driven by continued attrition and non-operating deposits as well as seasonally lower balances. Loans were up 13% year-on-year and 1% sequentially. C&I loans were up 1% quarter-on-quarter with somewhat different dynamics based on client size. In middle market banking, higher rates and recession concerns have decreased new loan demand and utilization, which is also leading to weakness in CapEx spending. In Corporate Client Banking, utilization rates increased modestly quarter-on-quarter as capital market conditions led more clients to opt for bank debt. CRE loans were also up 1% sequentially with higher rates creating headwinds for both originations and prepayments. And given the recent focus on commercial real estate, let me remind you that our office sector exposure is less than 10% of our portfolio and is focused in the urban dense markets, and nearly two-thirds of our loans are multifamily, primarily in supply-constrained markets. Finally, credit costs of $417 million included a net reserve build of $379 million, predominantly driven by what I mentioned upfront. Then to complete our lines of business, AWM on page 7. Asset & Wealth Management reported net income of $1.4 billion, pretax margin of 35%. Revenue of $4.8 billion was up 11% year-on-year driven by higher deposit margins on lower balances and a valuation gain on our initial investment triggered by taking full ownership of our asset management joint venture in China, partially offset by the impact of lower average market levels on management fees and lower performance fees. Expenses of $3.1 billion were up 8% year-on-year, predominantly driven by compensation, reflecting growth in our private banking advisory teams, higher revenue-related compensation and the run rate impact of acquisitions. For the quarter, net long-term inflows were $47 billion, led by fixed income and equities. And then liquidity, we saw net inflows of $93 billion, inclusive of our ongoing deposit migration. AUM of $3 trillion was up 2% year-on-year and overall client assets of $4.3 trillion were up 6%, driven by continued net inflows into liquidity and long-term products. And finally, loans were down 1% quarter-on-quarter, driven by lower securities-based lending, while average deposits were down 5%. Turning to Corporate on page 8. Corporate reported net income of $244 million. Revenue was $985 million compared to a net loss of $881 million last year. NII was $1.7 billion, up $2.3 billion year-on-year due to the impact of higher rates. NIR was a loss of $755 million compared with a loss of $345 million in the prior year and included the net investment securities losses I mentioned earlier. Expenses of $160 million were down $24 million year-on-year. And credit costs of $370 million were driven by reserve builds on a couple of single name exposures. Next, the outlook on page 9. We now expect 2023 NII and NII ex-markets to be approximately $81 billion. This increase in guidance is primarily driven by lower rate paid assumptions across both consumer and wholesale in light of the expectation of Fed cuts later in the year as well as slightly higher card revolving balances. Note that in line with my comments at the outset, recent deposit balance increases are not a meaningful contributor to the upward revision in the NII outlook, given that we expect a meaningful portion of the recent inflows to reverse later in the year. I would point out that this outlook still embeds significant reprice lags. We think a more sustainable NII ex-markets run rate in the medium term is well below this quarter\u2019s $84 billion as well as below the $80 billion that is implied for the rest of the year by our full year guidance. And while we don\u2019t know exactly when this lower run rate will be reached, when it happens, we believe it will be around the mid-70s. And of course, as we mentioned last quarter, this NII outlook remains highly sensitive to the uncertainty associated with the timing and the extent of deposit reprice, investment portfolio decisions, the dynamics of QT and RRP, the trajectory of Fed funds as well as the broader macroeconomic environment, including its impact on loan growth. Separately, it\u2019s worth noting that markets NII may start to trend slightly positive towards the end of the year as a function of mix and rate effects. Moving to expenses. Our outlook for 2023 continues to be about $81 billion. Importantly, this does not currently include the impact of the pending FDIC special assessment. And on credit, we continue to expect the 2023 card net charge-off rate to be approximately 2.6%. So to wrap up, our strong results this quarter once again highlight the earnings power of this diversified franchise. We have benefited from our fortress principles and commitment to invest, which we will continue to do as we head into an increasingly uncertain environment. With that, operator, please open the line for Q&A.","evidence_gemma_new":null,"evidence_llama_3_3":"Commercial Bank net income","evidence_qwen_3_30b":"Commercial Banking net income $1.3 billion","gemma_new_max":null,"gemma_new_min":null,"llama_3_3_max":1300000000.0,"llama_3_3_min":1300000000.0,"qwen_3_30b_max":1300000000.0,"qwen_3_30b_min":1300000000.0}
{"symbol":"JPM","year":2023,"quarter":2,"date":"2023-Q2","chunk_id":1,"sub_chunk_id":0,"centroid_label":"commercial banking net income","agreed_value":1500000000.0,"count":2,"chunk":"Jeremy Barnum: Thanks, operator. Good morning, everyone. Presentation is available on our website and please refer to the disclaimer on the back. Starting on Page 1, the firm reported net income of $14.5 billion, EPS of $4.75 on revenue of $42.4 billion and delivered an ROTCE of 25%. These results included the First Republic bargain purchase gain of $2.7 billion and credit reserve build for the First Republic lending portfolio $1.2 billion as well as $900 million of net investment securities losses in Corporate. Touching on a few highlights, CCB Client investment assets were up 18% year-on-year, we had record long-term inflows in AWM and we ranked Number One in IB Fee wallet share. Before giving you more detail on financials, let me give you a brief updates on the status of the First Republic integration on Page 2. The settlement process with the FDIC is on schedule, the number of key milestone being recently completed. Systems integration is also proceeding at pace and we are targeting being substantially complete by mid-2024. First Republic employees have formally joined us as of July 2, and we're pleased to have had very-high acceptance rates on our offers. And although it's still early days, as we get the sales force back in the market, we are happy to see the client retention is strong with about a $6 billion of net deposit inflows since the acquisition. Now, turning back to this quarter's results on Page 3. You'll see that in various parts of the presentation, we have specifically called out the impact of First Republic where relevant. To make things easier. I'm going to start by discussing the overall impact of First Republic on this quarter's results at the firm-wide level. Then, for the rest of the presentation, I will generally exclude the impact of First Republic, in order to improve comparability with prior periods. With that in mind, in this quarter, First Republic contributed $4 billion of revenue, $599 million of expense and $2.4 billion of net income. As noted on the first page, this includes $2.7 billion of bargain purchase gain, which is reflected in NIR in the Corporate segment as well as $1.2 billion of allowance build. And remember that the deal happened on May 1, so the First Republic numbers only represent two months of results. You'll see in the line-of-business results that we are showing First Republic revenue as allowance in CCB, CB and AWM. And for the purposes of this quarter's results, all of the deposits are in CCB and substantially all of the expenses are in Corporate. As the integration continues, some of those items will get allocated across the segments. Now turning back to firm-wide results excluding First Republic. Revenue of $38.4 billion was up $6.7 billion or 21% year-on-year. NII, ex-markets, was up $7.8 billion or 57%, driven by higher rates. NIR ex-markets was down $293 million, largely driven by the net investment securities losses I mentioned earlier, partially offset by a number of less notable items, primarily in the prior year. And Markets revenue was down $772 million or 10% year-on year. Expenses of $20.2 billion were up $1.5 billion or 8% year-on year, primarily driven by higher compensation expense including wage inflation and higher legal expense. And credit costs of $1.7 billion included net charge-offs of $1.4 billion, predominantly in card. The net reserve build included a $389 million build in the commercial bank and $200 million build in card and a $243 million release in corporate, all of which I will cover in more detail later. On to balance sheet and capital on Page 4. We ended the quarter with a CET1 ratio at 13.8%, flat versus the prior quarter as the benefit of net income less distributions was offset by the impact of First Republic. And as you can see in the two charts on the page, we've given you some information about the impact of the transaction on both RWA and the CET1 ratio. And as you know, we completed CCAR a couple of weeks ago. Our new indicative SCB is 2.9% versus our current requirements of 4% and it goes into effect in 4Q '23. The new SCB also reflects the Board's intention to increase the dividend to $1.05 per share in the third quarter. On liquidity, our bank LCR for the second quarter ended at 129%, in line with what we anticipated at Investor Day. About half of the reduction is associated with the First Republic transaction. And while we're on the balance sheet, as we previewed in the 10-K, we will be updating our earnings at-risk model to incorporate the impact of deposit repricing lags. So when we released this quarter's 10-Q, you will see the up 100 basis point parallel shift scenario will be about positive $2.5 billion, whereas in the absence of the change, it would have been about negative $1.5 billion. Now, let's go to our businesses starting with CCB on Page 5. Both U.S. Consumers and Small Businesses remained resilient and we haven't observed any meaningful changes to the trends in our data we discussed at Investor Day. Turning now to the financial results, which I will speak to excluding the impact of First Republic for CCB, CB and AWM. CCB reported net income of $5 billion on revenue of $16.4 billion, which was up 31% year-on year. In Banking & Wealth Management, revenue was up 59% year-on-year, driven by higher NII on higher rates. End-of-period deposits were down 4% quarter-on-quarter, as customers continue to spend down their cash buffers, including for seasonal tax payments and seek higher-yielding products. Client investment assets were up 18% year-on year, driven by market performance and strong net inflows across our adviser and digital channels. In Home Lending, revenue was down 23% year-on-year, driven by lower NII and higher loan spreads and lower servicing and production revenue. Originations were up quarter-on-quarter, driven by seasonality, although still down 54% year-on-year. Moving to Card Services & Auto, revenue was up 5%, largely driven by higher card services NII on higher revolving balances, partially offset by lower auto lease income. Card outstandings were up 18% year-on-year, which was the result of revolve normalization and strong new account growth. And in Auto, originations were up $12 billion, up 71% year-on-year as competitors pulled back and inventories continue to slowly recover. Expenses of $8.3 billion were up 8% year-on-year, driven by compensation, predominantly due to wage inflation and headcount growth as we continue to invest in our front office and technology staffing as well as marketing. In terms of credit performance this quarter, credit costs were $1.5 billion, reflecting the reserve build of $203 million, driven by loan growth in Card Services. Net charge-offs were $1.3 billion, up $640 million year-on-year, predominantly driven by Card as 30 day past delinquencies have returned to pre-pandemic levels, in line with our expectations. Next, the CIB on Page 6. CIB reported net income of $4.1 billion on revenue of $12.5 billion. Investment Banking revenue of $1.5 billion was up 11% year-on-year or down 7% excluding bridge book markdowns in the prior year. IB fees were down 6% year-on-year and we ranked Number One with year-to-date wallet share of 8.4%. In advisory, fees were down 19%. Underwriting fees were down 6% for debt and up 30% for equity with more positive momentum in the last month of the quarter. In terms of the second-half outlook, we have seen encouraging signs of activity in capital markets, and July should be a good indicator for the remainder of the year. However, year-to-date announced M&A is down significantly, which will be a headwind. Moving to Markets, total revenue was $7 billion, down 10% year-on-year. Fixed-income was down 3%. As expected, the macro franchise substantially normalized from last year's elevated levels of volatility and client flows. This was largely offset by improved performance in the Securitized Products Group and Credit. Equity markets was down 20% against a very strong prior year quarter, particularly in derivatives. Payments revenue was $2.5 billion, up 61% year-on-year. Excluding equity investments, it was up 32%, predominantly driven by higher rates, partially offset by lower deposit balances. Security services revenue of $1.2 billion was up 6% year-on-year, driven by higher rates, partially offset by lower fees. Expenses of $6.9 billion were up 1% year-on-year, driven by higher non-compensation expense as well as wage inflation and headcount growth, largely offset by lower revenue-related compensation. Moving to the Commercial Bank on Page 7. Commercial Banking reported net income of $1.5 billion. Revenue of $3.8 billion was up 42% year-on-year, driven by higher deposit margins. Payments revenue of $2.2 billion was up 79% year-on-year, driven by higher rates. Gross Investment Banking and Markets revenue of $767 million was down 3% year-on-year, primarily driven by fewer large M&A deals. Expenses of $1.3 billion were up 12% year-on-year, predominantly driven by higher compensation expense, including fun office hiring and technology investments, as well as higher volume-related expense. Average deposits were up 3% quarter-on-quarter driven by inflows related to new client acquisition, partially offset by continued attrition in non-operating deposits. Loans were up 2% quarter-on-quarter. C&I loans were up 2%, reflecting stabilization in new loan demand and revolver utilization in the current economic environment as well as pockets of growth in areas where we are investing. CRE loans were also up 1%, reflecting funding on prior year originations for construction loans and real-estate banking as well as increased affordable housing activity. Finally, credit costs were $489 million. Net charge-offs were $100 million, including $82 million in the office real-estate portfolio and the net reserve build of $389 million was driven by updates to certain assumptions related to the office real-estate market as well as net downgrade activity in Middle Market banking. Then, to complete our lines of business, AWM on Page 8. Asset & Wealth Management reported net income of $1.1 billion with pretax margin of 32%. Revenue of $4.6 billion was up 8% year-on-year, driven by higher deposit margins on lower balances and higher management fees on strong net inflows. Expenses of $3.2 billion were up 8% year-on-year, driven by higher compensation, including growth in our private banking advisor teams, higher revenue-related compensation and the impact of Global Shares and JPMorgan Asset Management China, both of which closed within the last year. For the quarter, record net long-term inflows were $61 billion, positive across all channels, regions and asset classes, led by fixed-income and equities. And in liquidity, we saw net inflows of $60 billion. AUM of $3.2 trillion was up 16% year-on-year and overall client assets of $4.6 trillion were up 20% year-on-year, driven by continued net inflows, higher market levels and the impact of the acquisition of Global Shares. And finally, loans were down 1% quarter-on-quarter, driven by lower securities-based lending and deposits were down 6%. Turning to Corporate on Page 9. As I noted upfront, we are reporting the First Republic bargain purchase gain and substantially all of the expenses in Corporate. Excluding those items, Corporate reported net income of $339 million; revenue was $985 million, up $905 million compared to last year; NII was $1.8 billion, up $1.4 billion year-on-year due to the impact of higher rates; NIR was a net loss of $782 million and included the net investment securities losses I mentioned upfront. Expenses of $590 million were up $384 million year-on year, largely driven by higher legal expense. And credit costs were a net benefit of $243 million, reflecting reserve release of the deposit placed with First Republic in the first quarter was eliminated as part of the transaction. Next, the outlook on Page 10. We now expect 2023 NII and NII ex-markets to be approximately $87 billion, the increase driven by higher rates coupled with slower deposit repricing than previously assumed across both consumer and wholesale. And I should take the opportunity to remind you once again that significant sources of uncertainty remained and we do expect the NII run rate to be substantially below this quarter's run-rate at some point in the future, as competition for deposits plays out. Our expense outlook for 2023 remains approximately $84.5 billion. And on credit, we continue to expect the 2023 card net charge-off rate to be approximately 2.6%. So, to wrap up, we are proud of the exceptionally strong operating results this quarter. As we look forward, we remain focused on the significant uncertainties relating to the economic outlook, competition for deposits and the impact on capital from the pending finalization of the Basel III rules. Nonetheless, despite the likely headwinds ahead, we remain optimistic about the Company's ability to continue delivering excellent performance through a range of scenarios. With that, operator, please open the line for Q&A.","evidence_gemma_new":null,"evidence_llama_3_3":"Commercial Bank net income","evidence_qwen_3_30b":"Commercial Banking net income $1.5 billion","gemma_new_max":null,"gemma_new_min":null,"llama_3_3_max":1500000000.0,"llama_3_3_min":1500000000.0,"qwen_3_30b_max":1500000000.0,"qwen_3_30b_min":1500000000.0}
{"symbol":"JPM","year":2023,"quarter":4,"date":"2023-Q4","chunk_id":1,"sub_chunk_id":0,"centroid_label":"commercial banking net income","agreed_value":1500000000.0,"count":2,"chunk":"Jeremy Barnum: Thank you, and good morning, everyone. The presentation is available on our website, and please refer to the disclaimer in the back. Starting on Page 1, the firm reported net income of $9.3 billion, EPS of $3.04 on revenue of $39.9 billion, and delivered an ROTCE of 15%. These results included the $2.9 billion FDIC special assessment and $743 million of net investment securities losses in Corporate. On Page 2, we have more on our fourth quarter results. Similar to prior quarters, we have called out the impact of First Republic, where relevant. You'll also note that we have now allocated certain deposits, which were previously in CCB to the appropriate lines of business. For the quarter, First Republic contributed $1.9 billion of revenue, $890 million of expense, and $647 million of net income. Now, focusing on the firmwide fourth quarter results, excluding First Republic. Revenue of $38.1 billion was up $2.5 billion or 7% year-on-year. NII, ex-Markets was up $2.2 billion or 11%, predominantly driven by higher rates. NIR, ex-Markets was up $139 million or 1% and Markets revenue was up $141 million or 2%. Expenses of $23.6 billion were up $4.6 billion or 24% year-on-year, predominantly driven by the FDIC special assessment and higher compensation, including wage inflation and growth in front office and technology. And credit costs were $2.6 billion, reflecting net charge-offs of $2.2 billion, and a net reserve build for $474 million. Net charge-offs were up $1.3 billion, predominantly driven by Card and single-name exposures in Wholesale, which were largely previously reserved. The net reserve build was primarily driven by loan growth in Card and the deterioration in the outlook related to commercial real-estate valuations in the Commercial Banking. Looking at the full-year results on Page 3. The firm reported net income of $50 billion, EPS of $16.23, and revenue of $162 billion, and we delivered an ROTCE of 21%. Onto balance sheet and capital on Page 4. We ended the quarter with CET1 ratio of 15%, up 70 basis points versus the prior quarter, primarily driven by net income, AOCI gains and lower RWA, partially offset by a continued modest pace of capital distributions as the firm builds towards the proposed Basel III Endgame requirements. Now, let's go to our businesses, starting with CCB on Page 5. Total debit and credit card spend was up 7% year-on-year, driven by strong account growth and consumer spend remained stable. Turning now to the financial results, excluding First Republic. CCB reported net income of $4.4 billion on revenue of $17 billion, which was up 8% year-on-year. In Banking & Wealth Management, revenue was up 6% year-on-year, reflecting higher NII on higher rates, largely offset by lower deposits, with average balances down 8% year-on-year. Client investment assets were up 25%, driven by market performance and strong net inflows. In fact, it's been a record year for retail net new money. In Home Lending revenue was up $230 million, predominantly driven by the absence of an MSR loss this quarter versus the prior year and higher NII. Moving to Card Services & Auto, revenue was up 8% year-on-year, driven by higher card services NII on higher revolving balances, partially offset by lower auto lease income. Card outstandings were up 14% due to strong account acquisition and continued normalization of revolve. And in auto, originations were $9.9 billion, up 32% as we gained market share while retaining strong margins. Expenses of $8.7 billion were up 10% year-on-year, largely driven by compensation, including an increase in employees, primarily in bankers, advisors, and technology, and wage inflation, as well as continued investments in marketing and technology. In terms of credit performance this quarter, credit costs were $2.2 billion, largely driven by net charge-offs which were up $791 million year-on-year, predominantly due to continued normalization in card. The net reserve build of $538 million reflected loan growth in card. Next, the CIB on Page 6. The CIB reported net income of $2.5 billion on revenue of $11 billion. Investment banking revenue of $1.6 billion was up 13% year-on-year. IB fees were also up 13% year-on-year and we ended the year ranked number one with a wallet share of 8.8%. And advisory fees were up 2%. Underwriting fees were up significantly compared to a weak prior year quarter with debt up 21% and equity up 30%. We are starting the year with a healthy pipeline and we are encouraged by the level of capital markets activity, but announced M&A remains a headwind, and the extent as well as the timing of capital markets normalization remains uncertain. Payments revenue was $2.3 billion, up 10% year-on-year. Excluding equity investments, it was flat as fee growth was predominantly offset by deposit-related client credits. Moving to Markets, total revenue was $5.8 billion, up 2% year-on-year. Fixed income was a record fourth quarter, up 8%. It was another strong quarter in our securitized products business, which was partially offset by lower revenue and rates coming off a strong quarter last year. Equity markets was down 8%, driven by lower revenue in derivatives and cash. Security services revenue of $1.2 billion was up 3% year-on-year. Expenses of $6.8 billion were up 4% year-on-year, predominantly driven by the timing of revenue-related compensation. Credit costs were $210 million, reflecting net charge-offs of $121 million and a net reserve build of $89 million. Moving to the Commercial Bank on Page 7. Commercial Banking reported net income of $1.5 billion. Revenue of $3.7 billion was up 7% year-on-year, largely driven by higher NII, where the impact of rates was partially offset by lower deposit balances. Payments revenue of $2 billion was up 2% year-on-year driven by fee growth, largely offset by deposit-related client credits. Gross investment banking and markets revenue of $924 million was up 32% year-on-year, primarily reflecting increased capital markets and M&A activity. Expenses of $1.4 billion were up 9% year-on-year, driven by an increase in employees, including front office and technology investments, as well as higher volume-related expense, including the impact of new client acquisition. Average deposits were down 6% year-on-year, primarily driven by lower non-operating deposits as clients continue to opt for higher-yielding alternatives and flat quarter-on-quarter as client balances are seasonally higher at year-end. Loans were down 1% quarter-on-quarter. C&I loans were down 2%, reflecting lower revolver utilization and muted demand for new loans as clients remained cautious. And CRE loans were flat as higher rates continued to have an impact on originations and payoff activity. Finally, credit costs were $269 million, including net charge-offs of $127 million and a net reserve build of $142 million, driven by deterioration in our commercial real estate valuation outlook. And then to complete our lines of business, AWM on Page 7. Asset & Wealth Management reported net income of $925 million with pretax margin of 28%. Revenue of $4.7 billion was up 2% year-on-year, driven by higher management fees on strong net inflows and higher average market levels, predominantly offset by lower NII. The decrease in NII reflects lower deposit margins and balances partially offset by wider spreads on loans. Expenses of $3.4 billion were up 11% year-on-year, largely driven by higher compensation, including performance-based incentives, continued growth in our private banking advisor teams, the impact of closing JPMorgan Asset Management China acquisition, and the continued investment in global shares. For the quarter, net long-term inflows were $12 billion, positive across equities and fixed income, and $140 billion for the full year. In liquidity, we saw net inflows of $49 billion for the quarter and net inflows of $242 billion for the full year. And we had record client asset net inflows of $489 billion for the year. AUM of $3.4 trillion and client assets of $5 trillion were both up 24% year-on-year, driven by continued net inflows and higher market levels. And finally, loans were up 2% quarter-on-quarter and deposits were up 7% quarter-on-quarter. Turning to Corporate on Page 9. Corporate reported a net loss of $689 million. Revenue of $1.8 billion was up $597 million year-on-year. NII of $2.5 billion was up $1.2 billion year-on-year due to the impact of higher rates and balance sheet mix. NIR was a net loss of $687 million compared to the net loss of $115 million, and included the net investment securities losses I mentioned upfront. And expenses of $3.4 billion were up $3 billion year-on-year, predominantly driven by the FDIC special assessment. With that, let's pivot to the outlook for 2024, starting with NII on Page 10. We expect 2024 NII ex-Markets to be approximately $88 billion. Going through the drivers, the outlook assumes that rates follow the forward curve, which currently includes six cuts this year. On deposits, we expect balances to be very modestly down from current levels. While lower rates should decrease repricing pressure, we remain asset sensitive, and therefore the lower rates will decrease NII, resulting in more normal deposit margins. We expect strong loan growth in Card to continue, but not at the same pace as 2023. Still, this should help offset some of the impact of lower rates. Outside of Card, loan growth will likely remain muted. It's important to note that we just reported a quarterly NII ex-Markets run rate of $94 billion. Combining that with the full-year guidance of approximately $88 billion implies meaningful sequential quarterly declines throughout 2024, consistent with what we've been telling you for some time. And keep in mind that many of the sources of uncertainty that we've highlighted previously surrounding the NII outlook remain. And on total NII, we expect it to be approximately $90 billion for the full-year, reflecting an increase in Markets NII which, as always, you should think of as largely offset in NIR. Now, let's turn to expenses on Page 11. We expect 2024 adjusted expense to be about $90 billion. You'll see on the slide we provided detail by line of business. Generally, you can see that both in dollar terms and in percentage terms, the expense growth is aligned to where the greatest opportunities are, both in terms of share and available returns. And of course, you'll hear more at Investor Day and between now and then. On the right-hand side of the page, we've highlighted some firmwide drivers. Thematically, the biggest driver is what I might call business growth writ large. Within that, narrowly defined volume and revenue-related growth represents about $1 billion of the increase across the company as a result of an improved NIR outlook, compared to about $400 million in 2023. But in addition, the ongoing growth of the company, which continues to produce share gains and additional profitability, is coming with increased expense across a range of categories. The quantum of investment increase is comparable to last year's increase and is driven by all the same themes, bankers, branches, advisors, technology as well as marketing. Net-net, First Republic produces a modest increase in expenses, but with a significantly lower 2024 exit run rate as the result of business integration efforts. Finally, despite significantly lower inflation outlook in the economy as a whole, we still see some residual effects of inflation flowing through most of our expense categories. It's worth noting that both the general business growth and investment growth include decisions that have been executed both in response to market conditions during 2023 and to support the future growth and profitability of the company. We've included the fourth quarter 2023 exit rate on the page to illustrate that a significant portion of the year-on-year increase in expense is already in the run rate. Now, let's turn to Page 12 and cover credit and wrap up. On credit, we continue to expect the 2024 card net charge-off rate to be below 3.5%, consistent with Investor Day guidance. So in closing, we shouldn't leave 2023 without noting what an outstanding year it was, producing record revenue and net income despite some notable significant items. We're very proud of what we accomplished this year and want to thank everyone who made it possible. At the same time, we emphasized throughout 2023 the extent to which we were over-earning, as indicated by an ROTCE that is 4% above our through-the-cycle target. As we turn to 2024, it shouldn't be surprising that our outlook has us beginning to march down the path towards normalization of our returns. But despite the expected dissipation of the 2023 tailwinds and the presence of significant economic and geopolitical uncertainties, we remain optimistic about this franchise's ability to produce superior returns through a broad range of environments. And this management team remains laser-focused on executing for shareholders, clients, and communities. And with that, let's open the line for Q&A.","evidence_gemma_new":null,"evidence_llama_3_3":"Commercial Bank net income fourth quarter","evidence_qwen_3_30b":"Commercial Banking net income $1.5 billion","gemma_new_max":null,"gemma_new_min":null,"llama_3_3_max":1500000000.0,"llama_3_3_min":1500000000.0,"qwen_3_30b_max":1500000000.0,"qwen_3_30b_min":1500000000.0}
{"symbol":"JPM","year":2024,"quarter":1,"date":"2024-Q1","chunk_id":1,"sub_chunk_id":0,"centroid_label":"commercial banking net income","agreed_value":1600000000.0,"count":2,"chunk":"Jeremy Barnum: Thank you very much, and good morning, everyone. The presentation is available on our website, and please refer to the disclaimer in the back. Starting on Page 1. The firm reported net income of $13.4 billion, EPS of $4.44 on revenue of $42.5 billion and delivered an ROTCE of 21%. These results included a $725 million increase to the special assessment resulting from the FDIC's updated estimate of expected losses from the closures of Silicon Valley Bank and Signature Bank. Touching on a couple of highlights. Firm-wide IB fees were up 18% year-on-year, reflecting particular strength in underwriting fees. And we have seen strong net inflows across AWM as well as in the CCB and Wealth Management business. On Page 2, we have some more detail. This is the last quarter we'll discuss results excluding First Republic, given that going forward, First Republic results will naturally be included in the prior period, making year-on-year results comparable. For this quarter, First Republic contributed $1.7 billion of revenue, $806 million of expense and $668 million of net income. Now focusing on the firm-wide results excluding First Republic. Revenue of $40.9 billion was up $1.5 billion or 4% year-on-year. NII ex Markets was up $736 million or 4% driven by the impact of balance sheet mix and higher rates as well as higher revolving balances in card, largely offset by deposit margin compression and lower deposit balances in CCB. NIR ex Markets was up $1.2 billion or 12% driven by higher firm-wide asset management and Investment Banking fees as well as lower net investment securities losses. And Markets revenue was down $400 million or 5% year-on-year. Expenses of $22 billion were up $1.8 billion or 9% year-on-year driven by higher compensation, including growth in employees and the increase to the FDIC special assessment. And credit costs were $1.9 billion, reflecting net charge-offs of $2 billion and a net reserve release of $38 million. Net charge-offs were up $116 million predominantly driven by Card. On to balance sheet and capital on Page 3. We ended the quarter with a CET1 ratio of 15%, relatively flat versus the prior quarter, reflecting net income which was predominantly offset by higher RWA and capital distribution. This quarter's higher RWA is largely due to seasonal effects, including higher client activity in Markets and higher risk weights on deferred tax assets, partially offset by lower Card loans. Now let's go to our businesses, starting with CCB on Page 4. Consumers remain financially healthy, supported by a resilient labor market. While cash buffers have largely normalized, balances were still above pre-pandemic levels, and wages are keeping pace with inflation. When looking at a stable cohort of customers, overall spend is in line with the prior year. Turning now to the financial results excluding First Republic. CCB reported net income of $4.4 billion on revenue of $16.6 billion, which was up 1% year-on-year. In Banking & Wealth Management, revenue was down 4% year-on-year, reflecting lower NII on lower deposits with average balances down 7% as our CD mix increased. Client investment assets were up 25% year-on-year driven by market performance and strong net inflows. In Home Lending, revenue was up 10% year-on-year, predominantly driven by higher NII and production revenue. Originations, while still modest, were up 10%. Moving to Card Services & Auto. Revenue was up 8% year-on-year driven by higher Card Services NII on higher revolving balances, partially offset by higher card acquisition costs from new account growth and lower auto lease income. Card outstandings were up 13% due to strong account acquisition and the continued normalization of revolve. And in auto, originations were $8.9 billion, down 3%, while we maintained healthy margins and market share. Expenses of $8.8 billion were up 9% year-on-year, largely driven by field compensation and continued growth in technology and marketing. In terms of credit performance this quarter, credit costs were $1.9 billion, driven by net charge-offs, which were up $825 million year-on-year predominantly due to continued normalization in Card. The net reserve build was $45 million, reflecting the build in Card largely offset by a release in Home Lending. Next, the Corporate & Investment Bank on Page 5. Before reporting CIB's results, I want to note that this will also be the last quarter we will be -- we will report earnings for the CIB and CB as standalone segments. Between now and Investor Day, we will furnish an 8-K with historical results, including 5 quarters and 2 full years of history consistent with the structure of the new Commercial and Investment Bank segment, in line with the reorganization that was announced in January. Turning back to this quarter. CIB reported net income of $4.8 billion on revenue of $13.6 billion. Investment Banking revenue of $2 billion was up 27% year-on-year. IB fees were up 21% year-on-year, and we ranked #1 with year-to-date wallet share of 9.1%. In Advisory, fees were down 21% driven by fewer large completed deals. Underwriting fees were up significantly, benefiting from improved market conditions with debt up 58% and equity up 51%. In terms of the outlook. While we are encouraged by the level of capital markets activity we saw this quarter, we need to be mindful that some meaningful portion of that is likely pulling forward from later in the year. Similarly, while it was encouraging to see some positive momentum in announced M&A in the quarter, it remains to be seen whether that will continue, and the Advisory business still faces structural headwinds from the regulatory environment. Payments revenue was $2.4 billion, down 1% year-on-year, as deposit margin normalization and deposit-related client credits were largely offset by higher fee-based revenue and deposit balances. Moving to Markets. Total revenue was $8 billion, down 5% year-on-year. Fixed income was down 7% driven by lower activity in rates and commodities compared to a strong prior year quarter, partially offset by strong results in Securitized Products. Equity Markets was flat. Securities Services revenue of $1.2 billion was up 3% year-on-year. Expenses of $7.2 billion were down 4% year-on-year predominantly driven by lower legal expense. Moving to the Commercial Bank on Page 6. Commercial Banking reported net income of $1.6 billion. Revenue of $3.6 billion was up 3% year-on-year driven by higher noninterest revenue. Gross Investment Banking and Markets revenue of $913 million was up 4% year-on-year with increased IB fees, largely offset by lower Markets revenue compared to a strong prior year quarter. Payments revenue of $1.9 billion was down 2% year-on-year driven by lower deposit margins and balances, largely offset by fee growth, net of higher deposit-related client credits. Expenses of $1.5 billion were up 13% year-on-year predominantly driven by higher compensation, reflecting an increase in employees, including for office and technology investments, as well as higher volume-related expenses. Average deposits were down 3% year-on-year, primarily driven by lower nonoperating deposits and down 1% quarter-on-quarter, reflecting seasonally lower balances. Loans were flat quarter-on-quarter. C&I loans were down 1%, reflecting muted demand for new loans as clients remain cautious. And CRE loans were flat as higher rates continue to have an impact on originations and sales activity. Finally, credit costs were a net benefit of $35 million, including a net reserve release of $101 million and net charge-offs of $66 million. Then to complete our lines of business, AWM on Page 7. Asset & Wealth Management reported net income of $1 billion with pretax margin of 28%. Revenue of $4.7 billion was down 1% year-on-year. Excluding net investment valuation gains in the prior year, revenue was up 5% driven by higher management fees on strong net inflows and higher average market levels, partially offset by lower NII due to deposit margin compression. Expenses of $3.4 billion were up 11% year-on-year largely driven by higher compensation, including revenue-related compensation; continued growth in our private banking advisor teams; and the impact of the JPMorgan Asset Management China acquisition; as well as higher distribution fees. For the quarter, long-term net inflows were $34 billion, led by equities and fixed income. AUM of $3.6 trillion was up 19% year-on-year. And client assets of $5.2 trillion were up 20% year-on-year driven by higher market levels and continued net inflow. And finally, loans were down 1% quarter-on-quarter and deposits were flat. Turning to Corporate on Page 8. Corporate reported net income of $918 million. Revenue was $2.3 billion, up $1.3 billion year-on-year. NII was $2.5 billion, up $737 million year-on-year driven by the impact of the balance sheet mix and higher rates. NIR was a net loss of $188 million. The current quarter included net investment securities losses of $366 million compared with net securities losses of $868 million in the prior year quarter. Expenses of $1 billion were up $889 million year-on-year predominantly driven by the increase to the FDIC special assessment. To finish up, we have the outlook on Page 9. We now expect NII ex Markets to be approximately $89 billion based on a forward curve that contained 3 rate cuts at quarter end. Our total NII guidance remains approximately $90 billion, which implies a decrease in our Markets NII guidance from around $2 billion to around $1 billion. The primary driver of that reduction is balance sheet growth and mix shift in the Markets business. And as a reminder, changes in Markets NII are generally revenue-neutral. Our outlook for adjusted expense is now about $91 billion, reflecting the increase to the FDIC special assessment I mentioned upfront. And on credit, we continue to expect the 2024 Card net charge-off rate to be below 3.5%. Finally, you may have noticed that our effective tax rate has increased this quarter, and it will likely stay around 23% this year, absent discrete items, which can vary quite a bit. The driver of this change is the firm's adoption of the proportional amortization method for certain tax equity investments. Our managed rate is unchanged, and it should average about 3.5% above the effective tax rate. This is a smaller gap than we've previously observed, and we expect this approximate relationship to persist going forward, although the difference will continue to fluctuate as it has in the past. For the avoidance of doubt, these changes have no meaningful impact on expected annual net income. We're just mentioning this to help with your models. So to wrap up. We're pleased with another quarter of strong operating results even as the journey towards NII normalization begins. While we remain confident in our ability to produce strong returns and manage risk across a range of scenarios, the economic, geopolitical and regulatory uncertainties that we have been talking about for some time remain prominent, and we are focused on being prepared to navigate those challenges as well as any others that may come our way. And with that, let's open up the line for Q&A.","evidence_gemma_new":null,"evidence_llama_3_3":"Commercial Bank net income","evidence_qwen_3_30b":"Commercial Banking net income $1.6 billion","gemma_new_max":null,"gemma_new_min":null,"llama_3_3_max":1600000000.0,"llama_3_3_min":1600000000.0,"qwen_3_30b_max":1600000000.0,"qwen_3_30b_min":1600000000.0}
{"symbol":"JPM","year":2023,"quarter":1,"date":"2023-Q1","chunk_id":1,"sub_chunk_id":0,"centroid_label":"corporate net income","agreed_value":244000000.0,"count":2,"chunk":"Jeremy Barnum: Thanks, and good morning, everyone. The presentation is available on our website, and please refer to the disclaimer in the back. Starting on page 1. The Firm reported net income of $12.6 billion, EPS of $4.10 on revenue of $39.3 billion and delivered an ROTCE of 23%. These results included $868 million of net investment securities losses in corporate. Before reviewing our results for the quarter, let\u2019s talk about the recent bank failures. Jamie has addressed a number of the important themes in his shareholder letter and the recent televised interview. So, I will go straight to the specific impacts on the Firm. As you would expect, we saw significant new account opening activity and meaningful deposit and money market fund inflows, most significantly in the Commercial Bank, Business Banking and AWM. Regarding the deposit inflows, at the Firm-wide level, average deposits were down 3% quarter-on-quarter, while end-of-period deposits were up 2% quarter-on-quarter, implying an intra-quarter reversal of the recent outflow trend as a consequence of the March events. We estimate that we have retained approximately $50 billion of these deposit inflows at quarter-end. It\u2019s important to note that while the sequential period-end deposit increase is higher than we would have otherwise expected, our current full year NII outlook, which I will address at the end, still assumes modest deposit outflows from here. We expect these outflows to be driven by the same factors as last quarter as well as the expectation that we will not retain all of this quarter\u2019s inflows. Now back to the quarter touching on a few highlights. We grew our IB fee wallet share. Consumer spending remained solid with combined debit and credit card spend up 10% year-on-year. And credit continues to normalize, but actual performance remains strong across the Company. On Page 2, we have some more detail. Revenue of $39.3 billion was up $7.7 billion or 25% year-on-year. NII ex markets was up $9.2 billion or 78%, driven by higher rates, partially offset by lower deposit balances. NIR ex markets was down $1.1 billion or 10% driven by the securities losses previously mentioned as well as lower IB fees and lower auto lease income on lower volume. And markets revenue was down $371 million or 4% year-on-year. Expenses of $20.1 billion were up $916 million or 5% year-on-year, driven by compensation-related costs, reflecting the annualization of last year\u2019s headcount growth and wage inflation. These results include the impact of the higher FDIC assessment I mentioned last quarter, which, of course, is unrelated to recent events. And credit costs of $2.3 billion included net charge-offs of $1.1 billion, predominantly in card. The net reserve build of $1.1 billion was largely driven by deterioration in our weighted average economic outlook. Onto balance sheet and capital on page 3. We ended the quarter with a CET1 ratio of 13.8%, up about 60 basis points, which was primarily driven by the benefit of net income less distributions and AOCI gains. And in line with what we previously said, we resumed stock buybacks this quarter and distributed a total of $1.9 billion and net repurchases back to shareholders. Now, let\u2019s go to our businesses, starting with CCB on Page 4. Touching quickly on the health of U.S. consumers and small businesses based on our data. Both continue to show resilience and remain on the path to normalization as expected, but we continue to monitor their activity closely. Spend remains solid, and we have not observed any notable pullback throughout the quarter. Moving to financial results. CCB reported net income of $5.2 billion on revenue of $16.5 billion, which was up 35% year-on-year. In Banking & Wealth Management, revenue was up 67% year-on-year, driven by higher NII on higher rates. Average deposits were down 2% quarter-on-quarter, in line with recent trends. Throughout the quarter, we continued to see customer flows to higher-yielding products, as you would expect, but were encouraged by what we are capturing in CDs and our Wealth Management offerings. Client investment assets were down 1% year-on-year, but up 7% quarter-on-quarter, driven by market performance as well as strong net inflows. In Home Lending, revenue was down 38% year-on-year, largely driven by lower net interest income from tighter loan spreads and lower production revenue. Moving to Card Services & Auto. Revenue was up 14% year-on-year, largely driven by higher Card Services NII on higher revolving balances, partially offset by lower auto lease income. Credit card spend was up 13% year-on-year. Card outstandings were up 21%, driven by strong new account growth and revolve normalization. And in Auto, originations were $9.2 billion, up 10% year-on-year. Expenses of $8.1 billion were up 5% year-on-year, reflecting the impact of wage inflation and higher headcount. In terms of credit performance this quarter, credit costs were $1.4 billion, reflecting reserve builds of $300 million in card and $50 million in Home Lending. Net charge-offs were $1.1 billion, up about $500 million year-on-year, in line with expectations as delinquency levels continue to normalize across portfolios. Next, the CIB on Page 5. CIB reported net income of $4.4 billion on revenue of $13.6 billion. Investment Banking revenue of $1.6 billion was down 24% year-on-year. IB fees were down 19%. We ranked number 1 with first quarter wallet share of 8.7%. In advisory, fees were down 6% compared to a strong first quarter last year. Our underwriting businesses continued to be affected by market conditions with fees down 34% for debt and 6% for equity. In terms of the outlook, the dynamics remain the same. Our pipeline is relatively robust, but conversion is sensitive to market conditions and the economic outlook. We expect the second quarter and the rest of the year to remain challenging. Moving to Markets. Total revenue was $8.4 billion, down 4% year-on-year. Fixed income was flat. Rates was strong during the rally early in the quarter as well as through the elevated volatility in March. Credit was up on the back of higher client flows and currencies in emerging markets was down relative to a very strong first quarter in the prior year. Equity Markets was down 12%, driven by lower revenues in derivatives relative to a strong first quarter in the prior year and lower client activity and cash. Payments revenue was $2.4 billion, up 26% year-on-year. Excluding the net impact of equity investments, primarily a gain in the prior year, it was up 55%, with the growth driven by higher rates, partially offset by lower deposit balances. Securities Services revenue of $1.1 billion was up 7% year-on-year, driven by higher rates, partially offset by lower deposit balances and market levels. Expenses of $7.5 billion were up 2% year-on-year as higher headcount and wage inflation were largely offset by lower revenue-related compensation. Moving to the Commercial Bank on page 6. Commercial Banking reported net income of $1.3 billion. Revenue of $3.5 billion was up 46% year-on-year, driven by higher deposit margins. Payments revenue of $2 billion was up 98% year-on-year driven by higher rates. And gross Investment Banking revenue of $881 million was up 21% year-on-year on increased M&A and bond underwriting from large deal activity. Expenses of $1.3 billion were up 16% year-on-year largely driven by higher compensation expense, including front office hiring and technology investments as well as higher volume-related expense. Average deposits were down 16% year-on-year and 5% quarter-on-quarter, predominantly driven by continued attrition and non-operating deposits as well as seasonally lower balances. Loans were up 13% year-on-year and 1% sequentially. C&I loans were up 1% quarter-on-quarter with somewhat different dynamics based on client size. In middle market banking, higher rates and recession concerns have decreased new loan demand and utilization, which is also leading to weakness in CapEx spending. In Corporate Client Banking, utilization rates increased modestly quarter-on-quarter as capital market conditions led more clients to opt for bank debt. CRE loans were also up 1% sequentially with higher rates creating headwinds for both originations and prepayments. And given the recent focus on commercial real estate, let me remind you that our office sector exposure is less than 10% of our portfolio and is focused in the urban dense markets, and nearly two-thirds of our loans are multifamily, primarily in supply-constrained markets. Finally, credit costs of $417 million included a net reserve build of $379 million, predominantly driven by what I mentioned upfront. Then to complete our lines of business, AWM on page 7. Asset & Wealth Management reported net income of $1.4 billion, pretax margin of 35%. Revenue of $4.8 billion was up 11% year-on-year driven by higher deposit margins on lower balances and a valuation gain on our initial investment triggered by taking full ownership of our asset management joint venture in China, partially offset by the impact of lower average market levels on management fees and lower performance fees. Expenses of $3.1 billion were up 8% year-on-year, predominantly driven by compensation, reflecting growth in our private banking advisory teams, higher revenue-related compensation and the run rate impact of acquisitions. For the quarter, net long-term inflows were $47 billion, led by fixed income and equities. And then liquidity, we saw net inflows of $93 billion, inclusive of our ongoing deposit migration. AUM of $3 trillion was up 2% year-on-year and overall client assets of $4.3 trillion were up 6%, driven by continued net inflows into liquidity and long-term products. And finally, loans were down 1% quarter-on-quarter, driven by lower securities-based lending, while average deposits were down 5%. Turning to Corporate on page 8. Corporate reported net income of $244 million. Revenue was $985 million compared to a net loss of $881 million last year. NII was $1.7 billion, up $2.3 billion year-on-year due to the impact of higher rates. NIR was a loss of $755 million compared with a loss of $345 million in the prior year and included the net investment securities losses I mentioned earlier. Expenses of $160 million were down $24 million year-on-year. And credit costs of $370 million were driven by reserve builds on a couple of single name exposures. Next, the outlook on page 9. We now expect 2023 NII and NII ex-markets to be approximately $81 billion. This increase in guidance is primarily driven by lower rate paid assumptions across both consumer and wholesale in light of the expectation of Fed cuts later in the year as well as slightly higher card revolving balances. Note that in line with my comments at the outset, recent deposit balance increases are not a meaningful contributor to the upward revision in the NII outlook, given that we expect a meaningful portion of the recent inflows to reverse later in the year. I would point out that this outlook still embeds significant reprice lags. We think a more sustainable NII ex-markets run rate in the medium term is well below this quarter\u2019s $84 billion as well as below the $80 billion that is implied for the rest of the year by our full year guidance. And while we don\u2019t know exactly when this lower run rate will be reached, when it happens, we believe it will be around the mid-70s. And of course, as we mentioned last quarter, this NII outlook remains highly sensitive to the uncertainty associated with the timing and the extent of deposit reprice, investment portfolio decisions, the dynamics of QT and RRP, the trajectory of Fed funds as well as the broader macroeconomic environment, including its impact on loan growth. Separately, it\u2019s worth noting that markets NII may start to trend slightly positive towards the end of the year as a function of mix and rate effects. Moving to expenses. Our outlook for 2023 continues to be about $81 billion. Importantly, this does not currently include the impact of the pending FDIC special assessment. And on credit, we continue to expect the 2023 card net charge-off rate to be approximately 2.6%. So to wrap up, our strong results this quarter once again highlight the earnings power of this diversified franchise. We have benefited from our fortress principles and commitment to invest, which we will continue to do as we head into an increasingly uncertain environment. With that, operator, please open the line for Q&A.","evidence_gemma_new":null,"evidence_llama_3_3":"Corporate net income","evidence_qwen_3_30b":"Corporate net income $244 million","gemma_new_max":null,"gemma_new_min":null,"llama_3_3_max":244000000.0,"llama_3_3_min":244000000.0,"qwen_3_30b_max":244000000.0,"qwen_3_30b_min":244000000.0}
{"symbol":"JPM","year":2024,"quarter":1,"date":"2024-Q1","chunk_id":1,"sub_chunk_id":0,"centroid_label":"corporate net income","agreed_value":918000000.0,"count":2,"chunk":"Jeremy Barnum: Thank you very much, and good morning, everyone. The presentation is available on our website, and please refer to the disclaimer in the back. Starting on Page 1. The firm reported net income of $13.4 billion, EPS of $4.44 on revenue of $42.5 billion and delivered an ROTCE of 21%. These results included a $725 million increase to the special assessment resulting from the FDIC's updated estimate of expected losses from the closures of Silicon Valley Bank and Signature Bank. Touching on a couple of highlights. Firm-wide IB fees were up 18% year-on-year, reflecting particular strength in underwriting fees. And we have seen strong net inflows across AWM as well as in the CCB and Wealth Management business. On Page 2, we have some more detail. This is the last quarter we'll discuss results excluding First Republic, given that going forward, First Republic results will naturally be included in the prior period, making year-on-year results comparable. For this quarter, First Republic contributed $1.7 billion of revenue, $806 million of expense and $668 million of net income. Now focusing on the firm-wide results excluding First Republic. Revenue of $40.9 billion was up $1.5 billion or 4% year-on-year. NII ex Markets was up $736 million or 4% driven by the impact of balance sheet mix and higher rates as well as higher revolving balances in card, largely offset by deposit margin compression and lower deposit balances in CCB. NIR ex Markets was up $1.2 billion or 12% driven by higher firm-wide asset management and Investment Banking fees as well as lower net investment securities losses. And Markets revenue was down $400 million or 5% year-on-year. Expenses of $22 billion were up $1.8 billion or 9% year-on-year driven by higher compensation, including growth in employees and the increase to the FDIC special assessment. And credit costs were $1.9 billion, reflecting net charge-offs of $2 billion and a net reserve release of $38 million. Net charge-offs were up $116 million predominantly driven by Card. On to balance sheet and capital on Page 3. We ended the quarter with a CET1 ratio of 15%, relatively flat versus the prior quarter, reflecting net income which was predominantly offset by higher RWA and capital distribution. This quarter's higher RWA is largely due to seasonal effects, including higher client activity in Markets and higher risk weights on deferred tax assets, partially offset by lower Card loans. Now let's go to our businesses, starting with CCB on Page 4. Consumers remain financially healthy, supported by a resilient labor market. While cash buffers have largely normalized, balances were still above pre-pandemic levels, and wages are keeping pace with inflation. When looking at a stable cohort of customers, overall spend is in line with the prior year. Turning now to the financial results excluding First Republic. CCB reported net income of $4.4 billion on revenue of $16.6 billion, which was up 1% year-on-year. In Banking & Wealth Management, revenue was down 4% year-on-year, reflecting lower NII on lower deposits with average balances down 7% as our CD mix increased. Client investment assets were up 25% year-on-year driven by market performance and strong net inflows. In Home Lending, revenue was up 10% year-on-year, predominantly driven by higher NII and production revenue. Originations, while still modest, were up 10%. Moving to Card Services & Auto. Revenue was up 8% year-on-year driven by higher Card Services NII on higher revolving balances, partially offset by higher card acquisition costs from new account growth and lower auto lease income. Card outstandings were up 13% due to strong account acquisition and the continued normalization of revolve. And in auto, originations were $8.9 billion, down 3%, while we maintained healthy margins and market share. Expenses of $8.8 billion were up 9% year-on-year, largely driven by field compensation and continued growth in technology and marketing. In terms of credit performance this quarter, credit costs were $1.9 billion, driven by net charge-offs, which were up $825 million year-on-year predominantly due to continued normalization in Card. The net reserve build was $45 million, reflecting the build in Card largely offset by a release in Home Lending. Next, the Corporate & Investment Bank on Page 5. Before reporting CIB's results, I want to note that this will also be the last quarter we will be -- we will report earnings for the CIB and CB as standalone segments. Between now and Investor Day, we will furnish an 8-K with historical results, including 5 quarters and 2 full years of history consistent with the structure of the new Commercial and Investment Bank segment, in line with the reorganization that was announced in January. Turning back to this quarter. CIB reported net income of $4.8 billion on revenue of $13.6 billion. Investment Banking revenue of $2 billion was up 27% year-on-year. IB fees were up 21% year-on-year, and we ranked #1 with year-to-date wallet share of 9.1%. In Advisory, fees were down 21% driven by fewer large completed deals. Underwriting fees were up significantly, benefiting from improved market conditions with debt up 58% and equity up 51%. In terms of the outlook. While we are encouraged by the level of capital markets activity we saw this quarter, we need to be mindful that some meaningful portion of that is likely pulling forward from later in the year. Similarly, while it was encouraging to see some positive momentum in announced M&A in the quarter, it remains to be seen whether that will continue, and the Advisory business still faces structural headwinds from the regulatory environment. Payments revenue was $2.4 billion, down 1% year-on-year, as deposit margin normalization and deposit-related client credits were largely offset by higher fee-based revenue and deposit balances. Moving to Markets. Total revenue was $8 billion, down 5% year-on-year. Fixed income was down 7% driven by lower activity in rates and commodities compared to a strong prior year quarter, partially offset by strong results in Securitized Products. Equity Markets was flat. Securities Services revenue of $1.2 billion was up 3% year-on-year. Expenses of $7.2 billion were down 4% year-on-year predominantly driven by lower legal expense. Moving to the Commercial Bank on Page 6. Commercial Banking reported net income of $1.6 billion. Revenue of $3.6 billion was up 3% year-on-year driven by higher noninterest revenue. Gross Investment Banking and Markets revenue of $913 million was up 4% year-on-year with increased IB fees, largely offset by lower Markets revenue compared to a strong prior year quarter. Payments revenue of $1.9 billion was down 2% year-on-year driven by lower deposit margins and balances, largely offset by fee growth, net of higher deposit-related client credits. Expenses of $1.5 billion were up 13% year-on-year predominantly driven by higher compensation, reflecting an increase in employees, including for office and technology investments, as well as higher volume-related expenses. Average deposits were down 3% year-on-year, primarily driven by lower nonoperating deposits and down 1% quarter-on-quarter, reflecting seasonally lower balances. Loans were flat quarter-on-quarter. C&I loans were down 1%, reflecting muted demand for new loans as clients remain cautious. And CRE loans were flat as higher rates continue to have an impact on originations and sales activity. Finally, credit costs were a net benefit of $35 million, including a net reserve release of $101 million and net charge-offs of $66 million. Then to complete our lines of business, AWM on Page 7. Asset & Wealth Management reported net income of $1 billion with pretax margin of 28%. Revenue of $4.7 billion was down 1% year-on-year. Excluding net investment valuation gains in the prior year, revenue was up 5% driven by higher management fees on strong net inflows and higher average market levels, partially offset by lower NII due to deposit margin compression. Expenses of $3.4 billion were up 11% year-on-year largely driven by higher compensation, including revenue-related compensation; continued growth in our private banking advisor teams; and the impact of the JPMorgan Asset Management China acquisition; as well as higher distribution fees. For the quarter, long-term net inflows were $34 billion, led by equities and fixed income. AUM of $3.6 trillion was up 19% year-on-year. And client assets of $5.2 trillion were up 20% year-on-year driven by higher market levels and continued net inflow. And finally, loans were down 1% quarter-on-quarter and deposits were flat. Turning to Corporate on Page 8. Corporate reported net income of $918 million. Revenue was $2.3 billion, up $1.3 billion year-on-year. NII was $2.5 billion, up $737 million year-on-year driven by the impact of the balance sheet mix and higher rates. NIR was a net loss of $188 million. The current quarter included net investment securities losses of $366 million compared with net securities losses of $868 million in the prior year quarter. Expenses of $1 billion were up $889 million year-on-year predominantly driven by the increase to the FDIC special assessment. To finish up, we have the outlook on Page 9. We now expect NII ex Markets to be approximately $89 billion based on a forward curve that contained 3 rate cuts at quarter end. Our total NII guidance remains approximately $90 billion, which implies a decrease in our Markets NII guidance from around $2 billion to around $1 billion. The primary driver of that reduction is balance sheet growth and mix shift in the Markets business. And as a reminder, changes in Markets NII are generally revenue-neutral. Our outlook for adjusted expense is now about $91 billion, reflecting the increase to the FDIC special assessment I mentioned upfront. And on credit, we continue to expect the 2024 Card net charge-off rate to be below 3.5%. Finally, you may have noticed that our effective tax rate has increased this quarter, and it will likely stay around 23% this year, absent discrete items, which can vary quite a bit. The driver of this change is the firm's adoption of the proportional amortization method for certain tax equity investments. Our managed rate is unchanged, and it should average about 3.5% above the effective tax rate. This is a smaller gap than we've previously observed, and we expect this approximate relationship to persist going forward, although the difference will continue to fluctuate as it has in the past. For the avoidance of doubt, these changes have no meaningful impact on expected annual net income. We're just mentioning this to help with your models. So to wrap up. We're pleased with another quarter of strong operating results even as the journey towards NII normalization begins. While we remain confident in our ability to produce strong returns and manage risk across a range of scenarios, the economic, geopolitical and regulatory uncertainties that we have been talking about for some time remain prominent, and we are focused on being prepared to navigate those challenges as well as any others that may come our way. And with that, let's open up the line for Q&A.","evidence_gemma_new":null,"evidence_llama_3_3":"Corporate net income","evidence_qwen_3_30b":"Corporate net income $918 million","gemma_new_max":null,"gemma_new_min":null,"llama_3_3_max":918000000.0,"llama_3_3_min":918000000.0,"qwen_3_30b_max":918000000.0,"qwen_3_30b_min":918000000.0}
{"symbol":"JPM","year":2024,"quarter":2,"date":"2024-Q2","chunk_id":1,"sub_chunk_id":0,"centroid_label":"corporate net income","agreed_value":6800000000.0,"count":2,"chunk":"Jeremy Barnum : Thank you and good morning everyone. Starting on Page one, the firm reported net income of $18.1 billion, EPS of $6.12 on revenue of $51 billion with an ROTCE of 28%. These results included the $7.9 billion net gain related to Visa shares and the $1 billion foundation contribution of the appreciated Visa stock. Also included is $546 million of net investment securities losses in corporate. Excluding these items, the firm had net income of $13.1 billion, EPS of $4.40, and an ROTCE of 20%. Touching on a couple of highlights, in the CIB, IB fees were up 50% year-on-year and 17% quarter-on-quarter, and market revenue was up 10% year-on-year. In CCB, we had a record number of first-time investors and strong customer acquisition across checking accounts and card and we've continued to see strong net inflows across AWM. Now before I get more detail on the results I just want to mention that starting this quarter we are no longer explicitly calling out the First Republic contribution in the presentation. Going forward, we'll only specifically call it out if it is a meaningful driver in the year-on-year comparison. As a reminder, we acquired First Republic in May of last year, so the prior year quarter only has two months of First Republic results compared to the full three months this quarter. Also in the prior year quarter most of the expenses were in corporate whereas now they are primarily in the relevant line-of-business. Now turning to Page 2 for the firm-wide results. The firm reported revenue of $51 billion, up $8.6 billion, or 20% year-on-year. Excluding both the Visa gain that I mentioned earlier, as well as last year's First Republic bargain purchase gain of $2.7 billion, revenue of $43.1 billion was up $3.4 billion or 9%. NII ex-Markets was up $568 million or 3%, driven by the impact of balance sheet mix and higher rates, higher revolving balances in card, and the additional month of First Republic related NII, partially offset by deposit margin compression and lower deposit balances. NIR ex-Markets was up $7.3 billion or 56%. Excluding the items I just mentioned, it was up $2.1 billion or 21%, largely driven by higher investment banking revenue and asset management fees. Both periods included net investment securities losses. And markets revenue was up $731 million or 10% year-on-year. Expenses of $23.7 billion were up $2.9 billion or 14% year-on-year. Excluding the foundation contribution I previously mentioned, expenses were up 9% primarily driven by compensation including revenue related compensation and growth in employees. And credit costs were $3.1 billion reflecting net charge-offs of $2.2 billion and a net reserve build of $821 million. Net charge-offs were up $820 million year-on-year, predominantly driven by Card. The net reserve build included $609 million in consumer and $189 million in wholesale. Onto balance sheet and capital on Page 3. We ended the quarter with a CET1 ratio of 15.3% up 30 basis points versus the prior quarter, primarily driven by net income, largely offset by capital distributions and higher RWA. As you know, we completed CCAR a couple of weeks ago and have already disclosed a number of the key points. Let me summarize them again here. Our preliminary SCB is 3.3%, although the final SCB could be higher. The preliminary SCB, which is up from the current requirement of 2.9%, results in a 12.3% standardized CET1 ratio requirement, which goes into effect in the fourth quarter of 2024. And finally the firm announced that the Board intends to increase the quarterly common stock dividend from $1.15 to $1.25 per share in the third quarter of 2024. Now, let's go to our businesses, starting with CCB on Page 4. CCB reported net income of $4.2 billion on revenue of $17.7 billion, which was up 3% year-on-year. In banking and wealth management, revenue was down 5% year-on-year, reflecting lower deposits and deposit margin compression, partially offset by growth and wealth management revenue. Average deposits were down 7% year-on-year and 1% quarter-on-quarter. Client investment assets were up 14% year-on-year, predominantly driven by market performance. In home lending, revenue of $1.3 billion was up 31% year-on-year, predominantly driven by higher NII, including one additional month of the First Republic portfolio. Turning to Card services and Auto, revenue was up 14% year-on-year, predominantly driven by higher Card NII and higher revolving balances. Card outstandings were up 12% due to strong account acquisition and the continued normalization of revolve. And in Auto, originations were $10.8 billion, down 10% coming off strong originations from a year ago, while continuing to maintain healthy margins. Expenses of $9.4 billion were up 13% year-on-year, predominantly driven by First Republic expenses now reflected in the lines-of-business, as I mentioned earlier, as well as field compensation and continued growth in technology and marketing. In terms of credit performance this quarter, credit costs were $2.6 billion reflecting net charge-offs of $2.1 billion up $813 million year-on-year, predominantly driven by Card, as newer vintages season and credit normalization continues. The net reserve build was $579 million, also driven by Card, due to loan growth and updates to certain macroeconomic variables. Next, the Commercial and Investment Bank on Page 5. Our new Commercial and Investment Bank reported net income of $5.9 billion on revenue of $17.9 billion. You'll note that we are disclosing revenue by business, as well as breaking down the banking and payments revenue by client coverage segment in order to best highlight the relevant trends in both important dimensions of the wholesale franchise. This quarter, IB fees were up 50% year-on-year, and we Ranked Number #1 with year-to-date wallet share of 9.5%. And advisory, fees were up 45%, primarily driven by the closing of a few large deals in a week prior year quarter. Underwriting fees were up meaningfully with equity up 56% and debt up 51%, benefiting from favorable market conditions. In terms of the outlook, we're pleased with both the year-on-year and sequential improvement in the quarter. We remain cautiously optimistic about the pipeline, although many of the same headwinds are still in effect. It's also worth noting that pull-forward refinancing activity was a meaningful contributor to the strong performance in the first half of the year. Payments revenue was $4.5 billion, down 4% year-on-year, as deposit margin compression and higher deposit related client credits were largely offset by fee growth. Moving to markets, total revenue was $7.8 billion, up 10% year-on-year. Fixed income was up 5% with continued strength in securitized products. And equity markets was up 21%, with equity derivatives up on improved client activity. We saw record revenue in Prime on growth and client balances amid supportive equity market levels. Security services revenue of $1.3 billion was up 3% year-on-year, driven by higher volumes and market levels, largely offset by deposit margin compression. Expenses of $9.2 billion were up 12% year-on-year, largely driven by higher revenue related compensation, legal expense, and volume related non-compensation expense. In banking and payments, average loans were up 2% year-on-year due to the impact of the First Republic acquisition and flat sequentially. Demand for new loans remains muted as middle market and large corporate clients remain somewhat cautious due to the economic environment, and revolver utilization continues to be below pre-pandemic levels. Also, capital markets are open and are providing an alternative to traditional bank lending for these clients. In CRE, higher rates continue to suppress both loan origination and payoff activity. Average client deposits were up 2% year-on-year and relatively flat sequentially. Finally, credit costs were $384 million. The net reserve build of $220 million was primarily driven by incorporating the First Republic portfolio in the Firm's modeled approach. Net charge-offs were $164 million, of which about half was in office. Then to complete our lines-of-business, AWM on Page 6. Asset and wealth management reported net income of $1.3 billion with pre-tax margin of 32%. Revenue of $5.3 billion was up 6% year-on-year, driven by growth in management fees on higher average market levels and strong net inflows, as well as higher brokerage activity, largely offset by deposit margin compression. Expenses of $3.5 billion were up 12% year-on-year, largely driven by higher compensation, primarily revenue-related compensation, and continued growth in our private banking advisor teams. For the quarter, long-term net inflows were $52 billion, led by equities and fixed income. And in liquidity, we saw net inflows of $16 billion. AUM of $3.7 trillion was up 15% year-on-year. And client assets of $5.4 trillion were up 18% year-on-year, driven by higher market levels and continued net inflows. And finally, loans and deposits were both flat quarter-on-quarter. Turning to corporate on Page 7. Corporate reported net income of $6.8 billion on revenue of $10.1 billion. Excluding this quarter's Visa-related gain and the First Republic bargain purchase gain in the prior year, NIR was up approximately $450 million year-on-year. NII was up $626 million year-on-year, driven by the impact of balance sheet mix and higher rates. Expenses of $1.6 billion were up $427 million year-on-year, excluding foundation contribution expenses were down $573 million year-on-year, largely as a result of moving First Republic related expense out of corporate into the relevant segments. To finish up, we have the outlook on Page 8. Our 2024 guidance, including the drivers, remains unchanged from what we said at Investor Day. We continue to expect NII and NII ex-markets of approximately $91 billion, adjusted expense of about $92 billion, and on credit, Card net charge-off rate of approximately 3.4%. So to wrap up, the reported performance for the quarter was exceptional and actually represents record revenue and net income. But more importantly, after excluding the significant items, the underlying performance continues to be quite strong. And as always, we remain focused on continuing to execute with discipline. And with that, let's open the line for Q&A.","evidence_gemma_new":null,"evidence_llama_3_3":"Corporate net income","evidence_qwen_3_30b":"Corporate net income","gemma_new_max":null,"gemma_new_min":null,"llama_3_3_max":6800000000.0,"llama_3_3_min":6800000000.0,"qwen_3_30b_max":6800000000.0,"qwen_3_30b_min":6800000000.0}
{"symbol":"JPM","year":2024,"quarter":3,"date":"2024-Q3","chunk_id":1,"sub_chunk_id":0,"centroid_label":"corporate net income","agreed_value":1800000000.0,"count":2,"chunk":"Jeremy Barnum: Thank you, and good morning, everyone. Starting on page one, the firm reported net income of $12.9 billion, EPS of $4.37 and revenue of $43.3 billion with an ROTCE of 19%. Touching on a couple of highlights. In CCB, we ranked number one in retail deposit share for the fourth straight year. In CIB, both IB fees and markets revenue were notably up year-on-year reflecting strength across the franchise. In AWM, we had record quarterly revenues and record long-term flows. Now turning to page two for the firm wide results. The firm reported revenue of $43.3 billion, up $2.6 billion or 6% year-on-year. NII ex-markets was up $274 million or 1%, driven by the impact of balance sheet mix and securities reinvestment, higher revolving balances in card and higher wholesale deposit balances, predominantly offset by lower deposit balances in banking and wealth management and deposit margin compression. NIR ex-markets was up $1.8 billion or 17%, but excluding the prior year's net investment securities losses, it was up 10% on higher asset management and investment banking fees and markets revenue was up $535 million or 8% year-on-year. Expenses of $22.6 billion were up $808 million or 4% year-on-year, driven by compensation including revenue related compensation and growth in employees, partially offset by lower legal expense. And credit costs were $3.1 billion, reflecting net charge offs of $2.1 billion and a net reserve bill of $1 billion, which included $882 million in consumer, primarily in card and $144 million in wholesale. Net charge offs were up $590 million year-on-year, predominantly driven by card. On to balance sheet and capital on page three. We ended the quarter with the CET1 ratio of 15.3% flat versus the prior quarter as net income and OCI gains were offset by capital distributions and higher RWA. This quarter's RWA reflects higher lending activity, as well as higher client activity and market moves on the trading side. We added $6 billion of net common share repurchases this quarter, which in part reflects the deployment of the proceeds from the share from the sale of Visa shares as we have previously mentioned. Now let's go to our businesses starting with CCB on page four. CCB reported net income of $4 billion on revenue of $17.8 billion, which was down 3% year-on-year. In Banking and Wealth Management, revenue was down 11% year-on-year, reflecting deposit margin compression and lower deposits partially offset by growth in Wealth Management revenue. Average deposits were down 8% year-on-year and 2% sequentially. We are seeing a slowdown in customer yield seeking activity including CD volumes and expect deposits to be relatively flat for the remainder of the year. Client investment assets were up 21% year-on-year, driven by market performance and we continue to see strong referrals of new wealth management clients from our branch network. In home lending, revenue was up 3% year-on-year driven by higher NII partially offset by lower servicing and production revenue. Turning to Card Services and Auto. Revenue was up 11% year-on-year, driven by higher card NII on higher revolving balances. Card outstandings were up 11% due to strong account acquisition and the continued normalization of revolve. And in Auto, originations were $10 billion, down 2%, while maintaining strong margins and high quality credit. Expenses of $9.6 billion were up 5% year-on-year, predominantly driven by higher field and technology compensation, as well as growth in marketing. In terms of credit performance this quarter, credit costs were $2.8 billion driven by card and reflected net charge offs of $1.9 billion, up $520 million year-on-year and a net reserve build of $876 million predominantly from higher revolving balances. Next the Commercial and Investment Bank on page five. The CIB reported net income of $5.7 billion on revenue of $17 billion. IB fees were up 31% year-on-year and we ranked number one with year-to-date wallet share of 9.1%. In advisory, fees were up 10% benefiting from the closing of a few large deals. Underwriting fees were up meaningfully with debt up 56% and equity up 26%, primarily driven by favorable market conditions. In light of the positive momentum throughout the year, we're optimistic about our pipeline, but the M&A regulatory environment and geopolitical situation are continued sources of uncertainty. Payments revenue was $4.4 billion, up 4% year-on-year, driven by fee growth and higher deposit balances, largely offset by margin compression. Moving to markets, total revenue was $7.2 billion, up 8% year-on-year. Fixed income was flat reflecting outperformance in currencies and emerging markets and lower revenue and rates. Equities was up 27%, reflecting strong performance across regions largely driven by a supportive trading environment in the U.S. and increased late quarter activity in Asia. Securities Services revenue was $1.3 billion, up 9% year-on-year largely driven by fee growth on higher market levels and volumes. Expenses of $8.8 billion were down 1% year-on-year with lower legal expense predominantly offset by higher revenue related compensation, and growth in-place, as well as higher technology spend. Average banking and payments loans were down 2% year-on-year and down 1% sequentially. In the middle market and large corporate client segments, we continue to see softness in both new loan demand and revolver utilization in part due to clients' access to receptive capital markets. In multifamily, while we are seeing encouraging signs in loan originations as long term rates fall, we expect overall growth to remain muted in the near-term as originations are offset by payoff activity. Average client deposits were up 7% year-on-year and 3% sequentially, primarily driven by growth from large corporates in payments and security services. Finally, credit costs were $316 million, driven by higher net lending activity, including in markets and downgrades, partially offset by improved macroeconomic variables. Then to complete our lines of business, AWM on page six. Asset and wealth management reported net income of $1.4 billion with pre-tax margin of 33%. For the quarter, revenue of $5.4 billion was up 9% year-on-year, driven by growth and management fees on higher average market levels and strong net inflows, investment valuation gains, compared to losses in the prior year, and higher brokerage activity, partially offset by deposit margin compression. Expenses of $3.6 billion or up 16% year-on-year, predominantly driven by higher compensation, including revenue-related compensation and continued growth in our private banking advisor teams, as well as higher distribution fees and legal expense. For the quarter, long-term net inflows were $72 billion, led by fixed income inequities. And in liquidity, we saw net inflows of $34 billion. AUM of $3.9 trillion and client assets of $5.7 trillion were both up 23%, driven by higher market levels and continued net inflows. And finally, loans were up 2% quarter-on-quarter, and deposits were up 4% quarter-on-quarter. Turning to corporate on page seven. Corporate reported net income of $1.8 billion. Revenue was $3.1 billion, up $1.5 billion year-on-year. NII was $2.9 billion, up $932 million year-on-year, predominantly driven by the impact of balance sheet mix and securities reinvestment, including from prior quarters. NIR was a net gain of $155 million, compared with a net loss of $425 million in the prior year, predominantly driven by lower net investment securities losses this quarter. Expenses of $589 million were down $107 million year-on-year. To finish up, let's turn to the outlook on page eight. We now expect 2024 NII ex-markets to be approximately $91.5 billion and total NII to be approximately $92.5 billion. Our outlook for adjusted expense is now about $91.5 billion. And given where we are in the year, we included on the page the implied fourth quarter guidance for NII and adjusted expense. And note that the NII numbers imply about $800 million of markets NII in the fourth quarter. On credit, we continue to expect the 2024 Card net charge-off rate to be approximately 3.4%. So to wrap up, we're pleased with another quarter of strong operating performance. As we look ahead to the next few quarters, we expect results will be somewhat challenged as normalization continues. But we remain upbeat and focused on executing in order to continue delivering excellent returns through the cycle. And with that, let's open the line for Q&A.","evidence_gemma_new":null,"evidence_llama_3_3":"Corporate net income","evidence_qwen_3_30b":"Corporate net income $1.8 billion","gemma_new_max":null,"gemma_new_min":null,"llama_3_3_max":1800000000.0,"llama_3_3_min":1800000000.0,"qwen_3_30b_max":1800000000.0,"qwen_3_30b_min":1800000000.0}
{"symbol":"JPM","year":2024,"quarter":4,"date":"2024-Q4","chunk_id":1,"sub_chunk_id":0,"centroid_label":"corporate net income","agreed_value":1300000000.0,"count":2,"chunk":"Jeremy Barnum: Thank you, and good morning, everyone. Starting on Page 1, the firm reported net income of $14 billion, EPS of $4.81 on revenue of $43.7 billion with an ROTCE of 21%. On Page 2, we have more on our fourth quarter results. The firm reported revenue of $43.7 billion, up $3.8 billion or 10% year-on-year. NII ex-markets was down $548 million or 2%, driven by the impact of lower rates and the associated deposit margin compression as well as lower deposit balances in CCB, largely offset by the impact of securities reinvestment, higher revolving balances in card and higher wholesale deposit balances. NII ex-markets was up $3.1 billion or 30%. Excluding the prior year's net investment securities losses, it was up 21%, largely on higher asset management fees and investment banking fees. And markets revenue was up $1.2 billion or 21%. Expenses of $22.8 billion were down $1.7 billion or 7% year-on-year. Excluding the prior year's FDIC special assessment, expenses were up $1.2 billion or 5%, predominantly driven by compensation as well as higher brokerage and distribution fees. And credit costs were $2.6 billion, reflecting net charge-offs of $2.4 billion and a net reserve of $267 million. On Page 3, you can see the reported results for the full year, I'll remind you that there were a number of significant items in 2024. Excluding those items, the firm reported net income of $54 billion, EPS of $18.22, revenue of $173 billion and we delivered an ROTCE of 20%. Touching on a couple of highlights for the year, in CCB, we had a record number of first-time investors and acquired nearly 10 million new card accounts. In CIB, we had record revenue in markets, payments, and security services, and in AWM, we had record long-term net inflows of $234 billion, positive across all channels, regions, and asset classes. On to balance sheet and capital on Page 4, we ended the quarter with a CET1 ratio of 15.7%, up 40 basis points versus the prior quarter as net income and lower RWA were largely offset by both OCI losses and capital distributions, which included $4 billion of net common share repurchases this quarter. The $24 billion decrease in RWA reflects a seasonal decline in markets activity and lower wholesale lending, which was predominantly offset by a seasonal increase in card. Now let's go to our businesses, starting with CCB on Page 5. CCB reported net income of $4.5 billion on revenue of $18.4 billion, which was up 1% year-on-year. In Banking and Wealth Management, revenue was down 7% year-on-year on deposit margin compression and lower deposits, partially offset by growth in wealth management revenue. Average deposits were down 4% year-on-year and flat sequentially as consumer balances have stabilized. Client investment assets were up 14% year-on-year, predominantly driven by market performance, and we continue to see healthy flows across branch and digital channels. In Home Lending, revenue was up 12% year-on-year, predominantly driven by higher production revenue. Turning to Card Services & Auto, revenue was up 14% year-on-year, largely driven by Card NII on higher revolving balances. Card outstandings were up 11% due to strong account acquisition and revolver growth. And in Auto, originations were $10.6 billion, up 7%, reflecting higher lease volume on robust new vehicle inventory. Expenses of $9.7 billion were up 4% year-on-year, predominantly driven by field compensation and growth in technology. In terms of credit performance this quarter, credit costs were $2.6 billion, reflecting net charge-offs of $2.1 billion, up $428 million year-on-year, driven by Card. The net reserve build was $557 million, predominantly driven by higher Card revolving balances. Next, the Commercial & Investment Bank on Page 6. CIB reported net income of $6.6 billion on revenue of $17.6 billion. IV fees were up 49% year-on-year and we ranked number one with wallet share of 9.3% for 2024. Advisory fees were up 41%, benefiting from large deals and share growth in a number of key sectors. Underwriting fees were up meaningfully with debt up 56% and equity up 54%, primarily driven by favorable market conditions. In terms of the outlook for the overall investment banking wallet, in light of the positive momentum, we remain optimistic about our pipeline. Payments revenue was $4.7 billion, up 3% year-on-year, excluding equity investments, driven by higher deposit balances and fee growth, largely offset by deposit margin compression. Lending revenue was $1.9 billion, up 9% year-on-year, predominantly driven by lower losses on hedges. Moving to markets, total revenue was $7 billion, up 21% year-on-year. Fixed income was up 20% with better performance in credit as well as continued outperformance in currencies and emerging markets. Equities was up 22% on elevated client activity and derivatives amid increased volatility and higher trading volumes and cash. Security Services revenue was $1.3 billion, up 10% year-on-year, driven by fee growth on higher client activity and market levels as well as higher deposit balances. Expenses of $8.7 billion were up 7% year-on-year, predominantly driven by higher brokerage, technology, and legal expense. Average banking and payments loans were down 2% year-on-year and down 1% sequentially. Global Corporate & Investment Banking loans were down 2% quarter-on-quarter, driven by paydowns in lower short-term financing, primarily offset by new originations. In commercial banking, middle market loans were also down 2%, driven by paydowns, predominantly offset by new originations, and commercial real estate loans were flat as new originations were offset by paydowns. Average client deposits were up 9% year-on-year and 5% sequentially, driven by underlying client growth. Finally, credit costs were $61 million, driven by net downgrade activity and the net impact of charge-offs, offset -- largely offset by a reserve release due to an update to certain loss assumptions. Then to complete our lines of business, Asset & Wealth Management on Page 7. AWM reported net income of $1.5 billion with pre-tax margin of 35%. Revenue of $5.8 billion was up 13% year-on-year, predominantly driven by growth in management fees on higher average market levels and strong net inflows as well as higher performance fees. Expenses of $3.8 billion were up 11% year-on-year, predominantly driven by higher compensation, including revenue-related compensation and continued growth in our private banking advisor teams as well as higher distribution fees. Long-term net inflows were $76 billion for the quarter, positive across all asset classes. In liquidity, we saw net inflows of $94 billion for the quarter and $104 billion for the full year -- $140 billion for the full year, sorry. And we had client asset net inflows of $468 billion for the year. AUM of $4 trillion and client assets of $5.9 trillion were both up 18% year-on-year, driven by continued net inflows and higher market levels. And finally, loans were up 2% quarter-on-quarter and deposits were up 5% quarter-on-quarter. Turning to Corporate on Page 8; Corporate reported net income of $1.3 billion. Revenue of $2 billion was up $223 million year-on-year. NII of $2 billion was down $415 million year-on-year, driven by the impact of lower rates, largely offset by balance sheet actions, primarily securities reinvestment activity. NII was a net loss of $30 million compared to the net loss of $668 million in the prior year, driven by lower net investment securities losses this quarter. And expenses of $550 million were down $3 billion year-on-year, predominantly driven by the absence of the FDIC Special Assessment of $2.9 billion in the prior year. With that, let's pivot to the outlook, starting with NII on Page 9. We expect 2025 NII ex-markets to be approximately $90 billion. Going through the drivers, as usual, the outlook assumes that rates follow the forward curve. It's worth noting that the NII decrease is driven by both the cut expected in 2025 and the impact of the 100 basis points of cuts in the back half of 2024. You can see on the page that we've illustrated the historical trajectory of card loan growth. We expect healthy card loan growth again this year, but below the 12% pace we saw in 2024 as tailwinds from revolve normalization are largely behind us. Turning to deposits; firm-wide deposits have stabilized and we expect to see a more visible growth trend to assert itself in the second half of 2025. It's notable that we can already see that trend in consumer checking deposits. On deposit margin, we expect modest compression due to lower rates. When you put all that together, we expect the NII trough could be sometime in the middle of the year, followed by growth as we illustrated at the bottom of the bar. And for completeness, we expect firm-wide NII to be approximately $94 billion as a function of markets NII increasing to about $4 billion, which you should think of as being primarily offset in NIR. Finally, I want to point out that starting this quarter, we are including an estimate of earnings at risk in the earnings supplement, so you no longer have to wait for the K or the Q to get that number. Now let's turn to expenses on Page 10. We expect 2025 expense to be about $95 billion. Looking at the chart in the middle of the page, I'll touch on the drivers of the year-on-year change, which you'll note are very consistent with what you've been hearing from us recently. The largest increase is volume and revenue-related expense, which is primarily driven by expected growth in auto leasing as well as capital markets. As a reminder, this comes with higher revenues. We continue to hire bankers and advisors to support business growth as well as expand our branch network. The increase in tech spend is primarily business-driven as we continue to invest in new products, features, and customer platforms as well as modernization. Marketing remains a driver of spend as we continue to see attractive opportunities, resulting in strong demand and engagement in our Card business. And finally, while we haven't explicitly called it out in each bar, inflation remains a source of some upward pressure, and as always, we are generating efficiencies to help offset it. Now let's turn to Page 11 to cover credit and wrap-up. On credit, we expect the 2025 card net charge-off rate to be in line with our previous guidance of approximately 3.6%. So, in closing, 2024 was another year of record revenue and net income, and we're proud of what we accomplished. As we look ahead to 2025, we still expect NII normalization, although to a lesser extent than we previously thought. And taking a step back, we think it's important to acknowledge the tension in the risks and uncertainties in the environment and the degree of optimism embedded in asset prices and expectations. In that context, we remain upbeat about the strength of the franchise, but we are focused on being prepared for a wide range of scenarios. Finally, let me say a few words about the wildfires in Los Angeles, while we don't expect much of a financial impact from it, we have a presence in the area across all three lines of business, so we're keeping in close contact with our customers, clients, and employees. We are offering support in a variety of ways, including waiving consumer and business banking fees as well as making a contribution to local relief organizations, offering employee donation matching, and supporting employee volunteer efforts. With that, I'll turn it over to Jamie before we open up the line for Q&A.","evidence_gemma_new":null,"evidence_llama_3_3":"Corporate net income","evidence_qwen_3_30b":"Corporate net income $1.3 billion","gemma_new_max":null,"gemma_new_min":null,"llama_3_3_max":1300000000.0,"llama_3_3_min":1300000000.0,"qwen_3_30b_max":1300000000.0,"qwen_3_30b_min":1300000000.0}
{"symbol":"JPM","year":2023,"quarter":1,"date":"2023-Q1","chunk_id":1,"sub_chunk_id":0,"centroid_label":"expenses","agreed_value":20100000000.0,"count":3,"chunk":"Jeremy Barnum: Thanks, and good morning, everyone. The presentation is available on our website, and please refer to the disclaimer in the back. Starting on page 1. The Firm reported net income of $12.6 billion, EPS of $4.10 on revenue of $39.3 billion and delivered an ROTCE of 23%. These results included $868 million of net investment securities losses in corporate. Before reviewing our results for the quarter, let\u2019s talk about the recent bank failures. Jamie has addressed a number of the important themes in his shareholder letter and the recent televised interview. So, I will go straight to the specific impacts on the Firm. As you would expect, we saw significant new account opening activity and meaningful deposit and money market fund inflows, most significantly in the Commercial Bank, Business Banking and AWM. Regarding the deposit inflows, at the Firm-wide level, average deposits were down 3% quarter-on-quarter, while end-of-period deposits were up 2% quarter-on-quarter, implying an intra-quarter reversal of the recent outflow trend as a consequence of the March events. We estimate that we have retained approximately $50 billion of these deposit inflows at quarter-end. It\u2019s important to note that while the sequential period-end deposit increase is higher than we would have otherwise expected, our current full year NII outlook, which I will address at the end, still assumes modest deposit outflows from here. We expect these outflows to be driven by the same factors as last quarter as well as the expectation that we will not retain all of this quarter\u2019s inflows. Now back to the quarter touching on a few highlights. We grew our IB fee wallet share. Consumer spending remained solid with combined debit and credit card spend up 10% year-on-year. And credit continues to normalize, but actual performance remains strong across the Company. On Page 2, we have some more detail. Revenue of $39.3 billion was up $7.7 billion or 25% year-on-year. NII ex markets was up $9.2 billion or 78%, driven by higher rates, partially offset by lower deposit balances. NIR ex markets was down $1.1 billion or 10% driven by the securities losses previously mentioned as well as lower IB fees and lower auto lease income on lower volume. And markets revenue was down $371 million or 4% year-on-year. Expenses of $20.1 billion were up $916 million or 5% year-on-year, driven by compensation-related costs, reflecting the annualization of last year\u2019s headcount growth and wage inflation. These results include the impact of the higher FDIC assessment I mentioned last quarter, which, of course, is unrelated to recent events. And credit costs of $2.3 billion included net charge-offs of $1.1 billion, predominantly in card. The net reserve build of $1.1 billion was largely driven by deterioration in our weighted average economic outlook. Onto balance sheet and capital on page 3. We ended the quarter with a CET1 ratio of 13.8%, up about 60 basis points, which was primarily driven by the benefit of net income less distributions and AOCI gains. And in line with what we previously said, we resumed stock buybacks this quarter and distributed a total of $1.9 billion and net repurchases back to shareholders. Now, let\u2019s go to our businesses, starting with CCB on Page 4. Touching quickly on the health of U.S. consumers and small businesses based on our data. Both continue to show resilience and remain on the path to normalization as expected, but we continue to monitor their activity closely. Spend remains solid, and we have not observed any notable pullback throughout the quarter. Moving to financial results. CCB reported net income of $5.2 billion on revenue of $16.5 billion, which was up 35% year-on-year. In Banking & Wealth Management, revenue was up 67% year-on-year, driven by higher NII on higher rates. Average deposits were down 2% quarter-on-quarter, in line with recent trends. Throughout the quarter, we continued to see customer flows to higher-yielding products, as you would expect, but were encouraged by what we are capturing in CDs and our Wealth Management offerings. Client investment assets were down 1% year-on-year, but up 7% quarter-on-quarter, driven by market performance as well as strong net inflows. In Home Lending, revenue was down 38% year-on-year, largely driven by lower net interest income from tighter loan spreads and lower production revenue. Moving to Card Services & Auto. Revenue was up 14% year-on-year, largely driven by higher Card Services NII on higher revolving balances, partially offset by lower auto lease income. Credit card spend was up 13% year-on-year. Card outstandings were up 21%, driven by strong new account growth and revolve normalization. And in Auto, originations were $9.2 billion, up 10% year-on-year. Expenses of $8.1 billion were up 5% year-on-year, reflecting the impact of wage inflation and higher headcount. In terms of credit performance this quarter, credit costs were $1.4 billion, reflecting reserve builds of $300 million in card and $50 million in Home Lending. Net charge-offs were $1.1 billion, up about $500 million year-on-year, in line with expectations as delinquency levels continue to normalize across portfolios. Next, the CIB on Page 5. CIB reported net income of $4.4 billion on revenue of $13.6 billion. Investment Banking revenue of $1.6 billion was down 24% year-on-year. IB fees were down 19%. We ranked number 1 with first quarter wallet share of 8.7%. In advisory, fees were down 6% compared to a strong first quarter last year. Our underwriting businesses continued to be affected by market conditions with fees down 34% for debt and 6% for equity. In terms of the outlook, the dynamics remain the same. Our pipeline is relatively robust, but conversion is sensitive to market conditions and the economic outlook. We expect the second quarter and the rest of the year to remain challenging. Moving to Markets. Total revenue was $8.4 billion, down 4% year-on-year. Fixed income was flat. Rates was strong during the rally early in the quarter as well as through the elevated volatility in March. Credit was up on the back of higher client flows and currencies in emerging markets was down relative to a very strong first quarter in the prior year. Equity Markets was down 12%, driven by lower revenues in derivatives relative to a strong first quarter in the prior year and lower client activity and cash. Payments revenue was $2.4 billion, up 26% year-on-year. Excluding the net impact of equity investments, primarily a gain in the prior year, it was up 55%, with the growth driven by higher rates, partially offset by lower deposit balances. Securities Services revenue of $1.1 billion was up 7% year-on-year, driven by higher rates, partially offset by lower deposit balances and market levels. Expenses of $7.5 billion were up 2% year-on-year as higher headcount and wage inflation were largely offset by lower revenue-related compensation. Moving to the Commercial Bank on page 6. Commercial Banking reported net income of $1.3 billion. Revenue of $3.5 billion was up 46% year-on-year, driven by higher deposit margins. Payments revenue of $2 billion was up 98% year-on-year driven by higher rates. And gross Investment Banking revenue of $881 million was up 21% year-on-year on increased M&A and bond underwriting from large deal activity. Expenses of $1.3 billion were up 16% year-on-year largely driven by higher compensation expense, including front office hiring and technology investments as well as higher volume-related expense. Average deposits were down 16% year-on-year and 5% quarter-on-quarter, predominantly driven by continued attrition and non-operating deposits as well as seasonally lower balances. Loans were up 13% year-on-year and 1% sequentially. C&I loans were up 1% quarter-on-quarter with somewhat different dynamics based on client size. In middle market banking, higher rates and recession concerns have decreased new loan demand and utilization, which is also leading to weakness in CapEx spending. In Corporate Client Banking, utilization rates increased modestly quarter-on-quarter as capital market conditions led more clients to opt for bank debt. CRE loans were also up 1% sequentially with higher rates creating headwinds for both originations and prepayments. And given the recent focus on commercial real estate, let me remind you that our office sector exposure is less than 10% of our portfolio and is focused in the urban dense markets, and nearly two-thirds of our loans are multifamily, primarily in supply-constrained markets. Finally, credit costs of $417 million included a net reserve build of $379 million, predominantly driven by what I mentioned upfront. Then to complete our lines of business, AWM on page 7. Asset & Wealth Management reported net income of $1.4 billion, pretax margin of 35%. Revenue of $4.8 billion was up 11% year-on-year driven by higher deposit margins on lower balances and a valuation gain on our initial investment triggered by taking full ownership of our asset management joint venture in China, partially offset by the impact of lower average market levels on management fees and lower performance fees. Expenses of $3.1 billion were up 8% year-on-year, predominantly driven by compensation, reflecting growth in our private banking advisory teams, higher revenue-related compensation and the run rate impact of acquisitions. For the quarter, net long-term inflows were $47 billion, led by fixed income and equities. And then liquidity, we saw net inflows of $93 billion, inclusive of our ongoing deposit migration. AUM of $3 trillion was up 2% year-on-year and overall client assets of $4.3 trillion were up 6%, driven by continued net inflows into liquidity and long-term products. And finally, loans were down 1% quarter-on-quarter, driven by lower securities-based lending, while average deposits were down 5%. Turning to Corporate on page 8. Corporate reported net income of $244 million. Revenue was $985 million compared to a net loss of $881 million last year. NII was $1.7 billion, up $2.3 billion year-on-year due to the impact of higher rates. NIR was a loss of $755 million compared with a loss of $345 million in the prior year and included the net investment securities losses I mentioned earlier. Expenses of $160 million were down $24 million year-on-year. And credit costs of $370 million were driven by reserve builds on a couple of single name exposures. Next, the outlook on page 9. We now expect 2023 NII and NII ex-markets to be approximately $81 billion. This increase in guidance is primarily driven by lower rate paid assumptions across both consumer and wholesale in light of the expectation of Fed cuts later in the year as well as slightly higher card revolving balances. Note that in line with my comments at the outset, recent deposit balance increases are not a meaningful contributor to the upward revision in the NII outlook, given that we expect a meaningful portion of the recent inflows to reverse later in the year. I would point out that this outlook still embeds significant reprice lags. We think a more sustainable NII ex-markets run rate in the medium term is well below this quarter\u2019s $84 billion as well as below the $80 billion that is implied for the rest of the year by our full year guidance. And while we don\u2019t know exactly when this lower run rate will be reached, when it happens, we believe it will be around the mid-70s. And of course, as we mentioned last quarter, this NII outlook remains highly sensitive to the uncertainty associated with the timing and the extent of deposit reprice, investment portfolio decisions, the dynamics of QT and RRP, the trajectory of Fed funds as well as the broader macroeconomic environment, including its impact on loan growth. Separately, it\u2019s worth noting that markets NII may start to trend slightly positive towards the end of the year as a function of mix and rate effects. Moving to expenses. Our outlook for 2023 continues to be about $81 billion. Importantly, this does not currently include the impact of the pending FDIC special assessment. And on credit, we continue to expect the 2023 card net charge-off rate to be approximately 2.6%. So to wrap up, our strong results this quarter once again highlight the earnings power of this diversified franchise. We have benefited from our fortress principles and commitment to invest, which we will continue to do as we head into an increasingly uncertain environment. With that, operator, please open the line for Q&A.","evidence_gemma_new":"Expenses","evidence_llama_3_3":"Expenses year-on-year","evidence_qwen_3_30b":"expenses $20.1 billion year-on-year","gemma_new_max":20100000000.0,"gemma_new_min":20100000000.0,"llama_3_3_max":20100000000.0,"llama_3_3_min":20100000000.0,"qwen_3_30b_max":20100000000.0,"qwen_3_30b_min":20100000000.0}
{"symbol":"JPM","year":2023,"quarter":4,"date":"2023-Q4","chunk_id":29,"sub_chunk_id":0,"centroid_label":"expenses","agreed_value":90000000000.0,"count":3,"chunk":"Mike Mayo: Hi. You're guiding to $90 billion of expenses. That's up $7 billion year-over-year. Seems like quite a big increase. And if you could just give some color on that. I know we've been through this before, two years ago with the big increase in expenses and without a lot of visibility. So if you could just upfront give us visibility. How much of that is due to incentive pay? How much is that due to tech? How much is that due to AI? And what are the expected returns to get from that $7 billion pickup? Thanks.","evidence_gemma_new":"expenses year-over-year","evidence_llama_3_3":"expenses year-over-year","evidence_qwen_3_30b":"guiding expenses year-over-year","gemma_new_max":90000000000.0,"gemma_new_min":90000000000.0,"llama_3_3_max":90000000000.0,"llama_3_3_min":90000000000.0,"qwen_3_30b_max":90000000000.0,"qwen_3_30b_min":90000000000.0}
{"symbol":"JPM","year":2023,"quarter":4,"date":"2024-FY","chunk_id":25,"sub_chunk_id":0,"centroid_label":"expenses","agreed_value":90000000000.0,"count":2,"chunk":"Erika Najarian: Thanks. And just as a follow-up, the $90 billion in expenses for 2024, does that contemplate a significant increase or the comeback of investment banking that everybody seems to be expecting for '24?","evidence_gemma_new":"expenses 2024","evidence_llama_3_3":null,"evidence_qwen_3_30b":"expenses 2024","gemma_new_max":90000000000.0,"gemma_new_min":90000000000.0,"llama_3_3_max":null,"llama_3_3_min":null,"qwen_3_30b_max":90000000000.0,"qwen_3_30b_min":90000000000.0}
{"symbol":"JPM","year":2024,"quarter":1,"date":"2024-Q1","chunk_id":1,"sub_chunk_id":0,"centroid_label":"expenses","agreed_value":22000000000.0,"count":2,"chunk":"Jeremy Barnum: Thank you very much, and good morning, everyone. The presentation is available on our website, and please refer to the disclaimer in the back. Starting on Page 1. The firm reported net income of $13.4 billion, EPS of $4.44 on revenue of $42.5 billion and delivered an ROTCE of 21%. These results included a $725 million increase to the special assessment resulting from the FDIC's updated estimate of expected losses from the closures of Silicon Valley Bank and Signature Bank. Touching on a couple of highlights. Firm-wide IB fees were up 18% year-on-year, reflecting particular strength in underwriting fees. And we have seen strong net inflows across AWM as well as in the CCB and Wealth Management business. On Page 2, we have some more detail. This is the last quarter we'll discuss results excluding First Republic, given that going forward, First Republic results will naturally be included in the prior period, making year-on-year results comparable. For this quarter, First Republic contributed $1.7 billion of revenue, $806 million of expense and $668 million of net income. Now focusing on the firm-wide results excluding First Republic. Revenue of $40.9 billion was up $1.5 billion or 4% year-on-year. NII ex Markets was up $736 million or 4% driven by the impact of balance sheet mix and higher rates as well as higher revolving balances in card, largely offset by deposit margin compression and lower deposit balances in CCB. NIR ex Markets was up $1.2 billion or 12% driven by higher firm-wide asset management and Investment Banking fees as well as lower net investment securities losses. And Markets revenue was down $400 million or 5% year-on-year. Expenses of $22 billion were up $1.8 billion or 9% year-on-year driven by higher compensation, including growth in employees and the increase to the FDIC special assessment. And credit costs were $1.9 billion, reflecting net charge-offs of $2 billion and a net reserve release of $38 million. Net charge-offs were up $116 million predominantly driven by Card. On to balance sheet and capital on Page 3. We ended the quarter with a CET1 ratio of 15%, relatively flat versus the prior quarter, reflecting net income which was predominantly offset by higher RWA and capital distribution. This quarter's higher RWA is largely due to seasonal effects, including higher client activity in Markets and higher risk weights on deferred tax assets, partially offset by lower Card loans. Now let's go to our businesses, starting with CCB on Page 4. Consumers remain financially healthy, supported by a resilient labor market. While cash buffers have largely normalized, balances were still above pre-pandemic levels, and wages are keeping pace with inflation. When looking at a stable cohort of customers, overall spend is in line with the prior year. Turning now to the financial results excluding First Republic. CCB reported net income of $4.4 billion on revenue of $16.6 billion, which was up 1% year-on-year. In Banking & Wealth Management, revenue was down 4% year-on-year, reflecting lower NII on lower deposits with average balances down 7% as our CD mix increased. Client investment assets were up 25% year-on-year driven by market performance and strong net inflows. In Home Lending, revenue was up 10% year-on-year, predominantly driven by higher NII and production revenue. Originations, while still modest, were up 10%. Moving to Card Services & Auto. Revenue was up 8% year-on-year driven by higher Card Services NII on higher revolving balances, partially offset by higher card acquisition costs from new account growth and lower auto lease income. Card outstandings were up 13% due to strong account acquisition and the continued normalization of revolve. And in auto, originations were $8.9 billion, down 3%, while we maintained healthy margins and market share. Expenses of $8.8 billion were up 9% year-on-year, largely driven by field compensation and continued growth in technology and marketing. In terms of credit performance this quarter, credit costs were $1.9 billion, driven by net charge-offs, which were up $825 million year-on-year predominantly due to continued normalization in Card. The net reserve build was $45 million, reflecting the build in Card largely offset by a release in Home Lending. Next, the Corporate & Investment Bank on Page 5. Before reporting CIB's results, I want to note that this will also be the last quarter we will be -- we will report earnings for the CIB and CB as standalone segments. Between now and Investor Day, we will furnish an 8-K with historical results, including 5 quarters and 2 full years of history consistent with the structure of the new Commercial and Investment Bank segment, in line with the reorganization that was announced in January. Turning back to this quarter. CIB reported net income of $4.8 billion on revenue of $13.6 billion. Investment Banking revenue of $2 billion was up 27% year-on-year. IB fees were up 21% year-on-year, and we ranked #1 with year-to-date wallet share of 9.1%. In Advisory, fees were down 21% driven by fewer large completed deals. Underwriting fees were up significantly, benefiting from improved market conditions with debt up 58% and equity up 51%. In terms of the outlook. While we are encouraged by the level of capital markets activity we saw this quarter, we need to be mindful that some meaningful portion of that is likely pulling forward from later in the year. Similarly, while it was encouraging to see some positive momentum in announced M&A in the quarter, it remains to be seen whether that will continue, and the Advisory business still faces structural headwinds from the regulatory environment. Payments revenue was $2.4 billion, down 1% year-on-year, as deposit margin normalization and deposit-related client credits were largely offset by higher fee-based revenue and deposit balances. Moving to Markets. Total revenue was $8 billion, down 5% year-on-year. Fixed income was down 7% driven by lower activity in rates and commodities compared to a strong prior year quarter, partially offset by strong results in Securitized Products. Equity Markets was flat. Securities Services revenue of $1.2 billion was up 3% year-on-year. Expenses of $7.2 billion were down 4% year-on-year predominantly driven by lower legal expense. Moving to the Commercial Bank on Page 6. Commercial Banking reported net income of $1.6 billion. Revenue of $3.6 billion was up 3% year-on-year driven by higher noninterest revenue. Gross Investment Banking and Markets revenue of $913 million was up 4% year-on-year with increased IB fees, largely offset by lower Markets revenue compared to a strong prior year quarter. Payments revenue of $1.9 billion was down 2% year-on-year driven by lower deposit margins and balances, largely offset by fee growth, net of higher deposit-related client credits. Expenses of $1.5 billion were up 13% year-on-year predominantly driven by higher compensation, reflecting an increase in employees, including for office and technology investments, as well as higher volume-related expenses. Average deposits were down 3% year-on-year, primarily driven by lower nonoperating deposits and down 1% quarter-on-quarter, reflecting seasonally lower balances. Loans were flat quarter-on-quarter. C&I loans were down 1%, reflecting muted demand for new loans as clients remain cautious. And CRE loans were flat as higher rates continue to have an impact on originations and sales activity. Finally, credit costs were a net benefit of $35 million, including a net reserve release of $101 million and net charge-offs of $66 million. Then to complete our lines of business, AWM on Page 7. Asset & Wealth Management reported net income of $1 billion with pretax margin of 28%. Revenue of $4.7 billion was down 1% year-on-year. Excluding net investment valuation gains in the prior year, revenue was up 5% driven by higher management fees on strong net inflows and higher average market levels, partially offset by lower NII due to deposit margin compression. Expenses of $3.4 billion were up 11% year-on-year largely driven by higher compensation, including revenue-related compensation; continued growth in our private banking advisor teams; and the impact of the JPMorgan Asset Management China acquisition; as well as higher distribution fees. For the quarter, long-term net inflows were $34 billion, led by equities and fixed income. AUM of $3.6 trillion was up 19% year-on-year. And client assets of $5.2 trillion were up 20% year-on-year driven by higher market levels and continued net inflow. And finally, loans were down 1% quarter-on-quarter and deposits were flat. Turning to Corporate on Page 8. Corporate reported net income of $918 million. Revenue was $2.3 billion, up $1.3 billion year-on-year. NII was $2.5 billion, up $737 million year-on-year driven by the impact of the balance sheet mix and higher rates. NIR was a net loss of $188 million. The current quarter included net investment securities losses of $366 million compared with net securities losses of $868 million in the prior year quarter. Expenses of $1 billion were up $889 million year-on-year predominantly driven by the increase to the FDIC special assessment. To finish up, we have the outlook on Page 9. We now expect NII ex Markets to be approximately $89 billion based on a forward curve that contained 3 rate cuts at quarter end. Our total NII guidance remains approximately $90 billion, which implies a decrease in our Markets NII guidance from around $2 billion to around $1 billion. The primary driver of that reduction is balance sheet growth and mix shift in the Markets business. And as a reminder, changes in Markets NII are generally revenue-neutral. Our outlook for adjusted expense is now about $91 billion, reflecting the increase to the FDIC special assessment I mentioned upfront. And on credit, we continue to expect the 2024 Card net charge-off rate to be below 3.5%. Finally, you may have noticed that our effective tax rate has increased this quarter, and it will likely stay around 23% this year, absent discrete items, which can vary quite a bit. The driver of this change is the firm's adoption of the proportional amortization method for certain tax equity investments. Our managed rate is unchanged, and it should average about 3.5% above the effective tax rate. This is a smaller gap than we've previously observed, and we expect this approximate relationship to persist going forward, although the difference will continue to fluctuate as it has in the past. For the avoidance of doubt, these changes have no meaningful impact on expected annual net income. We're just mentioning this to help with your models. So to wrap up. We're pleased with another quarter of strong operating results even as the journey towards NII normalization begins. While we remain confident in our ability to produce strong returns and manage risk across a range of scenarios, the economic, geopolitical and regulatory uncertainties that we have been talking about for some time remain prominent, and we are focused on being prepared to navigate those challenges as well as any others that may come our way. And with that, let's open up the line for Q&A.","evidence_gemma_new":null,"evidence_llama_3_3":"expenses","evidence_qwen_3_30b":"expenses $22 billion 9% year-on-year","gemma_new_max":null,"gemma_new_min":null,"llama_3_3_max":22000000000.0,"llama_3_3_min":22000000000.0,"qwen_3_30b_max":22000000000.0,"qwen_3_30b_min":22000000000.0}
{"symbol":"JPM","year":2024,"quarter":4,"date":"2024-Q4","chunk_id":1,"sub_chunk_id":0,"centroid_label":"expenses","agreed_value":22800000000.0,"count":2,"chunk":"Jeremy Barnum: Thank you, and good morning, everyone. Starting on Page 1, the firm reported net income of $14 billion, EPS of $4.81 on revenue of $43.7 billion with an ROTCE of 21%. On Page 2, we have more on our fourth quarter results. The firm reported revenue of $43.7 billion, up $3.8 billion or 10% year-on-year. NII ex-markets was down $548 million or 2%, driven by the impact of lower rates and the associated deposit margin compression as well as lower deposit balances in CCB, largely offset by the impact of securities reinvestment, higher revolving balances in card and higher wholesale deposit balances. NII ex-markets was up $3.1 billion or 30%. Excluding the prior year's net investment securities losses, it was up 21%, largely on higher asset management fees and investment banking fees. And markets revenue was up $1.2 billion or 21%. Expenses of $22.8 billion were down $1.7 billion or 7% year-on-year. Excluding the prior year's FDIC special assessment, expenses were up $1.2 billion or 5%, predominantly driven by compensation as well as higher brokerage and distribution fees. And credit costs were $2.6 billion, reflecting net charge-offs of $2.4 billion and a net reserve of $267 million. On Page 3, you can see the reported results for the full year, I'll remind you that there were a number of significant items in 2024. Excluding those items, the firm reported net income of $54 billion, EPS of $18.22, revenue of $173 billion and we delivered an ROTCE of 20%. Touching on a couple of highlights for the year, in CCB, we had a record number of first-time investors and acquired nearly 10 million new card accounts. In CIB, we had record revenue in markets, payments, and security services, and in AWM, we had record long-term net inflows of $234 billion, positive across all channels, regions, and asset classes. On to balance sheet and capital on Page 4, we ended the quarter with a CET1 ratio of 15.7%, up 40 basis points versus the prior quarter as net income and lower RWA were largely offset by both OCI losses and capital distributions, which included $4 billion of net common share repurchases this quarter. The $24 billion decrease in RWA reflects a seasonal decline in markets activity and lower wholesale lending, which was predominantly offset by a seasonal increase in card. Now let's go to our businesses, starting with CCB on Page 5. CCB reported net income of $4.5 billion on revenue of $18.4 billion, which was up 1% year-on-year. In Banking and Wealth Management, revenue was down 7% year-on-year on deposit margin compression and lower deposits, partially offset by growth in wealth management revenue. Average deposits were down 4% year-on-year and flat sequentially as consumer balances have stabilized. Client investment assets were up 14% year-on-year, predominantly driven by market performance, and we continue to see healthy flows across branch and digital channels. In Home Lending, revenue was up 12% year-on-year, predominantly driven by higher production revenue. Turning to Card Services & Auto, revenue was up 14% year-on-year, largely driven by Card NII on higher revolving balances. Card outstandings were up 11% due to strong account acquisition and revolver growth. And in Auto, originations were $10.6 billion, up 7%, reflecting higher lease volume on robust new vehicle inventory. Expenses of $9.7 billion were up 4% year-on-year, predominantly driven by field compensation and growth in technology. In terms of credit performance this quarter, credit costs were $2.6 billion, reflecting net charge-offs of $2.1 billion, up $428 million year-on-year, driven by Card. The net reserve build was $557 million, predominantly driven by higher Card revolving balances. Next, the Commercial & Investment Bank on Page 6. CIB reported net income of $6.6 billion on revenue of $17.6 billion. IV fees were up 49% year-on-year and we ranked number one with wallet share of 9.3% for 2024. Advisory fees were up 41%, benefiting from large deals and share growth in a number of key sectors. Underwriting fees were up meaningfully with debt up 56% and equity up 54%, primarily driven by favorable market conditions. In terms of the outlook for the overall investment banking wallet, in light of the positive momentum, we remain optimistic about our pipeline. Payments revenue was $4.7 billion, up 3% year-on-year, excluding equity investments, driven by higher deposit balances and fee growth, largely offset by deposit margin compression. Lending revenue was $1.9 billion, up 9% year-on-year, predominantly driven by lower losses on hedges. Moving to markets, total revenue was $7 billion, up 21% year-on-year. Fixed income was up 20% with better performance in credit as well as continued outperformance in currencies and emerging markets. Equities was up 22% on elevated client activity and derivatives amid increased volatility and higher trading volumes and cash. Security Services revenue was $1.3 billion, up 10% year-on-year, driven by fee growth on higher client activity and market levels as well as higher deposit balances. Expenses of $8.7 billion were up 7% year-on-year, predominantly driven by higher brokerage, technology, and legal expense. Average banking and payments loans were down 2% year-on-year and down 1% sequentially. Global Corporate & Investment Banking loans were down 2% quarter-on-quarter, driven by paydowns in lower short-term financing, primarily offset by new originations. In commercial banking, middle market loans were also down 2%, driven by paydowns, predominantly offset by new originations, and commercial real estate loans were flat as new originations were offset by paydowns. Average client deposits were up 9% year-on-year and 5% sequentially, driven by underlying client growth. Finally, credit costs were $61 million, driven by net downgrade activity and the net impact of charge-offs, offset -- largely offset by a reserve release due to an update to certain loss assumptions. Then to complete our lines of business, Asset & Wealth Management on Page 7. AWM reported net income of $1.5 billion with pre-tax margin of 35%. Revenue of $5.8 billion was up 13% year-on-year, predominantly driven by growth in management fees on higher average market levels and strong net inflows as well as higher performance fees. Expenses of $3.8 billion were up 11% year-on-year, predominantly driven by higher compensation, including revenue-related compensation and continued growth in our private banking advisor teams as well as higher distribution fees. Long-term net inflows were $76 billion for the quarter, positive across all asset classes. In liquidity, we saw net inflows of $94 billion for the quarter and $104 billion for the full year -- $140 billion for the full year, sorry. And we had client asset net inflows of $468 billion for the year. AUM of $4 trillion and client assets of $5.9 trillion were both up 18% year-on-year, driven by continued net inflows and higher market levels. And finally, loans were up 2% quarter-on-quarter and deposits were up 5% quarter-on-quarter. Turning to Corporate on Page 8; Corporate reported net income of $1.3 billion. Revenue of $2 billion was up $223 million year-on-year. NII of $2 billion was down $415 million year-on-year, driven by the impact of lower rates, largely offset by balance sheet actions, primarily securities reinvestment activity. NII was a net loss of $30 million compared to the net loss of $668 million in the prior year, driven by lower net investment securities losses this quarter. And expenses of $550 million were down $3 billion year-on-year, predominantly driven by the absence of the FDIC Special Assessment of $2.9 billion in the prior year. With that, let's pivot to the outlook, starting with NII on Page 9. We expect 2025 NII ex-markets to be approximately $90 billion. Going through the drivers, as usual, the outlook assumes that rates follow the forward curve. It's worth noting that the NII decrease is driven by both the cut expected in 2025 and the impact of the 100 basis points of cuts in the back half of 2024. You can see on the page that we've illustrated the historical trajectory of card loan growth. We expect healthy card loan growth again this year, but below the 12% pace we saw in 2024 as tailwinds from revolve normalization are largely behind us. Turning to deposits; firm-wide deposits have stabilized and we expect to see a more visible growth trend to assert itself in the second half of 2025. It's notable that we can already see that trend in consumer checking deposits. On deposit margin, we expect modest compression due to lower rates. When you put all that together, we expect the NII trough could be sometime in the middle of the year, followed by growth as we illustrated at the bottom of the bar. And for completeness, we expect firm-wide NII to be approximately $94 billion as a function of markets NII increasing to about $4 billion, which you should think of as being primarily offset in NIR. Finally, I want to point out that starting this quarter, we are including an estimate of earnings at risk in the earnings supplement, so you no longer have to wait for the K or the Q to get that number. Now let's turn to expenses on Page 10. We expect 2025 expense to be about $95 billion. Looking at the chart in the middle of the page, I'll touch on the drivers of the year-on-year change, which you'll note are very consistent with what you've been hearing from us recently. The largest increase is volume and revenue-related expense, which is primarily driven by expected growth in auto leasing as well as capital markets. As a reminder, this comes with higher revenues. We continue to hire bankers and advisors to support business growth as well as expand our branch network. The increase in tech spend is primarily business-driven as we continue to invest in new products, features, and customer platforms as well as modernization. Marketing remains a driver of spend as we continue to see attractive opportunities, resulting in strong demand and engagement in our Card business. And finally, while we haven't explicitly called it out in each bar, inflation remains a source of some upward pressure, and as always, we are generating efficiencies to help offset it. Now let's turn to Page 11 to cover credit and wrap-up. On credit, we expect the 2025 card net charge-off rate to be in line with our previous guidance of approximately 3.6%. So, in closing, 2024 was another year of record revenue and net income, and we're proud of what we accomplished. As we look ahead to 2025, we still expect NII normalization, although to a lesser extent than we previously thought. And taking a step back, we think it's important to acknowledge the tension in the risks and uncertainties in the environment and the degree of optimism embedded in asset prices and expectations. In that context, we remain upbeat about the strength of the franchise, but we are focused on being prepared for a wide range of scenarios. Finally, let me say a few words about the wildfires in Los Angeles, while we don't expect much of a financial impact from it, we have a presence in the area across all three lines of business, so we're keeping in close contact with our customers, clients, and employees. We are offering support in a variety of ways, including waiving consumer and business banking fees as well as making a contribution to local relief organizations, offering employee donation matching, and supporting employee volunteer efforts. With that, I'll turn it over to Jamie before we open up the line for Q&A.","evidence_gemma_new":null,"evidence_llama_3_3":"expenses","evidence_qwen_3_30b":"expenses down $1.7 billion or 7% year-on-year excluded the prior year's FDIC special assessment up $1.2 billion or 5%","gemma_new_max":null,"gemma_new_min":null,"llama_3_3_max":22800000000.0,"llama_3_3_min":22800000000.0,"qwen_3_30b_max":22800000000.0,"qwen_3_30b_min":22800000000.0}
{"symbol":"JPM","year":2024,"quarter":4,"date":"2024-Q4","chunk_id":1,"sub_chunk_id":0,"centroid_label":"expenses","agreed_value":550000000.0,"count":2,"chunk":"Jeremy Barnum: Thank you, and good morning, everyone. Starting on Page 1, the firm reported net income of $14 billion, EPS of $4.81 on revenue of $43.7 billion with an ROTCE of 21%. On Page 2, we have more on our fourth quarter results. The firm reported revenue of $43.7 billion, up $3.8 billion or 10% year-on-year. NII ex-markets was down $548 million or 2%, driven by the impact of lower rates and the associated deposit margin compression as well as lower deposit balances in CCB, largely offset by the impact of securities reinvestment, higher revolving balances in card and higher wholesale deposit balances. NII ex-markets was up $3.1 billion or 30%. Excluding the prior year's net investment securities losses, it was up 21%, largely on higher asset management fees and investment banking fees. And markets revenue was up $1.2 billion or 21%. Expenses of $22.8 billion were down $1.7 billion or 7% year-on-year. Excluding the prior year's FDIC special assessment, expenses were up $1.2 billion or 5%, predominantly driven by compensation as well as higher brokerage and distribution fees. And credit costs were $2.6 billion, reflecting net charge-offs of $2.4 billion and a net reserve of $267 million. On Page 3, you can see the reported results for the full year, I'll remind you that there were a number of significant items in 2024. Excluding those items, the firm reported net income of $54 billion, EPS of $18.22, revenue of $173 billion and we delivered an ROTCE of 20%. Touching on a couple of highlights for the year, in CCB, we had a record number of first-time investors and acquired nearly 10 million new card accounts. In CIB, we had record revenue in markets, payments, and security services, and in AWM, we had record long-term net inflows of $234 billion, positive across all channels, regions, and asset classes. On to balance sheet and capital on Page 4, we ended the quarter with a CET1 ratio of 15.7%, up 40 basis points versus the prior quarter as net income and lower RWA were largely offset by both OCI losses and capital distributions, which included $4 billion of net common share repurchases this quarter. The $24 billion decrease in RWA reflects a seasonal decline in markets activity and lower wholesale lending, which was predominantly offset by a seasonal increase in card. Now let's go to our businesses, starting with CCB on Page 5. CCB reported net income of $4.5 billion on revenue of $18.4 billion, which was up 1% year-on-year. In Banking and Wealth Management, revenue was down 7% year-on-year on deposit margin compression and lower deposits, partially offset by growth in wealth management revenue. Average deposits were down 4% year-on-year and flat sequentially as consumer balances have stabilized. Client investment assets were up 14% year-on-year, predominantly driven by market performance, and we continue to see healthy flows across branch and digital channels. In Home Lending, revenue was up 12% year-on-year, predominantly driven by higher production revenue. Turning to Card Services & Auto, revenue was up 14% year-on-year, largely driven by Card NII on higher revolving balances. Card outstandings were up 11% due to strong account acquisition and revolver growth. And in Auto, originations were $10.6 billion, up 7%, reflecting higher lease volume on robust new vehicle inventory. Expenses of $9.7 billion were up 4% year-on-year, predominantly driven by field compensation and growth in technology. In terms of credit performance this quarter, credit costs were $2.6 billion, reflecting net charge-offs of $2.1 billion, up $428 million year-on-year, driven by Card. The net reserve build was $557 million, predominantly driven by higher Card revolving balances. Next, the Commercial & Investment Bank on Page 6. CIB reported net income of $6.6 billion on revenue of $17.6 billion. IV fees were up 49% year-on-year and we ranked number one with wallet share of 9.3% for 2024. Advisory fees were up 41%, benefiting from large deals and share growth in a number of key sectors. Underwriting fees were up meaningfully with debt up 56% and equity up 54%, primarily driven by favorable market conditions. In terms of the outlook for the overall investment banking wallet, in light of the positive momentum, we remain optimistic about our pipeline. Payments revenue was $4.7 billion, up 3% year-on-year, excluding equity investments, driven by higher deposit balances and fee growth, largely offset by deposit margin compression. Lending revenue was $1.9 billion, up 9% year-on-year, predominantly driven by lower losses on hedges. Moving to markets, total revenue was $7 billion, up 21% year-on-year. Fixed income was up 20% with better performance in credit as well as continued outperformance in currencies and emerging markets. Equities was up 22% on elevated client activity and derivatives amid increased volatility and higher trading volumes and cash. Security Services revenue was $1.3 billion, up 10% year-on-year, driven by fee growth on higher client activity and market levels as well as higher deposit balances. Expenses of $8.7 billion were up 7% year-on-year, predominantly driven by higher brokerage, technology, and legal expense. Average banking and payments loans were down 2% year-on-year and down 1% sequentially. Global Corporate & Investment Banking loans were down 2% quarter-on-quarter, driven by paydowns in lower short-term financing, primarily offset by new originations. In commercial banking, middle market loans were also down 2%, driven by paydowns, predominantly offset by new originations, and commercial real estate loans were flat as new originations were offset by paydowns. Average client deposits were up 9% year-on-year and 5% sequentially, driven by underlying client growth. Finally, credit costs were $61 million, driven by net downgrade activity and the net impact of charge-offs, offset -- largely offset by a reserve release due to an update to certain loss assumptions. Then to complete our lines of business, Asset & Wealth Management on Page 7. AWM reported net income of $1.5 billion with pre-tax margin of 35%. Revenue of $5.8 billion was up 13% year-on-year, predominantly driven by growth in management fees on higher average market levels and strong net inflows as well as higher performance fees. Expenses of $3.8 billion were up 11% year-on-year, predominantly driven by higher compensation, including revenue-related compensation and continued growth in our private banking advisor teams as well as higher distribution fees. Long-term net inflows were $76 billion for the quarter, positive across all asset classes. In liquidity, we saw net inflows of $94 billion for the quarter and $104 billion for the full year -- $140 billion for the full year, sorry. And we had client asset net inflows of $468 billion for the year. AUM of $4 trillion and client assets of $5.9 trillion were both up 18% year-on-year, driven by continued net inflows and higher market levels. And finally, loans were up 2% quarter-on-quarter and deposits were up 5% quarter-on-quarter. Turning to Corporate on Page 8; Corporate reported net income of $1.3 billion. Revenue of $2 billion was up $223 million year-on-year. NII of $2 billion was down $415 million year-on-year, driven by the impact of lower rates, largely offset by balance sheet actions, primarily securities reinvestment activity. NII was a net loss of $30 million compared to the net loss of $668 million in the prior year, driven by lower net investment securities losses this quarter. And expenses of $550 million were down $3 billion year-on-year, predominantly driven by the absence of the FDIC Special Assessment of $2.9 billion in the prior year. With that, let's pivot to the outlook, starting with NII on Page 9. We expect 2025 NII ex-markets to be approximately $90 billion. Going through the drivers, as usual, the outlook assumes that rates follow the forward curve. It's worth noting that the NII decrease is driven by both the cut expected in 2025 and the impact of the 100 basis points of cuts in the back half of 2024. You can see on the page that we've illustrated the historical trajectory of card loan growth. We expect healthy card loan growth again this year, but below the 12% pace we saw in 2024 as tailwinds from revolve normalization are largely behind us. Turning to deposits; firm-wide deposits have stabilized and we expect to see a more visible growth trend to assert itself in the second half of 2025. It's notable that we can already see that trend in consumer checking deposits. On deposit margin, we expect modest compression due to lower rates. When you put all that together, we expect the NII trough could be sometime in the middle of the year, followed by growth as we illustrated at the bottom of the bar. And for completeness, we expect firm-wide NII to be approximately $94 billion as a function of markets NII increasing to about $4 billion, which you should think of as being primarily offset in NIR. Finally, I want to point out that starting this quarter, we are including an estimate of earnings at risk in the earnings supplement, so you no longer have to wait for the K or the Q to get that number. Now let's turn to expenses on Page 10. We expect 2025 expense to be about $95 billion. Looking at the chart in the middle of the page, I'll touch on the drivers of the year-on-year change, which you'll note are very consistent with what you've been hearing from us recently. The largest increase is volume and revenue-related expense, which is primarily driven by expected growth in auto leasing as well as capital markets. As a reminder, this comes with higher revenues. We continue to hire bankers and advisors to support business growth as well as expand our branch network. The increase in tech spend is primarily business-driven as we continue to invest in new products, features, and customer platforms as well as modernization. Marketing remains a driver of spend as we continue to see attractive opportunities, resulting in strong demand and engagement in our Card business. And finally, while we haven't explicitly called it out in each bar, inflation remains a source of some upward pressure, and as always, we are generating efficiencies to help offset it. Now let's turn to Page 11 to cover credit and wrap-up. On credit, we expect the 2025 card net charge-off rate to be in line with our previous guidance of approximately 3.6%. So, in closing, 2024 was another year of record revenue and net income, and we're proud of what we accomplished. As we look ahead to 2025, we still expect NII normalization, although to a lesser extent than we previously thought. And taking a step back, we think it's important to acknowledge the tension in the risks and uncertainties in the environment and the degree of optimism embedded in asset prices and expectations. In that context, we remain upbeat about the strength of the franchise, but we are focused on being prepared for a wide range of scenarios. Finally, let me say a few words about the wildfires in Los Angeles, while we don't expect much of a financial impact from it, we have a presence in the area across all three lines of business, so we're keeping in close contact with our customers, clients, and employees. We are offering support in a variety of ways, including waiving consumer and business banking fees as well as making a contribution to local relief organizations, offering employee donation matching, and supporting employee volunteer efforts. With that, I'll turn it over to Jamie before we open up the line for Q&A.","evidence_gemma_new":null,"evidence_llama_3_3":"expenses","evidence_qwen_3_30b":"expenses down $3 billion year-on-year","gemma_new_max":null,"gemma_new_min":null,"llama_3_3_max":550000000.0,"llama_3_3_min":550000000.0,"qwen_3_30b_max":550000000.0,"qwen_3_30b_min":550000000.0}
{"symbol":"JPM","year":2023,"quarter":1,"date":"2023-Q1","chunk_id":1,"sub_chunk_id":0,"centroid_label":"net income","agreed_value":12600000000.0,"count":3,"chunk":"Jeremy Barnum: Thanks, and good morning, everyone. The presentation is available on our website, and please refer to the disclaimer in the back. Starting on page 1. The Firm reported net income of $12.6 billion, EPS of $4.10 on revenue of $39.3 billion and delivered an ROTCE of 23%. These results included $868 million of net investment securities losses in corporate. Before reviewing our results for the quarter, let\u2019s talk about the recent bank failures. Jamie has addressed a number of the important themes in his shareholder letter and the recent televised interview. So, I will go straight to the specific impacts on the Firm. As you would expect, we saw significant new account opening activity and meaningful deposit and money market fund inflows, most significantly in the Commercial Bank, Business Banking and AWM. Regarding the deposit inflows, at the Firm-wide level, average deposits were down 3% quarter-on-quarter, while end-of-period deposits were up 2% quarter-on-quarter, implying an intra-quarter reversal of the recent outflow trend as a consequence of the March events. We estimate that we have retained approximately $50 billion of these deposit inflows at quarter-end. It\u2019s important to note that while the sequential period-end deposit increase is higher than we would have otherwise expected, our current full year NII outlook, which I will address at the end, still assumes modest deposit outflows from here. We expect these outflows to be driven by the same factors as last quarter as well as the expectation that we will not retain all of this quarter\u2019s inflows. Now back to the quarter touching on a few highlights. We grew our IB fee wallet share. Consumer spending remained solid with combined debit and credit card spend up 10% year-on-year. And credit continues to normalize, but actual performance remains strong across the Company. On Page 2, we have some more detail. Revenue of $39.3 billion was up $7.7 billion or 25% year-on-year. NII ex markets was up $9.2 billion or 78%, driven by higher rates, partially offset by lower deposit balances. NIR ex markets was down $1.1 billion or 10% driven by the securities losses previously mentioned as well as lower IB fees and lower auto lease income on lower volume. And markets revenue was down $371 million or 4% year-on-year. Expenses of $20.1 billion were up $916 million or 5% year-on-year, driven by compensation-related costs, reflecting the annualization of last year\u2019s headcount growth and wage inflation. These results include the impact of the higher FDIC assessment I mentioned last quarter, which, of course, is unrelated to recent events. And credit costs of $2.3 billion included net charge-offs of $1.1 billion, predominantly in card. The net reserve build of $1.1 billion was largely driven by deterioration in our weighted average economic outlook. Onto balance sheet and capital on page 3. We ended the quarter with a CET1 ratio of 13.8%, up about 60 basis points, which was primarily driven by the benefit of net income less distributions and AOCI gains. And in line with what we previously said, we resumed stock buybacks this quarter and distributed a total of $1.9 billion and net repurchases back to shareholders. Now, let\u2019s go to our businesses, starting with CCB on Page 4. Touching quickly on the health of U.S. consumers and small businesses based on our data. Both continue to show resilience and remain on the path to normalization as expected, but we continue to monitor their activity closely. Spend remains solid, and we have not observed any notable pullback throughout the quarter. Moving to financial results. CCB reported net income of $5.2 billion on revenue of $16.5 billion, which was up 35% year-on-year. In Banking & Wealth Management, revenue was up 67% year-on-year, driven by higher NII on higher rates. Average deposits were down 2% quarter-on-quarter, in line with recent trends. Throughout the quarter, we continued to see customer flows to higher-yielding products, as you would expect, but were encouraged by what we are capturing in CDs and our Wealth Management offerings. Client investment assets were down 1% year-on-year, but up 7% quarter-on-quarter, driven by market performance as well as strong net inflows. In Home Lending, revenue was down 38% year-on-year, largely driven by lower net interest income from tighter loan spreads and lower production revenue. Moving to Card Services & Auto. Revenue was up 14% year-on-year, largely driven by higher Card Services NII on higher revolving balances, partially offset by lower auto lease income. Credit card spend was up 13% year-on-year. Card outstandings were up 21%, driven by strong new account growth and revolve normalization. And in Auto, originations were $9.2 billion, up 10% year-on-year. Expenses of $8.1 billion were up 5% year-on-year, reflecting the impact of wage inflation and higher headcount. In terms of credit performance this quarter, credit costs were $1.4 billion, reflecting reserve builds of $300 million in card and $50 million in Home Lending. Net charge-offs were $1.1 billion, up about $500 million year-on-year, in line with expectations as delinquency levels continue to normalize across portfolios. Next, the CIB on Page 5. CIB reported net income of $4.4 billion on revenue of $13.6 billion. Investment Banking revenue of $1.6 billion was down 24% year-on-year. IB fees were down 19%. We ranked number 1 with first quarter wallet share of 8.7%. In advisory, fees were down 6% compared to a strong first quarter last year. Our underwriting businesses continued to be affected by market conditions with fees down 34% for debt and 6% for equity. In terms of the outlook, the dynamics remain the same. Our pipeline is relatively robust, but conversion is sensitive to market conditions and the economic outlook. We expect the second quarter and the rest of the year to remain challenging. Moving to Markets. Total revenue was $8.4 billion, down 4% year-on-year. Fixed income was flat. Rates was strong during the rally early in the quarter as well as through the elevated volatility in March. Credit was up on the back of higher client flows and currencies in emerging markets was down relative to a very strong first quarter in the prior year. Equity Markets was down 12%, driven by lower revenues in derivatives relative to a strong first quarter in the prior year and lower client activity and cash. Payments revenue was $2.4 billion, up 26% year-on-year. Excluding the net impact of equity investments, primarily a gain in the prior year, it was up 55%, with the growth driven by higher rates, partially offset by lower deposit balances. Securities Services revenue of $1.1 billion was up 7% year-on-year, driven by higher rates, partially offset by lower deposit balances and market levels. Expenses of $7.5 billion were up 2% year-on-year as higher headcount and wage inflation were largely offset by lower revenue-related compensation. Moving to the Commercial Bank on page 6. Commercial Banking reported net income of $1.3 billion. Revenue of $3.5 billion was up 46% year-on-year, driven by higher deposit margins. Payments revenue of $2 billion was up 98% year-on-year driven by higher rates. And gross Investment Banking revenue of $881 million was up 21% year-on-year on increased M&A and bond underwriting from large deal activity. Expenses of $1.3 billion were up 16% year-on-year largely driven by higher compensation expense, including front office hiring and technology investments as well as higher volume-related expense. Average deposits were down 16% year-on-year and 5% quarter-on-quarter, predominantly driven by continued attrition and non-operating deposits as well as seasonally lower balances. Loans were up 13% year-on-year and 1% sequentially. C&I loans were up 1% quarter-on-quarter with somewhat different dynamics based on client size. In middle market banking, higher rates and recession concerns have decreased new loan demand and utilization, which is also leading to weakness in CapEx spending. In Corporate Client Banking, utilization rates increased modestly quarter-on-quarter as capital market conditions led more clients to opt for bank debt. CRE loans were also up 1% sequentially with higher rates creating headwinds for both originations and prepayments. And given the recent focus on commercial real estate, let me remind you that our office sector exposure is less than 10% of our portfolio and is focused in the urban dense markets, and nearly two-thirds of our loans are multifamily, primarily in supply-constrained markets. Finally, credit costs of $417 million included a net reserve build of $379 million, predominantly driven by what I mentioned upfront. Then to complete our lines of business, AWM on page 7. Asset & Wealth Management reported net income of $1.4 billion, pretax margin of 35%. Revenue of $4.8 billion was up 11% year-on-year driven by higher deposit margins on lower balances and a valuation gain on our initial investment triggered by taking full ownership of our asset management joint venture in China, partially offset by the impact of lower average market levels on management fees and lower performance fees. Expenses of $3.1 billion were up 8% year-on-year, predominantly driven by compensation, reflecting growth in our private banking advisory teams, higher revenue-related compensation and the run rate impact of acquisitions. For the quarter, net long-term inflows were $47 billion, led by fixed income and equities. And then liquidity, we saw net inflows of $93 billion, inclusive of our ongoing deposit migration. AUM of $3 trillion was up 2% year-on-year and overall client assets of $4.3 trillion were up 6%, driven by continued net inflows into liquidity and long-term products. And finally, loans were down 1% quarter-on-quarter, driven by lower securities-based lending, while average deposits were down 5%. Turning to Corporate on page 8. Corporate reported net income of $244 million. Revenue was $985 million compared to a net loss of $881 million last year. NII was $1.7 billion, up $2.3 billion year-on-year due to the impact of higher rates. NIR was a loss of $755 million compared with a loss of $345 million in the prior year and included the net investment securities losses I mentioned earlier. Expenses of $160 million were down $24 million year-on-year. And credit costs of $370 million were driven by reserve builds on a couple of single name exposures. Next, the outlook on page 9. We now expect 2023 NII and NII ex-markets to be approximately $81 billion. This increase in guidance is primarily driven by lower rate paid assumptions across both consumer and wholesale in light of the expectation of Fed cuts later in the year as well as slightly higher card revolving balances. Note that in line with my comments at the outset, recent deposit balance increases are not a meaningful contributor to the upward revision in the NII outlook, given that we expect a meaningful portion of the recent inflows to reverse later in the year. I would point out that this outlook still embeds significant reprice lags. We think a more sustainable NII ex-markets run rate in the medium term is well below this quarter\u2019s $84 billion as well as below the $80 billion that is implied for the rest of the year by our full year guidance. And while we don\u2019t know exactly when this lower run rate will be reached, when it happens, we believe it will be around the mid-70s. And of course, as we mentioned last quarter, this NII outlook remains highly sensitive to the uncertainty associated with the timing and the extent of deposit reprice, investment portfolio decisions, the dynamics of QT and RRP, the trajectory of Fed funds as well as the broader macroeconomic environment, including its impact on loan growth. Separately, it\u2019s worth noting that markets NII may start to trend slightly positive towards the end of the year as a function of mix and rate effects. Moving to expenses. Our outlook for 2023 continues to be about $81 billion. Importantly, this does not currently include the impact of the pending FDIC special assessment. And on credit, we continue to expect the 2023 card net charge-off rate to be approximately 2.6%. So to wrap up, our strong results this quarter once again highlight the earnings power of this diversified franchise. We have benefited from our fortress principles and commitment to invest, which we will continue to do as we head into an increasingly uncertain environment. With that, operator, please open the line for Q&A.","evidence_gemma_new":"net income EPS revenue ROTCE","evidence_llama_3_3":"net income","evidence_qwen_3_30b":"net income The Firm reported 23%","gemma_new_max":12600000000.0,"gemma_new_min":12600000000.0,"llama_3_3_max":12600000000.0,"llama_3_3_min":12600000000.0,"qwen_3_30b_max":12600000000.0,"qwen_3_30b_min":12600000000.0}
{"symbol":"JPM","year":2023,"quarter":4,"date":"2023-Q4","chunk_id":23,"sub_chunk_id":0,"centroid_label":"net income","agreed_value":0.0051,"count":2,"chunk":"Erika Najarian: Hi. Good morning. My first question is a follow-up on Matt's with regarding the buyback. You printed 15% CET1 in the quarter. Your - on a net basis, net to RWA growth, your net income produces 51 basis points every quarter. Again, that's net of RWA growth. I'm wondering what guideposts you're looking for, Jeremy, in terms of that buyback increasing from that $2 billion a quarter. Do we need to wait for B3 finalization, which seems like it could be quite delayed? Or will having clarity in the June DFAST results, you mentioned the SCB sort of be enough that you could reconsider this pace over the medium-term?","evidence_gemma_new":"net income every quarter","evidence_llama_3_3":null,"evidence_qwen_3_30b":"net income 51 basis points every quarter","gemma_new_max":0.0051,"gemma_new_min":0.0051,"llama_3_3_max":null,"llama_3_3_min":null,"qwen_3_30b_max":0.0051,"qwen_3_30b_min":0.0051}
{"symbol":"JPM","year":2024,"quarter":1,"date":"2024-Q1","chunk_id":1,"sub_chunk_id":0,"centroid_label":"net income","agreed_value":13400000000.0,"count":2,"chunk":"Jeremy Barnum: Thank you very much, and good morning, everyone. The presentation is available on our website, and please refer to the disclaimer in the back. Starting on Page 1. The firm reported net income of $13.4 billion, EPS of $4.44 on revenue of $42.5 billion and delivered an ROTCE of 21%. These results included a $725 million increase to the special assessment resulting from the FDIC's updated estimate of expected losses from the closures of Silicon Valley Bank and Signature Bank. Touching on a couple of highlights. Firm-wide IB fees were up 18% year-on-year, reflecting particular strength in underwriting fees. And we have seen strong net inflows across AWM as well as in the CCB and Wealth Management business. On Page 2, we have some more detail. This is the last quarter we'll discuss results excluding First Republic, given that going forward, First Republic results will naturally be included in the prior period, making year-on-year results comparable. For this quarter, First Republic contributed $1.7 billion of revenue, $806 million of expense and $668 million of net income. Now focusing on the firm-wide results excluding First Republic. Revenue of $40.9 billion was up $1.5 billion or 4% year-on-year. NII ex Markets was up $736 million or 4% driven by the impact of balance sheet mix and higher rates as well as higher revolving balances in card, largely offset by deposit margin compression and lower deposit balances in CCB. NIR ex Markets was up $1.2 billion or 12% driven by higher firm-wide asset management and Investment Banking fees as well as lower net investment securities losses. And Markets revenue was down $400 million or 5% year-on-year. Expenses of $22 billion were up $1.8 billion or 9% year-on-year driven by higher compensation, including growth in employees and the increase to the FDIC special assessment. And credit costs were $1.9 billion, reflecting net charge-offs of $2 billion and a net reserve release of $38 million. Net charge-offs were up $116 million predominantly driven by Card. On to balance sheet and capital on Page 3. We ended the quarter with a CET1 ratio of 15%, relatively flat versus the prior quarter, reflecting net income which was predominantly offset by higher RWA and capital distribution. This quarter's higher RWA is largely due to seasonal effects, including higher client activity in Markets and higher risk weights on deferred tax assets, partially offset by lower Card loans. Now let's go to our businesses, starting with CCB on Page 4. Consumers remain financially healthy, supported by a resilient labor market. While cash buffers have largely normalized, balances were still above pre-pandemic levels, and wages are keeping pace with inflation. When looking at a stable cohort of customers, overall spend is in line with the prior year. Turning now to the financial results excluding First Republic. CCB reported net income of $4.4 billion on revenue of $16.6 billion, which was up 1% year-on-year. In Banking & Wealth Management, revenue was down 4% year-on-year, reflecting lower NII on lower deposits with average balances down 7% as our CD mix increased. Client investment assets were up 25% year-on-year driven by market performance and strong net inflows. In Home Lending, revenue was up 10% year-on-year, predominantly driven by higher NII and production revenue. Originations, while still modest, were up 10%. Moving to Card Services & Auto. Revenue was up 8% year-on-year driven by higher Card Services NII on higher revolving balances, partially offset by higher card acquisition costs from new account growth and lower auto lease income. Card outstandings were up 13% due to strong account acquisition and the continued normalization of revolve. And in auto, originations were $8.9 billion, down 3%, while we maintained healthy margins and market share. Expenses of $8.8 billion were up 9% year-on-year, largely driven by field compensation and continued growth in technology and marketing. In terms of credit performance this quarter, credit costs were $1.9 billion, driven by net charge-offs, which were up $825 million year-on-year predominantly due to continued normalization in Card. The net reserve build was $45 million, reflecting the build in Card largely offset by a release in Home Lending. Next, the Corporate & Investment Bank on Page 5. Before reporting CIB's results, I want to note that this will also be the last quarter we will be -- we will report earnings for the CIB and CB as standalone segments. Between now and Investor Day, we will furnish an 8-K with historical results, including 5 quarters and 2 full years of history consistent with the structure of the new Commercial and Investment Bank segment, in line with the reorganization that was announced in January. Turning back to this quarter. CIB reported net income of $4.8 billion on revenue of $13.6 billion. Investment Banking revenue of $2 billion was up 27% year-on-year. IB fees were up 21% year-on-year, and we ranked #1 with year-to-date wallet share of 9.1%. In Advisory, fees were down 21% driven by fewer large completed deals. Underwriting fees were up significantly, benefiting from improved market conditions with debt up 58% and equity up 51%. In terms of the outlook. While we are encouraged by the level of capital markets activity we saw this quarter, we need to be mindful that some meaningful portion of that is likely pulling forward from later in the year. Similarly, while it was encouraging to see some positive momentum in announced M&A in the quarter, it remains to be seen whether that will continue, and the Advisory business still faces structural headwinds from the regulatory environment. Payments revenue was $2.4 billion, down 1% year-on-year, as deposit margin normalization and deposit-related client credits were largely offset by higher fee-based revenue and deposit balances. Moving to Markets. Total revenue was $8 billion, down 5% year-on-year. Fixed income was down 7% driven by lower activity in rates and commodities compared to a strong prior year quarter, partially offset by strong results in Securitized Products. Equity Markets was flat. Securities Services revenue of $1.2 billion was up 3% year-on-year. Expenses of $7.2 billion were down 4% year-on-year predominantly driven by lower legal expense. Moving to the Commercial Bank on Page 6. Commercial Banking reported net income of $1.6 billion. Revenue of $3.6 billion was up 3% year-on-year driven by higher noninterest revenue. Gross Investment Banking and Markets revenue of $913 million was up 4% year-on-year with increased IB fees, largely offset by lower Markets revenue compared to a strong prior year quarter. Payments revenue of $1.9 billion was down 2% year-on-year driven by lower deposit margins and balances, largely offset by fee growth, net of higher deposit-related client credits. Expenses of $1.5 billion were up 13% year-on-year predominantly driven by higher compensation, reflecting an increase in employees, including for office and technology investments, as well as higher volume-related expenses. Average deposits were down 3% year-on-year, primarily driven by lower nonoperating deposits and down 1% quarter-on-quarter, reflecting seasonally lower balances. Loans were flat quarter-on-quarter. C&I loans were down 1%, reflecting muted demand for new loans as clients remain cautious. And CRE loans were flat as higher rates continue to have an impact on originations and sales activity. Finally, credit costs were a net benefit of $35 million, including a net reserve release of $101 million and net charge-offs of $66 million. Then to complete our lines of business, AWM on Page 7. Asset & Wealth Management reported net income of $1 billion with pretax margin of 28%. Revenue of $4.7 billion was down 1% year-on-year. Excluding net investment valuation gains in the prior year, revenue was up 5% driven by higher management fees on strong net inflows and higher average market levels, partially offset by lower NII due to deposit margin compression. Expenses of $3.4 billion were up 11% year-on-year largely driven by higher compensation, including revenue-related compensation; continued growth in our private banking advisor teams; and the impact of the JPMorgan Asset Management China acquisition; as well as higher distribution fees. For the quarter, long-term net inflows were $34 billion, led by equities and fixed income. AUM of $3.6 trillion was up 19% year-on-year. And client assets of $5.2 trillion were up 20% year-on-year driven by higher market levels and continued net inflow. And finally, loans were down 1% quarter-on-quarter and deposits were flat. Turning to Corporate on Page 8. Corporate reported net income of $918 million. Revenue was $2.3 billion, up $1.3 billion year-on-year. NII was $2.5 billion, up $737 million year-on-year driven by the impact of the balance sheet mix and higher rates. NIR was a net loss of $188 million. The current quarter included net investment securities losses of $366 million compared with net securities losses of $868 million in the prior year quarter. Expenses of $1 billion were up $889 million year-on-year predominantly driven by the increase to the FDIC special assessment. To finish up, we have the outlook on Page 9. We now expect NII ex Markets to be approximately $89 billion based on a forward curve that contained 3 rate cuts at quarter end. Our total NII guidance remains approximately $90 billion, which implies a decrease in our Markets NII guidance from around $2 billion to around $1 billion. The primary driver of that reduction is balance sheet growth and mix shift in the Markets business. And as a reminder, changes in Markets NII are generally revenue-neutral. Our outlook for adjusted expense is now about $91 billion, reflecting the increase to the FDIC special assessment I mentioned upfront. And on credit, we continue to expect the 2024 Card net charge-off rate to be below 3.5%. Finally, you may have noticed that our effective tax rate has increased this quarter, and it will likely stay around 23% this year, absent discrete items, which can vary quite a bit. The driver of this change is the firm's adoption of the proportional amortization method for certain tax equity investments. Our managed rate is unchanged, and it should average about 3.5% above the effective tax rate. This is a smaller gap than we've previously observed, and we expect this approximate relationship to persist going forward, although the difference will continue to fluctuate as it has in the past. For the avoidance of doubt, these changes have no meaningful impact on expected annual net income. We're just mentioning this to help with your models. So to wrap up. We're pleased with another quarter of strong operating results even as the journey towards NII normalization begins. While we remain confident in our ability to produce strong returns and manage risk across a range of scenarios, the economic, geopolitical and regulatory uncertainties that we have been talking about for some time remain prominent, and we are focused on being prepared to navigate those challenges as well as any others that may come our way. And with that, let's open up the line for Q&A.","evidence_gemma_new":null,"evidence_llama_3_3":"net income","evidence_qwen_3_30b":"net income $13.4 billion","gemma_new_max":null,"gemma_new_min":null,"llama_3_3_max":13400000000.0,"llama_3_3_min":13400000000.0,"qwen_3_30b_max":13400000000.0,"qwen_3_30b_min":13400000000.0}
{"symbol":"JPM","year":2024,"quarter":2,"date":"2024-Q2","chunk_id":1,"sub_chunk_id":0,"centroid_label":"net income","agreed_value":18100000000.0,"count":2,"chunk":"Jeremy Barnum : Thank you and good morning everyone. Starting on Page one, the firm reported net income of $18.1 billion, EPS of $6.12 on revenue of $51 billion with an ROTCE of 28%. These results included the $7.9 billion net gain related to Visa shares and the $1 billion foundation contribution of the appreciated Visa stock. Also included is $546 million of net investment securities losses in corporate. Excluding these items, the firm had net income of $13.1 billion, EPS of $4.40, and an ROTCE of 20%. Touching on a couple of highlights, in the CIB, IB fees were up 50% year-on-year and 17% quarter-on-quarter, and market revenue was up 10% year-on-year. In CCB, we had a record number of first-time investors and strong customer acquisition across checking accounts and card and we've continued to see strong net inflows across AWM. Now before I get more detail on the results I just want to mention that starting this quarter we are no longer explicitly calling out the First Republic contribution in the presentation. Going forward, we'll only specifically call it out if it is a meaningful driver in the year-on-year comparison. As a reminder, we acquired First Republic in May of last year, so the prior year quarter only has two months of First Republic results compared to the full three months this quarter. Also in the prior year quarter most of the expenses were in corporate whereas now they are primarily in the relevant line-of-business. Now turning to Page 2 for the firm-wide results. The firm reported revenue of $51 billion, up $8.6 billion, or 20% year-on-year. Excluding both the Visa gain that I mentioned earlier, as well as last year's First Republic bargain purchase gain of $2.7 billion, revenue of $43.1 billion was up $3.4 billion or 9%. NII ex-Markets was up $568 million or 3%, driven by the impact of balance sheet mix and higher rates, higher revolving balances in card, and the additional month of First Republic related NII, partially offset by deposit margin compression and lower deposit balances. NIR ex-Markets was up $7.3 billion or 56%. Excluding the items I just mentioned, it was up $2.1 billion or 21%, largely driven by higher investment banking revenue and asset management fees. Both periods included net investment securities losses. And markets revenue was up $731 million or 10% year-on-year. Expenses of $23.7 billion were up $2.9 billion or 14% year-on-year. Excluding the foundation contribution I previously mentioned, expenses were up 9% primarily driven by compensation including revenue related compensation and growth in employees. And credit costs were $3.1 billion reflecting net charge-offs of $2.2 billion and a net reserve build of $821 million. Net charge-offs were up $820 million year-on-year, predominantly driven by Card. The net reserve build included $609 million in consumer and $189 million in wholesale. Onto balance sheet and capital on Page 3. We ended the quarter with a CET1 ratio of 15.3% up 30 basis points versus the prior quarter, primarily driven by net income, largely offset by capital distributions and higher RWA. As you know, we completed CCAR a couple of weeks ago and have already disclosed a number of the key points. Let me summarize them again here. Our preliminary SCB is 3.3%, although the final SCB could be higher. The preliminary SCB, which is up from the current requirement of 2.9%, results in a 12.3% standardized CET1 ratio requirement, which goes into effect in the fourth quarter of 2024. And finally the firm announced that the Board intends to increase the quarterly common stock dividend from $1.15 to $1.25 per share in the third quarter of 2024. Now, let's go to our businesses, starting with CCB on Page 4. CCB reported net income of $4.2 billion on revenue of $17.7 billion, which was up 3% year-on-year. In banking and wealth management, revenue was down 5% year-on-year, reflecting lower deposits and deposit margin compression, partially offset by growth and wealth management revenue. Average deposits were down 7% year-on-year and 1% quarter-on-quarter. Client investment assets were up 14% year-on-year, predominantly driven by market performance. In home lending, revenue of $1.3 billion was up 31% year-on-year, predominantly driven by higher NII, including one additional month of the First Republic portfolio. Turning to Card services and Auto, revenue was up 14% year-on-year, predominantly driven by higher Card NII and higher revolving balances. Card outstandings were up 12% due to strong account acquisition and the continued normalization of revolve. And in Auto, originations were $10.8 billion, down 10% coming off strong originations from a year ago, while continuing to maintain healthy margins. Expenses of $9.4 billion were up 13% year-on-year, predominantly driven by First Republic expenses now reflected in the lines-of-business, as I mentioned earlier, as well as field compensation and continued growth in technology and marketing. In terms of credit performance this quarter, credit costs were $2.6 billion reflecting net charge-offs of $2.1 billion up $813 million year-on-year, predominantly driven by Card, as newer vintages season and credit normalization continues. The net reserve build was $579 million, also driven by Card, due to loan growth and updates to certain macroeconomic variables. Next, the Commercial and Investment Bank on Page 5. Our new Commercial and Investment Bank reported net income of $5.9 billion on revenue of $17.9 billion. You'll note that we are disclosing revenue by business, as well as breaking down the banking and payments revenue by client coverage segment in order to best highlight the relevant trends in both important dimensions of the wholesale franchise. This quarter, IB fees were up 50% year-on-year, and we Ranked Number #1 with year-to-date wallet share of 9.5%. And advisory, fees were up 45%, primarily driven by the closing of a few large deals in a week prior year quarter. Underwriting fees were up meaningfully with equity up 56% and debt up 51%, benefiting from favorable market conditions. In terms of the outlook, we're pleased with both the year-on-year and sequential improvement in the quarter. We remain cautiously optimistic about the pipeline, although many of the same headwinds are still in effect. It's also worth noting that pull-forward refinancing activity was a meaningful contributor to the strong performance in the first half of the year. Payments revenue was $4.5 billion, down 4% year-on-year, as deposit margin compression and higher deposit related client credits were largely offset by fee growth. Moving to markets, total revenue was $7.8 billion, up 10% year-on-year. Fixed income was up 5% with continued strength in securitized products. And equity markets was up 21%, with equity derivatives up on improved client activity. We saw record revenue in Prime on growth and client balances amid supportive equity market levels. Security services revenue of $1.3 billion was up 3% year-on-year, driven by higher volumes and market levels, largely offset by deposit margin compression. Expenses of $9.2 billion were up 12% year-on-year, largely driven by higher revenue related compensation, legal expense, and volume related non-compensation expense. In banking and payments, average loans were up 2% year-on-year due to the impact of the First Republic acquisition and flat sequentially. Demand for new loans remains muted as middle market and large corporate clients remain somewhat cautious due to the economic environment, and revolver utilization continues to be below pre-pandemic levels. Also, capital markets are open and are providing an alternative to traditional bank lending for these clients. In CRE, higher rates continue to suppress both loan origination and payoff activity. Average client deposits were up 2% year-on-year and relatively flat sequentially. Finally, credit costs were $384 million. The net reserve build of $220 million was primarily driven by incorporating the First Republic portfolio in the Firm's modeled approach. Net charge-offs were $164 million, of which about half was in office. Then to complete our lines-of-business, AWM on Page 6. Asset and wealth management reported net income of $1.3 billion with pre-tax margin of 32%. Revenue of $5.3 billion was up 6% year-on-year, driven by growth in management fees on higher average market levels and strong net inflows, as well as higher brokerage activity, largely offset by deposit margin compression. Expenses of $3.5 billion were up 12% year-on-year, largely driven by higher compensation, primarily revenue-related compensation, and continued growth in our private banking advisor teams. For the quarter, long-term net inflows were $52 billion, led by equities and fixed income. And in liquidity, we saw net inflows of $16 billion. AUM of $3.7 trillion was up 15% year-on-year. And client assets of $5.4 trillion were up 18% year-on-year, driven by higher market levels and continued net inflows. And finally, loans and deposits were both flat quarter-on-quarter. Turning to corporate on Page 7. Corporate reported net income of $6.8 billion on revenue of $10.1 billion. Excluding this quarter's Visa-related gain and the First Republic bargain purchase gain in the prior year, NIR was up approximately $450 million year-on-year. NII was up $626 million year-on-year, driven by the impact of balance sheet mix and higher rates. Expenses of $1.6 billion were up $427 million year-on-year, excluding foundation contribution expenses were down $573 million year-on-year, largely as a result of moving First Republic related expense out of corporate into the relevant segments. To finish up, we have the outlook on Page 8. Our 2024 guidance, including the drivers, remains unchanged from what we said at Investor Day. We continue to expect NII and NII ex-markets of approximately $91 billion, adjusted expense of about $92 billion, and on credit, Card net charge-off rate of approximately 3.4%. So to wrap up, the reported performance for the quarter was exceptional and actually represents record revenue and net income. But more importantly, after excluding the significant items, the underlying performance continues to be quite strong. And as always, we remain focused on continuing to execute with discipline. And with that, let's open the line for Q&A.","evidence_gemma_new":null,"evidence_llama_3_3":"net income","evidence_qwen_3_30b":"net income 28%","gemma_new_max":null,"gemma_new_min":null,"llama_3_3_max":18100000000.0,"llama_3_3_min":18100000000.0,"qwen_3_30b_max":18100000000.0,"qwen_3_30b_min":18100000000.0}
{"symbol":"JPM","year":2024,"quarter":4,"date":"2024-Q4","chunk_id":1,"sub_chunk_id":0,"centroid_label":"net income","agreed_value":14000000000.0,"count":2,"chunk":"Jeremy Barnum: Thank you, and good morning, everyone. Starting on Page 1, the firm reported net income of $14 billion, EPS of $4.81 on revenue of $43.7 billion with an ROTCE of 21%. On Page 2, we have more on our fourth quarter results. The firm reported revenue of $43.7 billion, up $3.8 billion or 10% year-on-year. NII ex-markets was down $548 million or 2%, driven by the impact of lower rates and the associated deposit margin compression as well as lower deposit balances in CCB, largely offset by the impact of securities reinvestment, higher revolving balances in card and higher wholesale deposit balances. NII ex-markets was up $3.1 billion or 30%. Excluding the prior year's net investment securities losses, it was up 21%, largely on higher asset management fees and investment banking fees. And markets revenue was up $1.2 billion or 21%. Expenses of $22.8 billion were down $1.7 billion or 7% year-on-year. Excluding the prior year's FDIC special assessment, expenses were up $1.2 billion or 5%, predominantly driven by compensation as well as higher brokerage and distribution fees. And credit costs were $2.6 billion, reflecting net charge-offs of $2.4 billion and a net reserve of $267 million. On Page 3, you can see the reported results for the full year, I'll remind you that there were a number of significant items in 2024. Excluding those items, the firm reported net income of $54 billion, EPS of $18.22, revenue of $173 billion and we delivered an ROTCE of 20%. Touching on a couple of highlights for the year, in CCB, we had a record number of first-time investors and acquired nearly 10 million new card accounts. In CIB, we had record revenue in markets, payments, and security services, and in AWM, we had record long-term net inflows of $234 billion, positive across all channels, regions, and asset classes. On to balance sheet and capital on Page 4, we ended the quarter with a CET1 ratio of 15.7%, up 40 basis points versus the prior quarter as net income and lower RWA were largely offset by both OCI losses and capital distributions, which included $4 billion of net common share repurchases this quarter. The $24 billion decrease in RWA reflects a seasonal decline in markets activity and lower wholesale lending, which was predominantly offset by a seasonal increase in card. Now let's go to our businesses, starting with CCB on Page 5. CCB reported net income of $4.5 billion on revenue of $18.4 billion, which was up 1% year-on-year. In Banking and Wealth Management, revenue was down 7% year-on-year on deposit margin compression and lower deposits, partially offset by growth in wealth management revenue. Average deposits were down 4% year-on-year and flat sequentially as consumer balances have stabilized. Client investment assets were up 14% year-on-year, predominantly driven by market performance, and we continue to see healthy flows across branch and digital channels. In Home Lending, revenue was up 12% year-on-year, predominantly driven by higher production revenue. Turning to Card Services & Auto, revenue was up 14% year-on-year, largely driven by Card NII on higher revolving balances. Card outstandings were up 11% due to strong account acquisition and revolver growth. And in Auto, originations were $10.6 billion, up 7%, reflecting higher lease volume on robust new vehicle inventory. Expenses of $9.7 billion were up 4% year-on-year, predominantly driven by field compensation and growth in technology. In terms of credit performance this quarter, credit costs were $2.6 billion, reflecting net charge-offs of $2.1 billion, up $428 million year-on-year, driven by Card. The net reserve build was $557 million, predominantly driven by higher Card revolving balances. Next, the Commercial & Investment Bank on Page 6. CIB reported net income of $6.6 billion on revenue of $17.6 billion. IV fees were up 49% year-on-year and we ranked number one with wallet share of 9.3% for 2024. Advisory fees were up 41%, benefiting from large deals and share growth in a number of key sectors. Underwriting fees were up meaningfully with debt up 56% and equity up 54%, primarily driven by favorable market conditions. In terms of the outlook for the overall investment banking wallet, in light of the positive momentum, we remain optimistic about our pipeline. Payments revenue was $4.7 billion, up 3% year-on-year, excluding equity investments, driven by higher deposit balances and fee growth, largely offset by deposit margin compression. Lending revenue was $1.9 billion, up 9% year-on-year, predominantly driven by lower losses on hedges. Moving to markets, total revenue was $7 billion, up 21% year-on-year. Fixed income was up 20% with better performance in credit as well as continued outperformance in currencies and emerging markets. Equities was up 22% on elevated client activity and derivatives amid increased volatility and higher trading volumes and cash. Security Services revenue was $1.3 billion, up 10% year-on-year, driven by fee growth on higher client activity and market levels as well as higher deposit balances. Expenses of $8.7 billion were up 7% year-on-year, predominantly driven by higher brokerage, technology, and legal expense. Average banking and payments loans were down 2% year-on-year and down 1% sequentially. Global Corporate & Investment Banking loans were down 2% quarter-on-quarter, driven by paydowns in lower short-term financing, primarily offset by new originations. In commercial banking, middle market loans were also down 2%, driven by paydowns, predominantly offset by new originations, and commercial real estate loans were flat as new originations were offset by paydowns. Average client deposits were up 9% year-on-year and 5% sequentially, driven by underlying client growth. Finally, credit costs were $61 million, driven by net downgrade activity and the net impact of charge-offs, offset -- largely offset by a reserve release due to an update to certain loss assumptions. Then to complete our lines of business, Asset & Wealth Management on Page 7. AWM reported net income of $1.5 billion with pre-tax margin of 35%. Revenue of $5.8 billion was up 13% year-on-year, predominantly driven by growth in management fees on higher average market levels and strong net inflows as well as higher performance fees. Expenses of $3.8 billion were up 11% year-on-year, predominantly driven by higher compensation, including revenue-related compensation and continued growth in our private banking advisor teams as well as higher distribution fees. Long-term net inflows were $76 billion for the quarter, positive across all asset classes. In liquidity, we saw net inflows of $94 billion for the quarter and $104 billion for the full year -- $140 billion for the full year, sorry. And we had client asset net inflows of $468 billion for the year. AUM of $4 trillion and client assets of $5.9 trillion were both up 18% year-on-year, driven by continued net inflows and higher market levels. And finally, loans were up 2% quarter-on-quarter and deposits were up 5% quarter-on-quarter. Turning to Corporate on Page 8; Corporate reported net income of $1.3 billion. Revenue of $2 billion was up $223 million year-on-year. NII of $2 billion was down $415 million year-on-year, driven by the impact of lower rates, largely offset by balance sheet actions, primarily securities reinvestment activity. NII was a net loss of $30 million compared to the net loss of $668 million in the prior year, driven by lower net investment securities losses this quarter. And expenses of $550 million were down $3 billion year-on-year, predominantly driven by the absence of the FDIC Special Assessment of $2.9 billion in the prior year. With that, let's pivot to the outlook, starting with NII on Page 9. We expect 2025 NII ex-markets to be approximately $90 billion. Going through the drivers, as usual, the outlook assumes that rates follow the forward curve. It's worth noting that the NII decrease is driven by both the cut expected in 2025 and the impact of the 100 basis points of cuts in the back half of 2024. You can see on the page that we've illustrated the historical trajectory of card loan growth. We expect healthy card loan growth again this year, but below the 12% pace we saw in 2024 as tailwinds from revolve normalization are largely behind us. Turning to deposits; firm-wide deposits have stabilized and we expect to see a more visible growth trend to assert itself in the second half of 2025. It's notable that we can already see that trend in consumer checking deposits. On deposit margin, we expect modest compression due to lower rates. When you put all that together, we expect the NII trough could be sometime in the middle of the year, followed by growth as we illustrated at the bottom of the bar. And for completeness, we expect firm-wide NII to be approximately $94 billion as a function of markets NII increasing to about $4 billion, which you should think of as being primarily offset in NIR. Finally, I want to point out that starting this quarter, we are including an estimate of earnings at risk in the earnings supplement, so you no longer have to wait for the K or the Q to get that number. Now let's turn to expenses on Page 10. We expect 2025 expense to be about $95 billion. Looking at the chart in the middle of the page, I'll touch on the drivers of the year-on-year change, which you'll note are very consistent with what you've been hearing from us recently. The largest increase is volume and revenue-related expense, which is primarily driven by expected growth in auto leasing as well as capital markets. As a reminder, this comes with higher revenues. We continue to hire bankers and advisors to support business growth as well as expand our branch network. The increase in tech spend is primarily business-driven as we continue to invest in new products, features, and customer platforms as well as modernization. Marketing remains a driver of spend as we continue to see attractive opportunities, resulting in strong demand and engagement in our Card business. And finally, while we haven't explicitly called it out in each bar, inflation remains a source of some upward pressure, and as always, we are generating efficiencies to help offset it. Now let's turn to Page 11 to cover credit and wrap-up. On credit, we expect the 2025 card net charge-off rate to be in line with our previous guidance of approximately 3.6%. So, in closing, 2024 was another year of record revenue and net income, and we're proud of what we accomplished. As we look ahead to 2025, we still expect NII normalization, although to a lesser extent than we previously thought. And taking a step back, we think it's important to acknowledge the tension in the risks and uncertainties in the environment and the degree of optimism embedded in asset prices and expectations. In that context, we remain upbeat about the strength of the franchise, but we are focused on being prepared for a wide range of scenarios. Finally, let me say a few words about the wildfires in Los Angeles, while we don't expect much of a financial impact from it, we have a presence in the area across all three lines of business, so we're keeping in close contact with our customers, clients, and employees. We are offering support in a variety of ways, including waiving consumer and business banking fees as well as making a contribution to local relief organizations, offering employee donation matching, and supporting employee volunteer efforts. With that, I'll turn it over to Jamie before we open up the line for Q&A.","evidence_gemma_new":null,"evidence_llama_3_3":"net income","evidence_qwen_3_30b":"net income EPS revenue ROTCE fourth quarter","gemma_new_max":null,"gemma_new_min":null,"llama_3_3_max":14000000000.0,"llama_3_3_min":14000000000.0,"qwen_3_30b_max":14000000000.0,"qwen_3_30b_min":14000000000.0}
{"symbol":"JPM","year":2024,"quarter":4,"date":"2024-Q4","chunk_id":1,"sub_chunk_id":0,"centroid_label":"net income","agreed_value":54000000000.0,"count":2,"chunk":"Jeremy Barnum: Thank you, and good morning, everyone. Starting on Page 1, the firm reported net income of $14 billion, EPS of $4.81 on revenue of $43.7 billion with an ROTCE of 21%. On Page 2, we have more on our fourth quarter results. The firm reported revenue of $43.7 billion, up $3.8 billion or 10% year-on-year. NII ex-markets was down $548 million or 2%, driven by the impact of lower rates and the associated deposit margin compression as well as lower deposit balances in CCB, largely offset by the impact of securities reinvestment, higher revolving balances in card and higher wholesale deposit balances. NII ex-markets was up $3.1 billion or 30%. Excluding the prior year's net investment securities losses, it was up 21%, largely on higher asset management fees and investment banking fees. And markets revenue was up $1.2 billion or 21%. Expenses of $22.8 billion were down $1.7 billion or 7% year-on-year. Excluding the prior year's FDIC special assessment, expenses were up $1.2 billion or 5%, predominantly driven by compensation as well as higher brokerage and distribution fees. And credit costs were $2.6 billion, reflecting net charge-offs of $2.4 billion and a net reserve of $267 million. On Page 3, you can see the reported results for the full year, I'll remind you that there were a number of significant items in 2024. Excluding those items, the firm reported net income of $54 billion, EPS of $18.22, revenue of $173 billion and we delivered an ROTCE of 20%. Touching on a couple of highlights for the year, in CCB, we had a record number of first-time investors and acquired nearly 10 million new card accounts. In CIB, we had record revenue in markets, payments, and security services, and in AWM, we had record long-term net inflows of $234 billion, positive across all channels, regions, and asset classes. On to balance sheet and capital on Page 4, we ended the quarter with a CET1 ratio of 15.7%, up 40 basis points versus the prior quarter as net income and lower RWA were largely offset by both OCI losses and capital distributions, which included $4 billion of net common share repurchases this quarter. The $24 billion decrease in RWA reflects a seasonal decline in markets activity and lower wholesale lending, which was predominantly offset by a seasonal increase in card. Now let's go to our businesses, starting with CCB on Page 5. CCB reported net income of $4.5 billion on revenue of $18.4 billion, which was up 1% year-on-year. In Banking and Wealth Management, revenue was down 7% year-on-year on deposit margin compression and lower deposits, partially offset by growth in wealth management revenue. Average deposits were down 4% year-on-year and flat sequentially as consumer balances have stabilized. Client investment assets were up 14% year-on-year, predominantly driven by market performance, and we continue to see healthy flows across branch and digital channels. In Home Lending, revenue was up 12% year-on-year, predominantly driven by higher production revenue. Turning to Card Services & Auto, revenue was up 14% year-on-year, largely driven by Card NII on higher revolving balances. Card outstandings were up 11% due to strong account acquisition and revolver growth. And in Auto, originations were $10.6 billion, up 7%, reflecting higher lease volume on robust new vehicle inventory. Expenses of $9.7 billion were up 4% year-on-year, predominantly driven by field compensation and growth in technology. In terms of credit performance this quarter, credit costs were $2.6 billion, reflecting net charge-offs of $2.1 billion, up $428 million year-on-year, driven by Card. The net reserve build was $557 million, predominantly driven by higher Card revolving balances. Next, the Commercial & Investment Bank on Page 6. CIB reported net income of $6.6 billion on revenue of $17.6 billion. IV fees were up 49% year-on-year and we ranked number one with wallet share of 9.3% for 2024. Advisory fees were up 41%, benefiting from large deals and share growth in a number of key sectors. Underwriting fees were up meaningfully with debt up 56% and equity up 54%, primarily driven by favorable market conditions. In terms of the outlook for the overall investment banking wallet, in light of the positive momentum, we remain optimistic about our pipeline. Payments revenue was $4.7 billion, up 3% year-on-year, excluding equity investments, driven by higher deposit balances and fee growth, largely offset by deposit margin compression. Lending revenue was $1.9 billion, up 9% year-on-year, predominantly driven by lower losses on hedges. Moving to markets, total revenue was $7 billion, up 21% year-on-year. Fixed income was up 20% with better performance in credit as well as continued outperformance in currencies and emerging markets. Equities was up 22% on elevated client activity and derivatives amid increased volatility and higher trading volumes and cash. Security Services revenue was $1.3 billion, up 10% year-on-year, driven by fee growth on higher client activity and market levels as well as higher deposit balances. Expenses of $8.7 billion were up 7% year-on-year, predominantly driven by higher brokerage, technology, and legal expense. Average banking and payments loans were down 2% year-on-year and down 1% sequentially. Global Corporate & Investment Banking loans were down 2% quarter-on-quarter, driven by paydowns in lower short-term financing, primarily offset by new originations. In commercial banking, middle market loans were also down 2%, driven by paydowns, predominantly offset by new originations, and commercial real estate loans were flat as new originations were offset by paydowns. Average client deposits were up 9% year-on-year and 5% sequentially, driven by underlying client growth. Finally, credit costs were $61 million, driven by net downgrade activity and the net impact of charge-offs, offset -- largely offset by a reserve release due to an update to certain loss assumptions. Then to complete our lines of business, Asset & Wealth Management on Page 7. AWM reported net income of $1.5 billion with pre-tax margin of 35%. Revenue of $5.8 billion was up 13% year-on-year, predominantly driven by growth in management fees on higher average market levels and strong net inflows as well as higher performance fees. Expenses of $3.8 billion were up 11% year-on-year, predominantly driven by higher compensation, including revenue-related compensation and continued growth in our private banking advisor teams as well as higher distribution fees. Long-term net inflows were $76 billion for the quarter, positive across all asset classes. In liquidity, we saw net inflows of $94 billion for the quarter and $104 billion for the full year -- $140 billion for the full year, sorry. And we had client asset net inflows of $468 billion for the year. AUM of $4 trillion and client assets of $5.9 trillion were both up 18% year-on-year, driven by continued net inflows and higher market levels. And finally, loans were up 2% quarter-on-quarter and deposits were up 5% quarter-on-quarter. Turning to Corporate on Page 8; Corporate reported net income of $1.3 billion. Revenue of $2 billion was up $223 million year-on-year. NII of $2 billion was down $415 million year-on-year, driven by the impact of lower rates, largely offset by balance sheet actions, primarily securities reinvestment activity. NII was a net loss of $30 million compared to the net loss of $668 million in the prior year, driven by lower net investment securities losses this quarter. And expenses of $550 million were down $3 billion year-on-year, predominantly driven by the absence of the FDIC Special Assessment of $2.9 billion in the prior year. With that, let's pivot to the outlook, starting with NII on Page 9. We expect 2025 NII ex-markets to be approximately $90 billion. Going through the drivers, as usual, the outlook assumes that rates follow the forward curve. It's worth noting that the NII decrease is driven by both the cut expected in 2025 and the impact of the 100 basis points of cuts in the back half of 2024. You can see on the page that we've illustrated the historical trajectory of card loan growth. We expect healthy card loan growth again this year, but below the 12% pace we saw in 2024 as tailwinds from revolve normalization are largely behind us. Turning to deposits; firm-wide deposits have stabilized and we expect to see a more visible growth trend to assert itself in the second half of 2025. It's notable that we can already see that trend in consumer checking deposits. On deposit margin, we expect modest compression due to lower rates. When you put all that together, we expect the NII trough could be sometime in the middle of the year, followed by growth as we illustrated at the bottom of the bar. And for completeness, we expect firm-wide NII to be approximately $94 billion as a function of markets NII increasing to about $4 billion, which you should think of as being primarily offset in NIR. Finally, I want to point out that starting this quarter, we are including an estimate of earnings at risk in the earnings supplement, so you no longer have to wait for the K or the Q to get that number. Now let's turn to expenses on Page 10. We expect 2025 expense to be about $95 billion. Looking at the chart in the middle of the page, I'll touch on the drivers of the year-on-year change, which you'll note are very consistent with what you've been hearing from us recently. The largest increase is volume and revenue-related expense, which is primarily driven by expected growth in auto leasing as well as capital markets. As a reminder, this comes with higher revenues. We continue to hire bankers and advisors to support business growth as well as expand our branch network. The increase in tech spend is primarily business-driven as we continue to invest in new products, features, and customer platforms as well as modernization. Marketing remains a driver of spend as we continue to see attractive opportunities, resulting in strong demand and engagement in our Card business. And finally, while we haven't explicitly called it out in each bar, inflation remains a source of some upward pressure, and as always, we are generating efficiencies to help offset it. Now let's turn to Page 11 to cover credit and wrap-up. On credit, we expect the 2025 card net charge-off rate to be in line with our previous guidance of approximately 3.6%. So, in closing, 2024 was another year of record revenue and net income, and we're proud of what we accomplished. As we look ahead to 2025, we still expect NII normalization, although to a lesser extent than we previously thought. And taking a step back, we think it's important to acknowledge the tension in the risks and uncertainties in the environment and the degree of optimism embedded in asset prices and expectations. In that context, we remain upbeat about the strength of the franchise, but we are focused on being prepared for a wide range of scenarios. Finally, let me say a few words about the wildfires in Los Angeles, while we don't expect much of a financial impact from it, we have a presence in the area across all three lines of business, so we're keeping in close contact with our customers, clients, and employees. We are offering support in a variety of ways, including waiving consumer and business banking fees as well as making a contribution to local relief organizations, offering employee donation matching, and supporting employee volunteer efforts. With that, I'll turn it over to Jamie before we open up the line for Q&A.","evidence_gemma_new":null,"evidence_llama_3_3":"net income","evidence_qwen_3_30b":"net income EPS revenue ROTCE excluded those items","gemma_new_max":null,"gemma_new_min":null,"llama_3_3_max":54000000000.0,"llama_3_3_min":54000000000.0,"qwen_3_30b_max":54000000000.0,"qwen_3_30b_min":54000000000.0}
{"symbol":"JPM","year":2023,"quarter":1,"date":"2023-Q1","chunk_id":20,"sub_chunk_id":0,"centroid_label":"nii","agreed_value":81000000000.0,"count":3,"chunk":"Erika Najarian: So, as we think about all of what you\u2019ve just told us, so $81 billion of NII this year, and who knows when medium term is going to happen is mid-70s, the clear strength of the franchise producing 23% ROTCE in a quarter where your CET1 was 13.8% and a reserve that already reflects 5.8% unemployment. As we think about recession and what JPMorgan can earn in a recession, do you think you can hit 17% ROTCE even in 2024, assuming we do have a recession in \u201824 as everybody is expecting, given all these revenue dynamics and how prepared you are on the reserve?","evidence_gemma_new":"NII this year","evidence_llama_3_3":"NII this year","evidence_qwen_3_30b":"NII this year","gemma_new_max":81000000000.0,"gemma_new_min":81000000000.0,"llama_3_3_max":81000000000.0,"llama_3_3_min":81000000000.0,"qwen_3_30b_max":81000000000.0,"qwen_3_30b_min":81000000000.0}
{"symbol":"JPM","year":2023,"quarter":1,"date":"2023-Q1","chunk_id":50,"sub_chunk_id":0,"centroid_label":"nii","agreed_value":7000000000.0,"count":2,"chunk":"Mike Mayo: All right. And then one for you, Jamie. I guess, taking the 10,000-foot level, I guess, when you look at asset liability management or AUM, you could call this Nightmare on Elm Street, and you\u2019ve seen some big problems at banks. And I guess, how would you evaluate yourself, I guess, with this $7 billion higher NII guide? Probably is good. But to what degree are you willing to sacrifice JPM shareholder money to help rescue problem banks that do not get their asset liability management correctly?","evidence_gemma_new":"guide NII","evidence_llama_3_3":"NII","evidence_qwen_3_30b":null,"gemma_new_max":7000000000.0,"gemma_new_min":7000000000.0,"llama_3_3_max":7000000000.0,"llama_3_3_min":7000000000.0,"qwen_3_30b_max":null,"qwen_3_30b_min":null}
{"symbol":"JPM","year":2023,"quarter":1,"date":"2023-Q1","chunk_id":1,"sub_chunk_id":0,"centroid_label":"nii","agreed_value":1700000000.0,"count":2,"chunk":"Jeremy Barnum: Thanks, and good morning, everyone. The presentation is available on our website, and please refer to the disclaimer in the back. Starting on page 1. The Firm reported net income of $12.6 billion, EPS of $4.10 on revenue of $39.3 billion and delivered an ROTCE of 23%. These results included $868 million of net investment securities losses in corporate. Before reviewing our results for the quarter, let\u2019s talk about the recent bank failures. Jamie has addressed a number of the important themes in his shareholder letter and the recent televised interview. So, I will go straight to the specific impacts on the Firm. As you would expect, we saw significant new account opening activity and meaningful deposit and money market fund inflows, most significantly in the Commercial Bank, Business Banking and AWM. Regarding the deposit inflows, at the Firm-wide level, average deposits were down 3% quarter-on-quarter, while end-of-period deposits were up 2% quarter-on-quarter, implying an intra-quarter reversal of the recent outflow trend as a consequence of the March events. We estimate that we have retained approximately $50 billion of these deposit inflows at quarter-end. It\u2019s important to note that while the sequential period-end deposit increase is higher than we would have otherwise expected, our current full year NII outlook, which I will address at the end, still assumes modest deposit outflows from here. We expect these outflows to be driven by the same factors as last quarter as well as the expectation that we will not retain all of this quarter\u2019s inflows. Now back to the quarter touching on a few highlights. We grew our IB fee wallet share. Consumer spending remained solid with combined debit and credit card spend up 10% year-on-year. And credit continues to normalize, but actual performance remains strong across the Company. On Page 2, we have some more detail. Revenue of $39.3 billion was up $7.7 billion or 25% year-on-year. NII ex markets was up $9.2 billion or 78%, driven by higher rates, partially offset by lower deposit balances. NIR ex markets was down $1.1 billion or 10% driven by the securities losses previously mentioned as well as lower IB fees and lower auto lease income on lower volume. And markets revenue was down $371 million or 4% year-on-year. Expenses of $20.1 billion were up $916 million or 5% year-on-year, driven by compensation-related costs, reflecting the annualization of last year\u2019s headcount growth and wage inflation. These results include the impact of the higher FDIC assessment I mentioned last quarter, which, of course, is unrelated to recent events. And credit costs of $2.3 billion included net charge-offs of $1.1 billion, predominantly in card. The net reserve build of $1.1 billion was largely driven by deterioration in our weighted average economic outlook. Onto balance sheet and capital on page 3. We ended the quarter with a CET1 ratio of 13.8%, up about 60 basis points, which was primarily driven by the benefit of net income less distributions and AOCI gains. And in line with what we previously said, we resumed stock buybacks this quarter and distributed a total of $1.9 billion and net repurchases back to shareholders. Now, let\u2019s go to our businesses, starting with CCB on Page 4. Touching quickly on the health of U.S. consumers and small businesses based on our data. Both continue to show resilience and remain on the path to normalization as expected, but we continue to monitor their activity closely. Spend remains solid, and we have not observed any notable pullback throughout the quarter. Moving to financial results. CCB reported net income of $5.2 billion on revenue of $16.5 billion, which was up 35% year-on-year. In Banking & Wealth Management, revenue was up 67% year-on-year, driven by higher NII on higher rates. Average deposits were down 2% quarter-on-quarter, in line with recent trends. Throughout the quarter, we continued to see customer flows to higher-yielding products, as you would expect, but were encouraged by what we are capturing in CDs and our Wealth Management offerings. Client investment assets were down 1% year-on-year, but up 7% quarter-on-quarter, driven by market performance as well as strong net inflows. In Home Lending, revenue was down 38% year-on-year, largely driven by lower net interest income from tighter loan spreads and lower production revenue. Moving to Card Services & Auto. Revenue was up 14% year-on-year, largely driven by higher Card Services NII on higher revolving balances, partially offset by lower auto lease income. Credit card spend was up 13% year-on-year. Card outstandings were up 21%, driven by strong new account growth and revolve normalization. And in Auto, originations were $9.2 billion, up 10% year-on-year. Expenses of $8.1 billion were up 5% year-on-year, reflecting the impact of wage inflation and higher headcount. In terms of credit performance this quarter, credit costs were $1.4 billion, reflecting reserve builds of $300 million in card and $50 million in Home Lending. Net charge-offs were $1.1 billion, up about $500 million year-on-year, in line with expectations as delinquency levels continue to normalize across portfolios. Next, the CIB on Page 5. CIB reported net income of $4.4 billion on revenue of $13.6 billion. Investment Banking revenue of $1.6 billion was down 24% year-on-year. IB fees were down 19%. We ranked number 1 with first quarter wallet share of 8.7%. In advisory, fees were down 6% compared to a strong first quarter last year. Our underwriting businesses continued to be affected by market conditions with fees down 34% for debt and 6% for equity. In terms of the outlook, the dynamics remain the same. Our pipeline is relatively robust, but conversion is sensitive to market conditions and the economic outlook. We expect the second quarter and the rest of the year to remain challenging. Moving to Markets. Total revenue was $8.4 billion, down 4% year-on-year. Fixed income was flat. Rates was strong during the rally early in the quarter as well as through the elevated volatility in March. Credit was up on the back of higher client flows and currencies in emerging markets was down relative to a very strong first quarter in the prior year. Equity Markets was down 12%, driven by lower revenues in derivatives relative to a strong first quarter in the prior year and lower client activity and cash. Payments revenue was $2.4 billion, up 26% year-on-year. Excluding the net impact of equity investments, primarily a gain in the prior year, it was up 55%, with the growth driven by higher rates, partially offset by lower deposit balances. Securities Services revenue of $1.1 billion was up 7% year-on-year, driven by higher rates, partially offset by lower deposit balances and market levels. Expenses of $7.5 billion were up 2% year-on-year as higher headcount and wage inflation were largely offset by lower revenue-related compensation. Moving to the Commercial Bank on page 6. Commercial Banking reported net income of $1.3 billion. Revenue of $3.5 billion was up 46% year-on-year, driven by higher deposit margins. Payments revenue of $2 billion was up 98% year-on-year driven by higher rates. And gross Investment Banking revenue of $881 million was up 21% year-on-year on increased M&A and bond underwriting from large deal activity. Expenses of $1.3 billion were up 16% year-on-year largely driven by higher compensation expense, including front office hiring and technology investments as well as higher volume-related expense. Average deposits were down 16% year-on-year and 5% quarter-on-quarter, predominantly driven by continued attrition and non-operating deposits as well as seasonally lower balances. Loans were up 13% year-on-year and 1% sequentially. C&I loans were up 1% quarter-on-quarter with somewhat different dynamics based on client size. In middle market banking, higher rates and recession concerns have decreased new loan demand and utilization, which is also leading to weakness in CapEx spending. In Corporate Client Banking, utilization rates increased modestly quarter-on-quarter as capital market conditions led more clients to opt for bank debt. CRE loans were also up 1% sequentially with higher rates creating headwinds for both originations and prepayments. And given the recent focus on commercial real estate, let me remind you that our office sector exposure is less than 10% of our portfolio and is focused in the urban dense markets, and nearly two-thirds of our loans are multifamily, primarily in supply-constrained markets. Finally, credit costs of $417 million included a net reserve build of $379 million, predominantly driven by what I mentioned upfront. Then to complete our lines of business, AWM on page 7. Asset & Wealth Management reported net income of $1.4 billion, pretax margin of 35%. Revenue of $4.8 billion was up 11% year-on-year driven by higher deposit margins on lower balances and a valuation gain on our initial investment triggered by taking full ownership of our asset management joint venture in China, partially offset by the impact of lower average market levels on management fees and lower performance fees. Expenses of $3.1 billion were up 8% year-on-year, predominantly driven by compensation, reflecting growth in our private banking advisory teams, higher revenue-related compensation and the run rate impact of acquisitions. For the quarter, net long-term inflows were $47 billion, led by fixed income and equities. And then liquidity, we saw net inflows of $93 billion, inclusive of our ongoing deposit migration. AUM of $3 trillion was up 2% year-on-year and overall client assets of $4.3 trillion were up 6%, driven by continued net inflows into liquidity and long-term products. And finally, loans were down 1% quarter-on-quarter, driven by lower securities-based lending, while average deposits were down 5%. Turning to Corporate on page 8. Corporate reported net income of $244 million. Revenue was $985 million compared to a net loss of $881 million last year. NII was $1.7 billion, up $2.3 billion year-on-year due to the impact of higher rates. NIR was a loss of $755 million compared with a loss of $345 million in the prior year and included the net investment securities losses I mentioned earlier. Expenses of $160 million were down $24 million year-on-year. And credit costs of $370 million were driven by reserve builds on a couple of single name exposures. Next, the outlook on page 9. We now expect 2023 NII and NII ex-markets to be approximately $81 billion. This increase in guidance is primarily driven by lower rate paid assumptions across both consumer and wholesale in light of the expectation of Fed cuts later in the year as well as slightly higher card revolving balances. Note that in line with my comments at the outset, recent deposit balance increases are not a meaningful contributor to the upward revision in the NII outlook, given that we expect a meaningful portion of the recent inflows to reverse later in the year. I would point out that this outlook still embeds significant reprice lags. We think a more sustainable NII ex-markets run rate in the medium term is well below this quarter\u2019s $84 billion as well as below the $80 billion that is implied for the rest of the year by our full year guidance. And while we don\u2019t know exactly when this lower run rate will be reached, when it happens, we believe it will be around the mid-70s. And of course, as we mentioned last quarter, this NII outlook remains highly sensitive to the uncertainty associated with the timing and the extent of deposit reprice, investment portfolio decisions, the dynamics of QT and RRP, the trajectory of Fed funds as well as the broader macroeconomic environment, including its impact on loan growth. Separately, it\u2019s worth noting that markets NII may start to trend slightly positive towards the end of the year as a function of mix and rate effects. Moving to expenses. Our outlook for 2023 continues to be about $81 billion. Importantly, this does not currently include the impact of the pending FDIC special assessment. And on credit, we continue to expect the 2023 card net charge-off rate to be approximately 2.6%. So to wrap up, our strong results this quarter once again highlight the earnings power of this diversified franchise. We have benefited from our fortress principles and commitment to invest, which we will continue to do as we head into an increasingly uncertain environment. With that, operator, please open the line for Q&A.","evidence_gemma_new":"NII","evidence_llama_3_3":null,"evidence_qwen_3_30b":"NII $1.7 billion year-on-year","gemma_new_max":1700000000.0,"gemma_new_min":1700000000.0,"llama_3_3_max":null,"llama_3_3_min":null,"qwen_3_30b_max":1700000000.0,"qwen_3_30b_min":1700000000.0}
{"symbol":"JPM","year":2023,"quarter":2,"date":"2023-Q2","chunk_id":9,"sub_chunk_id":0,"centroid_label":"nii","agreed_value":87000000000.0,"count":3,"chunk":"Erika Najarian: Hi, good morning, Jeremy. And I'm just laughing to myself, because I said to you at Investor Day, do you have any more NII rabbits to pull out of the hat and I guess you do. So I guess, I want to ask a broader question really here, and maybe Jamie I'd like to get your thoughts. So you earned 23% ROTCE on 13.8% CET1 and we hear you loud and clear that your more normalized NII generation is not $87 billion. That being said and fully taking into account the potential haircut from Basel III end game, is it possible that your natural ROTCE is maybe above that 17% through-the-cycle rate when rates aren't zero, because when you first introduced that ROTCE target, we were in a different role from a rate scenario and everybody is talking about, even if the Fed cuts, the natural sort of bottom in Fed funds is not going to be zero. So, any input on that would be great.","evidence_gemma_new":"NII","evidence_llama_3_3":"NII this year","evidence_qwen_3_30b":"NII","gemma_new_max":87000000000.0,"gemma_new_min":87000000000.0,"llama_3_3_max":87000000000.0,"llama_3_3_min":87000000000.0,"qwen_3_30b_max":87000000000.0,"qwen_3_30b_min":87000000000.0}
{"symbol":"JPM","year":2023,"quarter":2,"date":"2023-Q2","chunk_id":79,"sub_chunk_id":0,"centroid_label":"nii","agreed_value":75.0,"count":2,"chunk":"Betsy Graseck: Right. But you were saying earlier, deposit betas you do anticipate are going to be accelerating from here, and that's part of the outlook for NII longer term to normalize in the mid-70s. Is that right?","evidence_gemma_new":"NII mid-70s","evidence_llama_3_3":"NII NII","evidence_qwen_3_30b":null,"gemma_new_max":75.0,"gemma_new_min":75.0,"llama_3_3_max":75.0,"llama_3_3_min":75.0,"qwen_3_30b_max":null,"qwen_3_30b_min":null}
{"symbol":"JPM","year":2023,"quarter":2,"date":"2023-Q2","chunk_id":94,"sub_chunk_id":0,"centroid_label":"nii","agreed_value":22000000000.0,"count":2,"chunk":"Charles Peabody: So sort of wrapped into that as a follow-up. If you take your $87 billion forecast for NII this year and that implies at least one quarter of maybe $22 billion of NII, and you take your eventual forecast of mid-$70 billion of NII at some point in the future, that would imply at least one quarter of $18 billion of NII. So that's about an 18% drop. And if you hold the balance sheet steady, you're talking about a 30 basis point drop in your margin - your NIM to get to that from $22 billion to $18 billion. I mean what is driving - is it really the deposit? Or are you thinking in terms of interest reversals as credit deteriorates? Or is it rebuilding of liquidity? I'm just trying to get a better sense of what the impact?","evidence_gemma_new":"NII one quarter","evidence_llama_3_3":"NII","evidence_qwen_3_30b":null,"gemma_new_max":22000000000.0,"gemma_new_min":22000000000.0,"llama_3_3_max":22000000000.0,"llama_3_3_min":22000000000.0,"qwen_3_30b_max":null,"qwen_3_30b_min":null}
{"symbol":"JPM","year":2023,"quarter":2,"date":"2023-Q2","chunk_id":94,"sub_chunk_id":0,"centroid_label":"nii","agreed_value":18000000000.0,"count":2,"chunk":"Charles Peabody: So sort of wrapped into that as a follow-up. If you take your $87 billion forecast for NII this year and that implies at least one quarter of maybe $22 billion of NII, and you take your eventual forecast of mid-$70 billion of NII at some point in the future, that would imply at least one quarter of $18 billion of NII. So that's about an 18% drop. And if you hold the balance sheet steady, you're talking about a 30 basis point drop in your margin - your NIM to get to that from $22 billion to $18 billion. I mean what is driving - is it really the deposit? Or are you thinking in terms of interest reversals as credit deteriorates? Or is it rebuilding of liquidity? I'm just trying to get a better sense of what the impact?","evidence_gemma_new":"NII one quarter","evidence_llama_3_3":"NII","evidence_qwen_3_30b":null,"gemma_new_max":18000000000.0,"gemma_new_min":18000000000.0,"llama_3_3_max":18000000000.0,"llama_3_3_min":18000000000.0,"qwen_3_30b_max":null,"qwen_3_30b_min":null}
{"symbol":"JPM","year":2023,"quarter":2,"date":"2023-Q2","chunk_id":94,"sub_chunk_id":0,"centroid_label":"nii","agreed_value":70000000000.0,"count":2,"chunk":"Charles Peabody: So sort of wrapped into that as a follow-up. If you take your $87 billion forecast for NII this year and that implies at least one quarter of maybe $22 billion of NII, and you take your eventual forecast of mid-$70 billion of NII at some point in the future, that would imply at least one quarter of $18 billion of NII. So that's about an 18% drop. And if you hold the balance sheet steady, you're talking about a 30 basis point drop in your margin - your NIM to get to that from $22 billion to $18 billion. I mean what is driving - is it really the deposit? Or are you thinking in terms of interest reversals as credit deteriorates? Or is it rebuilding of liquidity? I'm just trying to get a better sense of what the impact?","evidence_gemma_new":"NII some point in the future","evidence_llama_3_3":null,"evidence_qwen_3_30b":"NII future","gemma_new_max":70000000000.0,"gemma_new_min":70000000000.0,"llama_3_3_max":null,"llama_3_3_min":null,"qwen_3_30b_max":70000000000.0,"qwen_3_30b_min":70000000000.0}
{"symbol":"JPM","year":2024,"quarter":3,"date":"2024-Q3","chunk_id":9,"sub_chunk_id":0,"centroid_label":"nii","agreed_value":90750000000.0,"count":3,"chunk":"Jeremy Barnum: Sure. So, good question and I agree with your numbers. I agree with the way you've normalized this year for the one-time type of significant items, and also where the consensus was when Daniel made his comments. And while we're at it, I would also just remind you on the NII comments at the time, the consensus for this year was $91.5 billion, and for next year it was $90 billion. So that was implying at the time a sequential decline of $1.5 billion. And it was because we thought that decline wasn't big enough that we made the comments that we made. So I'm happy to expand more on that. But anyway, to expenses, yes, so if you start for the sake of argument with a base of $90 billion, obviously inflation is normalizing and obviously we're always trying to generate efficiencies to offset inflation. But, you know, that having been said, if you assume 3% for the sake of argument on that base, that's a few billion dollars right out of the gates that we're working against, so that's one thing. The other thing is that we have continued to execute on our growth strategies this year, so there's a not insignificant amount of annualization. You can't quite see that in the fourth quarter numbers, because of the seasonality of incentive comp, but if you were to strip that out, you would see probably some sequential increases and so there's some manualization as an additional headwind. The other thing that's worth noting is that we do expect fees and volume-related businesses to grow next year. And so all else being equal, that would come with a higher expense loading. So when you assemble all those, that goes a long way to explain why sort of that consensus number that is slightly below $94 billion just seemed light. In terms of priorities and investments, really nothing has changed. Like the strategy hasn't changed. The strategy hasn't changed and the plans haven't changed and we're just kind of executing with the same long-term perspective that we've always had. I would note that relative to NII, obviously we're in the third quarter now and not the fourth quarter. In the old days, we did used to give you the guidance until investor day in late February. So we will give you formal expense guidance next quarter for both well for expenses and NII next quarter, but especially on expenses we are in the middle of the budget cycle right now so we probably have a little less visibility there than we do at the margin on the NII.","evidence_gemma_new":"NII this year next year","evidence_llama_3_3":"NII this year","evidence_qwen_3_30b":"consensus NII this year","gemma_new_max":90750000000.0,"gemma_new_min":90750000000.0,"llama_3_3_max":91500000000.0,"llama_3_3_min":91500000000.0,"qwen_3_30b_max":91500000000.0,"qwen_3_30b_min":91500000000.0}
{"symbol":"JPM","year":2024,"quarter":4,"date":"2024-Q4","chunk_id":1,"sub_chunk_id":0,"centroid_label":"nii","agreed_value":2000000000.0,"count":2,"chunk":"Jeremy Barnum: Thank you, and good morning, everyone. Starting on Page 1, the firm reported net income of $14 billion, EPS of $4.81 on revenue of $43.7 billion with an ROTCE of 21%. On Page 2, we have more on our fourth quarter results. The firm reported revenue of $43.7 billion, up $3.8 billion or 10% year-on-year. NII ex-markets was down $548 million or 2%, driven by the impact of lower rates and the associated deposit margin compression as well as lower deposit balances in CCB, largely offset by the impact of securities reinvestment, higher revolving balances in card and higher wholesale deposit balances. NII ex-markets was up $3.1 billion or 30%. Excluding the prior year's net investment securities losses, it was up 21%, largely on higher asset management fees and investment banking fees. And markets revenue was up $1.2 billion or 21%. Expenses of $22.8 billion were down $1.7 billion or 7% year-on-year. Excluding the prior year's FDIC special assessment, expenses were up $1.2 billion or 5%, predominantly driven by compensation as well as higher brokerage and distribution fees. And credit costs were $2.6 billion, reflecting net charge-offs of $2.4 billion and a net reserve of $267 million. On Page 3, you can see the reported results for the full year, I'll remind you that there were a number of significant items in 2024. Excluding those items, the firm reported net income of $54 billion, EPS of $18.22, revenue of $173 billion and we delivered an ROTCE of 20%. Touching on a couple of highlights for the year, in CCB, we had a record number of first-time investors and acquired nearly 10 million new card accounts. In CIB, we had record revenue in markets, payments, and security services, and in AWM, we had record long-term net inflows of $234 billion, positive across all channels, regions, and asset classes. On to balance sheet and capital on Page 4, we ended the quarter with a CET1 ratio of 15.7%, up 40 basis points versus the prior quarter as net income and lower RWA were largely offset by both OCI losses and capital distributions, which included $4 billion of net common share repurchases this quarter. The $24 billion decrease in RWA reflects a seasonal decline in markets activity and lower wholesale lending, which was predominantly offset by a seasonal increase in card. Now let's go to our businesses, starting with CCB on Page 5. CCB reported net income of $4.5 billion on revenue of $18.4 billion, which was up 1% year-on-year. In Banking and Wealth Management, revenue was down 7% year-on-year on deposit margin compression and lower deposits, partially offset by growth in wealth management revenue. Average deposits were down 4% year-on-year and flat sequentially as consumer balances have stabilized. Client investment assets were up 14% year-on-year, predominantly driven by market performance, and we continue to see healthy flows across branch and digital channels. In Home Lending, revenue was up 12% year-on-year, predominantly driven by higher production revenue. Turning to Card Services & Auto, revenue was up 14% year-on-year, largely driven by Card NII on higher revolving balances. Card outstandings were up 11% due to strong account acquisition and revolver growth. And in Auto, originations were $10.6 billion, up 7%, reflecting higher lease volume on robust new vehicle inventory. Expenses of $9.7 billion were up 4% year-on-year, predominantly driven by field compensation and growth in technology. In terms of credit performance this quarter, credit costs were $2.6 billion, reflecting net charge-offs of $2.1 billion, up $428 million year-on-year, driven by Card. The net reserve build was $557 million, predominantly driven by higher Card revolving balances. Next, the Commercial & Investment Bank on Page 6. CIB reported net income of $6.6 billion on revenue of $17.6 billion. IV fees were up 49% year-on-year and we ranked number one with wallet share of 9.3% for 2024. Advisory fees were up 41%, benefiting from large deals and share growth in a number of key sectors. Underwriting fees were up meaningfully with debt up 56% and equity up 54%, primarily driven by favorable market conditions. In terms of the outlook for the overall investment banking wallet, in light of the positive momentum, we remain optimistic about our pipeline. Payments revenue was $4.7 billion, up 3% year-on-year, excluding equity investments, driven by higher deposit balances and fee growth, largely offset by deposit margin compression. Lending revenue was $1.9 billion, up 9% year-on-year, predominantly driven by lower losses on hedges. Moving to markets, total revenue was $7 billion, up 21% year-on-year. Fixed income was up 20% with better performance in credit as well as continued outperformance in currencies and emerging markets. Equities was up 22% on elevated client activity and derivatives amid increased volatility and higher trading volumes and cash. Security Services revenue was $1.3 billion, up 10% year-on-year, driven by fee growth on higher client activity and market levels as well as higher deposit balances. Expenses of $8.7 billion were up 7% year-on-year, predominantly driven by higher brokerage, technology, and legal expense. Average banking and payments loans were down 2% year-on-year and down 1% sequentially. Global Corporate & Investment Banking loans were down 2% quarter-on-quarter, driven by paydowns in lower short-term financing, primarily offset by new originations. In commercial banking, middle market loans were also down 2%, driven by paydowns, predominantly offset by new originations, and commercial real estate loans were flat as new originations were offset by paydowns. Average client deposits were up 9% year-on-year and 5% sequentially, driven by underlying client growth. Finally, credit costs were $61 million, driven by net downgrade activity and the net impact of charge-offs, offset -- largely offset by a reserve release due to an update to certain loss assumptions. Then to complete our lines of business, Asset & Wealth Management on Page 7. AWM reported net income of $1.5 billion with pre-tax margin of 35%. Revenue of $5.8 billion was up 13% year-on-year, predominantly driven by growth in management fees on higher average market levels and strong net inflows as well as higher performance fees. Expenses of $3.8 billion were up 11% year-on-year, predominantly driven by higher compensation, including revenue-related compensation and continued growth in our private banking advisor teams as well as higher distribution fees. Long-term net inflows were $76 billion for the quarter, positive across all asset classes. In liquidity, we saw net inflows of $94 billion for the quarter and $104 billion for the full year -- $140 billion for the full year, sorry. And we had client asset net inflows of $468 billion for the year. AUM of $4 trillion and client assets of $5.9 trillion were both up 18% year-on-year, driven by continued net inflows and higher market levels. And finally, loans were up 2% quarter-on-quarter and deposits were up 5% quarter-on-quarter. Turning to Corporate on Page 8; Corporate reported net income of $1.3 billion. Revenue of $2 billion was up $223 million year-on-year. NII of $2 billion was down $415 million year-on-year, driven by the impact of lower rates, largely offset by balance sheet actions, primarily securities reinvestment activity. NII was a net loss of $30 million compared to the net loss of $668 million in the prior year, driven by lower net investment securities losses this quarter. And expenses of $550 million were down $3 billion year-on-year, predominantly driven by the absence of the FDIC Special Assessment of $2.9 billion in the prior year. With that, let's pivot to the outlook, starting with NII on Page 9. We expect 2025 NII ex-markets to be approximately $90 billion. Going through the drivers, as usual, the outlook assumes that rates follow the forward curve. It's worth noting that the NII decrease is driven by both the cut expected in 2025 and the impact of the 100 basis points of cuts in the back half of 2024. You can see on the page that we've illustrated the historical trajectory of card loan growth. We expect healthy card loan growth again this year, but below the 12% pace we saw in 2024 as tailwinds from revolve normalization are largely behind us. Turning to deposits; firm-wide deposits have stabilized and we expect to see a more visible growth trend to assert itself in the second half of 2025. It's notable that we can already see that trend in consumer checking deposits. On deposit margin, we expect modest compression due to lower rates. When you put all that together, we expect the NII trough could be sometime in the middle of the year, followed by growth as we illustrated at the bottom of the bar. And for completeness, we expect firm-wide NII to be approximately $94 billion as a function of markets NII increasing to about $4 billion, which you should think of as being primarily offset in NIR. Finally, I want to point out that starting this quarter, we are including an estimate of earnings at risk in the earnings supplement, so you no longer have to wait for the K or the Q to get that number. Now let's turn to expenses on Page 10. We expect 2025 expense to be about $95 billion. Looking at the chart in the middle of the page, I'll touch on the drivers of the year-on-year change, which you'll note are very consistent with what you've been hearing from us recently. The largest increase is volume and revenue-related expense, which is primarily driven by expected growth in auto leasing as well as capital markets. As a reminder, this comes with higher revenues. We continue to hire bankers and advisors to support business growth as well as expand our branch network. The increase in tech spend is primarily business-driven as we continue to invest in new products, features, and customer platforms as well as modernization. Marketing remains a driver of spend as we continue to see attractive opportunities, resulting in strong demand and engagement in our Card business. And finally, while we haven't explicitly called it out in each bar, inflation remains a source of some upward pressure, and as always, we are generating efficiencies to help offset it. Now let's turn to Page 11 to cover credit and wrap-up. On credit, we expect the 2025 card net charge-off rate to be in line with our previous guidance of approximately 3.6%. So, in closing, 2024 was another year of record revenue and net income, and we're proud of what we accomplished. As we look ahead to 2025, we still expect NII normalization, although to a lesser extent than we previously thought. And taking a step back, we think it's important to acknowledge the tension in the risks and uncertainties in the environment and the degree of optimism embedded in asset prices and expectations. In that context, we remain upbeat about the strength of the franchise, but we are focused on being prepared for a wide range of scenarios. Finally, let me say a few words about the wildfires in Los Angeles, while we don't expect much of a financial impact from it, we have a presence in the area across all three lines of business, so we're keeping in close contact with our customers, clients, and employees. We are offering support in a variety of ways, including waiving consumer and business banking fees as well as making a contribution to local relief organizations, offering employee donation matching, and supporting employee volunteer efforts. With that, I'll turn it over to Jamie before we open up the line for Q&A.","evidence_gemma_new":null,"evidence_llama_3_3":"NII","evidence_qwen_3_30b":"NII down $415 million year-on-year","gemma_new_max":null,"gemma_new_min":null,"llama_3_3_max":2000000000.0,"llama_3_3_min":2000000000.0,"qwen_3_30b_max":2000000000.0,"qwen_3_30b_min":2000000000.0}
{"symbol":"JPM","year":2024,"quarter":3,"date":"2025-FY","chunk_id":9,"sub_chunk_id":0,"centroid_label":"nii","agreed_value":90000000000.0,"count":2,"chunk":"Jeremy Barnum: Sure. So, good question and I agree with your numbers. I agree with the way you've normalized this year for the one-time type of significant items, and also where the consensus was when Daniel made his comments. And while we're at it, I would also just remind you on the NII comments at the time, the consensus for this year was $91.5 billion, and for next year it was $90 billion. So that was implying at the time a sequential decline of $1.5 billion. And it was because we thought that decline wasn't big enough that we made the comments that we made. So I'm happy to expand more on that. But anyway, to expenses, yes, so if you start for the sake of argument with a base of $90 billion, obviously inflation is normalizing and obviously we're always trying to generate efficiencies to offset inflation. But, you know, that having been said, if you assume 3% for the sake of argument on that base, that's a few billion dollars right out of the gates that we're working against, so that's one thing. The other thing is that we have continued to execute on our growth strategies this year, so there's a not insignificant amount of annualization. You can't quite see that in the fourth quarter numbers, because of the seasonality of incentive comp, but if you were to strip that out, you would see probably some sequential increases and so there's some manualization as an additional headwind. The other thing that's worth noting is that we do expect fees and volume-related businesses to grow next year. And so all else being equal, that would come with a higher expense loading. So when you assemble all those, that goes a long way to explain why sort of that consensus number that is slightly below $94 billion just seemed light. In terms of priorities and investments, really nothing has changed. Like the strategy hasn't changed. The strategy hasn't changed and the plans haven't changed and we're just kind of executing with the same long-term perspective that we've always had. I would note that relative to NII, obviously we're in the third quarter now and not the fourth quarter. In the old days, we did used to give you the guidance until investor day in late February. So we will give you formal expense guidance next quarter for both well for expenses and NII next quarter, but especially on expenses we are in the middle of the budget cycle right now so we probably have a little less visibility there than we do at the margin on the NII.","evidence_gemma_new":null,"evidence_llama_3_3":"NII next year","evidence_qwen_3_30b":"consensus NII next year","gemma_new_max":null,"gemma_new_min":null,"llama_3_3_max":90000000000.0,"llama_3_3_min":90000000000.0,"qwen_3_30b_max":90000000000.0,"qwen_3_30b_min":90000000000.0}
{"symbol":"JPM","year":2023,"quarter":1,"date":"2023-Q1","chunk_id":1,"sub_chunk_id":0,"centroid_label":"revenue","agreed_value":39300000000.0,"count":3,"chunk":"Jeremy Barnum: Thanks, and good morning, everyone. The presentation is available on our website, and please refer to the disclaimer in the back. Starting on page 1. The Firm reported net income of $12.6 billion, EPS of $4.10 on revenue of $39.3 billion and delivered an ROTCE of 23%. These results included $868 million of net investment securities losses in corporate. Before reviewing our results for the quarter, let\u2019s talk about the recent bank failures. Jamie has addressed a number of the important themes in his shareholder letter and the recent televised interview. So, I will go straight to the specific impacts on the Firm. As you would expect, we saw significant new account opening activity and meaningful deposit and money market fund inflows, most significantly in the Commercial Bank, Business Banking and AWM. Regarding the deposit inflows, at the Firm-wide level, average deposits were down 3% quarter-on-quarter, while end-of-period deposits were up 2% quarter-on-quarter, implying an intra-quarter reversal of the recent outflow trend as a consequence of the March events. We estimate that we have retained approximately $50 billion of these deposit inflows at quarter-end. It\u2019s important to note that while the sequential period-end deposit increase is higher than we would have otherwise expected, our current full year NII outlook, which I will address at the end, still assumes modest deposit outflows from here. We expect these outflows to be driven by the same factors as last quarter as well as the expectation that we will not retain all of this quarter\u2019s inflows. Now back to the quarter touching on a few highlights. We grew our IB fee wallet share. Consumer spending remained solid with combined debit and credit card spend up 10% year-on-year. And credit continues to normalize, but actual performance remains strong across the Company. On Page 2, we have some more detail. Revenue of $39.3 billion was up $7.7 billion or 25% year-on-year. NII ex markets was up $9.2 billion or 78%, driven by higher rates, partially offset by lower deposit balances. NIR ex markets was down $1.1 billion or 10% driven by the securities losses previously mentioned as well as lower IB fees and lower auto lease income on lower volume. And markets revenue was down $371 million or 4% year-on-year. Expenses of $20.1 billion were up $916 million or 5% year-on-year, driven by compensation-related costs, reflecting the annualization of last year\u2019s headcount growth and wage inflation. These results include the impact of the higher FDIC assessment I mentioned last quarter, which, of course, is unrelated to recent events. And credit costs of $2.3 billion included net charge-offs of $1.1 billion, predominantly in card. The net reserve build of $1.1 billion was largely driven by deterioration in our weighted average economic outlook. Onto balance sheet and capital on page 3. We ended the quarter with a CET1 ratio of 13.8%, up about 60 basis points, which was primarily driven by the benefit of net income less distributions and AOCI gains. And in line with what we previously said, we resumed stock buybacks this quarter and distributed a total of $1.9 billion and net repurchases back to shareholders. Now, let\u2019s go to our businesses, starting with CCB on Page 4. Touching quickly on the health of U.S. consumers and small businesses based on our data. Both continue to show resilience and remain on the path to normalization as expected, but we continue to monitor their activity closely. Spend remains solid, and we have not observed any notable pullback throughout the quarter. Moving to financial results. CCB reported net income of $5.2 billion on revenue of $16.5 billion, which was up 35% year-on-year. In Banking & Wealth Management, revenue was up 67% year-on-year, driven by higher NII on higher rates. Average deposits were down 2% quarter-on-quarter, in line with recent trends. Throughout the quarter, we continued to see customer flows to higher-yielding products, as you would expect, but were encouraged by what we are capturing in CDs and our Wealth Management offerings. Client investment assets were down 1% year-on-year, but up 7% quarter-on-quarter, driven by market performance as well as strong net inflows. In Home Lending, revenue was down 38% year-on-year, largely driven by lower net interest income from tighter loan spreads and lower production revenue. Moving to Card Services & Auto. Revenue was up 14% year-on-year, largely driven by higher Card Services NII on higher revolving balances, partially offset by lower auto lease income. Credit card spend was up 13% year-on-year. Card outstandings were up 21%, driven by strong new account growth and revolve normalization. And in Auto, originations were $9.2 billion, up 10% year-on-year. Expenses of $8.1 billion were up 5% year-on-year, reflecting the impact of wage inflation and higher headcount. In terms of credit performance this quarter, credit costs were $1.4 billion, reflecting reserve builds of $300 million in card and $50 million in Home Lending. Net charge-offs were $1.1 billion, up about $500 million year-on-year, in line with expectations as delinquency levels continue to normalize across portfolios. Next, the CIB on Page 5. CIB reported net income of $4.4 billion on revenue of $13.6 billion. Investment Banking revenue of $1.6 billion was down 24% year-on-year. IB fees were down 19%. We ranked number 1 with first quarter wallet share of 8.7%. In advisory, fees were down 6% compared to a strong first quarter last year. Our underwriting businesses continued to be affected by market conditions with fees down 34% for debt and 6% for equity. In terms of the outlook, the dynamics remain the same. Our pipeline is relatively robust, but conversion is sensitive to market conditions and the economic outlook. We expect the second quarter and the rest of the year to remain challenging. Moving to Markets. Total revenue was $8.4 billion, down 4% year-on-year. Fixed income was flat. Rates was strong during the rally early in the quarter as well as through the elevated volatility in March. Credit was up on the back of higher client flows and currencies in emerging markets was down relative to a very strong first quarter in the prior year. Equity Markets was down 12%, driven by lower revenues in derivatives relative to a strong first quarter in the prior year and lower client activity and cash. Payments revenue was $2.4 billion, up 26% year-on-year. Excluding the net impact of equity investments, primarily a gain in the prior year, it was up 55%, with the growth driven by higher rates, partially offset by lower deposit balances. Securities Services revenue of $1.1 billion was up 7% year-on-year, driven by higher rates, partially offset by lower deposit balances and market levels. Expenses of $7.5 billion were up 2% year-on-year as higher headcount and wage inflation were largely offset by lower revenue-related compensation. Moving to the Commercial Bank on page 6. Commercial Banking reported net income of $1.3 billion. Revenue of $3.5 billion was up 46% year-on-year, driven by higher deposit margins. Payments revenue of $2 billion was up 98% year-on-year driven by higher rates. And gross Investment Banking revenue of $881 million was up 21% year-on-year on increased M&A and bond underwriting from large deal activity. Expenses of $1.3 billion were up 16% year-on-year largely driven by higher compensation expense, including front office hiring and technology investments as well as higher volume-related expense. Average deposits were down 16% year-on-year and 5% quarter-on-quarter, predominantly driven by continued attrition and non-operating deposits as well as seasonally lower balances. Loans were up 13% year-on-year and 1% sequentially. C&I loans were up 1% quarter-on-quarter with somewhat different dynamics based on client size. In middle market banking, higher rates and recession concerns have decreased new loan demand and utilization, which is also leading to weakness in CapEx spending. In Corporate Client Banking, utilization rates increased modestly quarter-on-quarter as capital market conditions led more clients to opt for bank debt. CRE loans were also up 1% sequentially with higher rates creating headwinds for both originations and prepayments. And given the recent focus on commercial real estate, let me remind you that our office sector exposure is less than 10% of our portfolio and is focused in the urban dense markets, and nearly two-thirds of our loans are multifamily, primarily in supply-constrained markets. Finally, credit costs of $417 million included a net reserve build of $379 million, predominantly driven by what I mentioned upfront. Then to complete our lines of business, AWM on page 7. Asset & Wealth Management reported net income of $1.4 billion, pretax margin of 35%. Revenue of $4.8 billion was up 11% year-on-year driven by higher deposit margins on lower balances and a valuation gain on our initial investment triggered by taking full ownership of our asset management joint venture in China, partially offset by the impact of lower average market levels on management fees and lower performance fees. Expenses of $3.1 billion were up 8% year-on-year, predominantly driven by compensation, reflecting growth in our private banking advisory teams, higher revenue-related compensation and the run rate impact of acquisitions. For the quarter, net long-term inflows were $47 billion, led by fixed income and equities. And then liquidity, we saw net inflows of $93 billion, inclusive of our ongoing deposit migration. AUM of $3 trillion was up 2% year-on-year and overall client assets of $4.3 trillion were up 6%, driven by continued net inflows into liquidity and long-term products. And finally, loans were down 1% quarter-on-quarter, driven by lower securities-based lending, while average deposits were down 5%. Turning to Corporate on page 8. Corporate reported net income of $244 million. Revenue was $985 million compared to a net loss of $881 million last year. NII was $1.7 billion, up $2.3 billion year-on-year due to the impact of higher rates. NIR was a loss of $755 million compared with a loss of $345 million in the prior year and included the net investment securities losses I mentioned earlier. Expenses of $160 million were down $24 million year-on-year. And credit costs of $370 million were driven by reserve builds on a couple of single name exposures. Next, the outlook on page 9. We now expect 2023 NII and NII ex-markets to be approximately $81 billion. This increase in guidance is primarily driven by lower rate paid assumptions across both consumer and wholesale in light of the expectation of Fed cuts later in the year as well as slightly higher card revolving balances. Note that in line with my comments at the outset, recent deposit balance increases are not a meaningful contributor to the upward revision in the NII outlook, given that we expect a meaningful portion of the recent inflows to reverse later in the year. I would point out that this outlook still embeds significant reprice lags. We think a more sustainable NII ex-markets run rate in the medium term is well below this quarter\u2019s $84 billion as well as below the $80 billion that is implied for the rest of the year by our full year guidance. And while we don\u2019t know exactly when this lower run rate will be reached, when it happens, we believe it will be around the mid-70s. And of course, as we mentioned last quarter, this NII outlook remains highly sensitive to the uncertainty associated with the timing and the extent of deposit reprice, investment portfolio decisions, the dynamics of QT and RRP, the trajectory of Fed funds as well as the broader macroeconomic environment, including its impact on loan growth. Separately, it\u2019s worth noting that markets NII may start to trend slightly positive towards the end of the year as a function of mix and rate effects. Moving to expenses. Our outlook for 2023 continues to be about $81 billion. Importantly, this does not currently include the impact of the pending FDIC special assessment. And on credit, we continue to expect the 2023 card net charge-off rate to be approximately 2.6%. So to wrap up, our strong results this quarter once again highlight the earnings power of this diversified franchise. We have benefited from our fortress principles and commitment to invest, which we will continue to do as we head into an increasingly uncertain environment. With that, operator, please open the line for Q&A.","evidence_gemma_new":"revenue","evidence_llama_3_3":"Revenue year-on-year","evidence_qwen_3_30b":"revenue $39.3 billion year-on-year","gemma_new_max":39300000000.0,"gemma_new_min":39300000000.0,"llama_3_3_max":39300000000.0,"llama_3_3_min":39300000000.0,"qwen_3_30b_max":39300000000.0,"qwen_3_30b_min":39300000000.0}
{"symbol":"JPM","year":2023,"quarter":1,"date":"2023-Q1","chunk_id":1,"sub_chunk_id":0,"centroid_label":"revenue","agreed_value":3500000000.0,"count":2,"chunk":"Jeremy Barnum: Thanks, and good morning, everyone. The presentation is available on our website, and please refer to the disclaimer in the back. Starting on page 1. The Firm reported net income of $12.6 billion, EPS of $4.10 on revenue of $39.3 billion and delivered an ROTCE of 23%. These results included $868 million of net investment securities losses in corporate. Before reviewing our results for the quarter, let\u2019s talk about the recent bank failures. Jamie has addressed a number of the important themes in his shareholder letter and the recent televised interview. So, I will go straight to the specific impacts on the Firm. As you would expect, we saw significant new account opening activity and meaningful deposit and money market fund inflows, most significantly in the Commercial Bank, Business Banking and AWM. Regarding the deposit inflows, at the Firm-wide level, average deposits were down 3% quarter-on-quarter, while end-of-period deposits were up 2% quarter-on-quarter, implying an intra-quarter reversal of the recent outflow trend as a consequence of the March events. We estimate that we have retained approximately $50 billion of these deposit inflows at quarter-end. It\u2019s important to note that while the sequential period-end deposit increase is higher than we would have otherwise expected, our current full year NII outlook, which I will address at the end, still assumes modest deposit outflows from here. We expect these outflows to be driven by the same factors as last quarter as well as the expectation that we will not retain all of this quarter\u2019s inflows. Now back to the quarter touching on a few highlights. We grew our IB fee wallet share. Consumer spending remained solid with combined debit and credit card spend up 10% year-on-year. And credit continues to normalize, but actual performance remains strong across the Company. On Page 2, we have some more detail. Revenue of $39.3 billion was up $7.7 billion or 25% year-on-year. NII ex markets was up $9.2 billion or 78%, driven by higher rates, partially offset by lower deposit balances. NIR ex markets was down $1.1 billion or 10% driven by the securities losses previously mentioned as well as lower IB fees and lower auto lease income on lower volume. And markets revenue was down $371 million or 4% year-on-year. Expenses of $20.1 billion were up $916 million or 5% year-on-year, driven by compensation-related costs, reflecting the annualization of last year\u2019s headcount growth and wage inflation. These results include the impact of the higher FDIC assessment I mentioned last quarter, which, of course, is unrelated to recent events. And credit costs of $2.3 billion included net charge-offs of $1.1 billion, predominantly in card. The net reserve build of $1.1 billion was largely driven by deterioration in our weighted average economic outlook. Onto balance sheet and capital on page 3. We ended the quarter with a CET1 ratio of 13.8%, up about 60 basis points, which was primarily driven by the benefit of net income less distributions and AOCI gains. And in line with what we previously said, we resumed stock buybacks this quarter and distributed a total of $1.9 billion and net repurchases back to shareholders. Now, let\u2019s go to our businesses, starting with CCB on Page 4. Touching quickly on the health of U.S. consumers and small businesses based on our data. Both continue to show resilience and remain on the path to normalization as expected, but we continue to monitor their activity closely. Spend remains solid, and we have not observed any notable pullback throughout the quarter. Moving to financial results. CCB reported net income of $5.2 billion on revenue of $16.5 billion, which was up 35% year-on-year. In Banking & Wealth Management, revenue was up 67% year-on-year, driven by higher NII on higher rates. Average deposits were down 2% quarter-on-quarter, in line with recent trends. Throughout the quarter, we continued to see customer flows to higher-yielding products, as you would expect, but were encouraged by what we are capturing in CDs and our Wealth Management offerings. Client investment assets were down 1% year-on-year, but up 7% quarter-on-quarter, driven by market performance as well as strong net inflows. In Home Lending, revenue was down 38% year-on-year, largely driven by lower net interest income from tighter loan spreads and lower production revenue. Moving to Card Services & Auto. Revenue was up 14% year-on-year, largely driven by higher Card Services NII on higher revolving balances, partially offset by lower auto lease income. Credit card spend was up 13% year-on-year. Card outstandings were up 21%, driven by strong new account growth and revolve normalization. And in Auto, originations were $9.2 billion, up 10% year-on-year. Expenses of $8.1 billion were up 5% year-on-year, reflecting the impact of wage inflation and higher headcount. In terms of credit performance this quarter, credit costs were $1.4 billion, reflecting reserve builds of $300 million in card and $50 million in Home Lending. Net charge-offs were $1.1 billion, up about $500 million year-on-year, in line with expectations as delinquency levels continue to normalize across portfolios. Next, the CIB on Page 5. CIB reported net income of $4.4 billion on revenue of $13.6 billion. Investment Banking revenue of $1.6 billion was down 24% year-on-year. IB fees were down 19%. We ranked number 1 with first quarter wallet share of 8.7%. In advisory, fees were down 6% compared to a strong first quarter last year. Our underwriting businesses continued to be affected by market conditions with fees down 34% for debt and 6% for equity. In terms of the outlook, the dynamics remain the same. Our pipeline is relatively robust, but conversion is sensitive to market conditions and the economic outlook. We expect the second quarter and the rest of the year to remain challenging. Moving to Markets. Total revenue was $8.4 billion, down 4% year-on-year. Fixed income was flat. Rates was strong during the rally early in the quarter as well as through the elevated volatility in March. Credit was up on the back of higher client flows and currencies in emerging markets was down relative to a very strong first quarter in the prior year. Equity Markets was down 12%, driven by lower revenues in derivatives relative to a strong first quarter in the prior year and lower client activity and cash. Payments revenue was $2.4 billion, up 26% year-on-year. Excluding the net impact of equity investments, primarily a gain in the prior year, it was up 55%, with the growth driven by higher rates, partially offset by lower deposit balances. Securities Services revenue of $1.1 billion was up 7% year-on-year, driven by higher rates, partially offset by lower deposit balances and market levels. Expenses of $7.5 billion were up 2% year-on-year as higher headcount and wage inflation were largely offset by lower revenue-related compensation. Moving to the Commercial Bank on page 6. Commercial Banking reported net income of $1.3 billion. Revenue of $3.5 billion was up 46% year-on-year, driven by higher deposit margins. Payments revenue of $2 billion was up 98% year-on-year driven by higher rates. And gross Investment Banking revenue of $881 million was up 21% year-on-year on increased M&A and bond underwriting from large deal activity. Expenses of $1.3 billion were up 16% year-on-year largely driven by higher compensation expense, including front office hiring and technology investments as well as higher volume-related expense. Average deposits were down 16% year-on-year and 5% quarter-on-quarter, predominantly driven by continued attrition and non-operating deposits as well as seasonally lower balances. Loans were up 13% year-on-year and 1% sequentially. C&I loans were up 1% quarter-on-quarter with somewhat different dynamics based on client size. In middle market banking, higher rates and recession concerns have decreased new loan demand and utilization, which is also leading to weakness in CapEx spending. In Corporate Client Banking, utilization rates increased modestly quarter-on-quarter as capital market conditions led more clients to opt for bank debt. CRE loans were also up 1% sequentially with higher rates creating headwinds for both originations and prepayments. And given the recent focus on commercial real estate, let me remind you that our office sector exposure is less than 10% of our portfolio and is focused in the urban dense markets, and nearly two-thirds of our loans are multifamily, primarily in supply-constrained markets. Finally, credit costs of $417 million included a net reserve build of $379 million, predominantly driven by what I mentioned upfront. Then to complete our lines of business, AWM on page 7. Asset & Wealth Management reported net income of $1.4 billion, pretax margin of 35%. Revenue of $4.8 billion was up 11% year-on-year driven by higher deposit margins on lower balances and a valuation gain on our initial investment triggered by taking full ownership of our asset management joint venture in China, partially offset by the impact of lower average market levels on management fees and lower performance fees. Expenses of $3.1 billion were up 8% year-on-year, predominantly driven by compensation, reflecting growth in our private banking advisory teams, higher revenue-related compensation and the run rate impact of acquisitions. For the quarter, net long-term inflows were $47 billion, led by fixed income and equities. And then liquidity, we saw net inflows of $93 billion, inclusive of our ongoing deposit migration. AUM of $3 trillion was up 2% year-on-year and overall client assets of $4.3 trillion were up 6%, driven by continued net inflows into liquidity and long-term products. And finally, loans were down 1% quarter-on-quarter, driven by lower securities-based lending, while average deposits were down 5%. Turning to Corporate on page 8. Corporate reported net income of $244 million. Revenue was $985 million compared to a net loss of $881 million last year. NII was $1.7 billion, up $2.3 billion year-on-year due to the impact of higher rates. NIR was a loss of $755 million compared with a loss of $345 million in the prior year and included the net investment securities losses I mentioned earlier. Expenses of $160 million were down $24 million year-on-year. And credit costs of $370 million were driven by reserve builds on a couple of single name exposures. Next, the outlook on page 9. We now expect 2023 NII and NII ex-markets to be approximately $81 billion. This increase in guidance is primarily driven by lower rate paid assumptions across both consumer and wholesale in light of the expectation of Fed cuts later in the year as well as slightly higher card revolving balances. Note that in line with my comments at the outset, recent deposit balance increases are not a meaningful contributor to the upward revision in the NII outlook, given that we expect a meaningful portion of the recent inflows to reverse later in the year. I would point out that this outlook still embeds significant reprice lags. We think a more sustainable NII ex-markets run rate in the medium term is well below this quarter\u2019s $84 billion as well as below the $80 billion that is implied for the rest of the year by our full year guidance. And while we don\u2019t know exactly when this lower run rate will be reached, when it happens, we believe it will be around the mid-70s. And of course, as we mentioned last quarter, this NII outlook remains highly sensitive to the uncertainty associated with the timing and the extent of deposit reprice, investment portfolio decisions, the dynamics of QT and RRP, the trajectory of Fed funds as well as the broader macroeconomic environment, including its impact on loan growth. Separately, it\u2019s worth noting that markets NII may start to trend slightly positive towards the end of the year as a function of mix and rate effects. Moving to expenses. Our outlook for 2023 continues to be about $81 billion. Importantly, this does not currently include the impact of the pending FDIC special assessment. And on credit, we continue to expect the 2023 card net charge-off rate to be approximately 2.6%. So to wrap up, our strong results this quarter once again highlight the earnings power of this diversified franchise. We have benefited from our fortress principles and commitment to invest, which we will continue to do as we head into an increasingly uncertain environment. With that, operator, please open the line for Q&A.","evidence_gemma_new":"Revenue","evidence_llama_3_3":null,"evidence_qwen_3_30b":"revenue $3.5 billion year-on-year","gemma_new_max":3500000000.0,"gemma_new_min":3500000000.0,"llama_3_3_max":null,"llama_3_3_min":null,"qwen_3_30b_max":3500000000.0,"qwen_3_30b_min":3500000000.0}
{"symbol":"JPM","year":2023,"quarter":1,"date":"2023-Q1","chunk_id":1,"sub_chunk_id":0,"centroid_label":"revenue","agreed_value":985000000.0,"count":2,"chunk":"Jeremy Barnum: Thanks, and good morning, everyone. The presentation is available on our website, and please refer to the disclaimer in the back. Starting on page 1. The Firm reported net income of $12.6 billion, EPS of $4.10 on revenue of $39.3 billion and delivered an ROTCE of 23%. These results included $868 million of net investment securities losses in corporate. Before reviewing our results for the quarter, let\u2019s talk about the recent bank failures. Jamie has addressed a number of the important themes in his shareholder letter and the recent televised interview. So, I will go straight to the specific impacts on the Firm. As you would expect, we saw significant new account opening activity and meaningful deposit and money market fund inflows, most significantly in the Commercial Bank, Business Banking and AWM. Regarding the deposit inflows, at the Firm-wide level, average deposits were down 3% quarter-on-quarter, while end-of-period deposits were up 2% quarter-on-quarter, implying an intra-quarter reversal of the recent outflow trend as a consequence of the March events. We estimate that we have retained approximately $50 billion of these deposit inflows at quarter-end. It\u2019s important to note that while the sequential period-end deposit increase is higher than we would have otherwise expected, our current full year NII outlook, which I will address at the end, still assumes modest deposit outflows from here. We expect these outflows to be driven by the same factors as last quarter as well as the expectation that we will not retain all of this quarter\u2019s inflows. Now back to the quarter touching on a few highlights. We grew our IB fee wallet share. Consumer spending remained solid with combined debit and credit card spend up 10% year-on-year. And credit continues to normalize, but actual performance remains strong across the Company. On Page 2, we have some more detail. Revenue of $39.3 billion was up $7.7 billion or 25% year-on-year. NII ex markets was up $9.2 billion or 78%, driven by higher rates, partially offset by lower deposit balances. NIR ex markets was down $1.1 billion or 10% driven by the securities losses previously mentioned as well as lower IB fees and lower auto lease income on lower volume. And markets revenue was down $371 million or 4% year-on-year. Expenses of $20.1 billion were up $916 million or 5% year-on-year, driven by compensation-related costs, reflecting the annualization of last year\u2019s headcount growth and wage inflation. These results include the impact of the higher FDIC assessment I mentioned last quarter, which, of course, is unrelated to recent events. And credit costs of $2.3 billion included net charge-offs of $1.1 billion, predominantly in card. The net reserve build of $1.1 billion was largely driven by deterioration in our weighted average economic outlook. Onto balance sheet and capital on page 3. We ended the quarter with a CET1 ratio of 13.8%, up about 60 basis points, which was primarily driven by the benefit of net income less distributions and AOCI gains. And in line with what we previously said, we resumed stock buybacks this quarter and distributed a total of $1.9 billion and net repurchases back to shareholders. Now, let\u2019s go to our businesses, starting with CCB on Page 4. Touching quickly on the health of U.S. consumers and small businesses based on our data. Both continue to show resilience and remain on the path to normalization as expected, but we continue to monitor their activity closely. Spend remains solid, and we have not observed any notable pullback throughout the quarter. Moving to financial results. CCB reported net income of $5.2 billion on revenue of $16.5 billion, which was up 35% year-on-year. In Banking & Wealth Management, revenue was up 67% year-on-year, driven by higher NII on higher rates. Average deposits were down 2% quarter-on-quarter, in line with recent trends. Throughout the quarter, we continued to see customer flows to higher-yielding products, as you would expect, but were encouraged by what we are capturing in CDs and our Wealth Management offerings. Client investment assets were down 1% year-on-year, but up 7% quarter-on-quarter, driven by market performance as well as strong net inflows. In Home Lending, revenue was down 38% year-on-year, largely driven by lower net interest income from tighter loan spreads and lower production revenue. Moving to Card Services & Auto. Revenue was up 14% year-on-year, largely driven by higher Card Services NII on higher revolving balances, partially offset by lower auto lease income. Credit card spend was up 13% year-on-year. Card outstandings were up 21%, driven by strong new account growth and revolve normalization. And in Auto, originations were $9.2 billion, up 10% year-on-year. Expenses of $8.1 billion were up 5% year-on-year, reflecting the impact of wage inflation and higher headcount. In terms of credit performance this quarter, credit costs were $1.4 billion, reflecting reserve builds of $300 million in card and $50 million in Home Lending. Net charge-offs were $1.1 billion, up about $500 million year-on-year, in line with expectations as delinquency levels continue to normalize across portfolios. Next, the CIB on Page 5. CIB reported net income of $4.4 billion on revenue of $13.6 billion. Investment Banking revenue of $1.6 billion was down 24% year-on-year. IB fees were down 19%. We ranked number 1 with first quarter wallet share of 8.7%. In advisory, fees were down 6% compared to a strong first quarter last year. Our underwriting businesses continued to be affected by market conditions with fees down 34% for debt and 6% for equity. In terms of the outlook, the dynamics remain the same. Our pipeline is relatively robust, but conversion is sensitive to market conditions and the economic outlook. We expect the second quarter and the rest of the year to remain challenging. Moving to Markets. Total revenue was $8.4 billion, down 4% year-on-year. Fixed income was flat. Rates was strong during the rally early in the quarter as well as through the elevated volatility in March. Credit was up on the back of higher client flows and currencies in emerging markets was down relative to a very strong first quarter in the prior year. Equity Markets was down 12%, driven by lower revenues in derivatives relative to a strong first quarter in the prior year and lower client activity and cash. Payments revenue was $2.4 billion, up 26% year-on-year. Excluding the net impact of equity investments, primarily a gain in the prior year, it was up 55%, with the growth driven by higher rates, partially offset by lower deposit balances. Securities Services revenue of $1.1 billion was up 7% year-on-year, driven by higher rates, partially offset by lower deposit balances and market levels. Expenses of $7.5 billion were up 2% year-on-year as higher headcount and wage inflation were largely offset by lower revenue-related compensation. Moving to the Commercial Bank on page 6. Commercial Banking reported net income of $1.3 billion. Revenue of $3.5 billion was up 46% year-on-year, driven by higher deposit margins. Payments revenue of $2 billion was up 98% year-on-year driven by higher rates. And gross Investment Banking revenue of $881 million was up 21% year-on-year on increased M&A and bond underwriting from large deal activity. Expenses of $1.3 billion were up 16% year-on-year largely driven by higher compensation expense, including front office hiring and technology investments as well as higher volume-related expense. Average deposits were down 16% year-on-year and 5% quarter-on-quarter, predominantly driven by continued attrition and non-operating deposits as well as seasonally lower balances. Loans were up 13% year-on-year and 1% sequentially. C&I loans were up 1% quarter-on-quarter with somewhat different dynamics based on client size. In middle market banking, higher rates and recession concerns have decreased new loan demand and utilization, which is also leading to weakness in CapEx spending. In Corporate Client Banking, utilization rates increased modestly quarter-on-quarter as capital market conditions led more clients to opt for bank debt. CRE loans were also up 1% sequentially with higher rates creating headwinds for both originations and prepayments. And given the recent focus on commercial real estate, let me remind you that our office sector exposure is less than 10% of our portfolio and is focused in the urban dense markets, and nearly two-thirds of our loans are multifamily, primarily in supply-constrained markets. Finally, credit costs of $417 million included a net reserve build of $379 million, predominantly driven by what I mentioned upfront. Then to complete our lines of business, AWM on page 7. Asset & Wealth Management reported net income of $1.4 billion, pretax margin of 35%. Revenue of $4.8 billion was up 11% year-on-year driven by higher deposit margins on lower balances and a valuation gain on our initial investment triggered by taking full ownership of our asset management joint venture in China, partially offset by the impact of lower average market levels on management fees and lower performance fees. Expenses of $3.1 billion were up 8% year-on-year, predominantly driven by compensation, reflecting growth in our private banking advisory teams, higher revenue-related compensation and the run rate impact of acquisitions. For the quarter, net long-term inflows were $47 billion, led by fixed income and equities. And then liquidity, we saw net inflows of $93 billion, inclusive of our ongoing deposit migration. AUM of $3 trillion was up 2% year-on-year and overall client assets of $4.3 trillion were up 6%, driven by continued net inflows into liquidity and long-term products. And finally, loans were down 1% quarter-on-quarter, driven by lower securities-based lending, while average deposits were down 5%. Turning to Corporate on page 8. Corporate reported net income of $244 million. Revenue was $985 million compared to a net loss of $881 million last year. NII was $1.7 billion, up $2.3 billion year-on-year due to the impact of higher rates. NIR was a loss of $755 million compared with a loss of $345 million in the prior year and included the net investment securities losses I mentioned earlier. Expenses of $160 million were down $24 million year-on-year. And credit costs of $370 million were driven by reserve builds on a couple of single name exposures. Next, the outlook on page 9. We now expect 2023 NII and NII ex-markets to be approximately $81 billion. This increase in guidance is primarily driven by lower rate paid assumptions across both consumer and wholesale in light of the expectation of Fed cuts later in the year as well as slightly higher card revolving balances. Note that in line with my comments at the outset, recent deposit balance increases are not a meaningful contributor to the upward revision in the NII outlook, given that we expect a meaningful portion of the recent inflows to reverse later in the year. I would point out that this outlook still embeds significant reprice lags. We think a more sustainable NII ex-markets run rate in the medium term is well below this quarter\u2019s $84 billion as well as below the $80 billion that is implied for the rest of the year by our full year guidance. And while we don\u2019t know exactly when this lower run rate will be reached, when it happens, we believe it will be around the mid-70s. And of course, as we mentioned last quarter, this NII outlook remains highly sensitive to the uncertainty associated with the timing and the extent of deposit reprice, investment portfolio decisions, the dynamics of QT and RRP, the trajectory of Fed funds as well as the broader macroeconomic environment, including its impact on loan growth. Separately, it\u2019s worth noting that markets NII may start to trend slightly positive towards the end of the year as a function of mix and rate effects. Moving to expenses. Our outlook for 2023 continues to be about $81 billion. Importantly, this does not currently include the impact of the pending FDIC special assessment. And on credit, we continue to expect the 2023 card net charge-off rate to be approximately 2.6%. So to wrap up, our strong results this quarter once again highlight the earnings power of this diversified franchise. We have benefited from our fortress principles and commitment to invest, which we will continue to do as we head into an increasingly uncertain environment. With that, operator, please open the line for Q&A.","evidence_gemma_new":"Revenue","evidence_llama_3_3":null,"evidence_qwen_3_30b":"revenue $985 million last year","gemma_new_max":985000000.0,"gemma_new_min":985000000.0,"llama_3_3_max":null,"llama_3_3_min":null,"qwen_3_30b_max":985000000.0,"qwen_3_30b_min":985000000.0}
{"symbol":"JPM","year":2024,"quarter":2,"date":"2024-Q2","chunk_id":1,"sub_chunk_id":0,"centroid_label":"revenue","agreed_value":51000000000.0,"count":2,"chunk":"Jeremy Barnum : Thank you and good morning everyone. Starting on Page one, the firm reported net income of $18.1 billion, EPS of $6.12 on revenue of $51 billion with an ROTCE of 28%. These results included the $7.9 billion net gain related to Visa shares and the $1 billion foundation contribution of the appreciated Visa stock. Also included is $546 million of net investment securities losses in corporate. Excluding these items, the firm had net income of $13.1 billion, EPS of $4.40, and an ROTCE of 20%. Touching on a couple of highlights, in the CIB, IB fees were up 50% year-on-year and 17% quarter-on-quarter, and market revenue was up 10% year-on-year. In CCB, we had a record number of first-time investors and strong customer acquisition across checking accounts and card and we've continued to see strong net inflows across AWM. Now before I get more detail on the results I just want to mention that starting this quarter we are no longer explicitly calling out the First Republic contribution in the presentation. Going forward, we'll only specifically call it out if it is a meaningful driver in the year-on-year comparison. As a reminder, we acquired First Republic in May of last year, so the prior year quarter only has two months of First Republic results compared to the full three months this quarter. Also in the prior year quarter most of the expenses were in corporate whereas now they are primarily in the relevant line-of-business. Now turning to Page 2 for the firm-wide results. The firm reported revenue of $51 billion, up $8.6 billion, or 20% year-on-year. Excluding both the Visa gain that I mentioned earlier, as well as last year's First Republic bargain purchase gain of $2.7 billion, revenue of $43.1 billion was up $3.4 billion or 9%. NII ex-Markets was up $568 million or 3%, driven by the impact of balance sheet mix and higher rates, higher revolving balances in card, and the additional month of First Republic related NII, partially offset by deposit margin compression and lower deposit balances. NIR ex-Markets was up $7.3 billion or 56%. Excluding the items I just mentioned, it was up $2.1 billion or 21%, largely driven by higher investment banking revenue and asset management fees. Both periods included net investment securities losses. And markets revenue was up $731 million or 10% year-on-year. Expenses of $23.7 billion were up $2.9 billion or 14% year-on-year. Excluding the foundation contribution I previously mentioned, expenses were up 9% primarily driven by compensation including revenue related compensation and growth in employees. And credit costs were $3.1 billion reflecting net charge-offs of $2.2 billion and a net reserve build of $821 million. Net charge-offs were up $820 million year-on-year, predominantly driven by Card. The net reserve build included $609 million in consumer and $189 million in wholesale. Onto balance sheet and capital on Page 3. We ended the quarter with a CET1 ratio of 15.3% up 30 basis points versus the prior quarter, primarily driven by net income, largely offset by capital distributions and higher RWA. As you know, we completed CCAR a couple of weeks ago and have already disclosed a number of the key points. Let me summarize them again here. Our preliminary SCB is 3.3%, although the final SCB could be higher. The preliminary SCB, which is up from the current requirement of 2.9%, results in a 12.3% standardized CET1 ratio requirement, which goes into effect in the fourth quarter of 2024. And finally the firm announced that the Board intends to increase the quarterly common stock dividend from $1.15 to $1.25 per share in the third quarter of 2024. Now, let's go to our businesses, starting with CCB on Page 4. CCB reported net income of $4.2 billion on revenue of $17.7 billion, which was up 3% year-on-year. In banking and wealth management, revenue was down 5% year-on-year, reflecting lower deposits and deposit margin compression, partially offset by growth and wealth management revenue. Average deposits were down 7% year-on-year and 1% quarter-on-quarter. Client investment assets were up 14% year-on-year, predominantly driven by market performance. In home lending, revenue of $1.3 billion was up 31% year-on-year, predominantly driven by higher NII, including one additional month of the First Republic portfolio. Turning to Card services and Auto, revenue was up 14% year-on-year, predominantly driven by higher Card NII and higher revolving balances. Card outstandings were up 12% due to strong account acquisition and the continued normalization of revolve. And in Auto, originations were $10.8 billion, down 10% coming off strong originations from a year ago, while continuing to maintain healthy margins. Expenses of $9.4 billion were up 13% year-on-year, predominantly driven by First Republic expenses now reflected in the lines-of-business, as I mentioned earlier, as well as field compensation and continued growth in technology and marketing. In terms of credit performance this quarter, credit costs were $2.6 billion reflecting net charge-offs of $2.1 billion up $813 million year-on-year, predominantly driven by Card, as newer vintages season and credit normalization continues. The net reserve build was $579 million, also driven by Card, due to loan growth and updates to certain macroeconomic variables. Next, the Commercial and Investment Bank on Page 5. Our new Commercial and Investment Bank reported net income of $5.9 billion on revenue of $17.9 billion. You'll note that we are disclosing revenue by business, as well as breaking down the banking and payments revenue by client coverage segment in order to best highlight the relevant trends in both important dimensions of the wholesale franchise. This quarter, IB fees were up 50% year-on-year, and we Ranked Number #1 with year-to-date wallet share of 9.5%. And advisory, fees were up 45%, primarily driven by the closing of a few large deals in a week prior year quarter. Underwriting fees were up meaningfully with equity up 56% and debt up 51%, benefiting from favorable market conditions. In terms of the outlook, we're pleased with both the year-on-year and sequential improvement in the quarter. We remain cautiously optimistic about the pipeline, although many of the same headwinds are still in effect. It's also worth noting that pull-forward refinancing activity was a meaningful contributor to the strong performance in the first half of the year. Payments revenue was $4.5 billion, down 4% year-on-year, as deposit margin compression and higher deposit related client credits were largely offset by fee growth. Moving to markets, total revenue was $7.8 billion, up 10% year-on-year. Fixed income was up 5% with continued strength in securitized products. And equity markets was up 21%, with equity derivatives up on improved client activity. We saw record revenue in Prime on growth and client balances amid supportive equity market levels. Security services revenue of $1.3 billion was up 3% year-on-year, driven by higher volumes and market levels, largely offset by deposit margin compression. Expenses of $9.2 billion were up 12% year-on-year, largely driven by higher revenue related compensation, legal expense, and volume related non-compensation expense. In banking and payments, average loans were up 2% year-on-year due to the impact of the First Republic acquisition and flat sequentially. Demand for new loans remains muted as middle market and large corporate clients remain somewhat cautious due to the economic environment, and revolver utilization continues to be below pre-pandemic levels. Also, capital markets are open and are providing an alternative to traditional bank lending for these clients. In CRE, higher rates continue to suppress both loan origination and payoff activity. Average client deposits were up 2% year-on-year and relatively flat sequentially. Finally, credit costs were $384 million. The net reserve build of $220 million was primarily driven by incorporating the First Republic portfolio in the Firm's modeled approach. Net charge-offs were $164 million, of which about half was in office. Then to complete our lines-of-business, AWM on Page 6. Asset and wealth management reported net income of $1.3 billion with pre-tax margin of 32%. Revenue of $5.3 billion was up 6% year-on-year, driven by growth in management fees on higher average market levels and strong net inflows, as well as higher brokerage activity, largely offset by deposit margin compression. Expenses of $3.5 billion were up 12% year-on-year, largely driven by higher compensation, primarily revenue-related compensation, and continued growth in our private banking advisor teams. For the quarter, long-term net inflows were $52 billion, led by equities and fixed income. And in liquidity, we saw net inflows of $16 billion. AUM of $3.7 trillion was up 15% year-on-year. And client assets of $5.4 trillion were up 18% year-on-year, driven by higher market levels and continued net inflows. And finally, loans and deposits were both flat quarter-on-quarter. Turning to corporate on Page 7. Corporate reported net income of $6.8 billion on revenue of $10.1 billion. Excluding this quarter's Visa-related gain and the First Republic bargain purchase gain in the prior year, NIR was up approximately $450 million year-on-year. NII was up $626 million year-on-year, driven by the impact of balance sheet mix and higher rates. Expenses of $1.6 billion were up $427 million year-on-year, excluding foundation contribution expenses were down $573 million year-on-year, largely as a result of moving First Republic related expense out of corporate into the relevant segments. To finish up, we have the outlook on Page 8. Our 2024 guidance, including the drivers, remains unchanged from what we said at Investor Day. We continue to expect NII and NII ex-markets of approximately $91 billion, adjusted expense of about $92 billion, and on credit, Card net charge-off rate of approximately 3.4%. So to wrap up, the reported performance for the quarter was exceptional and actually represents record revenue and net income. But more importantly, after excluding the significant items, the underlying performance continues to be quite strong. And as always, we remain focused on continuing to execute with discipline. And with that, let's open the line for Q&A.","evidence_gemma_new":null,"evidence_llama_3_3":"revenue","evidence_qwen_3_30b":"revenue 20% year-on-year","gemma_new_max":null,"gemma_new_min":null,"llama_3_3_max":51000000000.0,"llama_3_3_min":51000000000.0,"qwen_3_30b_max":51000000000.0,"qwen_3_30b_min":51000000000.0}
{"symbol":"JPM","year":2024,"quarter":3,"date":"2024-Q3","chunk_id":1,"sub_chunk_id":0,"centroid_label":"revenue","agreed_value":43300000000.0,"count":2,"chunk":"Jeremy Barnum: Thank you, and good morning, everyone. Starting on page one, the firm reported net income of $12.9 billion, EPS of $4.37 and revenue of $43.3 billion with an ROTCE of 19%. Touching on a couple of highlights. In CCB, we ranked number one in retail deposit share for the fourth straight year. In CIB, both IB fees and markets revenue were notably up year-on-year reflecting strength across the franchise. In AWM, we had record quarterly revenues and record long-term flows. Now turning to page two for the firm wide results. The firm reported revenue of $43.3 billion, up $2.6 billion or 6% year-on-year. NII ex-markets was up $274 million or 1%, driven by the impact of balance sheet mix and securities reinvestment, higher revolving balances in card and higher wholesale deposit balances, predominantly offset by lower deposit balances in banking and wealth management and deposit margin compression. NIR ex-markets was up $1.8 billion or 17%, but excluding the prior year's net investment securities losses, it was up 10% on higher asset management and investment banking fees and markets revenue was up $535 million or 8% year-on-year. Expenses of $22.6 billion were up $808 million or 4% year-on-year, driven by compensation including revenue related compensation and growth in employees, partially offset by lower legal expense. And credit costs were $3.1 billion, reflecting net charge offs of $2.1 billion and a net reserve bill of $1 billion, which included $882 million in consumer, primarily in card and $144 million in wholesale. Net charge offs were up $590 million year-on-year, predominantly driven by card. On to balance sheet and capital on page three. We ended the quarter with the CET1 ratio of 15.3% flat versus the prior quarter as net income and OCI gains were offset by capital distributions and higher RWA. This quarter's RWA reflects higher lending activity, as well as higher client activity and market moves on the trading side. We added $6 billion of net common share repurchases this quarter, which in part reflects the deployment of the proceeds from the share from the sale of Visa shares as we have previously mentioned. Now let's go to our businesses starting with CCB on page four. CCB reported net income of $4 billion on revenue of $17.8 billion, which was down 3% year-on-year. In Banking and Wealth Management, revenue was down 11% year-on-year, reflecting deposit margin compression and lower deposits partially offset by growth in Wealth Management revenue. Average deposits were down 8% year-on-year and 2% sequentially. We are seeing a slowdown in customer yield seeking activity including CD volumes and expect deposits to be relatively flat for the remainder of the year. Client investment assets were up 21% year-on-year, driven by market performance and we continue to see strong referrals of new wealth management clients from our branch network. In home lending, revenue was up 3% year-on-year driven by higher NII partially offset by lower servicing and production revenue. Turning to Card Services and Auto. Revenue was up 11% year-on-year, driven by higher card NII on higher revolving balances. Card outstandings were up 11% due to strong account acquisition and the continued normalization of revolve. And in Auto, originations were $10 billion, down 2%, while maintaining strong margins and high quality credit. Expenses of $9.6 billion were up 5% year-on-year, predominantly driven by higher field and technology compensation, as well as growth in marketing. In terms of credit performance this quarter, credit costs were $2.8 billion driven by card and reflected net charge offs of $1.9 billion, up $520 million year-on-year and a net reserve build of $876 million predominantly from higher revolving balances. Next the Commercial and Investment Bank on page five. The CIB reported net income of $5.7 billion on revenue of $17 billion. IB fees were up 31% year-on-year and we ranked number one with year-to-date wallet share of 9.1%. In advisory, fees were up 10% benefiting from the closing of a few large deals. Underwriting fees were up meaningfully with debt up 56% and equity up 26%, primarily driven by favorable market conditions. In light of the positive momentum throughout the year, we're optimistic about our pipeline, but the M&A regulatory environment and geopolitical situation are continued sources of uncertainty. Payments revenue was $4.4 billion, up 4% year-on-year, driven by fee growth and higher deposit balances, largely offset by margin compression. Moving to markets, total revenue was $7.2 billion, up 8% year-on-year. Fixed income was flat reflecting outperformance in currencies and emerging markets and lower revenue and rates. Equities was up 27%, reflecting strong performance across regions largely driven by a supportive trading environment in the U.S. and increased late quarter activity in Asia. Securities Services revenue was $1.3 billion, up 9% year-on-year largely driven by fee growth on higher market levels and volumes. Expenses of $8.8 billion were down 1% year-on-year with lower legal expense predominantly offset by higher revenue related compensation, and growth in-place, as well as higher technology spend. Average banking and payments loans were down 2% year-on-year and down 1% sequentially. In the middle market and large corporate client segments, we continue to see softness in both new loan demand and revolver utilization in part due to clients' access to receptive capital markets. In multifamily, while we are seeing encouraging signs in loan originations as long term rates fall, we expect overall growth to remain muted in the near-term as originations are offset by payoff activity. Average client deposits were up 7% year-on-year and 3% sequentially, primarily driven by growth from large corporates in payments and security services. Finally, credit costs were $316 million, driven by higher net lending activity, including in markets and downgrades, partially offset by improved macroeconomic variables. Then to complete our lines of business, AWM on page six. Asset and wealth management reported net income of $1.4 billion with pre-tax margin of 33%. For the quarter, revenue of $5.4 billion was up 9% year-on-year, driven by growth and management fees on higher average market levels and strong net inflows, investment valuation gains, compared to losses in the prior year, and higher brokerage activity, partially offset by deposit margin compression. Expenses of $3.6 billion or up 16% year-on-year, predominantly driven by higher compensation, including revenue-related compensation and continued growth in our private banking advisor teams, as well as higher distribution fees and legal expense. For the quarter, long-term net inflows were $72 billion, led by fixed income inequities. And in liquidity, we saw net inflows of $34 billion. AUM of $3.9 trillion and client assets of $5.7 trillion were both up 23%, driven by higher market levels and continued net inflows. And finally, loans were up 2% quarter-on-quarter, and deposits were up 4% quarter-on-quarter. Turning to corporate on page seven. Corporate reported net income of $1.8 billion. Revenue was $3.1 billion, up $1.5 billion year-on-year. NII was $2.9 billion, up $932 million year-on-year, predominantly driven by the impact of balance sheet mix and securities reinvestment, including from prior quarters. NIR was a net gain of $155 million, compared with a net loss of $425 million in the prior year, predominantly driven by lower net investment securities losses this quarter. Expenses of $589 million were down $107 million year-on-year. To finish up, let's turn to the outlook on page eight. We now expect 2024 NII ex-markets to be approximately $91.5 billion and total NII to be approximately $92.5 billion. Our outlook for adjusted expense is now about $91.5 billion. And given where we are in the year, we included on the page the implied fourth quarter guidance for NII and adjusted expense. And note that the NII numbers imply about $800 million of markets NII in the fourth quarter. On credit, we continue to expect the 2024 Card net charge-off rate to be approximately 3.4%. So to wrap up, we're pleased with another quarter of strong operating performance. As we look ahead to the next few quarters, we expect results will be somewhat challenged as normalization continues. But we remain upbeat and focused on executing in order to continue delivering excellent returns through the cycle. And with that, let's open the line for Q&A.","evidence_gemma_new":null,"evidence_llama_3_3":"revenue","evidence_qwen_3_30b":"revenue up $2.6 billion or 6% year-on-year","gemma_new_max":null,"gemma_new_min":null,"llama_3_3_max":43300000000.0,"llama_3_3_min":43300000000.0,"qwen_3_30b_max":43300000000.0,"qwen_3_30b_min":43300000000.0}
{"symbol":"JPM","year":2024,"quarter":4,"date":"2024-Q4","chunk_id":1,"sub_chunk_id":0,"centroid_label":"revenue","agreed_value":43700000000.0,"count":2,"chunk":"Jeremy Barnum: Thank you, and good morning, everyone. Starting on Page 1, the firm reported net income of $14 billion, EPS of $4.81 on revenue of $43.7 billion with an ROTCE of 21%. On Page 2, we have more on our fourth quarter results. The firm reported revenue of $43.7 billion, up $3.8 billion or 10% year-on-year. NII ex-markets was down $548 million or 2%, driven by the impact of lower rates and the associated deposit margin compression as well as lower deposit balances in CCB, largely offset by the impact of securities reinvestment, higher revolving balances in card and higher wholesale deposit balances. NII ex-markets was up $3.1 billion or 30%. Excluding the prior year's net investment securities losses, it was up 21%, largely on higher asset management fees and investment banking fees. And markets revenue was up $1.2 billion or 21%. Expenses of $22.8 billion were down $1.7 billion or 7% year-on-year. Excluding the prior year's FDIC special assessment, expenses were up $1.2 billion or 5%, predominantly driven by compensation as well as higher brokerage and distribution fees. And credit costs were $2.6 billion, reflecting net charge-offs of $2.4 billion and a net reserve of $267 million. On Page 3, you can see the reported results for the full year, I'll remind you that there were a number of significant items in 2024. Excluding those items, the firm reported net income of $54 billion, EPS of $18.22, revenue of $173 billion and we delivered an ROTCE of 20%. Touching on a couple of highlights for the year, in CCB, we had a record number of first-time investors and acquired nearly 10 million new card accounts. In CIB, we had record revenue in markets, payments, and security services, and in AWM, we had record long-term net inflows of $234 billion, positive across all channels, regions, and asset classes. On to balance sheet and capital on Page 4, we ended the quarter with a CET1 ratio of 15.7%, up 40 basis points versus the prior quarter as net income and lower RWA were largely offset by both OCI losses and capital distributions, which included $4 billion of net common share repurchases this quarter. The $24 billion decrease in RWA reflects a seasonal decline in markets activity and lower wholesale lending, which was predominantly offset by a seasonal increase in card. Now let's go to our businesses, starting with CCB on Page 5. CCB reported net income of $4.5 billion on revenue of $18.4 billion, which was up 1% year-on-year. In Banking and Wealth Management, revenue was down 7% year-on-year on deposit margin compression and lower deposits, partially offset by growth in wealth management revenue. Average deposits were down 4% year-on-year and flat sequentially as consumer balances have stabilized. Client investment assets were up 14% year-on-year, predominantly driven by market performance, and we continue to see healthy flows across branch and digital channels. In Home Lending, revenue was up 12% year-on-year, predominantly driven by higher production revenue. Turning to Card Services & Auto, revenue was up 14% year-on-year, largely driven by Card NII on higher revolving balances. Card outstandings were up 11% due to strong account acquisition and revolver growth. And in Auto, originations were $10.6 billion, up 7%, reflecting higher lease volume on robust new vehicle inventory. Expenses of $9.7 billion were up 4% year-on-year, predominantly driven by field compensation and growth in technology. In terms of credit performance this quarter, credit costs were $2.6 billion, reflecting net charge-offs of $2.1 billion, up $428 million year-on-year, driven by Card. The net reserve build was $557 million, predominantly driven by higher Card revolving balances. Next, the Commercial & Investment Bank on Page 6. CIB reported net income of $6.6 billion on revenue of $17.6 billion. IV fees were up 49% year-on-year and we ranked number one with wallet share of 9.3% for 2024. Advisory fees were up 41%, benefiting from large deals and share growth in a number of key sectors. Underwriting fees were up meaningfully with debt up 56% and equity up 54%, primarily driven by favorable market conditions. In terms of the outlook for the overall investment banking wallet, in light of the positive momentum, we remain optimistic about our pipeline. Payments revenue was $4.7 billion, up 3% year-on-year, excluding equity investments, driven by higher deposit balances and fee growth, largely offset by deposit margin compression. Lending revenue was $1.9 billion, up 9% year-on-year, predominantly driven by lower losses on hedges. Moving to markets, total revenue was $7 billion, up 21% year-on-year. Fixed income was up 20% with better performance in credit as well as continued outperformance in currencies and emerging markets. Equities was up 22% on elevated client activity and derivatives amid increased volatility and higher trading volumes and cash. Security Services revenue was $1.3 billion, up 10% year-on-year, driven by fee growth on higher client activity and market levels as well as higher deposit balances. Expenses of $8.7 billion were up 7% year-on-year, predominantly driven by higher brokerage, technology, and legal expense. Average banking and payments loans were down 2% year-on-year and down 1% sequentially. Global Corporate & Investment Banking loans were down 2% quarter-on-quarter, driven by paydowns in lower short-term financing, primarily offset by new originations. In commercial banking, middle market loans were also down 2%, driven by paydowns, predominantly offset by new originations, and commercial real estate loans were flat as new originations were offset by paydowns. Average client deposits were up 9% year-on-year and 5% sequentially, driven by underlying client growth. Finally, credit costs were $61 million, driven by net downgrade activity and the net impact of charge-offs, offset -- largely offset by a reserve release due to an update to certain loss assumptions. Then to complete our lines of business, Asset & Wealth Management on Page 7. AWM reported net income of $1.5 billion with pre-tax margin of 35%. Revenue of $5.8 billion was up 13% year-on-year, predominantly driven by growth in management fees on higher average market levels and strong net inflows as well as higher performance fees. Expenses of $3.8 billion were up 11% year-on-year, predominantly driven by higher compensation, including revenue-related compensation and continued growth in our private banking advisor teams as well as higher distribution fees. Long-term net inflows were $76 billion for the quarter, positive across all asset classes. In liquidity, we saw net inflows of $94 billion for the quarter and $104 billion for the full year -- $140 billion for the full year, sorry. And we had client asset net inflows of $468 billion for the year. AUM of $4 trillion and client assets of $5.9 trillion were both up 18% year-on-year, driven by continued net inflows and higher market levels. And finally, loans were up 2% quarter-on-quarter and deposits were up 5% quarter-on-quarter. Turning to Corporate on Page 8; Corporate reported net income of $1.3 billion. Revenue of $2 billion was up $223 million year-on-year. NII of $2 billion was down $415 million year-on-year, driven by the impact of lower rates, largely offset by balance sheet actions, primarily securities reinvestment activity. NII was a net loss of $30 million compared to the net loss of $668 million in the prior year, driven by lower net investment securities losses this quarter. And expenses of $550 million were down $3 billion year-on-year, predominantly driven by the absence of the FDIC Special Assessment of $2.9 billion in the prior year. With that, let's pivot to the outlook, starting with NII on Page 9. We expect 2025 NII ex-markets to be approximately $90 billion. Going through the drivers, as usual, the outlook assumes that rates follow the forward curve. It's worth noting that the NII decrease is driven by both the cut expected in 2025 and the impact of the 100 basis points of cuts in the back half of 2024. You can see on the page that we've illustrated the historical trajectory of card loan growth. We expect healthy card loan growth again this year, but below the 12% pace we saw in 2024 as tailwinds from revolve normalization are largely behind us. Turning to deposits; firm-wide deposits have stabilized and we expect to see a more visible growth trend to assert itself in the second half of 2025. It's notable that we can already see that trend in consumer checking deposits. On deposit margin, we expect modest compression due to lower rates. When you put all that together, we expect the NII trough could be sometime in the middle of the year, followed by growth as we illustrated at the bottom of the bar. And for completeness, we expect firm-wide NII to be approximately $94 billion as a function of markets NII increasing to about $4 billion, which you should think of as being primarily offset in NIR. Finally, I want to point out that starting this quarter, we are including an estimate of earnings at risk in the earnings supplement, so you no longer have to wait for the K or the Q to get that number. Now let's turn to expenses on Page 10. We expect 2025 expense to be about $95 billion. Looking at the chart in the middle of the page, I'll touch on the drivers of the year-on-year change, which you'll note are very consistent with what you've been hearing from us recently. The largest increase is volume and revenue-related expense, which is primarily driven by expected growth in auto leasing as well as capital markets. As a reminder, this comes with higher revenues. We continue to hire bankers and advisors to support business growth as well as expand our branch network. The increase in tech spend is primarily business-driven as we continue to invest in new products, features, and customer platforms as well as modernization. Marketing remains a driver of spend as we continue to see attractive opportunities, resulting in strong demand and engagement in our Card business. And finally, while we haven't explicitly called it out in each bar, inflation remains a source of some upward pressure, and as always, we are generating efficiencies to help offset it. Now let's turn to Page 11 to cover credit and wrap-up. On credit, we expect the 2025 card net charge-off rate to be in line with our previous guidance of approximately 3.6%. So, in closing, 2024 was another year of record revenue and net income, and we're proud of what we accomplished. As we look ahead to 2025, we still expect NII normalization, although to a lesser extent than we previously thought. And taking a step back, we think it's important to acknowledge the tension in the risks and uncertainties in the environment and the degree of optimism embedded in asset prices and expectations. In that context, we remain upbeat about the strength of the franchise, but we are focused on being prepared for a wide range of scenarios. Finally, let me say a few words about the wildfires in Los Angeles, while we don't expect much of a financial impact from it, we have a presence in the area across all three lines of business, so we're keeping in close contact with our customers, clients, and employees. We are offering support in a variety of ways, including waiving consumer and business banking fees as well as making a contribution to local relief organizations, offering employee donation matching, and supporting employee volunteer efforts. With that, I'll turn it over to Jamie before we open up the line for Q&A.","evidence_gemma_new":null,"evidence_llama_3_3":"revenue","evidence_qwen_3_30b":"revenue up $3.8 billion or 10% year-on-year","gemma_new_max":null,"gemma_new_min":null,"llama_3_3_max":43700000000.0,"llama_3_3_min":43700000000.0,"qwen_3_30b_max":43700000000.0,"qwen_3_30b_min":43700000000.0}
{"symbol":"JPM","year":2024,"quarter":4,"date":"2024-Q4","chunk_id":1,"sub_chunk_id":0,"centroid_label":"revenue","agreed_value":2000000000.0,"count":2,"chunk":"Jeremy Barnum: Thank you, and good morning, everyone. Starting on Page 1, the firm reported net income of $14 billion, EPS of $4.81 on revenue of $43.7 billion with an ROTCE of 21%. On Page 2, we have more on our fourth quarter results. The firm reported revenue of $43.7 billion, up $3.8 billion or 10% year-on-year. NII ex-markets was down $548 million or 2%, driven by the impact of lower rates and the associated deposit margin compression as well as lower deposit balances in CCB, largely offset by the impact of securities reinvestment, higher revolving balances in card and higher wholesale deposit balances. NII ex-markets was up $3.1 billion or 30%. Excluding the prior year's net investment securities losses, it was up 21%, largely on higher asset management fees and investment banking fees. And markets revenue was up $1.2 billion or 21%. Expenses of $22.8 billion were down $1.7 billion or 7% year-on-year. Excluding the prior year's FDIC special assessment, expenses were up $1.2 billion or 5%, predominantly driven by compensation as well as higher brokerage and distribution fees. And credit costs were $2.6 billion, reflecting net charge-offs of $2.4 billion and a net reserve of $267 million. On Page 3, you can see the reported results for the full year, I'll remind you that there were a number of significant items in 2024. Excluding those items, the firm reported net income of $54 billion, EPS of $18.22, revenue of $173 billion and we delivered an ROTCE of 20%. Touching on a couple of highlights for the year, in CCB, we had a record number of first-time investors and acquired nearly 10 million new card accounts. In CIB, we had record revenue in markets, payments, and security services, and in AWM, we had record long-term net inflows of $234 billion, positive across all channels, regions, and asset classes. On to balance sheet and capital on Page 4, we ended the quarter with a CET1 ratio of 15.7%, up 40 basis points versus the prior quarter as net income and lower RWA were largely offset by both OCI losses and capital distributions, which included $4 billion of net common share repurchases this quarter. The $24 billion decrease in RWA reflects a seasonal decline in markets activity and lower wholesale lending, which was predominantly offset by a seasonal increase in card. Now let's go to our businesses, starting with CCB on Page 5. CCB reported net income of $4.5 billion on revenue of $18.4 billion, which was up 1% year-on-year. In Banking and Wealth Management, revenue was down 7% year-on-year on deposit margin compression and lower deposits, partially offset by growth in wealth management revenue. Average deposits were down 4% year-on-year and flat sequentially as consumer balances have stabilized. Client investment assets were up 14% year-on-year, predominantly driven by market performance, and we continue to see healthy flows across branch and digital channels. In Home Lending, revenue was up 12% year-on-year, predominantly driven by higher production revenue. Turning to Card Services & Auto, revenue was up 14% year-on-year, largely driven by Card NII on higher revolving balances. Card outstandings were up 11% due to strong account acquisition and revolver growth. And in Auto, originations were $10.6 billion, up 7%, reflecting higher lease volume on robust new vehicle inventory. Expenses of $9.7 billion were up 4% year-on-year, predominantly driven by field compensation and growth in technology. In terms of credit performance this quarter, credit costs were $2.6 billion, reflecting net charge-offs of $2.1 billion, up $428 million year-on-year, driven by Card. The net reserve build was $557 million, predominantly driven by higher Card revolving balances. Next, the Commercial & Investment Bank on Page 6. CIB reported net income of $6.6 billion on revenue of $17.6 billion. IV fees were up 49% year-on-year and we ranked number one with wallet share of 9.3% for 2024. Advisory fees were up 41%, benefiting from large deals and share growth in a number of key sectors. Underwriting fees were up meaningfully with debt up 56% and equity up 54%, primarily driven by favorable market conditions. In terms of the outlook for the overall investment banking wallet, in light of the positive momentum, we remain optimistic about our pipeline. Payments revenue was $4.7 billion, up 3% year-on-year, excluding equity investments, driven by higher deposit balances and fee growth, largely offset by deposit margin compression. Lending revenue was $1.9 billion, up 9% year-on-year, predominantly driven by lower losses on hedges. Moving to markets, total revenue was $7 billion, up 21% year-on-year. Fixed income was up 20% with better performance in credit as well as continued outperformance in currencies and emerging markets. Equities was up 22% on elevated client activity and derivatives amid increased volatility and higher trading volumes and cash. Security Services revenue was $1.3 billion, up 10% year-on-year, driven by fee growth on higher client activity and market levels as well as higher deposit balances. Expenses of $8.7 billion were up 7% year-on-year, predominantly driven by higher brokerage, technology, and legal expense. Average banking and payments loans were down 2% year-on-year and down 1% sequentially. Global Corporate & Investment Banking loans were down 2% quarter-on-quarter, driven by paydowns in lower short-term financing, primarily offset by new originations. In commercial banking, middle market loans were also down 2%, driven by paydowns, predominantly offset by new originations, and commercial real estate loans were flat as new originations were offset by paydowns. Average client deposits were up 9% year-on-year and 5% sequentially, driven by underlying client growth. Finally, credit costs were $61 million, driven by net downgrade activity and the net impact of charge-offs, offset -- largely offset by a reserve release due to an update to certain loss assumptions. Then to complete our lines of business, Asset & Wealth Management on Page 7. AWM reported net income of $1.5 billion with pre-tax margin of 35%. Revenue of $5.8 billion was up 13% year-on-year, predominantly driven by growth in management fees on higher average market levels and strong net inflows as well as higher performance fees. Expenses of $3.8 billion were up 11% year-on-year, predominantly driven by higher compensation, including revenue-related compensation and continued growth in our private banking advisor teams as well as higher distribution fees. Long-term net inflows were $76 billion for the quarter, positive across all asset classes. In liquidity, we saw net inflows of $94 billion for the quarter and $104 billion for the full year -- $140 billion for the full year, sorry. And we had client asset net inflows of $468 billion for the year. AUM of $4 trillion and client assets of $5.9 trillion were both up 18% year-on-year, driven by continued net inflows and higher market levels. And finally, loans were up 2% quarter-on-quarter and deposits were up 5% quarter-on-quarter. Turning to Corporate on Page 8; Corporate reported net income of $1.3 billion. Revenue of $2 billion was up $223 million year-on-year. NII of $2 billion was down $415 million year-on-year, driven by the impact of lower rates, largely offset by balance sheet actions, primarily securities reinvestment activity. NII was a net loss of $30 million compared to the net loss of $668 million in the prior year, driven by lower net investment securities losses this quarter. And expenses of $550 million were down $3 billion year-on-year, predominantly driven by the absence of the FDIC Special Assessment of $2.9 billion in the prior year. With that, let's pivot to the outlook, starting with NII on Page 9. We expect 2025 NII ex-markets to be approximately $90 billion. Going through the drivers, as usual, the outlook assumes that rates follow the forward curve. It's worth noting that the NII decrease is driven by both the cut expected in 2025 and the impact of the 100 basis points of cuts in the back half of 2024. You can see on the page that we've illustrated the historical trajectory of card loan growth. We expect healthy card loan growth again this year, but below the 12% pace we saw in 2024 as tailwinds from revolve normalization are largely behind us. Turning to deposits; firm-wide deposits have stabilized and we expect to see a more visible growth trend to assert itself in the second half of 2025. It's notable that we can already see that trend in consumer checking deposits. On deposit margin, we expect modest compression due to lower rates. When you put all that together, we expect the NII trough could be sometime in the middle of the year, followed by growth as we illustrated at the bottom of the bar. And for completeness, we expect firm-wide NII to be approximately $94 billion as a function of markets NII increasing to about $4 billion, which you should think of as being primarily offset in NIR. Finally, I want to point out that starting this quarter, we are including an estimate of earnings at risk in the earnings supplement, so you no longer have to wait for the K or the Q to get that number. Now let's turn to expenses on Page 10. We expect 2025 expense to be about $95 billion. Looking at the chart in the middle of the page, I'll touch on the drivers of the year-on-year change, which you'll note are very consistent with what you've been hearing from us recently. The largest increase is volume and revenue-related expense, which is primarily driven by expected growth in auto leasing as well as capital markets. As a reminder, this comes with higher revenues. We continue to hire bankers and advisors to support business growth as well as expand our branch network. The increase in tech spend is primarily business-driven as we continue to invest in new products, features, and customer platforms as well as modernization. Marketing remains a driver of spend as we continue to see attractive opportunities, resulting in strong demand and engagement in our Card business. And finally, while we haven't explicitly called it out in each bar, inflation remains a source of some upward pressure, and as always, we are generating efficiencies to help offset it. Now let's turn to Page 11 to cover credit and wrap-up. On credit, we expect the 2025 card net charge-off rate to be in line with our previous guidance of approximately 3.6%. So, in closing, 2024 was another year of record revenue and net income, and we're proud of what we accomplished. As we look ahead to 2025, we still expect NII normalization, although to a lesser extent than we previously thought. And taking a step back, we think it's important to acknowledge the tension in the risks and uncertainties in the environment and the degree of optimism embedded in asset prices and expectations. In that context, we remain upbeat about the strength of the franchise, but we are focused on being prepared for a wide range of scenarios. Finally, let me say a few words about the wildfires in Los Angeles, while we don't expect much of a financial impact from it, we have a presence in the area across all three lines of business, so we're keeping in close contact with our customers, clients, and employees. We are offering support in a variety of ways, including waiving consumer and business banking fees as well as making a contribution to local relief organizations, offering employee donation matching, and supporting employee volunteer efforts. With that, I'll turn it over to Jamie before we open up the line for Q&A.","evidence_gemma_new":null,"evidence_llama_3_3":"revenue","evidence_qwen_3_30b":"revenue up $223 million year-on-year","gemma_new_max":null,"gemma_new_min":null,"llama_3_3_max":2000000000.0,"llama_3_3_min":2000000000.0,"qwen_3_30b_max":2000000000.0,"qwen_3_30b_min":2000000000.0}
{"symbol":"JPM","year":2023,"quarter":1,"date":"2023-Q1","chunk_id":1,"sub_chunk_id":0,"centroid_label":"rotcce","agreed_value":0.23,"count":2,"chunk":"Jeremy Barnum: Thanks, and good morning, everyone. The presentation is available on our website, and please refer to the disclaimer in the back. Starting on page 1. The Firm reported net income of $12.6 billion, EPS of $4.10 on revenue of $39.3 billion and delivered an ROTCE of 23%. These results included $868 million of net investment securities losses in corporate. Before reviewing our results for the quarter, let\u2019s talk about the recent bank failures. Jamie has addressed a number of the important themes in his shareholder letter and the recent televised interview. So, I will go straight to the specific impacts on the Firm. As you would expect, we saw significant new account opening activity and meaningful deposit and money market fund inflows, most significantly in the Commercial Bank, Business Banking and AWM. Regarding the deposit inflows, at the Firm-wide level, average deposits were down 3% quarter-on-quarter, while end-of-period deposits were up 2% quarter-on-quarter, implying an intra-quarter reversal of the recent outflow trend as a consequence of the March events. We estimate that we have retained approximately $50 billion of these deposit inflows at quarter-end. It\u2019s important to note that while the sequential period-end deposit increase is higher than we would have otherwise expected, our current full year NII outlook, which I will address at the end, still assumes modest deposit outflows from here. We expect these outflows to be driven by the same factors as last quarter as well as the expectation that we will not retain all of this quarter\u2019s inflows. Now back to the quarter touching on a few highlights. We grew our IB fee wallet share. Consumer spending remained solid with combined debit and credit card spend up 10% year-on-year. And credit continues to normalize, but actual performance remains strong across the Company. On Page 2, we have some more detail. Revenue of $39.3 billion was up $7.7 billion or 25% year-on-year. NII ex markets was up $9.2 billion or 78%, driven by higher rates, partially offset by lower deposit balances. NIR ex markets was down $1.1 billion or 10% driven by the securities losses previously mentioned as well as lower IB fees and lower auto lease income on lower volume. And markets revenue was down $371 million or 4% year-on-year. Expenses of $20.1 billion were up $916 million or 5% year-on-year, driven by compensation-related costs, reflecting the annualization of last year\u2019s headcount growth and wage inflation. These results include the impact of the higher FDIC assessment I mentioned last quarter, which, of course, is unrelated to recent events. And credit costs of $2.3 billion included net charge-offs of $1.1 billion, predominantly in card. The net reserve build of $1.1 billion was largely driven by deterioration in our weighted average economic outlook. Onto balance sheet and capital on page 3. We ended the quarter with a CET1 ratio of 13.8%, up about 60 basis points, which was primarily driven by the benefit of net income less distributions and AOCI gains. And in line with what we previously said, we resumed stock buybacks this quarter and distributed a total of $1.9 billion and net repurchases back to shareholders. Now, let\u2019s go to our businesses, starting with CCB on Page 4. Touching quickly on the health of U.S. consumers and small businesses based on our data. Both continue to show resilience and remain on the path to normalization as expected, but we continue to monitor their activity closely. Spend remains solid, and we have not observed any notable pullback throughout the quarter. Moving to financial results. CCB reported net income of $5.2 billion on revenue of $16.5 billion, which was up 35% year-on-year. In Banking & Wealth Management, revenue was up 67% year-on-year, driven by higher NII on higher rates. Average deposits were down 2% quarter-on-quarter, in line with recent trends. Throughout the quarter, we continued to see customer flows to higher-yielding products, as you would expect, but were encouraged by what we are capturing in CDs and our Wealth Management offerings. Client investment assets were down 1% year-on-year, but up 7% quarter-on-quarter, driven by market performance as well as strong net inflows. In Home Lending, revenue was down 38% year-on-year, largely driven by lower net interest income from tighter loan spreads and lower production revenue. Moving to Card Services & Auto. Revenue was up 14% year-on-year, largely driven by higher Card Services NII on higher revolving balances, partially offset by lower auto lease income. Credit card spend was up 13% year-on-year. Card outstandings were up 21%, driven by strong new account growth and revolve normalization. And in Auto, originations were $9.2 billion, up 10% year-on-year. Expenses of $8.1 billion were up 5% year-on-year, reflecting the impact of wage inflation and higher headcount. In terms of credit performance this quarter, credit costs were $1.4 billion, reflecting reserve builds of $300 million in card and $50 million in Home Lending. Net charge-offs were $1.1 billion, up about $500 million year-on-year, in line with expectations as delinquency levels continue to normalize across portfolios. Next, the CIB on Page 5. CIB reported net income of $4.4 billion on revenue of $13.6 billion. Investment Banking revenue of $1.6 billion was down 24% year-on-year. IB fees were down 19%. We ranked number 1 with first quarter wallet share of 8.7%. In advisory, fees were down 6% compared to a strong first quarter last year. Our underwriting businesses continued to be affected by market conditions with fees down 34% for debt and 6% for equity. In terms of the outlook, the dynamics remain the same. Our pipeline is relatively robust, but conversion is sensitive to market conditions and the economic outlook. We expect the second quarter and the rest of the year to remain challenging. Moving to Markets. Total revenue was $8.4 billion, down 4% year-on-year. Fixed income was flat. Rates was strong during the rally early in the quarter as well as through the elevated volatility in March. Credit was up on the back of higher client flows and currencies in emerging markets was down relative to a very strong first quarter in the prior year. Equity Markets was down 12%, driven by lower revenues in derivatives relative to a strong first quarter in the prior year and lower client activity and cash. Payments revenue was $2.4 billion, up 26% year-on-year. Excluding the net impact of equity investments, primarily a gain in the prior year, it was up 55%, with the growth driven by higher rates, partially offset by lower deposit balances. Securities Services revenue of $1.1 billion was up 7% year-on-year, driven by higher rates, partially offset by lower deposit balances and market levels. Expenses of $7.5 billion were up 2% year-on-year as higher headcount and wage inflation were largely offset by lower revenue-related compensation. Moving to the Commercial Bank on page 6. Commercial Banking reported net income of $1.3 billion. Revenue of $3.5 billion was up 46% year-on-year, driven by higher deposit margins. Payments revenue of $2 billion was up 98% year-on-year driven by higher rates. And gross Investment Banking revenue of $881 million was up 21% year-on-year on increased M&A and bond underwriting from large deal activity. Expenses of $1.3 billion were up 16% year-on-year largely driven by higher compensation expense, including front office hiring and technology investments as well as higher volume-related expense. Average deposits were down 16% year-on-year and 5% quarter-on-quarter, predominantly driven by continued attrition and non-operating deposits as well as seasonally lower balances. Loans were up 13% year-on-year and 1% sequentially. C&I loans were up 1% quarter-on-quarter with somewhat different dynamics based on client size. In middle market banking, higher rates and recession concerns have decreased new loan demand and utilization, which is also leading to weakness in CapEx spending. In Corporate Client Banking, utilization rates increased modestly quarter-on-quarter as capital market conditions led more clients to opt for bank debt. CRE loans were also up 1% sequentially with higher rates creating headwinds for both originations and prepayments. And given the recent focus on commercial real estate, let me remind you that our office sector exposure is less than 10% of our portfolio and is focused in the urban dense markets, and nearly two-thirds of our loans are multifamily, primarily in supply-constrained markets. Finally, credit costs of $417 million included a net reserve build of $379 million, predominantly driven by what I mentioned upfront. Then to complete our lines of business, AWM on page 7. Asset & Wealth Management reported net income of $1.4 billion, pretax margin of 35%. Revenue of $4.8 billion was up 11% year-on-year driven by higher deposit margins on lower balances and a valuation gain on our initial investment triggered by taking full ownership of our asset management joint venture in China, partially offset by the impact of lower average market levels on management fees and lower performance fees. Expenses of $3.1 billion were up 8% year-on-year, predominantly driven by compensation, reflecting growth in our private banking advisory teams, higher revenue-related compensation and the run rate impact of acquisitions. For the quarter, net long-term inflows were $47 billion, led by fixed income and equities. And then liquidity, we saw net inflows of $93 billion, inclusive of our ongoing deposit migration. AUM of $3 trillion was up 2% year-on-year and overall client assets of $4.3 trillion were up 6%, driven by continued net inflows into liquidity and long-term products. And finally, loans were down 1% quarter-on-quarter, driven by lower securities-based lending, while average deposits were down 5%. Turning to Corporate on page 8. Corporate reported net income of $244 million. Revenue was $985 million compared to a net loss of $881 million last year. NII was $1.7 billion, up $2.3 billion year-on-year due to the impact of higher rates. NIR was a loss of $755 million compared with a loss of $345 million in the prior year and included the net investment securities losses I mentioned earlier. Expenses of $160 million were down $24 million year-on-year. And credit costs of $370 million were driven by reserve builds on a couple of single name exposures. Next, the outlook on page 9. We now expect 2023 NII and NII ex-markets to be approximately $81 billion. This increase in guidance is primarily driven by lower rate paid assumptions across both consumer and wholesale in light of the expectation of Fed cuts later in the year as well as slightly higher card revolving balances. Note that in line with my comments at the outset, recent deposit balance increases are not a meaningful contributor to the upward revision in the NII outlook, given that we expect a meaningful portion of the recent inflows to reverse later in the year. I would point out that this outlook still embeds significant reprice lags. We think a more sustainable NII ex-markets run rate in the medium term is well below this quarter\u2019s $84 billion as well as below the $80 billion that is implied for the rest of the year by our full year guidance. And while we don\u2019t know exactly when this lower run rate will be reached, when it happens, we believe it will be around the mid-70s. And of course, as we mentioned last quarter, this NII outlook remains highly sensitive to the uncertainty associated with the timing and the extent of deposit reprice, investment portfolio decisions, the dynamics of QT and RRP, the trajectory of Fed funds as well as the broader macroeconomic environment, including its impact on loan growth. Separately, it\u2019s worth noting that markets NII may start to trend slightly positive towards the end of the year as a function of mix and rate effects. Moving to expenses. Our outlook for 2023 continues to be about $81 billion. Importantly, this does not currently include the impact of the pending FDIC special assessment. And on credit, we continue to expect the 2023 card net charge-off rate to be approximately 2.6%. So to wrap up, our strong results this quarter once again highlight the earnings power of this diversified franchise. We have benefited from our fortress principles and commitment to invest, which we will continue to do as we head into an increasingly uncertain environment. With that, operator, please open the line for Q&A.","evidence_gemma_new":"ROTCE","evidence_llama_3_3":"ROTCCE CET1 reserve unemployment","evidence_qwen_3_30b":null,"gemma_new_max":0.23,"gemma_new_min":0.23,"llama_3_3_max":0.23,"llama_3_3_min":0.23,"qwen_3_30b_max":null,"qwen_3_30b_min":null}
{"symbol":"JPM","year":2023,"quarter":1,"date":"2023-Q1","chunk_id":23,"sub_chunk_id":0,"centroid_label":"rotcce","agreed_value":0.17,"count":2,"chunk":"Jeremy Barnum: Okay. Let\u2019s take a crack. Let\u2019s see what the boss thinks. I think, number one, we believe, have said and continue to believe that this is fundamentally a 17% through the cycle ROTCE franchise. So number one. Number two, as Jamie always says, we run this company for all different scenarios and to have it be as resilient as possible across all different scenarios. On the particular question of ROTCE expectations in 2024, contingent on the particular economic outlook, obviously, it depends a lot on the nature of the recession. I think we feel really good about how the Company is positioned for a recession, but we\u2019re a bank. A very serious recession is, of course, going to be a headline -- a headwind for returns. But we think even in a fairly severe recession, we\u2019ll deliver very good returns, whether that\u2019s 17% or not is too much detail for now.","evidence_gemma_new":"ROTCE through the cycle","evidence_llama_3_3":null,"evidence_qwen_3_30b":"believe ROTCE through the cycle","gemma_new_max":0.17,"gemma_new_min":0.17,"llama_3_3_max":null,"llama_3_3_min":null,"qwen_3_30b_max":0.17,"qwen_3_30b_min":0.17}
{"symbol":"JPM","year":2023,"quarter":2,"date":"2023-Q2","chunk_id":9,"sub_chunk_id":0,"centroid_label":"rotcce","agreed_value":0.23,"count":2,"chunk":"Erika Najarian: Hi, good morning, Jeremy. And I'm just laughing to myself, because I said to you at Investor Day, do you have any more NII rabbits to pull out of the hat and I guess you do. So I guess, I want to ask a broader question really here, and maybe Jamie I'd like to get your thoughts. So you earned 23% ROTCE on 13.8% CET1 and we hear you loud and clear that your more normalized NII generation is not $87 billion. That being said and fully taking into account the potential haircut from Basel III end game, is it possible that your natural ROTCE is maybe above that 17% through-the-cycle rate when rates aren't zero, because when you first introduced that ROTCE target, we were in a different role from a rate scenario and everybody is talking about, even if the Fed cuts, the natural sort of bottom in Fed funds is not going to be zero. So, any input on that would be great.","evidence_gemma_new":null,"evidence_llama_3_3":"ROTCE CET1","evidence_qwen_3_30b":"ROTCE CET1","gemma_new_max":null,"gemma_new_min":null,"llama_3_3_max":0.23,"llama_3_3_min":0.23,"qwen_3_30b_max":0.23,"qwen_3_30b_min":0.23}
{"symbol":"JPM","year":2023,"quarter":2,"date":"2023-Q2","chunk_id":10,"sub_chunk_id":0,"centroid_label":"rotcce","agreed_value":0.17,"count":3,"chunk":"Jeremy Barnum: Yes. Thanks, Erika. I mean it's a good question. There is a lot in there obviously. I guess I would start by saying that when we talk about 17% through-the-cycle ROTCE, even though we may have introduced that in a moment where we brought the lowest eurobond, it was always premised on a sort of normalized rate environment. And at some level, that remains true today. Furthermore -- you didn't ask this explicitly, but in the context of the proposed Basel III end-game, one relevant question might be, if you have a lot more capital in the denominator, what happens to that target. So, I think -- as I said in my prepared remarks, we feel very confident about the Company's ability to produce excellent returns through the cycle. There's a lot of moving parts right now in that. Some of them could be good, some of them could be bad. Narrowly on the capital one, the one thing to point out is that the straight-up math, simply diluting down the ROTCE by expand the denominator misses the possibility of reprice, you know repricing on products and services, which of course goes back to our point that these capital increases do have impacts on the real economy. So, I'm not suggesting that we can price our way out of it, but we obviously need to get the right returns on products and services, and where we have pricing power, we will adjust to the higher capital. So lot of moving parts in there, but I think the important point is that through a range of scenarios, we feel good about our ability to deliver the results and we'll see how the mix of all the various factors plays out, especially after we see the Basel III proposal and it goes through the common period.","evidence_gemma_new":"through-the-cycle ROTCE","evidence_llama_3_3":"Company through-the-cycle ROTCE","evidence_qwen_3_30b":"ROTCE through-the-cycle rate","gemma_new_max":0.17,"gemma_new_min":0.17,"llama_3_3_max":0.17,"llama_3_3_min":0.17,"qwen_3_30b_max":0.17,"qwen_3_30b_min":0.17}
{"symbol":"JPM","year":2023,"quarter":2,"date":"2023-Q2","chunk_id":11,"sub_chunk_id":0,"centroid_label":"rotcce","agreed_value":50.0,"count":2,"chunk":"Jamie Dimon: Erika, I'll say one thing. Of course we have a mix of businesses that earn from like 0% ROTCE to a 100%. We have some which are very capital-intensive, so we look at kind of all of them and I think 17% is a good number and a good target. The other thing we're earning on is credit. We've been over in credit for a substantial amount of time now, we're quite cautious about it. We know that it's going to kick-off just as a normalized it will be, considering more than that is now. Look, we would consider credit card normalized to be closer to 3.5%.","evidence_gemma_new":"ROTCE","evidence_llama_3_3":"ROTCE 0% 100%","evidence_qwen_3_30b":null,"gemma_new_max":50.0,"gemma_new_min":50.0,"llama_3_3_max":50.0,"llama_3_3_min":50.0,"qwen_3_30b_max":null,"qwen_3_30b_min":null}
{"symbol":"JPM","year":2023,"quarter":2,"date":"2023-Q2","chunk_id":9,"sub_chunk_id":0,"centroid_label":"rotcce","agreed_value":17.0,"count":3,"chunk":"Erika Najarian: Hi, good morning, Jeremy. And I'm just laughing to myself, because I said to you at Investor Day, do you have any more NII rabbits to pull out of the hat and I guess you do. So I guess, I want to ask a broader question really here, and maybe Jamie I'd like to get your thoughts. So you earned 23% ROTCE on 13.8% CET1 and we hear you loud and clear that your more normalized NII generation is not $87 billion. That being said and fully taking into account the potential haircut from Basel III end game, is it possible that your natural ROTCE is maybe above that 17% through-the-cycle rate when rates aren't zero, because when you first introduced that ROTCE target, we were in a different role from a rate scenario and everybody is talking about, even if the Fed cuts, the natural sort of bottom in Fed funds is not going to be zero. So, any input on that would be great.","evidence_gemma_new":"ROTCE","evidence_llama_3_3":"ROTCE 17%","evidence_qwen_3_30b":"we would consider ROTCE 17%","gemma_new_max":17.0,"gemma_new_min":17.0,"llama_3_3_max":17.0,"llama_3_3_min":17.0,"qwen_3_30b_max":17.0,"qwen_3_30b_min":17.0}
{"symbol":"JPM","year":2023,"quarter":3,"date":"2023-Q3","chunk_id":38,"sub_chunk_id":0,"centroid_label":"rotcce","agreed_value":22.0,"count":2,"chunk":"Gerard Cassidy: Jeremy, you guys have put up a really strong ROTC number of 22% for the quarter. And when you dive into your different segments, what really jumps out at us is the 40% ex-First Republic ROE in Consumer and Community Banking. I know you and Jamie have talked about your over-earning on credit, we get that. But in view of all of these fintechs and all these other non-bank competitors that were all supposed to pick away at everybody's market share, you guys have put up great numbers here. What's the drivers behind an ROE, even when you take that credit over-earning out, what's driving this business profitability at such high levels?","evidence_gemma_new":"ROTC for the quarter","evidence_llama_3_3":null,"evidence_qwen_3_30b":"ROTC quarter","gemma_new_max":22.0,"gemma_new_min":22.0,"llama_3_3_max":null,"llama_3_3_min":null,"qwen_3_30b_max":22.0,"qwen_3_30b_min":22.0}
{"symbol":"JPM","year":2023,"quarter":1,"date":"2024-FY","chunk_id":20,"sub_chunk_id":0,"centroid_label":"rotcce","agreed_value":17.0,"count":2,"chunk":"Erika Najarian: So, as we think about all of what you\u2019ve just told us, so $81 billion of NII this year, and who knows when medium term is going to happen is mid-70s, the clear strength of the franchise producing 23% ROTCE in a quarter where your CET1 was 13.8% and a reserve that already reflects 5.8% unemployment. As we think about recession and what JPMorgan can earn in a recession, do you think you can hit 17% ROTCE even in 2024, assuming we do have a recession in \u201824 as everybody is expecting, given all these revenue dynamics and how prepared you are on the reserve?","evidence_gemma_new":"ROTCE 2024","evidence_llama_3_3":null,"evidence_qwen_3_30b":"expecting 17% ROTCE 2024 recession","gemma_new_max":17.0,"gemma_new_min":17.0,"llama_3_3_max":null,"llama_3_3_min":null,"qwen_3_30b_max":17.0,"qwen_3_30b_min":17.0}
{"symbol":"JPM","year":2024,"quarter":2,"date":"2024-Q2","chunk_id":5,"sub_chunk_id":0,"centroid_label":"rotcce","agreed_value":0.17,"count":2,"chunk":"Steven Chubak: So, I wanted to start off with a question on capital. Just given some indications that the Fed is considering favorable revisions to both Basel III endgame and the GSIB surcharge calculations, which I know you've been pushing for some time. As you evaluate just different capital scenarios, are these revisions material enough where they could support a higher normalized ROTCE at the Firm versus a 17% target? And if so, just how that might impact or inform your appetite for buybacks going forward?","evidence_gemma_new":"through-the-cycle ROTCE","evidence_llama_3_3":"ROTCE","evidence_qwen_3_30b":null,"gemma_new_max":0.17,"gemma_new_min":0.17,"llama_3_3_max":0.17,"llama_3_3_min":0.17,"qwen_3_30b_max":null,"qwen_3_30b_min":null}
{"symbol":"KO","year":2023,"quarter":1,"date":"2023-FY","chunk_id":3,"sub_chunk_id":0,"centroid_label":"adjusted free cash flow","agreed_value":9500000000.0,"count":2,"chunk":"John Murphy: Thank you, James, and good morning, everyone. We've had a good start to the year with strong first quarter results. Starting with the top line. We grew organic revenues 12%. Unit cases grew 3% with broad-based growth across most markets, driven by investments in the marketplace. Concentrate sales were 2 points behind unit cases for the quarter primarily driven by timing of concentrate shipments and 1 less day. Our price\/mix growth was 11% for the quarter. Much of this was driven by carryover pricing coming into the base from last year, along with some new pricing actions across operating segments as well as revenue growth management initiatives and favorable channel and package mix. Comparable gross margin for the quarter was up approximately 120 basis points driven by underlying expansion and a slight benefit from bottler refranchising, partially offset by the impact of currency. Underlying gross margin expansion was driven by a benefit from the phasing of inventory costs, strong organic revenue growth and cycling the timing of M&A integration expenses, partially offset by higher commodity costs. Comparable operating margin expanded approximately 40 basis points for the quarter. This was primarily driven by underlying operating margin expansion due to robust top line growth across operating segments, partially offset by increased marketing investments and higher operating costs. Putting it all together, first quarter comparable EPS of $0.68 reflects an increase of 5% year-over-year despite higher-than-expected 7% currency headwinds. Free cash flow was negative by approximately $120 million in the quarter. This was largely attributable to the timing of working capital initiatives and the previously discussed M&A-related payments that took place in the quarter. Our underlying cash flow generation remains strong, and we feel confident in our cash flow agenda and full year outlook. Our balance [ achieves ] fit for purpose to support our growth agenda, and our net debt leverage of 1.8x EBITDA as of the end of the first quarter is below our targeted range of 2 to 2.5x. Our capital allocation priorities remain the same. We continue to invest to drive long-term growth and to deliver dividend growth for our shareowners as evidenced by the 5% dividend increase announced in February. We remain mindful of maintaining our financial flexibility amidst the ongoing tax dispute with the IRS. We are currently waiting for the tax court to render its final opinion in the case, allowing us to move forward with the appeals process. As previously discussed, we intend to assert our claims on appeal, vigorously defend our position and believe we will ultimately prevail. We will continue to keep you updated. As James mentioned, we are encouraged by our first quarter results and are harnessing what we can control to remain resilient in the face of a volatile operating environment. We remain laser-focused on top line-led growth as well as the endurance of the bottom line. And we'll reinvest in our brands with more rigor and discipline using the refreshed resource allocation framework we discussed at CAGNY. This approach enables the enterprise to prioritize and put more focus behind country and category combinations that can deliver the best return in the near term while fueling steady progress on our total beverage strategy over time, it also allows us to be more dynamic and to adapt quickly. For example, in emerging markets, where commercial beverages are still a small part of daily consumption, we're leading with core sparkling and juice strengths propositions. In developed markets, where consumers are looking for more beverage choices, we're investing behind a broader portfolio of brands and categories, including value-added dairy, enhanced water, tea and coffee. Despite the global macro picture remaining uncertain in the months ahead, our planned investments and operational strategy will support the momentum we've seen early in the year and give us good visibility to deliver on our 2023 guidance. This guidance is comprised of organic revenue growth of 7% to 8%, primarily led by price\/mix amidst the ongoing inflationary environment, comparable currency-neutral earnings per share growth of 7% to 9%. Based on current rates and our hedge positions, we are reiterating our currency outlook of an approximate 2- to 3-point headwind to comparable net revenues and an approximate 3- to 4-point currency headwind to comparable earnings per share for full year 2023. Inflationary forces are moderating in some respects. Spot prices have come down in oil and freight rates are more favorable. That said, many commodities were exposed to have been sticky, and we have some advantageous hedges that will be rolling off to less favorable rates during the year. Based on current rates and hedge positions, we continue to expect per case commodity price inflation in the range of a mid-single-digit impact on comparable cost of goods sold in 2023. Additionally, we expect wages and inflation in media will continue to remain elevated. Despite the increase in the first quarter effective tax rate, we continue to expect our underlying effective tax rate to be 19.5% for 2023. All in, we are reiterating comparable earnings per share growth of 4% to 5% versus $2.48 in 2022. We expect to generate approximately $9.5 billion of free cash flow in 2023 through approximately $11.4 billion in cash from operations, less approximately $1.9 billion in capital investments. I would like to remind you that included in cash from operations are 2 discrete items related to, one, transition tax payments, which will take place in the second quarter; and two, payments associated with M&A transactions. Excluding these, our implied free cash flow conversion would be within our long-term guidance. This guidance does not include any payments related to our ongoing U.S. income tax dispute with the IRS. Overall, we don't expect the tax dispute to have a bearing on our ability to deliver on our capital allocation agenda and drive long-term business growth. There are some considerations to keep in mind as it pertains to our guidance. We expect price\/mix to moderate through the year as we cycle our pricing initiatives from the prior year. The discrete gross margin benefits related to the phasing of inventory costs and cycling the timing of M&A integration expenses this quarter are unlikely to repeat. Given the ongoing backdrop of rising interest rates, we expect to see higher net interest expense given our effective exposure to floating rate debt. And finally, due to our reporting calendar, there will be one additional day in the fourth quarter. With a quarter of good results to start the year and our focus on driving top line-led growth in any macroeconomic environment, we are well positioned to compound quality value by delivering on 2023 guidance.","evidence_gemma_new":null,"evidence_llama_3_3":"free cash flow 2023","evidence_qwen_3_30b":"free cash flow $9.5 billion 2023","gemma_new_max":null,"gemma_new_min":null,"llama_3_3_max":9500000000.0,"llama_3_3_min":9500000000.0,"qwen_3_30b_max":9500000000.0,"qwen_3_30b_min":9500000000.0}
{"symbol":"KO","year":2023,"quarter":4,"date":"2023-FY","chunk_id":3,"sub_chunk_id":0,"centroid_label":"adjusted free cash flow","agreed_value":9700000000.0,"count":2,"chunk":"John Murphy: Thank you, James. And good morning, everyone. In the fourth quarter and throughout 2023, we delivered strong results. During the quarter, we grew organic revenues 12% which was in-line with our full year organic revenue growth. Unit case growth was 2% and it was positive in each quarter of 2023. Concentrate sales grew 1 point ahead of unit cases, driven primarily by one additional day in the quarter. Our price mix growth of 9% in the quarter was driven by three factors. One, 2023 pricing actions across most of our markets. Two, hyperinflationary pricing that I'll speak to in just a moment. And three, some mix which is mostly timing related. Comparable gross margin for the quarter was up approximately 140 basis points. Driven by underlying expansion and a slight benefit from bottle refranchising. Partially offset by the impact of currency headwinds. Comparable operating margin expanded approximately 40 basis points for the quarter. This was primarily driven by strong topline growth, partially offset by currency headwinds and an increase in marketing investments. The positive volume and topline growth that we're realizing today demonstrates the effectiveness of our marketing spend. Below the line, comparable other income declined primarily due to the operating environment in Argentina. Putting it all together, fourth quarter comparable EPS of $0.49 was up 10% year-over-year, despite higher than expected 13% currency headwinds. Before moving on, I wanted to discuss the impact of a few hyperinflationary markets on our fourth quarter results. During the quarter, inflation intensified and exceeded 60% across these markets. In aggregate, while they represent less than 5% of our total volume, this degree of inflation creates a cosmetic distortion to our underlying results. In the fourth quarter, these markets contributed more than 3 points of our price mix and most of our currency headwinds, including an outsized impact to comparable other income from balance sheet remeasurement in Argentina. They did not, however, have a material impact on our earnings per share results. In hyperinflationary markets it's either impractical or impossible to hedge our currency exposure. And to manage it, we use our full suite of revenue growth management tools, including pricing actions to keep pace with local market inflation. We have been operating a long-time in these markets and we expect to be in them for a long-time to come. We work hand-in-hand with our local bottling partners and our focus will be to continue to nurture the strong relationships we have with our consumers and customers. And to ultimately prevail longer-term. So while we will continue to experience volatility of this nature in a few markets, it's important to keep in mind they are operated locally, they are typically self-funding and they have not impeded our overall ability to grow earnings per share. As we move forward, we are confident that our business model and the many levers within it will allow us to deliver on our overall objectives. In 2023 free cash flow was $9.7 billion, which increased from the prior year. 2023 free cash flow included a transition tax payment of approximately $720 million, which was approximately $340 million higher than the prior year and included approximately $230 million in M&A related payments. Our underlying free cash flow growth was largely attributable to strong operational performance and working capital benefits. If you exclude the full impact of the transition tax in M&A related payments, our adjusted free cash flow conversion ratio would be within our target range of 90% to 95%. Our balance sheet remains strong. And our net debt leverage of 1.7 times EBITDA is below our targeted range of 2 times to 2.5 times. During the fourth quarter, in addition to offsetting dilution from the exercise of stock options by employees, we repurchased additional shares in anticipation of expected proceeds from bottler refranchising. As James mentioned, we anticipate 2024 will bring new challenges and opportunities. However, through our all-weather strategy, we've proven we can deliver in many different operating environments. Our 2024 guidance builds on the underlying momentum of our business. We expect organic revenue growth of 6% to 7% and comparable currency neutral earnings per share growth of 8% to 10%. We anticipate hyperinflationary pricing will continue to play a role in 2024, but it will moderate throughout the year. We continue to make significant progress towards refranchising company owned bottling operations. Bottler refranchising is expected to be a 4 point to 5 point headwind to comparable net revenues and a 2 point headwind to comparable earnings per share. But will have a positive impact on both our margins and the return profile of our business. Based on current rates and our hedge positions, we anticipate an approximate 2 point to 3 point currency headwind to comparable net revenues and an approximate 4 point to 5 point currency headwind to comparable earnings per share for full year 2024. Notably, much of our anticipated 2024 currency headwinds are attributed to hyperinflationary markets with a meaningful impact in the fourth quarter. Our underlying effective tax rate for 2024 is expected to be 19.2%. All in, we expect comparable earnings per share growth of 4% to 5% versus $2.69 in 2023. We expect to generate approximately $9.2 billion of free cash flow in 2024 through approximately $11.4 billion in cash from operations, less approximately $2.2 billion in capital investments. The $11.4 billion of cash from operations includes two items to highlight, transition tax payments of approximately $960 million, an increase of approximately $240 million versus 2023, payments associated with various M&A transactions of approximately $560 million, an increase of approximately $330 million versus 2023. Driven by our underlying cash flow generation and current balance sheet strength, we have ample flexibility to both reinvest in our business to drive growth and return capital to our shareowners. A significant portion of our expected capital investment increase is to build capacity for fairlife and for our India business, both of which experienced robust growth in 2023. Related to capital return, we have an unwavering priority to grow our dividend as we've done with 61 consecutive years of dividend increases. With respect to share repurchases, we will be flexible in our approach. Typically, we've repurchased shares to offset any dilution from the exercise of stock options by employees in the given year. Our capital allocation policy prioritize agility. And we're committed to taking the right actions needed to drive the long-term health of our business and create value for our stakeholders. There are some considerations to keep in mind for 2024. The first quarter of 2024 will be impacted by the timing of concentrate shipments in the fourth quarter of 2023 in some markets and cycling our strongest volume growth quarter from the prior year. We estimate the ongoing conflict in the Middle East had approximately 1 point of impact on volume growth during the fourth quarter of 2023. It's unclear how long this impact will last. In November 2023, the U.S. Tax Court rendered its supplemental opinion related to our ongoing dispute with the Internal Revenue Service. We intend to move forward on appeal and vigorously defend our position. We have ample balance sheet flexibility to fund any payment related to the appeal. Finally, due to our reporting calendar, there will be one less day in the first quarter and two additional days in the fourth quarter. So in summary, we're pleased with what we accomplished in 2023, we're building on our capabilities to continue the underlying momentum across our markets, we're progressing on our refranchising agenda and we're reinvesting in our system to drive long-term growth. We have great confidence, we can deliver on our 2024 guidance and long-term commitments. With that, operator, we're ready to take questions.","evidence_gemma_new":null,"evidence_llama_3_3":"free cash flow 2023","evidence_qwen_3_30b":"free cash flow 2023","gemma_new_max":null,"gemma_new_min":null,"llama_3_3_max":9700000000.0,"llama_3_3_min":9700000000.0,"qwen_3_30b_max":9700000000.0,"qwen_3_30b_min":9700000000.0}
{"symbol":"KO","year":2023,"quarter":1,"date":"2023-Q1","chunk_id":3,"sub_chunk_id":0,"centroid_label":"adjusted free cash flow","agreed_value":-120000000.0,"count":2,"chunk":"John Murphy: Thank you, James, and good morning, everyone. We've had a good start to the year with strong first quarter results. Starting with the top line. We grew organic revenues 12%. Unit cases grew 3% with broad-based growth across most markets, driven by investments in the marketplace. Concentrate sales were 2 points behind unit cases for the quarter primarily driven by timing of concentrate shipments and 1 less day. Our price\/mix growth was 11% for the quarter. Much of this was driven by carryover pricing coming into the base from last year, along with some new pricing actions across operating segments as well as revenue growth management initiatives and favorable channel and package mix. Comparable gross margin for the quarter was up approximately 120 basis points driven by underlying expansion and a slight benefit from bottler refranchising, partially offset by the impact of currency. Underlying gross margin expansion was driven by a benefit from the phasing of inventory costs, strong organic revenue growth and cycling the timing of M&A integration expenses, partially offset by higher commodity costs. Comparable operating margin expanded approximately 40 basis points for the quarter. This was primarily driven by underlying operating margin expansion due to robust top line growth across operating segments, partially offset by increased marketing investments and higher operating costs. Putting it all together, first quarter comparable EPS of $0.68 reflects an increase of 5% year-over-year despite higher-than-expected 7% currency headwinds. Free cash flow was negative by approximately $120 million in the quarter. This was largely attributable to the timing of working capital initiatives and the previously discussed M&A-related payments that took place in the quarter. Our underlying cash flow generation remains strong, and we feel confident in our cash flow agenda and full year outlook. Our balance [ achieves ] fit for purpose to support our growth agenda, and our net debt leverage of 1.8x EBITDA as of the end of the first quarter is below our targeted range of 2 to 2.5x. Our capital allocation priorities remain the same. We continue to invest to drive long-term growth and to deliver dividend growth for our shareowners as evidenced by the 5% dividend increase announced in February. We remain mindful of maintaining our financial flexibility amidst the ongoing tax dispute with the IRS. We are currently waiting for the tax court to render its final opinion in the case, allowing us to move forward with the appeals process. As previously discussed, we intend to assert our claims on appeal, vigorously defend our position and believe we will ultimately prevail. We will continue to keep you updated. As James mentioned, we are encouraged by our first quarter results and are harnessing what we can control to remain resilient in the face of a volatile operating environment. We remain laser-focused on top line-led growth as well as the endurance of the bottom line. And we'll reinvest in our brands with more rigor and discipline using the refreshed resource allocation framework we discussed at CAGNY. This approach enables the enterprise to prioritize and put more focus behind country and category combinations that can deliver the best return in the near term while fueling steady progress on our total beverage strategy over time, it also allows us to be more dynamic and to adapt quickly. For example, in emerging markets, where commercial beverages are still a small part of daily consumption, we're leading with core sparkling and juice strengths propositions. In developed markets, where consumers are looking for more beverage choices, we're investing behind a broader portfolio of brands and categories, including value-added dairy, enhanced water, tea and coffee. Despite the global macro picture remaining uncertain in the months ahead, our planned investments and operational strategy will support the momentum we've seen early in the year and give us good visibility to deliver on our 2023 guidance. This guidance is comprised of organic revenue growth of 7% to 8%, primarily led by price\/mix amidst the ongoing inflationary environment, comparable currency-neutral earnings per share growth of 7% to 9%. Based on current rates and our hedge positions, we are reiterating our currency outlook of an approximate 2- to 3-point headwind to comparable net revenues and an approximate 3- to 4-point currency headwind to comparable earnings per share for full year 2023. Inflationary forces are moderating in some respects. Spot prices have come down in oil and freight rates are more favorable. That said, many commodities were exposed to have been sticky, and we have some advantageous hedges that will be rolling off to less favorable rates during the year. Based on current rates and hedge positions, we continue to expect per case commodity price inflation in the range of a mid-single-digit impact on comparable cost of goods sold in 2023. Additionally, we expect wages and inflation in media will continue to remain elevated. Despite the increase in the first quarter effective tax rate, we continue to expect our underlying effective tax rate to be 19.5% for 2023. All in, we are reiterating comparable earnings per share growth of 4% to 5% versus $2.48 in 2022. We expect to generate approximately $9.5 billion of free cash flow in 2023 through approximately $11.4 billion in cash from operations, less approximately $1.9 billion in capital investments. I would like to remind you that included in cash from operations are 2 discrete items related to, one, transition tax payments, which will take place in the second quarter; and two, payments associated with M&A transactions. Excluding these, our implied free cash flow conversion would be within our long-term guidance. This guidance does not include any payments related to our ongoing U.S. income tax dispute with the IRS. Overall, we don't expect the tax dispute to have a bearing on our ability to deliver on our capital allocation agenda and drive long-term business growth. There are some considerations to keep in mind as it pertains to our guidance. We expect price\/mix to moderate through the year as we cycle our pricing initiatives from the prior year. The discrete gross margin benefits related to the phasing of inventory costs and cycling the timing of M&A integration expenses this quarter are unlikely to repeat. Given the ongoing backdrop of rising interest rates, we expect to see higher net interest expense given our effective exposure to floating rate debt. And finally, due to our reporting calendar, there will be one additional day in the fourth quarter. With a quarter of good results to start the year and our focus on driving top line-led growth in any macroeconomic environment, we are well positioned to compound quality value by delivering on 2023 guidance.","evidence_gemma_new":null,"evidence_llama_3_3":"Free cash flow first quarter","evidence_qwen_3_30b":"free cash flow -$120 million first quarter","gemma_new_max":null,"gemma_new_min":null,"llama_3_3_max":-120000000.0,"llama_3_3_min":-120000000.0,"qwen_3_30b_max":-120000000.0,"qwen_3_30b_min":-120000000.0}
{"symbol":"KO","year":2023,"quarter":2,"date":"2023-Q2","chunk_id":3,"sub_chunk_id":0,"centroid_label":"adjusted free cash flow","agreed_value":4000000000.0,"count":3,"chunk":"John Murphy: Thank you, James, and good morning, everyone. We are pleased with the momentum of our business and our strong second quarter results. Starting with the top line, we grew organic revenues 11%. Unit cases were flat. As James said, volume for the second quarter got off to a slower start, but ended on a positive note. Concentrate sales were one point ahead of unit cases for the quarter, primarily driven by the timing of concentrate shipments. Price mix growth was 10% for the quarter, driven by carryover pricing coming into the base from last year, along with some new pricing actions across operating segments, including the impact of hyperinflationary markets. Comparable gross margin for the quarter was up approximately 40 basis points, driven by underlying expansion and a slight benefit from bottler refranchising partially offset by the impact of currency. Comparable operating margin expanded approximately 90 basis points for the quarter. This was primarily driven by strong top line growth and the impact of refranchising bottling operations. Partially offset by an increase in marketing investments and higher operating costs versus the prior year as well as currency headwinds. Putting it all together, second quarter comparable EPS of $0.78 was up 11% year-over-year despite higher than expected 6% currency headwinds. Free cash flow was approximately $4 billion year-to-date. This was largely attributable to strong underlying operational performance and working capital benefits, partially offset by a $720 million transition tax payment that was made during the second quarter as well as M&A related payments. Our balance sheet is strong and our net debt leverage of 1.6 times EBITDA is below our targeted range of 2 to 2.5 times. Our capital allocation priorities remain the same and we continue to invest to drive long-term growth. As James mentioned, we are encouraged by what we are seeing in the marketplace. While we continue to spend our strategic flywheel faster to generate top line led growth, we've also progressed on a margin agenda, as demonstrated by our consistent track record of offsetting cost headwinds to sustain steady gross margins. We have numerous levers available to drive top line growth and improve the effectiveness and efficiency of our spend over the long-term. Our all-weather strategy, coupled with the great plans that we have in place to continue to create quality leadership across our portfolio give us good visibility to deliver on our raised 2023 guidance. This is comprised of organic revenue growth of 8% to 9%, which includes positive volume growth while continuing to be led by price mix. There are a few considerations to keep in mind. We expect pricing in developed markets to moderate through the year as we cycle pricing initiatives from the prior year. In developing and emerging markets, we aim to take price with local market inflation. To the extent that intense inflationary markets drive elevated price mix. The impact is oftentimes offset by currency, as it is frequently difficult to hedge our exposure. Due to our reporting calendar, there will be one additional day in the fourth quarter. We now expect comparable currency neutral earnings per share growth of 9% to 11%. Based on current rates and our hedge positions, we are updating our currency outlook of an approximate 3 to 4 point headwind to comparable net revenues and an approximate 4 to 5 point currency headwind to comparable earnings per share for full year 2023. Inflationary pressures are beginning to moderate in some ways, including freight rates that are favorable compared to last year. That said, several commodities that are prevalent in our basket like sugar and juice remain elevated and we have some hedges that we will be rolling off to less favorable rates. Based on current rates and hedge positions, we continue to expect per case commodity price inflation in the range of a mid-single digit impact on comparable cost of goods sold in 2023. Our updated underlying effective tax rate for 2023 is now 19.3%. All-in, we are updating comparable earnings per share growth of 5% to 6% versus $2.48 in 2022. We continue to expect to generate approximately $9.5 billion of free cash flow in 2023 through approximately $11.4 billion in cash from operations less approximately $1.9 billion in capital investments. If you exclude the transition tax payment made in the second quarter and various payments associated with M&A transactions, our implied free cash flow conversion would be within our long-term guidance. This guidance does not include any payments related to our ongoing US income tax dispute with the IRS. As we enter the second half of the year, we continue to build a culture that emphasizes raising the bar in every aspect of how we do business. Thanks to the tremendous ongoing commitment of our system employees around the world, we are confident in our ability to deliver on our guidance for 2023 and drive value for our stakeholders over the long-term. With that operator, we are ready to take questions.","evidence_gemma_new":"Free cash flow year-to-date","evidence_llama_3_3":"free cash flow year-to-date","evidence_qwen_3_30b":"free cash flow approximately $4 billion year-to-date","gemma_new_max":4000000000.0,"gemma_new_min":4000000000.0,"llama_3_3_max":4000000000.0,"llama_3_3_min":4000000000.0,"qwen_3_30b_max":4000000000.0,"qwen_3_30b_min":4000000000.0}
{"symbol":"KO","year":2023,"quarter":3,"date":"2023-Q3","chunk_id":3,"sub_chunk_id":0,"centroid_label":"adjusted free cash flow","agreed_value":7900000000.0,"count":3,"chunk":"John Murphy: Thank you, James and good morning, everyone. Today, I'll comment on our third quarter performance and highlight our updated 2023 guidance. I'll also provide some early commentary on 2024 and the actions we are taking to continue to deliver on our objectives. As James mentioned, we delivered strong third quarter results. Starting with the top line. We grew organic revenues 11%. Unit case growth was 2%. If you exclude the impact of suspending our business in Russia, we have delivered positive volume growth in each quarter since the start of 2021. Concentrate sales were in line with unit cases for the quarter. Price\/mix growth was 9% driven by pricing actions across operating segments, including the impact of a few hyperinflationary markets, along with carryover pricing coming into the base from last year. Comparable gross margin for the quarter was up approximately 130 basis points driven by underlying expansion and a slight benefit from bottler refranchising, partially offset by the impact of currency headwinds. Comparable operating margin expanded approximately 20 basis points for the quarter. This was primarily driven by strong top line growth and the impact of refranchising bottling operations, partially offset by an increase in marketing investments versus the prior year as well as currency headwinds. Putting it all together, third quarter comparable EPS of $0.74 was up 7% year-over-year despite higher-than-expected 4% currency headwinds. Free cash flow was approximately $7.9 billion year-to-date. This was largely attributable to strong underlying operational performance and working capital benefits, partially offset by $720 million transition tax payment and $230 million in M&A-related payments. Our balance sheet is strong and our net debt leverage of 1.5x EBITDA is below our target range of 2 to 2.5x. Recently, we entered into a letter of intent to refranchise our Philippines bottler. As we progress on our refranchising journey, we aspire to improve the return profile of our business. In 2015, when Bottling Investments Group was more than 50% of our net revenue, our return on invested capital was approximately 17%. Today, Bottling Investments Group makes up less than 20% of net revenue. And our return on invested capital is over 23%, nearly a 7-point increase. After this transaction closes, our remaining assets in the Bottling Investments Group will include operations in India, Africa and several smaller locations, primarily in Asia Pacific. We will remain disciplined in our refranchising approach by making sure we best position our system to deliver sustainable long-term growth. Our business performance year-to-date gives us confidence that we can deliver on our raised 2023 guidance. This is comprised of organic revenue growth of 10% to 11% which will be led by price\/mix and includes positive volume growth. We do expect pricing in developed markets to moderate in the fourth quarter as we cycle pricing initiatives from the prior year. There are also a few hyperinflationary markets that will continue to drive price\/mix. There will be 1 additional day in the fourth quarter. We now expect comparable currency-neutral earnings per share growth of 13% to 14%. And based on current rates and our hedge positions, we now expect currency to be an approximate 4-point headwind to comparable net revenues and an approximate 6-point currency headwind to comparable earnings per share for full year 2023. Based on current rates and hedge positions, we continue to expect per-case commodity price inflation in the range of a mid-single-digit impact on comparable cost of goods sold in 2023. We now expect our underlying effective tax rate for 2023 to be 19%. All in, we are updating comparable earnings per share growth of 7% to 8% versus $2.48 in 2022. We continue to expect to generate approximately $9.5 billion of free cash flow in 2023 through approximately $11.4 billion in cash from operations. That's approximately $1.9 billion in capital investments. This guidance does not include any payments related to our U.S. income tax dispute with the IRS which are unlikely to occur in 2023. Given the momentum of our business, the strength of our balance sheet and some proceeds that we expect to receive from bottler refranchising, we have increased flexibility to continue to both reinvest in our business and return capital to shareowners. While it is too early to provide specific items on 2024, we want to share some considerations based on what we know today. We're encouraged by our top line momentum across the majority of our markets. There are a handful of hyperinflationary markets where it is either not possible to hedge or it is costly to do so. In these markets, we've demonstrated that we can manage currency pressures by taking price with local market inflation and we will continue to follow this approach. While some commodities are normalizing, we also have input costs that could be impacted by tensions and conflicts. With respect to advertising spend, our bias is to continue to reinvest behind our brands while maintaining flexibility. Regarding currency, if we assume current rates and our hedge positions, there would be an approximate low single-digit currency headwind to comparable net revenues and an approximate mid-single-digit currency headwind to comparable earnings per share for full year 2024. Of course, several factors could impact both our currency outlook and broader business outlook between now and February. Over the past few years, we've delivered U.S. dollar EPS growth and we have many levers to continue to do so. So in summary, we are encouraged by our business results and confident in our ability to deliver on our commitments over the long term. Thanks to the incredible commitment of our system employees around the world, we're very clear on the direction we are heading and well equipped to execute on the strategies to get us there. And we continue to invest to drive sustainable long-term growth. We remain focused on capturing the opportunities available to us. With that, operator, we are ready to take questions.","evidence_gemma_new":"Free cash flow year-to-date","evidence_llama_3_3":"Free cash flow year-to-date","evidence_qwen_3_30b":"free cash flow year-to-date","gemma_new_max":7900000000.0,"gemma_new_min":7900000000.0,"llama_3_3_max":7900000000.0,"llama_3_3_min":7900000000.0,"qwen_3_30b_max":7900000000.0,"qwen_3_30b_min":7900000000.0}
{"symbol":"KO","year":2023,"quarter":4,"date":"2024-FY","chunk_id":3,"sub_chunk_id":0,"centroid_label":"adjusted free cash flow","agreed_value":9200000000.0,"count":2,"chunk":"John Murphy: Thank you, James. And good morning, everyone. In the fourth quarter and throughout 2023, we delivered strong results. During the quarter, we grew organic revenues 12% which was in-line with our full year organic revenue growth. Unit case growth was 2% and it was positive in each quarter of 2023. Concentrate sales grew 1 point ahead of unit cases, driven primarily by one additional day in the quarter. Our price mix growth of 9% in the quarter was driven by three factors. One, 2023 pricing actions across most of our markets. Two, hyperinflationary pricing that I'll speak to in just a moment. And three, some mix which is mostly timing related. Comparable gross margin for the quarter was up approximately 140 basis points. Driven by underlying expansion and a slight benefit from bottle refranchising. Partially offset by the impact of currency headwinds. Comparable operating margin expanded approximately 40 basis points for the quarter. This was primarily driven by strong topline growth, partially offset by currency headwinds and an increase in marketing investments. The positive volume and topline growth that we're realizing today demonstrates the effectiveness of our marketing spend. Below the line, comparable other income declined primarily due to the operating environment in Argentina. Putting it all together, fourth quarter comparable EPS of $0.49 was up 10% year-over-year, despite higher than expected 13% currency headwinds. Before moving on, I wanted to discuss the impact of a few hyperinflationary markets on our fourth quarter results. During the quarter, inflation intensified and exceeded 60% across these markets. In aggregate, while they represent less than 5% of our total volume, this degree of inflation creates a cosmetic distortion to our underlying results. In the fourth quarter, these markets contributed more than 3 points of our price mix and most of our currency headwinds, including an outsized impact to comparable other income from balance sheet remeasurement in Argentina. They did not, however, have a material impact on our earnings per share results. In hyperinflationary markets it's either impractical or impossible to hedge our currency exposure. And to manage it, we use our full suite of revenue growth management tools, including pricing actions to keep pace with local market inflation. We have been operating a long-time in these markets and we expect to be in them for a long-time to come. We work hand-in-hand with our local bottling partners and our focus will be to continue to nurture the strong relationships we have with our consumers and customers. And to ultimately prevail longer-term. So while we will continue to experience volatility of this nature in a few markets, it's important to keep in mind they are operated locally, they are typically self-funding and they have not impeded our overall ability to grow earnings per share. As we move forward, we are confident that our business model and the many levers within it will allow us to deliver on our overall objectives. In 2023 free cash flow was $9.7 billion, which increased from the prior year. 2023 free cash flow included a transition tax payment of approximately $720 million, which was approximately $340 million higher than the prior year and included approximately $230 million in M&A related payments. Our underlying free cash flow growth was largely attributable to strong operational performance and working capital benefits. If you exclude the full impact of the transition tax in M&A related payments, our adjusted free cash flow conversion ratio would be within our target range of 90% to 95%. Our balance sheet remains strong. And our net debt leverage of 1.7 times EBITDA is below our targeted range of 2 times to 2.5 times. During the fourth quarter, in addition to offsetting dilution from the exercise of stock options by employees, we repurchased additional shares in anticipation of expected proceeds from bottler refranchising. As James mentioned, we anticipate 2024 will bring new challenges and opportunities. However, through our all-weather strategy, we've proven we can deliver in many different operating environments. Our 2024 guidance builds on the underlying momentum of our business. We expect organic revenue growth of 6% to 7% and comparable currency neutral earnings per share growth of 8% to 10%. We anticipate hyperinflationary pricing will continue to play a role in 2024, but it will moderate throughout the year. We continue to make significant progress towards refranchising company owned bottling operations. Bottler refranchising is expected to be a 4 point to 5 point headwind to comparable net revenues and a 2 point headwind to comparable earnings per share. But will have a positive impact on both our margins and the return profile of our business. Based on current rates and our hedge positions, we anticipate an approximate 2 point to 3 point currency headwind to comparable net revenues and an approximate 4 point to 5 point currency headwind to comparable earnings per share for full year 2024. Notably, much of our anticipated 2024 currency headwinds are attributed to hyperinflationary markets with a meaningful impact in the fourth quarter. Our underlying effective tax rate for 2024 is expected to be 19.2%. All in, we expect comparable earnings per share growth of 4% to 5% versus $2.69 in 2023. We expect to generate approximately $9.2 billion of free cash flow in 2024 through approximately $11.4 billion in cash from operations, less approximately $2.2 billion in capital investments. The $11.4 billion of cash from operations includes two items to highlight, transition tax payments of approximately $960 million, an increase of approximately $240 million versus 2023, payments associated with various M&A transactions of approximately $560 million, an increase of approximately $330 million versus 2023. Driven by our underlying cash flow generation and current balance sheet strength, we have ample flexibility to both reinvest in our business to drive growth and return capital to our shareowners. A significant portion of our expected capital investment increase is to build capacity for fairlife and for our India business, both of which experienced robust growth in 2023. Related to capital return, we have an unwavering priority to grow our dividend as we've done with 61 consecutive years of dividend increases. With respect to share repurchases, we will be flexible in our approach. Typically, we've repurchased shares to offset any dilution from the exercise of stock options by employees in the given year. Our capital allocation policy prioritize agility. And we're committed to taking the right actions needed to drive the long-term health of our business and create value for our stakeholders. There are some considerations to keep in mind for 2024. The first quarter of 2024 will be impacted by the timing of concentrate shipments in the fourth quarter of 2023 in some markets and cycling our strongest volume growth quarter from the prior year. We estimate the ongoing conflict in the Middle East had approximately 1 point of impact on volume growth during the fourth quarter of 2023. It's unclear how long this impact will last. In November 2023, the U.S. Tax Court rendered its supplemental opinion related to our ongoing dispute with the Internal Revenue Service. We intend to move forward on appeal and vigorously defend our position. We have ample balance sheet flexibility to fund any payment related to the appeal. Finally, due to our reporting calendar, there will be one less day in the first quarter and two additional days in the fourth quarter. So in summary, we're pleased with what we accomplished in 2023, we're building on our capabilities to continue the underlying momentum across our markets, we're progressing on our refranchising agenda and we're reinvesting in our system to drive long-term growth. We have great confidence, we can deliver on our 2024 guidance and long-term commitments. With that, operator, we're ready to take questions.","evidence_gemma_new":null,"evidence_llama_3_3":"free cash flow 2024","evidence_qwen_3_30b":"free cash flow 2024","gemma_new_max":null,"gemma_new_min":null,"llama_3_3_max":9200000000.0,"llama_3_3_min":9200000000.0,"qwen_3_30b_max":9200000000.0,"qwen_3_30b_min":9200000000.0}
{"symbol":"KO","year":2024,"quarter":1,"date":"2024-Q1","chunk_id":3,"sub_chunk_id":0,"centroid_label":"adjusted free cash flow","agreed_value":160000000.0,"count":3,"chunk":"John Murphy: Thank you, James, and good morning, everyone. Our first quarter results marked a continuation of the underlying momentum in our business, driven by a strong and focused system. We delivered another quarter of volume growth, even as we cycled strong results. Additionally, we completed the refranchising of several bottlers during the quarter, leading to further comparable margin expansion. We progressed on our refranchising agenda, while making sure we best position our system to deliver long-term growth, and we earn a fair return on our investments. We continue to invest behind our portfolio with discipline and flexibility, thanks to our enhanced resource allocation agenda. During the quarter, we grew organic revenues 11%. We had 1% unit case growth. Concentrate sales were behind unit case volume by 3 points, driven by 1 less day in the quarter and the timing of concentrate shipments, primarily in Mexico and the Middle East. Our price\/mix growth of 13% in the quarter was driven by approximately 6 points of intense inflationary pricing across a handful of markets to offset significant currency devaluation, pricing actions across a number of markets and a couple of points of favorable mix. Excluding impacts from intense inflationary pricing, organic revenue growth in the first quarter was at the high end of our long-term growth algorithm. Comparable gross margin for the quarter was up approximately 130 basis points driven by underlying expansion and a benefit from bottler refranchising, partially offset by the impact of currency headwinds. Comparable operating margin expanded approximately 60 basis points for the quarter. This was primarily driven by strong top line growth and bottler refranchising, partially offset by currency headwinds and an increase in marketing investments. Markets experiencing intense inflation represent only a single-digit contribution to our volume, but continue to have an outsized impact on the shape of our P&L. Putting it all together, first quarter comparable EPS of $0.72 was up 7% year-over-year, including 9% currency headwinds, which were driven by currency devaluation in markets experiencing intense inflation. Free cash flow was approximately $160 million, an increase from the prior year. Before moving on, I want to discuss 2 items that are included in our first quarter reported results, a $765 million charge related to the remeasurement of our contingent consideration liability for our acquisition of fairlife. Our final payment related to the fairlife acquisition will take place in 2025. This payment has grown as fairlife has outperformed. We continue to be encouraged by our ability to scale fairlife organically. Secondly, a noncash impairment charge of $760 million related to BODYARMOR. While we are taking a charge to reflect revised projections and a higher discount rate since the acquisition date of BODYARMOR, we believe in the power of our 2 sports brand strategy with POWERADE and BODYARMOR. We're taking actions to help create long-term value, and we're seeing signs that this strategy is working. Our balance sheet remains strong and our net debt leverage of 1.6x EBITDA is below our targeted range of 2 to 2.5x. This gives us ample capacity for potential upcoming payments in 2024 related to the IRS tax case, which we continue to vigorously defend, and the upcoming fairlife payment in 2025. We continue to remain consistent in our approach to prioritizing our capital allocation. We're committed to investing to drive growth and to support our dividend, which we have raised for 62 consecutive years. We're confident our business model has the flexibility to allow us to deliver on our overall objectives. Our updated 2024 guidance reflects the underlying momentum of our business, and we now expect organic revenue growth of 8% to 9%, and comparable currency-neutral earnings per share growth of 11% to 13%. Our revised top line guidance is solely driven by higher-than-expected inflationary pricing in a handful of markets, which we expect to moderate throughout the year. Bottler refranchising is still expected to be a 4- to 5-point headwind to comparable net revenues and a 2-point headwind to comparable earnings per share, but will have a positive impact on both our margins and the return profile of our business. Based on current rates and our hedge positions, we anticipate an approximate 4- to 5-point currency headwind to comparable net revenues, and an approximate 7 to 8-point currency headwind to comparable earnings per share for full year 2024. This increase in currency headwind is driven by intense inflationary markets, while the rest of the currency basket is relatively neutral to our results. Our underlying effective tax rate for 2024 is now expected to be 19%. All in, we continue to expect comparable earnings per share growth of 4% to 5% versus $2.69 in 2023. There are some considerations to keep in mind. We estimate the ongoing conflict in the Middle East had approximately 1 point of impact on volume growth during the first quarter of 2024. It's unclear how long this impact will last. The cadence of structural impact will be larger in the second and third quarters due to the timing of transaction closing during the first quarter and the seasonality of the businesses we refranchised. Finally, there will be 2 additional days in the fourth quarter. To sum it up, and as James said, the year has started off well. We remain focused on the execution of our all-weather strategy. And thanks to the partnership of our system and the ongoing dedication of our people, we're confident we can create value for our stakeholders and deliver on our guidance for the year. And as we said at CAGNY, we're primed for performance in 2024 and over the long term. With that, operator, we are ready to take questions.","evidence_gemma_new":"free cash flow","evidence_llama_3_3":"free cash flow prior year","evidence_qwen_3_30b":"free cash flow first quarter","gemma_new_max":160000000.0,"gemma_new_min":160000000.0,"llama_3_3_max":160000000.0,"llama_3_3_min":160000000.0,"qwen_3_30b_max":160000000.0,"qwen_3_30b_min":160000000.0}
{"symbol":"KO","year":2024,"quarter":2,"date":"2024-Q2","chunk_id":3,"sub_chunk_id":0,"centroid_label":"adjusted free cash flow","agreed_value":3300000000.0,"count":3,"chunk":"John Murphy: Thank you, James, and good morning, everyone. In the second quarter, we delivered strong results. We grew organic revenues 15%. This consisted of 2% unit case growth. Concentrate sales were ahead of volume by four points, driven primarily by timing of concentrate shipments, and some disruptions in the global supply chain that we partly expect, to reverse next quarter. Our price\/mix growth of 9% in the quarter was primarily driven by two items: one, approximately five points of intense inflationary pricing, across a handful of markets to offset significant currency devaluation. And two, an array of pricing and mix actions across our markets. Excluding the impacts from concentrate shipment timing and pricing from markets with intense inflation. Organic revenue growth during the quarter was at the high end of our long-term growth algorithm. Comparable gross margin was up approximately 200 basis points, driven by underlying expansion, and the benefit from bottler refranchising partially offset by currency headwinds. Comparable operating margin expanded approximately 120 basis points. Comparable operating margin expansion was less than comparable gross margin expansion, due to less benefit from bottler refranchising and greater currency headwinds to comparable operating margin. Putting it all together, second quarter comparable EPS of $0.84 was up 7% year-over-year despite 10% currency headwinds and 2% headwind from bottler refranchising. Free cash flow was approximately $3.3 billion, down approximately $700 million versus the prior year, due to higher tax payments, cycling working capital benefits from the prior year and higher capital expenditures. We continue to take actions, to achieve a fit for purpose balance sheet that, will best support our growth agenda. During the quarter, we raised approximately $4 billion in cash by issuing long-term debt for general corporate purposes. This may include pre-funding upcoming payments related to the IRS tax case and the Fairlife contingent consideration. With respect to our IRS tax case, which we continue to vigorously defend. We're making progress to our next steps, and we expect we will be able to move forward an appeal by the end of the year. Given the continued outperformance of Fairlife, we recorded a charge of $1.3 billion during the quarter. Our estimated final payment related to this acquisition is $5.3 billion, which will be made in 2025. We are encouraged by Fairlife's performance and the value it has created for our company. So far this year, we've realized nearly $3 billion in gross proceeds from bottler refranchising and streamlining our equity investments. We'll continue to prioritize higher growth businesses, and take passive capital off the table. Return on invested capital is 24%, up approximately five points from three years ago. Our balance sheet is strong, as demonstrated by our net debt leverage of 1.5 times EBITDA, which is well below our targeted range of 2 to 2.5 times. We have ample capacity to pursue our capital allocation agenda, which prioritizes investing to drive further growth, continuing to support our dividend and staying dynamic, agile and opportunistic. As James mentioned, we're proactively managing our portfolio to deliver on our commitments. Our updated 2024 guidance reflects the momentum of our business in the first half of the year, and our confidence in our ability to execute on our plans during the second half of this year. We now expect organic revenue growth of 9% to 10%, and comparable currency-neutral earnings per share growth of 13% to 15%. Bottler refranchising is still expected to be a four to five-point headwind, to comparable net revenues. And we now expect a one to two-point headwind, to comparable earnings per share. Based on current rates and our hedge positions, we now anticipate an approximate five to six-point currency headwind, to comparable net revenues and an approximate eight to nine-point currency headwind, to comparable earnings per share for full year 2024. This increase in currency headwind is driven by a small number of intensive treasury markets, while the rest of the currency basket is relatively neutral to our results. All in, we now expect comparable earnings per share growth of 5% to 6% versus $2.69 in 2023. There are some considerations to keep in mind. We expect unit cases and concentrate shipments to be relatively in line with each other for the full year 2024. Please keep in mind there are two extra days in the fourth quarter. Taking everything into consideration, we expect earnings growth during the remainder of 2024, will be weighted towards the fourth quarter. To summarize, we're encouraged by our track record and the underlying momentum of our business. Our system remains incredibly focused and motivated to drive growth. We're continuing to drive quality top line growth, expand margins, grow comparable earnings per share and improve the return profile of our business. And we're confident we will deliver on our guidance, and longer-term objectives. With that, operator, we are ready to take questions.","evidence_gemma_new":"Free cash flow","evidence_llama_3_3":"Free cash flow second quarter","evidence_qwen_3_30b":"free cash flow second quarter","gemma_new_max":3300000000.0,"gemma_new_min":3300000000.0,"llama_3_3_max":3300000000.0,"llama_3_3_min":3300000000.0,"qwen_3_30b_max":3300000000.0,"qwen_3_30b_min":3300000000.0}
{"symbol":"KO","year":2024,"quarter":3,"date":"2024-Q3","chunk_id":3,"sub_chunk_id":0,"centroid_label":"adjusted free cash flow","agreed_value":7600000000.0,"count":3,"chunk":"John Murphy: Thank you, James, and good morning, everyone. Today I'll comment on our third quarter performance, discuss the outlook for the remainder of 2024, and provide some early commentary on 2025. During the third quarter, we grew organic revenues 9%. Unit cases declined 1% having had a poor July, but improving sequentially thereafter during the quarter. Concentrate sales were 1 point behind unit cases for the quarter, driven primarily by the timing of concentrate shipments. Our price\/mix growth of 10% was driven by two items. Approximately 7 points of pricing split somewhat evenly between normal pricing actions across our markets and intense inflationary pricing in a handful of markets experiencing currency devaluations, and approximately 3 points of mix across the markets, which was primarily driven by stronger growth in several developed markets versus developing and emerging markets. Excluding the impact from intense inflationary pricing, organic revenue growth during the quarter continued to be at the high end of our long-term growth algorithm. Comparable gross margin was up approximately 70 basis points and comparable operating margin was up approximately 100 basis points. Both were driven by underlying expansion and the benefit from butter refranchising, partially offset by the impact of currency headwinds. Putting it all together, third quarter comparable EPS of $0.77 was up 5% year-over-year despite higher-than-expected 9% currency headwinds and 2% headwinds from bottler refranchising. During the quarter, we made a $6 billion deposit with the IRS related to our ongoing tax dispute. We've also filed our appeal with the 11th Circuit Court. We're pleased to move forward with the process. We will vigorously defend our position. We believe we will prevail, and we will continue to keep you updated. Free cash flow, excluding the IRS tax litigation deposit, was approximately $7.6 billion, which is down approximately $290 million versus the prior year due to higher other tax payments, higher capital expenditures and cycling some working capital benefits from the prior year. Our balance sheet is strong, and our net debt leverage of 1.7 times EBITDA is below our targeted range of 2x to 2.5x. If you include our latest estimate of $6.1 billion related to our fairlife contingent consideration payment, which we expect to make in the first half of 2025, our expected net debt leverage would be at the low end of our target range. As James mentioned, our powerful portfolio, amplified by our system's unique capabilities gives us confidence in our ability to deliver on our updated 2024 guidance. We now expect organic revenue growth of approximately 10% and comparable currency-neutral earnings per share growth of 14% to 15%. Based on current rates and our hedge positions, we now anticipate an approximate 5-point currency headwind to comparable net revenues and an approximate 9-point currency headwind to comparable earnings per share for full year 2024. We continue to expect comparable earnings per share growth of 5% to 6% versus $2.69 in 2023. While it is too early to provide specific guidance on 2025, we do want to share some considerations based on what we know today. We're encouraged by our underlying performance and believe we're well positioned to deliver on our long-term growth opportunity. We expect pricing from intense inflationary markets to moderate in 2025 and recycling the impact of currency devaluations from these markets in 2024. With respect to our commodity environment, we expect prices on industrial materials to remain relatively stable, while agricultural commodities will continue to face volatility and higher prices. We will continue to invest behind our brands as we have been doing, while at the same time we will leverage a range of productivity levers to drive efficiency and effectiveness across our P&L. We expect elevated net interest expense resulting from the deposit made related to the ongoing IRS tax dispute and upcoming fairlife contingent consideration payment. Regarding currency, if we assume current rates on our hedge positions, there would be an approximate low single-digit currency headwind to comparable net revenues and an approximate mid-single-digit currency headwind to comparable earnings per share for full year 2025. Many factors could impact both our currency outlook and broader business between now and when we expect to provide guidance in February. With our all-weather strategy, we've delivered comparable earnings growth for many years now. We have numerous levers to continue to do so. So in summary, successfully executing our strategy in an ever-evolving operating environment, we're confident in our ability to deliver on our objectives in 2024 and over the long-term. We're clear on the direction we are heading in the system. And we continue to invest with our bottling partners to drive sustainable long-term growth. With that, operator, we are ready to take questions.","evidence_gemma_new":"Free cash flow","evidence_llama_3_3":"free cash flow third quarter","evidence_qwen_3_30b":"free cash flow third quarter","gemma_new_max":7600000000.0,"gemma_new_min":7600000000.0,"llama_3_3_max":7600000000.0,"llama_3_3_min":7600000000.0,"qwen_3_30b_max":7600000000.0,"qwen_3_30b_min":7600000000.0}
{"symbol":"KO","year":2024,"quarter":4,"date":"2025-FY","chunk_id":3,"sub_chunk_id":0,"centroid_label":"adjusted free cash flow","agreed_value":9500000000.0,"count":3,"chunk":"John Murphy: Thank you, James, and good morning, everyone. We closed the year with strong fourth quarter results. And as James said earlier, we delivered 7% comparable earnings per share growth in 2024 on top of 6% average comparable earnings per share growth over the prior 5 years. During the fourth quarter, we grew organic revenues 14%. Unit case growth was 2%, which is in line with our multiyear trend. Concentrate sales grew 3 points ahead of unit cases driven primarily by 2 additional days in the quarter and the timing of concentrate shipments. Our price\/mix growth of 9% was driven by two items: Approximately 8 points of pricing split somewhat evenly between normal pricing actions across our markets and intense inflationary pricing in a handful of markets experiencing currency devaluations and approximately one point of favorable mix. Excluding the impact of intense inflationary pricing, organic revenue growth was above our long-term growth algorithm. Comparable gross margin was up approximately 160 basis points and comparable operating margin was up approximately 80 basis points. Bottlers refranchising had a greater benefit to comparable gross margin and currency headwinds had a larger impact to comparable operating margin. [indiscernible] altogether, fourth quarter comparable EPS of $0.55 was up 12% year-over-year despite 11% currency headwinds and 4% headwinds from bottlers refranchising. [Audio Gap] In 2024, adjusted free cash flow conversion was 93%, which is within our long-term targeted range. [Audio Gap] at the high end of our long-term growth algorithm. We continue to focus on driving balanced volume and price\/mix and anticipate intense inflationary pricing will play a smaller role in 2025 and will moderate throughout the year. Our refranchise is expected to be a slight headwind to comparable net revenues and comparable earnings per share as we cycle the impact of bottler refranchising in 2024. We'll continue to invest appropriately behind our brands while also driving productivity across all areas of marketing. Next week at CAGNY, we'll discuss further our marketing transformation and enhanced resource allocation capabilities give us confidence in our ability to continue to drive more productivity we expect expense to be elevated versus prior year. We believe the step-up is manageable, and we're not expecting significant leverage or deleverage below the line. Based on current rates and our hedge positions, we anticipate an approximate 3- to 4-point currency headwind to comparable net revenues and an approximate 6 to 7-point currency headwind to comparable earnings per share for full year 2025. Our underlying effective tax rate for 2025 is expected to increase to 20.8% and which is driven primarily by the impact of several countries enacting the global minimum tax regulations. All in, we expect comparable earnings per share growth of 2% to 3% and versus $2.88 in 2024. Excluding the fair life contingent consideration payment, we expect to generate approximately $9.5 billion of free cash flow in 2025 through approximately $11.7 billion in cash from operations, less approximately $2.2 billion in capital investments. Included in this guidance are 2 items to highlight: One, a $1.2 billion transition tax payment, an increase of approximately $240 million versus 2024. This is the final year that we will make a payment related to the Tax Cuts and Jobs Act of 2017. Number two, we expect that part of the timing of working capital initiatives that benefited 2024 free cash flow will reverse and impact 2025 free cash flow. Driven by our underlying cash flow generation, we have flexibility to invest in our business and return capital to shareowners. A significant portion of our expected capital investment is to build capacity for fairlife and to continue to invest in our system in India and Africa. With respect to acquisitions and divestitures, we're making good progress on our agenda. Since 2006, we've added $9 billion brands via acquisition. Importantly, only 3 of these brands were $1 billion-dollar brands at the time of acquisition, demonstrating progress in scaling acquisitions. In 2024, we realized $3.5 billion in gross proceeds from refranchising bottling investments as a percent of consolidated net revenue is 13%, down from 52% in 2015. Return on invested capital is up 6 points at the same time. Related to capital return, we have an unwavering priority to grow our dividend as we've done for 62 consecutive years. Our dividend is supported by our long-term free cash flow generation. In 2024, dividends paid [indiscernible] as a percent, our adjusted free cash flow was 73%. On share repurchases, we've typically repurchased shares to offset any dilution from the exercise of stock options by employees in the given year. Our capital allocation policy prioritizes agility and we're committed to driving the long-term health of our business and creating value for our stakeholders. There are some considerations to keep in mind for 2025. We expect bottler refranchising to have a greater impact to comparable net revenues and comparable earnings per share during the first quarter as we cycle the impact of refranchising the Philippines, which closed during the first quarter of 2024. We expect the productivity benefits that I previously discussed to have a larger impact during the latter half of 2025. Due to our reporting calendar, there will be 2 less days in the first quarter and 1 additional day in the fourth quarter. So in summary, we're successfully executing our all-weather strategy to deliver on our objectives. Our system remains incredibly focused and motivated. We will continue to invest with discipline and believe we're well positioned to drive quality top line growth and deliver continued margin expansion. A hallmark of our company since its inception has been our ability to create enduring value over time, and we expect to continue to do so. With that, operator, we are ready to take questions.","evidence_gemma_new":"free cash flow 2025","evidence_llama_3_3":"free cash flow 2025","evidence_qwen_3_30b":"free cash flow $9.5 billion 2025","gemma_new_max":9500000000.0,"gemma_new_min":9500000000.0,"llama_3_3_max":9500000000.0,"llama_3_3_min":9500000000.0,"qwen_3_30b_max":9500000000.0,"qwen_3_30b_min":9500000000.0}
{"symbol":"KO","year":2023,"quarter":3,"date":"2023-Q3","chunk_id":3,"sub_chunk_id":0,"centroid_label":"average comparable earnings per share growth","agreed_value":7.5,"count":2,"chunk":"John Murphy: Thank you, James and good morning, everyone. Today, I'll comment on our third quarter performance and highlight our updated 2023 guidance. I'll also provide some early commentary on 2024 and the actions we are taking to continue to deliver on our objectives. As James mentioned, we delivered strong third quarter results. Starting with the top line. We grew organic revenues 11%. Unit case growth was 2%. If you exclude the impact of suspending our business in Russia, we have delivered positive volume growth in each quarter since the start of 2021. Concentrate sales were in line with unit cases for the quarter. Price\/mix growth was 9% driven by pricing actions across operating segments, including the impact of a few hyperinflationary markets, along with carryover pricing coming into the base from last year. Comparable gross margin for the quarter was up approximately 130 basis points driven by underlying expansion and a slight benefit from bottler refranchising, partially offset by the impact of currency headwinds. Comparable operating margin expanded approximately 20 basis points for the quarter. This was primarily driven by strong top line growth and the impact of refranchising bottling operations, partially offset by an increase in marketing investments versus the prior year as well as currency headwinds. Putting it all together, third quarter comparable EPS of $0.74 was up 7% year-over-year despite higher-than-expected 4% currency headwinds. Free cash flow was approximately $7.9 billion year-to-date. This was largely attributable to strong underlying operational performance and working capital benefits, partially offset by $720 million transition tax payment and $230 million in M&A-related payments. Our balance sheet is strong and our net debt leverage of 1.5x EBITDA is below our target range of 2 to 2.5x. Recently, we entered into a letter of intent to refranchise our Philippines bottler. As we progress on our refranchising journey, we aspire to improve the return profile of our business. In 2015, when Bottling Investments Group was more than 50% of our net revenue, our return on invested capital was approximately 17%. Today, Bottling Investments Group makes up less than 20% of net revenue. And our return on invested capital is over 23%, nearly a 7-point increase. After this transaction closes, our remaining assets in the Bottling Investments Group will include operations in India, Africa and several smaller locations, primarily in Asia Pacific. We will remain disciplined in our refranchising approach by making sure we best position our system to deliver sustainable long-term growth. Our business performance year-to-date gives us confidence that we can deliver on our raised 2023 guidance. This is comprised of organic revenue growth of 10% to 11% which will be led by price\/mix and includes positive volume growth. We do expect pricing in developed markets to moderate in the fourth quarter as we cycle pricing initiatives from the prior year. There are also a few hyperinflationary markets that will continue to drive price\/mix. There will be 1 additional day in the fourth quarter. We now expect comparable currency-neutral earnings per share growth of 13% to 14%. And based on current rates and our hedge positions, we now expect currency to be an approximate 4-point headwind to comparable net revenues and an approximate 6-point currency headwind to comparable earnings per share for full year 2023. Based on current rates and hedge positions, we continue to expect per-case commodity price inflation in the range of a mid-single-digit impact on comparable cost of goods sold in 2023. We now expect our underlying effective tax rate for 2023 to be 19%. All in, we are updating comparable earnings per share growth of 7% to 8% versus $2.48 in 2022. We continue to expect to generate approximately $9.5 billion of free cash flow in 2023 through approximately $11.4 billion in cash from operations. That's approximately $1.9 billion in capital investments. This guidance does not include any payments related to our U.S. income tax dispute with the IRS which are unlikely to occur in 2023. Given the momentum of our business, the strength of our balance sheet and some proceeds that we expect to receive from bottler refranchising, we have increased flexibility to continue to both reinvest in our business and return capital to shareowners. While it is too early to provide specific items on 2024, we want to share some considerations based on what we know today. We're encouraged by our top line momentum across the majority of our markets. There are a handful of hyperinflationary markets where it is either not possible to hedge or it is costly to do so. In these markets, we've demonstrated that we can manage currency pressures by taking price with local market inflation and we will continue to follow this approach. While some commodities are normalizing, we also have input costs that could be impacted by tensions and conflicts. With respect to advertising spend, our bias is to continue to reinvest behind our brands while maintaining flexibility. Regarding currency, if we assume current rates and our hedge positions, there would be an approximate low single-digit currency headwind to comparable net revenues and an approximate mid-single-digit currency headwind to comparable earnings per share for full year 2024. Of course, several factors could impact both our currency outlook and broader business outlook between now and February. Over the past few years, we've delivered U.S. dollar EPS growth and we have many levers to continue to do so. So in summary, we are encouraged by our business results and confident in our ability to deliver on our commitments over the long term. Thanks to the incredible commitment of our system employees around the world, we're very clear on the direction we are heading and well equipped to execute on the strategies to get us there. And we continue to invest to drive sustainable long-term growth. We remain focused on capturing the opportunities available to us. With that, operator, we are ready to take questions.","evidence_gemma_new":"comparable earnings per share growth","evidence_llama_3_3":null,"evidence_qwen_3_30b":"comparable earnings per share growth 7% to 8%","gemma_new_max":7.5,"gemma_new_min":7.5,"llama_3_3_max":null,"llama_3_3_min":null,"qwen_3_30b_max":7.5,"qwen_3_30b_min":7.5}
{"symbol":"KO","year":2024,"quarter":1,"date":"2024-Q1","chunk_id":2,"sub_chunk_id":0,"centroid_label":"average comparable earnings per share growth","agreed_value":7.0,"count":2,"chunk":"Now I will turn the call over to James. James Quincey: Thanks, Robin, and good morning, everyone. We're off to a good start this year as our first quarter results continued the momentum we've been building by executing our all-weather strategy. The operating backdrop differed greatly across our markets once again, but our powerful portfolio, coupled with our systems capabilities, equip us with the agility we need to deliver on our 2024 guidance, which we are updating today. This morning, I'll discuss the drivers in the quarter and how we use our scale and growth mindset to deliver these strong results. Then I'll highlight how we continue to meet consumer needs and grow our total beverage portfolio. Finally, John will discuss our financial results and updated 2024 guidance. In the first quarter, we grew volume and expanded comparable margins, and we continued to invest across the business. We're managing currency fluctuations to deliver earnings growth as shown by the 7% comparable earnings per share growth despite 9% currency headwinds, and we gained value share in both at-home and away-from-home channels. Across the world, we're continuing to win in the market by leveraging our scale and relying on our local expertise of our bottling partners. In Asia Pacific, momentum continued across a large portion of our business, including Japan and South Korea, Philippines and Thailand. We gained traction in Indonesia with a return to volume growth. India's momentum was impacted by some temporary factors that recovered at the end of March. In China, retail sales growth continues to improve, but consumer confidence is still below 2019 levels. We remain optimistic about the many opportunities ahead of us, and we're stepping up our execution in a number of ways. For example, greater focus on our core business for a more segmented market approach and more surgical horizontal market and execution. In EMEA, we're seeing gradual improvement in macro trends in Europe, leading to improved consumer confidence. We paired Sprite with spicy new locations to drive momentum in away-from-home channels. Fuze Tea and POWERADE also generated strong performance, and Jack Daniels and Coca-Cola expanded to 6 more European markets during the quarter. Africa saw continued volume momentum from last quarter, while navigating a number of markets with significant currency devaluations. Geopolitical and economic challenges in Eurasia and the Middle East continue to affect our business in the region. We are working closely with local partners to manage these challenging dynamics, and we're committed to investing behind the strength of our brands for the long term. North America volume had a slow start to the quarter before posting sequential improvement in each of the last 2 months of the quarter and elasticities remain favorable, leading to ongoing share gains. The launch of Coke Spiced featured compelling in-store displays. Across our sparkling softdrink brands, Zero Sugar sugar performance was strong, and we introduced 12-ounce slim cans to further drive premiumization. Value-added dairy continued across fairlife and Core Power in sports drinks, notwithstanding the noncash impairment charge that John will speak to in more detail. We believe our 2-brand strategy with POWERADE and BODYARMOR is gaining traction, and we've seen improved share trends. While we still have work to do, the stepped up execution by our dedicated sales force in driving improved on-shelf execution and we're encouraged by the continued growth in sports water and the more recent BODYARMOR innovations, including Zero Sugar and Flash I.V. While inflation has moderated and wages continue to trend upward in North America, we're closely monitoring consumer sentiment and traffic trends between at-home and away-from-home consumption. In Latin America, volume momentum continued. Performance was driven by strength in Mexico, Brazil and Colombia, while Argentina continued to experience high inflationary conditions. We have quality leadership across our portfolio in Latin America, with Coca-Cola Zero Sugar continuing its strong performance. Sparkling flavors, sports, juices and alcohol ready-to-drink also performed well during the quarter. Commercial initiatives are driving improved shelf space and basket incidence supported by ongoing outlet digitization. We have suggested order capabilities in digital platforms that reach more than 3 million customers in the region. Across developed markets, the overall inflationary environment is normalizing. However, across developing emerging markets, there continues to be a handful of markets that are experiencing intense inflation, which is driving elevated pricing, offset by incremental currency headwinds. We're proactively managing these volatile environments, and we feel confident we have the playbook to navigate challenges locally, while continuing our momentum at a consolidated level. We're continuing to spin our strategic flywheel faster across total beverage portfolio. And as discussed at CAGNY, we're building loved brands and innovating and delivering bigger, bolder bets. In the first quarter, we launched K-Wave as part of the Coke Creations platform in markets across 5 operating units. K-Wave celebrates Korean pop or K-pop fans, includes a global collaboration with 3 K-pop groups and an AI-based fan experience. Our growing number of Coke Creations are different with each iteration and, by design, are only available for a limited time. This generates buzz and excitement building relevance for the brand and reconsideration for Coke with Gen Z drinkers. We also know that sometimes the most successful lasting innovation is simply improving the taste of existing drinks. Using our deep in-house flavor expertise and understanding of the science of taste, we have worked to refine the recipes for Fanta and Sprite to meet consumer preferences across many markets. These changes bring new consumers to our brands as well as remind current consumers what drew them to their favorite beverages in the first place. The strong Fanta performance in markets from Brazil to Germany to the U.S. this quarter is largely due to this type of innovation, which was supported by marketing messages focused on taste and on tying the brand to snacking occasions at local festivals, like Carnival in Brazil. Elsewhere in our total beverage portfolio, Minute Maid Zero Sugar kicked off its global campaign in North America, leveraging influencers, social media and connected commerce activations with key customers. We're building on our innovations by driving awareness and excitement through an increasingly digital marketing media mix. Our total beverage portfolio plays a lead role, as shown by the New Guy campaign in the U.S. this quarter, which featured multiple grounds across categories. Innovation is woven into the fabric of our culture, and we're encouraged by our innovation pipeline as we look forward to the rest of 2024. Moving across the flywheel, we're leaning into integrated execution to drive basket incidence and create incremental value for customers. We work closely with our bottling partners and went bigger with in-store displays to inspire transactions around key events like NCAA March Madness in the U.S., and we'll do this again later this summer with the Olympic and Paralympic Games. As a system to improve quality availability, we increased outlets by 2%, added more than 600,000 cooler doors and increased our share of cold space and overall shelf space in stores. We benefited from global scale, while maintaining local relevance by tying our brands to regional meals occasions. For example, in Japan, we've associated Coke with Wagyu and Yakiniku through the path to purchase, using end-to-end consumer messaging and partnering with key customers in the modern trade and convenience retail. We have seen strong Coca-Cola revenue growth in Japan. While we continue to grow our business, we also strive to positively impact the communities we serve. We do this by focusing on the issues that matter most to our system, and we share our status and learnings each year when we publish our business' sustainability report. Putting it all together, it's early in the year, but we're off to a good start. We have confidence we will achieve our guidance for the year. With that, I'll turn the call over to John.","evidence_gemma_new":"comparable earnings per share growth 7%","evidence_llama_3_3":"comparable earnings per share growth 7% first quarter","evidence_qwen_3_30b":null,"gemma_new_max":7.0,"gemma_new_min":7.0,"llama_3_3_max":7.0,"llama_3_3_min":7.0,"qwen_3_30b_max":null,"qwen_3_30b_min":null}
{"symbol":"KO","year":2024,"quarter":1,"date":"2024-Q1","chunk_id":3,"sub_chunk_id":0,"centroid_label":"average comparable earnings per share growth","agreed_value":4.5,"count":2,"chunk":"John Murphy: Thank you, James, and good morning, everyone. Our first quarter results marked a continuation of the underlying momentum in our business, driven by a strong and focused system. We delivered another quarter of volume growth, even as we cycled strong results. Additionally, we completed the refranchising of several bottlers during the quarter, leading to further comparable margin expansion. We progressed on our refranchising agenda, while making sure we best position our system to deliver long-term growth, and we earn a fair return on our investments. We continue to invest behind our portfolio with discipline and flexibility, thanks to our enhanced resource allocation agenda. During the quarter, we grew organic revenues 11%. We had 1% unit case growth. Concentrate sales were behind unit case volume by 3 points, driven by 1 less day in the quarter and the timing of concentrate shipments, primarily in Mexico and the Middle East. Our price\/mix growth of 13% in the quarter was driven by approximately 6 points of intense inflationary pricing across a handful of markets to offset significant currency devaluation, pricing actions across a number of markets and a couple of points of favorable mix. Excluding impacts from intense inflationary pricing, organic revenue growth in the first quarter was at the high end of our long-term growth algorithm. Comparable gross margin for the quarter was up approximately 130 basis points driven by underlying expansion and a benefit from bottler refranchising, partially offset by the impact of currency headwinds. Comparable operating margin expanded approximately 60 basis points for the quarter. This was primarily driven by strong top line growth and bottler refranchising, partially offset by currency headwinds and an increase in marketing investments. Markets experiencing intense inflation represent only a single-digit contribution to our volume, but continue to have an outsized impact on the shape of our P&L. Putting it all together, first quarter comparable EPS of $0.72 was up 7% year-over-year, including 9% currency headwinds, which were driven by currency devaluation in markets experiencing intense inflation. Free cash flow was approximately $160 million, an increase from the prior year. Before moving on, I want to discuss 2 items that are included in our first quarter reported results, a $765 million charge related to the remeasurement of our contingent consideration liability for our acquisition of fairlife. Our final payment related to the fairlife acquisition will take place in 2025. This payment has grown as fairlife has outperformed. We continue to be encouraged by our ability to scale fairlife organically. Secondly, a noncash impairment charge of $760 million related to BODYARMOR. While we are taking a charge to reflect revised projections and a higher discount rate since the acquisition date of BODYARMOR, we believe in the power of our 2 sports brand strategy with POWERADE and BODYARMOR. We're taking actions to help create long-term value, and we're seeing signs that this strategy is working. Our balance sheet remains strong and our net debt leverage of 1.6x EBITDA is below our targeted range of 2 to 2.5x. This gives us ample capacity for potential upcoming payments in 2024 related to the IRS tax case, which we continue to vigorously defend, and the upcoming fairlife payment in 2025. We continue to remain consistent in our approach to prioritizing our capital allocation. We're committed to investing to drive growth and to support our dividend, which we have raised for 62 consecutive years. We're confident our business model has the flexibility to allow us to deliver on our overall objectives. Our updated 2024 guidance reflects the underlying momentum of our business, and we now expect organic revenue growth of 8% to 9%, and comparable currency-neutral earnings per share growth of 11% to 13%. Our revised top line guidance is solely driven by higher-than-expected inflationary pricing in a handful of markets, which we expect to moderate throughout the year. Bottler refranchising is still expected to be a 4- to 5-point headwind to comparable net revenues and a 2-point headwind to comparable earnings per share, but will have a positive impact on both our margins and the return profile of our business. Based on current rates and our hedge positions, we anticipate an approximate 4- to 5-point currency headwind to comparable net revenues, and an approximate 7 to 8-point currency headwind to comparable earnings per share for full year 2024. This increase in currency headwind is driven by intense inflationary markets, while the rest of the currency basket is relatively neutral to our results. Our underlying effective tax rate for 2024 is now expected to be 19%. All in, we continue to expect comparable earnings per share growth of 4% to 5% versus $2.69 in 2023. There are some considerations to keep in mind. We estimate the ongoing conflict in the Middle East had approximately 1 point of impact on volume growth during the first quarter of 2024. It's unclear how long this impact will last. The cadence of structural impact will be larger in the second and third quarters due to the timing of transaction closing during the first quarter and the seasonality of the businesses we refranchised. Finally, there will be 2 additional days in the fourth quarter. To sum it up, and as James said, the year has started off well. We remain focused on the execution of our all-weather strategy. And thanks to the partnership of our system and the ongoing dedication of our people, we're confident we can create value for our stakeholders and deliver on our guidance for the year. And as we said at CAGNY, we're primed for performance in 2024 and over the long term. With that, operator, we are ready to take questions.","evidence_gemma_new":"comparable earnings per share growth","evidence_llama_3_3":null,"evidence_qwen_3_30b":"comparable earnings per share growth 2023","gemma_new_max":4.5,"gemma_new_min":4.5,"llama_3_3_max":null,"llama_3_3_min":null,"qwen_3_30b_max":4.5,"qwen_3_30b_min":4.5}
{"symbol":"KO","year":2024,"quarter":3,"date":"2024-Q3","chunk_id":3,"sub_chunk_id":0,"centroid_label":"average comparable earnings per share growth","agreed_value":5.5,"count":2,"chunk":"John Murphy: Thank you, James, and good morning, everyone. Today I'll comment on our third quarter performance, discuss the outlook for the remainder of 2024, and provide some early commentary on 2025. During the third quarter, we grew organic revenues 9%. Unit cases declined 1% having had a poor July, but improving sequentially thereafter during the quarter. Concentrate sales were 1 point behind unit cases for the quarter, driven primarily by the timing of concentrate shipments. Our price\/mix growth of 10% was driven by two items. Approximately 7 points of pricing split somewhat evenly between normal pricing actions across our markets and intense inflationary pricing in a handful of markets experiencing currency devaluations, and approximately 3 points of mix across the markets, which was primarily driven by stronger growth in several developed markets versus developing and emerging markets. Excluding the impact from intense inflationary pricing, organic revenue growth during the quarter continued to be at the high end of our long-term growth algorithm. Comparable gross margin was up approximately 70 basis points and comparable operating margin was up approximately 100 basis points. Both were driven by underlying expansion and the benefit from butter refranchising, partially offset by the impact of currency headwinds. Putting it all together, third quarter comparable EPS of $0.77 was up 5% year-over-year despite higher-than-expected 9% currency headwinds and 2% headwinds from bottler refranchising. During the quarter, we made a $6 billion deposit with the IRS related to our ongoing tax dispute. We've also filed our appeal with the 11th Circuit Court. We're pleased to move forward with the process. We will vigorously defend our position. We believe we will prevail, and we will continue to keep you updated. Free cash flow, excluding the IRS tax litigation deposit, was approximately $7.6 billion, which is down approximately $290 million versus the prior year due to higher other tax payments, higher capital expenditures and cycling some working capital benefits from the prior year. Our balance sheet is strong, and our net debt leverage of 1.7 times EBITDA is below our targeted range of 2x to 2.5x. If you include our latest estimate of $6.1 billion related to our fairlife contingent consideration payment, which we expect to make in the first half of 2025, our expected net debt leverage would be at the low end of our target range. As James mentioned, our powerful portfolio, amplified by our system's unique capabilities gives us confidence in our ability to deliver on our updated 2024 guidance. We now expect organic revenue growth of approximately 10% and comparable currency-neutral earnings per share growth of 14% to 15%. Based on current rates and our hedge positions, we now anticipate an approximate 5-point currency headwind to comparable net revenues and an approximate 9-point currency headwind to comparable earnings per share for full year 2024. We continue to expect comparable earnings per share growth of 5% to 6% versus $2.69 in 2023. While it is too early to provide specific guidance on 2025, we do want to share some considerations based on what we know today. We're encouraged by our underlying performance and believe we're well positioned to deliver on our long-term growth opportunity. We expect pricing from intense inflationary markets to moderate in 2025 and recycling the impact of currency devaluations from these markets in 2024. With respect to our commodity environment, we expect prices on industrial materials to remain relatively stable, while agricultural commodities will continue to face volatility and higher prices. We will continue to invest behind our brands as we have been doing, while at the same time we will leverage a range of productivity levers to drive efficiency and effectiveness across our P&L. We expect elevated net interest expense resulting from the deposit made related to the ongoing IRS tax dispute and upcoming fairlife contingent consideration payment. Regarding currency, if we assume current rates on our hedge positions, there would be an approximate low single-digit currency headwind to comparable net revenues and an approximate mid-single-digit currency headwind to comparable earnings per share for full year 2025. Many factors could impact both our currency outlook and broader business between now and when we expect to provide guidance in February. With our all-weather strategy, we've delivered comparable earnings growth for many years now. We have numerous levers to continue to do so. So in summary, successfully executing our strategy in an ever-evolving operating environment, we're confident in our ability to deliver on our objectives in 2024 and over the long-term. We're clear on the direction we are heading in the system. And we continue to invest with our bottling partners to drive sustainable long-term growth. With that, operator, we are ready to take questions.","evidence_gemma_new":"comparable earnings per share growth","evidence_llama_3_3":null,"evidence_qwen_3_30b":"comparable earnings per share growth","gemma_new_max":5.5,"gemma_new_min":5.5,"llama_3_3_max":null,"llama_3_3_min":null,"qwen_3_30b_max":5.5,"qwen_3_30b_min":5.5}
{"symbol":"KO","year":2024,"quarter":4,"date":"2024-Q4","chunk_id":2,"sub_chunk_id":0,"centroid_label":"average comparable earnings per share growth","agreed_value":0.07,"count":2,"chunk":"James Quincey: Thanks, Robin, and good morning, everyone. We are pleased with our 2024 results, which include volume growth robust organic revenue growth and comparable gross and operating margin expansion. This led to a 7% comparable earnings per share growth despite nearly double-digit currency headwinds and the impact of bottler refranchising. These results reflect the continuation of delivering on our long-term commitment through our all-weather strategy, we've demonstrated we have agility to navigate what comes at us and continue to grow comparable [indiscernible] Given the strong momentum about this, we're confident we can deliver on our 2025 guidance and longer-term objectives. With that as context, I'll next provide perspective on our industry and review our business performance across our segments in the fourth quarter. Then I'll explain how we're executing our strategy by amplifying what is working and fine-tuning where needed. John will end by discussing our financial results in more detail and providing an overview of our 2025 guidance. One of our fundamental strengths is that we operate in a great industry with steady growth, no matter how you slice it by consumer, by customer, by beverage category, by geography we have vast opportunities ahead of us. During the quarter, we leveraged the power of our portfolio and the local expertise of our franchise system to capitalize on these opportunities. We overall share and had broad-based share gains across our global beverage categories. We're making progress across our total beverage portfolio delivering ongoing growth in sparkling soft drinks as well as momentum in other categories like value-added dairy and tea, which are reaching global scale while remaining tailored to local consumer need. And we're continuing to strengthen alignment across our system, and we believe our global franchise model, which operates locally is an advantage to drive long-term balanced growth. During the quarter, while our operating environment remained dynamic, consumer demand held up well and our industry remains strong. Starting in Asia Pacific. In Asian and South Pacific, we grew volume during the quarter and benefited from successful integrated marketing campaigns like food marks, which were activated in over 7,000 outlets and led to trademark Coca-Cola volume growth. Our system also drove affordability by increasing refillable offerings and focusing on attractive price points. Refillable offerings contributed to approximately 1\/3 of [indiscernible] South Pacific volume growth in 2024. In China, despite continued macro headwinds, we grew volumes during the quarter and while early, we're seeing improved trends across our business. Trademark Coca-Cola continues to gain share and Sprite, Fanta and Minute Made each improved volume performance. Our system is stepping up integrated execution in 2024 by accelerating placement of cold drink equipment and activating integrated marketing campaigns in key channels. In Japan and South Korea, we grew volume during the quarter. Innovation was a strong contributor to growth, led by research [indiscernible] and a number of other brands. We're continuing to benefit from steady performance from Trademark Coca-Cola stepped up integrated execution in key channels. In India, our business rebounded nicely during the quarter, and we grew volume. We recruited consumers with innovative marketing campaigns that link Coca-Cola with music, [indiscernible] travel and Thums Up with movies. And Maza is now our 30th $ 1 billion brand. In 2024, our system added approximately 440,000 outlets to our digital customer platforms in India, which provides more opportunities to better tailor our product, price and packaging offerings. Moving on to EMEA. In Europe, volume declined during the quarter with mixed performance across Western and Eastern markets. Despite volume pressure, we grew both revenue and profit. We're engaging consumers with experiential marketing campaigns like the world needs more Fantas for Trademark Coca-Cola and by linking our brands to new occasions like Sprite with spicy meals. Also, innovation velocities and multiyear innovation success rates both performed well in 2024. We're seeing good traction on Fuze Tea, Powerade Zero, Jack and Coke and Absolute and Sprite. In Eurasia and Middle East, despite a confluence of continued macro headwinds, we returned to volume growth during the quarter. We're emphasizing the localness of our business and seeing positive responses. For example, the made in made by campaign in Turkey led to strong volume growth for Trademark Coca-Cola. Fuze Tea also had good momentum across the region. [indiscernible] driving affordability and stepping up integrated execution by increasing cooler placement and share of visible inventory during the year. In Africa, volume declined during the quarter driven primarily by pressure in North Africa and Nigeria and partially offset by strong volume momentum in South Africa. We took acts during the quarter by adjusting our pack price architecture to further drive our ability. Our system is investing for the long term, adding refillable offerings, placing more cold drink equipment and increasing manufacturing capacity in 2024. In Latin America, despite some macroeconomic pressures, we grew volume revenue and profit during the quarter. We drove trial and recruited weekly plus drinkers for trademark Coca-Cola in 2024 by better linking the brand to the meal occasion. Also, to drive [indiscernible] top line growth our system focused on increasing single-serve offerings. Over 90% of our fragmented trade customers are now on our systems digital customer platforms, allowing for greater opportunity to tailor offerings to customers' individual needs. Lastly, in North America, we grew both transactions and volume and had robust top line and profit growth during the quarter. Trademark Coca-Cola and fairlife remain leaders in at-home retail sales growth. Sparkling flavors gained share in the quarter due to successful limited time innovations like Bright, Winter Spice cranberry and Fanta juice and stepped up integrated execution focused on increased point-of-sale messaging and increased share of visible inventory. Consumers responded well to value messaging in away-from-home channels and we increased distribution of key affordable and premium offerings and benefited from product, package and channel mix in the quarter. To sum everything up, we have good momentum in our business. We're responding to market dynamics locally to execute on our global objectives. While we're delivering on our near-term commitments, we're also investing to improve execution build capabilities and get more granular across our strategic growth flywheel. Our network marketing model is integrating product, digital, live and retail experiences and we are harnessing passion points to connect with consumers in more personalized ways. One great example, Fanta Halloween was our first ever global Halloween activation, and we scaled to nearly 50 markets. Partnering with Warner Brothers Pictures, we've created a limited time plantable juice [indiscernible] apple flavor. Consumers can packages to access personalized experiences and we replicated the bet juice after life train taking over train stations, trams and metros. The campaign was activated in store with our largest customers and contributed to sparkling flavors share gain during the quarter. Our culture increasingly emphasizes acting boldly, learning and scaling successes. This year, for the first time, our Coca-Cola Christmas was created with [indiscernible] Combining emerging technology with human creativity, which allowed us to produce the ad faster and at a lower cost. The power of emerging technologies like generative AI are still at early stages and we will continue to lead and iterate our approach. We're seeing tangible results from our marketing transformation. Over the past 3 years, Trademark Coca-Cola's retail sales have increased approximately $40 billion. According to Time's Magazine, Coca-Cola, Minute Made and fairlife were named world's best brands in their respective beverage categories in 2024. While we're building capabilities in marketing, also focusing on innovation that prioritizes bigger and bolder bets. Each of our innovations have a clear objectives. Sometimes, we innovate to create a short-term buzz like Coke and Oreo or Sprite Winter Spice cranberry. In other instances, we innovate for lasting impact. This year, we focused on sustaining investments behind key innovations to improve multiyear success rates and drive greater impact. This is paying off as Fuze Tea grew retail value 3x faster than the category. Topo Chico supporters continued its momentum and Minute Maid Zero Sugar realized strong growth. In 2024, innovation contributed strongly to revenue growth and our innovation success were improved for the prior year. We're excited about our innovation pipeline for 2025. Moving across our top line flywheel. Our system is investing heavily in digital capabilities and sticking to the fundamentals of commercial excellence to accelerate consumer recruitment, increase consumption and win in the market. Ensuring product availability is one of our systems greatest strengths, yet we still have tremendous opportunity. While our system improved share of visible inventory in 2024 and our brands are found in 33 million outlets, there remains ample headroom to increase outlet coverage, reduce out of stock and better tail our offerings with the right placements. Basket incidence is another opportunity. Winning just 1 point of global beverage incidence translates into over $40 billion in additional retail sales. To drive basket incidence, our system is focused on better activating integrated marketing campaigns in key channels, increasing point-of-sale displays and winning impulse zones outside the traditional beverage aisle. Final cold drink equipment is one of the strongest consumption drivers in our systems toolbox with approximately 14 million units of cold drink equipment present in our approximately 33 million customer outlets, we have significant opportunity to drive consumption by placing more cold drink equipment. In 2024, our system invested to add nearly 600,000 coolers. Strong commercial execution is enabled by our revenue growth management capabilities, which fuel both top line growth and margin expansion. We're driving affordability and premiumization across our total beverage portfolio. The strong elasticities we're realizing today are a testament to the progress we're making in this area. By focusing on availability, basket incidents and cold drink equipment, coupled with great marketing, innovation and revenue growth management, our system recruited weekly [indiscernible], grew volume and won share in 2024. While we made steady progress executing our all-weather strategy in 2024, we're operating with the mindset that we're only just getting started. As we turn the page to 2025, we anticipate the year will bring both opportunities and challenges. We expect the external environment will be dynamic. Several underpinnings remain constant: One, we operate in a great industry; two, we have many opportunities available to us, and we are primed to capture these and deliver sustained performance; three, our powerful portfolio of brands pervasive distribution system and the unwavering dedication of our system employees are clear advantages. Next Tuesday, at CAGNY, I look forward to sharing more about how we're leading to deliver results in all types of backdrops and I encourage everyone to listen. With that, I'll turn the call over to John.","evidence_gemma_new":"comparable earnings per share growth","evidence_llama_3_3":null,"evidence_qwen_3_30b":"7% comparable earnings per share growth 2024","gemma_new_max":0.07,"gemma_new_min":0.07,"llama_3_3_max":null,"llama_3_3_min":null,"qwen_3_30b_max":0.07,"qwen_3_30b_min":0.07}
{"symbol":"KO","year":2023,"quarter":2,"date":"2023-Q2","chunk_id":3,"sub_chunk_id":0,"centroid_label":"comparable eps","agreed_value":0.78,"count":2,"chunk":"John Murphy: Thank you, James, and good morning, everyone. We are pleased with the momentum of our business and our strong second quarter results. Starting with the top line, we grew organic revenues 11%. Unit cases were flat. As James said, volume for the second quarter got off to a slower start, but ended on a positive note. Concentrate sales were one point ahead of unit cases for the quarter, primarily driven by the timing of concentrate shipments. Price mix growth was 10% for the quarter, driven by carryover pricing coming into the base from last year, along with some new pricing actions across operating segments, including the impact of hyperinflationary markets. Comparable gross margin for the quarter was up approximately 40 basis points, driven by underlying expansion and a slight benefit from bottler refranchising partially offset by the impact of currency. Comparable operating margin expanded approximately 90 basis points for the quarter. This was primarily driven by strong top line growth and the impact of refranchising bottling operations. Partially offset by an increase in marketing investments and higher operating costs versus the prior year as well as currency headwinds. Putting it all together, second quarter comparable EPS of $0.78 was up 11% year-over-year despite higher than expected 6% currency headwinds. Free cash flow was approximately $4 billion year-to-date. This was largely attributable to strong underlying operational performance and working capital benefits, partially offset by a $720 million transition tax payment that was made during the second quarter as well as M&A related payments. Our balance sheet is strong and our net debt leverage of 1.6 times EBITDA is below our targeted range of 2 to 2.5 times. Our capital allocation priorities remain the same and we continue to invest to drive long-term growth. As James mentioned, we are encouraged by what we are seeing in the marketplace. While we continue to spend our strategic flywheel faster to generate top line led growth, we've also progressed on a margin agenda, as demonstrated by our consistent track record of offsetting cost headwinds to sustain steady gross margins. We have numerous levers available to drive top line growth and improve the effectiveness and efficiency of our spend over the long-term. Our all-weather strategy, coupled with the great plans that we have in place to continue to create quality leadership across our portfolio give us good visibility to deliver on our raised 2023 guidance. This is comprised of organic revenue growth of 8% to 9%, which includes positive volume growth while continuing to be led by price mix. There are a few considerations to keep in mind. We expect pricing in developed markets to moderate through the year as we cycle pricing initiatives from the prior year. In developing and emerging markets, we aim to take price with local market inflation. To the extent that intense inflationary markets drive elevated price mix. The impact is oftentimes offset by currency, as it is frequently difficult to hedge our exposure. Due to our reporting calendar, there will be one additional day in the fourth quarter. We now expect comparable currency neutral earnings per share growth of 9% to 11%. Based on current rates and our hedge positions, we are updating our currency outlook of an approximate 3 to 4 point headwind to comparable net revenues and an approximate 4 to 5 point currency headwind to comparable earnings per share for full year 2023. Inflationary pressures are beginning to moderate in some ways, including freight rates that are favorable compared to last year. That said, several commodities that are prevalent in our basket like sugar and juice remain elevated and we have some hedges that we will be rolling off to less favorable rates. Based on current rates and hedge positions, we continue to expect per case commodity price inflation in the range of a mid-single digit impact on comparable cost of goods sold in 2023. Our updated underlying effective tax rate for 2023 is now 19.3%. All-in, we are updating comparable earnings per share growth of 5% to 6% versus $2.48 in 2022. We continue to expect to generate approximately $9.5 billion of free cash flow in 2023 through approximately $11.4 billion in cash from operations less approximately $1.9 billion in capital investments. If you exclude the transition tax payment made in the second quarter and various payments associated with M&A transactions, our implied free cash flow conversion would be within our long-term guidance. This guidance does not include any payments related to our ongoing US income tax dispute with the IRS. As we enter the second half of the year, we continue to build a culture that emphasizes raising the bar in every aspect of how we do business. Thanks to the tremendous ongoing commitment of our system employees around the world, we are confident in our ability to deliver on our guidance for 2023 and drive value for our stakeholders over the long-term. With that operator, we are ready to take questions.","evidence_gemma_new":null,"evidence_llama_3_3":"comparable EPS second quarter","evidence_qwen_3_30b":"comparable EPS $0.78 up 11% year-over-year second quarter","gemma_new_max":null,"gemma_new_min":null,"llama_3_3_max":0.78,"llama_3_3_min":0.78,"qwen_3_30b_max":0.78,"qwen_3_30b_min":0.78}
{"symbol":"KO","year":2023,"quarter":4,"date":"2023-Q4","chunk_id":3,"sub_chunk_id":0,"centroid_label":"comparable eps","agreed_value":0.49,"count":3,"chunk":"John Murphy: Thank you, James. And good morning, everyone. In the fourth quarter and throughout 2023, we delivered strong results. During the quarter, we grew organic revenues 12% which was in-line with our full year organic revenue growth. Unit case growth was 2% and it was positive in each quarter of 2023. Concentrate sales grew 1 point ahead of unit cases, driven primarily by one additional day in the quarter. Our price mix growth of 9% in the quarter was driven by three factors. One, 2023 pricing actions across most of our markets. Two, hyperinflationary pricing that I'll speak to in just a moment. And three, some mix which is mostly timing related. Comparable gross margin for the quarter was up approximately 140 basis points. Driven by underlying expansion and a slight benefit from bottle refranchising. Partially offset by the impact of currency headwinds. Comparable operating margin expanded approximately 40 basis points for the quarter. This was primarily driven by strong topline growth, partially offset by currency headwinds and an increase in marketing investments. The positive volume and topline growth that we're realizing today demonstrates the effectiveness of our marketing spend. Below the line, comparable other income declined primarily due to the operating environment in Argentina. Putting it all together, fourth quarter comparable EPS of $0.49 was up 10% year-over-year, despite higher than expected 13% currency headwinds. Before moving on, I wanted to discuss the impact of a few hyperinflationary markets on our fourth quarter results. During the quarter, inflation intensified and exceeded 60% across these markets. In aggregate, while they represent less than 5% of our total volume, this degree of inflation creates a cosmetic distortion to our underlying results. In the fourth quarter, these markets contributed more than 3 points of our price mix and most of our currency headwinds, including an outsized impact to comparable other income from balance sheet remeasurement in Argentina. They did not, however, have a material impact on our earnings per share results. In hyperinflationary markets it's either impractical or impossible to hedge our currency exposure. And to manage it, we use our full suite of revenue growth management tools, including pricing actions to keep pace with local market inflation. We have been operating a long-time in these markets and we expect to be in them for a long-time to come. We work hand-in-hand with our local bottling partners and our focus will be to continue to nurture the strong relationships we have with our consumers and customers. And to ultimately prevail longer-term. So while we will continue to experience volatility of this nature in a few markets, it's important to keep in mind they are operated locally, they are typically self-funding and they have not impeded our overall ability to grow earnings per share. As we move forward, we are confident that our business model and the many levers within it will allow us to deliver on our overall objectives. In 2023 free cash flow was $9.7 billion, which increased from the prior year. 2023 free cash flow included a transition tax payment of approximately $720 million, which was approximately $340 million higher than the prior year and included approximately $230 million in M&A related payments. Our underlying free cash flow growth was largely attributable to strong operational performance and working capital benefits. If you exclude the full impact of the transition tax in M&A related payments, our adjusted free cash flow conversion ratio would be within our target range of 90% to 95%. Our balance sheet remains strong. And our net debt leverage of 1.7 times EBITDA is below our targeted range of 2 times to 2.5 times. During the fourth quarter, in addition to offsetting dilution from the exercise of stock options by employees, we repurchased additional shares in anticipation of expected proceeds from bottler refranchising. As James mentioned, we anticipate 2024 will bring new challenges and opportunities. However, through our all-weather strategy, we've proven we can deliver in many different operating environments. Our 2024 guidance builds on the underlying momentum of our business. We expect organic revenue growth of 6% to 7% and comparable currency neutral earnings per share growth of 8% to 10%. We anticipate hyperinflationary pricing will continue to play a role in 2024, but it will moderate throughout the year. We continue to make significant progress towards refranchising company owned bottling operations. Bottler refranchising is expected to be a 4 point to 5 point headwind to comparable net revenues and a 2 point headwind to comparable earnings per share. But will have a positive impact on both our margins and the return profile of our business. Based on current rates and our hedge positions, we anticipate an approximate 2 point to 3 point currency headwind to comparable net revenues and an approximate 4 point to 5 point currency headwind to comparable earnings per share for full year 2024. Notably, much of our anticipated 2024 currency headwinds are attributed to hyperinflationary markets with a meaningful impact in the fourth quarter. Our underlying effective tax rate for 2024 is expected to be 19.2%. All in, we expect comparable earnings per share growth of 4% to 5% versus $2.69 in 2023. We expect to generate approximately $9.2 billion of free cash flow in 2024 through approximately $11.4 billion in cash from operations, less approximately $2.2 billion in capital investments. The $11.4 billion of cash from operations includes two items to highlight, transition tax payments of approximately $960 million, an increase of approximately $240 million versus 2023, payments associated with various M&A transactions of approximately $560 million, an increase of approximately $330 million versus 2023. Driven by our underlying cash flow generation and current balance sheet strength, we have ample flexibility to both reinvest in our business to drive growth and return capital to our shareowners. A significant portion of our expected capital investment increase is to build capacity for fairlife and for our India business, both of which experienced robust growth in 2023. Related to capital return, we have an unwavering priority to grow our dividend as we've done with 61 consecutive years of dividend increases. With respect to share repurchases, we will be flexible in our approach. Typically, we've repurchased shares to offset any dilution from the exercise of stock options by employees in the given year. Our capital allocation policy prioritize agility. And we're committed to taking the right actions needed to drive the long-term health of our business and create value for our stakeholders. There are some considerations to keep in mind for 2024. The first quarter of 2024 will be impacted by the timing of concentrate shipments in the fourth quarter of 2023 in some markets and cycling our strongest volume growth quarter from the prior year. We estimate the ongoing conflict in the Middle East had approximately 1 point of impact on volume growth during the fourth quarter of 2023. It's unclear how long this impact will last. In November 2023, the U.S. Tax Court rendered its supplemental opinion related to our ongoing dispute with the Internal Revenue Service. We intend to move forward on appeal and vigorously defend our position. We have ample balance sheet flexibility to fund any payment related to the appeal. Finally, due to our reporting calendar, there will be one less day in the first quarter and two additional days in the fourth quarter. So in summary, we're pleased with what we accomplished in 2023, we're building on our capabilities to continue the underlying momentum across our markets, we're progressing on our refranchising agenda and we're reinvesting in our system to drive long-term growth. We have great confidence, we can deliver on our 2024 guidance and long-term commitments. With that, operator, we're ready to take questions.","evidence_gemma_new":"comparable EPS","evidence_llama_3_3":"comparable EPS fourth quarter","evidence_qwen_3_30b":"comparable EPS fourth quarter","gemma_new_max":0.49,"gemma_new_min":0.49,"llama_3_3_max":0.49,"llama_3_3_min":0.49,"qwen_3_30b_max":0.49,"qwen_3_30b_min":0.49}
{"symbol":"KO","year":2024,"quarter":1,"date":"2024-Q1","chunk_id":3,"sub_chunk_id":0,"centroid_label":"comparable eps","agreed_value":0.72,"count":2,"chunk":"John Murphy: Thank you, James, and good morning, everyone. Our first quarter results marked a continuation of the underlying momentum in our business, driven by a strong and focused system. We delivered another quarter of volume growth, even as we cycled strong results. Additionally, we completed the refranchising of several bottlers during the quarter, leading to further comparable margin expansion. We progressed on our refranchising agenda, while making sure we best position our system to deliver long-term growth, and we earn a fair return on our investments. We continue to invest behind our portfolio with discipline and flexibility, thanks to our enhanced resource allocation agenda. During the quarter, we grew organic revenues 11%. We had 1% unit case growth. Concentrate sales were behind unit case volume by 3 points, driven by 1 less day in the quarter and the timing of concentrate shipments, primarily in Mexico and the Middle East. Our price\/mix growth of 13% in the quarter was driven by approximately 6 points of intense inflationary pricing across a handful of markets to offset significant currency devaluation, pricing actions across a number of markets and a couple of points of favorable mix. Excluding impacts from intense inflationary pricing, organic revenue growth in the first quarter was at the high end of our long-term growth algorithm. Comparable gross margin for the quarter was up approximately 130 basis points driven by underlying expansion and a benefit from bottler refranchising, partially offset by the impact of currency headwinds. Comparable operating margin expanded approximately 60 basis points for the quarter. This was primarily driven by strong top line growth and bottler refranchising, partially offset by currency headwinds and an increase in marketing investments. Markets experiencing intense inflation represent only a single-digit contribution to our volume, but continue to have an outsized impact on the shape of our P&L. Putting it all together, first quarter comparable EPS of $0.72 was up 7% year-over-year, including 9% currency headwinds, which were driven by currency devaluation in markets experiencing intense inflation. Free cash flow was approximately $160 million, an increase from the prior year. Before moving on, I want to discuss 2 items that are included in our first quarter reported results, a $765 million charge related to the remeasurement of our contingent consideration liability for our acquisition of fairlife. Our final payment related to the fairlife acquisition will take place in 2025. This payment has grown as fairlife has outperformed. We continue to be encouraged by our ability to scale fairlife organically. Secondly, a noncash impairment charge of $760 million related to BODYARMOR. While we are taking a charge to reflect revised projections and a higher discount rate since the acquisition date of BODYARMOR, we believe in the power of our 2 sports brand strategy with POWERADE and BODYARMOR. We're taking actions to help create long-term value, and we're seeing signs that this strategy is working. Our balance sheet remains strong and our net debt leverage of 1.6x EBITDA is below our targeted range of 2 to 2.5x. This gives us ample capacity for potential upcoming payments in 2024 related to the IRS tax case, which we continue to vigorously defend, and the upcoming fairlife payment in 2025. We continue to remain consistent in our approach to prioritizing our capital allocation. We're committed to investing to drive growth and to support our dividend, which we have raised for 62 consecutive years. We're confident our business model has the flexibility to allow us to deliver on our overall objectives. Our updated 2024 guidance reflects the underlying momentum of our business, and we now expect organic revenue growth of 8% to 9%, and comparable currency-neutral earnings per share growth of 11% to 13%. Our revised top line guidance is solely driven by higher-than-expected inflationary pricing in a handful of markets, which we expect to moderate throughout the year. Bottler refranchising is still expected to be a 4- to 5-point headwind to comparable net revenues and a 2-point headwind to comparable earnings per share, but will have a positive impact on both our margins and the return profile of our business. Based on current rates and our hedge positions, we anticipate an approximate 4- to 5-point currency headwind to comparable net revenues, and an approximate 7 to 8-point currency headwind to comparable earnings per share for full year 2024. This increase in currency headwind is driven by intense inflationary markets, while the rest of the currency basket is relatively neutral to our results. Our underlying effective tax rate for 2024 is now expected to be 19%. All in, we continue to expect comparable earnings per share growth of 4% to 5% versus $2.69 in 2023. There are some considerations to keep in mind. We estimate the ongoing conflict in the Middle East had approximately 1 point of impact on volume growth during the first quarter of 2024. It's unclear how long this impact will last. The cadence of structural impact will be larger in the second and third quarters due to the timing of transaction closing during the first quarter and the seasonality of the businesses we refranchised. Finally, there will be 2 additional days in the fourth quarter. To sum it up, and as James said, the year has started off well. We remain focused on the execution of our all-weather strategy. And thanks to the partnership of our system and the ongoing dedication of our people, we're confident we can create value for our stakeholders and deliver on our guidance for the year. And as we said at CAGNY, we're primed for performance in 2024 and over the long term. With that, operator, we are ready to take questions.","evidence_gemma_new":"comparable EPS","evidence_llama_3_3":"comparable EPS first quarter","evidence_qwen_3_30b":null,"gemma_new_max":0.72,"gemma_new_min":0.72,"llama_3_3_max":0.72,"llama_3_3_min":0.72,"qwen_3_30b_max":null,"qwen_3_30b_min":null}
{"symbol":"KO","year":2024,"quarter":2,"date":"2024-Q2","chunk_id":3,"sub_chunk_id":0,"centroid_label":"comparable eps","agreed_value":0.84,"count":2,"chunk":"John Murphy: Thank you, James, and good morning, everyone. In the second quarter, we delivered strong results. We grew organic revenues 15%. This consisted of 2% unit case growth. Concentrate sales were ahead of volume by four points, driven primarily by timing of concentrate shipments, and some disruptions in the global supply chain that we partly expect, to reverse next quarter. Our price\/mix growth of 9% in the quarter was primarily driven by two items: one, approximately five points of intense inflationary pricing, across a handful of markets to offset significant currency devaluation. And two, an array of pricing and mix actions across our markets. Excluding the impacts from concentrate shipment timing and pricing from markets with intense inflation. Organic revenue growth during the quarter was at the high end of our long-term growth algorithm. Comparable gross margin was up approximately 200 basis points, driven by underlying expansion, and the benefit from bottler refranchising partially offset by currency headwinds. Comparable operating margin expanded approximately 120 basis points. Comparable operating margin expansion was less than comparable gross margin expansion, due to less benefit from bottler refranchising and greater currency headwinds to comparable operating margin. Putting it all together, second quarter comparable EPS of $0.84 was up 7% year-over-year despite 10% currency headwinds and 2% headwind from bottler refranchising. Free cash flow was approximately $3.3 billion, down approximately $700 million versus the prior year, due to higher tax payments, cycling working capital benefits from the prior year and higher capital expenditures. We continue to take actions, to achieve a fit for purpose balance sheet that, will best support our growth agenda. During the quarter, we raised approximately $4 billion in cash by issuing long-term debt for general corporate purposes. This may include pre-funding upcoming payments related to the IRS tax case and the Fairlife contingent consideration. With respect to our IRS tax case, which we continue to vigorously defend. We're making progress to our next steps, and we expect we will be able to move forward an appeal by the end of the year. Given the continued outperformance of Fairlife, we recorded a charge of $1.3 billion during the quarter. Our estimated final payment related to this acquisition is $5.3 billion, which will be made in 2025. We are encouraged by Fairlife's performance and the value it has created for our company. So far this year, we've realized nearly $3 billion in gross proceeds from bottler refranchising and streamlining our equity investments. We'll continue to prioritize higher growth businesses, and take passive capital off the table. Return on invested capital is 24%, up approximately five points from three years ago. Our balance sheet is strong, as demonstrated by our net debt leverage of 1.5 times EBITDA, which is well below our targeted range of 2 to 2.5 times. We have ample capacity to pursue our capital allocation agenda, which prioritizes investing to drive further growth, continuing to support our dividend and staying dynamic, agile and opportunistic. As James mentioned, we're proactively managing our portfolio to deliver on our commitments. Our updated 2024 guidance reflects the momentum of our business in the first half of the year, and our confidence in our ability to execute on our plans during the second half of this year. We now expect organic revenue growth of 9% to 10%, and comparable currency-neutral earnings per share growth of 13% to 15%. Bottler refranchising is still expected to be a four to five-point headwind, to comparable net revenues. And we now expect a one to two-point headwind, to comparable earnings per share. Based on current rates and our hedge positions, we now anticipate an approximate five to six-point currency headwind, to comparable net revenues and an approximate eight to nine-point currency headwind, to comparable earnings per share for full year 2024. This increase in currency headwind is driven by a small number of intensive treasury markets, while the rest of the currency basket is relatively neutral to our results. All in, we now expect comparable earnings per share growth of 5% to 6% versus $2.69 in 2023. There are some considerations to keep in mind. We expect unit cases and concentrate shipments to be relatively in line with each other for the full year 2024. Please keep in mind there are two extra days in the fourth quarter. Taking everything into consideration, we expect earnings growth during the remainder of 2024, will be weighted towards the fourth quarter. To summarize, we're encouraged by our track record and the underlying momentum of our business. Our system remains incredibly focused and motivated to drive growth. We're continuing to drive quality top line growth, expand margins, grow comparable earnings per share and improve the return profile of our business. And we're confident we will deliver on our guidance, and longer-term objectives. With that, operator, we are ready to take questions.","evidence_gemma_new":null,"evidence_llama_3_3":"comparable EPS second quarter","evidence_qwen_3_30b":"comparable EPS second quarter","gemma_new_max":null,"gemma_new_min":null,"llama_3_3_max":0.84,"llama_3_3_min":0.84,"qwen_3_30b_max":0.84,"qwen_3_30b_min":0.84}
{"symbol":"KO","year":2024,"quarter":4,"date":"2024-Q4","chunk_id":3,"sub_chunk_id":0,"centroid_label":"comparable eps","agreed_value":0.55,"count":2,"chunk":"John Murphy: Thank you, James, and good morning, everyone. We closed the year with strong fourth quarter results. And as James said earlier, we delivered 7% comparable earnings per share growth in 2024 on top of 6% average comparable earnings per share growth over the prior 5 years. During the fourth quarter, we grew organic revenues 14%. Unit case growth was 2%, which is in line with our multiyear trend. Concentrate sales grew 3 points ahead of unit cases driven primarily by 2 additional days in the quarter and the timing of concentrate shipments. Our price\/mix growth of 9% was driven by two items: Approximately 8 points of pricing split somewhat evenly between normal pricing actions across our markets and intense inflationary pricing in a handful of markets experiencing currency devaluations and approximately one point of favorable mix. Excluding the impact of intense inflationary pricing, organic revenue growth was above our long-term growth algorithm. Comparable gross margin was up approximately 160 basis points and comparable operating margin was up approximately 80 basis points. Bottlers refranchising had a greater benefit to comparable gross margin and currency headwinds had a larger impact to comparable operating margin. [indiscernible] altogether, fourth quarter comparable EPS of $0.55 was up 12% year-over-year despite 11% currency headwinds and 4% headwinds from bottlers refranchising. [Audio Gap] In 2024, adjusted free cash flow conversion was 93%, which is within our long-term targeted range. [Audio Gap] at the high end of our long-term growth algorithm. We continue to focus on driving balanced volume and price\/mix and anticipate intense inflationary pricing will play a smaller role in 2025 and will moderate throughout the year. Our refranchise is expected to be a slight headwind to comparable net revenues and comparable earnings per share as we cycle the impact of bottler refranchising in 2024. We'll continue to invest appropriately behind our brands while also driving productivity across all areas of marketing. Next week at CAGNY, we'll discuss further our marketing transformation and enhanced resource allocation capabilities give us confidence in our ability to continue to drive more productivity we expect expense to be elevated versus prior year. We believe the step-up is manageable, and we're not expecting significant leverage or deleverage below the line. Based on current rates and our hedge positions, we anticipate an approximate 3- to 4-point currency headwind to comparable net revenues and an approximate 6 to 7-point currency headwind to comparable earnings per share for full year 2025. Our underlying effective tax rate for 2025 is expected to increase to 20.8% and which is driven primarily by the impact of several countries enacting the global minimum tax regulations. All in, we expect comparable earnings per share growth of 2% to 3% and versus $2.88 in 2024. Excluding the fair life contingent consideration payment, we expect to generate approximately $9.5 billion of free cash flow in 2025 through approximately $11.7 billion in cash from operations, less approximately $2.2 billion in capital investments. Included in this guidance are 2 items to highlight: One, a $1.2 billion transition tax payment, an increase of approximately $240 million versus 2024. This is the final year that we will make a payment related to the Tax Cuts and Jobs Act of 2017. Number two, we expect that part of the timing of working capital initiatives that benefited 2024 free cash flow will reverse and impact 2025 free cash flow. Driven by our underlying cash flow generation, we have flexibility to invest in our business and return capital to shareowners. A significant portion of our expected capital investment is to build capacity for fairlife and to continue to invest in our system in India and Africa. With respect to acquisitions and divestitures, we're making good progress on our agenda. Since 2006, we've added $9 billion brands via acquisition. Importantly, only 3 of these brands were $1 billion-dollar brands at the time of acquisition, demonstrating progress in scaling acquisitions. In 2024, we realized $3.5 billion in gross proceeds from refranchising bottling investments as a percent of consolidated net revenue is 13%, down from 52% in 2015. Return on invested capital is up 6 points at the same time. Related to capital return, we have an unwavering priority to grow our dividend as we've done for 62 consecutive years. Our dividend is supported by our long-term free cash flow generation. In 2024, dividends paid [indiscernible] as a percent, our adjusted free cash flow was 73%. On share repurchases, we've typically repurchased shares to offset any dilution from the exercise of stock options by employees in the given year. Our capital allocation policy prioritizes agility and we're committed to driving the long-term health of our business and creating value for our stakeholders. There are some considerations to keep in mind for 2025. We expect bottler refranchising to have a greater impact to comparable net revenues and comparable earnings per share during the first quarter as we cycle the impact of refranchising the Philippines, which closed during the first quarter of 2024. We expect the productivity benefits that I previously discussed to have a larger impact during the latter half of 2025. Due to our reporting calendar, there will be 2 less days in the first quarter and 1 additional day in the fourth quarter. So in summary, we're successfully executing our all-weather strategy to deliver on our objectives. Our system remains incredibly focused and motivated. We will continue to invest with discipline and believe we're well positioned to drive quality top line growth and deliver continued margin expansion. A hallmark of our company since its inception has been our ability to create enduring value over time, and we expect to continue to do so. With that, operator, we are ready to take questions.","evidence_gemma_new":null,"evidence_llama_3_3":"comparable EPS fourth quarter","evidence_qwen_3_30b":"comparable EPS $0.55","gemma_new_max":null,"gemma_new_min":null,"llama_3_3_max":0.55,"llama_3_3_min":0.55,"qwen_3_30b_max":0.55,"qwen_3_30b_min":0.55}
{"symbol":"KO","year":2023,"quarter":1,"date":"2023-Q1","chunk_id":3,"sub_chunk_id":0,"centroid_label":"comparable gross margin","agreed_value":1.2,"count":3,"chunk":"John Murphy: Thank you, James, and good morning, everyone. We've had a good start to the year with strong first quarter results. Starting with the top line. We grew organic revenues 12%. Unit cases grew 3% with broad-based growth across most markets, driven by investments in the marketplace. Concentrate sales were 2 points behind unit cases for the quarter primarily driven by timing of concentrate shipments and 1 less day. Our price\/mix growth was 11% for the quarter. Much of this was driven by carryover pricing coming into the base from last year, along with some new pricing actions across operating segments as well as revenue growth management initiatives and favorable channel and package mix. Comparable gross margin for the quarter was up approximately 120 basis points driven by underlying expansion and a slight benefit from bottler refranchising, partially offset by the impact of currency. Underlying gross margin expansion was driven by a benefit from the phasing of inventory costs, strong organic revenue growth and cycling the timing of M&A integration expenses, partially offset by higher commodity costs. Comparable operating margin expanded approximately 40 basis points for the quarter. This was primarily driven by underlying operating margin expansion due to robust top line growth across operating segments, partially offset by increased marketing investments and higher operating costs. Putting it all together, first quarter comparable EPS of $0.68 reflects an increase of 5% year-over-year despite higher-than-expected 7% currency headwinds. Free cash flow was negative by approximately $120 million in the quarter. This was largely attributable to the timing of working capital initiatives and the previously discussed M&A-related payments that took place in the quarter. Our underlying cash flow generation remains strong, and we feel confident in our cash flow agenda and full year outlook. Our balance [ achieves ] fit for purpose to support our growth agenda, and our net debt leverage of 1.8x EBITDA as of the end of the first quarter is below our targeted range of 2 to 2.5x. Our capital allocation priorities remain the same. We continue to invest to drive long-term growth and to deliver dividend growth for our shareowners as evidenced by the 5% dividend increase announced in February. We remain mindful of maintaining our financial flexibility amidst the ongoing tax dispute with the IRS. We are currently waiting for the tax court to render its final opinion in the case, allowing us to move forward with the appeals process. As previously discussed, we intend to assert our claims on appeal, vigorously defend our position and believe we will ultimately prevail. We will continue to keep you updated. As James mentioned, we are encouraged by our first quarter results and are harnessing what we can control to remain resilient in the face of a volatile operating environment. We remain laser-focused on top line-led growth as well as the endurance of the bottom line. And we'll reinvest in our brands with more rigor and discipline using the refreshed resource allocation framework we discussed at CAGNY. This approach enables the enterprise to prioritize and put more focus behind country and category combinations that can deliver the best return in the near term while fueling steady progress on our total beverage strategy over time, it also allows us to be more dynamic and to adapt quickly. For example, in emerging markets, where commercial beverages are still a small part of daily consumption, we're leading with core sparkling and juice strengths propositions. In developed markets, where consumers are looking for more beverage choices, we're investing behind a broader portfolio of brands and categories, including value-added dairy, enhanced water, tea and coffee. Despite the global macro picture remaining uncertain in the months ahead, our planned investments and operational strategy will support the momentum we've seen early in the year and give us good visibility to deliver on our 2023 guidance. This guidance is comprised of organic revenue growth of 7% to 8%, primarily led by price\/mix amidst the ongoing inflationary environment, comparable currency-neutral earnings per share growth of 7% to 9%. Based on current rates and our hedge positions, we are reiterating our currency outlook of an approximate 2- to 3-point headwind to comparable net revenues and an approximate 3- to 4-point currency headwind to comparable earnings per share for full year 2023. Inflationary forces are moderating in some respects. Spot prices have come down in oil and freight rates are more favorable. That said, many commodities were exposed to have been sticky, and we have some advantageous hedges that will be rolling off to less favorable rates during the year. Based on current rates and hedge positions, we continue to expect per case commodity price inflation in the range of a mid-single-digit impact on comparable cost of goods sold in 2023. Additionally, we expect wages and inflation in media will continue to remain elevated. Despite the increase in the first quarter effective tax rate, we continue to expect our underlying effective tax rate to be 19.5% for 2023. All in, we are reiterating comparable earnings per share growth of 4% to 5% versus $2.48 in 2022. We expect to generate approximately $9.5 billion of free cash flow in 2023 through approximately $11.4 billion in cash from operations, less approximately $1.9 billion in capital investments. I would like to remind you that included in cash from operations are 2 discrete items related to, one, transition tax payments, which will take place in the second quarter; and two, payments associated with M&A transactions. Excluding these, our implied free cash flow conversion would be within our long-term guidance. This guidance does not include any payments related to our ongoing U.S. income tax dispute with the IRS. Overall, we don't expect the tax dispute to have a bearing on our ability to deliver on our capital allocation agenda and drive long-term business growth. There are some considerations to keep in mind as it pertains to our guidance. We expect price\/mix to moderate through the year as we cycle our pricing initiatives from the prior year. The discrete gross margin benefits related to the phasing of inventory costs and cycling the timing of M&A integration expenses this quarter are unlikely to repeat. Given the ongoing backdrop of rising interest rates, we expect to see higher net interest expense given our effective exposure to floating rate debt. And finally, due to our reporting calendar, there will be one additional day in the fourth quarter. With a quarter of good results to start the year and our focus on driving top line-led growth in any macroeconomic environment, we are well positioned to compound quality value by delivering on 2023 guidance.","evidence_gemma_new":"Comparable gross margin","evidence_llama_3_3":"Comparable gross margin first quarter","evidence_qwen_3_30b":"comparable gross margin 120 basis points first quarter","gemma_new_max":0.0012,"gemma_new_min":0.0012,"llama_3_3_max":1.2,"llama_3_3_min":1.2,"qwen_3_30b_max":1.2,"qwen_3_30b_min":1.2}
{"symbol":"KO","year":2023,"quarter":3,"date":"2023-Q3","chunk_id":3,"sub_chunk_id":0,"centroid_label":"comparable gross margin","agreed_value":130.0,"count":2,"chunk":"John Murphy: Thank you, James and good morning, everyone. Today, I'll comment on our third quarter performance and highlight our updated 2023 guidance. I'll also provide some early commentary on 2024 and the actions we are taking to continue to deliver on our objectives. As James mentioned, we delivered strong third quarter results. Starting with the top line. We grew organic revenues 11%. Unit case growth was 2%. If you exclude the impact of suspending our business in Russia, we have delivered positive volume growth in each quarter since the start of 2021. Concentrate sales were in line with unit cases for the quarter. Price\/mix growth was 9% driven by pricing actions across operating segments, including the impact of a few hyperinflationary markets, along with carryover pricing coming into the base from last year. Comparable gross margin for the quarter was up approximately 130 basis points driven by underlying expansion and a slight benefit from bottler refranchising, partially offset by the impact of currency headwinds. Comparable operating margin expanded approximately 20 basis points for the quarter. This was primarily driven by strong top line growth and the impact of refranchising bottling operations, partially offset by an increase in marketing investments versus the prior year as well as currency headwinds. Putting it all together, third quarter comparable EPS of $0.74 was up 7% year-over-year despite higher-than-expected 4% currency headwinds. Free cash flow was approximately $7.9 billion year-to-date. This was largely attributable to strong underlying operational performance and working capital benefits, partially offset by $720 million transition tax payment and $230 million in M&A-related payments. Our balance sheet is strong and our net debt leverage of 1.5x EBITDA is below our target range of 2 to 2.5x. Recently, we entered into a letter of intent to refranchise our Philippines bottler. As we progress on our refranchising journey, we aspire to improve the return profile of our business. In 2015, when Bottling Investments Group was more than 50% of our net revenue, our return on invested capital was approximately 17%. Today, Bottling Investments Group makes up less than 20% of net revenue. And our return on invested capital is over 23%, nearly a 7-point increase. After this transaction closes, our remaining assets in the Bottling Investments Group will include operations in India, Africa and several smaller locations, primarily in Asia Pacific. We will remain disciplined in our refranchising approach by making sure we best position our system to deliver sustainable long-term growth. Our business performance year-to-date gives us confidence that we can deliver on our raised 2023 guidance. This is comprised of organic revenue growth of 10% to 11% which will be led by price\/mix and includes positive volume growth. We do expect pricing in developed markets to moderate in the fourth quarter as we cycle pricing initiatives from the prior year. There are also a few hyperinflationary markets that will continue to drive price\/mix. There will be 1 additional day in the fourth quarter. We now expect comparable currency-neutral earnings per share growth of 13% to 14%. And based on current rates and our hedge positions, we now expect currency to be an approximate 4-point headwind to comparable net revenues and an approximate 6-point currency headwind to comparable earnings per share for full year 2023. Based on current rates and hedge positions, we continue to expect per-case commodity price inflation in the range of a mid-single-digit impact on comparable cost of goods sold in 2023. We now expect our underlying effective tax rate for 2023 to be 19%. All in, we are updating comparable earnings per share growth of 7% to 8% versus $2.48 in 2022. We continue to expect to generate approximately $9.5 billion of free cash flow in 2023 through approximately $11.4 billion in cash from operations. That's approximately $1.9 billion in capital investments. This guidance does not include any payments related to our U.S. income tax dispute with the IRS which are unlikely to occur in 2023. Given the momentum of our business, the strength of our balance sheet and some proceeds that we expect to receive from bottler refranchising, we have increased flexibility to continue to both reinvest in our business and return capital to shareowners. While it is too early to provide specific items on 2024, we want to share some considerations based on what we know today. We're encouraged by our top line momentum across the majority of our markets. There are a handful of hyperinflationary markets where it is either not possible to hedge or it is costly to do so. In these markets, we've demonstrated that we can manage currency pressures by taking price with local market inflation and we will continue to follow this approach. While some commodities are normalizing, we also have input costs that could be impacted by tensions and conflicts. With respect to advertising spend, our bias is to continue to reinvest behind our brands while maintaining flexibility. Regarding currency, if we assume current rates and our hedge positions, there would be an approximate low single-digit currency headwind to comparable net revenues and an approximate mid-single-digit currency headwind to comparable earnings per share for full year 2024. Of course, several factors could impact both our currency outlook and broader business outlook between now and February. Over the past few years, we've delivered U.S. dollar EPS growth and we have many levers to continue to do so. So in summary, we are encouraged by our business results and confident in our ability to deliver on our commitments over the long term. Thanks to the incredible commitment of our system employees around the world, we're very clear on the direction we are heading and well equipped to execute on the strategies to get us there. And we continue to invest to drive sustainable long-term growth. We remain focused on capturing the opportunities available to us. With that, operator, we are ready to take questions.","evidence_gemma_new":"Comparable gross margin","evidence_llama_3_3":"Comparable gross margin third quarter","evidence_qwen_3_30b":null,"gemma_new_max":130.0,"gemma_new_min":130.0,"llama_3_3_max":130.0,"llama_3_3_min":130.0,"qwen_3_30b_max":null,"qwen_3_30b_min":null}
{"symbol":"KO","year":2023,"quarter":4,"date":"2023-Q4","chunk_id":3,"sub_chunk_id":0,"centroid_label":"comparable gross margin","agreed_value":1.4,"count":3,"chunk":"John Murphy: Thank you, James. And good morning, everyone. In the fourth quarter and throughout 2023, we delivered strong results. During the quarter, we grew organic revenues 12% which was in-line with our full year organic revenue growth. Unit case growth was 2% and it was positive in each quarter of 2023. Concentrate sales grew 1 point ahead of unit cases, driven primarily by one additional day in the quarter. Our price mix growth of 9% in the quarter was driven by three factors. One, 2023 pricing actions across most of our markets. Two, hyperinflationary pricing that I'll speak to in just a moment. And three, some mix which is mostly timing related. Comparable gross margin for the quarter was up approximately 140 basis points. Driven by underlying expansion and a slight benefit from bottle refranchising. Partially offset by the impact of currency headwinds. Comparable operating margin expanded approximately 40 basis points for the quarter. This was primarily driven by strong topline growth, partially offset by currency headwinds and an increase in marketing investments. The positive volume and topline growth that we're realizing today demonstrates the effectiveness of our marketing spend. Below the line, comparable other income declined primarily due to the operating environment in Argentina. Putting it all together, fourth quarter comparable EPS of $0.49 was up 10% year-over-year, despite higher than expected 13% currency headwinds. Before moving on, I wanted to discuss the impact of a few hyperinflationary markets on our fourth quarter results. During the quarter, inflation intensified and exceeded 60% across these markets. In aggregate, while they represent less than 5% of our total volume, this degree of inflation creates a cosmetic distortion to our underlying results. In the fourth quarter, these markets contributed more than 3 points of our price mix and most of our currency headwinds, including an outsized impact to comparable other income from balance sheet remeasurement in Argentina. They did not, however, have a material impact on our earnings per share results. In hyperinflationary markets it's either impractical or impossible to hedge our currency exposure. And to manage it, we use our full suite of revenue growth management tools, including pricing actions to keep pace with local market inflation. We have been operating a long-time in these markets and we expect to be in them for a long-time to come. We work hand-in-hand with our local bottling partners and our focus will be to continue to nurture the strong relationships we have with our consumers and customers. And to ultimately prevail longer-term. So while we will continue to experience volatility of this nature in a few markets, it's important to keep in mind they are operated locally, they are typically self-funding and they have not impeded our overall ability to grow earnings per share. As we move forward, we are confident that our business model and the many levers within it will allow us to deliver on our overall objectives. In 2023 free cash flow was $9.7 billion, which increased from the prior year. 2023 free cash flow included a transition tax payment of approximately $720 million, which was approximately $340 million higher than the prior year and included approximately $230 million in M&A related payments. Our underlying free cash flow growth was largely attributable to strong operational performance and working capital benefits. If you exclude the full impact of the transition tax in M&A related payments, our adjusted free cash flow conversion ratio would be within our target range of 90% to 95%. Our balance sheet remains strong. And our net debt leverage of 1.7 times EBITDA is below our targeted range of 2 times to 2.5 times. During the fourth quarter, in addition to offsetting dilution from the exercise of stock options by employees, we repurchased additional shares in anticipation of expected proceeds from bottler refranchising. As James mentioned, we anticipate 2024 will bring new challenges and opportunities. However, through our all-weather strategy, we've proven we can deliver in many different operating environments. Our 2024 guidance builds on the underlying momentum of our business. We expect organic revenue growth of 6% to 7% and comparable currency neutral earnings per share growth of 8% to 10%. We anticipate hyperinflationary pricing will continue to play a role in 2024, but it will moderate throughout the year. We continue to make significant progress towards refranchising company owned bottling operations. Bottler refranchising is expected to be a 4 point to 5 point headwind to comparable net revenues and a 2 point headwind to comparable earnings per share. But will have a positive impact on both our margins and the return profile of our business. Based on current rates and our hedge positions, we anticipate an approximate 2 point to 3 point currency headwind to comparable net revenues and an approximate 4 point to 5 point currency headwind to comparable earnings per share for full year 2024. Notably, much of our anticipated 2024 currency headwinds are attributed to hyperinflationary markets with a meaningful impact in the fourth quarter. Our underlying effective tax rate for 2024 is expected to be 19.2%. All in, we expect comparable earnings per share growth of 4% to 5% versus $2.69 in 2023. We expect to generate approximately $9.2 billion of free cash flow in 2024 through approximately $11.4 billion in cash from operations, less approximately $2.2 billion in capital investments. The $11.4 billion of cash from operations includes two items to highlight, transition tax payments of approximately $960 million, an increase of approximately $240 million versus 2023, payments associated with various M&A transactions of approximately $560 million, an increase of approximately $330 million versus 2023. Driven by our underlying cash flow generation and current balance sheet strength, we have ample flexibility to both reinvest in our business to drive growth and return capital to our shareowners. A significant portion of our expected capital investment increase is to build capacity for fairlife and for our India business, both of which experienced robust growth in 2023. Related to capital return, we have an unwavering priority to grow our dividend as we've done with 61 consecutive years of dividend increases. With respect to share repurchases, we will be flexible in our approach. Typically, we've repurchased shares to offset any dilution from the exercise of stock options by employees in the given year. Our capital allocation policy prioritize agility. And we're committed to taking the right actions needed to drive the long-term health of our business and create value for our stakeholders. There are some considerations to keep in mind for 2024. The first quarter of 2024 will be impacted by the timing of concentrate shipments in the fourth quarter of 2023 in some markets and cycling our strongest volume growth quarter from the prior year. We estimate the ongoing conflict in the Middle East had approximately 1 point of impact on volume growth during the fourth quarter of 2023. It's unclear how long this impact will last. In November 2023, the U.S. Tax Court rendered its supplemental opinion related to our ongoing dispute with the Internal Revenue Service. We intend to move forward on appeal and vigorously defend our position. We have ample balance sheet flexibility to fund any payment related to the appeal. Finally, due to our reporting calendar, there will be one less day in the first quarter and two additional days in the fourth quarter. So in summary, we're pleased with what we accomplished in 2023, we're building on our capabilities to continue the underlying momentum across our markets, we're progressing on our refranchising agenda and we're reinvesting in our system to drive long-term growth. We have great confidence, we can deliver on our 2024 guidance and long-term commitments. With that, operator, we're ready to take questions.","evidence_gemma_new":"Comparable gross margin","evidence_llama_3_3":"comparable gross margin fourth quarter","evidence_qwen_3_30b":"comparable gross margin fourth quarter","gemma_new_max":1.4,"gemma_new_min":1.4,"llama_3_3_max":1.4,"llama_3_3_min":1.4,"qwen_3_30b_max":1.4,"qwen_3_30b_min":1.4}
{"symbol":"KO","year":2024,"quarter":1,"date":"2024-Q1","chunk_id":3,"sub_chunk_id":0,"centroid_label":"comparable gross margin","agreed_value":130.0,"count":2,"chunk":"John Murphy: Thank you, James, and good morning, everyone. Our first quarter results marked a continuation of the underlying momentum in our business, driven by a strong and focused system. We delivered another quarter of volume growth, even as we cycled strong results. Additionally, we completed the refranchising of several bottlers during the quarter, leading to further comparable margin expansion. We progressed on our refranchising agenda, while making sure we best position our system to deliver long-term growth, and we earn a fair return on our investments. We continue to invest behind our portfolio with discipline and flexibility, thanks to our enhanced resource allocation agenda. During the quarter, we grew organic revenues 11%. We had 1% unit case growth. Concentrate sales were behind unit case volume by 3 points, driven by 1 less day in the quarter and the timing of concentrate shipments, primarily in Mexico and the Middle East. Our price\/mix growth of 13% in the quarter was driven by approximately 6 points of intense inflationary pricing across a handful of markets to offset significant currency devaluation, pricing actions across a number of markets and a couple of points of favorable mix. Excluding impacts from intense inflationary pricing, organic revenue growth in the first quarter was at the high end of our long-term growth algorithm. Comparable gross margin for the quarter was up approximately 130 basis points driven by underlying expansion and a benefit from bottler refranchising, partially offset by the impact of currency headwinds. Comparable operating margin expanded approximately 60 basis points for the quarter. This was primarily driven by strong top line growth and bottler refranchising, partially offset by currency headwinds and an increase in marketing investments. Markets experiencing intense inflation represent only a single-digit contribution to our volume, but continue to have an outsized impact on the shape of our P&L. Putting it all together, first quarter comparable EPS of $0.72 was up 7% year-over-year, including 9% currency headwinds, which were driven by currency devaluation in markets experiencing intense inflation. Free cash flow was approximately $160 million, an increase from the prior year. Before moving on, I want to discuss 2 items that are included in our first quarter reported results, a $765 million charge related to the remeasurement of our contingent consideration liability for our acquisition of fairlife. Our final payment related to the fairlife acquisition will take place in 2025. This payment has grown as fairlife has outperformed. We continue to be encouraged by our ability to scale fairlife organically. Secondly, a noncash impairment charge of $760 million related to BODYARMOR. While we are taking a charge to reflect revised projections and a higher discount rate since the acquisition date of BODYARMOR, we believe in the power of our 2 sports brand strategy with POWERADE and BODYARMOR. We're taking actions to help create long-term value, and we're seeing signs that this strategy is working. Our balance sheet remains strong and our net debt leverage of 1.6x EBITDA is below our targeted range of 2 to 2.5x. This gives us ample capacity for potential upcoming payments in 2024 related to the IRS tax case, which we continue to vigorously defend, and the upcoming fairlife payment in 2025. We continue to remain consistent in our approach to prioritizing our capital allocation. We're committed to investing to drive growth and to support our dividend, which we have raised for 62 consecutive years. We're confident our business model has the flexibility to allow us to deliver on our overall objectives. Our updated 2024 guidance reflects the underlying momentum of our business, and we now expect organic revenue growth of 8% to 9%, and comparable currency-neutral earnings per share growth of 11% to 13%. Our revised top line guidance is solely driven by higher-than-expected inflationary pricing in a handful of markets, which we expect to moderate throughout the year. Bottler refranchising is still expected to be a 4- to 5-point headwind to comparable net revenues and a 2-point headwind to comparable earnings per share, but will have a positive impact on both our margins and the return profile of our business. Based on current rates and our hedge positions, we anticipate an approximate 4- to 5-point currency headwind to comparable net revenues, and an approximate 7 to 8-point currency headwind to comparable earnings per share for full year 2024. This increase in currency headwind is driven by intense inflationary markets, while the rest of the currency basket is relatively neutral to our results. Our underlying effective tax rate for 2024 is now expected to be 19%. All in, we continue to expect comparable earnings per share growth of 4% to 5% versus $2.69 in 2023. There are some considerations to keep in mind. We estimate the ongoing conflict in the Middle East had approximately 1 point of impact on volume growth during the first quarter of 2024. It's unclear how long this impact will last. The cadence of structural impact will be larger in the second and third quarters due to the timing of transaction closing during the first quarter and the seasonality of the businesses we refranchised. Finally, there will be 2 additional days in the fourth quarter. To sum it up, and as James said, the year has started off well. We remain focused on the execution of our all-weather strategy. And thanks to the partnership of our system and the ongoing dedication of our people, we're confident we can create value for our stakeholders and deliver on our guidance for the year. And as we said at CAGNY, we're primed for performance in 2024 and over the long term. With that, operator, we are ready to take questions.","evidence_gemma_new":"comparable gross margin","evidence_llama_3_3":"comparable gross margin quarter","evidence_qwen_3_30b":null,"gemma_new_max":130.0,"gemma_new_min":130.0,"llama_3_3_max":130.0,"llama_3_3_min":130.0,"qwen_3_30b_max":null,"qwen_3_30b_min":null}
{"symbol":"KO","year":2024,"quarter":2,"date":"2024-Q2","chunk_id":3,"sub_chunk_id":0,"centroid_label":"comparable gross margin","agreed_value":2.0,"count":2,"chunk":"John Murphy: Thank you, James, and good morning, everyone. In the second quarter, we delivered strong results. We grew organic revenues 15%. This consisted of 2% unit case growth. Concentrate sales were ahead of volume by four points, driven primarily by timing of concentrate shipments, and some disruptions in the global supply chain that we partly expect, to reverse next quarter. Our price\/mix growth of 9% in the quarter was primarily driven by two items: one, approximately five points of intense inflationary pricing, across a handful of markets to offset significant currency devaluation. And two, an array of pricing and mix actions across our markets. Excluding the impacts from concentrate shipment timing and pricing from markets with intense inflation. Organic revenue growth during the quarter was at the high end of our long-term growth algorithm. Comparable gross margin was up approximately 200 basis points, driven by underlying expansion, and the benefit from bottler refranchising partially offset by currency headwinds. Comparable operating margin expanded approximately 120 basis points. Comparable operating margin expansion was less than comparable gross margin expansion, due to less benefit from bottler refranchising and greater currency headwinds to comparable operating margin. Putting it all together, second quarter comparable EPS of $0.84 was up 7% year-over-year despite 10% currency headwinds and 2% headwind from bottler refranchising. Free cash flow was approximately $3.3 billion, down approximately $700 million versus the prior year, due to higher tax payments, cycling working capital benefits from the prior year and higher capital expenditures. We continue to take actions, to achieve a fit for purpose balance sheet that, will best support our growth agenda. During the quarter, we raised approximately $4 billion in cash by issuing long-term debt for general corporate purposes. This may include pre-funding upcoming payments related to the IRS tax case and the Fairlife contingent consideration. With respect to our IRS tax case, which we continue to vigorously defend. We're making progress to our next steps, and we expect we will be able to move forward an appeal by the end of the year. Given the continued outperformance of Fairlife, we recorded a charge of $1.3 billion during the quarter. Our estimated final payment related to this acquisition is $5.3 billion, which will be made in 2025. We are encouraged by Fairlife's performance and the value it has created for our company. So far this year, we've realized nearly $3 billion in gross proceeds from bottler refranchising and streamlining our equity investments. We'll continue to prioritize higher growth businesses, and take passive capital off the table. Return on invested capital is 24%, up approximately five points from three years ago. Our balance sheet is strong, as demonstrated by our net debt leverage of 1.5 times EBITDA, which is well below our targeted range of 2 to 2.5 times. We have ample capacity to pursue our capital allocation agenda, which prioritizes investing to drive further growth, continuing to support our dividend and staying dynamic, agile and opportunistic. As James mentioned, we're proactively managing our portfolio to deliver on our commitments. Our updated 2024 guidance reflects the momentum of our business in the first half of the year, and our confidence in our ability to execute on our plans during the second half of this year. We now expect organic revenue growth of 9% to 10%, and comparable currency-neutral earnings per share growth of 13% to 15%. Bottler refranchising is still expected to be a four to five-point headwind, to comparable net revenues. And we now expect a one to two-point headwind, to comparable earnings per share. Based on current rates and our hedge positions, we now anticipate an approximate five to six-point currency headwind, to comparable net revenues and an approximate eight to nine-point currency headwind, to comparable earnings per share for full year 2024. This increase in currency headwind is driven by a small number of intensive treasury markets, while the rest of the currency basket is relatively neutral to our results. All in, we now expect comparable earnings per share growth of 5% to 6% versus $2.69 in 2023. There are some considerations to keep in mind. We expect unit cases and concentrate shipments to be relatively in line with each other for the full year 2024. Please keep in mind there are two extra days in the fourth quarter. Taking everything into consideration, we expect earnings growth during the remainder of 2024, will be weighted towards the fourth quarter. To summarize, we're encouraged by our track record and the underlying momentum of our business. Our system remains incredibly focused and motivated to drive growth. We're continuing to drive quality top line growth, expand margins, grow comparable earnings per share and improve the return profile of our business. And we're confident we will deliver on our guidance, and longer-term objectives. With that, operator, we are ready to take questions.","evidence_gemma_new":"Comparable gross margin","evidence_llama_3_3":null,"evidence_qwen_3_30b":"comparable gross margin second quarter","gemma_new_max":2.0,"gemma_new_min":2.0,"llama_3_3_max":null,"llama_3_3_min":null,"qwen_3_30b_max":2.0,"qwen_3_30b_min":2.0}
{"symbol":"KO","year":2024,"quarter":3,"date":"2024-Q3","chunk_id":3,"sub_chunk_id":0,"centroid_label":"comparable gross margin","agreed_value":0.7,"count":2,"chunk":"John Murphy: Thank you, James, and good morning, everyone. Today I'll comment on our third quarter performance, discuss the outlook for the remainder of 2024, and provide some early commentary on 2025. During the third quarter, we grew organic revenues 9%. Unit cases declined 1% having had a poor July, but improving sequentially thereafter during the quarter. Concentrate sales were 1 point behind unit cases for the quarter, driven primarily by the timing of concentrate shipments. Our price\/mix growth of 10% was driven by two items. Approximately 7 points of pricing split somewhat evenly between normal pricing actions across our markets and intense inflationary pricing in a handful of markets experiencing currency devaluations, and approximately 3 points of mix across the markets, which was primarily driven by stronger growth in several developed markets versus developing and emerging markets. Excluding the impact from intense inflationary pricing, organic revenue growth during the quarter continued to be at the high end of our long-term growth algorithm. Comparable gross margin was up approximately 70 basis points and comparable operating margin was up approximately 100 basis points. Both were driven by underlying expansion and the benefit from butter refranchising, partially offset by the impact of currency headwinds. Putting it all together, third quarter comparable EPS of $0.77 was up 5% year-over-year despite higher-than-expected 9% currency headwinds and 2% headwinds from bottler refranchising. During the quarter, we made a $6 billion deposit with the IRS related to our ongoing tax dispute. We've also filed our appeal with the 11th Circuit Court. We're pleased to move forward with the process. We will vigorously defend our position. We believe we will prevail, and we will continue to keep you updated. Free cash flow, excluding the IRS tax litigation deposit, was approximately $7.6 billion, which is down approximately $290 million versus the prior year due to higher other tax payments, higher capital expenditures and cycling some working capital benefits from the prior year. Our balance sheet is strong, and our net debt leverage of 1.7 times EBITDA is below our targeted range of 2x to 2.5x. If you include our latest estimate of $6.1 billion related to our fairlife contingent consideration payment, which we expect to make in the first half of 2025, our expected net debt leverage would be at the low end of our target range. As James mentioned, our powerful portfolio, amplified by our system's unique capabilities gives us confidence in our ability to deliver on our updated 2024 guidance. We now expect organic revenue growth of approximately 10% and comparable currency-neutral earnings per share growth of 14% to 15%. Based on current rates and our hedge positions, we now anticipate an approximate 5-point currency headwind to comparable net revenues and an approximate 9-point currency headwind to comparable earnings per share for full year 2024. We continue to expect comparable earnings per share growth of 5% to 6% versus $2.69 in 2023. While it is too early to provide specific guidance on 2025, we do want to share some considerations based on what we know today. We're encouraged by our underlying performance and believe we're well positioned to deliver on our long-term growth opportunity. We expect pricing from intense inflationary markets to moderate in 2025 and recycling the impact of currency devaluations from these markets in 2024. With respect to our commodity environment, we expect prices on industrial materials to remain relatively stable, while agricultural commodities will continue to face volatility and higher prices. We will continue to invest behind our brands as we have been doing, while at the same time we will leverage a range of productivity levers to drive efficiency and effectiveness across our P&L. We expect elevated net interest expense resulting from the deposit made related to the ongoing IRS tax dispute and upcoming fairlife contingent consideration payment. Regarding currency, if we assume current rates on our hedge positions, there would be an approximate low single-digit currency headwind to comparable net revenues and an approximate mid-single-digit currency headwind to comparable earnings per share for full year 2025. Many factors could impact both our currency outlook and broader business between now and when we expect to provide guidance in February. With our all-weather strategy, we've delivered comparable earnings growth for many years now. We have numerous levers to continue to do so. So in summary, successfully executing our strategy in an ever-evolving operating environment, we're confident in our ability to deliver on our objectives in 2024 and over the long-term. We're clear on the direction we are heading in the system. And we continue to invest with our bottling partners to drive sustainable long-term growth. With that, operator, we are ready to take questions.","evidence_gemma_new":"comparable gross margin","evidence_llama_3_3":null,"evidence_qwen_3_30b":"comparable gross margin third quarter","gemma_new_max":0.7,"gemma_new_min":0.7,"llama_3_3_max":null,"llama_3_3_min":null,"qwen_3_30b_max":0.7,"qwen_3_30b_min":0.7}
{"symbol":"KO","year":2023,"quarter":1,"date":"2023-Q1","chunk_id":3,"sub_chunk_id":0,"centroid_label":"comparable operating margin","agreed_value":0.4,"count":2,"chunk":"John Murphy: Thank you, James, and good morning, everyone. We've had a good start to the year with strong first quarter results. Starting with the top line. We grew organic revenues 12%. Unit cases grew 3% with broad-based growth across most markets, driven by investments in the marketplace. Concentrate sales were 2 points behind unit cases for the quarter primarily driven by timing of concentrate shipments and 1 less day. Our price\/mix growth was 11% for the quarter. Much of this was driven by carryover pricing coming into the base from last year, along with some new pricing actions across operating segments as well as revenue growth management initiatives and favorable channel and package mix. Comparable gross margin for the quarter was up approximately 120 basis points driven by underlying expansion and a slight benefit from bottler refranchising, partially offset by the impact of currency. Underlying gross margin expansion was driven by a benefit from the phasing of inventory costs, strong organic revenue growth and cycling the timing of M&A integration expenses, partially offset by higher commodity costs. Comparable operating margin expanded approximately 40 basis points for the quarter. This was primarily driven by underlying operating margin expansion due to robust top line growth across operating segments, partially offset by increased marketing investments and higher operating costs. Putting it all together, first quarter comparable EPS of $0.68 reflects an increase of 5% year-over-year despite higher-than-expected 7% currency headwinds. Free cash flow was negative by approximately $120 million in the quarter. This was largely attributable to the timing of working capital initiatives and the previously discussed M&A-related payments that took place in the quarter. Our underlying cash flow generation remains strong, and we feel confident in our cash flow agenda and full year outlook. Our balance [ achieves ] fit for purpose to support our growth agenda, and our net debt leverage of 1.8x EBITDA as of the end of the first quarter is below our targeted range of 2 to 2.5x. Our capital allocation priorities remain the same. We continue to invest to drive long-term growth and to deliver dividend growth for our shareowners as evidenced by the 5% dividend increase announced in February. We remain mindful of maintaining our financial flexibility amidst the ongoing tax dispute with the IRS. We are currently waiting for the tax court to render its final opinion in the case, allowing us to move forward with the appeals process. As previously discussed, we intend to assert our claims on appeal, vigorously defend our position and believe we will ultimately prevail. We will continue to keep you updated. As James mentioned, we are encouraged by our first quarter results and are harnessing what we can control to remain resilient in the face of a volatile operating environment. We remain laser-focused on top line-led growth as well as the endurance of the bottom line. And we'll reinvest in our brands with more rigor and discipline using the refreshed resource allocation framework we discussed at CAGNY. This approach enables the enterprise to prioritize and put more focus behind country and category combinations that can deliver the best return in the near term while fueling steady progress on our total beverage strategy over time, it also allows us to be more dynamic and to adapt quickly. For example, in emerging markets, where commercial beverages are still a small part of daily consumption, we're leading with core sparkling and juice strengths propositions. In developed markets, where consumers are looking for more beverage choices, we're investing behind a broader portfolio of brands and categories, including value-added dairy, enhanced water, tea and coffee. Despite the global macro picture remaining uncertain in the months ahead, our planned investments and operational strategy will support the momentum we've seen early in the year and give us good visibility to deliver on our 2023 guidance. This guidance is comprised of organic revenue growth of 7% to 8%, primarily led by price\/mix amidst the ongoing inflationary environment, comparable currency-neutral earnings per share growth of 7% to 9%. Based on current rates and our hedge positions, we are reiterating our currency outlook of an approximate 2- to 3-point headwind to comparable net revenues and an approximate 3- to 4-point currency headwind to comparable earnings per share for full year 2023. Inflationary forces are moderating in some respects. Spot prices have come down in oil and freight rates are more favorable. That said, many commodities were exposed to have been sticky, and we have some advantageous hedges that will be rolling off to less favorable rates during the year. Based on current rates and hedge positions, we continue to expect per case commodity price inflation in the range of a mid-single-digit impact on comparable cost of goods sold in 2023. Additionally, we expect wages and inflation in media will continue to remain elevated. Despite the increase in the first quarter effective tax rate, we continue to expect our underlying effective tax rate to be 19.5% for 2023. All in, we are reiterating comparable earnings per share growth of 4% to 5% versus $2.48 in 2022. We expect to generate approximately $9.5 billion of free cash flow in 2023 through approximately $11.4 billion in cash from operations, less approximately $1.9 billion in capital investments. I would like to remind you that included in cash from operations are 2 discrete items related to, one, transition tax payments, which will take place in the second quarter; and two, payments associated with M&A transactions. Excluding these, our implied free cash flow conversion would be within our long-term guidance. This guidance does not include any payments related to our ongoing U.S. income tax dispute with the IRS. Overall, we don't expect the tax dispute to have a bearing on our ability to deliver on our capital allocation agenda and drive long-term business growth. There are some considerations to keep in mind as it pertains to our guidance. We expect price\/mix to moderate through the year as we cycle our pricing initiatives from the prior year. The discrete gross margin benefits related to the phasing of inventory costs and cycling the timing of M&A integration expenses this quarter are unlikely to repeat. Given the ongoing backdrop of rising interest rates, we expect to see higher net interest expense given our effective exposure to floating rate debt. And finally, due to our reporting calendar, there will be one additional day in the fourth quarter. With a quarter of good results to start the year and our focus on driving top line-led growth in any macroeconomic environment, we are well positioned to compound quality value by delivering on 2023 guidance.","evidence_gemma_new":null,"evidence_llama_3_3":"Comparable operating margin first quarter","evidence_qwen_3_30b":"comparable operating margin 40 basis points first quarter","gemma_new_max":null,"gemma_new_min":null,"llama_3_3_max":0.4,"llama_3_3_min":0.4,"qwen_3_30b_max":0.4,"qwen_3_30b_min":0.4}
{"symbol":"KO","year":2023,"quarter":3,"date":"2023-Q3","chunk_id":3,"sub_chunk_id":0,"centroid_label":"comparable operating margin","agreed_value":20.0,"count":2,"chunk":"John Murphy: Thank you, James and good morning, everyone. Today, I'll comment on our third quarter performance and highlight our updated 2023 guidance. I'll also provide some early commentary on 2024 and the actions we are taking to continue to deliver on our objectives. As James mentioned, we delivered strong third quarter results. Starting with the top line. We grew organic revenues 11%. Unit case growth was 2%. If you exclude the impact of suspending our business in Russia, we have delivered positive volume growth in each quarter since the start of 2021. Concentrate sales were in line with unit cases for the quarter. Price\/mix growth was 9% driven by pricing actions across operating segments, including the impact of a few hyperinflationary markets, along with carryover pricing coming into the base from last year. Comparable gross margin for the quarter was up approximately 130 basis points driven by underlying expansion and a slight benefit from bottler refranchising, partially offset by the impact of currency headwinds. Comparable operating margin expanded approximately 20 basis points for the quarter. This was primarily driven by strong top line growth and the impact of refranchising bottling operations, partially offset by an increase in marketing investments versus the prior year as well as currency headwinds. Putting it all together, third quarter comparable EPS of $0.74 was up 7% year-over-year despite higher-than-expected 4% currency headwinds. Free cash flow was approximately $7.9 billion year-to-date. This was largely attributable to strong underlying operational performance and working capital benefits, partially offset by $720 million transition tax payment and $230 million in M&A-related payments. Our balance sheet is strong and our net debt leverage of 1.5x EBITDA is below our target range of 2 to 2.5x. Recently, we entered into a letter of intent to refranchise our Philippines bottler. As we progress on our refranchising journey, we aspire to improve the return profile of our business. In 2015, when Bottling Investments Group was more than 50% of our net revenue, our return on invested capital was approximately 17%. Today, Bottling Investments Group makes up less than 20% of net revenue. And our return on invested capital is over 23%, nearly a 7-point increase. After this transaction closes, our remaining assets in the Bottling Investments Group will include operations in India, Africa and several smaller locations, primarily in Asia Pacific. We will remain disciplined in our refranchising approach by making sure we best position our system to deliver sustainable long-term growth. Our business performance year-to-date gives us confidence that we can deliver on our raised 2023 guidance. This is comprised of organic revenue growth of 10% to 11% which will be led by price\/mix and includes positive volume growth. We do expect pricing in developed markets to moderate in the fourth quarter as we cycle pricing initiatives from the prior year. There are also a few hyperinflationary markets that will continue to drive price\/mix. There will be 1 additional day in the fourth quarter. We now expect comparable currency-neutral earnings per share growth of 13% to 14%. And based on current rates and our hedge positions, we now expect currency to be an approximate 4-point headwind to comparable net revenues and an approximate 6-point currency headwind to comparable earnings per share for full year 2023. Based on current rates and hedge positions, we continue to expect per-case commodity price inflation in the range of a mid-single-digit impact on comparable cost of goods sold in 2023. We now expect our underlying effective tax rate for 2023 to be 19%. All in, we are updating comparable earnings per share growth of 7% to 8% versus $2.48 in 2022. We continue to expect to generate approximately $9.5 billion of free cash flow in 2023 through approximately $11.4 billion in cash from operations. That's approximately $1.9 billion in capital investments. This guidance does not include any payments related to our U.S. income tax dispute with the IRS which are unlikely to occur in 2023. Given the momentum of our business, the strength of our balance sheet and some proceeds that we expect to receive from bottler refranchising, we have increased flexibility to continue to both reinvest in our business and return capital to shareowners. While it is too early to provide specific items on 2024, we want to share some considerations based on what we know today. We're encouraged by our top line momentum across the majority of our markets. There are a handful of hyperinflationary markets where it is either not possible to hedge or it is costly to do so. In these markets, we've demonstrated that we can manage currency pressures by taking price with local market inflation and we will continue to follow this approach. While some commodities are normalizing, we also have input costs that could be impacted by tensions and conflicts. With respect to advertising spend, our bias is to continue to reinvest behind our brands while maintaining flexibility. Regarding currency, if we assume current rates and our hedge positions, there would be an approximate low single-digit currency headwind to comparable net revenues and an approximate mid-single-digit currency headwind to comparable earnings per share for full year 2024. Of course, several factors could impact both our currency outlook and broader business outlook between now and February. Over the past few years, we've delivered U.S. dollar EPS growth and we have many levers to continue to do so. So in summary, we are encouraged by our business results and confident in our ability to deliver on our commitments over the long term. Thanks to the incredible commitment of our system employees around the world, we're very clear on the direction we are heading and well equipped to execute on the strategies to get us there. And we continue to invest to drive sustainable long-term growth. We remain focused on capturing the opportunities available to us. With that, operator, we are ready to take questions.","evidence_gemma_new":"Comparable operating margin","evidence_llama_3_3":"Comparable operating margin third quarter","evidence_qwen_3_30b":null,"gemma_new_max":20.0,"gemma_new_min":20.0,"llama_3_3_max":20.0,"llama_3_3_min":20.0,"qwen_3_30b_max":null,"qwen_3_30b_min":null}
{"symbol":"KO","year":2023,"quarter":4,"date":"2023-Q4","chunk_id":3,"sub_chunk_id":0,"centroid_label":"comparable operating margin","agreed_value":0.4,"count":3,"chunk":"John Murphy: Thank you, James. And good morning, everyone. In the fourth quarter and throughout 2023, we delivered strong results. During the quarter, we grew organic revenues 12% which was in-line with our full year organic revenue growth. Unit case growth was 2% and it was positive in each quarter of 2023. Concentrate sales grew 1 point ahead of unit cases, driven primarily by one additional day in the quarter. Our price mix growth of 9% in the quarter was driven by three factors. One, 2023 pricing actions across most of our markets. Two, hyperinflationary pricing that I'll speak to in just a moment. And three, some mix which is mostly timing related. Comparable gross margin for the quarter was up approximately 140 basis points. Driven by underlying expansion and a slight benefit from bottle refranchising. Partially offset by the impact of currency headwinds. Comparable operating margin expanded approximately 40 basis points for the quarter. This was primarily driven by strong topline growth, partially offset by currency headwinds and an increase in marketing investments. The positive volume and topline growth that we're realizing today demonstrates the effectiveness of our marketing spend. Below the line, comparable other income declined primarily due to the operating environment in Argentina. Putting it all together, fourth quarter comparable EPS of $0.49 was up 10% year-over-year, despite higher than expected 13% currency headwinds. Before moving on, I wanted to discuss the impact of a few hyperinflationary markets on our fourth quarter results. During the quarter, inflation intensified and exceeded 60% across these markets. In aggregate, while they represent less than 5% of our total volume, this degree of inflation creates a cosmetic distortion to our underlying results. In the fourth quarter, these markets contributed more than 3 points of our price mix and most of our currency headwinds, including an outsized impact to comparable other income from balance sheet remeasurement in Argentina. They did not, however, have a material impact on our earnings per share results. In hyperinflationary markets it's either impractical or impossible to hedge our currency exposure. And to manage it, we use our full suite of revenue growth management tools, including pricing actions to keep pace with local market inflation. We have been operating a long-time in these markets and we expect to be in them for a long-time to come. We work hand-in-hand with our local bottling partners and our focus will be to continue to nurture the strong relationships we have with our consumers and customers. And to ultimately prevail longer-term. So while we will continue to experience volatility of this nature in a few markets, it's important to keep in mind they are operated locally, they are typically self-funding and they have not impeded our overall ability to grow earnings per share. As we move forward, we are confident that our business model and the many levers within it will allow us to deliver on our overall objectives. In 2023 free cash flow was $9.7 billion, which increased from the prior year. 2023 free cash flow included a transition tax payment of approximately $720 million, which was approximately $340 million higher than the prior year and included approximately $230 million in M&A related payments. Our underlying free cash flow growth was largely attributable to strong operational performance and working capital benefits. If you exclude the full impact of the transition tax in M&A related payments, our adjusted free cash flow conversion ratio would be within our target range of 90% to 95%. Our balance sheet remains strong. And our net debt leverage of 1.7 times EBITDA is below our targeted range of 2 times to 2.5 times. During the fourth quarter, in addition to offsetting dilution from the exercise of stock options by employees, we repurchased additional shares in anticipation of expected proceeds from bottler refranchising. As James mentioned, we anticipate 2024 will bring new challenges and opportunities. However, through our all-weather strategy, we've proven we can deliver in many different operating environments. Our 2024 guidance builds on the underlying momentum of our business. We expect organic revenue growth of 6% to 7% and comparable currency neutral earnings per share growth of 8% to 10%. We anticipate hyperinflationary pricing will continue to play a role in 2024, but it will moderate throughout the year. We continue to make significant progress towards refranchising company owned bottling operations. Bottler refranchising is expected to be a 4 point to 5 point headwind to comparable net revenues and a 2 point headwind to comparable earnings per share. But will have a positive impact on both our margins and the return profile of our business. Based on current rates and our hedge positions, we anticipate an approximate 2 point to 3 point currency headwind to comparable net revenues and an approximate 4 point to 5 point currency headwind to comparable earnings per share for full year 2024. Notably, much of our anticipated 2024 currency headwinds are attributed to hyperinflationary markets with a meaningful impact in the fourth quarter. Our underlying effective tax rate for 2024 is expected to be 19.2%. All in, we expect comparable earnings per share growth of 4% to 5% versus $2.69 in 2023. We expect to generate approximately $9.2 billion of free cash flow in 2024 through approximately $11.4 billion in cash from operations, less approximately $2.2 billion in capital investments. The $11.4 billion of cash from operations includes two items to highlight, transition tax payments of approximately $960 million, an increase of approximately $240 million versus 2023, payments associated with various M&A transactions of approximately $560 million, an increase of approximately $330 million versus 2023. Driven by our underlying cash flow generation and current balance sheet strength, we have ample flexibility to both reinvest in our business to drive growth and return capital to our shareowners. A significant portion of our expected capital investment increase is to build capacity for fairlife and for our India business, both of which experienced robust growth in 2023. Related to capital return, we have an unwavering priority to grow our dividend as we've done with 61 consecutive years of dividend increases. With respect to share repurchases, we will be flexible in our approach. Typically, we've repurchased shares to offset any dilution from the exercise of stock options by employees in the given year. Our capital allocation policy prioritize agility. And we're committed to taking the right actions needed to drive the long-term health of our business and create value for our stakeholders. There are some considerations to keep in mind for 2024. The first quarter of 2024 will be impacted by the timing of concentrate shipments in the fourth quarter of 2023 in some markets and cycling our strongest volume growth quarter from the prior year. We estimate the ongoing conflict in the Middle East had approximately 1 point of impact on volume growth during the fourth quarter of 2023. It's unclear how long this impact will last. In November 2023, the U.S. Tax Court rendered its supplemental opinion related to our ongoing dispute with the Internal Revenue Service. We intend to move forward on appeal and vigorously defend our position. We have ample balance sheet flexibility to fund any payment related to the appeal. Finally, due to our reporting calendar, there will be one less day in the first quarter and two additional days in the fourth quarter. So in summary, we're pleased with what we accomplished in 2023, we're building on our capabilities to continue the underlying momentum across our markets, we're progressing on our refranchising agenda and we're reinvesting in our system to drive long-term growth. We have great confidence, we can deliver on our 2024 guidance and long-term commitments. With that, operator, we're ready to take questions.","evidence_gemma_new":"Comparable operating margin","evidence_llama_3_3":"comparable operating margin fourth quarter","evidence_qwen_3_30b":"comparable operating margin fourth quarter","gemma_new_max":0.4,"gemma_new_min":0.4,"llama_3_3_max":0.4,"llama_3_3_min":0.4,"qwen_3_30b_max":0.4,"qwen_3_30b_min":0.4}
{"symbol":"KO","year":2024,"quarter":1,"date":"2024-Q1","chunk_id":3,"sub_chunk_id":0,"centroid_label":"comparable operating margin","agreed_value":60.0,"count":2,"chunk":"John Murphy: Thank you, James, and good morning, everyone. Our first quarter results marked a continuation of the underlying momentum in our business, driven by a strong and focused system. We delivered another quarter of volume growth, even as we cycled strong results. Additionally, we completed the refranchising of several bottlers during the quarter, leading to further comparable margin expansion. We progressed on our refranchising agenda, while making sure we best position our system to deliver long-term growth, and we earn a fair return on our investments. We continue to invest behind our portfolio with discipline and flexibility, thanks to our enhanced resource allocation agenda. During the quarter, we grew organic revenues 11%. We had 1% unit case growth. Concentrate sales were behind unit case volume by 3 points, driven by 1 less day in the quarter and the timing of concentrate shipments, primarily in Mexico and the Middle East. Our price\/mix growth of 13% in the quarter was driven by approximately 6 points of intense inflationary pricing across a handful of markets to offset significant currency devaluation, pricing actions across a number of markets and a couple of points of favorable mix. Excluding impacts from intense inflationary pricing, organic revenue growth in the first quarter was at the high end of our long-term growth algorithm. Comparable gross margin for the quarter was up approximately 130 basis points driven by underlying expansion and a benefit from bottler refranchising, partially offset by the impact of currency headwinds. Comparable operating margin expanded approximately 60 basis points for the quarter. This was primarily driven by strong top line growth and bottler refranchising, partially offset by currency headwinds and an increase in marketing investments. Markets experiencing intense inflation represent only a single-digit contribution to our volume, but continue to have an outsized impact on the shape of our P&L. Putting it all together, first quarter comparable EPS of $0.72 was up 7% year-over-year, including 9% currency headwinds, which were driven by currency devaluation in markets experiencing intense inflation. Free cash flow was approximately $160 million, an increase from the prior year. Before moving on, I want to discuss 2 items that are included in our first quarter reported results, a $765 million charge related to the remeasurement of our contingent consideration liability for our acquisition of fairlife. Our final payment related to the fairlife acquisition will take place in 2025. This payment has grown as fairlife has outperformed. We continue to be encouraged by our ability to scale fairlife organically. Secondly, a noncash impairment charge of $760 million related to BODYARMOR. While we are taking a charge to reflect revised projections and a higher discount rate since the acquisition date of BODYARMOR, we believe in the power of our 2 sports brand strategy with POWERADE and BODYARMOR. We're taking actions to help create long-term value, and we're seeing signs that this strategy is working. Our balance sheet remains strong and our net debt leverage of 1.6x EBITDA is below our targeted range of 2 to 2.5x. This gives us ample capacity for potential upcoming payments in 2024 related to the IRS tax case, which we continue to vigorously defend, and the upcoming fairlife payment in 2025. We continue to remain consistent in our approach to prioritizing our capital allocation. We're committed to investing to drive growth and to support our dividend, which we have raised for 62 consecutive years. We're confident our business model has the flexibility to allow us to deliver on our overall objectives. Our updated 2024 guidance reflects the underlying momentum of our business, and we now expect organic revenue growth of 8% to 9%, and comparable currency-neutral earnings per share growth of 11% to 13%. Our revised top line guidance is solely driven by higher-than-expected inflationary pricing in a handful of markets, which we expect to moderate throughout the year. Bottler refranchising is still expected to be a 4- to 5-point headwind to comparable net revenues and a 2-point headwind to comparable earnings per share, but will have a positive impact on both our margins and the return profile of our business. Based on current rates and our hedge positions, we anticipate an approximate 4- to 5-point currency headwind to comparable net revenues, and an approximate 7 to 8-point currency headwind to comparable earnings per share for full year 2024. This increase in currency headwind is driven by intense inflationary markets, while the rest of the currency basket is relatively neutral to our results. Our underlying effective tax rate for 2024 is now expected to be 19%. All in, we continue to expect comparable earnings per share growth of 4% to 5% versus $2.69 in 2023. There are some considerations to keep in mind. We estimate the ongoing conflict in the Middle East had approximately 1 point of impact on volume growth during the first quarter of 2024. It's unclear how long this impact will last. The cadence of structural impact will be larger in the second and third quarters due to the timing of transaction closing during the first quarter and the seasonality of the businesses we refranchised. Finally, there will be 2 additional days in the fourth quarter. To sum it up, and as James said, the year has started off well. We remain focused on the execution of our all-weather strategy. And thanks to the partnership of our system and the ongoing dedication of our people, we're confident we can create value for our stakeholders and deliver on our guidance for the year. And as we said at CAGNY, we're primed for performance in 2024 and over the long term. With that, operator, we are ready to take questions.","evidence_gemma_new":"comparable operating margin","evidence_llama_3_3":"comparable operating margin quarter","evidence_qwen_3_30b":null,"gemma_new_max":60.0,"gemma_new_min":60.0,"llama_3_3_max":60.0,"llama_3_3_min":60.0,"qwen_3_30b_max":null,"qwen_3_30b_min":null}
{"symbol":"KO","year":2024,"quarter":2,"date":"2024-Q2","chunk_id":3,"sub_chunk_id":0,"centroid_label":"comparable operating margin","agreed_value":1.2,"count":2,"chunk":"John Murphy: Thank you, James, and good morning, everyone. In the second quarter, we delivered strong results. We grew organic revenues 15%. This consisted of 2% unit case growth. Concentrate sales were ahead of volume by four points, driven primarily by timing of concentrate shipments, and some disruptions in the global supply chain that we partly expect, to reverse next quarter. Our price\/mix growth of 9% in the quarter was primarily driven by two items: one, approximately five points of intense inflationary pricing, across a handful of markets to offset significant currency devaluation. And two, an array of pricing and mix actions across our markets. Excluding the impacts from concentrate shipment timing and pricing from markets with intense inflation. Organic revenue growth during the quarter was at the high end of our long-term growth algorithm. Comparable gross margin was up approximately 200 basis points, driven by underlying expansion, and the benefit from bottler refranchising partially offset by currency headwinds. Comparable operating margin expanded approximately 120 basis points. Comparable operating margin expansion was less than comparable gross margin expansion, due to less benefit from bottler refranchising and greater currency headwinds to comparable operating margin. Putting it all together, second quarter comparable EPS of $0.84 was up 7% year-over-year despite 10% currency headwinds and 2% headwind from bottler refranchising. Free cash flow was approximately $3.3 billion, down approximately $700 million versus the prior year, due to higher tax payments, cycling working capital benefits from the prior year and higher capital expenditures. We continue to take actions, to achieve a fit for purpose balance sheet that, will best support our growth agenda. During the quarter, we raised approximately $4 billion in cash by issuing long-term debt for general corporate purposes. This may include pre-funding upcoming payments related to the IRS tax case and the Fairlife contingent consideration. With respect to our IRS tax case, which we continue to vigorously defend. We're making progress to our next steps, and we expect we will be able to move forward an appeal by the end of the year. Given the continued outperformance of Fairlife, we recorded a charge of $1.3 billion during the quarter. Our estimated final payment related to this acquisition is $5.3 billion, which will be made in 2025. We are encouraged by Fairlife's performance and the value it has created for our company. So far this year, we've realized nearly $3 billion in gross proceeds from bottler refranchising and streamlining our equity investments. We'll continue to prioritize higher growth businesses, and take passive capital off the table. Return on invested capital is 24%, up approximately five points from three years ago. Our balance sheet is strong, as demonstrated by our net debt leverage of 1.5 times EBITDA, which is well below our targeted range of 2 to 2.5 times. We have ample capacity to pursue our capital allocation agenda, which prioritizes investing to drive further growth, continuing to support our dividend and staying dynamic, agile and opportunistic. As James mentioned, we're proactively managing our portfolio to deliver on our commitments. Our updated 2024 guidance reflects the momentum of our business in the first half of the year, and our confidence in our ability to execute on our plans during the second half of this year. We now expect organic revenue growth of 9% to 10%, and comparable currency-neutral earnings per share growth of 13% to 15%. Bottler refranchising is still expected to be a four to five-point headwind, to comparable net revenues. And we now expect a one to two-point headwind, to comparable earnings per share. Based on current rates and our hedge positions, we now anticipate an approximate five to six-point currency headwind, to comparable net revenues and an approximate eight to nine-point currency headwind, to comparable earnings per share for full year 2024. This increase in currency headwind is driven by a small number of intensive treasury markets, while the rest of the currency basket is relatively neutral to our results. All in, we now expect comparable earnings per share growth of 5% to 6% versus $2.69 in 2023. There are some considerations to keep in mind. We expect unit cases and concentrate shipments to be relatively in line with each other for the full year 2024. Please keep in mind there are two extra days in the fourth quarter. Taking everything into consideration, we expect earnings growth during the remainder of 2024, will be weighted towards the fourth quarter. To summarize, we're encouraged by our track record and the underlying momentum of our business. Our system remains incredibly focused and motivated to drive growth. We're continuing to drive quality top line growth, expand margins, grow comparable earnings per share and improve the return profile of our business. And we're confident we will deliver on our guidance, and longer-term objectives. With that, operator, we are ready to take questions.","evidence_gemma_new":"Comparable operating margin","evidence_llama_3_3":null,"evidence_qwen_3_30b":"comparable operating margin second quarter","gemma_new_max":1.2,"gemma_new_min":1.2,"llama_3_3_max":null,"llama_3_3_min":null,"qwen_3_30b_max":1.2,"qwen_3_30b_min":1.2}
{"symbol":"KO","year":2024,"quarter":3,"date":"2024-Q3","chunk_id":3,"sub_chunk_id":0,"centroid_label":"comparable operating margin","agreed_value":1.0,"count":2,"chunk":"John Murphy: Thank you, James, and good morning, everyone. Today I'll comment on our third quarter performance, discuss the outlook for the remainder of 2024, and provide some early commentary on 2025. During the third quarter, we grew organic revenues 9%. Unit cases declined 1% having had a poor July, but improving sequentially thereafter during the quarter. Concentrate sales were 1 point behind unit cases for the quarter, driven primarily by the timing of concentrate shipments. Our price\/mix growth of 10% was driven by two items. Approximately 7 points of pricing split somewhat evenly between normal pricing actions across our markets and intense inflationary pricing in a handful of markets experiencing currency devaluations, and approximately 3 points of mix across the markets, which was primarily driven by stronger growth in several developed markets versus developing and emerging markets. Excluding the impact from intense inflationary pricing, organic revenue growth during the quarter continued to be at the high end of our long-term growth algorithm. Comparable gross margin was up approximately 70 basis points and comparable operating margin was up approximately 100 basis points. Both were driven by underlying expansion and the benefit from butter refranchising, partially offset by the impact of currency headwinds. Putting it all together, third quarter comparable EPS of $0.77 was up 5% year-over-year despite higher-than-expected 9% currency headwinds and 2% headwinds from bottler refranchising. During the quarter, we made a $6 billion deposit with the IRS related to our ongoing tax dispute. We've also filed our appeal with the 11th Circuit Court. We're pleased to move forward with the process. We will vigorously defend our position. We believe we will prevail, and we will continue to keep you updated. Free cash flow, excluding the IRS tax litigation deposit, was approximately $7.6 billion, which is down approximately $290 million versus the prior year due to higher other tax payments, higher capital expenditures and cycling some working capital benefits from the prior year. Our balance sheet is strong, and our net debt leverage of 1.7 times EBITDA is below our targeted range of 2x to 2.5x. If you include our latest estimate of $6.1 billion related to our fairlife contingent consideration payment, which we expect to make in the first half of 2025, our expected net debt leverage would be at the low end of our target range. As James mentioned, our powerful portfolio, amplified by our system's unique capabilities gives us confidence in our ability to deliver on our updated 2024 guidance. We now expect organic revenue growth of approximately 10% and comparable currency-neutral earnings per share growth of 14% to 15%. Based on current rates and our hedge positions, we now anticipate an approximate 5-point currency headwind to comparable net revenues and an approximate 9-point currency headwind to comparable earnings per share for full year 2024. We continue to expect comparable earnings per share growth of 5% to 6% versus $2.69 in 2023. While it is too early to provide specific guidance on 2025, we do want to share some considerations based on what we know today. We're encouraged by our underlying performance and believe we're well positioned to deliver on our long-term growth opportunity. We expect pricing from intense inflationary markets to moderate in 2025 and recycling the impact of currency devaluations from these markets in 2024. With respect to our commodity environment, we expect prices on industrial materials to remain relatively stable, while agricultural commodities will continue to face volatility and higher prices. We will continue to invest behind our brands as we have been doing, while at the same time we will leverage a range of productivity levers to drive efficiency and effectiveness across our P&L. We expect elevated net interest expense resulting from the deposit made related to the ongoing IRS tax dispute and upcoming fairlife contingent consideration payment. Regarding currency, if we assume current rates on our hedge positions, there would be an approximate low single-digit currency headwind to comparable net revenues and an approximate mid-single-digit currency headwind to comparable earnings per share for full year 2025. Many factors could impact both our currency outlook and broader business between now and when we expect to provide guidance in February. With our all-weather strategy, we've delivered comparable earnings growth for many years now. We have numerous levers to continue to do so. So in summary, successfully executing our strategy in an ever-evolving operating environment, we're confident in our ability to deliver on our objectives in 2024 and over the long-term. We're clear on the direction we are heading in the system. And we continue to invest with our bottling partners to drive sustainable long-term growth. With that, operator, we are ready to take questions.","evidence_gemma_new":"comparable operating margin","evidence_llama_3_3":null,"evidence_qwen_3_30b":"comparable operating margin third quarter","gemma_new_max":1.0,"gemma_new_min":1.0,"llama_3_3_max":null,"llama_3_3_min":null,"qwen_3_30b_max":1.0,"qwen_3_30b_min":1.0}
{"symbol":"KO","year":2023,"quarter":1,"date":"2023-Q1","chunk_id":3,"sub_chunk_id":0,"centroid_label":"net debt leverage","agreed_value":1.8,"count":3,"chunk":"John Murphy: Thank you, James, and good morning, everyone. We've had a good start to the year with strong first quarter results. Starting with the top line. We grew organic revenues 12%. Unit cases grew 3% with broad-based growth across most markets, driven by investments in the marketplace. Concentrate sales were 2 points behind unit cases for the quarter primarily driven by timing of concentrate shipments and 1 less day. Our price\/mix growth was 11% for the quarter. Much of this was driven by carryover pricing coming into the base from last year, along with some new pricing actions across operating segments as well as revenue growth management initiatives and favorable channel and package mix. Comparable gross margin for the quarter was up approximately 120 basis points driven by underlying expansion and a slight benefit from bottler refranchising, partially offset by the impact of currency. Underlying gross margin expansion was driven by a benefit from the phasing of inventory costs, strong organic revenue growth and cycling the timing of M&A integration expenses, partially offset by higher commodity costs. Comparable operating margin expanded approximately 40 basis points for the quarter. This was primarily driven by underlying operating margin expansion due to robust top line growth across operating segments, partially offset by increased marketing investments and higher operating costs. Putting it all together, first quarter comparable EPS of $0.68 reflects an increase of 5% year-over-year despite higher-than-expected 7% currency headwinds. Free cash flow was negative by approximately $120 million in the quarter. This was largely attributable to the timing of working capital initiatives and the previously discussed M&A-related payments that took place in the quarter. Our underlying cash flow generation remains strong, and we feel confident in our cash flow agenda and full year outlook. Our balance [ achieves ] fit for purpose to support our growth agenda, and our net debt leverage of 1.8x EBITDA as of the end of the first quarter is below our targeted range of 2 to 2.5x. Our capital allocation priorities remain the same. We continue to invest to drive long-term growth and to deliver dividend growth for our shareowners as evidenced by the 5% dividend increase announced in February. We remain mindful of maintaining our financial flexibility amidst the ongoing tax dispute with the IRS. We are currently waiting for the tax court to render its final opinion in the case, allowing us to move forward with the appeals process. As previously discussed, we intend to assert our claims on appeal, vigorously defend our position and believe we will ultimately prevail. We will continue to keep you updated. As James mentioned, we are encouraged by our first quarter results and are harnessing what we can control to remain resilient in the face of a volatile operating environment. We remain laser-focused on top line-led growth as well as the endurance of the bottom line. And we'll reinvest in our brands with more rigor and discipline using the refreshed resource allocation framework we discussed at CAGNY. This approach enables the enterprise to prioritize and put more focus behind country and category combinations that can deliver the best return in the near term while fueling steady progress on our total beverage strategy over time, it also allows us to be more dynamic and to adapt quickly. For example, in emerging markets, where commercial beverages are still a small part of daily consumption, we're leading with core sparkling and juice strengths propositions. In developed markets, where consumers are looking for more beverage choices, we're investing behind a broader portfolio of brands and categories, including value-added dairy, enhanced water, tea and coffee. Despite the global macro picture remaining uncertain in the months ahead, our planned investments and operational strategy will support the momentum we've seen early in the year and give us good visibility to deliver on our 2023 guidance. This guidance is comprised of organic revenue growth of 7% to 8%, primarily led by price\/mix amidst the ongoing inflationary environment, comparable currency-neutral earnings per share growth of 7% to 9%. Based on current rates and our hedge positions, we are reiterating our currency outlook of an approximate 2- to 3-point headwind to comparable net revenues and an approximate 3- to 4-point currency headwind to comparable earnings per share for full year 2023. Inflationary forces are moderating in some respects. Spot prices have come down in oil and freight rates are more favorable. That said, many commodities were exposed to have been sticky, and we have some advantageous hedges that will be rolling off to less favorable rates during the year. Based on current rates and hedge positions, we continue to expect per case commodity price inflation in the range of a mid-single-digit impact on comparable cost of goods sold in 2023. Additionally, we expect wages and inflation in media will continue to remain elevated. Despite the increase in the first quarter effective tax rate, we continue to expect our underlying effective tax rate to be 19.5% for 2023. All in, we are reiterating comparable earnings per share growth of 4% to 5% versus $2.48 in 2022. We expect to generate approximately $9.5 billion of free cash flow in 2023 through approximately $11.4 billion in cash from operations, less approximately $1.9 billion in capital investments. I would like to remind you that included in cash from operations are 2 discrete items related to, one, transition tax payments, which will take place in the second quarter; and two, payments associated with M&A transactions. Excluding these, our implied free cash flow conversion would be within our long-term guidance. This guidance does not include any payments related to our ongoing U.S. income tax dispute with the IRS. Overall, we don't expect the tax dispute to have a bearing on our ability to deliver on our capital allocation agenda and drive long-term business growth. There are some considerations to keep in mind as it pertains to our guidance. We expect price\/mix to moderate through the year as we cycle our pricing initiatives from the prior year. The discrete gross margin benefits related to the phasing of inventory costs and cycling the timing of M&A integration expenses this quarter are unlikely to repeat. Given the ongoing backdrop of rising interest rates, we expect to see higher net interest expense given our effective exposure to floating rate debt. And finally, due to our reporting calendar, there will be one additional day in the fourth quarter. With a quarter of good results to start the year and our focus on driving top line-led growth in any macroeconomic environment, we are well positioned to compound quality value by delivering on 2023 guidance.","evidence_gemma_new":"net debt leverage","evidence_llama_3_3":"net debt leverage first quarter","evidence_qwen_3_30b":"net debt leverage 1.8x EBITDA first quarter","gemma_new_max":1.8,"gemma_new_min":1.8,"llama_3_3_max":1.8,"llama_3_3_min":1.8,"qwen_3_30b_max":1.8,"qwen_3_30b_min":1.8}
{"symbol":"KO","year":2023,"quarter":2,"date":"2023-Q2","chunk_id":3,"sub_chunk_id":0,"centroid_label":"net debt leverage","agreed_value":1.6,"count":2,"chunk":"John Murphy: Thank you, James, and good morning, everyone. We are pleased with the momentum of our business and our strong second quarter results. Starting with the top line, we grew organic revenues 11%. Unit cases were flat. As James said, volume for the second quarter got off to a slower start, but ended on a positive note. Concentrate sales were one point ahead of unit cases for the quarter, primarily driven by the timing of concentrate shipments. Price mix growth was 10% for the quarter, driven by carryover pricing coming into the base from last year, along with some new pricing actions across operating segments, including the impact of hyperinflationary markets. Comparable gross margin for the quarter was up approximately 40 basis points, driven by underlying expansion and a slight benefit from bottler refranchising partially offset by the impact of currency. Comparable operating margin expanded approximately 90 basis points for the quarter. This was primarily driven by strong top line growth and the impact of refranchising bottling operations. Partially offset by an increase in marketing investments and higher operating costs versus the prior year as well as currency headwinds. Putting it all together, second quarter comparable EPS of $0.78 was up 11% year-over-year despite higher than expected 6% currency headwinds. Free cash flow was approximately $4 billion year-to-date. This was largely attributable to strong underlying operational performance and working capital benefits, partially offset by a $720 million transition tax payment that was made during the second quarter as well as M&A related payments. Our balance sheet is strong and our net debt leverage of 1.6 times EBITDA is below our targeted range of 2 to 2.5 times. Our capital allocation priorities remain the same and we continue to invest to drive long-term growth. As James mentioned, we are encouraged by what we are seeing in the marketplace. While we continue to spend our strategic flywheel faster to generate top line led growth, we've also progressed on a margin agenda, as demonstrated by our consistent track record of offsetting cost headwinds to sustain steady gross margins. We have numerous levers available to drive top line growth and improve the effectiveness and efficiency of our spend over the long-term. Our all-weather strategy, coupled with the great plans that we have in place to continue to create quality leadership across our portfolio give us good visibility to deliver on our raised 2023 guidance. This is comprised of organic revenue growth of 8% to 9%, which includes positive volume growth while continuing to be led by price mix. There are a few considerations to keep in mind. We expect pricing in developed markets to moderate through the year as we cycle pricing initiatives from the prior year. In developing and emerging markets, we aim to take price with local market inflation. To the extent that intense inflationary markets drive elevated price mix. The impact is oftentimes offset by currency, as it is frequently difficult to hedge our exposure. Due to our reporting calendar, there will be one additional day in the fourth quarter. We now expect comparable currency neutral earnings per share growth of 9% to 11%. Based on current rates and our hedge positions, we are updating our currency outlook of an approximate 3 to 4 point headwind to comparable net revenues and an approximate 4 to 5 point currency headwind to comparable earnings per share for full year 2023. Inflationary pressures are beginning to moderate in some ways, including freight rates that are favorable compared to last year. That said, several commodities that are prevalent in our basket like sugar and juice remain elevated and we have some hedges that we will be rolling off to less favorable rates. Based on current rates and hedge positions, we continue to expect per case commodity price inflation in the range of a mid-single digit impact on comparable cost of goods sold in 2023. Our updated underlying effective tax rate for 2023 is now 19.3%. All-in, we are updating comparable earnings per share growth of 5% to 6% versus $2.48 in 2022. We continue to expect to generate approximately $9.5 billion of free cash flow in 2023 through approximately $11.4 billion in cash from operations less approximately $1.9 billion in capital investments. If you exclude the transition tax payment made in the second quarter and various payments associated with M&A transactions, our implied free cash flow conversion would be within our long-term guidance. This guidance does not include any payments related to our ongoing US income tax dispute with the IRS. As we enter the second half of the year, we continue to build a culture that emphasizes raising the bar in every aspect of how we do business. Thanks to the tremendous ongoing commitment of our system employees around the world, we are confident in our ability to deliver on our guidance for 2023 and drive value for our stakeholders over the long-term. With that operator, we are ready to take questions.","evidence_gemma_new":null,"evidence_llama_3_3":"net debt leverage EBITDA","evidence_qwen_3_30b":"net debt leverage 1.6 times EBITDA targeted range of 2 to 2.5 times","gemma_new_max":null,"gemma_new_min":null,"llama_3_3_max":1.6,"llama_3_3_min":1.6,"qwen_3_30b_max":1.6,"qwen_3_30b_min":1.6}
{"symbol":"KO","year":2023,"quarter":3,"date":"2023-Q3","chunk_id":3,"sub_chunk_id":0,"centroid_label":"net debt leverage","agreed_value":1.5,"count":3,"chunk":"John Murphy: Thank you, James and good morning, everyone. Today, I'll comment on our third quarter performance and highlight our updated 2023 guidance. I'll also provide some early commentary on 2024 and the actions we are taking to continue to deliver on our objectives. As James mentioned, we delivered strong third quarter results. Starting with the top line. We grew organic revenues 11%. Unit case growth was 2%. If you exclude the impact of suspending our business in Russia, we have delivered positive volume growth in each quarter since the start of 2021. Concentrate sales were in line with unit cases for the quarter. Price\/mix growth was 9% driven by pricing actions across operating segments, including the impact of a few hyperinflationary markets, along with carryover pricing coming into the base from last year. Comparable gross margin for the quarter was up approximately 130 basis points driven by underlying expansion and a slight benefit from bottler refranchising, partially offset by the impact of currency headwinds. Comparable operating margin expanded approximately 20 basis points for the quarter. This was primarily driven by strong top line growth and the impact of refranchising bottling operations, partially offset by an increase in marketing investments versus the prior year as well as currency headwinds. Putting it all together, third quarter comparable EPS of $0.74 was up 7% year-over-year despite higher-than-expected 4% currency headwinds. Free cash flow was approximately $7.9 billion year-to-date. This was largely attributable to strong underlying operational performance and working capital benefits, partially offset by $720 million transition tax payment and $230 million in M&A-related payments. Our balance sheet is strong and our net debt leverage of 1.5x EBITDA is below our target range of 2 to 2.5x. Recently, we entered into a letter of intent to refranchise our Philippines bottler. As we progress on our refranchising journey, we aspire to improve the return profile of our business. In 2015, when Bottling Investments Group was more than 50% of our net revenue, our return on invested capital was approximately 17%. Today, Bottling Investments Group makes up less than 20% of net revenue. And our return on invested capital is over 23%, nearly a 7-point increase. After this transaction closes, our remaining assets in the Bottling Investments Group will include operations in India, Africa and several smaller locations, primarily in Asia Pacific. We will remain disciplined in our refranchising approach by making sure we best position our system to deliver sustainable long-term growth. Our business performance year-to-date gives us confidence that we can deliver on our raised 2023 guidance. This is comprised of organic revenue growth of 10% to 11% which will be led by price\/mix and includes positive volume growth. We do expect pricing in developed markets to moderate in the fourth quarter as we cycle pricing initiatives from the prior year. There are also a few hyperinflationary markets that will continue to drive price\/mix. There will be 1 additional day in the fourth quarter. We now expect comparable currency-neutral earnings per share growth of 13% to 14%. And based on current rates and our hedge positions, we now expect currency to be an approximate 4-point headwind to comparable net revenues and an approximate 6-point currency headwind to comparable earnings per share for full year 2023. Based on current rates and hedge positions, we continue to expect per-case commodity price inflation in the range of a mid-single-digit impact on comparable cost of goods sold in 2023. We now expect our underlying effective tax rate for 2023 to be 19%. All in, we are updating comparable earnings per share growth of 7% to 8% versus $2.48 in 2022. We continue to expect to generate approximately $9.5 billion of free cash flow in 2023 through approximately $11.4 billion in cash from operations. That's approximately $1.9 billion in capital investments. This guidance does not include any payments related to our U.S. income tax dispute with the IRS which are unlikely to occur in 2023. Given the momentum of our business, the strength of our balance sheet and some proceeds that we expect to receive from bottler refranchising, we have increased flexibility to continue to both reinvest in our business and return capital to shareowners. While it is too early to provide specific items on 2024, we want to share some considerations based on what we know today. We're encouraged by our top line momentum across the majority of our markets. There are a handful of hyperinflationary markets where it is either not possible to hedge or it is costly to do so. In these markets, we've demonstrated that we can manage currency pressures by taking price with local market inflation and we will continue to follow this approach. While some commodities are normalizing, we also have input costs that could be impacted by tensions and conflicts. With respect to advertising spend, our bias is to continue to reinvest behind our brands while maintaining flexibility. Regarding currency, if we assume current rates and our hedge positions, there would be an approximate low single-digit currency headwind to comparable net revenues and an approximate mid-single-digit currency headwind to comparable earnings per share for full year 2024. Of course, several factors could impact both our currency outlook and broader business outlook between now and February. Over the past few years, we've delivered U.S. dollar EPS growth and we have many levers to continue to do so. So in summary, we are encouraged by our business results and confident in our ability to deliver on our commitments over the long term. Thanks to the incredible commitment of our system employees around the world, we're very clear on the direction we are heading and well equipped to execute on the strategies to get us there. And we continue to invest to drive sustainable long-term growth. We remain focused on capturing the opportunities available to us. With that, operator, we are ready to take questions.","evidence_gemma_new":"net debt leverage","evidence_llama_3_3":"net debt leverage","evidence_qwen_3_30b":"net debt leverage 1.5x EBITDA","gemma_new_max":1.5,"gemma_new_min":1.5,"llama_3_3_max":1.5,"llama_3_3_min":1.5,"qwen_3_30b_max":1.5,"qwen_3_30b_min":1.5}
{"symbol":"KO","year":2024,"quarter":1,"date":"2024-Q1","chunk_id":3,"sub_chunk_id":0,"centroid_label":"net debt leverage","agreed_value":1.6,"count":3,"chunk":"John Murphy: Thank you, James, and good morning, everyone. Our first quarter results marked a continuation of the underlying momentum in our business, driven by a strong and focused system. We delivered another quarter of volume growth, even as we cycled strong results. Additionally, we completed the refranchising of several bottlers during the quarter, leading to further comparable margin expansion. We progressed on our refranchising agenda, while making sure we best position our system to deliver long-term growth, and we earn a fair return on our investments. We continue to invest behind our portfolio with discipline and flexibility, thanks to our enhanced resource allocation agenda. During the quarter, we grew organic revenues 11%. We had 1% unit case growth. Concentrate sales were behind unit case volume by 3 points, driven by 1 less day in the quarter and the timing of concentrate shipments, primarily in Mexico and the Middle East. Our price\/mix growth of 13% in the quarter was driven by approximately 6 points of intense inflationary pricing across a handful of markets to offset significant currency devaluation, pricing actions across a number of markets and a couple of points of favorable mix. Excluding impacts from intense inflationary pricing, organic revenue growth in the first quarter was at the high end of our long-term growth algorithm. Comparable gross margin for the quarter was up approximately 130 basis points driven by underlying expansion and a benefit from bottler refranchising, partially offset by the impact of currency headwinds. Comparable operating margin expanded approximately 60 basis points for the quarter. This was primarily driven by strong top line growth and bottler refranchising, partially offset by currency headwinds and an increase in marketing investments. Markets experiencing intense inflation represent only a single-digit contribution to our volume, but continue to have an outsized impact on the shape of our P&L. Putting it all together, first quarter comparable EPS of $0.72 was up 7% year-over-year, including 9% currency headwinds, which were driven by currency devaluation in markets experiencing intense inflation. Free cash flow was approximately $160 million, an increase from the prior year. Before moving on, I want to discuss 2 items that are included in our first quarter reported results, a $765 million charge related to the remeasurement of our contingent consideration liability for our acquisition of fairlife. Our final payment related to the fairlife acquisition will take place in 2025. This payment has grown as fairlife has outperformed. We continue to be encouraged by our ability to scale fairlife organically. Secondly, a noncash impairment charge of $760 million related to BODYARMOR. While we are taking a charge to reflect revised projections and a higher discount rate since the acquisition date of BODYARMOR, we believe in the power of our 2 sports brand strategy with POWERADE and BODYARMOR. We're taking actions to help create long-term value, and we're seeing signs that this strategy is working. Our balance sheet remains strong and our net debt leverage of 1.6x EBITDA is below our targeted range of 2 to 2.5x. This gives us ample capacity for potential upcoming payments in 2024 related to the IRS tax case, which we continue to vigorously defend, and the upcoming fairlife payment in 2025. We continue to remain consistent in our approach to prioritizing our capital allocation. We're committed to investing to drive growth and to support our dividend, which we have raised for 62 consecutive years. We're confident our business model has the flexibility to allow us to deliver on our overall objectives. Our updated 2024 guidance reflects the underlying momentum of our business, and we now expect organic revenue growth of 8% to 9%, and comparable currency-neutral earnings per share growth of 11% to 13%. Our revised top line guidance is solely driven by higher-than-expected inflationary pricing in a handful of markets, which we expect to moderate throughout the year. Bottler refranchising is still expected to be a 4- to 5-point headwind to comparable net revenues and a 2-point headwind to comparable earnings per share, but will have a positive impact on both our margins and the return profile of our business. Based on current rates and our hedge positions, we anticipate an approximate 4- to 5-point currency headwind to comparable net revenues, and an approximate 7 to 8-point currency headwind to comparable earnings per share for full year 2024. This increase in currency headwind is driven by intense inflationary markets, while the rest of the currency basket is relatively neutral to our results. Our underlying effective tax rate for 2024 is now expected to be 19%. All in, we continue to expect comparable earnings per share growth of 4% to 5% versus $2.69 in 2023. There are some considerations to keep in mind. We estimate the ongoing conflict in the Middle East had approximately 1 point of impact on volume growth during the first quarter of 2024. It's unclear how long this impact will last. The cadence of structural impact will be larger in the second and third quarters due to the timing of transaction closing during the first quarter and the seasonality of the businesses we refranchised. Finally, there will be 2 additional days in the fourth quarter. To sum it up, and as James said, the year has started off well. We remain focused on the execution of our all-weather strategy. And thanks to the partnership of our system and the ongoing dedication of our people, we're confident we can create value for our stakeholders and deliver on our guidance for the year. And as we said at CAGNY, we're primed for performance in 2024 and over the long term. With that, operator, we are ready to take questions.","evidence_gemma_new":"net debt leverage","evidence_llama_3_3":"net debt leverage EBITDA","evidence_qwen_3_30b":"net debt leverage","gemma_new_max":1.6,"gemma_new_min":1.6,"llama_3_3_max":1.6,"llama_3_3_min":1.6,"qwen_3_30b_max":1.6,"qwen_3_30b_min":1.6}
{"symbol":"KO","year":2024,"quarter":2,"date":"2024-Q2","chunk_id":3,"sub_chunk_id":0,"centroid_label":"net debt leverage","agreed_value":1.5,"count":3,"chunk":"John Murphy: Thank you, James, and good morning, everyone. In the second quarter, we delivered strong results. We grew organic revenues 15%. This consisted of 2% unit case growth. Concentrate sales were ahead of volume by four points, driven primarily by timing of concentrate shipments, and some disruptions in the global supply chain that we partly expect, to reverse next quarter. Our price\/mix growth of 9% in the quarter was primarily driven by two items: one, approximately five points of intense inflationary pricing, across a handful of markets to offset significant currency devaluation. And two, an array of pricing and mix actions across our markets. Excluding the impacts from concentrate shipment timing and pricing from markets with intense inflation. Organic revenue growth during the quarter was at the high end of our long-term growth algorithm. Comparable gross margin was up approximately 200 basis points, driven by underlying expansion, and the benefit from bottler refranchising partially offset by currency headwinds. Comparable operating margin expanded approximately 120 basis points. Comparable operating margin expansion was less than comparable gross margin expansion, due to less benefit from bottler refranchising and greater currency headwinds to comparable operating margin. Putting it all together, second quarter comparable EPS of $0.84 was up 7% year-over-year despite 10% currency headwinds and 2% headwind from bottler refranchising. Free cash flow was approximately $3.3 billion, down approximately $700 million versus the prior year, due to higher tax payments, cycling working capital benefits from the prior year and higher capital expenditures. We continue to take actions, to achieve a fit for purpose balance sheet that, will best support our growth agenda. During the quarter, we raised approximately $4 billion in cash by issuing long-term debt for general corporate purposes. This may include pre-funding upcoming payments related to the IRS tax case and the Fairlife contingent consideration. With respect to our IRS tax case, which we continue to vigorously defend. We're making progress to our next steps, and we expect we will be able to move forward an appeal by the end of the year. Given the continued outperformance of Fairlife, we recorded a charge of $1.3 billion during the quarter. Our estimated final payment related to this acquisition is $5.3 billion, which will be made in 2025. We are encouraged by Fairlife's performance and the value it has created for our company. So far this year, we've realized nearly $3 billion in gross proceeds from bottler refranchising and streamlining our equity investments. We'll continue to prioritize higher growth businesses, and take passive capital off the table. Return on invested capital is 24%, up approximately five points from three years ago. Our balance sheet is strong, as demonstrated by our net debt leverage of 1.5 times EBITDA, which is well below our targeted range of 2 to 2.5 times. We have ample capacity to pursue our capital allocation agenda, which prioritizes investing to drive further growth, continuing to support our dividend and staying dynamic, agile and opportunistic. As James mentioned, we're proactively managing our portfolio to deliver on our commitments. Our updated 2024 guidance reflects the momentum of our business in the first half of the year, and our confidence in our ability to execute on our plans during the second half of this year. We now expect organic revenue growth of 9% to 10%, and comparable currency-neutral earnings per share growth of 13% to 15%. Bottler refranchising is still expected to be a four to five-point headwind, to comparable net revenues. And we now expect a one to two-point headwind, to comparable earnings per share. Based on current rates and our hedge positions, we now anticipate an approximate five to six-point currency headwind, to comparable net revenues and an approximate eight to nine-point currency headwind, to comparable earnings per share for full year 2024. This increase in currency headwind is driven by a small number of intensive treasury markets, while the rest of the currency basket is relatively neutral to our results. All in, we now expect comparable earnings per share growth of 5% to 6% versus $2.69 in 2023. There are some considerations to keep in mind. We expect unit cases and concentrate shipments to be relatively in line with each other for the full year 2024. Please keep in mind there are two extra days in the fourth quarter. Taking everything into consideration, we expect earnings growth during the remainder of 2024, will be weighted towards the fourth quarter. To summarize, we're encouraged by our track record and the underlying momentum of our business. Our system remains incredibly focused and motivated to drive growth. We're continuing to drive quality top line growth, expand margins, grow comparable earnings per share and improve the return profile of our business. And we're confident we will deliver on our guidance, and longer-term objectives. With that, operator, we are ready to take questions.","evidence_gemma_new":"net debt leverage","evidence_llama_3_3":"net debt leverage second quarter","evidence_qwen_3_30b":"net debt leverage this year","gemma_new_max":1.5,"gemma_new_min":1.5,"llama_3_3_max":1.5,"llama_3_3_min":1.5,"qwen_3_30b_max":1.5,"qwen_3_30b_min":1.5}
{"symbol":"KO","year":2024,"quarter":3,"date":"2024-Q3","chunk_id":3,"sub_chunk_id":0,"centroid_label":"net debt leverage","agreed_value":1.7,"count":2,"chunk":"John Murphy: Thank you, James, and good morning, everyone. Today I'll comment on our third quarter performance, discuss the outlook for the remainder of 2024, and provide some early commentary on 2025. During the third quarter, we grew organic revenues 9%. Unit cases declined 1% having had a poor July, but improving sequentially thereafter during the quarter. Concentrate sales were 1 point behind unit cases for the quarter, driven primarily by the timing of concentrate shipments. Our price\/mix growth of 10% was driven by two items. Approximately 7 points of pricing split somewhat evenly between normal pricing actions across our markets and intense inflationary pricing in a handful of markets experiencing currency devaluations, and approximately 3 points of mix across the markets, which was primarily driven by stronger growth in several developed markets versus developing and emerging markets. Excluding the impact from intense inflationary pricing, organic revenue growth during the quarter continued to be at the high end of our long-term growth algorithm. Comparable gross margin was up approximately 70 basis points and comparable operating margin was up approximately 100 basis points. Both were driven by underlying expansion and the benefit from butter refranchising, partially offset by the impact of currency headwinds. Putting it all together, third quarter comparable EPS of $0.77 was up 5% year-over-year despite higher-than-expected 9% currency headwinds and 2% headwinds from bottler refranchising. During the quarter, we made a $6 billion deposit with the IRS related to our ongoing tax dispute. We've also filed our appeal with the 11th Circuit Court. We're pleased to move forward with the process. We will vigorously defend our position. We believe we will prevail, and we will continue to keep you updated. Free cash flow, excluding the IRS tax litigation deposit, was approximately $7.6 billion, which is down approximately $290 million versus the prior year due to higher other tax payments, higher capital expenditures and cycling some working capital benefits from the prior year. Our balance sheet is strong, and our net debt leverage of 1.7 times EBITDA is below our targeted range of 2x to 2.5x. If you include our latest estimate of $6.1 billion related to our fairlife contingent consideration payment, which we expect to make in the first half of 2025, our expected net debt leverage would be at the low end of our target range. As James mentioned, our powerful portfolio, amplified by our system's unique capabilities gives us confidence in our ability to deliver on our updated 2024 guidance. We now expect organic revenue growth of approximately 10% and comparable currency-neutral earnings per share growth of 14% to 15%. Based on current rates and our hedge positions, we now anticipate an approximate 5-point currency headwind to comparable net revenues and an approximate 9-point currency headwind to comparable earnings per share for full year 2024. We continue to expect comparable earnings per share growth of 5% to 6% versus $2.69 in 2023. While it is too early to provide specific guidance on 2025, we do want to share some considerations based on what we know today. We're encouraged by our underlying performance and believe we're well positioned to deliver on our long-term growth opportunity. We expect pricing from intense inflationary markets to moderate in 2025 and recycling the impact of currency devaluations from these markets in 2024. With respect to our commodity environment, we expect prices on industrial materials to remain relatively stable, while agricultural commodities will continue to face volatility and higher prices. We will continue to invest behind our brands as we have been doing, while at the same time we will leverage a range of productivity levers to drive efficiency and effectiveness across our P&L. We expect elevated net interest expense resulting from the deposit made related to the ongoing IRS tax dispute and upcoming fairlife contingent consideration payment. Regarding currency, if we assume current rates on our hedge positions, there would be an approximate low single-digit currency headwind to comparable net revenues and an approximate mid-single-digit currency headwind to comparable earnings per share for full year 2025. Many factors could impact both our currency outlook and broader business between now and when we expect to provide guidance in February. With our all-weather strategy, we've delivered comparable earnings growth for many years now. We have numerous levers to continue to do so. So in summary, successfully executing our strategy in an ever-evolving operating environment, we're confident in our ability to deliver on our objectives in 2024 and over the long-term. We're clear on the direction we are heading in the system. And we continue to invest with our bottling partners to drive sustainable long-term growth. With that, operator, we are ready to take questions.","evidence_gemma_new":null,"evidence_llama_3_3":"net debt leverage third quarter","evidence_qwen_3_30b":"net debt leverage","gemma_new_max":null,"gemma_new_min":null,"llama_3_3_max":1.7,"llama_3_3_min":1.7,"qwen_3_30b_max":1.7,"qwen_3_30b_min":1.7}
{"symbol":"KO","year":2024,"quarter":1,"date":"2024-Q1","chunk_id":8,"sub_chunk_id":0,"centroid_label":"north america pricing","agreed_value":0.07,"count":2,"chunk":"Dara Mohsenian: So I was just hoping you could give a bit of a deeper dive into North America, a, just wanted to get an update on what you're seeing from the consumer? Any channel shifts in terms of away-from-home versus at-home and the sequential improvement you discussed within Q1, is that something that's expected to continue going forward? And then just b, price\/mix was very strong at 7% in North America, can you unpack that between mix and pricing and just how you think about the balance between pricing mix and volume going forward in the balance of the year in North America?","evidence_gemma_new":"North America price\/mix","evidence_llama_3_3":"North America price\/mix Q1","evidence_qwen_3_30b":null,"gemma_new_max":0.07,"gemma_new_min":0.07,"llama_3_3_max":0.07,"llama_3_3_min":0.07,"qwen_3_30b_max":null,"qwen_3_30b_min":null}
{"symbol":"KO","year":2024,"quarter":2,"date":"2024-Q2","chunk_id":6,"sub_chunk_id":0,"centroid_label":"north america pricing","agreed_value":11.0,"count":3,"chunk":"James Quincey: Yes, sure. No problem, Dara. Firstly, overall, it'd be fair to say that the consumer sentiment in aggregate is actually pretty strong, pretty resilient. Within that, there are some softer spots, particularly, I think, which has been relatively put out there already some softness in away-from-home channels, with a little lower traffic and some increase in value seeking for combo meals. So definitely, there's a piece of the lower income consumers, which are either going out slightly less. But when they do go somewhere looking for greater value through combo meals. And then, of course, in the at-home channels, there's a slightly greater focus by those consumers on getting kind of value deals or promo deals. Having said that, there are just as much consumers spending on more premium categories or more premium price points and experiences. So that's all aggregating out at a sort of resilience, for the average overall consumer. Within that, I think we've done very well. We've seen strong growth across the portfolio. We saw a strong growth in Coke trademark in Fairlife, in Topo Chico and juices itself and in aggregate, we won value share in the quarter. So broad-based growth, some hotspots in terms of demand up demand down. But overall resilience for the consumer. And as you look out, the first thing that I think is worth underlining in North America, in particular, is the nature of the price mix. Remember that our North American business, a typically compared to the other parts of the world, we consolidate a set of vertically integrated businesses and a set of franchise kind of concentrate businesses, such that the growth of a channel or a category can produce a mix effect independent of pricing in the marketplace. As you look at the 11 points of price mix in the second quarter in North America, it's important to understand that, only half of that is actually price. The other half is mix. So when the juice drinks and Fairlife and the juice business grows, Topo Chico grows and Dasani is weaker, you get a mechanical business mix effect that, makes the price mix look like it's gone up, but it hasn't really in the marketplace. So think of it as half of it is business mix, and half of it is real pricing in the marketplace, which gets you to a much more logical match, to the level of inflation that's going out - going on in the marketplace in general, such that I think in North America and actually overall in general, around the world, excluding the high - the intense inflation markets John mentioned in the comments. We see that inflation is largely coming into the landing zone, yes, central banks would like to squeeze out another point or so. But generally, we're getting there, and I think that's reflected in our price mix. We still have input costs that are going up, typically, the agricultural ones rather than the metal, or commodity-based ones. But in the end, our strategy remains yes, there'll be cost inflation, yes, we'll look to put it through. Yes, we'll work on productivity. But any pricing we're going to take, we're going to have to earn with the marketing and the innovation and the execution. But it is, as I said earlier, approaching the normalization zone.","evidence_gemma_new":"North America price mix second quarter","evidence_llama_3_3":"North America price mix 11 points second quarter","evidence_qwen_3_30b":"North America price mix second quarter","gemma_new_max":11.0,"gemma_new_min":11.0,"llama_3_3_max":11.0,"llama_3_3_min":11.0,"qwen_3_30b_max":11.0,"qwen_3_30b_min":11.0}
{"symbol":"KO","year":2024,"quarter":3,"date":"2024-Q3","chunk_id":24,"sub_chunk_id":0,"centroid_label":"north america pricing","agreed_value":0.5,"count":2,"chunk":"James Quincey: Sure, Bonnie. Firstly, in North America, Q3, the price\/mix, half, in round numbers, half of it is price and half of it is mix. So price closer to rate. The mix is being driven by some of the de-price -- some of the kind of lesser focus on case pack water, but a heavy investments behind brands like fairlife, Topo Chico, some of the nutrition staff, Coca-Cola. And those tend to be mix positive. So there's clearly a consequence, actually John just talked about it, really being choiceful about where we invest behind which brands, in which countries, in which channels. And that's coming through in North America, which is why you got about half of that coming from mix and half of it coming from price or right. Clearly, there's a balance there with some of the affordability actions we're doing, but that's the basic setup. And if we just home in on price for a second, so you're getting roughly half of that in price, and that then starts to look a lot like the trajectory of CPI that has been coming down. And what we see going forward is there'll continue to be inflation in the input costs whether that be labor, particularly some of the agricultural commodities, some of the packaging costs as well, are still going to be increasing in cost, although at a lower rate. So again, we see us heading towards a more normalized level of pricing going into next year and kind of landing in a more normal zone as kind of -- some of that tracks down at kind of similar rates to CPI. Of course, we continue to be very choiceful about where we invest for affordability options and where we invest for premiumization options. I'm not sure, I think mix will always be four or five points. But certainly, we would look for continued growth in the North American business.","evidence_gemma_new":"North America price\/mix Q3","evidence_llama_3_3":null,"evidence_qwen_3_30b":"North America price\/mix Q3","gemma_new_max":0.5,"gemma_new_min":0.5,"llama_3_3_max":null,"llama_3_3_min":null,"qwen_3_30b_max":0.5,"qwen_3_30b_min":0.5}
{"symbol":"KO","year":2024,"quarter":4,"date":"2024-Q4","chunk_id":35,"sub_chunk_id":0,"centroid_label":"north america pricing","agreed_value":0.12,"count":2,"chunk":"Andrea Teixeira: I have a question on Mexico and then a follow-up on mix. On Mexico, you have obviously managed cycles, regulation tax as well and arguably, you count on one of the best bottling partners there. But can you comment on the playbook? And if you're embedding a deceleration in volumes there? And can you talk about the potential risk of recession or -- or would we met this is at a stronger dollar, meaning obviously, more business to their pockets, partially offsetting the slowdown? And then on the second point, you both spend a fair amount of time discussing the accelerating innovation results, which are remarkable. On the strong delivery in North America, I believe you posted like 12% growth in price mix, how much is that driven by Fair Life or away from home recovery? And should we expect that comparison to lead to a deceleration there? Or you still see a lot of potential for [indiscernible] distribution and potentially better execution on on-premise ahead?","evidence_gemma_new":"North America price mix","evidence_llama_3_3":"North America price mix","evidence_qwen_3_30b":null,"gemma_new_max":0.12,"gemma_new_min":0.12,"llama_3_3_max":0.12,"llama_3_3_min":0.12,"qwen_3_30b_max":null,"qwen_3_30b_min":null}
{"symbol":"KO","year":2023,"quarter":1,"date":"2023-Q1","chunk_id":2,"sub_chunk_id":0,"centroid_label":"organic revenue growth","agreed_value":0.12,"count":2,"chunk":"James Quincey: Thanks, Robin, and good morning, everyone. 2023 is off to a good start. We continue to execute well and grow amidst the dynamic macro environment. We like to say we have an all-weather strategy, one that enables us to thrive no matter what's happening in the world. We pursue excellence globally with an eye towards winning locally as a system. And our brand investments continue to create value for our customers and consumers, leading to our ability to drive quality growth for our stakeholders. Today, I'll discuss our first quarter performance and provide some perspective around today's global consumer and macro environment. I'll then reiterate why we are confident in our ability to deliver on our guidance for the full year. And finally, I'll elaborate on how the actions we're taking set us up for success in any environment and how we're driving resilience for our business and continued growth in 2023 and over the long term. John will then discuss our results and go into more detail on the 2023 outlook. In the first quarter, pandemic restrictions in parts of the world relaxed, and many supply chain pressures abated. At the same time, inflation and geopolitical tensions persisted. And new concerns emerged around the stability in the banking sector and the magnitude of the potential squeeze on consumers. In the face of these factors, we continue to generate momentum as investments in our brands got the year off to a positive start. We remain focused on creating value by meeting the needs of our customers and consumers. We delivered 12% organic revenue growth in the quarter. This was primarily driven by pricing actions across markets and revenue growth management initiatives to retain and add consumers. We also delivered volume growth of 3%, which is in line with last year versus 2019. We saw growth across developed as well as developing and emerging markets, and we continue to gain both volume and value share for the quarter, including at home and away from home channels. We're encouraged by this momentum and are operating the business with a focus on growth while closely monitoring macro trends for signs of a slowdown. As we look around the world today, the consumer picture varies across our markets. In Asia Pacific, the reopening of China has led to an increase in consumer activity, but consumption is still recovering to pre-pandemic levels. India's economy remains resilient with a strong job market and robust consumption. In Japan, consumers are feeling inflationary pressure for the first time in many years. In Europe, the recent banking crisis added to last year's energy spike, driving further uncertainty to purchasing behaviors and consumers continue to increasingly seek out affordable and private label options across many FMCG categories. In North America, the picture is a mixed bag with unemployment low, gas prices improved and savings holding up, but inflation and higher mortgage rates are top-of-mind concerns for many consumers. In many developing and emerging markets in Latin America, Africa and the Middle East, consumers continue to face varying levels of inflation and volatility in the macroeconomic conditions. Clearly, there's uncertainty in how the consumer environment may ultimately play out in 2023. But thanks to the hard work of our people and partners, we're a more flexible network enterprise today. And with our enhanced system alignment, we're confident we can win together locally in a wide variety of environments. Let's start with the portfolio. We have a growth portfolio of consumer-centric brands across categories, including [ 26 billion-dollar brands ]. Our networked organization is allowing us to raise the bar of innovation and marketing to leverage our loved brands more effectively in the marketplace. We're keeping our streamlined portfolio of brands relevant with consumers and finding innovative ways to offer beverage choices for every occasion. In Japan, we recently relaunched our Georgia Coffee brand with a fresh new look and a bright proposition to inspire current consumers and expand Georgia's appeal to a broader audience, complementing Costa's premium ready-to-drink offerings in that market. We're expanding our exploration in alcohol ready-to-drink beverages with a keen focus on responsibility. We work with Brown-Forman to roll out Jack and Coke cocktails in the U.S. during the quarter with more markets launching now. It's early days, but the ability to get one of the most popular [indiscernible] in the world in a can is proving to be compelling to retailers and consumers based on preliminary volumes and velocities. We're encouraged by the level of engagement as distribution expands. We're driving bigger and bolder innovations that can leverage consumer insights leading to a higher success rate and enduring growth. In North America, we continue to foster brand love for fairlife, which has grown volume double digits for 8 consecutive years. Fairlife became a $1 billion brand last year, and we're building on the momentum of the brand including the success of co-power with fairlife nutrition plan. Launched with a digital-first campaign in the club channel, fairlife nutrition plan has seen strong consumer interest from those looking for high-protein, low-sugar shake that tastes great and is lactose-free. We're planning to expand the product to more channels and packages in the coming months. We're working with WPP, our global marketing network partner, and increasingly leveraging digital capabilities to engage consumers through passion points, personalized experiences and collaborations. The Coke Studio concept first drove cultural relevance and brand performance in Pakistan, with the latest season streamed over 1 billion times. We scaled the program to 30 markets last year. And in 2023, it will become an always-on platform across the globe. Connecting consumers' love of music to consumption occasions by spotlighting breakthrough talent, Coke Studio provides a portal to live digital experiences and can be activated using QR codes on our packages. Consumers can drink, scan and enjoy their favorite beverage along with music from genres around the world. Working as a network system with our bottlers, we're managing through macroeconomic uncertainty with enhanced capabilities in revenue growth management and integrated execution. We often talk about the many levers of revenue growth management. While the inflationary environment led to proactive pricing increases over the past 18 months, it's important to recognize our RGM capabilities to extend far beyond pricing. At its core, revenue growth management is about consumer-centric segmentation, ensuring we have the right product in the right package in the right channel at the right price point, drive transactions and meet consumers where they are. Affordability and premiumization are key levers to maintain and expand our consumer base, and we continue to balance affordable offerings with compelling premium propositions to ensure we have beverage options across income levels. Affordability is a driver in developing and emerging markets, evidenced by double-digit volume growth in these offerings in Indonesia and Vietnam, helping to drive record sparkling share in Vietnam and driving approximately 3 billion transactions at affordable price points in India this quarter. Premium packages like slim cans and mini cans are seeing strong growth in many markets, including Australia, where mini cans drove 40 million transactions and contributed to share growth in the region. Premiumization also includes [indiscernible] occasions. In addition to alcohol, ready-to-drink beverages, we're also participating more broadly in adult alcohol drinking occasions. In North America, we've expanded our Simply premium juice brand into the mix of segment with Simply mixology in 3 flavors to serve as a cocktail or mocktail. In Europe, we've relaunched our Kinley and Royal Bliss brands as harmonized platforms to participate in the adult mixer segment. For both affordability and premiumization, the value proposition is often messaged at the point of sale, such as the expansion of the value bundle in certain channels in the U.S. and the mini can mini price campaign that drove strong growth in small packages in Japan. RGM, coupled with integrated execution, also drives value for our customers. By providing key insights and offering the right mix of brands, packages, price points and compelling data-driven promotions, we are able to partner with customers that deliver traffic, basket and incidence growth. Latin America is a great example of how this came to life in the first quarter, evidenced by revenue growth ahead of transactions and transaction growth ahead of volume. By working closely with key retailers, our system focused on the availability of cold, single-serve beverages in premium brands such as Schweppes and smartwater. We introduced refillable packages into new channels, all while driving better in-stock levels and higher consumer traffic in-store, owning accolades from customers. Our business has largely recovered from the effects of the pandemic and remains well equipped to navigate the dynamic macro environment and is emerging with even stronger capabilities and system alignment to deliver vibrant long-term growth for many years to come. At the same time, our consumers also care about sustainability. While we strive to grow our business, we also want to be water positive, drive a circular economy for our packaging and grow consumer beverage choices, including low- and no-calorie brands as part of our total beverage strategy. These goals are integral to our business and beneficial for society. Our annual business and sustainability will be released soon, including an integrated section on our World without Waste packaging initiatives. We're proud of what we've accomplished so far, recognize there is still opportunity ahead and continue to lead as well as act collectively with other key stakeholders to drive progress on this agenda. I encourage you to learn more about how we're progressing against our targets across various sustainability pillars and priorities to refresh the world and make a difference. Before I hand over to John, I'd note that it's early in the year, and there's a fair amount of uncertainty around the operating environment ahead. But our first quarter results give us increased visibility to deliver on our full year 2023 guidance. We're executing more efficiently and effectively on a local level, maintaining flexibility on a global level and continuing to reinvest in the business and build the system for the long term. In short, we're expanding the sphere of what we can control. We're well prepared to respond with speed to changing market dynamics as we've demonstrated that we can do. By staying clear on our purpose and remaining consumer-centric, we continue to execute to the sustainable long-term growth. With that, I'll turn the call over to John.","evidence_gemma_new":"organic revenue growth in the quarter","evidence_llama_3_3":"organic revenues first quarter","evidence_qwen_3_30b":null,"gemma_new_max":0.12,"gemma_new_min":0.12,"llama_3_3_max":0.12,"llama_3_3_min":0.12,"qwen_3_30b_max":null,"qwen_3_30b_min":null}
{"symbol":"KO","year":2023,"quarter":2,"date":"2023-Q2","chunk_id":3,"sub_chunk_id":0,"centroid_label":"organic revenue growth","agreed_value":0.11,"count":2,"chunk":"John Murphy: Thank you, James, and good morning, everyone. We are pleased with the momentum of our business and our strong second quarter results. Starting with the top line, we grew organic revenues 11%. Unit cases were flat. As James said, volume for the second quarter got off to a slower start, but ended on a positive note. Concentrate sales were one point ahead of unit cases for the quarter, primarily driven by the timing of concentrate shipments. Price mix growth was 10% for the quarter, driven by carryover pricing coming into the base from last year, along with some new pricing actions across operating segments, including the impact of hyperinflationary markets. Comparable gross margin for the quarter was up approximately 40 basis points, driven by underlying expansion and a slight benefit from bottler refranchising partially offset by the impact of currency. Comparable operating margin expanded approximately 90 basis points for the quarter. This was primarily driven by strong top line growth and the impact of refranchising bottling operations. Partially offset by an increase in marketing investments and higher operating costs versus the prior year as well as currency headwinds. Putting it all together, second quarter comparable EPS of $0.78 was up 11% year-over-year despite higher than expected 6% currency headwinds. Free cash flow was approximately $4 billion year-to-date. This was largely attributable to strong underlying operational performance and working capital benefits, partially offset by a $720 million transition tax payment that was made during the second quarter as well as M&A related payments. Our balance sheet is strong and our net debt leverage of 1.6 times EBITDA is below our targeted range of 2 to 2.5 times. Our capital allocation priorities remain the same and we continue to invest to drive long-term growth. As James mentioned, we are encouraged by what we are seeing in the marketplace. While we continue to spend our strategic flywheel faster to generate top line led growth, we've also progressed on a margin agenda, as demonstrated by our consistent track record of offsetting cost headwinds to sustain steady gross margins. We have numerous levers available to drive top line growth and improve the effectiveness and efficiency of our spend over the long-term. Our all-weather strategy, coupled with the great plans that we have in place to continue to create quality leadership across our portfolio give us good visibility to deliver on our raised 2023 guidance. This is comprised of organic revenue growth of 8% to 9%, which includes positive volume growth while continuing to be led by price mix. There are a few considerations to keep in mind. We expect pricing in developed markets to moderate through the year as we cycle pricing initiatives from the prior year. In developing and emerging markets, we aim to take price with local market inflation. To the extent that intense inflationary markets drive elevated price mix. The impact is oftentimes offset by currency, as it is frequently difficult to hedge our exposure. Due to our reporting calendar, there will be one additional day in the fourth quarter. We now expect comparable currency neutral earnings per share growth of 9% to 11%. Based on current rates and our hedge positions, we are updating our currency outlook of an approximate 3 to 4 point headwind to comparable net revenues and an approximate 4 to 5 point currency headwind to comparable earnings per share for full year 2023. Inflationary pressures are beginning to moderate in some ways, including freight rates that are favorable compared to last year. That said, several commodities that are prevalent in our basket like sugar and juice remain elevated and we have some hedges that we will be rolling off to less favorable rates. Based on current rates and hedge positions, we continue to expect per case commodity price inflation in the range of a mid-single digit impact on comparable cost of goods sold in 2023. Our updated underlying effective tax rate for 2023 is now 19.3%. All-in, we are updating comparable earnings per share growth of 5% to 6% versus $2.48 in 2022. We continue to expect to generate approximately $9.5 billion of free cash flow in 2023 through approximately $11.4 billion in cash from operations less approximately $1.9 billion in capital investments. If you exclude the transition tax payment made in the second quarter and various payments associated with M&A transactions, our implied free cash flow conversion would be within our long-term guidance. This guidance does not include any payments related to our ongoing US income tax dispute with the IRS. As we enter the second half of the year, we continue to build a culture that emphasizes raising the bar in every aspect of how we do business. Thanks to the tremendous ongoing commitment of our system employees around the world, we are confident in our ability to deliver on our guidance for 2023 and drive value for our stakeholders over the long-term. With that operator, we are ready to take questions.","evidence_gemma_new":null,"evidence_llama_3_3":"organic revenue growth second quarter","evidence_qwen_3_30b":"organic revenue growth second quarter","gemma_new_max":null,"gemma_new_min":null,"llama_3_3_max":0.11,"llama_3_3_min":0.11,"qwen_3_30b_max":0.11,"qwen_3_30b_min":0.11}
{"symbol":"KO","year":2023,"quarter":3,"date":"2023-Q3","chunk_id":2,"sub_chunk_id":0,"centroid_label":"organic revenue growth","agreed_value":0.11,"count":2,"chunk":"James Quincey: Thanks, Robin and good morning, everyone. In the third quarter, we delivered strong top line growth, comparable operating margin expansion and earnings per share growth. Our strategy is working. These results continue our track record of consistent delivery. And given our year-to-date performance, we are raising both our top line and bottom line guidance. This morning, I'll provide a brief update on the global consumer landscape. Then I'll focus much of my time on business performance across the segments and discuss how we've been investing to further strengthen our capabilities to capture longer-term growth opportunities. John will end by discussing financial details for the quarter, our revised guidance for full year 2023 and some early considerations for 2024. The global operating environment is always dynamic and this quarter was no exception. Some markets improved sequentially, while others dealt with a variety of factors ranging from transitory weather conditions, ongoing inflationary pressures, geopolitical tensions and conflicts. We delivered 11% organic revenue growth this quarter driven by positive volume, some pricing actions in the marketplace and carryover pricing coming into the base from last year. Volume grew 2% and sequentially improved each month in the quarter with September being our strongest month. Our year-to-date volume growth remains consistent with underlying performance compared to 2019. And overall, our industry remains vibrant and is expanding and we are executing to capture that growth. During the quarter, we gained volume and value share in both at-home and away-from-home channels. Consumer sentiment continues to vary around the world. In developed markets, consumer spending in agro goods [ph] has held up quite well, however, some consumers feel pressured. We've seen some shift to discount channels and switching to private label brands in a few markets and categories. The intensity of this activity was largely the same across Europe compared to the previous quarter but was less pronounced in the U.S., Australia and Japan. In the developing and emerging markets, the picture is more mixed. We're seeing broadly consumer strength across Latin America, India and in parts of Central and Southeast Asia. On the other hand, consumer confidence in spending has yet to fully recover in Africa and China. Our revenue growth management execution capabilities give us a distinct advantage and we are leveraging these capabilities to ensure we have the right product in the right package in the right channel and at the right price points to meet consumers where they are. Notwithstanding the dynamics in play around the world, we have many levers to pull and continue to deliver through varying market conditions. I'll share some more details from each region. Starting with Asia Pacific; we delivered organic revenue growth but operating income declined primarily as a result of investing ahead of the curve to participate in longer-term opportunities and incurring additional costs from strategic portfolio rationalization. In ASEAN and South Pacific, we grew top line and profit by linking our brands to drinking occasions coupled with strong execution. In Thailand, we launched Coke Kitchen which connected consumers to influencers who shared their favorite recipes with Coca-Cola. We also partnered with food service aggregators to drive combo meals. Campaign attracted nearly 1 million consumers and we significantly increased the attachment rate of our beverages with meals ordered through food service aggregators. In Japan, we're gaining volume and value share year-to-date. We continue to see strong momentum from our Coca-Cola, Georgia Coffee and I LOHAS campaigns and have stepped up execution in vending, e-commerce and community channels. However, in China, volume declined as the sparkling soft drink category is taking longer to recover. Our results were also impacted by some strategic conditions to deprioritize lower profit categories. Our focus is to restore momentum to the sparkling soft drink category and capitalize on revenue growth management and execution opportunities. In India, we delivered double-digit volume and top line growth which resulted in the highest value share gain over the past 3 years. We're winning in the marketplace by generating 2.6 billion transactions at affordable price point and driving availability across rural regions. Across Asia Pacific, as part of our World Without Waste strategy to help drive circular economy for packaging materials, our system launched 100% recycled PET packaging in India, Indonesia and Thailand. Moving on to EMEA; we delivered strong organic revenue and operating income growth. In Africa, macro conditions remain challenging and our business was further impacted by natural disasters in Morocco and Libya. Despite this environment, we drove transaction growth through accelerated refillable PET expansion, digitizing nearly 100,000 outlets and adding 80,000 coolers used to date. In Europe, consumers are still facing pressure and our business was unfavorably impacted by poor weather. Despite these dynamics, we gained value share through strong performances in sparkling soft drinks and tea. We did this by partnering with systems to drive value for key customers and our consumers. We continue to see promising early results for Jack Daniel's and Coca-Cola in Europe. We are learning and expanding in alcoholic drinks, including our recent announcement of our Absolut Vodka & Sprite. And last, in Eurasia and Middle East, we recruited consumers through innovative, occasion-based marketing events like Fanta Fest Turkey which focused on snacking occasions with concerts by prominent local artists. They also launched 100% recycled PET package this summer. In North America, we generated strong organic revenue growth and delivered margin expansion by executing across our total beverage portfolio. We continue to see away-from-home channel outperform at-home channels. Within sparkling soft drink, elasticities are holding up well and we continue to drive quality leadership with Coca-Cola, Sprite and Fanta. For example, our systems stepped up in-store activation on Sprite Lymonade Legacy and with increased displays at point of sale which drove higher household penetration and repeat purchases. Fanta drove nearly 2 points of vale share gain year-to-date through innovation and new graphics, including the latest Halloween iteration of the What the Fanta platform. Outside sparkling, BODYARMOR and Powerade trends are stabilizing. And fairlife, Core Power, smartwater and Gold Peak generated value share gains. And in the U.S., to protect water resources, we renewed a decade-long partnership with the Department of Agriculture to restore and improve water sheds in national forests and grasslands. Water is a critical priority for our system and the communities that we serve. In Latin America, we generated double-digit top line and profit growth by executing on all facets of our strategy which resulted in value share gains in 4 of our top 5 markets. In the fifth market, Mexico, we're seeing improving value share trends over the last few months. We're increasingly linking our brands to consumers' passion points to build deeper connections. In Brazil, through Coke Studio, we partnered with the Town Music Festival, where we hosted 60 hours of concert and engaged with artists and influencers which generated 1 billion impressions and reached nearly 50 million consumers. We continue to drive affordability through refillable packaging of larger PET packages. In developing and emerging markets, refillables are an important tool to eliminate waste and offer products at lower price points. Last, our systems stepped up availability, reflecting over 270,000 coolers year-to-date which increased our share of visible inventory in key areas. Global ventures generated strong overall growth. At Costa, we strengthened our revenue growth management equation while driving transaction growth. This was supported by strong innovation and marketing campaigns such as our global summer of ice, expansion of the refreshment category and the introduction of our personalized pre-drop loyalty activation in U.K. Additionally, innocent gained value share in both the U.K. and France. Finally, Bottling Investments Group grew organic revenue and operating income through expanding affordable immediate consumption entry packs and progressing for strengthening route to market and optimizing trade collections. At the same time, we're working towards decarbonizing our operations in India through using 200 electric vehicles with plans to add more before the end of 2023. Beyond the quarter, we continue to have confidence in the long term. We see momentum continuing across our industry and our system is galvanized more than ever to capture this opportunity. Leveraging data to drive better decision-making is key to improving execution. Our system has collectively invested in digital initiatives to drive on all facets of our strategy. Starting first with marketing and innovation. Our marketing transformation is increasingly making our brands more relevant to consumers. Today, Gen Zs spend 7 to 9 hours per day on screen. However, very little time is spent watching traditional TV. We've been shifting our media spend towards digital. In 2019, digital was less than 30% of our total media spend and year-to-date is over 60%, through digital campaigns which segment the population that's disproportionately reaching consumers where we earn higher return on investments. We've seen tremendous engagement through digital-first campaigns for Coke with meals, Sprite Heat Happens and Fuze Tea's Made of Fusion among others. We're taking bold steps to be at the forefront of both consumer and non-consumer facing generative AI. For example, we launched Create Real Magic which turns consumers into digital creators. We also brought GenAI into our creative process for the award-winning Coca-Cola Masterpiece film and letting the fans the chance to take a piece of this work through the sale of NFTs. Recently, we launched Coke Y3000 which is our eighth iteration in the Coke Creations platform. Coca-Cola Y3000, the world's first futuristic flavor, co-created with AI. The launch has demonstrated strong initial results. On the non-consumer facing side, we're implementing generative AI to improve access to insight, market data, research and trends. Moving on to revenue growth management and integrated execution. As a system, we're accelerating eB2B platforms that allow for better tailoring of product, price and packaging architecture, reducing out of stocks and optimizing placement of physical inventory. Year-to-date, we've connected 6.9 million customers to eB2B platforms. We continue to expand coverage and offer customers personalization at scale. Initial pilots suggest that customers who receive AI-written push notifications have been more likely to purchase recommended SKUs, resulting in incremental retail sales. And we're just scratching the surface of what's possible but we're investing in digital capabilities now to expand our potential down the road. To sum it all up, we're encouraged by our results year-to-date and this is reflected in our updated 2023 guidance. We have many levers to pull and have proven that we can deliver in many types of markets around the world. We continue to win on a local level, maintain flexibility on a global level and reinvest to build our system for the long term. With that, I'll turn the call over to John.","evidence_gemma_new":null,"evidence_llama_3_3":"organic revenues third quarter","evidence_qwen_3_30b":"organic revenue growth 11% this quarter","gemma_new_max":null,"gemma_new_min":null,"llama_3_3_max":0.11,"llama_3_3_min":0.11,"qwen_3_30b_max":0.11,"qwen_3_30b_min":0.11}
{"symbol":"KO","year":2023,"quarter":3,"date":"2023-Q3","chunk_id":3,"sub_chunk_id":0,"centroid_label":"organic revenue growth","agreed_value":11.0,"count":2,"chunk":"John Murphy: Thank you, James and good morning, everyone. Today, I'll comment on our third quarter performance and highlight our updated 2023 guidance. I'll also provide some early commentary on 2024 and the actions we are taking to continue to deliver on our objectives. As James mentioned, we delivered strong third quarter results. Starting with the top line. We grew organic revenues 11%. Unit case growth was 2%. If you exclude the impact of suspending our business in Russia, we have delivered positive volume growth in each quarter since the start of 2021. Concentrate sales were in line with unit cases for the quarter. Price\/mix growth was 9% driven by pricing actions across operating segments, including the impact of a few hyperinflationary markets, along with carryover pricing coming into the base from last year. Comparable gross margin for the quarter was up approximately 130 basis points driven by underlying expansion and a slight benefit from bottler refranchising, partially offset by the impact of currency headwinds. Comparable operating margin expanded approximately 20 basis points for the quarter. This was primarily driven by strong top line growth and the impact of refranchising bottling operations, partially offset by an increase in marketing investments versus the prior year as well as currency headwinds. Putting it all together, third quarter comparable EPS of $0.74 was up 7% year-over-year despite higher-than-expected 4% currency headwinds. Free cash flow was approximately $7.9 billion year-to-date. This was largely attributable to strong underlying operational performance and working capital benefits, partially offset by $720 million transition tax payment and $230 million in M&A-related payments. Our balance sheet is strong and our net debt leverage of 1.5x EBITDA is below our target range of 2 to 2.5x. Recently, we entered into a letter of intent to refranchise our Philippines bottler. As we progress on our refranchising journey, we aspire to improve the return profile of our business. In 2015, when Bottling Investments Group was more than 50% of our net revenue, our return on invested capital was approximately 17%. Today, Bottling Investments Group makes up less than 20% of net revenue. And our return on invested capital is over 23%, nearly a 7-point increase. After this transaction closes, our remaining assets in the Bottling Investments Group will include operations in India, Africa and several smaller locations, primarily in Asia Pacific. We will remain disciplined in our refranchising approach by making sure we best position our system to deliver sustainable long-term growth. Our business performance year-to-date gives us confidence that we can deliver on our raised 2023 guidance. This is comprised of organic revenue growth of 10% to 11% which will be led by price\/mix and includes positive volume growth. We do expect pricing in developed markets to moderate in the fourth quarter as we cycle pricing initiatives from the prior year. There are also a few hyperinflationary markets that will continue to drive price\/mix. There will be 1 additional day in the fourth quarter. We now expect comparable currency-neutral earnings per share growth of 13% to 14%. And based on current rates and our hedge positions, we now expect currency to be an approximate 4-point headwind to comparable net revenues and an approximate 6-point currency headwind to comparable earnings per share for full year 2023. Based on current rates and hedge positions, we continue to expect per-case commodity price inflation in the range of a mid-single-digit impact on comparable cost of goods sold in 2023. We now expect our underlying effective tax rate for 2023 to be 19%. All in, we are updating comparable earnings per share growth of 7% to 8% versus $2.48 in 2022. We continue to expect to generate approximately $9.5 billion of free cash flow in 2023 through approximately $11.4 billion in cash from operations. That's approximately $1.9 billion in capital investments. This guidance does not include any payments related to our U.S. income tax dispute with the IRS which are unlikely to occur in 2023. Given the momentum of our business, the strength of our balance sheet and some proceeds that we expect to receive from bottler refranchising, we have increased flexibility to continue to both reinvest in our business and return capital to shareowners. While it is too early to provide specific items on 2024, we want to share some considerations based on what we know today. We're encouraged by our top line momentum across the majority of our markets. There are a handful of hyperinflationary markets where it is either not possible to hedge or it is costly to do so. In these markets, we've demonstrated that we can manage currency pressures by taking price with local market inflation and we will continue to follow this approach. While some commodities are normalizing, we also have input costs that could be impacted by tensions and conflicts. With respect to advertising spend, our bias is to continue to reinvest behind our brands while maintaining flexibility. Regarding currency, if we assume current rates and our hedge positions, there would be an approximate low single-digit currency headwind to comparable net revenues and an approximate mid-single-digit currency headwind to comparable earnings per share for full year 2024. Of course, several factors could impact both our currency outlook and broader business outlook between now and February. Over the past few years, we've delivered U.S. dollar EPS growth and we have many levers to continue to do so. So in summary, we are encouraged by our business results and confident in our ability to deliver on our commitments over the long term. Thanks to the incredible commitment of our system employees around the world, we're very clear on the direction we are heading and well equipped to execute on the strategies to get us there. And we continue to invest to drive sustainable long-term growth. We remain focused on capturing the opportunities available to us. With that, operator, we are ready to take questions.","evidence_gemma_new":"organic revenue growth","evidence_llama_3_3":null,"evidence_qwen_3_30b":"organic revenues third quarter","gemma_new_max":11.0,"gemma_new_min":11.0,"llama_3_3_max":null,"llama_3_3_min":null,"qwen_3_30b_max":11.0,"qwen_3_30b_min":11.0}
{"symbol":"KO","year":2023,"quarter":4,"date":"2023-Q4","chunk_id":3,"sub_chunk_id":0,"centroid_label":"organic revenue growth","agreed_value":0.12,"count":2,"chunk":"John Murphy: Thank you, James. And good morning, everyone. In the fourth quarter and throughout 2023, we delivered strong results. During the quarter, we grew organic revenues 12% which was in-line with our full year organic revenue growth. Unit case growth was 2% and it was positive in each quarter of 2023. Concentrate sales grew 1 point ahead of unit cases, driven primarily by one additional day in the quarter. Our price mix growth of 9% in the quarter was driven by three factors. One, 2023 pricing actions across most of our markets. Two, hyperinflationary pricing that I'll speak to in just a moment. And three, some mix which is mostly timing related. Comparable gross margin for the quarter was up approximately 140 basis points. Driven by underlying expansion and a slight benefit from bottle refranchising. Partially offset by the impact of currency headwinds. Comparable operating margin expanded approximately 40 basis points for the quarter. This was primarily driven by strong topline growth, partially offset by currency headwinds and an increase in marketing investments. The positive volume and topline growth that we're realizing today demonstrates the effectiveness of our marketing spend. Below the line, comparable other income declined primarily due to the operating environment in Argentina. Putting it all together, fourth quarter comparable EPS of $0.49 was up 10% year-over-year, despite higher than expected 13% currency headwinds. Before moving on, I wanted to discuss the impact of a few hyperinflationary markets on our fourth quarter results. During the quarter, inflation intensified and exceeded 60% across these markets. In aggregate, while they represent less than 5% of our total volume, this degree of inflation creates a cosmetic distortion to our underlying results. In the fourth quarter, these markets contributed more than 3 points of our price mix and most of our currency headwinds, including an outsized impact to comparable other income from balance sheet remeasurement in Argentina. They did not, however, have a material impact on our earnings per share results. In hyperinflationary markets it's either impractical or impossible to hedge our currency exposure. And to manage it, we use our full suite of revenue growth management tools, including pricing actions to keep pace with local market inflation. We have been operating a long-time in these markets and we expect to be in them for a long-time to come. We work hand-in-hand with our local bottling partners and our focus will be to continue to nurture the strong relationships we have with our consumers and customers. And to ultimately prevail longer-term. So while we will continue to experience volatility of this nature in a few markets, it's important to keep in mind they are operated locally, they are typically self-funding and they have not impeded our overall ability to grow earnings per share. As we move forward, we are confident that our business model and the many levers within it will allow us to deliver on our overall objectives. In 2023 free cash flow was $9.7 billion, which increased from the prior year. 2023 free cash flow included a transition tax payment of approximately $720 million, which was approximately $340 million higher than the prior year and included approximately $230 million in M&A related payments. Our underlying free cash flow growth was largely attributable to strong operational performance and working capital benefits. If you exclude the full impact of the transition tax in M&A related payments, our adjusted free cash flow conversion ratio would be within our target range of 90% to 95%. Our balance sheet remains strong. And our net debt leverage of 1.7 times EBITDA is below our targeted range of 2 times to 2.5 times. During the fourth quarter, in addition to offsetting dilution from the exercise of stock options by employees, we repurchased additional shares in anticipation of expected proceeds from bottler refranchising. As James mentioned, we anticipate 2024 will bring new challenges and opportunities. However, through our all-weather strategy, we've proven we can deliver in many different operating environments. Our 2024 guidance builds on the underlying momentum of our business. We expect organic revenue growth of 6% to 7% and comparable currency neutral earnings per share growth of 8% to 10%. We anticipate hyperinflationary pricing will continue to play a role in 2024, but it will moderate throughout the year. We continue to make significant progress towards refranchising company owned bottling operations. Bottler refranchising is expected to be a 4 point to 5 point headwind to comparable net revenues and a 2 point headwind to comparable earnings per share. But will have a positive impact on both our margins and the return profile of our business. Based on current rates and our hedge positions, we anticipate an approximate 2 point to 3 point currency headwind to comparable net revenues and an approximate 4 point to 5 point currency headwind to comparable earnings per share for full year 2024. Notably, much of our anticipated 2024 currency headwinds are attributed to hyperinflationary markets with a meaningful impact in the fourth quarter. Our underlying effective tax rate for 2024 is expected to be 19.2%. All in, we expect comparable earnings per share growth of 4% to 5% versus $2.69 in 2023. We expect to generate approximately $9.2 billion of free cash flow in 2024 through approximately $11.4 billion in cash from operations, less approximately $2.2 billion in capital investments. The $11.4 billion of cash from operations includes two items to highlight, transition tax payments of approximately $960 million, an increase of approximately $240 million versus 2023, payments associated with various M&A transactions of approximately $560 million, an increase of approximately $330 million versus 2023. Driven by our underlying cash flow generation and current balance sheet strength, we have ample flexibility to both reinvest in our business to drive growth and return capital to our shareowners. A significant portion of our expected capital investment increase is to build capacity for fairlife and for our India business, both of which experienced robust growth in 2023. Related to capital return, we have an unwavering priority to grow our dividend as we've done with 61 consecutive years of dividend increases. With respect to share repurchases, we will be flexible in our approach. Typically, we've repurchased shares to offset any dilution from the exercise of stock options by employees in the given year. Our capital allocation policy prioritize agility. And we're committed to taking the right actions needed to drive the long-term health of our business and create value for our stakeholders. There are some considerations to keep in mind for 2024. The first quarter of 2024 will be impacted by the timing of concentrate shipments in the fourth quarter of 2023 in some markets and cycling our strongest volume growth quarter from the prior year. We estimate the ongoing conflict in the Middle East had approximately 1 point of impact on volume growth during the fourth quarter of 2023. It's unclear how long this impact will last. In November 2023, the U.S. Tax Court rendered its supplemental opinion related to our ongoing dispute with the Internal Revenue Service. We intend to move forward on appeal and vigorously defend our position. We have ample balance sheet flexibility to fund any payment related to the appeal. Finally, due to our reporting calendar, there will be one less day in the first quarter and two additional days in the fourth quarter. So in summary, we're pleased with what we accomplished in 2023, we're building on our capabilities to continue the underlying momentum across our markets, we're progressing on our refranchising agenda and we're reinvesting in our system to drive long-term growth. We have great confidence, we can deliver on our 2024 guidance and long-term commitments. With that, operator, we're ready to take questions.","evidence_gemma_new":"organic revenues","evidence_llama_3_3":"organic revenues fourth quarter","evidence_qwen_3_30b":null,"gemma_new_max":0.12,"gemma_new_min":0.12,"llama_3_3_max":0.12,"llama_3_3_min":0.12,"qwen_3_30b_max":null,"qwen_3_30b_min":null}
{"symbol":"KO","year":2023,"quarter":4,"date":"2023-Q4","chunk_id":3,"sub_chunk_id":0,"centroid_label":"organic revenue growth","agreed_value":12.0,"count":2,"chunk":"John Murphy: Thank you, James. And good morning, everyone. In the fourth quarter and throughout 2023, we delivered strong results. During the quarter, we grew organic revenues 12% which was in-line with our full year organic revenue growth. Unit case growth was 2% and it was positive in each quarter of 2023. Concentrate sales grew 1 point ahead of unit cases, driven primarily by one additional day in the quarter. Our price mix growth of 9% in the quarter was driven by three factors. One, 2023 pricing actions across most of our markets. Two, hyperinflationary pricing that I'll speak to in just a moment. And three, some mix which is mostly timing related. Comparable gross margin for the quarter was up approximately 140 basis points. Driven by underlying expansion and a slight benefit from bottle refranchising. Partially offset by the impact of currency headwinds. Comparable operating margin expanded approximately 40 basis points for the quarter. This was primarily driven by strong topline growth, partially offset by currency headwinds and an increase in marketing investments. The positive volume and topline growth that we're realizing today demonstrates the effectiveness of our marketing spend. Below the line, comparable other income declined primarily due to the operating environment in Argentina. Putting it all together, fourth quarter comparable EPS of $0.49 was up 10% year-over-year, despite higher than expected 13% currency headwinds. Before moving on, I wanted to discuss the impact of a few hyperinflationary markets on our fourth quarter results. During the quarter, inflation intensified and exceeded 60% across these markets. In aggregate, while they represent less than 5% of our total volume, this degree of inflation creates a cosmetic distortion to our underlying results. In the fourth quarter, these markets contributed more than 3 points of our price mix and most of our currency headwinds, including an outsized impact to comparable other income from balance sheet remeasurement in Argentina. They did not, however, have a material impact on our earnings per share results. In hyperinflationary markets it's either impractical or impossible to hedge our currency exposure. And to manage it, we use our full suite of revenue growth management tools, including pricing actions to keep pace with local market inflation. We have been operating a long-time in these markets and we expect to be in them for a long-time to come. We work hand-in-hand with our local bottling partners and our focus will be to continue to nurture the strong relationships we have with our consumers and customers. And to ultimately prevail longer-term. So while we will continue to experience volatility of this nature in a few markets, it's important to keep in mind they are operated locally, they are typically self-funding and they have not impeded our overall ability to grow earnings per share. As we move forward, we are confident that our business model and the many levers within it will allow us to deliver on our overall objectives. In 2023 free cash flow was $9.7 billion, which increased from the prior year. 2023 free cash flow included a transition tax payment of approximately $720 million, which was approximately $340 million higher than the prior year and included approximately $230 million in M&A related payments. Our underlying free cash flow growth was largely attributable to strong operational performance and working capital benefits. If you exclude the full impact of the transition tax in M&A related payments, our adjusted free cash flow conversion ratio would be within our target range of 90% to 95%. Our balance sheet remains strong. And our net debt leverage of 1.7 times EBITDA is below our targeted range of 2 times to 2.5 times. During the fourth quarter, in addition to offsetting dilution from the exercise of stock options by employees, we repurchased additional shares in anticipation of expected proceeds from bottler refranchising. As James mentioned, we anticipate 2024 will bring new challenges and opportunities. However, through our all-weather strategy, we've proven we can deliver in many different operating environments. Our 2024 guidance builds on the underlying momentum of our business. We expect organic revenue growth of 6% to 7% and comparable currency neutral earnings per share growth of 8% to 10%. We anticipate hyperinflationary pricing will continue to play a role in 2024, but it will moderate throughout the year. We continue to make significant progress towards refranchising company owned bottling operations. Bottler refranchising is expected to be a 4 point to 5 point headwind to comparable net revenues and a 2 point headwind to comparable earnings per share. But will have a positive impact on both our margins and the return profile of our business. Based on current rates and our hedge positions, we anticipate an approximate 2 point to 3 point currency headwind to comparable net revenues and an approximate 4 point to 5 point currency headwind to comparable earnings per share for full year 2024. Notably, much of our anticipated 2024 currency headwinds are attributed to hyperinflationary markets with a meaningful impact in the fourth quarter. Our underlying effective tax rate for 2024 is expected to be 19.2%. All in, we expect comparable earnings per share growth of 4% to 5% versus $2.69 in 2023. We expect to generate approximately $9.2 billion of free cash flow in 2024 through approximately $11.4 billion in cash from operations, less approximately $2.2 billion in capital investments. The $11.4 billion of cash from operations includes two items to highlight, transition tax payments of approximately $960 million, an increase of approximately $240 million versus 2023, payments associated with various M&A transactions of approximately $560 million, an increase of approximately $330 million versus 2023. Driven by our underlying cash flow generation and current balance sheet strength, we have ample flexibility to both reinvest in our business to drive growth and return capital to our shareowners. A significant portion of our expected capital investment increase is to build capacity for fairlife and for our India business, both of which experienced robust growth in 2023. Related to capital return, we have an unwavering priority to grow our dividend as we've done with 61 consecutive years of dividend increases. With respect to share repurchases, we will be flexible in our approach. Typically, we've repurchased shares to offset any dilution from the exercise of stock options by employees in the given year. Our capital allocation policy prioritize agility. And we're committed to taking the right actions needed to drive the long-term health of our business and create value for our stakeholders. There are some considerations to keep in mind for 2024. The first quarter of 2024 will be impacted by the timing of concentrate shipments in the fourth quarter of 2023 in some markets and cycling our strongest volume growth quarter from the prior year. We estimate the ongoing conflict in the Middle East had approximately 1 point of impact on volume growth during the fourth quarter of 2023. It's unclear how long this impact will last. In November 2023, the U.S. Tax Court rendered its supplemental opinion related to our ongoing dispute with the Internal Revenue Service. We intend to move forward on appeal and vigorously defend our position. We have ample balance sheet flexibility to fund any payment related to the appeal. Finally, due to our reporting calendar, there will be one less day in the first quarter and two additional days in the fourth quarter. So in summary, we're pleased with what we accomplished in 2023, we're building on our capabilities to continue the underlying momentum across our markets, we're progressing on our refranchising agenda and we're reinvesting in our system to drive long-term growth. We have great confidence, we can deliver on our 2024 guidance and long-term commitments. With that, operator, we're ready to take questions.","evidence_gemma_new":"organic revenue growth","evidence_llama_3_3":null,"evidence_qwen_3_30b":"organic revenues fourth quarter","gemma_new_max":12.0,"gemma_new_min":12.0,"llama_3_3_max":null,"llama_3_3_min":null,"qwen_3_30b_max":12.0,"qwen_3_30b_min":12.0}
{"symbol":"KO","year":2024,"quarter":1,"date":"2024-Q1","chunk_id":3,"sub_chunk_id":0,"centroid_label":"organic revenue growth","agreed_value":0.11,"count":2,"chunk":"John Murphy: Thank you, James, and good morning, everyone. Our first quarter results marked a continuation of the underlying momentum in our business, driven by a strong and focused system. We delivered another quarter of volume growth, even as we cycled strong results. Additionally, we completed the refranchising of several bottlers during the quarter, leading to further comparable margin expansion. We progressed on our refranchising agenda, while making sure we best position our system to deliver long-term growth, and we earn a fair return on our investments. We continue to invest behind our portfolio with discipline and flexibility, thanks to our enhanced resource allocation agenda. During the quarter, we grew organic revenues 11%. We had 1% unit case growth. Concentrate sales were behind unit case volume by 3 points, driven by 1 less day in the quarter and the timing of concentrate shipments, primarily in Mexico and the Middle East. Our price\/mix growth of 13% in the quarter was driven by approximately 6 points of intense inflationary pricing across a handful of markets to offset significant currency devaluation, pricing actions across a number of markets and a couple of points of favorable mix. Excluding impacts from intense inflationary pricing, organic revenue growth in the first quarter was at the high end of our long-term growth algorithm. Comparable gross margin for the quarter was up approximately 130 basis points driven by underlying expansion and a benefit from bottler refranchising, partially offset by the impact of currency headwinds. Comparable operating margin expanded approximately 60 basis points for the quarter. This was primarily driven by strong top line growth and bottler refranchising, partially offset by currency headwinds and an increase in marketing investments. Markets experiencing intense inflation represent only a single-digit contribution to our volume, but continue to have an outsized impact on the shape of our P&L. Putting it all together, first quarter comparable EPS of $0.72 was up 7% year-over-year, including 9% currency headwinds, which were driven by currency devaluation in markets experiencing intense inflation. Free cash flow was approximately $160 million, an increase from the prior year. Before moving on, I want to discuss 2 items that are included in our first quarter reported results, a $765 million charge related to the remeasurement of our contingent consideration liability for our acquisition of fairlife. Our final payment related to the fairlife acquisition will take place in 2025. This payment has grown as fairlife has outperformed. We continue to be encouraged by our ability to scale fairlife organically. Secondly, a noncash impairment charge of $760 million related to BODYARMOR. While we are taking a charge to reflect revised projections and a higher discount rate since the acquisition date of BODYARMOR, we believe in the power of our 2 sports brand strategy with POWERADE and BODYARMOR. We're taking actions to help create long-term value, and we're seeing signs that this strategy is working. Our balance sheet remains strong and our net debt leverage of 1.6x EBITDA is below our targeted range of 2 to 2.5x. This gives us ample capacity for potential upcoming payments in 2024 related to the IRS tax case, which we continue to vigorously defend, and the upcoming fairlife payment in 2025. We continue to remain consistent in our approach to prioritizing our capital allocation. We're committed to investing to drive growth and to support our dividend, which we have raised for 62 consecutive years. We're confident our business model has the flexibility to allow us to deliver on our overall objectives. Our updated 2024 guidance reflects the underlying momentum of our business, and we now expect organic revenue growth of 8% to 9%, and comparable currency-neutral earnings per share growth of 11% to 13%. Our revised top line guidance is solely driven by higher-than-expected inflationary pricing in a handful of markets, which we expect to moderate throughout the year. Bottler refranchising is still expected to be a 4- to 5-point headwind to comparable net revenues and a 2-point headwind to comparable earnings per share, but will have a positive impact on both our margins and the return profile of our business. Based on current rates and our hedge positions, we anticipate an approximate 4- to 5-point currency headwind to comparable net revenues, and an approximate 7 to 8-point currency headwind to comparable earnings per share for full year 2024. This increase in currency headwind is driven by intense inflationary markets, while the rest of the currency basket is relatively neutral to our results. Our underlying effective tax rate for 2024 is now expected to be 19%. All in, we continue to expect comparable earnings per share growth of 4% to 5% versus $2.69 in 2023. There are some considerations to keep in mind. We estimate the ongoing conflict in the Middle East had approximately 1 point of impact on volume growth during the first quarter of 2024. It's unclear how long this impact will last. The cadence of structural impact will be larger in the second and third quarters due to the timing of transaction closing during the first quarter and the seasonality of the businesses we refranchised. Finally, there will be 2 additional days in the fourth quarter. To sum it up, and as James said, the year has started off well. We remain focused on the execution of our all-weather strategy. And thanks to the partnership of our system and the ongoing dedication of our people, we're confident we can create value for our stakeholders and deliver on our guidance for the year. And as we said at CAGNY, we're primed for performance in 2024 and over the long term. With that, operator, we are ready to take questions.","evidence_gemma_new":null,"evidence_llama_3_3":"organic revenues quarter","evidence_qwen_3_30b":"organic revenues first quarter","gemma_new_max":null,"gemma_new_min":null,"llama_3_3_max":0.11,"llama_3_3_min":0.11,"qwen_3_30b_max":0.11,"qwen_3_30b_min":0.11}
{"symbol":"KO","year":2024,"quarter":2,"date":"2024-Q2","chunk_id":3,"sub_chunk_id":0,"centroid_label":"organic revenue growth","agreed_value":0.15,"count":2,"chunk":"John Murphy: Thank you, James, and good morning, everyone. In the second quarter, we delivered strong results. We grew organic revenues 15%. This consisted of 2% unit case growth. Concentrate sales were ahead of volume by four points, driven primarily by timing of concentrate shipments, and some disruptions in the global supply chain that we partly expect, to reverse next quarter. Our price\/mix growth of 9% in the quarter was primarily driven by two items: one, approximately five points of intense inflationary pricing, across a handful of markets to offset significant currency devaluation. And two, an array of pricing and mix actions across our markets. Excluding the impacts from concentrate shipment timing and pricing from markets with intense inflation. Organic revenue growth during the quarter was at the high end of our long-term growth algorithm. Comparable gross margin was up approximately 200 basis points, driven by underlying expansion, and the benefit from bottler refranchising partially offset by currency headwinds. Comparable operating margin expanded approximately 120 basis points. Comparable operating margin expansion was less than comparable gross margin expansion, due to less benefit from bottler refranchising and greater currency headwinds to comparable operating margin. Putting it all together, second quarter comparable EPS of $0.84 was up 7% year-over-year despite 10% currency headwinds and 2% headwind from bottler refranchising. Free cash flow was approximately $3.3 billion, down approximately $700 million versus the prior year, due to higher tax payments, cycling working capital benefits from the prior year and higher capital expenditures. We continue to take actions, to achieve a fit for purpose balance sheet that, will best support our growth agenda. During the quarter, we raised approximately $4 billion in cash by issuing long-term debt for general corporate purposes. This may include pre-funding upcoming payments related to the IRS tax case and the Fairlife contingent consideration. With respect to our IRS tax case, which we continue to vigorously defend. We're making progress to our next steps, and we expect we will be able to move forward an appeal by the end of the year. Given the continued outperformance of Fairlife, we recorded a charge of $1.3 billion during the quarter. Our estimated final payment related to this acquisition is $5.3 billion, which will be made in 2025. We are encouraged by Fairlife's performance and the value it has created for our company. So far this year, we've realized nearly $3 billion in gross proceeds from bottler refranchising and streamlining our equity investments. We'll continue to prioritize higher growth businesses, and take passive capital off the table. Return on invested capital is 24%, up approximately five points from three years ago. Our balance sheet is strong, as demonstrated by our net debt leverage of 1.5 times EBITDA, which is well below our targeted range of 2 to 2.5 times. We have ample capacity to pursue our capital allocation agenda, which prioritizes investing to drive further growth, continuing to support our dividend and staying dynamic, agile and opportunistic. As James mentioned, we're proactively managing our portfolio to deliver on our commitments. Our updated 2024 guidance reflects the momentum of our business in the first half of the year, and our confidence in our ability to execute on our plans during the second half of this year. We now expect organic revenue growth of 9% to 10%, and comparable currency-neutral earnings per share growth of 13% to 15%. Bottler refranchising is still expected to be a four to five-point headwind, to comparable net revenues. And we now expect a one to two-point headwind, to comparable earnings per share. Based on current rates and our hedge positions, we now anticipate an approximate five to six-point currency headwind, to comparable net revenues and an approximate eight to nine-point currency headwind, to comparable earnings per share for full year 2024. This increase in currency headwind is driven by a small number of intensive treasury markets, while the rest of the currency basket is relatively neutral to our results. All in, we now expect comparable earnings per share growth of 5% to 6% versus $2.69 in 2023. There are some considerations to keep in mind. We expect unit cases and concentrate shipments to be relatively in line with each other for the full year 2024. Please keep in mind there are two extra days in the fourth quarter. Taking everything into consideration, we expect earnings growth during the remainder of 2024, will be weighted towards the fourth quarter. To summarize, we're encouraged by our track record and the underlying momentum of our business. Our system remains incredibly focused and motivated to drive growth. We're continuing to drive quality top line growth, expand margins, grow comparable earnings per share and improve the return profile of our business. And we're confident we will deliver on our guidance, and longer-term objectives. With that, operator, we are ready to take questions.","evidence_gemma_new":"organic revenues","evidence_llama_3_3":"organic revenues second quarter","evidence_qwen_3_30b":null,"gemma_new_max":0.15,"gemma_new_min":0.15,"llama_3_3_max":0.15,"llama_3_3_min":0.15,"qwen_3_30b_max":null,"qwen_3_30b_min":null}
{"symbol":"KO","year":2024,"quarter":3,"date":"2024-Q3","chunk_id":3,"sub_chunk_id":0,"centroid_label":"organic revenue growth","agreed_value":9.0,"count":2,"chunk":"John Murphy: Thank you, James, and good morning, everyone. Today I'll comment on our third quarter performance, discuss the outlook for the remainder of 2024, and provide some early commentary on 2025. During the third quarter, we grew organic revenues 9%. Unit cases declined 1% having had a poor July, but improving sequentially thereafter during the quarter. Concentrate sales were 1 point behind unit cases for the quarter, driven primarily by the timing of concentrate shipments. Our price\/mix growth of 10% was driven by two items. Approximately 7 points of pricing split somewhat evenly between normal pricing actions across our markets and intense inflationary pricing in a handful of markets experiencing currency devaluations, and approximately 3 points of mix across the markets, which was primarily driven by stronger growth in several developed markets versus developing and emerging markets. Excluding the impact from intense inflationary pricing, organic revenue growth during the quarter continued to be at the high end of our long-term growth algorithm. Comparable gross margin was up approximately 70 basis points and comparable operating margin was up approximately 100 basis points. Both were driven by underlying expansion and the benefit from butter refranchising, partially offset by the impact of currency headwinds. Putting it all together, third quarter comparable EPS of $0.77 was up 5% year-over-year despite higher-than-expected 9% currency headwinds and 2% headwinds from bottler refranchising. During the quarter, we made a $6 billion deposit with the IRS related to our ongoing tax dispute. We've also filed our appeal with the 11th Circuit Court. We're pleased to move forward with the process. We will vigorously defend our position. We believe we will prevail, and we will continue to keep you updated. Free cash flow, excluding the IRS tax litigation deposit, was approximately $7.6 billion, which is down approximately $290 million versus the prior year due to higher other tax payments, higher capital expenditures and cycling some working capital benefits from the prior year. Our balance sheet is strong, and our net debt leverage of 1.7 times EBITDA is below our targeted range of 2x to 2.5x. If you include our latest estimate of $6.1 billion related to our fairlife contingent consideration payment, which we expect to make in the first half of 2025, our expected net debt leverage would be at the low end of our target range. As James mentioned, our powerful portfolio, amplified by our system's unique capabilities gives us confidence in our ability to deliver on our updated 2024 guidance. We now expect organic revenue growth of approximately 10% and comparable currency-neutral earnings per share growth of 14% to 15%. Based on current rates and our hedge positions, we now anticipate an approximate 5-point currency headwind to comparable net revenues and an approximate 9-point currency headwind to comparable earnings per share for full year 2024. We continue to expect comparable earnings per share growth of 5% to 6% versus $2.69 in 2023. While it is too early to provide specific guidance on 2025, we do want to share some considerations based on what we know today. We're encouraged by our underlying performance and believe we're well positioned to deliver on our long-term growth opportunity. We expect pricing from intense inflationary markets to moderate in 2025 and recycling the impact of currency devaluations from these markets in 2024. With respect to our commodity environment, we expect prices on industrial materials to remain relatively stable, while agricultural commodities will continue to face volatility and higher prices. We will continue to invest behind our brands as we have been doing, while at the same time we will leverage a range of productivity levers to drive efficiency and effectiveness across our P&L. We expect elevated net interest expense resulting from the deposit made related to the ongoing IRS tax dispute and upcoming fairlife contingent consideration payment. Regarding currency, if we assume current rates on our hedge positions, there would be an approximate low single-digit currency headwind to comparable net revenues and an approximate mid-single-digit currency headwind to comparable earnings per share for full year 2025. Many factors could impact both our currency outlook and broader business between now and when we expect to provide guidance in February. With our all-weather strategy, we've delivered comparable earnings growth for many years now. We have numerous levers to continue to do so. So in summary, successfully executing our strategy in an ever-evolving operating environment, we're confident in our ability to deliver on our objectives in 2024 and over the long-term. We're clear on the direction we are heading in the system. And we continue to invest with our bottling partners to drive sustainable long-term growth. With that, operator, we are ready to take questions.","evidence_gemma_new":"organic revenues","evidence_llama_3_3":null,"evidence_qwen_3_30b":"organic revenues third quarter","gemma_new_max":9.0,"gemma_new_min":9.0,"llama_3_3_max":null,"llama_3_3_min":null,"qwen_3_30b_max":9.0,"qwen_3_30b_min":9.0}
{"symbol":"KO","year":2024,"quarter":4,"date":"2024-Q4","chunk_id":3,"sub_chunk_id":0,"centroid_label":"organic revenue growth","agreed_value":14.0,"count":2,"chunk":"John Murphy: Thank you, James, and good morning, everyone. We closed the year with strong fourth quarter results. And as James said earlier, we delivered 7% comparable earnings per share growth in 2024 on top of 6% average comparable earnings per share growth over the prior 5 years. During the fourth quarter, we grew organic revenues 14%. Unit case growth was 2%, which is in line with our multiyear trend. Concentrate sales grew 3 points ahead of unit cases driven primarily by 2 additional days in the quarter and the timing of concentrate shipments. Our price\/mix growth of 9% was driven by two items: Approximately 8 points of pricing split somewhat evenly between normal pricing actions across our markets and intense inflationary pricing in a handful of markets experiencing currency devaluations and approximately one point of favorable mix. Excluding the impact of intense inflationary pricing, organic revenue growth was above our long-term growth algorithm. Comparable gross margin was up approximately 160 basis points and comparable operating margin was up approximately 80 basis points. Bottlers refranchising had a greater benefit to comparable gross margin and currency headwinds had a larger impact to comparable operating margin. [indiscernible] altogether, fourth quarter comparable EPS of $0.55 was up 12% year-over-year despite 11% currency headwinds and 4% headwinds from bottlers refranchising. [Audio Gap] In 2024, adjusted free cash flow conversion was 93%, which is within our long-term targeted range. [Audio Gap] at the high end of our long-term growth algorithm. We continue to focus on driving balanced volume and price\/mix and anticipate intense inflationary pricing will play a smaller role in 2025 and will moderate throughout the year. Our refranchise is expected to be a slight headwind to comparable net revenues and comparable earnings per share as we cycle the impact of bottler refranchising in 2024. We'll continue to invest appropriately behind our brands while also driving productivity across all areas of marketing. Next week at CAGNY, we'll discuss further our marketing transformation and enhanced resource allocation capabilities give us confidence in our ability to continue to drive more productivity we expect expense to be elevated versus prior year. We believe the step-up is manageable, and we're not expecting significant leverage or deleverage below the line. Based on current rates and our hedge positions, we anticipate an approximate 3- to 4-point currency headwind to comparable net revenues and an approximate 6 to 7-point currency headwind to comparable earnings per share for full year 2025. Our underlying effective tax rate for 2025 is expected to increase to 20.8% and which is driven primarily by the impact of several countries enacting the global minimum tax regulations. All in, we expect comparable earnings per share growth of 2% to 3% and versus $2.88 in 2024. Excluding the fair life contingent consideration payment, we expect to generate approximately $9.5 billion of free cash flow in 2025 through approximately $11.7 billion in cash from operations, less approximately $2.2 billion in capital investments. Included in this guidance are 2 items to highlight: One, a $1.2 billion transition tax payment, an increase of approximately $240 million versus 2024. This is the final year that we will make a payment related to the Tax Cuts and Jobs Act of 2017. Number two, we expect that part of the timing of working capital initiatives that benefited 2024 free cash flow will reverse and impact 2025 free cash flow. Driven by our underlying cash flow generation, we have flexibility to invest in our business and return capital to shareowners. A significant portion of our expected capital investment is to build capacity for fairlife and to continue to invest in our system in India and Africa. With respect to acquisitions and divestitures, we're making good progress on our agenda. Since 2006, we've added $9 billion brands via acquisition. Importantly, only 3 of these brands were $1 billion-dollar brands at the time of acquisition, demonstrating progress in scaling acquisitions. In 2024, we realized $3.5 billion in gross proceeds from refranchising bottling investments as a percent of consolidated net revenue is 13%, down from 52% in 2015. Return on invested capital is up 6 points at the same time. Related to capital return, we have an unwavering priority to grow our dividend as we've done for 62 consecutive years. Our dividend is supported by our long-term free cash flow generation. In 2024, dividends paid [indiscernible] as a percent, our adjusted free cash flow was 73%. On share repurchases, we've typically repurchased shares to offset any dilution from the exercise of stock options by employees in the given year. Our capital allocation policy prioritizes agility and we're committed to driving the long-term health of our business and creating value for our stakeholders. There are some considerations to keep in mind for 2025. We expect bottler refranchising to have a greater impact to comparable net revenues and comparable earnings per share during the first quarter as we cycle the impact of refranchising the Philippines, which closed during the first quarter of 2024. We expect the productivity benefits that I previously discussed to have a larger impact during the latter half of 2025. Due to our reporting calendar, there will be 2 less days in the first quarter and 1 additional day in the fourth quarter. So in summary, we're successfully executing our all-weather strategy to deliver on our objectives. Our system remains incredibly focused and motivated. We will continue to invest with discipline and believe we're well positioned to drive quality top line growth and deliver continued margin expansion. A hallmark of our company since its inception has been our ability to create enduring value over time, and we expect to continue to do so. With that, operator, we are ready to take questions.","evidence_gemma_new":"organic revenues during the fourth quarter","evidence_llama_3_3":null,"evidence_qwen_3_30b":"organic revenues 14% fourth quarter","gemma_new_max":14.0,"gemma_new_min":14.0,"llama_3_3_max":null,"llama_3_3_min":null,"qwen_3_30b_max":14.0,"qwen_3_30b_min":14.0}
{"symbol":"KO","year":2024,"quarter":4,"date":"2025-FY","chunk_id":8,"sub_chunk_id":0,"centroid_label":"organic revenue growth","agreed_value":0.05,"count":2,"chunk":"Dara Mohsenian: So just on that 5% organic revenue growth forecast for 2025, can you just give us a bit more granularity on the balance volume that you see as well as price and mix? And just wanted to focus on your plans on the pricing component in 2025. You mentioned there's some stress on low-end consumer in a few markets after inflation in recent years. But clearly, with your Q4 results, there seems to be handling pricing from Coke well. There's also FX pressure. So there's just a number of volatile external circumstances. Just how does that impact how you manage pricing in 2025 and how that might be different than a typical year, either on the pricing or the mix front?","evidence_gemma_new":"organic revenue growth 2025","evidence_llama_3_3":"organic revenue growth 2025","evidence_qwen_3_30b":null,"gemma_new_max":0.05,"gemma_new_min":0.05,"llama_3_3_max":0.05,"llama_3_3_min":0.05,"qwen_3_30b_max":null,"qwen_3_30b_min":null}
{"symbol":"KO","year":2023,"quarter":1,"date":"2023-Q1","chunk_id":3,"sub_chunk_id":0,"centroid_label":"price mix growth","agreed_value":0.11,"count":2,"chunk":"John Murphy: Thank you, James, and good morning, everyone. We've had a good start to the year with strong first quarter results. Starting with the top line. We grew organic revenues 12%. Unit cases grew 3% with broad-based growth across most markets, driven by investments in the marketplace. Concentrate sales were 2 points behind unit cases for the quarter primarily driven by timing of concentrate shipments and 1 less day. Our price\/mix growth was 11% for the quarter. Much of this was driven by carryover pricing coming into the base from last year, along with some new pricing actions across operating segments as well as revenue growth management initiatives and favorable channel and package mix. Comparable gross margin for the quarter was up approximately 120 basis points driven by underlying expansion and a slight benefit from bottler refranchising, partially offset by the impact of currency. Underlying gross margin expansion was driven by a benefit from the phasing of inventory costs, strong organic revenue growth and cycling the timing of M&A integration expenses, partially offset by higher commodity costs. Comparable operating margin expanded approximately 40 basis points for the quarter. This was primarily driven by underlying operating margin expansion due to robust top line growth across operating segments, partially offset by increased marketing investments and higher operating costs. Putting it all together, first quarter comparable EPS of $0.68 reflects an increase of 5% year-over-year despite higher-than-expected 7% currency headwinds. Free cash flow was negative by approximately $120 million in the quarter. This was largely attributable to the timing of working capital initiatives and the previously discussed M&A-related payments that took place in the quarter. Our underlying cash flow generation remains strong, and we feel confident in our cash flow agenda and full year outlook. Our balance [ achieves ] fit for purpose to support our growth agenda, and our net debt leverage of 1.8x EBITDA as of the end of the first quarter is below our targeted range of 2 to 2.5x. Our capital allocation priorities remain the same. We continue to invest to drive long-term growth and to deliver dividend growth for our shareowners as evidenced by the 5% dividend increase announced in February. We remain mindful of maintaining our financial flexibility amidst the ongoing tax dispute with the IRS. We are currently waiting for the tax court to render its final opinion in the case, allowing us to move forward with the appeals process. As previously discussed, we intend to assert our claims on appeal, vigorously defend our position and believe we will ultimately prevail. We will continue to keep you updated. As James mentioned, we are encouraged by our first quarter results and are harnessing what we can control to remain resilient in the face of a volatile operating environment. We remain laser-focused on top line-led growth as well as the endurance of the bottom line. And we'll reinvest in our brands with more rigor and discipline using the refreshed resource allocation framework we discussed at CAGNY. This approach enables the enterprise to prioritize and put more focus behind country and category combinations that can deliver the best return in the near term while fueling steady progress on our total beverage strategy over time, it also allows us to be more dynamic and to adapt quickly. For example, in emerging markets, where commercial beverages are still a small part of daily consumption, we're leading with core sparkling and juice strengths propositions. In developed markets, where consumers are looking for more beverage choices, we're investing behind a broader portfolio of brands and categories, including value-added dairy, enhanced water, tea and coffee. Despite the global macro picture remaining uncertain in the months ahead, our planned investments and operational strategy will support the momentum we've seen early in the year and give us good visibility to deliver on our 2023 guidance. This guidance is comprised of organic revenue growth of 7% to 8%, primarily led by price\/mix amidst the ongoing inflationary environment, comparable currency-neutral earnings per share growth of 7% to 9%. Based on current rates and our hedge positions, we are reiterating our currency outlook of an approximate 2- to 3-point headwind to comparable net revenues and an approximate 3- to 4-point currency headwind to comparable earnings per share for full year 2023. Inflationary forces are moderating in some respects. Spot prices have come down in oil and freight rates are more favorable. That said, many commodities were exposed to have been sticky, and we have some advantageous hedges that will be rolling off to less favorable rates during the year. Based on current rates and hedge positions, we continue to expect per case commodity price inflation in the range of a mid-single-digit impact on comparable cost of goods sold in 2023. Additionally, we expect wages and inflation in media will continue to remain elevated. Despite the increase in the first quarter effective tax rate, we continue to expect our underlying effective tax rate to be 19.5% for 2023. All in, we are reiterating comparable earnings per share growth of 4% to 5% versus $2.48 in 2022. We expect to generate approximately $9.5 billion of free cash flow in 2023 through approximately $11.4 billion in cash from operations, less approximately $1.9 billion in capital investments. I would like to remind you that included in cash from operations are 2 discrete items related to, one, transition tax payments, which will take place in the second quarter; and two, payments associated with M&A transactions. Excluding these, our implied free cash flow conversion would be within our long-term guidance. This guidance does not include any payments related to our ongoing U.S. income tax dispute with the IRS. Overall, we don't expect the tax dispute to have a bearing on our ability to deliver on our capital allocation agenda and drive long-term business growth. There are some considerations to keep in mind as it pertains to our guidance. We expect price\/mix to moderate through the year as we cycle our pricing initiatives from the prior year. The discrete gross margin benefits related to the phasing of inventory costs and cycling the timing of M&A integration expenses this quarter are unlikely to repeat. Given the ongoing backdrop of rising interest rates, we expect to see higher net interest expense given our effective exposure to floating rate debt. And finally, due to our reporting calendar, there will be one additional day in the fourth quarter. With a quarter of good results to start the year and our focus on driving top line-led growth in any macroeconomic environment, we are well positioned to compound quality value by delivering on 2023 guidance.","evidence_gemma_new":"price\/mix growth","evidence_llama_3_3":"price\/mix growth first quarter","evidence_qwen_3_30b":null,"gemma_new_max":0.11,"gemma_new_min":0.11,"llama_3_3_max":0.11,"llama_3_3_min":0.11,"qwen_3_30b_max":null,"qwen_3_30b_min":null}
{"symbol":"KO","year":2023,"quarter":2,"date":"2023-Q2","chunk_id":3,"sub_chunk_id":0,"centroid_label":"price mix growth","agreed_value":0.1,"count":2,"chunk":"John Murphy: Thank you, James, and good morning, everyone. We are pleased with the momentum of our business and our strong second quarter results. Starting with the top line, we grew organic revenues 11%. Unit cases were flat. As James said, volume for the second quarter got off to a slower start, but ended on a positive note. Concentrate sales were one point ahead of unit cases for the quarter, primarily driven by the timing of concentrate shipments. Price mix growth was 10% for the quarter, driven by carryover pricing coming into the base from last year, along with some new pricing actions across operating segments, including the impact of hyperinflationary markets. Comparable gross margin for the quarter was up approximately 40 basis points, driven by underlying expansion and a slight benefit from bottler refranchising partially offset by the impact of currency. Comparable operating margin expanded approximately 90 basis points for the quarter. This was primarily driven by strong top line growth and the impact of refranchising bottling operations. Partially offset by an increase in marketing investments and higher operating costs versus the prior year as well as currency headwinds. Putting it all together, second quarter comparable EPS of $0.78 was up 11% year-over-year despite higher than expected 6% currency headwinds. Free cash flow was approximately $4 billion year-to-date. This was largely attributable to strong underlying operational performance and working capital benefits, partially offset by a $720 million transition tax payment that was made during the second quarter as well as M&A related payments. Our balance sheet is strong and our net debt leverage of 1.6 times EBITDA is below our targeted range of 2 to 2.5 times. Our capital allocation priorities remain the same and we continue to invest to drive long-term growth. As James mentioned, we are encouraged by what we are seeing in the marketplace. While we continue to spend our strategic flywheel faster to generate top line led growth, we've also progressed on a margin agenda, as demonstrated by our consistent track record of offsetting cost headwinds to sustain steady gross margins. We have numerous levers available to drive top line growth and improve the effectiveness and efficiency of our spend over the long-term. Our all-weather strategy, coupled with the great plans that we have in place to continue to create quality leadership across our portfolio give us good visibility to deliver on our raised 2023 guidance. This is comprised of organic revenue growth of 8% to 9%, which includes positive volume growth while continuing to be led by price mix. There are a few considerations to keep in mind. We expect pricing in developed markets to moderate through the year as we cycle pricing initiatives from the prior year. In developing and emerging markets, we aim to take price with local market inflation. To the extent that intense inflationary markets drive elevated price mix. The impact is oftentimes offset by currency, as it is frequently difficult to hedge our exposure. Due to our reporting calendar, there will be one additional day in the fourth quarter. We now expect comparable currency neutral earnings per share growth of 9% to 11%. Based on current rates and our hedge positions, we are updating our currency outlook of an approximate 3 to 4 point headwind to comparable net revenues and an approximate 4 to 5 point currency headwind to comparable earnings per share for full year 2023. Inflationary pressures are beginning to moderate in some ways, including freight rates that are favorable compared to last year. That said, several commodities that are prevalent in our basket like sugar and juice remain elevated and we have some hedges that we will be rolling off to less favorable rates. Based on current rates and hedge positions, we continue to expect per case commodity price inflation in the range of a mid-single digit impact on comparable cost of goods sold in 2023. Our updated underlying effective tax rate for 2023 is now 19.3%. All-in, we are updating comparable earnings per share growth of 5% to 6% versus $2.48 in 2022. We continue to expect to generate approximately $9.5 billion of free cash flow in 2023 through approximately $11.4 billion in cash from operations less approximately $1.9 billion in capital investments. If you exclude the transition tax payment made in the second quarter and various payments associated with M&A transactions, our implied free cash flow conversion would be within our long-term guidance. This guidance does not include any payments related to our ongoing US income tax dispute with the IRS. As we enter the second half of the year, we continue to build a culture that emphasizes raising the bar in every aspect of how we do business. Thanks to the tremendous ongoing commitment of our system employees around the world, we are confident in our ability to deliver on our guidance for 2023 and drive value for our stakeholders over the long-term. With that operator, we are ready to take questions.","evidence_gemma_new":null,"evidence_llama_3_3":"price mix growth second quarter","evidence_qwen_3_30b":"price mix growth 10% quarter","gemma_new_max":null,"gemma_new_min":null,"llama_3_3_max":0.1,"llama_3_3_min":0.1,"qwen_3_30b_max":0.1,"qwen_3_30b_min":0.1}
{"symbol":"KO","year":2023,"quarter":4,"date":"2023-Q4","chunk_id":3,"sub_chunk_id":0,"centroid_label":"price mix growth","agreed_value":0.09,"count":2,"chunk":"John Murphy: Thank you, James. And good morning, everyone. In the fourth quarter and throughout 2023, we delivered strong results. During the quarter, we grew organic revenues 12% which was in-line with our full year organic revenue growth. Unit case growth was 2% and it was positive in each quarter of 2023. Concentrate sales grew 1 point ahead of unit cases, driven primarily by one additional day in the quarter. Our price mix growth of 9% in the quarter was driven by three factors. One, 2023 pricing actions across most of our markets. Two, hyperinflationary pricing that I'll speak to in just a moment. And three, some mix which is mostly timing related. Comparable gross margin for the quarter was up approximately 140 basis points. Driven by underlying expansion and a slight benefit from bottle refranchising. Partially offset by the impact of currency headwinds. Comparable operating margin expanded approximately 40 basis points for the quarter. This was primarily driven by strong topline growth, partially offset by currency headwinds and an increase in marketing investments. The positive volume and topline growth that we're realizing today demonstrates the effectiveness of our marketing spend. Below the line, comparable other income declined primarily due to the operating environment in Argentina. Putting it all together, fourth quarter comparable EPS of $0.49 was up 10% year-over-year, despite higher than expected 13% currency headwinds. Before moving on, I wanted to discuss the impact of a few hyperinflationary markets on our fourth quarter results. During the quarter, inflation intensified and exceeded 60% across these markets. In aggregate, while they represent less than 5% of our total volume, this degree of inflation creates a cosmetic distortion to our underlying results. In the fourth quarter, these markets contributed more than 3 points of our price mix and most of our currency headwinds, including an outsized impact to comparable other income from balance sheet remeasurement in Argentina. They did not, however, have a material impact on our earnings per share results. In hyperinflationary markets it's either impractical or impossible to hedge our currency exposure. And to manage it, we use our full suite of revenue growth management tools, including pricing actions to keep pace with local market inflation. We have been operating a long-time in these markets and we expect to be in them for a long-time to come. We work hand-in-hand with our local bottling partners and our focus will be to continue to nurture the strong relationships we have with our consumers and customers. And to ultimately prevail longer-term. So while we will continue to experience volatility of this nature in a few markets, it's important to keep in mind they are operated locally, they are typically self-funding and they have not impeded our overall ability to grow earnings per share. As we move forward, we are confident that our business model and the many levers within it will allow us to deliver on our overall objectives. In 2023 free cash flow was $9.7 billion, which increased from the prior year. 2023 free cash flow included a transition tax payment of approximately $720 million, which was approximately $340 million higher than the prior year and included approximately $230 million in M&A related payments. Our underlying free cash flow growth was largely attributable to strong operational performance and working capital benefits. If you exclude the full impact of the transition tax in M&A related payments, our adjusted free cash flow conversion ratio would be within our target range of 90% to 95%. Our balance sheet remains strong. And our net debt leverage of 1.7 times EBITDA is below our targeted range of 2 times to 2.5 times. During the fourth quarter, in addition to offsetting dilution from the exercise of stock options by employees, we repurchased additional shares in anticipation of expected proceeds from bottler refranchising. As James mentioned, we anticipate 2024 will bring new challenges and opportunities. However, through our all-weather strategy, we've proven we can deliver in many different operating environments. Our 2024 guidance builds on the underlying momentum of our business. We expect organic revenue growth of 6% to 7% and comparable currency neutral earnings per share growth of 8% to 10%. We anticipate hyperinflationary pricing will continue to play a role in 2024, but it will moderate throughout the year. We continue to make significant progress towards refranchising company owned bottling operations. Bottler refranchising is expected to be a 4 point to 5 point headwind to comparable net revenues and a 2 point headwind to comparable earnings per share. But will have a positive impact on both our margins and the return profile of our business. Based on current rates and our hedge positions, we anticipate an approximate 2 point to 3 point currency headwind to comparable net revenues and an approximate 4 point to 5 point currency headwind to comparable earnings per share for full year 2024. Notably, much of our anticipated 2024 currency headwinds are attributed to hyperinflationary markets with a meaningful impact in the fourth quarter. Our underlying effective tax rate for 2024 is expected to be 19.2%. All in, we expect comparable earnings per share growth of 4% to 5% versus $2.69 in 2023. We expect to generate approximately $9.2 billion of free cash flow in 2024 through approximately $11.4 billion in cash from operations, less approximately $2.2 billion in capital investments. The $11.4 billion of cash from operations includes two items to highlight, transition tax payments of approximately $960 million, an increase of approximately $240 million versus 2023, payments associated with various M&A transactions of approximately $560 million, an increase of approximately $330 million versus 2023. Driven by our underlying cash flow generation and current balance sheet strength, we have ample flexibility to both reinvest in our business to drive growth and return capital to our shareowners. A significant portion of our expected capital investment increase is to build capacity for fairlife and for our India business, both of which experienced robust growth in 2023. Related to capital return, we have an unwavering priority to grow our dividend as we've done with 61 consecutive years of dividend increases. With respect to share repurchases, we will be flexible in our approach. Typically, we've repurchased shares to offset any dilution from the exercise of stock options by employees in the given year. Our capital allocation policy prioritize agility. And we're committed to taking the right actions needed to drive the long-term health of our business and create value for our stakeholders. There are some considerations to keep in mind for 2024. The first quarter of 2024 will be impacted by the timing of concentrate shipments in the fourth quarter of 2023 in some markets and cycling our strongest volume growth quarter from the prior year. We estimate the ongoing conflict in the Middle East had approximately 1 point of impact on volume growth during the fourth quarter of 2023. It's unclear how long this impact will last. In November 2023, the U.S. Tax Court rendered its supplemental opinion related to our ongoing dispute with the Internal Revenue Service. We intend to move forward on appeal and vigorously defend our position. We have ample balance sheet flexibility to fund any payment related to the appeal. Finally, due to our reporting calendar, there will be one less day in the first quarter and two additional days in the fourth quarter. So in summary, we're pleased with what we accomplished in 2023, we're building on our capabilities to continue the underlying momentum across our markets, we're progressing on our refranchising agenda and we're reinvesting in our system to drive long-term growth. We have great confidence, we can deliver on our 2024 guidance and long-term commitments. With that, operator, we're ready to take questions.","evidence_gemma_new":"price mix growth","evidence_llama_3_3":"price mix growth fourth quarter","evidence_qwen_3_30b":null,"gemma_new_max":0.09,"gemma_new_min":0.09,"llama_3_3_max":0.09,"llama_3_3_min":0.09,"qwen_3_30b_max":null,"qwen_3_30b_min":null}
{"symbol":"KO","year":2024,"quarter":1,"date":"2024-Q1","chunk_id":3,"sub_chunk_id":0,"centroid_label":"price mix growth","agreed_value":0.13,"count":2,"chunk":"John Murphy: Thank you, James, and good morning, everyone. Our first quarter results marked a continuation of the underlying momentum in our business, driven by a strong and focused system. We delivered another quarter of volume growth, even as we cycled strong results. Additionally, we completed the refranchising of several bottlers during the quarter, leading to further comparable margin expansion. We progressed on our refranchising agenda, while making sure we best position our system to deliver long-term growth, and we earn a fair return on our investments. We continue to invest behind our portfolio with discipline and flexibility, thanks to our enhanced resource allocation agenda. During the quarter, we grew organic revenues 11%. We had 1% unit case growth. Concentrate sales were behind unit case volume by 3 points, driven by 1 less day in the quarter and the timing of concentrate shipments, primarily in Mexico and the Middle East. Our price\/mix growth of 13% in the quarter was driven by approximately 6 points of intense inflationary pricing across a handful of markets to offset significant currency devaluation, pricing actions across a number of markets and a couple of points of favorable mix. Excluding impacts from intense inflationary pricing, organic revenue growth in the first quarter was at the high end of our long-term growth algorithm. Comparable gross margin for the quarter was up approximately 130 basis points driven by underlying expansion and a benefit from bottler refranchising, partially offset by the impact of currency headwinds. Comparable operating margin expanded approximately 60 basis points for the quarter. This was primarily driven by strong top line growth and bottler refranchising, partially offset by currency headwinds and an increase in marketing investments. Markets experiencing intense inflation represent only a single-digit contribution to our volume, but continue to have an outsized impact on the shape of our P&L. Putting it all together, first quarter comparable EPS of $0.72 was up 7% year-over-year, including 9% currency headwinds, which were driven by currency devaluation in markets experiencing intense inflation. Free cash flow was approximately $160 million, an increase from the prior year. Before moving on, I want to discuss 2 items that are included in our first quarter reported results, a $765 million charge related to the remeasurement of our contingent consideration liability for our acquisition of fairlife. Our final payment related to the fairlife acquisition will take place in 2025. This payment has grown as fairlife has outperformed. We continue to be encouraged by our ability to scale fairlife organically. Secondly, a noncash impairment charge of $760 million related to BODYARMOR. While we are taking a charge to reflect revised projections and a higher discount rate since the acquisition date of BODYARMOR, we believe in the power of our 2 sports brand strategy with POWERADE and BODYARMOR. We're taking actions to help create long-term value, and we're seeing signs that this strategy is working. Our balance sheet remains strong and our net debt leverage of 1.6x EBITDA is below our targeted range of 2 to 2.5x. This gives us ample capacity for potential upcoming payments in 2024 related to the IRS tax case, which we continue to vigorously defend, and the upcoming fairlife payment in 2025. We continue to remain consistent in our approach to prioritizing our capital allocation. We're committed to investing to drive growth and to support our dividend, which we have raised for 62 consecutive years. We're confident our business model has the flexibility to allow us to deliver on our overall objectives. Our updated 2024 guidance reflects the underlying momentum of our business, and we now expect organic revenue growth of 8% to 9%, and comparable currency-neutral earnings per share growth of 11% to 13%. Our revised top line guidance is solely driven by higher-than-expected inflationary pricing in a handful of markets, which we expect to moderate throughout the year. Bottler refranchising is still expected to be a 4- to 5-point headwind to comparable net revenues and a 2-point headwind to comparable earnings per share, but will have a positive impact on both our margins and the return profile of our business. Based on current rates and our hedge positions, we anticipate an approximate 4- to 5-point currency headwind to comparable net revenues, and an approximate 7 to 8-point currency headwind to comparable earnings per share for full year 2024. This increase in currency headwind is driven by intense inflationary markets, while the rest of the currency basket is relatively neutral to our results. Our underlying effective tax rate for 2024 is now expected to be 19%. All in, we continue to expect comparable earnings per share growth of 4% to 5% versus $2.69 in 2023. There are some considerations to keep in mind. We estimate the ongoing conflict in the Middle East had approximately 1 point of impact on volume growth during the first quarter of 2024. It's unclear how long this impact will last. The cadence of structural impact will be larger in the second and third quarters due to the timing of transaction closing during the first quarter and the seasonality of the businesses we refranchised. Finally, there will be 2 additional days in the fourth quarter. To sum it up, and as James said, the year has started off well. We remain focused on the execution of our all-weather strategy. And thanks to the partnership of our system and the ongoing dedication of our people, we're confident we can create value for our stakeholders and deliver on our guidance for the year. And as we said at CAGNY, we're primed for performance in 2024 and over the long term. With that, operator, we are ready to take questions.","evidence_gemma_new":null,"evidence_llama_3_3":"price\/mix growth quarter","evidence_qwen_3_30b":"price\/mix growth first quarter","gemma_new_max":null,"gemma_new_min":null,"llama_3_3_max":0.13,"llama_3_3_min":0.13,"qwen_3_30b_max":0.13,"qwen_3_30b_min":0.13}
{"symbol":"KO","year":2024,"quarter":2,"date":"2024-Q2","chunk_id":3,"sub_chunk_id":0,"centroid_label":"price mix growth","agreed_value":0.09,"count":2,"chunk":"John Murphy: Thank you, James, and good morning, everyone. In the second quarter, we delivered strong results. We grew organic revenues 15%. This consisted of 2% unit case growth. Concentrate sales were ahead of volume by four points, driven primarily by timing of concentrate shipments, and some disruptions in the global supply chain that we partly expect, to reverse next quarter. Our price\/mix growth of 9% in the quarter was primarily driven by two items: one, approximately five points of intense inflationary pricing, across a handful of markets to offset significant currency devaluation. And two, an array of pricing and mix actions across our markets. Excluding the impacts from concentrate shipment timing and pricing from markets with intense inflation. Organic revenue growth during the quarter was at the high end of our long-term growth algorithm. Comparable gross margin was up approximately 200 basis points, driven by underlying expansion, and the benefit from bottler refranchising partially offset by currency headwinds. Comparable operating margin expanded approximately 120 basis points. Comparable operating margin expansion was less than comparable gross margin expansion, due to less benefit from bottler refranchising and greater currency headwinds to comparable operating margin. Putting it all together, second quarter comparable EPS of $0.84 was up 7% year-over-year despite 10% currency headwinds and 2% headwind from bottler refranchising. Free cash flow was approximately $3.3 billion, down approximately $700 million versus the prior year, due to higher tax payments, cycling working capital benefits from the prior year and higher capital expenditures. We continue to take actions, to achieve a fit for purpose balance sheet that, will best support our growth agenda. During the quarter, we raised approximately $4 billion in cash by issuing long-term debt for general corporate purposes. This may include pre-funding upcoming payments related to the IRS tax case and the Fairlife contingent consideration. With respect to our IRS tax case, which we continue to vigorously defend. We're making progress to our next steps, and we expect we will be able to move forward an appeal by the end of the year. Given the continued outperformance of Fairlife, we recorded a charge of $1.3 billion during the quarter. Our estimated final payment related to this acquisition is $5.3 billion, which will be made in 2025. We are encouraged by Fairlife's performance and the value it has created for our company. So far this year, we've realized nearly $3 billion in gross proceeds from bottler refranchising and streamlining our equity investments. We'll continue to prioritize higher growth businesses, and take passive capital off the table. Return on invested capital is 24%, up approximately five points from three years ago. Our balance sheet is strong, as demonstrated by our net debt leverage of 1.5 times EBITDA, which is well below our targeted range of 2 to 2.5 times. We have ample capacity to pursue our capital allocation agenda, which prioritizes investing to drive further growth, continuing to support our dividend and staying dynamic, agile and opportunistic. As James mentioned, we're proactively managing our portfolio to deliver on our commitments. Our updated 2024 guidance reflects the momentum of our business in the first half of the year, and our confidence in our ability to execute on our plans during the second half of this year. We now expect organic revenue growth of 9% to 10%, and comparable currency-neutral earnings per share growth of 13% to 15%. Bottler refranchising is still expected to be a four to five-point headwind, to comparable net revenues. And we now expect a one to two-point headwind, to comparable earnings per share. Based on current rates and our hedge positions, we now anticipate an approximate five to six-point currency headwind, to comparable net revenues and an approximate eight to nine-point currency headwind, to comparable earnings per share for full year 2024. This increase in currency headwind is driven by a small number of intensive treasury markets, while the rest of the currency basket is relatively neutral to our results. All in, we now expect comparable earnings per share growth of 5% to 6% versus $2.69 in 2023. There are some considerations to keep in mind. We expect unit cases and concentrate shipments to be relatively in line with each other for the full year 2024. Please keep in mind there are two extra days in the fourth quarter. Taking everything into consideration, we expect earnings growth during the remainder of 2024, will be weighted towards the fourth quarter. To summarize, we're encouraged by our track record and the underlying momentum of our business. Our system remains incredibly focused and motivated to drive growth. We're continuing to drive quality top line growth, expand margins, grow comparable earnings per share and improve the return profile of our business. And we're confident we will deliver on our guidance, and longer-term objectives. With that, operator, we are ready to take questions.","evidence_gemma_new":"price\/mix growth","evidence_llama_3_3":"price\/mix growth second quarter","evidence_qwen_3_30b":null,"gemma_new_max":0.09,"gemma_new_min":0.09,"llama_3_3_max":0.09,"llama_3_3_min":0.09,"qwen_3_30b_max":null,"qwen_3_30b_min":null}
{"symbol":"KO","year":2024,"quarter":3,"date":"2024-Q3","chunk_id":3,"sub_chunk_id":0,"centroid_label":"price mix growth","agreed_value":10.0,"count":2,"chunk":"John Murphy: Thank you, James, and good morning, everyone. Today I'll comment on our third quarter performance, discuss the outlook for the remainder of 2024, and provide some early commentary on 2025. During the third quarter, we grew organic revenues 9%. Unit cases declined 1% having had a poor July, but improving sequentially thereafter during the quarter. Concentrate sales were 1 point behind unit cases for the quarter, driven primarily by the timing of concentrate shipments. Our price\/mix growth of 10% was driven by two items. Approximately 7 points of pricing split somewhat evenly between normal pricing actions across our markets and intense inflationary pricing in a handful of markets experiencing currency devaluations, and approximately 3 points of mix across the markets, which was primarily driven by stronger growth in several developed markets versus developing and emerging markets. Excluding the impact from intense inflationary pricing, organic revenue growth during the quarter continued to be at the high end of our long-term growth algorithm. Comparable gross margin was up approximately 70 basis points and comparable operating margin was up approximately 100 basis points. Both were driven by underlying expansion and the benefit from butter refranchising, partially offset by the impact of currency headwinds. Putting it all together, third quarter comparable EPS of $0.77 was up 5% year-over-year despite higher-than-expected 9% currency headwinds and 2% headwinds from bottler refranchising. During the quarter, we made a $6 billion deposit with the IRS related to our ongoing tax dispute. We've also filed our appeal with the 11th Circuit Court. We're pleased to move forward with the process. We will vigorously defend our position. We believe we will prevail, and we will continue to keep you updated. Free cash flow, excluding the IRS tax litigation deposit, was approximately $7.6 billion, which is down approximately $290 million versus the prior year due to higher other tax payments, higher capital expenditures and cycling some working capital benefits from the prior year. Our balance sheet is strong, and our net debt leverage of 1.7 times EBITDA is below our targeted range of 2x to 2.5x. If you include our latest estimate of $6.1 billion related to our fairlife contingent consideration payment, which we expect to make in the first half of 2025, our expected net debt leverage would be at the low end of our target range. As James mentioned, our powerful portfolio, amplified by our system's unique capabilities gives us confidence in our ability to deliver on our updated 2024 guidance. We now expect organic revenue growth of approximately 10% and comparable currency-neutral earnings per share growth of 14% to 15%. Based on current rates and our hedge positions, we now anticipate an approximate 5-point currency headwind to comparable net revenues and an approximate 9-point currency headwind to comparable earnings per share for full year 2024. We continue to expect comparable earnings per share growth of 5% to 6% versus $2.69 in 2023. While it is too early to provide specific guidance on 2025, we do want to share some considerations based on what we know today. We're encouraged by our underlying performance and believe we're well positioned to deliver on our long-term growth opportunity. We expect pricing from intense inflationary markets to moderate in 2025 and recycling the impact of currency devaluations from these markets in 2024. With respect to our commodity environment, we expect prices on industrial materials to remain relatively stable, while agricultural commodities will continue to face volatility and higher prices. We will continue to invest behind our brands as we have been doing, while at the same time we will leverage a range of productivity levers to drive efficiency and effectiveness across our P&L. We expect elevated net interest expense resulting from the deposit made related to the ongoing IRS tax dispute and upcoming fairlife contingent consideration payment. Regarding currency, if we assume current rates on our hedge positions, there would be an approximate low single-digit currency headwind to comparable net revenues and an approximate mid-single-digit currency headwind to comparable earnings per share for full year 2025. Many factors could impact both our currency outlook and broader business between now and when we expect to provide guidance in February. With our all-weather strategy, we've delivered comparable earnings growth for many years now. We have numerous levers to continue to do so. So in summary, successfully executing our strategy in an ever-evolving operating environment, we're confident in our ability to deliver on our objectives in 2024 and over the long-term. We're clear on the direction we are heading in the system. And we continue to invest with our bottling partners to drive sustainable long-term growth. With that, operator, we are ready to take questions.","evidence_gemma_new":"price\/mix growth","evidence_llama_3_3":null,"evidence_qwen_3_30b":"price\/mix growth third quarter","gemma_new_max":10.0,"gemma_new_min":10.0,"llama_3_3_max":null,"llama_3_3_min":null,"qwen_3_30b_max":10.0,"qwen_3_30b_min":10.0}
{"symbol":"KO","year":2024,"quarter":4,"date":"2024-Q4","chunk_id":3,"sub_chunk_id":0,"centroid_label":"price mix growth","agreed_value":9.0,"count":2,"chunk":"John Murphy: Thank you, James, and good morning, everyone. We closed the year with strong fourth quarter results. And as James said earlier, we delivered 7% comparable earnings per share growth in 2024 on top of 6% average comparable earnings per share growth over the prior 5 years. During the fourth quarter, we grew organic revenues 14%. Unit case growth was 2%, which is in line with our multiyear trend. Concentrate sales grew 3 points ahead of unit cases driven primarily by 2 additional days in the quarter and the timing of concentrate shipments. Our price\/mix growth of 9% was driven by two items: Approximately 8 points of pricing split somewhat evenly between normal pricing actions across our markets and intense inflationary pricing in a handful of markets experiencing currency devaluations and approximately one point of favorable mix. Excluding the impact of intense inflationary pricing, organic revenue growth was above our long-term growth algorithm. Comparable gross margin was up approximately 160 basis points and comparable operating margin was up approximately 80 basis points. Bottlers refranchising had a greater benefit to comparable gross margin and currency headwinds had a larger impact to comparable operating margin. [indiscernible] altogether, fourth quarter comparable EPS of $0.55 was up 12% year-over-year despite 11% currency headwinds and 4% headwinds from bottlers refranchising. [Audio Gap] In 2024, adjusted free cash flow conversion was 93%, which is within our long-term targeted range. [Audio Gap] at the high end of our long-term growth algorithm. We continue to focus on driving balanced volume and price\/mix and anticipate intense inflationary pricing will play a smaller role in 2025 and will moderate throughout the year. Our refranchise is expected to be a slight headwind to comparable net revenues and comparable earnings per share as we cycle the impact of bottler refranchising in 2024. We'll continue to invest appropriately behind our brands while also driving productivity across all areas of marketing. Next week at CAGNY, we'll discuss further our marketing transformation and enhanced resource allocation capabilities give us confidence in our ability to continue to drive more productivity we expect expense to be elevated versus prior year. We believe the step-up is manageable, and we're not expecting significant leverage or deleverage below the line. Based on current rates and our hedge positions, we anticipate an approximate 3- to 4-point currency headwind to comparable net revenues and an approximate 6 to 7-point currency headwind to comparable earnings per share for full year 2025. Our underlying effective tax rate for 2025 is expected to increase to 20.8% and which is driven primarily by the impact of several countries enacting the global minimum tax regulations. All in, we expect comparable earnings per share growth of 2% to 3% and versus $2.88 in 2024. Excluding the fair life contingent consideration payment, we expect to generate approximately $9.5 billion of free cash flow in 2025 through approximately $11.7 billion in cash from operations, less approximately $2.2 billion in capital investments. Included in this guidance are 2 items to highlight: One, a $1.2 billion transition tax payment, an increase of approximately $240 million versus 2024. This is the final year that we will make a payment related to the Tax Cuts and Jobs Act of 2017. Number two, we expect that part of the timing of working capital initiatives that benefited 2024 free cash flow will reverse and impact 2025 free cash flow. Driven by our underlying cash flow generation, we have flexibility to invest in our business and return capital to shareowners. A significant portion of our expected capital investment is to build capacity for fairlife and to continue to invest in our system in India and Africa. With respect to acquisitions and divestitures, we're making good progress on our agenda. Since 2006, we've added $9 billion brands via acquisition. Importantly, only 3 of these brands were $1 billion-dollar brands at the time of acquisition, demonstrating progress in scaling acquisitions. In 2024, we realized $3.5 billion in gross proceeds from refranchising bottling investments as a percent of consolidated net revenue is 13%, down from 52% in 2015. Return on invested capital is up 6 points at the same time. Related to capital return, we have an unwavering priority to grow our dividend as we've done for 62 consecutive years. Our dividend is supported by our long-term free cash flow generation. In 2024, dividends paid [indiscernible] as a percent, our adjusted free cash flow was 73%. On share repurchases, we've typically repurchased shares to offset any dilution from the exercise of stock options by employees in the given year. Our capital allocation policy prioritizes agility and we're committed to driving the long-term health of our business and creating value for our stakeholders. There are some considerations to keep in mind for 2025. We expect bottler refranchising to have a greater impact to comparable net revenues and comparable earnings per share during the first quarter as we cycle the impact of refranchising the Philippines, which closed during the first quarter of 2024. We expect the productivity benefits that I previously discussed to have a larger impact during the latter half of 2025. Due to our reporting calendar, there will be 2 less days in the first quarter and 1 additional day in the fourth quarter. So in summary, we're successfully executing our all-weather strategy to deliver on our objectives. Our system remains incredibly focused and motivated. We will continue to invest with discipline and believe we're well positioned to drive quality top line growth and deliver continued margin expansion. A hallmark of our company since its inception has been our ability to create enduring value over time, and we expect to continue to do so. With that, operator, we are ready to take questions.","evidence_gemma_new":"price\/mix growth","evidence_llama_3_3":null,"evidence_qwen_3_30b":"price\/mix growth 9% ","gemma_new_max":9.0,"gemma_new_min":9.0,"llama_3_3_max":null,"llama_3_3_min":null,"qwen_3_30b_max":9.0,"qwen_3_30b_min":9.0}
{"symbol":"KO","year":2023,"quarter":3,"date":"2023-Q3","chunk_id":3,"sub_chunk_id":0,"centroid_label":"unit case growth","agreed_value":2.0,"count":2,"chunk":"John Murphy: Thank you, James and good morning, everyone. Today, I'll comment on our third quarter performance and highlight our updated 2023 guidance. I'll also provide some early commentary on 2024 and the actions we are taking to continue to deliver on our objectives. As James mentioned, we delivered strong third quarter results. Starting with the top line. We grew organic revenues 11%. Unit case growth was 2%. If you exclude the impact of suspending our business in Russia, we have delivered positive volume growth in each quarter since the start of 2021. Concentrate sales were in line with unit cases for the quarter. Price\/mix growth was 9% driven by pricing actions across operating segments, including the impact of a few hyperinflationary markets, along with carryover pricing coming into the base from last year. Comparable gross margin for the quarter was up approximately 130 basis points driven by underlying expansion and a slight benefit from bottler refranchising, partially offset by the impact of currency headwinds. Comparable operating margin expanded approximately 20 basis points for the quarter. This was primarily driven by strong top line growth and the impact of refranchising bottling operations, partially offset by an increase in marketing investments versus the prior year as well as currency headwinds. Putting it all together, third quarter comparable EPS of $0.74 was up 7% year-over-year despite higher-than-expected 4% currency headwinds. Free cash flow was approximately $7.9 billion year-to-date. This was largely attributable to strong underlying operational performance and working capital benefits, partially offset by $720 million transition tax payment and $230 million in M&A-related payments. Our balance sheet is strong and our net debt leverage of 1.5x EBITDA is below our target range of 2 to 2.5x. Recently, we entered into a letter of intent to refranchise our Philippines bottler. As we progress on our refranchising journey, we aspire to improve the return profile of our business. In 2015, when Bottling Investments Group was more than 50% of our net revenue, our return on invested capital was approximately 17%. Today, Bottling Investments Group makes up less than 20% of net revenue. And our return on invested capital is over 23%, nearly a 7-point increase. After this transaction closes, our remaining assets in the Bottling Investments Group will include operations in India, Africa and several smaller locations, primarily in Asia Pacific. We will remain disciplined in our refranchising approach by making sure we best position our system to deliver sustainable long-term growth. Our business performance year-to-date gives us confidence that we can deliver on our raised 2023 guidance. This is comprised of organic revenue growth of 10% to 11% which will be led by price\/mix and includes positive volume growth. We do expect pricing in developed markets to moderate in the fourth quarter as we cycle pricing initiatives from the prior year. There are also a few hyperinflationary markets that will continue to drive price\/mix. There will be 1 additional day in the fourth quarter. We now expect comparable currency-neutral earnings per share growth of 13% to 14%. And based on current rates and our hedge positions, we now expect currency to be an approximate 4-point headwind to comparable net revenues and an approximate 6-point currency headwind to comparable earnings per share for full year 2023. Based on current rates and hedge positions, we continue to expect per-case commodity price inflation in the range of a mid-single-digit impact on comparable cost of goods sold in 2023. We now expect our underlying effective tax rate for 2023 to be 19%. All in, we are updating comparable earnings per share growth of 7% to 8% versus $2.48 in 2022. We continue to expect to generate approximately $9.5 billion of free cash flow in 2023 through approximately $11.4 billion in cash from operations. That's approximately $1.9 billion in capital investments. This guidance does not include any payments related to our U.S. income tax dispute with the IRS which are unlikely to occur in 2023. Given the momentum of our business, the strength of our balance sheet and some proceeds that we expect to receive from bottler refranchising, we have increased flexibility to continue to both reinvest in our business and return capital to shareowners. While it is too early to provide specific items on 2024, we want to share some considerations based on what we know today. We're encouraged by our top line momentum across the majority of our markets. There are a handful of hyperinflationary markets where it is either not possible to hedge or it is costly to do so. In these markets, we've demonstrated that we can manage currency pressures by taking price with local market inflation and we will continue to follow this approach. While some commodities are normalizing, we also have input costs that could be impacted by tensions and conflicts. With respect to advertising spend, our bias is to continue to reinvest behind our brands while maintaining flexibility. Regarding currency, if we assume current rates and our hedge positions, there would be an approximate low single-digit currency headwind to comparable net revenues and an approximate mid-single-digit currency headwind to comparable earnings per share for full year 2024. Of course, several factors could impact both our currency outlook and broader business outlook between now and February. Over the past few years, we've delivered U.S. dollar EPS growth and we have many levers to continue to do so. So in summary, we are encouraged by our business results and confident in our ability to deliver on our commitments over the long term. Thanks to the incredible commitment of our system employees around the world, we're very clear on the direction we are heading and well equipped to execute on the strategies to get us there. And we continue to invest to drive sustainable long-term growth. We remain focused on capturing the opportunities available to us. With that, operator, we are ready to take questions.","evidence_gemma_new":"Unit case growth","evidence_llama_3_3":null,"evidence_qwen_3_30b":"unit case growth third quarter","gemma_new_max":2.0,"gemma_new_min":2.0,"llama_3_3_max":null,"llama_3_3_min":null,"qwen_3_30b_max":2.0,"qwen_3_30b_min":2.0}
{"symbol":"KO","year":2024,"quarter":1,"date":"2024-Q1","chunk_id":3,"sub_chunk_id":0,"centroid_label":"unit case growth","agreed_value":0.01,"count":2,"chunk":"John Murphy: Thank you, James, and good morning, everyone. Our first quarter results marked a continuation of the underlying momentum in our business, driven by a strong and focused system. We delivered another quarter of volume growth, even as we cycled strong results. Additionally, we completed the refranchising of several bottlers during the quarter, leading to further comparable margin expansion. We progressed on our refranchising agenda, while making sure we best position our system to deliver long-term growth, and we earn a fair return on our investments. We continue to invest behind our portfolio with discipline and flexibility, thanks to our enhanced resource allocation agenda. During the quarter, we grew organic revenues 11%. We had 1% unit case growth. Concentrate sales were behind unit case volume by 3 points, driven by 1 less day in the quarter and the timing of concentrate shipments, primarily in Mexico and the Middle East. Our price\/mix growth of 13% in the quarter was driven by approximately 6 points of intense inflationary pricing across a handful of markets to offset significant currency devaluation, pricing actions across a number of markets and a couple of points of favorable mix. Excluding impacts from intense inflationary pricing, organic revenue growth in the first quarter was at the high end of our long-term growth algorithm. Comparable gross margin for the quarter was up approximately 130 basis points driven by underlying expansion and a benefit from bottler refranchising, partially offset by the impact of currency headwinds. Comparable operating margin expanded approximately 60 basis points for the quarter. This was primarily driven by strong top line growth and bottler refranchising, partially offset by currency headwinds and an increase in marketing investments. Markets experiencing intense inflation represent only a single-digit contribution to our volume, but continue to have an outsized impact on the shape of our P&L. Putting it all together, first quarter comparable EPS of $0.72 was up 7% year-over-year, including 9% currency headwinds, which were driven by currency devaluation in markets experiencing intense inflation. Free cash flow was approximately $160 million, an increase from the prior year. Before moving on, I want to discuss 2 items that are included in our first quarter reported results, a $765 million charge related to the remeasurement of our contingent consideration liability for our acquisition of fairlife. Our final payment related to the fairlife acquisition will take place in 2025. This payment has grown as fairlife has outperformed. We continue to be encouraged by our ability to scale fairlife organically. Secondly, a noncash impairment charge of $760 million related to BODYARMOR. While we are taking a charge to reflect revised projections and a higher discount rate since the acquisition date of BODYARMOR, we believe in the power of our 2 sports brand strategy with POWERADE and BODYARMOR. We're taking actions to help create long-term value, and we're seeing signs that this strategy is working. Our balance sheet remains strong and our net debt leverage of 1.6x EBITDA is below our targeted range of 2 to 2.5x. This gives us ample capacity for potential upcoming payments in 2024 related to the IRS tax case, which we continue to vigorously defend, and the upcoming fairlife payment in 2025. We continue to remain consistent in our approach to prioritizing our capital allocation. We're committed to investing to drive growth and to support our dividend, which we have raised for 62 consecutive years. We're confident our business model has the flexibility to allow us to deliver on our overall objectives. Our updated 2024 guidance reflects the underlying momentum of our business, and we now expect organic revenue growth of 8% to 9%, and comparable currency-neutral earnings per share growth of 11% to 13%. Our revised top line guidance is solely driven by higher-than-expected inflationary pricing in a handful of markets, which we expect to moderate throughout the year. Bottler refranchising is still expected to be a 4- to 5-point headwind to comparable net revenues and a 2-point headwind to comparable earnings per share, but will have a positive impact on both our margins and the return profile of our business. Based on current rates and our hedge positions, we anticipate an approximate 4- to 5-point currency headwind to comparable net revenues, and an approximate 7 to 8-point currency headwind to comparable earnings per share for full year 2024. This increase in currency headwind is driven by intense inflationary markets, while the rest of the currency basket is relatively neutral to our results. Our underlying effective tax rate for 2024 is now expected to be 19%. All in, we continue to expect comparable earnings per share growth of 4% to 5% versus $2.69 in 2023. There are some considerations to keep in mind. We estimate the ongoing conflict in the Middle East had approximately 1 point of impact on volume growth during the first quarter of 2024. It's unclear how long this impact will last. The cadence of structural impact will be larger in the second and third quarters due to the timing of transaction closing during the first quarter and the seasonality of the businesses we refranchised. Finally, there will be 2 additional days in the fourth quarter. To sum it up, and as James said, the year has started off well. We remain focused on the execution of our all-weather strategy. And thanks to the partnership of our system and the ongoing dedication of our people, we're confident we can create value for our stakeholders and deliver on our guidance for the year. And as we said at CAGNY, we're primed for performance in 2024 and over the long term. With that, operator, we are ready to take questions.","evidence_gemma_new":null,"evidence_llama_3_3":"unit case growth quarter","evidence_qwen_3_30b":"unit case growth first quarter","gemma_new_max":null,"gemma_new_min":null,"llama_3_3_max":0.01,"llama_3_3_min":0.01,"qwen_3_30b_max":0.01,"qwen_3_30b_min":0.01}
{"symbol":"KO","year":2024,"quarter":2,"date":"2024-Q2","chunk_id":3,"sub_chunk_id":0,"centroid_label":"unit case growth","agreed_value":0.02,"count":2,"chunk":"John Murphy: Thank you, James, and good morning, everyone. In the second quarter, we delivered strong results. We grew organic revenues 15%. This consisted of 2% unit case growth. Concentrate sales were ahead of volume by four points, driven primarily by timing of concentrate shipments, and some disruptions in the global supply chain that we partly expect, to reverse next quarter. Our price\/mix growth of 9% in the quarter was primarily driven by two items: one, approximately five points of intense inflationary pricing, across a handful of markets to offset significant currency devaluation. And two, an array of pricing and mix actions across our markets. Excluding the impacts from concentrate shipment timing and pricing from markets with intense inflation. Organic revenue growth during the quarter was at the high end of our long-term growth algorithm. Comparable gross margin was up approximately 200 basis points, driven by underlying expansion, and the benefit from bottler refranchising partially offset by currency headwinds. Comparable operating margin expanded approximately 120 basis points. Comparable operating margin expansion was less than comparable gross margin expansion, due to less benefit from bottler refranchising and greater currency headwinds to comparable operating margin. Putting it all together, second quarter comparable EPS of $0.84 was up 7% year-over-year despite 10% currency headwinds and 2% headwind from bottler refranchising. Free cash flow was approximately $3.3 billion, down approximately $700 million versus the prior year, due to higher tax payments, cycling working capital benefits from the prior year and higher capital expenditures. We continue to take actions, to achieve a fit for purpose balance sheet that, will best support our growth agenda. During the quarter, we raised approximately $4 billion in cash by issuing long-term debt for general corporate purposes. This may include pre-funding upcoming payments related to the IRS tax case and the Fairlife contingent consideration. With respect to our IRS tax case, which we continue to vigorously defend. We're making progress to our next steps, and we expect we will be able to move forward an appeal by the end of the year. Given the continued outperformance of Fairlife, we recorded a charge of $1.3 billion during the quarter. Our estimated final payment related to this acquisition is $5.3 billion, which will be made in 2025. We are encouraged by Fairlife's performance and the value it has created for our company. So far this year, we've realized nearly $3 billion in gross proceeds from bottler refranchising and streamlining our equity investments. We'll continue to prioritize higher growth businesses, and take passive capital off the table. Return on invested capital is 24%, up approximately five points from three years ago. Our balance sheet is strong, as demonstrated by our net debt leverage of 1.5 times EBITDA, which is well below our targeted range of 2 to 2.5 times. We have ample capacity to pursue our capital allocation agenda, which prioritizes investing to drive further growth, continuing to support our dividend and staying dynamic, agile and opportunistic. As James mentioned, we're proactively managing our portfolio to deliver on our commitments. Our updated 2024 guidance reflects the momentum of our business in the first half of the year, and our confidence in our ability to execute on our plans during the second half of this year. We now expect organic revenue growth of 9% to 10%, and comparable currency-neutral earnings per share growth of 13% to 15%. Bottler refranchising is still expected to be a four to five-point headwind, to comparable net revenues. And we now expect a one to two-point headwind, to comparable earnings per share. Based on current rates and our hedge positions, we now anticipate an approximate five to six-point currency headwind, to comparable net revenues and an approximate eight to nine-point currency headwind, to comparable earnings per share for full year 2024. This increase in currency headwind is driven by a small number of intensive treasury markets, while the rest of the currency basket is relatively neutral to our results. All in, we now expect comparable earnings per share growth of 5% to 6% versus $2.69 in 2023. There are some considerations to keep in mind. We expect unit cases and concentrate shipments to be relatively in line with each other for the full year 2024. Please keep in mind there are two extra days in the fourth quarter. Taking everything into consideration, we expect earnings growth during the remainder of 2024, will be weighted towards the fourth quarter. To summarize, we're encouraged by our track record and the underlying momentum of our business. Our system remains incredibly focused and motivated to drive growth. We're continuing to drive quality top line growth, expand margins, grow comparable earnings per share and improve the return profile of our business. And we're confident we will deliver on our guidance, and longer-term objectives. With that, operator, we are ready to take questions.","evidence_gemma_new":"unit case growth","evidence_llama_3_3":"unit case growth second quarter","evidence_qwen_3_30b":null,"gemma_new_max":0.02,"gemma_new_min":0.02,"llama_3_3_max":0.02,"llama_3_3_min":0.02,"qwen_3_30b_max":null,"qwen_3_30b_min":null}
{"symbol":"KO","year":2024,"quarter":4,"date":"2024-Q4","chunk_id":3,"sub_chunk_id":0,"centroid_label":"unit case growth","agreed_value":2.0,"count":2,"chunk":"John Murphy: Thank you, James, and good morning, everyone. We closed the year with strong fourth quarter results. And as James said earlier, we delivered 7% comparable earnings per share growth in 2024 on top of 6% average comparable earnings per share growth over the prior 5 years. During the fourth quarter, we grew organic revenues 14%. Unit case growth was 2%, which is in line with our multiyear trend. Concentrate sales grew 3 points ahead of unit cases driven primarily by 2 additional days in the quarter and the timing of concentrate shipments. Our price\/mix growth of 9% was driven by two items: Approximately 8 points of pricing split somewhat evenly between normal pricing actions across our markets and intense inflationary pricing in a handful of markets experiencing currency devaluations and approximately one point of favorable mix. Excluding the impact of intense inflationary pricing, organic revenue growth was above our long-term growth algorithm. Comparable gross margin was up approximately 160 basis points and comparable operating margin was up approximately 80 basis points. Bottlers refranchising had a greater benefit to comparable gross margin and currency headwinds had a larger impact to comparable operating margin. [indiscernible] altogether, fourth quarter comparable EPS of $0.55 was up 12% year-over-year despite 11% currency headwinds and 4% headwinds from bottlers refranchising. [Audio Gap] In 2024, adjusted free cash flow conversion was 93%, which is within our long-term targeted range. [Audio Gap] at the high end of our long-term growth algorithm. We continue to focus on driving balanced volume and price\/mix and anticipate intense inflationary pricing will play a smaller role in 2025 and will moderate throughout the year. Our refranchise is expected to be a slight headwind to comparable net revenues and comparable earnings per share as we cycle the impact of bottler refranchising in 2024. We'll continue to invest appropriately behind our brands while also driving productivity across all areas of marketing. Next week at CAGNY, we'll discuss further our marketing transformation and enhanced resource allocation capabilities give us confidence in our ability to continue to drive more productivity we expect expense to be elevated versus prior year. We believe the step-up is manageable, and we're not expecting significant leverage or deleverage below the line. Based on current rates and our hedge positions, we anticipate an approximate 3- to 4-point currency headwind to comparable net revenues and an approximate 6 to 7-point currency headwind to comparable earnings per share for full year 2025. Our underlying effective tax rate for 2025 is expected to increase to 20.8% and which is driven primarily by the impact of several countries enacting the global minimum tax regulations. All in, we expect comparable earnings per share growth of 2% to 3% and versus $2.88 in 2024. Excluding the fair life contingent consideration payment, we expect to generate approximately $9.5 billion of free cash flow in 2025 through approximately $11.7 billion in cash from operations, less approximately $2.2 billion in capital investments. Included in this guidance are 2 items to highlight: One, a $1.2 billion transition tax payment, an increase of approximately $240 million versus 2024. This is the final year that we will make a payment related to the Tax Cuts and Jobs Act of 2017. Number two, we expect that part of the timing of working capital initiatives that benefited 2024 free cash flow will reverse and impact 2025 free cash flow. Driven by our underlying cash flow generation, we have flexibility to invest in our business and return capital to shareowners. A significant portion of our expected capital investment is to build capacity for fairlife and to continue to invest in our system in India and Africa. With respect to acquisitions and divestitures, we're making good progress on our agenda. Since 2006, we've added $9 billion brands via acquisition. Importantly, only 3 of these brands were $1 billion-dollar brands at the time of acquisition, demonstrating progress in scaling acquisitions. In 2024, we realized $3.5 billion in gross proceeds from refranchising bottling investments as a percent of consolidated net revenue is 13%, down from 52% in 2015. Return on invested capital is up 6 points at the same time. Related to capital return, we have an unwavering priority to grow our dividend as we've done for 62 consecutive years. Our dividend is supported by our long-term free cash flow generation. In 2024, dividends paid [indiscernible] as a percent, our adjusted free cash flow was 73%. On share repurchases, we've typically repurchased shares to offset any dilution from the exercise of stock options by employees in the given year. Our capital allocation policy prioritizes agility and we're committed to driving the long-term health of our business and creating value for our stakeholders. There are some considerations to keep in mind for 2025. We expect bottler refranchising to have a greater impact to comparable net revenues and comparable earnings per share during the first quarter as we cycle the impact of refranchising the Philippines, which closed during the first quarter of 2024. We expect the productivity benefits that I previously discussed to have a larger impact during the latter half of 2025. Due to our reporting calendar, there will be 2 less days in the first quarter and 1 additional day in the fourth quarter. So in summary, we're successfully executing our all-weather strategy to deliver on our objectives. Our system remains incredibly focused and motivated. We will continue to invest with discipline and believe we're well positioned to drive quality top line growth and deliver continued margin expansion. A hallmark of our company since its inception has been our ability to create enduring value over time, and we expect to continue to do so. With that, operator, we are ready to take questions.","evidence_gemma_new":"unit case growth multiyear trend","evidence_llama_3_3":null,"evidence_qwen_3_30b":"unit case growth 2% multiyear trend","gemma_new_max":2.0,"gemma_new_min":2.0,"llama_3_3_max":null,"llama_3_3_min":null,"qwen_3_30b_max":2.0,"qwen_3_30b_min":2.0}
{"symbol":"KO","year":2023,"quarter":2,"date":"2023-Q2","chunk_id":6,"sub_chunk_id":0,"centroid_label":"volume","agreed_value":5.5,"count":2,"chunk":"James Quincey: Yeah. Good morning, Bryan. Yeah, let me try and unpack that a little bit. I think the headline part of the answer is there's a little more pricing in Q2 and in the downhill than we had expected at the beginning of the year, principally around that basket of countries where inflation is high above 20% and a little more persistent. That's the short answer. The longer version of the answer is, look, we're executing the strategy we've talked about consistently over time and again in CAGNY, the real focus on upping the bar on marketing, upping the bar on RGM, the commercial strategies and the execution of the marketplace. All with the intent about delivering a good strong top line led growth algorithm. And obviously that we've talked historically, that is normal, normal times that 5% to 6% would be split between volume and price on a roughly equal basis. And so what you're seeing in the back half of the year, which I think is important to note, is we're expecting volume to be consistent in the second half with the way it was in the first half, which in the end is running on a trend, if you like, a CAGR versus 2019, similar to what we did last year. So we see, you know, sustained positive volume growth coming out of '22 and we're looking for volume growth in the second half in a very similar way to the first half, whether you're comparing to prior year or to 2019. So we want a business that is growing consumer base for all the right appropriate strategic reasons. Then what's going to happen to revenue in the second half is we're going to see the impact of three buckets of price mix. The first bucket is the carryover of pricing from prior year. Obviously there was more cost inflation last year, but logically that is a set of numbers that is going to tend to zero by the end of December. And so that is going to step down as we go through Q3 and Q4. So bucket one carryover that's going to step down. Bucket two is price increases we've made so far this year that are leaving aside the large inflation countries look much more like a normal year in terms of what we've taken this year, both in terms of timing, number of price increases and relative level of price increases. So we're --","evidence_gemma_new":"volume price","evidence_llama_3_3":null,"evidence_qwen_3_30b":"volume price 5% to 6%","gemma_new_max":5.5,"gemma_new_min":5.5,"llama_3_3_max":null,"llama_3_3_min":null,"qwen_3_30b_max":5.5,"qwen_3_30b_min":5.5}
{"symbol":"KO","year":2023,"quarter":3,"date":"2023-Q3","chunk_id":2,"sub_chunk_id":0,"centroid_label":"volume","agreed_value":0.02,"count":2,"chunk":"James Quincey: Thanks, Robin and good morning, everyone. In the third quarter, we delivered strong top line growth, comparable operating margin expansion and earnings per share growth. Our strategy is working. These results continue our track record of consistent delivery. And given our year-to-date performance, we are raising both our top line and bottom line guidance. This morning, I'll provide a brief update on the global consumer landscape. Then I'll focus much of my time on business performance across the segments and discuss how we've been investing to further strengthen our capabilities to capture longer-term growth opportunities. John will end by discussing financial details for the quarter, our revised guidance for full year 2023 and some early considerations for 2024. The global operating environment is always dynamic and this quarter was no exception. Some markets improved sequentially, while others dealt with a variety of factors ranging from transitory weather conditions, ongoing inflationary pressures, geopolitical tensions and conflicts. We delivered 11% organic revenue growth this quarter driven by positive volume, some pricing actions in the marketplace and carryover pricing coming into the base from last year. Volume grew 2% and sequentially improved each month in the quarter with September being our strongest month. Our year-to-date volume growth remains consistent with underlying performance compared to 2019. And overall, our industry remains vibrant and is expanding and we are executing to capture that growth. During the quarter, we gained volume and value share in both at-home and away-from-home channels. Consumer sentiment continues to vary around the world. In developed markets, consumer spending in agro goods [ph] has held up quite well, however, some consumers feel pressured. We've seen some shift to discount channels and switching to private label brands in a few markets and categories. The intensity of this activity was largely the same across Europe compared to the previous quarter but was less pronounced in the U.S., Australia and Japan. In the developing and emerging markets, the picture is more mixed. We're seeing broadly consumer strength across Latin America, India and in parts of Central and Southeast Asia. On the other hand, consumer confidence in spending has yet to fully recover in Africa and China. Our revenue growth management execution capabilities give us a distinct advantage and we are leveraging these capabilities to ensure we have the right product in the right package in the right channel and at the right price points to meet consumers where they are. Notwithstanding the dynamics in play around the world, we have many levers to pull and continue to deliver through varying market conditions. I'll share some more details from each region. Starting with Asia Pacific; we delivered organic revenue growth but operating income declined primarily as a result of investing ahead of the curve to participate in longer-term opportunities and incurring additional costs from strategic portfolio rationalization. In ASEAN and South Pacific, we grew top line and profit by linking our brands to drinking occasions coupled with strong execution. In Thailand, we launched Coke Kitchen which connected consumers to influencers who shared their favorite recipes with Coca-Cola. We also partnered with food service aggregators to drive combo meals. Campaign attracted nearly 1 million consumers and we significantly increased the attachment rate of our beverages with meals ordered through food service aggregators. In Japan, we're gaining volume and value share year-to-date. We continue to see strong momentum from our Coca-Cola, Georgia Coffee and I LOHAS campaigns and have stepped up execution in vending, e-commerce and community channels. However, in China, volume declined as the sparkling soft drink category is taking longer to recover. Our results were also impacted by some strategic conditions to deprioritize lower profit categories. Our focus is to restore momentum to the sparkling soft drink category and capitalize on revenue growth management and execution opportunities. In India, we delivered double-digit volume and top line growth which resulted in the highest value share gain over the past 3 years. We're winning in the marketplace by generating 2.6 billion transactions at affordable price point and driving availability across rural regions. Across Asia Pacific, as part of our World Without Waste strategy to help drive circular economy for packaging materials, our system launched 100% recycled PET packaging in India, Indonesia and Thailand. Moving on to EMEA; we delivered strong organic revenue and operating income growth. In Africa, macro conditions remain challenging and our business was further impacted by natural disasters in Morocco and Libya. Despite this environment, we drove transaction growth through accelerated refillable PET expansion, digitizing nearly 100,000 outlets and adding 80,000 coolers used to date. In Europe, consumers are still facing pressure and our business was unfavorably impacted by poor weather. Despite these dynamics, we gained value share through strong performances in sparkling soft drinks and tea. We did this by partnering with systems to drive value for key customers and our consumers. We continue to see promising early results for Jack Daniel's and Coca-Cola in Europe. We are learning and expanding in alcoholic drinks, including our recent announcement of our Absolut Vodka & Sprite. And last, in Eurasia and Middle East, we recruited consumers through innovative, occasion-based marketing events like Fanta Fest Turkey which focused on snacking occasions with concerts by prominent local artists. They also launched 100% recycled PET package this summer. In North America, we generated strong organic revenue growth and delivered margin expansion by executing across our total beverage portfolio. We continue to see away-from-home channel outperform at-home channels. Within sparkling soft drink, elasticities are holding up well and we continue to drive quality leadership with Coca-Cola, Sprite and Fanta. For example, our systems stepped up in-store activation on Sprite Lymonade Legacy and with increased displays at point of sale which drove higher household penetration and repeat purchases. Fanta drove nearly 2 points of vale share gain year-to-date through innovation and new graphics, including the latest Halloween iteration of the What the Fanta platform. Outside sparkling, BODYARMOR and Powerade trends are stabilizing. And fairlife, Core Power, smartwater and Gold Peak generated value share gains. And in the U.S., to protect water resources, we renewed a decade-long partnership with the Department of Agriculture to restore and improve water sheds in national forests and grasslands. Water is a critical priority for our system and the communities that we serve. In Latin America, we generated double-digit top line and profit growth by executing on all facets of our strategy which resulted in value share gains in 4 of our top 5 markets. In the fifth market, Mexico, we're seeing improving value share trends over the last few months. We're increasingly linking our brands to consumers' passion points to build deeper connections. In Brazil, through Coke Studio, we partnered with the Town Music Festival, where we hosted 60 hours of concert and engaged with artists and influencers which generated 1 billion impressions and reached nearly 50 million consumers. We continue to drive affordability through refillable packaging of larger PET packages. In developing and emerging markets, refillables are an important tool to eliminate waste and offer products at lower price points. Last, our systems stepped up availability, reflecting over 270,000 coolers year-to-date which increased our share of visible inventory in key areas. Global ventures generated strong overall growth. At Costa, we strengthened our revenue growth management equation while driving transaction growth. This was supported by strong innovation and marketing campaigns such as our global summer of ice, expansion of the refreshment category and the introduction of our personalized pre-drop loyalty activation in U.K. Additionally, innocent gained value share in both the U.K. and France. Finally, Bottling Investments Group grew organic revenue and operating income through expanding affordable immediate consumption entry packs and progressing for strengthening route to market and optimizing trade collections. At the same time, we're working towards decarbonizing our operations in India through using 200 electric vehicles with plans to add more before the end of 2023. Beyond the quarter, we continue to have confidence in the long term. We see momentum continuing across our industry and our system is galvanized more than ever to capture this opportunity. Leveraging data to drive better decision-making is key to improving execution. Our system has collectively invested in digital initiatives to drive on all facets of our strategy. Starting first with marketing and innovation. Our marketing transformation is increasingly making our brands more relevant to consumers. Today, Gen Zs spend 7 to 9 hours per day on screen. However, very little time is spent watching traditional TV. We've been shifting our media spend towards digital. In 2019, digital was less than 30% of our total media spend and year-to-date is over 60%, through digital campaigns which segment the population that's disproportionately reaching consumers where we earn higher return on investments. We've seen tremendous engagement through digital-first campaigns for Coke with meals, Sprite Heat Happens and Fuze Tea's Made of Fusion among others. We're taking bold steps to be at the forefront of both consumer and non-consumer facing generative AI. For example, we launched Create Real Magic which turns consumers into digital creators. We also brought GenAI into our creative process for the award-winning Coca-Cola Masterpiece film and letting the fans the chance to take a piece of this work through the sale of NFTs. Recently, we launched Coke Y3000 which is our eighth iteration in the Coke Creations platform. Coca-Cola Y3000, the world's first futuristic flavor, co-created with AI. The launch has demonstrated strong initial results. On the non-consumer facing side, we're implementing generative AI to improve access to insight, market data, research and trends. Moving on to revenue growth management and integrated execution. As a system, we're accelerating eB2B platforms that allow for better tailoring of product, price and packaging architecture, reducing out of stocks and optimizing placement of physical inventory. Year-to-date, we've connected 6.9 million customers to eB2B platforms. We continue to expand coverage and offer customers personalization at scale. Initial pilots suggest that customers who receive AI-written push notifications have been more likely to purchase recommended SKUs, resulting in incremental retail sales. And we're just scratching the surface of what's possible but we're investing in digital capabilities now to expand our potential down the road. To sum it all up, we're encouraged by our results year-to-date and this is reflected in our updated 2023 guidance. We have many levers to pull and have proven that we can deliver in many types of markets around the world. We continue to win on a local level, maintain flexibility on a global level and reinvest to build our system for the long term. With that, I'll turn the call over to John.","evidence_gemma_new":null,"evidence_llama_3_3":"volume this quarter","evidence_qwen_3_30b":"volume 2% this quarter","gemma_new_max":null,"gemma_new_min":null,"llama_3_3_max":0.02,"llama_3_3_min":0.02,"qwen_3_30b_max":0.02,"qwen_3_30b_min":0.02}
{"symbol":"KO","year":2024,"quarter":1,"date":"2024-Q1","chunk_id":44,"sub_chunk_id":0,"centroid_label":"volume","agreed_value":2.5,"count":2,"chunk":"James Quincey: Sure. Yes, timing differences naturally reverse between concentrate units and unit cases. Partly, it happens when there is a different number of days in the quarter, then we have the -- we use the 445 system for all sorts of reasons. And what that causes sometimes is different numbers of shipping days in quarters. And so you undersell when you got less days, like the first quarter. And of course, in the fourth quarter this year when there's 2 extra days, there'll be way more concentrate units than there were cases, relatively speaking. So over the course of time, these anomalies or differences reverse themselves or average themselves out. And then as regards to the 2% volume, yes, look, I have a very strong view that the -- our overall ambition to see our revenue grow at the top end of the algorithm, I'm leaving aside the intense inflation countries for the sake of the argument at the moment, we want to grow at that 5% to 6% range. And we want that to have a balanced contribution from volume and price\/mix. So implicitly, looking for 2% to 3% on volume. And I think we talked last quarter that in the current circumstances, that's likely to be slightly less volume and slightly more prices, as price inflation normalizes. And so I think that 2% is still pretty good number. It's certainly been the average growth rate in volume. If you take a compound number over the last number of years, you're going to get something like a 2%. So that seems to be the momentum we're driving. And that -- if you strip away the inflation and the weirdness in the first quarter, what you see is, you got that 1% volume, which given the Middle East headwind of 1% and actually recycling the strongest quarter last year, you can say it's a good volume number. It has good underlying price\/mix in the normal countries. So the kind of the normal performance is right at the top end of the algorithm there, and then that feeds its way through to 7% EPS growth. So I think right in there, the main business, notwithstanding the kind of peripheral noise, is humming away right in line with where we said we wanted to be.","evidence_gemma_new":"volume 2% 3%","evidence_llama_3_3":null,"evidence_qwen_3_30b":"looking for volume 2% to 3%","gemma_new_max":2.5,"gemma_new_min":2.5,"llama_3_3_max":null,"llama_3_3_min":null,"qwen_3_30b_max":2.5,"qwen_3_30b_min":2.5}
{"symbol":"KO","year":2024,"quarter":2,"date":"2024-Q2","chunk_id":30,"sub_chunk_id":0,"centroid_label":"volume","agreed_value":2.0,"count":2,"chunk":"James Quincey: Yes, so we as from a strategy perspective, have taken the approach over the last number of years, it cannot say even longer, that it's critically important, particularly when times get tougher to try and keep as many consumers in the franchise as possible, rather than trying to re-recruit them at some later stage. And they're in our focus not just on marketing innovation, but affordability within the price pack architecture. So clearly an objective of ours is not to see negative volumes, and to make sure we keep people in and use all the elements to do that. And so, as you say, we've got 2%. In the corridor, we've got - we've had a run right there. We've talked in the past, it remains true today that the central long-term growth algorithm, we're looking for a revenue of 4% to 6%, and we've set ourselves the ambition of staying in the 5% to 6% range, with a balance of volume and price mix. So that's essentially a way of, you know, if you've split that you're saying 2% to 3% in volume and 2% to 3% in price. We were kind of in that range in the quarter with the 2% volume. So I think in the long run, we'll continue to pursue that. Talked earlier this year that, in the shorter term, it's likely to be slightly more price and slightly less volume, which was kind of exactly what happened in the second quarter. So it would not surprise me, as we go through the rest of the year that that remains true, that we see slightly less volume than the kind of standard algorithm, and slightly more price - as pricing tends towards, inflation tends towards the landing zone. And I think that's likely to be true as we go through - the rest of the summer, hopefully the weather gets a bit better. But we're likely to see that slightly less volume, slightly more price. And probably a repetition of where that volume's coming from in terms of the rest of the year, the positives largely being the developing economies, Latin America, India, Africa, Southeast Asia, and to some extent Japan, and the kind of weighing on it a little, the kind of parts of North America and Europe channel and income specific and some of the disruptions from the Middle East. But net-net, we think we've got a strong strategy that's playing out and is winning. And we're confident that we can drive that to get the balanced algorithm of growth, through the rest of this year, for our guidance and into the future.","evidence_gemma_new":null,"evidence_llama_3_3":"volume second quarter","evidence_qwen_3_30b":"volume 2% volume the second quarter","gemma_new_max":null,"gemma_new_min":null,"llama_3_3_max":2.0,"llama_3_3_min":2.0,"qwen_3_30b_max":2.0,"qwen_3_30b_min":2.0}
{"symbol":"KO","year":2024,"quarter":2,"date":"2024-Q2","chunk_id":30,"sub_chunk_id":0,"centroid_label":"volume","agreed_value":2.5,"count":2,"chunk":"James Quincey: Yes, so we as from a strategy perspective, have taken the approach over the last number of years, it cannot say even longer, that it's critically important, particularly when times get tougher to try and keep as many consumers in the franchise as possible, rather than trying to re-recruit them at some later stage. And they're in our focus not just on marketing innovation, but affordability within the price pack architecture. So clearly an objective of ours is not to see negative volumes, and to make sure we keep people in and use all the elements to do that. And so, as you say, we've got 2%. In the corridor, we've got - we've had a run right there. We've talked in the past, it remains true today that the central long-term growth algorithm, we're looking for a revenue of 4% to 6%, and we've set ourselves the ambition of staying in the 5% to 6% range, with a balance of volume and price mix. So that's essentially a way of, you know, if you've split that you're saying 2% to 3% in volume and 2% to 3% in price. We were kind of in that range in the quarter with the 2% volume. So I think in the long run, we'll continue to pursue that. Talked earlier this year that, in the shorter term, it's likely to be slightly more price and slightly less volume, which was kind of exactly what happened in the second quarter. So it would not surprise me, as we go through the rest of the year that that remains true, that we see slightly less volume than the kind of standard algorithm, and slightly more price - as pricing tends towards, inflation tends towards the landing zone. And I think that's likely to be true as we go through - the rest of the summer, hopefully the weather gets a bit better. But we're likely to see that slightly less volume, slightly more price. And probably a repetition of where that volume's coming from in terms of the rest of the year, the positives largely being the developing economies, Latin America, India, Africa, Southeast Asia, and to some extent Japan, and the kind of weighing on it a little, the kind of parts of North America and Europe channel and income specific and some of the disruptions from the Middle East. But net-net, we think we've got a strong strategy that's playing out and is winning. And we're confident that we can drive that to get the balanced algorithm of growth, through the rest of this year, for our guidance and into the future.","evidence_gemma_new":"volume price","evidence_llama_3_3":null,"evidence_qwen_3_30b":"volume 2% to 3% standard algorithm","gemma_new_max":2.5,"gemma_new_min":2.5,"llama_3_3_max":null,"llama_3_3_min":null,"qwen_3_30b_max":2.5,"qwen_3_30b_min":2.5}
{"symbol":"KO","year":2024,"quarter":4,"date":"2024-Q4","chunk_id":9,"sub_chunk_id":0,"centroid_label":"volume","agreed_value":5.5,"count":2,"chunk":"James Quincey: Look, I think let's start from the top level down on '25. Our long-term algorithm we called out, we want to be at the top end, so 5 to 6 and expect in the long term a balance between volume and price, so I'd say 2 to 3 of each. It seems more likely in '25, there'll be a little more price and a little less volume but there will be volume growth and obviously, there will be price growth. But perhaps a little weighted a little more to price than volume than a long-term year, but still solid continued volume momentum, which has been an enduring feature of what we have pursued over the last number of years, which is not just keeping people in our franchise, but growing our franchise for the long term. And so that's the headline of what we expect to see. And I would say like if you take 2024, where you've got a kind of a headline price\/mix of about 10%, half of that is from these high-inflation countries, which we expect to largely drop out in 2025. Another way of thinking of it is really ex high inflation, you had about 5% price mix in 2024. And you're going to see that continue to moderate as inflation has moderated down to a kind of a slightly lower number in 2025 and largely the dropout of these high-inflation countries in 2025, if that helped give you a factor. And so we feel we've got a level of actual pricing in the marketplace that is proportionate and reasonable relative to inflation and relative to what we can support through the actions we're taking across the whole flywheel from the marketing, the innovation, the execution through affordability and premiumization and all the commercial execution.","evidence_gemma_new":"expect volume price","evidence_llama_3_3":null,"evidence_qwen_3_30b":"long-term 5 to 6 2 to 3","gemma_new_max":5.5,"gemma_new_min":5.5,"llama_3_3_max":null,"llama_3_3_min":null,"qwen_3_30b_max":5.5,"qwen_3_30b_min":5.5}
{"symbol":"KO","year":2023,"quarter":4,"date":"2023-FY","chunk_id":2,"sub_chunk_id":0,"centroid_label":"volume growth","agreed_value":2.0,"count":2,"chunk":"James Quincey: Thanks, Robin. And good morning, everyone. In 2023, we achieved our near-term goals, while also positioning our business for the long-term. Our all-weather strategy delivered 8% comparable earnings per share growth despite greater than expected 7% currency headwinds. Today, we are leveraging our scale globally and winning locally, which gives us confidence that we can deliver on our 2024 guidance. This morning, I'll talk about the global consumer landscape, then I'll highlight how our strategy and enhanced capabilities are making us a more agile and effective organization. And finally, John will discuss our financial results and our 2024 guidance. During the quarter, we benefited from strong performance across many of our markets. However, some were impacted by elevated inflation and others by geopolitical tensions and conflict. We delivered 12% organic revenue growth, which included 2 points of volume growth, continuing a positive volume trend for the year. Throughout, we continue to invest in our business to provide the right portfolio of brands and packages to retain and attract more drinkers. We drove industry growth and delivered value share gains in the quarter and for the full year. We achieved these results by effectively navigating a number of headwinds and capitalizing on tailwinds across our markets. During the quarter, we saw strong consumer demand across Australia, India, Latin America, Japan and South Korea. In North America, consumer spending in aggregate is holding up well. And in Europe, consumers remain cost conscious. In Africa and China, the macro environment remains uncertain. And in the Middle East, tensions have resulted in some shapes in consumer behavior that have had an impact on our business. Another important fact that I highlight is the inflationary pressures, which are moderating or stabilizing across most of our markets. To keep consumers in our franchise, we are leveraging our revenue growth management capabilities to tailor our offerings and price pack architecture to meet consumers' evolving needs. In North America and Europe, while inflation is moderating, the cumulative impact of inflation is pressuring certain consumer segments we're seeking value. Throughout 2023, we increased our affordability offerings and one volume and value share in both regions. In Latin America, despite double digit inflation during the fourth quarter, we grew volume 4% and increased household penetration and basket initiatives. There are a few pockets of the world that are experiencing hyperinflation. John will later speak to how this dynamic is impacting our business. However, I did want to mention that our local franchise operating model allows us to navigate through hyperinflationary environment and then gain an advantage over the long-term. Across our business, we continue to prioritize agility and focus on improving every aspect of how we operate. An important part of this is our marketing transformation. To recruit the next generation of drinkers, our marketing has shifted from a TV centric model to a digital first organization that balances local intimacy, scale and flexibility. Our digital mix has gone from less than 30% in 2019 to approximately 60% of our total media spend. In 2023, we stood up Studio X, the digital ecosystem that brings this altogether. We created physical hubs in each of our operating units to integrate disciplines, standardized data and technology and step change our capabilities. Creative, media, social and production capabilities and now operating at scale connected by our global network structure. In our previous model, it took several months to create a TV ad. Now, we're producing thousands of pieces of digital content that are contextually relevant and measuring these results in real-time. Studio X is driving tangible results. For example, Coke Studio which originated in Pakistan and taps into consumers' passion for music has been scale to our top 40 markets. The campaign uses packaging as digital portals to access real magic experiences, which have generated more than 1.2 billion YouTube views and a 100 million music streams this year, resulting in strong recruitment of Gen Z drinkers. We're engaging differently with consumers and is delivering results. In 2023, according to Cantor, Coca-Cola brand value increased $8 billion. Coke is now the 10th most valuable brand in the world, up seven spots from the prior year. In the US, Sprite was named by Morning Consult as the number one beverage brands for Gen Z drinkers. We were also named one of the top 10 innovative companies in augmented and virtual reality by Fast Company. Our innovation agenda is increasing our competitive advantage across our products, packaging and equipment. Taste is the starting point. Simply put, people want drinks to taste great. To drive superiority across our total beverage portfolio, we're continuing to build capabilities to tap into unique insights in taste and aroma sciences. We're applying digital tools, ingredient processing technology and AI to create bolder and more successful innovations. Coca-Cola Zero Sugar is an ongoing example of how superior taste drives demand, with volume that grew 5% in 2023, leading to continued volume and value share gains. We are applying learnings from this multiyear success and driving taste superiority elsewhere in our sparkling portfolio. In 2023, we launched Sprite and Fanta reformulations in 25 markets, delivering mid-single digit volume growth in those markets and driving overall sparkling flavors value share gains. Outside of our sparkling portfolio, we're dialing up flavor profiles, adding functional benefits and expanding into new categories. In Japan, we relaunched Georgia Coffee, which generated broader customer interest and led to value share gains. In the US, fairlife\u2019s Core Power and nutrition plan of a high protein dairy without compromising taste. In 2023, fairlife grew volume 15%, its 9th consecutive year of double digit volume growth. We're also seeing continued promising results from FUZE Tea across Europe, Jack and Coke in the Philippines, Flashlight in Mexico, among many others. In 2023, innovation contributed to approximately 30% of gross profit growth and our success rates have nearly tripled compared to 2019 levels. Our revenue growth management execution capabilities continue to be distinct advantages. As demonstrated by our ability to deliver volume and transaction growth, despite ongoing inflationary pressures. We're working with our bottling partners to capture every opportunity available to create significant value for consumers and customers. By offering a total beverage portfolio in the right packages and at the right price points, we're driving category expansion and becoming more relevant to more consumers and customers. In North America, we're evolving packaging options across more distribution points, drive affordability and premiumization. On the affordability side, our 1.25 liter PET bottles are now available in 80% of supermarkets and our 16 ounce can distribution increased by 14 points in convenience stores during 2023. We're also focused on premiumization through the expansion of our mini can offerings. During the quarter, we launched 15 pack mini cans in grocery and club channels. In Europe, we're leveraging the same playbook, but adapting it to local needs. In Spain, our 1.25 liter PET package is offered at a compelling price point and it drove 16% volume growth and increased household penetration in 2023. In Italy, Britain and Ireland, we drove premium single serve mini cans, a smaller package offerings to generate positive mix and incremental retail sales. Our franchise system uniquely combines the benefits of scale and knowledge sharing with the know-how needed to execute for customers and win locally in many different operating environments. For example, approximately 70% of purchase decisions are influenced at point of sale, our systems stepped up in-store displays during the quarter which drove incremental retail sales and cross selling opportunities. Putting it all together, we created $15 billion in incremental retail sales for our customers in 2023, more than any other beverage company. This was our sixth year in a row as the leader in value creation. While we're pleased with our progress, we recognize there's still much work to be done to capture the vast opportunities available. Our system is galvanized to move further and faster. Before I hand over to John, I want to acknowledge that none of this could happen without the unwavering dedication of our employees. And so as we turn to 2024, we expect the year will bring new challenges and opportunities. And we'll remain ready to respond through continuing to improve execution of our strategy across our total beverage portfolio. I look forward to sharing more next Tuesday at CAGNY and I encourage everyone to listen in. With that, I will turn the call over to John.","evidence_gemma_new":"volume growth 2023 fourth quarter","evidence_llama_3_3":"volume growth 2023","evidence_qwen_3_30b":null,"gemma_new_max":2.0,"gemma_new_min":2.0,"llama_3_3_max":2.0,"llama_3_3_min":2.0,"qwen_3_30b_max":null,"qwen_3_30b_min":null}
{"symbol":"KO","year":2023,"quarter":1,"date":"2023-Q1","chunk_id":2,"sub_chunk_id":0,"centroid_label":"volume growth","agreed_value":0.03,"count":2,"chunk":"James Quincey: Thanks, Robin, and good morning, everyone. 2023 is off to a good start. We continue to execute well and grow amidst the dynamic macro environment. We like to say we have an all-weather strategy, one that enables us to thrive no matter what's happening in the world. We pursue excellence globally with an eye towards winning locally as a system. And our brand investments continue to create value for our customers and consumers, leading to our ability to drive quality growth for our stakeholders. Today, I'll discuss our first quarter performance and provide some perspective around today's global consumer and macro environment. I'll then reiterate why we are confident in our ability to deliver on our guidance for the full year. And finally, I'll elaborate on how the actions we're taking set us up for success in any environment and how we're driving resilience for our business and continued growth in 2023 and over the long term. John will then discuss our results and go into more detail on the 2023 outlook. In the first quarter, pandemic restrictions in parts of the world relaxed, and many supply chain pressures abated. At the same time, inflation and geopolitical tensions persisted. And new concerns emerged around the stability in the banking sector and the magnitude of the potential squeeze on consumers. In the face of these factors, we continue to generate momentum as investments in our brands got the year off to a positive start. We remain focused on creating value by meeting the needs of our customers and consumers. We delivered 12% organic revenue growth in the quarter. This was primarily driven by pricing actions across markets and revenue growth management initiatives to retain and add consumers. We also delivered volume growth of 3%, which is in line with last year versus 2019. We saw growth across developed as well as developing and emerging markets, and we continue to gain both volume and value share for the quarter, including at home and away from home channels. We're encouraged by this momentum and are operating the business with a focus on growth while closely monitoring macro trends for signs of a slowdown. As we look around the world today, the consumer picture varies across our markets. In Asia Pacific, the reopening of China has led to an increase in consumer activity, but consumption is still recovering to pre-pandemic levels. India's economy remains resilient with a strong job market and robust consumption. In Japan, consumers are feeling inflationary pressure for the first time in many years. In Europe, the recent banking crisis added to last year's energy spike, driving further uncertainty to purchasing behaviors and consumers continue to increasingly seek out affordable and private label options across many FMCG categories. In North America, the picture is a mixed bag with unemployment low, gas prices improved and savings holding up, but inflation and higher mortgage rates are top-of-mind concerns for many consumers. In many developing and emerging markets in Latin America, Africa and the Middle East, consumers continue to face varying levels of inflation and volatility in the macroeconomic conditions. Clearly, there's uncertainty in how the consumer environment may ultimately play out in 2023. But thanks to the hard work of our people and partners, we're a more flexible network enterprise today. And with our enhanced system alignment, we're confident we can win together locally in a wide variety of environments. Let's start with the portfolio. We have a growth portfolio of consumer-centric brands across categories, including [ 26 billion-dollar brands ]. Our networked organization is allowing us to raise the bar of innovation and marketing to leverage our loved brands more effectively in the marketplace. We're keeping our streamlined portfolio of brands relevant with consumers and finding innovative ways to offer beverage choices for every occasion. In Japan, we recently relaunched our Georgia Coffee brand with a fresh new look and a bright proposition to inspire current consumers and expand Georgia's appeal to a broader audience, complementing Costa's premium ready-to-drink offerings in that market. We're expanding our exploration in alcohol ready-to-drink beverages with a keen focus on responsibility. We work with Brown-Forman to roll out Jack and Coke cocktails in the U.S. during the quarter with more markets launching now. It's early days, but the ability to get one of the most popular [indiscernible] in the world in a can is proving to be compelling to retailers and consumers based on preliminary volumes and velocities. We're encouraged by the level of engagement as distribution expands. We're driving bigger and bolder innovations that can leverage consumer insights leading to a higher success rate and enduring growth. In North America, we continue to foster brand love for fairlife, which has grown volume double digits for 8 consecutive years. Fairlife became a $1 billion brand last year, and we're building on the momentum of the brand including the success of co-power with fairlife nutrition plan. Launched with a digital-first campaign in the club channel, fairlife nutrition plan has seen strong consumer interest from those looking for high-protein, low-sugar shake that tastes great and is lactose-free. We're planning to expand the product to more channels and packages in the coming months. We're working with WPP, our global marketing network partner, and increasingly leveraging digital capabilities to engage consumers through passion points, personalized experiences and collaborations. The Coke Studio concept first drove cultural relevance and brand performance in Pakistan, with the latest season streamed over 1 billion times. We scaled the program to 30 markets last year. And in 2023, it will become an always-on platform across the globe. Connecting consumers' love of music to consumption occasions by spotlighting breakthrough talent, Coke Studio provides a portal to live digital experiences and can be activated using QR codes on our packages. Consumers can drink, scan and enjoy their favorite beverage along with music from genres around the world. Working as a network system with our bottlers, we're managing through macroeconomic uncertainty with enhanced capabilities in revenue growth management and integrated execution. We often talk about the many levers of revenue growth management. While the inflationary environment led to proactive pricing increases over the past 18 months, it's important to recognize our RGM capabilities to extend far beyond pricing. At its core, revenue growth management is about consumer-centric segmentation, ensuring we have the right product in the right package in the right channel at the right price point, drive transactions and meet consumers where they are. Affordability and premiumization are key levers to maintain and expand our consumer base, and we continue to balance affordable offerings with compelling premium propositions to ensure we have beverage options across income levels. Affordability is a driver in developing and emerging markets, evidenced by double-digit volume growth in these offerings in Indonesia and Vietnam, helping to drive record sparkling share in Vietnam and driving approximately 3 billion transactions at affordable price points in India this quarter. Premium packages like slim cans and mini cans are seeing strong growth in many markets, including Australia, where mini cans drove 40 million transactions and contributed to share growth in the region. Premiumization also includes [indiscernible] occasions. In addition to alcohol, ready-to-drink beverages, we're also participating more broadly in adult alcohol drinking occasions. In North America, we've expanded our Simply premium juice brand into the mix of segment with Simply mixology in 3 flavors to serve as a cocktail or mocktail. In Europe, we've relaunched our Kinley and Royal Bliss brands as harmonized platforms to participate in the adult mixer segment. For both affordability and premiumization, the value proposition is often messaged at the point of sale, such as the expansion of the value bundle in certain channels in the U.S. and the mini can mini price campaign that drove strong growth in small packages in Japan. RGM, coupled with integrated execution, also drives value for our customers. By providing key insights and offering the right mix of brands, packages, price points and compelling data-driven promotions, we are able to partner with customers that deliver traffic, basket and incidence growth. Latin America is a great example of how this came to life in the first quarter, evidenced by revenue growth ahead of transactions and transaction growth ahead of volume. By working closely with key retailers, our system focused on the availability of cold, single-serve beverages in premium brands such as Schweppes and smartwater. We introduced refillable packages into new channels, all while driving better in-stock levels and higher consumer traffic in-store, owning accolades from customers. Our business has largely recovered from the effects of the pandemic and remains well equipped to navigate the dynamic macro environment and is emerging with even stronger capabilities and system alignment to deliver vibrant long-term growth for many years to come. At the same time, our consumers also care about sustainability. While we strive to grow our business, we also want to be water positive, drive a circular economy for our packaging and grow consumer beverage choices, including low- and no-calorie brands as part of our total beverage strategy. These goals are integral to our business and beneficial for society. Our annual business and sustainability will be released soon, including an integrated section on our World without Waste packaging initiatives. We're proud of what we've accomplished so far, recognize there is still opportunity ahead and continue to lead as well as act collectively with other key stakeholders to drive progress on this agenda. I encourage you to learn more about how we're progressing against our targets across various sustainability pillars and priorities to refresh the world and make a difference. Before I hand over to John, I'd note that it's early in the year, and there's a fair amount of uncertainty around the operating environment ahead. But our first quarter results give us increased visibility to deliver on our full year 2023 guidance. We're executing more efficiently and effectively on a local level, maintaining flexibility on a global level and continuing to reinvest in the business and build the system for the long term. In short, we're expanding the sphere of what we can control. We're well prepared to respond with speed to changing market dynamics as we've demonstrated that we can do. By staying clear on our purpose and remaining consumer-centric, we continue to execute to the sustainable long-term growth. With that, I'll turn the call over to John.","evidence_gemma_new":"volume growth last year versus 2019","evidence_llama_3_3":"volume growth the quarter","evidence_qwen_3_30b":null,"gemma_new_max":0.03,"gemma_new_min":0.03,"llama_3_3_max":0.03,"llama_3_3_min":0.03,"qwen_3_30b_max":null,"qwen_3_30b_min":null}
{"symbol":"KO","year":2023,"quarter":4,"date":"2023-Q4","chunk_id":9,"sub_chunk_id":0,"centroid_label":"volume growth","agreed_value":0.02,"count":2,"chunk":"James Quincey: Sure. Look, I'm trying to justice the various angles that. Let me unpack a little bit 2023 -- the end of 2023 as a way of coming into 2024. In 2023, we had 2% volume growth, that was true in the fourth quarter and it was true through the year. And actually if you take a five year CAGR, we've been running at 2% volume growth for the last five years. So, to start with the volume, there has been strong underlying volume growth in the last quarter, in the last year, in the last five years. So that's there. And that's true because we focused on building momentum in the system around building the consumer franchise. When you look at how that's come along with pricing, obviously there's the pandemic, the ups and downs and inflation. But let's just break apart 2023 and how that then flows into 2024. If you look at the fourth quarter of 2023, it says 9%, yes, it says 9%. As John pointed out, there a couple of points there that's related to the intra year quarter-to-quarter deduction timing, so take off the two and you get a seven. Of the remaining seven, half of it is normal pricing in the 95% of the business, does not hyperinflationary. And the other 3.5% is in the hyperinflationary countries, because the inflation is so high. So really, what have you've got in the fourth quarter. You've got 2% volume, you've got 3.5%, a bit more than 3.5% price -- price mix and that's the call. There you've got something that's running bang in the center of the long-term growth algorithm of five to six on the topline. It was true in the fourth quarter, it's true as the kernel in the whole 2023, actually it's really true across the whole of the last five years. Once you take out some of these inflationary distortions in the selling of the bottling company. But there it is running the last quarter of last year, the last five years. Think about 2024, we're going to go as we've always said, for a balance of volume and price. In that 95% of the business, we're going to see volume growth and we're going to see normalized pricing growth on -- our aim is for the net of the two to be in that top end of the long-term growth algorithm for revenue growth. Yes, there's going to be an overlay of hyperinflation, that's probably more like a couple of points as we think about 2024 on the topline and that's why you get what we called out in terms of the topline growth. But hopefully that unpack a bit of how price mix has got this hyperinflationary distortion, it actually it's also got the selling of the bottlers, if you don't do it on comparable. But really embedded in that six to seven is a keep hitting the long-term growth [algorithm] (ph) on revenue for the kind of the six year. And we feel the momentum we've built with our bottling partners, investing in the marketing, the innovation, the in-store execution. The execution in the marketplace with the RGM strategies across the global profile of geographies gives us strong confidence we will continue with our momentum.","evidence_gemma_new":"volume growth the quarter the year","evidence_llama_3_3":"volume growth the quarter","evidence_qwen_3_30b":null,"gemma_new_max":0.02,"gemma_new_min":0.02,"llama_3_3_max":0.02,"llama_3_3_min":0.02,"qwen_3_30b_max":null,"qwen_3_30b_min":null}
{"symbol":"KO","year":2024,"quarter":4,"date":"2024-Q4","chunk_id":38,"sub_chunk_id":0,"centroid_label":"volume growth","agreed_value":2.5,"count":2,"chunk":"Peter Grom: So James, I was hoping to follow up on your response to Dara's question. And I apologize if I misheard this, but I think you mentioned organic growth to be a bit more weighted to price relative to volume, which isn't entirely surprising. And not to get too granular, but I wasn't sure if you were implying that you were expecting volume growth to kind of fall short of the 2% to 3% growth we typically see or just at the lower end of that range. And I'd just ask that in the kind of 2% unit case volume growth hitting the year. You touched on a lot of these more challenged markets getting better in the quarter. So it would seem that you have some pretty nice momentum exiting the year and 4Q exit rate would be a good place to start. But I'm not sure if there's maybe some offsets or areas of concern that we might not be thinking about.","evidence_gemma_new":"volume growth","evidence_llama_3_3":null,"evidence_qwen_3_30b":"volume growth","gemma_new_max":2.5,"gemma_new_min":2.5,"llama_3_3_max":null,"llama_3_3_min":null,"qwen_3_30b_max":2.5,"qwen_3_30b_min":2.5}
{"symbol":"MSFT","year":2023,"quarter":1,"date":"2023-Q1","chunk_id":2,"sub_chunk_id":0,"centroid_label":"azure ai VAL azure ai customers","agreed_value":8500.0,"count":2,"chunk":"Satya Nadella : Thank you, Brett. To start, I want to outline the principles that are guiding us through these changing economic times. First, we will invest behind categories that will drive the long-term secular trend where digital technology as a percentage of world's GDP will continue to increase. Second, we'll prioritize helping our customers get the most value out of their digital spend, so that they can do more with less. And finally, we will be disciplined in managing our cost structure. With that context, this quarter, the Microsoft Cloud again exceeded $25 billion in quarterly revenue, up 24% and 31% in constant currency. And based on current trends continuing, we expect our broader commercial business to grow at around 20% in constant currency this fiscal year, as we manage through the cyclical trends affecting our consumer business. With that, let me highlight our progress starting with Azure. Moving to the cloud is the best way for organizations to do more with less today. It helps them align their spend with demand and mitigate risk around increasing energy costs and supply chain constraints. We're also seeing more customers turn to us to build and innovate with infrastructure they already have. With Azure Arc, organizations like Wells Fargo can run Azure services, including containerized applications across on-premises, edge and multi-cloud environments. We now have more than 8,500 Arc customers, more than double the number a year ago. We are the platform of choice for customers' SAP workloads in the cloud, companies like [Chobani] (ph), Munich Re, Sodexo, Volvo Cars, all run SAP on Azure. We are the only cloud provider with direct and secure access to Oracle databases running an Oracle Cloud infrastructure, making it possible for companies like FedEx, GE and Marriott to use capabilities from both companies. And with Azure Confidential Computing, we're enabling companies in highly regulated industries, including RBC, to bring their most sensitive applications to the cloud. Just last week, UBS said it will move more than 50% of its applications to Azure. Now to data and AI. With our Microsoft Intelligent Data Platform, we provide a complete data fabric, helping customers cut integration tax associated with bringing together siloed solutions. Customers like Mercedes-Benz are standardizing on our data stack to process and govern massive amounts of data. Cosmos DB is the go-to database powering the world's most demanding workloads at limitless scale. Cosmos DB now supports postscript SQL, making Azure the first cloud provider to offer a database service that supports both relational and no SQL workloads. And in AI, we are turning the world's most advanced models into platforms for customers. Earlier this month, we brought the power of DALL-E to Azure OpenAI service, helping customers like Mattel apply the breakthrough image generation model to commercial use cases for the first time. In Azure machine learning, provides industry-leading ML apps, helping organizations like 3M deploy, manage and govern models. All up, Azure ML revenue has increased more than 100% for four quarters in a row. Now on to developers. We have the most complete platform for developers to build cloud native applications. Four years since our acquisition, GitHub is now at $1 billion in annual recurring revenue. And GitHub's developer first ethos has never been stronger. More than 90 million people now use the service to build software for any cloud on any platform up three times. GitHub advanced security is helping organizations improve their security posture by bringing features directly into the developer's workflow. Toyota North America chose the offering this quarter to help its developers build and secure many of its most critical applications. Now on to Power Platform. We are helping customers save time and money with our end-to-end suite spanning Low-Code\/No-Code tools, robotic process automation, virtual agents and business intelligence. Power BI is the market leader in business intelligence in the cloud and is growing faster than competition, as companies like Walmart standardize on the tool for reporting and analytics. Power Apps is the market leader in Low-Code\/No-Code tools and has nearly 15 million monthly active users, up more than 50% compared to a year ago. Power Automate has more than seven million monthly active users and is being used by companies like Brown-Forman, Komatsu, Mass, T-Mobile to digitize manual business processes and save thousands of hours of employee time. And we're going further with new AI-powered capabilities and power automate that turn natural language into advanced workflows. Now on to Dynamics 365. From customer experience and service to finance and supply chain, we continue to take share across all categories we serve. For example, Lufthansa Cargo chose us to centralize customer information and related shipments. CBRE is optimizing its field service operations, gaining cost efficiencies. Darden is using our solutions to increase both guest frequency and spend at its restaurants. And Tillamook is scaling its growth and improving supply chain visibility. All up more than 400,000 organizations now use our business applications. Now on to Industry Solutions. We are seeing increased adoption of our industry and cross-industry clouds. Bank of Queensland chose our cloud for financial services to deliver new digital experiences for its customers. Our cloud for sustainability is off to a fast start as organizations like Telstra use the solution to track their environmental footprint. New updates provide insights on hard-to-measure Scope 3 carbon emissions, and we are seeing record growth in healthcare, driven, in part, by our Nuance DAX ambient intelligence solutions, which automatically documents patient encounters at the point of care. Physicians tell us DAX dramatically improves their productivity, and it's quickly becoming an on-ramp to our broader healthcare offerings. Now on to new systems of work, Microsoft 365, Teams and Viva uniquely enable employees to thrive in today's digitally connected distributed world of work. Microsoft 365 is the cloud-first platform that supports all the ways people work and every type of worker reducing cost and complexity for IT. The new Microsoft 365 app brings together our productivity apps with third-party content, as well as personalized recommendations. Microsoft Teams is the de facto standard for collaboration and has become essential to how hundreds of millions of people meet, call, chat, collaborate and do business. As we emerge from the pandemic, we are retaining users we have gained and are seeing increased engagement, too. Users interact with Teams 1,500 times per month on average. In a typical day, the average commercial user spends more time in Teams chat than they do in e-mail, and the number of users who use four or more features within Teams increased over 20% year-over-year. Teams is becoming a ubiquitous platform for business process. Monthly active enterprise users running third-party and custom applications within Teams increased nearly 60% year-over-year, and over 55% of our enterprise customers who use Teams today also buy Teams Rooms or Teams Phone. Teams Phone provides the best-in-class calling. PSTN users have grown by double digits for five quarters in a row. We are bringing Teams Rooms to a growing hardware ecosystem, including Cisco's devices and peripherals, which will now run Teams natively. And we are creating a new category with Microsoft Places to help organizations evolve and manage the space for hybrid and in-person work. Just like Outlook calendar orchestrates when people can meet and collaborate, Places will do the same for where. We also announced Teams Premium, addressing enterprise demands for advanced meeting features like additional security options and intelligent meeting recaps. All this innovation is driving growth across Microsoft 365. Leaders in every industry from Fannie Mae and Land O'Lakes to Rabobank continue to turn to our premium E5 offerings for advanced security, compliance, voice and analytics. We've also built a completely new suite for our employee experience platform, Microsoft Viva, which now has more than 20 million monthly active users at companies like Finastra, SES and Unilever. And we are extending Viva to meet role-specific needs. Viva Sales is helping salespeople at companies like Adobe, Crayon and PwC reclaim their time by bringing customer interactions across Teams and Outlook directly into their CRM system. Now on to Windows. Despite the drop in PC shipments during the quarter, Windows continues to see usage growth. All up, there are nearly 20% more monthly active Windows devices than pre-pandemic. And on average, Windows 10 and Windows 11 users are spending 8.5% more time on their PCs than they were 2.5 years ago. And we are seeing larger commercial deployments of Windows 11. Accenture, for example, has deployed Windows 11 to more than 450,000 employees' PCs, up from just 25,000, 7 months ago, and L'Oreal has deployed the operating system to 85,000 employees. Now to security. Security continues to be a top priority for every organization. We're the only company with integrated end-to-end tools spanning security, compliance, identity and device management and privacy across all clouds and platforms. More than 860,000 organizations across every industry from BP and Fuji Film to ING Bank, iHeartMedia and Lumen Technologies now use our security solutions, up 33% year-over-year. They can save up to 60% when they consolidate our security stack, and the number of customers with more than four workloads have increased 50% year-over-year. More organizations are choosing both our XDR and cloud-native SIM to secure their entire digital estate. The number of E5 customers who also purchased Sentinel increased 44% year-over-year. And as threats become more sophisticated, we are innovating to protect customers. New capabilities in Defender help secure the entire DevOps life cycle and manage security posture across clouds. And Entra now provides comprehensive identity governance for both on-premise and cloud-based user directories. Now on to LinkedIn. We once again saw record engagement among our more than 875 million members, with international growth increasing at nearly 2x the pace as in the United States. There are now more than 150 million subscriptions to newsletters on LinkedIn, up 4x year-over-year. New integrations between Viva and LinkedIn Learning helped companies invest in their existing employees by providing access to courses directly in the flow of work. Members added 365 million skills to their profiles over the last 12 months, up 43% year-over-year. And with our acquisition of EduBrite, they will also soon be able to earn professional certificates from trusted partners directly on the platform. We launched the next-generation sales navigator this quarter, helping sellers increase win rates and deal sizes by better understanding and evaluating customer interest. Finally, LinkedIn Marketing Solution continues to provide leading innovation and ROI in B2B digital advertising. More broadly, with Microsoft Advertising, we offer a trusted platform for any marketeer or advertiser looking to innovate. We've expanded our geographies we serve by nearly 4x over the past year. We are seeing record daily usage of Edge, Start and Bing driven by Windows. Edge is the fastest-growing browser on Windows and continues to gain share as people use built-in coupon price comparison features to save money. We surface more than $2 billion in savings to date. And this quarter, we brought our shopping tools to 15 new markets. Users of our Start, personalized content feed are consuming 2x more content compared to a year ago. And we're also expanding our third-party ad inventory. Netflix will launch its first ad-supported subscription plan next month, exclusively powered by our technology and sales. And with PromoteIQ we offer an omni-channel media platform for retailers like the auto group looking to generate additional revenue while maintaining ownership of their own data and customer relationships. Now onto gaming. We are adding new gamers to our ecosystem as we execute on our ambition to reach players wherever and whenever they want on any device. We saw usage growth across all platforms driven by the strength of console. PC Game Pass subscriptions increased 159% year-over-year. And with cloud gaming, we're transforming how games are distributed, played and viewed. More than 20 million people have used the service to stream games to date. And we are adding support for new devices like handhelds from Logitech and Razor as well as Meta Quest. And as we look towards the holidays, we offer the best value in gaming with Game Pass and Xbox Series S, nearly half of the Series S buyers are new to our ecosystem. In closing, in a world facing increasing headwinds, digital technology is the ultimate tailwind. And we're innovating across the entire tech stack to help every organization, while also focusing intensely on our operational excellence and execution discipline. With that, I'll hand it over to Amy.","evidence_gemma_new":"Azure Arc Arc customers a year ago","evidence_llama_3_3":null,"evidence_qwen_3_30b":"Arc customers","gemma_new_max":8500.0,"gemma_new_min":8500.0,"llama_3_3_max":null,"llama_3_3_min":null,"qwen_3_30b_max":8500.0,"qwen_3_30b_min":8500.0}
{"symbol":"MSFT","year":2023,"quarter":3,"date":"2023-Q3","chunk_id":2,"sub_chunk_id":0,"centroid_label":"azure ai VAL azure ai customers","agreed_value":15000.0,"count":3,"chunk":"Satya Nadella: Thank you very much, Brett. The Microsoft Cloud delivered over $28 billion in quarterly revenue, up 22% and 25% in constant currency, demonstrating our continued leadership across the tech stack. We continue to focus on three priorities. First, helping customers use the breadth and depth of the Microsoft Cloud to get the most value out of their digital spend. Second, investing to lead in the new AI wave across our solution areas and expanding our TAM. And third, driving operating leverage, aligning our cost structure with our revenue growth. Now I'll highlight examples of our progress, starting with infrastructure. Azure took share as customers continue to choose our ubiquitous computing fabric from cloud to edge, especially as every application becomes AI-powered. We have the most powerful AI infrastructure and it\u2019s being used by our partner, OpenAI, as well as NVIDIA and leading AI start-ups like Adept and Inflection to train large models. Our Azure OpenAI Service brings together advanced models, including ChatGPT and GPT-4 with the enterprise capabilities of Azure. From Coursera and Grammarly to Mercedes-Benz and Shell, we now have more than 2,500 Azure OpenAI Service customers, up 10x quarter-over-quarter. Just last week, Epic Systems shared that it was using Azure OpenAI Service to integrate the next generation of AI with its industry-leading EHR software. Azure also powers OpenAI API and we are pleased to see brands like Shopify and Snap use the API to integrate OpenAI's models. More broadly, we continue to see the world's largest enterprises migrate key workloads to our cloud. Unilever, for example, went all in on Azure this quarter in one of the largest ever cloud migrations in the consumer goods industry. IKEA Retail, ING Bank, Rabobank, Telstra and Wolverine Worldwide, all use Azure Arc to run Azure services across on-premises, edge and multi-cloud environments. We now have more than 15,000 Azure Arc customers, up over 150% year-over-year. And we are extending our infrastructure to 5G network edge with Azure for Operators. We are the cloud of choice for telcos, and at MWC last month, AT&T, Deutsche Telekom, Singtel and Telefonica all shared how they are using our infrastructure to modernize and monetize their networks. Now on to data. Our Intelligent Data Platform brings together databases, analytics and governance, so organizations can spend more time creating value and less time integrating their data estate. Cosmos DB is the go-to database, powering the world's most demanding workloads at any scale. OpenAI relies on Cosmos DB to dynamically scale their ChatGPT service, one of the fastest-growing consumer apps ever, enabling high reliability and low maintenance. The NBA uses Cosmos DB to ingest more than 10 million data points per game, helping teams optimize their gameplay. And we are taking share with our analytics solutions. Companies like BP, Canadian Tire, Marks & Spencer and T-Mobile all rely on our end-to-end analytics to improve speed to insight. Now on to developers. From Visual Studio to GitHub, we have the most popular tools to help every developer go from idea to code and code to cloud, all while staying in their flow. Today, 76% of the Fortune 500 use GitHub to build, ship and maintain software. And with GitHub Copilot, the first at-scale AI developer tool, we are fundamentally transforming the productivity of every developer from novices to experts. In three months since we made Copilot for Business broadly available, over 10,000 organizations have signed up, including the likes of Coca-Cola and GM as well as Duolingo and Mercado Libre, all of which credit Copilot with increasing the speed for their developers. We're also bringing next-generation AI to Power Platform so anyone can automate workflows, create apps or web pages, build virtual agents and analyze data using only natural language. More than 36,000 organizations have already used existing AI-powered capabilities in Power Platform. And with our new Copilot in Power Apps, we are extending these capabilities to end users who can interact with any app through conversation instead of clicks. All up, we now have nearly 33 million monthly active users of Power Platform, up nearly 50% year-over-year. Now on to business applications. From customer experience and service to finance and supply chain, we continue to take share across all categories we serve as organizations like Asahi, C.H. Robinson, E.ON, Franklin Templeton, choose our AI-powered business applications to automate, simulate and predict every business process and function. And we are going further with Dynamics 365 Copilot, which works across CRM and ERP systems to bring the next generation of AI to employees in every job function, reducing burdensome tasks like manual data entry, content generation and notetaking. Now on to our industry and cross-industry solutions. Our Cloud for Sustainability is seeing strong adoption from companies in every industry, including BBC, Nissan and TCL as they deliver on their respective environmental commitments. Our Cloud for Healthcare was front and center at HIMSS last week as we expanded our offerings for payors and added new AI-powered capabilities for providers. We showcased the first fully AI-automated clinical documentation application, Nuance DAX Express, which will bring GPT-4 to more than 550,000 existing users of Dragon Medical. And at Hannover Messe manufacturing trade show, Siemens shared how it will use a Teams app integrated with Azure OpenAI Service to optimize factory workflows. Now on to future of work. Microsoft 365 Copilot combines next-generation AI with business data in the Microsoft Graph and Microsoft 365 applications, removing the drudgery and unleashing the creativity of work. Copilot works alongside users embedded in the Microsoft 365 applications millions use every day, and it also powers Business Chat, which uses natural language to surface information and insights based on business content and context. We've been encouraged by early feedback and look forward to bringing these experiences to more users in the coming months. Teams usage is at an all-time high and surpassed 300 million monthly active users this quarter, and we once again took share across every category from collaboration to chat to meetings to calling as we add value for existing customers and win new ones like ABN AMRO, Jaguar Land Rover, Mattress Firm, Unisys and Vodafone. We announced a new version of Teams that delivers up to 2 times faster performance while using 50% less memory so customers can collaborate more efficiently and prepare for experiences like Copilot. Teams is also expanding our TAM. Nearly 60% of our enterprise Teams customers buy Teams Phone, Rooms or Premium. Teams Phone is the undisputed market leader in cloud calling, helping our customers reduce cost with a three year ROI of over 140%. Teams Rooms revenue more than doubled year-over-year and Teams Premium meets enterprise demand for AI-powered features like intelligent recaps. Now generally available, it's one of our fastest-growing Modern Work products ever with thousands of paid customers just two months in. With Microsoft Viva, we have created a completely new suite for employee experience. Viva brings together goals, communications, learning, workplace analytics and employee feedback. Across industries, companies like Dell, Mastercard and SES are using Viva to help their employees thrive. Just last week, we announced Copilot for Viva, offering leaders a new way to build high-performance teams by prioritizing both productivity and employee engagement. And with Viva Sales, we have extended the platform to specific job functions, helping sellers apply large language models to their CRM and Microsoft 365 data so that they can automatically generate content like customer mails. All this innovation is driving growth across Microsoft 365, Ferrovial, Goldman Sachs, Novo Nordisk and Rogers all chose E5 to empower their employees with our best-in-class productivity apps along with advanced security, compliance, voice and analytics. Now on to Windows. While the PC market continues to face headwinds, we again saw record monthly active Windows devices and higher usage compared to pre-pandemic. We're also seeing accelerated growth in Windows 11 commercial deployments. Over 90% of the Fortune 500 are currently trialing or have deployed Windows 11. And with Windows 365 and Azure Virtual Desktop, we continue to transform how our employees at companies like Mazda and Nationwide access Windows. All up, over one-third of our enterprise customer base has purchased cloud-delivered Windows to-date. And new Windows 365 Frontline extends the power and security of Cloud PCs to shift workers for the first time. Now on to security. Our comprehensive AI-powered solutions spanning all clouds and all platforms give the agility advantage back to defenders. Among analysts, we are the leader in more categories than any other provider. And we once again took share across all major categories we serve and we continue to introduce new products and functionality to further protect customers. With Security Copilot, we are combining large language models with a domain-specific model informed by our threat intelligence and 65 trillion daily security signals to transform every aspect of the SOC productivity. And we also added new governance controls and policy protections to better secure identities along with resources they access. Nearly 720,000 organizations now use Azure Active Directory, up 33% year-over-year. And all up, nearly 600,000 customers now have four or more security workloads, up 35% year-over-year, underscoring our end-to-end differentiation. EY and Qualcomm, for example, both chose our full security stack to ensure the highest levels of protection and visibility across their organizations. Now on to LinkedIn. We once again saw record engagement as more than 930 million members turn to the professional social network to connect, learn, sell and get hired. Member growth accelerated for the seventh consecutive quarter as we expanded to new audiences. We now have 100 million members in India, up 19%. And as Gen Z enters the workforce, we saw 73% year-over-year increase in the number of student sign-ups. In this persistently tight labor market, LinkedIn Talent Solutions continues to help hirers connect to job seekers and professionals to build the skills they need to access opportunity. Our hiring business took share for the third consecutive quarter. The excitement around AI is creating new opportunities across every function from marketing, sales and finance to software development and security. LinkedIn is increasingly where people are going to learn, discuss and up-level their skills with more than 100 AI courses. And we have introduced new AI-powered features, including writing suggestions for member profiles and job descriptions and collaborative articles. Finally, LinkedIn Marketing Solutions continues to be a leader in B2B digital advertising, helping companies deliver the right message to the right audience on a safe, trusted platform. More broadly, we continue to expand our opportunity in advertising. Our exclusive partnership with Netflix brings differentiated premium video content to our ad network, and our new Copilot for the web is reshaping daily search and web habits. Two months since the launch of new Bing and Edge, we are very encouraged by user feedback and usage patterns. All up, Bing has more than 100 million daily active users. We are winning new customers on Windows and mobile. Daily installs of the Bing mobile app have grown 4 times since launch. We are making progress in share gains. Edge took share for the eighth consecutive quarter and Bing once again grew share in the United States. We continue to innovate with first-of-their-kind AI-powered features, including the ability to set the tone of chat and create images from text prompts powered by DALL-E. Over 200 million images have been created to date and we see that when people use these new AI features their engagement with Bing and Edge goes up. As we look towards a future where chat becomes a new way for people to seek information, consumers have real choice in business model and modalities with Azure-powered chat entry points across Bing, Edge, Windows and OpenAI\u2019s ChatGPT. We look forward to continuing this journey in what is a generational shift in the largest software category, search. Now on to gaming. We are rapidly executing on our ambition to be the first choice for people to play great games whenever, however and wherever they want. We set third quarter records for monthly active users and monthly active devices. Across our content & services business, we are delivering on our commitment to offer gamers more ways to experience the games they love. Our revenue from subscriptions reached nearly $1 billion this quarter. This quarter, we also brought PC Game Pass to 40 new countries, nearly doubling the number of markets we are available. Great content remains the flywheel behind our growth. We have now surpassed 500 million lifetime unique users across our first-party titles. And I\u2019ve never been more excited about our pipeline of games, including the fourth quarter launches of Minecraft Legends and Redfall. In closing, we are focused on continuing to raise the bar on our operational excellence and performance as we innovate to help our customers maximize the value of their existing technology investments and thrive in the new era of AI. In a few weeks times, we'll hold our Build conference, and we will share how we are building the most powerful AI platform for developers and I encourage you to tune in. I could not be more energized about the opportunities ahead. And with that, let me turn it over to Amy.","evidence_gemma_new":"Azure Arc customers year-over-year","evidence_llama_3_3":"Azure Arc customers 15,000 year-over-year","evidence_qwen_3_30b":"Azure Arc customers year-over-year","gemma_new_max":15000.0,"gemma_new_min":15000.0,"llama_3_3_max":15000.0,"llama_3_3_min":15000.0,"qwen_3_30b_max":15000.0,"qwen_3_30b_min":15000.0}
{"symbol":"MSFT","year":2023,"quarter":4,"date":"2023-Q4","chunk_id":2,"sub_chunk_id":0,"centroid_label":"azure ai VAL azure ai customers","agreed_value":18000.0,"count":2,"chunk":"Satya Nadella: Thank you very much, Brett. We had a solid close to our fiscal year. The Microsoft Cloud surpassed $110 billion in annual revenue, up 27% in constant currency, with Azure all-up accounting for more than 50% of the total for the first time. Every customer I speak with is asking not only how, but how fast they can apply next-generation AI to address the biggest opportunities and challenges they face, and to do so safely and responsibly. To that end, we remain focused on 3 key priorities: first, helping customers use the breadth and depth of Microsoft Cloud to get the most value on to their spend; second, investing to lead in the new AI platform shift by infusing AI across every layer of the tech stack; and third, driving operating leverage. Now I'll highlight examples of our progress, starting with infrastructure. Azure continues to take share as customers migrate their existing workloads and invest in new ones. We continue to see more cloud migrations, as it remains early when it comes to long-term cloud opportunity. We are also seeing increasing momentum with Azure Arc, which now has 18,000 customers, up 150% year-over-year, including Carnival Corp., Domino's, Thermo Fisher. And Azure AI is ushering in new born-in-the-cloud AI-first workloads, with the best selection of frontier and open models, including Meta's recent announcements supporting Llama on Azure and Windows, as well as OpenAI. We have great momentum across Azure OpenAI Service. More than 11,000 organizations across industries, including IKEA, Volvo Group, Zurich Insurance, as well as digital natives like Flipkart, Humane, Kahoot, Miro, Typeface, use the service. That's nearly 100 new customers added every day this quarter. Mercedes-Benz, for example, is bringing ChatGPT via Azure OpenAI to more than 900,000 vehicles in the United States, making its in-car voice assistant more intuitive. And Moody's built its own internal copilot to improve productivity of its 14,000 employees. We're also partnering broadly to scale this next generation of AI to more customers. Snowflake, for example, will increase its Azure spend as it builds new integrations with Azure OpenAI. And KPMG has announced a multibillion-dollar commitment to our cloud and AI services to transform professional services. Now on to data. Every AI app starts with data, and having a comprehensive data and analytics platform is more important than ever. Our intelligent data platform brings together operational databases, analytics and governance so organizations can spend more time creating value and less time integrating their data estate. We introduced Microsoft Fabric this quarter, which unifies compute storage and governance with a disruptive business model. One month in, we are encouraged by early interest in usage. Over 8,000 customers have signed up to trial the service and are actively using it, and over 50% are using 4 or more workloads. All-up, we once again took share with our analytics solutions with customers like Bridgestone, Chevron and Equinor turning to our stack. Now on to developers. New Azure AI Studio is becoming the tool of choice for AI development in this new era, helping organizations ground, fine-tune, evaluate and deploy models, and do so responsibly. VS Code and GitHub Copilot are category-leading products when it comes to how developers code every day. Nearly 90% of GitHub Copilot sign-ups are self-service, indicating strong organic interest and pull-through. More than 27,000 organizations, up 2x quarter-over-quarter, have chosen GitHub Copilot for Business to increase the productivity of their developers, including Airbnb, Dell and Scandinavian Airlines. We're also applying AI across low-code, no-code tool chain to help domain experts automate workflows, create apps and web pages, build virtual agents, or analyze data using just natural language. Copilot in Power BI combines the power of large language models with an organization's data to generate insights faster, and Copilot in Power Pages makes it easier to create secure low-code business websites. One of our tools that's really taken off is Copilot in Power Virtual Agents, which is delivering one of the biggest benefits of this new area of AI, helping customer service agents be significantly more productive. HP and Virgin Money, for example, have both built custom chatbots with Copilot and Power Virtual Agents that were trained to answer complex customer inquiries. All-up, more than 63,000 organizations have used AI-powered capabilities in Power Platform, up 75% quarter-over-quarter. Finally, Power Automate now has 10 million monthly active users at companies like Jaguar Land Rover, Repsol, Rolls-Royce, up 55% year-over-year. And we're going further with new process mining capabilities in Power Automate, which are helping organizations optimize business processes and, in turn, build their AI advantage. Now on to business applications. We are taking share in every category as we help organizations across the private and public sector from Avis to Albertsons to Breville to Equinox and the U.S. Department of Veterans Affairs transform their mission-critical business processes. All-up, Dynamics surpassed $5 billion in revenue over the past fiscal year with our customer experience, service and finance and supply chain businesses all surpassing $1 billion in annual sales. This quarter, we brought Dynamics 365 Copilots to our ERP portfolio, including finance, project operations and supply management. And with our new Microsoft Sales Copilot, sellers can ground their customer interactions with data from CRM systems, including both Salesforce and Dynamics to personalize customer interactions and close more deals. Now on to our industry and cross-industry clouds. Our Microsoft Cloud for Sustainability is helping customers like Costco, Land O'Lakes and REI take action to meet their environmental goals. And in health care, hundreds of organizations are using our Nuance DAX ambient intelligence solution to automatically document patient encounters at the point of care. This quarter, we expanded our collaboration with Epic to integrate Nuance DAX Express directly into their industry-leading EHR system. Now on to future of work. Across industries, customers like Ahold Delhaize, Deutsche Bank, Novartis, Siemens, Wells Fargo are choosing Microsoft 365 premium offerings for differentiated security, compliance, voice and analytics value. And 4 months ago, we introduced a new pillar of customer value with Microsoft 365 Copilot. We are now rolling out Microsoft 365 Copilot to 600 paid customers through our early access program, and feedback from organizations like Emirates NBD, General Motors, Goodyear and Lumen is that it's a game changer for employee productivity. We continue to build momentum in Microsoft Teams across collaboration, chat, meetings and calling. We now have more than 1,900 apps in Teams app store. And companies in every industry, from British Airways, to Dentsu, to Eli Lilly and Manulife, have built over 145,000 custom line of business apps, bringing business process directly into the flow of work. Five months in, Teams Premium has already surpassed 600,000 seats as companies like BNY Mellon, Clifford Chance, PepsiCo and Starbucks chose the add-on for advanced features like end-to-end encryption and real-time translation. Teams Phone is the market leader in cloud calling with more than 17 million PSTN users, up 45% year-over-year. Teams Room is used by more than 70% of the Fortune 500, including L'Oreal, United Airlines and U.S. Bank, and revenue more than doubled year-over-year this quarter. And with Microsoft Viva, we are creating a new market category for employee experience. Viva now has 35 million monthly active users as companies like CBRE, Fujitsu and Unisys turn to the platform to build data-driven, high-performance organizations. Now on to Windows. The number of devices running Windows 11 has more than doubled in the last year, and we are seeing continued growth in Windows 11 commercial deployments worldwide by companies like AT&T, Krones and Westpac. We are also transforming how Windows is experienced and managed for enterprise customers with Azure Virtual Desktop and Windows 365, which together surpassed $1 billion in revenue for the first time over the past 12 months. Enbridge, Eurowings, Marriott International and TD Bank Group, for example, all chose cloud-delivered Windows this quarter. Windows 11 is also rapidly becoming a powerful new canvas in this new era of AI. We introduced Windows Copilot this quarter, helping every Windows 11 user become a power user with just natural language and are excited to put it in the hands of more people in the coming months. Now on to security. More than 1 million organizations now count on our comprehensive AI-powered solutions to protect their digital estate across cloud and endpoint platforms, up 26% year-over-year. More than 60% including leading enterprises like ABN AMRO, Dow and Heineken use 4 or more of our security products, up 33% year-over-year, underscoring our end-to-end differentiation. And we once again took share across all major categories we serve as we innovate to protect customers. In identity, Microsoft Entra ID has more than 610 million monthly active users, and we are adding SSE to our Entra product family to complement our leading identity solution and secure access to any app or resource from anywhere. Finally, our Security Copilot, the first product to apply this next generation of AI to SecOps will be available to customers via paid early access program this fall. Now on to LinkedIn. LinkedIn's revenue surpassed $15 billion for the first time this fiscal year, and membership growth has now accelerated for 8 quarters in a row, a testament to how mission-critical the platform has become to help more than 950 million members connect, learn, sell and get hired. Our Talent Solutions business surpassed $7 billion in revenue for the first time over the past 12 months, and our hiring business took share for the fourth consecutive quarter. We continue to use AI to help our members and customers connect to opportunities and tap into experiences of experts on the platform. Our AI-powered collaborative articles are now the fastest-growing traffic driver in LinkedIn. And finally, we are helping LinkedIn stay trusted and authentic. More than 7 million members have verified who they are or where they work, many using new integrations with Microsoft Entra as well as CLEAR and Hyperverge. Now on to search, advertising and news. While it's early in our journey, we are reshaping daily search and web habits with our Copilot for the web. This quarter, we introduced new AI-powered features, including multimodal capabilities with visual search and Bing Chat. We are expanding to businesses with Bing Chat Enterprise, which offers commercial data protection, providing an easy on-ramp for any organization looking to get the benefit of this next generation of AI today. Bing is also the default search experience for OpenAI's ChatGPT, bringing timelier answers with links to our reputable sources to ChatGPT users. To date, Bing users have engaged in more than 1 billion chats and created more than 750 million images with Bing Image Creator, and Microsoft Edge took share for the ninth consecutive quarter. More broadly, we are growing our ad network, which is now available in 187 markets spanning search, display, native, retail, media, video and connected TV. Now on to gaming. Last week, we extended our Activision Blizzard merger agreement deadline to October. We continue to work through the regulatory approval process and remain confident about getting the deal done. We are committed to bringing more games to more players everywhere. Great content is key to our approach, and our pipeline has never been stronger. We announced our most ambitious lineup of games ever at our showcase last month, including 21 titles that will be available via Xbox Game Pass. And we're looking forward to the release of Starfield this fall, Bethesda's first new universe in 25 years. All-up, we set new fourth quarter highs for monthly active users, driven by strength off-console, as well as monthly active devices. And we saw record fourth quarter engagement across Game Pass, with hours played up 22% year-over-year. And just last week, we announced Game Pass Core, bringing together online play from Xbox Live and content from Game Pass into a single offering. In closing, I'm energized about the opportunities ahead. We continue to innovate across the tech stack to help our customers thrive in the new era of AI. And with that, let me turn it over to Amy.","evidence_gemma_new":null,"evidence_llama_3_3":"Azure Arc customers","evidence_qwen_3_30b":"Azure Arc 18,000 customers year-over-year","gemma_new_max":null,"gemma_new_min":null,"llama_3_3_max":18000.0,"llama_3_3_min":18000.0,"qwen_3_30b_max":18000.0,"qwen_3_30b_min":18000.0}
{"symbol":"MSFT","year":2024,"quarter":1,"date":"2024-Q1","chunk_id":2,"sub_chunk_id":0,"centroid_label":"azure ai VAL azure ai customers","agreed_value":21000.0,"count":2,"chunk":"Satya Nadella: Thank you, Brett. We are off to a strong start to the fiscal year, driven by the continued strength in Microsoft Cloud, which surpassed $31.8 billion in quarterly revenue, up 24%. With Copilots, we are making the age of AI real for people and businesses everywhere. We are rapidly infusing AI across every layer of the tech stack, and for every role and business process to drive productivity gains for our customers. Now I'll highlight examples of our progress starting with infrastructure. Azure again took share as organizations bring their workloads to our cloud. We have the most comprehensive cloud footprint with more than 60 data center regions worldwide, as well as, the best AI infrastructure for both training and inference. And we also have our AI services deployed in more regions, than any other cloud provider. This quarter, we announced the general availability of our next-generation H100 Virtual Machines. Azure AI provides access to best-in-class frontier models from OpenAI and open-source models, including our own, as well as from Meta and Hugging Face, which customers can use to build their own AI apps while meeting specific cost latency, and performance needs. Because of our overall differentiation more than 18,000 organizations now use Azure OpenAI services, including new to Azure customers. And we are expanding our reach with digital-first companies with OpenAI APIs as leading AI start-ups use OpenAI to power their AI solutions, therefore, making them Azure customers as well. We continue to see more cloud migrations with Azure Arc. We're meeting customers where they are, helping them run apps across on-prem edge and multi-cloud environments. We now have 21,000 Arc customers up 140% year-over-year. We are the only other cloud provider to run Oracle's database services, making it simpler for customers to migrate their on-prem Oracle databases to our cloud. Customers like PepsiCo and Vodafone will have access to a seamless fully integrated experience for deploying, managing, and using Oracle database instances on Azure. And we are the cloud of choice for customers' SAP workloads too. Companies like Brother Industries, Hanes, ZEISS, and ZF Group all run SAP on Azure. Now on to data, in the age of Copilots, organizations are looking to consolidate their data estate, that's why with our Microsoft Intelligent Data Platform, we are bringing together operational data stores, analytics, and governance. More than 73% of the Fortune 1000 use three or more of our data solutions today. And with Microsoft Fabric, we are unifying compute, storage, and governance into one end-to-end analytical solution with an all-inclusive business model. More than 16,000 customers are actively using Fabric, including over 50% of the Fortune 500. Now on to developers. With GitHub Copilot, we are increasing developer productivity by up to 55%, while helping them stay in the flow and bringing the joy back to coding. We have over 1 million paid Copilot users and more than 37,000 organizations have subscribed to Copilot for business, up 40% quarter-over-quarter with significant traction outside the United States. This quarter we added new capabilities with GitHub Copilot Chat, which are already being used by both digital natives like Shopify, as well as, leading enterprises like Maersk and PwC to supercharge the productivity of their software developers. All up, the number of developers using GitHub has increased 4x since our acquisition five years ago. We've also brought Copilot to Power Platform, enabling anyone to use natural language to create apps, build virtual agents and analyze data. More than 126,000 organizations, including 3M, Equinor, Lumen Technologies, Nationwide, PG&E, and Toyota have all used Copilot in Power Platform to date. EY for example has enabled Copilot for all 170,000 plus Power Platform users at the company. And this quarter we added new Copilot capabilities to Power Pages making it possible to build a data-driven website using just a few sentences or clicks. Finally, Power Apps remains the market leader and low-code no-code development, now with 20 million monthly active users, up 40% year-over-year. Now on to business applications, all-up Dynamics 365 took share for the 10th consecutive quarter. We're using this AI inflection point to redefine our role in business applications. We are becoming the Copilot-led business process transformation layer on top of existing CRM systems like Salesforce. For example, our Sales Copilot help sellers that more than 15,000 organizations including Rockwell Automation, Sandvik Coromant, Securitas, and Teleperformance, personalize customer interactions based on data from third-party CRMs. We're also bringing Copilot to Dynamics 365 to help with everything from suggested actions and content ideas, to faster access to valuable business data. And this quarter, we introduced Copilot in Dynamics 365 Field Service, to help streamline frontline tasks. Now on to industry and cross-industry clouds. In healthcare, our Dragon Ambient eXperience solution helps clinicians automatically document patient interactions at the point of care. It's been used across more than 10 million interactions to date. And with DAX Copilot, we are applying generative AI models to draft high-quality clinical notes in seconds, increasing physician productivity and reducing burnout. For example, Atrium Health, a leading provider in Southeast United States credits DAX Copilot with helping its physicians each save up to 40 minutes per day in documentation time. We are also introducing healthcare data solutions in Microsoft Fabric, enabling providers like Northwestern Medicine and SingHealth to unify health data in a secure, compliant way. And with our Microsoft Cloud for sovereignty, which will become generally available by the end of the calendar year, we offer industry-leading data sovereignty and encryption controls, meeting the specific needs of public sector customers around the world. Now on to the future of work. Copilot is your everyday AI assistant, helping you be more creative in Word, more analytical in Excel, more expressive in PowerPoint, more productive in Outlook, and more collaborative in Teams. Tens of thousands of employees at customers like Bayer, KPMG, Mayo Clinic, Suncorp, and Visa, including 40% of the Fortune 100, are using Copilot as part of our early access program. Customers tell us that once they use Copilot, they can't imagine work without it and we are excited to make it generally available for enterprise customers next week. This quarter, we also introduced a new hero experience in Copilot, helping employees tap into their entire universe of work, data, and knowledge using chat (ph). And the new Copilot Lab helps employees build new work habits for this era of AI, by helping them turn good prompts into great ones. When it comes to Teams, usage continues to grow with more than 320 million monthly active users, making Teams the place to work across chat, collaboration, meetings, and calling. This quarter, we introduced a new version of Teams that is up to 2 times faster, while using 50% less memory and includes seamless cross-tenant communications and collaboration. We've seen nine consecutive quarters of triple-digit revenue growth for Teams Rooms, and more than 10,000 paid customers now use Teams Premium. Teams has also become a multiplayer canvas for business process. There are more than 2,000 apps in Teams Store, and collaborative apps from Adobe, Atlassian and Workday, each exceeded 1 million monthly active users on Teams. And with Viva, we have created a new market category for employee experience, helping companies like Dell, Lloyds Banking Group, and PayPal build high-performance organizations. With skills in Viva, we're bringing together information from Microsoft 365 and LinkedIn to help employers understand workforce gaps, and suggest personalized learning content to address it, all in the flow of work. All up, we continue to see more organizations choose Microsoft 365, and companies across the private and public sectors including Cerberus, Chanel, and DXC Technology, all rely on our Premium E5 offerings for advanced security compliance, voice, and analytics. Now on to Windows, the PC market unit volumes were at roughly pre-pandemic levels and we continue to innovate across Windows, adding differentiated AI-powered experiences to the operating system. We rolled out the biggest update to Windows 11 ever adding 150 new features including new AI-powered experiences in apps, like, Clipchamp, Paint, and Photos, and we introduced Copilot in Windows, the Everyday AI companion, which incorporates the context to the web, your work data and what you are doing on the PC to provide better assistance. We are seeing accelerated Windows 11 deployments worldwide from companies like BP, Eurowings, Kantar, and RBC. Finally, with Windows 365 Boot and Switch, we're making it easier than ever for employees at companies like Crocs, Hamburg Commercial Bank, the ING Bank to get a personalized Windows 365 Cloud PC with Copilot on any device. Now on to security. The speed, scale, and sophistication of cyberattacks today is unparalleled and security is the number one priority for CIOs worldwide. We see high-demand for Security Copilot, the industry's first and most advanced generative AI product, which is now seamlessly integrated with Microsoft 365 Defender. Dozens of organizations including Bridgewater, Fidelity National Financial, and Government of Alberta have been using Copilot in Preview, and early feedback has been positive. And we look forward to bringing Copilot to hundreds of organizations in the coming months as part of the new early access program, so they can improve the productivity of their own, security operation centers and stop threats at machine speeds. More broadly, we continue to take share across all major categories we serve, and our SIEM, Microsoft Sentinel now has more than 25,000 customers in revenue, surpassed $1 billion annual run-rate, and customers in every industry like Booz Allen Hamilton, Grant Thornton and MetLife use our end-to-end solutions to protect their environments. Now on to LinkedIn. We are now applying this new generation of AI to transform how the 985 million members learn, sell and get hired. Membership growth has now accelerated each quarter for over two years in a row. This quarter, we introduced new AI-driven features across all of our businesses, including our learning coach that gives members personalized content guidelines, and tools to help employers find qualified candidates and sellers and marketers attract buyers in a single step. Since introducing AI-assisted messages for recruiters five months ago, three-fourths of them say, it saved them time. And we have seen a nearly 80% increase in members watching AI-related learning courses this quarter. More broadly, we continue to see record engagement and knowledge sharing on the platform. We now have more than 450 million newsletter subscriptions globally, up 3x year-over-year. Premium subscription sign-ups were up 55% year-over-year and our hiring business took share for the fifth consecutive quarter. Now on to search, advertising, and news. With our Copilot for the Web, we are redefining how people use the Internet to search and create. Bing users have engaged in more than 1.9 billion chats, and Microsoft Edge has now gained share for 10 consecutive quarters. This quarter, we introduced new personalized answers, as well as, support for DALL-E 3, helping people get more relevant answers and to create incredibly realistic images with more than 1.8 billion images have been created to-date. And with our Copilot and Shopping, people can find more tailored recommendations and better deals. We're also expanding to new endpoints, bringing Bing to Meta's AI chat experience in order to provide more up-to-date answers, as well as access to real-time search information. Finally, we are integrating this new generation of AI directly into our ad platforms to more effectively connect marketeers to customer intent in chat experiences, both from us as well as customers like Axel Springer and Snap. Now on to gaming. We were delighted to close our acquisition of Activision Blizzard King earlier this month. Together, we will advance our goal of bringing great games to players everywhere on any endpoint. Already with Game Pass, we're redefining how games are distributed, played, and discovered. We set a record for hours played per subscriber this quarter. We released Starfield this quarter to broader acclaim, more than 11 million people have played the game to date. Nearly half of the hours played have been on PC and on launch day, we set a record for the most Game Pass subscriptions added on a single day ever. Minecraft has now surpassed 300 million copies sold, and with Activision Blizzard King, we now adds significant depth to our content portfolio. We will have $13 billion-plus franchises from Candy Crush, Diablo, and Halo to Warcraft, Elder Scrolls and Gears of War. And we're looking forward to one of our strongest first-party holiday lineups ever, including new titles like Call of Duty: Modern Warfare 3 and Forza Motorsport. In closing, we are rapidly innovating to expand our opportunity across our consumer and commercial businesses, as we help our customers thrive in this new era. In just a few weeks, we'll be holding our flagship Ignite Conference, where we will introduce more than 100 new products and capabilities, including exciting new AI innovations. I encourage you to tune in. With that, I'll turn it over to Amy.","evidence_gemma_new":"Arc customers year-over-year","evidence_llama_3_3":"Azure Arc customers","evidence_qwen_3_30b":null,"gemma_new_max":21000.0,"gemma_new_min":21000.0,"llama_3_3_max":21000.0,"llama_3_3_min":21000.0,"qwen_3_30b_max":null,"qwen_3_30b_min":null}
{"symbol":"MSFT","year":2024,"quarter":2,"date":"2024-Q2","chunk_id":2,"sub_chunk_id":0,"centroid_label":"azure ai VAL azure ai customers","agreed_value":53000.0,"count":3,"chunk":"Satya Nadella: Thank you, Brett. It was a record quarter driven by the continued strength of Microsoft Cloud, which surpassed $33 billion in revenue, up 24%. We\u2019ve moved from talking about AI to applying AI at scale by infusing AI across every layer of our tech stack, we are winning new customers and helping drive new benefits and productivity gains. Now I'll highlight examples of our momentum and progress starting with Azure. Azure again took share this quarter with our AI advantage. Azure offers the top performance for AI training and inference in the most diverse selection of AI accelerators, including the latest from AMD and NVIDIA, as well as our own first-party silicon Azure Maia. And with Azure AI, we provide access to the best selection of foundation and open-source models, including both LLM and SLMs, all integrated deeply with infrastructure, data, and tools on Azure. We now have 53,000 Azure AI customers, over one-third are new to Azure over the past 12 months. Our new models of service offering makes it easy for developers to use LLM's from our partners like Cohere, Meta, and Mistral on Azure, without having to manage underlying infrastructure. We have also built the world's most popular SLMs, which offer performance comparable to larger models, but are small enough to run on a laptop or mobile device. Anker, Ashley, AT&T, EY, and Thomson Reuters, for example, are all already exploring how to use our SLM-5 for their applications. And we have great momentum with Azure OpenAI Service. This quarter we added support for OpenAI's latest models including GPT-4 Turbo, GPT-4 with Vision, DALL-E 3 as well as fine-tuning. We are seeing increased usage from AI-first start-ups like Moveworks, Perplexity, SymphonyAI, as well as some of the world's largest companies. Over half of the Fortune 500 use Azure OpenAI today including Ally Financial, Coca-Cola, and Rockwell Automation. For example, at CES this month, Walmart shared how it's using Azure OpenAI Service along with its own proprietary data and models to streamline how more than 50,000 associates work and transform how it's millions of customers\u2019 shop. More broadly, customers continue to choose Azure to simplify and accelerate their cloud migrations. Overall, we are seeing larger and more strategic Azure deals with an increase in the number of $1 billion-plus Azure commitments. Vodafone, for example, will invest $1.5 billion in Cloud and AI services over the next 10 years as it works to transform the digital experience of more than 300 million customers worldwide. Now on to data. We are integrating the power of AI across the entire data stack. Our Microsoft Intelligent Data Platform brings together operational databases, analytics, governance, and AI to help organizations simplify and consolidate their data estates. Cosmos DB is the go-to database to build AI-powered apps at any scale powering workloads for companies in every industry from AXA and Kohl's to Mitsubishi and TomTom. KPMG, for example, has used Cosmos DB including its built-in native vector search capabilities along with Azure OpenAI service to power an AI assistant, which it credits with driving an up to 50% increase in productivity for its consultants. All-up, Cosmos DB data transactions increased 42% year-over-year and for those organizations who want to go beyond in-database vector search, Azure AI search offers the best hybrid search solution. OpenAI is using it for retrieval augmented generation as part of ChatGPT. And this quarter, we made Microsoft Fabric generally available, helping customers like Milliman and PwC go from data to insights to action, all within the same unified SaaS solution. Data stored in Fabric's multi-cloud data lake, OneLake increased 46% quarter-over-quarter. Now on to developers. From GitHub to Visual Studio, we have the most comprehensive and loved developer tools for the era of AI. GitHub revenue accelerated to over 40% year-over-year, driven by all-up platform growth and adoption of GitHub Copilot, the world's most widely deployed AI developer tool. We now have over 1.3 million paid GitHub copilot subscribers, up 30% quarter-over-quarter, and more than 50,000 organizations use GitHub Copilot business to supercharge the productivity of their developers from digital natives like Etsy and HelloFresh to leading enterprises like Autodesk, Dell Technologies, and Goldman Sachs. Accenture alone will rollout GitHub Copilot to 50,000 of its developers this year and we're going further making copilot ubiquitous across the entire GitHub platform and new AI-powered security features, as well as Copilot enterprise, which tailors Copilot to organization's code bases and allows developers to converse with it in natural language. We're also the leader in low-code no-code development helping everyone create apps, automate workflows, analyze data, and now build custom copilots. More than 230,000 organizations have already used AI capabilities in Power Platform, up over 80% quarter-over-quarter, and with Copilot Studio, organizations can tailor Copilot for Microsoft 365 or create their own custom copilots. It is already being used by over 10,000 organizations including An Post, Holland America, PG&E. In just weeks, for example, both PayPal and Tata Digital built copilots to answer common employee queries, increasing productivity and reducing support costs. We're also using this AI moment to redefine our role in business applications. Dynamics 365 once again took share as organizations use our AI-powered apps to transform their marketing, sales, service, finance, and supply-chain functions. And we are expanding our TAM by integrating Copilot into third-party systems too. In sales out Copilot has helped sellers at more than 30,000 organizations including Lumen Technologies and Schneider Electric to enrich their customer interactions using data from Dynamics 365 or Salesforce. And with our new Copilot for service employees at companies like Northern Trust can resolve client queries faster. It includes out-of-the-box integrations to apps like Salesforce, ServiceNow, and Zendesk. With our industry and cross-industry clouds, we're tailoring our solutions to meet the needs of specific industries. In healthcare, DAX Copilot is being used by more than 100 healthcare systems including Lifespan, UNC Health and UPMC to increase physician productivity and reduce burnout. And our Cloud for Retail was front and center at NRF with retailers from Canadian Tire Corporation, to Leatherman and Ralph Lauren sharing how they will use our solutions across the shopper journey to accelerate time to value. Now on to future of work. A growing body of evidence makes clear the role AI will play in transforming work. Our own research as well as external studies show as much as 70% improvement in productivity, using generative AI for specific work tasks. And overall early Copilot for Microsoft 365 users were 29% faster in a series of tasks like searching, writing, and summarizing. Two months in, we have seen faster adoption than either our E3 or E5 suites as enterprises like Dentsu, Honda, Pfizer, all deploy Copilot to their employees. And we are expanding availability to organizations of all sizes. We're also seeing a Copilot ecosystem begin to emerge. ISVs like Atlassian, Mural, and Trello, as well as customers like Air India, Bayer, and Siemens have all built plug-ins for specific lines of business that extend Copilot's capabilities. When it comes to Teams, we again saw record usage as organizations brought together collaboration chat, meetings, and calling on one platform and Teams has also become a new entry point for us. More than two-thirds of our enterprise Teams customers buy Phone, Rooms or Premium. All this innovation is driving growth across Microsoft 365. We now have more than 400 million paid Office 365 seats and organizations like BP, Elanco, ING Bank, Mediaset, WTW, all chose E5 this quarter to empower their employees with our best-in-class productivity apps along with advanced security compliance, voice, and analytics. Now on to Windows. In 2024, AI will become a first-class part of every PC. Windows PCs with built-in neural processing units were front and center at CES, unlocking new AI experiences to make what you do on your PC easier and faster from searching for answers and summarizing emails to optimizing performance and battery efficiency. Copilot in Windows is already available on more than 75 million Windows 10 and Windows 11 PCs and with our new Copilot key, the first significant change to the Windows keyboard in 30 years, we're providing one-click access. We also continue to transform how Windows is experienced and managed with Azure Virtual Desktop and Windows 365, introducing new features that make it simpler for employees to access and IT teams to secure their cloud PCs. Usage of cloud-delivered Windows increased over 50% year-over-year. And all-up, Windows 11 commercial deployments increased 2 times year-over-year as companies like HPE and Petrobras rolled out operating systems to employees. Now onto security. The recent security attacks, including the nation-state attack on our corporate systems, we reported a week and a half ago have highlighted the urgent need for organizations to move even faster to protect themselves from cyber threats. It's why last fall we announced a set of engineering priorities under our secure future initiative, bringing together every part of the company to advance cyber security protection across both new products and legacy infrastructure. And it's why we continue to innovate across our security portfolio as well as our operational security posture to help customers adopt a Zero Trust security architecture. Our industry-first unified security operations platform brings together our SIM Microsoft Sentinel, our XDR Microsoft Defender, and Copilot for security to help teams manage an increasingly complex security landscape. And with Copilot for security, we're now helping hundreds of early access customers including Cmax, Dow, LTI Mindtree, McAfee, Nucor Steel, significantly increase their SecOps team's productivity. This quarter, we extended copilot to Entra, Intune, and Purview. All-up, we have over 1 million customers, including more than 700,000 who use four or more of our security products like Arrow Electronics, DXC Technology, Freeport-McMoRan, Insight Enterprises, JB Hunt, and the Mosaic Company. Now on to LinkedIn. LinkedIn is now helping over 1 billion members learn, sell, and get hired. We continue to see strong global membership growth driven by member sign-ups in key markets like Germany and India. In an ever-changing job market, members are staying competitive through skill-building and knowledge-sharing. Over the last 12 months, members have added 680 million skills to their profiles, up 80% year-over-year. Our new AI-powered features are transforming the LinkedIn member experience, everything from how people learn new skills to how they search for jobs and engage with [indiscernible]. New AI features, including more personalized emails also continue to increase business ROI on the platform and our hiring business took share for the sixth consecutive quarter. And more broadly, AI is transforming our search and browser experience. We are encouraged by the momentum, earlier this month, we achieved a new milestone with 5 billion images created and 5 billion chats conducted to-date, both doubling quarter-over-quarter and both being an edge took share this quarter. We also introduced Copilot as a standalone destination across all browsers and devices, as well as a Copilot app on iOS and Android. And just two weeks ago, we introduced Copilot Pro providing access to the latest models for quick answers and high-quality image creation and access to Copilot for Microsoft 365 personal and family subscribers. Now on to gaming. This quarter we set all-time records for monthly active users in Xbox PC, as well as mobile, where we now have over 200 million monthly active users alone, inclusive of Activision Blizzard King. With our acquisition, we have added hundreds of millions of gamers to our ecosystem, as we execute on our ambition to reach more gamers on more platforms. With cloud gaming, we continue to innovate to offer players more ways to experience the games they love where and when and how they want, hours streamed increased 44% year-over-year. Great content is key to our growth and across our portfolio, I've never been more excited about our line-up of upcoming games. Earlier this month, we shared exciting new first-party titles coming this year to Xbox PC and Game Pass including Indiana Jones. And we've also announced launching significant updates this calendar year to many of our most durable franchises, which brings in millions of players each month, including Call of Duty, Elder Scrolls Online, and Starfield. In closing, we are looking forward to how AI-driven transformation will benefit people and organizations in 2024. With that, I'll hand it over to Amy.","evidence_gemma_new":"Azure Azure AI customers 12 months","evidence_llama_3_3":"Azure AI customers","evidence_qwen_3_30b":"Azure AI 53,000 Azure AI customers","gemma_new_max":53000.0,"gemma_new_min":53000.0,"llama_3_3_max":53000.0,"llama_3_3_min":53000.0,"qwen_3_30b_max":53000.0,"qwen_3_30b_min":53000.0}
{"symbol":"MSFT","year":2024,"quarter":3,"date":"2024-Q3","chunk_id":2,"sub_chunk_id":0,"centroid_label":"azure ai VAL azure ai customers","agreed_value":33000.0,"count":2,"chunk":"Satya Nadella: Thank you, Brett. It was a record third quarter, powered by the continued strength of the Microsoft Cloud, which surpassed $35 billion in revenue, up 23%. Microsoft Copilot and Copilot stack, spanning everyday productivity, business process, and developer services, to models, data, and infrastructure, are orchestrating a new era of AI transformation, driving better business outcomes across every role and industry. Now, I\u2019ll highlight examples, walking up the stack, starting with AI infrastructure. Azure again took share, as customers use our platforms and tools to build their own AI solutions. We offer the most diverse selection of AI accelerators, including the latest from NVIDIA, AMD, as well as our own first-party silicon. Our AI innovation continues to build on our strategic partnership with OpenAI. More than 65% of the Fortune 500 now use Azure OpenAI Service. We also continue to innovate and partner broadly to bring customers the best selection of frontier models and open source models, LLMs and SLMs. With Phi-3, which we announced earlier this week, we offer the most capable and cost-effective SLM available. It\u2019s already being trialed by companies like CallMiner, LTIMindtree, PwC, and TCS. Our Models as a Service offering makes it easy for developers to use LLMs and SLMs without having to manage any underlying infrastructure. Hundreds of paid customers, from Accenture and EY, to Schneider Electric, are using it to take advantage of API access to third-party models, including as of this quarter the latest from Cohere, Meta, and Mistral. And, as part of a partnership announced last week, G42 will run its AI applications and services on our cloud. All-up, the number of Azure AI customers continues to grow and average spend continues to increase. We also saw an acceleration of revenue from migrations to Azure. Azure Arc continues to help customers like DICK'S Sporting Goods and World Bank streamline their cloud migrations. Arc now has 33,000 customers, up over 2X year-over-year. And, we are the hyperscale platform of choice for SAP and Oracle workloads, with Conduent and Medline moving their on-premises Oracle estates to Azure, and Kyndryl and L'Oreal migrating their SAP workloads to Azure. Overall, we are seeing an acceleration in the number of large Azure deals from leaders across industries, including billion dollar plus multi-year commitments announced this month from Cloud Software Group and The Coca-Cola Company. The number of $100 million plus Azure deals increased over 80% year-over-year, while the number of $10 million plus deals more than doubled. Now, on to data and analytics. Our Microsoft Intelligent Data Platform provides customers with the broadest capabilities spanning databases, analytics, business intelligence, governance, and AI. Over half of our Azure AI customers also use our data and analytics tools. Customers are building intelligent applications running on Azure, PostgreSQL and Cosmos DB with deep integrations with Azure AI. TomTom is a great example. They\u2019ve used Cosmos DB along with Azure Open AI service to build their own immersive in-car infotainment system. We are also encouraged by our momentum with our next-generation analytics platform, Microsoft Fabric. Fabric now has over 11,000 paid customers, including leaders in every industry from ABB, EDP, Energy Transfer to Equinor, Foot Locker, ITOCHU and Lumen, and we are seeing increased usage intensity. Fabric is seamlessly integrated with Azure AI Studio, meaning customers can run models against enterprise data that\u2019s consolidated in Fabric\u2019s multi-cloud data lake, OneLake. And Power BI, which is also natively integrated with Fabric provides business users with AI-powered insights. We now have over 350,000 paid customers. Now on to developers. GitHub Copilot is bending the productivity curve for developers. We now have 1.8 million paid subscribers with growth accelerating to over 35% quarter-over-quarter and continues to see increased adoption from businesses in every industry, including Itau, Lufthansa Systems, Nokia, Pinterest and Volvo cars. CoPilot is driving growth across the broader GitHub platform, too. AT&T, Citi Group and Honeywell all increased their overall GitHub usage after seeing productivity and code quality increases with CoPilot. All up more than 90% of the Fortune 100 are now GitHub customers and revenue accelerated over 45% year-over-year. Anyone can be a developer with new AI-powered features across our low-code, no-code tools, which makes it easier to build an app, automate workflow or create a Copilot using natural language. 30,000 organizations, across every industry have used Copilot Studio to customize Copilot for Microsoft 365 or build their own, up 175% quarter-over-quarter. Cineplex, for example, built a Copilot for customer service agents, reducing query handling time from as much as 15 minutes to 30 seconds. All up over 330,000 organizations, including over half of Fortune 100 have used AI-powered capabilities in Power Platform, and Power Apps now has over 25 million monthly active users, up over 40% year-over-year. Now on to future of work, we are seeing AI democratize expertise across the workforce. What inventory turns are to efficiency of supply chains, knowledge turns, the creation and diffusion and knowledge are to productivity of an organization. And Copilot for Microsoft 365 is helping increase knowledge turns, thus having a cascading effect changing work, work artifacts and workflows and driving better decision-making, collaboration and efficiency. This quarter, we made Copilot available to organizations of all types and sizes from enterprises to small businesses, nearly 60% of the Fortune 500 now use Copilot and we have seen accelerated adoption across industries and geographies with companies like Amgen, BP, Cognizant, Koch Industries, Moody\u2019s, Novo Nordisk, NVIDIA, and Tech Mahindra purchasing over 10,000 seats. We\u2019re also seeing increased usage intensity from early adopters, including a nearly 50% increase in the number of Copilot-assisted interactions per user in Teams, bridging group activity with business process workflows and enterprise knowledge. And we\u2019re not stopping there. We\u2019re accelerating our innovation, adding over 150 Copilot capabilities since the start of the year. With Copilot and Dynamics 365, we are helping businesses transform every role in business function as we take share with our AI-powered apps across all categories. This quarter, we made our Copilot for Service and Copilot for Sales broadly available, helping customer service agents and sellers at companies like Land O\u2019Lakes, Northern Trust, Rockwell Automation and Toyota Group generate role-specific insights and recommendations from across Dynamics 365 and Microsoft 365, as well as third-party platforms like Salesforce, ServiceNow, and Zendesk. And with our Copilot for Finance, we are drawing context from dynamics, as well as ERP systems like SAP to reduce labor-intensive processes like collections and contract and invoice capture for companies like Dentsu and IDC. ISVs are also building their own co-pilot integrations. For example, new integrations between Adobe Experience Cloud and Copilot will help marketeers access campaign insights in the flow of their work. When it comes to devices, Copilot in Windows is now available on nearly 225 million Windows 10 and Windows 11 PCs, up 2x quarter-over-quarter. With Copilot, we have an opportunity to create an entirely new category of devices, purpose-built for this new generation of AI. All of our largest OEM partners have announced AI PCs in recent months. And this quarter, we introduced new surface devices, which includes integrated NPUs to power on-device AI experiences like auto framing and live captions. And there is much more to come in just a few weeks, we\u2019ll hold a special event to talk about our AI vision across Windows and devices. When it comes to Teams, we once again saw year-over-year usage growth. We\u2019re rolling out a new version, which is up to two times faster while using 50% less memory to all customers. We surpassed 1 million Teams Rooms for the first time as we continue to make hybrid meetings better with new AI-powered features like automatic camera switching and speaker recognition. And Teams Phone continues to be the market leader in cloud calling now with over 20 million PSTN users, up nearly 30% year-over-year. All of this innovation is driving growth across Microsoft 365 companies across the private and public sector, including Amadeus, BlackRock, Chevron, Ecolab, Kimberly-Clark. All chose our premium E5 offerings this quarter for advanced security, compliance, voice and analytics. Now on to industry and cross-industry clouds. We are also bringing AI-powered transformation to every industry. In health care, DAX Copilot is being used by more than 200 health care organizations, including Providence, Stanford Health Care and WellSpan Health. And in manufacturing, this week at Hannover Messe, customers like BMW, Siemens and Volvo Penta shared how they're using our cloud and AI solutions to transform factory operations. Now on to security. Security underpins every layer of the tech stack, and it's our number one priority. We launched our Secure Future Initiative last fall for this reason, bringing together every part of the company to advance cybersecurity protection, and we are doubling down on this very important work, putting security above all else, before all other features and investments. We are focused on making continuous progress across the six pillars of this initiative as we protect tenants and isolate production systems, protect identities and secrets, protect networks, protect engineering systems, monitor and detect threats, and accelerate responses and remediation. We remain committed to sharing our learnings, tools and innovation with customers. A great example is Copilot for Security, which we made generally available earlier this month, bringing together LLMs with domain-specific skills informed by our threat intelligence and 78 trillion daily security signals to provide security teams with actionable insights. Now let me talk about our consumer businesses starting with LinkedIn. We continue to combine our unique data with this new generation of AI to transform the way members learn, sell and get hired. Features like LinkedIn AI-assisted messages are seeing a 40% higher acceptance rate and accepted over 10% faster by job seekers, saving hirers time and making it easier to connect them to candidates. Our AI-powered collaborative articles, which has reached over 12 million contributions are helping increase engagement on the platform, which reached a new record this quarter. New AI features are also helping accelerate LinkedIn Premium growth with revenue up 29% year-over-year. And we are also seeing strength across our other businesses with hiring taking share for the seventh consecutive quarter. Now on to search, advertising and news. We once again took share across Bing and Edge as we continue to apply this new generation of AI to transform how people search and browse. Bing reached over 140 million daily active users, and we are particularly encouraged by our momentum in mobile. Our free Copilot apps on iOS and Android saw a surge in downloads after our Super Bowl ad and are among the highest rated in this category. We also rolled out Copilot to our ad platform this quarter, helping marketeers use AI to generate recommendations for product images, headlines and descriptions. Now on to gaming. We are committed to meeting players where they are by bringing great games to more people on more devices. We set third quarter records for game streaming hours, console usage and monthly active devices. And last month, we added our first Activision Blizzard title Diablo IV to our Game Pass service. Subscribers played over 10 million hours within the first 10 days, making it one of our biggest first-party Game Pass launches ever. We were also encouraged by ongoing success of Call of Duty: Modern Warfare 3, which is attracting new gamers and retaining franchise loyalists. Finally, we are expanding our games to new platforms, bringing four of our fan favorite titles to Nintendo Switch and Sony PlayStation for the first time. In fact, earlier this month, we had seven games among the top 25 on the PlayStation store more than any other publisher. In closing, I'm energized about our opportunity ahead as we innovate to help people and businesses thrive in this new era. With that, let me turn it over to Amy.","evidence_gemma_new":"Azure Arc customers year-over-year","evidence_llama_3_3":null,"evidence_qwen_3_30b":"Arc 33,000 customers","gemma_new_max":33000.0,"gemma_new_min":33000.0,"llama_3_3_max":null,"llama_3_3_min":null,"qwen_3_30b_max":33000.0,"qwen_3_30b_min":33000.0}
{"symbol":"MSFT","year":2023,"quarter":1,"date":"2023-Q1","chunk_id":3,"sub_chunk_id":0,"centroid_label":"earnings per share","agreed_value":2.35,"count":2,"chunk":"Amy Hood: Thank you, Satya, and good afternoon, everyone. Our first quarter revenue was $50.1 billion, up 11% and 16% in constant currency. Earnings per share was $2.35, increased 4% and 11% in constant currency when adjusted for the net tax benefit for the first quarter of fiscal year 2022. Driven by strong execution in a dynamic environment, we delivered a solid start to our fiscal year, in line with our expectations even as we saw many of the macro trends from the end of the fourth quarter continued to weaken through Q1. In our consumer business, PC market demand further deteriorated in September, which impacted our Windows OEM and Surface businesses. And reductions in customer advertising spend, which also weakened later in the quarter, impacted search and news advertising and LinkedIn Marketing Solutions. As you heard from Satya, in our commercial business, we saw strong overall demand for our Microsoft cloud offerings with a growth of 31% in constant currency as well as share gains across many businesses. Commercial bookings declined 3% and increased 16% in constant currency on a flat expiry base. Excluding the FX impact, growth was driven by strong renewal execution, and we continue to see growth in the number of large long-term Azure and Microsoft 365 contracts across all deal sizes. More than half of the $10 million plus Microsoft 365 bookings came from E5. Commercial remaining performance obligation increased 31% and 34% in constant currency to $180 billion. Roughly 45% will be recognized in revenue in the next 12 months, up 23% year-over-year. The remaining portion, which we recognized beyond the next 12 months, increased 38% year-over-year, and our annuity mix increased one point year-over-year to 96%. FX impacted company results in line with expectations. With the stronger US dollar, FX decreased total company revenue by five points, and at the segment level, FX decreased productivity and business processes and intelligent cloud revenue growth by six points and more personal computing revenue growth by three points. Additionally, FX decreased COGS and operating expense growth by three points. Microsoft Cloud gross margin percentage increased roughly two points year-over-year to 73%. Excluding the impact of the change in accounting estimate for useful lives, Microsoft cloud gross margin percentage decreased roughly one point driven by sales mix shift to Azure and lower Azure margin, primarily due to higher energy costs. Company gross margin dollars increased 9% and 16% in constant currency, and gross margin percentage decreased slightly year-over-year to 69%, excluding the impact of the latest change in accounting estimate, gross margin percentage decreased roughly 3 points, driven by sales mix shift to cloud, the lower Azure margin noted earlier and Nuance. Operating expense increased 15% and 18% in constant currency, driven by investments in cloud engineering, LinkedIn, Nuance and commercial sales. At a total company level, headcount grew 22% year-over-year, as we continue to invest in key areas just mentioned, as well as customer deployment. Headcount growth included roughly 6 points from the Nuance and Xandr acquisitions, which closed last Q3 and Q4, respectively. Operating income increased 6% and 15% in constant currency, and operating margins decreased roughly 2 points year-over-year to 43%. Excluding the impact of the change in accounting estimate, operating margins declined roughly 4 points year-over-year driven by sales mix shift to cloud, unfavorable FX impact, Nuance and the lower Azure margin noted earlier. Now to our segment results. Revenue from productivity and business processes was $16.5 billion and grew 9% and 15% in constant currency, ahead of expectations, with better-than-expected results in Office commercial and LinkedIn. Office commercial revenue grew 7% and 13% in constant currency. Office 365 commercial revenue increased 11% and 17% in constant currency, slightly better than expected, with the strong renewal execution noted earlier. Growth was driven by installed base expansion across all workloads and customer segments, as well as higher ARPU from E5. Demand for security, compliance and voice value in Microsoft 365 drove strong E5 momentum again this quarter. Paid Office 365 commercial seats grew 14% year-over-year, driven by our small and medium business and frontline worker offerings, although we saw a continued impact of new deal moderation outside of E5. Office consumer revenue grew 7% and 11% in constant currency, driven by continued momentum in Microsoft 365 subscriptions, which grew 13% to $61.3 million. Dynamics revenue grew 15% and 22% in constant currency, driven by Dynamics 365, which grew 24% and 32% in constant currency. LinkedIn revenue increased 17% and 21% in constant currency, ahead of expectations, driven by better-than-expected growth in Talent Solutions, partially offset by weakness in marketing solutions from the advertising trends noted earlier. Segment gross margin dollars increased 11% and 18% in constant currency, and gross margin percentage increased roughly 1 point year-over-year. Excluding the impact of the latest change in accounting estimate, gross margin percentage decreased slightly, driven by sales mix shift to cloud offerings. Operating expense increased 13% and 16% in constant currency, and operating income increased 10% and 19% in constant currency, including 4 points due to the latest change in accounting estimate. Next, the Intelligent Cloud segment. Revenue was $20.3 billion, increasing 20% and 26% in constant currency, in line with expectations. Overall, server products and cloud services revenue increased 22% and 28% in constant currency. Azure and other cloud services revenue grew 35% and 42% in constant currency, about 1 point lower than expected, driven by the continued moderation in Azure consumption growth, as we help customers optimize current workloads while they prioritize new workloads. In our per user business, the enterprise mobility and security installed base grew 18% to over 232 million seats, with continued impact from the new deal moderation noted earlier. In our on-premises server business, revenue was flat, and increased 4% in constant currency, slightly ahead of expectations, driven by hybrid demand, including better-than-expected annuity purchasing ahead of the SQL Server 2022 launch. Enterprise Services revenue grew 5% and 10% in constant currency, driven by enterprise support services. Segment gross margin dollars increased 20% and 26% in constant currency, and gross margin percentage decreased slightly. Excluding the impact of the latest change in accounting estimate, gross margin percentage declined roughly three points, driven by sales mix shift to Azure and higher energy costs impacting Azure margins. Operating expenses increased 25% and 28% in constant currency, including roughly eight points of impact from Nuance. And operating income grew 17% and 25% in constant currency with roughly nine points of favorable impact from the latest change in accounting estimate. Now to more Personal Computing. Revenue decreased slightly year-over-year to $13.3 billion and grew 3% in constant currency, in line with expectations overall, but with OEM and Surface weakness offset by upside in gaming consoles. Windows OEM revenue decreased 15% year-over-year. Excluding the impact from the Windows 11 deferral last year, revenue declined 20%, driven by PC market demand deterioration noted earlier. Devices revenue grew 2% and 8% in constant currency, in line with expectations, driven by the impact of a large Hollands deal, partially offset by low double-digit declines in consumer Surface sales. Windows Commercial products and cloud services revenue grew 8% and 15% in constant currency, in line with expectations, driven by demand for Microsoft 365 E5 noted earlier. Search and news advertising revenue, ex TAC, increased 16% and 21% in constant currency, in line with expectations, benefiting from an increase in search volumes and roughly five points of impact from Xandr even as we saw increased ad market headwinds during September. Edge browser gained share again this quarter. And in gaming, revenue grew slightly and was up 4% in constant currency, ahead of expectations, driven by better-than-expected console sales. Xbox hardware revenue grew 13% and 19% in constant currency. Xbox content and services revenue declined 3% and increased 1% in constant currency, driven by declines in first-party content as well as in third-party content where we had lower engagement hours and higher monetization, partially offset by growth in Xbox Game Pass subscriptions. Segment gross margin dollars declined 9% and 4% in constant currency, and gross margin percentage decreased roughly five points year-over-year driven by sales mix shift to lower margin businesses. Operating expenses increased 2% and 5% in constant currency, driven by the Xandr acquisition. And operating income decreased 15% and 9% in constant currency. Now back to total company results. Capital expenditures, including finance leases were $6.6 billion, and cash paid for PP&E was $6.3 billion. Our data center investments continue to be based on strong customer demand and usage signals. Cash flow from operations was $23.2 billion, down 5% year-over-year, driven by strong cloud billings and collections, which were more than offset by a tax payment related to the transfer of intangible property completed in Q1 of FY '22. Free cash flow was $16.9 billion, down 10% year-over-year. Excluding the impact of this tax payment, cash flow from operations grew 2%, and free cash flow was relatively unchanged [indiscernible] year. This quarter, other income and expense was $54 million, driven by interest income, which was mostly offset by interest expense and net losses on foreign currency remeasurement. Our effective tax rate was approximately 19%. And finally, we returned $9.7 billion to shareholders through share repurchases and dividends. Now, moving to our Q2 outlook, which, unless specifically noted otherwise, is on a US dollar basis. My commentary, for both the full year and next quarter, does not include any impact from AC [ph] division, which we still expect to close by the end of the fiscal year. First, FX. With the stronger US dollar and based on current rates, we now expect FX to decrease total revenue growth by approximately five points and to decrease total COGS and operating expense growth by approximately three points. Within the segments, we anticipate roughly seven points of negative FX impact on revenue growth in Productivity and Business Processes, six points in Intelligent Cloud and three points in more Personal Computing. Our outlook has many of the trends we saw at the end of Q1, continue into Q2. In our consumer business, materially weaker PC demand from September will continue, and impact both Windows OEM and Surface device results even as the Windows installed base and usage grows, as you heard from Satya. Additionally, customers focusing our advertising spend will impact LinkedIn and Search and News advertising revenue. In our commercial business, demand for our differentiated hybrid and cloud offerings, together with consistent execution, should drive healthy growth across the Microsoft Cloud. In commercial bookings, continued strong execution across core annuity sales motions and commitments to our platform should drive solid growth on a moderately growing expiry base against a strong prior year comparable, which included a significant volume of large long-term Azure contracts. As a reminder, the growing mix of larger long-term Azure contracts which are more unpredictable in their timing, always drives increased quarterly volatility in our bookings growth rate. Microsoft Cloud gross margin percentage should be up roughly one point year-over-year, driven by the latest accounting estimate change noted earlier. Excluding that impact, Q2 gross margin percentage will decrease roughly two points driven by lower Azure margin, primarily due to higher energy cost, revenue mix shift to Azure and the impact from Nuance. In capital expenditures, we expect a sequential increase on a dollar basis with normal quarterly spend variability in the timing of our cloud infrastructure build-out. Next, to segment guidance. In Productivity and Business Processes, we expect revenue to grow between 11% and 13% in constant currency or USD16.6 billion to USD 16.9 billion. In Office Commercial, revenue growth will again be driven by Office 365, with seat growth across customer segments and ARPU growth from E5. We expect Office 365 revenue growth to be similar to last quarter on a constant currency basis. In our on-premises business, we expect revenue to decline in the low to mid-30s. In Office Consumer, we expect revenue to decline low to mid-single digits as Microsoft 365 subscription growth will be more than offset by unfavorable FX impact. For LinkedIn, we expect continued strong engagement on the platform, although results will be impacted by a slowdown in advertising spend and hiring, resulting in mid to high single-digit revenue growth or low to mid-teens growth in constant currency. And in Dynamics, we expect revenue growth in the low double digits or the low 20s in constant currency, driven by continued share gains in Dynamics 365. For Intelligent Cloud, we expect revenue to grow between 22% and 24% in constant currency or US$ 21.25 billion to US$ 21.55 billion. Revenue will continue to be driven by Azure, which, as a reminder, can have quarterly variability primarily from our per-user business and from in-period recognition depending on the mix of contracts. We expect Azure revenue growth to be sequentially lower by roughly 5 points on a constant currency basis. Azure revenue will continue to be driven by strong growth in consumption, with some impact from the Q1 trends noted earlier. And our per user business should continue to benefit from Microsoft 365 suite momentum, though we expect moderation in growth rate given the size of the installed base. In our on-premise server business, we expect revenue to decline low single digits, as demand for our hybrid solutions, including strong annuity purchasing from the SQL Server 2022 launch, will be more than offset by unfavorable FX impact. And in Enterprise Services, we expect revenue growth to be in the low single digits, driven by enterprise support. In More Personal Computing, we expect revenue of US$ 14.5 billion to US$ 14.9 billion. In Windows OEM, we expect revenue to decline in the high 30s. Excluding the impact from the Windows 11 revenue deferral last year, revenue would decline mid-30s, reflecting both PC market demand and a strong prior year comparable, particularly in the commercial segment. In Devices, revenue should decline approximately 30%, again, roughly in line with the PC market. In Windows commercial products and cloud services, customer demand for Microsoft 365 and our advanced security solutions should drive growth in the mid-single digits or low double digits in constant currency. Search and news advertising, ex TAC, should grow in the low to mid-teens, roughly 6 points faster than overall search and news advertising revenue, driven by growing first-party revenue and the inclusion of Xandr. And in gaming, we expect revenue to decline in the low to mid-teens against a strong prior year comparable. That included several first-party title launches, partially offset by growth in Xbox Game Pass subscribers. We expect Xbox content and services revenue to decline in the low to mid-teens. Now back to company guidance. We expect COGS to grow between 6% and 7% in constant currency or to be between US$ 17.4 billion and US$ 17.6 billion, and operating expense to grow between 17% and 18% in constant currency, or to be between US$ 14.3 billion and US$ 14.4 billion. As we continue to focus our investment in key growth areas, total headcount growth sequentially should be minimal. Other income and expense should be roughly $100 million, as interest income is expected to more than offset interest expense. Further FX and equity movements through Q2 are not reflected in this number. And as a reminder, we are required to recognize mark-to-market gains or losses on our equity portfolio, which can increase quarterly volatility. And we expect our Q2 effective tax rate to be between 19% and 20%. And finally, as a reminder, for Q2 cash flow, we expect to make a $2.4 billion cash tax payment related to the capitalization of R&D provision enacted in 2017 TCJA and effective as of July 1, 2022. Now some thoughts on the full fiscal year. First, FX. Based on current rates, we now expect a roughly five-point headwind to full year revenue growth. And FX should decrease COGS and operating expense growth by approximately three points. At the total company level, we continue to expect double-digit revenue and operating income growth on a constant currency basis. Revenue will be driven by around 20% constant currency growth in our commercial business, driven by strong demand for our Microsoft cloud offerings. That growth will be partially offset by the increased declines we now see in the PC market. With the high margins in our Windows OEM business and the cyclical nature of the PC market, we take a long-term approach to investing in our core strategic growth areas and maintain these investment levels regardless of PC market conditions. Therefore, with our first quarter results and lower expected OEM revenue for the remainder of the year as well as over $800 million of greater than expected energy cost, we now expect operating margins in US dollars to be down roughly a point year-over-year. On a constant currency basis, excluding the incremental impact of the lower Windows OEM revenue and the favorable impact of the latest accounting change, we continue to expect FY 2023 operating margins to be roughly flat year-over-year. In closing, in this environment, it is more critical than ever to continue to invest in our strategic growth markets such as Cloud, Security, Teams, Dynamics 365 and LinkedIn where we have opportunities to continue to gain share as we provide problem solving innovations to our customers. And while we continue to help our customers do more with less, we will do the same internally. And you should expect to see our operating expense growth moderate materially through the year. While we focus on growing productivity of the significant headcount investments we've made over the last year. With that, let's go to Q&A. Brett?","evidence_gemma_new":"constant currency Earnings per share first quarter fiscal year 2022","evidence_llama_3_3":null,"evidence_qwen_3_30b":"Earnings per share first quarter","gemma_new_max":2.35,"gemma_new_min":2.35,"llama_3_3_max":null,"llama_3_3_min":null,"qwen_3_30b_max":2.35,"qwen_3_30b_min":2.35}
{"symbol":"MSFT","year":2023,"quarter":2,"date":"2023-Q2","chunk_id":3,"sub_chunk_id":0,"centroid_label":"earnings per share","agreed_value":0.12,"count":2,"chunk":"Amy Hood: Thank you, Satya and good afternoon everyone. I\u2019d like to start by reiterating Satya\u2019s thoughts on the changing environment and our priorities, which underpin the decisions communicated in last week\u2019s announcement. The resulting Q2 charge negatively impacted gross margin by $152 million, operating income by $1.2 billion, and earnings per share by $0.12. Our second quarter revenue was $52.7 billion, up 2% and 7% in constant currency. When adjusted for the charge, gross margin dollars increased 2% and 8% in constant currency, operating income decreased 3% and increased 6% in constant currency, and earnings per share was $2.32, which decreased 6% and increased 2% in constant currency. In our consumer business, the PC market was in line with our expectations, but execution challenges impacted our Surface business. Advertising spend declined slightly more than expected, which impacted search and news advertising and LinkedIn Marketing Solutions. In our commercial business, we delivered strong growth in line with our expectations. However, as you heard from Satya, we are seeing customers exercise caution in this environment and we saw results weaken through December. We saw moderated consumption growth in Azure and lower-than-expected growth in new business across the standalone Office 365, EMS and Windows commercial products that are sold outside the Microsoft 365 suite. From a geographic perspective, we saw strong execution in many regions around the world. However, performance in the U.S. was weaker than expected. Importantly, we continued to see share gains in areas such as data and AI, Dynamics, Teams, Security and Edge. Commercial bookings increased 7% and 4% in constant currency, lower than expected. Consistent execution across our renewal sales motions, including strong recapture rates and growth in Azure commitments on a high prior year comparable were partially offset by the slowdown in growth of new standalone business noted earlier. Commercial remaining performance obligation increased 29% to 26% in constant currency to $189 billion. Roughly 45% will be recognized in revenue in the next 12 months, up 24% year-over-year. The remaining portion, which will be recognized beyond the next 12 months, increased 32%. Our annuity mix increased 2 points year-over-year to 96%. FX decreased total company revenue by 5 points, in line with expectations. At a segment level, FX decreased Productivity and Business Processes revenue growth by 6 points, 1 point favorable to expectations. FX impact on Intelligent Cloud and More Personal Computing were both in line with expectations. Additionally, FX decreased both COGS and operating expense growth by 2 points, 1 point unfavorable to expectations. Microsoft Cloud revenue was $27.1 billion and grew 22% and 29% in constant currency, ahead of expectations. Microsoft Cloud gross margin percentage increased roughly 2 points year-over-year to 72%, a point better than expected, driven by lower energy costs. Excluding the impact of the change in accounting estimate for useful lives, Microsoft Cloud gross margin percentage decreased roughly 1 point, primarily driven by sales mix shift to Azure. Company gross margin percentage was 67%. Excluding the impact of the change in accounting estimate, gross margin percentage decreased roughly 2 points, driven by a lower mix of Windows OEM revenue and sales mix shift from licensing to cloud. Operating expense when adjusted for the Q2 charge increased 11% and 13% in constant currency, about $500 million lower than expected. Operating expense growth was driven by investments in cloud engineering, the Nuance acquisition and LinkedIn. At a total company level, headcount ended December 19% higher than a year ago. Sequential headcount growth was less than 1%. Year-over-year growth included roughly 6 points from the Nuance and Xandr acquisitions, which closed last Q3 and Q4, respectively. Adjusted for the charge, operating margins decreased roughly 2 points year-over-year to 41%. Excluding the impact of the change in accounting estimate, operating margins declined roughly 4 points, primarily driven by unfavorable FX impact as well as a lower mix of OEM revenue. Now to our segment results. Revenue from Productivity and Business Processes was $17 billion and grew 7% and 13% in constant currency, in line with expectations when excluding the favorable FX impact noted earlier. Office Commercial revenue grew 7% and 14% in constant currency. Office 365 Commercial revenue increased 11% and 18% in constant currency, slightly better than expected with healthy renewal execution and ARPU growth as E5 momentum remains strong. Paid Office 365 Commercial seats grew 12% year-over-year with installed base expansion across all workloads and customer segments. Seat growth was driven by our small and medium business and frontline worker offerings, although we saw some impact from the slowdown in growth of new business noted earlier. Office Consumer revenue declined 2% and increased 3% in constant currency, with continued momentum in Microsoft 365 subscriptions, which grew 12% to 63.2 million, partially offset by declines in our transactional business. LinkedIn revenue increased 10% and 14% in constant currency, driven by growth in Talent Solutions, partially offset by weakness in Marketing Solutions from the advertising trends noted earlier. Dynamics revenue grew 13% and 20% in constant currency, driven by Dynamics 365, which grew 21% and 29% in constant currency. Segment gross margin dollars increased 8% and 16% in constant currency, and gross margin percentage increased roughly 1 point year-over-year. Excluding the impact of the change in accounting estimate, gross margin percentage decreased slightly, driven by sales mix shift to cloud offerings. Operating expense increased 12% and 14% in constant currency, including roughly 5 points from the Q2 charge. Operating income increased 6% and 17% in constant currency as the 3 points of favorable impact due to the change in accounting estimate were offset by 3 points of unfavorable impact from the Q2 charge noted earlier. Next, the Intelligent Cloud segment. Revenue was $21.5 billion, increasing 18% and 24% in constant currency, in line with expectations. Overall, server products and cloud services revenue increased 20% and 26% in constant currency. Azure and other cloud services revenue grew 31% and 38% in constant currency. As noted earlier, growth continued to moderate, particularly in December, and we exited the quarter with Azure constant currency growth in the mid-30s. In our per user business, the Enterprise Mobility and Security installed base grew 16% to over 241 million seats with impact from the slowdown in growth of new business noted earlier. In our on-premises server business, revenue decreased 2% and increased 2% in constant currency, with continued hybrid demand offset by weakness in transactional licensing. Enterprise Services revenue grew 2% and 7% in constant currency. Segment gross margin dollars increased 17% and 23% in constant currency, and gross margin percentage decreased slightly. Excluding the impact of the change in accounting estimate, gross margin percentage declined roughly 3 points, driven by sales mix shift to Azure and higher energy costs. Operating expenses increased 34% and 37% in constant currency, including roughly 13 points of impact from the Q2 charge noted earlier and roughly 7 points of impact from the Nuance acquisition. Operating income grew 7% and 15% in constant currency as roughly 7 points of favorable impact of the change in accounting estimate was offset by approximately 7 points of unfavorable impact from the Q2 charge. Now to More Personal Computing. Revenue was $14.2 billion, decreasing 19% and 16% in constant currency, below expectations driven by Surface, Windows Commercial and search. Windows OEM revenue decreased 39% year-over-year, in line with expectations. Excluding the impact from the Windows 11 deferral last year, revenue declined 36% on a strong prior year comparable. Devices revenue decreased 39% to 34% in constant currency, below expectations due to execution challenges on new product launches. Windows Commercial products and cloud services revenue declined 3% and increased 3% in constant currency, lower than expected, primarily due to the slowdown in growth of new business and stand-alone offerings noted earlier. Search and news advertising revenue ex TAC increased 10% and 15% in constant currency, a bit lower than expected, as noted earlier. Our Edge browser gained more share than expected this quarter. The Xandr acquisition contributed roughly 6 points of benefit. And in gaming, revenue declined 13% and 9% in constant currency, in line with expectations. Xbox hardware revenue declined 13% and 9% in constant currency. Xbox content and services revenue declined 12% and 8% in constant currency, given the strong first-party content last year. Segment gross margin dollars declined 29% and 24% in constant currency, and gross margin percentage decreased roughly 7 points year-over-year, driven by lower device gross margin and sales mix shift to lower-margin businesses. Operating expenses increased 6% and 9% in constant currency, including roughly 6 points of impact from the Q2 charge noted earlier and 3 points of impact from the Xandr acquisition. Operating income decreased 47% and 40% in constant currency, including roughly 6 points of unfavorable impact from the Q2 charge noted earlier. Now back to total company results. Capital expenditures, including finance leases, were $6.8 billion to support cloud demand. Cash paid for PP&E was $6.3 billion. Cash flow from operations was $11.2 billion, down 23% year-over-year as strong cloud billings and collections were more than offset by a tax payment related to the TCJA capitalization of R&D provision as well as higher employee and supplier payments. Free cash flow was $4.9 billion, down 43% year-over-year. Excluding the impact of this tax payment, cash flow from operations declined 7% and free cash flow declined 16%. This quarter, other income and expense was negative $60 million, lower than anticipated, driven by a mark-to-market loss on a forward share purchase agreement. Our effective tax rate was approximately 19%. And finally, we returned $9.7 billion to shareholders through share repurchases and dividends. Now moving to our Q3 outlook, which unless specifically noted otherwise, is on a U.S. dollar basis. My commentary for both the full year and next quarter does not include any impact from Activision, which we continue to work towards closing in fiscal year 2023, subject to obtaining required regulatory approvals. First, FX. Based on current rates, we now expect FX to decrease total revenue growth by approximately 3 points, COGS growth by 1 point and operating expense growth by 2 points. Within the segments, we anticipate roughly 4 points of negative impact on revenue growth in Productivity and Business Processes, 3 points in Intelligent Cloud and 2 points in More Personal Computing. In our Consumer business, Windows OEM and devices will see continued declines as the PC market returns to pre-pandemic levels. And LinkedIn and search will be impacted as ad market spending remains a bit cautious. In our Commercial business, we expect business trends that we saw at the end of December to continue into Q3. While customers are more cautious in their spend, we also have the opportunity to improve our execution, given our strong position in global growth markets. In commercial bookings, with a declining expiry base and the strong prior year comparable in terms of large Azure contracts, we expect growth to be relatively flat over year. We expect consistent execution across our core and sales motions and continued commitments to our platform will be offset by impact from the slowdown of new business noted earlier and 3 points of unfavorable impact from the inclusion of Nuance in the prior year. Microsoft Cloud gross margin percentage should be up roughly 1 point year-over-year, driven by the accounting estimate change noted earlier. Excluding that impact, Q3 cloud gross margin percentage will decrease roughly 1 point, driven by Azure. In capital expenditures, we expect a sequential increase on a dollar basis with normal quarterly spend variability in the timing of our cloud infrastructure build-out. Our data center investments continue to be based on a near-term and longer-term customer demand, including AI opportunities. Next, segment guidance. In Productivity and Business Processes, we expect revenue to grow between 11% and 13% in constant currency or $16.9 billion to $17.2 billion. In Office Commercial, revenue growth will again be driven by Office 365 with seat growth across customer segments and ARPU growth through E5. We expect Office 365 revenue growth to be sequentially lower by roughly 1 point on a constant currency basis. In our on-premises business, we expect revenue to decline in the mid-20s. In Office Consumer, we expect revenue growth in the low single digits, driven by Microsoft 365 subscriptions. For LinkedIn, we expect mid-single-digit revenue growth with continued strong engagement on the platform, although impacted by the advertising trends noted earlier and the slowdown in hiring, particularly in the technology industry, where we have significant exposure. And in Dynamics, we expect revenue growth to be in the low to mid-teens, driven by continued growth in Dynamics 365, which is now over 80% of total Dynamics revenue. For Intelligent Cloud, we expect revenue to grow between 17% and 19% in constant currency or $21.7 billion to $22 billion. Revenue will continue to be driven by Azure which, as a reminder, can have quarterly variability primarily from our per user business and from in-period revenue recognition depending on the mix of contracts. In Azure, our per-user business should continue to benefit from Microsoft 365 suite momentum, though we expect continued moderation in growth rate given the size of the installed base. As I noted earlier, we exited Q2 with Azure growth in the mid-30s in constant currency. And from that, we expect Q3 growth to decelerate roughly 4 to 5 points in constant currency. FX impact in Azure is about 1 point more than at the segment level. In our on-premises server business, we expect revenue to decline low single digits as demand for our hybrid solutions will be more than offset by unfavorable FX impact. And in Enterprise Services, revenue should decline low to mid-single digits, driven by Microsoft Consulting Services. In More Personal Computing, we expect revenue of $11.9 billion to $12.3 billion. Windows OEM revenue should decline in the mid to high 30s, in line with the PC market. We expect Q3 PC units to be similar to pre-pandemic levels. In devices, revenues should decline in the mid-40s as we work through the execution challenges noted earlier. In Windows Commercial products and cloud services on a strong prior year comparable, revenue should be relatively flat as customer demand for Microsoft 365 and our advanced security solutions will be partially offset by the slowdown in new business noted earlier. Search and news advertising ex-TAC should grow high single digits, roughly 7 points faster than overall search and news advertising revenue, driven by continued volume strength supported by Edge browser share gains and the inclusion of Xandr. And in gaming, on a prior year comparable that benefited from increased console supply, we expect revenue to decline in the high single digits. We expect Xbox content and services revenue to decline in the low single digits as growth in Xbox Game Pass subscriptions will be more than offset by lower monetization per hour and third-party and first-party content. Now back to company guidance. We expect COGS to grow between 1% and 2% in constant currency or to be between $15.65 billion and $15.85 billion and operating expense to grow between 11% and 12% at constant currency or be $14.7 billion to $14.8 billion. Other income and expense should be roughly $200 million as interest income is expected to more than offset interest expense. As a reminder, we are required to recognize mark-to-market gains and losses on our equity portfolio, which can increase quarterly volatility. We expect our Q3 effective tax rate to be between 19% and 20%. And finally, as a reminder, for Q3 cash flow, we expect to make a $1.2 billion cash tax payment related to the TCJA capitalization of R&D provision. Now some thoughts on H2 and the full year. First, in our Commercial business, revenue grew 20% on a constant currency basis in H1. However, we now expect to see a deceleration in H2, given how we exited December. Next, higher energy costs for the full year are now expected to be $500 million compared to our previous estimate of $800 million. Third, as we continue to prioritize our investments and anniversary the Nuance and Xandr acquisitions, our Q4 operating expense growth should be in the low single digits in constant currency. Finally, we remain committed to operational excellence, aligning cost and growth, investing in our customer success and leading the AI platform wave. As a result, when excluding the Q2 charge and favorable impact from the change in accounting estimate, we expect full year operating margins to be down roughly 1 point in constant currency and roughly 2 points in USD, even with the headwinds from materially lower OEM revenue and higher energy costs. In the first half of the year, over 70% of our revenue came from our Commercial business and over 70% of that from Microsoft Cloud. We have a resilient foundation and durable growth markets where we are gaining share. I\u2019m confident in the ability of our Microsoft team to manage the near-term by continuing to position ourselves for the future. With that, let\u2019s go to Q&A. Brett?","evidence_gemma_new":null,"evidence_llama_3_3":"earnings per share","evidence_qwen_3_30b":"Q2 charge earnings per share","gemma_new_max":null,"gemma_new_min":null,"llama_3_3_max":0.12,"llama_3_3_min":0.12,"qwen_3_30b_max":0.12,"qwen_3_30b_min":0.12}
{"symbol":"MSFT","year":2023,"quarter":3,"date":"2023-Q3","chunk_id":3,"sub_chunk_id":0,"centroid_label":"earnings per share","agreed_value":2.45,"count":2,"chunk":"Amy Hood: Thank you, Satya, and good afternoon, everyone. Our third quarter revenue was $52.9 billion, up 7% and 10% in constant currency. Earnings per share was $2.45 and increased 10% and 14% in constant currency. Our results exceeded expectations, driven by focused execution from our sales teams and partners. In our commercial business, revenue was up 19% in constant currency. We saw better-than-expected renewal strength, including across Microsoft 365, which also benefited Windows Commercial given the higher in-period revenue recognition. In Office 365 stand-alone products, we saw improvement in new business growth, while growth trends in EMS and Windows Commercial standalone products remained consistent with Q2. In Azure, customers continued to exercise some caution as optimization and new workload trends from the prior quarter continued as expected. In our consumer business, PC demand was a bit better than we expected, particularly in the commercial segment, which benefited Windows OEM and Surface even as channel inventory levels remain elevated, which negatively impacted results. Advertising spend landed in line with our expectations. We have seen share gains in Azure, Dynamics, Teams, Security, Edge and Bing as we continue to focus on delivering high value as well as new innovative solutions to our customers, including next-generation AI capabilities. Commercial bookings increased 11% and 12% in constant currency on a strong prior year comparable with a declining expiry base and 3 points of unfavorable impact from the inclusion of Nuance in the prior year. The better-than-expected result was driven by strong execution across our renewal sales motions mentioned earlier. Commercial remaining performance obligation increased 26% to $196 billion. Roughly 45% will be recognized in revenue in the next 12 months, up 18% year-over-year. The remaining portion, which will be recognized beyond the next 12 months increased 34%. And this quarter, our annuity mix was again 96%. FX impact on total company revenue, segment level revenue and operating expense growth was as expected. FX decreased COGS growth by 2 points, 1 point favorable to expectations. Microsoft Cloud revenue was $28.5 billion and grew 22% and 25% in constant currency, slightly ahead of expectations. Microsoft Cloud gross margin percentage increased roughly 2 points year-over-year to 72%, a point ahead of expectations driven by cloud engineering efficiencies. Excluding the impact of the change in accounting estimate for useful lives, Microsoft Cloud gross margin percentage decreased slightly, driven by lower Azure margin. Company gross margin dollars increased 9% and 13% in constant currency, including 2 points due to the change in accounting estimate. Gross margin percentage increased year-over-year to 69%. Excluding the impact of the change in accounting estimate, gross margin percentage decreased slightly, driven by a lower mix of OEM revenue. Operating expense increased 7% and 9% in constant currency, about $300 million lower than expected. Operating expense growth was driven by roughly 2 points from the Nuance and Xandr acquisitions as well as investments in cloud engineering and LinkedIn. At a total company level, head count at the end of March was 9% higher than a year ago. Operating income increased 10% and 15% in constant currency, including 4 points due to the change in accounting estimate. Operating margins increased roughly 1 point year-over-year to 42%. Excluding the impact of the change in accounting estimate, operating margins decreased slightly and increased slightly in constant currency. Now to our segment results. Revenue from Productivity and Business Processes was $17.5 billion and grew 11% and 15% in constant currency, ahead of expectations, primarily driven by better-than-expected results in Office commercial. Office commercial revenue grew 13% and 17% in constant currency. Office 365 commercial revenue increased 14% and 18% in constant currency, slightly better than expected with the strong renewal execution mentioned earlier and E5 momentum. Paid Office 365 commercial seats grew 11% year-over-year to over 382 million, with installed base expansion across all workloads and customer segments. Seat growth was again driven by our small and medium business and frontline worker offerings. Office commercial licensing declined 1% and increased 5% in constant currency, better than expected with 11 points of benefit from transactional strength in Japan. Office consumer revenue increased 1% and 4% in constant currency with continued momentum in Microsoft 365 subscriptions, which grew 12% to 65.4 million. LinkedIn revenue increased 8% and 10% in constant currency, driven by growth in Talent Solutions. Dynamics revenue grew 17% and 21% in constant currency, driven by Dynamics 365, which grew 25% and 29% in constant currency, with healthy growth across all workloads. Segment gross margin dollars increased 14% and 18% in constant currency, and gross margin percentage increased roughly 2 points year-over-year. Excluding the impact of the change in accounting estimate, gross margin percentage increased slightly, driven by improvements in Office 365, partially offset by sales mix shift to cloud offerings. Operating expenses increased 4% and 5% in constant currency, and operating income increased 20% and 27% in constant currency, including 4 points due to the change in accounting estimate. Next, the Intelligent Cloud segment. Revenue was $22.1 billion, increasing 16% and 19% in constant currency, slightly ahead of expectations. Overall, server products and cloud services revenue increased 17% and 21% in constant currency. Azure and other cloud services revenue grew 27% and 31% in constant currency. In our per user business, enterprise mobility and security installed base grew 15% to nearly 250 million seats. In our on-premises server business, revenue decreased 2% and was relatively unchanged in constant currency with continued demand for our hybrid offerings, including Windows Server and SQL Server running in multi-cloud environments, offset by transactional licensing. Enterprise Services revenue grew 6% and 9% in constant currency with better-than-expected performance across Enterprise Support Services and Microsoft Consulting Services. Segment gross margin dollars increased 15% and 18% in constant currency and gross margin percentage decreased slightly. Excluding the impact of the change in accounting estimate, gross margin percentage declined roughly 3 points, driven by sales mix shift to Azure and the lower Azure margin noted earlier. Operating expenses increased 19% and 20% in constant currency, including roughly 3 points of impact from the Nuance acquisition. Operating income grew 13% and 17% in constant currency, with roughly 6 points from the change in accounting estimate. Now to More Personal Computing. Revenue was $13.3 billion, decreasing 9% and 7% in constant currency with better-than-expected results across all businesses. Windows OEM revenue decreased 28% year-over-year and Devices revenue decreased 30% and 26% in constant currency, both ahead of expectations. We saw better-than-expected PC demand, as noted earlier, particularly in the commercial segment, which has higher revenue per license, although results continue to be negatively impacted by elevated channel inventory levels. Windows commercial products and cloud services revenue increased 14% and 18% in constant currency, significantly ahead of expectations, primarily due to the strong renewal execution with higher in-period revenue recognition noted earlier. Search and news advertising revenue ex TAC increased 10% and 13% in constant currency, including 2 points from the Xandr acquisition. Results were driven by higher search volume with share gains again this quarter for our Edge browser globally and Bing in the U.S. And in Gaming, revenue declined 4% and 1% in constant currency, ahead of expectations. Xbox hardware revenue declined 30% and 28% in constant currency on a high prior year comparable that benefited from increased console supply. Xbox content and services revenue increased 3% and 5% in constant currency, driven by better-than-expected monetization in third-party and first-party content and growth in Xbox Game Pass. Segment gross margin dollars declined 9% and 5% in constant currency, and gross margin percentage increased slightly year-over-year. Operating expenses declined 5% and 3% in constant currency, even with 3 points of growth from the Xandr acquisition. Operating income decreased 12% and 7% in constant currency. Now back to total company results. Capital expenditures, including finance leases were $7.8 billion to support cloud demand. Cash paid for PP&E was $6.6 billion. Cash flow from operations was $24.4 billion, down 4% year-over-year as strong cloud billings and collections as well as lower supplier payments were more than offset by a tax payment related to the R&D capitalization provisions and employee payments primarily related to headcount growth and an increase in employee compensation. Free cash flow was $17.8 billion, down 11% year-over-year. Excluding the impact of this tax payment, cash flow from operations increased 1% and free cash flow declined 5%. This quarter, other income and expense was $321 million, higher than anticipated, driven by net gains on foreign currency remeasurement. Our effective tax rate was approximately 19%. And finally, we returned $9.7 billion to shareholders through share repurchases and dividends. Now moving to our Q4 outlook, which unless specifically noted otherwise, is on a U.S. dollar basis. My commentary for the next quarter and FY '24 does not include any impact from Activision, which we continue to work towards closing in fiscal year 2023, subject to obtaining required regulatory approvals. Now to FX. Based on current rates, we expect FX to decrease total revenue growth by approximately 2 points with no impact to COGS or operating expense growth. Within segments, we anticipate roughly 2 points of negative FX impact on revenue growth in Productivity and Business Processes and Intelligent Cloud and roughly 1 point in More Personal Computing. Overall, our outlook has many of the trends we saw in Q3 continue through Q4. In our largest quarter of the year, we expect customer demand for our differentiated solutions, including our AI platform and consistent execution across the Microsoft Cloud to drive another quarter of healthy revenue growth. Last year, we had our largest commercial bookings quarter ever with a material volume of large multiyear commitments. On that comparable, we expect growth to be relatively flat. We expect consistent execution across our core annuity sales motions with strong renewals and continued commitment to our platform as we focus on meeting customers' changing contract needs, which include shorter term, quick time to value contracts in this dynamic environment. Our key focus remains on delivering customer value. Microsoft Cloud gross margin percentage should be up roughly 2 points year-over-year, driven by the accounting estimate change noted earlier. Excluding that impact, Q4 cloud gross margin percentage will be relatively flat as improvements in Office 365 will offset the lower Azure margin and the impact of scaling our AI infrastructure to meet growing demand. We expect capital expenditures to have a material sequential increase on a dollar basis, driven by investments in Azure AI infrastructure. Reminder there can be normal quarterly spend variability in the timing of our cloud infrastructure build-out. Next, to segment guidance. In Productivity and Business Processes, we expect revenue to grow between 10% and 12% in constant currency or $17.9 billion to $18.2 billion. In Office Commercial, revenue growth will again be driven by Office 365, with seat growth across customer segments and ARPU growth through E5. We expect Office 365 revenue growth to be roughly 16% in constant currency. In our on-premises business, we expect revenue to decline in the low 30s. In Office consumer, we expect revenue growth in the mid-single digits, driven by Microsoft 365 subscriptions. For LinkedIn, we expect mid-single digit revenue growth driven by Talent Solutions with continued strong engagement on the platform. And in Dynamics, we expect revenue growth in the mid- to high teens, driven by continued growth in Dynamics 365. For Intelligent Cloud, we expect revenue to grow between 15% and 16% in constant currency or $23.6 billion to $23.9 billion. Revenue will continue to be driven by Azure, which, as a reminder, can have quarterly variability primarily from our per user business and from in-period revenue recognition depending on the mix of contracts. In Azure, we expect revenue growth to be 26% to 27% in constant currency, including roughly 1 point from AI services. Growth continues to be driven by our Azure consumption business, and we expect the trends from Q3 to continue into Q4, as noted earlier. Our per-user business should continue to benefit from Microsoft 365 suite momentum, though we expect continued moderation in growth rates given the size of the installed base. In our on-premises server business, we expect revenue to decline low single digits as demand for our hybrid solutions, including Windows Server and SQL Server running in multi-cloud environments, will be more than offset by unfavorable FX impact. And in Enterprise Services, revenue should be relatively unchanged year-over-year as growth in Enterprise Support Services will be offset by a decline in Microsoft Consulting Services. In More Personal Computing, we expect revenue of $13.35 billion to $13.75 billion. PC demand should be similar to Q3, and given channel inventory still remains elevated, our revenue will lag overall market growth as it continues to normalize. Therefore, Windows OEM and Devices revenue should both decline in the low to mid-20s. In Windows commercial products and cloud services revenue should decline low to mid-single digits. While we expect healthy annuity billings growth driven by continued customer demand for Microsoft 365 and our advanced security solutions, a reminder that our quarterly revenue growth can have variability, primarily from in-period revenue recognition depending on the mix of contracts. Search and news advertising ex TAC revenue growth should be approximately 10%, roughly 5 points higher than the overall search and news advertising revenue, driven by growth in first-party revenue is similar to Q3. And in Gaming, we expect revenue growth in the mid- to high single digits. We expect Xbox content services revenue growth in the low to mid-teens, driven by third-party and first-party content as well as Xbox Game Pass. Now back to company guidance. We expect COGS to grow between 3% and 4% in constant currency or $16.8 billion to $17 billion and operating expense to grow approximately 2% in constant currency or $15.1 billion to $15.2 billion. Other income and expense should be roughly $300 million as interest income is expected to more than offset interest expense. As a reminder, we are required to recognize mark-to-market gains or losses on our equity portfolio, which can increase quarterly volatility. We expect our Q4 effective tax rate to be in line with our full year rate of approximately 19%. And finally, as a reminder, for Q4 cash flow, we expect to make a $1.3 billion cash tax payment related to the R&D capitalization provision. Now I'd like to share some closing thoughts as we look to the next fiscal year. With our leadership position as we begin this AI era, we remain focused on strategically managing the company to deliver differentiated customer value as well as long-term financial growth and profitability. As with any significant platform shift, it starts with innovation. And we are excited about the early feedback and demand signals for the AI capabilities we have announced to date. We will continue to invest in our cloud infrastructure, particularly AI-related spend as we scale with the growing demand, driven by customer transformation. And we expect the resulting revenue to grow over time. As always, we remain committed to aligning cost and revenue growth to deliver disciplined profitability. Therefore, while the scaled CapEx investments will impact COGS growth, we expect FY '24 operating expense growth to remain low. As a team, we have continually focused on pivoting our resources aggressively to the future as we execute at a high level in the moment to deliver value to our customers. That balance has enabled the company to successfully lead across a number of platform shifts over a number of decades. Therefore, we are committed to leading the AI platform wave and making the investments to support it. With that, let's go to Q&A. Brett?","evidence_gemma_new":null,"evidence_llama_3_3":"Earnings per share","evidence_qwen_3_30b":"earnings per share","gemma_new_max":null,"gemma_new_min":null,"llama_3_3_max":2.45,"llama_3_3_min":2.45,"qwen_3_30b_max":2.45,"qwen_3_30b_min":2.45}
{"symbol":"MSFT","year":2024,"quarter":3,"date":"2024-Q3","chunk_id":3,"sub_chunk_id":0,"centroid_label":"earnings per share","agreed_value":2.94,"count":2,"chunk":"Amy Hood: Thank you, Satya, and good afternoon, everyone. Our third quarter revenue was $61.9 billion, up 17%; and earnings per share was $2.94, up 20%. Results exceeded expectations, and we delivered another quarter of double-digit top and bottom line growth with continued share gains across many of our businesses. In our commercial business, bookings increased 29% and 31% in constant currency, significantly ahead of expectations, driven by Azure commitments with an increase in average deal size and deal length as well as strong execution across our core annuity sales motions. In Microsoft 365, suite strength contributed to ARPU expansion for our Office Commercial business, although new business growth continued to moderate for stand-alone products sold outside the Microsoft 365 suite. Commercial remaining performance obligation increased 20% and 21% in constant currency to $235 billion. Roughly 45% will be recognized in revenue in the next 12 months, up 20% year-over-year. The remaining portion recognized beyond the next 12 months increased 21%. And this quarter, our annuity mix increased to 97%. In our consumer business, PC market demand was slightly better than we expected, benefiting Windows OEM, while advertising spend landed relatively in line with our expectations. In gaming, we also saw better-than-expected performance of Activision titles, benefiting Xbox content and services. At a company level, Activision contributed a net impact of approximately 4 points to revenue growth, was a 2-point drag on operating income growth and had a negative $0.04 impact to earnings per share. A reminder, that this net impact includes adjusting for the movement of Activision content from our prior relationship as a third-party partner to first party and also includes $935 million from purchase accounting adjustments, integration and transaction-related costs. FX did not have a significant impact on our results and was roughly in line with our expectations on total company revenue, segment level revenue, COGS and operating expense growth. Microsoft Cloud revenue was $35.1 billion and grew 23%, ahead of expectations. Microsoft Cloud gross margin percentage decreased slightly year-over-year to 72%, a bit better than expected. Excluding the impact of the change in accounting estimate for useful lives, gross margin percentage increased slightly, driven by improvement in Azure and Office 365, even with the impact of scaling our AI infrastructure, partially offset by sales mix shift to Azure. Company gross margin dollars increased 18% and gross margin percentage increased slightly year-over-year to 70%. Excluding the impact of the change in accounting estimate, gross margin percentage increased roughly 1 point even with the impact from the purchase accounting adjustments, integration and transaction-related costs from the Activision acquisition. Growth was driven by the improvement in Azure and Office 365 just mentioned as well as sales mix shift to higher-margin businesses. Operating expenses increased 10% with 9 points from the Activision acquisition. At a total company level, head count at the end of March was 1% lower than a year ago. Operating income increased 23% and operating margins increased roughly 2 points year-over-year to 45%, excluding the impact of the change in accounting estimate, operating margins increased roughly 3 points, driven by the higher gross margin noted earlier and improved operating leverage through continued cost discipline. Now to our segment results. Revenue from Productivity and Business Processes was $19.6 billion and grew 12% and 11% in constant currency, in line with expectations. Office Commercial revenue grew 13% and 12% in constant currency. Office 365 commercial revenue increased 15%, in line with expectations, driven by healthy renewal execution, ARPU growth from continued E5 momentum and early Copilot for Microsoft 365 progress. Paid Office 365 commercial seats grew 8% year-over-year with installed base expansion across all customer segments. Seat growth was again driven by our small and medium business and frontline worker offerings, although growth continued to moderate in SMB. Office Commercial Licensing declined 20% and 18% in constant currency, with continued customer shift to cloud offerings. Office Consumer revenue increased 4%, slightly below expectations. Microsoft 365 subscriptions grew 14% to $80.8 million. LinkedIn revenue increased 10% and 9% in constant currency, ahead of expectations, driven by slightly better-than-expected performance in our premium subscriptions and Talent Solutions businesses. However, in Talent Solutions, bookings growth continues to be impacted by the weaker hiring environment in key verticals. Dynamics revenue grew 19% and 17% in constant currency, ahead of expectations. Growth was driven by Dynamics 365, which grew 23% and 22% in constant currency with continued growth across all workloads and better-than-expected new business, although bookings growth remains moderated. Segment gross margin dollars increased 11%, and gross margin percentage decreased slightly year-over-year. Excluding the impact of the change in accounting estimate, gross margin percentage increased slightly driven by improvement in Office 365. Operating expenses increased 1% and operating income increased 17% and 16% in constant currency. Next, the Intelligent Cloud segment. Revenue was $26.7 billion, increasing 21%, ahead of expectations with better-than-expected results across all businesses. Overall, Server products and cloud services revenue grew 24%. Azure and other cloud services revenue grew 31% ahead of expectations, while our AI services contributed 7 points of growth as expected. In the non-AI portion of our consumption business, we saw greater-than-expected demand broadly across industries and customer segments as well as some benefit from a greater-than-expected mix of contracts with higher in-period recognition. In our per-user business, the Enterprise Mobility and Security installed base grew 10% to over 274 million seats, with continued impact from the growth trends in new stand-alone business noted earlier. In our on-premises server business, revenue increased 6%, ahead of expectations, driven by better-than-expected renewal strength, particularly for contracts with higher in-period revenue recognition. Enterprise and partner services revenue decreased 9% on a strong prior year comparable for enterprise support services. Segment gross margin dollars increased 20% and gross margin percentage decreased slightly year-over-year. Excluding the impact of the change in accounting estimate [indiscernible] percentage increased slightly, primarily driven by the improvement in Azure noted earlier, even with the impact of scaling our AI infrastructure, partially offset by sales mix shift to Azure. Operating expenses increased 1% and operating income grew 32%. Now to More Personal Computing. Revenue was $15.6 billion, increasing 17% with 15 points of net impact from the Activision acquisition. Results were above expectations, driven by better-than-expected performance in gaming and Windows OEM. Windows OEM revenue increased 11% year-over-year, ahead of expectations, primarily driven by the slightly better PC market noted earlier as well as mix shift to higher monetizing markets. Windows commercial products and cloud services revenue increased 13% and 12% in constant currency, below expectations with impact from the growth trends in new stand-alone business noted earlier as well as lower in-period revenue recognition from a mix of contracts. Devices revenue decreased 17% and 16% in constant currency as we remain focused on our higher-margin premium products. Overall, Surface demand was slightly lower than expected. Search and News advertising revenue ex TAC increased 12% ahead of expectations with continued volume growth and increased engagement on Bing and Edge. And in gaming. Revenue increased 51% and 50% in constant currency with 55 points of net impact from the Activision acquisition. Results were ahead of expectations, primarily driven by Call of Duty. Xbox content and services revenue increased 62% and 61% in constant currency with 61 points of net impact from the Activision acquisition. Xbox hardware revenue decreased 31% and 30% in constant currency. Segment gross margin dollars increased 27% and 26% in constant currency, with 13 points of net impact from the Activision acquisition. Gross margin percentage increased roughly 4 points year-over-year, primarily driven by sales mix shift to higher-margin businesses. Operating expenses increased 41% with 43 points from the Activision acquisition. Operating income increased 16% and 15% in constant currency. Now back to total company results. Capital expenditures, including finance leases, were $14 billion to support our cloud demand, inclusive of the need to scale our AI infrastructure. Cash paid for PP&E was $11 billion. Cash flow from operations was $31.9 billion, up 31%, driven by strong cloud billings and collections. Free cash flow was $21 billion, up 18% year-over-year, reflecting higher capital expenditures to support our cloud and AI offerings. This quarter, other income and expense was negative $854 million, lower than anticipated, driven by losses on investments accounted for under the equity method. Our effective tax rate was approximately 18%. And finally, we returned $8.4 billion to shareholders through dividends and share repurchases. Now moving to our Q4 outlook, which unless specifically noted otherwise, is on a U.S. dollar basis. First, FX. Based on current rates, which reflect the recent strengthening of the U.S. dollar, we now expect FX to decrease total revenue and segment level revenue growth by less than 1 point. When compared to our January guide for Q4, FX, this is a decrease to total revenue of roughly $700 million. We expect FX to decrease COGS growth by approximately 1 point and operating expense growth by less than 1 point. In commercial bookings, we expect solid growth on a relatively flat expiry base driven by continued strong commercial sales execution. As a reminder, larger, long-term Azure contracts, which are more unpredictable in their timing, can drive increased quarterly volatility in our bookings growth rate. Microsoft Cloud gross margin percentage should decrease roughly 2 points year-over-year. Excluding the impact from the change in accounting estimate, Q4 cloud gross margin percentage will be down slightly as improvement in Azure, inclusive of scaling our AI infrastructure will be offset by sales mix shift to Azure. We expect capital expenditures to increase materially on a sequential basis driven by cloud and AI infrastructure investments. As a reminder, there can be normal quarterly spend variability in the timing of our cloud infrastructure build-outs and the timing of finance leases. We continue to bring capacity online as we scale our AI investments with growing demand. Currently, near-term AI demand is a bit higher than our available capacity. Next, to segment guidance. In Productivity and Business Processes, we expect revenue to grow between 9% and 11% in constant currency or US$19.9 billion to US$20.2 billion. In Office Commercial, revenue growth will again be driven by Office 365 with seat growth across customer segments and ARPU growth primarily through E5. We expect Office 365 revenue growth to be approximately 14% in constant currency. We continue to progress with adoption of CoPilot for Microsoft 365 and remain excited for the long-term growth opportunity. In our on-premises business, we expect revenue to decline in the mid to high teens. In Office Consumer, we expect revenue growth in the low to mid-single digits, driven by Microsoft 365 subscriptions. For LinkedIn, we expect revenue growth in the mid to high single digits driven by continued growth across all businesses. And in Dynamics, we expect revenue growth in the low to mid-teens, driven by Dynamics 365. For both LinkedIn and Dynamics, the continued bookings growth moderation noted earlier is a headwind to Q4 revenue growth. For Intelligent Cloud, we expect revenue to grow between 19% and 20% in constant currency or US$28.4 billion to US$28.7 billion. Revenue will continue to be driven by Azure, which, as a reminder, can have quarterly variability primarily from our per-user business and in-period revenue recognition depending on the mix of contracts. In Azure, we expect Q4 revenue growth to be 30% to 31% in constant currency or similar to our stronger-than-expected Q3 results. Growth will be driven by our Azure Consumption business and continued contribution from AI with some impact from the AI capacity availability noted earlier. Our per-user business should see benefit from Microsoft 365 suite momentum. Though we expect continued moderation in seat growth rates given the size of the installed base. In our on-premises server business, we expect revenue growth in the low to mid-single digits with continued hybrid demand, including licenses running in multi-cloud environments. And in Enterprise and Partner Services revenue should decline in the mid- to high single digits on a high prior year comparable for enterprise support services. In More Personal Computing, we expect revenue to grow between 10% and 13% in constant currency or US$15.2 billion to US$15.6 billion. Windows OEM revenue growth should be in the low to mid-single digits as PC market unit volumes continue at pre-pandemic levels. In Windows Commercial Products and Cloud Services, customer demand for Microsoft 365 and our advanced security solutions should drive revenue growth in the mid-single digits. As a reminder, our quarterly revenue growth can have variability primarily from in-period revenue recognition depending on the mix of contracts. In Devices, revenue should decline in the mid-teens as we continue to focus on our higher-margin premium products. Search and news advertising ex TAC revenue growth should be in the low to mid-teens, driven by continued volume strength. This will be higher than overall search and news advertising revenue growth, which we expect to be relatively flat. And in Gaming, we expect revenue growth in the low to mid-40s, including approximately 50 points of net impact from the Activision acquisition. We expect Xbox content and services revenue growth in the high 50s driven by approximately 60 points of net impact from the Activision acquisition. Hardware revenue will decline again year-over-year. Now back to company guidance. We expect COGS between US$19.6 billion to US$19.8 billion, including approximately $700 million from purchase accounting, integration and transaction-related costs from the Activision acquisition. We expect operating expense of US$17.15 billion to US$17.25 billion, including approximately $300 million from purchase accounting, integration and transaction-related costs from the Activision acquisition. Therefore, we now expect full year FY2024 operating margins to be up over 2 points year-over-year, even with our cloud and AI investments, the impact from the Activision acquisition and the headwind from the change in useful lives last year. This operating margin expansion reflects the hard work across every team to drive efficiencies and maintain disciplined cost management, knowing we will continue to grow our cloud and AI investments next year. Other income and expense should be roughly negative $850 million as interest income will be more than offset by interest expense and losses on investments accounted for under the equity method. As a reminder, we are required to recognize gains or losses on our equity investments which can increase quarterly volatility. We expect our Q4 effective tax rate to be approximately 18%. Now I\u2019d like to share some closing thoughts as we look to the next fiscal year. We continue to focus on building businesses that create meaningful value for our customers and therefore, significant growth opportunities for years to come. In FY2025, that focus on execution should again lead to double-digit revenue and operating income growth to scale to meet the growing demand signal for our cloud and AI products, we expect FY2025 capital expenditures to be higher than FY2024. These expenditures over the course of the next year are dependent on demand signals and adoption of our services. So we will manage that signal through the year. We will also continue to prioritize operating leverage. And therefore, we expect FY2025 operating margins to be down only about 1 point year-over-year, even with our significant cloud and AI investments, as well as a full year of impact from the Activision acquisition. We are leading the AI platform wave and are committed to bringing that value to our global customers as we enter the final quarter of our fiscal year. With that, let\u2019s go to Q&A, Brett.","evidence_gemma_new":"earnings per share","evidence_llama_3_3":"earnings per share third quarter","evidence_qwen_3_30b":null,"gemma_new_max":2.94,"gemma_new_min":2.94,"llama_3_3_max":2.94,"llama_3_3_min":2.94,"qwen_3_30b_max":null,"qwen_3_30b_min":null}
{"symbol":"MSFT","year":2024,"quarter":4,"date":"2024-Q4","chunk_id":3,"sub_chunk_id":0,"centroid_label":"earnings per share","agreed_value":2.95,"count":2,"chunk":"Amy Hood: Thank you, Satya, and good afternoon everyone. This quarter, revenue was $64.7 billion, up 15% and 16% in constant currency. Earnings per share was $2.95 and increased 10% and 11% in constant currency. In our largest quarter of the year, we again delivered double-digit top and bottom line growth with continued share gains across many of our businesses and record commitments to our Microsoft Cloud platform. Commercial bookings were significantly ahead of expectations and increased 17% and 19% in constant currency. This record commitment quarter was driven by growth in the number of 10-million-dollar-plus and 100-million-dollar-plus contracts for both Azure and Microsoft 365 and consistent execution across our core annuity sales motions. Commercial remaining performance obligation increased 20% and 21% in constant currency to $269 billion. Roughly 40% will be recognized in revenue in the next 12 months, up 18% year-over-year. The remaining portion, recognized beyond the next 12 months, increased 21%. And this quarter, our annuity mix was 97%. At a company level, Activision contributed a net impact of approximately 3 points to revenue growth, was a 2 point drag on operating income growth, and had a negative $0.06 impact to earnings per share. A reminder that this net impact includes adjusting for the movement of Activision content from our prior relationship as a third-party partner to first-party, and includes $938 million from purchase accounting adjustments, integration, and transaction-related costs. FX did not have a significant impact on our results and was roughly in line with our expectations on total company revenue, segment level revenue, COGS, and operating expense growth. Microsoft Cloud revenue was $36.8 billion and grew 21% and 22% in constant currency, roughly in line with expectations. Microsoft Cloud gross margin percentage decreased roughly 2 points year-over-year to 69% in line with expectations. Excluding the impact of the change in accounting estimate for useful lives, gross margin percentage decreased slightly driven by sales mix shift to Azure, partially offset by improvement in Azure even with the impact of scaling our AI infrastructure. Company gross margin dollars increased 14% and 15% in constant currency and gross margin percentage decreased slightly year-over-year to 70%. Excluding the impact of the change in accounting estimate, gross margin percentage increased slightly, even with the impact from purchase accounting adjustments, integration, and transaction-related costs from the Activision acquisition. Operating expenses increased 13% with 9 points from the Activision acquisition. At a total company level, headcount at the end of June was 3% higher than a year ago. Operating income increased 15% and 16% in constant currency and operating margins were 43%, relatively unchanged year-over-year. Excluding the impact of the change in accounting estimate, operating margins increased slightly driven by the higher gross margin noted earlier and improved operating leverage through continued cost discipline. Now to our segment results. Revenue from Productivity and Business Processes was $20.3 billion and grew 11% and 12% in constant currency, slightly ahead of expectations driven by better-than-expected results across all business units. Office commercial revenue grew 12% and 13% in constant currency. Office 365 commercial revenue increased 13% and 14% in constant currency with ARPU growth primarily from E5 momentum as well as Copilot for Microsoft 365. Paid Office 365 commercial seats grew 7% year-over-year with installed base expansion across all customer segments. Seat growth was again driven by our small and medium business and frontline worker offerings, although both segments continued to moderate. Office commercial licensing declined 9% and 7% in constant currency, with continued customer shift to cloud offerings. Office consumer revenue increased 3% and 4% in constant currency with continued momentum in Microsoft 365 subscriptions, which grew 10% to 82.5 million. LinkedIn revenue increased 10% and 9% in constant currency driven by better-than-expected performance across all businesses. Dynamics revenue grew 16% driven by Dynamics 365 which grew 19% and 20% in constant currency. We saw continued growth across all workloads and better-than-expected new business. Dynamics 365 now represents roughly 90% of total Dynamics revenue. Segment gross margin dollars increased 9% and 10% in constant currency and gross margin percentage decreased roughly 1 point year-over-year. Excluding the impact of the change in accounting estimate, gross margin percentage decreased slightly driven by Office 365 as we scale our AI infrastructure. Operating expenses increased 5%, and operating income increased 12% and 13% in constant currency. Next, the Intelligent Cloud segment. Revenue was $28.5 billion, increasing 19% and 20% in constant currency, in line with expectations. Overall, server products and cloud services revenue grew 21% and 22% in constant currency. Azure and other cloud services revenue grew 29% and 30% in constant currency, in line with expectations and consistent with Q3 when adjusting for leap year. Azure growth included 8 points from AI services where demand remained higher than our available capacity. In June, we saw slightly lower-than-expected growth in a few European geos. In our per-user business, the enterprise mobility and security installed base grew 10% to over 281 million seats with continued impact from moderated growth in seats sold outside the Microsoft 365 suite. Therefore, our Azure consumption business continues to grow faster than total Azure. In our on-premises server business, revenue increased 2% and 3% in constant currency. Growth was driven by demand for our hybrid solutions although with slightly lower-than-expected transactional purchasing. Enterprise and partner services revenue decreased 7% on a strong prior year comparable for Enterprise Support Services. Segment gross margin dollars increased 16% and gross margin percentage decreased roughly 2 points year-over-year. Excluding the impact of the change in accounting estimate, gross margin percentage decreased slightly driven by sales mix shift to Azure, partially offset by the improvement in Azure noted earlier, even with the impact of scaling our AI infrastructure. Operating expenses increased 5% and operating income grew 22% and 23% in constant currency. Now to More Personal Computing. Revenue was $15.9 billion, increasing 14% and 15% in constant currency, with 12 points of net impact from the Activision acquisition. Results were above expectations driven by Windows commercial and Search. The PC market was as expected and Windows OEM revenue increased 4% year-over-year. Windows commercial products and cloud services revenue increased 11% and 12% in constant currency, ahead of expectations due to higher in-period revenue recognition from the mix of contracts. Devices revenue decreased 11% and 9% in constant currency, roughly in line with expectations, as we remain focused on our higher margin premium products. While early days, we\u2019re excited about the recent launch of our Copilot+ PCs. Search and news advertising revenue ex-TAC increased 19%, ahead of expectations, primarily due to improved execution. Healthy volume growth was driven by Bing and Edge. And in Gaming, revenue increased 44% with 48 points of net impact from the Activision acquisition. Xbox content and services revenue increased 61%, slightly ahead of expectations, with 58 points of net impact from the Activision acquisition. Stronger-than-expected performance in first-party content was partially offset by third-party content performance. Xbox hardware revenue decreased 42% and 41% in constant currency. Segment gross margin dollars increased 21%, with 10 points of net impact from the Activision acquisition. Gross margin percentage increased roughly 3 points year-over-year primarily driven by sales mix shift to higher margin businesses. Operating expenses increased 43% with 41 points from the Activision acquisition. Operating income increased 5% and 6% in constant currency. Now back to total company results. Capital expenditures including finance leases were $19 billion, in line with expectations, and cash paid for PP&E was $13.9 billion. Cloud and AI related spend represents nearly all of total capital expenditures. Within that, roughly half is for infrastructure needs where we continue to build and lease datacenters that will support monetization over the next 15 years and beyond. The remaining cloud and AI related spend is primarily for servers, both CPUs and GPUs, to serve customers based on demand signals. For the full fiscal year, the mix of our cloud and AI related spend was similar to Q4. Cash flow from operations was $37.2 billion, up 29% driven by strong cloud billings and collections. Free cash flow was $23.3 billion, up 18% year-over-year, reflecting higher capital expenditures to support our cloud and AI offerings. For the full-year, cash flow from operations surpassed $100 billion for the first time, reaching $119 billion. This quarter, other income and expense was negative $675 million, more favorable than anticipated with lower-than-expected interest expense and higher-than-expected interest income. Our losses on investments accounted for under the equity method were as expected. Our effective tax rate was approximately 19%, higher than anticipated due to a state tax law signed in June that was effective retroactively. And finally, we returned $8.4 billion to shareholders through dividends and share repurchases, bringing our total cash returned to shareholders to over $34 billion for the full fiscal year. Now, moving to our outlook. My commentary for both the full-year and next quarter is on a U.S. dollar basis unless specifically noted otherwise. Let me start with some full year commentary for FY2025. First, FX. Assuming current rates remain stable, we expect FX to have no meaningful impact to full-year revenue, COGS, or operating expense growth. Next, we continue to expect double-digit revenue and operating income growth as we focus on delivering differentiated value for our customers. To meet the growing demand signal for our AI and cloud products, we will scale our infrastructure investments with FY2025 capital expenditures expected to be higher than FY2024. As a reminder, these expenditures are dependent on demand signals and adoption of our services that will be managed through the year. As scaling these investments drives growth in COGS, we will remain disciplined on operating expense management. Therefore, we expect FY2025 OpEx growth to be in the single digits. And given our focused commitment to managing at the operating margin level, we still expect FY2025 operating margins to be down only about one point year-over-year. And finally, we expect our FY2025 effective tax rate to be around 19%. Now, to the outlook for our first quarter. Based on current rates, we expect FX to decrease total revenue and segment level revenue growth by less than one point. We expect FX to decrease COGS growth by less than one point and to have no meaningful impact to operating expense growth. In commercial bookings, increased long-term commitments to our platform and strong execution across core annuity sales motions should drive healthy growth on a growing expiry base. As a reminder, larger long-term Azure contracts, which are more unpredictable in their timing, can drive increased quarterly volatility in our bookings growth rate. Microsoft Cloud gross margin percentage should be roughly 70%, down year-over-year driven by the impact of scaling our AI infrastructure. We expect capital expenditures to increase on a sequential basis given our cloud and AI demand, as well as existing AI capacity constraints. As a reminder, there can be quarterly spend variability from cloud infrastructure buildouts and the timing of delivery of finance leases. Next to segment guidance. In Productivity and Business Processes, we expect revenue to grow between 10% and 11% in constant currency, or US$20.3 to US$20.6 billion. In Office Commercial, revenue growth will again be driven by Office 365 with seat growth across customer segments and ARPU growth through E5 and Copilot for Microsoft 365. We expect Office 365 revenue growth to be approximately 14% in constant currency. In our on-premises business, we expect revenue to decline in the mid to high-teens. In Office consumer, we expect revenue growth in the low to mid-single digits, driven by Microsoft 365 subscriptions. For LinkedIn, we expect revenue growth in the high single digits driven by continued growth across all businesses. And in Dynamics, we expect revenue growth in the low to mid-teens driven by Dynamics 365. For Intelligent Cloud we expect revenue to grow between 18% and 20% in constant currency, or US$28.6 billion to US$28.9 billion. Revenue will continue to be driven by Azure which, as a reminder, can have quarterly variability primarily from our per-user business and in-period revenue recognition depending on the mix of contracts. In Azure, we expect Q1 revenue growth to be 28% to 29% in constant currency. Growth will continue to be driven by our consumption business, inclusive of AI, which is growing faster than total Azure. We expect the consumption trends from Q4 to continue through the first half of the year. This includes both AI demand impacted by capacity constraints and non-AI growth trends similar to June. Growth in our per-user business will continue to moderate. And in H2, we expect Azure growth to accelerate as our capital investments create an increase in available AI capacity to serve more of the growing demand. In our on-premises server business, we expect revenue to decline in the low single digits as continued hybrid demand will be more than offset by lower transactional purchasing. And in Enterprise and partner services, revenue should decline in the low single digits. In More Personal Computing, we expect revenue to grow between 9% and 12% in constant currency, or US$14.9 billion to US$15.3 billion. Windows OEM revenue growth should be relatively flat, roughly in line with the PC market. In Windows commercial products and cloud services, customer demand for Microsoft 365 and our advanced security solutions should drive revenue growth in the mid-single digits. As a reminder, our quarterly revenue growth can have variability primarily from in-period revenue recognition depending on the mix of contracts. In Devices, revenue growth should be in the low to mid-single digits. Search and news advertising ex-TAC revenue growth should be in the mid to high-teens. This will be higher than overall Search and news advertising revenue growth, which we expect to be in the low single digits. And in Gaming, we expect revenue growth in the mid-30s, including approximately 40 points of net impact from the Activision acquisition. We expect Xbox content and services revenue growth in the low to mid-50s, driven by the net impact from the Activision acquisition. Hardware revenue will again decline year-over-year. Now back to company guidance. We expect COGS between US$19.95 billion to US$20.15 billion, including approximately $700 million from purchase accounting, integration, and transaction-related costs from the Activision acquisition. We expect operating expense of US$15.2 billion to US$15.3 billion, including approximately $200 million from purchase accounting, integration, and transaction-related costs from the Activision acquisition. Other income and expense should be roughly negative $650 million driven by losses on investments accounted for under the equity method as interest income will be mostly offset by interest expense. As a reminder, we are required to recognize gains or losses on our equity investments, which can increase quarterly volatility. We expect our Q1 effective tax rate to be approximately 19%. In closing, we remain focused on delivering innovations that matter to our global customers of every size. That focus extends to delivering on our financial commitments as well. We delivered operating margin growth of nearly three points year-over-year even as we accelerated our AI investments, completed the Activision acquisition, and had a headwind from the change of useful lives last year. So, as we begin FY2025, we will continue to invest in the cloud and AI opportunity ahead aligned, and if needed adjusted, to the demand signals we see. We are committed to growing our leadership across our commercial cloud and within that, the AI platform, and we feel well positioned as we start FY2025. With that, let's go to Q&A, Brett.","evidence_gemma_new":null,"evidence_llama_3_3":"earnings per share this quarter","evidence_qwen_3_30b":"Earnings per share Quarterly 10% 11%","gemma_new_max":null,"gemma_new_min":null,"llama_3_3_max":2.95,"llama_3_3_min":2.95,"qwen_3_30b_max":2.95,"qwen_3_30b_min":2.95}
{"symbol":"MSFT","year":2023,"quarter":4,"date":"2023-Q4","chunk_id":3,"sub_chunk_id":0,"centroid_label":"microsoft cloud gross margin percentage","agreed_value":0.72,"count":2,"chunk":"Amy Hood: Thank you, Satya, and good afternoon, everyone. This quarter, revenue was $56.2 billion, up 8% and 10% in constant currency. Earnings per share was $2.69 and increased 21% and 23% in constant currency. In our largest quarter of the year, results exceeded expectations with focused execution by our sales and partner teams. These execution efforts led to share gains again this quarter in Azure, Dynamics, Security and Edge. In our commercial business, we continued to see healthy renewal strength, which includes our upsell and attach motions, particularly with Microsoft 365 E5. Growth of new business continued to be moderated for products sold outside the Microsoft 365 suite, including stand-alone Office 365, EMS and Windows Commercial products. As expected in Azure, we saw a continuation of the optimization and new workload trends from the prior quarter. In our consumer business, the PC market overall was in line with expectations, although the early timing of back-to-school inventory builds benefited Windows OEM. Advertising spend was slightly lower than anticipated, which impacted search and news advertising and LinkedIn Marketing Solutions. Commercial bookings decreased 2% and 1% in constant currency, in line with expectations against the prior year comparable that was our largest commercial bookings quarter ever. In addition to the healthy execution across our renewal sales motions mentioned earlier, we saw a record number of $10 million-plus contracts for both Azure and Microsoft 365. And the average annualized value for our large, long-term Azure contracts was the highest it's ever been, driven by customer demand for our innovative cloud solutions today as well as interest in AI opportunities ahead. Commercial remaining performance obligation increased 19% and 18% in constant currency to $224 billion. Roughly 45% will be recognized in revenue in the next 12 months, up 13% year-over-year. The remaining portion, which we recognized beyond the next 12 months, increased 22%. And this quarter, our annuity mix increased to 97%. FX impact on total company revenue, segment level revenue and operating expense growth was as expected. FX decreased COGS growth by 1 point, 1 point favorable to expectations. Microsoft Cloud revenue was $30.3 billion and grew 21% and 23% in constant currency, slightly ahead of expectations. Microsoft Cloud gross margin percentage increased roughly 3 points year-over-year to 72%, also slightly ahead of expectations. Excluding the impact of the change in accounting estimate for useful lives, Microsoft Cloud gross margin percentage increased slightly, driven by improvements in Office 365, partially offset by lower Azure margin and the impact of scaling our AI infrastructure to meet growing demand. Company gross margin dollars increased 11% and 13% in constant currency, including 2 points due to the change in accounting estimate. Gross margin percentage increased year-over-year to 70%. Excluding the impact of the change in accounting estimate, gross margin percentage increased slightly, driven by improvements in Office 365. Operating expense increased 2%, in line with expectations as savings across the company from our focus on prioritization and efficiency were offset by the charge related to the Irish Data Protection Commission matter. At a total company level, headcount at the end of June was flat compared to a year ago. Operating income increased 18% and 21% in constant currency, including 4 points due to the change in accounting estimate. Operating margins increased roughly 4 points year-over-year to 43%. Excluding the impact of the change in accounting estimate, operating margins increased roughly 2 points, driven by improved operating leverage through disciplined cost management. Now to our segment results. Revenue from Productivity and Business Processes was $18.3 billion and grew 10% and 12% in constant currency, ahead of expectations with better-than-expected results in Office Commercial, partially offset by LinkedIn. Office Commercial revenue grew 12% and 14% in constant currency. Office 365 Commercial revenue increased 15% and 17% in constant currency, a bit better than expected with particular strength in E5 upsell renewal noted earlier. Paid Office 365 Commercial seats grew 11% year-over-year with installed base expansion across all workloads and customer segments. Seat growth was again driven by our small and medium business and frontline worker offerings. Office Commercial licensing declined 20% and 18% in constant currency with better-than-expected transactional purchasing. Office Consumer revenue increased 3% and 6% in constant currency with continued momentum in Microsoft 365 subscriptions, which grew 12% to $67 million. LinkedIn revenue increased 5% and 7% in constant currency, driven by growth in Talent Solutions, with some continued bookings impact from the weaker hiring environment in key verticals. Growth was partially offset by a decline in Marketing Solutions due to the lower ad spend noted earlier. Dynamics revenue grew 19% and 21% in constant currency, driven by Dynamics 365, which grew 26% and 28% in constant currency, with continued healthy growth across all workloads. Segment gross margin dollars increased 14% and 16% in constant currency, and gross margin percentage increased roughly 3 points year-over-year. Excluding the impact of the change in accounting estimate, gross margin percentage increased roughly 1 point, driven by improvements in Office 365. Operating expenses decreased slightly and operating income increased 25% and 29% in constant currency, including 3 points due to the change in accounting estimate. Next, the Intelligent Cloud segment. Revenue was $24 billion, increasing 15% and 17% in constant currency, slightly ahead of expectations. Overall, server products and cloud services revenue increased 17% and 18% in constant currency. Azure and other cloud services revenue grew 26% and 27% in constant currency, including roughly 1 point from AI services, as expected. In our per user business, the Enterprise Mobility and Security installed base grew 11% to over 256 million seats, with impact from the continued growth trends in new business noted earlier. In our on-premises server business, revenue decreased 1% and was relatively unchanged in constant currency, driven by a slight decrease in new annuity contracts, which carry higher in-period revenue recognition. Enterprise Services revenue grew 4% and 5% in constant currency with better-than-expected performance across enterprise support services and industry solutions. Segment gross margin dollars increased 16% and 17% in constant currency, and gross margin percentage increased slightly. Excluding the impact of the change in accounting estimate, gross margin percentage declined roughly 2 points, driven by sales mix shift to Azure and the lower Azure margin noted earlier. Operating expenses increased 10%. Operating income grew 20% and 22% in constant currency, with roughly 6 points from the change in accounting estimate. Now to More Personal Computing. Revenue was $13.9 billion, decreasing 4% and 3% in constant currency, above expectations, driven by better-than-expected performance in Windows, partially offset by Gaming. Windows OEM revenue decreased 12% year-over-year, ahead of expectations due to 7 points of benefit from early back-to-school inventory builds, while the overall PC market was as expected. Devices revenue decreased 20% and 18% in constant currency, roughly in line with expectations. Windows commercial products and cloud services revenue increased 2% and 3% in constant currency, ahead of expectations, due to the renewal strength noted earlier, even with the moderated growth of new business and stand-alone offerings. Search and news advertising revenue ex TAC increased 8%, a bit behind expectations due to lower ad spend noted earlier. Higher search volumes, share gains again this quarter for our Edge browser, and the benefit from the Xandr acquisition were partially offset by the impact from third-party partnerships. And in Gaming, revenue increased 1% and 2% in constant currency, lower than expected due to weakness in first-party and third-party content performance. Xbox content and services revenue increased 5% and 6% in constant currency and Xbox hardware revenue declined 13%. Segment gross margin dollars declined 2% and were relatively unchanged in constant currency, and gross margin percentage increased roughly 1 point year-over-year, driven by sales mix shift to higher-margin businesses. Operating expenses declined 9% and 8% in constant currency. Operating income increased 4% and 6% in constant currency. Now back to total company results. Capital expenditures, including finance leases, were $10.7 billion to support cloud demand, including investments in AI infrastructure. Cash paid for PP&E was $8.9 billion. Cash flow from operations was $28.8 billion, up 17% year-over-year as strong cloud billings and collections were partially offset by a tax payment related to the R&D capitalization provision. Free cash flow was $19.8 billion, up 12% year-over-year. Excluding the impact of this tax payment, cash flow from operations increased 22% and free cash flow increased 19%. This quarter, other income and expense was $473 million, higher than anticipated, driven by net gains on foreign currency remeasurement. Our effective tax rate was approximately 19%. And finally, we returned $9.7 billion to shareholders through share repurchases and dividends, bringing our total cash returned to our shareholders to over $38 billion for the full fiscal year. Now let's turn to next fiscal year and start with a few reminders. First, the change in accounting estimate for the useful life of server and network equipment resulted in $3.7 billion of depreciation expense shifting from FY '23 to future periods. Our FY '23 operating income and margins benefited from this change in accounting estimate and that will be a headwind to growth in FY '24 as the benefit reduces to $2.1 billion. Next, my outlook commentary for both the full year and next quarter is on a U.S. dollar basis unless specifically noted otherwise. And my outlook does not include any impact from the Activision acquisition, which we continue to work towards closing, subject to obtaining required regulatory approvals. Now for some thoughts on the full year of FY '24. With the weaker U.S. dollar and assuming current rates remain stable, we expect FX to increase full year revenue growth by approximately 1 point with no impact to COGS or operating expense growth. The impact in H1 is expected to be greater than H2. At a total company level, revenue growth from our Commercial business will continue to be driven by the Microsoft Cloud and will again outpace the growth from our Consumer business. Even with strong demand and a leadership position, growth from our AI services will be gradual as Azure AI scales and our copilots reach general availability dates. So for FY '24, the impact will be weighted towards H2. To support our Microsoft Cloud growth and demand for our AI platform, we will accelerate investment in our cloud infrastructure. We expect capital expenditures to increase sequentially each quarter through the year as we scale to meet demand signals. We are committed to driving operating leverage, and therefore, we will manage our total cost growth across COGS and operating expense in line with the demand signals we see as well as revenue growth. Increased capital spend will drive higher COGS growth than in FY '23, and FY '24 operating expense growth will remain low as we prioritize our spend. Therefore, we expect full year operating margins to remain flat year-over-year, even with the headwind from the change in accounting estimate. And finally, we expect our FY '24 tax rate to be around 19%. Now to the outlook for the first quarter. First, FX. Based on current rates, we expect FX to increase total revenue and operating expense growth by approximately 1 point with no impact to COGS growth. Within the segments, we expect FX to increase revenue growth in Intelligent Cloud by 1 point with no impact to Productivity and Business Processes or More Personal Computing. In Commercial bookings, strong execution across our core annuity sales motions, including our renewal and upsell motions, along with long-term measure commitments should drive healthy growth on a growing expiry base. Microsoft Cloud gross margin percentage should decrease roughly 1 point year-over-year, driven by the accounting estimate change headwind noted earlier. Excluding that impact, Q1 cloud gross margin percentage will be up roughly 1 point, primarily driven by improvements in Azure and Office 365, partially offset by sales mix shift to Azure and the impact of scaling our AI infrastructure to meet growing demand. We expect capital expenditures to increase sequentially on a dollar basis, as noted earlier, driven by investments in our AI infrastructure. Reminder, there can be normal quarterly spend variability in the timing of cloud infrastructure build-out. Next to segment guidance. In Productivity and Business Processes, we expect revenue to grow between 9% and 11% or USD 18 billion to USD 18.3 billion. In Office Commercial, revenue growth will again be driven by Office 365 with seat growth across customer segments and ARPU growth through E5. We expect Office 365 revenue growth to be roughly 16% in constant currency. In our on-premises business, we expect revenue to decline in the low 20s. In Office Consumer, we expect revenue growth to be in the low to mid-single digits, driven by Microsoft 365 subscriptions. For LinkedIn, we expect revenue growth in the low to mid-single digits. Even with share gains in our hiring business, growth will continue to be impacted by the overall markets for recruiting and advertising, especially in the technology industry, where we have significant exposure. And in Dynamics, we expect revenue growth in the mid- to high teens, driven by continued growth in Dynamics 365. For Intelligent Cloud, we expect revenue to grow between 15% and 16%, or 14% and 15% in constant currency. Revenue should be USD 23.3 billion to USD 23.6 billion. Revenue will continue to be driven by Azure, which, as a reminder, can have quarterly variability primarily from our per user business and from in-period revenue recognition depending on the mix of contracts. In Azure, we expect revenue growth to be 25% to 26% in constant currency, including roughly 2 points from all Azure AI Services. Growth continues to be driven by our Azure consumption business, and we expect the trends from Q4 to continue into Q1. Our per user business should continue to benefit from Microsoft 365 suite momentum, though we expect continued moderation in growth rates, given the size of the installed base. In our on-premises server business, we expect revenue to decline low to mid-single digits against a prior comparable that benefited from annuity purchasing ahead of the SQL Server 2022 launch. And in Enterprise Services, revenue should decline low to mid-single digits year-over-year as growth in Enterprise Support Services will be more than offset by a decline in Industry Solutions. In More Personal Computing, we expect revenue of USD 12.5 billion to USD 12.9 billion. Windows OEM revenue should decline low to mid-teens, including 5 points of negative impact from the earlier back-to-school inventory builds that were pulled into the fourth quarter. Our guide assumes no significant changes to the PC demand environment. In devices, revenue should decline in the mid-30s due to the overall PC market and adjustments we made in our portfolio with an increased focus on our higher-margin premium products. In Windows commercial products and cloud services, customer demand for Microsoft 365 and our advanced security solutions should drive revenue growth in the mid- to high single digits. Search and news advertising ex TAC revenue growth should be mid- to high single digits, roughly 5 points higher than overall search and news advertising revenue, driven by continued volume strength supported by Edge browser share gains. Growth will continue to be impacted by the advertising spend environment and third-party partnerships mentioned earlier. We continue to be excited by Bing usage signals and the longer-term opportunity as we invest in AI. And in Gaming, we expect revenue growth in the mid-single digits. We expect Xbox content and services revenue growth in the mid- to high single digits, driven by first-party and third-party content as well as Xbox Game Pass. Now back to company guidance. We expect COGS between USD 16.6 billion to USD 16.8 billion and operating expense of USD 13.5 billion to USD 13.6 billion. Together, total cost growth should be around 6%. Other income and expense should be roughly $300 million as interest income is expected to more than offset interest expense. Two reminders. This does not include any impact from Activision on interest income and expense, and we are required to recognize mark-to-market gains or losses on our equity portfolio, which can increase quarterly volatility. We expect our Q1 effective tax rate to be around 19%. And finally, as a reminder for Q1 cash flow, we expect to make a $2.7 billion cash tax payment related to the TCJA transition tax. We do not expect payment related to the R&D capitalization provision in Q1. In closing, as a company, we delivered on the FY '23 financial commitments we discussed a year ago on revenue and operating margin. A focus on operational excellence allowed us to achieve these targets while we delivered near-term value to customers and prioritized our investments to continue to lead in the future. As we start FY '24, we are excited for the opportunities ahead and remain focused on delivering the 3 key priorities Satya mentioned. We'll maintain our lead as the top commercial cloud by helping customers use the breadth and depth of the Microsoft Cloud. We'll continue to invest in our cloud and AI infrastructure while scaling with growing demand so we can lead the AI platform wave. And finally, we'll align our costs with growth as we are committed to driving operating leverage. With that, let's go to Q&A, Brett.","evidence_gemma_new":null,"evidence_llama_3_3":"Microsoft Cloud gross margin percentage year-over-year","evidence_qwen_3_30b":"Microsoft Cloud gross margin percentage","gemma_new_max":null,"gemma_new_min":null,"llama_3_3_max":0.72,"llama_3_3_min":0.72,"qwen_3_30b_max":0.72,"qwen_3_30b_min":0.72}
{"symbol":"MSFT","year":2024,"quarter":1,"date":"2024-Q1","chunk_id":3,"sub_chunk_id":0,"centroid_label":"microsoft cloud gross margin percentage","agreed_value":0.73,"count":2,"chunk":"Amy Hood: Thank you, Satya, and good afternoon, everyone. This quarter's revenue was $56.5 billion, up 13% and 12% in constant currency. Earnings per share was $2.99 and increased 27% and 26% in constant currency. Consistent execution by our sales teams and partners drove a strong start to the fiscal year. Results exceeded expectations and we saw share gains again this quarter across many businesses, as customers adopt our innovative solutions to transform their businesses. In our commercial business, the trends from the prior quarter continued. We saw healthy renewals, particularly in Microsoft 365 E5 and growth of new business continued to be moderated for standalone products sold outside the Microsoft 365 suite. In Azure, as expected the optimization trends were similar to Q4. Higher-than-expected AI consumption contributed to revenue growth in Azure. And our consumer business, PC market unit volumes are returning to pre-pandemic levels. Advertising spend, landed roughly in line with our expectations and in gaming strong engagement helped by the Starfield launch benefited Xbox content and services. Commercial bookings increased 14% and 17% in constant currency, in line with expectations, primarily driven by strong execution across our core annuity sales motions, with continued growth in the number of $10 million plus contracts for both Azure and Microsoft 365. Commercial remaining performance obligation, increased 18% to $212 billion, and roughly 45% will be recognized in revenue in the next 12 months, up 15% year-over-year. The remaining portion, which will be recognized beyond the next 12 months increased 20% and this quarter, our annuity mix was 96%. FX did not have a significant impact on our results and was roughly in line with our expectations on total company revenue, segment-level revenue, COGS, and operating expense growth. Microsoft Cloud revenue was $31.8 billion and grew 24% and 23% in constant currency, ahead of expectations. Microsoft Cloud's gross margin percentage increased slightly year-over-year to 73%, a point better than expected, primarily driven by improvements in Azure. Excluding the impact of the change in accounting estimate for useful lives, Microsoft Cloud's gross margin percentage increased roughly 2 points, driven by the improvement just mentioned in Azure as well as Office 365, partially offset by the impact of scaling our AI infrastructure to meet growing demand. Company gross margin dollars increased 16% and 15% in constant currency and gross margin percentage increased year-over-year to 71%. Excluding the impact of the change in accounting estimate, the gross margin percentage increased roughly 3 points, driven by the improvement in Azure and Office 365 as well as sales mix shift to higher margin businesses. Operating expenses increased 1%, lower than expected due to cost-efficiency focus as well as investments that shifted to future quarters. Operating expense growth was driven by marketing, LinkedIn, and cloud engineering, partially offset by devices. At a total company level, headcount at the end of September was 7% lower than a year ago. Operating income increased 25% and 24% in constant currency. Operating margins increased roughly 5 points year-over-year to 48%. Excluding the impact of the change in accounting estimate, operating margins increased roughly 6 six points, driven by improved operating leverage through cost management and the higher gross margin noted earlier. Now to our segment results. Revenue from Productivity and Business Processes was $18.6 billion and grew 13% and 12% in constant currency, ahead of expectations, driven by better-than-expected results in Office 365 Commercial and LinkedIn. Office Commercial revenue grew 15% and 14% in constant currency. Office 365 Commercial revenue increased 18% and 17% in constant currency, slightly better than expected with a bit more in-period revenue recognition, while billings remained relatively in line with expectations. Growth continues to be driven by healthy renewal execution and ARPU growth, as E5 momentum remains strong. Paid Office 365 Commercial seats grew 10% year-over-year, with installed-base expansion across all customer segments. Seat growth was again driven by our small and medium business and frontline worker offerings with continued impact from the growth trends in new standalone business noted earlier. Office Commercial licensing declined 17%, in line with the continued customer shift to cloud offerings. Office Consumer revenue increased 3% and 4% in constant currency with continued momentum in Microsoft 365 subscriptions, which grew 18% to 76.7 million. LinkedIn revenue increased 8%, ahead of expectations, driven by slightly better-than-expected performance across all businesses. Growth was driven by Talent Solutions, though we continue to see negative year-over-year bookings there from the weaker hiring environment in key verticals. Dynamics revenue, grew 22% and 21% in constant currency, driven by Dynamics 365, which grew 28% and 26% in constant currency with continued growth across all workloads. Segment gross margin dollars increased 13% and gross margin percentage increased slightly year-over-year. Excluding the impact of the change in accounting estimate, gross margin percentage increased roughly, 1 point, driven by improvements in Office 365. Operating expenses increased to 2% and operating income increased 20% and 19% in constant currency. Next, the Intelligent Cloud segment. Revenue was $24.3 billion, increasing 19% and ahead of expectations, with better-than-expected results across all businesses. Overall, server products and cloud services revenue grew 21%. Azure and other cloud services revenue grew 29% and 28% in constant currency, including roughly 3 points from AI Services. While the trends from prior quarter continued, growth was ahead of expectations, primarily driven by increased GPU capacity and better-than-expected GPU utilization of our AI services, as well as slightly higher-than-expected growth in our per-user business. In our per user business, the enterprise mobility and security installed base, grew 11% to over 259 million seats with continued impact from the growth trends in new standalone business noted earlier. In our on-premises server business, revenue increased 2% ahead of expectations, driven primarily by demand in advance of Windows Server 2012 end of support. Enterprise and partner services revenue increased 1% and was relatively unchanged in constant currency ahead of expectations, driven by a better-than-expected performance in Enterprise Support Services. Segment gross margin dollars increased 20% and 19% in constant currency and gross margin percentage increased slightly. Excluding the impact of the change in accounting estimate, gross margin percentage increased roughly 2 points, driven by the improvement in Azure noted earlier, even as we scale our AI infrastructure to meet growing demand. Operating expenses increased 2% and 1% in constant currency, operating income grew 31% and 30% in constant currency. Now to More Personal Computing, revenue was $13.7 billion, increasing 3% and 2% in constant currency, above expectations, with better-than-expected results across all businesses. Windows OEM revenue increased 4% year-over-year, significantly ahead of expectations, driven by stronger-than-expected consumer channel inventory builds and the stabilizing PC market demand noted earlier, particularly in commercial. Windows Commercial products and cloud services revenue increased 8%, driven by demand for Microsoft 365 E5. Devices revenue decreased 22%, ahead of expectations due to stronger execution in the commercial segment. Search and news advertising revenue, ex-TAC increased 10% and 9% in constant currency, slightly ahead of expectations. We saw increased engagement on Bing and Edge share gains again this quarter, although search revenue growth continues to be impacted by a third-party partnership. And in gaming, revenue increased 9% and 8% in constant currency, ahead of expectations, driven by better-than-expected subscriber growth in Xbox Game Pass as well as first-party content, primarily due to the Starfield launch. Xbox content and services revenue increased 13% and 12% in constant currency and Xbox hardware revenue declined 7% and 8% in constant currency. Segment gross margin dollars increased 13% and 12% in constant currency, and gross margin percentage increased roughly 5 points year-over-year, driven primarily by sales mix-shift to higher-margin businesses. Operating expenses declined 1% and operating income increased 23% and 22% in constant currency. Now back to total company results. Capital expenditures, including finance leases were $11.2 billion to support cloud demand, including investments to scale our AI infrastructure. Cash paid for PP&E was $9.9 billion. Cash flow from operations was $30.6 billion, up 32% year-over-year, driven by strong cloud billings and collections. Free cash flow was $20.7 billion, up 22% year-over-year. This quarter, other income and expense was $389 million, higher-than-anticipated, driven by interest income, partially offset by net losses on investments and foreign currency remeasurement. Our effective tax rate was approximately 18%. And finally, we returned $9.1 billion to shareholders, through share repurchases and dividends. Now moving to our Q2 outlook, which unless specifically noted otherwise is on a U.S. dollar basis. The Activision acquisition closed on October 13. So my commentary includes the net impact of the deal from the date of acquisition. Our outlook includes purchase accounting impact, integration, and transaction-related expenses based on our current understanding of the purchase price allocation and related deal accounting. The net impact includes adjusting for the movement of Activision content from our prior relationship as a third-party partner to first party. Now to FX. Based on current rates, we expect FX to increase total revenue and segment-level revenue growth by approximately 1 point. We expect FX to have no impact to COGS and operating expense growth. In commercial bookings, we expect consistent execution across our core annuity sales motions, including healthy renewals. The growth will be impacted by a low growth expiry base. Therefore, we expect bookings growth to be relatively flat. Microsoft Cloud gross margin percentage to be relatively flat year-over-year, excluding the impact from the accounting estimate change, Q2 Cloud gross margin percentage will be up roughly 1 point, primarily driven by improvement in Azure and Office 365, partially offset by the impact of scaling our AI infrastructure to meet growing demand. We expect capital expenditures to increase sequentially on a dollar basis, driven by investments in our cloud and AI infrastructure. As a reminder, there can be normal quarterly spend variability in the timing of our cloud infrastructure buildout. Next to segment guidance. In Productivity and Business Processes, we expect revenue to grow between 11% and 12% or $18.8 billion to $19.1 billion. Growth in constant currency will be approximately 1 point lower. In Office Commercial, revenue growth will again be driven by Office 365 with seat growth across customer segments and ARPU growth through E5. We expect Office 365 revenue growth to be up roughly 16% in constant currency. We're excited for Microsoft 365 Copilot general availability on November 1st, and expect the related revenue to grow gradually over time. In our on-premise business, we expect revenue to decline in the mid-to-high teens. In Office Consumer, we expect revenue growth in the mid-single-digits, driven by Microsoft 365 subscriptions. For LinkedIn, we expect revenue growth in the mid-single-digits, driven by Talent Solutions and Marketing Solutions. Growth continues to be impacted by the overall market environment for recruiting and advertising, especially in the technology industry, where we have significant exposure. And in Dynamics, we expect revenue growth in the high teens, driven by Dynamics 365. For Intelligent Cloud, we expect revenue to grow between 17% and 18% or $25.1 billion to $25.4 billion. Revenue growth in constant currency will be approximately 1 point lower. Revenue will continue to be driven by Azure, which as a reminder can have quarterly variability, primarily from our per-user business and from in-period revenue recognition, depending on the mix of contracts. In Azure, we expect revenue growth to be 26% to 27% in constant currency, with an increasing contribution from AI. Growth continues to be driven by Azure consumption business and we expect the trends from Q1 to continue into Q2. Our per user business should continue to benefit from Microsoft 365 suite momentum, though we expect continued moderation in seat growth rates, given the size of the installed base. For H2, assuming the optimization and new workload trends continue and with the growing contribution from AI, we expect Azure revenue growth in constant currency to remain roughly stable compared to Q2. And our on-premises server business, we expect revenue growth to be roughly flat with continued hybrid demand, particularly from licenses running in multi-cloud environments. And in enterprise and partner services, revenue should decline by low-to-mid single digits. Now to more Personal Computing, which includes the net impact from the Activision acquisition. We expect revenue of $16.5 billion to $16.9 billion. Windows OEM revenue growth should be mid-to-high single digits with PC market unit volumes expected to look roughly similar to Q1. In devices, revenue should decline in the mid-teens as we continue to focus on our higher-margin premium products. In Windows Commercial products and cloud services, customer demand for Microsoft 365 and our advanced security solutions should drive revenue growth in the low-to-mid teens. Search and news advertising ex-TAC revenue growth should be mid-single digits with roughly 4 points of negative impact from a third-party partnership. Growth should be driven by volume strength, supported by Edge browser share gains and increasing Bing engagement, as we expect the advertising spend environment to be similar to Q1. A reminder that this ex-TAC growth will be roughly 4 points higher than overall search and news advertising revenue. And in gaming, we expect revenue growth in the mid-to-high 40s. This includes roughly 35 points of net impact from the Activision acquisition, which as a reminder includes adjusting for the third-party to first-party content change noted earlier. We expect Xbox content and services revenue growth in the mid-to-high 50s, driven by roughly 50 points of net impact from the Activision acquisition. Now back to company guidance. We expect COGS between $19.4 billion to $19.6 billion, including approximately $500 million of amortization of acquired intangible assets from the Activision acquisition. We expect operating expense of $15.5 billion to $15.6 billion, including approximately $400 million from purchase accounting adjustments, integration and transaction-related cost from the Activision acquisition. Other income and expense should be roughly negative $500 million, as interest income will be more than offset by interest expense, primarily due to a reduction in our investment portfolio balance and the issuance of short-term debt, both for the Activision acquisition. As a reminder, we are required to recognize gains or losses on our equity investments, which can increase quarterly volatility. We expect our Q2 effective tax rate to be between 19% and 20%. Now, some additional thoughts on H2 as well as the full fiscal year. First, FX, assuming current rates remain stable, we expect FX to have no meaningful impact to full year revenue COGS or operating expense growth. Therefore, in H2, we expect FX to decrease revenue COGS and operating expense growth by 1 point. Second, Activision, we expect approximately $900 million for purchase accounting adjustments as well as integration and transaction-related costs in each quarter in H2. For a full FY '24, we remain committed to investing for the cloud and AI opportunity, while also maintaining our disciplined focus on operating leverage. Therefore, as we add the net impact of Activision, inclusive of purchase accounting adjustments as well as integration and transaction-related expenses, we continue to expect full year operating margins to remain flat year-over-year. In closing, with our strong start to FY '24, I am confident that as a team, we will continue to deliver healthy growth in the year ahead, driven by our leadership in commercial cloud and our commitment to lead the AI platform wave. With that. Let's go to Q&A, Brett.","evidence_gemma_new":null,"evidence_llama_3_3":"Microsoft Cloud gross margin percentage","evidence_qwen_3_30b":"Microsoft Cloud gross margin percentage Quarterly","gemma_new_max":null,"gemma_new_min":null,"llama_3_3_max":0.73,"llama_3_3_min":0.73,"qwen_3_30b_max":0.73,"qwen_3_30b_min":0.73}
{"symbol":"MSFT","year":2024,"quarter":3,"date":"2024-Q3","chunk_id":3,"sub_chunk_id":0,"centroid_label":"microsoft cloud gross margin percentage","agreed_value":72.0,"count":2,"chunk":"Amy Hood: Thank you, Satya, and good afternoon, everyone. Our third quarter revenue was $61.9 billion, up 17%; and earnings per share was $2.94, up 20%. Results exceeded expectations, and we delivered another quarter of double-digit top and bottom line growth with continued share gains across many of our businesses. In our commercial business, bookings increased 29% and 31% in constant currency, significantly ahead of expectations, driven by Azure commitments with an increase in average deal size and deal length as well as strong execution across our core annuity sales motions. In Microsoft 365, suite strength contributed to ARPU expansion for our Office Commercial business, although new business growth continued to moderate for stand-alone products sold outside the Microsoft 365 suite. Commercial remaining performance obligation increased 20% and 21% in constant currency to $235 billion. Roughly 45% will be recognized in revenue in the next 12 months, up 20% year-over-year. The remaining portion recognized beyond the next 12 months increased 21%. And this quarter, our annuity mix increased to 97%. In our consumer business, PC market demand was slightly better than we expected, benefiting Windows OEM, while advertising spend landed relatively in line with our expectations. In gaming, we also saw better-than-expected performance of Activision titles, benefiting Xbox content and services. At a company level, Activision contributed a net impact of approximately 4 points to revenue growth, was a 2-point drag on operating income growth and had a negative $0.04 impact to earnings per share. A reminder, that this net impact includes adjusting for the movement of Activision content from our prior relationship as a third-party partner to first party and also includes $935 million from purchase accounting adjustments, integration and transaction-related costs. FX did not have a significant impact on our results and was roughly in line with our expectations on total company revenue, segment level revenue, COGS and operating expense growth. Microsoft Cloud revenue was $35.1 billion and grew 23%, ahead of expectations. Microsoft Cloud gross margin percentage decreased slightly year-over-year to 72%, a bit better than expected. Excluding the impact of the change in accounting estimate for useful lives, gross margin percentage increased slightly, driven by improvement in Azure and Office 365, even with the impact of scaling our AI infrastructure, partially offset by sales mix shift to Azure. Company gross margin dollars increased 18% and gross margin percentage increased slightly year-over-year to 70%. Excluding the impact of the change in accounting estimate, gross margin percentage increased roughly 1 point even with the impact from the purchase accounting adjustments, integration and transaction-related costs from the Activision acquisition. Growth was driven by the improvement in Azure and Office 365 just mentioned as well as sales mix shift to higher-margin businesses. Operating expenses increased 10% with 9 points from the Activision acquisition. At a total company level, head count at the end of March was 1% lower than a year ago. Operating income increased 23% and operating margins increased roughly 2 points year-over-year to 45%, excluding the impact of the change in accounting estimate, operating margins increased roughly 3 points, driven by the higher gross margin noted earlier and improved operating leverage through continued cost discipline. Now to our segment results. Revenue from Productivity and Business Processes was $19.6 billion and grew 12% and 11% in constant currency, in line with expectations. Office Commercial revenue grew 13% and 12% in constant currency. Office 365 commercial revenue increased 15%, in line with expectations, driven by healthy renewal execution, ARPU growth from continued E5 momentum and early Copilot for Microsoft 365 progress. Paid Office 365 commercial seats grew 8% year-over-year with installed base expansion across all customer segments. Seat growth was again driven by our small and medium business and frontline worker offerings, although growth continued to moderate in SMB. Office Commercial Licensing declined 20% and 18% in constant currency, with continued customer shift to cloud offerings. Office Consumer revenue increased 4%, slightly below expectations. Microsoft 365 subscriptions grew 14% to $80.8 million. LinkedIn revenue increased 10% and 9% in constant currency, ahead of expectations, driven by slightly better-than-expected performance in our premium subscriptions and Talent Solutions businesses. However, in Talent Solutions, bookings growth continues to be impacted by the weaker hiring environment in key verticals. Dynamics revenue grew 19% and 17% in constant currency, ahead of expectations. Growth was driven by Dynamics 365, which grew 23% and 22% in constant currency with continued growth across all workloads and better-than-expected new business, although bookings growth remains moderated. Segment gross margin dollars increased 11%, and gross margin percentage decreased slightly year-over-year. Excluding the impact of the change in accounting estimate, gross margin percentage increased slightly driven by improvement in Office 365. Operating expenses increased 1% and operating income increased 17% and 16% in constant currency. Next, the Intelligent Cloud segment. Revenue was $26.7 billion, increasing 21%, ahead of expectations with better-than-expected results across all businesses. Overall, Server products and cloud services revenue grew 24%. Azure and other cloud services revenue grew 31% ahead of expectations, while our AI services contributed 7 points of growth as expected. In the non-AI portion of our consumption business, we saw greater-than-expected demand broadly across industries and customer segments as well as some benefit from a greater-than-expected mix of contracts with higher in-period recognition. In our per-user business, the Enterprise Mobility and Security installed base grew 10% to over 274 million seats, with continued impact from the growth trends in new stand-alone business noted earlier. In our on-premises server business, revenue increased 6%, ahead of expectations, driven by better-than-expected renewal strength, particularly for contracts with higher in-period revenue recognition. Enterprise and partner services revenue decreased 9% on a strong prior year comparable for enterprise support services. Segment gross margin dollars increased 20% and gross margin percentage decreased slightly year-over-year. Excluding the impact of the change in accounting estimate [indiscernible] percentage increased slightly, primarily driven by the improvement in Azure noted earlier, even with the impact of scaling our AI infrastructure, partially offset by sales mix shift to Azure. Operating expenses increased 1% and operating income grew 32%. Now to More Personal Computing. Revenue was $15.6 billion, increasing 17% with 15 points of net impact from the Activision acquisition. Results were above expectations, driven by better-than-expected performance in gaming and Windows OEM. Windows OEM revenue increased 11% year-over-year, ahead of expectations, primarily driven by the slightly better PC market noted earlier as well as mix shift to higher monetizing markets. Windows commercial products and cloud services revenue increased 13% and 12% in constant currency, below expectations with impact from the growth trends in new stand-alone business noted earlier as well as lower in-period revenue recognition from a mix of contracts. Devices revenue decreased 17% and 16% in constant currency as we remain focused on our higher-margin premium products. Overall, Surface demand was slightly lower than expected. Search and News advertising revenue ex TAC increased 12% ahead of expectations with continued volume growth and increased engagement on Bing and Edge. And in gaming. Revenue increased 51% and 50% in constant currency with 55 points of net impact from the Activision acquisition. Results were ahead of expectations, primarily driven by Call of Duty. Xbox content and services revenue increased 62% and 61% in constant currency with 61 points of net impact from the Activision acquisition. Xbox hardware revenue decreased 31% and 30% in constant currency. Segment gross margin dollars increased 27% and 26% in constant currency, with 13 points of net impact from the Activision acquisition. Gross margin percentage increased roughly 4 points year-over-year, primarily driven by sales mix shift to higher-margin businesses. Operating expenses increased 41% with 43 points from the Activision acquisition. Operating income increased 16% and 15% in constant currency. Now back to total company results. Capital expenditures, including finance leases, were $14 billion to support our cloud demand, inclusive of the need to scale our AI infrastructure. Cash paid for PP&E was $11 billion. Cash flow from operations was $31.9 billion, up 31%, driven by strong cloud billings and collections. Free cash flow was $21 billion, up 18% year-over-year, reflecting higher capital expenditures to support our cloud and AI offerings. This quarter, other income and expense was negative $854 million, lower than anticipated, driven by losses on investments accounted for under the equity method. Our effective tax rate was approximately 18%. And finally, we returned $8.4 billion to shareholders through dividends and share repurchases. Now moving to our Q4 outlook, which unless specifically noted otherwise, is on a U.S. dollar basis. First, FX. Based on current rates, which reflect the recent strengthening of the U.S. dollar, we now expect FX to decrease total revenue and segment level revenue growth by less than 1 point. When compared to our January guide for Q4, FX, this is a decrease to total revenue of roughly $700 million. We expect FX to decrease COGS growth by approximately 1 point and operating expense growth by less than 1 point. In commercial bookings, we expect solid growth on a relatively flat expiry base driven by continued strong commercial sales execution. As a reminder, larger, long-term Azure contracts, which are more unpredictable in their timing, can drive increased quarterly volatility in our bookings growth rate. Microsoft Cloud gross margin percentage should decrease roughly 2 points year-over-year. Excluding the impact from the change in accounting estimate, Q4 cloud gross margin percentage will be down slightly as improvement in Azure, inclusive of scaling our AI infrastructure will be offset by sales mix shift to Azure. We expect capital expenditures to increase materially on a sequential basis driven by cloud and AI infrastructure investments. As a reminder, there can be normal quarterly spend variability in the timing of our cloud infrastructure build-outs and the timing of finance leases. We continue to bring capacity online as we scale our AI investments with growing demand. Currently, near-term AI demand is a bit higher than our available capacity. Next, to segment guidance. In Productivity and Business Processes, we expect revenue to grow between 9% and 11% in constant currency or US$19.9 billion to US$20.2 billion. In Office Commercial, revenue growth will again be driven by Office 365 with seat growth across customer segments and ARPU growth primarily through E5. We expect Office 365 revenue growth to be approximately 14% in constant currency. We continue to progress with adoption of CoPilot for Microsoft 365 and remain excited for the long-term growth opportunity. In our on-premises business, we expect revenue to decline in the mid to high teens. In Office Consumer, we expect revenue growth in the low to mid-single digits, driven by Microsoft 365 subscriptions. For LinkedIn, we expect revenue growth in the mid to high single digits driven by continued growth across all businesses. And in Dynamics, we expect revenue growth in the low to mid-teens, driven by Dynamics 365. For both LinkedIn and Dynamics, the continued bookings growth moderation noted earlier is a headwind to Q4 revenue growth. For Intelligent Cloud, we expect revenue to grow between 19% and 20% in constant currency or US$28.4 billion to US$28.7 billion. Revenue will continue to be driven by Azure, which, as a reminder, can have quarterly variability primarily from our per-user business and in-period revenue recognition depending on the mix of contracts. In Azure, we expect Q4 revenue growth to be 30% to 31% in constant currency or similar to our stronger-than-expected Q3 results. Growth will be driven by our Azure Consumption business and continued contribution from AI with some impact from the AI capacity availability noted earlier. Our per-user business should see benefit from Microsoft 365 suite momentum. Though we expect continued moderation in seat growth rates given the size of the installed base. In our on-premises server business, we expect revenue growth in the low to mid-single digits with continued hybrid demand, including licenses running in multi-cloud environments. And in Enterprise and Partner Services revenue should decline in the mid- to high single digits on a high prior year comparable for enterprise support services. In More Personal Computing, we expect revenue to grow between 10% and 13% in constant currency or US$15.2 billion to US$15.6 billion. Windows OEM revenue growth should be in the low to mid-single digits as PC market unit volumes continue at pre-pandemic levels. In Windows Commercial Products and Cloud Services, customer demand for Microsoft 365 and our advanced security solutions should drive revenue growth in the mid-single digits. As a reminder, our quarterly revenue growth can have variability primarily from in-period revenue recognition depending on the mix of contracts. In Devices, revenue should decline in the mid-teens as we continue to focus on our higher-margin premium products. Search and news advertising ex TAC revenue growth should be in the low to mid-teens, driven by continued volume strength. This will be higher than overall search and news advertising revenue growth, which we expect to be relatively flat. And in Gaming, we expect revenue growth in the low to mid-40s, including approximately 50 points of net impact from the Activision acquisition. We expect Xbox content and services revenue growth in the high 50s driven by approximately 60 points of net impact from the Activision acquisition. Hardware revenue will decline again year-over-year. Now back to company guidance. We expect COGS between US$19.6 billion to US$19.8 billion, including approximately $700 million from purchase accounting, integration and transaction-related costs from the Activision acquisition. We expect operating expense of US$17.15 billion to US$17.25 billion, including approximately $300 million from purchase accounting, integration and transaction-related costs from the Activision acquisition. Therefore, we now expect full year FY2024 operating margins to be up over 2 points year-over-year, even with our cloud and AI investments, the impact from the Activision acquisition and the headwind from the change in useful lives last year. This operating margin expansion reflects the hard work across every team to drive efficiencies and maintain disciplined cost management, knowing we will continue to grow our cloud and AI investments next year. Other income and expense should be roughly negative $850 million as interest income will be more than offset by interest expense and losses on investments accounted for under the equity method. As a reminder, we are required to recognize gains or losses on our equity investments which can increase quarterly volatility. We expect our Q4 effective tax rate to be approximately 18%. Now I\u2019d like to share some closing thoughts as we look to the next fiscal year. We continue to focus on building businesses that create meaningful value for our customers and therefore, significant growth opportunities for years to come. In FY2025, that focus on execution should again lead to double-digit revenue and operating income growth to scale to meet the growing demand signal for our cloud and AI products, we expect FY2025 capital expenditures to be higher than FY2024. These expenditures over the course of the next year are dependent on demand signals and adoption of our services. So we will manage that signal through the year. We will also continue to prioritize operating leverage. And therefore, we expect FY2025 operating margins to be down only about 1 point year-over-year, even with our significant cloud and AI investments, as well as a full year of impact from the Activision acquisition. We are leading the AI platform wave and are committed to bringing that value to our global customers as we enter the final quarter of our fiscal year. With that, let\u2019s go to Q&A, Brett.","evidence_gemma_new":"Microsoft Cloud gross margin percentage","evidence_llama_3_3":null,"evidence_qwen_3_30b":"Microsoft Cloud gross margin percentage","gemma_new_max":72.0,"gemma_new_min":72.0,"llama_3_3_max":null,"llama_3_3_min":null,"qwen_3_30b_max":72.0,"qwen_3_30b_min":72.0}
{"symbol":"MSFT","year":2024,"quarter":4,"date":"2024-Q4","chunk_id":3,"sub_chunk_id":0,"centroid_label":"microsoft cloud gross margin percentage","agreed_value":69.0,"count":2,"chunk":"Amy Hood: Thank you, Satya, and good afternoon everyone. This quarter, revenue was $64.7 billion, up 15% and 16% in constant currency. Earnings per share was $2.95 and increased 10% and 11% in constant currency. In our largest quarter of the year, we again delivered double-digit top and bottom line growth with continued share gains across many of our businesses and record commitments to our Microsoft Cloud platform. Commercial bookings were significantly ahead of expectations and increased 17% and 19% in constant currency. This record commitment quarter was driven by growth in the number of 10-million-dollar-plus and 100-million-dollar-plus contracts for both Azure and Microsoft 365 and consistent execution across our core annuity sales motions. Commercial remaining performance obligation increased 20% and 21% in constant currency to $269 billion. Roughly 40% will be recognized in revenue in the next 12 months, up 18% year-over-year. The remaining portion, recognized beyond the next 12 months, increased 21%. And this quarter, our annuity mix was 97%. At a company level, Activision contributed a net impact of approximately 3 points to revenue growth, was a 2 point drag on operating income growth, and had a negative $0.06 impact to earnings per share. A reminder that this net impact includes adjusting for the movement of Activision content from our prior relationship as a third-party partner to first-party, and includes $938 million from purchase accounting adjustments, integration, and transaction-related costs. FX did not have a significant impact on our results and was roughly in line with our expectations on total company revenue, segment level revenue, COGS, and operating expense growth. Microsoft Cloud revenue was $36.8 billion and grew 21% and 22% in constant currency, roughly in line with expectations. Microsoft Cloud gross margin percentage decreased roughly 2 points year-over-year to 69% in line with expectations. Excluding the impact of the change in accounting estimate for useful lives, gross margin percentage decreased slightly driven by sales mix shift to Azure, partially offset by improvement in Azure even with the impact of scaling our AI infrastructure. Company gross margin dollars increased 14% and 15% in constant currency and gross margin percentage decreased slightly year-over-year to 70%. Excluding the impact of the change in accounting estimate, gross margin percentage increased slightly, even with the impact from purchase accounting adjustments, integration, and transaction-related costs from the Activision acquisition. Operating expenses increased 13% with 9 points from the Activision acquisition. At a total company level, headcount at the end of June was 3% higher than a year ago. Operating income increased 15% and 16% in constant currency and operating margins were 43%, relatively unchanged year-over-year. Excluding the impact of the change in accounting estimate, operating margins increased slightly driven by the higher gross margin noted earlier and improved operating leverage through continued cost discipline. Now to our segment results. Revenue from Productivity and Business Processes was $20.3 billion and grew 11% and 12% in constant currency, slightly ahead of expectations driven by better-than-expected results across all business units. Office commercial revenue grew 12% and 13% in constant currency. Office 365 commercial revenue increased 13% and 14% in constant currency with ARPU growth primarily from E5 momentum as well as Copilot for Microsoft 365. Paid Office 365 commercial seats grew 7% year-over-year with installed base expansion across all customer segments. Seat growth was again driven by our small and medium business and frontline worker offerings, although both segments continued to moderate. Office commercial licensing declined 9% and 7% in constant currency, with continued customer shift to cloud offerings. Office consumer revenue increased 3% and 4% in constant currency with continued momentum in Microsoft 365 subscriptions, which grew 10% to 82.5 million. LinkedIn revenue increased 10% and 9% in constant currency driven by better-than-expected performance across all businesses. Dynamics revenue grew 16% driven by Dynamics 365 which grew 19% and 20% in constant currency. We saw continued growth across all workloads and better-than-expected new business. Dynamics 365 now represents roughly 90% of total Dynamics revenue. Segment gross margin dollars increased 9% and 10% in constant currency and gross margin percentage decreased roughly 1 point year-over-year. Excluding the impact of the change in accounting estimate, gross margin percentage decreased slightly driven by Office 365 as we scale our AI infrastructure. Operating expenses increased 5%, and operating income increased 12% and 13% in constant currency. Next, the Intelligent Cloud segment. Revenue was $28.5 billion, increasing 19% and 20% in constant currency, in line with expectations. Overall, server products and cloud services revenue grew 21% and 22% in constant currency. Azure and other cloud services revenue grew 29% and 30% in constant currency, in line with expectations and consistent with Q3 when adjusting for leap year. Azure growth included 8 points from AI services where demand remained higher than our available capacity. In June, we saw slightly lower-than-expected growth in a few European geos. In our per-user business, the enterprise mobility and security installed base grew 10% to over 281 million seats with continued impact from moderated growth in seats sold outside the Microsoft 365 suite. Therefore, our Azure consumption business continues to grow faster than total Azure. In our on-premises server business, revenue increased 2% and 3% in constant currency. Growth was driven by demand for our hybrid solutions although with slightly lower-than-expected transactional purchasing. Enterprise and partner services revenue decreased 7% on a strong prior year comparable for Enterprise Support Services. Segment gross margin dollars increased 16% and gross margin percentage decreased roughly 2 points year-over-year. Excluding the impact of the change in accounting estimate, gross margin percentage decreased slightly driven by sales mix shift to Azure, partially offset by the improvement in Azure noted earlier, even with the impact of scaling our AI infrastructure. Operating expenses increased 5% and operating income grew 22% and 23% in constant currency. Now to More Personal Computing. Revenue was $15.9 billion, increasing 14% and 15% in constant currency, with 12 points of net impact from the Activision acquisition. Results were above expectations driven by Windows commercial and Search. The PC market was as expected and Windows OEM revenue increased 4% year-over-year. Windows commercial products and cloud services revenue increased 11% and 12% in constant currency, ahead of expectations due to higher in-period revenue recognition from the mix of contracts. Devices revenue decreased 11% and 9% in constant currency, roughly in line with expectations, as we remain focused on our higher margin premium products. While early days, we\u2019re excited about the recent launch of our Copilot+ PCs. Search and news advertising revenue ex-TAC increased 19%, ahead of expectations, primarily due to improved execution. Healthy volume growth was driven by Bing and Edge. And in Gaming, revenue increased 44% with 48 points of net impact from the Activision acquisition. Xbox content and services revenue increased 61%, slightly ahead of expectations, with 58 points of net impact from the Activision acquisition. Stronger-than-expected performance in first-party content was partially offset by third-party content performance. Xbox hardware revenue decreased 42% and 41% in constant currency. Segment gross margin dollars increased 21%, with 10 points of net impact from the Activision acquisition. Gross margin percentage increased roughly 3 points year-over-year primarily driven by sales mix shift to higher margin businesses. Operating expenses increased 43% with 41 points from the Activision acquisition. Operating income increased 5% and 6% in constant currency. Now back to total company results. Capital expenditures including finance leases were $19 billion, in line with expectations, and cash paid for PP&E was $13.9 billion. Cloud and AI related spend represents nearly all of total capital expenditures. Within that, roughly half is for infrastructure needs where we continue to build and lease datacenters that will support monetization over the next 15 years and beyond. The remaining cloud and AI related spend is primarily for servers, both CPUs and GPUs, to serve customers based on demand signals. For the full fiscal year, the mix of our cloud and AI related spend was similar to Q4. Cash flow from operations was $37.2 billion, up 29% driven by strong cloud billings and collections. Free cash flow was $23.3 billion, up 18% year-over-year, reflecting higher capital expenditures to support our cloud and AI offerings. For the full-year, cash flow from operations surpassed $100 billion for the first time, reaching $119 billion. This quarter, other income and expense was negative $675 million, more favorable than anticipated with lower-than-expected interest expense and higher-than-expected interest income. Our losses on investments accounted for under the equity method were as expected. Our effective tax rate was approximately 19%, higher than anticipated due to a state tax law signed in June that was effective retroactively. And finally, we returned $8.4 billion to shareholders through dividends and share repurchases, bringing our total cash returned to shareholders to over $34 billion for the full fiscal year. Now, moving to our outlook. My commentary for both the full-year and next quarter is on a U.S. dollar basis unless specifically noted otherwise. Let me start with some full year commentary for FY2025. First, FX. Assuming current rates remain stable, we expect FX to have no meaningful impact to full-year revenue, COGS, or operating expense growth. Next, we continue to expect double-digit revenue and operating income growth as we focus on delivering differentiated value for our customers. To meet the growing demand signal for our AI and cloud products, we will scale our infrastructure investments with FY2025 capital expenditures expected to be higher than FY2024. As a reminder, these expenditures are dependent on demand signals and adoption of our services that will be managed through the year. As scaling these investments drives growth in COGS, we will remain disciplined on operating expense management. Therefore, we expect FY2025 OpEx growth to be in the single digits. And given our focused commitment to managing at the operating margin level, we still expect FY2025 operating margins to be down only about one point year-over-year. And finally, we expect our FY2025 effective tax rate to be around 19%. Now, to the outlook for our first quarter. Based on current rates, we expect FX to decrease total revenue and segment level revenue growth by less than one point. We expect FX to decrease COGS growth by less than one point and to have no meaningful impact to operating expense growth. In commercial bookings, increased long-term commitments to our platform and strong execution across core annuity sales motions should drive healthy growth on a growing expiry base. As a reminder, larger long-term Azure contracts, which are more unpredictable in their timing, can drive increased quarterly volatility in our bookings growth rate. Microsoft Cloud gross margin percentage should be roughly 70%, down year-over-year driven by the impact of scaling our AI infrastructure. We expect capital expenditures to increase on a sequential basis given our cloud and AI demand, as well as existing AI capacity constraints. As a reminder, there can be quarterly spend variability from cloud infrastructure buildouts and the timing of delivery of finance leases. Next to segment guidance. In Productivity and Business Processes, we expect revenue to grow between 10% and 11% in constant currency, or US$20.3 to US$20.6 billion. In Office Commercial, revenue growth will again be driven by Office 365 with seat growth across customer segments and ARPU growth through E5 and Copilot for Microsoft 365. We expect Office 365 revenue growth to be approximately 14% in constant currency. In our on-premises business, we expect revenue to decline in the mid to high-teens. In Office consumer, we expect revenue growth in the low to mid-single digits, driven by Microsoft 365 subscriptions. For LinkedIn, we expect revenue growth in the high single digits driven by continued growth across all businesses. And in Dynamics, we expect revenue growth in the low to mid-teens driven by Dynamics 365. For Intelligent Cloud we expect revenue to grow between 18% and 20% in constant currency, or US$28.6 billion to US$28.9 billion. Revenue will continue to be driven by Azure which, as a reminder, can have quarterly variability primarily from our per-user business and in-period revenue recognition depending on the mix of contracts. In Azure, we expect Q1 revenue growth to be 28% to 29% in constant currency. Growth will continue to be driven by our consumption business, inclusive of AI, which is growing faster than total Azure. We expect the consumption trends from Q4 to continue through the first half of the year. This includes both AI demand impacted by capacity constraints and non-AI growth trends similar to June. Growth in our per-user business will continue to moderate. And in H2, we expect Azure growth to accelerate as our capital investments create an increase in available AI capacity to serve more of the growing demand. In our on-premises server business, we expect revenue to decline in the low single digits as continued hybrid demand will be more than offset by lower transactional purchasing. And in Enterprise and partner services, revenue should decline in the low single digits. In More Personal Computing, we expect revenue to grow between 9% and 12% in constant currency, or US$14.9 billion to US$15.3 billion. Windows OEM revenue growth should be relatively flat, roughly in line with the PC market. In Windows commercial products and cloud services, customer demand for Microsoft 365 and our advanced security solutions should drive revenue growth in the mid-single digits. As a reminder, our quarterly revenue growth can have variability primarily from in-period revenue recognition depending on the mix of contracts. In Devices, revenue growth should be in the low to mid-single digits. Search and news advertising ex-TAC revenue growth should be in the mid to high-teens. This will be higher than overall Search and news advertising revenue growth, which we expect to be in the low single digits. And in Gaming, we expect revenue growth in the mid-30s, including approximately 40 points of net impact from the Activision acquisition. We expect Xbox content and services revenue growth in the low to mid-50s, driven by the net impact from the Activision acquisition. Hardware revenue will again decline year-over-year. Now back to company guidance. We expect COGS between US$19.95 billion to US$20.15 billion, including approximately $700 million from purchase accounting, integration, and transaction-related costs from the Activision acquisition. We expect operating expense of US$15.2 billion to US$15.3 billion, including approximately $200 million from purchase accounting, integration, and transaction-related costs from the Activision acquisition. Other income and expense should be roughly negative $650 million driven by losses on investments accounted for under the equity method as interest income will be mostly offset by interest expense. As a reminder, we are required to recognize gains or losses on our equity investments, which can increase quarterly volatility. We expect our Q1 effective tax rate to be approximately 19%. In closing, we remain focused on delivering innovations that matter to our global customers of every size. That focus extends to delivering on our financial commitments as well. We delivered operating margin growth of nearly three points year-over-year even as we accelerated our AI investments, completed the Activision acquisition, and had a headwind from the change of useful lives last year. So, as we begin FY2025, we will continue to invest in the cloud and AI opportunity ahead aligned, and if needed adjusted, to the demand signals we see. We are committed to growing our leadership across our commercial cloud and within that, the AI platform, and we feel well positioned as we start FY2025. With that, let's go to Q&A, Brett.","evidence_gemma_new":"Microsoft Cloud gross margin percentage","evidence_llama_3_3":null,"evidence_qwen_3_30b":"Microsoft Cloud gross margin percentage decreased roughly 2 points year-over-year 69%","gemma_new_max":69.0,"gemma_new_min":69.0,"llama_3_3_max":null,"llama_3_3_min":null,"qwen_3_30b_max":69.0,"qwen_3_30b_min":69.0}
{"symbol":"MSFT","year":2023,"quarter":1,"date":"2023-Q1","chunk_id":2,"sub_chunk_id":0,"centroid_label":"microsoft cloud quarterly revenue","agreed_value":25000000000.0,"count":3,"chunk":"Satya Nadella : Thank you, Brett. To start, I want to outline the principles that are guiding us through these changing economic times. First, we will invest behind categories that will drive the long-term secular trend where digital technology as a percentage of world's GDP will continue to increase. Second, we'll prioritize helping our customers get the most value out of their digital spend, so that they can do more with less. And finally, we will be disciplined in managing our cost structure. With that context, this quarter, the Microsoft Cloud again exceeded $25 billion in quarterly revenue, up 24% and 31% in constant currency. And based on current trends continuing, we expect our broader commercial business to grow at around 20% in constant currency this fiscal year, as we manage through the cyclical trends affecting our consumer business. With that, let me highlight our progress starting with Azure. Moving to the cloud is the best way for organizations to do more with less today. It helps them align their spend with demand and mitigate risk around increasing energy costs and supply chain constraints. We're also seeing more customers turn to us to build and innovate with infrastructure they already have. With Azure Arc, organizations like Wells Fargo can run Azure services, including containerized applications across on-premises, edge and multi-cloud environments. We now have more than 8,500 Arc customers, more than double the number a year ago. We are the platform of choice for customers' SAP workloads in the cloud, companies like [Chobani] (ph), Munich Re, Sodexo, Volvo Cars, all run SAP on Azure. We are the only cloud provider with direct and secure access to Oracle databases running an Oracle Cloud infrastructure, making it possible for companies like FedEx, GE and Marriott to use capabilities from both companies. And with Azure Confidential Computing, we're enabling companies in highly regulated industries, including RBC, to bring their most sensitive applications to the cloud. Just last week, UBS said it will move more than 50% of its applications to Azure. Now to data and AI. With our Microsoft Intelligent Data Platform, we provide a complete data fabric, helping customers cut integration tax associated with bringing together siloed solutions. Customers like Mercedes-Benz are standardizing on our data stack to process and govern massive amounts of data. Cosmos DB is the go-to database powering the world's most demanding workloads at limitless scale. Cosmos DB now supports postscript SQL, making Azure the first cloud provider to offer a database service that supports both relational and no SQL workloads. And in AI, we are turning the world's most advanced models into platforms for customers. Earlier this month, we brought the power of DALL-E to Azure OpenAI service, helping customers like Mattel apply the breakthrough image generation model to commercial use cases for the first time. In Azure machine learning, provides industry-leading ML apps, helping organizations like 3M deploy, manage and govern models. All up, Azure ML revenue has increased more than 100% for four quarters in a row. Now on to developers. We have the most complete platform for developers to build cloud native applications. Four years since our acquisition, GitHub is now at $1 billion in annual recurring revenue. And GitHub's developer first ethos has never been stronger. More than 90 million people now use the service to build software for any cloud on any platform up three times. GitHub advanced security is helping organizations improve their security posture by bringing features directly into the developer's workflow. Toyota North America chose the offering this quarter to help its developers build and secure many of its most critical applications. Now on to Power Platform. We are helping customers save time and money with our end-to-end suite spanning Low-Code\/No-Code tools, robotic process automation, virtual agents and business intelligence. Power BI is the market leader in business intelligence in the cloud and is growing faster than competition, as companies like Walmart standardize on the tool for reporting and analytics. Power Apps is the market leader in Low-Code\/No-Code tools and has nearly 15 million monthly active users, up more than 50% compared to a year ago. Power Automate has more than seven million monthly active users and is being used by companies like Brown-Forman, Komatsu, Mass, T-Mobile to digitize manual business processes and save thousands of hours of employee time. And we're going further with new AI-powered capabilities and power automate that turn natural language into advanced workflows. Now on to Dynamics 365. From customer experience and service to finance and supply chain, we continue to take share across all categories we serve. For example, Lufthansa Cargo chose us to centralize customer information and related shipments. CBRE is optimizing its field service operations, gaining cost efficiencies. Darden is using our solutions to increase both guest frequency and spend at its restaurants. And Tillamook is scaling its growth and improving supply chain visibility. All up more than 400,000 organizations now use our business applications. Now on to Industry Solutions. We are seeing increased adoption of our industry and cross-industry clouds. Bank of Queensland chose our cloud for financial services to deliver new digital experiences for its customers. Our cloud for sustainability is off to a fast start as organizations like Telstra use the solution to track their environmental footprint. New updates provide insights on hard-to-measure Scope 3 carbon emissions, and we are seeing record growth in healthcare, driven, in part, by our Nuance DAX ambient intelligence solutions, which automatically documents patient encounters at the point of care. Physicians tell us DAX dramatically improves their productivity, and it's quickly becoming an on-ramp to our broader healthcare offerings. Now on to new systems of work, Microsoft 365, Teams and Viva uniquely enable employees to thrive in today's digitally connected distributed world of work. Microsoft 365 is the cloud-first platform that supports all the ways people work and every type of worker reducing cost and complexity for IT. The new Microsoft 365 app brings together our productivity apps with third-party content, as well as personalized recommendations. Microsoft Teams is the de facto standard for collaboration and has become essential to how hundreds of millions of people meet, call, chat, collaborate and do business. As we emerge from the pandemic, we are retaining users we have gained and are seeing increased engagement, too. Users interact with Teams 1,500 times per month on average. In a typical day, the average commercial user spends more time in Teams chat than they do in e-mail, and the number of users who use four or more features within Teams increased over 20% year-over-year. Teams is becoming a ubiquitous platform for business process. Monthly active enterprise users running third-party and custom applications within Teams increased nearly 60% year-over-year, and over 55% of our enterprise customers who use Teams today also buy Teams Rooms or Teams Phone. Teams Phone provides the best-in-class calling. PSTN users have grown by double digits for five quarters in a row. We are bringing Teams Rooms to a growing hardware ecosystem, including Cisco's devices and peripherals, which will now run Teams natively. And we are creating a new category with Microsoft Places to help organizations evolve and manage the space for hybrid and in-person work. Just like Outlook calendar orchestrates when people can meet and collaborate, Places will do the same for where. We also announced Teams Premium, addressing enterprise demands for advanced meeting features like additional security options and intelligent meeting recaps. All this innovation is driving growth across Microsoft 365. Leaders in every industry from Fannie Mae and Land O'Lakes to Rabobank continue to turn to our premium E5 offerings for advanced security, compliance, voice and analytics. We've also built a completely new suite for our employee experience platform, Microsoft Viva, which now has more than 20 million monthly active users at companies like Finastra, SES and Unilever. And we are extending Viva to meet role-specific needs. Viva Sales is helping salespeople at companies like Adobe, Crayon and PwC reclaim their time by bringing customer interactions across Teams and Outlook directly into their CRM system. Now on to Windows. Despite the drop in PC shipments during the quarter, Windows continues to see usage growth. All up, there are nearly 20% more monthly active Windows devices than pre-pandemic. And on average, Windows 10 and Windows 11 users are spending 8.5% more time on their PCs than they were 2.5 years ago. And we are seeing larger commercial deployments of Windows 11. Accenture, for example, has deployed Windows 11 to more than 450,000 employees' PCs, up from just 25,000, 7 months ago, and L'Oreal has deployed the operating system to 85,000 employees. Now to security. Security continues to be a top priority for every organization. We're the only company with integrated end-to-end tools spanning security, compliance, identity and device management and privacy across all clouds and platforms. More than 860,000 organizations across every industry from BP and Fuji Film to ING Bank, iHeartMedia and Lumen Technologies now use our security solutions, up 33% year-over-year. They can save up to 60% when they consolidate our security stack, and the number of customers with more than four workloads have increased 50% year-over-year. More organizations are choosing both our XDR and cloud-native SIM to secure their entire digital estate. The number of E5 customers who also purchased Sentinel increased 44% year-over-year. And as threats become more sophisticated, we are innovating to protect customers. New capabilities in Defender help secure the entire DevOps life cycle and manage security posture across clouds. And Entra now provides comprehensive identity governance for both on-premise and cloud-based user directories. Now on to LinkedIn. We once again saw record engagement among our more than 875 million members, with international growth increasing at nearly 2x the pace as in the United States. There are now more than 150 million subscriptions to newsletters on LinkedIn, up 4x year-over-year. New integrations between Viva and LinkedIn Learning helped companies invest in their existing employees by providing access to courses directly in the flow of work. Members added 365 million skills to their profiles over the last 12 months, up 43% year-over-year. And with our acquisition of EduBrite, they will also soon be able to earn professional certificates from trusted partners directly on the platform. We launched the next-generation sales navigator this quarter, helping sellers increase win rates and deal sizes by better understanding and evaluating customer interest. Finally, LinkedIn Marketing Solution continues to provide leading innovation and ROI in B2B digital advertising. More broadly, with Microsoft Advertising, we offer a trusted platform for any marketeer or advertiser looking to innovate. We've expanded our geographies we serve by nearly 4x over the past year. We are seeing record daily usage of Edge, Start and Bing driven by Windows. Edge is the fastest-growing browser on Windows and continues to gain share as people use built-in coupon price comparison features to save money. We surface more than $2 billion in savings to date. And this quarter, we brought our shopping tools to 15 new markets. Users of our Start, personalized content feed are consuming 2x more content compared to a year ago. And we're also expanding our third-party ad inventory. Netflix will launch its first ad-supported subscription plan next month, exclusively powered by our technology and sales. And with PromoteIQ we offer an omni-channel media platform for retailers like the auto group looking to generate additional revenue while maintaining ownership of their own data and customer relationships. Now onto gaming. We are adding new gamers to our ecosystem as we execute on our ambition to reach players wherever and whenever they want on any device. We saw usage growth across all platforms driven by the strength of console. PC Game Pass subscriptions increased 159% year-over-year. And with cloud gaming, we're transforming how games are distributed, played and viewed. More than 20 million people have used the service to stream games to date. And we are adding support for new devices like handhelds from Logitech and Razor as well as Meta Quest. And as we look towards the holidays, we offer the best value in gaming with Game Pass and Xbox Series S, nearly half of the Series S buyers are new to our ecosystem. In closing, in a world facing increasing headwinds, digital technology is the ultimate tailwind. And we're innovating across the entire tech stack to help every organization, while also focusing intensely on our operational excellence and execution discipline. With that, I'll hand it over to Amy.","evidence_gemma_new":"Microsoft Cloud quarterly revenue constant currency","evidence_llama_3_3":"Microsoft Cloud quarterly revenue this quarter","evidence_qwen_3_30b":"Microsoft Cloud quarterly revenue constant currency","gemma_new_max":25000000000.0,"gemma_new_min":25000000000.0,"llama_3_3_max":25000000000.0,"llama_3_3_min":25000000000.0,"qwen_3_30b_max":25000000000.0,"qwen_3_30b_min":25000000000.0}
{"symbol":"MSFT","year":2023,"quarter":2,"date":"2023-Q2","chunk_id":2,"sub_chunk_id":0,"centroid_label":"microsoft cloud quarterly revenue","agreed_value":27000000000.0,"count":3,"chunk":"Satya Nadella: Thank you very much, Brett. I want to start with the context I shared with our employees last week on the changing environment and our priorities. As I meet with customers and partners, a few things are increasingly clear. Just as we saw customers accelerate their digital spend during the pandemic, we are now seeing them optimize that spend. Also, organizations are exercising caution given the macroeconomic uncertainty. And the next major wave of computing is being born as we turn the world\u2019s most advanced AI models into a new computing platform. In this environment, we remain convicted on three things. This is an important time for Microsoft to work with our customers, helping them realize more value from their tech spend and building long-term loyalty and share position while internally aligning our own cost structure with our revenue growth. This in turn sets us up to participate in the secular trend where digital spend as a percentage of GDP is only going to increase. And lastly, we are going to lead in the AI era, knowing that maximum enterprise value gets created during platform shifts. With that as the backdrop, the Microsoft Cloud exceeded $27 billion in quarterly revenue, up 22% and 29% in constant currency. Now, I will highlight examples of our innovation starting with Azure. Moving to the cloud is the best way for any customer in today\u2019s economy to mitigate demand uncertainty and energy costs while gaining efficiencies of cloud native development. Enterprises have moved millions of calls to Azure and run twice as many calls on our cloud today than they did 2 years ago. And yet, we are still in the early innings when it comes to long-term cloud opportunity. As an example, insurer AIA was able to save more than 20% by migrating to Azure and reduced IT provisioning time from multiple months to just an hour. We also continue to lead with hybrid computing with Azure Arc. We now have more than 12,000 Arc customers, double the number a year ago, including companies like Citrix, Northern Trust and PayPal. Now on to data. Customers continue to choose and implement the Microsoft Intelligent Data Platform over the competition because of its comprehensiveness, integration and lower cost. Bayer, for example, used the data stack to evaluate results from clinical trials faster and more efficiently while meeting regulatory requirements and ASOS chose Cosmos DB to power real-time product recommendations and order processing for over 26 million global customers. Now on to AI. The age of AI is upon us and Microsoft is powering it. We are witnessing non-linear improvements in capability of foundation models, which we are making available as platforms. And as customers select their cloud providers and invest in new workloads, we are well positioned to capture that opportunity as a leader in AI. We have the most powerful AI supercomputing infrastructure in the cloud. It\u2019s being used by customers and partners like OpenAI to train state-of-the-art models and services, including ChatGPT. Just last week, we made our Azure OpenAI service broadly available and already over 200 customers from KPMG to Al Jazeera are using it. We will soon add support for ChatGPT, enabling customers to use it in their own applications for the first time. And yesterday, we announced the completion of the next phase of our agreement with OpenAI. We are pleased to be their exclusive cloud provider and we will deploy their models across our consumer and enterprise products as we continue to push the state-of-the-art in AI. All of this innovation is driving growth across our Azure AI services. Azure ML revenue alone has increased more than 100% for five quarters in a row with companies like AXA, FedEx and H&R Block choosing the service to deploy, manage and govern their models. Now on to developers. Modernizing applications is mission-critical to any company\u2019s operations today. And with GitHub, Visual Studio and Azure PaaS services, we have the most comprehensive portfolio of tools to help. GitHub is now home to 100 million developers and GitHub Copilot is the first at-scale AI product built for this era, fundamentally transforming developer productivity. More than 1 million people have used Copilot to-date. This quarter, we brought Copilot to businesses and we have seen strong interest and early adoption from companies, including Duolingo, Lemonade and Volkswagen Cariad Software Group. Now on to Power Platform. Power Platform is becoming an essential digital transformation tool as every business looks to streamline their operations and drive productivity in today\u2019s environment. We are helping customers realize superior time to value with our end-to-end suite spanning low-code, no-code tools, automation, virtual agents and business intelligence. We are leading in robotic process automation. Power Automate has more than 45,000 customers from AT&T to Rabobank, up over 50% year-over-year. And we are making it easier for anyone to streamline repetitive tasks, introducing new AI-powered features to turn natural language prompts into complex workflows. Now on to business applications. Dynamics 365 is taking share as we help businesses digitize their service, finance, customer experience and supply chain functions. For example, G&J Pepsi-Cola Bottlers is moving from reactive to predictive field service. FUJIFILM is optimizing its operations. Investec is closing deals faster with conversational intelligence. Baylor Scott & White in Texas is using our digital contact center to enhance patient communications. And this quarter, we introduced our new Supply Chain Platform, helping customers like iFit and Kraft Heinz apply AI to predict and mitigate disruptions. Now on to Industry Solutions. Our industry and cross-industry clouds are driving pull-through for our entire tech stack. Our cloud for retail was front and center at NRF last week as we introduced new tools to help retailers manage their day-to-day operations and digitize their physical stores. Polish retailer Zabka has built the largest chain of autonomous stores in Europe with the help of our technology. In Financial Services, our new partnership with London Stock Exchange Group will deliver next generation of data analytics and workspace solutions. And in healthcare, we are rapidly becoming the partner of choice for any provider looking to generate real value from AI. With Nuance DAX ambient intelligence solution, physicians can reduce documentation time by half, improving the quality of their patient interactions. Now on to systems of work. Microsoft 365, Teams and Viva are essential for every organization to adapt to the new world of work. Microsoft 365 is rapidly evolving into an AI-first platform that enables every individual to amplify their creativity and productivity with both our established applications as well as new applications like Designer, Stream and Loop. We have more than 63 million consumer subscribers, up 12% year-over-year and we introduced Microsoft 365 Basic, bringing our premium offerings to more people. Teams surpassed 280 million monthly active users this quarter, showing durable momentum since the pandemic and we continue to take share across every category from collaboration to chat to meetings to calling. Teams has emerged as a first-class platform. Apps from Adobe, Atlassian, Poly, ServiceNow and Workday have each surpassed 0.5 million active users and the number of third-party apps with more than 10,000 users increased nearly 40% year-over-year. There are more than 500,000 active Teams Rooms devices, up 70% year-over-year and the number of customers with more than 1,000 rooms doubled year-over-year. Novo Nordisk will deploy Teams Rooms to 5,000 meeting rooms globally in our largest deal to-date. Teams Phone continues to take share and is the market leader in cloud calling. We have added more than 5 million PSTN seats over the last 12 months alone. With Teams Premium, we are meeting enterprise demand for advanced features like end-to-end encryption and AI-powered recaps. We have seen strong interest in preview and we will make it broadly available next month. With Microsoft Viva, we have created a new market category for our employee experience and organizational productivity. U.S. Bank is using Viva to streamline employee communications and Carlsberg turned to Viva to centralize its digital employee experience for 29,000 employees. In today\u2019s environment, aligning the entire organization and the most important work is critical. Viva Goals brings objectives and key results directly into the flow of daily work. Viva has also become an indispensable tool for business process. Viva Sales is the super app in Microsoft 365 for sellers. We have seen strong interest since making it generally available this quarter. All up, we continue to see organizations consolidate on Microsoft 365. 80% of our enterprise customers use 5 or more Microsoft 365 applications. And organizations across the private and public sector, including EY, IKEA, NTT Communications, Rio Tinto as well as the state government of Virginia are increasingly choosing our premium E5 offerings for advanced security, compliance, voice and analytics. Now on to Windows. While the number of PCs shipped declined during the quarter, returning to pre-pandemic levels, usage intensity of Windows continues to be higher than pre-pandemic with time spent per PC up nearly 10%. Monthly active devices also reached an all-time high this quarter. And for commercial customers, Windows 11 adoption continues to grow because of its differentiated security and productivity value proposition. We are also seeing growth in cloud-delivered Windows with usage of Windows 365 and Azure Virtual Desktop up by over two-thirds year-over-year. Leaders in every industry from Campari and Grant Thornton UK to Nutrien and Woolworths are using cloud-delivered Windows, including more than 60% of the Fortune 500. Now on to security. Over the past 12 months, our security business surpassed $20 billion in revenue as we help customers protect their digital estate across clouds and endpoint platforms. We are the only company with integrated end-to-end tools spanning identity, security, compliance, device management and privacy informed and trained on over 65 trillion signals each day. We are taking share across all major categories we serve. Customers are consolidating on our security stack in order to reduce risk, complexity and cost. The number of organizations with four or more workloads increased over 40% year-over-year. UK retailer Fraser Group, for example, consolidated from 10 security vendors to just Microsoft. Roku moved identity and access management to the cloud with Azure Active Directory. And Astellas Pharma, Ferrovial and University of Toronto all switched to Microsoft Sentinel because of our integrated XDR and SIM capabilities. Now on to LinkedIn. People and companies continue to look to LinkedIn to connect, learn, sell and get hired. We once again saw record engagement among our more than 900 million members. Three members are signing up every second. Over 80% of these members are from outside the United States. And as the members come to the platform to find and share professional knowledge and expertise, newsletter creation was up 10x year-over-year. Skills are the new currency and people are increasingly investing in their skill-building to keep up with their changing roles in industries. We offer more than 20,000 courses in 11 languages and companies are also turning to a skills-based approach in place of degree or pedigree to identify qualified talent, with more than 45% of the hires on LinkedIn explicitly using skills data to fill their roles. Finally, LinkedIn Marketing Solutions continues to be a leader in B2B digital advertising, helping companies deliver the right message to the right audience on a safe and trusted platform. Now on to advertising. Despite headwinds in the ad market, we continue to innovate across our first and third-party portfolios. Our browser, Microsoft Edge gained share for the seventh consecutive quarter. Bing continues to gain share in the United States and daily users of our Start personalized content feed increased over 30% year-over-year. We are now empowering retailers and expanding our third-party inventory. With PromoteIQ, we are building a complete omnichannel media platform for companies like the Australian retailer, Endeavor, as well as Canada\u2019s Hudson\u2019s Bay and Global, the largest Brazilian TV broadcasters chose Xandr to launch a new media buying platform in that market. Now on to gaming. In gaming, we continue to pursue our ambition to give players more choice to play great games wherever, whenever and however they want. We saw new highs for Game Pass subscriptions, game streaming hours and monthly active devices, and monthly active users surpassed a record 120 million during the quarter. We continue to invest to add value to Game Pass. This quarter, we partnered with Riot Games to make the company\u2019s PC and mobile games, along with premium content available to subscribers. And finally, we are energized by our upcoming lineup of AAA game launches, including exciting new titles from ZeniMax and Xbox Game Studios and we will be sharing details in Gameplay at our showcase tomorrow. In closing, I want to extend my deepest gratitude to our employees for their continued dedication to our mission, customers and partners. We will continue to pursue our long-term opportunity and innovation agenda with urgency while also raising the bar on our operational excellence. With that, I will hand it over to Amy.","evidence_gemma_new":"Microsoft Cloud quarterly revenue","evidence_llama_3_3":"Microsoft Cloud quarterly revenue","evidence_qwen_3_30b":"Microsoft Cloud quarterly revenue constant currency","gemma_new_max":27000000000.0,"gemma_new_min":27000000000.0,"llama_3_3_max":27000000000.0,"llama_3_3_min":27000000000.0,"qwen_3_30b_max":27000000000.0,"qwen_3_30b_min":27000000000.0}
{"symbol":"MSFT","year":2023,"quarter":3,"date":"2023-Q3","chunk_id":2,"sub_chunk_id":0,"centroid_label":"microsoft cloud quarterly revenue","agreed_value":28000000000.0,"count":3,"chunk":"Satya Nadella: Thank you very much, Brett. The Microsoft Cloud delivered over $28 billion in quarterly revenue, up 22% and 25% in constant currency, demonstrating our continued leadership across the tech stack. We continue to focus on three priorities. First, helping customers use the breadth and depth of the Microsoft Cloud to get the most value out of their digital spend. Second, investing to lead in the new AI wave across our solution areas and expanding our TAM. And third, driving operating leverage, aligning our cost structure with our revenue growth. Now I'll highlight examples of our progress, starting with infrastructure. Azure took share as customers continue to choose our ubiquitous computing fabric from cloud to edge, especially as every application becomes AI-powered. We have the most powerful AI infrastructure and it\u2019s being used by our partner, OpenAI, as well as NVIDIA and leading AI start-ups like Adept and Inflection to train large models. Our Azure OpenAI Service brings together advanced models, including ChatGPT and GPT-4 with the enterprise capabilities of Azure. From Coursera and Grammarly to Mercedes-Benz and Shell, we now have more than 2,500 Azure OpenAI Service customers, up 10x quarter-over-quarter. Just last week, Epic Systems shared that it was using Azure OpenAI Service to integrate the next generation of AI with its industry-leading EHR software. Azure also powers OpenAI API and we are pleased to see brands like Shopify and Snap use the API to integrate OpenAI's models. More broadly, we continue to see the world's largest enterprises migrate key workloads to our cloud. Unilever, for example, went all in on Azure this quarter in one of the largest ever cloud migrations in the consumer goods industry. IKEA Retail, ING Bank, Rabobank, Telstra and Wolverine Worldwide, all use Azure Arc to run Azure services across on-premises, edge and multi-cloud environments. We now have more than 15,000 Azure Arc customers, up over 150% year-over-year. And we are extending our infrastructure to 5G network edge with Azure for Operators. We are the cloud of choice for telcos, and at MWC last month, AT&T, Deutsche Telekom, Singtel and Telefonica all shared how they are using our infrastructure to modernize and monetize their networks. Now on to data. Our Intelligent Data Platform brings together databases, analytics and governance, so organizations can spend more time creating value and less time integrating their data estate. Cosmos DB is the go-to database, powering the world's most demanding workloads at any scale. OpenAI relies on Cosmos DB to dynamically scale their ChatGPT service, one of the fastest-growing consumer apps ever, enabling high reliability and low maintenance. The NBA uses Cosmos DB to ingest more than 10 million data points per game, helping teams optimize their gameplay. And we are taking share with our analytics solutions. Companies like BP, Canadian Tire, Marks & Spencer and T-Mobile all rely on our end-to-end analytics to improve speed to insight. Now on to developers. From Visual Studio to GitHub, we have the most popular tools to help every developer go from idea to code and code to cloud, all while staying in their flow. Today, 76% of the Fortune 500 use GitHub to build, ship and maintain software. And with GitHub Copilot, the first at-scale AI developer tool, we are fundamentally transforming the productivity of every developer from novices to experts. In three months since we made Copilot for Business broadly available, over 10,000 organizations have signed up, including the likes of Coca-Cola and GM as well as Duolingo and Mercado Libre, all of which credit Copilot with increasing the speed for their developers. We're also bringing next-generation AI to Power Platform so anyone can automate workflows, create apps or web pages, build virtual agents and analyze data using only natural language. More than 36,000 organizations have already used existing AI-powered capabilities in Power Platform. And with our new Copilot in Power Apps, we are extending these capabilities to end users who can interact with any app through conversation instead of clicks. All up, we now have nearly 33 million monthly active users of Power Platform, up nearly 50% year-over-year. Now on to business applications. From customer experience and service to finance and supply chain, we continue to take share across all categories we serve as organizations like Asahi, C.H. Robinson, E.ON, Franklin Templeton, choose our AI-powered business applications to automate, simulate and predict every business process and function. And we are going further with Dynamics 365 Copilot, which works across CRM and ERP systems to bring the next generation of AI to employees in every job function, reducing burdensome tasks like manual data entry, content generation and notetaking. Now on to our industry and cross-industry solutions. Our Cloud for Sustainability is seeing strong adoption from companies in every industry, including BBC, Nissan and TCL as they deliver on their respective environmental commitments. Our Cloud for Healthcare was front and center at HIMSS last week as we expanded our offerings for payors and added new AI-powered capabilities for providers. We showcased the first fully AI-automated clinical documentation application, Nuance DAX Express, which will bring GPT-4 to more than 550,000 existing users of Dragon Medical. And at Hannover Messe manufacturing trade show, Siemens shared how it will use a Teams app integrated with Azure OpenAI Service to optimize factory workflows. Now on to future of work. Microsoft 365 Copilot combines next-generation AI with business data in the Microsoft Graph and Microsoft 365 applications, removing the drudgery and unleashing the creativity of work. Copilot works alongside users embedded in the Microsoft 365 applications millions use every day, and it also powers Business Chat, which uses natural language to surface information and insights based on business content and context. We've been encouraged by early feedback and look forward to bringing these experiences to more users in the coming months. Teams usage is at an all-time high and surpassed 300 million monthly active users this quarter, and we once again took share across every category from collaboration to chat to meetings to calling as we add value for existing customers and win new ones like ABN AMRO, Jaguar Land Rover, Mattress Firm, Unisys and Vodafone. We announced a new version of Teams that delivers up to 2 times faster performance while using 50% less memory so customers can collaborate more efficiently and prepare for experiences like Copilot. Teams is also expanding our TAM. Nearly 60% of our enterprise Teams customers buy Teams Phone, Rooms or Premium. Teams Phone is the undisputed market leader in cloud calling, helping our customers reduce cost with a three year ROI of over 140%. Teams Rooms revenue more than doubled year-over-year and Teams Premium meets enterprise demand for AI-powered features like intelligent recaps. Now generally available, it's one of our fastest-growing Modern Work products ever with thousands of paid customers just two months in. With Microsoft Viva, we have created a completely new suite for employee experience. Viva brings together goals, communications, learning, workplace analytics and employee feedback. Across industries, companies like Dell, Mastercard and SES are using Viva to help their employees thrive. Just last week, we announced Copilot for Viva, offering leaders a new way to build high-performance teams by prioritizing both productivity and employee engagement. And with Viva Sales, we have extended the platform to specific job functions, helping sellers apply large language models to their CRM and Microsoft 365 data so that they can automatically generate content like customer mails. All this innovation is driving growth across Microsoft 365, Ferrovial, Goldman Sachs, Novo Nordisk and Rogers all chose E5 to empower their employees with our best-in-class productivity apps along with advanced security, compliance, voice and analytics. Now on to Windows. While the PC market continues to face headwinds, we again saw record monthly active Windows devices and higher usage compared to pre-pandemic. We're also seeing accelerated growth in Windows 11 commercial deployments. Over 90% of the Fortune 500 are currently trialing or have deployed Windows 11. And with Windows 365 and Azure Virtual Desktop, we continue to transform how our employees at companies like Mazda and Nationwide access Windows. All up, over one-third of our enterprise customer base has purchased cloud-delivered Windows to-date. And new Windows 365 Frontline extends the power and security of Cloud PCs to shift workers for the first time. Now on to security. Our comprehensive AI-powered solutions spanning all clouds and all platforms give the agility advantage back to defenders. Among analysts, we are the leader in more categories than any other provider. And we once again took share across all major categories we serve and we continue to introduce new products and functionality to further protect customers. With Security Copilot, we are combining large language models with a domain-specific model informed by our threat intelligence and 65 trillion daily security signals to transform every aspect of the SOC productivity. And we also added new governance controls and policy protections to better secure identities along with resources they access. Nearly 720,000 organizations now use Azure Active Directory, up 33% year-over-year. And all up, nearly 600,000 customers now have four or more security workloads, up 35% year-over-year, underscoring our end-to-end differentiation. EY and Qualcomm, for example, both chose our full security stack to ensure the highest levels of protection and visibility across their organizations. Now on to LinkedIn. We once again saw record engagement as more than 930 million members turn to the professional social network to connect, learn, sell and get hired. Member growth accelerated for the seventh consecutive quarter as we expanded to new audiences. We now have 100 million members in India, up 19%. And as Gen Z enters the workforce, we saw 73% year-over-year increase in the number of student sign-ups. In this persistently tight labor market, LinkedIn Talent Solutions continues to help hirers connect to job seekers and professionals to build the skills they need to access opportunity. Our hiring business took share for the third consecutive quarter. The excitement around AI is creating new opportunities across every function from marketing, sales and finance to software development and security. LinkedIn is increasingly where people are going to learn, discuss and up-level their skills with more than 100 AI courses. And we have introduced new AI-powered features, including writing suggestions for member profiles and job descriptions and collaborative articles. Finally, LinkedIn Marketing Solutions continues to be a leader in B2B digital advertising, helping companies deliver the right message to the right audience on a safe, trusted platform. More broadly, we continue to expand our opportunity in advertising. Our exclusive partnership with Netflix brings differentiated premium video content to our ad network, and our new Copilot for the web is reshaping daily search and web habits. Two months since the launch of new Bing and Edge, we are very encouraged by user feedback and usage patterns. All up, Bing has more than 100 million daily active users. We are winning new customers on Windows and mobile. Daily installs of the Bing mobile app have grown 4 times since launch. We are making progress in share gains. Edge took share for the eighth consecutive quarter and Bing once again grew share in the United States. We continue to innovate with first-of-their-kind AI-powered features, including the ability to set the tone of chat and create images from text prompts powered by DALL-E. Over 200 million images have been created to date and we see that when people use these new AI features their engagement with Bing and Edge goes up. As we look towards a future where chat becomes a new way for people to seek information, consumers have real choice in business model and modalities with Azure-powered chat entry points across Bing, Edge, Windows and OpenAI\u2019s ChatGPT. We look forward to continuing this journey in what is a generational shift in the largest software category, search. Now on to gaming. We are rapidly executing on our ambition to be the first choice for people to play great games whenever, however and wherever they want. We set third quarter records for monthly active users and monthly active devices. Across our content & services business, we are delivering on our commitment to offer gamers more ways to experience the games they love. Our revenue from subscriptions reached nearly $1 billion this quarter. This quarter, we also brought PC Game Pass to 40 new countries, nearly doubling the number of markets we are available. Great content remains the flywheel behind our growth. We have now surpassed 500 million lifetime unique users across our first-party titles. And I\u2019ve never been more excited about our pipeline of games, including the fourth quarter launches of Minecraft Legends and Redfall. In closing, we are focused on continuing to raise the bar on our operational excellence and performance as we innovate to help our customers maximize the value of their existing technology investments and thrive in the new era of AI. In a few weeks times, we'll hold our Build conference, and we will share how we are building the most powerful AI platform for developers and I encourage you to tune in. I could not be more energized about the opportunities ahead. And with that, let me turn it over to Amy.","evidence_gemma_new":"Microsoft Cloud quarterly revenue","evidence_llama_3_3":"Microsoft Cloud quarterly revenue","evidence_qwen_3_30b":"Microsoft Cloud quarterly revenue quarterly","gemma_new_max":28000000000.0,"gemma_new_min":28000000000.0,"llama_3_3_max":28000000000.0,"llama_3_3_min":28000000000.0,"qwen_3_30b_max":28000000000.0,"qwen_3_30b_min":28000000000.0}
{"symbol":"MSFT","year":2024,"quarter":1,"date":"2024-Q1","chunk_id":2,"sub_chunk_id":0,"centroid_label":"microsoft cloud quarterly revenue","agreed_value":31800000000.0,"count":3,"chunk":"Satya Nadella: Thank you, Brett. We are off to a strong start to the fiscal year, driven by the continued strength in Microsoft Cloud, which surpassed $31.8 billion in quarterly revenue, up 24%. With Copilots, we are making the age of AI real for people and businesses everywhere. We are rapidly infusing AI across every layer of the tech stack, and for every role and business process to drive productivity gains for our customers. Now I'll highlight examples of our progress starting with infrastructure. Azure again took share as organizations bring their workloads to our cloud. We have the most comprehensive cloud footprint with more than 60 data center regions worldwide, as well as, the best AI infrastructure for both training and inference. And we also have our AI services deployed in more regions, than any other cloud provider. This quarter, we announced the general availability of our next-generation H100 Virtual Machines. Azure AI provides access to best-in-class frontier models from OpenAI and open-source models, including our own, as well as from Meta and Hugging Face, which customers can use to build their own AI apps while meeting specific cost latency, and performance needs. Because of our overall differentiation more than 18,000 organizations now use Azure OpenAI services, including new to Azure customers. And we are expanding our reach with digital-first companies with OpenAI APIs as leading AI start-ups use OpenAI to power their AI solutions, therefore, making them Azure customers as well. We continue to see more cloud migrations with Azure Arc. We're meeting customers where they are, helping them run apps across on-prem edge and multi-cloud environments. We now have 21,000 Arc customers up 140% year-over-year. We are the only other cloud provider to run Oracle's database services, making it simpler for customers to migrate their on-prem Oracle databases to our cloud. Customers like PepsiCo and Vodafone will have access to a seamless fully integrated experience for deploying, managing, and using Oracle database instances on Azure. And we are the cloud of choice for customers' SAP workloads too. Companies like Brother Industries, Hanes, ZEISS, and ZF Group all run SAP on Azure. Now on to data, in the age of Copilots, organizations are looking to consolidate their data estate, that's why with our Microsoft Intelligent Data Platform, we are bringing together operational data stores, analytics, and governance. More than 73% of the Fortune 1000 use three or more of our data solutions today. And with Microsoft Fabric, we are unifying compute, storage, and governance into one end-to-end analytical solution with an all-inclusive business model. More than 16,000 customers are actively using Fabric, including over 50% of the Fortune 500. Now on to developers. With GitHub Copilot, we are increasing developer productivity by up to 55%, while helping them stay in the flow and bringing the joy back to coding. We have over 1 million paid Copilot users and more than 37,000 organizations have subscribed to Copilot for business, up 40% quarter-over-quarter with significant traction outside the United States. This quarter we added new capabilities with GitHub Copilot Chat, which are already being used by both digital natives like Shopify, as well as, leading enterprises like Maersk and PwC to supercharge the productivity of their software developers. All up, the number of developers using GitHub has increased 4x since our acquisition five years ago. We've also brought Copilot to Power Platform, enabling anyone to use natural language to create apps, build virtual agents and analyze data. More than 126,000 organizations, including 3M, Equinor, Lumen Technologies, Nationwide, PG&E, and Toyota have all used Copilot in Power Platform to date. EY for example has enabled Copilot for all 170,000 plus Power Platform users at the company. And this quarter we added new Copilot capabilities to Power Pages making it possible to build a data-driven website using just a few sentences or clicks. Finally, Power Apps remains the market leader and low-code no-code development, now with 20 million monthly active users, up 40% year-over-year. Now on to business applications, all-up Dynamics 365 took share for the 10th consecutive quarter. We're using this AI inflection point to redefine our role in business applications. We are becoming the Copilot-led business process transformation layer on top of existing CRM systems like Salesforce. For example, our Sales Copilot help sellers that more than 15,000 organizations including Rockwell Automation, Sandvik Coromant, Securitas, and Teleperformance, personalize customer interactions based on data from third-party CRMs. We're also bringing Copilot to Dynamics 365 to help with everything from suggested actions and content ideas, to faster access to valuable business data. And this quarter, we introduced Copilot in Dynamics 365 Field Service, to help streamline frontline tasks. Now on to industry and cross-industry clouds. In healthcare, our Dragon Ambient eXperience solution helps clinicians automatically document patient interactions at the point of care. It's been used across more than 10 million interactions to date. And with DAX Copilot, we are applying generative AI models to draft high-quality clinical notes in seconds, increasing physician productivity and reducing burnout. For example, Atrium Health, a leading provider in Southeast United States credits DAX Copilot with helping its physicians each save up to 40 minutes per day in documentation time. We are also introducing healthcare data solutions in Microsoft Fabric, enabling providers like Northwestern Medicine and SingHealth to unify health data in a secure, compliant way. And with our Microsoft Cloud for sovereignty, which will become generally available by the end of the calendar year, we offer industry-leading data sovereignty and encryption controls, meeting the specific needs of public sector customers around the world. Now on to the future of work. Copilot is your everyday AI assistant, helping you be more creative in Word, more analytical in Excel, more expressive in PowerPoint, more productive in Outlook, and more collaborative in Teams. Tens of thousands of employees at customers like Bayer, KPMG, Mayo Clinic, Suncorp, and Visa, including 40% of the Fortune 100, are using Copilot as part of our early access program. Customers tell us that once they use Copilot, they can't imagine work without it and we are excited to make it generally available for enterprise customers next week. This quarter, we also introduced a new hero experience in Copilot, helping employees tap into their entire universe of work, data, and knowledge using chat (ph). And the new Copilot Lab helps employees build new work habits for this era of AI, by helping them turn good prompts into great ones. When it comes to Teams, usage continues to grow with more than 320 million monthly active users, making Teams the place to work across chat, collaboration, meetings, and calling. This quarter, we introduced a new version of Teams that is up to 2 times faster, while using 50% less memory and includes seamless cross-tenant communications and collaboration. We've seen nine consecutive quarters of triple-digit revenue growth for Teams Rooms, and more than 10,000 paid customers now use Teams Premium. Teams has also become a multiplayer canvas for business process. There are more than 2,000 apps in Teams Store, and collaborative apps from Adobe, Atlassian and Workday, each exceeded 1 million monthly active users on Teams. And with Viva, we have created a new market category for employee experience, helping companies like Dell, Lloyds Banking Group, and PayPal build high-performance organizations. With skills in Viva, we're bringing together information from Microsoft 365 and LinkedIn to help employers understand workforce gaps, and suggest personalized learning content to address it, all in the flow of work. All up, we continue to see more organizations choose Microsoft 365, and companies across the private and public sectors including Cerberus, Chanel, and DXC Technology, all rely on our Premium E5 offerings for advanced security compliance, voice, and analytics. Now on to Windows, the PC market unit volumes were at roughly pre-pandemic levels and we continue to innovate across Windows, adding differentiated AI-powered experiences to the operating system. We rolled out the biggest update to Windows 11 ever adding 150 new features including new AI-powered experiences in apps, like, Clipchamp, Paint, and Photos, and we introduced Copilot in Windows, the Everyday AI companion, which incorporates the context to the web, your work data and what you are doing on the PC to provide better assistance. We are seeing accelerated Windows 11 deployments worldwide from companies like BP, Eurowings, Kantar, and RBC. Finally, with Windows 365 Boot and Switch, we're making it easier than ever for employees at companies like Crocs, Hamburg Commercial Bank, the ING Bank to get a personalized Windows 365 Cloud PC with Copilot on any device. Now on to security. The speed, scale, and sophistication of cyberattacks today is unparalleled and security is the number one priority for CIOs worldwide. We see high-demand for Security Copilot, the industry's first and most advanced generative AI product, which is now seamlessly integrated with Microsoft 365 Defender. Dozens of organizations including Bridgewater, Fidelity National Financial, and Government of Alberta have been using Copilot in Preview, and early feedback has been positive. And we look forward to bringing Copilot to hundreds of organizations in the coming months as part of the new early access program, so they can improve the productivity of their own, security operation centers and stop threats at machine speeds. More broadly, we continue to take share across all major categories we serve, and our SIEM, Microsoft Sentinel now has more than 25,000 customers in revenue, surpassed $1 billion annual run-rate, and customers in every industry like Booz Allen Hamilton, Grant Thornton and MetLife use our end-to-end solutions to protect their environments. Now on to LinkedIn. We are now applying this new generation of AI to transform how the 985 million members learn, sell and get hired. Membership growth has now accelerated each quarter for over two years in a row. This quarter, we introduced new AI-driven features across all of our businesses, including our learning coach that gives members personalized content guidelines, and tools to help employers find qualified candidates and sellers and marketers attract buyers in a single step. Since introducing AI-assisted messages for recruiters five months ago, three-fourths of them say, it saved them time. And we have seen a nearly 80% increase in members watching AI-related learning courses this quarter. More broadly, we continue to see record engagement and knowledge sharing on the platform. We now have more than 450 million newsletter subscriptions globally, up 3x year-over-year. Premium subscription sign-ups were up 55% year-over-year and our hiring business took share for the fifth consecutive quarter. Now on to search, advertising, and news. With our Copilot for the Web, we are redefining how people use the Internet to search and create. Bing users have engaged in more than 1.9 billion chats, and Microsoft Edge has now gained share for 10 consecutive quarters. This quarter, we introduced new personalized answers, as well as, support for DALL-E 3, helping people get more relevant answers and to create incredibly realistic images with more than 1.8 billion images have been created to-date. And with our Copilot and Shopping, people can find more tailored recommendations and better deals. We're also expanding to new endpoints, bringing Bing to Meta's AI chat experience in order to provide more up-to-date answers, as well as access to real-time search information. Finally, we are integrating this new generation of AI directly into our ad platforms to more effectively connect marketeers to customer intent in chat experiences, both from us as well as customers like Axel Springer and Snap. Now on to gaming. We were delighted to close our acquisition of Activision Blizzard King earlier this month. Together, we will advance our goal of bringing great games to players everywhere on any endpoint. Already with Game Pass, we're redefining how games are distributed, played, and discovered. We set a record for hours played per subscriber this quarter. We released Starfield this quarter to broader acclaim, more than 11 million people have played the game to date. Nearly half of the hours played have been on PC and on launch day, we set a record for the most Game Pass subscriptions added on a single day ever. Minecraft has now surpassed 300 million copies sold, and with Activision Blizzard King, we now adds significant depth to our content portfolio. We will have $13 billion-plus franchises from Candy Crush, Diablo, and Halo to Warcraft, Elder Scrolls and Gears of War. And we're looking forward to one of our strongest first-party holiday lineups ever, including new titles like Call of Duty: Modern Warfare 3 and Forza Motorsport. In closing, we are rapidly innovating to expand our opportunity across our consumer and commercial businesses, as we help our customers thrive in this new era. In just a few weeks, we'll be holding our flagship Ignite Conference, where we will introduce more than 100 new products and capabilities, including exciting new AI innovations. I encourage you to tune in. With that, I'll turn it over to Amy.","evidence_gemma_new":"Microsoft Cloud quarterly revenue","evidence_llama_3_3":"Microsoft Cloud quarterly revenue","evidence_qwen_3_30b":"Microsoft Cloud quarterly revenue","gemma_new_max":31800000000.0,"gemma_new_min":31800000000.0,"llama_3_3_max":31800000000.0,"llama_3_3_min":31800000000.0,"qwen_3_30b_max":31800000000.0,"qwen_3_30b_min":31800000000.0}
{"symbol":"MSFT","year":2023,"quarter":3,"date":"2023-Q3","chunk_id":3,"sub_chunk_id":0,"centroid_label":"microsoft revenue","agreed_value":28500000000.0,"count":2,"chunk":"Amy Hood: Thank you, Satya, and good afternoon, everyone. Our third quarter revenue was $52.9 billion, up 7% and 10% in constant currency. Earnings per share was $2.45 and increased 10% and 14% in constant currency. Our results exceeded expectations, driven by focused execution from our sales teams and partners. In our commercial business, revenue was up 19% in constant currency. We saw better-than-expected renewal strength, including across Microsoft 365, which also benefited Windows Commercial given the higher in-period revenue recognition. In Office 365 stand-alone products, we saw improvement in new business growth, while growth trends in EMS and Windows Commercial standalone products remained consistent with Q2. In Azure, customers continued to exercise some caution as optimization and new workload trends from the prior quarter continued as expected. In our consumer business, PC demand was a bit better than we expected, particularly in the commercial segment, which benefited Windows OEM and Surface even as channel inventory levels remain elevated, which negatively impacted results. Advertising spend landed in line with our expectations. We have seen share gains in Azure, Dynamics, Teams, Security, Edge and Bing as we continue to focus on delivering high value as well as new innovative solutions to our customers, including next-generation AI capabilities. Commercial bookings increased 11% and 12% in constant currency on a strong prior year comparable with a declining expiry base and 3 points of unfavorable impact from the inclusion of Nuance in the prior year. The better-than-expected result was driven by strong execution across our renewal sales motions mentioned earlier. Commercial remaining performance obligation increased 26% to $196 billion. Roughly 45% will be recognized in revenue in the next 12 months, up 18% year-over-year. The remaining portion, which will be recognized beyond the next 12 months increased 34%. And this quarter, our annuity mix was again 96%. FX impact on total company revenue, segment level revenue and operating expense growth was as expected. FX decreased COGS growth by 2 points, 1 point favorable to expectations. Microsoft Cloud revenue was $28.5 billion and grew 22% and 25% in constant currency, slightly ahead of expectations. Microsoft Cloud gross margin percentage increased roughly 2 points year-over-year to 72%, a point ahead of expectations driven by cloud engineering efficiencies. Excluding the impact of the change in accounting estimate for useful lives, Microsoft Cloud gross margin percentage decreased slightly, driven by lower Azure margin. Company gross margin dollars increased 9% and 13% in constant currency, including 2 points due to the change in accounting estimate. Gross margin percentage increased year-over-year to 69%. Excluding the impact of the change in accounting estimate, gross margin percentage decreased slightly, driven by a lower mix of OEM revenue. Operating expense increased 7% and 9% in constant currency, about $300 million lower than expected. Operating expense growth was driven by roughly 2 points from the Nuance and Xandr acquisitions as well as investments in cloud engineering and LinkedIn. At a total company level, head count at the end of March was 9% higher than a year ago. Operating income increased 10% and 15% in constant currency, including 4 points due to the change in accounting estimate. Operating margins increased roughly 1 point year-over-year to 42%. Excluding the impact of the change in accounting estimate, operating margins decreased slightly and increased slightly in constant currency. Now to our segment results. Revenue from Productivity and Business Processes was $17.5 billion and grew 11% and 15% in constant currency, ahead of expectations, primarily driven by better-than-expected results in Office commercial. Office commercial revenue grew 13% and 17% in constant currency. Office 365 commercial revenue increased 14% and 18% in constant currency, slightly better than expected with the strong renewal execution mentioned earlier and E5 momentum. Paid Office 365 commercial seats grew 11% year-over-year to over 382 million, with installed base expansion across all workloads and customer segments. Seat growth was again driven by our small and medium business and frontline worker offerings. Office commercial licensing declined 1% and increased 5% in constant currency, better than expected with 11 points of benefit from transactional strength in Japan. Office consumer revenue increased 1% and 4% in constant currency with continued momentum in Microsoft 365 subscriptions, which grew 12% to 65.4 million. LinkedIn revenue increased 8% and 10% in constant currency, driven by growth in Talent Solutions. Dynamics revenue grew 17% and 21% in constant currency, driven by Dynamics 365, which grew 25% and 29% in constant currency, with healthy growth across all workloads. Segment gross margin dollars increased 14% and 18% in constant currency, and gross margin percentage increased roughly 2 points year-over-year. Excluding the impact of the change in accounting estimate, gross margin percentage increased slightly, driven by improvements in Office 365, partially offset by sales mix shift to cloud offerings. Operating expenses increased 4% and 5% in constant currency, and operating income increased 20% and 27% in constant currency, including 4 points due to the change in accounting estimate. Next, the Intelligent Cloud segment. Revenue was $22.1 billion, increasing 16% and 19% in constant currency, slightly ahead of expectations. Overall, server products and cloud services revenue increased 17% and 21% in constant currency. Azure and other cloud services revenue grew 27% and 31% in constant currency. In our per user business, enterprise mobility and security installed base grew 15% to nearly 250 million seats. In our on-premises server business, revenue decreased 2% and was relatively unchanged in constant currency with continued demand for our hybrid offerings, including Windows Server and SQL Server running in multi-cloud environments, offset by transactional licensing. Enterprise Services revenue grew 6% and 9% in constant currency with better-than-expected performance across Enterprise Support Services and Microsoft Consulting Services. Segment gross margin dollars increased 15% and 18% in constant currency and gross margin percentage decreased slightly. Excluding the impact of the change in accounting estimate, gross margin percentage declined roughly 3 points, driven by sales mix shift to Azure and the lower Azure margin noted earlier. Operating expenses increased 19% and 20% in constant currency, including roughly 3 points of impact from the Nuance acquisition. Operating income grew 13% and 17% in constant currency, with roughly 6 points from the change in accounting estimate. Now to More Personal Computing. Revenue was $13.3 billion, decreasing 9% and 7% in constant currency with better-than-expected results across all businesses. Windows OEM revenue decreased 28% year-over-year and Devices revenue decreased 30% and 26% in constant currency, both ahead of expectations. We saw better-than-expected PC demand, as noted earlier, particularly in the commercial segment, which has higher revenue per license, although results continue to be negatively impacted by elevated channel inventory levels. Windows commercial products and cloud services revenue increased 14% and 18% in constant currency, significantly ahead of expectations, primarily due to the strong renewal execution with higher in-period revenue recognition noted earlier. Search and news advertising revenue ex TAC increased 10% and 13% in constant currency, including 2 points from the Xandr acquisition. Results were driven by higher search volume with share gains again this quarter for our Edge browser globally and Bing in the U.S. And in Gaming, revenue declined 4% and 1% in constant currency, ahead of expectations. Xbox hardware revenue declined 30% and 28% in constant currency on a high prior year comparable that benefited from increased console supply. Xbox content and services revenue increased 3% and 5% in constant currency, driven by better-than-expected monetization in third-party and first-party content and growth in Xbox Game Pass. Segment gross margin dollars declined 9% and 5% in constant currency, and gross margin percentage increased slightly year-over-year. Operating expenses declined 5% and 3% in constant currency, even with 3 points of growth from the Xandr acquisition. Operating income decreased 12% and 7% in constant currency. Now back to total company results. Capital expenditures, including finance leases were $7.8 billion to support cloud demand. Cash paid for PP&E was $6.6 billion. Cash flow from operations was $24.4 billion, down 4% year-over-year as strong cloud billings and collections as well as lower supplier payments were more than offset by a tax payment related to the R&D capitalization provisions and employee payments primarily related to headcount growth and an increase in employee compensation. Free cash flow was $17.8 billion, down 11% year-over-year. Excluding the impact of this tax payment, cash flow from operations increased 1% and free cash flow declined 5%. This quarter, other income and expense was $321 million, higher than anticipated, driven by net gains on foreign currency remeasurement. Our effective tax rate was approximately 19%. And finally, we returned $9.7 billion to shareholders through share repurchases and dividends. Now moving to our Q4 outlook, which unless specifically noted otherwise, is on a U.S. dollar basis. My commentary for the next quarter and FY '24 does not include any impact from Activision, which we continue to work towards closing in fiscal year 2023, subject to obtaining required regulatory approvals. Now to FX. Based on current rates, we expect FX to decrease total revenue growth by approximately 2 points with no impact to COGS or operating expense growth. Within segments, we anticipate roughly 2 points of negative FX impact on revenue growth in Productivity and Business Processes and Intelligent Cloud and roughly 1 point in More Personal Computing. Overall, our outlook has many of the trends we saw in Q3 continue through Q4. In our largest quarter of the year, we expect customer demand for our differentiated solutions, including our AI platform and consistent execution across the Microsoft Cloud to drive another quarter of healthy revenue growth. Last year, we had our largest commercial bookings quarter ever with a material volume of large multiyear commitments. On that comparable, we expect growth to be relatively flat. We expect consistent execution across our core annuity sales motions with strong renewals and continued commitment to our platform as we focus on meeting customers' changing contract needs, which include shorter term, quick time to value contracts in this dynamic environment. Our key focus remains on delivering customer value. Microsoft Cloud gross margin percentage should be up roughly 2 points year-over-year, driven by the accounting estimate change noted earlier. Excluding that impact, Q4 cloud gross margin percentage will be relatively flat as improvements in Office 365 will offset the lower Azure margin and the impact of scaling our AI infrastructure to meet growing demand. We expect capital expenditures to have a material sequential increase on a dollar basis, driven by investments in Azure AI infrastructure. Reminder there can be normal quarterly spend variability in the timing of our cloud infrastructure build-out. Next, to segment guidance. In Productivity and Business Processes, we expect revenue to grow between 10% and 12% in constant currency or $17.9 billion to $18.2 billion. In Office Commercial, revenue growth will again be driven by Office 365, with seat growth across customer segments and ARPU growth through E5. We expect Office 365 revenue growth to be roughly 16% in constant currency. In our on-premises business, we expect revenue to decline in the low 30s. In Office consumer, we expect revenue growth in the mid-single digits, driven by Microsoft 365 subscriptions. For LinkedIn, we expect mid-single digit revenue growth driven by Talent Solutions with continued strong engagement on the platform. And in Dynamics, we expect revenue growth in the mid- to high teens, driven by continued growth in Dynamics 365. For Intelligent Cloud, we expect revenue to grow between 15% and 16% in constant currency or $23.6 billion to $23.9 billion. Revenue will continue to be driven by Azure, which, as a reminder, can have quarterly variability primarily from our per user business and from in-period revenue recognition depending on the mix of contracts. In Azure, we expect revenue growth to be 26% to 27% in constant currency, including roughly 1 point from AI services. Growth continues to be driven by our Azure consumption business, and we expect the trends from Q3 to continue into Q4, as noted earlier. Our per-user business should continue to benefit from Microsoft 365 suite momentum, though we expect continued moderation in growth rates given the size of the installed base. In our on-premises server business, we expect revenue to decline low single digits as demand for our hybrid solutions, including Windows Server and SQL Server running in multi-cloud environments, will be more than offset by unfavorable FX impact. And in Enterprise Services, revenue should be relatively unchanged year-over-year as growth in Enterprise Support Services will be offset by a decline in Microsoft Consulting Services. In More Personal Computing, we expect revenue of $13.35 billion to $13.75 billion. PC demand should be similar to Q3, and given channel inventory still remains elevated, our revenue will lag overall market growth as it continues to normalize. Therefore, Windows OEM and Devices revenue should both decline in the low to mid-20s. In Windows commercial products and cloud services revenue should decline low to mid-single digits. While we expect healthy annuity billings growth driven by continued customer demand for Microsoft 365 and our advanced security solutions, a reminder that our quarterly revenue growth can have variability, primarily from in-period revenue recognition depending on the mix of contracts. Search and news advertising ex TAC revenue growth should be approximately 10%, roughly 5 points higher than the overall search and news advertising revenue, driven by growth in first-party revenue is similar to Q3. And in Gaming, we expect revenue growth in the mid- to high single digits. We expect Xbox content services revenue growth in the low to mid-teens, driven by third-party and first-party content as well as Xbox Game Pass. Now back to company guidance. We expect COGS to grow between 3% and 4% in constant currency or $16.8 billion to $17 billion and operating expense to grow approximately 2% in constant currency or $15.1 billion to $15.2 billion. Other income and expense should be roughly $300 million as interest income is expected to more than offset interest expense. As a reminder, we are required to recognize mark-to-market gains or losses on our equity portfolio, which can increase quarterly volatility. We expect our Q4 effective tax rate to be in line with our full year rate of approximately 19%. And finally, as a reminder, for Q4 cash flow, we expect to make a $1.3 billion cash tax payment related to the R&D capitalization provision. Now I'd like to share some closing thoughts as we look to the next fiscal year. With our leadership position as we begin this AI era, we remain focused on strategically managing the company to deliver differentiated customer value as well as long-term financial growth and profitability. As with any significant platform shift, it starts with innovation. And we are excited about the early feedback and demand signals for the AI capabilities we have announced to date. We will continue to invest in our cloud infrastructure, particularly AI-related spend as we scale with the growing demand, driven by customer transformation. And we expect the resulting revenue to grow over time. As always, we remain committed to aligning cost and revenue growth to deliver disciplined profitability. Therefore, while the scaled CapEx investments will impact COGS growth, we expect FY '24 operating expense growth to remain low. As a team, we have continually focused on pivoting our resources aggressively to the future as we execute at a high level in the moment to deliver value to our customers. That balance has enabled the company to successfully lead across a number of platform shifts over a number of decades. Therefore, we are committed to leading the AI platform wave and making the investments to support it. With that, let's go to Q&A. Brett?","evidence_gemma_new":null,"evidence_llama_3_3":"Microsoft Cloud revenue","evidence_qwen_3_30b":"Microsoft Cloud revenue constant currency","gemma_new_max":null,"gemma_new_min":null,"llama_3_3_max":28500000000.0,"llama_3_3_min":28500000000.0,"qwen_3_30b_max":28500000000.0,"qwen_3_30b_min":28500000000.0}
{"symbol":"MSFT","year":2023,"quarter":4,"date":"2023-Q4","chunk_id":2,"sub_chunk_id":0,"centroid_label":"microsoft revenue","agreed_value":110000000000.0,"count":3,"chunk":"Satya Nadella: Thank you very much, Brett. We had a solid close to our fiscal year. The Microsoft Cloud surpassed $110 billion in annual revenue, up 27% in constant currency, with Azure all-up accounting for more than 50% of the total for the first time. Every customer I speak with is asking not only how, but how fast they can apply next-generation AI to address the biggest opportunities and challenges they face, and to do so safely and responsibly. To that end, we remain focused on 3 key priorities: first, helping customers use the breadth and depth of Microsoft Cloud to get the most value on to their spend; second, investing to lead in the new AI platform shift by infusing AI across every layer of the tech stack; and third, driving operating leverage. Now I'll highlight examples of our progress, starting with infrastructure. Azure continues to take share as customers migrate their existing workloads and invest in new ones. We continue to see more cloud migrations, as it remains early when it comes to long-term cloud opportunity. We are also seeing increasing momentum with Azure Arc, which now has 18,000 customers, up 150% year-over-year, including Carnival Corp., Domino's, Thermo Fisher. And Azure AI is ushering in new born-in-the-cloud AI-first workloads, with the best selection of frontier and open models, including Meta's recent announcements supporting Llama on Azure and Windows, as well as OpenAI. We have great momentum across Azure OpenAI Service. More than 11,000 organizations across industries, including IKEA, Volvo Group, Zurich Insurance, as well as digital natives like Flipkart, Humane, Kahoot, Miro, Typeface, use the service. That's nearly 100 new customers added every day this quarter. Mercedes-Benz, for example, is bringing ChatGPT via Azure OpenAI to more than 900,000 vehicles in the United States, making its in-car voice assistant more intuitive. And Moody's built its own internal copilot to improve productivity of its 14,000 employees. We're also partnering broadly to scale this next generation of AI to more customers. Snowflake, for example, will increase its Azure spend as it builds new integrations with Azure OpenAI. And KPMG has announced a multibillion-dollar commitment to our cloud and AI services to transform professional services. Now on to data. Every AI app starts with data, and having a comprehensive data and analytics platform is more important than ever. Our intelligent data platform brings together operational databases, analytics and governance so organizations can spend more time creating value and less time integrating their data estate. We introduced Microsoft Fabric this quarter, which unifies compute storage and governance with a disruptive business model. One month in, we are encouraged by early interest in usage. Over 8,000 customers have signed up to trial the service and are actively using it, and over 50% are using 4 or more workloads. All-up, we once again took share with our analytics solutions with customers like Bridgestone, Chevron and Equinor turning to our stack. Now on to developers. New Azure AI Studio is becoming the tool of choice for AI development in this new era, helping organizations ground, fine-tune, evaluate and deploy models, and do so responsibly. VS Code and GitHub Copilot are category-leading products when it comes to how developers code every day. Nearly 90% of GitHub Copilot sign-ups are self-service, indicating strong organic interest and pull-through. More than 27,000 organizations, up 2x quarter-over-quarter, have chosen GitHub Copilot for Business to increase the productivity of their developers, including Airbnb, Dell and Scandinavian Airlines. We're also applying AI across low-code, no-code tool chain to help domain experts automate workflows, create apps and web pages, build virtual agents, or analyze data using just natural language. Copilot in Power BI combines the power of large language models with an organization's data to generate insights faster, and Copilot in Power Pages makes it easier to create secure low-code business websites. One of our tools that's really taken off is Copilot in Power Virtual Agents, which is delivering one of the biggest benefits of this new area of AI, helping customer service agents be significantly more productive. HP and Virgin Money, for example, have both built custom chatbots with Copilot and Power Virtual Agents that were trained to answer complex customer inquiries. All-up, more than 63,000 organizations have used AI-powered capabilities in Power Platform, up 75% quarter-over-quarter. Finally, Power Automate now has 10 million monthly active users at companies like Jaguar Land Rover, Repsol, Rolls-Royce, up 55% year-over-year. And we're going further with new process mining capabilities in Power Automate, which are helping organizations optimize business processes and, in turn, build their AI advantage. Now on to business applications. We are taking share in every category as we help organizations across the private and public sector from Avis to Albertsons to Breville to Equinox and the U.S. Department of Veterans Affairs transform their mission-critical business processes. All-up, Dynamics surpassed $5 billion in revenue over the past fiscal year with our customer experience, service and finance and supply chain businesses all surpassing $1 billion in annual sales. This quarter, we brought Dynamics 365 Copilots to our ERP portfolio, including finance, project operations and supply management. And with our new Microsoft Sales Copilot, sellers can ground their customer interactions with data from CRM systems, including both Salesforce and Dynamics to personalize customer interactions and close more deals. Now on to our industry and cross-industry clouds. Our Microsoft Cloud for Sustainability is helping customers like Costco, Land O'Lakes and REI take action to meet their environmental goals. And in health care, hundreds of organizations are using our Nuance DAX ambient intelligence solution to automatically document patient encounters at the point of care. This quarter, we expanded our collaboration with Epic to integrate Nuance DAX Express directly into their industry-leading EHR system. Now on to future of work. Across industries, customers like Ahold Delhaize, Deutsche Bank, Novartis, Siemens, Wells Fargo are choosing Microsoft 365 premium offerings for differentiated security, compliance, voice and analytics value. And 4 months ago, we introduced a new pillar of customer value with Microsoft 365 Copilot. We are now rolling out Microsoft 365 Copilot to 600 paid customers through our early access program, and feedback from organizations like Emirates NBD, General Motors, Goodyear and Lumen is that it's a game changer for employee productivity. We continue to build momentum in Microsoft Teams across collaboration, chat, meetings and calling. We now have more than 1,900 apps in Teams app store. And companies in every industry, from British Airways, to Dentsu, to Eli Lilly and Manulife, have built over 145,000 custom line of business apps, bringing business process directly into the flow of work. Five months in, Teams Premium has already surpassed 600,000 seats as companies like BNY Mellon, Clifford Chance, PepsiCo and Starbucks chose the add-on for advanced features like end-to-end encryption and real-time translation. Teams Phone is the market leader in cloud calling with more than 17 million PSTN users, up 45% year-over-year. Teams Room is used by more than 70% of the Fortune 500, including L'Oreal, United Airlines and U.S. Bank, and revenue more than doubled year-over-year this quarter. And with Microsoft Viva, we are creating a new market category for employee experience. Viva now has 35 million monthly active users as companies like CBRE, Fujitsu and Unisys turn to the platform to build data-driven, high-performance organizations. Now on to Windows. The number of devices running Windows 11 has more than doubled in the last year, and we are seeing continued growth in Windows 11 commercial deployments worldwide by companies like AT&T, Krones and Westpac. We are also transforming how Windows is experienced and managed for enterprise customers with Azure Virtual Desktop and Windows 365, which together surpassed $1 billion in revenue for the first time over the past 12 months. Enbridge, Eurowings, Marriott International and TD Bank Group, for example, all chose cloud-delivered Windows this quarter. Windows 11 is also rapidly becoming a powerful new canvas in this new era of AI. We introduced Windows Copilot this quarter, helping every Windows 11 user become a power user with just natural language and are excited to put it in the hands of more people in the coming months. Now on to security. More than 1 million organizations now count on our comprehensive AI-powered solutions to protect their digital estate across cloud and endpoint platforms, up 26% year-over-year. More than 60% including leading enterprises like ABN AMRO, Dow and Heineken use 4 or more of our security products, up 33% year-over-year, underscoring our end-to-end differentiation. And we once again took share across all major categories we serve as we innovate to protect customers. In identity, Microsoft Entra ID has more than 610 million monthly active users, and we are adding SSE to our Entra product family to complement our leading identity solution and secure access to any app or resource from anywhere. Finally, our Security Copilot, the first product to apply this next generation of AI to SecOps will be available to customers via paid early access program this fall. Now on to LinkedIn. LinkedIn's revenue surpassed $15 billion for the first time this fiscal year, and membership growth has now accelerated for 8 quarters in a row, a testament to how mission-critical the platform has become to help more than 950 million members connect, learn, sell and get hired. Our Talent Solutions business surpassed $7 billion in revenue for the first time over the past 12 months, and our hiring business took share for the fourth consecutive quarter. We continue to use AI to help our members and customers connect to opportunities and tap into experiences of experts on the platform. Our AI-powered collaborative articles are now the fastest-growing traffic driver in LinkedIn. And finally, we are helping LinkedIn stay trusted and authentic. More than 7 million members have verified who they are or where they work, many using new integrations with Microsoft Entra as well as CLEAR and Hyperverge. Now on to search, advertising and news. While it's early in our journey, we are reshaping daily search and web habits with our Copilot for the web. This quarter, we introduced new AI-powered features, including multimodal capabilities with visual search and Bing Chat. We are expanding to businesses with Bing Chat Enterprise, which offers commercial data protection, providing an easy on-ramp for any organization looking to get the benefit of this next generation of AI today. Bing is also the default search experience for OpenAI's ChatGPT, bringing timelier answers with links to our reputable sources to ChatGPT users. To date, Bing users have engaged in more than 1 billion chats and created more than 750 million images with Bing Image Creator, and Microsoft Edge took share for the ninth consecutive quarter. More broadly, we are growing our ad network, which is now available in 187 markets spanning search, display, native, retail, media, video and connected TV. Now on to gaming. Last week, we extended our Activision Blizzard merger agreement deadline to October. We continue to work through the regulatory approval process and remain confident about getting the deal done. We are committed to bringing more games to more players everywhere. Great content is key to our approach, and our pipeline has never been stronger. We announced our most ambitious lineup of games ever at our showcase last month, including 21 titles that will be available via Xbox Game Pass. And we're looking forward to the release of Starfield this fall, Bethesda's first new universe in 25 years. All-up, we set new fourth quarter highs for monthly active users, driven by strength off-console, as well as monthly active devices. And we saw record fourth quarter engagement across Game Pass, with hours played up 22% year-over-year. And just last week, we announced Game Pass Core, bringing together online play from Xbox Live and content from Game Pass into a single offering. In closing, I'm energized about the opportunities ahead. We continue to innovate across the tech stack to help our customers thrive in the new era of AI. And with that, let me turn it over to Amy.","evidence_gemma_new":"Microsoft Cloud annual revenue","evidence_llama_3_3":"Microsoft Cloud annual revenue","evidence_qwen_3_30b":"Microsoft Cloud annual revenue fiscal year","gemma_new_max":110000000000.0,"gemma_new_min":110000000000.0,"llama_3_3_max":110000000000.0,"llama_3_3_min":110000000000.0,"qwen_3_30b_max":110000000000.0,"qwen_3_30b_min":110000000000.0}
{"symbol":"MSFT","year":2023,"quarter":4,"date":"2023-Q4","chunk_id":3,"sub_chunk_id":0,"centroid_label":"microsoft revenue","agreed_value":30300000000.0,"count":2,"chunk":"Amy Hood: Thank you, Satya, and good afternoon, everyone. This quarter, revenue was $56.2 billion, up 8% and 10% in constant currency. Earnings per share was $2.69 and increased 21% and 23% in constant currency. In our largest quarter of the year, results exceeded expectations with focused execution by our sales and partner teams. These execution efforts led to share gains again this quarter in Azure, Dynamics, Security and Edge. In our commercial business, we continued to see healthy renewal strength, which includes our upsell and attach motions, particularly with Microsoft 365 E5. Growth of new business continued to be moderated for products sold outside the Microsoft 365 suite, including stand-alone Office 365, EMS and Windows Commercial products. As expected in Azure, we saw a continuation of the optimization and new workload trends from the prior quarter. In our consumer business, the PC market overall was in line with expectations, although the early timing of back-to-school inventory builds benefited Windows OEM. Advertising spend was slightly lower than anticipated, which impacted search and news advertising and LinkedIn Marketing Solutions. Commercial bookings decreased 2% and 1% in constant currency, in line with expectations against the prior year comparable that was our largest commercial bookings quarter ever. In addition to the healthy execution across our renewal sales motions mentioned earlier, we saw a record number of $10 million-plus contracts for both Azure and Microsoft 365. And the average annualized value for our large, long-term Azure contracts was the highest it's ever been, driven by customer demand for our innovative cloud solutions today as well as interest in AI opportunities ahead. Commercial remaining performance obligation increased 19% and 18% in constant currency to $224 billion. Roughly 45% will be recognized in revenue in the next 12 months, up 13% year-over-year. The remaining portion, which we recognized beyond the next 12 months, increased 22%. And this quarter, our annuity mix increased to 97%. FX impact on total company revenue, segment level revenue and operating expense growth was as expected. FX decreased COGS growth by 1 point, 1 point favorable to expectations. Microsoft Cloud revenue was $30.3 billion and grew 21% and 23% in constant currency, slightly ahead of expectations. Microsoft Cloud gross margin percentage increased roughly 3 points year-over-year to 72%, also slightly ahead of expectations. Excluding the impact of the change in accounting estimate for useful lives, Microsoft Cloud gross margin percentage increased slightly, driven by improvements in Office 365, partially offset by lower Azure margin and the impact of scaling our AI infrastructure to meet growing demand. Company gross margin dollars increased 11% and 13% in constant currency, including 2 points due to the change in accounting estimate. Gross margin percentage increased year-over-year to 70%. Excluding the impact of the change in accounting estimate, gross margin percentage increased slightly, driven by improvements in Office 365. Operating expense increased 2%, in line with expectations as savings across the company from our focus on prioritization and efficiency were offset by the charge related to the Irish Data Protection Commission matter. At a total company level, headcount at the end of June was flat compared to a year ago. Operating income increased 18% and 21% in constant currency, including 4 points due to the change in accounting estimate. Operating margins increased roughly 4 points year-over-year to 43%. Excluding the impact of the change in accounting estimate, operating margins increased roughly 2 points, driven by improved operating leverage through disciplined cost management. Now to our segment results. Revenue from Productivity and Business Processes was $18.3 billion and grew 10% and 12% in constant currency, ahead of expectations with better-than-expected results in Office Commercial, partially offset by LinkedIn. Office Commercial revenue grew 12% and 14% in constant currency. Office 365 Commercial revenue increased 15% and 17% in constant currency, a bit better than expected with particular strength in E5 upsell renewal noted earlier. Paid Office 365 Commercial seats grew 11% year-over-year with installed base expansion across all workloads and customer segments. Seat growth was again driven by our small and medium business and frontline worker offerings. Office Commercial licensing declined 20% and 18% in constant currency with better-than-expected transactional purchasing. Office Consumer revenue increased 3% and 6% in constant currency with continued momentum in Microsoft 365 subscriptions, which grew 12% to $67 million. LinkedIn revenue increased 5% and 7% in constant currency, driven by growth in Talent Solutions, with some continued bookings impact from the weaker hiring environment in key verticals. Growth was partially offset by a decline in Marketing Solutions due to the lower ad spend noted earlier. Dynamics revenue grew 19% and 21% in constant currency, driven by Dynamics 365, which grew 26% and 28% in constant currency, with continued healthy growth across all workloads. Segment gross margin dollars increased 14% and 16% in constant currency, and gross margin percentage increased roughly 3 points year-over-year. Excluding the impact of the change in accounting estimate, gross margin percentage increased roughly 1 point, driven by improvements in Office 365. Operating expenses decreased slightly and operating income increased 25% and 29% in constant currency, including 3 points due to the change in accounting estimate. Next, the Intelligent Cloud segment. Revenue was $24 billion, increasing 15% and 17% in constant currency, slightly ahead of expectations. Overall, server products and cloud services revenue increased 17% and 18% in constant currency. Azure and other cloud services revenue grew 26% and 27% in constant currency, including roughly 1 point from AI services, as expected. In our per user business, the Enterprise Mobility and Security installed base grew 11% to over 256 million seats, with impact from the continued growth trends in new business noted earlier. In our on-premises server business, revenue decreased 1% and was relatively unchanged in constant currency, driven by a slight decrease in new annuity contracts, which carry higher in-period revenue recognition. Enterprise Services revenue grew 4% and 5% in constant currency with better-than-expected performance across enterprise support services and industry solutions. Segment gross margin dollars increased 16% and 17% in constant currency, and gross margin percentage increased slightly. Excluding the impact of the change in accounting estimate, gross margin percentage declined roughly 2 points, driven by sales mix shift to Azure and the lower Azure margin noted earlier. Operating expenses increased 10%. Operating income grew 20% and 22% in constant currency, with roughly 6 points from the change in accounting estimate. Now to More Personal Computing. Revenue was $13.9 billion, decreasing 4% and 3% in constant currency, above expectations, driven by better-than-expected performance in Windows, partially offset by Gaming. Windows OEM revenue decreased 12% year-over-year, ahead of expectations due to 7 points of benefit from early back-to-school inventory builds, while the overall PC market was as expected. Devices revenue decreased 20% and 18% in constant currency, roughly in line with expectations. Windows commercial products and cloud services revenue increased 2% and 3% in constant currency, ahead of expectations, due to the renewal strength noted earlier, even with the moderated growth of new business and stand-alone offerings. Search and news advertising revenue ex TAC increased 8%, a bit behind expectations due to lower ad spend noted earlier. Higher search volumes, share gains again this quarter for our Edge browser, and the benefit from the Xandr acquisition were partially offset by the impact from third-party partnerships. And in Gaming, revenue increased 1% and 2% in constant currency, lower than expected due to weakness in first-party and third-party content performance. Xbox content and services revenue increased 5% and 6% in constant currency and Xbox hardware revenue declined 13%. Segment gross margin dollars declined 2% and were relatively unchanged in constant currency, and gross margin percentage increased roughly 1 point year-over-year, driven by sales mix shift to higher-margin businesses. Operating expenses declined 9% and 8% in constant currency. Operating income increased 4% and 6% in constant currency. Now back to total company results. Capital expenditures, including finance leases, were $10.7 billion to support cloud demand, including investments in AI infrastructure. Cash paid for PP&E was $8.9 billion. Cash flow from operations was $28.8 billion, up 17% year-over-year as strong cloud billings and collections were partially offset by a tax payment related to the R&D capitalization provision. Free cash flow was $19.8 billion, up 12% year-over-year. Excluding the impact of this tax payment, cash flow from operations increased 22% and free cash flow increased 19%. This quarter, other income and expense was $473 million, higher than anticipated, driven by net gains on foreign currency remeasurement. Our effective tax rate was approximately 19%. And finally, we returned $9.7 billion to shareholders through share repurchases and dividends, bringing our total cash returned to our shareholders to over $38 billion for the full fiscal year. Now let's turn to next fiscal year and start with a few reminders. First, the change in accounting estimate for the useful life of server and network equipment resulted in $3.7 billion of depreciation expense shifting from FY '23 to future periods. Our FY '23 operating income and margins benefited from this change in accounting estimate and that will be a headwind to growth in FY '24 as the benefit reduces to $2.1 billion. Next, my outlook commentary for both the full year and next quarter is on a U.S. dollar basis unless specifically noted otherwise. And my outlook does not include any impact from the Activision acquisition, which we continue to work towards closing, subject to obtaining required regulatory approvals. Now for some thoughts on the full year of FY '24. With the weaker U.S. dollar and assuming current rates remain stable, we expect FX to increase full year revenue growth by approximately 1 point with no impact to COGS or operating expense growth. The impact in H1 is expected to be greater than H2. At a total company level, revenue growth from our Commercial business will continue to be driven by the Microsoft Cloud and will again outpace the growth from our Consumer business. Even with strong demand and a leadership position, growth from our AI services will be gradual as Azure AI scales and our copilots reach general availability dates. So for FY '24, the impact will be weighted towards H2. To support our Microsoft Cloud growth and demand for our AI platform, we will accelerate investment in our cloud infrastructure. We expect capital expenditures to increase sequentially each quarter through the year as we scale to meet demand signals. We are committed to driving operating leverage, and therefore, we will manage our total cost growth across COGS and operating expense in line with the demand signals we see as well as revenue growth. Increased capital spend will drive higher COGS growth than in FY '23, and FY '24 operating expense growth will remain low as we prioritize our spend. Therefore, we expect full year operating margins to remain flat year-over-year, even with the headwind from the change in accounting estimate. And finally, we expect our FY '24 tax rate to be around 19%. Now to the outlook for the first quarter. First, FX. Based on current rates, we expect FX to increase total revenue and operating expense growth by approximately 1 point with no impact to COGS growth. Within the segments, we expect FX to increase revenue growth in Intelligent Cloud by 1 point with no impact to Productivity and Business Processes or More Personal Computing. In Commercial bookings, strong execution across our core annuity sales motions, including our renewal and upsell motions, along with long-term measure commitments should drive healthy growth on a growing expiry base. Microsoft Cloud gross margin percentage should decrease roughly 1 point year-over-year, driven by the accounting estimate change headwind noted earlier. Excluding that impact, Q1 cloud gross margin percentage will be up roughly 1 point, primarily driven by improvements in Azure and Office 365, partially offset by sales mix shift to Azure and the impact of scaling our AI infrastructure to meet growing demand. We expect capital expenditures to increase sequentially on a dollar basis, as noted earlier, driven by investments in our AI infrastructure. Reminder, there can be normal quarterly spend variability in the timing of cloud infrastructure build-out. Next to segment guidance. In Productivity and Business Processes, we expect revenue to grow between 9% and 11% or USD 18 billion to USD 18.3 billion. In Office Commercial, revenue growth will again be driven by Office 365 with seat growth across customer segments and ARPU growth through E5. We expect Office 365 revenue growth to be roughly 16% in constant currency. In our on-premises business, we expect revenue to decline in the low 20s. In Office Consumer, we expect revenue growth to be in the low to mid-single digits, driven by Microsoft 365 subscriptions. For LinkedIn, we expect revenue growth in the low to mid-single digits. Even with share gains in our hiring business, growth will continue to be impacted by the overall markets for recruiting and advertising, especially in the technology industry, where we have significant exposure. And in Dynamics, we expect revenue growth in the mid- to high teens, driven by continued growth in Dynamics 365. For Intelligent Cloud, we expect revenue to grow between 15% and 16%, or 14% and 15% in constant currency. Revenue should be USD 23.3 billion to USD 23.6 billion. Revenue will continue to be driven by Azure, which, as a reminder, can have quarterly variability primarily from our per user business and from in-period revenue recognition depending on the mix of contracts. In Azure, we expect revenue growth to be 25% to 26% in constant currency, including roughly 2 points from all Azure AI Services. Growth continues to be driven by our Azure consumption business, and we expect the trends from Q4 to continue into Q1. Our per user business should continue to benefit from Microsoft 365 suite momentum, though we expect continued moderation in growth rates, given the size of the installed base. In our on-premises server business, we expect revenue to decline low to mid-single digits against a prior comparable that benefited from annuity purchasing ahead of the SQL Server 2022 launch. And in Enterprise Services, revenue should decline low to mid-single digits year-over-year as growth in Enterprise Support Services will be more than offset by a decline in Industry Solutions. In More Personal Computing, we expect revenue of USD 12.5 billion to USD 12.9 billion. Windows OEM revenue should decline low to mid-teens, including 5 points of negative impact from the earlier back-to-school inventory builds that were pulled into the fourth quarter. Our guide assumes no significant changes to the PC demand environment. In devices, revenue should decline in the mid-30s due to the overall PC market and adjustments we made in our portfolio with an increased focus on our higher-margin premium products. In Windows commercial products and cloud services, customer demand for Microsoft 365 and our advanced security solutions should drive revenue growth in the mid- to high single digits. Search and news advertising ex TAC revenue growth should be mid- to high single digits, roughly 5 points higher than overall search and news advertising revenue, driven by continued volume strength supported by Edge browser share gains. Growth will continue to be impacted by the advertising spend environment and third-party partnerships mentioned earlier. We continue to be excited by Bing usage signals and the longer-term opportunity as we invest in AI. And in Gaming, we expect revenue growth in the mid-single digits. We expect Xbox content and services revenue growth in the mid- to high single digits, driven by first-party and third-party content as well as Xbox Game Pass. Now back to company guidance. We expect COGS between USD 16.6 billion to USD 16.8 billion and operating expense of USD 13.5 billion to USD 13.6 billion. Together, total cost growth should be around 6%. Other income and expense should be roughly $300 million as interest income is expected to more than offset interest expense. Two reminders. This does not include any impact from Activision on interest income and expense, and we are required to recognize mark-to-market gains or losses on our equity portfolio, which can increase quarterly volatility. We expect our Q1 effective tax rate to be around 19%. And finally, as a reminder for Q1 cash flow, we expect to make a $2.7 billion cash tax payment related to the TCJA transition tax. We do not expect payment related to the R&D capitalization provision in Q1. In closing, as a company, we delivered on the FY '23 financial commitments we discussed a year ago on revenue and operating margin. A focus on operational excellence allowed us to achieve these targets while we delivered near-term value to customers and prioritized our investments to continue to lead in the future. As we start FY '24, we are excited for the opportunities ahead and remain focused on delivering the 3 key priorities Satya mentioned. We'll maintain our lead as the top commercial cloud by helping customers use the breadth and depth of the Microsoft Cloud. We'll continue to invest in our cloud and AI infrastructure while scaling with growing demand so we can lead the AI platform wave. And finally, we'll align our costs with growth as we are committed to driving operating leverage. With that, let's go to Q&A, Brett.","evidence_gemma_new":null,"evidence_llama_3_3":"Microsoft Cloud revenue quarter","evidence_qwen_3_30b":"Microsoft Cloud revenue","gemma_new_max":null,"gemma_new_min":null,"llama_3_3_max":30300000000.0,"llama_3_3_min":30300000000.0,"qwen_3_30b_max":30300000000.0,"qwen_3_30b_min":30300000000.0}
{"symbol":"MSFT","year":2024,"quarter":1,"date":"2024-Q1","chunk_id":3,"sub_chunk_id":0,"centroid_label":"microsoft revenue","agreed_value":31800000000.0,"count":2,"chunk":"Amy Hood: Thank you, Satya, and good afternoon, everyone. This quarter's revenue was $56.5 billion, up 13% and 12% in constant currency. Earnings per share was $2.99 and increased 27% and 26% in constant currency. Consistent execution by our sales teams and partners drove a strong start to the fiscal year. Results exceeded expectations and we saw share gains again this quarter across many businesses, as customers adopt our innovative solutions to transform their businesses. In our commercial business, the trends from the prior quarter continued. We saw healthy renewals, particularly in Microsoft 365 E5 and growth of new business continued to be moderated for standalone products sold outside the Microsoft 365 suite. In Azure, as expected the optimization trends were similar to Q4. Higher-than-expected AI consumption contributed to revenue growth in Azure. And our consumer business, PC market unit volumes are returning to pre-pandemic levels. Advertising spend, landed roughly in line with our expectations and in gaming strong engagement helped by the Starfield launch benefited Xbox content and services. Commercial bookings increased 14% and 17% in constant currency, in line with expectations, primarily driven by strong execution across our core annuity sales motions, with continued growth in the number of $10 million plus contracts for both Azure and Microsoft 365. Commercial remaining performance obligation, increased 18% to $212 billion, and roughly 45% will be recognized in revenue in the next 12 months, up 15% year-over-year. The remaining portion, which will be recognized beyond the next 12 months increased 20% and this quarter, our annuity mix was 96%. FX did not have a significant impact on our results and was roughly in line with our expectations on total company revenue, segment-level revenue, COGS, and operating expense growth. Microsoft Cloud revenue was $31.8 billion and grew 24% and 23% in constant currency, ahead of expectations. Microsoft Cloud's gross margin percentage increased slightly year-over-year to 73%, a point better than expected, primarily driven by improvements in Azure. Excluding the impact of the change in accounting estimate for useful lives, Microsoft Cloud's gross margin percentage increased roughly 2 points, driven by the improvement just mentioned in Azure as well as Office 365, partially offset by the impact of scaling our AI infrastructure to meet growing demand. Company gross margin dollars increased 16% and 15% in constant currency and gross margin percentage increased year-over-year to 71%. Excluding the impact of the change in accounting estimate, the gross margin percentage increased roughly 3 points, driven by the improvement in Azure and Office 365 as well as sales mix shift to higher margin businesses. Operating expenses increased 1%, lower than expected due to cost-efficiency focus as well as investments that shifted to future quarters. Operating expense growth was driven by marketing, LinkedIn, and cloud engineering, partially offset by devices. At a total company level, headcount at the end of September was 7% lower than a year ago. Operating income increased 25% and 24% in constant currency. Operating margins increased roughly 5 points year-over-year to 48%. Excluding the impact of the change in accounting estimate, operating margins increased roughly 6 six points, driven by improved operating leverage through cost management and the higher gross margin noted earlier. Now to our segment results. Revenue from Productivity and Business Processes was $18.6 billion and grew 13% and 12% in constant currency, ahead of expectations, driven by better-than-expected results in Office 365 Commercial and LinkedIn. Office Commercial revenue grew 15% and 14% in constant currency. Office 365 Commercial revenue increased 18% and 17% in constant currency, slightly better than expected with a bit more in-period revenue recognition, while billings remained relatively in line with expectations. Growth continues to be driven by healthy renewal execution and ARPU growth, as E5 momentum remains strong. Paid Office 365 Commercial seats grew 10% year-over-year, with installed-base expansion across all customer segments. Seat growth was again driven by our small and medium business and frontline worker offerings with continued impact from the growth trends in new standalone business noted earlier. Office Commercial licensing declined 17%, in line with the continued customer shift to cloud offerings. Office Consumer revenue increased 3% and 4% in constant currency with continued momentum in Microsoft 365 subscriptions, which grew 18% to 76.7 million. LinkedIn revenue increased 8%, ahead of expectations, driven by slightly better-than-expected performance across all businesses. Growth was driven by Talent Solutions, though we continue to see negative year-over-year bookings there from the weaker hiring environment in key verticals. Dynamics revenue, grew 22% and 21% in constant currency, driven by Dynamics 365, which grew 28% and 26% in constant currency with continued growth across all workloads. Segment gross margin dollars increased 13% and gross margin percentage increased slightly year-over-year. Excluding the impact of the change in accounting estimate, gross margin percentage increased roughly, 1 point, driven by improvements in Office 365. Operating expenses increased to 2% and operating income increased 20% and 19% in constant currency. Next, the Intelligent Cloud segment. Revenue was $24.3 billion, increasing 19% and ahead of expectations, with better-than-expected results across all businesses. Overall, server products and cloud services revenue grew 21%. Azure and other cloud services revenue grew 29% and 28% in constant currency, including roughly 3 points from AI Services. While the trends from prior quarter continued, growth was ahead of expectations, primarily driven by increased GPU capacity and better-than-expected GPU utilization of our AI services, as well as slightly higher-than-expected growth in our per-user business. In our per user business, the enterprise mobility and security installed base, grew 11% to over 259 million seats with continued impact from the growth trends in new standalone business noted earlier. In our on-premises server business, revenue increased 2% ahead of expectations, driven primarily by demand in advance of Windows Server 2012 end of support. Enterprise and partner services revenue increased 1% and was relatively unchanged in constant currency ahead of expectations, driven by a better-than-expected performance in Enterprise Support Services. Segment gross margin dollars increased 20% and 19% in constant currency and gross margin percentage increased slightly. Excluding the impact of the change in accounting estimate, gross margin percentage increased roughly 2 points, driven by the improvement in Azure noted earlier, even as we scale our AI infrastructure to meet growing demand. Operating expenses increased 2% and 1% in constant currency, operating income grew 31% and 30% in constant currency. Now to More Personal Computing, revenue was $13.7 billion, increasing 3% and 2% in constant currency, above expectations, with better-than-expected results across all businesses. Windows OEM revenue increased 4% year-over-year, significantly ahead of expectations, driven by stronger-than-expected consumer channel inventory builds and the stabilizing PC market demand noted earlier, particularly in commercial. Windows Commercial products and cloud services revenue increased 8%, driven by demand for Microsoft 365 E5. Devices revenue decreased 22%, ahead of expectations due to stronger execution in the commercial segment. Search and news advertising revenue, ex-TAC increased 10% and 9% in constant currency, slightly ahead of expectations. We saw increased engagement on Bing and Edge share gains again this quarter, although search revenue growth continues to be impacted by a third-party partnership. And in gaming, revenue increased 9% and 8% in constant currency, ahead of expectations, driven by better-than-expected subscriber growth in Xbox Game Pass as well as first-party content, primarily due to the Starfield launch. Xbox content and services revenue increased 13% and 12% in constant currency and Xbox hardware revenue declined 7% and 8% in constant currency. Segment gross margin dollars increased 13% and 12% in constant currency, and gross margin percentage increased roughly 5 points year-over-year, driven primarily by sales mix-shift to higher-margin businesses. Operating expenses declined 1% and operating income increased 23% and 22% in constant currency. Now back to total company results. Capital expenditures, including finance leases were $11.2 billion to support cloud demand, including investments to scale our AI infrastructure. Cash paid for PP&E was $9.9 billion. Cash flow from operations was $30.6 billion, up 32% year-over-year, driven by strong cloud billings and collections. Free cash flow was $20.7 billion, up 22% year-over-year. This quarter, other income and expense was $389 million, higher-than-anticipated, driven by interest income, partially offset by net losses on investments and foreign currency remeasurement. Our effective tax rate was approximately 18%. And finally, we returned $9.1 billion to shareholders, through share repurchases and dividends. Now moving to our Q2 outlook, which unless specifically noted otherwise is on a U.S. dollar basis. The Activision acquisition closed on October 13. So my commentary includes the net impact of the deal from the date of acquisition. Our outlook includes purchase accounting impact, integration, and transaction-related expenses based on our current understanding of the purchase price allocation and related deal accounting. The net impact includes adjusting for the movement of Activision content from our prior relationship as a third-party partner to first party. Now to FX. Based on current rates, we expect FX to increase total revenue and segment-level revenue growth by approximately 1 point. We expect FX to have no impact to COGS and operating expense growth. In commercial bookings, we expect consistent execution across our core annuity sales motions, including healthy renewals. The growth will be impacted by a low growth expiry base. Therefore, we expect bookings growth to be relatively flat. Microsoft Cloud gross margin percentage to be relatively flat year-over-year, excluding the impact from the accounting estimate change, Q2 Cloud gross margin percentage will be up roughly 1 point, primarily driven by improvement in Azure and Office 365, partially offset by the impact of scaling our AI infrastructure to meet growing demand. We expect capital expenditures to increase sequentially on a dollar basis, driven by investments in our cloud and AI infrastructure. As a reminder, there can be normal quarterly spend variability in the timing of our cloud infrastructure buildout. Next to segment guidance. In Productivity and Business Processes, we expect revenue to grow between 11% and 12% or $18.8 billion to $19.1 billion. Growth in constant currency will be approximately 1 point lower. In Office Commercial, revenue growth will again be driven by Office 365 with seat growth across customer segments and ARPU growth through E5. We expect Office 365 revenue growth to be up roughly 16% in constant currency. We're excited for Microsoft 365 Copilot general availability on November 1st, and expect the related revenue to grow gradually over time. In our on-premise business, we expect revenue to decline in the mid-to-high teens. In Office Consumer, we expect revenue growth in the mid-single-digits, driven by Microsoft 365 subscriptions. For LinkedIn, we expect revenue growth in the mid-single-digits, driven by Talent Solutions and Marketing Solutions. Growth continues to be impacted by the overall market environment for recruiting and advertising, especially in the technology industry, where we have significant exposure. And in Dynamics, we expect revenue growth in the high teens, driven by Dynamics 365. For Intelligent Cloud, we expect revenue to grow between 17% and 18% or $25.1 billion to $25.4 billion. Revenue growth in constant currency will be approximately 1 point lower. Revenue will continue to be driven by Azure, which as a reminder can have quarterly variability, primarily from our per-user business and from in-period revenue recognition, depending on the mix of contracts. In Azure, we expect revenue growth to be 26% to 27% in constant currency, with an increasing contribution from AI. Growth continues to be driven by Azure consumption business and we expect the trends from Q1 to continue into Q2. Our per user business should continue to benefit from Microsoft 365 suite momentum, though we expect continued moderation in seat growth rates, given the size of the installed base. For H2, assuming the optimization and new workload trends continue and with the growing contribution from AI, we expect Azure revenue growth in constant currency to remain roughly stable compared to Q2. And our on-premises server business, we expect revenue growth to be roughly flat with continued hybrid demand, particularly from licenses running in multi-cloud environments. And in enterprise and partner services, revenue should decline by low-to-mid single digits. Now to more Personal Computing, which includes the net impact from the Activision acquisition. We expect revenue of $16.5 billion to $16.9 billion. Windows OEM revenue growth should be mid-to-high single digits with PC market unit volumes expected to look roughly similar to Q1. In devices, revenue should decline in the mid-teens as we continue to focus on our higher-margin premium products. In Windows Commercial products and cloud services, customer demand for Microsoft 365 and our advanced security solutions should drive revenue growth in the low-to-mid teens. Search and news advertising ex-TAC revenue growth should be mid-single digits with roughly 4 points of negative impact from a third-party partnership. Growth should be driven by volume strength, supported by Edge browser share gains and increasing Bing engagement, as we expect the advertising spend environment to be similar to Q1. A reminder that this ex-TAC growth will be roughly 4 points higher than overall search and news advertising revenue. And in gaming, we expect revenue growth in the mid-to-high 40s. This includes roughly 35 points of net impact from the Activision acquisition, which as a reminder includes adjusting for the third-party to first-party content change noted earlier. We expect Xbox content and services revenue growth in the mid-to-high 50s, driven by roughly 50 points of net impact from the Activision acquisition. Now back to company guidance. We expect COGS between $19.4 billion to $19.6 billion, including approximately $500 million of amortization of acquired intangible assets from the Activision acquisition. We expect operating expense of $15.5 billion to $15.6 billion, including approximately $400 million from purchase accounting adjustments, integration and transaction-related cost from the Activision acquisition. Other income and expense should be roughly negative $500 million, as interest income will be more than offset by interest expense, primarily due to a reduction in our investment portfolio balance and the issuance of short-term debt, both for the Activision acquisition. As a reminder, we are required to recognize gains or losses on our equity investments, which can increase quarterly volatility. We expect our Q2 effective tax rate to be between 19% and 20%. Now, some additional thoughts on H2 as well as the full fiscal year. First, FX, assuming current rates remain stable, we expect FX to have no meaningful impact to full year revenue COGS or operating expense growth. Therefore, in H2, we expect FX to decrease revenue COGS and operating expense growth by 1 point. Second, Activision, we expect approximately $900 million for purchase accounting adjustments as well as integration and transaction-related costs in each quarter in H2. For a full FY '24, we remain committed to investing for the cloud and AI opportunity, while also maintaining our disciplined focus on operating leverage. Therefore, as we add the net impact of Activision, inclusive of purchase accounting adjustments as well as integration and transaction-related expenses, we continue to expect full year operating margins to remain flat year-over-year. In closing, with our strong start to FY '24, I am confident that as a team, we will continue to deliver healthy growth in the year ahead, driven by our leadership in commercial cloud and our commitment to lead the AI platform wave. With that. Let's go to Q&A, Brett.","evidence_gemma_new":null,"evidence_llama_3_3":"Microsoft Cloud revenue","evidence_qwen_3_30b":"Microsoft Cloud revenue Quarterly","gemma_new_max":null,"gemma_new_min":null,"llama_3_3_max":31800000000.0,"llama_3_3_min":31800000000.0,"qwen_3_30b_max":31800000000.0,"qwen_3_30b_min":31800000000.0}
{"symbol":"MSFT","year":2024,"quarter":1,"date":"2024-Q1","chunk_id":3,"sub_chunk_id":0,"centroid_label":"microsoft revenue","agreed_value":0.04,"count":2,"chunk":"Amy Hood: Thank you, Satya, and good afternoon, everyone. This quarter's revenue was $56.5 billion, up 13% and 12% in constant currency. Earnings per share was $2.99 and increased 27% and 26% in constant currency. Consistent execution by our sales teams and partners drove a strong start to the fiscal year. Results exceeded expectations and we saw share gains again this quarter across many businesses, as customers adopt our innovative solutions to transform their businesses. In our commercial business, the trends from the prior quarter continued. We saw healthy renewals, particularly in Microsoft 365 E5 and growth of new business continued to be moderated for standalone products sold outside the Microsoft 365 suite. In Azure, as expected the optimization trends were similar to Q4. Higher-than-expected AI consumption contributed to revenue growth in Azure. And our consumer business, PC market unit volumes are returning to pre-pandemic levels. Advertising spend, landed roughly in line with our expectations and in gaming strong engagement helped by the Starfield launch benefited Xbox content and services. Commercial bookings increased 14% and 17% in constant currency, in line with expectations, primarily driven by strong execution across our core annuity sales motions, with continued growth in the number of $10 million plus contracts for both Azure and Microsoft 365. Commercial remaining performance obligation, increased 18% to $212 billion, and roughly 45% will be recognized in revenue in the next 12 months, up 15% year-over-year. The remaining portion, which will be recognized beyond the next 12 months increased 20% and this quarter, our annuity mix was 96%. FX did not have a significant impact on our results and was roughly in line with our expectations on total company revenue, segment-level revenue, COGS, and operating expense growth. Microsoft Cloud revenue was $31.8 billion and grew 24% and 23% in constant currency, ahead of expectations. Microsoft Cloud's gross margin percentage increased slightly year-over-year to 73%, a point better than expected, primarily driven by improvements in Azure. Excluding the impact of the change in accounting estimate for useful lives, Microsoft Cloud's gross margin percentage increased roughly 2 points, driven by the improvement just mentioned in Azure as well as Office 365, partially offset by the impact of scaling our AI infrastructure to meet growing demand. Company gross margin dollars increased 16% and 15% in constant currency and gross margin percentage increased year-over-year to 71%. Excluding the impact of the change in accounting estimate, the gross margin percentage increased roughly 3 points, driven by the improvement in Azure and Office 365 as well as sales mix shift to higher margin businesses. Operating expenses increased 1%, lower than expected due to cost-efficiency focus as well as investments that shifted to future quarters. Operating expense growth was driven by marketing, LinkedIn, and cloud engineering, partially offset by devices. At a total company level, headcount at the end of September was 7% lower than a year ago. Operating income increased 25% and 24% in constant currency. Operating margins increased roughly 5 points year-over-year to 48%. Excluding the impact of the change in accounting estimate, operating margins increased roughly 6 six points, driven by improved operating leverage through cost management and the higher gross margin noted earlier. Now to our segment results. Revenue from Productivity and Business Processes was $18.6 billion and grew 13% and 12% in constant currency, ahead of expectations, driven by better-than-expected results in Office 365 Commercial and LinkedIn. Office Commercial revenue grew 15% and 14% in constant currency. Office 365 Commercial revenue increased 18% and 17% in constant currency, slightly better than expected with a bit more in-period revenue recognition, while billings remained relatively in line with expectations. Growth continues to be driven by healthy renewal execution and ARPU growth, as E5 momentum remains strong. Paid Office 365 Commercial seats grew 10% year-over-year, with installed-base expansion across all customer segments. Seat growth was again driven by our small and medium business and frontline worker offerings with continued impact from the growth trends in new standalone business noted earlier. Office Commercial licensing declined 17%, in line with the continued customer shift to cloud offerings. Office Consumer revenue increased 3% and 4% in constant currency with continued momentum in Microsoft 365 subscriptions, which grew 18% to 76.7 million. LinkedIn revenue increased 8%, ahead of expectations, driven by slightly better-than-expected performance across all businesses. Growth was driven by Talent Solutions, though we continue to see negative year-over-year bookings there from the weaker hiring environment in key verticals. Dynamics revenue, grew 22% and 21% in constant currency, driven by Dynamics 365, which grew 28% and 26% in constant currency with continued growth across all workloads. Segment gross margin dollars increased 13% and gross margin percentage increased slightly year-over-year. Excluding the impact of the change in accounting estimate, gross margin percentage increased roughly, 1 point, driven by improvements in Office 365. Operating expenses increased to 2% and operating income increased 20% and 19% in constant currency. Next, the Intelligent Cloud segment. Revenue was $24.3 billion, increasing 19% and ahead of expectations, with better-than-expected results across all businesses. Overall, server products and cloud services revenue grew 21%. Azure and other cloud services revenue grew 29% and 28% in constant currency, including roughly 3 points from AI Services. While the trends from prior quarter continued, growth was ahead of expectations, primarily driven by increased GPU capacity and better-than-expected GPU utilization of our AI services, as well as slightly higher-than-expected growth in our per-user business. In our per user business, the enterprise mobility and security installed base, grew 11% to over 259 million seats with continued impact from the growth trends in new standalone business noted earlier. In our on-premises server business, revenue increased 2% ahead of expectations, driven primarily by demand in advance of Windows Server 2012 end of support. Enterprise and partner services revenue increased 1% and was relatively unchanged in constant currency ahead of expectations, driven by a better-than-expected performance in Enterprise Support Services. Segment gross margin dollars increased 20% and 19% in constant currency and gross margin percentage increased slightly. Excluding the impact of the change in accounting estimate, gross margin percentage increased roughly 2 points, driven by the improvement in Azure noted earlier, even as we scale our AI infrastructure to meet growing demand. Operating expenses increased 2% and 1% in constant currency, operating income grew 31% and 30% in constant currency. Now to More Personal Computing, revenue was $13.7 billion, increasing 3% and 2% in constant currency, above expectations, with better-than-expected results across all businesses. Windows OEM revenue increased 4% year-over-year, significantly ahead of expectations, driven by stronger-than-expected consumer channel inventory builds and the stabilizing PC market demand noted earlier, particularly in commercial. Windows Commercial products and cloud services revenue increased 8%, driven by demand for Microsoft 365 E5. Devices revenue decreased 22%, ahead of expectations due to stronger execution in the commercial segment. Search and news advertising revenue, ex-TAC increased 10% and 9% in constant currency, slightly ahead of expectations. We saw increased engagement on Bing and Edge share gains again this quarter, although search revenue growth continues to be impacted by a third-party partnership. And in gaming, revenue increased 9% and 8% in constant currency, ahead of expectations, driven by better-than-expected subscriber growth in Xbox Game Pass as well as first-party content, primarily due to the Starfield launch. Xbox content and services revenue increased 13% and 12% in constant currency and Xbox hardware revenue declined 7% and 8% in constant currency. Segment gross margin dollars increased 13% and 12% in constant currency, and gross margin percentage increased roughly 5 points year-over-year, driven primarily by sales mix-shift to higher-margin businesses. Operating expenses declined 1% and operating income increased 23% and 22% in constant currency. Now back to total company results. Capital expenditures, including finance leases were $11.2 billion to support cloud demand, including investments to scale our AI infrastructure. Cash paid for PP&E was $9.9 billion. Cash flow from operations was $30.6 billion, up 32% year-over-year, driven by strong cloud billings and collections. Free cash flow was $20.7 billion, up 22% year-over-year. This quarter, other income and expense was $389 million, higher-than-anticipated, driven by interest income, partially offset by net losses on investments and foreign currency remeasurement. Our effective tax rate was approximately 18%. And finally, we returned $9.1 billion to shareholders, through share repurchases and dividends. Now moving to our Q2 outlook, which unless specifically noted otherwise is on a U.S. dollar basis. The Activision acquisition closed on October 13. So my commentary includes the net impact of the deal from the date of acquisition. Our outlook includes purchase accounting impact, integration, and transaction-related expenses based on our current understanding of the purchase price allocation and related deal accounting. The net impact includes adjusting for the movement of Activision content from our prior relationship as a third-party partner to first party. Now to FX. Based on current rates, we expect FX to increase total revenue and segment-level revenue growth by approximately 1 point. We expect FX to have no impact to COGS and operating expense growth. In commercial bookings, we expect consistent execution across our core annuity sales motions, including healthy renewals. The growth will be impacted by a low growth expiry base. Therefore, we expect bookings growth to be relatively flat. Microsoft Cloud gross margin percentage to be relatively flat year-over-year, excluding the impact from the accounting estimate change, Q2 Cloud gross margin percentage will be up roughly 1 point, primarily driven by improvement in Azure and Office 365, partially offset by the impact of scaling our AI infrastructure to meet growing demand. We expect capital expenditures to increase sequentially on a dollar basis, driven by investments in our cloud and AI infrastructure. As a reminder, there can be normal quarterly spend variability in the timing of our cloud infrastructure buildout. Next to segment guidance. In Productivity and Business Processes, we expect revenue to grow between 11% and 12% or $18.8 billion to $19.1 billion. Growth in constant currency will be approximately 1 point lower. In Office Commercial, revenue growth will again be driven by Office 365 with seat growth across customer segments and ARPU growth through E5. We expect Office 365 revenue growth to be up roughly 16% in constant currency. We're excited for Microsoft 365 Copilot general availability on November 1st, and expect the related revenue to grow gradually over time. In our on-premise business, we expect revenue to decline in the mid-to-high teens. In Office Consumer, we expect revenue growth in the mid-single-digits, driven by Microsoft 365 subscriptions. For LinkedIn, we expect revenue growth in the mid-single-digits, driven by Talent Solutions and Marketing Solutions. Growth continues to be impacted by the overall market environment for recruiting and advertising, especially in the technology industry, where we have significant exposure. And in Dynamics, we expect revenue growth in the high teens, driven by Dynamics 365. For Intelligent Cloud, we expect revenue to grow between 17% and 18% or $25.1 billion to $25.4 billion. Revenue growth in constant currency will be approximately 1 point lower. Revenue will continue to be driven by Azure, which as a reminder can have quarterly variability, primarily from our per-user business and from in-period revenue recognition, depending on the mix of contracts. In Azure, we expect revenue growth to be 26% to 27% in constant currency, with an increasing contribution from AI. Growth continues to be driven by Azure consumption business and we expect the trends from Q1 to continue into Q2. Our per user business should continue to benefit from Microsoft 365 suite momentum, though we expect continued moderation in seat growth rates, given the size of the installed base. For H2, assuming the optimization and new workload trends continue and with the growing contribution from AI, we expect Azure revenue growth in constant currency to remain roughly stable compared to Q2. And our on-premises server business, we expect revenue growth to be roughly flat with continued hybrid demand, particularly from licenses running in multi-cloud environments. And in enterprise and partner services, revenue should decline by low-to-mid single digits. Now to more Personal Computing, which includes the net impact from the Activision acquisition. We expect revenue of $16.5 billion to $16.9 billion. Windows OEM revenue growth should be mid-to-high single digits with PC market unit volumes expected to look roughly similar to Q1. In devices, revenue should decline in the mid-teens as we continue to focus on our higher-margin premium products. In Windows Commercial products and cloud services, customer demand for Microsoft 365 and our advanced security solutions should drive revenue growth in the low-to-mid teens. Search and news advertising ex-TAC revenue growth should be mid-single digits with roughly 4 points of negative impact from a third-party partnership. Growth should be driven by volume strength, supported by Edge browser share gains and increasing Bing engagement, as we expect the advertising spend environment to be similar to Q1. A reminder that this ex-TAC growth will be roughly 4 points higher than overall search and news advertising revenue. And in gaming, we expect revenue growth in the mid-to-high 40s. This includes roughly 35 points of net impact from the Activision acquisition, which as a reminder includes adjusting for the third-party to first-party content change noted earlier. We expect Xbox content and services revenue growth in the mid-to-high 50s, driven by roughly 50 points of net impact from the Activision acquisition. Now back to company guidance. We expect COGS between $19.4 billion to $19.6 billion, including approximately $500 million of amortization of acquired intangible assets from the Activision acquisition. We expect operating expense of $15.5 billion to $15.6 billion, including approximately $400 million from purchase accounting adjustments, integration and transaction-related cost from the Activision acquisition. Other income and expense should be roughly negative $500 million, as interest income will be more than offset by interest expense, primarily due to a reduction in our investment portfolio balance and the issuance of short-term debt, both for the Activision acquisition. As a reminder, we are required to recognize gains or losses on our equity investments, which can increase quarterly volatility. We expect our Q2 effective tax rate to be between 19% and 20%. Now, some additional thoughts on H2 as well as the full fiscal year. First, FX, assuming current rates remain stable, we expect FX to have no meaningful impact to full year revenue COGS or operating expense growth. Therefore, in H2, we expect FX to decrease revenue COGS and operating expense growth by 1 point. Second, Activision, we expect approximately $900 million for purchase accounting adjustments as well as integration and transaction-related costs in each quarter in H2. For a full FY '24, we remain committed to investing for the cloud and AI opportunity, while also maintaining our disciplined focus on operating leverage. Therefore, as we add the net impact of Activision, inclusive of purchase accounting adjustments as well as integration and transaction-related expenses, we continue to expect full year operating margins to remain flat year-over-year. In closing, with our strong start to FY '24, I am confident that as a team, we will continue to deliver healthy growth in the year ahead, driven by our leadership in commercial cloud and our commitment to lead the AI platform wave. With that. Let's go to Q&A, Brett.","evidence_gemma_new":null,"evidence_llama_3_3":"Windows OEM revenue","evidence_qwen_3_30b":"Windows OEM revenue Quarterly","gemma_new_max":null,"gemma_new_min":null,"llama_3_3_max":0.04,"llama_3_3_min":0.04,"qwen_3_30b_max":0.04,"qwen_3_30b_min":0.04}
{"symbol":"MSFT","year":2024,"quarter":3,"date":"2024-Q3","chunk_id":3,"sub_chunk_id":0,"centroid_label":"microsoft revenue","agreed_value":35100000000.0,"count":3,"chunk":"Amy Hood: Thank you, Satya, and good afternoon, everyone. Our third quarter revenue was $61.9 billion, up 17%; and earnings per share was $2.94, up 20%. Results exceeded expectations, and we delivered another quarter of double-digit top and bottom line growth with continued share gains across many of our businesses. In our commercial business, bookings increased 29% and 31% in constant currency, significantly ahead of expectations, driven by Azure commitments with an increase in average deal size and deal length as well as strong execution across our core annuity sales motions. In Microsoft 365, suite strength contributed to ARPU expansion for our Office Commercial business, although new business growth continued to moderate for stand-alone products sold outside the Microsoft 365 suite. Commercial remaining performance obligation increased 20% and 21% in constant currency to $235 billion. Roughly 45% will be recognized in revenue in the next 12 months, up 20% year-over-year. The remaining portion recognized beyond the next 12 months increased 21%. And this quarter, our annuity mix increased to 97%. In our consumer business, PC market demand was slightly better than we expected, benefiting Windows OEM, while advertising spend landed relatively in line with our expectations. In gaming, we also saw better-than-expected performance of Activision titles, benefiting Xbox content and services. At a company level, Activision contributed a net impact of approximately 4 points to revenue growth, was a 2-point drag on operating income growth and had a negative $0.04 impact to earnings per share. A reminder, that this net impact includes adjusting for the movement of Activision content from our prior relationship as a third-party partner to first party and also includes $935 million from purchase accounting adjustments, integration and transaction-related costs. FX did not have a significant impact on our results and was roughly in line with our expectations on total company revenue, segment level revenue, COGS and operating expense growth. Microsoft Cloud revenue was $35.1 billion and grew 23%, ahead of expectations. Microsoft Cloud gross margin percentage decreased slightly year-over-year to 72%, a bit better than expected. Excluding the impact of the change in accounting estimate for useful lives, gross margin percentage increased slightly, driven by improvement in Azure and Office 365, even with the impact of scaling our AI infrastructure, partially offset by sales mix shift to Azure. Company gross margin dollars increased 18% and gross margin percentage increased slightly year-over-year to 70%. Excluding the impact of the change in accounting estimate, gross margin percentage increased roughly 1 point even with the impact from the purchase accounting adjustments, integration and transaction-related costs from the Activision acquisition. Growth was driven by the improvement in Azure and Office 365 just mentioned as well as sales mix shift to higher-margin businesses. Operating expenses increased 10% with 9 points from the Activision acquisition. At a total company level, head count at the end of March was 1% lower than a year ago. Operating income increased 23% and operating margins increased roughly 2 points year-over-year to 45%, excluding the impact of the change in accounting estimate, operating margins increased roughly 3 points, driven by the higher gross margin noted earlier and improved operating leverage through continued cost discipline. Now to our segment results. Revenue from Productivity and Business Processes was $19.6 billion and grew 12% and 11% in constant currency, in line with expectations. Office Commercial revenue grew 13% and 12% in constant currency. Office 365 commercial revenue increased 15%, in line with expectations, driven by healthy renewal execution, ARPU growth from continued E5 momentum and early Copilot for Microsoft 365 progress. Paid Office 365 commercial seats grew 8% year-over-year with installed base expansion across all customer segments. Seat growth was again driven by our small and medium business and frontline worker offerings, although growth continued to moderate in SMB. Office Commercial Licensing declined 20% and 18% in constant currency, with continued customer shift to cloud offerings. Office Consumer revenue increased 4%, slightly below expectations. Microsoft 365 subscriptions grew 14% to $80.8 million. LinkedIn revenue increased 10% and 9% in constant currency, ahead of expectations, driven by slightly better-than-expected performance in our premium subscriptions and Talent Solutions businesses. However, in Talent Solutions, bookings growth continues to be impacted by the weaker hiring environment in key verticals. Dynamics revenue grew 19% and 17% in constant currency, ahead of expectations. Growth was driven by Dynamics 365, which grew 23% and 22% in constant currency with continued growth across all workloads and better-than-expected new business, although bookings growth remains moderated. Segment gross margin dollars increased 11%, and gross margin percentage decreased slightly year-over-year. Excluding the impact of the change in accounting estimate, gross margin percentage increased slightly driven by improvement in Office 365. Operating expenses increased 1% and operating income increased 17% and 16% in constant currency. Next, the Intelligent Cloud segment. Revenue was $26.7 billion, increasing 21%, ahead of expectations with better-than-expected results across all businesses. Overall, Server products and cloud services revenue grew 24%. Azure and other cloud services revenue grew 31% ahead of expectations, while our AI services contributed 7 points of growth as expected. In the non-AI portion of our consumption business, we saw greater-than-expected demand broadly across industries and customer segments as well as some benefit from a greater-than-expected mix of contracts with higher in-period recognition. In our per-user business, the Enterprise Mobility and Security installed base grew 10% to over 274 million seats, with continued impact from the growth trends in new stand-alone business noted earlier. In our on-premises server business, revenue increased 6%, ahead of expectations, driven by better-than-expected renewal strength, particularly for contracts with higher in-period revenue recognition. Enterprise and partner services revenue decreased 9% on a strong prior year comparable for enterprise support services. Segment gross margin dollars increased 20% and gross margin percentage decreased slightly year-over-year. Excluding the impact of the change in accounting estimate [indiscernible] percentage increased slightly, primarily driven by the improvement in Azure noted earlier, even with the impact of scaling our AI infrastructure, partially offset by sales mix shift to Azure. Operating expenses increased 1% and operating income grew 32%. Now to More Personal Computing. Revenue was $15.6 billion, increasing 17% with 15 points of net impact from the Activision acquisition. Results were above expectations, driven by better-than-expected performance in gaming and Windows OEM. Windows OEM revenue increased 11% year-over-year, ahead of expectations, primarily driven by the slightly better PC market noted earlier as well as mix shift to higher monetizing markets. Windows commercial products and cloud services revenue increased 13% and 12% in constant currency, below expectations with impact from the growth trends in new stand-alone business noted earlier as well as lower in-period revenue recognition from a mix of contracts. Devices revenue decreased 17% and 16% in constant currency as we remain focused on our higher-margin premium products. Overall, Surface demand was slightly lower than expected. Search and News advertising revenue ex TAC increased 12% ahead of expectations with continued volume growth and increased engagement on Bing and Edge. And in gaming. Revenue increased 51% and 50% in constant currency with 55 points of net impact from the Activision acquisition. Results were ahead of expectations, primarily driven by Call of Duty. Xbox content and services revenue increased 62% and 61% in constant currency with 61 points of net impact from the Activision acquisition. Xbox hardware revenue decreased 31% and 30% in constant currency. Segment gross margin dollars increased 27% and 26% in constant currency, with 13 points of net impact from the Activision acquisition. Gross margin percentage increased roughly 4 points year-over-year, primarily driven by sales mix shift to higher-margin businesses. Operating expenses increased 41% with 43 points from the Activision acquisition. Operating income increased 16% and 15% in constant currency. Now back to total company results. Capital expenditures, including finance leases, were $14 billion to support our cloud demand, inclusive of the need to scale our AI infrastructure. Cash paid for PP&E was $11 billion. Cash flow from operations was $31.9 billion, up 31%, driven by strong cloud billings and collections. Free cash flow was $21 billion, up 18% year-over-year, reflecting higher capital expenditures to support our cloud and AI offerings. This quarter, other income and expense was negative $854 million, lower than anticipated, driven by losses on investments accounted for under the equity method. Our effective tax rate was approximately 18%. And finally, we returned $8.4 billion to shareholders through dividends and share repurchases. Now moving to our Q4 outlook, which unless specifically noted otherwise, is on a U.S. dollar basis. First, FX. Based on current rates, which reflect the recent strengthening of the U.S. dollar, we now expect FX to decrease total revenue and segment level revenue growth by less than 1 point. When compared to our January guide for Q4, FX, this is a decrease to total revenue of roughly $700 million. We expect FX to decrease COGS growth by approximately 1 point and operating expense growth by less than 1 point. In commercial bookings, we expect solid growth on a relatively flat expiry base driven by continued strong commercial sales execution. As a reminder, larger, long-term Azure contracts, which are more unpredictable in their timing, can drive increased quarterly volatility in our bookings growth rate. Microsoft Cloud gross margin percentage should decrease roughly 2 points year-over-year. Excluding the impact from the change in accounting estimate, Q4 cloud gross margin percentage will be down slightly as improvement in Azure, inclusive of scaling our AI infrastructure will be offset by sales mix shift to Azure. We expect capital expenditures to increase materially on a sequential basis driven by cloud and AI infrastructure investments. As a reminder, there can be normal quarterly spend variability in the timing of our cloud infrastructure build-outs and the timing of finance leases. We continue to bring capacity online as we scale our AI investments with growing demand. Currently, near-term AI demand is a bit higher than our available capacity. Next, to segment guidance. In Productivity and Business Processes, we expect revenue to grow between 9% and 11% in constant currency or US$19.9 billion to US$20.2 billion. In Office Commercial, revenue growth will again be driven by Office 365 with seat growth across customer segments and ARPU growth primarily through E5. We expect Office 365 revenue growth to be approximately 14% in constant currency. We continue to progress with adoption of CoPilot for Microsoft 365 and remain excited for the long-term growth opportunity. In our on-premises business, we expect revenue to decline in the mid to high teens. In Office Consumer, we expect revenue growth in the low to mid-single digits, driven by Microsoft 365 subscriptions. For LinkedIn, we expect revenue growth in the mid to high single digits driven by continued growth across all businesses. And in Dynamics, we expect revenue growth in the low to mid-teens, driven by Dynamics 365. For both LinkedIn and Dynamics, the continued bookings growth moderation noted earlier is a headwind to Q4 revenue growth. For Intelligent Cloud, we expect revenue to grow between 19% and 20% in constant currency or US$28.4 billion to US$28.7 billion. Revenue will continue to be driven by Azure, which, as a reminder, can have quarterly variability primarily from our per-user business and in-period revenue recognition depending on the mix of contracts. In Azure, we expect Q4 revenue growth to be 30% to 31% in constant currency or similar to our stronger-than-expected Q3 results. Growth will be driven by our Azure Consumption business and continued contribution from AI with some impact from the AI capacity availability noted earlier. Our per-user business should see benefit from Microsoft 365 suite momentum. Though we expect continued moderation in seat growth rates given the size of the installed base. In our on-premises server business, we expect revenue growth in the low to mid-single digits with continued hybrid demand, including licenses running in multi-cloud environments. And in Enterprise and Partner Services revenue should decline in the mid- to high single digits on a high prior year comparable for enterprise support services. In More Personal Computing, we expect revenue to grow between 10% and 13% in constant currency or US$15.2 billion to US$15.6 billion. Windows OEM revenue growth should be in the low to mid-single digits as PC market unit volumes continue at pre-pandemic levels. In Windows Commercial Products and Cloud Services, customer demand for Microsoft 365 and our advanced security solutions should drive revenue growth in the mid-single digits. As a reminder, our quarterly revenue growth can have variability primarily from in-period revenue recognition depending on the mix of contracts. In Devices, revenue should decline in the mid-teens as we continue to focus on our higher-margin premium products. Search and news advertising ex TAC revenue growth should be in the low to mid-teens, driven by continued volume strength. This will be higher than overall search and news advertising revenue growth, which we expect to be relatively flat. And in Gaming, we expect revenue growth in the low to mid-40s, including approximately 50 points of net impact from the Activision acquisition. We expect Xbox content and services revenue growth in the high 50s driven by approximately 60 points of net impact from the Activision acquisition. Hardware revenue will decline again year-over-year. Now back to company guidance. We expect COGS between US$19.6 billion to US$19.8 billion, including approximately $700 million from purchase accounting, integration and transaction-related costs from the Activision acquisition. We expect operating expense of US$17.15 billion to US$17.25 billion, including approximately $300 million from purchase accounting, integration and transaction-related costs from the Activision acquisition. Therefore, we now expect full year FY2024 operating margins to be up over 2 points year-over-year, even with our cloud and AI investments, the impact from the Activision acquisition and the headwind from the change in useful lives last year. This operating margin expansion reflects the hard work across every team to drive efficiencies and maintain disciplined cost management, knowing we will continue to grow our cloud and AI investments next year. Other income and expense should be roughly negative $850 million as interest income will be more than offset by interest expense and losses on investments accounted for under the equity method. As a reminder, we are required to recognize gains or losses on our equity investments which can increase quarterly volatility. We expect our Q4 effective tax rate to be approximately 18%. Now I\u2019d like to share some closing thoughts as we look to the next fiscal year. We continue to focus on building businesses that create meaningful value for our customers and therefore, significant growth opportunities for years to come. In FY2025, that focus on execution should again lead to double-digit revenue and operating income growth to scale to meet the growing demand signal for our cloud and AI products, we expect FY2025 capital expenditures to be higher than FY2024. These expenditures over the course of the next year are dependent on demand signals and adoption of our services. So we will manage that signal through the year. We will also continue to prioritize operating leverage. And therefore, we expect FY2025 operating margins to be down only about 1 point year-over-year, even with our significant cloud and AI investments, as well as a full year of impact from the Activision acquisition. We are leading the AI platform wave and are committed to bringing that value to our global customers as we enter the final quarter of our fiscal year. With that, let\u2019s go to Q&A, Brett.","evidence_gemma_new":"Microsoft Cloud revenue","evidence_llama_3_3":"Microsoft Cloud revenue","evidence_qwen_3_30b":"Microsoft Cloud revenue","gemma_new_max":35000000000.0,"gemma_new_min":35000000000.0,"llama_3_3_max":35000000000.0,"llama_3_3_min":35000000000.0,"qwen_3_30b_max":35100000000.0,"qwen_3_30b_min":35100000000.0}
{"symbol":"MSFT","year":2024,"quarter":4,"date":"2024-Q4","chunk_id":2,"sub_chunk_id":0,"centroid_label":"microsoft revenue","agreed_value":135000000000.0,"count":3,"chunk":"Satya Nadella: Thank you, Brett. We had a solid close to our fiscal year. All-up, annual revenue was more than $245 billion, up 15% year-over-year. And Microsoft Cloud revenue surpassed $135 billion, up 23%. Before I dive in, I want to offer some broader perspective on the AI platform shift. Similar to the cloud, this transition involves both knowledge and capital intensive investments. And as we go through this shift, we are focused on two fundamental things: First, driving innovation across a product portfolio that spans infrastructure and applications so as to ensure that we are maximizing our opportunity, while in parallel continuing to scale our cloud business and prioritizing fundamentals, starting with security. Second, using customer demand signal and time to value to manage our cost structure dynamically and generate durable, long-term operating leverage. With that, let me highlight examples, starting with Azure. Our share gains accelerated this year, driven by AI. We expanded our datacenter footprint, announcing investments across four continents. These are long-term assets around the world to drive growth for the next decade and beyond. We added new AI accelerators from AMD and NVIDIA, as well as our own first party silicon Azure Maia. And we introduced new Cobalt 100, which provides best-in-class performance for customers like Elastic, MongoDB, Siemens, Snowflake, and Teradata. We continued to see sustained revenue growth from migrations. Azure Arc is helping customers in every industry, from ABB and Cathay Pacific, to LaLiga, to streamline their cloud migrations. We now have 36,000 Arc customers, up 90% year-over-year. We remain the hyperscale cloud of choice for SAP and Oracle workloads. Atos, Coles, Daimler Truck AG, Domino\u2019s, Haleon, for example, all migrated their mission-critical SAP workloads to our cloud. And with our Azure VMware Solution, we offer the fastest and most cost-effective way for customers to migrate their VMware workloads too. With Azure AI, we are building out the app server for the AI wave, providing access to the most diverse selection of models to meet customers\u2019 unique cost, latency, and design considerations. All-up, we now have over 60,000 Azure AI customers, up nearly 60% year-over-year, and average spend per customer continues to grow. Azure OpenAI Service provides access to best-in-class frontier models, including as of this quarter GPT-4o and GPT-4o mini. It is being used by leading companies in every industry, including H&R Block, Suzuki, Swiss Re, Telstra as well as digital natives like Freshworks, Meesho, and Zomato. With Phi-3, we offer a family of powerful, small language models, which are being used by companies like BlackRock, Emirates, Epic, ITC, Navy Federal Credit Union, and others. And with Models as a Service, we provide API access to third-party models, including as of last week the latest from Cohere, Meta, and Mistral. The number of paid Models as a Service customers more than doubled quarter-over-quarter, and we are seeing increased usage by leaders in every industry, from Adobe and Bridgestone, to Novo Nordisk and Palantir. Now, on to data. Our Microsoft Intelligent Data Platform provides customers with the broadest capabilities spanning databases, analytics, business intelligence, and governance along with seamless integration with all of our AI services. The number of Azure AI customers also using our data and analytics tools grew nearly 50% year-over-year. Microsoft Fabric, our AI-powered next generation data platform \u2013 now has over 14,000 paid customers, including leaders in every industry, from Accenture and Kroger, to Rockwell Automation and Zeiss up 20% quarter-over-quarter. And, this quarter, we introduced new first-of-their-kind real-time intelligence capabilities in Fabric so customers can unlock insights on high-volume, time sensitive data. Now, on to developer tools. GitHub Copilot is by far the most widely adopted AI-powered developer tool. Just over two years since its general availability, more than 77,000 organizations from BBVA, FedEx, and H&M, to Infosys and Paytm have adopted Copilot, up 180% year-over-year. And we are going further. With Copilot Workspace, we offer Copilot-native end-to-end developer productivity across plan, build, test, debug, and deploy cycle. Copilot is driving GitHub growth, all up, GitHub\u2019s annual revenue run rate is now $2 billion. Copilot accounted for over 40% of GitHub revenue growth this year, and is already a larger business than all of GitHub was when we acquired it. We are also integrating generative AI across Power Platform, enabling anyone to use natural language to create apps, automate workflows, or build a website. To date, over 480,000 organizations have used AI-powered capabilities in Power Platform, up 45% quarter-over-quarter. In total, we now have 48 million monthly active users of Power Platform, up 40% year-over-year. Now, on to future of work. Copilot for Microsoft 365 is becoming a daily habit for knowledge workers, as it transforms work, workflow, and work artifacts. The number of people who use Copilot daily at work nearly doubled quarter-over-quarter, as they use it to complete tasks faster, hold more effective meetings, and automate business workflows and processes. Copilot customers increased more than 60% quarter-over-quarter. Feedback has been positive, with majority of enterprise customers coming back to purchase more seats. All-up, the number of customers with more than 10,000 seats more than doubled quarter-over-quarter, including Capital Group, Disney, Dow, Kyndryl, Novartis. And EY alone will deploy Copilot to 150,000 of its employees. And we are going further, adding agent capabilities to Copilot. New Team Copilot can facilitate meetings, and create and assign tasks. And, with Copilot Studio, customers can extend Copilot for Microsoft 365 and build custom copilots that proactively respond to data and events using their own first and third-party business data. To date, 50,000 organizations from Carnival Corporation, Cognizant, and Eaton, to KPMG, Majesco, and McKinsey have used Copilot Studio, up over 70% quarter-over-quarter. We are also extending Copilot to specific industries, including healthcare, with DAX Copilot. More than 400 healthcare organizations including Community Health Network, Intermountain, Northwestern Memorial Healthcare, and Ohio State University Wexner Medical Center have purchased DAX Copilot to date, up 40% quarter-over-quarter, and the number of AI-generated clinical reports more than tripled. Copilot is also transforming ERP and CRM business applications. We again took share this quarter, as customers like ThermoFisher Scientific switched to Dynamics. Our new Dynamics 365 Contact Center is a Copilot-first solution that infuses generative AI throughout the contact center workflow. Companies like 1-800 Flowers, Mediterranean Shipping, Synoptek will rely on it to deliver better customer support. And Dynamics 365 Business Central is now trusted by over 40,000 organizations for core ERP. Microsoft Teams has become essential to how hundreds of millions of people meet, call, chat, collaborate, and do business. We once again saw year-over-year usage growth. Teams Premium has surpassed 3 million seats, up nearly 400% year-over-year, as organizations like dentsu, Eli Lilly, and Ford chose it for advanced features like end-to-end encryption and real-time translation. When it comes to devices, we introduced our new category of Copilot+ PCs this quarter. They are the fastest, most intelligent Windows PCs ever, and they include a new system architecture designed to deliver best-in-class performance and breakthrough AI experiences. We are delighted by early reviews. And we are looking forward to the introduction of more Copilot+ PCs powered by all of our silicon and OEM partners in the coming months. More broadly, Windows 11 active devices increased 50% year-over-year. And we are seeing accelerated adoption of Windows 11 by companies like Carlsberg, E.ON, National Australia Bank. Now, on to security. We continue to prioritize security above all else. We are doubling down on our Secure Future Initiative, as we implement our principles of secure by design, secure by default, and secure operations. Through this initiative, we are also continually applying what we are learning, and translating it into innovation for our customers, including how we approach AI. Over 1,000 paid customers used Copilot for Security, including Alaska Airlines, Oregon State University, Petrofac, Wipro, WTW. And we are also securing customers\u2019 AI deployments, with updates to Defender and Purview. All-up, we now have over 1.2 million security customers. Over 800,000 including Dell Technologies, Deutsche Telekom, TomTom use four or more workloads, up 25% year-over-year. And Defender for Cloud, our cloud security solution, surpassed $1 billion in revenue over the past 12 months as we protect customer workloads across multi-cloud and hybrid environments. Now, let me turn to our consumer businesses, starting with LinkedIn. LinkedIn continues to see accelerated member growth and record engagement. 1.5 million pieces of content are shared every minute on the platform. And video is now the fastest growing format on LinkedIn, with uploads up 34% year-over-year. LinkedIn Marketing Solutions continues to be a leader in B2B digital advertising, helping companies deliver the right message, to the right audience, on a safe, trusted platform. And when it comes to our subscription businesses, Premium sign ups increased 51% this fiscal year, and we are adding even more value to our members and customers with new AI tools. Our reimagined AI-powered LinkedIn Premium experience is now available for every Premium subscriber worldwide, helping them more easily and intuitively connect to opportunity, learn, and get career coaching. Finally, hiring took share for the second consecutive year. And, now, on to Search, Advertising and News. We are ensuring that Bing, Edge, and Copilot collectively are driving more engagement and value to end-users, publishers, and advertisers. Our overall revenue ex-TAC increased 19% year-over-year, and we again took share across Bing and Edge. We continue to apply generative AI to pioneer new approaches to how people search and browse. Just last week, we announced we are testing a new generative search experience, which creates a dynamic response to a user\u2019s query, while maintaining click share to publishers. And we continue to drive record engagement with Copilot for the web. Consumers have used Copilot to create over 12 billion images and conduct 13 billion chats to date, up 150% since the start of the calendar year. Thousands of news and entertainment publishers trust us to reach new audiences with Microsoft Start. And, in fact, we have paid them $1 billion over the last five years. We are helping advertisers increase their ROI too. We have seen positive response to Performance Max, which uses AI to dynamically create and optimize ads. And Copilot in Microsoft Ad Platform helps marketers create campaigns and troubleshoot using natural language. Now, on to gaming. We now have over 500 million monthly active users across platforms and devices. And our content pipeline has never been stronger. We previewed a record 30 new titles at our showcase this quarter. 18 of them such as Call of Duty: Black Ops 6 will be available on Game Pass. Game Pass Ultimate subscribers can now stream games directly on the devices they already have, including as of last month, Amazon Fire TVs. Finally, we are bringing our IP to new audiences. Fallout, for example, made its debut as a TV show on Amazon Prime this quarter. It was the second most watched title on the platform ever, and hours played on Game Pass for Fallout franchise increased nearly 5x quarter-over-quarter. In closing, I am energized about the opportunities ahead. We are investing for the long-term in our fundamentals, in our innovation, and in our people. With that, let me turn it over to Amy.","evidence_gemma_new":"Microsoft Cloud revenue","evidence_llama_3_3":"Microsoft Cloud revenue","evidence_qwen_3_30b":"Microsoft Cloud revenue","gemma_new_max":135000000000.0,"gemma_new_min":135000000000.0,"llama_3_3_max":135000000000.0,"llama_3_3_min":135000000000.0,"qwen_3_30b_max":135000000000.0,"qwen_3_30b_min":135000000000.0}
{"symbol":"MSFT","year":2024,"quarter":4,"date":"2024-Q4","chunk_id":3,"sub_chunk_id":0,"centroid_label":"microsoft revenue","agreed_value":36800000000.0,"count":2,"chunk":"Amy Hood: Thank you, Satya, and good afternoon everyone. This quarter, revenue was $64.7 billion, up 15% and 16% in constant currency. Earnings per share was $2.95 and increased 10% and 11% in constant currency. In our largest quarter of the year, we again delivered double-digit top and bottom line growth with continued share gains across many of our businesses and record commitments to our Microsoft Cloud platform. Commercial bookings were significantly ahead of expectations and increased 17% and 19% in constant currency. This record commitment quarter was driven by growth in the number of 10-million-dollar-plus and 100-million-dollar-plus contracts for both Azure and Microsoft 365 and consistent execution across our core annuity sales motions. Commercial remaining performance obligation increased 20% and 21% in constant currency to $269 billion. Roughly 40% will be recognized in revenue in the next 12 months, up 18% year-over-year. The remaining portion, recognized beyond the next 12 months, increased 21%. And this quarter, our annuity mix was 97%. At a company level, Activision contributed a net impact of approximately 3 points to revenue growth, was a 2 point drag on operating income growth, and had a negative $0.06 impact to earnings per share. A reminder that this net impact includes adjusting for the movement of Activision content from our prior relationship as a third-party partner to first-party, and includes $938 million from purchase accounting adjustments, integration, and transaction-related costs. FX did not have a significant impact on our results and was roughly in line with our expectations on total company revenue, segment level revenue, COGS, and operating expense growth. Microsoft Cloud revenue was $36.8 billion and grew 21% and 22% in constant currency, roughly in line with expectations. Microsoft Cloud gross margin percentage decreased roughly 2 points year-over-year to 69% in line with expectations. Excluding the impact of the change in accounting estimate for useful lives, gross margin percentage decreased slightly driven by sales mix shift to Azure, partially offset by improvement in Azure even with the impact of scaling our AI infrastructure. Company gross margin dollars increased 14% and 15% in constant currency and gross margin percentage decreased slightly year-over-year to 70%. Excluding the impact of the change in accounting estimate, gross margin percentage increased slightly, even with the impact from purchase accounting adjustments, integration, and transaction-related costs from the Activision acquisition. Operating expenses increased 13% with 9 points from the Activision acquisition. At a total company level, headcount at the end of June was 3% higher than a year ago. Operating income increased 15% and 16% in constant currency and operating margins were 43%, relatively unchanged year-over-year. Excluding the impact of the change in accounting estimate, operating margins increased slightly driven by the higher gross margin noted earlier and improved operating leverage through continued cost discipline. Now to our segment results. Revenue from Productivity and Business Processes was $20.3 billion and grew 11% and 12% in constant currency, slightly ahead of expectations driven by better-than-expected results across all business units. Office commercial revenue grew 12% and 13% in constant currency. Office 365 commercial revenue increased 13% and 14% in constant currency with ARPU growth primarily from E5 momentum as well as Copilot for Microsoft 365. Paid Office 365 commercial seats grew 7% year-over-year with installed base expansion across all customer segments. Seat growth was again driven by our small and medium business and frontline worker offerings, although both segments continued to moderate. Office commercial licensing declined 9% and 7% in constant currency, with continued customer shift to cloud offerings. Office consumer revenue increased 3% and 4% in constant currency with continued momentum in Microsoft 365 subscriptions, which grew 10% to 82.5 million. LinkedIn revenue increased 10% and 9% in constant currency driven by better-than-expected performance across all businesses. Dynamics revenue grew 16% driven by Dynamics 365 which grew 19% and 20% in constant currency. We saw continued growth across all workloads and better-than-expected new business. Dynamics 365 now represents roughly 90% of total Dynamics revenue. Segment gross margin dollars increased 9% and 10% in constant currency and gross margin percentage decreased roughly 1 point year-over-year. Excluding the impact of the change in accounting estimate, gross margin percentage decreased slightly driven by Office 365 as we scale our AI infrastructure. Operating expenses increased 5%, and operating income increased 12% and 13% in constant currency. Next, the Intelligent Cloud segment. Revenue was $28.5 billion, increasing 19% and 20% in constant currency, in line with expectations. Overall, server products and cloud services revenue grew 21% and 22% in constant currency. Azure and other cloud services revenue grew 29% and 30% in constant currency, in line with expectations and consistent with Q3 when adjusting for leap year. Azure growth included 8 points from AI services where demand remained higher than our available capacity. In June, we saw slightly lower-than-expected growth in a few European geos. In our per-user business, the enterprise mobility and security installed base grew 10% to over 281 million seats with continued impact from moderated growth in seats sold outside the Microsoft 365 suite. Therefore, our Azure consumption business continues to grow faster than total Azure. In our on-premises server business, revenue increased 2% and 3% in constant currency. Growth was driven by demand for our hybrid solutions although with slightly lower-than-expected transactional purchasing. Enterprise and partner services revenue decreased 7% on a strong prior year comparable for Enterprise Support Services. Segment gross margin dollars increased 16% and gross margin percentage decreased roughly 2 points year-over-year. Excluding the impact of the change in accounting estimate, gross margin percentage decreased slightly driven by sales mix shift to Azure, partially offset by the improvement in Azure noted earlier, even with the impact of scaling our AI infrastructure. Operating expenses increased 5% and operating income grew 22% and 23% in constant currency. Now to More Personal Computing. Revenue was $15.9 billion, increasing 14% and 15% in constant currency, with 12 points of net impact from the Activision acquisition. Results were above expectations driven by Windows commercial and Search. The PC market was as expected and Windows OEM revenue increased 4% year-over-year. Windows commercial products and cloud services revenue increased 11% and 12% in constant currency, ahead of expectations due to higher in-period revenue recognition from the mix of contracts. Devices revenue decreased 11% and 9% in constant currency, roughly in line with expectations, as we remain focused on our higher margin premium products. While early days, we\u2019re excited about the recent launch of our Copilot+ PCs. Search and news advertising revenue ex-TAC increased 19%, ahead of expectations, primarily due to improved execution. Healthy volume growth was driven by Bing and Edge. And in Gaming, revenue increased 44% with 48 points of net impact from the Activision acquisition. Xbox content and services revenue increased 61%, slightly ahead of expectations, with 58 points of net impact from the Activision acquisition. Stronger-than-expected performance in first-party content was partially offset by third-party content performance. Xbox hardware revenue decreased 42% and 41% in constant currency. Segment gross margin dollars increased 21%, with 10 points of net impact from the Activision acquisition. Gross margin percentage increased roughly 3 points year-over-year primarily driven by sales mix shift to higher margin businesses. Operating expenses increased 43% with 41 points from the Activision acquisition. Operating income increased 5% and 6% in constant currency. Now back to total company results. Capital expenditures including finance leases were $19 billion, in line with expectations, and cash paid for PP&E was $13.9 billion. Cloud and AI related spend represents nearly all of total capital expenditures. Within that, roughly half is for infrastructure needs where we continue to build and lease datacenters that will support monetization over the next 15 years and beyond. The remaining cloud and AI related spend is primarily for servers, both CPUs and GPUs, to serve customers based on demand signals. For the full fiscal year, the mix of our cloud and AI related spend was similar to Q4. Cash flow from operations was $37.2 billion, up 29% driven by strong cloud billings and collections. Free cash flow was $23.3 billion, up 18% year-over-year, reflecting higher capital expenditures to support our cloud and AI offerings. For the full-year, cash flow from operations surpassed $100 billion for the first time, reaching $119 billion. This quarter, other income and expense was negative $675 million, more favorable than anticipated with lower-than-expected interest expense and higher-than-expected interest income. Our losses on investments accounted for under the equity method were as expected. Our effective tax rate was approximately 19%, higher than anticipated due to a state tax law signed in June that was effective retroactively. And finally, we returned $8.4 billion to shareholders through dividends and share repurchases, bringing our total cash returned to shareholders to over $34 billion for the full fiscal year. Now, moving to our outlook. My commentary for both the full-year and next quarter is on a U.S. dollar basis unless specifically noted otherwise. Let me start with some full year commentary for FY2025. First, FX. Assuming current rates remain stable, we expect FX to have no meaningful impact to full-year revenue, COGS, or operating expense growth. Next, we continue to expect double-digit revenue and operating income growth as we focus on delivering differentiated value for our customers. To meet the growing demand signal for our AI and cloud products, we will scale our infrastructure investments with FY2025 capital expenditures expected to be higher than FY2024. As a reminder, these expenditures are dependent on demand signals and adoption of our services that will be managed through the year. As scaling these investments drives growth in COGS, we will remain disciplined on operating expense management. Therefore, we expect FY2025 OpEx growth to be in the single digits. And given our focused commitment to managing at the operating margin level, we still expect FY2025 operating margins to be down only about one point year-over-year. And finally, we expect our FY2025 effective tax rate to be around 19%. Now, to the outlook for our first quarter. Based on current rates, we expect FX to decrease total revenue and segment level revenue growth by less than one point. We expect FX to decrease COGS growth by less than one point and to have no meaningful impact to operating expense growth. In commercial bookings, increased long-term commitments to our platform and strong execution across core annuity sales motions should drive healthy growth on a growing expiry base. As a reminder, larger long-term Azure contracts, which are more unpredictable in their timing, can drive increased quarterly volatility in our bookings growth rate. Microsoft Cloud gross margin percentage should be roughly 70%, down year-over-year driven by the impact of scaling our AI infrastructure. We expect capital expenditures to increase on a sequential basis given our cloud and AI demand, as well as existing AI capacity constraints. As a reminder, there can be quarterly spend variability from cloud infrastructure buildouts and the timing of delivery of finance leases. Next to segment guidance. In Productivity and Business Processes, we expect revenue to grow between 10% and 11% in constant currency, or US$20.3 to US$20.6 billion. In Office Commercial, revenue growth will again be driven by Office 365 with seat growth across customer segments and ARPU growth through E5 and Copilot for Microsoft 365. We expect Office 365 revenue growth to be approximately 14% in constant currency. In our on-premises business, we expect revenue to decline in the mid to high-teens. In Office consumer, we expect revenue growth in the low to mid-single digits, driven by Microsoft 365 subscriptions. For LinkedIn, we expect revenue growth in the high single digits driven by continued growth across all businesses. And in Dynamics, we expect revenue growth in the low to mid-teens driven by Dynamics 365. For Intelligent Cloud we expect revenue to grow between 18% and 20% in constant currency, or US$28.6 billion to US$28.9 billion. Revenue will continue to be driven by Azure which, as a reminder, can have quarterly variability primarily from our per-user business and in-period revenue recognition depending on the mix of contracts. In Azure, we expect Q1 revenue growth to be 28% to 29% in constant currency. Growth will continue to be driven by our consumption business, inclusive of AI, which is growing faster than total Azure. We expect the consumption trends from Q4 to continue through the first half of the year. This includes both AI demand impacted by capacity constraints and non-AI growth trends similar to June. Growth in our per-user business will continue to moderate. And in H2, we expect Azure growth to accelerate as our capital investments create an increase in available AI capacity to serve more of the growing demand. In our on-premises server business, we expect revenue to decline in the low single digits as continued hybrid demand will be more than offset by lower transactional purchasing. And in Enterprise and partner services, revenue should decline in the low single digits. In More Personal Computing, we expect revenue to grow between 9% and 12% in constant currency, or US$14.9 billion to US$15.3 billion. Windows OEM revenue growth should be relatively flat, roughly in line with the PC market. In Windows commercial products and cloud services, customer demand for Microsoft 365 and our advanced security solutions should drive revenue growth in the mid-single digits. As a reminder, our quarterly revenue growth can have variability primarily from in-period revenue recognition depending on the mix of contracts. In Devices, revenue growth should be in the low to mid-single digits. Search and news advertising ex-TAC revenue growth should be in the mid to high-teens. This will be higher than overall Search and news advertising revenue growth, which we expect to be in the low single digits. And in Gaming, we expect revenue growth in the mid-30s, including approximately 40 points of net impact from the Activision acquisition. We expect Xbox content and services revenue growth in the low to mid-50s, driven by the net impact from the Activision acquisition. Hardware revenue will again decline year-over-year. Now back to company guidance. We expect COGS between US$19.95 billion to US$20.15 billion, including approximately $700 million from purchase accounting, integration, and transaction-related costs from the Activision acquisition. We expect operating expense of US$15.2 billion to US$15.3 billion, including approximately $200 million from purchase accounting, integration, and transaction-related costs from the Activision acquisition. Other income and expense should be roughly negative $650 million driven by losses on investments accounted for under the equity method as interest income will be mostly offset by interest expense. As a reminder, we are required to recognize gains or losses on our equity investments, which can increase quarterly volatility. We expect our Q1 effective tax rate to be approximately 19%. In closing, we remain focused on delivering innovations that matter to our global customers of every size. That focus extends to delivering on our financial commitments as well. We delivered operating margin growth of nearly three points year-over-year even as we accelerated our AI investments, completed the Activision acquisition, and had a headwind from the change of useful lives last year. So, as we begin FY2025, we will continue to invest in the cloud and AI opportunity ahead aligned, and if needed adjusted, to the demand signals we see. We are committed to growing our leadership across our commercial cloud and within that, the AI platform, and we feel well positioned as we start FY2025. With that, let's go to Q&A, Brett.","evidence_gemma_new":null,"evidence_llama_3_3":"Microsoft Cloud revenue this quarter","evidence_qwen_3_30b":"Microsoft Cloud revenue 21% 22% constant currency","gemma_new_max":null,"gemma_new_min":null,"llama_3_3_max":36800000000.0,"llama_3_3_min":36800000000.0,"qwen_3_30b_max":36800000000.0,"qwen_3_30b_min":36800000000.0}
{"symbol":"MSFT","year":2023,"quarter":1,"date":"2023-Q1","chunk_id":2,"sub_chunk_id":0,"centroid_label":"monthly active users power apps","agreed_value":15000000.0,"count":2,"chunk":"Satya Nadella : Thank you, Brett. To start, I want to outline the principles that are guiding us through these changing economic times. First, we will invest behind categories that will drive the long-term secular trend where digital technology as a percentage of world's GDP will continue to increase. Second, we'll prioritize helping our customers get the most value out of their digital spend, so that they can do more with less. And finally, we will be disciplined in managing our cost structure. With that context, this quarter, the Microsoft Cloud again exceeded $25 billion in quarterly revenue, up 24% and 31% in constant currency. And based on current trends continuing, we expect our broader commercial business to grow at around 20% in constant currency this fiscal year, as we manage through the cyclical trends affecting our consumer business. With that, let me highlight our progress starting with Azure. Moving to the cloud is the best way for organizations to do more with less today. It helps them align their spend with demand and mitigate risk around increasing energy costs and supply chain constraints. We're also seeing more customers turn to us to build and innovate with infrastructure they already have. With Azure Arc, organizations like Wells Fargo can run Azure services, including containerized applications across on-premises, edge and multi-cloud environments. We now have more than 8,500 Arc customers, more than double the number a year ago. We are the platform of choice for customers' SAP workloads in the cloud, companies like [Chobani] (ph), Munich Re, Sodexo, Volvo Cars, all run SAP on Azure. We are the only cloud provider with direct and secure access to Oracle databases running an Oracle Cloud infrastructure, making it possible for companies like FedEx, GE and Marriott to use capabilities from both companies. And with Azure Confidential Computing, we're enabling companies in highly regulated industries, including RBC, to bring their most sensitive applications to the cloud. Just last week, UBS said it will move more than 50% of its applications to Azure. Now to data and AI. With our Microsoft Intelligent Data Platform, we provide a complete data fabric, helping customers cut integration tax associated with bringing together siloed solutions. Customers like Mercedes-Benz are standardizing on our data stack to process and govern massive amounts of data. Cosmos DB is the go-to database powering the world's most demanding workloads at limitless scale. Cosmos DB now supports postscript SQL, making Azure the first cloud provider to offer a database service that supports both relational and no SQL workloads. And in AI, we are turning the world's most advanced models into platforms for customers. Earlier this month, we brought the power of DALL-E to Azure OpenAI service, helping customers like Mattel apply the breakthrough image generation model to commercial use cases for the first time. In Azure machine learning, provides industry-leading ML apps, helping organizations like 3M deploy, manage and govern models. All up, Azure ML revenue has increased more than 100% for four quarters in a row. Now on to developers. We have the most complete platform for developers to build cloud native applications. Four years since our acquisition, GitHub is now at $1 billion in annual recurring revenue. And GitHub's developer first ethos has never been stronger. More than 90 million people now use the service to build software for any cloud on any platform up three times. GitHub advanced security is helping organizations improve their security posture by bringing features directly into the developer's workflow. Toyota North America chose the offering this quarter to help its developers build and secure many of its most critical applications. Now on to Power Platform. We are helping customers save time and money with our end-to-end suite spanning Low-Code\/No-Code tools, robotic process automation, virtual agents and business intelligence. Power BI is the market leader in business intelligence in the cloud and is growing faster than competition, as companies like Walmart standardize on the tool for reporting and analytics. Power Apps is the market leader in Low-Code\/No-Code tools and has nearly 15 million monthly active users, up more than 50% compared to a year ago. Power Automate has more than seven million monthly active users and is being used by companies like Brown-Forman, Komatsu, Mass, T-Mobile to digitize manual business processes and save thousands of hours of employee time. And we're going further with new AI-powered capabilities and power automate that turn natural language into advanced workflows. Now on to Dynamics 365. From customer experience and service to finance and supply chain, we continue to take share across all categories we serve. For example, Lufthansa Cargo chose us to centralize customer information and related shipments. CBRE is optimizing its field service operations, gaining cost efficiencies. Darden is using our solutions to increase both guest frequency and spend at its restaurants. And Tillamook is scaling its growth and improving supply chain visibility. All up more than 400,000 organizations now use our business applications. Now on to Industry Solutions. We are seeing increased adoption of our industry and cross-industry clouds. Bank of Queensland chose our cloud for financial services to deliver new digital experiences for its customers. Our cloud for sustainability is off to a fast start as organizations like Telstra use the solution to track their environmental footprint. New updates provide insights on hard-to-measure Scope 3 carbon emissions, and we are seeing record growth in healthcare, driven, in part, by our Nuance DAX ambient intelligence solutions, which automatically documents patient encounters at the point of care. Physicians tell us DAX dramatically improves their productivity, and it's quickly becoming an on-ramp to our broader healthcare offerings. Now on to new systems of work, Microsoft 365, Teams and Viva uniquely enable employees to thrive in today's digitally connected distributed world of work. Microsoft 365 is the cloud-first platform that supports all the ways people work and every type of worker reducing cost and complexity for IT. The new Microsoft 365 app brings together our productivity apps with third-party content, as well as personalized recommendations. Microsoft Teams is the de facto standard for collaboration and has become essential to how hundreds of millions of people meet, call, chat, collaborate and do business. As we emerge from the pandemic, we are retaining users we have gained and are seeing increased engagement, too. Users interact with Teams 1,500 times per month on average. In a typical day, the average commercial user spends more time in Teams chat than they do in e-mail, and the number of users who use four or more features within Teams increased over 20% year-over-year. Teams is becoming a ubiquitous platform for business process. Monthly active enterprise users running third-party and custom applications within Teams increased nearly 60% year-over-year, and over 55% of our enterprise customers who use Teams today also buy Teams Rooms or Teams Phone. Teams Phone provides the best-in-class calling. PSTN users have grown by double digits for five quarters in a row. We are bringing Teams Rooms to a growing hardware ecosystem, including Cisco's devices and peripherals, which will now run Teams natively. And we are creating a new category with Microsoft Places to help organizations evolve and manage the space for hybrid and in-person work. Just like Outlook calendar orchestrates when people can meet and collaborate, Places will do the same for where. We also announced Teams Premium, addressing enterprise demands for advanced meeting features like additional security options and intelligent meeting recaps. All this innovation is driving growth across Microsoft 365. Leaders in every industry from Fannie Mae and Land O'Lakes to Rabobank continue to turn to our premium E5 offerings for advanced security, compliance, voice and analytics. We've also built a completely new suite for our employee experience platform, Microsoft Viva, which now has more than 20 million monthly active users at companies like Finastra, SES and Unilever. And we are extending Viva to meet role-specific needs. Viva Sales is helping salespeople at companies like Adobe, Crayon and PwC reclaim their time by bringing customer interactions across Teams and Outlook directly into their CRM system. Now on to Windows. Despite the drop in PC shipments during the quarter, Windows continues to see usage growth. All up, there are nearly 20% more monthly active Windows devices than pre-pandemic. And on average, Windows 10 and Windows 11 users are spending 8.5% more time on their PCs than they were 2.5 years ago. And we are seeing larger commercial deployments of Windows 11. Accenture, for example, has deployed Windows 11 to more than 450,000 employees' PCs, up from just 25,000, 7 months ago, and L'Oreal has deployed the operating system to 85,000 employees. Now to security. Security continues to be a top priority for every organization. We're the only company with integrated end-to-end tools spanning security, compliance, identity and device management and privacy across all clouds and platforms. More than 860,000 organizations across every industry from BP and Fuji Film to ING Bank, iHeartMedia and Lumen Technologies now use our security solutions, up 33% year-over-year. They can save up to 60% when they consolidate our security stack, and the number of customers with more than four workloads have increased 50% year-over-year. More organizations are choosing both our XDR and cloud-native SIM to secure their entire digital estate. The number of E5 customers who also purchased Sentinel increased 44% year-over-year. And as threats become more sophisticated, we are innovating to protect customers. New capabilities in Defender help secure the entire DevOps life cycle and manage security posture across clouds. And Entra now provides comprehensive identity governance for both on-premise and cloud-based user directories. Now on to LinkedIn. We once again saw record engagement among our more than 875 million members, with international growth increasing at nearly 2x the pace as in the United States. There are now more than 150 million subscriptions to newsletters on LinkedIn, up 4x year-over-year. New integrations between Viva and LinkedIn Learning helped companies invest in their existing employees by providing access to courses directly in the flow of work. Members added 365 million skills to their profiles over the last 12 months, up 43% year-over-year. And with our acquisition of EduBrite, they will also soon be able to earn professional certificates from trusted partners directly on the platform. We launched the next-generation sales navigator this quarter, helping sellers increase win rates and deal sizes by better understanding and evaluating customer interest. Finally, LinkedIn Marketing Solution continues to provide leading innovation and ROI in B2B digital advertising. More broadly, with Microsoft Advertising, we offer a trusted platform for any marketeer or advertiser looking to innovate. We've expanded our geographies we serve by nearly 4x over the past year. We are seeing record daily usage of Edge, Start and Bing driven by Windows. Edge is the fastest-growing browser on Windows and continues to gain share as people use built-in coupon price comparison features to save money. We surface more than $2 billion in savings to date. And this quarter, we brought our shopping tools to 15 new markets. Users of our Start, personalized content feed are consuming 2x more content compared to a year ago. And we're also expanding our third-party ad inventory. Netflix will launch its first ad-supported subscription plan next month, exclusively powered by our technology and sales. And with PromoteIQ we offer an omni-channel media platform for retailers like the auto group looking to generate additional revenue while maintaining ownership of their own data and customer relationships. Now onto gaming. We are adding new gamers to our ecosystem as we execute on our ambition to reach players wherever and whenever they want on any device. We saw usage growth across all platforms driven by the strength of console. PC Game Pass subscriptions increased 159% year-over-year. And with cloud gaming, we're transforming how games are distributed, played and viewed. More than 20 million people have used the service to stream games to date. And we are adding support for new devices like handhelds from Logitech and Razor as well as Meta Quest. And as we look towards the holidays, we offer the best value in gaming with Game Pass and Xbox Series S, nearly half of the Series S buyers are new to our ecosystem. In closing, in a world facing increasing headwinds, digital technology is the ultimate tailwind. And we're innovating across the entire tech stack to help every organization, while also focusing intensely on our operational excellence and execution discipline. With that, I'll hand it over to Amy.","evidence_gemma_new":"Power Apps monthly active users a year ago","evidence_llama_3_3":"Power Platform monthly active users up more than 50% compared to a year ago","evidence_qwen_3_30b":null,"gemma_new_max":15000000.0,"gemma_new_min":15000000.0,"llama_3_3_max":15000000.0,"llama_3_3_min":15000000.0,"qwen_3_30b_max":null,"qwen_3_30b_min":null}
{"symbol":"MSFT","year":2023,"quarter":3,"date":"2023-Q3","chunk_id":2,"sub_chunk_id":0,"centroid_label":"monthly active users power apps","agreed_value":33000000.0,"count":3,"chunk":"Satya Nadella: Thank you very much, Brett. The Microsoft Cloud delivered over $28 billion in quarterly revenue, up 22% and 25% in constant currency, demonstrating our continued leadership across the tech stack. We continue to focus on three priorities. First, helping customers use the breadth and depth of the Microsoft Cloud to get the most value out of their digital spend. Second, investing to lead in the new AI wave across our solution areas and expanding our TAM. And third, driving operating leverage, aligning our cost structure with our revenue growth. Now I'll highlight examples of our progress, starting with infrastructure. Azure took share as customers continue to choose our ubiquitous computing fabric from cloud to edge, especially as every application becomes AI-powered. We have the most powerful AI infrastructure and it\u2019s being used by our partner, OpenAI, as well as NVIDIA and leading AI start-ups like Adept and Inflection to train large models. Our Azure OpenAI Service brings together advanced models, including ChatGPT and GPT-4 with the enterprise capabilities of Azure. From Coursera and Grammarly to Mercedes-Benz and Shell, we now have more than 2,500 Azure OpenAI Service customers, up 10x quarter-over-quarter. Just last week, Epic Systems shared that it was using Azure OpenAI Service to integrate the next generation of AI with its industry-leading EHR software. Azure also powers OpenAI API and we are pleased to see brands like Shopify and Snap use the API to integrate OpenAI's models. More broadly, we continue to see the world's largest enterprises migrate key workloads to our cloud. Unilever, for example, went all in on Azure this quarter in one of the largest ever cloud migrations in the consumer goods industry. IKEA Retail, ING Bank, Rabobank, Telstra and Wolverine Worldwide, all use Azure Arc to run Azure services across on-premises, edge and multi-cloud environments. We now have more than 15,000 Azure Arc customers, up over 150% year-over-year. And we are extending our infrastructure to 5G network edge with Azure for Operators. We are the cloud of choice for telcos, and at MWC last month, AT&T, Deutsche Telekom, Singtel and Telefonica all shared how they are using our infrastructure to modernize and monetize their networks. Now on to data. Our Intelligent Data Platform brings together databases, analytics and governance, so organizations can spend more time creating value and less time integrating their data estate. Cosmos DB is the go-to database, powering the world's most demanding workloads at any scale. OpenAI relies on Cosmos DB to dynamically scale their ChatGPT service, one of the fastest-growing consumer apps ever, enabling high reliability and low maintenance. The NBA uses Cosmos DB to ingest more than 10 million data points per game, helping teams optimize their gameplay. And we are taking share with our analytics solutions. Companies like BP, Canadian Tire, Marks & Spencer and T-Mobile all rely on our end-to-end analytics to improve speed to insight. Now on to developers. From Visual Studio to GitHub, we have the most popular tools to help every developer go from idea to code and code to cloud, all while staying in their flow. Today, 76% of the Fortune 500 use GitHub to build, ship and maintain software. And with GitHub Copilot, the first at-scale AI developer tool, we are fundamentally transforming the productivity of every developer from novices to experts. In three months since we made Copilot for Business broadly available, over 10,000 organizations have signed up, including the likes of Coca-Cola and GM as well as Duolingo and Mercado Libre, all of which credit Copilot with increasing the speed for their developers. We're also bringing next-generation AI to Power Platform so anyone can automate workflows, create apps or web pages, build virtual agents and analyze data using only natural language. More than 36,000 organizations have already used existing AI-powered capabilities in Power Platform. And with our new Copilot in Power Apps, we are extending these capabilities to end users who can interact with any app through conversation instead of clicks. All up, we now have nearly 33 million monthly active users of Power Platform, up nearly 50% year-over-year. Now on to business applications. From customer experience and service to finance and supply chain, we continue to take share across all categories we serve as organizations like Asahi, C.H. Robinson, E.ON, Franklin Templeton, choose our AI-powered business applications to automate, simulate and predict every business process and function. And we are going further with Dynamics 365 Copilot, which works across CRM and ERP systems to bring the next generation of AI to employees in every job function, reducing burdensome tasks like manual data entry, content generation and notetaking. Now on to our industry and cross-industry solutions. Our Cloud for Sustainability is seeing strong adoption from companies in every industry, including BBC, Nissan and TCL as they deliver on their respective environmental commitments. Our Cloud for Healthcare was front and center at HIMSS last week as we expanded our offerings for payors and added new AI-powered capabilities for providers. We showcased the first fully AI-automated clinical documentation application, Nuance DAX Express, which will bring GPT-4 to more than 550,000 existing users of Dragon Medical. And at Hannover Messe manufacturing trade show, Siemens shared how it will use a Teams app integrated with Azure OpenAI Service to optimize factory workflows. Now on to future of work. Microsoft 365 Copilot combines next-generation AI with business data in the Microsoft Graph and Microsoft 365 applications, removing the drudgery and unleashing the creativity of work. Copilot works alongside users embedded in the Microsoft 365 applications millions use every day, and it also powers Business Chat, which uses natural language to surface information and insights based on business content and context. We've been encouraged by early feedback and look forward to bringing these experiences to more users in the coming months. Teams usage is at an all-time high and surpassed 300 million monthly active users this quarter, and we once again took share across every category from collaboration to chat to meetings to calling as we add value for existing customers and win new ones like ABN AMRO, Jaguar Land Rover, Mattress Firm, Unisys and Vodafone. We announced a new version of Teams that delivers up to 2 times faster performance while using 50% less memory so customers can collaborate more efficiently and prepare for experiences like Copilot. Teams is also expanding our TAM. Nearly 60% of our enterprise Teams customers buy Teams Phone, Rooms or Premium. Teams Phone is the undisputed market leader in cloud calling, helping our customers reduce cost with a three year ROI of over 140%. Teams Rooms revenue more than doubled year-over-year and Teams Premium meets enterprise demand for AI-powered features like intelligent recaps. Now generally available, it's one of our fastest-growing Modern Work products ever with thousands of paid customers just two months in. With Microsoft Viva, we have created a completely new suite for employee experience. Viva brings together goals, communications, learning, workplace analytics and employee feedback. Across industries, companies like Dell, Mastercard and SES are using Viva to help their employees thrive. Just last week, we announced Copilot for Viva, offering leaders a new way to build high-performance teams by prioritizing both productivity and employee engagement. And with Viva Sales, we have extended the platform to specific job functions, helping sellers apply large language models to their CRM and Microsoft 365 data so that they can automatically generate content like customer mails. All this innovation is driving growth across Microsoft 365, Ferrovial, Goldman Sachs, Novo Nordisk and Rogers all chose E5 to empower their employees with our best-in-class productivity apps along with advanced security, compliance, voice and analytics. Now on to Windows. While the PC market continues to face headwinds, we again saw record monthly active Windows devices and higher usage compared to pre-pandemic. We're also seeing accelerated growth in Windows 11 commercial deployments. Over 90% of the Fortune 500 are currently trialing or have deployed Windows 11. And with Windows 365 and Azure Virtual Desktop, we continue to transform how our employees at companies like Mazda and Nationwide access Windows. All up, over one-third of our enterprise customer base has purchased cloud-delivered Windows to-date. And new Windows 365 Frontline extends the power and security of Cloud PCs to shift workers for the first time. Now on to security. Our comprehensive AI-powered solutions spanning all clouds and all platforms give the agility advantage back to defenders. Among analysts, we are the leader in more categories than any other provider. And we once again took share across all major categories we serve and we continue to introduce new products and functionality to further protect customers. With Security Copilot, we are combining large language models with a domain-specific model informed by our threat intelligence and 65 trillion daily security signals to transform every aspect of the SOC productivity. And we also added new governance controls and policy protections to better secure identities along with resources they access. Nearly 720,000 organizations now use Azure Active Directory, up 33% year-over-year. And all up, nearly 600,000 customers now have four or more security workloads, up 35% year-over-year, underscoring our end-to-end differentiation. EY and Qualcomm, for example, both chose our full security stack to ensure the highest levels of protection and visibility across their organizations. Now on to LinkedIn. We once again saw record engagement as more than 930 million members turn to the professional social network to connect, learn, sell and get hired. Member growth accelerated for the seventh consecutive quarter as we expanded to new audiences. We now have 100 million members in India, up 19%. And as Gen Z enters the workforce, we saw 73% year-over-year increase in the number of student sign-ups. In this persistently tight labor market, LinkedIn Talent Solutions continues to help hirers connect to job seekers and professionals to build the skills they need to access opportunity. Our hiring business took share for the third consecutive quarter. The excitement around AI is creating new opportunities across every function from marketing, sales and finance to software development and security. LinkedIn is increasingly where people are going to learn, discuss and up-level their skills with more than 100 AI courses. And we have introduced new AI-powered features, including writing suggestions for member profiles and job descriptions and collaborative articles. Finally, LinkedIn Marketing Solutions continues to be a leader in B2B digital advertising, helping companies deliver the right message to the right audience on a safe, trusted platform. More broadly, we continue to expand our opportunity in advertising. Our exclusive partnership with Netflix brings differentiated premium video content to our ad network, and our new Copilot for the web is reshaping daily search and web habits. Two months since the launch of new Bing and Edge, we are very encouraged by user feedback and usage patterns. All up, Bing has more than 100 million daily active users. We are winning new customers on Windows and mobile. Daily installs of the Bing mobile app have grown 4 times since launch. We are making progress in share gains. Edge took share for the eighth consecutive quarter and Bing once again grew share in the United States. We continue to innovate with first-of-their-kind AI-powered features, including the ability to set the tone of chat and create images from text prompts powered by DALL-E. Over 200 million images have been created to date and we see that when people use these new AI features their engagement with Bing and Edge goes up. As we look towards a future where chat becomes a new way for people to seek information, consumers have real choice in business model and modalities with Azure-powered chat entry points across Bing, Edge, Windows and OpenAI\u2019s ChatGPT. We look forward to continuing this journey in what is a generational shift in the largest software category, search. Now on to gaming. We are rapidly executing on our ambition to be the first choice for people to play great games whenever, however and wherever they want. We set third quarter records for monthly active users and monthly active devices. Across our content & services business, we are delivering on our commitment to offer gamers more ways to experience the games they love. Our revenue from subscriptions reached nearly $1 billion this quarter. This quarter, we also brought PC Game Pass to 40 new countries, nearly doubling the number of markets we are available. Great content remains the flywheel behind our growth. We have now surpassed 500 million lifetime unique users across our first-party titles. And I\u2019ve never been more excited about our pipeline of games, including the fourth quarter launches of Minecraft Legends and Redfall. In closing, we are focused on continuing to raise the bar on our operational excellence and performance as we innovate to help our customers maximize the value of their existing technology investments and thrive in the new era of AI. In a few weeks times, we'll hold our Build conference, and we will share how we are building the most powerful AI platform for developers and I encourage you to tune in. I could not be more energized about the opportunities ahead. And with that, let me turn it over to Amy.","evidence_gemma_new":"Power Platform year-over-year","evidence_llama_3_3":"Power Platform monthly active users 33 million year-over-year","evidence_qwen_3_30b":"Power Platform monthly active users year-over-year","gemma_new_max":33000000.0,"gemma_new_min":33000000.0,"llama_3_3_max":33000000.0,"llama_3_3_min":33000000.0,"qwen_3_30b_max":33000000.0,"qwen_3_30b_min":33000000.0}
{"symbol":"MSFT","year":2024,"quarter":3,"date":"2024-Q3","chunk_id":2,"sub_chunk_id":0,"centroid_label":"monthly active users power apps","agreed_value":25000000.0,"count":2,"chunk":"Satya Nadella: Thank you, Brett. It was a record third quarter, powered by the continued strength of the Microsoft Cloud, which surpassed $35 billion in revenue, up 23%. Microsoft Copilot and Copilot stack, spanning everyday productivity, business process, and developer services, to models, data, and infrastructure, are orchestrating a new era of AI transformation, driving better business outcomes across every role and industry. Now, I\u2019ll highlight examples, walking up the stack, starting with AI infrastructure. Azure again took share, as customers use our platforms and tools to build their own AI solutions. We offer the most diverse selection of AI accelerators, including the latest from NVIDIA, AMD, as well as our own first-party silicon. Our AI innovation continues to build on our strategic partnership with OpenAI. More than 65% of the Fortune 500 now use Azure OpenAI Service. We also continue to innovate and partner broadly to bring customers the best selection of frontier models and open source models, LLMs and SLMs. With Phi-3, which we announced earlier this week, we offer the most capable and cost-effective SLM available. It\u2019s already being trialed by companies like CallMiner, LTIMindtree, PwC, and TCS. Our Models as a Service offering makes it easy for developers to use LLMs and SLMs without having to manage any underlying infrastructure. Hundreds of paid customers, from Accenture and EY, to Schneider Electric, are using it to take advantage of API access to third-party models, including as of this quarter the latest from Cohere, Meta, and Mistral. And, as part of a partnership announced last week, G42 will run its AI applications and services on our cloud. All-up, the number of Azure AI customers continues to grow and average spend continues to increase. We also saw an acceleration of revenue from migrations to Azure. Azure Arc continues to help customers like DICK'S Sporting Goods and World Bank streamline their cloud migrations. Arc now has 33,000 customers, up over 2X year-over-year. And, we are the hyperscale platform of choice for SAP and Oracle workloads, with Conduent and Medline moving their on-premises Oracle estates to Azure, and Kyndryl and L'Oreal migrating their SAP workloads to Azure. Overall, we are seeing an acceleration in the number of large Azure deals from leaders across industries, including billion dollar plus multi-year commitments announced this month from Cloud Software Group and The Coca-Cola Company. The number of $100 million plus Azure deals increased over 80% year-over-year, while the number of $10 million plus deals more than doubled. Now, on to data and analytics. Our Microsoft Intelligent Data Platform provides customers with the broadest capabilities spanning databases, analytics, business intelligence, governance, and AI. Over half of our Azure AI customers also use our data and analytics tools. Customers are building intelligent applications running on Azure, PostgreSQL and Cosmos DB with deep integrations with Azure AI. TomTom is a great example. They\u2019ve used Cosmos DB along with Azure Open AI service to build their own immersive in-car infotainment system. We are also encouraged by our momentum with our next-generation analytics platform, Microsoft Fabric. Fabric now has over 11,000 paid customers, including leaders in every industry from ABB, EDP, Energy Transfer to Equinor, Foot Locker, ITOCHU and Lumen, and we are seeing increased usage intensity. Fabric is seamlessly integrated with Azure AI Studio, meaning customers can run models against enterprise data that\u2019s consolidated in Fabric\u2019s multi-cloud data lake, OneLake. And Power BI, which is also natively integrated with Fabric provides business users with AI-powered insights. We now have over 350,000 paid customers. Now on to developers. GitHub Copilot is bending the productivity curve for developers. We now have 1.8 million paid subscribers with growth accelerating to over 35% quarter-over-quarter and continues to see increased adoption from businesses in every industry, including Itau, Lufthansa Systems, Nokia, Pinterest and Volvo cars. CoPilot is driving growth across the broader GitHub platform, too. AT&T, Citi Group and Honeywell all increased their overall GitHub usage after seeing productivity and code quality increases with CoPilot. All up more than 90% of the Fortune 100 are now GitHub customers and revenue accelerated over 45% year-over-year. Anyone can be a developer with new AI-powered features across our low-code, no-code tools, which makes it easier to build an app, automate workflow or create a Copilot using natural language. 30,000 organizations, across every industry have used Copilot Studio to customize Copilot for Microsoft 365 or build their own, up 175% quarter-over-quarter. Cineplex, for example, built a Copilot for customer service agents, reducing query handling time from as much as 15 minutes to 30 seconds. All up over 330,000 organizations, including over half of Fortune 100 have used AI-powered capabilities in Power Platform, and Power Apps now has over 25 million monthly active users, up over 40% year-over-year. Now on to future of work, we are seeing AI democratize expertise across the workforce. What inventory turns are to efficiency of supply chains, knowledge turns, the creation and diffusion and knowledge are to productivity of an organization. And Copilot for Microsoft 365 is helping increase knowledge turns, thus having a cascading effect changing work, work artifacts and workflows and driving better decision-making, collaboration and efficiency. This quarter, we made Copilot available to organizations of all types and sizes from enterprises to small businesses, nearly 60% of the Fortune 500 now use Copilot and we have seen accelerated adoption across industries and geographies with companies like Amgen, BP, Cognizant, Koch Industries, Moody\u2019s, Novo Nordisk, NVIDIA, and Tech Mahindra purchasing over 10,000 seats. We\u2019re also seeing increased usage intensity from early adopters, including a nearly 50% increase in the number of Copilot-assisted interactions per user in Teams, bridging group activity with business process workflows and enterprise knowledge. And we\u2019re not stopping there. We\u2019re accelerating our innovation, adding over 150 Copilot capabilities since the start of the year. With Copilot and Dynamics 365, we are helping businesses transform every role in business function as we take share with our AI-powered apps across all categories. This quarter, we made our Copilot for Service and Copilot for Sales broadly available, helping customer service agents and sellers at companies like Land O\u2019Lakes, Northern Trust, Rockwell Automation and Toyota Group generate role-specific insights and recommendations from across Dynamics 365 and Microsoft 365, as well as third-party platforms like Salesforce, ServiceNow, and Zendesk. And with our Copilot for Finance, we are drawing context from dynamics, as well as ERP systems like SAP to reduce labor-intensive processes like collections and contract and invoice capture for companies like Dentsu and IDC. ISVs are also building their own co-pilot integrations. For example, new integrations between Adobe Experience Cloud and Copilot will help marketeers access campaign insights in the flow of their work. When it comes to devices, Copilot in Windows is now available on nearly 225 million Windows 10 and Windows 11 PCs, up 2x quarter-over-quarter. With Copilot, we have an opportunity to create an entirely new category of devices, purpose-built for this new generation of AI. All of our largest OEM partners have announced AI PCs in recent months. And this quarter, we introduced new surface devices, which includes integrated NPUs to power on-device AI experiences like auto framing and live captions. And there is much more to come in just a few weeks, we\u2019ll hold a special event to talk about our AI vision across Windows and devices. When it comes to Teams, we once again saw year-over-year usage growth. We\u2019re rolling out a new version, which is up to two times faster while using 50% less memory to all customers. We surpassed 1 million Teams Rooms for the first time as we continue to make hybrid meetings better with new AI-powered features like automatic camera switching and speaker recognition. And Teams Phone continues to be the market leader in cloud calling now with over 20 million PSTN users, up nearly 30% year-over-year. All of this innovation is driving growth across Microsoft 365 companies across the private and public sector, including Amadeus, BlackRock, Chevron, Ecolab, Kimberly-Clark. All chose our premium E5 offerings this quarter for advanced security, compliance, voice and analytics. Now on to industry and cross-industry clouds. We are also bringing AI-powered transformation to every industry. In health care, DAX Copilot is being used by more than 200 health care organizations, including Providence, Stanford Health Care and WellSpan Health. And in manufacturing, this week at Hannover Messe, customers like BMW, Siemens and Volvo Penta shared how they're using our cloud and AI solutions to transform factory operations. Now on to security. Security underpins every layer of the tech stack, and it's our number one priority. We launched our Secure Future Initiative last fall for this reason, bringing together every part of the company to advance cybersecurity protection, and we are doubling down on this very important work, putting security above all else, before all other features and investments. We are focused on making continuous progress across the six pillars of this initiative as we protect tenants and isolate production systems, protect identities and secrets, protect networks, protect engineering systems, monitor and detect threats, and accelerate responses and remediation. We remain committed to sharing our learnings, tools and innovation with customers. A great example is Copilot for Security, which we made generally available earlier this month, bringing together LLMs with domain-specific skills informed by our threat intelligence and 78 trillion daily security signals to provide security teams with actionable insights. Now let me talk about our consumer businesses starting with LinkedIn. We continue to combine our unique data with this new generation of AI to transform the way members learn, sell and get hired. Features like LinkedIn AI-assisted messages are seeing a 40% higher acceptance rate and accepted over 10% faster by job seekers, saving hirers time and making it easier to connect them to candidates. Our AI-powered collaborative articles, which has reached over 12 million contributions are helping increase engagement on the platform, which reached a new record this quarter. New AI features are also helping accelerate LinkedIn Premium growth with revenue up 29% year-over-year. And we are also seeing strength across our other businesses with hiring taking share for the seventh consecutive quarter. Now on to search, advertising and news. We once again took share across Bing and Edge as we continue to apply this new generation of AI to transform how people search and browse. Bing reached over 140 million daily active users, and we are particularly encouraged by our momentum in mobile. Our free Copilot apps on iOS and Android saw a surge in downloads after our Super Bowl ad and are among the highest rated in this category. We also rolled out Copilot to our ad platform this quarter, helping marketeers use AI to generate recommendations for product images, headlines and descriptions. Now on to gaming. We are committed to meeting players where they are by bringing great games to more people on more devices. We set third quarter records for game streaming hours, console usage and monthly active devices. And last month, we added our first Activision Blizzard title Diablo IV to our Game Pass service. Subscribers played over 10 million hours within the first 10 days, making it one of our biggest first-party Game Pass launches ever. We were also encouraged by ongoing success of Call of Duty: Modern Warfare 3, which is attracting new gamers and retaining franchise loyalists. Finally, we are expanding our games to new platforms, bringing four of our fan favorite titles to Nintendo Switch and Sony PlayStation for the first time. In fact, earlier this month, we had seven games among the top 25 on the PlayStation store more than any other publisher. In closing, I'm energized about our opportunity ahead as we innovate to help people and businesses thrive in this new era. With that, let me turn it over to Amy.","evidence_gemma_new":"Power Apps monthly active users year-over-year","evidence_llama_3_3":null,"evidence_qwen_3_30b":"Power Apps 25 million monthly active users","gemma_new_max":25000000.0,"gemma_new_min":25000000.0,"llama_3_3_max":null,"llama_3_3_min":null,"qwen_3_30b_max":25000000.0,"qwen_3_30b_min":25000000.0}
{"symbol":"MSFT","year":2024,"quarter":4,"date":"2024-Q4","chunk_id":2,"sub_chunk_id":0,"centroid_label":"monthly active users power apps","agreed_value":48000000.0,"count":2,"chunk":"Satya Nadella: Thank you, Brett. We had a solid close to our fiscal year. All-up, annual revenue was more than $245 billion, up 15% year-over-year. And Microsoft Cloud revenue surpassed $135 billion, up 23%. Before I dive in, I want to offer some broader perspective on the AI platform shift. Similar to the cloud, this transition involves both knowledge and capital intensive investments. And as we go through this shift, we are focused on two fundamental things: First, driving innovation across a product portfolio that spans infrastructure and applications so as to ensure that we are maximizing our opportunity, while in parallel continuing to scale our cloud business and prioritizing fundamentals, starting with security. Second, using customer demand signal and time to value to manage our cost structure dynamically and generate durable, long-term operating leverage. With that, let me highlight examples, starting with Azure. Our share gains accelerated this year, driven by AI. We expanded our datacenter footprint, announcing investments across four continents. These are long-term assets around the world to drive growth for the next decade and beyond. We added new AI accelerators from AMD and NVIDIA, as well as our own first party silicon Azure Maia. And we introduced new Cobalt 100, which provides best-in-class performance for customers like Elastic, MongoDB, Siemens, Snowflake, and Teradata. We continued to see sustained revenue growth from migrations. Azure Arc is helping customers in every industry, from ABB and Cathay Pacific, to LaLiga, to streamline their cloud migrations. We now have 36,000 Arc customers, up 90% year-over-year. We remain the hyperscale cloud of choice for SAP and Oracle workloads. Atos, Coles, Daimler Truck AG, Domino\u2019s, Haleon, for example, all migrated their mission-critical SAP workloads to our cloud. And with our Azure VMware Solution, we offer the fastest and most cost-effective way for customers to migrate their VMware workloads too. With Azure AI, we are building out the app server for the AI wave, providing access to the most diverse selection of models to meet customers\u2019 unique cost, latency, and design considerations. All-up, we now have over 60,000 Azure AI customers, up nearly 60% year-over-year, and average spend per customer continues to grow. Azure OpenAI Service provides access to best-in-class frontier models, including as of this quarter GPT-4o and GPT-4o mini. It is being used by leading companies in every industry, including H&R Block, Suzuki, Swiss Re, Telstra as well as digital natives like Freshworks, Meesho, and Zomato. With Phi-3, we offer a family of powerful, small language models, which are being used by companies like BlackRock, Emirates, Epic, ITC, Navy Federal Credit Union, and others. And with Models as a Service, we provide API access to third-party models, including as of last week the latest from Cohere, Meta, and Mistral. The number of paid Models as a Service customers more than doubled quarter-over-quarter, and we are seeing increased usage by leaders in every industry, from Adobe and Bridgestone, to Novo Nordisk and Palantir. Now, on to data. Our Microsoft Intelligent Data Platform provides customers with the broadest capabilities spanning databases, analytics, business intelligence, and governance along with seamless integration with all of our AI services. The number of Azure AI customers also using our data and analytics tools grew nearly 50% year-over-year. Microsoft Fabric, our AI-powered next generation data platform \u2013 now has over 14,000 paid customers, including leaders in every industry, from Accenture and Kroger, to Rockwell Automation and Zeiss up 20% quarter-over-quarter. And, this quarter, we introduced new first-of-their-kind real-time intelligence capabilities in Fabric so customers can unlock insights on high-volume, time sensitive data. Now, on to developer tools. GitHub Copilot is by far the most widely adopted AI-powered developer tool. Just over two years since its general availability, more than 77,000 organizations from BBVA, FedEx, and H&M, to Infosys and Paytm have adopted Copilot, up 180% year-over-year. And we are going further. With Copilot Workspace, we offer Copilot-native end-to-end developer productivity across plan, build, test, debug, and deploy cycle. Copilot is driving GitHub growth, all up, GitHub\u2019s annual revenue run rate is now $2 billion. Copilot accounted for over 40% of GitHub revenue growth this year, and is already a larger business than all of GitHub was when we acquired it. We are also integrating generative AI across Power Platform, enabling anyone to use natural language to create apps, automate workflows, or build a website. To date, over 480,000 organizations have used AI-powered capabilities in Power Platform, up 45% quarter-over-quarter. In total, we now have 48 million monthly active users of Power Platform, up 40% year-over-year. Now, on to future of work. Copilot for Microsoft 365 is becoming a daily habit for knowledge workers, as it transforms work, workflow, and work artifacts. The number of people who use Copilot daily at work nearly doubled quarter-over-quarter, as they use it to complete tasks faster, hold more effective meetings, and automate business workflows and processes. Copilot customers increased more than 60% quarter-over-quarter. Feedback has been positive, with majority of enterprise customers coming back to purchase more seats. All-up, the number of customers with more than 10,000 seats more than doubled quarter-over-quarter, including Capital Group, Disney, Dow, Kyndryl, Novartis. And EY alone will deploy Copilot to 150,000 of its employees. And we are going further, adding agent capabilities to Copilot. New Team Copilot can facilitate meetings, and create and assign tasks. And, with Copilot Studio, customers can extend Copilot for Microsoft 365 and build custom copilots that proactively respond to data and events using their own first and third-party business data. To date, 50,000 organizations from Carnival Corporation, Cognizant, and Eaton, to KPMG, Majesco, and McKinsey have used Copilot Studio, up over 70% quarter-over-quarter. We are also extending Copilot to specific industries, including healthcare, with DAX Copilot. More than 400 healthcare organizations including Community Health Network, Intermountain, Northwestern Memorial Healthcare, and Ohio State University Wexner Medical Center have purchased DAX Copilot to date, up 40% quarter-over-quarter, and the number of AI-generated clinical reports more than tripled. Copilot is also transforming ERP and CRM business applications. We again took share this quarter, as customers like ThermoFisher Scientific switched to Dynamics. Our new Dynamics 365 Contact Center is a Copilot-first solution that infuses generative AI throughout the contact center workflow. Companies like 1-800 Flowers, Mediterranean Shipping, Synoptek will rely on it to deliver better customer support. And Dynamics 365 Business Central is now trusted by over 40,000 organizations for core ERP. Microsoft Teams has become essential to how hundreds of millions of people meet, call, chat, collaborate, and do business. We once again saw year-over-year usage growth. Teams Premium has surpassed 3 million seats, up nearly 400% year-over-year, as organizations like dentsu, Eli Lilly, and Ford chose it for advanced features like end-to-end encryption and real-time translation. When it comes to devices, we introduced our new category of Copilot+ PCs this quarter. They are the fastest, most intelligent Windows PCs ever, and they include a new system architecture designed to deliver best-in-class performance and breakthrough AI experiences. We are delighted by early reviews. And we are looking forward to the introduction of more Copilot+ PCs powered by all of our silicon and OEM partners in the coming months. More broadly, Windows 11 active devices increased 50% year-over-year. And we are seeing accelerated adoption of Windows 11 by companies like Carlsberg, E.ON, National Australia Bank. Now, on to security. We continue to prioritize security above all else. We are doubling down on our Secure Future Initiative, as we implement our principles of secure by design, secure by default, and secure operations. Through this initiative, we are also continually applying what we are learning, and translating it into innovation for our customers, including how we approach AI. Over 1,000 paid customers used Copilot for Security, including Alaska Airlines, Oregon State University, Petrofac, Wipro, WTW. And we are also securing customers\u2019 AI deployments, with updates to Defender and Purview. All-up, we now have over 1.2 million security customers. Over 800,000 including Dell Technologies, Deutsche Telekom, TomTom use four or more workloads, up 25% year-over-year. And Defender for Cloud, our cloud security solution, surpassed $1 billion in revenue over the past 12 months as we protect customer workloads across multi-cloud and hybrid environments. Now, let me turn to our consumer businesses, starting with LinkedIn. LinkedIn continues to see accelerated member growth and record engagement. 1.5 million pieces of content are shared every minute on the platform. And video is now the fastest growing format on LinkedIn, with uploads up 34% year-over-year. LinkedIn Marketing Solutions continues to be a leader in B2B digital advertising, helping companies deliver the right message, to the right audience, on a safe, trusted platform. And when it comes to our subscription businesses, Premium sign ups increased 51% this fiscal year, and we are adding even more value to our members and customers with new AI tools. Our reimagined AI-powered LinkedIn Premium experience is now available for every Premium subscriber worldwide, helping them more easily and intuitively connect to opportunity, learn, and get career coaching. Finally, hiring took share for the second consecutive year. And, now, on to Search, Advertising and News. We are ensuring that Bing, Edge, and Copilot collectively are driving more engagement and value to end-users, publishers, and advertisers. Our overall revenue ex-TAC increased 19% year-over-year, and we again took share across Bing and Edge. We continue to apply generative AI to pioneer new approaches to how people search and browse. Just last week, we announced we are testing a new generative search experience, which creates a dynamic response to a user\u2019s query, while maintaining click share to publishers. And we continue to drive record engagement with Copilot for the web. Consumers have used Copilot to create over 12 billion images and conduct 13 billion chats to date, up 150% since the start of the calendar year. Thousands of news and entertainment publishers trust us to reach new audiences with Microsoft Start. And, in fact, we have paid them $1 billion over the last five years. We are helping advertisers increase their ROI too. We have seen positive response to Performance Max, which uses AI to dynamically create and optimize ads. And Copilot in Microsoft Ad Platform helps marketers create campaigns and troubleshoot using natural language. Now, on to gaming. We now have over 500 million monthly active users across platforms and devices. And our content pipeline has never been stronger. We previewed a record 30 new titles at our showcase this quarter. 18 of them such as Call of Duty: Black Ops 6 will be available on Game Pass. Game Pass Ultimate subscribers can now stream games directly on the devices they already have, including as of last month, Amazon Fire TVs. Finally, we are bringing our IP to new audiences. Fallout, for example, made its debut as a TV show on Amazon Prime this quarter. It was the second most watched title on the platform ever, and hours played on Game Pass for Fallout franchise increased nearly 5x quarter-over-quarter. In closing, I am energized about the opportunities ahead. We are investing for the long-term in our fundamentals, in our innovation, and in our people. With that, let me turn it over to Amy.","evidence_gemma_new":null,"evidence_llama_3_3":"Power Platform monthly active users","evidence_qwen_3_30b":"Power Platform monthly active users","gemma_new_max":null,"gemma_new_min":null,"llama_3_3_max":48000000.0,"llama_3_3_min":48000000.0,"qwen_3_30b_max":48000000.0,"qwen_3_30b_min":48000000.0}
{"symbol":"MSFT","year":2023,"quarter":2,"date":"2023-Q2","chunk_id":39,"sub_chunk_id":0,"centroid_label":"office 365 paid office 365 commercial seats","agreed_value":400000000.0,"count":3,"chunk":"Brad Reback: Great. Thanks very much. On Office 365 Commercial, with you guys approaching 400 million seats and the E5 business really starting to accelerate here on that consolidated sort of expense ROI that you are putting forth, should we think about the growth there more evenly balanced between seats and ARPU going forward or still to continue to favor seats? Thanks.","evidence_gemma_new":"Office 365 Commercial seats","evidence_llama_3_3":"Office 365 Commercial seats","evidence_qwen_3_30b":"Office 365 Commercial growth","gemma_new_max":400000000.0,"gemma_new_min":400000000.0,"llama_3_3_max":400000000.0,"llama_3_3_min":400000000.0,"qwen_3_30b_max":400000000.0,"qwen_3_30b_min":400000000.0}
{"symbol":"MSFT","year":2024,"quarter":1,"date":"2024-Q1","chunk_id":3,"sub_chunk_id":0,"centroid_label":"office 365 paid office 365 commercial seats","agreed_value":0.15,"count":2,"chunk":"Amy Hood: Thank you, Satya, and good afternoon, everyone. This quarter's revenue was $56.5 billion, up 13% and 12% in constant currency. Earnings per share was $2.99 and increased 27% and 26% in constant currency. Consistent execution by our sales teams and partners drove a strong start to the fiscal year. Results exceeded expectations and we saw share gains again this quarter across many businesses, as customers adopt our innovative solutions to transform their businesses. In our commercial business, the trends from the prior quarter continued. We saw healthy renewals, particularly in Microsoft 365 E5 and growth of new business continued to be moderated for standalone products sold outside the Microsoft 365 suite. In Azure, as expected the optimization trends were similar to Q4. Higher-than-expected AI consumption contributed to revenue growth in Azure. And our consumer business, PC market unit volumes are returning to pre-pandemic levels. Advertising spend, landed roughly in line with our expectations and in gaming strong engagement helped by the Starfield launch benefited Xbox content and services. Commercial bookings increased 14% and 17% in constant currency, in line with expectations, primarily driven by strong execution across our core annuity sales motions, with continued growth in the number of $10 million plus contracts for both Azure and Microsoft 365. Commercial remaining performance obligation, increased 18% to $212 billion, and roughly 45% will be recognized in revenue in the next 12 months, up 15% year-over-year. The remaining portion, which will be recognized beyond the next 12 months increased 20% and this quarter, our annuity mix was 96%. FX did not have a significant impact on our results and was roughly in line with our expectations on total company revenue, segment-level revenue, COGS, and operating expense growth. Microsoft Cloud revenue was $31.8 billion and grew 24% and 23% in constant currency, ahead of expectations. Microsoft Cloud's gross margin percentage increased slightly year-over-year to 73%, a point better than expected, primarily driven by improvements in Azure. Excluding the impact of the change in accounting estimate for useful lives, Microsoft Cloud's gross margin percentage increased roughly 2 points, driven by the improvement just mentioned in Azure as well as Office 365, partially offset by the impact of scaling our AI infrastructure to meet growing demand. Company gross margin dollars increased 16% and 15% in constant currency and gross margin percentage increased year-over-year to 71%. Excluding the impact of the change in accounting estimate, the gross margin percentage increased roughly 3 points, driven by the improvement in Azure and Office 365 as well as sales mix shift to higher margin businesses. Operating expenses increased 1%, lower than expected due to cost-efficiency focus as well as investments that shifted to future quarters. Operating expense growth was driven by marketing, LinkedIn, and cloud engineering, partially offset by devices. At a total company level, headcount at the end of September was 7% lower than a year ago. Operating income increased 25% and 24% in constant currency. Operating margins increased roughly 5 points year-over-year to 48%. Excluding the impact of the change in accounting estimate, operating margins increased roughly 6 six points, driven by improved operating leverage through cost management and the higher gross margin noted earlier. Now to our segment results. Revenue from Productivity and Business Processes was $18.6 billion and grew 13% and 12% in constant currency, ahead of expectations, driven by better-than-expected results in Office 365 Commercial and LinkedIn. Office Commercial revenue grew 15% and 14% in constant currency. Office 365 Commercial revenue increased 18% and 17% in constant currency, slightly better than expected with a bit more in-period revenue recognition, while billings remained relatively in line with expectations. Growth continues to be driven by healthy renewal execution and ARPU growth, as E5 momentum remains strong. Paid Office 365 Commercial seats grew 10% year-over-year, with installed-base expansion across all customer segments. Seat growth was again driven by our small and medium business and frontline worker offerings with continued impact from the growth trends in new standalone business noted earlier. Office Commercial licensing declined 17%, in line with the continued customer shift to cloud offerings. Office Consumer revenue increased 3% and 4% in constant currency with continued momentum in Microsoft 365 subscriptions, which grew 18% to 76.7 million. LinkedIn revenue increased 8%, ahead of expectations, driven by slightly better-than-expected performance across all businesses. Growth was driven by Talent Solutions, though we continue to see negative year-over-year bookings there from the weaker hiring environment in key verticals. Dynamics revenue, grew 22% and 21% in constant currency, driven by Dynamics 365, which grew 28% and 26% in constant currency with continued growth across all workloads. Segment gross margin dollars increased 13% and gross margin percentage increased slightly year-over-year. Excluding the impact of the change in accounting estimate, gross margin percentage increased roughly, 1 point, driven by improvements in Office 365. Operating expenses increased to 2% and operating income increased 20% and 19% in constant currency. Next, the Intelligent Cloud segment. Revenue was $24.3 billion, increasing 19% and ahead of expectations, with better-than-expected results across all businesses. Overall, server products and cloud services revenue grew 21%. Azure and other cloud services revenue grew 29% and 28% in constant currency, including roughly 3 points from AI Services. While the trends from prior quarter continued, growth was ahead of expectations, primarily driven by increased GPU capacity and better-than-expected GPU utilization of our AI services, as well as slightly higher-than-expected growth in our per-user business. In our per user business, the enterprise mobility and security installed base, grew 11% to over 259 million seats with continued impact from the growth trends in new standalone business noted earlier. In our on-premises server business, revenue increased 2% ahead of expectations, driven primarily by demand in advance of Windows Server 2012 end of support. Enterprise and partner services revenue increased 1% and was relatively unchanged in constant currency ahead of expectations, driven by a better-than-expected performance in Enterprise Support Services. Segment gross margin dollars increased 20% and 19% in constant currency and gross margin percentage increased slightly. Excluding the impact of the change in accounting estimate, gross margin percentage increased roughly 2 points, driven by the improvement in Azure noted earlier, even as we scale our AI infrastructure to meet growing demand. Operating expenses increased 2% and 1% in constant currency, operating income grew 31% and 30% in constant currency. Now to More Personal Computing, revenue was $13.7 billion, increasing 3% and 2% in constant currency, above expectations, with better-than-expected results across all businesses. Windows OEM revenue increased 4% year-over-year, significantly ahead of expectations, driven by stronger-than-expected consumer channel inventory builds and the stabilizing PC market demand noted earlier, particularly in commercial. Windows Commercial products and cloud services revenue increased 8%, driven by demand for Microsoft 365 E5. Devices revenue decreased 22%, ahead of expectations due to stronger execution in the commercial segment. Search and news advertising revenue, ex-TAC increased 10% and 9% in constant currency, slightly ahead of expectations. We saw increased engagement on Bing and Edge share gains again this quarter, although search revenue growth continues to be impacted by a third-party partnership. And in gaming, revenue increased 9% and 8% in constant currency, ahead of expectations, driven by better-than-expected subscriber growth in Xbox Game Pass as well as first-party content, primarily due to the Starfield launch. Xbox content and services revenue increased 13% and 12% in constant currency and Xbox hardware revenue declined 7% and 8% in constant currency. Segment gross margin dollars increased 13% and 12% in constant currency, and gross margin percentage increased roughly 5 points year-over-year, driven primarily by sales mix-shift to higher-margin businesses. Operating expenses declined 1% and operating income increased 23% and 22% in constant currency. Now back to total company results. Capital expenditures, including finance leases were $11.2 billion to support cloud demand, including investments to scale our AI infrastructure. Cash paid for PP&E was $9.9 billion. Cash flow from operations was $30.6 billion, up 32% year-over-year, driven by strong cloud billings and collections. Free cash flow was $20.7 billion, up 22% year-over-year. This quarter, other income and expense was $389 million, higher-than-anticipated, driven by interest income, partially offset by net losses on investments and foreign currency remeasurement. Our effective tax rate was approximately 18%. And finally, we returned $9.1 billion to shareholders, through share repurchases and dividends. Now moving to our Q2 outlook, which unless specifically noted otherwise is on a U.S. dollar basis. The Activision acquisition closed on October 13. So my commentary includes the net impact of the deal from the date of acquisition. Our outlook includes purchase accounting impact, integration, and transaction-related expenses based on our current understanding of the purchase price allocation and related deal accounting. The net impact includes adjusting for the movement of Activision content from our prior relationship as a third-party partner to first party. Now to FX. Based on current rates, we expect FX to increase total revenue and segment-level revenue growth by approximately 1 point. We expect FX to have no impact to COGS and operating expense growth. In commercial bookings, we expect consistent execution across our core annuity sales motions, including healthy renewals. The growth will be impacted by a low growth expiry base. Therefore, we expect bookings growth to be relatively flat. Microsoft Cloud gross margin percentage to be relatively flat year-over-year, excluding the impact from the accounting estimate change, Q2 Cloud gross margin percentage will be up roughly 1 point, primarily driven by improvement in Azure and Office 365, partially offset by the impact of scaling our AI infrastructure to meet growing demand. We expect capital expenditures to increase sequentially on a dollar basis, driven by investments in our cloud and AI infrastructure. As a reminder, there can be normal quarterly spend variability in the timing of our cloud infrastructure buildout. Next to segment guidance. In Productivity and Business Processes, we expect revenue to grow between 11% and 12% or $18.8 billion to $19.1 billion. Growth in constant currency will be approximately 1 point lower. In Office Commercial, revenue growth will again be driven by Office 365 with seat growth across customer segments and ARPU growth through E5. We expect Office 365 revenue growth to be up roughly 16% in constant currency. We're excited for Microsoft 365 Copilot general availability on November 1st, and expect the related revenue to grow gradually over time. In our on-premise business, we expect revenue to decline in the mid-to-high teens. In Office Consumer, we expect revenue growth in the mid-single-digits, driven by Microsoft 365 subscriptions. For LinkedIn, we expect revenue growth in the mid-single-digits, driven by Talent Solutions and Marketing Solutions. Growth continues to be impacted by the overall market environment for recruiting and advertising, especially in the technology industry, where we have significant exposure. And in Dynamics, we expect revenue growth in the high teens, driven by Dynamics 365. For Intelligent Cloud, we expect revenue to grow between 17% and 18% or $25.1 billion to $25.4 billion. Revenue growth in constant currency will be approximately 1 point lower. Revenue will continue to be driven by Azure, which as a reminder can have quarterly variability, primarily from our per-user business and from in-period revenue recognition, depending on the mix of contracts. In Azure, we expect revenue growth to be 26% to 27% in constant currency, with an increasing contribution from AI. Growth continues to be driven by Azure consumption business and we expect the trends from Q1 to continue into Q2. Our per user business should continue to benefit from Microsoft 365 suite momentum, though we expect continued moderation in seat growth rates, given the size of the installed base. For H2, assuming the optimization and new workload trends continue and with the growing contribution from AI, we expect Azure revenue growth in constant currency to remain roughly stable compared to Q2. And our on-premises server business, we expect revenue growth to be roughly flat with continued hybrid demand, particularly from licenses running in multi-cloud environments. And in enterprise and partner services, revenue should decline by low-to-mid single digits. Now to more Personal Computing, which includes the net impact from the Activision acquisition. We expect revenue of $16.5 billion to $16.9 billion. Windows OEM revenue growth should be mid-to-high single digits with PC market unit volumes expected to look roughly similar to Q1. In devices, revenue should decline in the mid-teens as we continue to focus on our higher-margin premium products. In Windows Commercial products and cloud services, customer demand for Microsoft 365 and our advanced security solutions should drive revenue growth in the low-to-mid teens. Search and news advertising ex-TAC revenue growth should be mid-single digits with roughly 4 points of negative impact from a third-party partnership. Growth should be driven by volume strength, supported by Edge browser share gains and increasing Bing engagement, as we expect the advertising spend environment to be similar to Q1. A reminder that this ex-TAC growth will be roughly 4 points higher than overall search and news advertising revenue. And in gaming, we expect revenue growth in the mid-to-high 40s. This includes roughly 35 points of net impact from the Activision acquisition, which as a reminder includes adjusting for the third-party to first-party content change noted earlier. We expect Xbox content and services revenue growth in the mid-to-high 50s, driven by roughly 50 points of net impact from the Activision acquisition. Now back to company guidance. We expect COGS between $19.4 billion to $19.6 billion, including approximately $500 million of amortization of acquired intangible assets from the Activision acquisition. We expect operating expense of $15.5 billion to $15.6 billion, including approximately $400 million from purchase accounting adjustments, integration and transaction-related cost from the Activision acquisition. Other income and expense should be roughly negative $500 million, as interest income will be more than offset by interest expense, primarily due to a reduction in our investment portfolio balance and the issuance of short-term debt, both for the Activision acquisition. As a reminder, we are required to recognize gains or losses on our equity investments, which can increase quarterly volatility. We expect our Q2 effective tax rate to be between 19% and 20%. Now, some additional thoughts on H2 as well as the full fiscal year. First, FX, assuming current rates remain stable, we expect FX to have no meaningful impact to full year revenue COGS or operating expense growth. Therefore, in H2, we expect FX to decrease revenue COGS and operating expense growth by 1 point. Second, Activision, we expect approximately $900 million for purchase accounting adjustments as well as integration and transaction-related costs in each quarter in H2. For a full FY '24, we remain committed to investing for the cloud and AI opportunity, while also maintaining our disciplined focus on operating leverage. Therefore, as we add the net impact of Activision, inclusive of purchase accounting adjustments as well as integration and transaction-related expenses, we continue to expect full year operating margins to remain flat year-over-year. In closing, with our strong start to FY '24, I am confident that as a team, we will continue to deliver healthy growth in the year ahead, driven by our leadership in commercial cloud and our commitment to lead the AI platform wave. With that. Let's go to Q&A, Brett.","evidence_gemma_new":null,"evidence_llama_3_3":"Office Commercial revenue","evidence_qwen_3_30b":"Office Commercial revenue Quarterly","gemma_new_max":null,"gemma_new_min":null,"llama_3_3_max":0.15,"llama_3_3_min":0.15,"qwen_3_30b_max":0.15,"qwen_3_30b_min":0.15}
{"symbol":"MSFT","year":2024,"quarter":1,"date":"2024-Q1","chunk_id":3,"sub_chunk_id":0,"centroid_label":"office 365 paid office 365 commercial seats","agreed_value":0.18,"count":2,"chunk":"Amy Hood: Thank you, Satya, and good afternoon, everyone. This quarter's revenue was $56.5 billion, up 13% and 12% in constant currency. Earnings per share was $2.99 and increased 27% and 26% in constant currency. Consistent execution by our sales teams and partners drove a strong start to the fiscal year. Results exceeded expectations and we saw share gains again this quarter across many businesses, as customers adopt our innovative solutions to transform their businesses. In our commercial business, the trends from the prior quarter continued. We saw healthy renewals, particularly in Microsoft 365 E5 and growth of new business continued to be moderated for standalone products sold outside the Microsoft 365 suite. In Azure, as expected the optimization trends were similar to Q4. Higher-than-expected AI consumption contributed to revenue growth in Azure. And our consumer business, PC market unit volumes are returning to pre-pandemic levels. Advertising spend, landed roughly in line with our expectations and in gaming strong engagement helped by the Starfield launch benefited Xbox content and services. Commercial bookings increased 14% and 17% in constant currency, in line with expectations, primarily driven by strong execution across our core annuity sales motions, with continued growth in the number of $10 million plus contracts for both Azure and Microsoft 365. Commercial remaining performance obligation, increased 18% to $212 billion, and roughly 45% will be recognized in revenue in the next 12 months, up 15% year-over-year. The remaining portion, which will be recognized beyond the next 12 months increased 20% and this quarter, our annuity mix was 96%. FX did not have a significant impact on our results and was roughly in line with our expectations on total company revenue, segment-level revenue, COGS, and operating expense growth. Microsoft Cloud revenue was $31.8 billion and grew 24% and 23% in constant currency, ahead of expectations. Microsoft Cloud's gross margin percentage increased slightly year-over-year to 73%, a point better than expected, primarily driven by improvements in Azure. Excluding the impact of the change in accounting estimate for useful lives, Microsoft Cloud's gross margin percentage increased roughly 2 points, driven by the improvement just mentioned in Azure as well as Office 365, partially offset by the impact of scaling our AI infrastructure to meet growing demand. Company gross margin dollars increased 16% and 15% in constant currency and gross margin percentage increased year-over-year to 71%. Excluding the impact of the change in accounting estimate, the gross margin percentage increased roughly 3 points, driven by the improvement in Azure and Office 365 as well as sales mix shift to higher margin businesses. Operating expenses increased 1%, lower than expected due to cost-efficiency focus as well as investments that shifted to future quarters. Operating expense growth was driven by marketing, LinkedIn, and cloud engineering, partially offset by devices. At a total company level, headcount at the end of September was 7% lower than a year ago. Operating income increased 25% and 24% in constant currency. Operating margins increased roughly 5 points year-over-year to 48%. Excluding the impact of the change in accounting estimate, operating margins increased roughly 6 six points, driven by improved operating leverage through cost management and the higher gross margin noted earlier. Now to our segment results. Revenue from Productivity and Business Processes was $18.6 billion and grew 13% and 12% in constant currency, ahead of expectations, driven by better-than-expected results in Office 365 Commercial and LinkedIn. Office Commercial revenue grew 15% and 14% in constant currency. Office 365 Commercial revenue increased 18% and 17% in constant currency, slightly better than expected with a bit more in-period revenue recognition, while billings remained relatively in line with expectations. Growth continues to be driven by healthy renewal execution and ARPU growth, as E5 momentum remains strong. Paid Office 365 Commercial seats grew 10% year-over-year, with installed-base expansion across all customer segments. Seat growth was again driven by our small and medium business and frontline worker offerings with continued impact from the growth trends in new standalone business noted earlier. Office Commercial licensing declined 17%, in line with the continued customer shift to cloud offerings. Office Consumer revenue increased 3% and 4% in constant currency with continued momentum in Microsoft 365 subscriptions, which grew 18% to 76.7 million. LinkedIn revenue increased 8%, ahead of expectations, driven by slightly better-than-expected performance across all businesses. Growth was driven by Talent Solutions, though we continue to see negative year-over-year bookings there from the weaker hiring environment in key verticals. Dynamics revenue, grew 22% and 21% in constant currency, driven by Dynamics 365, which grew 28% and 26% in constant currency with continued growth across all workloads. Segment gross margin dollars increased 13% and gross margin percentage increased slightly year-over-year. Excluding the impact of the change in accounting estimate, gross margin percentage increased roughly, 1 point, driven by improvements in Office 365. Operating expenses increased to 2% and operating income increased 20% and 19% in constant currency. Next, the Intelligent Cloud segment. Revenue was $24.3 billion, increasing 19% and ahead of expectations, with better-than-expected results across all businesses. Overall, server products and cloud services revenue grew 21%. Azure and other cloud services revenue grew 29% and 28% in constant currency, including roughly 3 points from AI Services. While the trends from prior quarter continued, growth was ahead of expectations, primarily driven by increased GPU capacity and better-than-expected GPU utilization of our AI services, as well as slightly higher-than-expected growth in our per-user business. In our per user business, the enterprise mobility and security installed base, grew 11% to over 259 million seats with continued impact from the growth trends in new standalone business noted earlier. In our on-premises server business, revenue increased 2% ahead of expectations, driven primarily by demand in advance of Windows Server 2012 end of support. Enterprise and partner services revenue increased 1% and was relatively unchanged in constant currency ahead of expectations, driven by a better-than-expected performance in Enterprise Support Services. Segment gross margin dollars increased 20% and 19% in constant currency and gross margin percentage increased slightly. Excluding the impact of the change in accounting estimate, gross margin percentage increased roughly 2 points, driven by the improvement in Azure noted earlier, even as we scale our AI infrastructure to meet growing demand. Operating expenses increased 2% and 1% in constant currency, operating income grew 31% and 30% in constant currency. Now to More Personal Computing, revenue was $13.7 billion, increasing 3% and 2% in constant currency, above expectations, with better-than-expected results across all businesses. Windows OEM revenue increased 4% year-over-year, significantly ahead of expectations, driven by stronger-than-expected consumer channel inventory builds and the stabilizing PC market demand noted earlier, particularly in commercial. Windows Commercial products and cloud services revenue increased 8%, driven by demand for Microsoft 365 E5. Devices revenue decreased 22%, ahead of expectations due to stronger execution in the commercial segment. Search and news advertising revenue, ex-TAC increased 10% and 9% in constant currency, slightly ahead of expectations. We saw increased engagement on Bing and Edge share gains again this quarter, although search revenue growth continues to be impacted by a third-party partnership. And in gaming, revenue increased 9% and 8% in constant currency, ahead of expectations, driven by better-than-expected subscriber growth in Xbox Game Pass as well as first-party content, primarily due to the Starfield launch. Xbox content and services revenue increased 13% and 12% in constant currency and Xbox hardware revenue declined 7% and 8% in constant currency. Segment gross margin dollars increased 13% and 12% in constant currency, and gross margin percentage increased roughly 5 points year-over-year, driven primarily by sales mix-shift to higher-margin businesses. Operating expenses declined 1% and operating income increased 23% and 22% in constant currency. Now back to total company results. Capital expenditures, including finance leases were $11.2 billion to support cloud demand, including investments to scale our AI infrastructure. Cash paid for PP&E was $9.9 billion. Cash flow from operations was $30.6 billion, up 32% year-over-year, driven by strong cloud billings and collections. Free cash flow was $20.7 billion, up 22% year-over-year. This quarter, other income and expense was $389 million, higher-than-anticipated, driven by interest income, partially offset by net losses on investments and foreign currency remeasurement. Our effective tax rate was approximately 18%. And finally, we returned $9.1 billion to shareholders, through share repurchases and dividends. Now moving to our Q2 outlook, which unless specifically noted otherwise is on a U.S. dollar basis. The Activision acquisition closed on October 13. So my commentary includes the net impact of the deal from the date of acquisition. Our outlook includes purchase accounting impact, integration, and transaction-related expenses based on our current understanding of the purchase price allocation and related deal accounting. The net impact includes adjusting for the movement of Activision content from our prior relationship as a third-party partner to first party. Now to FX. Based on current rates, we expect FX to increase total revenue and segment-level revenue growth by approximately 1 point. We expect FX to have no impact to COGS and operating expense growth. In commercial bookings, we expect consistent execution across our core annuity sales motions, including healthy renewals. The growth will be impacted by a low growth expiry base. Therefore, we expect bookings growth to be relatively flat. Microsoft Cloud gross margin percentage to be relatively flat year-over-year, excluding the impact from the accounting estimate change, Q2 Cloud gross margin percentage will be up roughly 1 point, primarily driven by improvement in Azure and Office 365, partially offset by the impact of scaling our AI infrastructure to meet growing demand. We expect capital expenditures to increase sequentially on a dollar basis, driven by investments in our cloud and AI infrastructure. As a reminder, there can be normal quarterly spend variability in the timing of our cloud infrastructure buildout. Next to segment guidance. In Productivity and Business Processes, we expect revenue to grow between 11% and 12% or $18.8 billion to $19.1 billion. Growth in constant currency will be approximately 1 point lower. In Office Commercial, revenue growth will again be driven by Office 365 with seat growth across customer segments and ARPU growth through E5. We expect Office 365 revenue growth to be up roughly 16% in constant currency. We're excited for Microsoft 365 Copilot general availability on November 1st, and expect the related revenue to grow gradually over time. In our on-premise business, we expect revenue to decline in the mid-to-high teens. In Office Consumer, we expect revenue growth in the mid-single-digits, driven by Microsoft 365 subscriptions. For LinkedIn, we expect revenue growth in the mid-single-digits, driven by Talent Solutions and Marketing Solutions. Growth continues to be impacted by the overall market environment for recruiting and advertising, especially in the technology industry, where we have significant exposure. And in Dynamics, we expect revenue growth in the high teens, driven by Dynamics 365. For Intelligent Cloud, we expect revenue to grow between 17% and 18% or $25.1 billion to $25.4 billion. Revenue growth in constant currency will be approximately 1 point lower. Revenue will continue to be driven by Azure, which as a reminder can have quarterly variability, primarily from our per-user business and from in-period revenue recognition, depending on the mix of contracts. In Azure, we expect revenue growth to be 26% to 27% in constant currency, with an increasing contribution from AI. Growth continues to be driven by Azure consumption business and we expect the trends from Q1 to continue into Q2. Our per user business should continue to benefit from Microsoft 365 suite momentum, though we expect continued moderation in seat growth rates, given the size of the installed base. For H2, assuming the optimization and new workload trends continue and with the growing contribution from AI, we expect Azure revenue growth in constant currency to remain roughly stable compared to Q2. And our on-premises server business, we expect revenue growth to be roughly flat with continued hybrid demand, particularly from licenses running in multi-cloud environments. And in enterprise and partner services, revenue should decline by low-to-mid single digits. Now to more Personal Computing, which includes the net impact from the Activision acquisition. We expect revenue of $16.5 billion to $16.9 billion. Windows OEM revenue growth should be mid-to-high single digits with PC market unit volumes expected to look roughly similar to Q1. In devices, revenue should decline in the mid-teens as we continue to focus on our higher-margin premium products. In Windows Commercial products and cloud services, customer demand for Microsoft 365 and our advanced security solutions should drive revenue growth in the low-to-mid teens. Search and news advertising ex-TAC revenue growth should be mid-single digits with roughly 4 points of negative impact from a third-party partnership. Growth should be driven by volume strength, supported by Edge browser share gains and increasing Bing engagement, as we expect the advertising spend environment to be similar to Q1. A reminder that this ex-TAC growth will be roughly 4 points higher than overall search and news advertising revenue. And in gaming, we expect revenue growth in the mid-to-high 40s. This includes roughly 35 points of net impact from the Activision acquisition, which as a reminder includes adjusting for the third-party to first-party content change noted earlier. We expect Xbox content and services revenue growth in the mid-to-high 50s, driven by roughly 50 points of net impact from the Activision acquisition. Now back to company guidance. We expect COGS between $19.4 billion to $19.6 billion, including approximately $500 million of amortization of acquired intangible assets from the Activision acquisition. We expect operating expense of $15.5 billion to $15.6 billion, including approximately $400 million from purchase accounting adjustments, integration and transaction-related cost from the Activision acquisition. Other income and expense should be roughly negative $500 million, as interest income will be more than offset by interest expense, primarily due to a reduction in our investment portfolio balance and the issuance of short-term debt, both for the Activision acquisition. As a reminder, we are required to recognize gains or losses on our equity investments, which can increase quarterly volatility. We expect our Q2 effective tax rate to be between 19% and 20%. Now, some additional thoughts on H2 as well as the full fiscal year. First, FX, assuming current rates remain stable, we expect FX to have no meaningful impact to full year revenue COGS or operating expense growth. Therefore, in H2, we expect FX to decrease revenue COGS and operating expense growth by 1 point. Second, Activision, we expect approximately $900 million for purchase accounting adjustments as well as integration and transaction-related costs in each quarter in H2. For a full FY '24, we remain committed to investing for the cloud and AI opportunity, while also maintaining our disciplined focus on operating leverage. Therefore, as we add the net impact of Activision, inclusive of purchase accounting adjustments as well as integration and transaction-related expenses, we continue to expect full year operating margins to remain flat year-over-year. In closing, with our strong start to FY '24, I am confident that as a team, we will continue to deliver healthy growth in the year ahead, driven by our leadership in commercial cloud and our commitment to lead the AI platform wave. With that. Let's go to Q&A, Brett.","evidence_gemma_new":null,"evidence_llama_3_3":"Office 365 Commercial revenue","evidence_qwen_3_30b":"Office 365 Commercial revenue Quarterly","gemma_new_max":null,"gemma_new_min":null,"llama_3_3_max":0.18,"llama_3_3_min":0.18,"qwen_3_30b_max":0.18,"qwen_3_30b_min":0.18}
{"symbol":"MSFT","year":2024,"quarter":2,"date":"2024-Q2","chunk_id":2,"sub_chunk_id":0,"centroid_label":"office 365 paid office 365 commercial seats","agreed_value":400000000.0,"count":2,"chunk":"Satya Nadella: Thank you, Brett. It was a record quarter driven by the continued strength of Microsoft Cloud, which surpassed $33 billion in revenue, up 24%. We\u2019ve moved from talking about AI to applying AI at scale by infusing AI across every layer of our tech stack, we are winning new customers and helping drive new benefits and productivity gains. Now I'll highlight examples of our momentum and progress starting with Azure. Azure again took share this quarter with our AI advantage. Azure offers the top performance for AI training and inference in the most diverse selection of AI accelerators, including the latest from AMD and NVIDIA, as well as our own first-party silicon Azure Maia. And with Azure AI, we provide access to the best selection of foundation and open-source models, including both LLM and SLMs, all integrated deeply with infrastructure, data, and tools on Azure. We now have 53,000 Azure AI customers, over one-third are new to Azure over the past 12 months. Our new models of service offering makes it easy for developers to use LLM's from our partners like Cohere, Meta, and Mistral on Azure, without having to manage underlying infrastructure. We have also built the world's most popular SLMs, which offer performance comparable to larger models, but are small enough to run on a laptop or mobile device. Anker, Ashley, AT&T, EY, and Thomson Reuters, for example, are all already exploring how to use our SLM-5 for their applications. And we have great momentum with Azure OpenAI Service. This quarter we added support for OpenAI's latest models including GPT-4 Turbo, GPT-4 with Vision, DALL-E 3 as well as fine-tuning. We are seeing increased usage from AI-first start-ups like Moveworks, Perplexity, SymphonyAI, as well as some of the world's largest companies. Over half of the Fortune 500 use Azure OpenAI today including Ally Financial, Coca-Cola, and Rockwell Automation. For example, at CES this month, Walmart shared how it's using Azure OpenAI Service along with its own proprietary data and models to streamline how more than 50,000 associates work and transform how it's millions of customers\u2019 shop. More broadly, customers continue to choose Azure to simplify and accelerate their cloud migrations. Overall, we are seeing larger and more strategic Azure deals with an increase in the number of $1 billion-plus Azure commitments. Vodafone, for example, will invest $1.5 billion in Cloud and AI services over the next 10 years as it works to transform the digital experience of more than 300 million customers worldwide. Now on to data. We are integrating the power of AI across the entire data stack. Our Microsoft Intelligent Data Platform brings together operational databases, analytics, governance, and AI to help organizations simplify and consolidate their data estates. Cosmos DB is the go-to database to build AI-powered apps at any scale powering workloads for companies in every industry from AXA and Kohl's to Mitsubishi and TomTom. KPMG, for example, has used Cosmos DB including its built-in native vector search capabilities along with Azure OpenAI service to power an AI assistant, which it credits with driving an up to 50% increase in productivity for its consultants. All-up, Cosmos DB data transactions increased 42% year-over-year and for those organizations who want to go beyond in-database vector search, Azure AI search offers the best hybrid search solution. OpenAI is using it for retrieval augmented generation as part of ChatGPT. And this quarter, we made Microsoft Fabric generally available, helping customers like Milliman and PwC go from data to insights to action, all within the same unified SaaS solution. Data stored in Fabric's multi-cloud data lake, OneLake increased 46% quarter-over-quarter. Now on to developers. From GitHub to Visual Studio, we have the most comprehensive and loved developer tools for the era of AI. GitHub revenue accelerated to over 40% year-over-year, driven by all-up platform growth and adoption of GitHub Copilot, the world's most widely deployed AI developer tool. We now have over 1.3 million paid GitHub copilot subscribers, up 30% quarter-over-quarter, and more than 50,000 organizations use GitHub Copilot business to supercharge the productivity of their developers from digital natives like Etsy and HelloFresh to leading enterprises like Autodesk, Dell Technologies, and Goldman Sachs. Accenture alone will rollout GitHub Copilot to 50,000 of its developers this year and we're going further making copilot ubiquitous across the entire GitHub platform and new AI-powered security features, as well as Copilot enterprise, which tailors Copilot to organization's code bases and allows developers to converse with it in natural language. We're also the leader in low-code no-code development helping everyone create apps, automate workflows, analyze data, and now build custom copilots. More than 230,000 organizations have already used AI capabilities in Power Platform, up over 80% quarter-over-quarter, and with Copilot Studio, organizations can tailor Copilot for Microsoft 365 or create their own custom copilots. It is already being used by over 10,000 organizations including An Post, Holland America, PG&E. In just weeks, for example, both PayPal and Tata Digital built copilots to answer common employee queries, increasing productivity and reducing support costs. We're also using this AI moment to redefine our role in business applications. Dynamics 365 once again took share as organizations use our AI-powered apps to transform their marketing, sales, service, finance, and supply-chain functions. And we are expanding our TAM by integrating Copilot into third-party systems too. In sales out Copilot has helped sellers at more than 30,000 organizations including Lumen Technologies and Schneider Electric to enrich their customer interactions using data from Dynamics 365 or Salesforce. And with our new Copilot for service employees at companies like Northern Trust can resolve client queries faster. It includes out-of-the-box integrations to apps like Salesforce, ServiceNow, and Zendesk. With our industry and cross-industry clouds, we're tailoring our solutions to meet the needs of specific industries. In healthcare, DAX Copilot is being used by more than 100 healthcare systems including Lifespan, UNC Health and UPMC to increase physician productivity and reduce burnout. And our Cloud for Retail was front and center at NRF with retailers from Canadian Tire Corporation, to Leatherman and Ralph Lauren sharing how they will use our solutions across the shopper journey to accelerate time to value. Now on to future of work. A growing body of evidence makes clear the role AI will play in transforming work. Our own research as well as external studies show as much as 70% improvement in productivity, using generative AI for specific work tasks. And overall early Copilot for Microsoft 365 users were 29% faster in a series of tasks like searching, writing, and summarizing. Two months in, we have seen faster adoption than either our E3 or E5 suites as enterprises like Dentsu, Honda, Pfizer, all deploy Copilot to their employees. And we are expanding availability to organizations of all sizes. We're also seeing a Copilot ecosystem begin to emerge. ISVs like Atlassian, Mural, and Trello, as well as customers like Air India, Bayer, and Siemens have all built plug-ins for specific lines of business that extend Copilot's capabilities. When it comes to Teams, we again saw record usage as organizations brought together collaboration chat, meetings, and calling on one platform and Teams has also become a new entry point for us. More than two-thirds of our enterprise Teams customers buy Phone, Rooms or Premium. All this innovation is driving growth across Microsoft 365. We now have more than 400 million paid Office 365 seats and organizations like BP, Elanco, ING Bank, Mediaset, WTW, all chose E5 this quarter to empower their employees with our best-in-class productivity apps along with advanced security compliance, voice, and analytics. Now on to Windows. In 2024, AI will become a first-class part of every PC. Windows PCs with built-in neural processing units were front and center at CES, unlocking new AI experiences to make what you do on your PC easier and faster from searching for answers and summarizing emails to optimizing performance and battery efficiency. Copilot in Windows is already available on more than 75 million Windows 10 and Windows 11 PCs and with our new Copilot key, the first significant change to the Windows keyboard in 30 years, we're providing one-click access. We also continue to transform how Windows is experienced and managed with Azure Virtual Desktop and Windows 365, introducing new features that make it simpler for employees to access and IT teams to secure their cloud PCs. Usage of cloud-delivered Windows increased over 50% year-over-year. And all-up, Windows 11 commercial deployments increased 2 times year-over-year as companies like HPE and Petrobras rolled out operating systems to employees. Now onto security. The recent security attacks, including the nation-state attack on our corporate systems, we reported a week and a half ago have highlighted the urgent need for organizations to move even faster to protect themselves from cyber threats. It's why last fall we announced a set of engineering priorities under our secure future initiative, bringing together every part of the company to advance cyber security protection across both new products and legacy infrastructure. And it's why we continue to innovate across our security portfolio as well as our operational security posture to help customers adopt a Zero Trust security architecture. Our industry-first unified security operations platform brings together our SIM Microsoft Sentinel, our XDR Microsoft Defender, and Copilot for security to help teams manage an increasingly complex security landscape. And with Copilot for security, we're now helping hundreds of early access customers including Cmax, Dow, LTI Mindtree, McAfee, Nucor Steel, significantly increase their SecOps team's productivity. This quarter, we extended copilot to Entra, Intune, and Purview. All-up, we have over 1 million customers, including more than 700,000 who use four or more of our security products like Arrow Electronics, DXC Technology, Freeport-McMoRan, Insight Enterprises, JB Hunt, and the Mosaic Company. Now on to LinkedIn. LinkedIn is now helping over 1 billion members learn, sell, and get hired. We continue to see strong global membership growth driven by member sign-ups in key markets like Germany and India. In an ever-changing job market, members are staying competitive through skill-building and knowledge-sharing. Over the last 12 months, members have added 680 million skills to their profiles, up 80% year-over-year. Our new AI-powered features are transforming the LinkedIn member experience, everything from how people learn new skills to how they search for jobs and engage with [indiscernible]. New AI features, including more personalized emails also continue to increase business ROI on the platform and our hiring business took share for the sixth consecutive quarter. And more broadly, AI is transforming our search and browser experience. We are encouraged by the momentum, earlier this month, we achieved a new milestone with 5 billion images created and 5 billion chats conducted to-date, both doubling quarter-over-quarter and both being an edge took share this quarter. We also introduced Copilot as a standalone destination across all browsers and devices, as well as a Copilot app on iOS and Android. And just two weeks ago, we introduced Copilot Pro providing access to the latest models for quick answers and high-quality image creation and access to Copilot for Microsoft 365 personal and family subscribers. Now on to gaming. This quarter we set all-time records for monthly active users in Xbox PC, as well as mobile, where we now have over 200 million monthly active users alone, inclusive of Activision Blizzard King. With our acquisition, we have added hundreds of millions of gamers to our ecosystem, as we execute on our ambition to reach more gamers on more platforms. With cloud gaming, we continue to innovate to offer players more ways to experience the games they love where and when and how they want, hours streamed increased 44% year-over-year. Great content is key to our growth and across our portfolio, I've never been more excited about our line-up of upcoming games. Earlier this month, we shared exciting new first-party titles coming this year to Xbox PC and Game Pass including Indiana Jones. And we've also announced launching significant updates this calendar year to many of our most durable franchises, which brings in millions of players each month, including Call of Duty, Elder Scrolls Online, and Starfield. In closing, we are looking forward to how AI-driven transformation will benefit people and organizations in 2024. With that, I'll hand it over to Amy.","evidence_gemma_new":"paid Office 365 seats","evidence_llama_3_3":"paid Office 365 seats","evidence_qwen_3_30b":null,"gemma_new_max":400000000.0,"gemma_new_min":400000000.0,"llama_3_3_max":400000000.0,"llama_3_3_min":400000000.0,"qwen_3_30b_max":null,"qwen_3_30b_min":null}
{"symbol":"MSFT","year":2024,"quarter":3,"date":"2024-Q3","chunk_id":3,"sub_chunk_id":0,"centroid_label":"office 365 paid office 365 commercial seats","agreed_value":12.5,"count":2,"chunk":"Amy Hood: Thank you, Satya, and good afternoon, everyone. Our third quarter revenue was $61.9 billion, up 17%; and earnings per share was $2.94, up 20%. Results exceeded expectations, and we delivered another quarter of double-digit top and bottom line growth with continued share gains across many of our businesses. In our commercial business, bookings increased 29% and 31% in constant currency, significantly ahead of expectations, driven by Azure commitments with an increase in average deal size and deal length as well as strong execution across our core annuity sales motions. In Microsoft 365, suite strength contributed to ARPU expansion for our Office Commercial business, although new business growth continued to moderate for stand-alone products sold outside the Microsoft 365 suite. Commercial remaining performance obligation increased 20% and 21% in constant currency to $235 billion. Roughly 45% will be recognized in revenue in the next 12 months, up 20% year-over-year. The remaining portion recognized beyond the next 12 months increased 21%. And this quarter, our annuity mix increased to 97%. In our consumer business, PC market demand was slightly better than we expected, benefiting Windows OEM, while advertising spend landed relatively in line with our expectations. In gaming, we also saw better-than-expected performance of Activision titles, benefiting Xbox content and services. At a company level, Activision contributed a net impact of approximately 4 points to revenue growth, was a 2-point drag on operating income growth and had a negative $0.04 impact to earnings per share. A reminder, that this net impact includes adjusting for the movement of Activision content from our prior relationship as a third-party partner to first party and also includes $935 million from purchase accounting adjustments, integration and transaction-related costs. FX did not have a significant impact on our results and was roughly in line with our expectations on total company revenue, segment level revenue, COGS and operating expense growth. Microsoft Cloud revenue was $35.1 billion and grew 23%, ahead of expectations. Microsoft Cloud gross margin percentage decreased slightly year-over-year to 72%, a bit better than expected. Excluding the impact of the change in accounting estimate for useful lives, gross margin percentage increased slightly, driven by improvement in Azure and Office 365, even with the impact of scaling our AI infrastructure, partially offset by sales mix shift to Azure. Company gross margin dollars increased 18% and gross margin percentage increased slightly year-over-year to 70%. Excluding the impact of the change in accounting estimate, gross margin percentage increased roughly 1 point even with the impact from the purchase accounting adjustments, integration and transaction-related costs from the Activision acquisition. Growth was driven by the improvement in Azure and Office 365 just mentioned as well as sales mix shift to higher-margin businesses. Operating expenses increased 10% with 9 points from the Activision acquisition. At a total company level, head count at the end of March was 1% lower than a year ago. Operating income increased 23% and operating margins increased roughly 2 points year-over-year to 45%, excluding the impact of the change in accounting estimate, operating margins increased roughly 3 points, driven by the higher gross margin noted earlier and improved operating leverage through continued cost discipline. Now to our segment results. Revenue from Productivity and Business Processes was $19.6 billion and grew 12% and 11% in constant currency, in line with expectations. Office Commercial revenue grew 13% and 12% in constant currency. Office 365 commercial revenue increased 15%, in line with expectations, driven by healthy renewal execution, ARPU growth from continued E5 momentum and early Copilot for Microsoft 365 progress. Paid Office 365 commercial seats grew 8% year-over-year with installed base expansion across all customer segments. Seat growth was again driven by our small and medium business and frontline worker offerings, although growth continued to moderate in SMB. Office Commercial Licensing declined 20% and 18% in constant currency, with continued customer shift to cloud offerings. Office Consumer revenue increased 4%, slightly below expectations. Microsoft 365 subscriptions grew 14% to $80.8 million. LinkedIn revenue increased 10% and 9% in constant currency, ahead of expectations, driven by slightly better-than-expected performance in our premium subscriptions and Talent Solutions businesses. However, in Talent Solutions, bookings growth continues to be impacted by the weaker hiring environment in key verticals. Dynamics revenue grew 19% and 17% in constant currency, ahead of expectations. Growth was driven by Dynamics 365, which grew 23% and 22% in constant currency with continued growth across all workloads and better-than-expected new business, although bookings growth remains moderated. Segment gross margin dollars increased 11%, and gross margin percentage decreased slightly year-over-year. Excluding the impact of the change in accounting estimate, gross margin percentage increased slightly driven by improvement in Office 365. Operating expenses increased 1% and operating income increased 17% and 16% in constant currency. Next, the Intelligent Cloud segment. Revenue was $26.7 billion, increasing 21%, ahead of expectations with better-than-expected results across all businesses. Overall, Server products and cloud services revenue grew 24%. Azure and other cloud services revenue grew 31% ahead of expectations, while our AI services contributed 7 points of growth as expected. In the non-AI portion of our consumption business, we saw greater-than-expected demand broadly across industries and customer segments as well as some benefit from a greater-than-expected mix of contracts with higher in-period recognition. In our per-user business, the Enterprise Mobility and Security installed base grew 10% to over 274 million seats, with continued impact from the growth trends in new stand-alone business noted earlier. In our on-premises server business, revenue increased 6%, ahead of expectations, driven by better-than-expected renewal strength, particularly for contracts with higher in-period revenue recognition. Enterprise and partner services revenue decreased 9% on a strong prior year comparable for enterprise support services. Segment gross margin dollars increased 20% and gross margin percentage decreased slightly year-over-year. Excluding the impact of the change in accounting estimate [indiscernible] percentage increased slightly, primarily driven by the improvement in Azure noted earlier, even with the impact of scaling our AI infrastructure, partially offset by sales mix shift to Azure. Operating expenses increased 1% and operating income grew 32%. Now to More Personal Computing. Revenue was $15.6 billion, increasing 17% with 15 points of net impact from the Activision acquisition. Results were above expectations, driven by better-than-expected performance in gaming and Windows OEM. Windows OEM revenue increased 11% year-over-year, ahead of expectations, primarily driven by the slightly better PC market noted earlier as well as mix shift to higher monetizing markets. Windows commercial products and cloud services revenue increased 13% and 12% in constant currency, below expectations with impact from the growth trends in new stand-alone business noted earlier as well as lower in-period revenue recognition from a mix of contracts. Devices revenue decreased 17% and 16% in constant currency as we remain focused on our higher-margin premium products. Overall, Surface demand was slightly lower than expected. Search and News advertising revenue ex TAC increased 12% ahead of expectations with continued volume growth and increased engagement on Bing and Edge. And in gaming. Revenue increased 51% and 50% in constant currency with 55 points of net impact from the Activision acquisition. Results were ahead of expectations, primarily driven by Call of Duty. Xbox content and services revenue increased 62% and 61% in constant currency with 61 points of net impact from the Activision acquisition. Xbox hardware revenue decreased 31% and 30% in constant currency. Segment gross margin dollars increased 27% and 26% in constant currency, with 13 points of net impact from the Activision acquisition. Gross margin percentage increased roughly 4 points year-over-year, primarily driven by sales mix shift to higher-margin businesses. Operating expenses increased 41% with 43 points from the Activision acquisition. Operating income increased 16% and 15% in constant currency. Now back to total company results. Capital expenditures, including finance leases, were $14 billion to support our cloud demand, inclusive of the need to scale our AI infrastructure. Cash paid for PP&E was $11 billion. Cash flow from operations was $31.9 billion, up 31%, driven by strong cloud billings and collections. Free cash flow was $21 billion, up 18% year-over-year, reflecting higher capital expenditures to support our cloud and AI offerings. This quarter, other income and expense was negative $854 million, lower than anticipated, driven by losses on investments accounted for under the equity method. Our effective tax rate was approximately 18%. And finally, we returned $8.4 billion to shareholders through dividends and share repurchases. Now moving to our Q4 outlook, which unless specifically noted otherwise, is on a U.S. dollar basis. First, FX. Based on current rates, which reflect the recent strengthening of the U.S. dollar, we now expect FX to decrease total revenue and segment level revenue growth by less than 1 point. When compared to our January guide for Q4, FX, this is a decrease to total revenue of roughly $700 million. We expect FX to decrease COGS growth by approximately 1 point and operating expense growth by less than 1 point. In commercial bookings, we expect solid growth on a relatively flat expiry base driven by continued strong commercial sales execution. As a reminder, larger, long-term Azure contracts, which are more unpredictable in their timing, can drive increased quarterly volatility in our bookings growth rate. Microsoft Cloud gross margin percentage should decrease roughly 2 points year-over-year. Excluding the impact from the change in accounting estimate, Q4 cloud gross margin percentage will be down slightly as improvement in Azure, inclusive of scaling our AI infrastructure will be offset by sales mix shift to Azure. We expect capital expenditures to increase materially on a sequential basis driven by cloud and AI infrastructure investments. As a reminder, there can be normal quarterly spend variability in the timing of our cloud infrastructure build-outs and the timing of finance leases. We continue to bring capacity online as we scale our AI investments with growing demand. Currently, near-term AI demand is a bit higher than our available capacity. Next, to segment guidance. In Productivity and Business Processes, we expect revenue to grow between 9% and 11% in constant currency or US$19.9 billion to US$20.2 billion. In Office Commercial, revenue growth will again be driven by Office 365 with seat growth across customer segments and ARPU growth primarily through E5. We expect Office 365 revenue growth to be approximately 14% in constant currency. We continue to progress with adoption of CoPilot for Microsoft 365 and remain excited for the long-term growth opportunity. In our on-premises business, we expect revenue to decline in the mid to high teens. In Office Consumer, we expect revenue growth in the low to mid-single digits, driven by Microsoft 365 subscriptions. For LinkedIn, we expect revenue growth in the mid to high single digits driven by continued growth across all businesses. And in Dynamics, we expect revenue growth in the low to mid-teens, driven by Dynamics 365. For both LinkedIn and Dynamics, the continued bookings growth moderation noted earlier is a headwind to Q4 revenue growth. For Intelligent Cloud, we expect revenue to grow between 19% and 20% in constant currency or US$28.4 billion to US$28.7 billion. Revenue will continue to be driven by Azure, which, as a reminder, can have quarterly variability primarily from our per-user business and in-period revenue recognition depending on the mix of contracts. In Azure, we expect Q4 revenue growth to be 30% to 31% in constant currency or similar to our stronger-than-expected Q3 results. Growth will be driven by our Azure Consumption business and continued contribution from AI with some impact from the AI capacity availability noted earlier. Our per-user business should see benefit from Microsoft 365 suite momentum. Though we expect continued moderation in seat growth rates given the size of the installed base. In our on-premises server business, we expect revenue growth in the low to mid-single digits with continued hybrid demand, including licenses running in multi-cloud environments. And in Enterprise and Partner Services revenue should decline in the mid- to high single digits on a high prior year comparable for enterprise support services. In More Personal Computing, we expect revenue to grow between 10% and 13% in constant currency or US$15.2 billion to US$15.6 billion. Windows OEM revenue growth should be in the low to mid-single digits as PC market unit volumes continue at pre-pandemic levels. In Windows Commercial Products and Cloud Services, customer demand for Microsoft 365 and our advanced security solutions should drive revenue growth in the mid-single digits. As a reminder, our quarterly revenue growth can have variability primarily from in-period revenue recognition depending on the mix of contracts. In Devices, revenue should decline in the mid-teens as we continue to focus on our higher-margin premium products. Search and news advertising ex TAC revenue growth should be in the low to mid-teens, driven by continued volume strength. This will be higher than overall search and news advertising revenue growth, which we expect to be relatively flat. And in Gaming, we expect revenue growth in the low to mid-40s, including approximately 50 points of net impact from the Activision acquisition. We expect Xbox content and services revenue growth in the high 50s driven by approximately 60 points of net impact from the Activision acquisition. Hardware revenue will decline again year-over-year. Now back to company guidance. We expect COGS between US$19.6 billion to US$19.8 billion, including approximately $700 million from purchase accounting, integration and transaction-related costs from the Activision acquisition. We expect operating expense of US$17.15 billion to US$17.25 billion, including approximately $300 million from purchase accounting, integration and transaction-related costs from the Activision acquisition. Therefore, we now expect full year FY2024 operating margins to be up over 2 points year-over-year, even with our cloud and AI investments, the impact from the Activision acquisition and the headwind from the change in useful lives last year. This operating margin expansion reflects the hard work across every team to drive efficiencies and maintain disciplined cost management, knowing we will continue to grow our cloud and AI investments next year. Other income and expense should be roughly negative $850 million as interest income will be more than offset by interest expense and losses on investments accounted for under the equity method. As a reminder, we are required to recognize gains or losses on our equity investments which can increase quarterly volatility. We expect our Q4 effective tax rate to be approximately 18%. Now I\u2019d like to share some closing thoughts as we look to the next fiscal year. We continue to focus on building businesses that create meaningful value for our customers and therefore, significant growth opportunities for years to come. In FY2025, that focus on execution should again lead to double-digit revenue and operating income growth to scale to meet the growing demand signal for our cloud and AI products, we expect FY2025 capital expenditures to be higher than FY2024. These expenditures over the course of the next year are dependent on demand signals and adoption of our services. So we will manage that signal through the year. We will also continue to prioritize operating leverage. And therefore, we expect FY2025 operating margins to be down only about 1 point year-over-year, even with our significant cloud and AI investments, as well as a full year of impact from the Activision acquisition. We are leading the AI platform wave and are committed to bringing that value to our global customers as we enter the final quarter of our fiscal year. With that, let\u2019s go to Q&A, Brett.","evidence_gemma_new":"constant currency Office Commercial revenue","evidence_llama_3_3":null,"evidence_qwen_3_30b":"Office Commercial revenue constant currency","gemma_new_max":12.5,"gemma_new_min":12.5,"llama_3_3_max":null,"llama_3_3_min":null,"qwen_3_30b_max":12.5,"qwen_3_30b_min":12.5}
{"symbol":"MSFT","year":2024,"quarter":3,"date":"2024-Q3","chunk_id":3,"sub_chunk_id":0,"centroid_label":"office 365 paid office 365 commercial seats","agreed_value":15.0,"count":2,"chunk":"Amy Hood: Thank you, Satya, and good afternoon, everyone. Our third quarter revenue was $61.9 billion, up 17%; and earnings per share was $2.94, up 20%. Results exceeded expectations, and we delivered another quarter of double-digit top and bottom line growth with continued share gains across many of our businesses. In our commercial business, bookings increased 29% and 31% in constant currency, significantly ahead of expectations, driven by Azure commitments with an increase in average deal size and deal length as well as strong execution across our core annuity sales motions. In Microsoft 365, suite strength contributed to ARPU expansion for our Office Commercial business, although new business growth continued to moderate for stand-alone products sold outside the Microsoft 365 suite. Commercial remaining performance obligation increased 20% and 21% in constant currency to $235 billion. Roughly 45% will be recognized in revenue in the next 12 months, up 20% year-over-year. The remaining portion recognized beyond the next 12 months increased 21%. And this quarter, our annuity mix increased to 97%. In our consumer business, PC market demand was slightly better than we expected, benefiting Windows OEM, while advertising spend landed relatively in line with our expectations. In gaming, we also saw better-than-expected performance of Activision titles, benefiting Xbox content and services. At a company level, Activision contributed a net impact of approximately 4 points to revenue growth, was a 2-point drag on operating income growth and had a negative $0.04 impact to earnings per share. A reminder, that this net impact includes adjusting for the movement of Activision content from our prior relationship as a third-party partner to first party and also includes $935 million from purchase accounting adjustments, integration and transaction-related costs. FX did not have a significant impact on our results and was roughly in line with our expectations on total company revenue, segment level revenue, COGS and operating expense growth. Microsoft Cloud revenue was $35.1 billion and grew 23%, ahead of expectations. Microsoft Cloud gross margin percentage decreased slightly year-over-year to 72%, a bit better than expected. Excluding the impact of the change in accounting estimate for useful lives, gross margin percentage increased slightly, driven by improvement in Azure and Office 365, even with the impact of scaling our AI infrastructure, partially offset by sales mix shift to Azure. Company gross margin dollars increased 18% and gross margin percentage increased slightly year-over-year to 70%. Excluding the impact of the change in accounting estimate, gross margin percentage increased roughly 1 point even with the impact from the purchase accounting adjustments, integration and transaction-related costs from the Activision acquisition. Growth was driven by the improvement in Azure and Office 365 just mentioned as well as sales mix shift to higher-margin businesses. Operating expenses increased 10% with 9 points from the Activision acquisition. At a total company level, head count at the end of March was 1% lower than a year ago. Operating income increased 23% and operating margins increased roughly 2 points year-over-year to 45%, excluding the impact of the change in accounting estimate, operating margins increased roughly 3 points, driven by the higher gross margin noted earlier and improved operating leverage through continued cost discipline. Now to our segment results. Revenue from Productivity and Business Processes was $19.6 billion and grew 12% and 11% in constant currency, in line with expectations. Office Commercial revenue grew 13% and 12% in constant currency. Office 365 commercial revenue increased 15%, in line with expectations, driven by healthy renewal execution, ARPU growth from continued E5 momentum and early Copilot for Microsoft 365 progress. Paid Office 365 commercial seats grew 8% year-over-year with installed base expansion across all customer segments. Seat growth was again driven by our small and medium business and frontline worker offerings, although growth continued to moderate in SMB. Office Commercial Licensing declined 20% and 18% in constant currency, with continued customer shift to cloud offerings. Office Consumer revenue increased 4%, slightly below expectations. Microsoft 365 subscriptions grew 14% to $80.8 million. LinkedIn revenue increased 10% and 9% in constant currency, ahead of expectations, driven by slightly better-than-expected performance in our premium subscriptions and Talent Solutions businesses. However, in Talent Solutions, bookings growth continues to be impacted by the weaker hiring environment in key verticals. Dynamics revenue grew 19% and 17% in constant currency, ahead of expectations. Growth was driven by Dynamics 365, which grew 23% and 22% in constant currency with continued growth across all workloads and better-than-expected new business, although bookings growth remains moderated. Segment gross margin dollars increased 11%, and gross margin percentage decreased slightly year-over-year. Excluding the impact of the change in accounting estimate, gross margin percentage increased slightly driven by improvement in Office 365. Operating expenses increased 1% and operating income increased 17% and 16% in constant currency. Next, the Intelligent Cloud segment. Revenue was $26.7 billion, increasing 21%, ahead of expectations with better-than-expected results across all businesses. Overall, Server products and cloud services revenue grew 24%. Azure and other cloud services revenue grew 31% ahead of expectations, while our AI services contributed 7 points of growth as expected. In the non-AI portion of our consumption business, we saw greater-than-expected demand broadly across industries and customer segments as well as some benefit from a greater-than-expected mix of contracts with higher in-period recognition. In our per-user business, the Enterprise Mobility and Security installed base grew 10% to over 274 million seats, with continued impact from the growth trends in new stand-alone business noted earlier. In our on-premises server business, revenue increased 6%, ahead of expectations, driven by better-than-expected renewal strength, particularly for contracts with higher in-period revenue recognition. Enterprise and partner services revenue decreased 9% on a strong prior year comparable for enterprise support services. Segment gross margin dollars increased 20% and gross margin percentage decreased slightly year-over-year. Excluding the impact of the change in accounting estimate [indiscernible] percentage increased slightly, primarily driven by the improvement in Azure noted earlier, even with the impact of scaling our AI infrastructure, partially offset by sales mix shift to Azure. Operating expenses increased 1% and operating income grew 32%. Now to More Personal Computing. Revenue was $15.6 billion, increasing 17% with 15 points of net impact from the Activision acquisition. Results were above expectations, driven by better-than-expected performance in gaming and Windows OEM. Windows OEM revenue increased 11% year-over-year, ahead of expectations, primarily driven by the slightly better PC market noted earlier as well as mix shift to higher monetizing markets. Windows commercial products and cloud services revenue increased 13% and 12% in constant currency, below expectations with impact from the growth trends in new stand-alone business noted earlier as well as lower in-period revenue recognition from a mix of contracts. Devices revenue decreased 17% and 16% in constant currency as we remain focused on our higher-margin premium products. Overall, Surface demand was slightly lower than expected. Search and News advertising revenue ex TAC increased 12% ahead of expectations with continued volume growth and increased engagement on Bing and Edge. And in gaming. Revenue increased 51% and 50% in constant currency with 55 points of net impact from the Activision acquisition. Results were ahead of expectations, primarily driven by Call of Duty. Xbox content and services revenue increased 62% and 61% in constant currency with 61 points of net impact from the Activision acquisition. Xbox hardware revenue decreased 31% and 30% in constant currency. Segment gross margin dollars increased 27% and 26% in constant currency, with 13 points of net impact from the Activision acquisition. Gross margin percentage increased roughly 4 points year-over-year, primarily driven by sales mix shift to higher-margin businesses. Operating expenses increased 41% with 43 points from the Activision acquisition. Operating income increased 16% and 15% in constant currency. Now back to total company results. Capital expenditures, including finance leases, were $14 billion to support our cloud demand, inclusive of the need to scale our AI infrastructure. Cash paid for PP&E was $11 billion. Cash flow from operations was $31.9 billion, up 31%, driven by strong cloud billings and collections. Free cash flow was $21 billion, up 18% year-over-year, reflecting higher capital expenditures to support our cloud and AI offerings. This quarter, other income and expense was negative $854 million, lower than anticipated, driven by losses on investments accounted for under the equity method. Our effective tax rate was approximately 18%. And finally, we returned $8.4 billion to shareholders through dividends and share repurchases. Now moving to our Q4 outlook, which unless specifically noted otherwise, is on a U.S. dollar basis. First, FX. Based on current rates, which reflect the recent strengthening of the U.S. dollar, we now expect FX to decrease total revenue and segment level revenue growth by less than 1 point. When compared to our January guide for Q4, FX, this is a decrease to total revenue of roughly $700 million. We expect FX to decrease COGS growth by approximately 1 point and operating expense growth by less than 1 point. In commercial bookings, we expect solid growth on a relatively flat expiry base driven by continued strong commercial sales execution. As a reminder, larger, long-term Azure contracts, which are more unpredictable in their timing, can drive increased quarterly volatility in our bookings growth rate. Microsoft Cloud gross margin percentage should decrease roughly 2 points year-over-year. Excluding the impact from the change in accounting estimate, Q4 cloud gross margin percentage will be down slightly as improvement in Azure, inclusive of scaling our AI infrastructure will be offset by sales mix shift to Azure. We expect capital expenditures to increase materially on a sequential basis driven by cloud and AI infrastructure investments. As a reminder, there can be normal quarterly spend variability in the timing of our cloud infrastructure build-outs and the timing of finance leases. We continue to bring capacity online as we scale our AI investments with growing demand. Currently, near-term AI demand is a bit higher than our available capacity. Next, to segment guidance. In Productivity and Business Processes, we expect revenue to grow between 9% and 11% in constant currency or US$19.9 billion to US$20.2 billion. In Office Commercial, revenue growth will again be driven by Office 365 with seat growth across customer segments and ARPU growth primarily through E5. We expect Office 365 revenue growth to be approximately 14% in constant currency. We continue to progress with adoption of CoPilot for Microsoft 365 and remain excited for the long-term growth opportunity. In our on-premises business, we expect revenue to decline in the mid to high teens. In Office Consumer, we expect revenue growth in the low to mid-single digits, driven by Microsoft 365 subscriptions. For LinkedIn, we expect revenue growth in the mid to high single digits driven by continued growth across all businesses. And in Dynamics, we expect revenue growth in the low to mid-teens, driven by Dynamics 365. For both LinkedIn and Dynamics, the continued bookings growth moderation noted earlier is a headwind to Q4 revenue growth. For Intelligent Cloud, we expect revenue to grow between 19% and 20% in constant currency or US$28.4 billion to US$28.7 billion. Revenue will continue to be driven by Azure, which, as a reminder, can have quarterly variability primarily from our per-user business and in-period revenue recognition depending on the mix of contracts. In Azure, we expect Q4 revenue growth to be 30% to 31% in constant currency or similar to our stronger-than-expected Q3 results. Growth will be driven by our Azure Consumption business and continued contribution from AI with some impact from the AI capacity availability noted earlier. Our per-user business should see benefit from Microsoft 365 suite momentum. Though we expect continued moderation in seat growth rates given the size of the installed base. In our on-premises server business, we expect revenue growth in the low to mid-single digits with continued hybrid demand, including licenses running in multi-cloud environments. And in Enterprise and Partner Services revenue should decline in the mid- to high single digits on a high prior year comparable for enterprise support services. In More Personal Computing, we expect revenue to grow between 10% and 13% in constant currency or US$15.2 billion to US$15.6 billion. Windows OEM revenue growth should be in the low to mid-single digits as PC market unit volumes continue at pre-pandemic levels. In Windows Commercial Products and Cloud Services, customer demand for Microsoft 365 and our advanced security solutions should drive revenue growth in the mid-single digits. As a reminder, our quarterly revenue growth can have variability primarily from in-period revenue recognition depending on the mix of contracts. In Devices, revenue should decline in the mid-teens as we continue to focus on our higher-margin premium products. Search and news advertising ex TAC revenue growth should be in the low to mid-teens, driven by continued volume strength. This will be higher than overall search and news advertising revenue growth, which we expect to be relatively flat. And in Gaming, we expect revenue growth in the low to mid-40s, including approximately 50 points of net impact from the Activision acquisition. We expect Xbox content and services revenue growth in the high 50s driven by approximately 60 points of net impact from the Activision acquisition. Hardware revenue will decline again year-over-year. Now back to company guidance. We expect COGS between US$19.6 billion to US$19.8 billion, including approximately $700 million from purchase accounting, integration and transaction-related costs from the Activision acquisition. We expect operating expense of US$17.15 billion to US$17.25 billion, including approximately $300 million from purchase accounting, integration and transaction-related costs from the Activision acquisition. Therefore, we now expect full year FY2024 operating margins to be up over 2 points year-over-year, even with our cloud and AI investments, the impact from the Activision acquisition and the headwind from the change in useful lives last year. This operating margin expansion reflects the hard work across every team to drive efficiencies and maintain disciplined cost management, knowing we will continue to grow our cloud and AI investments next year. Other income and expense should be roughly negative $850 million as interest income will be more than offset by interest expense and losses on investments accounted for under the equity method. As a reminder, we are required to recognize gains or losses on our equity investments which can increase quarterly volatility. We expect our Q4 effective tax rate to be approximately 18%. Now I\u2019d like to share some closing thoughts as we look to the next fiscal year. We continue to focus on building businesses that create meaningful value for our customers and therefore, significant growth opportunities for years to come. In FY2025, that focus on execution should again lead to double-digit revenue and operating income growth to scale to meet the growing demand signal for our cloud and AI products, we expect FY2025 capital expenditures to be higher than FY2024. These expenditures over the course of the next year are dependent on demand signals and adoption of our services. So we will manage that signal through the year. We will also continue to prioritize operating leverage. And therefore, we expect FY2025 operating margins to be down only about 1 point year-over-year, even with our significant cloud and AI investments, as well as a full year of impact from the Activision acquisition. We are leading the AI platform wave and are committed to bringing that value to our global customers as we enter the final quarter of our fiscal year. With that, let\u2019s go to Q&A, Brett.","evidence_gemma_new":"Office 365 commercial revenue","evidence_llama_3_3":null,"evidence_qwen_3_30b":"Office 365 commercial revenue","gemma_new_max":15.0,"gemma_new_min":15.0,"llama_3_3_max":null,"llama_3_3_min":null,"qwen_3_30b_max":15.0,"qwen_3_30b_min":15.0}
{"symbol":"MSFT","year":2024,"quarter":3,"date":"2024-Q3","chunk_id":3,"sub_chunk_id":0,"centroid_label":"office 365 paid office 365 commercial seats","agreed_value":8.0,"count":2,"chunk":"Amy Hood: Thank you, Satya, and good afternoon, everyone. Our third quarter revenue was $61.9 billion, up 17%; and earnings per share was $2.94, up 20%. Results exceeded expectations, and we delivered another quarter of double-digit top and bottom line growth with continued share gains across many of our businesses. In our commercial business, bookings increased 29% and 31% in constant currency, significantly ahead of expectations, driven by Azure commitments with an increase in average deal size and deal length as well as strong execution across our core annuity sales motions. In Microsoft 365, suite strength contributed to ARPU expansion for our Office Commercial business, although new business growth continued to moderate for stand-alone products sold outside the Microsoft 365 suite. Commercial remaining performance obligation increased 20% and 21% in constant currency to $235 billion. Roughly 45% will be recognized in revenue in the next 12 months, up 20% year-over-year. The remaining portion recognized beyond the next 12 months increased 21%. And this quarter, our annuity mix increased to 97%. In our consumer business, PC market demand was slightly better than we expected, benefiting Windows OEM, while advertising spend landed relatively in line with our expectations. In gaming, we also saw better-than-expected performance of Activision titles, benefiting Xbox content and services. At a company level, Activision contributed a net impact of approximately 4 points to revenue growth, was a 2-point drag on operating income growth and had a negative $0.04 impact to earnings per share. A reminder, that this net impact includes adjusting for the movement of Activision content from our prior relationship as a third-party partner to first party and also includes $935 million from purchase accounting adjustments, integration and transaction-related costs. FX did not have a significant impact on our results and was roughly in line with our expectations on total company revenue, segment level revenue, COGS and operating expense growth. Microsoft Cloud revenue was $35.1 billion and grew 23%, ahead of expectations. Microsoft Cloud gross margin percentage decreased slightly year-over-year to 72%, a bit better than expected. Excluding the impact of the change in accounting estimate for useful lives, gross margin percentage increased slightly, driven by improvement in Azure and Office 365, even with the impact of scaling our AI infrastructure, partially offset by sales mix shift to Azure. Company gross margin dollars increased 18% and gross margin percentage increased slightly year-over-year to 70%. Excluding the impact of the change in accounting estimate, gross margin percentage increased roughly 1 point even with the impact from the purchase accounting adjustments, integration and transaction-related costs from the Activision acquisition. Growth was driven by the improvement in Azure and Office 365 just mentioned as well as sales mix shift to higher-margin businesses. Operating expenses increased 10% with 9 points from the Activision acquisition. At a total company level, head count at the end of March was 1% lower than a year ago. Operating income increased 23% and operating margins increased roughly 2 points year-over-year to 45%, excluding the impact of the change in accounting estimate, operating margins increased roughly 3 points, driven by the higher gross margin noted earlier and improved operating leverage through continued cost discipline. Now to our segment results. Revenue from Productivity and Business Processes was $19.6 billion and grew 12% and 11% in constant currency, in line with expectations. Office Commercial revenue grew 13% and 12% in constant currency. Office 365 commercial revenue increased 15%, in line with expectations, driven by healthy renewal execution, ARPU growth from continued E5 momentum and early Copilot for Microsoft 365 progress. Paid Office 365 commercial seats grew 8% year-over-year with installed base expansion across all customer segments. Seat growth was again driven by our small and medium business and frontline worker offerings, although growth continued to moderate in SMB. Office Commercial Licensing declined 20% and 18% in constant currency, with continued customer shift to cloud offerings. Office Consumer revenue increased 4%, slightly below expectations. Microsoft 365 subscriptions grew 14% to $80.8 million. LinkedIn revenue increased 10% and 9% in constant currency, ahead of expectations, driven by slightly better-than-expected performance in our premium subscriptions and Talent Solutions businesses. However, in Talent Solutions, bookings growth continues to be impacted by the weaker hiring environment in key verticals. Dynamics revenue grew 19% and 17% in constant currency, ahead of expectations. Growth was driven by Dynamics 365, which grew 23% and 22% in constant currency with continued growth across all workloads and better-than-expected new business, although bookings growth remains moderated. Segment gross margin dollars increased 11%, and gross margin percentage decreased slightly year-over-year. Excluding the impact of the change in accounting estimate, gross margin percentage increased slightly driven by improvement in Office 365. Operating expenses increased 1% and operating income increased 17% and 16% in constant currency. Next, the Intelligent Cloud segment. Revenue was $26.7 billion, increasing 21%, ahead of expectations with better-than-expected results across all businesses. Overall, Server products and cloud services revenue grew 24%. Azure and other cloud services revenue grew 31% ahead of expectations, while our AI services contributed 7 points of growth as expected. In the non-AI portion of our consumption business, we saw greater-than-expected demand broadly across industries and customer segments as well as some benefit from a greater-than-expected mix of contracts with higher in-period recognition. In our per-user business, the Enterprise Mobility and Security installed base grew 10% to over 274 million seats, with continued impact from the growth trends in new stand-alone business noted earlier. In our on-premises server business, revenue increased 6%, ahead of expectations, driven by better-than-expected renewal strength, particularly for contracts with higher in-period revenue recognition. Enterprise and partner services revenue decreased 9% on a strong prior year comparable for enterprise support services. Segment gross margin dollars increased 20% and gross margin percentage decreased slightly year-over-year. Excluding the impact of the change in accounting estimate [indiscernible] percentage increased slightly, primarily driven by the improvement in Azure noted earlier, even with the impact of scaling our AI infrastructure, partially offset by sales mix shift to Azure. Operating expenses increased 1% and operating income grew 32%. Now to More Personal Computing. Revenue was $15.6 billion, increasing 17% with 15 points of net impact from the Activision acquisition. Results were above expectations, driven by better-than-expected performance in gaming and Windows OEM. Windows OEM revenue increased 11% year-over-year, ahead of expectations, primarily driven by the slightly better PC market noted earlier as well as mix shift to higher monetizing markets. Windows commercial products and cloud services revenue increased 13% and 12% in constant currency, below expectations with impact from the growth trends in new stand-alone business noted earlier as well as lower in-period revenue recognition from a mix of contracts. Devices revenue decreased 17% and 16% in constant currency as we remain focused on our higher-margin premium products. Overall, Surface demand was slightly lower than expected. Search and News advertising revenue ex TAC increased 12% ahead of expectations with continued volume growth and increased engagement on Bing and Edge. And in gaming. Revenue increased 51% and 50% in constant currency with 55 points of net impact from the Activision acquisition. Results were ahead of expectations, primarily driven by Call of Duty. Xbox content and services revenue increased 62% and 61% in constant currency with 61 points of net impact from the Activision acquisition. Xbox hardware revenue decreased 31% and 30% in constant currency. Segment gross margin dollars increased 27% and 26% in constant currency, with 13 points of net impact from the Activision acquisition. Gross margin percentage increased roughly 4 points year-over-year, primarily driven by sales mix shift to higher-margin businesses. Operating expenses increased 41% with 43 points from the Activision acquisition. Operating income increased 16% and 15% in constant currency. Now back to total company results. Capital expenditures, including finance leases, were $14 billion to support our cloud demand, inclusive of the need to scale our AI infrastructure. Cash paid for PP&E was $11 billion. Cash flow from operations was $31.9 billion, up 31%, driven by strong cloud billings and collections. Free cash flow was $21 billion, up 18% year-over-year, reflecting higher capital expenditures to support our cloud and AI offerings. This quarter, other income and expense was negative $854 million, lower than anticipated, driven by losses on investments accounted for under the equity method. Our effective tax rate was approximately 18%. And finally, we returned $8.4 billion to shareholders through dividends and share repurchases. Now moving to our Q4 outlook, which unless specifically noted otherwise, is on a U.S. dollar basis. First, FX. Based on current rates, which reflect the recent strengthening of the U.S. dollar, we now expect FX to decrease total revenue and segment level revenue growth by less than 1 point. When compared to our January guide for Q4, FX, this is a decrease to total revenue of roughly $700 million. We expect FX to decrease COGS growth by approximately 1 point and operating expense growth by less than 1 point. In commercial bookings, we expect solid growth on a relatively flat expiry base driven by continued strong commercial sales execution. As a reminder, larger, long-term Azure contracts, which are more unpredictable in their timing, can drive increased quarterly volatility in our bookings growth rate. Microsoft Cloud gross margin percentage should decrease roughly 2 points year-over-year. Excluding the impact from the change in accounting estimate, Q4 cloud gross margin percentage will be down slightly as improvement in Azure, inclusive of scaling our AI infrastructure will be offset by sales mix shift to Azure. We expect capital expenditures to increase materially on a sequential basis driven by cloud and AI infrastructure investments. As a reminder, there can be normal quarterly spend variability in the timing of our cloud infrastructure build-outs and the timing of finance leases. We continue to bring capacity online as we scale our AI investments with growing demand. Currently, near-term AI demand is a bit higher than our available capacity. Next, to segment guidance. In Productivity and Business Processes, we expect revenue to grow between 9% and 11% in constant currency or US$19.9 billion to US$20.2 billion. In Office Commercial, revenue growth will again be driven by Office 365 with seat growth across customer segments and ARPU growth primarily through E5. We expect Office 365 revenue growth to be approximately 14% in constant currency. We continue to progress with adoption of CoPilot for Microsoft 365 and remain excited for the long-term growth opportunity. In our on-premises business, we expect revenue to decline in the mid to high teens. In Office Consumer, we expect revenue growth in the low to mid-single digits, driven by Microsoft 365 subscriptions. For LinkedIn, we expect revenue growth in the mid to high single digits driven by continued growth across all businesses. And in Dynamics, we expect revenue growth in the low to mid-teens, driven by Dynamics 365. For both LinkedIn and Dynamics, the continued bookings growth moderation noted earlier is a headwind to Q4 revenue growth. For Intelligent Cloud, we expect revenue to grow between 19% and 20% in constant currency or US$28.4 billion to US$28.7 billion. Revenue will continue to be driven by Azure, which, as a reminder, can have quarterly variability primarily from our per-user business and in-period revenue recognition depending on the mix of contracts. In Azure, we expect Q4 revenue growth to be 30% to 31% in constant currency or similar to our stronger-than-expected Q3 results. Growth will be driven by our Azure Consumption business and continued contribution from AI with some impact from the AI capacity availability noted earlier. Our per-user business should see benefit from Microsoft 365 suite momentum. Though we expect continued moderation in seat growth rates given the size of the installed base. In our on-premises server business, we expect revenue growth in the low to mid-single digits with continued hybrid demand, including licenses running in multi-cloud environments. And in Enterprise and Partner Services revenue should decline in the mid- to high single digits on a high prior year comparable for enterprise support services. In More Personal Computing, we expect revenue to grow between 10% and 13% in constant currency or US$15.2 billion to US$15.6 billion. Windows OEM revenue growth should be in the low to mid-single digits as PC market unit volumes continue at pre-pandemic levels. In Windows Commercial Products and Cloud Services, customer demand for Microsoft 365 and our advanced security solutions should drive revenue growth in the mid-single digits. As a reminder, our quarterly revenue growth can have variability primarily from in-period revenue recognition depending on the mix of contracts. In Devices, revenue should decline in the mid-teens as we continue to focus on our higher-margin premium products. Search and news advertising ex TAC revenue growth should be in the low to mid-teens, driven by continued volume strength. This will be higher than overall search and news advertising revenue growth, which we expect to be relatively flat. And in Gaming, we expect revenue growth in the low to mid-40s, including approximately 50 points of net impact from the Activision acquisition. We expect Xbox content and services revenue growth in the high 50s driven by approximately 60 points of net impact from the Activision acquisition. Hardware revenue will decline again year-over-year. Now back to company guidance. We expect COGS between US$19.6 billion to US$19.8 billion, including approximately $700 million from purchase accounting, integration and transaction-related costs from the Activision acquisition. We expect operating expense of US$17.15 billion to US$17.25 billion, including approximately $300 million from purchase accounting, integration and transaction-related costs from the Activision acquisition. Therefore, we now expect full year FY2024 operating margins to be up over 2 points year-over-year, even with our cloud and AI investments, the impact from the Activision acquisition and the headwind from the change in useful lives last year. This operating margin expansion reflects the hard work across every team to drive efficiencies and maintain disciplined cost management, knowing we will continue to grow our cloud and AI investments next year. Other income and expense should be roughly negative $850 million as interest income will be more than offset by interest expense and losses on investments accounted for under the equity method. As a reminder, we are required to recognize gains or losses on our equity investments which can increase quarterly volatility. We expect our Q4 effective tax rate to be approximately 18%. Now I\u2019d like to share some closing thoughts as we look to the next fiscal year. We continue to focus on building businesses that create meaningful value for our customers and therefore, significant growth opportunities for years to come. In FY2025, that focus on execution should again lead to double-digit revenue and operating income growth to scale to meet the growing demand signal for our cloud and AI products, we expect FY2025 capital expenditures to be higher than FY2024. These expenditures over the course of the next year are dependent on demand signals and adoption of our services. So we will manage that signal through the year. We will also continue to prioritize operating leverage. And therefore, we expect FY2025 operating margins to be down only about 1 point year-over-year, even with our significant cloud and AI investments, as well as a full year of impact from the Activision acquisition. We are leading the AI platform wave and are committed to bringing that value to our global customers as we enter the final quarter of our fiscal year. With that, let\u2019s go to Q&A, Brett.","evidence_gemma_new":"Paid Office 365 commercial seats","evidence_llama_3_3":null,"evidence_qwen_3_30b":"Paid Office 365 commercial seats","gemma_new_max":8.0,"gemma_new_min":8.0,"llama_3_3_max":null,"llama_3_3_min":null,"qwen_3_30b_max":8.0,"qwen_3_30b_min":8.0}
{"symbol":"MSFT","year":2024,"quarter":4,"date":"2024-Q4","chunk_id":3,"sub_chunk_id":0,"centroid_label":"office 365 paid office 365 commercial seats","agreed_value":12.5,"count":2,"chunk":"Amy Hood: Thank you, Satya, and good afternoon everyone. This quarter, revenue was $64.7 billion, up 15% and 16% in constant currency. Earnings per share was $2.95 and increased 10% and 11% in constant currency. In our largest quarter of the year, we again delivered double-digit top and bottom line growth with continued share gains across many of our businesses and record commitments to our Microsoft Cloud platform. Commercial bookings were significantly ahead of expectations and increased 17% and 19% in constant currency. This record commitment quarter was driven by growth in the number of 10-million-dollar-plus and 100-million-dollar-plus contracts for both Azure and Microsoft 365 and consistent execution across our core annuity sales motions. Commercial remaining performance obligation increased 20% and 21% in constant currency to $269 billion. Roughly 40% will be recognized in revenue in the next 12 months, up 18% year-over-year. The remaining portion, recognized beyond the next 12 months, increased 21%. And this quarter, our annuity mix was 97%. At a company level, Activision contributed a net impact of approximately 3 points to revenue growth, was a 2 point drag on operating income growth, and had a negative $0.06 impact to earnings per share. A reminder that this net impact includes adjusting for the movement of Activision content from our prior relationship as a third-party partner to first-party, and includes $938 million from purchase accounting adjustments, integration, and transaction-related costs. FX did not have a significant impact on our results and was roughly in line with our expectations on total company revenue, segment level revenue, COGS, and operating expense growth. Microsoft Cloud revenue was $36.8 billion and grew 21% and 22% in constant currency, roughly in line with expectations. Microsoft Cloud gross margin percentage decreased roughly 2 points year-over-year to 69% in line with expectations. Excluding the impact of the change in accounting estimate for useful lives, gross margin percentage decreased slightly driven by sales mix shift to Azure, partially offset by improvement in Azure even with the impact of scaling our AI infrastructure. Company gross margin dollars increased 14% and 15% in constant currency and gross margin percentage decreased slightly year-over-year to 70%. Excluding the impact of the change in accounting estimate, gross margin percentage increased slightly, even with the impact from purchase accounting adjustments, integration, and transaction-related costs from the Activision acquisition. Operating expenses increased 13% with 9 points from the Activision acquisition. At a total company level, headcount at the end of June was 3% higher than a year ago. Operating income increased 15% and 16% in constant currency and operating margins were 43%, relatively unchanged year-over-year. Excluding the impact of the change in accounting estimate, operating margins increased slightly driven by the higher gross margin noted earlier and improved operating leverage through continued cost discipline. Now to our segment results. Revenue from Productivity and Business Processes was $20.3 billion and grew 11% and 12% in constant currency, slightly ahead of expectations driven by better-than-expected results across all business units. Office commercial revenue grew 12% and 13% in constant currency. Office 365 commercial revenue increased 13% and 14% in constant currency with ARPU growth primarily from E5 momentum as well as Copilot for Microsoft 365. Paid Office 365 commercial seats grew 7% year-over-year with installed base expansion across all customer segments. Seat growth was again driven by our small and medium business and frontline worker offerings, although both segments continued to moderate. Office commercial licensing declined 9% and 7% in constant currency, with continued customer shift to cloud offerings. Office consumer revenue increased 3% and 4% in constant currency with continued momentum in Microsoft 365 subscriptions, which grew 10% to 82.5 million. LinkedIn revenue increased 10% and 9% in constant currency driven by better-than-expected performance across all businesses. Dynamics revenue grew 16% driven by Dynamics 365 which grew 19% and 20% in constant currency. We saw continued growth across all workloads and better-than-expected new business. Dynamics 365 now represents roughly 90% of total Dynamics revenue. Segment gross margin dollars increased 9% and 10% in constant currency and gross margin percentage decreased roughly 1 point year-over-year. Excluding the impact of the change in accounting estimate, gross margin percentage decreased slightly driven by Office 365 as we scale our AI infrastructure. Operating expenses increased 5%, and operating income increased 12% and 13% in constant currency. Next, the Intelligent Cloud segment. Revenue was $28.5 billion, increasing 19% and 20% in constant currency, in line with expectations. Overall, server products and cloud services revenue grew 21% and 22% in constant currency. Azure and other cloud services revenue grew 29% and 30% in constant currency, in line with expectations and consistent with Q3 when adjusting for leap year. Azure growth included 8 points from AI services where demand remained higher than our available capacity. In June, we saw slightly lower-than-expected growth in a few European geos. In our per-user business, the enterprise mobility and security installed base grew 10% to over 281 million seats with continued impact from moderated growth in seats sold outside the Microsoft 365 suite. Therefore, our Azure consumption business continues to grow faster than total Azure. In our on-premises server business, revenue increased 2% and 3% in constant currency. Growth was driven by demand for our hybrid solutions although with slightly lower-than-expected transactional purchasing. Enterprise and partner services revenue decreased 7% on a strong prior year comparable for Enterprise Support Services. Segment gross margin dollars increased 16% and gross margin percentage decreased roughly 2 points year-over-year. Excluding the impact of the change in accounting estimate, gross margin percentage decreased slightly driven by sales mix shift to Azure, partially offset by the improvement in Azure noted earlier, even with the impact of scaling our AI infrastructure. Operating expenses increased 5% and operating income grew 22% and 23% in constant currency. Now to More Personal Computing. Revenue was $15.9 billion, increasing 14% and 15% in constant currency, with 12 points of net impact from the Activision acquisition. Results were above expectations driven by Windows commercial and Search. The PC market was as expected and Windows OEM revenue increased 4% year-over-year. Windows commercial products and cloud services revenue increased 11% and 12% in constant currency, ahead of expectations due to higher in-period revenue recognition from the mix of contracts. Devices revenue decreased 11% and 9% in constant currency, roughly in line with expectations, as we remain focused on our higher margin premium products. While early days, we\u2019re excited about the recent launch of our Copilot+ PCs. Search and news advertising revenue ex-TAC increased 19%, ahead of expectations, primarily due to improved execution. Healthy volume growth was driven by Bing and Edge. And in Gaming, revenue increased 44% with 48 points of net impact from the Activision acquisition. Xbox content and services revenue increased 61%, slightly ahead of expectations, with 58 points of net impact from the Activision acquisition. Stronger-than-expected performance in first-party content was partially offset by third-party content performance. Xbox hardware revenue decreased 42% and 41% in constant currency. Segment gross margin dollars increased 21%, with 10 points of net impact from the Activision acquisition. Gross margin percentage increased roughly 3 points year-over-year primarily driven by sales mix shift to higher margin businesses. Operating expenses increased 43% with 41 points from the Activision acquisition. Operating income increased 5% and 6% in constant currency. Now back to total company results. Capital expenditures including finance leases were $19 billion, in line with expectations, and cash paid for PP&E was $13.9 billion. Cloud and AI related spend represents nearly all of total capital expenditures. Within that, roughly half is for infrastructure needs where we continue to build and lease datacenters that will support monetization over the next 15 years and beyond. The remaining cloud and AI related spend is primarily for servers, both CPUs and GPUs, to serve customers based on demand signals. For the full fiscal year, the mix of our cloud and AI related spend was similar to Q4. Cash flow from operations was $37.2 billion, up 29% driven by strong cloud billings and collections. Free cash flow was $23.3 billion, up 18% year-over-year, reflecting higher capital expenditures to support our cloud and AI offerings. For the full-year, cash flow from operations surpassed $100 billion for the first time, reaching $119 billion. This quarter, other income and expense was negative $675 million, more favorable than anticipated with lower-than-expected interest expense and higher-than-expected interest income. Our losses on investments accounted for under the equity method were as expected. Our effective tax rate was approximately 19%, higher than anticipated due to a state tax law signed in June that was effective retroactively. And finally, we returned $8.4 billion to shareholders through dividends and share repurchases, bringing our total cash returned to shareholders to over $34 billion for the full fiscal year. Now, moving to our outlook. My commentary for both the full-year and next quarter is on a U.S. dollar basis unless specifically noted otherwise. Let me start with some full year commentary for FY2025. First, FX. Assuming current rates remain stable, we expect FX to have no meaningful impact to full-year revenue, COGS, or operating expense growth. Next, we continue to expect double-digit revenue and operating income growth as we focus on delivering differentiated value for our customers. To meet the growing demand signal for our AI and cloud products, we will scale our infrastructure investments with FY2025 capital expenditures expected to be higher than FY2024. As a reminder, these expenditures are dependent on demand signals and adoption of our services that will be managed through the year. As scaling these investments drives growth in COGS, we will remain disciplined on operating expense management. Therefore, we expect FY2025 OpEx growth to be in the single digits. And given our focused commitment to managing at the operating margin level, we still expect FY2025 operating margins to be down only about one point year-over-year. And finally, we expect our FY2025 effective tax rate to be around 19%. Now, to the outlook for our first quarter. Based on current rates, we expect FX to decrease total revenue and segment level revenue growth by less than one point. We expect FX to decrease COGS growth by less than one point and to have no meaningful impact to operating expense growth. In commercial bookings, increased long-term commitments to our platform and strong execution across core annuity sales motions should drive healthy growth on a growing expiry base. As a reminder, larger long-term Azure contracts, which are more unpredictable in their timing, can drive increased quarterly volatility in our bookings growth rate. Microsoft Cloud gross margin percentage should be roughly 70%, down year-over-year driven by the impact of scaling our AI infrastructure. We expect capital expenditures to increase on a sequential basis given our cloud and AI demand, as well as existing AI capacity constraints. As a reminder, there can be quarterly spend variability from cloud infrastructure buildouts and the timing of delivery of finance leases. Next to segment guidance. In Productivity and Business Processes, we expect revenue to grow between 10% and 11% in constant currency, or US$20.3 to US$20.6 billion. In Office Commercial, revenue growth will again be driven by Office 365 with seat growth across customer segments and ARPU growth through E5 and Copilot for Microsoft 365. We expect Office 365 revenue growth to be approximately 14% in constant currency. In our on-premises business, we expect revenue to decline in the mid to high-teens. In Office consumer, we expect revenue growth in the low to mid-single digits, driven by Microsoft 365 subscriptions. For LinkedIn, we expect revenue growth in the high single digits driven by continued growth across all businesses. And in Dynamics, we expect revenue growth in the low to mid-teens driven by Dynamics 365. For Intelligent Cloud we expect revenue to grow between 18% and 20% in constant currency, or US$28.6 billion to US$28.9 billion. Revenue will continue to be driven by Azure which, as a reminder, can have quarterly variability primarily from our per-user business and in-period revenue recognition depending on the mix of contracts. In Azure, we expect Q1 revenue growth to be 28% to 29% in constant currency. Growth will continue to be driven by our consumption business, inclusive of AI, which is growing faster than total Azure. We expect the consumption trends from Q4 to continue through the first half of the year. This includes both AI demand impacted by capacity constraints and non-AI growth trends similar to June. Growth in our per-user business will continue to moderate. And in H2, we expect Azure growth to accelerate as our capital investments create an increase in available AI capacity to serve more of the growing demand. In our on-premises server business, we expect revenue to decline in the low single digits as continued hybrid demand will be more than offset by lower transactional purchasing. And in Enterprise and partner services, revenue should decline in the low single digits. In More Personal Computing, we expect revenue to grow between 9% and 12% in constant currency, or US$14.9 billion to US$15.3 billion. Windows OEM revenue growth should be relatively flat, roughly in line with the PC market. In Windows commercial products and cloud services, customer demand for Microsoft 365 and our advanced security solutions should drive revenue growth in the mid-single digits. As a reminder, our quarterly revenue growth can have variability primarily from in-period revenue recognition depending on the mix of contracts. In Devices, revenue growth should be in the low to mid-single digits. Search and news advertising ex-TAC revenue growth should be in the mid to high-teens. This will be higher than overall Search and news advertising revenue growth, which we expect to be in the low single digits. And in Gaming, we expect revenue growth in the mid-30s, including approximately 40 points of net impact from the Activision acquisition. We expect Xbox content and services revenue growth in the low to mid-50s, driven by the net impact from the Activision acquisition. Hardware revenue will again decline year-over-year. Now back to company guidance. We expect COGS between US$19.95 billion to US$20.15 billion, including approximately $700 million from purchase accounting, integration, and transaction-related costs from the Activision acquisition. We expect operating expense of US$15.2 billion to US$15.3 billion, including approximately $200 million from purchase accounting, integration, and transaction-related costs from the Activision acquisition. Other income and expense should be roughly negative $650 million driven by losses on investments accounted for under the equity method as interest income will be mostly offset by interest expense. As a reminder, we are required to recognize gains or losses on our equity investments, which can increase quarterly volatility. We expect our Q1 effective tax rate to be approximately 19%. In closing, we remain focused on delivering innovations that matter to our global customers of every size. That focus extends to delivering on our financial commitments as well. We delivered operating margin growth of nearly three points year-over-year even as we accelerated our AI investments, completed the Activision acquisition, and had a headwind from the change of useful lives last year. So, as we begin FY2025, we will continue to invest in the cloud and AI opportunity ahead aligned, and if needed adjusted, to the demand signals we see. We are committed to growing our leadership across our commercial cloud and within that, the AI platform, and we feel well positioned as we start FY2025. With that, let's go to Q&A, Brett.","evidence_gemma_new":"constant currency Office commercial revenue","evidence_llama_3_3":null,"evidence_qwen_3_30b":"Office commercial revenue 12% 13% constant currency","gemma_new_max":12.5,"gemma_new_min":12.5,"llama_3_3_max":null,"llama_3_3_min":null,"qwen_3_30b_max":12.5,"qwen_3_30b_min":12.5}
{"symbol":"MSFT","year":2024,"quarter":4,"date":"2024-Q4","chunk_id":3,"sub_chunk_id":0,"centroid_label":"office 365 paid office 365 commercial seats","agreed_value":7.0,"count":2,"chunk":"Amy Hood: Thank you, Satya, and good afternoon everyone. This quarter, revenue was $64.7 billion, up 15% and 16% in constant currency. Earnings per share was $2.95 and increased 10% and 11% in constant currency. In our largest quarter of the year, we again delivered double-digit top and bottom line growth with continued share gains across many of our businesses and record commitments to our Microsoft Cloud platform. Commercial bookings were significantly ahead of expectations and increased 17% and 19% in constant currency. This record commitment quarter was driven by growth in the number of 10-million-dollar-plus and 100-million-dollar-plus contracts for both Azure and Microsoft 365 and consistent execution across our core annuity sales motions. Commercial remaining performance obligation increased 20% and 21% in constant currency to $269 billion. Roughly 40% will be recognized in revenue in the next 12 months, up 18% year-over-year. The remaining portion, recognized beyond the next 12 months, increased 21%. And this quarter, our annuity mix was 97%. At a company level, Activision contributed a net impact of approximately 3 points to revenue growth, was a 2 point drag on operating income growth, and had a negative $0.06 impact to earnings per share. A reminder that this net impact includes adjusting for the movement of Activision content from our prior relationship as a third-party partner to first-party, and includes $938 million from purchase accounting adjustments, integration, and transaction-related costs. FX did not have a significant impact on our results and was roughly in line with our expectations on total company revenue, segment level revenue, COGS, and operating expense growth. Microsoft Cloud revenue was $36.8 billion and grew 21% and 22% in constant currency, roughly in line with expectations. Microsoft Cloud gross margin percentage decreased roughly 2 points year-over-year to 69% in line with expectations. Excluding the impact of the change in accounting estimate for useful lives, gross margin percentage decreased slightly driven by sales mix shift to Azure, partially offset by improvement in Azure even with the impact of scaling our AI infrastructure. Company gross margin dollars increased 14% and 15% in constant currency and gross margin percentage decreased slightly year-over-year to 70%. Excluding the impact of the change in accounting estimate, gross margin percentage increased slightly, even with the impact from purchase accounting adjustments, integration, and transaction-related costs from the Activision acquisition. Operating expenses increased 13% with 9 points from the Activision acquisition. At a total company level, headcount at the end of June was 3% higher than a year ago. Operating income increased 15% and 16% in constant currency and operating margins were 43%, relatively unchanged year-over-year. Excluding the impact of the change in accounting estimate, operating margins increased slightly driven by the higher gross margin noted earlier and improved operating leverage through continued cost discipline. Now to our segment results. Revenue from Productivity and Business Processes was $20.3 billion and grew 11% and 12% in constant currency, slightly ahead of expectations driven by better-than-expected results across all business units. Office commercial revenue grew 12% and 13% in constant currency. Office 365 commercial revenue increased 13% and 14% in constant currency with ARPU growth primarily from E5 momentum as well as Copilot for Microsoft 365. Paid Office 365 commercial seats grew 7% year-over-year with installed base expansion across all customer segments. Seat growth was again driven by our small and medium business and frontline worker offerings, although both segments continued to moderate. Office commercial licensing declined 9% and 7% in constant currency, with continued customer shift to cloud offerings. Office consumer revenue increased 3% and 4% in constant currency with continued momentum in Microsoft 365 subscriptions, which grew 10% to 82.5 million. LinkedIn revenue increased 10% and 9% in constant currency driven by better-than-expected performance across all businesses. Dynamics revenue grew 16% driven by Dynamics 365 which grew 19% and 20% in constant currency. We saw continued growth across all workloads and better-than-expected new business. Dynamics 365 now represents roughly 90% of total Dynamics revenue. Segment gross margin dollars increased 9% and 10% in constant currency and gross margin percentage decreased roughly 1 point year-over-year. Excluding the impact of the change in accounting estimate, gross margin percentage decreased slightly driven by Office 365 as we scale our AI infrastructure. Operating expenses increased 5%, and operating income increased 12% and 13% in constant currency. Next, the Intelligent Cloud segment. Revenue was $28.5 billion, increasing 19% and 20% in constant currency, in line with expectations. Overall, server products and cloud services revenue grew 21% and 22% in constant currency. Azure and other cloud services revenue grew 29% and 30% in constant currency, in line with expectations and consistent with Q3 when adjusting for leap year. Azure growth included 8 points from AI services where demand remained higher than our available capacity. In June, we saw slightly lower-than-expected growth in a few European geos. In our per-user business, the enterprise mobility and security installed base grew 10% to over 281 million seats with continued impact from moderated growth in seats sold outside the Microsoft 365 suite. Therefore, our Azure consumption business continues to grow faster than total Azure. In our on-premises server business, revenue increased 2% and 3% in constant currency. Growth was driven by demand for our hybrid solutions although with slightly lower-than-expected transactional purchasing. Enterprise and partner services revenue decreased 7% on a strong prior year comparable for Enterprise Support Services. Segment gross margin dollars increased 16% and gross margin percentage decreased roughly 2 points year-over-year. Excluding the impact of the change in accounting estimate, gross margin percentage decreased slightly driven by sales mix shift to Azure, partially offset by the improvement in Azure noted earlier, even with the impact of scaling our AI infrastructure. Operating expenses increased 5% and operating income grew 22% and 23% in constant currency. Now to More Personal Computing. Revenue was $15.9 billion, increasing 14% and 15% in constant currency, with 12 points of net impact from the Activision acquisition. Results were above expectations driven by Windows commercial and Search. The PC market was as expected and Windows OEM revenue increased 4% year-over-year. Windows commercial products and cloud services revenue increased 11% and 12% in constant currency, ahead of expectations due to higher in-period revenue recognition from the mix of contracts. Devices revenue decreased 11% and 9% in constant currency, roughly in line with expectations, as we remain focused on our higher margin premium products. While early days, we\u2019re excited about the recent launch of our Copilot+ PCs. Search and news advertising revenue ex-TAC increased 19%, ahead of expectations, primarily due to improved execution. Healthy volume growth was driven by Bing and Edge. And in Gaming, revenue increased 44% with 48 points of net impact from the Activision acquisition. Xbox content and services revenue increased 61%, slightly ahead of expectations, with 58 points of net impact from the Activision acquisition. Stronger-than-expected performance in first-party content was partially offset by third-party content performance. Xbox hardware revenue decreased 42% and 41% in constant currency. Segment gross margin dollars increased 21%, with 10 points of net impact from the Activision acquisition. Gross margin percentage increased roughly 3 points year-over-year primarily driven by sales mix shift to higher margin businesses. Operating expenses increased 43% with 41 points from the Activision acquisition. Operating income increased 5% and 6% in constant currency. Now back to total company results. Capital expenditures including finance leases were $19 billion, in line with expectations, and cash paid for PP&E was $13.9 billion. Cloud and AI related spend represents nearly all of total capital expenditures. Within that, roughly half is for infrastructure needs where we continue to build and lease datacenters that will support monetization over the next 15 years and beyond. The remaining cloud and AI related spend is primarily for servers, both CPUs and GPUs, to serve customers based on demand signals. For the full fiscal year, the mix of our cloud and AI related spend was similar to Q4. Cash flow from operations was $37.2 billion, up 29% driven by strong cloud billings and collections. Free cash flow was $23.3 billion, up 18% year-over-year, reflecting higher capital expenditures to support our cloud and AI offerings. For the full-year, cash flow from operations surpassed $100 billion for the first time, reaching $119 billion. This quarter, other income and expense was negative $675 million, more favorable than anticipated with lower-than-expected interest expense and higher-than-expected interest income. Our losses on investments accounted for under the equity method were as expected. Our effective tax rate was approximately 19%, higher than anticipated due to a state tax law signed in June that was effective retroactively. And finally, we returned $8.4 billion to shareholders through dividends and share repurchases, bringing our total cash returned to shareholders to over $34 billion for the full fiscal year. Now, moving to our outlook. My commentary for both the full-year and next quarter is on a U.S. dollar basis unless specifically noted otherwise. Let me start with some full year commentary for FY2025. First, FX. Assuming current rates remain stable, we expect FX to have no meaningful impact to full-year revenue, COGS, or operating expense growth. Next, we continue to expect double-digit revenue and operating income growth as we focus on delivering differentiated value for our customers. To meet the growing demand signal for our AI and cloud products, we will scale our infrastructure investments with FY2025 capital expenditures expected to be higher than FY2024. As a reminder, these expenditures are dependent on demand signals and adoption of our services that will be managed through the year. As scaling these investments drives growth in COGS, we will remain disciplined on operating expense management. Therefore, we expect FY2025 OpEx growth to be in the single digits. And given our focused commitment to managing at the operating margin level, we still expect FY2025 operating margins to be down only about one point year-over-year. And finally, we expect our FY2025 effective tax rate to be around 19%. Now, to the outlook for our first quarter. Based on current rates, we expect FX to decrease total revenue and segment level revenue growth by less than one point. We expect FX to decrease COGS growth by less than one point and to have no meaningful impact to operating expense growth. In commercial bookings, increased long-term commitments to our platform and strong execution across core annuity sales motions should drive healthy growth on a growing expiry base. As a reminder, larger long-term Azure contracts, which are more unpredictable in their timing, can drive increased quarterly volatility in our bookings growth rate. Microsoft Cloud gross margin percentage should be roughly 70%, down year-over-year driven by the impact of scaling our AI infrastructure. We expect capital expenditures to increase on a sequential basis given our cloud and AI demand, as well as existing AI capacity constraints. As a reminder, there can be quarterly spend variability from cloud infrastructure buildouts and the timing of delivery of finance leases. Next to segment guidance. In Productivity and Business Processes, we expect revenue to grow between 10% and 11% in constant currency, or US$20.3 to US$20.6 billion. In Office Commercial, revenue growth will again be driven by Office 365 with seat growth across customer segments and ARPU growth through E5 and Copilot for Microsoft 365. We expect Office 365 revenue growth to be approximately 14% in constant currency. In our on-premises business, we expect revenue to decline in the mid to high-teens. In Office consumer, we expect revenue growth in the low to mid-single digits, driven by Microsoft 365 subscriptions. For LinkedIn, we expect revenue growth in the high single digits driven by continued growth across all businesses. And in Dynamics, we expect revenue growth in the low to mid-teens driven by Dynamics 365. For Intelligent Cloud we expect revenue to grow between 18% and 20% in constant currency, or US$28.6 billion to US$28.9 billion. Revenue will continue to be driven by Azure which, as a reminder, can have quarterly variability primarily from our per-user business and in-period revenue recognition depending on the mix of contracts. In Azure, we expect Q1 revenue growth to be 28% to 29% in constant currency. Growth will continue to be driven by our consumption business, inclusive of AI, which is growing faster than total Azure. We expect the consumption trends from Q4 to continue through the first half of the year. This includes both AI demand impacted by capacity constraints and non-AI growth trends similar to June. Growth in our per-user business will continue to moderate. And in H2, we expect Azure growth to accelerate as our capital investments create an increase in available AI capacity to serve more of the growing demand. In our on-premises server business, we expect revenue to decline in the low single digits as continued hybrid demand will be more than offset by lower transactional purchasing. And in Enterprise and partner services, revenue should decline in the low single digits. In More Personal Computing, we expect revenue to grow between 9% and 12% in constant currency, or US$14.9 billion to US$15.3 billion. Windows OEM revenue growth should be relatively flat, roughly in line with the PC market. In Windows commercial products and cloud services, customer demand for Microsoft 365 and our advanced security solutions should drive revenue growth in the mid-single digits. As a reminder, our quarterly revenue growth can have variability primarily from in-period revenue recognition depending on the mix of contracts. In Devices, revenue growth should be in the low to mid-single digits. Search and news advertising ex-TAC revenue growth should be in the mid to high-teens. This will be higher than overall Search and news advertising revenue growth, which we expect to be in the low single digits. And in Gaming, we expect revenue growth in the mid-30s, including approximately 40 points of net impact from the Activision acquisition. We expect Xbox content and services revenue growth in the low to mid-50s, driven by the net impact from the Activision acquisition. Hardware revenue will again decline year-over-year. Now back to company guidance. We expect COGS between US$19.95 billion to US$20.15 billion, including approximately $700 million from purchase accounting, integration, and transaction-related costs from the Activision acquisition. We expect operating expense of US$15.2 billion to US$15.3 billion, including approximately $200 million from purchase accounting, integration, and transaction-related costs from the Activision acquisition. Other income and expense should be roughly negative $650 million driven by losses on investments accounted for under the equity method as interest income will be mostly offset by interest expense. As a reminder, we are required to recognize gains or losses on our equity investments, which can increase quarterly volatility. We expect our Q1 effective tax rate to be approximately 19%. In closing, we remain focused on delivering innovations that matter to our global customers of every size. That focus extends to delivering on our financial commitments as well. We delivered operating margin growth of nearly three points year-over-year even as we accelerated our AI investments, completed the Activision acquisition, and had a headwind from the change of useful lives last year. So, as we begin FY2025, we will continue to invest in the cloud and AI opportunity ahead aligned, and if needed adjusted, to the demand signals we see. We are committed to growing our leadership across our commercial cloud and within that, the AI platform, and we feel well positioned as we start FY2025. With that, let's go to Q&A, Brett.","evidence_gemma_new":"year-over-year Paid Office 365 commercial seats","evidence_llama_3_3":null,"evidence_qwen_3_30b":"Paid Office 365 commercial seats 7% year-over-year","gemma_new_max":7.0,"gemma_new_min":7.0,"llama_3_3_max":null,"llama_3_3_min":null,"qwen_3_30b_max":7.0,"qwen_3_30b_min":7.0}
{"symbol":"MSFT","year":2023,"quarter":3,"date":"2023-Q3","chunk_id":3,"sub_chunk_id":0,"centroid_label":"productivity and business processes revenue","agreed_value":17500000000.0,"count":2,"chunk":"Amy Hood: Thank you, Satya, and good afternoon, everyone. Our third quarter revenue was $52.9 billion, up 7% and 10% in constant currency. Earnings per share was $2.45 and increased 10% and 14% in constant currency. Our results exceeded expectations, driven by focused execution from our sales teams and partners. In our commercial business, revenue was up 19% in constant currency. We saw better-than-expected renewal strength, including across Microsoft 365, which also benefited Windows Commercial given the higher in-period revenue recognition. In Office 365 stand-alone products, we saw improvement in new business growth, while growth trends in EMS and Windows Commercial standalone products remained consistent with Q2. In Azure, customers continued to exercise some caution as optimization and new workload trends from the prior quarter continued as expected. In our consumer business, PC demand was a bit better than we expected, particularly in the commercial segment, which benefited Windows OEM and Surface even as channel inventory levels remain elevated, which negatively impacted results. Advertising spend landed in line with our expectations. We have seen share gains in Azure, Dynamics, Teams, Security, Edge and Bing as we continue to focus on delivering high value as well as new innovative solutions to our customers, including next-generation AI capabilities. Commercial bookings increased 11% and 12% in constant currency on a strong prior year comparable with a declining expiry base and 3 points of unfavorable impact from the inclusion of Nuance in the prior year. The better-than-expected result was driven by strong execution across our renewal sales motions mentioned earlier. Commercial remaining performance obligation increased 26% to $196 billion. Roughly 45% will be recognized in revenue in the next 12 months, up 18% year-over-year. The remaining portion, which will be recognized beyond the next 12 months increased 34%. And this quarter, our annuity mix was again 96%. FX impact on total company revenue, segment level revenue and operating expense growth was as expected. FX decreased COGS growth by 2 points, 1 point favorable to expectations. Microsoft Cloud revenue was $28.5 billion and grew 22% and 25% in constant currency, slightly ahead of expectations. Microsoft Cloud gross margin percentage increased roughly 2 points year-over-year to 72%, a point ahead of expectations driven by cloud engineering efficiencies. Excluding the impact of the change in accounting estimate for useful lives, Microsoft Cloud gross margin percentage decreased slightly, driven by lower Azure margin. Company gross margin dollars increased 9% and 13% in constant currency, including 2 points due to the change in accounting estimate. Gross margin percentage increased year-over-year to 69%. Excluding the impact of the change in accounting estimate, gross margin percentage decreased slightly, driven by a lower mix of OEM revenue. Operating expense increased 7% and 9% in constant currency, about $300 million lower than expected. Operating expense growth was driven by roughly 2 points from the Nuance and Xandr acquisitions as well as investments in cloud engineering and LinkedIn. At a total company level, head count at the end of March was 9% higher than a year ago. Operating income increased 10% and 15% in constant currency, including 4 points due to the change in accounting estimate. Operating margins increased roughly 1 point year-over-year to 42%. Excluding the impact of the change in accounting estimate, operating margins decreased slightly and increased slightly in constant currency. Now to our segment results. Revenue from Productivity and Business Processes was $17.5 billion and grew 11% and 15% in constant currency, ahead of expectations, primarily driven by better-than-expected results in Office commercial. Office commercial revenue grew 13% and 17% in constant currency. Office 365 commercial revenue increased 14% and 18% in constant currency, slightly better than expected with the strong renewal execution mentioned earlier and E5 momentum. Paid Office 365 commercial seats grew 11% year-over-year to over 382 million, with installed base expansion across all workloads and customer segments. Seat growth was again driven by our small and medium business and frontline worker offerings. Office commercial licensing declined 1% and increased 5% in constant currency, better than expected with 11 points of benefit from transactional strength in Japan. Office consumer revenue increased 1% and 4% in constant currency with continued momentum in Microsoft 365 subscriptions, which grew 12% to 65.4 million. LinkedIn revenue increased 8% and 10% in constant currency, driven by growth in Talent Solutions. Dynamics revenue grew 17% and 21% in constant currency, driven by Dynamics 365, which grew 25% and 29% in constant currency, with healthy growth across all workloads. Segment gross margin dollars increased 14% and 18% in constant currency, and gross margin percentage increased roughly 2 points year-over-year. Excluding the impact of the change in accounting estimate, gross margin percentage increased slightly, driven by improvements in Office 365, partially offset by sales mix shift to cloud offerings. Operating expenses increased 4% and 5% in constant currency, and operating income increased 20% and 27% in constant currency, including 4 points due to the change in accounting estimate. Next, the Intelligent Cloud segment. Revenue was $22.1 billion, increasing 16% and 19% in constant currency, slightly ahead of expectations. Overall, server products and cloud services revenue increased 17% and 21% in constant currency. Azure and other cloud services revenue grew 27% and 31% in constant currency. In our per user business, enterprise mobility and security installed base grew 15% to nearly 250 million seats. In our on-premises server business, revenue decreased 2% and was relatively unchanged in constant currency with continued demand for our hybrid offerings, including Windows Server and SQL Server running in multi-cloud environments, offset by transactional licensing. Enterprise Services revenue grew 6% and 9% in constant currency with better-than-expected performance across Enterprise Support Services and Microsoft Consulting Services. Segment gross margin dollars increased 15% and 18% in constant currency and gross margin percentage decreased slightly. Excluding the impact of the change in accounting estimate, gross margin percentage declined roughly 3 points, driven by sales mix shift to Azure and the lower Azure margin noted earlier. Operating expenses increased 19% and 20% in constant currency, including roughly 3 points of impact from the Nuance acquisition. Operating income grew 13% and 17% in constant currency, with roughly 6 points from the change in accounting estimate. Now to More Personal Computing. Revenue was $13.3 billion, decreasing 9% and 7% in constant currency with better-than-expected results across all businesses. Windows OEM revenue decreased 28% year-over-year and Devices revenue decreased 30% and 26% in constant currency, both ahead of expectations. We saw better-than-expected PC demand, as noted earlier, particularly in the commercial segment, which has higher revenue per license, although results continue to be negatively impacted by elevated channel inventory levels. Windows commercial products and cloud services revenue increased 14% and 18% in constant currency, significantly ahead of expectations, primarily due to the strong renewal execution with higher in-period revenue recognition noted earlier. Search and news advertising revenue ex TAC increased 10% and 13% in constant currency, including 2 points from the Xandr acquisition. Results were driven by higher search volume with share gains again this quarter for our Edge browser globally and Bing in the U.S. And in Gaming, revenue declined 4% and 1% in constant currency, ahead of expectations. Xbox hardware revenue declined 30% and 28% in constant currency on a high prior year comparable that benefited from increased console supply. Xbox content and services revenue increased 3% and 5% in constant currency, driven by better-than-expected monetization in third-party and first-party content and growth in Xbox Game Pass. Segment gross margin dollars declined 9% and 5% in constant currency, and gross margin percentage increased slightly year-over-year. Operating expenses declined 5% and 3% in constant currency, even with 3 points of growth from the Xandr acquisition. Operating income decreased 12% and 7% in constant currency. Now back to total company results. Capital expenditures, including finance leases were $7.8 billion to support cloud demand. Cash paid for PP&E was $6.6 billion. Cash flow from operations was $24.4 billion, down 4% year-over-year as strong cloud billings and collections as well as lower supplier payments were more than offset by a tax payment related to the R&D capitalization provisions and employee payments primarily related to headcount growth and an increase in employee compensation. Free cash flow was $17.8 billion, down 11% year-over-year. Excluding the impact of this tax payment, cash flow from operations increased 1% and free cash flow declined 5%. This quarter, other income and expense was $321 million, higher than anticipated, driven by net gains on foreign currency remeasurement. Our effective tax rate was approximately 19%. And finally, we returned $9.7 billion to shareholders through share repurchases and dividends. Now moving to our Q4 outlook, which unless specifically noted otherwise, is on a U.S. dollar basis. My commentary for the next quarter and FY '24 does not include any impact from Activision, which we continue to work towards closing in fiscal year 2023, subject to obtaining required regulatory approvals. Now to FX. Based on current rates, we expect FX to decrease total revenue growth by approximately 2 points with no impact to COGS or operating expense growth. Within segments, we anticipate roughly 2 points of negative FX impact on revenue growth in Productivity and Business Processes and Intelligent Cloud and roughly 1 point in More Personal Computing. Overall, our outlook has many of the trends we saw in Q3 continue through Q4. In our largest quarter of the year, we expect customer demand for our differentiated solutions, including our AI platform and consistent execution across the Microsoft Cloud to drive another quarter of healthy revenue growth. Last year, we had our largest commercial bookings quarter ever with a material volume of large multiyear commitments. On that comparable, we expect growth to be relatively flat. We expect consistent execution across our core annuity sales motions with strong renewals and continued commitment to our platform as we focus on meeting customers' changing contract needs, which include shorter term, quick time to value contracts in this dynamic environment. Our key focus remains on delivering customer value. Microsoft Cloud gross margin percentage should be up roughly 2 points year-over-year, driven by the accounting estimate change noted earlier. Excluding that impact, Q4 cloud gross margin percentage will be relatively flat as improvements in Office 365 will offset the lower Azure margin and the impact of scaling our AI infrastructure to meet growing demand. We expect capital expenditures to have a material sequential increase on a dollar basis, driven by investments in Azure AI infrastructure. Reminder there can be normal quarterly spend variability in the timing of our cloud infrastructure build-out. Next, to segment guidance. In Productivity and Business Processes, we expect revenue to grow between 10% and 12% in constant currency or $17.9 billion to $18.2 billion. In Office Commercial, revenue growth will again be driven by Office 365, with seat growth across customer segments and ARPU growth through E5. We expect Office 365 revenue growth to be roughly 16% in constant currency. In our on-premises business, we expect revenue to decline in the low 30s. In Office consumer, we expect revenue growth in the mid-single digits, driven by Microsoft 365 subscriptions. For LinkedIn, we expect mid-single digit revenue growth driven by Talent Solutions with continued strong engagement on the platform. And in Dynamics, we expect revenue growth in the mid- to high teens, driven by continued growth in Dynamics 365. For Intelligent Cloud, we expect revenue to grow between 15% and 16% in constant currency or $23.6 billion to $23.9 billion. Revenue will continue to be driven by Azure, which, as a reminder, can have quarterly variability primarily from our per user business and from in-period revenue recognition depending on the mix of contracts. In Azure, we expect revenue growth to be 26% to 27% in constant currency, including roughly 1 point from AI services. Growth continues to be driven by our Azure consumption business, and we expect the trends from Q3 to continue into Q4, as noted earlier. Our per-user business should continue to benefit from Microsoft 365 suite momentum, though we expect continued moderation in growth rates given the size of the installed base. In our on-premises server business, we expect revenue to decline low single digits as demand for our hybrid solutions, including Windows Server and SQL Server running in multi-cloud environments, will be more than offset by unfavorable FX impact. And in Enterprise Services, revenue should be relatively unchanged year-over-year as growth in Enterprise Support Services will be offset by a decline in Microsoft Consulting Services. In More Personal Computing, we expect revenue of $13.35 billion to $13.75 billion. PC demand should be similar to Q3, and given channel inventory still remains elevated, our revenue will lag overall market growth as it continues to normalize. Therefore, Windows OEM and Devices revenue should both decline in the low to mid-20s. In Windows commercial products and cloud services revenue should decline low to mid-single digits. While we expect healthy annuity billings growth driven by continued customer demand for Microsoft 365 and our advanced security solutions, a reminder that our quarterly revenue growth can have variability, primarily from in-period revenue recognition depending on the mix of contracts. Search and news advertising ex TAC revenue growth should be approximately 10%, roughly 5 points higher than the overall search and news advertising revenue, driven by growth in first-party revenue is similar to Q3. And in Gaming, we expect revenue growth in the mid- to high single digits. We expect Xbox content services revenue growth in the low to mid-teens, driven by third-party and first-party content as well as Xbox Game Pass. Now back to company guidance. We expect COGS to grow between 3% and 4% in constant currency or $16.8 billion to $17 billion and operating expense to grow approximately 2% in constant currency or $15.1 billion to $15.2 billion. Other income and expense should be roughly $300 million as interest income is expected to more than offset interest expense. As a reminder, we are required to recognize mark-to-market gains or losses on our equity portfolio, which can increase quarterly volatility. We expect our Q4 effective tax rate to be in line with our full year rate of approximately 19%. And finally, as a reminder, for Q4 cash flow, we expect to make a $1.3 billion cash tax payment related to the R&D capitalization provision. Now I'd like to share some closing thoughts as we look to the next fiscal year. With our leadership position as we begin this AI era, we remain focused on strategically managing the company to deliver differentiated customer value as well as long-term financial growth and profitability. As with any significant platform shift, it starts with innovation. And we are excited about the early feedback and demand signals for the AI capabilities we have announced to date. We will continue to invest in our cloud infrastructure, particularly AI-related spend as we scale with the growing demand, driven by customer transformation. And we expect the resulting revenue to grow over time. As always, we remain committed to aligning cost and revenue growth to deliver disciplined profitability. Therefore, while the scaled CapEx investments will impact COGS growth, we expect FY '24 operating expense growth to remain low. As a team, we have continually focused on pivoting our resources aggressively to the future as we execute at a high level in the moment to deliver value to our customers. That balance has enabled the company to successfully lead across a number of platform shifts over a number of decades. Therefore, we are committed to leading the AI platform wave and making the investments to support it. With that, let's go to Q&A. Brett?","evidence_gemma_new":null,"evidence_llama_3_3":"Productivity and Business Processes revenue","evidence_qwen_3_30b":"Productivity and Business Processes revenue constant currency","gemma_new_max":null,"gemma_new_min":null,"llama_3_3_max":17500000000.0,"llama_3_3_min":17500000000.0,"qwen_3_30b_max":17500000000.0,"qwen_3_30b_min":17500000000.0}
{"symbol":"MSFT","year":2024,"quarter":1,"date":"2024-Q1","chunk_id":3,"sub_chunk_id":0,"centroid_label":"productivity and business processes revenue","agreed_value":18600000000.0,"count":2,"chunk":"Amy Hood: Thank you, Satya, and good afternoon, everyone. This quarter's revenue was $56.5 billion, up 13% and 12% in constant currency. Earnings per share was $2.99 and increased 27% and 26% in constant currency. Consistent execution by our sales teams and partners drove a strong start to the fiscal year. Results exceeded expectations and we saw share gains again this quarter across many businesses, as customers adopt our innovative solutions to transform their businesses. In our commercial business, the trends from the prior quarter continued. We saw healthy renewals, particularly in Microsoft 365 E5 and growth of new business continued to be moderated for standalone products sold outside the Microsoft 365 suite. In Azure, as expected the optimization trends were similar to Q4. Higher-than-expected AI consumption contributed to revenue growth in Azure. And our consumer business, PC market unit volumes are returning to pre-pandemic levels. Advertising spend, landed roughly in line with our expectations and in gaming strong engagement helped by the Starfield launch benefited Xbox content and services. Commercial bookings increased 14% and 17% in constant currency, in line with expectations, primarily driven by strong execution across our core annuity sales motions, with continued growth in the number of $10 million plus contracts for both Azure and Microsoft 365. Commercial remaining performance obligation, increased 18% to $212 billion, and roughly 45% will be recognized in revenue in the next 12 months, up 15% year-over-year. The remaining portion, which will be recognized beyond the next 12 months increased 20% and this quarter, our annuity mix was 96%. FX did not have a significant impact on our results and was roughly in line with our expectations on total company revenue, segment-level revenue, COGS, and operating expense growth. Microsoft Cloud revenue was $31.8 billion and grew 24% and 23% in constant currency, ahead of expectations. Microsoft Cloud's gross margin percentage increased slightly year-over-year to 73%, a point better than expected, primarily driven by improvements in Azure. Excluding the impact of the change in accounting estimate for useful lives, Microsoft Cloud's gross margin percentage increased roughly 2 points, driven by the improvement just mentioned in Azure as well as Office 365, partially offset by the impact of scaling our AI infrastructure to meet growing demand. Company gross margin dollars increased 16% and 15% in constant currency and gross margin percentage increased year-over-year to 71%. Excluding the impact of the change in accounting estimate, the gross margin percentage increased roughly 3 points, driven by the improvement in Azure and Office 365 as well as sales mix shift to higher margin businesses. Operating expenses increased 1%, lower than expected due to cost-efficiency focus as well as investments that shifted to future quarters. Operating expense growth was driven by marketing, LinkedIn, and cloud engineering, partially offset by devices. At a total company level, headcount at the end of September was 7% lower than a year ago. Operating income increased 25% and 24% in constant currency. Operating margins increased roughly 5 points year-over-year to 48%. Excluding the impact of the change in accounting estimate, operating margins increased roughly 6 six points, driven by improved operating leverage through cost management and the higher gross margin noted earlier. Now to our segment results. Revenue from Productivity and Business Processes was $18.6 billion and grew 13% and 12% in constant currency, ahead of expectations, driven by better-than-expected results in Office 365 Commercial and LinkedIn. Office Commercial revenue grew 15% and 14% in constant currency. Office 365 Commercial revenue increased 18% and 17% in constant currency, slightly better than expected with a bit more in-period revenue recognition, while billings remained relatively in line with expectations. Growth continues to be driven by healthy renewal execution and ARPU growth, as E5 momentum remains strong. Paid Office 365 Commercial seats grew 10% year-over-year, with installed-base expansion across all customer segments. Seat growth was again driven by our small and medium business and frontline worker offerings with continued impact from the growth trends in new standalone business noted earlier. Office Commercial licensing declined 17%, in line with the continued customer shift to cloud offerings. Office Consumer revenue increased 3% and 4% in constant currency with continued momentum in Microsoft 365 subscriptions, which grew 18% to 76.7 million. LinkedIn revenue increased 8%, ahead of expectations, driven by slightly better-than-expected performance across all businesses. Growth was driven by Talent Solutions, though we continue to see negative year-over-year bookings there from the weaker hiring environment in key verticals. Dynamics revenue, grew 22% and 21% in constant currency, driven by Dynamics 365, which grew 28% and 26% in constant currency with continued growth across all workloads. Segment gross margin dollars increased 13% and gross margin percentage increased slightly year-over-year. Excluding the impact of the change in accounting estimate, gross margin percentage increased roughly, 1 point, driven by improvements in Office 365. Operating expenses increased to 2% and operating income increased 20% and 19% in constant currency. Next, the Intelligent Cloud segment. Revenue was $24.3 billion, increasing 19% and ahead of expectations, with better-than-expected results across all businesses. Overall, server products and cloud services revenue grew 21%. Azure and other cloud services revenue grew 29% and 28% in constant currency, including roughly 3 points from AI Services. While the trends from prior quarter continued, growth was ahead of expectations, primarily driven by increased GPU capacity and better-than-expected GPU utilization of our AI services, as well as slightly higher-than-expected growth in our per-user business. In our per user business, the enterprise mobility and security installed base, grew 11% to over 259 million seats with continued impact from the growth trends in new standalone business noted earlier. In our on-premises server business, revenue increased 2% ahead of expectations, driven primarily by demand in advance of Windows Server 2012 end of support. Enterprise and partner services revenue increased 1% and was relatively unchanged in constant currency ahead of expectations, driven by a better-than-expected performance in Enterprise Support Services. Segment gross margin dollars increased 20% and 19% in constant currency and gross margin percentage increased slightly. Excluding the impact of the change in accounting estimate, gross margin percentage increased roughly 2 points, driven by the improvement in Azure noted earlier, even as we scale our AI infrastructure to meet growing demand. Operating expenses increased 2% and 1% in constant currency, operating income grew 31% and 30% in constant currency. Now to More Personal Computing, revenue was $13.7 billion, increasing 3% and 2% in constant currency, above expectations, with better-than-expected results across all businesses. Windows OEM revenue increased 4% year-over-year, significantly ahead of expectations, driven by stronger-than-expected consumer channel inventory builds and the stabilizing PC market demand noted earlier, particularly in commercial. Windows Commercial products and cloud services revenue increased 8%, driven by demand for Microsoft 365 E5. Devices revenue decreased 22%, ahead of expectations due to stronger execution in the commercial segment. Search and news advertising revenue, ex-TAC increased 10% and 9% in constant currency, slightly ahead of expectations. We saw increased engagement on Bing and Edge share gains again this quarter, although search revenue growth continues to be impacted by a third-party partnership. And in gaming, revenue increased 9% and 8% in constant currency, ahead of expectations, driven by better-than-expected subscriber growth in Xbox Game Pass as well as first-party content, primarily due to the Starfield launch. Xbox content and services revenue increased 13% and 12% in constant currency and Xbox hardware revenue declined 7% and 8% in constant currency. Segment gross margin dollars increased 13% and 12% in constant currency, and gross margin percentage increased roughly 5 points year-over-year, driven primarily by sales mix-shift to higher-margin businesses. Operating expenses declined 1% and operating income increased 23% and 22% in constant currency. Now back to total company results. Capital expenditures, including finance leases were $11.2 billion to support cloud demand, including investments to scale our AI infrastructure. Cash paid for PP&E was $9.9 billion. Cash flow from operations was $30.6 billion, up 32% year-over-year, driven by strong cloud billings and collections. Free cash flow was $20.7 billion, up 22% year-over-year. This quarter, other income and expense was $389 million, higher-than-anticipated, driven by interest income, partially offset by net losses on investments and foreign currency remeasurement. Our effective tax rate was approximately 18%. And finally, we returned $9.1 billion to shareholders, through share repurchases and dividends. Now moving to our Q2 outlook, which unless specifically noted otherwise is on a U.S. dollar basis. The Activision acquisition closed on October 13. So my commentary includes the net impact of the deal from the date of acquisition. Our outlook includes purchase accounting impact, integration, and transaction-related expenses based on our current understanding of the purchase price allocation and related deal accounting. The net impact includes adjusting for the movement of Activision content from our prior relationship as a third-party partner to first party. Now to FX. Based on current rates, we expect FX to increase total revenue and segment-level revenue growth by approximately 1 point. We expect FX to have no impact to COGS and operating expense growth. In commercial bookings, we expect consistent execution across our core annuity sales motions, including healthy renewals. The growth will be impacted by a low growth expiry base. Therefore, we expect bookings growth to be relatively flat. Microsoft Cloud gross margin percentage to be relatively flat year-over-year, excluding the impact from the accounting estimate change, Q2 Cloud gross margin percentage will be up roughly 1 point, primarily driven by improvement in Azure and Office 365, partially offset by the impact of scaling our AI infrastructure to meet growing demand. We expect capital expenditures to increase sequentially on a dollar basis, driven by investments in our cloud and AI infrastructure. As a reminder, there can be normal quarterly spend variability in the timing of our cloud infrastructure buildout. Next to segment guidance. In Productivity and Business Processes, we expect revenue to grow between 11% and 12% or $18.8 billion to $19.1 billion. Growth in constant currency will be approximately 1 point lower. In Office Commercial, revenue growth will again be driven by Office 365 with seat growth across customer segments and ARPU growth through E5. We expect Office 365 revenue growth to be up roughly 16% in constant currency. We're excited for Microsoft 365 Copilot general availability on November 1st, and expect the related revenue to grow gradually over time. In our on-premise business, we expect revenue to decline in the mid-to-high teens. In Office Consumer, we expect revenue growth in the mid-single-digits, driven by Microsoft 365 subscriptions. For LinkedIn, we expect revenue growth in the mid-single-digits, driven by Talent Solutions and Marketing Solutions. Growth continues to be impacted by the overall market environment for recruiting and advertising, especially in the technology industry, where we have significant exposure. And in Dynamics, we expect revenue growth in the high teens, driven by Dynamics 365. For Intelligent Cloud, we expect revenue to grow between 17% and 18% or $25.1 billion to $25.4 billion. Revenue growth in constant currency will be approximately 1 point lower. Revenue will continue to be driven by Azure, which as a reminder can have quarterly variability, primarily from our per-user business and from in-period revenue recognition, depending on the mix of contracts. In Azure, we expect revenue growth to be 26% to 27% in constant currency, with an increasing contribution from AI. Growth continues to be driven by Azure consumption business and we expect the trends from Q1 to continue into Q2. Our per user business should continue to benefit from Microsoft 365 suite momentum, though we expect continued moderation in seat growth rates, given the size of the installed base. For H2, assuming the optimization and new workload trends continue and with the growing contribution from AI, we expect Azure revenue growth in constant currency to remain roughly stable compared to Q2. And our on-premises server business, we expect revenue growth to be roughly flat with continued hybrid demand, particularly from licenses running in multi-cloud environments. And in enterprise and partner services, revenue should decline by low-to-mid single digits. Now to more Personal Computing, which includes the net impact from the Activision acquisition. We expect revenue of $16.5 billion to $16.9 billion. Windows OEM revenue growth should be mid-to-high single digits with PC market unit volumes expected to look roughly similar to Q1. In devices, revenue should decline in the mid-teens as we continue to focus on our higher-margin premium products. In Windows Commercial products and cloud services, customer demand for Microsoft 365 and our advanced security solutions should drive revenue growth in the low-to-mid teens. Search and news advertising ex-TAC revenue growth should be mid-single digits with roughly 4 points of negative impact from a third-party partnership. Growth should be driven by volume strength, supported by Edge browser share gains and increasing Bing engagement, as we expect the advertising spend environment to be similar to Q1. A reminder that this ex-TAC growth will be roughly 4 points higher than overall search and news advertising revenue. And in gaming, we expect revenue growth in the mid-to-high 40s. This includes roughly 35 points of net impact from the Activision acquisition, which as a reminder includes adjusting for the third-party to first-party content change noted earlier. We expect Xbox content and services revenue growth in the mid-to-high 50s, driven by roughly 50 points of net impact from the Activision acquisition. Now back to company guidance. We expect COGS between $19.4 billion to $19.6 billion, including approximately $500 million of amortization of acquired intangible assets from the Activision acquisition. We expect operating expense of $15.5 billion to $15.6 billion, including approximately $400 million from purchase accounting adjustments, integration and transaction-related cost from the Activision acquisition. Other income and expense should be roughly negative $500 million, as interest income will be more than offset by interest expense, primarily due to a reduction in our investment portfolio balance and the issuance of short-term debt, both for the Activision acquisition. As a reminder, we are required to recognize gains or losses on our equity investments, which can increase quarterly volatility. We expect our Q2 effective tax rate to be between 19% and 20%. Now, some additional thoughts on H2 as well as the full fiscal year. First, FX, assuming current rates remain stable, we expect FX to have no meaningful impact to full year revenue COGS or operating expense growth. Therefore, in H2, we expect FX to decrease revenue COGS and operating expense growth by 1 point. Second, Activision, we expect approximately $900 million for purchase accounting adjustments as well as integration and transaction-related costs in each quarter in H2. For a full FY '24, we remain committed to investing for the cloud and AI opportunity, while also maintaining our disciplined focus on operating leverage. Therefore, as we add the net impact of Activision, inclusive of purchase accounting adjustments as well as integration and transaction-related expenses, we continue to expect full year operating margins to remain flat year-over-year. In closing, with our strong start to FY '24, I am confident that as a team, we will continue to deliver healthy growth in the year ahead, driven by our leadership in commercial cloud and our commitment to lead the AI platform wave. With that. Let's go to Q&A, Brett.","evidence_gemma_new":null,"evidence_llama_3_3":"Productivity and Business Processes revenue","evidence_qwen_3_30b":"Productivity and Business Processes revenue Quarterly","gemma_new_max":null,"gemma_new_min":null,"llama_3_3_max":18600000000.0,"llama_3_3_min":18600000000.0,"qwen_3_30b_max":18600000000.0,"qwen_3_30b_min":18600000000.0}
{"symbol":"MSFT","year":2024,"quarter":3,"date":"2024-Q3","chunk_id":3,"sub_chunk_id":0,"centroid_label":"productivity and business processes revenue","agreed_value":19600000000.0,"count":2,"chunk":"Amy Hood: Thank you, Satya, and good afternoon, everyone. Our third quarter revenue was $61.9 billion, up 17%; and earnings per share was $2.94, up 20%. Results exceeded expectations, and we delivered another quarter of double-digit top and bottom line growth with continued share gains across many of our businesses. In our commercial business, bookings increased 29% and 31% in constant currency, significantly ahead of expectations, driven by Azure commitments with an increase in average deal size and deal length as well as strong execution across our core annuity sales motions. In Microsoft 365, suite strength contributed to ARPU expansion for our Office Commercial business, although new business growth continued to moderate for stand-alone products sold outside the Microsoft 365 suite. Commercial remaining performance obligation increased 20% and 21% in constant currency to $235 billion. Roughly 45% will be recognized in revenue in the next 12 months, up 20% year-over-year. The remaining portion recognized beyond the next 12 months increased 21%. And this quarter, our annuity mix increased to 97%. In our consumer business, PC market demand was slightly better than we expected, benefiting Windows OEM, while advertising spend landed relatively in line with our expectations. In gaming, we also saw better-than-expected performance of Activision titles, benefiting Xbox content and services. At a company level, Activision contributed a net impact of approximately 4 points to revenue growth, was a 2-point drag on operating income growth and had a negative $0.04 impact to earnings per share. A reminder, that this net impact includes adjusting for the movement of Activision content from our prior relationship as a third-party partner to first party and also includes $935 million from purchase accounting adjustments, integration and transaction-related costs. FX did not have a significant impact on our results and was roughly in line with our expectations on total company revenue, segment level revenue, COGS and operating expense growth. Microsoft Cloud revenue was $35.1 billion and grew 23%, ahead of expectations. Microsoft Cloud gross margin percentage decreased slightly year-over-year to 72%, a bit better than expected. Excluding the impact of the change in accounting estimate for useful lives, gross margin percentage increased slightly, driven by improvement in Azure and Office 365, even with the impact of scaling our AI infrastructure, partially offset by sales mix shift to Azure. Company gross margin dollars increased 18% and gross margin percentage increased slightly year-over-year to 70%. Excluding the impact of the change in accounting estimate, gross margin percentage increased roughly 1 point even with the impact from the purchase accounting adjustments, integration and transaction-related costs from the Activision acquisition. Growth was driven by the improvement in Azure and Office 365 just mentioned as well as sales mix shift to higher-margin businesses. Operating expenses increased 10% with 9 points from the Activision acquisition. At a total company level, head count at the end of March was 1% lower than a year ago. Operating income increased 23% and operating margins increased roughly 2 points year-over-year to 45%, excluding the impact of the change in accounting estimate, operating margins increased roughly 3 points, driven by the higher gross margin noted earlier and improved operating leverage through continued cost discipline. Now to our segment results. Revenue from Productivity and Business Processes was $19.6 billion and grew 12% and 11% in constant currency, in line with expectations. Office Commercial revenue grew 13% and 12% in constant currency. Office 365 commercial revenue increased 15%, in line with expectations, driven by healthy renewal execution, ARPU growth from continued E5 momentum and early Copilot for Microsoft 365 progress. Paid Office 365 commercial seats grew 8% year-over-year with installed base expansion across all customer segments. Seat growth was again driven by our small and medium business and frontline worker offerings, although growth continued to moderate in SMB. Office Commercial Licensing declined 20% and 18% in constant currency, with continued customer shift to cloud offerings. Office Consumer revenue increased 4%, slightly below expectations. Microsoft 365 subscriptions grew 14% to $80.8 million. LinkedIn revenue increased 10% and 9% in constant currency, ahead of expectations, driven by slightly better-than-expected performance in our premium subscriptions and Talent Solutions businesses. However, in Talent Solutions, bookings growth continues to be impacted by the weaker hiring environment in key verticals. Dynamics revenue grew 19% and 17% in constant currency, ahead of expectations. Growth was driven by Dynamics 365, which grew 23% and 22% in constant currency with continued growth across all workloads and better-than-expected new business, although bookings growth remains moderated. Segment gross margin dollars increased 11%, and gross margin percentage decreased slightly year-over-year. Excluding the impact of the change in accounting estimate, gross margin percentage increased slightly driven by improvement in Office 365. Operating expenses increased 1% and operating income increased 17% and 16% in constant currency. Next, the Intelligent Cloud segment. Revenue was $26.7 billion, increasing 21%, ahead of expectations with better-than-expected results across all businesses. Overall, Server products and cloud services revenue grew 24%. Azure and other cloud services revenue grew 31% ahead of expectations, while our AI services contributed 7 points of growth as expected. In the non-AI portion of our consumption business, we saw greater-than-expected demand broadly across industries and customer segments as well as some benefit from a greater-than-expected mix of contracts with higher in-period recognition. In our per-user business, the Enterprise Mobility and Security installed base grew 10% to over 274 million seats, with continued impact from the growth trends in new stand-alone business noted earlier. In our on-premises server business, revenue increased 6%, ahead of expectations, driven by better-than-expected renewal strength, particularly for contracts with higher in-period revenue recognition. Enterprise and partner services revenue decreased 9% on a strong prior year comparable for enterprise support services. Segment gross margin dollars increased 20% and gross margin percentage decreased slightly year-over-year. Excluding the impact of the change in accounting estimate [indiscernible] percentage increased slightly, primarily driven by the improvement in Azure noted earlier, even with the impact of scaling our AI infrastructure, partially offset by sales mix shift to Azure. Operating expenses increased 1% and operating income grew 32%. Now to More Personal Computing. Revenue was $15.6 billion, increasing 17% with 15 points of net impact from the Activision acquisition. Results were above expectations, driven by better-than-expected performance in gaming and Windows OEM. Windows OEM revenue increased 11% year-over-year, ahead of expectations, primarily driven by the slightly better PC market noted earlier as well as mix shift to higher monetizing markets. Windows commercial products and cloud services revenue increased 13% and 12% in constant currency, below expectations with impact from the growth trends in new stand-alone business noted earlier as well as lower in-period revenue recognition from a mix of contracts. Devices revenue decreased 17% and 16% in constant currency as we remain focused on our higher-margin premium products. Overall, Surface demand was slightly lower than expected. Search and News advertising revenue ex TAC increased 12% ahead of expectations with continued volume growth and increased engagement on Bing and Edge. And in gaming. Revenue increased 51% and 50% in constant currency with 55 points of net impact from the Activision acquisition. Results were ahead of expectations, primarily driven by Call of Duty. Xbox content and services revenue increased 62% and 61% in constant currency with 61 points of net impact from the Activision acquisition. Xbox hardware revenue decreased 31% and 30% in constant currency. Segment gross margin dollars increased 27% and 26% in constant currency, with 13 points of net impact from the Activision acquisition. Gross margin percentage increased roughly 4 points year-over-year, primarily driven by sales mix shift to higher-margin businesses. Operating expenses increased 41% with 43 points from the Activision acquisition. Operating income increased 16% and 15% in constant currency. Now back to total company results. Capital expenditures, including finance leases, were $14 billion to support our cloud demand, inclusive of the need to scale our AI infrastructure. Cash paid for PP&E was $11 billion. Cash flow from operations was $31.9 billion, up 31%, driven by strong cloud billings and collections. Free cash flow was $21 billion, up 18% year-over-year, reflecting higher capital expenditures to support our cloud and AI offerings. This quarter, other income and expense was negative $854 million, lower than anticipated, driven by losses on investments accounted for under the equity method. Our effective tax rate was approximately 18%. And finally, we returned $8.4 billion to shareholders through dividends and share repurchases. Now moving to our Q4 outlook, which unless specifically noted otherwise, is on a U.S. dollar basis. First, FX. Based on current rates, which reflect the recent strengthening of the U.S. dollar, we now expect FX to decrease total revenue and segment level revenue growth by less than 1 point. When compared to our January guide for Q4, FX, this is a decrease to total revenue of roughly $700 million. We expect FX to decrease COGS growth by approximately 1 point and operating expense growth by less than 1 point. In commercial bookings, we expect solid growth on a relatively flat expiry base driven by continued strong commercial sales execution. As a reminder, larger, long-term Azure contracts, which are more unpredictable in their timing, can drive increased quarterly volatility in our bookings growth rate. Microsoft Cloud gross margin percentage should decrease roughly 2 points year-over-year. Excluding the impact from the change in accounting estimate, Q4 cloud gross margin percentage will be down slightly as improvement in Azure, inclusive of scaling our AI infrastructure will be offset by sales mix shift to Azure. We expect capital expenditures to increase materially on a sequential basis driven by cloud and AI infrastructure investments. As a reminder, there can be normal quarterly spend variability in the timing of our cloud infrastructure build-outs and the timing of finance leases. We continue to bring capacity online as we scale our AI investments with growing demand. Currently, near-term AI demand is a bit higher than our available capacity. Next, to segment guidance. In Productivity and Business Processes, we expect revenue to grow between 9% and 11% in constant currency or US$19.9 billion to US$20.2 billion. In Office Commercial, revenue growth will again be driven by Office 365 with seat growth across customer segments and ARPU growth primarily through E5. We expect Office 365 revenue growth to be approximately 14% in constant currency. We continue to progress with adoption of CoPilot for Microsoft 365 and remain excited for the long-term growth opportunity. In our on-premises business, we expect revenue to decline in the mid to high teens. In Office Consumer, we expect revenue growth in the low to mid-single digits, driven by Microsoft 365 subscriptions. For LinkedIn, we expect revenue growth in the mid to high single digits driven by continued growth across all businesses. And in Dynamics, we expect revenue growth in the low to mid-teens, driven by Dynamics 365. For both LinkedIn and Dynamics, the continued bookings growth moderation noted earlier is a headwind to Q4 revenue growth. For Intelligent Cloud, we expect revenue to grow between 19% and 20% in constant currency or US$28.4 billion to US$28.7 billion. Revenue will continue to be driven by Azure, which, as a reminder, can have quarterly variability primarily from our per-user business and in-period revenue recognition depending on the mix of contracts. In Azure, we expect Q4 revenue growth to be 30% to 31% in constant currency or similar to our stronger-than-expected Q3 results. Growth will be driven by our Azure Consumption business and continued contribution from AI with some impact from the AI capacity availability noted earlier. Our per-user business should see benefit from Microsoft 365 suite momentum. Though we expect continued moderation in seat growth rates given the size of the installed base. In our on-premises server business, we expect revenue growth in the low to mid-single digits with continued hybrid demand, including licenses running in multi-cloud environments. And in Enterprise and Partner Services revenue should decline in the mid- to high single digits on a high prior year comparable for enterprise support services. In More Personal Computing, we expect revenue to grow between 10% and 13% in constant currency or US$15.2 billion to US$15.6 billion. Windows OEM revenue growth should be in the low to mid-single digits as PC market unit volumes continue at pre-pandemic levels. In Windows Commercial Products and Cloud Services, customer demand for Microsoft 365 and our advanced security solutions should drive revenue growth in the mid-single digits. As a reminder, our quarterly revenue growth can have variability primarily from in-period revenue recognition depending on the mix of contracts. In Devices, revenue should decline in the mid-teens as we continue to focus on our higher-margin premium products. Search and news advertising ex TAC revenue growth should be in the low to mid-teens, driven by continued volume strength. This will be higher than overall search and news advertising revenue growth, which we expect to be relatively flat. And in Gaming, we expect revenue growth in the low to mid-40s, including approximately 50 points of net impact from the Activision acquisition. We expect Xbox content and services revenue growth in the high 50s driven by approximately 60 points of net impact from the Activision acquisition. Hardware revenue will decline again year-over-year. Now back to company guidance. We expect COGS between US$19.6 billion to US$19.8 billion, including approximately $700 million from purchase accounting, integration and transaction-related costs from the Activision acquisition. We expect operating expense of US$17.15 billion to US$17.25 billion, including approximately $300 million from purchase accounting, integration and transaction-related costs from the Activision acquisition. Therefore, we now expect full year FY2024 operating margins to be up over 2 points year-over-year, even with our cloud and AI investments, the impact from the Activision acquisition and the headwind from the change in useful lives last year. This operating margin expansion reflects the hard work across every team to drive efficiencies and maintain disciplined cost management, knowing we will continue to grow our cloud and AI investments next year. Other income and expense should be roughly negative $850 million as interest income will be more than offset by interest expense and losses on investments accounted for under the equity method. As a reminder, we are required to recognize gains or losses on our equity investments which can increase quarterly volatility. We expect our Q4 effective tax rate to be approximately 18%. Now I\u2019d like to share some closing thoughts as we look to the next fiscal year. We continue to focus on building businesses that create meaningful value for our customers and therefore, significant growth opportunities for years to come. In FY2025, that focus on execution should again lead to double-digit revenue and operating income growth to scale to meet the growing demand signal for our cloud and AI products, we expect FY2025 capital expenditures to be higher than FY2024. These expenditures over the course of the next year are dependent on demand signals and adoption of our services. So we will manage that signal through the year. We will also continue to prioritize operating leverage. And therefore, we expect FY2025 operating margins to be down only about 1 point year-over-year, even with our significant cloud and AI investments, as well as a full year of impact from the Activision acquisition. We are leading the AI platform wave and are committed to bringing that value to our global customers as we enter the final quarter of our fiscal year. With that, let\u2019s go to Q&A, Brett.","evidence_gemma_new":null,"evidence_llama_3_3":"Productivity and Business Processes revenue Q3","evidence_qwen_3_30b":"Productivity and Business Processes revenue constant currency","gemma_new_max":null,"gemma_new_min":null,"llama_3_3_max":19490000000.0,"llama_3_3_min":19490000000.0,"qwen_3_30b_max":19600000000.0,"qwen_3_30b_min":19600000000.0}
{"symbol":"MSFT","year":2024,"quarter":4,"date":"2024-Q4","chunk_id":3,"sub_chunk_id":0,"centroid_label":"productivity and business processes revenue","agreed_value":20300000000.0,"count":2,"chunk":"Amy Hood: Thank you, Satya, and good afternoon everyone. This quarter, revenue was $64.7 billion, up 15% and 16% in constant currency. Earnings per share was $2.95 and increased 10% and 11% in constant currency. In our largest quarter of the year, we again delivered double-digit top and bottom line growth with continued share gains across many of our businesses and record commitments to our Microsoft Cloud platform. Commercial bookings were significantly ahead of expectations and increased 17% and 19% in constant currency. This record commitment quarter was driven by growth in the number of 10-million-dollar-plus and 100-million-dollar-plus contracts for both Azure and Microsoft 365 and consistent execution across our core annuity sales motions. Commercial remaining performance obligation increased 20% and 21% in constant currency to $269 billion. Roughly 40% will be recognized in revenue in the next 12 months, up 18% year-over-year. The remaining portion, recognized beyond the next 12 months, increased 21%. And this quarter, our annuity mix was 97%. At a company level, Activision contributed a net impact of approximately 3 points to revenue growth, was a 2 point drag on operating income growth, and had a negative $0.06 impact to earnings per share. A reminder that this net impact includes adjusting for the movement of Activision content from our prior relationship as a third-party partner to first-party, and includes $938 million from purchase accounting adjustments, integration, and transaction-related costs. FX did not have a significant impact on our results and was roughly in line with our expectations on total company revenue, segment level revenue, COGS, and operating expense growth. Microsoft Cloud revenue was $36.8 billion and grew 21% and 22% in constant currency, roughly in line with expectations. Microsoft Cloud gross margin percentage decreased roughly 2 points year-over-year to 69% in line with expectations. Excluding the impact of the change in accounting estimate for useful lives, gross margin percentage decreased slightly driven by sales mix shift to Azure, partially offset by improvement in Azure even with the impact of scaling our AI infrastructure. Company gross margin dollars increased 14% and 15% in constant currency and gross margin percentage decreased slightly year-over-year to 70%. Excluding the impact of the change in accounting estimate, gross margin percentage increased slightly, even with the impact from purchase accounting adjustments, integration, and transaction-related costs from the Activision acquisition. Operating expenses increased 13% with 9 points from the Activision acquisition. At a total company level, headcount at the end of June was 3% higher than a year ago. Operating income increased 15% and 16% in constant currency and operating margins were 43%, relatively unchanged year-over-year. Excluding the impact of the change in accounting estimate, operating margins increased slightly driven by the higher gross margin noted earlier and improved operating leverage through continued cost discipline. Now to our segment results. Revenue from Productivity and Business Processes was $20.3 billion and grew 11% and 12% in constant currency, slightly ahead of expectations driven by better-than-expected results across all business units. Office commercial revenue grew 12% and 13% in constant currency. Office 365 commercial revenue increased 13% and 14% in constant currency with ARPU growth primarily from E5 momentum as well as Copilot for Microsoft 365. Paid Office 365 commercial seats grew 7% year-over-year with installed base expansion across all customer segments. Seat growth was again driven by our small and medium business and frontline worker offerings, although both segments continued to moderate. Office commercial licensing declined 9% and 7% in constant currency, with continued customer shift to cloud offerings. Office consumer revenue increased 3% and 4% in constant currency with continued momentum in Microsoft 365 subscriptions, which grew 10% to 82.5 million. LinkedIn revenue increased 10% and 9% in constant currency driven by better-than-expected performance across all businesses. Dynamics revenue grew 16% driven by Dynamics 365 which grew 19% and 20% in constant currency. We saw continued growth across all workloads and better-than-expected new business. Dynamics 365 now represents roughly 90% of total Dynamics revenue. Segment gross margin dollars increased 9% and 10% in constant currency and gross margin percentage decreased roughly 1 point year-over-year. Excluding the impact of the change in accounting estimate, gross margin percentage decreased slightly driven by Office 365 as we scale our AI infrastructure. Operating expenses increased 5%, and operating income increased 12% and 13% in constant currency. Next, the Intelligent Cloud segment. Revenue was $28.5 billion, increasing 19% and 20% in constant currency, in line with expectations. Overall, server products and cloud services revenue grew 21% and 22% in constant currency. Azure and other cloud services revenue grew 29% and 30% in constant currency, in line with expectations and consistent with Q3 when adjusting for leap year. Azure growth included 8 points from AI services where demand remained higher than our available capacity. In June, we saw slightly lower-than-expected growth in a few European geos. In our per-user business, the enterprise mobility and security installed base grew 10% to over 281 million seats with continued impact from moderated growth in seats sold outside the Microsoft 365 suite. Therefore, our Azure consumption business continues to grow faster than total Azure. In our on-premises server business, revenue increased 2% and 3% in constant currency. Growth was driven by demand for our hybrid solutions although with slightly lower-than-expected transactional purchasing. Enterprise and partner services revenue decreased 7% on a strong prior year comparable for Enterprise Support Services. Segment gross margin dollars increased 16% and gross margin percentage decreased roughly 2 points year-over-year. Excluding the impact of the change in accounting estimate, gross margin percentage decreased slightly driven by sales mix shift to Azure, partially offset by the improvement in Azure noted earlier, even with the impact of scaling our AI infrastructure. Operating expenses increased 5% and operating income grew 22% and 23% in constant currency. Now to More Personal Computing. Revenue was $15.9 billion, increasing 14% and 15% in constant currency, with 12 points of net impact from the Activision acquisition. Results were above expectations driven by Windows commercial and Search. The PC market was as expected and Windows OEM revenue increased 4% year-over-year. Windows commercial products and cloud services revenue increased 11% and 12% in constant currency, ahead of expectations due to higher in-period revenue recognition from the mix of contracts. Devices revenue decreased 11% and 9% in constant currency, roughly in line with expectations, as we remain focused on our higher margin premium products. While early days, we\u2019re excited about the recent launch of our Copilot+ PCs. Search and news advertising revenue ex-TAC increased 19%, ahead of expectations, primarily due to improved execution. Healthy volume growth was driven by Bing and Edge. And in Gaming, revenue increased 44% with 48 points of net impact from the Activision acquisition. Xbox content and services revenue increased 61%, slightly ahead of expectations, with 58 points of net impact from the Activision acquisition. Stronger-than-expected performance in first-party content was partially offset by third-party content performance. Xbox hardware revenue decreased 42% and 41% in constant currency. Segment gross margin dollars increased 21%, with 10 points of net impact from the Activision acquisition. Gross margin percentage increased roughly 3 points year-over-year primarily driven by sales mix shift to higher margin businesses. Operating expenses increased 43% with 41 points from the Activision acquisition. Operating income increased 5% and 6% in constant currency. Now back to total company results. Capital expenditures including finance leases were $19 billion, in line with expectations, and cash paid for PP&E was $13.9 billion. Cloud and AI related spend represents nearly all of total capital expenditures. Within that, roughly half is for infrastructure needs where we continue to build and lease datacenters that will support monetization over the next 15 years and beyond. The remaining cloud and AI related spend is primarily for servers, both CPUs and GPUs, to serve customers based on demand signals. For the full fiscal year, the mix of our cloud and AI related spend was similar to Q4. Cash flow from operations was $37.2 billion, up 29% driven by strong cloud billings and collections. Free cash flow was $23.3 billion, up 18% year-over-year, reflecting higher capital expenditures to support our cloud and AI offerings. For the full-year, cash flow from operations surpassed $100 billion for the first time, reaching $119 billion. This quarter, other income and expense was negative $675 million, more favorable than anticipated with lower-than-expected interest expense and higher-than-expected interest income. Our losses on investments accounted for under the equity method were as expected. Our effective tax rate was approximately 19%, higher than anticipated due to a state tax law signed in June that was effective retroactively. And finally, we returned $8.4 billion to shareholders through dividends and share repurchases, bringing our total cash returned to shareholders to over $34 billion for the full fiscal year. Now, moving to our outlook. My commentary for both the full-year and next quarter is on a U.S. dollar basis unless specifically noted otherwise. Let me start with some full year commentary for FY2025. First, FX. Assuming current rates remain stable, we expect FX to have no meaningful impact to full-year revenue, COGS, or operating expense growth. Next, we continue to expect double-digit revenue and operating income growth as we focus on delivering differentiated value for our customers. To meet the growing demand signal for our AI and cloud products, we will scale our infrastructure investments with FY2025 capital expenditures expected to be higher than FY2024. As a reminder, these expenditures are dependent on demand signals and adoption of our services that will be managed through the year. As scaling these investments drives growth in COGS, we will remain disciplined on operating expense management. Therefore, we expect FY2025 OpEx growth to be in the single digits. And given our focused commitment to managing at the operating margin level, we still expect FY2025 operating margins to be down only about one point year-over-year. And finally, we expect our FY2025 effective tax rate to be around 19%. Now, to the outlook for our first quarter. Based on current rates, we expect FX to decrease total revenue and segment level revenue growth by less than one point. We expect FX to decrease COGS growth by less than one point and to have no meaningful impact to operating expense growth. In commercial bookings, increased long-term commitments to our platform and strong execution across core annuity sales motions should drive healthy growth on a growing expiry base. As a reminder, larger long-term Azure contracts, which are more unpredictable in their timing, can drive increased quarterly volatility in our bookings growth rate. Microsoft Cloud gross margin percentage should be roughly 70%, down year-over-year driven by the impact of scaling our AI infrastructure. We expect capital expenditures to increase on a sequential basis given our cloud and AI demand, as well as existing AI capacity constraints. As a reminder, there can be quarterly spend variability from cloud infrastructure buildouts and the timing of delivery of finance leases. Next to segment guidance. In Productivity and Business Processes, we expect revenue to grow between 10% and 11% in constant currency, or US$20.3 to US$20.6 billion. In Office Commercial, revenue growth will again be driven by Office 365 with seat growth across customer segments and ARPU growth through E5 and Copilot for Microsoft 365. We expect Office 365 revenue growth to be approximately 14% in constant currency. In our on-premises business, we expect revenue to decline in the mid to high-teens. In Office consumer, we expect revenue growth in the low to mid-single digits, driven by Microsoft 365 subscriptions. For LinkedIn, we expect revenue growth in the high single digits driven by continued growth across all businesses. And in Dynamics, we expect revenue growth in the low to mid-teens driven by Dynamics 365. For Intelligent Cloud we expect revenue to grow between 18% and 20% in constant currency, or US$28.6 billion to US$28.9 billion. Revenue will continue to be driven by Azure which, as a reminder, can have quarterly variability primarily from our per-user business and in-period revenue recognition depending on the mix of contracts. In Azure, we expect Q1 revenue growth to be 28% to 29% in constant currency. Growth will continue to be driven by our consumption business, inclusive of AI, which is growing faster than total Azure. We expect the consumption trends from Q4 to continue through the first half of the year. This includes both AI demand impacted by capacity constraints and non-AI growth trends similar to June. Growth in our per-user business will continue to moderate. And in H2, we expect Azure growth to accelerate as our capital investments create an increase in available AI capacity to serve more of the growing demand. In our on-premises server business, we expect revenue to decline in the low single digits as continued hybrid demand will be more than offset by lower transactional purchasing. And in Enterprise and partner services, revenue should decline in the low single digits. In More Personal Computing, we expect revenue to grow between 9% and 12% in constant currency, or US$14.9 billion to US$15.3 billion. Windows OEM revenue growth should be relatively flat, roughly in line with the PC market. In Windows commercial products and cloud services, customer demand for Microsoft 365 and our advanced security solutions should drive revenue growth in the mid-single digits. As a reminder, our quarterly revenue growth can have variability primarily from in-period revenue recognition depending on the mix of contracts. In Devices, revenue growth should be in the low to mid-single digits. Search and news advertising ex-TAC revenue growth should be in the mid to high-teens. This will be higher than overall Search and news advertising revenue growth, which we expect to be in the low single digits. And in Gaming, we expect revenue growth in the mid-30s, including approximately 40 points of net impact from the Activision acquisition. We expect Xbox content and services revenue growth in the low to mid-50s, driven by the net impact from the Activision acquisition. Hardware revenue will again decline year-over-year. Now back to company guidance. We expect COGS between US$19.95 billion to US$20.15 billion, including approximately $700 million from purchase accounting, integration, and transaction-related costs from the Activision acquisition. We expect operating expense of US$15.2 billion to US$15.3 billion, including approximately $200 million from purchase accounting, integration, and transaction-related costs from the Activision acquisition. Other income and expense should be roughly negative $650 million driven by losses on investments accounted for under the equity method as interest income will be mostly offset by interest expense. As a reminder, we are required to recognize gains or losses on our equity investments, which can increase quarterly volatility. We expect our Q1 effective tax rate to be approximately 19%. In closing, we remain focused on delivering innovations that matter to our global customers of every size. That focus extends to delivering on our financial commitments as well. We delivered operating margin growth of nearly three points year-over-year even as we accelerated our AI investments, completed the Activision acquisition, and had a headwind from the change of useful lives last year. So, as we begin FY2025, we will continue to invest in the cloud and AI opportunity ahead aligned, and if needed adjusted, to the demand signals we see. We are committed to growing our leadership across our commercial cloud and within that, the AI platform, and we feel well positioned as we start FY2025. With that, let's go to Q&A, Brett.","evidence_gemma_new":null,"evidence_llama_3_3":"Productivity and Business Processes revenue","evidence_qwen_3_30b":"Productivity and Business Processes revenue 11% 12% constant currency","gemma_new_max":null,"gemma_new_min":null,"llama_3_3_max":20300000000.0,"llama_3_3_min":20300000000.0,"qwen_3_30b_max":20300000000.0,"qwen_3_30b_min":20300000000.0}
{"symbol":"NEE","year":2023,"quarter":4,"date":"2023-FY","chunk_id":3,"sub_chunk_id":0,"centroid_label":"fpl reserve amortization mechanism","agreed_value":227000000.0,"count":2,"chunk":"Kirk Crews : Thanks John. Let's begin with FPL's detailed results. For the full year 2023 FPL's adjusted earnings per share increased $0.22 versus 2022. FPL's adjusted earnings results exclude the approximately $300 million after tax gain on the sale of Florida City Gas which closed on November 30th 2023. The principal driver of the 2023 full year performance was FPL's regulatory capital employed growth of approximately 12.5%. We continue to expect FPL's average annual growth and regulatory capital employed to be roughly 9% over the four year term of our current rate agreement, which runs through 2025. For the full year 2023, FPL's reported ROE for regulatory purposes will be approximately 11.8%. During the full year 2023, we used approximately $227 million of reserve amortization, leaving FPL with a yearend 2023 balance of roughly $1.2 billion. FPL's capital expenditures were approximately $2 billion in the fourth quarter, bringing its full year capital investments to a total of roughly $9.4 billion. These capital investments supported the successful commissioning of roughly 1, 200 megawatts of solar in 2023, continued hardening of the grid, and our efforts to underground our distribution system. During the fourth quarter of 2023, our 25 megawatt hydrogen pilot at the Okeechobee Clean Energy Center successfully achieved commercial operations. As a reminder, we plan to utilize this facility together with adjacent solar projects to create green hydrogen and blend it with natural gas at our Okeechobee plant. Key indicators show that the Florida economy remains strong and Florida's population continues to be one of the fastest growing in the country. Florida's economy continues to trend upward, and its GDP is now roughly $1.6 trillion, an increase of 9.3% over last year. For the fourth quarter of 2023, FPL's retail sales increased 1.6% from the prior year on a weather normalized basis, driven primarily by continued strong customer growth, which increased by nearly 81, 000 from the prior year comparable quarter. For the full year 2023, FPL retail sales increased 0.6% from the prior year on a weather normalized basis, also driven primarily by the strong customer growth in our service territory. Now, let's turn to Energy Resources, which reported full year adjusted earnings growth of approximately 12.9% year-over-year. Contributions from new investments increased by $0.35 per share due to strong growth in our renewables and storage portfolio. Contributions from our existing clean energy assets decreased results by $0.11 per share, driven primarily by the impact of weaker wind resource. 2023 was the lowest wind resource on record over the past 30 years. Our customer supply and trading business increased results by $0.16 per share, primarily due to higher margins in our customer facing businesses. Other decreased results by $0.26 per share year-over-year. This decline reflects higher interest costs of $0.22 per share, of which $0.10 was driven by new borrowing costs to support new investments. Energy Resources delivered our best year ever for origination, adding approximately 9, 000 megawatts of new renewables and battery storage projects to our backlog, which includes approximately 2, 060 megawatts since our last call. Our 2023 origination performance reflects continued strong demand from power customers looking for the least cost alternative to serve load and to replace uneconomic generation and commercial and industrial customers looking to help decarbonize their operation or meet their data center and AI demand. Our renewables backlog now stands at more than 20 gigawatts after taking into account roughly 2, 470 megawatts of new projects placed into service since our third quarter call. We believe our 20 gigawatt backlog provides clear visibility and Energy Resources\u2019 ability to deliver for shareholders through 2026 and beyond. Turning now to the consolidated results for NextEra Energy. For the full year adjusted earnings from our corporate and other segment decreased by $0.08 per share year-over-year, primarily driven by higher interest costs. We successfully supported the growth in our underlying businesses from our strong operating cash flows, including the sale of tax credits as well as our historical funding sources. In 2023, we grew cash flow from operations well in excess of our adjusted earnings. We transferred approximately $400 million of tax credits, establishing relationships with numerous counterparties. We believe this will prove to be a competitive advantage as buyers look first to NextEra Energy given its size, experience, and the overall quality of its tax credit program. Overall, our funding plans for 2024 through 2026 remain consistent with the information we shared on the third quarter earnings call. We continue to believe NextEra Energy is well positioned to manage the interest rate environment. While the recent decline in interest rates is encouraging, we remain committed to managing the business to deliver value for customers and shareholders. Overall, we believe we are well positioned with $18.5 billion of interest rate swaps and we will continue to closely monitor the interest rate environment as the clients and rates certainly represent a tail end for our sector and customers. Our long-term financial expectations remain unchanged. We will be disappointed if we are not able to deliver financial results at or near the top end of our adjusted EPS expectation ranges in 2024, 2025, and 2026. For the last 14 consecutive years, NextEra Energy has met or exceeded its financial expectation, which is a record we are proud of. From 2021 to 2026, we continue to expect that our average annual growth and operating cash flow will be at or above our adjusted EPS compound annual growth rate range. And we also continue to expect to grow our dividends per share at roughly 10% per year through at least 2024 off a 2022 base. As always, our expectations assume our caveats. Now let's turn to NextEra Energy Partners. In terms of the transition plans, NextEra Energy Partners closed the sale of Texas pipeline portfolio in late December, providing net proceeds of approximately $1.4 billion. NextEra Energy Partners expect to complete the NEP Renewables II buyouts of roughly $190 million and $950 million on their stated minimum buyout dates of June 2024 and 2025, respectively, as the partnerships continue to benefit from the low cash coupon through 2025. In terms of NextEra Energy Partners ' growth plan, as a reminder, it involves organic growth, specifically repowerings of approximately 1.3 gigawatt of wind projects through 2026, as well as acquiring assets at attractive yields. Today, we are announcing plans to repower an additional approximately 245 MW of wind facilities through 2026. The partnership has now announced roughly 985 MW of repowers with strong cash available for distribution yields. While the partnership does not expect to need an acquisition in 2024, the LP distribution growth target of 6% is supported, in part with roughly 175 MW of wind repowers, which are expected to generate attractive cash available for distribution yields. Finally, we were pleased with the high yield note issuance of $750 million, which was completed during the fourth quarter of 2023. This opportunistic refinancing allowed the partnership to pay off its corporate revolver in mid-December. Let me now turn to the financial results for NextEra Energy Partners. Fourth quarter adjusted EBITDA was $454 million, and cash available for distribution was $86 million. Adjusted EBITDA growth versus the prior year comparable quarter was primarily due to new asset additions and the incentive distribution's right fee suspension, while cash available for distribution was also impacted by incremental debt service. For the full year 2023, adjusted EBITDA was approximately $1.9 billion, up 13.6% year-over-year, and was primarily driven by the contribution for new projects acquired in late 2022 and during 2023 and the Incentive Distribution Right Fee Suspension. New investments added approximately $228 million and the Incentive Distribution Right Fee Suspension added approximately $113 million of adjusted EBITDA year-over-year. This growth was partially offset by a decline from existing projects driven primarily by weaker wind resource. Cash available for distribution was $689 million for the full year and primarily driven by contributions from new projects of approximately $42 million and the Incentive Distribution Right Fee Suspension of $113 million while being partially offset by the weaker wind resource. Yesterday, the NextEra Energy Partners Board declared a quarterly distribution of $0.88 per common unit or $3.52 per unit on an annualized basis, which reflects an annualized increase of 6% from its third quarter 2023 distribution per unit. The partnership grew its LP distributions per unit by more than 8% year-over-year. From an updated base of our fourth quarter 2023 distribution per common unit and an annualized rate of $3.52, we continue to see 5% to 8% growth per year in LP distributions per unit with a current target of 6% growth per year as being a reasonable range of expectations through at least 2026. We continue to expect the partnership payout ratio to be in the mid-90s through 2026. We expect the annualized rate of the fourth quarter 2024 distribution that is payable in February 2025 to be $3.73 per common unit. NextEra Energy Partners is introducing December 31, 2024 run rate expectations for adjusted EBITDA in a range of $1.9 billion to $2.1 billion and cash available for distribution in a range of $730 million to $820 million reflecting calendar year 2025 expectations for the forecasted portfolio at year end 2024. As a reminder, our expectations are subject to our caveat. That concludes our prepared remarks and with that, we will open the line for questions.","evidence_gemma_new":null,"evidence_llama_3_3":"FPL reserve amortization full year 2023","evidence_qwen_3_30b":"reserve amortization full year 2023","gemma_new_max":null,"gemma_new_min":null,"llama_3_3_max":227000000.0,"llama_3_3_min":227000000.0,"qwen_3_30b_max":227000000.0,"qwen_3_30b_min":227000000.0}
{"symbol":"NEE","year":2023,"quarter":1,"date":"2023-Q1","chunk_id":2,"sub_chunk_id":0,"centroid_label":"fpl reserve amortization mechanism","agreed_value":373000000.0,"count":2,"chunk":"Kirk Crews: Thank you, Kristen, and good morning everyone. NextEra Energy is off to a strong start in 2023. Adjusted earnings per share increased by approximately 13.5% year-over-year building on the success of last year's strong execution and financial performance. During the quarter, we were honored that NextEra Energy was again ranked number one in our sector on Fortune's list of the world's most admired companies for the 16th time in 17 years. We are extremely proud of the team and culture we have built that has enabled us to deliver low-cost clean and reliable power to our customers, while also providing long-term value to our shareholders. FPL is the largest electric utility in the US and Florida is now officially the fastest-growing state in America. At FPL, our focus remains the same deploying smart capital to deliver on what we believe is one of the best customer value propositions in our industry. Key to that strategy is keeping customer bills affordable. And this quarter, we proposed using projected 2023 fuel savings to reduce unbilled fuel costs from 2022 to provide bill relief to customers. To further manage fuel price volatility, we are also helping customers by adding more solar to the FPL grid. This quarter, we placed into service approximately 970 megawatts of new low-cost solar. Putting FPL's owned and operated solar portfolio at nearly 4,600 megawatts, which is the largest solar portfolio of any utility in the country. We believe solar is now the lowest cost generation option for Florida customers, but represents only about 5% of FPL's delivered energy. In order to extend the benefits of low-cost solar to customers, FPL's recently filed 10-year site plan, now includes nearly 20,000 megawatts of new solar. Energy Resources, the world's leader in renewables and a leader in battery storage, remains laser-focused on executing a strategy of decarbonizing the power sector and helping commercial and industrial customers outside the power sector, reduce their energy cost and decarbonize their operations by moving to low-cost renewables and other clean energy solutions. This quarter, Energy Resources added approximately 2,020 megawatts of new renewables and storage projects to its backlog. Energy Resources also closed on its previously announced acquisition of a large portfolio of operating landfill gas-to-electric facilities, providing the foundation for our growing RNG business. We are also excited to announce a new memorandum of understanding with CF Industries to create green hydrogen, establishing what we expect will be a long-term relationship with the world's largest ammonium producer. And finally, Energy Resources continues to build what we believe is the nation's leading competitive transmission business to help support growth in renewables. We are pleased to announce that the California ISO recently recommended for approval approximately $400 million in new transmission and substation upgrades for NextEra Energy Transmission. We believe, NextEra Energy continues to be anchored by two great businesses that leverage each other's expertise to make them even better. We do not believe anyone in our industry has our set of skills, scale and breadth of opportunities. We believe NextEra Energy is able to buy, build operate and finance cheaper with one of the strongest balance sheets in our sector. We also believe our best-in-class development skills and unparalleled data set enable us to provide innovative technology and low-cost clean energy solutions for the benefit of our customers. The opportunities and products demanded by the market are becoming more complex, requiring significant scale and a combination of skills that we believe few of our competitors can offer, further enhancing our competitive advantages and creating even more growth opportunities for our business going forward. We have a culture rooted and continuous improvement, always striving to be better. Along those lines, we just completed our annual employee-led productivity initiative, which we now call Velocity. For over 11 years, our employees have generated approximately $2.6 billion in annual run rate savings ideas, as part of this process. In 2023 alone, our team generated ideas expected to produce roughly $325 million in annual run rate savings, which when combined with last year's results of over $400 million is the most productive two-year period in this program's history and that's after doing it for over a decade. We believe we have the best team in the industry, and these results are indicative of the breadth and depth of capabilities and the commitment to excellence that our team brings to our business every day and executing on behalf of our customers and shareholders. With that let's turn to the detailed results beginning with FPL. For the first quarter of 2023, FPL reported net income of $1.07 billion, or $0.53 per share an increase of $0.09 year-over-year. Regulatory capital employed growth of approximately 11.2% was a significant driver of FPL's EPS growth versus the prior year comparable quarter. FPL's capital expenditures were approximately $2.3 billion for the quarter. We expect our full year 2023 capital investments at FPL to be between $8.0 billion and $9.0 billion, as we continue to invest capital smartly for the continued benefit of our customers. FPL's reported ROE for regulatory purposes will be approximately 11.8% for the 12 months ending March 2023. During the quarter, we utilized $373 million of reserve amortization to achieve our targeted regulatory ROE leaving FPL with a balance of $1.07 billion. As we've previously discussed, FPL historically utilizes more reserve amortization in the first half of the year, and we expect this trend to continue this year. Earlier this year, the Florida Public Service Commission approved FPL's proposed plan to recover approximately $2.1 billion of incremental fuel costs from 2022 partially offset by projected 2023 fuel savings of approximately $1.4 billion. Amid high natural gas prices in 2022, FPL's decades-long modernization of its generation fleet has saved customers more than $2 billion in fuel costs in 2022 alone. The commission also recently approved recovery of approximately $1.3 billion of hurricane costs from 2022 over a 12-month period. Taking all approved adjustments together, we anticipate that FPL's typical 1,000 kilowatt hour residential customer bills will remain well below the projected national average and among the lowest of all Florida utilities. Turning to our development planning and efforts. FPL recently filed its annual 10-year site plan that presents our generation resource plan for the next decade. The 2023 plan includes roughly 20,000 megawatts of new low-cost solar capacity across our service territory over the next 10 years, which would result in nearly 35% of FPL's forecasted energy delivery in 2032 coming from cost-effective solar generation up significantly from roughly 5% in 2022. Given the increasing customer benefits of low-cost renewables FPL's post-2025 solar capacity additions and this year's plan are more than double last year's approved plan and also includes 2 gigawatts of battery storage over the next decade. We believe the expansion of cost-effective solar and storage will provide a valuable hedge for our customers against volatile natural gas prices and meet the electricity demand of FPL's growing customer base with a low-cost generation source. Finally, construction of our green hydrogen pilot at our Okeechobee Clean Energy Center is on track and projected to go into service later this year. Turning now to the Florida economy. Florida became the fastest-growing state in the nation in 2022 and its population continues to increase with over 1,000 people moving to Florida every day. Over the last five years, Florida's GDP has grown at a roughly 7% compound annual growth rate and is now approximately $1.4 trillion which is up approximately 8% versus a year ago. Based on GDP, if Florida was a country, it would have the 14th largest economy in the world. FPL's first quarter retail sales increased 0.4% from the prior year comparable period driven by continued solid underlying population growth with FPL's average number of customers increasing by approximately 65,000, even after removing roughly 15,000 inactive customers due to Hurricane Ian. For the first quarter, we estimate that the positive impact of warmer weather was more than offset by a decline in underlying usage for our customers. As we have often pointed out, underlying usage can be somewhat volatile on a quarterly basis, particularly during periods when temperatures deviate significantly from normal, as we experienced this winter with average temperatures greater than four degrees above normal. Our long-term expectations of underlying usage growth continues to average between zero and approximately negative 0.5% per year. Energy Resources report first quarter 2023 GAAP earnings of approximately $1.440 billion or $0.72 per share. Adjusted earnings for the first quarter were $732 million or $0.36 per share up $0.04 versus the prior year comparable period. Contributions from new investments increased $0.07 per share year-over-year. Contributions from our existing Clean Energy portfolio were lower by $0.03 per share primarily due to less favorable wind and solar resource compared to the prior year. The contribution from our customer supply and trading business increased by $0.06 per share primarily due to higher margin in our customer-facing business and compared to a relatively weaker contribution in the prior year comparable quarter. Gas infrastructure and all other impacts reduced earnings by $0.01 and $0.05 per share respectively versus 2022. Energy Resources had another strong quarter of origination capitalizing on strong global demand environment. Since the last call, we added approximately 2020 megawatts of new renewables and storage projects to our backlog including roughly 1370 megawatts of solar, 450 megawatts of storage and 200 megawatts of wind. With these additions, our renewables and storage backlog now stands at over 20.4 gigawatts net of projects placed in service and provides strong visibility into our future growth. With more than 1.5 years remaining before the end of 2024, we are now within the 2023 to 2024 development expectations range. Given the volatility in gas and power prices over the last 1.5 years, we continue to see economics driving long-term decision-making and renewables remain the clear low-cost option for many customers. On the supply -- solar supply chain front, we continue to take constructive steps to mitigate potential future disruption. Nearly every one of our suppliers has repositioned their supply chains to manufacture solar panels in Southeast Asia using wafers and cells produced outside of China, and all our suppliers are expected to meet the criteria established in the Commerce Department's preliminary determination in the 2022 circumvention case by the end of 2023. Additionally, we are focused on further diversifying our supply chain and are currently advancing discussions to support the domestic production of solar panels. Finally, we are encouraged by the improvement in the flow of panels into the US as suppliers continue to provide the requested traceability documentation to US Customs and Border Protection. Also, during the quarter, we closed on the previously announced transaction to acquire a large portfolio of operating landfill gas-to-electric facilities that I mentioned earlier. The approximately $1.1 billion transaction represents an attractive opportunity for energy resources to realize double-digit returns on this investment, while expanding its portfolio of renewable natural gas assets and growing its in-house capabilities and rapidly expanding renewable fuel market. Turning to green hydrogen, we are excited about the role it is expected to play as a solution to help our customers cost effectively lower emissions. As the world leader in renewables and a leader in battery storage, we believe we are the logical partner for green hydrogen with significant interconnection and land inventory positions and deep market expertise to help our potential partners optimize some of the best green hydrogen sites around the country. As a result, with the right regulation, we see hydrogen quickly becoming a significant technology for our customers and a new growth driver for energy resources given the number and size of the opportunities we are evaluating. Earlier this month, NextEra Energy joined a coalition of 45 other companies with a combined approximately $1 trillion in market capitalization and sending a letter to the Secretaries of Energy & Treasury and the White House advocating for programmatic policies for the implementation of the IRAs green hydrogen production tax credit. This coalition is advocating for prudent policy that will foster investment in green hydrogen technology paving the way for the US to become the world leader in hydrogen technology. A key aspect of this policy is for the electricity consumed for green hydrogen production to be matched to its renewable power generation on an annual rather than an hourly basis. We believe that an annual matching construct has several benefits over hourly including lower green hydrogen prices, more renewables being built, a significant reduction in carbon emissions, and green hydrogen achieving cost parity with gray and blue hydrogen both of which rely on fossil fuels for their production. This viewpoint is supported by numerous third-party studies from respected entities such as Wood Mackenzie, Rhodium Group, Energy Futures Initiative, Energy and Environmental Economics, and MIT Energy Institute. As we continue to work with the industry and government representatives to progress a smart hydrogen policy, we are also advancing our green hydrogen development efforts including a recently executed Memorandum of Understanding for a joint venture with CF Industries, the world's largest producer of ammonia to develop -- to deliver green hydrogen to an existing CF Industries ammonia production facility which it intends to expand and incorporate green hydrogen into its production process. The proposed facility includes an approximately 450-megawatt renewable energy solution, powering a 40 tons per day hydrogen facility. This project combined with other opportunities we are pursuing represent significant momentum for green hydrogen, which we believe will continue to be a driver of new renewables growth going forward. Our team continues to engage with multiple potential partners and customers on hydrogen projects, representing over $20 billion of capital investments and requiring more than 15 gigawatts of new renewables to support. As we focus on leading the decarbonization of the US economy, building additional transmission is essential to support long-term renewables deployment. We believe our ability to build, own and operate transmission as a key competitive advantage for our renewables business, in addition to being a terrific investment opportunity. We are pleased that the California ISO recently recommended for approval of approximately $400 million in transmission and substation upgrades for NextEra Energy Transmission, subject to approval by the CAISO Board of Governors in May. We believe these projects along with others could unlock up to 11 gigawatts of new renewable generation that could be built to support California's ambitious clean energy goals. Turning now to the consolidated results for NextEra Energy. For the first quarter of 2023 GAAP earnings attributable to NextEra Energy were $2.086 billion or $1.04 per share. NextEra Energy's 2023 first quarter adjusted earnings and adjusted EPS were approximately $1.678 billion and $0.84 per share respectively. Adjusted earnings for the Corporate and Other segment decreased results by $0.03 per share year-over-year, primarily driven by higher interest rates. In March, S&P affirmed all its ratings for NextEra Energy and lowered its downgrade threshold for its funds from operations or FFO to debt metric from the previous level of 20% to the current level of 18%. In making this favorable adjustment, S&P acknowledged improvement in Energy Resources business risk following the passage of the IRA, particularly noting the improved visibility and clarity into long-term cash flows. At the same time, S&P adjusted its treatment of non-recourse project debt associated with FERC Regulated investments to bring it back on credit. We believe this overall favorable adjustment, which creates roughly 50 bps of additional headroom against the downgrade threshold, highlights the attractive risk profile of renewables and acknowledges the long-term stable cash flows and Energy Resources business, particularly given the benefits of the IRA. Finally as we have discussed in the past, we actively enter into various interest rate swaps products to manage interest rate exposure on future debt issuance. Today, we have $21 billion of interest rate swaps at NextEra Energy to help mitigate the impact of potential future increases in rates, which exceeds the notional value of our 2023 and 2024 maturities. And as always, the current interest rate environment is taken into account in our financial expectations. Our long-term financial expectations which we extended earlier this year through 2026 remain unchanged. And we will be disappointed if we are not able to deliver financial results at or near the top end of our adjusted EPS expectation ranges in each year from 2023 to 2026, while at the same time maintaining our strong balance sheet and credit ratings. From 2021 to 2026, we also continue to expect that our average annual growth in operating cash flow will be at or above our adjusted EPS compound annual growth rate range. We also continue to expect to grow our dividends per share at roughly 10% per year through at least 2024 off a 2022 base. As always, our expectations assume our usual caveats including normal weather and operating conditions. Turning to NextEra Energy Partners. We believe, we have never had more visible growth opportunities than we have today. We have the ability to grow in three ways: acquiring assets from Energy Resources, growing organically and buying assets from other third parties. With significant tailwinds from the IRA, Energy Resources' operating portfolio, combined with its backlog of projects and development expectations through 2026, total approximately 58 gigawatts, providing terrific visibility for NextEra Energy Partners and Energy Resources is continuing to grow in innovative ways, adding new technologies and clean energy assets to its portfolio, such as RNG and hydrogen. In addition to acquiring assets from Energy Resources, NextEra Energy Partners also has the ability to repower its existing assets, with approximately 1,300 megawatts of potential wind repowerings, already identified, and many more opportunities expected to come, as well as potential to locate storage at its existing renewable assets, given the new stand-alone storage ITC. Finally, there are significant acquisition opportunities with renewable portfolios, continuously being brought to market. NextEra Energy Partners also has numerous ways that can finance this growth and we believe, it can do so efficiently, given its ample liquidity and access to capital. At the end of the first quarter, NextEra Energy Partners had $2.8 billion of liquidity and approximately $6 billion of interest rate swaps to manage future interest rate volatility on debt maturities through 2026. With regard to convertible equity portfolio financing, we can fund equity buyouts by delivering common units or utilizing our at-the-market or ATM program or a combination of both and we believe we have ample liquidity to fund cash payments. Importantly, we have flexibility and we expect to leverage this flexibility to manage future buyouts to select the most efficient option. Using this flexibility, NextEra Energy Partners has now bought out 50% of the STX Midstream convertible equity portfolio financing through funds generated from a combination of the ATM program, where NextEra Energy Partners was able to be opportunistic and cash from a subsidiary's revolving credit facility. With the buyouts of the 2018 convertible equity portfolio financing and 50% of the STX Midstream convertible equity portfolio financing complete, we estimate that the convertible equity portfolio financing structure has resulted in approximately 55% and 64% respectively or 16 million fewer units being issued, compared to raising capital with underwritten block equity, all for the benefit of unitholders. For the balance of the year, files are now expected to be limited to the remaining 50% of the STX Midstream convertible equity [ph] portfolio financing and 15% of the net renewables to convertible equity portfolio financing with the equity portion of these buyouts requiring common units of approximately $280 million and $130 million respectively. Over the next eight months, we have flexibility and time to opportunistically manage these buyouts in the most efficient way. For each buyout, we have the flexibility to deliver common units to the convertible equity portfolio financing investor, utilize the ATM program or some combination of the two. Ultimately, we will select the most efficient option. In any event, the potential unit issuance from these buyouts are not expected to exceed an average of three days of total trading volume per quarter, which we expect will make them quite manageable. Most importantly, NextEra Energy Partners' growth expectations through 2026 already factor in its financing plan, including convertible equity portfolio financing buyouts at current trading yields. Turning to distribution growth. Yesterday the NextEra Energy Partners Board declared a quarterly distribution of $0.8425 per common unit or $3.37 per common unit on an annualized basis, up approximately 15% from a year earlier. Inclusive of this quarter, NextEra Energy Partners has grown its LP distribution per unit up nearly 350% since the IPO. Today we are pleased to announce that NextEra Energy Partners has entered into an agreement with Energy Resources to acquire an approximately 690-megawatt portfolio of long-term contracted operating wind and solar projects and attractive cash available for distribution yield. The high-quality portfolio has a cash available for distribution, weighted average remaining contract life of approximately 16 years, an average customer credit rating of BBB at S&P and Baa2 at Moody's Investors Service. NextEra Energy Partners is expected to acquire the portfolio for approximately $708 million, subject to closing adjustments and is inclusive of the portfolio's existing project debt and interest rate swaps which are estimated to be approximately $142 million. In addition to the approximately $708 million purchase price, NextEra Energy Partners is also expected to assume the portfolio's existing tax equity financing balance. The remaining purchase price is expected to be funded by a combination of new project finance debt and the corporate revolving credit facility. The portfolio of assets is expected to contribute adjusted EBITDA of approximately $110 million to $130 million and cash available for distribution prior to the existing project debt service of approximately $62 million to $72 million, each on a five-year average annual run rate basis, beginning December 31 2023. The transaction is expected to close in the second quarter of this year. Additional details on the portfolio of assets to be acquired by NextEnergy Partners can be found in the appendix of today's presentation. Next Energy Partners will remain opportunistic pursuing acquisitions in 2023. And with the closing of the transaction announced today, NextEnergy Partners expects to be well positioned to meet its year-end 2023 adjusted EBITDA and cash available for distribution run rate expectations. Turning to the detailed results. NextEra Energy Partners delivered first quarter adjusted EBITDA and cash available for distribution results in line with management's expectations. Adjusted EBITDA of $447 million increased by $35 million versus the prior year, driven primarily by favorable contributions from the approximately 1,200 net megawatts of new projects acquired in 2022. Both adjusted EBITDA and cash available for distributions were negatively affected by lower resource from existing projects. Additionally, cash available from distribution was lower versus the prior year comparable period due to incremental debt service and timing of payable payments. Looking forward in the second half of 2023, we expect strong double-digit growth in adjusted EBITDA and cash available for distribution to support NextEra Energy Partners, distribution per unit growth expectation range of 12% to 15% for the full year 2023. Additional details are shown on the accompanying slide. NextEra Energy Partners continues to expect run rate contributions for adjusted EBITDA and cash available for distributions from its forecasted portfolio at December 31, 2023, to be in the ranges of $2.22 billion to $2.42 billion and $770 million to $860 million respectively. As a reminder, year-end 2023 run rate projections reflect calendar year 2024 contribution from the forecasted portfolio at year-end 2023 and include the impact of IDR fees, which we treat as an operating expense. As always, our expectations are subject to our usual caveats including normal weather and operating conditions. From a base of our fourth quarter 2022 distribution per common unit at an annualized rate of $3.25, we continue to see 12% to 15% growth per year in LP distributions as being a reasonable range of expectations through at least 2026. We continue to remain comfortable with these growth expectations. And in fact even at the current trade yield, Energy Resources portfolio alone is just one way NextEra Energy Partners believes it can meet its growth expectations through 2026. For 2023, we expect the annualized rate of the fourth quarter 2023 distribution that is payable in February 2024 to be in a range of $3.64 to $3.74 per common unit. We also continue to expect to achieve our 2023 distribution growth of 12% to 15%. In summary, we continue to believe that both NextEra Energy and NextEra Energy Partners are well-positioned to continue delivering on their long-term growth prospects. At FPL that means executing on smart capital investments to deliver on its customer value proposition of low bills, high reliability and outstanding customer service. At Energy Resources that means leading the decarbonization of both the power sector and non-power sector and leveraging its competitive advantages to capitalize on low-cost renewals and new emerging technologies like green hydrogen. In NextEra Eneregy Partners, we expect to capitalize on its unmatched growth visibility to further expand its best-in-class clean energy portfolio to provide long-term distribution growth for unit holders. With that, we are happy to address your questions.","evidence_gemma_new":null,"evidence_llama_3_3":"FPL reserve amortization quarter","evidence_qwen_3_30b":"reserve amortization FPL targeted regulatory ROE","gemma_new_max":null,"gemma_new_min":null,"llama_3_3_max":373000000.0,"llama_3_3_min":373000000.0,"qwen_3_30b_max":373000000.0,"qwen_3_30b_min":373000000.0}
{"symbol":"NEE","year":2023,"quarter":3,"date":"2023-Q3","chunk_id":2,"sub_chunk_id":0,"centroid_label":"fpl reserve amortization mechanism","agreed_value":245000000.0,"count":2,"chunk":"Kirk Crews: Thanks Kristin and good morning. NextEra Energy delivered strong third-quarter results, growing adjusted earnings per share approximately 10.6% year-over-year. In the quarter, FPL continued to deliver outstanding value to its customers in what we believe has been one of the most constructive regulatory jurisdictions in the nation. FPL's bills are well below the national average, and we are relentlessly focused on reliability and running the business efficiently. Energy Resources extended its leadership position in renewable energy during the third quarter with strong adjusted earnings growth and its best renewables and storage origination quarter in its history. NextEra Energy has clear growth visibility through FPL's capital plan and Energy Resources' over 21 gigawatt renewables and storage backlog. With the strongest balance sheets in the sector and worldwide banking relationships, we believe NextEra Energy has both significant access to capital and cost-of-capital advantages and is well positioned to continue to deliver long-term value for shareholders. Now let's turn to FPL's detailed results. For the third quarter of 2023, FPL's earnings per share increased $0.04 year-over-year. The principal driver of this performance was FPL's regulatory capital employed growth of approximately 13.6% year-over-year. We continue to expect FPL to realize roughly 9% average annual growth in regulatory capital employed over our current rate agreement's four-year term, which runs through 2025. FPL's capital expenditures were approximately $2.6 billion for the quarter, and we expect FPL's full-year 2023 capital investments to be between $9 billion and $9.5 billion. For the 12 months ending September 2023, FPL's reported ROE for regulatory purposes will be approximately 11.8%. During the third quarter, we reversed roughly $245 million of reserve amortization, leaving FPL with a balance of over $1.2 billion. Over the current four-year settlement agreement, we continue to expect FPL to make capital investments of between $32 billion to $34 billion. Our capital investment plan is well-established and focused on enhancing what we believe is one of the best customer value propositions in the industry. Key indicators show that the Florida economy remains healthy and Florida continues to be one of the fastest-growing states in the country. FPL's third-quarter retail sales increased 3% from the prior year-comparable period due to warmer weather, which had a positive year-over-year impact on usage for customer of approximately 2%. As a result, FPL observed solid underlying growth in third quarter retail sales of roughly 1% on a weather normalized basis. Now let's turn to energy resources, which reported adjusted earnings growth of approximately 21% year-over-year. Contributions from new investments increased $0.11 per share year-over-year, while our existing clean energy portfolio declined $0.02 per share, which includes the impact of weaker year-over-year wind resource. The comparative contribution from our customer supply and trading and gas infrastructure businesses increased by $0.04 per share and $0.01 per share respectively. All other impacts reduced earnings by $0.08 per share. This decline reflects higher interest costs by $0.06 per share, half of which is driven by new borrowing costs to support new investments. Energy resources had a record quarter of new renewables and storage origination at approximately 3,245 megawatts to the backlog, which is the first time we have exceeded three gigawatts in a single quarter. Although we will remind you that signings can be lumpy quarter-to-quarter, we do believe this is a terrific sign of strong underlying demand for new renewable generation. With these additions, our backlog now totals over 21 gigawatts after taking into account roughly 1,025 megawatts of new projects placed into service since our second quarter call. We also removed roughly 1,180 megawatts from our backlog, including roughly 800 megawatts of projects in New York following an adverse decision by NYSERDA two weeks ago. We are optimistic that these projects will ultimately move forward, but are removing them from backlog for now. The remaining megawatts were removed due to permitting challenges. Overall, we remain on track to achieve our renewable development expectations of roughly 33 gigawatts to 42 gigawatts through 2026. This quarter's backlog additions include roughly 455 megawatts to repower existing wind facilities, which includes energy resources share of approximately 740 megawatts of repowers within the NextEra Energy Partners portfolio, which I'm going to discuss in a few minutes. As a reminder, in a repower, we invest roughly 50% to 80% of the cost of a new build, are able to refresh and enhance the performance of the turbine equipment, and start a new 10 years of production tax credits, collectively resulting in attractive returns. Energy Resources has previously repowered roughly 6 gigawatts of its approximately 23 gigawatt operating wind portfolio, and we believe we will be able to repower much of our existing wind portfolio in the coming years. Also included in the backlog additions are roughly 250 megawatts of standalone battery storage projects co-located with existing wind and solar facilities. The combination of the standalone storage tax credit and the ability to utilize existing interconnection capacity from our operating renewables and storage footprint positions us well to serve our customers' growing needs for capacity. Turning now to our third quarter 2023 consolidated results, adjusted earnings from corporate and other decreased by $0.01 per share year-over-year. Our long-term financial expectations remain unchanged. We will be disappointed if we are not able to deliver financial results at or near the top end of our adjusted EPS expectation ranges in each year from 2023 through 2026. From 2021 to 2026, we continue to expect that our average annual growth and operating cash flow will be at or above our adjusted EPS compound annual growth rate range, and we continue to expect to grow our dividends per share at roughly 10% per year for at least 2024 off a 2022 base. As always, our expectations are subject to our caveats. Going forward, we plan to fund the business in a manner similar to how we have historically done so at both FPL and Energy Resources. This includes utilizing cash flow from operations for roughly half of our funding needs, in addition to tax equity, project finance, and corporate debt. The sale of tax credits is serving as a new source of capital funding for NextEra Energy. We expect to transfer roughly $400 million in tax credits in 2023 and expect this amount to grow over the next couple of years to approximately $1.6 billion to $1.8 billion in 2026. This dynamic has reduced NextEra Energy's capital recycling needs, including those previously met via sales to NextEra Energy partners, which has historically averaged roughly $1 billion of annual cash proceeds. Let me address future equity issuances specifically. Our balance sheet and financial discipline remain core to our strategy. As we find attractive investments for our customers and shareholders, we expect to fund those investments in a way that maintains the strength of our balance sheet. As a reminder, over the last five years, we have issued roughly $1.5 billion annually on average of equity in the form of equity units. We do not expect to issue any equity for the balance of 2023 and expect our year-end credit metrics to exceed those specified by the agencies to support our current ratings. From 2024 through 2026, we would expect our total equity needs to be no more than $3 billion in total with continued reliance on equity units to satisfy our equity needs, which have no dilution for the first three years. We believe FPL and Energy Resources are well-positioned to manage interest rate volatility in the current environment. At FPL, we primarily rely on the surplus mechanism to offset higher interest rates for the benefit of customers. In addition, FPL's rate agreement already provided for an ROE adjustment to 11.8%, enabling it to earn a higher ROE in the current higher rate environment. We expect that FPL will be able to absorb much and potentially all of the cumulative effects of the current interest rate environment through the use of the surplus mechanism over the remaining settlement period. Consistent with the expiration of the current rate agreement, FPL expects to file a rate case in early 2025 for new rates effective 2026. For Energy Resources and corporate and other, we now have $20.5 billion of interest rate hedges in place. While the amounts vary as we add and settle hedges, the tenor of the swaps are between five years and ten years and have a weighted average rate of roughly 3.75%. Swaps allow us to mitigate the impact of interest rate changes on energy resources backlog returns and capital holdings $12.8 billion of debt maturities from 2024 through 2026. Specifically, these swaps allow us to hedge the project-level debt funding we expect to issue on our renewables backlog as well as a portion of the $12.8 billion of the term maturities. To put this all in perspective, NextEra Energy's sensitivity for an immediate 50 basis point upward shift in the yield curve has essentially no expected adjusted EPS impact on 2023 and 2024 and has on average $0.03 to $0.05 of expected adjusted EPS impact in 2025 and 2026, which is equivalent to approximately 1% of our adjusted EPS expectations. This sensitivity, of course, assumes we do not implement other offsetting initiatives, including among others, our normal process of cost reductions and capital efficiency opportunities. Our backlog is in good shape and is benefiting from our interest rate swaps, global supply chain management capabilities, and the ability to procure equipment, materials and balance of plant services at scale across our portfolio. The expected returns on equity for our backlog are mid-teens for solar and over 20 for wind and storage. As we have done historically, we price our power purchase agreements commensurate with current market conditions, including our current cost of capital in order to maintain appropriate returns. In addition, at the time of our final investment decision, before we commit significant capital to our backlog projects, we are utilizing interest rate swaps on contracts that we were entered into when rates were lower to maintain our return expectations. We remain financially disciplined and pass on projects that don't meet our return expectations. Going forward, we are encouraged by the trends we are seeing in lower equipment pricing for solar panels and batteries, given increased competition globally, and declining prices for materials, which we believe will help offset the impacts of higher interest rates on power purchase agreement prices. We are optimistic that demand will remain resilient due to the factors you all know well, including the continued cost competitiveness of renewable energy, relative to alternative forms of generation. Importantly to date, demand has remained strong, as evidenced by our substantial new additions to backlog this quarter. Now let's turn to NextEra Energy Partners. As a reminder, the partnership is a financing vehicle that grows its distribution by acquiring assets with long-term contracted high-quality cash flows and financing those acquisitions at low cost. Over the years, NextEra Energy Partners has been able to rely on low-cost financing to help drive its distribution growth. To meet its financing needs in recent years, the partnership has relied primarily on convertible equity portfolio financing that have a low cash coupon during their term and convert into equity over time. A significant amount of the equity required to be issued to buy out these financings began coming due this year and over the next several years, which we believe contributed to the partnership's trading yield almost doubling at the same time interest rates were rising. Consequently, the partnership's cost of capital increased, which made it difficult to support a 12% growth rate in a way that is sustainable and in the best interest of unit holders over the long term. By reducing the growth rate to 6%, NextEra Energy Partners LP distribution rate is now comparable to its peers, and the partnership does not expect to require growth equity until 2027. In order to meet these objectives, the partnership is focused on first executing against its transition plan. As a reminder, the transition plans include successfully entering into agreement to sell the Texas natural gas pipeline portfolio and natural gas pipeline assets this year and in 2025, respectively. Doing so will enable the partnership to address the equity buyouts associated with the FPL's midstream, the 2019 NEP pipelines and NEP renewables to convertible equity portfolio financing through 2025. Through the period of our current financial expectations, that would leave a small equity buyout of roughly $147 million on the genesis holding convertible equity portfolio financing in 2026. The partnership is continuing its process to sell the Texas pipeline portfolio and expects to have an update on or before our fourth quarter call in January. NextEra Energy Partners is focused on executing against its growth plan for unit holders. That plan involves organic growth, specifically repowering of approximately 1.3 gigawatts of wind projects, as well as acquiring assets from energy resources or third parties at favorable yields. Importantly, NextEra Energy Partners does not expect to need an acquisition in 2024 to meet the 6% growth in distributions per unit target. Today, we're announcing plans to repower approximately 740 megawatts of wind facilities through 2026, which require the final approval of the customer's [ph] board of directors, which is expected to be received in the near term. The repowerings are projected to generate attractive CAFD yields and the partnership expects to fund the repowerings with either tax equity or project-specific debt. Repowerings represent an efficient way to support the partnership's growth targets. Overall, we are pleased with this progress and remain focused on executing additional repowering opportunities in the future across NextEra Energy Partners' roughly 8-gigawatt wind portfolio. To minimize the volatility associated with the changes in interest rates and support the growth plan, the partnership also executed roughly $1.9 billion to hedge refinancing costs for the 2024 and 2025 maturities. The resulting expected refinancing costs of the maturities are factored into our expectations. Turning to the detailed results, NextEra Energy Partners' third quarter adjusted EBITDA was $488 million and cash available for distribution was $247 million. New projects, which primarily reflect contributions from approximately 1,100 net megawatts of new long-term contracted renewable projects acquired in 2022 and the approximately the 690 net megawatts of new projects that closed in the second quarter of this year, contributed approximately $66 million of adjusted EBITDA and $32 million of cash available for distribution. The third quarter adjusted EBITDA contribution from existing projects increased by approximately $5 million year-over-year. Third quarter results for adjusted EBITDA and cash available for distributions were positively impacted by the incentive distribution rights fee suspension and provided approximately $39 million of benefit this quarter, more than offsetting the cash available for distribution impacts of lower pay-go payments driven by lower wind resource at existing projects. Yesterday, NextEra Energy Partners' board declared a quarterly distribution of 86.75 cents per common unit or $3.47 per common unit on an annualized basis, which reflects an annualized increase of 6% from its second quarter 2023 distribution per common unit. From a base of our second quarter 2023 distribution per common unit at an annualized rate of $3.42, we continue to see 5% to 8% growth per unit per year in LP distributions per unit, with a current target of 6% growth per year, being a reasonable range of expectations through at least 2026. For 2023, we expect an annualized rate for the fourth quarter 2023 distribution that is payable in February of 2024 to be $3.52 per common unit. NextEra Energy Partners expects run rate contributions for adjusted EBITDA and cash available for distributions from its forecasted portfolio at December 31, 2023 to be in the range of $1.9 billion to $2.1 billion and $730 million to $820 million, respectively. As a reminder, year-end 2023 run rate projections reflect calendar year 2024 contributions from the forecasted portfolio at year-end 2023. The adjusted EBITDA and related cash available for distributions associated with the Texas Pipeline portfolio have been excluded from these run rate financial expectations. As always, our expectations are subject to our caveat. While NextEra Energy Partners navigates through this current environment, it's important not to lose sight of the value of the underlying portfolio. NextEra Energy Partners is the seventh largest producer of electricity from the wind and the sun in the world, with over 10 gigawatts of renewables in operation. The partnership owns renewable projects that deliver high-quality cash flows in 30 states, serving 94 customers with an average counterparty credit rating of BBB plus via contracts with an average remaining contract life of 14 years. We remain optimistic the partnership can be an attractive vehicle to own existing renewable assets over the long term. We want the partnership to be successful, and separately, to address a question we've been receiving from some investors, NextEra Energy has no plans to buy back NextEra Energy Partners. With that, I'll turn the call over to John.","evidence_gemma_new":null,"evidence_llama_3_3":"FPL reserve amortization","evidence_qwen_3_30b":"reserve amortization reversal third quarter","gemma_new_max":null,"gemma_new_min":null,"llama_3_3_max":245000000.0,"llama_3_3_min":245000000.0,"qwen_3_30b_max":245000000.0,"qwen_3_30b_min":245000000.0}
{"symbol":"NEE","year":2024,"quarter":4,"date":"2024-FY","chunk_id":3,"sub_chunk_id":0,"centroid_label":"fpl reserve amortization mechanism","agreed_value":328000000.0,"count":2,"chunk":"Brian Bolster: Thanks, John. Let's begin with FPL's detailed results. For the full year 2024, FPL's adjusted earnings per share increased $0.12 versus 2023. The principal driver of FPL's 2024 full year performance was regulatory capital employed growth of approximately 10%. We continue to expect FPL's average annual growth in regulatory capital employed to be roughly 10% over the four year term of our current rate agreement, which runs through 2025. For the full year 2024, FPL's reported ROE for regulatory purposes will be approximately 11.4%. During the full year 2024, we used $328 million of reserve amortization, leaving FPL with a year end 2024 balance of $895 million. FPL's capital expenditures were approximately $1.8 billion in the fourth quarter, bringing its full year capital investments to a total of roughly $8.2 billion. Key indicators show that the Florida economy remains strong and Florida's population continues to be one of the fastest growing in the country. Its GDP is now roughly $1.7 trillion, an increase of approximately 7% over last year. For the fourth quarter of 2024, FPL's retail sales increased 1.1% from the prior year on a weather normalized basis, driven primarily by continued strong customer growth. In the fourth quarter of 2024, we added nearly 119,000 customers as compared to the prior year comparable quarter, bringing our total customer accounts to over 6 million. For the full year 2024, FPL's retail sales increased 1.9% from the prior year on a weather normalized basis, also driven primarily by the strong customer growth in our service territory. As John mentioned, FPL is preparing to file a base rate case proposal that would cover the four years beginning 2026 through 2029 and provide customers longer term visibility to the cost of electricity. As a reminder, for the period 2022 through the end of 2025, FPL plans to invest approximately $36 billion with additional significant investments expected in 2026 and beyond to continue to meet the growing needs of Florida's economy. This capital will allow FPL to continue delivering outstanding value for Florida customers by keeping reliability high and fuel and other costs as low as possible. While the benefit of building a stronger, smarter grid and a cleaner, more efficient generation fleet are passed along regularly to customers, through higher service reliability and lower bills, we must periodically seek recovery for these long-term investments through base rates. While the details are still being finalized, we expect the proposal to include base rate adjustments of approximately $1.55 billion starting in January of 2026 and $930 million starting in January of 2027. We also expect the proposal to request support for continued deployment of low cost generation and capacity additions and the continuation of our solar and battery base rate adjustment or SoBRA mechanism to recover the revenue requirements of these cost effective projects. FPL plans to propose an ROE midpoint at 11.9% with an allowed ROE band of plus or minus 1%. The 11.9% estimated cost of equity reflects appreciably higher interest rates and other capital markets factors we have experienced since our last rate case and which we expect to continue during the term of the proposed four year rate plan. FPL also expects to propose maintaining FPL's long standing equity ratio approved in prior base rate cases, which is intended to keep it in a position to continue to access capital as needed through 2029. We continue to believe that a strong balance sheet, which starts with an appropriate equity layer and which supports strong credit ratings remains critical to ensure FPL maintains uninterrupted access to the capital markets, even in times of significant market disruption. It also allows us to attract capital to support the investments FPL is making to further improve the value we offer customers. FPL estimates that its proposal, along with the projections for fuel and other costs, will grow a typical residential customer bill by an average annual rate of approximately 2.5% from January 2025 through 2029. If the full amount of the requests were granted under our proposal and assuming other utilities experienced bill increases only at their historical rates of increase, we expect FPL's typical customer bills will continue to remain significantly lower than the national average through 2029. To put this proposal in context, it would result in a typical customer bill in January 2026 that is nearly 21% less than it was in real terms 20 years ago, even with our proposed base rate increases. We look forward to the opportunity to present the details of our case and expect to make our formal filing with testimony and required detailed data in February. The timeline for proceeding will ultimately be determined by the commission, but we currently expect that we will have hearings in the third quarter and a final commission decision in the fourth quarter in time for new rates to go in effect in January of 2026. We're open to the possibility of resolving our rate request through a fair settlement agreement. During the course of the past 22 years, FPL has entered into five multi-year settlement agreements that have provided customers with a high degree of rate stability and certainty and helped FPL execute to deliver its best-in-class customer value proposition. Our core focus will be to pursue a fair and objective review of our case that supports continued execution of our successful strategy for customers and we plan to continue to provide updates throughout the process. Now let's turn to Energy Resources, which reported full year adjusted earnings growth of more than 13% year-over-year. For the full year, contributions from new investments increased by $0.48 per share, reflecting continued growth of demand for our renewables and storage portfolio. Contributions from existing clean energy assets increased by $0.03 per share, primarily reflecting improved wind resource during the year and the impact of certain revenue and PTC escalation benefits inherent in our existing assets. Contributions from our gas infrastructure business decreased by $0.08 per share, most of which was recognized in the second quarter. As we discussed at the time, a combination of higher depletion expense related to an expectation for lower production, certain non-recurring items and the sale of the Texas pipeline portfolio resulted in lower relative earnings in that quarter. Contributions since that time have been effectively flat, consistent with the expectations we provided in the second quarter. Our customer supply and trading business, which you will recall, had a strong earnings in 2023, decreased results by $0.04 per share, driven by normalization of origination activity and margins, which is consistent with our expectations. Other impacts decreased results by $0.24 per share year-over-year. This decline reflects higher interest cost of $0.13 per share, nearly half of which is new borrowing to support our build and half of which reflects increased borrowing costs on existing debt. Energy Resources, again, for the third year in a row delivered our best year ever for origination, adding more than 12 gigawatts of new renewables and battery storage projects to our backlog, which includes approximately 3.3 gigawatts since our last call. Our 2024 origination performance reflects continued strong demand from power and commercial and industrial customers looking for the least cost alternative to serve load and meet increasing demand. Our renewables backlog now stands at more than 25 gigawatts after taking into account roughly 2.4 gigawatts of new projects placed into service since our third quarter call. We believe our more than 25 gigawatt backlog provides terrific visibility into Energy Resources' ability to deliver attractive growth in years ahead. Turning now to the consolidated results for NextEra Energy. For the full year, adjusted earnings per share from our Corporate and Other segment decreased by $0.01 per share year-over-year. We successfully supported the growth in our underlying businesses from our strong operating cash flows and grew 2024 cash flow from operations by more than 17%, well in excess of adjusted earnings. We also continue to focus on protecting our project economics at Energy Resources as well as minimizing the cost of refinancing at the parent. We now have $28.5 billion of interest rate hedges in place. To put this all in perspective, NextEra Energy's sensitivity for an immediate 50 basis point upward shift in the yield curve has on average $0.01 to $0.03 of expected adjusted EPS impact in 2025, 2026 and 2027, which is equivalent to less than 1% of our adjusted EPS expectations. The sensitivity, of course, assumes we do not implement other offsetting initiatives, including, among others, our normal process of cost reductions and capital efficiency opportunities. As a reminder, the current interest rate environment is taking into account in our financial expectations. Overall, our funding plans for 2024 through 2027 remain consistent with the information we shared previously. For each of the last 15 years, NextEra Energy has met or exceeded its financial expectations, which is a record we're proud of. And once again our long-term financial expectations remain unchanged. We will be disappointed if we're not able to deliver financial results at or near the top end of our adjusted EPS expectation ranges in 2025, 2026 and 2027. From 2023 to 2027, we continue to expect that our average annual growth and operating cash flow will be at or above our adjusted EPS compound annual growth rate range. And we will also continue to expect to grow our dividends per share at roughly 10% per year through at least 2026 off a 2024 base. As always, our expectations assume our caveats. That concludes our prepared remarks. And with that, we will open the line for questions.","evidence_gemma_new":null,"evidence_llama_3_3":"reserve amortization 2024","evidence_qwen_3_30b":"reserve amortization 2024","gemma_new_max":null,"gemma_new_min":null,"llama_3_3_max":328000000.0,"llama_3_3_min":328000000.0,"qwen_3_30b_max":328000000.0,"qwen_3_30b_min":328000000.0}
{"symbol":"NEE","year":2024,"quarter":1,"date":"2024-Q1","chunk_id":3,"sub_chunk_id":0,"centroid_label":"fpl reserve amortization mechanism","agreed_value":572000000.0,"count":2,"chunk":"Kirk Crews: Thank you, John. For the first quarter of 2024, FPL's earnings per share increased $0.04 year over year. The principal driver of this performance was FPL's regulatory capital employed growth of approximately 11.5% year-over-year. We now expect FPL to realize roughly 10% average annual growth in regulatory capital employed over our current rate agreements four-year term, which runs through 2025. FPL's capital expenditures were approximately $2.3 billion for the quarter and we expect FPL's full year 2024 capital investments to be between $7.8 billion and $8.8 billion. For the twelve months ending March 2024 FPL's reported ROE for regulatory purposes will be approximately 11.8%. During the first quarter, we utilized approximately $572 million of reserve amortization, leaving FPL with a balance of roughly $651 million. As we've previously discussed, FPL historically utilizes more reserve amortization in the first half of the year, and we expect this trend to continue this year. Earlier this month, FPL received approval to reduce customer bills due to projected 2024 fuel savings. As a result, FPL's typical 1000 kilowatt hour residential customer bill is expected to be roughly $14 lower in May than the start of the year and approximately 37% lower than the current national average. Over the current four-year settlement agreement we now expect FPL's capital investments to be slightly above our previous range of $32 billion to $34 billion. This quarter FPL placed into service 1640 MW of new cost effective solar, putting FPL's owned and operated solar portfolio at over 6400 MW, which is the largest utility owned solar portfolio in the country. FPL's annual ten-year site plan continues to indicate that solar and storage are the most cost effective answer for customers to add reliable grid capacity over the next decade. The 2024 plan includes similar levels of new solar generation capacity 21 gigawatts across our service territory over the next ten years compared to our 2023 plan. But our 2024 plan doubles the expected deployment of battery storage to over 4 gigawatts, some of which we expect to be needed earlier than forecasted in our 2023 plan. With this plan, we expect to increase FPL solar mix from approximately 6% of our total generation in 2023% to 38% in 2033 while continuing to provide customers with clean, affordable energy. FPL believes battery storage will play an increasingly valuable role for customers, serving as an attractive capacity complement to our growing solar generation. From providing system balancing needs in critical parts of FPL's service territory to supplying energy during any time of day or weather condition, battery storage acts as a key resource to the system that is both valuable and cost effective for customers. Key indicators show that Florida's economy remains healthy. Florida continues to be one of the fastest growing states in the nation and had four of the five fastest growing U.S. metro areas between 2022 and 2023. FPL had its strongest quarter of customer growth in over 15 years, with the average number of customers increasing by more than 100,000 from the comparable prior year period. Although FPL's first quarter retail sales decreased by approximately 1.3% year-over-year, we estimate that weather had a negative impact on usage per customer of approximately 5.4% on a year-over-year basis. After taking weather into account, first quarter retail sales increased roughly 4.1% on a weather normalized basis from the comparable prior year period, driven primarily by continued favorable underlying population growth and usage per customer. Now let's turn to Energy Resources, which reported adjusted earnings growth of approximately 13.1% year-over-year. Contributions from new investments increased $0.15 per share year-over-year, primarily reflecting continued growth in our renewables portfolio. Our existing clean energy portfolio declined $0.02 per share, primarily due to unfavorable wind resource during the quarter. The comparative contribution from our customer supply business increased results by $0.04 per share. All other impacts reduced earnings by $0.12 per share. This decline reflects higher interest costs of $0.07 per share, half of which related to new borrowing costs to support new investments. Energy Resources had a strong quarter of new renewables and storage origination, adding approximately 2765 to the backlog. With these additions, our backlog now totals roughly 21.5 gigawatts after taking into account 1165 MW of new projects placed into service since our last earnings call, highlighting Energy Resources ability to continue to identify attractive and accretive investment opportunities which provide strong growth visibility in the years ahead. We recently plugged 740 MW of new solar and storage projects into service which are being used to support data centers located in Arizona and New Mexico. Both of these projects are now one of the largest battery storage facilities in their respective states and in combination with their co-located solar each project enabled the local utility to serve their customers need for new, reliable, clean energy to grow their own business operations. We are proud to continue to support our power and commercial and industrial customers to meet their growing power and capacity needs create jobs and provide economic development in these local communities. Our origination activities across our power and commercial and industrial customers are beginning to reflect the rising power demand. We are seeing it manifest with our power customers in their state RFP processes and bilateral discussions where we deliver cost effective renewables and storage to their grid. We are also observing it through interactions with our oil and gas and manufacturing customers where we utilize our data and technology to help them make better siting decisions. Our technology customers have been a consistent driver of demand for many years, reflected by our roughly 3 gigawatt operating portfolio and over 3 gigawatt project backlog as we partner with them to provide various clean energy solutions based on their key business variables. We are a partner with both our power and commercial industrial customers trust. We leverage our 3 gigawatt development pipeline, our 35 gigawatt operating renewables and storage portfolio, and our transformer and switchgear procurement covering energy resources billed through 2027 to deliver projects for customers. As John said, the power demand growth is expected to be strong through at least the end of the decade. We expect 2024 to be another strong year for new renewables and storage origination. This is on the heels of two consecutive record origination years at Energy Resources. We continue to expect to remain on track for our overall renewables development expectations of roughly 33 to 42 gigawatts from 2023 through 2026. Beyond renewables and storage, NextEra Energy Transmissions was recently selected by the California ISO to develop a new a two-mile, 500 kV transmission line in Southern California, with a capital investment of more than $250 million. We believe this project could unlock over 3 gigawatts of new renewable generation capacity, supporting California's ambitious clean energy goals. This award follows a record year for NextEra Energy Transmission in 2023 and we remain excited about the opportunities ahead for this growing business. We continue to believe our ability to build, own and operate transmission is a key advantage for our renewables business. Turning now to our first quarter 2024 consolidated results, adjusted earnings from corporate and other decreased by $0.01 per share year-over-year. This quarter, we entered into an agreement to transfer approximately $1 billion of tax credits throughout 2024, representing the bulk of our expected transfers for the year. Our long-term financial expectations remain unchanged. We will be disappointed if we are not able to deliver financial results at or near the top end of our adjusted EPS expectation ranges in 2024, 2025 and 2026. From 2021 to 2026, we continue to expect that our average annual growth in operating cash flow will be at or above our adjusted EPS compound annual growth rate range. And as we announced in February, the Board of Directors of NextEra Energy approved a targeted growth rate in dividends per share of roughly 10% per year through at least 2026 off a 2024 base. As always, our expectations assume our caveat. Turning to NextEra Energy Partners, we continue to focus on executing against the partnerships transition plan and delivering an LP distribution growth target of 6% through at least 2026. We bought out the STX Midstream convertible equity portfolio financing in 2023 and have sufficient proceeds available from the Texas pipeline portfolio sale to complete the NEP Renewables II buyout due in June 2024 and 2025. The third convertible equity portfolio financing associated with the Meade natural gas pipeline assets is expected to be addressed in 2025. With the plan for the near-term convertible equity portfolio financings well understood, we remain focused on the partnership's cost of capital improving, which is critical for its success. With that objective in mind, we continue to evaluate alternatives to address the remaining convertible equity portfolio financing with equity buyout obligations in 2027 and beyond. Turning to the partnership's targeted 6% growth in LP distributions per unit, NextEra Energy Partners does not expect to need an acquisition this year to achieve its 6% targeted growth rate and the partnership does not expect to require growth equity until 2027. In terms of NextEra Energy Partners growth plan, as a reminder, it involves organic growth, specifically re-powering of approximately 1.3 gigawatts of wind projects through 2026, as well as acquiring assets at attractive yields. Today we are announcing plans to repower an additional approximately 100 MW of wind facilities through 2026. The partnership has now announced roughly 1085 MW of repowers. Yesterday, NextEra Energy Partners Board declared a quarterly distribution of 89.25 cents per common unit or $3.57 per common unit on an annualized basis, which reflects an annualized increase of 6% from its fourth quarter 2023 distribution per common unit. Let me now turn to the detailed results. First quarter adjusted EBITDA was $462 million and cash available for distribution was $164 million. New projects, which primarily reflect contributions from approximately 840 net megawatts of new projects that either closed in the second quarter of 2023 or achieved commercial operations in 2023, contributed approximately $32 million of adjusted EBITDA and $7 million of cash available for distribution. First quarter adjusted EBITDA contribution from existing projects declined by approximately $37 million year-over-year, driven primarily by unfavorable wind resource during the quarter and lower generation at Genesis Solar Project as a result of a planned outage for major maintenance. Wind resource was approximately 97% of long-term average versus 102% in the first quarter of 2023. The incentive distribution right fee suspension provided approximately $39 million of benefit this quarter for adjusted EBITDA and cash available for distribution. Finally, adjusted EBITDA and cash available for distribution declined by approximately $44 million and $38 million respectively, for the divestiture of the Texas pipeline portfolio. From a base of our fourth quarter 2023 distribution per common unit and an annualized rate of $3.52, we continue to see 5% to 8% growth per year in LP distributions per unit, with a current target of 6% growth per year as being a reasonable range of expectations through at least 2026. We continue to expect the partnerships payout ratio to be in the mid-90s through 2026. We expect the annualized rate of the fourth quarter 2024 distribution that is payable in February 2025 to be $3.73 per common unit. NextEra Energy Partners expects run rate contributions for adjusted EBITDA and cash available for distribution from its forecasted portfolio at December 31, 2024 to be in the ranges of $1.9 billion to $2.1 billion and $730 million to $820 million respectively. As a reminder, yearend 2024 run rate projections reflect calendar year 2025 contributions from the forecasted portfolio at year end 2024. As a reminder, our expectations are subject to our caveat. That concludes our prepared remarks and with that we will open the line for questions.","evidence_gemma_new":null,"evidence_llama_3_3":"reserve amortization first quarter","evidence_qwen_3_30b":"reserve amortization utilization","gemma_new_max":null,"gemma_new_min":null,"llama_3_3_max":572000000.0,"llama_3_3_min":572000000.0,"qwen_3_30b_max":572000000.0,"qwen_3_30b_min":572000000.0}
{"symbol":"NEE","year":2024,"quarter":3,"date":"2024-Q3","chunk_id":3,"sub_chunk_id":0,"centroid_label":"fpl reserve amortization mechanism","agreed_value":231000000.0,"count":3,"chunk":"Brian Bolster : Thank you, John, and good morning, everyone. For the third quarter of 2024, FPL increased earnings per share by $0.05 year-over-year. The principal driver of this performance was FPL's regulatory capital employed growth of approximately 9.5% year-over-year. We continue to expect FPL to realize roughly 10% average annual growth in regulatory capital employed over our current rate agreements four year term, which runs through 2025. FPL's capital expenditures were approximately $2 billion for the quarter, and we expect FPL's full year 2024 capital investment to be between $8 billion and $8.8 billion. Over the current four year settlement agreement, we expect FPL's capital investments to exceed $34 billion. FPL's third quarter retail sales increased 1% from the prior year comparable period. FPL grew retail sales by roughly 1.6% on a weather normalized basis, offset by milder weather. During the quarter, FPL reversed approximately $231 million of reserve amortization and FPL ended the quarter with a balance of roughly $817 million. With regard to costs associated with storm recovery, as a reminder, we have both the storm reserve and a surcharge mechanism to the extent the reserve has been fully utilized. Following Hurricane Debby, we had depleted our storm reserve and have deferred the remaining incremental cost for Hurricanes Debby, Helene and Milton to the balance sheet. We intend to recover those deferred costs and replenish the storm reserve via storm surcharge on customers' bills over the calendar year 2025. Although FPL has not completed the final accounting, our preliminary estimate of restoration costs that we plan to recover from customers through a surcharge is approximately $1.2 billion inclusive of $150 million, which will be utilized to replenish the storm reserve. Of course, the restoration cost will be subject to a final review and prudence determination by the Florida Public Service Commission. For the 12 months ending September 2024, FPL's reported ROE for regulatory purposes will be approximately 11.8%. We still expect the regulatory ROE for the 12 months ending December 2024 and 2025 to be 11.4%. Now let's turn to Energy Resources, which reported adjusted earnings growth of approximately 11% year-over-year. At Energy Resources, adjusted earnings per share increased by $0.04 year-over-year. Contributions from new investments increased $0.15 per share year-over-year, primarily driven by continued growth in our renewables portfolio. Comparative contribution from our customer supply and trading business, which you'll recall had strong earnings last year, decreased by $0.10 per share driven by normalization of origination activity and margins, which is consistent with our expectations. Contributions from both NextEra Energy transmission and gas infrastructure businesses increased by $0.01 per share year-over-year. All other impacts reduced earnings by $0.03 per share. Energy Resources had another strong quarter of new renewables and storage origination, adding approximately 3 gigawatts to the backlog. With these additions, our backlog now totals over 24 gigawatts after taking into account roughly 1 gigawatt of new projects placed into service since our last earnings call, providing great visibility into Energy Resources' ability to deliver on our development program expectations. We expect the backlog additions will go into service over the next several years. Turning now to our third quarter 2024 consolidated results, adjusted EPS was $1.03 per share. Adjusted earnings from corporate and other were flat to last year's comparable quarter. At NextEra Energy, our long-term financial expectations remain unchanged. We will be disappointed if we are not able to deliver financial results at or near the top end of our adjusted EPS expectation ranges in 2024, 2025, 2026 and 2027. In 2023 to 2027, we continue to expect that our average annual growth in operating cash flow will be at or above our adjusted EPS compound annual growth rate range. And we also continue to expect to grow our dividends per share at roughly 10% per year through at least 2026 off a base -- off a 2024 base. As a reminder, our expectations are subject to our caveats. Turning to NextEra Energy Partners. Yesterday, NextEra Energy Partners board declared a quarterly distribution of $0.9175 per common unit or $3.67 per common unit on an annualized basis, up nearly 6% from a year earlier. Today, NextEra Energy Partners is pleased to announce the expected wind repowering of another approximately 225 megawatts of wind facilities, bringing its total backlog of wind repowering to approximately 1.6 gigawatts through 2026. The partnership's organic growth opportunities have expanded and we are increasing our wind repowering target to approximately 1.9 gigawatts of wind projects owned by NextEra Energy Partners through 2026, which is up from the previous target of 1.3 gigawatts. NextEra Energy Partners owns a large portfolio of high quality long-term contracted clean energy assets and has attractive organic growth from the repowering of its existing portfolio. NextEra Energy Partners remains focused on executing additional wind repowering opportunities in the future, which we believe would provide improved operating performance and higher generation. Let me now turn to the detailed results. Third quarter adjusted EBITDA was $453 million and cash available for distribution was $155 million. Third quarter adjusted EBITDA and cash available for distribution declined by approximately $35 million and $92 million respectively from the same period last year. Third quarter adjusted EBITDA and cash available for distribution reflect the year-over-year impact of the divestiture of the Texas Pipeline portfolio. In addition, third quarter cash available for distribution in 2024 was negatively impacted by the first interest payment on the partnership's December 2023 HoldCo debt issuance, as well as $23 million of higher project level debt service relating in large part to the 2023 acquisition financing. NextEra Energy Partners continue to expect the run rate contribution for adjusted EBITDA from its forecasted portfolio at December 31, 2024 to be in the range of $1.9 billion to $2.1 billion. The year end 2024 run rate projections reflect expected calendar year 2025 contributions from the forecasted portfolio at year end 2024. The partnership also continues to evaluate alternatives to address its remaining convertible equity portfolio financing obligations and its cost of capital, focusing on its capital structure and the potential for redeployment of more cash flow toward driving organic cash flow growth. Given the demand for power, NextEra Energy Partners has many ways in which it can seek to grow, which could include not only acquiring assets, but also wind repowerings and potential other organic growth opportunities. NextEra Energy Partners plans to complete its review by no later than the fourth quarter 2024 call and intends to provide its distribution and run rate cash available for distribution expectations at that time. As a reminder, our expectations are subject to our caveats. That concludes our prepared remarks. And with that, we will open the line for questions.","evidence_gemma_new":"FPL reserve amortization","evidence_llama_3_3":"FPL reserve amortization $231 million the quarter","evidence_qwen_3_30b":"FPL reversed reserve amortization During the quarter","gemma_new_max":231000000.0,"gemma_new_min":231000000.0,"llama_3_3_max":231000000.0,"llama_3_3_min":231000000.0,"qwen_3_30b_max":231000000.0,"qwen_3_30b_min":231000000.0}
{"symbol":"NEE","year":2023,"quarter":1,"date":"2023-Q1","chunk_id":2,"sub_chunk_id":0,"centroid_label":"fpl s capital expenditures","agreed_value":2300000000.0,"count":3,"chunk":"Kirk Crews: Thank you, Kristen, and good morning everyone. NextEra Energy is off to a strong start in 2023. Adjusted earnings per share increased by approximately 13.5% year-over-year building on the success of last year's strong execution and financial performance. During the quarter, we were honored that NextEra Energy was again ranked number one in our sector on Fortune's list of the world's most admired companies for the 16th time in 17 years. We are extremely proud of the team and culture we have built that has enabled us to deliver low-cost clean and reliable power to our customers, while also providing long-term value to our shareholders. FPL is the largest electric utility in the US and Florida is now officially the fastest-growing state in America. At FPL, our focus remains the same deploying smart capital to deliver on what we believe is one of the best customer value propositions in our industry. Key to that strategy is keeping customer bills affordable. And this quarter, we proposed using projected 2023 fuel savings to reduce unbilled fuel costs from 2022 to provide bill relief to customers. To further manage fuel price volatility, we are also helping customers by adding more solar to the FPL grid. This quarter, we placed into service approximately 970 megawatts of new low-cost solar. Putting FPL's owned and operated solar portfolio at nearly 4,600 megawatts, which is the largest solar portfolio of any utility in the country. We believe solar is now the lowest cost generation option for Florida customers, but represents only about 5% of FPL's delivered energy. In order to extend the benefits of low-cost solar to customers, FPL's recently filed 10-year site plan, now includes nearly 20,000 megawatts of new solar. Energy Resources, the world's leader in renewables and a leader in battery storage, remains laser-focused on executing a strategy of decarbonizing the power sector and helping commercial and industrial customers outside the power sector, reduce their energy cost and decarbonize their operations by moving to low-cost renewables and other clean energy solutions. This quarter, Energy Resources added approximately 2,020 megawatts of new renewables and storage projects to its backlog. Energy Resources also closed on its previously announced acquisition of a large portfolio of operating landfill gas-to-electric facilities, providing the foundation for our growing RNG business. We are also excited to announce a new memorandum of understanding with CF Industries to create green hydrogen, establishing what we expect will be a long-term relationship with the world's largest ammonium producer. And finally, Energy Resources continues to build what we believe is the nation's leading competitive transmission business to help support growth in renewables. We are pleased to announce that the California ISO recently recommended for approval approximately $400 million in new transmission and substation upgrades for NextEra Energy Transmission. We believe, NextEra Energy continues to be anchored by two great businesses that leverage each other's expertise to make them even better. We do not believe anyone in our industry has our set of skills, scale and breadth of opportunities. We believe NextEra Energy is able to buy, build operate and finance cheaper with one of the strongest balance sheets in our sector. We also believe our best-in-class development skills and unparalleled data set enable us to provide innovative technology and low-cost clean energy solutions for the benefit of our customers. The opportunities and products demanded by the market are becoming more complex, requiring significant scale and a combination of skills that we believe few of our competitors can offer, further enhancing our competitive advantages and creating even more growth opportunities for our business going forward. We have a culture rooted and continuous improvement, always striving to be better. Along those lines, we just completed our annual employee-led productivity initiative, which we now call Velocity. For over 11 years, our employees have generated approximately $2.6 billion in annual run rate savings ideas, as part of this process. In 2023 alone, our team generated ideas expected to produce roughly $325 million in annual run rate savings, which when combined with last year's results of over $400 million is the most productive two-year period in this program's history and that's after doing it for over a decade. We believe we have the best team in the industry, and these results are indicative of the breadth and depth of capabilities and the commitment to excellence that our team brings to our business every day and executing on behalf of our customers and shareholders. With that let's turn to the detailed results beginning with FPL. For the first quarter of 2023, FPL reported net income of $1.07 billion, or $0.53 per share an increase of $0.09 year-over-year. Regulatory capital employed growth of approximately 11.2% was a significant driver of FPL's EPS growth versus the prior year comparable quarter. FPL's capital expenditures were approximately $2.3 billion for the quarter. We expect our full year 2023 capital investments at FPL to be between $8.0 billion and $9.0 billion, as we continue to invest capital smartly for the continued benefit of our customers. FPL's reported ROE for regulatory purposes will be approximately 11.8% for the 12 months ending March 2023. During the quarter, we utilized $373 million of reserve amortization to achieve our targeted regulatory ROE leaving FPL with a balance of $1.07 billion. As we've previously discussed, FPL historically utilizes more reserve amortization in the first half of the year, and we expect this trend to continue this year. Earlier this year, the Florida Public Service Commission approved FPL's proposed plan to recover approximately $2.1 billion of incremental fuel costs from 2022 partially offset by projected 2023 fuel savings of approximately $1.4 billion. Amid high natural gas prices in 2022, FPL's decades-long modernization of its generation fleet has saved customers more than $2 billion in fuel costs in 2022 alone. The commission also recently approved recovery of approximately $1.3 billion of hurricane costs from 2022 over a 12-month period. Taking all approved adjustments together, we anticipate that FPL's typical 1,000 kilowatt hour residential customer bills will remain well below the projected national average and among the lowest of all Florida utilities. Turning to our development planning and efforts. FPL recently filed its annual 10-year site plan that presents our generation resource plan for the next decade. The 2023 plan includes roughly 20,000 megawatts of new low-cost solar capacity across our service territory over the next 10 years, which would result in nearly 35% of FPL's forecasted energy delivery in 2032 coming from cost-effective solar generation up significantly from roughly 5% in 2022. Given the increasing customer benefits of low-cost renewables FPL's post-2025 solar capacity additions and this year's plan are more than double last year's approved plan and also includes 2 gigawatts of battery storage over the next decade. We believe the expansion of cost-effective solar and storage will provide a valuable hedge for our customers against volatile natural gas prices and meet the electricity demand of FPL's growing customer base with a low-cost generation source. Finally, construction of our green hydrogen pilot at our Okeechobee Clean Energy Center is on track and projected to go into service later this year. Turning now to the Florida economy. Florida became the fastest-growing state in the nation in 2022 and its population continues to increase with over 1,000 people moving to Florida every day. Over the last five years, Florida's GDP has grown at a roughly 7% compound annual growth rate and is now approximately $1.4 trillion which is up approximately 8% versus a year ago. Based on GDP, if Florida was a country, it would have the 14th largest economy in the world. FPL's first quarter retail sales increased 0.4% from the prior year comparable period driven by continued solid underlying population growth with FPL's average number of customers increasing by approximately 65,000, even after removing roughly 15,000 inactive customers due to Hurricane Ian. For the first quarter, we estimate that the positive impact of warmer weather was more than offset by a decline in underlying usage for our customers. As we have often pointed out, underlying usage can be somewhat volatile on a quarterly basis, particularly during periods when temperatures deviate significantly from normal, as we experienced this winter with average temperatures greater than four degrees above normal. Our long-term expectations of underlying usage growth continues to average between zero and approximately negative 0.5% per year. Energy Resources report first quarter 2023 GAAP earnings of approximately $1.440 billion or $0.72 per share. Adjusted earnings for the first quarter were $732 million or $0.36 per share up $0.04 versus the prior year comparable period. Contributions from new investments increased $0.07 per share year-over-year. Contributions from our existing Clean Energy portfolio were lower by $0.03 per share primarily due to less favorable wind and solar resource compared to the prior year. The contribution from our customer supply and trading business increased by $0.06 per share primarily due to higher margin in our customer-facing business and compared to a relatively weaker contribution in the prior year comparable quarter. Gas infrastructure and all other impacts reduced earnings by $0.01 and $0.05 per share respectively versus 2022. Energy Resources had another strong quarter of origination capitalizing on strong global demand environment. Since the last call, we added approximately 2020 megawatts of new renewables and storage projects to our backlog including roughly 1370 megawatts of solar, 450 megawatts of storage and 200 megawatts of wind. With these additions, our renewables and storage backlog now stands at over 20.4 gigawatts net of projects placed in service and provides strong visibility into our future growth. With more than 1.5 years remaining before the end of 2024, we are now within the 2023 to 2024 development expectations range. Given the volatility in gas and power prices over the last 1.5 years, we continue to see economics driving long-term decision-making and renewables remain the clear low-cost option for many customers. On the supply -- solar supply chain front, we continue to take constructive steps to mitigate potential future disruption. Nearly every one of our suppliers has repositioned their supply chains to manufacture solar panels in Southeast Asia using wafers and cells produced outside of China, and all our suppliers are expected to meet the criteria established in the Commerce Department's preliminary determination in the 2022 circumvention case by the end of 2023. Additionally, we are focused on further diversifying our supply chain and are currently advancing discussions to support the domestic production of solar panels. Finally, we are encouraged by the improvement in the flow of panels into the US as suppliers continue to provide the requested traceability documentation to US Customs and Border Protection. Also, during the quarter, we closed on the previously announced transaction to acquire a large portfolio of operating landfill gas-to-electric facilities that I mentioned earlier. The approximately $1.1 billion transaction represents an attractive opportunity for energy resources to realize double-digit returns on this investment, while expanding its portfolio of renewable natural gas assets and growing its in-house capabilities and rapidly expanding renewable fuel market. Turning to green hydrogen, we are excited about the role it is expected to play as a solution to help our customers cost effectively lower emissions. As the world leader in renewables and a leader in battery storage, we believe we are the logical partner for green hydrogen with significant interconnection and land inventory positions and deep market expertise to help our potential partners optimize some of the best green hydrogen sites around the country. As a result, with the right regulation, we see hydrogen quickly becoming a significant technology for our customers and a new growth driver for energy resources given the number and size of the opportunities we are evaluating. Earlier this month, NextEra Energy joined a coalition of 45 other companies with a combined approximately $1 trillion in market capitalization and sending a letter to the Secretaries of Energy & Treasury and the White House advocating for programmatic policies for the implementation of the IRAs green hydrogen production tax credit. This coalition is advocating for prudent policy that will foster investment in green hydrogen technology paving the way for the US to become the world leader in hydrogen technology. A key aspect of this policy is for the electricity consumed for green hydrogen production to be matched to its renewable power generation on an annual rather than an hourly basis. We believe that an annual matching construct has several benefits over hourly including lower green hydrogen prices, more renewables being built, a significant reduction in carbon emissions, and green hydrogen achieving cost parity with gray and blue hydrogen both of which rely on fossil fuels for their production. This viewpoint is supported by numerous third-party studies from respected entities such as Wood Mackenzie, Rhodium Group, Energy Futures Initiative, Energy and Environmental Economics, and MIT Energy Institute. As we continue to work with the industry and government representatives to progress a smart hydrogen policy, we are also advancing our green hydrogen development efforts including a recently executed Memorandum of Understanding for a joint venture with CF Industries, the world's largest producer of ammonia to develop -- to deliver green hydrogen to an existing CF Industries ammonia production facility which it intends to expand and incorporate green hydrogen into its production process. The proposed facility includes an approximately 450-megawatt renewable energy solution, powering a 40 tons per day hydrogen facility. This project combined with other opportunities we are pursuing represent significant momentum for green hydrogen, which we believe will continue to be a driver of new renewables growth going forward. Our team continues to engage with multiple potential partners and customers on hydrogen projects, representing over $20 billion of capital investments and requiring more than 15 gigawatts of new renewables to support. As we focus on leading the decarbonization of the US economy, building additional transmission is essential to support long-term renewables deployment. We believe our ability to build, own and operate transmission as a key competitive advantage for our renewables business, in addition to being a terrific investment opportunity. We are pleased that the California ISO recently recommended for approval of approximately $400 million in transmission and substation upgrades for NextEra Energy Transmission, subject to approval by the CAISO Board of Governors in May. We believe these projects along with others could unlock up to 11 gigawatts of new renewable generation that could be built to support California's ambitious clean energy goals. Turning now to the consolidated results for NextEra Energy. For the first quarter of 2023 GAAP earnings attributable to NextEra Energy were $2.086 billion or $1.04 per share. NextEra Energy's 2023 first quarter adjusted earnings and adjusted EPS were approximately $1.678 billion and $0.84 per share respectively. Adjusted earnings for the Corporate and Other segment decreased results by $0.03 per share year-over-year, primarily driven by higher interest rates. In March, S&P affirmed all its ratings for NextEra Energy and lowered its downgrade threshold for its funds from operations or FFO to debt metric from the previous level of 20% to the current level of 18%. In making this favorable adjustment, S&P acknowledged improvement in Energy Resources business risk following the passage of the IRA, particularly noting the improved visibility and clarity into long-term cash flows. At the same time, S&P adjusted its treatment of non-recourse project debt associated with FERC Regulated investments to bring it back on credit. We believe this overall favorable adjustment, which creates roughly 50 bps of additional headroom against the downgrade threshold, highlights the attractive risk profile of renewables and acknowledges the long-term stable cash flows and Energy Resources business, particularly given the benefits of the IRA. Finally as we have discussed in the past, we actively enter into various interest rate swaps products to manage interest rate exposure on future debt issuance. Today, we have $21 billion of interest rate swaps at NextEra Energy to help mitigate the impact of potential future increases in rates, which exceeds the notional value of our 2023 and 2024 maturities. And as always, the current interest rate environment is taken into account in our financial expectations. Our long-term financial expectations which we extended earlier this year through 2026 remain unchanged. And we will be disappointed if we are not able to deliver financial results at or near the top end of our adjusted EPS expectation ranges in each year from 2023 to 2026, while at the same time maintaining our strong balance sheet and credit ratings. From 2021 to 2026, we also continue to expect that our average annual growth in operating cash flow will be at or above our adjusted EPS compound annual growth rate range. We also continue to expect to grow our dividends per share at roughly 10% per year through at least 2024 off a 2022 base. As always, our expectations assume our usual caveats including normal weather and operating conditions. Turning to NextEra Energy Partners. We believe, we have never had more visible growth opportunities than we have today. We have the ability to grow in three ways: acquiring assets from Energy Resources, growing organically and buying assets from other third parties. With significant tailwinds from the IRA, Energy Resources' operating portfolio, combined with its backlog of projects and development expectations through 2026, total approximately 58 gigawatts, providing terrific visibility for NextEra Energy Partners and Energy Resources is continuing to grow in innovative ways, adding new technologies and clean energy assets to its portfolio, such as RNG and hydrogen. In addition to acquiring assets from Energy Resources, NextEra Energy Partners also has the ability to repower its existing assets, with approximately 1,300 megawatts of potential wind repowerings, already identified, and many more opportunities expected to come, as well as potential to locate storage at its existing renewable assets, given the new stand-alone storage ITC. Finally, there are significant acquisition opportunities with renewable portfolios, continuously being brought to market. NextEra Energy Partners also has numerous ways that can finance this growth and we believe, it can do so efficiently, given its ample liquidity and access to capital. At the end of the first quarter, NextEra Energy Partners had $2.8 billion of liquidity and approximately $6 billion of interest rate swaps to manage future interest rate volatility on debt maturities through 2026. With regard to convertible equity portfolio financing, we can fund equity buyouts by delivering common units or utilizing our at-the-market or ATM program or a combination of both and we believe we have ample liquidity to fund cash payments. Importantly, we have flexibility and we expect to leverage this flexibility to manage future buyouts to select the most efficient option. Using this flexibility, NextEra Energy Partners has now bought out 50% of the STX Midstream convertible equity portfolio financing through funds generated from a combination of the ATM program, where NextEra Energy Partners was able to be opportunistic and cash from a subsidiary's revolving credit facility. With the buyouts of the 2018 convertible equity portfolio financing and 50% of the STX Midstream convertible equity portfolio financing complete, we estimate that the convertible equity portfolio financing structure has resulted in approximately 55% and 64% respectively or 16 million fewer units being issued, compared to raising capital with underwritten block equity, all for the benefit of unitholders. For the balance of the year, files are now expected to be limited to the remaining 50% of the STX Midstream convertible equity [ph] portfolio financing and 15% of the net renewables to convertible equity portfolio financing with the equity portion of these buyouts requiring common units of approximately $280 million and $130 million respectively. Over the next eight months, we have flexibility and time to opportunistically manage these buyouts in the most efficient way. For each buyout, we have the flexibility to deliver common units to the convertible equity portfolio financing investor, utilize the ATM program or some combination of the two. Ultimately, we will select the most efficient option. In any event, the potential unit issuance from these buyouts are not expected to exceed an average of three days of total trading volume per quarter, which we expect will make them quite manageable. Most importantly, NextEra Energy Partners' growth expectations through 2026 already factor in its financing plan, including convertible equity portfolio financing buyouts at current trading yields. Turning to distribution growth. Yesterday the NextEra Energy Partners Board declared a quarterly distribution of $0.8425 per common unit or $3.37 per common unit on an annualized basis, up approximately 15% from a year earlier. Inclusive of this quarter, NextEra Energy Partners has grown its LP distribution per unit up nearly 350% since the IPO. Today we are pleased to announce that NextEra Energy Partners has entered into an agreement with Energy Resources to acquire an approximately 690-megawatt portfolio of long-term contracted operating wind and solar projects and attractive cash available for distribution yield. The high-quality portfolio has a cash available for distribution, weighted average remaining contract life of approximately 16 years, an average customer credit rating of BBB at S&P and Baa2 at Moody's Investors Service. NextEra Energy Partners is expected to acquire the portfolio for approximately $708 million, subject to closing adjustments and is inclusive of the portfolio's existing project debt and interest rate swaps which are estimated to be approximately $142 million. In addition to the approximately $708 million purchase price, NextEra Energy Partners is also expected to assume the portfolio's existing tax equity financing balance. The remaining purchase price is expected to be funded by a combination of new project finance debt and the corporate revolving credit facility. The portfolio of assets is expected to contribute adjusted EBITDA of approximately $110 million to $130 million and cash available for distribution prior to the existing project debt service of approximately $62 million to $72 million, each on a five-year average annual run rate basis, beginning December 31 2023. The transaction is expected to close in the second quarter of this year. Additional details on the portfolio of assets to be acquired by NextEnergy Partners can be found in the appendix of today's presentation. Next Energy Partners will remain opportunistic pursuing acquisitions in 2023. And with the closing of the transaction announced today, NextEnergy Partners expects to be well positioned to meet its year-end 2023 adjusted EBITDA and cash available for distribution run rate expectations. Turning to the detailed results. NextEra Energy Partners delivered first quarter adjusted EBITDA and cash available for distribution results in line with management's expectations. Adjusted EBITDA of $447 million increased by $35 million versus the prior year, driven primarily by favorable contributions from the approximately 1,200 net megawatts of new projects acquired in 2022. Both adjusted EBITDA and cash available for distributions were negatively affected by lower resource from existing projects. Additionally, cash available from distribution was lower versus the prior year comparable period due to incremental debt service and timing of payable payments. Looking forward in the second half of 2023, we expect strong double-digit growth in adjusted EBITDA and cash available for distribution to support NextEra Energy Partners, distribution per unit growth expectation range of 12% to 15% for the full year 2023. Additional details are shown on the accompanying slide. NextEra Energy Partners continues to expect run rate contributions for adjusted EBITDA and cash available for distributions from its forecasted portfolio at December 31, 2023, to be in the ranges of $2.22 billion to $2.42 billion and $770 million to $860 million respectively. As a reminder, year-end 2023 run rate projections reflect calendar year 2024 contribution from the forecasted portfolio at year-end 2023 and include the impact of IDR fees, which we treat as an operating expense. As always, our expectations are subject to our usual caveats including normal weather and operating conditions. From a base of our fourth quarter 2022 distribution per common unit at an annualized rate of $3.25, we continue to see 12% to 15% growth per year in LP distributions as being a reasonable range of expectations through at least 2026. We continue to remain comfortable with these growth expectations. And in fact even at the current trade yield, Energy Resources portfolio alone is just one way NextEra Energy Partners believes it can meet its growth expectations through 2026. For 2023, we expect the annualized rate of the fourth quarter 2023 distribution that is payable in February 2024 to be in a range of $3.64 to $3.74 per common unit. We also continue to expect to achieve our 2023 distribution growth of 12% to 15%. In summary, we continue to believe that both NextEra Energy and NextEra Energy Partners are well-positioned to continue delivering on their long-term growth prospects. At FPL that means executing on smart capital investments to deliver on its customer value proposition of low bills, high reliability and outstanding customer service. At Energy Resources that means leading the decarbonization of both the power sector and non-power sector and leveraging its competitive advantages to capitalize on low-cost renewals and new emerging technologies like green hydrogen. In NextEra Eneregy Partners, we expect to capitalize on its unmatched growth visibility to further expand its best-in-class clean energy portfolio to provide long-term distribution growth for unit holders. With that, we are happy to address your questions.","evidence_gemma_new":"FPL's capital expenditures","evidence_llama_3_3":"FPL capital expenditures quarter","evidence_qwen_3_30b":"FPL capital expenditures quarter","gemma_new_max":2300000000.0,"gemma_new_min":2300000000.0,"llama_3_3_max":2300000000.0,"llama_3_3_min":2300000000.0,"qwen_3_30b_max":2300000000.0,"qwen_3_30b_min":2300000000.0}
{"symbol":"NEE","year":2023,"quarter":4,"date":"2023-Q4","chunk_id":3,"sub_chunk_id":0,"centroid_label":"fpl s capital expenditures","agreed_value":2000000000.0,"count":2,"chunk":"Kirk Crews : Thanks John. Let's begin with FPL's detailed results. For the full year 2023 FPL's adjusted earnings per share increased $0.22 versus 2022. FPL's adjusted earnings results exclude the approximately $300 million after tax gain on the sale of Florida City Gas which closed on November 30th 2023. The principal driver of the 2023 full year performance was FPL's regulatory capital employed growth of approximately 12.5%. We continue to expect FPL's average annual growth and regulatory capital employed to be roughly 9% over the four year term of our current rate agreement, which runs through 2025. For the full year 2023, FPL's reported ROE for regulatory purposes will be approximately 11.8%. During the full year 2023, we used approximately $227 million of reserve amortization, leaving FPL with a yearend 2023 balance of roughly $1.2 billion. FPL's capital expenditures were approximately $2 billion in the fourth quarter, bringing its full year capital investments to a total of roughly $9.4 billion. These capital investments supported the successful commissioning of roughly 1, 200 megawatts of solar in 2023, continued hardening of the grid, and our efforts to underground our distribution system. During the fourth quarter of 2023, our 25 megawatt hydrogen pilot at the Okeechobee Clean Energy Center successfully achieved commercial operations. As a reminder, we plan to utilize this facility together with adjacent solar projects to create green hydrogen and blend it with natural gas at our Okeechobee plant. Key indicators show that the Florida economy remains strong and Florida's population continues to be one of the fastest growing in the country. Florida's economy continues to trend upward, and its GDP is now roughly $1.6 trillion, an increase of 9.3% over last year. For the fourth quarter of 2023, FPL's retail sales increased 1.6% from the prior year on a weather normalized basis, driven primarily by continued strong customer growth, which increased by nearly 81, 000 from the prior year comparable quarter. For the full year 2023, FPL retail sales increased 0.6% from the prior year on a weather normalized basis, also driven primarily by the strong customer growth in our service territory. Now, let's turn to Energy Resources, which reported full year adjusted earnings growth of approximately 12.9% year-over-year. Contributions from new investments increased by $0.35 per share due to strong growth in our renewables and storage portfolio. Contributions from our existing clean energy assets decreased results by $0.11 per share, driven primarily by the impact of weaker wind resource. 2023 was the lowest wind resource on record over the past 30 years. Our customer supply and trading business increased results by $0.16 per share, primarily due to higher margins in our customer facing businesses. Other decreased results by $0.26 per share year-over-year. This decline reflects higher interest costs of $0.22 per share, of which $0.10 was driven by new borrowing costs to support new investments. Energy Resources delivered our best year ever for origination, adding approximately 9, 000 megawatts of new renewables and battery storage projects to our backlog, which includes approximately 2, 060 megawatts since our last call. Our 2023 origination performance reflects continued strong demand from power customers looking for the least cost alternative to serve load and to replace uneconomic generation and commercial and industrial customers looking to help decarbonize their operation or meet their data center and AI demand. Our renewables backlog now stands at more than 20 gigawatts after taking into account roughly 2, 470 megawatts of new projects placed into service since our third quarter call. We believe our 20 gigawatt backlog provides clear visibility and Energy Resources\u2019 ability to deliver for shareholders through 2026 and beyond. Turning now to the consolidated results for NextEra Energy. For the full year adjusted earnings from our corporate and other segment decreased by $0.08 per share year-over-year, primarily driven by higher interest costs. We successfully supported the growth in our underlying businesses from our strong operating cash flows, including the sale of tax credits as well as our historical funding sources. In 2023, we grew cash flow from operations well in excess of our adjusted earnings. We transferred approximately $400 million of tax credits, establishing relationships with numerous counterparties. We believe this will prove to be a competitive advantage as buyers look first to NextEra Energy given its size, experience, and the overall quality of its tax credit program. Overall, our funding plans for 2024 through 2026 remain consistent with the information we shared on the third quarter earnings call. We continue to believe NextEra Energy is well positioned to manage the interest rate environment. While the recent decline in interest rates is encouraging, we remain committed to managing the business to deliver value for customers and shareholders. Overall, we believe we are well positioned with $18.5 billion of interest rate swaps and we will continue to closely monitor the interest rate environment as the clients and rates certainly represent a tail end for our sector and customers. Our long-term financial expectations remain unchanged. We will be disappointed if we are not able to deliver financial results at or near the top end of our adjusted EPS expectation ranges in 2024, 2025, and 2026. For the last 14 consecutive years, NextEra Energy has met or exceeded its financial expectation, which is a record we are proud of. From 2021 to 2026, we continue to expect that our average annual growth and operating cash flow will be at or above our adjusted EPS compound annual growth rate range. And we also continue to expect to grow our dividends per share at roughly 10% per year through at least 2024 off a 2022 base. As always, our expectations assume our caveats. Now let's turn to NextEra Energy Partners. In terms of the transition plans, NextEra Energy Partners closed the sale of Texas pipeline portfolio in late December, providing net proceeds of approximately $1.4 billion. NextEra Energy Partners expect to complete the NEP Renewables II buyouts of roughly $190 million and $950 million on their stated minimum buyout dates of June 2024 and 2025, respectively, as the partnerships continue to benefit from the low cash coupon through 2025. In terms of NextEra Energy Partners ' growth plan, as a reminder, it involves organic growth, specifically repowerings of approximately 1.3 gigawatt of wind projects through 2026, as well as acquiring assets at attractive yields. Today, we are announcing plans to repower an additional approximately 245 MW of wind facilities through 2026. The partnership has now announced roughly 985 MW of repowers with strong cash available for distribution yields. While the partnership does not expect to need an acquisition in 2024, the LP distribution growth target of 6% is supported, in part with roughly 175 MW of wind repowers, which are expected to generate attractive cash available for distribution yields. Finally, we were pleased with the high yield note issuance of $750 million, which was completed during the fourth quarter of 2023. This opportunistic refinancing allowed the partnership to pay off its corporate revolver in mid-December. Let me now turn to the financial results for NextEra Energy Partners. Fourth quarter adjusted EBITDA was $454 million, and cash available for distribution was $86 million. Adjusted EBITDA growth versus the prior year comparable quarter was primarily due to new asset additions and the incentive distribution's right fee suspension, while cash available for distribution was also impacted by incremental debt service. For the full year 2023, adjusted EBITDA was approximately $1.9 billion, up 13.6% year-over-year, and was primarily driven by the contribution for new projects acquired in late 2022 and during 2023 and the Incentive Distribution Right Fee Suspension. New investments added approximately $228 million and the Incentive Distribution Right Fee Suspension added approximately $113 million of adjusted EBITDA year-over-year. This growth was partially offset by a decline from existing projects driven primarily by weaker wind resource. Cash available for distribution was $689 million for the full year and primarily driven by contributions from new projects of approximately $42 million and the Incentive Distribution Right Fee Suspension of $113 million while being partially offset by the weaker wind resource. Yesterday, the NextEra Energy Partners Board declared a quarterly distribution of $0.88 per common unit or $3.52 per unit on an annualized basis, which reflects an annualized increase of 6% from its third quarter 2023 distribution per unit. The partnership grew its LP distributions per unit by more than 8% year-over-year. From an updated base of our fourth quarter 2023 distribution per common unit and an annualized rate of $3.52, we continue to see 5% to 8% growth per year in LP distributions per unit with a current target of 6% growth per year as being a reasonable range of expectations through at least 2026. We continue to expect the partnership payout ratio to be in the mid-90s through 2026. We expect the annualized rate of the fourth quarter 2024 distribution that is payable in February 2025 to be $3.73 per common unit. NextEra Energy Partners is introducing December 31, 2024 run rate expectations for adjusted EBITDA in a range of $1.9 billion to $2.1 billion and cash available for distribution in a range of $730 million to $820 million reflecting calendar year 2025 expectations for the forecasted portfolio at year end 2024. As a reminder, our expectations are subject to our caveat. That concludes our prepared remarks and with that, we will open the line for questions.","evidence_gemma_new":null,"evidence_llama_3_3":"FPL capital expenditures fourth quarter","evidence_qwen_3_30b":"FPL capital expenditures fourth quarter","gemma_new_max":null,"gemma_new_min":null,"llama_3_3_max":2000000000.0,"llama_3_3_min":2000000000.0,"qwen_3_30b_max":2000000000.0,"qwen_3_30b_min":2000000000.0}
{"symbol":"NEE","year":2024,"quarter":3,"date":"2024-Q3","chunk_id":3,"sub_chunk_id":0,"centroid_label":"fpl s capital expenditures","agreed_value":2000000000.0,"count":3,"chunk":"Brian Bolster : Thank you, John, and good morning, everyone. For the third quarter of 2024, FPL increased earnings per share by $0.05 year-over-year. The principal driver of this performance was FPL's regulatory capital employed growth of approximately 9.5% year-over-year. We continue to expect FPL to realize roughly 10% average annual growth in regulatory capital employed over our current rate agreements four year term, which runs through 2025. FPL's capital expenditures were approximately $2 billion for the quarter, and we expect FPL's full year 2024 capital investment to be between $8 billion and $8.8 billion. Over the current four year settlement agreement, we expect FPL's capital investments to exceed $34 billion. FPL's third quarter retail sales increased 1% from the prior year comparable period. FPL grew retail sales by roughly 1.6% on a weather normalized basis, offset by milder weather. During the quarter, FPL reversed approximately $231 million of reserve amortization and FPL ended the quarter with a balance of roughly $817 million. With regard to costs associated with storm recovery, as a reminder, we have both the storm reserve and a surcharge mechanism to the extent the reserve has been fully utilized. Following Hurricane Debby, we had depleted our storm reserve and have deferred the remaining incremental cost for Hurricanes Debby, Helene and Milton to the balance sheet. We intend to recover those deferred costs and replenish the storm reserve via storm surcharge on customers' bills over the calendar year 2025. Although FPL has not completed the final accounting, our preliminary estimate of restoration costs that we plan to recover from customers through a surcharge is approximately $1.2 billion inclusive of $150 million, which will be utilized to replenish the storm reserve. Of course, the restoration cost will be subject to a final review and prudence determination by the Florida Public Service Commission. For the 12 months ending September 2024, FPL's reported ROE for regulatory purposes will be approximately 11.8%. We still expect the regulatory ROE for the 12 months ending December 2024 and 2025 to be 11.4%. Now let's turn to Energy Resources, which reported adjusted earnings growth of approximately 11% year-over-year. At Energy Resources, adjusted earnings per share increased by $0.04 year-over-year. Contributions from new investments increased $0.15 per share year-over-year, primarily driven by continued growth in our renewables portfolio. Comparative contribution from our customer supply and trading business, which you'll recall had strong earnings last year, decreased by $0.10 per share driven by normalization of origination activity and margins, which is consistent with our expectations. Contributions from both NextEra Energy transmission and gas infrastructure businesses increased by $0.01 per share year-over-year. All other impacts reduced earnings by $0.03 per share. Energy Resources had another strong quarter of new renewables and storage origination, adding approximately 3 gigawatts to the backlog. With these additions, our backlog now totals over 24 gigawatts after taking into account roughly 1 gigawatt of new projects placed into service since our last earnings call, providing great visibility into Energy Resources' ability to deliver on our development program expectations. We expect the backlog additions will go into service over the next several years. Turning now to our third quarter 2024 consolidated results, adjusted EPS was $1.03 per share. Adjusted earnings from corporate and other were flat to last year's comparable quarter. At NextEra Energy, our long-term financial expectations remain unchanged. We will be disappointed if we are not able to deliver financial results at or near the top end of our adjusted EPS expectation ranges in 2024, 2025, 2026 and 2027. In 2023 to 2027, we continue to expect that our average annual growth in operating cash flow will be at or above our adjusted EPS compound annual growth rate range. And we also continue to expect to grow our dividends per share at roughly 10% per year through at least 2026 off a base -- off a 2024 base. As a reminder, our expectations are subject to our caveats. Turning to NextEra Energy Partners. Yesterday, NextEra Energy Partners board declared a quarterly distribution of $0.9175 per common unit or $3.67 per common unit on an annualized basis, up nearly 6% from a year earlier. Today, NextEra Energy Partners is pleased to announce the expected wind repowering of another approximately 225 megawatts of wind facilities, bringing its total backlog of wind repowering to approximately 1.6 gigawatts through 2026. The partnership's organic growth opportunities have expanded and we are increasing our wind repowering target to approximately 1.9 gigawatts of wind projects owned by NextEra Energy Partners through 2026, which is up from the previous target of 1.3 gigawatts. NextEra Energy Partners owns a large portfolio of high quality long-term contracted clean energy assets and has attractive organic growth from the repowering of its existing portfolio. NextEra Energy Partners remains focused on executing additional wind repowering opportunities in the future, which we believe would provide improved operating performance and higher generation. Let me now turn to the detailed results. Third quarter adjusted EBITDA was $453 million and cash available for distribution was $155 million. Third quarter adjusted EBITDA and cash available for distribution declined by approximately $35 million and $92 million respectively from the same period last year. Third quarter adjusted EBITDA and cash available for distribution reflect the year-over-year impact of the divestiture of the Texas Pipeline portfolio. In addition, third quarter cash available for distribution in 2024 was negatively impacted by the first interest payment on the partnership's December 2023 HoldCo debt issuance, as well as $23 million of higher project level debt service relating in large part to the 2023 acquisition financing. NextEra Energy Partners continue to expect the run rate contribution for adjusted EBITDA from its forecasted portfolio at December 31, 2024 to be in the range of $1.9 billion to $2.1 billion. The year end 2024 run rate projections reflect expected calendar year 2025 contributions from the forecasted portfolio at year end 2024. The partnership also continues to evaluate alternatives to address its remaining convertible equity portfolio financing obligations and its cost of capital, focusing on its capital structure and the potential for redeployment of more cash flow toward driving organic cash flow growth. Given the demand for power, NextEra Energy Partners has many ways in which it can seek to grow, which could include not only acquiring assets, but also wind repowerings and potential other organic growth opportunities. NextEra Energy Partners plans to complete its review by no later than the fourth quarter 2024 call and intends to provide its distribution and run rate cash available for distribution expectations at that time. As a reminder, our expectations are subject to our caveats. That concludes our prepared remarks. And with that, we will open the line for questions.","evidence_gemma_new":"FPL capital expenditures the quarter","evidence_llama_3_3":"FPL capital expenditures $2 billion the quarter","evidence_qwen_3_30b":"FPL capital expenditures for the quarter","gemma_new_max":2000000000.0,"gemma_new_min":2000000000.0,"llama_3_3_max":2000000000.0,"llama_3_3_min":2000000000.0,"qwen_3_30b_max":2000000000.0,"qwen_3_30b_min":2000000000.0}
{"symbol":"NEE","year":2024,"quarter":4,"date":"2024-Q4","chunk_id":3,"sub_chunk_id":0,"centroid_label":"fpl s capital expenditures","agreed_value":1800000000.0,"count":3,"chunk":"Brian Bolster: Thanks, John. Let's begin with FPL's detailed results. For the full year 2024, FPL's adjusted earnings per share increased $0.12 versus 2023. The principal driver of FPL's 2024 full year performance was regulatory capital employed growth of approximately 10%. We continue to expect FPL's average annual growth in regulatory capital employed to be roughly 10% over the four year term of our current rate agreement, which runs through 2025. For the full year 2024, FPL's reported ROE for regulatory purposes will be approximately 11.4%. During the full year 2024, we used $328 million of reserve amortization, leaving FPL with a year end 2024 balance of $895 million. FPL's capital expenditures were approximately $1.8 billion in the fourth quarter, bringing its full year capital investments to a total of roughly $8.2 billion. Key indicators show that the Florida economy remains strong and Florida's population continues to be one of the fastest growing in the country. Its GDP is now roughly $1.7 trillion, an increase of approximately 7% over last year. For the fourth quarter of 2024, FPL's retail sales increased 1.1% from the prior year on a weather normalized basis, driven primarily by continued strong customer growth. In the fourth quarter of 2024, we added nearly 119,000 customers as compared to the prior year comparable quarter, bringing our total customer accounts to over 6 million. For the full year 2024, FPL's retail sales increased 1.9% from the prior year on a weather normalized basis, also driven primarily by the strong customer growth in our service territory. As John mentioned, FPL is preparing to file a base rate case proposal that would cover the four years beginning 2026 through 2029 and provide customers longer term visibility to the cost of electricity. As a reminder, for the period 2022 through the end of 2025, FPL plans to invest approximately $36 billion with additional significant investments expected in 2026 and beyond to continue to meet the growing needs of Florida's economy. This capital will allow FPL to continue delivering outstanding value for Florida customers by keeping reliability high and fuel and other costs as low as possible. While the benefit of building a stronger, smarter grid and a cleaner, more efficient generation fleet are passed along regularly to customers, through higher service reliability and lower bills, we must periodically seek recovery for these long-term investments through base rates. While the details are still being finalized, we expect the proposal to include base rate adjustments of approximately $1.55 billion starting in January of 2026 and $930 million starting in January of 2027. We also expect the proposal to request support for continued deployment of low cost generation and capacity additions and the continuation of our solar and battery base rate adjustment or SoBRA mechanism to recover the revenue requirements of these cost effective projects. FPL plans to propose an ROE midpoint at 11.9% with an allowed ROE band of plus or minus 1%. The 11.9% estimated cost of equity reflects appreciably higher interest rates and other capital markets factors we have experienced since our last rate case and which we expect to continue during the term of the proposed four year rate plan. FPL also expects to propose maintaining FPL's long standing equity ratio approved in prior base rate cases, which is intended to keep it in a position to continue to access capital as needed through 2029. We continue to believe that a strong balance sheet, which starts with an appropriate equity layer and which supports strong credit ratings remains critical to ensure FPL maintains uninterrupted access to the capital markets, even in times of significant market disruption. It also allows us to attract capital to support the investments FPL is making to further improve the value we offer customers. FPL estimates that its proposal, along with the projections for fuel and other costs, will grow a typical residential customer bill by an average annual rate of approximately 2.5% from January 2025 through 2029. If the full amount of the requests were granted under our proposal and assuming other utilities experienced bill increases only at their historical rates of increase, we expect FPL's typical customer bills will continue to remain significantly lower than the national average through 2029. To put this proposal in context, it would result in a typical customer bill in January 2026 that is nearly 21% less than it was in real terms 20 years ago, even with our proposed base rate increases. We look forward to the opportunity to present the details of our case and expect to make our formal filing with testimony and required detailed data in February. The timeline for proceeding will ultimately be determined by the commission, but we currently expect that we will have hearings in the third quarter and a final commission decision in the fourth quarter in time for new rates to go in effect in January of 2026. We're open to the possibility of resolving our rate request through a fair settlement agreement. During the course of the past 22 years, FPL has entered into five multi-year settlement agreements that have provided customers with a high degree of rate stability and certainty and helped FPL execute to deliver its best-in-class customer value proposition. Our core focus will be to pursue a fair and objective review of our case that supports continued execution of our successful strategy for customers and we plan to continue to provide updates throughout the process. Now let's turn to Energy Resources, which reported full year adjusted earnings growth of more than 13% year-over-year. For the full year, contributions from new investments increased by $0.48 per share, reflecting continued growth of demand for our renewables and storage portfolio. Contributions from existing clean energy assets increased by $0.03 per share, primarily reflecting improved wind resource during the year and the impact of certain revenue and PTC escalation benefits inherent in our existing assets. Contributions from our gas infrastructure business decreased by $0.08 per share, most of which was recognized in the second quarter. As we discussed at the time, a combination of higher depletion expense related to an expectation for lower production, certain non-recurring items and the sale of the Texas pipeline portfolio resulted in lower relative earnings in that quarter. Contributions since that time have been effectively flat, consistent with the expectations we provided in the second quarter. Our customer supply and trading business, which you will recall, had a strong earnings in 2023, decreased results by $0.04 per share, driven by normalization of origination activity and margins, which is consistent with our expectations. Other impacts decreased results by $0.24 per share year-over-year. This decline reflects higher interest cost of $0.13 per share, nearly half of which is new borrowing to support our build and half of which reflects increased borrowing costs on existing debt. Energy Resources, again, for the third year in a row delivered our best year ever for origination, adding more than 12 gigawatts of new renewables and battery storage projects to our backlog, which includes approximately 3.3 gigawatts since our last call. Our 2024 origination performance reflects continued strong demand from power and commercial and industrial customers looking for the least cost alternative to serve load and meet increasing demand. Our renewables backlog now stands at more than 25 gigawatts after taking into account roughly 2.4 gigawatts of new projects placed into service since our third quarter call. We believe our more than 25 gigawatt backlog provides terrific visibility into Energy Resources' ability to deliver attractive growth in years ahead. Turning now to the consolidated results for NextEra Energy. For the full year, adjusted earnings per share from our Corporate and Other segment decreased by $0.01 per share year-over-year. We successfully supported the growth in our underlying businesses from our strong operating cash flows and grew 2024 cash flow from operations by more than 17%, well in excess of adjusted earnings. We also continue to focus on protecting our project economics at Energy Resources as well as minimizing the cost of refinancing at the parent. We now have $28.5 billion of interest rate hedges in place. To put this all in perspective, NextEra Energy's sensitivity for an immediate 50 basis point upward shift in the yield curve has on average $0.01 to $0.03 of expected adjusted EPS impact in 2025, 2026 and 2027, which is equivalent to less than 1% of our adjusted EPS expectations. The sensitivity, of course, assumes we do not implement other offsetting initiatives, including, among others, our normal process of cost reductions and capital efficiency opportunities. As a reminder, the current interest rate environment is taking into account in our financial expectations. Overall, our funding plans for 2024 through 2027 remain consistent with the information we shared previously. For each of the last 15 years, NextEra Energy has met or exceeded its financial expectations, which is a record we're proud of. And once again our long-term financial expectations remain unchanged. We will be disappointed if we're not able to deliver financial results at or near the top end of our adjusted EPS expectation ranges in 2025, 2026 and 2027. From 2023 to 2027, we continue to expect that our average annual growth and operating cash flow will be at or above our adjusted EPS compound annual growth rate range. And we will also continue to expect to grow our dividends per share at roughly 10% per year through at least 2026 off a 2024 base. As always, our expectations assume our caveats. That concludes our prepared remarks. And with that, we will open the line for questions.","evidence_gemma_new":"FPL capital expenditures fourth quarter","evidence_llama_3_3":"capital expenditures fourth quarter","evidence_qwen_3_30b":"FPL capital expenditures fourth quarter","gemma_new_max":1800000000.0,"gemma_new_min":1800000000.0,"llama_3_3_max":1800000000.0,"llama_3_3_min":1800000000.0,"qwen_3_30b_max":1800000000.0,"qwen_3_30b_min":1800000000.0}
{"symbol":"NEE","year":2023,"quarter":2,"date":"2023-FY","chunk_id":2,"sub_chunk_id":0,"centroid_label":"fpl s capital investments","agreed_value":9000000000.0,"count":2,"chunk":"Kirk Crews: Thanks Kristin and good morning. NextEra Energy continued its track record of solid execution as reflected in our second quarter results. Adjusted earnings per share grew by approximately 8.6% as we deploy capital for the benefit of FPL customers and leverage our competitive advantages to extend Energy Resources for a noble leadership position. As our fastest growing state in the U.S., Florida has underlying population growth and an economy that continues to drive clear investment needs. For years, FPL strategy has been simple: Keep bills affordable, the grid reliable, and our customer service exceptional. With our most recent settlement agreement, FPL has a well-established capital plan with clear visibility through 2025 to deliver on this strategy. This quarter we executed our capital plan with new solar and transmission and distribution infrastructure investments, which led to a greater than 12% increase in regulatory capital employed versus the same quarter last year. As a result, FPL's earnings per share increased by $0.07 year-over-year. We progress these capital initiatives, while keeping customer bills affordable. We continue to run the business efficiently with multiple opportunities to reduce and manage costs. We deploy smart capital that reduces O&M and fuel costs. We embrace innovation and new technologies and we identify cost savings through our various initiatives. Customers benefit from these actions, including bills that are among the lowest in Florida and well below the national average. FPL is uniquely positioned to extend its best-class customer value proposition and deliver long-term growth. Energy Resources, more than two decade track record of originating, developing, constructing, and operating renewables remains as strong as ever. This quarter, on the strength of new investments, Energy Resources grew adjusted earnings by over 14% year-over-year. We continue to see solid renewables and storage demand. Since our first quarter call, Energy Resources placed over 1,800 megawatts into commercial operations. And it's added approximately 1,665 megawatts of new renewable and storage projects to our backlog, which now stands at roughly 20 gigalons, keeping us on track to achieve our renewable development expectations through 2026. Given all of our competitive advantages, Energy Resources is uniquely positioned to continue to lead the decolonization of the U.S. economy and be the renewables partner of choice, supporting power, commercial and industrial, and eventually hydrogen customers. We are pleased with the progress we have made at NextEra Energy so far in 2023. For over 18 months we have operated in a challenging macroeconomic environment with various headwinds. And yet, we have leveraged our competitive advantages to serve customers and deliver on our financial expectations. Through the first half of the year, both businesses have executed well, delivering adjusted EPS growth of approximately 11%. With FPL comprising more than two-thirds of NextEra Energy's business, our well-established capital plan through 2025 provides investors with long-term growth visibility. At Energy Resources, we are leveraging our competitive advantages to continue adding new renewables and storage to our backlog, providing clear visibility to our future earnings growth through 2026. Combined, we believe we are well positioned with strong visibility to deliver on our expectations and create long-term value for shareholders. With that, let's turn to the detailed results beginning with FPL. For the second quarter of 2023, FPL reported net income of approximately $1.152 billion or $0.57 per share, an increase of $0.07 year-over-year. The principal driver of this performance was FPL's regulatory capital employed growth of approximately 12.1% year-over-year. We continue to expect FPL to realize roughly 9% average annual growth in regulatory capital employed over our current settlement agreements four year term, which runs through 2025. FPL's capital expenditures were approximately $2.5 billion for the quarter and we now expect FPL's full year 2023 capital investment to be between $8.5 billion and $9.5 billion. For the 12 months ending June 2023, FPLs reported ROE for regulatory purposes will be approximately 11.8%. During the quarter, we used approximately $78 million of reserve amortization, leaving FPL with a balance of approximately $1 billion. Our capital projects continue to progress well. As we indicated in our recent 10-year site plan, solar continues to be the lowest cost alternative for our customers. FPL placed into service roughly 225 megawatts of cost effective solar in the quarter, bringing the total year-to-date solar additions to nearly 1,200 megawatts. Over the last two years, FPL has commissioned over 1,600 megawatts of new solar generation. With two and a half years remaining under the current settlement agreement, FPL expects to add roughly 3,100 megawatts of incremental solar through 2025. FPL solar investments allow us to serve strong customer growth, while providing clean, affordable generation and avoiding volatile fuel purchases. Over the current four year settlement agreement, we continue to expect FPL with a capital investment of between $32 billion to $34 billion. Of that total, we anticipate investing approximately $10 billion in new solar generation and approximately $14 billion to $16 billion in transmission and distribution infrastructure. We remain confident in our total capital plan through 2025, as our cumulative capital investments of approximately $14 billion through June of 2023 are a little ahead of our original timeline. Our capital investment plan is well-established and by executing on solar deployment and transmission and distribution investments, we are enhancing what we believe is one of the best customer value propositions in the industry. I'll turn now to the Florida Economy, which continues to demonstrate strong growth. Over the past year, Florida has created roughly 412,000 new private sector jobs, and its unemployment rate continues to decline, currently standing at approximately 2.6%, which is nearly 30% below the U.S. average. Florida consumer sentiment improved roughly 14% compared to the prior year and remains above the U.S. average, while mortgage delinquency rates decline by 55 basis points compared to the prior year. Florida's GDP continues to trend upward, an increase over 9% versus a year ago. During the quarter, FPL had solid customer growth with the average number of customers increasing by more than 66,000 from the comparable prior year period. FPL's second quarter retail sales increased by approximately 0.3% year-over-year. We estimate that weather had a slightly negative impact on usage per customer of approximately 0.3% on a year-over-year basis. After taking these factors into account, second quarter retail sales increased roughly 0.6% on a weather normalized basis from the comparable prior year period, driven primarily by continued solid underlying population growth. Now let's turn to Energy Resources, where second quarter 2023 GAAP earnings, we're approximately $1.462 billion or $0.72 per share. Adjusted earnings for the second quarter we're approximately $781 million dollars or $0.39 per share, which is an increase in adjusted earnings per share of $0.04 year-over-year. Contributions from new investments increased $0.10 per share year-over-year. Contributions from our existing clean energy portfolio declined $0.06 per share. This decline was mostly due to a large swing in year-over-year wind resource. This quarter was the lowest second quarter of wind resource on record over the past 30 years, while last year was the highest. The contribution from our customer supply and trading business increased by $0.09 per share, primarily due to higher margins in our customer facing businesses, compared to a relatively weak contribution in the prior year quarter. All other impacts reduced earnings by $0.09 per share. This decline reflects higher interest cost of $0.06 per share, half of which is driven by new borrowing costs to support new investments and half of which is due to higher interest rates. The remaining impact is due to a combination of other factors, including additional costs to support early stage renewable development investments as we plan for growth in the latter part of the decade. Energy Resources had a solid quarter of new renewables and storage origination adding approximately 1,665 megawatts to the backlog. With these additions, our backlog now tolls roughly 20 gigawatts, after taking into account over 1,800 megawatts of new projects placed into service since our first quarter call, which keeps us on track to achieve our renewable development expectations through 2026. Having shared our new expectations just six months ago, we are already within the 2023 to 2024 development expectations range and only need roughly 15 gigawatts over the next three and 1.5 years to achieve the midpoint of the 2023 to 2026 development expectations range. As part of our backlog addition, this quarter we signed our first contract for a standalone battery storage project co-located with an existing wind facility. The 65 megawatts storage project is expected to serve our customers growing capacity needs in the southwest power pool and be available to monetize pricing arbitrage opportunities in this renewable rich area of the country. As we have highlighted, we believe there are many more opportunities to monetize the value of our existing 29 gigawatts operating renewables portfolio, including deploying co-located storage like we did here. We are excited to bring facility into commercial operation. During the quarter we continue to see solid demand for renewables and storage across power and commercial and industrial customers. After a period of underlying commodity price inflation, supply chain disruption and trade policy risk premiums, we are finally seeing signs of stability, which will be helpful in our customer conversations. We believe renewables remain economically attractive to alternative forms of generation, and position ourselves to meet long-term customer demand by expanding our significant pipeline of renewable projects. Today, we have a pipeline of roughly 250 gigawatts of renewables and storage projects in various stages of development. This includes projects in early stage diligence in our current backlog, and is supported by roughly 145 gigawatts of interconnection queue positions. When you combine our significant competitive advantages with our renewable pipeline, we believe Energy Resources is well positioned for growth and our renewable business for years to come. We also remain excited about the opportunity to serve hydrogen customers by leveraging our best-in-class renewables development expertise and early stage development position. Throughout the quarter we continue to advocate for smart hydrogen policy that we believe would help the U.S. establish a robust green hydrogen market and drive increased renewables penetration. We also progress our pipeline of potential green hydrogen opportunities by executing an additional memorandum of understanding to explore developing green hydrogen and related facilities that would integrate into our customers' operations and serve their energy needs. Hydrogen should be thought of as simply another renewables customer class, and as all our hydrogen related projects could potentially translate into additional new renewables, and with the appropriate regulations, begin to contribute to Energy Resources growth later this decade. Turning now to our consolidated results. For the second quarter of 2023, GAAP earnings attributed to NextEra Energy were approximately $2.795 billion or $1.38 per share. NextEra Energy recorded approximately $1.777 billion of adjusted earnings and $0.88 cents of adjusted EPS in the second quarter. Adjusted earnings from the corporate and other segment decreased results by $0.04 per share year-over-year, primarily driven by higher interest costs. We continue to proactively manage interest rates in multiple ways. First, NextEra Energy has $16 billion of various interest rate swaps to help mitigate the impact of future increases in rate. Second, FPL has features in its settlement agreement to offset higher interest rates such as reserve amortization and the ROE adjustment mechanism, which became effective on September 1, 2022 due to a sustained rise in the 30 year U.S. Treasury yield. Finally, our focus on continuous improvement through our annual velocity productivity initiative has yielded over $725 million in annual run rate savings ideas. Over the last two years, creating cost savings opportunities to help offset higher interest costs. As always, the current interest rate environment is taken into account in our financial expectations. Our long-term financial expectations remain unchanged, and we will be disappointed if we are not able to deliver financial results at or near the top end of our adjusted EPS expectation ranges. In each year, from 2023 to 2026, while the same time maintaining our strong balance sheet and credit ratings. From 2021 to 2026, we continue to expect that our average annual growth in operating cash flow will be at or above our adjusted EPS compound annual growth rate range. And we continue to expect to grow our dividends per share at roughly 10% per year, through at least 2024, off a 2022 base. As always, our expectations assume our usual caveats, including normal weather and operating conditions. Now, I'd like to turn to NextEra Energy Partners. Second quarter adjusted EBITDA and cash available for distribution were $486 million and $200 million respectively, reflecting weaker wind resource. NextEra Energy Partners remains well positioned to deliver on its 2023 run rate expectations for adjusted EBITDA and cash available for distribution. Yesterday, NextEra Energy Partners Board declared a quarterly distribution of $0.854 per share per common unit or $3.42 per common unit on an annualized basis, up approximately 12% from a year earlier. Inclusive of this quarter, NextEra Energy Partners has grown its LP distribution per unit over 355% since the IPO. Since our last earnings call, NextEra Energy Partners completed its previously announced acquisition of approximately 690 megawatts of wind and solar assets. With this acquisition, NextEra Energy Partners renewable portfolio is over 10,000 megawatts. Further strengthening its position as the world's seventh largest producer of electricity from the wind and sun. The partnership is well-positioned to execute on its simplification plan to become a 100% renewables focus company. Regarding this simplification plan, in May we launched the sales process for the Texas Natural Gas Pipeline portfolio and are pleased with our progress is we remain on track to sell the assets by later this year. NextEra Energy Partners expects to use the proceeds from the planned Texas Pipeline portfolio sales together with a mean natural gas pipeline sale in 2025 to eliminate the equity buyouts on the three near-term convertible equity portfolio financing. STX Midstream and EP Renewables 2, and 2019 NEP Pipelines. Upon successful execution of the Texas pipeline portfolio sell, the partnership does not expect to require equity through 2024, other than opportunistic equity issuances under our at the market equity program to fund future growth beyond 2024. Now to the detailed results. NextEra Energy Partners delivered second quarter adjusted EBITDA and cash available for distribution of $486 million and $200 million respectively, reflecting the adverse impacts of weaker wind resource. The adjusted EBITDA and cash available for distribution contribution from existing projects declined by approximately $99 million and $39 million respectively, primarily driven by a large swing in year-over-year wind resource. This quarter was the lowest-second quarter of wind resource on record over the past 30 years, while last year was the highest. New projects contributed approximately $49 million of adjusted EBITDA and $5 million of cash available for distribution. Second quarter results for adjusted EBITDA and cash available for distribution were positively impacted by the Incentive Distribution Rights Fee Suspension and provided approximately $38 million of benefit this quarter, partially offsetting the impact of poor wind resource performance. As we previously shared, we expect strong double-digit growth in the second half of the year and adjusted EBITDA and cash available for distribution to support NextEra Energy Partners, LP distribution per unit growth expectations range for the full year 2023. Additional details are shown on the accompanying slide. From a base of our fourth quarter 2022 distribution per common unit and an annualized rate of $3.25, we continue to see 12% to 15% growth per year and LP distributions per unit as being a reasonable range of expectations through at least 2026. However, as we previously shared with you, we expect to grow at or near the bottom end of that range. For 2023, we expect the annualized rate of the fourth quarter 2023 distribution that is payable in February of 2024 to be in a range of $3.64 to $3.74 per common unit. NextEra Energy Partners continue to expect run rate contributions for adjusted EBITDA and cash available for distribution and its forecasted portfolio at December 31, 2023 to be in the ranges of $2.2 billion to $2.42 billion and $770 million to $860 million respectively. As a reminder, year-end 2023 run rate projections reflect calendar year 2024 contributions from the forecasted portfolio at year-end 2023. As always, our expectations subject to our usual caveats, including normal weather and operating conditions. In summary, we believe that NextEra Energy and NextEra Energy Partners are well-positioned to continue delivering long-term value for shareholders and unit holders. At NextEra Energy, the plan is simple: Our two businesses are deploying capital and renewables and transmission for the benefit of customers providing visible growth opportunities for shareholders. At FPL, we're executing on our well-established capital investment plan, which allows us to extend our customer value proposition. Florida\u2019s strong population growth drives smart capital investment and running the business efficiently allows us to manage costs for the benefit of both customers and shareholders. FPL comprises more than two-thirds of NextEra Energy's business and provides a significant amount of visibility into capital deployment and earnings growth. At Energy Resources, we're leveraging our more than 20 years of experience, competitive advantages to grow our market share and add to our now roughly 20 gigawatts backlog, providing terrific growth visibility through 2026. We believe these competitive advantages will enable Energy Resources to serve power, commercial and industrial, and eventually hydrogen customers. With an opportunity set of $20 billion of capital investment, requiring more than 15 gigawatts of new renewables, Energy Resources is well-positioned to be green hydrogen partner of choice, potentially creating new opportunities toward the end of the decade. At NextEra Energy Partners we are executing on our plans to sell our natural gas pipelines and simplify the business. We continue to add to our renewables and storage portfolio, which now stands at over 10,000 megawatts. With the sale of the Texas Natural Gas Pipeline portfolio expected to be completed by the end of the year, NextEra Energy Partners remains on track to transition to a 100% pure play renewables company, while continuing to deliver LP distribution per unit growth for unit holders. With that, we're happy to answer your questions.","evidence_gemma_new":null,"evidence_llama_3_3":"FPL capital investment 2023","evidence_qwen_3_30b":"capital investment full year 2023","gemma_new_max":null,"gemma_new_min":null,"llama_3_3_max":9000000000.0,"llama_3_3_min":9000000000.0,"qwen_3_30b_max":9000000000.0,"qwen_3_30b_min":9000000000.0}
{"symbol":"NEE","year":2023,"quarter":2,"date":"2023-Q2","chunk_id":2,"sub_chunk_id":0,"centroid_label":"fpl s capital investments","agreed_value":33000000000.0,"count":2,"chunk":"Kirk Crews: Thanks Kristin and good morning. NextEra Energy continued its track record of solid execution as reflected in our second quarter results. Adjusted earnings per share grew by approximately 8.6% as we deploy capital for the benefit of FPL customers and leverage our competitive advantages to extend Energy Resources for a noble leadership position. As our fastest growing state in the U.S., Florida has underlying population growth and an economy that continues to drive clear investment needs. For years, FPL strategy has been simple: Keep bills affordable, the grid reliable, and our customer service exceptional. With our most recent settlement agreement, FPL has a well-established capital plan with clear visibility through 2025 to deliver on this strategy. This quarter we executed our capital plan with new solar and transmission and distribution infrastructure investments, which led to a greater than 12% increase in regulatory capital employed versus the same quarter last year. As a result, FPL's earnings per share increased by $0.07 year-over-year. We progress these capital initiatives, while keeping customer bills affordable. We continue to run the business efficiently with multiple opportunities to reduce and manage costs. We deploy smart capital that reduces O&M and fuel costs. We embrace innovation and new technologies and we identify cost savings through our various initiatives. Customers benefit from these actions, including bills that are among the lowest in Florida and well below the national average. FPL is uniquely positioned to extend its best-class customer value proposition and deliver long-term growth. Energy Resources, more than two decade track record of originating, developing, constructing, and operating renewables remains as strong as ever. This quarter, on the strength of new investments, Energy Resources grew adjusted earnings by over 14% year-over-year. We continue to see solid renewables and storage demand. Since our first quarter call, Energy Resources placed over 1,800 megawatts into commercial operations. And it's added approximately 1,665 megawatts of new renewable and storage projects to our backlog, which now stands at roughly 20 gigalons, keeping us on track to achieve our renewable development expectations through 2026. Given all of our competitive advantages, Energy Resources is uniquely positioned to continue to lead the decolonization of the U.S. economy and be the renewables partner of choice, supporting power, commercial and industrial, and eventually hydrogen customers. We are pleased with the progress we have made at NextEra Energy so far in 2023. For over 18 months we have operated in a challenging macroeconomic environment with various headwinds. And yet, we have leveraged our competitive advantages to serve customers and deliver on our financial expectations. Through the first half of the year, both businesses have executed well, delivering adjusted EPS growth of approximately 11%. With FPL comprising more than two-thirds of NextEra Energy's business, our well-established capital plan through 2025 provides investors with long-term growth visibility. At Energy Resources, we are leveraging our competitive advantages to continue adding new renewables and storage to our backlog, providing clear visibility to our future earnings growth through 2026. Combined, we believe we are well positioned with strong visibility to deliver on our expectations and create long-term value for shareholders. With that, let's turn to the detailed results beginning with FPL. For the second quarter of 2023, FPL reported net income of approximately $1.152 billion or $0.57 per share, an increase of $0.07 year-over-year. The principal driver of this performance was FPL's regulatory capital employed growth of approximately 12.1% year-over-year. We continue to expect FPL to realize roughly 9% average annual growth in regulatory capital employed over our current settlement agreements four year term, which runs through 2025. FPL's capital expenditures were approximately $2.5 billion for the quarter and we now expect FPL's full year 2023 capital investment to be between $8.5 billion and $9.5 billion. For the 12 months ending June 2023, FPLs reported ROE for regulatory purposes will be approximately 11.8%. During the quarter, we used approximately $78 million of reserve amortization, leaving FPL with a balance of approximately $1 billion. Our capital projects continue to progress well. As we indicated in our recent 10-year site plan, solar continues to be the lowest cost alternative for our customers. FPL placed into service roughly 225 megawatts of cost effective solar in the quarter, bringing the total year-to-date solar additions to nearly 1,200 megawatts. Over the last two years, FPL has commissioned over 1,600 megawatts of new solar generation. With two and a half years remaining under the current settlement agreement, FPL expects to add roughly 3,100 megawatts of incremental solar through 2025. FPL solar investments allow us to serve strong customer growth, while providing clean, affordable generation and avoiding volatile fuel purchases. Over the current four year settlement agreement, we continue to expect FPL with a capital investment of between $32 billion to $34 billion. Of that total, we anticipate investing approximately $10 billion in new solar generation and approximately $14 billion to $16 billion in transmission and distribution infrastructure. We remain confident in our total capital plan through 2025, as our cumulative capital investments of approximately $14 billion through June of 2023 are a little ahead of our original timeline. Our capital investment plan is well-established and by executing on solar deployment and transmission and distribution investments, we are enhancing what we believe is one of the best customer value propositions in the industry. I'll turn now to the Florida Economy, which continues to demonstrate strong growth. Over the past year, Florida has created roughly 412,000 new private sector jobs, and its unemployment rate continues to decline, currently standing at approximately 2.6%, which is nearly 30% below the U.S. average. Florida consumer sentiment improved roughly 14% compared to the prior year and remains above the U.S. average, while mortgage delinquency rates decline by 55 basis points compared to the prior year. Florida's GDP continues to trend upward, an increase over 9% versus a year ago. During the quarter, FPL had solid customer growth with the average number of customers increasing by more than 66,000 from the comparable prior year period. FPL's second quarter retail sales increased by approximately 0.3% year-over-year. We estimate that weather had a slightly negative impact on usage per customer of approximately 0.3% on a year-over-year basis. After taking these factors into account, second quarter retail sales increased roughly 0.6% on a weather normalized basis from the comparable prior year period, driven primarily by continued solid underlying population growth. Now let's turn to Energy Resources, where second quarter 2023 GAAP earnings, we're approximately $1.462 billion or $0.72 per share. Adjusted earnings for the second quarter we're approximately $781 million dollars or $0.39 per share, which is an increase in adjusted earnings per share of $0.04 year-over-year. Contributions from new investments increased $0.10 per share year-over-year. Contributions from our existing clean energy portfolio declined $0.06 per share. This decline was mostly due to a large swing in year-over-year wind resource. This quarter was the lowest second quarter of wind resource on record over the past 30 years, while last year was the highest. The contribution from our customer supply and trading business increased by $0.09 per share, primarily due to higher margins in our customer facing businesses, compared to a relatively weak contribution in the prior year quarter. All other impacts reduced earnings by $0.09 per share. This decline reflects higher interest cost of $0.06 per share, half of which is driven by new borrowing costs to support new investments and half of which is due to higher interest rates. The remaining impact is due to a combination of other factors, including additional costs to support early stage renewable development investments as we plan for growth in the latter part of the decade. Energy Resources had a solid quarter of new renewables and storage origination adding approximately 1,665 megawatts to the backlog. With these additions, our backlog now tolls roughly 20 gigawatts, after taking into account over 1,800 megawatts of new projects placed into service since our first quarter call, which keeps us on track to achieve our renewable development expectations through 2026. Having shared our new expectations just six months ago, we are already within the 2023 to 2024 development expectations range and only need roughly 15 gigawatts over the next three and 1.5 years to achieve the midpoint of the 2023 to 2026 development expectations range. As part of our backlog addition, this quarter we signed our first contract for a standalone battery storage project co-located with an existing wind facility. The 65 megawatts storage project is expected to serve our customers growing capacity needs in the southwest power pool and be available to monetize pricing arbitrage opportunities in this renewable rich area of the country. As we have highlighted, we believe there are many more opportunities to monetize the value of our existing 29 gigawatts operating renewables portfolio, including deploying co-located storage like we did here. We are excited to bring facility into commercial operation. During the quarter we continue to see solid demand for renewables and storage across power and commercial and industrial customers. After a period of underlying commodity price inflation, supply chain disruption and trade policy risk premiums, we are finally seeing signs of stability, which will be helpful in our customer conversations. We believe renewables remain economically attractive to alternative forms of generation, and position ourselves to meet long-term customer demand by expanding our significant pipeline of renewable projects. Today, we have a pipeline of roughly 250 gigawatts of renewables and storage projects in various stages of development. This includes projects in early stage diligence in our current backlog, and is supported by roughly 145 gigawatts of interconnection queue positions. When you combine our significant competitive advantages with our renewable pipeline, we believe Energy Resources is well positioned for growth and our renewable business for years to come. We also remain excited about the opportunity to serve hydrogen customers by leveraging our best-in-class renewables development expertise and early stage development position. Throughout the quarter we continue to advocate for smart hydrogen policy that we believe would help the U.S. establish a robust green hydrogen market and drive increased renewables penetration. We also progress our pipeline of potential green hydrogen opportunities by executing an additional memorandum of understanding to explore developing green hydrogen and related facilities that would integrate into our customers' operations and serve their energy needs. Hydrogen should be thought of as simply another renewables customer class, and as all our hydrogen related projects could potentially translate into additional new renewables, and with the appropriate regulations, begin to contribute to Energy Resources growth later this decade. Turning now to our consolidated results. For the second quarter of 2023, GAAP earnings attributed to NextEra Energy were approximately $2.795 billion or $1.38 per share. NextEra Energy recorded approximately $1.777 billion of adjusted earnings and $0.88 cents of adjusted EPS in the second quarter. Adjusted earnings from the corporate and other segment decreased results by $0.04 per share year-over-year, primarily driven by higher interest costs. We continue to proactively manage interest rates in multiple ways. First, NextEra Energy has $16 billion of various interest rate swaps to help mitigate the impact of future increases in rate. Second, FPL has features in its settlement agreement to offset higher interest rates such as reserve amortization and the ROE adjustment mechanism, which became effective on September 1, 2022 due to a sustained rise in the 30 year U.S. Treasury yield. Finally, our focus on continuous improvement through our annual velocity productivity initiative has yielded over $725 million in annual run rate savings ideas. Over the last two years, creating cost savings opportunities to help offset higher interest costs. As always, the current interest rate environment is taken into account in our financial expectations. Our long-term financial expectations remain unchanged, and we will be disappointed if we are not able to deliver financial results at or near the top end of our adjusted EPS expectation ranges. In each year, from 2023 to 2026, while the same time maintaining our strong balance sheet and credit ratings. From 2021 to 2026, we continue to expect that our average annual growth in operating cash flow will be at or above our adjusted EPS compound annual growth rate range. And we continue to expect to grow our dividends per share at roughly 10% per year, through at least 2024, off a 2022 base. As always, our expectations assume our usual caveats, including normal weather and operating conditions. Now, I'd like to turn to NextEra Energy Partners. Second quarter adjusted EBITDA and cash available for distribution were $486 million and $200 million respectively, reflecting weaker wind resource. NextEra Energy Partners remains well positioned to deliver on its 2023 run rate expectations for adjusted EBITDA and cash available for distribution. Yesterday, NextEra Energy Partners Board declared a quarterly distribution of $0.854 per share per common unit or $3.42 per common unit on an annualized basis, up approximately 12% from a year earlier. Inclusive of this quarter, NextEra Energy Partners has grown its LP distribution per unit over 355% since the IPO. Since our last earnings call, NextEra Energy Partners completed its previously announced acquisition of approximately 690 megawatts of wind and solar assets. With this acquisition, NextEra Energy Partners renewable portfolio is over 10,000 megawatts. Further strengthening its position as the world's seventh largest producer of electricity from the wind and sun. The partnership is well-positioned to execute on its simplification plan to become a 100% renewables focus company. Regarding this simplification plan, in May we launched the sales process for the Texas Natural Gas Pipeline portfolio and are pleased with our progress is we remain on track to sell the assets by later this year. NextEra Energy Partners expects to use the proceeds from the planned Texas Pipeline portfolio sales together with a mean natural gas pipeline sale in 2025 to eliminate the equity buyouts on the three near-term convertible equity portfolio financing. STX Midstream and EP Renewables 2, and 2019 NEP Pipelines. Upon successful execution of the Texas pipeline portfolio sell, the partnership does not expect to require equity through 2024, other than opportunistic equity issuances under our at the market equity program to fund future growth beyond 2024. Now to the detailed results. NextEra Energy Partners delivered second quarter adjusted EBITDA and cash available for distribution of $486 million and $200 million respectively, reflecting the adverse impacts of weaker wind resource. The adjusted EBITDA and cash available for distribution contribution from existing projects declined by approximately $99 million and $39 million respectively, primarily driven by a large swing in year-over-year wind resource. This quarter was the lowest-second quarter of wind resource on record over the past 30 years, while last year was the highest. New projects contributed approximately $49 million of adjusted EBITDA and $5 million of cash available for distribution. Second quarter results for adjusted EBITDA and cash available for distribution were positively impacted by the Incentive Distribution Rights Fee Suspension and provided approximately $38 million of benefit this quarter, partially offsetting the impact of poor wind resource performance. As we previously shared, we expect strong double-digit growth in the second half of the year and adjusted EBITDA and cash available for distribution to support NextEra Energy Partners, LP distribution per unit growth expectations range for the full year 2023. Additional details are shown on the accompanying slide. From a base of our fourth quarter 2022 distribution per common unit and an annualized rate of $3.25, we continue to see 12% to 15% growth per year and LP distributions per unit as being a reasonable range of expectations through at least 2026. However, as we previously shared with you, we expect to grow at or near the bottom end of that range. For 2023, we expect the annualized rate of the fourth quarter 2023 distribution that is payable in February of 2024 to be in a range of $3.64 to $3.74 per common unit. NextEra Energy Partners continue to expect run rate contributions for adjusted EBITDA and cash available for distribution and its forecasted portfolio at December 31, 2023 to be in the ranges of $2.2 billion to $2.42 billion and $770 million to $860 million respectively. As a reminder, year-end 2023 run rate projections reflect calendar year 2024 contributions from the forecasted portfolio at year-end 2023. As always, our expectations subject to our usual caveats, including normal weather and operating conditions. In summary, we believe that NextEra Energy and NextEra Energy Partners are well-positioned to continue delivering long-term value for shareholders and unit holders. At NextEra Energy, the plan is simple: Our two businesses are deploying capital and renewables and transmission for the benefit of customers providing visible growth opportunities for shareholders. At FPL, we're executing on our well-established capital investment plan, which allows us to extend our customer value proposition. Florida\u2019s strong population growth drives smart capital investment and running the business efficiently allows us to manage costs for the benefit of both customers and shareholders. FPL comprises more than two-thirds of NextEra Energy's business and provides a significant amount of visibility into capital deployment and earnings growth. At Energy Resources, we're leveraging our more than 20 years of experience, competitive advantages to grow our market share and add to our now roughly 20 gigawatts backlog, providing terrific growth visibility through 2026. We believe these competitive advantages will enable Energy Resources to serve power, commercial and industrial, and eventually hydrogen customers. With an opportunity set of $20 billion of capital investment, requiring more than 15 gigawatts of new renewables, Energy Resources is well-positioned to be green hydrogen partner of choice, potentially creating new opportunities toward the end of the decade. At NextEra Energy Partners we are executing on our plans to sell our natural gas pipelines and simplify the business. We continue to add to our renewables and storage portfolio, which now stands at over 10,000 megawatts. With the sale of the Texas Natural Gas Pipeline portfolio expected to be completed by the end of the year, NextEra Energy Partners remains on track to transition to a 100% pure play renewables company, while continuing to deliver LP distribution per unit growth for unit holders. With that, we're happy to answer your questions.","evidence_gemma_new":"capital investment","evidence_llama_3_3":null,"evidence_qwen_3_30b":"capital investment four year settlement agreement","gemma_new_max":33000000000.0,"gemma_new_min":33000000000.0,"llama_3_3_max":null,"llama_3_3_min":null,"qwen_3_30b_max":33000000000.0,"qwen_3_30b_min":33000000000.0}
{"symbol":"NEE","year":2024,"quarter":3,"date":"2024-FY","chunk_id":3,"sub_chunk_id":0,"centroid_label":"fpl s capital investments","agreed_value":8400000000.0,"count":3,"chunk":"Brian Bolster : Thank you, John, and good morning, everyone. For the third quarter of 2024, FPL increased earnings per share by $0.05 year-over-year. The principal driver of this performance was FPL's regulatory capital employed growth of approximately 9.5% year-over-year. We continue to expect FPL to realize roughly 10% average annual growth in regulatory capital employed over our current rate agreements four year term, which runs through 2025. FPL's capital expenditures were approximately $2 billion for the quarter, and we expect FPL's full year 2024 capital investment to be between $8 billion and $8.8 billion. Over the current four year settlement agreement, we expect FPL's capital investments to exceed $34 billion. FPL's third quarter retail sales increased 1% from the prior year comparable period. FPL grew retail sales by roughly 1.6% on a weather normalized basis, offset by milder weather. During the quarter, FPL reversed approximately $231 million of reserve amortization and FPL ended the quarter with a balance of roughly $817 million. With regard to costs associated with storm recovery, as a reminder, we have both the storm reserve and a surcharge mechanism to the extent the reserve has been fully utilized. Following Hurricane Debby, we had depleted our storm reserve and have deferred the remaining incremental cost for Hurricanes Debby, Helene and Milton to the balance sheet. We intend to recover those deferred costs and replenish the storm reserve via storm surcharge on customers' bills over the calendar year 2025. Although FPL has not completed the final accounting, our preliminary estimate of restoration costs that we plan to recover from customers through a surcharge is approximately $1.2 billion inclusive of $150 million, which will be utilized to replenish the storm reserve. Of course, the restoration cost will be subject to a final review and prudence determination by the Florida Public Service Commission. For the 12 months ending September 2024, FPL's reported ROE for regulatory purposes will be approximately 11.8%. We still expect the regulatory ROE for the 12 months ending December 2024 and 2025 to be 11.4%. Now let's turn to Energy Resources, which reported adjusted earnings growth of approximately 11% year-over-year. At Energy Resources, adjusted earnings per share increased by $0.04 year-over-year. Contributions from new investments increased $0.15 per share year-over-year, primarily driven by continued growth in our renewables portfolio. Comparative contribution from our customer supply and trading business, which you'll recall had strong earnings last year, decreased by $0.10 per share driven by normalization of origination activity and margins, which is consistent with our expectations. Contributions from both NextEra Energy transmission and gas infrastructure businesses increased by $0.01 per share year-over-year. All other impacts reduced earnings by $0.03 per share. Energy Resources had another strong quarter of new renewables and storage origination, adding approximately 3 gigawatts to the backlog. With these additions, our backlog now totals over 24 gigawatts after taking into account roughly 1 gigawatt of new projects placed into service since our last earnings call, providing great visibility into Energy Resources' ability to deliver on our development program expectations. We expect the backlog additions will go into service over the next several years. Turning now to our third quarter 2024 consolidated results, adjusted EPS was $1.03 per share. Adjusted earnings from corporate and other were flat to last year's comparable quarter. At NextEra Energy, our long-term financial expectations remain unchanged. We will be disappointed if we are not able to deliver financial results at or near the top end of our adjusted EPS expectation ranges in 2024, 2025, 2026 and 2027. In 2023 to 2027, we continue to expect that our average annual growth in operating cash flow will be at or above our adjusted EPS compound annual growth rate range. And we also continue to expect to grow our dividends per share at roughly 10% per year through at least 2026 off a base -- off a 2024 base. As a reminder, our expectations are subject to our caveats. Turning to NextEra Energy Partners. Yesterday, NextEra Energy Partners board declared a quarterly distribution of $0.9175 per common unit or $3.67 per common unit on an annualized basis, up nearly 6% from a year earlier. Today, NextEra Energy Partners is pleased to announce the expected wind repowering of another approximately 225 megawatts of wind facilities, bringing its total backlog of wind repowering to approximately 1.6 gigawatts through 2026. The partnership's organic growth opportunities have expanded and we are increasing our wind repowering target to approximately 1.9 gigawatts of wind projects owned by NextEra Energy Partners through 2026, which is up from the previous target of 1.3 gigawatts. NextEra Energy Partners owns a large portfolio of high quality long-term contracted clean energy assets and has attractive organic growth from the repowering of its existing portfolio. NextEra Energy Partners remains focused on executing additional wind repowering opportunities in the future, which we believe would provide improved operating performance and higher generation. Let me now turn to the detailed results. Third quarter adjusted EBITDA was $453 million and cash available for distribution was $155 million. Third quarter adjusted EBITDA and cash available for distribution declined by approximately $35 million and $92 million respectively from the same period last year. Third quarter adjusted EBITDA and cash available for distribution reflect the year-over-year impact of the divestiture of the Texas Pipeline portfolio. In addition, third quarter cash available for distribution in 2024 was negatively impacted by the first interest payment on the partnership's December 2023 HoldCo debt issuance, as well as $23 million of higher project level debt service relating in large part to the 2023 acquisition financing. NextEra Energy Partners continue to expect the run rate contribution for adjusted EBITDA from its forecasted portfolio at December 31, 2024 to be in the range of $1.9 billion to $2.1 billion. The year end 2024 run rate projections reflect expected calendar year 2025 contributions from the forecasted portfolio at year end 2024. The partnership also continues to evaluate alternatives to address its remaining convertible equity portfolio financing obligations and its cost of capital, focusing on its capital structure and the potential for redeployment of more cash flow toward driving organic cash flow growth. Given the demand for power, NextEra Energy Partners has many ways in which it can seek to grow, which could include not only acquiring assets, but also wind repowerings and potential other organic growth opportunities. NextEra Energy Partners plans to complete its review by no later than the fourth quarter 2024 call and intends to provide its distribution and run rate cash available for distribution expectations at that time. As a reminder, our expectations are subject to our caveats. That concludes our prepared remarks. And with that, we will open the line for questions.","evidence_gemma_new":"FPL capital investment full year 2024","evidence_llama_3_3":"FPL capital investments full year 2024","evidence_qwen_3_30b":"expect FPL capital investment full year 2024","gemma_new_max":8400000000.0,"gemma_new_min":8400000000.0,"llama_3_3_max":8400000000.0,"llama_3_3_min":8400000000.0,"qwen_3_30b_max":8400000000.0,"qwen_3_30b_min":8400000000.0}
{"symbol":"NEE","year":2024,"quarter":1,"date":"2024-Q1","chunk_id":3,"sub_chunk_id":0,"centroid_label":"fpl s capital investments","agreed_value":33000000000.0,"count":2,"chunk":"Kirk Crews: Thank you, John. For the first quarter of 2024, FPL's earnings per share increased $0.04 year over year. The principal driver of this performance was FPL's regulatory capital employed growth of approximately 11.5% year-over-year. We now expect FPL to realize roughly 10% average annual growth in regulatory capital employed over our current rate agreements four-year term, which runs through 2025. FPL's capital expenditures were approximately $2.3 billion for the quarter and we expect FPL's full year 2024 capital investments to be between $7.8 billion and $8.8 billion. For the twelve months ending March 2024 FPL's reported ROE for regulatory purposes will be approximately 11.8%. During the first quarter, we utilized approximately $572 million of reserve amortization, leaving FPL with a balance of roughly $651 million. As we've previously discussed, FPL historically utilizes more reserve amortization in the first half of the year, and we expect this trend to continue this year. Earlier this month, FPL received approval to reduce customer bills due to projected 2024 fuel savings. As a result, FPL's typical 1000 kilowatt hour residential customer bill is expected to be roughly $14 lower in May than the start of the year and approximately 37% lower than the current national average. Over the current four-year settlement agreement we now expect FPL's capital investments to be slightly above our previous range of $32 billion to $34 billion. This quarter FPL placed into service 1640 MW of new cost effective solar, putting FPL's owned and operated solar portfolio at over 6400 MW, which is the largest utility owned solar portfolio in the country. FPL's annual ten-year site plan continues to indicate that solar and storage are the most cost effective answer for customers to add reliable grid capacity over the next decade. The 2024 plan includes similar levels of new solar generation capacity 21 gigawatts across our service territory over the next ten years compared to our 2023 plan. But our 2024 plan doubles the expected deployment of battery storage to over 4 gigawatts, some of which we expect to be needed earlier than forecasted in our 2023 plan. With this plan, we expect to increase FPL solar mix from approximately 6% of our total generation in 2023% to 38% in 2033 while continuing to provide customers with clean, affordable energy. FPL believes battery storage will play an increasingly valuable role for customers, serving as an attractive capacity complement to our growing solar generation. From providing system balancing needs in critical parts of FPL's service territory to supplying energy during any time of day or weather condition, battery storage acts as a key resource to the system that is both valuable and cost effective for customers. Key indicators show that Florida's economy remains healthy. Florida continues to be one of the fastest growing states in the nation and had four of the five fastest growing U.S. metro areas between 2022 and 2023. FPL had its strongest quarter of customer growth in over 15 years, with the average number of customers increasing by more than 100,000 from the comparable prior year period. Although FPL's first quarter retail sales decreased by approximately 1.3% year-over-year, we estimate that weather had a negative impact on usage per customer of approximately 5.4% on a year-over-year basis. After taking weather into account, first quarter retail sales increased roughly 4.1% on a weather normalized basis from the comparable prior year period, driven primarily by continued favorable underlying population growth and usage per customer. Now let's turn to Energy Resources, which reported adjusted earnings growth of approximately 13.1% year-over-year. Contributions from new investments increased $0.15 per share year-over-year, primarily reflecting continued growth in our renewables portfolio. Our existing clean energy portfolio declined $0.02 per share, primarily due to unfavorable wind resource during the quarter. The comparative contribution from our customer supply business increased results by $0.04 per share. All other impacts reduced earnings by $0.12 per share. This decline reflects higher interest costs of $0.07 per share, half of which related to new borrowing costs to support new investments. Energy Resources had a strong quarter of new renewables and storage origination, adding approximately 2765 to the backlog. With these additions, our backlog now totals roughly 21.5 gigawatts after taking into account 1165 MW of new projects placed into service since our last earnings call, highlighting Energy Resources ability to continue to identify attractive and accretive investment opportunities which provide strong growth visibility in the years ahead. We recently plugged 740 MW of new solar and storage projects into service which are being used to support data centers located in Arizona and New Mexico. Both of these projects are now one of the largest battery storage facilities in their respective states and in combination with their co-located solar each project enabled the local utility to serve their customers need for new, reliable, clean energy to grow their own business operations. We are proud to continue to support our power and commercial and industrial customers to meet their growing power and capacity needs create jobs and provide economic development in these local communities. Our origination activities across our power and commercial and industrial customers are beginning to reflect the rising power demand. We are seeing it manifest with our power customers in their state RFP processes and bilateral discussions where we deliver cost effective renewables and storage to their grid. We are also observing it through interactions with our oil and gas and manufacturing customers where we utilize our data and technology to help them make better siting decisions. Our technology customers have been a consistent driver of demand for many years, reflected by our roughly 3 gigawatt operating portfolio and over 3 gigawatt project backlog as we partner with them to provide various clean energy solutions based on their key business variables. We are a partner with both our power and commercial industrial customers trust. We leverage our 3 gigawatt development pipeline, our 35 gigawatt operating renewables and storage portfolio, and our transformer and switchgear procurement covering energy resources billed through 2027 to deliver projects for customers. As John said, the power demand growth is expected to be strong through at least the end of the decade. We expect 2024 to be another strong year for new renewables and storage origination. This is on the heels of two consecutive record origination years at Energy Resources. We continue to expect to remain on track for our overall renewables development expectations of roughly 33 to 42 gigawatts from 2023 through 2026. Beyond renewables and storage, NextEra Energy Transmissions was recently selected by the California ISO to develop a new a two-mile, 500 kV transmission line in Southern California, with a capital investment of more than $250 million. We believe this project could unlock over 3 gigawatts of new renewable generation capacity, supporting California's ambitious clean energy goals. This award follows a record year for NextEra Energy Transmission in 2023 and we remain excited about the opportunities ahead for this growing business. We continue to believe our ability to build, own and operate transmission is a key advantage for our renewables business. Turning now to our first quarter 2024 consolidated results, adjusted earnings from corporate and other decreased by $0.01 per share year-over-year. This quarter, we entered into an agreement to transfer approximately $1 billion of tax credits throughout 2024, representing the bulk of our expected transfers for the year. Our long-term financial expectations remain unchanged. We will be disappointed if we are not able to deliver financial results at or near the top end of our adjusted EPS expectation ranges in 2024, 2025 and 2026. From 2021 to 2026, we continue to expect that our average annual growth in operating cash flow will be at or above our adjusted EPS compound annual growth rate range. And as we announced in February, the Board of Directors of NextEra Energy approved a targeted growth rate in dividends per share of roughly 10% per year through at least 2026 off a 2024 base. As always, our expectations assume our caveat. Turning to NextEra Energy Partners, we continue to focus on executing against the partnerships transition plan and delivering an LP distribution growth target of 6% through at least 2026. We bought out the STX Midstream convertible equity portfolio financing in 2023 and have sufficient proceeds available from the Texas pipeline portfolio sale to complete the NEP Renewables II buyout due in June 2024 and 2025. The third convertible equity portfolio financing associated with the Meade natural gas pipeline assets is expected to be addressed in 2025. With the plan for the near-term convertible equity portfolio financings well understood, we remain focused on the partnership's cost of capital improving, which is critical for its success. With that objective in mind, we continue to evaluate alternatives to address the remaining convertible equity portfolio financing with equity buyout obligations in 2027 and beyond. Turning to the partnership's targeted 6% growth in LP distributions per unit, NextEra Energy Partners does not expect to need an acquisition this year to achieve its 6% targeted growth rate and the partnership does not expect to require growth equity until 2027. In terms of NextEra Energy Partners growth plan, as a reminder, it involves organic growth, specifically re-powering of approximately 1.3 gigawatts of wind projects through 2026, as well as acquiring assets at attractive yields. Today we are announcing plans to repower an additional approximately 100 MW of wind facilities through 2026. The partnership has now announced roughly 1085 MW of repowers. Yesterday, NextEra Energy Partners Board declared a quarterly distribution of 89.25 cents per common unit or $3.57 per common unit on an annualized basis, which reflects an annualized increase of 6% from its fourth quarter 2023 distribution per common unit. Let me now turn to the detailed results. First quarter adjusted EBITDA was $462 million and cash available for distribution was $164 million. New projects, which primarily reflect contributions from approximately 840 net megawatts of new projects that either closed in the second quarter of 2023 or achieved commercial operations in 2023, contributed approximately $32 million of adjusted EBITDA and $7 million of cash available for distribution. First quarter adjusted EBITDA contribution from existing projects declined by approximately $37 million year-over-year, driven primarily by unfavorable wind resource during the quarter and lower generation at Genesis Solar Project as a result of a planned outage for major maintenance. Wind resource was approximately 97% of long-term average versus 102% in the first quarter of 2023. The incentive distribution right fee suspension provided approximately $39 million of benefit this quarter for adjusted EBITDA and cash available for distribution. Finally, adjusted EBITDA and cash available for distribution declined by approximately $44 million and $38 million respectively, for the divestiture of the Texas pipeline portfolio. From a base of our fourth quarter 2023 distribution per common unit and an annualized rate of $3.52, we continue to see 5% to 8% growth per year in LP distributions per unit, with a current target of 6% growth per year as being a reasonable range of expectations through at least 2026. We continue to expect the partnerships payout ratio to be in the mid-90s through 2026. We expect the annualized rate of the fourth quarter 2024 distribution that is payable in February 2025 to be $3.73 per common unit. NextEra Energy Partners expects run rate contributions for adjusted EBITDA and cash available for distribution from its forecasted portfolio at December 31, 2024 to be in the ranges of $1.9 billion to $2.1 billion and $730 million to $820 million respectively. As a reminder, yearend 2024 run rate projections reflect calendar year 2025 contributions from the forecasted portfolio at year end 2024. As a reminder, our expectations are subject to our caveat. That concludes our prepared remarks and with that we will open the line for questions.","evidence_gemma_new":null,"evidence_llama_3_3":"capital investments four-year settlement agreement","evidence_qwen_3_30b":"FPL's capital investments current four-year settlement agreement","gemma_new_max":null,"gemma_new_min":null,"llama_3_3_max":33000000000.0,"llama_3_3_min":33000000000.0,"qwen_3_30b_max":33000000000.0,"qwen_3_30b_min":33000000000.0}
{"symbol":"NEE","year":2024,"quarter":2,"date":"2024-Q2","chunk_id":3,"sub_chunk_id":0,"centroid_label":"fpl s capital investments","agreed_value":3500000000.0,"count":2,"chunk":"Brian Bolster: Thank you, John. Good morning, everyone. For the second quarter of 2024, FPL increased earnings per share by $0.03 year-over-year. The principal driver of this performance was FPL's regulatory capital employed growth of approximately 10.7% year-over-year. We continue to expect FPL to realize roughly 10% average annual growth in regulatory capital employed over our current rate agreements four year term, which runs through 2025. FPL's capital expenditures were approximately $2.1 billion for the quarter, and we expect FPL's full year 2024 capital investments to be between $8 billion $8.8 billion. Over the current four year settlement agreement, we expect FPL's capital investments to exceed $3 billion, $4 billion. FPL's second quarter retail sales increased 3.7% from the prior year comparable period due to warmer weather, which had a positive year-over-year impact on usage for costumer of approximately 2.6%. As a result FPL grew retail sales in second quarter by roughly 1.1% on a weather normalized basis. For the 12 months ending June 2024, FPL's reported ROE for regulatory purposes will be approximately 11.8% and the 11.4% regulatory ROE mentioned previously is expected to be realized in the fourth quarter for the 12-months ending December 2024. Now let's turn to Energy Resources, which reported adjusted earnings growth of approximately 10.8% per year -- at 10.8% year-over-year and Energy Resources adjusted earnings per share increased by $0.03 year-over-year. Contributions from new investments increased $0.12 per share year-over-year, primarily driven by continued growth in our renewables portfolio. Our existing clean energy portfolio increased $0.06 per share, primarily reflecting an increase in wind resources during the quarter. Wind resource for the Q2 of 2024 was approximately 104% of the long term average versus 88% in the second quarter of 2023. The comparative contribution from our customer supply business, which you'll recall had strong earnings last year, decreased by $0.03 per share. Contributions from our gas infrastructure business decreased by $0.07 per share, due to a combination of higher depletion expense related to lower production estimates, certain non-recurring items and the sale of the Texas pipelines by NextEra Energy Partners. While we may see a few pennies impact again next quarter, we expect gas infrastructure's earnings growth to be effectively flat going forward as we continue to allocate more capital on a relative basis to renewables, storage and transmission. Similar to what we saw this quarter, the increased contributions from new investment driven by the strength of our renewable development program are expected to more than offset any slowing in gas infrastructure growth going forward. All other impacts reduced earnings by $0.05 per share. Energy resources had a strong quarter of new renewables and storage origination, adding 3,000 megawatts to the backlog. With these additions, our backlog now totals roughly 22.6 gigawatts after taking into account more than 1,600 megawatts of new projects placed in the service since our last earnings call, providing great visibility into energy resources ability to deliver on our development program expectations which we recently extended at our Investor Conference. We expect the backlog additions will go into service over the next few years and into 2028. Energy resources 300 gigawatt pipeline is years in the making and ready to respond to customer demand. We have competitive advantages understanding transmission and grid constraints. We have strong relationships with utilities serving the growing power grid. We can build system solutions across stakeholders and customer needs, and we can leverage our proprietary technology to site and deploy the best projects for our customers. A great example is our collaboration with Entergy, where we are targeting to build 4.5 gigawatts of renewable storage solutions to help them meet both their new increased load demand and energy transition goals. And we couldn't be more excited to work with a long-term established customer in order to help them execute on these goals. Another example is our collaboration with Google. As John said earlier, this quarter's backlog addition include 860 megawatts signed with Google to support their data center needs. That brings our total renewables portfolio with technology and data center customers, including assets in operation and in backlog to 7 gigawatts. Our competitive position is even further advantaged by our existing portfolio, with interconnection timelines for new sites stretching for three to seven years or beyond. We can dramatically improve our speed to market by utilizing the existing interconnection from our operating footprint to deploy co-located solar and storage, as well as execute on wind and potentially solar repowers. This optionality provides a unique resource to meet our customer needs, while also capitalizing on the embedded option value from the existing portfolio. Beyond renewables and storage, we're excited to say that Mountain Valley Pipeline is now in service. Turning now to Q2 2024 consolidated results. Adjusted earnings from corporate and other increased by $0.02 per share year-over-year. During the quarter, NextEra issued $2 billion of equity units and recently Energy Resources entered into an agreement with Blackstone to sell a partial interest in a portfolio of wind and solar projects for approximately $900 million. Our long-term financial expectations, which we stated last month at our Investor Conference, remain unchanged. We will be disappointed if we're not able to deliver financial results at or near the top-end of our adjusted EPS expectations range in 2024, 2025, 2026 and 2027. From 2023 to 2027, we continue to expect that our average annual growth and operating cash flow will be at or above our adjusted EPS compound annual growth rate range. And we also continue to expect to grow our dividends per share at roughly 10% per year through at least \u201826 off of 2024 base. As always, our expectations assume our caveats. Turning next to NextEra Energy Partners. Yesterday, NextEra Energy Partners' board declared a quarterly distribution of $0.95 per common unit or $3.62 per common unit on an annualized basis, up approximately 6% from a year earlier. Turning to the balance sheet, since our last earnings call, the partnership completed the next net renewables to equity buyout of roughly $190 million in June 2024 and paid down our 2024 convertible maturity with cash on hand. After repayment of a $700 million HoldCo debt maturity earlier this month, the partnership now has approximately $2.7 billion of liquidity. Let me now turn to the detailed results. Second quarter adjusted EBITDA was $560 million and cash available for distribution was $220 million. New projects, which primarily reflect contributions from approximately 780 net megawatts of new assets that either closed in the Q2 of 2023 or achieved commercial operations in 2023 contributed approximately $39 million of adjusted EBITDA and $9 million of cash available for distribution. Second quarter adjusted EBITDA contribution from existing projects grew by approximately $62 million year-over-year, driven primarily by favorable wind resource during the quarter and partially offset by lower solar generation. Wind resources approximately 103% of the long term average versus 88% in the second of 2023. Finally, adjusted EBITDA and cash available for distribution declined by approximately $46 million and $43 million respectively, from the divestiture of the Texas pipeline portfolio, which is partially offset by the interest benefit of the remaining cash proceeds received from the sale of these assets. From a base of our fourth quarter 2023 distribution per common unit at an annualized rate of $3.52. The partnership continue to see 5% to 8% growth per year in LP distributions per unit with the current target of 6% growth per year as being a reasonable product range of expectations through at least 2026. NextEra Energy Partners expects the partner's payout ratio to be in the mid to high 90s through 2026. We expect the annualized rate of the fourth 2024 distribution that is payable in February 2025 to be $3.73 per common unit. In terms of next steps for NextEra Energy Partners, as we have discussed with you previously, the partnership is continuing to look at all options to secure a competitive cost of capital and to address the remaining convertible equity portfolio financing buyouts. At the same time, the partnership's 6% distribution growth target remains for now. NextEra Energy Partners does not need an acquisition related financing in 2024 to meet its 6% target and does not need gross equity until 2027. NextEra Energy Partners owns a large portfolio of high quality long term contracted clean energy assets and the partnership has attractive organic growth from the repowering of its existing portfolio. We expect to share more in the coming quarters as we address these objectives. NextEra Energy Partners expects run rate contributions for adjusted EBITDA and cash available for distribution from its forecasted portfolio at December 31, 2024 to be in the ranges of $1.9 billion to $2.1 billion and $730 million to $820 million respectively. As a reminder, year-end 2024 run rate projections reflect calendar year 2025 contributions from the forecasted portfolio at year-end 2024. As a further reminder, our expectations are subject to our caveats. That concludes our prepared remarks. And with that, we'll open the line for questions.","evidence_gemma_new":null,"evidence_llama_3_3":"FPL capital investments four year settlement agreement","evidence_qwen_3_30b":"expect FPL capital investments over the current four year settlement agreement","gemma_new_max":null,"gemma_new_min":null,"llama_3_3_max":3500000000.0,"llama_3_3_min":3500000000.0,"qwen_3_30b_max":3500000000.0,"qwen_3_30b_min":3500000000.0}
{"symbol":"NEE","year":2024,"quarter":3,"date":"2024-Q3","chunk_id":3,"sub_chunk_id":0,"centroid_label":"fpl s capital investments","agreed_value":34000000000.0,"count":3,"chunk":"Brian Bolster : Thank you, John, and good morning, everyone. For the third quarter of 2024, FPL increased earnings per share by $0.05 year-over-year. The principal driver of this performance was FPL's regulatory capital employed growth of approximately 9.5% year-over-year. We continue to expect FPL to realize roughly 10% average annual growth in regulatory capital employed over our current rate agreements four year term, which runs through 2025. FPL's capital expenditures were approximately $2 billion for the quarter, and we expect FPL's full year 2024 capital investment to be between $8 billion and $8.8 billion. Over the current four year settlement agreement, we expect FPL's capital investments to exceed $34 billion. FPL's third quarter retail sales increased 1% from the prior year comparable period. FPL grew retail sales by roughly 1.6% on a weather normalized basis, offset by milder weather. During the quarter, FPL reversed approximately $231 million of reserve amortization and FPL ended the quarter with a balance of roughly $817 million. With regard to costs associated with storm recovery, as a reminder, we have both the storm reserve and a surcharge mechanism to the extent the reserve has been fully utilized. Following Hurricane Debby, we had depleted our storm reserve and have deferred the remaining incremental cost for Hurricanes Debby, Helene and Milton to the balance sheet. We intend to recover those deferred costs and replenish the storm reserve via storm surcharge on customers' bills over the calendar year 2025. Although FPL has not completed the final accounting, our preliminary estimate of restoration costs that we plan to recover from customers through a surcharge is approximately $1.2 billion inclusive of $150 million, which will be utilized to replenish the storm reserve. Of course, the restoration cost will be subject to a final review and prudence determination by the Florida Public Service Commission. For the 12 months ending September 2024, FPL's reported ROE for regulatory purposes will be approximately 11.8%. We still expect the regulatory ROE for the 12 months ending December 2024 and 2025 to be 11.4%. Now let's turn to Energy Resources, which reported adjusted earnings growth of approximately 11% year-over-year. At Energy Resources, adjusted earnings per share increased by $0.04 year-over-year. Contributions from new investments increased $0.15 per share year-over-year, primarily driven by continued growth in our renewables portfolio. Comparative contribution from our customer supply and trading business, which you'll recall had strong earnings last year, decreased by $0.10 per share driven by normalization of origination activity and margins, which is consistent with our expectations. Contributions from both NextEra Energy transmission and gas infrastructure businesses increased by $0.01 per share year-over-year. All other impacts reduced earnings by $0.03 per share. Energy Resources had another strong quarter of new renewables and storage origination, adding approximately 3 gigawatts to the backlog. With these additions, our backlog now totals over 24 gigawatts after taking into account roughly 1 gigawatt of new projects placed into service since our last earnings call, providing great visibility into Energy Resources' ability to deliver on our development program expectations. We expect the backlog additions will go into service over the next several years. Turning now to our third quarter 2024 consolidated results, adjusted EPS was $1.03 per share. Adjusted earnings from corporate and other were flat to last year's comparable quarter. At NextEra Energy, our long-term financial expectations remain unchanged. We will be disappointed if we are not able to deliver financial results at or near the top end of our adjusted EPS expectation ranges in 2024, 2025, 2026 and 2027. In 2023 to 2027, we continue to expect that our average annual growth in operating cash flow will be at or above our adjusted EPS compound annual growth rate range. And we also continue to expect to grow our dividends per share at roughly 10% per year through at least 2026 off a base -- off a 2024 base. As a reminder, our expectations are subject to our caveats. Turning to NextEra Energy Partners. Yesterday, NextEra Energy Partners board declared a quarterly distribution of $0.9175 per common unit or $3.67 per common unit on an annualized basis, up nearly 6% from a year earlier. Today, NextEra Energy Partners is pleased to announce the expected wind repowering of another approximately 225 megawatts of wind facilities, bringing its total backlog of wind repowering to approximately 1.6 gigawatts through 2026. The partnership's organic growth opportunities have expanded and we are increasing our wind repowering target to approximately 1.9 gigawatts of wind projects owned by NextEra Energy Partners through 2026, which is up from the previous target of 1.3 gigawatts. NextEra Energy Partners owns a large portfolio of high quality long-term contracted clean energy assets and has attractive organic growth from the repowering of its existing portfolio. NextEra Energy Partners remains focused on executing additional wind repowering opportunities in the future, which we believe would provide improved operating performance and higher generation. Let me now turn to the detailed results. Third quarter adjusted EBITDA was $453 million and cash available for distribution was $155 million. Third quarter adjusted EBITDA and cash available for distribution declined by approximately $35 million and $92 million respectively from the same period last year. Third quarter adjusted EBITDA and cash available for distribution reflect the year-over-year impact of the divestiture of the Texas Pipeline portfolio. In addition, third quarter cash available for distribution in 2024 was negatively impacted by the first interest payment on the partnership's December 2023 HoldCo debt issuance, as well as $23 million of higher project level debt service relating in large part to the 2023 acquisition financing. NextEra Energy Partners continue to expect the run rate contribution for adjusted EBITDA from its forecasted portfolio at December 31, 2024 to be in the range of $1.9 billion to $2.1 billion. The year end 2024 run rate projections reflect expected calendar year 2025 contributions from the forecasted portfolio at year end 2024. The partnership also continues to evaluate alternatives to address its remaining convertible equity portfolio financing obligations and its cost of capital, focusing on its capital structure and the potential for redeployment of more cash flow toward driving organic cash flow growth. Given the demand for power, NextEra Energy Partners has many ways in which it can seek to grow, which could include not only acquiring assets, but also wind repowerings and potential other organic growth opportunities. NextEra Energy Partners plans to complete its review by no later than the fourth quarter 2024 call and intends to provide its distribution and run rate cash available for distribution expectations at that time. As a reminder, our expectations are subject to our caveats. That concludes our prepared remarks. And with that, we will open the line for questions.","evidence_gemma_new":"FPL capital investments","evidence_llama_3_3":"FPL capital investments $34 billion four year settlement agreement","evidence_qwen_3_30b":"expect FPL capital investments over the current four year settlement agreement","gemma_new_max":34000000000.0,"gemma_new_min":34000000000.0,"llama_3_3_max":34000000000.0,"llama_3_3_min":34000000000.0,"qwen_3_30b_max":34000000000.0,"qwen_3_30b_min":34000000000.0}
{"symbol":"NEE","year":2023,"quarter":4,"date":"2023-FY","chunk_id":3,"sub_chunk_id":0,"centroid_label":"fpl s regulatory capital employed growth","agreed_value":0.125,"count":2,"chunk":"Kirk Crews : Thanks John. Let's begin with FPL's detailed results. For the full year 2023 FPL's adjusted earnings per share increased $0.22 versus 2022. FPL's adjusted earnings results exclude the approximately $300 million after tax gain on the sale of Florida City Gas which closed on November 30th 2023. The principal driver of the 2023 full year performance was FPL's regulatory capital employed growth of approximately 12.5%. We continue to expect FPL's average annual growth and regulatory capital employed to be roughly 9% over the four year term of our current rate agreement, which runs through 2025. For the full year 2023, FPL's reported ROE for regulatory purposes will be approximately 11.8%. During the full year 2023, we used approximately $227 million of reserve amortization, leaving FPL with a yearend 2023 balance of roughly $1.2 billion. FPL's capital expenditures were approximately $2 billion in the fourth quarter, bringing its full year capital investments to a total of roughly $9.4 billion. These capital investments supported the successful commissioning of roughly 1, 200 megawatts of solar in 2023, continued hardening of the grid, and our efforts to underground our distribution system. During the fourth quarter of 2023, our 25 megawatt hydrogen pilot at the Okeechobee Clean Energy Center successfully achieved commercial operations. As a reminder, we plan to utilize this facility together with adjacent solar projects to create green hydrogen and blend it with natural gas at our Okeechobee plant. Key indicators show that the Florida economy remains strong and Florida's population continues to be one of the fastest growing in the country. Florida's economy continues to trend upward, and its GDP is now roughly $1.6 trillion, an increase of 9.3% over last year. For the fourth quarter of 2023, FPL's retail sales increased 1.6% from the prior year on a weather normalized basis, driven primarily by continued strong customer growth, which increased by nearly 81, 000 from the prior year comparable quarter. For the full year 2023, FPL retail sales increased 0.6% from the prior year on a weather normalized basis, also driven primarily by the strong customer growth in our service territory. Now, let's turn to Energy Resources, which reported full year adjusted earnings growth of approximately 12.9% year-over-year. Contributions from new investments increased by $0.35 per share due to strong growth in our renewables and storage portfolio. Contributions from our existing clean energy assets decreased results by $0.11 per share, driven primarily by the impact of weaker wind resource. 2023 was the lowest wind resource on record over the past 30 years. Our customer supply and trading business increased results by $0.16 per share, primarily due to higher margins in our customer facing businesses. Other decreased results by $0.26 per share year-over-year. This decline reflects higher interest costs of $0.22 per share, of which $0.10 was driven by new borrowing costs to support new investments. Energy Resources delivered our best year ever for origination, adding approximately 9, 000 megawatts of new renewables and battery storage projects to our backlog, which includes approximately 2, 060 megawatts since our last call. Our 2023 origination performance reflects continued strong demand from power customers looking for the least cost alternative to serve load and to replace uneconomic generation and commercial and industrial customers looking to help decarbonize their operation or meet their data center and AI demand. Our renewables backlog now stands at more than 20 gigawatts after taking into account roughly 2, 470 megawatts of new projects placed into service since our third quarter call. We believe our 20 gigawatt backlog provides clear visibility and Energy Resources\u2019 ability to deliver for shareholders through 2026 and beyond. Turning now to the consolidated results for NextEra Energy. For the full year adjusted earnings from our corporate and other segment decreased by $0.08 per share year-over-year, primarily driven by higher interest costs. We successfully supported the growth in our underlying businesses from our strong operating cash flows, including the sale of tax credits as well as our historical funding sources. In 2023, we grew cash flow from operations well in excess of our adjusted earnings. We transferred approximately $400 million of tax credits, establishing relationships with numerous counterparties. We believe this will prove to be a competitive advantage as buyers look first to NextEra Energy given its size, experience, and the overall quality of its tax credit program. Overall, our funding plans for 2024 through 2026 remain consistent with the information we shared on the third quarter earnings call. We continue to believe NextEra Energy is well positioned to manage the interest rate environment. While the recent decline in interest rates is encouraging, we remain committed to managing the business to deliver value for customers and shareholders. Overall, we believe we are well positioned with $18.5 billion of interest rate swaps and we will continue to closely monitor the interest rate environment as the clients and rates certainly represent a tail end for our sector and customers. Our long-term financial expectations remain unchanged. We will be disappointed if we are not able to deliver financial results at or near the top end of our adjusted EPS expectation ranges in 2024, 2025, and 2026. For the last 14 consecutive years, NextEra Energy has met or exceeded its financial expectation, which is a record we are proud of. From 2021 to 2026, we continue to expect that our average annual growth and operating cash flow will be at or above our adjusted EPS compound annual growth rate range. And we also continue to expect to grow our dividends per share at roughly 10% per year through at least 2024 off a 2022 base. As always, our expectations assume our caveats. Now let's turn to NextEra Energy Partners. In terms of the transition plans, NextEra Energy Partners closed the sale of Texas pipeline portfolio in late December, providing net proceeds of approximately $1.4 billion. NextEra Energy Partners expect to complete the NEP Renewables II buyouts of roughly $190 million and $950 million on their stated minimum buyout dates of June 2024 and 2025, respectively, as the partnerships continue to benefit from the low cash coupon through 2025. In terms of NextEra Energy Partners ' growth plan, as a reminder, it involves organic growth, specifically repowerings of approximately 1.3 gigawatt of wind projects through 2026, as well as acquiring assets at attractive yields. Today, we are announcing plans to repower an additional approximately 245 MW of wind facilities through 2026. The partnership has now announced roughly 985 MW of repowers with strong cash available for distribution yields. While the partnership does not expect to need an acquisition in 2024, the LP distribution growth target of 6% is supported, in part with roughly 175 MW of wind repowers, which are expected to generate attractive cash available for distribution yields. Finally, we were pleased with the high yield note issuance of $750 million, which was completed during the fourth quarter of 2023. This opportunistic refinancing allowed the partnership to pay off its corporate revolver in mid-December. Let me now turn to the financial results for NextEra Energy Partners. Fourth quarter adjusted EBITDA was $454 million, and cash available for distribution was $86 million. Adjusted EBITDA growth versus the prior year comparable quarter was primarily due to new asset additions and the incentive distribution's right fee suspension, while cash available for distribution was also impacted by incremental debt service. For the full year 2023, adjusted EBITDA was approximately $1.9 billion, up 13.6% year-over-year, and was primarily driven by the contribution for new projects acquired in late 2022 and during 2023 and the Incentive Distribution Right Fee Suspension. New investments added approximately $228 million and the Incentive Distribution Right Fee Suspension added approximately $113 million of adjusted EBITDA year-over-year. This growth was partially offset by a decline from existing projects driven primarily by weaker wind resource. Cash available for distribution was $689 million for the full year and primarily driven by contributions from new projects of approximately $42 million and the Incentive Distribution Right Fee Suspension of $113 million while being partially offset by the weaker wind resource. Yesterday, the NextEra Energy Partners Board declared a quarterly distribution of $0.88 per common unit or $3.52 per unit on an annualized basis, which reflects an annualized increase of 6% from its third quarter 2023 distribution per unit. The partnership grew its LP distributions per unit by more than 8% year-over-year. From an updated base of our fourth quarter 2023 distribution per common unit and an annualized rate of $3.52, we continue to see 5% to 8% growth per year in LP distributions per unit with a current target of 6% growth per year as being a reasonable range of expectations through at least 2026. We continue to expect the partnership payout ratio to be in the mid-90s through 2026. We expect the annualized rate of the fourth quarter 2024 distribution that is payable in February 2025 to be $3.73 per common unit. NextEra Energy Partners is introducing December 31, 2024 run rate expectations for adjusted EBITDA in a range of $1.9 billion to $2.1 billion and cash available for distribution in a range of $730 million to $820 million reflecting calendar year 2025 expectations for the forecasted portfolio at year end 2024. As a reminder, our expectations are subject to our caveat. That concludes our prepared remarks and with that, we will open the line for questions.","evidence_gemma_new":null,"evidence_llama_3_3":"FPL regulatory capital employed growth full year 2023","evidence_qwen_3_30b":"FPL regulatory capital employed growth full year 2023","gemma_new_max":null,"gemma_new_min":null,"llama_3_3_max":0.125,"llama_3_3_min":0.125,"qwen_3_30b_max":0.125,"qwen_3_30b_min":0.125}
{"symbol":"NEE","year":2023,"quarter":1,"date":"2023-Q1","chunk_id":2,"sub_chunk_id":0,"centroid_label":"fpl s regulatory capital employed growth","agreed_value":11.2,"count":2,"chunk":"Kirk Crews: Thank you, Kristen, and good morning everyone. NextEra Energy is off to a strong start in 2023. Adjusted earnings per share increased by approximately 13.5% year-over-year building on the success of last year's strong execution and financial performance. During the quarter, we were honored that NextEra Energy was again ranked number one in our sector on Fortune's list of the world's most admired companies for the 16th time in 17 years. We are extremely proud of the team and culture we have built that has enabled us to deliver low-cost clean and reliable power to our customers, while also providing long-term value to our shareholders. FPL is the largest electric utility in the US and Florida is now officially the fastest-growing state in America. At FPL, our focus remains the same deploying smart capital to deliver on what we believe is one of the best customer value propositions in our industry. Key to that strategy is keeping customer bills affordable. And this quarter, we proposed using projected 2023 fuel savings to reduce unbilled fuel costs from 2022 to provide bill relief to customers. To further manage fuel price volatility, we are also helping customers by adding more solar to the FPL grid. This quarter, we placed into service approximately 970 megawatts of new low-cost solar. Putting FPL's owned and operated solar portfolio at nearly 4,600 megawatts, which is the largest solar portfolio of any utility in the country. We believe solar is now the lowest cost generation option for Florida customers, but represents only about 5% of FPL's delivered energy. In order to extend the benefits of low-cost solar to customers, FPL's recently filed 10-year site plan, now includes nearly 20,000 megawatts of new solar. Energy Resources, the world's leader in renewables and a leader in battery storage, remains laser-focused on executing a strategy of decarbonizing the power sector and helping commercial and industrial customers outside the power sector, reduce their energy cost and decarbonize their operations by moving to low-cost renewables and other clean energy solutions. This quarter, Energy Resources added approximately 2,020 megawatts of new renewables and storage projects to its backlog. Energy Resources also closed on its previously announced acquisition of a large portfolio of operating landfill gas-to-electric facilities, providing the foundation for our growing RNG business. We are also excited to announce a new memorandum of understanding with CF Industries to create green hydrogen, establishing what we expect will be a long-term relationship with the world's largest ammonium producer. And finally, Energy Resources continues to build what we believe is the nation's leading competitive transmission business to help support growth in renewables. We are pleased to announce that the California ISO recently recommended for approval approximately $400 million in new transmission and substation upgrades for NextEra Energy Transmission. We believe, NextEra Energy continues to be anchored by two great businesses that leverage each other's expertise to make them even better. We do not believe anyone in our industry has our set of skills, scale and breadth of opportunities. We believe NextEra Energy is able to buy, build operate and finance cheaper with one of the strongest balance sheets in our sector. We also believe our best-in-class development skills and unparalleled data set enable us to provide innovative technology and low-cost clean energy solutions for the benefit of our customers. The opportunities and products demanded by the market are becoming more complex, requiring significant scale and a combination of skills that we believe few of our competitors can offer, further enhancing our competitive advantages and creating even more growth opportunities for our business going forward. We have a culture rooted and continuous improvement, always striving to be better. Along those lines, we just completed our annual employee-led productivity initiative, which we now call Velocity. For over 11 years, our employees have generated approximately $2.6 billion in annual run rate savings ideas, as part of this process. In 2023 alone, our team generated ideas expected to produce roughly $325 million in annual run rate savings, which when combined with last year's results of over $400 million is the most productive two-year period in this program's history and that's after doing it for over a decade. We believe we have the best team in the industry, and these results are indicative of the breadth and depth of capabilities and the commitment to excellence that our team brings to our business every day and executing on behalf of our customers and shareholders. With that let's turn to the detailed results beginning with FPL. For the first quarter of 2023, FPL reported net income of $1.07 billion, or $0.53 per share an increase of $0.09 year-over-year. Regulatory capital employed growth of approximately 11.2% was a significant driver of FPL's EPS growth versus the prior year comparable quarter. FPL's capital expenditures were approximately $2.3 billion for the quarter. We expect our full year 2023 capital investments at FPL to be between $8.0 billion and $9.0 billion, as we continue to invest capital smartly for the continued benefit of our customers. FPL's reported ROE for regulatory purposes will be approximately 11.8% for the 12 months ending March 2023. During the quarter, we utilized $373 million of reserve amortization to achieve our targeted regulatory ROE leaving FPL with a balance of $1.07 billion. As we've previously discussed, FPL historically utilizes more reserve amortization in the first half of the year, and we expect this trend to continue this year. Earlier this year, the Florida Public Service Commission approved FPL's proposed plan to recover approximately $2.1 billion of incremental fuel costs from 2022 partially offset by projected 2023 fuel savings of approximately $1.4 billion. Amid high natural gas prices in 2022, FPL's decades-long modernization of its generation fleet has saved customers more than $2 billion in fuel costs in 2022 alone. The commission also recently approved recovery of approximately $1.3 billion of hurricane costs from 2022 over a 12-month period. Taking all approved adjustments together, we anticipate that FPL's typical 1,000 kilowatt hour residential customer bills will remain well below the projected national average and among the lowest of all Florida utilities. Turning to our development planning and efforts. FPL recently filed its annual 10-year site plan that presents our generation resource plan for the next decade. The 2023 plan includes roughly 20,000 megawatts of new low-cost solar capacity across our service territory over the next 10 years, which would result in nearly 35% of FPL's forecasted energy delivery in 2032 coming from cost-effective solar generation up significantly from roughly 5% in 2022. Given the increasing customer benefits of low-cost renewables FPL's post-2025 solar capacity additions and this year's plan are more than double last year's approved plan and also includes 2 gigawatts of battery storage over the next decade. We believe the expansion of cost-effective solar and storage will provide a valuable hedge for our customers against volatile natural gas prices and meet the electricity demand of FPL's growing customer base with a low-cost generation source. Finally, construction of our green hydrogen pilot at our Okeechobee Clean Energy Center is on track and projected to go into service later this year. Turning now to the Florida economy. Florida became the fastest-growing state in the nation in 2022 and its population continues to increase with over 1,000 people moving to Florida every day. Over the last five years, Florida's GDP has grown at a roughly 7% compound annual growth rate and is now approximately $1.4 trillion which is up approximately 8% versus a year ago. Based on GDP, if Florida was a country, it would have the 14th largest economy in the world. FPL's first quarter retail sales increased 0.4% from the prior year comparable period driven by continued solid underlying population growth with FPL's average number of customers increasing by approximately 65,000, even after removing roughly 15,000 inactive customers due to Hurricane Ian. For the first quarter, we estimate that the positive impact of warmer weather was more than offset by a decline in underlying usage for our customers. As we have often pointed out, underlying usage can be somewhat volatile on a quarterly basis, particularly during periods when temperatures deviate significantly from normal, as we experienced this winter with average temperatures greater than four degrees above normal. Our long-term expectations of underlying usage growth continues to average between zero and approximately negative 0.5% per year. Energy Resources report first quarter 2023 GAAP earnings of approximately $1.440 billion or $0.72 per share. Adjusted earnings for the first quarter were $732 million or $0.36 per share up $0.04 versus the prior year comparable period. Contributions from new investments increased $0.07 per share year-over-year. Contributions from our existing Clean Energy portfolio were lower by $0.03 per share primarily due to less favorable wind and solar resource compared to the prior year. The contribution from our customer supply and trading business increased by $0.06 per share primarily due to higher margin in our customer-facing business and compared to a relatively weaker contribution in the prior year comparable quarter. Gas infrastructure and all other impacts reduced earnings by $0.01 and $0.05 per share respectively versus 2022. Energy Resources had another strong quarter of origination capitalizing on strong global demand environment. Since the last call, we added approximately 2020 megawatts of new renewables and storage projects to our backlog including roughly 1370 megawatts of solar, 450 megawatts of storage and 200 megawatts of wind. With these additions, our renewables and storage backlog now stands at over 20.4 gigawatts net of projects placed in service and provides strong visibility into our future growth. With more than 1.5 years remaining before the end of 2024, we are now within the 2023 to 2024 development expectations range. Given the volatility in gas and power prices over the last 1.5 years, we continue to see economics driving long-term decision-making and renewables remain the clear low-cost option for many customers. On the supply -- solar supply chain front, we continue to take constructive steps to mitigate potential future disruption. Nearly every one of our suppliers has repositioned their supply chains to manufacture solar panels in Southeast Asia using wafers and cells produced outside of China, and all our suppliers are expected to meet the criteria established in the Commerce Department's preliminary determination in the 2022 circumvention case by the end of 2023. Additionally, we are focused on further diversifying our supply chain and are currently advancing discussions to support the domestic production of solar panels. Finally, we are encouraged by the improvement in the flow of panels into the US as suppliers continue to provide the requested traceability documentation to US Customs and Border Protection. Also, during the quarter, we closed on the previously announced transaction to acquire a large portfolio of operating landfill gas-to-electric facilities that I mentioned earlier. The approximately $1.1 billion transaction represents an attractive opportunity for energy resources to realize double-digit returns on this investment, while expanding its portfolio of renewable natural gas assets and growing its in-house capabilities and rapidly expanding renewable fuel market. Turning to green hydrogen, we are excited about the role it is expected to play as a solution to help our customers cost effectively lower emissions. As the world leader in renewables and a leader in battery storage, we believe we are the logical partner for green hydrogen with significant interconnection and land inventory positions and deep market expertise to help our potential partners optimize some of the best green hydrogen sites around the country. As a result, with the right regulation, we see hydrogen quickly becoming a significant technology for our customers and a new growth driver for energy resources given the number and size of the opportunities we are evaluating. Earlier this month, NextEra Energy joined a coalition of 45 other companies with a combined approximately $1 trillion in market capitalization and sending a letter to the Secretaries of Energy & Treasury and the White House advocating for programmatic policies for the implementation of the IRAs green hydrogen production tax credit. This coalition is advocating for prudent policy that will foster investment in green hydrogen technology paving the way for the US to become the world leader in hydrogen technology. A key aspect of this policy is for the electricity consumed for green hydrogen production to be matched to its renewable power generation on an annual rather than an hourly basis. We believe that an annual matching construct has several benefits over hourly including lower green hydrogen prices, more renewables being built, a significant reduction in carbon emissions, and green hydrogen achieving cost parity with gray and blue hydrogen both of which rely on fossil fuels for their production. This viewpoint is supported by numerous third-party studies from respected entities such as Wood Mackenzie, Rhodium Group, Energy Futures Initiative, Energy and Environmental Economics, and MIT Energy Institute. As we continue to work with the industry and government representatives to progress a smart hydrogen policy, we are also advancing our green hydrogen development efforts including a recently executed Memorandum of Understanding for a joint venture with CF Industries, the world's largest producer of ammonia to develop -- to deliver green hydrogen to an existing CF Industries ammonia production facility which it intends to expand and incorporate green hydrogen into its production process. The proposed facility includes an approximately 450-megawatt renewable energy solution, powering a 40 tons per day hydrogen facility. This project combined with other opportunities we are pursuing represent significant momentum for green hydrogen, which we believe will continue to be a driver of new renewables growth going forward. Our team continues to engage with multiple potential partners and customers on hydrogen projects, representing over $20 billion of capital investments and requiring more than 15 gigawatts of new renewables to support. As we focus on leading the decarbonization of the US economy, building additional transmission is essential to support long-term renewables deployment. We believe our ability to build, own and operate transmission as a key competitive advantage for our renewables business, in addition to being a terrific investment opportunity. We are pleased that the California ISO recently recommended for approval of approximately $400 million in transmission and substation upgrades for NextEra Energy Transmission, subject to approval by the CAISO Board of Governors in May. We believe these projects along with others could unlock up to 11 gigawatts of new renewable generation that could be built to support California's ambitious clean energy goals. Turning now to the consolidated results for NextEra Energy. For the first quarter of 2023 GAAP earnings attributable to NextEra Energy were $2.086 billion or $1.04 per share. NextEra Energy's 2023 first quarter adjusted earnings and adjusted EPS were approximately $1.678 billion and $0.84 per share respectively. Adjusted earnings for the Corporate and Other segment decreased results by $0.03 per share year-over-year, primarily driven by higher interest rates. In March, S&P affirmed all its ratings for NextEra Energy and lowered its downgrade threshold for its funds from operations or FFO to debt metric from the previous level of 20% to the current level of 18%. In making this favorable adjustment, S&P acknowledged improvement in Energy Resources business risk following the passage of the IRA, particularly noting the improved visibility and clarity into long-term cash flows. At the same time, S&P adjusted its treatment of non-recourse project debt associated with FERC Regulated investments to bring it back on credit. We believe this overall favorable adjustment, which creates roughly 50 bps of additional headroom against the downgrade threshold, highlights the attractive risk profile of renewables and acknowledges the long-term stable cash flows and Energy Resources business, particularly given the benefits of the IRA. Finally as we have discussed in the past, we actively enter into various interest rate swaps products to manage interest rate exposure on future debt issuance. Today, we have $21 billion of interest rate swaps at NextEra Energy to help mitigate the impact of potential future increases in rates, which exceeds the notional value of our 2023 and 2024 maturities. And as always, the current interest rate environment is taken into account in our financial expectations. Our long-term financial expectations which we extended earlier this year through 2026 remain unchanged. And we will be disappointed if we are not able to deliver financial results at or near the top end of our adjusted EPS expectation ranges in each year from 2023 to 2026, while at the same time maintaining our strong balance sheet and credit ratings. From 2021 to 2026, we also continue to expect that our average annual growth in operating cash flow will be at or above our adjusted EPS compound annual growth rate range. We also continue to expect to grow our dividends per share at roughly 10% per year through at least 2024 off a 2022 base. As always, our expectations assume our usual caveats including normal weather and operating conditions. Turning to NextEra Energy Partners. We believe, we have never had more visible growth opportunities than we have today. We have the ability to grow in three ways: acquiring assets from Energy Resources, growing organically and buying assets from other third parties. With significant tailwinds from the IRA, Energy Resources' operating portfolio, combined with its backlog of projects and development expectations through 2026, total approximately 58 gigawatts, providing terrific visibility for NextEra Energy Partners and Energy Resources is continuing to grow in innovative ways, adding new technologies and clean energy assets to its portfolio, such as RNG and hydrogen. In addition to acquiring assets from Energy Resources, NextEra Energy Partners also has the ability to repower its existing assets, with approximately 1,300 megawatts of potential wind repowerings, already identified, and many more opportunities expected to come, as well as potential to locate storage at its existing renewable assets, given the new stand-alone storage ITC. Finally, there are significant acquisition opportunities with renewable portfolios, continuously being brought to market. NextEra Energy Partners also has numerous ways that can finance this growth and we believe, it can do so efficiently, given its ample liquidity and access to capital. At the end of the first quarter, NextEra Energy Partners had $2.8 billion of liquidity and approximately $6 billion of interest rate swaps to manage future interest rate volatility on debt maturities through 2026. With regard to convertible equity portfolio financing, we can fund equity buyouts by delivering common units or utilizing our at-the-market or ATM program or a combination of both and we believe we have ample liquidity to fund cash payments. Importantly, we have flexibility and we expect to leverage this flexibility to manage future buyouts to select the most efficient option. Using this flexibility, NextEra Energy Partners has now bought out 50% of the STX Midstream convertible equity portfolio financing through funds generated from a combination of the ATM program, where NextEra Energy Partners was able to be opportunistic and cash from a subsidiary's revolving credit facility. With the buyouts of the 2018 convertible equity portfolio financing and 50% of the STX Midstream convertible equity portfolio financing complete, we estimate that the convertible equity portfolio financing structure has resulted in approximately 55% and 64% respectively or 16 million fewer units being issued, compared to raising capital with underwritten block equity, all for the benefit of unitholders. For the balance of the year, files are now expected to be limited to the remaining 50% of the STX Midstream convertible equity [ph] portfolio financing and 15% of the net renewables to convertible equity portfolio financing with the equity portion of these buyouts requiring common units of approximately $280 million and $130 million respectively. Over the next eight months, we have flexibility and time to opportunistically manage these buyouts in the most efficient way. For each buyout, we have the flexibility to deliver common units to the convertible equity portfolio financing investor, utilize the ATM program or some combination of the two. Ultimately, we will select the most efficient option. In any event, the potential unit issuance from these buyouts are not expected to exceed an average of three days of total trading volume per quarter, which we expect will make them quite manageable. Most importantly, NextEra Energy Partners' growth expectations through 2026 already factor in its financing plan, including convertible equity portfolio financing buyouts at current trading yields. Turning to distribution growth. Yesterday the NextEra Energy Partners Board declared a quarterly distribution of $0.8425 per common unit or $3.37 per common unit on an annualized basis, up approximately 15% from a year earlier. Inclusive of this quarter, NextEra Energy Partners has grown its LP distribution per unit up nearly 350% since the IPO. Today we are pleased to announce that NextEra Energy Partners has entered into an agreement with Energy Resources to acquire an approximately 690-megawatt portfolio of long-term contracted operating wind and solar projects and attractive cash available for distribution yield. The high-quality portfolio has a cash available for distribution, weighted average remaining contract life of approximately 16 years, an average customer credit rating of BBB at S&P and Baa2 at Moody's Investors Service. NextEra Energy Partners is expected to acquire the portfolio for approximately $708 million, subject to closing adjustments and is inclusive of the portfolio's existing project debt and interest rate swaps which are estimated to be approximately $142 million. In addition to the approximately $708 million purchase price, NextEra Energy Partners is also expected to assume the portfolio's existing tax equity financing balance. The remaining purchase price is expected to be funded by a combination of new project finance debt and the corporate revolving credit facility. The portfolio of assets is expected to contribute adjusted EBITDA of approximately $110 million to $130 million and cash available for distribution prior to the existing project debt service of approximately $62 million to $72 million, each on a five-year average annual run rate basis, beginning December 31 2023. The transaction is expected to close in the second quarter of this year. Additional details on the portfolio of assets to be acquired by NextEnergy Partners can be found in the appendix of today's presentation. Next Energy Partners will remain opportunistic pursuing acquisitions in 2023. And with the closing of the transaction announced today, NextEnergy Partners expects to be well positioned to meet its year-end 2023 adjusted EBITDA and cash available for distribution run rate expectations. Turning to the detailed results. NextEra Energy Partners delivered first quarter adjusted EBITDA and cash available for distribution results in line with management's expectations. Adjusted EBITDA of $447 million increased by $35 million versus the prior year, driven primarily by favorable contributions from the approximately 1,200 net megawatts of new projects acquired in 2022. Both adjusted EBITDA and cash available for distributions were negatively affected by lower resource from existing projects. Additionally, cash available from distribution was lower versus the prior year comparable period due to incremental debt service and timing of payable payments. Looking forward in the second half of 2023, we expect strong double-digit growth in adjusted EBITDA and cash available for distribution to support NextEra Energy Partners, distribution per unit growth expectation range of 12% to 15% for the full year 2023. Additional details are shown on the accompanying slide. NextEra Energy Partners continues to expect run rate contributions for adjusted EBITDA and cash available for distributions from its forecasted portfolio at December 31, 2023, to be in the ranges of $2.22 billion to $2.42 billion and $770 million to $860 million respectively. As a reminder, year-end 2023 run rate projections reflect calendar year 2024 contribution from the forecasted portfolio at year-end 2023 and include the impact of IDR fees, which we treat as an operating expense. As always, our expectations are subject to our usual caveats including normal weather and operating conditions. From a base of our fourth quarter 2022 distribution per common unit at an annualized rate of $3.25, we continue to see 12% to 15% growth per year in LP distributions as being a reasonable range of expectations through at least 2026. We continue to remain comfortable with these growth expectations. And in fact even at the current trade yield, Energy Resources portfolio alone is just one way NextEra Energy Partners believes it can meet its growth expectations through 2026. For 2023, we expect the annualized rate of the fourth quarter 2023 distribution that is payable in February 2024 to be in a range of $3.64 to $3.74 per common unit. We also continue to expect to achieve our 2023 distribution growth of 12% to 15%. In summary, we continue to believe that both NextEra Energy and NextEra Energy Partners are well-positioned to continue delivering on their long-term growth prospects. At FPL that means executing on smart capital investments to deliver on its customer value proposition of low bills, high reliability and outstanding customer service. At Energy Resources that means leading the decarbonization of both the power sector and non-power sector and leveraging its competitive advantages to capitalize on low-cost renewals and new emerging technologies like green hydrogen. In NextEra Eneregy Partners, we expect to capitalize on its unmatched growth visibility to further expand its best-in-class clean energy portfolio to provide long-term distribution growth for unit holders. With that, we are happy to address your questions.","evidence_gemma_new":"Regulatory capital employed growth","evidence_llama_3_3":null,"evidence_qwen_3_30b":"FPL regulatory capital employed growth year-over-year","gemma_new_max":11.2,"gemma_new_min":11.2,"llama_3_3_max":null,"llama_3_3_min":null,"qwen_3_30b_max":11.2,"qwen_3_30b_min":11.2}
{"symbol":"NEE","year":2024,"quarter":1,"date":"2024-Q1","chunk_id":3,"sub_chunk_id":0,"centroid_label":"fpl s regulatory capital employed growth","agreed_value":0.115,"count":2,"chunk":"Kirk Crews: Thank you, John. For the first quarter of 2024, FPL's earnings per share increased $0.04 year over year. The principal driver of this performance was FPL's regulatory capital employed growth of approximately 11.5% year-over-year. We now expect FPL to realize roughly 10% average annual growth in regulatory capital employed over our current rate agreements four-year term, which runs through 2025. FPL's capital expenditures were approximately $2.3 billion for the quarter and we expect FPL's full year 2024 capital investments to be between $7.8 billion and $8.8 billion. For the twelve months ending March 2024 FPL's reported ROE for regulatory purposes will be approximately 11.8%. During the first quarter, we utilized approximately $572 million of reserve amortization, leaving FPL with a balance of roughly $651 million. As we've previously discussed, FPL historically utilizes more reserve amortization in the first half of the year, and we expect this trend to continue this year. Earlier this month, FPL received approval to reduce customer bills due to projected 2024 fuel savings. As a result, FPL's typical 1000 kilowatt hour residential customer bill is expected to be roughly $14 lower in May than the start of the year and approximately 37% lower than the current national average. Over the current four-year settlement agreement we now expect FPL's capital investments to be slightly above our previous range of $32 billion to $34 billion. This quarter FPL placed into service 1640 MW of new cost effective solar, putting FPL's owned and operated solar portfolio at over 6400 MW, which is the largest utility owned solar portfolio in the country. FPL's annual ten-year site plan continues to indicate that solar and storage are the most cost effective answer for customers to add reliable grid capacity over the next decade. The 2024 plan includes similar levels of new solar generation capacity 21 gigawatts across our service territory over the next ten years compared to our 2023 plan. But our 2024 plan doubles the expected deployment of battery storage to over 4 gigawatts, some of which we expect to be needed earlier than forecasted in our 2023 plan. With this plan, we expect to increase FPL solar mix from approximately 6% of our total generation in 2023% to 38% in 2033 while continuing to provide customers with clean, affordable energy. FPL believes battery storage will play an increasingly valuable role for customers, serving as an attractive capacity complement to our growing solar generation. From providing system balancing needs in critical parts of FPL's service territory to supplying energy during any time of day or weather condition, battery storage acts as a key resource to the system that is both valuable and cost effective for customers. Key indicators show that Florida's economy remains healthy. Florida continues to be one of the fastest growing states in the nation and had four of the five fastest growing U.S. metro areas between 2022 and 2023. FPL had its strongest quarter of customer growth in over 15 years, with the average number of customers increasing by more than 100,000 from the comparable prior year period. Although FPL's first quarter retail sales decreased by approximately 1.3% year-over-year, we estimate that weather had a negative impact on usage per customer of approximately 5.4% on a year-over-year basis. After taking weather into account, first quarter retail sales increased roughly 4.1% on a weather normalized basis from the comparable prior year period, driven primarily by continued favorable underlying population growth and usage per customer. Now let's turn to Energy Resources, which reported adjusted earnings growth of approximately 13.1% year-over-year. Contributions from new investments increased $0.15 per share year-over-year, primarily reflecting continued growth in our renewables portfolio. Our existing clean energy portfolio declined $0.02 per share, primarily due to unfavorable wind resource during the quarter. The comparative contribution from our customer supply business increased results by $0.04 per share. All other impacts reduced earnings by $0.12 per share. This decline reflects higher interest costs of $0.07 per share, half of which related to new borrowing costs to support new investments. Energy Resources had a strong quarter of new renewables and storage origination, adding approximately 2765 to the backlog. With these additions, our backlog now totals roughly 21.5 gigawatts after taking into account 1165 MW of new projects placed into service since our last earnings call, highlighting Energy Resources ability to continue to identify attractive and accretive investment opportunities which provide strong growth visibility in the years ahead. We recently plugged 740 MW of new solar and storage projects into service which are being used to support data centers located in Arizona and New Mexico. Both of these projects are now one of the largest battery storage facilities in their respective states and in combination with their co-located solar each project enabled the local utility to serve their customers need for new, reliable, clean energy to grow their own business operations. We are proud to continue to support our power and commercial and industrial customers to meet their growing power and capacity needs create jobs and provide economic development in these local communities. Our origination activities across our power and commercial and industrial customers are beginning to reflect the rising power demand. We are seeing it manifest with our power customers in their state RFP processes and bilateral discussions where we deliver cost effective renewables and storage to their grid. We are also observing it through interactions with our oil and gas and manufacturing customers where we utilize our data and technology to help them make better siting decisions. Our technology customers have been a consistent driver of demand for many years, reflected by our roughly 3 gigawatt operating portfolio and over 3 gigawatt project backlog as we partner with them to provide various clean energy solutions based on their key business variables. We are a partner with both our power and commercial industrial customers trust. We leverage our 3 gigawatt development pipeline, our 35 gigawatt operating renewables and storage portfolio, and our transformer and switchgear procurement covering energy resources billed through 2027 to deliver projects for customers. As John said, the power demand growth is expected to be strong through at least the end of the decade. We expect 2024 to be another strong year for new renewables and storage origination. This is on the heels of two consecutive record origination years at Energy Resources. We continue to expect to remain on track for our overall renewables development expectations of roughly 33 to 42 gigawatts from 2023 through 2026. Beyond renewables and storage, NextEra Energy Transmissions was recently selected by the California ISO to develop a new a two-mile, 500 kV transmission line in Southern California, with a capital investment of more than $250 million. We believe this project could unlock over 3 gigawatts of new renewable generation capacity, supporting California's ambitious clean energy goals. This award follows a record year for NextEra Energy Transmission in 2023 and we remain excited about the opportunities ahead for this growing business. We continue to believe our ability to build, own and operate transmission is a key advantage for our renewables business. Turning now to our first quarter 2024 consolidated results, adjusted earnings from corporate and other decreased by $0.01 per share year-over-year. This quarter, we entered into an agreement to transfer approximately $1 billion of tax credits throughout 2024, representing the bulk of our expected transfers for the year. Our long-term financial expectations remain unchanged. We will be disappointed if we are not able to deliver financial results at or near the top end of our adjusted EPS expectation ranges in 2024, 2025 and 2026. From 2021 to 2026, we continue to expect that our average annual growth in operating cash flow will be at or above our adjusted EPS compound annual growth rate range. And as we announced in February, the Board of Directors of NextEra Energy approved a targeted growth rate in dividends per share of roughly 10% per year through at least 2026 off a 2024 base. As always, our expectations assume our caveat. Turning to NextEra Energy Partners, we continue to focus on executing against the partnerships transition plan and delivering an LP distribution growth target of 6% through at least 2026. We bought out the STX Midstream convertible equity portfolio financing in 2023 and have sufficient proceeds available from the Texas pipeline portfolio sale to complete the NEP Renewables II buyout due in June 2024 and 2025. The third convertible equity portfolio financing associated with the Meade natural gas pipeline assets is expected to be addressed in 2025. With the plan for the near-term convertible equity portfolio financings well understood, we remain focused on the partnership's cost of capital improving, which is critical for its success. With that objective in mind, we continue to evaluate alternatives to address the remaining convertible equity portfolio financing with equity buyout obligations in 2027 and beyond. Turning to the partnership's targeted 6% growth in LP distributions per unit, NextEra Energy Partners does not expect to need an acquisition this year to achieve its 6% targeted growth rate and the partnership does not expect to require growth equity until 2027. In terms of NextEra Energy Partners growth plan, as a reminder, it involves organic growth, specifically re-powering of approximately 1.3 gigawatts of wind projects through 2026, as well as acquiring assets at attractive yields. Today we are announcing plans to repower an additional approximately 100 MW of wind facilities through 2026. The partnership has now announced roughly 1085 MW of repowers. Yesterday, NextEra Energy Partners Board declared a quarterly distribution of 89.25 cents per common unit or $3.57 per common unit on an annualized basis, which reflects an annualized increase of 6% from its fourth quarter 2023 distribution per common unit. Let me now turn to the detailed results. First quarter adjusted EBITDA was $462 million and cash available for distribution was $164 million. New projects, which primarily reflect contributions from approximately 840 net megawatts of new projects that either closed in the second quarter of 2023 or achieved commercial operations in 2023, contributed approximately $32 million of adjusted EBITDA and $7 million of cash available for distribution. First quarter adjusted EBITDA contribution from existing projects declined by approximately $37 million year-over-year, driven primarily by unfavorable wind resource during the quarter and lower generation at Genesis Solar Project as a result of a planned outage for major maintenance. Wind resource was approximately 97% of long-term average versus 102% in the first quarter of 2023. The incentive distribution right fee suspension provided approximately $39 million of benefit this quarter for adjusted EBITDA and cash available for distribution. Finally, adjusted EBITDA and cash available for distribution declined by approximately $44 million and $38 million respectively, for the divestiture of the Texas pipeline portfolio. From a base of our fourth quarter 2023 distribution per common unit and an annualized rate of $3.52, we continue to see 5% to 8% growth per year in LP distributions per unit, with a current target of 6% growth per year as being a reasonable range of expectations through at least 2026. We continue to expect the partnerships payout ratio to be in the mid-90s through 2026. We expect the annualized rate of the fourth quarter 2024 distribution that is payable in February 2025 to be $3.73 per common unit. NextEra Energy Partners expects run rate contributions for adjusted EBITDA and cash available for distribution from its forecasted portfolio at December 31, 2024 to be in the ranges of $1.9 billion to $2.1 billion and $730 million to $820 million respectively. As a reminder, yearend 2024 run rate projections reflect calendar year 2025 contributions from the forecasted portfolio at year end 2024. As a reminder, our expectations are subject to our caveat. That concludes our prepared remarks and with that we will open the line for questions.","evidence_gemma_new":null,"evidence_llama_3_3":"regulatory capital employed growth year-over-year","evidence_qwen_3_30b":"FPL's regulatory capital employed growth year-over-year","gemma_new_max":null,"gemma_new_min":null,"llama_3_3_max":0.115,"llama_3_3_min":0.115,"qwen_3_30b_max":0.115,"qwen_3_30b_min":0.115}
{"symbol":"NEE","year":2024,"quarter":3,"date":"2024-Q3","chunk_id":3,"sub_chunk_id":0,"centroid_label":"fpl s regulatory capital employed growth","agreed_value":0.095,"count":2,"chunk":"Brian Bolster : Thank you, John, and good morning, everyone. For the third quarter of 2024, FPL increased earnings per share by $0.05 year-over-year. The principal driver of this performance was FPL's regulatory capital employed growth of approximately 9.5% year-over-year. We continue to expect FPL to realize roughly 10% average annual growth in regulatory capital employed over our current rate agreements four year term, which runs through 2025. FPL's capital expenditures were approximately $2 billion for the quarter, and we expect FPL's full year 2024 capital investment to be between $8 billion and $8.8 billion. Over the current four year settlement agreement, we expect FPL's capital investments to exceed $34 billion. FPL's third quarter retail sales increased 1% from the prior year comparable period. FPL grew retail sales by roughly 1.6% on a weather normalized basis, offset by milder weather. During the quarter, FPL reversed approximately $231 million of reserve amortization and FPL ended the quarter with a balance of roughly $817 million. With regard to costs associated with storm recovery, as a reminder, we have both the storm reserve and a surcharge mechanism to the extent the reserve has been fully utilized. Following Hurricane Debby, we had depleted our storm reserve and have deferred the remaining incremental cost for Hurricanes Debby, Helene and Milton to the balance sheet. We intend to recover those deferred costs and replenish the storm reserve via storm surcharge on customers' bills over the calendar year 2025. Although FPL has not completed the final accounting, our preliminary estimate of restoration costs that we plan to recover from customers through a surcharge is approximately $1.2 billion inclusive of $150 million, which will be utilized to replenish the storm reserve. Of course, the restoration cost will be subject to a final review and prudence determination by the Florida Public Service Commission. For the 12 months ending September 2024, FPL's reported ROE for regulatory purposes will be approximately 11.8%. We still expect the regulatory ROE for the 12 months ending December 2024 and 2025 to be 11.4%. Now let's turn to Energy Resources, which reported adjusted earnings growth of approximately 11% year-over-year. At Energy Resources, adjusted earnings per share increased by $0.04 year-over-year. Contributions from new investments increased $0.15 per share year-over-year, primarily driven by continued growth in our renewables portfolio. Comparative contribution from our customer supply and trading business, which you'll recall had strong earnings last year, decreased by $0.10 per share driven by normalization of origination activity and margins, which is consistent with our expectations. Contributions from both NextEra Energy transmission and gas infrastructure businesses increased by $0.01 per share year-over-year. All other impacts reduced earnings by $0.03 per share. Energy Resources had another strong quarter of new renewables and storage origination, adding approximately 3 gigawatts to the backlog. With these additions, our backlog now totals over 24 gigawatts after taking into account roughly 1 gigawatt of new projects placed into service since our last earnings call, providing great visibility into Energy Resources' ability to deliver on our development program expectations. We expect the backlog additions will go into service over the next several years. Turning now to our third quarter 2024 consolidated results, adjusted EPS was $1.03 per share. Adjusted earnings from corporate and other were flat to last year's comparable quarter. At NextEra Energy, our long-term financial expectations remain unchanged. We will be disappointed if we are not able to deliver financial results at or near the top end of our adjusted EPS expectation ranges in 2024, 2025, 2026 and 2027. In 2023 to 2027, we continue to expect that our average annual growth in operating cash flow will be at or above our adjusted EPS compound annual growth rate range. And we also continue to expect to grow our dividends per share at roughly 10% per year through at least 2026 off a base -- off a 2024 base. As a reminder, our expectations are subject to our caveats. Turning to NextEra Energy Partners. Yesterday, NextEra Energy Partners board declared a quarterly distribution of $0.9175 per common unit or $3.67 per common unit on an annualized basis, up nearly 6% from a year earlier. Today, NextEra Energy Partners is pleased to announce the expected wind repowering of another approximately 225 megawatts of wind facilities, bringing its total backlog of wind repowering to approximately 1.6 gigawatts through 2026. The partnership's organic growth opportunities have expanded and we are increasing our wind repowering target to approximately 1.9 gigawatts of wind projects owned by NextEra Energy Partners through 2026, which is up from the previous target of 1.3 gigawatts. NextEra Energy Partners owns a large portfolio of high quality long-term contracted clean energy assets and has attractive organic growth from the repowering of its existing portfolio. NextEra Energy Partners remains focused on executing additional wind repowering opportunities in the future, which we believe would provide improved operating performance and higher generation. Let me now turn to the detailed results. Third quarter adjusted EBITDA was $453 million and cash available for distribution was $155 million. Third quarter adjusted EBITDA and cash available for distribution declined by approximately $35 million and $92 million respectively from the same period last year. Third quarter adjusted EBITDA and cash available for distribution reflect the year-over-year impact of the divestiture of the Texas Pipeline portfolio. In addition, third quarter cash available for distribution in 2024 was negatively impacted by the first interest payment on the partnership's December 2023 HoldCo debt issuance, as well as $23 million of higher project level debt service relating in large part to the 2023 acquisition financing. NextEra Energy Partners continue to expect the run rate contribution for adjusted EBITDA from its forecasted portfolio at December 31, 2024 to be in the range of $1.9 billion to $2.1 billion. The year end 2024 run rate projections reflect expected calendar year 2025 contributions from the forecasted portfolio at year end 2024. The partnership also continues to evaluate alternatives to address its remaining convertible equity portfolio financing obligations and its cost of capital, focusing on its capital structure and the potential for redeployment of more cash flow toward driving organic cash flow growth. Given the demand for power, NextEra Energy Partners has many ways in which it can seek to grow, which could include not only acquiring assets, but also wind repowerings and potential other organic growth opportunities. NextEra Energy Partners plans to complete its review by no later than the fourth quarter 2024 call and intends to provide its distribution and run rate cash available for distribution expectations at that time. As a reminder, our expectations are subject to our caveats. That concludes our prepared remarks. And with that, we will open the line for questions.","evidence_gemma_new":null,"evidence_llama_3_3":"FPL regulatory capital employed growth year-over-year","evidence_qwen_3_30b":"FPL regulatory capital employed growth year-over-year","gemma_new_max":null,"gemma_new_min":null,"llama_3_3_max":0.095,"llama_3_3_min":0.095,"qwen_3_30b_max":0.095,"qwen_3_30b_min":0.095}
{"symbol":"PFE","year":2023,"quarter":1,"date":"2023-Q1","chunk_id":3,"sub_chunk_id":0,"centroid_label":"adjusted diluted earnings per share","agreed_value":1.23,"count":2,"chunk":"Dave Denton: Thank you, Albert, and good morning, everyone. I want to begin with Pfizer's capital allocation strategy before we dive into additional commentary about our quarterly performance and outlook for the remainder of 2023. As you know our strategy includes three pillars: reinvesting in the business; growing and paying dividends; and repurchasing our shares. In the first three months of 2023, we have invested $2.5 billion in internal R&D and returned $2.3 billion to shareholders via our quarterly dividend, and importantly, allocated approximately $43 billion for the proposed Seagen acquisition. Over the last few years, we have reinvested heavily into our business to drive long-term growth and enhance long-term shareholder value. We have invested in Pfizer's own science, while acquiring the best external science to supplement our pipeline. Since 2022, we've invested approximately $70 billion, including Seagen, in business development. In addition, we have continued to grow our dividend. For the past 14 years, we have raised our dividend annually. Since 2010, our quarterly cash dividend grew from $0.16 a share to $0.41 a share in 2023. Looking ahead, as we exit this unprecedented period of anticipated launches, we would expect to achieve margin improvement over time. As we begin to de-lever our capital structure after the closing of the Seagen transaction, we expect to return to a more balanced capital allocation mix between our three pillars. While we will continue to invest in our business, we do expect more balance between that priority and returning value to our shareholders via increased dividends and value-enhancing share repurchases. Our capital allocation strategy is squarely focused on driving shareholder value while at the same time remaining committed to a high investment grade Tier 1 commercial paper rating. Now turning to the quarter, as Albert said, our results were in line with our expectations, albeit slightly better than consensus. As expected, overall revenues declined 26% operationally, primarily driven by the anticipated decline in Comirnaty, which was partially offset by strong Paxlovid sales. I want to point out that our COVID-19 products produced $7.1 billion in revenues in the first quarter alone. Our non-COVID operational revenue growth was solid at 5% year-over-year. Primarily driving this growth was the inclusion of Nurtec ODT and Oxbryta, and an increase in Sulperazon revenues in China. Revenues for Eliquis in the U.S. and the Vyndaqel family globally also contributed to this growth. Now, I want to remind you of the seasonality of some of our products. In the first-quarter, Nurtec ODT and Oxbryta typically have lower sales quarter-on-quarter due to annual copay reset dynamics, with higher sales anticipated in later quarters. Most important, both products continue to experience strong growth in demand. Sulperazon revenues increased more than $100 million year-over-year, due to higher demand in China during the quarter, which we do not expect to be sustained going forward. The demand was due to increased bacterial infections from more patients being hospitalized for COVID. To help ensure the success of the expected launches of our large number of new and acquired products and indications, we increased our investments in SI&A. These investments are squarely focused on Pfizer's 2025 to 2030 growth aspirations. Moving to the bottom-line, reported diluted EPS this quarter declined by 29% to $0.97, while adjusted diluted earnings per share of $1.23 declined 20% on an operational basis during the quarter. Once again this quarter, foreign exchange movements significantly impacted our results, reducing first quarter revenues by $730 million, or 3%, and adjusted diluted earnings per share by $0.07, or 4%, compared to LY. Now turning to the full year financial outlook for the Company, our full year 2023 guidance remains unchanged. On a total company basis, we continue to expect revenues of $67 billion to $71 billion, reflecting an operational decline of 31% at the midpoint. With 5% operational growth in our non-COVID revenues this quarter, we are on-track to achieve our non-COVID revenue guidance of 7% to 9% operational growth for the full year. Given that a large number of launches are expected to occur in the third and fourth quarter of 2023, we anticipate our quarterly revenues will not be linear this year and that our non-COVID revenues will grow more quickly in the back half of the year versus the first half of 2023. In terms of our COVID products, Comirnaty and Paxlovid, we expect sales to trend more seasonally in this year. Given these dynamics, we expect significantly lower sales contributions from our COVID products in the second quarter versus the first quarter. In fact, given the anticipated timing of approvals for a fall vaccine with strain change, we would expect more substantial vaccine deliveries to start in September, which is late in the U.S. third quarter and the beginning of our international fourth quarter. With respect to Paxlovid, we continue to expect 2023 to be a transitional year as we anticipate shifting to a commercial market in the second half of this year. We are reaffirming our adjusted diluted EPS guidance range of $3.25 to $3.45 per share. On a full year basis, we expect that foreign exchange will have an unfavorable impact compared with full year 2022 of approximately $0.13, on adjusted diluted earnings per share. We are also reaffirming the remaining components of our full year 2023 guidance, which you can find in the Appendix of the Q1 2023 earnings presentation. So in closing, this is an exciting period for Pfizer as we continue to invest to drive long-term growth and importantly enhance long-term shareholder value. With that, now let me turn it over to Mikael.","evidence_gemma_new":"adjusted diluted earnings per share","evidence_llama_3_3":"adjusted diluted earnings per share $1.23","evidence_qwen_3_30b":null,"gemma_new_max":1.23,"gemma_new_min":1.23,"llama_3_3_max":1.23,"llama_3_3_min":1.23,"qwen_3_30b_max":null,"qwen_3_30b_min":null}
{"symbol":"PFE","year":2023,"quarter":2,"date":"2023-Q2","chunk_id":3,"sub_chunk_id":0,"centroid_label":"adjusted diluted earnings per share","agreed_value":0.67,"count":2,"chunk":"Dave Denton: Thank you, Albert, and good morning to everyone. Over the past 24 months, Pfizer has made important investments to position it squarely on track to achieve profitable and sustainable growth particulary in the back half of this decade. We have strategically invested to expand our commercial portfolio and our late-stage pipeline, strengthen our market launch capabilities, and enhanced innovation through internal R&D and business development actions. These deliberate efforts continue to solidify Pfizer\u2019s ability to overcome upcoming LOEs and drive sustainable revenue growth all while enhancing long-term shareholder value. To further support our long-term growth objectives, we are executing a capital allocation strategy designed to effectively deploy our cash. Our strategy is focused on three main pillars: first is reinvesting in our business; second is growing our dividends over time; and finally, making value-enhancing share repurchases. In the first half of 2023 alone, we\u2019ve invested $5.2 billion in internal R&D; returned $4.6 billion to shareholders via our quarterly dividend; and allocated approximately $43 billion towards the proposed acquisition of Seagen. During the second quarter, Pfizer successfully completed a $31 billion unsecured debt offering across 8 tranches. The net proceeds of this debt offering will be used to substantially fund the Seagen acquisition. The new debt carries a weighted average yield of 4.93% and a weighted average maturity of 16.3 years, consistent with our expectations. On a full year run rate basis, the annual financing cost associated with the acquisition is expected to be nearly $2 billion. With the completion now of this debt offering, the company is now positioned to close the Seagen acquisition immediately upon post regulatory approvals. While we plan to continue investing in our business, we expect to de-lever our capital structure following the closing of Seagen transaction. As we de-lever it is our expectation to return to a more balanced capital allocation strategy inclusive of share repurchases. Now, with that, let me briefly cover a few highlights of our quarterly financial performance. As Albert said, our Q2 results were solid and in line with our expectations from both a top and bottom-line perspective, albeit slightly better than EPS consensus. As expected in our guidance, our overall Q2 revenues declined 53% operationally. The contraction of revenues was driven by the anticipated decline in Paxlovid and Comirnaty sales. We expect these products to transition to a commercial market in the second half of this year. Our operational revenue growth excluding our COVID products was in line with expectations at 5% versus Q2 of LY, with strong contributions from the inclusion of Nurtec and Oxbryta, as well as the continued growth from the Vyndaqel family. During Q2, adjusted SI&A expenses were $3.4 billion and grew 20% operationally versus LY. We continue to invest in support of our upcoming launches and grow our recently acquired products. While it\u2019s clear that these near-term investments are dampening our current profitability levels, we are laser-focused on maximizing the longer-term performance of these products. Now, moving to the bottom line, reported diluted EPS this quarter declined by 77% to $0.41, while adjusted diluted earnings per share of $0.67 declined 65% on an operational basis. Earnings compressed at a greater rate than revenues, primarily due to the steep and anticipated contraction in Paxlovid sales during the quarter. Once again, foreign exchange movements continued to unfavorably impact our results, reducing second quarter revenues by approximately $280 million, or 1%, and adjusted diluted earnings per share by $0.05, or 2%, compared to last year. Now that we are at the halfway point of our 2023 financial plan, I\u2019d like to take a moment to reflect on how we are executing across our business while navigating within an incredibly unique and dynamic environment. As a management team, we remain committed to transparency and sharing our assessment of the evolving marketplace given the magnitude of launches; the ongoing shifting nature of the COVID landscape; and the continued integration of acquired assets. Let me begin by elaborating on our full-year 2023 financial guidance. We are narrowing our expectations for revenues to between $67 billion to $70 billion and maintaining guidance for adjusted diluted earnings per share of $3.25 to $3.45 for the full year. For our more durable and predictable non-COVID revenues, we are updating our guidance range to 6% to 8% operational revenue growth. From a launch timing standpoint, I\u2019ll point out that the majority of our 2023 launches are anticipated to occur in the second half of 2023 and our commercialization schedule remains materially unchanged. As a company, we always strive to achieve the highest revenue level possible while maintaining a realistic view of key inputs that inform our outlook. Regarding RSV for older adults, the shared decision-making recommendation by ACIP is likely to slow its uptake in the U.S. In addition, the recent approval of Talzenna in the U.S. results in a more narrow patient population than originally planned. These factors coupled with the impact of the damaged Rocky Mount manufacturing facility presents near-term revenue challenges. However, we expect positive revenue momentum as we exit 2023 and head into 2024. Importantly, the long-term outlook for our non-COVID business remains intact relative to our 2030 ambitions. Turning now to our less predictable and more variable COVID portfolio. Year-to-date we have booked slightly over 40% of the $21.5 billion full-year revenue forecast for both Comirnaty and Paxlovid with the important fall vaccination and respiratory infection season ahead of us. We are acutely aware that COVID demand depends on many evolving market variables making the range of potential revenue outcomes increasingly large and difficult to predict with certainty. These variables include overall levels of vaccination and infection rates; the speed of draw-down of government inventory levels; and the mutating nature of the virus itself, just to name a few. In the interest of public health and with the important fall season ahead of us, we are maintaining our COVID revenue outlook for the year while continuing to invest, largely on a variable expense basis, to support our COVID products in 2023. These variable investments are important to support our efforts to reach as many patients as possible, helping to ensure the most at-risk individuals are both vaccinated and treated while maintaining our leading market share. We are proud of what we have achieved through the COVID portfolio, and this has allowed the Company to invest in support of its growth agenda for the back half of this decade. Our visibility into future COVID revenues and demands should improve through the remainder of 2023, as we gain clarity on a more typical annual revenue run-rate. We are well aware that our 2023 profit outlook is currently being dampened by incremental costs in support of our launches, as well as higher R&D investments aligned with the Company\u2019s current revenue base. We remain committed to both defending and growing our overall level of profitability. As Albert mentioned earlier, we expect this fall\u2019s performance of our COVID-19 products to help us more effectively forecast future sales performance. To that end, if our COVID-19 revenues are less than what we have assumed, we are prepared to launch an enterprise-wide cost improvement program aligned with the longer-term revenue projections for our business. This program would be designed to support our objective of growing our operating profit margin and we would expect it to begin to yield results in 2024. We look forward to sharing specific details of this program in our upcoming earnings calls. In closing, this is an extraordinary time for Pfizer. Our confidence and our commitment to our strategy and to achieving our 2030 goals is unwavering. We will continue to focus our efforts to drive growth while enhancing long-term shareholder value. And with that, let me now turn it over to Mikael.","evidence_gemma_new":"adjusted diluted earnings per share","evidence_llama_3_3":null,"evidence_qwen_3_30b":"adjusted diluted earnings per share declined 65% on an operational basis","gemma_new_max":0.67,"gemma_new_min":0.67,"llama_3_3_max":null,"llama_3_3_min":null,"qwen_3_30b_max":0.67,"qwen_3_30b_min":0.67}
{"symbol":"PFE","year":2023,"quarter":4,"date":"2023-Q4","chunk_id":3,"sub_chunk_id":0,"centroid_label":"adjusted diluted earnings per share","agreed_value":0.1,"count":2,"chunk":"David Denton : Thank you, Albert, and good morning, everyone. As we enter 2024, we are clearly focused on a small number of critical priorities. These priorities include building a world-class oncology organization, ensuring the next wave of pipeline innovations, maximizing our new product portfolio performance with a more efficient commercial structure, and finally right-sizing our cost base. With that said, I\u2019ll start this morning with our full-year and our fourth quarter results, then I\u2019ll touch on our capital allocation priorities. I'll finish this morning with a few comments on our 2024 guidance and the near-term expectations that set this year as a foundational year to drive our growth potential in the latter half of the decade. For the full-year 2023, we recorded revenues of $58.5 billion, achieving 7% operational growth, solidly in line with our expectations when excluding contributions from both Comirnaty and Paxlovid. The significant sales decline in our COVID products, including a $3.5 billion revenue reversal for Paxlovid, were the primary drivers of an overall 41% operational decrease year-over-year. And with the expectation that Seagen will be a substantial growth contributor in 2024 and beyond, our full-year and fourth quarter results include approximately $120 million in Seagen product revenue after the close of the acquisition on December 14. On the bottom line, we reported full-year 2023 diluted EPS of $0.37 a share, a 93% year-over-year decline, and adjusted diluted earnings per share of $1.84, down 72% versus year-over-year. This decline is primarily due to a significant decrease in sales for both Comirnaty and Paxlovid; the impact of the $3.5 billion revenue reversal for Paxlovid revenues in the fourth quarter related to an expected return of an estimated 6.5 million unused EUA-labeled treatment courses from the U.S. government; and finally a non-cash inventory write-off and other charges of $5.6 billion recorded in the third quarter for Paxlovid and to a lesser extent Comirnaty. Now turning to the quarter, I\u2019d like to highlight that we delivered a solid 8% year-over-year operational revenue growth, again, excluding Comirnaty and Paxlovid. Contributing to this strong performance were our newly approved RSV vaccine as well as Vyndaqel and Eliquis; partially offset by lower revenues for Ibrance and the Prevnar Family. However, our Q4 results, both top and bottom-line, continued to be significantly, and negatively, impacted by our COVID products on a year-on-year basis. Revenues declined 42% operationally, the results were significant decrease in both Comirnaty and Paxlovid sales. Adjusted cost of sales as a percentage of revenues increased by 12 percentage points driven primarily by the $3.5 billion non-cash Paxlovid revenue reversal, and to a much lesser extent, unfavorable changes in sales mix. Overall, our adjusted operating expenses declined 10%, compared to Q4 of last year. Adjusted SI&A expenses increased 1% operationally in the quarter, primarily driven by the timing of marketing and promotional activities, including those related to recently launched and acquired products. And consistent with our strategy, we have been focused on re-prioritizing our R&D spending to enhance overall returns. Adjusted R&D expenses decreased 24% operationally, driven primarily by lower spending across both vaccine programs and certain acquired assets, as well as lower compensation-related expenses. Both our reported diluted loss per share of $0.60 and our adjusted diluted earnings per share of $0.10 for the quarter were negatively impacted by the $3.5 billion Paxlovid revenue reversal, which dampened EPS by approximately $0.54. Continued declines in both Comirnaty and Paxlovid sales also negatively affected our performance in the quarter. Foreign exchange movements had an immaterial impact compared to last year's fourth quarter. As we are increasingly focused on prioritizing our investments to drive forward-looking growth, our GAAP results include a $1.4 billion intangible asset impairment charge associated with etrasimod, based on changes in development plans for additional indications and overall revenue expectations. But I will point out that this product is still projected to contribute over a $1 billion in peak annual sales. Additionally, we recorded a nearly $1 billion intangible asset impairment for Prevnar 13 reflecting a transition to vaccines with higher sero-type coverage. As discussed in prior quarters, our capital allocation strategy is designed to enhance shareholder value and is based on three core pillars. First is growing our dividend. Second is reinvesting in the business. And finally is making share repurchases after de-levering our balance sheet. For 2023, we returned $9.2 billion to shareholders via our quarterly dividend, we have invested $10.7 billion in internal R&D and finally, we have invested approximately $44 billion in completed business development transactions, net of cash acquired, essentially all for the acquisition of Seagen. Our expectation is to maintain and grow our dividend while de-levering our capital structure, with a gross leverage target of 3.25x and a goal to preserve our credit rating and access to Tier 1 commercial paper. Upon achieving our de-levering goals, we anticipate returning to a more balanced capital allocation strategy, inclusive of share repurchases. Now given that we issued our full-year 2024 revenue and adjusted diluted EPS guidance on December 13, let me just hit a few of the highlights. We expect total company full-year '24 revenues to be in the range of $58.5 billion to $61.5 billion, which reflects our expectation of strong contributions across our product portfolio. Importantly, excluding Comirnaty and Paxlovid, we anticipate operational revenue growth of 8%-10%. We remain confident on delivering at least $4 billion of net savings from our cost-realignment program by the end of the year. We believe right sizing the cost base will put us on a strong footing towards margin expansion and increased operational efficiency moving forward. We expect adjusted diluted earnings per share to be in the range of $2.05 to $2.25 a share for the full-year 2024 and as a reminder, this range is inclusive of an anticipated $0.40 of earnings dilution from the Seagen acquisition, and again with the vast majority of this dilution resulting from the financing costs associated with the deal. Cycling into 2024, we have significantly invested in our business to fuel our longer-term growth, and the foundation is set to deliver on our commitments to enhance long-term shareholder value. We are acutely focused on driving near-term performance while solidifying our growth expectations for the back half of the decade. And with that, I'd like to turn it back over to Albert to begin our Q&A session.","evidence_gemma_new":"adjusted diluted earnings per share","evidence_llama_3_3":"adjusted diluted earnings per share fourth quarter","evidence_qwen_3_30b":null,"gemma_new_max":0.1,"gemma_new_min":0.1,"llama_3_3_max":0.1,"llama_3_3_min":0.1,"qwen_3_30b_max":null,"qwen_3_30b_min":null}
{"symbol":"PFE","year":2023,"quarter":4,"date":"2023-Q4","chunk_id":3,"sub_chunk_id":0,"centroid_label":"adjusted diluted earnings per share","agreed_value":2.15,"count":2,"chunk":"David Denton : Thank you, Albert, and good morning, everyone. As we enter 2024, we are clearly focused on a small number of critical priorities. These priorities include building a world-class oncology organization, ensuring the next wave of pipeline innovations, maximizing our new product portfolio performance with a more efficient commercial structure, and finally right-sizing our cost base. With that said, I\u2019ll start this morning with our full-year and our fourth quarter results, then I\u2019ll touch on our capital allocation priorities. I'll finish this morning with a few comments on our 2024 guidance and the near-term expectations that set this year as a foundational year to drive our growth potential in the latter half of the decade. For the full-year 2023, we recorded revenues of $58.5 billion, achieving 7% operational growth, solidly in line with our expectations when excluding contributions from both Comirnaty and Paxlovid. The significant sales decline in our COVID products, including a $3.5 billion revenue reversal for Paxlovid, were the primary drivers of an overall 41% operational decrease year-over-year. And with the expectation that Seagen will be a substantial growth contributor in 2024 and beyond, our full-year and fourth quarter results include approximately $120 million in Seagen product revenue after the close of the acquisition on December 14. On the bottom line, we reported full-year 2023 diluted EPS of $0.37 a share, a 93% year-over-year decline, and adjusted diluted earnings per share of $1.84, down 72% versus year-over-year. This decline is primarily due to a significant decrease in sales for both Comirnaty and Paxlovid; the impact of the $3.5 billion revenue reversal for Paxlovid revenues in the fourth quarter related to an expected return of an estimated 6.5 million unused EUA-labeled treatment courses from the U.S. government; and finally a non-cash inventory write-off and other charges of $5.6 billion recorded in the third quarter for Paxlovid and to a lesser extent Comirnaty. Now turning to the quarter, I\u2019d like to highlight that we delivered a solid 8% year-over-year operational revenue growth, again, excluding Comirnaty and Paxlovid. Contributing to this strong performance were our newly approved RSV vaccine as well as Vyndaqel and Eliquis; partially offset by lower revenues for Ibrance and the Prevnar Family. However, our Q4 results, both top and bottom-line, continued to be significantly, and negatively, impacted by our COVID products on a year-on-year basis. Revenues declined 42% operationally, the results were significant decrease in both Comirnaty and Paxlovid sales. Adjusted cost of sales as a percentage of revenues increased by 12 percentage points driven primarily by the $3.5 billion non-cash Paxlovid revenue reversal, and to a much lesser extent, unfavorable changes in sales mix. Overall, our adjusted operating expenses declined 10%, compared to Q4 of last year. Adjusted SI&A expenses increased 1% operationally in the quarter, primarily driven by the timing of marketing and promotional activities, including those related to recently launched and acquired products. And consistent with our strategy, we have been focused on re-prioritizing our R&D spending to enhance overall returns. Adjusted R&D expenses decreased 24% operationally, driven primarily by lower spending across both vaccine programs and certain acquired assets, as well as lower compensation-related expenses. Both our reported diluted loss per share of $0.60 and our adjusted diluted earnings per share of $0.10 for the quarter were negatively impacted by the $3.5 billion Paxlovid revenue reversal, which dampened EPS by approximately $0.54. Continued declines in both Comirnaty and Paxlovid sales also negatively affected our performance in the quarter. Foreign exchange movements had an immaterial impact compared to last year's fourth quarter. As we are increasingly focused on prioritizing our investments to drive forward-looking growth, our GAAP results include a $1.4 billion intangible asset impairment charge associated with etrasimod, based on changes in development plans for additional indications and overall revenue expectations. But I will point out that this product is still projected to contribute over a $1 billion in peak annual sales. Additionally, we recorded a nearly $1 billion intangible asset impairment for Prevnar 13 reflecting a transition to vaccines with higher sero-type coverage. As discussed in prior quarters, our capital allocation strategy is designed to enhance shareholder value and is based on three core pillars. First is growing our dividend. Second is reinvesting in the business. And finally is making share repurchases after de-levering our balance sheet. For 2023, we returned $9.2 billion to shareholders via our quarterly dividend, we have invested $10.7 billion in internal R&D and finally, we have invested approximately $44 billion in completed business development transactions, net of cash acquired, essentially all for the acquisition of Seagen. Our expectation is to maintain and grow our dividend while de-levering our capital structure, with a gross leverage target of 3.25x and a goal to preserve our credit rating and access to Tier 1 commercial paper. Upon achieving our de-levering goals, we anticipate returning to a more balanced capital allocation strategy, inclusive of share repurchases. Now given that we issued our full-year 2024 revenue and adjusted diluted EPS guidance on December 13, let me just hit a few of the highlights. We expect total company full-year '24 revenues to be in the range of $58.5 billion to $61.5 billion, which reflects our expectation of strong contributions across our product portfolio. Importantly, excluding Comirnaty and Paxlovid, we anticipate operational revenue growth of 8%-10%. We remain confident on delivering at least $4 billion of net savings from our cost-realignment program by the end of the year. We believe right sizing the cost base will put us on a strong footing towards margin expansion and increased operational efficiency moving forward. We expect adjusted diluted earnings per share to be in the range of $2.05 to $2.25 a share for the full-year 2024 and as a reminder, this range is inclusive of an anticipated $0.40 of earnings dilution from the Seagen acquisition, and again with the vast majority of this dilution resulting from the financing costs associated with the deal. Cycling into 2024, we have significantly invested in our business to fuel our longer-term growth, and the foundation is set to deliver on our commitments to enhance long-term shareholder value. We are acutely focused on driving near-term performance while solidifying our growth expectations for the back half of the decade. And with that, I'd like to turn it back over to Albert to begin our Q&A session.","evidence_gemma_new":"adjusted diluted earnings per share","evidence_llama_3_3":"adjusted diluted earnings per share","evidence_qwen_3_30b":null,"gemma_new_max":2.15,"gemma_new_min":2.15,"llama_3_3_max":2.15,"llama_3_3_min":2.15,"qwen_3_30b_max":null,"qwen_3_30b_min":null}
{"symbol":"PFE","year":2024,"quarter":2,"date":"2024-Q2","chunk_id":3,"sub_chunk_id":0,"centroid_label":"adjusted diluted earnings per share","agreed_value":2.55,"count":2,"chunk":"Dave Denton: Thank you, Albert, and good morning, everyone. As we close out the first half of the year, I\u2019m very pleased by our second quarter results. We continue our relentless focus on execution, demonstrating our ability to both protect and grow our core brands while also continuing to advance our science-led transformation by investing in key TAs to build durable franchises. Our initiatives to right size OpEx and reduce cost of goods will result in a more efficient organization, setting the stage for strong capital returns and long-term improved shareholder value enabling our commitment to both maintain and to grow our dividend. This morning, I will briefly review our second quarter results including some one-time items, touch on our capital allocation priorities, and wrap up with an update on our 2024 financial guidance, our key priorities, and expectations for the remainder of this year. Turning first to Q2 performance versus the same period last year; let\u2019s walk down the P&L. Total company revenues for the quarter were $13.3 billion, reflecting operational growth of 3%. Our revenue and cash flow continue to be impacted by the post-pandemic COVID environment on a global basis but to a much lesser extent than prior quarters. Looking at the business excluding our COVID products, we demonstrated strong commercial execution across the enterprise, resulting in 14% operational revenue growth in the quarter. Performance was positively impacted by our continued focus on key products and geographies; refined allocation of commercial field resources globally; and further optimization of our marketing resources into key priority areas. Contributing to this performance was our acquired products from Seagen as well as Nurtec, alongside in-line products Vyndaqel, Eliquis and Xtandi. As expected, dampening our growth in the quarter were Xeljanz and Ibrance. Adjusted Gross Margin for the second quarter was 79%, compared to 76% last year, and was primarily the result of favorable sales mix from our non-COVID products, as well as continued strong cost management across our manufacturing network. Improvements in our gross margin rate will continue to be a focus for the company over the next few years as we execute on our recently announced Manufacturing Optimization Program. This new program and together with our cost realignment program is focused on returning the company to pre-pandemic operating margins on a mix adjusted basis excluding Comirnaty. Phase 1 of the Manufacturing Optimization Program, which focuses on operational efficiencies, is well underway now. This first phase is expected to deliver approximately $1.5 billion in savings by the end of 2027, some of which is anticipated to be realized beginning in 2025. Total Adjusted operating expenses increased by 5% operationally to $6.3 billion and include spending from our legacy Seagen business. Looking at the components, adjusted SI&A expenses increased 8% driven primarily by marketing and promotional expenses for recently launched as well as acquired products. Adjusted R&D expenses increased 2% operationally driven primarily by increased spending related to the acquisition of Seagen, partially offset by lower spending primarily the result of our cost realignment program. Q2 reported diluted earnings per share was $0.01 and our adjusted diluted EPS was $0.60. Unique one-time items included in our GAAP results and excluded from our adjusted results, this quarter include a $1.3 billion charge related to our Manufacturing Optimization Program primarily for severance, and a $230 million charge for IPR&D asset impairment and other related costs associated with the discontinuation of our DMD program. Additionally, we expect to record a charge of approximately $400 million in the third quarter of 2024 after a decision was made in July to sell one of our facilities as a result of the discontinuation of the DMD effort. Now let me quickly touch upon our capital allocation strategy, which is designed to enhance long-term shareholder value. Our strategy consists of maintaining and growing our dividend over time, reinvesting in our business at an appropriate level of financial return; and finally making value enhancing share repurchases after de-levering our balance sheet. In the first half of 2024, we returned $4.8 billion to shareholders via our quarterly dividend; invested $5.2 billion in internal R&D; and as expected, the completed business development activity was minimal. Our commitment to de-levering our capital structure to a gross leverage target of 3.25 times remains a key priority. In support of that goal, year-to-date, we have paid down approximately $2.25 billion in maturing debt, including $1 billion in May of outstanding notes. And though we did not monetize any Haleon shares in Q2, we expect to resume monetization of our 23% Haleon stake in the future. I would also note that once our Haleon ownership is less than 20%, our accounting will transition from recording equity income and will no longer be included in our adjusted results. This change is factored into our long-term financial planning and as well as our guidance. As we\u2019ve previously stated previously, we expect operating cash flow to be significantly below typical levels this year and particularly during the first half of 2024, due to the timing of certain payments and one-time expenses. We expect heavily weighting of revenues to the fourth quarter as our business has become more seasonal in nature with the potential that a high level of cash collections may carry over into Q1 of 2025. Despite this near-term pressure, clearly, our objective remains to return to a more balanced capital allocation strategy over time. Now, let me spend just a few minutes on our outlook for the remainder of the year. We entered 2024 focused on delivering on our financial commitments as well as commercial performance. With a successful first half now complete, we believe it is appropriate to update our full year earnings outlook to reflect our strong business performance. I\u2019ll remind you that our revised guidance assumes the seasonal cadence of our product portfolio, and that we expect Paxlovid results to trend with infection rates. With that said, we are raising our full year revenue range by $1 billion and our adjusted diluted earnings per share by $0.30. We now expect revenues in the range of $59.5 billion to $62.5 billion and operational revenue growth excluding COVID products is projected to be 9% to 11%. COVID product revenues are now expected to be $8.5 billion for the year; $5 billion for Comirnaty and $3.5 billion for Paxlovid. Our guidance for adjusted SI&A and adjusted R&D remains unchanged while our effective tax rate on adjusted income is now expected to be approximately 13%; and, lastly, we expect adjusted diluted earnings per share of $2.45 to $2.65 primarily reflecting the increase to the top line and the revised tax rate among other items. As a reminder, our EPS guidance includes an anticipated $0.40 of earnings dilution from the Seagen acquisition, largely due to financing cost. In closing, we remain on track to deliver at least $4 billion of net savings from our cost-realignment program by the end of this year. This improvement in our cost base alongside our new initiatives focused on manufacturing is expected to put us on strong footing towards margin expansion and improved financial returns. Additionally, our continued focus on execution and our recent investments have positioned the company for continued success moving forward. This quarter\u2019s results are a testament to the performance of our commercial business and our prudent approach to improving our cost base. Though we\u2019ve had a strong first half, we do not take lightly the continued focus needed to deliver in the second half considering the seasonality of our respiratory products. We are clearly striving to bring about improved performance on both the top and bottom lines through focus, execution and delivering on our near-term commercial and financial goals. 2024 is clearly a foundation year for Pfizer. Our achievements to date sets the stage for generating compelling shareholder value. Through our science-led transformation, we will methodically build off this base and with breakthroughs and innovation driving growth in the back half of the decade. And with that, I\u2019d now like to turn it back over to Albert to start our Q&A.","evidence_gemma_new":"adjusted diluted earnings per share","evidence_llama_3_3":null,"evidence_qwen_3_30b":"adjusted diluted earnings per share $2.45 to $2.65","gemma_new_max":2.55,"gemma_new_min":2.55,"llama_3_3_max":null,"llama_3_3_min":null,"qwen_3_30b_max":2.55,"qwen_3_30b_min":2.55}
{"symbol":"PFE","year":2024,"quarter":3,"date":"2024-Q3","chunk_id":3,"sub_chunk_id":0,"centroid_label":"adjusted diluted earnings per share","agreed_value":2.85,"count":2,"chunk":"Dave Denton: Thank you, Albert, and good morning, everyone. I will build on Albert's comments by reinforcing that we are very pleased with the financial results for the third quarter of 2024. These results demonstrate that our focus and our execution against our 5 strategic priorities are driving positive patient outcomes and continued financial and operational strength. In addition to our strong top line performance, our cost reduction programs are creating a more efficient organization, setting the stage for increased capital returns and supporting our commitment to both maintaining and growing our dividend, all while enhancing shareholder value. This morning, I will briefly review our Q3 P&L performance, I'll highlight our capital allocation priorities and touch upon our full year 2024 financial guidance. Additionally, as we approach the end of the year, I will also share several modeling considerations as we began to plan for 2025. Turning first to the third quarter performance versus the same period of last year. Let me walk on the P&L. Total company revenues were $17.7 billion, representing an impressive 32% operational growth. Our COVID-19 products were significant contributors with PAXLOVID generating $2.7 billion in revenue. This included $442 million related to delivering 1 million treatment courses to the U.S. Government Strategic National Stockpile. COMIRNATY, our COVID-19 vaccine contributed $1.4 billion in revenue. Our COVID-19 products were not the only drivers during the quarter. Our non-COVID products also exhibited robust performance with revenues of $13.6 billion, reflecting 14% operational year-over-year growth. This performance shows that our refined commercial approach is working. We continue to focus on key products and geographies, we've refined how we allocate our commercial field resources globally and we're further optimizing our marketing resources into key priority areas. We saw strong contribution from our recently acquired Seagen products, including Passive, which continues its momentum following the results of the EV302 study last year. Other key growth drivers included VYNDAQEL, ELIQUIS, XTANDI and NURTEC, partially offset by declines in Xeljanz and Ibrance. Adjusted gross margin for the third quarter is approximately 70%, primarily the result of a net unfavorable mix related to our COVID-19 products, primarily due to the COMIRNATY profit split with BioNTech and applicable royalty expenses, as well as a slight dampening due to the associated costs incurred with the withdrawal of Oxbryta. All of this was partially offset by our ongoing focus on cost management across our manufacturing network. We continue to expect gross margins to be in the mid-70s for the full year. And as previously communicated, long-term improvements in gross margins will remain a key focus for the company over the next several years. We expect to achieve savings from Phase I of our manufacturing optimization program beginning in 2025 and deliver approximately $1.5 billion in savings for the first phase by the end of 2027. In parallel, we continue to evaluate our strategy for both Phase II and Phase III, which will focus on network structure and product portfolio, respectively. And we expect to have more information to share on those components of the program once they become available. Total adjusted operating expenses decreased 2% operationally to $5.8 billion. And I will note that this amount includes spending acquired via our Seagen transaction. And looking at the components, adjusted SI&A expenses increased 1% operationally, driven primarily by marketing and promotional expenses for recently launched and acquired products partly offset by a reduction in the U.S. health care reform fees. Adjusted R&D expenses decreased 4% operationally, driven primarily by lower spending on certain vaccine programs as well as our cost realignment program, partially offset by an increased spending related to the Seagen acquisition. We continue to be disciplined with our operational expense management and remain on track to deliver at least $4 billion in net cost savings from our cost realignment program by year-end. Q3 reported diluted earnings per share was $0.78 in the quarter and our adjusted earnings per share was $1.06, benefiting from our top line performance and efficient operating structure as well as a favorable tax rate driven primarily by jurisdictional mix. As mentioned last quarter, unique onetime items included in our GAAP results and excluded from our adjusted results this quarter include a $420 million charge related to the expected sale of one of our facilities, resulting from the discontinuation of our DMD program earlier this year. Now let me quickly touch upon our capital allocation strategy, which is designed to enhance long-term shareholder value. Our strategy consists of both maintaining and growing our dividend over time, reinvesting in our business at an appropriate level of financial return and making value-enhancing share repurchases after delevering our balance sheet. In the first 9 months of '24, we returned $7.1 billion to shareholders via our quarterly dividend, invested $7.8 billion in internal R&D and as we expected, completed business development activity was minimal. Our commitment to delevering our capital structure to a gross leverage target of 3.25x remains a key priority. In support of that goal, year-to-date, we have delevered by approximately $4.4 billion, paying down approximately $2.3 billion in maturing debt and approximately $2.1 billion in commercial paper. And in October, we monetized another tranche of our Helion shares, which for reporting purposes is a Q4 event. We received approximately $3.5 billion in net cap proceeds, and our ownership in Helion was reduced from approximately 23% to approximately 15%. Year-to-date, we have received approximately $6.9 billion of net cash proceeds from the sale of our shares. We intend to monetize our remaining Helion investment in a prudent fashion considering our cash flow requirements and future market conditions. Overall, in Q3, we generated robust operating cash flows, which combined with the Helion net sale proceeds of approximately $3.5 billion, resulting in significant cash flow generation as we enter the fourth quarter. Our objective remains to delever and return to a more balanced allocation of capital between reinvestment and direct return to shareholders over time. Now let me spend just a few minutes on our outlook for the full year. Based on our focused execution and strong year-to-date results, we are raising our full year '24 revenue guidance by $1.5 billion and our adjusted diluted earnings per share by $0.30. We now expect revenues in the range of $61 billion to $64 billion and operational revenue growth, excluding COVID-19 products is unchanged at 9% to 11% and takes into consideration reduction of sales associated with Oxbryta. COVID-19 product revenues are now expected to be $10.5 billion, $5 billion for COMIRNATY and $5.5 billion for PAXLOVID. Our guidance for adjusted SI&A, adjusted R&D and our effective tax rate on adjusted income remains unchanged. And last, we expect adjusted diluted earnings per share of $2.75 to $2.95, primarily reflecting the top line increase and absorbing the Oxbryta impact. As a reminder, our EPS guidance includes an anticipated $0.40 of earnings dilution from the Seagen acquisition, largely due to financing costs. Now as we begin to look towards next year, I want to touch on a few modeling considerations. As we've previously discussed, there are several nonrecurring items included in our 2024 results. First, during 2024, PAXLOVID revenue included a U.S. government revenue credit true-up and the fulfillment of our obligation to the U.S. National Strategic Stockpile. Second, given our ownership of Helion is now below 20%, we will no longer record equity income from that investment in our adjusted earnings beginning in 2025. And finally, our 2024 tax rate on adjusted income was favorably impacted by timing with respect to the impact of Pillar 2 and to a lesser extent, audit settlements. All in, these items are expected to have a favorable impact on full year 2024 adjusted diluted earnings per share of approximately $0.30. In closing, I'm extremely pleased with our third quarter 2024 results and our overall performance this year. Our team remains dedicated to strong operational execution, and we believe our cost-saving programs will drive enhanced operating leverage over time that will enable us to consistently deliver on our financial commitments to our shareholders. We are committed to driving long-term value creation through scientific leadership, portfolio strength and productivity across all aspects of our business. And with that, I'll now turn it back over to Albert.","evidence_gemma_new":"adjusted diluted earnings per share","evidence_llama_3_3":null,"evidence_qwen_3_30b":"adjusted diluted earnings per share","gemma_new_max":2.85,"gemma_new_min":2.85,"llama_3_3_max":null,"llama_3_3_min":null,"qwen_3_30b_max":2.85,"qwen_3_30b_min":2.85}
{"symbol":"PFE","year":2023,"quarter":2,"date":"2023-Q2","chunk_id":3,"sub_chunk_id":0,"centroid_label":"revenues","agreed_value":68500000000.0,"count":2,"chunk":"Dave Denton: Thank you, Albert, and good morning to everyone. Over the past 24 months, Pfizer has made important investments to position it squarely on track to achieve profitable and sustainable growth particulary in the back half of this decade. We have strategically invested to expand our commercial portfolio and our late-stage pipeline, strengthen our market launch capabilities, and enhanced innovation through internal R&D and business development actions. These deliberate efforts continue to solidify Pfizer\u2019s ability to overcome upcoming LOEs and drive sustainable revenue growth all while enhancing long-term shareholder value. To further support our long-term growth objectives, we are executing a capital allocation strategy designed to effectively deploy our cash. Our strategy is focused on three main pillars: first is reinvesting in our business; second is growing our dividends over time; and finally, making value-enhancing share repurchases. In the first half of 2023 alone, we\u2019ve invested $5.2 billion in internal R&D; returned $4.6 billion to shareholders via our quarterly dividend; and allocated approximately $43 billion towards the proposed acquisition of Seagen. During the second quarter, Pfizer successfully completed a $31 billion unsecured debt offering across 8 tranches. The net proceeds of this debt offering will be used to substantially fund the Seagen acquisition. The new debt carries a weighted average yield of 4.93% and a weighted average maturity of 16.3 years, consistent with our expectations. On a full year run rate basis, the annual financing cost associated with the acquisition is expected to be nearly $2 billion. With the completion now of this debt offering, the company is now positioned to close the Seagen acquisition immediately upon post regulatory approvals. While we plan to continue investing in our business, we expect to de-lever our capital structure following the closing of Seagen transaction. As we de-lever it is our expectation to return to a more balanced capital allocation strategy inclusive of share repurchases. Now, with that, let me briefly cover a few highlights of our quarterly financial performance. As Albert said, our Q2 results were solid and in line with our expectations from both a top and bottom-line perspective, albeit slightly better than EPS consensus. As expected in our guidance, our overall Q2 revenues declined 53% operationally. The contraction of revenues was driven by the anticipated decline in Paxlovid and Comirnaty sales. We expect these products to transition to a commercial market in the second half of this year. Our operational revenue growth excluding our COVID products was in line with expectations at 5% versus Q2 of LY, with strong contributions from the inclusion of Nurtec and Oxbryta, as well as the continued growth from the Vyndaqel family. During Q2, adjusted SI&A expenses were $3.4 billion and grew 20% operationally versus LY. We continue to invest in support of our upcoming launches and grow our recently acquired products. While it\u2019s clear that these near-term investments are dampening our current profitability levels, we are laser-focused on maximizing the longer-term performance of these products. Now, moving to the bottom line, reported diluted EPS this quarter declined by 77% to $0.41, while adjusted diluted earnings per share of $0.67 declined 65% on an operational basis. Earnings compressed at a greater rate than revenues, primarily due to the steep and anticipated contraction in Paxlovid sales during the quarter. Once again, foreign exchange movements continued to unfavorably impact our results, reducing second quarter revenues by approximately $280 million, or 1%, and adjusted diluted earnings per share by $0.05, or 2%, compared to last year. Now that we are at the halfway point of our 2023 financial plan, I\u2019d like to take a moment to reflect on how we are executing across our business while navigating within an incredibly unique and dynamic environment. As a management team, we remain committed to transparency and sharing our assessment of the evolving marketplace given the magnitude of launches; the ongoing shifting nature of the COVID landscape; and the continued integration of acquired assets. Let me begin by elaborating on our full-year 2023 financial guidance. We are narrowing our expectations for revenues to between $67 billion to $70 billion and maintaining guidance for adjusted diluted earnings per share of $3.25 to $3.45 for the full year. For our more durable and predictable non-COVID revenues, we are updating our guidance range to 6% to 8% operational revenue growth. From a launch timing standpoint, I\u2019ll point out that the majority of our 2023 launches are anticipated to occur in the second half of 2023 and our commercialization schedule remains materially unchanged. As a company, we always strive to achieve the highest revenue level possible while maintaining a realistic view of key inputs that inform our outlook. Regarding RSV for older adults, the shared decision-making recommendation by ACIP is likely to slow its uptake in the U.S. In addition, the recent approval of Talzenna in the U.S. results in a more narrow patient population than originally planned. These factors coupled with the impact of the damaged Rocky Mount manufacturing facility presents near-term revenue challenges. However, we expect positive revenue momentum as we exit 2023 and head into 2024. Importantly, the long-term outlook for our non-COVID business remains intact relative to our 2030 ambitions. Turning now to our less predictable and more variable COVID portfolio. Year-to-date we have booked slightly over 40% of the $21.5 billion full-year revenue forecast for both Comirnaty and Paxlovid with the important fall vaccination and respiratory infection season ahead of us. We are acutely aware that COVID demand depends on many evolving market variables making the range of potential revenue outcomes increasingly large and difficult to predict with certainty. These variables include overall levels of vaccination and infection rates; the speed of draw-down of government inventory levels; and the mutating nature of the virus itself, just to name a few. In the interest of public health and with the important fall season ahead of us, we are maintaining our COVID revenue outlook for the year while continuing to invest, largely on a variable expense basis, to support our COVID products in 2023. These variable investments are important to support our efforts to reach as many patients as possible, helping to ensure the most at-risk individuals are both vaccinated and treated while maintaining our leading market share. We are proud of what we have achieved through the COVID portfolio, and this has allowed the Company to invest in support of its growth agenda for the back half of this decade. Our visibility into future COVID revenues and demands should improve through the remainder of 2023, as we gain clarity on a more typical annual revenue run-rate. We are well aware that our 2023 profit outlook is currently being dampened by incremental costs in support of our launches, as well as higher R&D investments aligned with the Company\u2019s current revenue base. We remain committed to both defending and growing our overall level of profitability. As Albert mentioned earlier, we expect this fall\u2019s performance of our COVID-19 products to help us more effectively forecast future sales performance. To that end, if our COVID-19 revenues are less than what we have assumed, we are prepared to launch an enterprise-wide cost improvement program aligned with the longer-term revenue projections for our business. This program would be designed to support our objective of growing our operating profit margin and we would expect it to begin to yield results in 2024. We look forward to sharing specific details of this program in our upcoming earnings calls. In closing, this is an extraordinary time for Pfizer. Our confidence and our commitment to our strategy and to achieving our 2030 goals is unwavering. We will continue to focus our efforts to drive growth while enhancing long-term shareholder value. And with that, let me now turn it over to Mikael.","evidence_gemma_new":"revenues","evidence_llama_3_3":null,"evidence_qwen_3_30b":"revenues $67 billion to $70 billion adjusted diluted earnings per share $3.25 to $3.45","gemma_new_max":68500000000.0,"gemma_new_min":68500000000.0,"llama_3_3_max":null,"llama_3_3_min":null,"qwen_3_30b_max":68500000000.0,"qwen_3_30b_min":68500000000.0}
{"symbol":"PFE","year":2024,"quarter":4,"date":"2024-FY","chunk_id":3,"sub_chunk_id":0,"centroid_label":"revenues","agreed_value":63600000000.0,"count":2,"chunk":"Dave Denton: Thank you, Albert, and good morning, everyone. I'll build on Albert's comments by reinforcing that we are very pleased with the financial results for both the fourth quarter as well as the full-year of 2024. These results demonstrate that our focus and execution against our strategic priorities are driving both positive patient outcomes as well as financial and operational strength. In addition to our strong top line performance, our cost reduction programs are creating a more efficient organization, driving operating margin improvement. And as we move into 2025, these efforts will continue to lay the groundwork for potential increased capital returns and reinforce our commitment to maintaining and growing our dividend while enhancing long-term shareholder value. With that said, let me start with our full-year and fourth quarter results, then I'll touch on our capital allocation priorities. I'll finish up with a few comments on our 2025 guidance, which we are reaffirming today, and our near-term expectations that will continue to drive our growth potential in the latter half of the decade. For the full-year of 2024, we recorded revenues of $63.6 billion versus $59.6 billion last year. Importantly, our operational revenue growth when excluding contributions from our COVID products was 12%, exceeding our expectations of 9% to 11%. Full year 2024 adjusted gross margins expanded to 74% as we continued to drive cost improvements across our manufacturing network. On the bottom line, we reported full year 2024 diluted EPS of $1.41 versus $0.37 last year, and adjusted diluted earnings per share of $3.11 versus $1.84 last year, significantly ahead of expectations due to our overall strong P&L performance. Now turning to the fourth quarter performance versus the same period of LOI, let me walk down the P&L. Total company revenues were $17.8 billion versus $14.6 billion in the fourth quarter of last year. Once again, our non-COVID-19 products exhibited robust performance with revenues of $13.7 billion reflecting 11% operational year-over-year growth. This performance continues to show that our refined commercial approach is working. We continue to focus on key products and geographies. We've refined how we allocate our commercial field resources globally. And we're further optimizing our marketing resources into key priority areas. We saw strong contributions across our product portfolio, primarily driven by the Vyndaqel family, Padcev, Eliquis and Nurtec, partially offset by declines in ABRYSVO and XELJANZ. Adjusted gross margin in the fourth quarter was approximately 68%, primarily the result of a net unfavorable mix related to our COVID-19 products, primarily due to the Comirnaty profit split with BioNTech and applicable royalty expenses. This was partially offset by our ongoing focus on cost management across our manufacturing network, as I previously mentioned. And as we previously communicated, long-term improvements in gross margin will remain a key focus for the company over the next few years. We expect to begin to achieve initial savings from Phase 1 of our manufacturing optimization program in the latter part of 2025 and continue to expect approximately $1.5 billion in savings from this first phase by the end of 2027. We continue to evaluate other strategies to improve our network structure and as well as our product portfolio. And we plan to share more information on those components of the program once it becomes available. Total adjusted operating expenses are essentially flat operationally at $7.3 billion in the fourth quarter of 2024. And I will note that this amount includes spending acquired via our Seagen transaction. Looking at the components specifically, adjusted SI&A expenses decreased 4% operationally, driven primarily by a decrease in marketing and promotional spend for various products, including both commodity Comirnaty and Paxlovid, partially offset by an increase in spending for certain oncology and recently launched and acquired products. Adjusted R&D expenses increased 8% operationally, driven primarily by net increase in spending, mainly to develop certain product candidates acquired from Seagen, partially offset by lower spending on certain ongoing vaccine programs and certainly as a result of our cost realignment program. We continue to be disciplined with our operational expense management and delivered on our goal of at least $4 billion in net cost savings from our cost realignment program. Q4 reported diluted earnings per share was $0.07, and our adjusted diluted earnings per share was $0.63, benefiting from our top line performance as well as our efficient operating structure, partially offset by a higher effective tax rate driven primarily by jurisdictional mix. In support of our goal to enhance R&D productivity and to focus on high-impact medicines, our fourth quarter GAAP results reflect strategic decisions in our development plans and updated long-range revenue forecasts for several medicines. And as a result, we recorded approximately $2.9 billion in noncash intangible asset impairments related to several medicines in development as well as several in-line products. These decisions reinforce our focus on future growth as well as innovation. Now let me quickly touch upon our capital allocation strategy, which is designed to enhance long-term shareholder value. Our strategy consists of maintaining and growing our dividend over time, reinvesting in our business at an appropriate level of financial return, and finally making value-enhancing share repurchases after delevering our balance sheet. In 2024, we returned $9.5 billion to shareholders via our quarterly dividend, invested $10.8 billion in internal R&D, and as expected, completed business development activity was minimal. Our commitment to delevering our capital structure to a gross leverage target of 3.25x by the end of 2025 remains a key priority. In support of that goal, in 2024, we delevered by approximately $7.8 billion, paying down approximately $2.3 billion in maturing debt and approximately $5.5 billion in commercial paper. And in January of '25, we monetized another tranche of our Haleon shares, which for reporting purposes is a Q1 '25 event. We received approximately $3 billion in net cash proceeds, and now our ownership in Haleon was reduced from approximately 15% to approximately 7%. We intend to monetize our remaining Haleon investment in a prudent fashion during 2025. Overall, in Q4, we generated robust operating cash flows which combined with the most recent Haleon net sales proceeds of approximately $3 billion, resulted in significant free cash flow generation as we enter 2025. Our objective remains to delever and return to a more balanced allocation of capital between reinvestments and direct return to shareholders over time. Given we issued our full year 2025 financial guidance on December 17, let me just hit a few highlights. We expect total company full year '25 revenues to be in the range of $61 billion to $64 billion and full year '25 adjusted diluted earnings per share to be in the range of $2.80 to $3 a share, which reflects our expectation of strong contributions across our product portfolio as well as our focus on disciplined cost management. Importantly, we believe the steps taken to right size our cost base will put us on a strong footing towards increased operational efficiency and support our goal to return to pre-pandemic operating margins. In further support of this initiative, we now expect to deliver overall net savings of $4.5 billion from our ongoing cost realignment programs by the end of 2025, while continuing to advance programs that will improve cost of goods sold in the years to come. As a reminder, the impact of the IRA Medicare Part D redesign is expected to be a net headwind to the company's revenue of approximately $1 billion across our product portfolio, dampening growth by approximately 1.6% versus 2024. The impact of catastrophic coverage is expected to exceed the potential volume benefit from the reduction of the patient out-of-pocket cap, leading to a negative impact beginning in early in the year, while the positive impact of lower patient out-of-pocket costs is expected to build throughout this year. As the IRA is felt more acutely in higher-priced medicines, we expect Vyndaqel, Ibrance, Xtandi and Xeljanz to reach catastrophic coverage much earlier in the year. And due to these changes, we expect a higher gross to net impact on our revenues for all drugs in the beginning of 2025 that is expected to moderate throughout the remainder of the year when compared to 2024. And lastly, I will mention that we continue to monitor currency fluctuation as the year progresses. So in closing, let me just emphasize several key aspects of our business. We believe our financial targets for 2025 are both reasonable and achievable, reinforcing our commitment to operational excellence. We also believe our revenue volatility is largely in the past as COVID-related uncertainties have diminished. Additionally, our cost improvement programs have set the stage for ongoing margin expansion. We will continue our focus and execution to maximize the commercial value of our product portfolio. And our new R&D leadership is committed to driving value-creating innovation and strengthening our pipeline. And lastly, we have a clear path to reloading our balance sheet, enabling enhanced capital deployment in pursuit of additional opportunities to strengthen our business and create value for our shareholders. We are dedicated to maintaining and growing our dividend and meeting our delevering targets by the end of 2025, providing for a more balanced capital allocation. And with that, I'll turn it back to Albert to start the Q&A session.","evidence_gemma_new":null,"evidence_llama_3_3":"revenues 2024","evidence_qwen_3_30b":"revenues full-year of 2024","gemma_new_max":null,"gemma_new_min":null,"llama_3_3_max":63600000000.0,"llama_3_3_min":63600000000.0,"qwen_3_30b_max":63600000000.0,"qwen_3_30b_min":63600000000.0}
{"symbol":"PFE","year":2024,"quarter":3,"date":"2024-Q3","chunk_id":3,"sub_chunk_id":0,"centroid_label":"revenues","agreed_value":62500000000.0,"count":2,"chunk":"Dave Denton: Thank you, Albert, and good morning, everyone. I will build on Albert's comments by reinforcing that we are very pleased with the financial results for the third quarter of 2024. These results demonstrate that our focus and our execution against our 5 strategic priorities are driving positive patient outcomes and continued financial and operational strength. In addition to our strong top line performance, our cost reduction programs are creating a more efficient organization, setting the stage for increased capital returns and supporting our commitment to both maintaining and growing our dividend, all while enhancing shareholder value. This morning, I will briefly review our Q3 P&L performance, I'll highlight our capital allocation priorities and touch upon our full year 2024 financial guidance. Additionally, as we approach the end of the year, I will also share several modeling considerations as we began to plan for 2025. Turning first to the third quarter performance versus the same period of last year. Let me walk on the P&L. Total company revenues were $17.7 billion, representing an impressive 32% operational growth. Our COVID-19 products were significant contributors with PAXLOVID generating $2.7 billion in revenue. This included $442 million related to delivering 1 million treatment courses to the U.S. Government Strategic National Stockpile. COMIRNATY, our COVID-19 vaccine contributed $1.4 billion in revenue. Our COVID-19 products were not the only drivers during the quarter. Our non-COVID products also exhibited robust performance with revenues of $13.6 billion, reflecting 14% operational year-over-year growth. This performance shows that our refined commercial approach is working. We continue to focus on key products and geographies, we've refined how we allocate our commercial field resources globally and we're further optimizing our marketing resources into key priority areas. We saw strong contribution from our recently acquired Seagen products, including Passive, which continues its momentum following the results of the EV302 study last year. Other key growth drivers included VYNDAQEL, ELIQUIS, XTANDI and NURTEC, partially offset by declines in Xeljanz and Ibrance. Adjusted gross margin for the third quarter is approximately 70%, primarily the result of a net unfavorable mix related to our COVID-19 products, primarily due to the COMIRNATY profit split with BioNTech and applicable royalty expenses, as well as a slight dampening due to the associated costs incurred with the withdrawal of Oxbryta. All of this was partially offset by our ongoing focus on cost management across our manufacturing network. We continue to expect gross margins to be in the mid-70s for the full year. And as previously communicated, long-term improvements in gross margins will remain a key focus for the company over the next several years. We expect to achieve savings from Phase I of our manufacturing optimization program beginning in 2025 and deliver approximately $1.5 billion in savings for the first phase by the end of 2027. In parallel, we continue to evaluate our strategy for both Phase II and Phase III, which will focus on network structure and product portfolio, respectively. And we expect to have more information to share on those components of the program once they become available. Total adjusted operating expenses decreased 2% operationally to $5.8 billion. And I will note that this amount includes spending acquired via our Seagen transaction. And looking at the components, adjusted SI&A expenses increased 1% operationally, driven primarily by marketing and promotional expenses for recently launched and acquired products partly offset by a reduction in the U.S. health care reform fees. Adjusted R&D expenses decreased 4% operationally, driven primarily by lower spending on certain vaccine programs as well as our cost realignment program, partially offset by an increased spending related to the Seagen acquisition. We continue to be disciplined with our operational expense management and remain on track to deliver at least $4 billion in net cost savings from our cost realignment program by year-end. Q3 reported diluted earnings per share was $0.78 in the quarter and our adjusted earnings per share was $1.06, benefiting from our top line performance and efficient operating structure as well as a favorable tax rate driven primarily by jurisdictional mix. As mentioned last quarter, unique onetime items included in our GAAP results and excluded from our adjusted results this quarter include a $420 million charge related to the expected sale of one of our facilities, resulting from the discontinuation of our DMD program earlier this year. Now let me quickly touch upon our capital allocation strategy, which is designed to enhance long-term shareholder value. Our strategy consists of both maintaining and growing our dividend over time, reinvesting in our business at an appropriate level of financial return and making value-enhancing share repurchases after delevering our balance sheet. In the first 9 months of '24, we returned $7.1 billion to shareholders via our quarterly dividend, invested $7.8 billion in internal R&D and as we expected, completed business development activity was minimal. Our commitment to delevering our capital structure to a gross leverage target of 3.25x remains a key priority. In support of that goal, year-to-date, we have delevered by approximately $4.4 billion, paying down approximately $2.3 billion in maturing debt and approximately $2.1 billion in commercial paper. And in October, we monetized another tranche of our Helion shares, which for reporting purposes is a Q4 event. We received approximately $3.5 billion in net cap proceeds, and our ownership in Helion was reduced from approximately 23% to approximately 15%. Year-to-date, we have received approximately $6.9 billion of net cash proceeds from the sale of our shares. We intend to monetize our remaining Helion investment in a prudent fashion considering our cash flow requirements and future market conditions. Overall, in Q3, we generated robust operating cash flows, which combined with the Helion net sale proceeds of approximately $3.5 billion, resulting in significant cash flow generation as we enter the fourth quarter. Our objective remains to delever and return to a more balanced allocation of capital between reinvestment and direct return to shareholders over time. Now let me spend just a few minutes on our outlook for the full year. Based on our focused execution and strong year-to-date results, we are raising our full year '24 revenue guidance by $1.5 billion and our adjusted diluted earnings per share by $0.30. We now expect revenues in the range of $61 billion to $64 billion and operational revenue growth, excluding COVID-19 products is unchanged at 9% to 11% and takes into consideration reduction of sales associated with Oxbryta. COVID-19 product revenues are now expected to be $10.5 billion, $5 billion for COMIRNATY and $5.5 billion for PAXLOVID. Our guidance for adjusted SI&A, adjusted R&D and our effective tax rate on adjusted income remains unchanged. And last, we expect adjusted diluted earnings per share of $2.75 to $2.95, primarily reflecting the top line increase and absorbing the Oxbryta impact. As a reminder, our EPS guidance includes an anticipated $0.40 of earnings dilution from the Seagen acquisition, largely due to financing costs. Now as we begin to look towards next year, I want to touch on a few modeling considerations. As we've previously discussed, there are several nonrecurring items included in our 2024 results. First, during 2024, PAXLOVID revenue included a U.S. government revenue credit true-up and the fulfillment of our obligation to the U.S. National Strategic Stockpile. Second, given our ownership of Helion is now below 20%, we will no longer record equity income from that investment in our adjusted earnings beginning in 2025. And finally, our 2024 tax rate on adjusted income was favorably impacted by timing with respect to the impact of Pillar 2 and to a lesser extent, audit settlements. All in, these items are expected to have a favorable impact on full year 2024 adjusted diluted earnings per share of approximately $0.30. In closing, I'm extremely pleased with our third quarter 2024 results and our overall performance this year. Our team remains dedicated to strong operational execution, and we believe our cost-saving programs will drive enhanced operating leverage over time that will enable us to consistently deliver on our financial commitments to our shareholders. We are committed to driving long-term value creation through scientific leadership, portfolio strength and productivity across all aspects of our business. And with that, I'll now turn it back over to Albert.","evidence_gemma_new":"revenues","evidence_llama_3_3":null,"evidence_qwen_3_30b":"revenues","gemma_new_max":62500000000.0,"gemma_new_min":62500000000.0,"llama_3_3_max":null,"llama_3_3_min":null,"qwen_3_30b_max":62500000000.0,"qwen_3_30b_min":62500000000.0}
{"symbol":"PFE","year":2023,"quarter":4,"date":"2030-FY","chunk_id":89,"sub_chunk_id":0,"centroid_label":"revenues","agreed_value":25000000000.0,"count":2,"chunk":"Chris Shibutani: Two questions, if I may. Aamir, with your prior role, you had talked about a $25 billion in revenues by 2030 that the company was looking to deliver based upon M&A. We have the impairment with Arena. Is there an update for that? And now that you're in the role of U.S. Chief Commercial Officer, non-oncology, non-COVID, what would be on your wish list in your currency in terms of where you feel an opportunity to expand those revenues potentially through business development that could work to hit that $25 billion target by 2030? Then secondly, with the M&A activity across the industry, investors are always paying attention to what's going on with the FTC. Having passed through this gauntlet with Seagen last year, is there anything you can comment about to help us think about how regulators are thinking about the M&A environment in terms of particularly size of deal or any other dimension that you think is worth being aware of that might have been your observations from your experience in '23?","evidence_gemma_new":"revenues year 2030","evidence_llama_3_3":"revenues 2030","evidence_qwen_3_30b":null,"gemma_new_max":25000000000.0,"gemma_new_min":25000000000.0,"llama_3_3_max":25000000000.0,"llama_3_3_min":25000000000.0,"qwen_3_30b_max":null,"qwen_3_30b_min":null}
{"symbol":"PFE","year":2024,"quarter":1,"date":"2024-Q1","chunk_id":3,"sub_chunk_id":0,"centroid_label":"total adjusted operating expenses","agreed_value":5900000000.0,"count":2,"chunk":"David Denton: Thank you, Albert, and good morning. As we continue to navigate a challenging post-COVID environment, I\u2019'm pleased to share that this year is off to a solid start. We are protecting and growing our core brands while investing in building a more effective organization. Our relentless focus on execution is positioning Pfizer to improve shareholder returns. This morning, I'll briefly review the highlights of our first quarter results, then I'll touch on our capital allocation priorities. I\u2019ll wrap up by outlining our 2024 financial guidance as well as our key priorities for the remainder of this year. Turning to the first quarter, let me walk down the P&L. Total company revenues for the quarter were $14.9 billion, reflecting an operational decline of $3.5 billion or 19% versus last year. As you know, our business continues to be negatively impacted by a declining COVID environment on a global basis. To that end, we expect our COVID products will continue to have an outsized effect on both our top line and our bottom line throughout this year. However, I do want to point out that we expect our COVID products will continue to be contributors to revenues and cash flows for the foreseeable future. Strong commercial execution across the enterprise drove 11% operational revenue growth in the quarter when you exclude COMIRNATY and PAXLOVID. Performance was positively impacted by our renewed focus on key products and markets, refined allocation of commercial field resources globally and further alignment of marketing resources into key priority areas. Contributing to this performance were our acquired products from Seagen, alongside in-line products such as VYNDAQEL, ELIQUIS and ABRYSVO. Dampening our growth in the quarter was the expected lower global demand for IBRANCE and SULPERAZON, driven largely by lower demand in China in the first quarter of 2024 versus last year. Adjusted Gross Margin for the first quarter improved by 530 basis points to 79.6% versus Q1 of last year. This improvement was driven by 3 factors. First were lower sales volume of COMIRNATY resulting in favorable sales mix. Second, in the quarter, we recorded a product return adjustment for PAXLOVID associated with our U.S. government contract, and I\u2019ll touch upon that in just a moment. And finally, we executed strong cost management across our manufacturing network. Improvements in our gross margin rate will continue to be an important focus for the company going forward. Total Adjusted operating expenses increased modestly by 1% to $5.9 billion compared to Q1 of last year despite adding expenses associated with the acquired Seagen business. This disciplined cost control puts us squarely on track to delivering on our $4 billion net savings commitment by the end of the year. Adjusted SI&A expenses increased 3% operationally in the quarter, driven by an increase in marketing and promotional expenses for recently acquired or launched products, partially offset by a decrease in expenses for PAXLOVID and COMIRNATY. Consistent with our strategy, we are prioritizing our R&D spending to enhance overall returns while supporting growth from our pipeline. For the quarter, adjusted R&D Expenses were $2.5 billion, a decrease of 1% operationally versus LY. The slight decline was driven primarily by a lower spending resulting from our cost realignment program and lower spending on certain vaccines program, largely offset by increased investments mainly to develop certain assets acquired from Seagen. Q1 reported diluted earnings per share were $0.55. Our adjusted diluted earnings per share was $0.82, which exceeded our expectations due to favorable gross margin performance as well as strong cost management across the enterprise. As I stated earlier, during the quarter, we recorded a favorable product return adjustment associated with our U.S. government contract for PAXLOVID. Recall that during Q4 of last year, we estimated the U.S. government credit for PAXLOVID was $3.5 billion. Earlier this year, the U.S. government announced that the EUA labeled product was no longer authorized for CUs and the agreed-upon return period had now expired. Given those facts, we can now finalize the total value of the U.S. government credit. This resulted in a favorable adjustment to revenues of $771 million for PAXLOVID and contributed $0.11 to the company's earnings per share. Now let me quickly touch upon our capital allocation strategy, which is designed to enhance long-term shareholder value. Our strategy consists of maintaining and growing our dividend over time, reinvesting in our business at an appropriate level of financial return and making value-enhancing share repurchases after delevering our balance sheet. During the first quarter, we returned $2.4 billion to shareholders via our quarterly dividend, invested $2.5 billion in internal R&D and, as expected, business development activity was minimal in the quarter. We are committed to delivering our capital structure with a gross leverage target of 3.25x, which we expect to achieve over time. In support of that goal, during the quarter, we paid down approximately $1.25 billion of maturing debt. And in May, we will pay down another $1 billion of outstanding notes. And importantly, during the quarter, we began to monetize our Haleon stake through an initial sale of $3.5 billion, which reduced our equity position in the company from 32% to approximately 23%. Looking ahead to the next couple of quarters, I'd like to point out that we expect operating cash flow to be significantly below typical levels, largely due to the timing of certain payments. Despite this near-term pressure, clearly, our objective is to return to a more balanced capital allocation strategy over time. Now let me spend just a few minutes on our outlook for the remainder of this year. As we entered 2024, the company was highly focused on delivering on its financial commitments, and our performance in Q1 demonstrates that we are off to a solid start. With that objective in mind and the fact that it's still early in the year, we are modestly updating the earnings outlook for this year. We are raising our full year adjusted diluted earnings per share guidance range by $0.10 to a new range of $2.15 to $2.35. Looking ahead, this increase takes into consideration both our improving line of sight to our cost savings targets and continued strength in our underlying business. As a reminder, our EPS guidance also includes an anticipated $0.40 of earnings dilution from the Seagen acquisition, largely due to financing costs. While the PAXLOVID revenue return adjustment moves us to the upper end of the revenue guidance range, our top line revenue expectations remain unchanged for the year. We continue to expect revenues in the range of $58.5 billion to $61.5 billion. In addition, even though COMIRNATY revenues continue to perform consistent with our plan, it is important to remember that we expect approximately 90% of our sales to occur in the second half of the year, mostly in Q4, given the seasonal nature of these products. Lastly, we remain on track to deliver at least $4 billion of net savings from our cost realignment program by the end of the year. Improving our cost base will put us on strong footing towards margin expansion and improved financial returns as we move forward. As you know, over the past 2 years, the company has made significant investments to drive growth in the back half of the decade, and we remain encouraged by the long-term growth outlook for Pfizer. 2024 is clearly a year of focus, execution and delivering on our near-term financial commitments. The foundation that we establish this year sets the stage to deliver on our commitment to enhance shareholder value, both this year and through the end of the decade. And with that, I'd like to turn it back over to Albert as we begin our Q&A session.","evidence_gemma_new":"Total Adjusted operating expenses","evidence_llama_3_3":null,"evidence_qwen_3_30b":"Total Adjusted operating expenses first quarter","gemma_new_max":5900000000.0,"gemma_new_min":5900000000.0,"llama_3_3_max":null,"llama_3_3_min":null,"qwen_3_30b_max":5900000000.0,"qwen_3_30b_min":5900000000.0}
{"symbol":"PFE","year":2024,"quarter":2,"date":"2024-Q2","chunk_id":3,"sub_chunk_id":0,"centroid_label":"total adjusted operating expenses","agreed_value":6300000000.0,"count":3,"chunk":"Dave Denton: Thank you, Albert, and good morning, everyone. As we close out the first half of the year, I\u2019m very pleased by our second quarter results. We continue our relentless focus on execution, demonstrating our ability to both protect and grow our core brands while also continuing to advance our science-led transformation by investing in key TAs to build durable franchises. Our initiatives to right size OpEx and reduce cost of goods will result in a more efficient organization, setting the stage for strong capital returns and long-term improved shareholder value enabling our commitment to both maintain and to grow our dividend. This morning, I will briefly review our second quarter results including some one-time items, touch on our capital allocation priorities, and wrap up with an update on our 2024 financial guidance, our key priorities, and expectations for the remainder of this year. Turning first to Q2 performance versus the same period last year; let\u2019s walk down the P&L. Total company revenues for the quarter were $13.3 billion, reflecting operational growth of 3%. Our revenue and cash flow continue to be impacted by the post-pandemic COVID environment on a global basis but to a much lesser extent than prior quarters. Looking at the business excluding our COVID products, we demonstrated strong commercial execution across the enterprise, resulting in 14% operational revenue growth in the quarter. Performance was positively impacted by our continued focus on key products and geographies; refined allocation of commercial field resources globally; and further optimization of our marketing resources into key priority areas. Contributing to this performance was our acquired products from Seagen as well as Nurtec, alongside in-line products Vyndaqel, Eliquis and Xtandi. As expected, dampening our growth in the quarter were Xeljanz and Ibrance. Adjusted Gross Margin for the second quarter was 79%, compared to 76% last year, and was primarily the result of favorable sales mix from our non-COVID products, as well as continued strong cost management across our manufacturing network. Improvements in our gross margin rate will continue to be a focus for the company over the next few years as we execute on our recently announced Manufacturing Optimization Program. This new program and together with our cost realignment program is focused on returning the company to pre-pandemic operating margins on a mix adjusted basis excluding Comirnaty. Phase 1 of the Manufacturing Optimization Program, which focuses on operational efficiencies, is well underway now. This first phase is expected to deliver approximately $1.5 billion in savings by the end of 2027, some of which is anticipated to be realized beginning in 2025. Total Adjusted operating expenses increased by 5% operationally to $6.3 billion and include spending from our legacy Seagen business. Looking at the components, adjusted SI&A expenses increased 8% driven primarily by marketing and promotional expenses for recently launched as well as acquired products. Adjusted R&D expenses increased 2% operationally driven primarily by increased spending related to the acquisition of Seagen, partially offset by lower spending primarily the result of our cost realignment program. Q2 reported diluted earnings per share was $0.01 and our adjusted diluted EPS was $0.60. Unique one-time items included in our GAAP results and excluded from our adjusted results, this quarter include a $1.3 billion charge related to our Manufacturing Optimization Program primarily for severance, and a $230 million charge for IPR&D asset impairment and other related costs associated with the discontinuation of our DMD program. Additionally, we expect to record a charge of approximately $400 million in the third quarter of 2024 after a decision was made in July to sell one of our facilities as a result of the discontinuation of the DMD effort. Now let me quickly touch upon our capital allocation strategy, which is designed to enhance long-term shareholder value. Our strategy consists of maintaining and growing our dividend over time, reinvesting in our business at an appropriate level of financial return; and finally making value enhancing share repurchases after de-levering our balance sheet. In the first half of 2024, we returned $4.8 billion to shareholders via our quarterly dividend; invested $5.2 billion in internal R&D; and as expected, the completed business development activity was minimal. Our commitment to de-levering our capital structure to a gross leverage target of 3.25 times remains a key priority. In support of that goal, year-to-date, we have paid down approximately $2.25 billion in maturing debt, including $1 billion in May of outstanding notes. And though we did not monetize any Haleon shares in Q2, we expect to resume monetization of our 23% Haleon stake in the future. I would also note that once our Haleon ownership is less than 20%, our accounting will transition from recording equity income and will no longer be included in our adjusted results. This change is factored into our long-term financial planning and as well as our guidance. As we\u2019ve previously stated previously, we expect operating cash flow to be significantly below typical levels this year and particularly during the first half of 2024, due to the timing of certain payments and one-time expenses. We expect heavily weighting of revenues to the fourth quarter as our business has become more seasonal in nature with the potential that a high level of cash collections may carry over into Q1 of 2025. Despite this near-term pressure, clearly, our objective remains to return to a more balanced capital allocation strategy over time. Now, let me spend just a few minutes on our outlook for the remainder of the year. We entered 2024 focused on delivering on our financial commitments as well as commercial performance. With a successful first half now complete, we believe it is appropriate to update our full year earnings outlook to reflect our strong business performance. I\u2019ll remind you that our revised guidance assumes the seasonal cadence of our product portfolio, and that we expect Paxlovid results to trend with infection rates. With that said, we are raising our full year revenue range by $1 billion and our adjusted diluted earnings per share by $0.30. We now expect revenues in the range of $59.5 billion to $62.5 billion and operational revenue growth excluding COVID products is projected to be 9% to 11%. COVID product revenues are now expected to be $8.5 billion for the year; $5 billion for Comirnaty and $3.5 billion for Paxlovid. Our guidance for adjusted SI&A and adjusted R&D remains unchanged while our effective tax rate on adjusted income is now expected to be approximately 13%; and, lastly, we expect adjusted diluted earnings per share of $2.45 to $2.65 primarily reflecting the increase to the top line and the revised tax rate among other items. As a reminder, our EPS guidance includes an anticipated $0.40 of earnings dilution from the Seagen acquisition, largely due to financing cost. In closing, we remain on track to deliver at least $4 billion of net savings from our cost-realignment program by the end of this year. This improvement in our cost base alongside our new initiatives focused on manufacturing is expected to put us on strong footing towards margin expansion and improved financial returns. Additionally, our continued focus on execution and our recent investments have positioned the company for continued success moving forward. This quarter\u2019s results are a testament to the performance of our commercial business and our prudent approach to improving our cost base. Though we\u2019ve had a strong first half, we do not take lightly the continued focus needed to deliver in the second half considering the seasonality of our respiratory products. We are clearly striving to bring about improved performance on both the top and bottom lines through focus, execution and delivering on our near-term commercial and financial goals. 2024 is clearly a foundation year for Pfizer. Our achievements to date sets the stage for generating compelling shareholder value. Through our science-led transformation, we will methodically build off this base and with breakthroughs and innovation driving growth in the back half of the decade. And with that, I\u2019d now like to turn it back over to Albert to start our Q&A.","evidence_gemma_new":"Total Adjusted operating expenses","evidence_llama_3_3":"Pfizer Total Adjusted operating expenses Q2","evidence_qwen_3_30b":"Total Adjusted operating expenses second quarter","gemma_new_max":6300000000.0,"gemma_new_min":6300000000.0,"llama_3_3_max":6300000000.0,"llama_3_3_min":6300000000.0,"qwen_3_30b_max":6300000000.0,"qwen_3_30b_min":6300000000.0}
{"symbol":"PFE","year":2024,"quarter":3,"date":"2024-Q3","chunk_id":3,"sub_chunk_id":0,"centroid_label":"total adjusted operating expenses","agreed_value":5800000000.0,"count":2,"chunk":"Dave Denton: Thank you, Albert, and good morning, everyone. I will build on Albert's comments by reinforcing that we are very pleased with the financial results for the third quarter of 2024. These results demonstrate that our focus and our execution against our 5 strategic priorities are driving positive patient outcomes and continued financial and operational strength. In addition to our strong top line performance, our cost reduction programs are creating a more efficient organization, setting the stage for increased capital returns and supporting our commitment to both maintaining and growing our dividend, all while enhancing shareholder value. This morning, I will briefly review our Q3 P&L performance, I'll highlight our capital allocation priorities and touch upon our full year 2024 financial guidance. Additionally, as we approach the end of the year, I will also share several modeling considerations as we began to plan for 2025. Turning first to the third quarter performance versus the same period of last year. Let me walk on the P&L. Total company revenues were $17.7 billion, representing an impressive 32% operational growth. Our COVID-19 products were significant contributors with PAXLOVID generating $2.7 billion in revenue. This included $442 million related to delivering 1 million treatment courses to the U.S. Government Strategic National Stockpile. COMIRNATY, our COVID-19 vaccine contributed $1.4 billion in revenue. Our COVID-19 products were not the only drivers during the quarter. Our non-COVID products also exhibited robust performance with revenues of $13.6 billion, reflecting 14% operational year-over-year growth. This performance shows that our refined commercial approach is working. We continue to focus on key products and geographies, we've refined how we allocate our commercial field resources globally and we're further optimizing our marketing resources into key priority areas. We saw strong contribution from our recently acquired Seagen products, including Passive, which continues its momentum following the results of the EV302 study last year. Other key growth drivers included VYNDAQEL, ELIQUIS, XTANDI and NURTEC, partially offset by declines in Xeljanz and Ibrance. Adjusted gross margin for the third quarter is approximately 70%, primarily the result of a net unfavorable mix related to our COVID-19 products, primarily due to the COMIRNATY profit split with BioNTech and applicable royalty expenses, as well as a slight dampening due to the associated costs incurred with the withdrawal of Oxbryta. All of this was partially offset by our ongoing focus on cost management across our manufacturing network. We continue to expect gross margins to be in the mid-70s for the full year. And as previously communicated, long-term improvements in gross margins will remain a key focus for the company over the next several years. We expect to achieve savings from Phase I of our manufacturing optimization program beginning in 2025 and deliver approximately $1.5 billion in savings for the first phase by the end of 2027. In parallel, we continue to evaluate our strategy for both Phase II and Phase III, which will focus on network structure and product portfolio, respectively. And we expect to have more information to share on those components of the program once they become available. Total adjusted operating expenses decreased 2% operationally to $5.8 billion. And I will note that this amount includes spending acquired via our Seagen transaction. And looking at the components, adjusted SI&A expenses increased 1% operationally, driven primarily by marketing and promotional expenses for recently launched and acquired products partly offset by a reduction in the U.S. health care reform fees. Adjusted R&D expenses decreased 4% operationally, driven primarily by lower spending on certain vaccine programs as well as our cost realignment program, partially offset by an increased spending related to the Seagen acquisition. We continue to be disciplined with our operational expense management and remain on track to deliver at least $4 billion in net cost savings from our cost realignment program by year-end. Q3 reported diluted earnings per share was $0.78 in the quarter and our adjusted earnings per share was $1.06, benefiting from our top line performance and efficient operating structure as well as a favorable tax rate driven primarily by jurisdictional mix. As mentioned last quarter, unique onetime items included in our GAAP results and excluded from our adjusted results this quarter include a $420 million charge related to the expected sale of one of our facilities, resulting from the discontinuation of our DMD program earlier this year. Now let me quickly touch upon our capital allocation strategy, which is designed to enhance long-term shareholder value. Our strategy consists of both maintaining and growing our dividend over time, reinvesting in our business at an appropriate level of financial return and making value-enhancing share repurchases after delevering our balance sheet. In the first 9 months of '24, we returned $7.1 billion to shareholders via our quarterly dividend, invested $7.8 billion in internal R&D and as we expected, completed business development activity was minimal. Our commitment to delevering our capital structure to a gross leverage target of 3.25x remains a key priority. In support of that goal, year-to-date, we have delevered by approximately $4.4 billion, paying down approximately $2.3 billion in maturing debt and approximately $2.1 billion in commercial paper. And in October, we monetized another tranche of our Helion shares, which for reporting purposes is a Q4 event. We received approximately $3.5 billion in net cap proceeds, and our ownership in Helion was reduced from approximately 23% to approximately 15%. Year-to-date, we have received approximately $6.9 billion of net cash proceeds from the sale of our shares. We intend to monetize our remaining Helion investment in a prudent fashion considering our cash flow requirements and future market conditions. Overall, in Q3, we generated robust operating cash flows, which combined with the Helion net sale proceeds of approximately $3.5 billion, resulting in significant cash flow generation as we enter the fourth quarter. Our objective remains to delever and return to a more balanced allocation of capital between reinvestment and direct return to shareholders over time. Now let me spend just a few minutes on our outlook for the full year. Based on our focused execution and strong year-to-date results, we are raising our full year '24 revenue guidance by $1.5 billion and our adjusted diluted earnings per share by $0.30. We now expect revenues in the range of $61 billion to $64 billion and operational revenue growth, excluding COVID-19 products is unchanged at 9% to 11% and takes into consideration reduction of sales associated with Oxbryta. COVID-19 product revenues are now expected to be $10.5 billion, $5 billion for COMIRNATY and $5.5 billion for PAXLOVID. Our guidance for adjusted SI&A, adjusted R&D and our effective tax rate on adjusted income remains unchanged. And last, we expect adjusted diluted earnings per share of $2.75 to $2.95, primarily reflecting the top line increase and absorbing the Oxbryta impact. As a reminder, our EPS guidance includes an anticipated $0.40 of earnings dilution from the Seagen acquisition, largely due to financing costs. Now as we begin to look towards next year, I want to touch on a few modeling considerations. As we've previously discussed, there are several nonrecurring items included in our 2024 results. First, during 2024, PAXLOVID revenue included a U.S. government revenue credit true-up and the fulfillment of our obligation to the U.S. National Strategic Stockpile. Second, given our ownership of Helion is now below 20%, we will no longer record equity income from that investment in our adjusted earnings beginning in 2025. And finally, our 2024 tax rate on adjusted income was favorably impacted by timing with respect to the impact of Pillar 2 and to a lesser extent, audit settlements. All in, these items are expected to have a favorable impact on full year 2024 adjusted diluted earnings per share of approximately $0.30. In closing, I'm extremely pleased with our third quarter 2024 results and our overall performance this year. Our team remains dedicated to strong operational execution, and we believe our cost-saving programs will drive enhanced operating leverage over time that will enable us to consistently deliver on our financial commitments to our shareholders. We are committed to driving long-term value creation through scientific leadership, portfolio strength and productivity across all aspects of our business. And with that, I'll now turn it back over to Albert.","evidence_gemma_new":"Total adjusted operating expenses","evidence_llama_3_3":"total adjusted operating expenses third quarter of 2024","evidence_qwen_3_30b":null,"gemma_new_max":5800000000.0,"gemma_new_min":5800000000.0,"llama_3_3_max":5800000000.0,"llama_3_3_min":5800000000.0,"qwen_3_30b_max":null,"qwen_3_30b_min":null}
{"symbol":"PFE","year":2024,"quarter":4,"date":"2024-Q4","chunk_id":3,"sub_chunk_id":0,"centroid_label":"total adjusted operating expenses","agreed_value":7300000000.0,"count":3,"chunk":"Dave Denton: Thank you, Albert, and good morning, everyone. I'll build on Albert's comments by reinforcing that we are very pleased with the financial results for both the fourth quarter as well as the full-year of 2024. These results demonstrate that our focus and execution against our strategic priorities are driving both positive patient outcomes as well as financial and operational strength. In addition to our strong top line performance, our cost reduction programs are creating a more efficient organization, driving operating margin improvement. And as we move into 2025, these efforts will continue to lay the groundwork for potential increased capital returns and reinforce our commitment to maintaining and growing our dividend while enhancing long-term shareholder value. With that said, let me start with our full-year and fourth quarter results, then I'll touch on our capital allocation priorities. I'll finish up with a few comments on our 2025 guidance, which we are reaffirming today, and our near-term expectations that will continue to drive our growth potential in the latter half of the decade. For the full-year of 2024, we recorded revenues of $63.6 billion versus $59.6 billion last year. Importantly, our operational revenue growth when excluding contributions from our COVID products was 12%, exceeding our expectations of 9% to 11%. Full year 2024 adjusted gross margins expanded to 74% as we continued to drive cost improvements across our manufacturing network. On the bottom line, we reported full year 2024 diluted EPS of $1.41 versus $0.37 last year, and adjusted diluted earnings per share of $3.11 versus $1.84 last year, significantly ahead of expectations due to our overall strong P&L performance. Now turning to the fourth quarter performance versus the same period of LOI, let me walk down the P&L. Total company revenues were $17.8 billion versus $14.6 billion in the fourth quarter of last year. Once again, our non-COVID-19 products exhibited robust performance with revenues of $13.7 billion reflecting 11% operational year-over-year growth. This performance continues to show that our refined commercial approach is working. We continue to focus on key products and geographies. We've refined how we allocate our commercial field resources globally. And we're further optimizing our marketing resources into key priority areas. We saw strong contributions across our product portfolio, primarily driven by the Vyndaqel family, Padcev, Eliquis and Nurtec, partially offset by declines in ABRYSVO and XELJANZ. Adjusted gross margin in the fourth quarter was approximately 68%, primarily the result of a net unfavorable mix related to our COVID-19 products, primarily due to the Comirnaty profit split with BioNTech and applicable royalty expenses. This was partially offset by our ongoing focus on cost management across our manufacturing network, as I previously mentioned. And as we previously communicated, long-term improvements in gross margin will remain a key focus for the company over the next few years. We expect to begin to achieve initial savings from Phase 1 of our manufacturing optimization program in the latter part of 2025 and continue to expect approximately $1.5 billion in savings from this first phase by the end of 2027. We continue to evaluate other strategies to improve our network structure and as well as our product portfolio. And we plan to share more information on those components of the program once it becomes available. Total adjusted operating expenses are essentially flat operationally at $7.3 billion in the fourth quarter of 2024. And I will note that this amount includes spending acquired via our Seagen transaction. Looking at the components specifically, adjusted SI&A expenses decreased 4% operationally, driven primarily by a decrease in marketing and promotional spend for various products, including both commodity Comirnaty and Paxlovid, partially offset by an increase in spending for certain oncology and recently launched and acquired products. Adjusted R&D expenses increased 8% operationally, driven primarily by net increase in spending, mainly to develop certain product candidates acquired from Seagen, partially offset by lower spending on certain ongoing vaccine programs and certainly as a result of our cost realignment program. We continue to be disciplined with our operational expense management and delivered on our goal of at least $4 billion in net cost savings from our cost realignment program. Q4 reported diluted earnings per share was $0.07, and our adjusted diluted earnings per share was $0.63, benefiting from our top line performance as well as our efficient operating structure, partially offset by a higher effective tax rate driven primarily by jurisdictional mix. In support of our goal to enhance R&D productivity and to focus on high-impact medicines, our fourth quarter GAAP results reflect strategic decisions in our development plans and updated long-range revenue forecasts for several medicines. And as a result, we recorded approximately $2.9 billion in noncash intangible asset impairments related to several medicines in development as well as several in-line products. These decisions reinforce our focus on future growth as well as innovation. Now let me quickly touch upon our capital allocation strategy, which is designed to enhance long-term shareholder value. Our strategy consists of maintaining and growing our dividend over time, reinvesting in our business at an appropriate level of financial return, and finally making value-enhancing share repurchases after delevering our balance sheet. In 2024, we returned $9.5 billion to shareholders via our quarterly dividend, invested $10.8 billion in internal R&D, and as expected, completed business development activity was minimal. Our commitment to delevering our capital structure to a gross leverage target of 3.25x by the end of 2025 remains a key priority. In support of that goal, in 2024, we delevered by approximately $7.8 billion, paying down approximately $2.3 billion in maturing debt and approximately $5.5 billion in commercial paper. And in January of '25, we monetized another tranche of our Haleon shares, which for reporting purposes is a Q1 '25 event. We received approximately $3 billion in net cash proceeds, and now our ownership in Haleon was reduced from approximately 15% to approximately 7%. We intend to monetize our remaining Haleon investment in a prudent fashion during 2025. Overall, in Q4, we generated robust operating cash flows which combined with the most recent Haleon net sales proceeds of approximately $3 billion, resulted in significant free cash flow generation as we enter 2025. Our objective remains to delever and return to a more balanced allocation of capital between reinvestments and direct return to shareholders over time. Given we issued our full year 2025 financial guidance on December 17, let me just hit a few highlights. We expect total company full year '25 revenues to be in the range of $61 billion to $64 billion and full year '25 adjusted diluted earnings per share to be in the range of $2.80 to $3 a share, which reflects our expectation of strong contributions across our product portfolio as well as our focus on disciplined cost management. Importantly, we believe the steps taken to right size our cost base will put us on a strong footing towards increased operational efficiency and support our goal to return to pre-pandemic operating margins. In further support of this initiative, we now expect to deliver overall net savings of $4.5 billion from our ongoing cost realignment programs by the end of 2025, while continuing to advance programs that will improve cost of goods sold in the years to come. As a reminder, the impact of the IRA Medicare Part D redesign is expected to be a net headwind to the company's revenue of approximately $1 billion across our product portfolio, dampening growth by approximately 1.6% versus 2024. The impact of catastrophic coverage is expected to exceed the potential volume benefit from the reduction of the patient out-of-pocket cap, leading to a negative impact beginning in early in the year, while the positive impact of lower patient out-of-pocket costs is expected to build throughout this year. As the IRA is felt more acutely in higher-priced medicines, we expect Vyndaqel, Ibrance, Xtandi and Xeljanz to reach catastrophic coverage much earlier in the year. And due to these changes, we expect a higher gross to net impact on our revenues for all drugs in the beginning of 2025 that is expected to moderate throughout the remainder of the year when compared to 2024. And lastly, I will mention that we continue to monitor currency fluctuation as the year progresses. So in closing, let me just emphasize several key aspects of our business. We believe our financial targets for 2025 are both reasonable and achievable, reinforcing our commitment to operational excellence. We also believe our revenue volatility is largely in the past as COVID-related uncertainties have diminished. Additionally, our cost improvement programs have set the stage for ongoing margin expansion. We will continue our focus and execution to maximize the commercial value of our product portfolio. And our new R&D leadership is committed to driving value-creating innovation and strengthening our pipeline. And lastly, we have a clear path to reloading our balance sheet, enabling enhanced capital deployment in pursuit of additional opportunities to strengthen our business and create value for our shareholders. We are dedicated to maintaining and growing our dividend and meeting our delevering targets by the end of 2025, providing for a more balanced capital allocation. And with that, I'll turn it back to Albert to start the Q&A session.","evidence_gemma_new":"Total adjusted operating expenses 2024 fourth quarter","evidence_llama_3_3":"total adjusted operating expenses fourth quarter","evidence_qwen_3_30b":"total adjusted operating expenses $7.3 billion","gemma_new_max":7300000000.0,"gemma_new_min":7300000000.0,"llama_3_3_max":7300000000.0,"llama_3_3_min":7300000000.0,"qwen_3_30b_max":7300000000.0,"qwen_3_30b_min":7300000000.0}
{"symbol":"PFE","year":2024,"quarter":1,"date":"2024-Q1","chunk_id":3,"sub_chunk_id":0,"centroid_label":"total company revenues","agreed_value":14900000000.0,"count":2,"chunk":"David Denton: Thank you, Albert, and good morning. As we continue to navigate a challenging post-COVID environment, I\u2019'm pleased to share that this year is off to a solid start. We are protecting and growing our core brands while investing in building a more effective organization. Our relentless focus on execution is positioning Pfizer to improve shareholder returns. This morning, I'll briefly review the highlights of our first quarter results, then I'll touch on our capital allocation priorities. I\u2019ll wrap up by outlining our 2024 financial guidance as well as our key priorities for the remainder of this year. Turning to the first quarter, let me walk down the P&L. Total company revenues for the quarter were $14.9 billion, reflecting an operational decline of $3.5 billion or 19% versus last year. As you know, our business continues to be negatively impacted by a declining COVID environment on a global basis. To that end, we expect our COVID products will continue to have an outsized effect on both our top line and our bottom line throughout this year. However, I do want to point out that we expect our COVID products will continue to be contributors to revenues and cash flows for the foreseeable future. Strong commercial execution across the enterprise drove 11% operational revenue growth in the quarter when you exclude COMIRNATY and PAXLOVID. Performance was positively impacted by our renewed focus on key products and markets, refined allocation of commercial field resources globally and further alignment of marketing resources into key priority areas. Contributing to this performance were our acquired products from Seagen, alongside in-line products such as VYNDAQEL, ELIQUIS and ABRYSVO. Dampening our growth in the quarter was the expected lower global demand for IBRANCE and SULPERAZON, driven largely by lower demand in China in the first quarter of 2024 versus last year. Adjusted Gross Margin for the first quarter improved by 530 basis points to 79.6% versus Q1 of last year. This improvement was driven by 3 factors. First were lower sales volume of COMIRNATY resulting in favorable sales mix. Second, in the quarter, we recorded a product return adjustment for PAXLOVID associated with our U.S. government contract, and I\u2019ll touch upon that in just a moment. And finally, we executed strong cost management across our manufacturing network. Improvements in our gross margin rate will continue to be an important focus for the company going forward. Total Adjusted operating expenses increased modestly by 1% to $5.9 billion compared to Q1 of last year despite adding expenses associated with the acquired Seagen business. This disciplined cost control puts us squarely on track to delivering on our $4 billion net savings commitment by the end of the year. Adjusted SI&A expenses increased 3% operationally in the quarter, driven by an increase in marketing and promotional expenses for recently acquired or launched products, partially offset by a decrease in expenses for PAXLOVID and COMIRNATY. Consistent with our strategy, we are prioritizing our R&D spending to enhance overall returns while supporting growth from our pipeline. For the quarter, adjusted R&D Expenses were $2.5 billion, a decrease of 1% operationally versus LY. The slight decline was driven primarily by a lower spending resulting from our cost realignment program and lower spending on certain vaccines program, largely offset by increased investments mainly to develop certain assets acquired from Seagen. Q1 reported diluted earnings per share were $0.55. Our adjusted diluted earnings per share was $0.82, which exceeded our expectations due to favorable gross margin performance as well as strong cost management across the enterprise. As I stated earlier, during the quarter, we recorded a favorable product return adjustment associated with our U.S. government contract for PAXLOVID. Recall that during Q4 of last year, we estimated the U.S. government credit for PAXLOVID was $3.5 billion. Earlier this year, the U.S. government announced that the EUA labeled product was no longer authorized for CUs and the agreed-upon return period had now expired. Given those facts, we can now finalize the total value of the U.S. government credit. This resulted in a favorable adjustment to revenues of $771 million for PAXLOVID and contributed $0.11 to the company's earnings per share. Now let me quickly touch upon our capital allocation strategy, which is designed to enhance long-term shareholder value. Our strategy consists of maintaining and growing our dividend over time, reinvesting in our business at an appropriate level of financial return and making value-enhancing share repurchases after delevering our balance sheet. During the first quarter, we returned $2.4 billion to shareholders via our quarterly dividend, invested $2.5 billion in internal R&D and, as expected, business development activity was minimal in the quarter. We are committed to delivering our capital structure with a gross leverage target of 3.25x, which we expect to achieve over time. In support of that goal, during the quarter, we paid down approximately $1.25 billion of maturing debt. And in May, we will pay down another $1 billion of outstanding notes. And importantly, during the quarter, we began to monetize our Haleon stake through an initial sale of $3.5 billion, which reduced our equity position in the company from 32% to approximately 23%. Looking ahead to the next couple of quarters, I'd like to point out that we expect operating cash flow to be significantly below typical levels, largely due to the timing of certain payments. Despite this near-term pressure, clearly, our objective is to return to a more balanced capital allocation strategy over time. Now let me spend just a few minutes on our outlook for the remainder of this year. As we entered 2024, the company was highly focused on delivering on its financial commitments, and our performance in Q1 demonstrates that we are off to a solid start. With that objective in mind and the fact that it's still early in the year, we are modestly updating the earnings outlook for this year. We are raising our full year adjusted diluted earnings per share guidance range by $0.10 to a new range of $2.15 to $2.35. Looking ahead, this increase takes into consideration both our improving line of sight to our cost savings targets and continued strength in our underlying business. As a reminder, our EPS guidance also includes an anticipated $0.40 of earnings dilution from the Seagen acquisition, largely due to financing costs. While the PAXLOVID revenue return adjustment moves us to the upper end of the revenue guidance range, our top line revenue expectations remain unchanged for the year. We continue to expect revenues in the range of $58.5 billion to $61.5 billion. In addition, even though COMIRNATY revenues continue to perform consistent with our plan, it is important to remember that we expect approximately 90% of our sales to occur in the second half of the year, mostly in Q4, given the seasonal nature of these products. Lastly, we remain on track to deliver at least $4 billion of net savings from our cost realignment program by the end of the year. Improving our cost base will put us on strong footing towards margin expansion and improved financial returns as we move forward. As you know, over the past 2 years, the company has made significant investments to drive growth in the back half of the decade, and we remain encouraged by the long-term growth outlook for Pfizer. 2024 is clearly a year of focus, execution and delivering on our near-term financial commitments. The foundation that we establish this year sets the stage to deliver on our commitment to enhance shareholder value, both this year and through the end of the decade. And with that, I'd like to turn it back over to Albert as we begin our Q&A session.","evidence_gemma_new":"Total company revenues","evidence_llama_3_3":null,"evidence_qwen_3_30b":"Total company revenues first quarter","gemma_new_max":14900000000.0,"gemma_new_min":14900000000.0,"llama_3_3_max":null,"llama_3_3_min":null,"qwen_3_30b_max":14900000000.0,"qwen_3_30b_min":14900000000.0}
{"symbol":"PFE","year":2024,"quarter":2,"date":"2024-Q2","chunk_id":3,"sub_chunk_id":0,"centroid_label":"total company revenues","agreed_value":13300000000.0,"count":2,"chunk":"Dave Denton: Thank you, Albert, and good morning, everyone. As we close out the first half of the year, I\u2019m very pleased by our second quarter results. We continue our relentless focus on execution, demonstrating our ability to both protect and grow our core brands while also continuing to advance our science-led transformation by investing in key TAs to build durable franchises. Our initiatives to right size OpEx and reduce cost of goods will result in a more efficient organization, setting the stage for strong capital returns and long-term improved shareholder value enabling our commitment to both maintain and to grow our dividend. This morning, I will briefly review our second quarter results including some one-time items, touch on our capital allocation priorities, and wrap up with an update on our 2024 financial guidance, our key priorities, and expectations for the remainder of this year. Turning first to Q2 performance versus the same period last year; let\u2019s walk down the P&L. Total company revenues for the quarter were $13.3 billion, reflecting operational growth of 3%. Our revenue and cash flow continue to be impacted by the post-pandemic COVID environment on a global basis but to a much lesser extent than prior quarters. Looking at the business excluding our COVID products, we demonstrated strong commercial execution across the enterprise, resulting in 14% operational revenue growth in the quarter. Performance was positively impacted by our continued focus on key products and geographies; refined allocation of commercial field resources globally; and further optimization of our marketing resources into key priority areas. Contributing to this performance was our acquired products from Seagen as well as Nurtec, alongside in-line products Vyndaqel, Eliquis and Xtandi. As expected, dampening our growth in the quarter were Xeljanz and Ibrance. Adjusted Gross Margin for the second quarter was 79%, compared to 76% last year, and was primarily the result of favorable sales mix from our non-COVID products, as well as continued strong cost management across our manufacturing network. Improvements in our gross margin rate will continue to be a focus for the company over the next few years as we execute on our recently announced Manufacturing Optimization Program. This new program and together with our cost realignment program is focused on returning the company to pre-pandemic operating margins on a mix adjusted basis excluding Comirnaty. Phase 1 of the Manufacturing Optimization Program, which focuses on operational efficiencies, is well underway now. This first phase is expected to deliver approximately $1.5 billion in savings by the end of 2027, some of which is anticipated to be realized beginning in 2025. Total Adjusted operating expenses increased by 5% operationally to $6.3 billion and include spending from our legacy Seagen business. Looking at the components, adjusted SI&A expenses increased 8% driven primarily by marketing and promotional expenses for recently launched as well as acquired products. Adjusted R&D expenses increased 2% operationally driven primarily by increased spending related to the acquisition of Seagen, partially offset by lower spending primarily the result of our cost realignment program. Q2 reported diluted earnings per share was $0.01 and our adjusted diluted EPS was $0.60. Unique one-time items included in our GAAP results and excluded from our adjusted results, this quarter include a $1.3 billion charge related to our Manufacturing Optimization Program primarily for severance, and a $230 million charge for IPR&D asset impairment and other related costs associated with the discontinuation of our DMD program. Additionally, we expect to record a charge of approximately $400 million in the third quarter of 2024 after a decision was made in July to sell one of our facilities as a result of the discontinuation of the DMD effort. Now let me quickly touch upon our capital allocation strategy, which is designed to enhance long-term shareholder value. Our strategy consists of maintaining and growing our dividend over time, reinvesting in our business at an appropriate level of financial return; and finally making value enhancing share repurchases after de-levering our balance sheet. In the first half of 2024, we returned $4.8 billion to shareholders via our quarterly dividend; invested $5.2 billion in internal R&D; and as expected, the completed business development activity was minimal. Our commitment to de-levering our capital structure to a gross leverage target of 3.25 times remains a key priority. In support of that goal, year-to-date, we have paid down approximately $2.25 billion in maturing debt, including $1 billion in May of outstanding notes. And though we did not monetize any Haleon shares in Q2, we expect to resume monetization of our 23% Haleon stake in the future. I would also note that once our Haleon ownership is less than 20%, our accounting will transition from recording equity income and will no longer be included in our adjusted results. This change is factored into our long-term financial planning and as well as our guidance. As we\u2019ve previously stated previously, we expect operating cash flow to be significantly below typical levels this year and particularly during the first half of 2024, due to the timing of certain payments and one-time expenses. We expect heavily weighting of revenues to the fourth quarter as our business has become more seasonal in nature with the potential that a high level of cash collections may carry over into Q1 of 2025. Despite this near-term pressure, clearly, our objective remains to return to a more balanced capital allocation strategy over time. Now, let me spend just a few minutes on our outlook for the remainder of the year. We entered 2024 focused on delivering on our financial commitments as well as commercial performance. With a successful first half now complete, we believe it is appropriate to update our full year earnings outlook to reflect our strong business performance. I\u2019ll remind you that our revised guidance assumes the seasonal cadence of our product portfolio, and that we expect Paxlovid results to trend with infection rates. With that said, we are raising our full year revenue range by $1 billion and our adjusted diluted earnings per share by $0.30. We now expect revenues in the range of $59.5 billion to $62.5 billion and operational revenue growth excluding COVID products is projected to be 9% to 11%. COVID product revenues are now expected to be $8.5 billion for the year; $5 billion for Comirnaty and $3.5 billion for Paxlovid. Our guidance for adjusted SI&A and adjusted R&D remains unchanged while our effective tax rate on adjusted income is now expected to be approximately 13%; and, lastly, we expect adjusted diluted earnings per share of $2.45 to $2.65 primarily reflecting the increase to the top line and the revised tax rate among other items. As a reminder, our EPS guidance includes an anticipated $0.40 of earnings dilution from the Seagen acquisition, largely due to financing cost. In closing, we remain on track to deliver at least $4 billion of net savings from our cost-realignment program by the end of this year. This improvement in our cost base alongside our new initiatives focused on manufacturing is expected to put us on strong footing towards margin expansion and improved financial returns. Additionally, our continued focus on execution and our recent investments have positioned the company for continued success moving forward. This quarter\u2019s results are a testament to the performance of our commercial business and our prudent approach to improving our cost base. Though we\u2019ve had a strong first half, we do not take lightly the continued focus needed to deliver in the second half considering the seasonality of our respiratory products. We are clearly striving to bring about improved performance on both the top and bottom lines through focus, execution and delivering on our near-term commercial and financial goals. 2024 is clearly a foundation year for Pfizer. Our achievements to date sets the stage for generating compelling shareholder value. Through our science-led transformation, we will methodically build off this base and with breakthroughs and innovation driving growth in the back half of the decade. And with that, I\u2019d now like to turn it back over to Albert to start our Q&A.","evidence_gemma_new":null,"evidence_llama_3_3":"Pfizer Total company revenues Q2","evidence_qwen_3_30b":"Total company revenues second quarter","gemma_new_max":null,"gemma_new_min":null,"llama_3_3_max":13300000000.0,"llama_3_3_min":13300000000.0,"qwen_3_30b_max":13300000000.0,"qwen_3_30b_min":13300000000.0}
{"symbol":"PFE","year":2024,"quarter":3,"date":"2024-Q3","chunk_id":3,"sub_chunk_id":0,"centroid_label":"total company revenues","agreed_value":17700000000.0,"count":3,"chunk":"Dave Denton: Thank you, Albert, and good morning, everyone. I will build on Albert's comments by reinforcing that we are very pleased with the financial results for the third quarter of 2024. These results demonstrate that our focus and our execution against our 5 strategic priorities are driving positive patient outcomes and continued financial and operational strength. In addition to our strong top line performance, our cost reduction programs are creating a more efficient organization, setting the stage for increased capital returns and supporting our commitment to both maintaining and growing our dividend, all while enhancing shareholder value. This morning, I will briefly review our Q3 P&L performance, I'll highlight our capital allocation priorities and touch upon our full year 2024 financial guidance. Additionally, as we approach the end of the year, I will also share several modeling considerations as we began to plan for 2025. Turning first to the third quarter performance versus the same period of last year. Let me walk on the P&L. Total company revenues were $17.7 billion, representing an impressive 32% operational growth. Our COVID-19 products were significant contributors with PAXLOVID generating $2.7 billion in revenue. This included $442 million related to delivering 1 million treatment courses to the U.S. Government Strategic National Stockpile. COMIRNATY, our COVID-19 vaccine contributed $1.4 billion in revenue. Our COVID-19 products were not the only drivers during the quarter. Our non-COVID products also exhibited robust performance with revenues of $13.6 billion, reflecting 14% operational year-over-year growth. This performance shows that our refined commercial approach is working. We continue to focus on key products and geographies, we've refined how we allocate our commercial field resources globally and we're further optimizing our marketing resources into key priority areas. We saw strong contribution from our recently acquired Seagen products, including Passive, which continues its momentum following the results of the EV302 study last year. Other key growth drivers included VYNDAQEL, ELIQUIS, XTANDI and NURTEC, partially offset by declines in Xeljanz and Ibrance. Adjusted gross margin for the third quarter is approximately 70%, primarily the result of a net unfavorable mix related to our COVID-19 products, primarily due to the COMIRNATY profit split with BioNTech and applicable royalty expenses, as well as a slight dampening due to the associated costs incurred with the withdrawal of Oxbryta. All of this was partially offset by our ongoing focus on cost management across our manufacturing network. We continue to expect gross margins to be in the mid-70s for the full year. And as previously communicated, long-term improvements in gross margins will remain a key focus for the company over the next several years. We expect to achieve savings from Phase I of our manufacturing optimization program beginning in 2025 and deliver approximately $1.5 billion in savings for the first phase by the end of 2027. In parallel, we continue to evaluate our strategy for both Phase II and Phase III, which will focus on network structure and product portfolio, respectively. And we expect to have more information to share on those components of the program once they become available. Total adjusted operating expenses decreased 2% operationally to $5.8 billion. And I will note that this amount includes spending acquired via our Seagen transaction. And looking at the components, adjusted SI&A expenses increased 1% operationally, driven primarily by marketing and promotional expenses for recently launched and acquired products partly offset by a reduction in the U.S. health care reform fees. Adjusted R&D expenses decreased 4% operationally, driven primarily by lower spending on certain vaccine programs as well as our cost realignment program, partially offset by an increased spending related to the Seagen acquisition. We continue to be disciplined with our operational expense management and remain on track to deliver at least $4 billion in net cost savings from our cost realignment program by year-end. Q3 reported diluted earnings per share was $0.78 in the quarter and our adjusted earnings per share was $1.06, benefiting from our top line performance and efficient operating structure as well as a favorable tax rate driven primarily by jurisdictional mix. As mentioned last quarter, unique onetime items included in our GAAP results and excluded from our adjusted results this quarter include a $420 million charge related to the expected sale of one of our facilities, resulting from the discontinuation of our DMD program earlier this year. Now let me quickly touch upon our capital allocation strategy, which is designed to enhance long-term shareholder value. Our strategy consists of both maintaining and growing our dividend over time, reinvesting in our business at an appropriate level of financial return and making value-enhancing share repurchases after delevering our balance sheet. In the first 9 months of '24, we returned $7.1 billion to shareholders via our quarterly dividend, invested $7.8 billion in internal R&D and as we expected, completed business development activity was minimal. Our commitment to delevering our capital structure to a gross leverage target of 3.25x remains a key priority. In support of that goal, year-to-date, we have delevered by approximately $4.4 billion, paying down approximately $2.3 billion in maturing debt and approximately $2.1 billion in commercial paper. And in October, we monetized another tranche of our Helion shares, which for reporting purposes is a Q4 event. We received approximately $3.5 billion in net cap proceeds, and our ownership in Helion was reduced from approximately 23% to approximately 15%. Year-to-date, we have received approximately $6.9 billion of net cash proceeds from the sale of our shares. We intend to monetize our remaining Helion investment in a prudent fashion considering our cash flow requirements and future market conditions. Overall, in Q3, we generated robust operating cash flows, which combined with the Helion net sale proceeds of approximately $3.5 billion, resulting in significant cash flow generation as we enter the fourth quarter. Our objective remains to delever and return to a more balanced allocation of capital between reinvestment and direct return to shareholders over time. Now let me spend just a few minutes on our outlook for the full year. Based on our focused execution and strong year-to-date results, we are raising our full year '24 revenue guidance by $1.5 billion and our adjusted diluted earnings per share by $0.30. We now expect revenues in the range of $61 billion to $64 billion and operational revenue growth, excluding COVID-19 products is unchanged at 9% to 11% and takes into consideration reduction of sales associated with Oxbryta. COVID-19 product revenues are now expected to be $10.5 billion, $5 billion for COMIRNATY and $5.5 billion for PAXLOVID. Our guidance for adjusted SI&A, adjusted R&D and our effective tax rate on adjusted income remains unchanged. And last, we expect adjusted diluted earnings per share of $2.75 to $2.95, primarily reflecting the top line increase and absorbing the Oxbryta impact. As a reminder, our EPS guidance includes an anticipated $0.40 of earnings dilution from the Seagen acquisition, largely due to financing costs. Now as we begin to look towards next year, I want to touch on a few modeling considerations. As we've previously discussed, there are several nonrecurring items included in our 2024 results. First, during 2024, PAXLOVID revenue included a U.S. government revenue credit true-up and the fulfillment of our obligation to the U.S. National Strategic Stockpile. Second, given our ownership of Helion is now below 20%, we will no longer record equity income from that investment in our adjusted earnings beginning in 2025. And finally, our 2024 tax rate on adjusted income was favorably impacted by timing with respect to the impact of Pillar 2 and to a lesser extent, audit settlements. All in, these items are expected to have a favorable impact on full year 2024 adjusted diluted earnings per share of approximately $0.30. In closing, I'm extremely pleased with our third quarter 2024 results and our overall performance this year. Our team remains dedicated to strong operational execution, and we believe our cost-saving programs will drive enhanced operating leverage over time that will enable us to consistently deliver on our financial commitments to our shareholders. We are committed to driving long-term value creation through scientific leadership, portfolio strength and productivity across all aspects of our business. And with that, I'll now turn it back over to Albert.","evidence_gemma_new":"Total company revenues","evidence_llama_3_3":"total company revenues third quarter of 2024","evidence_qwen_3_30b":"Total company revenues third quarter of 2024","gemma_new_max":17700000000.0,"gemma_new_min":17700000000.0,"llama_3_3_max":17700000000.0,"llama_3_3_min":17700000000.0,"qwen_3_30b_max":17700000000.0,"qwen_3_30b_min":17700000000.0}
{"symbol":"PFE","year":2024,"quarter":4,"date":"2024-Q4","chunk_id":3,"sub_chunk_id":0,"centroid_label":"total company revenues","agreed_value":17800000000.0,"count":2,"chunk":"Dave Denton: Thank you, Albert, and good morning, everyone. I'll build on Albert's comments by reinforcing that we are very pleased with the financial results for both the fourth quarter as well as the full-year of 2024. These results demonstrate that our focus and execution against our strategic priorities are driving both positive patient outcomes as well as financial and operational strength. In addition to our strong top line performance, our cost reduction programs are creating a more efficient organization, driving operating margin improvement. And as we move into 2025, these efforts will continue to lay the groundwork for potential increased capital returns and reinforce our commitment to maintaining and growing our dividend while enhancing long-term shareholder value. With that said, let me start with our full-year and fourth quarter results, then I'll touch on our capital allocation priorities. I'll finish up with a few comments on our 2025 guidance, which we are reaffirming today, and our near-term expectations that will continue to drive our growth potential in the latter half of the decade. For the full-year of 2024, we recorded revenues of $63.6 billion versus $59.6 billion last year. Importantly, our operational revenue growth when excluding contributions from our COVID products was 12%, exceeding our expectations of 9% to 11%. Full year 2024 adjusted gross margins expanded to 74% as we continued to drive cost improvements across our manufacturing network. On the bottom line, we reported full year 2024 diluted EPS of $1.41 versus $0.37 last year, and adjusted diluted earnings per share of $3.11 versus $1.84 last year, significantly ahead of expectations due to our overall strong P&L performance. Now turning to the fourth quarter performance versus the same period of LOI, let me walk down the P&L. Total company revenues were $17.8 billion versus $14.6 billion in the fourth quarter of last year. Once again, our non-COVID-19 products exhibited robust performance with revenues of $13.7 billion reflecting 11% operational year-over-year growth. This performance continues to show that our refined commercial approach is working. We continue to focus on key products and geographies. We've refined how we allocate our commercial field resources globally. And we're further optimizing our marketing resources into key priority areas. We saw strong contributions across our product portfolio, primarily driven by the Vyndaqel family, Padcev, Eliquis and Nurtec, partially offset by declines in ABRYSVO and XELJANZ. Adjusted gross margin in the fourth quarter was approximately 68%, primarily the result of a net unfavorable mix related to our COVID-19 products, primarily due to the Comirnaty profit split with BioNTech and applicable royalty expenses. This was partially offset by our ongoing focus on cost management across our manufacturing network, as I previously mentioned. And as we previously communicated, long-term improvements in gross margin will remain a key focus for the company over the next few years. We expect to begin to achieve initial savings from Phase 1 of our manufacturing optimization program in the latter part of 2025 and continue to expect approximately $1.5 billion in savings from this first phase by the end of 2027. We continue to evaluate other strategies to improve our network structure and as well as our product portfolio. And we plan to share more information on those components of the program once it becomes available. Total adjusted operating expenses are essentially flat operationally at $7.3 billion in the fourth quarter of 2024. And I will note that this amount includes spending acquired via our Seagen transaction. Looking at the components specifically, adjusted SI&A expenses decreased 4% operationally, driven primarily by a decrease in marketing and promotional spend for various products, including both commodity Comirnaty and Paxlovid, partially offset by an increase in spending for certain oncology and recently launched and acquired products. Adjusted R&D expenses increased 8% operationally, driven primarily by net increase in spending, mainly to develop certain product candidates acquired from Seagen, partially offset by lower spending on certain ongoing vaccine programs and certainly as a result of our cost realignment program. We continue to be disciplined with our operational expense management and delivered on our goal of at least $4 billion in net cost savings from our cost realignment program. Q4 reported diluted earnings per share was $0.07, and our adjusted diluted earnings per share was $0.63, benefiting from our top line performance as well as our efficient operating structure, partially offset by a higher effective tax rate driven primarily by jurisdictional mix. In support of our goal to enhance R&D productivity and to focus on high-impact medicines, our fourth quarter GAAP results reflect strategic decisions in our development plans and updated long-range revenue forecasts for several medicines. And as a result, we recorded approximately $2.9 billion in noncash intangible asset impairments related to several medicines in development as well as several in-line products. These decisions reinforce our focus on future growth as well as innovation. Now let me quickly touch upon our capital allocation strategy, which is designed to enhance long-term shareholder value. Our strategy consists of maintaining and growing our dividend over time, reinvesting in our business at an appropriate level of financial return, and finally making value-enhancing share repurchases after delevering our balance sheet. In 2024, we returned $9.5 billion to shareholders via our quarterly dividend, invested $10.8 billion in internal R&D, and as expected, completed business development activity was minimal. Our commitment to delevering our capital structure to a gross leverage target of 3.25x by the end of 2025 remains a key priority. In support of that goal, in 2024, we delevered by approximately $7.8 billion, paying down approximately $2.3 billion in maturing debt and approximately $5.5 billion in commercial paper. And in January of '25, we monetized another tranche of our Haleon shares, which for reporting purposes is a Q1 '25 event. We received approximately $3 billion in net cash proceeds, and now our ownership in Haleon was reduced from approximately 15% to approximately 7%. We intend to monetize our remaining Haleon investment in a prudent fashion during 2025. Overall, in Q4, we generated robust operating cash flows which combined with the most recent Haleon net sales proceeds of approximately $3 billion, resulted in significant free cash flow generation as we enter 2025. Our objective remains to delever and return to a more balanced allocation of capital between reinvestments and direct return to shareholders over time. Given we issued our full year 2025 financial guidance on December 17, let me just hit a few highlights. We expect total company full year '25 revenues to be in the range of $61 billion to $64 billion and full year '25 adjusted diluted earnings per share to be in the range of $2.80 to $3 a share, which reflects our expectation of strong contributions across our product portfolio as well as our focus on disciplined cost management. Importantly, we believe the steps taken to right size our cost base will put us on a strong footing towards increased operational efficiency and support our goal to return to pre-pandemic operating margins. In further support of this initiative, we now expect to deliver overall net savings of $4.5 billion from our ongoing cost realignment programs by the end of 2025, while continuing to advance programs that will improve cost of goods sold in the years to come. As a reminder, the impact of the IRA Medicare Part D redesign is expected to be a net headwind to the company's revenue of approximately $1 billion across our product portfolio, dampening growth by approximately 1.6% versus 2024. The impact of catastrophic coverage is expected to exceed the potential volume benefit from the reduction of the patient out-of-pocket cap, leading to a negative impact beginning in early in the year, while the positive impact of lower patient out-of-pocket costs is expected to build throughout this year. As the IRA is felt more acutely in higher-priced medicines, we expect Vyndaqel, Ibrance, Xtandi and Xeljanz to reach catastrophic coverage much earlier in the year. And due to these changes, we expect a higher gross to net impact on our revenues for all drugs in the beginning of 2025 that is expected to moderate throughout the remainder of the year when compared to 2024. And lastly, I will mention that we continue to monitor currency fluctuation as the year progresses. So in closing, let me just emphasize several key aspects of our business. We believe our financial targets for 2025 are both reasonable and achievable, reinforcing our commitment to operational excellence. We also believe our revenue volatility is largely in the past as COVID-related uncertainties have diminished. Additionally, our cost improvement programs have set the stage for ongoing margin expansion. We will continue our focus and execution to maximize the commercial value of our product portfolio. And our new R&D leadership is committed to driving value-creating innovation and strengthening our pipeline. And lastly, we have a clear path to reloading our balance sheet, enabling enhanced capital deployment in pursuit of additional opportunities to strengthen our business and create value for our shareholders. We are dedicated to maintaining and growing our dividend and meeting our delevering targets by the end of 2025, providing for a more balanced capital allocation. And with that, I'll turn it back to Albert to start the Q&A session.","evidence_gemma_new":null,"evidence_llama_3_3":"total company revenues fourth quarter","evidence_qwen_3_30b":"total company revenues fourth quarter","gemma_new_max":null,"gemma_new_min":null,"llama_3_3_max":17800000000.0,"llama_3_3_min":17800000000.0,"qwen_3_30b_max":17800000000.0,"qwen_3_30b_min":17800000000.0}
{"symbol":"PG","year":2023,"quarter":1,"date":"2023-Q1","chunk_id":1,"sub_chunk_id":0,"centroid_label":"adjusted free cash for productivity","agreed_value":86.0,"count":2,"chunk":"Andre Schulten: Good morning, everyone. Joining me on the call today are Jon Moeller, Chairman of the Board, President and Chief Executive Officer; and John Chevalier, Senior Vice President, Investor Relations. We're going to keep our prepared remarks brief and then turn straight to your questions. Execution of our integrated strategies continued to yield good results in the July to September quarter and provides a solid start to the fiscal year. We're growing organic sales in all 10 categories, holding global aggregate market share, accelerating productivity savings, and improving supply sufficiency. Together, this progress enables us to maintain guidance ranges for organic sales growth, core EPS growth, free cash flow productivity and cash return to shareowners. Despite continued high commodity and transportation costs, inflation in the upstream supply chain and in our own operations, accelerating headwinds from foreign exchange, geopolitical issues, COVID disruptions impacting consumer confidence and historically high inflation impacting consumer budgets. Moving to the first quarter numbers. Organic sales grew 7%, pricing added 9 points to sales growth and mix was up 1 point. Volume declined 3 points, primarily due to lower shipments in Russia. Growth was broad-based across business units with each of our 10 product categories growing organic sales. Personal Health Care grew high teens. Feminine Care was up double digits. Fabric Care and Home Care were up high single digits. Baby Care, Grooming, Hair Care and Skin and Personal Care were each up mid-singles. Family Care and Oral Care grew low single digits. Focus markets grew 4% for the quarter, with the US up 5%. Greater China organic sales were down 4% versus the prior year, modest sequential improvement in the market still affected by COVID lockdowns and weak consumer confidence. Longer term, we expect China to return to strong underlying growth rates. Enterprise markets were up 16% with each of the three regions, up 13% or more. Global aggregate market share was in line with prior year, with 26 of our top 50 category country combinations holding or growing share. In the US, all outlet value share was in line with prior year with 6 of 10 categories holding or growing shares. On the bottom line, core earnings per share were $1.57, down 2% versus prior year. On a currency-neutral basis, core EPS increased 7%. Core margin decreased 160 basis points and currency-neutral core margin was down 130 basis points. Higher commodity materials and freight cost impacts combined with a 550 basis point hit to gross margins. Mix was 120-point headwinds, productivity savings and pricing provided 580 basis points of offset. SG&A costs as a percentage of sales were lower by 90 basis points as sales leverage and productivity improvements more than offset inflation and foreign exchange impacts. Core operating margin decreased 70 basis points, currency-neutral core operating margin increased 10 basis points, productivity improvements were a 230 basis help to the quarter. Adjusted free cash flow productivity was 86%, we returned nearly $6.3 billion of cash to shareowners, approximately $2.3 billion in dividends and $4 billion share repurchase. In summary, considering the backdrop of a very challenging cost and operating environment, results across top line, bottom line and cash to start the fiscal year. Our team continues to operate with excellence, executing the integrating strategies that have enabled strong results over the past four years, which are the foundation for balanced growth and value creation. A portfolio of daily use products, many providing cleaning, health and hygiene benefits in categories where performance plays a significant role in brand choice. The priority across the five vectors of product, package, brand communication, retail execution and value. Productivity improvement in all areas of our operations to fund investments is a priority offset cost and currency challenges, expand margins and deliver strong cash generation. An approach of constructive disruption, a willingness to change, adapt and create new trends and technologies that will shape our industry for the future especially important in this volatile environment. Finally, an organization that is increasingly more empowered, agile and accountable with little overlap or redundancy flowing to new demands, seamlessly supporting each other to deliver against our priorities around the world. Going forward, there are four areas we are driving to improve the execution of integrated strategies: Supply Chain 3.0, digital acumen, environmental sustainability and employee value equation. These are not new or separate strategies. They are necessary elements in continuing to build the priority, reduce cost to enable investment and value creation and to further strengthen our organization. Jon touched on each of these in our July earnings call and they will be a central part of our discussion at Investor Day in November. Our strategic choices on portfolios, priority, productivity, constructive disruption and organization are not independent strategies. They reinforce and build on each other, when executed well, they grow markets, which in-turn grow share, sales and profit. We continue to believe that the best path forward to deliver sustainable top and bottom-line growth is to double down on these integrated strategies, starting with a commitment to deliver irresistibly superior propositions to consumers and retail partners. Now moving on to guidance, we fully expect more volatility in costs, currencies and consumer dynamics as we move through the fiscal year. However, we think the strategies we've chosen, the investments we've made and the focus on executional excellence has positioned us well to manage through this volatility over time. Raw and packaging material costs inclusive of commodities and supplier inflation have remained high since we gave our initial outlook for the year in late July. Based on current spot prices at latest contracts, we now estimate a $2.4 billion after-tax headwind in fiscal 2023. Freight costs have also remained high. Though we have seen some easing in spot prices, we've made a modest downward adjustment in our outlook and now expect a $200 million after-tax headwind on freight and transportation costs in fiscal 2023. Foreign exchange has continued its strong move against us as the US dollar has strengthened significantly against essentially all major currencies around the world. Based on current exchange rates, we forecast a $1.3 billion after-tax impact, an incremental hit of $400 million versus our initial outlook for the year. Combined, headwinds from these items are now estimated at approximately $3.9 billion after tax or $1.57 a share, a 27 percentage point headwind to EPS growth for the year. We will offset a portion of these cost headwinds with price increases and productivity savings. We will continue to invest in irresistible superiority, which is even more important as we compete in some markets with local or non-US based competitors that don't see the same foreign exchange rate impact. As we've said before, we believe this is a rough patch to grow through not a reason to reduce investment in the business. As I noted at the outset, our good first quarter results enable us to confirm our guidance ranges for the fiscal year, across all key metrics. We continue to expect organic sales growth in the range of 3% to 5%. On the bottom line, we are maintaining our outlook of core earnings per share growth in a range of in line plus 4% versus prior year. However, the steep increase in foreign exchange impact pushes our current expectations towards the lower end of the range. We continue to forecast adjusted free cash flow productivity of 90%. We expect to pay around $9 billion in dividends and to repurchase $6 billion to $8 billion in common stock, combined a plan to return $15 billion to $17 billion of cash to shareowners this fiscal year. The outlook is based on current market growth rate estimates, commodity prices and foreign exchange rates. Significant additional currency weakness, commodity cost increases, geopolitical disruption, major production stoppages or store closures are not anticipated within this guidance range. To conclude, the macroeconomic and market level consumer challenges we're facing are not unique to P&G, and we won't immune to the impact. We've attempted to be realistic about these impacts in our guidance and transparent in our commentary. As we've said before, we believe this is a rough patch to grow through not a reason to reduce investment in the long-term health of the business. We're doubling down on the strategy that has been working well and delivering strong results. We'll continue to step forward towards the opportunities that we may fully invest in our business. We remain committed to driving productivity improvements to fund growth investments, mitigate input cost challenges and to maintain balanced top and bottom line growth. With that, we'll be happy to take your questions.","evidence_gemma_new":"Adjusted free cash flow productivity","evidence_llama_3_3":null,"evidence_qwen_3_30b":"adjusted free cash flow productivity July to September quarter","gemma_new_max":86.0,"gemma_new_min":86.0,"llama_3_3_max":null,"llama_3_3_min":null,"qwen_3_30b_max":86.0,"qwen_3_30b_min":86.0}
{"symbol":"PG","year":2023,"quarter":1,"date":"2023-Q1","chunk_id":1,"sub_chunk_id":0,"centroid_label":"adjusted free cash for productivity","agreed_value":90.0,"count":2,"chunk":"Andre Schulten: Good morning, everyone. Joining me on the call today are Jon Moeller, Chairman of the Board, President and Chief Executive Officer; and John Chevalier, Senior Vice President, Investor Relations. We're going to keep our prepared remarks brief and then turn straight to your questions. Execution of our integrated strategies continued to yield good results in the July to September quarter and provides a solid start to the fiscal year. We're growing organic sales in all 10 categories, holding global aggregate market share, accelerating productivity savings, and improving supply sufficiency. Together, this progress enables us to maintain guidance ranges for organic sales growth, core EPS growth, free cash flow productivity and cash return to shareowners. Despite continued high commodity and transportation costs, inflation in the upstream supply chain and in our own operations, accelerating headwinds from foreign exchange, geopolitical issues, COVID disruptions impacting consumer confidence and historically high inflation impacting consumer budgets. Moving to the first quarter numbers. Organic sales grew 7%, pricing added 9 points to sales growth and mix was up 1 point. Volume declined 3 points, primarily due to lower shipments in Russia. Growth was broad-based across business units with each of our 10 product categories growing organic sales. Personal Health Care grew high teens. Feminine Care was up double digits. Fabric Care and Home Care were up high single digits. Baby Care, Grooming, Hair Care and Skin and Personal Care were each up mid-singles. Family Care and Oral Care grew low single digits. Focus markets grew 4% for the quarter, with the US up 5%. Greater China organic sales were down 4% versus the prior year, modest sequential improvement in the market still affected by COVID lockdowns and weak consumer confidence. Longer term, we expect China to return to strong underlying growth rates. Enterprise markets were up 16% with each of the three regions, up 13% or more. Global aggregate market share was in line with prior year, with 26 of our top 50 category country combinations holding or growing share. In the US, all outlet value share was in line with prior year with 6 of 10 categories holding or growing shares. On the bottom line, core earnings per share were $1.57, down 2% versus prior year. On a currency-neutral basis, core EPS increased 7%. Core margin decreased 160 basis points and currency-neutral core margin was down 130 basis points. Higher commodity materials and freight cost impacts combined with a 550 basis point hit to gross margins. Mix was 120-point headwinds, productivity savings and pricing provided 580 basis points of offset. SG&A costs as a percentage of sales were lower by 90 basis points as sales leverage and productivity improvements more than offset inflation and foreign exchange impacts. Core operating margin decreased 70 basis points, currency-neutral core operating margin increased 10 basis points, productivity improvements were a 230 basis help to the quarter. Adjusted free cash flow productivity was 86%, we returned nearly $6.3 billion of cash to shareowners, approximately $2.3 billion in dividends and $4 billion share repurchase. In summary, considering the backdrop of a very challenging cost and operating environment, results across top line, bottom line and cash to start the fiscal year. Our team continues to operate with excellence, executing the integrating strategies that have enabled strong results over the past four years, which are the foundation for balanced growth and value creation. A portfolio of daily use products, many providing cleaning, health and hygiene benefits in categories where performance plays a significant role in brand choice. The priority across the five vectors of product, package, brand communication, retail execution and value. Productivity improvement in all areas of our operations to fund investments is a priority offset cost and currency challenges, expand margins and deliver strong cash generation. An approach of constructive disruption, a willingness to change, adapt and create new trends and technologies that will shape our industry for the future especially important in this volatile environment. Finally, an organization that is increasingly more empowered, agile and accountable with little overlap or redundancy flowing to new demands, seamlessly supporting each other to deliver against our priorities around the world. Going forward, there are four areas we are driving to improve the execution of integrated strategies: Supply Chain 3.0, digital acumen, environmental sustainability and employee value equation. These are not new or separate strategies. They are necessary elements in continuing to build the priority, reduce cost to enable investment and value creation and to further strengthen our organization. Jon touched on each of these in our July earnings call and they will be a central part of our discussion at Investor Day in November. Our strategic choices on portfolios, priority, productivity, constructive disruption and organization are not independent strategies. They reinforce and build on each other, when executed well, they grow markets, which in-turn grow share, sales and profit. We continue to believe that the best path forward to deliver sustainable top and bottom-line growth is to double down on these integrated strategies, starting with a commitment to deliver irresistibly superior propositions to consumers and retail partners. Now moving on to guidance, we fully expect more volatility in costs, currencies and consumer dynamics as we move through the fiscal year. However, we think the strategies we've chosen, the investments we've made and the focus on executional excellence has positioned us well to manage through this volatility over time. Raw and packaging material costs inclusive of commodities and supplier inflation have remained high since we gave our initial outlook for the year in late July. Based on current spot prices at latest contracts, we now estimate a $2.4 billion after-tax headwind in fiscal 2023. Freight costs have also remained high. Though we have seen some easing in spot prices, we've made a modest downward adjustment in our outlook and now expect a $200 million after-tax headwind on freight and transportation costs in fiscal 2023. Foreign exchange has continued its strong move against us as the US dollar has strengthened significantly against essentially all major currencies around the world. Based on current exchange rates, we forecast a $1.3 billion after-tax impact, an incremental hit of $400 million versus our initial outlook for the year. Combined, headwinds from these items are now estimated at approximately $3.9 billion after tax or $1.57 a share, a 27 percentage point headwind to EPS growth for the year. We will offset a portion of these cost headwinds with price increases and productivity savings. We will continue to invest in irresistible superiority, which is even more important as we compete in some markets with local or non-US based competitors that don't see the same foreign exchange rate impact. As we've said before, we believe this is a rough patch to grow through not a reason to reduce investment in the business. As I noted at the outset, our good first quarter results enable us to confirm our guidance ranges for the fiscal year, across all key metrics. We continue to expect organic sales growth in the range of 3% to 5%. On the bottom line, we are maintaining our outlook of core earnings per share growth in a range of in line plus 4% versus prior year. However, the steep increase in foreign exchange impact pushes our current expectations towards the lower end of the range. We continue to forecast adjusted free cash flow productivity of 90%. We expect to pay around $9 billion in dividends and to repurchase $6 billion to $8 billion in common stock, combined a plan to return $15 billion to $17 billion of cash to shareowners this fiscal year. The outlook is based on current market growth rate estimates, commodity prices and foreign exchange rates. Significant additional currency weakness, commodity cost increases, geopolitical disruption, major production stoppages or store closures are not anticipated within this guidance range. To conclude, the macroeconomic and market level consumer challenges we're facing are not unique to P&G, and we won't immune to the impact. We've attempted to be realistic about these impacts in our guidance and transparent in our commentary. As we've said before, we believe this is a rough patch to grow through not a reason to reduce investment in the long-term health of the business. We're doubling down on the strategy that has been working well and delivering strong results. We'll continue to step forward towards the opportunities that we may fully invest in our business. We remain committed to driving productivity improvements to fund growth investments, mitigate input cost challenges and to maintain balanced top and bottom line growth. With that, we'll be happy to take your questions.","evidence_gemma_new":"adjusted free cash flow productivity","evidence_llama_3_3":null,"evidence_qwen_3_30b":"maintaining our outlook adjusted free cash flow productivity fiscal year","gemma_new_max":90.0,"gemma_new_min":90.0,"llama_3_3_max":null,"llama_3_3_min":null,"qwen_3_30b_max":90.0,"qwen_3_30b_min":90.0}
{"symbol":"PG","year":2023,"quarter":2,"date":"2023-Q2","chunk_id":1,"sub_chunk_id":0,"centroid_label":"adjusted free cash for productivity","agreed_value":72.0,"count":2,"chunk":"Andre Schulten : Good morning. Joining me on the call today are Jon Moeller, Chairman of the Board, President and Chief Executive Officer; and John Chevalier, Senior Vice President, Investor Relations. We're going to keep our prepared remarks brief and then turn straight to your questions. Execution of our integrated strategies continued to yield good results in the October to December quarter, growing organic sales in nine of 10 categories, holding global aggregate market share, continued productivity savings, improving supply efficiency, sustained investment and superiority of our brands across all five vectors: product, package, communication, go-to-market and value, continue to pay benefits for our consumers and retail partners and in turn, for P&G shareholders. Progress against our plan fiscal year-to-date enables us to increase the guidance range for organic sales growth and maintain ranges for core EPS growth, free cash flow productivity and cash return to shareowners. Moving to the second quarter numbers. Organic sales grew 5%, pricing at a 10 points to sales growth and mix was up 1 point. Volume declined 6 points driven by a combination of market contraction, trade inventory reductions and portfolio reduction in Russia. Growth was broad-based across business units with each of our 10 product categories growing or holding organic sales. Personal Health Care grew high teens, Feminine Care, Fabric Care and Home Care were up high single digits. Hair Care was up mid-single digits. Baby Care, Family Care, Oral Care and Skin and Personal Care were each up low single digits. Grooming was in line with prior year. Focus markets grew 3% for the quarter, with the U.S. up 6%. Greater China organic sales were down 7% versus prior year, as the market continued to be impacted by COVID lockdowns and weaker consumer confidence. We continue to expect a slow recovery as consumer mobility increases over the coming quarters. Long term, we expect China to return to strong underlying growth rates. Enterprise markets were up 14% with each of the three regions up 10% or more. Global aggregate market share was in line with prior year with 27 of our top 50 category country combinations holding or growing share. In the U.S., all outlet value share was in line with prior year with seven of 10 categories holding or growing share. U.S. volume share is up 0.5 point versus the prior year quarter, delivering sequential improvement from quarter one. Recent innovations like Downy Rinse and Refresh in fabric enhancers and Dawn Powerwash in hand dishwashing are extending superiority advantages and driving value and volume share growth. Innovation also serves as a catalyst for pricing across our other brands and forms in their category segments. On the bottom line, core earnings per share were $1.59, down 4% versus prior year. On a currency-neutral basis, core EPS increased 5%. Core operating margin decreased 170 basis points, primarily due to gross margin pressure from commodities and foreign exchange. Currency-neutral core operating margin decreased 70 basis points. Productivity improvements were 110 basis points help to the quarter. Adjusted free cash flow productivity was 72%, primarily due to a temporary reduction in payables. We returned $4.2 billion of cash to shareowners, approximately $2.2 billion in dividends and $2 billion in share repurchase. In summary, considering the backdrop of a very challenging cost and operating environment, continued solid results across the top line, bottom line and cash for the first half of the fiscal year. Moving on to strategy. Our team continues to operate with excellence, executing the integrated strategies that have enabled strong results over the past four years, and that are the foundation for balanced growth and value creation. A portfolio of daily use products, many providing cleaning, health and hygiene benefits in categories where performance plays a significant role in brand choice. Ongoing commitment to and investment in irresistible superiority across the five vectors of product, package, brand communication, retail execution and value. As discussed during our Investor Day in November, we are renewing our superiority standards to reflect the dynamic nature of this strategy. Productivity improvement in all areas of our operations to fund investments in superiority offset cost and currency challenges, expand margins and deliver strong cash generation. An approach of constructive disruption, a willingness to change, adapt and create new trends and technologies that will shape our industry for the future, especially important in this volatile environment. Finally, an organization that is increasingly more empowered, agile and accountable with little overlap or redundancy, flowing to new demands, seamlessly reporting each other to deliver against our priorities around the world. Going forward, there are four areas we are driving to improve the execution of the integrated strategies, Supply Chain 3.0, digital acumen, environmental sustainability and employee value creation. These are not new or separate strategies. They are necessary elements in continuing to build superiority, reduce cost to enable investment and value creation and to further strengthen our organization. We expanded on each of these at our Investor Day in November. If you weren't able to attend or listen in remotely, I encourage you to review the materials on our IR events website. Our strategic choices on portfolio, superiority, productivity, constructive disruption and organization are interdependent strategies. They reinforce and build on each other. When executed well, they grow markets, which in turn grow share, sales and profit. We continue to believe that the best path forward to deliver sustainable top and bottom line growth is to double down on these integrated strategies starting with commitment to deliver irresistible superior propositions to consumers and retail partners. Now moving to guidance. We continue to expect more volatility in costs, currencies and consumer dynamics as we move through the second half of the fiscal year. However, we think the strategies we've chosen, the investments we've made and the focus on executional excellence have positioned us well to manage through this volatility over time. Raw and pack material costs inclusive of commodities and supplier inflation are still a significant headwind versus last fiscal year, though we have seen some modest sequential improvement. Based on current spot prices and latest contracts, we now estimate a $2.3 billion after-tax headwind in fiscal '23. Foreign exchange is also a significant year-on-year headwind. But like raw and pack materials, we've seen modest directional improvement. Based on current exchange rates, we now forecast a $1.2 billion after-tax impact for the fiscal year. Freight costs remain higher versus prior year, and we continue to expect the $200 million after-tax headwind in fiscal '23. Combined headwinds from these items are now estimated at approximately $3.7 billion after tax, $1.50 per share, a 26 percentage point headwind to EPS growth for the year. For perspective, recall that we began the year expecting approximately $1.33 of cost and FX headwinds. So despite some modest relief since last quarter, our current outlook is still $0.17 worse than our ingoing position. We are offsetting a portion of these cost headwinds with price increases and productivity savings. We are continuing to invest in irresistible superiority, and we are investing to improve our supply capacity, resilience and flexibility. As we've said before, we believe this is a bottom line rough patch to grow through with continued investment in the business and underlying strategies. As I noted at the outset, our solid first half results enable us to raise our organic sales outlook and confirm our guidance ranges on EPS and cash. We are increasing our guidance for organic sales growth from a range of 3% to 5% to a range of 4% to 5%. Within this company-wide range, we -- there are many puts and takes. As I mentioned, we expect to see some modest improvement in China, but European markets have softened as high inflation affects consumer spending. The U.S. remains relatively strong to date, and most enterprise markets remain resilient. On the bottom line, we're maintaining our outlook of core earnings per share growth in the range of in line to plus 4% versus prior year. The significant headwinds from input costs and foreign exchange keep our current expectations towards the lower end of this range. This guidance also reflects our intent to remain fully invested to drive our superiority strategy and increase investments as opportunities are available. We continue to forecast adjusted free cash flow productivity of 90%. We expect to pay around $9 billion of dividends and to repurchase $6 billion to $8 billion of common stock, combined a plan to return $15 billion to $17 billion of cash to shareowners this fiscal year. This outlook is based on current market growth rate estimates, commodity prices and foreign exchange rates. Significant additional currency weakness, commodity cost increases, geopolitical disruptions, major production stoppages or store closures are not anticipated within these guidance ranges. To conclude, we continue to face high year-over-year commodity and transportation cost inflation in the upstream supply chain and in our own operations, headwinds from foreign exchange, geopolitical issues, COVID disruptions impacting consumer confidence and historically high inflation impacting consumer budgets. These macroeconomic and market level consumer challenges we're facing are not unique to P&G, and we won't be immune to the impact. We attempt to be realistic about these impacts in our guidance and transparent in our commentary. As we've said before, we believe this is a rough patch to grow through, not a reason to reduce investment in the long-term health of the business. We're doubling down on the strategy that has been working well and is delivering strong results. We continue to step forward towards our opportunities, and we remain fully invested in our business. We are committed to driving productivity, improvements to fund growth investments, mitigate input cost challenges and to deliver balanced top and bottom line growth. With that, we're happy to take your questions.","evidence_gemma_new":"Adjusted free cash flow productivity","evidence_llama_3_3":null,"evidence_qwen_3_30b":"adjusted free cash flow productivity 72% October to December quarter","gemma_new_max":72.0,"gemma_new_min":72.0,"llama_3_3_max":null,"llama_3_3_min":null,"qwen_3_30b_max":72.0,"qwen_3_30b_min":72.0}
{"symbol":"PG","year":2023,"quarter":2,"date":"2023-Q2","chunk_id":1,"sub_chunk_id":0,"centroid_label":"adjusted free cash for productivity","agreed_value":90.0,"count":2,"chunk":"Andre Schulten : Good morning. Joining me on the call today are Jon Moeller, Chairman of the Board, President and Chief Executive Officer; and John Chevalier, Senior Vice President, Investor Relations. We're going to keep our prepared remarks brief and then turn straight to your questions. Execution of our integrated strategies continued to yield good results in the October to December quarter, growing organic sales in nine of 10 categories, holding global aggregate market share, continued productivity savings, improving supply efficiency, sustained investment and superiority of our brands across all five vectors: product, package, communication, go-to-market and value, continue to pay benefits for our consumers and retail partners and in turn, for P&G shareholders. Progress against our plan fiscal year-to-date enables us to increase the guidance range for organic sales growth and maintain ranges for core EPS growth, free cash flow productivity and cash return to shareowners. Moving to the second quarter numbers. Organic sales grew 5%, pricing at a 10 points to sales growth and mix was up 1 point. Volume declined 6 points driven by a combination of market contraction, trade inventory reductions and portfolio reduction in Russia. Growth was broad-based across business units with each of our 10 product categories growing or holding organic sales. Personal Health Care grew high teens, Feminine Care, Fabric Care and Home Care were up high single digits. Hair Care was up mid-single digits. Baby Care, Family Care, Oral Care and Skin and Personal Care were each up low single digits. Grooming was in line with prior year. Focus markets grew 3% for the quarter, with the U.S. up 6%. Greater China organic sales were down 7% versus prior year, as the market continued to be impacted by COVID lockdowns and weaker consumer confidence. We continue to expect a slow recovery as consumer mobility increases over the coming quarters. Long term, we expect China to return to strong underlying growth rates. Enterprise markets were up 14% with each of the three regions up 10% or more. Global aggregate market share was in line with prior year with 27 of our top 50 category country combinations holding or growing share. In the U.S., all outlet value share was in line with prior year with seven of 10 categories holding or growing share. U.S. volume share is up 0.5 point versus the prior year quarter, delivering sequential improvement from quarter one. Recent innovations like Downy Rinse and Refresh in fabric enhancers and Dawn Powerwash in hand dishwashing are extending superiority advantages and driving value and volume share growth. Innovation also serves as a catalyst for pricing across our other brands and forms in their category segments. On the bottom line, core earnings per share were $1.59, down 4% versus prior year. On a currency-neutral basis, core EPS increased 5%. Core operating margin decreased 170 basis points, primarily due to gross margin pressure from commodities and foreign exchange. Currency-neutral core operating margin decreased 70 basis points. Productivity improvements were 110 basis points help to the quarter. Adjusted free cash flow productivity was 72%, primarily due to a temporary reduction in payables. We returned $4.2 billion of cash to shareowners, approximately $2.2 billion in dividends and $2 billion in share repurchase. In summary, considering the backdrop of a very challenging cost and operating environment, continued solid results across the top line, bottom line and cash for the first half of the fiscal year. Moving on to strategy. Our team continues to operate with excellence, executing the integrated strategies that have enabled strong results over the past four years, and that are the foundation for balanced growth and value creation. A portfolio of daily use products, many providing cleaning, health and hygiene benefits in categories where performance plays a significant role in brand choice. Ongoing commitment to and investment in irresistible superiority across the five vectors of product, package, brand communication, retail execution and value. As discussed during our Investor Day in November, we are renewing our superiority standards to reflect the dynamic nature of this strategy. Productivity improvement in all areas of our operations to fund investments in superiority offset cost and currency challenges, expand margins and deliver strong cash generation. An approach of constructive disruption, a willingness to change, adapt and create new trends and technologies that will shape our industry for the future, especially important in this volatile environment. Finally, an organization that is increasingly more empowered, agile and accountable with little overlap or redundancy, flowing to new demands, seamlessly reporting each other to deliver against our priorities around the world. Going forward, there are four areas we are driving to improve the execution of the integrated strategies, Supply Chain 3.0, digital acumen, environmental sustainability and employee value creation. These are not new or separate strategies. They are necessary elements in continuing to build superiority, reduce cost to enable investment and value creation and to further strengthen our organization. We expanded on each of these at our Investor Day in November. If you weren't able to attend or listen in remotely, I encourage you to review the materials on our IR events website. Our strategic choices on portfolio, superiority, productivity, constructive disruption and organization are interdependent strategies. They reinforce and build on each other. When executed well, they grow markets, which in turn grow share, sales and profit. We continue to believe that the best path forward to deliver sustainable top and bottom line growth is to double down on these integrated strategies starting with commitment to deliver irresistible superior propositions to consumers and retail partners. Now moving to guidance. We continue to expect more volatility in costs, currencies and consumer dynamics as we move through the second half of the fiscal year. However, we think the strategies we've chosen, the investments we've made and the focus on executional excellence have positioned us well to manage through this volatility over time. Raw and pack material costs inclusive of commodities and supplier inflation are still a significant headwind versus last fiscal year, though we have seen some modest sequential improvement. Based on current spot prices and latest contracts, we now estimate a $2.3 billion after-tax headwind in fiscal '23. Foreign exchange is also a significant year-on-year headwind. But like raw and pack materials, we've seen modest directional improvement. Based on current exchange rates, we now forecast a $1.2 billion after-tax impact for the fiscal year. Freight costs remain higher versus prior year, and we continue to expect the $200 million after-tax headwind in fiscal '23. Combined headwinds from these items are now estimated at approximately $3.7 billion after tax, $1.50 per share, a 26 percentage point headwind to EPS growth for the year. For perspective, recall that we began the year expecting approximately $1.33 of cost and FX headwinds. So despite some modest relief since last quarter, our current outlook is still $0.17 worse than our ingoing position. We are offsetting a portion of these cost headwinds with price increases and productivity savings. We are continuing to invest in irresistible superiority, and we are investing to improve our supply capacity, resilience and flexibility. As we've said before, we believe this is a bottom line rough patch to grow through with continued investment in the business and underlying strategies. As I noted at the outset, our solid first half results enable us to raise our organic sales outlook and confirm our guidance ranges on EPS and cash. We are increasing our guidance for organic sales growth from a range of 3% to 5% to a range of 4% to 5%. Within this company-wide range, we -- there are many puts and takes. As I mentioned, we expect to see some modest improvement in China, but European markets have softened as high inflation affects consumer spending. The U.S. remains relatively strong to date, and most enterprise markets remain resilient. On the bottom line, we're maintaining our outlook of core earnings per share growth in the range of in line to plus 4% versus prior year. The significant headwinds from input costs and foreign exchange keep our current expectations towards the lower end of this range. This guidance also reflects our intent to remain fully invested to drive our superiority strategy and increase investments as opportunities are available. We continue to forecast adjusted free cash flow productivity of 90%. We expect to pay around $9 billion of dividends and to repurchase $6 billion to $8 billion of common stock, combined a plan to return $15 billion to $17 billion of cash to shareowners this fiscal year. This outlook is based on current market growth rate estimates, commodity prices and foreign exchange rates. Significant additional currency weakness, commodity cost increases, geopolitical disruptions, major production stoppages or store closures are not anticipated within these guidance ranges. To conclude, we continue to face high year-over-year commodity and transportation cost inflation in the upstream supply chain and in our own operations, headwinds from foreign exchange, geopolitical issues, COVID disruptions impacting consumer confidence and historically high inflation impacting consumer budgets. These macroeconomic and market level consumer challenges we're facing are not unique to P&G, and we won't be immune to the impact. We attempt to be realistic about these impacts in our guidance and transparent in our commentary. As we've said before, we believe this is a rough patch to grow through, not a reason to reduce investment in the long-term health of the business. We're doubling down on the strategy that has been working well and is delivering strong results. We continue to step forward towards our opportunities, and we remain fully invested in our business. We are committed to driving productivity, improvements to fund growth investments, mitigate input cost challenges and to deliver balanced top and bottom line growth. With that, we're happy to take your questions.","evidence_gemma_new":"adjusted free cash flow productivity","evidence_llama_3_3":null,"evidence_qwen_3_30b":"expected adjusted free cash flow productivity 90% fiscal year","gemma_new_max":90.0,"gemma_new_min":90.0,"llama_3_3_max":null,"llama_3_3_min":null,"qwen_3_30b_max":90.0,"qwen_3_30b_min":90.0}
{"symbol":"PG","year":2023,"quarter":3,"date":"2023-Q3","chunk_id":1,"sub_chunk_id":0,"centroid_label":"adjusted free cash for productivity","agreed_value":92.0,"count":2,"chunk":"Andre Schulten: Good morning, everyone. Joining me on the call today are Jon Mueller, Chairman of the Board, President and Chief Executive Officer; and John Chevalier, Senior Vice President, Investor Relations. Execution of our integrated strategies drove strong results in the January to March quarter. Organic sales grew across all 10 categories in -- and in six out of seven regions. Global aggregate market share is holding steady, productivity savings are accelerating and enabling sustained investment in the superiority of our brands. In-market execution across all five vectors of superiority is strong and consistent: product, package, communication, go-to-market and value. Superior offerings continue to pay benefits for our consumers and retail partners and in turn for P&G shareholders. Progress against our plan enables us to increase guidance for organic sales growth and cash return to shareowners, and to maintain guidance for core EPS growth and free cash flow productivity. Moving to third quarter numbers. Organic sales grew more than 7%. Pricing added 10 points to sales growth and mix was a modest positive contributor for the quarter. Volume declined 3 points, including a 1 point headwind from portfolio reduction in Russia. Growth was broad based across business units with each of our 10 product categories growing organic sales. Feminine Care was up low teens, Personal Health Care, Home Care and Hair Care each grew double digits, Grooming, Oral Care and Fabric Care grew high single digits, Baby Care was up mid singles, and Family Care and Skin and Personal Care grew low singles. Growth was also broad based across geographies with six of seven regions growing organic sales. Focus markets grew 5% for the quarter. Organic sales in the U.S. were up 6%, including modest unit volume growth. Europe focus markets were up 8%. Greater China organic sales were up 2% versus prior year, as the market begins to recover from COVID lockdowns and as consumer confidence improves. We continue to expect further recovery as consumer mobility increases over the coming quarters. Longer-term, we expect China to return to mid singles underlying market growth rates for our portfolio of categories. Enterprise markets were up 15% with Latin America up nearly 30% and Europe enterprise markets up low teens. This is the fourth consecutive quarter in which all five sectors grew organic sales double digits in enterprise markets. Global aggregate value share was in line with prior year, with 30 of our top 50 category country combinations holding or growing share. Excluding Russia, global value share was up 20 basis points. In the U.S., all outlet value share was up 40 basis points versus prior year with eight of 10 categories holding or growing share in the quarter. U.S. volume share is up 90 basis points versus the prior year, driven by 2 points of absolute volume consumption growth in a market that is still down modestly versus prior year. Strong U.S. share growth in Personal Care has been led by innovation on the native brand and deodorants, as well as successful extension into body wash. Cascade Platinum Plus has driven strong share growth in auto dishwashing, and Dawn share continues to be up more than 1 point with ongoing leverage from the power wash and easy squeeze innovations. Vicks continues to be a growth leader in Personal Health Care, and we've delivered strong share growth in the Metamucil and Pepto-Bismol brands. In Europe, the new four-chamber Ariel Platinum PODS are driving strong consumer demand in Fabric Care. Fairy Power Spray is growing the dish category and building market share in Home Care. The new GilletteLabs exfoliating razor, male and female intimate grooming innovations and cardboard packaging upgrades are driving strong growth in grooming. Moving to the bottom-line. Core earnings per share were $1.37, up 3% versus prior year. On a currency neutral basis, core EPS increased 13%, good progress as we faced $0.31 per share of cost and foreign exchange headwinds in the quarter. Core operating margin increased 40 basis points, as 150 basis points of gross margin expansion were partially offset by SG&A investments and inflation impacts. Currency-neutral core operating margin increased 160 basis points. Productivity improvements were a 290 basis point help to the quarter. Adjusted free cash flow productivity was at 92%. We returned $3.6 billion of cash to shareowners, approximately $2.2 billion in dividends and $1.4 billion in share repurchase. Last week, we announced a 3% increase in our dividend, again reinforcing our commitment to return cash to shareowners. This is the 67th consecutive annual dividend increase and the 133rd consecutive year P&G has paid a dividend. In summary, against what is still a challenging cost and operating environment, continued good results across top-line, bottom-line and cash for the third quarter. Our team continues to operate with excellence, executing the integrated strategies that have enabled strong results over the past four years and that are the foundation for balanced growth and value creation. A portfolio of daily use products, many providing cleaning, health and hygiene benefits in categories where performance plays a significant role in brand choice. Ongoing commitment to and investment in irresistible superiority across the five vectors of product, package, brand communication, retail execution and value, we are again raising the bar on our superiority standards to reflect the dynamic nature of this strategy. Productivity improvements in all areas of operations to fund investments in superiority offset cost and currency challenges, extend margins and deliver strong cash generation, an approach of constructive disruption, a willingness to change, adapt and create new trends and technologies that will shape our industry for the future. Finally, an organization that is increasingly more empowered, agile and accountable with little overlap or redundancy flowing to new demands seamlessly supporting each other to deliver against our priorities around the world. There are four areas we are driving to improve the execution of the integrated strategies: Supply Chain 3.0, digital acumen, environmental sustainability and employee value equation. These are not new or separate strategies, they are necessary elements in continuing to build superiority, reduce costs to enable investment and value creation and to further strengthen our organization. Our strategic choices on portfolio, superiority, productivity, constructive disruption and organization are interdependent strategies. They reinforce and build on each other. When executed well, they grow markets, which in turn grow share, sales and profit. We continue to believe that the best path forward to deliver sustainable top- and bottom-line growth is to double down on these integrated strategies, starting with the commitment to deliver irresistibly superior propositions to consumers and retail partners. Now, moving to guidance. As we work towards the end of the fiscal year, we are cautiously optimistic. We remain confident in our strategies and the organization's ability to execute them with excellence. We continue to expect more volatility in the macro and consumer environment, and expect sustained pressure in costs and foreign exchange as we move forward. On the whole, our consumer markets remained relatively resilient, with U.S. and China volume trends improving, but with inflation pressures in Europe weighing more heavily on consumption. We continue to think the strategies we've chosen, the investments we've made and the focus on executional excellence have positioned us well to manage through this volatility over time. Raw and packaging material costs, inclusive of commodities and supply inflation, have largely stabilized over the last few months, but still remain a significant headwind versus last fiscal year. Based on current spot prices and latest contracts, we now estimate a $2.2 billion after-tax headwind in fiscal '23. Foreign exchange is also a significant year-on-year headwind and rates since last quarter have moved modestly against us. Based on current exchange rates, we now forecast a $1.3 billion after-tax impact to the fiscal year. Freight costs have moderated throughout the year, and we now expect them to be roughly in line with prior year. Combined headwinds from these items are now estimated at approximately $3.5 billion after-tax, or $1.40 per share, a 24 percentage point headwind to EPS growth for the year. In addition to these impacts, we are also facing higher inflation in wages and benefits and higher year-on-year net interest expense. We are offsetting a portion of these cost headwinds with price increases and productivity savings. We are continuing to invest in irresistible superiority and we are investing to improve our supply capacity, resilience and flexibility. As noted in the outset, our strong results over the first three quarters have enabled us to raise our organic sales outlook and confirm our guidance ranges on EPS and cash. We are increasing our guidance for organic sales growth from a range of 4% to 5% to approximately 6% for the fiscal year. This would put fiscal '23 in line with 6% top-line growth we've averaged over the last four years, which were 5%, 6%, 6% and 7% from fiscal '19 through '22, respectively. On the bottom-line, we're maintaining our outlook of core earnings per share growth in the range of in line to plus 4% versus prior year. Significant headwinds from input costs and foreign exchange keep our current expectations toward the lower end of this range. This guidance also reflects our intent to remain fully invested to drive our superiority strategy and increase investments as we value -- as value creating opportunities are available. We continue to forecast adjusted free cash flow productivity of 90%. We now expect to pay nearly $9 billion in dividends and to repurchase $7.4 billion to $8 billion in common stock, combined a plan to return $16 billion to $17 billion of cash to shareowners this fiscal year. This outlook is based on current market growth estimates, commodity prices and foreign exchange rates. Significant additional currency weakness commodity cost increases, geopolitical disruption, major production stoppages or store closures are not anticipated within this guidance range. To conclude, we continue to face highly volatile consumer and macro dynamics. We also continue to see high year-over-year input costs, inflation in the upstream supply chain and in our own operations. Headwinds from foreign exchange, geopolitical issues, and historically high inflation impacting consumer budgets. As we said before, we believe this is a rough patch to grow through, not a reason to reduce investment in the long-term health of our business. We're doubling down on the strategy that has been working well and is delivering strong results. We continue to step forward. We remain fully invested in our business. We remain committed to driving productivity improvements to fund growth investments, mitigate input cost challenges and to deliver balanced top- and bottom-line growth. With that, we'll be happy to take your questions.","evidence_gemma_new":"Adjusted free cash flow productivity","evidence_llama_3_3":null,"evidence_qwen_3_30b":"adjusted free cash flow productivity January to March quarter","gemma_new_max":92.0,"gemma_new_min":92.0,"llama_3_3_max":null,"llama_3_3_min":null,"qwen_3_30b_max":92.0,"qwen_3_30b_min":92.0}
{"symbol":"PG","year":2023,"quarter":4,"date":"2023-Q4","chunk_id":1,"sub_chunk_id":0,"centroid_label":"adjusted free cash for productivity","agreed_value":95.0,"count":3,"chunk":"Andre Schulten: With me today are Jon Moeller, Chairman of the Board, President and Chief Executive Officer, and John Chevalier, Senior Vice President, Investor Relations. I\u2019ll start with an overview of results for fiscal year \u201923 and the fourth quarter. Jon will add perspective on our strategic focus areas and capabilities and will close with guidance for fiscal \u201924 and then take your questions. Fiscal \u201923 was another very strong year. Execution of our integrated strategy continues to yield broad-based strong sales growth across categories and regions, strong earnings in the face of significant cost headwinds, and continued strong return on cash to P&G shareholders. Organic sales for the fiscal year grew 7%, our second consecutive year of 7% organic sales growth and fifth consecutive year of 5% or better organic growth starting fiscal 2019 - 5%, 6%, 6%, 7% and 7%. Growth was broad-based across business units with all 10 of our product categories growing organic sales. Personal healthcare grew mid-teens, feminine care grew double digits, fabric care, home care and hair care up high single digits, skin and personal care, baby care, family care and grooming each grew mid singles. Oral care grew low single digits. Focus markets were up 5% for the year and we delivered strong results in our largest and most profitable market, the United States, with organic sales growing 6% on top of a strong 8% growth comp in the base period. Greater China organic sales were down low single digits versus the prior year, with trends improving in the back half as the market continues to slowly recover. Enterprise markets were up 15% led by Latin America with 24% organic sales growth. Ecommerce sales increased 7%, now representing 17% of total company. Our strategy focused on driving market growth is in turn driving share growth for P&G. All channel market value sales in the U.S. categories in which we compete grew approximately 7% in fiscal \u201923. P&G consumption grew ahead of fair share of category growth, driving modest value share growth and volume share up 50 basis points for the year. We held global aggregate market share. Twenty-nine of our top 50 category-country combinations held or grew share for the year. Importantly, this share growth is broad-based. Seven of 10 product categories grew share globally over the past year. Core earnings per share were $5.90, up 2% for the year despite a 24 percentage point earnings growth headwind, or $1.38 from share from higher material costs and foreign exchange. On a currency neutral basis, core EPS was up 11%. Adjusted free cash flow productivity was 95%. We increased our dividend by 3% and returned over $16 billion of value to share owners, $9 billion in dividends and $7.4 billion in share repurchase. Moving to the April to June quarter, organic sales grew 8%. We have now delivered seven consecutive quarters with 5% or better organic sales growth. Pricing contributed seven points to organic sales growth, mix was up 2 points, volume declined one point, improving sequentially versus the March quarter, as expected. These strong company results are grounded in broad-based category and geographic strength. Each of our 10 product categories grew organic sales in the quarter. Skin and personal care, personal healthcare, home care, feminine care, and family care, five of our 10 categories, each grew double digits. Baby care, hair care and grooming grew high singles, fabric care grew mid singles, and oral care was up low single digits. Each of our seven regions grew organic sales with focus markets up 7% and enterprise markets up 13% for the quarter. Organic sales in the U.S. grew 6%. Importantly, this includes 3 points of volume growth, a return to positive volume in our largest market for the first time in five quarters. Greater China organic sales grew 4%. We continue to see sequential market recovery, but as expected at a slow pace. European focused market organic sales were up 12% despite volume pressure from wider pricing gaps. In enterprise markets, Latin America led the growth with organic sales up 22%. Global aggregate market share increased 10 basis points. Twenty nine of our top 50 category-country combinations held or grew share for the quarter. On the bottom line, core earnings per share were $1.37, up 13% versus the prior year. On a currency neutral basis, core EPS increased 22%. Core operating margin increased 190 basis points as benefits from strong sales growth and productivity improvements more than offset higher material cost, foreign exchange headwinds, wage and benefit inflation, and reinvestment in higher media reach and frequency. Currency neutral operating margin increased 310 basis points. Adjusted free cash flow productivity was 136%. We returned approximately $2.3 billion of cash to share owners in the quarter. In summary, we met or exceeded each of our going-in target ranges for the year: organic sales growth, core EPS growth, free cash flow productivity, and cash returned to share owners, strong performance again this year in a very difficult operating environment. Now I\u2019ll pass it over to Jon.","evidence_gemma_new":"Adjusted free cash flow productivity","evidence_llama_3_3":"adjusted free cash flow productivity fiscal year '23","evidence_qwen_3_30b":"adjusted free cash flow productivity fiscal year","gemma_new_max":95.0,"gemma_new_min":95.0,"llama_3_3_max":95.0,"llama_3_3_min":95.0,"qwen_3_30b_max":95.0,"qwen_3_30b_min":95.0}
{"symbol":"PG","year":2023,"quarter":4,"date":"2023-Q4","chunk_id":1,"sub_chunk_id":0,"centroid_label":"adjusted free cash for productivity","agreed_value":136.0,"count":3,"chunk":"Andre Schulten: With me today are Jon Moeller, Chairman of the Board, President and Chief Executive Officer, and John Chevalier, Senior Vice President, Investor Relations. I\u2019ll start with an overview of results for fiscal year \u201923 and the fourth quarter. Jon will add perspective on our strategic focus areas and capabilities and will close with guidance for fiscal \u201924 and then take your questions. Fiscal \u201923 was another very strong year. Execution of our integrated strategy continues to yield broad-based strong sales growth across categories and regions, strong earnings in the face of significant cost headwinds, and continued strong return on cash to P&G shareholders. Organic sales for the fiscal year grew 7%, our second consecutive year of 7% organic sales growth and fifth consecutive year of 5% or better organic growth starting fiscal 2019 - 5%, 6%, 6%, 7% and 7%. Growth was broad-based across business units with all 10 of our product categories growing organic sales. Personal healthcare grew mid-teens, feminine care grew double digits, fabric care, home care and hair care up high single digits, skin and personal care, baby care, family care and grooming each grew mid singles. Oral care grew low single digits. Focus markets were up 5% for the year and we delivered strong results in our largest and most profitable market, the United States, with organic sales growing 6% on top of a strong 8% growth comp in the base period. Greater China organic sales were down low single digits versus the prior year, with trends improving in the back half as the market continues to slowly recover. Enterprise markets were up 15% led by Latin America with 24% organic sales growth. Ecommerce sales increased 7%, now representing 17% of total company. Our strategy focused on driving market growth is in turn driving share growth for P&G. All channel market value sales in the U.S. categories in which we compete grew approximately 7% in fiscal \u201923. P&G consumption grew ahead of fair share of category growth, driving modest value share growth and volume share up 50 basis points for the year. We held global aggregate market share. Twenty-nine of our top 50 category-country combinations held or grew share for the year. Importantly, this share growth is broad-based. Seven of 10 product categories grew share globally over the past year. Core earnings per share were $5.90, up 2% for the year despite a 24 percentage point earnings growth headwind, or $1.38 from share from higher material costs and foreign exchange. On a currency neutral basis, core EPS was up 11%. Adjusted free cash flow productivity was 95%. We increased our dividend by 3% and returned over $16 billion of value to share owners, $9 billion in dividends and $7.4 billion in share repurchase. Moving to the April to June quarter, organic sales grew 8%. We have now delivered seven consecutive quarters with 5% or better organic sales growth. Pricing contributed seven points to organic sales growth, mix was up 2 points, volume declined one point, improving sequentially versus the March quarter, as expected. These strong company results are grounded in broad-based category and geographic strength. Each of our 10 product categories grew organic sales in the quarter. Skin and personal care, personal healthcare, home care, feminine care, and family care, five of our 10 categories, each grew double digits. Baby care, hair care and grooming grew high singles, fabric care grew mid singles, and oral care was up low single digits. Each of our seven regions grew organic sales with focus markets up 7% and enterprise markets up 13% for the quarter. Organic sales in the U.S. grew 6%. Importantly, this includes 3 points of volume growth, a return to positive volume in our largest market for the first time in five quarters. Greater China organic sales grew 4%. We continue to see sequential market recovery, but as expected at a slow pace. European focused market organic sales were up 12% despite volume pressure from wider pricing gaps. In enterprise markets, Latin America led the growth with organic sales up 22%. Global aggregate market share increased 10 basis points. Twenty nine of our top 50 category-country combinations held or grew share for the quarter. On the bottom line, core earnings per share were $1.37, up 13% versus the prior year. On a currency neutral basis, core EPS increased 22%. Core operating margin increased 190 basis points as benefits from strong sales growth and productivity improvements more than offset higher material cost, foreign exchange headwinds, wage and benefit inflation, and reinvestment in higher media reach and frequency. Currency neutral operating margin increased 310 basis points. Adjusted free cash flow productivity was 136%. We returned approximately $2.3 billion of cash to share owners in the quarter. In summary, we met or exceeded each of our going-in target ranges for the year: organic sales growth, core EPS growth, free cash flow productivity, and cash returned to share owners, strong performance again this year in a very difficult operating environment. Now I\u2019ll pass it over to Jon.","evidence_gemma_new":"Adjusted free cash flow productivity","evidence_llama_3_3":"adjusted free cash flow productivity April to June quarter","evidence_qwen_3_30b":"adjusted free cash flow productivity April to June quarter","gemma_new_max":136.0,"gemma_new_min":136.0,"llama_3_3_max":136.0,"llama_3_3_min":136.0,"qwen_3_30b_max":136.0,"qwen_3_30b_min":136.0}
{"symbol":"PG","year":2023,"quarter":4,"date":"2023-Q4","chunk_id":3,"sub_chunk_id":0,"centroid_label":"adjusted free cash for productivity","agreed_value":90.0,"count":2,"chunk":"Andre Schulten: Thank you Jon. As we\u2019ve said in each guidance outlook for the past three years and as Jon indicated, we will undoubtedly experience more volatility in the fiscal year ahead, and while supply chains and input costs have become more stable as we enter fiscal \u201924, the challenges we face are multi-faceted: economic, geopolitical, and societal, putting pressure on consumer confidence and household budgets. We\u2019ll navigate these challenges with our dynamic integrated strategy guided by consumers with every step. Based on current spot prices, we estimate commodities will be a tailwind of around $800 million after tax in fiscal \u201924. Foreign exchange rates continue to be a headwind and, based on current rates, we now expect a $400 million after-tax impact. We still face above normal levels of wage and benefit cost inflation in our cost structure and higher costs for third party services. In addition, we expect below-the-line impact from higher net interest expense to be a roughly $200 million after tax earnings headwind. With this context, I\u2019ll move to the key guidance metrics. We expect global market value growth in our categories to moderate back towards a range of around 4%, with the drivers of market growth normalizing as we move through the year, pricing becoming less of a driver and volume returning to modest growth. With the strength of our brands and commitment to keep investing in the business, we continue to expect to grow above underlying market levels, building aggregate market share globally. This leads to guidance for organic sales growth in the range of 4% to 5% for fiscal \u201924. On the bottom line, we expect EPS growth in the range of 6% to 9% versus fiscal year \u201923 EPS of $5.90. This guidance equates to a range of $6.25 to $6.43 per share, $6.34 or up 7.5% at the center of the range. With a three-point headwind from foreign exchange, this outlook translates to 9% to 12% EPS growth on a constant currency basis. We expect adjusted free cash flow productivity of 90% for the year. This includes an increase in capital spending as we add capacity in several categories. We expect to pay more than $9 billion in dividends and to repurchase $5 billion to $6 billion in common stock, combined a plan to return $14 billion to $15 billion of cash to share owners this fiscal year. Top line, bottom line and cash guidance for fiscal \u201924 all consistent with our long term algorithm. This outlook is based on current market growth estimates, commodity prices and foreign exchange rates. Significant additional currency weakness, commodity cost increases, geopolitical disruptions, major supply chain disruptions, more store closures are not anticipated within the guidance ranges. These guidance ranges also do not assume a further reduction in commodity and material costs versus current levels. If this should occur, it would generate greater flexibility to invest more in value-accretive innovation and marketing opportunities. With that, I\u2019ll hand it back to Jon for his closing thoughts.","evidence_gemma_new":"adjusted free cash flow productivity","evidence_llama_3_3":null,"evidence_qwen_3_30b":"adjusted free cash flow productivity","gemma_new_max":90.0,"gemma_new_min":90.0,"llama_3_3_max":null,"llama_3_3_min":null,"qwen_3_30b_max":90.0,"qwen_3_30b_min":90.0}
{"symbol":"PG","year":2024,"quarter":2,"date":"2024-Q2","chunk_id":1,"sub_chunk_id":0,"centroid_label":"adjusted free cash for productivity","agreed_value":95.0,"count":2,"chunk":"Andre Schulten: Good morning, everyone. Joining me on the call today are Jon Moeller, Chairman of the Board, President and Chief Executive Officer, and Jon Chevalier, Senior Vice-President, Investor Relations. I'll start with an overview of results for the October to December quarter, Jon will add perspective on our recent results and strategic focus areas and capabilities. We'll close with guidance for fiscal '24, and then take your questions. October to December, was another strong quarter. Execution of our integrated strategy drove solid sales and market-share results and another quarter of strong margin progress, delivering strong earnings and cash results for the quarter. The strong results we've delivered in the first half of fiscal '24, enable us to raise our outlook for core earnings per share and keep us on track to deliver within our fiscal year guidance ranges for organic sales growth, cash productivity and cash return to shareowners. We continue to see the upper range on organic sales and core EPS as likely outcome for fiscal '23 - '24. So, moving to second quarter numbers, organic sales grew 4%, volume rounded down to a decline of one point as continued volume acceleration in North America and Europe focused markets was offset by softer shipments in Greater China, Eastern Europe and Middle East, Africa regions due to local issues in select markets. Pricing contributed four points to sales growth, consistent with the guidance we provided, mix was neutral to organic sales growth. Growth across categories continues to be broad based with eight of 10 product categories holding or growing organic sales this quarter. Home care, hair care and grooming grew sales high single digits. Fabric care, family care, feminine care and oral care were up mid-single digits. Baby care was in line with prior year. Personal health care was down low singles against a very tough comp and a late developing cold and flu season this year. Skin and personal care was down mid singles due to SK-II in China. Growth was also broad based across geographies with North America, Europe, Asia Pacific focus markets and Latin America and Europe enterprise markets each growing organic sales. Focus markets grew 3% for the quarter and enterprise markets grew 7%. Organic sales in North America grew 5% with four points of volume growth. Over the last five quarters, volume growth in North America has been minus three, flat, then 2% growth plus 3% and now plus 4%, strong acceleration well ahead of the underlying market trends. Europe focused markets were up 7% with three points of volume growth. As expected, both regions saw a step down in pricing contribution to sales growth as a large portion of price increases from last year have annualized. Importantly, volume accelerated in both regions to partially offset the pricing impact. Latin America delivered another very strong quarter with 17% organic sales growth, continued strong results in these regions. There are some targeted issues affecting other markets. Greater China organic sales were down minus 15% versus prior year. Underlying market growth was down mid to high single digits as consumer confidence weakened further. The SK-II brand in Greater China was down 34% due to soft market conditions and a temporary headwind for Japanese brands in the market. Our consumer research indicates SK-II brand sentiment is improving and we expect to see sequential improvement in the back half. Underlying market trends have softened in some Europe enterprise and Asia Pacific, Middle East, Africa countries such as Egypt, Saudi Arabia and Turkey, following multiple rounds of pricing to offset inflation and due to heightened tensions in the Middle East. Global aggregate value share was up 40 basis points versus prior year with 28 of our top 50 category country combinations holding or growing share. In the U.S., all outlet value share was up 20 basis points versus prior year. U.S. volume share was up 50 basis points reflecting strong volume growth. Value share in European focus markets was up 90 basis points over the past three months. In summary, North America, Europe focus Markets, Asia Pacific focus markets and Latin America, which combined represent three-quarters of company sales, delivered over 6% of organic sales growth in quarter two, with three points of volume growth and three points of price mix. These same markets grew 9% in quarter one with around two points of volume growth and seven points of price mix. Continued strong organic sales growth with accelerating volume growth to mitigate the anticipated annualization of pricing, consistent with our guidance. The balanced 25% of company sales including Greater China, Eastern Europe and Middle East Africa were impacted by local market issues we described. Quarter two organic sales for this group were down five points versus prior year. We expect most of these effects in these regions to be temporary or annualizing, SK-II consumption is sequentially improving. We continue to expect China market growth to improve, and over time return to mid singles, and we expect market pressures in the Middle east and Turkey to ease over time. Moving to the bottom line, core earnings per share were $1.84, up 16% versus prior year. On a currency neutral basis, core EPS increased 18%. Core operating margin increased 400 basis points as 520 basis points of gross margin expansion were partially offset by increased marketing investments, wage and benefit inflation and foreign exchange impacts in SG&A. Currency neutral core operating margin increased 470 basis points. Productivity improvements were a very strong 340 basis points helped to the quarter. Adjusted free cash flow productivity was 95%. We returned $3.3 billion of cash to share owners, approximately $2.3 billion in dividends and $1 billion in share repurchase. In summary, against what continues to be a challenging and volatile operating environment, strong overall progress in the first half of the year keeping us on track for our fiscal year guidance ranges. Now I'll pass it over to Jon for his perspective.","evidence_gemma_new":null,"evidence_llama_3_3":"adjusted free cash flow productivity October to December","evidence_qwen_3_30b":"adjusted free cash flow productivity 95%","gemma_new_max":null,"gemma_new_min":null,"llama_3_3_max":95.0,"llama_3_3_min":95.0,"qwen_3_30b_max":95.0,"qwen_3_30b_min":95.0}
{"symbol":"PG","year":2024,"quarter":2,"date":"2024-Q2","chunk_id":3,"sub_chunk_id":0,"centroid_label":"adjusted free cash for productivity","agreed_value":90.0,"count":2,"chunk":"Andre Schulten: Thanks Jon. As I mentioned, we expect the environment around us to continue to be volatile and challenging from input costs to currencies to consumer, retailer and geopolitical dynamics. However, our strong first half results enable us to raise or maintain key guidance metrics for the year. We're maintaining our guidance range for organic sales growth of 4% to 5% for the fiscal year. This outlook includes a normalization in underlying market growth rates that we began to see in our second quarter results as the market lapsed the last waves of cost recovery pricing. For P&G, we expect the pricing contribution to topline growth to reduce by an additional 1 to 2 points in the back half of the year. We will continue to price for new innovations when warranted and to mitigate FX impacts. On the bottom line enabled by very strong earnings growth in the first half of the year, we're raising our outlook for fiscal '24 core earnings per share from a range of 6% to 9% to a range of 8% to 9% growth versus last fiscal year. This guidance implies slower bottom-line growth in the second half. As we highlighted last quarter, the second half of the fiscal year will see less pricing benefit as we annualize more prior year increases. We will also see less commodity cost benefit in the second half. Wage and benefit inflation continues throughout the supply chain and in our direct costs, and FX headwinds will increase versus the first half of the fiscal year. As I mentioned, we continue to expect organic sales and core EPS growth toward the upper end of the renewed guidance ranges. We estimate commodities will be a tailwind of around $800 million after tax in fiscal '24 based on current spot prices. This is consistent with the outlook we provided last quarter. We continue to expect foreign exchange will be a headwind of approximately $1 billion after tax for the fiscal year. The vast majority of this impact is driven by Argentina, and is heavily skewed towards the back half of the year. This outlook is based on a forecast for continued significant devaluation of the Argentine Peso, which we expect to largely offset with appropriate price increases. We now expect higher net interest expense of approximately $100 million after tax versus prior year. General inflation and higher wage and benefit costs weakness are also earnings headwinds for the year. We expect adjusted free cash flow productivity of 90%. We expect to pay more than $9 billion in dividends and to repurchase $5 billion to $6 billion in common stock, combined a plan to return $14 billion to $15 billion of cash to share owners this fiscal year. This outlook is based on current market growth rate estimates, commodity prices and foreign exchange rates. Significant additional currency weakness, commodity cost increases, geopolitical disruptions or major production stoppages are not anticipated within the guidance ranges. Finally, we'll be closely watching the more volatile regions we mentioned earlier, including the health of the China market, and we'll be keeping close watch on competitive dynamics to ensure P&G brands remain superior value for consumers and retailers. Now, I'll hand it back to Jon for closing thoughts.","evidence_gemma_new":"adjusted free cash flow productivity","evidence_llama_3_3":null,"evidence_qwen_3_30b":"adjusted free cash flow productivity 90%","gemma_new_max":90.0,"gemma_new_min":90.0,"llama_3_3_max":null,"llama_3_3_min":null,"qwen_3_30b_max":90.0,"qwen_3_30b_min":90.0}
{"symbol":"PG","year":2024,"quarter":3,"date":"2024-Q3","chunk_id":1,"sub_chunk_id":0,"centroid_label":"adjusted free cash for productivity","agreed_value":87.0,"count":2,"chunk":"Andre Schulten : Good morning, everyone. Joining me on the call today is John Chevalier, Senior Vice President, Investor Relations. Execution of our integrated strategy drove solid sales and market share results and another quarter of strong earnings and cash results. The strong results we've delivered in the first three quarters of fiscal 2024 enable us to raise our outlook for core earnings per share and keep us on track to deliver within our fiscal year guidance ranges for organic sales growth, cash productivity, and cash return to shareowners. Specifically on the numbers, organic sales grew 3%. Volume was in line with prior year, showing sequential progress. Pricing contributed 3 points to sales growth as we continue to annualize price increases taken last fiscal year. Mix was neutral to organic sales growth, and growth across categories continues to be broad based with 8 of 10 product categories holding or growing organic sales in this quarter. Grooming organic sales grew double-digits. Home Care and Hair Care up high singles. Oral Care grew mid-single-digits. Fabric Care, Family Care, Feminine Care and Personal Health Care were up low singles. Skin and Personal Care and Baby Care organic sales were lower versus prior year. Growth was also broad based across geographies. North America, Europe and Asia Pacific focused markets and Latin America and Europe Enterprise markets are each growing organic sales. Global aggregate value share was up versus prior year with 29 of our top 50 category country combinations holding or growing share. Focus markets grew organic sales 2% for the quarter, and Enterprise Markets grew 4%. Organic sales in North America grew 3% with 3 points of volume growth. Over the last 4 quarters, volume growth in North America has been plus 2%, plus 3%, plus 4%, and now plus 3%. These results include over a point of impact from retail inventory reductions, primarily in personal healthcare. Consumer demand for P&G brands remains very strong in the U.S., with all outlet consumption value growth of 5%, all outlet value share was up 10 basis points versus prior year. U.S. volume share was up 40 basis points, reflecting continued strong volume growth ahead of the underlying market. The gap between consumer offtake of 5% compared to our U.S. sales growth of 3% reflects the aforementioned trade inventory reductions in the quarter. Europe focus markets were up 7% with 4 points of volume growth. Value share in Europe Focus markets was up 100 basis points over the past 3 months. Latin America organic sales were up 17%. Argentina is a significant contributor to this result given the pricing taken to offset the more than 400% devaluation of the Argentine peso since the start of the year. Mexico and Brazil are annualizing high base periods with organic sales growth in the 20s and 30s, and we expect will normalize back to pre-COVID levels in the mid to high single-digits. As we noted last quarter, there are some specific issues affecting other markets. Those challenges continue to impact results in the quarter. Greater China organic sales were down 10% versus prior year, progress versus the December quarter, but still impacted by weak underlying market conditions and headwinds for SK-II and other Japanese brands in the market. SK-II sales in Greater China were down around 30% for the quarter. We have seen some month to month improvement in overall Greater China sales trends, though we expect it will be another quarter or two until we return to growth. Volume trends in some of the European Enterprise and Asia Pacific, Middle East Africa countries such as Egypt, Saudi Arabia, Turkey, Indonesia and Malaysia have remained soft since the start of the heightened tensions in the Middle East. Also, shipments in Russia continue to decline, double digits given our reduced footprint and curtailed investments with consumers and retailers. Combined, the headwinds from Greater China and Asia, Middle East Africa markets were a 150 basis point impact on total company sales for the quarter. We expect these headwinds to moderate or annualize over the coming periods. Moving to the bottom line, core earnings per share were $1.52 up 11% versus prior year. On a currency neutral basis, core EPS increased 18%. Core gross margin increased 310 basis points and operating margin increased 90 basis points. Strong productivity improvement of 320 basis points enabled continued strong investment in superior products, packaging and consumer communication to drive market growth. Currency neutral core operating margin increased 220 basis points. Adjusted free cash flow productivity was 87%. We returned $3.3 billion of cash to share owners, approximately $2.3 billion in dividends and $1 billion in share repurchase. Over 3 quarters, more than $10 billion returned to shareowners in dividends and repurchases. Last week, we announced a 7% increase in our dividend, again reinforcing our commitment to return cash to share owners. This is the 68th consecutive annual dividend increase and 134th consecutive year P&G has paid a dividend. In summary, again, what continues to be a challenging and volatile operating environment, strong overall results enabling us to increase our earnings projections for the year and to maintain our guidance ranges for organic sales and cash generation, all while sustaining strong investment. It's a priority to build category consumption and to restore business growth in China and in the Middle East. Our teams continue to operate with excellence, executing the integrated strategy that has enabled strong results over the past 5 years, and that is the foundation for balanced growth and value creation. A portfolio of daily use products, many providing cleaning, health and hygiene benefits in categories where performance plays a significant role in brand choice. Ongoing commitment to and investment in irresistible superiority across the 5 vectors of products, package, brand communication, retail execution and value for each price tier where we compete. We are again raising the bar on our superiority standards to reflect the dynamic nature of this strategy. Productivity improvements in all areas of our operations to fund investments in superiority, offset cost and currency challenges, expand margins and deliver strong cash generation. An approach of constructive disruption, a willingness to change, adapt and create new trends and technologies that will shape our industry for the future. Finally, an organization that is empowered, agile and accountable. We continue to improve the execution of the integrated strategy with 4 focus areas: strong progress on Supply Chain 3.0, digital acumen, environmental sustainability and a superior employee value equation. These four focus areas are not new or separate strategies. They simply strengthen our ability to execute the strategy. Our strategic choices on portfolio, superiority, productivity, constructive disruption and organization reinforce and build on each other. When executed well, they grow markets, which in turn grow share, sales and profit. We continue to believe that the best path forward to deliver sustainable top and bottom-line growth is to double down on this integrated strategy, starting with a commitment to deliver irresistibly superior propositions to consumers and retail partners, fueled by productivity. Moving on to guidance. As I mentioned, we expect the environment around us to continue to be volatile and challenging, from input costs to currencies to consumer, retailer and geopolitical dynamics. However, our strong results year to date enable us to raise or maintain key guidance metrics for the year. We're maintaining our guidance range for organic sales growth of 4% to 5% for the fiscal year. We're squarely in the middle of this range fiscal year-to-date. This outlook assumes continued normalization in underlying market growth rates that we've seen over the past few quarters. Markets will be lapping the last waves of cost recovery pricing and volumes slowly begin to recover. We also expect the market level changes we faced through quarter 3 to continue in Q4 though with some directional improvement. On the bottom-line, enabled by 15% core EPS growth year-to-date, we are raising our outlook for fiscal 2024 core earnings per share from a range 8% to 9% to a range of 10% to 11%. This outlook includes continued strong investments in innovation and brand building to grow markets and extend the superiority of P&G offerings to consumers. We now estimate commodities will be a tailwind of around $900 million after tax in fiscal '24 based on current spot prices. This is a modest improvement versus the outlook we provided last quarter, though nearly all of this benefit has been booked in the first three quarters of the year. We now expect foreign exchange to be a headwind of approximately $600 million after tax for the fiscal year. The change versus prior guidance reflects volatility in Argentina exchange rates, including a period of currency appreciation in quarter three and a revised devaluation outlook for quarter four. We also reflect a reduction in Argentina FX exposure due to the divestiture of our Argentina Fabric and Home Care business, which we completed in mid-March, and reduced assumptions for future volume and pricing given the current rate outlook and recent shipment trends. The net impact of these changes is a relatively modest help to the bottom line, which is reflected in our updated EPS outlook. We expect higher net interest expense of approximately $100 million after tax versus prior year. General inflation and higher wage and benefit costs are also earnings headwinds for the year. We expect adjusted free cash flow productivity of 90%, and we expect to pay more than $9 billion in dividends to repurchase $5 billion to $6 billion in common stock, combined a plan to return $14 billion to $15 billion of cash to share owners for the year. This outlook is based on current market growth rate estimates, commodity prices and foreign exchange rates, significant additional currency weakness, commodity cost increases, geopolitical disruption or major production stoppages are not anticipated within these guidance ranges. Finally, we'll be closely watching the more volatile regions we mentioned earlier, including the health of the China market, and we'll be keeping a close watch on competitive dynamics to ensure P&G brands remain a superior value for consumers and for retailers. The entire P&G organization remains focused on excellent execution of our integrated, market constructive strategy, which has delivered strong results in a challenging operating and competitive environment. While we expect volatile consumer and macro dynamics to continue, we are confident the best path forward is to double down on this strategy, remain fully invested to drive irresistible superiority across every part of our portfolio and stay focused on delivering balanced top and bottom line growth and value creation for our shareowners. With that, we'll be happy to take your questions.","evidence_gemma_new":"adjusted free cash flow productivity","evidence_llama_3_3":null,"evidence_qwen_3_30b":"adjusted free cash flow productivity was 87%","gemma_new_max":87.0,"gemma_new_min":87.0,"llama_3_3_max":null,"llama_3_3_min":null,"qwen_3_30b_max":87.0,"qwen_3_30b_min":87.0}
{"symbol":"PG","year":2024,"quarter":3,"date":"2024-Q3","chunk_id":1,"sub_chunk_id":0,"centroid_label":"adjusted free cash for productivity","agreed_value":90.0,"count":2,"chunk":"Andre Schulten : Good morning, everyone. Joining me on the call today is John Chevalier, Senior Vice President, Investor Relations. Execution of our integrated strategy drove solid sales and market share results and another quarter of strong earnings and cash results. The strong results we've delivered in the first three quarters of fiscal 2024 enable us to raise our outlook for core earnings per share and keep us on track to deliver within our fiscal year guidance ranges for organic sales growth, cash productivity, and cash return to shareowners. Specifically on the numbers, organic sales grew 3%. Volume was in line with prior year, showing sequential progress. Pricing contributed 3 points to sales growth as we continue to annualize price increases taken last fiscal year. Mix was neutral to organic sales growth, and growth across categories continues to be broad based with 8 of 10 product categories holding or growing organic sales in this quarter. Grooming organic sales grew double-digits. Home Care and Hair Care up high singles. Oral Care grew mid-single-digits. Fabric Care, Family Care, Feminine Care and Personal Health Care were up low singles. Skin and Personal Care and Baby Care organic sales were lower versus prior year. Growth was also broad based across geographies. North America, Europe and Asia Pacific focused markets and Latin America and Europe Enterprise markets are each growing organic sales. Global aggregate value share was up versus prior year with 29 of our top 50 category country combinations holding or growing share. Focus markets grew organic sales 2% for the quarter, and Enterprise Markets grew 4%. Organic sales in North America grew 3% with 3 points of volume growth. Over the last 4 quarters, volume growth in North America has been plus 2%, plus 3%, plus 4%, and now plus 3%. These results include over a point of impact from retail inventory reductions, primarily in personal healthcare. Consumer demand for P&G brands remains very strong in the U.S., with all outlet consumption value growth of 5%, all outlet value share was up 10 basis points versus prior year. U.S. volume share was up 40 basis points, reflecting continued strong volume growth ahead of the underlying market. The gap between consumer offtake of 5% compared to our U.S. sales growth of 3% reflects the aforementioned trade inventory reductions in the quarter. Europe focus markets were up 7% with 4 points of volume growth. Value share in Europe Focus markets was up 100 basis points over the past 3 months. Latin America organic sales were up 17%. Argentina is a significant contributor to this result given the pricing taken to offset the more than 400% devaluation of the Argentine peso since the start of the year. Mexico and Brazil are annualizing high base periods with organic sales growth in the 20s and 30s, and we expect will normalize back to pre-COVID levels in the mid to high single-digits. As we noted last quarter, there are some specific issues affecting other markets. Those challenges continue to impact results in the quarter. Greater China organic sales were down 10% versus prior year, progress versus the December quarter, but still impacted by weak underlying market conditions and headwinds for SK-II and other Japanese brands in the market. SK-II sales in Greater China were down around 30% for the quarter. We have seen some month to month improvement in overall Greater China sales trends, though we expect it will be another quarter or two until we return to growth. Volume trends in some of the European Enterprise and Asia Pacific, Middle East Africa countries such as Egypt, Saudi Arabia, Turkey, Indonesia and Malaysia have remained soft since the start of the heightened tensions in the Middle East. Also, shipments in Russia continue to decline, double digits given our reduced footprint and curtailed investments with consumers and retailers. Combined, the headwinds from Greater China and Asia, Middle East Africa markets were a 150 basis point impact on total company sales for the quarter. We expect these headwinds to moderate or annualize over the coming periods. Moving to the bottom line, core earnings per share were $1.52 up 11% versus prior year. On a currency neutral basis, core EPS increased 18%. Core gross margin increased 310 basis points and operating margin increased 90 basis points. Strong productivity improvement of 320 basis points enabled continued strong investment in superior products, packaging and consumer communication to drive market growth. Currency neutral core operating margin increased 220 basis points. Adjusted free cash flow productivity was 87%. We returned $3.3 billion of cash to share owners, approximately $2.3 billion in dividends and $1 billion in share repurchase. Over 3 quarters, more than $10 billion returned to shareowners in dividends and repurchases. Last week, we announced a 7% increase in our dividend, again reinforcing our commitment to return cash to share owners. This is the 68th consecutive annual dividend increase and 134th consecutive year P&G has paid a dividend. In summary, again, what continues to be a challenging and volatile operating environment, strong overall results enabling us to increase our earnings projections for the year and to maintain our guidance ranges for organic sales and cash generation, all while sustaining strong investment. It's a priority to build category consumption and to restore business growth in China and in the Middle East. Our teams continue to operate with excellence, executing the integrated strategy that has enabled strong results over the past 5 years, and that is the foundation for balanced growth and value creation. A portfolio of daily use products, many providing cleaning, health and hygiene benefits in categories where performance plays a significant role in brand choice. Ongoing commitment to and investment in irresistible superiority across the 5 vectors of products, package, brand communication, retail execution and value for each price tier where we compete. We are again raising the bar on our superiority standards to reflect the dynamic nature of this strategy. Productivity improvements in all areas of our operations to fund investments in superiority, offset cost and currency challenges, expand margins and deliver strong cash generation. An approach of constructive disruption, a willingness to change, adapt and create new trends and technologies that will shape our industry for the future. Finally, an organization that is empowered, agile and accountable. We continue to improve the execution of the integrated strategy with 4 focus areas: strong progress on Supply Chain 3.0, digital acumen, environmental sustainability and a superior employee value equation. These four focus areas are not new or separate strategies. They simply strengthen our ability to execute the strategy. Our strategic choices on portfolio, superiority, productivity, constructive disruption and organization reinforce and build on each other. When executed well, they grow markets, which in turn grow share, sales and profit. We continue to believe that the best path forward to deliver sustainable top and bottom-line growth is to double down on this integrated strategy, starting with a commitment to deliver irresistibly superior propositions to consumers and retail partners, fueled by productivity. Moving on to guidance. As I mentioned, we expect the environment around us to continue to be volatile and challenging, from input costs to currencies to consumer, retailer and geopolitical dynamics. However, our strong results year to date enable us to raise or maintain key guidance metrics for the year. We're maintaining our guidance range for organic sales growth of 4% to 5% for the fiscal year. We're squarely in the middle of this range fiscal year-to-date. This outlook assumes continued normalization in underlying market growth rates that we've seen over the past few quarters. Markets will be lapping the last waves of cost recovery pricing and volumes slowly begin to recover. We also expect the market level changes we faced through quarter 3 to continue in Q4 though with some directional improvement. On the bottom-line, enabled by 15% core EPS growth year-to-date, we are raising our outlook for fiscal 2024 core earnings per share from a range 8% to 9% to a range of 10% to 11%. This outlook includes continued strong investments in innovation and brand building to grow markets and extend the superiority of P&G offerings to consumers. We now estimate commodities will be a tailwind of around $900 million after tax in fiscal '24 based on current spot prices. This is a modest improvement versus the outlook we provided last quarter, though nearly all of this benefit has been booked in the first three quarters of the year. We now expect foreign exchange to be a headwind of approximately $600 million after tax for the fiscal year. The change versus prior guidance reflects volatility in Argentina exchange rates, including a period of currency appreciation in quarter three and a revised devaluation outlook for quarter four. We also reflect a reduction in Argentina FX exposure due to the divestiture of our Argentina Fabric and Home Care business, which we completed in mid-March, and reduced assumptions for future volume and pricing given the current rate outlook and recent shipment trends. The net impact of these changes is a relatively modest help to the bottom line, which is reflected in our updated EPS outlook. We expect higher net interest expense of approximately $100 million after tax versus prior year. General inflation and higher wage and benefit costs are also earnings headwinds for the year. We expect adjusted free cash flow productivity of 90%, and we expect to pay more than $9 billion in dividends to repurchase $5 billion to $6 billion in common stock, combined a plan to return $14 billion to $15 billion of cash to share owners for the year. This outlook is based on current market growth rate estimates, commodity prices and foreign exchange rates, significant additional currency weakness, commodity cost increases, geopolitical disruption or major production stoppages are not anticipated within these guidance ranges. Finally, we'll be closely watching the more volatile regions we mentioned earlier, including the health of the China market, and we'll be keeping a close watch on competitive dynamics to ensure P&G brands remain a superior value for consumers and for retailers. The entire P&G organization remains focused on excellent execution of our integrated, market constructive strategy, which has delivered strong results in a challenging operating and competitive environment. While we expect volatile consumer and macro dynamics to continue, we are confident the best path forward is to double down on this strategy, remain fully invested to drive irresistible superiority across every part of our portfolio and stay focused on delivering balanced top and bottom line growth and value creation for our shareowners. With that, we'll be happy to take your questions.","evidence_gemma_new":"adjusted free cash flow productivity","evidence_llama_3_3":null,"evidence_qwen_3_30b":"adjusted free cash flow productivity of 90%","gemma_new_max":90.0,"gemma_new_min":90.0,"llama_3_3_max":null,"llama_3_3_min":null,"qwen_3_30b_max":90.0,"qwen_3_30b_min":90.0}
{"symbol":"PG","year":2024,"quarter":4,"date":"2024-Q4","chunk_id":1,"sub_chunk_id":0,"centroid_label":"adjusted free cash for productivity","agreed_value":148.0,"count":2,"chunk":"Andre Schulten: Good morning everyone. Joining me on the call today are Jon Moeller, Chairman of the Board, President and Chief Executive Officer, and John Chevalier, Senior Vice President, Investor Relations. I will start with an overview of results for fiscal year \u201924 and for the fourth quarter. Jon will add perspective on our strategic focus areas and capabilities and will close with guidance for fiscal \u201925 and then take your questions. Fiscal \u201924 was another very strong year. Execution of our integrated strategies enabled the company to meet or exceed going-in guidance ranges for organic sales growth, core EPS growth, cash productivity and cash return to share owners, all this despite significant market level headwinds that were largely unknown when we gave our initial outlook for the year. Organic sales growth for the fiscal year was 4%, our sixth consecutive year of 4% or better organic growth against a strong 7% comp in the prior year and in more challenging market conditions. Growth was broad-based across business units with eight of 10 product categories growing organic sales. Home care, hair care and grooming were up high single digits, oral care and feminine care up mid singles. Fabric care, family care, and personal healthcare grew low single digits. Skin and personal care and baby care were down low singles. Focus markets grew 4% for the year with North America up 5% and Europe focus markets up 8%. Greater China organic sales were down 9% versus the prior year, driven by soft market conditions and brand-specific headwinds on SK-II. Enterprise markets were up 6%, led by Latin America with 15% organic sales growth. Ecommerce sales increased 9%, now representing 18% of the total company. Our strategy focused on driving market growth continues to drive share growth for P&G. All channel market value sales in the U.S. categories in which we compete grew around 5% in fiscal \u201924. P&G consumption grew ahead of our fair share of category growth, driving modest value and volume share growth for the year. We grew global aggregate value share. Thirty of 50 category country combinations held or grew share for the year. Importantly, this share growth is broad-based. Six of 10 product categories grew share globally over the past year. Core earnings per share were $6.59, up 12% for the year. Core gross margin improved 360 basis points and core operating margin increased 170 basis points. Over $2.3 billion of productivity improvements were enabled by a significant increase in investment in superior products, packages and brand communication to drive market growth. On a currency-neutral basis, core EPS was up 16% and core operating margin increased 250 basis points. Adjusted free cash flow productivity was 105%. We increased our dividend by 7% and returned over $14 billion of value to share owners, $9.3 billion in dividends, and $5 billion in share repurchase. Moving onto fourth quarter results, organic sales rounded down to 2%, volume was up 2%, solid sequential progress. Pricing was up 1% and mix was in line with prior year. Growth continues to be broad-based across categories and regions. Nine of 10 product categories grew or held organic sales in the quarter. Home care, hair care, grooming and oral care were each up high single digits, feminine care up low singles, skin and personal care, fabric care, personal health care and family care were each in line with prior year, and baby care was down mid singles. Five of seven regions grew organic sales with focus markets up 2% and enterprise markets up 2% for the quarter. Organic sales in North America grew 4% with four points of volume growth and price mix, in line with prior year. European focus markets organic sales were up 2% against a strong 12% comp in the base period. Volume was up 3%. Price mix was down a point as the region has now fully annualized prior year inflation-driven pricing. Latin America organic sales were up 8%, including high singles growth in Brazil. Of note, Argentina\u2019s overall contribution to organic sales for the region and the company were lower than the last two quarters due to the divestiture of a portion of the business in March and a notable decline in shipment volume for the remaining categories. As was announced earlier this month, we have divested the remaining portions of our operations in Argentina. As a result, Argentina will be largely removed from our organic sales reporting in fiscal year \u201925. Select P&G brands will still be available in the market through a distribution and licensing agreement with the new owner of the operations. Greater China organic sales declined 8%. Underlying market conditions have remained weak and the 6\/18 key consumption period was down sharply versus prior year, just as we saw in the 11\/11 Chinese New Year and Valentine\u2019s Day shopping periods. Also, brand-specific headwinds have continued on SK-II due to its Japanese heritage. We expect general market trends and the dynamics related to SK-II to improve over time, though it will likely be another quarter or two until we return to growth. Volume trends in some Europe enterprise and Asia Pacific, Middle East, Africa countries such as Egypt, Saudi Arabia, Turkey, Indonesia, Malaysia and Russia have remained soft. We expect these headwinds to moderate or annualize over the coming periods. Global aggregate market share was down 30 basis points as we are now annualizing very strong growth in European-focused markets. Twenty-five of our top 50 category country combinations held or grew share for the quarter. On the bottom line, core earnings per share were $1.40, up 2% versus the prior year. On a currency-neutral basis, core EPS increased 6%. Core gross margin increased 140 basis points and core operating margin decreased 100 basis points. Strong productivity improvements of 250 basis points, funding a meaningful increase in marketing investment, currency-neutral core operating margin decreased 60 basis points. Adjusted free cash flow productivity was 148%. We returned nearly $4 billion of cash to share owners this quarter, over $2.4 billion in dividends, and $1.5 billion in share repurchases. In summary, we met or exceeded each of our going-in target ranges for the year: organic sales growth, core EPS growth, free cash productivity and cash returns to share owners, strong performance again this year in a challenging economic and geopolitical environment. With that, I\u2019ll pass it over to Jon.","evidence_gemma_new":null,"evidence_llama_3_3":"adjusted free cash flow productivity fourth quarter","evidence_qwen_3_30b":"adjusted free cash flow productivity 148%","gemma_new_max":null,"gemma_new_min":null,"llama_3_3_max":148.0,"llama_3_3_min":148.0,"qwen_3_30b_max":148.0,"qwen_3_30b_min":148.0}
{"symbol":"PG","year":2024,"quarter":4,"date":"2024-Q4","chunk_id":1,"sub_chunk_id":0,"centroid_label":"adjusted free cash for productivity","agreed_value":105.0,"count":2,"chunk":"Andre Schulten: Good morning everyone. Joining me on the call today are Jon Moeller, Chairman of the Board, President and Chief Executive Officer, and John Chevalier, Senior Vice President, Investor Relations. I will start with an overview of results for fiscal year \u201924 and for the fourth quarter. Jon will add perspective on our strategic focus areas and capabilities and will close with guidance for fiscal \u201925 and then take your questions. Fiscal \u201924 was another very strong year. Execution of our integrated strategies enabled the company to meet or exceed going-in guidance ranges for organic sales growth, core EPS growth, cash productivity and cash return to share owners, all this despite significant market level headwinds that were largely unknown when we gave our initial outlook for the year. Organic sales growth for the fiscal year was 4%, our sixth consecutive year of 4% or better organic growth against a strong 7% comp in the prior year and in more challenging market conditions. Growth was broad-based across business units with eight of 10 product categories growing organic sales. Home care, hair care and grooming were up high single digits, oral care and feminine care up mid singles. Fabric care, family care, and personal healthcare grew low single digits. Skin and personal care and baby care were down low singles. Focus markets grew 4% for the year with North America up 5% and Europe focus markets up 8%. Greater China organic sales were down 9% versus the prior year, driven by soft market conditions and brand-specific headwinds on SK-II. Enterprise markets were up 6%, led by Latin America with 15% organic sales growth. Ecommerce sales increased 9%, now representing 18% of the total company. Our strategy focused on driving market growth continues to drive share growth for P&G. All channel market value sales in the U.S. categories in which we compete grew around 5% in fiscal \u201924. P&G consumption grew ahead of our fair share of category growth, driving modest value and volume share growth for the year. We grew global aggregate value share. Thirty of 50 category country combinations held or grew share for the year. Importantly, this share growth is broad-based. Six of 10 product categories grew share globally over the past year. Core earnings per share were $6.59, up 12% for the year. Core gross margin improved 360 basis points and core operating margin increased 170 basis points. Over $2.3 billion of productivity improvements were enabled by a significant increase in investment in superior products, packages and brand communication to drive market growth. On a currency-neutral basis, core EPS was up 16% and core operating margin increased 250 basis points. Adjusted free cash flow productivity was 105%. We increased our dividend by 7% and returned over $14 billion of value to share owners, $9.3 billion in dividends, and $5 billion in share repurchase. Moving onto fourth quarter results, organic sales rounded down to 2%, volume was up 2%, solid sequential progress. Pricing was up 1% and mix was in line with prior year. Growth continues to be broad-based across categories and regions. Nine of 10 product categories grew or held organic sales in the quarter. Home care, hair care, grooming and oral care were each up high single digits, feminine care up low singles, skin and personal care, fabric care, personal health care and family care were each in line with prior year, and baby care was down mid singles. Five of seven regions grew organic sales with focus markets up 2% and enterprise markets up 2% for the quarter. Organic sales in North America grew 4% with four points of volume growth and price mix, in line with prior year. European focus markets organic sales were up 2% against a strong 12% comp in the base period. Volume was up 3%. Price mix was down a point as the region has now fully annualized prior year inflation-driven pricing. Latin America organic sales were up 8%, including high singles growth in Brazil. Of note, Argentina\u2019s overall contribution to organic sales for the region and the company were lower than the last two quarters due to the divestiture of a portion of the business in March and a notable decline in shipment volume for the remaining categories. As was announced earlier this month, we have divested the remaining portions of our operations in Argentina. As a result, Argentina will be largely removed from our organic sales reporting in fiscal year \u201925. Select P&G brands will still be available in the market through a distribution and licensing agreement with the new owner of the operations. Greater China organic sales declined 8%. Underlying market conditions have remained weak and the 6\/18 key consumption period was down sharply versus prior year, just as we saw in the 11\/11 Chinese New Year and Valentine\u2019s Day shopping periods. Also, brand-specific headwinds have continued on SK-II due to its Japanese heritage. We expect general market trends and the dynamics related to SK-II to improve over time, though it will likely be another quarter or two until we return to growth. Volume trends in some Europe enterprise and Asia Pacific, Middle East, Africa countries such as Egypt, Saudi Arabia, Turkey, Indonesia, Malaysia and Russia have remained soft. We expect these headwinds to moderate or annualize over the coming periods. Global aggregate market share was down 30 basis points as we are now annualizing very strong growth in European-focused markets. Twenty-five of our top 50 category country combinations held or grew share for the quarter. On the bottom line, core earnings per share were $1.40, up 2% versus the prior year. On a currency-neutral basis, core EPS increased 6%. Core gross margin increased 140 basis points and core operating margin decreased 100 basis points. Strong productivity improvements of 250 basis points, funding a meaningful increase in marketing investment, currency-neutral core operating margin decreased 60 basis points. Adjusted free cash flow productivity was 148%. We returned nearly $4 billion of cash to share owners this quarter, over $2.4 billion in dividends, and $1.5 billion in share repurchases. In summary, we met or exceeded each of our going-in target ranges for the year: organic sales growth, core EPS growth, free cash productivity and cash returns to share owners, strong performance again this year in a challenging economic and geopolitical environment. With that, I\u2019ll pass it over to Jon.","evidence_gemma_new":"adjusted free cash flow productivity","evidence_llama_3_3":null,"evidence_qwen_3_30b":"adjusted free cash flow productivity 105%","gemma_new_max":105.0,"gemma_new_min":105.0,"llama_3_3_max":null,"llama_3_3_min":null,"qwen_3_30b_max":105.0,"qwen_3_30b_min":105.0}
{"symbol":"PG","year":2024,"quarter":4,"date":"2024-Q4","chunk_id":3,"sub_chunk_id":0,"centroid_label":"adjusted free cash for productivity","agreed_value":90.0,"count":2,"chunk":"Andre Schulten: Thank you Jon. As we enter fiscal \u201925, we continue to expect the environment around us to remain volatile and challenging, from input costs, currencies, to consumers, competitors, retailers, and geopolitical dynamics. As Jon said, we\u2019ll navigate these challenges with our dynamic integrated strategy guided by consumers every step of the way. Our going-in guidance for fiscal \u201925 is consistent with our long term algorithm. On the top line, we currently expect the markets in which we compete to deliver local currency sales growth in the range of 3% to 4% for the year. Our objective is to grow organic sales modestly ahead of the underlying growth in these markets. This translates to an organic sales growth guidance range of 3% to 5% for the fiscal year - apologies, I had my mic muted. On the bottom line, our algorithm calls for mid to high single digit core earnings per share growth. Our core EPS guidance range for fiscal \u201925 starts the year at 5% to 7% versus fiscal \u201924 core EPS of $6.59. This guidance equates to a range of $6.91 to $7.05 per share, $6.98 up 6% at the center of the range. This outlook includes a commodity cost headwind of approximately $300 million after tax and a foreign exchange headwind of approximately $200 million after tax. Combined, foreign exchange and commodities are projected to be a headwind of $0.20 per share for fiscal \u201925, or a 3 percentage point drag on core EPS growth. In addition, the prior fiscal year included benefits from several minor brand divestitures, and we expect a somewhat higher tax rate in the new fiscal year. Combined, these are an additional $0.10 to $0.12 headwind to core EPS. We expect adjusted free cash flow productivity of 90% for the year. This includes an increase in capital spending as we add capacity in several categories. We expect to pay around $10 billion in dividends and to repurchase $6 billion to $7 billion of common stock, combined a plan to return $16 billion to $17 billion of cash to share owners this fiscal year. While we are clear eyed on the challenges in the market and the work needed to continue to drive the business, fiscal \u201925 guidance for top line, bottom line and cash are each consistent with our long term algorithm. A few items for you to consider as you build your quarter-to-quarter estimates. On the top line, please keep in mind that the July to September period has the most difficult comp for the year, and many of the market-level challenges we\u2019ve noted will not fully annualize or improve materially in our estimate until the second half of the year. On the bottom line, the foreign exchange and commodity headwinds skew a bit toward the front half of the year, and the back half comps include the benefit of the tax items and minor brand divestitures I mentioned earlier. This outlook is based on current market growth rate estimates, commodity prices and foreign exchange rates. Significant additional currency weakness, commodity cost increases, geopolitical disruptions, major supply chain disruptions, or store closures are not anticipated within the guidance ranges. With that, I\u2019ll hand it back to Jon for his closing thoughts.","evidence_gemma_new":"adjusted free cash flow productivity for the year","evidence_llama_3_3":null,"evidence_qwen_3_30b":"adjusted free cash flow productivity fiscal \u201925","gemma_new_max":90.0,"gemma_new_min":90.0,"llama_3_3_max":null,"llama_3_3_min":null,"qwen_3_30b_max":90.0,"qwen_3_30b_min":90.0}
{"symbol":"PG","year":2023,"quarter":1,"date":"2023-Q1","chunk_id":1,"sub_chunk_id":0,"centroid_label":"core earnings per share","agreed_value":1.57,"count":3,"chunk":"Andre Schulten: Good morning, everyone. Joining me on the call today are Jon Moeller, Chairman of the Board, President and Chief Executive Officer; and John Chevalier, Senior Vice President, Investor Relations. We're going to keep our prepared remarks brief and then turn straight to your questions. Execution of our integrated strategies continued to yield good results in the July to September quarter and provides a solid start to the fiscal year. We're growing organic sales in all 10 categories, holding global aggregate market share, accelerating productivity savings, and improving supply sufficiency. Together, this progress enables us to maintain guidance ranges for organic sales growth, core EPS growth, free cash flow productivity and cash return to shareowners. Despite continued high commodity and transportation costs, inflation in the upstream supply chain and in our own operations, accelerating headwinds from foreign exchange, geopolitical issues, COVID disruptions impacting consumer confidence and historically high inflation impacting consumer budgets. Moving to the first quarter numbers. Organic sales grew 7%, pricing added 9 points to sales growth and mix was up 1 point. Volume declined 3 points, primarily due to lower shipments in Russia. Growth was broad-based across business units with each of our 10 product categories growing organic sales. Personal Health Care grew high teens. Feminine Care was up double digits. Fabric Care and Home Care were up high single digits. Baby Care, Grooming, Hair Care and Skin and Personal Care were each up mid-singles. Family Care and Oral Care grew low single digits. Focus markets grew 4% for the quarter, with the US up 5%. Greater China organic sales were down 4% versus the prior year, modest sequential improvement in the market still affected by COVID lockdowns and weak consumer confidence. Longer term, we expect China to return to strong underlying growth rates. Enterprise markets were up 16% with each of the three regions, up 13% or more. Global aggregate market share was in line with prior year, with 26 of our top 50 category country combinations holding or growing share. In the US, all outlet value share was in line with prior year with 6 of 10 categories holding or growing shares. On the bottom line, core earnings per share were $1.57, down 2% versus prior year. On a currency-neutral basis, core EPS increased 7%. Core margin decreased 160 basis points and currency-neutral core margin was down 130 basis points. Higher commodity materials and freight cost impacts combined with a 550 basis point hit to gross margins. Mix was 120-point headwinds, productivity savings and pricing provided 580 basis points of offset. SG&A costs as a percentage of sales were lower by 90 basis points as sales leverage and productivity improvements more than offset inflation and foreign exchange impacts. Core operating margin decreased 70 basis points, currency-neutral core operating margin increased 10 basis points, productivity improvements were a 230 basis help to the quarter. Adjusted free cash flow productivity was 86%, we returned nearly $6.3 billion of cash to shareowners, approximately $2.3 billion in dividends and $4 billion share repurchase. In summary, considering the backdrop of a very challenging cost and operating environment, results across top line, bottom line and cash to start the fiscal year. Our team continues to operate with excellence, executing the integrating strategies that have enabled strong results over the past four years, which are the foundation for balanced growth and value creation. A portfolio of daily use products, many providing cleaning, health and hygiene benefits in categories where performance plays a significant role in brand choice. The priority across the five vectors of product, package, brand communication, retail execution and value. Productivity improvement in all areas of our operations to fund investments is a priority offset cost and currency challenges, expand margins and deliver strong cash generation. An approach of constructive disruption, a willingness to change, adapt and create new trends and technologies that will shape our industry for the future especially important in this volatile environment. Finally, an organization that is increasingly more empowered, agile and accountable with little overlap or redundancy flowing to new demands, seamlessly supporting each other to deliver against our priorities around the world. Going forward, there are four areas we are driving to improve the execution of integrated strategies: Supply Chain 3.0, digital acumen, environmental sustainability and employee value equation. These are not new or separate strategies. They are necessary elements in continuing to build the priority, reduce cost to enable investment and value creation and to further strengthen our organization. Jon touched on each of these in our July earnings call and they will be a central part of our discussion at Investor Day in November. Our strategic choices on portfolios, priority, productivity, constructive disruption and organization are not independent strategies. They reinforce and build on each other, when executed well, they grow markets, which in-turn grow share, sales and profit. We continue to believe that the best path forward to deliver sustainable top and bottom-line growth is to double down on these integrated strategies, starting with a commitment to deliver irresistibly superior propositions to consumers and retail partners. Now moving on to guidance, we fully expect more volatility in costs, currencies and consumer dynamics as we move through the fiscal year. However, we think the strategies we've chosen, the investments we've made and the focus on executional excellence has positioned us well to manage through this volatility over time. Raw and packaging material costs inclusive of commodities and supplier inflation have remained high since we gave our initial outlook for the year in late July. Based on current spot prices at latest contracts, we now estimate a $2.4 billion after-tax headwind in fiscal 2023. Freight costs have also remained high. Though we have seen some easing in spot prices, we've made a modest downward adjustment in our outlook and now expect a $200 million after-tax headwind on freight and transportation costs in fiscal 2023. Foreign exchange has continued its strong move against us as the US dollar has strengthened significantly against essentially all major currencies around the world. Based on current exchange rates, we forecast a $1.3 billion after-tax impact, an incremental hit of $400 million versus our initial outlook for the year. Combined, headwinds from these items are now estimated at approximately $3.9 billion after tax or $1.57 a share, a 27 percentage point headwind to EPS growth for the year. We will offset a portion of these cost headwinds with price increases and productivity savings. We will continue to invest in irresistible superiority, which is even more important as we compete in some markets with local or non-US based competitors that don't see the same foreign exchange rate impact. As we've said before, we believe this is a rough patch to grow through not a reason to reduce investment in the business. As I noted at the outset, our good first quarter results enable us to confirm our guidance ranges for the fiscal year, across all key metrics. We continue to expect organic sales growth in the range of 3% to 5%. On the bottom line, we are maintaining our outlook of core earnings per share growth in a range of in line plus 4% versus prior year. However, the steep increase in foreign exchange impact pushes our current expectations towards the lower end of the range. We continue to forecast adjusted free cash flow productivity of 90%. We expect to pay around $9 billion in dividends and to repurchase $6 billion to $8 billion in common stock, combined a plan to return $15 billion to $17 billion of cash to shareowners this fiscal year. The outlook is based on current market growth rate estimates, commodity prices and foreign exchange rates. Significant additional currency weakness, commodity cost increases, geopolitical disruption, major production stoppages or store closures are not anticipated within this guidance range. To conclude, the macroeconomic and market level consumer challenges we're facing are not unique to P&G, and we won't immune to the impact. We've attempted to be realistic about these impacts in our guidance and transparent in our commentary. As we've said before, we believe this is a rough patch to grow through not a reason to reduce investment in the long-term health of the business. We're doubling down on the strategy that has been working well and delivering strong results. We'll continue to step forward towards the opportunities that we may fully invest in our business. We remain committed to driving productivity improvements to fund growth investments, mitigate input cost challenges and to maintain balanced top and bottom line growth. With that, we'll be happy to take your questions.","evidence_gemma_new":"core earnings per share","evidence_llama_3_3":"core earnings per share July to September quarter","evidence_qwen_3_30b":"core earnings per share July to September quarter","gemma_new_max":1.57,"gemma_new_min":1.57,"llama_3_3_max":1.57,"llama_3_3_min":1.57,"qwen_3_30b_max":1.57,"qwen_3_30b_min":1.57}
{"symbol":"PG","year":2023,"quarter":2,"date":"2023-Q2","chunk_id":1,"sub_chunk_id":0,"centroid_label":"core earnings per share","agreed_value":1.59,"count":3,"chunk":"Andre Schulten : Good morning. Joining me on the call today are Jon Moeller, Chairman of the Board, President and Chief Executive Officer; and John Chevalier, Senior Vice President, Investor Relations. We're going to keep our prepared remarks brief and then turn straight to your questions. Execution of our integrated strategies continued to yield good results in the October to December quarter, growing organic sales in nine of 10 categories, holding global aggregate market share, continued productivity savings, improving supply efficiency, sustained investment and superiority of our brands across all five vectors: product, package, communication, go-to-market and value, continue to pay benefits for our consumers and retail partners and in turn, for P&G shareholders. Progress against our plan fiscal year-to-date enables us to increase the guidance range for organic sales growth and maintain ranges for core EPS growth, free cash flow productivity and cash return to shareowners. Moving to the second quarter numbers. Organic sales grew 5%, pricing at a 10 points to sales growth and mix was up 1 point. Volume declined 6 points driven by a combination of market contraction, trade inventory reductions and portfolio reduction in Russia. Growth was broad-based across business units with each of our 10 product categories growing or holding organic sales. Personal Health Care grew high teens, Feminine Care, Fabric Care and Home Care were up high single digits. Hair Care was up mid-single digits. Baby Care, Family Care, Oral Care and Skin and Personal Care were each up low single digits. Grooming was in line with prior year. Focus markets grew 3% for the quarter, with the U.S. up 6%. Greater China organic sales were down 7% versus prior year, as the market continued to be impacted by COVID lockdowns and weaker consumer confidence. We continue to expect a slow recovery as consumer mobility increases over the coming quarters. Long term, we expect China to return to strong underlying growth rates. Enterprise markets were up 14% with each of the three regions up 10% or more. Global aggregate market share was in line with prior year with 27 of our top 50 category country combinations holding or growing share. In the U.S., all outlet value share was in line with prior year with seven of 10 categories holding or growing share. U.S. volume share is up 0.5 point versus the prior year quarter, delivering sequential improvement from quarter one. Recent innovations like Downy Rinse and Refresh in fabric enhancers and Dawn Powerwash in hand dishwashing are extending superiority advantages and driving value and volume share growth. Innovation also serves as a catalyst for pricing across our other brands and forms in their category segments. On the bottom line, core earnings per share were $1.59, down 4% versus prior year. On a currency-neutral basis, core EPS increased 5%. Core operating margin decreased 170 basis points, primarily due to gross margin pressure from commodities and foreign exchange. Currency-neutral core operating margin decreased 70 basis points. Productivity improvements were 110 basis points help to the quarter. Adjusted free cash flow productivity was 72%, primarily due to a temporary reduction in payables. We returned $4.2 billion of cash to shareowners, approximately $2.2 billion in dividends and $2 billion in share repurchase. In summary, considering the backdrop of a very challenging cost and operating environment, continued solid results across the top line, bottom line and cash for the first half of the fiscal year. Moving on to strategy. Our team continues to operate with excellence, executing the integrated strategies that have enabled strong results over the past four years, and that are the foundation for balanced growth and value creation. A portfolio of daily use products, many providing cleaning, health and hygiene benefits in categories where performance plays a significant role in brand choice. Ongoing commitment to and investment in irresistible superiority across the five vectors of product, package, brand communication, retail execution and value. As discussed during our Investor Day in November, we are renewing our superiority standards to reflect the dynamic nature of this strategy. Productivity improvement in all areas of our operations to fund investments in superiority offset cost and currency challenges, expand margins and deliver strong cash generation. An approach of constructive disruption, a willingness to change, adapt and create new trends and technologies that will shape our industry for the future, especially important in this volatile environment. Finally, an organization that is increasingly more empowered, agile and accountable with little overlap or redundancy, flowing to new demands, seamlessly reporting each other to deliver against our priorities around the world. Going forward, there are four areas we are driving to improve the execution of the integrated strategies, Supply Chain 3.0, digital acumen, environmental sustainability and employee value creation. These are not new or separate strategies. They are necessary elements in continuing to build superiority, reduce cost to enable investment and value creation and to further strengthen our organization. We expanded on each of these at our Investor Day in November. If you weren't able to attend or listen in remotely, I encourage you to review the materials on our IR events website. Our strategic choices on portfolio, superiority, productivity, constructive disruption and organization are interdependent strategies. They reinforce and build on each other. When executed well, they grow markets, which in turn grow share, sales and profit. We continue to believe that the best path forward to deliver sustainable top and bottom line growth is to double down on these integrated strategies starting with commitment to deliver irresistible superior propositions to consumers and retail partners. Now moving to guidance. We continue to expect more volatility in costs, currencies and consumer dynamics as we move through the second half of the fiscal year. However, we think the strategies we've chosen, the investments we've made and the focus on executional excellence have positioned us well to manage through this volatility over time. Raw and pack material costs inclusive of commodities and supplier inflation are still a significant headwind versus last fiscal year, though we have seen some modest sequential improvement. Based on current spot prices and latest contracts, we now estimate a $2.3 billion after-tax headwind in fiscal '23. Foreign exchange is also a significant year-on-year headwind. But like raw and pack materials, we've seen modest directional improvement. Based on current exchange rates, we now forecast a $1.2 billion after-tax impact for the fiscal year. Freight costs remain higher versus prior year, and we continue to expect the $200 million after-tax headwind in fiscal '23. Combined headwinds from these items are now estimated at approximately $3.7 billion after tax, $1.50 per share, a 26 percentage point headwind to EPS growth for the year. For perspective, recall that we began the year expecting approximately $1.33 of cost and FX headwinds. So despite some modest relief since last quarter, our current outlook is still $0.17 worse than our ingoing position. We are offsetting a portion of these cost headwinds with price increases and productivity savings. We are continuing to invest in irresistible superiority, and we are investing to improve our supply capacity, resilience and flexibility. As we've said before, we believe this is a bottom line rough patch to grow through with continued investment in the business and underlying strategies. As I noted at the outset, our solid first half results enable us to raise our organic sales outlook and confirm our guidance ranges on EPS and cash. We are increasing our guidance for organic sales growth from a range of 3% to 5% to a range of 4% to 5%. Within this company-wide range, we -- there are many puts and takes. As I mentioned, we expect to see some modest improvement in China, but European markets have softened as high inflation affects consumer spending. The U.S. remains relatively strong to date, and most enterprise markets remain resilient. On the bottom line, we're maintaining our outlook of core earnings per share growth in the range of in line to plus 4% versus prior year. The significant headwinds from input costs and foreign exchange keep our current expectations towards the lower end of this range. This guidance also reflects our intent to remain fully invested to drive our superiority strategy and increase investments as opportunities are available. We continue to forecast adjusted free cash flow productivity of 90%. We expect to pay around $9 billion of dividends and to repurchase $6 billion to $8 billion of common stock, combined a plan to return $15 billion to $17 billion of cash to shareowners this fiscal year. This outlook is based on current market growth rate estimates, commodity prices and foreign exchange rates. Significant additional currency weakness, commodity cost increases, geopolitical disruptions, major production stoppages or store closures are not anticipated within these guidance ranges. To conclude, we continue to face high year-over-year commodity and transportation cost inflation in the upstream supply chain and in our own operations, headwinds from foreign exchange, geopolitical issues, COVID disruptions impacting consumer confidence and historically high inflation impacting consumer budgets. These macroeconomic and market level consumer challenges we're facing are not unique to P&G, and we won't be immune to the impact. We attempt to be realistic about these impacts in our guidance and transparent in our commentary. As we've said before, we believe this is a rough patch to grow through, not a reason to reduce investment in the long-term health of the business. We're doubling down on the strategy that has been working well and is delivering strong results. We continue to step forward towards our opportunities, and we remain fully invested in our business. We are committed to driving productivity, improvements to fund growth investments, mitigate input cost challenges and to deliver balanced top and bottom line growth. With that, we're happy to take your questions.","evidence_gemma_new":"core earnings per share","evidence_llama_3_3":"core earnings per share prior year","evidence_qwen_3_30b":"core earnings per share $1.59 down 4% October to December quarter","gemma_new_max":1.59,"gemma_new_min":1.59,"llama_3_3_max":1.59,"llama_3_3_min":1.59,"qwen_3_30b_max":1.59,"qwen_3_30b_min":1.59}
{"symbol":"PG","year":2023,"quarter":3,"date":"2023-Q3","chunk_id":1,"sub_chunk_id":0,"centroid_label":"core earnings per share","agreed_value":1.37,"count":3,"chunk":"Andre Schulten: Good morning, everyone. Joining me on the call today are Jon Mueller, Chairman of the Board, President and Chief Executive Officer; and John Chevalier, Senior Vice President, Investor Relations. Execution of our integrated strategies drove strong results in the January to March quarter. Organic sales grew across all 10 categories in -- and in six out of seven regions. Global aggregate market share is holding steady, productivity savings are accelerating and enabling sustained investment in the superiority of our brands. In-market execution across all five vectors of superiority is strong and consistent: product, package, communication, go-to-market and value. Superior offerings continue to pay benefits for our consumers and retail partners and in turn for P&G shareholders. Progress against our plan enables us to increase guidance for organic sales growth and cash return to shareowners, and to maintain guidance for core EPS growth and free cash flow productivity. Moving to third quarter numbers. Organic sales grew more than 7%. Pricing added 10 points to sales growth and mix was a modest positive contributor for the quarter. Volume declined 3 points, including a 1 point headwind from portfolio reduction in Russia. Growth was broad based across business units with each of our 10 product categories growing organic sales. Feminine Care was up low teens, Personal Health Care, Home Care and Hair Care each grew double digits, Grooming, Oral Care and Fabric Care grew high single digits, Baby Care was up mid singles, and Family Care and Skin and Personal Care grew low singles. Growth was also broad based across geographies with six of seven regions growing organic sales. Focus markets grew 5% for the quarter. Organic sales in the U.S. were up 6%, including modest unit volume growth. Europe focus markets were up 8%. Greater China organic sales were up 2% versus prior year, as the market begins to recover from COVID lockdowns and as consumer confidence improves. We continue to expect further recovery as consumer mobility increases over the coming quarters. Longer-term, we expect China to return to mid singles underlying market growth rates for our portfolio of categories. Enterprise markets were up 15% with Latin America up nearly 30% and Europe enterprise markets up low teens. This is the fourth consecutive quarter in which all five sectors grew organic sales double digits in enterprise markets. Global aggregate value share was in line with prior year, with 30 of our top 50 category country combinations holding or growing share. Excluding Russia, global value share was up 20 basis points. In the U.S., all outlet value share was up 40 basis points versus prior year with eight of 10 categories holding or growing share in the quarter. U.S. volume share is up 90 basis points versus the prior year, driven by 2 points of absolute volume consumption growth in a market that is still down modestly versus prior year. Strong U.S. share growth in Personal Care has been led by innovation on the native brand and deodorants, as well as successful extension into body wash. Cascade Platinum Plus has driven strong share growth in auto dishwashing, and Dawn share continues to be up more than 1 point with ongoing leverage from the power wash and easy squeeze innovations. Vicks continues to be a growth leader in Personal Health Care, and we've delivered strong share growth in the Metamucil and Pepto-Bismol brands. In Europe, the new four-chamber Ariel Platinum PODS are driving strong consumer demand in Fabric Care. Fairy Power Spray is growing the dish category and building market share in Home Care. The new GilletteLabs exfoliating razor, male and female intimate grooming innovations and cardboard packaging upgrades are driving strong growth in grooming. Moving to the bottom-line. Core earnings per share were $1.37, up 3% versus prior year. On a currency neutral basis, core EPS increased 13%, good progress as we faced $0.31 per share of cost and foreign exchange headwinds in the quarter. Core operating margin increased 40 basis points, as 150 basis points of gross margin expansion were partially offset by SG&A investments and inflation impacts. Currency-neutral core operating margin increased 160 basis points. Productivity improvements were a 290 basis point help to the quarter. Adjusted free cash flow productivity was at 92%. We returned $3.6 billion of cash to shareowners, approximately $2.2 billion in dividends and $1.4 billion in share repurchase. Last week, we announced a 3% increase in our dividend, again reinforcing our commitment to return cash to shareowners. This is the 67th consecutive annual dividend increase and the 133rd consecutive year P&G has paid a dividend. In summary, against what is still a challenging cost and operating environment, continued good results across top-line, bottom-line and cash for the third quarter. Our team continues to operate with excellence, executing the integrated strategies that have enabled strong results over the past four years and that are the foundation for balanced growth and value creation. A portfolio of daily use products, many providing cleaning, health and hygiene benefits in categories where performance plays a significant role in brand choice. Ongoing commitment to and investment in irresistible superiority across the five vectors of product, package, brand communication, retail execution and value, we are again raising the bar on our superiority standards to reflect the dynamic nature of this strategy. Productivity improvements in all areas of operations to fund investments in superiority offset cost and currency challenges, extend margins and deliver strong cash generation, an approach of constructive disruption, a willingness to change, adapt and create new trends and technologies that will shape our industry for the future. Finally, an organization that is increasingly more empowered, agile and accountable with little overlap or redundancy flowing to new demands seamlessly supporting each other to deliver against our priorities around the world. There are four areas we are driving to improve the execution of the integrated strategies: Supply Chain 3.0, digital acumen, environmental sustainability and employee value equation. These are not new or separate strategies, they are necessary elements in continuing to build superiority, reduce costs to enable investment and value creation and to further strengthen our organization. Our strategic choices on portfolio, superiority, productivity, constructive disruption and organization are interdependent strategies. They reinforce and build on each other. When executed well, they grow markets, which in turn grow share, sales and profit. We continue to believe that the best path forward to deliver sustainable top- and bottom-line growth is to double down on these integrated strategies, starting with the commitment to deliver irresistibly superior propositions to consumers and retail partners. Now, moving to guidance. As we work towards the end of the fiscal year, we are cautiously optimistic. We remain confident in our strategies and the organization's ability to execute them with excellence. We continue to expect more volatility in the macro and consumer environment, and expect sustained pressure in costs and foreign exchange as we move forward. On the whole, our consumer markets remained relatively resilient, with U.S. and China volume trends improving, but with inflation pressures in Europe weighing more heavily on consumption. We continue to think the strategies we've chosen, the investments we've made and the focus on executional excellence have positioned us well to manage through this volatility over time. Raw and packaging material costs, inclusive of commodities and supply inflation, have largely stabilized over the last few months, but still remain a significant headwind versus last fiscal year. Based on current spot prices and latest contracts, we now estimate a $2.2 billion after-tax headwind in fiscal '23. Foreign exchange is also a significant year-on-year headwind and rates since last quarter have moved modestly against us. Based on current exchange rates, we now forecast a $1.3 billion after-tax impact to the fiscal year. Freight costs have moderated throughout the year, and we now expect them to be roughly in line with prior year. Combined headwinds from these items are now estimated at approximately $3.5 billion after-tax, or $1.40 per share, a 24 percentage point headwind to EPS growth for the year. In addition to these impacts, we are also facing higher inflation in wages and benefits and higher year-on-year net interest expense. We are offsetting a portion of these cost headwinds with price increases and productivity savings. We are continuing to invest in irresistible superiority and we are investing to improve our supply capacity, resilience and flexibility. As noted in the outset, our strong results over the first three quarters have enabled us to raise our organic sales outlook and confirm our guidance ranges on EPS and cash. We are increasing our guidance for organic sales growth from a range of 4% to 5% to approximately 6% for the fiscal year. This would put fiscal '23 in line with 6% top-line growth we've averaged over the last four years, which were 5%, 6%, 6% and 7% from fiscal '19 through '22, respectively. On the bottom-line, we're maintaining our outlook of core earnings per share growth in the range of in line to plus 4% versus prior year. Significant headwinds from input costs and foreign exchange keep our current expectations toward the lower end of this range. This guidance also reflects our intent to remain fully invested to drive our superiority strategy and increase investments as we value -- as value creating opportunities are available. We continue to forecast adjusted free cash flow productivity of 90%. We now expect to pay nearly $9 billion in dividends and to repurchase $7.4 billion to $8 billion in common stock, combined a plan to return $16 billion to $17 billion of cash to shareowners this fiscal year. This outlook is based on current market growth estimates, commodity prices and foreign exchange rates. Significant additional currency weakness commodity cost increases, geopolitical disruption, major production stoppages or store closures are not anticipated within this guidance range. To conclude, we continue to face highly volatile consumer and macro dynamics. We also continue to see high year-over-year input costs, inflation in the upstream supply chain and in our own operations. Headwinds from foreign exchange, geopolitical issues, and historically high inflation impacting consumer budgets. As we said before, we believe this is a rough patch to grow through, not a reason to reduce investment in the long-term health of our business. We're doubling down on the strategy that has been working well and is delivering strong results. We continue to step forward. We remain fully invested in our business. We remain committed to driving productivity improvements to fund growth investments, mitigate input cost challenges and to deliver balanced top- and bottom-line growth. With that, we'll be happy to take your questions.","evidence_gemma_new":"Core earnings per share","evidence_llama_3_3":"Core earnings per share prior year","evidence_qwen_3_30b":"core earnings per share January to March quarter","gemma_new_max":1.37,"gemma_new_min":1.37,"llama_3_3_max":1.37,"llama_3_3_min":1.37,"qwen_3_30b_max":1.37,"qwen_3_30b_min":1.37}
{"symbol":"PG","year":2023,"quarter":4,"date":"2023-Q4","chunk_id":1,"sub_chunk_id":0,"centroid_label":"core earnings per share","agreed_value":5.9,"count":3,"chunk":"Andre Schulten: With me today are Jon Moeller, Chairman of the Board, President and Chief Executive Officer, and John Chevalier, Senior Vice President, Investor Relations. I\u2019ll start with an overview of results for fiscal year \u201923 and the fourth quarter. Jon will add perspective on our strategic focus areas and capabilities and will close with guidance for fiscal \u201924 and then take your questions. Fiscal \u201923 was another very strong year. Execution of our integrated strategy continues to yield broad-based strong sales growth across categories and regions, strong earnings in the face of significant cost headwinds, and continued strong return on cash to P&G shareholders. Organic sales for the fiscal year grew 7%, our second consecutive year of 7% organic sales growth and fifth consecutive year of 5% or better organic growth starting fiscal 2019 - 5%, 6%, 6%, 7% and 7%. Growth was broad-based across business units with all 10 of our product categories growing organic sales. Personal healthcare grew mid-teens, feminine care grew double digits, fabric care, home care and hair care up high single digits, skin and personal care, baby care, family care and grooming each grew mid singles. Oral care grew low single digits. Focus markets were up 5% for the year and we delivered strong results in our largest and most profitable market, the United States, with organic sales growing 6% on top of a strong 8% growth comp in the base period. Greater China organic sales were down low single digits versus the prior year, with trends improving in the back half as the market continues to slowly recover. Enterprise markets were up 15% led by Latin America with 24% organic sales growth. Ecommerce sales increased 7%, now representing 17% of total company. Our strategy focused on driving market growth is in turn driving share growth for P&G. All channel market value sales in the U.S. categories in which we compete grew approximately 7% in fiscal \u201923. P&G consumption grew ahead of fair share of category growth, driving modest value share growth and volume share up 50 basis points for the year. We held global aggregate market share. Twenty-nine of our top 50 category-country combinations held or grew share for the year. Importantly, this share growth is broad-based. Seven of 10 product categories grew share globally over the past year. Core earnings per share were $5.90, up 2% for the year despite a 24 percentage point earnings growth headwind, or $1.38 from share from higher material costs and foreign exchange. On a currency neutral basis, core EPS was up 11%. Adjusted free cash flow productivity was 95%. We increased our dividend by 3% and returned over $16 billion of value to share owners, $9 billion in dividends and $7.4 billion in share repurchase. Moving to the April to June quarter, organic sales grew 8%. We have now delivered seven consecutive quarters with 5% or better organic sales growth. Pricing contributed seven points to organic sales growth, mix was up 2 points, volume declined one point, improving sequentially versus the March quarter, as expected. These strong company results are grounded in broad-based category and geographic strength. Each of our 10 product categories grew organic sales in the quarter. Skin and personal care, personal healthcare, home care, feminine care, and family care, five of our 10 categories, each grew double digits. Baby care, hair care and grooming grew high singles, fabric care grew mid singles, and oral care was up low single digits. Each of our seven regions grew organic sales with focus markets up 7% and enterprise markets up 13% for the quarter. Organic sales in the U.S. grew 6%. Importantly, this includes 3 points of volume growth, a return to positive volume in our largest market for the first time in five quarters. Greater China organic sales grew 4%. We continue to see sequential market recovery, but as expected at a slow pace. European focused market organic sales were up 12% despite volume pressure from wider pricing gaps. In enterprise markets, Latin America led the growth with organic sales up 22%. Global aggregate market share increased 10 basis points. Twenty nine of our top 50 category-country combinations held or grew share for the quarter. On the bottom line, core earnings per share were $1.37, up 13% versus the prior year. On a currency neutral basis, core EPS increased 22%. Core operating margin increased 190 basis points as benefits from strong sales growth and productivity improvements more than offset higher material cost, foreign exchange headwinds, wage and benefit inflation, and reinvestment in higher media reach and frequency. Currency neutral operating margin increased 310 basis points. Adjusted free cash flow productivity was 136%. We returned approximately $2.3 billion of cash to share owners in the quarter. In summary, we met or exceeded each of our going-in target ranges for the year: organic sales growth, core EPS growth, free cash flow productivity, and cash returned to share owners, strong performance again this year in a very difficult operating environment. Now I\u2019ll pass it over to Jon.","evidence_gemma_new":"core earnings per share","evidence_llama_3_3":"core earnings per share fiscal year '23","evidence_qwen_3_30b":"core earnings per share fiscal year","gemma_new_max":5.9,"gemma_new_min":5.9,"llama_3_3_max":5.9,"llama_3_3_min":5.9,"qwen_3_30b_max":5.9,"qwen_3_30b_min":5.9}
{"symbol":"PG","year":2023,"quarter":4,"date":"2023-Q4","chunk_id":1,"sub_chunk_id":0,"centroid_label":"core earnings per share","agreed_value":1.37,"count":2,"chunk":"Andre Schulten: With me today are Jon Moeller, Chairman of the Board, President and Chief Executive Officer, and John Chevalier, Senior Vice President, Investor Relations. I\u2019ll start with an overview of results for fiscal year \u201923 and the fourth quarter. Jon will add perspective on our strategic focus areas and capabilities and will close with guidance for fiscal \u201924 and then take your questions. Fiscal \u201923 was another very strong year. Execution of our integrated strategy continues to yield broad-based strong sales growth across categories and regions, strong earnings in the face of significant cost headwinds, and continued strong return on cash to P&G shareholders. Organic sales for the fiscal year grew 7%, our second consecutive year of 7% organic sales growth and fifth consecutive year of 5% or better organic growth starting fiscal 2019 - 5%, 6%, 6%, 7% and 7%. Growth was broad-based across business units with all 10 of our product categories growing organic sales. Personal healthcare grew mid-teens, feminine care grew double digits, fabric care, home care and hair care up high single digits, skin and personal care, baby care, family care and grooming each grew mid singles. Oral care grew low single digits. Focus markets were up 5% for the year and we delivered strong results in our largest and most profitable market, the United States, with organic sales growing 6% on top of a strong 8% growth comp in the base period. Greater China organic sales were down low single digits versus the prior year, with trends improving in the back half as the market continues to slowly recover. Enterprise markets were up 15% led by Latin America with 24% organic sales growth. Ecommerce sales increased 7%, now representing 17% of total company. Our strategy focused on driving market growth is in turn driving share growth for P&G. All channel market value sales in the U.S. categories in which we compete grew approximately 7% in fiscal \u201923. P&G consumption grew ahead of fair share of category growth, driving modest value share growth and volume share up 50 basis points for the year. We held global aggregate market share. Twenty-nine of our top 50 category-country combinations held or grew share for the year. Importantly, this share growth is broad-based. Seven of 10 product categories grew share globally over the past year. Core earnings per share were $5.90, up 2% for the year despite a 24 percentage point earnings growth headwind, or $1.38 from share from higher material costs and foreign exchange. On a currency neutral basis, core EPS was up 11%. Adjusted free cash flow productivity was 95%. We increased our dividend by 3% and returned over $16 billion of value to share owners, $9 billion in dividends and $7.4 billion in share repurchase. Moving to the April to June quarter, organic sales grew 8%. We have now delivered seven consecutive quarters with 5% or better organic sales growth. Pricing contributed seven points to organic sales growth, mix was up 2 points, volume declined one point, improving sequentially versus the March quarter, as expected. These strong company results are grounded in broad-based category and geographic strength. Each of our 10 product categories grew organic sales in the quarter. Skin and personal care, personal healthcare, home care, feminine care, and family care, five of our 10 categories, each grew double digits. Baby care, hair care and grooming grew high singles, fabric care grew mid singles, and oral care was up low single digits. Each of our seven regions grew organic sales with focus markets up 7% and enterprise markets up 13% for the quarter. Organic sales in the U.S. grew 6%. Importantly, this includes 3 points of volume growth, a return to positive volume in our largest market for the first time in five quarters. Greater China organic sales grew 4%. We continue to see sequential market recovery, but as expected at a slow pace. European focused market organic sales were up 12% despite volume pressure from wider pricing gaps. In enterprise markets, Latin America led the growth with organic sales up 22%. Global aggregate market share increased 10 basis points. Twenty nine of our top 50 category-country combinations held or grew share for the quarter. On the bottom line, core earnings per share were $1.37, up 13% versus the prior year. On a currency neutral basis, core EPS increased 22%. Core operating margin increased 190 basis points as benefits from strong sales growth and productivity improvements more than offset higher material cost, foreign exchange headwinds, wage and benefit inflation, and reinvestment in higher media reach and frequency. Currency neutral operating margin increased 310 basis points. Adjusted free cash flow productivity was 136%. We returned approximately $2.3 billion of cash to share owners in the quarter. In summary, we met or exceeded each of our going-in target ranges for the year: organic sales growth, core EPS growth, free cash flow productivity, and cash returned to share owners, strong performance again this year in a very difficult operating environment. Now I\u2019ll pass it over to Jon.","evidence_gemma_new":"core earnings per share","evidence_llama_3_3":null,"evidence_qwen_3_30b":"core earnings per share April to June quarter","gemma_new_max":1.37,"gemma_new_min":1.37,"llama_3_3_max":null,"llama_3_3_min":null,"qwen_3_30b_max":1.37,"qwen_3_30b_min":1.37}
{"symbol":"PG","year":2024,"quarter":1,"date":"2024-Q1","chunk_id":1,"sub_chunk_id":0,"centroid_label":"core earnings per share","agreed_value":1.83,"count":3,"chunk":"Andre Schulten: Good morning, everyone. Joining me on the call today is John Chevalier, Senior Vice President, Investor Relations. This fiscal year, Jon Moeller, Chairman, President and CEO, will join the mid-year and year-end calls and I'll be leading the Q1 and Q3 calls. Execution of our integrated strategy draws strong results in the July to September quarter. Broad-based organic sales growth across categories and regions, global aggregate market share growth, strong productivity savings enabling increased investment in superiority of our brands while also delivering very strong earnings growth. These strong first quarter results put us on track to deliver towards the higher end of our fiscal year guidance ranges for organic sales growth and core earnings per share, and continued strong cash productivity and cash return to share owners. So moving to first quarter numbers, organic sales grew 7%. Pricing added 7 points to sales growth, and mixed contributed 1 point. Volume rounded down to a decline of 1 point with overall modest volume growth outside greater China. Top-line growth was broad-based across business units with each of our 10 product categories growing organic sales. Home care grew low teens, personal healthcare was up double digits, feminine care, oral care, fabric care, hair care and grooming, each grew high single digits. Baby care and family care were up mid-singles, skin and personal care grew low singles. Growth was also broad-based across geographies, with five of seven regions growing organic sales. Focus markets grew 6% for the quarter, organic sales in the US were up 7% and Europe focus markets were up 15%. Greater China organic sales were down 6% versus prior year. Underlying market growth is soft and choppy as consumer confidence remains weak. SK-II was down low teens in Greater China due to soft market conditions and a temporary reduction in social retail merchandising. Enterprise markets were up 13%, with Latin America up 19%, and Europe enterprise markets up 15%. Shipment volume in the US grew 3% again this quarter and we returned to volume growth in Europe focus markets. Mexico, Brazil and India, some of our largest enterprise markets, continue to deliver volume growth. These gains largely offset volume declines in the Greater China, Asia Pacific and European enterprise regions primarily driven by underlying market contraction. Global aggregate value share was up 40 basis points versus prior year, with 32 of our top 50 category country combinations holding or growing share. In the US, all outlet value share was up 50 basis points versus prior year with seven of 10 categories holding or growing value share in the quarter. US volume share was up 60 basis points, reflecting 3% volume growth. Value share in European focus markets was up 40 basis points over the past three months. Moving to the bottom line, core earnings per share were $1.83, up 17% versus prior year. On a currency-neutral basis, core EPS increased 21%. Core operating margin increased 240 basis points, as 460 basis points of gross margin expansion were partially offset by increased marketing investments, wage and benefit inflation, and foreign exchange impacts on SG&A. Currency-neutral core operating margin increased 340 basis points. Productivity improvements were a 210 basis point help to the quarter. Adjusted free cash for productivity was 97%. We returned $3.8 billion of cash to share owners, approximately $2.3 billion in dividends, and $1.5 billion in share repurchase. In summary, against what continues to be a challenging and volatile operating environment, a very good start to the fiscal year across top-line, bottom line, and cash. Our team continues to operate with excellence, executing the integrated strategy that has enabled strong results over the past five years, and that is the foundation for balanced growth and value creation. A portfolio of daily use products, many providing cleaning, health, and hygiene benefits in categories where performance plays a significant role in brand choice. Ongoing commitment to and investment in irresistible superiority across the five vectors of product, package, brand communication, retail execution, and value across each price tier we compete. We are again raising the bar on our superiority standards to reflect the dynamic nature of this strategy. Productivity improvement in all areas of our operations to fund investments in superiority, offset cost and currency challenges, expand margins and deliver strong cash generation. An approach of constructive disruption, a willingness to change, adapt, and create new trends and technologies that will shape our industry for the future, especially important in the volatile environment we're in. Finally an organization that is more empowered, agile, and accountable. We continue to improve the execution of the integrated strategy with four focus areas, supply chain 3.0, digital acumen, environmental sustainability, and the employee value equation. These are not new or separate strategies. They are necessary elements in continuing to build superiority, reduce costs to enable investment and value creation, and to further strengthen our organization. Our strategic choices on portfolio, superiority, productivity, constructive disruption and organization reinforce and build on each other. When executed well, they grow markets which in turn grow share, sales and profit. We continue to believe that the best path forward to deliver sustainable top and bottom-line growth is to double down on these integrated strategies, starting with a commitment to deliver irresistibly superior propositions to consumers and retail partners fueled by productivity. Moving to guidance. As I mentioned, we expect the environment around us to continue to be volatile and challenging from input costs, to currencies, to consumer and geopolitical dynamics. We attempt to reflect these realities in our guidance ranges. Based on current spot prices, we estimate commodities will be a tailwind of around $800 million after tax in fiscal \u201824. This is consistent with the outlook we provided in July. However, within this estimate, there have been several moving parts. We've seen incremental relief on some commodities like pulp, which have been offset by higher costs than other commodities such as fuel. Foreign exchange rates have moved sharply against us, and we now expect a headwind of approximately $1 billion after tax, an incremental $600 million impact since our initial guidance for the year. In addition to these impacts, we are also facing higher inflation in wages and benefits, and we expect higher year-on-year net interest expense of approximately $200 million after tax. As we are just one quarter into the fiscal year, we are maintaining our guidance ranges for organic sales, core EPS growth, cash productivity, and cash return to share owners, with each solidly on track after a very strong first quarter. Guidance for organic sales is growth of 4% to 5% for the fiscal year. The range includes a normalization in underlying market growth rate that is likely to occur through calendar year \u201824 as the market laps the last wave of cost recovery pricing and as market volumes return to growth. For P&G, we expect 3 to 4 points less pricing benefit in each of the next two quarters compared to our first quarter results. On the bottom line, our outlook for fiscal \u201824 core earnings per share is 6% to 9% growth versus last fiscal year. We're holding the range despite the incremental $600 million after-tax headwind from foreign exchange. With now a 7-point EPS impact from FX, this outlook translates to 13% to 16% core EPS growth on a constant-currency basis. We continue to forecast adjusted free cash flow productivity of 90%. We expect to pay more than $9 billion in dividends and to repurchase $5 billion to $6 billion in common stock, combined a plan to return $14 billion to $15 billion of cash to shareowners this fiscal year. This outlook is based on current market growth rate estimates, commodity prices, and foreign exchange rates. Significant additional currency weakness, commodity cost increases, geopolitical disruptions, or major production stoppages are not anticipated within the guidance ranges. As you consider the cadence of earnings for the year, keep in mind that the back half of the year will see less pricing benefit as we progressively annualize prior year increases. We should also see less commodity benefit as we move through the year. Labor inflation continues throughout the supply chain and [in our] (ph) costs. FX headwinds will increase versus quarter one. Also with a strong start to the year, we'll be reinvesting to further strengthen our plans and to maintain strong momentum. Finally, we'll be closely watching the health of the China market and the balance of regions, energy costs are rising as we head into fall and winter, household saving levels have reduced, especially in Europe. Slower economic growth, higher energy costs and higher interest rates for longer have an impact on consumer confidence. To conclude, while we expect volatile consumer and market dynamics to continue, we remain confident in our strategy and the results that it delivers. We are focused on driving growth in our categories and we are committed to delivering balanced top and bottom-line growth and value creation for our share owners. With that, we'll be happy to take your questions.","evidence_gemma_new":"core earnings per share","evidence_llama_3_3":"core earnings per share first quarter","evidence_qwen_3_30b":"core earnings per share Q1","gemma_new_max":1.83,"gemma_new_min":1.83,"llama_3_3_max":1.83,"llama_3_3_min":1.83,"qwen_3_30b_max":1.83,"qwen_3_30b_min":1.83}
{"symbol":"PG","year":2024,"quarter":2,"date":"2024-Q2","chunk_id":1,"sub_chunk_id":0,"centroid_label":"core earnings per share","agreed_value":1.84,"count":3,"chunk":"Andre Schulten: Good morning, everyone. Joining me on the call today are Jon Moeller, Chairman of the Board, President and Chief Executive Officer, and Jon Chevalier, Senior Vice-President, Investor Relations. I'll start with an overview of results for the October to December quarter, Jon will add perspective on our recent results and strategic focus areas and capabilities. We'll close with guidance for fiscal '24, and then take your questions. October to December, was another strong quarter. Execution of our integrated strategy drove solid sales and market-share results and another quarter of strong margin progress, delivering strong earnings and cash results for the quarter. The strong results we've delivered in the first half of fiscal '24, enable us to raise our outlook for core earnings per share and keep us on track to deliver within our fiscal year guidance ranges for organic sales growth, cash productivity and cash return to shareowners. We continue to see the upper range on organic sales and core EPS as likely outcome for fiscal '23 - '24. So, moving to second quarter numbers, organic sales grew 4%, volume rounded down to a decline of one point as continued volume acceleration in North America and Europe focused markets was offset by softer shipments in Greater China, Eastern Europe and Middle East, Africa regions due to local issues in select markets. Pricing contributed four points to sales growth, consistent with the guidance we provided, mix was neutral to organic sales growth. Growth across categories continues to be broad based with eight of 10 product categories holding or growing organic sales this quarter. Home care, hair care and grooming grew sales high single digits. Fabric care, family care, feminine care and oral care were up mid-single digits. Baby care was in line with prior year. Personal health care was down low singles against a very tough comp and a late developing cold and flu season this year. Skin and personal care was down mid singles due to SK-II in China. Growth was also broad based across geographies with North America, Europe, Asia Pacific focus markets and Latin America and Europe enterprise markets each growing organic sales. Focus markets grew 3% for the quarter and enterprise markets grew 7%. Organic sales in North America grew 5% with four points of volume growth. Over the last five quarters, volume growth in North America has been minus three, flat, then 2% growth plus 3% and now plus 4%, strong acceleration well ahead of the underlying market trends. Europe focused markets were up 7% with three points of volume growth. As expected, both regions saw a step down in pricing contribution to sales growth as a large portion of price increases from last year have annualized. Importantly, volume accelerated in both regions to partially offset the pricing impact. Latin America delivered another very strong quarter with 17% organic sales growth, continued strong results in these regions. There are some targeted issues affecting other markets. Greater China organic sales were down minus 15% versus prior year. Underlying market growth was down mid to high single digits as consumer confidence weakened further. The SK-II brand in Greater China was down 34% due to soft market conditions and a temporary headwind for Japanese brands in the market. Our consumer research indicates SK-II brand sentiment is improving and we expect to see sequential improvement in the back half. Underlying market trends have softened in some Europe enterprise and Asia Pacific, Middle East, Africa countries such as Egypt, Saudi Arabia and Turkey, following multiple rounds of pricing to offset inflation and due to heightened tensions in the Middle East. Global aggregate value share was up 40 basis points versus prior year with 28 of our top 50 category country combinations holding or growing share. In the U.S., all outlet value share was up 20 basis points versus prior year. U.S. volume share was up 50 basis points reflecting strong volume growth. Value share in European focus markets was up 90 basis points over the past three months. In summary, North America, Europe focus Markets, Asia Pacific focus markets and Latin America, which combined represent three-quarters of company sales, delivered over 6% of organic sales growth in quarter two, with three points of volume growth and three points of price mix. These same markets grew 9% in quarter one with around two points of volume growth and seven points of price mix. Continued strong organic sales growth with accelerating volume growth to mitigate the anticipated annualization of pricing, consistent with our guidance. The balanced 25% of company sales including Greater China, Eastern Europe and Middle East Africa were impacted by local market issues we described. Quarter two organic sales for this group were down five points versus prior year. We expect most of these effects in these regions to be temporary or annualizing, SK-II consumption is sequentially improving. We continue to expect China market growth to improve, and over time return to mid singles, and we expect market pressures in the Middle east and Turkey to ease over time. Moving to the bottom line, core earnings per share were $1.84, up 16% versus prior year. On a currency neutral basis, core EPS increased 18%. Core operating margin increased 400 basis points as 520 basis points of gross margin expansion were partially offset by increased marketing investments, wage and benefit inflation and foreign exchange impacts in SG&A. Currency neutral core operating margin increased 470 basis points. Productivity improvements were a very strong 340 basis points helped to the quarter. Adjusted free cash flow productivity was 95%. We returned $3.3 billion of cash to share owners, approximately $2.3 billion in dividends and $1 billion in share repurchase. In summary, against what continues to be a challenging and volatile operating environment, strong overall progress in the first half of the year keeping us on track for our fiscal year guidance ranges. Now I'll pass it over to Jon for his perspective.","evidence_gemma_new":"core earnings per share","evidence_llama_3_3":"core earnings per share October to December","evidence_qwen_3_30b":"core earnings per share $1.84 up 16% versus prior year","gemma_new_max":1.84,"gemma_new_min":1.84,"llama_3_3_max":1.84,"llama_3_3_min":1.84,"qwen_3_30b_max":1.84,"qwen_3_30b_min":1.84}
{"symbol":"PG","year":2024,"quarter":2,"date":"2024-Q2","chunk_id":3,"sub_chunk_id":0,"centroid_label":"core earnings per share","agreed_value":8.5,"count":2,"chunk":"Andre Schulten: Thanks Jon. As I mentioned, we expect the environment around us to continue to be volatile and challenging from input costs to currencies to consumer, retailer and geopolitical dynamics. However, our strong first half results enable us to raise or maintain key guidance metrics for the year. We're maintaining our guidance range for organic sales growth of 4% to 5% for the fiscal year. This outlook includes a normalization in underlying market growth rates that we began to see in our second quarter results as the market lapsed the last waves of cost recovery pricing. For P&G, we expect the pricing contribution to topline growth to reduce by an additional 1 to 2 points in the back half of the year. We will continue to price for new innovations when warranted and to mitigate FX impacts. On the bottom line enabled by very strong earnings growth in the first half of the year, we're raising our outlook for fiscal '24 core earnings per share from a range of 6% to 9% to a range of 8% to 9% growth versus last fiscal year. This guidance implies slower bottom-line growth in the second half. As we highlighted last quarter, the second half of the fiscal year will see less pricing benefit as we annualize more prior year increases. We will also see less commodity cost benefit in the second half. Wage and benefit inflation continues throughout the supply chain and in our direct costs, and FX headwinds will increase versus the first half of the fiscal year. As I mentioned, we continue to expect organic sales and core EPS growth toward the upper end of the renewed guidance ranges. We estimate commodities will be a tailwind of around $800 million after tax in fiscal '24 based on current spot prices. This is consistent with the outlook we provided last quarter. We continue to expect foreign exchange will be a headwind of approximately $1 billion after tax for the fiscal year. The vast majority of this impact is driven by Argentina, and is heavily skewed towards the back half of the year. This outlook is based on a forecast for continued significant devaluation of the Argentine Peso, which we expect to largely offset with appropriate price increases. We now expect higher net interest expense of approximately $100 million after tax versus prior year. General inflation and higher wage and benefit costs weakness are also earnings headwinds for the year. We expect adjusted free cash flow productivity of 90%. We expect to pay more than $9 billion in dividends and to repurchase $5 billion to $6 billion in common stock, combined a plan to return $14 billion to $15 billion of cash to share owners this fiscal year. This outlook is based on current market growth rate estimates, commodity prices and foreign exchange rates. Significant additional currency weakness, commodity cost increases, geopolitical disruptions or major production stoppages are not anticipated within the guidance ranges. Finally, we'll be closely watching the more volatile regions we mentioned earlier, including the health of the China market, and we'll be keeping close watch on competitive dynamics to ensure P&G brands remain superior value for consumers and retailers. Now, I'll hand it back to Jon for closing thoughts.","evidence_gemma_new":"core earnings per share versus last fiscal year","evidence_llama_3_3":null,"evidence_qwen_3_30b":"raising core earnings per share fiscal '24","gemma_new_max":8.5,"gemma_new_min":8.5,"llama_3_3_max":null,"llama_3_3_min":null,"qwen_3_30b_max":8.5,"qwen_3_30b_min":8.5}
{"symbol":"PG","year":2024,"quarter":3,"date":"2024-Q3","chunk_id":1,"sub_chunk_id":0,"centroid_label":"core earnings per share","agreed_value":1.52,"count":2,"chunk":"Andre Schulten : Good morning, everyone. Joining me on the call today is John Chevalier, Senior Vice President, Investor Relations. Execution of our integrated strategy drove solid sales and market share results and another quarter of strong earnings and cash results. The strong results we've delivered in the first three quarters of fiscal 2024 enable us to raise our outlook for core earnings per share and keep us on track to deliver within our fiscal year guidance ranges for organic sales growth, cash productivity, and cash return to shareowners. Specifically on the numbers, organic sales grew 3%. Volume was in line with prior year, showing sequential progress. Pricing contributed 3 points to sales growth as we continue to annualize price increases taken last fiscal year. Mix was neutral to organic sales growth, and growth across categories continues to be broad based with 8 of 10 product categories holding or growing organic sales in this quarter. Grooming organic sales grew double-digits. Home Care and Hair Care up high singles. Oral Care grew mid-single-digits. Fabric Care, Family Care, Feminine Care and Personal Health Care were up low singles. Skin and Personal Care and Baby Care organic sales were lower versus prior year. Growth was also broad based across geographies. North America, Europe and Asia Pacific focused markets and Latin America and Europe Enterprise markets are each growing organic sales. Global aggregate value share was up versus prior year with 29 of our top 50 category country combinations holding or growing share. Focus markets grew organic sales 2% for the quarter, and Enterprise Markets grew 4%. Organic sales in North America grew 3% with 3 points of volume growth. Over the last 4 quarters, volume growth in North America has been plus 2%, plus 3%, plus 4%, and now plus 3%. These results include over a point of impact from retail inventory reductions, primarily in personal healthcare. Consumer demand for P&G brands remains very strong in the U.S., with all outlet consumption value growth of 5%, all outlet value share was up 10 basis points versus prior year. U.S. volume share was up 40 basis points, reflecting continued strong volume growth ahead of the underlying market. The gap between consumer offtake of 5% compared to our U.S. sales growth of 3% reflects the aforementioned trade inventory reductions in the quarter. Europe focus markets were up 7% with 4 points of volume growth. Value share in Europe Focus markets was up 100 basis points over the past 3 months. Latin America organic sales were up 17%. Argentina is a significant contributor to this result given the pricing taken to offset the more than 400% devaluation of the Argentine peso since the start of the year. Mexico and Brazil are annualizing high base periods with organic sales growth in the 20s and 30s, and we expect will normalize back to pre-COVID levels in the mid to high single-digits. As we noted last quarter, there are some specific issues affecting other markets. Those challenges continue to impact results in the quarter. Greater China organic sales were down 10% versus prior year, progress versus the December quarter, but still impacted by weak underlying market conditions and headwinds for SK-II and other Japanese brands in the market. SK-II sales in Greater China were down around 30% for the quarter. We have seen some month to month improvement in overall Greater China sales trends, though we expect it will be another quarter or two until we return to growth. Volume trends in some of the European Enterprise and Asia Pacific, Middle East Africa countries such as Egypt, Saudi Arabia, Turkey, Indonesia and Malaysia have remained soft since the start of the heightened tensions in the Middle East. Also, shipments in Russia continue to decline, double digits given our reduced footprint and curtailed investments with consumers and retailers. Combined, the headwinds from Greater China and Asia, Middle East Africa markets were a 150 basis point impact on total company sales for the quarter. We expect these headwinds to moderate or annualize over the coming periods. Moving to the bottom line, core earnings per share were $1.52 up 11% versus prior year. On a currency neutral basis, core EPS increased 18%. Core gross margin increased 310 basis points and operating margin increased 90 basis points. Strong productivity improvement of 320 basis points enabled continued strong investment in superior products, packaging and consumer communication to drive market growth. Currency neutral core operating margin increased 220 basis points. Adjusted free cash flow productivity was 87%. We returned $3.3 billion of cash to share owners, approximately $2.3 billion in dividends and $1 billion in share repurchase. Over 3 quarters, more than $10 billion returned to shareowners in dividends and repurchases. Last week, we announced a 7% increase in our dividend, again reinforcing our commitment to return cash to share owners. This is the 68th consecutive annual dividend increase and 134th consecutive year P&G has paid a dividend. In summary, again, what continues to be a challenging and volatile operating environment, strong overall results enabling us to increase our earnings projections for the year and to maintain our guidance ranges for organic sales and cash generation, all while sustaining strong investment. It's a priority to build category consumption and to restore business growth in China and in the Middle East. Our teams continue to operate with excellence, executing the integrated strategy that has enabled strong results over the past 5 years, and that is the foundation for balanced growth and value creation. A portfolio of daily use products, many providing cleaning, health and hygiene benefits in categories where performance plays a significant role in brand choice. Ongoing commitment to and investment in irresistible superiority across the 5 vectors of products, package, brand communication, retail execution and value for each price tier where we compete. We are again raising the bar on our superiority standards to reflect the dynamic nature of this strategy. Productivity improvements in all areas of our operations to fund investments in superiority, offset cost and currency challenges, expand margins and deliver strong cash generation. An approach of constructive disruption, a willingness to change, adapt and create new trends and technologies that will shape our industry for the future. Finally, an organization that is empowered, agile and accountable. We continue to improve the execution of the integrated strategy with 4 focus areas: strong progress on Supply Chain 3.0, digital acumen, environmental sustainability and a superior employee value equation. These four focus areas are not new or separate strategies. They simply strengthen our ability to execute the strategy. Our strategic choices on portfolio, superiority, productivity, constructive disruption and organization reinforce and build on each other. When executed well, they grow markets, which in turn grow share, sales and profit. We continue to believe that the best path forward to deliver sustainable top and bottom-line growth is to double down on this integrated strategy, starting with a commitment to deliver irresistibly superior propositions to consumers and retail partners, fueled by productivity. Moving on to guidance. As I mentioned, we expect the environment around us to continue to be volatile and challenging, from input costs to currencies to consumer, retailer and geopolitical dynamics. However, our strong results year to date enable us to raise or maintain key guidance metrics for the year. We're maintaining our guidance range for organic sales growth of 4% to 5% for the fiscal year. We're squarely in the middle of this range fiscal year-to-date. This outlook assumes continued normalization in underlying market growth rates that we've seen over the past few quarters. Markets will be lapping the last waves of cost recovery pricing and volumes slowly begin to recover. We also expect the market level changes we faced through quarter 3 to continue in Q4 though with some directional improvement. On the bottom-line, enabled by 15% core EPS growth year-to-date, we are raising our outlook for fiscal 2024 core earnings per share from a range 8% to 9% to a range of 10% to 11%. This outlook includes continued strong investments in innovation and brand building to grow markets and extend the superiority of P&G offerings to consumers. We now estimate commodities will be a tailwind of around $900 million after tax in fiscal '24 based on current spot prices. This is a modest improvement versus the outlook we provided last quarter, though nearly all of this benefit has been booked in the first three quarters of the year. We now expect foreign exchange to be a headwind of approximately $600 million after tax for the fiscal year. The change versus prior guidance reflects volatility in Argentina exchange rates, including a period of currency appreciation in quarter three and a revised devaluation outlook for quarter four. We also reflect a reduction in Argentina FX exposure due to the divestiture of our Argentina Fabric and Home Care business, which we completed in mid-March, and reduced assumptions for future volume and pricing given the current rate outlook and recent shipment trends. The net impact of these changes is a relatively modest help to the bottom line, which is reflected in our updated EPS outlook. We expect higher net interest expense of approximately $100 million after tax versus prior year. General inflation and higher wage and benefit costs are also earnings headwinds for the year. We expect adjusted free cash flow productivity of 90%, and we expect to pay more than $9 billion in dividends to repurchase $5 billion to $6 billion in common stock, combined a plan to return $14 billion to $15 billion of cash to share owners for the year. This outlook is based on current market growth rate estimates, commodity prices and foreign exchange rates, significant additional currency weakness, commodity cost increases, geopolitical disruption or major production stoppages are not anticipated within these guidance ranges. Finally, we'll be closely watching the more volatile regions we mentioned earlier, including the health of the China market, and we'll be keeping a close watch on competitive dynamics to ensure P&G brands remain a superior value for consumers and for retailers. The entire P&G organization remains focused on excellent execution of our integrated, market constructive strategy, which has delivered strong results in a challenging operating and competitive environment. While we expect volatile consumer and macro dynamics to continue, we are confident the best path forward is to double down on this strategy, remain fully invested to drive irresistible superiority across every part of our portfolio and stay focused on delivering balanced top and bottom line growth and value creation for our shareowners. With that, we'll be happy to take your questions.","evidence_gemma_new":"core earnings per share","evidence_llama_3_3":null,"evidence_qwen_3_30b":"core earnings per share $1.52 up 11% versus prior year","gemma_new_max":1.52,"gemma_new_min":1.52,"llama_3_3_max":null,"llama_3_3_min":null,"qwen_3_30b_max":1.52,"qwen_3_30b_min":1.52}
{"symbol":"PG","year":2024,"quarter":4,"date":"2024-Q4","chunk_id":1,"sub_chunk_id":0,"centroid_label":"core earnings per share","agreed_value":6.59,"count":3,"chunk":"Andre Schulten: Good morning everyone. Joining me on the call today are Jon Moeller, Chairman of the Board, President and Chief Executive Officer, and John Chevalier, Senior Vice President, Investor Relations. I will start with an overview of results for fiscal year \u201924 and for the fourth quarter. Jon will add perspective on our strategic focus areas and capabilities and will close with guidance for fiscal \u201925 and then take your questions. Fiscal \u201924 was another very strong year. Execution of our integrated strategies enabled the company to meet or exceed going-in guidance ranges for organic sales growth, core EPS growth, cash productivity and cash return to share owners, all this despite significant market level headwinds that were largely unknown when we gave our initial outlook for the year. Organic sales growth for the fiscal year was 4%, our sixth consecutive year of 4% or better organic growth against a strong 7% comp in the prior year and in more challenging market conditions. Growth was broad-based across business units with eight of 10 product categories growing organic sales. Home care, hair care and grooming were up high single digits, oral care and feminine care up mid singles. Fabric care, family care, and personal healthcare grew low single digits. Skin and personal care and baby care were down low singles. Focus markets grew 4% for the year with North America up 5% and Europe focus markets up 8%. Greater China organic sales were down 9% versus the prior year, driven by soft market conditions and brand-specific headwinds on SK-II. Enterprise markets were up 6%, led by Latin America with 15% organic sales growth. Ecommerce sales increased 9%, now representing 18% of the total company. Our strategy focused on driving market growth continues to drive share growth for P&G. All channel market value sales in the U.S. categories in which we compete grew around 5% in fiscal \u201924. P&G consumption grew ahead of our fair share of category growth, driving modest value and volume share growth for the year. We grew global aggregate value share. Thirty of 50 category country combinations held or grew share for the year. Importantly, this share growth is broad-based. Six of 10 product categories grew share globally over the past year. Core earnings per share were $6.59, up 12% for the year. Core gross margin improved 360 basis points and core operating margin increased 170 basis points. Over $2.3 billion of productivity improvements were enabled by a significant increase in investment in superior products, packages and brand communication to drive market growth. On a currency-neutral basis, core EPS was up 16% and core operating margin increased 250 basis points. Adjusted free cash flow productivity was 105%. We increased our dividend by 7% and returned over $14 billion of value to share owners, $9.3 billion in dividends, and $5 billion in share repurchase. Moving onto fourth quarter results, organic sales rounded down to 2%, volume was up 2%, solid sequential progress. Pricing was up 1% and mix was in line with prior year. Growth continues to be broad-based across categories and regions. Nine of 10 product categories grew or held organic sales in the quarter. Home care, hair care, grooming and oral care were each up high single digits, feminine care up low singles, skin and personal care, fabric care, personal health care and family care were each in line with prior year, and baby care was down mid singles. Five of seven regions grew organic sales with focus markets up 2% and enterprise markets up 2% for the quarter. Organic sales in North America grew 4% with four points of volume growth and price mix, in line with prior year. European focus markets organic sales were up 2% against a strong 12% comp in the base period. Volume was up 3%. Price mix was down a point as the region has now fully annualized prior year inflation-driven pricing. Latin America organic sales were up 8%, including high singles growth in Brazil. Of note, Argentina\u2019s overall contribution to organic sales for the region and the company were lower than the last two quarters due to the divestiture of a portion of the business in March and a notable decline in shipment volume for the remaining categories. As was announced earlier this month, we have divested the remaining portions of our operations in Argentina. As a result, Argentina will be largely removed from our organic sales reporting in fiscal year \u201925. Select P&G brands will still be available in the market through a distribution and licensing agreement with the new owner of the operations. Greater China organic sales declined 8%. Underlying market conditions have remained weak and the 6\/18 key consumption period was down sharply versus prior year, just as we saw in the 11\/11 Chinese New Year and Valentine\u2019s Day shopping periods. Also, brand-specific headwinds have continued on SK-II due to its Japanese heritage. We expect general market trends and the dynamics related to SK-II to improve over time, though it will likely be another quarter or two until we return to growth. Volume trends in some Europe enterprise and Asia Pacific, Middle East, Africa countries such as Egypt, Saudi Arabia, Turkey, Indonesia, Malaysia and Russia have remained soft. We expect these headwinds to moderate or annualize over the coming periods. Global aggregate market share was down 30 basis points as we are now annualizing very strong growth in European-focused markets. Twenty-five of our top 50 category country combinations held or grew share for the quarter. On the bottom line, core earnings per share were $1.40, up 2% versus the prior year. On a currency-neutral basis, core EPS increased 6%. Core gross margin increased 140 basis points and core operating margin decreased 100 basis points. Strong productivity improvements of 250 basis points, funding a meaningful increase in marketing investment, currency-neutral core operating margin decreased 60 basis points. Adjusted free cash flow productivity was 148%. We returned nearly $4 billion of cash to share owners this quarter, over $2.4 billion in dividends, and $1.5 billion in share repurchases. In summary, we met or exceeded each of our going-in target ranges for the year: organic sales growth, core EPS growth, free cash productivity and cash returns to share owners, strong performance again this year in a challenging economic and geopolitical environment. With that, I\u2019ll pass it over to Jon.","evidence_gemma_new":"core earnings per share year","evidence_llama_3_3":"core earnings per share fiscal year '24","evidence_qwen_3_30b":"core earnings per share $6.59 up 12%","gemma_new_max":6.59,"gemma_new_min":6.59,"llama_3_3_max":6.59,"llama_3_3_min":6.59,"qwen_3_30b_max":6.59,"qwen_3_30b_min":6.59}
{"symbol":"PG","year":2024,"quarter":4,"date":"2024-Q4","chunk_id":1,"sub_chunk_id":0,"centroid_label":"core earnings per share","agreed_value":1.4,"count":3,"chunk":"Andre Schulten: Good morning everyone. Joining me on the call today are Jon Moeller, Chairman of the Board, President and Chief Executive Officer, and John Chevalier, Senior Vice President, Investor Relations. I will start with an overview of results for fiscal year \u201924 and for the fourth quarter. Jon will add perspective on our strategic focus areas and capabilities and will close with guidance for fiscal \u201925 and then take your questions. Fiscal \u201924 was another very strong year. Execution of our integrated strategies enabled the company to meet or exceed going-in guidance ranges for organic sales growth, core EPS growth, cash productivity and cash return to share owners, all this despite significant market level headwinds that were largely unknown when we gave our initial outlook for the year. Organic sales growth for the fiscal year was 4%, our sixth consecutive year of 4% or better organic growth against a strong 7% comp in the prior year and in more challenging market conditions. Growth was broad-based across business units with eight of 10 product categories growing organic sales. Home care, hair care and grooming were up high single digits, oral care and feminine care up mid singles. Fabric care, family care, and personal healthcare grew low single digits. Skin and personal care and baby care were down low singles. Focus markets grew 4% for the year with North America up 5% and Europe focus markets up 8%. Greater China organic sales were down 9% versus the prior year, driven by soft market conditions and brand-specific headwinds on SK-II. Enterprise markets were up 6%, led by Latin America with 15% organic sales growth. Ecommerce sales increased 9%, now representing 18% of the total company. Our strategy focused on driving market growth continues to drive share growth for P&G. All channel market value sales in the U.S. categories in which we compete grew around 5% in fiscal \u201924. P&G consumption grew ahead of our fair share of category growth, driving modest value and volume share growth for the year. We grew global aggregate value share. Thirty of 50 category country combinations held or grew share for the year. Importantly, this share growth is broad-based. Six of 10 product categories grew share globally over the past year. Core earnings per share were $6.59, up 12% for the year. Core gross margin improved 360 basis points and core operating margin increased 170 basis points. Over $2.3 billion of productivity improvements were enabled by a significant increase in investment in superior products, packages and brand communication to drive market growth. On a currency-neutral basis, core EPS was up 16% and core operating margin increased 250 basis points. Adjusted free cash flow productivity was 105%. We increased our dividend by 7% and returned over $14 billion of value to share owners, $9.3 billion in dividends, and $5 billion in share repurchase. Moving onto fourth quarter results, organic sales rounded down to 2%, volume was up 2%, solid sequential progress. Pricing was up 1% and mix was in line with prior year. Growth continues to be broad-based across categories and regions. Nine of 10 product categories grew or held organic sales in the quarter. Home care, hair care, grooming and oral care were each up high single digits, feminine care up low singles, skin and personal care, fabric care, personal health care and family care were each in line with prior year, and baby care was down mid singles. Five of seven regions grew organic sales with focus markets up 2% and enterprise markets up 2% for the quarter. Organic sales in North America grew 4% with four points of volume growth and price mix, in line with prior year. European focus markets organic sales were up 2% against a strong 12% comp in the base period. Volume was up 3%. Price mix was down a point as the region has now fully annualized prior year inflation-driven pricing. Latin America organic sales were up 8%, including high singles growth in Brazil. Of note, Argentina\u2019s overall contribution to organic sales for the region and the company were lower than the last two quarters due to the divestiture of a portion of the business in March and a notable decline in shipment volume for the remaining categories. As was announced earlier this month, we have divested the remaining portions of our operations in Argentina. As a result, Argentina will be largely removed from our organic sales reporting in fiscal year \u201925. Select P&G brands will still be available in the market through a distribution and licensing agreement with the new owner of the operations. Greater China organic sales declined 8%. Underlying market conditions have remained weak and the 6\/18 key consumption period was down sharply versus prior year, just as we saw in the 11\/11 Chinese New Year and Valentine\u2019s Day shopping periods. Also, brand-specific headwinds have continued on SK-II due to its Japanese heritage. We expect general market trends and the dynamics related to SK-II to improve over time, though it will likely be another quarter or two until we return to growth. Volume trends in some Europe enterprise and Asia Pacific, Middle East, Africa countries such as Egypt, Saudi Arabia, Turkey, Indonesia, Malaysia and Russia have remained soft. We expect these headwinds to moderate or annualize over the coming periods. Global aggregate market share was down 30 basis points as we are now annualizing very strong growth in European-focused markets. Twenty-five of our top 50 category country combinations held or grew share for the quarter. On the bottom line, core earnings per share were $1.40, up 2% versus the prior year. On a currency-neutral basis, core EPS increased 6%. Core gross margin increased 140 basis points and core operating margin decreased 100 basis points. Strong productivity improvements of 250 basis points, funding a meaningful increase in marketing investment, currency-neutral core operating margin decreased 60 basis points. Adjusted free cash flow productivity was 148%. We returned nearly $4 billion of cash to share owners this quarter, over $2.4 billion in dividends, and $1.5 billion in share repurchases. In summary, we met or exceeded each of our going-in target ranges for the year: organic sales growth, core EPS growth, free cash productivity and cash returns to share owners, strong performance again this year in a challenging economic and geopolitical environment. With that, I\u2019ll pass it over to Jon.","evidence_gemma_new":"core earnings per share","evidence_llama_3_3":"core earnings per share fourth quarter","evidence_qwen_3_30b":"core earnings per share $1.40 up 2%","gemma_new_max":1.4,"gemma_new_min":1.4,"llama_3_3_max":1.4,"llama_3_3_min":1.4,"qwen_3_30b_max":1.4,"qwen_3_30b_min":1.4}
{"symbol":"PG","year":2023,"quarter":1,"date":"2023-Q1","chunk_id":1,"sub_chunk_id":0,"centroid_label":"dividends","agreed_value":9000000000.0,"count":2,"chunk":"Andre Schulten: Good morning, everyone. Joining me on the call today are Jon Moeller, Chairman of the Board, President and Chief Executive Officer; and John Chevalier, Senior Vice President, Investor Relations. We're going to keep our prepared remarks brief and then turn straight to your questions. Execution of our integrated strategies continued to yield good results in the July to September quarter and provides a solid start to the fiscal year. We're growing organic sales in all 10 categories, holding global aggregate market share, accelerating productivity savings, and improving supply sufficiency. Together, this progress enables us to maintain guidance ranges for organic sales growth, core EPS growth, free cash flow productivity and cash return to shareowners. Despite continued high commodity and transportation costs, inflation in the upstream supply chain and in our own operations, accelerating headwinds from foreign exchange, geopolitical issues, COVID disruptions impacting consumer confidence and historically high inflation impacting consumer budgets. Moving to the first quarter numbers. Organic sales grew 7%, pricing added 9 points to sales growth and mix was up 1 point. Volume declined 3 points, primarily due to lower shipments in Russia. Growth was broad-based across business units with each of our 10 product categories growing organic sales. Personal Health Care grew high teens. Feminine Care was up double digits. Fabric Care and Home Care were up high single digits. Baby Care, Grooming, Hair Care and Skin and Personal Care were each up mid-singles. Family Care and Oral Care grew low single digits. Focus markets grew 4% for the quarter, with the US up 5%. Greater China organic sales were down 4% versus the prior year, modest sequential improvement in the market still affected by COVID lockdowns and weak consumer confidence. Longer term, we expect China to return to strong underlying growth rates. Enterprise markets were up 16% with each of the three regions, up 13% or more. Global aggregate market share was in line with prior year, with 26 of our top 50 category country combinations holding or growing share. In the US, all outlet value share was in line with prior year with 6 of 10 categories holding or growing shares. On the bottom line, core earnings per share were $1.57, down 2% versus prior year. On a currency-neutral basis, core EPS increased 7%. Core margin decreased 160 basis points and currency-neutral core margin was down 130 basis points. Higher commodity materials and freight cost impacts combined with a 550 basis point hit to gross margins. Mix was 120-point headwinds, productivity savings and pricing provided 580 basis points of offset. SG&A costs as a percentage of sales were lower by 90 basis points as sales leverage and productivity improvements more than offset inflation and foreign exchange impacts. Core operating margin decreased 70 basis points, currency-neutral core operating margin increased 10 basis points, productivity improvements were a 230 basis help to the quarter. Adjusted free cash flow productivity was 86%, we returned nearly $6.3 billion of cash to shareowners, approximately $2.3 billion in dividends and $4 billion share repurchase. In summary, considering the backdrop of a very challenging cost and operating environment, results across top line, bottom line and cash to start the fiscal year. Our team continues to operate with excellence, executing the integrating strategies that have enabled strong results over the past four years, which are the foundation for balanced growth and value creation. A portfolio of daily use products, many providing cleaning, health and hygiene benefits in categories where performance plays a significant role in brand choice. The priority across the five vectors of product, package, brand communication, retail execution and value. Productivity improvement in all areas of our operations to fund investments is a priority offset cost and currency challenges, expand margins and deliver strong cash generation. An approach of constructive disruption, a willingness to change, adapt and create new trends and technologies that will shape our industry for the future especially important in this volatile environment. Finally, an organization that is increasingly more empowered, agile and accountable with little overlap or redundancy flowing to new demands, seamlessly supporting each other to deliver against our priorities around the world. Going forward, there are four areas we are driving to improve the execution of integrated strategies: Supply Chain 3.0, digital acumen, environmental sustainability and employee value equation. These are not new or separate strategies. They are necessary elements in continuing to build the priority, reduce cost to enable investment and value creation and to further strengthen our organization. Jon touched on each of these in our July earnings call and they will be a central part of our discussion at Investor Day in November. Our strategic choices on portfolios, priority, productivity, constructive disruption and organization are not independent strategies. They reinforce and build on each other, when executed well, they grow markets, which in-turn grow share, sales and profit. We continue to believe that the best path forward to deliver sustainable top and bottom-line growth is to double down on these integrated strategies, starting with a commitment to deliver irresistibly superior propositions to consumers and retail partners. Now moving on to guidance, we fully expect more volatility in costs, currencies and consumer dynamics as we move through the fiscal year. However, we think the strategies we've chosen, the investments we've made and the focus on executional excellence has positioned us well to manage through this volatility over time. Raw and packaging material costs inclusive of commodities and supplier inflation have remained high since we gave our initial outlook for the year in late July. Based on current spot prices at latest contracts, we now estimate a $2.4 billion after-tax headwind in fiscal 2023. Freight costs have also remained high. Though we have seen some easing in spot prices, we've made a modest downward adjustment in our outlook and now expect a $200 million after-tax headwind on freight and transportation costs in fiscal 2023. Foreign exchange has continued its strong move against us as the US dollar has strengthened significantly against essentially all major currencies around the world. Based on current exchange rates, we forecast a $1.3 billion after-tax impact, an incremental hit of $400 million versus our initial outlook for the year. Combined, headwinds from these items are now estimated at approximately $3.9 billion after tax or $1.57 a share, a 27 percentage point headwind to EPS growth for the year. We will offset a portion of these cost headwinds with price increases and productivity savings. We will continue to invest in irresistible superiority, which is even more important as we compete in some markets with local or non-US based competitors that don't see the same foreign exchange rate impact. As we've said before, we believe this is a rough patch to grow through not a reason to reduce investment in the business. As I noted at the outset, our good first quarter results enable us to confirm our guidance ranges for the fiscal year, across all key metrics. We continue to expect organic sales growth in the range of 3% to 5%. On the bottom line, we are maintaining our outlook of core earnings per share growth in a range of in line plus 4% versus prior year. However, the steep increase in foreign exchange impact pushes our current expectations towards the lower end of the range. We continue to forecast adjusted free cash flow productivity of 90%. We expect to pay around $9 billion in dividends and to repurchase $6 billion to $8 billion in common stock, combined a plan to return $15 billion to $17 billion of cash to shareowners this fiscal year. The outlook is based on current market growth rate estimates, commodity prices and foreign exchange rates. Significant additional currency weakness, commodity cost increases, geopolitical disruption, major production stoppages or store closures are not anticipated within this guidance range. To conclude, the macroeconomic and market level consumer challenges we're facing are not unique to P&G, and we won't immune to the impact. We've attempted to be realistic about these impacts in our guidance and transparent in our commentary. As we've said before, we believe this is a rough patch to grow through not a reason to reduce investment in the long-term health of the business. We're doubling down on the strategy that has been working well and delivering strong results. We'll continue to step forward towards the opportunities that we may fully invest in our business. We remain committed to driving productivity improvements to fund growth investments, mitigate input cost challenges and to maintain balanced top and bottom line growth. With that, we'll be happy to take your questions.","evidence_gemma_new":null,"evidence_llama_3_3":"dividends fiscal year","evidence_qwen_3_30b":"dividends fiscal year","gemma_new_max":null,"gemma_new_min":null,"llama_3_3_max":9000000000.0,"llama_3_3_min":9000000000.0,"qwen_3_30b_max":9000000000.0,"qwen_3_30b_min":9000000000.0}
{"symbol":"PG","year":2023,"quarter":3,"date":"2023-Q3","chunk_id":1,"sub_chunk_id":0,"centroid_label":"dividends","agreed_value":9000000000.0,"count":2,"chunk":"Andre Schulten: Good morning, everyone. Joining me on the call today are Jon Mueller, Chairman of the Board, President and Chief Executive Officer; and John Chevalier, Senior Vice President, Investor Relations. Execution of our integrated strategies drove strong results in the January to March quarter. Organic sales grew across all 10 categories in -- and in six out of seven regions. Global aggregate market share is holding steady, productivity savings are accelerating and enabling sustained investment in the superiority of our brands. In-market execution across all five vectors of superiority is strong and consistent: product, package, communication, go-to-market and value. Superior offerings continue to pay benefits for our consumers and retail partners and in turn for P&G shareholders. Progress against our plan enables us to increase guidance for organic sales growth and cash return to shareowners, and to maintain guidance for core EPS growth and free cash flow productivity. Moving to third quarter numbers. Organic sales grew more than 7%. Pricing added 10 points to sales growth and mix was a modest positive contributor for the quarter. Volume declined 3 points, including a 1 point headwind from portfolio reduction in Russia. Growth was broad based across business units with each of our 10 product categories growing organic sales. Feminine Care was up low teens, Personal Health Care, Home Care and Hair Care each grew double digits, Grooming, Oral Care and Fabric Care grew high single digits, Baby Care was up mid singles, and Family Care and Skin and Personal Care grew low singles. Growth was also broad based across geographies with six of seven regions growing organic sales. Focus markets grew 5% for the quarter. Organic sales in the U.S. were up 6%, including modest unit volume growth. Europe focus markets were up 8%. Greater China organic sales were up 2% versus prior year, as the market begins to recover from COVID lockdowns and as consumer confidence improves. We continue to expect further recovery as consumer mobility increases over the coming quarters. Longer-term, we expect China to return to mid singles underlying market growth rates for our portfolio of categories. Enterprise markets were up 15% with Latin America up nearly 30% and Europe enterprise markets up low teens. This is the fourth consecutive quarter in which all five sectors grew organic sales double digits in enterprise markets. Global aggregate value share was in line with prior year, with 30 of our top 50 category country combinations holding or growing share. Excluding Russia, global value share was up 20 basis points. In the U.S., all outlet value share was up 40 basis points versus prior year with eight of 10 categories holding or growing share in the quarter. U.S. volume share is up 90 basis points versus the prior year, driven by 2 points of absolute volume consumption growth in a market that is still down modestly versus prior year. Strong U.S. share growth in Personal Care has been led by innovation on the native brand and deodorants, as well as successful extension into body wash. Cascade Platinum Plus has driven strong share growth in auto dishwashing, and Dawn share continues to be up more than 1 point with ongoing leverage from the power wash and easy squeeze innovations. Vicks continues to be a growth leader in Personal Health Care, and we've delivered strong share growth in the Metamucil and Pepto-Bismol brands. In Europe, the new four-chamber Ariel Platinum PODS are driving strong consumer demand in Fabric Care. Fairy Power Spray is growing the dish category and building market share in Home Care. The new GilletteLabs exfoliating razor, male and female intimate grooming innovations and cardboard packaging upgrades are driving strong growth in grooming. Moving to the bottom-line. Core earnings per share were $1.37, up 3% versus prior year. On a currency neutral basis, core EPS increased 13%, good progress as we faced $0.31 per share of cost and foreign exchange headwinds in the quarter. Core operating margin increased 40 basis points, as 150 basis points of gross margin expansion were partially offset by SG&A investments and inflation impacts. Currency-neutral core operating margin increased 160 basis points. Productivity improvements were a 290 basis point help to the quarter. Adjusted free cash flow productivity was at 92%. We returned $3.6 billion of cash to shareowners, approximately $2.2 billion in dividends and $1.4 billion in share repurchase. Last week, we announced a 3% increase in our dividend, again reinforcing our commitment to return cash to shareowners. This is the 67th consecutive annual dividend increase and the 133rd consecutive year P&G has paid a dividend. In summary, against what is still a challenging cost and operating environment, continued good results across top-line, bottom-line and cash for the third quarter. Our team continues to operate with excellence, executing the integrated strategies that have enabled strong results over the past four years and that are the foundation for balanced growth and value creation. A portfolio of daily use products, many providing cleaning, health and hygiene benefits in categories where performance plays a significant role in brand choice. Ongoing commitment to and investment in irresistible superiority across the five vectors of product, package, brand communication, retail execution and value, we are again raising the bar on our superiority standards to reflect the dynamic nature of this strategy. Productivity improvements in all areas of operations to fund investments in superiority offset cost and currency challenges, extend margins and deliver strong cash generation, an approach of constructive disruption, a willingness to change, adapt and create new trends and technologies that will shape our industry for the future. Finally, an organization that is increasingly more empowered, agile and accountable with little overlap or redundancy flowing to new demands seamlessly supporting each other to deliver against our priorities around the world. There are four areas we are driving to improve the execution of the integrated strategies: Supply Chain 3.0, digital acumen, environmental sustainability and employee value equation. These are not new or separate strategies, they are necessary elements in continuing to build superiority, reduce costs to enable investment and value creation and to further strengthen our organization. Our strategic choices on portfolio, superiority, productivity, constructive disruption and organization are interdependent strategies. They reinforce and build on each other. When executed well, they grow markets, which in turn grow share, sales and profit. We continue to believe that the best path forward to deliver sustainable top- and bottom-line growth is to double down on these integrated strategies, starting with the commitment to deliver irresistibly superior propositions to consumers and retail partners. Now, moving to guidance. As we work towards the end of the fiscal year, we are cautiously optimistic. We remain confident in our strategies and the organization's ability to execute them with excellence. We continue to expect more volatility in the macro and consumer environment, and expect sustained pressure in costs and foreign exchange as we move forward. On the whole, our consumer markets remained relatively resilient, with U.S. and China volume trends improving, but with inflation pressures in Europe weighing more heavily on consumption. We continue to think the strategies we've chosen, the investments we've made and the focus on executional excellence have positioned us well to manage through this volatility over time. Raw and packaging material costs, inclusive of commodities and supply inflation, have largely stabilized over the last few months, but still remain a significant headwind versus last fiscal year. Based on current spot prices and latest contracts, we now estimate a $2.2 billion after-tax headwind in fiscal '23. Foreign exchange is also a significant year-on-year headwind and rates since last quarter have moved modestly against us. Based on current exchange rates, we now forecast a $1.3 billion after-tax impact to the fiscal year. Freight costs have moderated throughout the year, and we now expect them to be roughly in line with prior year. Combined headwinds from these items are now estimated at approximately $3.5 billion after-tax, or $1.40 per share, a 24 percentage point headwind to EPS growth for the year. In addition to these impacts, we are also facing higher inflation in wages and benefits and higher year-on-year net interest expense. We are offsetting a portion of these cost headwinds with price increases and productivity savings. We are continuing to invest in irresistible superiority and we are investing to improve our supply capacity, resilience and flexibility. As noted in the outset, our strong results over the first three quarters have enabled us to raise our organic sales outlook and confirm our guidance ranges on EPS and cash. We are increasing our guidance for organic sales growth from a range of 4% to 5% to approximately 6% for the fiscal year. This would put fiscal '23 in line with 6% top-line growth we've averaged over the last four years, which were 5%, 6%, 6% and 7% from fiscal '19 through '22, respectively. On the bottom-line, we're maintaining our outlook of core earnings per share growth in the range of in line to plus 4% versus prior year. Significant headwinds from input costs and foreign exchange keep our current expectations toward the lower end of this range. This guidance also reflects our intent to remain fully invested to drive our superiority strategy and increase investments as we value -- as value creating opportunities are available. We continue to forecast adjusted free cash flow productivity of 90%. We now expect to pay nearly $9 billion in dividends and to repurchase $7.4 billion to $8 billion in common stock, combined a plan to return $16 billion to $17 billion of cash to shareowners this fiscal year. This outlook is based on current market growth estimates, commodity prices and foreign exchange rates. Significant additional currency weakness commodity cost increases, geopolitical disruption, major production stoppages or store closures are not anticipated within this guidance range. To conclude, we continue to face highly volatile consumer and macro dynamics. We also continue to see high year-over-year input costs, inflation in the upstream supply chain and in our own operations. Headwinds from foreign exchange, geopolitical issues, and historically high inflation impacting consumer budgets. As we said before, we believe this is a rough patch to grow through, not a reason to reduce investment in the long-term health of our business. We're doubling down on the strategy that has been working well and is delivering strong results. We continue to step forward. We remain fully invested in our business. We remain committed to driving productivity improvements to fund growth investments, mitigate input cost challenges and to deliver balanced top- and bottom-line growth. With that, we'll be happy to take your questions.","evidence_gemma_new":null,"evidence_llama_3_3":"dividends fiscal year","evidence_qwen_3_30b":"dividends fiscal year","gemma_new_max":null,"gemma_new_min":null,"llama_3_3_max":9000000000.0,"llama_3_3_min":9000000000.0,"qwen_3_30b_max":9000000000.0,"qwen_3_30b_min":9000000000.0}
{"symbol":"PG","year":2023,"quarter":4,"date":"2023-Q4","chunk_id":3,"sub_chunk_id":0,"centroid_label":"dividends","agreed_value":9000000000.0,"count":2,"chunk":"Andre Schulten: Thank you Jon. As we\u2019ve said in each guidance outlook for the past three years and as Jon indicated, we will undoubtedly experience more volatility in the fiscal year ahead, and while supply chains and input costs have become more stable as we enter fiscal \u201924, the challenges we face are multi-faceted: economic, geopolitical, and societal, putting pressure on consumer confidence and household budgets. We\u2019ll navigate these challenges with our dynamic integrated strategy guided by consumers with every step. Based on current spot prices, we estimate commodities will be a tailwind of around $800 million after tax in fiscal \u201924. Foreign exchange rates continue to be a headwind and, based on current rates, we now expect a $400 million after-tax impact. We still face above normal levels of wage and benefit cost inflation in our cost structure and higher costs for third party services. In addition, we expect below-the-line impact from higher net interest expense to be a roughly $200 million after tax earnings headwind. With this context, I\u2019ll move to the key guidance metrics. We expect global market value growth in our categories to moderate back towards a range of around 4%, with the drivers of market growth normalizing as we move through the year, pricing becoming less of a driver and volume returning to modest growth. With the strength of our brands and commitment to keep investing in the business, we continue to expect to grow above underlying market levels, building aggregate market share globally. This leads to guidance for organic sales growth in the range of 4% to 5% for fiscal \u201924. On the bottom line, we expect EPS growth in the range of 6% to 9% versus fiscal year \u201923 EPS of $5.90. This guidance equates to a range of $6.25 to $6.43 per share, $6.34 or up 7.5% at the center of the range. With a three-point headwind from foreign exchange, this outlook translates to 9% to 12% EPS growth on a constant currency basis. We expect adjusted free cash flow productivity of 90% for the year. This includes an increase in capital spending as we add capacity in several categories. We expect to pay more than $9 billion in dividends and to repurchase $5 billion to $6 billion in common stock, combined a plan to return $14 billion to $15 billion of cash to share owners this fiscal year. Top line, bottom line and cash guidance for fiscal \u201924 all consistent with our long term algorithm. This outlook is based on current market growth estimates, commodity prices and foreign exchange rates. Significant additional currency weakness, commodity cost increases, geopolitical disruptions, major supply chain disruptions, more store closures are not anticipated within the guidance ranges. These guidance ranges also do not assume a further reduction in commodity and material costs versus current levels. If this should occur, it would generate greater flexibility to invest more in value-accretive innovation and marketing opportunities. With that, I\u2019ll hand it back to Jon for his closing thoughts.","evidence_gemma_new":"dividends fiscal year","evidence_llama_3_3":"expect dividends fiscal \u201924","evidence_qwen_3_30b":null,"gemma_new_max":9000000000.0,"gemma_new_min":9000000000.0,"llama_3_3_max":9000000000.0,"llama_3_3_min":9000000000.0,"qwen_3_30b_max":null,"qwen_3_30b_min":null}
{"symbol":"PG","year":2024,"quarter":4,"date":"2024-Q4","chunk_id":3,"sub_chunk_id":0,"centroid_label":"dividends","agreed_value":10000000000.0,"count":2,"chunk":"Andre Schulten: Thank you Jon. As we enter fiscal \u201925, we continue to expect the environment around us to remain volatile and challenging, from input costs, currencies, to consumers, competitors, retailers, and geopolitical dynamics. As Jon said, we\u2019ll navigate these challenges with our dynamic integrated strategy guided by consumers every step of the way. Our going-in guidance for fiscal \u201925 is consistent with our long term algorithm. On the top line, we currently expect the markets in which we compete to deliver local currency sales growth in the range of 3% to 4% for the year. Our objective is to grow organic sales modestly ahead of the underlying growth in these markets. This translates to an organic sales growth guidance range of 3% to 5% for the fiscal year - apologies, I had my mic muted. On the bottom line, our algorithm calls for mid to high single digit core earnings per share growth. Our core EPS guidance range for fiscal \u201925 starts the year at 5% to 7% versus fiscal \u201924 core EPS of $6.59. This guidance equates to a range of $6.91 to $7.05 per share, $6.98 up 6% at the center of the range. This outlook includes a commodity cost headwind of approximately $300 million after tax and a foreign exchange headwind of approximately $200 million after tax. Combined, foreign exchange and commodities are projected to be a headwind of $0.20 per share for fiscal \u201925, or a 3 percentage point drag on core EPS growth. In addition, the prior fiscal year included benefits from several minor brand divestitures, and we expect a somewhat higher tax rate in the new fiscal year. Combined, these are an additional $0.10 to $0.12 headwind to core EPS. We expect adjusted free cash flow productivity of 90% for the year. This includes an increase in capital spending as we add capacity in several categories. We expect to pay around $10 billion in dividends and to repurchase $6 billion to $7 billion of common stock, combined a plan to return $16 billion to $17 billion of cash to share owners this fiscal year. While we are clear eyed on the challenges in the market and the work needed to continue to drive the business, fiscal \u201925 guidance for top line, bottom line and cash are each consistent with our long term algorithm. A few items for you to consider as you build your quarter-to-quarter estimates. On the top line, please keep in mind that the July to September period has the most difficult comp for the year, and many of the market-level challenges we\u2019ve noted will not fully annualize or improve materially in our estimate until the second half of the year. On the bottom line, the foreign exchange and commodity headwinds skew a bit toward the front half of the year, and the back half comps include the benefit of the tax items and minor brand divestitures I mentioned earlier. This outlook is based on current market growth rate estimates, commodity prices and foreign exchange rates. Significant additional currency weakness, commodity cost increases, geopolitical disruptions, major supply chain disruptions, or store closures are not anticipated within the guidance ranges. With that, I\u2019ll hand it back to Jon for his closing thoughts.","evidence_gemma_new":"dividends","evidence_llama_3_3":"dividends","evidence_qwen_3_30b":null,"gemma_new_max":10000000000.0,"gemma_new_min":10000000000.0,"llama_3_3_max":10000000000.0,"llama_3_3_min":10000000000.0,"qwen_3_30b_max":null,"qwen_3_30b_min":null}
{"symbol":"PG","year":2023,"quarter":1,"date":"2023-Q1","chunk_id":52,"sub_chunk_id":0,"centroid_label":"organic sales growth","agreed_value":7.0,"count":3,"chunk":"Jon Moeller: Hey just one thing as we wrap this up, and I'll turn it back to Andre. If you step back from all of this -- as I step back from all of this, I am just incredibly pleased with our team and what they've accomplished. 7% organic sales growth against the context of Russia, Ukraine, what's happened in China where the market is down mid-singles, that is truly a fantastic work; communicating the value of our offerings, improving the value of our offerings as we take necessary pricing, maintaining topline momentum of the business, great work. The other piece that I that I think portends a strong future is the work, as Andre mentioned at the onset of the call that's happening on productivity. Between commodities, FX, and warehousing and transportation, we had a 32-point negative AT impact on the quarter, and this team was able to offset 30 points of that 32 through the combination of pricing and productivity. So, that's the big picture, in my view, and I couldn't be happier.","evidence_gemma_new":"organic sales","evidence_llama_3_3":"organic sales growth","evidence_qwen_3_30b":"organic sales July to September quarter","gemma_new_max":7.0,"gemma_new_min":7.0,"llama_3_3_max":7.0,"llama_3_3_min":7.0,"qwen_3_30b_max":7.0,"qwen_3_30b_min":7.0}
{"symbol":"PG","year":2023,"quarter":1,"date":"2023-Q1","chunk_id":1,"sub_chunk_id":0,"centroid_label":"organic sales growth","agreed_value":4.0,"count":2,"chunk":"Andre Schulten: Good morning, everyone. Joining me on the call today are Jon Moeller, Chairman of the Board, President and Chief Executive Officer; and John Chevalier, Senior Vice President, Investor Relations. We're going to keep our prepared remarks brief and then turn straight to your questions. Execution of our integrated strategies continued to yield good results in the July to September quarter and provides a solid start to the fiscal year. We're growing organic sales in all 10 categories, holding global aggregate market share, accelerating productivity savings, and improving supply sufficiency. Together, this progress enables us to maintain guidance ranges for organic sales growth, core EPS growth, free cash flow productivity and cash return to shareowners. Despite continued high commodity and transportation costs, inflation in the upstream supply chain and in our own operations, accelerating headwinds from foreign exchange, geopolitical issues, COVID disruptions impacting consumer confidence and historically high inflation impacting consumer budgets. Moving to the first quarter numbers. Organic sales grew 7%, pricing added 9 points to sales growth and mix was up 1 point. Volume declined 3 points, primarily due to lower shipments in Russia. Growth was broad-based across business units with each of our 10 product categories growing organic sales. Personal Health Care grew high teens. Feminine Care was up double digits. Fabric Care and Home Care were up high single digits. Baby Care, Grooming, Hair Care and Skin and Personal Care were each up mid-singles. Family Care and Oral Care grew low single digits. Focus markets grew 4% for the quarter, with the US up 5%. Greater China organic sales were down 4% versus the prior year, modest sequential improvement in the market still affected by COVID lockdowns and weak consumer confidence. Longer term, we expect China to return to strong underlying growth rates. Enterprise markets were up 16% with each of the three regions, up 13% or more. Global aggregate market share was in line with prior year, with 26 of our top 50 category country combinations holding or growing share. In the US, all outlet value share was in line with prior year with 6 of 10 categories holding or growing shares. On the bottom line, core earnings per share were $1.57, down 2% versus prior year. On a currency-neutral basis, core EPS increased 7%. Core margin decreased 160 basis points and currency-neutral core margin was down 130 basis points. Higher commodity materials and freight cost impacts combined with a 550 basis point hit to gross margins. Mix was 120-point headwinds, productivity savings and pricing provided 580 basis points of offset. SG&A costs as a percentage of sales were lower by 90 basis points as sales leverage and productivity improvements more than offset inflation and foreign exchange impacts. Core operating margin decreased 70 basis points, currency-neutral core operating margin increased 10 basis points, productivity improvements were a 230 basis help to the quarter. Adjusted free cash flow productivity was 86%, we returned nearly $6.3 billion of cash to shareowners, approximately $2.3 billion in dividends and $4 billion share repurchase. In summary, considering the backdrop of a very challenging cost and operating environment, results across top line, bottom line and cash to start the fiscal year. Our team continues to operate with excellence, executing the integrating strategies that have enabled strong results over the past four years, which are the foundation for balanced growth and value creation. A portfolio of daily use products, many providing cleaning, health and hygiene benefits in categories where performance plays a significant role in brand choice. The priority across the five vectors of product, package, brand communication, retail execution and value. Productivity improvement in all areas of our operations to fund investments is a priority offset cost and currency challenges, expand margins and deliver strong cash generation. An approach of constructive disruption, a willingness to change, adapt and create new trends and technologies that will shape our industry for the future especially important in this volatile environment. Finally, an organization that is increasingly more empowered, agile and accountable with little overlap or redundancy flowing to new demands, seamlessly supporting each other to deliver against our priorities around the world. Going forward, there are four areas we are driving to improve the execution of integrated strategies: Supply Chain 3.0, digital acumen, environmental sustainability and employee value equation. These are not new or separate strategies. They are necessary elements in continuing to build the priority, reduce cost to enable investment and value creation and to further strengthen our organization. Jon touched on each of these in our July earnings call and they will be a central part of our discussion at Investor Day in November. Our strategic choices on portfolios, priority, productivity, constructive disruption and organization are not independent strategies. They reinforce and build on each other, when executed well, they grow markets, which in-turn grow share, sales and profit. We continue to believe that the best path forward to deliver sustainable top and bottom-line growth is to double down on these integrated strategies, starting with a commitment to deliver irresistibly superior propositions to consumers and retail partners. Now moving on to guidance, we fully expect more volatility in costs, currencies and consumer dynamics as we move through the fiscal year. However, we think the strategies we've chosen, the investments we've made and the focus on executional excellence has positioned us well to manage through this volatility over time. Raw and packaging material costs inclusive of commodities and supplier inflation have remained high since we gave our initial outlook for the year in late July. Based on current spot prices at latest contracts, we now estimate a $2.4 billion after-tax headwind in fiscal 2023. Freight costs have also remained high. Though we have seen some easing in spot prices, we've made a modest downward adjustment in our outlook and now expect a $200 million after-tax headwind on freight and transportation costs in fiscal 2023. Foreign exchange has continued its strong move against us as the US dollar has strengthened significantly against essentially all major currencies around the world. Based on current exchange rates, we forecast a $1.3 billion after-tax impact, an incremental hit of $400 million versus our initial outlook for the year. Combined, headwinds from these items are now estimated at approximately $3.9 billion after tax or $1.57 a share, a 27 percentage point headwind to EPS growth for the year. We will offset a portion of these cost headwinds with price increases and productivity savings. We will continue to invest in irresistible superiority, which is even more important as we compete in some markets with local or non-US based competitors that don't see the same foreign exchange rate impact. As we've said before, we believe this is a rough patch to grow through not a reason to reduce investment in the business. As I noted at the outset, our good first quarter results enable us to confirm our guidance ranges for the fiscal year, across all key metrics. We continue to expect organic sales growth in the range of 3% to 5%. On the bottom line, we are maintaining our outlook of core earnings per share growth in a range of in line plus 4% versus prior year. However, the steep increase in foreign exchange impact pushes our current expectations towards the lower end of the range. We continue to forecast adjusted free cash flow productivity of 90%. We expect to pay around $9 billion in dividends and to repurchase $6 billion to $8 billion in common stock, combined a plan to return $15 billion to $17 billion of cash to shareowners this fiscal year. The outlook is based on current market growth rate estimates, commodity prices and foreign exchange rates. Significant additional currency weakness, commodity cost increases, geopolitical disruption, major production stoppages or store closures are not anticipated within this guidance range. To conclude, the macroeconomic and market level consumer challenges we're facing are not unique to P&G, and we won't immune to the impact. We've attempted to be realistic about these impacts in our guidance and transparent in our commentary. As we've said before, we believe this is a rough patch to grow through not a reason to reduce investment in the long-term health of the business. We're doubling down on the strategy that has been working well and delivering strong results. We'll continue to step forward towards the opportunities that we may fully invest in our business. We remain committed to driving productivity improvements to fund growth investments, mitigate input cost challenges and to maintain balanced top and bottom line growth. With that, we'll be happy to take your questions.","evidence_gemma_new":"organic sales growth","evidence_llama_3_3":null,"evidence_qwen_3_30b":"expect organic sales growth fiscal year","gemma_new_max":4.0,"gemma_new_min":4.0,"llama_3_3_max":null,"llama_3_3_min":null,"qwen_3_30b_max":4.0,"qwen_3_30b_min":4.0}
{"symbol":"PG","year":2023,"quarter":2,"date":"2023-Q2","chunk_id":1,"sub_chunk_id":0,"centroid_label":"organic sales growth","agreed_value":5.0,"count":2,"chunk":"Andre Schulten : Good morning. Joining me on the call today are Jon Moeller, Chairman of the Board, President and Chief Executive Officer; and John Chevalier, Senior Vice President, Investor Relations. We're going to keep our prepared remarks brief and then turn straight to your questions. Execution of our integrated strategies continued to yield good results in the October to December quarter, growing organic sales in nine of 10 categories, holding global aggregate market share, continued productivity savings, improving supply efficiency, sustained investment and superiority of our brands across all five vectors: product, package, communication, go-to-market and value, continue to pay benefits for our consumers and retail partners and in turn, for P&G shareholders. Progress against our plan fiscal year-to-date enables us to increase the guidance range for organic sales growth and maintain ranges for core EPS growth, free cash flow productivity and cash return to shareowners. Moving to the second quarter numbers. Organic sales grew 5%, pricing at a 10 points to sales growth and mix was up 1 point. Volume declined 6 points driven by a combination of market contraction, trade inventory reductions and portfolio reduction in Russia. Growth was broad-based across business units with each of our 10 product categories growing or holding organic sales. Personal Health Care grew high teens, Feminine Care, Fabric Care and Home Care were up high single digits. Hair Care was up mid-single digits. Baby Care, Family Care, Oral Care and Skin and Personal Care were each up low single digits. Grooming was in line with prior year. Focus markets grew 3% for the quarter, with the U.S. up 6%. Greater China organic sales were down 7% versus prior year, as the market continued to be impacted by COVID lockdowns and weaker consumer confidence. We continue to expect a slow recovery as consumer mobility increases over the coming quarters. Long term, we expect China to return to strong underlying growth rates. Enterprise markets were up 14% with each of the three regions up 10% or more. Global aggregate market share was in line with prior year with 27 of our top 50 category country combinations holding or growing share. In the U.S., all outlet value share was in line with prior year with seven of 10 categories holding or growing share. U.S. volume share is up 0.5 point versus the prior year quarter, delivering sequential improvement from quarter one. Recent innovations like Downy Rinse and Refresh in fabric enhancers and Dawn Powerwash in hand dishwashing are extending superiority advantages and driving value and volume share growth. Innovation also serves as a catalyst for pricing across our other brands and forms in their category segments. On the bottom line, core earnings per share were $1.59, down 4% versus prior year. On a currency-neutral basis, core EPS increased 5%. Core operating margin decreased 170 basis points, primarily due to gross margin pressure from commodities and foreign exchange. Currency-neutral core operating margin decreased 70 basis points. Productivity improvements were 110 basis points help to the quarter. Adjusted free cash flow productivity was 72%, primarily due to a temporary reduction in payables. We returned $4.2 billion of cash to shareowners, approximately $2.2 billion in dividends and $2 billion in share repurchase. In summary, considering the backdrop of a very challenging cost and operating environment, continued solid results across the top line, bottom line and cash for the first half of the fiscal year. Moving on to strategy. Our team continues to operate with excellence, executing the integrated strategies that have enabled strong results over the past four years, and that are the foundation for balanced growth and value creation. A portfolio of daily use products, many providing cleaning, health and hygiene benefits in categories where performance plays a significant role in brand choice. Ongoing commitment to and investment in irresistible superiority across the five vectors of product, package, brand communication, retail execution and value. As discussed during our Investor Day in November, we are renewing our superiority standards to reflect the dynamic nature of this strategy. Productivity improvement in all areas of our operations to fund investments in superiority offset cost and currency challenges, expand margins and deliver strong cash generation. An approach of constructive disruption, a willingness to change, adapt and create new trends and technologies that will shape our industry for the future, especially important in this volatile environment. Finally, an organization that is increasingly more empowered, agile and accountable with little overlap or redundancy, flowing to new demands, seamlessly reporting each other to deliver against our priorities around the world. Going forward, there are four areas we are driving to improve the execution of the integrated strategies, Supply Chain 3.0, digital acumen, environmental sustainability and employee value creation. These are not new or separate strategies. They are necessary elements in continuing to build superiority, reduce cost to enable investment and value creation and to further strengthen our organization. We expanded on each of these at our Investor Day in November. If you weren't able to attend or listen in remotely, I encourage you to review the materials on our IR events website. Our strategic choices on portfolio, superiority, productivity, constructive disruption and organization are interdependent strategies. They reinforce and build on each other. When executed well, they grow markets, which in turn grow share, sales and profit. We continue to believe that the best path forward to deliver sustainable top and bottom line growth is to double down on these integrated strategies starting with commitment to deliver irresistible superior propositions to consumers and retail partners. Now moving to guidance. We continue to expect more volatility in costs, currencies and consumer dynamics as we move through the second half of the fiscal year. However, we think the strategies we've chosen, the investments we've made and the focus on executional excellence have positioned us well to manage through this volatility over time. Raw and pack material costs inclusive of commodities and supplier inflation are still a significant headwind versus last fiscal year, though we have seen some modest sequential improvement. Based on current spot prices and latest contracts, we now estimate a $2.3 billion after-tax headwind in fiscal '23. Foreign exchange is also a significant year-on-year headwind. But like raw and pack materials, we've seen modest directional improvement. Based on current exchange rates, we now forecast a $1.2 billion after-tax impact for the fiscal year. Freight costs remain higher versus prior year, and we continue to expect the $200 million after-tax headwind in fiscal '23. Combined headwinds from these items are now estimated at approximately $3.7 billion after tax, $1.50 per share, a 26 percentage point headwind to EPS growth for the year. For perspective, recall that we began the year expecting approximately $1.33 of cost and FX headwinds. So despite some modest relief since last quarter, our current outlook is still $0.17 worse than our ingoing position. We are offsetting a portion of these cost headwinds with price increases and productivity savings. We are continuing to invest in irresistible superiority, and we are investing to improve our supply capacity, resilience and flexibility. As we've said before, we believe this is a bottom line rough patch to grow through with continued investment in the business and underlying strategies. As I noted at the outset, our solid first half results enable us to raise our organic sales outlook and confirm our guidance ranges on EPS and cash. We are increasing our guidance for organic sales growth from a range of 3% to 5% to a range of 4% to 5%. Within this company-wide range, we -- there are many puts and takes. As I mentioned, we expect to see some modest improvement in China, but European markets have softened as high inflation affects consumer spending. The U.S. remains relatively strong to date, and most enterprise markets remain resilient. On the bottom line, we're maintaining our outlook of core earnings per share growth in the range of in line to plus 4% versus prior year. The significant headwinds from input costs and foreign exchange keep our current expectations towards the lower end of this range. This guidance also reflects our intent to remain fully invested to drive our superiority strategy and increase investments as opportunities are available. We continue to forecast adjusted free cash flow productivity of 90%. We expect to pay around $9 billion of dividends and to repurchase $6 billion to $8 billion of common stock, combined a plan to return $15 billion to $17 billion of cash to shareowners this fiscal year. This outlook is based on current market growth rate estimates, commodity prices and foreign exchange rates. Significant additional currency weakness, commodity cost increases, geopolitical disruptions, major production stoppages or store closures are not anticipated within these guidance ranges. To conclude, we continue to face high year-over-year commodity and transportation cost inflation in the upstream supply chain and in our own operations, headwinds from foreign exchange, geopolitical issues, COVID disruptions impacting consumer confidence and historically high inflation impacting consumer budgets. These macroeconomic and market level consumer challenges we're facing are not unique to P&G, and we won't be immune to the impact. We attempt to be realistic about these impacts in our guidance and transparent in our commentary. As we've said before, we believe this is a rough patch to grow through, not a reason to reduce investment in the long-term health of the business. We're doubling down on the strategy that has been working well and is delivering strong results. We continue to step forward towards our opportunities, and we remain fully invested in our business. We are committed to driving productivity, improvements to fund growth investments, mitigate input cost challenges and to deliver balanced top and bottom line growth. With that, we're happy to take your questions.","evidence_gemma_new":"organic sales","evidence_llama_3_3":null,"evidence_qwen_3_30b":"organic sales 5% pricing 10 points mix 1 point October to December quarter","gemma_new_max":5.0,"gemma_new_min":5.0,"llama_3_3_max":null,"llama_3_3_min":null,"qwen_3_30b_max":5.0,"qwen_3_30b_min":5.0}
{"symbol":"PG","year":2023,"quarter":2,"date":"2023-Q2","chunk_id":1,"sub_chunk_id":0,"centroid_label":"organic sales growth","agreed_value":4.5,"count":2,"chunk":"Andre Schulten : Good morning. Joining me on the call today are Jon Moeller, Chairman of the Board, President and Chief Executive Officer; and John Chevalier, Senior Vice President, Investor Relations. We're going to keep our prepared remarks brief and then turn straight to your questions. Execution of our integrated strategies continued to yield good results in the October to December quarter, growing organic sales in nine of 10 categories, holding global aggregate market share, continued productivity savings, improving supply efficiency, sustained investment and superiority of our brands across all five vectors: product, package, communication, go-to-market and value, continue to pay benefits for our consumers and retail partners and in turn, for P&G shareholders. Progress against our plan fiscal year-to-date enables us to increase the guidance range for organic sales growth and maintain ranges for core EPS growth, free cash flow productivity and cash return to shareowners. Moving to the second quarter numbers. Organic sales grew 5%, pricing at a 10 points to sales growth and mix was up 1 point. Volume declined 6 points driven by a combination of market contraction, trade inventory reductions and portfolio reduction in Russia. Growth was broad-based across business units with each of our 10 product categories growing or holding organic sales. Personal Health Care grew high teens, Feminine Care, Fabric Care and Home Care were up high single digits. Hair Care was up mid-single digits. Baby Care, Family Care, Oral Care and Skin and Personal Care were each up low single digits. Grooming was in line with prior year. Focus markets grew 3% for the quarter, with the U.S. up 6%. Greater China organic sales were down 7% versus prior year, as the market continued to be impacted by COVID lockdowns and weaker consumer confidence. We continue to expect a slow recovery as consumer mobility increases over the coming quarters. Long term, we expect China to return to strong underlying growth rates. Enterprise markets were up 14% with each of the three regions up 10% or more. Global aggregate market share was in line with prior year with 27 of our top 50 category country combinations holding or growing share. In the U.S., all outlet value share was in line with prior year with seven of 10 categories holding or growing share. U.S. volume share is up 0.5 point versus the prior year quarter, delivering sequential improvement from quarter one. Recent innovations like Downy Rinse and Refresh in fabric enhancers and Dawn Powerwash in hand dishwashing are extending superiority advantages and driving value and volume share growth. Innovation also serves as a catalyst for pricing across our other brands and forms in their category segments. On the bottom line, core earnings per share were $1.59, down 4% versus prior year. On a currency-neutral basis, core EPS increased 5%. Core operating margin decreased 170 basis points, primarily due to gross margin pressure from commodities and foreign exchange. Currency-neutral core operating margin decreased 70 basis points. Productivity improvements were 110 basis points help to the quarter. Adjusted free cash flow productivity was 72%, primarily due to a temporary reduction in payables. We returned $4.2 billion of cash to shareowners, approximately $2.2 billion in dividends and $2 billion in share repurchase. In summary, considering the backdrop of a very challenging cost and operating environment, continued solid results across the top line, bottom line and cash for the first half of the fiscal year. Moving on to strategy. Our team continues to operate with excellence, executing the integrated strategies that have enabled strong results over the past four years, and that are the foundation for balanced growth and value creation. A portfolio of daily use products, many providing cleaning, health and hygiene benefits in categories where performance plays a significant role in brand choice. Ongoing commitment to and investment in irresistible superiority across the five vectors of product, package, brand communication, retail execution and value. As discussed during our Investor Day in November, we are renewing our superiority standards to reflect the dynamic nature of this strategy. Productivity improvement in all areas of our operations to fund investments in superiority offset cost and currency challenges, expand margins and deliver strong cash generation. An approach of constructive disruption, a willingness to change, adapt and create new trends and technologies that will shape our industry for the future, especially important in this volatile environment. Finally, an organization that is increasingly more empowered, agile and accountable with little overlap or redundancy, flowing to new demands, seamlessly reporting each other to deliver against our priorities around the world. Going forward, there are four areas we are driving to improve the execution of the integrated strategies, Supply Chain 3.0, digital acumen, environmental sustainability and employee value creation. These are not new or separate strategies. They are necessary elements in continuing to build superiority, reduce cost to enable investment and value creation and to further strengthen our organization. We expanded on each of these at our Investor Day in November. If you weren't able to attend or listen in remotely, I encourage you to review the materials on our IR events website. Our strategic choices on portfolio, superiority, productivity, constructive disruption and organization are interdependent strategies. They reinforce and build on each other. When executed well, they grow markets, which in turn grow share, sales and profit. We continue to believe that the best path forward to deliver sustainable top and bottom line growth is to double down on these integrated strategies starting with commitment to deliver irresistible superior propositions to consumers and retail partners. Now moving to guidance. We continue to expect more volatility in costs, currencies and consumer dynamics as we move through the second half of the fiscal year. However, we think the strategies we've chosen, the investments we've made and the focus on executional excellence have positioned us well to manage through this volatility over time. Raw and pack material costs inclusive of commodities and supplier inflation are still a significant headwind versus last fiscal year, though we have seen some modest sequential improvement. Based on current spot prices and latest contracts, we now estimate a $2.3 billion after-tax headwind in fiscal '23. Foreign exchange is also a significant year-on-year headwind. But like raw and pack materials, we've seen modest directional improvement. Based on current exchange rates, we now forecast a $1.2 billion after-tax impact for the fiscal year. Freight costs remain higher versus prior year, and we continue to expect the $200 million after-tax headwind in fiscal '23. Combined headwinds from these items are now estimated at approximately $3.7 billion after tax, $1.50 per share, a 26 percentage point headwind to EPS growth for the year. For perspective, recall that we began the year expecting approximately $1.33 of cost and FX headwinds. So despite some modest relief since last quarter, our current outlook is still $0.17 worse than our ingoing position. We are offsetting a portion of these cost headwinds with price increases and productivity savings. We are continuing to invest in irresistible superiority, and we are investing to improve our supply capacity, resilience and flexibility. As we've said before, we believe this is a bottom line rough patch to grow through with continued investment in the business and underlying strategies. As I noted at the outset, our solid first half results enable us to raise our organic sales outlook and confirm our guidance ranges on EPS and cash. We are increasing our guidance for organic sales growth from a range of 3% to 5% to a range of 4% to 5%. Within this company-wide range, we -- there are many puts and takes. As I mentioned, we expect to see some modest improvement in China, but European markets have softened as high inflation affects consumer spending. The U.S. remains relatively strong to date, and most enterprise markets remain resilient. On the bottom line, we're maintaining our outlook of core earnings per share growth in the range of in line to plus 4% versus prior year. The significant headwinds from input costs and foreign exchange keep our current expectations towards the lower end of this range. This guidance also reflects our intent to remain fully invested to drive our superiority strategy and increase investments as opportunities are available. We continue to forecast adjusted free cash flow productivity of 90%. We expect to pay around $9 billion of dividends and to repurchase $6 billion to $8 billion of common stock, combined a plan to return $15 billion to $17 billion of cash to shareowners this fiscal year. This outlook is based on current market growth rate estimates, commodity prices and foreign exchange rates. Significant additional currency weakness, commodity cost increases, geopolitical disruptions, major production stoppages or store closures are not anticipated within these guidance ranges. To conclude, we continue to face high year-over-year commodity and transportation cost inflation in the upstream supply chain and in our own operations, headwinds from foreign exchange, geopolitical issues, COVID disruptions impacting consumer confidence and historically high inflation impacting consumer budgets. These macroeconomic and market level consumer challenges we're facing are not unique to P&G, and we won't be immune to the impact. We attempt to be realistic about these impacts in our guidance and transparent in our commentary. As we've said before, we believe this is a rough patch to grow through, not a reason to reduce investment in the long-term health of the business. We're doubling down on the strategy that has been working well and is delivering strong results. We continue to step forward towards our opportunities, and we remain fully invested in our business. We are committed to driving productivity, improvements to fund growth investments, mitigate input cost challenges and to deliver balanced top and bottom line growth. With that, we're happy to take your questions.","evidence_gemma_new":"organic sales growth","evidence_llama_3_3":null,"evidence_qwen_3_30b":"expect organic sales growth range 4% to 5% fiscal year","gemma_new_max":4.5,"gemma_new_min":4.5,"llama_3_3_max":null,"llama_3_3_min":null,"qwen_3_30b_max":4.5,"qwen_3_30b_min":4.5}
{"symbol":"PG","year":2023,"quarter":2,"date":"2023-Q2","chunk_id":46,"sub_chunk_id":0,"centroid_label":"organic sales growth","agreed_value":8.0,"count":2,"chunk":"Kevin Grundy : We've covered a lot of ground. I want to try to connect the dots here on the 8% organic sales growth if we exclude the items that Andre called out, with comments in the press release around market contraction. So in the release, you mentioned market contractions in Hair Care, Grooming, Fabric Care, Baby Care, Family Care, across much of the portfolio. But as Andre talked about, the org sales in the quarter was closer to 8%. And if we look at the comp, it was actually an acceleration on a two-year stack basis. So what I really want to do is just -- I know we've covered a lot of ground on this call, just to make sure I'm kind of clear on how you're seeing category growth, how you're seeing elasticities and consumer behavior coming out of the quarter. Because it seems to me that the quarter is actually on a like-for-like basis, possibly even better than The Street had modeled. And setting aside China, you sound pretty constructive on demand dynamics. You sound pretty good on elasticity sort of relatively unchanged. And I just want to make sure that's the messaging for investors.","evidence_gemma_new":"organic sales growth","evidence_llama_3_3":null,"evidence_qwen_3_30b":"organic sales growth","gemma_new_max":8.0,"gemma_new_min":8.0,"llama_3_3_max":null,"llama_3_3_min":null,"qwen_3_30b_max":8.0,"qwen_3_30b_min":8.0}
{"symbol":"PG","year":2023,"quarter":3,"date":"2023-Q3","chunk_id":22,"sub_chunk_id":0,"centroid_label":"organic sales growth","agreed_value":0.02,"count":2,"chunk":"Andre Schulten: No, I think you said it. I think the other component we're not yet seeing is any return of Chinese consumers to travel retail. That is a significant negative for us in the SK-II business specifically. So that, hopefully, we see a more positive trend there in the near future. That's the only other upside that I think we have. But as Jon said, I think the recovery at 2% organic sales in the quarter is very consistent with what we would have expected.","evidence_gemma_new":"organic sales the quarter","evidence_llama_3_3":"organic sales in the quarter","evidence_qwen_3_30b":null,"gemma_new_max":0.02,"gemma_new_min":0.02,"llama_3_3_max":0.02,"llama_3_3_min":0.02,"qwen_3_30b_max":null,"qwen_3_30b_min":null}
{"symbol":"PG","year":2023,"quarter":3,"date":"2023-Q3","chunk_id":1,"sub_chunk_id":0,"centroid_label":"organic sales growth","agreed_value":7.0,"count":2,"chunk":"Andre Schulten: Good morning, everyone. Joining me on the call today are Jon Mueller, Chairman of the Board, President and Chief Executive Officer; and John Chevalier, Senior Vice President, Investor Relations. Execution of our integrated strategies drove strong results in the January to March quarter. Organic sales grew across all 10 categories in -- and in six out of seven regions. Global aggregate market share is holding steady, productivity savings are accelerating and enabling sustained investment in the superiority of our brands. In-market execution across all five vectors of superiority is strong and consistent: product, package, communication, go-to-market and value. Superior offerings continue to pay benefits for our consumers and retail partners and in turn for P&G shareholders. Progress against our plan enables us to increase guidance for organic sales growth and cash return to shareowners, and to maintain guidance for core EPS growth and free cash flow productivity. Moving to third quarter numbers. Organic sales grew more than 7%. Pricing added 10 points to sales growth and mix was a modest positive contributor for the quarter. Volume declined 3 points, including a 1 point headwind from portfolio reduction in Russia. Growth was broad based across business units with each of our 10 product categories growing organic sales. Feminine Care was up low teens, Personal Health Care, Home Care and Hair Care each grew double digits, Grooming, Oral Care and Fabric Care grew high single digits, Baby Care was up mid singles, and Family Care and Skin and Personal Care grew low singles. Growth was also broad based across geographies with six of seven regions growing organic sales. Focus markets grew 5% for the quarter. Organic sales in the U.S. were up 6%, including modest unit volume growth. Europe focus markets were up 8%. Greater China organic sales were up 2% versus prior year, as the market begins to recover from COVID lockdowns and as consumer confidence improves. We continue to expect further recovery as consumer mobility increases over the coming quarters. Longer-term, we expect China to return to mid singles underlying market growth rates for our portfolio of categories. Enterprise markets were up 15% with Latin America up nearly 30% and Europe enterprise markets up low teens. This is the fourth consecutive quarter in which all five sectors grew organic sales double digits in enterprise markets. Global aggregate value share was in line with prior year, with 30 of our top 50 category country combinations holding or growing share. Excluding Russia, global value share was up 20 basis points. In the U.S., all outlet value share was up 40 basis points versus prior year with eight of 10 categories holding or growing share in the quarter. U.S. volume share is up 90 basis points versus the prior year, driven by 2 points of absolute volume consumption growth in a market that is still down modestly versus prior year. Strong U.S. share growth in Personal Care has been led by innovation on the native brand and deodorants, as well as successful extension into body wash. Cascade Platinum Plus has driven strong share growth in auto dishwashing, and Dawn share continues to be up more than 1 point with ongoing leverage from the power wash and easy squeeze innovations. Vicks continues to be a growth leader in Personal Health Care, and we've delivered strong share growth in the Metamucil and Pepto-Bismol brands. In Europe, the new four-chamber Ariel Platinum PODS are driving strong consumer demand in Fabric Care. Fairy Power Spray is growing the dish category and building market share in Home Care. The new GilletteLabs exfoliating razor, male and female intimate grooming innovations and cardboard packaging upgrades are driving strong growth in grooming. Moving to the bottom-line. Core earnings per share were $1.37, up 3% versus prior year. On a currency neutral basis, core EPS increased 13%, good progress as we faced $0.31 per share of cost and foreign exchange headwinds in the quarter. Core operating margin increased 40 basis points, as 150 basis points of gross margin expansion were partially offset by SG&A investments and inflation impacts. Currency-neutral core operating margin increased 160 basis points. Productivity improvements were a 290 basis point help to the quarter. Adjusted free cash flow productivity was at 92%. We returned $3.6 billion of cash to shareowners, approximately $2.2 billion in dividends and $1.4 billion in share repurchase. Last week, we announced a 3% increase in our dividend, again reinforcing our commitment to return cash to shareowners. This is the 67th consecutive annual dividend increase and the 133rd consecutive year P&G has paid a dividend. In summary, against what is still a challenging cost and operating environment, continued good results across top-line, bottom-line and cash for the third quarter. Our team continues to operate with excellence, executing the integrated strategies that have enabled strong results over the past four years and that are the foundation for balanced growth and value creation. A portfolio of daily use products, many providing cleaning, health and hygiene benefits in categories where performance plays a significant role in brand choice. Ongoing commitment to and investment in irresistible superiority across the five vectors of product, package, brand communication, retail execution and value, we are again raising the bar on our superiority standards to reflect the dynamic nature of this strategy. Productivity improvements in all areas of operations to fund investments in superiority offset cost and currency challenges, extend margins and deliver strong cash generation, an approach of constructive disruption, a willingness to change, adapt and create new trends and technologies that will shape our industry for the future. Finally, an organization that is increasingly more empowered, agile and accountable with little overlap or redundancy flowing to new demands seamlessly supporting each other to deliver against our priorities around the world. There are four areas we are driving to improve the execution of the integrated strategies: Supply Chain 3.0, digital acumen, environmental sustainability and employee value equation. These are not new or separate strategies, they are necessary elements in continuing to build superiority, reduce costs to enable investment and value creation and to further strengthen our organization. Our strategic choices on portfolio, superiority, productivity, constructive disruption and organization are interdependent strategies. They reinforce and build on each other. When executed well, they grow markets, which in turn grow share, sales and profit. We continue to believe that the best path forward to deliver sustainable top- and bottom-line growth is to double down on these integrated strategies, starting with the commitment to deliver irresistibly superior propositions to consumers and retail partners. Now, moving to guidance. As we work towards the end of the fiscal year, we are cautiously optimistic. We remain confident in our strategies and the organization's ability to execute them with excellence. We continue to expect more volatility in the macro and consumer environment, and expect sustained pressure in costs and foreign exchange as we move forward. On the whole, our consumer markets remained relatively resilient, with U.S. and China volume trends improving, but with inflation pressures in Europe weighing more heavily on consumption. We continue to think the strategies we've chosen, the investments we've made and the focus on executional excellence have positioned us well to manage through this volatility over time. Raw and packaging material costs, inclusive of commodities and supply inflation, have largely stabilized over the last few months, but still remain a significant headwind versus last fiscal year. Based on current spot prices and latest contracts, we now estimate a $2.2 billion after-tax headwind in fiscal '23. Foreign exchange is also a significant year-on-year headwind and rates since last quarter have moved modestly against us. Based on current exchange rates, we now forecast a $1.3 billion after-tax impact to the fiscal year. Freight costs have moderated throughout the year, and we now expect them to be roughly in line with prior year. Combined headwinds from these items are now estimated at approximately $3.5 billion after-tax, or $1.40 per share, a 24 percentage point headwind to EPS growth for the year. In addition to these impacts, we are also facing higher inflation in wages and benefits and higher year-on-year net interest expense. We are offsetting a portion of these cost headwinds with price increases and productivity savings. We are continuing to invest in irresistible superiority and we are investing to improve our supply capacity, resilience and flexibility. As noted in the outset, our strong results over the first three quarters have enabled us to raise our organic sales outlook and confirm our guidance ranges on EPS and cash. We are increasing our guidance for organic sales growth from a range of 4% to 5% to approximately 6% for the fiscal year. This would put fiscal '23 in line with 6% top-line growth we've averaged over the last four years, which were 5%, 6%, 6% and 7% from fiscal '19 through '22, respectively. On the bottom-line, we're maintaining our outlook of core earnings per share growth in the range of in line to plus 4% versus prior year. Significant headwinds from input costs and foreign exchange keep our current expectations toward the lower end of this range. This guidance also reflects our intent to remain fully invested to drive our superiority strategy and increase investments as we value -- as value creating opportunities are available. We continue to forecast adjusted free cash flow productivity of 90%. We now expect to pay nearly $9 billion in dividends and to repurchase $7.4 billion to $8 billion in common stock, combined a plan to return $16 billion to $17 billion of cash to shareowners this fiscal year. This outlook is based on current market growth estimates, commodity prices and foreign exchange rates. Significant additional currency weakness commodity cost increases, geopolitical disruption, major production stoppages or store closures are not anticipated within this guidance range. To conclude, we continue to face highly volatile consumer and macro dynamics. We also continue to see high year-over-year input costs, inflation in the upstream supply chain and in our own operations. Headwinds from foreign exchange, geopolitical issues, and historically high inflation impacting consumer budgets. As we said before, we believe this is a rough patch to grow through, not a reason to reduce investment in the long-term health of our business. We're doubling down on the strategy that has been working well and is delivering strong results. We continue to step forward. We remain fully invested in our business. We remain committed to driving productivity improvements to fund growth investments, mitigate input cost challenges and to deliver balanced top- and bottom-line growth. With that, we'll be happy to take your questions.","evidence_gemma_new":"Organic sales","evidence_llama_3_3":null,"evidence_qwen_3_30b":"organic sales January to March quarter","gemma_new_max":7.0,"gemma_new_min":7.0,"llama_3_3_max":null,"llama_3_3_min":null,"qwen_3_30b_max":7.0,"qwen_3_30b_min":7.0}
{"symbol":"PG","year":2023,"quarter":3,"date":"2023-Q3","chunk_id":26,"sub_chunk_id":0,"centroid_label":"organic sales growth","agreed_value":6.0,"count":2,"chunk":"Jon Moeller: And just one additional point, the 6% top-line organic sales growth that the team delivered in the quarter, and as Andre said, sales share -- value share growth and volume share growth, we still have a couple of categories where we are not supplying full demand. That'll be remediated here fairly quickly. But as you as you consider the strength of the U.S. consumer, if you look at those key measures, and realize that there -- while there are both opportunities and risks within the number, there are opportunities as well as risks, which continue to point to a relatively healthy U.S. consumption pattern.","evidence_gemma_new":"U.S. Organic sales","evidence_llama_3_3":null,"evidence_qwen_3_30b":"top-line organic sales growth quarter","gemma_new_max":6.0,"gemma_new_min":6.0,"llama_3_3_max":null,"llama_3_3_min":null,"qwen_3_30b_max":6.0,"qwen_3_30b_min":6.0}
{"symbol":"PG","year":2023,"quarter":3,"date":"2023-Q3","chunk_id":15,"sub_chunk_id":0,"centroid_label":"organic sales growth","agreed_value":8.0,"count":2,"chunk":"Jon Moeller: Just building on Andre's points, which I fully agree with, I want to come back to this notion of balance and our commitment to it. Some of you have heard me talk about this probably many times, but it's worth repeating, so you understand how we're thinking about things. We have a chart that we use with the leadership team every time we gather, which shows what you would have to believe to deliver top total share shareholder return, which is our objective entirely through the top-line or entirely through the bottom-line. And to do it entirely through the top-line, you'd have to assume that we can grow 8% from an organic sales standpoint each and every quarter, which is in our view unrealistic. If you try to do it entirely through the bottom-line, you'd have to assume that you could expand margins 180 basis points per year. So five years, 10 margin points in a highly competitive industry where it's taken us 187 years to build 22 margin points, equally unlikely. So, we are very committed to driving both top-line and bottom-line. It's the only way we see to get home. I have a trite little saying that we use on occasion, which is \"Top-line with no bottom-line, a waste of time. Bottom-line with no top-line, just a matter of time.\" We're going to continue to operate in that vein. And if we're successful, you'll see top-line growth driven by proper levels of investment and bottom-line growth and margin expansion -- modest margin expansion. One last thing on the point of advertising rate of return, or ROI, in addition to what Andre was talking about, we simply have, though maybe hard to believe, a lot of low-hanging fruit that's out there. We have many categories where we are not at our target levels of reach. And that's a very high ROI activity when we can reduce wasted frequency, reinvest that into expanded reach, very good things happen. As you've seen, by the way, not just this quarter, but for the last four years. And there's no reason to change that approach at this point in time.","evidence_gemma_new":"organic sales quarter","evidence_llama_3_3":null,"evidence_qwen_3_30b":"organic sales grow 8% each and every quarter","gemma_new_max":8.0,"gemma_new_min":8.0,"llama_3_3_max":null,"llama_3_3_min":null,"qwen_3_30b_max":8.0,"qwen_3_30b_min":8.0}
{"symbol":"PG","year":2023,"quarter":4,"date":"2023-Q4","chunk_id":1,"sub_chunk_id":0,"centroid_label":"organic sales growth","agreed_value":7.0,"count":3,"chunk":"Andre Schulten: With me today are Jon Moeller, Chairman of the Board, President and Chief Executive Officer, and John Chevalier, Senior Vice President, Investor Relations. I\u2019ll start with an overview of results for fiscal year \u201923 and the fourth quarter. Jon will add perspective on our strategic focus areas and capabilities and will close with guidance for fiscal \u201924 and then take your questions. Fiscal \u201923 was another very strong year. Execution of our integrated strategy continues to yield broad-based strong sales growth across categories and regions, strong earnings in the face of significant cost headwinds, and continued strong return on cash to P&G shareholders. Organic sales for the fiscal year grew 7%, our second consecutive year of 7% organic sales growth and fifth consecutive year of 5% or better organic growth starting fiscal 2019 - 5%, 6%, 6%, 7% and 7%. Growth was broad-based across business units with all 10 of our product categories growing organic sales. Personal healthcare grew mid-teens, feminine care grew double digits, fabric care, home care and hair care up high single digits, skin and personal care, baby care, family care and grooming each grew mid singles. Oral care grew low single digits. Focus markets were up 5% for the year and we delivered strong results in our largest and most profitable market, the United States, with organic sales growing 6% on top of a strong 8% growth comp in the base period. Greater China organic sales were down low single digits versus the prior year, with trends improving in the back half as the market continues to slowly recover. Enterprise markets were up 15% led by Latin America with 24% organic sales growth. Ecommerce sales increased 7%, now representing 17% of total company. Our strategy focused on driving market growth is in turn driving share growth for P&G. All channel market value sales in the U.S. categories in which we compete grew approximately 7% in fiscal \u201923. P&G consumption grew ahead of fair share of category growth, driving modest value share growth and volume share up 50 basis points for the year. We held global aggregate market share. Twenty-nine of our top 50 category-country combinations held or grew share for the year. Importantly, this share growth is broad-based. Seven of 10 product categories grew share globally over the past year. Core earnings per share were $5.90, up 2% for the year despite a 24 percentage point earnings growth headwind, or $1.38 from share from higher material costs and foreign exchange. On a currency neutral basis, core EPS was up 11%. Adjusted free cash flow productivity was 95%. We increased our dividend by 3% and returned over $16 billion of value to share owners, $9 billion in dividends and $7.4 billion in share repurchase. Moving to the April to June quarter, organic sales grew 8%. We have now delivered seven consecutive quarters with 5% or better organic sales growth. Pricing contributed seven points to organic sales growth, mix was up 2 points, volume declined one point, improving sequentially versus the March quarter, as expected. These strong company results are grounded in broad-based category and geographic strength. Each of our 10 product categories grew organic sales in the quarter. Skin and personal care, personal healthcare, home care, feminine care, and family care, five of our 10 categories, each grew double digits. Baby care, hair care and grooming grew high singles, fabric care grew mid singles, and oral care was up low single digits. Each of our seven regions grew organic sales with focus markets up 7% and enterprise markets up 13% for the quarter. Organic sales in the U.S. grew 6%. Importantly, this includes 3 points of volume growth, a return to positive volume in our largest market for the first time in five quarters. Greater China organic sales grew 4%. We continue to see sequential market recovery, but as expected at a slow pace. European focused market organic sales were up 12% despite volume pressure from wider pricing gaps. In enterprise markets, Latin America led the growth with organic sales up 22%. Global aggregate market share increased 10 basis points. Twenty nine of our top 50 category-country combinations held or grew share for the quarter. On the bottom line, core earnings per share were $1.37, up 13% versus the prior year. On a currency neutral basis, core EPS increased 22%. Core operating margin increased 190 basis points as benefits from strong sales growth and productivity improvements more than offset higher material cost, foreign exchange headwinds, wage and benefit inflation, and reinvestment in higher media reach and frequency. Currency neutral operating margin increased 310 basis points. Adjusted free cash flow productivity was 136%. We returned approximately $2.3 billion of cash to share owners in the quarter. In summary, we met or exceeded each of our going-in target ranges for the year: organic sales growth, core EPS growth, free cash flow productivity, and cash returned to share owners, strong performance again this year in a very difficult operating environment. Now I\u2019ll pass it over to Jon.","evidence_gemma_new":"organic sales growth each year","evidence_llama_3_3":"P&G organic sales fiscal year '23","evidence_qwen_3_30b":"organic sales fiscal year","gemma_new_max":7.0,"gemma_new_min":7.0,"llama_3_3_max":7.0,"llama_3_3_min":7.0,"qwen_3_30b_max":7.0,"qwen_3_30b_min":7.0}
{"symbol":"PG","year":2023,"quarter":4,"date":"2023-Q4","chunk_id":1,"sub_chunk_id":0,"centroid_label":"organic sales growth","agreed_value":8.0,"count":3,"chunk":"Andre Schulten: With me today are Jon Moeller, Chairman of the Board, President and Chief Executive Officer, and John Chevalier, Senior Vice President, Investor Relations. I\u2019ll start with an overview of results for fiscal year \u201923 and the fourth quarter. Jon will add perspective on our strategic focus areas and capabilities and will close with guidance for fiscal \u201924 and then take your questions. Fiscal \u201923 was another very strong year. Execution of our integrated strategy continues to yield broad-based strong sales growth across categories and regions, strong earnings in the face of significant cost headwinds, and continued strong return on cash to P&G shareholders. Organic sales for the fiscal year grew 7%, our second consecutive year of 7% organic sales growth and fifth consecutive year of 5% or better organic growth starting fiscal 2019 - 5%, 6%, 6%, 7% and 7%. Growth was broad-based across business units with all 10 of our product categories growing organic sales. Personal healthcare grew mid-teens, feminine care grew double digits, fabric care, home care and hair care up high single digits, skin and personal care, baby care, family care and grooming each grew mid singles. Oral care grew low single digits. Focus markets were up 5% for the year and we delivered strong results in our largest and most profitable market, the United States, with organic sales growing 6% on top of a strong 8% growth comp in the base period. Greater China organic sales were down low single digits versus the prior year, with trends improving in the back half as the market continues to slowly recover. Enterprise markets were up 15% led by Latin America with 24% organic sales growth. Ecommerce sales increased 7%, now representing 17% of total company. Our strategy focused on driving market growth is in turn driving share growth for P&G. All channel market value sales in the U.S. categories in which we compete grew approximately 7% in fiscal \u201923. P&G consumption grew ahead of fair share of category growth, driving modest value share growth and volume share up 50 basis points for the year. We held global aggregate market share. Twenty-nine of our top 50 category-country combinations held or grew share for the year. Importantly, this share growth is broad-based. Seven of 10 product categories grew share globally over the past year. Core earnings per share were $5.90, up 2% for the year despite a 24 percentage point earnings growth headwind, or $1.38 from share from higher material costs and foreign exchange. On a currency neutral basis, core EPS was up 11%. Adjusted free cash flow productivity was 95%. We increased our dividend by 3% and returned over $16 billion of value to share owners, $9 billion in dividends and $7.4 billion in share repurchase. Moving to the April to June quarter, organic sales grew 8%. We have now delivered seven consecutive quarters with 5% or better organic sales growth. Pricing contributed seven points to organic sales growth, mix was up 2 points, volume declined one point, improving sequentially versus the March quarter, as expected. These strong company results are grounded in broad-based category and geographic strength. Each of our 10 product categories grew organic sales in the quarter. Skin and personal care, personal healthcare, home care, feminine care, and family care, five of our 10 categories, each grew double digits. Baby care, hair care and grooming grew high singles, fabric care grew mid singles, and oral care was up low single digits. Each of our seven regions grew organic sales with focus markets up 7% and enterprise markets up 13% for the quarter. Organic sales in the U.S. grew 6%. Importantly, this includes 3 points of volume growth, a return to positive volume in our largest market for the first time in five quarters. Greater China organic sales grew 4%. We continue to see sequential market recovery, but as expected at a slow pace. European focused market organic sales were up 12% despite volume pressure from wider pricing gaps. In enterprise markets, Latin America led the growth with organic sales up 22%. Global aggregate market share increased 10 basis points. Twenty nine of our top 50 category-country combinations held or grew share for the quarter. On the bottom line, core earnings per share were $1.37, up 13% versus the prior year. On a currency neutral basis, core EPS increased 22%. Core operating margin increased 190 basis points as benefits from strong sales growth and productivity improvements more than offset higher material cost, foreign exchange headwinds, wage and benefit inflation, and reinvestment in higher media reach and frequency. Currency neutral operating margin increased 310 basis points. Adjusted free cash flow productivity was 136%. We returned approximately $2.3 billion of cash to share owners in the quarter. In summary, we met or exceeded each of our going-in target ranges for the year: organic sales growth, core EPS growth, free cash flow productivity, and cash returned to share owners, strong performance again this year in a very difficult operating environment. Now I\u2019ll pass it over to Jon.","evidence_gemma_new":"organic sales","evidence_llama_3_3":"P&G organic sales April to June quarter","evidence_qwen_3_30b":"organic sales April to June quarter","gemma_new_max":8.0,"gemma_new_min":8.0,"llama_3_3_max":8.0,"llama_3_3_min":8.0,"qwen_3_30b_max":8.0,"qwen_3_30b_min":8.0}
{"symbol":"PG","year":2023,"quarter":4,"date":"2023-Q4","chunk_id":1,"sub_chunk_id":0,"centroid_label":"organic sales growth","agreed_value":6.0,"count":2,"chunk":"Andre Schulten: With me today are Jon Moeller, Chairman of the Board, President and Chief Executive Officer, and John Chevalier, Senior Vice President, Investor Relations. I\u2019ll start with an overview of results for fiscal year \u201923 and the fourth quarter. Jon will add perspective on our strategic focus areas and capabilities and will close with guidance for fiscal \u201924 and then take your questions. Fiscal \u201923 was another very strong year. Execution of our integrated strategy continues to yield broad-based strong sales growth across categories and regions, strong earnings in the face of significant cost headwinds, and continued strong return on cash to P&G shareholders. Organic sales for the fiscal year grew 7%, our second consecutive year of 7% organic sales growth and fifth consecutive year of 5% or better organic growth starting fiscal 2019 - 5%, 6%, 6%, 7% and 7%. Growth was broad-based across business units with all 10 of our product categories growing organic sales. Personal healthcare grew mid-teens, feminine care grew double digits, fabric care, home care and hair care up high single digits, skin and personal care, baby care, family care and grooming each grew mid singles. Oral care grew low single digits. Focus markets were up 5% for the year and we delivered strong results in our largest and most profitable market, the United States, with organic sales growing 6% on top of a strong 8% growth comp in the base period. Greater China organic sales were down low single digits versus the prior year, with trends improving in the back half as the market continues to slowly recover. Enterprise markets were up 15% led by Latin America with 24% organic sales growth. Ecommerce sales increased 7%, now representing 17% of total company. Our strategy focused on driving market growth is in turn driving share growth for P&G. All channel market value sales in the U.S. categories in which we compete grew approximately 7% in fiscal \u201923. P&G consumption grew ahead of fair share of category growth, driving modest value share growth and volume share up 50 basis points for the year. We held global aggregate market share. Twenty-nine of our top 50 category-country combinations held or grew share for the year. Importantly, this share growth is broad-based. Seven of 10 product categories grew share globally over the past year. Core earnings per share were $5.90, up 2% for the year despite a 24 percentage point earnings growth headwind, or $1.38 from share from higher material costs and foreign exchange. On a currency neutral basis, core EPS was up 11%. Adjusted free cash flow productivity was 95%. We increased our dividend by 3% and returned over $16 billion of value to share owners, $9 billion in dividends and $7.4 billion in share repurchase. Moving to the April to June quarter, organic sales grew 8%. We have now delivered seven consecutive quarters with 5% or better organic sales growth. Pricing contributed seven points to organic sales growth, mix was up 2 points, volume declined one point, improving sequentially versus the March quarter, as expected. These strong company results are grounded in broad-based category and geographic strength. Each of our 10 product categories grew organic sales in the quarter. Skin and personal care, personal healthcare, home care, feminine care, and family care, five of our 10 categories, each grew double digits. Baby care, hair care and grooming grew high singles, fabric care grew mid singles, and oral care was up low single digits. Each of our seven regions grew organic sales with focus markets up 7% and enterprise markets up 13% for the quarter. Organic sales in the U.S. grew 6%. Importantly, this includes 3 points of volume growth, a return to positive volume in our largest market for the first time in five quarters. Greater China organic sales grew 4%. We continue to see sequential market recovery, but as expected at a slow pace. European focused market organic sales were up 12% despite volume pressure from wider pricing gaps. In enterprise markets, Latin America led the growth with organic sales up 22%. Global aggregate market share increased 10 basis points. Twenty nine of our top 50 category-country combinations held or grew share for the quarter. On the bottom line, core earnings per share were $1.37, up 13% versus the prior year. On a currency neutral basis, core EPS increased 22%. Core operating margin increased 190 basis points as benefits from strong sales growth and productivity improvements more than offset higher material cost, foreign exchange headwinds, wage and benefit inflation, and reinvestment in higher media reach and frequency. Currency neutral operating margin increased 310 basis points. Adjusted free cash flow productivity was 136%. We returned approximately $2.3 billion of cash to share owners in the quarter. In summary, we met or exceeded each of our going-in target ranges for the year: organic sales growth, core EPS growth, free cash flow productivity, and cash returned to share owners, strong performance again this year in a very difficult operating environment. Now I\u2019ll pass it over to Jon.","evidence_gemma_new":"U.S. Organic sales","evidence_llama_3_3":null,"evidence_qwen_3_30b":"U.S. organic sales April to June quarter","gemma_new_max":6.0,"gemma_new_min":6.0,"llama_3_3_max":null,"llama_3_3_min":null,"qwen_3_30b_max":6.0,"qwen_3_30b_min":6.0}
{"symbol":"PG","year":2023,"quarter":4,"date":"2023-Q4","chunk_id":3,"sub_chunk_id":0,"centroid_label":"organic sales growth","agreed_value":4.5,"count":2,"chunk":"Andre Schulten: Thank you Jon. As we\u2019ve said in each guidance outlook for the past three years and as Jon indicated, we will undoubtedly experience more volatility in the fiscal year ahead, and while supply chains and input costs have become more stable as we enter fiscal \u201924, the challenges we face are multi-faceted: economic, geopolitical, and societal, putting pressure on consumer confidence and household budgets. We\u2019ll navigate these challenges with our dynamic integrated strategy guided by consumers with every step. Based on current spot prices, we estimate commodities will be a tailwind of around $800 million after tax in fiscal \u201924. Foreign exchange rates continue to be a headwind and, based on current rates, we now expect a $400 million after-tax impact. We still face above normal levels of wage and benefit cost inflation in our cost structure and higher costs for third party services. In addition, we expect below-the-line impact from higher net interest expense to be a roughly $200 million after tax earnings headwind. With this context, I\u2019ll move to the key guidance metrics. We expect global market value growth in our categories to moderate back towards a range of around 4%, with the drivers of market growth normalizing as we move through the year, pricing becoming less of a driver and volume returning to modest growth. With the strength of our brands and commitment to keep investing in the business, we continue to expect to grow above underlying market levels, building aggregate market share globally. This leads to guidance for organic sales growth in the range of 4% to 5% for fiscal \u201924. On the bottom line, we expect EPS growth in the range of 6% to 9% versus fiscal year \u201923 EPS of $5.90. This guidance equates to a range of $6.25 to $6.43 per share, $6.34 or up 7.5% at the center of the range. With a three-point headwind from foreign exchange, this outlook translates to 9% to 12% EPS growth on a constant currency basis. We expect adjusted free cash flow productivity of 90% for the year. This includes an increase in capital spending as we add capacity in several categories. We expect to pay more than $9 billion in dividends and to repurchase $5 billion to $6 billion in common stock, combined a plan to return $14 billion to $15 billion of cash to share owners this fiscal year. Top line, bottom line and cash guidance for fiscal \u201924 all consistent with our long term algorithm. This outlook is based on current market growth estimates, commodity prices and foreign exchange rates. Significant additional currency weakness, commodity cost increases, geopolitical disruptions, major supply chain disruptions, more store closures are not anticipated within the guidance ranges. These guidance ranges also do not assume a further reduction in commodity and material costs versus current levels. If this should occur, it would generate greater flexibility to invest more in value-accretive innovation and marketing opportunities. With that, I\u2019ll hand it back to Jon for his closing thoughts.","evidence_gemma_new":"organic sales growth fiscal \u201924","evidence_llama_3_3":null,"evidence_qwen_3_30b":"organic sales growth fiscal \u201924","gemma_new_max":4.5,"gemma_new_min":4.5,"llama_3_3_max":null,"llama_3_3_min":null,"qwen_3_30b_max":4.5,"qwen_3_30b_min":4.5}
{"symbol":"PG","year":2024,"quarter":1,"date":"2024-Q1","chunk_id":1,"sub_chunk_id":0,"centroid_label":"organic sales growth","agreed_value":7.0,"count":2,"chunk":"Andre Schulten: Good morning, everyone. Joining me on the call today is John Chevalier, Senior Vice President, Investor Relations. This fiscal year, Jon Moeller, Chairman, President and CEO, will join the mid-year and year-end calls and I'll be leading the Q1 and Q3 calls. Execution of our integrated strategy draws strong results in the July to September quarter. Broad-based organic sales growth across categories and regions, global aggregate market share growth, strong productivity savings enabling increased investment in superiority of our brands while also delivering very strong earnings growth. These strong first quarter results put us on track to deliver towards the higher end of our fiscal year guidance ranges for organic sales growth and core earnings per share, and continued strong cash productivity and cash return to share owners. So moving to first quarter numbers, organic sales grew 7%. Pricing added 7 points to sales growth, and mixed contributed 1 point. Volume rounded down to a decline of 1 point with overall modest volume growth outside greater China. Top-line growth was broad-based across business units with each of our 10 product categories growing organic sales. Home care grew low teens, personal healthcare was up double digits, feminine care, oral care, fabric care, hair care and grooming, each grew high single digits. Baby care and family care were up mid-singles, skin and personal care grew low singles. Growth was also broad-based across geographies, with five of seven regions growing organic sales. Focus markets grew 6% for the quarter, organic sales in the US were up 7% and Europe focus markets were up 15%. Greater China organic sales were down 6% versus prior year. Underlying market growth is soft and choppy as consumer confidence remains weak. SK-II was down low teens in Greater China due to soft market conditions and a temporary reduction in social retail merchandising. Enterprise markets were up 13%, with Latin America up 19%, and Europe enterprise markets up 15%. Shipment volume in the US grew 3% again this quarter and we returned to volume growth in Europe focus markets. Mexico, Brazil and India, some of our largest enterprise markets, continue to deliver volume growth. These gains largely offset volume declines in the Greater China, Asia Pacific and European enterprise regions primarily driven by underlying market contraction. Global aggregate value share was up 40 basis points versus prior year, with 32 of our top 50 category country combinations holding or growing share. In the US, all outlet value share was up 50 basis points versus prior year with seven of 10 categories holding or growing value share in the quarter. US volume share was up 60 basis points, reflecting 3% volume growth. Value share in European focus markets was up 40 basis points over the past three months. Moving to the bottom line, core earnings per share were $1.83, up 17% versus prior year. On a currency-neutral basis, core EPS increased 21%. Core operating margin increased 240 basis points, as 460 basis points of gross margin expansion were partially offset by increased marketing investments, wage and benefit inflation, and foreign exchange impacts on SG&A. Currency-neutral core operating margin increased 340 basis points. Productivity improvements were a 210 basis point help to the quarter. Adjusted free cash for productivity was 97%. We returned $3.8 billion of cash to share owners, approximately $2.3 billion in dividends, and $1.5 billion in share repurchase. In summary, against what continues to be a challenging and volatile operating environment, a very good start to the fiscal year across top-line, bottom line, and cash. Our team continues to operate with excellence, executing the integrated strategy that has enabled strong results over the past five years, and that is the foundation for balanced growth and value creation. A portfolio of daily use products, many providing cleaning, health, and hygiene benefits in categories where performance plays a significant role in brand choice. Ongoing commitment to and investment in irresistible superiority across the five vectors of product, package, brand communication, retail execution, and value across each price tier we compete. We are again raising the bar on our superiority standards to reflect the dynamic nature of this strategy. Productivity improvement in all areas of our operations to fund investments in superiority, offset cost and currency challenges, expand margins and deliver strong cash generation. An approach of constructive disruption, a willingness to change, adapt, and create new trends and technologies that will shape our industry for the future, especially important in the volatile environment we're in. Finally an organization that is more empowered, agile, and accountable. We continue to improve the execution of the integrated strategy with four focus areas, supply chain 3.0, digital acumen, environmental sustainability, and the employee value equation. These are not new or separate strategies. They are necessary elements in continuing to build superiority, reduce costs to enable investment and value creation, and to further strengthen our organization. Our strategic choices on portfolio, superiority, productivity, constructive disruption and organization reinforce and build on each other. When executed well, they grow markets which in turn grow share, sales and profit. We continue to believe that the best path forward to deliver sustainable top and bottom-line growth is to double down on these integrated strategies, starting with a commitment to deliver irresistibly superior propositions to consumers and retail partners fueled by productivity. Moving to guidance. As I mentioned, we expect the environment around us to continue to be volatile and challenging from input costs, to currencies, to consumer and geopolitical dynamics. We attempt to reflect these realities in our guidance ranges. Based on current spot prices, we estimate commodities will be a tailwind of around $800 million after tax in fiscal \u201824. This is consistent with the outlook we provided in July. However, within this estimate, there have been several moving parts. We've seen incremental relief on some commodities like pulp, which have been offset by higher costs than other commodities such as fuel. Foreign exchange rates have moved sharply against us, and we now expect a headwind of approximately $1 billion after tax, an incremental $600 million impact since our initial guidance for the year. In addition to these impacts, we are also facing higher inflation in wages and benefits, and we expect higher year-on-year net interest expense of approximately $200 million after tax. As we are just one quarter into the fiscal year, we are maintaining our guidance ranges for organic sales, core EPS growth, cash productivity, and cash return to share owners, with each solidly on track after a very strong first quarter. Guidance for organic sales is growth of 4% to 5% for the fiscal year. The range includes a normalization in underlying market growth rate that is likely to occur through calendar year \u201824 as the market laps the last wave of cost recovery pricing and as market volumes return to growth. For P&G, we expect 3 to 4 points less pricing benefit in each of the next two quarters compared to our first quarter results. On the bottom line, our outlook for fiscal \u201824 core earnings per share is 6% to 9% growth versus last fiscal year. We're holding the range despite the incremental $600 million after-tax headwind from foreign exchange. With now a 7-point EPS impact from FX, this outlook translates to 13% to 16% core EPS growth on a constant-currency basis. We continue to forecast adjusted free cash flow productivity of 90%. We expect to pay more than $9 billion in dividends and to repurchase $5 billion to $6 billion in common stock, combined a plan to return $14 billion to $15 billion of cash to shareowners this fiscal year. This outlook is based on current market growth rate estimates, commodity prices, and foreign exchange rates. Significant additional currency weakness, commodity cost increases, geopolitical disruptions, or major production stoppages are not anticipated within the guidance ranges. As you consider the cadence of earnings for the year, keep in mind that the back half of the year will see less pricing benefit as we progressively annualize prior year increases. We should also see less commodity benefit as we move through the year. Labor inflation continues throughout the supply chain and [in our] (ph) costs. FX headwinds will increase versus quarter one. Also with a strong start to the year, we'll be reinvesting to further strengthen our plans and to maintain strong momentum. Finally, we'll be closely watching the health of the China market and the balance of regions, energy costs are rising as we head into fall and winter, household saving levels have reduced, especially in Europe. Slower economic growth, higher energy costs and higher interest rates for longer have an impact on consumer confidence. To conclude, while we expect volatile consumer and market dynamics to continue, we remain confident in our strategy and the results that it delivers. We are focused on driving growth in our categories and we are committed to delivering balanced top and bottom-line growth and value creation for our share owners. With that, we'll be happy to take your questions.","evidence_gemma_new":"US organic sales","evidence_llama_3_3":"organic sales first quarter","evidence_qwen_3_30b":null,"gemma_new_max":7.0,"gemma_new_min":7.0,"llama_3_3_max":7.0,"llama_3_3_min":7.0,"qwen_3_30b_max":null,"qwen_3_30b_min":null}
{"symbol":"PG","year":2024,"quarter":1,"date":"2024-Q1","chunk_id":1,"sub_chunk_id":0,"centroid_label":"organic sales growth","agreed_value":4.5,"count":3,"chunk":"Andre Schulten: Good morning, everyone. Joining me on the call today is John Chevalier, Senior Vice President, Investor Relations. This fiscal year, Jon Moeller, Chairman, President and CEO, will join the mid-year and year-end calls and I'll be leading the Q1 and Q3 calls. Execution of our integrated strategy draws strong results in the July to September quarter. Broad-based organic sales growth across categories and regions, global aggregate market share growth, strong productivity savings enabling increased investment in superiority of our brands while also delivering very strong earnings growth. These strong first quarter results put us on track to deliver towards the higher end of our fiscal year guidance ranges for organic sales growth and core earnings per share, and continued strong cash productivity and cash return to share owners. So moving to first quarter numbers, organic sales grew 7%. Pricing added 7 points to sales growth, and mixed contributed 1 point. Volume rounded down to a decline of 1 point with overall modest volume growth outside greater China. Top-line growth was broad-based across business units with each of our 10 product categories growing organic sales. Home care grew low teens, personal healthcare was up double digits, feminine care, oral care, fabric care, hair care and grooming, each grew high single digits. Baby care and family care were up mid-singles, skin and personal care grew low singles. Growth was also broad-based across geographies, with five of seven regions growing organic sales. Focus markets grew 6% for the quarter, organic sales in the US were up 7% and Europe focus markets were up 15%. Greater China organic sales were down 6% versus prior year. Underlying market growth is soft and choppy as consumer confidence remains weak. SK-II was down low teens in Greater China due to soft market conditions and a temporary reduction in social retail merchandising. Enterprise markets were up 13%, with Latin America up 19%, and Europe enterprise markets up 15%. Shipment volume in the US grew 3% again this quarter and we returned to volume growth in Europe focus markets. Mexico, Brazil and India, some of our largest enterprise markets, continue to deliver volume growth. These gains largely offset volume declines in the Greater China, Asia Pacific and European enterprise regions primarily driven by underlying market contraction. Global aggregate value share was up 40 basis points versus prior year, with 32 of our top 50 category country combinations holding or growing share. In the US, all outlet value share was up 50 basis points versus prior year with seven of 10 categories holding or growing value share in the quarter. US volume share was up 60 basis points, reflecting 3% volume growth. Value share in European focus markets was up 40 basis points over the past three months. Moving to the bottom line, core earnings per share were $1.83, up 17% versus prior year. On a currency-neutral basis, core EPS increased 21%. Core operating margin increased 240 basis points, as 460 basis points of gross margin expansion were partially offset by increased marketing investments, wage and benefit inflation, and foreign exchange impacts on SG&A. Currency-neutral core operating margin increased 340 basis points. Productivity improvements were a 210 basis point help to the quarter. Adjusted free cash for productivity was 97%. We returned $3.8 billion of cash to share owners, approximately $2.3 billion in dividends, and $1.5 billion in share repurchase. In summary, against what continues to be a challenging and volatile operating environment, a very good start to the fiscal year across top-line, bottom line, and cash. Our team continues to operate with excellence, executing the integrated strategy that has enabled strong results over the past five years, and that is the foundation for balanced growth and value creation. A portfolio of daily use products, many providing cleaning, health, and hygiene benefits in categories where performance plays a significant role in brand choice. Ongoing commitment to and investment in irresistible superiority across the five vectors of product, package, brand communication, retail execution, and value across each price tier we compete. We are again raising the bar on our superiority standards to reflect the dynamic nature of this strategy. Productivity improvement in all areas of our operations to fund investments in superiority, offset cost and currency challenges, expand margins and deliver strong cash generation. An approach of constructive disruption, a willingness to change, adapt, and create new trends and technologies that will shape our industry for the future, especially important in the volatile environment we're in. Finally an organization that is more empowered, agile, and accountable. We continue to improve the execution of the integrated strategy with four focus areas, supply chain 3.0, digital acumen, environmental sustainability, and the employee value equation. These are not new or separate strategies. They are necessary elements in continuing to build superiority, reduce costs to enable investment and value creation, and to further strengthen our organization. Our strategic choices on portfolio, superiority, productivity, constructive disruption and organization reinforce and build on each other. When executed well, they grow markets which in turn grow share, sales and profit. We continue to believe that the best path forward to deliver sustainable top and bottom-line growth is to double down on these integrated strategies, starting with a commitment to deliver irresistibly superior propositions to consumers and retail partners fueled by productivity. Moving to guidance. As I mentioned, we expect the environment around us to continue to be volatile and challenging from input costs, to currencies, to consumer and geopolitical dynamics. We attempt to reflect these realities in our guidance ranges. Based on current spot prices, we estimate commodities will be a tailwind of around $800 million after tax in fiscal \u201824. This is consistent with the outlook we provided in July. However, within this estimate, there have been several moving parts. We've seen incremental relief on some commodities like pulp, which have been offset by higher costs than other commodities such as fuel. Foreign exchange rates have moved sharply against us, and we now expect a headwind of approximately $1 billion after tax, an incremental $600 million impact since our initial guidance for the year. In addition to these impacts, we are also facing higher inflation in wages and benefits, and we expect higher year-on-year net interest expense of approximately $200 million after tax. As we are just one quarter into the fiscal year, we are maintaining our guidance ranges for organic sales, core EPS growth, cash productivity, and cash return to share owners, with each solidly on track after a very strong first quarter. Guidance for organic sales is growth of 4% to 5% for the fiscal year. The range includes a normalization in underlying market growth rate that is likely to occur through calendar year \u201824 as the market laps the last wave of cost recovery pricing and as market volumes return to growth. For P&G, we expect 3 to 4 points less pricing benefit in each of the next two quarters compared to our first quarter results. On the bottom line, our outlook for fiscal \u201824 core earnings per share is 6% to 9% growth versus last fiscal year. We're holding the range despite the incremental $600 million after-tax headwind from foreign exchange. With now a 7-point EPS impact from FX, this outlook translates to 13% to 16% core EPS growth on a constant-currency basis. We continue to forecast adjusted free cash flow productivity of 90%. We expect to pay more than $9 billion in dividends and to repurchase $5 billion to $6 billion in common stock, combined a plan to return $14 billion to $15 billion of cash to shareowners this fiscal year. This outlook is based on current market growth rate estimates, commodity prices, and foreign exchange rates. Significant additional currency weakness, commodity cost increases, geopolitical disruptions, or major production stoppages are not anticipated within the guidance ranges. As you consider the cadence of earnings for the year, keep in mind that the back half of the year will see less pricing benefit as we progressively annualize prior year increases. We should also see less commodity benefit as we move through the year. Labor inflation continues throughout the supply chain and [in our] (ph) costs. FX headwinds will increase versus quarter one. Also with a strong start to the year, we'll be reinvesting to further strengthen our plans and to maintain strong momentum. Finally, we'll be closely watching the health of the China market and the balance of regions, energy costs are rising as we head into fall and winter, household saving levels have reduced, especially in Europe. Slower economic growth, higher energy costs and higher interest rates for longer have an impact on consumer confidence. To conclude, while we expect volatile consumer and market dynamics to continue, we remain confident in our strategy and the results that it delivers. We are focused on driving growth in our categories and we are committed to delivering balanced top and bottom-line growth and value creation for our share owners. With that, we'll be happy to take your questions.","evidence_gemma_new":"organic sales","evidence_llama_3_3":"expect organic sales growth fiscal year","evidence_qwen_3_30b":"organic sales fiscal year","gemma_new_max":4.5,"gemma_new_min":4.5,"llama_3_3_max":4.5,"llama_3_3_min":4.5,"qwen_3_30b_max":4.5,"qwen_3_30b_min":4.5}
{"symbol":"PG","year":2024,"quarter":1,"date":"2024-Q1","chunk_id":1,"sub_chunk_id":0,"centroid_label":"organic sales growth","agreed_value":0.07,"count":2,"chunk":"Andre Schulten: Good morning, everyone. Joining me on the call today is John Chevalier, Senior Vice President, Investor Relations. This fiscal year, Jon Moeller, Chairman, President and CEO, will join the mid-year and year-end calls and I'll be leading the Q1 and Q3 calls. Execution of our integrated strategy draws strong results in the July to September quarter. Broad-based organic sales growth across categories and regions, global aggregate market share growth, strong productivity savings enabling increased investment in superiority of our brands while also delivering very strong earnings growth. These strong first quarter results put us on track to deliver towards the higher end of our fiscal year guidance ranges for organic sales growth and core earnings per share, and continued strong cash productivity and cash return to share owners. So moving to first quarter numbers, organic sales grew 7%. Pricing added 7 points to sales growth, and mixed contributed 1 point. Volume rounded down to a decline of 1 point with overall modest volume growth outside greater China. Top-line growth was broad-based across business units with each of our 10 product categories growing organic sales. Home care grew low teens, personal healthcare was up double digits, feminine care, oral care, fabric care, hair care and grooming, each grew high single digits. Baby care and family care were up mid-singles, skin and personal care grew low singles. Growth was also broad-based across geographies, with five of seven regions growing organic sales. Focus markets grew 6% for the quarter, organic sales in the US were up 7% and Europe focus markets were up 15%. Greater China organic sales were down 6% versus prior year. Underlying market growth is soft and choppy as consumer confidence remains weak. SK-II was down low teens in Greater China due to soft market conditions and a temporary reduction in social retail merchandising. Enterprise markets were up 13%, with Latin America up 19%, and Europe enterprise markets up 15%. Shipment volume in the US grew 3% again this quarter and we returned to volume growth in Europe focus markets. Mexico, Brazil and India, some of our largest enterprise markets, continue to deliver volume growth. These gains largely offset volume declines in the Greater China, Asia Pacific and European enterprise regions primarily driven by underlying market contraction. Global aggregate value share was up 40 basis points versus prior year, with 32 of our top 50 category country combinations holding or growing share. In the US, all outlet value share was up 50 basis points versus prior year with seven of 10 categories holding or growing value share in the quarter. US volume share was up 60 basis points, reflecting 3% volume growth. Value share in European focus markets was up 40 basis points over the past three months. Moving to the bottom line, core earnings per share were $1.83, up 17% versus prior year. On a currency-neutral basis, core EPS increased 21%. Core operating margin increased 240 basis points, as 460 basis points of gross margin expansion were partially offset by increased marketing investments, wage and benefit inflation, and foreign exchange impacts on SG&A. Currency-neutral core operating margin increased 340 basis points. Productivity improvements were a 210 basis point help to the quarter. Adjusted free cash for productivity was 97%. We returned $3.8 billion of cash to share owners, approximately $2.3 billion in dividends, and $1.5 billion in share repurchase. In summary, against what continues to be a challenging and volatile operating environment, a very good start to the fiscal year across top-line, bottom line, and cash. Our team continues to operate with excellence, executing the integrated strategy that has enabled strong results over the past five years, and that is the foundation for balanced growth and value creation. A portfolio of daily use products, many providing cleaning, health, and hygiene benefits in categories where performance plays a significant role in brand choice. Ongoing commitment to and investment in irresistible superiority across the five vectors of product, package, brand communication, retail execution, and value across each price tier we compete. We are again raising the bar on our superiority standards to reflect the dynamic nature of this strategy. Productivity improvement in all areas of our operations to fund investments in superiority, offset cost and currency challenges, expand margins and deliver strong cash generation. An approach of constructive disruption, a willingness to change, adapt, and create new trends and technologies that will shape our industry for the future, especially important in the volatile environment we're in. Finally an organization that is more empowered, agile, and accountable. We continue to improve the execution of the integrated strategy with four focus areas, supply chain 3.0, digital acumen, environmental sustainability, and the employee value equation. These are not new or separate strategies. They are necessary elements in continuing to build superiority, reduce costs to enable investment and value creation, and to further strengthen our organization. Our strategic choices on portfolio, superiority, productivity, constructive disruption and organization reinforce and build on each other. When executed well, they grow markets which in turn grow share, sales and profit. We continue to believe that the best path forward to deliver sustainable top and bottom-line growth is to double down on these integrated strategies, starting with a commitment to deliver irresistibly superior propositions to consumers and retail partners fueled by productivity. Moving to guidance. As I mentioned, we expect the environment around us to continue to be volatile and challenging from input costs, to currencies, to consumer and geopolitical dynamics. We attempt to reflect these realities in our guidance ranges. Based on current spot prices, we estimate commodities will be a tailwind of around $800 million after tax in fiscal \u201824. This is consistent with the outlook we provided in July. However, within this estimate, there have been several moving parts. We've seen incremental relief on some commodities like pulp, which have been offset by higher costs than other commodities such as fuel. Foreign exchange rates have moved sharply against us, and we now expect a headwind of approximately $1 billion after tax, an incremental $600 million impact since our initial guidance for the year. In addition to these impacts, we are also facing higher inflation in wages and benefits, and we expect higher year-on-year net interest expense of approximately $200 million after tax. As we are just one quarter into the fiscal year, we are maintaining our guidance ranges for organic sales, core EPS growth, cash productivity, and cash return to share owners, with each solidly on track after a very strong first quarter. Guidance for organic sales is growth of 4% to 5% for the fiscal year. The range includes a normalization in underlying market growth rate that is likely to occur through calendar year \u201824 as the market laps the last wave of cost recovery pricing and as market volumes return to growth. For P&G, we expect 3 to 4 points less pricing benefit in each of the next two quarters compared to our first quarter results. On the bottom line, our outlook for fiscal \u201824 core earnings per share is 6% to 9% growth versus last fiscal year. We're holding the range despite the incremental $600 million after-tax headwind from foreign exchange. With now a 7-point EPS impact from FX, this outlook translates to 13% to 16% core EPS growth on a constant-currency basis. We continue to forecast adjusted free cash flow productivity of 90%. We expect to pay more than $9 billion in dividends and to repurchase $5 billion to $6 billion in common stock, combined a plan to return $14 billion to $15 billion of cash to shareowners this fiscal year. This outlook is based on current market growth rate estimates, commodity prices, and foreign exchange rates. Significant additional currency weakness, commodity cost increases, geopolitical disruptions, or major production stoppages are not anticipated within the guidance ranges. As you consider the cadence of earnings for the year, keep in mind that the back half of the year will see less pricing benefit as we progressively annualize prior year increases. We should also see less commodity benefit as we move through the year. Labor inflation continues throughout the supply chain and [in our] (ph) costs. FX headwinds will increase versus quarter one. Also with a strong start to the year, we'll be reinvesting to further strengthen our plans and to maintain strong momentum. Finally, we'll be closely watching the health of the China market and the balance of regions, energy costs are rising as we head into fall and winter, household saving levels have reduced, especially in Europe. Slower economic growth, higher energy costs and higher interest rates for longer have an impact on consumer confidence. To conclude, while we expect volatile consumer and market dynamics to continue, we remain confident in our strategy and the results that it delivers. We are focused on driving growth in our categories and we are committed to delivering balanced top and bottom-line growth and value creation for our share owners. With that, we'll be happy to take your questions.","evidence_gemma_new":null,"evidence_llama_3_3":"organic sales growth 7% first quarter","evidence_qwen_3_30b":"organic sales Q1","gemma_new_max":null,"gemma_new_min":null,"llama_3_3_max":0.07,"llama_3_3_min":0.07,"qwen_3_30b_max":0.07,"qwen_3_30b_min":0.07}
{"symbol":"PG","year":2024,"quarter":2,"date":"2024-Q2","chunk_id":1,"sub_chunk_id":0,"centroid_label":"organic sales growth","agreed_value":4.0,"count":2,"chunk":"Andre Schulten: Good morning, everyone. Joining me on the call today are Jon Moeller, Chairman of the Board, President and Chief Executive Officer, and Jon Chevalier, Senior Vice-President, Investor Relations. I'll start with an overview of results for the October to December quarter, Jon will add perspective on our recent results and strategic focus areas and capabilities. We'll close with guidance for fiscal '24, and then take your questions. October to December, was another strong quarter. Execution of our integrated strategy drove solid sales and market-share results and another quarter of strong margin progress, delivering strong earnings and cash results for the quarter. The strong results we've delivered in the first half of fiscal '24, enable us to raise our outlook for core earnings per share and keep us on track to deliver within our fiscal year guidance ranges for organic sales growth, cash productivity and cash return to shareowners. We continue to see the upper range on organic sales and core EPS as likely outcome for fiscal '23 - '24. So, moving to second quarter numbers, organic sales grew 4%, volume rounded down to a decline of one point as continued volume acceleration in North America and Europe focused markets was offset by softer shipments in Greater China, Eastern Europe and Middle East, Africa regions due to local issues in select markets. Pricing contributed four points to sales growth, consistent with the guidance we provided, mix was neutral to organic sales growth. Growth across categories continues to be broad based with eight of 10 product categories holding or growing organic sales this quarter. Home care, hair care and grooming grew sales high single digits. Fabric care, family care, feminine care and oral care were up mid-single digits. Baby care was in line with prior year. Personal health care was down low singles against a very tough comp and a late developing cold and flu season this year. Skin and personal care was down mid singles due to SK-II in China. Growth was also broad based across geographies with North America, Europe, Asia Pacific focus markets and Latin America and Europe enterprise markets each growing organic sales. Focus markets grew 3% for the quarter and enterprise markets grew 7%. Organic sales in North America grew 5% with four points of volume growth. Over the last five quarters, volume growth in North America has been minus three, flat, then 2% growth plus 3% and now plus 4%, strong acceleration well ahead of the underlying market trends. Europe focused markets were up 7% with three points of volume growth. As expected, both regions saw a step down in pricing contribution to sales growth as a large portion of price increases from last year have annualized. Importantly, volume accelerated in both regions to partially offset the pricing impact. Latin America delivered another very strong quarter with 17% organic sales growth, continued strong results in these regions. There are some targeted issues affecting other markets. Greater China organic sales were down minus 15% versus prior year. Underlying market growth was down mid to high single digits as consumer confidence weakened further. The SK-II brand in Greater China was down 34% due to soft market conditions and a temporary headwind for Japanese brands in the market. Our consumer research indicates SK-II brand sentiment is improving and we expect to see sequential improvement in the back half. Underlying market trends have softened in some Europe enterprise and Asia Pacific, Middle East, Africa countries such as Egypt, Saudi Arabia and Turkey, following multiple rounds of pricing to offset inflation and due to heightened tensions in the Middle East. Global aggregate value share was up 40 basis points versus prior year with 28 of our top 50 category country combinations holding or growing share. In the U.S., all outlet value share was up 20 basis points versus prior year. U.S. volume share was up 50 basis points reflecting strong volume growth. Value share in European focus markets was up 90 basis points over the past three months. In summary, North America, Europe focus Markets, Asia Pacific focus markets and Latin America, which combined represent three-quarters of company sales, delivered over 6% of organic sales growth in quarter two, with three points of volume growth and three points of price mix. These same markets grew 9% in quarter one with around two points of volume growth and seven points of price mix. Continued strong organic sales growth with accelerating volume growth to mitigate the anticipated annualization of pricing, consistent with our guidance. The balanced 25% of company sales including Greater China, Eastern Europe and Middle East Africa were impacted by local market issues we described. Quarter two organic sales for this group were down five points versus prior year. We expect most of these effects in these regions to be temporary or annualizing, SK-II consumption is sequentially improving. We continue to expect China market growth to improve, and over time return to mid singles, and we expect market pressures in the Middle east and Turkey to ease over time. Moving to the bottom line, core earnings per share were $1.84, up 16% versus prior year. On a currency neutral basis, core EPS increased 18%. Core operating margin increased 400 basis points as 520 basis points of gross margin expansion were partially offset by increased marketing investments, wage and benefit inflation and foreign exchange impacts in SG&A. Currency neutral core operating margin increased 470 basis points. Productivity improvements were a very strong 340 basis points helped to the quarter. Adjusted free cash flow productivity was 95%. We returned $3.3 billion of cash to share owners, approximately $2.3 billion in dividends and $1 billion in share repurchase. In summary, against what continues to be a challenging and volatile operating environment, strong overall progress in the first half of the year keeping us on track for our fiscal year guidance ranges. Now I'll pass it over to Jon for his perspective.","evidence_gemma_new":"organic sales growth","evidence_llama_3_3":null,"evidence_qwen_3_30b":"organic sales 4%","gemma_new_max":4.0,"gemma_new_min":4.0,"llama_3_3_max":null,"llama_3_3_min":null,"qwen_3_30b_max":4.0,"qwen_3_30b_min":4.0}
{"symbol":"PG","year":2024,"quarter":2,"date":"2024-Q2","chunk_id":3,"sub_chunk_id":0,"centroid_label":"organic sales growth","agreed_value":4.5,"count":2,"chunk":"Andre Schulten: Thanks Jon. As I mentioned, we expect the environment around us to continue to be volatile and challenging from input costs to currencies to consumer, retailer and geopolitical dynamics. However, our strong first half results enable us to raise or maintain key guidance metrics for the year. We're maintaining our guidance range for organic sales growth of 4% to 5% for the fiscal year. This outlook includes a normalization in underlying market growth rates that we began to see in our second quarter results as the market lapsed the last waves of cost recovery pricing. For P&G, we expect the pricing contribution to topline growth to reduce by an additional 1 to 2 points in the back half of the year. We will continue to price for new innovations when warranted and to mitigate FX impacts. On the bottom line enabled by very strong earnings growth in the first half of the year, we're raising our outlook for fiscal '24 core earnings per share from a range of 6% to 9% to a range of 8% to 9% growth versus last fiscal year. This guidance implies slower bottom-line growth in the second half. As we highlighted last quarter, the second half of the fiscal year will see less pricing benefit as we annualize more prior year increases. We will also see less commodity cost benefit in the second half. Wage and benefit inflation continues throughout the supply chain and in our direct costs, and FX headwinds will increase versus the first half of the fiscal year. As I mentioned, we continue to expect organic sales and core EPS growth toward the upper end of the renewed guidance ranges. We estimate commodities will be a tailwind of around $800 million after tax in fiscal '24 based on current spot prices. This is consistent with the outlook we provided last quarter. We continue to expect foreign exchange will be a headwind of approximately $1 billion after tax for the fiscal year. The vast majority of this impact is driven by Argentina, and is heavily skewed towards the back half of the year. This outlook is based on a forecast for continued significant devaluation of the Argentine Peso, which we expect to largely offset with appropriate price increases. We now expect higher net interest expense of approximately $100 million after tax versus prior year. General inflation and higher wage and benefit costs weakness are also earnings headwinds for the year. We expect adjusted free cash flow productivity of 90%. We expect to pay more than $9 billion in dividends and to repurchase $5 billion to $6 billion in common stock, combined a plan to return $14 billion to $15 billion of cash to share owners this fiscal year. This outlook is based on current market growth rate estimates, commodity prices and foreign exchange rates. Significant additional currency weakness, commodity cost increases, geopolitical disruptions or major production stoppages are not anticipated within the guidance ranges. Finally, we'll be closely watching the more volatile regions we mentioned earlier, including the health of the China market, and we'll be keeping close watch on competitive dynamics to ensure P&G brands remain superior value for consumers and retailers. Now, I'll hand it back to Jon for closing thoughts.","evidence_gemma_new":"organic sales growth fiscal year","evidence_llama_3_3":null,"evidence_qwen_3_30b":"guidance organic sales growth fiscal year","gemma_new_max":4.5,"gemma_new_min":4.5,"llama_3_3_max":null,"llama_3_3_min":null,"qwen_3_30b_max":4.5,"qwen_3_30b_min":4.5}
{"symbol":"PG","year":2024,"quarter":3,"date":"2024-Q3","chunk_id":1,"sub_chunk_id":0,"centroid_label":"organic sales growth","agreed_value":3.0,"count":2,"chunk":"Andre Schulten : Good morning, everyone. Joining me on the call today is John Chevalier, Senior Vice President, Investor Relations. Execution of our integrated strategy drove solid sales and market share results and another quarter of strong earnings and cash results. The strong results we've delivered in the first three quarters of fiscal 2024 enable us to raise our outlook for core earnings per share and keep us on track to deliver within our fiscal year guidance ranges for organic sales growth, cash productivity, and cash return to shareowners. Specifically on the numbers, organic sales grew 3%. Volume was in line with prior year, showing sequential progress. Pricing contributed 3 points to sales growth as we continue to annualize price increases taken last fiscal year. Mix was neutral to organic sales growth, and growth across categories continues to be broad based with 8 of 10 product categories holding or growing organic sales in this quarter. Grooming organic sales grew double-digits. Home Care and Hair Care up high singles. Oral Care grew mid-single-digits. Fabric Care, Family Care, Feminine Care and Personal Health Care were up low singles. Skin and Personal Care and Baby Care organic sales were lower versus prior year. Growth was also broad based across geographies. North America, Europe and Asia Pacific focused markets and Latin America and Europe Enterprise markets are each growing organic sales. Global aggregate value share was up versus prior year with 29 of our top 50 category country combinations holding or growing share. Focus markets grew organic sales 2% for the quarter, and Enterprise Markets grew 4%. Organic sales in North America grew 3% with 3 points of volume growth. Over the last 4 quarters, volume growth in North America has been plus 2%, plus 3%, plus 4%, and now plus 3%. These results include over a point of impact from retail inventory reductions, primarily in personal healthcare. Consumer demand for P&G brands remains very strong in the U.S., with all outlet consumption value growth of 5%, all outlet value share was up 10 basis points versus prior year. U.S. volume share was up 40 basis points, reflecting continued strong volume growth ahead of the underlying market. The gap between consumer offtake of 5% compared to our U.S. sales growth of 3% reflects the aforementioned trade inventory reductions in the quarter. Europe focus markets were up 7% with 4 points of volume growth. Value share in Europe Focus markets was up 100 basis points over the past 3 months. Latin America organic sales were up 17%. Argentina is a significant contributor to this result given the pricing taken to offset the more than 400% devaluation of the Argentine peso since the start of the year. Mexico and Brazil are annualizing high base periods with organic sales growth in the 20s and 30s, and we expect will normalize back to pre-COVID levels in the mid to high single-digits. As we noted last quarter, there are some specific issues affecting other markets. Those challenges continue to impact results in the quarter. Greater China organic sales were down 10% versus prior year, progress versus the December quarter, but still impacted by weak underlying market conditions and headwinds for SK-II and other Japanese brands in the market. SK-II sales in Greater China were down around 30% for the quarter. We have seen some month to month improvement in overall Greater China sales trends, though we expect it will be another quarter or two until we return to growth. Volume trends in some of the European Enterprise and Asia Pacific, Middle East Africa countries such as Egypt, Saudi Arabia, Turkey, Indonesia and Malaysia have remained soft since the start of the heightened tensions in the Middle East. Also, shipments in Russia continue to decline, double digits given our reduced footprint and curtailed investments with consumers and retailers. Combined, the headwinds from Greater China and Asia, Middle East Africa markets were a 150 basis point impact on total company sales for the quarter. We expect these headwinds to moderate or annualize over the coming periods. Moving to the bottom line, core earnings per share were $1.52 up 11% versus prior year. On a currency neutral basis, core EPS increased 18%. Core gross margin increased 310 basis points and operating margin increased 90 basis points. Strong productivity improvement of 320 basis points enabled continued strong investment in superior products, packaging and consumer communication to drive market growth. Currency neutral core operating margin increased 220 basis points. Adjusted free cash flow productivity was 87%. We returned $3.3 billion of cash to share owners, approximately $2.3 billion in dividends and $1 billion in share repurchase. Over 3 quarters, more than $10 billion returned to shareowners in dividends and repurchases. Last week, we announced a 7% increase in our dividend, again reinforcing our commitment to return cash to share owners. This is the 68th consecutive annual dividend increase and 134th consecutive year P&G has paid a dividend. In summary, again, what continues to be a challenging and volatile operating environment, strong overall results enabling us to increase our earnings projections for the year and to maintain our guidance ranges for organic sales and cash generation, all while sustaining strong investment. It's a priority to build category consumption and to restore business growth in China and in the Middle East. Our teams continue to operate with excellence, executing the integrated strategy that has enabled strong results over the past 5 years, and that is the foundation for balanced growth and value creation. A portfolio of daily use products, many providing cleaning, health and hygiene benefits in categories where performance plays a significant role in brand choice. Ongoing commitment to and investment in irresistible superiority across the 5 vectors of products, package, brand communication, retail execution and value for each price tier where we compete. We are again raising the bar on our superiority standards to reflect the dynamic nature of this strategy. Productivity improvements in all areas of our operations to fund investments in superiority, offset cost and currency challenges, expand margins and deliver strong cash generation. An approach of constructive disruption, a willingness to change, adapt and create new trends and technologies that will shape our industry for the future. Finally, an organization that is empowered, agile and accountable. We continue to improve the execution of the integrated strategy with 4 focus areas: strong progress on Supply Chain 3.0, digital acumen, environmental sustainability and a superior employee value equation. These four focus areas are not new or separate strategies. They simply strengthen our ability to execute the strategy. Our strategic choices on portfolio, superiority, productivity, constructive disruption and organization reinforce and build on each other. When executed well, they grow markets, which in turn grow share, sales and profit. We continue to believe that the best path forward to deliver sustainable top and bottom-line growth is to double down on this integrated strategy, starting with a commitment to deliver irresistibly superior propositions to consumers and retail partners, fueled by productivity. Moving on to guidance. As I mentioned, we expect the environment around us to continue to be volatile and challenging, from input costs to currencies to consumer, retailer and geopolitical dynamics. However, our strong results year to date enable us to raise or maintain key guidance metrics for the year. We're maintaining our guidance range for organic sales growth of 4% to 5% for the fiscal year. We're squarely in the middle of this range fiscal year-to-date. This outlook assumes continued normalization in underlying market growth rates that we've seen over the past few quarters. Markets will be lapping the last waves of cost recovery pricing and volumes slowly begin to recover. We also expect the market level changes we faced through quarter 3 to continue in Q4 though with some directional improvement. On the bottom-line, enabled by 15% core EPS growth year-to-date, we are raising our outlook for fiscal 2024 core earnings per share from a range 8% to 9% to a range of 10% to 11%. This outlook includes continued strong investments in innovation and brand building to grow markets and extend the superiority of P&G offerings to consumers. We now estimate commodities will be a tailwind of around $900 million after tax in fiscal '24 based on current spot prices. This is a modest improvement versus the outlook we provided last quarter, though nearly all of this benefit has been booked in the first three quarters of the year. We now expect foreign exchange to be a headwind of approximately $600 million after tax for the fiscal year. The change versus prior guidance reflects volatility in Argentina exchange rates, including a period of currency appreciation in quarter three and a revised devaluation outlook for quarter four. We also reflect a reduction in Argentina FX exposure due to the divestiture of our Argentina Fabric and Home Care business, which we completed in mid-March, and reduced assumptions for future volume and pricing given the current rate outlook and recent shipment trends. The net impact of these changes is a relatively modest help to the bottom line, which is reflected in our updated EPS outlook. We expect higher net interest expense of approximately $100 million after tax versus prior year. General inflation and higher wage and benefit costs are also earnings headwinds for the year. We expect adjusted free cash flow productivity of 90%, and we expect to pay more than $9 billion in dividends to repurchase $5 billion to $6 billion in common stock, combined a plan to return $14 billion to $15 billion of cash to share owners for the year. This outlook is based on current market growth rate estimates, commodity prices and foreign exchange rates, significant additional currency weakness, commodity cost increases, geopolitical disruption or major production stoppages are not anticipated within these guidance ranges. Finally, we'll be closely watching the more volatile regions we mentioned earlier, including the health of the China market, and we'll be keeping a close watch on competitive dynamics to ensure P&G brands remain a superior value for consumers and for retailers. The entire P&G organization remains focused on excellent execution of our integrated, market constructive strategy, which has delivered strong results in a challenging operating and competitive environment. While we expect volatile consumer and macro dynamics to continue, we are confident the best path forward is to double down on this strategy, remain fully invested to drive irresistible superiority across every part of our portfolio and stay focused on delivering balanced top and bottom line growth and value creation for our shareowners. With that, we'll be happy to take your questions.","evidence_gemma_new":"organic sales","evidence_llama_3_3":null,"evidence_qwen_3_30b":"organic sales 3%","gemma_new_max":3.0,"gemma_new_min":3.0,"llama_3_3_max":null,"llama_3_3_min":null,"qwen_3_30b_max":3.0,"qwen_3_30b_min":3.0}
{"symbol":"PG","year":2024,"quarter":3,"date":"2024-Q3","chunk_id":25,"sub_chunk_id":0,"centroid_label":"organic sales growth","agreed_value":4.5,"count":2,"chunk":"Andre Schulten: Thanks, Chris. I think you gave the answer on the organic sales line. It's exactly that. I think Argentina, as we said, peso requires a little less pricing. That's an impact on organic sales, and the business is also smaller and responding maybe more aggressively to the pricing. So that is one building block. The other building block, I think is the biggest one is really the U.S. inventory reduction. So as I think about the step up that we need to see in order to be within that 4% to 5% range, we assume that that inventory reduction is a one timer, and that's what we expect in the guidance range. The elasticity in general is not changing. I think we've done and you see it in the results, I think the teams have done a very good job of making sure that we maintain a healthy value equation for our retail partners and our consumers with strong innovation, with pricing, only pricing where necessary, balancing pricing with strong productivity. So I do feel overall the business is responding very favorably even after we had to take the pricing that we took. The volume is coming up as we would have expected both in the market and for P&G. And in our biggest geographies, we're growing volume share consistently. So I do feel overall the elasticity is doing well. Baby is a very elastic category. And especially, as I mentioned, if we've not been able to consistently innovate across all tiers. And that actually is a confirmation of the model. So where we've not been able to push the innovation out and hold the full level of superiority as we took pricing, the consumer is responding. And we know the answer to that, which is push the innovation that we know how to do and communicate as a priority, and I'm confident that we'll recover the elasticity here. I don't see a broader issue. Actually, I see a lot of upside with the strength of the innovation pipeline going into next year.","evidence_gemma_new":"organic sales growth FY '24","evidence_llama_3_3":null,"evidence_qwen_3_30b":"organic sales growth FY '24 Q4","gemma_new_max":4.5,"gemma_new_min":4.5,"llama_3_3_max":null,"llama_3_3_min":null,"qwen_3_30b_max":4.5,"qwen_3_30b_min":4.5}
{"symbol":"PG","year":2024,"quarter":4,"date":"2024-Q4","chunk_id":1,"sub_chunk_id":0,"centroid_label":"organic sales growth","agreed_value":4.0,"count":3,"chunk":"Andre Schulten: Good morning everyone. Joining me on the call today are Jon Moeller, Chairman of the Board, President and Chief Executive Officer, and John Chevalier, Senior Vice President, Investor Relations. I will start with an overview of results for fiscal year \u201924 and for the fourth quarter. Jon will add perspective on our strategic focus areas and capabilities and will close with guidance for fiscal \u201925 and then take your questions. Fiscal \u201924 was another very strong year. Execution of our integrated strategies enabled the company to meet or exceed going-in guidance ranges for organic sales growth, core EPS growth, cash productivity and cash return to share owners, all this despite significant market level headwinds that were largely unknown when we gave our initial outlook for the year. Organic sales growth for the fiscal year was 4%, our sixth consecutive year of 4% or better organic growth against a strong 7% comp in the prior year and in more challenging market conditions. Growth was broad-based across business units with eight of 10 product categories growing organic sales. Home care, hair care and grooming were up high single digits, oral care and feminine care up mid singles. Fabric care, family care, and personal healthcare grew low single digits. Skin and personal care and baby care were down low singles. Focus markets grew 4% for the year with North America up 5% and Europe focus markets up 8%. Greater China organic sales were down 9% versus the prior year, driven by soft market conditions and brand-specific headwinds on SK-II. Enterprise markets were up 6%, led by Latin America with 15% organic sales growth. Ecommerce sales increased 9%, now representing 18% of the total company. Our strategy focused on driving market growth continues to drive share growth for P&G. All channel market value sales in the U.S. categories in which we compete grew around 5% in fiscal \u201924. P&G consumption grew ahead of our fair share of category growth, driving modest value and volume share growth for the year. We grew global aggregate value share. Thirty of 50 category country combinations held or grew share for the year. Importantly, this share growth is broad-based. Six of 10 product categories grew share globally over the past year. Core earnings per share were $6.59, up 12% for the year. Core gross margin improved 360 basis points and core operating margin increased 170 basis points. Over $2.3 billion of productivity improvements were enabled by a significant increase in investment in superior products, packages and brand communication to drive market growth. On a currency-neutral basis, core EPS was up 16% and core operating margin increased 250 basis points. Adjusted free cash flow productivity was 105%. We increased our dividend by 7% and returned over $14 billion of value to share owners, $9.3 billion in dividends, and $5 billion in share repurchase. Moving onto fourth quarter results, organic sales rounded down to 2%, volume was up 2%, solid sequential progress. Pricing was up 1% and mix was in line with prior year. Growth continues to be broad-based across categories and regions. Nine of 10 product categories grew or held organic sales in the quarter. Home care, hair care, grooming and oral care were each up high single digits, feminine care up low singles, skin and personal care, fabric care, personal health care and family care were each in line with prior year, and baby care was down mid singles. Five of seven regions grew organic sales with focus markets up 2% and enterprise markets up 2% for the quarter. Organic sales in North America grew 4% with four points of volume growth and price mix, in line with prior year. European focus markets organic sales were up 2% against a strong 12% comp in the base period. Volume was up 3%. Price mix was down a point as the region has now fully annualized prior year inflation-driven pricing. Latin America organic sales were up 8%, including high singles growth in Brazil. Of note, Argentina\u2019s overall contribution to organic sales for the region and the company were lower than the last two quarters due to the divestiture of a portion of the business in March and a notable decline in shipment volume for the remaining categories. As was announced earlier this month, we have divested the remaining portions of our operations in Argentina. As a result, Argentina will be largely removed from our organic sales reporting in fiscal year \u201925. Select P&G brands will still be available in the market through a distribution and licensing agreement with the new owner of the operations. Greater China organic sales declined 8%. Underlying market conditions have remained weak and the 6\/18 key consumption period was down sharply versus prior year, just as we saw in the 11\/11 Chinese New Year and Valentine\u2019s Day shopping periods. Also, brand-specific headwinds have continued on SK-II due to its Japanese heritage. We expect general market trends and the dynamics related to SK-II to improve over time, though it will likely be another quarter or two until we return to growth. Volume trends in some Europe enterprise and Asia Pacific, Middle East, Africa countries such as Egypt, Saudi Arabia, Turkey, Indonesia, Malaysia and Russia have remained soft. We expect these headwinds to moderate or annualize over the coming periods. Global aggregate market share was down 30 basis points as we are now annualizing very strong growth in European-focused markets. Twenty-five of our top 50 category country combinations held or grew share for the quarter. On the bottom line, core earnings per share were $1.40, up 2% versus the prior year. On a currency-neutral basis, core EPS increased 6%. Core gross margin increased 140 basis points and core operating margin decreased 100 basis points. Strong productivity improvements of 250 basis points, funding a meaningful increase in marketing investment, currency-neutral core operating margin decreased 60 basis points. Adjusted free cash flow productivity was 148%. We returned nearly $4 billion of cash to share owners this quarter, over $2.4 billion in dividends, and $1.5 billion in share repurchases. In summary, we met or exceeded each of our going-in target ranges for the year: organic sales growth, core EPS growth, free cash productivity and cash returns to share owners, strong performance again this year in a challenging economic and geopolitical environment. With that, I\u2019ll pass it over to Jon.","evidence_gemma_new":"organic sales growth for the fiscal year","evidence_llama_3_3":"organic sales growth fiscal year '24","evidence_qwen_3_30b":"organic sales growth guidance fiscal \u201925","gemma_new_max":4.0,"gemma_new_min":4.0,"llama_3_3_max":4.0,"llama_3_3_min":4.0,"qwen_3_30b_max":4.0,"qwen_3_30b_min":4.0}
{"symbol":"PG","year":2024,"quarter":4,"date":"2024-Q4","chunk_id":1,"sub_chunk_id":0,"centroid_label":"organic sales growth","agreed_value":2.0,"count":3,"chunk":"Andre Schulten: Good morning everyone. Joining me on the call today are Jon Moeller, Chairman of the Board, President and Chief Executive Officer, and John Chevalier, Senior Vice President, Investor Relations. I will start with an overview of results for fiscal year \u201924 and for the fourth quarter. Jon will add perspective on our strategic focus areas and capabilities and will close with guidance for fiscal \u201925 and then take your questions. Fiscal \u201924 was another very strong year. Execution of our integrated strategies enabled the company to meet or exceed going-in guidance ranges for organic sales growth, core EPS growth, cash productivity and cash return to share owners, all this despite significant market level headwinds that were largely unknown when we gave our initial outlook for the year. Organic sales growth for the fiscal year was 4%, our sixth consecutive year of 4% or better organic growth against a strong 7% comp in the prior year and in more challenging market conditions. Growth was broad-based across business units with eight of 10 product categories growing organic sales. Home care, hair care and grooming were up high single digits, oral care and feminine care up mid singles. Fabric care, family care, and personal healthcare grew low single digits. Skin and personal care and baby care were down low singles. Focus markets grew 4% for the year with North America up 5% and Europe focus markets up 8%. Greater China organic sales were down 9% versus the prior year, driven by soft market conditions and brand-specific headwinds on SK-II. Enterprise markets were up 6%, led by Latin America with 15% organic sales growth. Ecommerce sales increased 9%, now representing 18% of the total company. Our strategy focused on driving market growth continues to drive share growth for P&G. All channel market value sales in the U.S. categories in which we compete grew around 5% in fiscal \u201924. P&G consumption grew ahead of our fair share of category growth, driving modest value and volume share growth for the year. We grew global aggregate value share. Thirty of 50 category country combinations held or grew share for the year. Importantly, this share growth is broad-based. Six of 10 product categories grew share globally over the past year. Core earnings per share were $6.59, up 12% for the year. Core gross margin improved 360 basis points and core operating margin increased 170 basis points. Over $2.3 billion of productivity improvements were enabled by a significant increase in investment in superior products, packages and brand communication to drive market growth. On a currency-neutral basis, core EPS was up 16% and core operating margin increased 250 basis points. Adjusted free cash flow productivity was 105%. We increased our dividend by 7% and returned over $14 billion of value to share owners, $9.3 billion in dividends, and $5 billion in share repurchase. Moving onto fourth quarter results, organic sales rounded down to 2%, volume was up 2%, solid sequential progress. Pricing was up 1% and mix was in line with prior year. Growth continues to be broad-based across categories and regions. Nine of 10 product categories grew or held organic sales in the quarter. Home care, hair care, grooming and oral care were each up high single digits, feminine care up low singles, skin and personal care, fabric care, personal health care and family care were each in line with prior year, and baby care was down mid singles. Five of seven regions grew organic sales with focus markets up 2% and enterprise markets up 2% for the quarter. Organic sales in North America grew 4% with four points of volume growth and price mix, in line with prior year. European focus markets organic sales were up 2% against a strong 12% comp in the base period. Volume was up 3%. Price mix was down a point as the region has now fully annualized prior year inflation-driven pricing. Latin America organic sales were up 8%, including high singles growth in Brazil. Of note, Argentina\u2019s overall contribution to organic sales for the region and the company were lower than the last two quarters due to the divestiture of a portion of the business in March and a notable decline in shipment volume for the remaining categories. As was announced earlier this month, we have divested the remaining portions of our operations in Argentina. As a result, Argentina will be largely removed from our organic sales reporting in fiscal year \u201925. Select P&G brands will still be available in the market through a distribution and licensing agreement with the new owner of the operations. Greater China organic sales declined 8%. Underlying market conditions have remained weak and the 6\/18 key consumption period was down sharply versus prior year, just as we saw in the 11\/11 Chinese New Year and Valentine\u2019s Day shopping periods. Also, brand-specific headwinds have continued on SK-II due to its Japanese heritage. We expect general market trends and the dynamics related to SK-II to improve over time, though it will likely be another quarter or two until we return to growth. Volume trends in some Europe enterprise and Asia Pacific, Middle East, Africa countries such as Egypt, Saudi Arabia, Turkey, Indonesia, Malaysia and Russia have remained soft. We expect these headwinds to moderate or annualize over the coming periods. Global aggregate market share was down 30 basis points as we are now annualizing very strong growth in European-focused markets. Twenty-five of our top 50 category country combinations held or grew share for the quarter. On the bottom line, core earnings per share were $1.40, up 2% versus the prior year. On a currency-neutral basis, core EPS increased 6%. Core gross margin increased 140 basis points and core operating margin decreased 100 basis points. Strong productivity improvements of 250 basis points, funding a meaningful increase in marketing investment, currency-neutral core operating margin decreased 60 basis points. Adjusted free cash flow productivity was 148%. We returned nearly $4 billion of cash to share owners this quarter, over $2.4 billion in dividends, and $1.5 billion in share repurchases. In summary, we met or exceeded each of our going-in target ranges for the year: organic sales growth, core EPS growth, free cash productivity and cash returns to share owners, strong performance again this year in a challenging economic and geopolitical environment. With that, I\u2019ll pass it over to Jon.","evidence_gemma_new":"organic sales volume fourth quarter","evidence_llama_3_3":"organic sales fourth quarter","evidence_qwen_3_30b":"organic sales 2% volume 2% solid sequential progress","gemma_new_max":2.0,"gemma_new_min":2.0,"llama_3_3_max":2.0,"llama_3_3_min":2.0,"qwen_3_30b_max":2.0,"qwen_3_30b_min":2.0}
{"symbol":"PG","year":2024,"quarter":4,"date":"2024-Q4","chunk_id":3,"sub_chunk_id":0,"centroid_label":"organic sales growth","agreed_value":0.04,"count":2,"chunk":"Andre Schulten: Thank you Jon. As we enter fiscal \u201925, we continue to expect the environment around us to remain volatile and challenging, from input costs, currencies, to consumers, competitors, retailers, and geopolitical dynamics. As Jon said, we\u2019ll navigate these challenges with our dynamic integrated strategy guided by consumers every step of the way. Our going-in guidance for fiscal \u201925 is consistent with our long term algorithm. On the top line, we currently expect the markets in which we compete to deliver local currency sales growth in the range of 3% to 4% for the year. Our objective is to grow organic sales modestly ahead of the underlying growth in these markets. This translates to an organic sales growth guidance range of 3% to 5% for the fiscal year - apologies, I had my mic muted. On the bottom line, our algorithm calls for mid to high single digit core earnings per share growth. Our core EPS guidance range for fiscal \u201925 starts the year at 5% to 7% versus fiscal \u201924 core EPS of $6.59. This guidance equates to a range of $6.91 to $7.05 per share, $6.98 up 6% at the center of the range. This outlook includes a commodity cost headwind of approximately $300 million after tax and a foreign exchange headwind of approximately $200 million after tax. Combined, foreign exchange and commodities are projected to be a headwind of $0.20 per share for fiscal \u201925, or a 3 percentage point drag on core EPS growth. In addition, the prior fiscal year included benefits from several minor brand divestitures, and we expect a somewhat higher tax rate in the new fiscal year. Combined, these are an additional $0.10 to $0.12 headwind to core EPS. We expect adjusted free cash flow productivity of 90% for the year. This includes an increase in capital spending as we add capacity in several categories. We expect to pay around $10 billion in dividends and to repurchase $6 billion to $7 billion of common stock, combined a plan to return $16 billion to $17 billion of cash to share owners this fiscal year. While we are clear eyed on the challenges in the market and the work needed to continue to drive the business, fiscal \u201925 guidance for top line, bottom line and cash are each consistent with our long term algorithm. A few items for you to consider as you build your quarter-to-quarter estimates. On the top line, please keep in mind that the July to September period has the most difficult comp for the year, and many of the market-level challenges we\u2019ve noted will not fully annualize or improve materially in our estimate until the second half of the year. On the bottom line, the foreign exchange and commodity headwinds skew a bit toward the front half of the year, and the back half comps include the benefit of the tax items and minor brand divestitures I mentioned earlier. This outlook is based on current market growth rate estimates, commodity prices and foreign exchange rates. Significant additional currency weakness, commodity cost increases, geopolitical disruptions, major supply chain disruptions, or store closures are not anticipated within the guidance ranges. With that, I\u2019ll hand it back to Jon for his closing thoughts.","evidence_gemma_new":"organic sales growth","evidence_llama_3_3":"guidance organic sales growth fiscal '25","evidence_qwen_3_30b":null,"gemma_new_max":0.04,"gemma_new_min":0.04,"llama_3_3_max":0.04,"llama_3_3_min":0.04,"qwen_3_30b_max":null,"qwen_3_30b_min":null}
{"symbol":"PG","year":2024,"quarter":4,"date":"2024-Q4","chunk_id":6,"sub_chunk_id":0,"centroid_label":"organic sales growth","agreed_value":0.02,"count":2,"chunk":"Bryan Spillane: Thanks Operator, and good morning everyone. I guess the question that we\u2019ve fielded a few times this morning, and if you could touch on this a bit, the last couple of quarters, it seems like organic sales have come in maybe slower or lower than expected--than you were expecting at the start of each quarter, so maybe if you can touch a little bit on just what\u2019s developed, especially in the fourth quarter, maybe different than what you were expecting, and then if you can add to that also, is that true for the market? At a 2% organic sales for this quarter, are we above, below, or in line with market growth? Thanks.","evidence_gemma_new":"organic sales this quarter","evidence_llama_3_3":"organic sales 2% this quarter","evidence_qwen_3_30b":null,"gemma_new_max":0.02,"gemma_new_min":0.02,"llama_3_3_max":0.02,"llama_3_3_min":0.02,"qwen_3_30b_max":null,"qwen_3_30b_min":null}
{"symbol":"PG","year":2024,"quarter":4,"date":"2024-Q4","chunk_id":16,"sub_chunk_id":0,"centroid_label":"organic sales growth","agreed_value":0.09,"count":2,"chunk":"Andre Schulten: Morning Steve. Look - home care, I think is just performing outstandingly well, 9% organic sales growth on the year, 13 quarters of sustained share growth and gaining momentum, so I think I\u2019d focus my comments on fabric care. I would tell you two things. Number one, we are annualizing record periods in Europe with differentiated pricing between competitors, where we had a bit of a tailwind last year that is turning into a high base comp. But structurally, the business is in great shape in Europe - Ariel continues to perform extremely well, the innovation across unit dose and the broader portfolio, including FE, is doing very well, so I expect that business to re-accelerate very quickly. In North America, we are just launching the innovation bundle, the spring innovation bundle which is supported with the right level of investment, including promotion investment and merchandising investment, and that\u2019s why you see the negative price mix component in the North American business. But the business is picking up momentum, we\u2019re growing share, so I expect also North America to continue to move in the right direction on fabric care, and we\u2019re very encouraged with the innovation, both the innovation that just launched and the innovation that is in the pipeline. Last point maybe on fabric care, in China specifically, we also made a portfolio choice to focus on the most profitable part of the business, and so there are some short term implications in terms of base period there. Again, for the longer term, benefit of the China fabric care business, I think that\u2019s the right decision, but it\u2019s part of the softness that you see right now in the current quarter. Baby care, I\u2019ll talk two regions. One is North America - the baby care business on the premium end continues to be doing very well. We have Swaddlers growing share by 1.4%, Cruisers 360 is growing, so on the premium end of the spectrum where we\u2019ve been able to innovate over the past one to two years, we continue to see the momentum accelerating across Pampers. We have an opportunity, we\u2019ve had an opportunity on Luvs, the mid-tier brand, where we postponed innovation due to some supply chain challenges. That innovation is now in the market, so again very significant acceleration expected given the innovation just launched in the market over the next few quarters. In Europe, again base period mostly in terms of share data, and that is something we need to work through, and certainly in Europe baby, I think that\u2019s one of the areas where we\u2019re watching our sufficiency of innovation very closely, simply because the spread versus private label is the most significant, so again the team is working through strong communication and innovation that will be launching here over the next few quarters.","evidence_gemma_new":null,"evidence_llama_3_3":"organic sales growth sustained share growth","evidence_qwen_3_30b":"organic sales growth on the year","gemma_new_max":null,"gemma_new_min":null,"llama_3_3_max":0.09,"llama_3_3_min":0.09,"qwen_3_30b_max":0.09,"qwen_3_30b_min":0.09}
{"symbol":"PG","year":2024,"quarter":4,"date":"2024-Q4","chunk_id":7,"sub_chunk_id":0,"centroid_label":"organic sales growth","agreed_value":8.0,"count":2,"chunk":"Andre Schulten: Morning Bryan. I\u2019ll start and then Jon, I\u2019m sure, will add some perspective as well. I\u2019ll start back where we kind of started the prepared remarks. I think we delivered a year where we exceeded on that, all of our in-going guidance metrics. Now, the year wasn\u2019t linear, as you highlight, and I\u2019d distinguish two parts of the business. Eighty-five percent of the business is performing right in line with expectations, and right in line with what we would have expected throughout the year. We have strong growth in North America, 4% in the quarter, 4% volume growth in the quarter. Europe focus markets growing volumes at 3%, Europe enterprise markets growing volumes at 6%, LA normalizing to about 8% organic sales growth, so that\u2019s part of the business where the trajectory is not impacted by significant external events. I think it\u2019s moving right along. We expected the normalization and price-mix contribution, as we have talked throughout the quarters. If you look at the headwinds that we started to communicate in December, they are really still with us in--throughout the second half, and that\u2019s what\u2019s driving the volatility in the top line results. Those headwinds have accelerated in part, and honestly in quarter four, some of them developed late in the quarter, so when you think about China and SK-II, we\u2019re heavily impacted by 6\/18, a weaker key consumption period in China, and overall market sentiment in China has not improved throughout H2. We had highlighted that we expect the China recovery to be slow and to take time, and I think that\u2019s playing out in the results we see in the second half. The Middle East situation has not really improved, so we continue to see developing stronger impacts on western retailers in some of these markets, and while the team has implemented many interventions, the execution in-store has been limited by some of these headwinds in the Middle East. The last element, we saw a softening in quarter four on the Argentina volumes driven by the general circumstances in the market, strong high translation pricing in Argentina, so there was a softer contribution on organic sales growth in quarter four than what we\u2019d seen in quarter three. If you step back, though, the performance of the business and the way we set up for \u201925, I think is very strong. Eighty five of the business is developing right in line with what we would have expected. We\u2019re growing share in North America. The balance of the markets are growing volume, which is really the shift we needed to see. Our gross margin is at record levels. Our productivity is very strong. That has enabled us to remain fully invested from a media perspective and from an innovation perspective, and so going into the year, we feel all the structural elements of the business are strong. Now, what is important to understand, and we mentioned it in the prepared remarks, those headwinds that we have experienced in H2 will still be with us in H1 of this fiscal year, so we expect this year not to be linear and we have to accelerate sales growth throughout the quarters as some of these headwinds annualize and we return to growth. But overall, I think we\u2019re well set up to deliver against the guidance metrics we just communicated.","evidence_gemma_new":"LA organic sales growth","evidence_llama_3_3":null,"evidence_qwen_3_30b":"LA organic sales growth 8%","gemma_new_max":8.0,"gemma_new_min":8.0,"llama_3_3_max":null,"llama_3_3_min":null,"qwen_3_30b_max":8.0,"qwen_3_30b_min":8.0}
{"symbol":"PG","year":2023,"quarter":1,"date":"2023-Q1","chunk_id":11,"sub_chunk_id":0,"centroid_label":"pricing","agreed_value":9.0,"count":2,"chunk":"Andre Schulten: Good morning Dara. The guidance of 3% to 5% is really grounded in what we believe the market will be. We see some softening in the market as we have communicated, about 3% to 4% value growth is what we're expecting the market to be. We want to grow slightly ahead of that. As you say, the first quarter gives us a good level of confidence that we're within the right range, but we're also very early in the year. So, we believe -- confirming the range is prudent. In terms of volume elasticity in my earlier remarks, as I said, we feel very encouraged by the fact that we were able to realize 9% of pricing in organic sales growth and effectively only see about a point of reduction in volume, which speaks to favorable elasticities speaks to our strategy working and providing consumers value with innovation even as we take pricing. As we always do, we assume that these elasticities return to historical levels over time. But certainly, the first quarter is a good indication. It gives us confidence that the approach we've taken around the world in terms of combining pricing with innovation and productivity in order to offset the cost is the right approach.","evidence_gemma_new":"pricing","evidence_llama_3_3":null,"evidence_qwen_3_30b":"pricing July to September quarter","gemma_new_max":9.0,"gemma_new_min":9.0,"llama_3_3_max":null,"llama_3_3_min":null,"qwen_3_30b_max":9.0,"qwen_3_30b_min":9.0}
{"symbol":"PG","year":2023,"quarter":2,"date":"2023-Q2","chunk_id":1,"sub_chunk_id":0,"centroid_label":"pricing","agreed_value":10.0,"count":2,"chunk":"Andre Schulten : Good morning. Joining me on the call today are Jon Moeller, Chairman of the Board, President and Chief Executive Officer; and John Chevalier, Senior Vice President, Investor Relations. We're going to keep our prepared remarks brief and then turn straight to your questions. Execution of our integrated strategies continued to yield good results in the October to December quarter, growing organic sales in nine of 10 categories, holding global aggregate market share, continued productivity savings, improving supply efficiency, sustained investment and superiority of our brands across all five vectors: product, package, communication, go-to-market and value, continue to pay benefits for our consumers and retail partners and in turn, for P&G shareholders. Progress against our plan fiscal year-to-date enables us to increase the guidance range for organic sales growth and maintain ranges for core EPS growth, free cash flow productivity and cash return to shareowners. Moving to the second quarter numbers. Organic sales grew 5%, pricing at a 10 points to sales growth and mix was up 1 point. Volume declined 6 points driven by a combination of market contraction, trade inventory reductions and portfolio reduction in Russia. Growth was broad-based across business units with each of our 10 product categories growing or holding organic sales. Personal Health Care grew high teens, Feminine Care, Fabric Care and Home Care were up high single digits. Hair Care was up mid-single digits. Baby Care, Family Care, Oral Care and Skin and Personal Care were each up low single digits. Grooming was in line with prior year. Focus markets grew 3% for the quarter, with the U.S. up 6%. Greater China organic sales were down 7% versus prior year, as the market continued to be impacted by COVID lockdowns and weaker consumer confidence. We continue to expect a slow recovery as consumer mobility increases over the coming quarters. Long term, we expect China to return to strong underlying growth rates. Enterprise markets were up 14% with each of the three regions up 10% or more. Global aggregate market share was in line with prior year with 27 of our top 50 category country combinations holding or growing share. In the U.S., all outlet value share was in line with prior year with seven of 10 categories holding or growing share. U.S. volume share is up 0.5 point versus the prior year quarter, delivering sequential improvement from quarter one. Recent innovations like Downy Rinse and Refresh in fabric enhancers and Dawn Powerwash in hand dishwashing are extending superiority advantages and driving value and volume share growth. Innovation also serves as a catalyst for pricing across our other brands and forms in their category segments. On the bottom line, core earnings per share were $1.59, down 4% versus prior year. On a currency-neutral basis, core EPS increased 5%. Core operating margin decreased 170 basis points, primarily due to gross margin pressure from commodities and foreign exchange. Currency-neutral core operating margin decreased 70 basis points. Productivity improvements were 110 basis points help to the quarter. Adjusted free cash flow productivity was 72%, primarily due to a temporary reduction in payables. We returned $4.2 billion of cash to shareowners, approximately $2.2 billion in dividends and $2 billion in share repurchase. In summary, considering the backdrop of a very challenging cost and operating environment, continued solid results across the top line, bottom line and cash for the first half of the fiscal year. Moving on to strategy. Our team continues to operate with excellence, executing the integrated strategies that have enabled strong results over the past four years, and that are the foundation for balanced growth and value creation. A portfolio of daily use products, many providing cleaning, health and hygiene benefits in categories where performance plays a significant role in brand choice. Ongoing commitment to and investment in irresistible superiority across the five vectors of product, package, brand communication, retail execution and value. As discussed during our Investor Day in November, we are renewing our superiority standards to reflect the dynamic nature of this strategy. Productivity improvement in all areas of our operations to fund investments in superiority offset cost and currency challenges, expand margins and deliver strong cash generation. An approach of constructive disruption, a willingness to change, adapt and create new trends and technologies that will shape our industry for the future, especially important in this volatile environment. Finally, an organization that is increasingly more empowered, agile and accountable with little overlap or redundancy, flowing to new demands, seamlessly reporting each other to deliver against our priorities around the world. Going forward, there are four areas we are driving to improve the execution of the integrated strategies, Supply Chain 3.0, digital acumen, environmental sustainability and employee value creation. These are not new or separate strategies. They are necessary elements in continuing to build superiority, reduce cost to enable investment and value creation and to further strengthen our organization. We expanded on each of these at our Investor Day in November. If you weren't able to attend or listen in remotely, I encourage you to review the materials on our IR events website. Our strategic choices on portfolio, superiority, productivity, constructive disruption and organization are interdependent strategies. They reinforce and build on each other. When executed well, they grow markets, which in turn grow share, sales and profit. We continue to believe that the best path forward to deliver sustainable top and bottom line growth is to double down on these integrated strategies starting with commitment to deliver irresistible superior propositions to consumers and retail partners. Now moving to guidance. We continue to expect more volatility in costs, currencies and consumer dynamics as we move through the second half of the fiscal year. However, we think the strategies we've chosen, the investments we've made and the focus on executional excellence have positioned us well to manage through this volatility over time. Raw and pack material costs inclusive of commodities and supplier inflation are still a significant headwind versus last fiscal year, though we have seen some modest sequential improvement. Based on current spot prices and latest contracts, we now estimate a $2.3 billion after-tax headwind in fiscal '23. Foreign exchange is also a significant year-on-year headwind. But like raw and pack materials, we've seen modest directional improvement. Based on current exchange rates, we now forecast a $1.2 billion after-tax impact for the fiscal year. Freight costs remain higher versus prior year, and we continue to expect the $200 million after-tax headwind in fiscal '23. Combined headwinds from these items are now estimated at approximately $3.7 billion after tax, $1.50 per share, a 26 percentage point headwind to EPS growth for the year. For perspective, recall that we began the year expecting approximately $1.33 of cost and FX headwinds. So despite some modest relief since last quarter, our current outlook is still $0.17 worse than our ingoing position. We are offsetting a portion of these cost headwinds with price increases and productivity savings. We are continuing to invest in irresistible superiority, and we are investing to improve our supply capacity, resilience and flexibility. As we've said before, we believe this is a bottom line rough patch to grow through with continued investment in the business and underlying strategies. As I noted at the outset, our solid first half results enable us to raise our organic sales outlook and confirm our guidance ranges on EPS and cash. We are increasing our guidance for organic sales growth from a range of 3% to 5% to a range of 4% to 5%. Within this company-wide range, we -- there are many puts and takes. As I mentioned, we expect to see some modest improvement in China, but European markets have softened as high inflation affects consumer spending. The U.S. remains relatively strong to date, and most enterprise markets remain resilient. On the bottom line, we're maintaining our outlook of core earnings per share growth in the range of in line to plus 4% versus prior year. The significant headwinds from input costs and foreign exchange keep our current expectations towards the lower end of this range. This guidance also reflects our intent to remain fully invested to drive our superiority strategy and increase investments as opportunities are available. We continue to forecast adjusted free cash flow productivity of 90%. We expect to pay around $9 billion of dividends and to repurchase $6 billion to $8 billion of common stock, combined a plan to return $15 billion to $17 billion of cash to shareowners this fiscal year. This outlook is based on current market growth rate estimates, commodity prices and foreign exchange rates. Significant additional currency weakness, commodity cost increases, geopolitical disruptions, major production stoppages or store closures are not anticipated within these guidance ranges. To conclude, we continue to face high year-over-year commodity and transportation cost inflation in the upstream supply chain and in our own operations, headwinds from foreign exchange, geopolitical issues, COVID disruptions impacting consumer confidence and historically high inflation impacting consumer budgets. These macroeconomic and market level consumer challenges we're facing are not unique to P&G, and we won't be immune to the impact. We attempt to be realistic about these impacts in our guidance and transparent in our commentary. As we've said before, we believe this is a rough patch to grow through, not a reason to reduce investment in the long-term health of the business. We're doubling down on the strategy that has been working well and is delivering strong results. We continue to step forward towards our opportunities, and we remain fully invested in our business. We are committed to driving productivity, improvements to fund growth investments, mitigate input cost challenges and to deliver balanced top and bottom line growth. With that, we're happy to take your questions.","evidence_gemma_new":"pricing","evidence_llama_3_3":"pricing second quarter","evidence_qwen_3_30b":null,"gemma_new_max":10.0,"gemma_new_min":10.0,"llama_3_3_max":10.0,"llama_3_3_min":10.0,"qwen_3_30b_max":null,"qwen_3_30b_min":null}
{"symbol":"PG","year":2023,"quarter":3,"date":"2023-Q3","chunk_id":1,"sub_chunk_id":0,"centroid_label":"pricing","agreed_value":10.0,"count":2,"chunk":"Andre Schulten: Good morning, everyone. Joining me on the call today are Jon Mueller, Chairman of the Board, President and Chief Executive Officer; and John Chevalier, Senior Vice President, Investor Relations. Execution of our integrated strategies drove strong results in the January to March quarter. Organic sales grew across all 10 categories in -- and in six out of seven regions. Global aggregate market share is holding steady, productivity savings are accelerating and enabling sustained investment in the superiority of our brands. In-market execution across all five vectors of superiority is strong and consistent: product, package, communication, go-to-market and value. Superior offerings continue to pay benefits for our consumers and retail partners and in turn for P&G shareholders. Progress against our plan enables us to increase guidance for organic sales growth and cash return to shareowners, and to maintain guidance for core EPS growth and free cash flow productivity. Moving to third quarter numbers. Organic sales grew more than 7%. Pricing added 10 points to sales growth and mix was a modest positive contributor for the quarter. Volume declined 3 points, including a 1 point headwind from portfolio reduction in Russia. Growth was broad based across business units with each of our 10 product categories growing organic sales. Feminine Care was up low teens, Personal Health Care, Home Care and Hair Care each grew double digits, Grooming, Oral Care and Fabric Care grew high single digits, Baby Care was up mid singles, and Family Care and Skin and Personal Care grew low singles. Growth was also broad based across geographies with six of seven regions growing organic sales. Focus markets grew 5% for the quarter. Organic sales in the U.S. were up 6%, including modest unit volume growth. Europe focus markets were up 8%. Greater China organic sales were up 2% versus prior year, as the market begins to recover from COVID lockdowns and as consumer confidence improves. We continue to expect further recovery as consumer mobility increases over the coming quarters. Longer-term, we expect China to return to mid singles underlying market growth rates for our portfolio of categories. Enterprise markets were up 15% with Latin America up nearly 30% and Europe enterprise markets up low teens. This is the fourth consecutive quarter in which all five sectors grew organic sales double digits in enterprise markets. Global aggregate value share was in line with prior year, with 30 of our top 50 category country combinations holding or growing share. Excluding Russia, global value share was up 20 basis points. In the U.S., all outlet value share was up 40 basis points versus prior year with eight of 10 categories holding or growing share in the quarter. U.S. volume share is up 90 basis points versus the prior year, driven by 2 points of absolute volume consumption growth in a market that is still down modestly versus prior year. Strong U.S. share growth in Personal Care has been led by innovation on the native brand and deodorants, as well as successful extension into body wash. Cascade Platinum Plus has driven strong share growth in auto dishwashing, and Dawn share continues to be up more than 1 point with ongoing leverage from the power wash and easy squeeze innovations. Vicks continues to be a growth leader in Personal Health Care, and we've delivered strong share growth in the Metamucil and Pepto-Bismol brands. In Europe, the new four-chamber Ariel Platinum PODS are driving strong consumer demand in Fabric Care. Fairy Power Spray is growing the dish category and building market share in Home Care. The new GilletteLabs exfoliating razor, male and female intimate grooming innovations and cardboard packaging upgrades are driving strong growth in grooming. Moving to the bottom-line. Core earnings per share were $1.37, up 3% versus prior year. On a currency neutral basis, core EPS increased 13%, good progress as we faced $0.31 per share of cost and foreign exchange headwinds in the quarter. Core operating margin increased 40 basis points, as 150 basis points of gross margin expansion were partially offset by SG&A investments and inflation impacts. Currency-neutral core operating margin increased 160 basis points. Productivity improvements were a 290 basis point help to the quarter. Adjusted free cash flow productivity was at 92%. We returned $3.6 billion of cash to shareowners, approximately $2.2 billion in dividends and $1.4 billion in share repurchase. Last week, we announced a 3% increase in our dividend, again reinforcing our commitment to return cash to shareowners. This is the 67th consecutive annual dividend increase and the 133rd consecutive year P&G has paid a dividend. In summary, against what is still a challenging cost and operating environment, continued good results across top-line, bottom-line and cash for the third quarter. Our team continues to operate with excellence, executing the integrated strategies that have enabled strong results over the past four years and that are the foundation for balanced growth and value creation. A portfolio of daily use products, many providing cleaning, health and hygiene benefits in categories where performance plays a significant role in brand choice. Ongoing commitment to and investment in irresistible superiority across the five vectors of product, package, brand communication, retail execution and value, we are again raising the bar on our superiority standards to reflect the dynamic nature of this strategy. Productivity improvements in all areas of operations to fund investments in superiority offset cost and currency challenges, extend margins and deliver strong cash generation, an approach of constructive disruption, a willingness to change, adapt and create new trends and technologies that will shape our industry for the future. Finally, an organization that is increasingly more empowered, agile and accountable with little overlap or redundancy flowing to new demands seamlessly supporting each other to deliver against our priorities around the world. There are four areas we are driving to improve the execution of the integrated strategies: Supply Chain 3.0, digital acumen, environmental sustainability and employee value equation. These are not new or separate strategies, they are necessary elements in continuing to build superiority, reduce costs to enable investment and value creation and to further strengthen our organization. Our strategic choices on portfolio, superiority, productivity, constructive disruption and organization are interdependent strategies. They reinforce and build on each other. When executed well, they grow markets, which in turn grow share, sales and profit. We continue to believe that the best path forward to deliver sustainable top- and bottom-line growth is to double down on these integrated strategies, starting with the commitment to deliver irresistibly superior propositions to consumers and retail partners. Now, moving to guidance. As we work towards the end of the fiscal year, we are cautiously optimistic. We remain confident in our strategies and the organization's ability to execute them with excellence. We continue to expect more volatility in the macro and consumer environment, and expect sustained pressure in costs and foreign exchange as we move forward. On the whole, our consumer markets remained relatively resilient, with U.S. and China volume trends improving, but with inflation pressures in Europe weighing more heavily on consumption. We continue to think the strategies we've chosen, the investments we've made and the focus on executional excellence have positioned us well to manage through this volatility over time. Raw and packaging material costs, inclusive of commodities and supply inflation, have largely stabilized over the last few months, but still remain a significant headwind versus last fiscal year. Based on current spot prices and latest contracts, we now estimate a $2.2 billion after-tax headwind in fiscal '23. Foreign exchange is also a significant year-on-year headwind and rates since last quarter have moved modestly against us. Based on current exchange rates, we now forecast a $1.3 billion after-tax impact to the fiscal year. Freight costs have moderated throughout the year, and we now expect them to be roughly in line with prior year. Combined headwinds from these items are now estimated at approximately $3.5 billion after-tax, or $1.40 per share, a 24 percentage point headwind to EPS growth for the year. In addition to these impacts, we are also facing higher inflation in wages and benefits and higher year-on-year net interest expense. We are offsetting a portion of these cost headwinds with price increases and productivity savings. We are continuing to invest in irresistible superiority and we are investing to improve our supply capacity, resilience and flexibility. As noted in the outset, our strong results over the first three quarters have enabled us to raise our organic sales outlook and confirm our guidance ranges on EPS and cash. We are increasing our guidance for organic sales growth from a range of 4% to 5% to approximately 6% for the fiscal year. This would put fiscal '23 in line with 6% top-line growth we've averaged over the last four years, which were 5%, 6%, 6% and 7% from fiscal '19 through '22, respectively. On the bottom-line, we're maintaining our outlook of core earnings per share growth in the range of in line to plus 4% versus prior year. Significant headwinds from input costs and foreign exchange keep our current expectations toward the lower end of this range. This guidance also reflects our intent to remain fully invested to drive our superiority strategy and increase investments as we value -- as value creating opportunities are available. We continue to forecast adjusted free cash flow productivity of 90%. We now expect to pay nearly $9 billion in dividends and to repurchase $7.4 billion to $8 billion in common stock, combined a plan to return $16 billion to $17 billion of cash to shareowners this fiscal year. This outlook is based on current market growth estimates, commodity prices and foreign exchange rates. Significant additional currency weakness commodity cost increases, geopolitical disruption, major production stoppages or store closures are not anticipated within this guidance range. To conclude, we continue to face highly volatile consumer and macro dynamics. We also continue to see high year-over-year input costs, inflation in the upstream supply chain and in our own operations. Headwinds from foreign exchange, geopolitical issues, and historically high inflation impacting consumer budgets. As we said before, we believe this is a rough patch to grow through, not a reason to reduce investment in the long-term health of our business. We're doubling down on the strategy that has been working well and is delivering strong results. We continue to step forward. We remain fully invested in our business. We remain committed to driving productivity improvements to fund growth investments, mitigate input cost challenges and to deliver balanced top- and bottom-line growth. With that, we'll be happy to take your questions.","evidence_gemma_new":"Pricing points","evidence_llama_3_3":"Pricing quarter","evidence_qwen_3_30b":null,"gemma_new_max":10.0,"gemma_new_min":10.0,"llama_3_3_max":10.0,"llama_3_3_min":10.0,"qwen_3_30b_max":null,"qwen_3_30b_min":null}
{"symbol":"PG","year":2023,"quarter":4,"date":"2023-Q4","chunk_id":1,"sub_chunk_id":0,"centroid_label":"pricing","agreed_value":7.0,"count":2,"chunk":"Andre Schulten: With me today are Jon Moeller, Chairman of the Board, President and Chief Executive Officer, and John Chevalier, Senior Vice President, Investor Relations. I\u2019ll start with an overview of results for fiscal year \u201923 and the fourth quarter. Jon will add perspective on our strategic focus areas and capabilities and will close with guidance for fiscal \u201924 and then take your questions. Fiscal \u201923 was another very strong year. Execution of our integrated strategy continues to yield broad-based strong sales growth across categories and regions, strong earnings in the face of significant cost headwinds, and continued strong return on cash to P&G shareholders. Organic sales for the fiscal year grew 7%, our second consecutive year of 7% organic sales growth and fifth consecutive year of 5% or better organic growth starting fiscal 2019 - 5%, 6%, 6%, 7% and 7%. Growth was broad-based across business units with all 10 of our product categories growing organic sales. Personal healthcare grew mid-teens, feminine care grew double digits, fabric care, home care and hair care up high single digits, skin and personal care, baby care, family care and grooming each grew mid singles. Oral care grew low single digits. Focus markets were up 5% for the year and we delivered strong results in our largest and most profitable market, the United States, with organic sales growing 6% on top of a strong 8% growth comp in the base period. Greater China organic sales were down low single digits versus the prior year, with trends improving in the back half as the market continues to slowly recover. Enterprise markets were up 15% led by Latin America with 24% organic sales growth. Ecommerce sales increased 7%, now representing 17% of total company. Our strategy focused on driving market growth is in turn driving share growth for P&G. All channel market value sales in the U.S. categories in which we compete grew approximately 7% in fiscal \u201923. P&G consumption grew ahead of fair share of category growth, driving modest value share growth and volume share up 50 basis points for the year. We held global aggregate market share. Twenty-nine of our top 50 category-country combinations held or grew share for the year. Importantly, this share growth is broad-based. Seven of 10 product categories grew share globally over the past year. Core earnings per share were $5.90, up 2% for the year despite a 24 percentage point earnings growth headwind, or $1.38 from share from higher material costs and foreign exchange. On a currency neutral basis, core EPS was up 11%. Adjusted free cash flow productivity was 95%. We increased our dividend by 3% and returned over $16 billion of value to share owners, $9 billion in dividends and $7.4 billion in share repurchase. Moving to the April to June quarter, organic sales grew 8%. We have now delivered seven consecutive quarters with 5% or better organic sales growth. Pricing contributed seven points to organic sales growth, mix was up 2 points, volume declined one point, improving sequentially versus the March quarter, as expected. These strong company results are grounded in broad-based category and geographic strength. Each of our 10 product categories grew organic sales in the quarter. Skin and personal care, personal healthcare, home care, feminine care, and family care, five of our 10 categories, each grew double digits. Baby care, hair care and grooming grew high singles, fabric care grew mid singles, and oral care was up low single digits. Each of our seven regions grew organic sales with focus markets up 7% and enterprise markets up 13% for the quarter. Organic sales in the U.S. grew 6%. Importantly, this includes 3 points of volume growth, a return to positive volume in our largest market for the first time in five quarters. Greater China organic sales grew 4%. We continue to see sequential market recovery, but as expected at a slow pace. European focused market organic sales were up 12% despite volume pressure from wider pricing gaps. In enterprise markets, Latin America led the growth with organic sales up 22%. Global aggregate market share increased 10 basis points. Twenty nine of our top 50 category-country combinations held or grew share for the quarter. On the bottom line, core earnings per share were $1.37, up 13% versus the prior year. On a currency neutral basis, core EPS increased 22%. Core operating margin increased 190 basis points as benefits from strong sales growth and productivity improvements more than offset higher material cost, foreign exchange headwinds, wage and benefit inflation, and reinvestment in higher media reach and frequency. Currency neutral operating margin increased 310 basis points. Adjusted free cash flow productivity was 136%. We returned approximately $2.3 billion of cash to share owners in the quarter. In summary, we met or exceeded each of our going-in target ranges for the year: organic sales growth, core EPS growth, free cash flow productivity, and cash returned to share owners, strong performance again this year in a very difficult operating environment. Now I\u2019ll pass it over to Jon.","evidence_gemma_new":"Pricing organic sales growth","evidence_llama_3_3":"pricing April to June quarter","evidence_qwen_3_30b":null,"gemma_new_max":7.0,"gemma_new_min":7.0,"llama_3_3_max":7.0,"llama_3_3_min":7.0,"qwen_3_30b_max":null,"qwen_3_30b_min":null}
{"symbol":"PG","year":2024,"quarter":1,"date":"2024-Q1","chunk_id":1,"sub_chunk_id":0,"centroid_label":"pricing","agreed_value":7.0,"count":2,"chunk":"Andre Schulten: Good morning, everyone. Joining me on the call today is John Chevalier, Senior Vice President, Investor Relations. This fiscal year, Jon Moeller, Chairman, President and CEO, will join the mid-year and year-end calls and I'll be leading the Q1 and Q3 calls. Execution of our integrated strategy draws strong results in the July to September quarter. Broad-based organic sales growth across categories and regions, global aggregate market share growth, strong productivity savings enabling increased investment in superiority of our brands while also delivering very strong earnings growth. These strong first quarter results put us on track to deliver towards the higher end of our fiscal year guidance ranges for organic sales growth and core earnings per share, and continued strong cash productivity and cash return to share owners. So moving to first quarter numbers, organic sales grew 7%. Pricing added 7 points to sales growth, and mixed contributed 1 point. Volume rounded down to a decline of 1 point with overall modest volume growth outside greater China. Top-line growth was broad-based across business units with each of our 10 product categories growing organic sales. Home care grew low teens, personal healthcare was up double digits, feminine care, oral care, fabric care, hair care and grooming, each grew high single digits. Baby care and family care were up mid-singles, skin and personal care grew low singles. Growth was also broad-based across geographies, with five of seven regions growing organic sales. Focus markets grew 6% for the quarter, organic sales in the US were up 7% and Europe focus markets were up 15%. Greater China organic sales were down 6% versus prior year. Underlying market growth is soft and choppy as consumer confidence remains weak. SK-II was down low teens in Greater China due to soft market conditions and a temporary reduction in social retail merchandising. Enterprise markets were up 13%, with Latin America up 19%, and Europe enterprise markets up 15%. Shipment volume in the US grew 3% again this quarter and we returned to volume growth in Europe focus markets. Mexico, Brazil and India, some of our largest enterprise markets, continue to deliver volume growth. These gains largely offset volume declines in the Greater China, Asia Pacific and European enterprise regions primarily driven by underlying market contraction. Global aggregate value share was up 40 basis points versus prior year, with 32 of our top 50 category country combinations holding or growing share. In the US, all outlet value share was up 50 basis points versus prior year with seven of 10 categories holding or growing value share in the quarter. US volume share was up 60 basis points, reflecting 3% volume growth. Value share in European focus markets was up 40 basis points over the past three months. Moving to the bottom line, core earnings per share were $1.83, up 17% versus prior year. On a currency-neutral basis, core EPS increased 21%. Core operating margin increased 240 basis points, as 460 basis points of gross margin expansion were partially offset by increased marketing investments, wage and benefit inflation, and foreign exchange impacts on SG&A. Currency-neutral core operating margin increased 340 basis points. Productivity improvements were a 210 basis point help to the quarter. Adjusted free cash for productivity was 97%. We returned $3.8 billion of cash to share owners, approximately $2.3 billion in dividends, and $1.5 billion in share repurchase. In summary, against what continues to be a challenging and volatile operating environment, a very good start to the fiscal year across top-line, bottom line, and cash. Our team continues to operate with excellence, executing the integrated strategy that has enabled strong results over the past five years, and that is the foundation for balanced growth and value creation. A portfolio of daily use products, many providing cleaning, health, and hygiene benefits in categories where performance plays a significant role in brand choice. Ongoing commitment to and investment in irresistible superiority across the five vectors of product, package, brand communication, retail execution, and value across each price tier we compete. We are again raising the bar on our superiority standards to reflect the dynamic nature of this strategy. Productivity improvement in all areas of our operations to fund investments in superiority, offset cost and currency challenges, expand margins and deliver strong cash generation. An approach of constructive disruption, a willingness to change, adapt, and create new trends and technologies that will shape our industry for the future, especially important in the volatile environment we're in. Finally an organization that is more empowered, agile, and accountable. We continue to improve the execution of the integrated strategy with four focus areas, supply chain 3.0, digital acumen, environmental sustainability, and the employee value equation. These are not new or separate strategies. They are necessary elements in continuing to build superiority, reduce costs to enable investment and value creation, and to further strengthen our organization. Our strategic choices on portfolio, superiority, productivity, constructive disruption and organization reinforce and build on each other. When executed well, they grow markets which in turn grow share, sales and profit. We continue to believe that the best path forward to deliver sustainable top and bottom-line growth is to double down on these integrated strategies, starting with a commitment to deliver irresistibly superior propositions to consumers and retail partners fueled by productivity. Moving to guidance. As I mentioned, we expect the environment around us to continue to be volatile and challenging from input costs, to currencies, to consumer and geopolitical dynamics. We attempt to reflect these realities in our guidance ranges. Based on current spot prices, we estimate commodities will be a tailwind of around $800 million after tax in fiscal \u201824. This is consistent with the outlook we provided in July. However, within this estimate, there have been several moving parts. We've seen incremental relief on some commodities like pulp, which have been offset by higher costs than other commodities such as fuel. Foreign exchange rates have moved sharply against us, and we now expect a headwind of approximately $1 billion after tax, an incremental $600 million impact since our initial guidance for the year. In addition to these impacts, we are also facing higher inflation in wages and benefits, and we expect higher year-on-year net interest expense of approximately $200 million after tax. As we are just one quarter into the fiscal year, we are maintaining our guidance ranges for organic sales, core EPS growth, cash productivity, and cash return to share owners, with each solidly on track after a very strong first quarter. Guidance for organic sales is growth of 4% to 5% for the fiscal year. The range includes a normalization in underlying market growth rate that is likely to occur through calendar year \u201824 as the market laps the last wave of cost recovery pricing and as market volumes return to growth. For P&G, we expect 3 to 4 points less pricing benefit in each of the next two quarters compared to our first quarter results. On the bottom line, our outlook for fiscal \u201824 core earnings per share is 6% to 9% growth versus last fiscal year. We're holding the range despite the incremental $600 million after-tax headwind from foreign exchange. With now a 7-point EPS impact from FX, this outlook translates to 13% to 16% core EPS growth on a constant-currency basis. We continue to forecast adjusted free cash flow productivity of 90%. We expect to pay more than $9 billion in dividends and to repurchase $5 billion to $6 billion in common stock, combined a plan to return $14 billion to $15 billion of cash to shareowners this fiscal year. This outlook is based on current market growth rate estimates, commodity prices, and foreign exchange rates. Significant additional currency weakness, commodity cost increases, geopolitical disruptions, or major production stoppages are not anticipated within the guidance ranges. As you consider the cadence of earnings for the year, keep in mind that the back half of the year will see less pricing benefit as we progressively annualize prior year increases. We should also see less commodity benefit as we move through the year. Labor inflation continues throughout the supply chain and [in our] (ph) costs. FX headwinds will increase versus quarter one. Also with a strong start to the year, we'll be reinvesting to further strengthen our plans and to maintain strong momentum. Finally, we'll be closely watching the health of the China market and the balance of regions, energy costs are rising as we head into fall and winter, household saving levels have reduced, especially in Europe. Slower economic growth, higher energy costs and higher interest rates for longer have an impact on consumer confidence. To conclude, while we expect volatile consumer and market dynamics to continue, we remain confident in our strategy and the results that it delivers. We are focused on driving growth in our categories and we are committed to delivering balanced top and bottom-line growth and value creation for our share owners. With that, we'll be happy to take your questions.","evidence_gemma_new":"pricing","evidence_llama_3_3":null,"evidence_qwen_3_30b":"pricing Q1","gemma_new_max":7.0,"gemma_new_min":7.0,"llama_3_3_max":null,"llama_3_3_min":null,"qwen_3_30b_max":7.0,"qwen_3_30b_min":7.0}
{"symbol":"PG","year":2024,"quarter":2,"date":"2024-Q2","chunk_id":1,"sub_chunk_id":0,"centroid_label":"pricing","agreed_value":4.0,"count":2,"chunk":"Andre Schulten: Good morning, everyone. Joining me on the call today are Jon Moeller, Chairman of the Board, President and Chief Executive Officer, and Jon Chevalier, Senior Vice-President, Investor Relations. I'll start with an overview of results for the October to December quarter, Jon will add perspective on our recent results and strategic focus areas and capabilities. We'll close with guidance for fiscal '24, and then take your questions. October to December, was another strong quarter. Execution of our integrated strategy drove solid sales and market-share results and another quarter of strong margin progress, delivering strong earnings and cash results for the quarter. The strong results we've delivered in the first half of fiscal '24, enable us to raise our outlook for core earnings per share and keep us on track to deliver within our fiscal year guidance ranges for organic sales growth, cash productivity and cash return to shareowners. We continue to see the upper range on organic sales and core EPS as likely outcome for fiscal '23 - '24. So, moving to second quarter numbers, organic sales grew 4%, volume rounded down to a decline of one point as continued volume acceleration in North America and Europe focused markets was offset by softer shipments in Greater China, Eastern Europe and Middle East, Africa regions due to local issues in select markets. Pricing contributed four points to sales growth, consistent with the guidance we provided, mix was neutral to organic sales growth. Growth across categories continues to be broad based with eight of 10 product categories holding or growing organic sales this quarter. Home care, hair care and grooming grew sales high single digits. Fabric care, family care, feminine care and oral care were up mid-single digits. Baby care was in line with prior year. Personal health care was down low singles against a very tough comp and a late developing cold and flu season this year. Skin and personal care was down mid singles due to SK-II in China. Growth was also broad based across geographies with North America, Europe, Asia Pacific focus markets and Latin America and Europe enterprise markets each growing organic sales. Focus markets grew 3% for the quarter and enterprise markets grew 7%. Organic sales in North America grew 5% with four points of volume growth. Over the last five quarters, volume growth in North America has been minus three, flat, then 2% growth plus 3% and now plus 4%, strong acceleration well ahead of the underlying market trends. Europe focused markets were up 7% with three points of volume growth. As expected, both regions saw a step down in pricing contribution to sales growth as a large portion of price increases from last year have annualized. Importantly, volume accelerated in both regions to partially offset the pricing impact. Latin America delivered another very strong quarter with 17% organic sales growth, continued strong results in these regions. There are some targeted issues affecting other markets. Greater China organic sales were down minus 15% versus prior year. Underlying market growth was down mid to high single digits as consumer confidence weakened further. The SK-II brand in Greater China was down 34% due to soft market conditions and a temporary headwind for Japanese brands in the market. Our consumer research indicates SK-II brand sentiment is improving and we expect to see sequential improvement in the back half. Underlying market trends have softened in some Europe enterprise and Asia Pacific, Middle East, Africa countries such as Egypt, Saudi Arabia and Turkey, following multiple rounds of pricing to offset inflation and due to heightened tensions in the Middle East. Global aggregate value share was up 40 basis points versus prior year with 28 of our top 50 category country combinations holding or growing share. In the U.S., all outlet value share was up 20 basis points versus prior year. U.S. volume share was up 50 basis points reflecting strong volume growth. Value share in European focus markets was up 90 basis points over the past three months. In summary, North America, Europe focus Markets, Asia Pacific focus markets and Latin America, which combined represent three-quarters of company sales, delivered over 6% of organic sales growth in quarter two, with three points of volume growth and three points of price mix. These same markets grew 9% in quarter one with around two points of volume growth and seven points of price mix. Continued strong organic sales growth with accelerating volume growth to mitigate the anticipated annualization of pricing, consistent with our guidance. The balanced 25% of company sales including Greater China, Eastern Europe and Middle East Africa were impacted by local market issues we described. Quarter two organic sales for this group were down five points versus prior year. We expect most of these effects in these regions to be temporary or annualizing, SK-II consumption is sequentially improving. We continue to expect China market growth to improve, and over time return to mid singles, and we expect market pressures in the Middle east and Turkey to ease over time. Moving to the bottom line, core earnings per share were $1.84, up 16% versus prior year. On a currency neutral basis, core EPS increased 18%. Core operating margin increased 400 basis points as 520 basis points of gross margin expansion were partially offset by increased marketing investments, wage and benefit inflation and foreign exchange impacts in SG&A. Currency neutral core operating margin increased 470 basis points. Productivity improvements were a very strong 340 basis points helped to the quarter. Adjusted free cash flow productivity was 95%. We returned $3.3 billion of cash to share owners, approximately $2.3 billion in dividends and $1 billion in share repurchase. In summary, against what continues to be a challenging and volatile operating environment, strong overall progress in the first half of the year keeping us on track for our fiscal year guidance ranges. Now I'll pass it over to Jon for his perspective.","evidence_gemma_new":"Pricing sales growth","evidence_llama_3_3":null,"evidence_qwen_3_30b":"pricing four points","gemma_new_max":4.0,"gemma_new_min":4.0,"llama_3_3_max":null,"llama_3_3_min":null,"qwen_3_30b_max":4.0,"qwen_3_30b_min":4.0}
{"symbol":"PG","year":2024,"quarter":3,"date":"2024-Q3","chunk_id":1,"sub_chunk_id":0,"centroid_label":"pricing","agreed_value":3.0,"count":2,"chunk":"Andre Schulten : Good morning, everyone. Joining me on the call today is John Chevalier, Senior Vice President, Investor Relations. Execution of our integrated strategy drove solid sales and market share results and another quarter of strong earnings and cash results. The strong results we've delivered in the first three quarters of fiscal 2024 enable us to raise our outlook for core earnings per share and keep us on track to deliver within our fiscal year guidance ranges for organic sales growth, cash productivity, and cash return to shareowners. Specifically on the numbers, organic sales grew 3%. Volume was in line with prior year, showing sequential progress. Pricing contributed 3 points to sales growth as we continue to annualize price increases taken last fiscal year. Mix was neutral to organic sales growth, and growth across categories continues to be broad based with 8 of 10 product categories holding or growing organic sales in this quarter. Grooming organic sales grew double-digits. Home Care and Hair Care up high singles. Oral Care grew mid-single-digits. Fabric Care, Family Care, Feminine Care and Personal Health Care were up low singles. Skin and Personal Care and Baby Care organic sales were lower versus prior year. Growth was also broad based across geographies. North America, Europe and Asia Pacific focused markets and Latin America and Europe Enterprise markets are each growing organic sales. Global aggregate value share was up versus prior year with 29 of our top 50 category country combinations holding or growing share. Focus markets grew organic sales 2% for the quarter, and Enterprise Markets grew 4%. Organic sales in North America grew 3% with 3 points of volume growth. Over the last 4 quarters, volume growth in North America has been plus 2%, plus 3%, plus 4%, and now plus 3%. These results include over a point of impact from retail inventory reductions, primarily in personal healthcare. Consumer demand for P&G brands remains very strong in the U.S., with all outlet consumption value growth of 5%, all outlet value share was up 10 basis points versus prior year. U.S. volume share was up 40 basis points, reflecting continued strong volume growth ahead of the underlying market. The gap between consumer offtake of 5% compared to our U.S. sales growth of 3% reflects the aforementioned trade inventory reductions in the quarter. Europe focus markets were up 7% with 4 points of volume growth. Value share in Europe Focus markets was up 100 basis points over the past 3 months. Latin America organic sales were up 17%. Argentina is a significant contributor to this result given the pricing taken to offset the more than 400% devaluation of the Argentine peso since the start of the year. Mexico and Brazil are annualizing high base periods with organic sales growth in the 20s and 30s, and we expect will normalize back to pre-COVID levels in the mid to high single-digits. As we noted last quarter, there are some specific issues affecting other markets. Those challenges continue to impact results in the quarter. Greater China organic sales were down 10% versus prior year, progress versus the December quarter, but still impacted by weak underlying market conditions and headwinds for SK-II and other Japanese brands in the market. SK-II sales in Greater China were down around 30% for the quarter. We have seen some month to month improvement in overall Greater China sales trends, though we expect it will be another quarter or two until we return to growth. Volume trends in some of the European Enterprise and Asia Pacific, Middle East Africa countries such as Egypt, Saudi Arabia, Turkey, Indonesia and Malaysia have remained soft since the start of the heightened tensions in the Middle East. Also, shipments in Russia continue to decline, double digits given our reduced footprint and curtailed investments with consumers and retailers. Combined, the headwinds from Greater China and Asia, Middle East Africa markets were a 150 basis point impact on total company sales for the quarter. We expect these headwinds to moderate or annualize over the coming periods. Moving to the bottom line, core earnings per share were $1.52 up 11% versus prior year. On a currency neutral basis, core EPS increased 18%. Core gross margin increased 310 basis points and operating margin increased 90 basis points. Strong productivity improvement of 320 basis points enabled continued strong investment in superior products, packaging and consumer communication to drive market growth. Currency neutral core operating margin increased 220 basis points. Adjusted free cash flow productivity was 87%. We returned $3.3 billion of cash to share owners, approximately $2.3 billion in dividends and $1 billion in share repurchase. Over 3 quarters, more than $10 billion returned to shareowners in dividends and repurchases. Last week, we announced a 7% increase in our dividend, again reinforcing our commitment to return cash to share owners. This is the 68th consecutive annual dividend increase and 134th consecutive year P&G has paid a dividend. In summary, again, what continues to be a challenging and volatile operating environment, strong overall results enabling us to increase our earnings projections for the year and to maintain our guidance ranges for organic sales and cash generation, all while sustaining strong investment. It's a priority to build category consumption and to restore business growth in China and in the Middle East. Our teams continue to operate with excellence, executing the integrated strategy that has enabled strong results over the past 5 years, and that is the foundation for balanced growth and value creation. A portfolio of daily use products, many providing cleaning, health and hygiene benefits in categories where performance plays a significant role in brand choice. Ongoing commitment to and investment in irresistible superiority across the 5 vectors of products, package, brand communication, retail execution and value for each price tier where we compete. We are again raising the bar on our superiority standards to reflect the dynamic nature of this strategy. Productivity improvements in all areas of our operations to fund investments in superiority, offset cost and currency challenges, expand margins and deliver strong cash generation. An approach of constructive disruption, a willingness to change, adapt and create new trends and technologies that will shape our industry for the future. Finally, an organization that is empowered, agile and accountable. We continue to improve the execution of the integrated strategy with 4 focus areas: strong progress on Supply Chain 3.0, digital acumen, environmental sustainability and a superior employee value equation. These four focus areas are not new or separate strategies. They simply strengthen our ability to execute the strategy. Our strategic choices on portfolio, superiority, productivity, constructive disruption and organization reinforce and build on each other. When executed well, they grow markets, which in turn grow share, sales and profit. We continue to believe that the best path forward to deliver sustainable top and bottom-line growth is to double down on this integrated strategy, starting with a commitment to deliver irresistibly superior propositions to consumers and retail partners, fueled by productivity. Moving on to guidance. As I mentioned, we expect the environment around us to continue to be volatile and challenging, from input costs to currencies to consumer, retailer and geopolitical dynamics. However, our strong results year to date enable us to raise or maintain key guidance metrics for the year. We're maintaining our guidance range for organic sales growth of 4% to 5% for the fiscal year. We're squarely in the middle of this range fiscal year-to-date. This outlook assumes continued normalization in underlying market growth rates that we've seen over the past few quarters. Markets will be lapping the last waves of cost recovery pricing and volumes slowly begin to recover. We also expect the market level changes we faced through quarter 3 to continue in Q4 though with some directional improvement. On the bottom-line, enabled by 15% core EPS growth year-to-date, we are raising our outlook for fiscal 2024 core earnings per share from a range 8% to 9% to a range of 10% to 11%. This outlook includes continued strong investments in innovation and brand building to grow markets and extend the superiority of P&G offerings to consumers. We now estimate commodities will be a tailwind of around $900 million after tax in fiscal '24 based on current spot prices. This is a modest improvement versus the outlook we provided last quarter, though nearly all of this benefit has been booked in the first three quarters of the year. We now expect foreign exchange to be a headwind of approximately $600 million after tax for the fiscal year. The change versus prior guidance reflects volatility in Argentina exchange rates, including a period of currency appreciation in quarter three and a revised devaluation outlook for quarter four. We also reflect a reduction in Argentina FX exposure due to the divestiture of our Argentina Fabric and Home Care business, which we completed in mid-March, and reduced assumptions for future volume and pricing given the current rate outlook and recent shipment trends. The net impact of these changes is a relatively modest help to the bottom line, which is reflected in our updated EPS outlook. We expect higher net interest expense of approximately $100 million after tax versus prior year. General inflation and higher wage and benefit costs are also earnings headwinds for the year. We expect adjusted free cash flow productivity of 90%, and we expect to pay more than $9 billion in dividends to repurchase $5 billion to $6 billion in common stock, combined a plan to return $14 billion to $15 billion of cash to share owners for the year. This outlook is based on current market growth rate estimates, commodity prices and foreign exchange rates, significant additional currency weakness, commodity cost increases, geopolitical disruption or major production stoppages are not anticipated within these guidance ranges. Finally, we'll be closely watching the more volatile regions we mentioned earlier, including the health of the China market, and we'll be keeping a close watch on competitive dynamics to ensure P&G brands remain a superior value for consumers and for retailers. The entire P&G organization remains focused on excellent execution of our integrated, market constructive strategy, which has delivered strong results in a challenging operating and competitive environment. While we expect volatile consumer and macro dynamics to continue, we are confident the best path forward is to double down on this strategy, remain fully invested to drive irresistible superiority across every part of our portfolio and stay focused on delivering balanced top and bottom line growth and value creation for our shareowners. With that, we'll be happy to take your questions.","evidence_gemma_new":"pricing","evidence_llama_3_3":null,"evidence_qwen_3_30b":"pricing 3 points","gemma_new_max":3.0,"gemma_new_min":3.0,"llama_3_3_max":null,"llama_3_3_min":null,"qwen_3_30b_max":3.0,"qwen_3_30b_min":3.0}
{"symbol":"PG","year":2024,"quarter":4,"date":"2024-Q4","chunk_id":1,"sub_chunk_id":0,"centroid_label":"pricing","agreed_value":1.0,"count":2,"chunk":"Andre Schulten: Good morning everyone. Joining me on the call today are Jon Moeller, Chairman of the Board, President and Chief Executive Officer, and John Chevalier, Senior Vice President, Investor Relations. I will start with an overview of results for fiscal year \u201924 and for the fourth quarter. Jon will add perspective on our strategic focus areas and capabilities and will close with guidance for fiscal \u201925 and then take your questions. Fiscal \u201924 was another very strong year. Execution of our integrated strategies enabled the company to meet or exceed going-in guidance ranges for organic sales growth, core EPS growth, cash productivity and cash return to share owners, all this despite significant market level headwinds that were largely unknown when we gave our initial outlook for the year. Organic sales growth for the fiscal year was 4%, our sixth consecutive year of 4% or better organic growth against a strong 7% comp in the prior year and in more challenging market conditions. Growth was broad-based across business units with eight of 10 product categories growing organic sales. Home care, hair care and grooming were up high single digits, oral care and feminine care up mid singles. Fabric care, family care, and personal healthcare grew low single digits. Skin and personal care and baby care were down low singles. Focus markets grew 4% for the year with North America up 5% and Europe focus markets up 8%. Greater China organic sales were down 9% versus the prior year, driven by soft market conditions and brand-specific headwinds on SK-II. Enterprise markets were up 6%, led by Latin America with 15% organic sales growth. Ecommerce sales increased 9%, now representing 18% of the total company. Our strategy focused on driving market growth continues to drive share growth for P&G. All channel market value sales in the U.S. categories in which we compete grew around 5% in fiscal \u201924. P&G consumption grew ahead of our fair share of category growth, driving modest value and volume share growth for the year. We grew global aggregate value share. Thirty of 50 category country combinations held or grew share for the year. Importantly, this share growth is broad-based. Six of 10 product categories grew share globally over the past year. Core earnings per share were $6.59, up 12% for the year. Core gross margin improved 360 basis points and core operating margin increased 170 basis points. Over $2.3 billion of productivity improvements were enabled by a significant increase in investment in superior products, packages and brand communication to drive market growth. On a currency-neutral basis, core EPS was up 16% and core operating margin increased 250 basis points. Adjusted free cash flow productivity was 105%. We increased our dividend by 7% and returned over $14 billion of value to share owners, $9.3 billion in dividends, and $5 billion in share repurchase. Moving onto fourth quarter results, organic sales rounded down to 2%, volume was up 2%, solid sequential progress. Pricing was up 1% and mix was in line with prior year. Growth continues to be broad-based across categories and regions. Nine of 10 product categories grew or held organic sales in the quarter. Home care, hair care, grooming and oral care were each up high single digits, feminine care up low singles, skin and personal care, fabric care, personal health care and family care were each in line with prior year, and baby care was down mid singles. Five of seven regions grew organic sales with focus markets up 2% and enterprise markets up 2% for the quarter. Organic sales in North America grew 4% with four points of volume growth and price mix, in line with prior year. European focus markets organic sales were up 2% against a strong 12% comp in the base period. Volume was up 3%. Price mix was down a point as the region has now fully annualized prior year inflation-driven pricing. Latin America organic sales were up 8%, including high singles growth in Brazil. Of note, Argentina\u2019s overall contribution to organic sales for the region and the company were lower than the last two quarters due to the divestiture of a portion of the business in March and a notable decline in shipment volume for the remaining categories. As was announced earlier this month, we have divested the remaining portions of our operations in Argentina. As a result, Argentina will be largely removed from our organic sales reporting in fiscal year \u201925. Select P&G brands will still be available in the market through a distribution and licensing agreement with the new owner of the operations. Greater China organic sales declined 8%. Underlying market conditions have remained weak and the 6\/18 key consumption period was down sharply versus prior year, just as we saw in the 11\/11 Chinese New Year and Valentine\u2019s Day shopping periods. Also, brand-specific headwinds have continued on SK-II due to its Japanese heritage. We expect general market trends and the dynamics related to SK-II to improve over time, though it will likely be another quarter or two until we return to growth. Volume trends in some Europe enterprise and Asia Pacific, Middle East, Africa countries such as Egypt, Saudi Arabia, Turkey, Indonesia, Malaysia and Russia have remained soft. We expect these headwinds to moderate or annualize over the coming periods. Global aggregate market share was down 30 basis points as we are now annualizing very strong growth in European-focused markets. Twenty-five of our top 50 category country combinations held or grew share for the quarter. On the bottom line, core earnings per share were $1.40, up 2% versus the prior year. On a currency-neutral basis, core EPS increased 6%. Core gross margin increased 140 basis points and core operating margin decreased 100 basis points. Strong productivity improvements of 250 basis points, funding a meaningful increase in marketing investment, currency-neutral core operating margin decreased 60 basis points. Adjusted free cash flow productivity was 148%. We returned nearly $4 billion of cash to share owners this quarter, over $2.4 billion in dividends, and $1.5 billion in share repurchases. In summary, we met or exceeded each of our going-in target ranges for the year: organic sales growth, core EPS growth, free cash productivity and cash returns to share owners, strong performance again this year in a challenging economic and geopolitical environment. With that, I\u2019ll pass it over to Jon.","evidence_gemma_new":null,"evidence_llama_3_3":"pricing fourth quarter","evidence_qwen_3_30b":"pricing 1% mix in line with prior year","gemma_new_max":null,"gemma_new_min":null,"llama_3_3_max":1.0,"llama_3_3_min":1.0,"qwen_3_30b_max":1.0,"qwen_3_30b_min":1.0}
{"symbol":"PG","year":2023,"quarter":1,"date":"2023-Q1","chunk_id":36,"sub_chunk_id":0,"centroid_label":"u s private label shares","agreed_value":0.3,"count":2,"chunk":"Andre Schulten: Yes. Hi, Bill. Look, maybe the macro indication of trade down is two-fold. Our value shares in aggregate are holding, as we said, and private label shares, which is the other indicator for a trade down in the market, are growing modestly, both in the US and in Europe. When you look at the US, we see value share for private label increasing 30 basis points over the past three and six months. In Europe, we're looking at about 20 basis points of growth. Some of that is simply driven by supply dynamics. So where in the US, for example, where we see private label growth in our categories would be in bath tissue or in paper towels, where private label in the base period was not supplying well and we kind of picked up that supply over quarter one and quarter two of last fiscal year. Now, as private label is in supply and merchandising is reinstated, we see some growth. Encouragingly, when you then look at our Family Care business, sequential share is holding. So there is no direct link of private label growth and us not being able to continue to hold our share position or even expand our share position. Overall, trade down within our portfolio is the design. That's why we have created different value tiers; that\u2019s why we have created different pack sizes. So some level of consumer shifting is expected. We are very encouraged by many of our consumers actually continuing to look for the upper end of our portfolio. And I mentioned the Fabric Care example. Our biggest growth in the Fabric Care share is in the single unit dose segment in the total market, and we're driving that growth. So we're encouraged there. So we see trends in both directions. Part of the consumers continue to look for the upper end of the portfolio. Some consumers who are more exposed from a cash outlay or value standpoint, find a solution within our more value-focused tiers.","evidence_gemma_new":null,"evidence_llama_3_3":"US value share for private label past three and six months","evidence_qwen_3_30b":"US value share for private label three and six months","gemma_new_max":null,"gemma_new_min":null,"llama_3_3_max":0.3,"llama_3_3_min":0.3,"qwen_3_30b_max":0.3,"qwen_3_30b_min":0.3}
{"symbol":"PG","year":2023,"quarter":2,"date":"2023-Q2","chunk_id":51,"sub_chunk_id":0,"centroid_label":"u s private label shares","agreed_value":25.0,"count":2,"chunk":"Andre Schulten : Mark, I wouldn't expect the U.S. to fundamentally change. If you look back over the past six months, private label shares in the U.S. have been relatively steady. We've seen 20 basis points to 30 basis points of increase in private label share, which is a metric we're watching closely. But if you look at sequential share, absolute shares of private label, it continues to hover around 16%, past three, six and even 12 months. So there hasn't been a significant shift in consumer behavior in terms of trade down. I think the way that our pricing was executed with great support in innovation and great support in terms of marketing spend has helped. Our strategy isn't shifting. I don't see the market shifting significantly. All of that with a caveat that who knows what the next six months are going to bring. But if past behavior over the last six months, nine months is any indication, I think the consumer is relatively steady in the U.S., which gives us great confidence. It's our biggest market. We do well, expanding volume share, as I said, and hopefully have a bit more upside here as Family Care and Fabric Care continue to gain momentum.","evidence_gemma_new":"private label shares increase","evidence_llama_3_3":null,"evidence_qwen_3_30b":"U.S. private label shares past six months","gemma_new_max":25.0,"gemma_new_min":25.0,"llama_3_3_max":null,"llama_3_3_min":null,"qwen_3_30b_max":25.0,"qwen_3_30b_min":25.0}
{"symbol":"PG","year":2023,"quarter":2,"date":"2023-Q2","chunk_id":51,"sub_chunk_id":0,"centroid_label":"u s private label shares","agreed_value":16.0,"count":2,"chunk":"Andre Schulten : Mark, I wouldn't expect the U.S. to fundamentally change. If you look back over the past six months, private label shares in the U.S. have been relatively steady. We've seen 20 basis points to 30 basis points of increase in private label share, which is a metric we're watching closely. But if you look at sequential share, absolute shares of private label, it continues to hover around 16%, past three, six and even 12 months. So there hasn't been a significant shift in consumer behavior in terms of trade down. I think the way that our pricing was executed with great support in innovation and great support in terms of marketing spend has helped. Our strategy isn't shifting. I don't see the market shifting significantly. All of that with a caveat that who knows what the next six months are going to bring. But if past behavior over the last six months, nine months is any indication, I think the consumer is relatively steady in the U.S., which gives us great confidence. It's our biggest market. We do well, expanding volume share, as I said, and hopefully have a bit more upside here as Family Care and Fabric Care continue to gain momentum.","evidence_gemma_new":"private label share past three","evidence_llama_3_3":null,"evidence_qwen_3_30b":"absolute shares of private label three, six and even 12 months","gemma_new_max":16.0,"gemma_new_min":16.0,"llama_3_3_max":null,"llama_3_3_min":null,"qwen_3_30b_max":16.0,"qwen_3_30b_min":16.0}
{"symbol":"PG","year":2023,"quarter":3,"date":"2023-Q3","chunk_id":25,"sub_chunk_id":0,"centroid_label":"u s private label shares","agreed_value":0.16,"count":2,"chunk":"Andre Schulten: Good morning, Robert. On the gross margin and sales connection here from mix perspective, the effect that you're seeing here is product mix. So, consumers when they come into our P&G portfolio, tend to trade up into higher-value items. We've seen that actually consistently over the past quarters. So that -- as they trade up into higher unit sales, that's a positive impact from a mix perspective on the top-line. But those higher unit sales items also have higher unit profit, but the gross margin in percentage is slightly lower for some of them. When you think about adult incontinence, for example, when you think about fabric care, single unit dose versus liquid detergent, gross margin percentage lower, unit sales higher, unit profit higher. So, it's a positive effect both from the top-line and the bottom-line standpoint, but the percentage mix is lower. U.S. consumer, I think is holding up well. As we said, any indication that we see on our business is that the consumer is still choosing P&G brands. We are growing volume share in a market that is still down on volume. We are growing absolute volume. So, 90 basis points value share goes, 40 basis points value share goes fairly consistently across periods. We also see private label shares stable at 16%, really no movement here over the past one, three, six, nine months, which is a good indication that we don't see any material trade down. Now we're watching this very closely. And we believe that a lot of that is again driven by our very intentional strategy to drive superiority. We continue to invest in innovation. We'll continue to invest in product packaging innovation. We're increasing, as Jon said, communication frequency and reach where we see a good payout and return. Continue to work with our retail partners to ensure that the presentation of our brands online and in-store is as good as it can be. Last element I would call out is we are stable in terms of supply and on-shelf availability, which is also helping our overall position in the market. So, stable, I think is the characterization, but we're watching carefully.","evidence_gemma_new":"private label shares one, three, six, nine months","evidence_llama_3_3":"private label shares past one, three, six, nine months","evidence_qwen_3_30b":null,"gemma_new_max":0.16,"gemma_new_min":0.16,"llama_3_3_max":0.16,"llama_3_3_min":0.16,"qwen_3_30b_max":null,"qwen_3_30b_min":null}
{"symbol":"PG","year":2023,"quarter":4,"date":"2023-Q4","chunk_id":15,"sub_chunk_id":0,"centroid_label":"u s private label shares","agreed_value":0.16,"count":2,"chunk":"Andre Schulten: Let me start. I\u2019m sure Jon will add. I\u2019ll start by saying we\u2019re very pleased with our market share performance. We are holding global aggregate volume share and value share in the light of very strong pricing contribution to the P&L, which is a great outcome. As Jon mentioned, we see sequential progress in terms of volumes in the market and in our performance, which is the critical outcome as we enter fiscal \u201924. When you look at the U.S., we continue to drive value share growth of 20 basis points and volume share growth of 50 basis points in the most recent reading, and when you look at our European share, our focus market shares, they\u2019ve turned positive in the past one and two months in European focused markets. All of those things give us great confidence that the strategy of driving superiority and providing value to consumers via innovation at the time when we price is working. Our vertical portfolio across value tiers and across price points in the markets is working, so we\u2019ll continue to double down in that direction. From a U.S. share perspective, we see some trading into private label. Private label shares in aggregate are actually flat in the U.S. at about 16%, so not really growing sequentially, but if you compare versus previous quarter, as we have mentioned before, there is some volatility especially in family care, some in baby care where we would expect as private label and smaller brands return to the shelf, some of those record shares will decrease, and that\u2019s partially what we\u2019re seeing. But structurally, the business is in a very good place and we think we are well positioned to continue our journey on driving market growth and thereby expanding our share premium, which by the way included in our guidance where we said the market is going to grow 4% and we\u2019re going to grow ahead of the market.","evidence_gemma_new":"U.S. Private label shares","evidence_llama_3_3":"U.S. private label shares","evidence_qwen_3_30b":null,"gemma_new_max":0.16,"gemma_new_min":0.16,"llama_3_3_max":0.16,"llama_3_3_min":0.16,"qwen_3_30b_max":null,"qwen_3_30b_min":null}
{"symbol":"PG","year":2024,"quarter":3,"date":"2024-Q3","chunk_id":10,"sub_chunk_id":0,"centroid_label":"u s private label shares","agreed_value":16.4,"count":2,"chunk":"Andre Schulten: Look, the flat price mix contribution to organic sales growth in the U.S. is an outcome of simply annualizing the price increases that we had taken in previous periods. That was anticipated and it's consistent with what we're seeing in terms of the construction of the market growth across the U.S. The volume component is coming up, getting closer to about 2%, and the value component is coming down. Different players have priced at different points. So that's really the differential between market and us. There is no trade down of note that I that we can observe. Private label shares, value shares are actually very stable, 16.4% past 1 month and 16.4% past 12 months. So consumers are not trading down within the U.S. towards private label. And if anything, we continue to see when consumers trade into P&G, which they continue to do because both volume share up strongly in the U.S. and value share up. Once they trade into P&G propositions, they continue to trade up actually within those propositions, be it from liquid detergent to unit dose to power pods. So we continue to observe that. So no worries in terms of trade down. On Baby specifically, look, Baby is annualizing a very strong base period and obviously was heavily exposed to the commodity run up and therefore took pricing and in combination with productivity and strong innovation. The volume decline, I would say, is really differential by region. If you look at China, the business is growing very strongly. It's actually 11% growth in the quarter, share growth of more than a point in China, and that's with birth rates contracting. So the portfolio strength in China is remarkable. When I look at the U.S., the premium tier, so when you look at swaddlers, you look at cruisers and cruisers 360, those tiers we have been innovating in very strongly over the past 12, 15 months, and they are growing. They are growing share, and they are growing sales. Where we have an opportunity in the U.S. is on the mid-tier. On Luvs, for example, we have not been able to push the full innovation pipeline out for different reasons, and that's what the team really is focused on to reestablish superiority on those few businesses where we feel that we let value get a little bit out of sync with what the consumer needs. But the plans are there, so now it's a matter of execution. So I feel very good overall about the baby care business, strong innovation pipeline, and that I think will address the isolated superiority gaps that we might have. On commodities, it's very difficult to say when they would actually flow through. I think it's safe to say that there's at least 60 to 90 days of delay. Many of the commodities will take longer to flow through simply because of contract structures that use certain trigger points or holding periods. So I would say at least 60 to 90 days, for many of them probably longer. The only one that tends to flow through quickly is fuel diesel, obviously, because it's captured in transportation.","evidence_gemma_new":"Private label shares value shares 1 month","evidence_llama_3_3":null,"evidence_qwen_3_30b":"private label shares value shares 16.4% past 1 month","gemma_new_max":16.4,"gemma_new_min":16.4,"llama_3_3_max":null,"llama_3_3_min":null,"qwen_3_30b_max":16.4,"qwen_3_30b_min":16.4}
{"symbol":"PLD","year":2023,"quarter":3,"date":"2023-Q3","chunk_id":2,"sub_chunk_id":0,"centroid_label":"development starts","agreed_value":1000000000.0,"count":2,"chunk":"Tim Arndt: Thanks Jill. Good morning, everybody, and thank you for joining our call. The third quarter marked a continuation of themes we have been anticipating for more than a year, namely; growing supply translating to increased market vacancy; continued moderation of demand; and market rent growth that will slow until the low levels of new starts drive reduced availability over-time. We have operated in accordance with these views in both our approach to leasing, as well as timing of new development. What\u2019s incremental to our forecast is that continued hawkish posture from central banks and the impact it\u2019s had on rates is delaying decision-making and willingness to take expansion space early. The geopolitical backdrop has clearly become more troubling as well amounting to a lack of clarity that will likely weigh on demand. In the meantime, and also playing out to our expectations is that our existing lease mark-to-market will drive durable earnings growth as it did in delivering record rent change this quarter, as well as strong earnings and same-store growth. We remain focused on the fact that we own assets critical to the supply chain with long-term secular drivers that remain intact. Further, the outlook for future supply will continue to face structural barriers, ultimately driving occupancy, rents and values. In terms of our results, we had an excellent quarter with core FFO excluding net promote income of $1.33 per share. This result includes approximately $0.03 of one-time items related to interest and termination income, as well as the timing of expenses, which we can address in Q&A. Occupancy ticked up over the quarter to 97.5%, aided by retention of 77%. Net effective rent change was a record 84% at our share, with notable contributions from Northern New Jersey at 200%, Toronto at 187% and Southern California at 165%. Same-store growth on a net effective and cash basis was 9.3% and 9.5%, respectively, driven predominantly by rent change. We saw market rents grow roughly 60 basis points during the quarter, the slower pace embedded in our forecast. In combination with the strong build of in-place rents, our lease mark-to-market recalculates to 62% as of September. We raised approximately $1.4 billion in new financings at an average interest rate of 3.2%, comprised principally of $760 million within our ventures, as well as a recast of our Yen credit facility increasing our aggregate line availability. In combination with our cash position, we ended the quarter with a record $6.9 billion of liquidity. Finally, it\u2019s noteworthy that our debt-to-EBITDA has remained very low and essentially flat all year, hovering in the mid-4 times range, despite our increased financing activity, a demonstration of the tremendous growth in our nominal EBITDA. Turning to our markets, while rising, vacancy remains historically very low in the U.S., Mexico and Europe. Market vacancy increased approximately 70 basis points during the quarter in the U.S., driven by low absorption, as well as recently delivered but unleased completions. Europe experienced similar dynamics with an overall increase in market vacancy of 50 basis points. At the macro level our expectations for the U.S. are for completions to outpace net absorption by a cumulative 150 million square feet to 200 million square feet over the next three quarters. Then, over the subsequent three quarters, we see that trend reversing with demand exceeding supply and recovering the net 75 million to 125 million square feet. That trend may extend further into 2025, as we believe development starts over the next several quarters are likely to remain low. Whatever the precise path, we expect that as vacancy normalizes over the long-term, our portfolio will outperform the market due to both its location and quality, as well as the strength of our relationships and operating platform. In this regard, our portfolio has been largely resilient to moderating demand. Our teams would describe the depth of our leasing pipeline as consistent with the last few quarters. In coming fresh off of one of our customer advisory board sessions, it\u2019s clear that our customers have plans to continue to expand their footprint, increasing capacity and resiliency. However, what\u2019s also clear is that they are slowing such investments until there is more clarity in the economic environment. In the U.S., rents increased in most of our markets with the strongest located in the Sunbelt, Mid-Atlantic and Northern California regions. Europe and Mexico were also bright spots for growth in the quarter. Rents across our Southern California sub-markets declined approximately 2% as it continues to adjust to higher levels of vacancy. While the markets and outlook are mixed, we remain confident in continued market rent growth in the U.S. and globally over the coming year, albeit at a slow pace while the pipeline continues to get absorbed. From our appraisals, U.S. values declined approximately 3% while European values remain stable, in fact, having a very modest write-up. The difference isn\u2019t too surprising as the Fed\u2019s language around inflation and the economy has had more effect in the U.S. capital markets, driving the 10-year up 100 basis points since our last earnings call, compared to the bund [ph] at just 50 basis points. We believe that this is likely another instance, as we saw one year ago, where U.S. appraisals at the end of the quarter have not had sufficient time to react to the increase in rates and we are thus pausing on appraisal-based activity in USLF for at least one quarter. Elsewhere, values in Mexico are up 8.5%, while China experienced its first meaningful decline of 6.5%, a write-down that we don\u2019t believe has fully run its course. Our funds experienced their first quarter of net positive inflows with approximately $180 million of new commitments versus new redemption requests of $115 million. Given other activity in the quarter, the net redemptions have been reduced from their height of $1.6 billion to approximately $700 million or roughly 2% of third-party AUMs. In terms of our own deployment, development starts ramped up during the quarter, crossing $1 billion, over half of which is related to a data center opportunity in our central region, a testament to our higher and better use strategy and strategically located land bank. Also notable is the acquisition of $118 million of land, including a strategic parcel in Las Vegas, which will build out an additional 10 million square feet over time and brings our total build-out of land globally to over $40 billion. We are laser focused in identifying and executing on value creation in our core business, our energy business, and their adjacencies. Combined with the debt capacity and liquidity we have worked hard to build and preserve, we see the environment as rich with opportunity. Moving to guidance, we are increasing the average occupancy to a range between 97.25% and 97.5%. As a result, we are increasing our same-store guidance to a range of 9% to 9.25% on a net effective basis and 9.75% to 10% on a cash basis. We are maintaining our strategic capital revenue guidance, excluding promotes to a range of $520 million to $530 million and adjusting G&A guidance to range between $390 million and $395 million. Our development starts guidance is increased to a new range of $3 billion to $3.5 billion at our share, driven primarily from the data center start mentioned earlier. We have $500 million of contribution and disposition activity during the quarter and given our commentary on USLF valuations, we are pausing our planned contributions into that vehicle this quarter and reducing our combined contribution and disposition guidance to a range of $1.7 billion to $2.3 billion. In the end, we are adjusting guidance for GAAP earnings to a range of $3.30 per share to $3.35 per share. We are increasing our core FFO, including promotes guidance to a range of $5.58 per share to $5.60 per share and are increasing core FFO, excluding promotes to a range between $5.08 per share and $5.10 per share, growth of nearly 10.5%. I know that many of you are focusing on 2024, so I\u2019d like to take an opportunity to remind you that the Duke portfolio will be entering the same-store pool in 2024, which will widen the recently observed delta between net effective and cash same-store growth. This is, of course, because Duke rents were mark-to-market at close one year ago, so its contribution to net effective same-store growth and earnings will be minimal, even though the cash rent change will be on par with the rest of the Prologis portfolio. In closing, we are navigating the current environment, assured that whatever the economy brings in the short-term, we are positioned to outperform over the long-term. This stems from not only the premier logistics portfolio and customer franchise with one of the best balance sheets amongst corporates, but also highly visible earnings and portfolio growth ahead of us. We know that turbulent times can bring opportunity for those who are prepared and that\u2019s been central to our strategy and management as a company. I\u2019d like to also remind you of our upcoming Investor Forum on December 13th in New York, our first in four years. We are looking forward to spending the day with you, sharing more about our business, outlook and opportunities ahead. Additional information is available on our website and in our earnings press release. And with that, I will hand it back to the Operator for your questions.","evidence_gemma_new":"development starts during the quarter","evidence_llama_3_3":"development starts","evidence_qwen_3_30b":null,"gemma_new_max":1000000000.0,"gemma_new_min":1000000000.0,"llama_3_3_max":1000000000.0,"llama_3_3_min":1000000000.0,"qwen_3_30b_max":null,"qwen_3_30b_min":null}
{"symbol":"PLD","year":2023,"quarter":4,"date":"2023-Q4","chunk_id":2,"sub_chunk_id":0,"centroid_label":"development starts","agreed_value":3250000000.0,"count":2,"chunk":"Tim Arndt: Thanks, Jill. I'd like to start our call by recognizing and thanking our team for the incredible effort given over 2023. While it was a turbulent year in many ways, we ended it by delivering nearly 11% earnings growth and driving our 12-year earnings CAGR since merger to 10.3%. We deployed over $7 billion into new investments, raised nearly $2 billion of strategic capital in a very challenging environment and delivered excellent operating results while serving and growing customer relationships. We're also appreciative of the opportunity we had at our Investor Forum last month to share our vision and outlook for the company over the coming years. The environment is setting up in line or better than our expectations with development starts across the market continuing to decline by two-thirds from peak and an improvement in customer sentiment that appears more constructive than just 90 days ago. That said, we still see challenges in some submarkets as near-term outsized deliveries are met with still recovering demand. But our thesis remains the same as we've been describing for over a year and detailed last month in New York, which is that the supply cliff will converge with normalized demand later this year, delivering an environment conducive to strong market rent growth. We believe that annual market rent growth will average between 4% and 6% over the next three years, with 2024 being modestly positive and ramping thereafter. Turning to our results. We finished the year strong with quarterly core FFO, excluding promotes of $1.29 per share, bringing the full year to the top end of our guidance $5.10 per share. While market occupancy declined by approximately 100 basis points, our portfolio gained 10 basis points to end the year at 97.6%. Net effective rent change over the quarter was 74%, bringing the full year to a record of 77%, with another impressive results out of Southern California at over 150%, a reminder that it remains the strongest market for cash flow growth despite near-term choppiness given the large quantum of its lease mark-to-market. In the end, same-store on a net effective basis was 7.8%, while cash was 8.5%. We started over $2 billion of new developments in the quarter across 46 projects in 27 markets with nearly 50% of the activity in build-to-suit. In Energy and as seen in our new supplemental disclosure, we stand at year end with approximately 515 megawatts of solar and storage in operation with an additional 70 currently under construction. We had a quiet quarter on the financing front, raising approximately $300 million, but our full year of activity closed out at over $12 billion at a weighted average rate of 4.5% and term of 10 years. Our total debt portfolio remains at an overall in-place rate of just 3% with more than nine years of average remaining life. Turning to market conditions. The increase in fourth quarter market vacancy was in line with our expectations and driven by demand that remained moderate as customers exercised caution in their spending, while completions hit an all-time high. Development starts, however, have continued to fall across the U.S. and Europe, extending and deepening the future supply shortfall. On the ground, our teams are seeing revived customer interest with healthy showing activity to start the year. This includes build-to-suit inquiries, which we expect to remain active for Prologis following a strong year in 2023. Our proprietary metrics point to normal levels of activity with proposals and gestation timing in line or a bit better than historical norms. Utilization declined in the quarter to approximately 83% and keeping with this morning's report a decrease in the inventory to sales ratio. We view this positively because utilization also increased from here as stronger than expected retail sales over the fourth quarter and holiday season drove lower inventories, which will need to be replenished. Turning to market rents. Our global view is that rents declined this quarter by 90 basis points, but predominantly impacted by an estimated 7% decline in Southern California. Our full year view is that global market rents grew by 6%, just below our expectations, ultimately driving our lease mark-to-market to end the quarter at 57% after capturing approximately $100 million in realized NOI growth from leases rolling up to market. The outlier on rent growth is clearly Southern California. While our portfolio was only 2.6% vacant at year end, growing availability has made leasing very competitive. Combined with a 110% increase in rents since 2020, the rent retracement is understandable. Historically, there has never been a market where the delta between expiring and market rents has been so large that it provides ample room for property owners to deviate from market in order to attract customers. But looking ahead, the positive news is that we are launching two trends reverse. The first is that the supply pipeline is clearly emptying with little in the way of new starts. And the second is that the escalating issues in both the Suez and Panama canals together with the resolution of the West Coast labor negotiations are moving shipment volumes back to the West. While this bodes well for SoCal and still early, we are watching East Coast port markets more closely. In any event, all of these disruptions are reiterating the underlying need for resiliency and the just in case approach to inventories. Summing this all up globally, we recognize the high volume of near term deliveries that need to be absorbed into our markets over the next few quarters. But we are very pleased with our ability thus far to build occupancy, drive rents, and illustrate more differentiation in our portfolio as market vacancy grows. As for Strategic Capital and Valuations, we saw U.S. values decline approximately 5.5% during the quarter, which was our expectation and the reason we paused our appraisal based activity, which includes calling and redeeming capital as well as asset contributions. We run an industry leading franchise in which we aim to set the standard for governance, including timely, accurate, and independent valuations. Calling out when pronounced lags and valuations emerge has protected investors and demonstrated how we stand apart as a responsible partner. With this quarter's value declines in a more stabilized rate environment, we'll resume activity in USLF including the funding of our $250 million commitment announced in the second half of '23. Turning to guidance and all at our share. In terms of operating metrics, we are guiding average occupancy to range between 96.5% and 97.5% with occupancy likely to step down in the first quarter and rebuild over the course of the year. Cash same-store will range between 8% and 9% and net effective same-store growth will range from 7% to 8%. We are forecasting net G&A to range between $420 million and $440 million and Strategic Capital income to range from $530 million to $550 million. We have a very big year of stabilization activity ahead of us with a range of $3.6 billion to $4 billion, and expected yields of approximately 6.25%. On the new deployment front, we are guiding development starts to range between $3 billion and $3.5 billion with the estimated build to suit mix of 40%. And we plan to take sale portfolios to the market over the year with expected proceeds to range between $800 million and $1.2 billion and additionally forecast $1.75 billion to $2.25 billion in contributions to our Strategic Capital vehicles. In the end, we are forecasting GAAP earnings to range between $3.20 and $3.45 per share. Core FFO excluding promotes will range from $5.50 to $5.64 per share, while core FFO including net promote expense will range between $5.42 and $5.56 per share, each a bit higher than our preliminary guidance at the Investor Forum. While we do not forecast any promote revenue at this time, there are some small opportunities that do exist in FIBRA Prologis and our new PJLF vehicle in Japan. In closing, we know that the market is not yet out of the woods with regards to incoming supply, but the combination of a stronger backdrop continued low level of starts and a calmer capital markets environment has us optimistic that 2024 will be another great year. As you know from our Investor Day, we have many initiatives in flight designed to add value beyond our real estate and because of our real estate. We look forward to continuing to execute on our plan and providing you updates throughout the year. And before we move to Q&A, I'd like to get ahead of questions which have grown a little more frequent in recent quarters surrounding market rent growth. Unintentionally, we set an expectation that we could forecast market rents to a single point of accuracy in increasingly short time periods, and honestly, we're just not that good. We've gotten away from a practice that was originally aimed at being high level and directional. So what we've elected to do in order to help investors without perpetuating the issue is to simply provide high level rent growth expectations on a rolling 12 month forward view. As mentioned earlier, in terms of our three year CAGR of 4% to 6%, we believe we'll see modestly positive rent growth aligned with inflation over the next 12 months and we'll continue to update this rolling view on our future calls. With that, we will now take your questions. Operator?","evidence_gemma_new":"development starts","evidence_llama_3_3":"development starts","evidence_qwen_3_30b":null,"gemma_new_max":3250000000.0,"gemma_new_min":3250000000.0,"llama_3_3_max":3250000000.0,"llama_3_3_min":3250000000.0,"qwen_3_30b_max":null,"qwen_3_30b_min":null}
{"symbol":"PLD","year":2024,"quarter":1,"date":"2024-Q1","chunk_id":2,"sub_chunk_id":0,"centroid_label":"development starts","agreed_value":270000000.0,"count":2,"chunk":"Tim Arndt: Good morning and thank you for joining our call. We've had a good start to the year in terms of our operating and financial results in the first quarter. We delivered strong rent change, drove occupancy slightly ahead of our forecast, raised nearly $5 billion in capital, including $750 million in strategic capital, and made important headway in our Energy business. That said, as we evaluate the market, persistent inflation and high interest rates have kept more customers focused on controlling costs. The resulting delay in decision making, easily observed through the first quarter's below average net absorption, will translate to lower leasing volume within the year. Accordingly, we've opted to adjust our guidance early, getting ahead of what looks like a period of occupancy below our forecast in the near term and its effect on same store in a number of our higher rent markets. This is punctuated, of course, by a more pronounced period of correction still underway in Southern California. New starts, however, continues to be surprisingly disciplined, adding to the expectation for limited new supply in the back half of '24, but also extending deeper into '25. When considered alongside muted demand, we arrive at a view that the operating environment has only changed modestly in aggregate, and that demand is simply pushing out by a few quarters. The outcome of this may simply mean moving towards a long-term occupancy expectation more swiftly this year, which sets up for a better next year. Turning to our results for the quarter. Core FFO, excluding promotes, was $1.31 per share and including net promote expense was $1.28 per share, essentially in line with our forecast. Occupancy in the portfolio ended the quarter at 97%. For context, the US market declined 310 basis points since its peak in the summer of '22, while our portfolio's occupancy has only declined 80 basis points, resulting in vacancy today for Prologis that is less than half of that in our markets and reflective of our portfolio quality. Net effective rent change was 68% based on commencements and 70% based on new signings. Following this in-place increase and changes in market rents, our net effective lease mark-to-market stands at 50%, representing over $2.2 billion of rent to harvest without any additional market rent growth from here. Rent growth captured just for the single quarter was approximately $110 million on an annualized basis and at our share. Our same-store growth on a cash basis was 5.7% and on a net effective basis was 4.1%. The same-store from rent change alone was strong at approximately 9%, but is impacted by a 130 basis point change in year-over-year vacancy, as well as 150 basis points from fair value lease adjustments with the Duke portfolio's inclusion in our same-store pool. Additionally, there were approximately 175 basis points of items specific to the quarter, including one-time reconciling items from 2023, as well as unfavorable comps from low expenses last year. We started over $270 million of new developments in the quarter, bringing our portfolio to approximately $7.5 billion at our share, with estimated value creation of over $1.7 billion, a number we feel increasingly confident in with value stabilizing. In our Energy business, we've made meaningful progress on this year's deployment, including the signing of 405 megawatts of long-term storage-related contracts with investment-grade utilities. We also delivered the largest EV fleet charging project in the United States, less than 15 miles from both the ports of LA and Long beach. Finally, we raised $4.1 billion of debt across our balance sheet and funds at a weighted average rate of 4.7% and a term of 10 years. Our debt portfolio has an overall in-place rate of just 3.1%, with more than nine years of average remaining life and liquidity at the end of the quarter of over $5.8 billion. Turning to market conditions. Most broad economic data from unemployment to retail sales to the health of the consumer remain very strong. And while our tour proposal and other proprietary metrics are similarly positive, overall leasing activity and net absorption are running below expectations. Net absorption in the US, for example, was very low this quarter at just 27 million square feet. So while the macro landscape and supply chains continue to generate a need for space, we think it's prudent to expect continued headwinds on overall absorption over the next few quarters. The interest rate environment and its associated volatility have weighed on customer decision making, especially as the 10 year has increased 70 basis points from its level just 90 days ago and expectations for Fed rate cuts have moved from potentially six to now possibly zero. In parallel, sublease and space utilization rates highlight that some customers have available capacity, driven in part by the high rate of absorption through the pandemic. This dynamic of available space intersecting with the desire for cost containment is what leads to lower absorption and is playing out at different rates across submarkets and customers. For example, while slow leasing has persisted so far this year for less capitalized customers and 3PLs, we see a handful of large e-commerce and retail customers further along in this process, such as Amazon, who voiced caution two years ago, but is now active in several global markets and has openly discussed plans to commit to significant amounts of new space. The overall leasing slowdown is most felt in only a handful of markets. Southern California and the Inland Empire being the most acute. In fact, rents in most of our US markets are generally flat, several are up, and it is mainly elongated downtime affecting near-term occupancy and NOI. While Southern California leasing has been challenging, it has not slowed the tremendous uplift we realize every single quarter from rent change on rollover, which was 120% for the market in the first quarter, with the Inland Empire at 156%, nearly the highest in our portfolio. In Europe, rents grew overall during the quarter, which we believe will remain the case over the balance of the year. And of course, LATAM continues to impress with very high occupancy and market rent growth that has led the globe in recent quarters. Overall, global market rents declined slightly over 1% in the quarter, driven mostly by Southern California, and would have been slightly positive if excluded. I'd like to spend a moment on Baltimore, where we own over 18 million square feet and has been a dynamic market of ours for decades. Our employees, customers and properties are all safe following the bridge collapse last month and our customers expect to be able to withstand the disruption with little impact to their businesses. Shifting to capital markets. Valuations increased in all of our geographies, except for China, which saw a very small decline. Over the last 1.5 years, global values have decreased despite increases in cash flow due to cap rate expansion. As cap rates have stabilized, cash flow growth now has the ability to translate to value growth. Even though modest, the value uplift in the US and Europe are important as strategic capital investors have been looking for values to not only bottom, but actually turn upwards before committing new capital. With Europe a bit ahead of the US in this regard, it is indeed where we've seen stronger fund-raising interest in recent quarters. We also had a successful equity raise in FIBRA Prologis, raising over $500 million for deployment into both assets to be contributed from our balance sheet, as well as pursuits of third-party acquisitions. Transaction volumes and activity have ticked up in recent weeks and pricing has certainly improved. As always, we are actively looking at acquisition opportunities across all of our markets, but our focus remains on the development of our land bank, which provides an opportunity for over $38 billion of build out with a return on incremental capital of approximately 8.5%. In terms of guidance, in light of our views on demand and leasing pace in the coming quarters, we are reducing our average occupancy guidance to range between 95.75% and 96.75% of the 75 basis point adjustment from the midpoint. It's important to understand that approximately two-thirds of this change stems from our higher rent markets, meaning they create a disproportionate impact on same store in 2024. Same-store growth on a net effective basis will range between 5.5% and 6.5%, a reduction of 150 basis points, which accounts for the average occupancy decline, slightly lower rent change for the year as well as 30 basis points of annualized impact from the one-time items in the first quarter mentioned earlier. Our revised range on a cash basis is now 6.25% to 7.25%. We are maintaining our guidance for strategic capital revenue, excluding promotes, to a range of $530 million to $550 million and reducing our G&A guidance to a range of $415 million to $430 million. We are adjusting development start guidance for the year to a revised range of $2.5 billion to $3 billion at our share, reflecting our discipline in speculative starts and the timing impact this has in the calendar year. As we've always said, we don't consider our guidance to be a target internally and each deal ultimately needs to be rational and accretive on its own. In the end, we are forecasting GAAP earnings to range between $3.15 per share and $3.35 per share. Core FFO, including net promote expense, will range between $5.37 per share and $5.47 per share, while core FFO, excluding promotes, will range from $5.45 per share to $5.55 per share. Our updated guidance calls for core earnings growth of nearly 8% at the midpoint. As we close out, I'd like to underscore the message of the call, which is that while we have only a modest change of view in the intermediate term, our confidence in the long term is intact. And putting timing aside, we are encouraged by the outlook for supply in the back half of this year and '25, have tremendous lease mark-to-market to harvest in the interim, and are pleased to see valuations, fundraising and transaction activity all picking up. With that, I'll turn the call over to the operator for your questions.","evidence_gemma_new":"new developments","evidence_llama_3_3":null,"evidence_qwen_3_30b":"new developments started $270 million first quarter","gemma_new_max":270000000.0,"gemma_new_min":270000000.0,"llama_3_3_max":null,"llama_3_3_min":null,"qwen_3_30b_max":270000000.0,"qwen_3_30b_min":270000000.0}
{"symbol":"PLD","year":2024,"quarter":4,"date":"2024-Q4","chunk_id":2,"sub_chunk_id":0,"centroid_label":"development starts","agreed_value":2500000000.0,"count":2,"chunk":"Tim Arndt: Thanks, Justin. Good morning, everybody and thank you for joining our call. I'd like to begin by recognizing the devastating wildfires still affecting Los Angeles. We operate a large portfolio there, but more importantly, we have colleagues, customers, and their communities struggling with the aftermath. It's too early to predict the full ramifications, but we'll continue to support the response and stay connected with local and state leaders as well as service organizations as the region works to recover. We have no doubt that a vibrant and dynamic Los Angeles will emerge from this crisis even stronger. In our business, the bottoming process across our markets continues to progress. Leasing in our portfolio accelerated following the U.S. election, and the pipeline has started the year at healthy levels. During the quarter, we signed more than 60 million square feet of leases, a company record, and saw interest diversify across customer profile, size requirements and markets. Looking ahead, we believe market vacancy is topping out and rents will inflect later this year. Turning to our results. Core FFO, excluding net promote income was $1.42 per share and including net promotes was $1.50 per share. Our full-year results ended at the top end of our guidance range, and in the end represent 8.4% growth over 2023, putting us in the 86th percentile of all REITs. Average occupancy was 95.8% for the quarter, 96.3% for the year. Net effective rent change during the quarter was 66% and on a full-year basis was 69%, activity which added over $340 million in annualized NOI. Our net effective lease mark-to-market finished the year at 30% and represents a further $1.4 billion of incremental NOI. And finally, net effective and cash same-store growth during the quarter were 6.6% and 6.7% respectively. In terms of capital recycling, we had another active quarter. Importantly, we contributed $2 billion of assets to our strategic capital ventures, bringing the full-year total to over $3.3 billion. While capital flows in 2024 remain challenging, we did raise over $1.7 billion across the platform, driving the growth in third-party AUM by over 7%. We disposed of over $900 million of assets in the quarter and acquired approximately $450 million. And stepping back, over the full-year, we disposed of over $2.1 billion and reinvested into a similar $2.3 billion of acquisitions at a positive IRR spread of 170 basis points, demonstrating our ability to self-fund and earn a return regardless of the yield environment. Included in our disposition activity for the quarter was the sale of our Elk Grove data center in Chicago. Elk Grove was a logistics asset that we converted to a powered shell before securing a build-to-suit turnkey transaction with a hyperscaler last Fall. We simultaneously identified a buyer and closed in the fourth quarter at very attractive economics. Because the property was owned by USLF for our structuring, procurement, leasing and monetization efforts, Prologis earned a value creation fee of $112 million, which was not included in our prior guidance due to the uncertainty and the timing of the transaction. Elk Grove is a great showcase of our data center development capabilities, which are more comprehensive than most. Today, we have 1.4 gigawatts of secured power and 1.6 gigawatts in advanced stages of procurement. Over the next 10 years, we see 10 gigawatts of development potential across our portfolio. As a platform, we have the team, customer relationships, development and energy expertise, advanced procurement capabilities and the capital required to create significant value for our shareholders. Turning to market conditions. As mentioned, quantitative measures of the market such as vacancy and changes in market rent met our expectations. More importantly, indicators in our pipeline and dialogue with customers have us encouraged that conditions are set for a recovery in net absorption, leading to a bottoming of global rents. It's worth highlighting that our non-U.S. portfolio fared better in rent growth over 2024, particularly in places like Japan, the U.K., Southern Europe, and Latin America, which all grew over the year. Customer engagement is improving and we saw a notable increase in activity amongst our larger global customers who often lead in the recovery of demand as we've seen in past cycles. The improvement in decision-making is reflected in our proprietary metrics where proposals increased earlier in the year, lingered for a period of time and then began converting more meaningfully after the election. That leasing pattern translated to elevated gestation also seen in our metrics. Our '25 forecast for net absorption calls for approximately 20% improvement over 2024, gradually building over the year. We also know that completions will decline significantly, contributing to a supply forecast that is approximately 35% below '24. As such, we expect a decline in vacancy over the year, which will pave the way for rent growth. Longer term, we continue to see the path for uplift from market rents to replacement cost rents, a dynamic that will build upon our already significant lease mark-to-market. Today, we see replacement costs as 50% higher than in-place rents. The capital markets were active with fourth quarter transaction volumes that put the year in total back to pre-COVID levels. Unlevered IRRs have compressed to the mid-7% range, and valuations as reported in our third-party appraisals had the globe marginally up this quarter. Capital raising in our open-end vehicles was more muted in the fourth quarter as investors paused to take in changes in the yield environment, but we remain confident in our expectation for growing capital raises in 2025 as the pipeline is solid and conversations are active. In terms of guidance, which I'll review at our share, we are forecasting average occupancy to range between 94.5% and 95.5%, which contemplates a dip in occupancy over the next one to two quarters, some of which is seasonal before rebuilding closer to 96% by the end of the year. Net effective same-store growth is forecasted to be in a range of 3.5% to 4.5% and cash in the range of 4% to 5%, each driven by still significant rent change. Our G&A forecast is for $440 million to $460 million and our strategic capital revenue forecast calls for $560 million to $580 million. As for deployment, we are forecasting development starts to range between $2.25 billion and $2.75 billion. We will continue to be selective in our starts and clearly have a lot of capacity to grow this number as conditions, rents and returns warrant. As a reminder, data center starts are excluded from this guidance, given their lumpiness. That said, we do expect new projects to begin in 2025, likely in a range of 200 to 400 megawatts. Acquisitions will range between $750 million and $1.25 billion and our combined contribution and disposition activity will range between $2.5 billion and $3.5 billion. Our development portfolio now stands at $4.7 billion with estimated value creation of $1.1 billion, $450 million to $600 million of which we expect to realize this year. Finally, 2025 will be an important year for our energy business where our forecast is to hit our 1-gigawatt goal for solar generation and storage by year-end. In total, we are establishing our initial GAAP earnings guidance in a range of $3.45 to $3.70 per share. Core FFO, including net promote expense will range between $5.65 and $5.81 per share, while core FFO, excluding net promote expense will range between $5.70 and $5.86 per share. In closing, we navigated a challenging year in terms of an operating environment, clearly unwinding from the overbuilding of the COVID era. Our ability to generate over 8% growth in such an environment is a testament to the resiliency and breadth of our company. We're pleased with the increase in activity and improvement in sentiment that we've seen so far in the last two months. And working through great space amid the favorable supply backdrop will further establish the foundation to build occupancy, grow rents, and increase values, unlocking the full earnings potential in our core business. And finally, we're very excited with what the future holds for our data center and energy initiatives. With that, I'll turn the call over to the operator for your questions. Operator?","evidence_gemma_new":"development starts","evidence_llama_3_3":null,"evidence_qwen_3_30b":"development starts $2.25 billion to $2.75 billion","gemma_new_max":2500000000.0,"gemma_new_min":2500000000.0,"llama_3_3_max":null,"llama_3_3_min":null,"qwen_3_30b_max":2500000000.0,"qwen_3_30b_min":2500000000.0}
{"symbol":"PLD","year":2023,"quarter":4,"date":"2023-FY","chunk_id":53,"sub_chunk_id":0,"centroid_label":"net absorption","agreed_value":192000000.0,"count":3,"chunk":"Chris Caton: Hey. It's Chris. Thanks for the question, Vikram. I'll take the first one. So, 250 million square feet of net absorption in 2024 compared to 192 million square feet of net absorption in 2023. And we consult a wide range of leading indicators, some of which are contemporary and some that have a nine months to 12-month lease.","evidence_gemma_new":"net absorption 2023","evidence_llama_3_3":"net absorption 2023","evidence_qwen_3_30b":"net absorption 2023","gemma_new_max":192000000.0,"gemma_new_min":192000000.0,"llama_3_3_max":192000000.0,"llama_3_3_min":192000000.0,"qwen_3_30b_max":192000000.0,"qwen_3_30b_min":192000000.0}
{"symbol":"PLD","year":2023,"quarter":4,"date":"2023-Q4","chunk_id":25,"sub_chunk_id":0,"centroid_label":"net absorption","agreed_value":250000000.0,"count":3,"chunk":"Chris Caton: Hi, Jay. It's Chris Caton. So we project 250 million square feet of net absorption in the calendar year and 285 million square feet of completions. And yeah, that's going to be front-end loaded, particularly on the supply side. And so we think you'll see the vacancy rate rise by another 50 basis points to 75 basis points here in the first half of the year, peaking at 6% maybe 6.1%, and then making a meaningful move through the subsequent rest of the year and into 2025 and 2026 based on the trend in starts that we've profiled for you.","evidence_gemma_new":"project net absorption calendar year","evidence_llama_3_3":"project net absorption calendar year","evidence_qwen_3_30b":"project net absorption calendar year","gemma_new_max":250000000.0,"gemma_new_min":250000000.0,"llama_3_3_max":250000000.0,"llama_3_3_min":250000000.0,"qwen_3_30b_max":250000000.0,"qwen_3_30b_min":250000000.0}
{"symbol":"PLD","year":2023,"quarter":4,"date":"2024-FY","chunk_id":53,"sub_chunk_id":0,"centroid_label":"net absorption","agreed_value":250000000.0,"count":3,"chunk":"Chris Caton: Hey. It's Chris. Thanks for the question, Vikram. I'll take the first one. So, 250 million square feet of net absorption in 2024 compared to 192 million square feet of net absorption in 2023. And we consult a wide range of leading indicators, some of which are contemporary and some that have a nine months to 12-month lease.","evidence_gemma_new":"net absorption 2024","evidence_llama_3_3":"net absorption 2024","evidence_qwen_3_30b":"net absorption 2024","gemma_new_max":250000000.0,"gemma_new_min":250000000.0,"llama_3_3_max":250000000.0,"llama_3_3_min":250000000.0,"qwen_3_30b_max":250000000.0,"qwen_3_30b_min":250000000.0}
{"symbol":"PLD","year":2024,"quarter":2,"date":"2024-Q1","chunk_id":38,"sub_chunk_id":0,"centroid_label":"net absorption","agreed_value":26000000.0,"count":3,"chunk":"Chris Caton: Hi, Vikram. Thanks for the question. It's Chris. So as it relates to demand, just for those following along, net absorption in the first quarter was $26 million square feet, 27 million square feet. We have it at $43 million square feet in the second. And so, we expect 40 to 50 million square feet in net absorption. I think that's the tone that Tim had in his script and that we have here on the call for you. That'll leave - us with a full year net absorption on 160 million to 170 million square feet. Tim's going to take the rest.","evidence_gemma_new":"net absorption first quarter","evidence_llama_3_3":"net absorption first quarter","evidence_qwen_3_30b":"net absorption first quarter","gemma_new_max":26000000.0,"gemma_new_min":26000000.0,"llama_3_3_max":26000000.0,"llama_3_3_min":26000000.0,"qwen_3_30b_max":26000000.0,"qwen_3_30b_min":26000000.0}
{"symbol":"PLD","year":2024,"quarter":2,"date":"2024-Q1","chunk_id":38,"sub_chunk_id":0,"centroid_label":"net absorption","agreed_value":27000000.0,"count":2,"chunk":"Chris Caton: Hi, Vikram. Thanks for the question. It's Chris. So as it relates to demand, just for those following along, net absorption in the first quarter was $26 million square feet, 27 million square feet. We have it at $43 million square feet in the second. And so, we expect 40 to 50 million square feet in net absorption. I think that's the tone that Tim had in his script and that we have here on the call for you. That'll leave - us with a full year net absorption on 160 million to 170 million square feet. Tim's going to take the rest.","evidence_gemma_new":"Net absorption","evidence_llama_3_3":"net absorption first quarter","evidence_qwen_3_30b":null,"gemma_new_max":27000000.0,"gemma_new_min":27000000.0,"llama_3_3_max":27000000.0,"llama_3_3_min":27000000.0,"qwen_3_30b_max":null,"qwen_3_30b_min":null}
{"symbol":"PLD","year":2024,"quarter":2,"date":"2024-Q2","chunk_id":37,"sub_chunk_id":0,"centroid_label":"net absorption","agreed_value":175000000.0,"count":3,"chunk":"Vikram Malhotra: Good morning. Thanks so much for taking the question. So I guess just two parts. One, Chris could you just update us, sort of, your view on the, I think, $175 million. Of net absorption, sort of what you anticipate for the second half, and then, I guess. You also mentioned sort of the rolling rent growth projection. Could you expand upon that in context of your three year view that you provided at the Investor Day on occupancy and term NOI growth?","evidence_gemma_new":"net absorption second half","evidence_llama_3_3":"net absorption second half","evidence_qwen_3_30b":"net absorption second half","gemma_new_max":175000000.0,"gemma_new_min":175000000.0,"llama_3_3_max":175000000.0,"llama_3_3_min":175000000.0,"qwen_3_30b_max":175000000.0,"qwen_3_30b_min":175000000.0}
{"symbol":"PLD","year":2024,"quarter":2,"date":"2024-Q2","chunk_id":38,"sub_chunk_id":0,"centroid_label":"net absorption","agreed_value":43000000.0,"count":3,"chunk":"Chris Caton: Hi, Vikram. Thanks for the question. It's Chris. So as it relates to demand, just for those following along, net absorption in the first quarter was $26 million square feet, 27 million square feet. We have it at $43 million square feet in the second. And so, we expect 40 to 50 million square feet in net absorption. I think that's the tone that Tim had in his script and that we have here on the call for you. That'll leave - us with a full year net absorption on 160 million to 170 million square feet. Tim's going to take the rest.","evidence_gemma_new":"net absorption second","evidence_llama_3_3":"net absorption second","evidence_qwen_3_30b":"net absorption second","gemma_new_max":43000000.0,"gemma_new_min":43000000.0,"llama_3_3_max":43000000.0,"llama_3_3_min":43000000.0,"qwen_3_30b_max":43000000.0,"qwen_3_30b_min":43000000.0}
{"symbol":"PLD","year":2024,"quarter":2,"date":"2024-Q2","chunk_id":38,"sub_chunk_id":0,"centroid_label":"net absorption","agreed_value":45000000.0,"count":3,"chunk":"Chris Caton: Hi, Vikram. Thanks for the question. It's Chris. So as it relates to demand, just for those following along, net absorption in the first quarter was $26 million square feet, 27 million square feet. We have it at $43 million square feet in the second. And so, we expect 40 to 50 million square feet in net absorption. I think that's the tone that Tim had in his script and that we have here on the call for you. That'll leave - us with a full year net absorption on 160 million to 170 million square feet. Tim's going to take the rest.","evidence_gemma_new":"expect net absorption","evidence_llama_3_3":"expect net absorption","evidence_qwen_3_30b":"expect net absorption","gemma_new_max":45000000.0,"gemma_new_min":45000000.0,"llama_3_3_max":45000000.0,"llama_3_3_min":45000000.0,"qwen_3_30b_max":45000000.0,"qwen_3_30b_min":45000000.0}
{"symbol":"PLD","year":2024,"quarter":2,"date":"2024-Q2","chunk_id":38,"sub_chunk_id":0,"centroid_label":"net absorption","agreed_value":165000000.0,"count":3,"chunk":"Chris Caton: Hi, Vikram. Thanks for the question. It's Chris. So as it relates to demand, just for those following along, net absorption in the first quarter was $26 million square feet, 27 million square feet. We have it at $43 million square feet in the second. And so, we expect 40 to 50 million square feet in net absorption. I think that's the tone that Tim had in his script and that we have here on the call for you. That'll leave - us with a full year net absorption on 160 million to 170 million square feet. Tim's going to take the rest.","evidence_gemma_new":"net absorption full year","evidence_llama_3_3":"net absorption full year","evidence_qwen_3_30b":"net absorption full year","gemma_new_max":165000000.0,"gemma_new_min":165000000.0,"llama_3_3_max":165000000.0,"llama_3_3_min":165000000.0,"qwen_3_30b_max":165000000.0,"qwen_3_30b_min":165000000.0}
{"symbol":"PLD","year":2024,"quarter":3,"date":"2024-Q3","chunk_id":36,"sub_chunk_id":0,"centroid_label":"net absorption","agreed_value":40000000.0,"count":3,"chunk":"Chris Caton: Hi, Vince, it's Chris Caton. Thank you for the question, and your read on the quarter is correct. So, we saw 40 million square feet of net absorption in the quarter, 63 million square feet of completions. So, let's just zoom out and talk about the year and talk about how it's -- the direction it's heading, because we are progressing through this bottoming phase. So, net absorption, this year, will amount to 160 million square feet, and that's against deliveries that are 300 million square feet. So, naturally, market vacancies are rising. They're rising up to 6.8%. And it sounds like you're very familiar with historical data, so you'll know that 6.8% is a low number in the totality of history. But there's something that's happening in the background that's really -- that doesn't always get attention we're talking about, which is the emptying of supply chains. So, deliveries peaked a year ago at 135 million square feet per quarter, and they fall into that number I gave you 63 million here this quarter, so less than half in terms of the decline, and they'll continue to decline into next year. At work here, in the backdrop, also is starts are very low. We have them at 40 million, 42 million square feet in the quarter. So, when you put all this together, what you find is the under-construction pipeline, which is about 215 million square feet today, is at its lowest point since 2017. So, we're going to be going into 2025 with a relatively low level of supply and an opportunity for demand to improve as we progress through this uncertainty in the spare capacity.","evidence_gemma_new":"net absorption in the quarter","evidence_llama_3_3":"net absorption this quarter","evidence_qwen_3_30b":"net absorption the quarter","gemma_new_max":40000000.0,"gemma_new_min":40000000.0,"llama_3_3_max":40000000.0,"llama_3_3_min":40000000.0,"qwen_3_30b_max":40000000.0,"qwen_3_30b_min":40000000.0}
{"symbol":"PLD","year":2024,"quarter":3,"date":"2024-Q3","chunk_id":36,"sub_chunk_id":0,"centroid_label":"net absorption","agreed_value":160000000.0,"count":3,"chunk":"Chris Caton: Hi, Vince, it's Chris Caton. Thank you for the question, and your read on the quarter is correct. So, we saw 40 million square feet of net absorption in the quarter, 63 million square feet of completions. So, let's just zoom out and talk about the year and talk about how it's -- the direction it's heading, because we are progressing through this bottoming phase. So, net absorption, this year, will amount to 160 million square feet, and that's against deliveries that are 300 million square feet. So, naturally, market vacancies are rising. They're rising up to 6.8%. And it sounds like you're very familiar with historical data, so you'll know that 6.8% is a low number in the totality of history. But there's something that's happening in the background that's really -- that doesn't always get attention we're talking about, which is the emptying of supply chains. So, deliveries peaked a year ago at 135 million square feet per quarter, and they fall into that number I gave you 63 million here this quarter, so less than half in terms of the decline, and they'll continue to decline into next year. At work here, in the backdrop, also is starts are very low. We have them at 40 million, 42 million square feet in the quarter. So, when you put all this together, what you find is the under-construction pipeline, which is about 215 million square feet today, is at its lowest point since 2017. So, we're going to be going into 2025 with a relatively low level of supply and an opportunity for demand to improve as we progress through this uncertainty in the spare capacity.","evidence_gemma_new":"net absorption this year","evidence_llama_3_3":"net absorption this year","evidence_qwen_3_30b":"net absorption this year","gemma_new_max":160000000.0,"gemma_new_min":160000000.0,"llama_3_3_max":160000000.0,"llama_3_3_min":160000000.0,"qwen_3_30b_max":160000000.0,"qwen_3_30b_min":160000000.0}
{"symbol":"PLD","year":2024,"quarter":3,"date":"2024-Q3","chunk_id":45,"sub_chunk_id":0,"centroid_label":"net absorption","agreed_value":20.0,"count":2,"chunk":"Chris Caton: Hi, Blaine, it's Chris Caton. Thanks for the question. I'll give you a concise answer and then I'll provide you some context, because this is a growing category. And so, yes, we are leasing with these customers, and yes, we think they will continue to lease space into next year and beyond. And no, we don't really think it's much related to any sort of pull-forward as you asked. But let's just zoom out and understand kind of the broader context here. So, to understand really all these 3PL companies, it is productive to first start with the Chinese e-commerce platforms. They're enjoying rapid growth this year, last year. We're talking about 25%, 50% annual growth and more depending on the concept. And so, the Chinese 3PLs, obviously, are performing the logistics here and they're growing rapidly. I'd say they represent roughly 20% of net absorption this year. And what it also offers their businesses are diversifying as now they compete for all contracts, not just Chinese e-commerce. And so, many of these customers are positioned for growth. They're signing long-term leases and they're investing in their space. You ask after this concept of a pull-forward, and so it is natural to think about how might tariffs and changes in tariffs affect these customers. And a couple of ways to think about it. First, the growth of this ecosystem. This is one that connects Asian manufacturers with American consumers. And what they're doing is they're bypassing the traditional import distributors, and they're doing this in response to the past tariffs, the margin pressure brought about by those tariffs. So, in summary, of that point, some of the growth this year is simply a shift in business model in response to past tariffs. The second point, which I described earlier, is, look, Asian imports are up 21% versus 2019 on an inflation-adjusted basis, and this is really fueled by that China Plus One manufacturing model, and the growth of Asia ex China -- imports from Asia ex China, which are up 40%, as I said. And then the third, in the details of tariffs is something called de minimis provision. You may be aware, this is a provision that allows goods to come in and avoid tariffs under a certain value. These are likely to be wound down under a wide range of scenarios, but it's worth knowing that these are only 3% goods coming in under the de minimis provision, only 3% of Asian imports. And so, look, as the category matures, this is a growth category for sure, there will be winners and losers. And please know that we employ the same rigorous credit evaluation process here as we do with any and all of our prospective customers.","evidence_gemma_new":"net absorption","evidence_llama_3_3":null,"evidence_qwen_3_30b":"net absorption 20% this year","gemma_new_max":20.0,"gemma_new_min":20.0,"llama_3_3_max":null,"llama_3_3_min":null,"qwen_3_30b_max":20.0,"qwen_3_30b_min":20.0}
{"symbol":"PLD","year":2024,"quarter":4,"date":"2024-Q4","chunk_id":85,"sub_chunk_id":0,"centroid_label":"net absorption","agreed_value":39000000.0,"count":3,"chunk":"Tim Arndt: And as it relates to net absorption, we saw net absorption of 39 million square feet in the fourth quarter. That amounted to just shy of 150 million square feet in the year, and we are looking for 185 million, 190 million square feet of net absorption in 2025. And that is expected to build over the course of the year.","evidence_gemma_new":"net absorption fourth quarter","evidence_llama_3_3":"net absorption fourth quarter","evidence_qwen_3_30b":"net absorption fourth quarter","gemma_new_max":39000000.0,"gemma_new_min":39000000.0,"llama_3_3_max":39000000.0,"llama_3_3_min":39000000.0,"qwen_3_30b_max":39000000.0,"qwen_3_30b_min":39000000.0}
{"symbol":"PLD","year":2024,"quarter":4,"date":"2024-Q4","chunk_id":85,"sub_chunk_id":0,"centroid_label":"net absorption","agreed_value":150000000.0,"count":2,"chunk":"Tim Arndt: And as it relates to net absorption, we saw net absorption of 39 million square feet in the fourth quarter. That amounted to just shy of 150 million square feet in the year, and we are looking for 185 million, 190 million square feet of net absorption in 2025. And that is expected to build over the course of the year.","evidence_gemma_new":null,"evidence_llama_3_3":"net absorption in the year","evidence_qwen_3_30b":"net absorption year","gemma_new_max":null,"gemma_new_min":null,"llama_3_3_max":150000000.0,"llama_3_3_min":150000000.0,"qwen_3_30b_max":150000000.0,"qwen_3_30b_min":150000000.0}
{"symbol":"PLD","year":2024,"quarter":4,"date":"2025-FY","chunk_id":85,"sub_chunk_id":0,"centroid_label":"net absorption","agreed_value":187500000.0,"count":3,"chunk":"Tim Arndt: And as it relates to net absorption, we saw net absorption of 39 million square feet in the fourth quarter. That amounted to just shy of 150 million square feet in the year, and we are looking for 185 million, 190 million square feet of net absorption in 2025. And that is expected to build over the course of the year.","evidence_gemma_new":"expected net absorption 2025","evidence_llama_3_3":"expected net absorption 2025","evidence_qwen_3_30b":"expected net absorption 2025","gemma_new_max":187500000.0,"gemma_new_min":187500000.0,"llama_3_3_max":187500000.0,"llama_3_3_min":187500000.0,"qwen_3_30b_max":187500000.0,"qwen_3_30b_min":187500000.0}
{"symbol":"PLD","year":2023,"quarter":1,"date":"2023-Q1","chunk_id":2,"sub_chunk_id":0,"centroid_label":"net effective and cash same store growth","agreed_value":9.9,"count":2,"chunk":"Tim Arndt: Thanks, Jill. Good morning, everybody, and welcome to our first quarter earnings call. We began the year with results and conditions that remained strong. Market rents have continued to grow, demand has been consistent and we're seeing sharp declines in new construction limiting future supply. While logistics real estate is very healthy, the macroeconomic picture continues to be a concern and we anticipate it could weigh on customer sentiment over the balance of the year translate into some demand that could be delayed into 2024. However, this will overlap with a slowdown of new deliveries, creating a sustained dynamic for high occupancy and continued rent growth into next year. Beginning with our results, our core FFO excluding promotes was $1.23 per share and including promotes was $1.22 per share. Our results benefited from higher NOI in the quarter but offset by approximately $0.02 of higher insurance expense from an unusually active storm season experiencing a year's worth of claims activity in just the first quarter. In terms of our operating results, both ending and average occupancy for the quarter were 98%, holding average occupancy flat for the fourth quarter. Rent change was 69% on a net effective basis and 42% on a cash basis each a record. The unusually wide spread between the two is reflective of lower free rent and higher escalations in our new leasing. Despite the step-up of in-place rents, our lease mark-to-market expanded to 68% during the quarter as market rent growth remained strong and slightly ahead of expectations. With the remaining lease term of roughly four years, this lease mark-to-market represents over $2.85 per share of incremental earnings as our leases roll the market, providing visibility to future income and dividend growth. These results drove record same-store growth 9.9% on a net effective basis and 11.4% on a cash basis. During the quarter, our efforts on the balance sheet were focused on liquidity, raising over $3.6 billion in new financings for Prologis and our ventures at an interest rate of 4.6% and a term of nearly 14 years. This fundraising total does not include $1 billion of additional capacity from a recast of our global line-of-credit, which closed in April, and brings our total borrowing potential under our lines to $6.5 billion. As mentioned, fundamentals in our markets remain strong, but we expect that a more cautious outlook will weigh on the pace of demand. This is not a new perspective as our forecast 90 days ago prepared for a weakening sentiment and how the top-down view for some occupancy loss over the year. We haven't changed that outlook, but we also haven't upgraded it despite the quarter's outperformance. As an update on proprietary metrics, our proposal activity ticked up in absolute terms and is in line with strong market conditions as a percent of available space. Approximately 99% of the units across our 1.2 billion square feet are either leased or in negotiation. Utilization ticked down to 85%, which is normalizing to a level that our customers view as optimal. E-commerce leasing increased during the quarter to 19% of all new leasing. We avoid drawing conclusions from a single quarter of activity on most metrics, but it's notable here, that e-commerce leasing picked up meaningfully back towards its five-year average. As we've said before, we ultimately look at retention, pre-leasing and rent achievement as the best real-time metrics of portfolio health, and on that basis, our results are certainly very strong. We expect that the current 3.5% vacancy rate in our US markets will build to the low 4s toward the end of the year, before turning back to the mid-3s by late 2024, due to the lack of incoming supply and accounting for moderating demand. We anticipate a similar path in our European markets, and of course, even a 5% vacancy rate is historically excellent and supportive of strong rental growth. We expect this pattern to play out in our true months of supply metric, which was a very healthy 30 months in the US and should decline into the 20s next year. We are launching markets that have large development pipelines such as a few in the Sunbelt in the US, but so far that supply also seems manageable. In Europe, most of our focus is on the UK, where development starts have continued even as demand has moderated, which will lift market vacancies and may pressure rents. And Japan is also a market which is expected to see larger increases in vacancy over the year, but similarly, expects a slowdown in new supply due to surges in land and construction costs. Taking all of these movements into account, we are holding our market rent growth forecast for the year at 10% in the US and 9% globally. In capital markets, transactions continue to be few and far between, but the pickup in activity suggests, we will see a busier second quarter. Appraised values in our funds declined 1% in the US and 2% in Europe during the quarter and 8% and 18% respectively from the peak. It's worth noting that our view of public market prices and NAVs that they have adjusted much more than is warranted for these levels of write-down. Redemption requests and our open-ended funds have slowed significantly with the redemption queue nearly unchanged around 5% of net asset value. This is reflective of both a slower pace of new redemptions as well as rescissions of prior requests. Combined with over $150 million of new commitments made our net queue is essentially unchanged from last year. Last quarter, we described our approach to fulfilling redemption requests, which is based on an overarching objective to be consistent and fair to all investors, requiring a few quarters for valuers to catch up. In that regard, as appraisal seem to be nearing fair value, we plan to redeem units in this quarter, given the swift response to value changes in Europe and expect to do the same in USLF next quarter. In turn, we view this as an excellent time to invest more of our capital into the vehicles, which we'll be doing over the coming quarters and some meaningful numbers. Turning to guidance. We are tightening and increasing average occupancy to range between 97.25% and 97.75%, a 25 basis point increase at the midpoint. Our same-store will benefit from this increase driving our net effective guidance to a range of 8.5% to 9.25%, and cash same-store of 9% to 9.75%. We are forecasting our lease mark-to-market to end the year close to 70%. Extracting the 2024 component of this suggests rent change should exceed 85% next year, even without continued market rent growth, which is a clear illustration of how our exceptional rent change will not only endure but continue to grow. We expect G&A to range between $380 million and $390 million and strategic capital revenues excluding promotes to range between $515 million and $530 million. We are maintaining our forecast for net promote income of $380 million, and given the size of USLF and the potential for small changes in value to have a meaningful impact, there is potential for upside here and we believe we have the downside covered. We had few development starts in the quarter, a reflection of our discipline, but our pipeline is deep and we are maintaining our guidance of $2.5 billion to $3 billion for the year. We expect the pace to remain slow in the second quarter, putting the bulk of the activity into the second half. It's noteworthy that following the belief that construction costs may decline in the coming quarters. We now see them as likely to increase mostly in line with inflation. As new fundraising has become visible, we forecast contributions to be concentrated in the second half totaling $2 billion to $3 billion when combined with forecasted dispositions. So in total, we expect GAAP earnings to range between $3.10 per share and $3.25 per share. We are increasing our core FFO including promotes guidance to a range of $5.42 per share to $5.50 per share, and further, we are guiding core FFO excluding promotes to range between $5.02 per share and $5.10 per share, with the midpoint representing 10% growth over 2022. I'd like to close with a few observations that we've made about our standing in the equity markets, which we found interesting and wanted to share. Today, we sit as the 68th largest company in the S&P 500 ahead of names like GE, American Express, Cigna, Citigroup, as well as Ford and GM combined. Also of notice that with our planned $3.3 billion of dividends this year, we ranked 42nd in terms of total cash return to investors. Of these top 42 dividend payers, Prologis has outgrown the group by 500 basis points per year over the last three years. And in fact, since our IPO, we have paid over $15 billion in dividends at a 15% CAGR, ranking 13th on growth in the entire S&P 100. While getting bigger has never been our objective, we thought the context would be eye-opening. So in closing, we feel great about the health of our business, even in the face of a slowing economy, most importantly, nothing we have seen alters the path of its underlying secular drivers for the long-term potential of our platform. In that regard, we're excited to tell you much more about that outlook and our platform later in the year. Last week, we announced our upcoming Investor Day to be held at the New York Stock Exchange this December. We hope to see many of you there in person and tuned into the live webcast, where we will showcase our deep bench of talents and the strong differentiators that define our company. More details on that to come. But with that I'll hand it back to the operator for your questions.","evidence_gemma_new":"same-store growth net effective basis","evidence_llama_3_3":"same-store growth","evidence_qwen_3_30b":null,"gemma_new_max":9.9,"gemma_new_min":9.9,"llama_3_3_max":9.9,"llama_3_3_min":9.9,"qwen_3_30b_max":null,"qwen_3_30b_min":null}
{"symbol":"PLD","year":2023,"quarter":2,"date":"2023-Q2","chunk_id":18,"sub_chunk_id":0,"centroid_label":"net effective and cash same store growth","agreed_value":8.5,"count":2,"chunk":"Hamid Moghadam : Yeah. Let me start on the development volume and then pitch it over to Dan for the other commentary. We do not care about development starts. We do not care about acquisition guidance. We will - we make all these decisions one-by-one and only when it makes sense to pull the trigger on these. They're buying large already more or less and we could, on a discretionary basis, start all of them today. But that would not be a wise thing to do and we're not going to do it just to meet some artificial guidance. I think the main driver of earnings in this company, which is what we all care about is rental growth and same-store growth. And all I can tell you is that with mid-60s mark-to-market, you can model whatever scenario you want, including zero rent growth from here on out. And for the next four years, five years, you're going to get same-store NOI increase of 7.5% with no rental growth from this point forward. You put in our normalized forecast for a rental growth our best guess and that same-store growth will be at 8.5%. Both of those numbers are consistent with low-double-digit earnings growth, while maintaining our leverage, which is, which is so low. So, I don't - we don't need development starts to drive anything, and we're not going to get in a position of \u2013 or jeopardizing our pricing power by virtue of wanting to meet an artificial development goal. Now having said all that, we will start the ones that we think we can lease efficiently and economically and quickly. And the land is there. The approvals are there. And our ability to put buildings up is there. So, there is no benefit in front end loading that stuff and pushing it ahead of where it needs to be. Dan, do you want to address the site question?","evidence_gemma_new":"same-store growth","evidence_llama_3_3":null,"evidence_qwen_3_30b":"same-store growth normalized forecast for a rental growth","gemma_new_max":8.5,"gemma_new_min":8.5,"llama_3_3_max":null,"llama_3_3_min":null,"qwen_3_30b_max":8.5,"qwen_3_30b_min":8.5}
{"symbol":"PLD","year":2023,"quarter":4,"date":"2023-Q4","chunk_id":2,"sub_chunk_id":0,"centroid_label":"net effective and cash same store growth","agreed_value":8.5,"count":3,"chunk":"Tim Arndt: Thanks, Jill. I'd like to start our call by recognizing and thanking our team for the incredible effort given over 2023. While it was a turbulent year in many ways, we ended it by delivering nearly 11% earnings growth and driving our 12-year earnings CAGR since merger to 10.3%. We deployed over $7 billion into new investments, raised nearly $2 billion of strategic capital in a very challenging environment and delivered excellent operating results while serving and growing customer relationships. We're also appreciative of the opportunity we had at our Investor Forum last month to share our vision and outlook for the company over the coming years. The environment is setting up in line or better than our expectations with development starts across the market continuing to decline by two-thirds from peak and an improvement in customer sentiment that appears more constructive than just 90 days ago. That said, we still see challenges in some submarkets as near-term outsized deliveries are met with still recovering demand. But our thesis remains the same as we've been describing for over a year and detailed last month in New York, which is that the supply cliff will converge with normalized demand later this year, delivering an environment conducive to strong market rent growth. We believe that annual market rent growth will average between 4% and 6% over the next three years, with 2024 being modestly positive and ramping thereafter. Turning to our results. We finished the year strong with quarterly core FFO, excluding promotes of $1.29 per share, bringing the full year to the top end of our guidance $5.10 per share. While market occupancy declined by approximately 100 basis points, our portfolio gained 10 basis points to end the year at 97.6%. Net effective rent change over the quarter was 74%, bringing the full year to a record of 77%, with another impressive results out of Southern California at over 150%, a reminder that it remains the strongest market for cash flow growth despite near-term choppiness given the large quantum of its lease mark-to-market. In the end, same-store on a net effective basis was 7.8%, while cash was 8.5%. We started over $2 billion of new developments in the quarter across 46 projects in 27 markets with nearly 50% of the activity in build-to-suit. In Energy and as seen in our new supplemental disclosure, we stand at year end with approximately 515 megawatts of solar and storage in operation with an additional 70 currently under construction. We had a quiet quarter on the financing front, raising approximately $300 million, but our full year of activity closed out at over $12 billion at a weighted average rate of 4.5% and term of 10 years. Our total debt portfolio remains at an overall in-place rate of just 3% with more than nine years of average remaining life. Turning to market conditions. The increase in fourth quarter market vacancy was in line with our expectations and driven by demand that remained moderate as customers exercised caution in their spending, while completions hit an all-time high. Development starts, however, have continued to fall across the U.S. and Europe, extending and deepening the future supply shortfall. On the ground, our teams are seeing revived customer interest with healthy showing activity to start the year. This includes build-to-suit inquiries, which we expect to remain active for Prologis following a strong year in 2023. Our proprietary metrics point to normal levels of activity with proposals and gestation timing in line or a bit better than historical norms. Utilization declined in the quarter to approximately 83% and keeping with this morning's report a decrease in the inventory to sales ratio. We view this positively because utilization also increased from here as stronger than expected retail sales over the fourth quarter and holiday season drove lower inventories, which will need to be replenished. Turning to market rents. Our global view is that rents declined this quarter by 90 basis points, but predominantly impacted by an estimated 7% decline in Southern California. Our full year view is that global market rents grew by 6%, just below our expectations, ultimately driving our lease mark-to-market to end the quarter at 57% after capturing approximately $100 million in realized NOI growth from leases rolling up to market. The outlier on rent growth is clearly Southern California. While our portfolio was only 2.6% vacant at year end, growing availability has made leasing very competitive. Combined with a 110% increase in rents since 2020, the rent retracement is understandable. Historically, there has never been a market where the delta between expiring and market rents has been so large that it provides ample room for property owners to deviate from market in order to attract customers. But looking ahead, the positive news is that we are launching two trends reverse. The first is that the supply pipeline is clearly emptying with little in the way of new starts. And the second is that the escalating issues in both the Suez and Panama canals together with the resolution of the West Coast labor negotiations are moving shipment volumes back to the West. While this bodes well for SoCal and still early, we are watching East Coast port markets more closely. In any event, all of these disruptions are reiterating the underlying need for resiliency and the just in case approach to inventories. Summing this all up globally, we recognize the high volume of near term deliveries that need to be absorbed into our markets over the next few quarters. But we are very pleased with our ability thus far to build occupancy, drive rents, and illustrate more differentiation in our portfolio as market vacancy grows. As for Strategic Capital and Valuations, we saw U.S. values decline approximately 5.5% during the quarter, which was our expectation and the reason we paused our appraisal based activity, which includes calling and redeeming capital as well as asset contributions. We run an industry leading franchise in which we aim to set the standard for governance, including timely, accurate, and independent valuations. Calling out when pronounced lags and valuations emerge has protected investors and demonstrated how we stand apart as a responsible partner. With this quarter's value declines in a more stabilized rate environment, we'll resume activity in USLF including the funding of our $250 million commitment announced in the second half of '23. Turning to guidance and all at our share. In terms of operating metrics, we are guiding average occupancy to range between 96.5% and 97.5% with occupancy likely to step down in the first quarter and rebuild over the course of the year. Cash same-store will range between 8% and 9% and net effective same-store growth will range from 7% to 8%. We are forecasting net G&A to range between $420 million and $440 million and Strategic Capital income to range from $530 million to $550 million. We have a very big year of stabilization activity ahead of us with a range of $3.6 billion to $4 billion, and expected yields of approximately 6.25%. On the new deployment front, we are guiding development starts to range between $3 billion and $3.5 billion with the estimated build to suit mix of 40%. And we plan to take sale portfolios to the market over the year with expected proceeds to range between $800 million and $1.2 billion and additionally forecast $1.75 billion to $2.25 billion in contributions to our Strategic Capital vehicles. In the end, we are forecasting GAAP earnings to range between $3.20 and $3.45 per share. Core FFO excluding promotes will range from $5.50 to $5.64 per share, while core FFO including net promote expense will range between $5.42 and $5.56 per share, each a bit higher than our preliminary guidance at the Investor Forum. While we do not forecast any promote revenue at this time, there are some small opportunities that do exist in FIBRA Prologis and our new PJLF vehicle in Japan. In closing, we know that the market is not yet out of the woods with regards to incoming supply, but the combination of a stronger backdrop continued low level of starts and a calmer capital markets environment has us optimistic that 2024 will be another great year. As you know from our Investor Day, we have many initiatives in flight designed to add value beyond our real estate and because of our real estate. We look forward to continuing to execute on our plan and providing you updates throughout the year. And before we move to Q&A, I'd like to get ahead of questions which have grown a little more frequent in recent quarters surrounding market rent growth. Unintentionally, we set an expectation that we could forecast market rents to a single point of accuracy in increasingly short time periods, and honestly, we're just not that good. We've gotten away from a practice that was originally aimed at being high level and directional. So what we've elected to do in order to help investors without perpetuating the issue is to simply provide high level rent growth expectations on a rolling 12 month forward view. As mentioned earlier, in terms of our three year CAGR of 4% to 6%, we believe we'll see modestly positive rent growth aligned with inflation over the next 12 months and we'll continue to update this rolling view on our future calls. With that, we will now take your questions. Operator?","evidence_gemma_new":"Cash same-store","evidence_llama_3_3":"cash same-store growth","evidence_qwen_3_30b":"cash same-store 8% to 9% net effective same-store growth 7% to 8%","gemma_new_max":8.5,"gemma_new_min":8.5,"llama_3_3_max":8500000.0,"llama_3_3_min":8500000.0,"qwen_3_30b_max":8.5,"qwen_3_30b_min":8.5}
{"symbol":"PLD","year":2023,"quarter":4,"date":"2023-Q4","chunk_id":2,"sub_chunk_id":0,"centroid_label":"net effective and cash same store growth","agreed_value":7500000.0,"count":2,"chunk":"Tim Arndt: Thanks, Jill. I'd like to start our call by recognizing and thanking our team for the incredible effort given over 2023. While it was a turbulent year in many ways, we ended it by delivering nearly 11% earnings growth and driving our 12-year earnings CAGR since merger to 10.3%. We deployed over $7 billion into new investments, raised nearly $2 billion of strategic capital in a very challenging environment and delivered excellent operating results while serving and growing customer relationships. We're also appreciative of the opportunity we had at our Investor Forum last month to share our vision and outlook for the company over the coming years. The environment is setting up in line or better than our expectations with development starts across the market continuing to decline by two-thirds from peak and an improvement in customer sentiment that appears more constructive than just 90 days ago. That said, we still see challenges in some submarkets as near-term outsized deliveries are met with still recovering demand. But our thesis remains the same as we've been describing for over a year and detailed last month in New York, which is that the supply cliff will converge with normalized demand later this year, delivering an environment conducive to strong market rent growth. We believe that annual market rent growth will average between 4% and 6% over the next three years, with 2024 being modestly positive and ramping thereafter. Turning to our results. We finished the year strong with quarterly core FFO, excluding promotes of $1.29 per share, bringing the full year to the top end of our guidance $5.10 per share. While market occupancy declined by approximately 100 basis points, our portfolio gained 10 basis points to end the year at 97.6%. Net effective rent change over the quarter was 74%, bringing the full year to a record of 77%, with another impressive results out of Southern California at over 150%, a reminder that it remains the strongest market for cash flow growth despite near-term choppiness given the large quantum of its lease mark-to-market. In the end, same-store on a net effective basis was 7.8%, while cash was 8.5%. We started over $2 billion of new developments in the quarter across 46 projects in 27 markets with nearly 50% of the activity in build-to-suit. In Energy and as seen in our new supplemental disclosure, we stand at year end with approximately 515 megawatts of solar and storage in operation with an additional 70 currently under construction. We had a quiet quarter on the financing front, raising approximately $300 million, but our full year of activity closed out at over $12 billion at a weighted average rate of 4.5% and term of 10 years. Our total debt portfolio remains at an overall in-place rate of just 3% with more than nine years of average remaining life. Turning to market conditions. The increase in fourth quarter market vacancy was in line with our expectations and driven by demand that remained moderate as customers exercised caution in their spending, while completions hit an all-time high. Development starts, however, have continued to fall across the U.S. and Europe, extending and deepening the future supply shortfall. On the ground, our teams are seeing revived customer interest with healthy showing activity to start the year. This includes build-to-suit inquiries, which we expect to remain active for Prologis following a strong year in 2023. Our proprietary metrics point to normal levels of activity with proposals and gestation timing in line or a bit better than historical norms. Utilization declined in the quarter to approximately 83% and keeping with this morning's report a decrease in the inventory to sales ratio. We view this positively because utilization also increased from here as stronger than expected retail sales over the fourth quarter and holiday season drove lower inventories, which will need to be replenished. Turning to market rents. Our global view is that rents declined this quarter by 90 basis points, but predominantly impacted by an estimated 7% decline in Southern California. Our full year view is that global market rents grew by 6%, just below our expectations, ultimately driving our lease mark-to-market to end the quarter at 57% after capturing approximately $100 million in realized NOI growth from leases rolling up to market. The outlier on rent growth is clearly Southern California. While our portfolio was only 2.6% vacant at year end, growing availability has made leasing very competitive. Combined with a 110% increase in rents since 2020, the rent retracement is understandable. Historically, there has never been a market where the delta between expiring and market rents has been so large that it provides ample room for property owners to deviate from market in order to attract customers. But looking ahead, the positive news is that we are launching two trends reverse. The first is that the supply pipeline is clearly emptying with little in the way of new starts. And the second is that the escalating issues in both the Suez and Panama canals together with the resolution of the West Coast labor negotiations are moving shipment volumes back to the West. While this bodes well for SoCal and still early, we are watching East Coast port markets more closely. In any event, all of these disruptions are reiterating the underlying need for resiliency and the just in case approach to inventories. Summing this all up globally, we recognize the high volume of near term deliveries that need to be absorbed into our markets over the next few quarters. But we are very pleased with our ability thus far to build occupancy, drive rents, and illustrate more differentiation in our portfolio as market vacancy grows. As for Strategic Capital and Valuations, we saw U.S. values decline approximately 5.5% during the quarter, which was our expectation and the reason we paused our appraisal based activity, which includes calling and redeeming capital as well as asset contributions. We run an industry leading franchise in which we aim to set the standard for governance, including timely, accurate, and independent valuations. Calling out when pronounced lags and valuations emerge has protected investors and demonstrated how we stand apart as a responsible partner. With this quarter's value declines in a more stabilized rate environment, we'll resume activity in USLF including the funding of our $250 million commitment announced in the second half of '23. Turning to guidance and all at our share. In terms of operating metrics, we are guiding average occupancy to range between 96.5% and 97.5% with occupancy likely to step down in the first quarter and rebuild over the course of the year. Cash same-store will range between 8% and 9% and net effective same-store growth will range from 7% to 8%. We are forecasting net G&A to range between $420 million and $440 million and Strategic Capital income to range from $530 million to $550 million. We have a very big year of stabilization activity ahead of us with a range of $3.6 billion to $4 billion, and expected yields of approximately 6.25%. On the new deployment front, we are guiding development starts to range between $3 billion and $3.5 billion with the estimated build to suit mix of 40%. And we plan to take sale portfolios to the market over the year with expected proceeds to range between $800 million and $1.2 billion and additionally forecast $1.75 billion to $2.25 billion in contributions to our Strategic Capital vehicles. In the end, we are forecasting GAAP earnings to range between $3.20 and $3.45 per share. Core FFO excluding promotes will range from $5.50 to $5.64 per share, while core FFO including net promote expense will range between $5.42 and $5.56 per share, each a bit higher than our preliminary guidance at the Investor Forum. While we do not forecast any promote revenue at this time, there are some small opportunities that do exist in FIBRA Prologis and our new PJLF vehicle in Japan. In closing, we know that the market is not yet out of the woods with regards to incoming supply, but the combination of a stronger backdrop continued low level of starts and a calmer capital markets environment has us optimistic that 2024 will be another great year. As you know from our Investor Day, we have many initiatives in flight designed to add value beyond our real estate and because of our real estate. We look forward to continuing to execute on our plan and providing you updates throughout the year. And before we move to Q&A, I'd like to get ahead of questions which have grown a little more frequent in recent quarters surrounding market rent growth. Unintentionally, we set an expectation that we could forecast market rents to a single point of accuracy in increasingly short time periods, and honestly, we're just not that good. We've gotten away from a practice that was originally aimed at being high level and directional. So what we've elected to do in order to help investors without perpetuating the issue is to simply provide high level rent growth expectations on a rolling 12 month forward view. As mentioned earlier, in terms of our three year CAGR of 4% to 6%, we believe we'll see modestly positive rent growth aligned with inflation over the next 12 months and we'll continue to update this rolling view on our future calls. With that, we will now take your questions. Operator?","evidence_gemma_new":"net effective same-store growth","evidence_llama_3_3":"net effective same-store growth","evidence_qwen_3_30b":null,"gemma_new_max":7.5,"gemma_new_min":7.5,"llama_3_3_max":7500000.0,"llama_3_3_min":7500000.0,"qwen_3_30b_max":null,"qwen_3_30b_min":null}
{"symbol":"PLD","year":2024,"quarter":1,"date":"2024-FY","chunk_id":2,"sub_chunk_id":0,"centroid_label":"net effective and cash same store growth","agreed_value":6.75,"count":2,"chunk":"Tim Arndt: Good morning and thank you for joining our call. We've had a good start to the year in terms of our operating and financial results in the first quarter. We delivered strong rent change, drove occupancy slightly ahead of our forecast, raised nearly $5 billion in capital, including $750 million in strategic capital, and made important headway in our Energy business. That said, as we evaluate the market, persistent inflation and high interest rates have kept more customers focused on controlling costs. The resulting delay in decision making, easily observed through the first quarter's below average net absorption, will translate to lower leasing volume within the year. Accordingly, we've opted to adjust our guidance early, getting ahead of what looks like a period of occupancy below our forecast in the near term and its effect on same store in a number of our higher rent markets. This is punctuated, of course, by a more pronounced period of correction still underway in Southern California. New starts, however, continues to be surprisingly disciplined, adding to the expectation for limited new supply in the back half of '24, but also extending deeper into '25. When considered alongside muted demand, we arrive at a view that the operating environment has only changed modestly in aggregate, and that demand is simply pushing out by a few quarters. The outcome of this may simply mean moving towards a long-term occupancy expectation more swiftly this year, which sets up for a better next year. Turning to our results for the quarter. Core FFO, excluding promotes, was $1.31 per share and including net promote expense was $1.28 per share, essentially in line with our forecast. Occupancy in the portfolio ended the quarter at 97%. For context, the US market declined 310 basis points since its peak in the summer of '22, while our portfolio's occupancy has only declined 80 basis points, resulting in vacancy today for Prologis that is less than half of that in our markets and reflective of our portfolio quality. Net effective rent change was 68% based on commencements and 70% based on new signings. Following this in-place increase and changes in market rents, our net effective lease mark-to-market stands at 50%, representing over $2.2 billion of rent to harvest without any additional market rent growth from here. Rent growth captured just for the single quarter was approximately $110 million on an annualized basis and at our share. Our same-store growth on a cash basis was 5.7% and on a net effective basis was 4.1%. The same-store from rent change alone was strong at approximately 9%, but is impacted by a 130 basis point change in year-over-year vacancy, as well as 150 basis points from fair value lease adjustments with the Duke portfolio's inclusion in our same-store pool. Additionally, there were approximately 175 basis points of items specific to the quarter, including one-time reconciling items from 2023, as well as unfavorable comps from low expenses last year. We started over $270 million of new developments in the quarter, bringing our portfolio to approximately $7.5 billion at our share, with estimated value creation of over $1.7 billion, a number we feel increasingly confident in with value stabilizing. In our Energy business, we've made meaningful progress on this year's deployment, including the signing of 405 megawatts of long-term storage-related contracts with investment-grade utilities. We also delivered the largest EV fleet charging project in the United States, less than 15 miles from both the ports of LA and Long beach. Finally, we raised $4.1 billion of debt across our balance sheet and funds at a weighted average rate of 4.7% and a term of 10 years. Our debt portfolio has an overall in-place rate of just 3.1%, with more than nine years of average remaining life and liquidity at the end of the quarter of over $5.8 billion. Turning to market conditions. Most broad economic data from unemployment to retail sales to the health of the consumer remain very strong. And while our tour proposal and other proprietary metrics are similarly positive, overall leasing activity and net absorption are running below expectations. Net absorption in the US, for example, was very low this quarter at just 27 million square feet. So while the macro landscape and supply chains continue to generate a need for space, we think it's prudent to expect continued headwinds on overall absorption over the next few quarters. The interest rate environment and its associated volatility have weighed on customer decision making, especially as the 10 year has increased 70 basis points from its level just 90 days ago and expectations for Fed rate cuts have moved from potentially six to now possibly zero. In parallel, sublease and space utilization rates highlight that some customers have available capacity, driven in part by the high rate of absorption through the pandemic. This dynamic of available space intersecting with the desire for cost containment is what leads to lower absorption and is playing out at different rates across submarkets and customers. For example, while slow leasing has persisted so far this year for less capitalized customers and 3PLs, we see a handful of large e-commerce and retail customers further along in this process, such as Amazon, who voiced caution two years ago, but is now active in several global markets and has openly discussed plans to commit to significant amounts of new space. The overall leasing slowdown is most felt in only a handful of markets. Southern California and the Inland Empire being the most acute. In fact, rents in most of our US markets are generally flat, several are up, and it is mainly elongated downtime affecting near-term occupancy and NOI. While Southern California leasing has been challenging, it has not slowed the tremendous uplift we realize every single quarter from rent change on rollover, which was 120% for the market in the first quarter, with the Inland Empire at 156%, nearly the highest in our portfolio. In Europe, rents grew overall during the quarter, which we believe will remain the case over the balance of the year. And of course, LATAM continues to impress with very high occupancy and market rent growth that has led the globe in recent quarters. Overall, global market rents declined slightly over 1% in the quarter, driven mostly by Southern California, and would have been slightly positive if excluded. I'd like to spend a moment on Baltimore, where we own over 18 million square feet and has been a dynamic market of ours for decades. Our employees, customers and properties are all safe following the bridge collapse last month and our customers expect to be able to withstand the disruption with little impact to their businesses. Shifting to capital markets. Valuations increased in all of our geographies, except for China, which saw a very small decline. Over the last 1.5 years, global values have decreased despite increases in cash flow due to cap rate expansion. As cap rates have stabilized, cash flow growth now has the ability to translate to value growth. Even though modest, the value uplift in the US and Europe are important as strategic capital investors have been looking for values to not only bottom, but actually turn upwards before committing new capital. With Europe a bit ahead of the US in this regard, it is indeed where we've seen stronger fund-raising interest in recent quarters. We also had a successful equity raise in FIBRA Prologis, raising over $500 million for deployment into both assets to be contributed from our balance sheet, as well as pursuits of third-party acquisitions. Transaction volumes and activity have ticked up in recent weeks and pricing has certainly improved. As always, we are actively looking at acquisition opportunities across all of our markets, but our focus remains on the development of our land bank, which provides an opportunity for over $38 billion of build out with a return on incremental capital of approximately 8.5%. In terms of guidance, in light of our views on demand and leasing pace in the coming quarters, we are reducing our average occupancy guidance to range between 95.75% and 96.75% of the 75 basis point adjustment from the midpoint. It's important to understand that approximately two-thirds of this change stems from our higher rent markets, meaning they create a disproportionate impact on same store in 2024. Same-store growth on a net effective basis will range between 5.5% and 6.5%, a reduction of 150 basis points, which accounts for the average occupancy decline, slightly lower rent change for the year as well as 30 basis points of annualized impact from the one-time items in the first quarter mentioned earlier. Our revised range on a cash basis is now 6.25% to 7.25%. We are maintaining our guidance for strategic capital revenue, excluding promotes, to a range of $530 million to $550 million and reducing our G&A guidance to a range of $415 million to $430 million. We are adjusting development start guidance for the year to a revised range of $2.5 billion to $3 billion at our share, reflecting our discipline in speculative starts and the timing impact this has in the calendar year. As we've always said, we don't consider our guidance to be a target internally and each deal ultimately needs to be rational and accretive on its own. In the end, we are forecasting GAAP earnings to range between $3.15 per share and $3.35 per share. Core FFO, including net promote expense, will range between $5.37 per share and $5.47 per share, while core FFO, excluding promotes, will range from $5.45 per share to $5.55 per share. Our updated guidance calls for core earnings growth of nearly 8% at the midpoint. As we close out, I'd like to underscore the message of the call, which is that while we have only a modest change of view in the intermediate term, our confidence in the long term is intact. And putting timing aside, we are encouraged by the outlook for supply in the back half of this year and '25, have tremendous lease mark-to-market to harvest in the interim, and are pleased to see valuations, fundraising and transaction activity all picking up. With that, I'll turn the call over to the operator for your questions.","evidence_gemma_new":null,"evidence_llama_3_3":"cash same-store growth 2024","evidence_qwen_3_30b":"same-store growth on a cash basis projected 7.25% 2024","gemma_new_max":null,"gemma_new_min":null,"llama_3_3_max":6.7,"llama_3_3_min":6.7,"qwen_3_30b_max":6.75,"qwen_3_30b_min":6.75}
{"symbol":"PLD","year":2024,"quarter":1,"date":"2024-Q1","chunk_id":2,"sub_chunk_id":0,"centroid_label":"net effective and cash same store growth","agreed_value":5.7,"count":2,"chunk":"Tim Arndt: Good morning and thank you for joining our call. We've had a good start to the year in terms of our operating and financial results in the first quarter. We delivered strong rent change, drove occupancy slightly ahead of our forecast, raised nearly $5 billion in capital, including $750 million in strategic capital, and made important headway in our Energy business. That said, as we evaluate the market, persistent inflation and high interest rates have kept more customers focused on controlling costs. The resulting delay in decision making, easily observed through the first quarter's below average net absorption, will translate to lower leasing volume within the year. Accordingly, we've opted to adjust our guidance early, getting ahead of what looks like a period of occupancy below our forecast in the near term and its effect on same store in a number of our higher rent markets. This is punctuated, of course, by a more pronounced period of correction still underway in Southern California. New starts, however, continues to be surprisingly disciplined, adding to the expectation for limited new supply in the back half of '24, but also extending deeper into '25. When considered alongside muted demand, we arrive at a view that the operating environment has only changed modestly in aggregate, and that demand is simply pushing out by a few quarters. The outcome of this may simply mean moving towards a long-term occupancy expectation more swiftly this year, which sets up for a better next year. Turning to our results for the quarter. Core FFO, excluding promotes, was $1.31 per share and including net promote expense was $1.28 per share, essentially in line with our forecast. Occupancy in the portfolio ended the quarter at 97%. For context, the US market declined 310 basis points since its peak in the summer of '22, while our portfolio's occupancy has only declined 80 basis points, resulting in vacancy today for Prologis that is less than half of that in our markets and reflective of our portfolio quality. Net effective rent change was 68% based on commencements and 70% based on new signings. Following this in-place increase and changes in market rents, our net effective lease mark-to-market stands at 50%, representing over $2.2 billion of rent to harvest without any additional market rent growth from here. Rent growth captured just for the single quarter was approximately $110 million on an annualized basis and at our share. Our same-store growth on a cash basis was 5.7% and on a net effective basis was 4.1%. The same-store from rent change alone was strong at approximately 9%, but is impacted by a 130 basis point change in year-over-year vacancy, as well as 150 basis points from fair value lease adjustments with the Duke portfolio's inclusion in our same-store pool. Additionally, there were approximately 175 basis points of items specific to the quarter, including one-time reconciling items from 2023, as well as unfavorable comps from low expenses last year. We started over $270 million of new developments in the quarter, bringing our portfolio to approximately $7.5 billion at our share, with estimated value creation of over $1.7 billion, a number we feel increasingly confident in with value stabilizing. In our Energy business, we've made meaningful progress on this year's deployment, including the signing of 405 megawatts of long-term storage-related contracts with investment-grade utilities. We also delivered the largest EV fleet charging project in the United States, less than 15 miles from both the ports of LA and Long beach. Finally, we raised $4.1 billion of debt across our balance sheet and funds at a weighted average rate of 4.7% and a term of 10 years. Our debt portfolio has an overall in-place rate of just 3.1%, with more than nine years of average remaining life and liquidity at the end of the quarter of over $5.8 billion. Turning to market conditions. Most broad economic data from unemployment to retail sales to the health of the consumer remain very strong. And while our tour proposal and other proprietary metrics are similarly positive, overall leasing activity and net absorption are running below expectations. Net absorption in the US, for example, was very low this quarter at just 27 million square feet. So while the macro landscape and supply chains continue to generate a need for space, we think it's prudent to expect continued headwinds on overall absorption over the next few quarters. The interest rate environment and its associated volatility have weighed on customer decision making, especially as the 10 year has increased 70 basis points from its level just 90 days ago and expectations for Fed rate cuts have moved from potentially six to now possibly zero. In parallel, sublease and space utilization rates highlight that some customers have available capacity, driven in part by the high rate of absorption through the pandemic. This dynamic of available space intersecting with the desire for cost containment is what leads to lower absorption and is playing out at different rates across submarkets and customers. For example, while slow leasing has persisted so far this year for less capitalized customers and 3PLs, we see a handful of large e-commerce and retail customers further along in this process, such as Amazon, who voiced caution two years ago, but is now active in several global markets and has openly discussed plans to commit to significant amounts of new space. The overall leasing slowdown is most felt in only a handful of markets. Southern California and the Inland Empire being the most acute. In fact, rents in most of our US markets are generally flat, several are up, and it is mainly elongated downtime affecting near-term occupancy and NOI. While Southern California leasing has been challenging, it has not slowed the tremendous uplift we realize every single quarter from rent change on rollover, which was 120% for the market in the first quarter, with the Inland Empire at 156%, nearly the highest in our portfolio. In Europe, rents grew overall during the quarter, which we believe will remain the case over the balance of the year. And of course, LATAM continues to impress with very high occupancy and market rent growth that has led the globe in recent quarters. Overall, global market rents declined slightly over 1% in the quarter, driven mostly by Southern California, and would have been slightly positive if excluded. I'd like to spend a moment on Baltimore, where we own over 18 million square feet and has been a dynamic market of ours for decades. Our employees, customers and properties are all safe following the bridge collapse last month and our customers expect to be able to withstand the disruption with little impact to their businesses. Shifting to capital markets. Valuations increased in all of our geographies, except for China, which saw a very small decline. Over the last 1.5 years, global values have decreased despite increases in cash flow due to cap rate expansion. As cap rates have stabilized, cash flow growth now has the ability to translate to value growth. Even though modest, the value uplift in the US and Europe are important as strategic capital investors have been looking for values to not only bottom, but actually turn upwards before committing new capital. With Europe a bit ahead of the US in this regard, it is indeed where we've seen stronger fund-raising interest in recent quarters. We also had a successful equity raise in FIBRA Prologis, raising over $500 million for deployment into both assets to be contributed from our balance sheet, as well as pursuits of third-party acquisitions. Transaction volumes and activity have ticked up in recent weeks and pricing has certainly improved. As always, we are actively looking at acquisition opportunities across all of our markets, but our focus remains on the development of our land bank, which provides an opportunity for over $38 billion of build out with a return on incremental capital of approximately 8.5%. In terms of guidance, in light of our views on demand and leasing pace in the coming quarters, we are reducing our average occupancy guidance to range between 95.75% and 96.75% of the 75 basis point adjustment from the midpoint. It's important to understand that approximately two-thirds of this change stems from our higher rent markets, meaning they create a disproportionate impact on same store in 2024. Same-store growth on a net effective basis will range between 5.5% and 6.5%, a reduction of 150 basis points, which accounts for the average occupancy decline, slightly lower rent change for the year as well as 30 basis points of annualized impact from the one-time items in the first quarter mentioned earlier. Our revised range on a cash basis is now 6.25% to 7.25%. We are maintaining our guidance for strategic capital revenue, excluding promotes, to a range of $530 million to $550 million and reducing our G&A guidance to a range of $415 million to $430 million. We are adjusting development start guidance for the year to a revised range of $2.5 billion to $3 billion at our share, reflecting our discipline in speculative starts and the timing impact this has in the calendar year. As we've always said, we don't consider our guidance to be a target internally and each deal ultimately needs to be rational and accretive on its own. In the end, we are forecasting GAAP earnings to range between $3.15 per share and $3.35 per share. Core FFO, including net promote expense, will range between $5.37 per share and $5.47 per share, while core FFO, excluding promotes, will range from $5.45 per share to $5.55 per share. Our updated guidance calls for core earnings growth of nearly 8% at the midpoint. As we close out, I'd like to underscore the message of the call, which is that while we have only a modest change of view in the intermediate term, our confidence in the long term is intact. And putting timing aside, we are encouraged by the outlook for supply in the back half of this year and '25, have tremendous lease mark-to-market to harvest in the interim, and are pleased to see valuations, fundraising and transaction activity all picking up. With that, I'll turn the call over to the operator for your questions.","evidence_gemma_new":"same-store growth","evidence_llama_3_3":null,"evidence_qwen_3_30b":"same-store growth on a cash basis 5.7% first quarter","gemma_new_max":5.7,"gemma_new_min":5.7,"llama_3_3_max":null,"llama_3_3_min":null,"qwen_3_30b_max":5.7,"qwen_3_30b_min":5.7}
{"symbol":"PLD","year":2024,"quarter":2,"date":"2024-Q2","chunk_id":2,"sub_chunk_id":0,"centroid_label":"net effective and cash same store growth","agreed_value":7.2,"count":3,"chunk":"Tim Arndt: Thank you, Justin, and thank you all for joining our call. We had solid execution against our second quarter plan, which showed improvement over the first quarter, underpinned by a pickup in overall market activity. In fact, we leased 52 million square feet in our portfolio, a 27% increase over the first quarter and one of our highest quarters in the past few years. This helped in delivering occupancy, which outperformed our forecast and more importantly at rent change well over 70%. This was achieved in an environment where decision making has remained slow as many customers optimize existing footprints before committing to new space. As a result, we expect many property owners to continue to prioritize occupancy in select markets with higher availability, keeping pressure on rents. That said, the bright spot continues to be the depletion of the supply pipeline and successive quarters of very low development starts. We believe we are near peak vacancy and this dearth of new supply is setting the stage for more favorable conditions in 2025. As evidenced by very strong rent change this quarter, our lease mark-to-market is serving to sustain meaningful growth through this transition. In terms of results for the quarter, core FFO, excluding promotes, was $1.36 per share and including net promote expense was $1.34 per share. We earned promote revenue within our FIBRA vehicle in Mexico, marking the seventh year of such achievements since its IPO and speaking to the high quality of our portfolio and team in that market. Global occupancy at our share ended the quarter at 96.5%. Our U.S. portfolio continues to outperform the market by over 320 basis points, a meaningful spread that has widened from our historic norm of roughly 175 basis points. As vacancy normalizes in our markets, we expect this flight to quality to continue. We crystallized $100 million of our lease mark to market during the quarter. As of June, we estimate that the net effective market rents are 42% above in-place rents, representing $2 billion of potential NOI. Over 40% of the decline in our lease mark to market ratio is due to this quarter's mark-to-market capture. Net effective rent change was nearly 74% based on commencement and is 64% based on new signings. This metric can be volatile between quarters due to mix, but we continue to expect full year net effective rent change to be above 70%, illustrating the outsized mark to market opportunity that will remain in the near and intermediate term. Our same-store growth was 7.2% on a cash basis, 5.5% on a net effective basis, each strong despite the impact of over 100 basis points of decline in average occupancy year over year, as well as the effect of fair value lease adjustments on net effective growth from the Duke acquisition. We deployed over $700 million into new development projects and acquisitions during the quarter and also closed on over $1 billion in dispositions and contributions at values exceeding our initial expectations. We continue to grow our solar energy business with the installed capacity of our operating portfolio now at 524 megawatts, with an additional 134 megawatts currently under construction, the total of which will generate approximately $55 million of NOI once stabilized in line with our forecast. Finally, we raised $1.2 billion of debt across our balance sheet and funds at a weighted average rate of 4.4% and a term of 11 years. Outside of this total, we also launched our $1 billion commercial paper program, which has thus far saved an average of 60 basis points on our short-term borrowing costs in the U.S. In terms of our markets, there are several encouraging signs for demand, including port volumes on both the East and West Coast, as well as increased volume of proposal activity we've seen across our portfolio. While overall leasing has increased since the first quarter, the tone of our conversations with customers warrants continued caution in the near term. Even though space utilization sits at near a normal range, approximately 85%, we find that many customers simply lack urgency, still prioritizing cost containment in light of an uncertain economic and political environment, both of which will be clearer soon. In the meantime, development starts remain muted and below pre-COVID levels. Quarterly completions peaked last year at 140 million square feet and are projected to approach 50 million square feet by the fourth quarter of this year. We estimate vacancies in our U.S. and European markets will peak over the next few quarters, likely creating a shift in tone as customers assess the requirements heading into 2025. Until then, rent growth will be anemic in most markets and down modestly in some. Southern California remains its own story, where demand remains sluggish and vacancy continues to drift higher. While we've observed some green shoots over the last 90 days, we expect soft conditions to persist over the next 12 months. Globally, we estimate that effective market rents declined 2% during the quarter, with 75% of the decline attributed to SoCal. Because there is so much conflicting data available to investors, it's worth mentioning that we measure market rent growth by evaluating effective rents achieved, not asking rents before concessions, a difference that can be as wide as 5% to 10%. We'd summarize by highlighting that most of the puts and takes across our global portfolio have provided conditions that are largely stable with reason for intermediate-term optimism due to several quarters of low starts and subdued but positive demand. Turning to capital markets. Value saw modest increases in the second quarter for our U.S. and European funds. There's greater depth amongst buyers of logistics properties and lenders are more active, together reducing yield requirements. In particular, buyer pools for well-located core product are growing now with multiple bidders back in the mix. We saw this very clearly in a large portfolio sale we closed this quarter, which was originally brought to the market last fall. Interest was reasonable at the time, but we felt pricing was off, elected to wait, and achieved 28% higher value in the end. I'd like to provide a brief update on our data center business, where we are having very good momentum across our pipeline. As you know, access to power is the key to unlocking value, and our dedicated energy and sustainability teams are leveraging our expertise in net-zero carbon solutions, solar generation, and battery storage to ensure that we're in the pole position with all of the major utilities. To date, we have secured 1.3 gigawatts of power. Of this, 450 megawatts is currently under construction in $1.2 billion of TEI. 300 megawatts is in active pre-development with an expected $700 million of TEI, leaving 550 megawatts as available and currently undergoing build-to-suit discussions. Beyond all of this, we are also in advanced stages of procurement for an additional 1.5 gigawatts, which is key to delivering on our five-year outlook for $7 billion to $8 billion of total data center investment. Overall, we've made significant progress growing this business and are optimistic about the targets we laid out at our Investor Day. Turning to guidance. We are making few changes as the year is playing out to our expectations. As such, we're maintaining our forecast for average occupancy, same-store, G&A, development starts, and stabilizations. There are only a few small changes otherwise. We are lowering our guidance for strategic capital revenue by $10 million only to account for the impact of FX rates, which are hedged elsewhere under P&L and will not affect overall earnings. Due to the increased activity we're seeing in the capital markets and deals completed year-to-date, we are increasing our acquisitions guidance to a new range of $1 billion to $1.5 billion and similarly increasing our guidance for overall dispositions and contributions to a range of $2.75 billion to $3.65 billion. Ultimately, we are increasing our GAAP earnings to a range of $3.25 to $3.45 per share. Core FFO excluding net promote expense will range between $5.46 and $5.54 per share, while core FFO including promotes will range from $5.39 to $5.47 per share, a slight increase at the midpoint from our prior guidance attributed to the FIBRA promote. Our core earnings guidance calls for nearly 8% growth at the midpoint, which ranks in the 87th percentile of S&P 500 REITs. We've been unique in our ability to generate leading growth over a long period of time, not only through a superior business model and portfolio, but also from our commitment to leveraging all that comes from our scale, including adjacent verticals strategic to our core business. Our focus is simply to continue to deliver on this industry-leading and durable growth. As we close, I'd also like to highlight an upcoming event, our annual GROUNDBREAKERS Thought Leadership Forum on October 2nd in London. The program is taking shape as our best yet, exploring the surprising intersection of logistics and health, energy, and even fashion. Additional information for the forum is available on our website, and we hope to see you there or online. With that, I'll hand the call back to the operator for your questions.","evidence_gemma_new":"same-store growth","evidence_llama_3_3":"same-store growth second quarter","evidence_qwen_3_30b":"same-store growth 7.2% on a cash basis","gemma_new_max":7.2,"gemma_new_min":7.2,"llama_3_3_max":7.2,"llama_3_3_min":7.2,"qwen_3_30b_max":7.2,"qwen_3_30b_min":7.2}
{"symbol":"PLD","year":2024,"quarter":3,"date":"2024-Q3","chunk_id":2,"sub_chunk_id":0,"centroid_label":"net effective and cash same store growth","agreed_value":6.75,"count":2,"chunk":"Tim Arndt: Thank you, Justin, and welcome to everybody joining our call. Before diving in, I'd like to share our concern for those affected by the recent hurricanes in the U.S. and Europe that impacted our employees, customers and communities. Thankfully, our teams are safe and their proactive customer outreach and assistance has been outstanding. Our property sustained limited damage for such strong storms. Overall, we are pleased with our operating and financial results as the third quarter played out to our expectations. While occupancy and rent softened against the backdrop of positive yet subdued demand, we continue to deliver impressive net effective rent change due to the still powerful lease mark-to-market embedded in our portfolio, which bridges us through this soft patch to the next cycle of rent growth. Turning to the quarter, core FFO, excluding net promote expense, was $1.45 per share and included in net promotes was $1.43 per share. These results were slightly ahead of our forecast and the quarter included approximately $0.03 of income from the Prologis Ventures' exit. Period-ending occupancy was 96.2% [at our share] (ph), nearly 300 basis points above the market as the flight to quality continues. Net effective rent change was 68% and cash rent change was 44%. We captured over $90 million of NOI by rolling leases up to market. The portfolio produced net effective and cash same store growth of 6.2% and 7.2%, respectively. Revenues were impacted by approximately 35 basis points of bad debt, which is elevated from our normal 15 to 20 basis points. While bankruptcy filings are on the rise broadly, the good news is that the space we've taken back as a result has had embedded rental upside of over 60%. Our overall portfolio lease mark-to-market finished the quarter at 34%, representing $1.6 billion of potential NOI. Finally, on the balance sheet, we raised $4.6 billion of new debt across Prologis and our funds at a weighted average rate of 4.6% and the maturity of approximately nine years. In terms of deployment, we had a very active quarter. We started over $0.5 billion in development projects, including incremental capital to an existing data center development now pre-leased to a hyperscale customer with a turnkey buildout. We expanded our land bank, driving our potential development opportunity over $40 billion, which now includes our first two projects in India that support over 5 million square feet of new development. We deployed over $1.4 billion in third-party acquisitions. Year-to-date, we have acquired over 14 million square feet of strategic assets at an estimated 20% discount to replacement cost. We started development on 54 megawatts of new energy systems. Our momentum here is building, and we continue to have and we expect to have generation capacity well over 600 megawatts at the end of this year, with good line of sight to our 1 gigawatt goal by the end of 2025. As mentioned, Prologis Ventures had a successful exit of an early round investment in the Japanese workforce solution, [indiscernible]. This produced a 9-times multiple on our investment, realizing a 65% IRR. Beyond the economics, our strategy and supply chain venture investing has delivered valuable insights for Prologis and our customers. Finally, FIBRA Prologis, our strategic capital vehicle in Mexico, successfully closed a tender for the shares of Terrafina, of which it now owns nearly 80%, enhancing its leadership position in one of our best-performing and highest-growth global markets. Turning to the operating environment, conditions remain soft in many of our markets, and as we've described over the last few quarters, this is despite healthy GDP and consumption growth. We ascribe the weaker relationship between economic output and industrial absorption to the availability built into the supply chain through COVID, originally earmarked for resiliency, but now available to operators as a source for cost containment. But ultimately, the ability to rely on this [excess] (ph) is diminishing as utilization reaches a level that will force decision making and expansion, the pace of which will vary by market. Many customers are making progress in reducing this capacity through growth, while others are gaining efficiencies through consolidation. In the end, it's all serving to hold net absorption below pre-COVID levels, impacting rents. Globally, we estimate that market rents decreased approximately 3% this quarter and roughly half this amount when excluding Southern California. As we noted before, Southern California will take the longest to reach equilibrium. While activity has improved, the remaining amounts of excess capacity will simply take time to work through. That said, it's important to keep this context, our SoCal portfolio generated 84% rent change on commencements this quarter even as it led the globe in market rent decline, a great example of the interplay between the spot reduction in rents against our lease mark-to-market. This has us well positioned to navigate the cyclical downturn and taking it a step further, we see the structural investment case for SoCal as strengthening with new supply barriers that come into effect from recently enacted legislation and continued focus on carbon emissions. As always, the rent picture is mixed and there remain many markets that are either flat on rents or positive, such as Houston, Atlanta, Nashville, Northern Europe, and of course, LatAm remains very strong. Overall, bottoming process is underway, and we expect demand to remain soft in the near term. Looking ahead, market vacancy is at or near its peak and will hover there as utilization improves, and global rents will bottom sometime mid next year. It stands to reason then that the near-term growth will be affected by the path market rents and occupancy have already taken. We remain very positive on the outlook for our business, as vacancies are still low in the context of history, starts are down significantly, and supply deliveries are falling below their pre-COVID levels. Additionally, with replacement cost rents approximately 15% above today's market, even with land values marked down by a third from their peak, the long-term growth trajectory remains highly favorable. Moving on to capital markets, we've seen improved pricing and activity in the transaction market and values continue to grow. U.S. and European values, again, increased approximately 1% in the quarter, and Mexico saw an impressive 2.2%. With the bottom seemingly in, our strategic capital business had its most productive quarter in the last two years, raising a net $460 million. Overall, it appears private market sentiment is stronger than the public markets. During the quarter, transaction volumes increased and unlevered IRRs compressed another 25 basis points. In terms of guidance, which I'll review [at our share] (ph), we are tightening our forecast for average occupancy to a range of 96% to 96.5%, and also tightening our forecast for cash same store growth to a range of 6.5% to 7%. Our net effective same store growth is for a range of 5.5% to 6%, which has been tightened and reduced modestly at the midpoint for the increased non-cash write-offs we expect from higher bankruptcies in the balance of the year. We are tightening and slightly reducing our G&A guidance to a range of $415 million to $425 million, and tightening our range for strategic capital revenue to $525 million to $535 million. We are reducing our overall development starts guidance to a range of $1.75 billion to $2.25 billion, which reflects both slow decision-making in build-to-suits and discipline on our part in deferring new spec development amid stubborn demand. Of course, we are in the best position to react quickly as conditions warrant with approximately $8 billion of pad-ready development opportunities. We see attractive acquisition opportunities in the market and are increasing our guidance here, taking our range up to $1.75 billion to $2.25 billion. And finally, the forecast for our contribution and disposition activity is increasing to a new range of $3 billion to $4 billion, reflecting the improving transaction market and stronger fundraising and strategic capital. The positive spread between our buying and selling IRRs year-to-date has been approximately 100 basis points. Putting it all together, we are increasing our GAAP earnings to a range of $3.35 to $3.45 per share, core FFO, including net promote expense, will range between $5.42 and $5.46 per share, while core FFO, excluding net promote expense, will range between $5.49 and $5.53 per share, a $0.01 increase from our prior guidance. Core FFO, obviously, excludes our development gain guidance, but it's noteworthy to highlight our increase to a new range of $375 million to $425 million. In closing, we had a very productive quarter in which we delivered strong operating results, high occupancy, high rent change and meaningful same store growth in a challenging market environment. Alongside that performance, it's clear that we are focused on the future as evidenced in our very active deployment, spanning our global reach and product offerings. The company is well-positioned to capitalize on the structural demand for logistics real estate and our focus on operational excellence, customer centricity and value creation will continue to drive strong performance across all market cycles. Consistent with this drive for excellence, I'd be remiss to not highlight our annual GROUNDBREAKERS forum, which we just held in London. It featured some of the most innovative companies of our day, and we heard from the likes of the legendary Fred Smith of FedEx and Sir Tony Blair amongst many others. GROUNDBREAKERS deepens our customer relationships and builds upon our thought leadership across the supply chain and its emerging foundation for clean energy and digital infrastructure. It's great to see so many of you there, and a replay of the event is available on our website. With that, I'll hand the call back to the operator for your questions. Unfortunately, Hamid is feeling under the weather today, and while he's on the call, he may be limited in his responses. Operator?","evidence_gemma_new":"cash same store growth","evidence_llama_3_3":null,"evidence_qwen_3_30b":"cash same store growth","gemma_new_max":6.75,"gemma_new_min":6.75,"llama_3_3_max":null,"llama_3_3_min":null,"qwen_3_30b_max":6.75,"qwen_3_30b_min":6.75}
{"symbol":"PLD","year":2024,"quarter":3,"date":"2024-Q3","chunk_id":2,"sub_chunk_id":0,"centroid_label":"net effective and cash same store growth","agreed_value":5.75,"count":2,"chunk":"Tim Arndt: Thank you, Justin, and welcome to everybody joining our call. Before diving in, I'd like to share our concern for those affected by the recent hurricanes in the U.S. and Europe that impacted our employees, customers and communities. Thankfully, our teams are safe and their proactive customer outreach and assistance has been outstanding. Our property sustained limited damage for such strong storms. Overall, we are pleased with our operating and financial results as the third quarter played out to our expectations. While occupancy and rent softened against the backdrop of positive yet subdued demand, we continue to deliver impressive net effective rent change due to the still powerful lease mark-to-market embedded in our portfolio, which bridges us through this soft patch to the next cycle of rent growth. Turning to the quarter, core FFO, excluding net promote expense, was $1.45 per share and included in net promotes was $1.43 per share. These results were slightly ahead of our forecast and the quarter included approximately $0.03 of income from the Prologis Ventures' exit. Period-ending occupancy was 96.2% [at our share] (ph), nearly 300 basis points above the market as the flight to quality continues. Net effective rent change was 68% and cash rent change was 44%. We captured over $90 million of NOI by rolling leases up to market. The portfolio produced net effective and cash same store growth of 6.2% and 7.2%, respectively. Revenues were impacted by approximately 35 basis points of bad debt, which is elevated from our normal 15 to 20 basis points. While bankruptcy filings are on the rise broadly, the good news is that the space we've taken back as a result has had embedded rental upside of over 60%. Our overall portfolio lease mark-to-market finished the quarter at 34%, representing $1.6 billion of potential NOI. Finally, on the balance sheet, we raised $4.6 billion of new debt across Prologis and our funds at a weighted average rate of 4.6% and the maturity of approximately nine years. In terms of deployment, we had a very active quarter. We started over $0.5 billion in development projects, including incremental capital to an existing data center development now pre-leased to a hyperscale customer with a turnkey buildout. We expanded our land bank, driving our potential development opportunity over $40 billion, which now includes our first two projects in India that support over 5 million square feet of new development. We deployed over $1.4 billion in third-party acquisitions. Year-to-date, we have acquired over 14 million square feet of strategic assets at an estimated 20% discount to replacement cost. We started development on 54 megawatts of new energy systems. Our momentum here is building, and we continue to have and we expect to have generation capacity well over 600 megawatts at the end of this year, with good line of sight to our 1 gigawatt goal by the end of 2025. As mentioned, Prologis Ventures had a successful exit of an early round investment in the Japanese workforce solution, [indiscernible]. This produced a 9-times multiple on our investment, realizing a 65% IRR. Beyond the economics, our strategy and supply chain venture investing has delivered valuable insights for Prologis and our customers. Finally, FIBRA Prologis, our strategic capital vehicle in Mexico, successfully closed a tender for the shares of Terrafina, of which it now owns nearly 80%, enhancing its leadership position in one of our best-performing and highest-growth global markets. Turning to the operating environment, conditions remain soft in many of our markets, and as we've described over the last few quarters, this is despite healthy GDP and consumption growth. We ascribe the weaker relationship between economic output and industrial absorption to the availability built into the supply chain through COVID, originally earmarked for resiliency, but now available to operators as a source for cost containment. But ultimately, the ability to rely on this [excess] (ph) is diminishing as utilization reaches a level that will force decision making and expansion, the pace of which will vary by market. Many customers are making progress in reducing this capacity through growth, while others are gaining efficiencies through consolidation. In the end, it's all serving to hold net absorption below pre-COVID levels, impacting rents. Globally, we estimate that market rents decreased approximately 3% this quarter and roughly half this amount when excluding Southern California. As we noted before, Southern California will take the longest to reach equilibrium. While activity has improved, the remaining amounts of excess capacity will simply take time to work through. That said, it's important to keep this context, our SoCal portfolio generated 84% rent change on commencements this quarter even as it led the globe in market rent decline, a great example of the interplay between the spot reduction in rents against our lease mark-to-market. This has us well positioned to navigate the cyclical downturn and taking it a step further, we see the structural investment case for SoCal as strengthening with new supply barriers that come into effect from recently enacted legislation and continued focus on carbon emissions. As always, the rent picture is mixed and there remain many markets that are either flat on rents or positive, such as Houston, Atlanta, Nashville, Northern Europe, and of course, LatAm remains very strong. Overall, bottoming process is underway, and we expect demand to remain soft in the near term. Looking ahead, market vacancy is at or near its peak and will hover there as utilization improves, and global rents will bottom sometime mid next year. It stands to reason then that the near-term growth will be affected by the path market rents and occupancy have already taken. We remain very positive on the outlook for our business, as vacancies are still low in the context of history, starts are down significantly, and supply deliveries are falling below their pre-COVID levels. Additionally, with replacement cost rents approximately 15% above today's market, even with land values marked down by a third from their peak, the long-term growth trajectory remains highly favorable. Moving on to capital markets, we've seen improved pricing and activity in the transaction market and values continue to grow. U.S. and European values, again, increased approximately 1% in the quarter, and Mexico saw an impressive 2.2%. With the bottom seemingly in, our strategic capital business had its most productive quarter in the last two years, raising a net $460 million. Overall, it appears private market sentiment is stronger than the public markets. During the quarter, transaction volumes increased and unlevered IRRs compressed another 25 basis points. In terms of guidance, which I'll review [at our share] (ph), we are tightening our forecast for average occupancy to a range of 96% to 96.5%, and also tightening our forecast for cash same store growth to a range of 6.5% to 7%. Our net effective same store growth is for a range of 5.5% to 6%, which has been tightened and reduced modestly at the midpoint for the increased non-cash write-offs we expect from higher bankruptcies in the balance of the year. We are tightening and slightly reducing our G&A guidance to a range of $415 million to $425 million, and tightening our range for strategic capital revenue to $525 million to $535 million. We are reducing our overall development starts guidance to a range of $1.75 billion to $2.25 billion, which reflects both slow decision-making in build-to-suits and discipline on our part in deferring new spec development amid stubborn demand. Of course, we are in the best position to react quickly as conditions warrant with approximately $8 billion of pad-ready development opportunities. We see attractive acquisition opportunities in the market and are increasing our guidance here, taking our range up to $1.75 billion to $2.25 billion. And finally, the forecast for our contribution and disposition activity is increasing to a new range of $3 billion to $4 billion, reflecting the improving transaction market and stronger fundraising and strategic capital. The positive spread between our buying and selling IRRs year-to-date has been approximately 100 basis points. Putting it all together, we are increasing our GAAP earnings to a range of $3.35 to $3.45 per share, core FFO, including net promote expense, will range between $5.42 and $5.46 per share, while core FFO, excluding net promote expense, will range between $5.49 and $5.53 per share, a $0.01 increase from our prior guidance. Core FFO, obviously, excludes our development gain guidance, but it's noteworthy to highlight our increase to a new range of $375 million to $425 million. In closing, we had a very productive quarter in which we delivered strong operating results, high occupancy, high rent change and meaningful same store growth in a challenging market environment. Alongside that performance, it's clear that we are focused on the future as evidenced in our very active deployment, spanning our global reach and product offerings. The company is well-positioned to capitalize on the structural demand for logistics real estate and our focus on operational excellence, customer centricity and value creation will continue to drive strong performance across all market cycles. Consistent with this drive for excellence, I'd be remiss to not highlight our annual GROUNDBREAKERS forum, which we just held in London. It featured some of the most innovative companies of our day, and we heard from the likes of the legendary Fred Smith of FedEx and Sir Tony Blair amongst many others. GROUNDBREAKERS deepens our customer relationships and builds upon our thought leadership across the supply chain and its emerging foundation for clean energy and digital infrastructure. It's great to see so many of you there, and a replay of the event is available on our website. With that, I'll hand the call back to the operator for your questions. Unfortunately, Hamid is feeling under the weather today, and while he's on the call, he may be limited in his responses. Operator?","evidence_gemma_new":"net effective same store growth","evidence_llama_3_3":null,"evidence_qwen_3_30b":"net effective same store growth","gemma_new_max":5.75,"gemma_new_min":5.75,"llama_3_3_max":null,"llama_3_3_min":null,"qwen_3_30b_max":5.75,"qwen_3_30b_min":5.75}
{"symbol":"PLD","year":2024,"quarter":4,"date":"2024-Q4","chunk_id":46,"sub_chunk_id":0,"centroid_label":"net effective and cash same store growth","agreed_value":0.067,"count":2,"chunk":"Blaine Heck: Great. Thanks. Can you give an update on your overall mark-to-market throughout the portfolio? And secondly, I guess, how should we think about the cadence of same-store NOI throughout 2025? You're coming off a fourth quarter at 6.7% cash same-store NOI. So should we expect it to gradually come down throughout '25 and end the year somewhere below that 4.5% cash midpoint? Or is there more nuance and seasonality in the forecast, given that you mentioned, I think that occupancy would build back up towards the end of the year? Any commentary there would be helpful.","evidence_gemma_new":"cash same-store NOI","evidence_llama_3_3":"cash same-store NOI fourth quarter","evidence_qwen_3_30b":null,"gemma_new_max":0.067,"gemma_new_min":0.067,"llama_3_3_max":0.067,"llama_3_3_min":0.067,"qwen_3_30b_max":null,"qwen_3_30b_min":null}
{"symbol":"PLD","year":2024,"quarter":4,"date":"2024-Q4","chunk_id":2,"sub_chunk_id":0,"centroid_label":"net effective and cash same store growth","agreed_value":6.6,"count":2,"chunk":"Tim Arndt: Thanks, Justin. Good morning, everybody and thank you for joining our call. I'd like to begin by recognizing the devastating wildfires still affecting Los Angeles. We operate a large portfolio there, but more importantly, we have colleagues, customers, and their communities struggling with the aftermath. It's too early to predict the full ramifications, but we'll continue to support the response and stay connected with local and state leaders as well as service organizations as the region works to recover. We have no doubt that a vibrant and dynamic Los Angeles will emerge from this crisis even stronger. In our business, the bottoming process across our markets continues to progress. Leasing in our portfolio accelerated following the U.S. election, and the pipeline has started the year at healthy levels. During the quarter, we signed more than 60 million square feet of leases, a company record, and saw interest diversify across customer profile, size requirements and markets. Looking ahead, we believe market vacancy is topping out and rents will inflect later this year. Turning to our results. Core FFO, excluding net promote income was $1.42 per share and including net promotes was $1.50 per share. Our full-year results ended at the top end of our guidance range, and in the end represent 8.4% growth over 2023, putting us in the 86th percentile of all REITs. Average occupancy was 95.8% for the quarter, 96.3% for the year. Net effective rent change during the quarter was 66% and on a full-year basis was 69%, activity which added over $340 million in annualized NOI. Our net effective lease mark-to-market finished the year at 30% and represents a further $1.4 billion of incremental NOI. And finally, net effective and cash same-store growth during the quarter were 6.6% and 6.7% respectively. In terms of capital recycling, we had another active quarter. Importantly, we contributed $2 billion of assets to our strategic capital ventures, bringing the full-year total to over $3.3 billion. While capital flows in 2024 remain challenging, we did raise over $1.7 billion across the platform, driving the growth in third-party AUM by over 7%. We disposed of over $900 million of assets in the quarter and acquired approximately $450 million. And stepping back, over the full-year, we disposed of over $2.1 billion and reinvested into a similar $2.3 billion of acquisitions at a positive IRR spread of 170 basis points, demonstrating our ability to self-fund and earn a return regardless of the yield environment. Included in our disposition activity for the quarter was the sale of our Elk Grove data center in Chicago. Elk Grove was a logistics asset that we converted to a powered shell before securing a build-to-suit turnkey transaction with a hyperscaler last Fall. We simultaneously identified a buyer and closed in the fourth quarter at very attractive economics. Because the property was owned by USLF for our structuring, procurement, leasing and monetization efforts, Prologis earned a value creation fee of $112 million, which was not included in our prior guidance due to the uncertainty and the timing of the transaction. Elk Grove is a great showcase of our data center development capabilities, which are more comprehensive than most. Today, we have 1.4 gigawatts of secured power and 1.6 gigawatts in advanced stages of procurement. Over the next 10 years, we see 10 gigawatts of development potential across our portfolio. As a platform, we have the team, customer relationships, development and energy expertise, advanced procurement capabilities and the capital required to create significant value for our shareholders. Turning to market conditions. As mentioned, quantitative measures of the market such as vacancy and changes in market rent met our expectations. More importantly, indicators in our pipeline and dialogue with customers have us encouraged that conditions are set for a recovery in net absorption, leading to a bottoming of global rents. It's worth highlighting that our non-U.S. portfolio fared better in rent growth over 2024, particularly in places like Japan, the U.K., Southern Europe, and Latin America, which all grew over the year. Customer engagement is improving and we saw a notable increase in activity amongst our larger global customers who often lead in the recovery of demand as we've seen in past cycles. The improvement in decision-making is reflected in our proprietary metrics where proposals increased earlier in the year, lingered for a period of time and then began converting more meaningfully after the election. That leasing pattern translated to elevated gestation also seen in our metrics. Our '25 forecast for net absorption calls for approximately 20% improvement over 2024, gradually building over the year. We also know that completions will decline significantly, contributing to a supply forecast that is approximately 35% below '24. As such, we expect a decline in vacancy over the year, which will pave the way for rent growth. Longer term, we continue to see the path for uplift from market rents to replacement cost rents, a dynamic that will build upon our already significant lease mark-to-market. Today, we see replacement costs as 50% higher than in-place rents. The capital markets were active with fourth quarter transaction volumes that put the year in total back to pre-COVID levels. Unlevered IRRs have compressed to the mid-7% range, and valuations as reported in our third-party appraisals had the globe marginally up this quarter. Capital raising in our open-end vehicles was more muted in the fourth quarter as investors paused to take in changes in the yield environment, but we remain confident in our expectation for growing capital raises in 2025 as the pipeline is solid and conversations are active. In terms of guidance, which I'll review at our share, we are forecasting average occupancy to range between 94.5% and 95.5%, which contemplates a dip in occupancy over the next one to two quarters, some of which is seasonal before rebuilding closer to 96% by the end of the year. Net effective same-store growth is forecasted to be in a range of 3.5% to 4.5% and cash in the range of 4% to 5%, each driven by still significant rent change. Our G&A forecast is for $440 million to $460 million and our strategic capital revenue forecast calls for $560 million to $580 million. As for deployment, we are forecasting development starts to range between $2.25 billion and $2.75 billion. We will continue to be selective in our starts and clearly have a lot of capacity to grow this number as conditions, rents and returns warrant. As a reminder, data center starts are excluded from this guidance, given their lumpiness. That said, we do expect new projects to begin in 2025, likely in a range of 200 to 400 megawatts. Acquisitions will range between $750 million and $1.25 billion and our combined contribution and disposition activity will range between $2.5 billion and $3.5 billion. Our development portfolio now stands at $4.7 billion with estimated value creation of $1.1 billion, $450 million to $600 million of which we expect to realize this year. Finally, 2025 will be an important year for our energy business where our forecast is to hit our 1-gigawatt goal for solar generation and storage by year-end. In total, we are establishing our initial GAAP earnings guidance in a range of $3.45 to $3.70 per share. Core FFO, including net promote expense will range between $5.65 and $5.81 per share, while core FFO, excluding net promote expense will range between $5.70 and $5.86 per share. In closing, we navigated a challenging year in terms of an operating environment, clearly unwinding from the overbuilding of the COVID era. Our ability to generate over 8% growth in such an environment is a testament to the resiliency and breadth of our company. We're pleased with the increase in activity and improvement in sentiment that we've seen so far in the last two months. And working through great space amid the favorable supply backdrop will further establish the foundation to build occupancy, grow rents, and increase values, unlocking the full earnings potential in our core business. And finally, we're very excited with what the future holds for our data center and energy initiatives. With that, I'll turn the call over to the operator for your questions. Operator?","evidence_gemma_new":"net effective and cash same-store growth","evidence_llama_3_3":null,"evidence_qwen_3_30b":"net effective same-store growth 6.6% quarter","gemma_new_max":6.6,"gemma_new_min":6.6,"llama_3_3_max":null,"llama_3_3_min":null,"qwen_3_30b_max":6.6,"qwen_3_30b_min":6.6}
{"symbol":"PLD","year":2024,"quarter":4,"date":"2024-Q4","chunk_id":2,"sub_chunk_id":0,"centroid_label":"net effective and cash same store growth","agreed_value":4.0,"count":2,"chunk":"Tim Arndt: Thanks, Justin. Good morning, everybody and thank you for joining our call. I'd like to begin by recognizing the devastating wildfires still affecting Los Angeles. We operate a large portfolio there, but more importantly, we have colleagues, customers, and their communities struggling with the aftermath. It's too early to predict the full ramifications, but we'll continue to support the response and stay connected with local and state leaders as well as service organizations as the region works to recover. We have no doubt that a vibrant and dynamic Los Angeles will emerge from this crisis even stronger. In our business, the bottoming process across our markets continues to progress. Leasing in our portfolio accelerated following the U.S. election, and the pipeline has started the year at healthy levels. During the quarter, we signed more than 60 million square feet of leases, a company record, and saw interest diversify across customer profile, size requirements and markets. Looking ahead, we believe market vacancy is topping out and rents will inflect later this year. Turning to our results. Core FFO, excluding net promote income was $1.42 per share and including net promotes was $1.50 per share. Our full-year results ended at the top end of our guidance range, and in the end represent 8.4% growth over 2023, putting us in the 86th percentile of all REITs. Average occupancy was 95.8% for the quarter, 96.3% for the year. Net effective rent change during the quarter was 66% and on a full-year basis was 69%, activity which added over $340 million in annualized NOI. Our net effective lease mark-to-market finished the year at 30% and represents a further $1.4 billion of incremental NOI. And finally, net effective and cash same-store growth during the quarter were 6.6% and 6.7% respectively. In terms of capital recycling, we had another active quarter. Importantly, we contributed $2 billion of assets to our strategic capital ventures, bringing the full-year total to over $3.3 billion. While capital flows in 2024 remain challenging, we did raise over $1.7 billion across the platform, driving the growth in third-party AUM by over 7%. We disposed of over $900 million of assets in the quarter and acquired approximately $450 million. And stepping back, over the full-year, we disposed of over $2.1 billion and reinvested into a similar $2.3 billion of acquisitions at a positive IRR spread of 170 basis points, demonstrating our ability to self-fund and earn a return regardless of the yield environment. Included in our disposition activity for the quarter was the sale of our Elk Grove data center in Chicago. Elk Grove was a logistics asset that we converted to a powered shell before securing a build-to-suit turnkey transaction with a hyperscaler last Fall. We simultaneously identified a buyer and closed in the fourth quarter at very attractive economics. Because the property was owned by USLF for our structuring, procurement, leasing and monetization efforts, Prologis earned a value creation fee of $112 million, which was not included in our prior guidance due to the uncertainty and the timing of the transaction. Elk Grove is a great showcase of our data center development capabilities, which are more comprehensive than most. Today, we have 1.4 gigawatts of secured power and 1.6 gigawatts in advanced stages of procurement. Over the next 10 years, we see 10 gigawatts of development potential across our portfolio. As a platform, we have the team, customer relationships, development and energy expertise, advanced procurement capabilities and the capital required to create significant value for our shareholders. Turning to market conditions. As mentioned, quantitative measures of the market such as vacancy and changes in market rent met our expectations. More importantly, indicators in our pipeline and dialogue with customers have us encouraged that conditions are set for a recovery in net absorption, leading to a bottoming of global rents. It's worth highlighting that our non-U.S. portfolio fared better in rent growth over 2024, particularly in places like Japan, the U.K., Southern Europe, and Latin America, which all grew over the year. Customer engagement is improving and we saw a notable increase in activity amongst our larger global customers who often lead in the recovery of demand as we've seen in past cycles. The improvement in decision-making is reflected in our proprietary metrics where proposals increased earlier in the year, lingered for a period of time and then began converting more meaningfully after the election. That leasing pattern translated to elevated gestation also seen in our metrics. Our '25 forecast for net absorption calls for approximately 20% improvement over 2024, gradually building over the year. We also know that completions will decline significantly, contributing to a supply forecast that is approximately 35% below '24. As such, we expect a decline in vacancy over the year, which will pave the way for rent growth. Longer term, we continue to see the path for uplift from market rents to replacement cost rents, a dynamic that will build upon our already significant lease mark-to-market. Today, we see replacement costs as 50% higher than in-place rents. The capital markets were active with fourth quarter transaction volumes that put the year in total back to pre-COVID levels. Unlevered IRRs have compressed to the mid-7% range, and valuations as reported in our third-party appraisals had the globe marginally up this quarter. Capital raising in our open-end vehicles was more muted in the fourth quarter as investors paused to take in changes in the yield environment, but we remain confident in our expectation for growing capital raises in 2025 as the pipeline is solid and conversations are active. In terms of guidance, which I'll review at our share, we are forecasting average occupancy to range between 94.5% and 95.5%, which contemplates a dip in occupancy over the next one to two quarters, some of which is seasonal before rebuilding closer to 96% by the end of the year. Net effective same-store growth is forecasted to be in a range of 3.5% to 4.5% and cash in the range of 4% to 5%, each driven by still significant rent change. Our G&A forecast is for $440 million to $460 million and our strategic capital revenue forecast calls for $560 million to $580 million. As for deployment, we are forecasting development starts to range between $2.25 billion and $2.75 billion. We will continue to be selective in our starts and clearly have a lot of capacity to grow this number as conditions, rents and returns warrant. As a reminder, data center starts are excluded from this guidance, given their lumpiness. That said, we do expect new projects to begin in 2025, likely in a range of 200 to 400 megawatts. Acquisitions will range between $750 million and $1.25 billion and our combined contribution and disposition activity will range between $2.5 billion and $3.5 billion. Our development portfolio now stands at $4.7 billion with estimated value creation of $1.1 billion, $450 million to $600 million of which we expect to realize this year. Finally, 2025 will be an important year for our energy business where our forecast is to hit our 1-gigawatt goal for solar generation and storage by year-end. In total, we are establishing our initial GAAP earnings guidance in a range of $3.45 to $3.70 per share. Core FFO, including net promote expense will range between $5.65 and $5.81 per share, while core FFO, excluding net promote expense will range between $5.70 and $5.86 per share. In closing, we navigated a challenging year in terms of an operating environment, clearly unwinding from the overbuilding of the COVID era. Our ability to generate over 8% growth in such an environment is a testament to the resiliency and breadth of our company. We're pleased with the increase in activity and improvement in sentiment that we've seen so far in the last two months. And working through great space amid the favorable supply backdrop will further establish the foundation to build occupancy, grow rents, and increase values, unlocking the full earnings potential in our core business. And finally, we're very excited with what the future holds for our data center and energy initiatives. With that, I'll turn the call over to the operator for your questions. Operator?","evidence_gemma_new":"Net effective same-store growth","evidence_llama_3_3":null,"evidence_qwen_3_30b":"net effective same-store growth 3.5% to 4.5%","gemma_new_max":4.0,"gemma_new_min":4.0,"llama_3_3_max":null,"llama_3_3_min":null,"qwen_3_30b_max":4.0,"qwen_3_30b_min":4.0}
{"symbol":"PLD","year":2024,"quarter":1,"date":"2024-Q1","chunk_id":2,"sub_chunk_id":0,"centroid_label":"net effective basis rent change","agreed_value":68.0,"count":2,"chunk":"Tim Arndt: Good morning and thank you for joining our call. We've had a good start to the year in terms of our operating and financial results in the first quarter. We delivered strong rent change, drove occupancy slightly ahead of our forecast, raised nearly $5 billion in capital, including $750 million in strategic capital, and made important headway in our Energy business. That said, as we evaluate the market, persistent inflation and high interest rates have kept more customers focused on controlling costs. The resulting delay in decision making, easily observed through the first quarter's below average net absorption, will translate to lower leasing volume within the year. Accordingly, we've opted to adjust our guidance early, getting ahead of what looks like a period of occupancy below our forecast in the near term and its effect on same store in a number of our higher rent markets. This is punctuated, of course, by a more pronounced period of correction still underway in Southern California. New starts, however, continues to be surprisingly disciplined, adding to the expectation for limited new supply in the back half of '24, but also extending deeper into '25. When considered alongside muted demand, we arrive at a view that the operating environment has only changed modestly in aggregate, and that demand is simply pushing out by a few quarters. The outcome of this may simply mean moving towards a long-term occupancy expectation more swiftly this year, which sets up for a better next year. Turning to our results for the quarter. Core FFO, excluding promotes, was $1.31 per share and including net promote expense was $1.28 per share, essentially in line with our forecast. Occupancy in the portfolio ended the quarter at 97%. For context, the US market declined 310 basis points since its peak in the summer of '22, while our portfolio's occupancy has only declined 80 basis points, resulting in vacancy today for Prologis that is less than half of that in our markets and reflective of our portfolio quality. Net effective rent change was 68% based on commencements and 70% based on new signings. Following this in-place increase and changes in market rents, our net effective lease mark-to-market stands at 50%, representing over $2.2 billion of rent to harvest without any additional market rent growth from here. Rent growth captured just for the single quarter was approximately $110 million on an annualized basis and at our share. Our same-store growth on a cash basis was 5.7% and on a net effective basis was 4.1%. The same-store from rent change alone was strong at approximately 9%, but is impacted by a 130 basis point change in year-over-year vacancy, as well as 150 basis points from fair value lease adjustments with the Duke portfolio's inclusion in our same-store pool. Additionally, there were approximately 175 basis points of items specific to the quarter, including one-time reconciling items from 2023, as well as unfavorable comps from low expenses last year. We started over $270 million of new developments in the quarter, bringing our portfolio to approximately $7.5 billion at our share, with estimated value creation of over $1.7 billion, a number we feel increasingly confident in with value stabilizing. In our Energy business, we've made meaningful progress on this year's deployment, including the signing of 405 megawatts of long-term storage-related contracts with investment-grade utilities. We also delivered the largest EV fleet charging project in the United States, less than 15 miles from both the ports of LA and Long beach. Finally, we raised $4.1 billion of debt across our balance sheet and funds at a weighted average rate of 4.7% and a term of 10 years. Our debt portfolio has an overall in-place rate of just 3.1%, with more than nine years of average remaining life and liquidity at the end of the quarter of over $5.8 billion. Turning to market conditions. Most broad economic data from unemployment to retail sales to the health of the consumer remain very strong. And while our tour proposal and other proprietary metrics are similarly positive, overall leasing activity and net absorption are running below expectations. Net absorption in the US, for example, was very low this quarter at just 27 million square feet. So while the macro landscape and supply chains continue to generate a need for space, we think it's prudent to expect continued headwinds on overall absorption over the next few quarters. The interest rate environment and its associated volatility have weighed on customer decision making, especially as the 10 year has increased 70 basis points from its level just 90 days ago and expectations for Fed rate cuts have moved from potentially six to now possibly zero. In parallel, sublease and space utilization rates highlight that some customers have available capacity, driven in part by the high rate of absorption through the pandemic. This dynamic of available space intersecting with the desire for cost containment is what leads to lower absorption and is playing out at different rates across submarkets and customers. For example, while slow leasing has persisted so far this year for less capitalized customers and 3PLs, we see a handful of large e-commerce and retail customers further along in this process, such as Amazon, who voiced caution two years ago, but is now active in several global markets and has openly discussed plans to commit to significant amounts of new space. The overall leasing slowdown is most felt in only a handful of markets. Southern California and the Inland Empire being the most acute. In fact, rents in most of our US markets are generally flat, several are up, and it is mainly elongated downtime affecting near-term occupancy and NOI. While Southern California leasing has been challenging, it has not slowed the tremendous uplift we realize every single quarter from rent change on rollover, which was 120% for the market in the first quarter, with the Inland Empire at 156%, nearly the highest in our portfolio. In Europe, rents grew overall during the quarter, which we believe will remain the case over the balance of the year. And of course, LATAM continues to impress with very high occupancy and market rent growth that has led the globe in recent quarters. Overall, global market rents declined slightly over 1% in the quarter, driven mostly by Southern California, and would have been slightly positive if excluded. I'd like to spend a moment on Baltimore, where we own over 18 million square feet and has been a dynamic market of ours for decades. Our employees, customers and properties are all safe following the bridge collapse last month and our customers expect to be able to withstand the disruption with little impact to their businesses. Shifting to capital markets. Valuations increased in all of our geographies, except for China, which saw a very small decline. Over the last 1.5 years, global values have decreased despite increases in cash flow due to cap rate expansion. As cap rates have stabilized, cash flow growth now has the ability to translate to value growth. Even though modest, the value uplift in the US and Europe are important as strategic capital investors have been looking for values to not only bottom, but actually turn upwards before committing new capital. With Europe a bit ahead of the US in this regard, it is indeed where we've seen stronger fund-raising interest in recent quarters. We also had a successful equity raise in FIBRA Prologis, raising over $500 million for deployment into both assets to be contributed from our balance sheet, as well as pursuits of third-party acquisitions. Transaction volumes and activity have ticked up in recent weeks and pricing has certainly improved. As always, we are actively looking at acquisition opportunities across all of our markets, but our focus remains on the development of our land bank, which provides an opportunity for over $38 billion of build out with a return on incremental capital of approximately 8.5%. In terms of guidance, in light of our views on demand and leasing pace in the coming quarters, we are reducing our average occupancy guidance to range between 95.75% and 96.75% of the 75 basis point adjustment from the midpoint. It's important to understand that approximately two-thirds of this change stems from our higher rent markets, meaning they create a disproportionate impact on same store in 2024. Same-store growth on a net effective basis will range between 5.5% and 6.5%, a reduction of 150 basis points, which accounts for the average occupancy decline, slightly lower rent change for the year as well as 30 basis points of annualized impact from the one-time items in the first quarter mentioned earlier. Our revised range on a cash basis is now 6.25% to 7.25%. We are maintaining our guidance for strategic capital revenue, excluding promotes, to a range of $530 million to $550 million and reducing our G&A guidance to a range of $415 million to $430 million. We are adjusting development start guidance for the year to a revised range of $2.5 billion to $3 billion at our share, reflecting our discipline in speculative starts and the timing impact this has in the calendar year. As we've always said, we don't consider our guidance to be a target internally and each deal ultimately needs to be rational and accretive on its own. In the end, we are forecasting GAAP earnings to range between $3.15 per share and $3.35 per share. Core FFO, including net promote expense, will range between $5.37 per share and $5.47 per share, while core FFO, excluding promotes, will range from $5.45 per share to $5.55 per share. Our updated guidance calls for core earnings growth of nearly 8% at the midpoint. As we close out, I'd like to underscore the message of the call, which is that while we have only a modest change of view in the intermediate term, our confidence in the long term is intact. And putting timing aside, we are encouraged by the outlook for supply in the back half of this year and '25, have tremendous lease mark-to-market to harvest in the interim, and are pleased to see valuations, fundraising and transaction activity all picking up. With that, I'll turn the call over to the operator for your questions.","evidence_gemma_new":"net effective rent change","evidence_llama_3_3":null,"evidence_qwen_3_30b":"net effective rent change 68% first quarter","gemma_new_max":68.0,"gemma_new_min":68.0,"llama_3_3_max":null,"llama_3_3_min":null,"qwen_3_30b_max":68.0,"qwen_3_30b_min":68.0}
{"symbol":"PLD","year":2024,"quarter":2,"date":"2024-Q2","chunk_id":2,"sub_chunk_id":0,"centroid_label":"net effective basis rent change","agreed_value":74.0,"count":3,"chunk":"Tim Arndt: Thank you, Justin, and thank you all for joining our call. We had solid execution against our second quarter plan, which showed improvement over the first quarter, underpinned by a pickup in overall market activity. In fact, we leased 52 million square feet in our portfolio, a 27% increase over the first quarter and one of our highest quarters in the past few years. This helped in delivering occupancy, which outperformed our forecast and more importantly at rent change well over 70%. This was achieved in an environment where decision making has remained slow as many customers optimize existing footprints before committing to new space. As a result, we expect many property owners to continue to prioritize occupancy in select markets with higher availability, keeping pressure on rents. That said, the bright spot continues to be the depletion of the supply pipeline and successive quarters of very low development starts. We believe we are near peak vacancy and this dearth of new supply is setting the stage for more favorable conditions in 2025. As evidenced by very strong rent change this quarter, our lease mark-to-market is serving to sustain meaningful growth through this transition. In terms of results for the quarter, core FFO, excluding promotes, was $1.36 per share and including net promote expense was $1.34 per share. We earned promote revenue within our FIBRA vehicle in Mexico, marking the seventh year of such achievements since its IPO and speaking to the high quality of our portfolio and team in that market. Global occupancy at our share ended the quarter at 96.5%. Our U.S. portfolio continues to outperform the market by over 320 basis points, a meaningful spread that has widened from our historic norm of roughly 175 basis points. As vacancy normalizes in our markets, we expect this flight to quality to continue. We crystallized $100 million of our lease mark to market during the quarter. As of June, we estimate that the net effective market rents are 42% above in-place rents, representing $2 billion of potential NOI. Over 40% of the decline in our lease mark to market ratio is due to this quarter's mark-to-market capture. Net effective rent change was nearly 74% based on commencement and is 64% based on new signings. This metric can be volatile between quarters due to mix, but we continue to expect full year net effective rent change to be above 70%, illustrating the outsized mark to market opportunity that will remain in the near and intermediate term. Our same-store growth was 7.2% on a cash basis, 5.5% on a net effective basis, each strong despite the impact of over 100 basis points of decline in average occupancy year over year, as well as the effect of fair value lease adjustments on net effective growth from the Duke acquisition. We deployed over $700 million into new development projects and acquisitions during the quarter and also closed on over $1 billion in dispositions and contributions at values exceeding our initial expectations. We continue to grow our solar energy business with the installed capacity of our operating portfolio now at 524 megawatts, with an additional 134 megawatts currently under construction, the total of which will generate approximately $55 million of NOI once stabilized in line with our forecast. Finally, we raised $1.2 billion of debt across our balance sheet and funds at a weighted average rate of 4.4% and a term of 11 years. Outside of this total, we also launched our $1 billion commercial paper program, which has thus far saved an average of 60 basis points on our short-term borrowing costs in the U.S. In terms of our markets, there are several encouraging signs for demand, including port volumes on both the East and West Coast, as well as increased volume of proposal activity we've seen across our portfolio. While overall leasing has increased since the first quarter, the tone of our conversations with customers warrants continued caution in the near term. Even though space utilization sits at near a normal range, approximately 85%, we find that many customers simply lack urgency, still prioritizing cost containment in light of an uncertain economic and political environment, both of which will be clearer soon. In the meantime, development starts remain muted and below pre-COVID levels. Quarterly completions peaked last year at 140 million square feet and are projected to approach 50 million square feet by the fourth quarter of this year. We estimate vacancies in our U.S. and European markets will peak over the next few quarters, likely creating a shift in tone as customers assess the requirements heading into 2025. Until then, rent growth will be anemic in most markets and down modestly in some. Southern California remains its own story, where demand remains sluggish and vacancy continues to drift higher. While we've observed some green shoots over the last 90 days, we expect soft conditions to persist over the next 12 months. Globally, we estimate that effective market rents declined 2% during the quarter, with 75% of the decline attributed to SoCal. Because there is so much conflicting data available to investors, it's worth mentioning that we measure market rent growth by evaluating effective rents achieved, not asking rents before concessions, a difference that can be as wide as 5% to 10%. We'd summarize by highlighting that most of the puts and takes across our global portfolio have provided conditions that are largely stable with reason for intermediate-term optimism due to several quarters of low starts and subdued but positive demand. Turning to capital markets. Value saw modest increases in the second quarter for our U.S. and European funds. There's greater depth amongst buyers of logistics properties and lenders are more active, together reducing yield requirements. In particular, buyer pools for well-located core product are growing now with multiple bidders back in the mix. We saw this very clearly in a large portfolio sale we closed this quarter, which was originally brought to the market last fall. Interest was reasonable at the time, but we felt pricing was off, elected to wait, and achieved 28% higher value in the end. I'd like to provide a brief update on our data center business, where we are having very good momentum across our pipeline. As you know, access to power is the key to unlocking value, and our dedicated energy and sustainability teams are leveraging our expertise in net-zero carbon solutions, solar generation, and battery storage to ensure that we're in the pole position with all of the major utilities. To date, we have secured 1.3 gigawatts of power. Of this, 450 megawatts is currently under construction in $1.2 billion of TEI. 300 megawatts is in active pre-development with an expected $700 million of TEI, leaving 550 megawatts as available and currently undergoing build-to-suit discussions. Beyond all of this, we are also in advanced stages of procurement for an additional 1.5 gigawatts, which is key to delivering on our five-year outlook for $7 billion to $8 billion of total data center investment. Overall, we've made significant progress growing this business and are optimistic about the targets we laid out at our Investor Day. Turning to guidance. We are making few changes as the year is playing out to our expectations. As such, we're maintaining our forecast for average occupancy, same-store, G&A, development starts, and stabilizations. There are only a few small changes otherwise. We are lowering our guidance for strategic capital revenue by $10 million only to account for the impact of FX rates, which are hedged elsewhere under P&L and will not affect overall earnings. Due to the increased activity we're seeing in the capital markets and deals completed year-to-date, we are increasing our acquisitions guidance to a new range of $1 billion to $1.5 billion and similarly increasing our guidance for overall dispositions and contributions to a range of $2.75 billion to $3.65 billion. Ultimately, we are increasing our GAAP earnings to a range of $3.25 to $3.45 per share. Core FFO excluding net promote expense will range between $5.46 and $5.54 per share, while core FFO including promotes will range from $5.39 to $5.47 per share, a slight increase at the midpoint from our prior guidance attributed to the FIBRA promote. Our core earnings guidance calls for nearly 8% growth at the midpoint, which ranks in the 87th percentile of S&P 500 REITs. We've been unique in our ability to generate leading growth over a long period of time, not only through a superior business model and portfolio, but also from our commitment to leveraging all that comes from our scale, including adjacent verticals strategic to our core business. Our focus is simply to continue to deliver on this industry-leading and durable growth. As we close, I'd also like to highlight an upcoming event, our annual GROUNDBREAKERS Thought Leadership Forum on October 2nd in London. The program is taking shape as our best yet, exploring the surprising intersection of logistics and health, energy, and even fashion. Additional information for the forum is available on our website, and we hope to see you there or online. With that, I'll hand the call back to the operator for your questions.","evidence_gemma_new":"net effective rent change","evidence_llama_3_3":"net effective rent change second quarter","evidence_qwen_3_30b":"Net effective rent change nearly 74% based on commencement","gemma_new_max":74.0,"gemma_new_min":74.0,"llama_3_3_max":74.0,"llama_3_3_min":74.0,"qwen_3_30b_max":74.0,"qwen_3_30b_min":74.0}
{"symbol":"PLD","year":2024,"quarter":3,"date":"2024-Q3","chunk_id":2,"sub_chunk_id":0,"centroid_label":"net effective basis rent change","agreed_value":68.0,"count":2,"chunk":"Tim Arndt: Thank you, Justin, and welcome to everybody joining our call. Before diving in, I'd like to share our concern for those affected by the recent hurricanes in the U.S. and Europe that impacted our employees, customers and communities. Thankfully, our teams are safe and their proactive customer outreach and assistance has been outstanding. Our property sustained limited damage for such strong storms. Overall, we are pleased with our operating and financial results as the third quarter played out to our expectations. While occupancy and rent softened against the backdrop of positive yet subdued demand, we continue to deliver impressive net effective rent change due to the still powerful lease mark-to-market embedded in our portfolio, which bridges us through this soft patch to the next cycle of rent growth. Turning to the quarter, core FFO, excluding net promote expense, was $1.45 per share and included in net promotes was $1.43 per share. These results were slightly ahead of our forecast and the quarter included approximately $0.03 of income from the Prologis Ventures' exit. Period-ending occupancy was 96.2% [at our share] (ph), nearly 300 basis points above the market as the flight to quality continues. Net effective rent change was 68% and cash rent change was 44%. We captured over $90 million of NOI by rolling leases up to market. The portfolio produced net effective and cash same store growth of 6.2% and 7.2%, respectively. Revenues were impacted by approximately 35 basis points of bad debt, which is elevated from our normal 15 to 20 basis points. While bankruptcy filings are on the rise broadly, the good news is that the space we've taken back as a result has had embedded rental upside of over 60%. Our overall portfolio lease mark-to-market finished the quarter at 34%, representing $1.6 billion of potential NOI. Finally, on the balance sheet, we raised $4.6 billion of new debt across Prologis and our funds at a weighted average rate of 4.6% and the maturity of approximately nine years. In terms of deployment, we had a very active quarter. We started over $0.5 billion in development projects, including incremental capital to an existing data center development now pre-leased to a hyperscale customer with a turnkey buildout. We expanded our land bank, driving our potential development opportunity over $40 billion, which now includes our first two projects in India that support over 5 million square feet of new development. We deployed over $1.4 billion in third-party acquisitions. Year-to-date, we have acquired over 14 million square feet of strategic assets at an estimated 20% discount to replacement cost. We started development on 54 megawatts of new energy systems. Our momentum here is building, and we continue to have and we expect to have generation capacity well over 600 megawatts at the end of this year, with good line of sight to our 1 gigawatt goal by the end of 2025. As mentioned, Prologis Ventures had a successful exit of an early round investment in the Japanese workforce solution, [indiscernible]. This produced a 9-times multiple on our investment, realizing a 65% IRR. Beyond the economics, our strategy and supply chain venture investing has delivered valuable insights for Prologis and our customers. Finally, FIBRA Prologis, our strategic capital vehicle in Mexico, successfully closed a tender for the shares of Terrafina, of which it now owns nearly 80%, enhancing its leadership position in one of our best-performing and highest-growth global markets. Turning to the operating environment, conditions remain soft in many of our markets, and as we've described over the last few quarters, this is despite healthy GDP and consumption growth. We ascribe the weaker relationship between economic output and industrial absorption to the availability built into the supply chain through COVID, originally earmarked for resiliency, but now available to operators as a source for cost containment. But ultimately, the ability to rely on this [excess] (ph) is diminishing as utilization reaches a level that will force decision making and expansion, the pace of which will vary by market. Many customers are making progress in reducing this capacity through growth, while others are gaining efficiencies through consolidation. In the end, it's all serving to hold net absorption below pre-COVID levels, impacting rents. Globally, we estimate that market rents decreased approximately 3% this quarter and roughly half this amount when excluding Southern California. As we noted before, Southern California will take the longest to reach equilibrium. While activity has improved, the remaining amounts of excess capacity will simply take time to work through. That said, it's important to keep this context, our SoCal portfolio generated 84% rent change on commencements this quarter even as it led the globe in market rent decline, a great example of the interplay between the spot reduction in rents against our lease mark-to-market. This has us well positioned to navigate the cyclical downturn and taking it a step further, we see the structural investment case for SoCal as strengthening with new supply barriers that come into effect from recently enacted legislation and continued focus on carbon emissions. As always, the rent picture is mixed and there remain many markets that are either flat on rents or positive, such as Houston, Atlanta, Nashville, Northern Europe, and of course, LatAm remains very strong. Overall, bottoming process is underway, and we expect demand to remain soft in the near term. Looking ahead, market vacancy is at or near its peak and will hover there as utilization improves, and global rents will bottom sometime mid next year. It stands to reason then that the near-term growth will be affected by the path market rents and occupancy have already taken. We remain very positive on the outlook for our business, as vacancies are still low in the context of history, starts are down significantly, and supply deliveries are falling below their pre-COVID levels. Additionally, with replacement cost rents approximately 15% above today's market, even with land values marked down by a third from their peak, the long-term growth trajectory remains highly favorable. Moving on to capital markets, we've seen improved pricing and activity in the transaction market and values continue to grow. U.S. and European values, again, increased approximately 1% in the quarter, and Mexico saw an impressive 2.2%. With the bottom seemingly in, our strategic capital business had its most productive quarter in the last two years, raising a net $460 million. Overall, it appears private market sentiment is stronger than the public markets. During the quarter, transaction volumes increased and unlevered IRRs compressed another 25 basis points. In terms of guidance, which I'll review [at our share] (ph), we are tightening our forecast for average occupancy to a range of 96% to 96.5%, and also tightening our forecast for cash same store growth to a range of 6.5% to 7%. Our net effective same store growth is for a range of 5.5% to 6%, which has been tightened and reduced modestly at the midpoint for the increased non-cash write-offs we expect from higher bankruptcies in the balance of the year. We are tightening and slightly reducing our G&A guidance to a range of $415 million to $425 million, and tightening our range for strategic capital revenue to $525 million to $535 million. We are reducing our overall development starts guidance to a range of $1.75 billion to $2.25 billion, which reflects both slow decision-making in build-to-suits and discipline on our part in deferring new spec development amid stubborn demand. Of course, we are in the best position to react quickly as conditions warrant with approximately $8 billion of pad-ready development opportunities. We see attractive acquisition opportunities in the market and are increasing our guidance here, taking our range up to $1.75 billion to $2.25 billion. And finally, the forecast for our contribution and disposition activity is increasing to a new range of $3 billion to $4 billion, reflecting the improving transaction market and stronger fundraising and strategic capital. The positive spread between our buying and selling IRRs year-to-date has been approximately 100 basis points. Putting it all together, we are increasing our GAAP earnings to a range of $3.35 to $3.45 per share, core FFO, including net promote expense, will range between $5.42 and $5.46 per share, while core FFO, excluding net promote expense, will range between $5.49 and $5.53 per share, a $0.01 increase from our prior guidance. Core FFO, obviously, excludes our development gain guidance, but it's noteworthy to highlight our increase to a new range of $375 million to $425 million. In closing, we had a very productive quarter in which we delivered strong operating results, high occupancy, high rent change and meaningful same store growth in a challenging market environment. Alongside that performance, it's clear that we are focused on the future as evidenced in our very active deployment, spanning our global reach and product offerings. The company is well-positioned to capitalize on the structural demand for logistics real estate and our focus on operational excellence, customer centricity and value creation will continue to drive strong performance across all market cycles. Consistent with this drive for excellence, I'd be remiss to not highlight our annual GROUNDBREAKERS forum, which we just held in London. It featured some of the most innovative companies of our day, and we heard from the likes of the legendary Fred Smith of FedEx and Sir Tony Blair amongst many others. GROUNDBREAKERS deepens our customer relationships and builds upon our thought leadership across the supply chain and its emerging foundation for clean energy and digital infrastructure. It's great to see so many of you there, and a replay of the event is available on our website. With that, I'll hand the call back to the operator for your questions. Unfortunately, Hamid is feeling under the weather today, and while he's on the call, he may be limited in his responses. Operator?","evidence_gemma_new":"Net effective rent change","evidence_llama_3_3":null,"evidence_qwen_3_30b":"net effective rent change","gemma_new_max":68.0,"gemma_new_min":68.0,"llama_3_3_max":null,"llama_3_3_min":null,"qwen_3_30b_max":68.0,"qwen_3_30b_min":68.0}
{"symbol":"PLD","year":2024,"quarter":4,"date":"2024-Q4","chunk_id":2,"sub_chunk_id":0,"centroid_label":"net effective basis rent change","agreed_value":66.0,"count":2,"chunk":"Tim Arndt: Thanks, Justin. Good morning, everybody and thank you for joining our call. I'd like to begin by recognizing the devastating wildfires still affecting Los Angeles. We operate a large portfolio there, but more importantly, we have colleagues, customers, and their communities struggling with the aftermath. It's too early to predict the full ramifications, but we'll continue to support the response and stay connected with local and state leaders as well as service organizations as the region works to recover. We have no doubt that a vibrant and dynamic Los Angeles will emerge from this crisis even stronger. In our business, the bottoming process across our markets continues to progress. Leasing in our portfolio accelerated following the U.S. election, and the pipeline has started the year at healthy levels. During the quarter, we signed more than 60 million square feet of leases, a company record, and saw interest diversify across customer profile, size requirements and markets. Looking ahead, we believe market vacancy is topping out and rents will inflect later this year. Turning to our results. Core FFO, excluding net promote income was $1.42 per share and including net promotes was $1.50 per share. Our full-year results ended at the top end of our guidance range, and in the end represent 8.4% growth over 2023, putting us in the 86th percentile of all REITs. Average occupancy was 95.8% for the quarter, 96.3% for the year. Net effective rent change during the quarter was 66% and on a full-year basis was 69%, activity which added over $340 million in annualized NOI. Our net effective lease mark-to-market finished the year at 30% and represents a further $1.4 billion of incremental NOI. And finally, net effective and cash same-store growth during the quarter were 6.6% and 6.7% respectively. In terms of capital recycling, we had another active quarter. Importantly, we contributed $2 billion of assets to our strategic capital ventures, bringing the full-year total to over $3.3 billion. While capital flows in 2024 remain challenging, we did raise over $1.7 billion across the platform, driving the growth in third-party AUM by over 7%. We disposed of over $900 million of assets in the quarter and acquired approximately $450 million. And stepping back, over the full-year, we disposed of over $2.1 billion and reinvested into a similar $2.3 billion of acquisitions at a positive IRR spread of 170 basis points, demonstrating our ability to self-fund and earn a return regardless of the yield environment. Included in our disposition activity for the quarter was the sale of our Elk Grove data center in Chicago. Elk Grove was a logistics asset that we converted to a powered shell before securing a build-to-suit turnkey transaction with a hyperscaler last Fall. We simultaneously identified a buyer and closed in the fourth quarter at very attractive economics. Because the property was owned by USLF for our structuring, procurement, leasing and monetization efforts, Prologis earned a value creation fee of $112 million, which was not included in our prior guidance due to the uncertainty and the timing of the transaction. Elk Grove is a great showcase of our data center development capabilities, which are more comprehensive than most. Today, we have 1.4 gigawatts of secured power and 1.6 gigawatts in advanced stages of procurement. Over the next 10 years, we see 10 gigawatts of development potential across our portfolio. As a platform, we have the team, customer relationships, development and energy expertise, advanced procurement capabilities and the capital required to create significant value for our shareholders. Turning to market conditions. As mentioned, quantitative measures of the market such as vacancy and changes in market rent met our expectations. More importantly, indicators in our pipeline and dialogue with customers have us encouraged that conditions are set for a recovery in net absorption, leading to a bottoming of global rents. It's worth highlighting that our non-U.S. portfolio fared better in rent growth over 2024, particularly in places like Japan, the U.K., Southern Europe, and Latin America, which all grew over the year. Customer engagement is improving and we saw a notable increase in activity amongst our larger global customers who often lead in the recovery of demand as we've seen in past cycles. The improvement in decision-making is reflected in our proprietary metrics where proposals increased earlier in the year, lingered for a period of time and then began converting more meaningfully after the election. That leasing pattern translated to elevated gestation also seen in our metrics. Our '25 forecast for net absorption calls for approximately 20% improvement over 2024, gradually building over the year. We also know that completions will decline significantly, contributing to a supply forecast that is approximately 35% below '24. As such, we expect a decline in vacancy over the year, which will pave the way for rent growth. Longer term, we continue to see the path for uplift from market rents to replacement cost rents, a dynamic that will build upon our already significant lease mark-to-market. Today, we see replacement costs as 50% higher than in-place rents. The capital markets were active with fourth quarter transaction volumes that put the year in total back to pre-COVID levels. Unlevered IRRs have compressed to the mid-7% range, and valuations as reported in our third-party appraisals had the globe marginally up this quarter. Capital raising in our open-end vehicles was more muted in the fourth quarter as investors paused to take in changes in the yield environment, but we remain confident in our expectation for growing capital raises in 2025 as the pipeline is solid and conversations are active. In terms of guidance, which I'll review at our share, we are forecasting average occupancy to range between 94.5% and 95.5%, which contemplates a dip in occupancy over the next one to two quarters, some of which is seasonal before rebuilding closer to 96% by the end of the year. Net effective same-store growth is forecasted to be in a range of 3.5% to 4.5% and cash in the range of 4% to 5%, each driven by still significant rent change. Our G&A forecast is for $440 million to $460 million and our strategic capital revenue forecast calls for $560 million to $580 million. As for deployment, we are forecasting development starts to range between $2.25 billion and $2.75 billion. We will continue to be selective in our starts and clearly have a lot of capacity to grow this number as conditions, rents and returns warrant. As a reminder, data center starts are excluded from this guidance, given their lumpiness. That said, we do expect new projects to begin in 2025, likely in a range of 200 to 400 megawatts. Acquisitions will range between $750 million and $1.25 billion and our combined contribution and disposition activity will range between $2.5 billion and $3.5 billion. Our development portfolio now stands at $4.7 billion with estimated value creation of $1.1 billion, $450 million to $600 million of which we expect to realize this year. Finally, 2025 will be an important year for our energy business where our forecast is to hit our 1-gigawatt goal for solar generation and storage by year-end. In total, we are establishing our initial GAAP earnings guidance in a range of $3.45 to $3.70 per share. Core FFO, including net promote expense will range between $5.65 and $5.81 per share, while core FFO, excluding net promote expense will range between $5.70 and $5.86 per share. In closing, we navigated a challenging year in terms of an operating environment, clearly unwinding from the overbuilding of the COVID era. Our ability to generate over 8% growth in such an environment is a testament to the resiliency and breadth of our company. We're pleased with the increase in activity and improvement in sentiment that we've seen so far in the last two months. And working through great space amid the favorable supply backdrop will further establish the foundation to build occupancy, grow rents, and increase values, unlocking the full earnings potential in our core business. And finally, we're very excited with what the future holds for our data center and energy initiatives. With that, I'll turn the call over to the operator for your questions. Operator?","evidence_gemma_new":"Net effective rent change","evidence_llama_3_3":null,"evidence_qwen_3_30b":"net effective rent change 66% quarter","gemma_new_max":66.0,"gemma_new_min":66.0,"llama_3_3_max":null,"llama_3_3_min":null,"qwen_3_30b_max":66.0,"qwen_3_30b_min":66.0}
{"symbol":"PLD","year":2023,"quarter":2,"date":"2023-Q2","chunk_id":15,"sub_chunk_id":0,"centroid_label":"occupancy","agreed_value":0.95,"count":2,"chunk":"Chris Caton: Sure. Let me take a stab at that, because I've seen this now a couple of times over the last 30, 40 years. Southern California is really being adversely affected by two things. One, ports volumes. I think this labor strike has gone on longer than most people anticipated. And the timing of it was such that people have to make decisions about the Christmas season and they've shifted volumes to other ports. And that affect Southern California and honestly, the longer disclose out, I believe the worse it will be for Southern California in terms of doing permanent damage. From now from everything we hear and we're not an expert on this, things are apparently heading in a positive direction with respect to a resolution. But you read the same things we do. So, I don't have any unique perspectives on that. The other, the other difference with Southern California is just pricing. I mean, you had between \u201820 and \u201822, about an 130% increase in rents in Southern California, that compares to less than half of that for the overall markets that we operate in. So, there is more price sensitivity now because it's a very, very expensive market. So to the extent possible, people will shift to adjacent markets. And combined, it's not just price, but up until a quarter ago, occupancies in the Inland Empire was 99 point something percent. So people couldn't even get the space that they wanted. I think with the more normalized vacancy level and we're still not at normal. I mean, normalized in my experience is 95% occupancy and that would have been great for the last 15 or 20 years. I think with more normalized occupancy, you'll see, Peep and a resolution of the labor strike. I think you see a more normal pattern from which you can draw some conclusions.","evidence_gemma_new":"occupancy","evidence_llama_3_3":"occupancy","evidence_qwen_3_30b":null,"gemma_new_max":0.95,"gemma_new_min":0.95,"llama_3_3_max":0.95,"llama_3_3_min":0.95,"qwen_3_30b_max":null,"qwen_3_30b_min":null}
{"symbol":"PLD","year":2023,"quarter":3,"date":"2023-Q3","chunk_id":2,"sub_chunk_id":0,"centroid_label":"occupancy","agreed_value":97.5,"count":2,"chunk":"Tim Arndt: Thanks Jill. Good morning, everybody, and thank you for joining our call. The third quarter marked a continuation of themes we have been anticipating for more than a year, namely; growing supply translating to increased market vacancy; continued moderation of demand; and market rent growth that will slow until the low levels of new starts drive reduced availability over-time. We have operated in accordance with these views in both our approach to leasing, as well as timing of new development. What\u2019s incremental to our forecast is that continued hawkish posture from central banks and the impact it\u2019s had on rates is delaying decision-making and willingness to take expansion space early. The geopolitical backdrop has clearly become more troubling as well amounting to a lack of clarity that will likely weigh on demand. In the meantime, and also playing out to our expectations is that our existing lease mark-to-market will drive durable earnings growth as it did in delivering record rent change this quarter, as well as strong earnings and same-store growth. We remain focused on the fact that we own assets critical to the supply chain with long-term secular drivers that remain intact. Further, the outlook for future supply will continue to face structural barriers, ultimately driving occupancy, rents and values. In terms of our results, we had an excellent quarter with core FFO excluding net promote income of $1.33 per share. This result includes approximately $0.03 of one-time items related to interest and termination income, as well as the timing of expenses, which we can address in Q&A. Occupancy ticked up over the quarter to 97.5%, aided by retention of 77%. Net effective rent change was a record 84% at our share, with notable contributions from Northern New Jersey at 200%, Toronto at 187% and Southern California at 165%. Same-store growth on a net effective and cash basis was 9.3% and 9.5%, respectively, driven predominantly by rent change. We saw market rents grow roughly 60 basis points during the quarter, the slower pace embedded in our forecast. In combination with the strong build of in-place rents, our lease mark-to-market recalculates to 62% as of September. We raised approximately $1.4 billion in new financings at an average interest rate of 3.2%, comprised principally of $760 million within our ventures, as well as a recast of our Yen credit facility increasing our aggregate line availability. In combination with our cash position, we ended the quarter with a record $6.9 billion of liquidity. Finally, it\u2019s noteworthy that our debt-to-EBITDA has remained very low and essentially flat all year, hovering in the mid-4 times range, despite our increased financing activity, a demonstration of the tremendous growth in our nominal EBITDA. Turning to our markets, while rising, vacancy remains historically very low in the U.S., Mexico and Europe. Market vacancy increased approximately 70 basis points during the quarter in the U.S., driven by low absorption, as well as recently delivered but unleased completions. Europe experienced similar dynamics with an overall increase in market vacancy of 50 basis points. At the macro level our expectations for the U.S. are for completions to outpace net absorption by a cumulative 150 million square feet to 200 million square feet over the next three quarters. Then, over the subsequent three quarters, we see that trend reversing with demand exceeding supply and recovering the net 75 million to 125 million square feet. That trend may extend further into 2025, as we believe development starts over the next several quarters are likely to remain low. Whatever the precise path, we expect that as vacancy normalizes over the long-term, our portfolio will outperform the market due to both its location and quality, as well as the strength of our relationships and operating platform. In this regard, our portfolio has been largely resilient to moderating demand. Our teams would describe the depth of our leasing pipeline as consistent with the last few quarters. In coming fresh off of one of our customer advisory board sessions, it\u2019s clear that our customers have plans to continue to expand their footprint, increasing capacity and resiliency. However, what\u2019s also clear is that they are slowing such investments until there is more clarity in the economic environment. In the U.S., rents increased in most of our markets with the strongest located in the Sunbelt, Mid-Atlantic and Northern California regions. Europe and Mexico were also bright spots for growth in the quarter. Rents across our Southern California sub-markets declined approximately 2% as it continues to adjust to higher levels of vacancy. While the markets and outlook are mixed, we remain confident in continued market rent growth in the U.S. and globally over the coming year, albeit at a slow pace while the pipeline continues to get absorbed. From our appraisals, U.S. values declined approximately 3% while European values remain stable, in fact, having a very modest write-up. The difference isn\u2019t too surprising as the Fed\u2019s language around inflation and the economy has had more effect in the U.S. capital markets, driving the 10-year up 100 basis points since our last earnings call, compared to the bund [ph] at just 50 basis points. We believe that this is likely another instance, as we saw one year ago, where U.S. appraisals at the end of the quarter have not had sufficient time to react to the increase in rates and we are thus pausing on appraisal-based activity in USLF for at least one quarter. Elsewhere, values in Mexico are up 8.5%, while China experienced its first meaningful decline of 6.5%, a write-down that we don\u2019t believe has fully run its course. Our funds experienced their first quarter of net positive inflows with approximately $180 million of new commitments versus new redemption requests of $115 million. Given other activity in the quarter, the net redemptions have been reduced from their height of $1.6 billion to approximately $700 million or roughly 2% of third-party AUMs. In terms of our own deployment, development starts ramped up during the quarter, crossing $1 billion, over half of which is related to a data center opportunity in our central region, a testament to our higher and better use strategy and strategically located land bank. Also notable is the acquisition of $118 million of land, including a strategic parcel in Las Vegas, which will build out an additional 10 million square feet over time and brings our total build-out of land globally to over $40 billion. We are laser focused in identifying and executing on value creation in our core business, our energy business, and their adjacencies. Combined with the debt capacity and liquidity we have worked hard to build and preserve, we see the environment as rich with opportunity. Moving to guidance, we are increasing the average occupancy to a range between 97.25% and 97.5%. As a result, we are increasing our same-store guidance to a range of 9% to 9.25% on a net effective basis and 9.75% to 10% on a cash basis. We are maintaining our strategic capital revenue guidance, excluding promotes to a range of $520 million to $530 million and adjusting G&A guidance to range between $390 million and $395 million. Our development starts guidance is increased to a new range of $3 billion to $3.5 billion at our share, driven primarily from the data center start mentioned earlier. We have $500 million of contribution and disposition activity during the quarter and given our commentary on USLF valuations, we are pausing our planned contributions into that vehicle this quarter and reducing our combined contribution and disposition guidance to a range of $1.7 billion to $2.3 billion. In the end, we are adjusting guidance for GAAP earnings to a range of $3.30 per share to $3.35 per share. We are increasing our core FFO, including promotes guidance to a range of $5.58 per share to $5.60 per share and are increasing core FFO, excluding promotes to a range between $5.08 per share and $5.10 per share, growth of nearly 10.5%. I know that many of you are focusing on 2024, so I\u2019d like to take an opportunity to remind you that the Duke portfolio will be entering the same-store pool in 2024, which will widen the recently observed delta between net effective and cash same-store growth. This is, of course, because Duke rents were mark-to-market at close one year ago, so its contribution to net effective same-store growth and earnings will be minimal, even though the cash rent change will be on par with the rest of the Prologis portfolio. In closing, we are navigating the current environment, assured that whatever the economy brings in the short-term, we are positioned to outperform over the long-term. This stems from not only the premier logistics portfolio and customer franchise with one of the best balance sheets amongst corporates, but also highly visible earnings and portfolio growth ahead of us. We know that turbulent times can bring opportunity for those who are prepared and that\u2019s been central to our strategy and management as a company. I\u2019d like to also remind you of our upcoming Investor Forum on December 13th in New York, our first in four years. We are looking forward to spending the day with you, sharing more about our business, outlook and opportunities ahead. Additional information is available on our website and in our earnings press release. And with that, I will hand it back to the Operator for your questions.","evidence_gemma_new":"occupancy","evidence_llama_3_3":null,"evidence_qwen_3_30b":"occupancy 97.5% retention 77%","gemma_new_max":97.375,"gemma_new_min":97.375,"llama_3_3_max":null,"llama_3_3_min":null,"qwen_3_30b_max":97.5,"qwen_3_30b_min":97.5}
{"symbol":"PLD","year":2024,"quarter":1,"date":"2024-Q1","chunk_id":2,"sub_chunk_id":0,"centroid_label":"occupancy","agreed_value":97.0,"count":2,"chunk":"Tim Arndt: Good morning and thank you for joining our call. We've had a good start to the year in terms of our operating and financial results in the first quarter. We delivered strong rent change, drove occupancy slightly ahead of our forecast, raised nearly $5 billion in capital, including $750 million in strategic capital, and made important headway in our Energy business. That said, as we evaluate the market, persistent inflation and high interest rates have kept more customers focused on controlling costs. The resulting delay in decision making, easily observed through the first quarter's below average net absorption, will translate to lower leasing volume within the year. Accordingly, we've opted to adjust our guidance early, getting ahead of what looks like a period of occupancy below our forecast in the near term and its effect on same store in a number of our higher rent markets. This is punctuated, of course, by a more pronounced period of correction still underway in Southern California. New starts, however, continues to be surprisingly disciplined, adding to the expectation for limited new supply in the back half of '24, but also extending deeper into '25. When considered alongside muted demand, we arrive at a view that the operating environment has only changed modestly in aggregate, and that demand is simply pushing out by a few quarters. The outcome of this may simply mean moving towards a long-term occupancy expectation more swiftly this year, which sets up for a better next year. Turning to our results for the quarter. Core FFO, excluding promotes, was $1.31 per share and including net promote expense was $1.28 per share, essentially in line with our forecast. Occupancy in the portfolio ended the quarter at 97%. For context, the US market declined 310 basis points since its peak in the summer of '22, while our portfolio's occupancy has only declined 80 basis points, resulting in vacancy today for Prologis that is less than half of that in our markets and reflective of our portfolio quality. Net effective rent change was 68% based on commencements and 70% based on new signings. Following this in-place increase and changes in market rents, our net effective lease mark-to-market stands at 50%, representing over $2.2 billion of rent to harvest without any additional market rent growth from here. Rent growth captured just for the single quarter was approximately $110 million on an annualized basis and at our share. Our same-store growth on a cash basis was 5.7% and on a net effective basis was 4.1%. The same-store from rent change alone was strong at approximately 9%, but is impacted by a 130 basis point change in year-over-year vacancy, as well as 150 basis points from fair value lease adjustments with the Duke portfolio's inclusion in our same-store pool. Additionally, there were approximately 175 basis points of items specific to the quarter, including one-time reconciling items from 2023, as well as unfavorable comps from low expenses last year. We started over $270 million of new developments in the quarter, bringing our portfolio to approximately $7.5 billion at our share, with estimated value creation of over $1.7 billion, a number we feel increasingly confident in with value stabilizing. In our Energy business, we've made meaningful progress on this year's deployment, including the signing of 405 megawatts of long-term storage-related contracts with investment-grade utilities. We also delivered the largest EV fleet charging project in the United States, less than 15 miles from both the ports of LA and Long beach. Finally, we raised $4.1 billion of debt across our balance sheet and funds at a weighted average rate of 4.7% and a term of 10 years. Our debt portfolio has an overall in-place rate of just 3.1%, with more than nine years of average remaining life and liquidity at the end of the quarter of over $5.8 billion. Turning to market conditions. Most broad economic data from unemployment to retail sales to the health of the consumer remain very strong. And while our tour proposal and other proprietary metrics are similarly positive, overall leasing activity and net absorption are running below expectations. Net absorption in the US, for example, was very low this quarter at just 27 million square feet. So while the macro landscape and supply chains continue to generate a need for space, we think it's prudent to expect continued headwinds on overall absorption over the next few quarters. The interest rate environment and its associated volatility have weighed on customer decision making, especially as the 10 year has increased 70 basis points from its level just 90 days ago and expectations for Fed rate cuts have moved from potentially six to now possibly zero. In parallel, sublease and space utilization rates highlight that some customers have available capacity, driven in part by the high rate of absorption through the pandemic. This dynamic of available space intersecting with the desire for cost containment is what leads to lower absorption and is playing out at different rates across submarkets and customers. For example, while slow leasing has persisted so far this year for less capitalized customers and 3PLs, we see a handful of large e-commerce and retail customers further along in this process, such as Amazon, who voiced caution two years ago, but is now active in several global markets and has openly discussed plans to commit to significant amounts of new space. The overall leasing slowdown is most felt in only a handful of markets. Southern California and the Inland Empire being the most acute. In fact, rents in most of our US markets are generally flat, several are up, and it is mainly elongated downtime affecting near-term occupancy and NOI. While Southern California leasing has been challenging, it has not slowed the tremendous uplift we realize every single quarter from rent change on rollover, which was 120% for the market in the first quarter, with the Inland Empire at 156%, nearly the highest in our portfolio. In Europe, rents grew overall during the quarter, which we believe will remain the case over the balance of the year. And of course, LATAM continues to impress with very high occupancy and market rent growth that has led the globe in recent quarters. Overall, global market rents declined slightly over 1% in the quarter, driven mostly by Southern California, and would have been slightly positive if excluded. I'd like to spend a moment on Baltimore, where we own over 18 million square feet and has been a dynamic market of ours for decades. Our employees, customers and properties are all safe following the bridge collapse last month and our customers expect to be able to withstand the disruption with little impact to their businesses. Shifting to capital markets. Valuations increased in all of our geographies, except for China, which saw a very small decline. Over the last 1.5 years, global values have decreased despite increases in cash flow due to cap rate expansion. As cap rates have stabilized, cash flow growth now has the ability to translate to value growth. Even though modest, the value uplift in the US and Europe are important as strategic capital investors have been looking for values to not only bottom, but actually turn upwards before committing new capital. With Europe a bit ahead of the US in this regard, it is indeed where we've seen stronger fund-raising interest in recent quarters. We also had a successful equity raise in FIBRA Prologis, raising over $500 million for deployment into both assets to be contributed from our balance sheet, as well as pursuits of third-party acquisitions. Transaction volumes and activity have ticked up in recent weeks and pricing has certainly improved. As always, we are actively looking at acquisition opportunities across all of our markets, but our focus remains on the development of our land bank, which provides an opportunity for over $38 billion of build out with a return on incremental capital of approximately 8.5%. In terms of guidance, in light of our views on demand and leasing pace in the coming quarters, we are reducing our average occupancy guidance to range between 95.75% and 96.75% of the 75 basis point adjustment from the midpoint. It's important to understand that approximately two-thirds of this change stems from our higher rent markets, meaning they create a disproportionate impact on same store in 2024. Same-store growth on a net effective basis will range between 5.5% and 6.5%, a reduction of 150 basis points, which accounts for the average occupancy decline, slightly lower rent change for the year as well as 30 basis points of annualized impact from the one-time items in the first quarter mentioned earlier. Our revised range on a cash basis is now 6.25% to 7.25%. We are maintaining our guidance for strategic capital revenue, excluding promotes, to a range of $530 million to $550 million and reducing our G&A guidance to a range of $415 million to $430 million. We are adjusting development start guidance for the year to a revised range of $2.5 billion to $3 billion at our share, reflecting our discipline in speculative starts and the timing impact this has in the calendar year. As we've always said, we don't consider our guidance to be a target internally and each deal ultimately needs to be rational and accretive on its own. In the end, we are forecasting GAAP earnings to range between $3.15 per share and $3.35 per share. Core FFO, including net promote expense, will range between $5.37 per share and $5.47 per share, while core FFO, excluding promotes, will range from $5.45 per share to $5.55 per share. Our updated guidance calls for core earnings growth of nearly 8% at the midpoint. As we close out, I'd like to underscore the message of the call, which is that while we have only a modest change of view in the intermediate term, our confidence in the long term is intact. And putting timing aside, we are encouraged by the outlook for supply in the back half of this year and '25, have tremendous lease mark-to-market to harvest in the interim, and are pleased to see valuations, fundraising and transaction activity all picking up. With that, I'll turn the call over to the operator for your questions.","evidence_gemma_new":"occupancy","evidence_llama_3_3":null,"evidence_qwen_3_30b":"Occupancy 97% first quarter","gemma_new_max":96.25,"gemma_new_min":96.25,"llama_3_3_max":null,"llama_3_3_min":null,"qwen_3_30b_max":97.0,"qwen_3_30b_min":97.0}
{"symbol":"PLD","year":2024,"quarter":2,"date":"2024-Q2","chunk_id":2,"sub_chunk_id":0,"centroid_label":"occupancy","agreed_value":70.0,"count":2,"chunk":"Tim Arndt: Thank you, Justin, and thank you all for joining our call. We had solid execution against our second quarter plan, which showed improvement over the first quarter, underpinned by a pickup in overall market activity. In fact, we leased 52 million square feet in our portfolio, a 27% increase over the first quarter and one of our highest quarters in the past few years. This helped in delivering occupancy, which outperformed our forecast and more importantly at rent change well over 70%. This was achieved in an environment where decision making has remained slow as many customers optimize existing footprints before committing to new space. As a result, we expect many property owners to continue to prioritize occupancy in select markets with higher availability, keeping pressure on rents. That said, the bright spot continues to be the depletion of the supply pipeline and successive quarters of very low development starts. We believe we are near peak vacancy and this dearth of new supply is setting the stage for more favorable conditions in 2025. As evidenced by very strong rent change this quarter, our lease mark-to-market is serving to sustain meaningful growth through this transition. In terms of results for the quarter, core FFO, excluding promotes, was $1.36 per share and including net promote expense was $1.34 per share. We earned promote revenue within our FIBRA vehicle in Mexico, marking the seventh year of such achievements since its IPO and speaking to the high quality of our portfolio and team in that market. Global occupancy at our share ended the quarter at 96.5%. Our U.S. portfolio continues to outperform the market by over 320 basis points, a meaningful spread that has widened from our historic norm of roughly 175 basis points. As vacancy normalizes in our markets, we expect this flight to quality to continue. We crystallized $100 million of our lease mark to market during the quarter. As of June, we estimate that the net effective market rents are 42% above in-place rents, representing $2 billion of potential NOI. Over 40% of the decline in our lease mark to market ratio is due to this quarter's mark-to-market capture. Net effective rent change was nearly 74% based on commencement and is 64% based on new signings. This metric can be volatile between quarters due to mix, but we continue to expect full year net effective rent change to be above 70%, illustrating the outsized mark to market opportunity that will remain in the near and intermediate term. Our same-store growth was 7.2% on a cash basis, 5.5% on a net effective basis, each strong despite the impact of over 100 basis points of decline in average occupancy year over year, as well as the effect of fair value lease adjustments on net effective growth from the Duke acquisition. We deployed over $700 million into new development projects and acquisitions during the quarter and also closed on over $1 billion in dispositions and contributions at values exceeding our initial expectations. We continue to grow our solar energy business with the installed capacity of our operating portfolio now at 524 megawatts, with an additional 134 megawatts currently under construction, the total of which will generate approximately $55 million of NOI once stabilized in line with our forecast. Finally, we raised $1.2 billion of debt across our balance sheet and funds at a weighted average rate of 4.4% and a term of 11 years. Outside of this total, we also launched our $1 billion commercial paper program, which has thus far saved an average of 60 basis points on our short-term borrowing costs in the U.S. In terms of our markets, there are several encouraging signs for demand, including port volumes on both the East and West Coast, as well as increased volume of proposal activity we've seen across our portfolio. While overall leasing has increased since the first quarter, the tone of our conversations with customers warrants continued caution in the near term. Even though space utilization sits at near a normal range, approximately 85%, we find that many customers simply lack urgency, still prioritizing cost containment in light of an uncertain economic and political environment, both of which will be clearer soon. In the meantime, development starts remain muted and below pre-COVID levels. Quarterly completions peaked last year at 140 million square feet and are projected to approach 50 million square feet by the fourth quarter of this year. We estimate vacancies in our U.S. and European markets will peak over the next few quarters, likely creating a shift in tone as customers assess the requirements heading into 2025. Until then, rent growth will be anemic in most markets and down modestly in some. Southern California remains its own story, where demand remains sluggish and vacancy continues to drift higher. While we've observed some green shoots over the last 90 days, we expect soft conditions to persist over the next 12 months. Globally, we estimate that effective market rents declined 2% during the quarter, with 75% of the decline attributed to SoCal. Because there is so much conflicting data available to investors, it's worth mentioning that we measure market rent growth by evaluating effective rents achieved, not asking rents before concessions, a difference that can be as wide as 5% to 10%. We'd summarize by highlighting that most of the puts and takes across our global portfolio have provided conditions that are largely stable with reason for intermediate-term optimism due to several quarters of low starts and subdued but positive demand. Turning to capital markets. Value saw modest increases in the second quarter for our U.S. and European funds. There's greater depth amongst buyers of logistics properties and lenders are more active, together reducing yield requirements. In particular, buyer pools for well-located core product are growing now with multiple bidders back in the mix. We saw this very clearly in a large portfolio sale we closed this quarter, which was originally brought to the market last fall. Interest was reasonable at the time, but we felt pricing was off, elected to wait, and achieved 28% higher value in the end. I'd like to provide a brief update on our data center business, where we are having very good momentum across our pipeline. As you know, access to power is the key to unlocking value, and our dedicated energy and sustainability teams are leveraging our expertise in net-zero carbon solutions, solar generation, and battery storage to ensure that we're in the pole position with all of the major utilities. To date, we have secured 1.3 gigawatts of power. Of this, 450 megawatts is currently under construction in $1.2 billion of TEI. 300 megawatts is in active pre-development with an expected $700 million of TEI, leaving 550 megawatts as available and currently undergoing build-to-suit discussions. Beyond all of this, we are also in advanced stages of procurement for an additional 1.5 gigawatts, which is key to delivering on our five-year outlook for $7 billion to $8 billion of total data center investment. Overall, we've made significant progress growing this business and are optimistic about the targets we laid out at our Investor Day. Turning to guidance. We are making few changes as the year is playing out to our expectations. As such, we're maintaining our forecast for average occupancy, same-store, G&A, development starts, and stabilizations. There are only a few small changes otherwise. We are lowering our guidance for strategic capital revenue by $10 million only to account for the impact of FX rates, which are hedged elsewhere under P&L and will not affect overall earnings. Due to the increased activity we're seeing in the capital markets and deals completed year-to-date, we are increasing our acquisitions guidance to a new range of $1 billion to $1.5 billion and similarly increasing our guidance for overall dispositions and contributions to a range of $2.75 billion to $3.65 billion. Ultimately, we are increasing our GAAP earnings to a range of $3.25 to $3.45 per share. Core FFO excluding net promote expense will range between $5.46 and $5.54 per share, while core FFO including promotes will range from $5.39 to $5.47 per share, a slight increase at the midpoint from our prior guidance attributed to the FIBRA promote. Our core earnings guidance calls for nearly 8% growth at the midpoint, which ranks in the 87th percentile of S&P 500 REITs. We've been unique in our ability to generate leading growth over a long period of time, not only through a superior business model and portfolio, but also from our commitment to leveraging all that comes from our scale, including adjacent verticals strategic to our core business. Our focus is simply to continue to deliver on this industry-leading and durable growth. As we close, I'd also like to highlight an upcoming event, our annual GROUNDBREAKERS Thought Leadership Forum on October 2nd in London. The program is taking shape as our best yet, exploring the surprising intersection of logistics and health, energy, and even fashion. Additional information for the forum is available on our website, and we hope to see you there or online. With that, I'll hand the call back to the operator for your questions.","evidence_gemma_new":"occupancy rent change","evidence_llama_3_3":null,"evidence_qwen_3_30b":"occupancy rent change 70%","gemma_new_max":70.0,"gemma_new_min":70.0,"llama_3_3_max":null,"llama_3_3_min":null,"qwen_3_30b_max":70.0,"qwen_3_30b_min":70.0}
{"symbol":"PLD","year":2024,"quarter":2,"date":"2024-Q2","chunk_id":43,"sub_chunk_id":0,"centroid_label":"occupancy","agreed_value":96.0,"count":2,"chunk":"John Kim: Thank you. I wanted to ask about the occupancy trajectory for the remainder of this year. At NAREIT, there was some discussion that this would dip below 96% in the near term and then recover. Is that still on the table, or are you now past that risk given the end of the quarter at 96.4%?","evidence_gemma_new":"occupancy end of the quarter","evidence_llama_3_3":null,"evidence_qwen_3_30b":"occupancy end of the quarter","gemma_new_max":96.4,"gemma_new_min":96.4,"llama_3_3_max":null,"llama_3_3_min":null,"qwen_3_30b_max":96.4,"qwen_3_30b_min":96.4}
{"symbol":"PLD","year":2024,"quarter":4,"date":"2024-Q4","chunk_id":27,"sub_chunk_id":0,"centroid_label":"occupancy","agreed_value":95.0,"count":2,"chunk":"Craig Mailman: Hey, good afternoon guys. Just on the occupancy piece, just a few follow-ups. Tim, maybe you mentioned a couple of tenants that you're monitoring for bad debt and then you also mentioned seasonality. Could you frame up, within that range of 100 basis points at 94.5% to 95.5%, how much of that's sort of seasonality driven versus how much of it is potential bad debt that may not materialize? And then that was helpful on the pipeline update. But I'm just kind of curious here also how you guys are managing the portfolio with an expected market rent inflection potentially by the end of the year. Are you guys prioritizing occupancy over rate at this point to kind of run the portfolio? Or are you holding back at all kind of holding on price? So just kind of curious how much toggle there is in that occupancy guide on kind of what you know versus how you're managing the portfolio.","evidence_gemma_new":"occupancy seasonality bad debt","evidence_llama_3_3":null,"evidence_qwen_3_30b":"occupancy 94.5% to 95.5%","gemma_new_max":95.0,"gemma_new_min":95.0,"llama_3_3_max":null,"llama_3_3_min":null,"qwen_3_30b_max":95.0,"qwen_3_30b_min":95.0}
{"symbol":"PLD","year":2023,"quarter":1,"date":"2023-Q1","chunk_id":20,"sub_chunk_id":0,"centroid_label":"rental growth","agreed_value":0.1,"count":2,"chunk":"Hamid R. Moghadam: Yeah. Let me take the second part and I'll pitch it to Chris for the third part of the question. Look, you'll be surprised if we're surprised. So -- and we really worked hard at not being surprised. And the best indicator of what's happening is the ongoing leasing and proposals and all that stuff that we're involved and you guys don't really see directly other than at the end of the quarter. So I would say -- I would describe market conditions as very good to excellent. They are not exceptional like they were a year and a half or two years ago, but they are very good to excellent. The markets you mentioned LA and Inland Empire, not worried about those at all. I mean, those markets are in the one percentage -- one percentage to two percentage vacancy rate. When you get to Dallas and particularly South Dallas and some other markets like Atlanta, way down the South, et cetera, those markets through all the cycles have been prone to over-development and softening of demand when a business was down. So we're watching those very carefully, but I wouldn't characterize any of them as watchlist markets now, otherwise, we would have classified them as such. The 10% rental growth is an overall number, but there is a very wide dispersion around that 10%. And Chris, do you want to elaborate on that?","evidence_gemma_new":"rental growth","evidence_llama_3_3":"rental growth","evidence_qwen_3_30b":null,"gemma_new_max":0.1,"gemma_new_min":0.1,"llama_3_3_max":0.1,"llama_3_3_min":0.1,"qwen_3_30b_max":null,"qwen_3_30b_min":null}
{"symbol":"PLD","year":2023,"quarter":2,"date":"2023-Q2","chunk_id":4,"sub_chunk_id":0,"centroid_label":"rental growth","agreed_value":0.1,"count":2,"chunk":"Tom Catherwood : Thank you, and good morning all. Tim, appreciate your commentary around guidance on projected rent growth. Kind of a two-part question on that first. Have you adjusted your projection for US rent growth? I think it was previously 10% and you mentioned it globally now. And then, can you provide some more detail around those markets or regions where as you said you've seen you know rent growth and values kind of exceed expectations and then conversely are there others like Southern California that have somewhat lagged your expectations?","evidence_gemma_new":"US rent growth","evidence_llama_3_3":"US projected rent growth","evidence_qwen_3_30b":null,"gemma_new_max":0.1,"gemma_new_min":0.1,"llama_3_3_max":0.1,"llama_3_3_min":0.1,"qwen_3_30b_max":null,"qwen_3_30b_min":null}
{"symbol":"PLD","year":2023,"quarter":2,"date":"2023-Q2","chunk_id":78,"sub_chunk_id":0,"centroid_label":"rental growth","agreed_value":1.5,"count":2,"chunk":"Hamid Moghadam : Yeah. U.S. has got the highest rent growth over time of any of these markets because it's a more dynamic economy, bigger GDP growth I think than Europe certainly. But Europe has always been a sort of more muted market in terms of supply. Vacancy rates are always lower in Europe and land is metered out by usually government authorities. It\u2019s not so much of a free market. You go buy from the former land. So, it's a more muted growth pattern than the US one. But we mitigate that because we employ more of a fund structure in Europe. So the combination of the earnings on the fund management business plus the growth in the underlying real estate business makes up for the - makes up for that difference. Asia, China used to be a powerhouse in terms of economic growth. It frankly has surprised everybody coming out of it with respect to how slow it's been to turnaround. I'm not smart enough to know whether that's a, that's a long-term trend, or a short-term trend. But that market has gone from basically 10% per year type of GDP growth to more like a 5% rate of growth. Japan, probably the best long-term market for us, from a development point of view has always had low rent growth. 1% to 2% rent growth would be great. But boy!! there's no CapEx. There's no turnover. There is, - and yields have maintained themselves in Japan, better than anywhere else. There's been no cap rate expansion in Japan at all. And remember, there's hardly any mark-to-market. So there is no cap rate expansion. And in fact, I would say there's probably 10, 15 basis points of compression in the last 12 months. So it's a good development market and from an operating point of view, we talk cap rates. But at the end of the day, the cash flows in Japan are very strong. There's very little of it leaks out to CapEx and other things. So, each market is different and each market when you look at it as a portfolio plays its role within our overall business.","evidence_gemma_new":null,"evidence_llama_3_3":"rental growth","evidence_qwen_3_30b":"1% to 2% rent growth","gemma_new_max":null,"gemma_new_min":null,"llama_3_3_max":1.5,"llama_3_3_min":1.5,"qwen_3_30b_max":1.5,"qwen_3_30b_min":1.5}
{"symbol":"PLD","year":2024,"quarter":1,"date":"2024-Q1","chunk_id":2,"sub_chunk_id":0,"centroid_label":"rental growth","agreed_value":110000000.0,"count":2,"chunk":"Tim Arndt: Good morning and thank you for joining our call. We've had a good start to the year in terms of our operating and financial results in the first quarter. We delivered strong rent change, drove occupancy slightly ahead of our forecast, raised nearly $5 billion in capital, including $750 million in strategic capital, and made important headway in our Energy business. That said, as we evaluate the market, persistent inflation and high interest rates have kept more customers focused on controlling costs. The resulting delay in decision making, easily observed through the first quarter's below average net absorption, will translate to lower leasing volume within the year. Accordingly, we've opted to adjust our guidance early, getting ahead of what looks like a period of occupancy below our forecast in the near term and its effect on same store in a number of our higher rent markets. This is punctuated, of course, by a more pronounced period of correction still underway in Southern California. New starts, however, continues to be surprisingly disciplined, adding to the expectation for limited new supply in the back half of '24, but also extending deeper into '25. When considered alongside muted demand, we arrive at a view that the operating environment has only changed modestly in aggregate, and that demand is simply pushing out by a few quarters. The outcome of this may simply mean moving towards a long-term occupancy expectation more swiftly this year, which sets up for a better next year. Turning to our results for the quarter. Core FFO, excluding promotes, was $1.31 per share and including net promote expense was $1.28 per share, essentially in line with our forecast. Occupancy in the portfolio ended the quarter at 97%. For context, the US market declined 310 basis points since its peak in the summer of '22, while our portfolio's occupancy has only declined 80 basis points, resulting in vacancy today for Prologis that is less than half of that in our markets and reflective of our portfolio quality. Net effective rent change was 68% based on commencements and 70% based on new signings. Following this in-place increase and changes in market rents, our net effective lease mark-to-market stands at 50%, representing over $2.2 billion of rent to harvest without any additional market rent growth from here. Rent growth captured just for the single quarter was approximately $110 million on an annualized basis and at our share. Our same-store growth on a cash basis was 5.7% and on a net effective basis was 4.1%. The same-store from rent change alone was strong at approximately 9%, but is impacted by a 130 basis point change in year-over-year vacancy, as well as 150 basis points from fair value lease adjustments with the Duke portfolio's inclusion in our same-store pool. Additionally, there were approximately 175 basis points of items specific to the quarter, including one-time reconciling items from 2023, as well as unfavorable comps from low expenses last year. We started over $270 million of new developments in the quarter, bringing our portfolio to approximately $7.5 billion at our share, with estimated value creation of over $1.7 billion, a number we feel increasingly confident in with value stabilizing. In our Energy business, we've made meaningful progress on this year's deployment, including the signing of 405 megawatts of long-term storage-related contracts with investment-grade utilities. We also delivered the largest EV fleet charging project in the United States, less than 15 miles from both the ports of LA and Long beach. Finally, we raised $4.1 billion of debt across our balance sheet and funds at a weighted average rate of 4.7% and a term of 10 years. Our debt portfolio has an overall in-place rate of just 3.1%, with more than nine years of average remaining life and liquidity at the end of the quarter of over $5.8 billion. Turning to market conditions. Most broad economic data from unemployment to retail sales to the health of the consumer remain very strong. And while our tour proposal and other proprietary metrics are similarly positive, overall leasing activity and net absorption are running below expectations. Net absorption in the US, for example, was very low this quarter at just 27 million square feet. So while the macro landscape and supply chains continue to generate a need for space, we think it's prudent to expect continued headwinds on overall absorption over the next few quarters. The interest rate environment and its associated volatility have weighed on customer decision making, especially as the 10 year has increased 70 basis points from its level just 90 days ago and expectations for Fed rate cuts have moved from potentially six to now possibly zero. In parallel, sublease and space utilization rates highlight that some customers have available capacity, driven in part by the high rate of absorption through the pandemic. This dynamic of available space intersecting with the desire for cost containment is what leads to lower absorption and is playing out at different rates across submarkets and customers. For example, while slow leasing has persisted so far this year for less capitalized customers and 3PLs, we see a handful of large e-commerce and retail customers further along in this process, such as Amazon, who voiced caution two years ago, but is now active in several global markets and has openly discussed plans to commit to significant amounts of new space. The overall leasing slowdown is most felt in only a handful of markets. Southern California and the Inland Empire being the most acute. In fact, rents in most of our US markets are generally flat, several are up, and it is mainly elongated downtime affecting near-term occupancy and NOI. While Southern California leasing has been challenging, it has not slowed the tremendous uplift we realize every single quarter from rent change on rollover, which was 120% for the market in the first quarter, with the Inland Empire at 156%, nearly the highest in our portfolio. In Europe, rents grew overall during the quarter, which we believe will remain the case over the balance of the year. And of course, LATAM continues to impress with very high occupancy and market rent growth that has led the globe in recent quarters. Overall, global market rents declined slightly over 1% in the quarter, driven mostly by Southern California, and would have been slightly positive if excluded. I'd like to spend a moment on Baltimore, where we own over 18 million square feet and has been a dynamic market of ours for decades. Our employees, customers and properties are all safe following the bridge collapse last month and our customers expect to be able to withstand the disruption with little impact to their businesses. Shifting to capital markets. Valuations increased in all of our geographies, except for China, which saw a very small decline. Over the last 1.5 years, global values have decreased despite increases in cash flow due to cap rate expansion. As cap rates have stabilized, cash flow growth now has the ability to translate to value growth. Even though modest, the value uplift in the US and Europe are important as strategic capital investors have been looking for values to not only bottom, but actually turn upwards before committing new capital. With Europe a bit ahead of the US in this regard, it is indeed where we've seen stronger fund-raising interest in recent quarters. We also had a successful equity raise in FIBRA Prologis, raising over $500 million for deployment into both assets to be contributed from our balance sheet, as well as pursuits of third-party acquisitions. Transaction volumes and activity have ticked up in recent weeks and pricing has certainly improved. As always, we are actively looking at acquisition opportunities across all of our markets, but our focus remains on the development of our land bank, which provides an opportunity for over $38 billion of build out with a return on incremental capital of approximately 8.5%. In terms of guidance, in light of our views on demand and leasing pace in the coming quarters, we are reducing our average occupancy guidance to range between 95.75% and 96.75% of the 75 basis point adjustment from the midpoint. It's important to understand that approximately two-thirds of this change stems from our higher rent markets, meaning they create a disproportionate impact on same store in 2024. Same-store growth on a net effective basis will range between 5.5% and 6.5%, a reduction of 150 basis points, which accounts for the average occupancy decline, slightly lower rent change for the year as well as 30 basis points of annualized impact from the one-time items in the first quarter mentioned earlier. Our revised range on a cash basis is now 6.25% to 7.25%. We are maintaining our guidance for strategic capital revenue, excluding promotes, to a range of $530 million to $550 million and reducing our G&A guidance to a range of $415 million to $430 million. We are adjusting development start guidance for the year to a revised range of $2.5 billion to $3 billion at our share, reflecting our discipline in speculative starts and the timing impact this has in the calendar year. As we've always said, we don't consider our guidance to be a target internally and each deal ultimately needs to be rational and accretive on its own. In the end, we are forecasting GAAP earnings to range between $3.15 per share and $3.35 per share. Core FFO, including net promote expense, will range between $5.37 per share and $5.47 per share, while core FFO, excluding promotes, will range from $5.45 per share to $5.55 per share. Our updated guidance calls for core earnings growth of nearly 8% at the midpoint. As we close out, I'd like to underscore the message of the call, which is that while we have only a modest change of view in the intermediate term, our confidence in the long term is intact. And putting timing aside, we are encouraged by the outlook for supply in the back half of this year and '25, have tremendous lease mark-to-market to harvest in the interim, and are pleased to see valuations, fundraising and transaction activity all picking up. With that, I'll turn the call over to the operator for your questions.","evidence_gemma_new":"Rent growth","evidence_llama_3_3":null,"evidence_qwen_3_30b":"rent growth captured $110 million first quarter","gemma_new_max":110000000.0,"gemma_new_min":110000000.0,"llama_3_3_max":null,"llama_3_3_min":null,"qwen_3_30b_max":110000000.0,"qwen_3_30b_min":110000000.0}
{"symbol":"PLD","year":2024,"quarter":3,"date":"2026-FY","chunk_id":75,"sub_chunk_id":0,"centroid_label":"rental growth","agreed_value":0.0,"count":3,"chunk":"Brendan Lynch: Great. Thanks for taking my question. I'm hoping you can help us reconcile the guidance from the December Investor Day. It sounds like rent growth is around 0% through 2026 and vacancy is going to peak out a little bit higher than what you had been expecting. So, how should we think about your core FFO CAGR over the next three years?","evidence_gemma_new":"rent growth 2026","evidence_llama_3_3":"rent growth 2026","evidence_qwen_3_30b":"guidance rent growth through 2026","gemma_new_max":0.0,"gemma_new_min":0.0,"llama_3_3_max":0.0,"llama_3_3_min":0.0,"qwen_3_30b_max":0.0,"qwen_3_30b_min":0.0}
{"symbol":"PLD","year":2023,"quarter":2,"date":"2023-Q2","chunk_id":15,"sub_chunk_id":0,"centroid_label":"southern california rents","agreed_value":1.3,"count":3,"chunk":"Chris Caton: Sure. Let me take a stab at that, because I've seen this now a couple of times over the last 30, 40 years. Southern California is really being adversely affected by two things. One, ports volumes. I think this labor strike has gone on longer than most people anticipated. And the timing of it was such that people have to make decisions about the Christmas season and they've shifted volumes to other ports. And that affect Southern California and honestly, the longer disclose out, I believe the worse it will be for Southern California in terms of doing permanent damage. From now from everything we hear and we're not an expert on this, things are apparently heading in a positive direction with respect to a resolution. But you read the same things we do. So, I don't have any unique perspectives on that. The other, the other difference with Southern California is just pricing. I mean, you had between \u201820 and \u201822, about an 130% increase in rents in Southern California, that compares to less than half of that for the overall markets that we operate in. So, there is more price sensitivity now because it's a very, very expensive market. So to the extent possible, people will shift to adjacent markets. And combined, it's not just price, but up until a quarter ago, occupancies in the Inland Empire was 99 point something percent. So people couldn't even get the space that they wanted. I think with the more normalized vacancy level and we're still not at normal. I mean, normalized in my experience is 95% occupancy and that would have been great for the last 15 or 20 years. I think with more normalized occupancy, you'll see, Peep and a resolution of the labor strike. I think you see a more normal pattern from which you can draw some conclusions.","evidence_gemma_new":"Southern California rents \u201820 and \u201822","evidence_llama_3_3":"Southern California increase in rents \u201820 and \u201822","evidence_qwen_3_30b":"Southern California rents \u201820 and \u201822","gemma_new_max":1.3,"gemma_new_min":1.3,"llama_3_3_max":1.3,"llama_3_3_min":1.3,"qwen_3_30b_max":1.3,"qwen_3_30b_min":1.3}
{"symbol":"PLD","year":2024,"quarter":2,"date":"2024-Q2","chunk_id":40,"sub_chunk_id":0,"centroid_label":"southern california rents","agreed_value":0.23,"count":3,"chunk":"Hamid Moghadam: Yes, one other perspective I might provide to you is that the big change since our 4% to 6% three-year forecast, has actually been in concessions. So those concessions have, I mean, in other words, if you had two forecasts, one for asking rents and one for effective rents, the effective rent one has been affected more since our Investor Day when we laid out that assumption. Not all of it. The face rents have come down in Southern California, certainly, but most of it has been expansion in the concessions. And we see those burning off over the next 12 months as markets come into, even the weaker markets come into balance. Just to give you a sense of something that Chris mentioned before, Southern California accounts for about 23% of our rents over the next 12 months. What we categorize as sort of the weakest market, are another 21% of our rental profile for the next 12 months. And only 56% of the rents rolling over in the next 12 months are in stable or healthy markets. So, this is really a Southern California problem where it's both an expansion in concessions and a reduction in face rent. Fortunately, and this is really important. Southern California is the market with the largest mark-to-market in the next 12 months, even with the declines that we're projecting. So there is pretty good downside protection, in fact, upside protection, if there's such a word, on those expiring rents in Southern California. So, ironically, the weakest markets have the most mark-to-market, certainly in the near term.","evidence_gemma_new":"Southern California rents next 12 months","evidence_llama_3_3":"Southern California rents next 12 months","evidence_qwen_3_30b":"Southern California rents next 12 months","gemma_new_max":0.23,"gemma_new_min":0.23,"llama_3_3_max":0.23,"llama_3_3_min":0.23,"qwen_3_30b_max":0.23,"qwen_3_30b_min":0.23}
{"symbol":"PLD","year":2024,"quarter":3,"date":"2024-Q3","chunk_id":16,"sub_chunk_id":0,"centroid_label":"southern california rents","agreed_value":1.2,"count":2,"chunk":"Steve Sakwa: Yeah, thanks. Good morning. I guess, on Page 12, you guys break out your ending occupancy by unit size. And I noticed, sequentially, there was a much bigger drop on the spaces that were kind of below [250] (ph). So, I'm just wondering if you can sort of speak to the strength of the bigger boxes, maybe the softness in the weaker. And then, just on the Southern California, I noticed that your lease percentage in SoCal went up about 120 basis points sequentially. So, any comments just around Southern California demand either by product type or LA versus Inland Empire would be helpful. Thanks.","evidence_gemma_new":"Southern California lease percentage sequentially","evidence_llama_3_3":"Southern California lease percentage","evidence_qwen_3_30b":null,"gemma_new_max":1.2,"gemma_new_min":1.2,"llama_3_3_max":1.2,"llama_3_3_min":1.2,"qwen_3_30b_max":null,"qwen_3_30b_min":null}
{"symbol":"PLD","year":2024,"quarter":4,"date":"2024-Q4","chunk_id":42,"sub_chunk_id":0,"centroid_label":"southern california rents","agreed_value":0.25,"count":2,"chunk":"Chris Caton: Hey, Vince, Chris Caton here. So I think I'd start by saying let's not go market-by-market, detail-by-detail that we're a large global international business, but a couple of touchstones that we've had that I think are worth coming back to. So number one, if it's not clear, it should be that international markets outperformed in the domestic markets. Tim enumerated them on the -- in his script, but whether it's Japan, whether it's Europe broadly, and in particular, some of the geographies there as well as Latin America, that was a clear outperform. And then within the U.S., really talked about this dynamic of Southern California and the rest of the business. In Southern California, we had rents down 25% on a net basis so a meaningful reset in rates there. And so then by contrast, when you look at sort of U.S. ex SoCal, it was only down modestly in the year.","evidence_gemma_new":"Southern California rents","evidence_llama_3_3":"Southern California rents","evidence_qwen_3_30b":null,"gemma_new_max":0.25,"gemma_new_min":0.25,"llama_3_3_max":0.25,"llama_3_3_min":0.25,"qwen_3_30b_max":null,"qwen_3_30b_min":null}
{"symbol":"PLD","year":2023,"quarter":1,"date":"2023-Q1","chunk_id":4,"sub_chunk_id":0,"centroid_label":"starts activity","agreed_value":50000000.0,"count":2,"chunk":"Caitlin Burrows: Hi. Good morning, everyone. Maybe on development. Tim, you touched on it briefly, but the earnings release mentions how the build-out of your land bank is a driver of growth, and this quarter, like you mentioned starts for only like $50 million versus recent quarters over a billion. And it sounds like that is expected to ramp up significantly to over a billion again in the second half. So just wondering what metrics or other things that you're looking at to drive the starts activity? And what makes you confident that increasing starts so significantly later this year is kind of possible and the right thing to do?","evidence_gemma_new":"starts this quarter","evidence_llama_3_3":"starts this quarter","evidence_qwen_3_30b":null,"gemma_new_max":50000000.0,"gemma_new_min":50000000.0,"llama_3_3_max":50000000.0,"llama_3_3_min":50000000.0,"qwen_3_30b_max":null,"qwen_3_30b_min":null}
{"symbol":"PLD","year":2023,"quarter":1,"date":"2023-Q2","chunk_id":4,"sub_chunk_id":0,"centroid_label":"starts activity","agreed_value":1000000000.0,"count":2,"chunk":"Caitlin Burrows: Hi. Good morning, everyone. Maybe on development. Tim, you touched on it briefly, but the earnings release mentions how the build-out of your land bank is a driver of growth, and this quarter, like you mentioned starts for only like $50 million versus recent quarters over a billion. And it sounds like that is expected to ramp up significantly to over a billion again in the second half. So just wondering what metrics or other things that you're looking at to drive the starts activity? And what makes you confident that increasing starts so significantly later this year is kind of possible and the right thing to do?","evidence_gemma_new":"starts activity second half","evidence_llama_3_3":"expected starts the second half","evidence_qwen_3_30b":null,"gemma_new_max":1000000000.0,"gemma_new_min":1000000000.0,"llama_3_3_max":1000000000.0,"llama_3_3_min":1000000000.0,"qwen_3_30b_max":null,"qwen_3_30b_min":null}
{"symbol":"PLD","year":2023,"quarter":3,"date":"2023-Q3","chunk_id":30,"sub_chunk_id":0,"centroid_label":"starts activity","agreed_value":0.65,"count":2,"chunk":"Hamid Moghadam: It depends on the actual markets. There are about 20% of the markets that I can see us driving for occupancy and about 80% of the markets that are still in equilibrium or tighter. But the key to your question is what you asked in the middle of it, which is, how do you expect that to change? And the reason we are not going to get super aggressive on rents is because we have a belief that, I mean, just look at the starts. They are down 65% and even with moderating demand, we are going to get something like 60% or 70% of that shortfall that we are going to encounter in the next three quarters shortfall of demand, we are going to get it back in the subsequent three quarters. So there\u2019s no sense really going cheap, it\u2019s just. But I would say 20% of our markets, we are going to be more focused on occupancy.","evidence_gemma_new":"starts","evidence_llama_3_3":"starts","evidence_qwen_3_30b":null,"gemma_new_max":0.65,"gemma_new_min":0.65,"llama_3_3_max":0.65,"llama_3_3_min":0.65,"qwen_3_30b_max":null,"qwen_3_30b_min":null}
{"symbol":"PLD","year":2023,"quarter":3,"date":"2023-Q3","chunk_id":15,"sub_chunk_id":0,"centroid_label":"starts activity","agreed_value":1400000000.0,"count":2,"chunk":"Steve Sakwa: Yeah. Thanks and good morning. I just wanted to follow up on the development and just make sure I understand on the fourth quarter, I think, you have got something like $1.9 billion of planned starts, given that you have done about $1.4 billion year-to-date. So just curious, does that include other data centers or is that all traditional industrial? And if so, what is the mix between spec and build-to-suit on that fourth quarter starts volume? Thanks.","evidence_gemma_new":"year-to-date","evidence_llama_3_3":null,"evidence_qwen_3_30b":"year-to-date","gemma_new_max":1400000000.0,"gemma_new_min":1400000000.0,"llama_3_3_max":null,"llama_3_3_min":null,"qwen_3_30b_max":1400000000.0,"qwen_3_30b_min":1400000000.0}
{"symbol":"PLD","year":2023,"quarter":4,"date":"2023-Q4","chunk_id":18,"sub_chunk_id":0,"centroid_label":"starts activity","agreed_value":1000000000.0,"count":2,"chunk":"Dan Letter: Caitlin, this is Dan. I'll respond here. A few thoughts for you. First of all, we started just over $1 billion worth of spec in the fourth quarter. So, we had talked over the last several quarters about the decline in starts in the marketplace and that's when we wanted to come out of the gate here with some starts and that's what you're seeing us do right now. We have a pretty healthy guidance here for the 2024 starts, at owned and managed of about $4 billion. And if you think about it, that's 25 million square feet or so of starts that we could be doing this year. And we have a development portfolio right now of about 50 million square feet. So, we've got an appetite for spec. Our build-to-suit volume we think is going to shake out in that 40% range as we've projected. And then keep in mind, we talked about this plenty at the Investor Day, we have $40 billion worth of opportunities in our land bank. And we have the ability to make decisions on a quarterly basis where we're going to build. We own this land in 50 markets around the globe, 300 different sites. So, plenty of opportunities there.","evidence_gemma_new":null,"evidence_llama_3_3":"starts fourth quarter","evidence_qwen_3_30b":"starts fourth quarter","gemma_new_max":null,"gemma_new_min":null,"llama_3_3_max":1000000000.0,"llama_3_3_min":1000000000.0,"qwen_3_30b_max":1000000000.0,"qwen_3_30b_min":1000000000.0}
{"symbol":"PLD","year":2023,"quarter":4,"date":"2023-Q4","chunk_id":18,"sub_chunk_id":0,"centroid_label":"starts activity","agreed_value":25000000.0,"count":3,"chunk":"Dan Letter: Caitlin, this is Dan. I'll respond here. A few thoughts for you. First of all, we started just over $1 billion worth of spec in the fourth quarter. So, we had talked over the last several quarters about the decline in starts in the marketplace and that's when we wanted to come out of the gate here with some starts and that's what you're seeing us do right now. We have a pretty healthy guidance here for the 2024 starts, at owned and managed of about $4 billion. And if you think about it, that's 25 million square feet or so of starts that we could be doing this year. And we have a development portfolio right now of about 50 million square feet. So, we've got an appetite for spec. Our build-to-suit volume we think is going to shake out in that 40% range as we've projected. And then keep in mind, we talked about this plenty at the Investor Day, we have $40 billion worth of opportunities in our land bank. And we have the ability to make decisions on a quarterly basis where we're going to build. We own this land in 50 markets around the globe, 300 different sites. So, plenty of opportunities there.","evidence_gemma_new":"starts","evidence_llama_3_3":"starts","evidence_qwen_3_30b":"starts this year","gemma_new_max":25000000.0,"gemma_new_min":25000000.0,"llama_3_3_max":25000000.0,"llama_3_3_min":25000000.0,"qwen_3_30b_max":25000000.0,"qwen_3_30b_min":25000000.0}
{"symbol":"PLD","year":2024,"quarter":3,"date":"2024-Q3","chunk_id":36,"sub_chunk_id":0,"centroid_label":"starts activity","agreed_value":40000000.0,"count":2,"chunk":"Chris Caton: Hi, Vince, it's Chris Caton. Thank you for the question, and your read on the quarter is correct. So, we saw 40 million square feet of net absorption in the quarter, 63 million square feet of completions. So, let's just zoom out and talk about the year and talk about how it's -- the direction it's heading, because we are progressing through this bottoming phase. So, net absorption, this year, will amount to 160 million square feet, and that's against deliveries that are 300 million square feet. So, naturally, market vacancies are rising. They're rising up to 6.8%. And it sounds like you're very familiar with historical data, so you'll know that 6.8% is a low number in the totality of history. But there's something that's happening in the background that's really -- that doesn't always get attention we're talking about, which is the emptying of supply chains. So, deliveries peaked a year ago at 135 million square feet per quarter, and they fall into that number I gave you 63 million here this quarter, so less than half in terms of the decline, and they'll continue to decline into next year. At work here, in the backdrop, also is starts are very low. We have them at 40 million, 42 million square feet in the quarter. So, when you put all this together, what you find is the under-construction pipeline, which is about 215 million square feet today, is at its lowest point since 2017. So, we're going to be going into 2025 with a relatively low level of supply and an opportunity for demand to improve as we progress through this uncertainty in the spare capacity.","evidence_gemma_new":null,"evidence_llama_3_3":"starts this quarter","evidence_qwen_3_30b":"starts the quarter","gemma_new_max":null,"gemma_new_min":null,"llama_3_3_max":40000000.0,"llama_3_3_min":40000000.0,"qwen_3_30b_max":40000000.0,"qwen_3_30b_min":40000000.0}
{"symbol":"PLD","year":2024,"quarter":3,"date":"2024-Q3","chunk_id":36,"sub_chunk_id":0,"centroid_label":"starts activity","agreed_value":42000000.0,"count":2,"chunk":"Chris Caton: Hi, Vince, it's Chris Caton. Thank you for the question, and your read on the quarter is correct. So, we saw 40 million square feet of net absorption in the quarter, 63 million square feet of completions. So, let's just zoom out and talk about the year and talk about how it's -- the direction it's heading, because we are progressing through this bottoming phase. So, net absorption, this year, will amount to 160 million square feet, and that's against deliveries that are 300 million square feet. So, naturally, market vacancies are rising. They're rising up to 6.8%. And it sounds like you're very familiar with historical data, so you'll know that 6.8% is a low number in the totality of history. But there's something that's happening in the background that's really -- that doesn't always get attention we're talking about, which is the emptying of supply chains. So, deliveries peaked a year ago at 135 million square feet per quarter, and they fall into that number I gave you 63 million here this quarter, so less than half in terms of the decline, and they'll continue to decline into next year. At work here, in the backdrop, also is starts are very low. We have them at 40 million, 42 million square feet in the quarter. So, when you put all this together, what you find is the under-construction pipeline, which is about 215 million square feet today, is at its lowest point since 2017. So, we're going to be going into 2025 with a relatively low level of supply and an opportunity for demand to improve as we progress through this uncertainty in the spare capacity.","evidence_gemma_new":null,"evidence_llama_3_3":"starts this quarter","evidence_qwen_3_30b":"starts the quarter","gemma_new_max":null,"gemma_new_min":null,"llama_3_3_max":42000000.0,"llama_3_3_min":42000000.0,"qwen_3_30b_max":42000000.0,"qwen_3_30b_min":42000000.0}
{"symbol":"PLD","year":2024,"quarter":4,"date":"2024-Q4","chunk_id":18,"sub_chunk_id":0,"centroid_label":"starts activity","agreed_value":0.7,"count":2,"chunk":"Dan Letter: Yes. Thanks, Ron. What I would say is our starts last year, we deliberately slowed those starts. We continue a very disciplined approach to our spec program. We also saw a number of very large build-to-suits push into 2025. So what are we looking at right now? We're looking at the market conditions improving so we do expect completions to come way down. They're actually down 70% from the peak -- excuse me, starts are down 70% from the peak as well. So the market itself is heading in the right direction, and we're waiting for that rent to improve, for the returns to improve. One thing to keep in mind is we do have $5 billion under development right now and 30 million square feet. We do have this very large land portfolio with $41.5 billion worth of opportunities, and that's in literally hundreds of sites around the globe. And we've been making infrastructure investments, site work investments so we can really narrow the vertical build time and flip the switch when the time is right.","evidence_gemma_new":"starts","evidence_llama_3_3":null,"evidence_qwen_3_30b":"starts 70% from the peak","gemma_new_max":0.7,"gemma_new_min":0.7,"llama_3_3_max":null,"llama_3_3_min":null,"qwen_3_30b_max":0.7,"qwen_3_30b_min":0.7}
{"symbol":"SHW","year":2023,"quarter":3,"date":"2023-FY","chunk_id":3,"sub_chunk_id":0,"centroid_label":"adjusted diluted net income per share","agreed_value":9.31,"count":2,"chunk":"John Morikis: Thank you, Heidi. Our team delivered another strong quarter in an environment characterized by ongoing uncertainty. My thanks go to our 64,000 employees for continuing to focus on our mission and for executing on our strategy. Their energy in serving our customers and providing them with solutions remains a true differentiator. On our July call, we described the anticipated second half demand backdrop across our businesses. The third quarter played out much as we expected, and we believe the environment remains largely unchanged in the fourth quarter. Paint Stores Group will face another strong year-over-year comparison. Demand in commercial, property maintenance, residential repaint and Protective & Marine remains stable with New Residential remaining soft as we expected. We have now annualized prior price increases. In Consumer Brands, North America DIY demand remained soft. Europe demand has stabilized and Latin America markets remain mixed. Performance Coatings demand remains highly variable by end market and by region. We know we cannot defy gravity in terms of the macro environment. What we can do is aggressively pursue new account and share of wallet opportunities to drive market share gains, we are aggressively focused on doing just that. Moving to the cost side. We're narrowing our full year raw material outlook. We expect cost to be down by a high single-digit percentage in 2023 compared to 2022. We expect other costs, including wages and other input costs to be up in the mid- to high single-digit range. We also continue to see the current market uncertainty as an opportunity to press our advantages through greater investment in solutions for our customers that will drive their success and ours. Our SG&A spend in the fourth quarter will reflect these investments, leading full year SG&A to increase in the high single-digit to low double-digit range compared to last year. This approach has served us well many times in the past. We are highly confident and will again now resulting in continued above-market growth and strong returns. Now moving on to our specific guidance. We anticipate our fourth quarter 2023 consolidated net sales will be up or down a low single-digit percentage compared to a high single-digit increase in the fourth quarter of 2022, with volume flat to down slightly. As a reminder, we've largely annualized previous price increases across the business. For the full year 2023, we expect consolidated net sales to be up a low single-digit percentage with volume down a low single-digit percentage. Our sales expectations by segment for the fourth quarter and the full year are included in the slide deck issued with our press release this morning. We are increasing our full year 2023 diluted net income per share to be in the range of $9.21 to $9.41 per share. We believe this increased range accurately reflects our strong third quarter performance, continued pricing discipline and moderating raw material costs while also acknowledging the ongoing uncertainty in our seasonally smaller fourth quarter. This guidance includes acquisition-related amortization expense of approximately $0.80 per share and restructuring related net expense of $0.09 per share. On an adjusted basis, we expect full year 2023 earnings per share in the range of $10.10 to $10.30. This is an increase of 16.8% at the midpoint compared to last year's $8.73 adjusted earnings per share. We provided a GAAP reconciliation in the Reg G table within our press release. Our slide deck includes additional information on our assumptions for the year. As we begin the fourth quarter, we continue to expect choppiness by region and end market. More importantly, we continue to see opportunity amid uncertainty, and we are extremely confident in how well our various businesses are positioned. Our strategy is clear. It's working, and it's not changing. We'll continue to provide our customers with differentiated solutions that drive their productivity and their profitability. Our capabilities, products and services are unique. We remain on offense, growing new accounts and share of wallet in the right markets with the right customers. We also remain focused on developing and retaining talent and improving and simplifying our operations. We expect to finish the year with momentum that will carry us into 2024. I have the utmost confidence in Heidi, Al, our leadership team and our people. Together, we expect to continue outperforming our competitors and the market. This concludes our prepared remarks. And with that, I'd like to thank you for joining us this morning, and we'll be happy to take your questions.","evidence_gemma_new":"diluted net income per share full year 2023","evidence_llama_3_3":null,"evidence_qwen_3_30b":"diluted net income per share full year 2023","gemma_new_max":9.31,"gemma_new_min":9.31,"llama_3_3_max":null,"llama_3_3_min":null,"qwen_3_30b_max":9.31,"qwen_3_30b_min":9.31}
{"symbol":"SHW","year":2023,"quarter":1,"date":"2023-Q1","chunk_id":1,"sub_chunk_id":0,"centroid_label":"adjusted diluted net income per share","agreed_value":1.84,"count":3,"chunk":"James Jaye: Thank you, and good morning to everyone. Sherwin-Williams delivered excellent first quarter results compared to the same period a year ago. Consolidated net sales grew by a high single-digit percentage, ahead of our expectations and were led by a mid-teens percentage increase in our professional architectural end markets. On the Industrial side of the business, sales increased in all regions except Asia Pacific. Gross margin significantly improved sequentially and year-over-year, driven by strong volume in the Paint Stores Group and effective pricing. Cost of goods sold includes higher inflation in wages and other employee-related categories, which were partially offset by a slight decrease in year-over-year raw material costs. We expect to hold the majority of the pricing we have put into the market, given the ongoing investments we have made to drive innovation, enhance services and secure the talent that provides differentiated solutions to help our customers reach their goals and drive their success. Segment margin in all three reportable segments expanded sequentially and year-over-year. We also delivered strong double-digit growth in diluted net income per share and EBITDA. Additionally, we continue to execute on the portfolio realignment actions we announced late last year, including the divestiture of a noncore aerosol business, which closed on April 1, and our recently announced agreement to divest our China architectural business. I'd like to highlight just a few of our consolidated first quarter numbers. Comparisons in my comments are to the prior year period unless stated otherwise. Starting with the top line. First quarter 2023 consolidated net sales increased 8.9% to $5.44 billion. Consolidated gross margin increased to 44.5%, an improvement of 340 basis points. SG&A expense as a percentage of sales was 31.1%, an increase of 140 basis points, driven by investments in the Paint Stores Group's long-term growth initiatives and investments in our people across the company through year-over-year increases in compensation and other employee-related benefits. Our people remain our key differentiator in the marketplace. Consolidated profit before tax increased $153.7 million or 33.3%. Diluted net income per share in the quarter was $1.84 per share versus $1.41 per share a year ago. Excluding Valspar acquisition-related amortization expense and costs related to previously announced restructuring actions, first quarter adjusted diluted net income per share increased 26.7% to $2.04 per share versus $1.61 per share a year ago. EBITDA in the quarter increased $185 million or 26.7% and was 16.1% as a percent of sales. Let me now turn it over to Heidi, who will provide some commentary on our first quarter results by segment. John will follow Heidi with comments on our outlook before we move on to your questions.","evidence_gemma_new":"Diluted net income per share first quarter","evidence_llama_3_3":"Diluted net income per share first quarter 2023","evidence_qwen_3_30b":"Diluted net income per share","gemma_new_max":1.84,"gemma_new_min":1.84,"llama_3_3_max":1.84,"llama_3_3_min":1.84,"qwen_3_30b_max":1.84,"qwen_3_30b_min":1.84}
{"symbol":"SHW","year":2023,"quarter":1,"date":"2023-Q1","chunk_id":1,"sub_chunk_id":0,"centroid_label":"adjusted diluted net income per share","agreed_value":2.04,"count":2,"chunk":"James Jaye: Thank you, and good morning to everyone. Sherwin-Williams delivered excellent first quarter results compared to the same period a year ago. Consolidated net sales grew by a high single-digit percentage, ahead of our expectations and were led by a mid-teens percentage increase in our professional architectural end markets. On the Industrial side of the business, sales increased in all regions except Asia Pacific. Gross margin significantly improved sequentially and year-over-year, driven by strong volume in the Paint Stores Group and effective pricing. Cost of goods sold includes higher inflation in wages and other employee-related categories, which were partially offset by a slight decrease in year-over-year raw material costs. We expect to hold the majority of the pricing we have put into the market, given the ongoing investments we have made to drive innovation, enhance services and secure the talent that provides differentiated solutions to help our customers reach their goals and drive their success. Segment margin in all three reportable segments expanded sequentially and year-over-year. We also delivered strong double-digit growth in diluted net income per share and EBITDA. Additionally, we continue to execute on the portfolio realignment actions we announced late last year, including the divestiture of a noncore aerosol business, which closed on April 1, and our recently announced agreement to divest our China architectural business. I'd like to highlight just a few of our consolidated first quarter numbers. Comparisons in my comments are to the prior year period unless stated otherwise. Starting with the top line. First quarter 2023 consolidated net sales increased 8.9% to $5.44 billion. Consolidated gross margin increased to 44.5%, an improvement of 340 basis points. SG&A expense as a percentage of sales was 31.1%, an increase of 140 basis points, driven by investments in the Paint Stores Group's long-term growth initiatives and investments in our people across the company through year-over-year increases in compensation and other employee-related benefits. Our people remain our key differentiator in the marketplace. Consolidated profit before tax increased $153.7 million or 33.3%. Diluted net income per share in the quarter was $1.84 per share versus $1.41 per share a year ago. Excluding Valspar acquisition-related amortization expense and costs related to previously announced restructuring actions, first quarter adjusted diluted net income per share increased 26.7% to $2.04 per share versus $1.61 per share a year ago. EBITDA in the quarter increased $185 million or 26.7% and was 16.1% as a percent of sales. Let me now turn it over to Heidi, who will provide some commentary on our first quarter results by segment. John will follow Heidi with comments on our outlook before we move on to your questions.","evidence_gemma_new":null,"evidence_llama_3_3":"Adjusted diluted net income per share first quarter 2023","evidence_qwen_3_30b":"adjusted diluted net income per share","gemma_new_max":null,"gemma_new_min":null,"llama_3_3_max":2.04,"llama_3_3_min":2.04,"qwen_3_30b_max":2.04,"qwen_3_30b_min":2.04}
{"symbol":"SHW","year":2023,"quarter":2,"date":"2023-Q2","chunk_id":1,"sub_chunk_id":0,"centroid_label":"adjusted diluted net income per share","agreed_value":20.9,"count":2,"chunk":"Jim Jaye: Thank you and good morning to everyone. Joining me on the call today are John Morikis, Chairman and CEO; and Heidi Petz, President and Chief Operating Officer; Al Mistysyn, Chief Financial Officer; and Jane Cronin, Senior Vice President of Enterprise Finance. Sherwin-Williams delivered excellent second quarter results compared to the same period a year ago. These results, coupled with a similar strong performance in the first quarter led to an excellent first half that exceeded the expectations we laid out back in January. Given the strong first half and current visibility into our second half, we are significantly increasing our full year guidance, which John will talk about in just a few minutes. But first, let me touch on a few second quarter highlights. Consolidated net sales in the quarter exceeded our expectations and grew by a mid-single-digit percentage. Sales in all 3 reportable segments came in above our guided range. Gross margin significantly improved sequentially and year-over-year, driven by strong volume in the Paint Stores Group and moderating raw material costs. Pricing discipline remains strong. SG&A expense increased over the prior year quarter, though the year-over-year percentage increase was lower than that of our first quarter. Excluding the impact of incremental acquisition and restructuring costs SG&A increased 8% year-over-year. Approximately 85% of that second quarter increase was related to investments in Paint Store Group long-term growth initiatives with the remainder driven by increases in compensation and benefits. We are highly confident these growth investments will deliver strong returns and benefit our customers. And while we recognize SG&A expense was higher year-over-year in the quarter, we ultimately manage the business to drive operating profit and margin, both of which expanded meaningfully in the quarter. We are committed to investing in and profitably growing the business at the same time. Segment margin in all three reportable segments expanded sequentially and year-over-year. We also delivered strong double-digit growth in adjusted diluted net income per share and EBITDA with adjusted EBITDA margin of 20.9% near the high end of our current long-term 19% to 21% target range. Let me now turn it over to Heidi, who will provide some commentary on our second quarter results by segment. John will follow Heidi with comments on our outlook before we move on to your questions.","evidence_gemma_new":"adjusted diluted net income per share EBITDA adjusted EBITDA margin","evidence_llama_3_3":null,"evidence_qwen_3_30b":"adjusted diluted net income per share EBITDA adjusted EBITDA margin 20.9%","gemma_new_max":20.9,"gemma_new_min":20.9,"llama_3_3_max":null,"llama_3_3_min":null,"qwen_3_30b_max":20.9,"qwen_3_30b_min":20.9}
{"symbol":"SHW","year":2024,"quarter":1,"date":"2024-Q1","chunk_id":1,"sub_chunk_id":0,"centroid_label":"adjusted diluted net income per share","agreed_value":6.4,"count":3,"chunk":"James Jaye: Thank you, and good morning. In what is a seasonally smaller first quarter and with continued demand choppiness in several end markets, Sherwin-Williams delivered consolidated sales within our guided range, gross margin expansion and diluted earnings per share and EBITDA growth. Throughout the quarter, we continued to execute on our strategy, demonstrate our value proposition with current and prospective customers and position ourselves to take advantage of disruptions in the market. While our results were at the lower end of our sales expectations, we remain confident in our full year outlook and there is no change from the guidance we provided in January. We also remain highly confident in our differentiated business model and we are well positioned as the painting season begins. While uncertainties persist in the macroeconomic environment, we see opportunity. We are encouraged by pro architectural sentiment in April and customers in several end markets are optimistic about an improving demand environment as the year progresses. Competitor decisions coupled with our recent growth investments are enabling us to continue penetrating our targeted end markets at multiple levels. We expect share gains and returns to become more and more evident as the year progresses. Consolidated sales in the quarter were at the low end of our range, driven by lower than anticipated volume, primarily in Paint Stores Group against the strongest comparison we will face this year followed by Consumer Brands Group in North America. Contributions from price were modest, as expected and we are now seeing our recently announced increases in Paint Stores beginning to ramp more fully in our second quarter. Gross margin expanded 270 basis points year-over-year to 47.2%. Higher SG&A in the quarter reflects the deliberate and accelerated investments in growth we made in the second half of last year and which have not yet annualized. EBITDA margin improved by 60 basis points to 16.7% and adjusted diluted net income per share increased 6.4%. We also maintained our disciplined capital allocation approach and returned $728 million to our shareholders through dividends and share repurchases during the quarter, an increase of 59% year-over-year. Let me now turn it over to Heidi, who will provide some commentary on our first quarter results by segment before moving on to our outlook and your questions.","evidence_gemma_new":"adjusted diluted net income per share","evidence_llama_3_3":"adjusted diluted net income per share 6.4% the quarter","evidence_qwen_3_30b":"adjusted diluted net income per share 6.4%","gemma_new_max":6.4,"gemma_new_min":6.4,"llama_3_3_max":6.4,"llama_3_3_min":6.4,"qwen_3_30b_max":6.4,"qwen_3_30b_min":6.4}
{"symbol":"SHW","year":2023,"quarter":1,"date":"2023-Q1","chunk_id":2,"sub_chunk_id":0,"centroid_label":"adjusted segment margin","agreed_value":13.0,"count":2,"chunk":"Heidi Petz : Thank you, Jim. I'll begin with the Paint Stores Group, previously known as The Americas Group. We described this change on our last call and in this morning's press release. There is no impact to prior year consolidated results related to this change. Current and prior year segment results have been restated to reflect this change. First quarter Paint Stores Group sales were ahead of our expectations and increased 14.8%, driven by high single-digit volume growth and continued effective pricing. Segment profit increased by $97.9 million and segment margin improved 120 basis points to 18.4%. Our Pro architectural sales grew by a mid-teens percentage in the quarter. All Pro market segments increased by double digits, led by property management and followed by commercial, residential repaint and new residential, respectively. Sales in protective & marine and DIY also increased by double-digit percentages. From a product perspective, interior and exterior paint sales were both strong, with interior sales growing faster and representing a larger part of the mix. Moving on to results in our Consumer Brands Group, which again now reflects the addition of a Latin America architectural business in the current quarter and prior year. Sales were well ahead of our guidance and increased by 2.4% in the quarter. Performance was better than expected in North America, where sales were down less than 1%; and in Europe, where sales were down low single digits. In other regions, sales were up strong double digits in Latin America and down double digits in Asia. Effective pricing led by Latin America was partially offset by a mid-single-digit decrease in volume and low single-digit FX headwinds. The tightness in alkyd resins impacting our ability to produce stains and aerosols, improved significantly during the quarter, and we expect this issue to be behind us by the end of the second quarter. Adjusted segment margin was 13%, up 120 basis points year-over-year. As Jim mentioned, we divested a noncore aerosol business at the beginning of this month, and we also entered into an agreement to divest our China architectural business. We expect these actions will benefit segment margin over time as we drive a return to our high teens, low 20s adjusted margin target. Onetime restructuring costs in the quarter were immaterial. Sales in the Performance Coatings Group increased 3.4% against a 20.4% comparison. The increase was driven by low teens pricing and mid-single-digit sales from acquisitions, partially offset by a low teens decrease in volume, which included the impact from discontinued operations in Russia and a low single-digit unfavorable FX impact. Adjusted segment margin increased 390 basis points to 15.7% of sales. This is the fourth straight quarter this team has delivered year-over-year segment margin improvement, driven by execution of our strategy, including effective pricing. Sales in PCG varied significantly by region. In North America, sales increased high single digits against a nearly 30% comp. Latin America sales increased by double digits, also against a strong comp. Sales in Europe were up mid-single digits, while sales in Asia were down double digits. From a division perspective, growth was strongest in Auto Refinish, which was up by a mid-teens percentage, followed by Coil and General Industrial, which were both up mid-single digits. All three of these divisions grew against double-digit comparisons. Industrial Wood sales were down mid-single digits as expected due to slowing in furniture, cabinetry and flooring related to new residential softness. Packaging sales also were down mid-single digits against a 30-plus comp with volume down about 1 point in the remainder due to our exit of Russia and unfavorable FX. We continue to feel very good about our position and growth prospects in this end market. With that, let me turn it over to John for his comments on our outlook for the second quarter and the full year.","evidence_gemma_new":"Adjusted segment margin year-over-year","evidence_llama_3_3":null,"evidence_qwen_3_30b":"adjusted segment margin","gemma_new_max":13.0,"gemma_new_min":13.0,"llama_3_3_max":null,"llama_3_3_min":null,"qwen_3_30b_max":13.0,"qwen_3_30b_min":13.0}
{"symbol":"SHW","year":2023,"quarter":2,"date":"2023-Q2","chunk_id":2,"sub_chunk_id":0,"centroid_label":"adjusted segment margin","agreed_value":15.7,"count":2,"chunk":"Heidi Petz: Thank you, Jim. I\u2019ll begin with the Paint Stores Group. Second quarter Paint Stores Group sales were ahead of our expectations and increased 10%, driven by mid-single-digit volume growth and continued effective pricing. Segment margin improved 280 basis points to 24.3%. Growth was led by our protective & marine business, which was up strong double digits and was driven by industrial flooring infrastructure and oil and gas applications. In our pro-architectural end markets, the strongest performers were commercial and property maintenance, both of which increased by double-digit percentages. Residential repaint was close behind with sales up by a high single-digit percentage. Demand in this market is being somewhat tempered by the extended period of weak existing home sales. New residential sales were flat against a double-digit comparison, reflecting the softer start that we saw at the end of last year, which have continued into this year. As we\u2019ve previously noted, we anticipated new residential would be challenging in 2023, though we are performing better than the market as we continue to focus on new accounts and share gains. Our DIY business was up strong double digits, albeit against a softer comparison where sales were impacted by supply chain challenges. From a product perspective, interior and exterior paint sales were both up high single digits, with interior sales growing faster and representing a larger part of the mix. Sales in our Consumer Brands Group also exceeded our guidance and increased by 5.1% in the quarter, primarily driven by mid-single-digit pricing. Sales in North America, our largest region, increased by a low single-digit percentage. We continue to invest here with our strategic retail partners for growth. In other regions, sales were up strong double digits in Latin America and Europe. Sales in China were down double digits, and we expect the previously announced divestiture of the China business to be completed in the third quarter. Adjusted segment margin was 15.7%, up 470 basis points year-over-year. Sales in the Performance Coatings Group increased less than 1% against a strong 15.2% comparison. Volume decreased low single digits but was offset by mid-single-digit increases in price. Adjusted segment margin increased 420 basis points to 18% of sales, which is within the range we have been targeting for this business. Sales in PCG varied significantly by region. In North America, sales increased low single digits against a nearly 30% comp. Sales in Europe were up mid-single digits. Latin America sales were down less than 1%, also against a strong comp of over 20%. Demand in Asia remained weak with sales down double digits against a soft period a year ago. From a division perspective, growth was strongest in Auto Refinish, which is up by a high single-digit percentage followed by General Industrial, which was up mid-single digits. Industrial wood sales were up less than 1% as softness in new residential continued to impact demand for furniture, capetry and flooring. Coil sales were down mid-single digits driven mainly by Europe, which was impacted by last year\u2019s Russia exit and against the nearly 40% comparison. Packaging sales were also down low double digits against a 20%-plus comp. We anticipated this decline given the near-term destocking by brand owners that we described on our last call. We continue to feel very good about our position and growth prospects in this end market. With that, let me turn it to John for his comments on our outlook for the third quarter and the full year.","evidence_gemma_new":"Adjusted segment margin","evidence_llama_3_3":null,"evidence_qwen_3_30b":"adjusted segment margin 15.7% 470 basis points year-over-year","gemma_new_max":15.7,"gemma_new_min":15.7,"llama_3_3_max":null,"llama_3_3_min":null,"qwen_3_30b_max":15.7,"qwen_3_30b_min":15.7}
{"symbol":"SHW","year":2023,"quarter":2,"date":"2023-Q2","chunk_id":2,"sub_chunk_id":0,"centroid_label":"adjusted segment margin","agreed_value":18.0,"count":2,"chunk":"Heidi Petz: Thank you, Jim. I\u2019ll begin with the Paint Stores Group. Second quarter Paint Stores Group sales were ahead of our expectations and increased 10%, driven by mid-single-digit volume growth and continued effective pricing. Segment margin improved 280 basis points to 24.3%. Growth was led by our protective & marine business, which was up strong double digits and was driven by industrial flooring infrastructure and oil and gas applications. In our pro-architectural end markets, the strongest performers were commercial and property maintenance, both of which increased by double-digit percentages. Residential repaint was close behind with sales up by a high single-digit percentage. Demand in this market is being somewhat tempered by the extended period of weak existing home sales. New residential sales were flat against a double-digit comparison, reflecting the softer start that we saw at the end of last year, which have continued into this year. As we\u2019ve previously noted, we anticipated new residential would be challenging in 2023, though we are performing better than the market as we continue to focus on new accounts and share gains. Our DIY business was up strong double digits, albeit against a softer comparison where sales were impacted by supply chain challenges. From a product perspective, interior and exterior paint sales were both up high single digits, with interior sales growing faster and representing a larger part of the mix. Sales in our Consumer Brands Group also exceeded our guidance and increased by 5.1% in the quarter, primarily driven by mid-single-digit pricing. Sales in North America, our largest region, increased by a low single-digit percentage. We continue to invest here with our strategic retail partners for growth. In other regions, sales were up strong double digits in Latin America and Europe. Sales in China were down double digits, and we expect the previously announced divestiture of the China business to be completed in the third quarter. Adjusted segment margin was 15.7%, up 470 basis points year-over-year. Sales in the Performance Coatings Group increased less than 1% against a strong 15.2% comparison. Volume decreased low single digits but was offset by mid-single-digit increases in price. Adjusted segment margin increased 420 basis points to 18% of sales, which is within the range we have been targeting for this business. Sales in PCG varied significantly by region. In North America, sales increased low single digits against a nearly 30% comp. Sales in Europe were up mid-single digits. Latin America sales were down less than 1%, also against a strong comp of over 20%. Demand in Asia remained weak with sales down double digits against a soft period a year ago. From a division perspective, growth was strongest in Auto Refinish, which is up by a high single-digit percentage followed by General Industrial, which was up mid-single digits. Industrial wood sales were up less than 1% as softness in new residential continued to impact demand for furniture, capetry and flooring. Coil sales were down mid-single digits driven mainly by Europe, which was impacted by last year\u2019s Russia exit and against the nearly 40% comparison. Packaging sales were also down low double digits against a 20%-plus comp. We anticipated this decline given the near-term destocking by brand owners that we described on our last call. We continue to feel very good about our position and growth prospects in this end market. With that, let me turn it to John for his comments on our outlook for the third quarter and the full year.","evidence_gemma_new":"Adjusted segment margin","evidence_llama_3_3":null,"evidence_qwen_3_30b":"adjusted segment margin 420 basis points 18% of sales","gemma_new_max":18.0,"gemma_new_min":18.0,"llama_3_3_max":null,"llama_3_3_min":null,"qwen_3_30b_max":18.0,"qwen_3_30b_min":18.0}
{"symbol":"SHW","year":2023,"quarter":3,"date":"2023-Q3","chunk_id":2,"sub_chunk_id":0,"centroid_label":"adjusted segment margin","agreed_value":13.8,"count":2,"chunk":"Heidi Petz: Thank you, Jim. I'll begin with the Paint Stores Group. Third quarter Paint Stores Group sales increased 3.6% against the challenging 21.5% comp. The increase was driven by continued effective pricing and higher Pro architectural volume, excluding New Residential. Segment margin improved sequentially and year-over-year to 25.9%, driven by pricing discipline and moderating raw material costs. Protective & Marine was the fastest growing in the quarter, driven by strong volume as sales increased by a double-digit percentage against the mid-teens comparison. Industrial flooring, infrastructure and oil and gas applications remain key drivers. In our Pro architectural end markets commercial sales were strongest, increasing by a high single-digit percentage versus a high teens comparison. Residential repaint sales increased by a mid-single-digit percentage amid continued softness in existing home sales and against a 20% comparison. While this is a solid performance in the current environment, we are not satisfied, and res repaint continues to be our largest opportunity for growth. Property maintenance sales grew by a low single-digit percentage against a mid-20s comparison. New Residential sales were down mid-single digits with volume down high single digits against the mid-20s comparison. As we've previously noted, we anticipated New Residential would be challenging near term, given prior softness in single-family starts. We expect our continued share gains and new account wins to become more and more apparent as starts improve. Our DIY business was down low single digits against a very difficult low 30s comparison. From a product perspective, interior paint sales were up low single digits and exterior paint sales were flat, both against double-digit comparisons in last year's third quarter. Sales in our Consumer Brands Group decreased by 4% in the quarter, primarily due to the divestiture of the China architectural business and softer DIY demand in North America, which was partially offset by selling price increases. Sales in North America, our largest region, decreased by a mid-single-digit percentage against a double-digit comparison. The Pros Who Paint category continued to grow, while DIY demand remained muted by inflationary pressures on consumers. We continue to invest here with our strategic retail partners for growth. In other regions, sales were up high single digits in Latin America and low double digits in Europe. Sales in China were down high double digits as we completed divestiture of the business on August 1. Adjusted segment margin was 13.8%, which was lower than a year ago, primarily due to lower sales volume and lower fixed cost absorption due to lower production volumes. Sales in the Performance Coatings Group decreased 1% against a low teens comparison. Volume decreased by a high single-digit percentage, but was partially offset by positive low single-digit contribution from pricing, FX and acquisitions. Adjusted segment margin increased to 19.1% of sales, primarily due to pricing discipline and moderating raw material costs. Sales in PCG varied significantly by region. Sales were strongest in Europe and increased by a mid-teens percentage. Latin America sales increased by low single digits against a mid-teens comp. North America sales decreased mid-single digits against a 20% comp. Demand in Asia remained weak, with sales down double digits against high single-digit growth a year ago. From a division perspective, growth was strongest in our Industrial Wood business, which was up by a low double-digit percentage against a mid-single-digit comparison. This growth reflects our ICA acquisition, share gains and a potential bottoming of New Residential construction. We expect to gain further momentum in this business. As we closed October 1st on the previously announced acquisition of Germany-based specialized industrial coatings holding comprised of the Oskar Nolte and Klumpp Coatings businesses. We are gaining share and seeing steady demand in Auto Refinish, where sales increased by a mid-single-digit percentage against a high single-digit comparison. Sales in Coil and General Industrial both decreased by low single-digit percentages against challenging comparisons and vary widely by region. Packaging sales were down by a mid-teens percentage against the high single-digit comparison. We anticipated this decline given the near-term destocking by brand owners that we described earlier this year. Packaging sales in the quarter were also slightly impacted by the fire at our Garland, Texas plant. Our business continuity team is executing our contingency plans to minimize customer impacts from this event near term. Longer term, we continue to feel very good about our position and growth prospects in this end market, and we expect to bring additional capacity online at our , France plant by early 2024. With that, let me turn it to John for his comments on our outlook for the fourth quarter and the year.","evidence_gemma_new":"Adjusted segment margin","evidence_llama_3_3":null,"evidence_qwen_3_30b":"adjusted segment margin","gemma_new_max":13.8,"gemma_new_min":13.8,"llama_3_3_max":null,"llama_3_3_min":null,"qwen_3_30b_max":13.8,"qwen_3_30b_min":13.8}
{"symbol":"SHW","year":2023,"quarter":3,"date":"2023-Q3","chunk_id":2,"sub_chunk_id":0,"centroid_label":"adjusted segment margin","agreed_value":19.1,"count":2,"chunk":"Heidi Petz: Thank you, Jim. I'll begin with the Paint Stores Group. Third quarter Paint Stores Group sales increased 3.6% against the challenging 21.5% comp. The increase was driven by continued effective pricing and higher Pro architectural volume, excluding New Residential. Segment margin improved sequentially and year-over-year to 25.9%, driven by pricing discipline and moderating raw material costs. Protective & Marine was the fastest growing in the quarter, driven by strong volume as sales increased by a double-digit percentage against the mid-teens comparison. Industrial flooring, infrastructure and oil and gas applications remain key drivers. In our Pro architectural end markets commercial sales were strongest, increasing by a high single-digit percentage versus a high teens comparison. Residential repaint sales increased by a mid-single-digit percentage amid continued softness in existing home sales and against a 20% comparison. While this is a solid performance in the current environment, we are not satisfied, and res repaint continues to be our largest opportunity for growth. Property maintenance sales grew by a low single-digit percentage against a mid-20s comparison. New Residential sales were down mid-single digits with volume down high single digits against the mid-20s comparison. As we've previously noted, we anticipated New Residential would be challenging near term, given prior softness in single-family starts. We expect our continued share gains and new account wins to become more and more apparent as starts improve. Our DIY business was down low single digits against a very difficult low 30s comparison. From a product perspective, interior paint sales were up low single digits and exterior paint sales were flat, both against double-digit comparisons in last year's third quarter. Sales in our Consumer Brands Group decreased by 4% in the quarter, primarily due to the divestiture of the China architectural business and softer DIY demand in North America, which was partially offset by selling price increases. Sales in North America, our largest region, decreased by a mid-single-digit percentage against a double-digit comparison. The Pros Who Paint category continued to grow, while DIY demand remained muted by inflationary pressures on consumers. We continue to invest here with our strategic retail partners for growth. In other regions, sales were up high single digits in Latin America and low double digits in Europe. Sales in China were down high double digits as we completed divestiture of the business on August 1. Adjusted segment margin was 13.8%, which was lower than a year ago, primarily due to lower sales volume and lower fixed cost absorption due to lower production volumes. Sales in the Performance Coatings Group decreased 1% against a low teens comparison. Volume decreased by a high single-digit percentage, but was partially offset by positive low single-digit contribution from pricing, FX and acquisitions. Adjusted segment margin increased to 19.1% of sales, primarily due to pricing discipline and moderating raw material costs. Sales in PCG varied significantly by region. Sales were strongest in Europe and increased by a mid-teens percentage. Latin America sales increased by low single digits against a mid-teens comp. North America sales decreased mid-single digits against a 20% comp. Demand in Asia remained weak, with sales down double digits against high single-digit growth a year ago. From a division perspective, growth was strongest in our Industrial Wood business, which was up by a low double-digit percentage against a mid-single-digit comparison. This growth reflects our ICA acquisition, share gains and a potential bottoming of New Residential construction. We expect to gain further momentum in this business. As we closed October 1st on the previously announced acquisition of Germany-based specialized industrial coatings holding comprised of the Oskar Nolte and Klumpp Coatings businesses. We are gaining share and seeing steady demand in Auto Refinish, where sales increased by a mid-single-digit percentage against a high single-digit comparison. Sales in Coil and General Industrial both decreased by low single-digit percentages against challenging comparisons and vary widely by region. Packaging sales were down by a mid-teens percentage against the high single-digit comparison. We anticipated this decline given the near-term destocking by brand owners that we described earlier this year. Packaging sales in the quarter were also slightly impacted by the fire at our Garland, Texas plant. Our business continuity team is executing our contingency plans to minimize customer impacts from this event near term. Longer term, we continue to feel very good about our position and growth prospects in this end market, and we expect to bring additional capacity online at our , France plant by early 2024. With that, let me turn it to John for his comments on our outlook for the fourth quarter and the year.","evidence_gemma_new":"Adjusted segment margin","evidence_llama_3_3":null,"evidence_qwen_3_30b":"adjusted segment margin","gemma_new_max":19.1,"gemma_new_min":19.1,"llama_3_3_max":null,"llama_3_3_min":null,"qwen_3_30b_max":19.1,"qwen_3_30b_min":19.1}
{"symbol":"SHW","year":2023,"quarter":4,"date":"2023-Q4","chunk_id":2,"sub_chunk_id":0,"centroid_label":"adjusted segment margin","agreed_value":10.8,"count":2,"chunk":"Heidi Petz: Thank you, Jim. I'll begin with the Paint Stores Group, where sales increased 2.3% against a mid-teens comparison. Volume drove the increase as our previous price increase annualized in September. Segment margin improved 210 basis points to 19.3%. Protective & Marine, commercial and residential repaint drove the growth. Strength in these markets was partially offset by decreases in New Residential and property management. From a product perspective, exterior and interior paint sales both increased by low-single digit percentages. Exterior sales grew faster but were a smaller part of the mix. We opened 35 new paint stores in Paint Stores Group in the fourth quarter and a total of 76 new stores in 2023. We also announced a 5% price increase to our customers in the quarter effective February 1. Moving on to our Consumer Brands Group. Sales decreased by 7.1% in the quarter, which was better than our guidance. Sales increased mid-teens percentage in Europe and Latin America. Sales decreased in North America by a low-double-digit percentage as customers managed their inventories lower due to soft paint demand, partially offset by an increase in the pro paint sales. Adjusted segment margin, which excludes acquisition-related amortization expense and impairment charge related to trademarks in Europe and the negative impact from the significant devaluation of the Argentine Peso in December was 10.8%. The decrease from last year's fourth quarter was driven by lower volume and higher nonoperating costs. Sales in the Performance Coatings Group increased slightly with continued choppiness across each of our businesses and regions. Acquisitions and favorable FX were offset by lower volume. Adjusted segment margin, which excludes acquisition-related amortization expense and the Argentine devaluation impact, improved to 17.3%. This is the fourth straight quarter this team has delivered year-over-year segment margin improvement. This performance reflects execution of our strategy, moderating raw material costs and the ongoing value we are providing customers. Industrial wood led the growth, including the impact of recent acquisitions. Coil and Automotive Refinish also delivered solid growth. Packaging was down as expected. General industrial was impacted by lower demand in all regions. PCG sales varied significantly by region with growth in Europe and Latin America and decreases in North America and Asia-Pacific. From a full-year perspective, I'll provide just a few highlights before turning to our 2024 outlook. At this time a year ago, you'll recall an environment of tremendous macro uncertainty with single-family housing starts down an average of more than 20% for seven consecutive months, existing home sales down a similar percentage, soft PMI manufacturing indices in all regions and most economists predicting a hard recession. Against that backdrop, we provided guidance that we believed was appropriate. We also said that if conditions improved, our performance would be better than our initial guidance, and that is exactly what happened. I could not be more proud or thankful for the efforts of our 64,000 employees throughout 2023. On a consolidated basis, our team delivered record full-year sales, adjusted EBITDA, adjusted diluted net income per share and net operating cash. We returned a total of $2.1 billion to our shareholders in the form of dividends and share buybacks in 2023. We delivered these results while reinvesting in the business by design and at an accelerated rate to drive continued above-market growth and enhanced profitability. In terms of CapEx, we invested $590 million, including approximately $205 million for building our future R&D lab projects. We expect to begin occupying these facilities by the end of 2024. We ended the year with a net debt to adjusted EBITDA ratio of 2.3x. Looking at our reportable segment on a full-year basis. Paint Stores grew sales by a high-single digit percentage and expanded its margin. Sales increased in all end markets except New Residential, which was down less than 1%. This New Residential performance was remarkable given the state of the market and reflects our share gains. Performance Coatings also grew its top line while further integrating recent acquisitions and achieving a high teens adjusted segment margin. The full-year adjusted margin performance is the best since the Valspar acquisition in 2017. Consumer Brands had a challenging year on the top line with lower sales resulting from soft DIY demand, but adjusted segment margin expanded. We're confident our aggressive portfolio adjustments completed during the year, including the divestiture of noncore aerosol product lines and the China architectural business, should result in improved future profitability. I am confident that we further separated ourselves from our competitors in 2023, and that's exactly what we intend to do again in 2024. Our success in 2023 stemmed from executing on our strategy, which remains unchanged. We provide differentiated solutions that enable our customers to increase their productivity and profitability and for which they are willing to pay and stay. These solutions center on industry and application expertise, innovation, value-added services and differentiated distribution. We also have momentum in the enterprise strategic priorities that are illustrated in our slide deck and I first described at our Investor Day last August. I am confident the continued execution of our strategy and our enterprise priorities will spur the next era of profitable growth for Sherwin-Williams. So turning to our outlook. We entered 2024 with confidence, energy and a commitment to seize profitable growth opportunities in our targeted end-market segments. We expect to outperform the market just as we have in the past. And while the macro environment feels better today than it did a year ago, it still contains a number of uncertainties. On the architectural side, U.S. New Residential sentiment has improved. Single-family starts have been up year-over-year for six consecutive months. Mortgage rates are expected to begin moderating but will remain well above historic levels. In residential repaint, existing home sales drove a portion of our sales and have declined year-over-year for 28 straight months. The trajectory of recovery is not clear here, and the LIRA index is forecasting negative remodeling spend in 2024. However, there are numerous other drivers for repaint, and our investments and our model give us confidence that we will continue to grow share. In new commercial, starts slowed considerably in 2023, which we expect will impact completions starting midway through 2024. Commercial lending standards have also tightened, and the Architectural Billing Index has been negative for five consecutive months. On the DIY side, we'll remain in share gain mode as we do not currently see a macroeconomic catalyst driving meaningful improvement in consumer demand, though any improvement in existing home sales could be a tailwind. On the industrial side, the PMI numbers for manufacturing in the U.S., Europe and Brazil have largely been negative for multiple months with China being slightly better recently. We expect Automotive Refinish to be our most resilient business in this environment, and we expect to see ongoing benefit from recent share gains. Industrial wood is likely to benefit from recovery in New Residential given the furniture, flooring and cabinetry end markets it serves. We expect Coil will grow driven by significant new account wins over the past year. Protective & Marine should continue to have momentum but will face challenging comps. We expect general industrial demand to remain choppy. In packaging, we expect industry volume for food and beverage cans to be flat to down in 2024. We will also see a negative short-term impact related to temporary volume shifts, which occurred as a result of our Garland production plant incident last August. We fully expect to recover this volume in stages in 2024 and 2025 while also winning new business. Longer term, we remain bullish on our packaging business and our differentiated non-BPA solutions. Our Garland plant is fully back online, and we are bringing on additional capacity in other locations during the first half of the year. We continue to have excellent new account and share-of-wallet opportunities in every business and in every region. The continued growth investments we have made over the past year give us tremendous confidence in pursuing these opportunities and gaining share. Moving to the cost environment. Our outlook assumes our raw material costs will be down by a low-single digit percentage in 2024 compared to 2023. We expect to see the largest benefit occurring in the first half of the year as comparisons become more challenging in the back half, where the entire basket decreased low-double-digits. While raw materials will likely be a benefit for us, other costs, including wages, health care, energy and transportation are expected to be up in the mid- to high-single digit range in 2024. I will remind you that these categories also inflated in 2023. Working with our customers, we delayed additional Paint Stores price increases last year given the pricing actions that we took in 2021 and 2022. We cannot however ignore these escalating costs indefinitely. As I mentioned earlier, Paint Stores Group is implementing a 5% price increase effective February 1st. The Performance Coatings and the Consumer Brands Group are also likely to have some targeted pricing activity in 2024 though at a more modest level than Paint Stores. As for our specific outlook, the slide deck issued with this morning's press release includes our expectations for consolidated and segment sales for the first quarter of 2024. The deck also includes our expectations for the full-year, where consolidated sales are expected to be up a low to mid-single-digit percentage and diluted net income per share is expected to be in the range of $10.05 to $10.55 per share. Excluding acquisition-related amortization expense of approximately $0.80 per share, adjusted diluted net income per share is expected in the range of $10.85 to $11.35, an increase of over 7% at the midpoint compared to 2023's adjusted diluted net income per share of $10.35. We've provided a GAAP reconciliation in Reg G table within our press release. Let me provide some additional data points and an update to our capital allocation priorities. Given incremental 2024 pricing, raw material deflation and Paint Stores Group, our largest and highest gross margin segment, growing sales faster than the other two segments, we would expect full-year gross margin expansion. We expect SG&A dollars to increase by a more typical level and increase by a mid-single-digit percentage in 2024, a moderation from the low-double-digit percentage increase we reported in 2023. We expect the investments we made last year and those we plan to make this year will enable us to grow at a multiple of the market. We plan to control costs tightly in noncustomer-facing functions. And we have a variety of SG&A levers we can pull, depending on a material change to our outlook up or down. We expect to open 80 to 100 new stores in the U.S. and Canada in 2024. We'll also be focused on sales reps, capacity and productivity, system improvements and product innovation. Next month, at our Board of Directors meeting, we will recommend an annual dividend increase of 18.2% to $2.86 per share, up from $2.42 last year. If approved, this will mark the 46th consecutive year that we've increased our dividend. We expect to continue making opportunistic share repurchases. We'll also continue to evaluate acquisitions that fit our strategy. We have a manageable $1.1 billion of long-term debt due in 2024 and expect to refinance the debt at higher rates. We expect to be within our current long-term target debt-to-adjusted EBITDA leverage ratio of 2x to 2.5x. In addition, I will refer you to the slide deck issued with our press release this morning, which provides guidance on our expectations for currency exchange, effective tax rate, CapEx, depreciation and amortization and interest expense. Our team is operating with great confidence as we begin 2024. We are extremely well positioned to continue delivering shareholder value. And I want to thank John Morikis for the incredibly strong foundation he leaves with us as he moves into his role as Executive Chair. I'm also grateful for the outstanding executive leadership team surrounding me. Given that there is still a considerable amount of uncertainty in the global economy, we believe our initial 2024 outlook is an appropriate one. Should the demand environment prove to be stronger than we are currently assuming, we would expect to do better than the guidance we are laying out today. Our first quarter is a seasonally smaller one. For that reason, we will not be making any updates to full-year guidance until our second quarter is completed and we have a better view of how the painting season is unfolding. Our strategy is clear, our priorities are focused, and our people are ready. We will continue to win by providing innovative solutions that help our customers to be more productive and more profitable. We expect to deliver meaningful earnings growth in 2024. This concludes our prepared remarks. With that, I'd like to thank you for joining us this morning, and we'll be happy to take your questions.","evidence_gemma_new":"Adjusted segment margin December","evidence_llama_3_3":null,"evidence_qwen_3_30b":"adjusted segment margin 10.8%","gemma_new_max":10.8,"gemma_new_min":10.8,"llama_3_3_max":null,"llama_3_3_min":null,"qwen_3_30b_max":10.8,"qwen_3_30b_min":10.8}
{"symbol":"SHW","year":2023,"quarter":4,"date":"2023-Q4","chunk_id":2,"sub_chunk_id":0,"centroid_label":"adjusted segment margin","agreed_value":17.3,"count":2,"chunk":"Heidi Petz: Thank you, Jim. I'll begin with the Paint Stores Group, where sales increased 2.3% against a mid-teens comparison. Volume drove the increase as our previous price increase annualized in September. Segment margin improved 210 basis points to 19.3%. Protective & Marine, commercial and residential repaint drove the growth. Strength in these markets was partially offset by decreases in New Residential and property management. From a product perspective, exterior and interior paint sales both increased by low-single digit percentages. Exterior sales grew faster but were a smaller part of the mix. We opened 35 new paint stores in Paint Stores Group in the fourth quarter and a total of 76 new stores in 2023. We also announced a 5% price increase to our customers in the quarter effective February 1. Moving on to our Consumer Brands Group. Sales decreased by 7.1% in the quarter, which was better than our guidance. Sales increased mid-teens percentage in Europe and Latin America. Sales decreased in North America by a low-double-digit percentage as customers managed their inventories lower due to soft paint demand, partially offset by an increase in the pro paint sales. Adjusted segment margin, which excludes acquisition-related amortization expense and impairment charge related to trademarks in Europe and the negative impact from the significant devaluation of the Argentine Peso in December was 10.8%. The decrease from last year's fourth quarter was driven by lower volume and higher nonoperating costs. Sales in the Performance Coatings Group increased slightly with continued choppiness across each of our businesses and regions. Acquisitions and favorable FX were offset by lower volume. Adjusted segment margin, which excludes acquisition-related amortization expense and the Argentine devaluation impact, improved to 17.3%. This is the fourth straight quarter this team has delivered year-over-year segment margin improvement. This performance reflects execution of our strategy, moderating raw material costs and the ongoing value we are providing customers. Industrial wood led the growth, including the impact of recent acquisitions. Coil and Automotive Refinish also delivered solid growth. Packaging was down as expected. General industrial was impacted by lower demand in all regions. PCG sales varied significantly by region with growth in Europe and Latin America and decreases in North America and Asia-Pacific. From a full-year perspective, I'll provide just a few highlights before turning to our 2024 outlook. At this time a year ago, you'll recall an environment of tremendous macro uncertainty with single-family housing starts down an average of more than 20% for seven consecutive months, existing home sales down a similar percentage, soft PMI manufacturing indices in all regions and most economists predicting a hard recession. Against that backdrop, we provided guidance that we believed was appropriate. We also said that if conditions improved, our performance would be better than our initial guidance, and that is exactly what happened. I could not be more proud or thankful for the efforts of our 64,000 employees throughout 2023. On a consolidated basis, our team delivered record full-year sales, adjusted EBITDA, adjusted diluted net income per share and net operating cash. We returned a total of $2.1 billion to our shareholders in the form of dividends and share buybacks in 2023. We delivered these results while reinvesting in the business by design and at an accelerated rate to drive continued above-market growth and enhanced profitability. In terms of CapEx, we invested $590 million, including approximately $205 million for building our future R&D lab projects. We expect to begin occupying these facilities by the end of 2024. We ended the year with a net debt to adjusted EBITDA ratio of 2.3x. Looking at our reportable segment on a full-year basis. Paint Stores grew sales by a high-single digit percentage and expanded its margin. Sales increased in all end markets except New Residential, which was down less than 1%. This New Residential performance was remarkable given the state of the market and reflects our share gains. Performance Coatings also grew its top line while further integrating recent acquisitions and achieving a high teens adjusted segment margin. The full-year adjusted margin performance is the best since the Valspar acquisition in 2017. Consumer Brands had a challenging year on the top line with lower sales resulting from soft DIY demand, but adjusted segment margin expanded. We're confident our aggressive portfolio adjustments completed during the year, including the divestiture of noncore aerosol product lines and the China architectural business, should result in improved future profitability. I am confident that we further separated ourselves from our competitors in 2023, and that's exactly what we intend to do again in 2024. Our success in 2023 stemmed from executing on our strategy, which remains unchanged. We provide differentiated solutions that enable our customers to increase their productivity and profitability and for which they are willing to pay and stay. These solutions center on industry and application expertise, innovation, value-added services and differentiated distribution. We also have momentum in the enterprise strategic priorities that are illustrated in our slide deck and I first described at our Investor Day last August. I am confident the continued execution of our strategy and our enterprise priorities will spur the next era of profitable growth for Sherwin-Williams. So turning to our outlook. We entered 2024 with confidence, energy and a commitment to seize profitable growth opportunities in our targeted end-market segments. We expect to outperform the market just as we have in the past. And while the macro environment feels better today than it did a year ago, it still contains a number of uncertainties. On the architectural side, U.S. New Residential sentiment has improved. Single-family starts have been up year-over-year for six consecutive months. Mortgage rates are expected to begin moderating but will remain well above historic levels. In residential repaint, existing home sales drove a portion of our sales and have declined year-over-year for 28 straight months. The trajectory of recovery is not clear here, and the LIRA index is forecasting negative remodeling spend in 2024. However, there are numerous other drivers for repaint, and our investments and our model give us confidence that we will continue to grow share. In new commercial, starts slowed considerably in 2023, which we expect will impact completions starting midway through 2024. Commercial lending standards have also tightened, and the Architectural Billing Index has been negative for five consecutive months. On the DIY side, we'll remain in share gain mode as we do not currently see a macroeconomic catalyst driving meaningful improvement in consumer demand, though any improvement in existing home sales could be a tailwind. On the industrial side, the PMI numbers for manufacturing in the U.S., Europe and Brazil have largely been negative for multiple months with China being slightly better recently. We expect Automotive Refinish to be our most resilient business in this environment, and we expect to see ongoing benefit from recent share gains. Industrial wood is likely to benefit from recovery in New Residential given the furniture, flooring and cabinetry end markets it serves. We expect Coil will grow driven by significant new account wins over the past year. Protective & Marine should continue to have momentum but will face challenging comps. We expect general industrial demand to remain choppy. In packaging, we expect industry volume for food and beverage cans to be flat to down in 2024. We will also see a negative short-term impact related to temporary volume shifts, which occurred as a result of our Garland production plant incident last August. We fully expect to recover this volume in stages in 2024 and 2025 while also winning new business. Longer term, we remain bullish on our packaging business and our differentiated non-BPA solutions. Our Garland plant is fully back online, and we are bringing on additional capacity in other locations during the first half of the year. We continue to have excellent new account and share-of-wallet opportunities in every business and in every region. The continued growth investments we have made over the past year give us tremendous confidence in pursuing these opportunities and gaining share. Moving to the cost environment. Our outlook assumes our raw material costs will be down by a low-single digit percentage in 2024 compared to 2023. We expect to see the largest benefit occurring in the first half of the year as comparisons become more challenging in the back half, where the entire basket decreased low-double-digits. While raw materials will likely be a benefit for us, other costs, including wages, health care, energy and transportation are expected to be up in the mid- to high-single digit range in 2024. I will remind you that these categories also inflated in 2023. Working with our customers, we delayed additional Paint Stores price increases last year given the pricing actions that we took in 2021 and 2022. We cannot however ignore these escalating costs indefinitely. As I mentioned earlier, Paint Stores Group is implementing a 5% price increase effective February 1st. The Performance Coatings and the Consumer Brands Group are also likely to have some targeted pricing activity in 2024 though at a more modest level than Paint Stores. As for our specific outlook, the slide deck issued with this morning's press release includes our expectations for consolidated and segment sales for the first quarter of 2024. The deck also includes our expectations for the full-year, where consolidated sales are expected to be up a low to mid-single-digit percentage and diluted net income per share is expected to be in the range of $10.05 to $10.55 per share. Excluding acquisition-related amortization expense of approximately $0.80 per share, adjusted diluted net income per share is expected in the range of $10.85 to $11.35, an increase of over 7% at the midpoint compared to 2023's adjusted diluted net income per share of $10.35. We've provided a GAAP reconciliation in Reg G table within our press release. Let me provide some additional data points and an update to our capital allocation priorities. Given incremental 2024 pricing, raw material deflation and Paint Stores Group, our largest and highest gross margin segment, growing sales faster than the other two segments, we would expect full-year gross margin expansion. We expect SG&A dollars to increase by a more typical level and increase by a mid-single-digit percentage in 2024, a moderation from the low-double-digit percentage increase we reported in 2023. We expect the investments we made last year and those we plan to make this year will enable us to grow at a multiple of the market. We plan to control costs tightly in noncustomer-facing functions. And we have a variety of SG&A levers we can pull, depending on a material change to our outlook up or down. We expect to open 80 to 100 new stores in the U.S. and Canada in 2024. We'll also be focused on sales reps, capacity and productivity, system improvements and product innovation. Next month, at our Board of Directors meeting, we will recommend an annual dividend increase of 18.2% to $2.86 per share, up from $2.42 last year. If approved, this will mark the 46th consecutive year that we've increased our dividend. We expect to continue making opportunistic share repurchases. We'll also continue to evaluate acquisitions that fit our strategy. We have a manageable $1.1 billion of long-term debt due in 2024 and expect to refinance the debt at higher rates. We expect to be within our current long-term target debt-to-adjusted EBITDA leverage ratio of 2x to 2.5x. In addition, I will refer you to the slide deck issued with our press release this morning, which provides guidance on our expectations for currency exchange, effective tax rate, CapEx, depreciation and amortization and interest expense. Our team is operating with great confidence as we begin 2024. We are extremely well positioned to continue delivering shareholder value. And I want to thank John Morikis for the incredibly strong foundation he leaves with us as he moves into his role as Executive Chair. I'm also grateful for the outstanding executive leadership team surrounding me. Given that there is still a considerable amount of uncertainty in the global economy, we believe our initial 2024 outlook is an appropriate one. Should the demand environment prove to be stronger than we are currently assuming, we would expect to do better than the guidance we are laying out today. Our first quarter is a seasonally smaller one. For that reason, we will not be making any updates to full-year guidance until our second quarter is completed and we have a better view of how the painting season is unfolding. Our strategy is clear, our priorities are focused, and our people are ready. We will continue to win by providing innovative solutions that help our customers to be more productive and more profitable. We expect to deliver meaningful earnings growth in 2024. This concludes our prepared remarks. With that, I'd like to thank you for joining us this morning, and we'll be happy to take your questions.","evidence_gemma_new":"Adjusted segment margin","evidence_llama_3_3":null,"evidence_qwen_3_30b":"adjusted segment margin 17.3%","gemma_new_max":17.3,"gemma_new_min":17.3,"llama_3_3_max":null,"llama_3_3_min":null,"qwen_3_30b_max":17.3,"qwen_3_30b_min":17.3}
{"symbol":"SHW","year":2024,"quarter":2,"date":"2024-Q2","chunk_id":2,"sub_chunk_id":0,"centroid_label":"adjusted segment margin","agreed_value":26.1,"count":2,"chunk":"Heidi Petz : Thank you, Jim. First, I want to thank all 65,000 of our employees around the world for their efforts in the quarter and for their ongoing passion for our company and for our customers. I continue to be humbled and inspired by all that you do. I believe our second quarter results demonstrate three things: One, we have the right strategy. Two, our team continues to execute and adapt. And three, we continue to see returns from our ongoing investments in the business. At the same time, we're not content with where we are by any means and our team understands that we must continue to operate with determination and urgency. We're delivering strong results in a choppy demand environment while executing on initiatives that will put our customers and our company in position for even greater sustained success. As far as specifics on the second quarter, I'll begin with the Paint Stores Group where sales increased by mid-single digits against a double-digit comparison. Volume and price were both up low-single digits. As we expected, price realization improved as the quarter progressed. Segment margin increased to 25.1%, driven by higher sales and moderating raw material costs. Pro sales were led by residential repaint which was up by a mid-single digit percentage. Strong evidence that we are continuing to take share in a down market. We're clearly seeing a return here from the investments in dedicated sales reps we made in the back half of last year. New residential returned to growth in the quarter as we are seeing improving single family starts turn to completion. Commercial grew by low-single digits against a double-digit comparison. Property management was down less than 1% with continued delays in CapEx projects. Protective and marine was up mid-single digits against a low-20s comparison. And while we acknowledge that there have been project delays, we feel very good about the pipeline. DIY increased low-single digit increased compared to a high-teens comp. From a product perspective, interior paint sales grew faster than exterior paint sales. We have opened 26 net new stores year-to-date and expect to open 80 to 100 for the full year. Moving on to our Consumer Brands Group, sales underperformed our expectations in a market that was softer than we anticipated. Lower volume, the impact of the China architectural divestiture and unfavorable currency translation were partially offset by selling price increases primarily in Latin America. Sales in North America decreased by a high-single digit percentage where weakness in existing home sales remains a headwind. Inflation, depleted savings and household debt also continue to pressure consumers who currently appear to be spending their modest available discretionary dollars elsewhere. We understand where we are in this cycle and eventually expect to see an upturn in DIY demand. We're confident that we are well positioned with our growing partnerships over the long-term. Outside of North America, sales decreased by a high-single digit percentage in Latin America and a double-digit percentage in Europe. Adjusted segment margin expanded to 26.1%. This was primarily driven by improvements in manufacturing and distribution fixed cost absorption within the segment and moderating raw material costs partially offset by net sales that were below expectations and higher employee related costs. In the Performance Coatings Group, modest sales growth was driven by an acquisition which was partially offset by unfavorable currency translation. Adjusted segment margin improved to 19.4%. This continued strong margin performance reflects our ability to drive our customer success in end markets that value differentiation. It also reflects the ongoing hard work of our team to optimize this business. We continue to see choppy demand by division and region. Industrial wood led the growth including the impact of an acquisition. Coil also delivered solid growth driven by share gains. Auto refinish was up low-single digits in North America and down less than 1% overall. Share gains are offsetting softness in our core business where consumer reluctance to pay deductibles is resulting in lower insurance claims. Packaging was down less than expected and we have a good line of sight to improvement in the back half of the year. General industrial demand was lower in all regions. Heavy equipment and transportation were down more significantly, while energy infrastructure was a bright spot. Regionally, sales in the group were down low-single digits in North America, but positive in other regions. Moving on to our guidance for the third quarter and full year, it's clear that the macroeconomic environment has been softer for longer than many economists anticipated at the start of the year. We don't expect to get material help from the market in our back half. We are unwilling to simply accept these conditions and you can count on us to continue being very aggressive in our pursuit of new business and share of wallet gains. Sherwin-Williams have incredibly well positioned in each of our targeted end markets. Comparisons ease in our second half, competitive dynamics are a tailwind and we are confident share gains will become more apparent over time as market conditions improve. As for our specific outlook, the slide deck issued with this morning's press release includes our expectations for consolidated and segment sales for the third of 2024. For the full year 2024, consolidated sales are expected to be up a low-single digit percentage compared to our previous guide of up low- to mid-single digits. Full year sales guidance for the Paint Stores Group and the Performance Coatings Group remain unchanged. We have reduced our Consumer Brands Group guidance meaningfully following the softer than expected first half and continued weak demand in the North American DIY market. We are increasing our full year earnings guidance given our better than expected results in the second quarter. The midpoint of our previous guidance now becomes the low end of our revised guidance. On an adjusted basis, we are now guiding diluted EPS in the range of $11.10 to $11.40 a share, an increase of 8.7% at the midpoint over the prior year. As we have often said, should our sales prove to be better than we are currently anticipating, we would expect EPS to be better. Our slide deck also provides guidance on our expectations for raw material costs and other items helpful for modeling purposes. As we enter our second half, we know that we are not immune from choppy market conditions. This leads us to focus even more intensely on our strategy. In periods of uncertainty and competitive disarray, customers are looking to Sherwin-Williams for consistency, reliability, dependability and differentiated solutions that will drive their productivity and their profitability. We have a deep and experienced team that knows how to do just that. We believe in success by design and we do expect to win. This concludes our prepared remarks. With that, I'd like to thank you for joining us this morning and we'd be happy to take your questions.","evidence_gemma_new":null,"evidence_llama_3_3":"Adjusted segment margin","evidence_qwen_3_30b":"adjusted segment margin 26.1%","gemma_new_max":null,"gemma_new_min":null,"llama_3_3_max":26.1,"llama_3_3_min":26.1,"qwen_3_30b_max":26.1,"qwen_3_30b_min":26.1}
{"symbol":"SHW","year":2023,"quarter":1,"date":"2023-Q1","chunk_id":39,"sub_chunk_id":0,"centroid_label":"gross margins","agreed_value":46.5,"count":2,"chunk":"John Morikis : Well, we've talked about our -- speaking to the margin -- gross margin, we expect we'll be in the range of the 45% to 48%. We've I think demonstrated the incremental sequential margins in this quarter, getting close to that bottom level of the range, and we expect to poke through that. And the reason we do expect that is, is that we believe we're focused on the right customers with the right solutions. Our focus is really simple. I mean we want to help them make more money, help them to be successful. And as a result, we are in a position to be able to build that combined success. And as a result, we expect to be able to provide margins for both our customers and our shareholders. And the combination of the right customers with the right solutions, we believe will lead us to that.","evidence_gemma_new":"expect gross margin","evidence_llama_3_3":null,"evidence_qwen_3_30b":"expect gross margin this quarter","gemma_new_max":46.5,"gemma_new_min":46.5,"llama_3_3_max":null,"llama_3_3_min":null,"qwen_3_30b_max":46.5,"qwen_3_30b_min":46.5}
{"symbol":"SHW","year":2023,"quarter":2,"date":"2023-Q2","chunk_id":7,"sub_chunk_id":0,"centroid_label":"gross margins","agreed_value":0.46,"count":2,"chunk":"Greg Melich: Got it. And I guess my second question is on getting back to those that margin range, the 46% gross margin. Could you remind us of the range you were targeting? And is there a potential to be above that in the cycle, given that it sounds like at least the pricing environment is remaining quite rational?","evidence_gemma_new":"gross margin","evidence_llama_3_3":"gross margin","evidence_qwen_3_30b":null,"gemma_new_max":0.46,"gemma_new_min":0.46,"llama_3_3_max":0.46,"llama_3_3_min":0.46,"qwen_3_30b_max":null,"qwen_3_30b_min":null}
{"symbol":"SHW","year":2023,"quarter":3,"date":"2023-Q2","chunk_id":15,"sub_chunk_id":0,"centroid_label":"gross margins","agreed_value":440.0,"count":2,"chunk":"Allen Mistysyn: Yes, Jeff, if you look at our pricing because you annualize pricing throughout each of the segments as we've gone. I know we've talked about Performance Coatings through basically, at some point, through on a 90-day cycle. So price was still up in the quarter, in the third quarter, up low single digit. But if you look at that compared to our second quarter, price would have added a mid single-digit percentage in the second quarter. So -- and as you get into our fourth quarter, you'd be at a lower single-digit impact on our fourth quarter. So that's just annualizing the price increases we've taken throughout '22. But I would argue and say, we have not given that price back. And you can see that in our gross margin performance in the second quarter, up -- 440 up in the third -- third quarter of 490 basis points, and we expect to be up again in our fourth quarter, along with the moderating raw material cost sequentially.","evidence_gemma_new":"gross margin performance second quarter","evidence_llama_3_3":"gross margin performance second quarter","evidence_qwen_3_30b":null,"gemma_new_max":440.0,"gemma_new_min":440.0,"llama_3_3_max":440.0,"llama_3_3_min":440.0,"qwen_3_30b_max":null,"qwen_3_30b_min":null}
{"symbol":"SHW","year":2023,"quarter":2,"date":"2023-Q2","chunk_id":8,"sub_chunk_id":0,"centroid_label":"gross margins","agreed_value":46.5,"count":2,"chunk":"Al Mistysyn: Yes, Greg, this is Al Mistysyn. And we\u2019re really pleased with the performance of our gross margin. As a reminder, our target is midterm, 45% to 48%. As we have talked about in the past, we \u2013 in our raw material inflationary environment, we put price in to offset those dollars. And then as raw materials moderate, we start seeing the benefit of that pricing to increase our gross margin and helps us cover the continued investments we make to help our customers drive value in their business. So I\u2019d expect the sequential gross margin to be similar to what I saw in this \u2013 what we saw in the second quarter. Price, as you know, we\u2019ll start annualizing the price increases in our third quarter, specifically the September 10% in Paint Stores Group plus the other items, other segments that have put pricing in. So for the full year, I think our gross margin, depending on where Paint Stores Group volume is could be in that 45% to 46% range. And then as you know, we\u2019ll evaluate that 45% to 48% range over time. And as we get consistency in that range, look to raise the bar and move that target up.","evidence_gemma_new":"gross margin midterm","evidence_llama_3_3":null,"evidence_qwen_3_30b":"target gross margin midterm","gemma_new_max":46.5,"gemma_new_min":46.5,"llama_3_3_max":null,"llama_3_3_min":null,"qwen_3_30b_max":46.5,"qwen_3_30b_min":46.5}
{"symbol":"SHW","year":2023,"quarter":3,"date":"2023-Q3","chunk_id":15,"sub_chunk_id":0,"centroid_label":"gross margins","agreed_value":490.0,"count":2,"chunk":"Allen Mistysyn: Yes, Jeff, if you look at our pricing because you annualize pricing throughout each of the segments as we've gone. I know we've talked about Performance Coatings through basically, at some point, through on a 90-day cycle. So price was still up in the quarter, in the third quarter, up low single digit. But if you look at that compared to our second quarter, price would have added a mid single-digit percentage in the second quarter. So -- and as you get into our fourth quarter, you'd be at a lower single-digit impact on our fourth quarter. So that's just annualizing the price increases we've taken throughout '22. But I would argue and say, we have not given that price back. And you can see that in our gross margin performance in the second quarter, up -- 440 up in the third -- third quarter of 490 basis points, and we expect to be up again in our fourth quarter, along with the moderating raw material cost sequentially.","evidence_gemma_new":"gross margin performance third quarter","evidence_llama_3_3":"gross margin performance third quarter","evidence_qwen_3_30b":null,"gemma_new_max":490.0,"gemma_new_min":490.0,"llama_3_3_max":490.0,"llama_3_3_min":490.0,"qwen_3_30b_max":null,"qwen_3_30b_min":null}
{"symbol":"SHW","year":2023,"quarter":4,"date":"2023-Q4","chunk_id":57,"sub_chunk_id":0,"centroid_label":"gross margins","agreed_value":1.0,"count":2,"chunk":"Greg Melich: Okay. Great. No, it's good to be back. So I just wanted to frame a little bit differently how important mean the gross margins back up to the middle upper part of your range. And if I take your guidance, it seems like there's another 100 bps of gross margin expansion assumed this year. How important is volume versus price raws and mix for that 100 improvement this year? And I guess that, how long do you wait before you end up raising that long-term goal?","evidence_gemma_new":null,"evidence_llama_3_3":"guidance gross margins this year","evidence_qwen_3_30b":"guidance gross margins this year","gemma_new_max":null,"gemma_new_min":null,"llama_3_3_max":1.0,"llama_3_3_min":1.0,"qwen_3_30b_max":1.0,"qwen_3_30b_min":1.0}
{"symbol":"SHW","year":2024,"quarter":2,"date":"2024-Q2","chunk_id":19,"sub_chunk_id":0,"centroid_label":"gross margins","agreed_value":488.0,"count":3,"chunk":"John McNulty : So on the gross margin front, you put up this [488] number really high despite some soft volumes. I guess, was the bulk of this price versus raws in terms of the improvement? And if not, how should we be thinking about some of the efficiency and some of the simplicity measures that you've been making? Because obviously, volumes really didn't drive this one entirely. So I guess, how should we be thinking about the big drivers there?","evidence_gemma_new":"gross margin 488","evidence_llama_3_3":"gross margin","evidence_qwen_3_30b":"gross margin [488]","gemma_new_max":488.0,"gemma_new_min":488.0,"llama_3_3_max":488.0,"llama_3_3_min":488.0,"qwen_3_30b_max":488.0,"qwen_3_30b_min":488.0}
{"symbol":"SHW","year":2023,"quarter":1,"date":"2023-Q1","chunk_id":2,"sub_chunk_id":0,"centroid_label":"paint stores group segment","agreed_value":14.8,"count":2,"chunk":"Heidi Petz : Thank you, Jim. I'll begin with the Paint Stores Group, previously known as The Americas Group. We described this change on our last call and in this morning's press release. There is no impact to prior year consolidated results related to this change. Current and prior year segment results have been restated to reflect this change. First quarter Paint Stores Group sales were ahead of our expectations and increased 14.8%, driven by high single-digit volume growth and continued effective pricing. Segment profit increased by $97.9 million and segment margin improved 120 basis points to 18.4%. Our Pro architectural sales grew by a mid-teens percentage in the quarter. All Pro market segments increased by double digits, led by property management and followed by commercial, residential repaint and new residential, respectively. Sales in protective & marine and DIY also increased by double-digit percentages. From a product perspective, interior and exterior paint sales were both strong, with interior sales growing faster and representing a larger part of the mix. Moving on to results in our Consumer Brands Group, which again now reflects the addition of a Latin America architectural business in the current quarter and prior year. Sales were well ahead of our guidance and increased by 2.4% in the quarter. Performance was better than expected in North America, where sales were down less than 1%; and in Europe, where sales were down low single digits. In other regions, sales were up strong double digits in Latin America and down double digits in Asia. Effective pricing led by Latin America was partially offset by a mid-single-digit decrease in volume and low single-digit FX headwinds. The tightness in alkyd resins impacting our ability to produce stains and aerosols, improved significantly during the quarter, and we expect this issue to be behind us by the end of the second quarter. Adjusted segment margin was 13%, up 120 basis points year-over-year. As Jim mentioned, we divested a noncore aerosol business at the beginning of this month, and we also entered into an agreement to divest our China architectural business. We expect these actions will benefit segment margin over time as we drive a return to our high teens, low 20s adjusted margin target. Onetime restructuring costs in the quarter were immaterial. Sales in the Performance Coatings Group increased 3.4% against a 20.4% comparison. The increase was driven by low teens pricing and mid-single-digit sales from acquisitions, partially offset by a low teens decrease in volume, which included the impact from discontinued operations in Russia and a low single-digit unfavorable FX impact. Adjusted segment margin increased 390 basis points to 15.7% of sales. This is the fourth straight quarter this team has delivered year-over-year segment margin improvement, driven by execution of our strategy, including effective pricing. Sales in PCG varied significantly by region. In North America, sales increased high single digits against a nearly 30% comp. Latin America sales increased by double digits, also against a strong comp. Sales in Europe were up mid-single digits, while sales in Asia were down double digits. From a division perspective, growth was strongest in Auto Refinish, which was up by a mid-teens percentage, followed by Coil and General Industrial, which were both up mid-single digits. All three of these divisions grew against double-digit comparisons. Industrial Wood sales were down mid-single digits as expected due to slowing in furniture, cabinetry and flooring related to new residential softness. Packaging sales also were down mid-single digits against a 30-plus comp with volume down about 1 point in the remainder due to our exit of Russia and unfavorable FX. We continue to feel very good about our position and growth prospects in this end market. With that, let me turn it over to John for his comments on our outlook for the second quarter and the full year.","evidence_gemma_new":"Paint Stores Group sales First quarter","evidence_llama_3_3":null,"evidence_qwen_3_30b":"Paint Stores Group sales First quarter","gemma_new_max":14.8,"gemma_new_min":14.8,"llama_3_3_max":null,"llama_3_3_min":null,"qwen_3_30b_max":14.8,"qwen_3_30b_min":14.8}
{"symbol":"SHW","year":2023,"quarter":2,"date":"2023-Q2","chunk_id":2,"sub_chunk_id":0,"centroid_label":"paint stores group segment","agreed_value":10.0,"count":2,"chunk":"Heidi Petz: Thank you, Jim. I\u2019ll begin with the Paint Stores Group. Second quarter Paint Stores Group sales were ahead of our expectations and increased 10%, driven by mid-single-digit volume growth and continued effective pricing. Segment margin improved 280 basis points to 24.3%. Growth was led by our protective & marine business, which was up strong double digits and was driven by industrial flooring infrastructure and oil and gas applications. In our pro-architectural end markets, the strongest performers were commercial and property maintenance, both of which increased by double-digit percentages. Residential repaint was close behind with sales up by a high single-digit percentage. Demand in this market is being somewhat tempered by the extended period of weak existing home sales. New residential sales were flat against a double-digit comparison, reflecting the softer start that we saw at the end of last year, which have continued into this year. As we\u2019ve previously noted, we anticipated new residential would be challenging in 2023, though we are performing better than the market as we continue to focus on new accounts and share gains. Our DIY business was up strong double digits, albeit against a softer comparison where sales were impacted by supply chain challenges. From a product perspective, interior and exterior paint sales were both up high single digits, with interior sales growing faster and representing a larger part of the mix. Sales in our Consumer Brands Group also exceeded our guidance and increased by 5.1% in the quarter, primarily driven by mid-single-digit pricing. Sales in North America, our largest region, increased by a low single-digit percentage. We continue to invest here with our strategic retail partners for growth. In other regions, sales were up strong double digits in Latin America and Europe. Sales in China were down double digits, and we expect the previously announced divestiture of the China business to be completed in the third quarter. Adjusted segment margin was 15.7%, up 470 basis points year-over-year. Sales in the Performance Coatings Group increased less than 1% against a strong 15.2% comparison. Volume decreased low single digits but was offset by mid-single-digit increases in price. Adjusted segment margin increased 420 basis points to 18% of sales, which is within the range we have been targeting for this business. Sales in PCG varied significantly by region. In North America, sales increased low single digits against a nearly 30% comp. Sales in Europe were up mid-single digits. Latin America sales were down less than 1%, also against a strong comp of over 20%. Demand in Asia remained weak with sales down double digits against a soft period a year ago. From a division perspective, growth was strongest in Auto Refinish, which is up by a high single-digit percentage followed by General Industrial, which was up mid-single digits. Industrial wood sales were up less than 1% as softness in new residential continued to impact demand for furniture, capetry and flooring. Coil sales were down mid-single digits driven mainly by Europe, which was impacted by last year\u2019s Russia exit and against the nearly 40% comparison. Packaging sales were also down low double digits against a 20%-plus comp. We anticipated this decline given the near-term destocking by brand owners that we described on our last call. We continue to feel very good about our position and growth prospects in this end market. With that, let me turn it to John for his comments on our outlook for the third quarter and the full year.","evidence_gemma_new":"Paint Stores Group sales","evidence_llama_3_3":null,"evidence_qwen_3_30b":"Paint Stores Group sales second quarter","gemma_new_max":10.0,"gemma_new_min":10.0,"llama_3_3_max":null,"llama_3_3_min":null,"qwen_3_30b_max":10.0,"qwen_3_30b_min":10.0}
{"symbol":"SHW","year":2023,"quarter":3,"date":"2023-Q3","chunk_id":52,"sub_chunk_id":0,"centroid_label":"paint stores group segment","agreed_value":36.0,"count":3,"chunk":"Michael Harrison: You have opened 36 new paint store locations so far this year. Is the target still 82\/100? And are you seeing any delays in either the permitting process or the construction process?","evidence_gemma_new":"new paint store locations this year","evidence_llama_3_3":"new paint store locations this year","evidence_qwen_3_30b":"new paint store locations this year","gemma_new_max":36.0,"gemma_new_min":36.0,"llama_3_3_max":36.0,"llama_3_3_min":36.0,"qwen_3_30b_max":36.0,"qwen_3_30b_min":36.0}
{"symbol":"SHW","year":2023,"quarter":3,"date":"2023-Q3","chunk_id":2,"sub_chunk_id":0,"centroid_label":"paint stores group segment","agreed_value":3.6,"count":2,"chunk":"Heidi Petz: Thank you, Jim. I'll begin with the Paint Stores Group. Third quarter Paint Stores Group sales increased 3.6% against the challenging 21.5% comp. The increase was driven by continued effective pricing and higher Pro architectural volume, excluding New Residential. Segment margin improved sequentially and year-over-year to 25.9%, driven by pricing discipline and moderating raw material costs. Protective & Marine was the fastest growing in the quarter, driven by strong volume as sales increased by a double-digit percentage against the mid-teens comparison. Industrial flooring, infrastructure and oil and gas applications remain key drivers. In our Pro architectural end markets commercial sales were strongest, increasing by a high single-digit percentage versus a high teens comparison. Residential repaint sales increased by a mid-single-digit percentage amid continued softness in existing home sales and against a 20% comparison. While this is a solid performance in the current environment, we are not satisfied, and res repaint continues to be our largest opportunity for growth. Property maintenance sales grew by a low single-digit percentage against a mid-20s comparison. New Residential sales were down mid-single digits with volume down high single digits against the mid-20s comparison. As we've previously noted, we anticipated New Residential would be challenging near term, given prior softness in single-family starts. We expect our continued share gains and new account wins to become more and more apparent as starts improve. Our DIY business was down low single digits against a very difficult low 30s comparison. From a product perspective, interior paint sales were up low single digits and exterior paint sales were flat, both against double-digit comparisons in last year's third quarter. Sales in our Consumer Brands Group decreased by 4% in the quarter, primarily due to the divestiture of the China architectural business and softer DIY demand in North America, which was partially offset by selling price increases. Sales in North America, our largest region, decreased by a mid-single-digit percentage against a double-digit comparison. The Pros Who Paint category continued to grow, while DIY demand remained muted by inflationary pressures on consumers. We continue to invest here with our strategic retail partners for growth. In other regions, sales were up high single digits in Latin America and low double digits in Europe. Sales in China were down high double digits as we completed divestiture of the business on August 1. Adjusted segment margin was 13.8%, which was lower than a year ago, primarily due to lower sales volume and lower fixed cost absorption due to lower production volumes. Sales in the Performance Coatings Group decreased 1% against a low teens comparison. Volume decreased by a high single-digit percentage, but was partially offset by positive low single-digit contribution from pricing, FX and acquisitions. Adjusted segment margin increased to 19.1% of sales, primarily due to pricing discipline and moderating raw material costs. Sales in PCG varied significantly by region. Sales were strongest in Europe and increased by a mid-teens percentage. Latin America sales increased by low single digits against a mid-teens comp. North America sales decreased mid-single digits against a 20% comp. Demand in Asia remained weak, with sales down double digits against high single-digit growth a year ago. From a division perspective, growth was strongest in our Industrial Wood business, which was up by a low double-digit percentage against a mid-single-digit comparison. This growth reflects our ICA acquisition, share gains and a potential bottoming of New Residential construction. We expect to gain further momentum in this business. As we closed October 1st on the previously announced acquisition of Germany-based specialized industrial coatings holding comprised of the Oskar Nolte and Klumpp Coatings businesses. We are gaining share and seeing steady demand in Auto Refinish, where sales increased by a mid-single-digit percentage against a high single-digit comparison. Sales in Coil and General Industrial both decreased by low single-digit percentages against challenging comparisons and vary widely by region. Packaging sales were down by a mid-teens percentage against the high single-digit comparison. We anticipated this decline given the near-term destocking by brand owners that we described earlier this year. Packaging sales in the quarter were also slightly impacted by the fire at our Garland, Texas plant. Our business continuity team is executing our contingency plans to minimize customer impacts from this event near term. Longer term, we continue to feel very good about our position and growth prospects in this end market, and we expect to bring additional capacity online at our , France plant by early 2024. With that, let me turn it to John for his comments on our outlook for the fourth quarter and the year.","evidence_gemma_new":"Paint Stores Group sales","evidence_llama_3_3":null,"evidence_qwen_3_30b":"Paint Stores Group sales third quarter","gemma_new_max":3.6,"gemma_new_min":3.6,"llama_3_3_max":null,"llama_3_3_min":null,"qwen_3_30b_max":3.6,"qwen_3_30b_min":3.6}
{"symbol":"SHW","year":2023,"quarter":4,"date":"2023-Q4","chunk_id":2,"sub_chunk_id":0,"centroid_label":"paint stores group segment","agreed_value":2.3,"count":2,"chunk":"Heidi Petz: Thank you, Jim. I'll begin with the Paint Stores Group, where sales increased 2.3% against a mid-teens comparison. Volume drove the increase as our previous price increase annualized in September. Segment margin improved 210 basis points to 19.3%. Protective & Marine, commercial and residential repaint drove the growth. Strength in these markets was partially offset by decreases in New Residential and property management. From a product perspective, exterior and interior paint sales both increased by low-single digit percentages. Exterior sales grew faster but were a smaller part of the mix. We opened 35 new paint stores in Paint Stores Group in the fourth quarter and a total of 76 new stores in 2023. We also announced a 5% price increase to our customers in the quarter effective February 1. Moving on to our Consumer Brands Group. Sales decreased by 7.1% in the quarter, which was better than our guidance. Sales increased mid-teens percentage in Europe and Latin America. Sales decreased in North America by a low-double-digit percentage as customers managed their inventories lower due to soft paint demand, partially offset by an increase in the pro paint sales. Adjusted segment margin, which excludes acquisition-related amortization expense and impairment charge related to trademarks in Europe and the negative impact from the significant devaluation of the Argentine Peso in December was 10.8%. The decrease from last year's fourth quarter was driven by lower volume and higher nonoperating costs. Sales in the Performance Coatings Group increased slightly with continued choppiness across each of our businesses and regions. Acquisitions and favorable FX were offset by lower volume. Adjusted segment margin, which excludes acquisition-related amortization expense and the Argentine devaluation impact, improved to 17.3%. This is the fourth straight quarter this team has delivered year-over-year segment margin improvement. This performance reflects execution of our strategy, moderating raw material costs and the ongoing value we are providing customers. Industrial wood led the growth, including the impact of recent acquisitions. Coil and Automotive Refinish also delivered solid growth. Packaging was down as expected. General industrial was impacted by lower demand in all regions. PCG sales varied significantly by region with growth in Europe and Latin America and decreases in North America and Asia-Pacific. From a full-year perspective, I'll provide just a few highlights before turning to our 2024 outlook. At this time a year ago, you'll recall an environment of tremendous macro uncertainty with single-family housing starts down an average of more than 20% for seven consecutive months, existing home sales down a similar percentage, soft PMI manufacturing indices in all regions and most economists predicting a hard recession. Against that backdrop, we provided guidance that we believed was appropriate. We also said that if conditions improved, our performance would be better than our initial guidance, and that is exactly what happened. I could not be more proud or thankful for the efforts of our 64,000 employees throughout 2023. On a consolidated basis, our team delivered record full-year sales, adjusted EBITDA, adjusted diluted net income per share and net operating cash. We returned a total of $2.1 billion to our shareholders in the form of dividends and share buybacks in 2023. We delivered these results while reinvesting in the business by design and at an accelerated rate to drive continued above-market growth and enhanced profitability. In terms of CapEx, we invested $590 million, including approximately $205 million for building our future R&D lab projects. We expect to begin occupying these facilities by the end of 2024. We ended the year with a net debt to adjusted EBITDA ratio of 2.3x. Looking at our reportable segment on a full-year basis. Paint Stores grew sales by a high-single digit percentage and expanded its margin. Sales increased in all end markets except New Residential, which was down less than 1%. This New Residential performance was remarkable given the state of the market and reflects our share gains. Performance Coatings also grew its top line while further integrating recent acquisitions and achieving a high teens adjusted segment margin. The full-year adjusted margin performance is the best since the Valspar acquisition in 2017. Consumer Brands had a challenging year on the top line with lower sales resulting from soft DIY demand, but adjusted segment margin expanded. We're confident our aggressive portfolio adjustments completed during the year, including the divestiture of noncore aerosol product lines and the China architectural business, should result in improved future profitability. I am confident that we further separated ourselves from our competitors in 2023, and that's exactly what we intend to do again in 2024. Our success in 2023 stemmed from executing on our strategy, which remains unchanged. We provide differentiated solutions that enable our customers to increase their productivity and profitability and for which they are willing to pay and stay. These solutions center on industry and application expertise, innovation, value-added services and differentiated distribution. We also have momentum in the enterprise strategic priorities that are illustrated in our slide deck and I first described at our Investor Day last August. I am confident the continued execution of our strategy and our enterprise priorities will spur the next era of profitable growth for Sherwin-Williams. So turning to our outlook. We entered 2024 with confidence, energy and a commitment to seize profitable growth opportunities in our targeted end-market segments. We expect to outperform the market just as we have in the past. And while the macro environment feels better today than it did a year ago, it still contains a number of uncertainties. On the architectural side, U.S. New Residential sentiment has improved. Single-family starts have been up year-over-year for six consecutive months. Mortgage rates are expected to begin moderating but will remain well above historic levels. In residential repaint, existing home sales drove a portion of our sales and have declined year-over-year for 28 straight months. The trajectory of recovery is not clear here, and the LIRA index is forecasting negative remodeling spend in 2024. However, there are numerous other drivers for repaint, and our investments and our model give us confidence that we will continue to grow share. In new commercial, starts slowed considerably in 2023, which we expect will impact completions starting midway through 2024. Commercial lending standards have also tightened, and the Architectural Billing Index has been negative for five consecutive months. On the DIY side, we'll remain in share gain mode as we do not currently see a macroeconomic catalyst driving meaningful improvement in consumer demand, though any improvement in existing home sales could be a tailwind. On the industrial side, the PMI numbers for manufacturing in the U.S., Europe and Brazil have largely been negative for multiple months with China being slightly better recently. We expect Automotive Refinish to be our most resilient business in this environment, and we expect to see ongoing benefit from recent share gains. Industrial wood is likely to benefit from recovery in New Residential given the furniture, flooring and cabinetry end markets it serves. We expect Coil will grow driven by significant new account wins over the past year. Protective & Marine should continue to have momentum but will face challenging comps. We expect general industrial demand to remain choppy. In packaging, we expect industry volume for food and beverage cans to be flat to down in 2024. We will also see a negative short-term impact related to temporary volume shifts, which occurred as a result of our Garland production plant incident last August. We fully expect to recover this volume in stages in 2024 and 2025 while also winning new business. Longer term, we remain bullish on our packaging business and our differentiated non-BPA solutions. Our Garland plant is fully back online, and we are bringing on additional capacity in other locations during the first half of the year. We continue to have excellent new account and share-of-wallet opportunities in every business and in every region. The continued growth investments we have made over the past year give us tremendous confidence in pursuing these opportunities and gaining share. Moving to the cost environment. Our outlook assumes our raw material costs will be down by a low-single digit percentage in 2024 compared to 2023. We expect to see the largest benefit occurring in the first half of the year as comparisons become more challenging in the back half, where the entire basket decreased low-double-digits. While raw materials will likely be a benefit for us, other costs, including wages, health care, energy and transportation are expected to be up in the mid- to high-single digit range in 2024. I will remind you that these categories also inflated in 2023. Working with our customers, we delayed additional Paint Stores price increases last year given the pricing actions that we took in 2021 and 2022. We cannot however ignore these escalating costs indefinitely. As I mentioned earlier, Paint Stores Group is implementing a 5% price increase effective February 1st. The Performance Coatings and the Consumer Brands Group are also likely to have some targeted pricing activity in 2024 though at a more modest level than Paint Stores. As for our specific outlook, the slide deck issued with this morning's press release includes our expectations for consolidated and segment sales for the first quarter of 2024. The deck also includes our expectations for the full-year, where consolidated sales are expected to be up a low to mid-single-digit percentage and diluted net income per share is expected to be in the range of $10.05 to $10.55 per share. Excluding acquisition-related amortization expense of approximately $0.80 per share, adjusted diluted net income per share is expected in the range of $10.85 to $11.35, an increase of over 7% at the midpoint compared to 2023's adjusted diluted net income per share of $10.35. We've provided a GAAP reconciliation in Reg G table within our press release. Let me provide some additional data points and an update to our capital allocation priorities. Given incremental 2024 pricing, raw material deflation and Paint Stores Group, our largest and highest gross margin segment, growing sales faster than the other two segments, we would expect full-year gross margin expansion. We expect SG&A dollars to increase by a more typical level and increase by a mid-single-digit percentage in 2024, a moderation from the low-double-digit percentage increase we reported in 2023. We expect the investments we made last year and those we plan to make this year will enable us to grow at a multiple of the market. We plan to control costs tightly in noncustomer-facing functions. And we have a variety of SG&A levers we can pull, depending on a material change to our outlook up or down. We expect to open 80 to 100 new stores in the U.S. and Canada in 2024. We'll also be focused on sales reps, capacity and productivity, system improvements and product innovation. Next month, at our Board of Directors meeting, we will recommend an annual dividend increase of 18.2% to $2.86 per share, up from $2.42 last year. If approved, this will mark the 46th consecutive year that we've increased our dividend. We expect to continue making opportunistic share repurchases. We'll also continue to evaluate acquisitions that fit our strategy. We have a manageable $1.1 billion of long-term debt due in 2024 and expect to refinance the debt at higher rates. We expect to be within our current long-term target debt-to-adjusted EBITDA leverage ratio of 2x to 2.5x. In addition, I will refer you to the slide deck issued with our press release this morning, which provides guidance on our expectations for currency exchange, effective tax rate, CapEx, depreciation and amortization and interest expense. Our team is operating with great confidence as we begin 2024. We are extremely well positioned to continue delivering shareholder value. And I want to thank John Morikis for the incredibly strong foundation he leaves with us as he moves into his role as Executive Chair. I'm also grateful for the outstanding executive leadership team surrounding me. Given that there is still a considerable amount of uncertainty in the global economy, we believe our initial 2024 outlook is an appropriate one. Should the demand environment prove to be stronger than we are currently assuming, we would expect to do better than the guidance we are laying out today. Our first quarter is a seasonally smaller one. For that reason, we will not be making any updates to full-year guidance until our second quarter is completed and we have a better view of how the painting season is unfolding. Our strategy is clear, our priorities are focused, and our people are ready. We will continue to win by providing innovative solutions that help our customers to be more productive and more profitable. We expect to deliver meaningful earnings growth in 2024. This concludes our prepared remarks. With that, I'd like to thank you for joining us this morning, and we'll be happy to take your questions.","evidence_gemma_new":"Paint Stores Group sales","evidence_llama_3_3":null,"evidence_qwen_3_30b":"Paint Stores Group sales mid-teens comparison","gemma_new_max":2.3,"gemma_new_min":2.3,"llama_3_3_max":null,"llama_3_3_min":null,"qwen_3_30b_max":2.3,"qwen_3_30b_min":2.3}
{"symbol":"SHW","year":2024,"quarter":1,"date":"2024-Q1","chunk_id":2,"sub_chunk_id":0,"centroid_label":"paint stores group segment","agreed_value":0.5,"count":2,"chunk":"Heidi Petz: Thank you, Jim. We are successfully implementing our strategy, which at Sherwin-Williams we do with a very forward looking and aggressive approach. While market conditions are choppy and may give others in our industry a moment of pause, let me be clear, we are not pausing. So this morning, I'm going to talk as much about our results as I am about what we're doing to ensure the momentum of our company not only continues but accelerates our ability to widen the gap between us and our competition. So let me start with the results of the first quarter. As Jim mentioned, our first quarter is a seasonally smaller one and our results do not necessarily dictate how our full year will unfold. While our sales came in within our guidance, it was at the lower end of our range. Going forward, I believe in our differentiated strategy, our deeply experienced leadership and our team's ability to execute in lockstep with our customers to deliver above market growth. Here are several of the leading indicators that give me great confidence that we continue to strengthen our position. For example, we increased the number of exclusive national contracts we have with homebuilders and property management customers in the quarter. New accounts and active purchasing accounts in our stores are up significantly from a year ago. Paint Stores Group rep call activity and unique accounts calls are also up in the quarter. Foot traffic in our stores is up and our net promoter score is at an all-time high. And we're seeing multiple share of wallet and meaningful new customer wins across our industrial businesses. These are just some of the factors we expect will translate into strong performance as the year unfolds. As far as specifics on the first quarter, I'll begin with the Paint Stores Group, where sales increased by 0.5 percentage against a mid-teens comparison. We are not satisfied with this level of performance as volume was basically flat in the quarter. Exterior paint sales were exterior paint sales were pressured by challenging outdoor painting conditions in some geographies. As we've demonstrated in the past, we expect to see the benefit of our focused investments unfold throughout the balance of the year. A few strong weeks in June can more than offset first quarter challenges. Price was up modestly related to our February 1 announced increase. We are now seeing a ramp to typical effectiveness as our second quarter moves forward. Segment margin decreased to 17.2%, reflecting flat volume and the higher year-over-year planned growth investments. As a reminder, Paint Store sales were up by a double-digit percentage in every customer segment in the first quarter a year ago. In this year's first quarter, pro sales were led by residential repaint where gallons were up mid-single-digits. We see this above market growth as evidence that our increased investments in this segment are already beginning to deliver a return. Commercial and protective and marine grew modestly in the quarter. New residential was down as expected, but there is momentum in single family starts that will increasingly turn to completions as the year progresses. Property management was also down driven by delays in CapEx projects even as apartment turns remained steady. From a product perspective, interior paint sales increased by a low-single-digit percentage while exterior sales decreased modestly. Encouragingly, spray equipment sales were up mid-single-digits in the quarter. We opened seven net new stores in the quarter and expect to open 80 to 100 for the full year. Our doors are open. We are laser focused on the momentum we have created serving both existing and new customers. We'll continue to win business and take share based on our differentiated solutions. Moving on to our consumer brands group, sales decreased by 7.1% in the quarter. Lower volume and the impact of divestitures were partially offset by selling price increases primarily in Latin America. Sales in North America decreased by a high single-digit percentage, as our strategic partners manage the timing of their seasonal inventory build. Outside of North America, sales increased by a double-digit percentage in Europe and a low-single-digit percentage in Latin America. Adjusted segment margin which excludes acquisition related amortization expense expanded to 20.9%. This was primarily driven by improved manufacturing and distribution fixed cost absorption, moderating raw material costs and improved results in Latin America and Europe, partially offset by lower North America sales volume. Sales in the Performance Coatings Group were in the range we expected with continued choppiness across each of our businesses and regions. Lower volume was partially offset by growth from acquisitions. Sales growth in Europe and Asia was offset by decreases in North America and Latin America. Adjusted segment margin, which excludes acquisition related amortization expense improved to 17.1%. This is the fifth straight quarter this team has delivered year-over-year segment margin improvement and again reflects the disciplined strategy to growing operating margin in the industrial business to mirror that of our architectural business. Industrial wood led the growth including the impact of recent acquisitions. Coil also delivered solid growth. Auto Refinish was flat against a mid-teens comparison. We are confident recent share wins driven by our differentiated service and technology will begin to show up more meaningfully as the year progresses. Packaging was down as expected with improvement expected in the back half of the year. General industrial was impacted by lower demand in all regions. Moving on to our guidance for the second quarter and full year. First, I want to talk about our global team. It always comes down to our people. Our team is highly engaged, aggressive and acting with determination and urgency. They are focused on the right priorities and this will become more and more visible in our results. I would bet on this team all day every day. Second, on our January call, we acknowledged there are uncertainties in the economy. We don't expect to get material help from the macro environment this year, but a few bright spots are emerging. Single family housing starts have improved and this will increasingly turn to completions as the year progresses. Existing home sales are unlikely to get much softer. Last week's LIRA report from Harvard indicates that the remodeling outlook continues to improve with declines easing and momentum building later in the year. On the industrial side, the manufacturing PMI has stabilized or improved in several regions. Third, we are tilting the table in our favor by controlling what we can control. Year-to-date, we have signed 56 new exclusive national account agreements in Paint Stores Group primarily in new residential and property maintenance. We also have increased sales rep call activity and unique accounts called significantly. We have a robust plan and aggressive field activity to engage customers of competitors who have recently closed their doors or are otherwise distracted. As I said earlier, our doors are open. We are not distracted. You can expect us to be very aggressive here. In addition to our stores platform and team of experienced reps and store managers, we're driving customer stickiness through our digital initiatives. In March, we had the highest number of pro plus users ever engaging with our platform, along with a near record number of new registrations. We have opened our Tournus France packaging plant which will support customers converting to non-BPA coating to meet the European Commission's 2026 mandate. We expect on multiple new infrastructure and mega projects that are gaining momentum. And we're introducing multiple new products in both the architectural and industrial businesses to drive our customers' success. Obviously, we're not going to share everything that we're doing for competitive reasons, but you can be certain that there's a long list of actions that we are taking in addition to these items. The key takeaway is this, at some point the demand logjam in multiple end markets is going to break. We will be there to capitalize. We're very confident it's a matter of when, not if. As for our specific outlook, the slide deck issued with this morning's press release includes our expectations for consolidated and segment sales for the second quarter of 2024. The deck also contains our full year sales and earnings per share outlook, which again is unchanged from what we provided in January. We expect to provide an update on our 2024 full year outlook when we report our second quarter results in July. Our slide deck also provides guidance on our expectations for raw material costs and other items helpful for modeling purposes. All of these remain unchanged from our January call as well. As you can see, we have high expectations of ourselves. Our team is aggressive, determined and focused on the right priorities. I want to be clear, we are playing to win. We know our strategy is the right one and we have demonstrated for decades that it works. We expect to outperform the market and we are confident our differentiated solutions will continue to drive our customers' success, while also rewarding our shareholders. This concludes our prepared remarks. And with that, I'd like to thank you all for joining us this morning. We'll be happy to take your questions.","evidence_gemma_new":"Paint Stores Group sales first quarter","evidence_llama_3_3":"Paint Stores Group sales first quarter","evidence_qwen_3_30b":null,"gemma_new_max":0.5,"gemma_new_min":0.5,"llama_3_3_max":0.5,"llama_3_3_min":0.5,"qwen_3_30b_max":null,"qwen_3_30b_min":null}
{"symbol":"SHW","year":2024,"quarter":2,"date":"2024-Q2","chunk_id":44,"sub_chunk_id":0,"centroid_label":"paint stores group segment","agreed_value":0.035,"count":3,"chunk":"Allen Mistysyn : Yes, Greg, if you look at our second quarter with our sales up 0.5% volume and price were up slightly, acquisitions at less than 1%. And we also had the headwind of the divestitures and FX. But really the driver in the quarter was our Paint Stores Group up 3.5%, both segment that segment of PCG segment was where we expected, and we talked about the miss on consumer. If I look at the second half, kind of a little bit up low-single-digits guide compared to low-single-digit comparison last year. I think price is expected to be up low-single-digit percentage. And when you look at -- that would tell you that volume is expected to be up or down low-single-digits. And then all the other impacts are, I'd say, immaterial, less than 1%. FX is unfavorable. A little bit of tailwind in acquisitions and again, a little bit of a headwind on the divestitures, but not material. I'd call out Paint Stores Group, just to be clear, and I said this before, second half, we expect volume and price to be up low-single-digits. Consumer down high single to low-double digits, really the continued softness in DIY. We do expect the price to be flat and that's primarily increases we see in Latin America. FX will be a headwind of about [1.5] and then the remainder is volume down high-single-digits and then within PCG for the second half, I expect up low-single-digits. Acquisitions will be a tailwind of the low-single-digits and then FX, about 1% headwind in price because of the small number of accounts we have on index will actually be a small headwind.","evidence_gemma_new":"Paint Stores Group","evidence_llama_3_3":"Paint Stores Group sales second quarter","evidence_qwen_3_30b":"Paint Stores Group 3.5%","gemma_new_max":0.035,"gemma_new_min":0.035,"llama_3_3_max":0.035,"llama_3_3_min":0.035,"qwen_3_30b_max":0.035,"qwen_3_30b_min":0.035}
{"symbol":"XOM","year":2023,"quarter":1,"date":"2023-Q1","chunk_id":2,"sub_chunk_id":0,"centroid_label":"cash flow from operations","agreed_value":16300000000.0,"count":3,"chunk":"Darren Woods: Good morning. Thanks for joining us today. Following a record year, ExxonMobil delivered the highest first quarter earnings in our history even as energy prices and refining margins moderated from the fourth quarter. This ongoing success reflects the hard work of our people, executing our strategic priorities and fully leveraging our competitive advantages. Through investments in advantaged assets, mix improvements and cost and operating discipline, we are delivering the structural earnings improvements outlined in our corporate plan update last December and expanding the energy supplies needed to meet growing global demand. Compared to the first quarter of 2022, we added about 300,000 oil-equivalent barrels per day to global supply, primarily from a 40% increase in production from Guyana in the Permian Basin, increase more than offset our divestments in the expropriation of Sakhalin-1, which we no longer account for, but which importantly remains part of global supply. In addition, our Beaumont refinery expansion reached nameplate capacity in the quarter. This 250,000 barrel a day expansion is the largest US refinery addition in a decade, helping meet society's ongoing need for transportation fuels. Guyana, we're pleased to announce that we reached final investment decisions for Uaru, fifth offshore project, which will bring on even more production from this low-cost, low-carbon intensity resource. Uaru will provide an additional 250,000 barrels a day of gross capacity with start-up targeted for 2026. Earnings in our Product Solutions business benefited from the team's solid operational execution with top quartile turnaround cost and schedule performance during a particularly heavy planned maintenance period. Low Carbon Solutions, we're building momentum across several fronts. In early April, we announced a long-term agreement with Linde to capture, transport and permanently store up to 2.2 million metric tons CO2 annually. Hydrogen, we announced front-end engineering and design contract for the world's largest low carbon hydrogen facility in Baytown, ahead of agreement with SK Group of Korea for offtake of blue ammonia from that facility. As we said during our Low Carbon Solutions spotlight earlier this month, our low carbon projects must be advantaged and deliver competitive returns. The ability of our low-carbon projects to compete successfully for capital is important if the world is going to meet its emissions aspirations. Incentives included in the Inflation Reduction Act are a positive step forward, although permitting and other regulatory improvements are still needed. Europe, by contrast, policy approach remains far more prescriptive and punitive. This is true whether we're talking about the emissions reductions needed to put the world on a path to net-zero or the production needed to provide Europe with affordable and reliable energy. The progress we're making across the company is underpinned by the continuing evolution of our business model. Effective on May 1, two new enterprise-wide organizations will be up and running. Global Business Solutions will centralize the majority of our finance procurement operations, enabling us to deliver simplified corporate-wide processes. ExxonMobil Supply Chain will consolidate supply chain activities globally. The organizations will focus on leveraging our scale to drive efficiencies, improve operating and financial results and, importantly, deliver an improved experience for customers, vendors and our people. On June 1, we plan to launch our new enterprise-wide trading organization. Global Trading will bring together expertise from across the company in crude, products, natural gas, power and marine freight trading, plan to build on our record 2022 results, leveraging the unique insights we gain from participating across each of our value chains and all along their entire length, with a global operating footprint larger than any of our competitors. Now, let me cover the quarter's headlines. We're pleased to have delivered $11.4 billion of earnings, a record first quarter following a record year. A significant contributing factor was structural cost savings that now total approximately $7.2 billion, keeps us on track to meet our target of $9 billion by the end of this year. Cash flow from operations totaled $16.3 billion, and our net debt-to-capital ratio declined to 4%, further increasing the strength of our balance sheet, while supporting shareholder distributions of $8.1 billion in the quarter, including $3.7 billion in dividends. Biodynamic market, our underlying performance remains rock solid and well ahead of our competition, reflecting the many improvements we've made over the last six years and, of course, the hard work of our people. Our diverse portfolio of advantaged businesses, improvements in mix, structural cost savings, excellence in execution are driving industry-leading earnings, cash flow and shareholder value. Combined with the strength of our balance sheet, we have the capability to win across a wide variety of market conditions to deliver strong returns, while meeting the evolving needs of society, including the need to reduce emissions. Leveraging the capabilities and advantages developed in our traditional businesses, we're building an advantaged new business, Low Carbon Solutions, which is positioning us as a leader in the energy transition, in our own and other's emissions and establishing long-term value-accretive growth opportunities that will underpin continued growth in shareholder returns. With that, let me turn the call over to Jennifer.","evidence_gemma_new":"Cash flow from operations","evidence_llama_3_3":"cash flow from operations","evidence_qwen_3_30b":"cash flow from operations $16.3 billion","gemma_new_max":16300000000.0,"gemma_new_min":16300000000.0,"llama_3_3_max":16300000000.0,"llama_3_3_min":16300000000.0,"qwen_3_30b_max":16300000000.0,"qwen_3_30b_min":16300000000.0}
{"symbol":"XOM","year":2023,"quarter":2,"date":"2023-Q2","chunk_id":2,"sub_chunk_id":0,"centroid_label":"cash flow from operations","agreed_value":9400000000.0,"count":2,"chunk":"Darren Woods: Good morning. Thanks for joining us today. I'm pleased to be conducting our earnings call from our Houston campus. As of July 1st, our corporate headquarters is now located at the campus, alongside the senior managers of our businesses and centralized organizations. This is the first time in the company\u2019s history that the senior leadership team of the corporation is located on one site and represents a critical step in continuing the transformation of our business enabling us to improve collaboration and alignment and further leverage synergies across our integrated businesses. The ongoing efforts to structurally improve our company and drive sustained, industry-leading performance was clearly demonstrated in our second-quarter results. We delivered earnings of almost $8 billion, two times higher than what we earned in the second quarter of 2018, under comparable industry commodity prices. That doubling of earnings reflects our work in the intervening years to reshape our portfolio of businesses, invest in advantaged projects, and drive a higher level of efficiency and effectiveness in everything we do. With these results, I would like to take a moment to recognize our people. Starting with all those that made the move to Houston. I\u2019m sure you know moves like this are not easy and that many personal sacrifices are made. I\u2019m very thankful for all who did this. Their willingness to disrupt their lives for the benefit of our company is a testament to the dedication of our people whose commitment and hard work underpin all the improvements we are making. I hope our shareholders take comfort in this one, small example of our people\u2019s commitment to the company and have confidence in their resolve to further strengthen our position as an industry leader in all that we do. Our achievements this quarter also demonstrate the progress we\u2019re making in solving the \u201cand\u201d equation: meeting the world\u2019s needs for energy and essential products and reducing emissions, both our own and others\u2019. In the Permian, we set another production record and remain on track for an overall growth in production of 10% this year. As I said last quarter, our growth won\u2019t be linear as we execute our development plans that balance and optimize capital efficiency, resource recovery, and production rates. Our priority will remain on driving value, not volumes. In Guyana, we achieved a record quarterly gross production rate of 380,000 barrels per day. Our team in Guyana continues to deliver excellent operating, environmental and safety results, while optimizing and growing production. In fact, we see the potential to increase the combined gross capacity of these two FPSOs to above 400,000 barrels a day with further debottlenecking, which is nearly a 20% increase above the investment basis and a testament to the ingenuity of our people. In the Gulf Coast, we continue to profitably grow our business. In the second quarter we achieved mechanical completion of the Baytown chemical expansion. The project grows volume and improves mix with 750,000 tonnes per annum of additional performance chemical products. The Baytown expansion is the final Product Solutions component of the Growing the Gulf initiative announced in 2017. If you recall, the initiative committed to investments of $20 billion over ten years to capitalize on the US\u2019s advantaged resources, economic growth, and strong regional support for our businesses and the jobs we create. 11 of the 13 projects are up and running. The Baytown expansion, after product qualifications, should begin contributing by the fourth quarter. And Golden Pass, the last of our Growing the Gulf projects, should have its first train up at the back end of 2024. The Growing the Gulf initiative is another example of executing our strategy, investing in advantaged, high-value growth, and delivering on our commitments. Improving the earnings power of our businesses also requires divestments. In the second quarter we completed the divestment of the Billings refinery. Including this sale, cash proceeds from divestments of non-strategic assets have totaled roughly $2 billion year-to-date. In advancing our efforts to better leverage corporate scale and integration, we established three new centralized organizations in the quarter. Consolidating activities previously embedded in each of our businesses: Global Business Solutions, ExxonMobil Supply Chain, and Global Trading. They\u2019re all off to a good start and have clear lines of sight to improve performance and lower cost. Our Low Carbon Solutions business continues to make progress in building an advantaged, low cost, high-return business in capturing, transporting, and storing carbon. We announced a CO2 offtake agreement with Nucor, one of North America\u2019s largest steel producers. And we signed an agreement to acquire Denbury, which will provide ExxonMobil with the largest owned and operated network of CO2 pipelines in the United States. Combining Denbury\u2019s assets and experience with our capabilities will significantly accelerate and expand our ability to profitably help customers reduce their emissions and allow ExxonMobil to play an even greater role in a thoughtful energy transition. It significantly enhances our competitive position and offers a compelling customer proposition to economically reduce emissions in hard-to-decarbonize heavy industries which, today, have limited practical options. Of Denbury\u2019s 1,300 miles of CO2 pipeline, roughly 70% are in the Gulf Coast states of Louisiana, Texas, and Mississippi, one of the largest US markets for CO2 reduction and home to some of ExxonMobil\u2019s largest integrated refining and chemical sites and nine of their 10 strategically-located CO2 storage sites are also in this region. We believe the transaction synergies will drive strong growth and returns. A cost-efficient transportation and storage system accelerates CCS deployment for both ExxonMobil and our third-party customers. It supports multiple low-carbon value chains, including CCS, hydrogen, ammonia, and biofuels. Ultimately, we see an opportunity to create a CCS business with the capacity to reduce emissions across the Gulf Coast by up to 100 million tons per year. This transaction will help us do that at a lower cost and faster pace. In fact, we see the potential for a third of the opportunity being actionable in the near term. Which takes us to our customers. Our latest offtake agreement extends our CCS customer base beyond industrial gas and fertilizers into steel. This project will tie into the same CO2 transportation and storage infrastructure we\u2019ll use to serve CF Industries, located just 10 miles from Nucor. Focusing our efforts and investments in areas with concentrated sources of emissions allows us to capture the benefits of scale, reduce our spend per ton of CO2 captured and improves returns. Our work with Nucor supports Louisiana\u2019s goal of reaching net-zero greenhouse gas emissions by 2050 and it increases the total amount of CO2 we\u2019ve agreed to transport and store for customers to 5 million metric tons per year, equivalent to replacing 2 million cars with EVs, roughly the same number of electric vehicles on the road in the United States today. With the planned Denbury acquisition, the potential reduction could be up to 20 times that. As demonstrated by these new developments, we\u2019re continuing to make significant progress in our plans to lead industry in helping society reduce emissions. A major component of our improved earnings is the structural cost savings that we\u2019ve achieved, currently at $8.3 billion. We remain on track to reach our target of $9 billion in savings by the end of this year. As we develop plans for future years, we\u2019re committed to finding additional savings. Cash flow from operations totaled $9.4 billion in the quarter, or $13 billion excluding the change in working capital. Our year-to-date production of 3.7 million oil-equivalent barrels per day is on track with the full-year guidance we shared last year as part of our Capex investments totaled $12.5 billion year-to-date, also in line with our full-year guidance. And, consistent with our capital allocation philosophy, we continue to share our success with shareholders, distributing $8 billion in cash during the quarter, including $4.3 billion in share repurchases and $3.7 billion in dividends. Before we go to Q&A, I\u2019ll leave you with a few key takeaways from the quarter. First, our work to structurally improve earnings power is paying off, demonstrated this quarter as we doubled earnings versus a comparable price environment in the second quarter of 2018. Our reorganizations, aggressive investments in advantaged projects, and significant reductions in cost are driving value and improving our competitive position. We\u2019ve made great progress and have a clear line of sight to much more. In the back half of this year alone, we expect to bring on two advantaged projects: Baytown Performance Chemicals and the Payara FPSO in Guyana, further growing our capacity to generate industry-leading earnings. The company\u2019s ongoing business transformation is giving the organization a better view of end-to-end value creation and focusing us on the highest value opportunities. Today, we are better positioned than ever to realize the value of our scale and the synergies from improving the integration of our businesses. For the first time in our history, we have a corporate technology, projects, trading, supply chain, and business solutions organization allowing us to apply the best solutions and talent to our biggest opportunities. And, importantly, we are developing the most talented people in the industry, providing unrivaled opportunities to meet some of society\u2019s greatest challenges. Their work is delivering exceptional results, driving industry-leading returns on investments, and growth in earnings and cash flow. This, in turn, allows us to distribute cash to shareholders through share repurchases and a sustained, competitive, and growing dividend while maintaining investments in industry advantaged projects including investments in our Low Carbon Solutions business. By leveraging the advantages developed in our traditional businesses, we are laying the foundation for a world-scale, competitively-advantaged, low carbon business with industry-leading returns. The planned acquisition of Denbury is a step in that direction, improving our decarbonization proposition for customers, while generating attractive returns. In summary, we\u2019re pleased with the quarter, the progress it represents and the improved earnings power of the company. We\u2019re confident that we have the right strategy with the right leadership and best people to effectively execute it, delivering sustained growth in shareholder value. With that, I\u2019ll turn it over to Jennifer.","evidence_gemma_new":null,"evidence_llama_3_3":"cash flow from operations","evidence_qwen_3_30b":"Cash flow from operations quarter","gemma_new_max":null,"gemma_new_min":null,"llama_3_3_max":9400000000.0,"llama_3_3_min":9400000000.0,"qwen_3_30b_max":9400000000.0,"qwen_3_30b_min":9400000000.0}
{"symbol":"XOM","year":2023,"quarter":4,"date":"2023-Q4","chunk_id":12,"sub_chunk_id":0,"centroid_label":"cash flow from operations","agreed_value":0.2,"count":2,"chunk":"Darren Woods: Yeah, good morning, Doug. Thanks for the question. Maybe I'll start with the back end of your question around the CapEx. I mean, it should be clear, hopefully it's clear, we've provided guidance in a range in CapEx to give you a perspective of when we start the year based on the plans that we put together the previous year where we think we're going to end up and spend across the year. Obviously as we're going through the business, each of the businesses are clear on their objective to find value creative opportunities and to capture those as quickly as possible. So we've got an ongoing process. If we see an opportunity that we weren't aware of at the time of putting together the plan, we're not constraining our activities based on some artificial number or the guidance that we've put out. We're very focused on making sure that it's going to be an effective use of capital, that we can efficiently execute what's required for that capital, and then that there's value behind it and there's an advantage in it. So that's how we're managing. What we talked about in the release with respect to our CapEx in 2023 reflects just that, incremental optimizations as we're going through the year. And my view is we'll continue to do that as we go forward into the plan years. Obviously, we've given you some guidance that we believe reflect where we'll end up. But as we work the opportunities, we're very focused on that. I think, the short term, what we've done with Guyana, you're seeing today in Payara, where we brought that online. And frankly, in January, well ahead of our plans, reached nameplate capacity. And part of that was around the optimization of the drilling and making sure that we had what we needed to bring that up quickly. In terms of the broader objective to get to 2027, I mean we're on that plan and we're actually delivering the value that we laid out in 2018. So I feel really good about the progress we've made. We noted in the release that if you look at just from 2019, the year before the pandemic, the advances that we've made in the business, on a flat price, take margin, take price out of it, we've doubled the earnings capacity of the corporation from 2019 to 2023. We've grown earnings at compounded annual basis by 40%, greater than 40%. We've grown cash flow from operations almost 20%, greater than 15%. So I think significant progress we've demonstrated at the work that we're doing, projects that we've put in place, the reorganizations that we've executed, the cost that we're cutting out of the business are all driving us towards this improved valuation and frankly the plans we have going forward are going to continue to do that. So the targets that we've laid out, what we communicated in our December company plan release, basically those are plans and we feel that we're right on track if not slightly ahead of delivering on those. Kathy, anything to add to that?","evidence_gemma_new":null,"evidence_llama_3_3":"cash flow from operations 2019 2023","evidence_qwen_3_30b":"cash flow from operations almost 20%","gemma_new_max":null,"gemma_new_min":null,"llama_3_3_max":0.2,"llama_3_3_min":0.2,"qwen_3_30b_max":0.2,"qwen_3_30b_min":0.2}
{"symbol":"XOM","year":2023,"quarter":4,"date":"2023-Q4","chunk_id":38,"sub_chunk_id":0,"centroid_label":"cash flow from operations","agreed_value":13700000000.0,"count":3,"chunk":"Kathy Mikells: Yep. And so I'll just speak specifically to cash flow from operations and I think you're referencing the quarter but I'm happy to talk about the quarter and the year. Our cash flow from operations, if you look at the quarter was $13.7 billion. If you exclude working capital, we would have been at $16.9 billion. You're mentioning a beat relative to the street, and so was there anything unusual going on? As I look at people's models, I think sometimes they struggle to get depreciation and amortization right, so that's the only thing I'm going to speak to. And when we have a quarter where we're taking impairments, then we get an increase kind of in terms of a non-cash add back that flows through to cash flow from operations and we obviously took an impairment in the quarter. So that's my best guess as to anything that might be nuanced. Otherwise, no, nothing particularly unusual going on.","evidence_gemma_new":"cash flow from operations the quarter","evidence_llama_3_3":"cash flow from operations the quarter","evidence_qwen_3_30b":"cash flow from operations quarter","gemma_new_max":13700000000.0,"gemma_new_min":13700000000.0,"llama_3_3_max":13700000000.0,"llama_3_3_min":13700000000.0,"qwen_3_30b_max":13700000000.0,"qwen_3_30b_min":13700000000.0}
{"symbol":"XOM","year":2023,"quarter":4,"date":"2023-Q4","chunk_id":38,"sub_chunk_id":0,"centroid_label":"cash flow from operations","agreed_value":16900000000.0,"count":2,"chunk":"Kathy Mikells: Yep. And so I'll just speak specifically to cash flow from operations and I think you're referencing the quarter but I'm happy to talk about the quarter and the year. Our cash flow from operations, if you look at the quarter was $13.7 billion. If you exclude working capital, we would have been at $16.9 billion. You're mentioning a beat relative to the street, and so was there anything unusual going on? As I look at people's models, I think sometimes they struggle to get depreciation and amortization right, so that's the only thing I'm going to speak to. And when we have a quarter where we're taking impairments, then we get an increase kind of in terms of a non-cash add back that flows through to cash flow from operations and we obviously took an impairment in the quarter. So that's my best guess as to anything that might be nuanced. Otherwise, no, nothing particularly unusual going on.","evidence_gemma_new":null,"evidence_llama_3_3":"cash flow from operations the quarter","evidence_qwen_3_30b":"cash flow from operations excluding working capital","gemma_new_max":null,"gemma_new_min":null,"llama_3_3_max":16900000000.0,"llama_3_3_min":16900000000.0,"qwen_3_30b_max":16900000000.0,"qwen_3_30b_min":16900000000.0}
{"symbol":"XOM","year":2024,"quarter":4,"date":"2024-FY","chunk_id":1,"sub_chunk_id":0,"centroid_label":"cash flow from operations","agreed_value":55000000000.0,"count":2,"chunk":"Darren Woods: Good morning, and thanks for joining us. I'll focus my comments this morning on ExxonMobil's 2024 results and the company we've become. In our prepared presentation available on our website, Kathy dives deeper into our results and long-term growth outlook. What our 2024 performance makes clear is that the transformed company we've built is delivering. We strengthened and further capitalized on our unique competitive advantages, technology, scale, integration, execution excellence, and, of course, people. We demonstrated the strength of our consistent strategy now in its eighth year of driving greater value for society and shareholders alike. We set and achieved ambitious objectives. When we say we'll do something, we deliver. And we expanded our unrivaled set of opportunities for profitable growth both now and long into the future. The ultimate source of cash, distributions, and shareholder value is unchanging, investments in advantaged high-return assets and projects. The proof of our transformation shows up in our performance. Operationally, we delivered strong results across the board, including safety, a bedrock commitment underpinning everything we do, reliability, where we achieved record performance in our product solutions business, and emissions, where we've achieved a more than 60% reduction in methane intensity since 2016. Financially, we demonstrated our steadily improving earnings power across a range of metrics. We delivered earnings of $34 billion in 2024, our third highest result in a decade despite softer market conditions. Over five years, we've grown earnings, excluding identified items, a compounded annual growth rate of nearly 30%. We generated cash flow from operations at $55 billion, also our third highest in a decade, to fund profitable growth, maintain our financial strength, and reward shareholders. Excluding working capital, our free cash flow more than covered shareholder distributions. And we delivered a return on capital employed of 13%. Over five years, our average return on capital employed is an industry-leading 11%. When you set aside cash balances in capital and projects that are under construction and yet to start up, our 2024 ROCE rises to roughly 17%, with a five-year average of about 15%. Our disciplined approach to investing continues to generate returns well above our cost of capital. Every part of our business contributed to our success. We built the best upstream portfolio in the industry. In 2024, we achieved the highest-ever production from our advantaged assets and the highest liquid production from our overall portfolio in more than 40 years. In the Permian, we delivered record production from both our Heritage ExxonMobil assets and our Pioneer assets. Together, the two are even stronger. As we said last month, we now see an average of more than $3 billion per year of synergies from our combined assets, with production growing from 1.5 million oil-equivalent barrels per day at the end of 2024 to 2.3 million barrels per day by 2030, a more than 50% increase. This growth will further strengthen U.S. energy security and will do it with even better overall environmental performance. In Guyana, we delivered record production from the world's premier deepwater development. We've gone from discovery to 650,000 barrels per day in just 10 years, a pace for deepwater projects the world has rarely seen. The benefits are tremendous, not just profitable growth for ExxonMobil, but rapidly rising living standards for the Guyanese people. The GDP per capita more than tripling since we started production in 2020. Turning to product solutions, we've further enhanced our already industry-leading portfolio by divesting non-strategic assets and establishing the foundation for new-to-world products that outperform existing alternatives. The advantage projects we brought online over time drove record sales of high-value products in 2024. Our ongoing shift to a more profitable product mix is a key driver of earnings improvement in product solutions. We also advanced our plans to develop and grow new businesses, most notably our Proxxima resin systems and carbon materials, with an estimated total addressable market of $100 billion by 2030. Within low-carbon solutions, we demonstrated strengthened commercial interest through additional customer contracts and equity partnerships. We're the only company in the world today with an end-to-end system capable of capturing, transporting, and storing carbon emissions. At 6.7 million tons per year, we've contracted more CO2 for transport and storage than any other company by far. We're also well-positioned to meet surging demand from data centers for low-carbon power, and on a timetable that alternatives such as nuclear simply can't match. On the hydrogen and lithium fronts, we announced new equity partnerships and off-take agreements that demonstrate the significant market interest these new businesses are generating. Our success in 2024 and every other year is due to our people. It's not just that we recruit the best or that we give them the most challenging assignments to build the best capability. It's our culture, our mindset. When this team takes the field, we expect to win. That drive underpins our value creation in 2025 as well. We'll bring online a full slate of major projects to increase profitable volumes, make more profitable products, and lay the foundation for profitable new businesses. To name a few, we'll start up Yellowtail in Guyana, our fourth and largest development to date. In the Permian, we'll further improve resource recovery using our next-generation cube design and patented lightweight proppant. This is the right kind of growth, low cost of supply, low emissions intensity, and high returns. At our Singapore refining and chemical complex, our residual upgrade project, we use new-to-the-world technology to transform bottom-of-the-barrel molecules into a new grade of high-value lube-based stocks. We'll transform high-sulfur, low-value export fuels into higher-value diesel for the U.K. market at our expanded refinery at Fawley. We'll expand our capacity to produce higher-value performance polyethylene and polypropylene at our petrochemical complex in China. And we'll add new advanced recycling facilities at Baytown to meet the growing demand for certified circular polymers, which has the added benefit of keeping hundreds of millions of pounds of plastic waste from being burned or buried. Earlier this month, we sued the California Attorney General and activist groups for defamation and interference in our advanced recycling business. As our filing made clear, this suit is about abuse of the public trust and the hijacking of the legal system for financial and political gain. I want to emphasize that we don't take these actions lightly. Unfortunately, it's another example of what it takes to defend our company and preserve the value we create for our customers, shareholders, and broader society. Overall, the major projects we start up in 2025 will deliver more than $3 billion in earnings potential in 2026 at both constant and current prices and margins. And this earnings gain excludes the uplift from our Permian growth plans. As we showed at the corporate plan update, ExxonMobil's runway of profitable growth extends along into the future. Our new technology-driven businesses, such as Proxxima Products and Carbon Materials, creates huge opportunities to expand beyond traditional fuels and chemicals into higher growth, higher margin markets that are decoupled from commodity price fluctuations. This year, we expect to start up a new facility that can produce 25,000 metric tons of Proxxima products and plan to grow to nearly 200,000 tons by 2030. We're committed to investing in these new businesses in a stepwise fashion, progresses in tandem with demonstrated success in the marketplace. To change in administrations in the U.S., I want to say a few words about the right policy framework for a successful energy future. I'll begin by noting that through 2030, roughly 90% of our planned CapEx is allocated to established, fully-functioning markets for energy and products that require no policy support. Only about 10% is earmarked for nascent, lower-emissions markets where market forces have yet to fully take hold. The case in point is our Baytown low-carbon hydrogen project, which requires incentives under Section 45B of the Inflation Reduction Act to be economically viable. We believe these incentives are critical to establishing a fully market-based future where hydrogen competes head-to-head with traditional fuels. But the end goal is clear, a system where no energy source remains dependent on government subsidies. Just as energy sources should not be supported by governments in perpetuity, they should not be artificially discouraged either. The prior administration's moratorium on new LNG export facilities and its executive order limiting offshore drilling were policy mistakes that the new administration is right to reverse. Oil and natural gas remain essential to economic growth, jobs, and national security, both for ourselves, and our allies around the globe. Over the longer term, to achieve broad decarbonization, government policy should set carbon intensity standards on products. We believe this is the best way to engage the collective efforts of industry and leverage competitive market forces. To drive further innovation and reduce the most emissions at the lowest cost, policies must remain technology agnostic. Governments should not pick winners and losers. Intensity standards establish a level playing field and have a strong precedent. They were most recently used to successfully and affordably reduce sulfur and marine fuel. In closing, I want to say again how proud I am of the people of ExxonMobil and how pleased I am that we are creating unmatched value for our shareholders. Compared to the IOCs, over the last five years, we've grown cash flow from operations at a roughly 15% compounded annual growth rate, more than double the closest competitor. We've distributed more than $125 billion in dividends and buybacks, $30 billion more than the closest competitor. And we've delivered a total shareholder return compounded annual growth of 14%, 600 basis points higher than the closest competitor. Looking ahead, the value creation arc of the company is equally distinguished. We're going to build an even more advantaged asset portfolio with 60% of our option production from advantaged assets by 2030. That's nearly the same amount as the next largest IOC's total production. We're going to develop an even more profitable product mix with 80% growth of high-value product sales and product solutions by 2030. We're going to be an even more efficient operator, taking an additional $6 billion in costs out of the business. We're going to generate even more earnings in cash on a constant price and margin basis. We're confident we'll deliver 2030 by 2030, $20 billion more in earnings and $30 billion more in cash flow, all of which enables us to keep our commitment to sustainable, competitive, and growing shareholder returns. With that, I look forward to your questions.","evidence_gemma_new":null,"evidence_llama_3_3":"ExxonMobil cash flow from operations 2024","evidence_qwen_3_30b":"cash flow from operations 2024","gemma_new_max":null,"gemma_new_min":null,"llama_3_3_max":55000000000.0,"llama_3_3_min":55000000000.0,"qwen_3_30b_max":55000000000.0,"qwen_3_30b_min":55000000000.0}
{"symbol":"XOM","year":2024,"quarter":1,"date":"2024-Q1","chunk_id":2,"sub_chunk_id":0,"centroid_label":"cash flow from operations","agreed_value":14700000000.0,"count":2,"chunk":"Kathryn Mikells: Thanks, Darren. We've established a consistent track record of improving the earnings power of our business. Across the company, our teams have been laser-focused on investing in competitively advantaged, low cost of supply, high-return opportunities delivering execution excellence in everything we do and driving additional structural cost improvements. Our earnings growth over the past 4 years was more than twice the pace of our closest peer. As of year-end 2023, we more than doubled earnings, bringing an incremental $14 billion to our bottom line on a constant price and margin basis versus 2019. As Darren noted, over the next 4 years, we plan to increase earnings potential by an additional $12 billion or a CAGR of more than 10%. Our ability to deliver industry-leading earnings growth reflects our unique competitive advantages, consistent strategy and the differentiated execution capabilities our people bring every single day. We've demonstrated our ability to improve the profitability of the business by reshaping our portfolio, divesting noncore assets, investing in accretive high profit opportunities and driving structural cost savings. This quarter, we've included a few additional slides to remind you of the plans we discussed during the corporate plan update last December and to demonstrate the progress we've been making. Going forward, we'll provide you with regular updates on these metrics. The drivers of our expected earnings growth are clear. Additional structural cost savings reductions of over $5 billion versus year-end 2023, higher volumes and more profitable barrels from advantaged assets like Guyana and the Permian in the upstream and execution of strategic projects and product solutions that enhance our product mix driving exceptional growth in high-value products. As I said during the corporate plan update in December last year, to win in our business, we must be a low-cost operator. That means continually finding ways to become even more efficient. With more than $10 billion in structural cost improvements as of the first quarter of 2024, split roughly 50-50 between upstream and product solutions, we're making steady progress towards the incremental $5 billion we're working to deliver by 2027. And we are on track to further extend that industry-leading performance. These structural cost savings have not only mitigated the impact of inflation, but have helped to offset the cost of new projects. Our success is meaningfully improving our operating cost and driving higher earnings for both upstream and product solutions. In fact, we ended last year with our cash operating expenses, excluding energy cost and production taxes down $4.5 billion versus 2019. We have a clear line of sight to achieve the roughly $1.5 billion in annual savings contained in our plan, and our team has a track record of beating our targets. We're leveraging our global organizations, including our Global Operations and Sustainability Group and the global business solutions and global supply chain organizations that we stood up last year. These organizations are tasked with realizing savings across all of our businesses. We're optimizing our turnarounds and other scheduled maintenance activities. We're streamlining and automating our order to cash, procure to pay, record to report and our planning processes. And we're better leveraging the scale of our supply chain to improve the efficiency of our logistics movements, enhance our buying power and lower the level of materials and inventory that we need to run our operations. We have a proven track record and a high level of confidence in our plan, and more importantly, in our team's ability to deliver. In the Upstream, on a stand-alone basis, we're on track to double earnings potential by 2027 compared to 2019 on a constant price basis, as we reshape our portfolio, divesting noncore assets and growing production from industry-leading assets that offer lower cost of supply, lower life cycle emissions and higher returns. Between 2019 and 2023, we've pruned Upstream's portfolio of nonstrategic assets, including U.S. flowing gas and focused on developing advantaged assets such as Guyana, the Permian, LNG and Brazil. For example, since 2019, we've more than doubled production volume in the Permian. In Guyana, we started 2019 with 0 production volumes. This quarter, we delivered more than 600 kbd of gross production. These efforts have resulted in a significant Upstream mix improvement. Our share of total production from advantaged assets has risen from 28% to 44%. We expect to grow Upstream earnings by an additional 50% between 2023 and 2027. That growth is driven by further production mix improvement, incremental cost savings and production growth. We expect our stand-alone production in 2024 to be about 3.8 million oil-equivalent barrels per day, rising to about 4.2 million oil-equivalent barrels per day by 2027, as growth from advantaged assets more than offset base depletion. Since 2019, we've nearly doubled Upstream unit profitability at constant price from $5 per oil-equivalent barrel to $9 as of the first quarter of 2024. We expect unit profitability to increase to $13 per oil-equivalent barrel by 2027. Unit earnings from our advantaged assets are expected to be $9 per barrel higher than our base portfolio by 2027 at constant prices. Moving to Product Solutions. We're focused on nearly tripling earnings from 2019 to 2027. We're well on our way to achieving that, having more than doubled earnings potential at the halfway mark at the end of last year. As an Upstream, a key driver of our earnings growth is improving our mix. The strategic projects we're executing do just that. Projects like the China Chemical Complex and the renewable diesel project in Strathcona will increase our high-value product volumes, which command a 10% to 25% margin premium. Projects such as our Singapore Resid Upgrade will also improve our mix without increasing overall volumes by converting low-margin products like fuel oil to higher-margin products like base stocks, diesel and chemical feed. This, in addition to structural cost savings, is the key to further growing our earnings. We have a clear line of sight on the nearly $5 billion in earnings from strategic projects in 2027. Through 2023, we delivered nearly 1\/3 of our goal. In 2024, we'll see a full year of earnings benefit from the Beaumont refinery expansion and Permian Crude Venture. On the chart, you can see the annualized first quarter contributions from these and other projects that we brought online since 2019. As we highlighted on our earnings call last quarter, 2025 is a big year for strategic project start-ups, which will provide a further large boost in earnings growth. Given the track record of our global projects and centralized technology organizations, we're confident in our ability to execute this plan, which delivers the capacity needed to double high-value product sales. By 2027, we expect high-value products to deliver about 40% of Product Solutions total earnings. Turning to the quarter, I'll start with a high-level review of sequential earnings. Details by business segments are available in the backup to this presentation. I'm then going to spend a bit of time discussing our earnings year-on-year, which I think better highlights the progress that we're making in the key areas that drive our underlying earnings growth over the medium term. You'll see that we're providing more detail on what impacts our volumes and costs period-to-period to more clearly link our current performance to the earnings growth drivers that I discussed earlier. We provided definitions of these factors and the backup to this presentation. First quarter GAAP earnings were $8.2 billion, excluding identified items, earnings were down $1.8 billion sequentially. Timing effects were $1 billion unfavorable impact this quarter, mostly related to unsettled derivatives mark-to-market impacts consistent with this quarter's increase in oil prices. Other items, largely noncash, were $600 million or $0.15 per share hurt this quarter, driven mainly by noncash impacts from tax and inventory balance sheet adjustments. Base volumes were lower in the quarter as entitlement impacts fewer days in the quarter and the impact of higher scheduled maintenance were partially offset by growth from advantaged assets and strategic projects. Looking at the first quarter performance versus the same quarter last year, you can clearly see the contributions from growing advantaged assets and executing our strategic projects as well as our underlying structural cost improvements. GAAP earnings of $8.2 billion were down more than $3 billion versus our record first quarter earnings reported last year. The decline was driven by lower industry gas prices and refining and chemical margins, as well as higher maintenance and negative timing impacts from higher oil prices and the noncash expenses that I mentioned earlier. We made good progress continuing to improve the underlying earnings power of the business. We saw a strong growth from our advantaged assets like Guyana and projects like the Beaumont refinery expansion, which roughly offset lower base volumes that reflect divestments, entitlements and curtailments in the Upstream and divestments and higher maintenance in energy products. We added $400 million of structural cost savings this quarter, which resulted in an after-tax earnings benefit of $300 million. Now let's turn to the segments to dive further into our performance. In the Upstream, lower gas realizations were partly offset by slightly higher liquid realizations. As Darren mentioned, oil and natural gas prices in the quarter were about at the middle of the 10-year range. Our excellence in execution is delivering results. Higher volumes from advantaged assets more than offset divestment, curtailment and entitlement impacts, contributing $430 million in earnings versus the first quarter last year. In Guyana, we delivered 3 development projects, bringing online over 600 kbd of gross oil production since initial discovery at an industry-leading pace and cost. This quarter, gross production for Payara ramped up to 220 Kbd design capacity well ahead of schedule. We've also announced a new exploration discovery, Bluefin. Earnings also benefited from about $90 million in additional structural cost savings, driven by operational efficiency gains and reduced expenses from divested assets. Our Kearl operation in Canada is a great example of how we're reducing production costs. Last year, we converted our entire fleet of about 80 heavy haul trucks to a fully autonomous operation. The automation program enables us to capture improvements in truck productivity, further enhance safety of our operations and structurally reduce our operating costs. With this program, Kearl now operates the largest autonomous fleet in our industry and one of the largest autonomous mining fleets in the world. And we continue to look at other opportunities to expand automation across our production footprint. Kearl's gross production in the first quarter was 277 Kbd, which was a record for a first quarter. 2023 average gross production of 270 Kbd was also a record annual production. Higher expenses of $160 million were driven by an increase in depreciation rates in U.S. unconventional, while other, which is largely noncash, reflects the absence of favorable tax and divestment adjustments last year and inventory adjustments this quarter. Timing effects in the Upstream had a negative $120 million impact on the quarter, compared to a negative $490 million impact last year, driven by our mark-to-market position on our derivatives portfolio. In Product Solutions, we're high-grading our portfolio by divesting nonstrategic sites and investing where we have competitive advantages. Energy Products delivered roughly $1.4 billion in earnings in the quarter. Our advantaged configuration and commercial logistics capabilities enabled a dynamic response to the changing macro environment, which saw industry margins decline versus last year, primarily due to additional supply and normalizing trade flows. The strategic projects we executed last year, expanding our Beaumont refinery and completing the Permian Crude pipeline, helped us achieve record first quarter refining throughput and contributed to the $140 million earnings improvement. High-grading our portfolio also means making some tough but necessary choices to improve long-term competitiveness. Divestments in the middle of last year impacted volumes, but also contributed to structural cost savings in the period. We recently announced additional rationalizations in France and Germany to further strengthen our portfolio. As Darren mentioned, we saw a high level of turnaround activity in the quarter, which is reflected in expenses. We're really proud of our team who delivered best ever execution of our recent slate of turnarounds. As expected in a rising price environment, we saw negative timing effects which are primarily related to the mark-to-market on unsettled derivatives. Last year, the timing impact was favorable as prices were falling at that time. These impacts unwind over time. Chemical products earned nearly $800 million this quarter, more than double the result from the prior year period. While global polyethylene and polypropylene margins decreased, we drove a sizable margin increase largely due to our advantaged footprint but also due to increased contributions from Performance Products. Higher earnings from high-value product volumes reflect the many investments we've made over the years. Gulf Coast growth ventures in Corpus Christi, North American polypropylene and Baton Rouge and our Baytown Chemical expansion, all contribute to this growth. Base volumes increased on the absence of prior period turnarounds, but also on strong reliability in the U.S. Gulf Coast that enabled additional sales when others in the region were negatively impacted by winter storms in January. Specialty Products continued to deliver consistently strong earnings coming in at $760 million this quarter. Our efforts to grow margins through feed optimization and revenue management were evident this quarter and largely made possible by the differentiated performance of our high-value products. We had a strong contribution from the finished lubricants business, which is celebrating the 50-year anniversary of Mobil 1, our flagship brand. Our rigorous focus on structural cost reductions partially offset higher base expenses. The improved earnings power in our businesses translates to strong cash flow and our consistent capital allocation philosophy enables exceptional long-term shareholder returns. We generated $14.7 billion in cash flow from operations and $10.1 billion of free cash flow during the first quarter, and we continue to deploy that capital, consistent with our allocation priorities. First and foremost, our CapEx deployment supports investments in competitively advantaged opportunities that drive long-term earnings and cash flow growth. To sustain growth, we need to be investing now in low cost of supply, high-return, resilient projects. We're doing just that with multiple project startups planned for 2025 and that will contribute nearly $4 billion in earnings potential in 2027 at constant prices and margins. Our cash CapEx for the quarter came in at $5.3 billion. Secondly, to stay on the offensive through the commodity cycles, we need to maintain a bulletproof balance sheet. During the first quarter, we repaid $1.1 billion of bond maturities, bringing our debt-to-capital down to 16% and our net debt-to-capital ratio down to 3%. This outstanding balance sheet strength gives us ample optionality to capitalize on attractive opportunities regardless of where the market moves. And finally, strong operational results coupled with a healthy balance sheet, not only provide flexibility to invest through the cycles, but also to consistently return excess cash to our shareholders. We distributed $6.8 billion in the first quarter, including $3.8 billion in dividends. And while we briefly paused share repurchases following the Pioneer S-4 filing in January, we resumed in February and are on track to complete our $17.5 billion stand-alone share repurchase program this year. As a reminder, we intend to increase the pace of the program to $20 billion per year after the Pioneer transaction closes, assuming reasonable market conditions. These distributions matter. They help to drive our industry-leading total shareholder return and over a longer period of time, significantly reduce our share count. Since we began the program in 2022, we reduced our share count by about 7% and or 8% excluding the shares issued for the Denbury acquisition. Looking ahead, our team's execution excellence, our stellar balance sheet and our extended reach to new high-value, high-growth markets uniquely positions us to grow long-term value. Turning to the second quarter outlook items. We expect seasonal scheduled maintenance to lower upstream volumes by about 40 KOEBD. This does not impact our 2024 full year production guidance, which is 3.8 million oil-equivalent barrels a day. This guidance excludes Pioneer, which we still anticipate will close in the second quarter. In Product Solutions, we expect lower scheduled maintenance as we exit the peak of the 2024 turnaround season. We expect corporate and financing expenses to total $300 million to $500 million, in line with the first quarter. We also anticipate an unfavorable working capital impact of about $3 billion from seasonal cash tax payments, similar to what we saw in the second quarter of last year. With that, let me go ahead and turn it back to Darren.","evidence_gemma_new":null,"evidence_llama_3_3":"cash flow from operations first quarter","evidence_qwen_3_30b":"cash flow from operations","gemma_new_max":null,"gemma_new_min":null,"llama_3_3_max":14700000000.0,"llama_3_3_min":14700000000.0,"qwen_3_30b_max":14700000000.0,"qwen_3_30b_min":14700000000.0}
{"symbol":"XOM","year":2023,"quarter":1,"date":"2023-Q1","chunk_id":2,"sub_chunk_id":0,"centroid_label":"earnings","agreed_value":11400000000.0,"count":2,"chunk":"Darren Woods: Good morning. Thanks for joining us today. Following a record year, ExxonMobil delivered the highest first quarter earnings in our history even as energy prices and refining margins moderated from the fourth quarter. This ongoing success reflects the hard work of our people, executing our strategic priorities and fully leveraging our competitive advantages. Through investments in advantaged assets, mix improvements and cost and operating discipline, we are delivering the structural earnings improvements outlined in our corporate plan update last December and expanding the energy supplies needed to meet growing global demand. Compared to the first quarter of 2022, we added about 300,000 oil-equivalent barrels per day to global supply, primarily from a 40% increase in production from Guyana in the Permian Basin, increase more than offset our divestments in the expropriation of Sakhalin-1, which we no longer account for, but which importantly remains part of global supply. In addition, our Beaumont refinery expansion reached nameplate capacity in the quarter. This 250,000 barrel a day expansion is the largest US refinery addition in a decade, helping meet society's ongoing need for transportation fuels. Guyana, we're pleased to announce that we reached final investment decisions for Uaru, fifth offshore project, which will bring on even more production from this low-cost, low-carbon intensity resource. Uaru will provide an additional 250,000 barrels a day of gross capacity with start-up targeted for 2026. Earnings in our Product Solutions business benefited from the team's solid operational execution with top quartile turnaround cost and schedule performance during a particularly heavy planned maintenance period. Low Carbon Solutions, we're building momentum across several fronts. In early April, we announced a long-term agreement with Linde to capture, transport and permanently store up to 2.2 million metric tons CO2 annually. Hydrogen, we announced front-end engineering and design contract for the world's largest low carbon hydrogen facility in Baytown, ahead of agreement with SK Group of Korea for offtake of blue ammonia from that facility. As we said during our Low Carbon Solutions spotlight earlier this month, our low carbon projects must be advantaged and deliver competitive returns. The ability of our low-carbon projects to compete successfully for capital is important if the world is going to meet its emissions aspirations. Incentives included in the Inflation Reduction Act are a positive step forward, although permitting and other regulatory improvements are still needed. Europe, by contrast, policy approach remains far more prescriptive and punitive. This is true whether we're talking about the emissions reductions needed to put the world on a path to net-zero or the production needed to provide Europe with affordable and reliable energy. The progress we're making across the company is underpinned by the continuing evolution of our business model. Effective on May 1, two new enterprise-wide organizations will be up and running. Global Business Solutions will centralize the majority of our finance procurement operations, enabling us to deliver simplified corporate-wide processes. ExxonMobil Supply Chain will consolidate supply chain activities globally. The organizations will focus on leveraging our scale to drive efficiencies, improve operating and financial results and, importantly, deliver an improved experience for customers, vendors and our people. On June 1, we plan to launch our new enterprise-wide trading organization. Global Trading will bring together expertise from across the company in crude, products, natural gas, power and marine freight trading, plan to build on our record 2022 results, leveraging the unique insights we gain from participating across each of our value chains and all along their entire length, with a global operating footprint larger than any of our competitors. Now, let me cover the quarter's headlines. We're pleased to have delivered $11.4 billion of earnings, a record first quarter following a record year. A significant contributing factor was structural cost savings that now total approximately $7.2 billion, keeps us on track to meet our target of $9 billion by the end of this year. Cash flow from operations totaled $16.3 billion, and our net debt-to-capital ratio declined to 4%, further increasing the strength of our balance sheet, while supporting shareholder distributions of $8.1 billion in the quarter, including $3.7 billion in dividends. Biodynamic market, our underlying performance remains rock solid and well ahead of our competition, reflecting the many improvements we've made over the last six years and, of course, the hard work of our people. Our diverse portfolio of advantaged businesses, improvements in mix, structural cost savings, excellence in execution are driving industry-leading earnings, cash flow and shareholder value. Combined with the strength of our balance sheet, we have the capability to win across a wide variety of market conditions to deliver strong returns, while meeting the evolving needs of society, including the need to reduce emissions. Leveraging the capabilities and advantages developed in our traditional businesses, we're building an advantaged new business, Low Carbon Solutions, which is positioning us as a leader in the energy transition, in our own and other's emissions and establishing long-term value-accretive growth opportunities that will underpin continued growth in shareholder returns. With that, let me turn the call over to Jennifer.","evidence_gemma_new":"earnings","evidence_llama_3_3":null,"evidence_qwen_3_30b":"earnings $11.4 billion record first quarter","gemma_new_max":11400000000.0,"gemma_new_min":11400000000.0,"llama_3_3_max":null,"llama_3_3_min":null,"qwen_3_30b_max":11400000000.0,"qwen_3_30b_min":11400000000.0}
{"symbol":"XOM","year":2023,"quarter":2,"date":"2023-Q2","chunk_id":2,"sub_chunk_id":0,"centroid_label":"earnings","agreed_value":8000000000.0,"count":3,"chunk":"Darren Woods: Good morning. Thanks for joining us today. I'm pleased to be conducting our earnings call from our Houston campus. As of July 1st, our corporate headquarters is now located at the campus, alongside the senior managers of our businesses and centralized organizations. This is the first time in the company\u2019s history that the senior leadership team of the corporation is located on one site and represents a critical step in continuing the transformation of our business enabling us to improve collaboration and alignment and further leverage synergies across our integrated businesses. The ongoing efforts to structurally improve our company and drive sustained, industry-leading performance was clearly demonstrated in our second-quarter results. We delivered earnings of almost $8 billion, two times higher than what we earned in the second quarter of 2018, under comparable industry commodity prices. That doubling of earnings reflects our work in the intervening years to reshape our portfolio of businesses, invest in advantaged projects, and drive a higher level of efficiency and effectiveness in everything we do. With these results, I would like to take a moment to recognize our people. Starting with all those that made the move to Houston. I\u2019m sure you know moves like this are not easy and that many personal sacrifices are made. I\u2019m very thankful for all who did this. Their willingness to disrupt their lives for the benefit of our company is a testament to the dedication of our people whose commitment and hard work underpin all the improvements we are making. I hope our shareholders take comfort in this one, small example of our people\u2019s commitment to the company and have confidence in their resolve to further strengthen our position as an industry leader in all that we do. Our achievements this quarter also demonstrate the progress we\u2019re making in solving the \u201cand\u201d equation: meeting the world\u2019s needs for energy and essential products and reducing emissions, both our own and others\u2019. In the Permian, we set another production record and remain on track for an overall growth in production of 10% this year. As I said last quarter, our growth won\u2019t be linear as we execute our development plans that balance and optimize capital efficiency, resource recovery, and production rates. Our priority will remain on driving value, not volumes. In Guyana, we achieved a record quarterly gross production rate of 380,000 barrels per day. Our team in Guyana continues to deliver excellent operating, environmental and safety results, while optimizing and growing production. In fact, we see the potential to increase the combined gross capacity of these two FPSOs to above 400,000 barrels a day with further debottlenecking, which is nearly a 20% increase above the investment basis and a testament to the ingenuity of our people. In the Gulf Coast, we continue to profitably grow our business. In the second quarter we achieved mechanical completion of the Baytown chemical expansion. The project grows volume and improves mix with 750,000 tonnes per annum of additional performance chemical products. The Baytown expansion is the final Product Solutions component of the Growing the Gulf initiative announced in 2017. If you recall, the initiative committed to investments of $20 billion over ten years to capitalize on the US\u2019s advantaged resources, economic growth, and strong regional support for our businesses and the jobs we create. 11 of the 13 projects are up and running. The Baytown expansion, after product qualifications, should begin contributing by the fourth quarter. And Golden Pass, the last of our Growing the Gulf projects, should have its first train up at the back end of 2024. The Growing the Gulf initiative is another example of executing our strategy, investing in advantaged, high-value growth, and delivering on our commitments. Improving the earnings power of our businesses also requires divestments. In the second quarter we completed the divestment of the Billings refinery. Including this sale, cash proceeds from divestments of non-strategic assets have totaled roughly $2 billion year-to-date. In advancing our efforts to better leverage corporate scale and integration, we established three new centralized organizations in the quarter. Consolidating activities previously embedded in each of our businesses: Global Business Solutions, ExxonMobil Supply Chain, and Global Trading. They\u2019re all off to a good start and have clear lines of sight to improve performance and lower cost. Our Low Carbon Solutions business continues to make progress in building an advantaged, low cost, high-return business in capturing, transporting, and storing carbon. We announced a CO2 offtake agreement with Nucor, one of North America\u2019s largest steel producers. And we signed an agreement to acquire Denbury, which will provide ExxonMobil with the largest owned and operated network of CO2 pipelines in the United States. Combining Denbury\u2019s assets and experience with our capabilities will significantly accelerate and expand our ability to profitably help customers reduce their emissions and allow ExxonMobil to play an even greater role in a thoughtful energy transition. It significantly enhances our competitive position and offers a compelling customer proposition to economically reduce emissions in hard-to-decarbonize heavy industries which, today, have limited practical options. Of Denbury\u2019s 1,300 miles of CO2 pipeline, roughly 70% are in the Gulf Coast states of Louisiana, Texas, and Mississippi, one of the largest US markets for CO2 reduction and home to some of ExxonMobil\u2019s largest integrated refining and chemical sites and nine of their 10 strategically-located CO2 storage sites are also in this region. We believe the transaction synergies will drive strong growth and returns. A cost-efficient transportation and storage system accelerates CCS deployment for both ExxonMobil and our third-party customers. It supports multiple low-carbon value chains, including CCS, hydrogen, ammonia, and biofuels. Ultimately, we see an opportunity to create a CCS business with the capacity to reduce emissions across the Gulf Coast by up to 100 million tons per year. This transaction will help us do that at a lower cost and faster pace. In fact, we see the potential for a third of the opportunity being actionable in the near term. Which takes us to our customers. Our latest offtake agreement extends our CCS customer base beyond industrial gas and fertilizers into steel. This project will tie into the same CO2 transportation and storage infrastructure we\u2019ll use to serve CF Industries, located just 10 miles from Nucor. Focusing our efforts and investments in areas with concentrated sources of emissions allows us to capture the benefits of scale, reduce our spend per ton of CO2 captured and improves returns. Our work with Nucor supports Louisiana\u2019s goal of reaching net-zero greenhouse gas emissions by 2050 and it increases the total amount of CO2 we\u2019ve agreed to transport and store for customers to 5 million metric tons per year, equivalent to replacing 2 million cars with EVs, roughly the same number of electric vehicles on the road in the United States today. With the planned Denbury acquisition, the potential reduction could be up to 20 times that. As demonstrated by these new developments, we\u2019re continuing to make significant progress in our plans to lead industry in helping society reduce emissions. A major component of our improved earnings is the structural cost savings that we\u2019ve achieved, currently at $8.3 billion. We remain on track to reach our target of $9 billion in savings by the end of this year. As we develop plans for future years, we\u2019re committed to finding additional savings. Cash flow from operations totaled $9.4 billion in the quarter, or $13 billion excluding the change in working capital. Our year-to-date production of 3.7 million oil-equivalent barrels per day is on track with the full-year guidance we shared last year as part of our Capex investments totaled $12.5 billion year-to-date, also in line with our full-year guidance. And, consistent with our capital allocation philosophy, we continue to share our success with shareholders, distributing $8 billion in cash during the quarter, including $4.3 billion in share repurchases and $3.7 billion in dividends. Before we go to Q&A, I\u2019ll leave you with a few key takeaways from the quarter. First, our work to structurally improve earnings power is paying off, demonstrated this quarter as we doubled earnings versus a comparable price environment in the second quarter of 2018. Our reorganizations, aggressive investments in advantaged projects, and significant reductions in cost are driving value and improving our competitive position. We\u2019ve made great progress and have a clear line of sight to much more. In the back half of this year alone, we expect to bring on two advantaged projects: Baytown Performance Chemicals and the Payara FPSO in Guyana, further growing our capacity to generate industry-leading earnings. The company\u2019s ongoing business transformation is giving the organization a better view of end-to-end value creation and focusing us on the highest value opportunities. Today, we are better positioned than ever to realize the value of our scale and the synergies from improving the integration of our businesses. For the first time in our history, we have a corporate technology, projects, trading, supply chain, and business solutions organization allowing us to apply the best solutions and talent to our biggest opportunities. And, importantly, we are developing the most talented people in the industry, providing unrivaled opportunities to meet some of society\u2019s greatest challenges. Their work is delivering exceptional results, driving industry-leading returns on investments, and growth in earnings and cash flow. This, in turn, allows us to distribute cash to shareholders through share repurchases and a sustained, competitive, and growing dividend while maintaining investments in industry advantaged projects including investments in our Low Carbon Solutions business. By leveraging the advantages developed in our traditional businesses, we are laying the foundation for a world-scale, competitively-advantaged, low carbon business with industry-leading returns. The planned acquisition of Denbury is a step in that direction, improving our decarbonization proposition for customers, while generating attractive returns. In summary, we\u2019re pleased with the quarter, the progress it represents and the improved earnings power of the company. We\u2019re confident that we have the right strategy with the right leadership and best people to effectively execute it, delivering sustained growth in shareholder value. With that, I\u2019ll turn it over to Jennifer.","evidence_gemma_new":"earnings","evidence_llama_3_3":"earnings second quarter","evidence_qwen_3_30b":"earnings Second Quarter of 2018","gemma_new_max":8000000000.0,"gemma_new_min":8000000000.0,"llama_3_3_max":8000000000.0,"llama_3_3_min":8000000000.0,"qwen_3_30b_max":8000000000.0,"qwen_3_30b_min":8000000000.0}
{"symbol":"XOM","year":2023,"quarter":3,"date":"2023-Q3","chunk_id":2,"sub_chunk_id":0,"centroid_label":"earnings","agreed_value":9100000000.0,"count":3,"chunk":"Darren Woods: Good morning. Thanks for joining us today. We delivered another robust quarter of earnings, cash flow and shareholder returns, reflecting our ongoing efforts to structurally improve our company and drive sustained industry-leading performance. We reported $9.1 billion of earnings, an increase of $1.2 billion compared to last quarter. While the market provided a bit of tailwind, our success was enabled by the continued strength of our operational performance, which reflects the hard work of our people across the company. Whether it\u2019s continuing to drive efficiency in maintenance and turnarounds, running at high throughputs and utilization rates, or delivering big projects at first quintile cost and schedule, the excellent work of our people underpins our results and sustains our drive to deliver industry-leading performance in everything we do. The work is fundamentally strengthening the underlying earnings power of the company, establishing a strong foundation to deliver industry-leading results in any price environment. Consistent with our capital allocation strategy, we continue to share the success of the company with our shareholders. This morning, we were pleased to announce a 4% increase to the quarterly dividend to $0.95 per share. This year is our 41st consecutive year of annual dividend increases, a record that we\u2019re proud of and that we know our investors value highly. We continue to strengthen our portfolio of businesses by investing in advantaged high return opportunities while divesting businesses that are no longer a strategic fit. During the quarter, we closed on the sale of our Thailand refinery, bringing our year-to-date cash proceeds from asset sales to more than $3 billion. We followed this in October with the close of the refinery sale in Italy. Recently announced acquisitions are great examples of the and equation, meeting the world\u2019s needs for energy and essential products and reducing emissions. Acquiring Denbury strengthens our position to economically reduce emissions in hard-to-decarbonize industries, which today have limited practical options. We see the potential to drive strong returns with the capacity to reduce the nation\u2019s carbon emissions by 100 million tons per year - that\u2019s 20 times our current CO2 off-take agreements with CF Industries, Linde and Nucor, which by themselves could reduce CO2 emissions by an amount equivalent to replacing two million cars with EVs, roughly the same number of electric vehicles currently on U.S. roads. We expect to close the transaction in early November with Denbury shareholders scheduled to vote next week. Earlier this month, we signed an agreement to acquire Pioneer Natural Resources in another all-stock transaction. This combination will further strengthen our already advantaged upstream portfolio and create significant value for the shareholders of both companies. Together, we will recover more resource more efficiently and with a lower environmental impact. We plan to accelerate Pioneer\u2019s Permian net zero ambition by 15 years and fully leverage their advances in water recycling. This deal is a win any way you look at it - good for our shareholders, good for the environment, good for the economy, and good for U.S. energy security. Neil will say more about the benefits of the transaction in a few moments. We\u2019re also continuing to drive profitable growth organically. In energy products, we achieved the highest third quarter refinery throughput on record, driven by our Beaumont refinery expansion. At a time of strong demand and low inventories, this project is providing 250,000 barrels per day of much needed new capacity to the market. In addition, we recently started up our Baytown chemical expansion, which grows volume and improves mix. It provides 750,000 tons per year of new performance chemical capacity, including 350,000 tons of linear alpha olefins, marking our entry into this growing market. We delivered another quarter of strong operational and financial performance with earnings of $9.1 billion and cash flow from operations of $16 billion. These results reflect the structural earnings improvements we\u2019ve delivered over the past several years as we\u2019ve improved our mix of assets and driven significant structural cost reductions, while maintaining our focus on industry-leading safety and reliability. We have lowered our structural costs by $9 billion since 2019, meeting our plan, and expect to deliver additional savings in the fourth quarter. We continue to identify opportunities to improve our base operations, including enhancing our maintenance and turnaround processes, strengthening our digital capabilities, and optimizing our supply chain. Our year-to-date production of 3.7 million oil-equivalent barrels per day is on track with our full year guidance. Capex investments of $18.6 billion year-to-date are on plan. We expect 2023 capex to finish the year at the top end of our guidance range as we continue to invest in high return advantaged projects, our top priority for creating long term shareholder value. As always, we remain focused on sharing the company\u2019s success with our shareholders. We delivered $8.1 billion in shareholder distributions in the third quarter, $3.7 billion in dividends, and $4.4 billion in share repurchases. With that, I\u2019ll turn it over to Neil.","evidence_gemma_new":"earnings","evidence_llama_3_3":"earnings third quarter","evidence_qwen_3_30b":"earnings cash flow from operations","gemma_new_max":9100000000.0,"gemma_new_min":9100000000.0,"llama_3_3_max":9100000000.0,"llama_3_3_min":9100000000.0,"qwen_3_30b_max":9100000000.0,"qwen_3_30b_min":9100000000.0}
{"symbol":"XOM","year":2023,"quarter":4,"date":"2023-Q4","chunk_id":2,"sub_chunk_id":0,"centroid_label":"earnings","agreed_value":36000000000.0,"count":2,"chunk":"Darren Woods: Good morning, and thanks for joining us. I want to start with the theme of the quarter, which frankly, has been a theme of the year, excellence in execution. Whether it\u2019s operating our facilities, building projects, deploying technologies, trading, marketing, sales, supply chain, or any of our other activities, the men and women of ExxonMobil are setting and holding themselves to very high standards as they execute their responsibilities. Their hard work and commitment drove the strong results we reported today and are the foundation of our success. At the end of the day, it\u2019s all about our people. They make the difference and are delivering industry-leading results. And nothing is more important than the safety of our people. Keeping them safe requires intense focus and relentless discipline, 24 hours a day, every single day. For many years we\u2019ve outperformed industry benchmarks for workplace safety. Over the last several years we\u2019ve been implementing improved systems for managing both personnel and process safety, leveraging best practices from across our company and industry, our own and others. These efforts are paying off with continued improvements in the number and severity of incidents. The discipline needed to consistently deliver industry-leading safety performance manifests itself in all our work. We see it in our project teams, who are delivering large capital projects at top-quintile performance on cost and schedule. We see it in the reliability of our operations, where we achieved record performance in both the upstream and refining. We see it in our environmental performance, where we set several new records. And we see it in the successful management of the transformational re-organizations we\u2019ve made over the last several years. Results are clear. By any measure, 2023 was an outstanding year. We delivered $36 billion of earnings, strong cash flows, and a 15% return on capital employed. Our strategy, introduced in 2018, coupled with consistently strong execution, is delivering results that lead industry across a range of metrics, including earnings and cash flow growth, total shareholder distributions, and total shareholder returns since 2019, the baseline year of our plans. On a constant-price basis, we more than doubled earnings in 2023 versus 2019, demonstrating the improved earnings power of the company. The growth in profitability reflects significant progress in high-grading our portfolio of assets through advantaged projects, divestment of less strategic operations, and significant cost reductions. During the year, our divestments generated more than $4 billion of cash proceeds. And we also announced two value-accretive acquisitions. Denbury, which closed in November, provides opportunities to profitably accelerate our Low Carbon Solutions business with a compelling, end-to-end, customer decarbonization offer. Pioneer, which is expected to close in the second quarter, will further differentiate our advantaged Upstream portfolio. The synergies will create significant shareholder value and accelerate Pioneer\u2019s net zero ambitions by 15 years, to 2035. In 2023, we made significant advances in a number of innovative solutions. We entered the lithium business, where we see an opportunity to supply approximately 1 million electric vehicles per year by 2030 with economically advantaged production that has a much smaller environmental impact than today\u2019s supply. In the carbon capture and storage space, we recently completed the construction of a pilot plant to further develop a unique, proprietary technology, which has the potential to significantly lower the cost of direct air capture. We also launched Proxxima, a thermoset resin with a high value in use for coatings, infrastructure, automotive parts, and wind power, made from low value components used in gasoline. We also took a further step in reducing cost, leveraging scale and improving effectiveness with the formation of three new centralized organizations, Global Supply, Trading, and Global Business Solutions. This change provides additional opportunities to grow deep expertise across a broad portfolio of critical business capabilities. Today, we\u2019re convinced that no other company can match the depth and breadth of development opportunities that ExxonMobil offers. It\u2019s no surprise that for the 11th year in a row, we were recognized as the most attractive US employer in the industry for engineering students. This is another key competitive advantage. Our plan for 2024 remains anchored in our existing strategy, building on world-class execution and the performance we delivered last year. We set a high bar for ourselves across all aspects of the business, from safety to operational excellence to financial performance, and have confidence in our team's ability to consistently deliver. For 2024, we expect to invest $23 billion to $25 billion to grow our portfolio of advantaged, low-cost of supply assets, further shift our product mix towards higher value, higher margin performance products, and reduce emissions, both our own and others. Our plan also continues to structurally reduce costs to achieve $15 billion in structural cost savings through 2027. We have opportunities to enhance supply chain efficiency, further improve maintenance and turnarounds, modernize data management, and simplify business processes. In Low Carbon Solutions, we\u2019ll continue the integration of Denbury and look to add additional customers to our US Gulf Coast network. As we noted during the Corporate Plan update in December, we\u2019re now pursuing more than $20 billion of lower emissions opportunities, evenly split between reducing our own emissions and reducing third-party emissions. Overall, our portfolio of low carbon investments is expected to generate returns of approximately 15%. Our Upstream portfolio will be further transformed when we close on the transaction with Pioneer. By combining the capabilities of our two companies and leveraging the advances we\u2019ve made in technology, we expect to recover more resource, more efficiently, with lower emissions. We\u2019ll provide more detail about this compelling combination at our Spotlight event following the close. Our results in 2023 once again demonstrated the strength of our strategy. As I reflect on the past year, I have tremendous pride in what our people accomplished and a strong level of confidence in our continued ability to lead in the years ahead. Finally, I want to thank our shareholders for their continued confidence and support. Now, I'll turn it back to Jennifer.","evidence_gemma_new":null,"evidence_llama_3_3":"ExxonMobil earnings","evidence_qwen_3_30b":"earnings 15% return on capital employed","gemma_new_max":null,"gemma_new_min":null,"llama_3_3_max":36000000000.0,"llama_3_3_min":36000000000.0,"qwen_3_30b_max":36000000000.0,"qwen_3_30b_min":36000000000.0}
{"symbol":"XOM","year":2024,"quarter":4,"date":"2024-FY","chunk_id":1,"sub_chunk_id":0,"centroid_label":"earnings","agreed_value":34000000000.0,"count":2,"chunk":"Darren Woods: Good morning, and thanks for joining us. I'll focus my comments this morning on ExxonMobil's 2024 results and the company we've become. In our prepared presentation available on our website, Kathy dives deeper into our results and long-term growth outlook. What our 2024 performance makes clear is that the transformed company we've built is delivering. We strengthened and further capitalized on our unique competitive advantages, technology, scale, integration, execution excellence, and, of course, people. We demonstrated the strength of our consistent strategy now in its eighth year of driving greater value for society and shareholders alike. We set and achieved ambitious objectives. When we say we'll do something, we deliver. And we expanded our unrivaled set of opportunities for profitable growth both now and long into the future. The ultimate source of cash, distributions, and shareholder value is unchanging, investments in advantaged high-return assets and projects. The proof of our transformation shows up in our performance. Operationally, we delivered strong results across the board, including safety, a bedrock commitment underpinning everything we do, reliability, where we achieved record performance in our product solutions business, and emissions, where we've achieved a more than 60% reduction in methane intensity since 2016. Financially, we demonstrated our steadily improving earnings power across a range of metrics. We delivered earnings of $34 billion in 2024, our third highest result in a decade despite softer market conditions. Over five years, we've grown earnings, excluding identified items, a compounded annual growth rate of nearly 30%. We generated cash flow from operations at $55 billion, also our third highest in a decade, to fund profitable growth, maintain our financial strength, and reward shareholders. Excluding working capital, our free cash flow more than covered shareholder distributions. And we delivered a return on capital employed of 13%. Over five years, our average return on capital employed is an industry-leading 11%. When you set aside cash balances in capital and projects that are under construction and yet to start up, our 2024 ROCE rises to roughly 17%, with a five-year average of about 15%. Our disciplined approach to investing continues to generate returns well above our cost of capital. Every part of our business contributed to our success. We built the best upstream portfolio in the industry. In 2024, we achieved the highest-ever production from our advantaged assets and the highest liquid production from our overall portfolio in more than 40 years. In the Permian, we delivered record production from both our Heritage ExxonMobil assets and our Pioneer assets. Together, the two are even stronger. As we said last month, we now see an average of more than $3 billion per year of synergies from our combined assets, with production growing from 1.5 million oil-equivalent barrels per day at the end of 2024 to 2.3 million barrels per day by 2030, a more than 50% increase. This growth will further strengthen U.S. energy security and will do it with even better overall environmental performance. In Guyana, we delivered record production from the world's premier deepwater development. We've gone from discovery to 650,000 barrels per day in just 10 years, a pace for deepwater projects the world has rarely seen. The benefits are tremendous, not just profitable growth for ExxonMobil, but rapidly rising living standards for the Guyanese people. The GDP per capita more than tripling since we started production in 2020. Turning to product solutions, we've further enhanced our already industry-leading portfolio by divesting non-strategic assets and establishing the foundation for new-to-world products that outperform existing alternatives. The advantage projects we brought online over time drove record sales of high-value products in 2024. Our ongoing shift to a more profitable product mix is a key driver of earnings improvement in product solutions. We also advanced our plans to develop and grow new businesses, most notably our Proxxima resin systems and carbon materials, with an estimated total addressable market of $100 billion by 2030. Within low-carbon solutions, we demonstrated strengthened commercial interest through additional customer contracts and equity partnerships. We're the only company in the world today with an end-to-end system capable of capturing, transporting, and storing carbon emissions. At 6.7 million tons per year, we've contracted more CO2 for transport and storage than any other company by far. We're also well-positioned to meet surging demand from data centers for low-carbon power, and on a timetable that alternatives such as nuclear simply can't match. On the hydrogen and lithium fronts, we announced new equity partnerships and off-take agreements that demonstrate the significant market interest these new businesses are generating. Our success in 2024 and every other year is due to our people. It's not just that we recruit the best or that we give them the most challenging assignments to build the best capability. It's our culture, our mindset. When this team takes the field, we expect to win. That drive underpins our value creation in 2025 as well. We'll bring online a full slate of major projects to increase profitable volumes, make more profitable products, and lay the foundation for profitable new businesses. To name a few, we'll start up Yellowtail in Guyana, our fourth and largest development to date. In the Permian, we'll further improve resource recovery using our next-generation cube design and patented lightweight proppant. This is the right kind of growth, low cost of supply, low emissions intensity, and high returns. At our Singapore refining and chemical complex, our residual upgrade project, we use new-to-the-world technology to transform bottom-of-the-barrel molecules into a new grade of high-value lube-based stocks. We'll transform high-sulfur, low-value export fuels into higher-value diesel for the U.K. market at our expanded refinery at Fawley. We'll expand our capacity to produce higher-value performance polyethylene and polypropylene at our petrochemical complex in China. And we'll add new advanced recycling facilities at Baytown to meet the growing demand for certified circular polymers, which has the added benefit of keeping hundreds of millions of pounds of plastic waste from being burned or buried. Earlier this month, we sued the California Attorney General and activist groups for defamation and interference in our advanced recycling business. As our filing made clear, this suit is about abuse of the public trust and the hijacking of the legal system for financial and political gain. I want to emphasize that we don't take these actions lightly. Unfortunately, it's another example of what it takes to defend our company and preserve the value we create for our customers, shareholders, and broader society. Overall, the major projects we start up in 2025 will deliver more than $3 billion in earnings potential in 2026 at both constant and current prices and margins. And this earnings gain excludes the uplift from our Permian growth plans. As we showed at the corporate plan update, ExxonMobil's runway of profitable growth extends along into the future. Our new technology-driven businesses, such as Proxxima Products and Carbon Materials, creates huge opportunities to expand beyond traditional fuels and chemicals into higher growth, higher margin markets that are decoupled from commodity price fluctuations. This year, we expect to start up a new facility that can produce 25,000 metric tons of Proxxima products and plan to grow to nearly 200,000 tons by 2030. We're committed to investing in these new businesses in a stepwise fashion, progresses in tandem with demonstrated success in the marketplace. To change in administrations in the U.S., I want to say a few words about the right policy framework for a successful energy future. I'll begin by noting that through 2030, roughly 90% of our planned CapEx is allocated to established, fully-functioning markets for energy and products that require no policy support. Only about 10% is earmarked for nascent, lower-emissions markets where market forces have yet to fully take hold. The case in point is our Baytown low-carbon hydrogen project, which requires incentives under Section 45B of the Inflation Reduction Act to be economically viable. We believe these incentives are critical to establishing a fully market-based future where hydrogen competes head-to-head with traditional fuels. But the end goal is clear, a system where no energy source remains dependent on government subsidies. Just as energy sources should not be supported by governments in perpetuity, they should not be artificially discouraged either. The prior administration's moratorium on new LNG export facilities and its executive order limiting offshore drilling were policy mistakes that the new administration is right to reverse. Oil and natural gas remain essential to economic growth, jobs, and national security, both for ourselves, and our allies around the globe. Over the longer term, to achieve broad decarbonization, government policy should set carbon intensity standards on products. We believe this is the best way to engage the collective efforts of industry and leverage competitive market forces. To drive further innovation and reduce the most emissions at the lowest cost, policies must remain technology agnostic. Governments should not pick winners and losers. Intensity standards establish a level playing field and have a strong precedent. They were most recently used to successfully and affordably reduce sulfur and marine fuel. In closing, I want to say again how proud I am of the people of ExxonMobil and how pleased I am that we are creating unmatched value for our shareholders. Compared to the IOCs, over the last five years, we've grown cash flow from operations at a roughly 15% compounded annual growth rate, more than double the closest competitor. We've distributed more than $125 billion in dividends and buybacks, $30 billion more than the closest competitor. And we've delivered a total shareholder return compounded annual growth of 14%, 600 basis points higher than the closest competitor. Looking ahead, the value creation arc of the company is equally distinguished. We're going to build an even more advantaged asset portfolio with 60% of our option production from advantaged assets by 2030. That's nearly the same amount as the next largest IOC's total production. We're going to develop an even more profitable product mix with 80% growth of high-value product sales and product solutions by 2030. We're going to be an even more efficient operator, taking an additional $6 billion in costs out of the business. We're going to generate even more earnings in cash on a constant price and margin basis. We're confident we'll deliver 2030 by 2030, $20 billion more in earnings and $30 billion more in cash flow, all of which enables us to keep our commitment to sustainable, competitive, and growing shareholder returns. With that, I look forward to your questions.","evidence_gemma_new":null,"evidence_llama_3_3":"ExxonMobil earnings 2024","evidence_qwen_3_30b":"earnings 2024","gemma_new_max":null,"gemma_new_min":null,"llama_3_3_max":34000000000.0,"llama_3_3_min":34000000000.0,"qwen_3_30b_max":34000000000.0,"qwen_3_30b_min":34000000000.0}
{"symbol":"XOM","year":2024,"quarter":1,"date":"2024-Q1","chunk_id":1,"sub_chunk_id":0,"centroid_label":"earnings","agreed_value":8200000000.0,"count":2,"chunk":"Darren Woods: Good morning, and thanks for joining us. Our strategy and the way our people are executing created significant value in the first quarter. We delivered $8.2 billion of earnings and $14.7 billion of cash flow. Even more important, we continue to strengthen the underlying earnings power of the company, which both Kathy and I will discuss in more detail on today's call. An important driver of this improved earnings power is our ongoing focus on structural cost savings, which reached $10.1 billion in the quarter versus 2019, furthering our progress towards our goal of $15 billion by 2027. CapEx in the quarter was $5.8 billion, as we continue to invest in advantaged growth projects that will drive future earnings and cash flow. At the same time, we further strengthened our balance sheet, bringing our net debt-to-capital down to 3%, the lowest in more than a decade. To reward our shareholders, we distributed $6.8 billion in cash, including $3.8 billion in dividends. For all of 2023, ExxonMobil was the third largest total dividend payer in the S&P 500. Only Microsoft and Apple paid more. We also repurchased about $3 billion of shares. Buybacks were temporarily paused until the shareholders of Pioneer voted on the combination of our companies, which they approved on February 7. Post close, we expect buybacks to ramp up to a pace of $20 billion a year. Our ongoing success this quarter reflects the intense focus we have had for the past 7 years on improving every aspect of our business. We developed a strategy tied more directly to our core competitive advantages. We reorganized the company to create a group of centralized organizations that fully utilize the significant synergies between our businesses. We set and met ambitious plans to improve the fundamental earnings power of the company. And we established a track record of excellence in execution that is second to none. All of this has been critical to laying the foundation for further success, both in the current plan period through 2027 and over a much longer growth horizon, which I will discuss in a few minutes. As covered in the corporate plan update in early December, we expect to generate an additional $12 billion in earnings potential from 2023 to 2027 on a constant price and margin basis. That represents a compounded annual earnings growth rate over the plan period of greater than 10%. The drivers of this additional value are clear. Higher volumes from advantaged assets, mix improvements from the shift to higher-value products and further structural cost reductions. Within Product Solutions, for example, we expect to start up multiple strategic projects between now and the end of 2025, which will drive significant earnings growth through mix improvements. Consider our Singapore Resid Upgrade Project where our industry first technology application will allow us to transform bottom-of-the-barrel molecules into higher value base stocks significantly lifting margins. Our focus on shareholder value extends beyond the work we're doing to drive profitable growth. We're also working hard to ensure that the value we've created is not diminished through third-party actions. I'd like to take a moment to highlight a few that occurred in the quarter that attracted some media attention. In Guyana, as the operator of the world's premier deepwater development, we have created tremendous value. We believe the proposed Chevron-Hess transaction and ignoring preemption rights triggered by a change of control, diminishes an element of value due ExxonMobil. We believe it's critical to defend these rights and fully preserve the value we've created. The arbitration we filed in the quarter seeks to confirm our rights and establish the value of the transaction places on the Guyana asset. This will allow us to fully evaluate options to maximize the value to ExxonMobil and our shareholders. Any responsible management team would do the same. In the quarter, we also initiated litigation against 2 special interest activists masquerading as investors. These activists borrowed or group funded a nominal amount of shares to resubmit a proposal that in previous years had little shareholder support, which is a violation of the SEC's rules. These activists have publicly admitted they are working to stop production of oil and natural gas and have no interest in earning a financial return. They hijack an important process that gives small shareholders a voice and are undermining the integrity of the system with an agenda that is not in the best interest of our investors or society, which is why we are actively opposing their efforts. Finally, although it attracted less attention, we successfully defended the Pioneer merger against a frivolous lawsuit designed to extract value from ExxonMobil shareholders. A plaintiff's lawyer who sued to block the deal has repeatedly abused a legitimate legal process to extort money from companies to have his lawsuit withdrawn. We refused to pay this \"merger tax\". The court ruled in our favor, finding that filing a lawsuit solely to gain leverage in the settlement negotiation is an improper purpose. Even more important, the court sanctioned the lawyer for operating in bad faith in order him to pay ExxonMobil's legal fees, which will hopefully discourage similar frivolous lawsuits in the future. While results of these efforts may not show up in any discrete quarterly result, they underpin long-term value and demonstrate our strong commitment to doing what's right. Turning to another area of strong commitment that shows up every quarter, is our focus on functional excellence, a core competitive advantage and a key pillar of our strategy. In Guyana, it's delivering unprecedented success and value creation, reflected in the startup of the Prosperity FPSO last November, ahead of schedule and below cost. As with our 2 previous developments, this cost and schedule performance was industry-leading. The excellence in execution demonstrated in delivering a project continued into its operation. With Prosperity, we reached nameplate capacity of 220,000 barrels a day in January, just 2 months after startup and well ahead of the industry average of 15 months. Once our projects are up and running, we continually look for debottlenecking opportunities to increase production. All 3 FPSOs are now producing above their funding basis, helping to drive record gross production in the first quarter, all with an emissions intensity amongst the lowest in our upstream portfolio. Looking ahead, we're pleased that our sixth project, Whiptail, has now reached FID with a planned start-up by year-end 2027. It's remarkable to think that within 8 years of first oil, Guyana will have a production capacity of more than 1.3 million barrels per day. Our work in Guyana is delivering tangible benefits for the Guyanese people. The development of Guyana's energy economy drove the highest real GDP growth in the world in 2022. The oil and gas industry is directly supporting thousands of local suppliers and Guyanese workers. And our gas-to-energy project will feed a new government-owned power plant with the potential to significantly increase reliability and reduce both the cost of electricity and its greenhouse gas emissions. As I said at CERAWeek last month, I believe Guyana will go down as one of the most successful deep water developments in the history of the industry. The final point I'd like to make about our upstream business this morning involves our Canada operations. With the Trans Mountain pipeline expansion scheduled to come online May 1, our production from Kearl will have better access to markets in Asia and the U.S. West Coast, which we expect will improve margins and drive higher earnings in future quarters. Product Solutions also demonstrated excellence in execution this quarter. Overall, we generated record first quarter refining throughput during a period of peak turnaround activity. Thanks to the outstanding work of our team, we maintained strong turnaround cost and schedule performance. The structural improvements made in turnarounds would not have been possible with our decision to create centralized organizations that are now critical elements of our success. We've been able to take our best thinking and experience from across the corporation and apply it to some of our biggest challenges like these very large maintenance events. We've eliminated silos, consolidated expertise and narrowed our focus to the challenges and opportunities with the highest value. Our turnaround performance is translating to both structural cost savings and higher throughput, helping us capture more value from the market than peers, especially at a time of historically high refining margins. Finally, our commitment to execution excellence is delivering significant improvements in our environmental performance. Our methane emissions intensity is down more than 60% since 2016. One of the many steps we took included replacing all 6,000-plus natural gas-driven pneumatic devices in our Permian unconventional operated assets. Disciplined execution is critical to success when markets are weak and margins are low. It pays even bigger dividends when the market environment is constructive as it was in the first quarter for crude and refining. Crude prices remained roughly flat near the middle of the 10-year range. More recently, the market for crude has tightened with ongoing concerns about the Middle East, putting a floor into prices, which are up more than 10% year-to-date. Natural gas prices move back inside the 10-year range on high inventory and lower demand. Refining margins rose back to the top of the 10-year range as demand grew while industry downtime and global disruptions weighed on supply. Chemical margins were relatively flat as demand growth is being met with new capacity. While short-term market conditions are an important context for quarterly results, it's how we position ourselves to leverage the long-term fundamentals that drive sustained shareholder value. I'd like to turn to this for a moment now and plan to spend more time over the year reminding everyone of our attractive growth opportunities that extend well beyond this year and our planned period. I know there's a view that we're in a declining industry. That view is wrong. People don't fully appreciate the scale of the global energy system. It took many tens of trillions of dollars to build and today takes more than $2 trillion a year to sustain. This doesn't mean we shouldn't address the emissions challenge. In fact, the world needs to do more in a far more serious way to meet society's emission reduction ambitions. But it also means that oil and natural gas will play a much greater role than the market thinks. By 2050, the world is expected to add nearly 2 billion people and the size of the global economy is expected to double from roughly $90 trillion to $180 trillion. Scenarios like IEA Net Zero to see oil demand falling from more than 100 million barrels per day now to 25 million barrels per day in 2050, are not realistic. Even if demand for transportation fuels declined significantly with greater penetration of electric vehicles, the market for petrochemicals is expected to double. While the transition to a lower emissions future will be long, there's no denying, it's happening. The question is, who will capture the value. We believe the same competitive advantages that have underpinned ExxonMobil's success for more than 100 years, will serve as the foundation for building a range of world-class businesses in a lower emissions world. As I've said many times, we're a technology company at our core. We transform molecules at scale to meet society's needs. The notion that the world can electrify everything is misguided. Molecules will play a dominant role in the energy, materials and products the world needs in 2050 and beyond. At our low carbon solutions spotlight last year, we'll walk you through the opportunity we saw in carbon capture and storage, hydrogen and biofuels. Since that time, we've also entered the market for lithium. The total addressable market in these areas going forward is potentially in the trillions of dollars. Today, I'd like to mention some of the additional areas we're exploring that have tremendous potential. We discussed each of these opportunities in detail with our Board of Directors during a visit to our Baytown complex in March. The world has become increasingly focused on the challenge of mismanaged plastic waste. The solution requires a sound policy, responsible manufacturing, expanded waste management infrastructure and new technologies like those that underpin our advanced recycling projects. We have 12 projects in our plants to help us meet the growing demand for processing plastic waste. Our first project at Baytown is one of the largest in North America, with the ability to process 80 million pounds per year of plastic waste that would otherwise end up in a landfill. By breaking down plastic waste into its constituent molecules, our technology significantly widens the range of plastics that can be processed, including hard recycled materials such as potato chip bags and astro turf. We are planning to develop more than 1 billion pounds per year of plastic waste processing capacity by 2027. Another growth area is Proxima, which was showcased at our Product Solutions spotlight last September. With Proxima, we transform lower-value gasoline molecules into a high-performance, high-value resin with numerous commercial applications. In short, Proxima is a new chemistry for an enduring challenge, making materials that are lighter, stronger and more durable with lower GHD emissions. Proxima is up to 4x stronger than steel and 7x lighter, making an excellent replacement for rebar. As a protective coating, it takes one application in 5 minutes to cure versus 2 to 3 applications with 8 hours in between. It has multiple light weighting applications in the automotive sector, and it has half the life cycle emissions of traditional thermoset resin systems. For us, Proxima is an advantaged fuels to Performance Chemicals business that we plan to scale and build into a global brand. We see an addressable market of up to 5 million tonnes per year, growing faster than GDP, with earnings potential of $1 billion a year by 2040 and returns above 15%. We are also exploring opportunities materials made from carbon which, as the world decarbonizes, will become an increasingly advantaged feedstock. We launched a technology venture about 2 years ago to assess attractive new markets for carbon products. We see opportunities to transform the molecular structure of low-value carbon-rich feeds from refining and petrochemical processes to create high-value products for growing markets. Some of these markets include carbon fiber, polymer additives, battery materials and electrodes for steel production. We are specifically focused on high-value segments with margins of several thousand dollars per ton and growth rates more than double GDP. One potential opportunity is the carbon materials used in batteries and energy storage solutions. With demand for this segment growing above 10% per year, these carbon materials are expected to be in short supply. Additionally, as the needs for storage solutions evolve, there will be an increasing demand for higher-performance carbon materials. The carbon-rich feedstock available in ExxonMobil's existing businesses coupled with our core technology capabilities and complementary lithium offering positions us to meet the growing demand and deliver product performance improvements required for the battery and energy storage solutions of the future. The last technology I'll touch on today is Direct Air Capture or DAC. For the world to reach Net Zero, negative emissions technologies are going to be needed, none holds greater long-term promise than DAC. The challenges, however, are as big as the opportunity. Atmospheric CO2 is extremely diluted at about 425 parts per million, a massive amount of air has to be processed to remove a single ton of carbon dioxide. Today, many technologies are competing to crack the code and make DAC scalable and affordable. Our scientists and engineers are hard at work on this problem. We've launched a pilot project at Baytown that has demonstrated feasibility with the use of a proprietary capture process. Our initial goal is to cut the cost in half, which will still be too expensive, but will help move us down the cost curve. The current market for DAC is tiny, at less than 10,000 tons per year of CO2 captured, but the long-term potential is huge. We are excited that dozens of companies and universities are chasing direct air capture solutions. We wish them all success irrespective of where the breakthrough occurs or who achieves it. ExxonMobil will have an important role to play. As we've demonstrated, there are a few, if any, companies better positioned than us to globally deploy a molecule technology at scale with attractive returns. People who limit our future to the products and markets we are in today, have lost sight of our past and don't understand our core capabilities or advantages or the future potential they hold. Consider our Baytown low carbon hydrogen project, which is entering advanced stages of engineering and development. We are not only focused on building the supply side of this new market for low carbon hydrogen, but are also making strong progress in building large-scale demand as demonstrated in our MOUs for offtake of low-carbon ammonia with SK of South Korea and JERA of Japan. The last piece required to bring this project in market to life is government policy that maintains a level playing field across all methods of hydrogen production. Without this, we cannot and will not move forward. On the other hand, if incentives are developed to establish a viable technology neutral market, our advantages will allow us to generate attractive returns and invest more, accelerating customers' emissions reduction. Over ExxonMobil's entire history and across the globe, we've built industries and value chains where none previously existed. We will continue to do this. In a fast transition, we'll grow earnings and cash flow with accelerated investments in CCS, hydrogen, biofuels and DAC. In a slow transition, we'll grow earnings and cash flow through advantaged investments in our traditional businesses. In irrespective of the transition pace, we'll extend our reach to new high-value markets with innovative new products. Under any scenario, we are convinced that our company is uniquely positioned to play a leading role, meeting the world's essential needs for energy and high-value materials and products. With that, I'll hand it over to Kathy.","evidence_gemma_new":null,"evidence_llama_3_3":"ExxonMobil earnings first quarter","evidence_qwen_3_30b":"earnings first quarter","gemma_new_max":null,"gemma_new_min":null,"llama_3_3_max":8200000000.0,"llama_3_3_min":8200000000.0,"qwen_3_30b_max":8200000000.0,"qwen_3_30b_min":8200000000.0}
{"symbol":"XOM","year":2024,"quarter":2,"date":"2024-Q2","chunk_id":2,"sub_chunk_id":0,"centroid_label":"earnings","agreed_value":9200000000.0,"count":3,"chunk":"Darren Woods : Good morning and thanks for joining us. ExxonMobil's performance remains strong. In the second quarter we delivered earnings of $9.2 billion, our second best second quarter results in the last 10 years. Just as important, we continue to improve the fundamental earnings power of the company, as Kathy covers in her prepared remarks available on our website. Our overall market conditions were softer in the second quarter. Oil prices remained firm. As a reminder, at Brent between $60 and $80 a barrel real and 10-year average refinery and chemical margins, we expect to generate between $80 billion and $140 billion in cumulative surplus cash from 2024 to 2027. The Pioneer acquisition increases that even further. In the quarter, we once again set production records from our advantage assets in Guyana and the Permian. Including Pioneer, our Permian production surged to 1.2 million barrels per day. In product solutions, our sales of high-return performance products rose 5% sequentially to a new record. Our strong performance in the quarter continues to support our capital allocation priorities, including the distribution of $9.5 billion to shareholders, of which $4.3 billion was in dividends. With the close of the Pioneer transaction, our shareholders now include the former owners of Pioneer stock who have begun to benefit from the strength of our combined companies. We welcome them to ExxonMobil, just as we do the talented people of Pioneer who bring a strong entrepreneurial mindset and deep expertise in unconventional resource development. I also want to recognize the combined transaction team for their excellence in execution. The average time to complete this type of merger over the last several years has been more than 11 months. We closed Pioneer in six months, once again demonstrating the strength of our organization and effectively executing large, complicated projects, including large acquisitions. It is challenging work, requiring deep thinking, a highly structured approach, and disciplined action, areas where we excel. Although, it's still early days, the integration is exceeding our expectations, and I'm confident we'll deliver even more synergies than we've announced. The team looks forward to sharing these details and all the other work we're doing to significantly grow value at our corporate plan update and Upstream spotlight in December. As we look ahead, we see opportunities to grow value not only through our corporate plan period, but long into the future. Later this month, we'll publish our global outlook, which projects global energy demand 15% higher in 2050 than it is today. We see oil demand holding steady at around 100 million barrels per day in 2050, while demand for renewables and natural gas grows considerably. An energy abundant future, driven by economic growth and rising levels of prosperity, creates opportunity for ExxonMobil, no matter the speed or direction of the energy transition. Over time, as it becomes more and more obvious that heavy industry and commercial transportation will not be meaningfully powered by renewables, the world will come to rely more on technologies where we have an advantage, including hydrogen, biofuels, and carbon capture and storage. A serious approach to the transition should focus on moving the world from high carbon to low carbon energy, not simply from oil and gas to wind and solar. The data, science, and economics all support this as fundamentally necessary. Our strategy reflects this reality and since it relies on the same corporate capabilities and advantages under any scenario, it is extremely flexible, delivering strong profitability irrespective of the path society takes. As a technology company that transforms molecules to meet society's needs, we're not defined by our existing product suite. We began as a maker of kerosene for lamps. Today, No one thinks of ExxonMobil as a kerosene company serving the lamp industry. In the future, ExxonMobil will be defined by the technologies and products it is producing to meet the world's future needs. As always, by drawing on our unique combination of competitive advantages. We shared with you a variety of technologies and products we're developing to more effectively meet existing needs, while helping the world achieve a lower carbon future. Two examples where I see significant new market potential are Proxxima and carbon materials. With Proxxima, we transform lower value gasoline molecules into a high performance, high value thermoset resin that can be used in coatings, lightweight construction materials, and advanced composites for cars and trucks, including battery boxes for electric vehicles. Materials made with Proxxima are lighter, stronger, more durable, and produced with significantly fewer GHG emissions than traditional alternatives. In March, we showcased the automotive uses of Proxxima at the world's leading international composites exhibition in Paris. We're progressing projects in Texas with startups planned in 2025 that will significantly expand the production of Proxxima. We see the total addressable market for Proxxima at 5 million tons and $30 billion by 2030, with demand growing faster than GDP and returns above 15%. That's an exciting new business opportunity with significant profit potential, for we have unique and hard to replicate advantages consistent with our strategy and core capabilities. We also see a sizable opportunity in carbon materials, transforming the molecular structure of low-value, carbon-rich feeds from our refining processes into high-value products for a range of applications. We are targeting market segments with margins of several thousand dollars per ton and growth rates outpacing GDP. These include carbon fiber, polymer additives, and battery materials. Our competitive advantages of scale, technology, and integration, combined with our North American manufacturing footprint, provides a foundation for building these compelling new high-margin businesses. I've challenged the product solutions team to lean into those opportunities and develop plans to accelerate the growth of both of these profitable new businesses. I hope we can ramp up investments to make them a meaningful part of our overall portfolio sooner, which will help further diversify earnings and significantly grow shareholder value for decades to come. ExxonMobil has a long history of successfully establishing new high-value and used products for established and growing markets. Consider Vistamaxx, which we launched to enhance the performance of everything from auto parts and construction materials to personal care products and packaging. We've grown our Vistamaxx performance polymer from five grades to 20, and total annual production capacity is 700,000 metric tons per annum, with highly attractive returns and significantly more growth potential. Of course, consistent with the track record we've established over the last seven years, the hurdle for investing will be high. Any investment will have to generate competitive returns, possess clear competitive advantages, and be resilient to the bottom of any commodity cycle. As we've demonstrated, our capital allocation decisions have generated robust earnings, cash flow, and shareholder returns. I look forward to sharing more about our growth opportunities in December. In closing, we have a lot to feel good about. Our performance is strong. Our merger with Pioneer is already creating tremendous value with more to come. And we continue to develop products and build businesses that will enable us to grow properly far into the future across a wide range of scenarios, including a rapid energy transition. With that, we'd be happy to take your questions.","evidence_gemma_new":"earnings second quarter","evidence_llama_3_3":"earnings second quarter","evidence_qwen_3_30b":"earnings second quarter","gemma_new_max":9200000000.0,"gemma_new_min":9200000000.0,"llama_3_3_max":9200000000.0,"llama_3_3_min":9200000000.0,"qwen_3_30b_max":9200000000.0,"qwen_3_30b_min":9200000000.0}
{"symbol":"XOM","year":2024,"quarter":1,"date":"2023-FY","chunk_id":2,"sub_chunk_id":0,"centroid_label":"structural cost savings","agreed_value":5000000000.0,"count":2,"chunk":"Kathryn Mikells: Thanks, Darren. We've established a consistent track record of improving the earnings power of our business. Across the company, our teams have been laser-focused on investing in competitively advantaged, low cost of supply, high-return opportunities delivering execution excellence in everything we do and driving additional structural cost improvements. Our earnings growth over the past 4 years was more than twice the pace of our closest peer. As of year-end 2023, we more than doubled earnings, bringing an incremental $14 billion to our bottom line on a constant price and margin basis versus 2019. As Darren noted, over the next 4 years, we plan to increase earnings potential by an additional $12 billion or a CAGR of more than 10%. Our ability to deliver industry-leading earnings growth reflects our unique competitive advantages, consistent strategy and the differentiated execution capabilities our people bring every single day. We've demonstrated our ability to improve the profitability of the business by reshaping our portfolio, divesting noncore assets, investing in accretive high profit opportunities and driving structural cost savings. This quarter, we've included a few additional slides to remind you of the plans we discussed during the corporate plan update last December and to demonstrate the progress we've been making. Going forward, we'll provide you with regular updates on these metrics. The drivers of our expected earnings growth are clear. Additional structural cost savings reductions of over $5 billion versus year-end 2023, higher volumes and more profitable barrels from advantaged assets like Guyana and the Permian in the upstream and execution of strategic projects and product solutions that enhance our product mix driving exceptional growth in high-value products. As I said during the corporate plan update in December last year, to win in our business, we must be a low-cost operator. That means continually finding ways to become even more efficient. With more than $10 billion in structural cost improvements as of the first quarter of 2024, split roughly 50-50 between upstream and product solutions, we're making steady progress towards the incremental $5 billion we're working to deliver by 2027. And we are on track to further extend that industry-leading performance. These structural cost savings have not only mitigated the impact of inflation, but have helped to offset the cost of new projects. Our success is meaningfully improving our operating cost and driving higher earnings for both upstream and product solutions. In fact, we ended last year with our cash operating expenses, excluding energy cost and production taxes down $4.5 billion versus 2019. We have a clear line of sight to achieve the roughly $1.5 billion in annual savings contained in our plan, and our team has a track record of beating our targets. We're leveraging our global organizations, including our Global Operations and Sustainability Group and the global business solutions and global supply chain organizations that we stood up last year. These organizations are tasked with realizing savings across all of our businesses. We're optimizing our turnarounds and other scheduled maintenance activities. We're streamlining and automating our order to cash, procure to pay, record to report and our planning processes. And we're better leveraging the scale of our supply chain to improve the efficiency of our logistics movements, enhance our buying power and lower the level of materials and inventory that we need to run our operations. We have a proven track record and a high level of confidence in our plan, and more importantly, in our team's ability to deliver. In the Upstream, on a stand-alone basis, we're on track to double earnings potential by 2027 compared to 2019 on a constant price basis, as we reshape our portfolio, divesting noncore assets and growing production from industry-leading assets that offer lower cost of supply, lower life cycle emissions and higher returns. Between 2019 and 2023, we've pruned Upstream's portfolio of nonstrategic assets, including U.S. flowing gas and focused on developing advantaged assets such as Guyana, the Permian, LNG and Brazil. For example, since 2019, we've more than doubled production volume in the Permian. In Guyana, we started 2019 with 0 production volumes. This quarter, we delivered more than 600 kbd of gross production. These efforts have resulted in a significant Upstream mix improvement. Our share of total production from advantaged assets has risen from 28% to 44%. We expect to grow Upstream earnings by an additional 50% between 2023 and 2027. That growth is driven by further production mix improvement, incremental cost savings and production growth. We expect our stand-alone production in 2024 to be about 3.8 million oil-equivalent barrels per day, rising to about 4.2 million oil-equivalent barrels per day by 2027, as growth from advantaged assets more than offset base depletion. Since 2019, we've nearly doubled Upstream unit profitability at constant price from $5 per oil-equivalent barrel to $9 as of the first quarter of 2024. We expect unit profitability to increase to $13 per oil-equivalent barrel by 2027. Unit earnings from our advantaged assets are expected to be $9 per barrel higher than our base portfolio by 2027 at constant prices. Moving to Product Solutions. We're focused on nearly tripling earnings from 2019 to 2027. We're well on our way to achieving that, having more than doubled earnings potential at the halfway mark at the end of last year. As an Upstream, a key driver of our earnings growth is improving our mix. The strategic projects we're executing do just that. Projects like the China Chemical Complex and the renewable diesel project in Strathcona will increase our high-value product volumes, which command a 10% to 25% margin premium. Projects such as our Singapore Resid Upgrade will also improve our mix without increasing overall volumes by converting low-margin products like fuel oil to higher-margin products like base stocks, diesel and chemical feed. This, in addition to structural cost savings, is the key to further growing our earnings. We have a clear line of sight on the nearly $5 billion in earnings from strategic projects in 2027. Through 2023, we delivered nearly 1\/3 of our goal. In 2024, we'll see a full year of earnings benefit from the Beaumont refinery expansion and Permian Crude Venture. On the chart, you can see the annualized first quarter contributions from these and other projects that we brought online since 2019. As we highlighted on our earnings call last quarter, 2025 is a big year for strategic project start-ups, which will provide a further large boost in earnings growth. Given the track record of our global projects and centralized technology organizations, we're confident in our ability to execute this plan, which delivers the capacity needed to double high-value product sales. By 2027, we expect high-value products to deliver about 40% of Product Solutions total earnings. Turning to the quarter, I'll start with a high-level review of sequential earnings. Details by business segments are available in the backup to this presentation. I'm then going to spend a bit of time discussing our earnings year-on-year, which I think better highlights the progress that we're making in the key areas that drive our underlying earnings growth over the medium term. You'll see that we're providing more detail on what impacts our volumes and costs period-to-period to more clearly link our current performance to the earnings growth drivers that I discussed earlier. We provided definitions of these factors and the backup to this presentation. First quarter GAAP earnings were $8.2 billion, excluding identified items, earnings were down $1.8 billion sequentially. Timing effects were $1 billion unfavorable impact this quarter, mostly related to unsettled derivatives mark-to-market impacts consistent with this quarter's increase in oil prices. Other items, largely noncash, were $600 million or $0.15 per share hurt this quarter, driven mainly by noncash impacts from tax and inventory balance sheet adjustments. Base volumes were lower in the quarter as entitlement impacts fewer days in the quarter and the impact of higher scheduled maintenance were partially offset by growth from advantaged assets and strategic projects. Looking at the first quarter performance versus the same quarter last year, you can clearly see the contributions from growing advantaged assets and executing our strategic projects as well as our underlying structural cost improvements. GAAP earnings of $8.2 billion were down more than $3 billion versus our record first quarter earnings reported last year. The decline was driven by lower industry gas prices and refining and chemical margins, as well as higher maintenance and negative timing impacts from higher oil prices and the noncash expenses that I mentioned earlier. We made good progress continuing to improve the underlying earnings power of the business. We saw a strong growth from our advantaged assets like Guyana and projects like the Beaumont refinery expansion, which roughly offset lower base volumes that reflect divestments, entitlements and curtailments in the Upstream and divestments and higher maintenance in energy products. We added $400 million of structural cost savings this quarter, which resulted in an after-tax earnings benefit of $300 million. Now let's turn to the segments to dive further into our performance. In the Upstream, lower gas realizations were partly offset by slightly higher liquid realizations. As Darren mentioned, oil and natural gas prices in the quarter were about at the middle of the 10-year range. Our excellence in execution is delivering results. Higher volumes from advantaged assets more than offset divestment, curtailment and entitlement impacts, contributing $430 million in earnings versus the first quarter last year. In Guyana, we delivered 3 development projects, bringing online over 600 kbd of gross oil production since initial discovery at an industry-leading pace and cost. This quarter, gross production for Payara ramped up to 220 Kbd design capacity well ahead of schedule. We've also announced a new exploration discovery, Bluefin. Earnings also benefited from about $90 million in additional structural cost savings, driven by operational efficiency gains and reduced expenses from divested assets. Our Kearl operation in Canada is a great example of how we're reducing production costs. Last year, we converted our entire fleet of about 80 heavy haul trucks to a fully autonomous operation. The automation program enables us to capture improvements in truck productivity, further enhance safety of our operations and structurally reduce our operating costs. With this program, Kearl now operates the largest autonomous fleet in our industry and one of the largest autonomous mining fleets in the world. And we continue to look at other opportunities to expand automation across our production footprint. Kearl's gross production in the first quarter was 277 Kbd, which was a record for a first quarter. 2023 average gross production of 270 Kbd was also a record annual production. Higher expenses of $160 million were driven by an increase in depreciation rates in U.S. unconventional, while other, which is largely noncash, reflects the absence of favorable tax and divestment adjustments last year and inventory adjustments this quarter. Timing effects in the Upstream had a negative $120 million impact on the quarter, compared to a negative $490 million impact last year, driven by our mark-to-market position on our derivatives portfolio. In Product Solutions, we're high-grading our portfolio by divesting nonstrategic sites and investing where we have competitive advantages. Energy Products delivered roughly $1.4 billion in earnings in the quarter. Our advantaged configuration and commercial logistics capabilities enabled a dynamic response to the changing macro environment, which saw industry margins decline versus last year, primarily due to additional supply and normalizing trade flows. The strategic projects we executed last year, expanding our Beaumont refinery and completing the Permian Crude pipeline, helped us achieve record first quarter refining throughput and contributed to the $140 million earnings improvement. High-grading our portfolio also means making some tough but necessary choices to improve long-term competitiveness. Divestments in the middle of last year impacted volumes, but also contributed to structural cost savings in the period. We recently announced additional rationalizations in France and Germany to further strengthen our portfolio. As Darren mentioned, we saw a high level of turnaround activity in the quarter, which is reflected in expenses. We're really proud of our team who delivered best ever execution of our recent slate of turnarounds. As expected in a rising price environment, we saw negative timing effects which are primarily related to the mark-to-market on unsettled derivatives. Last year, the timing impact was favorable as prices were falling at that time. These impacts unwind over time. Chemical products earned nearly $800 million this quarter, more than double the result from the prior year period. While global polyethylene and polypropylene margins decreased, we drove a sizable margin increase largely due to our advantaged footprint but also due to increased contributions from Performance Products. Higher earnings from high-value product volumes reflect the many investments we've made over the years. Gulf Coast growth ventures in Corpus Christi, North American polypropylene and Baton Rouge and our Baytown Chemical expansion, all contribute to this growth. Base volumes increased on the absence of prior period turnarounds, but also on strong reliability in the U.S. Gulf Coast that enabled additional sales when others in the region were negatively impacted by winter storms in January. Specialty Products continued to deliver consistently strong earnings coming in at $760 million this quarter. Our efforts to grow margins through feed optimization and revenue management were evident this quarter and largely made possible by the differentiated performance of our high-value products. We had a strong contribution from the finished lubricants business, which is celebrating the 50-year anniversary of Mobil 1, our flagship brand. Our rigorous focus on structural cost reductions partially offset higher base expenses. The improved earnings power in our businesses translates to strong cash flow and our consistent capital allocation philosophy enables exceptional long-term shareholder returns. We generated $14.7 billion in cash flow from operations and $10.1 billion of free cash flow during the first quarter, and we continue to deploy that capital, consistent with our allocation priorities. First and foremost, our CapEx deployment supports investments in competitively advantaged opportunities that drive long-term earnings and cash flow growth. To sustain growth, we need to be investing now in low cost of supply, high-return, resilient projects. We're doing just that with multiple project startups planned for 2025 and that will contribute nearly $4 billion in earnings potential in 2027 at constant prices and margins. Our cash CapEx for the quarter came in at $5.3 billion. Secondly, to stay on the offensive through the commodity cycles, we need to maintain a bulletproof balance sheet. During the first quarter, we repaid $1.1 billion of bond maturities, bringing our debt-to-capital down to 16% and our net debt-to-capital ratio down to 3%. This outstanding balance sheet strength gives us ample optionality to capitalize on attractive opportunities regardless of where the market moves. And finally, strong operational results coupled with a healthy balance sheet, not only provide flexibility to invest through the cycles, but also to consistently return excess cash to our shareholders. We distributed $6.8 billion in the first quarter, including $3.8 billion in dividends. And while we briefly paused share repurchases following the Pioneer S-4 filing in January, we resumed in February and are on track to complete our $17.5 billion stand-alone share repurchase program this year. As a reminder, we intend to increase the pace of the program to $20 billion per year after the Pioneer transaction closes, assuming reasonable market conditions. These distributions matter. They help to drive our industry-leading total shareholder return and over a longer period of time, significantly reduce our share count. Since we began the program in 2022, we reduced our share count by about 7% and or 8% excluding the shares issued for the Denbury acquisition. Looking ahead, our team's execution excellence, our stellar balance sheet and our extended reach to new high-value, high-growth markets uniquely positions us to grow long-term value. Turning to the second quarter outlook items. We expect seasonal scheduled maintenance to lower upstream volumes by about 40 KOEBD. This does not impact our 2024 full year production guidance, which is 3.8 million oil-equivalent barrels a day. This guidance excludes Pioneer, which we still anticipate will close in the second quarter. In Product Solutions, we expect lower scheduled maintenance as we exit the peak of the 2024 turnaround season. We expect corporate and financing expenses to total $300 million to $500 million, in line with the first quarter. We also anticipate an unfavorable working capital impact of about $3 billion from seasonal cash tax payments, similar to what we saw in the second quarter of last year. With that, let me go ahead and turn it back to Darren.","evidence_gemma_new":"structural cost savings year-end 2023","evidence_llama_3_3":"structural cost savings year-end 2023","evidence_qwen_3_30b":null,"gemma_new_max":5000000000.0,"gemma_new_min":5000000000.0,"llama_3_3_max":5000000000.0,"llama_3_3_min":5000000000.0,"qwen_3_30b_max":null,"qwen_3_30b_min":null}
{"symbol":"XOM","year":2023,"quarter":1,"date":"2023-Q1","chunk_id":2,"sub_chunk_id":0,"centroid_label":"structural cost savings","agreed_value":7200000000.0,"count":3,"chunk":"Darren Woods: Good morning. Thanks for joining us today. Following a record year, ExxonMobil delivered the highest first quarter earnings in our history even as energy prices and refining margins moderated from the fourth quarter. This ongoing success reflects the hard work of our people, executing our strategic priorities and fully leveraging our competitive advantages. Through investments in advantaged assets, mix improvements and cost and operating discipline, we are delivering the structural earnings improvements outlined in our corporate plan update last December and expanding the energy supplies needed to meet growing global demand. Compared to the first quarter of 2022, we added about 300,000 oil-equivalent barrels per day to global supply, primarily from a 40% increase in production from Guyana in the Permian Basin, increase more than offset our divestments in the expropriation of Sakhalin-1, which we no longer account for, but which importantly remains part of global supply. In addition, our Beaumont refinery expansion reached nameplate capacity in the quarter. This 250,000 barrel a day expansion is the largest US refinery addition in a decade, helping meet society's ongoing need for transportation fuels. Guyana, we're pleased to announce that we reached final investment decisions for Uaru, fifth offshore project, which will bring on even more production from this low-cost, low-carbon intensity resource. Uaru will provide an additional 250,000 barrels a day of gross capacity with start-up targeted for 2026. Earnings in our Product Solutions business benefited from the team's solid operational execution with top quartile turnaround cost and schedule performance during a particularly heavy planned maintenance period. Low Carbon Solutions, we're building momentum across several fronts. In early April, we announced a long-term agreement with Linde to capture, transport and permanently store up to 2.2 million metric tons CO2 annually. Hydrogen, we announced front-end engineering and design contract for the world's largest low carbon hydrogen facility in Baytown, ahead of agreement with SK Group of Korea for offtake of blue ammonia from that facility. As we said during our Low Carbon Solutions spotlight earlier this month, our low carbon projects must be advantaged and deliver competitive returns. The ability of our low-carbon projects to compete successfully for capital is important if the world is going to meet its emissions aspirations. Incentives included in the Inflation Reduction Act are a positive step forward, although permitting and other regulatory improvements are still needed. Europe, by contrast, policy approach remains far more prescriptive and punitive. This is true whether we're talking about the emissions reductions needed to put the world on a path to net-zero or the production needed to provide Europe with affordable and reliable energy. The progress we're making across the company is underpinned by the continuing evolution of our business model. Effective on May 1, two new enterprise-wide organizations will be up and running. Global Business Solutions will centralize the majority of our finance procurement operations, enabling us to deliver simplified corporate-wide processes. ExxonMobil Supply Chain will consolidate supply chain activities globally. The organizations will focus on leveraging our scale to drive efficiencies, improve operating and financial results and, importantly, deliver an improved experience for customers, vendors and our people. On June 1, we plan to launch our new enterprise-wide trading organization. Global Trading will bring together expertise from across the company in crude, products, natural gas, power and marine freight trading, plan to build on our record 2022 results, leveraging the unique insights we gain from participating across each of our value chains and all along their entire length, with a global operating footprint larger than any of our competitors. Now, let me cover the quarter's headlines. We're pleased to have delivered $11.4 billion of earnings, a record first quarter following a record year. A significant contributing factor was structural cost savings that now total approximately $7.2 billion, keeps us on track to meet our target of $9 billion by the end of this year. Cash flow from operations totaled $16.3 billion, and our net debt-to-capital ratio declined to 4%, further increasing the strength of our balance sheet, while supporting shareholder distributions of $8.1 billion in the quarter, including $3.7 billion in dividends. Biodynamic market, our underlying performance remains rock solid and well ahead of our competition, reflecting the many improvements we've made over the last six years and, of course, the hard work of our people. Our diverse portfolio of advantaged businesses, improvements in mix, structural cost savings, excellence in execution are driving industry-leading earnings, cash flow and shareholder value. Combined with the strength of our balance sheet, we have the capability to win across a wide variety of market conditions to deliver strong returns, while meeting the evolving needs of society, including the need to reduce emissions. Leveraging the capabilities and advantages developed in our traditional businesses, we're building an advantaged new business, Low Carbon Solutions, which is positioning us as a leader in the energy transition, in our own and other's emissions and establishing long-term value-accretive growth opportunities that will underpin continued growth in shareholder returns. With that, let me turn the call over to Jennifer.","evidence_gemma_new":"structural cost savings","evidence_llama_3_3":"structural cost savings","evidence_qwen_3_30b":"structural cost savings $7.2 billion target $9 billion","gemma_new_max":7200000000.0,"gemma_new_min":7200000000.0,"llama_3_3_max":7200000000.0,"llama_3_3_min":7200000000.0,"qwen_3_30b_max":7200000000.0,"qwen_3_30b_min":7200000000.0}
{"symbol":"XOM","year":2023,"quarter":2,"date":"2023-Q2","chunk_id":2,"sub_chunk_id":0,"centroid_label":"structural cost savings","agreed_value":8300000000.0,"count":2,"chunk":"Darren Woods: Good morning. Thanks for joining us today. I'm pleased to be conducting our earnings call from our Houston campus. As of July 1st, our corporate headquarters is now located at the campus, alongside the senior managers of our businesses and centralized organizations. This is the first time in the company\u2019s history that the senior leadership team of the corporation is located on one site and represents a critical step in continuing the transformation of our business enabling us to improve collaboration and alignment and further leverage synergies across our integrated businesses. The ongoing efforts to structurally improve our company and drive sustained, industry-leading performance was clearly demonstrated in our second-quarter results. We delivered earnings of almost $8 billion, two times higher than what we earned in the second quarter of 2018, under comparable industry commodity prices. That doubling of earnings reflects our work in the intervening years to reshape our portfolio of businesses, invest in advantaged projects, and drive a higher level of efficiency and effectiveness in everything we do. With these results, I would like to take a moment to recognize our people. Starting with all those that made the move to Houston. I\u2019m sure you know moves like this are not easy and that many personal sacrifices are made. I\u2019m very thankful for all who did this. Their willingness to disrupt their lives for the benefit of our company is a testament to the dedication of our people whose commitment and hard work underpin all the improvements we are making. I hope our shareholders take comfort in this one, small example of our people\u2019s commitment to the company and have confidence in their resolve to further strengthen our position as an industry leader in all that we do. Our achievements this quarter also demonstrate the progress we\u2019re making in solving the \u201cand\u201d equation: meeting the world\u2019s needs for energy and essential products and reducing emissions, both our own and others\u2019. In the Permian, we set another production record and remain on track for an overall growth in production of 10% this year. As I said last quarter, our growth won\u2019t be linear as we execute our development plans that balance and optimize capital efficiency, resource recovery, and production rates. Our priority will remain on driving value, not volumes. In Guyana, we achieved a record quarterly gross production rate of 380,000 barrels per day. Our team in Guyana continues to deliver excellent operating, environmental and safety results, while optimizing and growing production. In fact, we see the potential to increase the combined gross capacity of these two FPSOs to above 400,000 barrels a day with further debottlenecking, which is nearly a 20% increase above the investment basis and a testament to the ingenuity of our people. In the Gulf Coast, we continue to profitably grow our business. In the second quarter we achieved mechanical completion of the Baytown chemical expansion. The project grows volume and improves mix with 750,000 tonnes per annum of additional performance chemical products. The Baytown expansion is the final Product Solutions component of the Growing the Gulf initiative announced in 2017. If you recall, the initiative committed to investments of $20 billion over ten years to capitalize on the US\u2019s advantaged resources, economic growth, and strong regional support for our businesses and the jobs we create. 11 of the 13 projects are up and running. The Baytown expansion, after product qualifications, should begin contributing by the fourth quarter. And Golden Pass, the last of our Growing the Gulf projects, should have its first train up at the back end of 2024. The Growing the Gulf initiative is another example of executing our strategy, investing in advantaged, high-value growth, and delivering on our commitments. Improving the earnings power of our businesses also requires divestments. In the second quarter we completed the divestment of the Billings refinery. Including this sale, cash proceeds from divestments of non-strategic assets have totaled roughly $2 billion year-to-date. In advancing our efforts to better leverage corporate scale and integration, we established three new centralized organizations in the quarter. Consolidating activities previously embedded in each of our businesses: Global Business Solutions, ExxonMobil Supply Chain, and Global Trading. They\u2019re all off to a good start and have clear lines of sight to improve performance and lower cost. Our Low Carbon Solutions business continues to make progress in building an advantaged, low cost, high-return business in capturing, transporting, and storing carbon. We announced a CO2 offtake agreement with Nucor, one of North America\u2019s largest steel producers. And we signed an agreement to acquire Denbury, which will provide ExxonMobil with the largest owned and operated network of CO2 pipelines in the United States. Combining Denbury\u2019s assets and experience with our capabilities will significantly accelerate and expand our ability to profitably help customers reduce their emissions and allow ExxonMobil to play an even greater role in a thoughtful energy transition. It significantly enhances our competitive position and offers a compelling customer proposition to economically reduce emissions in hard-to-decarbonize heavy industries which, today, have limited practical options. Of Denbury\u2019s 1,300 miles of CO2 pipeline, roughly 70% are in the Gulf Coast states of Louisiana, Texas, and Mississippi, one of the largest US markets for CO2 reduction and home to some of ExxonMobil\u2019s largest integrated refining and chemical sites and nine of their 10 strategically-located CO2 storage sites are also in this region. We believe the transaction synergies will drive strong growth and returns. A cost-efficient transportation and storage system accelerates CCS deployment for both ExxonMobil and our third-party customers. It supports multiple low-carbon value chains, including CCS, hydrogen, ammonia, and biofuels. Ultimately, we see an opportunity to create a CCS business with the capacity to reduce emissions across the Gulf Coast by up to 100 million tons per year. This transaction will help us do that at a lower cost and faster pace. In fact, we see the potential for a third of the opportunity being actionable in the near term. Which takes us to our customers. Our latest offtake agreement extends our CCS customer base beyond industrial gas and fertilizers into steel. This project will tie into the same CO2 transportation and storage infrastructure we\u2019ll use to serve CF Industries, located just 10 miles from Nucor. Focusing our efforts and investments in areas with concentrated sources of emissions allows us to capture the benefits of scale, reduce our spend per ton of CO2 captured and improves returns. Our work with Nucor supports Louisiana\u2019s goal of reaching net-zero greenhouse gas emissions by 2050 and it increases the total amount of CO2 we\u2019ve agreed to transport and store for customers to 5 million metric tons per year, equivalent to replacing 2 million cars with EVs, roughly the same number of electric vehicles on the road in the United States today. With the planned Denbury acquisition, the potential reduction could be up to 20 times that. As demonstrated by these new developments, we\u2019re continuing to make significant progress in our plans to lead industry in helping society reduce emissions. A major component of our improved earnings is the structural cost savings that we\u2019ve achieved, currently at $8.3 billion. We remain on track to reach our target of $9 billion in savings by the end of this year. As we develop plans for future years, we\u2019re committed to finding additional savings. Cash flow from operations totaled $9.4 billion in the quarter, or $13 billion excluding the change in working capital. Our year-to-date production of 3.7 million oil-equivalent barrels per day is on track with the full-year guidance we shared last year as part of our Capex investments totaled $12.5 billion year-to-date, also in line with our full-year guidance. And, consistent with our capital allocation philosophy, we continue to share our success with shareholders, distributing $8 billion in cash during the quarter, including $4.3 billion in share repurchases and $3.7 billion in dividends. Before we go to Q&A, I\u2019ll leave you with a few key takeaways from the quarter. First, our work to structurally improve earnings power is paying off, demonstrated this quarter as we doubled earnings versus a comparable price environment in the second quarter of 2018. Our reorganizations, aggressive investments in advantaged projects, and significant reductions in cost are driving value and improving our competitive position. We\u2019ve made great progress and have a clear line of sight to much more. In the back half of this year alone, we expect to bring on two advantaged projects: Baytown Performance Chemicals and the Payara FPSO in Guyana, further growing our capacity to generate industry-leading earnings. The company\u2019s ongoing business transformation is giving the organization a better view of end-to-end value creation and focusing us on the highest value opportunities. Today, we are better positioned than ever to realize the value of our scale and the synergies from improving the integration of our businesses. For the first time in our history, we have a corporate technology, projects, trading, supply chain, and business solutions organization allowing us to apply the best solutions and talent to our biggest opportunities. And, importantly, we are developing the most talented people in the industry, providing unrivaled opportunities to meet some of society\u2019s greatest challenges. Their work is delivering exceptional results, driving industry-leading returns on investments, and growth in earnings and cash flow. This, in turn, allows us to distribute cash to shareholders through share repurchases and a sustained, competitive, and growing dividend while maintaining investments in industry advantaged projects including investments in our Low Carbon Solutions business. By leveraging the advantages developed in our traditional businesses, we are laying the foundation for a world-scale, competitively-advantaged, low carbon business with industry-leading returns. The planned acquisition of Denbury is a step in that direction, improving our decarbonization proposition for customers, while generating attractive returns. In summary, we\u2019re pleased with the quarter, the progress it represents and the improved earnings power of the company. We\u2019re confident that we have the right strategy with the right leadership and best people to effectively execute it, delivering sustained growth in shareholder value. With that, I\u2019ll turn it over to Jennifer.","evidence_gemma_new":null,"evidence_llama_3_3":"structural cost savings","evidence_qwen_3_30b":"structural cost savings end of this year","gemma_new_max":null,"gemma_new_min":null,"llama_3_3_max":8300000000.0,"llama_3_3_min":8300000000.0,"qwen_3_30b_max":8300000000.0,"qwen_3_30b_min":8300000000.0}
{"symbol":"XOM","year":2024,"quarter":1,"date":"2024-Q1","chunk_id":1,"sub_chunk_id":0,"centroid_label":"structural cost savings","agreed_value":10100000000.0,"count":2,"chunk":"Darren Woods: Good morning, and thanks for joining us. Our strategy and the way our people are executing created significant value in the first quarter. We delivered $8.2 billion of earnings and $14.7 billion of cash flow. Even more important, we continue to strengthen the underlying earnings power of the company, which both Kathy and I will discuss in more detail on today's call. An important driver of this improved earnings power is our ongoing focus on structural cost savings, which reached $10.1 billion in the quarter versus 2019, furthering our progress towards our goal of $15 billion by 2027. CapEx in the quarter was $5.8 billion, as we continue to invest in advantaged growth projects that will drive future earnings and cash flow. At the same time, we further strengthened our balance sheet, bringing our net debt-to-capital down to 3%, the lowest in more than a decade. To reward our shareholders, we distributed $6.8 billion in cash, including $3.8 billion in dividends. For all of 2023, ExxonMobil was the third largest total dividend payer in the S&P 500. Only Microsoft and Apple paid more. We also repurchased about $3 billion of shares. Buybacks were temporarily paused until the shareholders of Pioneer voted on the combination of our companies, which they approved on February 7. Post close, we expect buybacks to ramp up to a pace of $20 billion a year. Our ongoing success this quarter reflects the intense focus we have had for the past 7 years on improving every aspect of our business. We developed a strategy tied more directly to our core competitive advantages. We reorganized the company to create a group of centralized organizations that fully utilize the significant synergies between our businesses. We set and met ambitious plans to improve the fundamental earnings power of the company. And we established a track record of excellence in execution that is second to none. All of this has been critical to laying the foundation for further success, both in the current plan period through 2027 and over a much longer growth horizon, which I will discuss in a few minutes. As covered in the corporate plan update in early December, we expect to generate an additional $12 billion in earnings potential from 2023 to 2027 on a constant price and margin basis. That represents a compounded annual earnings growth rate over the plan period of greater than 10%. The drivers of this additional value are clear. Higher volumes from advantaged assets, mix improvements from the shift to higher-value products and further structural cost reductions. Within Product Solutions, for example, we expect to start up multiple strategic projects between now and the end of 2025, which will drive significant earnings growth through mix improvements. Consider our Singapore Resid Upgrade Project where our industry first technology application will allow us to transform bottom-of-the-barrel molecules into higher value base stocks significantly lifting margins. Our focus on shareholder value extends beyond the work we're doing to drive profitable growth. We're also working hard to ensure that the value we've created is not diminished through third-party actions. I'd like to take a moment to highlight a few that occurred in the quarter that attracted some media attention. In Guyana, as the operator of the world's premier deepwater development, we have created tremendous value. We believe the proposed Chevron-Hess transaction and ignoring preemption rights triggered by a change of control, diminishes an element of value due ExxonMobil. We believe it's critical to defend these rights and fully preserve the value we've created. The arbitration we filed in the quarter seeks to confirm our rights and establish the value of the transaction places on the Guyana asset. This will allow us to fully evaluate options to maximize the value to ExxonMobil and our shareholders. Any responsible management team would do the same. In the quarter, we also initiated litigation against 2 special interest activists masquerading as investors. These activists borrowed or group funded a nominal amount of shares to resubmit a proposal that in previous years had little shareholder support, which is a violation of the SEC's rules. These activists have publicly admitted they are working to stop production of oil and natural gas and have no interest in earning a financial return. They hijack an important process that gives small shareholders a voice and are undermining the integrity of the system with an agenda that is not in the best interest of our investors or society, which is why we are actively opposing their efforts. Finally, although it attracted less attention, we successfully defended the Pioneer merger against a frivolous lawsuit designed to extract value from ExxonMobil shareholders. A plaintiff's lawyer who sued to block the deal has repeatedly abused a legitimate legal process to extort money from companies to have his lawsuit withdrawn. We refused to pay this \"merger tax\". The court ruled in our favor, finding that filing a lawsuit solely to gain leverage in the settlement negotiation is an improper purpose. Even more important, the court sanctioned the lawyer for operating in bad faith in order him to pay ExxonMobil's legal fees, which will hopefully discourage similar frivolous lawsuits in the future. While results of these efforts may not show up in any discrete quarterly result, they underpin long-term value and demonstrate our strong commitment to doing what's right. Turning to another area of strong commitment that shows up every quarter, is our focus on functional excellence, a core competitive advantage and a key pillar of our strategy. In Guyana, it's delivering unprecedented success and value creation, reflected in the startup of the Prosperity FPSO last November, ahead of schedule and below cost. As with our 2 previous developments, this cost and schedule performance was industry-leading. The excellence in execution demonstrated in delivering a project continued into its operation. With Prosperity, we reached nameplate capacity of 220,000 barrels a day in January, just 2 months after startup and well ahead of the industry average of 15 months. Once our projects are up and running, we continually look for debottlenecking opportunities to increase production. All 3 FPSOs are now producing above their funding basis, helping to drive record gross production in the first quarter, all with an emissions intensity amongst the lowest in our upstream portfolio. Looking ahead, we're pleased that our sixth project, Whiptail, has now reached FID with a planned start-up by year-end 2027. It's remarkable to think that within 8 years of first oil, Guyana will have a production capacity of more than 1.3 million barrels per day. Our work in Guyana is delivering tangible benefits for the Guyanese people. The development of Guyana's energy economy drove the highest real GDP growth in the world in 2022. The oil and gas industry is directly supporting thousands of local suppliers and Guyanese workers. And our gas-to-energy project will feed a new government-owned power plant with the potential to significantly increase reliability and reduce both the cost of electricity and its greenhouse gas emissions. As I said at CERAWeek last month, I believe Guyana will go down as one of the most successful deep water developments in the history of the industry. The final point I'd like to make about our upstream business this morning involves our Canada operations. With the Trans Mountain pipeline expansion scheduled to come online May 1, our production from Kearl will have better access to markets in Asia and the U.S. West Coast, which we expect will improve margins and drive higher earnings in future quarters. Product Solutions also demonstrated excellence in execution this quarter. Overall, we generated record first quarter refining throughput during a period of peak turnaround activity. Thanks to the outstanding work of our team, we maintained strong turnaround cost and schedule performance. The structural improvements made in turnarounds would not have been possible with our decision to create centralized organizations that are now critical elements of our success. We've been able to take our best thinking and experience from across the corporation and apply it to some of our biggest challenges like these very large maintenance events. We've eliminated silos, consolidated expertise and narrowed our focus to the challenges and opportunities with the highest value. Our turnaround performance is translating to both structural cost savings and higher throughput, helping us capture more value from the market than peers, especially at a time of historically high refining margins. Finally, our commitment to execution excellence is delivering significant improvements in our environmental performance. Our methane emissions intensity is down more than 60% since 2016. One of the many steps we took included replacing all 6,000-plus natural gas-driven pneumatic devices in our Permian unconventional operated assets. Disciplined execution is critical to success when markets are weak and margins are low. It pays even bigger dividends when the market environment is constructive as it was in the first quarter for crude and refining. Crude prices remained roughly flat near the middle of the 10-year range. More recently, the market for crude has tightened with ongoing concerns about the Middle East, putting a floor into prices, which are up more than 10% year-to-date. Natural gas prices move back inside the 10-year range on high inventory and lower demand. Refining margins rose back to the top of the 10-year range as demand grew while industry downtime and global disruptions weighed on supply. Chemical margins were relatively flat as demand growth is being met with new capacity. While short-term market conditions are an important context for quarterly results, it's how we position ourselves to leverage the long-term fundamentals that drive sustained shareholder value. I'd like to turn to this for a moment now and plan to spend more time over the year reminding everyone of our attractive growth opportunities that extend well beyond this year and our planned period. I know there's a view that we're in a declining industry. That view is wrong. People don't fully appreciate the scale of the global energy system. It took many tens of trillions of dollars to build and today takes more than $2 trillion a year to sustain. This doesn't mean we shouldn't address the emissions challenge. In fact, the world needs to do more in a far more serious way to meet society's emission reduction ambitions. But it also means that oil and natural gas will play a much greater role than the market thinks. By 2050, the world is expected to add nearly 2 billion people and the size of the global economy is expected to double from roughly $90 trillion to $180 trillion. Scenarios like IEA Net Zero to see oil demand falling from more than 100 million barrels per day now to 25 million barrels per day in 2050, are not realistic. Even if demand for transportation fuels declined significantly with greater penetration of electric vehicles, the market for petrochemicals is expected to double. While the transition to a lower emissions future will be long, there's no denying, it's happening. The question is, who will capture the value. We believe the same competitive advantages that have underpinned ExxonMobil's success for more than 100 years, will serve as the foundation for building a range of world-class businesses in a lower emissions world. As I've said many times, we're a technology company at our core. We transform molecules at scale to meet society's needs. The notion that the world can electrify everything is misguided. Molecules will play a dominant role in the energy, materials and products the world needs in 2050 and beyond. At our low carbon solutions spotlight last year, we'll walk you through the opportunity we saw in carbon capture and storage, hydrogen and biofuels. Since that time, we've also entered the market for lithium. The total addressable market in these areas going forward is potentially in the trillions of dollars. Today, I'd like to mention some of the additional areas we're exploring that have tremendous potential. We discussed each of these opportunities in detail with our Board of Directors during a visit to our Baytown complex in March. The world has become increasingly focused on the challenge of mismanaged plastic waste. The solution requires a sound policy, responsible manufacturing, expanded waste management infrastructure and new technologies like those that underpin our advanced recycling projects. We have 12 projects in our plants to help us meet the growing demand for processing plastic waste. Our first project at Baytown is one of the largest in North America, with the ability to process 80 million pounds per year of plastic waste that would otherwise end up in a landfill. By breaking down plastic waste into its constituent molecules, our technology significantly widens the range of plastics that can be processed, including hard recycled materials such as potato chip bags and astro turf. We are planning to develop more than 1 billion pounds per year of plastic waste processing capacity by 2027. Another growth area is Proxima, which was showcased at our Product Solutions spotlight last September. With Proxima, we transform lower-value gasoline molecules into a high-performance, high-value resin with numerous commercial applications. In short, Proxima is a new chemistry for an enduring challenge, making materials that are lighter, stronger and more durable with lower GHD emissions. Proxima is up to 4x stronger than steel and 7x lighter, making an excellent replacement for rebar. As a protective coating, it takes one application in 5 minutes to cure versus 2 to 3 applications with 8 hours in between. It has multiple light weighting applications in the automotive sector, and it has half the life cycle emissions of traditional thermoset resin systems. For us, Proxima is an advantaged fuels to Performance Chemicals business that we plan to scale and build into a global brand. We see an addressable market of up to 5 million tonnes per year, growing faster than GDP, with earnings potential of $1 billion a year by 2040 and returns above 15%. We are also exploring opportunities materials made from carbon which, as the world decarbonizes, will become an increasingly advantaged feedstock. We launched a technology venture about 2 years ago to assess attractive new markets for carbon products. We see opportunities to transform the molecular structure of low-value carbon-rich feeds from refining and petrochemical processes to create high-value products for growing markets. Some of these markets include carbon fiber, polymer additives, battery materials and electrodes for steel production. We are specifically focused on high-value segments with margins of several thousand dollars per ton and growth rates more than double GDP. One potential opportunity is the carbon materials used in batteries and energy storage solutions. With demand for this segment growing above 10% per year, these carbon materials are expected to be in short supply. Additionally, as the needs for storage solutions evolve, there will be an increasing demand for higher-performance carbon materials. The carbon-rich feedstock available in ExxonMobil's existing businesses coupled with our core technology capabilities and complementary lithium offering positions us to meet the growing demand and deliver product performance improvements required for the battery and energy storage solutions of the future. The last technology I'll touch on today is Direct Air Capture or DAC. For the world to reach Net Zero, negative emissions technologies are going to be needed, none holds greater long-term promise than DAC. The challenges, however, are as big as the opportunity. Atmospheric CO2 is extremely diluted at about 425 parts per million, a massive amount of air has to be processed to remove a single ton of carbon dioxide. Today, many technologies are competing to crack the code and make DAC scalable and affordable. Our scientists and engineers are hard at work on this problem. We've launched a pilot project at Baytown that has demonstrated feasibility with the use of a proprietary capture process. Our initial goal is to cut the cost in half, which will still be too expensive, but will help move us down the cost curve. The current market for DAC is tiny, at less than 10,000 tons per year of CO2 captured, but the long-term potential is huge. We are excited that dozens of companies and universities are chasing direct air capture solutions. We wish them all success irrespective of where the breakthrough occurs or who achieves it. ExxonMobil will have an important role to play. As we've demonstrated, there are a few, if any, companies better positioned than us to globally deploy a molecule technology at scale with attractive returns. People who limit our future to the products and markets we are in today, have lost sight of our past and don't understand our core capabilities or advantages or the future potential they hold. Consider our Baytown low carbon hydrogen project, which is entering advanced stages of engineering and development. We are not only focused on building the supply side of this new market for low carbon hydrogen, but are also making strong progress in building large-scale demand as demonstrated in our MOUs for offtake of low-carbon ammonia with SK of South Korea and JERA of Japan. The last piece required to bring this project in market to life is government policy that maintains a level playing field across all methods of hydrogen production. Without this, we cannot and will not move forward. On the other hand, if incentives are developed to establish a viable technology neutral market, our advantages will allow us to generate attractive returns and invest more, accelerating customers' emissions reduction. Over ExxonMobil's entire history and across the globe, we've built industries and value chains where none previously existed. We will continue to do this. In a fast transition, we'll grow earnings and cash flow with accelerated investments in CCS, hydrogen, biofuels and DAC. In a slow transition, we'll grow earnings and cash flow through advantaged investments in our traditional businesses. In irrespective of the transition pace, we'll extend our reach to new high-value markets with innovative new products. Under any scenario, we are convinced that our company is uniquely positioned to play a leading role, meeting the world's essential needs for energy and high-value materials and products. With that, I'll hand it over to Kathy.","evidence_gemma_new":null,"evidence_llama_3_3":"ExxonMobil structural cost savings 2019","evidence_qwen_3_30b":"structural cost savings quarter","gemma_new_max":null,"gemma_new_min":null,"llama_3_3_max":10100000000.0,"llama_3_3_min":10100000000.0,"qwen_3_30b_max":10100000000.0,"qwen_3_30b_min":10100000000.0}
{"symbol":"XOM","year":2024,"quarter":2,"date":"2024-Q2","chunk_id":53,"sub_chunk_id":0,"centroid_label":"structural cost savings","agreed_value":600000000.0,"count":2,"chunk":"Kathy Mikells: Great. Thanks very much for the question. And so, you're right. If we look on an after-tax basis we had about $600 million overall on a pre basis for the year-to-date where our structural cost savings is about $1 billion. So making really good progress. Continuing to optimize maintenance is a big driver of overall savings. We gave a number of $200 million in energy products in terms of my prepared remarks. And that was just noting that, in the half we had a particularly heavy turnaround slate. And if we looked back at that same turnaround slate the last time we did it, we did it much more quickly and we did it at lower cost. Hence the $200 million savings number that you mentioned. We are also obviously driving savings in terms of supply chain and looking to get more efficient there. And all of our centralized organizations which we've kind of stood up over the last couple of years, are really responsible for driving savings into the business. So whether that's global business solutions or whether that's supply chain, or our global operating and sustainability group, who works on our maintenance activities, we are really starting to see the uptick from the benefit that those organizations can bring, by simplifying things and standardizing things, and bringing better data analytics to optimize our overall organization. So that's what you are going to continue to see on a go-forward basis. And then I\u2019d say, longer-term, as those centralized organizations start to standardize processes for the company which are quite disparate, as we sit here today, we'll be able to apply more technology to get, I\u2019d say, even more automated in the things that we do which will drive further efficiencies for us long term. So whether it is getting more efficient on logistics or getting more efficient because we're standardizing now between ourselves and Pioneer, standardizing all the materials and things that we're buying, those are the things that will continue to drive savings. And I think we have both the largest program, by far of anybody in the industry and now a very proven track record that we feel quite good about typically over delivering on the initial plans that we developed. So we are feeling good about the progress we're making, and that overall target to get to $15 billion in savings between 2019 and 2027.","evidence_gemma_new":null,"evidence_llama_3_3":"structural cost savings year-to-date","evidence_qwen_3_30b":"after-tax basis structural cost savings year-to-date","gemma_new_max":null,"gemma_new_min":null,"llama_3_3_max":600000000.0,"llama_3_3_min":600000000.0,"qwen_3_30b_max":600000000.0,"qwen_3_30b_min":600000000.0}
{"symbol":"XOM","year":2024,"quarter":2,"date":"2024-Q2","chunk_id":53,"sub_chunk_id":0,"centroid_label":"structural cost savings","agreed_value":1000000000.0,"count":2,"chunk":"Kathy Mikells: Great. Thanks very much for the question. And so, you're right. If we look on an after-tax basis we had about $600 million overall on a pre basis for the year-to-date where our structural cost savings is about $1 billion. So making really good progress. Continuing to optimize maintenance is a big driver of overall savings. We gave a number of $200 million in energy products in terms of my prepared remarks. And that was just noting that, in the half we had a particularly heavy turnaround slate. And if we looked back at that same turnaround slate the last time we did it, we did it much more quickly and we did it at lower cost. Hence the $200 million savings number that you mentioned. We are also obviously driving savings in terms of supply chain and looking to get more efficient there. And all of our centralized organizations which we've kind of stood up over the last couple of years, are really responsible for driving savings into the business. So whether that's global business solutions or whether that's supply chain, or our global operating and sustainability group, who works on our maintenance activities, we are really starting to see the uptick from the benefit that those organizations can bring, by simplifying things and standardizing things, and bringing better data analytics to optimize our overall organization. So that's what you are going to continue to see on a go-forward basis. And then I\u2019d say, longer-term, as those centralized organizations start to standardize processes for the company which are quite disparate, as we sit here today, we'll be able to apply more technology to get, I\u2019d say, even more automated in the things that we do which will drive further efficiencies for us long term. So whether it is getting more efficient on logistics or getting more efficient because we're standardizing now between ourselves and Pioneer, standardizing all the materials and things that we're buying, those are the things that will continue to drive savings. And I think we have both the largest program, by far of anybody in the industry and now a very proven track record that we feel quite good about typically over delivering on the initial plans that we developed. So we are feeling good about the progress we're making, and that overall target to get to $15 billion in savings between 2019 and 2027.","evidence_gemma_new":"structural cost savings year-to-date","evidence_llama_3_3":"structural cost savings year-to-date","evidence_qwen_3_30b":null,"gemma_new_max":1000000000.0,"gemma_new_min":1000000000.0,"llama_3_3_max":1000000000.0,"llama_3_3_min":1000000000.0,"qwen_3_30b_max":null,"qwen_3_30b_min":null}
{"symbol":"XOM","year":2024,"quarter":4,"date":"2024-Q4","chunk_id":33,"sub_chunk_id":0,"centroid_label":"structural cost savings","agreed_value":6000000000.0,"count":3,"chunk":"Kathy Mikells: Sure. So, I'll start with capital because we gave guidance at our corporate plan. This coming year in 2025, we said we expect cash capex to be between $27 billion and $29 billion. And then, between 2026 and 2030, that number is $28 billion to $33 billion. And then, if you just think about expenses, obviously, we're growing, and we're growing across our business. That is going to have growth expense associated with it. And some of the offsets of that is driving significant structural cost reductions. And so, to date, since 2019, we're at a little over $12 billion in terms of structural cost reductions. And we said, between here and 2030, we expect to get that number up to $18 billion. So, kind of an additional $6 billion in structural cost savings to help to offset, just the cost of that growth overall, and, obviously, a little bit of inflation. And the last thing I would say on that topic is, we have a global procurement organization, as we talked about, the Global Projects Organization, working pretty hard to make sure that we're bringing kind of the full scale and the manner in which we integrate our business kind of to bear as we procure the different products and services that we procure. So, they're doing quite a good job, as they look to help us hold down expenses.","evidence_gemma_new":"structural cost savings","evidence_llama_3_3":"structural cost savings","evidence_qwen_3_30b":"structural cost savings","gemma_new_max":6000000000.0,"gemma_new_min":6000000000.0,"llama_3_3_max":6000000000.0,"llama_3_3_min":6000000000.0,"qwen_3_30b_max":6000000000.0,"qwen_3_30b_min":6000000000.0}
{"symbol":"XOM","year":2023,"quarter":4,"date":"2027-FY","chunk_id":2,"sub_chunk_id":0,"centroid_label":"structural cost savings","agreed_value":15000000000.0,"count":3,"chunk":"Darren Woods: Good morning, and thanks for joining us. I want to start with the theme of the quarter, which frankly, has been a theme of the year, excellence in execution. Whether it\u2019s operating our facilities, building projects, deploying technologies, trading, marketing, sales, supply chain, or any of our other activities, the men and women of ExxonMobil are setting and holding themselves to very high standards as they execute their responsibilities. Their hard work and commitment drove the strong results we reported today and are the foundation of our success. At the end of the day, it\u2019s all about our people. They make the difference and are delivering industry-leading results. And nothing is more important than the safety of our people. Keeping them safe requires intense focus and relentless discipline, 24 hours a day, every single day. For many years we\u2019ve outperformed industry benchmarks for workplace safety. Over the last several years we\u2019ve been implementing improved systems for managing both personnel and process safety, leveraging best practices from across our company and industry, our own and others. These efforts are paying off with continued improvements in the number and severity of incidents. The discipline needed to consistently deliver industry-leading safety performance manifests itself in all our work. We see it in our project teams, who are delivering large capital projects at top-quintile performance on cost and schedule. We see it in the reliability of our operations, where we achieved record performance in both the upstream and refining. We see it in our environmental performance, where we set several new records. And we see it in the successful management of the transformational re-organizations we\u2019ve made over the last several years. Results are clear. By any measure, 2023 was an outstanding year. We delivered $36 billion of earnings, strong cash flows, and a 15% return on capital employed. Our strategy, introduced in 2018, coupled with consistently strong execution, is delivering results that lead industry across a range of metrics, including earnings and cash flow growth, total shareholder distributions, and total shareholder returns since 2019, the baseline year of our plans. On a constant-price basis, we more than doubled earnings in 2023 versus 2019, demonstrating the improved earnings power of the company. The growth in profitability reflects significant progress in high-grading our portfolio of assets through advantaged projects, divestment of less strategic operations, and significant cost reductions. During the year, our divestments generated more than $4 billion of cash proceeds. And we also announced two value-accretive acquisitions. Denbury, which closed in November, provides opportunities to profitably accelerate our Low Carbon Solutions business with a compelling, end-to-end, customer decarbonization offer. Pioneer, which is expected to close in the second quarter, will further differentiate our advantaged Upstream portfolio. The synergies will create significant shareholder value and accelerate Pioneer\u2019s net zero ambitions by 15 years, to 2035. In 2023, we made significant advances in a number of innovative solutions. We entered the lithium business, where we see an opportunity to supply approximately 1 million electric vehicles per year by 2030 with economically advantaged production that has a much smaller environmental impact than today\u2019s supply. In the carbon capture and storage space, we recently completed the construction of a pilot plant to further develop a unique, proprietary technology, which has the potential to significantly lower the cost of direct air capture. We also launched Proxxima, a thermoset resin with a high value in use for coatings, infrastructure, automotive parts, and wind power, made from low value components used in gasoline. We also took a further step in reducing cost, leveraging scale and improving effectiveness with the formation of three new centralized organizations, Global Supply, Trading, and Global Business Solutions. This change provides additional opportunities to grow deep expertise across a broad portfolio of critical business capabilities. Today, we\u2019re convinced that no other company can match the depth and breadth of development opportunities that ExxonMobil offers. It\u2019s no surprise that for the 11th year in a row, we were recognized as the most attractive US employer in the industry for engineering students. This is another key competitive advantage. Our plan for 2024 remains anchored in our existing strategy, building on world-class execution and the performance we delivered last year. We set a high bar for ourselves across all aspects of the business, from safety to operational excellence to financial performance, and have confidence in our team's ability to consistently deliver. For 2024, we expect to invest $23 billion to $25 billion to grow our portfolio of advantaged, low-cost of supply assets, further shift our product mix towards higher value, higher margin performance products, and reduce emissions, both our own and others. Our plan also continues to structurally reduce costs to achieve $15 billion in structural cost savings through 2027. We have opportunities to enhance supply chain efficiency, further improve maintenance and turnarounds, modernize data management, and simplify business processes. In Low Carbon Solutions, we\u2019ll continue the integration of Denbury and look to add additional customers to our US Gulf Coast network. As we noted during the Corporate Plan update in December, we\u2019re now pursuing more than $20 billion of lower emissions opportunities, evenly split between reducing our own emissions and reducing third-party emissions. Overall, our portfolio of low carbon investments is expected to generate returns of approximately 15%. Our Upstream portfolio will be further transformed when we close on the transaction with Pioneer. By combining the capabilities of our two companies and leveraging the advances we\u2019ve made in technology, we expect to recover more resource, more efficiently, with lower emissions. We\u2019ll provide more detail about this compelling combination at our Spotlight event following the close. Our results in 2023 once again demonstrated the strength of our strategy. As I reflect on the past year, I have tremendous pride in what our people accomplished and a strong level of confidence in our continued ability to lead in the years ahead. Finally, I want to thank our shareholders for their continued confidence and support. Now, I'll turn it back to Jennifer.","evidence_gemma_new":"structural cost savings 2027","evidence_llama_3_3":"structural cost savings 2027","evidence_qwen_3_30b":"structural cost savings by 2027","gemma_new_max":15000000000.0,"gemma_new_min":15000000000.0,"llama_3_3_max":15000000000.0,"llama_3_3_min":15000000000.0,"qwen_3_30b_max":15000000000.0,"qwen_3_30b_min":15000000000.0}